- INTERNATIONAL BANK Ft R RECONSTRUCTION IND DEVELOPMENT A~~FL AE I I I I SIXTH ANNUAL REPORT TO THE BOARD OF GOVERNORS 19 5 0 -1 9 5 1 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT dgINIEN1ONAI) *BAN, WASHINGTON, D. C. I I I INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT September 10, 1951 My dear Mr. Chairman: In accordance with Section 10 of the By-Laws of the International Bank for Reconstruction and Development, I have been authorized by the Executive Directors to submit to the Board of Governors this Sixth Annual Report of the Bank. The report includes financial statements as of June 30, 1951, based on an audit of the accounts of the Bank made pursuant to Section 19 of the By-Laws. It also incorporates, pursuant to Section 19 of the By-Laws, an administrative budget for the fiscal year ending June 30, 1952. The report as a whole covers the Bank's activities for the fiscal year beginning July 1, 1950 and ending June 30, 1951. Sincerely yours, EUGENE R. BLACK, President. Chairman, Board of Governors, International Bank for Reconstruction and Development. TABLE OF CONTENTS Page THE YEAR IN REVIEW .............7.......................................... 7 THE BANK IN RELATION TO RECENT WORLD DEVELOPMENTS. 9 Economic Developments during the Past Year-Their Effect Upon the Bank. 9 Increased Earnings of Underdeveloped Countries ......................... 9 Loans of Non-Dollar Funds . ............................................... 10 The Importance of Economic Development .................................. 11 The Need for Programming . ............................................... 12 Bank Lending: 1947 - 1951 ...................3.................. t3 Future Possibilities ................. 15 THE BANK'S OPERATIONS ................................. 17 Africa .................. 17 Asia ...............,.,......................... 20 Australia ............................................... . 25 Europe ........... 26 Latin America .................. ........ 32 FINANCIAL ACTIVITIES AND RESOURCES ......... ........ ............ 41 Earnings, Reserves, Repayments and Disbursements ............................... 41 Funds Available for Lending ..................... 42 Sales of Securities . .......................................................... 42 New Issues of the Bank's Bonds .......................................... 43 Sales of Bonds from the Bank's Portfolio ................. ...... ........... 43 Broadening Market for the Bank's Bonds .................................... 44 Financial Statements and Reports .............................................. 44 MANAGEMENT AND ORGANIZATION ........................................ 45 Changes in Personnel ............. ......................................... 45 Staff Retirement Plan .............. ......................................... 45 Training Program ..................... ..................................... 45 Administrative Budget .............. ........................................ 46 Page MISCELLANEOUS ....................................... 47 Relations with Other International Organizations .................................. 47 Membership and Subscription ................................................ 47 Additional Reports to Board of Governors ....................... ...... .. 48 Appendices ...................................................... 48 A. Balance Sheet-June 30, 1951 ....................... 50 B. Comparative Statement of Income and Expenses for the Fiscal Y ears Ended June 30. 1950 and June 30, 1951 ................ 52 C. Statement of Loans-June 30, 1951 ..................................... 54 D. Statement of Currencies Held by the Bank-June 30, 1951 ... ..... ..... 58 E. Statement of Subscriptions to Capital Stock and Voting Power-June 30, 1951... 60 F. Notes to Financial Statements-June 30, 1951 ............................ 62 G. Opinion of Independent Auditor .64 H. Administrative Budget for the Fiscal Year Ending June 30, 1952 . 65 I. Voting Power and Subscriptions of Member Countries as of June 30, 1951 ... 66 J. Governors and Alternates as of June 30, 1951 ............................ 67 K. Executive Directors and Alternates and Their Voting Pouwer as of June 30, 1951 . .................................................... 68 L. Principal Officers of the Bank as of June 30, 1951 .. ..................... 70 I I I THE YEAR IN REVIEW In the past fiscal year the Bank made 21 loans try's development program; the study group or totaling the equivalent of $297.1 million for de- "seminar," in which specialists from member coun- velopmental projects in 11 countries. This is the tries exchange views with the staff of the Bank on largest number of loans as well as the largest specific development problems; and the sending amount in value to be made by the Bank in any of Bank staff to member countries for extended one fiscal year since the Bank started its lending periods to aid in the analysis of the councries' activities in May 1947. The 48 loans made by the development programs and in the effective carry- Bank up to the end of the fiscal year on June 30, ing out of projects. In addition, the Bank par- 1951 totaled $1,114 million; of this $691.7 million ticipated in the first of a series of training institutes had been disbursed, and $17 million had been can- designed to acquaint government officials of under- celled at the request of borrowers. developed countries with the techniques of pro- During the fiscal year loans for electric power gramming and project control. In making use of development were made to Brazil, Colombia, Ice- these new methods the Bank has on occasion com- land, South Africa and Uruguay; for the expansion bined forces with other international and national of transportation facilities - including roads, port agencies. development and railway rehabilitation and im- The Bank has continued its use of the com- provement - to Australia, Colombia, Ethiopia, prehensive survey mission as a means of drawing Nicaragua, South Africa, Thailand and Turkey; up broad recommendations for a country's eco- for flood control and irrigation to Iraq and Thai- nomic development. During the fiscal year the land; and for agricultural machinery and grain report of the comprehensive survey mission to storage to Nicaragua and Turkey. A loan to Ethio- Colombia was published. The report of a similar pia and part of one to Uruguay were for the im- mission to Turkey was presented to the Turkish provement of telecommunications. The Australian Government in June 1951. The reports of the loan was for the expansion of many kinds of pro- Guatemalan and Cuban missions were scheduled ductive facilities. For the purpose of providing for transmittal to the Governments of those coun- medium and long-term assistance to small enter- tries in July and August respectively. At the end prises, the Bank made loans to newly organized of the fiscal year the report of the mission to Iraq financial institutions in Ethiopia and Turkey, and was being drafted, and survey missions to Ceylon to a consortium of private banks in Mexico. and Surinam were being organized. In the past year the Bank has increasingly in- Throughout the year the Bank watched for signs terested itself in helping member countries to of growing shortages in the supplies of capital assess their total economic resources and to set up goods needed by its member countries in carrying priorities to be followed in their development out their development projects. No shortages de- programs. The Fifth Annual Report contained a veloped acute enough to impede the Bank's opera- discussion of some of the methods being used by tions seriously, but it was expected that with the the Bank in this field. During the past year the intensification of mobilization for defense, in the Bank has experimented with new techniques, and United States especially, the problem would be- has expanded its activities in this type of technical come more grave. A special unit was set up in the assistance. Bank to follow developments in this field and to Some of these new methods are the specialized assist member countries in locating sources of mission, sent out to study specific aspects of a coun- supply in the United States, Canada, and the coun- [ 7 ] tries of Western Europe. effect, one credit transaction in which the Bank In May 1951 the Bank sold £5 million of its own and private investors cooperated. bonds in the London investment market, and thus With the countries of Western Europe now hav- for the first time added to its lendable resources ing a greater capacity to produce the goods needed of pounds sterling by tapping private investment for development, the Bank has found an increasing funds. At the close of the fiscal year, the Bank had need for Western European currencies in the course also completed arrangements for its first public of its operations. Some of the Bank's member coun- offering of Swiss-franc bonds in Switzerland. These tries atter able o me lan serie pamnt tranactins ae anindiatio of he boadeing tries are better able to meet loan service payments transactions are aion of the broadening in non-dollar currencies. Accordingly, a desirable expansion of the Bank's activities may be pre- An increasing willingness of investors to asso- vented, unless greater resources of Western Euro- cdate themselves directly with Bank financing was shown by two other developments. In the past pencrece,otie ihrfo h 8 shown by te eeomet.Ih a capital subscriptions of its Western European mem- year, for the first time, the Bank sold bonds out of ptnk ofits Weste Erpean mem- its loan portfolio to private investors without its bers or by Bank borrowings in the capital markets guarantee. A total of $4.5 million of such bonds, of Western Europe, are made available to the of short maturities, were sold. Bank. In January 1951 when the Bank made a loan to In the past fiscal year the equivalent of 9.9 mil- the Union of South Africa for the development of lion United States dollars was released from 18% transportation facilities, eight American commer- funds for use by the Bank in making loans. Dur- cial banks simultaneously extended to the Union ing the five years of the Bank's operations non- Government a credit of $10 million for purposes dollar 18% funds have been released in an amount related to the Bank's loan. The two loans were, in equivalent to $26.2 million. L8] THE BANK IN RELATION TO RECENT WORLD DEVELOPMENTS In every year since its establishment in 1946 the created more favorable conditions for the Bank's Bank has faced new and changing conditions in lending operations. On the other hand, serious new the world. At no time in the Bank's experience, problems have arisen. It is the purpose of this however, have the economic conditions of the section of the Sixth Annual Report to examine the world changed so abruptly as in the year just relationship between recent world events and the ended. New factors have provided underdeveloped activities of the Bank. countries with opportunities for growth, and have ECONOMIC DEVELOPMENTS DURING THE PAST YEAR - THEIR EFFECT UPON THE BANK The beginning of the fiscal year 1950-51 vir- ital savings, to stabilize national accounts and cur- tually coincided with the outbreak of war in Korea. rencies, and to promote development. Some of the major economic trends affecting the In addition to the trends mentioned, tightening Bank's investment policy and operations in the in the supplies of capital goods has taken place past year had started in the early months of 1950 and is expected to become more serious in the and cannot be traced to defense preparations or year ahead. Restrictions on the supply of capital military action. It is clear, however, that some of goods will create difficult problems for the Bank's these trends have become more pronounced since member countries. New effort and new approaches June 1950. The efforts of the industrial countries will be needed to make possible for member coun- to mobilize their military defenses have stimulated tries the maximum economic development with- heavy buying of raw materials; and there was a in the limitations of funds, local resources, and further reduction in the dollar shortage late in equipment available from abroad. This means ex- 1950 and early in 1951. ploring the possibility of drawing upon the funds The demand for raw materials has increased the and resources of those industrialized countries foreign-exchange earnings of many of the Bank's whose economies and currencies have been member countries. These increased earnings, com- strengthened in the postwar years. It means in- bined with the disappearance of dollar deficits in creased emphasis on the shaping of broad develop- many countries, have generally strengthened the ment programs and the careful setting up of pri- underdeveloped countries in their ability to service orities within those programs. It means making foreign debts. At the same time, the increase in the the most of new opportunities for productive loans prices of raw materials has worsened the terms of to those countries whose increased foreign earnings trade of many industrialized countries and thereby have placed them in a position to proceed more increased the strain on their resources. rapidly with their own development. In many countries the booming raw materials market has set in motion strong inflationary forces Increased Earnings of Underdeveloped which must be controlled by vigorous measures if Countries the gains in income are to be used to increase cap- The sharp increase in the demand for industrial [ 9 1 raw materials and foodstuffs by the industrial long-run prospects of the underdeveloped coun- countries of North America and Western Eu- tries on the basis of the extraordinary price and rope, combined with increases in the prices of demand conditions which prevailed in the last most of these commodities, caused substantial im- twelve months. Prices of primary commodities in provements during the past year and a half in the the world market have declined to some extent in balance of payments position of most countries recent months, and prices of the consumer and producing primary materials. The primary pro- capital goods that must be imported by the primary ducing countries of the sterling area, for instance, producing countries have increased. The prospect built up a sizable surplus of dollar earnings over is for a continued high level of production of pri- dollar expenditures. On the other hand, claims on mary commodities and their sale at satisfactory the United Kingdom increased, in the form of prices for some time to come, but it will require higher sterling balances among virtually all mem- careful husbanding of the additional earnings at bers of the sterling area. the disposal of the economically underdeveloped Some countries, finding themselves with more countries for these countries to reap the full bene- gold and dollars, relaxed their restrictions against fits of their favorable position. the import of dollar goods. In general, the im- provement in foreign-exchange earnings has helped Loans of Non-Dollar Funds these countries to build up reserves, has improved In earlier years the Bank's lending operations their ability to service foreign loans, and has im- were almost exclusively confined to loans in United proved their financial position by providing a mar- States dollars, since the United States was virtually gin of safety against temporary balance of pay- the only country whose economy could afford a ments difficulties. Of greater importance, however, net outflow of capital and resources. The appraisal is the fact that increased exchange earnings should of the ability of the Bank's borrowers to carry in- enable many of the primary producing countries creased debt had to be based on the prospects of to devote a larger share of their total income to these countries to service dollar loans - either by economic development. earning dollars in direct trade with the dollar area The increase in foreign-exchange earnings, which or by converting the necessary amounts from other was especially pronounced in the summer and fall currencies into dollars. During the past year the of 1950, was not an unmixed blessing. In many direct and indirect dollar earnings of many coun- countries it led to a renewal of inflationary pres- tries have improved; but there are still a number sures. A number of countries have taken effective of countries that cannot service loans in dollars to steps to curb these pressures by the introduction of the extent they can in other currencies. At the same higher export taxes and similar measures designed time, the expansion of production and income in to siphon off a certain proportion of the gains re- many of the Western European countries has cre- sulting from the raw materials boom. It remains to ated a reasonable expectation that these countries be seen whether the increased foreign-exchange would find it possible to devote resources on an earnings will be used to the best advantage by these increasing scale to supply some part of the devel- countries. If the earnings are used to increase opment needs of underdeveloped countries on reserves and pay off indebtedness, to finance sound long-term credit. The impact of the rearmament development projects, and to encourage the expan- program on the economies of Western Europe has, sion of agricultural and industrial production, the however, for the time being, raised new difficulties. temporary profits will be converted into lasting The Bank wishes to expand its loan operations in economic benefits. non-dollar currencies insofar as European member It would be a mistake, however, to appraise the countries are able to release 18co funds and to [10] open their capital markets for the issue of the resources to the strengthening of defense. Bank's bonds. A good beginning has been made, Within the last year four documents of major and it is highly important that such operations importance reaffirmed the need for economic de- be gradually expanded. velopment in underdeveloped areas. In the United During the fiscal year the Bank has obtained States, Mr. Gordon Gray submitted a Report on currencies other than United States dollars both Foreign Economic Policy to the President in which through releases of 18% funds and through bor- he urged an expansion of United States assistance rowing operations. The currencies thus made avail- to underdeveloped countries. A report by the In- able include mainly Canadian dollars and European ternational Development Advisory Board, headed currencies. The interchangeability of a portion of by Mr. Nelson Rockefeller, suggested concrete the funds obtained in Europe within the framework measures for carrying out the recommendation of of the European Payments Union enables the Bank the Gray Report that the United States make finan- to use them to finance purchases in most of the cial and technical aid available to underdeveloped countries of Western Europe. Loans of funds in areas and encourage the flow of private capital to currencies other than United States dollars should these areas. Both reports expressed the conviction clearly be to the advantage of those borrowers who, that the defense efforts of the industrial countries because of the pattern of their foreign trade and of North America and Western Europe are insep- international payments, find it easier to discharge arable from the continuation of economic aid to a non-dollar debt than one in dollars. But such underdeveloped countries. loans may have more far-reaching consequences. The countries of the British Commonwealth like- To the extent that they contribute to the accelera- wise endorsed the urgency of the task of economic tion of economic progress in underdeveloped coun- development in a report on the Colombo Plan for tries, they may eventually strengthen the ability of Cooperative Economic Development in South and these countries to assume debts in all currencies, Southeast Asia. The first steps have been taken to including United States dollars. In addition, in implement this plan through financial and tech- view of expanded industrial production in Western nical aid and through international efforts to assist Europe and limitations on the availability of many the countries concerned. types of equipment in the United States, it is quite The United Nations, in a report by a group of possible that those countries which can afford to experts, presented a comprehensive set of recom- incur dollar indebtedness will increasingly use mended measures for the speeding up of the rate borrowed dollars for purchases in non-dollar areas, of development in underdeveloped countries. These measures included international action by the The importance of Economic Development United Nations and other international agencies, The improvement in the economic and financial national action by developed countries, and na- position of most of the raw materials producing tional action by underdeveloped countries. It should countries, together with increased industrial pro- be noted that, in reporting to the United Nations duction in Western Europe, provide a new back- Economic and Social Council concerning the ex- ground for the efforts of the peoples of under- perts' recommendations, the Economic, Employ- developed countries to raise their standard of liv- ment and Development Commission of that Council ing. The economically advanced countries have stated that, generally speaking, it did not consider given increasing recognition to the urgency of pro- the experts' statistical estimates of financial needs, viding aid and encouragement to these efforts - and especially of needs for foreign financial as- in spite of growing international tensions and the sistance, to be substantiated. necessity of devoting a larger share of national There is a growing realization that the strength- [ 11 ] ening of defense undertaken by the economically ment of an underdeveloped country, whether they advanced countries depends in large measure on are policies designed to foster private initiative or the continued support and encouragement of the steps in the direction of expanding the govern- desire on the part of the peoples in Asia, Africa ment's own development expenditures, must be and Latin America to develop their resources. At coordinated. In the attempt to accelerate capital the same time, it has been recognized that the formation, it is particularly important to take ac- immediate requirements for defense may cause count of all the potentialities of both local and for- shortages of certain types of equipment and ma- eign investment. In many instances the Bank has terials and may therefore conflict, in the immediate found that borrowers are likely to consider specific future, with the carrying out of development pro- development projects primarily from the point of grams. But this does not mean that economic de- view of their suitability for foreign financing, velopment, which is a long-run and continuous rather than according to the most pressing needs process, will have to be interrupted or drastically of the economy as a whole; consequently, too lit- curtailed. The industrial capacity of the United tle consideration is given to the importance of local States, Canada and Western Europe has grown investment in economic development. and continues to grow at a rate which could make The Bank has always emphasized that economic it possible to satisfy both the increased claims on development is a continuous process, and that its resources arising from military necessity and the success depends to a large extent on the ability of essential needs of underdeveloped countries. the countries themselves to mobilize their total resources successfully and to use them to the best Need for Programming advantage. The Bank does not conceive of itself The need for care in the planning of economic merely as a source of funds for a few isolated development exists at all times - regardless of projects, but is prepared to take an active and con- economic trends and shifts in economic relation- tinuing interest in the over-all development prob- ships among nations. However, at a time when the lems of a member country. In its lending opera- income of many underdeveloped countries has in- tions the Bank has always evaluated requests for creased sharply, and when goods available for loans by assessing the contribution of a proposed development are limited, the need for careful project to the total economy of a country. This planning - and particularly the careful selection evaluation involves an appraisal not only of the of priorities - takes on new meaning. technical and financial aspects of the project but The technique of development programming also of its relative urgency and comparative value consists in essence of making an inventory of the in accelerating a country s economic development. sum total of the resources available to each econ- In the normal course of loan negotiations and ad- omy, and then deciding the order in which various ministration the Bank sometimes finds itself in a development projects should be undertaken within position to make helpful suggestions on engineer- the limits of available resources. The inventory and ing and management problems, on marketing, and the priorities must take into consideration the on methods of raising local capital. needs and possibilities for expanding facilities in Increasingly, however, the Bank is called upon the fields of education, technical training, public to provide advice or assistance without reference administration and health, as well as facilities for to any immediate financial operation. In large part, production and basic services. these requests for assistance show a growing appre- The main instrument of all development is ac- ciation of the need for establishing long-term de- celerated capital formation. For this purpose, all velopment programs. Member countries are seek- developmental activities carried on by the govern- ing help in formulating and carrying out coordi- [ 12] nated programs, and in training personnel in the the Food and Agriculture Organization of the techniques of programming development as a United Nations. The Bank has also stationed staff whole and in the appraisal of specific projects. members in several member countries for varying The Bank endeavors to adapt the form in which lengths of time to advise the governments in for- assistance is given to the needs and problems of mulating development programs. the particular situation. In the cases of Colombia, Frequently the Bank is asked for advice or assis- Cuba, Guatemala, Iraq and Turkey, the Bank has tance on particular problems, projects, or industries organized missions, at the request of the govern- important in development, without relation to any ments, to make comprehensive economic surveys to immediate financial operation. Aid of this kind, assist the government in working out the broad while usually concerned with economic or financial outlines of development programs. matters, covers a wide range of subjects. It may As yet this aspect of the Bank's technical assis- be rendered by members of the Bank's staff, or by tance activities is difficult to evaluate. Its success consultants specially engaged or nominated by the will be determined by the extent to which the sur- Bank. vey reports are accepted and acted upon. In Colom- The varied needs of member nations have thus bia, where the first such survey was made, the Gov- led to a growing diversity in the kinds of technical ernment established a non-partisan committee of assistance provided, as the more detailed account leading private citizens to review the report of the of the Bank's operations will illustrate. It may be mission and prepare recommendations for a na- stressed here that many advantages are to be tional development program. gained by underdeveloped countries if they begin The Bank hopes that similar procedures will be the admittedly difficult task of formulating their followed in other countries to which survey mis- long-run developmental aims with an unbiased sions have been sent, and is ready to provide appraisal of the relative urgency and the technical further assistance whenever possible to help in feasibility of the various parts of their programs. working out concrete programs of action based on It is equally important for them to base their plans the reports. on sound monetary and fiscal policies. Objective Some countries have called for more specialized and careful planning can greatly accelerate the help. Uruguay and Chile, for example, have asked speed of economic development. Moreover, the for the assistance of the Bank in formulating pro- full utilization of a country's ability to make effec- grams for agriculture; and the Bank is providing tive use of its own resources will contribute sub- this help through missions undertaken jointly with stantially to its ability to service foreign loans. BANK LENDING: 1947-1951 The Bank has now been in existence for more construction efforts of these countries were seri- than five years, and has been carrying on actual ously impeded and their economies critically men- lending operations for more than four. It has made aced by the lack of adequate resources. Because of a total of 48 loans amounting to the equivalent the magnitude of the problem and the need to take of $1,114 million, including $17 million in can- action on a large scale, these loans account for cellations by borrowers. The tabulation on page nearly one-half of the Bank's total lending. In mak- 14 shows the purposes for which the Bank's loans ing these loans the Bank assisted in the earlier have been made. phase of reconstruction, before the European Re- The first loans were to France, the Netherlands, covery Program was in operation. Denmark and Luxembourg, whose economies had Virtually all other loans have been granted to suffered severely from the war. The postwar re- less developed countries for the purpose of accel- [13] International Bank Loans cilities, and the improvement and expansion of Classified by Purpose telecommunications. as of June 30, 1951 It is only natural that, except for the early re- (In millions of dollars) construction loans, the Bank's lending operations Loans to France, Netherlands, Denmark and Luxembourg have been concentrated in the field of basic utili- for post-war reconstruction. . 497 ties. An adequate supply of power, communications Other Loans ............... 600 and transportation facilities is a pre-condition for Electric power - Machinery, equipment and construc- the most productive application of private savings tion materials .......... 271 in new enterprises. It is also the first step in the Transportation ............... 119 gtat Railroads: locomotives, gradual industrialization and diversification of the rolling stock, rails, and underdeveloped countries. These basic facilities shop supplies ....... 61 require large initial capital outlays which, because Shipping: vessels and ma- rine equipment ...... 12 of the low level of savings and the inadequate Roads: building machinery development of savings institutions, often cannot and materials ........... 29 anrts:domaerils . be financed wholly by the countries themselves. Ports: dockss, loading v equipment and dredging Moreover, most of the machinery and equipment machinery ........... 17 used in the construction of these facilities must be Communications-Telephone and telegraph equipment imported. Therefore, the resources of the Bank are and supplies ........... 30 called upon to provide the foreign exchange neces- Agriculture and Forestry 92 sary for the building of these vitally important Mechanization: general fie farm machinery and facilties. equipment ... . 38 Irrigation and flood con- Loans for the expansion of agricultural and for- trol: construction equip- estry production amount to $92 million, or slightly ment and materials.... 35 t Land clearing: machinery. 11 more than 15% of the Bank's development loans. Grain storage: construc- Of this $92 million, the greater part represents tion materials ........investment in basic agricultural development Timber production: ma- chinery and vehides ... 5 irrigation, flood control, and land clearing. In most Industry ................ 67 instances, the agricultural projects financed by the Manufacturing machinery. 60 B Mining equipment ...... 7 Bank form a retativety smatt part of wider pro- Development Banks ....... 21 grams aimed at expansion of agricultural produc- Total 1097 tion and the improvement of productivity. Agri- Ttl...............109 culture also benefits from many other projects financed by the Banlc. Better roads and railways eraring the growth and improving the basic struc- mean better markets for farm products; better port othre dfthevrel onopm ienl loans tha e lapied prtion t facilities result in lower costs of fertilizers and of the developmental loans has been applied to the agricultural equipment; and more electric power expansion and improvement of electric power sup- ailturaeipent; a more eler powe ply,comunictios an trnspotaton. oan of holds the promitse of a larger and cheaper supply ply, communications and transportation, Loans of ofidsrapoucsnedbyamr. this type to 17 countries have helped to finance the construction of power plants and transmission sys- A special category of loans are those made to tems, the rehabilitation and modernization of rail- existing or newly established credit institutions roads, the purchase of merchant vessels and marine to provide them with foreign-exchange resources equipment, the acquisition of roadbuilding ma- which they in turn can put at the disposal of pri- chinery and materials, the construction of port fa- vate borrowers engaged in small or medium-sized [ 14 ] businesses. In many countries, this important kind is not available on reasonable terms. The Bank's of business has not flourished, to some extent be- purpose in making this type of loan is to encourage cause the habit of free enterprise does not exist, private initiative in activities which can do much to and to some extent because development capital increase production and improve living standards. FUTURE POSSIBILITIES Production in the industrialized countries of ment have not yet been fully established, it is clear Western Europe is well above the prewar level, and that at all stages during the present period of the United States has expanded its productive fa- shortages it will be necessary for borrowers to cilities even beyond the high capacity reached dur- present full and complete statements on their pro- ing World War II. The needs of the industrialized jects to justify the filling of orders on American countries in Europe and North America for raw suppliers for critical items. The Bank will assist materials provide a strong demand for the prod- member countries, if they request such assistance, ucts of the underdeveloped countries in Asia, in drawing up their statements of justification. Africa and Latin America; and there is every The problem of obtaining the materials and prospect that this demand will continue. These equipment needed for development is concrete and basic trends mean good earnings for many of the tangible. But the progress of economic develop- underdeveloped countries and - in the perspective ment depends upon intangible as well as tangible of years and decades - a good supply of the equip- considerations. The people of a country must have ment necessary to economic development. a purposeful desire to develop their human and In the year to come, however, the countries de- natural resources. They must place the interests of siring to push ahead with their development face their country ahead of the interests of particular serious problems. Some kinds of goods they need groups. They must be prepared to accept the sud- are in short supply. This is true especially of power- den and sometimes painful adjustments in their generating equipment. It is true also of some social structure that come with economic progress. types of construction machinery, such as draglines, In addition to the desire for development and shovels, heavy tractors and excavators. In the past the willingness to make the sacrifices involved in year shortages have actually interfered little with its achievement, skill in economic programming, the Bank's operations or with the process of eco- knowledge of the techniques of financial control, nomic development generally. As mobilization pro- competent public administration, and efficient gresses, however, the difficulty of getting goods management of specific projects are necessary. It is needed for development will undoubtedly increase. for this reason that the Bank has expanded its In an effort to help member countries obtain the technical assistance activities. In the year ahead equipment they need, and to give them the infor- the Bank will continue to use the techniques it has mation required for planning, the Bank has estab- developed for helping member countries plan their lished a new unit to keep abreast of supply devel- further development; and it will continue to ex- opments in the United States and in Western periment with new ways of sharing with them what Europe, to assist borrowers in getting export pri- it has learned from its own experience. orities from the United States, and to keep mem- The Bank will watch with interest the progress ber countries informed on government regulations made in putting into effect plans of the more affecting the availability of goods for export. While advanced countries for aiding inr the development procedures for securing allocations of equipment of other nations. Investment and technical assis- for foreign economic development projects from tance by national agencies mean additional sources the defense agencies of the United States Govern- of funds, more trained personnel, and more inter- [ 15 ] est in the process of development. The Bank bene- to modify or postpone certain projects. Yet the fits by this increase of effort and stands ready to productive potential of the developed countries is cooperate with national agencies in all phases of immense, and current strains, although considera- their development activities. It will also make ble, are those of a defense economy rather than every effort to work out with other development of a war economy. It seems probable, in view of agencies, national and international, a clear under- the mutuality of interest between the industrial standing of the activities to be undertaken by each and the underdeveloped nations of the world, that agency so as to avoid the waste of duplicated effort. sufficient resources will be found and used to keep The speed of development will depend upon economic development on its course. The depen- the effectiveness with which economic resources dence of industrial nations on increasing supplies throughout the world are allocated and used; upon of primary materials from underdeveloped coun- the skill with which development programs are tries is great; and investment, especially in power desi,ned; upon competence in the administration o nedf . p and transportation, can increase those supplies. Of specific projects and of policies affecting devel- opment; upon the success with which developing Income from raw materials exports is essential countries mob-l.ze dones capital; and un t for providing to underdeveloped countries the cap- countries mobilize dom-estic capital; and upon thle itlncsaytvhi urhreooi rges determination of both the advanced nations and ital necessary to their further economic progress. the underdeveloped nations to give economic de- Even apart from broader considerations, these are velopment its proper emphasis. compelling reasons why investment to increase There is a sound basis for believing that conflicts productivity and raise living standards of less de- in the allocation of scarce materials and equipment veloped areas of the world should proceed in can be resolved without serious damage to the balance with the efforts of the more advanced continuity of economic development. In the months nations to strengthen their own economies and immediately ahead, to be sure, it may be necessary military defenses. F 16] THE BANK'S OPERATIONS This section is a country-by-country description less otherwise indicated, the respective govern- of the operations of the Bank in the past fiscal ments are the borrowers; loans to other borrow- year. Information is given for each country on one ers are government-guaranteed. The interest rates or more of the following topics: loans made; ne- shown include the 1% commission which, under gotiations and surveys looking forward to possible the Bank's Articles of Agreement, is allocated to loans; reports of progress made on Bank-financed the Bank's Special Reserve. Additional details such projects; and technical assistance to member coun- as maturity dates of loans, amounts disbursed and tries. repayments of principal are shown in a tabular Preceding the account of operations in each summary of loans in Appendix C, beginning on country is a list of loans made to that country. Un- page 54. AFRICA Belgian Congo plants, the remainder being largely for agriculture, Following preliminary discussions earlier in the housing, public health and education. year between the Belgian Government and the Egypt Bank, the President of the Bank and members of the staff visited Brussels in May to explore the pos- Athe invtationo t Egyptian Gvnment, sii of th Bak' participatin in th fianin the Bank sent a mission to Egypt in June 1951 to oft a development program for the Belgian Congo. examine projects for which Bank participation of a development.pogramfortheBelgianCn might be requested and to discuss with the Egyp- During this visit, it was agreed that the Bank t tr would try to work out two loans: first, a loan to investmenthe pets o beeamine incld the Belgian Congo to cover part of the cost of investment. The projects to be examined include the elgin Cogo o coer prt f th cos of improvement and expansion of irrigation in Upper goods and equipment which will be imported from androw er pand hydroelectric pow er and Lower Egypt, and hydroelectric poNver com- countries other than Belgium as a result of public bined with industrial development at Aswan. The investment in the Congo; and second, a loan to Bank mission, first to visit Egypt since March 1949, Belgium to cover the impact on the Belgian for- will also bring up to date the Bank's first-hand eign-exchange position of the additional exports knowledge of economic and financial conditions which she will provide to the Congo under the pro- in the country. gram. Both loans would be linked to projects form- ing part of the Congo program. A Bank mission Ethiopia visited Brussels at the end of June, en route to Fiscal $5 million 20-year 4%7 Loan of Septem- the Congo. 1951: ber 13, 1950 for rehabilitation of roads. $2 million 20-year 4% Loan of Septem- The Ten Year Plan for the Economic and Social ber 13, 1950 for establishment of Devel- Development of the Belgian Congo envisages opment Bank. public investment equivalent to $500 million, with $1.5 million 20-year 4%,j Loan of RFb- ruary 19, 1951 for development of tele- private investment of roughly the same amount. communications. About half of the investment covered by the public The Bank's highway loan to Ethiopia was made investment plan is for transport and communi- to pay the foreign-exchange costs of a program for cations, and about one-tenth for electric power road rehabilitation and maintenance to be carried f 17] out by a new Ethiopian Highway Authority. Pro- vestigate projects to be financed, and will assist ceeds of the loan will help pay for materials, equip- prospective borrowers in the preparation of proj- ment and services needed in the program. ects. Projects requiring the use of foreign exchange The improvement of roads is a prerequisite to from the International Bank loan to pay for im- the economic development of Ethiopia. A large ported equipment and services will be presented part of the country's export goods must be trans- to the International Bank for approval. ported by truck for part or all of the way to ports The Bank's $1.5 million telecommunications on the Red Sea. In addition, both export and im- loan will finance the import of equipment needed port goods travel by truck over feeder roads to for the expansion and improvement of three dif- and from main stations of the railway which links ferent communications systems: the local telephone the capital city of Addis Ababa with the port of service at Addis Ababa; an interurban system; and Djibouti, in French Somaliland. Lack of funds an international radio-telephone and radio-tele- and of experienced personnel to supervise high- graph service. In 1950, there were less than 2,000 way maintenance have caused deterioration of the telephones in Ethiopia to serve a population esti- roads. Transportation costs have been high and mated officially at 15 million persons, and fewer deliveries of goods slow. than 100 communities in the country could be The Highway Authority, established by the Gov- reached by telephone or telegraph. Successful com- ernment in 1951, has the responsibility for plan- pletion and operation of the projects contemplated ning, repairing and maintaining the national road under the Bank's loan would enable producers to system. In consultation with the Bank, the Govern- get quicker and wider knowledge of market con- ment has selected for the Authority a management ditions, would help shippers and traders to keep of experienced administrators and technicians from track of goods moving on the roads, and would the United States Bureau of Public Roads. An give the Government additional channels for com- important function of the Authority is to train municating both with outlying centers of popula- Ethiopian personnel in highway work. tion and with other countries. The Government The loan for the Development Bank of Ethiopia intends to establish a new Telecommunication was made by the International Bank to help provide Authority to carry out the project and to train original working capital for this new institution. Ethiopian personnel, and will select suitable man- The Government established the Development agement for the Authority in consultation with the Bank in 1951, and merged with it the Agricultural Bank. Band Co 1mrca, ank of Ethio, which, with Ethiopia's current balance of payments account and Commercial Bank of Ethiopia, which, with ha bee aprxmtl neuiiru ich small resources, had pioneered in the field of agri- has been approximately in equilibrium since the cultural credir. The International Bank's loan pro- end of World War II. The value of exports has vides foreign exchange for the new institution; the been well maintained; a market for hides and skins Government has subscribed the local capital, which ultimately will amount to Eth. $11 million (U. S. present high price of coffee has greatly increased $4.4 million). the income from the coffee crop, while the Govern- ment is making efforts to expand its export trade The Development Bank affords Ethiopia for the in ote cmo'te. first time a credit institution adequately capitalized in other commodities. for the purpose of making medium and long-term loans on reasonable terms for projects contributing to agricultural or industrial development. The man- Bank participation in the financing of develop- agement of the Development Bank, selected in ment in French Overseas Territories has been dis- consultation with the International Bank, will in- cussed from time to time with the French Govern- [ 18] ment. The Bank understands that documentation for the expansion and improvement of the state- is being prepared and may be presented informally owned transport system operated by the South to the Bank later in 1951. African Railways and Harbors Administration. To handle the great increase of traffic brought Southern Rhodesia about by the expanding economy of the war and At the request of the Prime Minister of Southern postwar years, the Administration has embarked . . . ~on a comprehensive program of improvement and Rhodesia, the Bank plans to send a mission in the onaco nsive prram oftimrovementhand expaso to b are u rm15 hog autumn to examine the possibilities of Bank lend- paso. ber crorie outifrom l195 throug ing for development. ~~~1955. Under this program, existing railway lines ing for development. will be improved, new lines constructed, rolling Union of South Africa stock purchased, road services improved, and har- bors and airports modernized and expanded. The Fiscal $30 million 20-year 4%o Loan of January foreign-exchange costs of. this program for 1951 1951: 23, 1951 to the Electricity Supply Com- and 1952 are estimated at the equivalent of $41 mission for power development program. $20miion 15-ypwear develoament profJan million; and part of this amount will be covered $20 million 15-year 33/41o Loan of Jan- uary 23, 1951 for expansion of trans- by the Bank's loan. portation facilities. Simultaneously with the Bank's loan, eight com- At the time of last year's Annual Meeting, a mercial banks in the United States extended a Bank mission was in South Africa. While there it credit of $10 million, maturing in 1954 and 1955, reviewed the economic and financial position of to the Union Government. The proceeds from this the Union and worked out the details of two loans, credit will be lent by the Union to the Railways which were concluded in Washington in January. and Harbors Administration for purposes com- A loan of $30 million, guaranteed by the Union, plementary to those of the loan from the Inter- was made to the Electricity Supply Commission, an national Bank. autonomous state agency, to assist in the expansion Since the end of World War II, several factors of its generating, transmission and distribution sys- have combined to sustain a high level of investment tem. The Commission supplies about three-quarters and consumption in the Union of South Africa. of the electricity consumed in the Union. It serves At the end of the war, the assets of the banking an area of 73,000 square miles which includes the system were very liquid and included ample re- more industrialized parts of the country. It has serves of foreign exchange. Investment funds and greatly increased its generating capacity and its consumer demand, pent up during the war, were transmission and distribution network since the released. The discovery of new gold deposits in end of the war. Nevertheless, present facilities are the Orange Free State created new demand for inadequate for current needs, and will be still less investment, both in mining and in the provision able to meet the much greater demands foreseen of services and amenities. The high level of activity for the future. The Commission is accordingly en- throughout the country stimulated a continuation gaged on an expansion program for the six-year of the wartime growth of secondary industry, and period from 1950 through 1955, which is designed required a general expansion of public utilities. to keep pace with the economic development tak- The boom was accelerated by an exceptionally ing place in all parts of the Union. The Bank's heavy flow of capital to the Union from the United loan will assist in financing imports of equipment Kingdom in 1947 and early in 1948, and by credit required for this program during the years 1951 expansion within South Africa. During this period, and 1952. internal savings were low; the high level of invest- A loan of $20 million was made to the Union ment and consumption expenditure was maintained 1 19 1 by incurring large deficits on the balance of pay- and private, considered necessary by South Africa ments and covering them either by capital inflow for the next few years, is considerably larger than or by utilization of foreign-exchange reserves. The can be financed out of local savings. Consequently, total balance of payments deficits in 1946-1949 continued development of the economy at the de- were S. A. £515 million; in this period foreign- sired rate requires foreign capital. The diflicult exchange reserves fell from S. A. £266.8 million position in which South Africa found itself in ($1,160 million) to S. A. £104.6 million ($293 mid-1949, with its foreign-exchange position seri- million). ously weakened, was the result of a reduction of In 1950 various factors combined to bring about private investment from abroad during the second an improvement in South Africa's international ac- half of 1948 and the first half of 1949. counts. There was a substantial increase in the South Africa has reserves ot toreign exchange value of exports, owing particularly to high wool which could be used if necessary to supplement the prices and the rise (in terms of sterling) of the inflow of new capital. These reserves, however, price of gold; imports remained at approximately are not high for a country which is developing the 1949 level owing to the continued operation of rapidly on the basis of an irregular influx of private import control. Consequently, the deficit on the foreign capital. The Government has therefore current balance of payments was reduced from wished to borrow dollars and other freely con- S. A. £111 million in 1949 to S. A. £7 million in vertible currencies to meet its investment require- 1950. At the same time the inflow of capital from ments, and has encouraged the inflow of private the United Kingdom led to an increase in foreign- capital from hard-currency countries. The Govern- exchange reserves of S. A. £61.4 million ($173 ment's borrowings from the International Bank million) during the year. and from private banks in the United States are The size of the investment program, both public an expression of this policy. A S I A Ceylon financial position of the railways has also im- A mission to Ceylon is presently being organized proved, and should be further strengthened by the by the Bank to undertake a general survey of the increase in rates introduced in 1951. To reduce economy of that country. overhead costs and make more effective use of railway facilities, the Indian Railways are being India reorganized and regrouped for administrative pur- Fiscal $34 million 15-year 4% Loan of August poses into six regional zones. 1950. 18, 1949 for railway rehabilitation; re- Organizational and managerial difficulties in the duced to $32.8 million May 16, 1950 at execution of the project for land reclamation, partly request of borrower hfinanced out of the Bank's $10 million loan, have $10 million 7-year 31/27o Loan of Sep- continued. The clearance of lands infested with tember 29, 1949 for importation of agri- cultural machinery. kans grass is proceeding at an increasing rate, but $18.5 million 20-year 4%O Loan of April is still slower than had been expecred. In the 18, 1950 for power development project. 1950-51 season 224,000 acres were cleared witlh The Bank's railway loan to India has been fully Bank-financed equipment. The pilot project for disbursed. There has been an appreciable im- the clearance of jungle land has been successfully provement during the past year in the efficiency carried out. On four occasions since the spring of of the railways which has contributed substantially 1950 the Bank sent technical experts to India to the strengthening of the Indian economy. The to exchange views with the Government on meth- [20] ods to remove existing difficulties and ensure suc- price levels. Production declined in the important cessful completion of the entire undertaking. It jute and cotton industries in 1950 because of raw- has been agreed between the Government and the materials shortages and some labor difficulties; but Bank that the present fleet of tractors will not be output increased in most other industrial fields as increased; however, a part of the undisbursed bal- well as in power, transport and mining. ance of the loan will be used to finance the pur- In spite of increased expenditure for economic chase of additional spare parts for tractors and development, the 1950-51 budget closed more auxiliary equipment. favorably than was expected, and for the first time The Bokaro-Konar power project in the Damo- since the partition of India and Pakistan, there dar Valley is progressing satisfactorily. The first was no reduction in the Government's cash bal- thermal unit at Bokaro should be ready for opera- ances. For 1951-52 the Government again proposes tion at the end of 1952 as originally planned. Its to increase expenditures for economic develop- operation through the subsequent dry season, how- ment. ever, will depend largely on the amount of cooling water provided by tlhe Konar Dam; and completion Iran of the dam will be delayed because of changes in A Bank mission visited Iran in April and May design. of 1950 to make a survey of the economic and During the fiscal year, certain developments in financial situation and to discuss with the Govern- the Indian economy were more favorable than in ment the technical and financial aspects of a few previous years. India built up a current balance of specific projects. In August 1950 the Bank advised payments surplus, including substantial net dollar the Government that it was ready to open nego- earnings. Foreign-exchange assets increased, in tiations for a loan to rehabilitate and expand the contrast to the steady decline prior to devaluation port of Khorramshar. At the same time, the Bank in 1949. Many of the difficulties arising from the informed the Government that it would require protracted trade deadlock with Pakistan have been supplementary information before it could consider dispelled by the trade settlement between the two projects for the construction of cement plants and countries early in 1951. Greater availability of for a multiple-purpose dam on the river Karaj near essential supplies from Pakistan, especially raw Teheran. The Bank also asked for a statement of jute, should strengthen India's export position. the policies of the new Government in fiscal, credit However, a normal relationship between the two and monetary matters, and in the administration countries cannot be expected until a solution of the of the Seven Year Development Plan. With the major political issues which exist between them deterioration of the budgetary situation which had has been found. In the year 1951 as a whole the set in during recent years, the Government had Indian balance of payments position may be af- diverted from developmental investment a sub- fected by heavy import requirements, particularly stantial part of its oil revenue. The result had been of grain needed to make up the deficiencies caused a serious slowing down of the pace of developmcnt by wide-spread crop failures in 1950. The United contemplated in the Seven Year Plan. States Government has authorized a long-term loan In October 1950 the Government advised the of $190 million to finance part of the grain-import Bank that it considered the cement and Karaj requirements. dam projects of high priority and gave certain Since the autumn of 1950, prices in India have general assurances regarding its financial policies been rising. The effects of devaluation have been and the administrative set-up of the Seven Year reinforced by a sharp seasonal upswing in business Plan. activity, an export surplus, and increasing world An Iranian delegation, which arrived in Wash- [ 211 ington in November 1950 to negotiate with the struction at the Port of Basrah of a complete grain United States Export-Import Bank, visited the handling and storage plant of 40,000 tons capacity. Bank in January 1951. It submitted additional Through its grading and cleaning facilities, the information on the projects under consideration plant would contribute to an improvement of earn- and discussed other projects for possible Bank ings from the export of grain. The proposed ma- financing. After a preliminary exchange of views chinery loan would finance a short-term program with the delegation, the Bank advised the Govern- of importing agricuLtural equipment, in part on ment in January 1951 that it was willing to consider government account for rental, and in part on pri- a material contribution to the development of Iran vate account for sale to individual farmers. Me- and suggested that a Bank representative should clhanical cultivation would help materially to ex- visit Teheran to establish with the Government an pand production on dry-farming land and increase appropriate basis for Bank assistance in the light the exportable surplus of grain. Discussions on of Iran's economic and financial situation and loan- these projects are proceeding. servicing capacity. The Iranian Government ac- The Government has informed the Bank that no cepted this suggestion and an exchange of views loan will be required for the Euphrates flood-con- between the Government and the Loan Director trol and irrigation project, which will be financed took place in Teheran in February 1951. out of the resources of the Development Board Events in Iran since March 1951 have made it established in 1950 for the purpose of planning necessary for the Bank to wait until the situation and executing a program of economic develop- has clarified sufficiently to enable the Bank to ment. make a re-assessment of Iran's position. In response to a request submitted in January 1951 to finance a modern oil refinery, the Bank Iraq recommended that the Government undertake Fiscal $12.8 million 15-year 33/4% Loan of studies to determine how this project could be eco- 190.: June 15, 1950 for flood control. nomically developed in conjunction with existing The Iraqi Government has called for bids on facilities. The Bank also notified the Government part of the construction of the Wadi Tharthar of its interest in the project, if it can be properly flood-control project to be carried out under the worked out. Bank's loan, and the arrangements necessary to Increased oil royalties, expanded agricultural make the loan effective were nearly complete. production, and high export prices have brought When the loan agreement was signed, the Govern- about considerable improvement in Iraq's economic ment indicated to the Bank its desire to obtain fur- situation during the last two years. A surplus in ther financial assistance for agricultural develop- Iraq's balance of payments was achieved in 1950 ment. The Bank agreed to undertake studies on the and the Government's fiscal position has been ground to establish the suitability of selected strengthened. Revenues from oil royalties have projects, and for this purpose sent a technical mis- been assigned to the Development Board; and de- sion to Iraq early in November 1950. velopment should be greatly accelerated as the in- As a result of this mission, the Bank advised creasing revenues from a higher rate of royalties the Government in February 1951 that it was pre- and the expanding oil production become avail- pared to negotiate loans for the importation of able. agricultural machinery, for the construction of In October 1950 the Government requested the grain-storage facilities, and for flood control and Bank to send a comprehensive survey mission to irrigation on the Euphrates. undertake a review of the country's economic po- The grain-silo project would provide for the con- tential and to make recommendations for thie [ 22 ] most effective use of Iraq's physical and financial by the increased world demand and high prices for resources for a long-term program of development. her exports. Early in 1951 the virtual trade dead- In response to this request the Bank organized a lock with India was broken by the conclusion of a mission of 14 technical and economic experts re- new trade agreement. However, the major political cruited on a broad international basis. The mis- issues which exist between the two countries still sion, headed by Dr. Ivar Rooth, left for Iraq in hamper the establishment of normal relations. In the latter part of February and returned to Wash- the 1950-51 financial year Pakistan reached an ington in June 1951. It studied all major segments over-all balance in its budgetary position and since of the Iraqi economy, including public finance, agri- September 1950 has substantially increased its for- culture, animal husbandry, irrigation, flood control eign assets through a current balance of payments and drainage, transportation, industry and power, surplus. Economic development in Pakistan is public health, education, public administration already going forward and the general lines of and community planning and housing. The mission emphasis appear well conceived. is now preparing its findings and recommendations. From October to December 1950 Pakistan was host to a Training Institute on the Economic Ap- Lebanon praisal of Agricultural Development Projects. Held Bank representatives visited Lebanon and had in Lahore, the training institute was sponsored discussions with the Government in December jointly by the United Nations, the Food and Agri- 1950. The project for the development of hydro- culture Organization, and the Bank for the purpose electric power and irrigation on the Litani River, of training government officials of member coun- now being surveyed, may require external aid in tries in the techniques of preparing and executing its financing. programs and projects. The institute was attended by representatives of Australia, Burma, India, Pakistan Indonesia, Japan, Nepal, Pakistan and Thailand. In October 1950 the Bank sent a mission to Pakistan to examine economic and financial con- Syria ditions and to appraise projects on which the Gov- In August 1950 the Syrian Government advised ernment had submitted data during the previous the Bank of its intention to apply for a loan for the summer. financing of various projects, including flood con- In March 1951 the Bank informed the Govern- trol, irrigation and drainage, hydroelectric power ment that it was prepared to enter into negotia- and port and railroad construction. A Bank mission tions for Bank participation in financing the reha- visited Syria during November and December bilitation of the railways and the expansion of 1950 to make a preliminary survey of the economic power, agriculture, industry and telecommunica- and financial situation and to review specific pro- tions. A delegation from Pakistan arrived during posals. the last week of June to open loan negotiations. Two projects were submitted in January 1951 While Pakistan has been confronted with diffi- for Bank consideration. One provides for the drain- cult economic and financial problems since its crea- age and irrigation of 10,000 acres of swamp land tion as an independent nation, it produces an ade- in the Roudj, near Aleppo; the other is for the quate internal food supply and exports substantial improvement of roads, primarily in the Jezira, a surpluses of basic agricultural products. Recent rapidly developing agricultural area in the north- developments have been particularly favorable. east. A third proposal, for the expansion of the Since the latter part of 1950 Pakistan's internal port of Latakia to a minimum annual capacity of and external financial position has been bolstered 400,000 tons to handle the increasing exports of [ 23 ] agricultural products, was submitted in May. the railways system. Previously, the railways had There are several other projects in preparation been operated by a department of the Ministry which may be presented for Bank consideration. of Communications. The railways are now gov- In compliance with the desire of the Government, erned by a board with a director in charge of negotiations for the financing of irrigation and management and operations. road improvement are waiting until the Bank has The irrigation loan will finance the cost of imi- concluded its examination of the Latakia Port ported equipment and materials for a project to Project. provide an assured water supply to a rice-produc- Since 1949 there has been a considerable im- ing area of 21/4 million acres in the central plain. provement in Syria's economic situation, due prin- The project includes a barrage, with housing for cipally to a remarkable increase in the production the future installation of power-generating equip- of cotton and grain, and to an expansion of ex- ment, to partially retain the waters of the Chao ports, which have recently commanded greatly in- Phya River at Chainat. The execution of this proj- creased prices. ect, which is expected to take eight years, will be On the other hand, the Government budget has carried out by the Irrigation Department of the been showing deficits, which have been caused in Ministry of Agriculture, which has retained the part by heavy military expenditures. Only a part services of a foreign construction firm to furnish of the deficits has been met from accumulated technical advice. Rice production in the area served reserves, the remainder being covered by borrow- by the irrigation project is expected to increase ings from the Banque de Syrie et du Liban, which sufficiently to provide an exportable rice surplus performs the functions of a bank of issue. These of nearly half a million tons even after allowance borrowings have had no appreciable effect on cur- is made for increased local consumption require- rency circulation, but they have resulted in a con- ments. siderable reduction of Syria's foreign-exchange The port construction and development loan will reserves. finance the acquisition of port equipment, and will help pay the foreign-exchange cost of dredging Thailand w 7 a channel through the sandbar at the mouth of the Fiscal $3 million 15-year 33/4A Loan of Octo- Chao Phya River to permit larger vessels to enter 1951. ber 27, 1950 for railway rehabilitation, the port of Bangkok. The project should increase $18 million 20-year 4%o Loan of October 27, 1950 for irrigation project. the port's capacity and reduce cargo-handling costs $4.4 million 15-year 33/4% Loan of Oc- by the elimination of charges for lighterage and tober 27, 1950 for port development. transshipment. In the interests of efficient opera- The major part of the Bank's railway rehabilita- tion, regulation and unified development of port tion loan will be devoted to equipping the railway and navigation facilities in the Bangkok area, a workshops at Makkasan according to plans pre- government-owned autonomous authority, the pared by consulting engineers retained by the Gov- Thai Port, was created in May 1951. The Port is ernment. These workshops will provide for main- now governed by a board of commissioners and tenance of locomotives and rolling stock. The administered by a port director. balance of the loan will be used to purchase me- The Bank has cooperated with the Government chanical signaling equipment and spare parts. An in obtaining the services of technical experts for autonomous government-owned agency, the Rail- various duties in Thailand. Most of the experts ways Authority of Thailand, was established by have been retained to advise on projects financed act of Parliament in May 1951 and was made by the Bank; one will advise the Government on responsible for the operation and development of fiscal administration. [ 24 1 During the year under review the economic tin, which had lagged since the war, recovered to situation continued to improve. The upward trend nearly the prewar average. Thailand achieved large in production has continued, and a further increase trade and balance of payments surpluses with both in exports has been achieved. Thailand, with 1.5 the hard and soft-currency areas, and its gold and million tons of rice exported in 1950, is the world's foreign-exchange reserves, which had been rising largest rice exporter. Rubber exports increased to since 1948, reached a new high. The internal price more than twice the prewar level, and exports of level has remained relatively stable. AUSTRALIA Fiscal $100 million 25-year 4/47o Loan of ing, iron and steel production, and a broad range 1951: August 22, 1950 for development pro- of other industries; and, concurrently, the develop- ment of water conservation, hydroelectric power The Bank's loan to Australia followed negotia- facilities, road and rail transport, housing and pub- tions which were initiated in Washington by the lic utilities. The carrying out of this program should Commonwealth Prime Minister. The loan was add substantially to the country's productive capac- made to help pay the cost of importing capital ity and strengthen its long-run balance of payments goods and equipment needed for development position. projects, both private and governmental, over the The major part of the Bank's loan will be used next two years. for equipment needed by farmers and private busi- Australia is embarking on a period of rapid eco- ness concerns. Specialized agricultural machinery nomic development. A sharp rise in immigration and equipment, such as crawler and special wheel has contributed to an annual rate of population tractors, are needed to increase farm mechaniza- increase of 31/2%; and it is an aim of Australian tion, promote more intensive cultivation and make policy to continue a high rate of immigration over possible the introduction of the latest agricultural the next decade. This gives rise to large investment techniques. Heavy crawler tractors and earth-mov- requirements for new productive facilities, hous- ing equipment will assist in opening up new areas, ing and public utilities. In addition, there are sub- clearing land for cultivation, providing irrigation, stantial investment needs resulting from unsatisfied conserving water resources and constructing hy- demand during World War II, as well as from the droelectric works. normal industrial development of a young country To meet the special operating conditions on the with unexploited natural resources. Australian railways - long stretches of line poorly The development program which the Bank's supplied with water - diesel electric locomotives loan will help finance forms one part of the Com- are being acquired. The expansion of strip mining monwealth Government's plan for dealing with in New South Wales will be assisted by heavy the problems brought about by high demand for excavators, stripping shovels and specialized drills, investment and production. Since the bulk of capi- and the modernization of underground mines by tal investment in Australia is undertaken by private coal cutters, loaders and underground locomotives. enterprise, it is not possible to lay down beforehand Equipment for the mining, smelting and refining the precise proportions of investment in different of non-ferrous metals will improve operating effi- economic fields. Among other things, however, ciency. Australia's development plans provide for the A substantial part of the loan will be used for modernization and expansion of agriculture, coal urgently needed items of capital equipment for a and non-ferrous metal mining, smelting and refin- wide variety of manufacturing industries. In the [ 25 ] steel industry the increase of pig-iron and steel- Commonwealth possessed large sterling reserves ingot capacity and the erection of a hot and cold and received a substantial inflow of private sterling continuous strip mill, a skelp mill and a cold capital. Australia continued to have a surplus in reversing sheet mill all require dollar equipment its current balance of payments and increased its which the Bank's loan is financing. Equipment will sterling reserves to a level much higher than at the be procured for the production and processing of end of 1945. However, these resources could not aluminum; modern mechanical foundry opera- be used to import all the goods and equipment tions; gear-cutting and the manufacture of ma- needed because adequate supplies were not avail- chine tools; the manufacture of roller chain and able in soft-currency countries. In these circum- conveyor systems; food processing; and the manu- stances, the Government decided that recourse facture of rayon filament. must be taken to hard-currency sources of supply When Australia attempted to satisfy investment in order to obtain the goods urgently required for demands which had been postponed during World economic development. In view of the difficulty of War II, inflationary pressures began to appear, obtaining hard currency within the sterling area, accompanied by shortages of labor and of many the Government approached the International important materials and types of equipment. The Bank to obtain a loan in dollars. EUROPE Belgium As mentioned on page 17, discussions were Fiscal $16 million 20-year 41,4% Loan of started in June on a possible loan to Belgium to 1949: March 1, 1949 for steel plants and elec- cover the impact on the Belgian foreign-exchange tric power. position of additional exports which Belgium may In April 1951 Bank engineers visited Belgium provide to the Congo for development purposes. to observe the work on the projects financed under The declining levels of production, employment the loan. The slabbing and blooming mill of S. A. and prices which dominated the Belgian economic d'Ougr6e-Marihaye has been in full operation for scene up to the summer of 1950, were abruptly over a year and is producing at an annual rate of reversed by the outbreak of hostilities in Korea. 900,000 tons. The cold rolling mill of the Com- A wave of buying - both by domestic and foreign pagnie des Fers Blancs et T6les a Froid (Ferblatil) consumers - badly depleted normal inventory at Tilleur began operating in June 1950 and is now holdings and sent the index of industrial produc- in production. The tinning line, which will pro- tion to an all-time high. A new stimulus was given duce high-quality tin plate, and is the only one in to the heavy industries in which production had continental Europe using the electrolytic tin-plat- declined markedly. The increase in demand, com- ing process, started operations on March 15, 1951. bined with price increases in world markets, caused The construction of the thermal power plant at a sharp rise in the level of domestic wholesale Awirs of the Union des Centrales Electriques de prices. Unemployment dropped sharply while gov- Liege-Namur-Luxembourg (Linalux) is nearing ernment revenues rose. The combined effect of completion. The first turbine was started on May these developments materially improved the pub- 21, 1951 and the second should be in operation lic finances, although the grave international sit- in September. It is expected that at the end of the uation increased rearmament needs and thereby year the plant will work at its full installed capac- imposed an additional burden on the country. ity of 100,000 kw. Total disbursements under the The high levels of economic activity brought an loan amounted to $12.5 million at the end of the increased demand for imports and caused a defcit fiscal year. in the current balance of payments of the Belgo- [ 26 ] Luxembourg Economic Union in all currencies ous dollar problem as a result of high prices for equivalent to $190 million during 1950. This, to- essential raw-material imports, declining ECA aid, gether with some outflow of capital, brought about and dollar payments to the European Payments a decline in the gold reserves of the National Bank Union to finance the Danish deficit with OEEC which has since, however, been partly recovered. countries. At the same time, rearmament in other The dollar deficit of the Economic Union was re- countries is making it more difficult for Denmark duced to $200 million by means of increased ex- to obtain necessary supplies of important raw ma- ports and continued to be largely financed by ECA terials. conditional aid. The Vice President of the Bank visited Denmark in September 1950 and discussed matters of com- Denmark mon interest with representatives of the Govern- Fiscal $40 million 25-year 4¼% Loan of Au- ment and other officials. The Bank has since con- 1948: gust 22, 1947 for reconstruction. tinued to consult with the Government with regard It is now about two and one-half years since dis- to measures by Denmark to meet her present bursement was completed on the loan made before problems. the advent of the European Recovery Program, when there was urgent need for the Bank to help Finland meet the problem of financing essential imports for F;scal $12.5 million 15-year 4% Loan of Au- postwar reconstruction. 1950: gust 1, 1949 to the Bank of Finland for development of power, woodworking in- Danish production has successfully recovered dustries and limestone powder produc- from dislocations caused by the war. Agricultural tion. production is at present 10%7 above prewar levels $2.3 million 2-year 3% Loan of October and industrial output is almost 60% higher than 17, 1949 for timber equipment. in the best prewar year. The rate of exports is More than half of the $12.5 million loan made more than 20%° above the prewar volume. to the Bank of Finland has been disbursed. Most Unfortunately, these achievements have not of the equipment for the electric power program brought Denmark the benefits which were hoped has been delivered and paid for, and the program for two and a half years ago. The terms of trade itself is nearing completion. Of the relatively small deteriorated seriously after the currency devalua- amount for limestone grinding, most has been tion of 1949. This development has been further disbursed. Disbursement for machinery for the accentuated since the outbreak of war in Korea. modernization and expansion of a number of Since September 1949, the prices of Denmark's plants in the woodworking industries has been imports have risen by more than 60%. The prices slower. This has been due largely to the redistri- of her exports, oIn the other hand, have increased bution of orders to take advantage of changes in only a few per cent, in part because exports to the the price of equipment after the devaluation of United Kingdom are largely governed by long- European currencies. term bulk-purchase contracts. The significance of Slightly less than $2 million of the $2.3 million the deterioration in the terms of trade for the Dan- loan to the Government to finance purchases of ish economy is illustrated by the fact that, but for timber equipment had been disbursed by the end these price changes, Denmark would have achieved of the fiscal year, and withdrawals were continuing. a small surplus on her balance of payments account Brisk demand and high prices for paper, pulp for 1950 instead of a deficit equivalent to about and other wood products have raised Finland's $100 million. Although exports to the dollar area production and exports to new higlh levels. Post- have risen considerably, Denmark still faces a seri- war reconstruction is virtually completed and rep- [ 27 1 arations deliveries, due to end in September 1952, Production in France has geared itself to a higher are already tapering off. Finland's payments posi- level of industrial activity than it had reached at tion, both with regard to dollars and other cur- the outbreak of war in Korea. However, the grow- rencies, is satisfactory but is dependent upon a con- ing burden of rearmament, shortages and higher tinuation of the present highly favorable terms of prices of raw materials, the budgetary deficit, and trade. Inflation - caused chiefly by a high level the inflationary rise in domestic prices remain seri- of investment and the heavy burden of reparations, ous problems. The external financial position con- and aggravated by rising money incomes of both tinued to improve in 1950. The current account farmers and workers - remains the most urgent of the balance of payments of the franc area economic problem. During the past year inflation showed a deficit equivalent to $238 million; the has been given additional impetus by the rise in dollar deficit was $419 million, but there was a prices of imported raw materials. However, since substantial surplus with other continental Euro- January 1951 a stronger anti-inflationary policy pean countries. In the first half of 1951, for metro- has been adopted. politan France only, the deficit in dollar trade The Vice President of the Bank visited Finland was substantially lower than in the corresponding in September 1950 and a small delegation from period of 1950. However, the position in trade Finland came to the Bank in February 1951. As a with other areas, notably Europe, was less favor- result of discussions held at these times, several able so that the over-all trade deficit with foreign proposals have been made to the Bank for further countries was approximately the same. lending. The Bank has indicated its willingness to consider these proposals after it has been supplied Iceland with information on Finland's over-all investment program. Fircal £875,000 22-year 43/s% Loan of June 1951: 20, 1951 for power development projects. France The loan of £875,000 ($2.45 million) made this Fiscal $250 million 30-year 4¼4 % Loan of May year to finance the cost of imported equipment for 1947: 9, 1947 to Credit National for recon- the expansion of electric power in Iceland is the struction. first Bank loan consisting entirely of currencies The Bank continued to maintain close contact other than United States dollars. It will be dis- with the French Government throughout the past bursed in sterling, French francs, Danish kroner year. The President of the Bank held numerous and Norwegian kroner for purchases in Sweden, discussions with leading Government officials dur- the United Kingdom, Western Germany, Denmark ing his visits to Paris and members of the Bank's and Norway .The United Kingdom, France, Den- engineering staff visited France in the spring. Of mark and Norway have agreed to release, for this the projects which the Bank helped to finance loan, portions of their 18% subscriptions to the through its $250 million loan, two steel mill proj- Bank's capital. Part of these releases will be used ects are the last to be completed. The cold rolling for purchases in Sweden and Western Germany, mill at Montataire, completed in January 1950, has which are not yet members of the Bank. now been in regular production for over a year; The loan will help to finance two hydroelectric and the quality of the sheets rolled by this mill projects which will further develop the resources is reported to be excellent. At Denain, the reversi- of the Sog and Laxa Rivers. The entire cost of ble slabbing mill was put into production on De- these two projects is the equivalent of $13 million; cember 31, 1950; it is not expected to be in full the purchase of equipment in the United States in operation, however, before the end of 1951. the amount of nearly $5 million is to be financed [ 28] by ECA, and the Icelandic krona costs will be per il Mezzogiorno) was satisfactory, and that financed locally. suitable projects had been selected. These projects These projects are of high priority in Iceland's are now being drawn up in a form which will make investment program. The existing supply of elec- possible their detailed appraisal by the Bank. The tric power is insufficient to meet present industrial Bank has indicated that its interest in the develop- and household needs; and in addition to meeting ment of Southern Italy is intended to be a con- these requirements, an increased supply of power tinuing one. is needed to make possible the establishment of As indicated in the last Annual Report, the pro- new industries which would tend to diversify the gram for Southern Italy involves expenditures of economy and help reduce dependence on fishing public funds over a period of ten years at the rate and related industries. of 100 billion lire ($160 million) per annum, of Iceland has, since the war, been engaged in a which three-quarters will be spent on land reclama- heavy investment program which has had consid- tion, irrigation, and agricultural improvement, and erable inflationary impact. Now, however, the the remainder on the construction of aqueducts, Government has adopted policies to restrict credit the rehabilitation of roads, and the development of and balance the budget. Certain institutional tourist facilities. Funds are to be appropriated an- changes to enable Iceland to carry forward a well nually by the Treasury, including in the first two regulated investment program are also being con- years of the program substantial amounts of the sidered. A Bank staff member visited Iceland lire counterpart of United States aid. The program in February 1951 to study investment requirements has been formulated by a committee of Cabinet and the institutional changes needed for their most Ministers responsible also for coordinating it with effective accomplishment. His findings and recom- the programs of public works remaining within mendations have been submitted to the Govern- the competence of the ministries. ment. There is a continued exchange of views between the Government and the Bank on this and Luxembourg other matters of common interest. Fiscal $12 million 25-year 41/4o Loan of Au- 1948. gust 28, 1947 for reconstruction; reduced to $11.8 million on December 19, 1949 Italy at request of borrower. The possibility of the Bank's assisting in the de- In April 1951 Bank engineers visited the steel velopment of Southern Italy was mentioned in the mill projects of the Aci6ries R6unies de Burbach- Fifth Annual Report. In August 1950 the Bank Eich-Dudelange (Arbed) at Dudelange, the for- informed the Italian Government of its willingness eign-exchange cost of which was financed under to participate in the financing of the 10-year pro- the Bank's $12 million loan. Disbursement of loan gram for that area. The purpose of Bank assistance proceeds was completed in December 1949. Both would be to mneet the additional demand for dol- the hot and the cold rolling mills have been in lar imports arising from investment activity in the operation since the spring of 1951. The annual South. The technique would be for the Bank to capacity of the hot mill is 400,000 tons, and of the select projects which would be financed by the lire cold mill 180,000 tons, but it is not expected that counterpart of its loan. the mills will operate at full capacity until the In the spring of 1951, the Bank sent a mission additional steel-producing facilities, now under to Italy to investigate the technical aspects of the construction, are completed. program. The mission reported that the general Luxembourg has benefited greatly from the re- conception of the program was sound, that the or- covery in the demand for steel. Production reached ganization responsible for its execution (the Cassa 251,000 metric tons in April 1951, compared \\ ithl [7293 180,500 in the corresponding month of 1950, and imports of Swiss machinery than before. It also was still rising. Total Government revenues dur- allots a substantially larger proportion of loan ing the first quarter of 1951 slightly exceeded those funds to the textile industry. for the same period of last year. The output of goods and services in the Nether- lands has continued to increase, making possible The Netherlands a further slight rise in real per capita income in Fiscal $195 million 25-year 414% Loan of 1950. The level of domestic consumption con- 1948: Auclust 7, 1947 for reconstruction. tinued to decline somewhat, allowing a higher rate Fiscal $12 million 10-year 3-9/16%G Loans of of investment, largely in increased inventories. 7949: Julv 15, 1948 to N. V. Stoomvaarr Maat- Considerable inflationary pressures developed, gen- schappij "Nederland" (two loans of $2 erated by a combination of internal credit expan- million each), N. V. Vereenigde Neder- landsclie Scheepvaartmaatschappij (one sion and the rise of prices in world markets. Owing loan of $2 million), N. V. Nederlandsch- to sustained high tax receipts the Treasury cash Amerikaansche Stoomvaart-Mattschappij "Holland Amerika Lijn" (one loan of position developed favorably through 1950 but $2 million), and N. V. Rotterdamsche due to tightening of the market for Treasury securi- Lloyd (two loans of $2 million each), for ties, the cash position has considerably deteriorated purchase of ships. during the first half of 1951. The balance of pay- Fiscal $15 million 15-year 4c%G Loan of July 26, ments has suffered a sharp setback. The deficit on 1950: 1949 to the Maatschappij tot Financier- ing van het Nationaal Herstel N. V. current account climbed from roughly the equiva- (Herstelbank) for industrial development lent of $74 million in 1949 to $237 million in 1950 projects; reduced to $8.8 million March because of deterioration in the terms of trade and 17, 1950 at request of borrower. increased imports for inventory accumulations. Th-e The administration of the $195 million recon- ratio of exports to imports fell from 72% in 1949 struction loan, which has been fully disbursed, has to 68% in 1950. The deficit with the dollar area, proceeded satisfactorily. The $12 million loan to however, continued to decrease from $191 million four shipping companies has been reduced to $9 in 1949 to $107 million in 1950. million through repayments made to the private C ~~~~~~~~~~The Netherlands faces serious problems in its banks in the United Stares which, with the Inter- efforts to balance its foreign accounts, while at the national Bank's guarantee, have purchased the loan . . u > ~~~~~~same time undertaking an expanded defense pro- in its entirety. gram. The Government is seeking by fiscal and The loan to the Herstelbank, a finance corpora- monetary measures to bring about a reduction in tion for national reconstruction, for the rehabilita- consumption and a substantial cut in net invest- tion and modernization of a considerable num- ment, and thus to release resources for the defense ber of manufacturing industries, is being utilized effort and to overcome the deficit in the balancc gradually. Total disbursements by June 30, 1951 of payments. amounted to approximately $4 million; only three of the more than 30 individual projects have been Turkey reported completed. Fi,rcal 3.9 million 18-year 37/s% Loan of Jul' As a result of the currency devaluations and the 1951. 7, 1950 for (grain-storagc facilitics. increasing availability of industrial equipment in $12.5 million 25-year 414 %C Loan of Julv Western Europe, the character of the original loan 7, 1950 for development of ports. was substantially modified, some projects being S9 million 15-year 33jj.4 Loan of Octo- eliminated, others changed, and new ones intro- ber 19, 1950 to Industrial Dcvelopmnc Bank of Turkey for dcvclopmeit of pri- duced. The loan now includes a larger share of vate industry. [ 30 ] Most of the projects under the grain-storage developing the basic public utilities, the report loan will be from six months to a year behind their points out, and this progress should make it pos- scheduled dates. Delays also have occurred in the sible, with careful planning, to increase the pro- selection of engineering consultants on port devel- duction both of agricultural and industrial con- opment, but it is now expected that port projects sumer goods. will go forward. Turkey is carrying out a large development pro- As described in the Fifth Annual Report, the gram, of which the projects financed by the Bank privately owned Industrial Development Bank was form only a small part. At the same time, she is created as a result of discussions between the Turk- building up her military detenses, which will con- ish Government, private Turkish interests and the tinue to consume a large share of her economic Bank, for the purpose of stimulating the growth resources. These programs, proceeding simultane- of private industrial enterprise in Turkey. The ously, impose a heavy strain on Turkey's internal Bank's loan of $9 million is to finance the costs of finances. The Government continues to show a imports for this program. deficit in its budget and inflationary pressure The Industrial Development Bank has now be- persists. gun operations. By June 30, 1951 it had made loans fo see prjet amutn.o276,0 uks Turkey's current balance of payments situation for seven projects amounting to 2,762,000 Turkish ha eetysonsm ipoeet eete liras and had approved additional loans totaling as recently shown some improvement. Neverthe- T.L. 4,180,000, of which slightly over half would ls, the import surplus remains substantial. Jts be in foreign exchange to be requested from the fnancig has been provided largely by external Bank. So far, actual withdrawals from the Bank's aid. loan have been for small administrative expenses incurred in foreign exchange. Yugoslavia On June 4, 1951 the report of the Bank's com- Fiscal $2.7 million 2-year 3% Loan of October prehensive economic survey mission headed by Mr. 1950: 17, 1949 for timber equipment. James M. Barker was presented to the President and Prime Minister of the Turkish Republic by the The loan was fully disbursed by December 31, Vice President of the Bank. The report contains 1950. Repayment of principal, as of June 30, 1951, an analysis of the Turkish economy and its rec- amounted to slightly more than $2.2 million. ommendations are designed to create the essential In the Fifth Annual Report it was indicated that framework within which the Turkish Government discussions were being held in Washington be- can work out a sound long-term economic develop- tween representatives of the Bank and of the ment program. Yugoslav Government. Immediately after the An- Three basic principles underlie the program pro- nual Meeting of the Governors of the Bank last posed by the mission: the development of agri- year in Paris, the President of the Bank visited culture as the essential base for further industriali- Belgrade to reappraise Yugoslavia's development zation; better utilization of the human and physical and general economic policies. During this visit the resources Turkey now has, in particular the train- Government presented its investment program, ing of technical, administrative and managerial which subsequently was examined and discussed personnel; and greater coordination of economic by the Bank with a Government representative activity by the Government in order to ensure that sent to Washington for the purpose. As a result of the limited resources available for development these discussions a program of investment priori- will be applied to the areas of greatest economic ties was worked out which might form the basis need. Turkey has already made great progress in for financing by the Bank. [ 31] LATIN AMERICA Brazil do Sul, and was arranging to send a small mission Fiscal $75 million 25-year 41/2 % Loan of Jan- to Porto Alegre during the summer to examine the 1949: uary 27, 1949 to Brazilian Traction, Light Commission's plans for expanding service in the and Power Company, Ltd. for power and region telephone development program. Fiscal $15 million 25-year 41/4% Loan of May The Bank has followed with interest the recent 1950: 26, 1950 to Companhia Hidro Eletrica establishment under United States Point IV legis- do Sao Francisco for power development eatiooaont Brazi-U S.aeconomIc leveo- project. lation of a Joint Brazil-U. S. Economic Develop- Fiscal $15 million 25-year 414% Loan of Jan- ment Commission. It will be the task of the Com- 1951.' uary 18, 1951 to Brazilian Traction, Light mission to work out an investment program for and Power Company, Ltd. for power de- Brazil, to establish priorities within the program, velopment program. ' In January 1951 the Bank increased by $15 mil- and to assist in the technical preparation of proj- l sloan of January 1949 to the Brazilian Trac- ects for which priorities have been established. lion its loan of January 1949 to the Brazilian Trac- The Bank has indicated its willingness to work tion, Light and Power Company, Limited. This was closely with the Commission. the second installment of a $90 million loan which the Brazilian Congress, in 1948, authorized the Brazil's economic situation improved during the Minister of Finance to guarantee. past year. Both agricultural and industrial produc- The first installment of the Traction loan has tion increased. Development of powver, transporta- been used for the expansion of hydroelectric power tion facilities and domestic refining of imported facilities in the Rio de Janeiro and Sao Paulo areas liquid fuels was accelerated and heavy industry, an and of telephone facilities over a wider area in the outgrowth of rising domestic production of steel, central part of Brazil. A part of the first installment expanded. The world price of coffee continued was used to divert water from the Paraiba River high, and following the outbreak of hostilities in system to the Pirai River by means of a series of Korea, there was an increase in most other export pumps, dams, tunnels and canals. The second in- prices and an urgent demand from abroad for staltment will enable the Company, at an earlier greater production of strategic minerals. For the date than was formerly planned, to take advantage year 1950, foreign trade showed an over-all surplus of large investments now being made to increase of about $250 million compared with a deficit of water availability for the Rio system. The Company around $25 million in 1949. The improvement was plans to spend a total of approximately $260 mil- largely in dollars; it permitted the liquidation of lion in its expansion program; the Bank's loans former arrears on dollar remittances and the ac- will provide the major part of the foreign-exchange cumulation of substantial net dollar holdings at requirements. the end of the first quarter of 1951. Concurrently, The projects of the Companhia Hidro Eletrica by purchases from the International Monetary do Sao Francisco for the development of hydro- Fund and by special arrangements with the Bank electric power at Paulo Afonso on the Sao Francisco of England, accumulated arrears in sterling were River in northeast Brazil has been developing sat- reduced. The improved dollar position and the rise isfactorily during the year under review. Construc- in world food and raw-material prices permitted a tion schedules are being maintained and the work considerable relaxation both of export licensing is being carried forward efficiently in accordance and of quantitative import restrictions which were with the original plans. introduced in 1948, and lessened the resort to The Bank has maintained contact with the Elec- barter trade as a means of moving certain exports. tric Energy Commission of the State of Rio Grande Accelerated foreign debt amortization, particularly [ 32 ] of the coffee loans, has brought about a sizable by the Bank's engineering staff. reduction in the external bonded debt. At the same As a result of an investigation sponsored by the time, there was a material increase in registered Government of a number of irrigation proposals, foreign private investment. it was suggested that underground water re- These favorable developments were, however, sources of the Rio Elqui Valley in the north cen- attended by a sharp rise in the budgetary deficit tral part of Chile might be sufficient to provide and in the monetary supply. It is the announced supplementary water for land already under irri- policy of the Government to bring under effective gation and to irrigate new lands. The Government control this renewed tendency to inflation, which requested the Bank to consider financing the first otherwise would diminish the benefits Brazil has of three steps in the development of these under- derived from the rise in world prices of food and ground water resources. Accordingly, the Bank raw materials. had a preliminary technical study made. This in- dicates that there is substantial ground water; but Chile the volume and rate of recharge must be determined Fiscal $13.5 million 20-year 41/2% Loan of before sizable investments are made. The Bank 1948. March 25, 1948 to Corporaci6n de Fo- and the Government are now considering further mento de la Producci6n and Empresa Nacional de Electricidad, S.A. (Endesa), steps to be taken. for power development program. On the invitation of the Bank, representatives $2.5 million 61½2 year 33/4¾ Loan of of the Government spent several weeks during March 25, 1948 to Corporaci6n de Fo- mento de la Producci6n for importation April-May of this year in Washington discussing of agricultural machinery. economic and technical problems involved in the Bank representatives visited Chile last May to preparation of a general development program. review the progress of the projects being financed At the request of the Government, the Bank and by the Bank under the two loans for agricultural the Food and Agriculture Organization are spon- equipment and for hydroelectric development and soring a joint group for the study of agricultural incidental irrigation. Practically all of the agricul- development in Chile. This group, which arrived tural equipment had, as contemplated in the proj- in Chile at the end of May 1951, has been working ect, been sold to farmers. Work on the hydroelec- in close collaboration with the Government and tric projects, including the first two units for the with other technical experts who have been study- Los Cipreses plant, was on the whole proceeding ing various agricultural problems under the aus- satisfactorily. pices of FAO and the Institute of Inter-American The President of the Bank took advantage of Affairs. The group is expected to return to Wash- his visit to Santiago in March to attend the meet- ington in September. ing of the Economic and Social Council of the The problem of inflation remained still unre- United Nations to discuss development problems solved in mid-1951. Both the money supply and the wi-th the President of Chile. cost of living rose about 17% during 1950, giving As a result of conversations between the Bank rise to labor unrest and to demands for compensa- and representatives of Corporaci6n de Fomento de tory wage increases. Wage raises granted to Gov- la Producci6n early in 1951, the Bank had ex- ernment employees during the year were the prin- pressed an interest in possible loans to re-equip cipal cause of the fiscal deficit. Inflationary pres- two privately owned coal mines and to add a third sures were rendered more acute by a reduction of generating unit ro the Los Cipreses hydroelectric agricultural output due to serious drought in 1950 plant now under construction by Endesa. The tech- and by the fact that total manufacturing output nical aspects of these projects are now being studied did not expand. There was, however, encouraging [ 33 ] growth in some fields. Electric power production to expand the production of cotton, thereby reduc- rose to a point that permitted rationing to be ing the need for imported cotton for the textile eased. Output from the Huachipato steel mill grew industry. In the Department of Tolima there is steadily and some steel products were exported. increased production of rice and of sesame, which The Chilean balance of payments improved dur- is important in supplying much-needed fats and ing 1950, as a result mainly of reduction of im- oils. In the fertile Cauca Valley, loan-financed ports. Export values were slightly lower than in equipment is being used in the production of sugar 1949, despite an increase in copper prices in the cane, rice, beans and maize; and on the plain of latter part of 1950. The improvement continued Bogota the cultivation of potatoes, wheat and veg- in the first half of 1951. An agreement was reached etables is aided by the increase in farm mechaniza- with the United States Government regarding an tion. increase in the export price of Chilean copper and The Fifth Annual Report mentioned loans un- there are good prospects for expansion of output der consideration for financing part of the foreign- of both copper and nitrate. exchange costs of three new hydroelectric proj- ects, each of which would supply power to an Colombia important Colombian city. Loans have now been Fiscal $5 million 7-year 31/2½o Loan of Au- made for two of these projects, while the third, 1950: gust 19, 1949 to Caja de Credito Agrario, to provide additional electric power to the city of Industrial y Minero for importation of Bucaramanga in northeastern Colombia, is stil agricultural machinery. ucongatn pern Combta, of stis- Fijcal $3.5 million 20-year 4%c Loan of No- under consideration pending completion of satis- 1951: vember 2. 1950 to Central Hidroelectrica factory arrangements for marketing the electric dcl Rio Anchicayi, Limitada, for power power that would be generated. development project. g $2.6 million 20-year 4%o Loan of De- The loan of $3.5 million made in November cember 28, 1950 to Central Hidroel6c- 1950 to the Central Hidroelectrica del Rio An- trica de Caldas, Limitada, for power de- chicaya, Limitada was to cover part of the foreign- velopment project. $16.5 million 10-year 3 %% Loan of exchange costs of a hydroelectric project to sere April 10, 1951 for highway construction the city of Cali, one of the four major industrial and rehabilitation. centers of Colombia. Power from this installation Disbursement of the loan for the purchase of will also assist the economic development of the agricultural machinery was completed on April Cauca Valley, a rich agricultural region with poten- 1, 1951 and an undisbursed balance of some tial for industrial development. $75,000 was cancelled. Representatives of the Bank The loan of $2.6 million made in December visited Colombia early in 1950 and their examina- 1950 to the Central Hidroel6ctrica de Caldas, Lim- nion indicated that distribution of loan-financed itada was to cover the major part of the foreign- machinery was progressing satisfactorily. The ma- exchange costs of a plant that will supply electric chinery appeared to be suitably employed and ade- power to the city of Manizales, and help in the quately maintained. While it is too early to assess development of the Department of Caldas, an im- the full results of the loan, agricultural production portant agricultural area of the countrv. has already benefited in those areas where mech- The report of the Bank-sponsored comprehen- anization has been introduced. Most of the equip- sive survey mission referred to in the Fifth Annual ment imported under the loan is used in four main Report was transmitted to the Government of areas well suited to mechanized farming. In the Colombia on July 27, 1950. Shortly thereafter the Sinu River area, formerly devoted largely to cattle, Government appointed a non-governmental and the machinery imported under the loan is helping non-partisan Economic Development Committee [ 34 ] to assist the Government in formulating an over- maintenance of repair shops; and the training of all development program based on the report Colombian personnel in the repair and use of the and to. recommend steps to be taken to assure equipment and in highway maintenance. the effective execution of the program. One Recently the main sectors of the Colombian member of the Bank's staff and two consultants economy have been developing satisfactorily. Both who had been members of the mission returned to agricultural and industrial production are now at a Colombia as advisers to the Committee. The Com- relatively high level. Receipts from coffee exports, mittee has submitted a number of recommenda- the chief source of Colombia's foreign-exchange tions which were adopted by the Government income, were higher in 1950 than in 1949, and and translated into positive action. Inflation was have been at a high level in 1951. Since October checked, new regulations relaxing foreign-ex- 1950 inflation has been checked and the cost of change controls were enacted, and the highway living index has steadied. The fiscal position of program imentioned below was adopted. The Gov- the Government has improved. In March 1951, ernment also reorganized the Banco de la Repuiblica restrictions on imports were reduced and the Gov- and announced a more liberal policy regarding the ernment set a new exchange rate for the peso. import and export of capital. Upon completion of its work, the Committee will submit plans for a Costa Rica comprehensive development program to the Gov- A Bank mission will visit Costa Rica in Septem- ernment. In the meantime, a number of United ber to study the general economic situation and to Nations and United States experts have been in- examine the Government's development plans. vited to render special assistance in various fields and are now working in Colombia. Cuba Although the Bank had intended to await the A Bank mission under the leadership of Mr. completion of the over-all program before deter- Arank AmisTsion rghed ladersipofMr . Francis Adams Truslowr, organized at the request mining in what direction its assistance would be of the Government, went to Cuba at the end of most effective, it decided to support immediately July 1950. The composition and objectives of the a three-year highway rehabilitation program. Both mission were described in last year's Annual Re- the Econtomic Development Committee and the port. Briefly, the purpose of the mission was to Government felt tlhat, in view of the fact that the maeacprhniesvyoftecnmyn make a comprehensive survey of the economy in condition of Colombia's highways was seriously order to determine its full potentialities, and to hampering the country's economic development, m s immediate action should be taken to rehabilitate maeseii.rpsl fo fuur dvlopet immeiat acionshold e tkento ehailiate The mission spent 11 weeks In Cuba and traveled the existing trunk highway system. The Bank also felt that a loan to finance this project would be extensively throughout the country. On January 10, 1951 the Bank and the Govern- justified, sInce It would unquestionably be an im- ment made public a report entitled "Comment and portant part of any broad program. Accordingly, a Recommendations of the Cuban Mission with Re- loan of $16.5 million was made by the Bank in spect to the Public Service Railways of Cuba." April 1951 to finance the foreign-exchange cost of Because of the urgency of the railway situation, the higlhway work, to be done under contract by this report was submitted prior to the completion cxperienced firms. The project will consist of the of the other sections of the mission's over-all re- construction of approximately 155 kilometers of port. It was recommended that the United Railways ne,w liihglvays to provide connecting links in the of Havana and the Consolidated Railroads of Cuba, trunk system: the rehabilitation of 2,906 kilometers which constitute practically all of the public serv- of existing trunk highways; the establishment and ice railways, be combined into a new company and [ 35 ] operated as a single railway system; that Cuban allowed to increase in the same proportion as sugar companies acquire a substantial minority in- foreign-exchange reserves. Partly as a result of a terest and participation in the control of the new new coffee export tax, the budget continues to be railway company; and that the Government sup- balanced. port the reorganization and provide such reason- able assurances as would permit the new company Guatemala to carry out an appropriate program of rehabilita- An economic survey mission, headed by Dr. tion and to operate on a self-sustaining basis under George E. Britnell, visited Guatemala between private management. June and August 1950 to study the country's re- As of June 30, 1951 the full report was nearing sources and potentialities and to make recommen- completion, and was scheduled for presentation to dations as to its further development. The mission the Government in August. consisted of six members whose fields of specializa- tion included agriculture, industry, mining, trans- Ecuador portation, power and economics. This group was The President of Ecuador, during his visit to the assisted in the field by a number of additional United States in June 1951, discussed Ecuador's specialists for varying periods of time. The report development plans informally with the Bank. A of the mission was completed in June 1951 and B3ank mission will visit the country later this year was to be presented to the Government early in to examine projects under consideration. July. The general program proposed by the mission El Salvador places primary emphasis on the improvement of Fiscail $12.5 million 25-year 4V414%1c, Loan of agricultural productivity, particularly in coffee and 1950.: December 14, 1949 to Comisi6n Ejecutiva low-cost food crops, and the expansion of trans- Hidroelktrica del Rio Lempa for power portation facilities, especially highways. Improve- development project. ment in these two sectors would lay the foundation In the Bank's Fifth Annual Report, details were for the gradual diversification of the economy and given of the loan for the development of hydro- the expansion of manufacturing industries. electric power on the Lempa River. Work was In the opinion of the mission, the opening up of started by the contractor in October 1950, and since the Pacific coastal plains to mechanized agriculture tihat date has been proceeding normaLly. offers the greatest possibilities for achieving a rapid A local bond issue in the amount of 13,100,000 and substantial increase in foodstuffs at reduced colones ($5.24 million) was successfully floated in prices. The mission points out, however, that be- order to meet the local-currency costs of the proj- fore further development of this area can be suc- ect. Apart from some movement from commercial cessfully undertaken a vigorous effort will be nec- banks to the public, these bonds have been mainly essary to eliminate the malarial mosquito. The rcetained by the original subscribers as investments, importance of improvements in marketing, storage aud tlhere has been little trading in them. and credit facilities is also stressed in the report. The economic situation of El Salvador remains The mission urges an all-out effort to increase the s.itisfactory. The high price of coffee, the principal production of coffee, Guatemala's most important exportt has contributed to a steady increase of for- export and the potential source of most of the eltcn-cxclange reserves. Other exports, such as funds for financing future development needs, and cw)tton, sesame and precious metals, have also in- reorganization of the Fincas Nacionales (farms creased, wlile imports have not risen to the same owned or controlled by the Government), to in- exrent. The internal money supply has not been crease their production and reduce their costs. [ 36] The inadequacy of the transportation system is by the Mexican Government for a moderate-sized probably the greatest single barrier to Guatemala's loan to finance small and medium-scale projects economic development, the mission found. As a unldertaken by private enterprises. In order to carry first step toward relieving this situation, it recom- out this proposal, it was necessary to devise a mends the adoption of a basic national plan for the means whereby foreign credits, which had hitherto development and maintenance of highways. The been granted almost entirely to finance major de- report also suggests the expansion of domestic velopment projects carried out by Government or airlines to serve isolated areas and the establish- Government-sponsored enterprises, could be made ment of a non-political public utilities commission available for the smaller projects of private enter- to regulate rates and services for all forms of prise. transport. In the summer of 1950 conversations were held Other sections of the report deal with industry, between the Bank and Mexican private banks and mining, telecommunications and power, public Government officials to work out some method of policies affecting development, the financial re- financing which would not impose on the Bank the sources available to Guatemala for carrying Out its burden of screening a number of relatively small development program, and finally, three alternative loan applications. The creation of an entirely new programs of public investment. agency seemed superfluous in view of the existence of a well-developed private banking system. Con- Honduras sequently, a consortium was organized, by means of which a number of commercial banks and Na- As mentioned in the Fifth Annual Report, the cional Financiera, a government financial agency, Bank at the request of the Honduran Government a t t assigned a member of its economic staff for a period of eight months to assist in the organiza- for financing private enterprises. tion of a new Development Bank and in the formu- The proposal finally took shape on October 16, lation of its credit and development policies. The 1950, in the Consortium Agreement, signed by assignment ended in December 1950, and the De- eight of the principal commercial banks of Mexico velopment Bank is now in operation. and by Nacional Financiera. On October 18, 1950 the Bank entered into an agreement with the nine Mexko Consortium members, extending to them a line of credit of $10 million. A covering guarantee agree- Fiscal $24.1 million 25-year 41/2 % Loan of Jan- ment was signed with the Government of Mexico. 1949. uary 6, 1949 to Cornisi6n Federal de Electricidad and Nacional Financiera for The commercial banks participating in the Con- power development. sortium are: Banco Nacional de M6xico, S.A., $10 million 1-year 41/2% Loan of Jan- Banco de Comercio, S.A., Banco Internacional, uary 6, 1949 to Comisi6n Federal de ur6, 1949 to Con6 Feea de S.A., 13anco de Londres y M6xico, S.A., Banco Electricidad and Nacional Financiera for , power development. (Refunded) Mexicano, S.A., all in Mexico City; and Banco Fiscal $26 million 25-year 41/2 % Loan of April Mercantil de Monterrey, S.A., and Banco Indus- 1950: 28, 1950 to Mexican Light and Power tria! de Monterrey, S.A., both in Monterrey, and Company, Ltd., for power development. Banco Comercial Mexicano, S.A., in Chihuahua. Fiscal $10 million (maturity date to be deter- Applications by Mexican firms for specific loans 1951: mined) 31 % Loan of October 18, 1950 to a Consortium of Eight Mexican under the line of credit must be sponsored by one Banks and Nacional Financiera for finan- cr more of the members of the Consortium. They cial assistance to small enterprises, are then scrutinized by the Nacional Financiera, The Fifth Annual Report referred to a proposal which, if it approves, submits the applications to [ 37 1 the Bank. If the Bank approves a project, it makes Nicaragua a loan to such members of the Consortium as wish F.cal $3.5 million 10-year 41/8% Loan of June to participate, and they re-lend the proceeds to the 1951 . 7, 1951 for highway construction. applicant. Loans will normally range from $25,000 $1.2 million 7-year 4% Loan of June to $1 million, and their term will not as a rule 7, 1951 to the Banco Nacional de Nic- exceed five years. aragua for importation of agricultural machinery. By this mechanism the Bank is able to delegate In 'November 1950 the Government of Nic- to members of the Consortium the greater part of aragua applied to the Bank for loans for farm- the detailed screening of numerous small-scale machinery, road-building and grain-storage proj- projects. At the same time, the Bank retains the ect5. Representatives of the Bank had visited power to ensure that the loans conform to its gen- Nicara.gua in 1949 and made a preliminary survey eral standards and objectives, of the country's development possibilities. 117he Mexico today is enjoying highly prosperous con- Bank sent a second mission to Nicaragua in Tanu- ditions. The expansion of both agricultural and arv 1951 to study the proposed projects, and ar- industrial production which followed the stabili- ranged for the services of an expert from the Food zation of the peso in 1949, has now received the and Agriculture Organization to study the coun- further stimulus of the urgent world demand for try's grain-storage program. In June, the Bank raw materials. The terms of trade have accordingly made two loans, one to the Government for high- been moving in Mexico's favor; imports have ex- way construction, and the other to the Banco panded. Net receipts from tourism, an increasingly Nacional for the importation of agricultural ma- important source of Mexico's earnings of foreign chinerv. exchange, rose steadily throughout 1950. In ad- The loan for highway constuction will finance dition, the exchange reserves of the country nave the import of equipment and materials for build- been considerably augmented through the inflow irng eighit roads. The roads will total 622 kilometers of short-term capital from abroad. in length, will be asphalt-paved to permit year- The Government has continued to carry out an round traffic, and should be completed in 31,4 active program of economic development. Over years. The total cost of the project is estimared 17% of the 1950 budget, a total of 483 million at about $5 million. pesos, was devoted to the development of internal Lack of commiiunications has been one of the most transportation systems. Public investments in irri- serious obstacles to the development of Nicaragua. gation, electric power and petroleum have also Roads are urgently needed, both to provide access continued on a high level. Nevertheless, a budget- ro hi-.herto untouched areas of rich agricultural ary surplus was realized in 1950. land and to link the major centers of production, The general expansion of economic activity, and consu-napuon and export. in particular the high level of export prices, has The pet consists of three separate groups of caused a steep rise in domestic prices. The index roads, the Northern, the East-West and the West- of wholesale prices has risen 43% since 1949. Re- ern, which will complement the existing trunk cently, however, the Government has adopted a road.s and the Inter-American Highway. Comple- number of measures designed to check the growing ion of the NTorthern group should yield substan- inflation. In March 1951 the Executive was granted tial returns by opening up new land in the rich wide powers to control production, consumption, coffee-producing region around Matagalpa. The distribution and prices, and in May a new decree East-West group will serve a fertile rural area; and was passed limiting the total amount of credits to by facilitating the marketing and exporting of be issued by commercial banks. cereals, vegetables, cotton and livestock, it should r38] reduce the wastage now prevalent in this area. Of of bank credit, and high export prices, Nicaragua the Western group, the most important highway has been experiencing a severe inflation. At the will link Managua, the capital, with Le6n, the sec- beginning of 1951, the money supply was 17% ond largest city. These two cities are now connected above that of the previous year and almost 70% only by rail. In addition to stimulating commerce, higher than at the end of 1945. However, firm the new road should open up a rich agricultural measures have been adopted by the Government area, suitable for mechanized farming and capa- to check this situation. In 1950 a small budget sur- ble of producing a wide variety of crops. plus was realized for the first time in several years The agricultural loan will provide the foreign and the budget for 1951 is expected to be in exchange required for the purchase and importa- balance. tion of agricultural machinery and spare parts. The machinery, which will range from small tractors to Panama heavy land-clearing equipment, will be imported In April 1951 the Government of Panama re- through normal channels of trade and will be sold quested the Bank to organize a general survey mis- to farmers who will have received credits from the sion to study development possibilities. The Bank Banco Nacional. A training program is being un- suggested that a small staff mission should make a dertaken and arrangements are being made to pro- preliminary survey which would indicate in what vide facilities for the repair and maintenance of directions more specialized studies would be most the equipment. fruitful. This Bank mission will visit Panama in In January of this year, the Government asked the second half of 1951. the Bank for assistance in planning and carrying out various phases of a development program. The Paraguay Bank indicated its willingness to send a special A Bank mission will visit Paraguay this summer representative who, assisted by an engineer, would to study plans for agricultural development and remain in Nicaragua for a period of eight months road construction. to a year to assist in formulating and executing a general economic program. In addition, technical Peru experts will visit Nicaragua as needed. The Bank's Last year's Annual Report indicated that Peru special representative was to arrive in Nicaragua had a number of development projects under con- early in July. sideration which might be suitable for financing. Nicaragua today is in a more favorable eco- Following a brief visit to Peru by the President of nomic situation than for many years past. With the the Bank in March, a Bank mission examined the exception of 1949, when the coffee crop was un- merits and discussed the preparation of these proj- usually poor, exports have expanded steadily in ects. Those found to be most suitable for Bank recent years, and in 1950 amounted to $26.6 mil- consideration are projects for irrigation, highway lion, as against only $6.9 million in 1945. Between construction and maintenance, agricultural machin- 50 and 60% of Nicaragua's exports are sold to ery, equipment for the Port of Callao, and devel- the United States, and substantially all the rest is opment of anthracite in the Santa Valley. Members sold for dollars or other convertible currencies. of the mission completed their work by mid-June With improvement in transportation and methods and their findings as well as-general aspects of the of production, there are good prospects for in- country's position, are currently under considera- creased exports of coffee and cotton, and of tion by the Bank. bananas, previously low on account of crop disease. Peru's balance of payments has continued to As a result of budgetary deficits, the expansion improve during the past year, making possible [39] removal of import restrictions. The Government is power and for the expansion of telephone services expected to operate with a balanced budget. On which are operated by U.T.E. the whole, the prospects are good for increased At the request of the Government, a joint Bank- production and continued economic development, FAO technical mission was in Uruguay from Octo- provided that the renewed inflationary pressures, ber to December 1950 to make a survey of the which have arisen mainly because of foreign-ex- country's agricultural problems and requirements, change inflow, are restrained. and to formulate recommendations for increas- ing and improving production. The mission was Surinam headed by Sir Maurice Hutton, and included spe- The Bank has agreed to organize a mission to cialists in production, marketing, animal husban- review and makie recommendations concering a dry, pasture and forage, dairying, soils and fer- revlew~ ~ ~ ~ ~ ~ ~~~~~iizr fores extesio servicesalon anderln a ricu.l'ra provisional program which has been formulated to tlizers, forestry, extension services and agricultural engineering. The mission's report was scheduled for transmittal to the Uruguayan Government in Uruguay July. Uruguay's balance of payments position im- Fisral $33 million 24-year 4¼4 % Loan of Au- proved substantially during the past year. Both 1951: gust 25, 1950 to Administraci6n General pove ant the past ear. Bot de las Usinas El&tricas y los Tel6fonos the volume and the unit price of wool exports in- del Estado for power and telephone de- creased, resulting in considerably higher dollar velopment program. earmings on trading account. At the same time The loan to Administraci6n Genera I de las Usinas there has been a relatively large movement of flight Electricas y los Telefonos del Estado (U.T.E.), an capital into Uruguay which has also contributed autonomous government agency, signed on August to a growth of exchange holdings, although intro- 25, 1950, was ratified on May 19, 1951 by the ducing a possible element of future instability. Uruguayan Parliament and became effective ten The authorities have not succeeded fully in con- days later. As a result of the nationwide elections trolling the inflationary pressures which were in- held last November, a new Parliament took office creased by the abnormal exchange inflow and by on February 15 of this year and active considera- an unbalanced budget. The 1950 budget showed a tion of the agreements began in March. deficit amounting to 7% of expenditures, arising The proceeds of this loan are being used to cover mainly from increase of civil service salaries. The the foreign-exchange cost of increasing Uruguay's Government has, however, shown itself aware of facilities for generating and distributing electric the dangers of the situation. [40] FINANCIAL ACTIVITIES AND RESOURCES EARNINGS, RESERVES, REPAYMENTS AND DISBURSEMENTS Reflecting the growth in the volume of loans pal payments of $1.2 million to investors holding outstanding, the earnings of the Bank for the the Guaranteed Serial Notes of four Netherlands fiscal year showed a substantial increase over the shipping companies which were sold by the Bank earnings in 1949-50. Net income after all deduc- in 1948-49 with its unconditional guarantee. tions, including interest and other bond expenses Total disbursements made on the Bank's loans to and the transfer of loan commissions to the Special June 30, 1951 amounted to the equivalent of Reserve, was $15,156,947, which compares with a $691.7 million, of which a total of $77.6 million net of $13,698,398 for the fiscal year ended June was made in the last fiscal year. Of total funds dis- 30, 1950. Gross income from all sources amounted bursed, $666.6 million was repayable in United to $34,591,085. Of this, $28,456,318 represented States dollars and the equivalent of $25.1 million income from interest, commissions and other was repayable in Canadian dollars, Belgian charges on loans; and $6,116,319 was income from francs, Danish kroner, French francs, Italian lire, investment. pounds sterling and Swiss francs. Of the $77.6 In accordance with a decision of the Executive million disbursed during the year, $53.3 million Directors and the Board of Governors all net in- (68.6%) was spent in the United States and $24.3 come for the entire period of the Bank's operations million (31.4%) in other countries. has been placed in a general reserve against losses The geographical distribution of total expendi- on loans and guarantees, and on June 30, 1951 tures financed by the Bank from the start of its this reserve was $42,155,217. operations in 1946 to June L>51 is shown below: Loan commissions for the year totaled $6,388,543, and as required by the Articles of Amount Agreement were credited to the Special Reserve Area of Expenditure Mill(ors of U S $) for meeting the Bank's obligations. That reserve United States ... .................... $505.6 amounted to $20,125,748 on June 30, 1951. Total Europe ......................... 78.2 reserves of the Bank on that date aggregated Latin America ........ ............ 57.5 $62,280,965. ~~~~~~~~~~~Canada ...... ........45.5 $62,280,965. Near East ....... ................. 2.5 Repayments of loan principal due during the year Africa ............................ 2.2 were all received on schedule and amounted to Far East ... > .2 $5,549,135. This amount does not include princi- Total ...$............ $691.7 [41] FUNDS AVAILABLE FOR LENDING Funds available to the Bank for lending on June States, tie equivalent of $2 rnillion from Belgium, 30, 1951, in terms of United States dollars, are $16%6 million from Canada, $125,000 from Den- summarized below: mark, $1.3 million from France, $120,000 from Guatemala, $100,000 from Italy, $2 million from 2% paid-in portion of sub- Mexico, $126,oiao from Paraguay and $2.9 million scriptions of all members $ 163,715,000 18% portion of subscription of from the United ngdom. the United States ...... 571,500,000 Many of the other member countries have ex- 18% prin of subscriptions mad poravilo by other pressed a willingness to consider releases of their members . ........ 26,221,000 18% funds at such time as borrowing countries need gcods which can be purchased with their Total available Capital Subscriptions ......... 760,896,000 currencies. The following countries, including Net available funds resulting some who already have made releases as mentioned from operations 43,000,000 above, have agreed, subject to further consultation Net proceeds of sale of bonds - excluding premium and in eadt particular case, to the use of all or part of discount ............. 324,588,000 their 13%7, currency for loans: Gross Total Available Funds $1,128,484,000 Colombia Netherlands Total loans Costa Rica Norway commited $1,113,525,000 Denmark Pakistan Fzss cancella- d ,ri2land Peru tions, loans Firance Philippines sold and Gr -ece Syina srincipal Icehand South Africa repayments india Thailand available lady Uaited Kingdom for re- Lelyon Yugoslavia lending .. 48,741,000 1,064,784,000 Currency releases are of greater or less useful- Excess of Available Funds ness to the Bank according to their degree of con- over Net Loan Commit- vertibilivy or to the ability of the releasing coun- ments ............. $ 63,700,000 tries to export goods needed for development. It Undisbursed Balance of Loans. 404,085,000 is ner possible, however, to overstress the long-run Excess of Available Funds importance of cooperation by member nations in over Net Loan Disburse- reICasing their capital subscriptions to add to the lendai e resources of the Bank. Such action will This table shows only those funds which have enabfe he Bank to meet a larger proportion of the been utilized by the Bank or may be utilized with- capital t-quirements of many members whose out further approval of members. These funds in- ability tU asu ne United States dollar indebtedness clude the entire 187o portion of the subscriptions is limited, and whose requirements therefore must of Ecuador, El Salvador, Honduras and the United be met by loans in other currencies. SALES OF SECURITIES During the year, the Bank sold new issues of its to European, Canadian and American investors. direct obligations in the United States and Great Tere was evidence of a broadening of the Britain, and was preparing for an issue in Switzer- marker fcr the Bank's securities in the United land. For the first time it sold without its gnar- States. TMe successful flotation of the sterling antee bonds received from certain of its borrowers, issue t the London market, together with the sub- [42 ] stantial quantities of the Bank's dollar bonds pur- banking ffnnAs and managed jointly by The Chase chased outside the United States, shows the prog- National Bank, Thbe First Boston Corp., C. T. De- ress that has been achieved in developing markets vine & Co., and Salomon Bros. & Hutzler. rne for the Bank's bonds in the territories of other function c. this group wras to consult and advise member countries. the Bank on rhe financing, arrange for group sales The Bank does not consider such sales a substi- to large Lni -ioal invesrors and to offer tit se- tute for releases of member countries' 18%, cur- curities fcr cupoon to a Selling Group of 421 rencies. The Bank does consider sales of its bonds members. A trotal of approximately $26 million in the traditional financial centers a means of de- principal amount of securities was allotted as group veloping potential sources of additional funds for sales to life insurance companies in the United lending. Where conditions are favorable, there are States and Canada, pension and trust funds, sav- obvious long-term advantages in establishing the ings banks and European financial institutions. Bank's credit in the financial markets and in fa- The balance of the issue was allotted to 408 selling miliarizing local investors with its securities - group menrbers and was widely distributed both even before all 18% funds are released, Such geographicaiNy and as .o qpe of investor, operations are important steps in building future The Bank concauded its first financing in a mem- markets, which should become increasingly useful ber nation other than the United States when it as sources of investment funds. sold an issue or £5 mll'ion 3Y2 % stock i966/76. . to Developments of far-reaching importance oc- a London syndicate of banking firms composed of curred in the United States bond market during the Baring Brothers & Co., Ltd.; Hambros Bank, Ltd. past fiscal year as the monetary authorities sought Lazard Brothers & Co., Ltd.; Morgan Grenfelh to reduce inflationary pressures through measures C(o., Lt . . dI . AR o thschild & Sons; and J. Henr designed to curtail the expansion of credit. The Schroder & Co. The securities were publicly of- resultant increase in interest rates in the United fered in the Ln~:oon, market beginning May 23, States appeared to accelerate and in some cases to 1951, anc rhe recepstion of the issue was h9ighy initiate a trend toward higher rates in other finan- favorable. cial centers. Following the sale of its dollar bond At rhe cloae ef tfi ca. year arrangements had issue at the end of February, the Bank found these been corn'`tl. :l with a S -iss banking syndicate conditions reflected in higher interest rates in the for the r b'ilc ofl1ering of the Bank's bonds ir United Kingdom and Switzerland. Despite the Switzerlard, n h e made early iin July. The issue, general decline of bond values, the market action of 12-year ,-/2% bonds, was to be in the amount of the Bank's issues in the United States has been of 5° S, "n Swiss Efrancs, equivalent to approxi- favorable compared with other highly rated bonds, mately i 6 mi1ior. On two previous occasions and confirms that the obligations are now consid- the B borawed in the Swiss martet ered seasoned securities and are generally in strong through 41,e asrivate sale of its bonds. investrnent hands. New Issues of the Bank's Bonds Sales oS' D5 .r r, !. Te Bank's Portfolio On February 28, 1951 the Bank offered in the The Bank soid from its portfolio, with its un- United States a new issue of $50 million 3%o bonds conditional guarantee, $549,000 principal amount of 1951 due 1976. It was well received by investors of bonds of Corporacion de Fomento de la Pro- in the United States, Canada and Europe. A new ducci6n (Chile). Tne securities were purchased by method of distribution was employed. A Sponsor- a large United &a-.es motrmercial bank. Another ing Group was formed, composed of 32 leading block of 3242,coo, o' these Chilean bonds was United States commercial banks and investment scheduled for sal e in luly. [43 J The Barnk also sod -without its guarantee - During the past fiscal year, the Bank's position the equivalent of $4.5 million short-maturity bonds has been clarified in connection with borrowing of the Brazilian Traction, Light and Power Com- operations and other activities in Switzerland, parny, Limited, Cr6dit National (France), Suo- which is not a member of the Bank. Negotiations men Pankki (Finland), Herstelbank (Nether- between -he Swiss Federal Council and the Bank lands), Grand-Duchy of Luxembourg, and King- resulted in an agreement, signed in Berne on June dom of the Netherlands. The securities were 29, which recognizes the international personality purchased by American, Canadian and European and legal capacity of the Bank and grants it facil- investors. The transfer of those investments from ities which in part correspond to those which it the Bank's portfolio to private investors and the enjoys in the territories of its members. The agree- loan of $10 million granted to the Union of South ment will be submitted to the Swiss Federal Chain- Africa by American commercial banks simul- bers for ratfication. taneously with the loan from the Bank, are de- The £5 million sterling issue, sold to a London velopinelnts of considerable importance as they syndicate of banking firms and publicly offered in demonstrate methods by which the Bank can help the London market, was made possible by the ap- promote private foreign investment. proval of the United Kingdom Government as required1 under the Bank's Articles of Agreement. 3 oaJening Market for the Bank's Bonds The French Government authorized the listing Substantial investments in the Bank's United on the Paris Bourse of the Bank's twenty-five year States dollar bonds were made by non-United 3% bonds due 1972 and the twenty-five year bonids States investors during the last year. Purchases of of 1951 due 1976. French foreign-exchange regu- bonds are known to have been made in Canada, lations permit residents of France to purchase, in -at.n America, Europe, Asia and Africa. It is the United States, International Bank bonds with estimated that such holdings exceed $39 million, dollars acquired through the sale in the United includincg suibstantial amounts purchased by the States of other securities. The Bank's bonds so ac- central banking institutions of ten member nations. quired are officially traded on the Paris Bourse and including the S-wviss franc and sterling issues, the may be purchased directly against French francs. aggregate amount ot the Bank's direct and guaran- In Mi[arch 1951 the Colombian Government teed indebtedness held by non-United States in- issued a decree authorizing all national banks in vestors exceeds $60c million. Colombia to invest up to 10% of their capital and This development may in large part be attributed reserves in International Bank bonds or in Colom- to the cooperation of various countries in enacting bian bonds issued under loan agreements with the legislation or issuing rulings or decrees to facilitate Bank. Tlhe same decree outlines a procedure the introduction of the Bank's obligations in their wherebv Colombian branches of foreign banks can capital markets. Several such actions are described increase their capital and reserves by investing in in the Fifth Annual Report of the Bank. such bonds. FINANCIAL STATEMENTS AND REPORTS Appendices A through G provide a balance statement of loans up to the end of the fiscal year, sheet showing the financial position of the Bank an opinion of the auditor, and other schedules as of June 30, 1951, a comparative statement of giving details about the assets and the capital struc- income and expenses for the fiscal years ended ture of the Bank. June 30, 1950 and June 30, 1951, a complete F 44 I MANAGEMENT AND CRGANIZATION Changes in Personnel ment in short supply as a result of the emergency Mr. William A. B. Ihiff, since February 5, 1948 situaation. the Loan Director of he lBank, was appointed As of June 30, 1951 the staff of the Bank con- theLoa Drecor f he ank ws apoite sisted of 424 mem.bers rrom 30 countries. Assistant to the President on April 3, 1951. In the absence of the President and Vice President, Mr. Staff Retirement Plan Ilif acts as Senior Executive Officer of the Bank. Mr. A. S. G. Hoar, who had been Assistant Di- The monsulting actuary to the staff retirement rector of the Loan Department since October 1, plan of the Bank made his second annual valua- 1946, succeeded Mr. Iliff as Loan Director. tion as of December 31, 1950, and recommended Mr. William L. Ayers, Director of Public Rela- that the current ,rate of contribution by the Bank, tions since November 1, 1949, suffered a heart 12.26%o of pavroll should be continued. During attack while en route to the Bank's Firth Annual the past year the plan was amended to provide Meeting at Paris. His death shortly thereafter was certain retirement rights after three full years of a major loss to the Bank. Mr. Harold N. Graves, eligible service, rather than five years as required Jr., of the Public Relations staff, was appointed a heretofore. Also during 1950 provision was made succeed him on November 20, 1950. for coverinrg under the plan those staff mem- Mr. Norman M. Tucker resigned as Director of bers who are granted leave of absence from the Marketing on October 31, 1950 to accept the posi- Bank for emergeny civilian or military service. tion of General Manager of the Industrial Devel- opment Bank of Turkey, which is being financed ogD in part by the Bank. Mr. Tucker died in Istanbul The Bank has continued the training program after a brief illness. His death was a serious loss to which was inaugurated in 1'949. For the third his many friends among the Executive Directors course under this programr, beginning in January and staff of the Bank. Mr. Tucker was succeeded 1915, eiglht persorns were selected, one each from as Director of Marketing on November 1, 1950 Denmark, finland, Iceland, Mexico, Pakistan, the by Mr. George L. Martin, wno had been the head Philippines, Turkey and Yu,goslavia. The Bank of the temporary Middle Western office of the plans iO cOstinue iS program and is now in Bank in Chicago for the term of its existence, from process of selecting a fourrn group to begin train- January to July, 1950. ing in Januay 1952. Mr. Ansel F. Luxford, who had been a member Early in 1950 the Bank inaugurated a pilot of the Bank's staff since the start of its operations, program of ctainlng in public finance for selected resigned as Associate General Counsel on April officials of underdeveloped countries. The object 30, 1951 to enter private practice. Mr. Aron of the program has been to assist governments to Broches of the Legal Department was appointed im prove their financial and accounting procedures Assistant General Counsel on May 1, 1951. ir accordance wvith the Barin's general purpose of The only major change in the functions of the furthering fhe de 'eiopment of its member coun- various departments during the year was the as- tries. Two government officials, one from India sumption by the Loan Department of responsibility and one from Thailand, have completed their for assisting borrowers to procure capital equip- training, which included the study of financial [45] procedures of United States federal, state and city istrative Budget of the Bank for the fiscal year governments. Two other officials, from Turkey ending June 30, 1952. This budget has been pre- and Honduras, are presently in the United States pared by the President and approved by the Execu- under this program. It is expected that the program tive Directors in accordance with Section 19 of will be continued on the present selective basis. the By-Laws. A special report on the budget is Administrative Budget being submitted to the Board of Governors at the There is attached as Appendix H the Admin- Annual Meeting. [46] MISCELLANEOUS Relations with Other International The Bank was represented at all meetings of Organizations the Technical Assistance Board of the Uniced Na- uons and of the Technical Assistance Commiutee, During the past year the Bank continued to which reviews the Board's activities on behalf of maintain close relations with the International the Economic and Social Council. The Food and Monetary Fund, the United Nations and other Agriculture Organidation of the United Natoond, international organizations. The Bank continued A e rgntion of the U d- as has been mentioned in another part of the Re- its practice of having representatives at meetings port, has joined with the Bank in sponsoring of the United Nations General Assembly and the missions to survey agricultural development in Economic and Social Council. At the spring meet- Chile and Urguay and has nominated expets on ing of the Council in Santiago, the President of the other survey missions as have the World Bank took an active part in the discussion of the or sure io as haie thorl & genealpfblem of inaning conoic dvelo Organization and the United Nations Educational, general problems of financing economic develop- Scientific and Cultural Organization. Mention has ment. During the course of the year, representa- already been made of the seminar for discu:mOn tives of the Bank also attended meetings of the of methods and techniques of econornic develo- regional economic commissions - the Economic Comrmission for Europe, the Economic Commission ment planning, jointly sponsored by the Eco.fiic Commission for Latin America and the Bank, for Latin America, and the Economic Commssion and of th triigisiueso h cnu and of the trainin instiutes on the ecoiioirl-ic for Asia and the Far East - and the Bank kept in a appraisal of development programs unde_ita1.gn close touc3h with the Consultative Coimmnittee on jointly by the FAO, the United Nations aLid i--e Economic Development in South and Southeast Bank. Asia and the Organization of American States. In March a group of experts appointed by rhe Membersbip and Subscription Secretary-General of the Uniited Nations visited the Bank to consult informally with staff members Ceylon became a meimber of the Bank in Anasc on problems relating to the economic develop- 1950, bringing the total membership to 49. The ment of less developed countries. Their report, Bank's total subscribed capital was $8,33805 rmil- "Measures for Economic Development of Under- lion as of June 30, 1951. While the Bank's capital Developed Countries," was considered at a meet- had increased by $115 million through the adnais- ing, in which officers of the Bank participated, of sion of Pakistan and Ceylon in July and Aug-sc the Economic, Employment and Development 1950, it was reduced by $125 million after the Commission of the Economic and Social Council. withdrawal of Poland by the repurchase by dae The President of the Bank attended several Bank on September 14, 1950 of the 1,250 sharis meetings of the United Natiors Administrative to which Poland had subscribed. The applicaUion Committee on Coordination, and staff members for membership by Burma (proposed subscription attended meetings of its subsidiary comrnittees. $15 million) was approved by the Board of Gov- The Bank is also collaborating with the United ernors in May 1951, and that country will have Nations Film Board in making short documentary until October 15, 1951 to accept membership in records of several projects which have been par- the Bank. The application by Swedein (proposed tially financed by the Bank. subscription $100 million) was referred tc the [47 ] Board of Governors for vote in June 1951. In (e) Revised Loan Regulations Nos. 3 and 4. addition, the applications of Jordan, Indonesia (f) Decisions of Executive Directors Interpret- and the Federal Republic of Germany are being ing Articles of Agreement. given consideration. The period in which Haiti and Liberia could have accepted membership ex- Appendices pired in September 1950. In addition to Appendices A through H con- Addition41 Reports to Board of Governors tamining the financial statements and reports and the administrative budget of the Bank, there are Reports in addition tO this Annual Report are also included for the information of the Governors being submitted to the Board of Governors at the the following appendices: Sixth Annual Meeting. With regard to the Ad- Appendix I-Voting Power and Subscriptions visory Council of the Bank, the study of rhe Execu- of Member Countries as of June tive Directors is continuing. The additional reports 30, 1951. cover: Appendix J-Governors and Alternates as of (a) Administrative Budget. June 30, 1951. (b) Allocation of Income by Executive Di- Appendix K-Executive Directors and Alter- rectors to Reserve. nates and their Voting Power as (c) Applications for Membership. of June 30, 1951. (d) Resolution of United Nations Assembly Appendix L-Principal Officers of the Bank as 377 (V) entitled "Uniting for Peace." of June 30, 1951. [48] I I I I I APPENDIX A Balance Sheet-June 30, 1951 EXPRESSED IN UNITED STATES CURRENCY (See Notes to Financidl Statements) ASSETS Due from Banks and Other Depositories (APPENDIX D) -NOTE A Member currency-United States .................. 8,944,939 Member currency-other than United States 111,922,773 Non-member currency ........................... 4,273,280 $ 125,!40,992 Investment Securities United States Government obligations ($434,391,600 face amount; at cost plus accumulated discount and less amortized premium) .......................$ 434,143,650 United Kingdom Government obligations (£1,175,000 face amount; at cost) .3,286,955 $ 437,430,605 Accrued interest .. 1,354,188 438,784.793 Receivable on Account of Subscribed Capital (APPEN- DIx E) Payable in member currency-United States Calls on subscription to capital stock-NOTE B ...... $ 3,595,000 Payable in member currency-other than United States Non-negotiable, non-interest-bearing, demand notes.. $ 799,555,522 Amounts required to maintain value of currency hold- ings-NOTE C ............................. 2,947,688 802,503,210 806,098,210 Loans Outstanding Held by Bank-(APPENDIX C)- NOTEs D and E ............... ............. 1,004,343,657 Actrued Interest, Commitment and Service Charges on Loans-NOTE B 5,290,360 Other Assets Receivable from sale of Sterling Stock ............... $ 10,080,000 Miscellaneous receivables and other assets 477,276 10,557,276 Special Reserve Fund Assets-NOTE F Due from Banks-member currency-United States $ 449 Investment securities-United States Government obliga- tions ($18,626,900 face amount; at cost) 18,626,900 Accrued loan commissions-NOTE E . 1,498,399 20,125,748 Staff Retirement Plan Assets (Segregated and held in trust) .....,,,,,,,, 1,481,634 Total Assets $2,411,822,670 (5o ] APPENDIX A Balance Sheet-June 30, 1951 EXPRESSED IN UNITED STATES CURRENCY (See Notes to Financial Statements) LIABILITIES, RESERVES AND CAPITAL Liabilitries Accounts payable and accrued expenses, including $3,411,257 bond interest ....................... $ 4,037,225 Undisbursed balance of loans On loans held by Bank... $ 348,284,845 On loans represented by obligations of borrowers sold under guarantee . . ........................... 3,450,450 351,735,295 Funded debt-NOTE G Amount payable in United States Dollars 2%7o Serial Bonds of 1950, due 1953-62 ......... $ 100,000,000 Twenty-Five Year 3% Bonds, due July 15, 1972 150,000,000 Twenty-Five Year 3% Bonds of 1951, due March 1, 1976 .. 50,000,000 $ 300,000,000 Amount payable in Pounds Sterling 3y2-,% Stock 1966-71 (.5,000,000) ............ 14,000,000 Amount payable in Swiss Francs 21/2 % Swiss Franc Serial Bonds of 1948, due 1953- 54 (Sw fr 17,000,000) .$ 3,955,788 2½2 % Swiss Franc Serial Bonds of 1950, due 1953- 56 (Sw fr 28,500,000) . ......... I ......... 6,631,763 10,587,551 324,587,551 Bonds called for redemption not presented . $ 2,215 Less funds on deposit with Fiscal Agent therefor. 2,215 Reserves for Losses Special reserve-NOTE F ......................... $ 20,125,748 General (Supplemental) reserve-NOTE H 42,155,217 62,280,965 Staff Retirement Plan Reserve 1,481,634 Capital (APPENDIX E) Capital stock Authorized 100,000 shares of $100,000 par value each Subscribed 83,385 shares ..................... $8,338,500,000 Less-Uncalled portion of subscriptions-NOTE I 6,670,800,000 1,667,700,000 Contingent Liability-Obligations of Borrowers Out- Standing Sold under Guarantee-NOTE D $22,098,550 Total Liabilities, Reserves and Capital.... $2,411,822,670 [ 511 APPENDIX B Comparative Statement of Income and Expenses for the Fiscal Years Ended June 30, 1950 and June 30, 1951 EXPRESSED IN UNITED STATES CURRENCY (See Notes to Financial Statements) July i-June 30 1949-1950 1950-1951 Income Interest earned on investments .......,........ $ 5,152,517 $ 6,116,319 Income from loans: Interest ................... ......................................... .17,670,427 19,926,371 Commitment charges .................................................. . 2,491,707 2,053,197 Commissions ................................................. 5,663,064 6,388,543 Service charges ............................................... 141,281 88,207 Other income ........... ............................................... 8,133 18,448 Gross Income ......... $31,127,129 $34,591,085 Deduct-Amount equivalent to commission appropriated to Special Reserve (NOTE F) 5,663,064 6,388,543 Gross Income Less Reserve Deduction ............................$ 25,464,065 $28,202,542 Expenses Administrative expenses: Personal services ........... $ 2,672,630 $ 2,778,456 Expense allowances-Executive Directors and Alternates ....................... 12,194 4,317 Fees and compensation ................................................ 334,958 406,976 Representation ......... .............................................. .46,713 57,589 Travel .. ........................................................... 437,257 597,011 Supplies and material .......... .,,, 26,954 45,060 Rents and utility services ................33666 ...................... 335,887 Communication services ................,,,,,,,,,......... 89,522 106,860 Furniture and equipment ......................................... 28,540 29,513 Motor vehicles .5,335 10,843 Books and library services .................. , , . ............ 59,707 56,554 Printing ............................................................ 36,764 84,018 Contributions to staff benefits .......................,.,,.,..,..,...... 266,126 300,322 Insurance ........................ .......... 14,644 29,040 Other expenses ........................ .......... ...... 2,201 1,001 Total Administrative Expenses .................................... $ 4,370,011 $ 4,843,447 Interest on bonds .6,811,798 7,248,276 Bond registration, issuance and other financial expenses .,, 583,858 953,872 Gross Expenses .............................................. $11,765,667 $13,045,595 Net Income-Appropriated to General Reserve for Losses on Loans and Guarantees- - NOTE H ., ...................................... ....................... 13,698,398 $15,156,947 [ 52 I I I I I APPENDIX C Statement of Loans-June 30, 1951 EXPRESSED IN UNITED STATES CURRENCY (See Notes to Financial S4taements) Date of Borrower and Guarantor Program or Project Loan Agreement Maturities Australia Equipment and materials for development Aug. 22, 1950 1955-1975 Belgifm Equipment for steel and power industries Mar. 1, 1949 1953-1969 Brazil (Guarantor) - Brazilian Traction (First Installment) Electric power development and telephone equipment Jan. 27, 1949 1953-1974 Brazilian Traction (Second Installment) Electric power development Jan. 18, 1951 1955-1976 Sao Francisco Hidro E1ec. Co. Electric power development May 26, 1950 1954-1975 Chile (Guarantor) Fomento and Endesa Electric power development Mar. 25, 1948 1953-1968 Fomento Agricultural machinery Mar. 25, 1948 1950-1955 Colombia Highway construction and rehabilitation Apr. 10, 1951 1954-1961 Colombia (Guarantor) Caja de Credito Agricultural machinery Aug. 19, 1949 1952-1956 CHIDRAL Electric power development Nov. 2, 1950 1954-1970 Caldas Hidro-Elec. Co. Electric power development Dec. 28, 1950 1952-1971 Denmark Equipment and materials for reconstruction and devel- opment Aug. 22, 1947 1953-1972 El Salvador (Guarantor) Comisi6n del Rio Lempa Electric power development Dec. 14, 1949 1954-1975 Ethiopia Rehabilitation of road system Sept. 13, 1950 1956-1971 Foreign exchange for Development Bank Sept. 13, 1950 1956-1971 Rehabilitation and extension of telephone and telegraph systems Feb. 19, 1951 1956-1971 Finland Equipment for timber production Oct. 17, 1949 1950-1951 Finland (Guarantor) Bank of Finland Electric power development and equipment for wood- working industries and limestone powder production Aug. 1, 1949 1953-1964 France (GUarantor) Credit National Equipment and materials for reconstruction and devel- opment May 9, 1947 1952-1977 Iceland Electric power development June 20, 1951 1956-1973 India Railway rehabilitation Aug. 18, 1949 1950-1964 Agricultural machinery Sept. 29, 1949 1952-1956 Electric power development v Apr. 18, 1950 1955-1970 Iraq Construction of a flood-control project June 15, 1950 1956-1965 Luxembourg Equipment for steel mill and railroads Aug. 28, 1947 1949-1972 Mexico (Guarantor) Financiera and Comisi6n Electric power development Jan. 6, 1949 1953-1973 Financiera and Comisi6n Electric power development Jan. 6, 1949 July 1, 1950 Mexican Light and Power Co., Ltd. Electric power development Apr. 28, 1950 1953-1975 Consortium of Eight Mexican Banks and Foreign exchange for small private enterprises To be Nacional Financiera Oct. 18, 1950 determined Netherlands Equipment and materials for reconstruction and devel- opment Aug. 7, 1947 1954-1972 Equipment and materials for reconstruction and devel- opment (Supplemental Loan Agreement) May 25, 1948 1953-1954 - 541 Carried forward APPENDIX C Statement of Loans-June 30, 1951 EXPRESSED IN UNITED STATES CURRENCY (See Notes to Financial Statements) Interest Effective lUndisbuirsed Rate Original Loans Cancellations Principal Obligations Loans Principal Balance of (Including Principal Not Yet and Repayments of Borrowers Outstanding Amount Eflective Commission) Amount Effective Refundings to Bank Sold by Bank Heid by Bank Disbursed Loans 41/4%7 $ 100,000,000 $ - $ $ $ - $ 100,000,000 $ 9,057,902 $ 90,942,098 4 Y4% 16,000,000 - - 16,000,000 - 12,549,550 3,450,450 41/2 75,000,000 - - - 3,062,848 71,937,152 53,450,936 21,549,064 41/4%, 15,000,000 - - - - 15,000,000 1,579,576 13.420,424 4 1/4 f o 15,000,000 15,000,000 5,740,911 9,259,089 41/% 13,500,000 - - _ - 13.500,000 3,910,815 9,589,185 33/4 %1o 2,500,000 - - 473,000 549,000 1,478,000 2,500,000 - 3-7/8% 16,500,000 16,500,000 - - - - - 31 %+ 5,000,000 - 74,559 - - 4,925,441 4,925,441 - 4% 3,530,000 _- - - 3,530,000 263,715 3,266,285 4%c 2,600,000 - - - 2,600,000 1,782,516 8i7,484 41/4 ','o 40,000,000 _ - 40,000,000 40,000,000 4'/4% 12,545,000 - - - 12,545.000 2.485,548 10,059,452 4% 5,000,000 - - - - 5,000,000 472,178 4,527,822 4% 2,000,000 - - - - 2,000,000 - 2,000,000 4% 1,500,000 1,500,000 - - - -- _ _ 3' 2,300,000 - - 1,565,009 - 734,991 1,983,739 316,26? 4 12,500,000 - - 57,010 12,442,990 7,400,775 5,099,225 41//4 250,000,000 - 50,000 249,950,000 250,000,000 - 438/ %70 2,450,000 2,450,000 - - - 4% 34,000,000 - 1,200,000 1,707,529 - 31,092,471 32,800,000 31/., % 10,000,000 - - - - 10,000,000 4,051,632 5,948,368 18,500,000 - - - - 18,500,000 6,132,889 12,367,111 3 ,/4 %o 12,800,000 12,800,000 - - - - - 41/4yf ~ 12,000,000 - 238,017 151,983 632,000 10,978,000 11,761,983 414/2% 24,100,000 - - - - 24,100,000 12,168,610 11,931,390 41/, 7% 10,000,000 - 10,000,000 (Refunding) - _ 41/2 26,000,000 - - - - 26,000,000 11,123,634 14,876,366 3127% 10,000,000 1(,000,000 - - 41 (7o 191,044,212 - - - 50,000 190,994,212 191,044,212 - 41/ CJo 3,955,788 - _ 3,955,788 3,955,788 - $945,325,000 $43,250,000 $11,512,576 $3,897,521 $20,400,858 $866,264,045 $671,142,350 $219,420,074 [ 55 ] APPENDIX C Statement of Loans-June 30, 1951 (Continued) EXPRESSED IN UNII'ED STATES CURRENCY (See Notes to Financial Sta;cements) Date of Borrower and Gudraror Program or Project Loan Agreement Maturii-ji Brouglht forwa.i Netherlands (Guarantor) N. V. Sroomvaart Mij. "Nederland" Purchase of S. S. Raki and S. S. Roebiah July -15, 1948 1949-1958 N. V. Vereenigde Schvrt. Mij. Purchase of S.S. Almkerk July 15, 1948 1949-1958 N. V Ned.-Amer. Stoomvaart-Mij. "Holland-Amerika Lijn" Purchase of S.S. Alblasserdijk July 15, 1948 1949-i 958 N. V. Rotterdamsche Lloyd Purchase of S.S. Friesland and S.S. Drente July 15, 1948 1949-!958 Herstelbank Equipment for reconstruction and modernization of pcr- ticular industrial plants July 26, 1949 1952-196-! Nicaragua Highway construction June 7, 1951 1954- 9 Nicaragua (Guarantor) Banco Nacional de Nicaragua Agricultural machinery June 7, 1951 954 -19 South Africa Expansion of transport facilities Jan. 23, 1951 1956--- South Africa (Guarantor) Electricity Supply Commission Electric power development Jan. 23, 1951 54 - Thailand Railway rehabilitation Oct. 27, 1950 1954- !9,, Irrigation Oct. 27, 1950 195- 197i Port construction and developrment Oct. 27, 1950 1b54-1,6 8 Turkey Construction of grain-storage facilities July 7, 1950 1954-!968 TI.arkey (Guarantor) Port construction and development July 7, 1950 1956-19t 7 Industrial Development bank of Turkey Foreign exchatnge for development of private inluascry OCct. 19, -195 Uruguay (Guarantor) U. T. E. Electric powcr development and telephocn c3uipr.enr Au-g. 25, 19$0 59 Yugoslavia Equipment for timber production Oct. 17, 1949 19 50 -915 TOTAL LOANS GRANTED--NOT1S 1D and E [56] APPENDIX C Statement of Loans-June 30, 1951 (Continued) EXPRESSED IN UNITED STATES CURRENCY (See Notes to Finanril Statements) Interest Eflective Undisbarsed Rate Original Loans Cancellations Principal Obligations Loans Principal Balance of (Including Pricipal Not Yet and Repdyments of Borrowers Outstanding Amount Effective Commission) Amount Effective Refundings to Bank Sold by Bank Held by Batk Disbursed Loans $945,325,000 $43,250,000 $11,512,576 $3,897,521 $20,400,858 $866,264,045 $671,142,350 $ 19,420,074 - 3D9o% 4,000,000 - - - 4,000,000 - 4,000,000 - 3%670 2,000,000 - - 2,000,000 - 2,000,000 - 394%6 2,000,000 - - - 2,000,000 - 2,000,000 - 3946% 4,000,000 - - - 4,000,000 - 4,000,000 - 4%; 15,000,000 - 6,200,000 - 616,638 8,183,362 3,953,580 4,846,420 41/8 % 3,500,000 3,500,000 - - - - _ _ 4 % 1,200,000 1,200,000 - - 33/4% 20,000,000 - - - - 20,000,000 - 20,000,000 4%S 30,000,000 - - - - 30,000,000 1,839,291 28,160,709 33/4% 3,000,000 - - - - 3,000,000 - 3,000,000 4% 18,000,000 - - - - 18,000,000 15,000 17,985,000 33/4 % 4,400,000 4,400,000 - _ _ _ _ _ 3 789S 3,900,000 - - - - 3,900,000 67,715 3,832,285 4/4% -7, 12,500,000 - - - - 12,500,000 - 12,500,000 33C Y479,000,000 - - - - 9,000,000 9,193 8,990,807 41/4 33,000,000 - - - - 33,000,000 - 33,000,000 3% 2,700,000 - - 2,203,750 - 496,250 2,700,000 - $1,113,525,000 $52,350,000 $17,712,576 $6,101,271 $33,017,496 $1,004,343,657 $691,727,129 $351,735,295 [ 57] APPENDIX D Statement of Currencies Held by the Bank-June 30, 1951 (See Notes to Financial Statements) Total Amount Expressed Expressed in Unit of In Member Currency Rate of Exchange United States Currency (Restricted) (Note A) Dollars Member Currencies: Australia Pound 160,839 $ = 0.4464 $ 360,280 Austria Schilling 1,288,457 $ 14.40 89,564 Belgium Franc 18,016,928 $ = 50.00 360,339 Bolivia Boliviano 737,429 $ 60.00 12,290 Brazil Cruzeiro 349,434,903 $ 18.50 18,888,373 Canada Dollar 3,717,750 $ = 1.10 3,379,773 Ceylon Rupee 12,855,920 $ = 4.7619 2,699,746 Chile Peso 194,637,871 $ 31.00 6,278,641 China Gold Yuan 21,581,589 $ = 20.00 1,079,079 Colombia Peso 12,264,238 $ = 1.950. 6,289,414 Costa Rica Col6n 2,004,020 $ = 5.615 356,905 Cuba Peso 59,585 $ 1.00 59,585 Czechoslovakia Koruna 11,062,883 $ 50.00 221,258 Denmark Krone 575,691 $ 6.907 83,347 Dominican Republic Peso 3,190 $ = 1.00 3,190 Ecuador Sucre 8,598,807 $ = 15.00 573,254 .Egypt Pound 21,706 $ = 0.3482 62,331 El Salvador Col6n 436,726 $ = 2.50 174,690 Ethiopia Dollar 1,298,430 $ = 2.484 522,618 Finland Markka 929,725,054 $ 230.00 4,042,283 France Franc 183,255,887 $ 349.6 524,187 Greece Drachma 22,500,000,000 $ 5,000.00 4,500,000 Guatemala Quetzal 352,888 $ 1.00 352.888 H,onduras Tempira 2,600 $ 2.00 1,300 Iceland Kr6na 2,900,576 $ 16.286 178.106 India Ruoee 3,252,729 $ = 4.762 683,073 Iran Rial 1,684,724 $ 32.25 52,239 Iraq Dinar 4,024 $ 0.3571 11,268 izaiy Lira 7,258,807,169 $ e 225.00 32,261,365 Lebanon Pound 1,768,275 $ _ 2.191 806,886 Luxembourg Franc 770,634 $ = 5000 15,413 Mexico Peso 101,066,425 $ - 8.65 11,683,980 Netherlands Guilder 1,834,791 $ = 3.80 482,840 Nicaragua Cordoba 700,076 $ 5.00 140,015 Norway Krone 624,291 $ 7.143 87,401 Pakistan Rupee 552,218 $ 3.309 166,908 Panama Balboa 35,995 $ 1.00 35,995 Paraguay Guarani 1,501,183 $ 6.oo 250,197 Peru Sol 65,604 $ 6.50 10,093 Philippines Peso 2,382,999 $ 2.00 1,191,500 Syria Pound 12,438 $ 2.191 5,676 Thailand Baht 161,997 $ 12.50 12,960 Turkey Lira 135,041 $ 2.80 48,229 Union of South Africa Pound 61,520 $ 0.3571 172,257 United Kingdom Pound 694,832 S 0.3571 1,945,529 United States Dollar 4,950,318 None 4,950,318 Uruguay Peso 2,846,177 $ 1.519 1,873,657 Venezuela Bolivar 4,564,456 S 3.35 1,362,524 Yugoslavia Dinar 359,490,127 $ 50.00 7,189,802 Restricted Currency (NOTE J) .............................. $116,533,5 Unrestricted Currency (Belgium, Canada, United Kingdom and United States) .4,334,146 $120,867,712 Non-Member Currency (Switzerland) ................................................ 4,273,280 Total (NOTE K) .......... $125,140,992 [583 I APPENDIX E Statement of Subscriptions to Capital Stock and Voting Power-June 30, 1951 EXPRESSED IN UNITED STATES CURRENCY (See Notes to Financial Statements) Amounts Paid In Subscriptions (Note A) In Currency of Member Other Amount Usited Stdaes Than United Member Sbares (Note L) Dollars States Dollars 1 Australia 2,000 $ 200,000,000 $ 4,000,000 $ 360,368 2 Austria 500 50,000,000 1,000,000 90,000 3 Belgium 2,250 225,000,000 4,500,000 2,344r422 4 Bolivia 70 7,000,000 140,000 12,600 5 Brazil 1,050 105,000,000 2,100,000 18,900,000 6 Canada 3,250 325,000,000 6,500,000 13,340,334 7 Ceylon 150 15,000,000 300,000 2,700,000 8 Chile 350 35,000,000 700,000 6,300,000 9 China 6,000 600,000,000 9,030,000 1,080,000 10 Colombia 350 35,000,000 700,000 6,300,000 11 Costa Rica 20 2,000,000 40,000 360,000 12 Cuba 350 35,000,000 700,000 63,000 13 Czechoslovakia 1,250 125,000,000 1,875,000 225,000 14 Denmark 680 68,000,000 1,360,000 158,594 15 Dominican Republic 20 2,000,000 40,000 3,600 16 Ecuador 32 3,200,000 64,000 576,000 17 Egypt 533 53,300,000 1,066,000 95,940 18 El Salvador 10 1,000,000 20,000 180,000 19 Ethiopia 30 3,000,000 60,000 540,000 20 Finland 380 38,000,000 760,000 4,046,069 21 France 5,250 525,000,000 10,500,000 1,193,364 22 Greece 250 25,000,000 500,000 4,500,000 23 Guatemala 20 2,000,000 40,000 360,000 24 Honduras 10 1,000,000 20,000 3,600 25 Iceland 10 1,000,000 20,000 180,000 26 India 4,000 400,000,000 8,000,000 721,800 27 Iran 336 33,600,000 672,000 60,480 28 Iraq 60 6,000,000 120,000 20,880 29 Italy 1,800 180,000,000 3,600,000 32,400,000 30 Lebanon 45 4,500,000 90,000 810,000 31 Luxembourg 100 10,000,000 200,000 18,000 32 Mexico 650 65,000,000 1,300,000 11,700,000 33 Netherlands 2,750 275,000,000 5,500,000 552,631 34 Nicaragua 8 800,000 16,000 144,000 35 Norway 500 50,000,000 1,000,000 90,000 36 Pakistan 1,000 100,000,000 2,000,000 180,008 37 Panama 2 200,000 4,000 36,000 38 Paraguay 14 1,400,000 28,000 252,000 39 Peru 175 17,500,000 350,000 31,500 40 Philippine Republic 150 15,000,000 300,000 1,200,000 41 Syria 65 6,500,000 130,000 11,700 42 Thailand 125 12,500,000 250,000 22,500 43 Turkey 430 43,000,000 860,000 77,400 44 Union of South Africa 1,000 100,000,000 2,000,000 180,000 45 United Kingdom 13,000 1,300,000,000 26,000,000 4,050,000 46 United States 31,750 3,175,000,000 635,000,000 -- 47 Uruguay 105 10,500,000 210,000 1,890,000 48 Venezuela 105 10,500,000 210,000 1,365,000 49 Yugoslavia 400 40,000,000 800,000 7,200,000 83,385 $8,338,500,000 $734,675,000 $126,926,790 (60] APPENDIX E Statement of Subscriptions to Capital Stock and Voting Power-June 30, 1951 EXPRESSED IN UNITED STATES CURRENCY (See Notes to Financial Statements) Amounts Paid In Amounts (Note A) Required to Maintain Non-Interest- Value of Subject to Call Bearing, Non- Currency Amounts to Meet Obliga. Number Negotiable Holdings Due tions of Bank of Demand Notes (Note C) (Note B) (Note I) Votes $ 35,639,632 S - $ - $ 160,000,000 2,250 1 8,910,000 - - 40,000,000 750 2 38,155,578 _ _ 180,000,000 2,500 3 1,247,400 - - 5,600,000 320 4 - - - 84,000,000 1,300 5 45,005,909 153,757 - 260,000,000 3,500 6 - - - 12,000,000 400 7 - - - 28,000,000 600 8 106,920,000 2,970,000 480,000,000 6,250 9 - - - 28,000,000 600 10 - - - 1,600,000 270 11 6,237,000 - - 28,000,000 600 12 22,275,000 - 625,000 100,000,000 1,500 13 12,081,406 - - 54,400,000 930 14 356,400 - - 1,600,000 270 15 _ _ _ 2,560,000 282 16 9,498,060 - - 42,640,000 783 17 - - - 800,000 260 18 _ _ 2,400,000 280 19 - 2,793,931 - 30,400,000 630 20 93,306,636 - - 420,000,000 5,500 21 - - - 20,000,000 500 22 - - -- i,600,ooo 270 23 176,400 - - 800,000 260 24 - - - 800,000 260 25 71,278,200 - - 320,000,000 4,250 26 5,987,520 - - 26,880,000 586 27 1,059,120 - - 4,800,000 310 28 - - - 144,000,000 2,050 29 _ - - 3,600,000 295 30 1,782,000 - - 8,000,000 350 31 _ - - 52,000,000 900 32 48,947,369 - _ 220,000,000 3,000 33 - - _ 640,000 258 34 8,910,000 - - 40,000,000 750 35 17,819,992 - - 80,000,000 1,250 36 - - - 160,000 252 37 _ _ _ 1,120,000 264 38 3,118,500 _ _ 14,000,000 425 39 1,500,000 - - 12,000,000 400 40 1,158,300 - - 5,200,000 315 41 2,227,500 - - 10,000,000 375 42 7,662,600 - - 34,400,000 680 43 17,820,000 - - 80,000,000 1,250 44 229,950,000 1,040,000,000 13,250 45 _ _ _ 2,540,000,000 32,000 46 _ _ - 8,400,000 355 47 525,000 - - 8,400,000 355 48 _ __ 32,000,000 650 49 $799,555,522 $2,947,688 $3,595,000 $6,670,800,000 95,635 [61] APPENDIX F Notes to Financial Statements-June 30, 1951 NOTE A NOTE C Amounts in currencies other than United States dollars Payment due within a reasonable time under Article II, have been translated into United States dollars: Section 9(a) from two members by reason of a reduction (i) In the cases of 39 members, at the par values in the established par values of such members' currencies.- (i) Ithcaeof3mebr,athpavaus This Section provides as follows: established under the International Monetary Fund Agreement as specified in the "Schedule of Par Values" (a) Whenever (i) the par value of a member's published by the International Monetary Fund; and currency is reduced, or (ii) the foreign exchange value- (ii) In the cases of the remaining 10 members of a member's currency has, in the opinion of the Bank, (Austria, Canada, Ceylon, China, France, Greece, Italy, depreciated to a significant extent within that member's Peru, Thailand and Uruguay), the par values of whose territories, the member shall pay to the Bank within a currencies are not so specified, at the rates used by such reasonable time an additional amount of its own cur- members in making capital payments. rency sufficient to maintain the value, as of the time of initial subscription, of the amount of the currency of (iii) In the case of non-member currency, all Swiss such member which is held by the Bank and derived francs, at 4.2975 Swiss francs to 1 United States dollar. from currency originally paid in to the Bank by the No representation is made that any of such currencies member under Article II, Section 7(i), from currency is convertible into any other of such currencies at any rate referred to in Article IV, Section 2(b), or from any or rates. See also Note C. additional currency furnished under the provisions of the present paragraph, and which has nor been repur- NOTE B chased by the member for gold or for the currency of any member which is acceptable to the Bank. Under Article II, Section 8(a) (i) any original mem- ber of the Bank whose metropolitan territories suffered (b) Whenever the par value of a member's currency from enemy occupation or hostilities during World War is increased, the Bank shall return to such member II had a right to postpone payment of 1/2 of 1%o of the within a reasonable time an amount of that member's amount of its subscription payable in gold or United States currency equal to the increase in the value of the dollars until June 25,1951. All memberswho received such amount of such currency described in (a) above. a postponement have made payment in full except China (c) The provisions of the preceding paragraphs may and Czechoslovakia. China has made a payment of $30,- be waived by the Bank when a uniform proportionate 000 and has stated that it recognized its obligation to the change in the par values of the currencies of all its Bank and would pay the balance of $2,970,000 as soon members is made by the International Monetary Fund. as it was in a position to do so. Czechoslovakia has claimed a further postponement under Article II, Section 8(a) (ii), NOTE D which reads as follows: The Bank has sold under its guarantee $12,000,000 of "An original member who cannot make such a pay- 21/2% serial notes, $549,000 of 23/4% serial bonds and ment because it has not recovered possession of its gold $16,000,000 of 3%o sinking fund bonds received by the reserves which are still seized or immobilized as a re- Bank in connection with its loan operations of which sult of the war may postpone all payment until such amounts a total of $3,000,000 has been retired. Of the date as the Bank shall decide." total of $25,549,000 of obligations outstanding under guarantee $3,450,450 is reflected in the balance sheet as The Bank has not passed on such claim. a direct liability subject to withdrawal. NOTE E The principal outstanding on loans disbursed, and the accrued charges for interest, commitment fee, service charge and loan commission are payable in United States dollars except the following amounts for which the dollar equivalent is shown: Accrued Interest, Principal Commitment and Accrued Loan Currency Payable Outstanding Service Charges Commissions Total Belgian Francs .......... ........ $ 2,073,853 $ 20,289 $ 6,116 $ 2,100,258 Canadian Dollars ........ ........ 10,126,770 74,578 24,623 10,225,971 Danish Kroner .......... ........ 53,676 666 222 54,564 French Francs ................... 364,259 2,390 598 367,247 Italian Lire ..................... 98,675 1,042 297 100,014 Pounds Sterling ................ 2,000,815 147 58 2,001,020 Swiss Francs .............. ... 6,271,358 45,118 13,953 6,330,429 Total .............. ..... $20,989,406 $144,230 $45,867 $21,179,503 [62] NOTE F however, that, if necessary, after the Bank's subscribed The amount of commissions received by the Bank on capital is entirely called, such currencies may, without loans made or guaranteed by it is required under Article restriction by the members whose currencies are offered, IV, Section 6 to be set aside as a special reserve to be kept be used or exchanged for the currencies required to meet available for meeting obligations of the Bank created y contractual payments of interest, other charges or amoti- borrowing or by guaranteeing loans. On all loans granted zation on the Bank's own borrowings or to meet the to date the effective rate of commission is 1 % per annum. Bank's liabilities with respect to contractual payments on loans guaranteed by it. NOTE G NOTE K As sinking funds for the two issues of United States The currencies of the several members, and the notes Twenty-Five Year Dollar Bonds and the issue of Sterling substituted by them for any part of such currencies, as Stock, the Bank has agreed to purchase and retire or re- perznirted under te provisions of Artide V, Section 12, deem bonds of each such issue in varying amounts calcu- are held on deposit with designated depositories in the lated to retire 50%7 of the total of such issue by maturity. tertre of thepciemmes In July 1951 the Bank sold a public issue of 3m/2aiss, territories of the respective members. Franc Bonds of 1951, due August 1, 1963 in the principal NOTE L amount of Sw fr 50,000,000 (United States equivalent approximately $11,600,000). In terms of United States doliars of the weight and fineness in effect on July 1, 1944. NOTE H Pursuant to action of the Board of Governors and GENERAL Executive Directors the net income of the Bank has been Burma has until October 15, 1951, and Sweden until allocated to a General Reserve Against Losses on Loans August 31, 1951, to comply with the terms and condi- and Guarantees Made by the Bank; and the future net tions of the respective resolutions of the Board of Gov- income of the Bank will, until further action by the ernors authorizing admission to membership in the Bank Executive Directors or the Board of Governors, be allo- with share subscriptions of $15,000,000 and $100,000,- cated to this reserve. 000 respectively. Formal applications for membership have also been received from Indonesia, Jordan and the NOTE I Federal Republic of Germany but final action on these applications has not yet been taken by the Board of Subject to call by the Bank only when required to meet Governors. the obligations of the Bank created by borrowing or guaranteeing loans. LMTIGATION NOTE J A suit has been commenced by an individual plaintiff against the Bank asking damages of approximately $625,- These currencies are derived from the 18 % of the 000 for alleged interference with plaintiff's contractual subscriptions to the capital stock of the Bank which is relationships (Frank H. Redicker v. Warfield et al., U. S. payable in the currencies of the respective members. Such District Court, Southern District of New York, Civil No. 18 % may be loaned by the Bank, and funds received by 61-210). The Bank has denied the substance of the the Bank on account of principal of loans made by the charges contained in the complaint and has been advised Bank out of such currencies may be exchanged for other by trial counsel that the suit is without merit. At June 30, currencies or reloaned, only with the approval in each case 1951 there was no other litigation pending against the of the member whose currency is involved; provided, Bank. [63 APPENDIX G Opinion of Independent Auditor PRICE WATERHOUSE & CO. 1000 VERMONT AVENUE, N.W. WASHINGTON 5, D. C. July 23, 1951 To INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT, Washington, D. C. We have examined the financial statements listed below of Inter- national Bank for Reconstruction and Development as of June 30, 1951. Our examination was made in accordance with generally accepted audit- ing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, such financial statements, with the notes thereto, present fairly the financial position of the Bank at June 30, 1951, expressed in United States currency, and the results of its operations for the twelve months then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. PRICE WATERHOUSE & CO. Financial Statements Covered by the Foregoing Opinion Balance Sheet-June 30, 1951 APPENDIX A Comparative Statement of Income and Expenses for the Fiscal Years Ended June 30, 1950 and June 30, 1951 APLENDIX B Statement of Loans-June 30, 1951 APPENDIX C Statement of Currencies Held by the Bank-June 30, 1951 APPENDIX D Statement of Subscriptions to Capital Stock and Voting Power-June 30, 1951 APPENDIX E Notes to Financial Statements APPENDIX F [64 ] APPENDIX 1H Administrative Budget for the Fiscal Year Ending June 30, 1952 There is outlined below the Administrative Budget for the fiscal year ending June 30, 1952, as prepared by the ; , President and approved by the Executive Directors in accordance with Section 19 of the By-Laws. For purposes of comparison there are also outlined below the administrative expenses incurred during the fiscal years ended June 30, 1949, 1950 and 1951. Actual ExPees Budget 1949 1950 1951 1952 BANK STAFF Personal Services .................. $2,377,602 $2,396,389 $2,547,169 $2,921,000 Fees and Compensation ............. ,19,694 20,273 55,119 40,000 Special Technical Services ............ - 313,500 382,340 375,000 Representation ........ 20,739 38,534 43,504 41,000 Travel ...... .. .. 243,810 326,130 358,252 360,000 Supplies and Materials ....... ....... 25,531 26,320 42,130 44,500 Rents and Utilities ................. 327,860 335,093 335,040 364,000 Communications .......... ........ 78,733 88,564 101,575 108,000 Furniture and Equipment ...... ...... 31,302 26,097 28,791 29,800 Motor Vehicles ...... ........... 6,486 5,335 10,843 5,000 Books and Library Service ........... 63,821 59,707 56,554 59,500 Printing ......................... 32,638 35,436 50,001 51,000 Contributions to Staff Benefits ......... 270,577 266,126 300,322 349,200 Insurance ........................ 11,312 14,644 29,040 21,000 Other Expenses ........ 7,584 2,201 1,001 Contingencies ............ , 100,000 Total ........................$ 3,657,689 $3,954,349 $4,341,681 $4,869,000 Office of Executive Directors ..... ...... 325,336 322,804 278,630 269,000 Board of Governors and Advisory Council. 85,582 92,858 223,136 95,000 Total Administrative Expenses .......... $4,068,607 $4,370,011 $4,843,447 $5,233,000 Expenses during the past year for bond registration, issuance and other sirnilar financial transactions amounted to $953,872. These expenses have not been estimated for the fiscal year ending June 30, 1952, as the extent to which the Bank may borrow during this next year is not known. Experience during previous years indicates that these expenses, exclusive of commissions, premiums and discounts will average about $125,000 for each $100 million of bonds which the Bank may issue and, also, that commissions incident to the sale of securities from the Bank's portfolio will average $2,500 for each rnillion dollars of securities which the Bank may sell. [ 65 APPENDIXI Yoting Power and Subscriptions of Mem -er Countries As of June 30, 1951 V-Ng PwrSts~bSritzMons MEMBER COUJNTRIES votes yTat;i of DolJars) 'o~ ... ... .. ... ... .. . . . ..2,2 5 0 2.35 20`0.00 2.4`0 A ..... ...... ............ 750 .78 60. ..... ..... .. . ..... ..... ....2,500 2.62 225.0 27 BlVia.................. . 320 .34 7.0 .08 Brazil .......... .. .....1,300 1.36 105.0- 1.26 Q~anqa..................3,500 3.66 325.0 3.90 Cey'nn ~~~ ~ ~~~~~~400 .42 15.0 .18 Lh~de , ........ ....... .......600 .63 35.0 .42 Chna.................6,250 6.54 600.0 7 1 9 C ol, orn bi . .... ... . .. ... .... ... ...600 .63 35.C .42 Rice- .....270 .28 2. .2 ...... ..... ..... ..... ..... .....600 .63 35.0 .A2 1oka........-......1,500 1.57 125.0 1.50 ....... ...... .... .. ......930 .97 68,0 .81 Domnian Republic..............270 .28 2.0 .02 E ." 7a cd or ....... --......282 .30 3.2 .04 _ py ...................783 .82 53.3 .64 El Salvador..................260 .27 1.0 .0i Et-hiopia ..................280 .29 3.0 .04 Finland ..................630 .66 38.0 .45 France...................5,500 5.75 525.0 6,3C rec........... . ....C0 5 2'.0, Gixatema!a ..............,,... , 270 .28 2. 02 7ijnu-as...... ... .......,.,... 26,0 .27 1.0 .0i ...... . .......260 .27 1.0.0 ..... .....I- - . ..... ....4,250 4.44 400. 4.80 . . ...... ....... ...... ...... 586.61 33.6 .40 0.~~~~...... .... ..310 .33 6.0 .07 ....... ...... 2~~~.050 2.14 180.0 2 1 ........ ~ ~ ~ ~ ~~ 5 3 1 4.5 0 ...... ......... ......0 3.14 275.0 3.30 .................... 258 .27 .8 .01 N ctway ..................750 .78 50.0 .60 Pakistan...................1,250 1.31 100.0 1.20 Panama ..................252 .26 .2* RP~raguay~......... ... 264 . 28 1.4 .02 P,--, ... ..... . - -... . .... . ... ....425 A44 1 7,5 .21 P`i:i~Ppines..................400 .42 15.0 .18 Syria........... 315 .33 6,5 .08 Thailand........... ...375 .;3g 12.5 .15 Turkey........ ....... 680 .71 43.0 .52 Unilon of South ALfri-a... .... ,.... ,,1,250 1.31 100.0 1.20 United Kingdom .,........................ 13,250 13.85 1,300.0 15.59 United States................ 32,000 33.46 3,175.0 38.08 Uruguay .....355 .37 10.5 .13 Venezuela................. 3 55 .37 10.5 .13 Yugoslavia..... -1- ... 65 0 .68 40.0 .48 Total ...,............ 95,635 100 00 8,338.5 100.00 Less than .005 percent. L 663 APPENDIX J Governors and Alternates As of June 30, 1951 COUNTRY GOVERNOR ALTERNATE AUSTRALIA Arthur William Fadden N. J. 0. Makin AUSTRIA Eugen Margaretha Assen Hartenau BELGIUM Jean van Houtte Maurice Frere BOLIVIA Hector Ormachea Zalles Jaime Gutierrez Guerra BRAZIL Eugenio Gudin Octavio Paranagua CANADA D. C. Abbott R. B. Bryce CEYLON J. R. Jayawardene G. C. S. Corea CHILE Arturo Maschke Fernando Illanes CHINA Chia Kan Yen Te-Mou Hsi COLOMBIA Emilio Toro Diego Mejia COSTA RICA Angel Coronas Mario Fernandez CUBA Luis Machado Joaquin E. Meyer CZECHOSLOVAKIA Jaroslav Docekal Zikmund Konecny DENMARK Svend Nielsen Hakon Jespersen DOMINICAN REPUBLIC Wenceslao Troncoso Milton Messina ECUADOR Luis Ernesto Borja Ramon de Ycaza EGYPT Ahmed Zaki Saad Pasha A. Nazmy Abdel Hamid EL SALVADOR Catalino Herrem Luis Escalante-Arce ETHIOPIA Jack Bennett Ato Menassie Lemma FINLAND Artturi Lehtinen Ralf Torngren FRANCE Minister of Finance Pierre Mendes-France GREECE George Mavros Gregorios Zarifopoulos GUATEMALA Manuel Noriega Molaes Carios Leonidas Acevedo HONDURAS Rafael Heliodoro Valle Guillermo Lopez Rodezno ICELAND Jon Arnason Thor Thors INDIA Sir Chintaman D. Deshmukh Sir B. Rama Rau IRAN Ibrahim Zend Morharraf Naficy IRAQ Seyed Ata Amin Abdul-Ghani Al-Dalli ITALY Donato Menichella Giorgio Cigliana-Piazza LEBANON Charles Malik Raja Himadeh LUXEMBOURG Pierre Dupong Pierre Werner MEXICO Carlos Novoa Raul Martinez-Ostos NETHERLANDS P. Lieftinck A. M. de Jong NICARAGUA Guillermo Sevilla-Sacasa Alfredo J. Sacasa NORWAY Gunnar Jahn Ole Colbjornsen PAKISTAN Ghulam Mohammed Anwar Ali PANAMA Rodolfo F. Herbruger Julio E. Heurtematte PARAGUAY Juan R. Chaves Victor A. Pane PERU Fernando Berckemeyer -- PHILIPPINES Miguel Cuaderno, Sr. Emilio Abello SYRIA Husni A. Sawwaf Nihad Ibrahim Pasha THAILAND Prince Viwat Kajit Kasemsri TURKEY Nurullah Esat Sumer Nahit Alpar UNION OF SOUTH AFRICA N. C. Havenga M. 1H de Kock UNITED KINGDOM Hugh Gaitskell Sir Henry Wilson-Smith UNITED STATES John W. Snyder james F. Webb URUGUAY Carlos Quijano Nilo Berchesi VENEZUELA Manuel Reyna Carlos M. Lollet C. YUGOSLAVIA Lavoslav Dolinsek Dragoslav Avramovic [67] APPENDIX K Executive Directors and Alterates and Their Voting Power As of June 30, 1951 VOTES BY TOTAL DIRECTORS ALTERNATES CASTING VOTES Oy COUNTRY VOTES Appointed Wm. McC. Martin, Jr. John S. Hooker United States 32,000 32,000 Sir Ernest Rowe-Dutton Sir Sydney Caine United Kingdom 13,250 13,250 Yueh-Lien Chang Tsoo-Whe Chu China 6,250 6.250 Roger Hoppenot France 5,500 5,500 B. K. Nehru D. S. Savkar India 4,250 4,250 Elected Thomas Basyn Ernest de Sellier Belgium 2,500 (Belgium) (Belgiam) Denmark 930 4,4iO Finland 630~ ,1 Luxembourg 350 Manuel Jose Diez Julio E. Heurtematte Mexico 900 (Panama) (Panama) Cuba 60o Philippines 400 Uruguay 355 Venezuela 355 Costa Rica 270 4,180 Dominican Repubic 2-70 El Salvador 260 i Honduras 260 Nicaragua 258 panama 252 Guillermo Perez Chiriboga Eduardo Salazar Brazil l,.30 0 (Ecu1ador) (Ecuador) Chile 6001 Colombia 600 Peru 425 Bolivia 20 . Ecuador 28 2 Guatemala 27C0 Paraguay 264i Louis Rasminsky J. F. Parkinson Canada 3,500 L (Canada) (Canada) Iceland 260J J. W. Beyen Thoralf Svendsen Netherlands 3,00| 3 750 (Netherlands) (Norway) Norway 75Q Yaqub Shah Nasrollah Djahanguir Pakistan 1,250 (Pakistan) (Iran) Egypt Iran 3,: Syria 3' Iraq31 Lebanon 29-f Leslie Galfreid Melville L. H. E. Bury Australia 2,25 3:500 (Australia) (Australia) Union of South Ag- c0 Costantino Bresciani-Turroni *Giorgio Cigliana-Piazza Italy 2,050 (Italy) (Itly) Austria 750 3,300 Greece 500!J Cabir Selek Boonma Wongswan Turkey 680 (Turkey) (Thailand) Yugoslavia 6''0 ' Ceylon 400 28.35 Thailand 375 * Acting temporarily. Ethiopia 0 J Member country unrepresented by an Executive Director: Czechoslovakia with 1,5CC : [68 3 APPENDIX K In addition to the Executive Directors and Alternates shown on the foregoing list. the following also served as Alternates since the effective date of the Third Regular Election: ALTERNATE EXECUTIVE DIRECTORS Date of Resigatliop Kuo-Hwa Yu (China) January 2, 1951 Raul Diez de Medina (Bolivia) February 28, 195 1 J. M. Garland (Australia) March 11. 1951 - . Gunnar Kjoistad (Noruway) April 30, 1951 [69] APPENDIX L Principal Officers of the Bank As of June 30, 1951 Eugene R. Black. .. ....... President Robert L. Garner ............................ . Vice President William A. B. Iliff ............ ............. Assistant to President A. S. G. Hoar ....................... .. Loan Director D. Crena de Iongh .............. . , . . Treasurer Leonard B. Rist ................ . Economic Director Davidson Sommers . . ... General Counsel M. M. Mendels .............. ... , . , .Secretary George L. Martin . . ............ ... .. Director of Marketing Chauncey G. Parker ............ ........ Director of Administration Harold N. Graves, Jr ................ .. . . Director of Public Relations Richard H. Demuth ............ ..... Assistant to the Vice President [ 70 ]