The manner in which the United States Government keeps its books reflects a loan as a dollar expenditure in the year in which the dollars were actually paid out and, as there is no asset side of the balance sheet showing an offsetting receivable to the United States, the full amount of the loan in most instances shows dollars spent in a particular year and, in the year of repayment, reflects the payment as dollar income to the United States. It is this type of dollar spending which the administration now seeks to avoid. This has been a much-discussed subject in which I am taking no part, and I merely make reference to it as it relates to a plan whereby private capital may actually take over the function of a Government loan with the Government assuming only a contingent liability which, if properly handled, should never become a fixed liability. The Government bookkeeping system again becomes important because that system does not take into account contingent liabilities, in fact even fixed liabilities do not show up until actual payment is made.

My experience with American businessmen has been that they are always anxious to do business where they can be paid in United States dollars and that they have no hesitation in doing business in foreign countries so long as the payment is in dollars even though it means doing business under circumstances where the contract is subject to use of foreign labor, cancellation upon short notice, renegotiation which cuts down profits, changes and extras, and other final determinations being made entirely by the contracting officer.

Most businessmen have become interested in the large profits they understand can be earned in such foreign countries as Brazil, but, unless they have once done business in Brazil, they have a great skepticism about investing even small amounts of capital in return for large anticipated profits. When they look into the problems of doing business in Brazil they first discover that they may experience diffiOnce that is cleared culties in obtaining import licenses from the Bank of Brazil.

up they learn that Brazilian law requires that the invested capital be registered with the Bank of Brazil at the time of entry and Brazilian law further provides that the registered capital may be repatriated at the rate of 20 percent per year together with 8 percent per year of profits at the official rate of exchange, or even better in some cases, at a closed rate of exchange, by contract with the Brazilian Government. In this way the American no longer need be concerned about how many cruzeiros he must deposit with the Bank of Brazil at some future date in order to get one American dollar.

Usually, the American businessman does not find these conditions unreasonable. He recognizes that a return of his capital within 5 years together with profits of percent together with additional profits which would be earned in cruzeiros and which would be required to remain in Brazil, is a pretty good deal. However, the question that the American investor always asks is what assurance do I have that 3, 4, or 5 years from now the Brazilian Government will respect what the law is today and will allow me to repatriate my capital at the rate of 20 percent per year at the official rate of exchange. This doubt is not directed at the integrity of the country but at its ability to keep its dollar commitments. No one American Government seems to be able to answer that question satisfactorily.

officials, experienced in this field, frequently express their personal views one way or the other with respect to the likelihood of the Brazilian Government, in the years to come, permitting the investor to do exactly what the Brazilian law says he can do. This is not enough to satisfy most American investors. They feel that they would do better to keep their capital in the United States, earn smaller amounts thereon, and pay high taxes on those earnings, than they would be to take the chance of having that same capital earn large profits taxable at lower rates but all in a currency which they cannot convert to dollars and, as they see it, is therefore of doubtful value to them.

Taking Brazil as an example, if the United States Government believes that Erazil has the ability to continue to repatriate invested capital at the rate of 20 percent per year or, in other words, if the United States Government believes that it is economically possible for Brazil to obey its own laws in this respect, why shouldn't the United States Government, in appropriate instances, gurantee to American investors the availability of dollars on the due dates in return for the payment of cruzeiros at the official rate and why shouldn't the Export-Import Bank be the appropriate agency to issue these guaranties.

I am aware that this subject has been discussed in the past and that the FxportImport Bank has been opposed to these guaranties principally on the theory that if the transaction was sufficiently sound and worthwhile to the Brazilian economy to justify a convertibility guaranty, then the bank should go ahead and make the loan rather than guarantee the currency conversion. It would seem to me that

this position made perfect sense so long as they could make the loan. If the policy now is to not make the loan no matter how sound the transaction may be nor how beneficial it is to foreign economy, then the logic of the position no longer stands. If this policy is to continue, then it would seem that all the logic would be in favor of the guaranty.

It just comes down to this, if Brazil can, in fact, meet its future obligations to make dollars available for the repatriation of capital, then the United States Government guaranty would cost nothing but it would get the capital invested for the simple reason that the investor will accept the United States Government guaranty where he will not accept the Brazilian Government guaranty. At the present time there is no legal authority in any agency of the United States Government to issue such a guaranty. It is true that the broad charter of the ExportImport Bank may support the opinion that the power to guarantee is there, for practical purposes it is not.

Under Brazilian law, as it now stands, any investor has a right to repatriate his capital at the rate of 20 percent per year regardless of the purpose for which it is used after it enters Brazil. Take for example, an investor who wishes to establish a plant in Brazil which is to produce cigarette lighters or any other equally useless item, he has the same rights of capital repatriation as one who invests in a railway, hydroelectric system, food-processing plant or any other equally essential and worthy business venture. Surely, the United States Government should not guarantee against convertibility risks for the cigarette-lighter manufacturer but, it may be very proper for the Government to guarantee against the same risks for one venturing capital in the hydroelectric system. If, therefore, such a program would have real merit, I would think that in order to obtain the convertibility guaranty, the capital investment would be required to meet the same standards as were heretofore imposed by the United States Government agencies relative to the making of a Government loan. If it were otherwise, it could well be that Brazil could be so flooded with American capital employed in more or less useless projects which would earn sufficient cruzeiros to make it impossible for Brazil, itself, to ever earn sufficient United States dollars to allow capital repatriation. To summarize, it is my opinion that no United States bank will risk $1 in Brazil so long as there remains a doubt about convertibility back to dollars and I am further of the opinion that additional capital from private sources will not enter Brazil at a greatly increased rate until satisfactory assurances of repatriation of that capital have been given by the United States Government. This must entail an agreement with Brazil regarding exchange so that an investor will know the number of cruzeiros necessary to purchase a dollar just as he knows when making the investment how many cruzeiros he will get for his dollar. In short, the position of the American investor, businessman, or otherwise, is that he is willing to take his chances on these wonderful profits about which he has heard so much, and if they develop that is just fine and if they fail to develop that is just too bad, but he will not take a chance on the return of his investment no matter how great the potential profits may be.

If the present administration proposes to carry out its policy of encouragement to private investors to place capital in friendly foreign countries for the performance of essential work I can think of no better or less expensive way of fulfilling this policy than to have availability of United States Government guaranties respecting the repatriation of capital. Respectfully submitted.

JOHN L. INGOLDSBY, Jr.

ISBRANDTSEN Co., INC.,

New York, N. Y., October 19, 1953.

Re Export-Import Bank.

Senator HOMER E. CAPEHART,

Chairman, United States Senate Committee on Banking and Currency,
Washington, D. C.

DEAR SIR: We refer to your letter of September 18, 1953, in which you advise of the study being made by your committee of the operations of the ExportImport Bank, with which our company has had some contact within the past few years.

We are pleased to advise herewith some difficulties we have experienced in dealing with the Export-Import Bank.

From United States of America North Atlantic ports we operate regular steamship service to continental Europe, and regular steamship service around

the world eastward, in both of which services we operate American-flag vessels purchased from the United States Maritime Commission, and for which we have neither requested nor received any subsidy.

As to the purchase of American goods for shipment abroad, and which transactions are financed through the Export-Import Bank, the law requires the goods be shipped (100 percent) on American-flag vessels—unless the United States Maritime Commission shall certify to the Export-Import Bank there are not sufficient American-flag-vessel accommodations to take care of the movementin which case other than American-flag vessels can be used by the American sellers. For reasons partly unclear to us, the United States Maritime Commission, whose duty it is to promote a healthy and substantial American merchant marine, has taken the initiative with the approval of the Export-Import Bank, to ignore that portion of the law requiring all goods move on American-flag vessels, if available, and insisted on dividing the substantial business involved equally between American-flag vessels, and the ships of the country to which the goods are sold, even where there are plenty of American ships available and needing the business. For instance, on substantial movements of cargo financed through Export-Import Bank, to Germany and Japan, instead of the cargo being shipped on available American ships, half has been given to German and Japanese vessels. This is just an arbitrary, unauthorized aid program to assist foreign shipping at the expense of the American merchant marine. We protested, completely without results or consideration, to the United States Maritime Commission and the Export-Import Bank.

The United States Maritime Commission went through the motion of asking American-flag vessel operators for waivers (of their rights) and most Americanflag vessel operators wishing to please the United States Maritime Commission gave such waivers. We refused.

Now, by another odd twist, we were "caught in the wringer" in a different way as to Export-Import Bank cargo. We, an American corporation owned by American citizens, also operate regular steamship service from United States of America gulf ports to continental Europe, but we use Dutch-flag vessels in this particular service. On ECA and MSA shipments of cotton and other American products, we have carried a substantial amount of such aid goods. However, on very substantial movements of cotton and other products from United States of America gulf ports to Europe, under these arbitrary actions of the United States Maritime Commission with the approval of the Export-Import Bank, the shipments have not gone with American vessels available as required by law, but here again the shipments were divided between American-flag vessels, and the vessels of the countries to which the goods were moving-again, for instance, Germany and other countries.

So as to trades where we operate only American vessels, and needed business, contrary to law we lost substantial business to foreign steamship operators. As to trades where we operated Dutch vessels, half of the business was taken away from American ships and given to ships of the receiving countries with the result the American ships available lost half the business, and we lost all of it.

The Maritime Commission gave as the reason for this unlawful interference in the shipment of Export-Import Bank cargo, and this authorized foreign-aid program, that they would be able to get agreements out of the countries involved that American vessels would not be discriminated against as to matters controlled by the governments of those countries-which agreements, we understand, are already covered by treaties, or, in the case of Germany, can be properly dealt with by our Government under existing circumstances. However, the writer considers all this reasoning as just so much "guff," for our American-flag vessels operating between United States North Atlantic ports and Europe have been subjected to drastic discrimination by the German Government in its exchange regulations applying to payment of passage money by passengers traveling on freight vessels. We have been dogging the United States Maritime Commission all these months to get the relief we needed, without avail.

You may say our complaints go more to the United States Maritime Commission than to the Export-Import Bank, but the bank has agreed to these things despite protest, and despite the fact such actions were contrary to the spirit of the law, and the clear intent of Congress as set forth in the law.

We might add as more or less a footnote, that we are independent ship operators; will not join the international shipping cartels, and generally quote attractive freight rates. Our independent competition as to service and rates has saved the taxpayers of the United States millions of dollars in the transportation of aid shipments since World War II.

The writer does not know whether he has made sufficiently clear the details of a rather involved and complex matter, nor whether you would consider we have a proper complaint. We can only say in that connection we are writing at your invitation, only because you raised the matter of the contact we had with the Export-Import Bank. If you have any interest in the matter and have questions to which we might be able to give reply, please advise us. Yours very truly,

ISBRANDTSEN Co., INC.,
M. S. CRINKLEY,

Executive Vice President.

INTERNATIONAL GENERAL ELECTRIC Co.,

A DIVISION OF GENERAL ELECTRIC Co., U. S. A.,
New York, N. Y., October 20, 1953.

Re Export-Import Bank and International Bank for Reconstruction and Develop

ment.

Senator HOMER E. CAPEHART,

Chairman, Committee on Banking and Currency,

United States Senate, Washington, D. C.

MY DEAR SENATOR CAPEHART: (a) With reference to your September 3, 1953, letter outlining the study which the Committee on Banking and Currency is conducting of the operations of the Export-Import Bank of Washington and the International Bank for Reconstruction and Development pursuant to Senate Resolution 25, International General Electric Co. (I. G. E.), formerly separately incorporated but now a division of General Electric Co., appreciates the opportunity to be of assistance to you in gathering information and opinions. Mr. George S. Eveleth, Jr., executive vice president; Mr. J. A. H. Torry, commercial vice president; and the undersigned, all of I. G. E., have received similar letters. We have accordingly consolidated our opinions in this reply, both to ease your burden and to have a single expression of the opinion of I. G. E., which, as you know, conducts a substantial international business including exports from the United States.

(b) In this connection, I. G. E. has had a deep and abiding interest in the Export-Import Bank's activities since its inception. We likewise have been correspondingly interested in the World Bank. It is our understanding that the Export-Import Bank has engaged in various forms of banking activity such as: The financing of imports; the so-called export loans; loans for economic development abroad; loans to develop supplies of strategic materials; loans to foreign governments (e. g., Argentina and Brazil) for the purpose of enabling those countries to pay off their indebtedness to American exporters which loans have sometimes been referred to as bail-out loans; as well as certain other operations. I. G. E. has had business relations with the bank and has been benefited by certain of the bank's loans to the extent that such may have involved an I. G. È. export from the United States. I. G. E. has benefited along with other manufacturers and exporters from the so-called bail-out loans. In all cases the bank's loans were to others than I. G. E., though in the case of the so-called export loans, application has sometimes been made by I. G. E. for the purchaser's account and in these instances I. G. E. has participated in credit extension to the purchaser. I. G. E. has received no loans itself from Export-Import Bank, and has had no experience with the Export-Import Bank in connection with the bank's import loans or loans for economic development abroad or for the foreign development of strategie materials other than as they may have related to I. G. E.'s exports.

(c) The comments in this letter hence relate primarily to those phases of the Export-Import Bank's operations with which I. G. E. has had experience. And in this connection, it gives me pleasure to answer the specific questions in your letter of September 3, 1953, as follows:

(1) The nature and purpose of I. G. E.'s contact with the Export-Import Bank has been in connection with the solicitation or implementation of credit, finance, or payment in connection with (A) certain exports in which I. G. E. has been interested on specific projects, and (B) certain outstanding accounts for which the so-called bail-out loans have been extended by the bank. The nature of our contact has been personal and through correspondence, through visits, and through conferences.

(2) Insofar as I. G. E. has had correspondence or other communication with the Export-Import Bank, we have received considered attention with prompt

and adequate replies. Naturally, we and the bank have not always been in agreement; and differences of opinion have been expressed from time to time, as might normally be expected when negotiating financial matters. But our proposals, applications for credit and finance, and our various communications have always been handled in a courteous manner; and even where decisions may not have been the way we desired them, they have been made known to us in a cooperative and businesslike spirit. The time taken to obtain decisions has sometimes been longer than we have desired; but this we believe has been due to the complications of the various matters involved, or due to considerations of United States Government policy or other factors requiring time to resolve. In our opinion in the circumstances, the Export-Import Bank's service has been reasonably prompt, and not unduly long.

(3) We have applied for loans from the Export-Import Bank for the account of purchasers. We have further from time to time arranged with the bank for the sale to the Export-Import Bank of purchasers' notes, and have benefited through the repayment to us of certain outstanding accounts in Argentina and Brazil under Export-Import Bank loans to those countries for that purpose. We have never applied for a direct loan from Export-Import Bank to I. G. E. itself. (4) In connection with applications for finance which I. G. E. has made (subpar. (3) above) we have had experience in having the applications granted. We have had no experience in having formally made an application and having it denied. In certain cases where our preliminary discussions with the bank have indicated little or no likelihood of an application being favorably acted upon we have refrained from submitting an application. In every case however our proposals and applications have been handled in a courteous, businesslike, and under the circumstances, expeditious manner.

(5) Under such credits as have been authorized by the bank and under which we have been a beneficiary, and to the extent that operations have been within the province of the Export-Import Bank, the Bank has handled matters in an efficient manner. This does not mean that there have not been delays, due for example to the necessity of action on the part of foreign purchasers or foreign governments. But within the field of the Export-Import Bank's operations and decisions, the bank's activities with which we have had experience have been handled efficiently and promptly.

(6) We have no specific complaints about the operations of the Export-Import Bank. We have certain comments and suggestions mentioned below.

(7) We have had no direct experience with the Export-Import Bank in the import field; in our opinion, the bank has aided considerably the export trade of the United States. Since 1940 some $67 million of I. G. È.'s export orders are readily and directly identifiable with finance by the Export-Import Bank whose accommodation on these orders has aggregated some $49 million. Without Export-Import Bank accommodation, a considerable portion of these orders would not have resulted in business for anyone; and in such cases as business might have resulted without the bank's accommodations, in our opinion there would have been no or little corresponding export from the United States but a diversion to other exporting countries.

(8) In our opinion, the Export-Import Bank has assisted considerably in developing and expanding the economy of various foreign countries. In the power, transportation, mining and industrial fields, fundamental to the economic expansion of various foreign countries, the Export-Import Bank has played a significant part through the extension of finance. As to whether such basic and fundamental developments in the economies of foreign countries have increased those countries' capacity to purchase United States exports, it is difficult to state categorically, for direct evidence may be difficult to adduce. In our opinion, however, the strengthening of the economies of the various foreign countries through these loans has raised their standards of living and purchasing power, and made larger markets in the respective countries. The United States has, we believe, benefited from such development.

(9) As to suggestions for changes or alterations in the policy or operations of the Export-Import Bank:

(A) It is our feeling that the Export-Import Bank might well consider greater activity in the field of export credit insurance or export credit guaranty. If under reasonable terms guaranties or insurance of export credits could more readily be obtained, we believe that private business, banking and other interests, many of whom have the resources but are not in a position to accept all of the risks, would be willing to extend more international finance. It is suggested that the Export-Import Bank under suitable conditions might more readily on a selec