covered most of your present plans for expansion? Do you have plans for future expansion which will involve more loans from the ExportImport Bank?

Mr. PAPE. The first loan is almost paid up. The $8 million will be paid off in 3 more years, and we have started payment on the second loan, the $5-million loan.

Of course, we have plans for further expansion. But as to what will be the means of financing them we have not decided yet.

It might be constructive to let you know that of the present program of expansion, which is for almost $9,500,000, perhaps $10 million, we used $5 million from the loan of the United States and $5 million from

our own resources.

Senator BENNETT. You suggest the next question. You have had $15,700,000 from the Export-Import Bank. How much private capital have you put in against that?

Mr. ROLDAN. In round figures, it is about 200 million pesos. That is about $25 million.

Senator BENNETT. So the Export-Import Bank has supplied a little less than 40 percent of your capital and you have supplied the balance, mainly from Mexican nationals rather than from stockholders in the United States?

Mr. ROLDAN. That is right. Of course, the reinvestments have been out of our own areas, and have been considerable in the last 2 or 3 years.

Senator BENNETT. Of course, those earnings are still available to spend in the Mexican market for machinery and replacement? Mr. ROLDAN. Yes, sir.

Senator BENNETT. I appreciate your point of view. I can understand, having been a borrower, how anxious a borrower is not only to get the best possible terms but to lighten the burden as he goes along, if he can.

We appreciate your being with us. I shall supply for the record at this point the letter from Mr. Pape of September 17, 1953, which was written in response to the questionnaire of the committee. Mr. PAPE. Thank you very much, Mr. Chairman.

(The material referred to follows:)

Senator HOMER E. CAPEHART,

ALTOS HORNOS DE MEXICO, S. A.,

Monclova, Coahuila, September 17, 1953.

Chairman, Committee of Banking and Currency,

Senate of the United States, Washington, D. C., U. S. A.

DEAR SENATOR CAPEHART: In reply to your kind letter of September 3d, with respect to the study of the operations of the Export-Import Bank of Washington, we can state without reserve that our operations and contacts with the ExportImport Pank have not only been courteous, agreeable, and considerate, but that the results obtained in the form of loans have made almost directly possible the existence of our industry in Mexico.

1. I bave had to do with three loans, namely, the original Altos Hornos de Mexico, S. A. project of 1942 for $8 million, the expansion program of Altos Hornos loan of 1951 for $5 million and the coal mine development project loan of Carbonifera Unida de Palau, S. A. for $2,700,000 in 1950.

2. All details, studies and correspondence with respect to these three loans were handled with reasonable promptitude and all data submitted was seemingly very carefully considered and studied, as could be observed from the understanding manner in which the technicians and experts of the Export-Import Bank were able to discuss the matter with our representatives.

3. Without any doubt, the assistance of the bank has aided considerably in the developing and expanding of our industry and of the economy of Mexico, and by

its very nature has caused to be purchased in the United States considerable equipment and machinery.

4. It is our opinion that the operations of the bank, as an instrument to aid in financing and to facilitate the foreign trade of the United States, has been successful. However, we feel that its operations to develop projects which will improve the economy of friendly countries, is somewhat hampered by the full percentage of the loans being earmarked for only purchase of equipment, services, and machinery in the United States, without allowing certain leeway, on the part of the officials of the bank, in exceptional cases, with respect to the use of funds for purchase of equipment in the country where the loan has been made, or in other special cases, a percentage of the loan for working capital, where precisely defined in an agreement between the recipient and the bank. We fully appreciate the dangers involved, but we feel that there are cases where a banking institution, to protect itself and its customers, needs to have some leeway with respect to working-capital loans, although this has never come up in our relations with the Export-Import Bank.

It is also our opinion, as a result of some 10 years' contact with officials in Mexico and after having had, during that period, several opportunities to return to Europe-where I had worked some 15 years before coming to Mexico-that the functioning of the Export-Import Bank, as a means to develop friendly relations and to improve the economy of our neighbors, has been more successful than other plans of aid adopted in Europe. The Export-Import Bank officials and employees have made good friends for the United States in Mexico. This has made good business for the Export-Import Bank and, by the same token good business for the countries to which the loans have been granted. There is no greater satisfaction than to have received help on a project which has been submitted, and then to be able to face your benefactor on equal terms, having met squarely your obligations. I believe the Export-Import Bank is breeding this type of relationship, which is healthy and appreciative to all.

My belief in the good that the Export-Import Bank has done here in Mexico is such, that I would not hesitate to testify before your committee, provided the dates are such that it can be managed with respect to the business for which I am responsible here in Monclova. From this center of operations we handle a steel mill, iron mines, coal mines, and this does not leave room for many other activities. However, if you will advise me well in advance of the dates you have planned for your hearings, and should my testifying be of any use to you, I shall be glad to advise you of the possibility of assisting.

Sincerely yours,

H. R. PAPE, General Manager.

Senator BENNETT. It appears that if we can spend a few minutes more together we will not have to come back this afternoon. Our last witness is Mr. William J. Siemon. Mr. Siemon has a Wall Street address. He will have to identify himself otherwise.

STATEMENT OF WILLIAM J. SIEMON, NEW YORK, N. Y.

Mr. SIEMON. I am William J. Siemon, financial executive of the New York office of the Corporacion de Fomento de la Produccion of Chile, otherwise known as the Chilean Development Corp. I reside in East Orange, N. J.

However, I would prefer to appear not in my official capacity as financial executive of the Corporacion de Fomento de la Produccion of Chile, which is an instrumentality of the Chilean Government, but rather as an individual, a citizen of the United States. The opinions that I will express are based upon my many years of experience in the commercial banking business on both domestic and foreign sides, including much experience in foreign exchange and arbitrage, and particularly my experience in international financing and development during the past 13 years. Those 13 years did not cover one credit nor one project. My relationship with the ExportImport Bank has been in connection with many projects and many credits.

To repeat in full, Mr. Chairman, my letter of September 14, which was in answer to the committee's letter of September 30, would be time consuming. Therefore, with your permission, I would like to confine my remarks to what in my opinion are the more important aspects of the study being made by your committee. Those three questions, as I see it, briefly stated and in the inverse order of their importance are:

(1) Have credits of the Export-Import Bank assisted in developing and expanding the economy of other countries?

(2) Has the Export-Import Bank aided in financing and facilitating the export-import trade of the United States?

(3) Has the Export-Import Bank aided American industry?

Based upon my experience, it is my opinion that the Export-Import Bank definitely has contributed to the development and the expanding of the economy of other countries, and toward increasing their capacity to purchase United States exports.

To the degree to which we enable another country to develop a certain basic industry or fill certain internal requirements, we enable that country to increase their purchases in the United States of other goods.

I will use as an example those loans granted by the Export-Import Bank to Chile in connection with that country's hydroelectric development, and in the erection of its steel mill.

The hydroelectric development represents a savings in Chile's foreign-exchange budget, which would otherwise be spent for the importation of fuels, and to the degree to which Chile can so effect a saving in its foreign-exchange budget it becomes a potential buyer of other goods from the United States.

The steel mill in Chile, using as it does local iron ore, limestone, and coal, results in a savings in foreign exchange which would otherwise be expended for the importation of that country's basic steel needs. For Chile, an exporter of iron ore, to ship that iron ore 6,000 miles to the United States and then turn around and import fabricated steel another 6,000 miles, constitutes a distinct economic waste.

If one only considers the cost of the freight involved, it would be a sizable factor. As a matter of fact, the total inland and ocean freight on certain steel products, such as structurals, is approximately 30 percent of the f. o. b. factory price of the steel. I think that is the thing we must consider in terms of the Western Hemisphere.

To the extent that Chile, or any other country with a similar project, saves foreign exchange by being able to produce internally its basic steel needs, it means that that country has more dollars for the purchase of more highly fabricated goods from the United States.

Looking at this solely from a realistic point of view, from that of an American citizen, I would much rather see my country sell X dollars of refrigerators, automobiles, radios or similar equipment, than a like amount of dollars of basic steel shapes.

In our exporting of steel, a good portion of which cost represents raw materials, we are further depleting our own limited reserves of that raw material. To sell the same amounts of dollars in the form of refrigerators, automobiles, radios, and general appliances, the largest cost of which represents wages paid to American industrial labor, we export our technical know-how and our American labor, which is limitless.

With respect to the second point aforementioned, "Has the ExportImport Bank aided in financing and facilitating the export-import trades of the United States?" on the basis of the credits of the Export-Import Bank of which I have definite knowledge, and those of which I have a passing knowledge, I would say it is my unqualified opinion that the Export-Import Bank has contributed in facilitating the export-import trade of the United States.

The benefits to United States industries do not stop with the sale of the particular American goods specifically financed under the ExportImport Bank credit; that operation lays the foundation for subsequent orders to the same suppliers in the future. In other words, the benefits to American industry do not stop with these original orders. Mr. Chairman, I think that is a point which very often is not sufficiently stressed. I will cite two examples.

Some years ago, Chile was in the market for trolley coaches. The competition among the manufacturers to obtain that initial order was most keen. That is understandable, for it is only logical to assume that when that country would be in the market for additional coaches it would be more prone to buy the same make in the interests of economy of operation than a different type from a different supplier, possibly, in some country other than the United States. That proved to be the case. For when Chile was in the market again it bought American-made trolley coaches.

Another example is that of the steel mill in Chile, financed by a credit of the Export-Import Bank. The machinery and equipment for that plant was purchased in the United States and financed under Export-Import Bank credit. Among the machinery so purchased was electrical equipment, likewise of United States manufacture, and from one of our large producers of electrical equipment, produced by American labor.

As replacements are required in the future, or additional equipment is ordered to take care of expansion, it is only logical to assume that such orders will be placed in the United States so as to have uniformity of equipment operating in the plant. The same thing is true with respect to spare parts for maintenance and operating supplies in general. I believe that if our manufacturers were in the room here today they would admit that it is a very profitable business.

For the information of the committee, I believe the steel mill spent last year in the United States approximately $11 million for operating supplies which was not financed by any Export-Import Bank credit. The point I am making, Mr. Chairman, is that the benefits from the Export-Import Bank continue.

Now, if I may, I will treat with the third point, which is perhaps the most important. It is the question of whether the Export-Import Bank has aided American industry. For a period, our country enjoyed a seller's market, as there were very few other countries from which goods could be obtained. With the end of World War II, it was only logical to anticipate that United States industry would be confronted with keener competition.

This has proved to be the case, and it will be intensified as time goes on, but the difference in price between what can be offered by American companies as compared to what can be offered by a supplier in other than the United States can, in some instances, be offset by the terms of payment accorded to the buyer abroad.

42493-54-pt. 1-22

Our American industries are not in a position to give long-term credit and, therefore, there must be a powerful financial institution, such as the Export-Import Bank, engaged solely in the financing of purchases from American industries, which has the ability to finance such operations and give its aid to American industry in the meeting of that inevitable world competition.

Senator BENNETT. Thank you, Mr. Siemon. Do you have any questions, Senator Payne?

Senator PAYNE. No.

Senator BENNETT. I have 1 or 2. You said at the end of your testimony that as this competition goes on it will be intensified. I think you are right. Is it your feeling in order to meet the credit competition of the foreign producers it is going to be necessary for the American Government through the Export-Import Bank, or some other agency, to supply longer credit terms? Is that impression correct?

Mr. SIEMON. Mr. Chairman, I say that the difference in price can sometimes be offset by longer credit terms. You are correct in that respect.

Senator BENNETT. The testimony-I think you have heard most of it-is to the effect that there is a difference in price favoring the European producers now, plus the advantage of longer and more liberalized credit terms.

Mr. SIEMON. Yes, sir. I think it is largely a matter of price. Senator BENNETT. The thing that puzzles me is how is European industry, that has just begun to reconstitute itself after some devastat ing war experiences, in which countries have largely been supported by American loans and grants, able to extend and continue to extend more liberal credit terms than American industry could extend which has never had its facilities destroyed or never lost its markets. Mr. SIEMON. I think first, in my opinion, the very sudden and quick revival of European industries is largely attributable to Marshall funds.

Senator BENNETT. There is no question about that.

Mr. SIEMON. And not to Export-Import Bank credits.

Senator BENNETT. But having been revived, are those funds on so firm a financial foundation now that they can maintain themselves and extend unusual long credit terms in competition with standard American terms?

Mr. SIEMON. I wish I could answer that question with more assurance of authority. I will express an opinion, however, Mr. Chairman. Senator BENNETT. I would appreciate it.

Mr. SIEMON. And that is perhaps you may say they are at present living on a little bit of fat. I do not believe they are going to be able to extend those long terms in the future. I am talking now of 4 or 5 years from now. There comes a point of saturation.

However, we are confronted with this immediate period of the next 4 or 5 years where our industries, yours and mine, are going to be confronted with that competition. I think it is logical that we should assist our American industry immediately.

Senator BENNETT. I would say, and I do not want to sound as if I really knew the answer because I do not, that I think it would be obvious that there is more fat in American industry to live on than there should be in those newly reconstituted countries in Europe.