We are at your entire disposal for any further information you may desire, and remain, Very truly yours,

ERNEST H. Meili,
Senior Vice President.

1. Has the Export-Import Bank been of assistance to clients of your bank? Answer. Yes, particularly to manufacturers of capital goods.

2. Has it competed with private capital in your area?

Answer. No.

3. Has it taken business away from your bank and, if so, how and to what degree?

Answer. No.

4. Can the Export-Import Bank use the services of your bank more than in the past and, if so, how?

Answer. The Export-Import Bank has used our services most effectively in transactions in which we were involved. We consider it proper for them to follow the foreign borrowers' wisnes as to the selection of the cooperating American banks.

5. What position has your bank taken with respect to term loans, i. e., where repayment exceeds a term of 6 months?

Answer. We have in some instances granted longer terms (Chile, Mexico, Spain, Holland, Norway, etc.) but the aggregate is very small in comparison with the business offered to us.

6. Are you financing, without recourse, shipments to foreign countries payable over term periods?

Answer. In very rare cases only but we do a considerable amount up to 3 months and some up to 6 months.

7. In cases where you have acted for the Export-Import Bank in the operation of credits has your compensation been adequate, taking into consideration the risk factors involved, by the Export-Import Bank as a Federal agency?

Answer. The interest rates as the "price of money" have ranged from barely adequate to less than enough. A more generous fee basis should be found to compensate for the more than usual amount of paperwork.

8. Have you participated with the Export-Import Bank in any of its loans without the latter's guaranty? If so, was your experience satisfactory? Answer. Yes, with satisfactory experience.

to 3 years.

We have participated in loans up

9. Do you consider continuation of the Export-Import Bank's loaning facilities essential in the interest of international trade?

Answer. Yes, if the question were rephrased to refer to American exports instead of international trade. Some financing medium is essential to the maintenance of American exports of capital goods and particularly in order to move agricultural surpluses. We do not feel that the same can be said for consumer goods which should be sold on short-term and for which adequate private finance is available, except perhaps for politically risky territories.

10. Has the Export-Import Bank facilitated the expansion of international trade in the past and, if so, how can it more adequately expand it in the future? Answer. The Export-Import Bank has in the past facilitated American exports very considerably, particularly in the capital-goods line. We feel that its management has quite successfully adhered to sound financing principles and has, with few exceptions probably beyond its control, taken sound cognizance of the borrowers' capacity to pay. As to suggestions for greater usefulness in the future we would suggest that instead of limiting itself in the main to a few specific large projects, it should make its facilities available to the exporting American manufacturers across the board, with proper safeguards such as substantial participation by the manufacturer and of course a sound overall limit for each foreign country. This would resemble somewhat the export insurance schemes in use in other countries but should in our opinion be limited to exports for which terms of payment longer than 3 months are logical. In this connection we feel that adequate finance is available for short-term transactions.

Senator BENNETT. Turning now to the list that is headed, "Foreign Witnesses," I shall be happy to call Mr. H. Danforth Starr, vice president of the Cerro de Pasco Corp. of New York City.

STATEMENT OF H. DANFORTH STARR, VICE PRESIDENT, CERRO DE PASCO CORP., NEW YORK, N. Y.

Mr. STARR. I have a prepared statement which, with your kind permission, I should like to read.

Senator BENNETT. You may proceed as you please.

Mr. STARR. My name is H. Danforth Starr. I am a resident of Greenwich, Conn., and a vice president of Cerro de Pasco Corp., a New York corporation, which has its executive office at 40 Wall Street, New York City. The president of the corporation, Mr. Robert P. Koenig, is now in Peru, where Cerro de Pasco's mines and all other operating properties are located.

Cerro de Pasco Corp. has approximately 7,000 registered stockholders, and more than 95 percent of its stock is registered in names with United States addresses in all parts of the country. We believe that there are 10,000 to 15,000 beneficial owners of Cerro de Pasco shares.

Cerro de Pasco is engaged in Peru, South America, in the mining. smelting, and refining of lead, copper, zinc, silver, gold, bismuth, and other metals. It has the largest nonferrous mining operations in Peru and, indeed, is the largest industrial enterprise in that country. The corporation is also engaged in the operation of numerous ancillary facilities necessary to support both its principal endeavor and its many people; such operations include powerplants, railroads, retail stores, hospitals, schools, and ranches.

Its principal mines are located at Cerro de Pasco, Casapulca, Morococha, and Yauricocha, in the central Peruvian Andes at altitudes ranging from 13,000 to 15,000 feet above sea level. The corporation's smelters, refineries, and other principal metallurgical plants are located at La Oroya at an altitude of 12,200 feet.

Senator BENNETT. At this point, may we suggest there are photographs on the easel over there.

Mr. STARR. On the easel at my right are photographs. On the left is a general view of the metallurgical plants at La Oroya at an altitude of 12,200 feet.

Long before the arrival in South America of the Spanish conquistadores some of the wealth of the Incas came from gold and silver won from the Cerro de Pasco mine. Later these great ore bodies were worked by the Spaniards during the colonial era.

In the 19th century the depletion of rich silver ore reserves and the increasing difficulty of draining underground workings gradually brought mining operations to a standstill.

In 1902, claims to ore bodies in this area were acquired by an imaginative group of Americans who organized the Cerro de Pasco Mining Co., which was eventually succeeded by the present Cerro de Pasco Corp. For many years copper and silver were the principal products. In the past 10 years lead has come to the fore; zinc and lead are expected to be our most important products in the future.

While Cerro de Pasco Corp. is small in comparison with some of the world's great mining enterprises, it plays a very important part in the economy of Peru, and particularly in that section of the Andes Mountains where its mines and plants are located. At present it has about 17,000 employees on its payroll in Peru and some 5,000 others work for contractors in the corporation's operations and construction; in all there are probably more than 80,000 persons in Peru who are directly dependent on Cerro de Pasco's activities.

In addition, Cerro de Pasco pays substantial direct and indirect taxes in Peru: In 1952 nearly 20 percent of the corporate income taxes collected by the Peruvian Government were paid by Cerro de Pasco. The corporation is also an important source of Peru's dollar exchange; it is estimated that about 25 percent of the dollar exchange available in 1952 was generated by the corporation.

Cerro de Pasco Corp. has a line of credit of $20,800,000 with ExportImport Bank, established under a credit agreement dated January 29, 1951, to assist Cerro de Pasco in financing its zinc-development program, which is expected to cost a total of approximately $44 million. So far Cerro de Pasco Corp. has borrowed $14 million under the credit agreement.

The mine at Cerro de Pasco contains a large lead-zinc ore body in which lead and zinc occur in a complex ore. For a number of years the corporation has been producing a substantial tonnage of refined lead. Since there were no facilities in Peru, other than Cerro de Pasco's pilot plant, for the production of refined zinc, we were able to realize something from the zinc content of the lead-zinc ore only when prices were high enough to make it possible to sell zinc concentrates, which then had to be shipped out of Peru, usually to Europe, for treatment.

Obviously, it was very disadvantageous economically not to have facilities for the treatment of zinc concentrates and the production of refined zinc near the mine and concentrator. The corporation's program provides for zinc production facilities near Oroya with a capacity of 200 tons of slab zinc per day; the expansion of ore concentrating facilities at Cerro de Pasco; the installation of 17,000 kilovolt-amperes of generating capacity at the corporation's 51,000kilovolt-ampere power plant at Malpaso a picture of which is on the easel to my right-which is located between Cerro de Pasco and Oroya; and a hydroelectric power plant of 72,000 kilovolt-amperes installed capacity on the Paucartambo River in undeveloped territory on the eastern slope of the Andes.

As a measure of magnitude, it is interesting to note that such a plant would fulfill the requirements of an American city with a population of 300,000 to 350,000 people.

The successful financing of the zinc development program was and is vital to the Cerro de Pasco enterprise. The production of copper from the corporation's own mines declined from an average of over 50 million pounds a year in the years 1936-40 to an average of about 25 million in the years 1946-50; while it is higher now a further decline can be expected in the near future when the Yauricocha deposit is exhausted.

In general, the production of silver has declined with that of copper. Because of these trends, at the time the zinc-development program was decided upon, it was possible to foresee a shutdown of the entire enterprise within a relatively short period unless the economic production of zinc could be undertaken on a fairly large scale.

Cerro de Pasco Corp. is providing over half of the total cost of the zinc-development program out of funds accumulated before construction was started and with cash obtained from operations while the program is progressing, but it was necessary to obtain at least $20,800,000 through outside financing to assure completion of the project.

We explored the possibility of obtaining private financing through investment bankers, insurance companies, and commercial bankers and found that funds could not be obtained on any reasonable basis. for a project of this kind in South America. A loan from the ExportImport Bank or some other governmental agency was therefore indispensable to the continuation of the development of the enterprise. We believe that there were and are several reasons why it was in the best interests of the United States for the Export-Import Bank to make the loan. In summarizing them I will start with the area where the zinc-production facilities and hydroelectric installations. will be.

The Export-Import Bank loan assured a long-term extension of the life of Cerro de Pasco Corp. operations. Termination of these operations would at any time have had a catastrophic effect on the large area of central Peru where Cerro de Pasco's operations are located and on the whole economy of Peru. The Cerro de Pasco zinc-development program will mean that, instead of a possible shutdown in a few years, there will be an expansion of operations with more employment and with other direct benefits to the Peruvian economy in the form of increased dollar exchange and taxes paid to the Peruvian Government. The Government of Peru itself recognized the great importance of the program by entering into a contract with the corporation just before the Export-Import Bank credit agreement was executed. By that contract, among other things, the Government limited the taxes which would be levied against the profits from the production of zine; agreed to admit duty-free the equipment, machinery, material, and spare parts needed for the construction and operation of the zinc facilities; promised to make dollar exchange available to Cerro de Pasco for the interest and principal payments necessary to service the Export-Import Bank loan; and exempted the interest payable to the Export-Import Bank from payment of what is called "the income tax on movable capital."

Of course, a strengthening of the Peruvian economy means a further increase of imports from the United States. Wherever you go.