Funding the Empire: Part II -- The Multinational Strategy
Melo, Hector & Yost, Israel
One of the most prominent features of the interna- tional landscape today is the multinational corporation. The Peterson Report, another product of corporate Amer- ica, formulates a new...
...Thus, rather than take the chance of SUNFED becoming a reality, the United States approved ahd sponsored the more malleable IDA, and it was established as a World Bank affiliate...
...Latin America provides an excellent opportunity for the United States to demonstrate by inviting Europe "in," that we do not seek a position of domination or exclusiveness of American i erests within a broader Atlantic Community...
...The multiplication of ioint and coordinated financial arrangements among capital groups from several industrialized countries is the present trend at the international level...
...director, contrary to any sense of "multilaterality...
...Overseas Loans and Grants and Assistance from International Organizations, Obligations and Loan Authorizations, July 1, 1945 -- June 30, 1966 (U.S...
...An outstanding example of the way in which IMF, through its stabilization requirements, attempts to dictate the economic and social policies of the applicant government is the case of Revolutionary Cuba...
...The shift from bilateralism to multilateralism in foreign aid is not too hard to understand: the existence of a bilateral program through which the United States, as the leading imperialist power, intends to reap the benefits of underdeveloping the Third World to the exclusion of all other partners is inconsistent with the role it has to play as organizer of the imperialist camp...
...Congressman Henry S. Reuss (D, Wisc...
...ADELA Annual Report 1968, p. 14...
...2. The favorable international market in paper and wood pulp encouraged ADELA to finance a $48 million rayon pulp project in Brazil (note in the chart above that ADELA has its greatest capital investment concentration in the paper and pulp industry...
...Clearly, the interests served are not likely those of the underdeveloping countries of Latin America...
...For a good theoretical discussion of IBRD and IMF's general roles, see Michael Hudson, "Epitaph for Bretton Woods," Journal of International Affairs, XXIII, 2, pp...
...But Moore's efforts overseas do not stop with expanding business for his bank...
...This announcement in 1959 signaled the completion of the tripartite team -OAS-IDB-ECLA (Economic Committee for Latin America) 4 0 -of sister organizations which bring para-military, monetary, and ideological support to the policies of U.S...
...This is the case with banks looking for business with new companies abroad, or seeking to get intobusiness in a country where they have not yet'become established...
...He currently sits on the board of American Express C., the New York Times, International Telephone and Telegraph, Electric Bond and Share, Chase Manhattan Bank, Cummins Engine, F.W...
...5, 19-20...
...In the more detailed examina- tion of this strategy which follows, it should become clear that by supporting this constellation of inter- national and regional institutions, all of which func- tion in some way as instruments for the increasing con- centration of capital from the developed countries, the internationalist businessmen of the "free" world hope to insure their continued penetration and control of the underdeveloping world...
...standpoint, enactment of this "contribution" has no effect on the country's budgetary situation...
...SUNFED had no mechanism of weighted voting (i.e., each member would have one vote), which meant that it would be under the control of the underdeveloping nations...
...It is interesting to note that Martin Rosen, upon leaving the post of IFC executive vice president in 1969 after more than 20 years with the World Bank Group, went to head a new investment banking company with the participation of the Banca Commerciale Italiana Group...
...This IPIAC panel, which recommended forming a U.S...
...As established in its enacting legislation OPIC will receive funds which under previous legislation would have gone to the AID program, and use them to foster private investment in the underdeveloping countries of the world...
...25 One of the main activities of the Fund, and the major ne regarding Latin American countries, is to make short-term loans to member countries that are experiencing financial crises (usually centering around balance of payments problems...
...In any given case, negotiations follow between the Latin American director concerned (there are six) and the U.S...
...Martin Rosen once estimated that a full four-fifths of IFC financing through portfolio sales was by well-known European and U.S...
...goods have to be purchased mainly in the United States...
...The forms which that action will take are as yet unclear...
...Among the projects being studied in the latter category are the Salto Grande Hydroelectric Project involving Argentina and Uruguay, the Joint Tumbas River Developmen\ Project involving Ecuador and Peru, and the interconnection of the Central rD ,0 u) CI ar .0 o E C)Moore of First National City 11 marketing, etc., they exist primarily to finance corporate expansion...
...19 Countries 98 Enterprises13 given "useful breakfast meetings" for representatives of the World Bank, IFC, IMF, and mbers of other investment banking communities...
...The Bank serves a dual role: on the one hand, as an administrator of the Fund for Special Operations it is a direct instrument of U.S...
...goods...
...LAAD...
...Secondly, it has agreed to keep the proceeds from bond issues floated in the United States in the U.S...
...Peterson, p. 16...
...INCORPORATED IN LUXEMBOURG ADELA INVESTMENT COMPANY S.A...
...As of 1969, 1/3 of IFC's cumulative gross commitments had been sold...
...Castro, of course, refused, and Cuba subsequently faced severe restrictions limiting its participation in a substantial sector of the world market...
...Ernst Keller, "Joint Ventures," Peruvian Times, XXVII, 1499, September 1, 1969, p. 16...
...As in Part I, the Peterson Report is herein cited without footnotes...
...insistence on having Canadian, European and Japanese participation in the Board of the Bank, a move first announced at the 1970 Board meeting in Punta del Este...
...For example, as one means of refurbishing its own reserves, IFC opens its portfolio for sale to interested parties...
...EM, 10 PETERSON ON IDB The Inter-American D)cvelopmcnt Bank (IDB) should be able to expand its rate of lending over the next few years by perhaps 50 pclrcnt-or, to indicate rough magnitudes, from $600 million a year to $900 million a year...
...World Bank Annual Report, 1969, p. 18...
...Murphy, "The Mellons of Pittsburgh," Fortune, October, November, December 1967...
...and Fuji Iron and Steel Co., the country's two largest steel concerns...
...Congress of $13.5 billion in loan commitments and $3.5 billion in export credit guarantees and insurance, and looks to the public capital market for a substantial portion of its funds (raised through the sale of debentures underwritten by syndicates including such banks as the First Boston Corporation...
...Source: Peterson Report, p. 25...
...266-301...
...Gaud hopes, for example, to establish some type of multinational insurance scheme for IFC, patterned along the U.S...
...of the capital stock, IFC holds 14.5% and foreign shareholders 33.7...
...Latin America has also been IFC's most profitable area of investment -55 percent of sales from its portfolio has come from investments in Mexico, Brazil, the Philippines, and Colombia, although these countries amount to only 39 percent of the total commitment...
...ADELA, A MULTINATIONAL INVESTMENT COMPANY Capital has demonstrated a remarkable ingenuity for creating new means for its permanent expansion...
...Because of the limited debt capacity of many underdeveloping countries, the need for "soft" term lending was becoming quite obvious...
...This policy bars the local government from establishing multiple rates that encourage certain types of im.ports and investments and discourage others according to development priorities...
...of the recent past, and perhaps the harbinger of a new development...
...CONCLUDING REMARKS 1. Part I of this article (NACLA Newsletter, IV, 2 / April 1970) dealt with the U.S...
...corporations, and of the role the dollar plays in financing the world's trade...
...banks which are financing joint operations involving U.S...
...3 9 The Bank currently operates within the limits set by the U.S...
...Ernest Mandel, La reponse socialiste au defi americain (Paris: Maspero, 1970), p. 51...
...In recent year :he Third World has also been host to many newcomers, representing European and Japanese concerns, fully recovered from the World War II disaster...
...Latin America, on the other hand, though it accounts for 22 of the 110 mem- ber nations, has only 8.5 percent of the vote...
...5 4 I the last 60 years, tne assets of financial institutions have increased 40 times, as compared with 18 times for non-financial corporations...
...Through its operations, IMF functions as the enforcer of the rules, the re- feree, of a game that not only favors the developed countries, but is their own creation...
...A LETTER OF INTENT TO IMF (From a letter sent by the Colombian government to the IMF in order to receive a credit for the period April 21, 1970 to April 20, 1971 "In the period of this stand-by credit we will avoid any delay in the payments for imports and ship- ment fees of more than 20 days...
...measure of control...
...NACLA Newsletter, III, 2, pp...
...The primary role of ADELA is to generate feasible investment opportunities for multinational corporations...
...The government will agree to reduce the bilat- eral agreements of trade, even with countries who are members of IMF...
...Latin America is being more and more integrated under the aegis of such collective groups...
...ADELA'S RELATIVE FINANCIAL ADVANTAGE Even more than any single bank or bank consortium ADELA enjoys a relative financial superiority in its field because of its ability to pool large amounts of capital from the most diverse sources and its unique broad strategy of corporate control...
...However, there was at the same time within the United Nations considerable pressure for the establishment of the Special United Nations Fund for Economic Development (SUNFED), which was similar to IDA, with one extremely important exception...
...5 9 When banks move into Latin America they may utilize another method of concentrating multinational private capital -- association with existing banking networks...
...For a discussion of ECLA's role see A. Gunder Frank, "The Underdevelopment Policy of the United Nations in Latin America," NACLA Newsletter, III, 8, December 1969...
...2 7 Opposition to the IDA idea was quite widespread...
...the nine directors include representatives of Bankers International Financing Co...
...Baker, The International Finance Corporation (New York: Praeger, 1968), p. 192...
...The Peterson Report, which is a crystal-clear reflection o the multinational strategy analyzed in this article, stated the matter succintly: The Task Force believes that more reliance on international organizations should be built into all U.S...
...The projects range from the promotion of heavy industry to the development of electric power...
...By making loans, investing in equity stock, and underwriting debenture offerings, IFC serves as a responsible and dependable guarantor of the budding new private enterprise...
...Baker, p. 48...
...PL480...
...The U.S...
...Although its charter allows structurally for Monroney's ideas about local currencies, IDA has in fact only advanced "development credits" which are to be repaid in foreign exchange (dollars, most of the time...
...Barclays Bank and the Bank of Montreal now own jointly with the Bank of London and South America (BOLSA) a network in Central America and the Caribbean...
...Although the Bank gave only minor funding in 1969 to agribusiness, it has several projects in advanced stages of approval, and considers this new field to be of special importance...
...The necessity of 're- maining financially attractive to potential bond purchas- ers has precluded the type of risk-taking which true de- velopment lending requires...
...For a discussion covering the involvement of Ford and Rockefeller Foundations in Latin American universities, see "Foundations on the Move," Subliminal Warfare: The Role of Latin American Studies (publishe-by NACLA, 1970), pp...
...Moore s active in groups designed to upgrade Latin America economically, including ADELA, the international investment consortium But he has warned LatinAmerican countries that continued foreign investment depends on the money being used wisely, and on debts being repaid...
...Thus, the major characteristic of bilateral aid was -the stimulus to trade achieved by forcing the purchase of U.S...
...Address at the Second Plenary Session of the 11th Annual Meeting of the Bank's Board of Governors, Punta del Este, April 21, 197Q (mimeographed), p. 23...
...no page numbers...
...For a general discussion of the evolution of IDA, see James H. Weaver, The International Development Association (New York: Praeger, 1965...
...ROBERT S. McNAMARA (April 1968 - present) A Harvard graduate, he joined the Ford Motor Company in 1946 and rose to occupy the President's office...
...Tourism, another of the Bank's growing interests, is being handled primarily through the IFC, and will be discussed later...
...28 Issue...
...An overseas Private Investment Corporation (OPIC) was created by the Foreign Assistance Act of 1969 as a Federal agency under the overall policy guidance of the Secretary of State...
...which was to begin operations on OctoDer 1, 1960...
...JOHN J. McCLOY (March 1947 - June 1949) A graduate of the Harvard Law School, he served as Assistant Secretary of War (1941-45) and then became a member of the corporate law firm, Milbank, Tweed, Hope Hadley McCloy ( whose clients include several Rockefeller interests...
...3. The drive of corporations abroad has not been peculiar to the United States...
...of Amount As % of total Projects invested invested (Thousands of US dollars) Agriculture, Fishing Food Processing 18 16,570 20.2 -General Manufacturing 16 13,855 16.9 Pulp Paper 3 10,200 12.4 Financial Institutions 21 9,185 11.2 Textiles 4 6,520 7.9 Wood Products 5 6,160 7.5 Chemical Allied Products 8 5,425 6.6 Capital Goods Machinery 8 Metalworking 9 4,910 5.9 Service Industries 8 4,195 5.1 Iron Steel 6 4,160 5.1 Mining Mineral Processing 1 1,000 1.2 Country United Switzerl Sweden United Germany Japan Canada Spain Finland Denmark Netherla DISTRIBUTION OF SHAREHOLDERS BY COUNTRY OF ORIGIN No...
...Policies of the Bank are dictated by the United States and this is directly reflected in the management of the institution and its decision-making process...
...The ellons also have a substantial interest ($20 million) in General Motors...
...IFC itself put only $1.6 million of its funds into these companies in 1969, and has put a total of only $29 million into them since 1961...
...the family holds 42 percent of the stock, an equity worth some $210 million in 1967...
...The Peterson Report, another product of corporate Amer- ica, formulates a new "develqpment" strategy to meet the growing needs of these many-tentacled giants...
...It attempts to do sp by making loans at conventional rates of interest to governments, or to private projects with a government guarantee...
...Th*s expansion by banks through branches and associations has been in response to the specific requirements of corporations operating abroad...
...Second-class postage paid at New York, New York.3 A further important function of the World Bank is to serve as a participant, and often as chairman, of various consultative and consortia-type groups in the Third World...
...In fact, one of IFC's functions within these local privately-owned banks is to shield them from the local government...
...The current and projected concentration of Eximbank transactions on high-technology goods, such a aircraft, computers, power plant equipment (including nuclear apparatus), satellite tracking stations and desalinization equipment, is most important in that these are the types of goods that cannot be produced in the foreign-owned plants of the underdeveloping countries...
...lately the growth rate has been seven times greater than that of deposits at home...
...These services include management and technical assistance, investment and marketing analysis, insurance, strategic contracts with the local and international business-government community, underwriting, etc...
...The typical IFC commitment is the joint venture, involving the mutual participation in a given enterprise of several groups representing either local or foreign private interests...
...corporations are participants, supplying almost 50 percent of the original capital subscription...
...IERD's interest in agriculture has undergone a basic shift from the construction of irrigation facilities and the like to the development of agro-industries which apply the innovations of agricultural technology produced by the Ford and Rockefeller Foundations to the large-scale pro- duction of cash-crops...
...In his spare time he manages to serve as a special financial consultant to the Shaikh of Kuwait...
...In the past five years, 18 Latin American countries have made stand-by agreements with IMF...
...ADELA, Atlantic Community Group for the Development of Latin America, one of its most novel creations, grew out of a framework quite different from that of Rockefeller6's International Basic Economy Corporation (IBEC), and is more complex in nature...
...The Bank has three primary sources of funds: paid- in capital of member governments, borrowings (mainly from bonds floated on the international capital market at the current interest rate and guaranteed by unpaid-in capital subscriptions), and net income from its operations...
...The conventionality of its loan policies has helped bring IBRD to the point where few countries can afford to borrow from it any more...
...ADELA Administraci6n y Servicios de Colombia S.A...
...Note: ADELA has equity investments in all of the five financieras listed above, and in turn they are all shareholders in ADELA...
...After leaving Chase he rejoined his law firm (Milbank, Tweed, Hadley McCloy) and took over the chairmanship of the Ford Foundation...
...Congress...
...Top borrowers from Eximbank funds include Morgan Guaranty Trust Co., Chase Manhattan Bank (these two have been the biggest borrowers), Continental Illinois National Bank 6 Trust Company (Chicago), Bankers Trust Co...
...The OAS provided a multilateral facade for continued U.S...
...government announced it would finance most of the $1 billion capital resources for IDB...
...The Fund fulfills, in the words of Thomas Balogh, a noted British economist, the role of the "colonial administration...
...He envisions an Atlantic Alliance in which U.S...
...In its formative period, Javits' idea for the creation of ADELA was supported by three key leaders of the U.S...
...In the area of education, the Bank appears to be concerned primarily with secondary and technical schools, and with teacher training facilities at all levels...
...The new company had 54 shareholders from 16 countries, an executive committee representing nine of the world's largest corporations $16 million in capital, and an operating staff of one -- Ernst Keller, a 44-year old Swiss...
...As an instrument of foreign policy, this program exemplified the characteristics of political and economic domination and intervention in the last decades...
...For Japan the list includes Yawata Iron and Steel Co...
...By making evaluations and recommendations, as well as commitments and disbursements, this group is able to direct capital flows between the developed world and Colombia, often exerting tremendous pressure on that government...
...The New York Times, September 5, 1969...
...These include the top three -- General Motors, Standard Oil (New Jersey), and Ford Motor Co...
...He therefore proposed that an international body be established to loan out local currencies among the underdeveloping nations, thus facilitating a transfer of surpluses from one to another...
...In outlining a shift from the subsidization of U.S...
...finance boards under Presidents Wilson, Harding, Coolidge and FDR...
...The multinational structure places all strategic decisions outside of national considerations and priorities...
...Latin America has actually received very little (approximately five percent...
...and Henry Ford II, Chairman of Ford Motor Company...
...Jacob K. Javits, "The Atlantic Community: Return to the Mainstream," a speech before the American Club, Paris, May 29, 1969, printed in Congressional Record, July 2, 1969, pp...
...1946) A Yale graduate, he served on various...
...For the purposes of this article, the role of IM in the working of the international monetary system in its general aspects will be neglected in favor of a discussion of its role regarding specifically the underdeveloping countries...
...east coast corporate establishment, is also the author of a proposal for an Atlantic free trade area embracing most of the industrialized-capitalist countries...
...The multinational growth of the corporations is a major event of the recent past whose impact on the American economy is being felt16 with increasing strength...
...S. There is reason to believe that the Nixon Administration will increasingly move to adjust its foreign aid program to these major changes in the international economy...
...What the United States does is t guarantee operations of the Bank without any real input of U.S...
...In April 1968, the Congressionally-chartered International Private Investment Advisory Council (IPIAC) was charged with studying this approach to private investment incentives...
...Also participating is the number one U.S...
...Though performing regular operations such as mutual funds, insurance, bond lobbyists in Congress for the U.S...
...the 10 directors include representatives of Wells Fargo Bank of San Francisco,* Bodgan Corporation of New York, Manufacturers National Bank of Detroit,* Fidelity Philadelphia Trust Co., and IFC...
...However, IFC in 1962 assumed responsibility for all World Bank assistance to development finance companies, which has amounted during the last five fiscal years to $640.7 million, including $193 million in 1969...
...The First National Bank of Chicago and Irving Trust Company three years ago joined a consortium known as the International Commercial Bank, which also includes the Commerzbank of Dusseldorf, the Hong Kong Shanghai Banking Crporation, and the Westminster Bank of London...
...In an article written by Rosen while with IFC, another consideration .is identified: The profit record no doubt influenced the investment decisions of a large number of participants, but other participants have been attracted by actual or potential collateral benefits...
...The net result for the underdeveloping countries has been an increased measure of control over their economies by the United Stated, Europe and Japan...
...It has, for example, recently begun to provide loan guarantees to non-U.S...
...products...
...The Peterson Report clearly recognized this...
...policies relating to international development -- whether they concern development assistance, debt rescheduling, tying, trade, investment, or population...
...Moreover, it is interesting to note how the decreasing U.S...
...and they own 30 percent of the $2 billion equity shares of the Aluminum Company of America (ALCOA), the world's largest producer of aluminum...
...the U.S...
...3 0 Whose enterprise it is that does the working and the spreading becomes obvious as one looks at the past practices and future directions of the Corporation...
...INVESTMENT COMPANY S:A...
...Table VIII, ALLOCATION OF LOANS BY IBRD IDA (LATIN AMERICA) By fiscal year 1965 1966 1967 1968 1969 Total (millions of dollars) 230.8 382.2 284.3 385.4 472.3 Transportation 34% 12 8 8 25 Electric Power 49 48 72 56 40 Industry - 7 9 5 Development Finance (7) (3) (5) Companies Agriculture 17 18 7 22 21 Education - 1 3 2 7 Water Supply - 5 - 4 1 Telecommunications - 10 10 - - Note: Totals over 100% are due to rounding of figures Source: World Bank Annual Reports, 1965-1969 NACLA NEWSLETTER Vol...
...IFC's partners in this enterprise are likely to include local investment groups, foreign private banking and industrial companies, other aid agencies, and perhaps the local government...
...goods and services...
...On the other, it serves as an intermediary for private banking operations...
...imperialism will stand in a "good partner" relationship with the Europeans and Japanese in the exploitation of the Third World, especially Latin America...
...banks might otherwise feel towards such transactions...
...Furthermore, IDA lending is the foundation for international participation in some of the major development programs...
...4 ff...
...This infrastructure was considered (of course) to be basic to the establish- ment of the local industrial sector, but more often than not it has served to provide easy access to the primary products needed by the developed nations, and to facili- tate the operations of a foreign-owned industrial sector...
...this gives an idea of the scope of the Bank's activities...
...Ten of the other sixteen largest banks in the United States (ranked according to assets), including First National City Bank (New York) and Manufacturers Hanover Trust Co., with assets of more than $23 and $11.9 billion respectively...
...The most spectacular overseas drive has occurred in the last decade, when the number of overseas branches of U.S...
...ADELA in particular has, through the use of sophisticated forms of association like the joint venture, been able to expand at a tremendous rate...
...private capital market) could have on the U.S...
...When the Castro government early in 1959 sought out the IMF for assistance with its severe foreign exchange problems certain conditions were set forth by the Fund...
...Copyright 1970 by the North American Congress on Latin America, Inc...
...In this case ADELA served as the capital organizer and technical adviser in the initial stages of the project...
...In addition, the president of the Bank is al- ways a North American...
...This amounted in effect to having a multilateral institution supervising bilateral barter agreements, and consequently elicited violent opposition on the part of the free-trade minded IMF (despite the fact that it had accepted the bilateral barter aspects of U.S...
...For example, Brazilian cruzeiros could be loaned to Greece for the purchase of Brazilian lumber...
...Extracted from a speech to the British National Export Council Conference on Joint Ventures in Latin America, July 9, 1969...
...As "aid" restrictions become less rigid, or as the bilateral programs are phased out, the Eximbank will have to become somewhat more aggressive in directing available foreign exchange toward U.S...
...The role of the U.S...
...aid funds from bilateral programs like AID to multilateral institutions like the World Bank...
...This cooperation indicates a change in the design of future Eximbank supports...
...Although the allocation figures are just beginning to reflect it, the World Bank is in the process of shifting its interest from the local infrastructure to such areas as birth control, education, and industries such as agribusiness and tour- ism...
...Another area of special interest to IFC is that of local development finance companies...
...ADELA AND THE ATLANTIC COMMUNITY Perhaps the most interesting feature of ADELA is the diversity of its capital...
...in this case IDB also acts as an instrument of denationalization and foreign capital penetration...
...The profitability of these safe investments from IFC is not the only consideration in the mind of the potential buyer...
...Furthermore, they urged, The U.S...
...Martin M. Rosen, "IFC Recruits Capital for Development," reprinted from the November-December 1968 issue of Columbia Journal of World Business...
...Credit restrictions are instituted and no salary increases are allowed...
...investors have been invested in the United States rather than in Latin America in such a manner as to eliminate any effect on the U.S...
...To minimize the detrimental impact that a possible outflow of funds (collected by the Bank in the U.S...
...This isould involve arn appropriate combination of contributions for concessional lending and subscriptions of paid-in ad callable capital...
...In Colombia, for example, a successful national oil company was broken by "aid" from OKNIPFRgSR CA INGERENCIAIDB...
...the directors are all nationals...
...McNamara joined the board of trustees of the Ford Foundation in 1968 to strengthen his "humanitarian" concerns.required, in making the stand-by agreement, to forward to the IMF a "letter of intent," in which are stated the measures it will take to solve its outstanding financial problems, measures which follow the guidelines IMF has already laid down...
...COPINA) was established in Tegucigalpa to permit the foreign takeover of a rich natural resource, a strategic sector of Honduras' already weakened economy...
...Of the $3.8 billion loaned to Latin America, for example, a disproportionate amount has been used for transporta- tion and electric power...
...of Chicago.* * indicates equity participation in ADELA...
...Thus the development banks which IFC supports are able to use publicly accumulated capital for private purposes...
...This Funding the Empire: Part I1 The Multinational Strategy 1 Dependency and Imperialism -- The Roots of Latin American Underdevelopment...
...5 6 Through multibranch stragegy the Bank of America has ended the decade with almost 100 overseas branches in 75 countries...
...policy...
...By means of alternative strategies -- representative offices (Manufacturers Hanover Trust), foreign correspondent banks (Irving Trust), and participations (The Fidelity Bank) -- other banks have followed the same path.Furthermore, in the last ten years, deposits in the foreign branches of New York banks have risen from $1.35 to $9.5 billion...
...Although exact information about individual development banks is not easy to obtain, foreign money is considerably important in.most of them...
...Other countries, in order to remain within that marketplace, have been cowed into submission to the IMF restrictions, and are suffering the consequences...
...Emilio Collado, Executive Vice President of Standard Oil of New Jersey...
...President McNamara has repeatedly emphasized the necessity of stemming the "excessive rates of population growth" in Third World countries, and has indicated that the Bank plans direct action in that area...
...He then became a special financial consultant to the UN Secretary General and a member of the permanant advisory committee to evaluate U.S...
...CORPORACION FINANCIERA DEL NORTE: Total assets--$1.6 million...
...Thus, from the U.S...
...Of greater importance, however, is the fact that these agencies are a more adequate means for the penetration and control of underdeveloping countries: freer than the bilateral programs of jingoistic restrictions, they are necessary instruments for the concentration of capi- tal from the developed countries...
...143-144...
...3 5 Some new ideas about how world-wide private enterprise might be further extended were brought to IFC by the current executive-vice president, Mr...
...Peterson, p. 24...
...92 ff...
...Thus it was not until the crucial event of the Cuban Revolution and the resultant rise throughout Latin America of socio-economic expectations and anti-United States militancy, that the U.S...
...the New York Times (where he meets Black) and the International Executive Service Corps...
...In the words of U.S...
...share of the vote i IDB decisions is 42 percent...
...5 Also among the participants are such large corporations as the Deutsche Bank AG, the Dresdner Bank AG, and the Commerzbank AG of Dusseldorf, Germany's first, second and third largest comnercial banks, and the Swiss Credit Bank, one of Switzerland's largest...
...The 11th meeting of the Board of Governors of the Bank (Punta del Este, April 24, 1970) voted an increase in these resources from $1 to $2 billion...
...New York) and ADELA hold significant control...
...Similar groups have been established for Mexico and Peru, as well as other countries outside Latin Aerica...
...2 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT IBRD (generally referred to as the World Bank) ori- ginated, along with the IMF, in the Bretton Woods Confe- rence of 1944...
...Though changes have been suggested in the U.S...
...military intervention, which had begun in the 19th Century...
...S7502-S7503...
...foundations (Ford and Rockefeller) and AID in "Americanizing" the Latin American universities...
...Of the total commitments till 1969, 43 percent have been made south of the border...
...18...
...he then moved over to board Chairman of the Rockefeller-controlled Chase Manhattan Bank (1953-61...
...The Bank'has already started (July 1966) a "preinvestment survey program" which at the regional level reproduces what the UNDP has already undertaken...
...6 0 DELTEC Panamericana, now an associate of ADELA, is a subsidiary of DELTEC Banking Corp...
...the Bank has established a Population Projects Department, which thus far has served only a an advisory body to countries that have requested assistance...
...Unemployment rises, as do the regressive taxes, and subsidies of public services are greatly reduced...
...4 1 Loans from this source have resulted in the imposition of the North American model of course programming and academic organization (47 Latin American universities have received these monies) and the utilization of the local research center for couterinsurgency research...
...And even such traditionally bilateral agencies as the Inter- American Development Bank (IDB) and the Export-Import Bank (Eximbank) are beginning to Assume more Ifinterna- tional" characteristics...
...Fortune, August 15, 1969, p. 113...
...shareholders include nine of the fifteen largest industrial corporations in the United States (ranked according to assets...
...Recently he has promoted efforts to expand Europe's capital markets...
...By 1967, out of a total of $42.1 million, $16.1 million had been sold to U.S...
...TABLE IX LATIN AMERICAN COUNTRIES MAKING IMF STAND-BY AGREEMENTS, 1965-1969 Number of Number of Country Agreements Country Agreements Argentina 2 Guatemala 3 Bolivia 4 Guyana 2 Brazil 5 Haiti 3 Chile 3 Honduras 3 Colombia 4 Nicaragua 2 Costa Rica 3 Panama 3 Dom...
...This movement abroad was led by First National City Bank (New York) with over 200 foreign offices, twice the number of eight years ago...
...Private sector loans accounted for 38 percent of the Bank's operations in the period 1961-69...
...Its libe- ral trade policies grossly favor the developed nations, and put heavy restrictions on attempts by under'iee- loping nations to implement basic social and economic reforms...
...and, the United States can terminate funding "at worst" within thirty.days...
...balance of payments, the Bank has adopted policies favorable to the United States...
...ADELA Administracibn y Servicios de Venezuela S.A...
...4 Felipe Herrera of Chile, the acting president of the Bank, justifies this power given to the United States...
...should encourage other governments and more private firms to support regional private investment companies, such as ADELA for Latin America and the Private Investment Corporation for Asia (PICA...
...It would seem that Eximbank's function is to continue its bilateral support of U.S...
...z . 6 C; r I- CD S 441 4 e I I i i . i ? I -"...above everything else, we are trying to show that private enterprise works...
...4. The United States is the first world empire to supersede national capital limitations...
...goods thus financed are often unavailable from any other source they do not compete with foreign producers, a state of affairs which reduces the natural inhibitions that non-U.S...
...private lenders also benefit from the payment of interest on loans of the Bank and from the increased financial dependency of underdeveloping countries on U.S...
...Large scale collective private groups like ADELA have also been set up to mobilize the Third World's resources...
...federally-chartered "Peace-by-Investment" Corporation...
...As ADELA's managing director has observed, "The only effective means of 14 exercising control does not involve holding the majority of the stock but building up an excellent management team and actively cooperating and contributing to growth and profit objectives...
...Business Week, December 27, 1969, p. 50...
...they have controlling interests (at least 20 percent of the shares) in Koppers Company, Inc., a petrochemical concern...
...Other participating companies in the Mellon sphere of influence include Pullman Incorporated, the Fidelity Bank of Philadelphia (mentioned above), and the H.J...
...In general, IDA follows the same loan criteria as IBRD, and in fact operates under the same management...
...sources...
...The new company, Compania Pino Celulosa de Centro America, S.A...
...Today ADELA is owned by 04 companies from developed countries and 35 companies incorporated in Latin America...
...The development fund (Social Progress Trust Fund) that was suggested by the Act of Bogota and ratified June 19, 1961, by President Kennedy, was the basis of the Alliance and furnished the rules by which the Alliance was administered...
...All companies mentioned in the ADELA section of this article are participants in ADELA, either directly or through subsidiaries...
...The foreign ownership element is supposed to inject technical, managerial, and administrative skills into the operation, and the local ownership element offers knowledge of the local market, experience in obtaining labor, and the ability to maintain a good relationship with the local government...
...1962) Another Rockefeller man, he worked as an executive for Chase Manhattan Bank (1933-47) before joining the World Bank...
...Bank of America, ADELA and nine companies involved in the manufacture, processing, transport, and distribution of agricultural products and equipment The companies are Borden, Cargill, Caterpillar...
...Moreover, being the initial supplier of credit the United States derives special market advantages as well as those of a political nature accruing to any participant...
...capital market for a considerable period (e.g...
...Dock, Financing and Problems of Development Banking, (New York: 1967) p. 68-69...
...But since such schemes for the financing of underdevelopment are given to the Latin American oligarchies as compensation for political and military concessions they grant to the Colcssus of the North, the U.S...
...In effect, they function as the local instruments of the higher financial institutions, and pay very little attention to the country's development needs...
...Since ADELA draws capital equity from any corporation owned by any interest group in any sector from any country its resources are virtually unlimited (any private corporation can make an equity investment of between $100,000 and $500,000...
...Moore provided much of the thrust behind First National City's tremendous growth abroad (It now has over 200 foreign offices, double the number eight years ago...
...What is involved is government guarantees and no actual funding...
...From 1960 to the end of fiscal 1969, it extended a total of $2.2 billion in credits to SO countries...
...5 5 The current overseas expansion of banking is a consequence of the post-war expansion f U.S...
...Prohibitions and high duties are to be reduced if not eliminated, as are export subsidies, and thus any national control over the trade process is denied...
...With voting weighted according to the amount of capital subscribed, the United States (24.7 percent of the vote) and the other developed countries (over 30 per- cent) have full control of the Bank...
...As the majority of technologically sophisticated U.S...
...3, May-June 1970 Published monthly, except May-June and July-August, when it is published bi-monthly, at 418 West 25th Street, New York, New York 10001...
...6 For the underdeveloping countries this means continued exploitation and pours new fuel on a situation to which the only alternative is national liberation...
...and (more recently) foreign commercial banks, the Eximbank has financed some $35 billion in U.S...
...Comparable organizations could be useful in the Middle East and Africa (Peterson, p.20...
...exports and only incidentally contribute to inter- national development...
...Ferdinand Lundberg, The Rich and the Super-Rich (New York: Lyle Stuart, 1968 , p. 23 Vl'Vcto r Perlo, "Companies and Assets in the Melron Sphere of Influence," in The Empire of High Finance (New York: International Publishers, 1957...
...Traditionally the greatest preoccupation of the United States in Latin America has been military security and political support, at one time against the Axis powers, and later against the socialist bloc...
...This allows foreign investors complete freedom to remit profits, further depriving the country of already scarce foreign exchange...
...after serving as President of the World Bank he returned to the Post as Chairman of the board...
...It was feared that, in decisions adopted by an agency of this type, the specific interest of member countries would exert greater influence than the technical requirements of banking operations...
...3 8 Through direct loans to overseas buyers, guarantees and insurance of export credits, and discount loans to U.S...
...Established on December 30, 1959, the Bank shows a total volume of operation of $3,430 million for the 1961-69 period...
...OECD), Global Directory of Development Finance Institutions in Developing Countries, (Paris: 1967...
...The result of such changes is to reinforce the existing price and trade relationships and all the resulting facets of economic and financial dependence...
...The International Monetary Fund (IMF), through its sta- bilization policies vis a vis the underdeveloped coun- tries, maintains an economic and political status qtl...
...On the economic side, the program promoted the forceful expansion of U.S...
...dollars) CORPORACION FINANCIERA COLOMBIANA: Total assets--S18.6 million...
...International [or multilateral] aid, on the other hand, is designed to support the broad policy and interests of the imperialist camp [United States France, Great Britain, etc.] in a more general way...
...4 4 The following two examples manifest a pattern whereby IDB favors multinational, U.S...
...The government will try to avoid excessive increases in salaries, either in the public or the private sector...
...It seems fitting that the leader of the world-wide U.S...
...Despite frictions within the imperialist bloc, these have tended to sublimate themselves on behalf of world capitalist integration, with the United States acting as the organizer of imperialism's exploitation of the Third World's resources...
...5 2 Nissan Motor Co., Ltd., apan's second largest auto producer, with large operations in Latin America, is also involved...
...The problems of poor nations deeply disturb Moore, and he gives them particular attention in Latin Amenca...
...In these activities the Bank joins U.S...
...exports to support private investment in the underdeveloping world, the report recommends the transfer of U.S...
...The United States contributes 41 percent of this money -- a percentage fixed by the U.S...
...After retiring from the World Bank he rejoined First Boston and the Board of Kaisgr Industries...
...Because the replenishment of funds (through subscriptions by members) has been a continual problem, IDA has generally had to work with rather limited resources...
...For imperialism these changes make sense...
...The market glut in medium-term loan financing (3 to 5 years) has led U.S...
...During the formative period the possible danger inherent in establishing a 'bank managed by its debtors' was pointed out...
...ADELA has also coordinated the most ambitious project for controlling the successive stages in the production of agribusiness commodities...
...the Banca Nazionale tel Laboro of Italy, the Dresdner Bank of Germany, and the Algemene Bank of Holland...
...ratio in the Fund shifts the burden of financing underdevelopment onto the underdeveloping nations themselves...
...Since its beginning in 1945, IBRD has lent a total of $12.6 billion...
...In effect, this declaration amounts to an acceptance of the financial policies which IMF imposes on borrowing countries...
...CORPORACION FINANCIERA NACIONAL: Total assets--$23 million...
...3 1 Thus, after IFC has taken all the initial investment risk, international banking firms buy up the successful stocks, which as of 1966 had an average yield of 12.4 percent2 3 2 Predominant among these resale purchasers in 1969 were the First National City Group, the Banca Commerciale Italiana Group, and the Detroit Bank & Trust Company...
...Gaud (recruited fiom AID by MacNamara...
...On the other hand, as long as the controlling interest is in private hands, IFC would appear to have little concern about whose hands they are...
...The role of the Export-Import Bank in the new global corporate strategy of capital concentration is still-unclear...
...The Bank, which originated in 1934 as part of the New Deal attempt to force open world trade channels, has consistently provided support for the U.S...
...For Latin-American critics of U.S...
...The handling of the money for the Social Progress 9 Trust Fund, now channeled through the Fund for Special Operations of IDB (which constituted 48 percent of its total operations for 1961-69) has gained for the bank the title of "Bank of the Alliance...
...The logical conclusion of this stategy led to the invasion and destruction of Vietnam...
...imperialism in Latin America...
...Minimum contribution for one-year subscription: $5.00...
...Rudolph A. Peterson, who as chairman of the Presidential Task Force on International Development lent his name to the Peterson Report, is President of the Bank of America and member of the Board of Directors of ADELA...
...Source: El Tiempo (Bogota), April 24, 1970...
...This explains the U.S...
...Since the Bank now borrows and obtains funds in Canada, Europe, and Japan, opening up its membership would both give it greater assurance of capital from these areas and make for more healthy relationships within the organization...
...See Table IX) 4 The net effect of IMF's stabilization loans is to maintain the existing economic and social condi- tions both within and among member nations...
...would retain its portion of the local import market...
...Affiliation of Corporacion Financiera del Valle--Moody's Industrials.more importantly, it will enable the underdeveloping countries to obtain the high-technology goods needed by foreign-owned heavy industry within the area...
...When the United States, anxious about the deteriorating political situation in Europe, unilaterally initiated the Marshall Plan, the World Bank became increasingly involved in the development of the Third World...
...Furthermore, IFC, as a member of the World Bank group, helps to convince the local government that the new enterprise is important to the development of the country...
...banks more than doubled to a total of over 300...
...For a detailed analysis of preinvestment activities as related to the UN, see Carlos Rafael Rodriguez, "Cuba's Views on A Study on the Capacity of the United Nations Development System under Discussion by the UNDP Administrative Council," Granma (Havana, English edition) March 29, 1970...
...Exemplifying this trend are the multilateral arrangements (World Bank consultative groups) to negotiate the financing of a country's trade relations or debt...
...banks are owned by the top ten banks...
...A recent IBRD review of the Mexican economy, as reported in Latin America of London (March 6, 1 9 7 0), recommended that Mexico push tourism as the most immediate source of foreign exchange...
...The $385 million loaned in 1969 was the largest ever for a single year...
...This destroys any multilateral character the organization may claim...
...Corporations from all of the industrialized countries Qf the "free" world are represented among ADELA's investors, and corporations.from NATO countries are among the most prominent...
...2 6 Fourth, IMF encourages the types of strong controls over the internal economy that are deemed necessary for a balanced bddget...
...Heinz Company...
...institutions, and $13.1 million to England and Europe (Japan was not listed...
...and Bank of London and South America, Ltd.* CORPORACION FINANCIERA DE CALDAS: Total assets--S8 million...
...This trend is clearly observed by examining the merging activity among ADELA participants...
...By smoothing the way for multinational investments ADELA is only accelerating the process of underdevelopment that already impoverishes most of Latin America...
...The Act of Bogota also called for a meeting of the IA-ECOSOC in 1961 at Punta del Este, Uruguay, which turned out to be the birthplace of the Alliance for Progress...
...The latter in turn are partly owned by ADELA...
...He currently is a director of such corporate giants as Allied Chemical, Westinghouse, American Telephone and Telegraph and the Metropolitian Life Insurance Co...
...3 4 In this way IFC very efficiently facilitates the economic penetration of the underdeveloped countries by the United States and its cohorts...
...At present, the United States is the only industrial country member, and this makes for an awkward relationship...
...control the United States now has the resources to finance its expansion on all levels...
...exports generated by the activities of the Fund for Special Operations which requires the recipient country to purchase goods in the United States...
...Policies and Operations, p. 105...
...IDA will become more and more important in Latin America as well as in other parts of the Third World, for it is the only international agency in existence able to offer even temporary relief from the critical debt servicing problem...
...in the San Jose Red Eye, May 7-20, 1970, p. 4. Article in 56-page p 1i-~t-f- rm may be obtained for $1 contribution to Student Legal Defense Fund from Dick Parker, Box 4068, Santa Barbara, Calif...
...In addition, it permits the creation of a very diverse portfolio that cuts across sectoral and national lines, which in turn makes it possible to orient a large portion of the Latin American economies toward the needs of multinational corporations and international trade (see chart above...
...5 An increase in International Development Association (IDA) lending is critical to establishing an international framework for development...
...Fifteen percent of the funds committed in fiscal 1969 were in tourism projects, and a new Tourism Projects Department was established to help IFC with this task.' Tourism is supposedly important as an "industry with special developmental impact," as a source of foreign exchange earnings...
...It closely cooperates with IDB, IFC and AID to accomplish this purpose...
...This is the most recent evidence of the corporations' power to manipulate the government apparatus for their own purposes...
...Incentives to foreign trade and corresponding institutional apparatus as related to the foreign economic policy of the United States are extensively discussed in David Horowitz, ed., The Corporations and the Cold War (New York: Monthly Review Press, 1969...
...I CONV ERGiF.N (IA I 1INTERNATIONAL DEVELOPMENT ASSOCIATION Granting loans to the poorest nations (e.g...
...Private Country No...
...Furthermore, control of the Bank remains firmly in the hands of the United States and the other developed nations...
...First suggested by the International Development Advisory Board when this group was headed by Nelson Rockefeller, IDA was championed by Senator Mike Monroney, who conceived f it as a second-mortgage operation...
...By investing small amounts (from 3 to 6 percent of the total stock) in local finance corporations in conjunction with associated banks, ADELA is further able to multiply its impact, since such finance firms make investments or loans to a large number of local corporations...
...Two blocs have emerged in the process: the industrialized countries and the Third World, with the United States playing the undisputed role of leading imperialist power...
...Directors and capital stock participation--from Nyhart, J.D...
...The United States has not transmitted any of its local currency holdings to IDA, nor has IDA ever made a local currency loan...
...Both, however, are important members of the family of "multinational investment companies...
...37 Furthermore, the United States, with its critical balance of payments problem, certainly suffers no anguish at the thought of her tourists abandoning Europe for more tropical areas.B EXPORT-IMPORT BANK Unlike other literature on "development financing," the Peterson Report goes so far as to accept that the Eximbank, "whose operations are designed to promote U.S...
...In this way OPIC should be able to cater with considerable ease to the needs of the international corporate community...
...The role of IFC in the joint venture is similar to that of any iternaticnal investment bank -- it organizes the capital...
...and Tore Browaldh, Chairman of Sweden's Svenska Handelsbanken -- all helped to line up shareholders for ADELA...
...They have favored private universities at the expense of the relative influence of public higher education in the recipient countries, as well as permitting ever greater private influence on the university system...
...El Tiempo (Bogota), September 11, 1967...
...It will be evident from the following description of its activities that IDB is scarcely the former, very much the latter, and should be called instead the "Bank of Economic Dependency...
...Moreover, Arthur K. Watson, President of the IBM World Trade Corp...
...just 3 projects account for $10.2 million...
...Business Week, April 5, 1969, pp...
...In contrast to present practice, the IDB should reserve it, concessional lending for its least developed member nations...
...House Foreign Affairs Committee, U.S...
...A group of Norwegian investors were brought into the project, put up most of the capital and provided the technical assistance (ADELA invested $1.7 million or 8 percent of the total capital...
...foreign aid programs (he headed a special aid mission to Southeast Asia for President Johnson and was instrumental in the founding of the Asian Development Bank...
...A PROFILE OF THE PARTICIPANTS 5 0 On September 30, 1964, ADELA was chartered as a Luxembourg corporation, with Marcus Wallenberg, head of Stockholm's Enskilda Bank, as its first chairman...
...The purpose of IBRD, as currently stated, is to pro- vide the capital from international sources needed to fi- nance an increase in productivity and living standards in the underdeveloped areas of the world...
...Lately, the Bank has broadened the scope of its activities to include also medical and public health training, the social sciences, and central services such as those of the administrative development of universities...
...EUGENE R. BLACK (July 1949 - Dec...
...The U.S.-controlled management has determined its approach regarding integration and the formulation of development projects at the multinational level...
...Baker, pp...
...28 Thus, as more and more underdeveloping countries reach the point of debt saturation, IDA will become the only available means of retaining these nations within the process of western capitalist "development...
...From 1947 on the idea of an inter-American bank was discussed at meetings of this institutional arm of the Monroe Doctrine and its creation, the Inter-American Economic and Social Council (IA-ECOSOC...
...New York), Bank of America (San Francisco), United California Bank (Los Angeles), First Pennsylvania Banking & Trust Co...
...CPC Infternational, Deere, Dow Chemical, Gerber Products, Monsanto, Ralston Purina, and Standard Fruit and Steamship The more successful ADELA is in accomplishing its main purpose, the more Latin American governments lose control over the direction of their economies...
...It was to this end that a long series of "hemispheric" intergovernmental meetings occurred during the postWorld War II decades, and for which the Organization of American States (OAS) was created in the same period...
...The Task Force also believes that the United States should support current initiatives to open membership in the IDB to other industrial nations...
...With this collateral the Bank can only float equal amounts in bonds in the costly private financial markets of the United States, Europe and Japan...
...The fact that IFC committed a full quarter of its 1969 investments to agribusiness enterprises and has been given, by the Bank group, the responsibility of developing the fertilizer industry in underdeveloped countries is certainly not out of step with Gaud's inclinations while with AID...
...While this provides a competitive edge against other developed countries, COLOMBIAN FINANCIERAS (Figures in U.S...
...At Manufacturers Hanover Trust, foreign business has increased from 10 percent to 25 percent of total business, and the profits of its international division have more than doubled in the last five years...
...Charles J.V...
...Such studies lead toward the creation of the infrastructure for the operations of the multinational corporations...
...What IFC does, then, is to improve the political acceptibility of private foreign investment in the underdeveloping countries, while making few, if any, concessions to the economic and social needs of the host nation...
...IBRD and IMF were specific institutional solutions to the economic problems anticipated for the postwar period, with IBRD directed toward the reconstruc- tion of the war-torn nations, especially those in Europe...
...Rather, they tend to operate at a nice profit simply by lending money for low-risk business ventures...
...Since the United States is responsible for the funding of 41 percent of the ordinary capital, one might wonder at the increased cost to the largest shareholder...
...bookkeeping transactions and it is unlikely that a single dollar of these funds will ever be spent...
...Javits, who is one of the most important GEORGE S. MOORE -- Board member of ADELA Missionaries for Poor Nations There's no doubt which way First National City Bank of New York will go now that George S. Moore...
...and, with other business leaders, flew to Rome to discuss the plight of poor nations with Pope Paul...
...The vot- ing systems of IDA and IFC, as well as IMF, are similarly weighted...
...Ecuador) on terms that place a lighter burden on their balance of payments, IDA was inaugurated as a World Bank affiliate in 1960...
...By accumulating capital from all the western capitalist countries and placing it under U.S...
...government in funding the Bank consists in allowing increases in callable capital stock subscriptions which are actually contingent liabilities of the subscribing nations(the members of the Bank) which enables the Bank to borrow in world capital markets...
...that facilitates c0ntinue.i foreign penetration...
...49..The Rotarian, March 1969...
...foreign aid served the same ends as military intervention...
...IFC's goals are clearly stated in a World Bank policy booklet'which claims that it is "the only such [intergovernmental] institution operated for the sole purpose of assisting the international spread of private enterprise...
...a substantial part of the total costs should be financed by the applicant...
...Heinz Company...
...Sources: Total assets--from Houk, J.T...
...TIERRA MUERTE FOOTNOTES For complete references see Part I (NACLA Newsletter, IV, 2 / April 1970...
...Second, IMF pushes for the establishment of free exchange rates...
...A predominantly bilateral U.S...
...Previously (from 1934 on) he headed a major underwriter of corporate securities, the First Boston Corporation, a Rockefeller-Mellon joint venture...
...with assets of over $24, $14.9 and $14.7 billion respectively...
...he was a director of various corporations, rising to editor and publisher of the Washington Post...
...1 Paraguay 3 Ecuador 3 Peru 4 El Salvador 2 Uruguay 2 Source: compiled from International Financial News Survey, 1965-1970...
...CORPORACION FINANCLERA DEL VALLE: Total assets--$3.9 million...
...In fact, Senator Jacob K. Javits (R., New York, and member of the Joint Economic Committee of the U.S...
...Generally the loan assumes the form of a "stand-by" agreement which allows the applicant country to draw a stipulated amount of foreign currency from the Fund as the money is needed to meet the emergency situation...
...Currently operating through two basic divisions, the Fund for Special Operations and Ordinary Capital Resources, IDB is still an important channel for foreign capital to penetrate Latin America...
...This appears to have been the case in both Mexico and Venezuela, whereas U.S...
...Even if a particular loan constitutes but a small portion of the total costs of the individual project, it nonetheless means increasing participation by the United States in a project started by non-Bank sources...
...Of course, the resulting increase in taxes and/or reduction of government expenditures puts the pinch immediately on the working class, peasantry, and unemployed...
...exports since it began...
...balance of payments...
...foreign policy...
...Bilateral aid," said Pierre Jalee, "is designed to support the policy and interests of the United States, or France, or Great Britain, in different places, and at different times...
...See Box on Colombian financiejas...
...The International Development Association (IDA), on tl:e other hand, gives opportune injections to those nations who might drop out of the entire process because of ex- cessive debts...
...trade and business interests -- the most important aim of the U.S...
...will maintain a normal flow of payments for current transactions such as interest, royalties, and profit remittances...
...Government Printing Office), p. 27...
...The development bank differs from the ordinary commercial bank in that while the commercial bank is concerned with easily realizable, tangible security, the development bank supposedly takes a long-term economic view...
...Report of Senator Jacob K. Javits, as Trustee for the Special Committee on Developing NATO Countries, of the North Atlantic Assembly, November 1968," Congressional Record, July 2, 1969, p. 57505...
...In view of the debt-servicing problem in a number of the developing countires, concessional lending on IDA terms is badly needed...
...He goes on to claim that the inclusion of European interests in the plans for exploiting Latin America refute the charges that these plans arise from "imperial instincts...
...In addition to the $10 million long term loan granted by IDB to ADELA for the financing of small and medium-size projects which are not within IDB's direct reach, DB has made parallel loans to larger projects in which we have invested...
...This ignores of course the important fact that tourist facilities are for the most part foreign controlled, and hence of questionable value as a means of accumulating foreign exchange for domestic use...
...4 3 The debtors are the Latin American countries...
...The vast majority of these credits have gone to India and Pakistan (65 percent of the total through 1969...
...In order to operate the Bank, a certain quantity of paid-in capital (i.e., actual payments, capital outlays calculated as 10 percent of callable stock) is needed...
...Regardless of any changes in the voting structure, the United States would be able to exert indirect controlling mechanisms...
...These conditions, which were designed to force Cuba to implement policies leading to a balanced budget, in effect amounted to a veto of Castro's plans to eliminate unemployment and carry out agrarian reform...
...of the capital stock, IFC holds 13.2% and foreign stockholders 15.3...
...The purpose of the appropriations by member nations is to create a reservoir of credit upon which to float bonds...
...The World Bank, IDA, and IFC: Policies and Operations, April 1968 (Pamphlet pu-blished by the World Bank), p. 95.17 30...
...Police Assistance Programs in Latin America...
...It will be our policy to seek reduction of the deposits importers have to make in advance of their operations...
...GEORGE D. WOODS (Jan...
...From 1946 to 1966 the Bank provided over $3.6 billion to OAS countries alone for the purchase of U.S...
...These financing operations in cooperation with overseas financial institutions are another example of the attempt to draw together capital from all the developed countries...
...The average development finance company functions very much after the model of IFC -- it organizes capitaP, albeit on the local level...
...Furthermore, ADELA induces the Latin American governments to undertake suitable changes in their legislation to assure that the flow of capital abroad will take place without interruption...
...Basic in the Peterson proposals is the incorporation in a broader (multilateral) framework of a program of insurance, guarantee, and protection of multinational corporations...
...A report of the House Committee on Banking and Currency, cited in Dick Parker et al., "Why the Bank of America...
...These merged recently to form Japan Iron and Steel Co., which is the largest industrial organization in that country, in its own sector ranking behind only the Morgan-controlled U.S.' Steel Corporation, the world's largest steel producer...
...Credits from the United States for this specific purpose are conditioned to those in which financing will be obtained wholly or partially from the external sources...
...banks to join their foreign counterparts in international consortia...
...1963 - March 1968) The fourth President is a long-time friend and business associate of Eugene R.Black, who along with another international banker, C.Douglas Dillon, picked Woods for his World Bank job...
...Furthermore, the Eximbank has shown an increased interest in making its own operations more multilateral in nature...
...Private Corps...
...INTER-AMERICAN DEVELOPMENT BANK IDB is often presented as a multilateral institution and as the bank of the Alliance for Progress...
...10 for institu- tions...
...Standard Fruit and Steamship Company and the United Fruit Company, both previously operating only in the banana industry, became participants in this joint,venture, along with the International Paper Company...
...IMF insists on the implementation of several "sound" fiscal and monetary policies which in effect insure the continuation of liberal world trade...
...This is not at all surprising in light of the fact that ADELA was conceived in the 1961 NATO Parliamentarians' Conference...
...There are, however, indications that the Eximbank has a more integrated role to play within the new strategy than simply remaining a bilateral export support agency in the old style...
...Through this broad strategy of penetration ADELA is able to maximize its control over corporations with a minimum of capital outlay...
...The International Bank for Reconstruction and De- velopment (IBRD), for example, constructs the local in- frastructures that are essential to the proper function- ing of overseas operations, and increasingly serves as the grand coordinator of the underdevelopment process...
...It was designed to function as a kind of international authority which would both set a standard of conduct in international monetary affairs and help actively to regulate them by operations designed to assist countries to achieve balance in their international payments...
...That conference represented the culmina- tion of a series of discussions by economic and finan- cial experts of the Allied nations which were designed to develop plans for the postwar expansion of the capi- talist camp...
...This is basic to the new approach to foreign assistance we recommend...
...Fifty-three large U.S...
...6 1 Since it is composed of so many corporations with specialized knowledge in almost every field, ADELA can call on experts for planning and operating any firm...
...a member of the Joint Economic Committee, "we are the only wealthy country in an organization of poor countries, yet they ae putting in 59 percent of the total capital...
...This time, in Bogota, Colombia, the United States offered to set up a $500 million development fund to be handled by the IDB...
...1, 1970, p. 14...
...5 3 ADELA AT THE CROSSROADS ADELA is not the first attempt at massive capital concentration, but rather the culmination of a trend...
...Of that, $1,339 million was loaned in 1969, the largest year total in its history...
...Interview with William S. Gaud," Finance and Development, No...
...Decisions about the administration of the Fund have to be adopted by a two-thirds vote (based on capital subscription), which until now has been held by the United States...
...The effect of such a "stabilization" plan (as it is generally referred to by IMF) is to reinforce the established structures of the society, and to make basic changes within it nearly impossible...
...He recently demonstrated his life-long loyalty to the Rockefellers when he accompained Nelson on his tumultuous tour of Latin America...
...In order t get private capital, the Bank is obligated to tender collateral and security, which is the callable stock...
...Woolworth, Lazard Fund, Communications Satellite, Royal Dutch Shell, the Brookings Institution, the Population Council, John Hopkins University (where he joins McCloy...
...government capital whatsoever...
...IDB has been offered $15 million to develop this ki2 of activities on behalf of the United States...
...private banks and investment companies...
...export industry...
...Foremost among the private in- vestment groups is ADELA, which has evolved an imperial- ist strategy for Latin America that may provide the pro- totype for a whole new line of capitalist devices...
...The 1968 Annual Report discusses the close relationships with the Inter-American Development Bank (IDB) and with International Finance Corporation (IFC...
...IFC, however, doesn't deal with just any development finance company...
...If one considers AID's part in the administering of the Fund, the Bank's claim to be multilateral becomes still more dubious...
...Therefore, the "softness" of its loans refers to their easy repayment requirements -- usually 50 years, with a 10-year grace period and only a .75 percent service charge...
...Moreover, ADELA combines its large capital resources with an extremely wide variety of business services that enhance penetration above and beyond traditional direct capital investment...
...The Mellons also own one fourth of the shares of Gulf Oil Corporation, third among the international producers of oil...
...62, s chairman...
...this is the crucial factor'in its ability to maintain its world leadership...
...capitalism he has a pithy answer: the free-enterprise system has produced the wages nd profits that are the main source of revenue for financing development...
...Furthermore, Monroney envisioned the possibility of making use of the local currency holdings that the United States was accumulating through its own aid programs...
...The appropriations covering the subscriptions are essentially...
...In light of IFC's zeal for private enterprise, it is not surprising that it has been very active in Latin America...
...In addition, he is a trustee of John Hopkins University, whose press publishes the World Bank's special reports...
...After deducting the part AID directly administers, the Fund consisted of $394 million to be loaned, on application, for housing, land, or sanitation reforms...
...New York Times, June 4, 1970...
...Industrial Corporations," for 1969, Fortune, May 1970...
...and several European counterparts -- Giovanni Agnelli, Chairman of Italy's Fiat Motor Company...
...See Table VIII...
...The United States manages to fund the Bank at the lowest possible cost and the real lenders are the private banks...
...One important role for the Bank as administrator of the Fund for Special Operations (and consequently of the Alliance for Progress) is its penetration of higher education in the Latin American countries, primarily in the basic and applied sciences...
...representative to the North Atlantic Assembly (NATO), claims ADELA as his own brainchild...
...Congress), who has on more than one occasion been U.S...
...By conservative estimate, 75 percent of the foreign assets of U.S...
...IV, No...
...With both institutions there exists a continuous contact and free exchange of information so as to avoid duplication of effort in the areas of developing and evaluating investment opportunities...
...commercial bank -- Bank of America -- with more than $25.5 billion in assets as of last year...
...foreign aid effort as it has been organized hitherto in bilateral form...
...participation in the Fund (from a ratio of 3:1 to 2:1), it is not altogether clear how this would affect the U.S...
...3 6 This does not exclude government participation...
...The beneficiaries are: first, the United States, through the impact in the volume of U.S...
...ADELA International Financing Company S.A...
...Jeremy Main, "Our First Real International Bankers," Fortune, December 1967, pp...
...2 The main purpose of generating greater investment opportunities for multinational corporations is clarified by the following examples: 1. ADELA joined with IFC in 1968 to give financial and technical backing for launching a new pulp, paper and lumber operation in Honduras...
...often the local government has provided a substantial portion of the capital, but in non-controlled forms -- directly, through loans of government funds on concessionary terms, or indirectly, through stipulations requiring institutions such as banks and insurance companies to provide funds at low rates of interest...
...military machine is now in charge of the "free world's" most important bank for structuring the global market for private gain...
...Funds are passed to large private banks to finance their lending operations abroad...
...IDB, in granting loans under this Fund imposes conditions similar to those imposed in general to the aid program of the United States: no agricultural land can be bought with them...
...As a result it demonstrated a phenomenal rise in available capital over the last five years -from $32.4 million in 1965 to $187.3 million in 1969, mainly from new equity investments...
...aid legislation of a provision for the creation of a private development corporation as a fundamental instrument of U.S...
...It so happens First Boston handles more bonds of international financial organizations (including the World Bank) than any other firm...
...America Power System...
...IFC has also become the prime mechanism by which the World Bank Group expresses its growing interest in the tourist industry...
...Historically the Bank has concentrated its work on infrastructure development within the various countries, with a major portion of loan money going for transportation and power facilities...
...Cur- riculum reform has taken on particular importance as a means of gearing the local educational system to the "eco- nomic needs" of the country as seen by the multinational corporate interest groups...
...Subscription price: $5 per year for individuals...
...This marked the beginning of a systematic policy of protection of the giant American corporations in their massive migration abroad...
...The Mellon National Bank and Trust Co., with assets of $3.5 billion, is the larger of two family banks in the vast Pittsburgh-based Mellon empire...
...We will make all efforts to end the registration of foreign capital...
...INTERNATIONAL FINANCE CORPORATION IFC, formed in 1956 "to further economic development by encouraging the growth of productive private enterprise in developing member countries," differs specifically from both IBRD and IDA in that it can make loans to private enterprises without a government guarantee, and can make equity (stock) investments in those enterprises...
...Even so, "tourism-embraces not just vacation travel," which also contributes to "...general economic development by encouraging potential investors to visit developing countries...
...Philadelphia), Marine National Exchange Bank (Milwaukee...
...After serving as President of the World Bank he went on to become the U.S...
...corporate community -- George Moore, Chairman of the First National City Bank of New York and also a member of the finance committee of Javits' campaign...
...economy during the cold war...
...To fulfill these two purposes, the Fund adopted a monetary philosophy that serves to maintain traditional world business relations, a monetary status quo that favors the developed capitalist countries to the detriment of the rest o the world...
...The new joint venture which replaced it included IDB (on behalf oi 12 foreign private banks), Dow Chemical, and the local government...
...Howard Petersen, Chairman of the Fidelity Bank of Philadelphia...
...exports, and thus help to fill the vacuum created by the loss of trade subsidies that had previously been provided by other bilateral programs such as AID...
...an affiliate of Continental Illinois National Bank and Trust Co...
...The Task Force recomncnds that the United States support such an increase in line with tie special consideration for Latin American development that is part of U.S...
...Fortune, September 15, 1967, p. 98...
...93103...
...of the capital stock, IFC holds 15.9% and foreign shareholders 24.3...
...This gives the United States a veto power which it has consistently exercised by saying "we are not ready to vote...
...Congressional Record, March 19, 1968, p. H2043...
...The support of these banks represents a major part of IFC's attempt to build domestic financial institutions which will service the operation of private enterprise within the underdeveloping countries...
...Among these is the toleration of periodic visits by an IMF mission...
...BOLSA, a banking system with about 60 Latin American branches, got more dollar backing in 1965 through an agreement with Pittsburgh's Mellon Bank, which by 1973 will have invested $35 million in BOLSA...
...In order to qualify for World Bank Group assistance, no finance company may have its ownership controlled by the government...
...In 1961 he became President Kennedy's Secretary of Defense and instituted a counterinsurgency strategy for halting national liberation movements throughout the world...
...Peterson, p.22...
...78, 191...
...Luxembourg - Lima - Washington 1964/65 1968/69 (Thousands of US $) Investments, loans and underwritings 14,100 147,200 Financial resources (equity capital and loan funds available) 32,500 187,300 Shares outstanding ($10,000 par value) 3,215 5,037 Shareholders / from number of countries 124/15 239/23 Number of projects (Enterprises / countries) 14/8 98/19 SECTORAL DISTRIBUTION OF PROJECTS April 30, 1970 Economic Sector No...
...Through its operations,' U.S...
...Ltd., Nassau, which includes among its shareholders the Commerzbank AG, the Deutsche Bank AG, BOLSA, and the Swiss Credit Bank...
...for which he has warm personal regard: his wife is from Mexico...
...In March 1968, following extensive hearings, the House Foreign Affairs Subcommittee on Foreign Economic Policy also endorsed the corporate concept...
...IFC insists that the use of its capital yield both private and developmental profits, but a look at its operational history indicates that it has paid much more attention to the stimulation of private profits than to the development requirements of poor member nations...
...The NACLA NEWSLETTER is published ten times a year by the North American Congress on Latin America...
...A month after the August 1960, OAS Declaration of San Jose (Costa Rica), which set in motion the economic boycott and embargo of Cuba and sealed her exclusion from the interAmerican system, the OAS Committee of 21 met again...
...and the Ford Foundation...
...Europe," he declared, has a major role to play in the development and evolution of Latin America -- the success of my own ADELA experiment points the way...
...2. In 1967 the Office of Private Resources (OPR) of AID was created and with it new functions were added to the foreign aid program to cope with the needs of the multinational corporations working abroad...
...INTERNATIONAL MONETARY FUND IMF originated in the Bretton Woods Conference as a sister institution to the World Barnk...
...Corps...
...Motivating this re- commendation is the conclusion that multilateral agen- cies are more acceptable channels for aid monies...
...The other activities of IDB are carried out through the so-called Ordinary Capital Resources division -- the "hard-loan window" for private enterprise...
...The nature of the measures which the underdeveloping countries (who constitute the vast majority of the borrowers) are required to take clearly indicates that IMF functions as the chief regulator of the western capitalist trade system...
...29 Or, in the words of the current IFC executive vice president, William S. Gaud,v I St ,,5...
...and Janssens, E.F...
...Overseas Private Development Corporation, included prominent members of the corporate establishment along with a list of consultants among whom was Ernst Keller, the Managing Director of ADELA...
...Participants include the...
...In this case, ADELA made the connections with European investors and encouraged them to exploit this profitable industry on a global scale.3...
...1967-69...
...The Bank calculates it has helped to mobilize, in projects it has partially financed, an aggregate total of more than $9.5 billion...
...Thus, the main international contradiction has shifted from within the imperialist camp, as during World War II, to that between the imperial metropoles and the Third World...
...ADELA Administraci6n y Servicios de Mexico S.A...
...The cllon family is a most important participant in ADELA, and all the companies in'their network mentioned below are ADELAt shareholders...
...Manufacturing and financial capital from 11 major corporations was assembled to form the Latin American Agribusiness Development Corp...
...Pierre Jalee, The Pillage of the Third World (New York: Monthly Review Press, 1968), p. 69...
...Thus, the proceeds of bond sales to U.S...
...An earlier proposal by Senator Javits, cosponsored by ten other senators, called for a U.S...
...Fortune's "Directory of the 500 Largest U.S...
...made forceful speeches urging reform of the international monetary system...
...In Colombia, for example, IBRD chairs a Consultative Group that includes representatives from that country, twelve developed countries, IMF, IDB, the United Nations Development Program (UNDP), and the Inter-American Committee for the Alliance for Progress (CIAP...
...government did not show serious interest in the bank proposal until a crisis on its perimeter made it imperative...
...The applicant is WORLD BANK PRESIDENTS, 1945 - Present EUGENE MEYER (June 1946 - Dec...
...Since the World Bank group's interest in agribusiness has been developing over the last several years, it should come as no surprise that IFC has become increasingly active in that field...
...The Bank of America has joined a similar consortium, the Societe Financiere Europeene, whicn was sponsored by the Banque Nationale de Paris and includes Barclays Bank (United Kingdom, which leads Fortune's 1969 list of the Fifty Largest Commercial Banks Outside the United States, 5 8 and participates in ADELA through its overseas subsidiary, Barclays Bank D.C.O...
...The international capital market is by far the largest single source of IBRD funds, and since funds in this market are costly and the profitability requirements complex, the Bank's dependency on that market has led to a notable con- servatism in its lending policies...
...This task force also included two other members of the ADELA Board, the representatives of Deere and Company and H.J...
...corporate subsidiaries or local agencies in which foreigners have significant participation: a $10 million loan given to the ADELA octopus and 5 million in two loans to Corporacion Financiera Cdlombiana de Desarrollo Industrial, a private concern in which Manufacturers Hanover Trust Co...
...States 53 Norway 4 land 21 Belgium 3 21 Austria 3 Kingdom 15 14 LATIN AMERICA 13 11 Argentina 9 11 Brazil 94 8 Mexico 6 8 Colombia 5 hands 4 Panama 1 GEOGRAPHICAL Argentina Bolivia Brazil Chile Colombia Belize Costa Rica El Salvador Guatemala Honduras DISTRIBUTION OF PROJECTS 7 Nicaragua 2 Panama 11 Dominican Republic 8 Ecuador 11 Mexico 1 Paraguay 3 Peru 5 Uruguay 2 Venezuela 4 Caribbean Area 7 4 1 6 7 3 4 1 10 1 TOTAL 99 82,180 100.0 WHOLLY OWNED SUBSIDIARIES: ADELA CompaRia de Inversiones (Panama) S.A...
...ADELA Administraclo e ServiCos Ltda...
...Even more clearly, the International Finance Cor- poration (IFC), anaever more important arm of the World Bank group, serves as an organizer of private capital in underdeveloping regions, and has set a pattern for pri- vate capital organizers...
...model...
...In December 1968, IPIAC endorsed Javits' proposal and submitted to AID its recommendations for establishment of such a corporation...
...enforcing permanent subservience to official guidelines...
...goods through tied aid, additionally, and the control of the counterpart funds generated by the loans...
...The creation of OPIC was also endorsed by the Peterson Report...
...These banks, it should be noted, have also been heavily supported by AID and IDB funds...
...program is no longer politically tenable in our relations with many developing countries, nor is it advisable in view of what other countries are doing in international development...
...First, member nations are pressured to eliminate controls over imports and exports...
...Third, IMF advocates complete currency convertibility, which further limits the local government from controlling the monetary flow in and out of the country...
...Its capital is provided through subscriptions from member countries, as well as loans from IBRD (currently authorized to $400 million, of which $200.amillion has already been drawn...
...First, the Bank has increasingly conducted its borrowing in capital markets outside the United States...
...James.C...
...Samuel Scheizer, Chairman of the Swiss Bank Corp...
...So great is his commitment to international cooperation in the exploitation of the Third World, that he is known to haveADESTMENT COMPANY S:A...
...the 10 directors include representatives of Bank of London and Montreal, Ltd., Manufacturers Hanover Trust Co.,* and Phoenix Rheinrohr International G.m.b.h...
...OPIC, ADELA'S STEP CHILD The success of the ADELA experiment led its supporters to suggest the inclusion in U.S...
...As president under James S. Rockefeller, who retired in July...
...Ordinary" operations require the purchase of goods from the country outlaying the capital...
...IFC in effect reassures the partners in the investment that the enterprise will be a profitable success, while providing no more than 25 percent of the total capital from its own funds...
...The World Bank Group in gene- ral has also developed an intense interest in the possi- bility of making "quality improvements" through the appli- cation of modern technology to the educational institu- tions (i.e., packaged education wholesale from the United States...
...Many times the "other" source is the local government...
...aid programs were withdrawn, the Eximbank moved to help insure that the U.S...
...Foreign Policy...
...Military Governor and the High Comissioner for Germany (1949-52...
...AN UNCONSOLIDATED SUBSIDIARY: ADELATEC Technical and Management Services Company S.A...
...The Bank in fact has never experienced a loan default...
...See Box on IBRD presidents...
...Magdoff, p. 147...
...In practice, however, development finance companies are reluctant to promote new enterprises, especially those high-risk types of enterprises necessary for economic development...
...With IFC we have an increasing number of joint projects, including joint sponsorship of very large investments...
...Consolidation Coal (a HannaMellcn venture) owns seven percent of the Chrysler Corporation, while its directors own only one percent...
...By financing the export of these goods, which in no way compete with the goods produced in overseas subsidiaries, but are in fact necessary to their efficient operation, the Bank fits neatly into the overall scheme...
Vol. 4 • May 1970 • No. 3
