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I T,oans to Let in ,^-erica for the Indus trial ;*-?elof»ent of Latin Assert oa !• Latin .%©rica presents a reiaarkable opportunity for econoRie de-elope-sent* Only capital and technical skill art nseded to develop the area s*o that i t could provide for a much larger populationf for a higher standard of living and a groatly ^separated foreign trade, Latin ftiseriea has the full natural resources of a continent s t i l l tssdteviilo-ped • Tha industrial revolution hae but haralj b&g\m in large a reap in Latin Amrim* It has & variety of elim^e, e o i l , Viarbors, minerals, -aluaMe forget products and gr««t agricultural poffaibilltieff. 2, If latin krmrir^ em;Id obtain i«ffl«teiit capital tmder favorable tersa and conditions a«d If that capital could be devoted ©xelut&vely to productl?* dev©lop««nt of tbe various countrloa, L^^in Aaerlea could wlthiix a r©n«rati©n b«foom® a proiperouf and friendly neighbor and a fff*t, market far A^irican products. It ii» ojolte ulthln the reals of poeeiMli'y that if properly detreloped our eccmofH-c relations with Latin taerleft eould becos^ within a .renerfttlon ae Important BB anr ®commie relations with the r*»st of the world eorbined, 3» € have now a surfeit of both the capital and technical skill "•hat Latin *merlca s*o badly s^edf?. To rais# tatin sc«rica fror» ita present ®tstu» to that of a progressive, prosperous neighbor call® for a bold progr&p ooncs&lved and executed in a spirit appropriate to the poeaibl l i t ley mid involving' eeononie aid in amounts oofisensurate with the taak and provided under conditions consonant with our Good neighbor policy, "ach of the countries to the south of us have, of course, their special problems and economic assistance to each of %hm will vary in fora, asount, termr and condition®. Tet all of the Latin taeriean countries hav» in common the on© handicap which we can rerov® to our mitual advantage, i»e#, shortasr® of capital and technical »kill» 4# ¥ost instances of our recent aufistance to Latin Aawlcan countries are not the kind contemplated in this rwRorftndueu -'aall loans tis©d indirectly It pro^l.de <jov»miwmt funds for the purpose of helping defaulted T.ptin nerloan countries r»ervice their deb « to foreign invefltore or to influence local political aligrasentp are ineffective for the objectives herein enTlsafed. iMP are loans to facilitate exports to those countri^f on the scale undertaken, .owever desirable on their own account sufficient, 'hty touch only one small part of the problem and on a scale absurdly small in proportion to the broad task that oould "be performed, ••"concede developments to l^tin America could be an Important part of a domestic recovtzy program. It preisent?? to us an e vers iwre ii*portant part of mxr international political program of peace, eecwlty and encouragement of d«moc«Msy« ^his i» no ti»« for a timorous or traditional approach to the task* Now Is the time to harmonise cur economic program with our new political program if a Good Neighbor policy. Here i s the opportunity for the exercise of great economic statesmanship at I point in history which say well prove decisive. 5« .>bat can we do about i t jiow? (a) 111® profrarr, should be placed under the superSviaion of ft Cabinet aeraber who approaches the proble« from a broad gauged point of view, who would not be bound by the traditions of his organisation or hamstrung b deep-rooted heirarehy. • 1-3 (b) Create by l e g i s l a t i o n a %ovmmmnt bank whose sole function should be to a s s i s t in promoting the long~run ©conojsic developssent of Latin America. The bank should have a capital of 3300 million in coroon stock, purchased entirely by the goverraaenfc, with the power to i s sue 1700 inlllion In h$iw&& guaranteed by MM government as t o interset and principal* The bank would hmvt the power to issma an additional b i l l i o n dollars in sr&arftnteed bond? ap the n««d aroiNi Th# purch®gr« of coiaffion atoek to 1300 million wi^ht earn ant a? the gold profit now in tfct s t a b i l i s a t i o n Ftind or out of th« KU9 b i l l i o n onieewri s i l v e r certificates* Thus i t would not involve an Increase in *:-h« d e f i c i t , 6. The bank coi2ld E?»ke three types of loane. (a) The soat important type would v>e in the forss of iongwters loans fcr productive purposea. The loans in general should be devoted to domestic rehabilitation programs, including public works, creation of nsw industries and the ff-od«rnisation and pansion of existing ind«?trl©B» ®3EP- vtm program selecting the types of indtiirtries to be encouraged could be worked out by & joint planning board* The loans should b© made under tlie following ter»s and e^nditionm (1) Toanc t o be offered at low rates of interest, not rore than 1 percent in excess of the cost of borrowing by Mat bank* (?) 'The proceeds of the loan imiet be used exclusively for the purpose of developing IwaVlla worke and industrial enter- I - 4 prise© of a kind which will add to the productivity of the g country In the not too distant future. The invest** should be such as would eventually provide foreign *x» chang© l i repay the loan* and which wjuld be of a kind to increase trade with&e T?nit#d : t a t e s . (3) The borrowing country should be required to provide in local currency a proportion of the aiaoufit invested by the bank* (I) Control and equity ownership of the projects ?*ufst regain in the hands of the borrowing government or i t * national*, a l though the United ! tatee r^gbt retain the power of active technical participation to insure efficient expenditure •€ the funds. At least 75 percent of the dollar loans made available r*uet he e rpended in tho United t a t e s and a l l iigport«<l goods or forei n aenrices utilized in the construction of the project rauut be purclmsed in the United ftates« (b) ^tension of rrold or silver loans for purposes of mmlsry bility. sta- These leans need not be large in amount and should be for a short tern? and renewable. The loan should be? so safeguarded as to prewnt i t s use for purposes not contributing to ttw ©conoaslc develorw rmnt of the borrowing country. (c) The establl&hasnt of revolving credits for the flnancinf of exports to l a t i n fe.erica. made \n**er the conditions Indicated nho^e will not only i^ake substantial contributions to recovery now but «^11 pa*re Usl path for greater busimss during the cming decades. I t will serro to Insure for the r.Tnit©d ^^atee in the y^ars to o?xm a greater share of a greater of foreign I rade# ttwre will likewise fctj m*eh smaller looses in Ntt loan** than has be<*n true !• HMI pest. One of Urn Important reasons wh>! loanp to L gserican countries have had such a * ad record of default it that the effective rates of interest have been exorbitantly high, and the bulk of the fvrdp Vorroired V& e not bean employed for productive rmrpesee or when so tssploy«d ha.^/e be«n tn«ffici«ntly ttped, "Hi® long run prod>.ict5-d.t of Sowtfc American lndnstri«e wa« not developed to ^ovlde th« re«ourc«8 to m«et llM s©rvic# charges. Econos&c ®nt®rprise in Latin America as d«vtlop©d ^ private foreign capital in tJ* paet has him directed toward exploiting those countries without adequate attentic^i to febetr fundamental ap^clty and long-run interests, h low rete of interest accompanied hr t-a^efusrds tha' the fnnd will be efficiently m\6 widely used will provide a far greater degree of eecnrity tixat the oane will be gladly and voluntarily repaid* ^rtbtr^or®, loans <so\tld be R*de under conditione wtiich would improve our trade relations and protect the^ against further incmrsleno "by countries pursuiiw practices inimical to our trade* Tlie tjroposed loan should be mjipplemented by mature* desi <med to increase the ability of latin Taerioan rcruntries to weet IMlf obli--ationp that wwild be invol"^ed in the adoption of the above proposals. These meesures could include Vistulation of ^nserican tourist travel to L&tln to»ric», through ^rantf of ??pecial rates oa A^-ierican vessels and by proJisotion of i^proTwd travel ronten and by careful surreys of l*tin American products with a ?iew of promoting increased ^•trican products, etc. ons^sption in the United States of I- Th« above program i* not dollar diplomacy! i t la M i w t t i l l y MfU ferent frtr «o»eellBd dollar diploma^ in that, the l a t t e r ^ea^t the exploitation of a w«ak country by private American eorc-'ereial and UN doetrlal interestn with the aid of UN &ffierican uo^en»snt# This o'ild have se IW base Ifef developnent of tatltlvial enteiv» in T^tin As#ric« that would be imder tYm control and owimreklp ©f %h» borrowing oountry or Ifeiiv nationale and that, there i® no part of the piragua which «mrisaff®» any action ly MM United c tat«e 'io^ern^ m«nt or thre-at o^ mteh action, wbtle or overt, which would inter"®re with the iiohereni Bttmmlgnty and righte of those countries* HM pro* jfrais i«? eoRpletely in the s p i r i t of democracy for the gfrjtttfn o f the mutual ad^nntanre of trie United S^etee and t a t in Amerioa. 6/6/39
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