Historical Documents - Office of the Historian

Washington, April 14, 1962.

1.: The paper seems to me good as far as it goes with the exception of one or two minor points which I discuss below. However, it errs by omission in failing to deal with the question of what the mix of loans available to any given country will be. In no country is it likely that all the aid will be given in terms of a single set of loan conditions. Therefore, some countries may in fact be receiving some loan funds on the A basis and other funds on the B basis.
2.: The division of countries suggested in the appendix seems reasonable. It is consistent with the internal surveys of stated development in Latin America made by Hollis Chenery’s office.2 A minor point is that Chile seems to have disappeared from the list of Latin American countries.3
3.: 5B raises a problem. It appears to imply that development banks and similar institutions in recipient countries must always make loans to private enterprise at “normal” (equal commission?) rates. One of the functions of these development banks is to encourage private investment by making capital available at lower rates. It may be argued that this raises the problem of subsidizing individual entrepreneurs to their personal profit. This is a genuine problem but one which should be met by the tax system of the host country in such a way as to permit re-investment of profits but to penalize high personal consumption out of entrepreneurs’ incomes.

Source: Washington National Records Center, RG 286, AID Administrator Files: FRC 65 A 481, Development Financing, FY 1962. Official Use Only. Forwarded under cover of a memorandum from Dungan to Lingle, April 19, which noted in part: “I thought you might be interested in having Carl’s comments which appear to be quite pertinent.”↩
Document 135.↩
These surveys have not been found.↩
A marginal handwritten note next to this sentence reads: “This has been repaired.”↩

Foreign Relations of the United States, 1961–1963, Volume IX, Foreign Economic Policy