240. Letter From President Reagan to Senate Majority Leader Robert Byrd1
As you are aware, the Administration in February of this year reached agreement on a General Capital Increase (GCI) for the World [Page 616] Bank.2 This would require an annual paid-in appropriation of $70.1 million for the 6-year period 1989–1994, substantially less than the appropriation required for the previous capital increase. Recently the Department of the Treasury submitted legislation to the Congress authorizing U.S. participation in the GCI.
The General Capital Increase is in our national economic and strategic interests. The World Bank remains the single largest source of development assistance. The Bank commits the vast majority of its funds in support of specific investment projects in the middle income developing nations. These are mostly nations (such as the Philippines, Egypt, Pakistan, Turkey, Morocco, Tunisia, Mexico, Argentina, Indonesia, and Brazil) that are strategically and economically important to the United States.
The Bank’s General Capital Increase will provide new development funding for these countries at a level far beyond that which we could accomplish bilaterally. This is because in the World Bank the cost of assisting these nations is shared with the other major non-communist industrial nations, and the Bank raises most of its funds by borrowing in the international capital markets.
The U.S. contribution of $70.1 million annually (plus repayment reflows from earlier loans) will make available an average of $18.8 billion in new annual World Bank loan commitments over the next 6 years, a multiple 268 times the U.S. appropriation.
The substantial increase in the Bank’s resources will enable it to expand its vital role in promoting structural adjustment and market-oriented economic reforms. The Bank plays a key role in the major Latin American debtor nations that are pursuing significant economic reforms. Such reforms often include privatization, freeing prices from official controls, and reducing trade barriers, which would benefit U.S. exports. Turkey is an example of a major ally that has successfully implemented structural adjustment, in conjunction with active World Bank involvement.
World Bank project and sector lending will benefit U.S. business. American exports of equipment, agricultural products, and consulting services will increase from the growth in developing nations promoted by World Bank lending. Many U.S. firms profit directly from export sales financed by World Bank loans. United States companies [Page 617] received $1.6 billion (or 22 percent) of World Bank disbursements for foreign procurement in World Bank fiscal year 1987. American firms also received additional sums from World Bank project-related procurement contracts that are financed by borrowing countries.
United States participation in the GCI will also accomplish other important foreign economic policy goals. The GCI commits the Bank to increase its support for the private sector in developing countries. The GCI resolution also calls on the Bank to take specific steps to make environmental protection a higher priority. Finally, our humanitarian goals are served by the Bank’s emphasis upon alleviating mass poverty.
I ask you to support quick and unencumbered passage of authorizing legislation for the GCI. It is in everyone’s interest to ensure that this significant legislation is passed without distorting amendments. I urge you to support this important effort.
Sincerely,
- Source: Washington National Records Center, RG 56, Executive Secretariat, Secretaries Miller, Regan, and Baker Files, January 1979–December 1988, 56–10–0062, Box 3, Memos/Notes, Secretary Baker, June–August. No classification marking. Sent under a June 21 covering memorandum from Robert Zoellick to Baker and McPherson, in which Zoellick communicated that “Senate Appropriations included our administration $70 million GCI request.”↩
- In a February 22 memorandum to Baker, Conrow reported on the successful conclusion of the GCI negotiations and that the World Bank Board of Executive Directors “recommended approval of a $74.8 billion General Capital Increase with a three percent paid-in component on February 19, 1988.” (National Archives, RG 56, Records of the Office of the Secretary of the Treasury, Congressional Correspondence, 1988, UD–10, 56–10–1, Box 38, [no folder title])↩