As the cotton is shipped, we make our payment accordingly.

Mr. MULTER. I think you financed some sales of farm commodities to the Middle East, too, did you not?

Mr. WAUGH. No, sir.

Mr. MULTER. To India?

Mr. WAUGH. No, sir. That is under Public Law 480, sir, under what we call, when we are referring to the House, to the Cooley loans where we get 25 percent of that to loan back to U.S. private business in that particular area. This is all local currency financing and does not come out of our dollar funds.

Mr. MULTER. Thank you, Mr. Chairman.

Mr. YATES. Mr. Brown.

Mr. BROWN. Mr. Waugh, this is a most interesting, fine picture to see. What was the percent of your total loans which have gone to governments, and what percent to private companies or individuals?

Mr. WAUGH. I cannot give you that figure, sir. I will say this, that in number of loans that we have made, the largest number of loans have gone to the private sector, but in the dollar volume, the largest percentage of the dollar volume goes to governments or government agencies.

Mr. BROWN. Those loans to governments are for public facilities, and in some instances public utilities, are they?

Mr. WAUGH. Yes, sir.

Mr. BROWN. Are they also for public-owned industry in those countries, in some instances?

Mr. WAUGH. In some instances, yes, sir.

Mr. BROWN. Now, do you have a breakdown of what percent of your loans have gone for utilities and facilities, what percent to industrials, and what percent agriculture?

Mr. WAUGH. We developed for our own use, and I am sorry I do not have it, but will furnish a copy to the committee, as to what our funds have been used for over the 25 years. I am sorry I don't have

it with me.

Mr. BROWN. With the chairman's permission, could it be inserted at this point in the record?

Mr. YATES. Without objection, it will be included.

(The material referred to is as follows:)

EXPORT-IMPORT BANK OF WASHINGTON

Credits authorized 1934 to March 31, 1959, inclusive, classified by purposes

Mr. BROWN. Now, as I understand it, a good portion of your loans are made to, say, industries in these countries, such as Haiti, Paraguay, and so forth-such as a cement plant. Do they often have some U.S. money in those industries, too?

Mr. WAUGH. There is a whole gamut of plans that are used. I wonder, sir, if I could answer your question by giving you a specific illustration on how it develops.

Mr. BROWN. I wish you would.

Mr. WAUGH. In 1940, the Export-Import Bank, and Nacional Financiera, which is a sort of RFC in Mexico, decided to build a steel mill at Monclova, Mexico. Monclova was a typical little town down there with two automobiles registered in the town, no paving, no hospital-it was a very, well, I don't want to use an uncomplimentary term, but it wasn't very much of a city.

The steel mill was originally principally owned by the Mexican Government. They could see the war coming and they wanted to have a steel mill operation. Ten percent was owned at that time, at the outset, by U.S. citizens.

Now, that steel mill today at Monclova, Mexico, has developed a city of, they say, 35,000, and I will be conservative and say 25,000 people. They have three hospitals, they have paved streets, they have beautiful schools, they have fine residences, modest residences for the workmen. There were 1,600 automobiles registered from that place last year instead of 2 in 1940. The employees of the steel mill receive today $5 per day, plus fringe benefits. They originally received 1 peso, or 50 cents a day, 4 years ago.

Now from that 90-percent government owned plant, we have encouraged them to get this ownership into the private sector as fast as they could. Four years ago when we made a loan, when I first came with the Bank, they had 87.5 percent in the public sector, still. Today they tell me that now over 40 percent is owned in the private sector, and gradually they are selling to the private sector.

Now, the same thing can be illustrated in Chile, at the Huachipato steel mill at Concepcion, Chile. Today that is almost out of the public sector, except the fact that the Government has a debt.

So while at the outset you sometimes make these loans in the public sector, frankly because there is not enough private money in the country to develop the industry from time to time we encourage these people to turn the ownership to the private sector. We are great believers in the Export-Import Bank, of the private enterprise and American know-how system.

These two steel mills, incidentally, both are operated with management contracts here in the United States.

Mr. BROWN. That is very interesting, and it is part of what I wanted to know.

I notice here also on your reports where, for instance, there is a company that had borrowed money from your Bank-General Electric, Argentina.

Now, tell me about that company.

Mr. WAUGH. That is what we call a mixed company, they have both Argentine and United States capital in it.

44204-59-5

Mr. BROWN. Do you recall what percent of the money is Argentine and what percent United States?

Mr. WAUGH. No, sir, I do not know.

Mr. BROWN. Would you say there would be more U.S. money in it than Argentine?

Mr. WAUGH. I think in this particular instance there might be, but I am not sure.

Mr. BROWN. In this case, this company during one brief period borrowed, let's say, $300,000 from your bank. What percent interest would they pay?

Mr. WAUGH. Our interest rates vary, depending upon the term and the rate of interest we pay the Treasury of the United States.

Our interest rate to the borrowers today is 534 percent on a loan of that type. Interest rates, of course, have gone up. Five years ago that might have been a 5-percent loan.

Incidentally, on our annual statement we indicate the actual rate of the interest charged on every development loan that we make.

Mr. BROWN. Now, I have this statement, Export-Import Bank credit authorized January 1 to June 30, 1959.

Mr. WAUGH. In the exporter credits, we do not indicate the interest but in the loans that we make direct we do. The exporter credits are loans that we make on that 60-20-20 basis that I mentioned in my

statement.

Mr. BROWN. To follow through that for just a moment, here a U.S. firm goes into a foreign country and with help of capital from private individuals establishes a firm in that country, and you make long-term loans to them at a reasonable rate of interest. That is part of your operation; isn't that right?

Mr. WAUGH. Yes, sir.

Mr. BROWN. Are the repayments made in dollars?

Mr. WAUGH. All of our loans are made in dollars, we collect dollars, we take no exchange risk.

Mr. BROWN. Now, suppose that a company, a U.S. company wanted to go into an operation of that kind, and say that the total capital investment on fixed capital items would run $100,000, just for example.

How much equity would you expect them to have before you would make a loan?

Mr. WAUGH. We try to follow sound banking practices, Mr. Congressman. We like to get 50 percent equity. We are not always successful.

Mr. BROWN. What is the least equity that you recall where you made a loan?

Mr. WAUGH. Well, again I say we might make a loan with a smaller equity if we could obtain from the borrower a guarantee from one of the local banks that would guarantee the payment of the loan. I don't have any thought in mind

Mr. BROWN. Have you ever put up 90 percent of the total capital requirement?

Mr. WAUGH. I doubt it.

Mr. BROWN. Have you put up 75?

Mr. WAUGH. I imagine we have. When we talk about capital requirements, let me explain. We don't loan money for working capital. We loan our money for purchases in the United States.

Mr. BROWN. I understand.

Mr. WAUGH. I just wanted to clarify the record on that.

Mr. BROWN. You will agree the hardest part of the capital to raise is for fixed capital. A man can get working capital.

Now, in some instances you do put up as much as 75 percent.

Mr. WAUGH. I would say so, yes.

Mr. BROWN. Now let's go back a few years, when some of these countries wanted to sell their lead and zinc resources. Did the ExportImport Bank lend any funds to any U.S. companies that went into Mexico and Peru to help those people develop their resources?

Mr. WAUGH. I remember a loan we made to a company in Guatemala to develop some lead business. At the time it was thought we should do everything we could to help people get employed in Guatemala, and it was a loan that I would say was a calculated risk.

I will also say, and perhaps I would like to say it off the record, I was tremendously relieved when it was paid in full. Mr. BROWN. It did not go sour?

Mr. WAUGH. It did not. I was afraid it would.

Mr. BROWN. One reason I might suggest is that imports of lead and zinc into this country in the past 4 or 5 years have multiplied severalfold, so that probably bailed Guatemala out.

Now, have there been any other instances?

Mr. WAUGH. We made a manganese loan, one of the loans we have in default. It was made at the time the Government wanted manganese, and it was made to an American firm that went to Mexico. That was a real difficult case, and we are going to suffer a very substantial loss because of the lack of ability and lack of raw material in the mine.

We also took a loss last year, the largest loss the Bank has ever taken, on a sulfur operation in Mexico for a private firm.

Mr. BROWN. Now, on lead and zinc, has the Export-Import Bank lent any money to National Lead, St. Joseph Lead

Mr. WAUGH. No, sir, I do not think we have any loaned for lead and zinc. We have, however, made loans for the opening of copper mines in certain countries. The largest individual loan that we have ever made for a private company without a guarantee was $100 million loan made to the Southern Peru Copper Co., which is owned by a consortium of four U.S. companies, American Smelter, Cerro de Pasco, Phelps-Dodge, and Dumont Mining-I am quoting from memory, I think I am correct on that.

That operation is going to cost between $200 and $250 million. They came to us originally, sir, to have one company make the loan, and were told they did not have enough equity. They went out and got three other partners.

Now, that loan will assist in opening a copper mine in the next 12 months. They have been working on it now for over 3 years and the production of copper we think will be in demand, and at the same time it will result in an estimate of $30 million per year foreign exchange earnings for the Government of Peru.

We have made other loans of that type for the development of iron ore in Brazil, also in Peru, but we, to my knowledge, have never made lead or zinc loans.

Mr. BROWN. Now, when these automobile plants spring up in Europe, where there was some U.S. money involved in them, and also European investments, did the Export-Import Bank make any loans?

Mr. WAUGH. We made one loan to Simca, in France, which is the company that Chrysler now owns 25 percent, for the purchase of highly specialized machine tools in this country. The loan I think it was $10 million for the purchase of machine tools in this country. Mr. BROWN. Now, in addition to these loans to these foreign companies that are started partially with money in the host country and American money, in addition to that you also lend to exporters in this country when they sell overseas; is that right?

Mr. WAUGH. Yes, sir. We do not loan to exporters directly. We do buy paper from exporters on their sales overseas, which amounts to the same thing as far as you are concerned.

Mr. BROWN. In other words, what you are doing is discounting their receivables?

Mr. WAUGH. Yes, sir, in specific cases.

Mr. BROWN. That is a short-term operation?

Mr. WAUGH. Yes, sir.

Mr. BROWN. What percent of your total credits made available would that constitute?

Mr. WAUGH. A very modest percentage of the total as far as dollars and cents are concerned. We made $16 million last year, and the number of credits we made were 66 credits out of a total of 123 credits authorized, and 135 allocated. In other words, out of a total of 258 credits authorized and allocations under previous credits, 66 for a total of $16 million were for exporter credits.

Mr. BROWN. As I understand that, if the XYZ company, incorporated in the United States sold to an importer in Japan, $100,000 worth of coal, he could come to the Bank

Mr. WAUGH. Capital goods only for exporters.

Mr. BROWN. All right, let's say coal mining equipment.

Mr. WAUGH. Yes, sir.

Mr. BROWN. He could come to the Export-Import Bank and discount his $100,000 receivable at the Bank?

Mr. WAUGH. No, sir. Let me take it on this basis. For the purpose of easy identification, we call it a 20-20-60 plan. In other words, we have 144, I think it is, exporters who come to us and bring their financial statements and the names of as many of their customers as they can, and we authorize lines of credit for them in individual cases. The importer pays 20 percent down. The exporter-U.S. exporter carries 20 percent, and we discount without recourse, 60 percent. Roughly speaking, on a $100,000 transaction, it would be $20,000 down, 20 carried by the exporter, and we could discount $60,000.

Mr. BROWN. In other words, these short-term credits that you make available to exporters in this country are to export firms, as such, not to manufacturers?

Mr. WAUGH. Oh, no, they are mostly to manufacturers, sir. There are a few export concerns, as such, but mostly to manufacturers. Mr. BROWN. So it is a difference in terminology here. When you referred to the 144 exporters, who are they?

Mr. WAUGH. I say 144 U.S. firms doing business in the international field, for the most part export people, manufacturing people.