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Mr. Moscoso. No. I think that what we are trying to do in Bolivia is to assist a small country which has undertaken a series of reforms

Mr. PASSMAN. Was this not a country in which we were going to go all out to show what could be done?

Mr. STERNFELD. This was done by people who were in charge of the Latin American program prior to Mr. Moscoso's time in office. He is not aware of it, but I am.

Mr. PASSMAN. This was a kind of showcase, to show what could be done with the proper aid; is that right?

Mr. STERNFELD. The administration, during the Eisenhower administration, was quite concerned with making Bolivia an example of the ability of a country to have a social revolution-which is what this country had-and continue to exist and not go Communist.

SUCCESS OF AID PROGRAM

Mr. PASSMAN. It has cost us approximately $300 million. Has this program been as successful as we had hoped?

Mr. Moscoso. No, it hasn't been as successful as we had hoped.
Mr. PASSMAN. Has it been a failure?

Mr. Moscoso. I wouldn't call it a failure, no.

Mr. PASSMAN. Almost a failure?

Mr. Moscoso. No.

Mr. PASSMAN. Bordering on failure?

Mr. Moscoso. I think that we are now for the first time really embarking on a developmental program in Bolivia.

Mr. PASSMAN. But so far you could not say this program has been a success, even though it was an all-out effort?

Mr. Moscoso. Of course not.

Mr. FORD. Let me ask this question: Do you think there is a chance it is going to be successful?

Mr. Moscoso. I think it has a very good chance of becoming a success from the developmental point of view. I will say up until now it has proven itself from a political point of view. It has maintained a status as a democracy and has not gone Communist. I think the chances at one time were very great that Bolivia would go Communist.

MINERS STRIKE IN BOLIVIA

Mr. PASSMAN. Do you not imagine the Communists would give it back as soon as they took it when they find out what they are up against? How about the striking miners up in Bolivia right now? Mr. Moscoso. They are out on strike and this is testing

Mr. PASSMAN. It has been almost continuous since we started this aid program?

Mr. Moscoso. That's right, it is one of the problems we are facing. Mr. PASSMAN. The fact is that there has been very little progress made. We are getting by presently on faith that something can be developed in the future.

Mr. Moscoso. The cold fact is that these miners are Communist-led and the Government of Bolivia is making a strenuous effort to cope with that situation and as of now it is facing the problem head on. Mr. PASSMAN. This is the idea we have been dealing with-this is

the same trouble Bolivia has had ever since we went into their program. It has just been repeating itself?

Mr. Moscoso. I think that at this time the situation is probably

Mr. PASSMAN. Is the situation really worse than it was?

Mr. Moscoso. Well, the Government of Bolivia I believe is really making the kind of an effort that has to be made in order to deal with the situation.

Mr. PASSMAN. These people are again out on strike, closing down the mines?

Mr. Moscoso. Yes, sir.

Mr. PASSMAN. Is that the kind of thing that has kept this country almost in a condition of poverty for years?

Mr. Moscoso. No, there are other reasons for that.

Mr. PASSMAN. Is that the main reason?

Mr. Moscoso. Well, no. If you look back at the tremendous amount of wealth that was taken out of that country by the tin barons and never reinvested in the country, I would say that is one of the reasons.

Mr. PASSMAN. As Mr. Sternfeld says, this was supposed to be the showcase, to show what could be done with aid. What is the population of Bolivia?

Mr. Moscoso. Four million.

Mr. PASSMAN. We have put in $300 million and actually we do not have anything to show for it other than we just hope they may be embarking now upon a program that might be more successful.

STABILITY OF BOLIVIAN GOVERNMENT

Mr. Moscoso. Well, there is a democratic government.

Mr. FORD. When did that government take over? How long has it been in existence?

Mr. Moscoso. In 1952. They had elections again in 1956. Then again the President elected in 1952 was reelected in 1960 and will continue until 1964.

Mr. PASSMAN. Was there a government that came into being in

1952?

Mr. Moscoso. Yes, sir.

Mr. PASSMAN. And we have contributed to the 4 million people $300 million?

Mr. Moscoso. That's right.

Mr. PASSMAN. How do we know actually how the present elected officials feel about us, with this tremendous amount of aid going in. unless we sort of discuss their future without any aid commitments attached to it?

We are going to have to deal with this thing realistically.

Mr. Moscoso. With the assistance of this committee and your assistance, Mr. Chairman, we hope to be able to develop a truly developmental program.

Mr. PASSMAN. Giving $300 million to a little country this size, and taking what happened last week, would certainly indicate that the success they have had, the progress they have had, has been to the extent of getting 300 million American dollars. Now, if we deal

with the situation on that basis, maybe these people who are out on strike will someday come to their senses. I think we have to deal with this program realistically and I do not see any reason whatsoever to be very encouraged over Bolivia.

I am afraid there is not much in the showcase to show for the $300 million, other than we have a government in power that is on speaking terms with us.

Mr. FORD. Would the chairman yield?
Mr. PASSMAN. Yes; I yield.

BUDGETARY SUPPORT

Mr. FORD. How much of that $300 million has gone for direct budgetary support?

Mr. STERNFELD. It got to $22.8 million per year.

Mr. PASSMAN. What was the aggregate sum since 1952?
Mr. FORD. Give us a ball park figure.

Mr. STERNFELD. About $56 million.

DOMESTIC REVENUES

Mr. PASSMAN. Does our aid exceed the amount of money they collected for their budget? What are the domestic revenues accruing to the credit of Bolivia?

Mr. Moscoso. $40 million a year.

Mr. PASSMAN. Let us start in 1960. It was only $26 million, total domestic revenue.

How much aid did we give that year?

Mr. Moscoso. $24.3 million.

Mr. PASSMAN. How much was the budgetary support?

Mr. Moscoso. $16.7 million.

Mr. PASSMAN. Is that sum included in this $26 million?

Mr. Moscoso. No.

Mr. PASSMAN. Let us go to calendar year 1961. The revenues amounted to $34 million. How much aid did we give them that year! Mr. Moscoso. $21.7 million.

Mr. TENNANT. The total aid including military in 1961 was $30 million.

Mr. PASSMAN. How about budgetary support in 1962?

Mr. Moscoso. $19 million.

Mr. PASSMAN. Which is 50 percent of their total domestic revenues? Mr. Moscoso. That's right.

Mr. RHODES. This is really a great example of the failure of socialism. This is a socialist state.

Mr. Moscoso. As a matter of fact, Mr. Congressman, that is one of the lessons we are trying to pin down. One of the things we are working with the Bolivians is to regenerate some vitality in the private sector in Bolivia. Just recently we approved a loan for one of these industrial banks, Mr. Chairman, that you were speaking of in the case of northeast Brazil, in which we are trying to generate economic activity in the private sector by providing the private sector with development funds for industrial development.

WELFARE PROGRAM

Mr. PASSMAN. Do they have a welfare program in Bolivia similar to the welfare program in this country?

Mr. Moscoso. As a matter of fact, one of the problems with Bolivia is that they have a welfare program approved since the date of the revolution, way beyond the capacity of the economy to support it.

Mr. PASSMAN. When the miners go out on strike, are they eligible for the welfare benefits?

Mr. Moscoso. No. As a matter of fact, this is precisely what the miners are protesting about, because they have been cut off all the various benefits that they wanted to have.

Mr. PASSMAN. This is just an example of failure, so far as giving away our wealth is concerned, hoping we can create something satisfactory.

AID TO STATE-OWNED INDUSTRIES

Mr. RHODES. How much have we given in grants and in loans to the State-owned industries, the tin mines, and the railroads and all? You can furnish that for the record.

Mr. Moscoso. We can get you the information on that. For all the public corporations owned by the Government of Bolivia? Mr. RHODES. That's right.

(The information requested is as follows:)

TOTAL ASSISTANCE TO STATE-OWNED INDUSTRIES IN BOLIVIA BY AID AND PREDECESSOR AGENCIES SINCE 1952

The following assistance by type of funds is in the form of loans to the State-owned industries except as indicated:

[blocks in formation]

Bolivian-owned counterpart generated from U.S. supporting assistance grants and repayable by recipient industries to the counterpart fund.

Supporting assistance grant.

EFFECT OF CESSATION OF AID TO BOLIVIA

Mr. PASSMAN. Could this be an example where possibly aid is doing more harm than good? These people have to live. They have a socialistic government there and if you cut off this aid, those people would have to work or starve, would they not?

Mr. Moscoso. It is not a question of working, Mr. Chairman. I think what might happen is that we might have a government which no longer receives any support from us, trying to get support from almost anyone.

Mr. PASSMAN. Why do you not try to let them get it?

We shall now adjourn, gentlemen, until tomorrow afternoon.

WEDNESDAY, AUGUST 7, 1963.

Mr. PASSMAN. The committee will come to order.

GOLD BACKING OF U.S. DOLLAR

I shall read from an article captioned "Study Urged on Ending Gold Backing of Notes":

Senator Javits, Republican, of New York, is urging the Joint Senate-House Economic Committee to hold hearings on a proposal to remove the 25-percent gold reserve requirement for Federal Reserve notes * * *.

Federal Reserve notes are currency making up the bulk of the paper money in circulation. About $12 billion of the $15.6 billion in U.S. monetary gold is earmarked as backing for the notes under the 25 percent gold reserve requirement.

The remainder of the article will be inserted in the record. (The article follows:)

STUDY URGED ON ENDING GOLD BACKING OF NOTES

Senator Javits, Republican, of New York, is urging the Joint SenateHouse Economic Committee to hold hearings on a proposal to remove the 25percent gold reserve requirement for Federal Reserve notes.

In a letter to Senator Douglas, Democrat, of Illinois, the committee chairman, Senator Javits said some economists have advanced the proposal as one method of dealing with the balance-of-payments crisis.

Senator Javits, the ranking Republican on the committee, said an exploration of the views of Government, academic, and banking witnesses "would go a long way toward alleviating unjustified fears that might arise should the United States ever find it desirable or necessary to take the actions."

Federal Reserve notes are currency, making up the bulk of the paper money in circulation. About $12 billion of the $15.6 billion in U.S. monetary gold is earmarked as backing for the notes under the 25-percent gold reserve requirement.

The remainder of the gold is called the "free reserve." Foreign holders of dollars credits who demand gold are paid from the free reserve. Because more dollars have for years been going out of the country than have been coming back, the free reserve has been dwindling.

Senator Javits said it is argued by some economists that ending the 25percent gold requirement would make clear to the world that "the entire U.S. gold supply-not simply the dwindling 'free' reserve-stands behind our foreign dollar liabilities; and that there is much opinion among bankers, economists, and Government officials that the gold reserve requirement is an anachronism and should have been abandoned long ago."

He wrote Senator Douglas:

"While removal of the requirement would probably have no adverse domestic economic consequences, there is some question about the effect such a move might have on confidence in the dollar abroad.

"A considerable body of opinion holds that the requirement should not be lifted until substantial progress toward balance-of-payments equilibrium is achieved. Others believe that to wait until action becomes urgently necessary would be particularly damaging to confidence. The issue, therefore, seems to become one of determining the proper time of such action."

Mr. PASSMAN. Other nations have tried such a procedure and later they had to repudiate their public debts and issue new currency. I hope that we do not proceed with any such idea of withdrawing the gold support from our currency.

SURFEIT OF FUNDS HELD BY WORLD BANK

This is an article about the World Bank:

Pity the World Bank. It currently is suffering from a problem most of have never had to worry about: more money than it can easily spend

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