Summary of Sources and Application of Funds (in thousands of dollars) 419,343 1962 actual 1963 1964 estimate estimate 49,994 governments in order to provide capital for projects and programs contributing to the economic growth of lessdeveloped free countries. Under the Foreign Assistance Act of 1961, the Development Loan Fund corporation was abolished and its functions were transferred, effective November 3, 1961, to the New Agency for International Development. As of this date the fund had approved 217 loans and allocations and 3 guarantees for development assistance in 50 countries amounting to $2,008.5 million. Of this total, 203 loans and guarantee agreements had been signed totaling $1,887.7 million of which $632.9 million was actually 469,337 disbursed, leaving $1,254.8 million undisbursed loan and guarantee agreements still outstanding. In addition, the fund had $120.8 million unobligated funds outstanding to provide for approved but unsigned loans. The agreements were in such fields as power, irrigation, transportation, and industry which contribute to basic economic development. Approximately 24% of all loans were repayable in dollars and 76% in foreign currencies. A total of $2,000 million was appropriated for the fund, in addition to which receipts from operations totaling approximately $15.5 million were also available, including $5.8 million realized from foreign currency receipts sold to the U.S. Treasury for dollars. 51,725 58,051 64,588 336,338 400,000 407,000 The Development Loan Fund was established as a corporation by the Mutual Security Act of 1958 to extend Subsequent to November 3, 1961, the fund has reloans, credits, and guarantees to American or foreign in-mained open for the purpose of liquidating outstanding dividuals, businesses, financial institutions, or foreign obligations and approved but unsigned loans. As of Public enterprise funds-Continued LOAN AND GUARANTEE PROGRAMS- -Continued Development Loan Fund (Liquidation Account) -Continued June 30, 1962, the undisbursed loan agreements amounted to $1,033.1 million. It is estimated that this balance will be decreased to $677.2 million in 1963 and to $252.8 million in 1964. Loan repayments and interest collections are to be credited with the U.S. Treasury and are not available for lending under the liquidation account. Loan repayments and interest earned totaled $51.4 million in 1962 and are scheduled to be $58.1 million in 1963 and $64.6 million in 1964. In 1962, unobligated foreign currencies of $64.4 million (in dollar equivalents) was transferred to the U.S. Treasury. $27.7 million reserved for guarantees and fee collections of $0.1 million were transferred to the Foreign Investment Guarantee Fund. Revenue, Expense, and Retained Earnings (in thousands of dollars) End of year. Foreign currencies (in dollar equivalents): Retained earnings. ment to Treasury (loan repayments) -4,343 -4.774 2,000,023 1,907,736 1,880,099 1,851,025 22,994 27,626 19,225 47,751 49,870 52,121 Total Government equity. - - 2,019,248 1,955,487 1,929,969 1,903, 146 Analysis of Government Equity (in thousands of dollars) Foreign Investment Guarantee Fund [Investment guarantees: For expenses authorized by section 222(f), $30,000,000, to remain available until expended.] (Foreign Aid and Related Agencies Appropriation Act, 1963.) Program and Financing (in thousands of dollars) Operating costs, funded: 1962 actual 1963 1964 estimate estimate Program by activities: Specific risk and development loan fund: 660 9,000 9,000 38,555 -1,285 -38,555-47,555 95,300 1 Balances of selected resources are identified on the statement of financial condition. Summary of Sources and Application of Funds (in thousands of dollars) The investment guarantee program encourages and facilitates participation by U.S. businesses in developing the economies of the underdeveloped countries. There are three statutory types of investment guarantees. First, there are the specific risk guarantees which insure a U.S. investor against loss from inconvertibility of the local currency, from expropriation or confiscation, or from war, revolution or insurrection. Second, there are the extended risk guarantees through which up to 75% of an investment may be insured against loss from any causes other than the investor's own misconduct or normally insurable risks, such as fire and theft. Third, there is an extended risk guarantee available only for selected self-liquidating pilot housing projects in Latin America. Guarantees are available for investment in those countries whose governments have agreed with the Government of the United States to institute the investment guarantee program, and where there are suitable arrangements to protect the interests of the United States Government in connection with assets or claims acquired as a result of having provided relief under a guarantee. Substantial progress has been made in reaching these agreements with countries that had previously not participated, particularly in Latin America. This program is now instituted in 47 of the developing countries. A portion of the reserves available to discharge obligations of the U.S. under investment guarantees is obligated each time a guarantee is issued. The fractional reserve, initially authorized in 1956, has been lowered from 25% to 12% for specific risk guarantees and from 50% to 25% for extended risk guarantees following the suggestions of the Appropriations Committees made during the hearings on the Foreign Assistance and Related Agencies Appropriations Act, 1963. The 1962 amendments to the act placed the full faith and credit of the United States Government behind these guarantees. In light of this, the executive branch will propose substantive legislation this year to eliminate the practice of obligating a portion of the reserve each time a guarantee is issued. No additional appropriations are being requested to increase the size of the reserves for fiscal year 1964. As of November 1962, total reserves available for all authorized investment guarantees exceeded $265,000,000. The reserves are derived from (1) fee collections, (2) proceeds of notes accepted by the Secretary of the Treasury, (3) transfers of former appropriations to the Development Loan Fund obligated behind Development Loan Fund guarantees, (4) recovery of subrogated assets after payment of claims, and (5) fiscal year 1963 appropriations of $30 million. It is contemplated that since guarantees are obligations of the general credit of the United States, that amount will suffice to handle any claims that might reasonably be anticipated to mature before a supplemental appropriation could be obtained from the Congress to restore the liquidity of the program. Because of the recent and rapid increase in the use of investment guarantees, the following increases in the authority to issue investment guarantees are requested: (a) Specific risks. Inconvertibility, expropriation, war, revolution and insurrection $1.2 billion. This will allow outstanding specific risk guarantees to amount to $2.5 billion (the present such authority is $1.3 billion). (b) Extended risk.-For general projects, $120 million. This will allow $300 million in outstanding extended risks guarantees (the present such authority is $180 million). (c) Extended risk.-For Latin American housing projects, $90 million. This will allow $150 million in out LOAN AND GUARANTEE PROGRAMS-continued Foreign Investment Guarantee Fund-Continued standing housing guarantees (the present ceiling is $60 million). Operating costs and administration.-Several claims have been paid out of reserves. The more substantial of these was the amount of $650,000 paid pursuant to a Development Loan Fund all-risk guarantee. A lesser claim in the amount of $9,922 was paid pursuant to an inconvertibility guarantee for an investment in the Congo. A subsequent claim is being processed for that same investment, and until the foreign exchange position of the Congo improves, the claim can be anticipated to continue to recur. It should be pointed out in connection with the inconvertibility claim, that the Congo francs acquired by the U.S. pursuant to the investment guarantee have been used by the U.S. so that the net loss with respect to the payment of $9,922 was $1,823. It is anticipated that claims will increase, because investment guarantees since 1959 have been issued only for investments in the less developed countries. In 1962 $366.6 million in specific risk guarantees were issued. It is estimated that $440 million and $500 million will be issued in 1963 and 1964, respectively. It is estimated that extended risk guarantees will increase from $170 million in 1963 to $270 million in 1964. Administrative expenses to date have been paid from funds appropriated for the general administrative expenses of the economic assistance programs. Position With Respect to Issuing Authority (in thousands of dollars) Grand total guarantees outstanding Revenue, Expense, and Retained Earnings (in thousands of dollars) Specific risk and Development Loan Fund guarantees issued: 1,000,000 1,000,000 1,300,000 300,000 1,200,000 Revenue.. Expense 1 2,299 3,184 4,800 -660 178,056 198,556 219,056 2. Extended risk guarantee program: Authorized guarantee issuing authority. New authorization.... Expense 1 1 90,000 Proposed new authorization.. 90,000 180,000 90,000 120,000 Budget expenditures.. As an addition to established programs in the Agency for International Development for acquisition and utilization of excess personal property, section 608 of the Foreign Assistance Act of 1961 created a revolving fund to provide for more effective use by the Agency for International Development of U.S. Government-owned domestic and foreign excess property in foreign assistance programs by authorizing such property to be acquired and renovated in advance of specifically known requirements for country programs. This includes many types of excess property, such as tractors, construction and roadbuilding equipment, machinery, and machine tools, the general needs for which can be anticipated with a high degree of certainty. Costs include accessorial charges only, i.e., transportation, renovation, storage, packing, crating and handling, paid initially from a revolving fund established for the purpose in 1962 and subsequently charged to the recipient government or program. Proceeds from these charges are deposited to the credit of the revolving fund. The law limits the value of domestic excess property which may be held at any one time to $15 million in total original acquisition value. There is no legal limit with respect to the value of foreign excess property which may be held at any one time. No addition to the revolving fund is proposed. Seven domestic marshalling sites have been established, primary sites being located at Schenectady, N.Y.; Memphis, Tenn.; and Stockton, Calif. Four foreign marshalling sites are being established, two of which are to be located in Europe and two in the Far East. |