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Steel and Power Equipment Project - Industry- Belgium - Loan 0014 - P037358 -

Negotiations - Volume 1

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Project ID:

Dates:

Fonds:

1535518

P037358

10/17/1946 - 5/31/1948

Records of the Europe and Central Asia Regional Vice Presidency

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© International Bank for Reconstruction and Development / International Development Association or

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Al 16351REIURN TO R ORDS CNTER 193721B( e A1995-203 other #: 3 P3721 -

mPkIIL Steel and P o~er Equipment Project - industry - Belgium - Loan 0014 - P037358 -FIENegotiations - Volume 1_

DECLASSIFIEDTO RE-ORDER SPECIFY WITH RESTRICTIONSNo. 86163 Folder

PAT. USA No. 1484611 VBG ArchivesMADE IN U. S. A.

...

PEH BRUXELYES,LE 31 mai 1948.43,RUE DES COLONIES

PAR AVION.

J

Monsieur John M. PENTONInternational Bank for Reconstruction

and DevelopmentWASHINGTON 6,D.C.

(U.S. A.)

Cher Monsieur Penton,

J'ai reQu avec infiniment de plaisir votreaimable lettre du 26 mai, qui m'apporte de vos nouvelles. Jevous en remercie tres sincerement.

Je f~is parvenir au Docteur REMBERT et 9CMr. WATERSTONE, le livre sur l'Industrie Belge, dont je vous airemis un exemplaire avant votre d6part ,de Bruxelles. Je vousdemanderai, A cette occasion, de bien vouloir me rappeler au bonsouvenir de ces Messieurs.

J'ai 6t6 regulierement tenu au courant del'6volution des n6gociations a Washington, de l'op6ration quiinteresse au plus haut titre la soci6t6 Linalux et ce n'est passans une tres grande joie que j'avais appris, mercredi dernier,par un t6l6gramme de Mr. BERGER, adresse a la Banque Nationaleet a la S.N.C.I., que toutes les difficult6s avaient 6te sur-mont6es. Malheureusement, depuis lors, il semble que de nouvellesconditions pos6es creent une entrave A la conclusion immrndiatedes emprunts. Nous nous en sommes entretenus samedi avec Monsieurle Vice-President GARNIER et Mr. HOAR, que nous avons eu le plaisirde recevoir a Linalux.

A mon avis, il est extremement regrettableque l'oparation puisse etre mise en 6chec pour une simple questionde forme juridique, alors que tous s'accordent pour reconnaitrequ'aux points de vue technique, 6conomique, social, et mgme,politique, cette operation est int6ressante et opportune.

Au cours de votre s6 jour a Bruxelles, vousm'aviez laiss6 pressentir les difficult6s qui 6taient A vaincre.J'ai suffisamment, au cours de ce sajour, appracie votre manierede travailler et votre sens pratique, que pour ne pas savoir quevous avez 6t6 l'artisan principal de la r6ussite dont j'avais 6te

Monsieur John ] PENTON - le 31 mai 1948.

inform6 la semaine derniere. Aussi, c'est vous dire que je garde

la plus entiere confiance dans l'issue definitive de cette affaire.Elle est actuellement dans une impasse, mais j'ai la conviction

que vous l'en ferez sortir certainement.

Je conserve un trop bon souvenir de nos contacts ' Bruxelles

que pour ne pas souhaiter, comme vous, une nouvelle rencontre aussi

prochainement que possible.

Veuillez agraer, Cher Monsieur Penton, l'expression de mes

sentiments tres cordialement d6vouas.

Charles M. Mouton

C o 2 1 e

T 1Sgrammie requ le 28 mai 1948.

ATTENT2ION ERGER

coFInUDZU BA Mi DE BUXLLE GCCCZILL IGNO PROMESES CC

AVALIIEUS LTCP JN iRONt A B N7 S CLAJU6 RECLUTICRE T STTP

DEP0T PRC.TET LCI POUR KEGATIVE PLEDGE MN SUSPENS STOP IINISTRE ESTIE

DEVOIR REFLECHIR STOP f]ZGS6IBILITE ABCUTIR AVANT VCTRE DEPART

VI-N,-r4UTTE

EIAUX I0, Rue ForestiereATTORN Y AT THE~ COURT OF APAL fBruxelles

L y 28, 19 8

Dear Dir:

By your letter of 7-y 20, you havn lased me to

examine certain asects of BYLgien law 'ich arise in

connetion -ith A loan ich yo - re -bo t to -r.nt to

SoOiete Nationale d Credit n l'Industrie.

You have stoted that under the terms of the Articles

of gree7ent of your institution, -ten the Bank gr-nts a

loan to an orgnization other than one of its members, it

is nece rary for the memb-r -ithin hose territory this

organizetion is established, to give its guar-ntee forthat this loan be gurnnteed by the c ntrsl Bank orn'Ji lan oriother similar ognzt ol. o'the mme

country.

By ay of comparison, you have ouoted the nrovisions

of th loan ngreement Ated rch 25, 198 between theB00 and for-oracion de -omento Ae 1- Produccion and

Emrosa N-drnal de Electriciand, established in Chile:

on the one hand, a Swecin Igreem nt 'as "do betwean

h Bank *nd the Re ubli of Chile for the purpose of

grantig this guarantee, and on the other hand the

geenent urovides that the bons hich 411 be delivered

to the 7ank shll ver thr guarintee given by the

Republic of Chile endorsed thereon.

- 2 -

agreement mnde with the Republic provides that

the RepublIc wi7 give it % arntee "as primary obligor

-nd not ms surety ierely" and that the Dank iay invoke

the guarante -1thout bring rpquire to proceed prviouslY

against the hqrroer: thin gu rnntpe iS therrfore ihat the

rrench torninology charact ories n - joint undring,

wft cut the riht of icuseIon, takan by the guarantor

vie-0-viS the k

It similr uq-rantee Thich the DanO --oUl wish to

obtAIn frm tho Belgian -vrnment.

e main rue tion which rrises is to kno- wh-ther under

the eIspting Bela n i.ls the ov ,rnment of th Kingdoni of

BOZium culd be aut oried to evcute a vaId gusrantee

Agree et n1ht tho PM iOnta-iln undertakings of

milar ,harate~r or Ahther new la would be necessary.

Co n qently, you h..ve ased me:t

1. - #hether vnder i i -3w the elgian inister

of rinsn. could validly qxecute nith the Dank

a guarnntee agreement cont ining substantially

the - e terns an ,rovisions as set forth in

7chpeu 4 of th Chil an Ian Agreenft.

2. - rh thcr the in ster of Finanne would abo be

Authorized to endorse on the bonds th "selves

r 7 t-rnen subyt ntially in the terms of those

s t forth at -7e 4 of the Chilean Loan

Agre ement

.- hether, under xisting 7elgi n law a State

guArantee confers upon the Bank or the holders

- I .

of the bonds n direct right against the State.

The Coiete Ntionile de 7redit a 1'dustrie,

established in 1919), is a commercial oganization under

a Aecial l w which dearts in many ways froM the common

lw. This 1- ha b en amend s vera times. The

hCrter of the organization has, therefore, been altered,

and in its present form, it contains the follo-Ing ro-

visions regarding the g'uar tee of the Kingdom of lelgium:

"Article 10.

The Socite mmy issue bonds of - rturity of notmore than thirty years and 'hons de caissel of

turlty of five years or less. These issuesare subject to the authori-ation of the Ministor offinance, ho nust n.rov- 1hir terms.

Sen ount of the issues m; not ceed fifteentimes th- munt of the c- it- an resorve excetby s-eci l c I sion athoriz by oy-lDeoreeconsidered in the Counel of inistern."

"Article I1

The nt te 7u-r ntees, undar the conditions and sub-pot to the limittionA roviie for by law, theredemtion of the caital -nd the interest of thebonds and 'aonp de c-nise' issued unier the "rovisionsof the oreceding article.

In case the income from the o Pritions should not")ermit the redemotion of the 'bone de caisse' andbonds ai -ell s the fu1l ont of qaid interest,the Stat vill urnish the 2ociete 7ith the necessaryfunds to make up the difffrence...".

The leglity of the first aragrah of Art, 11 of the

Qhrter results from Art. 4 of the Royal Decree of October

of October 21, 1934, proviin tht "the State also

guarantees ithin the limits provided by paragraph 1 of

Art. 1 of the Royal Decree 7o, 3 of August 22, 1934,

the r.enrtion of prncipal and te aymnt of interest

of the bonds and "bon de nAiss& issued or to be issued

by the Societe N tionale de Credit a llIndustrie our-

nt to the )rovisions of Art. 1 and rt. 11 of the

Chorter". This decree has in turn been issued vursuant

to th law of July ni, 19n, h <onf-r special po-ers

on the ing for the prlose o econ mic an fin ncia1

reconstruction -nd the deoreasn of ublic exi -iturm.

The second -emrao-h of Art. 11 of the harter has

ben tneen from the text of Art. 2 of th- 1aw of 1 rmh

16, 1919, hich rovi0s tVt, for th -yment of interest

on bonds, the 0te 7oudr furnish the Thciete with the

necesssry fund. to make up the Iffernc. It doem not

1enm tha- there exists 1-7 -rovi ionj ich hs

form ily extended this - hno to the rri-m-tion of prin-

ciAl, but ersonily thin tht th-t is of no iinortance

at R11.

The guarantee in ostion is "Ourety".

Without ouestion, one rmot cy that the ,ingdom

of Belgium is, in reonect of holders of bonds issued by

the Societe, "- nrinry olinor an! not osurety oerely".Ihat would be, under 7e7ian ixw, the effect of this

gunrantee rhen and if the 7ank would invoke it?

The agreement nay b coqns!er d 7 a surpty agreemnt,i.e. an -greemrnt y which -r-on binds hisnelf Ath

10thecredito to prform the obligationc of

another nerson, to -it, the rinci-l debtor, if the

latter does not hiMself ,Orform. e tqrm used by

Art. 14 of th RoyaJ. Decree of October 31, 193L do not

perrit any other initerpretation: the creditor may claim

payrent from the surety an nturity, heniever the prtn-

Ci a d ebtor has not i, but without being required to

prooeed first eagnt the principa I ebtor. This oint

1e ~ell settled in Belgi'n rd Prench law.

he 5Urety, in thie ea th ngdom of Ielgira, w4l

only b. rele sed from its obligtion. efter the bondholders

have been paid.

You h vs wond re whether th e is r 11l o, beo use

w rmgra h 2 of trt. 1' trovi .e, that "'the Staete will

ftuxnish the Soci te Tith the necese rj funds to niaU tv

th differenoc'": ur4iibtedly, If' therc oere rio oth r text

re ting to the. o 1igetion of +;he St.te it might beeon id r t 't the t to hr inito it elf to rn nder -

tking vIsa-vi the ociete to di-noe to erId xoctet

certin mo nt in c s t ?oe houl rind itself in

.ffcUlties. Tzt such on interaretettion ould disregard

ths first -ragrvh of Art. 11 ich orovi es that the

State guarantees the redettioni of the principal. Nor

~otd such intnr'r t tion be ,4ni.tent pth the terms of

rt., of th 1 of 191a ich, hue only untionng interest,

rotidos th t the Ctat t r ritee th ayment theorof vP-

h immeditiy fter da th rovision

hioh hs beome ra rarh '? or Art. 11. If this -rovisiont

had e. mni othr than to be ImCle form of execution,

it ,ould mor over bocone nes. ry to contest the legality

of its insertion in Art. 11 of the Charter. S!ch Charter

- 6 -

my not be contrary to the 7a, no- constitOtVs in reAlity

a ecrdination of the varioue succ sive >awe which have

regulated the rbject-.atter. , the dOare of

Qctbor 31, 19?, which he e rovided the guerantee of the

tate 'or th red ition of o nt ton

the 3tipulation rur unt to h "the State ill urnieh

the Societe wth the nec e ry frvl. to Ie Un te dIf.

Con eqnently, the obligntin _f too itate -I to dis-

charge, if need b, Wnt " of th %oci t , the obigations

undertpken by it via-n-vis the bonhoJler.n "or Proctical

reasonn, anc in orer to nvoid thyt the holer vus t Aress

the elve to tWo debtor, it f arovided that the State

w11 furnih th soc te It" the ncee ry C nds to repaythe bondholl-i , bit tO 7t-te '1 be dieqred nly

fter the bondholdere h-ve received coplete satei ction.

The Tini t r of inAnrce ha -o 1owr to me iny commit-

rnent which iould go beyond -hIt is crmitted by exteting

law.Ut preciely, the aisin Ia -ee ri in my o inion 'to

aeenre the sank all the gunrate e whch th IBank ha a

rigzht to demmn'i.

of couree, it Is not noeebLe to renroduce textually

the oroviions o the Agreement sith ?rmento nd the Whileen

Wepublic, but tt mut b notied IiediAteP y tht if

ecial reem nt -a nece ary to gve to the cOMMitmntAS

of omento the Qur ty of the Cilea n Wornimnt, thereoon for thrt, r rntly, ha beun thVt in Chile there

was no are-existing and ermanent lew establishing this

~U ante.

In order to et the reuet of the 13nk ai mob

es pOSBible without new egi itlv e tion, I take the

ibbrty to make the follo ing uggeetions to you:

1 - Text of the on (form of guar ntea)

As you he ben info rd, the inisterial lecree

of December 17, 194, Ahich r gulates the methods of

carrying out the Royal Deoree of October 31, 193 , the

execution of which ia entru tel to th Mister of

inane pr nt to Art. 1i of sai Deree, pre cribes

o the vi of th Tr sury houl be -ffixed on the

bonds and specifies the Lore acordin to whch this ~viea

wil be eet blished.

Ho over, a- the bonds are destined. to be in circula-

tion outsld~e of Blgian territory, sugest that you

a.k iociete Ntion de Credit 1'Industrie to

re>roduce in additian the uL A t ext of the provisione

establiehing the State's guarantee, to Ait Art. 2 of the

1w of Maroh 16, 1919 nd the text of Art. 4, paragrah

2, of the oyal Jecree o. 27 of October 3, 1934.

2. Schedule h

Angreent minht b e bet-e n the Bank, the

>4lgian Th rnment, r. relented by the inister of

Finance, and Societe tionale de Credit a 1'Zndustrie,

rovi ing that at vatuity, if the Societe h s not

redee:med the prLncial, the Bank iould release the

Belgi Government from its oblig tion to furnish the

ociete with the necessary funds to that effect and

8 -

'oul uthor1 th7 lg ov rnment to A directlY

to th n te amounts due, the Societe agreeing on

the other h nd to waiv i qul1Y its right to demA d the

othe han A, le hat

ipplintion of Art. 11, -r" r 13 f'ts-"rtr

Va-y truly youra,

(signe4) P. AnsiUX

r.Cester A. r cLsin

Iner-I CounseThOtnntion-I t n for

RconstructiOln pd DeveOipmEntnehigto 6,D.C.

10, Rue Forestiere

vocet a l~a aour d'Aoe2. Bruxellee

Le ~8 met l948

ret c.I.

Cher Nonsieur,

r votre lettre du 20 mat, vous avez bien voulu meclemanda d'examiner certaines iuestion de droit belgnesut se -osnt a l'occasion d'un vret rue vous vous a re-

tez a consentir a la Societe Wttonale de Credit a l'In-cltrie.

VOUS m'ave. expose qu' o: t re oes Statuts do votreinstitution, lors"u1 T3 n'ue ait n re a un orgenismeautre que l'un de ses membres, II acovient cue le membre.

ur l o territoire d 1 sieg ct org nisme estetsbli, donne sa garantie au rret ou - uc ce "rot soi tara nti. Dar la t3'nque centrale u autre org nisme semblablei >aye membre.

A titre d e com)artison vous .navez cite les dis-0ositions du oontrt de ret quo la Bnque consenti le

25 mors 18 e le Car oracion do oento do la Produccionn pres Noclon I le Telectricide t, oabie ou C'hili:

d'une part, unr convention 7.rticuliere est intervenueentre M a n ue et li N (i'n < hilt n at toi r ob-

je 'oc'-roi de cette garatic, d'autre vrt conv-ntioniarevoit me lee ob11gction, cut serout rexnimee a l- T- nrue~orteront mention do la g erentie rionnee par la Renublie'uedu Chili.

La. conventica crclcue "vec la Rerublique nrevotque celle-ci donnora sa garsntie "as nrtmary obligor andnot as surety r y t 'u 1 . n u. ourrc fire avela I, garantie sans devoir gir nu nrelable contre l'em-runteur: cete er nie est Co c cc lie la terminologie

fr nte iie f li ie 'ngement solid ire, sans beneficed discussion, >Ti8 a l'egard de l Tnrue par le garant.

C'eat une gar ntie du me orire cue la Banquesouhaitorait obtenir do 1'Ptet blm .

La qtuestion esuelnt ele Ut os est de savoirei 1 lgislation exiante en i t ire -ermet iu gouver-

nement do nrenci valablement vis-a-vig de la Eeanue deengaements ay-nt erel e orte o i .vtine lot nzrelle

serait necessire.

- 2 .

fn consceuence, VOuS avez bien yoult me demander:

10- mi le 7inistre V-s Pn-n- rc nt a e 4i li e e n~r orrr it conclure leg 1evnt avec a anque unenv o-ntion Q garantie analo-Oue a cll, e i Vl 1 et 0- i cn hedule 4 ducontrat de ret chilien-

20- Ai le Finintre des 71ne crl nmm ne20 r i u ni t ,es ~' nces .0 rr it de meie inae-rer 5ur Ws~ co Atiog ple-munoes le texte d'unegap ige 0ntae Ins Aq tarva as ogues a ceuxui LILUat a M ige h" de l, conventlon chilienne

30 si, nas ie c Are de Va' o- n axictantoeli., ti rni 2 i.ontexista>t v ueTaigona m -rni 1 Qq conferc a 11 nn uou qux ort rs Q'ob io-Wav un rcoure A r a ncntl' tAt.

L %ociete - tion-le d Or t "I'muntri" renao OIr out "ne nocito 0 . nrc-A a wise P un regimer-Pticulir -u 1 roge an de nobrex oints -Y roit0 1 04n. e reg im p ete wno i ie - iA sinur re pise s :arVcois succoiv a. Les attutA suciete ant et-n conse teno rovonics et, T. 7ur at scteTl t ADeAt!e nnt 1 an iO itio YA nten r - tiver o la-

wrte cle 1.Lt o cn e te ute a m .t r-o bi g9 r r m bour a. ble aQRA ttne erio e trnt -n. 4 1us et des bons deo inse N unn dure 771 on z cinq ans. Ceecissions sont ubord nnes ' utcristion dA inistrede Winncn uri a 7 V c Qonditinns .

Le montynt de ces em!.s1cnv -- ao Asq r nin-e fols In -- fu c vitI 'p. reserves, sauf eroga-Tion Putorl- or arrte-roy'i 1.clire en Conneil desiniatres.

MET Z =t t, 1Ons Ao limitea r:PUTE le A 1 in rrmlourament dA oa-tal t f i %nt Ac trct es obligations et des0oqs Q d~sw --n en vertu e 1 rticle nrecedent.

ns le c a ou le roduit des oer-tions ne -rmet-tr-il aq i ron a in. vnt onde ACi Se et ooliga.Mono Mini rpn e alent Integrol desdits interetn,r1, tr t ffournir r acit e' somnes neceegqires ,ourarfore lA Afr'crnce.. .10

" 3 ,.

L. lo it u remier linen le Yart. 11 des sta-u 8rewulte de !fart. 4 e l'arrete royal du 31 octobreM 9 i 'o ue "'- .t tnit asni d no I n 1M-to fix1en Wa l n , - 'Art. ler de P'arretero1 i u 2? mut7, rmoirsemnt Ot I 9 ielent Aes int:,rcts I , ) Vow. cona de caise emisou -'vttre yr l- hociete ation-le do Credit a 'Mn-.uetrio en vertu dos art 10 Ot 12 de atutS". etrrate ret lui n rig on oxecu'tion ne a lot d u 33]all!t -7 if?! ~t tr nt au toi de 'ouvoirs n -ecilux envue 1u rearessemnt economine ot finnanier et Ae'abnemot 'lee c iarges bol'Ouen.

U8 cod Qii est ro-rin texte de 1-rt - '7a 10l du 16 mrr TO?, -m! - T up, our le -iements inteetion - ligatom , 1'That 'ournirait o 1, ,odie~te I ommegnees8nirs -ow -ire in ifferce. I1Oe Uil exiate une K.o ition :rleg y itt forT&fmri. Mttn mo -1ity 'exeettion AU r- oqr-.e:,e, c t*, i Jo 2:fl' croonneIlement o-ne colaauo e i orta.nc e.

La 7ir- v dont ' git ot une Surete,

n e t urcwent re " Itt belge soitlea norkurs d'oblig'tionq emines ar la socle-te rimry oblIeor and not ? urpty merely".

U-1- cyr'4ont, en droit im, le erets d cotteY irtie -e jour cu il y -r-it fait a -el mr Q 7nnue?

1- contrmt eut etro onfidere co e un cqutionnement1--t'-irr no w-rm r - -nn-e orno e e en-Z" envers .e ronoIer n zIz-Ta a une obligntionrte r une ut or n, vor le debiteur prin-1c iOl.ci ily wtl? a elle-meme. Les termeay -r Tt.!e Vrte rayyl du 31 octobre 1934P ermoettent s autre intr r t tion: Ie creancier eutgoe Torn r- n-r 7 ciernwet D>. 1cautiom dea l'echeane,

Mi Tl'nsmnt ou lo debiteur rinial na nas apyes 1is;ns qu'll voit neceniro e orouivre nu nreaLable cewbtor ori iQ 17 -Ot co conptmnt en droit belgeetfrangaio,

La cnUti o'ent.-E-ire i' tot bel-, ne sort li-Pe do son obligation me lors'ue les Aorteuri d'obliga..tone uront "t- r-ocbore- e.

70"s vos dende 87 0' ' .,t rPAllTmot aininimorn i- W-lei I do Wart. II 'revoit -"Iie "l tn-iWra -22oci 1 ct'on sen' necessirv nour nrtaire

ine q do'te, l .'y vait as 'lautretreltiff engneemant de l'etat, 'oorrait-on consi-nrr et bmorne - 'enmger vis-a-vis de a

4 .

a oo d fi u ': r c rt 3 ne w nce a u at n o u elle er nlite n del.l n l ou tl a .ort 1 tn r t t on er t bh trac. --r-n att 1. re. boiu rnt -tW.~leo artt pe-ve 1 a g0 C Oa0 n e j e -~. ' c t 2 d e a l o tort 19 9 tt er ti t e e d e interet a,

iestrt1 e ?i d . t I 3 e t f' rr u i v d t L n e au t r e n o r --tee'uill uri es r &cit ex e uti n n d ev t

l'artl1 r toutest~ Th son it trton an

Snt . .res tat e 'euvent en offe' etretcon r re i ta e uot t n realite une co ord tnati oer e di p e t e 1 l u c o rt reg le 1a m a-tr i oeo

t i r ie, Od , I ' t r rt d- ' i n t -t u e l ag ir n s ue uivc r en r o r e t (U c ite1 ne rero..ociete ' r ut fournira a 2.~oct Le~o~ yes: 4re ,a re la differ noe.,.,,

Ctt onc a doluitter,on uleI ea engagere7ta

' ' r r e li cir G~iw or ra . Pour dee rai...s 'on e d s rdr nr t J u t e fr it ux orteurs di r S a 1 r e ti d& teD 1 ~ e l'Etat four-0citr 1 a o , r our ren1bourser ieo rtnu r e ~ a i ~ a i e ~ n ~ t f re le s P o rte u r a c ue

Le~ ~~~ ~~~~ in r e 1 c c ~ r tt t C.

L::" n :)e-rqp efl in ct xtt~t e n.

'A -i i u r vo 7n

-cr n -IPnu otela~nrnte uel a ndri

re > ires "uerto, U ' ct n e b t-~ r~ n2t e :to

textuelle lee n sto chonrrtae e Pdento et n

a chi' 0 le Fonne

un c nt a spcl mi U 1 > u a s t observer re 'Uti c o n e m ont a p c e o e a ' r r c o n e r e r a u x e n gy e11ene t T h z nt t ~'e ""I ~ ~ t ' o r exit 'nte

an o in bl > Ire e Tnue an a inmoure

c u e v u~ e a v n z e t c n fin eri& d 17 ecej 3 ri' a xe, ji ontr - 'j -.n a litte d'aa tl a..

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d~e l a Id d~u 16 :nars I9I~ e> U: t1:te dLe l'art, LL aliena 2l'arrete roya:l no 27 d~u '31 octobre 1S0h.

Un accor. vourrrit iatervenir ervtre La 3navue, 1 'tatbelge re 'resente Mr le lMinistre e Fininceo et 12 ~ocieteNationale dec Credit a I'Industrie, dissoeant aiu' 1'echeenoe,si 1a oci te r'a 986s reinboarse le ,r ital, 1> niuodisense 1' stat e brnir at 1? 2oiete lee fond neces-

saires a cot effet it atorse~ 1't a liii vrser i4rcc~ternt lees orrnes '1ueg La Sciete mr'oent d'eutre ~irtson ceord t our renoac r Oge wL'a a d 'emsrizer 1' epvli' --

tion do l'srt, 1I, Ktinee 2 e asv stetuts.

Vetillez croirc, oher l on eur, a I'aeeursnce 3eflee sentir:.ca tree distingnres.

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shingon 6.I'.r

BELGIUM

Notes of eeting held in Mr. Penton'sOffice on May 28, 1948, at 11:30 a.m.

Belgian Loan Negotiations - Seventh Meeting

Present:

Mr. Penton14. Berger, Societe Nationale de Credit a l'Industrie (WCI)Yr. Aldevereld, Treasurer's Department1,r. Broches, Legal DepartmentMr. Fajans, Loan Department

Mr. Penton opened the meeting and asked Mr. Aldewereld to tell

M. Berger what was the attitude of the Treasurer's Department with regard

to prospective interest rates. Mr. Aldewereld said that although the Bank

could give no commitment of any kind at the present moment, M. Berger might

take as an indication the following rates: 10-year loan, 2 3/14; 15-year

loan, 3 1/4%; 20-year loan, 3 1/2/. Obviously, in each case the Bank's com-

mission of l5 would have to be added.

Mr. Penton stressed once more that no final decision could be

taken until the loan contract was about to be signed and that these rates

should be considered as no more than a rough indication.

14. Berger then said that the loan agreement will be signed in

Washington by the Belgian Ambassador. Papers and drafts exchanged between

the Bank and the SFCI will be transmitted through 1. Basyn. All points re-

quiring further clarification will be negotiated between 1r. Penton and M.

de Selliers.

Yr. Penton briefly reviewed all questions on which agreement has

been achieved in the course of the negotiations. Among them he mentioned

the amounts and the duration of loans to the three subsidiary borrowers,

the pledge of the promissory notes issued by them, the problem of end-use

supervision, and the question of foreign currencies other than dollars

required by Linalux. he said that the only problems still unsettled appeared

to be that of the State guarantee, on which the Bank is expecting the opinion

of 1. Ansiaux within the next few days, and that of the negative covenant of

the Belgian Government; the question of the assignment of contract will pre-

sumably be clarified either before or very soon after E. Bergerts departure.

Mr. Broches said that he will give further consideration to the

form of guarantees assumed by Banque de Bruxelles, Cofinindus and Cockerill

for obligations of subsidiary borrowers. He stressed that contracts concluded

between SNCI and the subsidiary borrowers will be attached to the loan agree-

ment signed by the Bank and the SNCI.

Mr. Penton said that the loan agreement vill provide for the possible

use by the Bank of currencies other than dollars for purchases outside the

U.S.A.

It was then agreed that the Legal Department would draft the articles

of the loan agreement and mail them to M. Berger in Brussels in sections as and

when the drafts are completed. On the other hand, the Bank will await drafts

of agreements to be concluded between the S!,CI and the subsidiary borrowers

which 1. Berger has agreed to send to the Bank.

JFajans/pnnMay 28, 1948

Copies to: Mr. Penton - 21. Berger - 2Mr. AldewereldMr. BrochesYr. Burlandkr. Waterston

BELGIUMh

Notes of eeting held in hr. Penton'sOffice on May 26, 1948, at 4:30 p.m.

Belgian Loan Negotiations - Sixth eeting

Present:

Mr. PentonM. Berger, Societe Nationale de Credit a l'Industrie (SNCI)

Mr. Aldewereld, Treasurer's DepartmentMr. Broches, Legal DepartmentKr. Fajans, Loan Department

The following problems were under discussion:

1. The new proposal of SNCI and the Bank's counterproposition;

2. The modalities of endorsement and pledging of the promissory

notes;

3. End-use supervision.

Mr. Penton opened the meeting with reference to a telegram received

by M. Berger the day before from Brussels. He said that the Bank could not

agree to the Belgian proposal and explained the new approach which the Bank

would be ready to take. The Legal Department would continue with the draft-

ing of the loan agreement which would contain an additional clause to the

effect that the agreement would come into force only upon the receipt by the

Bank of a valid and binding negative pledge covenant from the Belgian Govern-

ment. The agreement would then be signed. The SNCI would advance to the

subsidiary borrowers sums required for down payments on orders placed and

the National Bank of Belgium would put at their disposal the equivalent in

foreign exchange. At the same time the loan agreement would provide that

immediately upon its coming into effect the Bank will reimburse SNCI in

dollars for any disbursements made in accordance with the loan agreement.

Mr. Penton's proposition was not agreeable to X. Berger. In view

of the vacation lasting from July to September he would not expect the

-2-

Parliament to act promptly on the negative pledge matter. The National Bank

of Belgium would be reluctant to place dollars at the disposal of the sub-

sidiary borrowers and the SNCI itself could only lend to them by cutting down

credit requirements of other industries. Only after Yr. Penton's stand had

been reinforced by the representations of the other members of the Bank's

staff present,did II. Berger agree to telegraph the Bank's proposal to Brussels

in the form drafted by Mr. Broches at the meeting.

Mr. Broches took up the question of endorsement and pledging of the

promissory notes and stressed that the Bank wants to be secured on the under-

lying obligations as prior creditor to the exclusion of all other creditors.

M. Berger explained that according to Belgian law the Bank would be

fully protected if a "lettre de gage" were executed and the promissory notes

bearing in blanco endorsement of the SNCI would be deposited in the Bank's

account at the National Bank of Belgium. After 1r. Broches stated that if

this would have the desired effect under the Belgian law, it would be satis-

factory to the Bank, h. Berger agreed to cable to Brussels the Bank's desire

to have a full pledge of the underlying obligations.A t the request of Mr.

Penton, Mr. Aldewereld described in detail to 11. Berger the procedures applied

by the Bank with regard to disbursement of loan proceeds, documentary evidence,

and on-the-spot supervision. M. Berger accepted all these procedures as

entirely clear to him and acceptable to SNCI.

The question of interest on the three parts of the loan was then

briefly mentioned. Messrs. Penton and Aldewereld agreed that they would take

this matter up within the Bank and would do their best to supply X. Berger

with some information the next day.

JFajans/pnn Kay 28, 1948

Copies to: Mr. Penton - 2N. Berger - 2Kr. Aldewereld

r. BrochesMr. BurlandMr. Waterston

For Belgian File

Provisions reg~ardinz closing dates

Dutch Loan

Agreement signed August 7, 1947

Effective Date: date of ratification

Closing Date: March 31, 1948, or such other

date as the Bank and the

borrower shall agree to as the

closing date.

Danish Loan

Agreement signed August 22, 1947

Effective Date: date of ratification

Closing Date: December 31, 1948, or such other

date as the Bank and the borrower

shall agree to as the closing date.

C 0 D i e

T616gramme requ le 26 mai 1948.

ATTENTION LIGh

INTUSTRELU 2IISTENT POUR QU' OPIPTION SIT COLMU DEFIKITIVMh NT DES

QUR PCSIELL 6TCP SONT DELI-M DE PA4SER LIUPZ CCLLL ES

VAI0EPUTTE

No. 26

INTERNATION.. i>ANK FOR RECONSTRUCTION ANi AVELOPMENT

INCOMING WIRERC4 LC

Date of Wire MAY 26, 1948

To ALEA* I71?N'ATIONAL BANK, WABHINGTON, D.C.

From BIRXELLES

TEXT: WILL SEND OPINION FRIDAY.

PIERRE ANSIAUX

MAY 26TH

ROUTING:ACTION copy to MR. MCLilN

INFORMATION copy to \

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V ROUTING SL*gDate

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FOR-Action Initialing

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Filing Noting and Returning

Full Report Recommendation

Information Signature

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FROM-

orrict scovfccl 18-12

f

ILE COP 1

May 25, 1918

My dear M. ferger:

This is just to confirm what I told you duringour conversation this afternoon; nalely, that T have beenauthorized by the Bank to state that, should the proposedloan to Linalux be -ranted, the Benk will be willing to fin-ance the whole of the foreign exchange costs of the project,i.e., Y,3h5,000, without regard to the currency in whichthe expenditure is made.

Yourg sincerely#

John 1. Penton

Y. Pi rre Bergerat the International -n k

Record Removal Notice &. Reord, nme

File Title Barcode No.Steel and Power Equipment Project - Industry - Belgium - Loan 0014 - P037358 - Negotiations -Volume 1 1535518

Document Date Document Type

25 May, 1948 Memorandum

Correspondents / ParticipantsTo: Mr. A. BrochesFrom: John M. Penton

Subject / TitleBelgian Loan Negotiations Negative Pledge

Exception(s)Attorney-Client Privilege

Additional Comments

The item(s) identified above has/have beenremoved in accordance with The World BankPolicy on Access to Information or otherdisclosure policies of the World Bank Group.

Withdrawn by Date

Vlada Alekankina October 26, 2011

Archives 01 (March 2017)

C o D i e

T461gramme requ le 25 mai 1948.

ATTETIOK hERGER

POII TROIS VAM1RCK SUGGERE QUE kIISTRE INANCES SIGiE LE I GATIVE PLEDGE SI

BA~nUE ITERATICNALE EXIGE CELA AMSOLUJi- STOP L114MTRE PRENDRAIT SiILTA-

I i T 2NGGiDE DEPOSER PRCJET DE LOI RATIFIIAT EGlATIVE PLEDGE STOP

SI CETTE LOI ' EST PAS VOTEE AVT T EJT2 ZT UN D1C l~1U LE PRFET SRAIT

Thi. BOURBLE L.L T STOP CETT SOLUTICN PlY TRAIT DE REALIER

CPlRATION SL- NTVEAlTX rELAM

VAMEPUTTE

INTERNATIOP BANK FOR RECONSTRUCTION AN )EVELOPMENT

OFFICE MEMORANDUM

TO: Mr. E. Burland DATE: May 25, 1948

FROM: J. M. Penton

SUBJECT: Belgium

1. The Belgians, as you know, are raising the question of

interest rates on the loan now under negotiation. Although it

is the Bank's policy to fix interest rates at the very end of

negotiations, nevertheless, M. Berger is leaving Washington on

Friday and the Yinister of Finance has expressed the desire to

have some indication as to what these rates are likely to be. Al-

though we can obviously give no firm cormitment at this stage, I

think, nevertheless, that it is a reasonable request that they should

be told provisionally what we think we shall have to charge.

2. I believe that Mr. Dunstan is away from his New York Of-

fice, but I suppose that the Treasurer should have something to

say on the subject. May I ask you to take this up urgently with

the appropriate Departments of the Bank so that we may be in a

position to give some reply, however tentative, before M. Berger

70es,

/QAt

I &7

C o p y

Cable received lay 24, 1948.

ATTENTION 3EG1R

POINT 1 DE VOTRE LETTRE DU TREIM.7 LRX 1 T DE YIOM=RDR PRLPMERT CONAULTATION

DAIs S S IIQUE DES ION TM GRLdE DE DIUIT STOP ENVOI LUNDI STOP

POINT 2 CONFIR E YON TELEGRAiE DU VINGT ED . . LC ET REALISAME ILAIS

A ECARTR SI P SI3LE STOP $UIVANT PRO.JET ACTUL OUGREE YE PRED PAS

2NG~ 2T NI HYPOTHLQJR NI _LIENE

V AnDEPUTTE

0 p i e

Cable received lay 24, 1948.

ATTZlr ION BERGER

VTOUS CQNNAITSEZ PAR TMIELGR.; D VAURCK P06TION GCUVEIC1L.,l' PCUR

XEGATIE PLEDGE

.. .... - :,VANPTTE

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BELGIUM

Notes of Meeting held in M. Berger's Officeon May 24, 1948, at 3:30 p.m.

Belgian Loan Negotiations - Fifth Meeting

Present:

Mr. Penton14. Berger, Societe Nationale de Credit a ltIndustrie (SNCI)Mr. Burland, Loan DepartmentMr. Broches, Legal DepartmentMr. Waterston, Economic DepartmentMr. Fajans, Loan Department

The main problems considered were the following:

1. The Government guarantee;

2.. Covenants and guarantees to be granted by the beneficiary

companies (hereinafter called subsidiary borrowers) to SNCI;

3. The endorsement and deposit of the promissory notes;

4. The establishment of a direct relationship between the Bank

and the subsidiary borrowers.

After the meeting was opened by Mr. Penton, M. Berger pointed out

that he does not expect the loan agreement to be drafted in its final form

prior to his departure at the end of the week. However, he would like to be

in accord with the Bank on as many salient features of the agreement as

possible.

Mr. Penton said that his instructions at present are to consider

the negative pledge of the Belgian Government a conditio sine qua non of the

agreement. N. Berger replied that he is going to make this clear to his

Government in a cable which he will dispatch immediately.

M. Berger then explained the conditions which the SNCI proposes to

impose on the subsidiary borrowers. According to his information the SNCI

will demand from Ferblatil the negative pledge clause for the period of the

duration of the loan and the guarahtee (caution solidaire) of Cockerill, from

-2.

Linalux the negative pledge clause, from Ougree Marihaye the guarantee

(caution solidaire) of Banque de Bruxelles (50% of total amount of the loan)

and of Cofinindus (50% of total amount of the loan). Replying to Mr. Broches'

question, M. Berger described further the cooperative structure of Linalux.

He said that all customers of Linalux are at the same time members of this

cooperative society and have agreed to buy from it a fixed minimum of power

annually for a period of 30 years. The price for power supplied is being

calculated at the end of each year and covers all costs and administrative

expenses, including, of course, interest on and redemption of outstanding

indebtedness. The members of the Linalux being all first-rate industrial

concerns, the SNOI considers the obligation of Linalux safe enough under the

SNCI charter and the Belgian law, and does not, therefore, require an addi-

tional guarantee of a third party.

Mr. Penton said that in order to make the provisions of all three

loans consistent he would prefer to obtain from Ougree Marihaye the negative

pledge clause. M. Berger promised to cable Brussels to this effect.

11. Berger stressed once again the difficulties arising out of the

direct endorsement by SNCI to the order of the Bank of the promissory notes

issued by the subsidiary borrowers, and put forward two alternative sugges-

tions with regard to the terms of their deposit with the National Bank of

Belgium. One would be to stipulate that the National Bank will only return

the promissory notes to SNCI with the agreement of the Bank, the other would

be to give the National Bank an irrevocable mandate to cash the promissory

notes at maturity and to remit the proceeds to the Bank. It was decided

that Mr. Broches with Messrs. Penton and Burland will give further consider-

ation to this matter.

Mr. Broches explained that the main desire of the Bank is to estab-

lish some kind of direct relationship between itself and the subsidiary

-3-

borrowers. A discussion ensued as to proper means of linking the Bank to

the subsidiary borrowers. It was finally suggested by Mr. Broches that all

the covenants which the Bank desires to obtain would appear both in the

agreements between the Bank and SXCI and in the agreements concluded by the

latter with the subsidiary borrowers, and that the subsidiary agreements

would be submitted for advance approval of the Bank. If this form could be

adopted, the Bank wuld presumably be able to relax its attitude with regard

to the modalities of endorsement and pledging of the promissory notes. M.

Berger said that Mr. Brochest suggestions appeared to him to be entirely

acceptable to SNCI.

Mr. Penton then closed the discussion and assured MN. Berger that

it is the intention of the Bank to have as many questions as possible settled

in Washington prior to his departure.

JFajans/pnnMay 25, 1948

Copies to: Mr. Penton - 2E. Berger - 2Mr. BurlandMr. BrochesMr. Waterston

INTERNATIOP BANK FOR RECONSTRUCTION AN iEVELOPMENT

6FFICE MEMORANDUMTO: Mr. Walr 11 DATE: May 24, 1948

FROM: J. M. Penton

SUBJECT: Belgium

1. As instructed, I spoke to M. Berger on Saturday and explained tohim again the Bank's hesitations about financing the imports of equipment forLinalux which require payment in sterling and French francs. I asked him ifhe could say whether the Belgian Government would care to permit the Bank todraw on their 18% capital subscription and to lend to Linalux the franc equiv-alent of their purchases from France and the U.K. Linalux could then usethese francs to purchase the required exchange from the National Bank.

2. Berger replied that the three companies concerned, Ougree Marihaye,Cockerill and Linaluxwere financing projects totalling about 8%0 millions,of which only $16.8 were required as a loan from external sources. All the

internal finance had already been raised from the capital market. If theGovernment allowed the Bank to draw on its 18%, it would have to draw on theNational Bank to find the money, since the budget was barely balanced andthere was no surplus. Moreover, the limit of BF50 milliards for advances bythe National Bank to the Government had been reached. Such a proposal wouldgreatly embarrass the Governor of the National Bank whose policy it was touse the credit machinery to bring about the necessary economic adjustmentsnecessary for the country's recovery. All his efforts were directed towards

holding the Finance Minister to the agreed limit for the advances since hewas under constant pressure from certain of his cabinet colleagues to finance,even if it meant resorting to inflation, certain ambitious projects like theelectrification of the railways.

3. Frere had, however, told Berger that, if Belgium received aid from

E.C.A., he would consider in a few months time recommending to the Government

to allow the Bank to make a further drawing on the 18%. Obviously Frere was

thinking of our using the francs to finance purchases in Belgium for other bor-

rowers.

4. Berger also pointed out that Linalux could procure all the necessary

equipment, perhaps at slightly cheaper prices, from the U.S.A. It was, how-

ever, a question of delivery dates. He could not understand why the Bank should

impose what he considered a penalty in a case where purchases would bring bene-

fits to neighboring European countries who were also recipients of U.S. aid.

5. Finally Berger said that, although the Belgians had a surplus of

certain currencies at present, yet these currencies would recover, and they

wished to retain these assets for the future when market conditions for their

exports might no longer be so favorable. Furthermore, Belgium had given very

substantial credits which must be regarded as a contribution to European re-

covery.

OFFICE SERVICES 17.10

INTERNATIONA ANK FOR RECONSTRUCTION AND VELOPM ENT

OFFICE MEMORANDUM

TO: Mr. W.A.B. Iliff. DATE: May 24, 1948.

FROM: Walter Hill.

SUBJECT: Belgium. I

1. As you know, the Linalux Project involves certain p chases of

equipment in the U.K. and in France. Since the Belgians hol surplus

of French francs and sterling, the question arose whether the Bank should

finance these purchases (estimated to total between $1 million and

$11 million).

2. Last Thursday, Mr. Hoar and Mr. Penton took the matter up with

Mr. Garner who suggested that the views of members of the Staff Loan

Committee should be ascertained on Friday morning and that any recommenda-

tion made should be discussed with Mr. McCloy before it was put to Mr.

Berger by Mr. Penton.

3. The accompanying papers will bring you up-to-date; they

include a note from Mr. Penton indicating M. Berger's reaction,

h. Mr. Penton informed me that M. Berger has an appointment with

Mr. McCloy at 2.30 p.m. to-day.

5. Mr. Berger's reply suggests that the Belgians are anxious to

conserve their French francs and their sterling; the question therefore

arises whether it is the policy of the Bank to ask potential borrowers to

liquidate foreign assets in payment for imports. Even if one is against

such a policy in principle, each case would have to be considered on its

merits - and Belgium is clearly a border-line case. The fact is, however,

that, whatever the economic merit of a loan to Belgium, the Belgians have

been given to understand that they could obtain from the I.B.R.D. a loan

Memo. to Mr. Iliff. Sheet 2. May 24, 19h8.

of around $15 million for approved purposes.

WH/MLC

"ay 21, 194,

Morgan Stanley and Company2 Well StreetNew York, New York

Gentlemen:

Would it he nossible to obtain from you v copyof the circular or other document showing the nature ofthe security behind one of the Belgien Government bondissues brought out by yourselves in 1924 and 1925, i.e.,the 61'a due 1940, the 6's due 1955, or the 7's due 19557

Thanking you in advance, I am,

Sincerely yours,

E. ". Purland,Finencial Adviser.

INTERNATION^' BANK FOR RECONSTRUCTION AN- "EVELOPMENT

OFFICE MEMORANDUMTO jr. W >e 1, Assistant Loan Director DATE: May 21, 1948

FROM: D. Crena de Iongh, Treasurer

BUBJECT:

The ques on referred to in my memorandum which I sent to Mr.

iliff on A il 16 and which I recommended for study, namely, whether

the Bank should furnish to a borrower currency which it already

possesses, has come up as a practical matter in the case of the

Belgian Linalux. In this respect, I would like to mention four

aspects.

I. In the first place, it occurs to me that the Bank has up

to now mostly considered loans in the light of filling a gap or part

of a gap in the borrower's foreign exchange position. The fact should,

however, also be borne in mind that a foreign loan has also the function

of supplementing a lack in a country's saving capacity. In fact,

development loans which serve to pay for capital goods have that special

aspect. In the case of Linalux, which is a loan destined to finance

the purchase of capital goods, we are in this position. If I under-

stand the transaction well, Linalux will be our borrower. Linalux, of

course, as a result of Belgian exchange controls, does not possess

foreign exchange. Therefore, it has to buy the foreign exchange from

the Banque Nationale de Belgique, and while the National Bank evidently

has the sterling and French francs which Linalux needs, the latter does

not have the Belgian francs with which to buy the foreign currency.

The next question which comes up, and which I understand has

been put to Linalux by Mr. Penton, is can Linalux issue bonds or shares

OFFICE SERVICES 17.10

-2-

on the Belgian capital market in order to obtain the Belgian francs

with which to buy the necessary foreign exchange. Evidently this is

not possible, the Belgian market not being able to absorb such an issue,

which might be an evidence that the saving capacity of Belgium is not

large enough to provide for the necessary capital investment. Unless:

this situation is caused by an economic policy laying too much stress on

consumption to the neglect of productive investment, it would be a

normal function for the Bank to provide the necessary foreign exchange

with which to buy the capital goods.

II. It may be of interest to consider the position of the Banque

Nationale de Belgique in this respect. Evidently the Banque Nationale

de Belgique has large quantities of sterling and French francs. These

currencies have, of course, been bought by the Banque Nationale de Belgique

against Belgian francs. These francs, therefore, having been put into

circulation in Belgium, probably have served to finance purchases of con-

sumer goods and have not come to a sufficient extent into the hands of the

investment sphere where they could be used for the absorption of Belgian

franc obligations to be issued by Linalux.

III. My provisional conclusion, on the basis of the two foregoing

points, would be that although on first look it would seem illogical

that the Bank would furnish currency to a country which the country

already has, yet it may be logical, on the overall position of Belgium,

that this transaction, nevertheless, be carried through.

Then the question arises how it should be carried through.

The following remarks solely intend to be of a general nature without

giving a definite answer, since the matter under consideration is extremely

-3-

complex in nature and cannot be solved in the short period of time at

my disposal. For instance, it can be argued that Belgium is a net

creditor of France and Great Britain, and it seems logical, therefore,

that if Belgium would need goods which can be furnished by the said

countries, they would furnish such goods against Belgium's credit

balances. In this light it wouldn't be very logical for the Bank to

buy French francs and sterling for Belgium against dollars from the

Banque de France and the Bank of England. On the contrary, it seems

logical that as the Belgians would be debited anyway in dollars by

the Bank, the necessary French francs and sterling which the Belgian

Government has should be bought from the Banque Nationale de Belgique

against dollars which Belgium is in need of. In this way the Bank

would assist Belgium to use some of its foreign currency which is frozen

and would provide at the same time dollars to the Belgians which they

need.

IV. If the conclusion would be that the Bank should buy against

dollars from Belgium the needed French francs and sterling, aiother

problem arises. One of the faults in foreign financing, for instance,

in the big foreign currency loans provided to pre-Hitler Germany was

that the loans w ere used for internal capital expenditures in Germany

for which the borrowers needed only local currency. The foreign exchange

was sold to the Reichsbank to buy that local currency, thus becoming a

rather illogical by-product of the transaction. Of course, it accentu-

ated the fact that the capital expenditures were very often not necessary

and were not made for productive purposes. Although in the Belgian case

-4-

the productivity of the capital expenditure by Linalux has been

recognized by the Bank, nevertheless the use of the dollar foreign

exchange should be looked into and should, to my mind, be discussed

with the Belgian Government. It would seem logical that the use of such

dollars would be supervised by the Bank.

In conclusion, I think that the above demonstrates that even in

the field of the financing of special projects the Bank should be con-

cerned with the whole economic and financial structure of a country.

I hope that the above thoughts (which are, of necessity, of a

very preliminary character) may be helpful in our discussions on the

subject. I still doubt whether decisions on all the facets of this

question should be made without deeper study.

DC/mct D. CRENA DE IONMay 21, 1948

cc Mr. McLainMr. RistMr. Rosenstein-RodanMr. Penton

2.. One of the projecta whiz]. the i.n&hs been asked to ifinance in con-

nection vith the loan to felgium is the erection of a thermoelectric power station

known s Lineduz. A Met of, the Sta.Vf Loan Comittee was held to discuss the

following points I

a. S3cw of the purchases prposed by Linalux are in mscellaneouscurrencies, including French francs, sterling, and possiblyCzech crowns, of which Belgium at present holds balances. Thequestion arises as to whether the Bank should finance the wholeof the foreign echange costs of the Linalux Project, or restrictitself to the portion in currencies not readily available toBelgium.

b. It has been suIested that Eelgiua should be asked to .llow theBank to make further drawings on the 18% 3elgan capital subscrip-tion. 3hould Belgium be pressed to do so at this stage?

2. It was explained at he ;o)mittes that, although Linalux has raised

the ?*lgian franca necessary to finance tie internal costs of the project, it

expectd to borrow the external costs fromi the iank. If the sank now refuees

to finance in dollars, or otherwise, that portion of the foreign exchange costs

which will be incurred in currencies readily available to Belgim (about U1 mil-

lion in French fraics and , 2QOOO in sterling), Linalux will have at this late

s a e to revert to the capital market to raise the necessary Belgian francs with

which to biy this exchange fr the National Bank of Belgium. The capital market

is very tight, aind the Minister o. Yinance has said that any extra which is ob.

tained from it will hve to be at the expense of other item in the elgian rec on-

8 tructi on program. The total aWonWt involved, however, in this case is very small.

3. The itte felt that insul ficient infornation was available on which

it could form an opinion as to whether the Belgians were really troubled by the

shortage of capital for reconstruction, or whather they wished to conserve their

foreign exchange assets.

h. In order to elucidate this problem, it is renr ended that, as a first

step, the il an ne otiator at prs-.nt in W'ashington should be asked whether the

-2-

B!lgian Govern-snt would caro to release a portion of the 1> f t 1ian

subscription to the Bank's cpital, which could in turn be lent a Analux in

order to permit them to buy the francs and sterling rom the ationa a to

finance necessary imports ol equipmen, rm irnce an the United Icingdom.

5. in the event of a negative reaction ira th , iogiane, the iank '

policy could be reconsidered in the Lizht of their reply.

JPenton/mvp

May 21, 19t48

FORM NO. 61i 4, o Copy .

DECLASSIFIED INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT SLC/ I

8 201F DENTMALJA 201 STAFF LOAN COMMITTEE

WiBG ARCHIVES

(This document is for the use of the President, Vice President and membersof the Staff Loan Committee only. Its contents should not be communicated to

other persons except in the course of duty.)

1U - 11 e Of 9Wrt X0AW Gaiud*%W *00%t U A$ U: 130 &.m. aM 3 vsyft IaL" 3A12 Ma &

1. 9 M aw;

Wh. W. IRU (mQ i=M)m. P. 1m. do Zen&%&. C. A. XOX-7nMr'. P. 3. U.reamsar-go0a

t. 3. V. Doe$st m

er. J. PAW.e. 5.Ese

so 0mwitt" 1S1'( 11 A OSJ/A/9,

aM

(a) St *0 Sol Ro U*t) as a first *to 10wvwr 1bw WA can

to v*Usa * Vwtma t *atar 0% sdwinmiretar to Us anuk'** 0"#

Auk e3ta ta t"1 be st to Us"= JA ta enm I pox"It f.t to

%Wg V fins aMi -1102AW tst Us Atios)a *k to tlahn.

1.m 0100 1t ovavwt ftft W*1" e 10 .3.

(b) ft, ha 1 11 Ot a WOgTO ~thiss tm t0 bs #

bwWs vI1Y w""3 be m1 m ha 1 lik st t wr "3.

"N * I. I.* " 4* rB. . W. A.. eZtupla. V. 0xawa do lam*sJ. r. 8. A. MLMA5.2.L. X. Rift

Form No. 60(4-48) c opy No. 3.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPHEIT SLC/A/CONFID hIAL

STAFF LOAN COMMITTEEDate:

TO: h &4e% &

A meeting of the Staff Loan Committee will be held at 11,30 awm

on , in Boom No.

IECLASSIFEDjAN 18 2017

WBG ARCHIVES 9409t,taff Loan Committee

AGENDA

1.Bla uat1w Pk rs4.bjU R S *UTho fallowing questimns arise;

a. -law of the purchsoos proposed by LiUS a"e In zian#ma

aurencU sinding Prench francs, oterlliV, and possibly Czedh

.erDs, of which Belcius at pesen a balata- The que-ttim

arseas s to ibether tJ* ansol d be finam e whole of005 e

foreign emehafts oosts of the Idnalux Proj e or etrict IaW0%

to the prtion in c-reneiss not realy avaiiablo to Belgiu.

b. I ha. bowe aested that BlWvx sadA be asked to 8a the

Bak to sake furthr dravigs an thI Ngi v caital subuealpt

m. Shabm Belgium be Pressed to d so at ttdo etags7

Distribution

1. Mr. R.L. Garner2. Mrs. slter Kr

3. Wr. D. Crema do 1=9nh4. Mr. C. A. ,CSA5. r. L. B. st6.U Lan 'Departawnt

Mr. JJ. eCloy. May 21, 1 .

Walter ill.

Policy Problem in ' -otiations wit l-i u.

On Mr. tarner's 4 estion we held a meeting of the Staff Loan

Committee this morning to discuss a point of policy that has arisen in

the negotiations with the Belians. The subject of tha d sssions and

the r ecommendations are su-arised in the accompanying note. As Mr.

Bergerthe Belgian negotiator, is returning to Belgiun on Thursday next

week, and as our recommendation will probably involve some exchange of

cables between him and the wuthorities in Brussels, it would be helpful

if we could inform him of our decision as soon as possible. I should

be grateful, therefore, if you could find the opportunity to discuss

this matter with Yr. Penton and myself this afternoon.

Le 20 mai 1948.

MEIM OR ANDUM

A : Mr. John M. Penton,Loan Department.

DE :Pierre Berger

Vous m'avez demand4 de vous faire connaltre les conditions

que la S.N.C.I. imposera k ses emprunteurs.D'aprs les renseignements en ma possession, la S.U.C.I.

exigera :

l/ de Ferblantil, la caution solidaire de Cockerill, plus l'engagement de la

soci'ts (Ferblantil) do ne pas hypothsquer ni alidner ses biens avant

d'avoir rembours6 entierement l'emprunt $ de la Banque Internationale;

2/ des Supercentrales Electriques des Awirs (Linalux), la souscription '

l'engageent envers la . de ne pas hypothd quer ni alidner ses

biens sans l'accord de l e.X.C.I. avant d'avoir rembours6 ltemprunt $;

3/ d'Cugrse-larihaye, la caution solidaire de :a- la Banque de Bruxelles - concurrence de 50% de l'emprunt (soit

environ $ 3 millions)b- la Compagnie Financiere et Industrielle (Cofinindus) pour 50 de

l'emprunt (soit environ $ 3 millions).

V'ai t6legraphi4 'a la S.N.C.I. pour savoir si oui ou non elle

a exig6 d'autres garanties en ce qui concerne Ougre-Larihaye.

Qop g

rkuss els:Ty , 19L T15

DM iNCTR ID IL S'AT h*%,O 8; DO% QENOSN P0UON

C~sSIUaiQ' L3HM2L AK7 NIiD2 s ' I2LT DILTO m

A LABE2s IKERAT Gi3L JEPRQIT ELMA~ml TPLMC

POURNCU L'3D~omia@BIGORAIF AEC NDICIONW BUTITA.R

INTERNATIONAL NK FOR RECONSTRUCTION AND ELOPMENT

OFFICE MEMORANDUMTO: Mr. Leonard B. Rist DATE: May 20, 1948

FROM: A. Basch

SUBJECT: A brief note on Mr. Rembert's Report onSpecific Projects Included in the Belgian Loan Application.

1. In general, I am in agreement with Mr. Rembertts analysis

of the three projects included in the Belgian loan application,

with only one reservation. According to his report, the estimated

cost of production of electrical power of the new planned station

would be about 45 Belgian centimes per one kw. hr., assuming a load

factor of 5,000 hours per year. While this price would be lower

than the existing cost of production in Belgium at present (about

85 Belgian centimes per kw. hr.), it still would be higher than the

cost of production of any hydro-electric power station, and also of

big steam power stations in Germany and in some other parts of

Europe. The new price, for instance, would be still too high for

the chemical or electro-chemical industry.

2. Although there is no doubt that the projects have been well

selected and are economically justified, and that Belgium is a very

good risk, there still remain some questions to be answered. The

two steel companies belong to the leading enterprises in Belgium in

this field, with a very good credit standard. As Belgium has around

ten concerns in the steel and iron industry, it might be asked on

what grounds have these two companies been selected for the contem-

plated credit? Some other companies, for instance, Usineg Gustave

Boil, have modernized their plants, using their own local and foreign

exchange resources.

Mr. Leonard B. Rist -2-

3. A thorough analysis of the Belgian balance of payments

should provide the answer as to whether Belgium really needs this

credit and whether its industry is unable to obtain private credit

for the proposed modernization. A substantial part of the credit

is needed not in dollars but in Swiss francs. It can be easily

proved that a reduction of Belgian imports and also of other expen-

ditures would provide means to finance this investment.

4. Finally, a question might be raised whether the Bank

should reach a decision until it is known what assistance Belgium

is going to receive through the E.R.P.

cc Dr. Rosenstein-Rodan

Mr. Pierre AnsiauxAvocat a la Cour d'Appel10 rue ForestiereBruxelles, B1elgium- A

Dear Sir,

The International Bank for Reconstra nion andDevelopment is at oreseint consirering sn -alicationfor a loan to Societe N tionale -otr 1. Cr4dit a1'Induatrie. Under the Zrticles of A reeuent of theBank the loan mu t be guarteed by the ingdom -f9elgium.

In connection 4ith this a>)lication, certainciiestions of Belian law 1-re risen on 1hich the

nk desires to have the oAinio of Telgiin cm neel.At the sug estion of Vr. v-n Co nhout, General Coun-oel of the Interniio:nal onetry "und, I m -ritingto yon to vsk you to vise thr rn on these fos-tinns 7 rhich are briefly set forth ')low.

rticle III, section L, of the T3-nk's Articles ofAgreement -rovides thi t the n m.y re loani n teny member or any politicnl subivision thcreof andany )usiness, industril an a-ricultura1 enterprise inthe territories of a member", ubject, ho ever, to thecondition that,

"'Tien themeb r in whose territories theproject is located is not itself the borrower,the member or thlce centra b nk or somecorin.rabie agency of the me-ber which is ac-c )tble to the thn,2ell rteester 'iym nt of the rincal and the i'aymentof interest ar other ch-r es on the loan.

(underscoring added)In order that you may kno, the tyne of )u-.r-ntee

icch the nk foul-I normally require in such cases, Iam enclosing hero ith a copy of the Loan Areementdrted March 25, 1348, bet reen Corporaci6n de Fomento

May 20, 1948

10 ~ ~ ~ ~ ~ ~ n w rjo1nen"le ePoctrioi vda . nn the Intrrnoto Vary. wt u0e " at

err )4o ot fc :AO: ,o i wesa 7rnath ten f'rn of1u0rontee nreirit to be oenpitp! by the ->ublie Of7hila to thArnMw lnNi nn 1 -nm thn 1Imn-rvi4p for In s"Ch LoN %re wnt. At 40 of nuah

eann 7rco nt yr- iU 1eo n oC0" rwtoPyth - Vcan1lis of Whi to wn 10rn0Ac eno Q0e awl V)

be issund to th Ttorn tn1 p ors -on

It " t - o o2 te Oki a nyin u lic it in not "Pt1,a7 the en;",

,, -to - : ia t oh 1ierartoo rrro; oa r~no ~a;u on the :>onAa,

ntor go a ic a Y thorniz ec by avro>riste loin-

connootion e At tioio .1, at 1i 3 l, of

roy : < o 1 owrd trt 1 i W.e.t.r . VA-- PlA Co v.i t thte

tn a3 haveAr idice t rt under xiating ] the

1o 7teA iaeThi oc tor t

a J~r~tO CO ~ 0 t 'tir c2: n)eA~g~ aUIh tantially~iArr to thoe ot rh h e-te h to the nuve

ued by iut n the t-r~n of the

Ix o - oi oh of th* 'Oe - r --lthi,

'Ce irrc n ntio Re aer te "oGnton th

t no ntirel 1i nr r t vri roVi ns of

o 0 tionr of 4.r -. A A'ither ouch atot-. contntste " CirIot Wb1i7timn of the

a vat Cov>rn - t to the holer of tho orh ;tion'';rnteed, in t i~ irwtne t' o boam if tho Th t'i, laned for the >ronooed loon, o" "h-ther the obliga-

'in- 71 t , -Y! n 7ov irr t -fv A W -uc mriti1:. aerely to :ut . in funds -ufficient to en'r1Uit to no t th- itproot n' othrr yrge" -q, nn thr

3-Mr. Pierre Ansiaux - tr i, 194

principal of, the loan as they become due. Furthermoreit is not clear whether under such laws the BelrgianE inister of FinInce --onld be authorized, to execute onbehalf of the Kindom of Belgium s guerantee agreementcontoining provisions such as those which ire includedin the aove-mentioned gur)tee greevient by the~eDublic of Chile.

Specifically I should rac-t. hving youroPinion on the following questions:

1. Under Telgian lw ,uold the elgian MiInisterof :'inance be authorized to execute in the name arid onbehlf of the ingdom of elgium snd to deliver to theank a guarwntee igreemet containing eubtsntilly the

terms and nrovisions set forth in Schedule 4 to theaoovi-mentioned Chilean Loan Agre met for the ;ar osesof gu-ranteeing tP'e ! rosed lr- to S.T.C.I., and toexecute in the nae nd on oehf of s'id Kindon on thebonds of S.I.C. I. to be de-ivnred to the 7n for suchloan a guane e suostantinlly in the tr-s of the formof forth at 0e of such Loan Agreement?

?. Under Jelan lr, if 7ni hen such uranteeagreement and ouch guarentee on t bonds were soexecuted, "ould they constitute v)lid onr binding obliga-tions of the Kingdom of elgium in nccorc-nce with theirterms?

3. Undor -n 7w 1oul. the obligotions of theKing1ofn of ~elgium under such 'u-rantee constituteV ect obligotions of the 7ingdom of Belgium to theInternationnl nn to the hol-er or 'olders of suchbonds, ras etively?

Tor :our nonv-nicnt refrace, the various 7rovi-sions o. elgian 1w which hove been brought to ourattention are the following:

(a) Article 2 of the Law of Iarch 16, 1919,creating the .N.C.I. provides:

"l'rtat garantit envers les tiers le >aiement desinteretS des obligations d'une duree de wlus decin 'ns, P P-ettre uar la 7ociete. Dans le casOU 1- nrduit des operations ne quffirait nas aassurer le aiement intgral desdits interets,l'-tat fovrnirA a la societe les sommes necessairesPour psrfaire la difference."

4-Mr. Pierre Ansiaux - 2' , 4

"Les decaissements que l'tat serait obliged'effectuer en vertu de sa garantie lui serontrembourses en -rinci)al, mnJore des interete aUmneme taux que celul des obligations garanties,par voie de jreleverent sur Lz 3roduit net del'exercice suivant et, 'il echet, des exercioesulterieurs."

(b) Article 1 of the Royal Decree No. 3 ofAugust 22, 1934, concerning the organization of S.N.C.I.provides:

BPar derogation P l'article de la loi du 16mars 1919, l'Etat reoresente par le Vinistre desFinances, eut ccorder -x orteurs s- -r- ntiepour le re botrqeme-nt et l'interct dee tous bonsde caisse ou ulgatione, uelle 0'en soit laduree, erie ou a ernettre en vertu des articles 10et 11 de-,, sttes de la Societ .tion-le decredit a l'Inclustrie, sans oe, toutefois, 1',urmntant total uise exceder celui qui est indi-iue a l'alinen 2 dudit article 10."

(c) Article 4 of the Royal Decree No. 27 ofOctober 31, 1934 , rovides:

"l'Ttat garantit le ref-ourserent du ca)ital aconcurrence de deux millierds, et le 'a-ementdes interets dee oblig tione a emettre par laSociete Nationale de Credit a l'Industrie enexecution de l' 'tic e 2 e 'Arrete royal no1 du 22 aout 193L, il garantit atsi, dlans lelimites fixees r 1'alin-P I de IL'rticle lerde larrete royal no I du 22 aout 1934, lerermbourserent et le unie ent des interets desoblige tions et bone de c-iese eris ou a emettrepar la Societe '-tionale -e Iredit a 1'Industrieen vertu des articles 10 et 11 de ses 8tatuts ...

(d) Article 1 of a Ministerial Decree of December17, 1934, issued 'ureuant to the Royal Decree No. 27of October 31, 1934, erovides:

"Les obligations nominatives ou au porteur et lesbone de caisse a emettre oar la Societe 'tionalede Credit a l'Industrie dont le modele sera a-prouve 'ar le "inistre des 7'inances sont soumisau visa du Tresor.

Ce visa, qui emportera la garantie de l'Etat,sera constate:

5-Mr. Tierre Ansiaux - M'

"lO - sur l nnteu des obigtionqs r 1'Mo-eition ~ desrirfes Ku Directeur enorr e1 T recorerie et Ke ia Dette nbljoue et duirecteur do la Dette cn POrteur ric iueer I' emp reinte du timbre KU ? Miitore descinances r- roduLte ci-contre:

S- our le recta (e Chreun Kes cotv'ric -r1'e r reinte dju tin q c- do onrole1u Tresor e rlr+ roduit ci-contre."

I hone th'qt you?-1 Xi_ fn y ollrslf free to gilreme your a inion on h i i tiorn f t, . ttshould not be the c hhould rthvin;: your ~ sue'tions s to ~ t~ ejycr to I ii t onutin the n tter.

Since the negoti tin > con-rni m th -- oe edlocn -are no7r in eso t he 0oveCuestions is les! 2 n ce y areplyte t, if

you 0ould inD1e m s t hbelou b~1ieve yoi coulIlrt e -- your oYnion V reny

Sin11rely yojrs,

Ch'ester A. PcLninGen erl Counsel

ABroches/CAM/wrk5/20/1948

a ierro egr

is l V.G.C.-V Vv pD~ra l: r sineet ( mepsenin ula i4.0

n. Fr L nt ;

a- 9d e>d (:aitenvion 3 illone )

1%prunt~I Ast en.io ilos)

: t .wou non llI s-u;y

- INTERNATIONA ANK FOR RECONSTRUCTION AND ~-VELOPMENT

OFFICE MEMORANDUMTO: Mr. W.A.B. Illff DATE: May 19, 1948

FROM: Mr. Penton ' J

SUBJECT:

Mr. Basyn asked me late last night whether the Loan Departmentdid not consider that something should be said at today's BoardMeeting about the Belgian negotiations.

We have, as you know, received the formal Loan Application fromBelgium in which a loan is sought of $16.8 million and the threecompanies concerned are mentioned. Mr. Rucinski and I think thatif anything is said at all it would be well to confine ourselvesto stating that a Belgian Delegation has arrived in Washington andthat negotiations are now actively proceeding for a loan of $16.8million and that the proceeds will eventually be used for themodernization of the equipment of two steel companies and theerection of a power station near Liege.

We feel that it would be unwise to give a breakdown of the$16.8 million in view of the fact that we have not yet taken afinal decision about the amount which we shall lend to Linalux.Likewise, it would probably be unwise to go into detail aboutthe type of equipment to be imported for the two steel companiessince this might raise objections from the Dutch. It would seembetter to present the details of the steel projects with theEconomic Report when the negotiations are further advanced andwhen we shall be able to show that we are not contemplatingfinancing an increase in Belgian crude steel capacity.

I attach a separate sheet showing the breakdown of the $16.8million in case you require this information nevertheless. Ihave told Mr. Basyn that the matter is in your hands.

JMPenton/pm

0 FF I CE S ERY V 1E 7.1 0

Breakdown of $W.8 million

Linalux $6.8 million

John Cockerill & Sons 4. "

Ougree Marihaye 6. "

SOCIETE N.TIONZE Bruxelles, le 19 mai 1948.DE CREDIT -A Boulevard de Waterloo, 16.

INDUSTRIE.

Cher Monsieur Berger,

........................................ *..................................

D'accord avec Y. De Voghel, j'ai suggdr6 AL. Vanheurck que 1. Marx et M. de Liomandre fassent, L itintention de laBanque Internationale, une consultation 6crite dans le sens qui vientd'etre expos6.

Comme vous le savez, la S.N.C.I. n'a jamais endoss6A des tiers, depuis d longues ann4es, les effets de commerce remis parses d/biteurs. Il n'y aurait pas d'inconvanient A ce cue les promessessign'es par les industriels (Ferblatil, Linalux et Ougrde-Marihaye) soientremises en d'pot A la Banque Nationale, avec stipulation que celle-ci nepeut nous les rendre que moyennent l'accord de la Banque Internationale.Toutefois, des lJabord, cette derniere nous marquerait son consentement,pour la reprise des promesses A la Banque Nationale, au cas oni nous aurionsbesoin d'agir contre nos propres dAbiteurs.

Une autre formule consisterait A dire que nous donnonsA la Banque Nationale un mandat irrvocable dtencaisser las effets, Al'6cheance, et d'en remettre le produit a la Banque Internationale. Seule-ment, dans ce cas, nous devrions obtenir l1accord expras de la BanqueInternationale pour pouvoir reprendre les effets aux fins de poursuites4ventuelles contre nos dtbiteurs.

,Te ne pense pas que la Banque Internationale envisageune v6ritable mise en gage des promesses par endosserment, car cette garan-tie ferait double emploi avec celle confSre par l'Etat et pourrait ddt&-riorer la prssentation de notre bilan annuel................................................. .. .........................

(s) Robert Vandeputte.

laonsieur le Directeur P. Berger,

c/o International Bank for Reconstructionand Development,Washington, D.C.

C o p y

Cable.

Bruasels, May 18, 1948.

ATTENTION BERGER INTBiQRAD WAEIrGTG DC

RECU VOs L.TTRES Du 13 ET f4 TMAI STOP POUR POINT UN PROP0ON APPLES NrTI&N

AVEC VZEL7RK QUE 1L$INISTRE FINANCES S'NGAGE ARP2LIE'TRE DIREZCT2d PROVISION

A BANQUEP INTr ATIONALE SI NOTRE INSTTUTIONE PAIE PAS STOP CETTE SOLUTIION

EST CONFORBLE A LOI ET STATUTS

EANDEUTTh.

BELGIUM

Notes of eeting held in Mr. Basyn's Officeon May 18, 1948, at 5:00 p.m.

Belgian Loan Negotiations - Fourth Meeting

Present:

Mr. PentonM. Berger, Societe Nationale de Credit pour l'Industrie (SNCI)Mr. Burland, Loan DepartmentMr. Broches, Legal DepartmentMr. Fajans, Loan Department

The questions under consideration were the following:

1. The endorsement and deposit of promissory notes,

2. The form of the bonds,

3. Steps taken by the Legal Department in order to clarify the

problem of the Belgian Government's guarantee,

4. The form of the loan agreement.

Mr. Penton opened the discussion by referring to the problem of

promissory notes expressed in dollars and drawn by the companies to the order

of SNCI. He said that they could either be deposited with a trustee, such as

the National Bank of Belgium, (which would require the establishment of a

trust indenture), or endorsed by the SNCI directly to the Bank.

Mr. Broches suggested that the promissory notes be endorsed across

by SNCI to the Bank and deposited in our account in Brussels.

M. Berger objected that the direct endorsement by SNI would present

certain difficulties from the point of view of its bookkeeping operations, and

requesting that the notes be endorsed by SNCI in blanco and deposited in the

Bank's account. Mr. Broches accepted this proposal and it was agreed tenta-

tively that the companies' promissory notes will be endorsed in blanco by

SNCI and deposited in the Bank's custo4" account in Brussels. M. Berger

agreed to obtain confirmation from Brussels that this would be agreeable to

SCI.

-2-

Mr. Burland said that the form of bonds issued under the prospec-

tive loan agreement would be worked out only after the drafting of the

agreement had been completed. After being shown the text of the Credit

National bond, M. Berger pointed out that great care would have to be taken,

if any changes were made in the standard form of the SNCI bond, so as not

to affect the Government guarantee incorporated in the bond.

Mr. Broches stressed the fact that the form of the bond issued

under the loan agreement would in any case be presented to the Belgian

Minister of Finance for his approval.

In reply to M. Berger's question, Mr. Broches explained that the

Legal Department had decided to write to two prominent lawyers in Brussels

in order to clarify the problem of the statutory state guarantee for liabili-

ties of SNCI.

F. Berger said that he himself had already written to SNCI advising

them to see a first-class lawyer in Brussels and to transmit to him the

advice of the lawyer.

Mr. Penton said that he would like the drafting of the loan agree-

ment to be started. A discussion ensued between Messrs. Penton, Burland and

Broches with regard to the form of the loan agreement. Some changes in the

standard form were indicated because of three separate loans with different

maturities, different security and maybe different interest rates. Mr.

Burland briefly described the form of the two Chilean agreements. Mr. Broches

reviewed briefly the articles of the standard form of the loan agreement,

pointing out which problems will have to be discussed specifically in connec-

tion with the set up of the proposed loan to SNCI, He further explained

that the Bank will have to deal with the two sets of covenants: certain

undertakings will have to be obtained directly from SNCI with regard to,

-3-

e.g., consultation, information, terms granted by SNCI to the companies; on

the other hand, SNCI would undertake to insert certain provisions, or covenants

into its contracts with the companies.

Mr. Penton pointed out that it seemed to him that some restriction

on future borrowings of the companies might be advisable. Because of M. Berger's

objections this question was then left open for further consideration.

JFajans/pnnMay 19, 1948

Copies to: Mr. Penton - 2Mr. BurlandM. Berger - 2Mr. BrochesMr. Waterston

BELGIUM

Notes of Meeting held in Mr. Penton's Office"on May 17, 1948, at 11:15 a.m.

Belgian Loan Negotiations - Third Meeting

Present:

Mr. PentonM. Berger, Societe Nationale de Credit pour l'Industrie (SNCI)Mr. Burland, Loan DepartmentMr. Waterston, Economic DepartmentMr. Fajans, Loan Department

Discussion was resumed with regard to: (1) the Closing Date, and

(2) premiums on prior redemption.

Mr. Penton said that he thought the establishment of a Closing Date

should not raise any problems. The Bank wished to adhere to its normal

practice and to maintain a Closing Date for the loan. If by that date the

proceeds had not been withdrawn, the Bank would want to review the position

with the borrower. He suggested a fairly distant date - e.g., eighteen

months - which might in certain circumstances be further extended at the

borrower's request.

M. Berger requested that the term of two years from the date of

signature of the prospective loan agreement be accepted by the Bank as the

Closing Date, and thanked Mr. Penton for his readiness to give further con-

sideration to this matter.

At the request of Mr. Penton, M. Berger explained to Mr. Burland

SNCI's policy with regard to prior redemption. He said that the debtors of

SNCI are not normally granted an automatic right to redeem their obligations

prior to maturity, but that SNCI has in practice always agreed to their

doing so, and has charged a premium equal to three months' interest on the

amount redeemed.

Mr. Burland pointed out that it is in the interest of the Bank to

encourage prior repayment of its loans and that the premiums, which the Bank

-2-

charges, are very little higher than those paid by the Bank in order to retire

its own bonds from the market. He then suggested for discussion three different

sets of premiums for the three tranches of the proposed loan:

1. 10 year loan to Ougree Marihaye:

Redeemed in the course of first two years - 1 1/2% premiumRedeemed in the course of next two years - 1 % premiumRedeemed in the course of fifth and sixth years - 3/4% premiumRedeemed in the course of seventh and eighth years - 1/2% premiumRedeemed in the course of last two years - 1/4% premium

2. 15 year loan to "Ferblatil"

Redeemed in the course of first five years - 2 % premium

Redeemed in the course of second five years - 1 1/4% premiumRedeemed in the course of last five years - 1/2% premium

3. 20 year loan to Linalux

Redeemed in the course of first five years - 2 1/2% premiumRedeemed in the course of second five years - 1 3/4% premiumRedeemed in the course of third five years - 1 % premium

Redeemed in the course of last five years - 1/2p premium

M. Berger said that these schedules were acceptable to him and that

SNCI would apply them to the companies, but stressed that the company wishing

to repay part of its obligation prior to the date of maturity would have first

to obtain the agreement of both the Bank and SNCI. He agreed with Mr. Penton

that there is little probability of Linalux and Ferblatil redeeming part or

all of their obligations prior to maturity, although such a possibility may

arise with regard to Ougree Marihaye.

The question of the interest rate was then approached. Mr. Burland

explained the Bank's system of charging commitment fee, interest and statu-

tory commission, and the method of fixing the interest rate; he proposed,

however, to postpone the discussion of the interest rate, for the time being.

JFajans;pnnMay 19, 194+8

Copies to: Mr. Penton - 2Mr. Burland1. Berger - 2Mr. WaterstonMr. Broches

INTERNATION BANK FOR RECONSTRUCTION AN[ EVE T

OFFICE MEMORANDUMTO: Mr. J. 1. Penton DATE: ,ay 17, 1948

FROM: S. Aldewereld

SUBJECT: Belgium

I wish to acknowledge receipt of your memorpndum of May 13

on the above subject.

I or one of the members of my staff will be pleased to be

present at a meeting which you are -l.nning to hold with the Belgians some

tire this week in order to discuss the subject of end-use supervision.

SA/lms

cc: Mr. Rimnan

OF F f CE SFRV I CES 1 7. 10

INTERNATIONAL kNK FOR RECONSTRUCTION AND 'ELOPMENT

OFFICE MEMORANDUMTO: Mr. Walter Hill DATE: May 17, 1948

FROM: J. M. Penton

SUBJECT: BELGIUM - Closing Date of Loan

Further to my minute of May 13, we discussed this question

again today with M. Berger in the presence of Mr. Burland. We explained

to M. Berger the reason why the Bank wished to retain a closing date for

all loans, and M. Berger said that he thought that a closing date two years

from the date of ratification of the loan would be satisfactory. I think,

therefore, that we can consider this question settled for the time being.

OFFICE SERVICES 17-10

PROPOSED IA STIPULATIONS CONTAINED IN MR. RIMERT'SREPORT

1. Cokermll

Foreign exchange requirements $4,000,000 to be spent in the U.S.

Delivery of equipment contemplated within 18 months after placing

orders.

Plant expected to be in operation two years after financing is

arranged.

It seems that no further information is contained in the report.

2. QUnMa rQ=h

Total dollar costs of the project &p7-x"+% $5,987,280.

Part of equipment already ordered.

Proposed duration of the loan 10 years.

Amortization to start after the third year.

3. Limal

Total foreign exchange requirements amount to approximately

$6.5 million of which about $2.5 million will be actually

spent in the U.S. and the rest in Switzerland (equivalent

of about $2,000,000) and other European countries.

Expenditures of foreign exchange estimated to be spread equally

over the years 1948 to 1950.

It is expected that the installation will be completed in January

1951.

Desired duration of the loan 20 years.

Amortization to start at the end of the fifth year.

Washington, le 13 mai 1948.

Jucoim reu:Tut at i a.C n l

Lat f omn aA m 'j4rdCq :ui pr:It s' oceuxr co; 1 :ooo ~ ux ot

l'utd o11 trtle :" t raronwit d o 1 cuition tmt lWaitec asr yvu a o.

"E itiorw 1 'olc . r (a t di cf pAe1 et 9 o1ixf."rtdschi Iti~r~ot d n 2. a a ei xu d riticlo

fu

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n& 1 l c% eo 1co prohiit daa , 'r tionone no ttr. t~1 r.eurLAefnt da oo r iOC .ioso et a ~iaucr di4 a U ~p~I i~t in 'ra

"gdo m ta U Vif rat E . ."c ~ o ~ ~ ~ ~JomUl1ane "da i. nertior et ii e ~~~~ '1*

ortial I Gc4ntoniN 14, l ntra l ai t tI. 'at-4 fre quo le oturd1V 01 li t t er 1 i ola el d f rtr tt1 a ad ' 1 C.-'t a i pourr onquaConre @li.C.X' "o pnlo D , loflolocs

t -~a' t vn~~ fE~faid ~ .o e ur ce ro: b~uuratt lt1uo: cuppoon . -- C1- lyev &tycr reotr !l4 ' 11' roa bourer tou 011 4 do o 0balifstjQns L'tafi l j, laYocjvi I t n 'c aro dont leo cdlnso d*

duxeeUto un1ri t 1 Pin i e e "r lo rar to1 ' ~ ~t qu ... .1* C ~ utilk or ceo o duA i rt cu e all e pcour las u11os bla 'tIt dootjiao

cf tt naau lto m'fir-il 0 ertatr eo pa i

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aS * I ar -Do e l. -

(s ) Pi erre Bergor.

MIonsieour Robert Vandeputte,Adinst rat our,S.N.. I.Bruxellos .

BELGIUM

Notes of Meeting held in Mr. Penton's Officeon May 13, 1948, at 11:30 a.m.

Belgian Loan Negotiations - Second Meeting

Present:

Mr. PentonM. Berger, Societe Nationale de Credit pour l'Industrie (SNCI)Mr. Waterston, Economic DepartmentMr. Fajans, Loan Department

The problems under discussion were:

1. Premiums on prior redemption,

2. Closing Date,

3. End-use supervision.

Mr. Penton opened the meeting by referring to the question of

prior amortization of the loan by the companies to whom the SNCI would re-

lend the money. He explained to the Belgian representative the provisions

for prior redemption laid down in the previous loan agreements concluded

by the Bank.

M. Berger stated that the practice accepted by SNCI was to charge

a uniform 1/2 of 1% premium on prior redemption and to require that bonds

of the latest maturity be redeemed prior to bonds of earlier maturities.

He then expressed the view that the standing clause included, e.g., in the

French Loan Agreement, and providing for premiums on an ascending scale

from 1/2 of 1% to 3%, would not prove an incentive to the companies to

redeem bonds of the latest maturity before those of earlier maturities.

Mr. Waterston said that the redemption of latest maturities and

the shortening of the duration of the loan appeared to him to be the obvious

intention of the provisions established by the Bank in the previous loan

agreements. Summarizing the argument, Mr. Penton reserved the decision with

-2-

regard to the system of premiums for prior redemption until further consid-

eration of the matter has taken place within the Bank.

Mr. Penton pointed out that the Bank would like to set a Closing

Date and incorporate it into the prospective loan agreement in conformity

with the previous practice. He stressed, however, that the BDank was inter-

ested in giving the borrowers a reasonable period in which to complete their

transactions. If, at a later date, the borrowers came to the Bank with a

reasonable explanation showing why they were unable to utilize the total of

their funds by the agreed date, the Bank would probably be willing to con-

sider granting an extension.

M. Berger had some difficulty in understanding why the Bank wished

to set a Closing Date at all now that we had changed our policy regarding

the commitment fee. His argument was that, if the SNCI was to pay full

interest on the loan proceeds at the end of six months, it would not matter

to the Bank whether the funds were actually withdrawn or not. On the other

hand, the projects might not be in operation before 1951, and 1. Berger

pointed out that the delivery dates of the material depend to some extent

upon the speed with which the borrowers were able to place the orders, which

again depended on the time taken to complete present negotiations. He asked

that the Bank give further consideration to this matter.

Mr. Penton then explained the problem of end-use control. He

pointed out that the Bank must ensure that the proceeds of the loan be spent

exclusively on projects for which it has been granted, and described the

experience with the supervision of the French loan.

M. Berger replied that the Bank's control of the utilization of

the loan by the benefiting companies is entirely acceptable to SNCI, which

itself maintains a close watch over the spending of funds lent by it to

-3-

Belgian industrial establishments. He added that, if desired, the Bank

could control the progress of the projects through SNC1, which would be

ready to follow-up the spending of loan proceeds by the companies. There

would also be no objection to direct contact between the Bank's represent-

atives and the companies concerned.

Mr. Penton said that he appreciated SNCI's attitude and that the

Bank's field representatives would always keep in close touch with the

SNCI during their investigations. He then suggested an elaboration of

the details of end-use supervision at a later meeting at which the Trea-

surer's Department would be represented, and with this he concluded the

discussion.

JFajans/pnn

May 17, 1948

Copies to: Mr. Penton - 2

Mr. BurlandM. Berger - 21r. Waterston

AGENDA

Meeting with Belgian Representatives at 11:45 a.m., May 13, 1948

1. End-use control: To what extent will it be possible for the Bank to dealdirectly with the ultimate recipients of the loan proceed3in order to check end-use?

In this connection: What provisions does S.N.C.I. nor-mally make for this purpose?

2. What would be the feeling of recipients to provision for a premium in returnZbr the privilege of repaying before the maximum maturity dates?

3. Closing dates: Would it be possible to obtain at the earliest Oates, :i astatement showing the length of time needed by each of thethree firms involved to expend the loan proceeds. This infor-mation needed in connection with closing dates.

4. Review terms of repayment requested by each recipient.

5. Procedure to be followed for future meetings with representatives: Problemsraised with be submitted to appropriate departments of the Bank for discus-sion and solution; thereafter, further negotiations willi be held to commu-nicate decisions and to solve further problems which arise.

INTERNATIO' NK FOR RECONSTRUCTION A' ELOPMENT

OFFICE MEMORANDUMTO: Mr. Wal te\ l DATE: May 13, 1948

FROM: J. M. Penton

SUBJECT: Belgium - Closing Date of Loan

1. The question of a closing date to be eventually incorporated in the

Belgian Loan Agreement was briefly discussed today with the Belgian delegation.

2. The Belgians had some difficulty in understanding why we wished to

set a closing date at all now that we had changed our policy regarding the com-

mitment fee. Their argument was that, if they were to pay full interest on the

loan proceeds at the end of six months, it would not matter to the Bank whether

the funds were actually withdrawn or not. On the other hand, the projects might

not be in operation before 1951, and the delivery dates of the material depend

to some extent upon the speed with which they are able to place the orders,

which again depends on the time taken to complete present negotiations.

3. I explained to them that it was the practice of the Bank to set a

closing date for all loans, but that we were interested in giving the borrowers

a reasonable period in which to complete their transactions. If, at a later

date, the borrowers came to us with a reasonable explanation showing why they

were unable to utilize the total of their funds by the agreed date, the Bank

would probably be willing to consider granting an extension.

It. The Belgians asked, however, that the Bank should give further con-

sideration to this matter. I think that perhaps the Belgians would consider

eighteen months from the date of the loan as a reasonable period for disburse-

ment, but before taking the matter up with them again, I should welcome your

advice.

tO C E.4ECA .

OFFICE SERVICES 17.10

INTERNATIONAL -'NK FOR RECONSTRUCTION AND '~"ELOPMENT

OFFICE MEMORANDUM

TO: Mr. S. Aldewereld DATE: May 13, 1948

FROM: J. M. Penton

SUBJECT: BELGIUM

We are commencing discussions for a loan of $16.8 million to Belgium.

The money is for capital equipment and will be divided up as follows:

a) Messrs. John Cockerill & Son - $h million for a steelmill;

b) Ougree Marihaye - $6 million for a steel mill; and

c) Linalux - $6.8 million (partly in European currencies,including Swiss francs) for imported equipment for acentral thermoelectric power station.

At a meeting this morning with the Belgian representative, M. Berger,

the question of end-use control was very briefly discussed. As at present proposed,

the Bank will lend the money to the SNCI (Societe Nationale pour le Credit a lIn-

dustrie) who will in turn lend to the three companies concerned. The SNCI itself

generally exercises some form of end-use control in connection with its normal lend-

ing operations in Belgium, but Berger told us that there would be no objection to

the Bank's having direct relations with the companies.

I would suggest that you or one of your staff should be present at a

meeting which we could hold with the Belgians some time early next week in order to

discuss this subject and decide what sort of clause we should want put into the

Loan Contract.

INTERNATION BANK FOR RECONSTRUCTION AN[ EVELOPMENT

OFFICE MEMORANDUMTO: Mr. W.At>/tliff DATE: May 13, 1948

FROM: J. M. Penton

SUBJECT: Belgian Loan - Linalux

1. You will remember that one of the projects which the Belgianswished to see included in the Loan Contract is the construction of a thermo-electric power station in the Liege basin called Linalux. The total cost ofthe project is estimated at the equivalent of $20.7 million, of which $6.8million will be required in foreign exchange.

2. At the present time, orders have been placed for $2.5 million inSwitzerland, U. S. and Canada. Orders for an additional $625,000 have beenplaced in France, England, Sweden and Czechoslovakia, bringing the total ordersplaced to $3.1 million, and leaving orders to be placed at $3.7 million.

3. The orders placed in Switzerland, U. S. and Canada will requirepayment in currencies which are not readily available to Belgium, and no ques-tion, therefore, arises concerning a loan from the Bank to cover such orders.On the other hand, Belgium does have ample supplies of currencies for ordersplaced in the other countries. The amount involved so far in these last or-ders is, of course, quite small, but it is believed that the total may rise toas much as, but probably not more than, $3 million. Because the Linalux peo-ple are still considering the technical, delivery and price aspects of materi-als they are ordering, no accurate statement can be furnished at this time con-cerning the ultimate destination of the unplaced orders.

4. The problem which arises, therefore, concerns the Bank's attitudetoward material to be obtained from countries whose currencies are readily ava. 1-able to Belgium. The arguments which could be mustered against including the"available" currencies in the loan proceeds are obvious. However, I suggest thatthere are, nevertheless, cogent reasons why the Bank should consider making aloan to cover the entire Linalux foreign exchange requirements.

5. In the first place, the amount of the readily available currenciesis quite small, especially in relation to the $21 million involved in the con-struction of the entire project. Inasmuch as the Bank is also considering theCockerill and Ougree Marihaye projects as well, the amount in question becomesinsignificant in relation to the $40 million, which is the total finance, bothexternal and internal, required in connection with all three projects.

6. Secondly, there is much to be said for simplifying the financing ofthis project through the provision of the full amount of foreign exchange fromone source, i.e., the Bank.

7. The francs needed for domestic purchases of materials have alreadybeen obtained by Linalux, and they are looking to us for the balance of $6.8million. If the Bank should decide to furnish a lesser amount, Linalux would beput to the necessity of obtaining additional funds from the market, which isvery tight. There is a big backlog of reconstruction and rehabilitation sched-uled for 1948 in Belgium, and it is estimated that the domestic money market canfurnish no more than a quarter of the total investment needs this year ($40 mil-lion).

OFFICE SERVICES 17.10

8. Finally, I should like to repeat the point which I made in myletter from Brussels of April"5, that the Linalux project is one of particu-lar importance to the immediate economic welfare of Belgium. Its output isneeded not only for the continued expansion of industry, but would immediatelyresult in a reduction of electricity imported from Germany, for which paymentmust now be made in dollars.

BELGIUM

Notes of Meeting held in Mr. Penton's Officeon May 12, 1948, at 3:30 p.m.

Belgian Loan Negotiations - First Meeting

Present:

1r. PentonM. Berger, Societe Nationale de Credit pour l'Industrie (SNCI)M. Basyn, Alternate Executive Director for BelgiumMr. Burland, Loan DepartmentMr. Broches, Legal DepartmentMr. Fajans, Loan Department

The problems under discussion were:

1. The setup of the loan,

2. The special covenants to be obtained from the Belgian Government,

3. The statutory obligation of the Kingdom of Belgium to assume

responsibility for the liabilities of the SNCI.

After discussion with Mr. Burland, it emerged that the most practieal

setup for the loan appeared to be as follows:

The Bank would lend the 16.8 million to the SNCI, who would in turn

lend the money to the three companies concerned. The SNCI would issue to the

Bank dollar bonds, and would itself receive from the companies promissory notes

expressed in dollars. On being pressed, M. Berger said that he thought it

likely that the Belgian Government would agree to the SNCI endorsing these

promissory notes over to the Bank as security, but Mr. Burland stated that, in

his view, it would be sufficient if the bonds were deposited with a trustee

such as the National Bank of Belgium, who would only release them on authoriza-

tion by the IBRD.

Mr. Penton also pointed out that it would be necessary to ensure

that the dollars were made available to the companies when the time came for

them to amortize their loans, and M. Berger replied that it would be possible

for the Bank to obtain a letter from the Institut Belgo-Luxembourgeois d

Change guaranteeing that the dollars would be made available to the companies

-2-

against Belgian francs at the prevailing rate of exchange. A similar letter

was given in the case of the Luxembourg loan.

With regard to the negative pledge clause, M. Berger stated that

the Belgian Government has never pledged and in all probability will never

pledge any of its assets. Should, however, a negative pledge clause be

accorded in the future to any creditors of Belgium, it appears certain that

the Bank would be placed pari passu with them. In his view'no parliamentary

authorization would be required to accord to the Bank similar treatment as

that extended to any other lender.

At the recuest of Mr. Penton, M. Berger explained to Mr. Broches

the legal structure and mode of operation of the SNCI, repeatedly stressing

the fact that the SNCI is working under special status and that the Belgian

Government can intervene in its activities by enforcing a veto, which is

exercised by the Commissaire du Gouvernement in the organization. Ninety

per cent of the liabilities of the SNCI are in the form of bonds sold to

the public; since 1919 the Government has undertaken to guarantee certain

obligations of the SNCI and has especially guaranteed interest on its bonds.

Later on a new law was passed providing for a Government guarantee for the

principal of the bonds, which now bear signatures of two high officials of

the Ministry of Finance in addition to signatures of two members of the

Management of the organization.

In reply to Mr. Brochest objection that the Government guarantee

to SNCI is not a guarantee of payment, but merely implies that the SNCI will

have sufficient funds to pay to the holders of its bonds, M. Berger and M. Basyn

expressed the opinion that this is identical with a Government guarantee since

the bondholders are practically the sole creditors of the SNOI and would,

therefore, be first in line to receive any funds advanced by the Belgian

Government to the SNCI. M. Berger further stated that it is the special

-3-

legal position of the SNCI which makes the payment to the bondholders of

any funds advanced by the Government automatic and not necessitating any

recourse to a decision of the court. He added that in the purely theoret-

ical case in which the board members of the SNCI, elected by the share-

holders, failed to disburse to the bondholders the funds provided by the

Government, the Governor of the SNCI, appointed by the King, would ultimately

be responsible for doing so. M. Berger also mentioned that the proposed in-

crease of the capital of the SNCI by B.fra. 200,000,000 will be subscribed

by the Belgian State; this will, of course, strengthen the public character

of the organization. Summarizing, M. Berger stressed the fact that the

insistence of the Bank on any additional guarantee of the Belgian Government

for the Bank's loan would delay matters beyond the end of 1948 because of the

necessary parliamentary authorization. This would especially affect ugree

Marihaye which has already placed part of its orders for American equipment.

Mr. Penton said that the possible risk involved appeared to him

to be insignificant, but the fact remains that the Bank is indisputably

bound by its Articles of Agreement. He, therefore, suggested:

1. That the opinion of Belgian coungt1 be sought on the character

and extent of the legal obligation of the Belgian State to pay the liabili-

ties of the SNCI;

2. That the possibility of the Belgian Government giving a nega-

tive pledge to the Bank without having recourse to special legislation be

further investigated in Brussels.

A further point cursorily mentioned in the discussion was that of

handling and guarantee charges. It was stated by M. Berger that the remun-

eration of SNCI will amount to 1/4% as was agreed during Mr. Penton's dis-

cussions in Brussels. Brufina and Banque de Bruxelles, each carrying 50%

of the guarantee of the SNCI loan to Ougree Marihaye, will also charge 1/4%.

-4-

No charge will arise out of a guarantee which the participating companies

will give to SNCI for its loan to Linalux.

Copies to:

Mr. Penton (2)Mr. BurlandMr. Broches

JFajans/pnnMay 13, 1948

INTERNATIONA lANK FOR RECONSTRUCTION AND 4LSPMENT

OFFICE MEMORANDUMTO: Mr. W.A.B. Iliff DATE: May 10, 1948

FROM: Mr. Luxford

SUBJECT: Belgian Loan

I am attaching hereto the following documentswhich were handed to me by Mr. Basyn:

(1) Memorandum from Mr. Vandeputte to Mr. Bergerwith attached memoranduWA by Mr. Jamoulle.

\J (2) Original power of attorney from Societe Na-tionale to Mr. Berger.

x. (3) English translation of Mr. Berger's power ofattorney.

O' t4'-.

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pour Mr. , Directeur E IG ER

minute de la procuration liconfTrfe par la S...I.aux fins de n'gocier et deconclure 1'emprunt.

Before us .................. notary residing at Brussels, hasapeared:

The ".ntional Induistrial Credit Comprany, Inc." with -eadquartersat Brussels, Boulevard de 'Jaterloo, Mo. 16.

Dstablished in nura:uance of the law of 16 Aarch 1919, (honiteurBelge of Iarch 20, 1919), with statutes originally drawn up by the clerks......... ,......., and ..................... , both notaries at Brussels, onJune 2, 1919, nublished ir the Suiplace t of the .oritemr Belge on June 9,10, and 11, 1919, Yo. 4644, and last modified, according to a document re-ceived by us, the undcersigned notary Cn Iarch 26, 1940, oublished in theunioe:.ent f the kaoiteur Belge of Auril 12, 1940, Yo. 3876 and a-orovedboyal Decree up-ted ..................Aril 1940, (M.oriteur .elge, Arril 6,

191-0), Cormmercial Resister of Brussels, ,Io. 2008.

Here represented by:

1. hr........................, civil engineer2. . ........................ Doctor of Laws

both end irectors of sai C .any, an_ ointed to thefe qositions, to wit:

1. Mr. ..............., by resolution of the ordinary generalmeeting of the shareholders held 1.rc" 25, 1947 nublished in the Supolementof the iiioniteur lEe or the follo in april 11115 Mo. 646.

2.... ............... , by resolution of the ordinary generalmeetAng of the c*are!olders held liarc! 27, 195 -oublished in the supplcmentof the Moniteur Beige on the folloing Anril 16/17, Mo. 3667.

Acting in compliance with paragraph one, Article 21 of the Statutes,which roads:

"All acts, other than those of the day to C_-- -ana eent, whichcomit the Co pany, and all powers and -owers of attorney are silned unlessthere 'e a special dele ation of powers from the Board of Directors, either bythe Gover:or and the Vice-ovy rr, or ':; one of theand one Director, or bytwo Directors, who shall not .ave to ive proof with regard to third cartiesof a resolution taken beforerand by the Board of Directors,"

The Comnany, represented as above stated, herebr declares thatpower of attorney i given to:

Mr. Pierre Berger, Director of the COn and Director of theNational Bank of Belgium, residing at Antwerp,............. .

For the ouroose of contracting in the nae of the Iational Indus-trial Credit Cozrn a loLn of aproximately seveitee. _illion U.S. dollarsith the Internaonal >rk 'or .econstruction and De-elor-ent of laslington

or simIlar institutions, of settling the tyne of the loan and the form of de-benture to be gi-:er to the lending; institutions, the dates at -::hich the borrowedca !tal is to be. e available, the reriod of amortization, thc interest to benaid on the debentures, the time and place of nayment, and also the eventual

2.

commissions to be allowed, anI in general of tai :i all masnres and decisions

pertaining to the above :aentioned a operatio, just as it could be done bythe mandator comnany itself.

For the above nurnosee to conclude and sign all deeds and documents

and in veneral do wlatever is necessary for the execution of the present com-

mission.

This includes equally the right to appoint a substitute.

Given in original at Trussels the above text having been read, the

representatives of the Ch: vn- have signed with us.

Le 20.4.48.

NOTE pour Monsieur BERGER.--------------

M. JAMOULLE me remet la note ci-jointe, concernant la

portee de la garantie consentie par l'Etat en faveur des por-

teurs de nos obligations.

Je me rallie aux conclusions de la dite note et je suis

convaincu qu'il n'y a pas moyen de changer les modalites de

la garantie accordde par l'Etat.

R. VANDEPUTTE.

LA ?:i7 CIB A2CC7D L 1 K . .. . .

ui7 St -t'

T e'. c, .31 ,. 1-3 ,-

3 1p, t 3l Arc

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1173-7 1 '. C '. 17 1 1 ' 3 T:' 7 +3 > C0

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Il ('77. 7 .3,/.

1 2.

Dans la conception du ldgislateur, si la S.N.C.I. nepouvait pas payer, l'Etat mettrait les fonds : la dispositionde la Soci6te'

Les poursuites contre l'Eitat ne se concevaient doncpas. La Societe devait r4gler ses 4cheances d'intarat au moyende fords mis a sa disposition par l'Etat.

Lorsqu'en 1934, la garantie de l']jtat a ete 6tendueau principal des obligations, on n'a nas cherch6 davantage apr4ciser cette garantie.

II faut en cormIure que la dette n'est pas solidaireau sens du droit civil.

Le porteur ne aeut pas s'adresser indiff'remment ala S.N.C.I. ou 'a l'tat. Les titres mentionnent d'ailleurs queleur remboursement . l'achdance et le paiement des coupons d'in-terat ont lieu au sige de la Societe Nationale de Credit a l'In-dustrie ' Bruxelles et aux guichets de la Banque Nationale deBelgique en province (La Societe Nationale elle-meme n'a pas desiege en province). C'est la que le porteur est tenu de presen-ter ses titres et coupons.

Avant de recourir a l'Etat, le porteur n'a pas a exe-cuter la S.N.C.I. La garantie de l'Etat n'est pas a ce point sub-sidiaire que la S.N.C.I. devrait PStre mise en liquidation etexecut*e avant que l'Etat n'intervienne. Ce n'est pas cette si-gnification que 'on donne a. la garantie de l'Etat. Le texte dela loi prerappelde de 1019 le montre bien, en ce qui concerneles int'r~ts -puisqu'il prevoit le remboursement des sommes avan-cues par l'Etat, au moyen des benefices de l'anr'e suivante- etil ne se congoit pas qu'il en aille autrement pour le principaldes obligations. d'un non-paiementpar la S.N.C.I.

L'Etat devrait donc, dans l'hypothese, -air; face ason engagement, constat6 sur chacun des titres 6mis, et cela sansprocedure prealable contre la Societe Nationale.

Le seul retard que pour;ait subir un tel paiement, ceserait celui qu'occasionneraient les formalites administrativesde mise a disposition de la Societ4 Nationale, des fonds ndces-saires.

La garantie de l'Etat, non solidaire en droit strict,apparalt cependant telle en fait et est de nature a donner tousapaisements aux porteurs.

Le 20.4.48.

The World Rank Group

Record Removal Notice & Records Management

File Title Barcode No.Steel and Power Equipment Project - Industry - Belgium - Loan 0014 - P037358 - Negotiations -Volume 1 1535518

Document Date Document Type

04 May, 1948 Letter

Correspondents I ParticipantsTo: National Industrial Credit CompanyFrom: JG. Penninckx and R. Vandeputte

Subject / TitleBelgian Loan Negotiations

Exception(s)Information Provided by Member Countries or Third Parties in Confidence

Additional Comments

The item(s) identified above has/have beenremoved in accordance with The World BankPolicy on Access to Information or otherdisclosure policies of the World Bank Group.

Withdrawn by Date

Tonya Ceesay January 05, 2017

Archives 01 (March 2017)

INTERNATIONAL R

RECONSTRUCTION AND OPMENT

S. 4.

INTERNATI BANK FOR RECONSTRUCTION EVELOPMENT

OFFICE MEMORANDUMTO: Mr. W.A.B. Iliff DATE: April 27, 1948

FROM: Mr. Luxford

SUBJECT: Belgian Loan -

The Bank Mission to Belr'ium has submitted to the LegalDepartment for its comments certain documents relating to theSociete Nationale pour le Credit a l'Industrie. I understandthat the Belgian officials with whom the representatives ofthe Bank have talked have taken the position that no legis-lative action is needed to enable the Belgian Government toguarantee a loan from the Bank to Societe Nationale becauseunder the Charter of Societe Nationale all of its obligationscarry the guarantee of the Belgian State,

Article 11 of the Charter of Societe Nationale provides:

The State guarantees, on the conditions andwithin the limits provided by law, the re-payment of the capital and the payment ofinterest on the bonds and 'bons de caisset

issued by virtue of the preceding article.

In the event that the proceeds from operationsare insufficient to permit the repayment of'bons de caisse' and bonds as well as the fullpayment of the interest thereon, the Statewill furnish to the corporation the amountsnecessary to make up the difference.

The disbursements which the State might beobliged to make by virtue of its guaranteewill be reimbursed in the principal amountthereof together with interest thereon at thesame rate as on the guaranteed obligations asa first charge on the net income during thenext fiscal year and if, necessary, subsequentfiscal years.

The legal authority for this Charter provision is foundin a number of statutes and decrees which were promulgated atvarious times beginning in 1919,

OFFICE SERVICES 17-10

2 - Mr. VW.A.B. Iliff - 4/27/48

You will notice that while Article 11 provides thatthe State guarantees the obligations of Societe Nationale,it does not grant to the creditors of Societe Nationale theright to proceed directly against the State in the eventof a default by Societe Nationale. The State undertakesto furnish Societe Nationale with sufficient funds to meetits obligations and the creditor must proceed against SocieteNationale. The guarantee afforded by the Charter of SocieteNationale thus differs materially from the type of guaranteewhich the Bank received from France (Guarantee Agreement,Article II) and which it will receive from Chile (GuaranteeAgreements, Article II). Whether or not the Belgian Govern-ment, under existing law, could give a guarantee of theFrench and Chilean type seems doubtful and it is a questionof Belgian constitutional law upon which we would need theopinion of Belgian counsel if the point were pressed.

It is the policy of the Bank to include in guaranteeagreements with its members, in addition to the guaranteeproper, certain covenants such as covenants with respect tosecurity (negative pledge clause), consultation and thefurnishing of information. Whether such or similar covenants,if entered into by the Belgian Government without statutoryauthorization, would be binding on the Kingdom of Belgium isagain a question of Belgian constitutional law, but I shouldthink that it would be open to the gravest doubt.

In conclusion I feel that it would be advisable toinform the Belgians that the Bank is not satisfied that theBelgian Government under the Charter of Societe Nationaleand the legislation relating to that institution, could enterinto a guarantee agreement of the type desired by the Bankand that the Bank on the basis of its present informationand in the absence of a contrary opinion by Belgian counselacceptable to the Bank, would therefore have to insist uponparliamentary action with respect to the guarantee agreementin the form of enabling legislation or of ratification.

C7I,4

Bruxelles, le 19 avril 1948.

LE GOUVERNEUR -

Mon cher Penton,

J'ai bien requ votre lettre du 16 avril au sujetdu voyage de Berger h Washington.

Je m'en suis entretenu ce matin avec Berger etvoici ce que nous avons decide:

Il est h peu pres impossible de modifier le pro-gramme dtabli;malgr6 tous nos efforts nous ne sommes pasparvenus h assurer le passage de Berger pour une dateposterieure aN celle qu'il avait choisie. Le retour pre-sentedes difficultes plus grandes encore.

Dans ces conditions, je pense, 6tant donne queBerger devra avoir une sdrie d'entretiens avec les ban-ques de New York que le mieux est qu'il parte h la dateindiqude pour New York on". il arrivera le I mai. Il y res-tera une dizaine de jours pendant lesquels vous pourreztranquillement faire votre travail h Washington avec cetavantage que si pendant cette pdriode vous aviez besoind'un renseignement, Berger serait h votre disposition hNew York.

- Dans ces conditions, prenez votre temps pour ter-miner vos affaires aN Paris.

Je pense que tout s'arrangera parfaitement. Ber-ger reserve la fin de son s jour aux Etats-Unis pour Was-hington.

Il compte quitter New York pour rentrer ABruxelles le 31 mai sur le "Stavelot".

J'ai beaucoup appr6ci6, moi aussi, notre agrea-ble voyage h Paris. Je vous y souhaite une bonne fin desejour et un bon voyage de retour A Washington,

Mr. John M. PENTON,International Bank for Reconstructionand Development,

77, avenue des Champs Elysdes,PARIS VIIIe.

BANQUE NATIONALE DE BELGIQU SUITE No I

19/4/48

Il est possible rue je vous y retrouve, car jepars moi-mgme sur le ":ueen Elizabeth" de Cherbourg jeu-di prochain.

Croyez moi je vous prie, mon cher Penton,

votre tout devou6

/z

INTERNATIONAL BANK FOR RECOW UCTION AND DEVELOPMENT

OFFICE MEMORANDUMDATE: Aoril 19 /48

TO: W. Hill

FROM: J. Rucinski

SUBJECT: B3LGIAf LOA,, l t1 S.1T.C.T.

I think the attachedmemorandinm will interest you.

I shall send Mr. Broches'oninion on the subject as soon as

I receive it.

Jucinski /mo.Attach.l.

OFFICE SERVICES 17.10

INTERNATIONAl NNK FOR RECONSTRUCTION AND ^fELOPMENT

OFFICE MEMORANDUMTO: Mr. J. Ru DATE: April 19, 1948

FROM: A.:tr

SUBJECT: The Belgian Loan qnd the Z.N.C.I.

Mr. Droches called Saturday to say that he had examined the papers

on the S.Y.C.I. and had found nothing to alter his original opinion that the

Government guarantee to S.N.C.I.was not the kind the Bank normally accepted,

since no direct right would carry from the T.B.R.D. to the Belgian Government.

Ir. Broches also said that the Government guarantee to the S.N.C.I. is not

wide enough to cover a negative pledge or a stipulation for consultation

between the Bank and the Belgian Government prior to further increase in

indebtedness.

Mr. Broches is to prepare a memorandur. giving the basis for his

opinion.

It was therefore Mr. Broches' opinion that unless legislation already

existed peritting the Belgian Government to muarantee an I.D.7.D. loan to the

S. T .C.I. that the Government would have to enact the necessary legislation to

permit it to rake such a guarantee.

OFFICE SERVICES 17-10

1rrir11lii di e ' nt eret ciitons de la

0UGREE-tm L LJ L

~ 3le'encrcet~~ olde '6i orerch~ olde~ r~tat ~u 'reT~nt de ' restalt d~l

1948 -265.C0.00- O.000 0 -175.cco.coc

9 - 265.C00.CO ' - ' 300.00C.000 - 175.000.Coo

1995 - 225.1C5.000 t - t 300.000.000 - 175.000.0001950 - .5 '00 265.COO.000 - ' 300.OCC.000 ' - ' 175.000.000

195 ' 37.3D0.CCO 1822.250.000 I - '300.000.0CC - '1?5.000.000

1S5337.850.000 18900.000 - 300.000.000 15.su.00 159.100.000

11;54: 3781. 113. 600. O0c 30.00.00)CC0.0 1.0.000 143.20O.Coo

1955 37.850.000 2715..050.0C- 3.4.00.000 15.900. cO 1 127.300.000

1956 37.850.000 3.600.000 30.CC.000 ' 210.000.000 t 15.90.000 111.400.000

195? 37.9C0.000 -030.OCO.000 240.000.000 15.900.000 95 .1500.C001956 - -~C.G 7.0.0 30.000.000 150.OCC.OCO 15.900.000 ' 19.400.COO

1959 - 30.000.000 120.000.000 15.900.000 63.700.000

195 - - 3C.000.C 90.000.000 15.900.000 47.800.0001959 - - 30.000.000 ' 10.000.000 115.900.000 3.900.000

1960 - - 30.000.000 30.000.000 15.900.000 16.000.000

193 - 1 - L30.000.000 - i 16.C.000 -

Le 19 a~~J1948.

16 April 1948

Monsieur Maurice Prere.,Gouverneur do la Banque Nationale de Belgique,Bruxelles.

Xy' dear Prere,

I had arranged with Berger that he would come to Washington on aboutlst May to open negotiations for the loan to 3egiu. Unfortunately I havebecome very tied up here in Paris and doubt if I get back to Aneriea myselfmch before May 3rd or 4th, even if I take an aeroplane. my9 assistantsare doing a certain amount of preliminary work already in Washington, butthe final recommendation on the 3ank's policy will be mad* by me which meansa further delay of about a week before we shall be ready to negotiate.

I am letting you know this at once since I am afraid that it Wq upsetBerger t s timp-table; I am extremely sorry that I am unable to adhere to it,but am wondering whether Berger's visit to Washington could be retarded f~ra fortnight. I feel quit e sure the Bank would appreciate such a move onyour part, to say nothing of myself since I know that is Eq not fit in withcertain other projected arrangements at the Banque Nationale.

Perhaps it would not be too much to ask you whether you could let meknow what you feel about this at this address in Paris.

Thank you once again for a very pleasant stay in 3russels and a mostagreeable journey to Paris.

Tours very sincerely,

JOHN M. ?EOS

. .* m 12 triX 193

,aan +*iat anatt win m t.I.Egmmbori -% eq* s * Vri Laebor i wen.In gomoifrthe riot

ofprohasos for ra 1rad1 ,qipmet ini aco dnswith t)e se aale I

al ea tra lsa .e t

A. lgl ic tes involved in hawin the fae st jatosal. do Credit

s 1' ndu rio as th orwr The $.K. .1. is a qal-oen

eal d dt is aratd by te % a.f iovelant.

th rM17 ueto tU V dt rinD4 whe ther the ge.ral gaw -

an ee y te*1l Ant soere Vf *.N.C..'. QbI gatIao will to

*.Th rea a..h bema SRCI acd the *14ga. eara hc

ilb h Vltiat ie i daes fth loanfra. the IBA).

1. 1nt rsut tV b hargod b .L.I. and otberst alti-

itresl harin

2. IL ha enpee thet varyin amertisatim n ods

befiedfo ach o he thrse profi ct an h browrs

ejy th ri to antip rep met p? to the e

the aaorte a ion dad.

* r I (JOh GeekeriU) steel pro.ct,

x".were inclded in teBegan 8ubizion, to the C. E.. . in

Paris. Qury hat ts ah Bank9 i plicy coneerningd iao

ing of proact inoldd in E. .. * stiaates?

D. -oreig curreney r flis or L nalux project -at . illion.

It is riot yet ertaini in ic o! sev al atterI iVO Cojin rise f.r-

eign purchases will be mad fr aoat of the $6.3 iilUio. Of the

$3.l miillion in f~O?5ig1 Dirohase& there orders have been or are about

to "e lac d, . ilion are aI Iat V 3Wit erlawd, U.S. and

dand* Mout tf te remainin, order are bing placed in France.

QU7ry: Th what extent will te Bank be prepared to finance the for-

aigni exehang reqnirinents of Linalux?

E T of f O to 200 Aillion from the zol an subscription

to the lank.

III. Role of the IfTD in a uropean Clearing Union

Mr. Triffin of the Intornatiwnal Mntary Fund has been tiving ceni4-

erable attention to the problems involved in the extension to other Eiropean c)un-

tries of the clsaring a greement concluded last year wmong the Benelux countries,

4rance nd Italy. P. has proposed that a "C;pean ClearinC ion be created from

the p'resent modest beginnings throuih the miltilateralization of: oxiating bilat-

eral payrtents agraeeents eng the Europesn nations participating in the ,uropean

ecovery Progran. From the point of view of a creditor country, this would re-

re that the a re ate credits ex4ended b a creditor country to all other par-

tici atin countries be -ade available to each such eomntry for settlinj. halances

with the country itendin -the credit. Fro the point of view of a debtor coum-

try, the sta of all credits 7ade available to it y all the participating countries

could be utilized to sttle balanes with any partioipatini creditor nation.tend to

Snoe mtilat'alisetion of b:ilateral payments a-reenents would

-3-

make the currencies of 7uropean nreditor nations (e.g. Belar francs) scarce,

Mr. riffin pronoses that the und sel su-Q currencies to 7emers ef the Clear-

in- Union to counteract any Chortage of scarCe currencies. The dollar deficit

o he nations inthe ' learing nin ould be covered by the kropean Cooperation

Administration, "akin, it unnecessary for the Fund to sell dollars to the uamber

countries.

Some countries, notably reat tai and Denmark, wo-ld Ko at a diA-

advantage in joining a clearing arran ement beeause they are heavily in debt under

exttng -ayment- agreeents. 1ne we oI liini t this b rrier to multilateral-

isation wouId be to place countriev -it" heavy debit balnces in a current position

by converting existin- balances into long-te Indebtedness. W- this connection,

Mr. Trnfin inquired whether the nank's Articles of Agrement would perit it to

extend loans for this 'urpose to reat Fritain and Denmark. ne emphasised that

he was merely interested in ex loin. all posyiblitie of unfreesing the heavy

debit balances of Great Britain and Denmark and was not suggesting at this time

That the IR make loans for this purpos.

aaterston/jtmvp

cc: Mr. Tillr. Penton

79 440

PLAZAHOT

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INTERNATIONAL BANk FOR 4RECONSTRUCTIO D DEVELOPMENT

]ROUTING SLDate q

TO- Name Room No.

2

3

FOR- _1

Action Initialing

Approval Preparing Reply

Comment Previous Papers

Filing Noting and Returning

Full Report Recommendation

S Information Signature

REMA 4 S

FROM-

orsCed sEIVoCES IS-12

WI,

Wi G ARCHIVES

y c a~r ~jalter*

D uring th pnrod Tatarotoc, R nt and I k*ve spent here, we have

the LinnAluxi ree Esribasy and Cookeriul projects. They all seem

perfectly tra Which arc jns tcfiable on San=10 and c=.

.1a 'nds. The two steel fiA's 5ave coneervative rogra, does the

rest h be steel industry, wtieh has been puttin ts profits, derived frma

.asla at hl h prices, back into the industry. ,her. is a rea deal of mod-

ernisation goin, on at. all the plants, anid the industry seems t have no 13-

lusions on the score tia these good times cannot last sich longer, and that

their Job ~nm is to put themselves in a sound c(peti tAv pe tion for later

on. ebert advbses that the Belgans are efficient, low cost producers of

steel and that their present progra are not cone d with an expansion of

crude steel capacity, but simply with shift. in the nature of the finished

products to kp pace iith current chlnes in demand. Thse may wall be a mild

expansion of DAutOh oa aity, but Uhs abvuid not be aufficient to onbarrass

the Bel ian producer., and of eeurse, Ihere I no questiou of cutting dsa pre-

seat Belian capacity. bert has nar tore reservatios about British, and

partioula3ly french expansion.

The Lrinalux project is more c ated from the Bank's point of vi,

but 41t is so intricatel, cornnected with t induus try of the Liege basin, in-

cluding, of course, the two steel firms in which we are interested, and it is

enerally such a desirable developsunt, that we all feel we should4 like to

pr0ss for some way to bQ found to help the;. I hed tought that Wt. milht make

an estimate of their needs in haur currency (incldiin _wiss Francs) and cover

that outri )t in any ease. Tbie, however, mig-ht man that we should incur the

accusation that we were directinh where the proceeds of our loan were to be

DE..LASSW.IED

WBG ARCHIVES

5spqzt, 10 *u t ha we oover al their neYd,, iroluding ster'ing and ranch

rans, but tht we as" te alian. up sufficient 3.1 1*R francs to cover

-ofty part. in ci Il, this would eeonomise for 1W th xp

be used to buy 03 lian 1'racs, n the lon run, the Cmli*3s @ai be made

to Vbi, 3.lgi woild betle oad urrc either. ei ce, if by were to

buy uuipmant under their -A-mats aIre nt in 'ranoe and Uand, tey sould

reduce pro taatC the asount of gold or doflare rec ivwad hen the balance; wr

cleared. ~'he calculation is adittedly complicated, but Al try to qplaiR

t :mre fully when 7 return. alto wondered wbethar we cou cover the -,ige

francs, ',erhapo through e d'eal with the E... as I unlerstawi we look like

buin~ aUA to do for 1ollamd.

T have discussed the qaustioU of il3.1 ptt ing up ne more franca

her 18 c. iaIl subscripton. rore said that this would cause him aer-

ra-ent because he was oldin the Minis tar of iance down as tihtly as poSe

siblo aid had only just cently succeeded t' akin- an aeemet width him to

aro l ate the law of qay 19140 prvidin for advances from the Eational Bank to

te 5tato. Ng wandered wh-ther it could not be done later on as part of the

tarshal-. arrangements. I think what he had in Lind was to isae frane fram

h. 18 and 1nel an equivalent amount of Local currency blookd under the ar-

ran Vt wit the U.S.A. tbis does not sound very practical, but, at any rate,

it was not a definite refusal. that is really worrying, the Belgians is the pro-

posal, which I understand has been made in Washingt., that the MrW U Cou-

tries should no muore be able to drew dollars from the FmW. Sine they are, how-

ever, to be ,lloed to draw other currencies, the ,elians fear thbq will all

d w elman francs and ,at 4elgum will ba unable to draw dollars. This will

be tantai-ount to an increas, in Btel ian ports on ce-dit.

I poiNted e t Oawynes, the Vice Governor of the Bank, and de Voghel,

DECLAMiFED

JAN 12HWB3G ARCHIVES

tfat we had in mr-d only Ce*p rativel suall sums, say Fe .200 3illons, or

say 3 or Lk million do lrv, at which thy soee auch relieved. Ta 1Mtister

of Finance, to wbm also broached the subject, said he wou1l be wiUling to

'ive iz aroenent to a wip"11 am like this f necesaay, but, of ours,, he

will e to et 'reie' s agrv. t fee slf that the vl ian nw now

what w( want and our reasons for askin it, d at the best way tohande

the matter is not to link a contribution in francs directly to the Inalaz pros-

oct, Mat to fix a& roughaly equivalent mu and, when the time come, proaent the

request, prhaps as coendition of the loan. think we hav a go hnso

gettin g a Mr~ooate suu if we are firm.

The Mtnistr of FLnance still wants the 3ank's loan to be Iven tbroag

te . . . . We had a little trouble fixin, the tet on which te S..C.I.

would exten to the actual campanies. atQrsto c iv. yu the detail, bUt

it u s ident to say here that a ter a show of firmness we got their rian-

rat 4 on down frow 15 to l/k, which, in 1 c aireumtano.., a s to us justi-

Liad. The mattnr was further complioated y 1g. Marihayu hwvin, made aa

inaccurate sta Vt in the proapctus which they hat isMned in eonnection with

the inral fnnoing of the :m_ w, but ti ha. now beon leared up satis.

factorily. Ac i raieg the S.M.(.I, their bada unoubtedly carry an adaquate

-tate gurantee and do it tis way would awoid l4ivlaon, which wMl cer-

nto the xov ment and take eom time. ,i the other

haxnd, Ie 3rk .ay feel t need. uow ;ort oC ndgative p1e frim the 13lgioae.

I do not tink this y Itself will entail special le.I4latma, but W ouda

t. avoid causing thi we posibly can.

n I .w lsken. today, he zrouht .p the q.estion of th. railways,

which are to be electrid. I told him that we had sme informatinam about this

in the ank, ut Phat the project had not bcen submitted to us here. He said

DECLASSWLIED

WBG ARCHIVES

that he attached imotneto this pro3.ct, ae weUl as to one or two mr

ofa similar naue but T replied that it was ret~hr late to start esdrg

the. plans now, but trt if he really felt hat thy ought to be suitted to

the ank, oot, , iit C) Uig5rnt, Who iS n4 in with

the Prince ReeAnt, 51ght 11an tak to the Bank about it. Of @0n2% the

main idea beit. thip io to aid the *inttr a r al1 his needs (which

are hea7) i the internl market and the project or th railways would have

to be ex.5ined by the -!ank in this i14t. If do poet. de see 14r. 0ar or

sonebody, it eight do no harm also to mphesioe our nued for Bel ian france.

Prom te standpoint of a sound lo;n, I would m 1h raher finane the

three project. wit which we have been dealinu. -hey are l1 more than justi-

tied oAay, and should be able to repay withot undue difficultr. The

desirable amortisaton period varies in each oase, witb I4uah ag to ao-

Qept 1$-20 years, lugree - 10 years, and Cookerill 311. All ois will be subject

to further debate and negotiation in ashinton. The iigree and Gockerill requeste

were included in the Ialgin estimates for C.i.C. In this etin, ateratM

dwas ahow' a copy of a teleram frow the Pl.lau Ebsesy in Washigtmsin that 20 million dollars had been aJllosted for the first 3 monh of E.R.P.

to elgium. This does not sn very much,

roadly apeakiW, te concluaion which I drer in the report of ov

viow last Jenuary hav. roved to be correct. The flel tag are not in too bad

a position at present, although their exports are falling sm3what because other

countries cannot pay for them. T.ir dollar position today is not undu2 tight,

althoi most of it is borrowed orwy. Altbough the ratio of extermal to intaval

indebtedness It light, the 'ank, if it makes a loan to se14, should, neverthe-

les watch the short-tern fore n debt position rather Oarefully, as the IPelgiane

are Certain to seek %urther loans abroad in the coming months. By financin

-projec-to, h1oever, the :ank is attempting; to help the 'elgians to put

COFIDWNTAL

thr indutriee en a. modrn footine und thus maita their a.l-1porVtan

competit e -postio . In vie t lu's evan situatio, I el tbat

Sa I the moet desirable ore a hel awl rovidi, that thb um 1avOlYed

are moderate, quit. Juetilie4.

The .1 gts have a uneed their intention et Mdin rer, a dir.

ector of the ?National B)ank and or the 3.J.C. T. to ~ashin ton at the beginning

sy to neti e the loan. This shoul bari ht as tar as tbI'n O gos.,

on a %o Ot have to stay to ion. n Paris, ae i atrstn ad w

can m e to prepare the draft of r report. should be ratefl i

they ould be 4 iA opportunity t - d so on their retura. I auggest tat it

should, hoever, be kept in provailonal ftormi until I -at back, nd that all

Aection1 of the report, in-ludin the technic.l reorta on the projcta, hould

e eraled tojthr atter I been able t. consider tV .

Your. Zinei'e y,

John Penton

The World Sank Group

rY4-~ArchoIvesRecord Removal Notice & Records Management

File Title Barcode No.Steel and Power Equipment Project - Industry - Belgium - Loan 0014 - P037358 - Bonds - Volume 1

1535518

Document Date Document Type

01 April, 1948 Memorandum

Correspondents / ParticipantsTo: Mr. W.A.B. Iliff, Loan DirectorFrom: D. Grena de Iongh, Treasurer

Subject / TitleCredits to Belgian Steel Industry

Exception(s)Information Provided by Member Countries or Third Parties in Confidence

Additional Comments

The item(s) identified above has/have beenremoved in accordance with The World BankPolicy on Access to Information or otherdisclosure policies of the World Bank Group.

Withdrawn by Date

Tonya Ceesay January 05, 2017

Archives 01 (March 2017)

Arril1 1,19.

Dearr. Ftch,

-,ou for your letter :atec arc 24 witht

encloSurso. The lettnrs from the Natlonal Bank of 3i iu

Sth inster of Pational Re-equipment are returned here-

wlth.

Yours sincerely

Walter ill,Assistant Loan Director.

Mr. John n. Fitch,SChlef, M-inerin- ,iision,7x-ort-T -orort 'ank o" AashIngton,ashinrton 25, .c.

russels, March 25th, I9h8.

Mr. M1ter Hill,International sank for Recotruction

and L;evelopwent1818 "i StreetWashington D.C. (6)

Mr dear alter,

During the past ten days our work has been progressing with the

result that the outlines of the Belian proposals are begnning to take shape.

Cur activities have centered around three projects: those of John .ockerill,

cigre-xarihaq. and Linalux. The general plan of action has been to examine

eac project fror the technical as well as economic point of view and to assess

the relationship between then, the ten-year investvnt ograa and the belgian

ecnn. We are also gathering infozmation coneerning~ the Socia l Iationalae

de Crdit 1'a lIndustrie, the quasi-cvr tal body to which it is prposed

that the loan be wade, and its relationship to the overnment, particularly to

determine whether a loan by the hank to he S.N.C.I. would satisfy our require-

,ent for a gar t guarantee. Because of the internal political situatia,

it is practically certain that the (iwernzent will be mnilling to req-juest spe"

cial legislation guaranteeing a loan frog the Bank. The A.N.C.I. is a creature

of the belgian Jovernment and its oper Ations are in fact under the complete

control of the belgian Minister of Finance. If ae words on the S.t..X. honds

and enabling statutes and regulations wean what they say, it would seem that

there is edequate basis for a loan by te 3ank to the S.N..I. However, we

have not yet CeXpleted our studies on the subject. e are also looking into

the connection between the projects subwitted to us and .i.P. It has not been

possible so far to o tain an analysis of the projects included in the subuei-

sions to t-e Paris Conference but we have reason to believe that we can get the

inforwation eventually.

t11e 4Stia of our iJ in Was t of e t yar invest-

m*nt pan and the detailed qutionnafr. Ceeigpoee proJocts which I

wint to Delgiwm prior to our d*parturw, I a ntertinedi te voe s s mgt

fiid other proJects waitiung besides those us bad hr ebout in as he

coa1 rinng I dsry, for emlsee to uffr a prtAni~iys fo iac

Rsfle, 4ncordig to infota~i furzdshed us in Washigth y e Islis they

w Vl require abu $7 zmiin inports 7sc yr or tnyr to ?e-quip

5h ie. M. .87yU had atso meiond that sa.on.s had appr ahdthe S.4 ..or he el at iaowd *enk to fitann beprneo the Je u berty ships from

the U.S.At.

Th. q.sticniAir* we had seuit ahead au w usi worth e troub

we took to do e ie we f d ex nt presentaton. oer, t Cokerl

I4d nalx when we arrived. There were, osevn, no other projects to be pre-

sa~ted and Vt beoa. appait that no other. were likely to be presented, at

la I-, t:il e Were .1'r, im.Wi tt*eepuno te Jobn ckvrill &=d

i,,t prbect., the :,el Nati aa1 Wank was witaht infrati on nc aIng

other Individual projet., asuoh as those for the r.-eqiwunt of the co&2.

sinee, since each firm i proc with it. ez rioqui t pro iad

naaay tiere is rio govenetlsnrladn

Wehvs 14n o ige several tims, where all the conern. which

have Oesente prejecs are looat., for dstalled discasin of tbefr pro3.eta.

thde uholo, I ca" report tat m ockeril1 and aAgW(oM et i stageq

aee Vo oer no s gfic~at C tpliaens, 4 t, kuwever, stll look into

some aspeat. w h are no a e loty cear V o not spe Vhs any

mutabl. ?roblem will arise eo far a. the steel project. are conacrned,

h hvs conveyed to everyone here the reservations we h aessig

inalaIX and the Belgians concde the reasoraalenevs our position regarding

the in&ncing of the loss in exporta. The poaint out, however, that Ualu,

is of prine iMportance because it supplies cheap eurrent to industry in the

UIlge, Nsair and uabourg areas of the "ountry. here is al4s a close c-

neaction between John ;ockerill, fmgrds-.arihe and Linalug since the steel

concerns draw upon Linalax for their eney. The aelgans he,

moreo-er, that the erection of this power station will !ot cnly provide an 15-

portent and veryr necessary reserve of power, since the req ireientL of the L4.eg

basin are deronstrably increasing annually, t it will o i rate the coun

try frca its depndence on importation of power frw c:

n orein exchange. Another iipWrtant feature of the -ian is that uwing to

the cetralisation of' the generation of power for the industaies of the district

economies which are estimated to a Vont to about 192,000

one o Ceal annualy, valued at present prices at fr. 61 millions. ,e are

going into all this as carefully as possible.

Yours ever,

s i pdt John

EXPORT-IMPORT BANK OF WASHINGTON

WASHINGTON 25, D. C.

CAB1LE ADDRESS"EXIMBANK"

March 24, 1948

Mr. Walter Hill,Assistant Loan Director,International Bank for Reconstruc-

tion and Development,Washington, D. C. J ,

Dear Mr. Hill:

As of possible interest to you in your consideration

of the loan application of the Ougree-Marihaye Steel Works,

I am enclosing a March 1 letter from the Manager of the

National Bank of Belgium, to which is attached copy of a

February 27 letter from the Minister of National Reequipment.

Also enclosed are copies of our translations of the letters

referred to.

Sincerely yours,

John D. FitchChief, Engineering Division

Enclosures

aiX)

CD

S D

NatiArn:: iankoIf Bekiun.

rc ist, 9I8

r. Wr in, b rmnxport-Ilrort inkshingtor

Mr. reident,

e hArve been ap roC'hed by The tee Wof Qutree-Marihazye whioh are presently in negytIation withyou :with e view to obtMininF the necesery credit toac cire ree u fMteri&L in the U.it too.

They Wvise ue that yon imve inoiioted thedesire tL .t a fora1 ae urance shrw2A >e ;ivcn you thatthe price of thir saoe k strbai ~ilL rot oc inclue: inthe r r te rshjeh de}4uia y ruidt in oornectiL n -iththe are LL isLm,

adth a view to a etIng yur ashes, sehave the honor to :obhnit herraith, copy of~ a diestchrignen by the Minieter of W tion i1 heer:ivnent, h~ ohsves you the oeoeomtry .:mrices.

The - irceur(K ged)

F, De Vogh0V

.inistry of

1el irg mtor ryY2t P 1OOugroe-brih ye

Mon ieu 1. tou reur:

I vethe honorto fim to you y ettrofebrtar 12 n, an' to 1luci a t fin~n i o~et of the

- m V u C- te wibe te , - we i- re

n~'rt-i. *rt kAbnk it to corit t ct:iitin in th neitdut'.a lop o iL lr ,n i o n h .. utin

I ye j d 1 ioni cMeno to t. e

no Oth; 1, eM C

r e r rv t 1 r. A !. Coer ner 0 t d tO:

the:N. s atn t te t .2 su inota) e

Ifs-sA r0 , h C i Q j~o "w brf on tno e of L n Sy E k no f 1 r a

i L o tr th

i , qrnwianr M oulereur, atc, etc.

- ge (P.do Grxote)

To~~~ ~~ ,o "xrl o enuofth Ntional 1 en r f or 1; um

S.r.o. to onversatioi 61: at the oci~t# ' atioru le

o Cr t t'frvu ric on the 1pth o arch 1 .

S. terston, oi7 t.r Int rn tIo l an , - e

rr, Van utt or t er losrv :ocu ents an. urt e uoreasse~ ,or sou. generaI inior:uatlon regariing the :.. .1.

Ar, V ielAntte e laii eJ t~iat the . .2.. ostai-

e; tw a c tal ae ee oa the gra tin of er its, se jeally bj trne issue of 'on . ani z iJs. -o unlf iart]l i -:erence It >etween it on its " ills", c r : t

tot th n oe o, noon" usuall; sp liei to tV securities

aturji later than tnose 05110: ?illsu; this last or

being rosrrved to the short term securities.

ve total eur o outta ni on s an .ills

on. the 1st aerh 1 3, tmount $ V. . .gian

Tne event's leeree ol uth Jctober I U+7 authorizestne issue ol bonis u~ to 5.OtY :zillions. This ceiiing. mightbe reachoi rairly ra I ly bythe curront issue and by theloan which the Enternationtl nank aight agree o. This Is

ehy the .,. has approaChe the relgian ainister 0r

inance to raise this ccili:< a ount to 7.,J3 4illiO-s ,

e e r a.t.v. has, tnese last iew onts, 'na e a

t aenious a Port to slce Its " on.s". re have se two

sueces ivo .ua i 1 : one in epte er 1 , the otherin A4erch l Aoreovar, the .a i has since also plaC a:several private issues with Iasursace ':oipanies, ofilcialinstitutions naying. caeital in reserve, etc. P ser- is astrong eeling tnat tn ,.. . will run out ore itiuuis in the course oV 1A , because it see s to nave tam-

'orarily exhauste te pos ibility of placing its "con s"'.

It Is a a -t that available ca ital is rat rer scarce in

~elgim at ton resent tite.

ba.n.,1. has been establishe1 or tne Surpose

of ..rantin. credit to industry, by means of' tne funis it isacle to raise, Its eai is not to make a profit. It allocates

a mo oerate yearly divineni to its shareholders an, enleavourst- nelp in the sount -y's reequiment by creitt greats on rea-

sonable to ma an at reasona l o rates.

ne ..- . ays between 4 1/2 to 5~ interest

ror t aapital it raises. reits are grante at or

a 1 year ' , rio:, ae aro Iate 1 margin allows 'orgeneral exenae~ ani the ouiding; u~ o. some reserve.

ru. ee in the c:hoice os its 3ebtors is its

olic y and fu:Is are only grante d against al quate uarantee!SAnnual heport for the end o' l937vis sitner .uaranteI

by a bank's signature or ray one 01 a "Comptoir d'gscomptedo is hanque nationale ise Belgiqjue" (Olseount hoard oxthe ._elgian aational bank). In all these instances, the

e~.1. has two aebtors i.e. the borrower and the financialconcern which gives its e viorsment. Loans without endorsaent;

~'shws hatLio + tan 20 o- the volume 01 cra.Iits granted

4.

~anuiot on ante unless i sortant gluarafltees ar. si aale,su:h as ortgajes on the oorrowers plants ani i1staIlatiou5,here are no lIto C Alin an. no Oro 'its, .or w ich an

eventual In s is &orecaSt, outstaniing.

ns an institutton oi lI utility, tu . .rants its wroaits only to tnese inoustrial se-tors wich can,

o, their activity, ei-ciently contribute to the reconstruc-tiov of te ountry. AplL:tio.a .o Ua .s ron orederies,listilleries, .luminiis, even alth conl erable nuaranteesare almost always rejeoteJ. urejIts are not grnntel to coverlosss, but essentiall wor tne payment OL equipment. or

Instarce, the various creits re2ently rantel to the coal-.ines, had or sole p rpose the financing o equipment ja;SDbeo in reasiU the coal output. The policy 0o0owed by the

. ; is a::or ar witn t"at of tP Ainistr Yor De, A,ent, both the Z.... an! tis ejart ent -onstanly wee- in

clos- touch

Anoter puslia institution, the .isse u rale4' &ar n] at A e detraite (the neneral savings' an: PeMsions'an ) o casionall grants loans to in- ustrial undertanings

by twe subscription of bonis. uce cases are however Rew aCar b tween; toe presmnce o tie car. o t . ,..I. othe "rest ont o this $avins s:ann has tie coordination of'both tnese Institutions in view,

Il l'Tdustrte

forig >o rrecy.

estblshd y hela ciMac 16t 19V, aIm toe> set

lon o lon ind meiu ters, ~ epec1ay to faeilitste tho

I provem n , the mrition mn the evelopment of indui-try

the eAissio of stock -' en- -bune a t-lv - 11 of tfle

giao st g n s thv reiyawnt of V

prneil n th t ' t a n 1 o t toc nds

d ca on Vss ort : i u t cit. tion-

Sdt 'ndtr (orr to tt1-pot 1f in-e '!s Stbe to K o

yrde o t in toer1 te ian So-

verant LS tipuS ted that tie i s" o stobonfs Vnd rp:-

bon JIY juLj to t MtioriAti o t . i tr o

"Financ' extn din - 1 approv to h Conitt n3 Of the i-

"suc; t e no inwl amoUnt of the issus tay rot eeed fif-

"teen tie te *u of the~ o&pii and~ the resorve. fci txhe

"Soirty eYce i in tae of dero gao authorIzd by Order in

"Coiineii dei>eratr in the (ounci of Ninisters".

An rde ofthenestof te 6t c. V ai

i tIA3I i 1V ta OiFi;rd,

Moreovr, it in wort noticing tha A inivtoria1

Co 1, ,ce 1+ 1k- pov ion y waithe

sperirm n of tim 3toeik ons and casbends ms b y aroved by

t tn r t t grnt t Vrn-

t dton t va of Tr ry, i vi. will 5e

,o tim bon -heit i1-O1l by iean1 of t tstp c I-

ct C t Dir ~.ectur .c"ral of the ;e: -ry d of tie

Ptional ebt, n of t Vir tor P. the e by earer,

an o t "gt Aid W rancuo bteseial work or

tu. te reosIrU control.

a. Thu ar su mari/fe tiie d2fferent trxts In forc'o re-

ar. ir the stcoik- snd cahod of t ie "Gocist Nationalo de

Griit e l' ndstri&" I: alloui to raise a Von abrosd find

Pn ord o ex t - it cUi ty, th 0 :"jfldt (ap

..:i tweo:r r : cr iht,

r tett rioed to Wit t trun pi-

oC hr ze tion rf tve fi sr t f iou.t ofie,S. -V,

Tipo Ine o 1 (W I ful n IrvVsr .y r rnrr m nannOt

naft t U "cc .~T w i rnat d1 O d t 'indsi-

T T TT

. asc i+ taed rdi 'a sre osee

sot desaio nr 1% s irn 1'1bli tions t Ue >ons dc

iri C) (ar.1 et 1de stt')

Pindsri (e: Sto A u b o 1 3, 1' 'U 31 ocob 1t934)~

Pa ' c~t ra a. 'ct b1 117, ' (ey; a4 stipulI

Hu l'x~inF bi tosat bn ecis el

"ds s m e *Vc'a 1dase Qui >tA foi l-0a somT) d

"trse" rArt o 1U1 jlbr r Conser l d I<es Ti;str s.

111% ecu, quu .1t ins i dui/il/

193 e ttem o es obig atIn e bono 'e cai s

i d s 'ot r 1 C t du .iad T'Uv r C ' vis

Sara castato Au eGnendsol~tosea oe e

~ U ... /..

~rifmes 1. Ijrect< K.: re e1 ysrre 4t de 1. Dett

Ais se tru t r se lo dUvrs tete n Igu

Il1 et~< p dis'utb e tu c1v 3. .I. ,etcnrce *e

em rnts I l'tranger et imttre >e oIl ton t bns

c s, p r r14 , 1 'Atrenr; mris' il fYut >svide cAn q'cl-

1c0 r~s3e)t( e i Ilfn fix 17XXu' se I ijtpns ct qu''ic

c Su l

nones.Ca elU i-ct dit, sui , v 1nt l Os spoitiors 1 gelr

apruve le coditonsdesempuns (A.. d 111 octobrc

L 37).

EnsomtoteIn1i+titiv dc is * a~. . on cc docm rn

d1Tpcn1 Sc laou i , qu y rle( t initr~e Wes F'in coes.

Ai la , *..61 ,t lc i t trc ACs Fitnprnc> sont d'co

l'o nevo' to 2 ntK 1jtt pur ent 'x r 1 s T'te,

Le1/31

9 S - I-

t a4 ta etna

t n o tao1; 1 ol 1 tji

f'J alstut V n eno 31 1 ita a f~ti ' 1Lni-etrIqu pas1 ' p ededem a t ch primardaae dm lint

4'Inimt 'r ms9,n 7'on2n2e ca s-ut. a d - l ' t0hn,

modrn. Ctt otheh ndoetea s jcnsta s e mesa tcaid' Ic--i ct(-8 ctw -a cor spohansods

as s'1t a a W 'mr et Ie tous pe4 soctlIs l'd

a ar~ ~~-' ~ '- ~ a 1

r ;~ a T0'p.. -~t1~ar~ t--~ ~ n-n~mta lan- aot~r~ ic0

-v a ~ a. i~ --a~-8-~- -~x

- tIc V t ala :~ ' f i .~~5

p'- xr oa l'ns e t, ' aion, ii at ' -mir joe

Le'wI (Sw met a a 1 'eda de tsr a po -aiqu sa l

~c- a~' f~~ c~ r e'a~Oa 3O

n i a ~ ~~tva t 1n 0-

I ~o c-'t t ns airn o'7t1 .

a aiat.at n o~i

-doV irdc, lo de eI4t Lrt-s cn nt ati> axeters in so

t t-n ic a-.' a r dAt r c , ;s -rat ar unt e-t ;or l

I ra' cn~a% -~r I'4~ r r'=r :ot coan ':t~ia no-t lnovtrmvaaa, Iq I p ons 4 :3: Ia1- "rrb6 lea siL I- ,

-a-i~ -va, i-a t~taa -ats aiv z atI a rat et a/s

C 'et poxiruoi le -ouverne'ent entend rentforcer lesmoyens d'aCtions do lo Socit6 -tionl -r I.,- souscrip-tion dI '1tat i-ne pert importate di captal social.

D'r 'tre pe~t, teant compto dTiie 6votion g 'ndrale,o ~ouvc eeront a val Wh ssurer n sein do 1'AdministrattonV le 13ocidt6 uine eo~rwentation p4ritet1 du mondo du tra-ii et nos chef~s PFenteprisIs.

La Soci t0 lattonale ~e Cr dtt l'Thd 'strie cnnr~talnztl co~ u poinr Ic r cont e tous 1os xd iewr int6-rev6s - ~e bovne gestton et d(et"M do so consec or, dansUn eoprtt l o;ye4e olaboratton, '0 la rlisatton hn ioncorin.n

La r fonc pronoas per e o uvnvercant se raswiecr dt :

17 n -n i 1onc; l 41o o l' tet z

La viu'trI J1a Gocits attonalo a Crdt I'In-1 e~i sora o tUd 0O! 41O atheins do rrencs.

Cette mcn e tton 'e r t1 " cat soscrite et Ii-

l qn Coin1 - y

La sonscri tion I 'iettion du e pitel sore as~r ~e prr I'Etat uitn prix tenant corpte dos rdso vos do la

soci t6, tellos ql, su Ia base dii dorrie bilen, u4iesresortiaient on cas do ltqutdatton.

Los ncttons non;v'11es ainsi crWdes soront noninativosat incess bles,

fMto op ra tion p~ r~ ettrn note ~riet tun aceroissoe ntdes moyons rinencti-s do lo ocits, le pldrond norual dos

caprcte d'6iisston do bons 'o caisre et 1'obli ations 6tantq nne tots Ve son o du nAt to) social o t ~es raser-

~n ow rn, 1V prih d'4iistio vers&~ per l'e tat, sefe e V eonstittion d'n rdserv# disponible.

2~'n Ce cni 0ncorn 1'orenmition t 'ectt n 4. 0 o -

a) 1V Gonv<il 'd& ini t rtinn eor co -pos Ntruizeh bos font etnq rsobro - y CQo p is Ia ?r~stdont nonia par1 at- soront pr saotT per lea Pen roi s Publics at par

Vs i~tttions iuncfro d'Nntuit pnhlic. m,~tro no -nos eoron choiso par ~ilea p -sonnalitss rep see tent Iaon dt 1'rl e oint~ etree seont chotats parrii las

L~ i otion et In v stion joiirnaliM'e 'o l'tustitu--tion wus pr r V vr'-sr nt,

f &e e lea Co e i seires - ehr-' -s T le si 'V , -:rc ot c" rol -s opnrttons - a enn r>abr dii Consei

d'j ii it aton p0 o -r er ox u erintton snolconeod- s nn ha pnr vis e en titro Tar c l'ar >t~ royal n' l25dii ;hullet ' 35, ni dane i#e socidts corinecielo on ~i f'ome

con ere Ial d tenet, dtrectem u in nt, vtn t-r'tn tonu cent h eapitru d'un tulle brrwue.h)P&r dleision dii ?inistsc den Finincc s, In Socitd do-

nile nont Atro ehorde do in r pertition, semi f'oro Oe cdits, to c tt alsa so diposittvn par 1'Ftet e'u par

dos tiers,

La ' euzro ~ te t viso en 1 'rcc rone os eaitrxpoun p novenl e iota rnt 4'o prints gnu no sr'mntnt ?tisdtretoi~et contrct ~s per I Soo t tetonele, a dte-tions affect -s d er hats d'herrin u on lea rese Tres 4u[tli-n, lesquolles auront cu .natre'-pirte dt-s obli'- tions.o, lo bone a c' Use do Ia oct it Ib 6 4'i1K7 t drIn n-

tV 1' tet.

t,..

nin, outre le Cer aire du iouvern ent d1-"ueaetuellient aip \s ie la Goeidts per le Mnistre des Fi-

nences, ii est pe4vu im deuxi~me eori saire d61 41 por I.1inistro nirent Th *a64quipement actonfd dtns ses ettribu-tions. Cette iiesure se jxtifie par l'intwTht quI 1e rs4-quipement prdsente pour '1o pays et par Il4 pert irxportexntequea 1h Soci ts it p eir as r Ce dornatne.

La OUVnwnt estine que ces diverses masures ac-eroitront noteblemant I'a'icteoit6 de 1'actton Ie la Soeidt6

i1 tion.Ie et (acIitrnnt dens une r ge uesira, at dens eedre da Is politiqie gonvemomentaal, a restauratioi at

Jn1Eell, a .4Drueen , l 94

rie kintstre des Finees,

G. VK S.

PJT KE 1 Of ELTPA vrAuT DE L SCLTE 4rE0i4NL D fCEDI A L'I ) ;T I'

Suu' In oposition dui inistre dcs Nnes at dol'nisdes ;Intstres qui an ont d+ lbi r5 an Gonseil,

Lo pojot d J4 dent r. trau? s"4t sTa prfsent6re Uotre 'oni aux arihras 4 gIslttives par Ia inistre dos

utile or- L'articlo ber aT l'prretdi rel du a octobrei V, pisen exzie ition do In lot dii 10 juin 1937, at conriir-

mu npr In lot d& 16 juin 19+7, e'st noIii come sit :

a) La Y* dui sndit article est conpuldtd pr r 1 toxte ci-ep as~n outre lV socitt p* , rnr y ntorlsntton dui /Ins-

tre 4es itnirncs at aux eondttions ru'il d toimine, otreehr e e 1 r/nortltion seus Vorre 3o cr dts, do capt-

taux nl is Io sition p& r I 'Ptot on p: r des tiers.b) La '* di sudtt :eti e a ot ebrod at re pae6f pr lI

toxte sut ront :Li soedtA est adnini'str a p- r in Con eil e trt

a- bros. Un rie- bra est norln p r la ~oi; ii porte 1.titra do Prdsiloot at pr6dido 1a Consall.

L'a' sarmbh0 dndrne 4iit le dno aetras -e hbres,ont qUntra 1a!b "as sent prsentds prF Pouvoirs Publi sat los Instt V tion TinaneIZ'ras d'intdrot public; austro

rerbres sent ciotsis permi baa porsonnelltss repr sentant0 rondc dui t'ntl; qiiatre riit bras sent choisis parrt

'lea poronia it s reprdaernt Ths chaif'sd'entroprises.La dI rctton at 1a ~est~on joutsali "" sent confidos

a) La i'ot "g niver'sa r" eat -er p1nc6 per 1o rot "prdsid1ant"on bar olinein d 64 at n n r d n' rtic.e Vr sodit;

Los uots "Ia vica gouvoeur" sent sweprtm s dons lealr lItne dii 6* Ia l'n-ttle 'lot;

La r e nin o di 6* d l'artic 1o eat ro6 trm oI e6 pr e ta sTiv01t :

"La tit ont du Pr o ont eat rix6 prr Jo ; inttra Jos" Itnanc s, mw proposition i Connt d'1 d innistrtion";

Dana Ia 3e elinea di 60 srdeit6 lea mats " at lo vicegouva'"eur" senta s'zpprtm s;

Dns be bar olin a dii $a b 'crttclo br rea t ots"do vtce-'ouvorneur" a nt s inprtuds; dens be da el in a las'ots "l vico-gouveeour" sent sup "rtia.

I) Los dIspositions 1 7" dii it rticle sent abrones atrenplhcos pr P tex te a p rva t s

La IFli nonne nprs Ia Th Socitt io eot i insairasdii Gouvarnenent, b'un ddlgu4 - ar be Xtntstra des Ftnnncesat Jiautre ddleui par le Pinlat~o syant dans sea attrtbu-t"ono e <q poneit 7t-oMol.

i r rtinur lt on, at -elba des oxuorts ventue qrenthIOnds pour 1' a asslater, sons rtxdes e' pnyes par Ia

~inIktTe s anenees at sup ot~ s arr be aoedtCd.a) Las Iux In trs li 's d3 d I 'iSttcbe Vr sont

obrogds at rarul' cds p: r 1V taxte snive it zLas nie ,bras In Consoil at le( coIissairs Ia is

OecI 46 no peuvent axarcar une f'onctton qualconque dons imebanque vtsse an titro ber a l'arrots royal n*1d5 dii 9 jut].-

t 1935, nt dtns iina soclata' ca -'-de cu formeryc j f-

-2-

eo-~recbo, deonnvit dtrecterent ou indireeteent I oncapital d'an telle b:nle.

v- re ermItal 1e Ia 3oci5t4 !ationcle est port6 detrs. 20 Ailltons ~i trs. 4l0 millions; cette auretationtu onnti1. est srmu eite por I'>tat et lihdr e dia 20.

La prix de soIscrtption est *dtabli de eo an tiecordentre Ic tntst-e des finances at le Soeist6.

La prire drission payde por l'Ytnt est nfrectde hiIt constitutton d'me rdserve dispontble.

Las actiovis seuscrits per l' tpt sont nominttivesat Thcesst 1iS.

~e droit l'enregisre~ ant at Ia droit Ne tiuibra sur'las aetionw ne set nws aplU ahics l'mngentation deas-g

Artcl A- U'article 76 des lots en)ordon as sur lassoct t s cem erci; las n'est pas anpitebhle an dr it de votenttreh4 en retlons ae Ia Zocist6 ~iatiOnele de Cr~dit 61'T n t I1 1.

i -Las madats des mobres dn Conseil at dos conmis-sotres 'cteellernt en fonction vtenrient N cehoance Ic JourTh l'sssemblde d"nrsie de In ~oeidtd q ~i anra A paurvoir hI'attribntion 4a tidats enrorrimient au Iitt~b Ia l'nrti-e'le bor a Ir prscnta lot at du * de l'artcbe V-r die1'a '4tK r ya1 dn octobre l' 37.

Aril . Dens un 461st it 3 nets, & dr ter die In promulga--ti In p as nt l ot, In 3ocist6 iationcl~e mettra seeststvits en concord flee avac Its dtsposittons des articles I2 at 3 et-dessns. Cas stat its entreront en vigueur das leur8Tharobattofn per Ia Poi.

Par Ia E gent a

e Uinistre dies ?inances,

LOI INITITU. T U; 1 S0CI TE NATIONALF D CREDIT A L'I DUSTRIE.

ALBERT, Rol des Belges,

A tous prosents et 7) ve nir, Salut.

Las Chmbres ont sdopt6 at lous sanctionnons ce qui suit I

Article lor- La Banque ?ationale de lBelgique est autorisde ' fonderune socite anonymp au capital de 25 millions de francs, qul pren-dra is dnomination le Soci t6 Nationale fle Cr'dit l'Industrieet aura pour objet de conscntir des pr^ts q lon ou moyen terme auxentreprises industrielies, a ricoles et coine rcil les belges.

La d6lib6ration en date du 30 decembra 1-91$ Ie l'assembl'eg~n6rala extraordinsire des actionnaires 1ie la Banque ationale deBelgique, qui a docid6 _i souscription, la libration at l'attri-bution des actions de la Soci6t6 PTationsle Ile CrIdit a l'Industrie,est approuve.,

Le projet (Ie statuts ci-annex6 est approuv4, ( conditionqu'il y soit anport les modifications suivantes :

10- A V'rticlP 3 1 1, apres les- mots :rdes avances destindes 41"qera inseree la mention :"la reconstitution";

2o- A l'article 3 9 3, la derni'e phrase du premier alinea saraRupprim6e;

30- A l'article 6, 5 apr's las mots : "aux titulaires" sara ins(rele 1ot "bel es".

Les modifications aux stat ts seront soumises . l'approba-tion du Pot.

Article 2 - L'Etat garantit envers les tiers 1e pae re t des in-t6-rts des obligations d'une durde d- plus ]ie cinq ans, 6 nettrep r 10 socidt6.

Dans lr cas oii is produit des op6rations ne suffirait pa5sassurer Ia p lament intl( des dits intdrAts, l'Etat fournira as socl t6 les somrnes nrcessaires pour parfaire la difference.

Las dJcaisserients quo l'Etat serait oblig6 d'effectuer envertu Ie s gaantia li saront rembours s, en principal, major6sdes intdrots, au m T! taux qua celul des obligations gsranties, parvoie tie prl?4vement sur To produit net de l'exercice suivant et,s'il 6chet, des exerci es ultcrieurs.

'Article - Le Gouvernement aura le droit do contr(ler toutes lesoporations cle ls soci t6 at, I cett fin, d'exig r tols 6tats etrensaigne cents.

IT pourra soooser a l'exdcution tie toute Tnesura qu'iljugersit co traire, soit 'a il loi, soit aux statuts, soit aux in-t6rets tim ux du pays.

Il nomura un cor.issaire chard a surveiler les opra-tions 'e la socit6 at notar ant lea dnissions d'obligations.

Ce coimissairc aura l droit de prandre, an tout temps, con-neissaince de 'tat Oes affaires et de v rif ier las ocritures etles ca as, Il assistera, quand il le jugera convenable, rux s6-ances as a se bldes ,en rales, du conseil d'ad inistration et d1collge des colmi a irss; i y ura voix consultative. Il veil-lers ce quo is gestion s'inspire des intdrOts nrtionaux. IIpourra suspandre at dcnoncer au Gouvernement toute dscision qu'iljugamit contraire, soit aux lois, soit aux statuts, soit aux in-tsrets te l'Etat. Si e Gouvernemant n'a pas statu6 tans lt quin-

1-ne Tie i1 d6noncistion, 'i decision pourra (tre exdcutoe.

-2-- -

ArtcL- 1 - CWh -u anne, le Ninistre Is Finrnces dposern surbu oa ci s Chzinbres 1-lsl t yes 1 bil n ve L Soc it6 aatio-

n!:e de :rdtt T 1'Industrie pour l'exercloe 6coul6 et les rapportsdu C nsel d'administration et u collhge des comaiss tes falsantcorna~tre 1 siteatton dos affairos.

Promulguons 1a prmse-te lot, ordonnons qu'elle soit revetuedu sreau do l'-tt et publt1e .ar le "oniteur.

DornnS a IBrusellcs, le 16 mars 1919.

ALBERT

Par le o1Le Ministre des Finances,

LTon Delacroix,

Vu et scell6 du scIau da l' tat;Le Vinistre e I Justice,

E. Vandervre) di

COPLE

LE VII$Ti3 D: 5 F'T Ci2S,

Vui l'arra royal n~l du 24 aoflt 1934 'ortantextension do- Irdit;

Vu i'arret6 royal n*3 de is %me date su7 l'organi-sation d1e la Socict6 Mationrlo do Cr'dit i l'Ind strie;

VI l'art6 royal n027 du 31 octobre 1934 compLtantles aretds prcits et notament son article 1 libell cominii suit : "l'Etat g raotitle renboursonont dii capital concur-rence i l deux milliards, et le orent ds intdrots des obli-gations -c ettre par La ocidt6 ationale do Cr'dit l'Indus-trio n exdcition o l'artclo 2 le l'arvet6 royal n~l du 22ao-t 1934. Il garvntit au: si, dans les 'linitos fixdes par 1'a-linda 1 le l.'article icr de l'srrst royal n3 du 2 aolt 1934,Ie reibourseoent et le iene-t dos int'-ets des obligtions etbons Ic rcisse is ou a 6ettro par la Soc-6t 6 Tationale doCr1dit l'Industrie on vcrtu 10s -ticle0 et 11 de ses sta-tuots";

T1 lea article 10 et 11 des statuts le aI Socit4Nationale do Crdtt h l'Industrie modifids par l'assemblde g6-ndrale dii 9 novmbre 1931 ot pubiis au lonitour beige du 28di wme ois, souo ir n0 1461;

eu l'article 11 do l'arst' ro 1 n*27 du 31 octobro1931* ehreant 10 Minatt des inances l'exdeition do cet

A R T T E

Aril e Los obliatijcns roriinatives ou au porteur et losbons do caisse it dott e par in Soci t6 Utionale do Crdit i

l'TIdustrie dont le modIle sera approuv6 pr le _Anistre desFinances s-nt soumis u visa d- Tr's r.

Ce visa, qut enportera l garantie do 1'Etat, seraconstat6 :

1) sur ie manteau dos oblivotions, par V'apposition des griffesdi Dirocteur gndral do la Trso-erie Ot dO Is Dette publi-q0"e et dui Directer la Dtte au portour, 7insi quo parl'expreinto di timbre di Minist.re des Finances re-roduitecl-contre :

2) s'r ie rect do ci cun des cauoons, par l'empreinto dutimbre spiciel do contrlle di 2rdsor (g3ioment re roduitC -contre.

Article 2 - Los cFrtficats globux repr sotant --ovi--oirenenttout ou prtie des obli ations ou des bons 'e caisse serontconfones au modale ci-annex6 et seront sournls su viso e la

rsorenie; cc visa, qut enportora in garantie de i' tat, seraconrttd par i'voosition des stnaturs manuscritos dii Direc-

tear g0ndral de la 2rdsororie et d ls Dette Publique t duDP-octeur do la iette at porteur, sinsi ae par l'enpreinte dutimbre sec du einiataro doe Fine sco, repro lute ci-dssous.

Article 3 - Le Directour G-ndral do la Trdsorrie etdo Iaf DettEpubliquc eat charg6 do i'exdcution dii prdsent errat6.

Brnuxeiis, le 17.12.1934

(a) GiUTT

jcj i

~~I W~ C_

EXPORT-IMPORT BANK OF WASHINGTON

WASHINGTON 25, D. C.

CABLE ADDRESS"EXIMBANK"

March 16, 1948

r.ialter HiAssistant L . DirectorInternational Bank forReconstruction and Development

Washington 25, D. C.

Dear Mr. Hill:

This will acknowledge your March 12 letter with which

you returned our file containing iuterial relating to the loan

application of Societe Anonyme d'Ougree-Marihaye. We are happy

to have had the opportunity of coopereting with your office by

making this meterial available to you.

Sincerely yours,

John D. FitchCf, Erngineering Division

p

7

9

- -x-

x - ---- x

. . s ..

s-

March 12th, 19ls.

Mr. John 1. Fitch,Chief, Enginuering Diviion,SEport-Tport ,ank of nachington,Wiashington 25, ]X..

ar ir. FItch,

Thank you for your letter of !arch 9th enclosing yourfile containing the materiall relating to the loan application of5ociete Anonyme d'Ougree-Marihaye. I am returning the file herewithand shall be pleased to have your acknowledgment in due course.Thank you very much for letting us have a look at these papers.

Yours sincerely,

salter Hill.sistant Loan Director.

C -

arch 11, 19 W.

WrJohn,

I hope you .a had a ple nt crossi. i th"Cr-e to th" pr cent.", think it would be a ood

idea if you were to ascertain i . 2rere's reaction to thesugestion tat, in view of the prospect of a loan from the?ank, he hi u put some more francs at its disposal. On theother nand, it night b, Anwse to take the initiative inwuvistin. to hm tht he should try and persuade other countries

to d'o likewrise.

I L";enclozvn a :opy of the letter ad e ed to r.dasyn (your terms of' reierence) as well as copies of two letters concern-int 0ree- ar .ha C r. R ibrt as examined the documents sent tous y the port-mport !ank.

Aince you appear not to have left any private forwardingaNr-ss, we thought it best to ask 1r. Relbert to take this letterwith him.

Best wi he,Yours 1ver,

John P ston, Esq.,ruIselZ.

EXPORT-IMPORT BANK OF WASHINGTON

WASHINGTON 25, D. C.

dch 9 1948 CABLE ADDRESS"EXIMBANK"

_Air. alter hii!Assisant oan irector

International ank for Re-construction & evelopment

.LL8 "1" Street i.i.

-ashingzton, D.G.

Dear ar. hill:

Pursuant to our recent teleohone conversation, I am trans-nittinc herewith a file containinp the material relatin7 to theloan aoiication of Dociete inonyme dIOUwree- arihraye:

Item -L. teir 31, 1947- Letr from 'oriaGo erce Cororation and enco reslisted therein.

Item 2. October 31, 1947 - Letter irom srs.oastine a~nL Desoer and attachments.

Item 3. Lovemner 10, 1947 - Letter from-r. Bavtine ano attachment.

item 4. lovem er 4, 1947 - Letter <romair. Sastine ano attachments.

I em_5. ovember i8, 197 - ,ietter from_r. astine and att ci nts.

Item r. _ovember 2a, 19V7 - Letter fromMr. Jastine and attachments.

Item 7. 7ov e-r 26, 19 7 - Letter fromMr. .Desoer.

AS y)U i1 note from the material reerred to as Itcm 1 above,

the orin _ lication 3as made on zepte rber 30, 1947 on i - f ofsociete Anonya1 d'1ugree-i'rihaye by orld Commerce borporation 7:icf

proposed to act as 0gent or Trastee unler a zormzula :hrby it mas tok tile to steel pronecs b wy Ougre Und to sell aie to provide

dollars in the event of default by Ouree. In the course of dis-ussions 1ith accredited rrsn a of Duaree, they have

-2-

the glintin asther on and haesae htte o not insist

on the~ incorporation oa th aoovre oruIla.

te t'ei return o" Xi.-rc = it h

Sinceroiy yours,

J hn iD. itchGhi Engineeing Division

M1arch 6, l9Lb

Dear Chrie;

Thary you fc you- lettp- o'' rch 3r. 'he 1 lgiAmecutie irect- Fpoke to.e the othe r u out te riye n I rsLo tal eo with Bill 'r n 1t50 o a t it.

It seeps th-t it i h very wel' Ke soethil, ve voila PonsiserI .ill be gra to h ve o r y eo1 to -e a tA t projatt on

their tri to Uelgium.

In thc -e nti~e , P co ,et tje aS fro:c Bill A rtino the x pott-I- ort .:l. 1 " st rt 01 it here.

e woula v nt to get iP touch r tr ::onotly with rep-raoe t-tire -; Th iel;aiT Cove-qrt beca e, L3 you kno, before

Scrn e a l' &e 1-o t m-e t, Govern::itts Y r' nty. InasmAh: t-. !asy, the eljum repre-ntive o z7 : o 7a, ha inic tea.o. wiis inthre-t 2- t.- p rt &f the :Plgii over..ent, I vo t,

s mie 5h t na h a r, ity ni, ht he fortcoping at ue vant to beia of it before we - ert;ice much work on the .. roject. I asse

t C fro the not of -i--* of yoir client there is no ojectionv a r spoe kin to represe ntative of the elgium Goverar t s tout

it.

One other thig that I shoui perhkp5 a e cle- r to you,a N lv :Are- ; ooe to the belgia ,verizent peo;le, is th t

heree a we - re jre- P re tc t e look ver shrtily t helgiun pro-jects, we loll' certainly t to see hov OP work: out Iith rele-i . to Fel iu before we ca iose to ny &efi iite conclusion s

to h t the extent nY our fir -c- in hel; iur can be.

I u; very ga to heA r frov you and look forward to thechu c of our doinI youc b0uines to ethesr.

I hole things go well with you.

Anicerely,

CharlP; Pol j. A.,593 %oison PAvenue,iev York 22, 2. Y.

JJM:melLetter from Mr. Poletti in Mr. MeCloy't fiiez.

70 let

7Fr

arct 3rd, 194k.

Dear Vonsieur Basyn,

ith reference to your informal inquiries we now wi h toinform you that the Bank is willing to consider the finan n, ofsuitable projects up to a combined total of $1 million. We shall

be glad, therefore, to accept the invitation conveyed by you to fr.Pent:n to send to your country a small group of representatives.The roup will be led by ir. John P nton of the Loan Depart ent; hewill be accomvanied by r. E. Wayne Rombert of the Tndustrial groupof the 1e)oarch Depart ent and by Mr. Albert Waterston of the LoanDeparto nt. Provided this is a-r, cable to you, the roup will arriveon -arch 15th.

The purpose of h roup will b. (a) to provide any informa-tion that ma -be requir- about the kind of projects suitable forfinancin, by th. sank and (- ) to complet. th Bank's study of theBelAan economy In its var ous aspect . In other words, its purposewill be exploratory.

While we are gla to send the mission in order to avoid anyt nxec sary delays in the selection an( considration of projects that

;ht he suitable for financing by the Bank, at the same time we shallbe grateful if you will be so good as to point out that the Bank willbe unwilling to vnter into any commitment for a loan to Belgium beforeclarification of the extent and type of any financial assistance thatmay be provided by the United States Government under the proposedEuropean Recovery Programme.

Sincerely yours,

Walter HillAssistant Loan Director.

r. Thomas Basyn.Washington, D'.C.

W/mlc

COPY

POLETTI, DIAMOND, FREIDIN & MACKAY

598 Madison Avenue,

New York 22, N.Y.

March 3, 1948.

Hon. John J/ McCloy,International Bank for

Reconstruction and Development1818 H Street, N.W.,Washington, D.C.

Dear Jack:

Our client, S.A d'Ougree-Marihaye, a Belgian steelproducer, has had an application pending with the Export-ImportBank f or a loan to finance the purchase in this country of steelproducing equipment.

This morning 1 received a call from Bill Martin of theExport Import Pank advising me that his institution and your bankhave been in contact on the matter, that some of your people areabout to go to Belgium to examine pending applications of two otherBblgian steel producers and that you would like to consider theOugree-Marihaye matter at the same time.

I have aaked Bill Martin to let you have Ougree-Marihaye'sapplication and supporting data. In effect, our client is herebyfiling its application with the International Bank. Of course weare ready to furnish any additional data desired by the InternationalBank. YoA will also find that in our discussions with the ExportImport Bank we have explained Ougree-Marihaye's requirements for ablooming mill, a hot strip mill, a cold rolling mill and supplementalequipment, and that no decision has been reached as yet by Ougree-Marihaye as to whether all or only part of this program should befinanced at the present time.

We would greatly appreciate it if you could arrange to haveyour associates consider the Ougree-Marihaye application on theoccasion of their forthcoming trip. I suggest that they contactDr. Josse Bastine of the Bank of Brussels who is in charge of thematter on behalf of Ougree-Marihaye. He may be reached at the mainoffices of that bank in Brussels. We have advised Mr. Bastine thatrepresentatives of your bank are soon going to Belgium.

I am looking forward to working withyou on this matter.

With warm regards.

Yours sincerely,

(signed) Charles Poletti

INTERNATIO BANK FOR RECONSTRUCTION At )EVELOPMENT

FFICE MEMORANDUMTO: Walt I 1 DATE: March 1, 1948

FROM: J. M. Pen n

SUBJECT: Ougree Marihaye

I spoke to Mr. Tirana of the Export-Import Bank. He gave me the im-

pression from what he said that the Export-Import Bank was not going to take

any definite steps to turn down this application but would rather wait for the

International Bank to express its interest. I said that we could not take the

initiative with Ougree Marihaye and would have to wait until we were approached.

This leaves the situation rather unclear and somebody will nonetheless have to

speak to the Belgians, presumably in the first place to Monsieur Basyn. I should

have preferred it to be the Export-Import Bank, but if we are expected to do some-

thing, we must consider rather carefully what we say.

Meanwhile, Mr. Tirana agreed that Mr. Waterston should call on their

Chief Engineer who is in charge of the Ougree Marihaye project and have a look

at the technical data.

FF ICE SE RV I CES

COPY

(TIANSLATION)

National Bankof Belgium.

BrusselsMarch 1st, 1948BN 200-2605

yr. Martin, ChairmanExort-Import Bank

ashington

Mr. President,

Ile have been approached by the Steel Worksof Ougree-Marihaye which are presently in negotiation withyou with a view to obtaining the necessary credit to acquirereequipment material in the United States.

They advise us that you have indicated thedesire that a formal assurance should be given you that theprice of this same material will not be included in the pro-grarme which Belgium may submit in connection with the Marsh-all Plan.

With a view to meeting your wishes, we have thehonor to submit herewith, copy of a dispatch signed by the Ministerof National Reequipment, which gives you the necessary assurances.

7e are, Mr. President, etc. etc.

The Directeur(Signed)

F. De Voghel

INTERNATIONAL BANK FOR RECONSTRUCTION ANu UEVELOPMENT

OFFICE MEMORANDUMTO: Walt 11 DATE: February 27, 1948

FROM: J. M. Penton

SUBJECT: Belgium: Ougree Marihaye

Shortly after I had spoken to you today about this Belgian steelfirm, Monsieur Basyn rang me to say that he had seen the Export-Import Bankon the subject. He had learned from the Export-Import Bank that OugreeMarihaye had originally asked them for a loan of $15 million for a bloomingmill and a strip mill. Apparently only the strip mill is still under dis-cussion for about $6 million. According to Basyn, the Export-Import Bankwere willing to nditke the business without a special guarantee from theBelgian Government, but the firm were told that the business could not bedone for several months because the Export-Import Bank was unwilling to makea loan to a European country until ERP legislation was passed, after whichthey would have to send a representative to Belgium to view the project lo-cally.

Mr. Tirana told me on the other hand that Ougree Marihaye were un-willing to accept a Belgian Government guarantee because this might mean Gov-ernment interference in their business and that this had proved a stumblingblock in the negotiations. The story is thus obscure but it appears thatBasyn had suggested to the Export-Import Bank that the International Bankmight take over the business and the Export-Import Bank had replied that theywere still negotiating with Ougree Marihaye and could not recommend them toturn to the International Bank. Mr. Waterston was subsequently informed thatMr. Martin would probably speak to Mr. McCloy on the matter.

The business would seem to be equally in our field as in that ofthe Export-Import Bank, provided that a Belgian Government guarantee couldbe given. It is almost certain, however, that Ougree Marihaye only requirea five-year loan and, consequently, expect to pay a lower rate of interestthan they would get from us. On the other hand, the total requirements ofBelgium for re-equipment will probably be found to be greatly in excess of$15 million, which is approximately the sum which we are prepared to advanceat the present time, and there seems no point, therefore, in our objecting tothe Export-Import Bank's trying to reach agreement with Ougree Marihaye. If,on the other hand, we are asked when in Brussels by official Belgian repre-sentatives to have a look at the project, I suggest, if you are in agreement,that I should express readiness to have Dr. Rembert do so, provided that agree-ment on the subject can be shown to exist between the Company and the BelgianGovernment.

(TBANSLATION)Copy

Ministry ofNational Reequipment

3russels------------ February 27th, 1948

Steel making plant ofOugree-Marihaye.

Monsieur le Couverneur:

I have the honor to confirm to you my letter of

February 12th, and to elucidate the financial aspect of the

problem under consideration.

As you are aware, the purpose of the loan under

negotiation between the Oigree-Marihaye Company and the Export-Import Bank is to permit the acquisition in the United States,of a blooming mill and a cold rolling mill. This material forms

part of a general programme of reequipment of our steel industry.

It is, however, clearly understood that the funds relating to

this installation will not be requested through two different chan-

nels.

If, as we propose, the acquisition is brought about

by means of a loan by Eximbank, no withdrawal relating to the

same purpose shall be made from the amount placed at the disposalof Bel-ium by the Marshall Plan.

I believe this declaration replies to the question

which has been put to us.

Believe me, TY'onsieru le louverneur, etc. etc.

Signed (P. de Groote)

To Tonsieur le rTouverneurof the National Bank of BelgiumPrussels.

February 27, 1948

onsieur F. de Voghelan ue Nationale de Belgique

iraxelles, Belgium

Vy dear Mnsieur de Voghel:

In connection with our forthcoming discussions concerning abasis for a loan from the International Bank to Belgium, it wouldbe very desirable to have a series of reports available covering theindividual projects which are to be offered for consideration. Thesereports could conveniently be supplemented by others covering basicbackground information in the fields of the various orojects which areto be presented. It is sug ested that the people on your side whowill be involved in these discussions might start ',ork as soon as pos-sible on the preparation of such reports since their availability willbe ost helpful in reaching prompt conclusions, and they can also serveas formal docuentation with the Bank of the various projects involved.

Attached are two outlines coverin7 the im ortant points whichshould be included in these reports. The Information should be as com-plete as possible based on official statistics when available. It isdesirable that the reports be nrepared in English.

I shall arrive in Trussels on Sunday, March 14, accompanied bymy colleague, Mr. Xterston. Our Technical Adviser, Dr. Rembert, plansto arrive however about March , for preliminary discussions on projectswhich you may choose to submit. I shall give him a letter of introduc-tion to you.

I should be most grateful if the Panque Nationale could reserverooms for us at the Hotel Plaza in -'russels. The exact date of

Dr. ,embert's arriv -l will be confirmed early next week by cable.

Yours very sincerely,

J. V. Penton

attachments (2)J enton/mvp

. 25nrha led tl .Bsy htM Bn eul 1b 14

S mt onsA o ln to rel

to . cortin a1mber Of god mirriv 4 uc projietv toi~ng en &aggret

* Ba h1 s n co to n a mnd h 7 told us tbh the I ljii

.etw lo t nn 70 1ee ta ;; - 'ro Jthe. Bnk a

th 't of roject:.

in ur vim, it viuld be proferabl,, if av aa o nicto >l>i at the moient, tdat it be led 1qy br. P nton, w w'uld b

acceop"mnid by a tschnioal sngiee (who wje sugeb auld be li. R1 mbert),

Watestonto acompny . - nn in~ order thot the opportu-Ity of their

prxsne in Beimi rmiht be ued to eke '. rapid over-2l study of the

B ir 00 fl nOry.

corn 2bg, iyu eoe, we pro e Va doupatch this i eat n

net It. Be h s 1. v e Unt1 t tea, howenw, wepropo)se to tel *. flaay to V in vi v of the BeAn's preuent policy w-th

reg2t l oanz o Arp, he Bnk is o m d taenter into av

final contrect for ra kma unt I the Mci all eitwuaton has eared, I

think iL mi'hit be cub arrvng tc us 'if we d7i not mnke this point le r

to .he gIm Gmovrn t b r QCn nt to !eO.

DECLASSIFIED

JAN 1 8 2017WI3G ARCHIVES

CONFIDENTIAL

RESUME OF INFORMATION FURNISHED ON FEBRUARY 25th, 1948

BY MR. TIRANA of the EXPORT-IMPORT BANK AT A MERTING WITH

MESSRS. PENTON and WATERSTON of the I.B.R.D.

(1) $50 MILLION LOAN.

The $50 million loan to Belgium has reached the stage where

documents are practically ready for signature. Participation by private banks

has been obtained for $19 million ($15 million from New York banks, including

the Bank of America; and $1 million each from banks in Chicago, Philadelphia,

and probably Boston) and the amount is likely to reach $20 million. Interest

has been fixed at 3j%per annum and the loan will be repatple in ten semi-annual

installments. Belgium will maintain gold stocks at the New York Federal Reserve

Bank equal to 105% of the outstanding portion of the loan.

Unlike previous loans made by the Export-Import Bank, this credit

will include a list of commodity categories for which the proceeds of the credit

will be expended. However, no limitation is being imposed on the amount to be

expended on any category. Most of the commodities to be procured will be raw

materials, of which coal is the most important item. Other items include raw

cotton, raw tobacco, lubricating oils and other industrial petroleum products,

chemicals and fertilizers, tools and machinery, equipment and services (U.S.

freight and related charges).

(II) OUGREE MARIHAIS.

In November 1947, the steel firm, Ougree Marihaye, approached the

Export-Import Bank for a loan, a M. Bassinet acting as negotiator for the concern,

and the law firm of Charles Poletti as counsel. The original amount requested

was $15 million, to cover the cost of a blooming mill and hot and cold rolling

-2-

mills. At the present time, however, only the blooming mill remains under dis-

cussion, the estimated cost of which is $5 to $7 million. Ougree Marihay.

originally requested a loan for ten years, but has now revised its request

downward to seven years. Mr. Tirana said they would probably be glad to settle

for a loan for only five years.

The Export-Import discussions so far remain on staff levels and the

probabilities are that no Board action on the loan will be forthcoming in the

foreseeable future. Action on the Ougree Marihaye loan was postponed, at first,

bee)use of the higher priority of the $50 million being negotiated by Belgium

and, later, because of the uncertainty engendered by E.R.P.

Ougree Marihaye has been negotiating with three American suppliers

(only General Electric was mentioned by name) which cannot make deliveries

before two or three years. Ougree Marihaye is most anxious to place orders for

the equipment immediately and have transmitted letters of intent to the suppliers.

As a result of negotiations between Ougree M1rihaye and the suppliers, the American

firms are willing to participate in the proposed loan by extending credit for

the equipment. However, Ougree Maribaye now wants to obtain the blooming mill

on credit for the cash price originally quoted and the suppliers insist on an

inereased price.

The Export-Import Bank has ascertained from the Belgian Ministry of

Equipment that the Belgian estimate of $55 million for iron and steel equipment

submitted to the CEEC only covered replacement cost of equipment damaged as a

result of the war. Since the project envisaged by Ougree Marihaye involves

eapeesixn of existing facilities, it presumably was not included in the CEEC

estimates.

-3-

The Belgian Goverment has been unwilling to guarantee an Export-

Import Bank loan to Ougree Marihaye, although M. Frere on his recent visit

indicated to the Export-Import Bank Board of Directors that in his opinion the

Ougree Marihaye project was a worthy object of an Export-Import Bank loan. The

Belgians base their hesitation to guarantee the proposed loan on the grounds

that such action would subject them to pressure for similar guarantees to other

firms and that they are also opposed to such action on principle as violating

their concept of the relation between the Government and free enterprise.

Mr. Tirana indicated that other considerations may have played a more important

role in the Belgian decision, although just why the Government is prepared to

guarantee a loan to Cockerill but not to Ougree Marihaye is unclear. He expressed

the belief that it was most important for the I.B.R.D. and the Export-Import

Bank to exchange information and views where a potential borrower approaches

both the I.B.R.D. and the Export-Import Bank. In the present instance, he in-

dicated that it was clear that neither Bank was completely informed concerning

the proposals presented to them and stated that only the importance which E.R.P.

plays in the Export-Import Bank's work at this time has dissuaded him from

recommending to his Bank's Board that a mission be sent to Belgium to obtain all

the facts concerning the Ougree Marihaye project and the place it would occupy

in overall steel expansion in Belgium.

AWaterstonFeb. 26, 1948

INTERNATIONA 1ANK FOR RECONSTRUCTION ANE :VELOPMENT

OFFICE MEMORANDUMTO: Mr. John Penton DATE: February 24, 1948

FROM: Andrew F. Patterson

SUBJECT: Withdrawals by Borrowers of Belgian Francs from our account with

Banque Nationale de Belgique to February 24, 1948.

Luxembourg B. Frs. 42,300,000

Netherlands 20,830,957

These amounts have been taken out of the Belgian francs put at out

disposal by the Belgian Government. This amount being B. Frs.87,655.ooQ, an amount of B. Frs. 24,524,043 is left.

Applications Pending

Luxembourg has indicated a desire to withdrawin the near future 7,000,000

The Netherlands faas pending applications whichwill be withdrawn in Belgian francs totallingabout 319,240,367

An amount of B. Fra. 301,716,324 will, therefore, have to be boughtagainst dollars from the Banque Nationale de Belgique. We will buy-B. Frs. against dollars at the International Monetary Fund rate43.8275 80 that the amount of dollars accruing to the Belgians willbe approximately $6,884,171.

AFP:gmc

OFFICE SERVICE

D. Crena de Iongh February 20, 1948

J. O. enton

Belgitau

We are looking into the Belgian proposals for a loan. It

would be of great help to know the countries for which you have dix-

bursed Belgian francs and the amounts. Could you also please say how

many Belgian francs have been bought for dollars in connection with

the Bank's loans?

-entonmvp

INTERNATIC . BANK FOR RECONSTRUCTION A DEVELOPMENT

OFFICE MEMORANDUMTO: Walter Hill DATE: February 19, 1948

FROM: J. M. Penton

SUBJECT: Belgium

I saw Monsieur Basyn yesterday. He told me that he had seen

Mr. Garner the day before. Mr. Garner said that the Bank was ready to helpBelgium to finance imports of capital goods for specific projects, and thatthe Bank would be willing to make a start up to about $15 millions immedi-

ately, provided that the technical reports on the projects were approved.He also said that we would only finance imports which had to be paid for in

dollars. Mr. Garner also appears to have added that we could not make a

larger loan at the present time because no decision had yet been taken byCongress on the Marshall Plan, but he does not seem to have said anythingelse to Monsieur Basyn about the timing of the loan in relation to the Mar-shall Plan.

Monsieur Basyn said to me that he thought it would be usefulif a mission from the Bank could return to Belgium to look at projects and

discuss general matters connected with the loan in order to pave the way fornegotiations in Washington. He showed me a draft of a cable which he was

sending yesterday to Monsieur de Voghel asking whether the Belgians would

like a mission to go over there and, if so, whether they would like it to

start immediately or would like its departure timed so as to arrive in Bel-

gium about the middle of March. He pointed out in the cable that the Bankwould be unable to finance Linalux and that it was therefore essential for

the Belgians to prepare other suitable projects.

F FICE SFRVICES

W.A.B. Iliff 2/16/48J. M. Penton

Belgium

I understand that in the near future Mr. Garner will tell Monsieur Basynthat the Bank is ready to help Belgium in the following manner:

a) It will assist in financing Belgian imports of capitalequipment for approved -rojects over a eriod. Itwould be wiser, in my opinion, not to specify an upperlimit.

b) The Bank can, at present, only finance for Belgium im-ports from the dollar area. The Belgians must makeother arrangements to finance imports from Switzerlandand European countries such as the U.K. and France, withwhom Belgium stands at present in a creditor position.

c) The Bank is ready to examine immediately projects requir-ing dollars up to a sum of about $15 millions.

d) In view of the Bank's policy not to make substantial loansto Europe before the position regarding Marshall Aid isclarified further, it may in the end be necessary to delayformal signature of the loan contract for a short time.

The practical effect of such a statement will be that the Bank will startexamination forthwith of the John Cockerill steel project ($1 millions), butthat it will not interest itself in the Linalux electrical project, except pos-sibly to the very limited extent that equipment will come from the U.S. Fin-ance for this project might come from Switzerland, but Linalux is an interest-ing affair and may play an important role in the development of industry inthe Liege district. I would suggest, therefore, that we should nonethelesskeep in touch with what is done to put the project into execution.

"onsieur Basyn should be asked to tell his Government that they should atonce set about selecting other projects for the Bank to conform with the deci-sions at b) and c) above. This should be made very clear, since the Belgianrovernment has no competent planning staff, and coordination between the Miis-tries of :conomic Affairs and ie-equipment and the Banque Nationale, which han-dles the liaison with the International Bank, is most imperfect. We face thedanger, therefore, of having presented to us a series of small and often even un-suitable projects, unless steps are taken to prevent this.

It would be possible to make a start with Cockerill, and leave it to thecel ians to take their own time about submitting other projects, but from what

I have sid above, it is apparent that this may lead to misunderstanding. Ifthe Bank really wishes to take a positive attitude over help to Belgium, I sug-gest that I should return to Brussels in a few days time to supplement any action

lonsieur Rasln may take by amlifying his comumunication to his Government,which will pass through the Banque Nationale. I should make a ooint of ex-plainin, what the Bank wants to do in the matter to as wide a ran e of inter-ested tzeopic a posible.

It would be useful if I co; he ioined in ' elium by r. em-ert of theresesrch T~eartment, or omebodv -ossessin- similar uat fications. He couldinvestigate the technical side of the & ckerill _rojecb and have a look at anyother nrojects submitted by the 3el -ians while we were over there.

The loan will be for specific projects and not, in the broader sense, abalance of payments loan. It will also be made to a very advanced Yesternuropean country with a ood credit record. I think that we have enough informa-

tion in the Bank already about Pelgiumrs ene ral economic o ition zind that any"urther tnvesti ration of it would urove unnecessary.

-x ~~( "-1w t

R. L, Gar'ner 16 1e1ruar 1948

*..B Ilif

1ched myora ns on nei

~tteced a1 a ionrande by 'r r. a t : vh'ch >a r useru1

t uin r'-ur intorviow 1~i flnaieu Ba ayn.

I agryo 'ith Mr. Pentrn s reoomndahtin0 n I think It iwuM

be t ou id a if Hess Penton ar Rembhrt gent to I weels julte ean

to Wide ahe >1lIrma in tho r'ght direc. -n. If w e, r' zp

ouw ud lthi g!t. n v o ur n.

ild y u like r.* Pent a to be with you when you interview

on eruray 121, ,I 3

A meeing 4"X Sauf La ca ', th. wrld sMr Crwa is

ocngtcider be qgstion wbetr te !fk woher 3u.Vifled in;r * o

to B lgium b*for. alrtricatiari of me si Wato readn Mashl Ai, uk..

iag int coratoo ber &sa esa t .1ania po, io wtih as aare

It WA pite t that i t was vita. for JeAt t eit g

indutryto at she eou14 said1na to aopt tn wort4 exor wartIska

utura years On th . er 3ea, 1id1 atili ha sas 0 uili1n Is ge*

and Qriga esChngp whiek, IS r..adie to the ebm. Of hwr pQpuatis is *e

i atr . $be bis bm

m t, Lore, ae loa1 mrI. v li e mado avU u

impmntswer mad tosupliea* cv ouddrivu, var4 ite nasa aai

from a lon a ab e hr bbn fpgmtawses

dollar area and a n-,rab balauct wm E , whic rt. Juts a 4A" 'Cf-

Sof a.out % in er wrd tre ls thereforeo a stroag

ma~n4 r 3Ia cr from -Itber 1 crronI*, nd th tr'

1"4par mt isu4s o Blia frea tin r c pato meDa r.euiras.

It was felt ,t if a to B4 it be paibl. to pss

her Lo mak availab1 to tbe ZBak a wrtber #'.*htati4l ~aot of ea frae

a., two Lro o far .utbu;td til Alm

A. W. repl nt of %e pwsent pmt at Jok ocherI'

,teel works by a cold strip mill. All orders for this new

equipment are to be placed in the U.S. ( million).

B. The erection of a thermoelectric power station (Linalux) to

supply current to the industry in the Liege district. The

overall requirement amounts to the equivalent of 01 million,

but it is unlikely that a substantial proportion of this will

be needed for the U.S., since much of the equipVent will be

ordered in Enland, France, Sweden, Switzerland, etc., depend-

ing on delivery dates and prices.

The consensus in the meeting was that the Bank should not at this stage finance

in dollars aelgian requirements from other uropean countries with whom Belgium

has a credit in her Bilateral Clearing Agreements.

The total sum so far requested by the Belgians, i.e., $ 1 million, is

small, and Belgium would find herself in a somewhat sounder position than other

Furopean countries, even if no arshall Aid were to materialize. $323 million

have been -rovisionally earmarked for her under the first year t ERP authoriza-

tion, both in -rants and loans. It I A;uite likely, however, that the Bank

i ht, in certain circumstances, take over the financing of imports of this type

of equipment as art of its contribution to Marshall Aid. It cannot be said that

3elium's present position and the Lon -term nature of the projects render it es-

sential for the Bank to finance them as a matter of urgency, and, moreover, some

doubts were expressed about the advisability of taking a c m-itment to make a

loan to Belgium at this st'e efore the clarification of Marshall Aid, because

it mdiiht set an undesirable precedent where other countries were concerned.

France and Italy have, however, received interim aid, and France, Holland, Denmark

and Luxembourg have al ready received loans. Purthermore, some time would elapse

-3-

belore investigation into the project5 had been coupleted, oy which time the

situation regarding Marshall Aid ht have become clearer. There are tacti-

cal advantages also to be rained from naking a small loan to Belgiu for spe-

cific projects. The loan would lonk "11 in the Bankvs iortfolio; it would

stren-then the hand of "onsieur Frere, the 'overnor of the Banae Nationale,

who is endeavoring to pursue a sound orthodox financial policy in BelgIu; and

there -i ht also be the further advantage that the Bank would obtain -ermission

to draw further on the Belgian 15% capital subscription.

It was therefore auggested that the Belgians should be told that, al-

thou, Ii the Bank did not feel justified in financing imports from European cou-

tries in respect of which 3el ium was in a creditor position, the -'ank was, how-

ever, illing to help Belgium by financing imports of capital equipment for dol-

lars in successive stages over a period. The Bank would start at unce the exax-

ination of any projects of this nature which the Belgians cared to submit up to

an inclusive total of .15 million. In practice, this would mean that, subject

to satisfactory technical reports, the Bank would consider financing the John

,ockerill project, but at most, only the relatively smai] proportion of dollar

equipment included in the Linalux project. The Belgians should also be told that

the Bank would wish to examine imediately the technical aspects of any prOject

submitted, and thereafter to conmence negotiations for a loan contract. It was,

however1 the Bank's policy to wait until more was known about the orn which

Marshall Aid would take before -akin loans to Burope; in aroer to avoid embar-

rassi-ent in the Bank's relations with its :enbers, the forial signature oC the

loan contract m-. ht, therefore, have to be delayed a little, althou.h the delay

should iot be nduly long since the technical tnveti ations would normally take

a certain time.

eC: 1!r. 1'clov M I c"nski

W. 11i1 February 11, 1948.

J. Rcinki

Status of loans granted, pending loan negotiations andoreliminary discussions with iros;ective 1icana.

Following your raqu-st I em submitting the following nform tioncovering countries of the Torthwestern ?uropean Division with regard to theabove-mentioned subject.

I. O0UIE1I1S TC) HII{ L0XAD ST IUDD 1EI'.,

T 7 DS. An ngreement for a loan of A195 million tofinance the 1947 dollar deficit of The Netherlands was signedon Awost 7, 1947. The loan became effective on September 11,1947, and its Closing Jate is March 31, 1948. UP to January 31,1.9!8, incll, 83,204,814. had been drawn.

The Duteh informed the ank last week that they will soon ap lyfor an extension of the Closing atn.

An agreement for a loan of $40 million, which in effectwas destined to finance part of the 1947 and 1948 balance of pay-ments deficit of Denmark, was signed on August 22, 1947. This loanbecame effective on October 17, 1947, and its Closing Date isDecember 31, 1948. Up to January 31, 1948, Incl., $1,960,719.had been withdrawn.

LtJXO3GUBO. An agreement for a loan of $12 million to financethe purchase of a rolling mill and railroad equipment was signedon Aunst 28, 1947,

In connection with this loan, the Belgian Government agreed to theuse by the Bank of Belgian frncs from Belgium's capital sub-secriet Lon up to the equivalent of I2 million.

The loan becnme effective on Octobor 24, 197, Its Closing Dateis D cenber 31, 1948. Up to February 10, 1948, MR., $6,359,860.had been drawn - in U.S. $5,391,900 and in BF the equivalent of$967,960.

II.* 0IUliTRI; A * { ICE iGO'f IQ~II 20 I G C6DUCTBD.

T. The an is no studying a D2tch proposal for afurthier loan of :proximately 7.2 million to finance the balanceof the .urchase price of ;ix ships for the Dutch merchant marine.

W. Th-- Fa ary 11, 1948.

Iii.* coimmi s nIo~ MAV IErmL2JAY APOACThED TH AKWTA V 7S! TO . I LFL a F( LOANS.

; ELGIU3. The Belgian lOvernment informally approached the ank'V ficials on 3eptember 18, 1947, (during the feneral eeting in London)to a olore the posibility of obt. Ining a loani of 010O million forthe electrification of ra ilways and the renewal of industrial equilp-mont. In november, 197, th l lgin a. informally 'ether,instend of a larger loan, the Bank would be willing to grant a creditfor the financing of a few specific project, i.e., an electric plantand equiiment for steel mills, of a total value of about $14 million.

In connection with this pro-osal, Mr. enton visited elium inJanuar 14 and a loan to Belgium is now being considered br theank . he asked the Belgians not to submit a formal alicntion

unt il a decision as to principle is reached.

NOiAY. On January 77, 198, the representatives of the MorwegianCGovernmont approaehed the Bank with a view to obtaining informationas to the procedure to be followed in the lase of a loan ap lication.The orwegan indicte th t they might be interested in a lon forfinancing their shipoing reconstruction program. They mentioned thatthey also have projectl for the construction of hydro-electric powerplants d railway electrification. A draft a reliminaryquestionnaire to be anawared by the applicant country was sent to theflorwegians.

fNLM . On January 23, 1948, the Comercial Counsellor of theFinnish Legation in 1shington anproached the Bank with a view toobtaining information as to the procedure to be followed in the cseof a loan application. ie indIcated that Finland would probably notap sly f or a loan unt il thde se cond half of 1948.

4. 2ii ~~A3T ib:) . ) r entat lsve of the *T .. Governmentvisited the Bank on December 5 and 9, 1947, and discussed the

ossibility of obtaining a loa to f inance the 1948 imort program,or, alternatively, specific :rojecta such as the rehabilitation ofthe Talm oil and tin industries. The Bank informed them that nodecision could be taken until the political situation in that countrywas mre settled. however, no anser has been received to date to a2uestionnaire handed to the representatives.

IV. :,"" 1 VT'IP V 0.IM~LIM 2{0 LOA3Zi.

.I02t dthe ,ch the Bankforloans.

* , which is also a orteatern )uropean Division country, isnot a member of the ~3retton #oos institutions.

JR/mo.

kr. Robert L. --arnzr, vice President February 11, 1A8

D. Crena de iongh, Treasurer

Bsigian L.oan Application

Although the following idea may ive an overs2*plifiedpicture and may, p rhaps, not be wholly b on the facts as

ney actually are, nevertheless I think it ]i ht bhelpful todiscuSs it at a :5ftFl-, of the 3taff Loan Coittee on the i'elgianLoan Application.

In general terns I see the Belgian situation as follows,The Belgian tovernment has been following classical methods by vbiehit hoped to succeed in bringing its international balauc. of paymentsin order by contracting currency circulation in the country itself.in doing so the Covernment had to take two riskst In the first placethat the political situation would not permit them to balance thebudget; an% in the second place that currencies would not be inter-convertible so that surpluses in one currency could not be compensatedwith a deficit in another currency. While in the first place theCovernment seena to have been rather successful with regard to itsbucget and perhaps, on account of that fact, the overall balance ofpayment a s a good showing, nevertheless the fact that currenciesare not interconvertible has created a situation whereby Belgiue hasnow a deficit in dollars and a surplus in other currencies. In otherverde, Belgium, while being short in dollars, as any other uropeanc untry, has a unique position of being a creditor of practically allother uropean countries.

if the above view of the situation is about right, it wouldoffer, to AY nind, special opportunities for the Bank and its maubers.tn granting a credit to .lgiua. the Bank might impose the condition

that Blgins would hive its consent to the Bank to use the counter-value in Juelgiw francs of its paid participation (18%) in the Bank'scapital.

If such a transaction were possible, it would have thefollowing advanta es. The Bank is certain to receive from other borrow-ers for Belgian francs, which otherwise would have to be bought.in using the Belgian 18% _oney the Bank would therefore save dollars.Belgian exports to the countries who use the 18% money would be stimu-lated, thereby counteracting the tendency of yaent as describedin r. ilonton's report.

Thirdly, altough Belgian francs are a scarce currency in_urope, nevertheless they are less scarce than dollars, so that re-payment in Belgian francs by our borrowers would always be easier forthem than repayment in dollars, which would be necessary if we had tobuy the Belgian francs for dollars.

I woulf sug::est ihnt the above idea be discussed at the meeing on te 3elgian Loan.

cc Mesars. Iliff, McLain, Rist, feton Rilty

February 10, 19L6

Last September the Belgian Government made an informal approach to the

Bank for a loan. As a result, )r. Penton oaic a iit to Biussels in January

in order to make a quick investigation of general economic and political condi-

tions there, and especially to discover whether any attempt was to be made to

control expenditare in dollars. It was discovered that the Belgian lovernment

has recently imposed restrictions on imports from the dollar area, although it

is too early yet to say what their effect will be on the monthly expenditure,

The Belgians wished at first to obtain a loan for ,1O0 millions, but

eventualLy said that they would be content to submit an application for $l11 mil-

lions, based on

a) The replacement of the present steel making equipmient at

John Cockerillls works by a cold strip mill ($4 miions)

b) The erection of a thermoelectric power station (Linalux) to

supply current to industry in the Liege district ($1O mil-

lions ),

For various reasons Belgium is not in such a precarious economic situa-

tion as most Western European countries and although she has lost gold recently,

her remaining stock is not yet excessively depleted in relation to her needs.

She lives however by selling finished products abroad and for this reason it is

of the utmost importance for her to retain her export markets by modernizing her

factories and increasing the efficiency of her industry generally. Both of the

proposed projects would materially contribute to this end. The loan money would

only be released as paypuents were made to the manufacturer, except for an esti-

mated $3.5 millions compensation for loss of exports in the case of Linalux.

The loan would therefore be for purposes fallin- within the scope of

Article 1 (3) f the Articles of Agreement of the Bank - "To promote the long

range balanced growth of international trade and the maintenance of equilibrium

-2-

in balances of payments oy encourain international investnent for the devel-

opaent of the production resources of mesber5.

eium has a ;ood credit standin and is capable of holan ont o er

than her neighbors in the present crisis. She has however reached this favor-

able position partly by takin -maximum advanta .e of the sellers' market. She

has exported on credit to Europe, but at hi h rices. She has also received

larye sums in oln and dollars from other 7uropean countries for pods supplied

in excess of the values provided for in the credit marg~in in her payments aree-

pents.

The loan would be for specific projects, but the total is not very yeat

in relation to the Bank's present resources. If the Marshall Plan is passed by

on res t e Bank would probably make loans for similar purposes covered by the

Marshall estimates. 1reover, a loan to Belgium of this type would probably be

well received by the investment market, and it should not be forgotten that 3el-

gium made nesture to the ank by aiowin F 2 millions from her capital sab-

scription to be used in connection with the loan to Luxembourg. It na open up

the possibility of persuading the Tel ian Government to allow further sums to be

used if a loan were maee to Belgium.

The idance of the Comittee is requested on the following points:

1. Is the iank justified in Oakin a loan to 3elgium taking into acc2unt

e relative ur ency of the needs of various countries in relation to the anks

resources at present?

2. Us it agreed in principle to make a loan to Belgium and therefore to ex-

a Ine the projects, bearing in MnY that if we do so, it will be taken by the Bel-

4ans as indic tive of a favorable attitde?

INTERNATIO1 BANK FOR RECONSTRUCTION AI )EVELOPMENT

OFFICE MEMORANDUMTO: Talter Hill DATE: 2/5/68

FROM: J. Y. Penton

SUBJECT: Report on Belgium

I have circulated my report on Belgium to the members of the Staff

Loan Committee. I should be grateful if a Committee Meeting could be called

to discuss it early next week -- preferably on Yonday.

If the decision is that a mission from the Bank should return to

Belgium, it should leave in the fairly near future, but a few days must nec-

essarily elapse between the time when the decision is taken and the departure

of the mission.

FFfCE SERVICES 17.10

Ir

BELGIUI -- General Conditions

As a part of a wider tour to gain an impression of certain w'estern

European countries on the eve of the Marshall Plan, Mr. J. M. enton, of the

Loan Department visited Belgium in January. Mr. Penton had conl rsations with

many prominent nersonalities in Felgium including the inister of Finnce, the

Governor of the National Bank, the Secretary-General of the Ministry of Economic

Affairs, private bankers and businessmen., The following is a summary of his

impressions.

Belgian Post->ar Position

It is now a matter of history that, with her industries, transporta-

tion, and the port of Antwerp virtually intact, Belgium enjoyed a favorable

position after Liberation, and was able to accumulate considerable sterling and

dollar credits for her services to the Allied forces, and was enabled thereby

to start production of industrial and other peacetime goods.

Belgian post-war governments were coalition with an active Liberal in-

fluence, and therefore had fewer restrictions than other european countries.

Mr. Gutt's deflationary policy was beneficial because it decreased the amount

of money in circulation, b 't it did little to reduce nrices. It is probable

that these measures contributed to a certain amount of distrust with which the

population in :eneral regards the currercy, although this distrust is not nearly

so nronounced as in Trance.

Present Policy

Y. Spaak's cabinet is a coalition of moderates, with the Liberals

now in opposition. There has been a general mild tightening of rationing and

import restrictions.

In the past six months Belgium's trading position has deteriorated.

The Gutt reform aroused distrust in the currency, prompted hoarding. Tighten-

ing of restrictions in other European countries precipitated a maximum of imports

-2-

lest similar measures be taken in Belmium, and the imminence of the BFNELUX

tariff, on January 1, 19L8, also contributed to this excessive importation.

In August and epte er averA-e imports from all sources amounted to 4160 mil-

lion vhile in December they ad risen to <239 million. The resulting net loss

of gold has brought about a change of policy. This policy is to some extent

a compromise which takes into account the point of view of the National Bank

which insists that equilibrium must be maintained between the volume of goods

on the market and that of the currency in circulation, and the fears of those

who foresee the possible reduction to an embarrassingly low level of elgium

gold and dollar reserves in future. 3estrictions have been introduced on the

importation or goods from the dollar area. Import licenses in future will be

granted by the Excbanoe Control on the basis of three categories of goods:

Licenses for essential manufactured 7oods and raw materials will be granted

automaticlly. Licenses for luxuries and inessential consumption goods will

be rejected, blut there is a lar e class of goods in respect of which applica-

tion for licenses will be reviewed individually n -ranted or rejected on their

merits and in accordance rith the prevailing situation.

The Gove~ rnt believes that very large stocks of consumption goods

are held in Belgium, partly as a hede against inflation, and that the reduction

of imnorts from America will brin atout the liquidation of some of these stocks.

In order to prevent speculation in stocks, details of these restrictions have

not been published in nrussels, alt ough the complete lists of g-oods covered by

thesM restrictions are already in the hands of many big stores and merchants

in Brussels.

Belgum is also endeavorin, to switch imnorts from America to Purope,

with wbich , lar-e proportion or her export trade is done. She has negotiated

a commercial agreement with Russia under whicb she hopes to obtain :rain in

e-xchange 'or manufactures and raw materials from, the Congo. Feliun has beer

importing on an avera7e of 230 thousand tons of coal a month from the USA,

but it is hoped to reduce this amount in future through the import of coal from

Poland and the UK. A price limit of Z140W has been planed on cars imported

from the US, but 7ritish cars will be accepted at higher prices.

An Anglo-Belrian a;reerent which was on the point of conclusion sets

for 1918 the figure of ;,98 million for exports from the sterling area to Bel-

7ium and the Congo, and of T75 million for imports from Felgium and the Congo.

Transfers of sterling from third countries to Belgium are limited to T6 million

for 1948.

It seems unlikely, however, that a greatly increased quantity of g-oods

can be &btained from Eurone in the immediate future, nor is it likely that Bel-

-ian exports to the US will be increased materially at once. Moreover, the de-

valuation of the French franc may cause competition on world markets for certain

lines of Belwian goods. It is also unlikely that other European countries who

have a cieficit on current trade wijth TBelgium will be able to continue indefin-

itely to huy nelgian Toods with sold and dollars once the credit marsins in

their payments aree-nts w'it> Felgiurm have been exceeded. It is, therefore,

a fair assumption that the Belaian dollar position will continue to deteriorate -

at least until the effects of Marshall Aid begin to be felt in Europe, and that

there is a g7reater likelihood of the restrictions being applied with gradually

increasinc enery.

There is today a certain amount of unemplymnent, mostly so far in

the textile, leather and furniture industries. The worst 'it at oresent is

the shoe industry. The total number of wholly unemployed in Belgiun has risen

from 26,'0! last June, to 67,000 in January. The n mber of partially unemployed

in December was 1,000, and it is said that these ficures are 'treater than normal,

even when allowance is made for a termorary seasonal increase in the unemployment

figures. The Government hope that unemnloyment may only be a symptom of a gen-

oral economic readjustment within the country, but if prices are not soon brought

down and unemployment increases, it is likely that there will be a renewal of

social anitation and roneed clamor for wage increases.

The 7 -udet for 19L is balanced hut at a very high level and taxation

is heavy. Public and rrivate reconstruction was financed in 1917 to the tune

of 7F 21. milliards. mn effort is being made to encourage savings by high inter-

est rates, etc., but the tendency to stock 7oods and the general lack of confi-

dence in the international situation has resulted in an apathetic canital mar-

ket. The ,eneral stock exch-anre index is no- about 165, whereas, when the Bourse

opened in Drussels in August 1915, it stood at somewhere around 230 (1938 = 100).

The 7inister of rational ?eequipment has talked publicly about a reconstruction

nrog7ram extending over ten years and callin7 for a total expenditure of DF 370

milliards. On the other hand, it is not expected that the capital market can

make an annual contribution greater than about PF 25 milliards, which leaves a

large sum each year to be financed by external loans, to wnich it is hoped that

the Tnternational Bank and the Export-Imnport Rank will contribute.

,ECLASSIFED

JAN 1 8 201? Report on a Visit to Belgium

WBG ARCHIVESIn view of the fact that the Belgians had made an informal approach

to the Bank for a loan, it was decided that I should visit Belgium in order tomake a quick investigation of general conditions there, with special reference

to the Belgian dollar position, It ras also decided that it would be desirablethat my visit should appear to the Belgians as part of a wider tour to gain animpression of the atmosphere in neighboring Western European countries on theeve of the Marshall Plan. This was not only because it had been felt that sucha trip would in itself be useful, but also because it was thought undesirableto give the Belgians the impression that the Bank had already decided in prin-ciple to make them a loan,

I spent just under two weeks in Belgium, and during that time I hadconversations with the Minister of Finance, the Governor and several Directorsof the National Bank, the Secretary-General of the Ministry of Economic Affairs,as well as with private bankers and businessmen. I also had intimate contactduring the whole of my stay with the U.S. and British Embassies in Brussels.

It is common knowledge by now that Belgium emerged from the war withher industries and transportation system relatively in tact, She also pos-sessed a great asset in the port of Antwerp, which became the main supply base

for the Allied armies in N.TY Europe. She was thus able to accumulate substan-tial dollar and sterling credits in payment for services rendered to the Allied

troops, and she was also able to start production rapidly of industrial and oth-

er peacetime goods. The monetary reform carried out by Yonsieur Gutt was ben-eficial insofar as inflation was curbed by the withdrawal of surplus money fromcirculation, and dollar credits enabled Belgium to fill her shops with consump-tion goods to provide incentive to her workers in the factories.

This favorable s ituation at -the close of the i-ar enabled the BelgianGovernment to pursue a liberal economic policy, but it is probably not gener-

ally realized to what extent the pursuit of this policy was also due to the com-

position of successive Belgian Governments. Hitherto, all Belgian Governmentssince the Liberation have been coalitions in which the Socialists have figured

prominently, but in which also the very small liberal element in the Chambersucceeded in obtaining a disproportionately large number of Cabinet posts. The

PSC, the Catholic party, who are of a more conservative complexion, were in op-position. This combination enabled the liberals to exercise a great influenceon the policy of the- Government, with the result that there have been up to now

fewer restrictions in Belgium than in any other European country.

Last July Tonsieur Spaak formed a new Government which is a coalition

between the PSC and the Socialists with the liberal party in opposition. This

coalition can only be maintained because the left wing of the PSC and the right

-in;! of the Socialists are both moderate in character and do not find undue dif-ficulty in working together. The PSC "inisters are, however, under constant

criticism from their party that they make too many concessions to the Socialistsin order to preserve the life of the Government, the result of whose economic

policy can be seen in a general although mild tightening-up of such things as

the rationing system in Belgium and the imposition of restrictions on Belgium's

imports fror the dolar area,

During the last six months Belgium's trading position has-wdrsened

owing to a variety of reasons. In the first place, it is fair' to say that the

Outt reforms were not without certain disadvantages. For instance, there is

no doubt that the pubiic has been led to distrust the currency and to hoard

goods as a hedge against inflation or altetnatively against further Government

measures to prevent inflation. Secondly, the public, as it turned out rightly,had little faith in the Government's declaration a few months ago that the era

of ftstrictions was past and that the last vestiges of directed economy in Bel-

gium would shortly disappear. People noticed that conditions were growing worse

in other parts of Europe and that restrictions were being tightened up. This

led them to fear an inevitable reintroduction of restrictions in Belgium with

the result that traders started to import the maximum amount of goods from a-

broad, including the dollar area, immediately. A further reason was the desire

to import as much as possible before January 1, 1948, when the new BENELUX tar-

iff was introduced. This tariff has the general effect of raising the import

duties in Belgium on many goods compared to the duties which existed before the

war. It also reimposes many duties which had been waived for supply reasons

since the end of the war. For the priod of January to July 1947, imports of

goods from the U.S. amounted in value to approximately 233.6 millions, whereas,

exports to the U.S. only attained a value of approximately $30.3 millions, Im-

ports from all sources rose from an average of $160 millionsduring August and

September to $239 millions in December, Although Belgium was able to make up

part of the hard currency deficit through receipts in gold and dollars from oth-

er countries and through the convertibility of sterling, until August, 1947,

there has, nevertheless, been a net loss of gold which has caused widespreadalarm and a change of policy. The new policy appears so far to be a compromise

between the views of those like Frere (the Governor of the National Bank) who

insist that an equilibrium must be maintained at all cost between the volume of

goods on the market and the amount of currency in circulation, and those who

fear above all the probable exhaustion of the Belgian gold and dollar reservesin the foreseeable future. The result has been the introduction of new restric-tions on the importation of goods from the dollar area. In the future, all re-

quests for dollars, pesos, etc. will be referred to the local exchange control.

Lists have already been drawn up dividing prospective imports into three cate-

gories:

a) so-called luxury goods -- licenses for these will henceforthautomatically be refused:

b) raw materials and other essential goods for which licenseswill automatically be granted; and

c) the largest category containing a wide range of miscellsneousgoods in respect of which individual applications for licenseswill be judged on their merits and in accordance with the pre-

vailing situation,

Another regulation has been introduced to prohibit the reexport of imports from

the dollar area to soft currency markets,

-3-

The Government believe that very large stocks of consumption goods

are held in Belgium and that a reduction in imports will not impose a hardship

on the business community, and will ultimately force the goods onto the market.

This may have the result of bringing down the very high prices which s~till pre-

vail. It is an interesting conrentary., however, on the situation and mental-

ity in Belgium that, although the Government have decided not to publish the

details of these restrictions for fear of provoking speculation in stocks, the

lists are, however, actually in the hands of the managers of many of the big

shops in Brussels!

The Goverrment's second line of attack consists in an attempt to switch

the import trade away from America to European countries. The Belgians point

out that they are one of the most highly industrialized countries in Europe and

that their trade has always been for the most part with the rest of the Contin-

ent, including, of course, Germany - the loss of which both as an export market

and a source of goods affects them very severely, Although one may not perhaps

take too seriously a remark made by the National Bank to the effect that no

more Belgian goods will be exported to countries who cannot pay for them either

in goods, gold or convertible currency, it is, nevertheless, true to say that

the Belgians are willing to go to considerable lengths to get goods out of their

creditors, nearly all of whom, however, are themselves engaged in continual ne-

gotiations to obtain further credit from Belgium, Nevertheless, Belgium has

negotiated a commercial agreement with dussia from whom she will obtain wheat,

and she also hopes to get some coal from Poland and the U.K. Coal imports from

Europe will be of great assistance in relieving the dollar drain, since in re-

cent months, the Belgians have been importing an average of 230 thousand tons

from the U.S. The Government have also placed an upper price limit of $1400 on

automobiles imported from the U.S., while they have agreed to take as many cars

as the British can provide, even though the prices are higher than those of Am-

erican cars. In the new Anglo-Belgian agreement, for instance, exports from

the sterling area to Belgium and the Congo have been set at L98 million for 1948and Belgian and Congo exports to the sterling area at L75 million. The Belgians

have agreed to hold an additional '5 million, but transfers from third countries

to Belgium in sterling have been limited to 16 million for the year. This has

caused concern to the Belgians because it will affect their export trade to plac-

es like Italy and Yugoslavia, etc, At the date of writing, the agreement has

not been signed, It is clear, however, that the new import restrictions will,

if properly used, give the Belgians a fair measure of flexibility in the opera-

tion of their import policy. If goods are obtainable from other sources and

the dollar position continues unfavorable, by refusing more licenses for the

third category of goods, it will be possible to reduce the dollar expenditure

still further. Various forecasts are heard in Brussels as to the effect of these

restrictions on the Belgian dollar expenditure and they differ according to the

individual views of the speaker. ,onsieur Frere and Baron Snoy, the Secretary-

General of the Vinistry of Economic Affairs, maintain that the restrictions have

merely been imposed by the Government as a concession to left-wing elementS, and

that they will not reduce Belgium's dollar expenditure by more than about $5million a month. On the other hand, other people, including the Tinister of Fin-

ance, and several other Directors of the National Bank, consider that their ef-

fect will be very much greater. In any case, since it seems unlikely that the

Belgians' exports to the U.S. will increase materially in the next few months or

that other European countries will be able to continue indefinitely to pay

Belgium gold and dollars for the goods which they receive from her, it is

4 fair assumption that Belgium's dollar position will continue to deterior-ate rather than to improve, and that, therefore, there is a greater likeli-hood of the restrictions being applied with increased vigor than otherwise.

The Governor of the National Bank sees this whole matter from the

point of view of internal financial policy. The advances by the NationalBank to the State have reached a total of BF 5O milliards, and Ponsieur

Frere is opposed to giving the Government any further credit. The 1inisterof Finance said that he had agreed not to exceed this limit, although theNational Bank insist that he is putting oressure on them to increase thisamount since the Belgian Treasury is chronically short of cash. The Nation-al Bank consider that an increase in the circulation brought about by thismeans would put additional pressure on Belgiumts external reserves and that

the wa- to control the situation is to pursue a very tight credit policy.The average interest and rediscount rates in Belgium are h.73 and 3.5%, re-spectively. Unfortunately, however, this is in reality a political ques-tion which is affected by the fact that the statute of the National Bankwill come up for revision in a few months time. There is a distinct possi-bility that the National Bank may be nationalized, but in aly case, it is

fairly certain that additional governmental control of some nature will beimposed on the Bank, The Governor has it in mind to attempt to negotiatea deal with the Minister of Finance by which the credit to the State nightbe slightly increased by BF 1 milliard francs or so, provided that a reason-able statute is granted to the Bank in the future; some agreement is made bythe Government progressively to liquidate its liability of BF 64 milliardsto the Bank, caused through the winding-up of the Banque dtEmission (theGerman-sponsored issuing bank during the occupation); and the law providingfor the possibility of future advances from the Bank to the State be abro-

gated. In this manner, it is hoped that not only will goods be forced ontothe market, but the people in Belgium will, throuch the restriction of cre-dit, find themselves short of money and thus be obliged to repatriate for-

eign assets. There is no machinery in Belgium for estimating what the val-ue of Belgian assets held abroad might be.

To anyone who was in Brussels siy months ago, the shortage of money

in the hands of the public today is striking. Tlotels and restaurants are

half empty, and for the first time since 1939, shops are holding "end ofseason" sales. A further hoped-for result is a reduction in the excessive

number of middlemen in commerce -- all of whom take their share of the final

retail prices paid by consumers. oreover, the shortage of money may accel-

erate the reduction of prices since traders and industrialists have in the

past sold at large profits as is evidenced by the ease with which exporters

absorbed the 3/ tax on exports imposed a few months ago by the Government tofinance social measures.

Unfortunately, there is another side to this picture. The Governmentcannot be over-optimistic about obtaining in the near future a greatly increased

quantity of imports from Europe and Belgian goods are already becoming more

-5-

difficult to sell abroad. The effect on the Belgian franc of the devaluationof the French franc cannot as yet clearly be foreseen, but whilst French goodswill henceforth be cheaper and therefore imported in larger quantities into Bel-gium, the devaluation will probably cause competition in certain lines for Bel-gian goods on world markets and may bring in its train a general adjustment ofcurrency values. This may well have a dislocating effect on the Belgian exporttrade. There is already today a certain amount of unemployment, mostly so farin the textile, leather and furniture industries. The worst hit at present isthe shoe industry. The total number of wholly unemployed in Belgium has risenfrom 26,500 last June to 67,000 in January. The number of partially unemployedin December was h0,000, and it is said that these figures are greater than nor-mal, even when allowance is made for a temporary seasonal increase in the unem-ployment figures. Black wage rates are consequently today practically a thingof the past. The Government hopes that unemployment may only be the symptom ofa general economic readjustment, but if prices are not soon brought down and un-employment increases, it is likely that there will be a renewal of social agi-tation and a renewed clamour for wage increases accompanied by a slowing-down ofthe economic machine.

The budget for 198 is balanced but at a very high level and taxationis heavy. Public and private reconstruction was financed in 1947 to the tuneof BF 24 milliards. An effort is being made to encourage savings by high interest rates, etc,,, but the tendency to stock goods and the general lack of confi-dence in the international situation has resulted in an apathetic capital mar-ket. The general stock exchange index is now about 168, whereas, when the Bourseopened in Brussels in August 1945, it stood at somewhere around 280 (1938 = 100).The Minister of National Reequipment has talked publically about a reconstructionprogram extending over ten years and calling for a total expenditure of BF 370milliards. On the other hand, it is not expected that the capital market canmake an annual contribution greater than about BF 25 milliards, which leaves alarge sum each year to be financed by external loans, to ihich it is hoped thatthe International Bank and the Export-Import Bank will contribute,

When assessing the possibility of the International Bank making a lomto Belgium, the fact must not be lost sight of that the Belgians are hard-work-ing people with progressive ideas and that they are anxious to modernize theirequipment so that they can continue to play their prewar industrial role inEurope. By the imposition of restrictions on what has hitherto been regardedin some quarters as an excessive dollar expenditure, and by their attempts torestrict credit and thus reduce the amount of money available for expenditureby business and by the general public, the Government has put itself in a posi-tion where it can, if it chooses, pursue a flexible policy adapted to chang-ing circumstances. The choice of the actual policy which will be pursued in thecoming months depends on the relative strengths of political forces inside thecoalition Government and it must also be remembered that a too drastic trend to-wards directed economy might set up stresses and strains 7hich would imperil theexistence of the Government. Similarly, the Govermnentts life might come to anabrupt end if the controversy over the return of Kin- Leopold became acute.The chances are, however, that this last contingency will be avoided for the timebeing, mainly owing to the diplomacy of the Prime Vinister himself, and that amoderate economic policy will be pursued with an increasing use of restrictions

-6-

caused byr a deterioration of the general situation in Europe before aid underthe Yarshall Plan is received in concrete form. feanwhile, it is reported thatthe agreement with the Export--Import Bank for a loan of $50 millions is on thepoint of being concluded, Further short-term relief can be had from the remain-der of the Canadian credit to Belgium, and possibly from further drawings on theI.M.F, If no Marshall aid were forthcoming, Belgium would be unable to encapethe fate of the rest of estern Europe. In the short term, if the Marshall Planis to materialize, there is no reason to believe that Belgium cannot hold out inanticipation of deriving benefit from such aid as long as, if not longer than,any of her neighbors and recover her former position just as quickly as, if notquicker than, most of them, In the long term, however, Belgiumts capacity tomaintain her export markets and earn foreign exchange with which to service for-eign indebtedness vill depend on the modernization of her industrial equipment.This is crucial since Belgium lives by the transformation and reexport of im-ported raw materials. The completion of the two projects, briefly discussed onanother page, will add to Belgium's future industrial potential and it is sub-

mitted that9,on this basis, there would seem to be no prima facie reason why theBank should not consider seriously the possibility of making a loan to Belgium.

John M, Penton?/A/S

-7-PROJECTS

The Belgians said that they were anxious to obtain a loan of $100 mik.lions from the International Bank to be used for the payment of equipment im-ported from the U.S. for various projects as and when they were approved by theBank during the course of the next twelve months After it had been explainedthat both the nature of such a proposal and the sum involved were unsuitablefor presentation to the Bank at the present time, they agreed to make a startby submitting to the Bank two projects for a total amount of $14 millions whichare briefly described below. It was made clear to them that the Bank had asyet taken-no decision in principle to make a loan to Belgiumand the matter wasdiscussed on the understanding that only if such a decision were to be taken bythe Bank, the projects would serve as a basis for discussion.

*John Cockerill & Sons

The steel menufacturing firm of John Cockerill & Sons is controlledby the Societe Genera3e de Belgique, They are anxious to replace their presenthot strip mill by a cold strip mill and the equipment will be ordered from var-ious firms in the U.S. with whom the engineers of John Cockerill & Sons have al-ready had advanced conversations. The total cost of this material Vill be 04millions and the Company is anxious to place the orders by the end of March,1948, in which case the installation of the factory could begin at the begin-ning of 1950. This is purely a project to modernize existing equipment and willnot add materially to the total Belgian output of steel. The local finance nec-essary to complete the project will be put up by the Societe Generaib de Belgique,

Linalux

This is a project for the erection of a modern thermoelectric powerplant near Liege on the Tleuse. The capacity of the plant will be of 100 thousandkw. The idea is to erect a central power station which will serve the needs ofa group of industries in the Liege district and thus avoid a multiplication ofsmaller individual plants. The sums involved are as follows:

Purchase of equipment from US $ 6.8 millionsCompensation for loss of exports 3.8 " "Local finance (additional) 14.0 "

* I was unable to make certain in Belgium whether this equipment had been in-cluded in the Belgian request for Marshall Aid as presented to the Paris Con-ference,

Two other steel firms, Ougree Marihaye and Esperance beia are also desir-ous of modernizing their mills by the replacement of existing equipment bycold strip mills, but so far there has been no suggestion of an approach tothe Bank. Some approach may have been made to the Export-Import Bank by oneor the other of these firms.

-81

The internal finance will be found in varying proportions by the industries in-terested in the erection of the power plant, from the Liege coal mining compan-ies, and from insurance companies.

The Government is anxious that this project should be carried out forthree reasons: In the first place, it is a good example of industrial ration-alization which might be followed by other industries; secondly, the power plantwill use a quality of coal which is too poor to be put to other uses; and third-ly, there is a political element in that Liege is the center of the Walloon dis-trict which feels that it has of recent years been neglected to the advantageof the Flemish-speaking districts who now enjoy a numerical and political pre-ponderance in Belgium. The completion of the plant will do something to redressthe balance.

It is to be noted that only part of the equipment will be importedfrom the US and part may be ordered in Switzerland, France and the U.K. If theBank decides to finance this project, consideration must be given to the alter-natives of financing in dollars imports of equipment from countries other thanthe U.S,, or in the currency of the country of origin, In the case of Switz-erland, it may be impossible to avoid purchasing equipment in dollars, but ifconsidered desirable, it might be possible to approach the French and U.K. Gov-ernment with a view to obtaining their consent to the use of part of their 18%capital subscription to the Bank for this purpose. Their reaction to such aproposal may, however, depend on the view they take of allowing Belgium to payfor goods in francs and sterling advanced by the Bank at a time when she holdssubstantial balances in these currencies and has been receiving'gold transfersfrom France and the U.K. continuously during the last two years.

If a loan is made by the, Bank to Belgium, the Belgian Government sug.gest that it should be made to the Societe Nationale de Credit pour l'Industrie(S.N.C.I.). This is a Government-sponsore iredT. insti ton siilar to theCredit National in France. It issues bonds in Belgium and lends the proceeds toindustry. Its bonds are backed by the guarantee of the Belgian Government. Incase of a loan from the International Bank, the SN.C.I. would issue dollar bondsto the Bank and it has been explained both to the Belgian Government and to theDirector of the S.N.C.I, that the Bank would almost certainly require a specificguarantee from the Belgian Government in addition to the general governmentalbacking which S.N.C.I. enjoys.

John M, Thnton2/4/h8

J. Rucinski 2/4/48

J. 1. Penton

Linalux

In connection with the Linalux project, I was informed in Belgiin

by "!r. Van der Putte that the total outlay in francs was in the nei hborhood

of 900 -illions. It was estimated that the equivalent of approximately 500

illions would be provided in dollars by the Rank, 30 millions by the coal-

mminin industry, 180 millions by the industries interested in the scheme and

the rest by insurance companies.

I have already iven you the papers in connection with this project

so that I am unable to check whether these figures are the same as those in

the Linalux expose.

E nton/mvp

Skejt4 I

ROBERT VANDEPUTTE

Le 21.1.48.

Note pour Monsieur PENTON.

La Societe Nationale de Credit a l'Industrie (S.N.C.I.) a

kt6 crdee par une loi du 16 mars 1919. Elle est destinee "a favori-

ser le ddveloppement de 1'industrie et du commerce par l'octroi de

cr'dits ' long et moyen terme. Elle ne fait qu'exceptionnellement

des avances a court terme.

A l'heure actuelle, les credit$ consentis par la S.N.C.I.

ont surtout pour but l'acquisition de mat'riel. Les operations dece genre ont 6te tres nombreusestau cours des derniers mois.

Des lois sp ciales ont parfois charg4 la S.N.C.I. de l'oc-

troi d'avances pour lesquelles elle a comme debiteur, outre l'em-

prunteur lui-meme, l'Etat belge, qui donne ainsi sa garantie, par-

ce qu'il estime que les credits en cause sont particulierement uti-

les "a la collectivit6. Une loi du ler'fevrier 1939 a notamment

charge la Soci6t6 Nationale de faire des avances aux armements, sous

la garantie de l'Etat, pour la construction ou l'acquisition d'uni-

tds navales. Depuis la seconde guerre mondiale, des dispositions

l4gales ont confi6 e la S.NC.I. l'octroi de cfe'dits aux entrepri-ses industrielles et commerciales sinistr'es par faits de guerre.

Le volume total de l'encours des credits depasse, en ce mo-ment, assez largement les 4 milliards de francs. Les entreprisesjouissant d'avances a la S.N.C.I. sont au nombre de 1.1+68.

Pour financer ses op6rations de credit, la S.N.C.I. 4met

des obligations, tantot sous forme d'4missions publiques, tant8t

par des placements prives, soit chez des particuliers, soit ches

des institutions telles que compagnies d'assurances ou organismes

d'Etat. Aux obligations 6mises par la Societe Nationale, est atta-

ch6e la garantie de l'Etat en faveur des preteurs. Aussi ces obli-

gations ont-elles souvent 6t6 bien accueillies par les d'tenteurs

de capitaux. C'est ainsi qu'une emission publique, faite au mois

de septembre 1947, a concurrence de 400 millions de francs, a 6t6

couverte en trois jours.

Pour le financement de l'acquisition d'6quipements indus-

triels par des entreprises belges, au moyen de crddits a consen-

tir 6ventuellement par la Banque Internationale, la S.N.C.I. sem-

ble pouvoir exercer utilement un r8le d'intermediaire.

La formule serait la suivante. La S.N.C.I. 6mettrait des

obligations en dollars en faveur de la Banque Internationale. Ces

obligations seraient, comme il a 6t6 expos6 ci-dessus, garanties

par l'Etat belge. S'il y a lieu, la Banque Internationale pourrait

stipuler a quelles fins le produit des obligations doit &tre uti-

lis' par la S.N.C.I. Celle-ci ferait alors des credits aux indus-

triels belges avec les fonds obtenus a la Banque Internationale,conform'ment aux arrangements a prendre, le cas echdant, a ce sujet.

't INTERNATION ANK FOR RECONSTRUCTION AND VELOPMENT

OFFICE MEMORANDUMTO: DATE: J.

FROM: J./

5UBJECT:

OFF ICE SERVICES 17-10

BELGIUM

N'otes on the Zeetingwith

yr. T. EasynAssistant Fxecutive Director for Belgium

held on January 22, 1048

At Mr. Basyn's request Pessrs. <11l and Rucinski saw >r. 9esyn

in the latter's office. Lr. bs asked about the present status of the

studies on the informal Belgian loan proposals. In particular he wanted

to know whether any reports on 2elgium had been prepaerd and circulated to

the staff. Mr. iill answered that the Department is pursuing its studies

and some working papers have been prepared. After MIr. Pentonts return

from Belgium at the end of this month, the helgian proposals will again

be discussed by the officials of the BanD. He added that in principle it

is the Bank's present policy not to make any loans to the Karshall Plan

countries so long as K.'.P. aid has not passed through the Congress. He

asked Mr. Basyn whether the amount of >323 million, provisionally allocated

by the U.T. Government under the -.P. program for the first fifteen months,

would satisfy the Delgian needs.

1r. Basyn expressed his satisfaction that the studies on Belgium

are being continued. He added that he is still negotiating with private

banks in Yew York. the conditions of their narticipation in the 'xport-Import

Bank loan of ,50 million. le hoped that in the course of the next week this

problem would be settled, although the terms asked by The bankers were, in

the opinion of the Belgian Government, unduly severe. 'Jith regard to the

amount rut forward by the American administratior as E.. id to Belgium,

he thought that it would probably satisfy the Belgian Government.

Ir. Fasyn presented to rr. Rucinski a copy of the _elgian Govern-

ment's budgetary nroposal for the next fiscal year which had been submitted

to the 3elgian Chambers.

cc: Mr. J. rentonJR/pnn Jan. 27, 1948

JurY 7. 1948

Mr. A. D. kentonotel Plaza

Brussels, Belgium

Dhar Mr. Penton;

I au sending you htrewith two copies each of outlinesof information which is necessary for a rational analysisof electric power and steel projects in Belgium. These arein line with our discussion prior to your departure.

I suggst that these be turned over to appropriategovernment agoncies with the request that the info zm:ionbe compiled as rapidly as possible. I believe in each casethat they should have T good start on assembling thisinformation as a result of the work connected with theMarsha-l1 Plan. However, considerably more detail isrequired than is antained in the Marshall papers and thisdetail is essential for our purpose.

%ith bent personal regards.

Sincerely,

Z. Wayne Rembert

Mr. C. C. Hamilton January 7, 1948

G. Stewart Mason

List of loan applications.

As you may be aware the Belgians have made a very confidential

and very informal approach to us regarding a loan from the International

Bank for Reconstruction and Development. It would, therefore, appear

that the name of Belgium should be added to Section II (b) of the list

attached to your memorandum.

However, it has been stressed that the Belgian approach must be

kept as confidential as possible and under these circumstances I hesitate

having the name of Belgium added to the "I.B.R.D. Basic Documents" at this

time as I think their circulation is too wide for as confidential a matter

as the Belgian discussions on loan prospects. I think it would be advisable

to consult Mr. Hoar before adding Belgium to the list.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

ROUTING SLIPDate

TO- Name Room No.

I J. Rucid 422

2__

3

FOR-Action Initialing

Approval Preparing ReplyComment Previous Papers

Filing Noting and ReturningFull Report Recommendation

--- Information SignatureREM

I attach for your information a memo-ran um concerning an interview with the Export-Import Bank at which were present Mr. WalterSauer, General Counsel; Mr. Grant Forbes and Mr.Tirana. Attached also is a copy of a pressrelease dated November 26, 1947.

FROM- G.S. Mason

oFFICE SERVICES 13-12

Mr. J. M. Penton January 2, 1948

G. Stewart Mason

Belgium - Interview with Export-Import Bank

I had conversations with officials of the Export-Import Bank

this afternoon.

(1) $50,000,000 credit.

As you are probably aware correspondence between the Export-

Import Bank and the National Bank of Belgium has been published. In Mr.

Frere's letter to the Export-Import Bank a line of credit of $50,000,000

was applied for, repayable in five years in ten approximately equal semi-

annual installments. In his letter Mr. Frere went on to say that he

expected banks and other private investors in the United States would

participate or take a portion of the credit which, incidentally, the

Export-Import Bank told me Mr. Frere was anxious to get in order to main-

tain Belgium's credit on the market.

In reply the Export-Import Bank stated that it was prepared to

extend a credit to the Kingdom of Belgium and had set aside $50,000,000

of its uncommitted funds. The terms and conditions have not been formal-

ized but would include (1) provision for repayment as requested; (2) avail-

ability of credit to December 31, 1948; (3) a schedule of industrial raw

material and equipment; and (4) a rate of interest to be determined in

accordance with the policy of the Bank not to compete with private capital.

Since these letters were exchanged the Export-Import Bank offi-

cials said that as far as they knew not much progress had been made.

Negotiations were still in progress with New York banks and the terms on

which they would be willing to take up a portion of the $50,000,000 were

unknown.

-2-

(2) Specific project.

The Ougrie-Marihaye Steel Company has approached the Export-

Import Bank for a credit of about $15,000,000 for re-equipment and modern-

isation. This project is under study by the Export-Import Bank but no

definite stepa have been taken as yet. The representatives of the Export-

Import Bank stated that in their opinion it seemed to be a good project

and one of them said that he thought the Ougr4 e-Marihaye people had also

approached the Loan Department of the International Bank for Reconstrue-

tion and Development. I said I had no knowledge of any such approach and

would like to know if you have heard anything concerning this project.

GSM/pnn

Chiefs of Divisions December 31, 1947.

C. C. Hamilton

List of Loan Applications

It is proposed to amend Page T - 1 of the

IBRD Basic Documents to take account of the fact that informal

approaches to the Bank by prospective borrowers now usually

precede formal applications. The suggested new form is appended

to this memo.

You are requested to indicate:

(a) Any amendments or additions

required by Section II (a); and

(b) Which of the countries ( if any )

covered by your Division should be

included under Section II (b).

Attachment

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

I. Loans Granted

Borrower Amount Date

France (Credit National) $ 250,000,000 May 9, 1947

Netherlands $ 195,000,000 August 7, 1947

Denmark $ 40,000,000 August 22, 1947

Luxembourg $ 12,000,000 August 28, 1947

II, Loan Applications

(a) Formal applications have been received as follows:

Applicant Amount

Chile $ 40,000,000

Czechoslovakia $ 192,000,000

Iran $ 250,000,000

Italy $ 250,000,000

Mexico $ 208,875,000

Poland $ 600,000,000

(b) There have been informal discussions of loan possibilities with

the following:

T - 1

SocIE-rE ANONYM E JOH N COCKERI LL

SERAING LE )

T ii

INTERNATIO BANK FOR RECONSTRUCTION A..- DEVELOPMENT

/I OFFICE MEMORANDUMS1 TO: A.S.G. oar DATE: 23 Decem 1947

FROM: Paul N. iosenstein-Rodan /

SUBJECT: Belgium

I entirely agree with your note of the 18 December that thechoice of the individual who should accompany Rucinski toBelgium (or to Belgium, Holland and Denmark) should dependon what Penton reports. If it is a general investigationof the state of Belgian industry, then a person like Rembertwould be suitable. If on the other hand a specific reporton electrical industry is required, then we could makeavailable an electrical industry specialist.

We shall keep this in mind, in any case, and shall be grate-ful for a communication of Penton's report.

OFFICE SERVICES 17.10

INTERNATIONAl BA MK FOR RECONSTRUCTION AND DE"'OPMENT

OFFICE MEMORANDUMTO: Dr. Paul Rosenstein-Rodan DATE: 12/18/47

FROM: A.S.G. Hoar

SUBJECT: 4 ,

Mr. McCloy has now agreed that Penton should go over to Europe at the

beginning of January. H:4has advised Monsieur Basyn that he will be visiting

Belgium as well as the neighboring European countries and the U. K., and that

his visit to Brussels will assist the Bank to form an opinion as to mhether a

loan would be a feasible proposition in principle or not.

We shall also be arranging for Rucinski to go over to join Penton in

Brussels as soon as he returns from Canada. It will be desirable for somebody

to accompany Rucinski, but we thought that the choice of the individual ought

in some measure to be dependent on what Penton reports. If there is not much

prospect of a loan, Rucinski might do better to take a member of his Division

with him to make contacts and get to know Belgium, Holland and perhaps Denmark.

If, on the other hand, it looks from what Penton gathers in Brussels that the

Bank might after all be able to consider some kind of a loan to Belgium in the

not too far distant future, it would probably be advisable for Rucinski to be

accompanied by somebody from the Research Department Waho could not only assist

in gathering economic data, but who would also be able to advise him on certain

aspects connected with the Linalux and other projects which the Belgians have

submitted. I had tentatively thought of somebody like Rembert, but should be

grateful if you would turn the matter over in your mind.

OFFICE SERVICES 17.10

Conversation on Belgium with Mr. eore Bolton

Decamb r 16, 19h7

I explained to Mr. Bolton that the 1 gans had originally been think-

in of making an atplication for a loan from the ank for 7100 million but that they

now understood that the ank's resources were limited -nd that the Bank would not

be able to make them a loan of this size at the present time. The B)elgiams had then

chanved their tactics and had advanced proposals for the financing of one or two

small projects of which one was the "Linalux" project for about n0. million. This,

however, wasonly a beginning: and it was quite clear that once we had agreed to make

this loan the Elgians would return with further requests for finance for projects

during the next year or eighteen months and that the total of their requests would

in all probability reach the figure of $10O million.

Since knew that Mr. Bolton had worked a great deal in London on Western

Europe, I was interested in knowing what he felt about the position of Belgium.

Vr. Bolton replied that he felt that the ?elgianO gamble ontliberal economy had not

come off, although it was not their fault. The fit must be faced, however, that

about next parch Europe and the rest of the world would be going through a very acute

exchange crisis. At the present time attention was concentrated on the British ex-

change crisis which seemed more acute than that of other ountries, but I in

three months' time the ,ritish would have begun to take steps to put their house in

order and would still have some reserves left, whereas other countries would have

exhausted theirs. Then that time came, on present showing, the ?elgians would have

done nothing to curb their imports nor would they be able to receive any more gold

or dollars from neighboring European countries. urthermore, he felt that the dis-

cussions ofl I1'arshall aid would drag on for several months next year in the United

tates and that it miht not be voted by Congress until June - which would mean

that effective aid would not be forthcoming to 'Western 2Europe before -eptember 1948.

-2-

If this were go, the Belgians, who have lost gold steadily, would also go through

a very acute crisis. '!e pointed out that there was considerable imount of ot"

money in elgiu w.ich had lready beiun to flo out agam 'nd that he believed

that Belgian importers were bayin dollars froa the Bel ian xchange Control, leg-

edly for imi orte from the dollar areas, but that a large proportion of these i-

ports did not, in fact, materialize. In other words, the Belgian Exchange Control

was incapable of preventing evasion or export of capital at the present time on a

substantial scale.

Yr. -olton also told me that the Delgiana had been iven f rou h ride

by the ',und which had presd th- to impose import restrictions, especially on

imports fr the dollar areas, but that the Belgians had said that with their pre-

sent Qovernnent and 'e fact that the ,atholic and right-wing. 'arties were once

a n beginning an mitation to bring back King Leopold, all of which created a

certain kind of political and psychological atnoaphere in Belgium, there was little

hopc of their being able to depart from their present liberal system. hey had,

however, en able to arran c to draw on the Fund and they had also borrowed 0

million from the -ximbank, althu-h part of this was bein provided by a Chase

Pank syndicate and there were certain difficulties which still had to be cleared

away. Thus it was clear that the Belgians had not yet actually got these dollars

in their possession. le thought that the 'ximbank Loan and the drawings on the

flund would be insufficient to prevent the elgians from going through an acute

crisis in the prin, :md that anythin- which the Bank could do now would be but a

drop in the ocean and quite inadequate even to delay for any considerable time

,the evil day. 'le felt that the Bank would do better not to advance any money

to Belgium now but to conserve its resources with a view to helping Belgium and

the rest of estern Europe when the critical time came next -pring. After the ex-

haustion of stop-gap aid, etc., he felt, however, that it would be a useful thing

for the fank to send a small mission to 3elgium to et the ClI~nL of the

country generally and to form an opinion of the situation. Moreover, they

would be able *rhaps to talk to one or two people in London and possibly

some other neighboring countries with a viw to forming an opinion of Belgi's

relat ons with her neighbors.

J Penton/mvp

INTERNATION, L BANK FOR RECONSTRUCTION AND DEVELOPMENT

OFFICE MEMORANDUMTO: 1vmbers of the Staff Loan Committee DATE: 15th December 1947

FROM: A.S.G. Hoar

SUBJECT: BELGIUM

A meeting of the Staff Loan Coimaittee will be held in my room (407)

on Tuesday, 16th December, 1947 at 5:00 P.M. to discuss Belgium.

. note, prepared in this Department, concerning certain tentative

Belgian proposals for a loan from the Bank, together with a short survey of

the Belgian economy, is attached.

Your presence at the meeting will be appreciated.

Attachments

cc: Mr. Crena de Iongh'r. hicLainMr. Rist

OFFICE SERVICES 17-10

NOTE ON BELGIUM

In Connection withthe Belgian Proposal Submitted to the Bank

I. Informal Belgian Proposals for a Loan.

At the Second Annual Meeting in London, representatives of Belgium

discussed with the Staff of the Bank the possibility of borrowing fro, the

Bank about 400 million for the electrification of Belgian railways. Be-

cause of the limited resources of the Bank, the Belgians have since changed

their approach and have suggested that the Bank might be prepared to consider

one or two applications for specific projects. At the end of November, the

Belgian Alternate Director handed to the Loan Department a scheme for-ae-1 --

M4et-f-a-r the construction of an electric power station by a private electric

power company -- Linalux (Liege-Namur-Luxembourg), which requirey external

financing to the extent of $10,580,000 and a4vsad that he maV submit two

further specific projects for the construction of steel mills requiring oi-

external financing of about $10 million each. He also informed the Bank

that Belgium w-i-4 not lodge a formal application for a loan until an answer

from thejan/i received to the above informal proposal. It was not indi-

cated whether in the case of a formal application the applicant would be

Linalux or some governmental agency.

The Linalux project e the construction of an electrical

power plant with a capacity of 100,000 KW, the total cost of which (includ-

ing labor and connection with the general Belgian network) is estimated at

20.7 ,.0C7, of which $10,580,000 would be reouested as a loan from the Bank.

Of this latter amount

(a) "6,749,000 would be needed to cover imports (foreign equip-

ment - $5,792,000; raw materials - $957,000);

(b) 3,831,000 would be required to compensate for a reduction of

exports, since the project calls for Belgian-produced equipment which other-

wise would have-been exported.

-2-

An analysis of the purpose of the project and economic results

to be obtained has been requested from the Research Department,

As a background for the Staff Loan Committee's discussion of the

project a short assessment of the general economic situation of Belgium is

given below.

II. Assessment of Situation.

A. Government policy since liberation.

Belgium came out of the last conflict with relatively small

losses both physical and human. Ties with her overseas territory have re-

mained undisturbed. Due to early liberation she was in a position to render

the Allied Armies valuable services, the repayent of which greatly assisted

in financing imports in the following years. Thus Belgium started post-war

economic reconstruction in conditions much more favorable than those pre-

vailing in most of the Western European countries.

Political difficulties which appeared after the return of the

Belgian Government-in-exile and threatened to become a major constitutional

issue have been overcome. The country elected a new Parliament with

Socialists as the strongest party. The present Government is a coalition

of Socialists and Catholics and c -ids a large majority in Parliament.

This Government has given proof of coitnce by tackling the post-war

economic and social problems with energy and foresight. The working popu-

lation of Belgium has shown codene in governmental policies. This was

demonstrated by prompt settlements of a relatively small number of strikes.

In line with basic characteristics of the Belgians - a dislike

of regimentation and a propensity for a high standard of living - the

Government set out to provide for a prompt return to a pre-war standard of

living liting t interfernce with the economic life of the country to

a minimum. As a consequence the replacement and modernization of capital

-3-

equipment was postponed until the country could satisfy its consumption

needs.

The main lines of Gover nt economc policy have been the

following:

(a) 4he reduction of the inflated r haing power esulting

from policies of the occupying Govern ent by two co plmentary steps:

(1) a forced reduction o0 the supply oy money, and

(2) the supply of a max m aount of conur goods;

(b) te maintenance of real wag - through the applicat:on of

price controls and, when necessary, subsidies;

(c) +L kopin e and gradual reduction of Government expen-

ditures;

(d) a libera- commercial policy aiming at the rapid restoration

of foreign trade to a pre-war level; and

(e) Ve maintenance of flexible exchange controls to be lifted

as production and exports improved.

The re its achieved in the main sectors of the economy may be

summarized as followr:

Industrial oroduction has almost reached pre-war levels. Some

im-ortant industries, such as electricity, metal products and textiles

have even exceeded these levels. A material exception is the production

of coal, th ain natural urce o' Blgium, which still lags behind at

of 193A production in October 1947. Agricultural roduction, in

comon with )thr Erpan countrie, he not yt reached pre-war levels.

The monetar andfanal ituatn o- the country las improved consid-

erably, the danger G run-a in lation haing been eliminated by the

monetary purge in 1944. lowever, expcations that prices would align

themselves to eve ta as a b" i 'or th exchar rates fixed in 1944

-4-

have ben nt . Thi was pimrily due to a re-expansion of the

note circultion resulting from the fin ncing 0e budgetary deficits and

advanc s to the Allied Go rnments for troop expendituras. The rise in

world prices has also played a part in tis expansionary movement. Thus,

note circul tion reduced by the monetary surge Crom BF 190 billion to

BF 25 billion in 1944 reached a level of 7F 73 billion at the end of 1945*

From the end of 1945 circulation was maintained at an alost steady level

till the le of 1947 when there has been some increase resulting in a

level of BF 79,5 billion in November. Unblocing has reduced frozen

accounts from 11 39 billion in October 1944 to BF 12 billion in February

1947 thus diminishing by two-thirds the potential ager of a further in-

crease in the supply of money. Credit expansion has been restricted by

compelling the banks to maintain 55 to 60% of their deposits in Treasury

Bills and by gradually increas ig the Bank rate from 1% in 1945 to 3%, the

present rate. The budgetary deficits have been reduced by two-thirds from

BF 39 billion in 1945 to an estimated BF 13 billion in 1947 while there is

ground for hope that the 1948 budget will be balanced. Through the expan-

sion of production and as a result of large imports of consumer goods,

confidence in the franc has been restored. This is shown by the fall in

the black market rate for the dollar which decreased from 183 francs in

October 1944 to 4S francs in Leptember 1947 (the official rate is 43.96

francs for a dollr). The zold reserves of the Bank, approximately the

euulvalent of $735 million, remained virtually unchanged during 1945 and

1946 whereas foreign exchange reser'es have shown a constant increase since

1945. Belgium's economic position improved to the point where she has been

S able to grant redium-term credits of about - 90 million to The Netherlands.

Inc7uding these medium-term credits Belgium has at present a net credit

-5-

position under her monetary agrements with European countries of the equiva-

lent of $273 million.

The inancing over the three years' period of budgetary deficits

which aggregate some B 80 bllion re ed in a strinenc on t aital

market. As a result interest r tea have risen and the B rilways were

recently compelled to give an interest rate of 4 3/4% for a ten-year loan.

Since the expected deflation of prices did not take place, the Government in

order to prevent any large outbreak of industrial unrest had to agree to

boost waaes which are still showing a rising tendency. This increased the

cost of production to a level relatively higher than that obtaining in the

U.S., The Netherlands and the U.K., the main suppliers and customers of

Belgium.

Incre sed production and the demand for Belgian products has

enabled Belgium to raise her exoorts from BF 30 billion in 1946 to almost

BF 60 billion in 1947, reaching 93% of monthly imports in July 1947, the

pre-war ratio, and this in spite of the high level of domestic prices.

Another result of increased production has been the need for

importing raw materials which coupled with the demand for consumer goods

has caused an increase in imports from BF 14 billion in 1945 to BF 53

billion in 1946 and some BF 73 billion in 1947.

Belgium, in common with other Western European countries, is

suffering from a shortage of manpower. The Government has, however, vigor-

ously pursued a policy of enrollment of foreign workers especially for the

mining industry.

ThE Government has also followed the policy laid down in London

aiming at the creation of an Economic Union with The Netherlands. Common

tariffs have been negotiated as the first step to a complete Economic Union

-6-

and will be put into effect on January 1, 1948.

Thus, it may be said that the Government has achieved the aims

for which its policies were laid down in 1944, i.e., the bringing of the

country safely through the dangers threatened by inflation, shortages and

social unrest. However, other difficulties which may require the formula-

tion of new policies have come to the fore.

B. Recent Developments and Outlook for the Future.

If Belgium's recovery is far advanced, the country remains

greatly dependent on the -rgrs of reconstruction in other Vestern Euro-

pean countries to which her economy is geared. Setbacks suffered by some

countries in 1947 and the conselent alowdown in tir recovery 4e affecting

Belgium's econ my an in particul-r her liberal trae n forign exchange

policies. The unavilability in European countries of goods for which there

is a demand in Belgium and the growing demand for Belgian products has re-

sulted in a necessity for increasing imports from the U.S., while the suspen-

sion of sterling convertibility and the final repayment by the U.S. of sums

advanced to the American army has cut down her sources of dollar supply.

The icon vertibility of most Europan currencies prevents their use for

offsetting dollar liabilities.

The main short-term problem is thus one of a growing deficit with

the dollar area. With the United States alone, the average monthly trade

deficit of 417 million in 1946 increased on the basis of the first nine

months of 1947 to 436 million. In 1947, the total net dollar requirements

for the entire dollar area increased from an average of $49 million per

month in the first six months to 69 million per month for the eleven months.

In 1946, the co odity imports from the U.S. amounted to $210

mi :ion, but they are estim ted to reach the 6500 million mark in 1947.

On the other hand, though Belgian exports have shown remarkable progress

-7-

in 1947, exports to the U.S. have declined from $70 million in 1946 to an

estimated 50 million in 1947, so hat they w1 cover only 10% of imports.

Thus, the deficit with the I.S. alone ha increased from $140 million in

1946 to some p450 million in 1947. As far as the composition of the present

imports from the U.S.A. is concerned, it is estimated that 25% (in terms of

value) consist of essential supplies such as coal, grains, fats, petroleum,

etc.; 10% of cars and trucks, nd the balance consists of a sm 11 rcentage

of capital goods but is inly acounted ror by raw materl1 and manfac-

tord goods for consumption (e.g., in the first nine months of 1947 ports

of nylon hosiery amountd to $11.8 million).

A closer examnation c. th econo-ic evelopments in elgi

reveal that the increaed de or U.S. good, is primarily due to the

basic plicies of -he Governnt; such as

(a) a policy of abundant a uply of consuner goods aimed at avoid-

ing inflation of prices and gi ing an incentive to the pulation, and

(b) a liberal commercial and foreign exchange policy which is a

corollary of the rirst.

This situatin has ben g avated by temporary factors such as

rumors regarding the introduction of import restrictions, re-exports of

America goods to other ropan countries gainst payment in inconvertible

currencies, ando crop failures.

The financing of the deficit with the dollar area as a whole in

1945, 1946 and the first half of 1947 was made possible without having re-

course to th gold reserves of th Nationa1 Bank by

(a) U.S. credits of ;10 million and a Canadian credit of $100

million;

(b) rimbur ment e or t intenance of troops in Belgium,

est td to date at Z300 million;

-8-

(c) receipts in gold of overdran balances under monetary and

nayments agrements w ich nettd 100 mi n the first half of 1947

alone;

(d) conversion of sterling whh Prom th beginning of 191+7 to

the suspension of convertibility, amounted to o-er <200 million; and

(e) income from dollar ivestments, and some repatriation of

dollar investments estimated at 4100 milion.

Since the above .ources of dollar supplies were virtually exhausted

during the second half of 1947, the Belgian authorities were compelled to use

their gold reserves. In the course of October and the first half of November

about -60 mion of gd wer d to obtaI dollar exchange. Th rved

as a danger aigal to the Government. In the hope of improving conditions

in Erp in 19F1, the Governent, it seems, h dicded to tackle the

dollar problem by te rary epdiets rather than chagng heir basic

policies. Cnly mild import resirictios affecting luxury goods have so far

beer inrduced.

It, t eefore, a, s t a' the Govern mnt expects to finance the

dollar deficlt:

(a) by new dollar credits;

(b) b priting indirectly from the European Recovery Plan;

(c) by increasing exports to the dollar area.

As a r' L of re7n ngotiation a credit of $50 million has been

obtaine d rm te E xport-Import nd rrangmnts have been made to draw

on the Belgian cuota in the Intrnationa 1onetay und (56. milliun).

These are at present the only actual new sources of dollars in the face of

a deficit which at recent monthly rates is running in the neighborhood of

4500 millior per annum. It will thus be seen that Belgium is placing a great

reliance on the other two possibilities of financing the dollar gap.

-9-

Available information is insufficient to form a judgment as to whether this

reliance is justified and whether the gamble on improving conditions is

warranted.

In addition to the dollar scarcity Belgium, which has the largest

foreign trade per capita of any country in the world, is also facing another

problem of considerable importance, namely, that of a more realistic exchange

rate. At present, in spite of the overvaluation of the franc with regard to

the chief customer countries, the need for Belgian goods in those countries

eliinate price considerations. But when competition reasserts itself,

this problem will become acute.

The main lona-term problem is the need for replacement and modern-

ization of industrial caital equipment. The policy of providing the popu-

lation with an abundant supply of consumers' goods has adversely affected

capital formation with the result that financial means have been insufficient

to undertake the re-equipment and modernization of industry except on a very

insignificant scale. In the case of Belgium which depends to a large extent

on industrial production for her prosperity the gravity of the re-equipment

problem will continue to grow. Information regarding the present attitude

of the Government towards this problem is lacking.

III. Conclusions.

A. In the light of the general economic considerations previously

discussed it will be seen that:

(a) as far as the short-term problem of the dollar scarcity

is concerned, a loan of the size suggested would play a negligible part in

helping Belgium to maintain her present policies and avoid the introduction

of import restrictions of sufficient severity, and

(b) with regard to the long-term problem of modernization of

Belgium's industry the Linalux loan would not go far towards assisting in

the financing of capital investments (which according to the Belgian Ministry

-10-

of Reconstruction may require in the course of the next ten years as much as

BF 92.4 billion ( 2,100 million) for the private sector alone) so that it

appears that the Bank may be asked to consider further requests for capital

equipment loans.

B. Thus the Bank's loan policy towards Beli cannot be adequately

formulated without a more complete knowledge

(a) of the further remedies to be adopted by the Government

should the dollar deficit continue at its present level; and

(b) of the long-term measure- to be undertaken by the Govern-

ment to provide financing for capital equiment.

It i, threfore, recommerded that such information be obtained by

seding Bank officials to elgiu bforen further con ide-tion is given

the Belgian proposal.

C. As far as the Linalux project submitted to the Bank is concerned

it conists of two rts, a part to finance the im rt of foreign equipment

($6,749,000) which could be regarded by the Bank as a loan for a specific

project of industrial expansion and another part required to compensate for

the reduction in Belgian exports ($3,831,000) which must be considered in the

nature of a special-circumstances balance of payments loan, falling presumably

under Article IV, Section 3, of the Articles of Agreement.

The financing of thermal power expansion in Europe raises the

following policy questions:

(a) Should expansion loans be granted to Europe at a time when

the European Reconstruction Program has not yet been decided upon and applica-

tion for urgnt reconstruction loans may be forthcoming?

(b) Should the Linalux project be regarded as making the best

strategic use of the Ban fund for industria1 exnsion purposes in

Western Europe having in mind (i) the choice of industry, ahd (ii) the choice

of locality?

-121-

The financing of co,-ensation for reduction of exports would

raise all sorts of difficultie (notably the absence of anything to -uper-

vise) ar t "o. tte will foeeably fee that it would constitute an

undes ir' precednt even if It were possible unde the Articles of gre -

ment, and should not, therefore, be considered.

J :/pnnDecer hber 2.2, 1947

The Be14an have iade nnforal auproreh

the 3ank for a loan f aout 10,000,00O for thi

Conutruct Ion of an electric wer 1 t, 1t stresge4

that tIs wsnot for1l& pioaton d hou,

therefore, be kept confidwntial.

DTh!o47.

oll rn u teleh oner vonveston, Vher ar a >ttzch dhe h fveAnnitl RTh ert e o the Ltnal.ux.

It Aill be appruciat ed if yot wil return the<i to the Lonamnt atr p1rsal

Note on eetin, th !r. ay laller

1aving heard that I-r. tay iiler, the Comercial Counsellcr to

the * '. Embassy in irusels, was temporarily in -shington, I asked

him to come and see e.

;iller told a4 that althou the "50 1ilion credit granted to

Celgiun by Exi tank a tieoreticaLl Vi d co cdi lea such coal,

wheot, etc., this woe in fact more of a. facade than anythtn ee. Thse

comodities were included in any case in the Belgiu import progr-i and

the main pur-ose of the U. . Gov rnment in reUo ending this loan to the

,ximbank had been to provide 3elgium with dollars in order to pr'vent a

deterioration in her economic situation. The prevailint idea in the tate

Department seems to be that it is better to give countries like Belgium,

Norway, sweden, etc., some aid now in order to keep their economies running

at the -reeent relatively high level rather than let these countries slip

backwards with the restlt that it would cost more to bring about a revival

later on.

Alier said that he had been urpirise to hear that the Belgians wer

thinking of applying to the ank for loan since he felt that the Pund was

better fitted to do this particular job. e admitted that Belgium was run-

nin.- down her gold reserves and s oending her dollar income at an alarming

rate, and that it was impossible to foresee what would ha en in a few

months time if she did not either obtain further direct aid,or benefit from

the feeovery of the rest of the V.estern European countries through the

action of the 1arshall Plan. He felt, therefore, that although -el4um ight

ask the Sank to finance certain specific 7rojects, this aain was only a

window dressing since wat the elgians are really after is additional dollar

comodtion in order to continue to import gods from the dollar countries

-2-

at the rresent rate. le did not see much hope that the Belgian Govemnment

ould impose adequate controls on imports and foreign exchange expenditure

to sat'uard their osition later on, should t other ropean countries

continue in their present state, ut he was in favor of helin; the Beigeans

to try to get through the present -eriod of European disequilibrium. ve

pointed out that there was a gr at deal of hot money in Belgium. reich e-

porters, for instince,would sell th ir goods for Belgia " rais at the of-

ficial rate of exchange and buy french francs cn the fre -arket. They

-oil rewire fewer Bei-ian Francs to purchase on the free market the arount

of r rc francs which Wy were under an obli ation to the trench Government

to reatriate and they would k ep in Belgium the di ference between the swi

in Belgian fr nca required for this purpose and the sum i ich they received

rom the sale of the oods. If things start to go badly in Belgium, all of

this money and a great deal more besides would flow out, which would have a

serious effect on the stability of the Belgian franc. In other words, he

agreed that the Belgians had taken a bit of a gamble in pursuing their liberal

economic policy since the end of the war and that it wa not entirely their

fault that this gamble might not come off in the end.

JllPenton/mvp

l2/5/A7

Walter Hill.

Roquest for study.

The Belgians have informd the Bank that they may Upply

in 1.W4 for a loan to finance certain specific projocts, e.g., theconstriction of an electric power plant near Liege.

ef ore the formal application is lodged we should like to-orsulate our views on the above project. ne enclose herewith

documents which have been informally subtitted to us and we shouldbe glad if the esearch epartnt would prepare mn analysis of theproject in relation to the existing production and deiand for elec-tric power, as well as to the need for expansion o' eloctric plantsof Linalux.

The details regarding the requested study might best bedigussed by the r of the Reeearch taff to whoa the workwill be allocated and Mr. Rucinaki.

In view of the fact that the formal a ltcation has notyet been lod ed, the matter ahould be considered as confidential.

EnclosddocjL.*tO (to be eturned, nlease.)

1. L 'Industrie de !a Production D'Energie electrique en Belgiquoau lendonain de la pre

2. '0euvre de 1 'Union de6 Centrales 17lectriques d Lieg.-Naiw-Lu ,xccnbou "U C. . .- Linalux. "

3. i'ifioation sur Ila :euse, aux Iwirs, pres de LieGed'uw supercentrale electrique.

L. B. Rist Dec. 2,1047,

".AHll

Rquet for study.

The Bleene inormed the BenY tht they my PT'qly

in 1946 for a Torn to fincnon certAin zr-ctric r-ojects,e.g , the conptruction 0 o en plectric poTr 1lant niarLiege.

Bpfore the formnl arrlicetion It loded we lhouldlikfe to formul te our vitwq on th- e -ove rroject. We

Pnclose herewith documentq which hv- been informnllyoub Itted to uo and whoud be very 1'-d if th- PeerchDep rtrnent would wrro~er en onelye s of the rrojct in

rpeltion to the -xiAting rooduction anf den , for elpctricrower, a, well ea to the nee4 for evransion of electricplante of Linalux.

It is sugented that the dstPel- rf-rdinv the

rep usted itudy be scumepd by the mrem -- of the IBoparchMtaff to whom thim work Will be Allocete , end Mr. Thoini.

Tn vier of thp fect thr t th formal mlication

han not yet been lodped, it is reouested that the matterbe con-ider-d a, confidential.

Enclosed docurentv (to be returned):

1. L'Tndumtrie de LP Prolction d nrvMrvip olpctriozi enBplginue au 1-ndem In de 1>, rverre.

T. I'Oeuvre de 1'Union dee ('ntrplee leectrinupm de

LIege-Namur-T u rnourg "U.C.. - Tinqluv.". Fdifloetion -ur 1 , ue , .ur r rre de Tiage,

d'une eupercentrele 'el1ctrieue.

USLZX AND.-GOB c INC ING OMMUNICATION

COMMUNICATION: Letter CA?,

SERIAL NO: 40

DATED: 21 October 1947

RECEIVED (DATE): 24 October 1947

RECEIVED FROM: Miister of IinanceBruxell,, Belgium

ADDRESSED TO: . yPresident

SUMMARY:SUMMARY: Gives assuance of the itelgium Government that the claims ofthe ielgiu. Government on the Grand tchy of I]xembourgwill not be pressed in such 8 way as to unsettle the Luxembourgfinancial position and to impede the fulfilment of Luxembourg'.obligation to International ank.Encloses Resolution dated 17 October signed by Ma)rice Frerecertifying that National Ban of belgium has been authorized tosell to Luxubourg Currencie8 as may be needed.

REFERRED TO: Mr. Mocloy, President

DATE: 24 October 1947

FILED UNDER: Belgium

CROSS REFERENCED: ,iwmbourg - Loan

Summary to: 34-j.li, LoanMr. Garner, Vice Presidentr1 . MeLain, Genoral CounselMr. Crena de 5ongh, Treasurer

INTERNATIOP 'NK FOR RECONSTRUCTION A! #ELOPMENT

INCOMING TELEGRAM O CABLEGRAM

From 1110 Date 9-"q7.

GT BANK I 18th SEPT. 5.20 PM

HILL

BELGIUM WISHES TO GO AHEAD WITH ELECTRIFICATION OF RAILWAY AND

RENEWAL OF INDUSTRIAL EQUIPMENT. THEY CAN FURNISH MATERIAL

THEMSELVES BUT LOCAL CURRENCY REQUIREMUMNS IS PROBLEM FROM

INFLATIONARY STANDPOINT WITHOUT CONTERPART COUNTERPART

AVAILABLE IN DOLLARS. INCONVERTIBILITY OF STERLING INTO DOLLARS

PRECIPITATES MATTERS. BELGIUM COULD SUPPLY LIST OF GENERAL IMPORTS

INDISPENSABLE TO KEEP ECONOMY RUNNING BUT NOT DIRECTLY RELATE TO

MODERNISATION AND RENEWALS REFRRED TO ABOVE BUT COMPARATIVELY LITTLE

IN THE WAY OF CAPITAL GOODS. WE WOULD LIKE YOU TO GIVE CONSIDERATION

TO POSSIBLE FORM IN WHICH LOAN MIGHT BE MADE SO WE MAY HAVE FMdE

DISCUSSIONS WHEN BASYN AND I ARRIVE IN WASHINGTON.

PINEO

ACTION copy routed to -

INF. copy routed to

INF. copy routed to

Decoded by

Office Services,22-21

INTERNATION BANK FOR RECONSTRUCTION AN EVELOPMENT

OFFICE MEMORANDUM

TO: Mr. p eo DATE: 2?, 19August 2,14

FROM: F. D. Stephens

SUBJECT: Belgian Assurances

I talked on the phone this morning with Mr. Basyn in Brussels.

He said that the assurances to the Bank from I. B. L. C. and Belgian author-

ities regarding service of the Bank's loan would be forthcoming in the

form desired by the Bank except for a slight and unimportant change in

the I.B.L. C. letter.

Regarding the assurance from the Belgian Minister of

Finance about the settlement of Luxembourg's sight debt to Belgium,

negotiations were at present going on between the two countries. M. Basyn

did not know the exact terms proposed by Belgium, but understood that the

settlement would take the form of a consolidation of this debt which might

possibly be made non-interest bearing. Negotiations might require four or

five days. Both the Belgian and Luxembourg Finance Ministers were in

Switzerland so that it was difficult to get a written assurance satisfactory

to the Bank along the lines of the draft in M. Basyn's possession as sub-

mitted by the Bank, to cover the interval pending final negotiation of a

settlement and to permit signature of the loan agreement.

I pointed out to M. Basyn that we would have to have,

before signing, a) the exact terms of the settlement or b) the text of an

assurance. M. Basyn said he understood our problem and would endeavour to

find a substitute for the absent Minister of Finance to give the Bank a

written assurance; and that we would hear from him by cable within a day or

two.

Dear jir. President:

lelgius economy suffered very severe loases an result c. , ar

and prolonged enemy occupation.

Not only did military opcrations dcntroy stat and private property,

but conditions in which iielgium' s econom,, iunctioned' durin@ the occupation re-

sulted in lower productivityj due to obsolescence and preature wear and t ear

of equipuent.

As a consequence, one of the leadin otives of dovernment policy is to

increase productien by improving odtput.

While the re-equipmnent programne, drawn up by he Ministry in charge,

rests upon privat enterprise vhich is still favorab1y regarded in Belgiunm,

certain estimates have m.ade it possible to deteraine the effort which will

have to ~o :ade to achieve the desired end.

In this respec t, the doconents supportin the present Loan Application

(Part iwo) supply all needed information as well as all the facts enabling' an

appraisal of the general. situation of the country ad of its credit standir4;

which, "in Iine", constitutes the guarantee ol. the Loan (Part Une).

The points on which I particularly wish to draw your attention are the

f ollowing

(a) The re-eqipment of Belgium will materialize chiefly by means of

an expansion of production and savin s achieved by the country' s

own energies. The bulk of the contemplated program will be carried

out by the efforts of our own econonmy. however, one of th~e conse-

quences will be that some of the goods "earmarked" for export purposes

shall bereleased to domestic consumption. In the measure in which

this obtains, a deficit in the balance of payments will result. Such

?a e 2

a deficit ay e adjusted only by a decline in the nation s

standard of living or by a ioreign loan. Alowc r stand~ard of

Living may noU possiuly be envisagyd at present us a nimun has

been reached. The capacity of the country to accmulate :avin~;s

is therefore Iinited. For this reason, lgim asks the inter-

national -ank for arsistance in the form ol a ion-teI loan o.

$lOO million, this amount being a first "raache" to be availed

of dWrinr t e follow T months.

ThiS loan nay contribute to the recovery of other countries

in the measure in which elgiinr is able to increase her eports

to the latter. It is generally known that the production of

Belgim's industries consists chiefly of raw an: 7e.i-finished

metal producte, railwa, equipment, cerent and many other articles

of vital iinportnc to international reccnstrnction.

(b) n Lhe documents supporting the prsent Application, raw materials

and capi al goos needei for each branch of activity are not listed

and no tie table has been established; it is impossible even for the

immediate uture, tT compile a record of imports to be used ultimately

for industrial re-equipment.

The reaon for this lies in the fact that the I.ports in

question will consist not only of equipment and racinery, but also

of raw matrials and supplies needed to manufacture such equipment

whenever it is processed by Beigian industry.

L or instan en ineerin construction work connected wth the

el ctrification of railroads Yil e mainly carried out with lgian

materials but the relative labor forces will have to be diverted from

other produc lve activities, thus bringin bt bota scarcit, of certain

Pa e 3

corirdities on the doris tic isarmt ar well as a denes in

exports.

As a further exaIple, reconstruction of the rolling stock

owned b the Societe Nationale ds his d r b der-

taker mainly with "elian equipment, while in normal times Lhe

bulk of the output of jelnian railw car builders is e porte

Notwithstanding reduced sales abroad, at iast the sae qantity

of raw taterials and foodstuffs will have to be imported in order

to ensure the operation of factories and the subsistence of the

labor forces therein employed.

to sumarize the above, the loan is to be used to the best

overall purpose of national reconstruction, according to the needs

of the moment. Irrespective of whether the lea &erves to purchase

capital goods abroad or to enable exportable moods to be used for

national ends or even to supl the nation with foodstuffs and

certain conSumer goods the production of which has become inadequate

owing to re-equipment requirements, the object is to enable Belgium

to maintain and expand her reconstruction effort.

(0) In practice, the aountsAborrowed by the Belgian Government shall

be placed at the disposal of the S:ociete Nationale des Chemins de for

and the Societe Nationale de credit a l'Industrie which will allocate

them within the fra ework of the overall pro rmpe prepared by the

binistry for re-equipment along the eneral lines described in the

attached documents.

The loan, however, 8hould be etended in freely convertible

foreign currencies because t e re-equipment conueuplated, even though

?are i4

it i8 car ted out in Belgium on a Belgian franc basie by theabove-mentioned ins titutions, will inevitably bring about adeficit 6n the balance of payments of the nation by depriving itof the foreign exchang e resourcea which othe1wise would haveaccrued from export5 wh ich had to oe waivedi. It should, therefore,be provided that the proceeds of the loan are depesitod with theNational Bank of Belgitm which will place at the disposai of thetwo above-mentioned institution either foreign curre1'i0s oriBelgian francs. ihe foreign currencies correspoadjng to kBegianfracs w e used by the National k of Blgi to just

the balance of payments which will flecessarily be disrupted bythe use made 0 the loan. Adequate guarantee ie therefore pro-vided that the Itoan will not be used to balance the Jud ;et nor torestore the capital balance unless it be in the measure in whicha dis equilibrium results from exceptional re-equi~nent investmaents

based on specific projects.

Increased productivit; will ruarantee the reimburseent in foreigncurrencies when due.* I remain, dear Mr. President,

The linister of Finance.

PROJET. Le 4 juillet 1947.

Monsieur le President,

LI conomie belge a subi, du fait de la guerre et del'occupation ennemie prolong6e, des pertes tres graves.

Non seulement les biens du domaine public et lee 4patrimoines priv6s ont subi des destructions r'sultant desoperations militaires, mais les conditions m6mes du fonction-nement de l'economie belge sous lloccupation ont provoque unediminution de la -oroductivit6, due au vieillissement techni-cue et a l'usure orematuree de l'outillage.

L'augmentation du volume de la production par uneam'lioration du rendement est, des lors, un des objectifsimportants de la politique du Gouvernement.

3ien que le programme de resquipement dresse' parle Ministere como6tent repose sur i'initiative priv6e, qui, enBelgique, beneficie toujours d'un nrdjug6 favorable, certai-nes 6valuations ont nermis de mesurer l'effort cui sera n6ces-saire nour rhaliser cet objectif.

Le dossier cui vous est remis a l'appui de la pr6 -sente demande de credit donne toutes les indications utilesa cet 'gard (2e partie), ainsi que tous les elements d'appre-ciation de la situation d'ensemble du -pays et de son cr'dit,aui constitue en definitive la garentie de l'emprunt (Iere

partie).

Les points sur lesquels je desirerais sn6cialementattirer votre attention, Monsieur le President, sont les sui-

vants:

a) Le r66cuipement en Belgique sera assure avant toutpar un effort de production et d'6sargne de la nation elle-

meme. Le programme envisage sere dans le plus grande mesurerealise par l'effort propre de l'economie belge.

Mais cet effort se traduira partiellement tout au

moins par un prekevement sur le volume des biens actuellementdestin6s A l'exoortation. Dane cette mesure, il entrainera une

dese'uilibre de la balance des naiements.

Ce desecquilibre ne pourrait etre corrige que par unediminution du niveau de vie de la population ou par un emprunta l'6tranger.

-2-

Il n'est pas possible d'envisager en ce moment unedimihution du niveau de vie de la population. Celui-ci estetabli A un minimum. Le volume de l'epargne ?. l'interieur dupays est de ce fait limits.

Telle est la raison pour laquelle la Belgique solli-cite l'aide de la Banque Internationale, sous la forme d'unprbt de 100 millions de dollars ;i long terme, constituant unenremibre tranche, dont l'utilisation est pr6vue au cours desprochains mois.

Ce pret sera susceptible d'ailleurs de contribuerau redressement de pays tiers, dans la mesure o'u la Belgique

pourra aider ensuite ceux-ci par le developpement de ses expor-tations. On sait que la production belge consiste principale-

ment en produits netallurgiques bruts et demi-finis, mat'erielde chemin de fer, ciment et nombreux autres -oroduits d'impor-

tance canitale pour la reconstruction internationale.

b) Le dossier remis a itanpul de la -oresente demande

ne fait nas etat d'un programme detaill6, preioyant pour cha-que secteur d'activit6 et par 'oeriode, les besoins de matie-

ree premi'res ou de materiel- il est imiossible de dresser le

tableau, meme pour la plus prochaine periode, des importationsde produits destines, en definitive, au reequipement indus-

triel.

Ces imoortations consisteront, en effet, non seule-

ment en materiel et machines, mais encore - si ce materiel

et ces machines sont fabrioues par l'industrie belge - enmatieres premieres et -oroduits accessoires indispensables aleur fabrication.

Par exemple, la partie de l'electrification des

chemins de fer correspondant a des travaux de genie civil,se fera surtout avec des matieres belges, mais la main-d'oeu-vre qui y sera effect~e aura 6t6 detournee d'autres activi-tes productrices: il en resultera une o6nurie de certains

produits sur le marche national ou une diainution des expor-

tations. Par exemole encore, la reconstruction des parcs de

voitures et wagons de la Societ'e Nationale des Chemins de fersloperera surtout avec du materiel belge; mais dans les p~rio-

des d'activite normale, les ateliers belges de construction

de materiel de chemin de fer exportent la mjeure partie de

leur production; malgre la contraction des ventes a llEtran-

ger, un volume au moins 6gal de matieres premieres et de pro-duits alimentaires devront ftre irmortes, destines les unes

a l'activit6 des ateliers, lee autres a la subsistance de la

main-d'oeuvre y occupoe.

En un mot, l'emnrunt est destine e Stre utilisg au

mieux des besoins d'ensemble de la reconstruction du pays,suivant les necessites du moment. Mais soit qu'il serve a

acqunerir a lt'tranger des biens de cauital, soit qu'il permet-te a la Belgioue de reserver au ree'nuipement national des

3-

nroduits exportables, soit meme quil soit utilise pour four-nir au uays les produits alimentaires et certains biens deconsommation, dont par suite de l'effort de r'6quipement lanroduction s'avere insuffisante, en definitive, l'emprunt doitservir a permettre a la Belgique de maintenir et de d'veloo-ner son effort de reconstruction.

c) En pratique, les fonds emoruntes par i'Etat belgeseront mis nar celui-ci 'a la disposition soit de la Soci6teNationale des Chemins de fer belges, soit de le Societ6 Na-tionale de Credit a 1'Industrie, qui en o'erera la reparti-tion dans le cadre du programme d'ensemble dress6 par le Mi-nistere du Reequipement et dont le dossier indique les lignesdirectrices.

Ltemprunt doit cependant etre contracts en devisesetrangeres convertibles entre elles, narce oue le rescuipe-ment envisage, meme s'il est effectu'~ en Belgique et en francsbelges -ar les entreprises mentionnses, aura inevitablementpour effet de d'sequilibrer la balance des comptes du paysen le privant de recettes de change provenant d'exportationsPuxouelles il aura fallu renoncer.

Il devrait donc etre prevu cue le uroduit de i'em-nrunt sera vers Ni la Banque Nationale de Belgique, qui met-tra a la disposition des deux institutions visees ci-dessus,soit des devises 'etrangeres, soit des francs belges. Elle uti-users ies devises etran'eres correspondant aux francs bel-ges oour retablir l'eouilibre de la balance de naiementscue l'usage du credit doit necessairement comnromettre.

Des garanties suffisantes existent done cue le cre-dit ne sera pas utilise pour retablir ni i'e'ouilibre budg4-taire, ni l'ecuilibre de la balance des comptes sinon, ence cui concerne celle-ci, dans la mesure o'u le deseouilibreprovient d'investissements exceptionnels en vue du re'quipe-ment du pays sur la base de nrojiets socifioues.

L'augmentation de la productivite' assure a l'6-ch'ance le remboursement en devises.

Veuillez croire, Monsieur le President,

Le Ministre des Finances,

BELGIUM

Mr. 14cCloy has said that onsieur Frere has renewed the request for a

loan to Belgium.

Belgium emerged from the war in a far better state than her neighbors,

France and Holland. Her transport system was almost irktact and, except in one

or two areas such as Liege and the Ardennes, she suffered little industrial

and agricultural damage. Although she made a great effort through the provision

of very considerable quantities of aid as reverse Lend-Lease to the American and

British Armies, she has nevertheless received in troop pay U.S. 453 million,

$45.7 million (Canadian), and the sterling equivalent of $180 million from the

United Kingdom since 1944. These amounts have all been spent.

Belgium has pursued, since the war, a policy of economic liberty, and,

whereas very tight import and exchange controls are operated in neighboring countries,

in Belgium they are comparatively light. For instance, there is no restriction

on the quantity of automobiles imported, although there is a limitation as to price.

Permission has to be sought to purchase the foreign exchange from the Central Bank

before goods can be imported from abroad, but there is what practically amounts

to a free market in Brussels in sterling, French francs, guilders, etc., the

existence of which appears to be winked at by the authorities. Belgian industrial

goods are exported to European and Latin American markets at the highest prices

obtainable, and the maximum amount of consumption goods is imported with the

object of preventing a depreciation in the purchasing power of the currency and giving

the population incentive to work. So far this policy has produced remarkable results

and the attached tables show the types and values of consumption goods imported

from the U.S.A. and France. They are evidence of the fact that the Belgian standard

of living is at present far higher than that of other European countries.

On the other hand, the continuance of Belgium's favorable economic situation

depends on an iaprovement in surrounding European countries. It is partly the

- 2 -

realisation of this fact which has led Belgium to grant considerable credits to

other Europ-an countries with whom she has payments agreements, especially to

Holland, France, and the United Kingdom. She still receives, however, substantial

sums in gold or hard currency in excess of these credit margins, and between Jan-

uary 1st and July 15th, 1947, she converted over 540 million into dollars. Despite

this heavy expenditure in the dollar area, her gold holdings rose from $693 million

in September 1944, to a peak of $755 million in July 1946. They have since fallen

to $629 million on October 15th last, but this decrease has been offset by an

increase in her foreign exchange resources which have risen from the equivalent of

$89 million in September 1944 to $284 million on October 15th. The total of her

gold and foreign exchange resources, including claims on other countries, expressed

in Belgian francs, stood at $754 million at the end of 1939, $783 million in Sept-

ember 1944, and $921 million on October 15, 1947.

Great progress has been made in equilibrating Belgium's overall balance

of payments, but she still has a current trading deficit of $269 million, of

which $248 million (91 per cent) is with the U.S.A. Her total trading deficit with

the whole of the dollar area is $,305 million, the difference being accounted for by

her surplus with the rest of the world. The high level of consumption reflected

by the dollar deficit has adversely affected the accumulation of savings to

finance investment. Plars have been drawn for a ten-year industrial modernization

and investment program which is estimated to cost about 08 billion. Although only

10 per cent of the equipment will be imported from abroad, it is clear that the

present financial policy of the Belgian Government will have to be revised if

domestic funds are to furnish the means of financing the rest of the program.

According to first reports the Belgians were hoping to obtain a loan of

about $100 million from the Bank, but no definite application has been made. It

is understood, however, that they are now thinking in very much smaller terms;

for instance, they might ask for $10 million for the development of electric

power, and $10 million for additional steel nat. The latter request, if made,

would have to be examined in the light of the general steel program for Europe.

In conclusion it can be said that Belgium has not only made more progress

towards economic recovery than other countries in Europe, but she has also made a

definite contribution to the solution of the European problem through the credits

which she has granted to her neighbors. On the other hand, the fragility of her

position should not be overlooked, since in the long run it will depend on the

improvement of the situation of the rest o-f Europe. Generally speaking, however,

Belgium may be considered credit-worthy and, from the point of view of the Bank's

portfolio, a Belgian loan might be a good proposition. Whilst, however, the success

of her efforts leads one to view a request from her for a loan with sympathy, it

can also be argued that it is more urgent to draw on the Bank's limited resources

to aid other countries who are not so well off. If Belgium has an urgent need for

dollars, she might consider drawing on the International :Monetary Fund.

If Monsieur Frere raises the question of the loan, it is recommemded

that we should reply by a show of sympathetic interest, but that it should be made

clear that we cannot consider any application for the time-being until the position

becomes clearer regarding the Marshall Plan. There is no reason, however, why

we should not express willingness to examine any data which the Belgians may care

to give us regarding their general situation and any other plans that they may have

in mind.

Mr. Basyn 12 March 19W7

A.3.G. boar

Eventual ' elgian Loan Application

From our conversation yesterday, I understood that the Belgian problem

to which an eventual loan application may be related is the following:-

1. Belgium proposes a comprehensive plan of re-equipment andelectrification which will cost somewhere in the regionof from 3,bOO to 5,700 million ilfcs.

2. The intention is to supply the necessary material, as far aspossible, entirely from Belgian sources.

3. The consequence of this will be that a considerable quantity ofmetallurgical products, electrical equipment, etc., whichwould otherwise earn foreign exchange, will not be exportedbut will be used internally.

The intention, therefore1 is to ask the International Bank for a loan of foreign

currencies in order to compensate for the lack of earning power in foreign ex-

change as the result of the execution of the re-equipment plan.

I have discussed this matter informally with Mr. Pineo and with Mr.

McLain. Obviously, on the very broad description of the situation which is

all that is at present available, it is not possible to make a very definite

statement. This will have to wait until the plan has been spelled out in

greater detail and, of course, certain of the details (such as any dependence

there may be for execution of the plan upon the importation of raw materials

costing foreign exchange) may materially assist us in determining the eligi-

bility of the loan. However, the object of the loan appears extremely sensible;

our first impression is that a way could be found to identify it with the per-

mitted operations of the Bank. No doubt Article IV,3 (C) will help.

A.S.G.Hoar/mbcc: Mr. Pineo

Mr. McLain

noti it1 1 1

- 27o n Yr t - e-: M. . ,, - a n Ty ye nud7 1 orkn; - t t s n& .rch W, Ia t- I .1 vti r it a--we to tM I'..20 r ciiic ia i:- c . art n by

I Uoeal inest tn U i'r: in rti ret oeition ,Apre paetI.

III. ~olo which errg ag in t1e economy of a4 n ~r r Vo :oridU 4Iedh eNur rl ~tioau 4ri c e the

)fa4 to dis@uig in dro M i *gnpi* !f the tmJie1born of ya p to vom yon will :sin ove -erd.

J~igpJoseph flcinsir~

BELGIA PARTY

First Meeting

Held 28 February 1947 at 3:00 p.m.Present:

A.S.G. Hoar - From Loan DepartmentF. D. StephensG. S. MasonL. 11. Svoboda

J. Rucinski - From Research DepartmentM. Rosen

3). Sommers - From Legal DepartmentL. Nurick

S. Aldewereld - From Treasurer's Office

On the suggestion of Mr. Stephens the meeting proceeded to discuss the

agenda which had been preoared by the Loan Department as follows:

I. (1) Mr. Ricinski said that the Research Department was gathering

material on the balance of payment figures for Belgium but that

they had difficulty in reconciling the figures and statements

receiveed. It was therefore suggested that the writing of any

finished study on the balance of payments should arait the

receipt of the loan application when it would be possible to

ask the Belgian Government for full particulars. The Research

Department will continue to gather information from available

sources. In answer to a question by Mr. Hoar, Mr. Thacinski said

that the Research Department was cooperating closely on the

balance of payments question with the Research Department of the

Fund.

(2) It was decided that the Loan Department would prepare:

(a) a study on the debt record and the present situation of the

public debt

(b) another study on currency and credit

The Research Department undertook to prepare a study on the budget.

Belgian Working Party - 2

II. (1) The meeting was informed that the Research Department was already

making a study of the coal industry in Europe and that it would

contain the information desired on the coal industry in Belgium.

(2) Mr. Rucinski was of the opinion that the transportation system in

Belgium might not require a special study as he thought that it had

been restored to good working condition and that there was no lack

of rolling stock. However, the Research Department is to find out

if this is so and either complete a special study or inform the

Loan Department that such a study is not necessary.

(3) The Research Department stated that when they had time it was

proposed to make a general study of the manpower situation in

Europe as a whole. The Loan Department would be informed if the

study would be completed in time or whether it would be better

to make a separate study on the Belgian situation.

(4) The Research Department will undertake an immediate study of the

wage and price levels in Belgium.

(5) There was some discussion on payment and trade agreements as a whole.

Mr. Hoar suggested that we should ask all countries for their

published payment and trade agreements as a basis for keeping an

up-to-date record. It was suggested that we should get in touch

with the Fund and find out what had been done by them, but that

we should not await action by them. It was probable that the

Bank for International Settlements would be a good source of

information. In answer to a statement of Mr. Rucinski, Mr. Hoar

said that if it were found thai redit could be extended to an

applicant country by means of its nayment agreements then, to that

extent, such a country would be ineligible to borrow from the

I.3.R.D. It was agreed that as far as bilateral agreements were

Belgian Working Party - 3

concerned in general, and as regards Belgium in particular, the

Loan Department would make a study of the situation.

III. (1) The Research Department undertook to make a study of the economic

developments in the Belgian Congo and, as suggested by Mr. Hoar,

they promised to pay particular attention to the extent to which

the Belgian Congo could dispose of its own foreign exchange.

(2) A study of the effect of the cutting down of the direct and

transit trade of Germany with the Netherlands had almost been

completed and after that the Research Department would make a

similar one from the point of view of Belgium.

Reference was made to two other studies. One was the effect of the Union

of Belgium-Luxembourg with the Netherlands which the Research Department had

already undertaken, and which was to be discussed at a joint meeting with the

Fund and Belgium officials to which the members of the Loan Department had

been invited. The other was a study of the external trade of Belgium which

the Research De-oartment suggeeted they should undertake.

It was decided that there were no studies which could be usefully undertaken

by the Legal or Treasury Departments at this time.

BEIA&A WTIN PA2 Y 2-- trt ''etin 21 >E6 air 194

4 Stan,7rf lin e t*nt - F. .Sehn

e di~e 2rt~n -L. ht. IbdFrom &,-,rmh c Aert . ,z

Yv -0

ton 1 ranl etent Of- A. - throra 2reasuror' ai Offce - 3. AlPiwer#1d

Wer IrSi&S2nt' Ofice - R. B. ) sth

No fral iiatien far r ioan h1 ! been rec ied fror the

PQl e n -ov-r :nt but w conntructicn i 1; v wocotly been

1-71-d an, as cq,- ue .", t, , V-1"inn GOvermn 7 : : = u d

to nke w alition or Ionn to tM pk a&- p'wobably at

The j 7r en var t neyottAte a oan on kjl .troot.

It ie, thereore, propose4 tt reiminr stuies m1gWt be

on aubJectu whioh vii hav. to be isveeti ted when thp p

ie aioni Ceiv. 7e !t e& ih riht e ond rta nov

can De divided int- Goneral and Secirl.

I. A g eral ady f the econovic sit ation of elkien. $uch

Sstudy iwould include

(i) The 1aat rocent baian* of > 17ent figures

'n , if 10Cib", an estfate of future yeare,

(2) The ornsent statK of Velgirn finanoes aich

wauld in-lu a fi re, of mublIc d'bt, budget,

lit

fek a~,mtermnMi&w a e

M. oess men** 4 he0 17 ,~s

fu * smgane n a towea * Mss4 tea

M MaAtasnec tie an as. 44 toltewtyhaar h eta oe#is

BEE~jmtg *e ssa fn eee

emem a~a/

INTERNATIONAL BANK FOR

RECONSTRUCTION AND DEVELOPMENT

AnJ-

INTERNATION BANK FOR RECONSTRUCTION AW ~EVELOPMENT

OFFICE, MEMORANDUM

TO: Mr. A. S. G. Hopi Q DATE: February 2 ', 1947

FROM: D. Crena de Iongh, Treasurer

SUBJECT: Belgian and Mexican Loan Applications

Answering your two memoranda of February 19 on

the Belgian and Mexican Loan Awplications, I would like

to designate Mr. Aldewereld for the Belgian working party

and Mr. Riley for the Mexican working party.

cc Mr. RileyMr. Aldewereld

OFFICE NENVIOCE 17-10

INTERNATION'~ BANK FOR RECONSTRUCTION AN- -1EVELOPMENT

OF ICE MEMORANDUM

TO Mr ar DATE: February 20, 1947

FROM: Mr. McLain

SUBJECT:

Referring to your memorandum of February 19, 1947 con-

cerning the formation of a Mexican working party: Mr. Bengston

and Mr. Lopes-Herrarte will represent the Legal Department on such

working party.

Since each member of the Legal Staff is now working on

one or more working party, I shall from now on name two members of

the Legal Staff to each working party so that in case one of them

shall be tied up, the other can attend any meeting of the working

party.

With reference to your memorandum also of the 19th instant,

concerning the Belgian working party, Mr. Soumers and Mr. Nurick will

represent the Legal Department on such working party.

C. A. M 6 Lain

OrFICE SENVICES 17-10

Mr.De h

I1 t

nohn 1 ic ti(tn

it' the >re Loa Apieation in ny memor xvit to yox yest rd~~

Mr Fie wse t'i prooed ith the f orrmation of a. Belgihn

ari~' ty. It is understood th t we ray eet to receive

In Nc Arij.

Kr. Zto:n viiI heai unp wrsing. .rty for the

SS rt and I h ked hm to notify ;u of the o etin s,

ich I -:e-ure you <iIl -Ig to atten4.

.~.. : a

Thrin oa Aptin n t ), to noeiu

with the~ Greek Loan Apli":tion~ nmy~ meo:ou to yrryesterday,

. to :rOc2e wit tio of 1 B .nvork4nj party. It ii unesto tt we ay wet to r cet v

BelianApolIc;tion at th tU )M.Fr ire viits W'ahin tfn

~r ''c or evl

Iu yru be so good a to n irte your re res ntative

so t' t '. St'phen, *whon !. ?ine a s noinated t reor sent

the T. n DartPent, may call a ti at an early d.te?

A.9..T m

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

Ot-FICE MEMORANDUM

TO: Mr. Rist DATE: 19 February 1947

FROM: A.S.G.Hoar

SUBJECT: Belgian Loan Application

For similar reasons to those mentioned in connection

with the Greek Loan Application in my memorandum to you yesterday,

Mr. Pineo wishes to proceed with the formation of a Belgian

working party. It is understood that we may expect to receive

a Belgian Application at the time M. Fre're visits Washington

in March or April.

Would you be so good as to nominate your representatives

so that Mr. Stephens, whom Mr. Pineo has nominated to represent the

Loan Department, may call a meeting at an early datel

A.S.G.Hoar:mb

OFFICE GERVICES 17-10

Ar. 1. .in

V Ofn -n 2" tiofW

Yhr similar re1C;on to thoe vi 'ntion t- cnn ction

with thc Greek Loan A'nlio'tion in my "pro an4it t yon. ye't -da

Mr. Fineo wishes to proceed with the formtion of a era

vorhin- purty. It is understoKd ti. t we r'ay e t to rocolye

l irch or Anil

7ou3d -u be mo nod Ap to nominato your rereent tiVe

tr tht Mr. VSt t*hefl, whom ?4r. Fin-o has noninatd to re~resent

t<4e no7n De'artnt, -ay crJin a -ee4ina t an l ai; e

tl e

INTERNATIONAL BANK FOR

RECONSTRUCTION AND DEVELOPMENT

WASHINGTON. D. C.

November 5, 1946.

MEMOR AND UM

TO : Mr. Meyer,President of the International Bank,

FROM : Thomas Basyn,Alternate Executive Director.

During the conversation Mr. Ansiaux, Mr. Beyenand myself, we had with you on Friday November 1, 1946, the followingpoints have been brought out in connexion with the application for aloan from the International Bank, which might be contemplatedby theBelgian Government.

It should be stated from the beginning that thepresent memorandum must be considered as referring to preliminary talksof an unofficial character.

Mr. Ansiaux has made clear that,at this juncture,the negociations carried on with the bankers in New York by Mr. Frere,Governor of the Banque Nationale de Belgique, after the meeting heldin the President's office on October 16, seem to preclude the possibilityfor the Belgian Government to obtain a loan of more than 25 or 30 milliondollars, half of which at least would be made through the InternationalBank with an option for the bankers, the other half being placed in themarket through the bankers. Mr. Frbre has allowed Mr. Ansiaux to informMr. Meyer that the main objection to the bankers'propositions is thelimitation to,say $ 12,5 million, in their share in the operation, whereaethe minimum needs for foreign capital of Belgium would amount in 1947to $ 100 million. Mr. Frere is of the opinion that the Belgian Government,although very eager to be the first to reopen the New York market forforeign ong-term lending , is not prepared to run the risk of a publicissue for the small amount mentioned.

It would therefore, seem more advisable for Belgiumto make a straight deal with the International Bank, the other way round,for the total requirements of $ 100 million, that is to make an applicatio:in this amount, with the stipulation that the Bank and the BelgianGovernment would agree that the bankers take over, in the proper time,such amount of the loan that the market could safely absorb. The loanto be made by the Bank could be spread over the year 1947 in amounts

5 62.

INTERNATIONAL BANK FOR

RECONSTRUCTION AND DEVELOPMENTWASHINGTON, D. C.

Of approximately 25 million 9.

The general purpose of the loan would be toenable Belgium to expedite the rest or ation of its economic structure,and especially to meet the needs of the railroads, postal, telephoneand telegraph services, in equipment and modernization, as well asto make up for the deficiency in fresh capital of the"Socift6 Nationalede Cr6dit & l'Industrie", a corporation whose liabilities are guaranteedby the State and whose object is to grant middle-term credits to indus-try. .

Mr. Ansiaux has added that perhaps not all theloan will be needed in $ and that other currencies might be necessaryfor the purchase of equipment abroad. He also mentioned that it shouldnot be overlooked that Belgium has already made considerable stridestowards recovery by its own means and that fresh capital is now neededto speed up and complete the restor-ation of the country's productivecapacity.

The Belgian Government is ready to prepare a fullreport on the matter in support of a possible application to theInternational Bank. Belgium's case is in some respects, similar tothat of other highly industrialized countries which need working capitalto enhance their normal productivity and a plan for raising the capacity.of the country to normal levels should therefore include to all generaland practical purposes, items covering imports of certain raw materials.The lack of capital has considerably slowed down the reparation ofwar damages to industrial and private properties.

Mr. Meyer believes that it is quite possible thatthe bankers after some more contacts, might reconsider their propositionsand might possibly broaden them, Mr. nsiaux has made no objection tosome tentative talks by the President with a view to sounding thebankers in this connexion.

Mr. Meyer mentioned that the International Bank'sinterest rate wouldunderthe present circumstances, be somewhere around4 1/2%, including the l commission.

Thomas Basyn.

MORGAN STANLEY & CO.

Two Wall Street

New York 5

October 21, 1946

Dear 'Ar. Meyer:

In Icordance with Harold Stanley' s letter to

you of October 18, 1946, I am enclosing two copies of

the memorandum, which Mr. Stanley sent to you in his

letter of October 17, 1946, which has been revised in

light of additional information which we have received

from Governor Fr'ere. The only change made in the

memorandum is in the first paragraph.

Sincer.y yours,

Eugene Meyer, Esq.,1624 Crescent Circle,Washington, D. C.

October 17, 1946TENTATIVE (Revised October 21, 1946)

It is understood that Belgium would like to raise $25,000,000 now for

advances to the S.N.C.I. (Societe Nationale de Credit a l'Industrie) which, in

turn, will immediately advance this amount to Belgian industry. (The S.N..I.,

which has been in existence for a number of years, is a quasi-governmental

company formed for the purpose of assisting in the financing of Belgian industry.)

This amount coupled with the sums which could be raised in the internal market

would probably cover the needs of the Societe for advances to industry through the

year 1947. The Government will desire an additional substantial amount before the

end of 1947 for capital expenditures for reconstruction and modernization of the

Government owned railway, telegraph and telephone systems and for other similar

purposes, but this program and its urgency is indefinite, and there is no

information presently available in this country on which to base an informative

statement respecting such matters. If the Belgian Government makes an application

for a loan from the International Bank, presumably data regarding such a program

would be fully set forth. Assuming that the maturity of the $25,000,000 needed

immediately for advances to S.N.C.I. should be part 20 years and part 10; that

the amortization should be complete for each maturity and based further on the

opinion of MS and SB (without discussing the matter with others); that B prefers

issuing in the public market and having its bonds held there if reasonable terms

can be obtained; that such an issue offered in the usual way to the public

market in the near future may not be successful or entirely absorbed:-

It is suggested that consideration be given to the following program

and steps be taken to ascertain whether it is acceptable to those concerned, and

whether it seems practicable to carry it out:

1. Get the registration in final form. This requires (among other

things) preparation by the National Bank of Belgium of data and esti-

mates of the balance of payments, and the sending of a representative of

Page 2.

and counsel for the private bankers to Brussels after Governor

Frere returns there and has discussed matters with his Government.

It is estimated that it will take six or eight weeks to put the

registration statement in final form.

2. After final registration statement is ready MS and SB would

discuss the issue with prospective underwriters, decide tentatively

what terms would be likely and whether the transaction could probably

be carried through. Final decision could not be made until just

before the registration became effective. The effective date would

probably be days after filing and there should be some

representative of the Government here at that time to answer questions

which the SEC might have, to attend the underwriters meeting, etc.

3. It has been suggested that if the bonds have a rating from the

services which permits banks to buy, or if the Comptroller or other

authorities give such permission it might be possible to arrange that

the underwriting group offer the entire $25,000,000 in the market, and

if the entire amount is not sold, that the International Bank would

purchase the unsold amount. Whether the banks will buy without a

Moody rating is still a question even if permissive action is taken

by the Comptroller and/or the other two rating agencies. The under-

writing group, however, to make a firm purchase of a part of the issue,

say 1/2 the total dollar amount, with some agreed division of this be-

tween the 10 year and 20 year maturities - possibly, say 2/5 of the

10 year and 1/5 of the 20 year, or possibly half of each maturity.

Whether it is better to have the arrangement with the International

Bank in the form of a "put" or in the form of a purchase by the

International Bank of an agreed amount of bonds on which the under-

writing group would have an option, are matters for discussion.

Page 3.

So is the price at which the International Bank purchases bonds it

retains, i.e. whether at the public offering price or at the under-

writing price. The initial inclination of the International Bank

seemed to be to prefer to purchase at the issue price rather than at

the underwriting price. This is much better for the success of the

issue as two different purchase prices by different investors (i.e.

the Bank and the investing public) would militate against the sale to

the public. The views of the Bank on this would be controlling. The

regular underwriting and selling commissions would apply to all bonds

sold by the underwriting group, but it would make no profit on bonds

retained by the International Bank.

4. There was some discussion that the rate on the 10 year bonds

(with complete S.F.) might need to be 4% to be successful, and it was

the strong view of the Bank, at least preliminarily, that no greater

rate than 4% should apply on the longer issue also, and that unless

this rate were obtainable the business should be postponed. MS and SB

pointed out, however, that if 4% were necessary for the 10 years, a

higher rate would be needed for the 20 years, even with the International

Bank's participation on some such basis as outlined. If it develops

six or eight weeks from now that a yield rate of less than 4% is

possible for the 10 year issue, then a 4% rate on the 20 year might be

in line, perhaps at some discount, or to put it another way, it doesn't

seem unreasonable to anticipate, if the markets permit that the business

be undertaken at all, that an overall rate of 4% could be obtained on

both maturities, perhaps at some reasonable discount.

5. The complete amortization could be either a cumulative S.F.

beginning after a year or a S.F. of equal amounts semi-annually

beginning at some later date, but it should be calculated to fully

Page 4

amortise each series independently at the respective matirities.

6, Other matters to be discussed:

Optional Redemption prices.

S.F. Redemption prices.

7. It is anticipated that arrangements might be made if markets

are satisfactory, for Belgium to purchase or redeem at some future

date from the International Bank the bonds it holds and market them

through its bankers.

MORGAN STANTEY & Co.

Two Wall Street

New Yor)k 5

October 18, 1946

Mr. Eugene Meyer,1624 Crescent Circle,Washington, D. C.

Derar Gene'

After showing Frere the memorandum which I

sent you last night it developed the first paragraph

was not clear. I am to be away but John Young will

re-write it and discuss it with Frere and send you a

revIsed copy.

Sincerely yours,

MORGAN STANLEY & CO.

Two Wall Street

New York 5

October 17, 1946

AIR MAIL - SPECIAL DELIVERY

Mr. Eugene Meyer,1624 Crescent Circle,Washington, D. C.

Dear Gene:

I enclose herewith memorandum, which is

entirely tentative and for discussion purposes only,

about the possible Belgian issue and will telephone you

Friday morning, the 18th, to ask whether or not I shall

discuss it with Frere.

I am sorry the memorandum is not in more

polished form but I wanted to get it off to you tonight

in view of the fact I am going away tomorrow and don't

know whether Prbre is sailing tomorrow or next week.

With beat regards,

Sincerely yours,

Enclosure

Octob 17, 1946TENTATIVE

Based on the understanding that B needs $25,000,000 now for

advances to industry; that this amount would cover its needs for ap-

proximately a year though the total amount needed might reach

$110,0O,000; that the maturity of the 425,000,000 should be part

20 years and part 10; that the amortization should be complete for

both maturities and based further on the opinion of MS and SB

(without discussing the matter with others); that B prefers issuing

in the public market and having its bonds held there if reasonable

terms can be obtained; that such an issue offered in the usual way

to the public market in the near future may not be successful or en-

tirely absorbed:-

It is suggested that consideration be given to the following

program and steps be taken to ascertain whether it is acceptable to

those concerned, and whether it seems practicable to carry it out:

1. Get the registration in final form. This requires

(among other things) preparation by the National Bank of

Belgium of data and estimates of the balance of payments,

and the sending of a representative of and counsel for the

private bankers to Brussels after Governor Frere returns

there and has discussed matters with his Government, It

is estimated that it will take six or eight weeks to put

the registration statement in final form,

2. After final registration statement is ready MS and SB

would discuss the issue with prospective underwriters, de-

cide tentatively what terms would be likely and whether the

transaction could probably be carried through. Final de-

cision could not be made until just before the registration

Page 2

became effective. The effective date would probably be

days after filing and there should be some repre-

sentative of the Government here at that time to answer

questions which the SEC might have, to attend the under-

writers meeting, etc.

3. It has been suggested that if the bonds have a rat-

ing from the services which permits banks to buy, or if

the Comptroller or other authorities give such permission

it might be possible to arrange that the underwriting

group offer the entire $25'000,000 in the market, and if

the entire amount is not sold, that the International

Bank would purchase the unsold amount. Whether the banks

will buy without a Moody rating is still a question even

if permissive action is taken by the Comptroller and/or the

other two rating agencies. The underwriting group, however,

to make a firm purchase of a part of the issue, say 1/2 the

total dollar amount, with some agreed division of this be-

tween the 10 year and 20 year maturities - possibly, say,

2/3 of the 10 year and 1/3 of the 20 year, or possibly half

of each maturity, Whether it is better to have the ar-

rangement with the International Bank in the form of a "put"

or in the form of a purchase by the International Bank of an

agreed amount of bonds on which the underwriting group would

have an option, are matters for discussion, So is the price

at which the International Bank purchases bonds it retains,

i.e. whether at the public offering price or at the underwrit-

ing price. The initial inclination of the International

Bank seemed to be to prefer to purchase at the issue price

Page 3

rather than at the underwriting price. This is much

better for the success of the issue as two different

purchase prices by different investors (i.e. the Bank

and the investing public) would militate against the

sale to the public. The views of the Bank on this

would be controlling. The regular underwriting and

selling commissions would apply to all bonds sold by

the underwriting group, but it would make no profit on

bonds retained by the International Bank.

4. There was some discussion that the rate on the 10

year bonds (with complete S.F.) might need to be 4; to

be successful, and it was the strong view of the Bank,

at least preliminarily, that no greater rate than 4%

should apply on the longer issue also, and that unless

this rate were obtainable the business should be postponed.

MS and SB pointed out, however, that if 4% were necessary

for the 10 years, a higher rate would be needed for the

20 years, even with the International Bank's participation

on some such basis as outlined, If it develops six or

eight weeks from now that a yield rate of less than 4% is

possible for the 10 year issue, then a 4% rate on the 20

year might be in line, perhaps at some discount, or to put

it in another way, it doesn't seem unreasonable to anticipate,

if the markets permit that the business be undertaken at all,

that an overall rate of 4% could be obtained on both matur-

ities, perhaps at some reasonable discount.

Page 4

5Q. The complete amortization could be either a cumulative

S.F. beginning after a year or a S.F. of equal amounts semi-

annually beginning at some later date, but it should be cal-

culated to fully amortize each series independently at the

respective maturities.

6. Other matters to be discussed:

Optional Redemption prices.

S.F. Redemption prices.

It is anticipated that arrangements might be made if

markets are satisfactory, for Belgium to purchase or redeem

at some future date from the International Bank the bonds

it holds and market them through its bankers.