THE AMERICAS: New Builder at Work

The all-too-apparent need for easing the economic and social aches and pains of Latin America took concrete form last week in a set of redecorated offices in a nondescript building in Washington. With a ceremonial round of martinis, pisco sours* and Brazilian coffee, the Inter-American Development Bank declared itself ready for business at 801 Nineteenth Street. No sooner were the doors open than the loan ideas started pouring in. What could the bank do for a dietetic laboratory in Mexico? How about a farm machinery credit house in Chile?

Look-Alike. The bank’s least hidden asset is its first president, a plump, articulate Chilean named Felipe Herrera. Once a Socialist, and at 38 still prone to consider banking economics as mere means to social ends, Herrera has labored nonstop to get the bank going ever since he was elected last February. By his own methodical count, he has been on the road 92 days, visited 19 countries, explained the bank to 18 Presidents, 3 Presidents-elect, 85 government ministers, 42 political party leaders (“while gaining six pounds and losing seven shirts and five handkerchiefs”).

From the sidewalk, Herrera’s new bank is hard to distinguish from all-the other international financial agencies that root their initials deep in the bureaucratic soil of Washington. IADB’s planned capitalization is $959,476,000; by far the biggest share ($450 million) will come from the U.S. with the rest to be contributed by 19 other hemisphere republics* (see chart).

Built-in Scope. The new bank has divided its cash in two. The larger portion, 85%, will be used for normal development loans repayable in the currency lent. The rest will make up a special fund for emergencies or for special projects outside the normal scope of banking, e.g., roads in Bolivia. Regardless of what currency the special loans are made in. they can be made repayable partly or wholly in the currency of the borrowing nation. Interest on normal loans will be a maximum of 6%, low by Latino standards; on special loans the rate will be as little as 3%. The new bank bears little beneath-the-façade resemblance to the other development outfits that the U.S. is caught up in. Public Law 480 sells U.S. surplus agricultural products for local currencies, then lends back the payments for development. The Export-Import Bank makes loans exclusively for the purchase of U.S. equipment and commodities. The International Co operation Administration dispenses grant aid and technical assistance. The International Finance Corporation operates on a small scale as an affiliate of the World Bank and the IMF to invest in private enterprise.

Its built-in scope made the new development bank the natural organization to handle the Eisenhower plan for singlehanded, soft-loan social development of Latin America by the U.S. The hope is that inter-American administration can help avoid the kind of situation that currently exists in Peru, where U.S. aid for housing and land reform is being blocked by opposition politicians. The $500 million that the U.S. has promised for the plan will be administered separately from the bank’s other activities—as will other future U.S. contributions, expected to total billions before the building job is finished.

* Concocted of skull-popping (90 proof) pisco brandy from the western coast of South America, lemon juice, sugar and egg white—very potent.

* Castro Cuba refuses to participate.