of United States equipment manufacturers, we obtained our first loan from the Export-Import Bank. This loan, in the amount of $1,850,000 represented the c. i. f. cost of a diesel electric plant of 10,000 kilowatts capacity. Later, in 1950, we obtained a second credit from the bank, in the amount of $5,500,000, to finance 50 percent of the cost of power-generating and distribution equipment. Of the balance, our company financed half out of its own funds and the remaining half represented credit extended by the manufacturer.

I am happy to be able to report to the committee that our company has met every payment under both of these loans when due. As our balance sheet will show, we are in a very sound financial condition. I think this committee will agree that the credits which the ExportImport Bank extended to our company have been an excellent example of international cooperation which is beneficial to both parties. Through these credits we have been able to meet the demands of a rapidly expanding economy. As that economy expands, Venezuelans purchase more and more goods from the United States. American private capital is attracted to Venezuela by the opportunities of the market to establish tire plants and textile rayon mills, to develop our vast iron ore resources, and to continue the exploitation of our great oil reserves.

With all of this, the Venezuelan people are making constant progress toward a higher standard of living. Our per capita income is four times what it was prewar. As the living standard rises, so does the demand for goods produced in the United States. I think that it is not too much to say that the Export-Import Bank credits extended to my country have been one of the essential pump-priming operations which have served to raise the level of trade between our two nations. This committee has requested me to discuss our experience with Export-Import Bank credits and I would like to venture one or two

comments.

We have found that the requirement of a government guaranty is a serious disadvantage to an Export-Import Bank credit. In the case of loans which we obtained from the Export-Import Bank, the bank required that we obtain the guaranty of the Corporacion Venezolana de Fomento, an agency of the Venezuelan Government. The funds of the Corporacion Venezolana de Fomento are provided out of the Venezuelan treasury and the Corporacion has been established to provide financial help in the development of the country. With the tremendous expansion of the Venezuelan economy, the demands upon the Corporacion have been commensurately great. When it is required to guarantee credits, the amount of those credits reduces the assistance which the Corporacion can extend to other industries. Moreover, the problem of processing these guaranties through the Corporacion has imposed an additional burden upon its already overtaxed staff. The result is, therefore, considerable delay, which creates real difficulty for a company like ours that is under great pressure to meet the demands of its customers while competing as a purchaser for equipment.

On the basis of our experience, I would suggest therefore that to the extent feasible Export-Import Bank credits be extended without Government guaranties, at least in countries like Venezuela which have a hard currency and free convertibility. In this way private initiative will be encouraged and the time of negotiation of credits will be very materially reduced.

This suggestion has particular relevance to the situation which exists today. At the present time, European equipment producers are competing very actively for the South American market. In many cases they are offering not only lower prices but credit terms far more favorable than those offered by American producers. We in Venezuela like to buy from the United States. Our company particularly likes to have United States equipment, not only because we can always be assured of replacements, but because we have excellent working relations with representatives of the United States companies. However, like businessmen everywhere, we must make our judg ments on the basis of the ultimate good of our own stockholders and customers; if we have to choose between the immediate extension of credit by a European manufacturer and the necessity of obtaining a Government guaranty as a condition to the obtaining of credit from the Export-Import Bank, there is obviously strong reason for dealing with the European producer.

I want to make clear at this point that I am not appearing before this committee in order to pave the way for a new application for Export-Import Bank credit. However, we know that the ExportImport Bank has played such an important role in the postwar development of our country that we think it our duty, in response to your request, to tell you the facts as we see them.

I am appearing here in my capacity as a representative of Electricidad. Since I understand, however, that I am the only witness from Venezuela, I should like to say a word in appreciation of the Export-Import Bank credits that have been extended to other Venezuelan enterprises. Those credits also have been beneficial both to your country and to mine. I am sure that the bank's experience with Venezuelan producers has been good. I know that some of you gentlemen on the committee are aware of the fact that C. A. Venezolana de Cementos only 2 weeks ago paid off in full a $4 million credit from the bank 5 years before it was due.

Finally, I should like to add one word on a subject which we in Venezuela consider as most vitally affecting our economic relations with your country. The Venezuelan economy, as you know, is built upon oil. Ninety-five percent of our dollar exports to the United States are oil or oil products. With the dollars that we earn through selling oil to the United States we are buying each year a half-billion dollars' worth of your products.

May I mention that in addition to this $500 million of direct purchases there is perhaps another $500 million of indirect transfers of dollars from Venezuela into the United States through the tourist trade, dividends from companies located in Venezuela, scholarships to students, and so forth.

We have therefore watched with great anxiety during the last 2 or 3 years the efforts made by groups within the United States to bring about the restriction of oil imports. Such restriction would have the most disastrous effects not only upon our trade with your country but upon the whole future of the Venezuelan economy, upon the social progress we are making so rapidly, and upon the stability of our society.

I wish to thank this committee very sincerely for their kindness in asking me to come here this morning and in letting me speak to the committee as a representative businessman of Venezuela.

Senator BENNETT. Thank you, Mr. Machado. Without objection, the balance sheet referred to in your statement will be made a part of the committee files.

(The material referred to will be found in the files of the committee.) Senator BENNETT. I only have one question. I always say that, but I may find others. You have raised the question of the necessity for guaranties by the Venezuelan Government. Are European credits available without such guaranties?

Mr. MACHADO. Yes.

Senator BENNETT. Are those government credits or private credits? Mr. MACHADO. They are private credits through semigovernment banking institutions, but are directly extended by the manufacturers. The manufacturer then finances the loan internally.

Senator BENNETT. Isn't there private credit of the United States available without requiring Government guaranty?

Mr. MACHADO. Not under those terms.

Senator BENNETT. Isn't the problem then the difference between the credit policy of private sellers in the United States as compared with the credit policy of private sellers in Europe?

Mr. MACHADO. I think the question should be answered perhaps with a little explanation. I think perhaps the Europeans are competing. In order to compete, they have to have letters of credit. In order to get them, they go to their government financial institutions which help them materially. To the purchaser, and that is the important thing, that has nothing to do with it. He has to choose one way or the other.

The European manufacturer will offer delayed terms of payment, payment of 15 percent at the time of shipment and 7 or more years to pay the balance with 4 percent interest. That is as good as the Export-Import Bank and better than anything I have heard from private industries in the United States.

Senator BENNETT. I have been in small business in the United States for 30 years, and I have always discovered that the man who tries to break into the market, or the man whose products are not quite up to standard, attempts to sell them or very often attempts to sell them on the basis of more liberal credit, which is an attempt to interject into the transaction a kind of bait that might be necessary because either his product or his salesmanship is not equal to that of his competitor.

There is a phrase in the United States, "A man is said to flush the market," when he attempts to force his way into a situation by terms that are either uneconomic or that he does not intend to continue indefinitely.

Are we facing that kind of situation in South America today because these European people have been out of the market since the beginning of World War II for all practical purposes and they are now attempting to blast their way back into it on terms that they could not continue indefinitely?

Mr. MACHADO. I could not answer that question exactly. It depends. There are some that may be doing that. Our point, and we want to make it clear, is the fact that if the Export-Import Bank requests a guaranty of the Government agency it will make it so difficult or so undesirable from the standpoint of private enterprise that you will just get away from that possibility. It will just be non

existent, and he will either have to find a seller in the United States that will accommodate him with credit, without a credit rating, or he will be forced to go to Europe.

Senator BENNETT. Turning that around, and looking at the position of the seller in the United States, he must find a way of meeting the price and credit competition of his European competitor or decide that he will have to give up the Venezuelan market. There are two sides to that problem.

The extent to which the Federal Government should enter into that basic situation is one that concerns this committee.

Mr. MACHADO. May I explain that the Government guaranty is not actually helping the Export-Import Bank. I am talking basically about a sound credit proposition for desirable enterprises. We can refer to what you a few minutes ago called project loans. In those instances the Export-Import Bank has the ability and the facilities to investigate the project and the financial position of the customer. He could also accept a commercial bank's guaranty which can be obtained instead of a Government guaranty. The point I am driving at is that the risk of the bank is not great and will not be greater by not having a Government guaranty. The point is that the complexity of obtaining it makes it undesirable from a customer's standpoint.

Senator BENNETT. That is another of these elements that are involved in this final decision as to whether the purchase will be made. here or elsewhere, and I assume the officers of the Export-Import Bank are conscious of that problem. I do not know. If there is a representative of the Export-Import Bank here, maybe at this point I might ask him the question: Is it the basic policy of the ExportImport Bank to require a Government guaranty on all its loans to private capital?

STATEMENT OF LYNN U. STAMBAUGH, DEPUTY DIRECTOR, EXPORT-IMPORT BANK--Resumed

Mr. STAMBAUGH. No, sir; quite the contrary.

Senator BENNETT. This is a case of a decision made on the basis of the facts involved in each particular loan?

Mr. STAMBAUGH. That is correct.

Senator BENNETT. That leaves us with the question, Mr. Machado, of the judgment of the Export-Import Bank with relation to its Venezuelan loans. You feel they might be well advised not to require that guaranty to the extent to which they have been doing?

Mr. MACHADO. I must point it out because I thought it was a matter of strict policy. I was not informed of any credit extended to foreign individuals in foreign countries without guaranties. I may be misinformed on the subject.

Senator BENNETT. We have that straight now for the record, that the bank is prepared to make direct loans without Government guaranties under some circumstances; is that right?

Mr. STAMBAUGH. To private enterprise on the credit of that enterprise itself; that is correct.

Senator BENNETT. Since I am not an officer of the bank and am not familiar with the basis on which some of these guaranties in Venezuela have been required, I cannot discuss it with any particular knowledge.

Mr. Machado, I appreciate your testimony very much. The latter part of your testimony, which discusses the question of tariff and restrictions, is a terrible temptation to me but I am going to resist it. Thank you.

Mr. MACHADO. Thank you, Mr. Chairman.

Senator BENNETT. At this point, without objection, we will place in the record your letter of October 8, 1953, in replay to the committee questionnaire.

(The material referred to follows:)

COMPANIA ANONIMA LA ELECTRICIDAD DE CARACAS,
Caracas, October 8, 1953.

Mr. HOMER E. CAPEHART,

Chairman, United States Senate Committee on Banking and Currency,

Washington, D. C.

DEAR SIR: With reference to your kind letter of September 3, regarding the business carried by this company with the Export-Import Bank of Washington, we are glad to advise you as follows:

1. This company had contact with the Export-Import Bank, in connection with the financing of generating and distribution equipment required to supply the increased load of our customers.

2. We have carried correspondence with the bank in a most normal manner, without any complaint whatsoever on our part.

3. As stated in (1) above, we were granted 2 loans from the bank, 1 directly to us in 1948 for the purchase of 4 diesel electric sets, and for a total of $1,850,000, and another, distinguished as contract No. 244, with the cooperation of the International General Electric Co., for the purchase of one 30,000-kilowatt turbine generating unit, and a sizable amount of distribution material, amounting to $9,494,440, of which the bank contributed $5,158,000.

4 and 5. As above, the applications were granted, and the handling was also again in a most satisfactory manner.

6. Upon approval and signature of the Tripartite agreement between the bank, the International General Electric Co., and ourselves, we have had not a single instance of complaint or difficulty between the bank and ourselves.

7. At the time of our applying for both loans, the help of the bank was most adequate, since otherwise we would have encountered a number of difficulties to raise the money required for expansion. In one instance, the Government of Venezuela insisted that the material of the subject contract should be transported by ships of the Venezuelan lines. The contract with the bank called for such freight to be handled by American lines. An agreement was reached by which a split of the freight was possible, and we sincerely feel this was a very adequate gesture on the part of the bank.

8. As above, we feel that we derived a very definite help from the bank's loans. It is only to be regretted that the bank has not seen its way clear to make more direct loans to private companies, without a direct guaranty from a Venezuelan Government organization, such as the Corporacion Venezolana de Fomento, whose endorsement has been required in those instances.

9. As above, we feel that there might be a number of sound industries or projects, whose financing by the bank would definitely open new markets for American goods, and improve the purchasing capacity from the United States. 10. It is our sincere feeling that the Export-Import Bank could materially expand the trade between the United States of America and these countries, but, unfortunately, in the past we know of only 4 loans from the bank to Venezuela, 2 of them have been outlined above, a third we know of was in connection with the Compania Anonima Venezolana de Cementos, which we understand had been very helpful, the fourth was to a construction company of American capital, of which we don't know the practical results. Although individually important, the number of loans has been very small and the ultimate benefits are not easily felt. If a way could be found, by which the bank could make direct loans to industries, without the guaranty from the Venezuelan Government agency, we feel certain it would permit a number of new industries to be financed, permitting at the same time, the improvement of living conditions and consequently the increase of the purchasing power of basic foreign goods.

I must apologize for not answering sooner, but unaccountably, your letter was delayed in the mail. We have just been advised that 28 members of the United