with imported sulfur from the United States has been extensively used in our plant. We believe that the above figures are sufficient to indicate the amount of trade made possible as a direct result of the Export-Import Bank loans for worthy projects like ours designed to develop the basic resources of our country. An excellent indication of the recent growth of the Brazilian industry in general, resulting directly from the establishment of the Volta Redonda plant, is that our company is now again confronted with the same situation which prevailed in 1949 when market conditions made it imperative to carry out our first expansion program. The continuing urgent demand for rolled steel products has already far exceeded the productive capacity contemplated in the expansion program now underway. Therefore, our company has now under consideration another plan for further expansion of our facilities in order to meet the country's additional requirements. In specific answer to your questions numbers 2, 4 and 5, with reference to our contacts with the Export-Import Bank, we wish to emphasize that at all times we have received very prompt and satisfactory replies to our correspondence with the bank, which handled our applications for loans in a courteous and expeditious manner. Moreover, both credits were very efficiently administered by the bank. We trust that the Export-Import Bank will continue to operate in the future as it has in the past, and we do not have any suggestions for changes or alterations in its past policy or operations. It is our considered belief that the bank has given great stimulation to the industries of our country and, at the same time, has substantially increased her capacity to purchase United States exports. Furthermore, the assistance of the bank in the financing of our Volta Redonda project has markedly contributed to raising the standards of living in our country. We sincerely appreciate this opportunity of expressing our views on the past operations of the Export-Import Bank of Washington. Senator BENNETT. Mr. Pinheiro, do you have any other comments to make in addition to the material in your prepared statement? Mr. PINHEIRO. No, I do not. Senator BENNETT. I have no particular questions. The statement is very clear. I have one observation. It is interesting that in Brazil you feel it profitable and very much worthwhile to operate a native steel industry or a local steel industry in spite of the fact that you have to import your coal. Mr. PINHEIRO. Part of the coal only. Senator BENNETT. How much of the coal? Mr. PINHEIRO. Between 40 and 50 percent. However, our coke ovens have been designed so that we can operate with 100 percent Brazilian coal. The reason we do not do that at the present time is that it is more economical to use a certain percentage of American coal to reduce our cost. Senator BENNETT. You charge both kinds of coal into the oven at the same time? Mr. PINHEIRO. Yes. Senator BENNETT. It is a blending operation? Mr. PINHEIRO. Yes, that is right. Between 40 and 50 percent of American coal is used at all times. But we operated in the beginning with 100 percent Brazilian coal to test our installation. We can do it in the future, if it is necessary. Senator BENNETT. Is the Brazilian National Steel Co. a privately owned enterprise? Mr. PINHEIRO. No. It has private capital as well as Government capital. Senator BENNETT. Is it controlled by Government capital? Mr. PINHEIRO. Yes, it is. Senator BENNETT. So this, then, is in effect a loan to the Brazilian Government? Mr. PINHEIRO. It is. Senator BENNETT. What percentage are you able to supply of Brazilian steel needs? Mr. PINHEIRO. As of 1941, for instance, the latest statistics available showed that total consumption in finished products was 1,150,000 tons. This figure that I have shows the Brazilian steel industry produced 725,000 tons and had to import 364,000 tons. Senator BENNETT. I notice you are expecting to increase your productive capacity. Mr. PINHEIRO. That is right. Senator BENNETT. Will that give you enough capacity to approximately balance the needs of the economy? Mr. PINHEIRO. No, it will not. As the result of our metal production, there has been a very marked growth in every industry in Brazil. Very recently we made a survey and it shows that for 1955, next year, the total consumption to be expected in Brazil is roughly 1,700,000 tons. At that time our plant will be contributing 467,000 tons as a result of the expansion now under way. Assuming that there is an increase of 10 percent in capacity, we will still be short 780,000 tons of steel in Brazil. Senator BENNETT. The harder you run the more you run behind? Mr. PINHEIRO. That is right. Senator BENNETT. Thank you very much. I appreciate your coming here. This report which you have read is already in the record. At this point I will submit for the record the letter of Mr. Sylvio Oliveira to Senator Capehart, responding to the committee questionnaire, dated October 3, 1953. (The material referred to follows:) Senator HOMER E. CAPEHART, COMPANHIA SIDERURGICA NACIONAL, Chairman, Committee on Banking and Currency, United States Senate, Washington, D. C. DEAR SENATOR CAPEHART: I am in receipt of your letter dated September 3, regarding the United States Senate purpose of conducting a thorough study of the activities of Export-Import Bank of Washington and of the International Bank for Reconstruction and Development and their relationship to the expansion of international trade. I wish to assure you of this company's full support to the scheme and therefore will, as concisely as possible, reply to the questions put forward.' 1. The nature or purpose of your contact with the bank. Answer. In 1941, Companhia Siderurgica Nacional established her first contact with Export-Import Bank of Washington, with the purpose of applying for a loan, in dollars, to cover the financing of a steel plant, to be located in Volta Redonda, State of Rio de Janeiro, Brazil, and accordingly the purchase of equipments in the United States. In 1950, again an application was granted for the fulfillment of a first expansion program, already on its last stages. 2. If you had correspondence with the bank did you receive prompt and satisfactory replies? Answer. Yes. Covering above-mentioned period correspondence with the bank, all subjects were promptly and satisfactorily answered. 3. Have you ever applied for a loan from the Export-Import Bank? Answer. Yes. In addition to answer 1, and in view of previous dealings between Companhia Siderurgica Nacional and Export-Import Bank, at our request, supplemental agreements were made for the following loans: US$20,000 on the 22d of May 1941: US$5,000 on the 12th of December 1941: US$20,000 on the 14th of June of 1943; totaling: US$45,000. A second loan of million dollars, at 4 percent per annum, over a period of 20 years, was concluded on August 1, 1950. 4. If so, has your application been granted or denied? Was it handled in a courteous and expeditious manner? Answer. Yes. Answer 3 clearly states that applications of Companhia Siderurgica Nacional were always grar ted in a courteous and expeditious manner. 5. If a credit was authorized was it administered by the Export-Import Bank in an efficient manner? Answer. Yes. After a thorough and a detailed study of the problem presented, a credit was granted by Export-Import Bank to Companhia Siderurgica Nacional. At the bank's demand, this credit was guaranteed by the Brazilian Treasury, the Bank of Brazil, and the company itself. Covering technical points, the use of this credit was safeguarded, also at the bank's request, by a separate agreementbetween Companhia Siderurgica Nacional and Arthur G. McKee, an American firm, considered by the bank as capable. Under terms of this agreement the company was bound to maintain, at work, in Volta Redonda, several technicians, employees of Arthur G. McKee, thereby giving to said agreement the financial and technical guaranties demanded. 6. Have you any specific complaints about the operations of the Export-Import Bank? Answer. No. 7. Has the Export-Import Bank aided or failed in properly financing and facilitating the export-import trade of the United States? Answer. We consider that the bank had considerably aided the United States trade progress, especially as regards exports. As in our case, where, by terms of agreement, the amount of the loan was used in the United States, in purchase of equipment as well as all the exceeding material necessary, besides coal and other supplies, thereby spending the amount of $12 million per year. In addition, we are obliged, also by terms of said agreement to transport all the material acquired through United States ships. 8. Has the bank assisted in developing and expanding the economy of foreign countries? Has it increased their capacity to purchase United States exports? Answer. Yes. The Export-Import Bank's financial aid has developed Brazilian economy, and Volta Redonda steel plant, as leader of the Brazilian industrial progress testifies to it. As holder of a large quantity of raw material, the manufacturing industry in this country has considerably increased. Various essential equipments and raw materials were acquired in the United States, thereby placing Brazil as one of her greatest consumers. This effort which proves the determination and acquisitive power of the Brazilian, supports, to the utmost capacity, its increasing national industry. As a result a considerable number of factories, especially American, have established themselves. We are convinced that were Brazil able to acquire more dollars, as it shortly will be in a position to do, trade with the United States would be on a much bigger scale. 9. Have you any suggestions for changes or alterations in the policy or operations of the Export-Import Bank? Answer. No. We wish, however, to draw your attention to the Export-Import Bank's healthy policy of granting loans for the establishment of important enterprises in Brazil, a fact which has had a favorable reflection in Brazilian public opinion. The Export-Import Bank's loan aided Brazil to create its basic industry and it is current voice in financial and administrative circles, that Volta Redonda steel plant is the best proof of the excellent policy developed by both countries, a fact which the Brazilian press has frequently mentioned with applause. 10. Has the Export-Import Bank facilitated the expansion of international trade in the past, and if so, how can it more adequately expand it in the future? Answer. Export-Import Bank has helped the international trade, and it is our opinion, that were it granted more expansively, it would enable greater development by those who, although suffering from a shortage of dollars, are possessors of national resources to guarantee an ample investment of funds. I hope that the information herein contained will entirely meet with your requirements. Should, however, the necessity arise of my personal appearance before your committee, I am willing to testify on this matter, subject to prior approval of my country's Government, since Companhia Siderurgica Nacional, as a mixed economy concern, is comprised of private funds controlled by the Brazilian Government, as the largest shareholder. Sincerely yours, S. R. DE OLIVEIRA, President. Senator BENNETT. Is Mr. Campos here? Will you take the stand, Mr. Campos? Do you wish to read your statement? STATEMENT OF ROBERTO CAMPOS, REPRESENTING BANCO NACIONAL DO DESENVOLVIMENTO ECONOMICO, RIO DE JANEIRO, BRAZIL Mr. CAMPOS. Yes, Mr. Chairman. I wish to express to you, sir, the deep appreciation of the Brazilian National Economic Development Bank for the courteous invitation received from this committee to attend the hearings on the activities of the Export-Import Bank. The National Economic Development Bank, which I am representing here, is in itself a new institution having been established by the Brazilian Congress by a law passed on June 20, 1952. It is primarily concerned with channeling tax resources and some types of collective savings into investments in basic fields such as railroads and highways, ports and shipping, and the production of electric energy. Like the Export-Import Bank, it aims at supplementing rather than substituting for, or competing with, private capital. It has, in fact, been directed by its basic statute passed by the Brazilian Congress to concentrate its action on the provision of basic public services, which, due to the long-term nature of the investments required, their generally low direct financial yield, and the high risks involved, are not ordinarily capable of securing private financing and yet are indispensable to break obstacles to economic growth and to create new opportunities for private capital investment. The National Economic Development Bank has, since the inception of its activities, developed close relations with the Export-Import Bank and has benefited from two loans totaling some $26 million, one intended for the financing of the importation of American agricultural machinery and implements to aid in the farm mechanization program, and the other for the purchase of railroad equipment and supplies. It has also acted as a guarantor of a loan extended by the ExportImport Bank to a private Brazilian company engaged in the production of iron and steel semimanufactures. While the direct relations of the Development Bank with the Export-Import Bank are recent in time, I feel nevertheless that I can speak on the basis of a great deal of accumulated experience. For the Development Bank inherited from other agencies of the Brazilian Government and from mixed governmental and private companies such as the Volta Redonda Steel Mill and the Itabira Iron Ore concern, a long history of close cooperation with the Export-Import Bank. Moreover, in its daily contacts with private Brazilian and foreign investors, as well as with the trading community, the Development Bank has had ample opportunity to sense the great importance of the activity of the Export-Import Bank in promoting foreign trade between the two countries and in giving assistance and support to private investors. The comparatively large volume of Export-Import Bank investments in my country, and their diversified nature, render the Brazilian experience particularly enlightening for an appraisal of the past role of the Export-Import Bank, both as a banking institution and as an auxiliary instrument of American foreign economic policy. While the primary purpose of promoting foreign trade has been dominant in all of the Export-Import Bank dealings with Brazil, the bank has recognized-wisely in our estimation-that the objective of trade promotion is inseparable from other wider objectives, and has adjusted its lending policy accordingly. The credits extended over a period of years by the Export-Import Bank to Brazil encompass a variety of operations ranging from shortterm credits to medium-term exporters' loans and, in some cases, long-term investments. The majority of those credits can be classified as straight trade-promotion loans. Others, such as the Ampa manganese loan, aim at creating or expanding sources of supply of strategic materials indispensable for the American defense program. Still others, while directly helping the exportation of American goods, have had the important subsidiary effect of strengthening the financial and economic position of private American investors by extending to them long-term credits that they could not raise on an equity basis or in the private loan market. A few of the loans, finally, are aimed at achieving more than shortor medium-term financing of the export and import trade. They represent a positive contribution to the long-term economic development of Brazil based on the premise that only through economic growth can a sound basis be established for an expanding foreign trade. Some concrete examples may perhaps conveniently illustrate the interrelations of those objectives. The Export-Import Bank has recently extended a series of credits which taken together total some $41 million, to finance the expansion of the power-generating capacity of the Empresas Electricas Brazileiras, an American-owned subsidiary of the American & Foreign Power Co. These loans, with varying maturities ranging from 7 to 20 years, are undoubtedly contributing to stimulate the American foreign trade by rendering possible for Brazil to import from this country electrical machinery and equipment which, for lack of financing, might not have been purchased or might have to be imported, perhaps with the sacrifice of relevant technical considerations, from other currency areas willing to give favorable credit terms. But this is only part of the story. In enabling the power program of subsidiary companies of the American & Foreign Power to be implemented, a significant contribution is being brought to the economic development of vast zones of the interior of Brazil, particularly in the fast-growing states of São Paulo and Parana, where the development of manufacturing industry and agricultural processing plants has been stymied for lack of power. On the other hand, these loans will give support and additional strength to private investors engaged in an attempt to meet the challenge of a fast-growing demand for electricity, and will contribute |