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Caribbean Development Bank (CDB)
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1626
department OF STATE
Washington, D.C. 20520
11452
August 22, 1969
CONFIDENTIAL
MEMORANDUM FOR MR. HENRY A. KISSINGER
THE WHITE HOUSE
Subject: Caribbean Development Bank (CDB)
In your memorandum of July 22, 1969, you asked for a
report on the current status of the Caribbean Development
Bank (CDB) and the Department's views on the question of
equity participation in the bank.
Current Status
The CDB was launched as an idea in mid-1967 following
a study made by a team sponsored by the United Nations
Development Program (UNDP). After almost a score of meet-
ings and many fits and starts the bank is now scheduled to
be formally established by the end of 1969, although
experience would suggest that there might be some further
slippage. The bank is to be capitalized at US$50 million
with the non-regional members (United Kingdom and Canada)
contributing 40%, or US$10 million each, and the Caribbean
governments 60%, or US$30 million on a sliding scale. The
U.S. has budgeted in the FY 1970 A.I.D. request a US$6 mil
lion development loan to the bank, the uses of which are to
be negotiated when the bank is established.
69. Wd 25
RECEIVED.NSC NSC
Background
The idea of a development bank for the Caribbean arose
out of a meeting held in Antigua in November 1966 when
representatives of the United States, United Kingdom and
Canada met with officials of Barbados and the Leeward and
CONFIDENTIAL
Group 3
Downgraded at 12-year intervals;
not automatically declassified.
Reproduced at the Richard Nixon Presidential Library
DECLASSIFIED This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
CONFIDENTIAL
-2-
Windward islands to discuss follow-through action on a tri-
partite economic survey of the area. Impressed by the fact
that the Leeward and Windward islands (with a population of
500,000) had no access to economic development funds except
the limited resources which the UK was able to make avail-
able, the conferees decided to ask the UNDP to ascertain if
some public financial institution for the area might be
feasible and acceptable to the various islands. Not only the
original islands, but also the Bahamas, British Honduras,
Jamaica, Trinidad, and Guyana informed the UNDP of their
desire to participate in such a bank. On this basis, UNDP
recommended the establishment of a bank capitalized at
US$50 million (half paid and half callable over a five-year
period) with 40% of the equity (or US$20 million) allocated
in equal shares for the U.S., UK, and Canada and 60% (or
US$30 million) for the islands.
U.S. Position Up To This Time
Under the original proposal the U.S. equity partici-
pation was US$ 6.666 million (i.e., one-third of US$20 million)
over a five-year period, or US$666,000 paid in and US$666,000
callable for each of the five years. The Department thought
that the U.S. should take up this equity participation in the
belief that this bank was a true self-help measure (the U.S.
equity share was only 13% of the bank's capital), that the
bank was a vehicle which would keep the UK committed to a
long-term institution in the Caribbean, and that the bank
would also be a means for U.S.-Canadian cooperation in the
area.
Unfortunately, at that time the Congress, which would
have had to approve U.S. membership and equity participation,
already had under consideration legislation concerning the
World Bank, the Inter-American Bank, the Asian Bank, and the
African Bank, and the decision was made at the White House
level that the U.S. would not participate in the CDB as an
CONFIDENTIAL
Reproduced at the Richard Nixon Presidential Library
DECLASSIFIED This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
CONFIDENTIAL
-3-
equity member but would, funds permitting, make available
A.I.D. development loans to the bank, when established, in
an amount substantially equal to half of the total UK-
Canadian participation. This decision was communicated to
the other governments in October 1967. They were understand-
ably unhappy with the U.S. decision but did accept the fact
that the U.S. would cooperate with the CDB. The UK and
Canada then agreed to absorb in equal shares the proposed
U.S. equity participation.
U.S. Equity Participation
By not committing itself to equity participation in the
beginning, the U.S. lost an element of leadership in the
establishment of the bank and an opportunity to lend its
financial prestige to the institution. With final steps
toward the establishment of the bank being carried out in
the coming months, it would not be advisable for the U.S.,
by offering equity participation now, to delay the setting
up of the bank. Equity participation, and each increase in
funding, no matter how small, would require extensive hear-
ings in at least four congressional committees (Foreign
Affairs, Foreign Relations, and Banking and Currency of each
branch). In addition, there is the question as to whether
the Congress should actually be asked to hold full-scale
hearings and otherwise tie itself up for what is a relatively
small amount of money.
The relationship to which we have committed ourselves
is the same as that which we have with the Central American
Bank of Economic Integration (CABEI). This has worked
reasonably well and as CABEI has become more active, the U.S.,
through A.I.D., has been able to make a substantial amount
of loans available to that bank.
CONFIDENTIAL
Reproduced at the Richard Nixon Presidential Library
DECLASSIFIED This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
CONFIDENTIAL
-4-
The Department, therefore, for the reasons cited above,
does not believe that the U.S. should at this time consider
equity participation in the CDB.
Theodore he.
Theodore L. Eliot, Jr.
Executive Secretary
CONFIDENTIAL
Reproduced at the Richard Nixon Presidential Library
DECLASSIFIED This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.