- Third IDA replenishment comes into effect
- IFC invests in Brazil, Cyprus, and Venezuela
Agreements for ten International Development Association (IDA) credits totaling $319.5 million were signed with the coming into effect of the third replenishment of the resources of IDA on September 22. The credits to assist key sectors of the economies of Ethiopia, India, Indonesia, Korea, Morocco, Pakistan, Senegal, Tunisia, and Turkey were approved by the Executive Directors of the Association during the fiscal year ended June 30, 1972. Their approval was subject to completion of the third replenishment.
The replenishment, totaling $2,442 million, was the subject of an international agreement concluded in 1970.
The World Bank’s ability to assist the poorest of its members depends heavily upon funds made available to IDA, which gives credits to member countries on highly concessionary terms. The resources of IDA are replenished periodically by contributions from the more affluent member countries. Under the agreement contributions of about $800 million had been expected during the fiscal year 1971/72.
By June 30, 1972, 16 of the 19 Part I (or richer) nations had ratified the agreement and 15 of them had made advance contributions totaling $448 million. With ratification by the United States on September 22, the third replenishment came into effect.
World Bank Reorganized
The World Bank has reorganized its operational structure on a regional basis in order to respond more effectively and efficiently to the needs of developing countries. Among other things, the reorganization is designed to provide a closer linkage of country and sectoral expertise and greater delegation of authority.
The new organizational structure establishes five Regional Offices, each headed by a Vice President reporting to a Senior Vice President, Operations. Within approved policy, the Regional Offices will have the responsibility for planning and executing the bank’s lending and technical assistance programs in the individual member countries. The internal organization of these offices varies to reflect the particular needs of each region; but in general the top management team assisting the Regional Vice President includes the positions of Directors of Country Programs, Director of Project Operations, Chief Economist, and Program Coordinator.
Mr. J. Burke Knapp, a Vice President of the bank since 1953, has been named Senior Vice President, Operations. The five Regional Offices and Vice Presidents are as follows: Latin America and the Caribbean, Mr. Gerald Alter; East Africa, Mr. Bernard R. Bell; Europe, Middle East, and North Africa, Mr. Munir P. Benjenk; Asia, Mr. I.P.M. Cargill; and West Africa, Mr. Roger Chaufournier.
In addition to the five Regional Offices, the new organization establishes the position of Vice President, Project Staff, who will also report to the Senior Vice President, Operations. Mr. Warren C. Baum, the Vice President, is responsible for providing functional guidance and assistance to the Regional Offices. His staff consists of selected experts to provide the support necessary to assure uniform sectoral policies throughout the Regional Offices; certain specialists who cannot practically be allocated to any single region; and project units such as Population, Tourism, Urbanization, and Industry.
The reorganization is the result of a study of the bank’s organization begun in January 1972 under the overall charge of Mr. Mohamed Shoaib, Vice President. He was assisted by a steering committee composed of staff members. The firm of McKinsey and Company was employed as outside consultants.
The bank’s membership increased to 121 and IDA’s to 110. The new nation of Bangladesh joined the bank and IDA. Bahrain, Qatar, and the United Arab Emirates (Abu Dhabi, Dubai, Sharjah, Ajman, Umm al-Qaiwain, Ras al-Khaimah, and Fujairah) became members of the bank. Fiji, which had joined the bank in fiscal 1971, became a member of IDA.
New IFC Investments
The International Finance Corporation (IFC) made new investments, totaling $14.8 million, in three diverse fields in Brazil, Cyprus, and Venezuela during the period July 1—September 30, the first quarter of the fiscal year 1972/73.
|Country||Purpose||Amount ($ millions)|
|Total credits approved during the quarter |
ended September 30, 1972
In a transaction that reflects the continued cooperation between local underwriters and IFC in the development of the capital market in Venezuela, IFC made a commitment in August to C. A. Venezolana de Desarrollo (CAVENDES), to purchase unsecured debentures of Protinal C. A. of Venezuela, for an amount up to the equivalent of $3 million. CAVENDES, a private development finance company of which IFC is a shareholder, was to underwrite one half of the $6.8 million, equivalent issue, and other local underwriters the other half.
The IFC investment will assist Protinal, the largest manufacturer of animal feed in Venezuela, in a new expansion program that fits into a priority sector of the agricultural development plans of the Venezuelan Government and which includes a 50 per cent increase in the productive capacity of the company’s main plant in Valencia, the continued development of a national grain cultivation program, and the formation of new poultry farms.
In September, IFC invested in a large joint venture in the steel producing sector, a project being undertaken by Companhia Siderúrgica de Guanabara (COSIGUA), a Brazilian company which is constructing and will operate a scrap-based steel producing plant and rolling facilities near Santa Cruz, 70 kilometers west of Rio de Janeiro.
The local sponsor of this project is the Gerdau group of Porto Alegre, which already owns and operates three similar plants in Brazil. The foreign sponsor is August Thyssen Huette A. G., of Germany, a major European steelmaker.
The IFC investment consists of a loan of $7 million and $2 million in equity. COSIGUA will operate a modern plant of economical size, close to the main markets of Rio de Janeiro and São Paulo, but well suited for future expansion because of its location at Sepetiba Bay. The project will make intensive use of locally available raw materials and skilled labor, providing employment for hundreds of workers in one of the more densely inhabited areas of the country. The new project fits into the program formulated by the National Steel Council for the expansion, restructuring, and rationalization of the Brazilian steel sector, which has to meet a growing rate of consumption, estimated at 9 per cent a year during the last two decades and is expected to keep growing at a similar rate in the future.
Also during September IFC announced its first investment in Cyprus. Consisting of the equivalent of approximately $2.8 million, it will help the country meet its growing cement needs, maintain its self-sufficiency, and pave the way for exports at competitive prices. The investment was made in the Cyprus Cement Company for expansion of its production capacity through the addition of a second line of machinery using the dry process. The two major shareholders of the company are the Galatariotis Group, a Cypriot business group, and Holderbank Financière Glarus, of Switzerland, a world-wide product of cement. In addition, there are about 300 local private shareholders.
|Country||Purpose||Amount ($ millions)|
|Brazil||Agriculture (grain storage)||30.00|
|Brazil||Agriculture (land settlement)||6.70|
|Total loans approved during the quarter ended September 30, 1972||226.20|