Special Message to the Congress on United States Participation in the International Finance Corporation.

To the Congress of the United States:

The establishment of the International Finance Corporation and our participation in it will strengthen the partnership of the free nations. In my message to the Congress, January 10, 1955, on the foreign economic policy of the United States and in my annual Economic Report transmitted to you January 20, 1955, I stated that I would recommend at the appropriate time legislation to permit United States participation in the Corporation as part of our effort to increase the flow of United States private investment funds abroad.

I now forward to you the Articles of Agreement of the International Finance Corporation and an Explanatory Memorandum approved by the Executive Directors of the International Bank for Reconstruction and Development. I recommend that the Congress enact legislation authorizing me to accept membership in the Corporation for the United States and providing for the payment of our subscription of $35,168,000 to the $100 million capital stock of the Corporation as set forth in the Articles of Agreement. The subscription was included in the Budget.

The entire free world needs capital to provide a sound basis for economic growth which will support rising standards of living and will fortify free social and political institutions. Action to that end by cooperating nations is essential.

In its own enlightened self-interest, the United States is vitally concerned that capital should move into productive activities in free countries unable to finance development needs out of their own resources.

Government funds cannot, and should not, be regarded as the basic sources of capital for international investment. The best means is investment by private individuals and enterprises. The major purpose of the new institution, consequently, will be to help channel private capital and experienced and competent private management into productive investment opportunities that would not otherwise be developed. Through the Corporation, we can cooperate more effectively with other people for mutual prosperity and expanding international trade, thus contributing to the peace and the solidarity of the free world.

Economic recovery, notably in Western Europe, enables nations other than the United States to participate substantially in furnishing capital to the less developed areas. The International Finance Corporation is an undertaking in which all nations, as members of the International Bank for Reconstruction and Development, will be able to pool some of their resources to spur such investment. All subscriptions to the Corporation will be paid in gold or dollars.

The Corporation, as an affiliate of the International Bank, will serve as an international agency, which will provide, in association with local and foreign private investors, risk capital for financing the establishment, improvement, and expansion of productive private enterprises in member countries when other sources of funds are not available on reasonable terms. This type of risk or venture capital is most urgently needed.

By providing the margin of capital needed to attract other funds, the Corporation will help expand private investment abroad. It will make its investments without guarantee of repayment by the member governments concerned. Accordingly, it will complement the activities of existing international investment institutions.

The Corporation will not duplicate the operations of the International Bank for Reconstruction and Development, for the investments of the International Bank are guaranteed by its member governments and are of fixed-interest nature in projects not usually attractive to risk capital.

Since the Executive Directors of the International Bank would serve ex-officio as Directors of the Corporation, and the President of the Bank would serve as Chairman of the Corporation's Board, effective collaboration between the two agencies and operating economy is assured.

Nor will the Corporation's operations duplicate the work of the Export-Import Bank. That Bank, an agency of the United States Government, is an instrumentality of our foreign and trade policy. It is not designed to provide venture capital; its loans are at definite interest rates with fixed schedules of repayment.

The Corporation will not hold capital stock nor participate in operating control but will rely on private management. It will not be a holding company retaining its investments on a long-term basis, but will dispose of its holdings to private investors as opportunity offers so that it can reinvest its funds in new activities. Since its main mission is to supply risk capital where it is needed, its investments will be highly flexible.

In some cases the Corporation may take fixed interest obligations, in others it may receive obligations bearing a return related to the earnings of the enterprises, and in others its holdings may be obligations convertible into stock when sold by it to private investors. Thus, the Corporation will supplement private investment, and will operate only in association with private interests which are willing to carry a large share of the total investment in each enterprise. In no event will it supply capital for an enterprise which could reasonably be expected to obtain the funds from private sources.

United States participation in the International Finance Corporation will be a step forward in our foreign economic policy in cooperation with the other free nations. It is, however, only one step among several which we must take. In my message to the Congress on January 10, 1955, I outlined other important steps.

These actions--such as extension of the Trade Agreements Act, United States membership in the Organization for Trade Cooperation, simplification and improvement of customs valuation procedures, increased tourist allowances, changes in the law concerning the taxation of income from foreign sources and further developments in tax treaties designed to encourage private investment abroad, continued technical cooperation with other countries, and necessary programs of foreign assistance--are essential to a sound and foresighted foreign economic policy for the United States.

I urge the Congress to enact promptly the legislation permitting the United States to join with the other free nations in organizing the International Finance Corporation--an important part of our foreign economic program which will foster more rapid advance by free people everywhere as they strive to improve their material well-being.

DWIGHT D. EISENHOWER