Mr. BERRY. It is the same as if we bought it and shipped it down? Mr. GORDON. That is right.

Mr. BERRY. I was wondering when you said there were so many companies that were anxious to sell, I was wondering how it was handled, why they would be so anxious to sell.

Mr. GORDON. For them it is straight business. It is ordinary business. They want to sell into a growing market. Mr. BERRY. That is all, Mr. Chairman.

Chairman MORGAN. Mr. Monagan.

Mr. MONAGAN. Thank you, Mr. Chairman.

Mr. Secretary, I want to begin by tossing a bouquet in your direction for your service as our Ambassador in Brazil. Certainly the recent developments in that country are something that all of us can take great satisfaction in, and I am sure that the Secretary's efforts contributed substantially to that result.

Mr. GORDON. Thank you very much, Mr. Congressman. I think the bouquet should be given to the Brazilian regime. If we helped a little bit here and there, that was a footnote.

Mr. MONAGAN. I agree with that, too.

As you know, I have inserted in the record at times some of the economic statistics that show the remarkable progress that has been made there.

How is the political situation shaping up in Brazil? We know that some of these reforms have been made at the expense of some loss of political support from the people who have to pay higher transportation costs and other similar charges. We hope this improvement can continue. What are the developments?

Mr. GORDON. [Security deletion.]

Some of the business groups are concerned about restraint on credit because in the old days of wild inflation they had unlimited credit. They made a lot of paper profits, which weren't real because they kept getting eaten away by inflation. They are having to adjust themselves. [Security deletion.]

Obviously in any transition of this kind from a rate of inflation from over 100 percent a year to something hopefully close to zero or less than 10 percent a year, the adjustment process is tough. It is painful. If it succeeds, then everybody will be pleased, once it succeeds.

Germany went through that in 1948 and 1949 and there was a lot of pain while it was happening, but once they got over the hump people became very happy about it.

It happens that this coincides with the year of general elections for a new Congress, for State legislatures and indirect elections for the Presidential succession, and also for the 11 Governorships. [Security deletion.]

Mr. MONAGAN. Can you say there is a particular economic hump. that they have to get over and when that might be? Or is this just a continuous long-range proposition?

Mr. GORDON. No, sir. It can't go on forever. That is for sure. They are behind their own hoped-for program and the one that we hope for too as far as results are concerned.

The cost-of-living indexes, for example, in both January and February of this year were over 4 percent in each month, which is much higher than had been hoped for. They had hoped that by the end of

this calendar year that the rate of inflation would be down to about 10 percent. [Security deletion.] I would say that by sometime in 1967 for the program to be a success they have to have reasonable stability.

Mr. MONAGAN. Mr. Secretary, we speak about the need for self-help in this program. One of the situations that seems to me about as ridiculous as it can be is that in Chile. We have programed $70 million worth of loans for Chile and still in the last 6 months through the strikes that they have been unable, or unwilling, to control, I have seen an estimate that they have lost $60 million in foreign exchange income. These strikes are not related to wages or working conditions for the most part.

Isn't there something that we can do to put the heat on the Government there to control this sort of thing?

Mr. GORDON. There are two kinds of strikes, Congressman. There was a legal strike under the Chilean situation, the very long-lasting one at the Braden mine. And the Government was as anxious as we were to get it settled. It did get settled last week and the men are back at work. That was the worst.

There were a number of sympathy strikes from time to time. The Government tried to prevent those. The army occupied some mines and there was an incident about a month ago which resulted in the death of several miners. The Government has been taking an increasingly strong stand.

This major strike was finally settled after 75 days or something like that. It was a long strike, at a big mine, and costly. I thought that the losses were a little less than the $60 million figure you mentioned. I would like to check that and supply it for the record, but it has been a very worrisome development.

(The following memorandum has been supplied for the record :)

Loss OF INCOME AS RESULT OF RECENT COPPER STRIKE

Copper strikes in the last 6 months are roughly estimated to have cost Chile almost 120,000 metric tons in production, with a loss in foreign exchange of $60 million, of which $35 million represents lost tax income. Of this amount, Chile has lost about $32 million in foreign exchange, of which $20 million was tax revenues loss, as a result of the strikes during 1966.

Mr. GORDON. Nonetheless, the Chilean Government is very much bound by the law, and is a very constitutionally minded government, which in itself is a good thing. That very serious strike was a legal strike. They had no legal authority to put an end to it under their present system. [Security deleted.]

All I can say is that as of today the labor situation on the copper front certainly looks very much better. There is no strike today in any Chilean copper mine. They are all working.

Mr. MONAGAN. The law has finally passed the Congress?

Mr. GORDON. The law passed the Senate at 3 a.m., about 4 days ago. in spite of the fact that the Senate does not have a majority supporting the President.

This was a great step forward and it ought now to open up the way for the copper expansion. [Security deletion.]

Mr. MONAGAN. There have been World Bank and Inter-American Development Bank investments in these countries of course, as well as the AID

Mr. GORDON. Yes, and they are growing.

Mr. MONAGAN. What, just briefly, has been the experience as far as the amortization goes?

Mr. GORDON. The Inter-American Development Bank is so new in business that it hasn't had many repayments due yet. These loans typically have had a grace period at the beginning. They have been getting payments on schedule.

The World Bank has never had a default but it has been close to

some.

Mr. MONAGAN. In Brazil?

Mr. GORDON. Yes; and in a couple of other countries. There have been no defaults on those international obligations.

Chairman MORGAN. Mr. Morse.

Mr. MORSE. Thank you, Mr. Chairman.

I, too, would like to take this opportunity to welcome the distinguished Assistant Secretary on his first appearance before this committee in his new capacity.

As a very junior member on the minority side, I think the United States is mighty fortunate to have a man of his ability, integrity, experience, and devotion. I think I speak for the committee when I say that we have immense confidence in the job you propose to do.

Two or three very brief questions, Mr. Secretary. Does the Under Secretary for Economic Affairs still carry the title of Special Assistant to the President for Latin America?

Mr. GORDON. No.

Mr. MORSE. Is there any such person designated?

Mr. GORDON. No. As you know, when Mr. Rostow was named Special Assistant to the President the other day in a press conference, the President indicated Mr. Rostow would have an interest in longterm development in Latin America, which of course

Mr. MORSE. Without any formal designation?

Mr. GORDON. That is right.

Mr. MORSE. Has the Department recommended, or does the White House contemplate the appointment of a new U.S. representative on the Committee for the Alliance for Progress?

Mr. GORDON. We have that under discussion. I just got back 2 days ago from Buenos Aires. I haven't had a chance to discuss that with Mr. Rostow or other authorities. We have to consider it because it may be difficult for him to carry on fulfilling that responsibility. Mr. MORSE. I would think it would be impossible for Mr. Rostow to continue, with the intimate association he has now with the White House, to bring the kind of detachment to the CIAP that is essential. Mr. GORDON. We would like to find someone who can do as fine a job as he has done on CIAP.

Mr. MORSE. I was one of the Members of the House who supported the 5-year authorization for the Alliance when it was first enacted. Can you tell me, sir, what you deem to be the advantages of the 5-year authorization that the Alliance has had since 1961?

Mr. GORDON. It is essentially a matter of our feeling that we have the backing of the Congress in the notion that the Alliance is a longterm program and that we can talk with the Latin American governments about their making corresponding long-term self-help efforts that they can and think about programing their development on a longterm basis.

As you recall, one of the items in the Charter of Punta del Este was the notion of long-term planning for economic development and social progress.

We believe that this kind of explicit congressional endorsement of a long-term approach does help get that spirit of being abroad for the long haul across to the Latin American

governments.

Our aid relationships with Latin America over the period since the beginning of the Second World War have tended to be in my judgment on much too much of a hand-to-mouth basis, dealing with immediate crises and balance of payments or budgets or things of this emergency nature. We would like to get out of that kind of business and, to the extent that we can, into long-term cooperation supporting long-term developmental efforts.

Mr. MORSE. And the 5-year period has been, in your opinion, a desirable period of time for the authorization?

Mr. GORDON. Yes, I think it is reasonable.

As you know, we talked about a 10-year program. We have had one 5 years. Now we are talking about the second 5 years. It seems to me a very good approach.

Mr. MORSE. If we were to revert, insofar as the Alliance is concerned, to a 1-year program, would that have an beneficial or adverse effect upon the operation of the program?

Mr. GORDON. I think that would have an adverse effect, certainly psychologically, particularly in the face of previously having had a 5-year authorization.

Mr. MORSE. Would it also make it most difficult to attain the kind of things you are seeking to accomplish?

Mr. GORDON. I think it would raise in the minds of the Latin American governments some question as to whether the Congress supports the executive branch in the notion that the Alliance for Progress is a long-term joint effort among all of the hemisphere

countries.

Mr. MORSE. To a lesser extent, but to some extent, an authorization of 2 years would have an adverse effect.

Mr. GORDON. Yes, sir.

Mr. MORSE. Two years would not be sufficient to give you the kind of operational flexibility properly to do your job?

Mr. GORDON. I can't honestly say that we couldn't and wouldn't operate. After all, our operations are controlled by annual appropriations. I would think that that much of a reduction would have a seriously adverse psychological effect.

Mr. MORSE. I brought up these questions, Mr. Secretary, to share with you my very deep concern that the administration's effort to expand all programs to a 5-year authorization may result in the Alliance for Progress being cut back to a 2-year authorization with the other programs.

I would think that is something that we should all try to avoid. I am very apprehensive about this. I think the administration came up here with a 5-year request really believing it was going to get no more than 2 years for the other programs, and I fear it will be a 2-year program for the Alliance as well.

Mr. GORDON. I share that concern. I hope such a result can be avoided.

Congressman Morse was identified with a statement, along with a number of other Members of this House, in connection with our interest in and cooperation with Latin America, and all of us on the executive side have found that to be a very helpful initiative. Chairman MORGAN. Mr. Fraser.

Mr. FRASER. Thank you, Mr. Chairman.

In the rundown on the funding which you have, Mr. Secretary, I didn't see any reference to the money that might be devoted to multilateral projects. Would that come out of developmental loans?

Mr. GORDON. Yes; both for feasibility studies and for financing of projects.

Mr. FRASER. How strongly are we pushing regional projects?

Mr. GORDON. We are pushing hard. One of the main loans projected to Central America, for example, is a follow-on loan to the development bank for Central America, which is part of their integration movement.

In South America, the Inter-American Development Bank is proposing at its governors' meeting, which comes later this month, to establish, and the United States will support this, a fund out of its own resources, a small fund at the beginning for multinational feasibility studies.

We have said-I said in my speech in Buenos Aires, and Secretary Fowler at the Mexico City meeting this month will repeat this, that where there are large feasibility studies and the resources of the IDB are not sufficient, we would like to join with them to help finance those studies and recruit technical help to do them well.

I think this is an enormously important thing, not only to support the integration movement, but also to speed up the development of that large interior area of South America which is very good for human settlement and has lots of resources which are almost completely undeveloped in any way.

As I said last week in Buenos Aires, this is the largest area on the face of the globe which is easily habitable by man and which is still largely empty.

Mr. FRASER. In your statement made down at Buenos Aires, you say that lagging are agricultural modernization, export diversification, and education beyond the primary level.

I am interested in agricultural modernization problems. I don't see anything in our programs which is designed to do very much very rapidly to develop the rural sector of these countries where most of the people live.

I am aware of a number of the programs, to build credit institutions, to develop agricultural training institutions and extension services and so on. I find the order of magnitude of these efforts to be about 1 out of a needed scale of 100. This is my frank opinion.

It seems to me what happens in Latin America is going to be determined more by this than any other area of concern, speaking in terms of the rural-versus-city situation.

Mr. GORDON. This is enormously important. I think we fully agree on that.

Just to give some idea of the order of magnitude of our involvement in this field, loans for agricultural projects in Latin America by AID in the last fiscal year, 1965, were $63.9 million.