TABLE B.-Tabulation of Cooley loan applications, where loan not made, Jan. 1, 1962, to present-Continued

2 No Cooley funds since 1961, until AID's Jan. 28, 1966, announcement of new Cooley program. Handled by AID's Bureau for Africa (formerly Bureau for Africa-Europe).

Chairman MORGAN. Mr. Gross.

Mr. GROSS. Thank you, Mr. Chairman.

Mr. Hoagland, in connection with Mr. Zablocki's questions concerning the employment of so-called nonprofit organizations, do you employ consultants?

Mr. HOAGLAND. The Agency does employ consultants; yes, sir.

Mr. GROSS. Would you be good enough to provide for the record a list of these consultants for the past 3 years and the amounts paid to them?

Mr. HOAGLAND. I think that would be a substantial list, Mr. Congressman. Do you mean to include contract services as well as consultants as such? Consultants generally are individuals, is that what you had in mind?

Mr. GROSS. You have already been asked for the information concerning the employment of so-called nonprofit organizations.

Yes, I would like to know who you are employing as consultants in addition to the staffs that are permanently employed, yours and others, in connection with your operation. Is this too much to ask?

Mr. HOAGLAND. No, sir; I don't believe it is.

Mr. GROSS. Let's find out how far beyond the permanent staff you go. (The information requested is as follows:)

Consultants to AID's Office of Development Finance and Private Enterprise

Mr. GROSS. You are encouraging U.S. private investment abroad. What effect does this have on the balance-of-payments situation?

Mr. HOAGLAND. The present policy we are pursuing is that the encouragement of private U.S. investment in developing countries is something we would continue to do even if we attempt to restrict private investment in the industrialized countries for the sake of our balance of payments. The direct capital flows to the developing countries as a result of private investment were $803 million in 1965 and $578 million in 1964, not counting reinvested earnings which would add a couple of hundred million.

Mr. GROSS. Mr. Hoagland, since I have other questions to ask, and I would like to ask them, can you say whether this has an adverse effect upon the balance-of-payments situation?

Mr. HOAGLAND. It has a short-run bookkeeping adverse effect, and a longrun plus effect.

Mr. GROSS. I would like to go into that further, because I don't agree with you on that. The Watson Committee urged the United States to give full support to the principle of an investment code under international sponsorship. AID commented that no significant support for the OECD draft convention-that is, for the protection of foreign property-has yet appeared among the developing countries. Why has there been no support among the developing countries for this code?

Mr. HOAGLAND. I think it is because they are very concerned about their power to advance their affairs and handle investment without the participation of outside judges of their internal law. In most of these situations what they are concerned about is that they anticipate the way they adopt laws and reach judgments in their courts are going to be questioned internationally, and they think that as long as they are offering nondiscriminatory treatment for foreign investment with their local investment that that is all that ought to be asked of them.

Mr. GROSS. They are perfectly willing to take American dollars, are they not, without joining in establishing a code or assuring-giving us any reasonable assurance of safety of investment?

Mr. HOAGLAND. They have entered into other kinds of agreements with us such as the bilateral guarantee agreement, which is cooperative. Mr. GROSS. This leads to the question. We have dished out $130 billion or more in foreign aid around the world, and this we were told through the years was for the purpose of creating a favorable climate for American investment; to make American investments safe abroad. How much longer are you going to continue this program, or is it to go on indefinitely and forever?

Mr. HOAGLAND. I think this program is for more than to make American investment safe abroad, as you appreciate, Mr. Congressman. It is to make a contribution to the peace and security of the world, and to build nations that will be partners and neighbors that we can get along with and be both secure and prosperous with in the long run. The program is designed and planned to work itself out of business. I cannot tell you how long that is going to take, but that is the purpose of it.

Mr. GROSS. Do you have any more situations like that in London where there was a guarantee to protect the Knott Hotels Corp.?

Mr. HOAGLAND. I don't know that situation, Mr. Congressman. Mr. GROSS. This was some years ago. I have never been able to understand why there was any necessity for any guarantee program in England.

Mr. HOAGLAND. This refers, I assume, to the period immediately after World War II when we had convertibility insurance and we were at that time responsive to the dollar gap in Europe and trying to reconstruct that area and encourage American industry and investment to go there, in much the same spirit as is involved in these programs.

Mr. GROSS. Are the multilateral organizations, such as the U.N. and OAS to assist the development and improvement of local financial institutions and support of private enterprise in the less developed countries?

Mr. HOAGLAND. Specialized agencies of the U.N. carry on technical assistance programs that would contribute particularly to industrial techniques, and the improvement of development banks and institutions of this kind that would service the private sector.

The World Bank is particularly strong in this respect in financing and improving intermediate credit institutions that would service private borrowers.

Mr. GROSS. Are you saying that is true as to both the U.N. and the OAS?

Mr. HOAGLAND. I think it would be less true of them than the World Bank.

Mr. GROSS. I would think so. Do our food-for-peace agreements with all countries include-I believe that has been brought up under the Cooley programs by Mr. Farbstein-do they include all the Cooley loan provisions and, if not, why not?

Mr. HOAGLAND. It is part of the negotiation in every situation. During the past year out of, I would say, 10 food-for-peace agreements, about 5 were with small African countries in which very little allocation for Cooley was possible simply because there was no demand, but an allocation was made. The only ones in which there were none made was in the Congo, in Vietnam, and in Afghanistan where there was no demand for the funds. Unless there is no demand, there is some percentage set aside.

Mr. GROSS. Are the British still charging the going rate of interest in England on their loans to foreign countries?

Mr. HOAGLAND. They have this past year made a change in policy which has resulted in loans which in some cases are longer in term and lower in interest rates than ours. They have some no-interest loans now to developing countries from England.

Mr. GROSS. I cannot help but ask a question, perhaps you can't answer it, but where do the British get the money to make no-interest loans, since we are propping up the pound sterling.

Mr. Chairman, that is all.

Chairman MORGAN. Mr. Roybal.

Mr. ROYBAL. Mr. Hoagland, I am fast coming to the conclusion. that your program in Latin America looks a lot better on paper than it does on the scene. In a recent visit to Latin America I noticed that AID people lived in the best districts in whatever country they happen to be assigned to. It appears to me that they don't seem to care

too much about the slum dweller and that their programs do not really include the people who live in the slum community. This I saw in Peru, for example, and even some in Chile.

What specifically is being done to provide housing for the people in the lowest income brackets-not only in Peru and Chile, but throughout Latin America?

Mr. HOAGLAND. The housing program in the form enacted by the Congress last year shifts as you know from a pilot demonstration type of program to a program authorized to go into four particular kinds of projects. One of them is the type of project which will finance housing for low-income families for a maximum sales price of $2,500. The hope is that we can get those units down to as low as $1,500. At the same time, in terms of what the general interests of the slum dweller is, and of the most severely impoverished portion of the population, one of the most difficult choices you have to make is, given the fact that we cannot and would not want to simply support a country's economy, we want to use our resources in the way that makes a maximum contribution and moves them to make the maximum contribution, and there is a hard choice to where to put it. If we spread the money around in dollar bills to the poorest people, we wouldn't accomplish anything. We have to tackle the problems comprehensively, and that is the way it is being done where our interest is strong enough.

Mr. ROYBAL. What I was referring to specifically was a program that I saw in its inception in which the people in the slum areas were forming cooperatives. They started making their own homes, using indigenous materials, and their own labor. The house would definitely not cost $2,500 because these people couldn't afford to pay $2,500 in their lifetime. This to me is the type of program that we should be advancing in certain Latin American countries.

What is being done insofar as AID is concerned in regard to a program of this kind where they, themselves, participate in building their own houses, in providing their own sewage and good sanitary conditions?

As I say, I have seen a pilot project of a private group that is doing this, and I would want to know what AID is doing in this regard. Mr. HOAGLAND. I agree self-help housing is an excellent mechanism. This is the kind of thing that has to be generated from within, from the energy and the initiative of the people concerned. But the InterAmerican Development Bank in particular is actively assisting in loans and other activities to encourage this kind of housing. The forms of housing guarantees that we have been discussing are by definition to guarantee the cost of construction. Other programs to encourage credit unions and savings and loans and to encourage housing that might be put together by cooperatives are handled largely through technical assistance where we sent advisers to help groups of this kind who have this kind of energy.

Mr. ROYBAL. This again makes this thing very complicated to that individual. He is not interested in the finances of a credit union. Nor does he understand the finances of a savings and loan. He is interested in his immediate problem. What is AID doing to motivate these people to form their own cooperatives so at a very minimum they can get away from their atmosphere of poverty and squalor?