Opening Address by the Chairman of the Board of Governors of the Fund, the Governor of the Fund for Argentina1, José María Dagnino Pastore

International Monetary Fund. Secretary's Department
Published Date:
October 1969
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On behalf of my colleague as Chairman, Governor Iannella, and myself, I cordially greet the distinguished Governors of our organizations, their alternates and advisers, and official observers and special guests.

It is a particular pleasure for me to welcome the delegates of Swaziland, who are taking part in these Annual Meetings for the first time, and the observers from Cambodia, Equatorial Guinea, Southern Yemen, and the Yemen Arab Republic, countries which have applied for membership in both the Bank and the Fund.

I know that I speak for all when I express our deep appreciation for the generous hospitality which the Government and people of the United States are once more extending to us.

Before calling on the President of the World Bank and the Managing Director of the Fund, I should like to make some introductory remarks. I shall not describe the operations and achievements of our organizations in the recent past, as the various Annual Reports before us already offer a detailed description. Rather, I prefer to concentrate on a few of the more important issues and problems confronting the Bank Group and the Fund today, with particular reference to those which will most probably occupy our attention and efforts in the months to come.

In this twenty-fifth anniversary year of the Bretton Woods Conference, it is difficult for me to analyze the financial issues of the day without pausing to meditate on the outstanding contributions of these organizations, and their efforts to achieve the basic goals of international financial cooperation, stability and growth, and a high level of employment, established a quarter of a century ago.

I shall begin by analyzing what I deem to be the most significant issues in the sphere of the World Bank Group.

The first such issue is the matter of the scale of operations. I particularly mention this because of the substantial change that has occurred recently and because it has additional important implications for the future. During the fiscal year 1969 the Bank increased its lending by 87 per cent. This striking achievement deserves to be emphasized for what it signifies in itself, as well as for what it implies for the ambitious goal, announced by the President of the Bank a year ago, of doubling lending in the subsequent five-year period. The Bank has made a flexible adaptation to the tensions and requirements of this expansion. The continuation and consolidation of this expansion will create new problems, calling for unremitting efforts, great imagination, and resourcefulness.

Simultaneously with this increase in the scope of its lending operations, the Bank has shown an equally substantial increase in its level of borrowing. But it is in this area where its future development becomes more uncertain, particularly because of the existence of various elements that are difficult to predict, since they are not completely within the control of the Bank. Fiscal and balance of payments preoccupations in capital-exporting countries, concomitant regulation of capital outflows, and high and rising interest rates are factors that affect the financial development of the Bank.

The fundamental question is whether we collectively wish to facilitate a more expansive development, given that the majority of those factors are not beyond our aggregate control. Various important countries have already adopted positive and timely action to afford the Bank a greater and more frequent access to their capital markets. Others have provided such access for the first time. But much remains to be done in this sphere, and I suggest that more of the countries here represented offer their valuable contributions by permitting the Bank more liberal and frequent access to their capital markets.

At the same time, I should like to call your attention to a matter connected with the participation of the domestic industry of borrower countries in the supply of materials and equipment for projects financed by the Bank. An increase in this participation will represent a significant contribution to the promotion of industrial development in these countries by allowing local suppliers greater possibilities for achieving adequate levels of efficiency.

The second issue I should like to mention is the question of the replenishment of IDA’s resources. Its scope of operations has been adversely affected by the limitation and uncertainty about the availability of resources. In this respect, I should also like to express my preference for, and to make a suggestion with regard to, the possibility of beginning early discussions of a third replenishment and, what is even more important, to consider ways and means to make all future action for financing of IDA a more predictable and adequate element within the over-all strategy of development financing.

The third factor I should like to mention relates to the general field of development aid, and covers problems related to its volume, quality, and efficiency.

Much effort has been made in the area of development assistance since Bretton Woods, and our organizations have contributed their share.

Nevertheless, much remains to be done, and to be done more efficiently. Today, once again, we are confronted by a great challenge to our purposes, intentions, and capabilities.

Our organizations can continue to make their valuable contributions, and even increase them. But, more important still, I believe they can take advantage of their unique position as truly multilateral operational organizations, and offer an appropriate forum where many of the current difficulties can be discussed and mitigated.

The absolute and relative size of over-all financial assistance is an important element. The Governors at these meetings can make significant contributions to increasing the volume of these flows. At the same time, I deem it appropriate to pay more attention to the problem of the organization, quality, and real value to recipients of the funds transferred. Nothing is gained—except perhaps spurious complacency—if we continue to substitute larger nominal amounts with smaller real values to recipients, through the burdening of transfers with ties and conditions of one kind or another. I can understand that serious preoccupations with balance of payments and other problems in the more advanced countries have suggested procedures that tend to diminish the real value of their contributions to countries receiving aid, but at the same time I feel that those more basic preoccupations are not beyond the collective control of the countries represented here today, to the extent that they confront these difficulties in a coordinated manner.

The question of trade and access to markets is another element of great importance in this development venture. In terms of autonomy of decision and of enhanced self-respect, there is much to be said for more and freer trade, beyond all the other considerations of efficiency and dynamic transfer of technological knowledge which all of us have repeatedly acknowledged. Nevertheless, the road to self-sustained growth is paved with restrictions, limitations, and lack of opportunities for many countries. I appeal to the Governors attending these meetings, and to our organizations, to continue to do their utmost, and to undertake effective action toward the removal of the obstacles that hinder freer trade.

I shall now refer to a few of the more important problems within the Fund’s sphere of action.

At these meetings, Governors will be invited to make a historic decision in the area of international liquidity. The deliberate creation of international liquidity is a new venture and one important step in the long—and not always smooth—process of financial evolution. This is an action that will open up new technical prospects and possibilities in the field of liquidity. But its significance goes beyond the specific problems it attempts to solve: the SDR scheme clearly stands as an example of what can be achieved by the system and by individual members—through genuine multilateral cooperation, on the basis of full participation, and fair treatment for all.

Like all new enterprises, the activation of the facility opens an untried path before us, and probably some difficulties and problems will arise as we traverse it in the future. Some thoughts and suggestions on this point will probably be made during the next few days. I believe we should welcome them and feel optimistic that whatever problems may arise they will always be adequately resolved, provided the same spirit of global cooperation and understanding that led to the creation of the facility prevails.

There is another Resolution that Governors will be called upon to consider at these meetings. It deals with the acceleration of the Fifth Quinquennial Review of Quotas and relates to the question of an enlarged Fund through general and special increases in quotas. The Executive Directors of the Fund have already discussed this matter at length, and have made substantial progress toward achieving the consensus that we hope will be reached shortly.

I believe that effective action in this field is essential to keeping the resources of the Fund in line with the prospective growth of world trade and payments. At the same time, and what is perhaps even more important, I believe that additional strength at the center of the system is necessary, if we wish to avoid—or, should I say, reverse—a centrifugal dispersion in decision making and multilateral surveillance. We should work toward this strengthening, particularly since we can envisage that it will make an important contribution in terms of an improvement of the adjustment process, through a more generalized use of Fund resources.

It also seems appropriate that we should approach this matter with an open and global view and, consequently, with a reasonable amount of flexibility in individual aspirations.

My third point deals with the adjustment process. It is apparent that the events of the recent past cannot give comfort to any observer of the international financial scene. Recurrent exchange crises, widespread uncertainty, massive and unstabilizing speculation, high and rising interest rates, the maintenance and even the extension of controls and restrictions, and so on, are not the elements of an efficient monetary structure within which countries may devote their energies and preoccupations to the accepted goals of orderly growth, of freer trade and payments, and of more efficient capital flows. I believe this is a field in which the contrast between goals and realities suggests the need for further and searching exploration, both at the multilateral and individual country levels.

The role that the adjustment discipline is supposed to play should be an important and decisive part of the rules of the game practiced by both deficit and surplus countries. I merely wish to stress my belief that domestic stability and wide international cooperation are efficient instruments for achieving genuine and orderly economic progress.

As we all know, domestic stability is a difficult objective to achieve and maintain. It is a goal that taxes very heavily the technical and political energies of nations, requires strong internal discipline, and involves time, perseverance, and permanent vigilance. But we cannot dispense with it—in the internal or in the international sphere—if we wish to achieve our objectives. Consequently, we must be convinced that all these difficulties should not, in any way, affect our determination to act—and to act promptly—to achieve and to maintain stability.

The other side of the same coin is international monetary cooperation. We know how difficult it is to attain domestic stability, but we also know how much these difficulties are compounded when we receive, through our external sectors, negative influences affecting that stability and thus frustrating our internal efforts.

This is a complex subject—surely more complex than my brief comments would imply—but it is one of the most important issues of the financial picture today. I believe that we should unceasingly increase our individual and multilateral efforts in the search for viable, efficient, and timely solutions to our problems of adjustment to international disequilibria.

Finally, allow me to state that, over and above the technical complexities of the problem that have been outlined, we should not lose sight of the framework within which economic activity functions when adopting relevant decisions at an international level. In the 25 years that have gone by since the creation of these organizations, man has witnessed the advent of the nuclear age, of the cybernetic age, and of the space age. However, an important fraction of humanity has not yet emerged from poverty, sickness, and ignorance. The continuous assimilation of scientific, cultural, and political changes threatens to break out in tensions and frustrations both in man and in communities.

Even more perceptible are the demands for human progress at all levels, toward a solidaristic and integrated society, rich in moral and spiritual values, and it is becoming increasingly clear that participation in the decision-making process, the attainment of economic growth, a more just distribution of income, and the reduction of regional differences in standards of living are essential instruments in the forward march of human achievement. Let us bear in mind, when beginning these meetings, the challenge implied in these deficiencies that afflict the world, and let us respond to it with the same imagination and resolution that was shown by the participants at Bretton Woods when they confronted the economic reconstruction of the postwar world.

Delivered at the Opening Joint Session, September 29, 1969. Mr. José María Dagnino Pastore, Governor of the Fund for Argentina, and Mr. Egidio Iannella, Governor of the Bank, IFC, and IDA for Argentina, acted as Chairmen of the Annual Meetings. Governor Pastore presided at the Opening Joint Session on September 29, at the Second Joint Session on September 30, at the Fund Session on October 2, at the Third Joint Session on October 2, and at the Closing Joint Session on October 3. Governor Iannella presided at the Bank, IFC, and IDA Session on October 1 and delivered the Closing Remarks from the Chair on October 3.

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