France - Loan administration report on the $250,000,000 loan to the Credit National

W E MS -'' )g LLI I r . l1JCj ti T,Ri Fa'S L This report is rstricted to use withii the B.ank INTERNATIONAL BANK FOR RECONSTRUCTION AND IEVEIDPiiENT IDAN ADMINISTRATION IEFORT ON TE 42501O,000900 IOAN To THE CREDIT NATIONAL Granted 14r 99, 1947 Loan Department  FRANCE Loan of $250 Million to Credit lNational-May 9D 1947 Loan Administration Report Page I. Introduction 1 II. Disbursement of the Loan 1 Rat of 'WiMhrawrais Disbursement by Categories 1 Disbursement by Currencies 1 Methods of Disbursement III. End-U'se and Effect of the Loan on the French Economy 2 Coal 2 Petroleum Products 2 Von-Ferrous Metals 3 Cotton 3 Steel Products 3 Transportation 3 Steel Miills Misc. Equipment 4 IV. Use of Counterpart Funds 5 V. Service of the Loan 5 VI. Relations Between the Banwc and the Borrower and the Guarantor ViL. General Situation of the Borrower 6 vIII, Political Developments 7 Iv..&. .nconomic Situation anu rruspecus 8 Introduction 8 Production', Consumption and Investment 9 Internal Finance 11 External Economic Relations 12 Francels Capacity to Service Foreign Loans 14 Summary of Economic Situation and Prospects 16 AMTEX It Summary Statement of the Loan Granted to France 1 to 5 AIXE II: Disbursements by Quarterly Periods 6 ANNEX III: Disbursement by Categories 7 Asi~XE IV: Annual Payments for the Life of the Loan 8 - 9 AIBhEX V: External Debt of France 10 - 11 A31EX VI: Total Service Charges on the French External Debt 12  Republic of France Area: 212,659 square miles (550,786 sq. km.) Population: 41,180,000 (mid-1949 estimate) Currency Unit: Franc (Sign F. Fr.) Exchange Rate (Lay 16, 1950): F. Frs. 349.90 - U.S. 4. irad-Ue 01,atist-ics k(1949), (excTuding Tra7e with Overseas' Territories) Imports 42,426.4 million EI-xports wl,574.4 million Balance of Payments 'ra nc . rea) 1948 deficit 'p1,737.6 million 19h9 deficit (est.) :; 800 million National Income (in current Francs at factor cost) F.Fr. 6,901 billion Budget in 1.950 Receipts F.Fr. 2,218 billion Expendciture F.Fr. 2,217 billion Public Debt Long-term External Debt (Jan. 1, 1950) (expressed in $U.S.) : 2,954.6 million Wholesale Prices (1937 = 100) 2,360 ) ) As of -arch 31, 1950 lletail Prices (Food) (1937 = 100) 2,200 ) Wages (Daily Earnings) (1937 = 100) 1,810 (1948) Gold and Foreign Exchange Reserves of the bank of France; 1938 1948 1949 Gold (fj million) 2,430 548 523 Foreign E,xchange ($ million) 22 - 177  LOAN ADNINISTRATION REPORT FRANCE - CREDIT NATIONAL LQAN I, INTRODUCTION 1. An Agreement for a Loan of t250 million to the Credit National was signed on May 9th, 1947, and became effective one month later. The Loan was guaranteed by the Republic of France. It was for a period of thirty years with amortization beginning in the sixth year. interest was at 3-l/4%, plus a statutory commission of 1% per annum. The closing date of the Loan was originally December 31, 1947, but was subsequently extended to March 31, 1948. 2, This was the first loan to be made by the Bank, and is the largest invest- ment made by the Bank in any member country up to the present time. 3. A statement issued to the press by the Bank on the signlng of the Loan Agreement on May 9, 1947, is attached as Annex I. This contains, among other points, the justification of the loan and the recovery prospects of France, as seen by the Bank at that date. It provides a background against which to view! prevail- ing conditions in France and the economic progress made during the past three years, as discussed in subsequent paragraphs of this report. II. DISBURSEMENT CF THE LOAN Rate of Withdrawals 4. Contrary to the Bank's experience with several subsequent loans, disburse- ment of this Loan was made at approximately the rate contemplated during the loan negotiations. W!ithin two months of the effective date more than half of the loan had been expended and by the end of September 1947 only one-fifth of the commitment remained unused. This rapid utilization of the loan was due to the nature of the goods purchased, which generally were readily available; reimbursement of pay- ments made prior to the effective date; and the method of purchase used by the Borrower. Disbursements by quarterly periods are summarized in Annex II. Disbursement bv Catepories 5. Actual disbursements in individual categories differed from the arnounts shoim in the original list, as a result of changes in the List of Goods effected July 30. 1947, December 2, 1947, and December 24, 194-7. in a_cordance with Article III of the Loan Agreement. These changes, together with the final disbursement figures by eategories; are summarized in Anne:x III. Disbursement by Currencies 6 All of the loan wras disbursed in .Sdollr a the lnargest prt of the loan, t;i217 million, was expended for purchases in the United States. The remainder covered geods p-chased elsewhere, prnial i GnCara a MAGCentralA. or South44 America for U.S. dollars. Locomotives and ships were purchased in Canada under U.S. dolr- cor.tracts; purchases in other cou,tries of the llestern Hemisphere were of raw materials, such as petroleum and non-ferrous metals, normally sold only for U.S. dollars. Method of Disbursement 7. Except for an initial advance of Q25 million on the effective date, for which documents were later submitted in justification, all disbursement took the form of reimbursement for expenditures made, prior to the submission of withdrawal applica- tions, either for goods received from suppliers (4'174.3 million) or as advance rav- ments under contracts (t050.7 million). Of these reimbursements, y88.9 million was for purchases made subsequent to Januarv 1, 1947, but prior to the effeetive date.  -2- 8. Purchases were made for the m;ost part, either through official purchasing organizations of the French Government in the United States, or through various semi-official organizations in France known as "Groupementsll" and concerned with the importationi and distribution of essential goods. The "Groupeinents" consoli- dated numerous requisitions from all sections of Metropolitan France and North Africa into a relativeLy few large purchase transactions; applications for vith- drawals from the Loan Account were, therefore, for substantial amounts, and con- sisted of a few large items. III. END USE AND EFFECT OF THE LOAN ON THE FRENCH ECONOMY 9. Investigation of the use to which loan financed goods w!ere put was carried out mostly in Paris in the offices of the various Groupements. Visits wrere also made to the offices of these same Groupements at the ports of entry into France and North Africa. As fl resul-t of these investigations it was ascertained that loan financed goods were used in the following manner: 10. Coal: The loan served to finance the purchase of 6,919,000 tons of coal at a cost of f63 million plus mifl m llion foor freight, or a total of $103 mil- lion. This coal represented 68% of coal imports from the U.S. during the first eleven. months of 1947 an.d nearly 12< of the quantities of coal availhibe in France during that period. It was delivered to users in Metropolitan France and Fren.ch No;Irth Africa a follovns: Metropolitan Total Francs in #L of toal' Arica ir. /' of tot i Recinients _000 tons consumed 000 tons consumed 001) tons Railways 1,827 28 214 79 2,041 Gas 1,300 22 ) -)46 Electricity 91 2 ) Steel Industry ) ) Coal to Belgium ) 653 11 - ) 653 for coking ) Other Industries 2.4"88 19 112 9 2.600 Total 6,447 12% 472 - 6,919 11. Petroleu_Products: NP26.5 million was allocated to this category and served to finance the purchase of 1,218,000 metric tons of petroleum products, includtng 700,000 metric tons of crude oil. Of this total,