New financing mechanism for Latin America

The he introduction of Latin American bank acceptances (LABS) on the New York market should stimulate commerce among the member countries of the Latin American Free Trade Association (LAFTA). This new financial mechanism will, in effect, supply LAFTA countries with short-term funds from international private banking institutions.

In permitting the deferment of payments thanks to term credit at competitive cost, this mechanism should facilitate the promotion of nontraditional exports, for which normally this type of credit is not available, yet which in the past few years have grown rapidly.

Between 1960 and 1975, the industrial production of the region tripled, rising from $22000 to 559 000 million, while manufactured products increased from 12 percent in 1960 to 24 percent in 1975 - very promising figures indeed!

But as far back as 1966, the commercial banks of various Latin American countries felt that the growth of intraregional commerce required additional financing from private foreign sources. The "bank acceptances" were considered the best vehicle for drawing this supplementary financing.

Accordingly, in September 1973 the central banks of LAFTA member countries signed an agreement creating the LABS. By this accord they guarantee that "accepting" banks will be able to obtain the necessary dollars for the term payment (180 days) of LABS and transfer these dollars to the place of payment (New York) despite whatever controls over currency exchange rates certain countries may impose.

Moreover, provision is made for the accepting banks to be reimbursed under multilateral payment agreements concluded among countries participating in this system.

Next it was necessary to convince the financiers. Before being able to sell the LABS on the United States market, thus linking the national financing systems of the LAFTA countries with the international private banking systems, it took the Latin American banks, backed by the Inter-American Development Bank (IDB), no less than three years of negotiation with the representatives of the Federal Reserve Bank of New York and various Wall Street financial organizations.

• The LAFTA member countries are Argentina, Bolivia, Brazil, Colombia, Chile. Ecuador, Mexico. Parasuay, Peru, Uruguay and Venezuela.

Don't flush it!

The flush toilet can use up more than 300 litres of water per day and per family. It is one of the most wasteful inventions, and a potentially polluting one, as septic tanks can pollute ground-and well water as well as rivers, lakes and the we.

One alternative is the compost toilet, in which human waste, toilet paper and some household garbage can gradually be decomposed into an odour-free, highly fertilizing humus. (The weight l of humus represents about 5 percent of the weight of the original waste, the rest being transformed into carbon dioxide and water vapour.)

Several systems have been developed. Among the most effective and most costly, the Clivus Multrum can be purchased for about $1000. There is a small composter that can be made from an old oil drum. The top is used as a lid to keep animals out, and the bottom is removed for drainage. Bacterial decomposition suppresses odours, and the end | product is a good fertilizer.

Rabbits for tomorrow?

The prolific rabbit could become a major source of food in the future. A good breeding doe can produce more than 50 kg of l meat in a year, and nearly 100 kg of milk, which is at least as nourishing as cow's milk. Researchers in France have even had some success in milking rabbits, but a good rabbit-milking machine has yet to be developed.

AsDB turns to agriculture, and provides the means

The Asian Development Bank (ASDB) has taken & great leap forward. In deciding to raise its capital stock from $3 707 to $8 711 million (a 135 percent increase), it has more than sextupled its 1971 capital. It will indeed be remembered that a first increase in capital occurred in November 1972.

Why all this money? Like its sister banks of Africa and Latin America, ASDB would soon run out of money catering to development needs if it did not regularly increase its own means. It suffices to recall that, since its creation in 1968, the GNP of the continent of Asia, Japan excluded, has doubled. But in the same time, if the 1961-65 average is taken as reference period, the index of agricultural production only rose from 115 to 139-yet at the cost of what efforts!

These few figures explain why ASDB is now converting to agriculture. In 1973, the loans it made to agriculture constituted only 11.2 percent of its total loans. Two years later, the proportion was 37.23 percent. In absolute value, the growth was still more spectacular: $47.32 million in 1973 versus $245.86 million in 1975.

Among its latest loans to agriculture, the following three represent 1.5 times the total loans to agriculture granted by ASDB in 1973.

• The development of the Namgang zone, in the Republic of Korea. In this 578.9 million project, which comes under Korea's fourth five-year plan, the Bank is participating to the tune of $32 million. With this loan-it is worth noting in passing-ASDB tops the $3 000 million peak of loans since its inception in ]968. The goals of the project are soil improvement for agricultural purposes - notably by irrigation works-soil conservation, reforestation, market organization, modernization of farming equipment, importation of high-grade dairy cattle, also improvement of the quality of rural life, essentially by conduction of water to villages, the establishment of consultation services and the modernization of a hospital.

• In Malaysia, it is in the domain of fisheries that the Bank has intervened, with a 527 million loan in several currencies to back a $59.7 million project for the acquisition of a fleet of 200 40-ton and 20 80-ton trawlers; in addition, the onshore installation of five complexes comprising refrigeration plants and truck transport to deliver fisheries products to the consumer. Improve the situation of the fisherman, meet domestic consumer demands and earn foreign exchange on foreign markets ($5.1 million per year): these are the three objectives set by this project.

• Production of seed for Afghanistan, to which the Bank is lending the equivalent of $14 million out of its Special Fund, i.e., at the rate of I percent per year for 40 years. The idea is to cover the foreign exchange costs, and slightly more, of a $17.6 million project to organize the production of cotton and wheat seeds in the country. The setting up of four modern seed production units should permit distribution of 32 500 tons of seed cotton and 323 000 tons of seed wheat for planting per year starting in 1985. This is indeed a judicious choice as wheat is the staple of the diet in Afghanistan and cotton is among the country's leading industrial crops.