FRANCE'S FOREIGN AID PROGRAM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A004400070002-7
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 10
• Document Creation Date: December 20, 2016
• Document Release Date: April 7, 2006
• Sequence Number: 2
• Publication Date: April 10, 1964
• Content Type: REPORT

e 2006/05/24: CIA-RDP79-00927A000000700041ff April 1964
OCI No. `0326/64A
Copy No4
SPECIAL REPORT
FRANCE'S FOREIGN AID PROGRAM
CENTRAL INTELLIGENCE AGENCY
OFFICE OF CURRENT INTELLIGENCE
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10 April 1964
De Gaulle's recent visit to Mexico and the pro-
posals France presented on 24 March at the United Na-
tions Conference on Trade and Development (UNCTAD) in
Geneva have dramatized to a world-wide audience the
scope and implications of the French foreign aid pro-
gram. France's record is, indeed, a good one. Testi-
fying to this is the fact that it devotes a larger
proportion of national income--about $29 per capita
--to foreign aid than any other country. Although
most French aid will continue to be dispensed among
countries it formerly controlled, Paris now has an-
nounced its intention to channel a larger share than
in the past to countries outside the franc zone.
Tight controls assure immediate trade benefits for
France, but probably more important in De Gaulle's
eyes is the greater international prestige and po-
litical leverage that France stands to derive from
its aid program.
France's UNCTAD Proposal
The proposals Finance Min-
ister Valery Giscard d'Estaing
formally presented at UNCTAD
had originally been distributed
in an aide-memoire for consider-
ation by the participating coun-
tries. The decision to adopt it
as the official French position
in Geneva was probably dictated
by a desire to appeal to under-
developed countries in a way which
was clearly distinct from the
pattern followed by the US. This
was, in fact, foreshadowed by De
Gaulle's promise to Mexico's
President Lopez Mateos that France
would present some "new formulas"
in support of Latin America at
UNCTAD.
The essential feature of
the French plan is an attempt
to help underdeveloped countries
achieve progress by expanding
their trade rather than by granting
them financial aid. Its basic
recommendations include: (1)
establishing an international
pricing system for selected agri-
cultural commodities; (2) en-
couraging industrialization in
developing countries by giving
their manufactured products freer
access to the industrialized na-
tions without reciprocity; and
(3) achieving regional economic
integration as a means of develop-
ment.
These proposals appear to
be an attempt to apply on a much
broader scale the approach Paris
has used in assisting its former
African dependencies. Since France
scarcely expects--and may not
even desire--the other industrial
countries to accept its recommen-
dations, the plan probably is de-
signed primarily to achieve cer-
tain tactical ends.
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Both the contents of the
French aide-memoire and the man-
ner in which it was presented
have strong propaganda overtones.
The objective is to make a con-
vincing case for the general ap-
plicability of the French ap-
proach in working out solutions
to the problems of relations be-
tween underdeveloped and indus-
trial countries. It also serves
to identify France's interests
with the needs of the underde-
veloped states, including those
outside the traditional French
sphere of influence.
By encouraging the aspira-
tions of the developing countries,
Paris hopes it will be able to
expand the French presence through-
out the "third world." It is
also interested in winning a num-
ber of other, more indirect bene-
fits, including increased accept-
ance of French technology.
Some support for the French
proposal has come from the un-
derdeveloped nations, particu-
larly the French African states.
They may, however, come to have
second thoughts when the other
industrial nations begin to dis-
sect the French position and ex-
pose its weaknesses. France's
independent initiative at Geneva
may, nevertheless, at least serve
to promote De Gaulle as a poten-
tial mediator between the de-
veloping countries and the Euro-
pean Common Market as well as
other international economic
councils.
Scope of French Aid
Paris presently spends about
$1.4 billion--two percent of
France's GNP--annually on for-
eign assistance. By comparison,
the total American public aid
and private investment program
amounts to 0.8 percent of the
United States' GNP. Almost 90
percent of French aid, however,
is concentrated in countries
belonging to the franc zone
where it is most likely to pro-
mote overseas French business.
French aid outside the franc
zone is almost wholly committed
to a program of loans, extended
on commercial terms, to be used
for the purchase of French in-
dustrial equipment.
France's aid program dif-
fers in other respects from that
of the US. Outside the franc
zone, for instance, Paris is
willing to extend credit for gov-
ernment investments in projects
which Americans tend to regard
as best left to private initia-
tive. Also,in territories for-
merly ruled by France,.the French
are motivated in part by a con-
tinuing sense of responsibility
for their economic and social'de-
velopment. In practice, this
has led Paris to contribute budget
support to these governments to
finance the local costs of major
assistance activity.
In 1962, direct governmental
expenditure, largely grants, con-
stituted 62 percent of total
French aid disbursements. Grant
aid covers infrastructure expendi-
tures, principally for transporta-
tion and communication, in addi-
tion to technical assistance and
outright budgetary support. Pri-
vate outlays, which are roughly
half as large as official dis-
bursements, include both
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investments and government-guar-
anteed, long-term (five to ten
years) export credits,
France makes relatively
small contributions to UN and
other multilateral agencies con-
cerned with aid. Most of what
it does contribute to such or-
ganizations goes to the EEC's
European Development Fund. All
of the fund's resources distrib-
uted in 1962 ($55 million) went
to what the EEC calls Associated
Overseas Countries. Virtually
all of these are former French
dependencies.
The most notable effect of
the French aid program on world
trade patterns has been to main-
tain the position of France as
the dominant exporter of indus-
trial goods within the franc
zone. Contracts for aid-financed
projects in this area are let
only to nationals of the country
concerned, and stipluate that
whatever supplies are required
from abroad can be imported only
from France. Moreover, through
preferential agreements between
France and the franc zone coun-
tries, imports of French or EEC
capital equipment enter at at-
tractive duty-free prices. In
order to maintain the political
and economic advantages of its
status as a preferred trader,
France has often been willing to
buy primary products from the
other franc zone members at
prices above the world market.
Geographic Distribution
In 1963, the tropical French
African States and the Malagasy
Republic as a group received the
bulk of French assistance. In
the past much of this aid has
been used for budgetary support
and infrastructure programs.
More recently, however, Paris
has considered reducing budget
subsidies in favor of more ex-
tensive technical assistance,
and is giving increasing atten-
tion to projects for agricultural
and small-scale industrial de-
velopment.
While Algeria still receives
the largest single allotment of
French aid, the total figure for
1963 was far less than French
expenditures for economic assist-
ance to Algeria before its in-
dependence. French assistance
is expected to amount to
$190
million in
1964,
slightly
less
than last
year's
outlay.
A more
substantial cutback is likely to
occur in 1965 when a French com-
mitment to maintain aid at the
preindependence level expires.
Morocco and Tunisia also
continue to get financial help
from France. In 1963, Paris
provided Rabat with a 20-year
loan of $42 million, along with
export credits amounting to
another $20 million. French as-
sistance scheduled for Tunisia
in 1964 adds up to $42 million
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- Embraces all of France's former African territories, except Guinea, Plus the present Overseas Departments and Territories
in loans and export credits, all
but $5 million of which is tied
to purchases from France.
French assistance outside
the franc zone is increasingly
being extended in the form of
long-term guaranteed export cred-
its. The best available figures
--those for 1962--show that
official disbursements outside
the franc zone stood at $32 mil-
lion, while private investments
and guaranteed long-term export
credits totaled $123.4 million.
Two thirds of the $32 million in
official aid to non-franc-zone
countries consisted of technical
assistance grants for South Viet-
nam, Laos, and Cambodia. The re-
maining $10 million went to Bra-
zil.
The 1963 statistics will
reflect a further growth in both
public and private expenditures
outside the franc zone. Mexico,
for example, received a loan
package consisting of a $30-
million government loan at 3.5
to 4 percent, and $120 million
4
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in private credits at 6,25 to
6.5 percent. The credits will
be good for an average of 12
years following the completion
of the projects for which they
are drawn. Late in 1963 France
also signed an agreement with
Iran providing that country with
$61 million in guaranteed pri-
vate export credits.
France has also offered
substantial aid to underdeveloped
countries closer to home. Spain
has been granted a financial as-
sistance program similar to the
Mexican deal. It consists of a
$30-million government-to-gov-
ernment credit, and a $120-mil-
lion open credit to Spanish im-
porters. Both credits are tied
to French exports, Greece has
been offered a $5-million of-
ficial loan along with $10 mil-
lion in export credit guarantees.
A similar package has been pro-
posed for Turkey.
FRENCH BILATERAL AID DISBURSEMENTS, 1961 - 1962*
(Amounts shown are in millions of US dollars)
Total Official Aid
Net Private Loans
(Loans and Grants)
And Investments
Total French Aid
Year
Amount
% of Total
Amount
% of Total
Amount
% of Total
WITHIN FRANC ZONE
Overseas territories & depts.
1961
97.5
11.2
6.0
2.0
103.5
8.5
1962
124.7
14.2
124.7
10.0
Algeria (and Sahara)
1961
435.9
50.1
207.3
67.4
643.2
53.1
1962
371.2
42.2
172.4
60.6
543.6
43,4
Morocco and Tunisia
1961
28.3
3,3
16.2
5.3
44.5
3.7
1962
42.8
4.9
6.1
2.1
48.9
3.9
Members of Afro-Malagasy
1961
275.7
31.7
56.7
18.4
332.4
27.4
grouping
1962
303.5
34.5
71.7
25.2
375.2
29.9
Others
1961
6.4
0.7
-
-
6.4
0.5
1962 ?
4.4
0.5
-
4.4
0.4
TOTAL FOR FRANC ZONE
1961
843.8
97.0
286.2
93.1
1,130.0
93.2
1962
846.6
96.3
250.2
87.9
11096.8
87.6
OUTSIDE FRANC ZONE
1961
26.2
3.0
21.3
6.9
82.0**
6.8
1962
32.0
3.7
34.4
12.1
155.4**
12.4
TOTAL
1961
870.0
100.0
307.5
100.0
1,212.0
100.0
1962
878.6
100.0
284.6
100.0
1,252.2
100.0
640403-3
* Complete figures for data covered in this tabulation are not available beyond 1962. The level of aid to the Afro-
Malagasy states has remained about the some in 1963 and 1964. However, aid to Algeria declined considerably
after independence; official French aid totaled about $210 million in 1963, and dropped to $190 million in 1964.
** Includes five- to ten-year guaranteed export credits amounting to $34.5 million for 1961 and $89 million for 1962.
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French Capabilities
For Increasing i
The government-authorized
"Jeanneney Report on Foreign As-
sistance" :forsees French offi-
cial aid reaching $1.69 billion
in 1975. Some 15 percent of
this money--$250 million--is ear-
marked for spending outside the
franc zone. The over-all in-
crease in aid is based on the as-
sumption that it will be main-
tained at the present ratio of
2 percent of France's GNP. The
current flurry in the French
press over the size of the pro-
gram, however, may lead to a re-
appraisal in the post - De Gaulle
era.
Nevertheless the level
of future foreign aid expendi-
tures will, of necessity, be de-
termined by the growth rate of
the French economy, and in its
projection of aid levels through
1975, the Jeanneney committee as-
sumed an annual 5-percent real
the countries demand for credit.
Moreover, few will find France's
credit terms exceptionally at-
tractive since the interest rates
are likely to conform to those
charged by other governments,
and particularly since private
French credits will be offered
at commercial rates. Willing-
ness to absorb French credit will
be circumscribed by the ability
of a borrowing country to pay
interest at commercial rates and
to liquidate development loans,
or credits at commercial maturi-
ties.
The government's decision
to hold the increase in over-all
budgetary expenditures to the
same rate as GNP growth will
also hurt the French foreign
aid program as the approaching
presidential election encourages
greater expenditures on more
popular domestic projects such
as schools and roads. Indeed,
such pressures were probably a
prime factor behind decisions
increase
in the French GNP. This,
to
cut
aid
slightly
in 1963
and
however,
may be too optimistic,
to
hold
the
line in
1964.
because
designed
a stabilization program
to head off inflationary
tendencies in France appears al-
ready to have had some slowing
effect on GNP growth.
In any event, the aid lev-
els Paris is forecasting for
1975 are miniscule in terms of
Paris will probably bend
considerable effort to expand
its foreign aid program and to
make it more of a global under-
taking. Priority, however, will
be given to those states which
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give reasonable promise of main-
taining sufficient stability to
assure some return for France.
Also having an inside track are
countries where there is an es-
tablished French cultural pres-
ence.
Nevertheless such prerequi-
sites for French aid are by no
means hard and fast. One ex-
ception to Paris' prudence ap-
pears to be the Leopoldville
Congo. France has recently es-
tablished an aid cooperation mis-
sion there, and a French Foreign
Ministry official has asserted
that France is amenable to rro-
viding technical assistance and
cultural aid, including scholar-
ships in France for Congolese
students. Paris' ambassador in
Leopoldville also has expressed
a willingness to consider a Congo-
lese request for military aid.
While any French aid pro-
gram to Leopoldville will be
modest, if for no other reason
than budgetary limitations, Paris'
display of interest in a hereto-
fore largely Belgian preserve is
nevertheless symptomatic of French
thinking for the future. That
is, it reflects a recognition
that this country holds the key
to the expansion of French in-
fluence in Central Africa.
France will continue its
effort to bolster its image in
underdeveloped countries by ex-
horting other industrial nations
--chiefly the US, the UK, and
West Germany--to bring the lev-
els of their aid relative to na-
tional GNP up to that of France.
The main object of this exercise
will be to increase the partici-
pation of the EEC countries in
financing the development of the
French-oriented Associated Over-
seas Countries in Africa.
Outside the franc zone, a
prime objective of future French
aid will be to enhance French
prestige through the compara-
tively inexpensive export of
French technology. Going on the
enthusiastic reception he re-
ceived in Mexico and the antici-
pation with which South Americans
are awaiting his fall trip to the
western hemisphere, De Gaulle
has probably been encouraged to
believe that France stands to
gain a great deal in extending
this kind of aid.
In time, De Gaulle expects
that developing nation-states
will pursue more classical pat-
terns in their foreign relations
rather than be dependent on either
the US or the USSR. In this en-
vironment, he believes, France
would have more freedom of diplo-
matic maneuver and could strengthen
its image as the leading spokes-
man for Europe. France's aid
program thus represents a care-
fully considered investment
aimed at yielding progressively
greater political dividends.
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