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When a loan is finally signed, the bank never finances the total cost of the project, requires the borrower to find enough local capital to meet local expenditures for labor and materials. Thus Black estimates that the bank's $2.6 billion in loans has prompted well over $3 billion of additional investment, plus an incalculable amount of other benefits, as each new project breeds new industries, which in turn give rise to still more. Furthermore, the bank rarely hands over a lump sum for a project, instead gives the borrower credit on its books to pay for specified equipment, all of which must be bought by international competitive bidding.
When a country gets off the beam, the World Bank is as tough as any other banker. Currently, the bank is on strained terms with both Brazil and Turkey. Beginning in 1947, the bank made ten loans worth $194 million to Brazil—$90 million for a big hydroelectric project on the Paraiba and Parai rivers to increase electric-power capacity for Rio de Janeiro and São Paulo by 637,000 kw.; $12.5 million to rehabilitate the Central do Brasil railroad; $3,000,000 to improve highways around Rio; another $25 million to produce 96,000 more kw. of power capacity in the state of Rio Grande do Sul. All went well until 1953, when Brazil went on an import spending spree that it could ill afford. The bank advised Brazil to reduce its imports. Brazil ignored this Dutch-uncle advice, and the bank reluctantly decided to make no further loans until the economic climate cleared. Brazilians bitterly criticize President Black for his action, call his stand shortsighted in view of Brazil's enormous potential. Snorts one Brazilian economist: "Black has a small-town banker mentality." Be that as it may, World Banker Black firmly believes that the safest, surest road to long-range prosperity lies in making certain that the day-to-day economy remains sound.
The same is true for Turkey, where the bank has loans totaling $63.4 million for a hydroelectric project, highway and harbor improvement. To help build the huge earthen Seyhan Dam, the World Bank funneled out $25 million for turbines, generators, power stations, which it hopes will eventually cut electric-power costs in the cotton-producing Adana area by 75%. Yet recently, Turkey's economic development has been hampered by inflation and a multitude of other economic ills, largely brought on by Turkey's own economic ineptness. As a result, a resident World Bank adviser strongly urged better coordination of overall economic policy. The proud Turks objected so angrily that the bank was forced to withdraw its man. But as the economic troubles get worse, the Turkish government will have to start taking the World Bank's strong medicine of curbing imports, tightening domestic credit, reducing subsidies to favored industries.