No. T 3

Copy No... o ......... i.-.. I

This report contains, injormation which h

been given to the Bank in ionfidence. It ir.

not to be quoted or reproduced.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

GERMAN FOREIGN INDEBTEDNESS AND

FOREIGN DIRECT INVESTMENT IN GERMANY

A tentative survey

October 27, 1949

Treasurer's Department

Prepared by: D. Crena de Iongh. H. Robert Slusser

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1,

SUMMARY

From the incomplete and overlapping information which could be ob-

tained for a study of pre-war German foreign indebtedness and foreign

direct investment in Germany, it was not possible to come to a total

figure which has any claim to accuracy. The study led U. to believe,.

however, that the order of magnitude of the total amount involved

might be between $1 and 2 billion.

In this amount are included direct investments, the ore-war value

of which might be estimated at around $1 billion. It is impossible to

estimate even roughly the changes that have occurred in these values as

the result of the war and its aftermath; it seems safe to assume, how-

ever, that the present value of these investLients is smaller than

it was before the war. On the other hand, foreign direct investments

have been increased somewhat by the restitution of the property of

emigrants from Germany.

German bonded Oebts may be estimated at an amount between $500

million and. $1 billion. The foreign bonded indebtedness of the Reich

would constitute something more than one third of the total. In view

of the devaluation of the German mark, as well as many other currencies

in which foreign-held German bonds were expressed, and especially in

view of the large-scale reoatriation of bonds from occu-pied countries

during the war, the figure is probably nearer to the lower than to the

upper limiti The amount of non-bonded indebtedness may be roughly

estimated at between $250 and 500 million4 In this case, too, the

actual figure probably is nearer to the lower than to the upper limit,

for reasons similar to those given in connection with the bonded debt.

iio

Of the claims against Germany, those which are owned in Switzerland are

to be compensated to some extent out of German-owned property in Switz-,

erland, in accordance with the Washington Agreement of May 1946 between

Switzerland and the United States, the United Kingdom and France,

German Foreign Indebtedness .and Fbreign Direct Investment in Germany

Table of Contents

Pace

Introduction I

All Foreign Debt 5

Bonded Debt 5.Dollar Bonds 6Sterling Bonds 8Swiss Franc Bonds 9Florin Bonds 9Swedish Kroner Bonds 10Bonds in Other Currencies 11

Other Loans and Credits 12

United States 14England 15Switzerland 16Other Countries 17Bank for International Settlements 18

Direct Investment 18

All Direct Investment 22United States 22United Kingdom 25Netherlands 26Belgium 28Luxembourg 28Other Countries 29

Appendix I Sources of Information 1

Appendix II Excerpt from B.T.S.. Press Review,"Germanyts Debts to Switzerland" 1

1, CC-71I~4- rilALOct. 27,19L49

CrAC 70.TIr7 IVDEBTEDNESSAITD FOREIGT DIRECT INVESTMET IF GERIJAIY.

INTRODUCTION

At Mr. McCloyls request, we have made a study of German foreign

financial obligations in order to arrive at an estimate of-the total of

foreign financial claims against Germany. We have omitted from our

studies the claims which were created after the outbreak of war. since

most of these claims (i 0e, those "arising out of the war").are covered.

by the Paris Reparations Agreement as part of the general reparations

settlement. Yo attempt has been made to break down the claims according

to the domicile of the debtor in the various zones of occupation, since

the information available would not support such a breakdown. Whenever

possible, the dollar equivalents of debts in other currencies have been

given at the rates in effect before and after the devaluations.of last

month.

There was no single place where the information needed for the study

could be obtained. Instead, it was necessary to seek out numerous esti-

mates from as many sources as could be found. The best information was

obtained largely through personal contacts-and correspondence, and, on

bond issues, from a study on bonded debt made by the Economic Department

of the International Bank for Reconstruction and Development. The 'list of

2a

sources eventually included letters, private memoranda and.tables, state-

-ments by the British, Belgian and Netherlands committees of industrial

.interests in Germany,-verbal e,stimates, publications of the U.S. Govern-

ment, of the Military Government for Germany, and of certain German

government offices, and finally a few published studies. These sources

are listed at the end of this memorandum,

Very early in the study, it became clear that figures from any

source would be incomplete or inaccurate, not up to date, or useless to

us for one reason or another, For examnle, the reports of the U.S. Mil-

itary Government-s property control staff in Germany were concerned with

an objective that was quite different from .the subject of our study and

for that reason they were of little use to us. Those reports gave only

the number of pieces of property under control at certain dates, or the

number of pieces of property released from control in certain periods.

No valuation was given,.and no distinction was made as to pieces of

property.

As another illustration, the U.S. Treasury Department's Census of

American-Owned Assets in Foreign Countries is probably incomplete, since

private organizations in New York have been able to get reports of miuch

larger holdings in the U.S. (This is illustrated by the fact that a

settlement offer for Italian securities brought in several times the

amount of them that had been renorted earlier to the Treasury Department

for the Census..) On the other hand, the figures provided by the trustees

of dollar loans in New York, while they may be very nearly complete, are

inaccurate because they are not up to date. They apparently do not re-

flect any of the large-rscale buying-up, retiring and canceling of

securities which the Germans did in the countries they over-ran. One of

the trustees reports, on the basis of a recent investigation in Germany

covering bonds administered by that institution, that the amount of

30

those bonds actually outstanding is only one-third of the amount shown

by their records in Few York.

Further difficulty resulted from the fact that the various figures

had been com iled for different purposes, and according to differing

definitions, and thus could not be compared or averaged for arriving at

a reliable estimate,

The study was by no means simplified by the number of currencies

involved. Seldom was the conversion rate given when a debt was reported

in a currency other than its actual denomination. German sources, for.

example, gave an amount in RM for debt issued in Holland, although the

bonds were denominated in dollars, pounds, gold marks and Reichsmarks,

as well as in guilders. American sources showed all German foreign

debt as an amount of dollars, and the Dutch government computed German

securities held in the Netherlands as an amount of RM

At one stage, we tried to put the various estimates into a table

arranged by country and type of debt or claim, showing for each type

as many estimates as we had collected, each in the currency its author

had used, However, the table became quite complicated due to the over-

lapping between countries and currencies as headings under which the

figures could be placed. As an illustration, the Economic Department of

the Bank computed a t9tal of guilder bond issues, regardless of the

place of issue, while the Anmeldestelle reported a total for bonds

originally issued in Hollandregardless of their currencies, and the

Netherlands Iinister of Foreign Affairs gave a figure for "Securities

not included in Participations in Enterprises" orned in the Netherlands,

regardless of currency or place of issue. In the end, each figure re-

quired more explanation and qualification than could conveniently be

4J.

presented in such a table, and another form of presentation promised..to

be more lucid, In this memorandum, the estimates of bonded debt are.

given, first for the bonded debt as a whole and then for the currencies

in which the debt was denominated. .Other loans and-credits' are grouped

by the country in which they are presumed to be held, as are the Psti-

mates of foreign direct investment in Germany.

Mlany of our sources of figures are now several years old, but, even

among the recent ones, debts and claims are not identified by occu-oation.

zone except in the NYote of the Netherlands Minister of Foreign Affairs

(4)* and the German tables on standstill debts (15)..

* umbers in narentheses throughout the memorandum refer to sourpewhich are listed at the end of the memorandum.

5.

ALL FOREIGIT DEBT

The total amount of foreign claims against Germany was estimated by

the U.S. Military Government in its background studies for the reform of

the German currency (12)*. It quoted the Statistisches Jahrbuch f das

Deutqche. Reich,1941 - 1942, to show that foreign debt of all types

amounted to RM 9.4 billion in February 1940, and it was estimated in the

studies that this pre-war debt had been reduced during the war to between

PM 5 and 7 billion.

The President of the Foreign Bondholders Protective Council, Inc.(7),

in New York has estimated that the principal of the German foreign debt

is Drobably'less than one billion dollars, with half held in the United

States.

BONDED DEBT

The bonded debt held outside the country is well-documented (with

the important reservation of bonds retired during the war).

Figures available to the Rank for International Settlements (5)

indicated that long-term foreign loans of the Reich totaled some RM 1.2

billion at September 30, 1944, not including the untransferred amortiza-

tion instalments (about RM 150 million) in respect of the Dawes and

Young Loans; long-term foreign loans of the L'Ander amounted to R11 122.7

million at March 31, 1944 and loans floated abroad by private enter-

orise totaled RM 646.6 million at December 31, 1941. These figures

suggest a magnitude of bonded debt at the end of 1944 of RM 2 billion,

more or less. This is noticeably lower than the amount now re-ported by

the Anmeldestelle fir Auslandsschulden (16) as outstanding on.

September 30-i 1940, which was RM 3,545,347,000, including bonded debt

of Austriaj Sudetenland: Danzig and Polish areas annexed to Germany.

* See note p,4.

6,

Without the debt of these annexed areas, the amount outstanding on

September 30, 1940, is given as RH 3,153,537,000. The survey by the

Economic Department of the International Bank for Reconstruction and

Development (1)* gives the amount outstanding in 1940*as $1,192,600,000.

For the amount of foreign bonded debt outstanding at the present

time, the Economic Department of the Bank, after an exhaustive survey of

lists of issues, has compiled a figure of $1,099,900,000, which was

revised to $1,019,800,000 after the devaluations of last month. That

survey was based on published sources but was checked against more recent

information supplied orivately in some cases. Official records outside

Germany probably could not produce a more reliable figure.

Doubt has been cast on the reliability of official records outside

Germany by the results of private investigation of the records in Germany

for some of the bond issues included in the Economic Department survey.

For one particular group of issues, New York records showed $149 million

outstanding, out $104 million principal amount were recorded in Germany

as having been deposited with German depositories or as having been cre-

mated by the obligors or by the German Embassy in MJexico, leaving $45

million principal amount not accounted for and, therefore, -oresumably

held by the iublic. Only private coroorate issues of dollar bonds were

included in this sample, but it is conceivable that records outside

Germany are equally incomp-lete for all issues. If we were to accept

tbia example as characteristic of the entire debt, the Economic Depart-

ment;s figure of $1 billion, derived from official records, would be in

reality three times the amount still actually held by the nublic.

The amount of dollar bonds issued in the

Dollar BondsUnited States and outstanding in September

1940 is now reoorted by the Anmeldestelle

fIr Auslandsschulden (16) as RM 1,607,000,000, including debt of annexed

* See note p.. All Economic Department figures for 1940 are based solelyon the Anmeldestalle's detailed list of issues,

7.

areas. Another RM 316,089,000 of dollar bonds then outstanding had been

issued in other countries, including principally the RM 299,029,000 of

Krueger dollar bonds recorded as originally issued in Holland. The

Economic Deoartment (1)* total for German dollar issues alone is

$736,600,000.

The amount of German bonds reported by the U.S. Treasury Department

in 1943 in its Census of American-Owned Assets in Foreign Countries.(13)

was $51.7 million. That includes all bonds owned in the U.S. but does

not include the substantial holdings of dollar bonds in other countries,

Furthermore, private surveys indicate that the figure is also incomplete

with respect to U.S. holdings alone,

A recent estimate by the U.S. Military Government (10) of the long-

dated German debt in the United States is $515 million. The survey by

the Economic Department of the Bank (1) derives a total of $800,600,000

now outstanding, comprising 125 issues, The Foreign Bondholders Pro-

tective Council, Inc., (7) has compiled a total of $680 million ($360.m.

government, $320 m, industrial) from the Few York official records, The

difference between that figure and the estimate of the Economic Depart-

nent of the Bank is principally in the Swedish Match Company (Krueger)

6% Loan with $119.6 million outstanding, reportedly all held now by the

Match Con-any. On the other hand, the Council has information supplied

by the U.S. Political Advisor in Berlin indicating that only $443

million is now outstanding, composed as follows:

$160 million Reich debt: Dawes,.Young and Conversion Office.

40 " States (L9nder).25 " Municipal.

8 n bonds of public institutions with gov't guarantee, Liun.,$263 million (usually spoken for by the Council.) State or Rei

180 " industrial bonds without gov't guarantee.$443 million total

These figures are all principal amounts, and do not include interest in

* See note p,4.

8.

default for about 15 years, about equal to the principal amount,

Sterling Bonds The amount of debt issued in England and

outstanding in September 1940 is .given

by the Anmeldestelle f1r A.uslandsschulden

(16) * as RM 577,000,000, including debt of annexed areas. The Economic

fDepartment of the Bank.(1) shows a total for 22 German sterling issues of

$215.7 million in 1940. Additionally, there were then outstanding some

$10.9 million of gold mark bonds which had originally been issued in

England.

On the authority of the London Council, the Foreign Bondholders

Protective Council, Inc., in New York (7) gives the amount of sterling

bonds now outstanding as 1 44,000,000, being & 36,000,000 of'Reich debt

(Dawes, Young and Conversion Office) and ; 8,000,000 State and City (with-

out deduction for or indication of German retirements).

The Economic Department Survey shows 20 issues of sterling bonds

with a total now outstanding of 7 46,759,000 including

& 35,996,000 Reich3,405,000 Provincial4,642,000 Municipal2,716.0o Corporate

& 46,759,000 Total

This amount was valued at $188.3 million before the recent devaluations,

but is now shown as $130.9 million.

With regard to the amount of sterling bonds now outstanding, we have

not had the advantage of checking records inside Germany against the in-

formation we received from other countries. It is -robably important

to keep in mind the great difference between German records and New York

records on dollar issues, when considering these estimates of sterling

debt outstanding.

*.See note p. 4 .

9.

Swiss Franc Bonds In Sentember 1940, according to the

Anmeldestelle ft' Auslandsschulden, (16)*

the oblipations under foreign loans issued

in Switzerland totaled M 348,000,.000, including the debt of annexed

areas, The survey by the Economic Department of the Bank (1) shows

$96,299 000 of Swiss franc bonds outstanding in 1940, in 36 German issues

only,

For the amount now due in Swiss francs for government bonds, the

Foreign Bondholders Protective Council (7) gives an.amount of

$37,000,000, while the survey of the Economic Department of the Bank (1).

shows $36,529,000 outstanding, composed of:

$22'645,o00 Reich (Dawes and Young)9,410S000 Provincial1,2681000 Municipal3.206 .000 Corporate

$36,529,000 Total

Part of this amount may be com-pensated under the terms of the agreement

on Swiss-held German property. This agreement, concluded in May 1946

between France, the United Kingdom, United States and Switzerland.

1rovided that a part of the German property in Switzerland might be used

for the compensation of Swiss claims against Germany.1

Florin Bonds The 1940 amount'of obligations under for-

eign loans issued in Holland was 1M 68T

m llion, including debt of annexed areps,

according to the Anmeldestelle f1r Auslandsschulden (16). This included

only RM 288,219,000 of bonds denominated in guilders, however. The re-

mainder was RM 42,805,000 of gold mark bonds, RM 19,0 1 9 r0 0 0 of sterling,

RN 17,560,000 denominated in Reichsmarks, and W4 313,3324,000 in dollars,

including the 1M 299,029,000 of the Krueger loan. The Survey of the Bank's

Economic Department (1) shows 48 issues with hfl 190,958,000 outstanding

* See note p.4. 1 See also Appendix II-

10,

in 1940. This amount is shown as $71,789,000 before the recent devalua-

tiont i50.3 million since the devaluation.

For the present time, the Survey shows only two florin issues,.

hfl 67,617,000 Reich (Young)2,253.000 Corporate

hfl 69,870,000 Total

They were valued.at $26.3 million before the devaluation and at $18.4

million at the new rate, The Netherlands Minister of Foreign Affairs.(24)*

has published an estimate of RM 300 million or $120 million for the value

of ITetherlands interest in German securities not referable to participa-

tions in German concerns, estimating RM 60 million to be in the Russian

Zone and RM 240 million or $96 million in the 3 Western Zones of Germany.

The amounts are based on face values of the securities, and they include

property still held by Dutch subjects at the time of Germany's capitula-

tion, plus property forfeited in consequence of German discriminatory

measures in those cases where rights to restitution are kncwn.to exist.

Swedish Kronor Bonds The Anmeldestelle fur Auslandsschulden

(16) gives RM 87,000,000 as the amount

outstanding in September 1940 of bonds

issued originally in Sweden. Over RM 10,000,000 of this was debt of

Austria and other annexed areas, however. The Survey of the Economic De-

nartment of the Bank (1) shows two issues of German debt in Swedish

kronor, with $33,804,000 outstanding in the same year, 1940.

For the nresent time, the Survey shows the same two issues (Dawes,

Young) plus a small loan to Prussia ($86,000) with a total of

$33,197,000 outstanding in the three issues. According to the Foreign

Bondholders Protective Council, the amount now due in Swedish kronor is

about $100,000, 000

* See note p.4.

11.

Bonds in Other Currencies For the remaining currencies in which

German foreign bonded debt is expressed,

information has been obtained from the

same two sources. The Anmeldestelle ftr Auslandsschulden (16)* gives a

figure in RM for the amount outstanding in 1940, but this figure includes

debt of the annexed areas of Austria, Poland, etc., and furthermore

includes dollar or sterling loans issued in these remaining countries

(as also for the countries previously discussed). The Survey of the

Economic Demartment of the Bank (1) gives for each currency, the amount

outstanding in 1938, and at the present time, and the amount outstanding

in 1940 as summarized from the Anmeldestelle's detailed list of issues.

All amounts are converted into dollars at the.rates in effect before

September 1949 and at the rates now in effect. The Survey does not

include debt in dollars or sterling which might have been issued in

these countries, nor does it include debt of the annexed areas. From

the Anmeldestelle report (16) were taken the following amounts out-

standing on September 30, 1940, in respect of bonds:

issued in Belgium RM 27 million" " France 185 "

Italy 32 "" I" Canada 1 "

From the Survey (1), the amounts outstanding of the following issuesi

1940 1Q48 1948'Value before devaluation Value since

devalpation(in millions of do lars)

* BelgasReich (1 issue; Young) 3,713 3.713 3.3

French FrancsReich (1 issue; Young) 11.033 11,033 6.7Corporate (1 issue) 0.178 - -

Lire aReich (2 issues; Dawes, Young) 0.316 0.316 0.3

Canadian DollarsChurches (1 issue) 0.456.

* See note p.4.

12.

Mention should be made, also, of some GM 54,235,000 of gold mark

bonds, issued generally by German banking institution.. They are listed

by the Anmeldestelle as outstanding.in 1940, 'but no further information

about them is given in the Survey of the Economic Department of the Bank.

There are finally some pre-war foreign issues denominated in Reichs-

marks whose value was left undetermined by the currency reform..

RM 17,560,000 in scattered corporate and municipal issues are listed by

the Anmeldestelle (16)*, while the Survey of the Economic Department

shows only Young Loan and Conversion Office bonds, amounting to

RM 203,519,000 in 1938 and now.

OTHER LOANS AND CREDITS

In a discussion of loans and credits to Germany other than bond

issues, a distinction must be made between credits which were granted

before the war and those credits which Germany was.able to obtain while

conducting the war, namely the credits for financing imports from occupied

countries and. the costs of its occupation armies. This study is con-

fined to credits created before the war so far as they can be identified

separately in the sources from which figures were taken,

In the background studies by the U.S. Military Government for the

currency reform plan (12) this distinction is made, but the figures

given there apply to all foreign dabt, and have been included in this

memorandum under that .heading (p.5). The studies quote a table from

Statistisches Jahrbuch Mr das Deutsche Reich 1941-42, which shows Stand-

still credits in February 1938 as RO 1 billion and other short-term

credits as RM 4 billion in the same month.

The Anmeldestelle fffr Auslandsachulden (16) does not make the dis-

tincti4n between pre war and. war-time debts, but shows instead short-

* See i.ote p.4.

13.

term and long-term obligations as of September 30, 1940, including

obligations of annexed areas. (Short-term =.due within twelve months;

long-term = due after twelve months.)

Short LongTy)e of Obligation Term Term Topether

(In millions of RM)Foreign accounts with

German banks

Free 43 0 43

Blocked 924 21 945

Reimbursement credits 336 - 336

Cash advances 139 0 139

Obligations from trade 628a 5 634a

Loans, current accountsand other credits 1,290b 473 1,763b

Mortgages 265 114 379

B.I,S. 241 - 241

Other payment obligations 1,573 19 1,592

Totals 5,439 632 6,072

a Includes RN 65 million of Reich debt.b Includes RM 181 million of Reich debt.

The Anmeldestelle has classified these obligations under a variety of

headings, and arranged them by creditor country, by type of debtor, by

type of creditor, by rate of interest, and a number of other arrange-

ments, but not by the date on which they were created. The only Reich

debt included was the RM 246 million identified in the footpotes to the

table.

Clearing debts arising from Germany's foreign trade have been com-

puted by L. E. Davin (19)* who gives the amount due in December 1940

as RM 1.8 billion. The Bank for International Settlements points out,

* See note P. 4.

l4.

without giving a total figure for Standstill debts, that arrears of

interest on them are estimated by the Custodian of British and U.S.A.

Stadstill interests to amount to about 40 per cent of the principal, in

.all.

The oroblem of debts expressed in RM is complicated by the fact

that the currency reform, converting RM claims at the rate of one new

)M for ten M, does not generally apply to holdings of foreigners.

However, this exemption does not mean that foreigners are entitled to

claim a conversion of RM claims into DM at par, but only that the matter

is left for future settlement.

United States Indebtedness to the United States,

excluding bonded debt, according to the

Anmeldestelle fir Auslandsschulden (16)*

amounted to RM 906 million at September 30, 1940, with RN 57 million of

it due later than September 30, 1941,

Foreign accounts withGerman banks

Free PM 3 millionBlocked 155 "1

Reimbursement credits 84 "Cash advances 5 "Obligations arising from trade 109 "Loans, current accounts and

other credits 275 "Mortgages 34 aOther payment obligations 241 "

Total RM 906 million

The Census of the Treasury Department of the U.S. (13) shows $162.3

million of German obligations, excluding bonds,.owned in the United

States on May 31, 1943.

Bullion, currency and deposits $ 56.6 millionNotes 1.3 "Accounts receivable 23.2 "Other claims and demands 81.2 "

Total $ 162.3 million

* See. note p. 4 .

15.

In his Memorandum on German Foreign Debt, Mr. Rogers, of the 3ond-

holders Protective Council (7Ylists, on the authority of the Standstill

Committee in New York, $29,500,000 of short-term credits from American

sources, many of them apparently commercial accounts and possibly pay-

able in currencies other than dollars.

A recent estimate by'the U.S. 1ilitary Government for Germany (10)

nuts the amount of U.S. Standstill credits at $33 million, Since it was

not defined, this amount may include interest payments which are in

arrears,

The report of an enqiry made in Germany (15) gives DM 101,467,700

($0.30 - DM 1.00) of short-term debt and MRN 729,400 (no rate) of long-

term debt for the U.S.A. in April 1949. These figures relate exclus-

ively to the outstanding amount of capital and do not include arrears

of interest.

England The Anmeldestelle fdr Auslandsschulden (16)

shows RM 741 million of German debt to

England on September 30, 1940, excluding

bonded debt, but including debt of annexed areas. All but RM 76 million

of the amount was due before September 30, 1941.

Foreign accounts with German banks

Free RM 2 miljlon

BlocCed 83 "

Reimbursement credits 236 "

Cash advances 36 "

Obligations from trade 38 "

Loans, current accounts and other credits 203 "t

,ortgages 16 "

Other payment obligations 127 "

Total RM 741 million* See note p.4.

16.

An official of the U.S. Military Government for Germany (101"has

estimated present British claims against Germany at & 40 million includ-

ing direct investment. The figure may also include bonded debt; that.

was not specified.

The report of an enquiry on the standstill debts (15) lists

DM 364,094,700 (1 1 a DM 13.433) of shortmterm claims and RM 427,600 and

A 449,850 of long-term claims for England in April 1949.

Switzerland German debt to Switzerland, as shown by

the Anmeldestelle fdr Auslandsuchulden (16)

was IM 909 million on September 30, 1940

excluding bonded debt, but including debt of annexed areas.

Foreign.accounts with German banks

Free RM 4 million

Elocked 113 "

Reimbursement credits 4 "

Cash advances 5 "

Obligations from trade 35 "

Loans, current accounts and otheT credits 468 "

Mortgages 166 "Other payment obligations 114 "

Total RM 909 million

This figure does not include IM 141 p4llioq of ,I.S. 4Qv9ptqpts

in Germany.

Davin.(19) shows RN 50 million of clearing ebts tq Switzerland in

December 1940.

Standstill claims of Switzerland appear i the retort of an enquiry

made in Germany (15) as DM 72,945,100 (Sfr 100. = DM 77,339) short-term

* See note p.4,

1(o

and RU 1,332,400 and Sfr 63,625,600 long-term in April 1949.1

Other countries Information about loans and credits from

several other countries has been taken

from the same few sources. Therefore, it

is probably better to present it here accordingly. All figures given by

the AnMeldestelle fAr Auslandsechulden (16)* apply to Germany plus the

annexed areas of Poland, Sudetenland, Austria and Danzig. From the

totals given there we have deducted the amounts of bonded debt presented

in the first section of this memorandum, leaving the total of other..

loans and credits from each country on September 30, 1940:

Holland RjM 1,027 million

Belgium 267 "

France 130 "

Sweden 97 "

Italy 172 "

Denmark 200

Davints (19) book has a table (on p. 302) of clearing debts showing

the balances annually from 1940 to 1944. The balances for December 1940

were:

Netherlands Rl 160 million

Belgium 250

France 200 "

Denmark 390 "

Bulgaria 100 "

SloVkiM 90 '

Bohemia and Horavia 600 "

* See note p.4. 1 See also Anroendix II

18. (r)

The report.of an enquiry made in Germany (15)* gives the amounts of

Standstill claims, all long-term, for various.countries-in April 1949.

Amounts are given in DM with the notation $0.30 = DM 1,00.

Netherlands DM 2,078,600France 2,411,100Sweden 3,618,200

The largest part of these amounts applies to the British zone of Germany.

Bank for International The Bank for International Settlements (5)Settlements

has listed its own claims outstanding in

Germany (not including accrued interest).

Treasury bills 3nd certificatesof the German Government RM 62.4 million

Treasury bills of the GermanPostal Administration 30,0

Bills issued by the GermanRailway Administration 60.0

Bills (Solawechsel) of theDeutsche Golddiskontbank 51.4

"Money employed" with theDeutsche Golddiskontbank 6.1 "

Funds on current account withthe Deutsche Reichsbank 24!91.

Total RM 234,0 million

Since 1947 the Bank for International Settlements has specified that its

claims on Germany "all have their origin in funds which were placed in

the German market, during the years 1930 and 1931, in fulfilment of the

obligations laid upon the Bark by th4 Hague Agreementp of 1930 and they

share in the priv.leges provided under those agreements. 1o new f-qnds

have bepn placed in Germany by the Bank since 9 1."

DIRECT INESTM-ENT

Clearly, the amount of direct investment in Germany is difficult to

calculate. Even for countries which have not been at war, or have not

been defeated in war, that calculation entails problems which apply

equally to Germany. The definition of direct investment, itself, can be

* See note p,4, 1 17th Annual Report, B.I.S., p. 159.

19.

deemed to cover only the amount of foreign exchange or foreign equipment

actually brought in, or it can be broadened to include also the profits-

of operation which have been reinvested when they might have been trans-

ferred out of the country. There is a question, also, of evaluating the

foreign part of the ownership of companies and corporations only partly

owned by foreigners, in the case where outside ownership is a controlling

fraction and in the case where it is not. Technical questions of

accounting.procedure cast their shadow on the calculation, as well.

Each of those problems would exist even if full information were

available. But direct investment has been, in the past, a private

matter, with as little publicity as pos!ible given to the amounts in-

volved an, the precise character of such arrangements.

In the case of direct investment in Germany, general problems like

the ones just described are eclipsed by*those created by the conduct of

an unsuccessful war. During the war, such investments were, for the

most part, interests in an enemy country, and they were liquidated,

converted, reorganized and otherwise concealed from the public view.

There are, on the other hand, some owners who were German residents be-

fore the war and who have long since left the courntry, and whatever

interests they retaip have become foreign interests, although they P

no way reprqsent foreign investment of an parlier day. Some attention

must be given to the questionable title to property acquired from

foreigners by the Germans during their conduct of the war.

20.

In addition there is a problem of recognizing, in monetary terms,

the physcial damage done to property durin- the war, as a means of-

deducing the value of what remains. A simple solution here might seem

to be to determine the cost of reconstruction or replacement. But that

method would imply that undamaged or salvageable property deserves also

to be valued at the cost of replacing it now (as is often proposed in the

United States), in spite of the fact that replacement of that part is

pure theorizing and will not (indeed, could not) be carried out in the

near future,

Finally, all manner of complications have been introduced by the

many changes in Germany's boundaries. Propert, in i7hat had been for-

eign territory became German property, as long as Germany's military

expansion succeeded, and neu German assets were created in those areas.

At the same time, Germany's special methods of financing brought the

ownership of much property in these areas into trusted Gerf,an hands,

The end of the war separated those territories again, leaving tangled

claims to the assets there. Furthermore, parts of eastern Germany

were sliced off and with them nent natural resources which had formerly

supported foreign investments in German industry. Equally important

are the consequences of quartering tIhe 4efeated countr,- apong fovr

occupying armies with Varying degees of financial intercourse among

thempelvey,

Because there are so many obstacles to a historical method of

determining the value of foreign investments in Germany, it would

appear that the most practical method of determination would be a gener-

al survey within the country, of property and claims to it, utilizing

21.

all the records existing there as guides for locating property and eval-

uating it. Obviously, the i;ilitary Governments of the separate zones

of occupation have been in the most favorable position to nerform this

task,

The U.S. Military Government has, in fact, used just this approach

for its property control program. However, the purpose.of that program

was not to determine the value of the foreign interest in the property,

but to return the units to their rightful owners. Consequently, the

reports issued do not classify property by type or by nationality of

ownership, or by productive value, but arrange it instead by legal

reason for assuming control and by the considerations under which the

units were released from control.

One of the bases for assuming control was evidence of ownership by

nationals of United Fations or neutral countries. Because items con-

trolled for this reason included such things as church bells and 0rivate

collections of books as well as industrial and business properties, the

total value of all such property is of limited significance here. Fur-

thermore, the total of properties taken into control for this reason is

never given for the entire period of control, but only for one month at

a time.

It would seem that the individual property records for items taken

under control might be a good p1ce to begin a survey within Germany,

which would build up, eventually, a total of foreign claims to produc)Ve

properties. So far as we have been able to learn, no such survey has

yet been made, or has been published or publicly announced, if one has

been made.

22,

All Direct Investment In the absence of any complete set of

figures, we have collected estimates from

the representatives of persons wTho have

interests in Germany and from a few other sources. The Bank for InterP

national Settlements (5)* referred us to a publication "Warum Aussen

handel?"%(21) in which Director bei der Reichsbank Dr. R. icke esti-

mated direct investments made in.Germany 'by foreigners at about R! 4

billion at the beginning of 1936.

United States In the past, the U.S. Department of Com-

merce (20) computed periodically the total

of American direct investment in other

countries. For investment in Germany in 1936 it derived a figure of

$227,817,000 with a note that a part of that figure was based on an obso-

lete value for the mark. For 1940 it gave a figure of $349,399,000, but

it included in that figure the amount of American investment in Austriaj

The U.S. Treasury Department's Census of American-Owned Assets in

Foreign Countries (13) gives the following amounts for 'ay 1943 for

items which may be considered elements of direct investment in Germany:

Interests in controlled enterprises $ 513,7 million

Corporate shares 73.7 "

M,Terchandisp and equipment 13.2

Interests in estapps a4d t-,usts 50.7 I

Life insurance policies and annuities 11,2 "

Total $ 662.5 million

and in addition:

Land and buildings for personal use $ 34.0 millionLand and buildings for other than personal usel34.8 "ilortgages and other rights 20,4 "

Total T 189.2 million

* See note p.4.

23.

It is not known whether these figures should be considered incomplete,

as seemed advisable in the case of the Census figures for American-owned

boncts.

From Mr. Victor Schoepperle (9)* we have lists.of-American companie,

doing business in Europe, but with no value shown: for their interests in

the country. From his listswe have compiled'the one which follows:,

American Companies Operating, orHaving Plants or. Interests in Germany

Comranv Property at

Addressograph-Multigraph Corp. London, Paris and Berlin

Aluminum, Limited Reduction plants in Italy and Norway,Fabricating plants in England, Germany,and Switzerland

American Express Company

American Radiator & StandardSanitary Corporation Neuss, Schoenbech and Wiener-Neu-

stadt, Germany; Belgium; Hull, England.Brescia and Livorno, Italy; Argeteuil,Aulnay, Blanc-Mesnil, Clichy, Daim-marie, Dole and St. Quen, France

Atlantic Refining Germany, Belgium, Spain and Portugal

Chase National Bank of the Cityof New York

Chicago Pneumatic Tool Fraserburg, Scotland and Berlin,Germany

City Bank Farmers Trust Company

Colgate-Palmolive-Peet England, Germany and in other countrie

Corn Products Refining Manchester, England; Barby, Germany;Italy; Czechoslovakia; France;.Holland and Jugo-Slavia

Eastman Kodak Company England, France, Germany and Hungary

First National Bankc of Boston

Ford Motor Company

* See note p. 4.

24..

Cornany Pronty at

General American Transportation France and Germany

General Electric England, France, Spain, Germany,Belgium, Holland, Hungary and Italy

General Motors Corporation Principal European subsidiaries arein Germany and British Isles.

Gillette Safety Razor Company Berlin, London and in France

Guaranty Trust Company of New York

Hudson Motors Berlin and London

International Business Machines Paris, France; Vilan, Italy; andCorporation Berlin and Sinderfingen, Germany

International General Electric Co.

International Harvester France, Germany and Sweden

Intertype Corporation Slough, England and Berlin, Germany

L, 0. Smith & Corona Typewriters

Libbey-Owens-Ford England, France and Germany

Minneapolis,Moline Power Imple-ment Company

National Cash Register Berlin

National Dairy Products Hayes and London, England; Hamburg,Germany; and Rotterdam, Holland.

National Lead London; Paris, Leverkusen, Germany;and Fredrikestad, Norway

Otis Elevator London, Paris, Berlin, 7russels

Quaker Oats London, England; Elsen, Germany;Rotterdam, Holland; Makpkov, Denmark

Remington-Rand, Inc. Saarbruecken, Berlin, Frankfort, Ger-many; London, England

Royal Typewriter Co., Inc.

Singer Sewing Machine Company

Socony-Vacuum Oil Company, Inc. France, Italy, Ireland, Belgium, Hol-land, England, Norway, Germany, Hun-gary, Czechoslovakia, Poland, Roumania,Spain, Sweden and Denmark

25.

Company Property at

Standard Oil Company (N.J.) France, Germany, Italy, Roumania,.United Kingdom and Irish Free State

Standard Oil Company of New Jersey

Tinken Roller Bearing Birmingham, England; Paris, France;and Berlin, Germany

Underwood-Elliott-Fisher Company Germany

United Shoe Machinery Corporamion vrance, uermany and Great Britain

United States Lines Company

Westinghouse Air Brake Turin, Italy; Paris, France; andHanover, Germany

Westinghouse Electric Inter-national Company

Woolworth (F.W.) England and Germany

Worthington Pump & Machinery Berlin, Germany; Le Bourget, Franceand Newark-on-Trent, England

Yale & Towne ManufacturingCompany Germany, England and Czechoslovakia

Mr. ,jcnoepperle made his lists available with reservations, because

some of the information in them had not been revised from the situation

prevailing in 1938. The above list, in turn, must be taken only as an

indication, and by no means as a definitive listing of United States

firms now having direct investments in Germany. Certainly, the war

period led many of these firms to dispose of part or all of their in-

vestments in Germany.

United Kingdom Mr. V. Cdvendish-Bettinck, Chairman of the

Committee of British Industrial Interests

in Germany .(2)*, writes that the net

* See note p. 4.

26.

asset value of the interests in Germany of the members of that Committee

was about RM 500 million before the outbreak of the war in 1939. To

tAis he would add a further MI 10 to 12 million-for firms that have

subsidiaries in Germany and are not members of the Committee. For the

present value of these industrial assets, he makes a guess of DIM 350 to

400 m.illion,.regretting that he cannot estimate more accurately at this

time, The figure covers firms having subsidiaries in Germany or having

interests in German industrial concerns which give the right to have a

voice in the management, including among them .the Shell Group and

Unilever Concern. Other British shareholding in German industrial firms

was not very large, in his opinion.

Netherlands The Netherlands M!inister of Foreign

Affairs, in a note.to the States General

(4)* estimated the volume of Netherlands

capital interests in Germany at the present time to be RMd 1,669 million

or $669 million, including only property still held by Dutch subjects

at the time of Germany's capitulation, plus property forfeited in con-

sequence of German discriminatory measures where rights to restitution

were known to exist. There are, in addition, claims whose monetary

value is too indefinite to be included in the table.

* See note p.,4.

27.

Tyoe of Interest Russian 3 Western TotalZone . Zones

(in'millions of RI)

A. Participation in German concerns 231 899 1,130

B. Real estate 77 162 239

C. Securities not referable to Group A 60 240 300

(est) (est)

Total 368 1,301 1,669

Group B (Real Estate) comprises the following, consisting of approxi-

mately 4i,500 individual items.

Houses RM 152 million

Land 33 "

Mortgages 54

R4 239 million

Group 0 (Securities...) has already been mentioned in the earlier sec-

tion on Florin bonds. Because face values were used in most cases, the

Minister believes that the estimates are considerably lower than actual

value, especially for the items included in Participations in German

concerns, The schedule refers to territory of Germany within its post-

war frontiers, * exclusively of Austria, the Saar territory, and the

eastern areas provisionally assigned to Russia and Poland,

Not included in the table, but equally valid, is an aO.ditional

group of claims not vested in securities which can not be valued with

any accuracy due to lack of information, but which would add up to

several hundred million RMV, exclusive of claims upon the German Reich

and its agencies.

Claims deriving from patents, trade marks, and copy rights must

also be considered, although they can not be assigned a capital value.

28.

In 1939, it is noted, hfl 5.5 million were remitted from Germanv to the

Netherlands in settlement,of license ana patent rights.

Belgium The President of the Association of Bel-

gian Industrial Interests Abroad (11)*

has advised us that.some two dozen

members of the Association have majority participations in German sub-

sidiaries with a total nominal capital of RM 157,590,000. outside the

Association there are doubtless ot#er Belgian interests in Germany, in

commerce or, to a lesser extent, in industiy. Flout which information is

not available.

Luxembourg The Central Office of ARBED in Luxem

bourg (8) has sent us a list of Arbed

subsidiaries established in the three

western zones of occupation in Germany and in which Arbed has a direct

or indirect participation of at least 500. of par-

British tone of occuration ticivation

Eschweiler Bergwerks-Verein A.G, Kohlscheid 95.60

Felten & Guilleaume Caswerk A.G. K81n-1heim 68.27

Felten & Guilleaume Calwerk Eise; u, Stahl AG " 68.27

Walzwerke A.G. vorm. M8cking & Co. K81n-MAlheim 68.27

Felten & Guilleaume Eschweiler Draht,AG " 68.27

Franz Clouth Rheinische Gummiwaren-fabrik A.G. K81n-Yippes 68.27

Land. n, Seekabelwerke A.G. 68,27

Braunkohlenbergwerk und 3riketfabrikG.m,b,H, Liblar 68.27

Liblo Tieioa 4,m,bH., 68.27

*See note p.A,

29.

Dielektra A.G. Porz a. Rhein 68.27

J. Pohlig A.G. Kl1n-Zolstock 66.4S.

Carlsverkhaus A.Go Kln 6)627

Arcona Ein- uo Ausfuhr G.m.b.H.' Hamburg 5608

Antueiler Thon- u. Chamottewerke, G.m.b.H. Antweiler 1000-

Artewek Handelsges. fiAr Berg- undHGlttenerzeugnisse mi,,.b.H n 100.-

Gewerkschaft, Henriette Kohlscheid 99.96

Ge,nerkschaft Norbert Metz Aldenhoven 100.-

U.S. zone of occuDation

SlAddeutsche Telefon-Apparate, Kabel- undDrahtvieri,e "Te]kadel" A.Go 11irnberg 6rt27

C. FlHggen Kohlenhansa G.m.b.H. L-nchen 95.60

French zone of occupation

Brohltal A.G. fir Stein- u. Tonindustrie Burgbrohl 100,.-

Other Countries Mr. Cavendish-Bentinc (2)* has mentioned,

without figures, a couple of large Swedish

companies, in particular the Electrolux,

vhich have interests in Germany. The Suiss have large equity invest-

ments there, as have also some French and other companies. In the case

of these countries, figures for the amount of direct investment have

been obtained only for Switzerland,1 as indicated.

* See note p. 41 See Appendix II

GERIMAIT FOPEIGN INDEBTEDNIESSAND FOREIGN DIRECT II-VESTM4ENT IN GERM1ANY

Appendix I

Sources of Information

Letters, private memoranda and tables.

1. "Preliminary Survey of Germany's Bonded CForeign) Debt" (22 pp.)

9-30-49, Economic Department, IBRD..- outstanding 1938, 1940 and 1948 by denomination (= currency) and

by category (gov't., munic., etc.) of loan.detailed list of issues for same dates.

2. Letter (2 pp.), dated 8-15-49, from V. Cavendish _ Bentinck, C,M.G.,Chairman, Committee of British Industrial Interests in Germany.

-"oresent value of the British industrial assets in Germany...DIV 350 - 400 million"

-- pre-war "net asset value ... RM 510 million"- includes Shell Group and Unilever Concern

3. Memorandum (1 n,) (no date = 8-2) supplied by Mr. M1inskoff of theU.S. Treasury Department,-- Some figures on Dawes Plan, Young Plan, Conversion Office Loans,

and on sorle types of government loans.References to 13 and 14 below.

4. "Note on the Situation with Regard to the Gernan Problem presented,

to the States General by the Netherlands Minister of Foreign Affairs

under cover of a letter dated 7-19-49" (6 pp.).-m "Netherlands interests in Germany," by zones, and by type of

interest- Enclosed with a letter from the Secretary, Committee for Fether-

lands Industrial Interests in Germany,

5, Letter (3 pp.) dated 8-16-49, from Secretary General, Pank forInternational Settlements,- n1B,I.S. claims outstanding in Germany"- figures from European sources-- enclosed 15 and 16 below.

6. Letter (1 p.), dated 6-22-49, from Fred E. Hartzsch, Chief,Property Control and Assets Branch, Property Division, 0 G U S

enclosed 17.and 18 below,.

7, Memorandum on German Foreign Debt, (8 pp.) 9-15-49, James'Grafton

Rogers, President, Fbr'eign Bondholders 7rotective Council, Inc.

-- a dozen or so figures on bonds

8. Letter (2 pp.) dated 9-16-49 from ARBED, Luxembourg.-- one-page list of Arbed subsidiaries in Western zones, with

percentage of Arbed particination.

-2-

9 - Letter dated 9-15-49 from Victor Schoepperle, Vice President,National City Bank of New York.

* lists of com-panies operating in, or having plants or interestsin Germany. No values stated.

10. Ettimatez by U.S. Military Government official, given verbally byMajor T. W. Archer.

11, Letter (1 p.) dated 9-r23-49 from Pr6sident, Association des Inter'tsndutria2ls Belaes :t l'tranaer.

w list of Belgian companies with majority participation in Germansubsidiaries.

Government Publications

12. Appendices J and L to Colm - Dodge Plan, for German currency reform,(7 pP. and 4- pp.) 6-10-46, 0 M G U S- "Foreign claims against the Reich"; Table.- "Development of Germany's external Debt, 1931-1940."

13. Census of American-Owned Assets in Foreign Countries, (128 pp.) 1947,U.S., Treasury Department.-- Tables np. 68, 80, 82, 123,- "Value of American"owmed assets, by type of pro-oert,,."

14. Foreign Assets and Liabilities of the United States, (177 pP.)12-18-47, U.S. ITAC.- tables.

15. "Statistische Uebersichten" of the Standstill Credits, (13 pp.)April 1949.-- tables, short-term and long-term claims by L4nder, by occupation

zones, and by creditors' countries,

16. Die Auslaidsverschuldung Deutschlands, 30 September 1940, (70 pp.)Anmeldestelle fir Ausiandsschulden.

- tables, by creditors' countries, currencies, type of obligation,etc.

-- detailed list of bond issues.

17. Pronerty Control History, Policies, Practices and Procedures of theUnited States Area of.Control, Germany (96 pp.) July 1949, U.S.Military o7vernment F *Germany.-- A few figures only.

18. Pronerty Control Statistical Renorts, (13 -pp. each) 12-31-47,12-31-48, 5-31-49, U.S. filitary Government for Germany.- value of property controlled or released from control by reason

for control, One reason is foreign ownership. No cumulativetotals.

Private Publications

19, Les Finances de 1939 A 1945. II. L'Allemagne, Louis E. Davin,Paris, 1949 (378 P7.)

- one table of clearing debts by year and by country, 1940 to 1944,

20, American Direct Investments in Foreign Countries -193, and. .

(45 pp. eaeh) 1938 and 1942, U.S. Department 'of Commerce.- table for European countries: type of industry, value, and

number of firms (p.10).

21. Warum Auszenhandel, Dr. Rudolf Eicke, Dir. Reichsbank, Berlin 1936

(9pp.01,v table of foreign debt 1930 to 1936, p.

66 ; long-term, short-term

and Standstill, by semester.

22. German Control Over International Economic Relations, A. T. Bonnella

-- Stands+41 +,+.1 o l1Ir -n

Appendix II

Excerpt from B.I.S. Press Review No. 199, dated October 11, 19L49.

"Germanyts Debts to Switzerland DEUTSCHE ZTG, 1/10, in a report

from Zurich, discusses the question of the size of the German debts

towards Switzerland.'A remark recently made by the President of the Swiss Bankers'

Association, that a complete transfer of carital yields owed to Switzer-

land by Western Germany would amount to only about 10O of the counter,

value of Swiss imports from the three western zones, would seem to suggest

that, taking 46 as the average interest rate, the total indebtedness of

Western Germany to Switzerland amounts to about SF 625 million. Con-flicting estimates have, from time to time, been published on this matter.

Iuch confusion was caused in 1932 by a statement on Germany's external

indebtedness, published in a German periodical. In this statement the

aggregate sum of Swiss claims was given as M 2.7 milliard, out of a

total German foreign debt of RM 19.5 milliard, including MR1 1,096 million

of long-term and P,1,611 million of short-term debts of industry, trade

and banks, etc, But, in appraising these figures, two essential factors

must be allowed for. Hlost Swiss claims are denominated in SF and they

were therefore affected by the 3Qo devaluation of

the SF in 1936. 11oreover, in the first few years of German transfer

restrictions, a substantial portion of the German consolidated external

debt was prematurely redeemed, advantage being taken of the fact that

exchange rates were in the debtors, favour or direct agreements being

made between debtors and creditors. Thus, all that is left of the stand-

still debts, which in 1932 accounted for about R4 1 milliard among

German short-term debts, is a residue of SF 70 million. A recent Swiss

estimate of Swiss capital assets in Germany, including private invest-

ments in the form of real estate, trade and manufacturing companies,

gives the total as about SF 2 milliard, without, however, allowing for

Swiss clearing advances of about SF 1 milliard. Since this estimate does

not contain any details or analysis, no judgement can be based upon it.

It is understood that of late a -orivate memorandum has been circulated in

financial circles, according to which the total amounts of German bonds

outstanding in Switzerland (at par value) are as follows: SF 108 million

for loans denominated in SF; SF 39 million for loans denomiated. in U.S.

dollars, L sterling and Dutch guilders; and SF 11 million for German in-

ternal bonds denominated in Nar%s. According to the same memorandum,German shares for an amount of SF 340 million are held in Switzerland,

Since the real value of the shares cannot be gauged, the memorandum does

not take the capital value as'basis but calculates, after deduction of

the oresumable tax on trofits, a future dividend yield of SF 5 million

per annum, There.is also an item of SF 41 million as arrears in respect

of untransferred yields for the years 1945-49. The total amount of the

so-called SF mortgage debts (previously known as gold mortgages), the

'bulk of which date from before the first world war, is given as SF 75million, requiring an annual interest service of SF 3 million. In giving

the figure of SF 25.2 million as the annual amount which should be paid

to the creditors (for interest and amortisation), the memorandum does not

take into account the above-mentioned Swiss clearing advances for an

amount of about SF 1 milliard, presumably because Switzerland would like

to have this Govt claim satisfied out of the proceeds of the liquidation

-2-

"'of German assets, provided for under the Washington Agreement.,

Another item omitted from the calculations is the SF 70 million in

respect of standstill credits, requiring an annual interest service ofSF 2,7 million (arrears SF 8.9 million)., and separate treatment is givento the two tranches of the German potash loan, on which the Swiss claimfor interest is SF 1.45 million ner annum,.e