IN MEXICO, loans from the World Bank are putting tens of thousands of acres of farm land under irrigation to help feed a rapidly growing population. The loans are bringing electricity and safe drinking water, for the first time, to hundreds of impoverished villages. These loans are not, incidentally, charity. The carry an interest rate that covers the cost at which the World Bank itself borrows.
In Cameroon, on the west coast of Africa, a small loan from the World Bank is increasing rice production for some 3,400 families whose income currently averages around $70 a year. The loan is bringing in a controller water supply, improved seed, fertilizer and - like most World Bank loans - technical advice. This one is a soft loan, which means a minimal interest rate and deferred payments.
In Indonesia, a World Bank loan is buying safewater supplies for the steamy slums of Jakarta. Over the last generation the city's population has shot from half a million up to 4.5 million, most of it having no sewage service whatever. The loan is also building communal toilets, paved footpaths and schools.
The World Bank is now the main conduit of development aid from the rich countries to the poor. Because the World Bank is a tough and careful lender - none of its loans has ever been defaulted - it is also a catalyst for large loans from multinational commercial banks. The North-South relationship, measured in the actual flow of cash, runs through the World Bank's massive building at 18th and H Streets NW. It now lends $8.5 billion a year - compared, for example with the United States' annual outlay of some $1.2 billion a year in direct country-to-country development aid.
Most of the bank's money comes from the bonds that it sells in financial centers like New York. It can borrow more cheaply and surely than poor countries with shaky currencies. But like any other bank, it requires a basic fund of capital that is the lever for all the rest. That capital is contributed by the governments of the rich countries, of which the largest, and the leader, is the United States. This country now provides only one-quarter of the annual capital requirement. But if it defaults on this commitment, the whole World Bank structure may well collapse.
The United States' contribution this year is in great danger. President Carter asked Congress in January for $3.5 billion for the World Bank and the smaller regional development banks. The House Appropriations COmmittee has cut it to $2.6 billion. Next week the bill is scheduled to come to the House floor, where there will be a series of attempts either to cut it further or to attach crippling political conditions to it. The bill's prospects were uncertain even before the California tax referendum threw Congress into its present panic. But it would be squalid for a country with an average family income of $18,000 a year to cut its taxes by eliminating aid to countries where the average is a few hundred dollars.
Beyond the obvious moral issues, there is the sharpest American self-interest in keeping the World Bank in business. The dilemmas of a rich country bordered by poor ones are illustrated by the steady stream of illegal immigration into the United States. Americans know that it cannot be stopped without resort to unaccepted police methods. Americans also understand Latin Americans in their own countries. The principal means of providing that opportunity is the World Bank.
Americans also know that their foreign-trade deficit is getting steadily worse. Part of the solution lies in expanding exports to the developing countries - but the rate at which they buy American goods depends on the rate at which they develop. U.S. exports to Latin America have nearly doubled over the past four years, but it takes capital to keep that process going. The case for development aid rests not only on the needs of the poor countries, but on those of the rich as well.
(This is the first of two editorials on the plight of the multinational lending institutions. )