I now wish to inform you that after discussing the matter with Mr.
Thorp in brief, I had occasion to submit more detailed plans to Mr.
Ness.Y4 In quite an informal discussion with him, I outlined to Mr.
Ness the types of credit lines which I at present consider the most
important ones for Hungary in case the Export-Import Bank would
be ready to negotiate loans. These are the following:
  1. Establishment of a credit line for carrying out an agricultural
      rehabilitation program.
  At the time when the termination of the activities of UNRRA had
not yet been decided, the Hungarian Government filed a request with
UNRRA for the carrying out of an agricultural rehabilitation pro-
gram in Hungary. The Hungarian Government would have under-
taken to repay the money to be invested by UNRRA in terms of agri-
cultural products which UNRRA would have been able to use in its
relief program in Europe. The early termination of the activities of
UNRRA have excluded the adoption of such a plan by UNRRA. The
Hungarian Government therefore desires to carry out a similar pro-
,gram by negotiating a loan for this purpose.
  The carrying out of such a program would result not merely in the
rehabilitation of Hungarian agriculture, but an increase in Hungarian
agricultural production would also contribute in a positive way to-
ward alleviating the European food supply problem.
  The Hungarian Government feels certain that such a program would
increase the agricultural output of the country to an extent which
would enable Hungary to export already in the forthcoming years
considerable quantities of agricultural products. These could be sold
for convertible foreign exchange, thus rendering possible a relatively
quick amortization of the loan. The sale of the commodities produced
under this plan would serve to a considerable extent the purpose of
reestablishing Hungary's normal trade relations under the auspices of
free trade.
  2. Establishment of a credit line for the purpose of purchasing
      domestic surplus materials from the War Assets Administration.
  In this connection, I should like to point out that although the
Hungarian Purchasing Commission had entered into firm contracts
with the European Field Commissioner of the Foreign Liquidation
Commission for almost the entire amount of the $15,000,000 credit
line established for the purchase of overseas surpluses, a deficiency
of about $5,000,000 worth of goods occurred when actual deliveries
were to take place. Since there is very little likelihood of being
able to replace this deficiency with other overseas surpluses, and since
Hungary is very anxious to be able to use up the entire credit line
for actual deliveries, I feel that domestic surpluses might be considered
in order to make up the overseas deficiency. This could be a starting
point for the negotiation of a loan for domestic surpluses which Hun-
gary would be very much interested to purchase in quantities even
exceeding the value of the $5,000,000 referred to above.
"Szegedy-Masz7Ak's meeting with Ness took place on November 6.
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