(2) it is in the national interest of the United States to terminate a suspension under subsection (a).

TITLE II-INTER-AMERICAN DEVELOPMENT BANK 5

SEC. 205. SENSE OF THE CONGRESS THAT INTER-AMERICAN DEVELOPMENT BANK LOANS SHOULD REDUCE DEPENDENCE ON ILLICIT NARCOTICS.

It is the sense of the Congress that, whenever possible and appropriate, loans made by the Inter-American Development Bank during the 4-year period beginning on January 1, 1990, should promote economic development which will reduce the growing economic dependence on the production and transit of illicit narcotics in certain borrower countries.

SEC. 206. DIRECTIVES REGARDING GOVERNMENT-OWNED ENTERPRISES IN COUNTRIES RECEIVING IADB LOANS. *

TITLE III-INTERNATIONAL MONETARY FUND ENHANCED STRUCTURAL ADJUSTMENT FACILITY 7

TITLE IV-INTERNATIONAL DEBT PROVISIONS 8

SEC. 401. SHORT TITLE.

This title may be cited as the "Foreign Debt Reserving Act of 1989".

SEC. 402. ADDITIONAL RESERVE REQUIREMENTS.

(a) FINDINGS.-The Congress finds that

(1) since the adoption of the International Lending Supervision Act of 1983, the credit quality of loans by United States banking institutions to highly indebted countries has deteriorated and the prospects for full repayment of such loans have diminished;

(2) in general during this period, the level of country exposure and transfer risk associated with loans by United States banking institutions to highly indebted countries has not been adequately reflected in the reserve levels established by many individual United States banking institutions or the reserve re

On December 19, 1989 (same date as enactment of this Act), the President reported to the Speaker of the House of Representatives and President of the Senate the following: "Pursuant to the authority vested in me by subsection 103(c)(2) of the International Development and Finance Act of 1989 (the 'Act'), and as President of the Untied States, I hereby report that it is in the national interest of the United States to terminate the suspensions under subsection 103(a) of the Act of programs of the Export-Import Bank of the United States for the People's Republic of China. I am thereby waiving the prohibitions on the Export-Import Bank's financing any trade with, and on extending any loan, credit, credit guarantee, insurance or reinsurance to the People's Republic of china as provided in subsection 103(a)." [Weekly Compilation of Presidential Documents. December 25, 1989, vol. 235, no. 51, p. 1973.]

5 Secs. 201-204 amended the Inter-American Development Bank Act; see beginning at page

101.

Sec. 206 amended the International Financial Institutions Act by adding a new sec. 1612. For text, see page 181.

'Title III added new secs. 54 and 55 to the Bretton Woods Agreements Act. For text, see beginning at page 78.

12 U.S.Č. 3901 note.

912 U.S.C. 3904a note.

quirements imposed by Federal banking agencies pursuant to such Act;

(3) during the last 3 years and particularly in recent months, United States banking institutions have increased their reserves for possible losses from loans to highly indebted countries but such reserves remain, in some cases, significantly lower than reserves established by banking institutions in a number of foreign countries and may not be adequate to deal with potential risks; and

(4) in order to fulfill the purposes of such Act, the Federal banking agencies should take a more active role in reviewing reserve levels established by United States banking institutions for potential losses from loans to highly indebted countries and in requiring appropriate levels of both special and general reserves to reflect the increased risk of such loans. (b) 10 IN GENERAL.— *

SEC. 403. REPORT ON MARK TO MARKET ACCOUNTING.

(a) REPORT REQUIRED.-Before the end of the 90-day period beginning on the date of the enactment of this section, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Comptroller of the Currency shall jointly report to the Committee on Banking, Finance and Urban Affairs of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate on the merits of mark to market accounting treatment as an appropriate accounting treatment for the sovereign debt of highly indebted countries which is held by United States commercial banks.

(b) CONTENTS OF REPORT.-The report required under subsection (a) shall include

(1) a discussion of the merits of mark to market accounting treatment as the appropriate accounting treatment for the sovereign debt of highly indebted countries which is held by United States commercial banks; and

(2) a description of the factors which the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Comptroller of the Currency will consider in future assessments of the applicability of mark to market accounting to such debt.

SEC. 404. STUDY ON ELIMINATION OF CAPITAL FLIGHT.

(a) IN GENERAL.-The Secretary of the Treasury shall instruct the United States Executive Director of the International Monetary Fund to propose that the Fund conduct a study on multilateral means by which the banking industry might help reverse capital flight from countries which are engaged in debt restructuring, including

(1) the feasibility of disclosing the names of account holders whose accounts may consist of flight capital, and the balances of such accounts;

10 Sec. 402(b) amended the International Lending Supervision Act of 1983 (12 U.S.C. 3901 et seq.) by inserting a new sec. 905A. For text, see page 195.

(2) the usefulness of such disclosures in deterring the creation and maintenance of such accounts, and how such deterrence would operate or be defeated;

(3) the extent to which any such information is gathered and to whom such information is made available;

(4) the receptiveness of such countries to the disclosure of such information;

(5) the difficulties in, and the cost of, collecting such information and overcoming legal obstacles used to disguise the true ownership of such deposits, including the feasibility of using the threat of confiscatory penalties to prevent the disguising of the ownership of deposits;

(6) the usefulness of using taxes as a means to encourage the repatriation of flight capital; and

(7) the applicability (if any) of efforts to facilitate the identification, tracing, seizure, and forfeiture of drug crime proceeds, and to prevent the use of the banking system and of financial institutions for the purpose of money laundering.

(b) FLIGHT CAPITAL DEFINED.-As used in subsection (a), the term "flight capital" means any asset

(1)(A) which is deposited in a banking institution for safekeeping or investment purposes; or

(B) for which a financial institution serves as a conduit, an agent, or a fiduciary in a transaction; and

(2) the owner of which may be a legal resident of a country other than the country in which the institution is located. (c) REPORT TO THE CONGRESS.-Not later than the end of the 180day period beginning on the date of the enactment of this Act, the Secretary of the Treasury shall submit to the Chairman of the Committee on Banking, Finance and Urban Affairs of the House of Representatives, and the Committee on Banking, Housing, and Urban Affairs of the Senate a report on the actions taken and studies completed as required by subsection (a).

SEC. 405. FACTORS TO BE TAKEN INTO ACCOUNT IN DEVELOPING UNITED STATES POLICY TOWARD DEBT REDUCTION FOR CERTAIN HIGHLY INDEBTED COUNTRIES; REPORT TO THE CONGRESS.

(a) FACTORS TO BE TAKEN INTO ACCOUNT.-In developing the policy of the United States Government with respect to debt reduction for each highly indebted country which has a substantial share of the export market for 1 or more agricultural commodities the export market for which the United States also has a substantial share, the Secretary of the Treasury shall consider among other factors the effects of such policy on:

(1) United States exports of such commodities.

(2) The world price of such commodities.

(3) Domestic agricultural production and land distribution patterns in such country.

(4) The volume of exports from such country of agricultural commodities the export market for which such country has a substantial share of.

(5) Basic nutrition levels in such country.

(b) REPORT TO THE CONGRESS.-Before the end of the 12-month period beginning on the date of the enactment of this section, the

「

Secretary of the Treasury shall submit a report to the Congress on the potential impact of such policy on such factors in the highly indebted countries.

(c) HIGHLY INDEBTED COUNTRY DEFINED.-As used in this section, the term "highly indebted country" means any country designated as a "Highly Indebted Country" in the annual World Debt Tables most recently published by the International Bank for Reconstruction and Development before the date of the enactment of this section.

SEC. 406. SENSE OF THE CONGRESS THAT AGREEMENTS TO REDUCE DEBT BURDEN SHOULD BE ACCOMPANIED BY TRADE LIBERALIZATION.

(a) FINDINGS.-The Congress finds that

(1) Third World debtor nations have often been forced to raise trade barriers in order to accumulate foreign exchange surpluses to repay debt obligations;

(2) trade flows between such nations and the United States have lessened due to the debt crisis;

(3) the reduction of trade barriers would benefit the world economy and promote economic growth; and

(4) the Brady plan encourages debt reduction agreements on behalf of domestic financial institutions.

(b) SENSE OF THE CONGRESS.-It is the sense of Congress that the Secretary of the Treasury should continue to encourage trade liberalization as an element of economic reform programs.

SEC. 407.11 LINKAGE OF DEBT REDUCTION LOANS TO REDUCTION IN DRUG TRAFFICKING; REPORT TO CONGRESS.

(a) FINDINGS.-The Congress finds that

(1) the Brady Initiative is a positive step, recognizing as it does the need for reducing the debt and debt service burdens of the indebted developing countries;

(2) the multilateral development banks should, as part of this debt reduction process, encourage such countries to further reform their economies by reducing their dependence on production and trafficking of illicit narcotics; and

(3) reduction of debt should relieve some of the financial burden on these countries, and thereby enable them to rely on legal income-generating activities.

(b) INSTRUCTION OF UNITED STATES EXECUTIVE DIRECTORS.-The Secretary of the Treasury shall instruct the United States Executive Director of each multilateral development bank that, in voting with respect to loans from the multilateral development bank to reduce the debt and debt burden of borrowing countries which are major producers, processors, traffickers, or exporters of illegal drugs to the United States, the Executive Director shall give preference to those countries which show marked improvement in reducing the volume of cultivation, processing, trafficking, and export to the United States of illegal drugs. In making a determination under the preceding sentence with respect to a country's improvement, the Secretary of the Treasury shall consult with the heads of the relevant agencies.

11 22 U.S.C. 2291 note.

(c) REPORT TO CONGRESS.-The Secretary of the Treasury shall include, in the detailed accounting required by section 2018(c) of the International Narcotics Control Act of 1986 (22 U.S.C. 2191 note), relating to multilateral development bank assistance for drug eradication and crop substitution programs, an additional discussion of the steps taken and the progress made in implementing the goals set forth in subsection (b) of this section, and further steps needed to secure the achievement of these goals.

(d) DEFINITIONS.-As used in this section

(1) the term "multilateral development bank" includes the International Bank for Reconstruction and Development, the International Development Association, the International Finance Corporation, the Inter-American Development Bank, the Inter-American Investment Corporation, the Asian Development Bank, the African Development Bank, and the African Development Fund; and

(2) the term "illegal drugs" means "narcotic and psychotropic drugs and other controlled substances", as defined in section 481(i)(3) of the Foreign Assistance Act of 1961 (22 U.S.C. 2291(i)(3)).

TITLE V-ALLEVIATION OF POVERTY; ENVIRONMENTAL PROVISIONS; DEBT-FOR-DEVELOPMENT SWAPS; CONSOLIDATION OF REPORTING REQUIREMENTS

SUBTITLE A-ALLEVIATION OF POVERTY

Sec. 501.12 INCREASING THE PRODUCTIVE ECONOMIC PARTICIPATION OF THE POOR.

SUBTITLE B-INTERNATIONAL DEBT EXCHANGES AND THE

ENVIRONMENT

SEC. 511. SENSE OF THE CONGRESS RESOLUTION REGARDING ENVIRONMENTAL POLICY AND INTERNATIONAL DEBT EXCHANGES.

It is the sense of the Congress that—

(1) the Secretary of the Treasury should include support for sustainable development and conservation projects when providing a framework for negotiating or facilitating exchanges or reductions of commercial debt of foreign countries; and

(2) that in assisting or facilitating the reduction of debt of heavily indebted foreign countries, through multilateral institutions such as the International Monetary Fund or the International Bank for Reconstruction and Development, the Secretary of State and the Secretary of the Treasury should

(A) support efforts to provide adequate resources for sustainable development and conservation projects as a component of the restructured commercial bank debt of that country; and

(B) in providing such support, seek to assure that—

12 22 U.S.C. 262p-5. Sec. 501 amended the International Financial Institutions Act, redesignating sec. 1613 as 1614 (as added by sec. 206 of this Act), and adding a new sec. 1613. Sec. 1614 is further redesignated sec. 1617 by sec. 512 of this Act, which also adds new secs. 1614-1616. For text, see page 184.