Argentina - Economic memorandum

Report No. 1282-AR I iur tconomic iviemoranuum on Argentina September 8, 1976 Latin America and the Caribbean Regional Office FOR OFFICIAL USE ONLY Document of the World Bank This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Year A$ per US Dollar- 1973 9.35 1974 8.87 1975 27.39 1976 140.17- 1/ The above currency equivalents are based on the official exchange rates. Because of the existence of multiple exchange rates, the effective rates have depended on the extent to which transactions were carried out at the "free" market rate. 2/ It is estimated that on June 30, 1976 the effective weighted average export/import rate was about A$195 per US$.  FOR OFFICIAL USE ONLY This report was prepared by Jan Peter Wogart on the basis of the findings of an economic mission to Argentina in May/June 1976. This docunient hu a rtricted distribution and may be used by recipients only in the performanc of their oMcial duties. Its contents may not otherwise be disclosed without World Bank auth@risatbl.   TABLE OF CONTENTS Page No. COUNTRY DATA MAP SUMMARY AND CONCLUSIONS i-vi I. INTRODUCTION ................................... 1 II. ECONOMIC POLICIES, 1974-1975 .... ............... 3 III. THE RECONSTRUCTION PROGRAM ..... ................ 5 IV. IMPACT OF PROGRAM ON ECONOY .8 V. STABILITY AND GROWTH .11 Supply-Oriented Policies . 11 Demand-Oriented Policies .13 Balance-of-Payments Measures .21 VI. GROWTH PROSPECTS AND EXTERNAL CAPITAL REQUIREMENTS 24 VII. STATISTICAL APPENDIX   LIST OF TABLES IN TEXT Page No. 1. Gross Domestic Product at Factor Cost 8 2. Summary Balance of Payments, 1974-76 10 3. Public Sector Fiscal Operations, 1972-75 13 4. Real Public Sector Tariffs, 1972-76 and Actual 15 and Scheduled Increases 5. Revenues from 1976 Tax Changes 18 6. Growth Rates of Credit and Liabilities of 20 Financial System 7. Capital Requirements and Financing 25 LIST OF CHARTS IN TEXT Chart No. 1: Synopsis of the Program for Recovery, 7a Reorganization and Expansion of the Argentine Economy   Page 1 of 2 pages COUNTRY DATA - ARGENTINA AREA 2 POPULATION DENSITY 2,776,889km 25.8 million (1975) 8.5 per km2 Rate of Growth: 1.4 (from 1970 to 1974) 15 per km2 of arable land POPULATION CHARACTERISTICS (1974) Crude Birth Rate (per 1,000) 22 HEALTH (1970) Crude Death Rate (per 1,000) 9 Population per physician 530 Infant Mortality (per 1,000 live births) 59 Population per hospital bed 180 INCOME DISTRIBUTION (1970) DISTRIBUTION OF LAND OWNERSHIP (1970) % of national income, highest quintile 47 % owned by top 10% of owners lowest quintile 5 % owned by smallest 10% of owners ACCESS TO'PIPED WATER (1970) ACCESS TO ELECTRICITY (1960) % of population - urban .. % of population - urban ) - rural .. - rural 78 NUTRITION (1973) EDUCATION (1970) Calorie intake as % of requirements 115 Adult literacy rate % 93 Per capita protein intake 100 Primary school enrollment % 104 GNP PER CAPITA in 1975- : US$1,592 GROSS NATIONAL PRODUCT (1975) ANNUAL RATE OF GROWTH (% constant prices) US$ Mln. % 1965-70 1970-73 1973-76 GNP at Market Prices 41,074 100.0 4.1 4.1 1.6 Gross Domestic Investment 7,845 19.1 6.6 5.0 -5.3 Gross National Saving 6,942 16.9 4.2 7.0 -4.5 Current Account Balance -1,027 -2.5 - - - Exports of Goods, NFS 2,875 7.0 2.6 7.0 1.9 Imports of Goods, NFS 3,573 8.7 4.2 -1.4 -1.8 OUTPUT, LABOR FORCE AND PRODUCTIVITY (1973) Value Addea Labor Force2/ V. A. Per Worker US$ Mln. % Mln. % US$ x Agriculture 4,888 12.3 1.1 15.5 4,444 79.4 Industry 17,286 43.5 2.7 38.0 6,402 114.4 Services 17,564 44.2 3.3 46.5 5,322 95.1 Total/Average 39,758 100.0 7.1 100.0 2951.0 100.0 GOVERNMENT FINANCE General Government/ Treasury (a$ Mln.) % of GDP (a$ Mln.) % of GDP 1975 1970 1975 1975 1972 1975 Current Receipts 3,216 29.1 25.6 50.24/ 5.64/ 3.7 Current Expenditure 3,929 23.3 32.2 184.8- 8.0- 15.3- Current Surplus -713 5.8 -6.6 -134.6 -2.4 -11.6 Capital Expenditures 7,170 7.3 9.4 6.7 0.7 0.5 External Assistance (net) 538 0.8 0.4 - - - 1/ The GNP and per capita GNP estimates are at 1975 market prices, calculated on an average of 1973 and 1975 exchange rates. Earlier Atlas figures have been revised, because of the dis- torted effects of the 1974 revaluation. All other conversions to dollars in this table are at the average exchange rate prevailing during the period covered. 2/ Total labor force; unemployed are allocated to sector of their normal occupation. 3/ Consolidated public sector. 4/ Expenditures include transfers to private and nublic entities.  Page 2 of 2 MONEY, CREDIT AND PRICES 1970 1971 1972 1973 1974 1975 (a$ billion outstanding end period) Money and Quasi Money 25.0 36.7 54.5 103.8 161.7 397.2 Bank credit to Public Sector 6.0 9.0 14.8 30.0 44.1 155.6 Bank credit to Private Sector 21.3 32.1 42.6 78.7 122.1 317.2 (Percentages or Index Numbers) Money and Quasi Money as % of GDP 27.3 27.7 24.8 28.5 33.1 29.5 General Price Index (1970 = 100) 100.0 148.2 260.8 341.2 404.3 2,083.4 Annual percentage charges in: General Price Index (wholesale) 16.2 48.2 76.0 30.8 36.1 348.7 Bank credit to Public Sector - 50.0 64.4 102.7 47.0 252.8 Bank credit to Private Sector - 50.7 48.2 65.3 55.1 160.8 BALANCE OF PAYMENTS MERCHANDISE EXPORTS (AVERAGE 1973-75) 1973 1974 1975 US$ Mln % (in millions US$) Cereals 1,090 32.1 Oils & Fats 235 6.9 Exports of Goods, NFS 2,197 4,791 3,749 Meats 498 14.7 Imports of Goods, NFS 2,131 4,331 4,647 Wool 130 3.8 Resource Gap (deficit = 1) 66 460 -898 Hides & Skins 96 2.8 Other Agriculture 575 17.1 Interest Payments (net) -222 -332 -457 Exports Other Factor Payments (net) -70 -35 -16 Industrial Exports 758 22.3 Net Transfers -3 - 6 Fuels & Lubricants 10 0.3 Balance on Current Account -159 128 -1,349 - Total 3,392 100.0 Direct Foreign Investment 11 10 0 Net MLT Borrowing 189 412 376 EXTERNAL DEBT, DECEMBER 31, 1975 Disbursements 576 1,262 1,330 Amortization -387 -850 -955 US$ Bil. Basic Balance 41 550 -974 Public Debt, incl. guaranteed 3.2 Capital Grants - - - Non-Guaranteed Private Debt 3.8 Other Capital (net) 89 -504 193 Total outstanding & Disb. 7.0 Other Items n.e.i. 1/ Increase in Reserves DEBT SERVICE RATIO for 1975-' = increase) -130 -46 781 Public Debt, incl. guaranteed 20.0 Non-Guaranteed Private Debt 16.1 Total outstanding & Disb. 37.0 IBRD/IDA LENDING (12/31/1975 (Million US$): IBRD IDA RATE OF EXCHANGE 2/ Outstanding & Disbursed 341 - December 31, 1975 June 30, 1976 Undisbursed 60 - Outstanding incl. Undisbursed 401 - US$ 1.00 = a$60.89 US$ 1.00 = a$140.17 a$ 1.00 = US$0.016 a$ 1.00 = US$0.007 1/ Ratio of Debt Service to Exports of Goods and Non-Factor Services plus workers' remittances. 2/ See footnotes on back of cover page.  IBRD 12432 t B O L I V I A\ / Z AUGUST 1976 SUTH I A At-' AM E R I CA . omvzvl l ncos 34 N ~~~~~~~~~~~~~~~~~~~~~~~P A R A Y | 0~~~~00, 7 , 4 ASAN RAFAEtLlUISl f i ENQS AIRES /~~~~~~~~~~~~si .'' '/ATr nIna PA/A,AT C f 4 >-----l @ S~~~~~~~~~~~~~~ANT t_()t rIAnArb N 'b \ \/ **I-. // / U\ '9 \Bernerdo de Ivge~~~~~~~antagode \~~~~JA C6lOA rc,dvs SANTIAGO~~~~~~~~~~~~R0 RINE leke NeAe,I HvepHuoow,i'( / R iO NEGRO ) R Z R<<FAroNe/ JUA EDOBA ; , i SA JU T/- FEu o o Mso ) Ge/NR AN I A ENTINA rL, fa - __ >,_ COMODORO -,7 RI tVADAVIA I ~~~~~~ \ g S S ~~~~~~-~-.-Prrmary roods IVI/ Al .l n Fi, Rny<)Paved or grovel roads 14 tJ ZJ t 1 1g ~~~~~~~~------Earth roads tt < J S A N TA 58) v ~~~~~~* PrnncipOI airporIs @> (g -- ___ El Salade V. e~~~~~~~~~~~~~~~~~~~~~~~~5 80 65 5e\15 , 23 0, 0 0 QU N MA DE PLATAADE 40- 70- Huap5   SUMMARY AND CONCLUSIONS 1. Argentina is endowed with a favorable human and natural resource base and enjoys a relatively high GDP per capita, which reached almost US$1,600 in 1975. However, it is by no means fully developed and its income level masks deep-seated structural imbalances in the economy, mani- fested in its inability to attain stable growth. The core of these imbalances lay not only in the rural versus urban conflict, but also in the clash of interests between the industrial and agricultural entrepreneurs on the one hand and the demands of a large mass of well-organized employees and workers on the other. The socio-economic tensions which were generated by these diverse interest groups made it impossible to pursue reasonably sound economic policies for any considerable time period. With the view of moving the economy forward, the present government is aiming at reducing these tensions by stressing the convergence of the industrial and agricultural interests. Although the country was able to achieve an average annual rate of growth of GDP of 4.4% during the ten years ending in 1974, equivalent to about 2.8% in per capita terms, the pace of growth has been uneven, marked by persistent inflation and accompanied periodically by severe balance-of-payments difficulties. 2. Although Argentina's economic development in recent decades has been characterized by a "stop-go" syndrome, the economic and financial chaos of 1975/76 was virtually without precedent in the country's history. The annual rate of inflation which reached 355% in 1975, accelerated to an annual rate of over 1,000% during the first quarter of 1976 with a rapidly accelerating momentum. The last few months of the previous administration saw a total breakdown of economic management which propelled the nation toward hyper- inflation and created very serious external payments difficulties. The military forces which had been hesitant to displace the elected authorities finally took the reins of government on March 24, 1976. 3. The economic and financial chaos inherited by the military govern- ment when it came to power in March 1976 dictated in large measure the priorities of its actions. The most urgent tasks before the authorities were to halt hyperinflation and to preclude default on its international financial obligations. Since inflationary expectations manifested themselves in a flight from the peso and the consequent skyrocketing of the free market exchange rate, the authorities took prompt action to alter this pernicious situation. To contain the means of payment and reduce the velocity of money, the authorities rendered the cost of credit more expensive through higher interest rates and intensified the use of indexed peso-denominated government bonds. With the view of further strengthening the peso, an ever-increasing proportion of export transactions was placed in the free market and a US$300 million short-term credit from US and European banks was arranged. To avoid the adverse consequences of cessation of payments on external obligations, the authorities successfully rolled over about US$350 million of payments due on public sector obligations from the second to the last quarter of 1976. These measures resulted in a sharp drop in the free exchange rate from 380 pesos per dollar to 240-250 within one month, indicating initial success in lowering inflationary expectations and halting capital flight.  (ii) 4. In pursuit of further deceleration of inflation, the authorities undertook the twin task of breaking the wage-price spiral and eliminating price controls which had led to a distortion of relative prices and para- doxically fueled inflation by generating widespread scarcities. To break the wage-price spiral, the authorities instituted on a temporary basis a procedure whereby they preempted the sole right to grant wage increases. Wages may not be increased except as decreed by the government. Adoption of such a strong incomes policy led to a continuation of the downward trend in real wages which ensued in the latter part of 1975 and early 1976, as nominal wage increases failed to keep pace with price rises and mounting scarcities of goods. A 15% wage increase was authorized in June and another of 12% for September. By May 1976, when real wages reached their lowest level, it is estimated that they were approximately 80% of the average for 1971-75. Indications are that since June real wages have improved somewhat. The combined effect of the decline in the free exchange rate and the change in incomes policy produced the intended deceleration of inflation. The first major slowdown occurred in May, when the cost-of-living index increased by 13% as compared with 38% in March, and it further dropped to 2.9% in June. In spite of additional increases in prices of public sector services instituted in July, the rate of inflation was only 4.2% that month, which was well within the limits to maintain overall price increases of around 5% monthly by year-end. 5. The present authorities have recognized that sound management of public finances is the cornerstone of any successful campaign against hyper- inflation. In large measure the debilitating events in the economy were brought about by a rapid deterioration in public sector finances culminating in four-fifths of the budget relying on new money issue by the Central Bank by March 1976. Rehabilitation of public finances will require three basic elements: (i) restoration of the earlier value of tax revenues; (ii) adjust- ment in prices of public sector enterprises; and (iii) reduction in public sector expenditures. To achieve the first objective, the government has indexed many tax liabilities and thereby removed any incentive to postpone payments. Moreover, a deceleration in inflation should by itself remove the advantage associated with deferred tax payments. In addition to relying on these fundamental factors, the authorities have raised the most important value-added tax from 13% to 16%, have reinstated the high-yielding provincial turnover tax at 1.6% and increased the provincial property tax with the view of reducing budgetary transfers to the provinces, have undertaken a reassess- ment of urban and rural property, have reinstated the levy on capital of enterprises as well as enacted a number of other minor tax measures. With respect to state economic enterprises, the government has adopted a program of phased increases in prices of publicly produced goods and services. As a first step, transportation and electricity rates were raised. Further sub- stantial price adjustments were made in almost all other public enterprises with an effective weighted average increase of 70% between March and September On the expenditure side, savings are being achieved in the largest expenditure category of salaries by both gradually reducing the payrolls padded in recent years and through an emergency reduction in the real wages of public sector employees. Provided the badly debilitated tax administration structure is promptly rehabilitated, the Treasury deficit should be reduced to 7% of GDP in 1976, compared to over 12% in 1975.  6. The recessionary treid which began in the second half of 1975 and continued into the first quarter of 1976 does not appear to have been exacerbated by the government's stabilization program. GDP which had fallen in the last quarter of 1975 to a level almost 7% below that of the previous year is now estimated to decline by 4% this year. It appears that during the second quarter of this year the economy has been experiencing a large- scale inventory liquidation phase. Producers, wholesalers, retailers and even households which previously had hoarded goods in preference to money were finding the practice too expensive with the cost of money greatly exceeding its depreciation and were rapidly dishoarding. This explains in part the tenfold drop in the rate of inflation between March and June. It appears reasonable to expect that the stabilization measures, which are introducing a semblance of order to the economy and have provided a strong impetus to exports, will also serve as a basis for revival of GDP growth in 1977. 7. Argentina's balance of payments is beginning to show signs of improvement after a disastrous year in 1975, when recorded export earnings fell by over 20%. The drop was due not only to the closing of the EEC market for meat, but also to export taxes and to smuggling stimulated by the large spread between the official and the free market exchange rate. Whereas the volume of wheat exports is expected to nearly double this year, little immediate improvement is expected in total foreign exchange earnings from grain exports because of generally lower prices than last year and a poor corn crop. Most other export categories, however, are already showing signs of recovery. Beef export volume is about double last year's level, although still substantially below the 1972 peak. The EEC is now permitting beef imports pari passu with its own sales abroad from stock. The volume of manufactured exports has also increased noticeably, surpassing the 1974 level. Overall, the government is projecting an increase in export receipts of about 20% this year over 1975 to US$3.6 billion, which should stimulate the economy. Imports are expected to decline from US$4 billion in 1975 to about US$3.3 billion this year, reflecting depressed economic activity in industry, drawdowns of stocks accumulated in 1975 and removal of incentives to overinvoice imports by a realistic exchange rate. The increase in export receipts and reduction of import payments should produce a swing of about US$1,370 million in the resource balance, from a gap of US$900 million in 1975 to a surplus of US$470 million in 1976. Factor payments are, however, expected to increase because of high interest payments and a current account deficit of about US$100 million is forecast for this year. In addition, because of large payments due on capital account, a substantial overall balance-of-payments deficit is projected for 1976. 8. The spectre of default on external debt, which seemed imminent at the beginning of the year, has vanished. This has been accomplished through a mammoth funding operation. The government upon taking office secured a US$300 million 180-day loan from commercial banks and had rolled over about US$350 million of payments due on public sector debts from the second to the fourth quarter of this year. It has obtained a standby credit from the IMF  (iv) of SDR260 million (about US$300 million). This incudes the first credit tranche of about US$180 million to be used this year and about US$120 million or two-thirds of the second credit tranche for next year's availability. The government is currently negotiating with commercial banks in the US, Canada, Europe, and Japan for a medium-term loan and expects to conclude shortly an agreement for approximately US$870 million with a four-year maturity. These loans, the proceeds of which are to become available upon signing, are related to Argentina's standby agreement with IMF of August 6, 1976. These loans and credits, although needed to make payments on the previously short-term bank borrowing and the rollovers, should nevertheless strengthen Argentina's foreign exchange position and further improve confidence in the peso. More- over, since the loans and credits from the banks are of a medium-term character, they should contribute to an improvement in the external debt structure. 9. The authorities recognize that export agriculture will continue to be, for the foreseeable future, the prime generator of foreign exchange. By means of a combination of favorable policy instruments, including prices, taxation, exchange rate, credit, etc., it is intended to increase agricultural output. With a more favorable policy environment, increasing agricultural output will require larger inputs of fixed long-term capital and a corres- ponding increase in long-term credit. In an integrated approach to developing export agriculture, attention will have to be paid to processing industries, especially meat processing. Additional investment will be required to permit modernization and expansion of capacity of this industry and its adaptation to increasing sanitary standards in world markets as well as to rapidly diversifying demand for food products based on beef. Similarly, there will be a definite need for additional facilities to handle expanded grain and beef trade both in storage and shipping. The government is taking steps to establish these facilities by assigning them high priority in the public investment program. 10. In the industrial sector, current government thinking is in the direction of decreasing the high protection of many industries and channelling financial resources into those branches which could compete with industrial products of other nations. A new industrial promotion law seeking to encourage investment, a mining law, a technology transfer law, and a tariff reform program are under active consideration. A new foreign investment law encouraging direct foreign investment has already been enacted. The clearest policy directive has been given to the energy sector. The authorities have indicated their intention to invite domestic and foreign private companies to assist in the production of petroleum in order to curb the increasing burden of oil imports. These imports currently run at US$400 million annually and are expected to increase to US$1.5 billion by 1980, if the country does not make prompt efforts to increase production. In spite of sustained exploration efforts by previous governments, the rate of new discoveries of oil fields has been rather small. To gradually diminish oil imports and  (v) become self-sufficient in the years to come, a three-step program has been adopted. These steps include: (i) extension of areas currently exploited by private companies to stimulate larger production at lower per unit costs; (ii) permission to private Argentine enterprises to bid for the exploitation of minor deposits, which are considered uneconomical for YPF; and (iii) invitation of foreign oil companies to participate in secondary recovery operations and in exploration and exploitation of off-shore oil fields. 11. With appropriate and sustained economic management, Argentina should be capable of averaging at least a 5% growth rate annually during the recon- struction period. Beyond this phase, a somewhat higher growth rate should prove feasible without encountering balance-of-payments difficulties. With its low rate of population increase, this would permit steady, significant increases in living standards. Given the demonstrated volatility of Argentina's export earnings, an appropriate development strategy would entail a reduction of short-term external debt and rebuilding of foreign exchange reserves. This would reduce the vulnerability of domestic product and income to sharp fluctuations in export receipts. Thus, while export prospects for the next few years look promising, it.will be necessary to moderate the pace of growth so that a current account surplus can be generated. In addition, considerable external financial assistance will be required to restructure the country's external debt. 12. Because of the shortness of their tenure, the authorities have not yet had the opportunity to quantify their longer-term program and prepare a plan for its financing from internal and external sources. However, it appears that reasonably realistic and consistent projections of growth in exports and imports would allow the country to generate a trade surplus approaching US$1 billion annually between 1977 and 1980. This surplus would be adequate to cover factor service payments and still yield a current account surplus of over US$350 million annually. However, given Argentina's heavy amortization payments, and the need to rebuild its foreign exchange reserves, considerable gross capital inflows will be required, averaging US$1.1 billion annually for the next four years. In the event that imports of capital goods for private and public investment substantially exceed the levels assumed by the model, to maintain its consistency with the two major constraints of foreign exchange reserves and debt service burden, the increased imports would have to be compensated by a higher level of exports and/or financed by increased direct foreign private investment. Both are within the realm of possibility. Argentina's exports are assumed by the model to increase from 8% to almost 10% of GDP by 1980, which is only about one-third of what they once were, and the declared policies of the authorities to "open up" the economy mav stimulate exDort Rrowth considerablv faster than the above projections imply. Similarly, the pace of direct private foreign investments may greatly surpass the assumed magnitudes once confidence is reestablished under the new foreign investment law.  (vi) 13. The immediate capital requirements of roughly US$1 billion for the restructuring of the short-term external debt in 1976/77 and for amortization and interest payments on this debt between 1978/80 are being met through arrangements with IMF and private commercial banks. Beyond these emergency operations, the external capital requirements of roughly US$1.1 billion annually will have to rely on a systematic and coordinated program of external borrowing on appropriate terms. Under the assumption that somewhere between US$600-700 million in long-term capital may be secured from bilateral arrangements, suppliers credits, world capital markets and foreign commercial banks, there will still remain a gap of US$300 to US$400 million for other lenders to fill. This pattern of external capital inflows plus the projected surpluses in the current account in the balance of payments should enable Argentina to reconstitute the badly depleted foreign exchange reserves under the previous administration to a reasonably comfortable level of some three months of imports. 14. Argentina's debt management problems result from the maturity structure more than from the level of its external debt. The latter is not excessively high. It is estimated that public and publicly guaranteed debt bro- outstanding and disbursed was US$3.2 billion at the end of 1975. Private external debt amounted to roughly US$3.8 billion, of which "swaps" with a maturity of six months constituted $US1.3 billion, and short-term import financing, also with a six-month maturi't US$1.5 billion. The latter in large measure is revolving in character and normally excluded from medium- and long-term debt figures. However, prior to the previously mentioned funding operations, almost one-third of the outstanding public debt and almost one-half of the private debt outstanding at the end of 1975 fell due during 1976. Over 70% of the total external debt falls due within four years. This maturity structure constitutes a serious challenge to sound monetary and foreign exchange reserve management and will require realign- ment. The external public debt service ratio during the current year is estimated to reach 24%. With the substantial substitution of public for private debt projected, the public debt service ratio would decline to about 19% in 1979 and 16% in 1980 because of the improvement in the term structure and the expected increases in export earnings. Provided the authorities successfully implement their policies of reconstructing the economy and manage the external indebtedness along the above indicated lines, debt service should not prove unduly burdensome. Under the circumstances, Argentina should be able to service the estimated external capital require- ments essential for her economic rehabilitation.  I. INTRODUCTION 1. This report addresses itself primarily to the internal and external financial difficulties Argentina experienced between 1974 and 1976 and the most recent stabilization program implemented since March of this year. In addition, it analyzes the short- and medium-term outlook of the Argentine economy. A more thorough review of the economy and its recuperative powers over the longer-term will be undertaken at a later stage. 2. Although Argentina's economic development in recent decades has been characterized by a "stop-go" syndrome, the economic and financial chaos of 1975/76 was virtually without precedent in the country's history. The annual rate of inflation which reached 355% in 1975, accelerated to an annual rate of about 1,000% during the first quarter of 1976 with a rapidly accelerating momentum. The last few months of the previous administration saw a total breakdown of economic management which propelled the nation toward hyperinflation and created very serious external payments difficulties. The military forces which had been hesitant to displace the elected authorities finally took the reins of government on March 24, 1976. 3. Argentina is endowed with a favorable human and natural resource base and enjoys a relatively high GDP per capita, which reached almost US$1,600 in 1975. However, it is by no means fully developed and its income level masks deep-seated structural imbalances in the economy, mani- fested in its inability to attain stable growth. The core of these imba- lances lay not only in the rural versus urban conflict but also in the clash of interests between the industrial and agricultural entrepreneurs on the one hand and the demands of a large mass of well organized employees and workers on the other. The socio-economic tensions which were generated by these diverse interest groups made it impossible to pursue reasonably sound economic policies for any considerable time period. With the view of moving the economy forward, the present government is aiming at reducing these tensions by stressing the convergence of industrial and agricultural interests. Although the country was able to achieve an average annual rate of growth of GDP of 4.4% during the ten years ending in 1974, equivalent to about 2.8% in per capita terms, the pace of growth has been uneven, marked by persistent inflation and accompanied periodically by severe balance-of-payments difficulties. 4. Evolution of the economy has thus followed a "stop-go" pattern reflecting a disparity between the slow and irregular growth of export- generating activities, especially agriculture, and the heavy import require- ments of the largely domestic-oriented industrial sector. The paradox of Argentina's development is that despite its relatively high per capita income and slow population growth, the performance of export-oriented  activity has been inadequate to provide the foreign exchange earnings necessary to achieve the government's urban income-employment objectives. Argentina's exports constitute only around 8% of GDP while in similarly richly endowed economies, such as Australia and Canada, the export-to-GDP- ratio is about 16% and 25%, respectively. Under these circumstances, attempts on the part of previous governments to sustain high rates of growth of urban incomes, industrial output and employment through liberal wage policy, expansionary monetary and fiscal mangement have tended to produce periodic balance-of-payments difficulties. These have also, at times, been aggravated by poor crops and/or by the cyclical behavior of the livestock industry.  -3- II. ECONOMIC POLICIES 1974-1975 5. Argentina's balance-of-payments situation was exceptionally favor- able from the beginning of 1973 to mid-1974 as production of most grain crops was substantially above average and world prices of grains and beef were at historic peaks. With the rapid growth of exports, the government was able to follow a sharply expansionary policy which combined strong increases in nominal wage rates, substantial budgetary deficits, and rapid credit expansion with rigid price controls and fixed exchange rates. That policy produced boom conditions, as GDP increased by about 6.5% per year during 1973-74, spurred by rapid growth of consumption (7% in 1973 and 9% in 1974), resulting from the sharp increase in real wages. However, large budgetary deficits (5 to 7% of GDP for the Central Government and 8 to 9% for the public sector as a whole) and rapid monetary expansion (domestic credit more than doubled between the end of 1972 and 1974) led to strong inflationary pressures. 6. A drastic reversal of export performance occurred in mid-1974 as production of grains declined by 15% because of poor weather, international grain prices began to fall and the effects of the EEC ban on beef imports began to be felt. Deterioration of the foreign sector coincided with an intensification of domestic, social and political strains following the death of President Peron. In the ensuing contention for power, management of the domestic economy was effectively abandoned and inflationary pressures, built up during 1973 and early 1974, were unleashed (see Table 9.1). About the only policy instrument actively used was a periodic depreciation of the exchange rate after mid-1975 in the hope of averting a balance-of-payments crisis. Despite deteriorating terms of trade and shrinking domestic income, nominal wages were adjusted upward continuously in a vain effort to maintain the high level of real wages established earlier (see Table 9.2). The country thus found itself locked into a vicious wage-price spiral. Inflationary pressures were exacerbated by a rapidly deteriorating fiscal situation, reflecting built- in lags in tax collections, a breakdown in tax administration and accelerated hiring of new personnel by the public sector. Monetary expansion continued unchecked, propelled by heavy borrowing from the Central Bank by the Treasury and the expansionary effects of roll-overs of "swaps" (about US$1.2 billion of short-term borrowing from abroad by private companies) and of peso losses incurred by the Central Bank as a result of forward exchange purchase guarantees given to importers. 7. Various attempts to break inflation and improve the balance of pay- ments in 1975 were unsuccessful. A shock program in June-July 1975 consisting of massive devaluation, adjustments in public sector tariffs and wage restraint, backfired as the government was unable to persuade the unions to moderate their demands during negotiations in a fully-employed economy which was overheated by high consumer demand. The wage increases agreed upon more than offset the devaluation and price adjustments, propelling inflation by over 60% within two months. In September of 1975, a new economic team proposed a more moderate program, which was attempting to combine fiscal-monetary restraint with mainten- ance of high urban incomes and employment. Although assistance through the  - 4 - Oil Facility and the Compensatory Financing Facility of the IMF was useful in temporarily coping with an impending balance-of-payments crisis, the incom- patibility of the government's conflicting goals and the inability to reverse inflationary expectations led to a further deterioration of the Argentine economy. GDP declined by 2% in 1975 with adverse effects on employment in the private sector. 8. When the present military authorities took over the government in March 1976, economic difficulties had reached critical proportions. The annual rate of increase in the domestic prices which had reached 355% in 1975, accelerated to an annual rate of around 1,000% in the first quarter of 1976 and was rapidly gaining momentum. The fiscal situation had deteriorated to the point where Treasury revenues were covering less than 20% of expenditures by end of first quarter of 1976, and net foreign exchange reserves were nearly exhausted. Civilian authorities seemed incapable of regaining effective control over the economy and, under the circumstances, the military decided to intervene.  -5- III. THE RECONSTRUCTION PROGRAM 9. Before taking office, the Armed Forces asked several prominent economists to present outlines of their economic programs so that the military could reach an internal agreement on a set of economic policy measures and a general course of action to be followed. The new government adopted a program, the core of which consists of removing price controls, reducing state payrolls, eliminating export taxes, restoring prices of publicly-produced goods and services to economic levels, reducing the role of state enterprises, simplifying the foreign exchange and payments systems and encouraging private capital formation, including direct private foreign investment. 10. The economic and financial chaos inherited by the military govern- ment when it came to power in March 1976 dictated in large measure the priorities of its actions. The most urgent tasks before the authorities were to halt hyperinflation and to preclude default on its international financial obligations. Since inflationary expectations manifested themselves in a flight from the peso and the consequent skyrocketing of the free market exchange rate, the authorities took prompt action to alter this pernicious situation. To contain the means of payment and reduce the velocity of money the authorities rendered the cost of credit more expensive through higher interest rates and intensified the use of indexed peso-denominated govern- ment bonds. With the view of further strengthening the peso, an ever increasing proportion of export transactions was placed in the free market and a US$300 million short-term credit from US and European banks was arranged. To avoid the adverse consequences of cessation of payments on external obligations, the authorities successfully rolled over about US$350 million of payments due on public sector obligations from the second to free the last quarter of 1976. These measures resulted in a sharp drop in the ex- change rate from 380 pesos per dollar to 240-250 within one month indicating initial success in lowering inflationary expectations and halting capital flight. 11. With the aim of further decelerating inflationary expectations, the authorities undertook the twin task of breaking the wage-price spiral and eliminating price controls which had led to a distortion of relative prices and paradoxically fueled inflation by generating widespread scarcities. To break the wage-price spiral, the authorities instituted on a temporary basis a procedure whereby they preempted the sole right to grant wage increases. Wages may not be increased except as decreed by the government. Adoption of such a strong incomes policy led to a continuation of the downward trend in real wages which ensued in the latter part of 1975 and early 1976, as nominal wage increases failed to keep pace with price rises and mounting scarcities of goods. A 15% wage increase was authorized in June and another of 12% for September. By May 1976, when real wages reached their lowest level, it is estimated that they were approximately 80% of the average for 1971-75. Indications are that since June real wages have improved somewhat.  - 6 - The combined effect of the decline in the free exchange rate and the change in incomes policy produced the intended deceleration of inflation. The first major slowdown occurred in May, when the cost-of-living index increased by 13% as compared with 38% in March, and it further dropped to 2.9% in June. In spite of additional increases in prices of public sector services instituted in July, the rate of inflation was only 4.2% that month, which was well within the limits to maintain overall price increases of around 5% monthly by year-end. 12. The combined effect of the decline in the free exchange rate and the change in incomes' policy appears to have produced the intended decelera- tion of inflation. The first major slowdown occurred in May, when the cost- of-living index increased by 13% as compared with 38% in March. A major contributing factor was undoubtedly the dramatic shift from hoarding to dishoarding as the cost of holding inventories mounted. A decline in inflationary expectations also became apparent in the marked shift in holdings of financial assets from government indexed bonds (VNAs) to Treasury bills carrying a fixed interest of 6% per month. The forward price of VNAs also fell quite sharply with the future market price quoted for June 30 only 7% above the June 1 level. Actually, the deceleration of inflation was even faster than anticipated by the traders in "futures" with prices increasing by only 2.9% in June. Since the authorities instituted a time-phased program of price adjustments in the public sector in July, the inflation rate rose to 4.2% during that month, which was still within the limits to maintain overall price increases at around 5% monthly by year-end. 13. The present authorities have recognized that sound management of public finances is the cornerstone of any successful campaign against hyper- inflation. In large measure the debilitating events in the economy were brought about by a rapid deterioration in public sector finances culminating in four-fifths of the budget relying on new money issue by the Central Bank by March 1976. Rehabilitation of public finances will require three basic elements: (i) restoration of the earlier value of tax revenues; (ii) adjust- ment in prices of public sector enterprises; and (iii) reduction in public expenditures. To achieve the first objective, the government has indexed many tax liabilities and thereby removed any incentive to postpone payments. Moreover, a deceleration in inflation should by itself remove the advantage associated with deferred tax payments. In addition to relying on these fundamental factors, the authorities have raised the most important value- added tax from 13 to 16%, have reinstated the high-yielding provincial turn- over tax at 1.6% and increased the provincial property tax with the view of reducing budgetary transfers to the provinces, have undertaken a reasess- ment of urban and rural property, have reinstated the levy on capital of enterprises as well as enacted a number of other minor tax measures. With respect to state economic enterprises, the government has adopted a program  -7- of phased increases in prices of publicly produced goods and services. As a first step, transportation and electricity rates were raised. Further substantial price adjustments were made in almost all other public enter- prises with an effective weighted average increase of 70% between March and September. On the expenditure side, savings are being achieved in the 'largest expenditure category of salaries by both gradually reducing the payrolls padded in recent years and through an emergency reduction in the wages of public sector employees. Provided the badly debilitated tax administration structure is promptly rehabilitated, the Treasury deficit should be reduced to 7% of GDP in 1976, compared to over 12% in 1975. Once the deficit is drastically reduced, it will become easier to simplify and strengthen the overall tax system, to be discussed below. 14. To extricate the economy from the prevailing balance-of-payments difficulties, the government'has taken measures to encourage exports. It has indicated its intention: (1) to establish a single unified free exchange rate in the near future; (2) to eliminate all restrictions on imports and on capital transactions; and (3) to maintain a realistic exchange rate through a crawling peg mechanism. The existing multiple exchange rate system entails effective exchange rates which range from 88 to 269 pesos per dollar for exports, a spread of 200%. On the one hand, most agricultural exporters sell their products at rates below the official rate and are subject to export taxes reaching 50% on wheat and 45% on corn and sorghum. On the other handl there are export subsidies of up to 35% on certain manufactured products. There are also multiple exchange rates for imports ranging from 165 pesos per dollar for petroleum and paper to 250 pesos for certain luxury items. In addition, there is a list of prohibited imports and most non-prohibited imports are subject to quotas. The govern- ment believes that such a complex exchange system and exchange rate differen- tials are economically unjustified and plans to simplify the exchange system as well as to reduce the maximum export tax to 15% and the maximum subsidy to 25% in early 1977. The adoption by the authorities of policies which entail a realistic exchange rate and favor exports of agricultural and industrial products should serve well the objective of strengthening Argentina's external accounts.   - 7a - SYNOPSIS OF THE PROGRAM FOR RECOVERY, REORGANIZATION CHART 1 AND EXPANSION OF THE ARGENTINE ECONOMY Personnel rationalization Elimi na tion of state-company defi cits REDUCTION OF STATE EXPENDITURE Readjustment of size of State enterprises Return of companies back to private enterprise Genuine financing for publilc works INCREASED FISCAL REVENUE Tax delinquency ANTI-INFLATIONARY POLICY REDUCTION OF CURRENCY ISSUANCE Expansion of financial market Reduction of Central Bank support to the Treasury IMPROVEMENT OF FINANCIAL SYSTEM Bank and financing companies legislation GOVERNMENT CONTROL OF SALARY INCREASES . ~~~~~~~~~~Suppression of the price-control system ELIMINATION OF PRICE CONTROLS Special scheme for medicinal products Appeal to leading business companies 0 INCREASED PRODUCTION Increase of acreage farmed; incorporation of new IMPROVED YIELDS farming areas o NEW AGRICULTURAL FRONTIERS Increased yields AGRICULTURAL POLICY AMENDMENT OF MEAT TRADE LEGISLATION Technological modernizatlon ELIMINATION OF QUOTAS FOR SLAUGHTERING Profitability in farming ELIMINATION OF EXPORT DUTIES Resettlement of fiscal land o PRIVATE MARKETING ABROAD OF MEATS AND GRAIN Elimination of minifundia PROMOTION OF BASIC INDUSTRIES Free pricing FACILITIES FOR CAPITALIZATION OF INDUSTRY Foreign support a REHABILITATION OF DOMESTIC MARKET FOR BUSINESS CAPITAL INDUSTRIAL POLICY STEP-UP OF INDUSTRIAL PROMOTION 2: INDUSTRIAL EFFICIENCY SUPPORT FOR LAFTA INDUSTRIAL INTEGRATION oz AMENDMENT OF LABOUR CONTRACT LAW AND REMOVAL OF OBSTACLES TO GREATER PRODUCTIVITY s . ~~~~~~~~~~~~~~~~~~~~~~~Step-up of work in areas exploited INCREASED PRODUCTION OF OIL, GAS, COAL, ETC. Prospecting and exploration of new areas Secondary recovery RATIONALIZATIONOF CONSUMPTIONContracts with local and foreign private companiesi ENERGY P LICY A RATIONALIZATION OF CONSUMPTION ENERGY POLICY FINANCIAL REORGANIZATION OF ELECTRICITY UTILITIES INCREASED POWER OUTPUT FROM OTHER SOURCES PROMOTION OF MINING AT ALL LEVELS Updating of mining legislation MINING POLICY REDUCTION OF FOREIGN DEPENDENCY FOR MINERALS Reform of mining promotion law 0 FOREIGN EXCHANGE MEASURES IEDIATE Adjustment of exchange parity COMBATING SMUGGLING EDiATe and fre exchange rate c) r [ ~~~~~~~~~~~~~~~~~~~~~~~~~Suppression of export duties l t | ~~~~~~~~~INCENTIVATION OF TRADITIONAL AND 2 | ~~~~~~~~~~NON-TRADITIONAL EXPORTSl INCREASE OF FOREIGN TRADE REVITALIZATION OF LAFTA OPENING-UP NEW EXPORT MARKETS GROW INCREASED PARTICIPATION IN WORLD TRADE RESTRUCTURING OF FOREING DEBT FOREIGN DEBT INTERNATIONAL FINANCIAL AID SUPPORT TO INTERNATIONAL ORGANIZATIONS I- r a |RECOGNITION OF NECESSITY OF BUSINESS PROFITS g<~ | | DOMESTIC INVESTMENT rH STIMULATE SAVINGS AND INVESTMENTS NEW FOREIGN INVESTMENTS LEGISLATION | | FOREIGN INVESTMENTS M SETTLNG PENDING DIFFERENCES BETWEEN THE FOREIGN ______INV___ STATE AND SOME PRIVATE CONCERNS  - 8 - IV. IMPACT OF PROGRAM ON ECONOMY 15. The recessionary trend which began in the second half of 1975 and continued into the first quarter of 1976 does not appear to have been exacerbated by the government's stabilization program. As Table 1 below indicates, agriculture experienced a bad year in 1975 and output decreased in all other sectors of the Argentine economy during the second half of year. Whereas agricultural production has recovered and is expected to yield a record wheat harvest this year, activities in manufacturing, services and particularly construction, have suffered some serious setbacks. Although only preliminary data are available for the second quarter of 1976, indications are that the downward trend has not yet been halted. Moreover, it appears that during the second quarter of this year the economy has been experiencing a large-scale inventory liquidation phase. Producers, whole- salers, retailers and even households which hoarded goods in preference to money were finding the practice too expensive with the cost of money greatly exceeding its depreciation and were rapidly dishoarding. This explains in part the tenfold drop in inflation between March and June. It appears reasonable to expect that the stabilization measures, which are introducing a semblance of order to the economy and have provided a strong impetus to exports, will soon lead to a revival of GDP growth. Table 1: GROSS DOMESTIC PRODUCT AT FACTOR COST I/ (in percentage change at 1960 prices) - Agriculture Live- Manufac- Construc- GDP Total Crops stock Mining turing tion Services 1972 3.1 -7.9 -13.3 -1.3 2.3 6.0 4.9 3.7 1973 6.1 16.8 26.0 6.6 -3.2 6.4 -5.1 4.7 1974 6.5 6.1 6.6 3.3 2.0 6.8 12.2 6.0 1975 -2.0 -2.5 -6.4 3.6 -4.6 -3.2 -9.5 0.2 1975 (end of) 1st quarter 2.7 -6.4 -8.7 -0.8 -0.1 2.4 8.2 5.2 2nd quarter 0.9 -4.7 -9.6 4.7 -1.1 1.2 -6.7 1.9 3rd quarter -4.3 -3.8 -7.1 1.0 -8.7 -6.4 --11.3 -1.7 4th quarter -6.7 6.6 4.2 9.0 -8.1 -9.1 -26.4 -5.5 1976 1st quarter -4.0 6.7 6.7 1.8 -5.6 -6.2 -25.0 -3.0 1/ All rates are annual. Source: Central Bank of Argentina  -9- 16. True to its populist principles, the previous government had been able to create a fully-employed economy in 1974 and 1975. Labor absorption took place mainly, however, in the'public sector, which bolstered its man- power by nearly 30% between 1971 and 1975. This substitution process of under-employment for unemployment has been reversed since April. Urban employment, according to official sources, is currently estimated to be around 5%. This is a fairly low pace for a depressed economy, which can partly be explained by the government's compact with enterprises to maintain their employees as quid pro quo for decontrolling prices and by declining real wages. Once the recession is overcome, it will not suffice to fully occupy the labor force of the private sector, where short working hours, vacations and temporary shutdowns in key industries have avoided massive unemployment. The recovery will also have to make room for surplus workers and employees of the public sector, i.e., it will be necessary to change the employment structure, shifting substantial manpower from services to the more directly productive sectors of the economy. 17. Argentina's balance of payments is beginning to show signs of improvement after a disastrous year in 1975, when recorded export earnings fell by over 20%. The drop was due not only to the closing of the EEC market for meat, but also to export taxes and to smuggling stimulated by the large spread between the official and the free market exchange rate. Whereas the volume of wheat exports is expected to nearly double this year, little immediate improvement is expected in total foreign exchange earnings from grain exports because of generally lower prices than last year and a poor corn crop. Most other export categories, however, are already showing signs of recovery. Beef export volume is about double last year's level, although still substantially below the 1972 peak. The EEC is now permitting beef imports pari passu with its own sales abroad from stock. The volume of manufactured exports has also increased noticeably, surpassing the 1974 level. Overall, the government is projecting an increase in export receipts of about 20% annually over 1975 to US$3.6 billion, which should stimulate the economy. Imports are expected to decline from US$ 4 billion in 1975 to about US$3.3 billion this year, reflecting depressed economic activity in industry', drawdowns of stocks accumulated in 1975 and removal of incentives to overinvoice imports by a realistic exchange rate. The increase in export receipts and reduction of import payments should produce a swing of about US$1,370 million in the resource balance,-from a gap of US$900 million in 1975 to a surplus of US$470 million in 1976. Factor payments are, how- ever, expected to increase because of high interest payments and a current account deficit of about US$100 million is forecast for this year. In addition, because of large payments due on capital account, a substantial overall balance-of-payments deficit is projected for 1976.  - 10 - Table 2: SUMMARY BALANCE OF PAYMENTS, 1974-76 Preliminary Estimated 1974 1975 1976 Exports Goods and NFS 4,791 3,749 4,426 Imports Goods and NFS -4,331 -4,647 3,958 Resource Balance 460 -898 466 Factor Services and Transfers -332 -451 -560 Current Account Balance 128 -1,349 - 94 Private L.T. Capital (net) 426 372 785 Public L.T. Capital (net) -4 3 85 Basic Balance 650 -974 776 Short-term Capital (incl. errors & omissions) -504 193 -1,213 Change in Reserves = increase) - 46 781 437 18. The spectre of default on external debt, which seemed imminent at the beginning of the year, has vanished. This has been accomplished through a mammoth funding operation. The government upon taking office secured a US$300 million 180-day loan from commercial banks and had rolled over about US$350 million of payments due on public sector debts from the second to the fourth quarter of this year. It has obtained a standby credit from the IfF of SDR260 million (about US$300 million). This includes the first credit tranche of about US$180 million to be used this year and about US$120 million or two-thirds of the second credit tranche for next year's availability. The government is currently negotiating with commercial banks in the US, Canada, Europe, and Japan for a medium-term loan and expects to conclude shortly an agreement for approximately US$870 million with a four-year maturity. These loans, the proceeds of which are to become available upon signing, are related to Argentina's standby agreement with the IMF of August 6, 1976. These loans and credits, although needed to make payments on the previously short-term bank borrowing and the rollovers, should nevertheless strengthen Argentina's foreign exchange position and further improve confidence in the peso. More- over, since the loans and credits from the banks are of a medium-term character, they should contribute to an improvement in the external debt structure.  V. STABILITY AND GROWTH 19. The Argentine economy has in the past demonstrated considerable resilience, reflecting the country's strong natural and human resource base. There is little doubt that with proper management the economy can be stabilized and will recover from the present recession. The longer-term problem is much more complex. It involves a restructuring of the economy so that the recovery can be sustained and the country placed on a viable long-term growth path. This will involve revitalizing the agricultural sector, reorienting the industrial sector toward export markets and re- moving infrastructure bottlenecks to increase output and exports. Supply Oriented Policies 20. Export agriculture will continue to be, for the foreseeable future, the prime generator of foreign exchange. Unlike many other countries which depend on agricultural exports, Argentina has a strong comparative advantage in grains, oilseeds and meat for which prospects, in terms of demand and prices, are promising. Moreover, this year's drought in Europe will probably lead to a substantial rise of demand for Argentina's major export products. There are no obvious physical limitations on the potential for domestic production. The key to unlocking this potential is clearly adoption of consistent policies to induce increased output. The sharp swing in cattle production, which has limited investment, discouraged specializa- tion and inhibited the growth of production of import substitutes, could be reduced substantially with judicious management of export taxes, price supports and credit policies. Export taxes on agricultural products should be used primarily to stabliize prices and induce production rather than as revenue measures. Taxation of the agricultural sector should be restructured to increase reliance on those taxes, such as the land tax, which encourage production and additionally on types of income taxes which do not reduce in- centives to production. 21. Realizing that the internal terms of trade have turned against agriculture after 1973, the present administration is determined to stimu- late supply by two policy measures: higher minimum prices and lower export taxes. In the first case, the recently granted four-to seven-fold price increase for the 1975/76 crop year has led to substantial enlargement of the planted area for cereals (11% for rye, 45% for wheat). Moreover, it is the aim of the authorities to end the monopoly of the Grain Board in buying and selling all cereals for export and to have prices paid to the producers approaching international levels. In order to achieve this goal, it will be necessary to reduce export taxes. These taxes, however, constitute one of the major sources of government revenue and benefits gained through the reduction of these taxes will have to be paid for by a land tax including taxes on urban property, which in the past has faced stiff resistance from most landowners. As regards beef exports, due to the difficulties of selling beef in traditional markets abroad, the Government is searching for new outlets  - 12 - to provide sufficient demand for the livestock sector since cattlemen have continued to increase their herds above the usual peak of the stockbuilding phase. 22. With a more favorable policy environment, increasing agri- cultural output will require larger inputs of fixed long-term capital and a corresponding increase in long-term credit. In an integrated approach to developing export agriculture, attention will have to be paid to pro- cessing industries, especially meat processing. Additional investment will be required to permit modernization and expansion of capacity of this industry and its adaptation to increasing sanitary standards in world mar- kets as well as to rapidly diversifying demand for food products based on beef. In a similar way, there will be a definite need for additional facilities to handle expanded grain and beef trade both in storage and shipping. 23. In the industrial sector, steps will have to be taken by means of which heavily protected, high-cost import substitution industries are increasingly transformed into internationally competitive, export-oriented industries. Such transformation is more difficult the more widespread the import substitution process, since interdependent local industries must simultaneously move toward international standards of efficiency if any one of them is to break into world export markets without heavy subsidies. Gradual reduction and rationalization of tariffs, accompanied by mainte- nance of a realistic exchange rate will be required so that domestic prices begin to reflect world market prices. With effective protection still being very high and uneven, it is little wonder that industry's export performance has been lagging below its potential. 24. Current government thinking is nededd in the direction of de- creasing the high protection of many industries and channelling financial resources into those branches which could compete with industrial products of other nations. An industrial promotion law favoring both domestic and foreign investment has just been enacted and a wide-ranging tariff reform program is under active consideration. 25. The clearest policy directive has been given to the energy sector. The authorities have indicated their intention to invite domestic and foreign private companies to assist in the procuction of petroleum in order to curb the increasing burden of oil imports. These imports currently run at US$400 million per year and are expected to increase to US$1.5 billion by 1980, if the country does not make efforts to increase production. In spite of sustained exploration efforts by previous governments, the rate of new discoveries of oil fields has been rather small. To gradually diminish oil imports and become self-sufficient in the years to come a three-step program has been adopted. These steps include: (i) extension of areas currently exploited by private companies to stimulate larger production at lower per unit costs; (ii) permission to private Argentine enterprises to bid for the exploitation of minor deposits, which are considered uneconomical  - 13 - for YPF; and (iii) invitation of foreign oil companies to participate in secondary recovery operations and in exploration and exploitation of off- shore oil fields. 26. Unlike much of the rest of South America, Argentina relies heavily on thermal sources of energy mainly based on fuel oil, but recent plans have also been advanced to increase coal and natural gas output and to proceed with the establishment of three nuclear power stations, the first of which has been operating since 1974. The country's heavy dependence on thermal power is expected to be reduced furthermore by a shift toward greater use of hydroelectrical power. The first two stages of the El Chocon- Cerro Colorado hydroelectric power station started producing in 1973/74 and a a third stage is planned to be completed in early 1977. While two other power stations are expected to come on stream in 1977/78, work is progressing on seven other hydroelectric projects. The development program calls for fea- sibility studies of nine additional projects and predicts an increase in hydroelectric power generating capacity of 300%, raising the share of this source of energy from 20% to 40% of total energy production. Demand Oriented Policies 27. Sustained improvement in fiscal performance will constitute the determining factor in the government's ability to continue the deceleration of inflation. Argentina's public finances have traditionally played a de- cisive role in its periodic inflationary episodes. The public sector has acted as a residual employer throughout the post-war era, and the state has absorbed many private enterprises to rescue them from bankruptcy. The country's revenue structure requires strengthening. It has too many taxes (there are currently about 70 under administration), many of them tend to be overly complex and there is too great a reliance on indirect taxes. The tax structure, excepting social security taxes, has a low buoyancy and collections tend to lag badly as inflation accelerates. Administration of the tax system has been relatively weak, with a tendency to break down in times of political uncertainty. Even in the light of all these inadequacies, the deterioration of the fiscal situation during the past two years has been unprecedented and damaging to the economy. 1/ Table 3: PUBLIC SECTOR FISCAL OPERATIONS - 1972-75 (% of GDP) 1972 1973 1974 1975 1976 Current Revenues 25.0 27.1 31.8 25.6 25.6 (of which taxes) (14.4) (16.5) (19.0) (14.1) (14.5) Current Expenditures 22.3 26.8 31.8 32.2 23.6 Current Surplus (+) or Deficit 2.7 0.9 - -6.6 2.0 Capital Revenues 0.4 0.3 0.4 - 0.1 Investments 8.2 8.8 9.8 9.4 10.4 Surplus (+) or Deficit -5.1 -7.6 -9.4 -16.0 -8.3 1/ Budgetary Figures  - 14 - 28. There has been a steady increase in the public sectors' deficit since 1972 and a sharp jump in 1975. Public sector savings, which had been 7% of GDP in the late 1960s, gradually diminished and turned to -6.6% in 1975. With public sector investment approximately 9.0% of GDP, the total public sector deficit reached 16% of GDP in 1975. The major factors in the deterioration of the public sector fiscal performance have been: (a) a drastic deterioration of provincial government finances, reflecting upward adjustment of the provincial salary scale in 1972 (to that prevailing in Buenos Aires), increasing employment and derogation of the major provincial tax (about 1.6% turnover tax) in 1975); (b) a worsening of public enterprise finances resulting from heavy increases in their expenditures and failure to ad- just their prices in a timely fashion; and (c) a drop in tax revenue collections in 1975, equivalent to almost 5% of GDP, as a result of inflation and a breakdown in tax collections. The deterioration of the finances of provinces and public enterprises was reflected in Treasury operations because of the transfer mechanism. Treasury transfers to the provinces reached 6.2% of GDP in 1975, compared with only about 1.7% in 1974 and 0.4% in 1970. Transfers to public enterprises were 2.1% of GDP in 1975, compared with 1.3% in 1974. Despite these trans- fers, the enterprises ran a deficit after transfers equivalent to 2.1% of GDP. 29. Employment in the public sector is estimated to have increased by almost 30%, from 1,370,000 in 1971 to 1,760,000 in 1975. As noted earlier, a large part of the increases occurred in the state enterprises. Excessive employment with little or no increase in output has characterized the twelve most important state enterprises between 1973 and 1975. During that time, employment of YPF, the state oil company, increased by a third (or 13,000) with virtually no increase in its output. Employment on the railroads, the output of which declined fairly steadily from 1970 to 1974, increased by 10% (or 14,000) in 1975 alone. There were also large percent- age increases in employment in Agua y Energia, the power company that serves most of the country outside Buenos Aires and OSN (the water and sewer company). 30. Pricing of publicly-produced goods and services has also been a serious problem for most state economic enterprises in Argentina, as Table 4 below shows. This problem has tended to worsen in times of inflation. In general, these prices tended to fall in the early 1960's and were adjusted upward during the stabliziation program of the late 1960s. By 1972, however, most public sector prices were well below their 1960 levels in real terms. It would be difficult to argue that in many of these cases real costs of production were below those in 1960, although there may have been some such instances. Price adjustments were sporadic between 1972 and 1975, with some  - 15- Table 4: REAL PUBLIC SECTOR TARIFFS, 1972-76- AND ACTUAL AND SCHEDULED INCREASES (1960 = 100) 1972 1973 1974 1975 June 1976 YPF (State Oil Company) 78.7 .99.3 159.8 159.7 116.6 Gas del Estado 69.5 67.7 66.7 50.4 82.5 YCF (State Coal Company) 53.1 60.7 61.1 59.4 111.9 SEGBA (Buenos Aires Power Co.) 85.9 71.7 94.1 62.9 49.0 Agua y Energla (Federal Power Co.) 56.6 51.1 58.3 44.9 47.4 ENTEL (Telephones) 97.9 105.5 121.5 95.4 57.3 ENCOTEL (Post and Telegraph) 179.9 181.3 259.5 302.6 166.2 Ferrocarriles Argentinos (Railways) 94.1 103.7 104.9 84.9 93.2 Subte (Buenos Aires Subway) 127.6 139.1 142.1 136.7 136.4 Aerolineas Argentinas (domestic flights) 59.8 72.0 76.6 63.9 60.1 OSN (Water and Sewer) 44.8 39.8 39.3 51.1 21.0 Actual and Scheduled Increases Timing (July to December 1976) Railways Urban 35% July 1, 1976 15% October 1, 1976 Interurban 40% July 1, 1976 15% October 1, 1976 Cargo 80% July 1, 1976 15% October 1, 1976 Subway 20% July 1, 1976 15% October 1, 1976 Airlines Domestic 32% July 1, 1976 15% October 1, 1976 International Pari passu with exchange rate As required Telephones (ENTEL) 15% monthly Beginning July 1, 1976 13% additional July 1, 1976 Water and Seweraae (OSN) 15% monthly Beginning JulY 1, 1976 15% additional July 1, 1976 Electric Power Agua y Energia 15% monthly July 1, 1976 to December 31. 1976 SEGBA 15% monthly Beginning July 1, 1976 20% additional July 1, 1976 Gas (Gas del Estado) Domestic Use 15% monthly Beginning July 1, 1976 Other 25% July 1, 1976 Petroleum 25% (average) August 1, 1976 Coal (YCF) 25% July 1, 1976 1/ Deflated by wholesale price index.  - 16 - enterprises gaining ground and others losing. However, during 1975-76 most tariffs and prices declined very sharply in real terms. While this does not give a complete picture of the financial state of these enterprises, it is clear that several of them are running substantial current deficits and are in serious difficulty, and that significant rate adjustments are called for. These include Agua y Energia, Gas del Estado, YCF, SEGBA, Ferrocarriles Argentinos, Aerolineas Argentinas and ENCOTEL. 31. The present authorities have recognized this problem and imple- mented a schedule of price adjustments shown in Table 4 above. The actual and planned price adjustments should gradually improve the financial situation of the various state enterprises and diminish the subsidies from the Treasury. These adjustments should stimulate higher productivity and better performance as in the case of price policies towards the private sector. Much of the success in these directions will, however, depend on the future containment of inflationary pressures to relatively manageable rates. 32. The adjustment problem was even more serious in the tax collection system. The lag between accrual of the tax liability and actual payments was four to six months in Argentina. During hyperinflation, with prices rising between 10% and 30% per month, it implies a real loss of tax revenue between 44% and 80%. Actually, tax payers postponed their payments for even longer periods since credit in real terms became scarce and penalties for paying late were insignificant. In the case of real assets and land, the tax base is completely eroded. The overall erosion is evident in the tax revenue data, the rates of which declined from 17.7% to 12.2% with respect to GDP between 1974 and 1975. It is thus evident that a mere deceleration of inflation coupled with a strengthening of the collection system as well as indexing and stiff penalties for delayed payments should by themselves improve government revenue and decrease the deficit. These effects, however, are difficult to measure and have to be reexamined at the end of 1976. What can more easily be estimated is the impact of certain tax increases and expenditure reductions, both of which the government has al- ready started to implement in the last few months. 33. Specific tax increases, most of which have been enacted during the last three months, are expected to raise total tax revenue by A$212 billion or by 2.5% of GDP in 1976. The measures taken or to be taken include: (a) an increase in the rate of the value-added tax from 13% to 16%; (b) an emergency tax on the existing stock of cars; (c) reinstatement of a levy on the capital of enterprises and on the net worth of individuals;  - 17 - (d) an 8.5% semi-annual tax on bank credit; (e) a 0.2% tax on turnover in checking accounts; (f) a tax on transfers on financial assets; (g) establishment of a 4% tax on the gross value of agricultural and livestock production; this tax, plus future increases in land taxes, are expected to eventually replace export taxes; (h) an increase in the fuel tax and changes in some excise taxes from specific to ad valorem; (i) an increase up to 3% in the "Statistics" tax and up to 3% in the "consular" tax on imports; and (j) special tax on higher incomes, defined as 10 times the minimum wage. 34. Besides the current problem of implementing some of these taxes, it should be noted that these numerous changes were required to generate additional revenue of 2.4% GDP with the objective of a prompt reduction in the deficit. If the government plans to generate again public sector savings in the order of 6% to 7% of GDP as it was achieved in the late 1960s, a more basic reform will be needed to make the tax system not only more elastic and efficient but also more equitable and resilient. Basically, this system would need to concentrate on three major issues: (a) simplification and adjustment of the income tax system; (b) better methods to assess and enforce taxes on real and financial assets as well as on property; and (c) streamlining the value-added tax and strengthening its collection. 35. In the case of income taxes, it is important to point out that social security contributions have responded quite well to the inflationary environment. This experience could be applied to the taxation of personal income. Moreover, recent tax reforms in a number of countries have shown that a well-thought-out and implemented income tax can play an important role even in a tax system which has traditionally relied heavily on in- direct taxes.  - 18 - Table 5: REVENUES FROM 1976 TAX CHANGES In Billions of In Per Cent Argentine Pesos of GDP Capital gains 2.9 0.03 Agricultural production 8.2 0.10 Net wealth tax 5.2 0.06 Capital of enterprises 21.4 0.25 Emergency tax on cars 24.0 0.28 Transfer of financial assets 4.5 0.05 Tax on credits 30.6 0.36 Tax on checking accounts 18.0 0.21 Change in rate of VAT 20.0 0.24 Change in excise taxes 5.0 0.06 Change in fuel tax 10.0 0.12 Statistical tax 17.3 0.20 Consular Tax 9.9 0.12 Income tax 1/ 35.7 0.42 Total 212.2 2.50 1/ Mission estimate. Source: Based on information provided by the Ministry of Economy, IMF. 36. Adjustment in expenditure policies to reduce the current fiscal deficit are threefold: (a) reduction in the number of government employees by 70% of 1973-75 increase; (b) revision of public investment program by eliminating all projects not deemed to be both of high priority and a favorable benefit/cost ratio; and (c) maintenance of real wages of public employees at realistic and sustainable levels based on financial capabilities of the public sector and improvement in productivity. The first objective, though certainly most important over the medium-and- long term, is presently not pursued very vigorously because of the recession and the danger of social unrest in the face of higher unemploy- ment. On the other hand, the salary policy has a good chance to succeed, since the rate of inflation is proceeding at a lower than expected rate. June and July price increases have not reached yet the 15% salary raise granted on June 1. If the pace of inflation continues at the present rate, only one increase of a similar nature would be required to maintain the real incomes of public servants. This increase became effective September, 1976. Revisions of the pubjic investment program will  - 19 - entail a lengthy process. In the meantime, maintenance of public sector investment will be necessary pending recuperation of private investment in order to avoid deepening the recession. Although external capital can help fill some of the savings/investment gap of the public sector, it is not likely that it can provide over the longer term much more than 20% of public sector capital formation in Argentina. 37. The monetary system has proven very difficult to manage over the past two years because of the large fiscal deficit. Central govern- ment borrowing in 1975 was greater than the stock of domestic credit outstanding at the end of 1974 and in the first four months of 1976 Treasury recourse to the Central Bank was equal to about 25% of domestic credit outstanding at the end of 1975. A second factor complicating monetary management is the "swaps" problem. The "swap" facility was used by the previous administration as a means of obtaining foreign exchange. Under this system, the Central Bank guaranteed the provider of foreign exchange with repurchase rights at a fixed exchange rate. Given the galloping domestic inflation, the Central Bank incurred very large peso losses. Approximately US$1.2 billion in short-term foreign borrowing has been rolled-over every six months, each time at a higher exchange rate. The peso losses incurred by the Central Bank on these transactions have been an important factor in monetary expansion. In addition, importers have been required to obtain six months'external financing on all purchases. They have been given forward exchange cover by the Central Bank at a rate of interest considerably below the pace of devaluation. This has been another source of peso losses and, therefore, of monetary expansion by the Central Bank. 38. The present government intends to eliminate the "swap" system and external financing requirements for importers but is implementing the process gradually, because it feared a precipitous short-term capital outflow. It has raised the interest rate and requires prepayment of in- terest on foreign exchange guarantees for "swaps" and has maintained the exchange rate for "swaps" at 140 pesos per dollar to minimize the expan- sionary impact. The government is now committed to reducing the level of "swaps" outstanding by more than one-half by the end of 1976 and to offer no new guarantees thereafter. Obligatory external financing will also be reduced to no more than 50% of import value by year-end. The government is no longer guaranteeing foreign exchange cover for importers. It is not clear how much foreign exchange loss will be involved in reducing the level of "swaps" and of external requirements for imports. If the monetary pro- gram is managed soundly both importers and private firms which have relied on "swaps" will have little choice but to replace them with domestic or external borrowing. While these measures will greatly simplify the problems of monetary management in Argentina over the medium term, "swaps" and ex- change guarantees will continue to be an important expansionary factor in the second half of 1976.  - 20 - 39. In Argentina all commercial bank deposits are currently nationalized (credited to the Central Bank). Individual bank lending levels are determined by rediscounts given by the Central Bank. There is, therefore, no direct relationship between the amount of deposits a bank receives and its lending level. Moreover, there are certain leakages from the system, i.e. certain types of financing can be carried out by commercial banks completely outside the control of the monetary authorities. As a result, credit expansion by the banking system has proven much more difficult to control than had been anticipated. The growth of total credit in real terms as shown in Table 6 below reveals the problem of insufficient controls over the money supply. Except for 1973, the private sector has not been able to get any significant increases. As a matter of fact, there was a sharp reduction of nearly 50% to the private sector in 1975. The authorities are now in the process of abolishing the existing structure, reverting to the earlier fractional reserve system and eventually relying on open-market operations and rediscounting for managing the monetary system. Table 6: GROWTH RATES OF CREDIT AND LIABILITIES OF FINANCIAL SYSTEM (Percentage changes) 1972 1973 1974 1975 In nominal terms Liabilities to private sector 48.6 90.5 55.6 145.7 Total creditl/ 50.9 79.2 54.1 172.8 Credit to private sectorl/ 42.3 57.1 41.8 120.6 In real terms2/ Liabilities to private sector -9.4 32.6 11.1 -43.5 Total creditl/ -8.0 24.7 10.0 -37.3 Credit to private sectorl/ -13.3 9.3 1.2 -49.3 1/ In relation to the stock of liabilities to private sector at the beginning of the year. Source: Central Bank of Argentina.  - 21 - 40. The Central Bank has developed a monetary budget for the second part of 1976, which is based on projected revenues and expenditures of the public sector and a fairly large balance-of-payments deficit, both of which have been discussed above. In addition, it is assumed that demand for money will be strong, once the economy shows signs of recovery and that prices will rise by approximately 50% between June 30 and December 31, 1976. Total currency issue is expected to be raised by 65% during the second half of 1976 taking into account that seasonal demand for cash is stronger at the end of each calendat year. (In real terms currency issue would actually still be 50% below its 1974 level.) A cautionary expansionist credit program is not only justified because of the rapid decline in inflation and the need to avoid a further erosion of real cash balances in an economy which tries to overcome a recession, it is also a necessary step to replace part of the short-term foreign credit with domestic credit, because the external short-term obligations have turned out to be very expensive for the Central Bank in the past. 41. Of the projected A$300 billion credit expansion of the Central Bank, about 45% is expected to go to the public sector in order to finance the deficit and one-third is allocated to cover the peso losses on foreign exchange operations. Expansion of private credit in the order of A$200 billion is anticipated to originate in the commercial banking system, which should experience some recovery of its deposits and receive the additional credit required from the Central Bank. Two measures accompany the credit program: indexed government bonds and freeing of interest rates. Interest rates on bank acceptances stood at about 100% per year at the beginning of June but have since then declined. The government favors this decline in interest rates, but does not intend to reduce them artificially, since it plans to establish a system of real positive interest rates, with a view to allocating resources more efficiently than in the past. The indexed government bonds, which had been very attractive in April and May of 1976, lost their attractiveness soon after the rate of inflation fell from over 13% in May to 2.7% in June. Consequently, a large part of these bonds were substituted by the government, which marketed short- term Treasury bills paying a 6% rate of interest per month. Balance-of-Payments Measures 42. Unable to contain domestic inflation, the previous administration placed the burden of reconciling-the widening gap between Argentine and international inflation on the exchange rate mechanism. Between 1972 and 1975, the commercial rate was fixed at A$5 per US$1 and the financial rate at A$9.93 per US$1, with most exports and imports being transacted at a mixed rate. As internal price increases proceeded much faster than world inflation, the Argentine-peso became more and more over-valued. Beginning in 1975, a "crawling peg" policy was instituted and periodic exchange rate adjustments ensued. The advantages gained by the exporter  - 22 - through this policy were, however, offset by an increase in export taxes. When on March 8, 1976, the official rate of A$140 = US$1 was established and the free market rate reached A$244 per US$1, the real effective exchange rate for imports became nearly 20% above its 1970/72 level and about 40% above the 1973/75 level. While most export and import transactions took place under the official rate in early 1976, increasing proportions of exports and imports were moved to the free market exchange rate during the last few months of the previous administration. The present government's intention is to move toward a unified exchange rate, and it is expected that all trade can take place at the free market rate in early 1977. 43. In line with the decpreciation of the Argentine currency, previous governments had implemented a host of measures to control imports, including quotas and import prohibitions, compulsory import credits, and advance import deposits. As a first step the present government removed a large number of items from the list of prohibited imports in April 1976. Furthermore, selective quantitative controls are being gradually removed in an attempt to make import policies consistent with exchange rate measures. Together with freeing the exchange rate it will be necessary to further reduce import barriers and rationalize the system of export promotion and taxation. 44. Although export policies have in general followed the pattern of stimulating non-traditional exports to reduce Argentina's dependence on cereals and meat, most measures have been cumbersome to administer and their complexity has hampered potential exporters to fully utilize them. Changes in export rebates and taxes have been frequent since 1974, mainly as a response to the active devaluation of the peso. In the last two years, the basic philosophy behind export promotion was either the existence of excess capacity or the support of those commodities the prices of which had fallen but which faced elastic demand. Combining the fiscal measures (export taxes, subsidies, rebates, etc.) with the exchange rate differentials for various exports yielded the "real effective" exchange rate, which differed widely for industrial and agricultural exports over the past several years. It rose from 4.40 in 1970 to 13.40 in 1974 and reached 155 in March 1976 for automobiles, whereas it increased from 3.11 to 5.50 and to 55 for wheat during the same period. The spread during the months of April and May in the "real effective" exchange rate narrowed -- the ratio between the two exchange rates fell from 2.82 to 2.68. However the government, in its determination to stimulate manufactured exports in the hope that external demand will substitute for the depressed domestic economy during the current year, is permitting a widening of the spread.  - 23 - 45. Between 1973 and 1975 external capital movements were re- stricted, prescribing quantitative limits on the sale of foreign exchange for travel, tourism, profit and dividendremittance. A foreign investment law which was enacted in 1973 contained rather stringent provisions for new investment, including restriction to a few sectors, transformation of foreign firms into national companies, and establishing absolute ceilings on profit and dividend remittances. As a consequence, direct foreign in- vestment ceased to flow into Argentina. Since long-term bilateral and multilateral inflows declined at the same time, Argentina's main form of capital inflow consisted of suppliers' credits and financial loans. This situation was viable when large balance-of-trade surpluses prevailed during 1973 and early 1974. However, when the surpluses turned into deficits, the government resorted to "swaps" as a major source of external capital in- flows. The incentives granted to Argentinian borrowers under the "swap" arrangement were so large that their volume rose from US$0.5 billion at the end of 1974 to US$1.5 billion at the end of 1975. On April 5, 1976, the present government raised the fee on "swaps" from 32% to 40% and required advance payments rather than payments at maturity. Moreover, the authorities are in the process of substituting the short-term "swap" debt with medium- term loans from foreign commercial banks. 46. A new foreign investment law, approved by the Argentine government on August 13, 1976, encourages private foreign investment. The new law requires that foreign capital should remain in Argentina for a minimum of three years and foreign investors will be able to remit profits and re- patriate capital without restrictions, providing the country has no diffi- culty in meeting external payments. Profit remittances, which were limited to 12% under the 1973 law, are unrestricted, with amounts above 12% being subject to taxation. Basically, the law is to guarantee foreign investors the same rights and obligations to which domestic capital is subject. Al- though it is not expected that this law will have an immediate effect on foreign private investment, it should nevertheless contribute, together with overall political and economic stability, to stimulate private capital inflow into directly productive activities.  - 24 - VI. GROWTH PROSPECTS AND EXTERNAL CAPITAL REQUIREMENTS 47. With appropriate and sustained economic management, Argentina should be capable of averaging at least a 5% growth rate annually with- out encountering balance-of-payments difficulties during the reconstruction period. Beyond this phase, a somewhat higher growth rate should prove feasible. With its low rate of population increase, this would permit steady, significant increases in living standards. Given the demonstrated volatility of Argentina's exports, an appropriate development strategy would entail a reduction of short-term external debt and rebuilding of foreign exchange reserves. This would reduce the vulnerability of domestic product and income to sharp fluctuations in exports. Thus, while export prospects for the next few years look promising, it will be necessary to moderate the pace of growth so that a current account surplus can be generated. In addition, considerable external financial assistance will be required to restructure the country's external debt. 48. The problem of projecting Argentina's foreign trade is seriously handicapped by the instability and shaip fluctuations which have characterized it in the recent past. It has been subjected to variations in weather, in domestic price policies and in the restrictive practices of its major trading partners. Under the circumstances, realistic projections must be based on the assumption of successful implementation of the present government's export-oriented policies which have already brought about a favorable response in the case of wheat acreage expansion. The behavior pattern of Argentina's major trading partners will be a critical factor in achieving the government's export goals. In this connection it seems reasonable to proceed on the assumption that the earlier severe restrictions by the EEC on meat imports will be gradually relaxed and that no special obstacles will be encountered by grains and other traditional farm exports. 49. Within the above context and under the assumption that beef export prices and volumes recover gradually, earnings from beef exports by 1979 are projected to reach their levels of the early 1970's. Given the impetus to wheat producers, export earnings from cereals are pro- jected to rise by an annual average of 7.5% in volume. Similarly, it is expected that the exchange rate policy and other incentives offered by the present outward-looking strategy will lead to an increase in exports of industrial products by an annual average of approximately 12% in real terms. On the average, real exports should grow by 7% annually in the 1977-1980 period. Taking into account reasonable price projections, the annual rate of export growth in current terms should average 17% between 1977 and 1980. About two-thirds of this increase would be generated by agriculture and the rest by the industrial sector. Such export growth would be consistent with a growth rate of GDP which is  - 25 - TABLE 7: CAPITAL REQUIREMENTS AND FINANCING (In US$ millions) Average Estimated Average 1974-75 1976 1980 1977-80 Resource Balance -219 466 1,185 945 Exports (incl. NFS) (4,270) (4,424) (8,171) (6,708) Imports (incl. NFS) (4,489) (3,958) (6,986) (5,762) Services Balance -395 -560 -593 -583 Transfers 3 0 -4 -4 Current Account Balance -611 -94 588 358 Amortization -903 -988 -1,130 -1,025 Capital Required 1,514 1,02 542 667 Financing Direct Foreign Investment 5 - 40 33 M&LT Loans 1,178 1,621 1,202 1,252 (official sources) (837) (1,015) (946) (939) (private sources) (341) (306) (256) (313) Short-term Capital -156 -1,213 -27 -166 Use of IMF Resources 108 237 -173 -29 Reserve Change (- = increase) 379 437 -500 -423 Memo Items 1975 1976 1980 2/ Reserve Level 247 -190 1,502 3/ External Public Debt Outstanding 3,162 3,739 4,365 Public Debt Service Ratio 20.9 23.6 16.3 Total Debt Service Ratio 37.0 33.1 21.0 1/ Gross Capital Requirements including reserve replenishment. 2/ International Reserves as shown in IFS Summary Table. 3/ Disbursed only, end of each year.  - 26 expected to average 5% in real terms. If foreign demand should accelerate because of estimated shortfalls in'Europe's crops and meat production in 1976/77, annual export earnings may grow by 25% in the next two to three years. Under these circumstances, the above-mentioned bottlenecks in trans- portation and storage would set serious constraints. The authorities are giving their highest priority to removal of these bottlenecks. 50. Projecting Argentina's imports on the basis of historical ex- perience is problematic because of the "stop-go" character of previous economic development policies. Nevertheless, a consistent set of re- lations betwwen changes in gross domestic output, investment, and imports lead to the conclusion that an import elasticity of approximately 1.4 is justified. This global elasticity allows for imports of capital goods to increase by 8.25% between 1976 and 1980, supporting an annual growth of real investment averaging 6.5%. Similarly, the growth of imports of raw materials and intermediate inputs is projected to surpass the growth of industrial production by some 10% . Overall real import growth thus grows at about 3% annually. 51. The above growth in export earnings by an annual average of 17% would allow the country to generate a trade surplus approaching $1 billion annually between 1977 and 1980. This surplus would be adequate to cover factor services and still yield a current account surplus of over $350 million annually. However, given Argentina's substantial amortization payments and the need to rebuild its foreign exchange reserves, considerable gross inflows will be required, averaging US$1.1 billion for the next four years.. As Table 7 above indicates, foreign private investment may not pick up imme- diately although it may soon respond to the incentives under the new foreign investment law and larger amounts of venture capital might return to Argen- tina. In the interim, it seems reasonable to assume that by far the largest portion of medium- and long-term capital inflow will have to rely on in- creased lending by governments, private financial institutions and multi- lateral agencies. 52. The immediate capital requirements of roughly US$1 billion for the restructuring of the short-term external debt in 1976-77 and for amortization and interest payments on this debt between 1978/1980 are being met through arrangements with IMF and private commercial banks. Beyond these emergency operations, the external capital requirements of roughly US$1.1 billion annually will have to rely on a systematic and coordinated program of external borrowing on appropriate terms. Under the assumption that somewhere between US$600-700 million in long-term capital may be secured from bilateral arrangements, suppliers credits, world capital markets and foreign commercial banks, there will still remain a gap of US$300 to US$400 million for other lenders to fill. This pattern of external capital inflows plus the projected surpluses in the current account in the balance of payments should enable Argentina to recon- stitute the badly depleted foreign exchange reserves under the previous ad- ministration to a reasonably comfortable level of some three months of imports  - 27 - 53. Argentina's debt management problems result from the maturity structure more than from the level of its external debt. The latter is not excessively high. It is estimated that public and publicly guaranteed debt outstanding and disbursed was US$3.2 billion at the end of 1975. Private external debt amounted to roughly US$3.8 billion, of which "swaps" with a maturity of six months constituted US$1.3 billion, and short-term import financing, also with a six-month maturity, US$1.5 billion. The latter in large measure is revolving in character and normally excluded from medium and long-term debt figures-. However, prior to the previously mentioned funding operations, almost one-third of the outstanding public debt and almost one-half of the private debt outstanding at the end of 1975 fell due during 1976. Over 70% of the total falls due within four years. This maturity structure constitutes a serious challenge to sound monetary and foreign exchange reserve management and will require realignment. The external public debt service ratio during the current year is estimated to reach 24%. With the substantial substitution of public for private debt projected, the public debt service ratio would decline to about 19% in 1979 and 16% in 1980 because of the improvement in the term structure and the expected increases in export earnings. Provided the authorities successfully implement their policies of reconstructing the economy and manage the external indebtedness along the above indicated lines, debt service should not prove unduly burdensome. Under the circumstances, Argentina should be able to service the estimated external capital requirements essential for her economic rehabilitation.   VII. STATISTICAL APPENDIX I. HUMAN RESOURCES 1.1 Vital Statistics, 1960-1974 1.2 Unemployment in Urban Areas, 1971-1975 II. NATIONAL ACCOUNTS 2.1 Gross Domestic Product by Sector of Origin at Current Prices, 1965-1975 2.2 Gross Domestic Product by Sector of Origin at Constant Prices, 1965-1975 2.3(a) Expenditure on Gross National Product at Current Prices, 1965-1975, in millions of Argentine pesos 2.3(b) Expenditure on Gross National Product at Current Prices, 1965-1975, as percentage of GDP 2.4 Expenditures on Gross National Product at Constant Prices, 1965-1967 2.5 Implicit Deflators, 1960-1975 2.6 Projected Macroindicators, 1976-1980 III. BALANCE OF PAYMENTS 3.1 Merchandise Exports, 1965-1976 3.2 Export Price Indices, 1965-1976 3.3 Imports in Current and Constant Values, 1969-1976 3.4 Direction of Trade, 1970-1975 3.5 Balance of Payments, 1969-1975 3.6 Export Projections, 1976-1980 3.7 Import Projections, 1976-1980 3.8 Balance of Payments Projection 1976-1980 IV. EXTERNAL PUBLIC AND PUBLICLY GUARANTEED DEBT 4.1 External Public Debt Outstanding (pp. 1-4) 4.2 External Public Debt and Debt Payments as of December 31, 1975 (pp. 1-15) V. PUBLIC FINANCE 5.1 Treasury Cash Expenditures, 1970-1975 5.2 Treasury Budgetary Reserves, 1970-1975 5.3 Public Sector Operations, 1970-1975 5.4 Public Sector Employees, 1971-1975 VI. MONETARY STATISTICS 6.1 Summary Account of the Banking System, 1970-1975 6.2 Summary Account of Central Bank of Argentina, 1970-1975 6.3 Structure of Interest Rates VII. AGRICULTURAL PRODUCTION 7.1 Area, Yield, Production and Exports of Selected Crops  STATISTICAL APPENDIX (cont'd) VIII. OTHER PRODUCTIVE SECTORS 8.1 Manufacturing Output, 1970-1976 8.2 Production and Consumption of Natural Gas, Petroleum, and Petroleum Derivative IX. PRICES AND WAGES 9.1 Principal Price Indicator, 1969-1976 9.2(a) Average Annual Wages and Salaries by Sector, 1965-1973 9.2(b) Basic Wage Adjustments for the Private and Public Enterprises, 1973-1976  Table 1.1/ ARGENTINA - VITAL STATISTICS, 1960-74 1 Crude Birth Crude Death Rate of Natural Net Total Rate of Year Rate Rate Increase Migration Populatiod/2 Growth (Per Thousand Population) (Z Per Year) (In Thousands) (% Per Year) 1960 23.7 9.0 1.5 0.3 19,992/2 1.8 1961 23.4 8.6 1.5 0.2 20,239 1.7 1962 23.6 8.9 1.5 0.2 20,542 1.7 1963 23.3 8.9 1.4 -0.1 20,849 1.3 1964 23.2 9.4 1.4 0.1 21,168 1.5 1965 22.7 9.1 1.4 0.1 21,485 1.5 1966 21.9 8.9 1.3 - 21,819 1.3 1967 23.0 8.9 1.4 0.1 22,157 1.5 1968 22.9 9.5 1.3 0.1 22,501 1.4 1969 22.6 9.5 1.3 0.1 22,854 1.4 1970 22.5 9.5 1.3 0.1 23,212 1.4 1971 13 22.5 9.0 1.4 0.1 23,569 1.5 1972 13 22.2 9.0 1.3 0.2 23,923 1.5 1973 13 21.9 8.9 1.3 0.2 24,282 1.5 1974 /3 21.8 8.8 1.3 0.2 24,646 1.5 11 Rates of growth calculated on June 30 base. /2. Census as of June 30, figures adjusted to calendar year basis using intercensal average growth. - /3 Provisional figures. Source: Censo Nacional de Poblacion 1970; Instituto Nacional de Estadistica Y CenSos; Mission Estimates.  Table 1.2: ARGENTINA - UNEMPLOYMENT IN URBAN AREAS, 1971-1975 (In percent of active population) 1971 1972 1973 1974 1975 April uct. April uct. aprii UctT.- April Uct. April uct. Total!-! 6.1 ... 7.8 6.1 6.1 5.4 4.7 3.1 3.2 3.5 Greater Buenos Aires 5.7 ... 7.4 5.8 6.1 4.5 4.2 2.5 2.3 2.7 Cordoba 5.0 4.4 7.2 5.2 5.3. 6.1 7.0 5.4 7.2 7.5 Rosario 5.3 3.5 6.2 5.8 5.3 5.5 4.7 3.8 5.5 5.6 Tucuman 11.7 12.2 14.2 11.7 12.5 11.3 10.5 7.5 8.6 6.8 Greater Mendoza 4.3 3.6 4.8 4.3 4.1 3.2 4.9 4.7 4.0 4.1 /1 After 1973 calculated by weighing unemployment rates by the population of the corresponding cities in the 1970 census. Source: INDFC.  Table 2.1: ARGENTINA: 'GROSS DOMESTIC PRODUCT BY SECTOR OF ORIGIN AT CURRENT PRICES, 1965-75 (millions of Argentine pesos) 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 Goods Sector 18.464.9 21,739.3 27.242.1 30,597.8 36,707.5 43.354 0 62 007.9 108,168.1 176 981 4 230 624 0 663 281 0 Agriculture 5,304.6 5,745.2 7,216.1 7,627.6 9,126.8 11,119.3 16,761.8 3Q,686.5 50 314.4 58;733 0 140t233:0 Mining 656.1 861.7 1,099.9 1,315.4 1,670.5 1,787.6 - 2; -,88;0 3,023.6 4,992.3 6,308.0 18,570.0 Manufacturing 11,302.0 13,463.5 16,515.3 18,599.9 21,934.3 25,582.5 36,721.1 64,554.2 105,451.0 140,575.0 425,016.0 Construction 1,202.2 1,668.9 2,410.8 3,054.9 3,975.9 4,864.6 6,137.0 9,903.8 16,223.7 25,008.0 79,462.0 Services Sector 15,169.4 19.754.7 25,764.2 30,016.5 35.123.8 41.269.9 58.155.8 92.598.9 157.166.2 217.176.0 606,719.0 Electricity, gas, water 597.1 861.0 1,288.7 1,580.5 1,680.0 1,819.4 2,402.2 3,760.6 6,895.1 Transport & Communications 2,650.3 3,691.3 4,805.4 5,818.7 6,814.9 8,576.9 12,790.5 19,162.9 33,390.7 Commerce Restaurants and Hotels 5,242.8 6,212.8 8,004.3 8,877.5 10,483.0 11,388.5 15,658.6 26,184.8 41,596.3 Banking 1,151.5 1,400.4 1,817.3 2,441.6 3,072.3 3,828.5 5,167.8 7,857.7 13,556.8 Government & other services 5,526.7 7,589.2 9,848.5 11,298.2 13,072.8 15,656.6 22,136.7 35,632.9 61,727.3 GDP at factor cost 33.634.3 41.494.0 53.006.3 60,614.3 71.831.3 84.623.9 120.163.7 200.767.0 234,147.6 44,780.0 1.270.000.0 Indirect Taxes, less subsidies 2,759.6 3.916.7 6.595.8 8,113.2 9.152.6 10,169.5 12,503.5 19,171.4 30,443.6 40.800.0 75400.0 GDP at market prices 36.393.9 45,410.7 59.602,1 68.727.5 80,983.9 94.793,4 132.067,2 2,9.938.4 364,591.2 488.600.0 1.345.400.0 Composition (as % of GDP at factor cost) Goods Sector 54.9 52.4 51.4 50.5 51.1 51.2 51.6 53.9 53.0 51.5 52.2 Agriculture 15.8 13.8 13.6 12.6 12.7 13.1 13.9 15.3 15.1 13.1 11.0 Mining 1.9 2,1 2.1 2.2 2.3 2.1 2.0 1.5 1.5 1.4 1.5 Manufacturing 33.6 32.5 31.2 30,7 30.5 30.2 30.6 32.2 31.6 31.4 33.5 Construction 3.6 4,0 4.5 5.0 5.6 5.8 5.1 4.9 4.8 5.6 6.2 Services Sector 45.1 47.6 48.6 49.5 48.9 48.8 48.4 46.1 47.0 48.5 47.8 Electricity, gas, water 1.8 2.0 2.4 2.6 2.3 2.2 2.0 1.9 2.0 Transport & Communications 7.9 8.9 9.1 9.6 9.5 10.1 10.7 9.5 10.0 Commerce, restaurants and hotels 15.6 15.0 15.1 14.7 14.6 13.5 13.0 13.0 12.4 Banking 3.4 3.4 3.4 4.0 4.3 4.5 4.3 3.9 4.1 Government and other services 16.4 18.3 18.6 18.6 18.2 18.5 18.4 17.8 18.5 GDP at factor cost 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Momo: For years 1974 and 1975, the goods sector was inflated by applying the growth of the following indices to the indices 1973. a) Agriculture - wholesale price index of agriculture. b) Mining - wholesale price index of non-agriculture (national). c) Manufacturing - wholesale price index of non-agriculture (total). d) Construction - cost of construction index. Source: Central Bank; Ministry of Economy; IMF.  Table 2.2: ARGENTINA: GROSS DOMESTIC PRODUCT BY SECTOR OF ORIGIN AT CONSTANT PRICES, 1965-75 (millions of 1960 Argentine pesos) PreI. Prel. 1965 1966 1967 1968 1969 1970 1971 1972 1973 197l4 1975 Goods Sector 6242 2 6,230.6 6,435.9 6696.4 7,369.4 7,841.6 8,21.5 8,428.5 9,039.1 9.664,0 9,317,0 Agriculture 1,834.9 1,766.3 1,842.1 1,742.1 1,837.6 1,940.6 1,842.8 1,697.8 1,983.6 2,l05.0 2,052.0 Mining 159.3 168.1 188.4 211.7 232.5 248.3 257.8 263.2 254.9 260.0 248.0 Manufacturing 3,882.1 3,907.7 3,966.9 4,224.7 4,682.4 4,977.9 5,458.5 5,783.9 6,151.6 6,571.0 6,358.0 Construction 365.9 388.5 438.5 517.9 616.9 674.8 651.9 683.6 649.0 728.0 659.0 Services Sector 5,215.8 5,298.9 5.404,9 5,648,7 6,034.3 6,279.7 6,589.8 6,834.0 7.157.0 7,588.0 7,601.0 Electricity, gas, water 210.8 227.2 244,2 263.9 287.5 319.8 348.6 385.5 413.2 442.0 470.0 Transport and communications 884.5 884.5 893.3 940.8 1,006.0 1,055.6 1,096.8 1,115.0 1,189,5 1,244.0 1,203.0 Commerce restaurants and hotels 2,069.6 2,058.4 2,479.4 2.189.7 2,416.7 2,516.2 2,681.4 2,765.9 2,843.3 3,079.0 2,960.0 Banking 415.1 427.4 435.8 458.1 481.9 489.6 512.7 538.9 563.7 595.0 631.0 Government & other services 1,635.8 1,701.4 1,749.2 1,796.2 1,842.2 1,898.5 1,950.3 2,028.7 2,147.3 2,228.0 2,337.0 GDP at factor cost 11,458.0 11.529.5 11,840.8 12.345.1 13,403.7 14,121.3 14,800.3 15,262.5 16,196,1 17.252.0 16,918.0 Indirect taxes for subsidies 1,085.6 1,095.1 1,117.9 1,170.4 1.265.9 1,338.0 1,398.1 1,442.1 1,531.0 1,624.0 1,271.0 GDP at market prices 12,543.6 12,624.6 12.958,7 13.515.5 14.669,6 15,459.3 16,198,4 16,704.6 17,727.1 18,876,0 18,189.0 ANNUAL GROf RATESE Goods Sector 10,5 -0,2 3.3 4.0 10.1 6.4 4.7 2.7 7,2 6.9 -3.6 Agriculture 5.9 -3.7 4.3 -5.4 5.5 5.6 -5.0 -7.9 16.8 6.1 -2.5 Mining 3.8 5.5 12.1 12.4 9.8 6.8 3.6 2.3 -3.2 2.0 -4.6 Manufacturing 13.8 0.7 1.5 6.5 10.8 6.3 9.7 6.0 6.4 6.8 -3.2 Construction 3.8 6.2 12.9 18.1 19.1 9.4 -3.4 4.7 -5.1 12.2 -9.5 Services Sector 7.6 1.6 3,,2 4.5 6.8 4.1 4.9 3.7 4.7 6.0 0.2 Electricity, gas, water 15.3 7.8 7.5 8.1 8.9 11.2 9.0 10.6 7.2 7.0 6.3 Transport & comunications 9.2 - 1.0 5.3 6.9 4.9 3.9 1.7 6.7 4.6 -3.3 Commerce restaurants and hotels 10.3 -0.5 1.0 5.3 10.4 4.1 6.6 3.2 2.8 8.3 -3.9 Banking 3.7 3.0 2.7 4.4 5.2 1.6 4.7 5.1 4.6 5.6 6.1 Government & other services 3.6 4.0 2.8 2.7 2.6 3.1 2.7 4.0 5.8 3.8 4.9 GDP at factor cost 9,1 0.6 2,7 4.3 8.6 5.4 4.8 3.1 6.1 6.5 -1.9 Indirect taxes less subsidies 9.4 0.9 2.1 4.7 8.2 5.7 4.5 3.1 6.2 6.1 -21.7 GDP at market prices 9.2 0.6 2.6 4.3 8.5 5.4 4.8 3.1 6.1 6.5 -3.6 Source: Central Bank; IMF.  Table 2.3a: ARGENTINA: EXPENDITURE ON GROSS NATIONAL PRODUCT AT CURRENT PRICES, 1965-75 (in millions of Argentine Pesos) 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 Gross National Product 36,254.2 44,833.8 58,828.6 67,784.6 79,986.0 93,705.2 130,667.7 217,078.3 360,574.7 484,800.0 1,331,700.0 Net Factor Payments -139.7 -576.9 -833.5 -942.9 -997.9 -1,078.2 -1,999.5 -2,860.1 -4,016.5 -3,800.0 -13,700.0 Gross Domestic Product 36,393.9 45,410.7 59,662.1 68,727.5 80,983.9 94,783.4 132,667.2 219,938.4 364,591.2 488,600.0 1,345,400.0 Imports of Goods & NFS 2,316.1 2,738.4 4,319.0 5,134.5 6,691.8 7,533.7 11,597.5 18,452.2 24,189.5 39,300.0 130,400.0 Exports of Goods & NFS 2,777.5 3,719.0 5,541.5 5,920.4 6,912.6 8,011.5 11,330.8 19,833.2 34,908.3 44,200.0 106,600.0 Resource Balance 461.4 980.6 1,222.5 785.9 220.8 477.8 266.7 138.10 10,718.8 4,900.0 -23,800.0 Consumption 28,947.9 36,439.7 47,733.2 55,010.0 64,307.7 74,969.2 106,239.9 172,630.0 279,222.8 373,300.0 1,079,200.0 Public (3,241.0) (4,686.3) (5,917.0) (6,516.5) (7,667.9) (9,054.9) (12,726.4) (20,109.7) (36,939.5) (47,800.0) (136,800.0) Private (25,505.9) (31,753.4) (41,816.2) (48,493.5) (56,639.8) (65,914.3) (93,513.5) (152,520.3) (242,283.3) (325,500.0) (942,400.0) Investment 6,984.6 7,990.4 I0,706.4 12,931.6 16,455.4 19,336.4 26,694:0 45,927.4 74,649.6 110,400.0 290,000.0 Gross Domestic Savings 7,447.0 8,971.0 11,928.9 13,717.5 16,676.2 19,814.2 26,427.3 47,308.4 85,368.4 115,300.0 266,200.0 Net Current Transfer - - 0.2 0.1 -5.0 - 9.9 - - - - Gross National Savings 7,306.4 8,394.1 11,095.6 12,774.7 15,673.3 18,736.0 24,437,7 44,448.3 81,351.9 111,500.0 252,500.0 Source: Cenfral Bank, IMF.  Table 2.3b- ARGENTINA: EXPENDITURE ON GROSS NATIONAL PRODUCT AT CURRENT PRICES, 1965-75 (As percent of GDP) 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 Gross Domestic Product 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Net Factor Payments -0.6 -1.3 -1.4 -1.3 -1.2 -1.1 -1.3 -1.5 -1.2 -0.8 -1.0 Gross National Product 99.4 98.7 98.6 98.7 98.8 98.9 98.5 98.5 98.8 99.2 99.0 Imports of Goods and NFS 6.4 6.0 7.3 7.4 8.3 8.0 8.8 8.4 6.6 8.0 9.7 Exports of Goods and NFS 7.7 8.2 9.3 8.6 8.5 8.4 8.6 9.0 9.6 9.0 7.9 Resource Balance 1.3 2.2 2.0 1.2 0.2 0.4 -0.2 0.6 3.0 1.0 -1.8 Consumption 79.3 80.1 79.9 80.0 80.3 79.2 80.1 78.5 76.5 76.4 80.2 Public (17.1) (19.2) (19.0) (18.5) (17.8) (17.9) (17.5) (15.5) (18.9) (17.4) (18.2) Private (62.2) (60.9) (60.9) (61.5) (62.5) (61.3) (62.6) (63.0) (57.6) (59.0) (62.0) Investment 19.3 17.7 18.1 19.0 19.4 20.4 20.1 20.9 20.5 22.6 21.6 Public 1/ (6.6) (6.6) (7.8) (8.4) (8.2) (8.8) (8.4) (8.6) (8.6) (9.4) (9.0) Private (12.7) (11.1) (10.3) (10.6) (11.2) (11.6) (11.7) (12.3) (11.9) (13.2) (12.6) Gross Domestic Savings 20.7 19.9 20.1 20.0 19.7 20.8 19.9 21.5 23.5 23.6 19.8 Public (2.5) (1.8) (5.2) (5.5) (5.9) (3.9) (2.5) (1.9) (1.5) (1.7) (-2.9) Private (18.2) (18.1) (14.9) (14.5) (13.8) (16.9) (17.4) (19.6) (22.0) (21.9) (22.7) Net current transfers - - - - - Gross National Savings 20.2 18.6 18.8 18.8 18.5 19.7 18.6 20.0 22.3 22.8 18.8 1/ Fixed investment and financial investment. Sources: Central Bank; IMF; Bank estimates.  Table 2.4: ARGENTINA: EXPENDITURE ON GROSS NATIONAL PRODUCT AT CONSTANT PRICES, 1965-67 (in millions of 1960 Argentine pesos) 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1. Gross Domestic Product 12,543.6 12,624.6 12,958.7 13,515.5 14,669.6 15,459.3 16,198.4 16,704.6 17,727.1 18,880.0 18,190.0 2. Terms of Trade Effect 54.3 49.5 -12.9 -57.9 -142.4 -222.9 -19.3 133.9 452.3 337.0 -27.0 3. Gross Domestic Income 12,597.9 12,674.1 12,945.8 13,457.6 14,527.2 15,236.4 16,179.1 16,838.7 18,179.4 19,217.0 18,163.0 4. Imports of Goods and NFS 1,164.5 1,122.1 1,125.2 1,195.9 1,476.5 1,472.0 1,595.2 1,504.0 1,477.1 1,740.0 1,630.0 5. Exports of Goods and NFS 1,342.2 1,474.2 1,456.7 1,436.9 1,667.6 1,788.4 1,577.9 1,482.6 1,572,1 1,620.0 1,360.0 6. Exports-adjusted for terms of trade 1,396.5 1,523.7 1,443.8 1,379.0 1,525.2 1,565.5 1,558.6 1,616.5 2,024.4 1,957.0 1,333.0 7. Resource Balance 232.0 401.6 318.6 183.1 48.7 93.5 -36.6 112.5 547.3 217.0 -297.0 Resource Available (= 1 + 2 - 7) 8. Consumption 9,934.6 10,015.9 10,269.0 , 10,665.8 11,310.3 11,741.5 12,466.7 12,783.4 13,666.6 14,800.0 14,850.0 9. Investment 2,431.3 2,256.6 2,358.2 2,608.7 3,168.2 3,401.4 3,749.0 3,942.6 3,965.5 4,200.0 3,610.0 10. Gross Domestic Savings 2,663.3 2,658.2 2,676.8 2,791.8 3,216.9 3,494.9 3,712.4 4,055.1 4,512.8 4,417.0 3,313.0 11. Net Factor Income -48.9 -159.9 -185.6 -189.7 -186.5 -177.3 -240.5 -206.9 -191.4 -150.0 -190.0 12. Net Current Transfers _ _ _ 13. Gross National Savings 2,614.4 2,498.3 2,491.2 2,602.1 3,030.4 3,317.6 3,471.9 3,848.2 4,321.4 4,267.0 3,123.0 14. Gross National Product 12,494.7 12,464.7 12,773.1 13,325.8 14,483.1 15,282.0 15,957.9 16,497.7 17,535.7 18,730.0 18,000.0 15. Gross National Income 12,549,0 12,514.2 12,760.2 13,267.9 14,340.7 15,059.1 15,938.5 16,631.5 17,988.1 19,067.0 17,973.0  Table 2.5: ARGENTINAt IMPLICIT DEFLATORS, 1960-75 (1960 - 100) GDP Annual rate Agricul- Annual rate Manufacturing Annual rate Construction Annual rate Deflator of change ture Deflator of change Deflator of change Deflator of change 1960 100.0 - 100.0 - 100.0 - 100.0 _ 1961 111.3 11.3 96.6 -3.4 109.5 9.5 121.4 21.4 1962 137.9 25.7 126.4 30.8 141.6 29.3 156.4 28.8 1963 179.2 28.1 175.6 38.9 179.4 26.7 192.9 23.3 1964 226.5 26.4 254.3 44.8 221.9 23.7 237.5 23.1 1965 290.1 28.1 289.1 13.7 291. 31.2 328.6 38.4 1966 359.7 24.0 325.3 12.5 344.5 18.3 429.6 30.7 1967 459.9 27.9 391.7 20.4 416.3 20.8 549.8 28.0 1968 508.5 10.6 437.8 11.8 440.3 5.8 589.9 7.3 1969 552.1 8.6 496.7 13.5 468.4 6.4 644.5 9.3 1970 613.2 11.1 573.0 15.4 513.9 9.7 720.9 11.9 1971 819.0 33.6 909.6 58.7 672.7 30.9 941.1 30.5 1972 1,316.0 60.8 1,807.4 98.7 1,116.1 65.9 1,448.8 53.9 1973 2,056.7 56.2 2,536.5 40.3 1,714.2 53.6 2,499.8 72.5 1974 1/ 2,587.9 25.8 2,790.2 10.0 2,139.3 24.8 3,435.2 37.4 1975 1/ 7,396.4 185.8 6,834.0 144.9 6,684.7 212.5 12,058.0 251.0 Services Annual rate Export Annual rate Import Annual rate Investment Annual rate Deflator of change Deflator of change Deflator of change Deflator of change 1960 100.0 - 100.0 - 100.0 - 100.0 - 1961 112.8 12.8 98.8 -1.2 97.6 -2.4 110.0 10.0 1962 143.8 27.5 121.0 22.5 135.9 39.2 145.0 31.8 1963 180.7 25.7 158.2 30.7 162.8 19.8 175.0 20.7 1964 225.7 24.9 176.9 11.8 167.3 2.8 212.7 21.5 1965 290.8 28.8 206.9 17.0 198.9 18.9 287.3 35.1 1966 372.8 28.2 252.3 21.9 244.0 22.7 354.1 23.3 1967 476.7 27.9 380.4 50.8 383.8 57.3 454.0 28.2 1968 531.4 11.5 412.0 8.3 429.3 11.9 495.7 9.2 1969 582.1 9.5 414.5 0.6 453.2 5.6 519.4 4.8 1970 657.2 12.9 448.0 8.1 511.8 12.9 568.5 9.5 1971 882.5 34.3 718.1 60.3 727.0 42.0 712.0 25.2 1972 1,355.0 53.5 1,337.7 86.3 1,226.9 68.8 1,164 9 63.6 1973 2,196.0 62.1 2,220.5 66.0 1,637.7 33.5 1, 88,2.5 61.6' 1974 1/ 2,862.1 30.3 2,728.4 22.9 2,258.6 37.9 2.628.6 39.6 1975 r, 7,982.1 178.9 7,838.2 187.3 800.0 254.2 8,033.2 205 6 1/ Preliminary. Sources: Central Bank; IMF; Ministry of Economy, and Bank estimates,  Table 2.6: PROJECTED MACROINDICATORS, 1975-80 (in 1974 mill. dollars) 1975 1976 1977 1978 1979 1980 Gross Domestic Product 54,070 51,841 54,222 57,319 60,315 63,278 Terms of Trade Adjustment -458 -964 -934 -968 -1,021 -1,044 Gross Domestic Income 53,612 50,876 53,293 56,360 59,305 62,245 Consumption 44,152 40,857 41,091 42.861 45.2;3 47.497 Gross Domestic Investment 10,253 9,633 11,630 12,888 13,111 14,018 Gross Domestic Saving 9,460 10,020 12,203 13,499 14,093 14,749 Exports 3,769 4,638 5,013 5,351 5,708 6,067 Imports 4,104 3,287 3,512 3,782 4,047 4,304 Exports (Terms-of-Trade adjusted) 3,311 3,674 4,084 4,392 4,698 5,034 Resource Gap 793 -387 -572 -610 -651 -730 BASIC RATIOS/l Consumption/GDY 82.4 80.3 77.1 76.0 76.2 76.3 Investment/GDY 19.1 18.9 21.8 22.9 22.7 22.5 Exports/GDP 7.0 8.9 9.2 9.3 9.5 9.6 Imports /GDP 7.6 6.3 6.5 6.6 6.7 6.8 GROWTH RATES/- Gross Domestic Product -4.1 4.6 5.7 5.2 4.9 Gross Domestic Income -5.1 4.7 5.7 5.2 5.0 Total Consumption -7.4 0.6 4.3 5.5 5.1 Personal Consumption -8.0 -10.0 5.7 7.6 6.8 Gross Domestic Investment -6.0 20.7 10.8 4.3 4.3 Gross Domestic Saving 5.9 21.8 10.6 4.9 4.7 Exports 23.1 8.1 6.7 6.7 6.3 Imports -19.9 16.8 17.7 7.0 6.4 /1 In percent. Source: Mission estimates.  Table 3.1: ARGENTINA: MERCHANDISE EXPORTS, 1965-1975 (in current US$ millions) 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 Agricultural exports 1,390.8 1,449.6 1,325.1 1,152.7 1.344.2 1,477.0 1,408.3 1,565.6 2,608.0 3,003,0 2,257.0 Cereals 576.6 543.7 399.0 342.3 416.3 509.9 535.2 338.6 864.0 1,339.0 1,068.0 Corn (153.6) (200.7) (223.5) (139.8) (194.6) (266.4) (346.4) (174.7) (365.0) (658.0) (511.0) Wheat (373.6) (279.6) (122.1) (139.0) (138.5) (125.9) (48.5) (190.5) (274.0) (305.0) (300.0) Sorghum (6.7) (36.7) (22.4) (26.6) (53.8) (79.7) (105.9) (31.2) (162.0) (296.0) (215.0) Other (43.7) (26.7) (31.1) (40.9) (29.4) (37.9) (34.4) (23.2) (63.0) (80.0) (42.0) Oils and fats 158.7 137.2 144.1 111.5 105.0 140.3 132.4 87.1 254.0 277.0 169.0 Industrial oils (52.2) (26.1) (40.8) (18.3) (36.9) (37.6) (38.5) (22.2) (53.0) (85.0) (70.0) Edible oils (29.7) (43.7) (34.5) (33.9) (20.0) (35.8) (29.0) (19.5) (85.0) (118.0) (29.0) Pellets and expellers (76.8) (67.4) (68.8) (59.3) (51.1) (66.9) (64.9) (45.4) (116.0) (74.0) (70.0) Sugar 6.8 6.2 7.7 15.8 7.2 11.9 14.5 24.0 91.0 297.0 180.0 Fruits 37.1 39.2 46.7 51.6 51.7 46.6 50.2 57.9 50.0 101.0 112.0 Meat 295.8 341.3 329.9 290.8 369.5 374.3 404.0 673.5 790.0 440.0 265.0 Beef (265.0) (294.1) (277.1) (245.3) (326.7) (330.2) (363.6) (623.2) (685.0) (367.0) (212.0) Other meats (30.8) (47.2) (52.8) (45.5) (42.8) (44.1) (41.4) (50.3) (105.0) (73.0) (53.0) Wool 112.0 127.6 102.3 105.8 94.1 84.4 60.0 70.3 182.0 101.0 107.0 Hides and skins 50.0 81.9 74.8 69.2 93.9 94.2 66.0 88.4 121.0 99.0 69.0 Live animals 23.9 26.0 42.0 34.9 32.7 22.7 18.5 16.5 11.0 7.0 1.0 Other 129.9 146.5 178.6 130.8 170.8 192.7 127.5 309.3 245.0 342.0 286.0 Industrial exports 92.9 129.5 131.4 202.8 262.1 288.6 323.3 369.5 653.0 911.0 729.0 Fuels and lubricants 9.3 14.3 8.0 12.4 5.8 7.6 8.8 6.0 5.0 17.0 14.0 Total Merchandise exports 1,493.0 1,593.4 1,464.5 1,367.9 1.612.1 1,773.2 1,740.2 1,941.1 3,206,0 3,931.0 3,000.0 Non-factor services 163.0 190.0 294.0 331.0 371.0 424.0 457.2 450.2 567.6 861.0 766.7 Total Exports & n.f.s. 1,656.0 1.783.4 1,758.5 1,698.9 1,983.1 2,197,2 2,197.4 2,399.3 3,833.6 4,792.0 3,766.9  Table 3.2: EXPORT PRICE INDICES, 1965-1975 (1974 = 100) 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 Agriculture Exports 33.9 34.6 33.8 33.4 34.8 36.7 40.0 47.4 67.2 100.0 92.4 Cereals 35.3 36.5 40.0 36.9 38.1 39.5 46.3 45.0 67.0 100.0 105.4 Corn (46.1) (44.9) (43.5) (40.6) (40.7) (42.7) (47.5) (48.8) (76.5) (100.0) (110.9) Wheat (31.8) (31.4) (33.6) (32.6) (33.6) (31.1) (34.2) (38.0) (52.3) (100.0) (99.4) Sorghum (41.8) (40.4) (45.9) (45.0) (42.0) (42.3) (49.1) (52.3) (82.3) (100.0) (102.1) Other (38.8) (43.6) (42.6) (38.6) (41.1) (52.4) (52.4) (48.8) (70.1) (100.0) (105.4) Oils and fats 41.2 39.0 35.6 38.2 43.3 39.6 42.0 39.6 68.8 100.0 97.2 Industrial oils (32.3) (29.8) (26.7) (29.2) (34.0) (38.0) (29.4) (22.2) (43.3) (100.0) (95.8) Edible oils (32.7) (33.6) (25.6) (31.6) (43.6) (27.7) (37.7) (38.3) (54.6) (100.0) (83.9) vellets and expellers (57.8) (56.4) (58.7) (58.9) (58.9) (57.5) (60.2) (66.0) (127.0) (100.0) '104.8) Suigar 23.2 24.4 26.3 23.7 25.6 22.7 25.3 31.5 39.0 100.0 114.9 Fuits 43.2 59.7 56.8 58.8 63.4 71.5 69.2 70.3 142.3 100.0 129.0 Meat 32.5 31.5 30.4 34.5 32.1 36.0 51.1 58.6 86.9 100.0 70.8 Beef (32.2) (30.4) (28.6) (33.0) (31.2) (35.3) (51.3) (58.4) (87.0) (100.0) (68.9) Other meats (35.4) (41.0) (45.5) (44.7) (40.1) (42.4) (49.2) (61.2) (86.1) (100.0) (78.7) Wool 37.4 36.5 36.8 33.0 37.7 36.2 28.5 47.0 98.2 100.0 50.6 Hides and skins 13.6 20.6 15.6 14.1 18.0 19.1 25.2 49.3 91.2 100.0 83.6 Live animalsl/ 39.8 39.7 38.9 39.2 41.3 43.5 43.0 47.5 71.9 100.0 83.6 Otherl/ 39.8 39.7 38.9 39.2 41.3 43.5 43.0 47.5 71.9 100.0 83.6 Industrial n5Zore2/ 52.4 53.6 54.0 53.7 55.8 59.6 63.3 68.9 51.7 100.0 118.5 Fuels and lubricants-3/ 25.0 25.0 25.0 25.0 25.0 25.0 25.0 28.6 32.9 100.0 109.2 Total Merchandise exports 34.6 35.5 34.9 35.3 37.0 39.1 46.4 53.3 75.5 100.0 97.0 Non-factor services2/ 52.4 53.6 54.0 53.7 55.8 59.6 63.3 68.9 81.7 100.0 114.5 Total Exports & n.f.s. 35.8 36.8 37.1 37.8 39.5 41.9 49.1 55.7 76.4 100.0 100.1 1/ Total agriculture index of commodity prices. 2/ Index of international inflation. 3/ Index of petroleum prices (Venezuela). Source: Ministry of Economy; IMF; Bank estimates.  Table 3.3: ARGENTINA: IMPORTS IN CURRENT AND CONSTANT VALUES, 1969-1975 1969 1970 1971 1972 1973 1974 1975 A. Current Values (millions of US dollars) 1.1 Food 39.0 53.0 44.0 66.0 45.0 88.0 79.0 1.2 Other consumer goods 29.0 29.0 26.0 17.0 22.0 46.0 41.2 2. Petroleum and derivative 101.0 79.0 122.0 70.0 168.0 526.0 470.7 3. Other intermediate goods 1,075.0 1,168.0 1,257.0 1,294.0 1,615.0 2,543.0 2,877.4 4. Capital goods 332.0 365.0 419.0 458.0 380.0 432.0 517.5 5. Total goods (CIF) 1,576.0 1,694.0 1,868.0 1,905.0 2,230.0 3,635.0 3,985.8 6. Non-factor servicesl/ 410.0 437.0 459.0 380.0 499.0 696.0 661.8 7. Total Imports & n.f.s. 1,986.0 2,131.0 2,327.0 2,285.0 2,729.0 4,331.0 4,647.6 B. Constant 1974 Prices (millions of US dollars) 1.1 Food 101.3 125.3 107.1 145.1 70.6 88.0 94.0 1.2 Other consumer goods 52.0 48.7 41.1 24.7 26.9 46.0 36.0 2. Petroleum and derivatives 771.0 594.0 726.2 360.8 608.7 526.0 431.0 3. Other intermediate goods 1,926.5 1,959.7 1,985.8 1,878.1 1,976.7 2,543.0 2,513.0 4. Capital goods 595.0 612.4 661.9 664.7 465.1 432.0 452.0 5. Total goods (CIF) 3,445.8 3,340.1 3,522.1 3,073.3 3,148.0 3,635.0 3,526.0 6. Non-factor servicesl/ 734.8 733.2 725.1 551.5 610.8 696.0 578.0 7. Total Imports & n.f.s. 4,180.6 4,073.3 4,247.2 3,624.8 3,758.8 4,331.0 4,104.0 1/ excluding freight.  Table 3.4: DIRECTION OF TRADE (in percent) Jan.- Sept. 1970 1971 1972 1973 1974 1975 Exports LAFTA 20.6 21.0 24.9 24.4 23.7 25.0 EEC 46.7 45.8 48.3 40.2 33.7 28.6 U.S. 8.7 9.1 9.5 7.8 8.1 5.6 Japan 6.2 5.1 3.0 4.1 4.5 4.8 Spain 4.5 7.0 2.7 3.1 3.6 6.1 Rest of world 13.3 12.0 11.6 20.4 26.4 29.9 Imports LAFTA 22.0 20.9 19.6 19.5 21.7 20.6 EEC 30.8 30.6 35.8 30.0 27.3 29.5 U.S. 24.7 22.2 20.2 21.4 16.8 16.5 Japan 5.0 8.4 7.5 11.5 10.8 13.2 Spain 1.9 1.9 1.5 1.0 1.2 1.0 Rest of world 15.6 16.0 15.4 16.6 22.2 19.2 (In millions of U.S. dollars) Balance of trade LAFTA -6.4 -24.7 110.9 361.3 139.8 -77.7 EECI/ 305.7 226.3 255.3 643.7 334.8 -270.6 U.S. -263.3 -256.0 -200.6 -223.8 -291.6 -378.6 Japan 24.4 - 67.8 - 85.3 -121.6 -213.0 -294.3 Spain 46.5 86.0 24.0 80.3 97.1 101.9 Rest of world - 27.8 - 91.5 - 67.9 296.6 228.7 72.9 Total 79.1 -127.7 36.4 1,036.5 295.8 -846.4 1/ Includes Denmark, Ireland and United Kingdom for all years. Source: Central Bank of Argentina  Table 3.5: ARGENTINA: BALANCE OF PAYMENTS, 1969-75 (in current US$ millions) Est, 1969 1970 1971 1972 1973 1974 1975 1. Exports (intl. NFS) 1,983 2,197 2,197 2,399 3,834 4,791 3,749 2. Imports (incl. NFS) 1,986 2,131 2,327 2,285 2,729 4,331 4,647 3. Resource Balance -3 66 -130 114 1,105 460 -898 4. Net Factor Service Income -219 -222 -256 -333 -394 -332 -457 1. Net Interest payments -114 -152 -210 -273 -317 -297 -440 of which interest on public M&LT Loans (-114) (-118) (-132) (-155) (-203) (-226) (-249) 2. Direct Investment Income -105 -70 -46 -60 -77 -35 -16 5. Current Transfer (net) -4 -3 -3 -4 10 - 6 6. Balance on Current Account -226 -159 -389 -223 721 128 7. Private Direct Investment 13 11 11 10 10 10 8. Official Capital Grants - - - - _ _ Public M&LT Loans 9. Disbursements 346 475 529 517 912 984 689 10. Amortization -365 -341 -295 -316 -469 -558 -553 11. Net Disbursements -19 134 234 201 443 426 156 Other M&LT Loans - 12. Disbursements 34 42 163 101 71 278 405 13. Amortization -41 -46 -44 -55 -82 -292 -402 14. Net Disbursements -7 -4 119 46-11 -14 3 15. Use of IMF Resources - 59 47 60 _, - 216 16. Short-Term Capital Transactions 10 89 -442 -204 -553 -504 193 17. Capital Transactions, n.e.i. 18. Change in Reserves (- = increase) 229 -130 420 110 -610 -41 781 Source: Central Bank, Mission Estimates.  Table 3.6: EXPORT PROJECTIONS, 1976-1980 1976 1977 1978 1979 1980 A. Constant 1974 Prices (Millions of US Dollars) 1.1 Beef 502.0 527.0 533.0 581.0 610.0 .2 Wheat 599.0 605.0 623.0 642.0 661.0 .3 Corn 377.0 452.0 502.0 556.0 612.0 .4 Sorghum 210.0 242.0 260.0 293.0 310.0 .5 Wool 261.0 269.0 277.0 285.0 294.0 .6 Sugar 194.0 202.0 210.0 218.0 227.0 .7 Oils and Fats 229.0 237.0 245.0 254.0 263.0 2. Manufactured Goods 789.0 907.0 1,016.0 1,118.0 1,230.0 3. All other Goods 781.0 820.0 861.0 904.0 949.0 4. Total Goods (FOB) 3,942.0 4,261.0 4,547.0 4,851.0 5,156.0 5. Non-Factor Services 696.0 752.0 804.0 857.0 911.0 6. Total Goods and NFS 4,638.0 5,013.0 5,351.0 5,708.0 6,067.0 B. Price Index (1974 = 100) 1.1 Beef 65.1 87.0 105.0 118.0 138.0 .2 Wheat 90.95j 95.7 100.5 107.7 .3 Corn 100.9 108.5 111.1 115.3 120.2 .4 Sorghum 100.8 105.9 106.7 111.4 119.0 .5 Wool 58.6 78.2 90.7 110.3 120.4 .6 Sugar 63.9 69.2 70.0 75.6 80.4 .7 Oils and Fats 101.2 103.7 106.3 109.0 111.7 2. Manufactured Goods 121.9 130.2 142.8 153.4 164.2 3. All other Goods 91.0 99.0 108.0 115.0 123.0 4. Total Goods (FOB) 90.7 101.9 111.1 119.8 129.5 5. Non-Factor Services 121.9 132.2 142.8 153.4 164.2 6. Total Goods and NFS 95.4 106.5 115.9 124.8 134.7 C. Current Values (Millions of US Dollars) 1.1 Beef 326.3 458.5 580.7 685.6 841.8 .2 Wheat 476.2 549.9 596.2 645.2 711.9 .3 Corn 380.4 490.4 557.7 641.1 735.6 .4 Sorghum 211.7 256.3 277.4 326.4 368.9 .5 Wool 152.9 210.3 251.2 314.4 354.0 .6 Sugar 124.0 139.8 147.0 164.8 182.5 .7 Oils and Fats 231.7 245.8 260.4 276.9 293.8 2. Manufactured Goods 961.8 1,180.9 1,450.0 1,715.0 2,019.7 3. All Other Goods 710.7 811.8 929.9 1,039.6 1,167.3 4. Total Goods (FOB) 3,575.7 4,343.8 5,051.4 5,808.9 6,675.4 5. Non-Factor Services 848.4 994.1 1,148.1 1,314.6 1,495.9 6. Total Goods and NFS 4,424.1 5,337.9 6,199.5 7,123.5 8,171.3 Source: Mission Estimates.  Table 3.7 IMPORT PROJECTIONS, 1976-1980 1976 1977 1978 1979 1980 A. Constant 1974 Prices (Millions of US Dollars) 1.1 Food 100.0 102.0 105.0 108.0 111.0 1.2 Other consumer goods 40.0 41.0 42.0 43.0 45.0 2. Petroleum and derivatives 400.0 418.0 443.0 466.0 489.0 3. Other intermediate goods 1,820.0 1,960.0 2,133.0 2,297.0 2,462.0 4. Capital goods 410.0 461.0 498.0 533.0 563.0 5. Total goods (CIF) 1/ 2,770.0 2,982.0 3,221.0 3,447.0 3,670.0 6. Non-factor services- 517.0 530.0 561.0 600.0 634.0 7. Total Imports & n.f.s. 3,287.0 3,512.0 3,782.0 4,047.0 4,304.0 B. Price Index (1974 = 100) 1.1 Food 87.0 95.0 100.0 106.0 113.0 1.2 Other consumer goods 121.9 132.2 142.8 153.4 164.2 2. Petroleum and derivatives 118.4 128.6 138.8 149.0 159.2 3. Other intermediate goods 121.9 132.2 142.8 153.4 164.2 4. Capital goods 121.9 132.2 142.8 153.4 163.2 5. Total goods 120.1 130.4 140.9 151.3 162.0 6. Non-factor services 121.9 132.2 142.8 153.4 164.2 7. Total Imports & n.f.s. 120.4 130.7 141.1 151.6 162.3 C. Current Values (Millions of US Dollars) 1.1 Food 87.0 96.9 105.0 114.5 125.4 1.2 Other consumer goods 48.7 54.2 60.0 66.0 73.9 2. Petroleum and derivatives 473.6 537.6 -614.9 694.3 778.5 3. Other intermediate goods 2,218.6 2,591.1 3,045.9 3,523.6 4,042.6 4. Capital goods 499.8 609.4 711.1 817.6 924.5 5. Total goods (CIF) 1/ 3,327.7 3,889.2 4,536.9 5,216.0 5,944.9 6. Non-factor services - 630.2 700.7 801.1 920.4 1,041.0 7. Total Imports and n.f.s. 3,957.9 4,589.9 5,338.0 6,136.4 6,985.9 1/ Excluding freight. Source: Mission estimates  Table 3.8: BALANCE OF PAYMENTS PROJECTIONS, 1976-1980 (in US $ millions) 1976 1977 1978 1979 1980 1. Exports (incl. NFS) 4,424 5,338 6,200 7,123 8,171 2. Imports (incl. NFS) 3,958 4,590 5,338 6,136 6,986 3. Resource Balance 466 748 862 987 1,185 4. Net Factor Service Income -560 -564 -590 -584 -593 1. Net Interest payments -526 -504 -500 -489 -493 of which interest on public M&LT Loans (-259) (-295) (-324) (-328) (-347) 2. Direct Investment Income -34 -60 -90 -95 -100 5. Current Transfers (net) - -3 -4 -5 -4 6. Balance on Current Account -94 181 268 398 588 7. Private Direct Investment - 25 30 40 40 8. Official Capital Grants - - - - - Public M&LT Loans 9. Disbursements 1,315 1,053 859 896 946 10. Amortization -767 -764 -770 -774 -820 11. Net Disbursements 577 289 89 122 126 Other M&LT Loans 12. Disbursements 306 256 417 325 256 13. Amortization -221 -221 -204 -235 -312 14. Net Disbursements 85 35 213 90 -54 15. Use of IMF Resources 237 160 -10 -93 -173 16. Short-Term Capital Transactions ) 17. Capital Transactions, n.e.i. ) -1,213 -340 -190 -107 -27 18. Change in Reserves (- = increase) 437 -350 -400 -450 -500 Source: Mission Estimates.  Table 4.1 - ARGENTINA Page 1 EXTERNAL PUBLIC DEBT OUTSTANDING INCLUDING UNDISBUPSED AS ~1F DEC. 31, 1975 DEBT REPAYABLE IN FOREIGN CURRENCY AND GOODS (IN THOUSANDS OF U.S. DOLLARS) D E B T O U T S T A N D I N G : I N A R R E A R S TYPE OF CREDITOR ------------ - CREDITOR COUNTRY DISBURSED :UNDISBURSED: TOTAL : PRINCIPAL INTEREST _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _