Ecuador - Current economic position and prospects

REPORTS DES S RESTRICTED WITHIN I IL OPY Reort No. wT-in4h ONE WEEK % This report was prepared for use within the Bank. It may not be published n.m ,toLa q.uot". .. ........a. 6i . L- . --.. TL- D2--L -----. . 9V.. UP WuvIPIVOW my 11VnU "U1V WIU llrU I **IWD I ew LUnK uU%.4wl* Flu responsibility for the accuracy or completeness of the contents of the report. T'rTVDTA TTfnKTA T DAWTV UnD Df flkTQTDTTtTTnlkT AXTT T% nVTLT flDA4XTr AIA L.:fA I"J AL kX JL J"1 1& IL WJLX JLXJ. %, W 11 t 4aI .j % A II Z11 J.f JL L.;# v .;&J 1A T ~YL,A. A CURRENT ECUONM1C PUSTION AND PROSPECTS OF ECUADOR June 7, 1961 Department of Operations Western Hemisphere CURRENCY EQUIVALENTS __ __ 1/ T.S. $1 = 1t Ine - 1 sucre = U.S. $0. 07 i million sucres = U. S. o, uuu approx. exchange markets: an official market in which the buying rate was 5/ 15 = U.S. $1, and a free market in which the rate was about S/ 22. 50 = U.S. $1 in late May. About one-third of all exchange transactions were effected in the free market. On that date, the bulk of the transaction formerly in the free market were shifted to a newly created second official market in which the buying rate is S/ 18 = U.S. $1. The free market now exchange transactions, mainly invisibles and unregistered capital transfers. TABLE OF CONTT'NTS Page No. BASIC DATA . . . . . . . . . . . . . . . . . . . . SJNAPY AND CONCLTSIONS . . . . . . . . . . . . . i - iii INTRODUCTION . . . . . . . . . . . . . . . . . . . . CHAPTER I - THECM01\Y . . . . .. . . . . . . . . 2 A. Economic Structure . . . . . . . . . . . . . . . 2 B. Agriculture . . . . . . . . . . . . . . . . . . 3 Growth in Output . . . . .. . . •. . . . . . 3 Domestic Agriculture ... . . . . . . . . . . . 3 Export Agriculture . . . . . . . . . . . . . h Agricultural Credit . . . . . . . . . . . . .5 C. Industryv....... . . . . . . . . . . . . . 7 D. Mining . . . . . . . . . . . . . . . . . . . . . 9 CUAPTEPR T - MONEY AD CRiT , . . . . . . . . . 10 rHAPTiTR TTT -T THEIl? PIJRTC TR . . . . . . . . . . 13 B. r19ÅIPTl?pR TV TÆ TiRAT,,,UKTGE 01? PAYMTt UTS--------------------17 STAmTIS~TICAT- APPIR1T'MTY BASIC DATA Area 102,000 square miles Population (1961 estimate) 4.4 million Annual rate of increase 3.1 percent Gross National Product, 1959 12.5 billion sucres o devoted to gross investment 14.6 percent Average annual rate of increase in real terms, 1950-1959 4.7 percent % originating in agriculture 37 percent Cost of Living (1950 = 100) 119 (1960) Avprnge annual rate of increase. 1950-1960 1.7 percent Exports, 1960 U.S.$ 150 million Coffee 23 Cacao 22 Others 13 rn"+Q no I- n r..P 18 npercent 0 ff; C ..UaJ I .L T '~ n+,- a+- o-1~fcA~ P - Amount at end of: May 1960 U.S.$ 36.6 million May 1961 17.1 T' nCLC rZ'* 0 .1 - *1 1)4 Public Finances % of G.N.P. 10 percent % for investment 17 percent ruuije secur revenues, 1912y .O Uio-Ln-L uce % of G.N.P. 21 percent External Public Debt, June 30, 1960 U.S.4 105 million o- wnnci undIsbursed U.*D.J .)-. m1UininU Service payments as % of exports, 1960 9 percent SUM11ARY AND CONCLUSIONS . -cuador entered the 1yous, Tne notable expansion of reaL oU- put of the 1950's - 4.7 percent each year on the average - and of investment and nUcume per capiua seemed to be slowing down. Incomes nave been increas- ing less rapidly in recent years. Some regions and groups have not parti- cipated fully in tne growth that did take place. Ecuador is still among the poorest countries in Latin America. Concern with economic problems influ.. enced the tone and the outcome of the presidential elections of June 190 and will color the direction and urgency of the Government's efforts during the remainder of its term of office. 2. A majority of Ecuadorians still work and live on the land. In- dustry's percentage contribution to the total product has not increased. Exports continue to be almost exclusively agricultural - mainly bananas, coffee and cacao. Extreme dispersion of authority and financial resources remains the dominant characteristic of the public sector. 3. Prices of major domestic food staples and of cacao and coffee have been declining. Efforts to diversify output and accelerate the settle- ment of new and low-cost producing areas will, therefore, greatly influence agricultural development prospects. Ecuador is fortunate in having much readily accessible undeveloped land and in the demonstrated. willingness of farmers to move to new areas. 4. Investment in highways has been indispensable to agricultural de- velopment, and will continue to be important in opening up new lands and making existing areas of production more accessible to markets. However, the continued development of agriculture will require relatively more of other facilities such as research and P.yt,n-ion sprvces improved marketing and credit. Bank credit for agriculture did not increase at all during the 19qnts desnite a more than doubling of the value of agrinltural productionn The problem of agricultural credit cannot be solved until the present System of Development Banks. which is insolvent- nnn be reorgani7e8 or An alternative channel for credit developed. 5. Monetary expansion has been geared conservatively to growth in outnut nvpr the year, as indicantrs csnh +.ht nricn level the nehane rate and exchange reserves clearly indicate. However, the past pattern of monetaTr manaement. wasn. vianriqltr -r'- t t. fit dii,ng +.Ina rl=J +a+. early in 1960, and the new Government subsequently introduced a number of P.Ynnn.,z n1 -n?-T' -m~a-irnn Tha Imaml Y agv"r~t~11 -- +1 - - - -- C-C -- - . ec.j.t_4 -~1* -~. -_~Z LJ IJI~ ---O banks were reduced. Central Bank credit to the public sector increased rate policy contributed to the loss of one half of the official foreign ~~ -L .1 % . v ~ J C4 1" r1 . j L . L IJ11 V WU U.L~ , L7 U .L a $10 million stand-by credit was obtained from the International Monetary to a strict stabilization program which should reverse the financial deterioratioLn_ of1 the past monhs - ii I have been broadly in balance, with persistent transfers within the public -V- 1 taii L U~ o)y Ulit! eUt: Id±a_ UUveL1ullu LU 6iulflu aU-UIU1J1UOL agencies and borrowing by the Central Government from others. The Central Government receives Less than 4u percent of all public revenues. ALter several years of restraint, pressures for rising Central Government expendi- tures are urgent, but Central Government investment, transfer and current expenditures cannot all be increased as desired in the present structure of the pubic fInances. 11 expenlditures are to be limitea to non-inflationary funds available from domestic and foreign sources without, as in the past, leaving Central Government investment expenditures as a residual category in the budget, budgetary planning and administration must be improved,. 7. As progress is made in creating a primary highway network, public investment should be directed towards realizing its full potential. It is difficult to appraise the probable scale or amphasis of investment effcrt over the next few years because public investment resources and decisions are dispersed and there is no coordinated project planning or public invest- ment budgeting, even though the Planning Board has progressed notably in preparing the basis for such coordination. 8. Export growth has been due almost entirely to bananas. Price de- clines have offset increases in coffee and cacao shipments. Banana export values doubled over the 1950's with the result that, from less than one- fourth of total export values in 1950, bananas accounted for almost two- thirds of total export values in 1959 and 1960. Though coffee and cacao exports are expected to increase, price prospects for these crops are not encouraging and further increases in total exports will continue to depend primarily on banana sales. These are unlikely to increase as ra- pidly as during the 19501s, and export values as a whole are thus not ex- pected to grow by more than some 2 to 3 percent per year on average over the next few years. In the light of these prospects, the authorities will be faced with a delicate problem of restraining imports without at the same time restraining activity in those sectors dependent for supplies and equipment on imports. 9. Ecuador's external public indebtedness outstanding, which amounts to :) 99 million. has not increased significantly since the last economic report was presented two years ago. Even with the rather level export earnings now in prospect. Ecuador has nossibilities for new borrowing. though the amounts that can be prudently borrowed will depend greatly upon the terms on which new debts are incurred. Presentlv scheduled annul servinp navrents, which are currently at a $ 14 million level, begin to decline after 1962 and by 1965 will have fallen to nn 2 8 million level, enivalent t.n ip than 5 percent of gross export earnings expected at that time. - iii - 10. New public external borrowing of about $ 60 to $ 70 million could well materialize in the next year or two if projects now being contemplated in the fields of transportation, power, development credit, housing and water supplies mature properly. There seems to be a fairly good prospect that some $ 35 to $ 40 million of this total could be obtained in the form of "soft" loans. But even with this help, the conventional loans in prospect would, with some rollover of suppliers' credits now outstanding, extend for some years what is now a very short period debt service peak. 11. With reasonable financial policies, the service of a debt of this: magnitude should be manageable. But in view of Ecuador's rather limited balance of payments and public savings prospects, the possibilities for further borrowing on conventional terms in the next few years fall far below the financing required for the essential public sector investments that still have to be made in Ecuador. and for which specific projects are expected to be forthcoming fairly soon. These possibilities would, of course, be even lower if the loans now considered as probable were all to be made on conven- tional terms. INTRODUCTION 1 The 19qOfq wRrA for FnunAor q aerq1P of not-qb1e economic nprforrm- ance. The national product increased in volume by an average of 4.7 percent ah year. subst.ntial1v in Pre.Pq of the high ( nperent) annual rnt. of population growth. Exports virtually doubled in value. The proportion of resomrces rvoper .o arn inroqv.mPn+. ro'n from nn nnnin1 airmrap of 12 nPr- cent to 15 percent. All this occured in an environment of remarkable fi- npnoil ThnTn+i nom-iic taq re inn-ronce v loac +.hin 9 na n. m vron on the average. The free market exchange rate was virtually the same at period represented the equivalent of fewer months' imports than it did at +hn han -ng ha+ bu t n,+ 4- v44-nin -1nkn--A 0s DEvonom c u-ve" oymoient during the -Pun -Pz 4-" -P-; -P4-ce -; ~~ ~U- L5jiI L U.i %.ku.1 -L1 WiIV .OiL.A1t. 11CL-L-L L ULAV .. L k1LUO WV Uj. however, less satisfactory than during the first half. In real terms, the gross unu,uni ynaU 'uU1uL-L . ncrleased a v auIue' .au vi vI between 1950 and 1954 but only at 3-1/2 percent between 195 and 1959. IVVLIuIL an av-,erag-:e r et apitca -.0su :U' av u 4 n Tu --u-- u- 3-- cos,- -4mu Liiid.5i dV~J.dd~ ~ djJ L Li LUU.1itz U.L UUVUt.U W5 .LWV)J ZQUCUJ. L0 J UL-±.L alIULIS the poorest countries of Latin America, Misgivings about the economic s!LALavion were uevated vigurOu0.±Juu 1y Uu1LL11ru witz ±yUV UcL;LnU1 uclipauil Cuiu contributed to the very large popular vote and to the absolute majority with which the present Vovernment came into power. Ine Uegree to w1Ich Ecuadorians in the next few years judge the Government to have fulfilled expectations in the economic field could nave profound effect on the future pattern of political and social development. O"UA T'D T M P1tI rnlTnmv A L -- 4 J10 1)ROV ~LVull"k)LI. ~JL Uk.0 L, Uak U 3. The Andes divide Ecuador into three separate zones: a low-lying, partly tro-UpicLal,9 aric.Lulturaldly richUL andu btill noLt, fLu.Ly de:VlopPacifi coastal area; a high Sierra, many of whose valleys are densely populated, but poor in natural resources; and an extensive, largely unknown and very tai.ly settled jungle area east of the Andes. Industry is concentrated almost entirely in Quito and Guayaquil. 4. The population, now some 4.4 million, is increasing rapidly, but there is still new land to be brought under cultivation and much scope for increasing productivity. 5. People are badly distributed, however, in relation t^ resources. The population is densest in the relatively resource-poor Sierra. Migration has alleviated this problem somewhat. Coastal lands have been newly opened in recent years by immigrants moving spontaneously from the high Sierra, and it is hoped that well-planned colonization will carry this process further. There has also been much movement from farms to cities, especially to Quito and Guayaquil, which has given rise to housing and unemployment problems, and created a politically significant urban proletariat. 6. Despite this movement to the cities, Ecuador is still predominantly agricultural. During 1950-1954, the percentage of the gross national p.7oduct originatinp in agriculture ranged between 39 and U percent; and during 19" - 1959 between 36 and 37 percent. This slight decline does not indicate any fundamental structural chanwe. Industry's share of the total product has remained constant at 15 to 16 percent for the last decade. 7. Ecuador's exports continue to be almost exclusively primary agri- ,n1tural nroducts. Fnorts increased durinr t-p fir.t. hlf of the nst decade from 14 percent of total product to 18 percent, but recently, they have no more than kept in nace with total product. 8. Extreme disntrsion of PAthority and financinl ro;ources continle to characterise government. The traditional regional differences wnich have nntributed t +. 4isnrsinn nea no+ likely tn diminish soon, The concentra- tion on the coast of production for export and of foreign commerce in general h-r r _n mnAm +hna cannr%min n-+a o+ nP +he va etnnc1. rnrnq ri thnrp of th domestically-oriented Sierra. With the growing relative importance of the and thus many of its problems, are still much as they were a decade ago. stUU hUUiiiLU s. lfao be.1Ultyl vLLv UO fUlxiLY er; w Y . adrpni toeLVgin sector has shown itself to be vigorous, flexible and rc:sponsiVe to emerging opportunities. Awareness of national development problems and opportunities has broadened.* Ecuador has been receiving almost continuous technical assistance in economic and financial matters and in particular aspects of Planning Board, have enlarged substantially the amount and quality of infor- maiU aout the ecuuumy nu uroaueeu ne vase fLr iAormeu ecouomui adU financial policy making. There is, therefore, good reason to expect economic expnsin t cotine longI traditionlJ. ines at a U rate tha, on the avrg. keeps ahead of population growth. B. Agriculture Growth in Output 10. Ecuadorls overall economic performance will for a considerable time continue to reflect closely developments in its agriculture. The growth of the agricultural sector has been rapid. The gross domestic product of agriculture valued at factor cost in constant prices was 4l% greater in 1959 than in 1950, equivalent to an average annual volume increase of 3.9 percent each year. In per capita terms, improvement was less marked. but still clear. 11. But this progress has been uneven. Years of vigorous expansion, particularly when exports were in strong demand, were inter-mixed with years of little progress. Growth in agriculture production has been slower in recent years than in the earlier 1950's. Since the mid-1950's, Ecuador's agricultural product has just kept pace with population. Furthermore, some groups within the agricultural community have been faced with declining terms of trade, and incomes in these sectors have not even kept pace with increases in output. Domestic Agriculture 12. Incomes earned from producing traditional foodstuffs for commercial sale appear to have lagged behind output. The principal agricultural crops produced for the home market are corn, potatoes, barley and wheat, all pre.- dominantly products of the Sierra. Output of corn and potatoes. which in 1958 accounted for three-fourths of the combined value of these four products, increased markedly over the decade, Corn output rose byan average of over 4-1/2 percent each year between 1950 and 1959, and potatoes by more than 6 per- cent each year. Barley nroduction did not increase siLnificantly; but heat production did, by almost 5 percent annually. But while wheat prices e kept-stable.by means of import quotas, corn, barley and potato prices were respectively, 13 percent, 18 percent and 40 percent lower in 1959 than in 195L in contrast, cattle production has been expanding very rapidly both on the coast and in the Sierra, by more than 10 percent a year on average, without a iia fstigmovement--4 in prices. 13. The potential for further increases in agricultural output for home consumption appears substantial. Though primitive subsistence agri- culture still predominates, producers' associations, commodity institutes dedicated to research and to the dissemination of improved seeds and techniques, and foreign technical assistance are improving the efficiency of the larger farmers. Imports of fertilizer have been increasing rapidly. Even more Important, there is large potential for increasing the acreage under cultivation, particularly in the coastal area. 14. Further increases in the marketable supplies of traditional foodstuffs could, however, prolong recent price declines. Increasing attention will therefore have to be given to developing new crops,to reducing unit costs on the farm and, most urgent of all, to enlarging the still highly fragmented local market. The large highway investments of recent years have markedly improved farm-to-market communications. But the extreme diversity in standards of quality and units of measurement, in local regulations governing trade in primary staples, in local taxes, and the absence of adequate processing and storage facilities still keep producers from tapping their full market potential in many lines. Export Agriculture 15. In the export sector, which consists overwhelmingly of bananas, coffee and cacao. comparable market problems also exist. 16. The banana boom has dominated much of Ecuador's postwar agri- cultural development. Expanding markets and declining supplies from Central America after the Wnr nrovided onnortunities which growers took advantage of with alacrity. In 1946, exports amounted to some one mil- lion stems in 1959, to 35 million st.em Since 192 Eririor hns been the leading exporter of bananas and now supplies about one banana of every four entering wnrld traeP. Although the nnible rPnovery of' exports from Central America to the United States and increases in ex- po-rts. from Africa_ tor thec HWronPnn marrket, ndr t1he evr nrPq4cnt. .h-rpq. of epidemic disease, have always made Ecuador's banana prospects appear uncertain- epansion to date has coni.qtntl. rreAded the most. ontimis.- tic forecasts. Bananas not only dominate the export oicture, but domes.- t.in q zo1 'i Av~ TTzl mn~iA nnt-T. _q-'on(lly). fre-%r nic- e~t f thep gross value of all agricultural output in Ecuador, much more than any other singee cr p. A -Pn-nr nnPPan nn re - m nn. - '_ r-n- - r, I - - l A nnrl ni1+nii+. increased substantially in response to the favorable prices of the mid- f3 f'+!_ n"r n - i+l +In- 'k -nq,hrrv v-k-tie n ,nrl 1snrl jo -L W - - y V LI 1 . V- L,aAc.A. WWJI,*M I - - __- -_~ planted to bananas wherever possible. Bananas can thrive on roughly al nvnA "11 they blm e-r --l c-lea th . en la-i- 1'nd -ful" 1 byv pxv rov-i-d'nc -, hae t-r nc retards undergrowth, they provide food and income to the farmer during can readily be planted on the same land under the broad banana leaves VU CUU.~~UNL~mJ J~iIL~± IIJ J U J. kA dI UUL16J1g over. Between 1950 and 1959, coffee acreage increased by some 75 per- cen andu cacau acreage by some )U percent. come vi unee new pianI1ug are replacing old trees coming out of production but the rest is adding to output. The volume of cofee exporeu in 1Yu was 6V percent abuve its 1950 level; the cacao export volume increased 35 percent in this period, 17. However, with the expansion of the banana areas some of the older supply regions have become marginal. Declining prices may be placing many coffee and cacao producers in comparable difficulties. 18. In the case of bananas, excess supplies for export and for home consumption have been more usual than not. On average, one-third of total output is estimated either to go to waste or is used as live- stock feed. E=corters have normally adjusted supplies to demand by varying minimum quality standards for accepting fruit at shipside rather than by var7inL prices. Thus, though banana production is on the averege profitable even after allowing for waste, and prices have been fairly stable. the typical small grower without orior sales contracts has at times found himself unable to sell to exporters at any price. For some years. the Centra7 Bnk has aided prnodners from marainnI branqn rpgiin by permitting a portion of the foreign currency proceeds of their export sales to he nonverted into unere. nt qneiv11V f'qvorqhiP rates. 19. i nnp (-.f'fpp andl cacao arnr abl nd hoogneousq andi since! Ecuador is a very small supplier to the world market, the problems pecu- lia tobannasdonot- confront coffee and caca growes. Sple r marketable at going world market prices. But prices have been falling. Thep avroera f no". rc foi r n aa n 19590 Was onme 10 pec nt, n-r coffee, some 25 percent, below the 1954-1956 averages. Cacao prices have since, dl%ind conA-nsidrabyfrthr Anicrain ube f r- ducers of these crops are being pressed by these price declines. 20. According to sample cost studies made toward the end of 1958 bi,r +f-,r Tlr)-l -mr+ Ba,nl, gtowevrs ofA coffeand cacao nnnrecc - on avrar're less than the current cost of keeping their plantations in good condition ~L14-'4L~JL~.~L1a U~LJ.UJ I, V UL, iii U iU tLIZ.00 W[iCLLI U1ll % : l tAJ. U of operations on family-run farms. 21. These cost estimates are very approximate. Variations about ule averagpu eves, tatn in ne areas sanvpleu, MuS Ue 1-Lue. Accuriugly, these estimates are not a sufficient basis for arguing that, with the must decline unless the sucre is devalued. But they do suggest that, for iILd.44y'V _iUCA±~ U A.±U~.U9, LiiUUiIL- J opt: i U ld. ZJIIC IU U U#Z dLo U1±L IIU Ij output prospects. Agricultural development planning should accordingly incluue among its highest priorities programs to U_ve[Sify ouUpu andU oU accelerate the settlement of new and low-cost producing areas. Agricultural Credit 22. The principal investment efforts in agriculture have been private. The Government's contribution has c-)nsisted of extenaing and Im- proving surface transportation and providing limited agricultural credit through the Development Banks. 23. Investments in roads have been essential to the extensive agri- cultural development of the past decade, and will continue to be important .Lli Upt::1.LE1 Up lit::W -±aliuo Ull blitz L;()at: wlu J.1 IrLai'L-Uig t&± Li-U_ '.Llr production more accessible to markets. However, the continued develop- ment of agriculture will require relatively more of other facLius such as improved research and extension services, marketing facilities ai]u credito. 24. Ine evidence of a credit problem is clear. Total credit made available to agriculture by the banking system was even lower in 1959 than in 1950 despite a more than doubling of the current values of agri-- cultural production. In view of the growth in agricultural output and trade that did take place, certainly not all self-financed, there must have been increasing recourse to expensive private non-bank credit from exporters, wholesalers and other intermediaries. While farmers have always used non-bank credit extensively, there is clearly a serious shortage of institutional short-term credit to finance normal agricultural operations at moderate rates and a very serious shortage of medium - and long-term credit of any kind. The development credit that has been made available through the Development Banks and the National Securities Commission has been limited in amount. 25. The Srstem of Development ±Ban,<s - 15 provincial banks and one national bank to direct the financial ana lending policies of the System - intended primarily to provide finance to agriculture, has been insolvent for years. Between 1955 and 1959, loans in arrears increased as a percent- age of total loans outstanding from 27 percent to 40 percent. Frozen assets are probably even greater than indicated by the percentage of loans in arrears since the total of loans considered as current includes many re-- newals. some undoubtedly potential bad debts. During 1957 through 1959., more than half of all loans falling due were renewed. 26. The urgency of revitalizing the flow of credit to agriculture has for some years been widely recognized in Ecuador. Various attempts have been made to correct the structural deficiencies of the System. Changes +.hnt wAnila nrnvirlp. rn- nnPble baqin fvr rnitlifinn the system mnv be under way. The first efforts of the new Government in the agricultural credit field were. however, to orovide for the consolidation of the System's debts to the Central Bank in order to reopen the door to more borrowing by the System from this soure- Tn view of the -0 ntrPnt decline in _19"Q in credit made available to agriculture by the System, the concern of the new Government + -ill again +.he credit ninaline i undertandableT +. in view of the past history of the System's borrowings from the Central Bank, more Central Bank Ae+ nuld cnmnline+ and rolny even fuYther the even+nal recapitalization of the System unless the required reorganization is sat- 27, 'II -1ether the, Syte of Devel opment Banks i s to beoeae as a3 bank or is also to be a vehicle for making subsidies to agriculture is, of course, a maUer fU tUe uveUnmen to dcide . Uwever, an avUweU OuuOAy program should be financed forthrightly through assignment of monies from one overnments audgo. lur sn long s nte Deveuopment cank ytem cannot conserve its capital, foreign exchange credits for agricultural development which Ecuador needs and to which it could otherwise have access will remain unavailable simply because of the lack of an institutional intermediary that can distribute these credits to the individual farmer and provide reason- able assurances that they will be well used and repaid. 28. A Commission to draft an agrarian reform law was set up in January of this year and was instructed to complete its work in six months. The abundance of unused but cultivable land still owned by the Government makes the typically difficult questions of redistribution and penalty taxa- tion for failure of private landowners to use land to its full potential somewhat less pressing than in other countries. But whatever may be done to broaden landownershio. the ultimate success of any effort will be affected greatly by the degree to which credit and technical assistance can be made avilahle from ; wnrkinp qPrii1tunr;; devPlonment hnnk. r.- Tnriuist.-r 90 ~ Tn iQ_-n gm n nq n )in 'h o T)--o!i Tn -ITr)l im1. inAl~i o+_. rial output is estimated to have increased by over 7 percent a year on for more than two-thirds of industrial production and close to two-thirds 04..LLIJ l st,±r.dL emplouyment an waes UiI"U 4i U L ± WIk)L_.Y U±I L U UU LuIltz home market for sales but largely import-oriented for raw materials. Some 4kJ percent of all industrial raw materials are obtained from-1 abroad, though the proportions vary widely among industries. Organized factory operations account for some 6u percenu of iuuurial output and most of Its growth but for less than 15 percent of industrial employment. The great bulk of industrial employment is in small artisan-type activities with limated capital, limited skills, and very low productivity. Most of Ecuador's industry is concentrated in and near Quito and Guayaquil, but mainly Guayaquil. 31. Sharply divergent patterns of expansion among industries suggest that structural change may be beginning. It is among the newer lines of activity - such as edible fats, malt, paper bags, rubber footwear, paints and varnishes - that the highest rates of expansion are to be found (Table 9). 32. Ecuador's import list consists overwhelmingly of many items imported in small quantities, and the potential for manufacturing plants: of economic size to produce items now imported is accordingly limited. Apart from industry based on the processing of local materials such as fibres and foods, industrial plants typically process imported materials and thus change the composition more than the scale of import requirements. However, the mere increase in the scale of the economy is steadily creating new opportunities for the economical production of things that were formerly imported. industrial expansion. Many firms have had to tie up capital to produce thir owli power from smll thermaIl~ units~ atL comparyaveVly high costj. i. hydroelectric power expansion program now in progress in Quito with IDW financUg wi.L relieve, 1r a short wi-ale, the shortage in une area of the capital. In the Guayas region, a project for expanding power capacity tnrough development of the hyaroelectric potential of Tne Rio Jubones is being prepared. 34. To remedy the power situation outside the two main urban indus- trial centers, the Planning Board recently recommended that a national Electrification Institute be established. The Institute would be a kind of government-holding company for the many small municipal power plants throughout the country, most of which are inefficient, undercapitalized and dependent on subsidies because of inadequate rate structures. It would also prepare a power expansion program for the country as a whole. 35. In 1957 an Industrial Development Law was passed which offers financial incentives such as accelerated depreciation and reductions in import and local taxes to new industries. Most of the new industrial investments in prospect will enjoy the advantages of this Law, though it is difficult to assess the extent to which the incentives offered have been critical to these decisions to invest. An industrial development center, operated and financed jointly by the Ecuadorian and the United States Governments, was recently established to explore and publicize the possibilities for still further industrial expansion. 36. Additional incentives could be provided by appropriate adjust- ments in the tariff and domestic tax laws. The development impact of these fiscal instruments has been largely neglected and certainly reauires study. A comprehensive system of suitable financial incentives coupled with well-studied and publicized industrial investment oooortunities could do much to accelerate the spread of industry. However, the best of incent- ives and information may orove of limited Pffpc.t. without. narallel arranPe- ments for suitable financing. 37. In recognition of the dearth of long-term finance for investment in industry. the Congress recently authorized the estahlishment of six provincial industrial development banks. But it has yet to reform company lais Tiih n vipw to imnrnvina thp conditions for inv.tina transfPrahle savings in industry. Adequate protection for minority shareholders could be amofn he monstr imnporant. onrity cpta fo roher the ance-teyrm d-el- opment of industry in Ecuador. Equity capital for other than closely-held - 9 - D. Minina 38. In relative size, mining has been among the less imnortant of Ecuador's activities, accounting regularly for only 2 percent of the national nroinet. Petroium is the only minral of imnortance. Gold. silver, copper and lead have been produced in amounts which have been veryr qmAll Aa nnot inorpnPing- Thp-rA i-q At n-r Qpn.rnnhd fnv P"nf_t ing any important change in the present scale of mining activities. Though there are indications of mineral deositnn sfaout the contry basic geological information is still deficient. As for petroleum, nx-In --nf+-*, i-Y, ir-; ' + 10n li"-un nnf+ nc irn+ ii"lfflXTOrn fn rl ne c-d ,-1 1 ,- n-"-17-nc2 Cd44J.LJ2 C LiJ..d I %A il V .1 0JC IC L U.L *Id LU iAL . LV U,J-LA. dV Ad 011% L* IUdT .L VAC d..L UU -L recently completed a new refinery, which is not yet being used at full poten aL, anu 1d.d uncuniguou iut huasIr becouen wUesi n-eru-u. But the capacity to produce enough crude oil for Ecuador's growing needs is less certain. Thle majOr present fIlZ are uu andU require inucleaoiig effort to maintain present output from existing wells. There does not appear to be any immediate danger of output declining. It could even increase if the intensive drilling now under way in known areas of supply and the exploration going on elsewhere proved fruitful. 3ut the prospects are not clear. Thus, Ecuador's crude oil surplus, which was formerly exported and which has been declining steadily since tae mid-fifties, may turn into a deficit as consumption continues to grow. Consumption of petroleum products has been increasing steadily by some 10 percent each year and promises to continue at a similar rate with the expanding road transport system and with the expanding consumption of thermal power. - 10 - CHAPTER II - MONEY AND CREDIT 40. Monetary stability has been a distinguishing characteristic of the Ecuadorian economy during the 1950's. The most impressive indicator of this stability is the steady and rapid expansion in the willingness of private savers in Ecuador to invest their savings in fixed interest domestic debt denominated in local currency. Between 1950 and 1959, when private holdings of currency and sight deposits were increasing on average by some 6 percent earch year. time and savings deposits increased by more than 9 percent an- nually and private holdings of mortgage bonds issued by banks, by over 20 percent each year. Over the decade as a whole. new purchases of mortgage bonds by the general public provided sums equivalent to one out of each eleven sucres of gross private fixed capital investment in the economy. During 1957-1959, new issues of mortgage bonds provided even greater stuns, Pouivalent to more than one sunre out of every eight invested in fixed as- sets by the private sector in these years. 41. Perhaps the most important single factor contributing to monetary s+ability has hon +ho rol+.ive absnnP of thet +rgnretee h n +.he nnhli e and the private sector over credit allocation which in so many countries been sporadic and, on the whole, limited; though it should be added that on occ_asi nS Uh-I I~bh--Viny' .reflece Uhe iA+~ndepeArnnce of twhe +rMonet+'-r niut-n'v- rities rather than government restraint. In six of the ten years between banking system, deposits exceeding loans outstanding. As a result of this pattern in the public finances, monetary de- Ve_Um1Ui IaVe ret± eUueu overwnevIu1,Liy unaLuYge- in U1nt Lupp.y ui. o u creuit to the private sector. The major determinants of this credit supply - the behavior of the commercial banks, of the general publi and of the monetary authorities, and changes in the gold and foreign exchange holdings of the banking system - have not been expansionair in their monetary efiects. Ill un Uomm1c1.LU uaix navu WierL.L- LU11U_ing W.LL1uL1I WIne ilLb jUU by autonomous changes in their loanable funds. Ecuadorian bankers have uraudonai-y been averse to becoming indeotea to tne entral nanK. Iney have maintained day-to-day operational flexibility by keeping their reserves against deposits substantially higher than the minimum levels required by law. 4- There was no important move during these years by the general public to hold money in the form of sight deposits instead of currency, which would have enlarged the lending power of the commercial banks. Until late in 1960 there were only seasonal reductions in the legal reserve re- quirements for banks. Foreign exchange holdings of the banking system were substantially the same at the end of 1959 as at the end of 1950. Consider- able bank credit expansion has been based on mortgage bond sales to public and some on new paid-in capital, but these represented transfers of savings - 11 - to banks and not net money creation by the banking system. The fact that the money supply was able to increase by an average 6 percent each year over the decade as a whole was largely due to the steady growth in lending by the Central Bank directly to the private sector. The record shows this to have been geared conservatively to growth in outout over the years. 65. However, these factors which have made for secular stability in the money supply have also made for sharp seasonal and cyclical in- stabilit. There has bepn a sta-nnal nattern in eP.ort r nints not nara- leled by the steadier pattern of payments for imports. Commercial banks' naSh Inl lnn hinn fln-wrl qnl xThhjnA -nriy n -in +ho h ohi since the commercial banks have not gone to the Central Bank, borrowers have often fonn" +hemelves nnPnn+d v4+ih sharn f-4"' e 4n +hn accommodation available to them. Recurring periods of credit stringency Central Bank credit to the private sector. 46. Special measures have been used to relieve this seasonal string- ~' JV U QC;kVV. L . U J_v" _L:.J , Li J±A licto u,--iI UU -LVW'Z,. for brief periods the legal reserve requirements of the commercial banks. in the money supply paralleling Ecuadorts fairly marked cycles in exports and InLJ exchange h1o.ldigs of thle bnbiung sysemi pa6t yearso Year-to"year changes in Central Bank credit have exhibited a marked countercyclical pattern wthout which thoe swings would have Veen conideraoly greater. (. 1uXing tne election aecates earjy in 1yu tne monetary autnorities were accused of stifling Ecuadorts economic performance, especially in 1957 when there was virtually no monetary expansion and in 19y8 when there was even a small contraction. The money supply has since been expanding at an 11 to 12 percent annual rate. The present Government took office in the fall of 1960 determined to make Ecuador's monetary management "more flexible". Under new lagislation enacted in the closing weeks of 1960, commercial banks were allowed to hold up to 50 percent of their required legal reserves in interest-bearing securities of the National Securities ",ommission, redeemable at par. This measure reduced by half the effective minimum legal reserve requirements of these banks. They were fuither rediced when seasonal reductions in reserve requirements made early in 1960 were not later eliminated, 48. The scope of Central Bank lending was enlarged and the maxi- mum maturity of its loans for specified purposes was more than doubled. Preparations were made to fund the outstanding indebtedness of the Development Banks to the Central Bank and thereby make possible new redis- counting, and Central Bank credits to the development banks were to be interest-free. Also, the rules governing the composition of the Monetary Board were changed and the new Board was to be advised by a new management. The General Manager of the Central Bank. who had been in office since 1944, resigned in November 1960. - 12 - 49. The legislature also authorized substantial new borrowing by the public sector, which would be predominantly from the Central Bank. Large Development Bank rediscounting has not yet materialized, but public sector borrowing has already begun. During 1960, total Central Bank credit out- standing increased by S/ 413 million or by more than 50 percent above the end of 1959 figure, compared to no increase at all during 1959. Over 80 percent of this increase represented new public sector indebtedness - S/ 285 million for the Central Government, S/ 58 million for other public agencies - and over 80 percent of this new public sector indebtedness was incurred during the last two months of 1960. 50. As yet there has been no comparable monetary expansion because of Central Bank net sales of foreign exchange and also because of increases in Central Gnvernment d1nnsits- undisbursed tax collections and other nublic sector claims on the Central Bank during these same months. But the spend- incr 7 nn ial n+P A 1 nf t.h nhl m ir _cz tr-+.r_ n n rlyq fA -ihn nitrl n- .,nvrrnrnnt has grown. 51. Monetary management has had less freedom of manoeuvre in recent In 1955 Ecuador's exchange reserves fell by over 30 percent, and the need to 1955 reserves increased steadily, though they could not be described as t:;v~ V1_i Ct ±~±U 1t;t:1j t,CI , 1)UUL Wit. PCLUUt_L,i Of restraint U1L 1UVU- ment has now been interrupted. With the relaxation in financial policy describedu aboUve: andu thelic: u n -unic ertai nt-y ab-Out fuUt fIsLOt-, moniltarCIY and exchange rate policy, the demand for foreign exchange rose sharply. DuUring thle first fiv months ofulU1 1, j J-_ m.Lj_Lan Or aliflabu lia-LI Ci. wl January 1 reserve holdings were lost. Notwithstanding large sales of exchange in the free market by the Central BanK-, the free rate also depreciated steadily from 17.4 sucres per dollar during January 1961 to 22.5 sucres per dollar at the end of May. 52. unaer the terms of a 10 million stand-by credit obtained from the International Monetary Fund on June 8, 1961, the Government has now committed itself to a strict stabilization program which should correct the financial deterioration of recent months. Central Bank credit expansion is to be limited; the effective legal reserve requirements of commercial banks are to be restored to the levels which were in effect before the late 1960 reductions were introduced; and no further Central Bank exchange sales are to be made in the free market. If the program is to be viable, however, the recent growing imbalance in the Central Government's budget will have to be corrected. This will not be easy in view of the still unresolved structural problems of the public finances, which are discussed in the following chapter. - 13 - CHAPTER III - THE PUBLIC SECTOR A. Finances 53. During the last ten years financial performance of the public sector as a whole was remarkably good. Revenue increased by some 9 percent per year on the average. The public sector share of the total product rose from 17 percent of GNP to 21 percent. Public sector savings and investments also grew over the decade, if not in the oast few years, not only in resnect to nublic sector revenues but also in relation to the economy as a whole. Public savings as a percentage of gross output was only 2.5 nercent in 19q0 nnd h nernent or less through 19 3: since 194 it has been around the 5 percent level. $4. Public expenditures have on the whole been kept within the l imTit of' frmg avaTnila I 1 nml suplse occurred I in fouvr of 'he te#=n years under review; the deficits of the other years were small. Virtually in which they occurred. As has been mentioned already in Chapter II, there was,n- no + 44 - -r 1-t +1b ,- h 4r , n+-- +- +Ib . nr,-, oe+ - These years also saw some improvement in the revenue structure. Though share of direct taxes in the total tax take increased. $5. This orthodox record represents the combined result of very diverse tendencies at the diferent levels O' the public secuor, WIIlch in rcuaUdr has been traditionally characterized by extreme disperson of resources and authority. In a public sector which includes some 800 autonomous pubic entities and local governments, the Central Government receives less than 4U percent of the total public revenues. After several years of decline, the degree of dispersion has been rising again, and in 1959 the Central Governmentis share of public revenues was the lowest of any year since J.5,3J Exoenditure patterns are correspondingly dispersed, especially investment expenditures. In 1950 investment expenditures of the Central Government accounted for less than 20 percent of total public investments. This per- centage has since risen, but in l Gb9 Central Government investments were still only 36 to 37 percent of total public investments. 56. The public sector is composed of four major groups of institutions: the Central Uovernment, autonomous public entities, municipal councils and provincial councils. Together, provincial and municipal councils dispose of only about 16 percent of total public revenues. The major public revenue streams flow to the autonomous entities, which in 1959 received 47 percent of all public revenues, and to the Central Government, which received 37 percent of total revenues in that year. /1 Including revenues of the Social Security Funds. - l - 57. The autonomous entities canprise hundreds of institutions of diverse size and function. Among the largest are the Social Insurance Funds, the railroads, the highway authority of the Guayas region, the National Securities Commission, the Guayaquil Port Authority, and a number of regional public welfare bodies. Taken together, the revenues of these institutions have been growing over the years by 8 to 9 percent per annum on the average and have produced consistent surpluses over non- investment exoenditures. A large part of these savings has originated in the Social Insurance Funds and has been transferable. The Funds have been the largest purchasers and holders of negotiable securities in the country. q8. The Central Government has reularly been the maor borrower in the public sector. For the most part, the Goverment's borrowing has reprenq+snte a usep of genuiine savings_ monstly from does.tic source.qf from the National Securities Commission (which receives each year a share of imnnnor.t_qrP the ncnial TnsurannA i-nl nn+rnt+rn ;nr ,)nn1iers_ Foreign borrowing by the Central Government was not only the lesser part of itS oimn t-otal bDOr-rowing, but also the lesser part of all fnreign bo-rrow- ing by the public sector. Municipal governments and autonomous entities have T bee the a.-or~ , friint ,fP n~-e f0le. in 10-n d,~i -s ur-s-atnt~~+a-s nini tenths of the total for the public sector during 1950-54 and two-thirds public sector surpluses are due to transfers within the public sector, Commission, the Government borrows funds which under other institutional arrangeienu woulu nave accrueu Arec Lu ±o. Durrow-ug ± a X on-- 4 U0- Insurance Funds is normal in most countries. The Central Goverment at the same time has been making increasingly large transfers each year to other parts of the public sector in the form of subsidies from the budget. Much of the Governmentis new indebtedness during these years could be saIL to have been incurred on behalf of the rest of the public sector. 60. This system of transfers, however, is steadily enlarging the areas of inflexibility in the Central Government's budget and aggravates rather than alleviates budgetary problems. The probability is that the Central Government's administrative and service expenditures, outlays for public works, and transfers to the rest of the public sector will be pressed upwards in the face of only modest increases in revenues and in transfer- able public sector surpluses. The Central Government's 1960 deficit of some S/ 300 million, equivalent to over 20 percent of revenue, and the still larger deficit estimated for 1961, probably exaggerate the magnitude of its underlying budgetary problem. But the directions of change appear clear, After several years of restraint, pressures for rising expenditures are urgent. Even in the past the years of high investment were the years of large deficits. Under the present structure of the public finances, limiting expenditures to non-inflationary funds available from domestic and foreign sources tends to relegate Central Government investment expenditures to a residual category in the budget. - 15 - 61. Reflecting as it does a distribution of power and influence -within the public sector that has developed over many years, the present degree of dispersion will probably change only slowly. If, then, the Central Government is to finance responsibilities which are increasing faster than the normal expansion of the tax base, it must increase its revenues by levying new taxes, raising tax rates, or raising the yield of existing taxes through improvements in tax administration, and at the same time improve the efficiency with which its present monies are spent. The Government has said that it would not impose new taxes, though in the face of increasing obligations and promises some new taxes may have to be established. Much emphasis is being placed on improved tax administration. With the assistance of the Curran Hission (1957-1959) a Klein and Saks Mission in Ecuador since November 1960, the United Nations Technical Assist- ance Program and a United States I.C.A. public administration mission, programs to consolidate and simplify existing tax laws, to improve their administration, and to improve the budget process are under way. But progress in such things is slow at best and the prospect is for continu- ine budeetary strain. R. Investment 62. Though investment expenditures both in the public and the private sep+cto hare '.in.+nA mll-+in+4l inkm - he a+. A ngn Ihl nith', i nv tr n somewhat more rapidly than private, public sector investments are still no + Inn"n v, I +^~I ~ LO ..~,d ne' nn l N-n'I +^~+n* T., -klin- cinnlrt-e investments have been concentrated in social overhead facilities and have nomic growth. 63. More than one-third of all public investment expenditures has b e n fw rt,, nS 0'-L- r t-4i,in Mn- - + of t1lis J --s-mlnt hasen ipn,i4 ro_".A Transportation expenditures,'Imaihly for roads, have accounted for three- .L. LU 1 UIi L _.L.L _L e UIa U L.AjJtIRLo VU~ y Uill-, .jtLil d c.L LUV ;±Li1 1 U. I113 concentration on transportation has been criticized by some as excessive electric power, irrigation and development credit have been neglected. the whole, the goal of opening up new lands and enlarging the domestic ma ke b 'y develpL1 a UCLOL%. OLLL.LCLUt U.LCt10JJU1UL.U_LUt1L1 t- L'WVJL-P 'd a V. OviuVJL ly high priority and was realized. In the absence of funds to do other UL.Lngs~ ali tlt OcUlLt:: UU't;, Uli-LO _1iVt:.U11Iti,L1U tILIJL1cL_L U1LAU _L_LUJ_r UI"- not appear to have been misplaced. 64. Since feeder roads are needed to realize the full potentialof the new highway network, since a port development program is under way, and since the pressure of sheer physical deterioration of the Quito - Guayaquil railroad will call for an early decision as to what should be done with the rail system, much of the past emphasis on transnortation will probably continue. But directions for new expenditure exist. Reference has already been made to the problem of the development banks and the problem of developing local power supplies. irrigation projects are also under study, and efforts are under way to establish with United States Government assistance a housing bank and a housing program. - 16 - 65. However, in view of the dispersion of public investment resources and decisions and the virtual absence of any coordinated project planning or investment budgeting, there is no basis now for appraising the probable size or emphasis of the investment effort for the next years. The Planning Board has progressed notably in preparing the foundations for a public investment program. But the expenditure plans of the Ministries and other public agencies have still to be coordinated and related to this work. Though preparations are being made to attach the Planning Board to the President's office. it does not yet constitute an effective mechanism for coordinating public investment decisions. The actual pattern and rate of investment expenditures in the next years will, under these conditions. be affected very largely by the speed with which projects suitable for foreign financing can be develoned. Without sunlementarv financinv. many of the new project ideas under consideration are unlikely to be realized. (IT7A11M.vLn TT MTTn1 fnAT AATnV nVi -Mt.VT=TTr1' Jilj-Uc IrJi~ L V - JI1LJL)IZ' %J. I.1_. L.1j 10J economic expansion. The dollar value of exports increased fivefold between 1)5/O ana I9ou, from 0U milion a year to VL,U million a yeare r-ports currently account for 16 to 18 percent, or one-sixth, of each year's gross national product. Growth in exchange earnings has been the primary deter- minant of the country's ability to satisfy its growing imlort demands, and particularly its need for capital goods. Growth in exports has also influ- enced importantly income flows taroughout the country. Income from exports is received by many producers, not by just a few. The slowdown of export expansion during the second half of the past decade had a significant effect in slowing down the expansion of the economy as a whole. 67. Ecuador's exports are almost exclusively agricultural and consist primarily of three commodities: bananas, coffee and cacao. For years now these three commodities have been accounting for 90 percent of total export values. Increasingly, however, bananas have come to dominate the export picture. In 1950, bananas represented less than one-fourth of total export values; in 1959 and 1960, almost two-thirds (62 percent) of total exports. Over the decade, the steady expansion of banana export volumes without off- setting price declines accounted for virtually the entire increase in total export values. Coffee and cacao export volumes also increased, coffee more rapidly than cacao. Coffee exoort volume was 60 percent higher in 1960 than in 1950 and cacao export volume was 35 percent higher. But the export values of these two commodities barely reflected this increase because of offsetting price declines. Average coffee prices have been declining steadily since 19q6_ qnd by 1960 had reached a 32 cents per pound average. 25 percent below average export values in 1950. Cacao prices were more erratic, but thev have hPn declining steadily since 1958. Thp 1960 nverage of 27 cents per pound was 15 percent below the 1950 level, and the current cacao price is -some t0 nernnt below the 19Q0 I]vP1 Merchandise ponrt, 1950/ql qind 1? 99/6 (annual averagesin millions of US dollars) Commodity 1950/51 1959/60 Increase Bananas 21 91 70 Coffee 17 20 3 Cacao 18 22 4 46 1 1 77 Others 18 15 -3 74 148 74 Source: Table 29 - 18 L price declines, but with the predominance of small growers, the flexibility would be devalued or other measures taken were a reduction in export supplies in recent years come into production. Ecuador is a small seller on the world market and its expanding supplies should all be exportable, suoject only to possible withholdings under commodity stabilization programs. Ecudaor has not yet withheld any coffee under tne international Coffee Agreement, TnCugh with rising exportable supplies it will now have to begin. As for cacaco, there is no international agreement, out in view or the precipitous decline in cacao prices in recent months as unexpectedly large increases in supplies from new and permanent sources began to come onto the market, pressures for an agreement of some kind may develop. But even with agreements, Ecuador may reasonably expect to maintain its small share of the world market for these commodities and thus continue to increase exports at least in pace with these markets. The supply potential appears ample for this goal. .69 For purposes of a 1965 export estimate, coffee and cacao export volumes have been assumed conservatively to increase above their 1960 level by an average of 3 percent each year during the next few years, raising the export volume of each commodity to a 37,000 metric ton level. But with present price prospects, this volume increase is not likely to add much to recent export values. As Ecuadorian coffee is expected to be selling f.o.b. at about 30 cents per pound in the mid-1960's compared to 32 cents in 1960, and cacao could well still be selling f.o.b. at about a 20 cents per pound level, 1965 coffee exports may approximate some $24 million and cacao exoorts about $16 million; or together, not more than in 1960. .70. The "other commodities" group, which has been consisting princi- pally of rice, balsa wood, crude petroleum (now ending), pharmaceuticals, and panama hats fluctuated in value during the past decade between $ll and $23 million. The 1960 figure was $13 million. For 196$ a figure of 125 million is assumed, to reflect oossibilities for new exoort develooments in fish products, oilseeds and possibly sugar. 71. Ecuador's export prospects for the next few years would thus seem to hinve almost entirely on the orosoect for further increases in banann exports. 72. There would seem to be little possibility of supply limitations to banana exports devopnning in these vtar. Friedom from wind amaOe. effective control of Sigatoka disease, the development of plant varieties ressta2nt_ ton Pa-n disenae thea avilabili.-u n~f oy.o1q-v iidopIirl~ lnane. suitable for bananas, and improved transportation facilities from banana. expansion. Market prospects will thus continue to be determining, and they A~. o .,no+ rnd-e +r nto J-1-1t as -J no y nc i, +l,, ,Co+ LL.J J V tJfI.t U'. .- - r ' ~ a pid as inJ.' thebttlaL..A pas1~1 'S'~ r' to - 10- enlarged Ecuador's share of the worla market. Very elastic supply responses enabled Ecuador to subStitute for declining Shipments to the Uniteu States from Central America and to satisfy rapidly expanding postwar markets in Belgium and Germany. But per capita consumption in these markets, which have regularly taken over 90 percent of Ecuador's total banana exports, is approaching saturation. Exports to Belgium and Germany have not increased since 1958. Efforts are being made to develop the Japanese market, but its potential cannot yet be appraised even approximately. For purposes of a conservative 1965 export projection, banana exports have accordingly been assumed to increase by some 3 percent each year on the average over current levels, i.e., at just about that rate which would ensure Ecuaaor's retention of her share of the world market. This would raise annual shipments from a 35 million stem level for 1959/60 to a 4l million stem level in 1965, worth $106 million at present prices. 74. On the basis of these estimates, total merchandise exports would approximate $170 million in the mid-1960's. Compared to 1960 export values of $150 million, this would represent an increase equivalent to an average growth of between 2 and 3 percent per year in export values in the next few years. This expected rate of growth in export values is the same as that envisaged in the last IBRD economic report on Ecuador (WH-74a, June 8, 1958) though the commodity details differ somewhat.1/ 75. In.the absence of any prospect for substantial increases in export earnings and of an adequate cushion of exchange reserves, domestic financial policies will have to be formulated with prudence if dangerous pressures on the exchange reserves are not to recur. New external borrowing will also have to be adjusted carefully to existing commitments if debt service is not to make fixed exchange oayment oblikations excessively large. 76. There is little nrosnpnt for maior rpc3ntions in imnrt. remand through import substitution in the near future. Industrial exoansion consists l_aglyi o)f rPlacning finisqhedp.roducitsq with ser-rnLroz_essed o-r -ra atrianlsq which only reduces import cost by the value added at the final stage cf processing. New imnort margins are continually being added in this way. but they are small. The largest single raw material import is wheat. Increases in domestic nrnntion in nronnot will nrobably at best only orvent whrqt imports from increasing much above their present levels. About three-fourths of e ach -year Is import v%alues continu to1 10 n~ ncQ.'+. rf n-ri +.nr, od ndH indus-c: trial raw materials and about one-fourth consumers' goods. The only category tha hs nceaedstadlyin reainto toal_1 ot has been fuels end 1 .LJ . O U LIJd'.'~'J.Lu U W V .1 LOLICL V dX_LUU~ U11-L'. IyL customs valuations based on exchange surrendered whereas in this ta inthe two r eU pr Ut s U tLhu not compaubu totals in the two reports are thus not comparable. - 20 - lubricants, from under 2 percent of total imports in 1950 to 5 percent in 1959; with the new refinery now in operation it is not likely for some years to increase as rapidly as in the past. It may even decrease if petroleum exploration efforts enlarge the domestic supplies of crude oil. 77. With reasonable financial policies, the prospect is that import demand will increase gradually with total output over the next few years, by some 3 to 4 percent per annum on average. The task for the monetary authorities that this prospect implies is delicate, for the increases in export earnings in prospect are such that imports financed out of current exchange earnings will barely be able to increase in step with total output. Undue stimulation of import demand could so influence the composition of imports as to reduce the margins for materials and equipment imports essential to the development process. 78. There are two related conclusions to be drawn from these prospects. The first and most obvious is the clearly defined need for financial policies that will not contribute to further indiscriminate expansion of the demand for imports and for foreign exchange. Ecuador's short-term external payments flexibility has been sharply reduced by the steady foreign exchange losses of recent months. Official exchange reserves amounted to 8 32 million at the end of 1960, equivalent to about three months imports. Within the five following months they fell by almost half to a net total of 9 17 million. Ecuador drew $ 5 million from the International Monetary Fund in April and ohtained a standby credit for A 10 million from the Fund in June. The stabilization progra that was initiated under the stand-by agreement shonild hain tn lay thp bqsi. for a aradal rebuilding of Ecuador's badly depleted foreign exchange reserves. 79. The second conclusion relates to the importance, in view of the bala1nce of payMt rospects of -omtn " -, a+ 4ne ng " n ri -P for- puici I borrowing abroad only to priority development projects with financing at payment obligations on external public debt - equivalent to over 9 percent practices of past years. It consists largely of write-offs of suppliers' credits of re"Lati-Vely- brief termi fLor proVJeCt-S, many of whIIChI could. more appropriately have been financed at longer term with lower annual service OL)-L.LU111i 80. ~ ~ ~ ~ Y Th-n 9015,dwing of -, 85 milo on frin loas to the public sector financed some 30 percent of total gross fixed investment expenditures of the pubioc sector. Together, the united States Government and the IBRD were the principal creditors, but suppliers provided important sums. More than one-third of the total drawings on loans during these years were on suppliers' credits. One half of the total drawings, which were for transportation projects of all kinds - roads, railways, airports, ports - financed one-third of total investment expenditures in transportation in these years. - 21 - ,1 tL i %.U UU LidJV UVCt 1J UZt=11 iJIiJJ'J_ U 1iit. LAJ Ld. .UJC of the Fcuadorian economy, even though they may not have represented very I --- -uu,44 u 4 n ou ava::-' use' reso -urces _v _l 1-1 a 1 ;_ oume - -s ma- I-ve _ 6 Uj_ UL ii LA LLXLJULt: It U ILt Vt± CLLL Cllkk L±11 DV11'Z ie 1 Ili-,Y --.j . been accompanied by offsetting outflows for amortization. In view of the ow uegree v. LexiuLity inl 1 Vn_In Xu--- __ 4u -u- u4 o-U uvouIt within the public sector, the availability of these credits has been especialli. prtn in making- itL PossbleL: to ucarry " Ut1 Partic'Lku_lOrpjc s UC_. Frign cuisD cvulu play an even more utravgic rle in te public investment picture in the years ahead. At the beginning of 1961, Ecuador?s external public indebtedness outstanding, inCludiUg funU SUll undisbursed, was ''99 million. This total includes still undisbursed sums amounting to some F;u millIon, equivalent to about nine months' pubLic investment expenditures at the 1959 rate. Even with the rather level export earnings now in prospect, Ecuador also nas possiobilIes lor new borrowing, though the amount that can prudently be borrowed will depend greatly on the terms on which new debts are incurred. Presently scheduled peak annual service payments at ;14 million begin to decline after 1962 and by 196' will have fallen to ..0 miL0ion,equivalent to less than per- cent of gross export earnings expected at that time. Substantial foreign resources at conventional terms could thus become available in the next few years. In view of the clear urge to raise public invest7lnt expenditure levels and accelerate the pace of economic expansion, every effort should now be made to develop good projects that would enable these potentials for borrowing at conventional terms, as well as for obtainin ot0er fi- nancing at more liberal terms, to be utilized in the most productive manner. - 22 - CRATTR V - (P7;)TMJCA?74TNESS; -rrP f - -T -- - - - - decisions during the next years are likely to impose strains on the economy. of the community to prevent these strains from leading again to financial exc sse tcat u l qUL u d ~4 A -'L UCUL.%JPCIL1 L t.LU.L L,O V.L4 .LU 4 JV 114. .1. LJV 114, 4 the extreme, threaten Ecuador's ability to meet its current external fLinlanicial obJ-Lgatin* 0o. Ecuador has for the past seven montns been experncing Seriouts financial strain. However, the financial policy commitments made at the beginning of june in connection with the stand-by credit of the International Monetary Fund should begin to mark the end of this financial deterioration, When similar periods of strain occurred in past years, reactions against financial excess followed soon after. The very dispersion of political power among institutions and regions which has frustrated coordinated public sector policy-making has also frustrated prolonged i"balance of the public finances. The Ecuadorian economy is small, and those groups which pay the price of financial excesses have been able to exert effective counter-. vailing pressure on the Government, There is little reason to expect that they will not continue to do so in the future. There will undoubtedly be periods of difficulty, but the economy and the import structure are flexible and should continue to provide margins for adjustment during these periods as they have in the past. The peak external public debt service obligations now current have not created payment problems in what have been years of fairly level export earnings, and they begin to decline shortly, 85. Various public sector projects for transportation, agricultural and industrial credit, irrigation, electrification, housing and education were being considered when an IBRD mission last visited Ecuador at the end of 1960. Though they are on the whole pointed in good directions, there is little likelihood that all these projects will materialize soon in view of the preliminary stage of preparation at which many of them are. But borrowing of about $ 35 million for transportation projects and about another $ 35 million for electric power, development credit, housing and water supplies could well materialize in the next year or two if the relevant project ideas mature properly. 86. Not all of these loans would be hard loans at conventional term. There seems to be a fairly eood nossibility that. of this A 60 to A 70 million of possible loans, about half could materialize in the form of "soft" loans. But even with this help. A 30 to ' Iq million of conventional loans would, with some rollover of suppliers' credits now outstandin7, reduce somewhat REuadorts nreent. external navmnts flexibility by extending for some years what is now a very short period debt .qprvir-p nnnk- Annnql P+,rtmniI nnfhlin riphtf qprvinp nnymPntsq untmr q+, .A I)f million level - equivalent to about 9 percent of current gross export earnings - wouill afte.r a brie.f ndr sligyhtecin roise nmni-) ton 1), +r,A 15 mni lion - 23 - after 1964. eauivalent to 8 to 9 perent of export earnings expected then. 87. With reasonable financial policiees, debt service o ths magnatude should be manageable. But in view of Lcuador's rather limited balance of payments and nblic savings prospects, the margins for still nrther b erro., ing at conventional term in the next few years would be far below the financ- ing reqnired for the large volume of essential public sector investments that still have to be made in Ecuador, and for which some specific projects are expected to be forthcomn n ired These mpro a al o beumae be even lower if the loans now considered as probable were all to be made onf cnnton l t rm.n STATISTICAL AF?ENDIX Table No. External public debt 1 Estimated external public debt outstanding June 30, 1960. 2 Estimated contractual interest and amortization payments on external public debt outstanding including undisbursed as of June 30, 1960. National accounts 3 Expenditures on gross national product, 1950-1959. 4 Gross national product, by origin, 1950-1959. Production 5 Structure of agriculture! 1950. 1954. 1958. 6 Main~r ari(nfltmr'al nrr~ndit- nrnrlhn.inn- fn-rp.ian tr rit- nnmnntir- area harvested and yield, 1950-1959. 7 Credit extended to agriculture by the banking system, 1950-1959. 8 Structure of industry: 1955, 1958. 9 Industrial production: volume indices, 1950-1958. 10 Major industrial products: production, 1950-1959. 11 Electric power: capacity, production, consumption, 1950-1959. 12 Minerals production, 1950-1959. 13 Consumption of petroleum products, 1950-1959. 14 Exports and imports of petroleum products, 1950-1959. Banking 15 Bank credit, by origin and Aestination, 1950-1959. 1 nChanges in bank credit, by origin and destination, 195U-1959. Public finance 17 Consolidated finances of the public sector, 1950-1959. 18 Revenue of the public sector, by source, 1950-1959. 19 Finances of the public sector, by authority, 1950-1959. 20 The Central Government's budget, 1950-1959. -2- Pol MA- IP l e AToP~ C-L V _U L%J V "±III L,U±UiLPV 22 Gross fixed capital formation, by purpose, 1950-1959. 23 Gross fixed capital formation, by purpose and by major sector, 24 Gross fixed capital formation In the public sector, by purpose ana by major authorities, 1950-1959. Capital market 25 Negotiable securities outstanding on December 31, 19 9, by purchaser and by security. 26 Purchases of negotiable securities, by purchaser, during 1951-1959. 27 Average annual purchases of negotiable securities, by purchaser and by security, during 1954-1959. Balance of payments 28 Balance of payments, 1950-1959. 29 Merchandise exports, by value, 1950-1960. 30 Major merchandise exports, by volume and value, 1950-1959. 31 Banana exports, by destination, 1948-1959. 32 Destination of major exports, 1959. 33 Merchandise trade, by geographical area, 1957-1959. 34 Composition of imports, 19 0-19 9. 35 Foreign direct investments in Ecuador. by sector and by country of origin, 1950-1958. 36 International reserves of the Central Bank, 19 0-1960. Prices '7 Tprmns of trade. 19qO-1919- 'F'pi. n-rk --P-- ---qna rnt.iz -,- - ---;n nf' l-tri-a in1cor Ocr)-i oAn ).n WhI rIoesaleny-^ prce, byvrrain caegrii Q IQ 1, - C)[ Table 1: ESTIMATED EXTERNAL PUBLIC DEBT OUTSTANDING JUNE 30, 1960 (In thousands of U.S. dollar equivalents) Estimated debt outstanding itemn June 30, 1960 Net of Including undisbursed undisbursed TOTAL a 73 877 10h,626 Publicly-issued bonds 6,849 6,849 U.S. dollars 7,89 6,689 Pounds sterling 160 160 Privately-placed debt 18,988 21,248 U.S. dollars 12,683 14,943 Pounds sterling 5.996 5.996 Belgian francs 309 309 IBRD loans 21,440 12,829 U.S. Government loans 24,169 31,269 Export-Import Bank loans 20E7 21- 7' Other U.S. Government loans 3,291 7,,4'22 Colonbian Government loans 2,431 2,431 Colombian pesos 2,099 2,099 /a Does not include: $8,585,367 outstanding on ICA loans on which the debtor has the option to repay in local currency. $5,000,000 outstanding on DLF loans repayable in local currency. IBRD - Economic Staff February 2, 1961 Table 2: ESTIiATED CONTRAC'T1UL INTEREST AND A!,ORTIZATION PAYPENTS ON EXTERNAL PUBLIC DEBT OUTSTANDING INCLUDING UNDISBUR.ED AS OF JUIVE_30 960 - (In thousands of U.S. dollar equivalents) T otal deb)t Dbnt Payments during year Total service payments by category of debt Year- standing- - - - - - plus un- Publicly- Privately- Colombian disbursed Amorti- In- Total Pisued :plael IBRD U.S. Govt. Gv Janurs_1 zation terest issued placed loans loans lons JanuCary 1 bondsJ ha_ bt___lo-gns 1960 104,611 b 11,238 2,352 13,.590 294 8,079 1,987 3,171 59 1961 99,223 11,145 3,202 14,347 292 7,714 2,549 3,480 312 1962 88,055 9,998 3,661 13,659 292 5,414 4,071 3,579 303 1963 78,033 8,233 3,707 11,940 292 2,935 4,914 3,504 295 1964 69,776 5,876 3,355 9,231 292 1,143 4,156 3,355 285 1966 63,874 5,061 3,084 8,145 292 1,029 3,387 3,160 277 1966 58,787 4,850 2,825 7,675 292 746 3,386 2,934 317 1967 53,910 4,629 2,587 7,216 292 522 3,386 2,806 210 1968 49,253 4,544 2,349 6,893 292 248 3,385 2,766 202 1969 44,680 4,627 2,128 6,755 292 3,388 2,880 195 1970 40,023 4,091 1,906 5,997 292 3,388 2,130 187 1971 35,901 3,673 1,710 5,383 292 3,385 1,526 180 1972 32,196 3,714 1,526 5,240 292 3,387 1,389 172 1973 28,449 3,759 1,336 5,095 292 3,386 1,252 165 1974 24,656 3,609 1,151 1,760 292 3,388 924 156 Ja Includes service on all debts listed in the Table 1 prepared on February 2, 1961 except a $15,000 Export-Import Bank loan for which terms are not readily available. b The amount outstanding in 1960 is as of June 30, 1960; payments in that year are for the full year. 1c It was assumed that bonds would be retired by the sinking fund through purchases in the open market at prices below par at approximately present yields. IBRD - Economic Staff February 2, 1961 Table 3: EXPENDITURES ON GROSS NATIONAL PRODUCT, 1950-1959 (millions of sucres at current market prices) 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 Consumption eip enditures 6,014 6, 722 7, 466 7 908 8, 706 9, 221 9, 492 9 944 10 39 10,750 Private 5,17 5, 672 6,343 6,65 7, 372 7,50 5 125 , 3 , 9, 270 Publie 997 1,050 1,123 1,254 1,334 1,374 1,367 1,407 1,414 1,480 Gross investment expenditures 783 1,C0 908 1,263 1,631 1,806 1,78o 1,811 1,769 1,826 Fixed capital 617 855 810 1,002 1,382 1,538 1,,560 1,56i 1 513 1,586 Pr iate 420 591 50 623 90 977 997 M6 936 Public 197 264 302 379 498 637 583 564 567 650 Inventories 166 149 98 261 249 268 220 250 256 240 GROSS AVAILKBLE RESOUROES 6,798 7,726 8,374 9,171 10,1337 11,03) 11,272 1,755 12,163 12,576 Net exports of goods and services 270 - 112 174 - 1 - - 289 - 375 - 124 - 112 - 36 Exports 1,390 1,229 1, 70 1,716 2,153 2,070 2,097 2,377 2,312 2,459 Imports - 943 -1,194 -1, 228 -1,538 -2,043 -2,05L -2,103 -2,125 -2,120 -2,125 Net factor payments abroad - 177 - 147 - 306 - 286 - 273 - 308 - 369 - 376 - 304 - 370 GROSS NATION.AL PRODUCT 7,068 7,614 8,548 9,063 10,174 10,74 10,897 11,631 12,051 12,540 GC.N.P. at 1950 prices 7,068 7,307 7,944 8,232 8,94() 9,165 9,443 9,950 10,247 10,654 Gross investnent as % of gross available resources 11.5 13.0 10.8 13.8 15.8 16.4 15.8 15.4 14.5 14.5 . ra&n+-rn1 Bank Table 4; GROSS NiTIONAL PRODUCT B ORIGIN 1950-1959 Origin 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 (millions of sucres, at current factor cost) Total 6,611 6,963 8,077 8,437 9,426 9,971 10,183 1090 11,014 11,1.0 (percentages) Agriculture 39 39 41 40 39 36 37 37 36 37 Industry 16 16 15 16 15 15 15 15 16 J Commerce 10 10 11 11 11 13 13 12 12 Services 9 9 9 9 9 9 8 9 9 10 Ownership of buildings 8 8 7 7 7 8 8 8 8 l/ Public administration and defense 6 6 5 6 6 6 6 6 6 Transportation 5 5 5 5 5 5 5 5 51 Construction 3 3 3 3 3 3 3 4 4 Mining 2 2 2 2 2 2 2 2 2 Banking, insurance 1 1 1 1 2 2 2 2 2 2 Powerpwater, sanitation 1 1 1 1 1 1 1 1 i/ 100 100 100 100 100 100 100 100 100 100 Not available Source: Central Bank Table 5: STRUCTURE OF AGRICULTURE: 1950, 1954, 1958 7Value of nroduction as nercentaae of value of total agricultural production) Product 1950 1954 1958 Primarily for export 35 45 37 Bananas 15 21 24 Coffee 10 13 7 Cacao 10 11 6 Primarily for internal consumption 65 55 63 Rice 7 4 5 Corn 5 4 4 Potatoes 5 4 4 Wheat 2 1 1 Barley 1 1 1 Other crops 22 23 21 hh 36 36 Cattle and products 21 19 27 TOTAL 100 100 100 0ource: Uentral Bwank Table 6: MAJOR AGRICULTRAL PRODUCTS: PRODUCTION FO1EIGN TRAL COSUMP ION AREA HARTLSTED AiD YIELD, 1950-1959 Product Unit 1950 1951 1952 1953 1954 1955 1956 1957 1958 _259 Rice, milled Production '000 metric tons 85 81 103 100 85 115 119 144 148 160 Imports " - 1/ 1/ 1/ 1/ 1/ - - - Exports 62 7 56 33 19 21 12 :37 26 17 NnSmIption . 23 T) )7 67 6 95 108 iA 121 JL3 Area 1000 hectares 71 75 78 78 51 79 93 104 109 116 Yield quintals/hectare 26 23 29 28 36 :32 28 .30 30 30 Cotton, raw Production '000 metric tons 9 6 8 8 8 9 9 12 10 8 Imports " - l 1 2 1 -- - - - Consumption n 9 6 9 10 9 9 9 12 10 8 Area '000 hectares 18 18 19 19 23 26 27 :28 28 24 Yield quintals/hectare 11 7 9 10 8 7 7 9 8 7 Bananas Production '00000 stems 21 22 24 25 62 69 72 60 64 68 Exports " 7 10 17 16 19 24 23 26 28 35 Consumption " 14 12 7 9 43 45 49 34 36 33 Area '000 hectares 45 46 54 53 115 135 147 156 164 169 Yield stems/hectare 469 470 )438 473 539 510 488 385 390 4oo Cacao Production '000 metric tons 30 28 27 26 34 28 33 31 27 33 Exports It 27 2)4 23 23 30 24 29 27 22 28 Consumption " 3 3 4 4 4 4 4 4 5 5 Area '000 hectares 155 166 171 178 230 205 202 243 230 237 Yield quintals/hectare 4 4 3 3 3 3 4 3 3 3 Coffee Production '000 metric tons 23 22 24 22 35 :36 30 34 37 30 Exports " 20 17 20 18 21 23 25 29 30 2[ Consumption " 3 5 4 4 14 l2 5 5 6 6 Area '000 hectares 63 63 75 76 83 8)4 83 105 114 109 Yield quintals/hectare 8 8 7 6 9 9 8 7 7 6 Barley Production '000 metric tons 71 64 76 82 59 79 77 61 69 76 Exports I 13 12 17 15 1 /- - - Consumption " 58 52 60 67 58 79 77 61 69 76 Area '000 hectares 105 106 106 103 119 125 133 129 130 132 Yield quintals/hectare 15 13 16 17 11 14 13 10 12 13 / Less than 0., (continued) (Table 6 continued) Product Unit 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 Sugar, cane Production '0C0O,000 metric tons 1.5 1.5 1.6 1.6 2.3 2.1 2.h 2.5 2.1 2.3 Consumption " 1.5 1.5 1.6 1.6 2.3 2.1 2.4 2.5 2.1 2.3 Area '000 hectares 46 47 50 50 45 44 47 50 42 45 Yield tons/hectare 32 32 32 32 51 48 51 50 50 50 Corn Production '000 metric tons 111 101 95 94 1ii 161 160 132 13 . 166 E#ort 11 1 1/ / y 1/ 1/ 161/ 12 13 i/ Consumption " 111 101 95 94 ii 160 160 132 142 166 Area '000 hectares 144 121 110 109 183 241 240 218 221 240 Yield quintals/hectare 17 18 19 19 13 15 15 13 14 15 Potatoes Production '000 metric tons 118 85 127 152 143 164 177 154 161 205 Consumption 1 118 85 127 152 143 164 177 154, 161 205 Area '000 hectares 26 25 25 24 37 45 51 56 58 59 Yjeld quintals/hectare 98 74 110 135 83 80 76 60 60 75 Wheat Froduction '000 metric tons 31 30 :28 28 34 42 h0 35 39 47 ämports 7 10 15 17 89 63 66 44 4l 51 Consumption " 38 40 143 45 123 105 106 79 79 98 Area 'OCO hectares 61 60 53 51 57 70 65 61 56 55 Yield quintals/hectare 11 11 12 12 13 13 13 13 15 18 Less than 0.5 Source: Central Bank Table 7: CREDIT EXTENDED TO AGRICULTURE BY THE BANKING SYSTEM, 195o-1959 (millions of sucres of new loans) Central Commercial Development All Bank Banks Banks Banks 1950 1CC 31 193 379 1901 T0 20 162. 331 aO~ I q 21R7 9L7 -1 01f, 07 Or% 070 L71IL4 l .L7J t ou I woul be large tha shwIeenic t a en prviin 7oe lending. ZZ . re: Cnr BankU 4UM Y14 _LUy Note: These figures reflect credit extended directly to final borrowers. in terms of the origin of funds lent, the share of the Central Bank would be larger than shown here since it has been providing over two-thirds of the funds available to the Development Banks for new lending. Source: Central Bank Table 8: STRIJCTUME OF IUTSuTJRY: 1955, 1958 (percentage of totals) Industrial Production Industrial Employment Industrial Wages Gross Value Value Added Industry 1955 19T _19__ 1957 1955 195 Y919]19 Foods, beverages, tobacco 28 37 34 39 54 55 49 49 Textiles 25 25 19 18 15 14 17 17 Petroleum / 8 8 14 16 9 8 13 10 Shoes, clothing 6 4 3 2 2 2 2 Chemicals 6 4 6 5 5 6 6 6 Printing 6 5 5 5 2 2 2 2 Lumber >4 4 3 3 2 2 2 2 Non-metallic minerals 2/ 3 3 4 4 3 4 2 5 Others 14 10 12 8 7 7 7 7 100 100 100 100 100 100 100 100 1/ Orude production and refining 2/ Not including petroleum Source: Central ]Bank Table 9: IDUSTRIAL PRODUCTIONi, VOLUM,IE ICES 1950-1L958 (1955 = 100) Average annual % increase Tidustry 1950 1951 1952 1953 1954 L955 1956 1957 1958 during 1950-58 All industries 66 75 82 84 96 100 105 111 117 7.5 Foodstuffs 70 74 78 76 90 100 111 110 118 6.8 Beverages 52 68 82 92 103 100 104 120 128 11.9 Tobacco 108 109 107 103 100 100 125 113 111 - Textiles 65 78 82 89 97 100 96 116 111 6.9 Shoes and. clothing 74 83 82 83 106 100 100 112 101 4.0 Lumber 70 76 82 88 89 100 115 109 110 5.8 Furniture, wood 53 43 57 65 92 100 83 105 116 10.3 Paper and cardboard 44 42 48 60 70 100 122 113 145 16.1 Printing 77 80 87 88 109 100 111 107 129 6.7 Leather 87 91 88 92 100 100 93 92 85 - Rubber 44 50 60 70 81 100 108 117 111 12.3 Chemicals 71 82 99 106 118 100 90 93 98 4.1 Petroleum 77 82 86 85 95 100 101 102 117 5.4 Non-metallic minerals 41 53 60 62 67 100 108 117 123 14.7 Metal products 48 54 60 75 92 100 109 124 135 13.8 Various 38 44 66 69 90 100 115 127 137 17.4 Source: Planning Board Table 10: MAJR INDUSTRiAL PRODUCTS: PRODUGTION, 1950-1959 Industry Unit 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 Foods, vegetable fats '000 m. tons 1.0 1.5 1.3 1.2 3.0 4.6 6.3 6.6 6.9 6.6 vegetable oils '000,000 litres 0.3 0.4 0.6 0.8 0.9 0.7 1.5 1.7 2.0 2.1 milled rice '000 m. tons 62 61 70 101 46 69 61 82 62 78 wheat flour 1000 m. tons 17 22 26 28 59 72 73 54 56 69 sugar '000 m. tons 52 54 56 53 52 67 75 76 b7 100 Beverages: liquors '000 bottles 153 154 157 129 139 175 194 186 156 245 wines '000 bottles 218 187 194 134 103 71 59 81 59 61 beer '000,000 botties 26 36 U, 49 58 57 55 62 66 69 malt '000 m. tons - 0.2 0.2 0.6 0.7 1.0 L,3 2.1 2.6 5.9 soft drinks 1000,000 bottles 61 8o 96 108 106 103 121 142 150 154 Tobacco: cigarettes 1000,000 packs 55 56 54 53 52 51 49 48 46 44 Textiles: fabrics '000,000 metres 12 17 17 19 21 27 25 32 29 29 Footwear: leather '000 pairs bll 439 422 404 427 419 390 380 347 Paper: cardboard '000 m. tons 0.2 0.2 C).3 0,3 0.3 0.3 0.3 0.3 0.3 bags '000 m. tons 0.3 0.3 0.3 0.4 0.5 0.8 .1.0 0.9 1.3 Tanning: hides '000,000 feet 2.3 2.6 2.7 2.6 2.9 3.2 3.0 2.8 2.4 soles '000,000 pounds 2.4 2.4 2.3 2.5 2.7 2.5 2.3 2.4 2.3 Rubber: footwear '000 pairs 113 11.4 130 134 181 229 296 349 340 soles 1000 pairs 11 50 100 131 141 208 184 173 140 heels '000 pairs 386 399 407 506 511 528 474 468 460 Petroleum: refinery '000,000 gallons 68 72 74 71 81 84 86 87 102 119 products Cement '000 m. tons 58 79 89 91 95 146 152 155 160 157 Electricity '000,000 kw-hours 152 173 187 205 230 259 279 296 316 hemicals: paints and vanishes'000 n 12 16 17 2 30 34 74 136 159 soaps ?000,000 pounds 13 15 18 20 32 23 27 32 34 Source: Central Bank Table 11: ELECTRIC POWER: CAPACITY, PRODUCTION, CONSUMPTION, 1950-1959 1950 1951 1952 1953 1954 :955 1956 1957 1958 1959 Installed capacity 10 50 55 62 66 70 86 92 97 hydro 19 21 22 25 25 26 29 33 34 37 thermal 21 24 28 30 37 O i 51 58 60 Production 152 173 187 205 230 259 279 296 316 339 residential and commercial 54 60 66 74 84 98 104 112 133 141. industrial 44 53 58 63 71 83 94 102 105 1e street lighting 13 13 13 l4 17 17 18 19 20 23 other uses and losses 42 48 50 54 59 61 63 63 59 67 .1 Thousands of kilowatts 2/ Millions of kilowatt-hours Source: Central Bank Table 12: MINERALS PRODUCTI09, 1950-1959 Produet 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 (lC00 troy ounces) Gold 98 13 24 29 19 15 15 17 20 19 Silver 273 34 82 87 57 48 52 61 85 163 (metric tons) Copper 527 - - 1 13 9 12 16 48 135 Lead 229 - 114 114 114 85 116 110 120 107 (millions of U.S. gallons) Petroleum - crude 111 114 119 125 132 148 144 1314 131 116 - gasoline 22 24 24 25 27 28 29 27 30 37 - kerosene 5 6 6 7 8 8 9 9 10 11 - diesel 2 1/ / 15 15 19 27 - residual 29 31 31 25 30 33 32 34 39 29 _/ Less than 0.5 Source: Central Bank Table 13: CONSUMPTION OF PETROLEUM PRODUCTS, 1950-959 (millions of U.S. gallons) Year Gasoline Kerosene Diesel Residual 1950 25 5 8 28 1951 28 5 9 30 1952 32 6 11 32 1953 32 6 12 32 1954 41 7 14 33 1955 47 8 17 36 1956 52 9 18 37 1957 54 9 19 38 1958 59 10 21 40 1959 62 11 25 ho Average annual increase 1950-1959 10.7% 9.1% 13.5% 4.1% 1955-1959 9.3% 8.4% 10.1% 2. Source: Central Bank Table 14: EXPORTS AND IMPORTS OF PETROLEUM PRODUCTS 1950-1959 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 (millions of U.S. gallons) Exports Crude oil 39 49 37 54 61 63 52 56 29 12 imports. Gasoline 1 3 3 6 10 16 17 23 2b 20 Diesel - - - - 5 6 3 6 5 3 Residual 1 - 1 2 5 8 4 8 4 6 (millions of U.S. dollars) Exports 1.1 1.3 1.0 1.4 1.9 2.1 1.7 1.8 0.8 0.6 imorts / 0,4 0.5 0.9 2.3 3.4 3.1 5.0 3.9 3.0 Gasoline - 0.4 0.5 0.9 1.4 2.1 2.3 3.3 3.0 2.2 Diesel 0.5 0.7 0.3 0.7 0.6 0.3 Residual 0.4 0.6 0.5 1.1 0.3 0.5 Balance 1.1 0.9 0.6 0.3 -0.4 -1.3 -1.4 -3.2 -3.1 -2.4 1/ Less than 0.5 Source: Central Bank Table 15: BANK GREDIT BY ORIGIN AND DESTINATION, 1950-1959 (millions of sucres) 1950 1951 1952 1953 19514 1955 1956 1957 1958 1959 Central Bank Credit 227.3 276.2 230.8 392.3 '426.8 542.2 661.0 662.3 519.2 520.2 dentralovernment: - 0.2 -~ 19. -19.7 7.7 . 17 71.6 5.7 7- 12-.2 - 25¯ Loans & Investments 58 51. 34 7.5 b.3 100.2 156. 19.2 12.1 131.1 Less: Deposits - 55.0 - 71.4 - 83.1 - 79.8 - 71.5 - 82.8 - 84.9 - 94.5 - 154.3 - 156.1 Rest of Public Sector 5.9 21.0 - 23.5 3.8 37.6 62.8 79.1 47.6 18.7 16.7 Loans & Investments -5.9 67.7 51.4 313.71.9 176.2 138.8 -921 134.9 Less: Deposits - 40.0 - 46.7 - 74.9 - 80.5 - 94.1 - 89.1 - 97.1 - 91.2 - 110.8 - 118.2 Private Sector 1191.1 188.6 179.7 248.2 235.4 238.3 304.8 360.7 330.0 323.9 Commercial Banks 19.3 16.6 14.3 13.4 17.5 19.5 24.9 15.5 26.1 27.4 Development Banks 83.2 69.8 80.0 119.2 127.5 20,4.2 180.6 183.8 194.0 177.2 Commercial Bank Credit 563.9 572.0 689.1 802.1 1,008.7 1,108.2 1,262.2 1,436.4 1,58o.7 1,796. Loans-&-I-nves tmentU to Private Sector 583.2 588.6 703.4 815.5 1,026.2 1,127.7 1,287.1 1,>51.9 1,606.8 1,823.4 Less: Financing through Central Bank: - 19.3 - 16.6 - 14.3 - 13.4 - 17.5 - 19.5 - 24.9 - 15.5 - 26.1 - 27.4 Development Bank Credit 230.3 246.3 266.0 391.1 421.8 >61. >494.6 533.1 568.1 555. mentits) -6 6,-C117i -25.7.- - . - .5 0 - 7.3 - - Rest of Public Sector (Deposits) - 22.3 - 24.7 - 37.0 - 25.1 - 24.6 - 26.0 - 23.9 - 30.8 - 40.1 - 38.5 Private Sector 3424 352.5 388.7 541.9 580.9 697.7 707.1 755.0 802.2 771.4 3135 316.1 36 .335 5.3 665.2 6752 5716.9 762.1 732.9 Less: Financing through Central Bark - 83.2 - 6?.8 - 80.0 - 119.2 - 127.5 - 20,4.2 - 180.6 - 183.8 - 194.0 - 177.2 Total Banking System Credit Tentr Uvernmer - 6.8 - 31.5 - 25.4 1,2 1.8 10.9 63.6 47.4 - 12. 2 - 25,0 Rest of Public Sector - 16.>4 - 3.7 - 60.5 - 21.3 13.0 36.8 55.2 16.8 - 58.8 - 21.8 Privt Setor 1,044.7 1,129.7 1,271.8 1,605.6 1,842.5 2,063.7 2,299.0 2,567.6 2,739.0 2,918.7 1,021.,5 1,094.5 1,185,9 1,585.5 1,857.3 2,1114 2,417.8 2,631.8 2,668.0 2,871.9 (Continued) (Table 15 continued) 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 Private Holdings of Bank Debt L298.1 1L230.7 1,492.9 19675. 1987.4 2,079.3 2 363.3 213.8 2,628.42,974.6 Currency in circulation 45. b 441.1 513.5 5507 T 090.2 '1 6.3 01 Danand Deposits 456.6 402.0 524.3 550.7 635.7 589.9 666,7 707.7 709.2 836.5 Total Money Supply 915 FTTD T1h 03 7. 1. 1 1 3[6.9'--l.:L 11397 Mortgage Bonds 21 19. 9 30870 399.7r -7423.1 '22.0 933 Time, Savings, and Foreign Exchange Deposits 208.6 189.6 20.2 266.L 312-5 381.4 426.0 479.6 408.9 473.2 Total other Bank Debt 32.77 6 77 T T T -00.2 .7130.9 730 Gold & Foreign Exchange Holdings of Banks - 526.6 - 430.8 - 621.4 - 523.6 - 538.2 -- 371.4 - 378.2 - 433.7 - 465.3 - 541.5 Capital Reserves & Other (net) bi t 250.0 294.6 314.4 433.3 4o8.,l 4o3.5 4:32.7 1451.7 504.9 438.8 1,021.5 1,094.5 1,185.9 1,585.5 1,857.3 2,111.4 2,A17.8 2,631.8 2,668.0 2,871.9 Source: International Monetary Fnd Table 16: CHANGES IN BANK CREDIT, BY ORIGIN AND DESTINATION, 1951-1959 (millions of sucres) 1951 1952 1953 1954 1955 1956 1957 1958 1959 Central Bank credit 48.9 - 45.4 161.5 3,4.8 115.1 118.8 1.4 -143. 2 1.0 to: GentralGovernment - 19.6 7.L 7. 1 . 5 -_16T9 Y6 9 -21274 Loans and investments - 3.2 ¯11.ö 2T.1 - 7.2 19.9 56.3 - 7.3 - 71 - 11,C less: deposits - 16.4 - 11.7 3.3 8.3 - 11.3 - 2.1 - 9.6 - 59.8 - 1.8 Rest of public sector 15.1 - 44.5 27.3 33.8 24.9 16.3 - 31.5 - 66.3 35.4 Loans and investments 21.8 - 16.3 32. 9 f7 20.2 24.3 - 37 --66.7 42.B less: deposits - 6.7 - 28.2 5.6 - 13.6 4.7 - 8.0 5.9 - 19.6 - 7.4 Private sector 69.5 - 8.9 68.5 - 12.8 2.9 66.5 55.9 - 30.7 - 6.1 Commercial banks - 2.7 - 2.3 0.9 4.1 2.0 5.4 - 9.4 10.6 1.3 Development banks - 13.4 10.2 39.2 8.3 76.7 - 23.6 3.3 10.1 - 16.8 Commercial Bank credit 8.1 :117.1 113.0 206.6 99.5 154.0 174.2 144.3 215.3 Loans ard iWvestments to private sector 5.4 -114.8 112.1 210.7 101.5 159.4 1614.8 154.9 216.6 le ss: financing through Central Bank 2.7 2.3 0.9 - 4.1 - 2.0 - 5.4 9.4 - 10.6 - 1.3 Development Bank credit 16.0 19.7 125.1 30.7 39.2 33.6 38.-4 35.1 - 12.14 o ral Government (deposits) - 5.1 6.0 -_6.8 - 0.5 .5 -. ;. 0. 7 7.3- Rest of public sector (deposits) - 2.4 - 12.3 11.9 0.5 - 1.4 2.1 - 6.9 - 9.3 1.6 Private sector 10.1 36.2 153.2 39.0 n16.8 9.4 47.9 47.2 - 30.8 S.9 I.3 39.0 15.9- 10.07 5.2 - 29.2 less: financing through Central Bank 13.4 - 10.2 - 39.2 - 8.3 - 76.7 23.6 - 3.3 - 10.1 16.8 Total banking system credit to: Central overnmen - 24.7 6.1 26.6 i0.6 9.1 52.7 - 16.2 - 59.6 - 12.8 Rest of public sector 12.7 - 56.8 39.2 34.6 23.5 18.4 - 38.4 - 75.6 37.0 Private sector 85.0 142.1 333.8 236.9 221.2 235.3 268.6 171.4 179.7 73.0 91. 1_ 399.6 271.8 254.1 306.4 U 2Z. 36.2 203 .9 (Continued) (Table 16 continued) L951 1952 1953 1954 1955 1956 1957 1958 1959 Private holdings of bank debt - 67.4 262.2 182.9 311.6 91.9 284.0 25C.5 1.6 346.2 Money - 72.3 194.7 63.6 173.7 - 75.4 157.2 54.2 - 13.6 169.6 Other bank cebt 4.9 67.5 119.3 137.9 167.3 126.8 196.3 28.2 176.6 Gold and foreign exchange holdings of bans /inUrease (-T 95.8 -190.6 97.8 - 14.6 166.8 - 6.8 - 55.5 - 31.6 - 76.2 Capital, reserves, and other (net) liabilities 44.6 19.13 118.9 - 25.2 - 4.6 29.2 19.0 53.2 - 66.1 73.0 91.4 399.6 271.8 254.1 306.4 214.0 36.2 203.9 Scurce: Table 15 Table 17: CONSOLIDATED FINANCES OF THE PUBLIC SEcTOR, 1950-1959 (millions of sucres) 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 Revenue Direct taxes 262 276 347 364 493 573 613 694 735 743 on: income 176 193 235 7 310 371 393 431 >68 inheritance 28 38 42 45 55 57 68 73 79 74 exports 38 35 57 57 101 1,04 110 136 134 138 other 10 10 13 15 27 41 42 54 Sh 62 Indirect taxes 623 736 725 845 973 1 034 965 1109 1 150 1 177 on: imports 269 339 .36ö7 699 consumption 211 239 242 275 337 372 353 388 392 417 transactions 19 16 17 17 26 27 25 27 32 32 other 1214 142 98 109 133 151 140 222 220 229 Other revenue 290 349 391 443 470 548 576 610 689 _708 Total revenue 1,175 1,361 1,1463 1,652 1,936 2,155 2,154 2,.413 2,5714 2,628 Current expenditure 1,003 1,089 1,:119 1,359 1,487 1,635 1,587 1,823 1,970 2,033 Saving 172 272 344 293 449 520 567 590 604 595 Investment ep enditure 197 264 302 379 498 644 584 564 567 650 Surplus, or deficit( - 25 8 42 - 86 - 49 - 124 - 17 26 37 - 55 Financed by: External borrowing,net 25 12 55 - 2 103 88 49 - 2 19 94 Domestic borro)wing, net, and use of cash balances - -20--97 89 - 36 32 - 24 -56 39 25 - 8 ->42 87 49 124 17 -26 -37 55 Source: Central Bank Table 18: REVENUE OF THE PUBLIC SECTOR, BY SOURE, 1.950-1959 1950 1951 1952 1953 1954 1955 1956 1957 .1958 1959 (millions of sucres) Total revenue 1,175 1,361 1,463 1,652 1,936 2,155 2,12,43 2,574 2226 2,8 (percertages) Direct taxes 22 20 24 22 26 28 28 29 29 26 On: income 16 i 16 15 16 17 :18 18 18 18 inheritance 2 3 3 3 3 3 3 3 3 3 exports 3 3 h 3 5 5 5 6 5 5 other 1 1 1 1 1 2 2 2 2 2 Indirect taxes 53 54 50 51 50 48 145 46 45 45 On: imports 23 25 25 27 25 22 21 20 20 19 consunption 18 18 17 17 17 17 16 16 15 16 transactions 2 l 1 1 1 1 1 1 1 1 other 11 10 7 7 7 7 7 9 9 9 Other revenue 25 26 27 27 24 25 27 25 27 27 100 100 100 100 100 100 100 .100 100 100 Source: Table 17 able 19: FINANCES OF TI-E PUBLIC SECTOR, BY AUTHORITY, 1950--1959 (millions of sucres and percentages) 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 Central Government Revenue 380 465 497 641 754 850 820 1,011 1,02 972 Non-investrment expenditure 374 459 479 .597 753 867 772 864 879 85S Saving 6 - 61 W -I1 713 Investment expenditure 38 44 54 74 138 236 242 166 147 235 Surplus, or deficit (-) 32 - 3- 36 30 137 - 23 - 19 -1 - 122 Total expenditure l 503 67 91 1, 103 1,014 1,030 1,026 Investment as % of total ep enditure 9 9 LO 11 15 21 24 16 14 22 Sav-ing as % of revenue 2 1 4 7/ ·6 15 14 12 Provincial Councils Revenue 19 2-1 30 38 35 34 32 37 36 37 Non.-investimert expenditure 5 4 5 7 14 11 9 12 12 13 Saving 6 17,25 31 21 23 23 25 26 2T Investrment ependiture 10 15 16 22 17 30 18 25 22 22 Surplus, or deficit (-) -9 9 · 7 2 -2 Total experKiture 19 21 29 3 I 1 7 37 3W 35 Investment as % of total expenditure 62 79 76 76 55 73 67 68 65 63 Saving as ' of revenue 32 81 84 82 60 68 72 68 67 65 Municipal Councils Revenue 205 246 270 285 306 3315 303 352 382 391 Non-investrment eXpenditure 137 172 174 214 235 207 180 220 261 279 Saving 676 71 1080 123 132 121 112 Investnent expenditure 76 81 74 93 89 179 132 140 134 133 Surplus, or deficit (-) .8 7 :22 - 22 - 1 -71 - 9 - - 13 -1 Total experditure 213 -2-53 240 307 3 312 360 395" Investment as- ý of total expenditure 36 32 30 30 28 46 42 39 34 32 Saving as % of revenue 33 30 36 25 23 34 41 38 32 (Continued) (Table 19 continued) 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 Autonomious entities Revenue 571 629 666 688 841 956 999 1,013 1,131 1, 228 Non-investment expenditure 486 454 460 548 485 55) 626 727 818 88,1 Saving ~2 313 347 Investment expenditures 74 124 159 183 254 199 192 233 264 260 S-urplus, or deficit (-) 1r1 27 - 3 102 207 _12__9 Total exoerdituare 560 563739 79 8860 ,2 , Investnent as :% of total expenditure 13 21 26 25 34 27 23 24 24 23 Saving as % of revenue 15 28 31 20 42 42 37 28 28 28 Total public sector Revenue 1,175 1,361 1,463 1,652 1,936 2,155 2,154 2,413 2,574 2,628 Non-irvestiment expenditure 1,003 1,089 1,119 1,359 1,487 1,635 1 587 1,823 1 970 2033 Saving 1'2 272 293 65906 Investment expenditure 197 264 302 379 498 644 584 564 567 650 Su'rplus, or deficit (-) -2_ 4_ 2 -92 26 37 -55 Total expenditure 7 200 1,353 1, 421 1 2,2792,171 257 537 ~ 2, Investnent as % of total expEnditure 16 19 21 22 25 28 27 24 22 24 Saving as g of reveme 15 20 24 18 23 24 26 24 23 23 Central Government as % of total public sector Reveme 32 34 34 39 39 4o .38 42 40 37 Non-investment expenditure 37 42 43 44 51 53 49 47 45 42 Saving 4 2 5 15 - 8 25 24 19 Investnent exp enditure 19 17 18 20 28 37 35 29 26 36 Total eip enditure 34 37 38 39 45 49 47 43 41 41 if Less than 0.5 Source: Central Bank No-_e: As these data reflect the public sector firLances after consolidation, Central Government data shown here do not agree in all respects with Central Governerit budget data shown in Table 20. Revenue for each segment of the public sector is snown hiere after transfers fron the Central Government to the rest of the public sector. Revenue does n.ut iiclude proceeds of loans or cash balances, expenditu:re does not include amortization of debt. Table 20: TIE CENTRAL GOVERN4ENTS BUDGET 1950.-1989 (millions of sucres) 195o 1951 1952 1953 1954 1955 1956 1957 1958 1959 Revenue Indirect taxes 398 46o 487 600 794 862 773 934 935 958 on: imports 162 1g8 216 293 44( 473 413 478 492 L.98 consumption 202 208 213 239 272 299 285 293 288 304 others 34 4 58 68 77 90 75 163 155 156 .Direct taxes 86 103 112 202 254 249 280 304 290 on: income 51 64 73 83 94 136 147 158 183 166 exports 10 7 13 15 91 94 79 98 87 90 others 26 15 17 14 17 24 23 24 34 34 Other revenues 29 43 39 60 75 104 113 141 140 101 Total revenue 514 589 629 772 1l 1,220 1,135 155 1,379 1,38 Current e:penditure and tases49 2 521 575 742 _1 q00' 1,129 1,082 1,72 196 1 15 transfers -_ _ _ ~2 j 1 i Saving22 68 54 30 64 91 53 183 218 io Investment expenditure 38 i4 4 74 138 236 242 166 147 235 ]3ue -16 24 744 3 4 -15 -189 17 71 54 (Continued) (Table 20 continaed) 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 Financed by: Domestic borrowing 16 7 18 33 46 108 136 - 22 - 24 82 Central. Bank 6 1/ 21 28 2 96 5 - 5 National securities commission 16 2 h 21 32 76 23 - 25 137 Social insurance funds - 16 - 8 14 18 5 - 1 9 Others - - 3 2 29 51 54 29 22 10 22 19 29 59 77 145 177 39 48 160 Less amortization - 6 - 12 11 25 31 37 h 56 72 78 External borrowing 5 - 13 - 2 30 56 34 - 21 - 2 - 10 Gross borrowing 11 7 9 7 36 65 47 5 16 38 Less amortization 6 20 10 8 6 9 14 26 18 48 Use of cash balances - 5 - 17 17 13 - 2 18 20 26 - 45 - 18 16 - 2h - h 74 145 189 -17 -71 h Table 21: CENTRAL GOVLRNMyENT EX LNDITUE, By PURPOSE i51-1958 (percentages) Purpose 1951 1952 1953 1954 1955 1956 1957 1958 General admirnistration 19 20 19 15 12 13 13 14 National defense 16 18 22 22 22 23 22 21 Police and justice 9 8 8 5 5 5 5 5 Education 15 14 14 9 10 11 11 Public health 5 5 > 3 3 3 3 3 Social welfare, labor 5 5 4 4 4 4 14 4 Housing, communal ser-vices 1 i/ 1/ 1/ Agriculture, forestry, fisheries 2 1 2 1 1 1 1 1 Industry and commerce 1 71 /1 Transportation, communication 15 15 ik 17 21 20 17 17 Other 14 14 12 23 22 19 2J4 24 100 100 100 100 100 100 100 100 1/ Less than 0.5 2/ From 1954, includes customs duties collected by the Central Governmnent on behalf of autonomous entities. Note: These figures do not include :repayment of debt. Source: Central Bank Table 22: GROSS FIXED OPIT.L F"iYTN ~ PURPOSE, 1950-1959 Purpose 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 (millions of 1955 sucres) Total 723 962 882 1,067 1,h24 1,537 ,5 5&D 66 509 1,58 (percentages) Transportation 11 10 1r 11 17 18 18 16 14 14 roads, bridges 8 7 9 1 13 13 12 railroads 3 1 5 4 7 2 1 1 1/ 1/ airports - - 1 1 2 2 1 ports 1/ 1 1/ 1/ 1/ 1 1 1 Electrification 1 1 1 1 1 2 1 3 3 Irrigation 1 1 i 1/ 1/ 1 Housing 16 10 97 17 19 Non-residential buildiings 7 4 11 8 7 8 10 10 11 12 Other construction 16 14 14 15 10 12 9 9 8 10 Vehicles, machinery and equipment 47 60 49 53 52 44 46 46 47 43 100 100 100 100 100 100 100 100 100 100 (percentages) Private sector 68 70 65 65 67 59 63 64 64 59 Central Government 10 10 13 13 18 18 18 13 11 17 Other public sector 22 20 22 22 15 23 19 23 25 _ 2> 100 100 100 100 100 100 100 100 100 100 1/ Less than 0.5 Source: Planning Board Table 23: GROSS FIXE,D CAPITAL FORMdAT10N, _ihIO3 AD Bi_ MAJOR_SECToRS, 950-:1959 Purpose 1950 1951 L952 1953 1954 1955 1956 1957 1958 1959 (illionsof195sucre-) Private Sector 1ota! 92 676 576 695 950 901 992 959 933 (percentages) Housing 23 15 13 l4 17 27 25 25 26 30 Other buildings and ccnstruction 12 8 12 12 10 5 9 10 9 Vehicles, machinery and equipment 65 77 75 75 73 68 67 65 66 61 1CO 100 100 100 100 100 100 100 100 100 (millions of 1955 sucres) Public Sector Total 231 286 306 372 474 636 588 566 550 638 (percentages) Transportation 33 34 4h 31 52 42 48 44 38 35 roads, bridges 28 20 27 33 38 37 3d 30 railroads 9 3 15 11 22 4 3 3 1 1 airports - - >4 . 2 4 > 2 2 ports 3 1 1 3 2 2 2 Ele ctrification 3 2 3 2 3 4 4 8 7 6 Irrigation 3 3 3 3 3 1 1 1 1 I Buildings arid other construction 48 34 50 47 30 ho 35 35 411/ 42 Communications 8 2 1 1 Vehicles, machinery and equiprent 12 19 - 15 12 11 11 11 13 16 100 100 100 100 100 100 100 100 100 100 1/ Less than 0.5 Source: Planrning Board Note: 'Jhe public sector investment totals shown here differ slightly from those shoýwn in Table 19, but not by amounts which reduce the significance of the above data on investment composition. Table 24: GRO,3S FIXED CAPITAL FORMATION IN TAE PUBLIC SECTOR BY PURPOSE AND BY MiAJOR AUTHORITIE?S, 1950-1959 Purpose 1950 1951 1952 1953 1954 1955 1956 1957 1958 1L959 (millions of 1955 sucres) Central Government 13 56 58 80 146 240 260 174 157 246 (percentages) Transportation 67 94 74 59 75 86 83 80 71 74 roads, bridges 6 railroads - - - - - - airports - - 3 3 8 10 10 8 - - ports 2 l4 2 1 3 2 7 5 6 Ele ctrification - - 2 1 1 4 2 3 9 Irrigation - - - - - - Buildings and other construetion 16 4 7 20 9 9 9 12 16 12 Communications - - - - - - - - - - Vehicles, machinery, equipment 16 2 17 20 16 5 4 6 10 6 100 100 100 100 100 100 100 100 100 100 (millions of 1955 sucres) Rest of public sector 188 230 258 292 328 396 328 392 393 392 Transportation 26 20 32 25 43 16 22 27 25 9 roads, bridges 11 ili il 816 23 22 railroads 11 4 18 14 32 7 6 4 2 1 airports - - - - - 1 - - 1 3 ports - - - - - - - - - - Ele ctrif ication 4 3 3 2 5 6 3 11 9 4 Irrigation 4 b h 4 4 2 2 1 1 2 EUildlings and other construction 55 41 61 54 39 59 56 46 50 61 Communications 1 10 1 1 3 2 1 1 2 Vehicles, machinery, equipment 11 23 .2 13 10 i4 16 14 15 23 100 100 100 100 100 100 100 100 100 100 (Table 24 continued) 1/ Less than 0., 2/ Not available Source: Planning Board Note: This table is based on public sector investment data which differ slightly in totals from those shown in Table 19. However, the differences are small and do not reduce the significance of the above data on investment composition. In the source material for this table, investments in railroads, irrigation and communications are classified as Central Government investments. Here, as in Table 19, these categories are classified as investments by autonomous entities. Table 2: NEGOTIABLE SECURITIES OUTSTANDING ON DECEMBER 31, 1959, BY PURCHASER AND BY SECURITY (millions of sucres) Central Govt. Other Mortgage Municipal and other Company Bank Negotiable Purchaser Bonds Bonds public bonds Shares Shares Securities Total Social insurance funds 263 122 120 61 - - 567 Insurance companies 50 2 1 10 - - 63 Commercial banks 26 1 - - 15 - 42 Development 'banks 22 - - - 8 30 National Securities Commission 19 - 205 - - 6 230 The public 550 - - -50 Total 930 125 326 71 15 l 1,481 Source: Central Bank Note: This table does not include private holdings of privately-issued securities, for which no data are available. Amounts of less than 0.5 are not shown. Table 26: PURCHASES OF NEGOTIABLE SLCURITIE,S Y PURCHASER 1951-1959 (millions of sucres) Purchaser 1951 1952 1953 1954 1955 19,6 1957 L958 1959 Social insurance funds 28 28 8 74 64 72 52 84 36 Insurance companies 3 -J1 1 - 5 9 6 6 7 Commercial banks 2 2 5 -1 4 -3 - -1 6 Development banks -5 -1 1 11 30 -22 -5 3 10 National Securities Commission 1 8 40 40 39 32 - 6 20 17 The public - 8 19 45 66 51 37 93 59 91 20 54 101 190 193 125 140 171 168 Source: Central Bank Note: This table does not include private purchases of privately-issued securities for which no data are available. Amounts shown represent changes in totals outstanding at ends of years and therefore represent net, and not gross, purchases by investors. Amounts of less than 0.5 are not shown. Table 27: AVERAGE ANNUPL PURCHASES OF UGOTTINBTE SCTJITIS BY PM11-AER AND BY SECURITY DURING 1954-1959 (millions of sucres) Central Govt, Other Mortgage Municipal and other Company Bank Negotiable Purchaser Bonds Bonds public bonds Shares Shaes Securities Total Social insurance funds 27 l l5 9 - - 64 Insurance companies 5 - - 1 - - 6 Commercial banks 1 - - - 1 Development banks 4 - - - 4 National Securities Commission 3 - 19 - - 2 The public 66 - - - - 66 Total 105 l 34 10 - 1 164 Source: Central Bank Note: This table does not include private purchases of privately-issued securities, for which no data are available. Anounts shown have been calculated from differences in totals outstanding at the end of 1953 and 1959,, and therefore represent net, and not gross, purchases by investors. Anounts of less than 0.5 are not shown. Table 26: BALLNCE OF ITERNATIONAL FAYMENTS, 1990-1989 (millions of dollars) 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 Goods and services Exports 1/ 77.6 70.9 102.6 93.4 125.8 115.5 118.4 137.7 137.6 14142 Imports f.o.b. - l1.2 - 52.0 - 7.,8 - 61.8 -100.0 - 93.4- 95.9 - 93,5 -102.2 - 96.1 36.4 18.9 44.8 31.6 :25.8 22.1 22.5 39,2 3J.1 48.1 Transportation, net - 5.6 - 7.2 - 8.9 - 11.0 - 13.7 - 13.3 - 14.0 - 12,5 - 18.1 - 14.2 Investment income, net2 - 7.8 - 6.9 - 13.7 - 14.5 - 16. 9 - 18.6 - 20.3 - 21.6 - 18. - 23.4 Other services, net - 3.6 - 5.1 - 3.2 - 8.1 - 12.1 - 10.0 - 11,3 - 11,1 -_l0 - 15.0 Balance 19.4 - 0.3 19.,0 - 2.0 - 16.9 - 19.8 23.1 - 6.0 - 7.2 - 4.5 Donations 1.3 0.5 1..4 1.3 1.8 1.8 2.5 2.9 3.8 4.7 Private financing 3.1 - 1.5 2.8 2.5 5.1 -_4.0 16.2 2.1 1.2 3.4 Direct investments/ 3.1 3.7 4.7 6.7 4.8 4.2 10.6 4.4 3.6 3.4 Other - - 5.2 - 1.9 - 1.2 0.3 - 8.2 5.6 - 2.3 - 2.2 - Official financing - 19.1 7.7 -_9.7 6.5 6.1 19.8 -12.8 -2.5 - 2.5 1.1 Long-term. 1: Z 2.9 - 7.1 b.? 13.3 1.1 - o. L -77 Short-term - 22.14 10.9 - 1241 6.7 - 0.9 11.2 1.7 - 3.6 - 2.1 - 6.6 Monetary gold 1.9 - 3.6 - 0.2 - 0.2 - 0.1 - 0.1 1.2 - - 1.2 Errors and omissions - 4.7 - 6.3 - 13.5 - 8.4 3.9 2.2 8.4 3.5 4.7 - 4.7 1/ Including non-monetary gold and an adjustment for the estimated undervaluation of banana exports. 2/ Mostly profits of banana exporters estimated to have been e arned and kept abroad, calculated as the difference between the estimated f.o.b. value of bananas exported and their estimated purchase cost. 3/ Mainly reinvested earnings. Source: Central Bank Table 29: MERCHANDISE LXPORTS, BY VALT 1950-1960 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 (millions of U.S. dollars) Bananas 17.2 25.0 43.6 4l.2 50.9 62.3 59.8 69.0 72.9 88.9 92.2 Coffee 18.9 15.8 20.1 18.9 27.6 23.1 29.3 29.9 26.3 17.6 22.5 Cacao 18.4 17.8 17.0 15.6 34.1 18.7 17.4 18.6 20.14 21.8 21.6 Rice 8.2 1.1 11.3 6.0 3.3 2.6 1.6 h.9 3.5 2.3 3.7 Panama hats 3.8 3.2 2.8 3.2 1.6 1.0 1.5 1.1 0.9 0.9 Crude petroleum 1.2 1.3 1.0 1.4 1.9 2.1 1.7 1.8 0.8 0.6 Pharmaceuticals 0.4 0.6 0.8 0.7 1.0 0.8 0.7 0.14 0.7 0.9 Balsa wood 0.7 1.2 1.0 1.0 0.9 1.1 1. 1.9 1.5 1.5 Others 8.8 4.9 5.0 5.h 4.5 3.8 5.h 10.1 10.6 9.7 Total 77.6 70.9 102.6 93.h 125.8 n15.5 18.h 137.7 137.6 l44.2 149.7 (perceritages of total eXPorts) Bananas 22 35 h3 44 h 54 51 50 53 62 62 Coffee 24 22 20 20 22 20 25 22 19 12 15 Cacao 24 25 17 17 27 16 15 14 15 15 14 70 82 80 81 90 90 91 86 87 89 91 Others 30 18 20 19 10 10 9 14 13 11 9 100 100 100 100 100 100 100 100 100 100 100 Source: 1950-1959, Central Bank; 1960, International Financial S tatistics Table 30: MAJOR IERCHANDISE EXPORTS, BY VOLUME AND VALUE 1950--196) Produet 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 Volumnte ('o metric tons) Bananas 170 247 430 406 492 613 579 669 743 891 920 (min. 25.7 kg. stems) 6.6 9.7 16.8 15.8 19.2 23.9 22.6 26.1 28,.9 34.7 36.4 Coffee 20.2 16.6 20.0 18.1 21.0 23.1 24.5 29.,0 30.2 23.8 32.4 Cacao 26.8 24.1 23.3 22.6 29.7 24.4 29.2 26.9 22,2 28.5 36.4 Unit Vaue (U.S. cents per pound) Bananas 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 Coffee 42 44 47 48 60 46 55 47 ho 34 32 Cacao 32 3b 34 32 53 35 27 32 42 35 27 Value (millions of U.S.dollars) Bananas 17.2 25.0 43.6 41.2 50.9 62.3 59,.8 69,o 72.9 88.9 92.2 Coffee 18.9 15.8 20.1 18.9 27.6 23.1 29.3 29.9 26.3 17,6 22.5 Cacao 18.4 17.8 17.0 15.6 34.1 18.7 17.4 18,6 20.4 21.8 21.6 54.5 58.6 80.7 75.7 112.6 104.1 106.5 117.5 119,6 128.3 136.3 others 23.1 12.3 21.9 17.7 13.2 11.4 11.9 20.,2 18.0 15.9 13.4 77.6 70.9 102.6 93.4 125.8 115.,5 118.4 137.,7 137.6 144.2 149.7 Sorce:,Cent- --.- --nk Table 31: BANANA EXPORTS, BY DESTINATION, 1948-1959 U.S.A. Germany Belgium Chile Others Total (millions of stems per year) 1948-1951 (average) 5.2 0.1 0.2 0.7 0.2 6.L 1952-1955 (average) 14.6 1.8 1.2 0.8 0.5 18.9 1956 16.1 3.6 1.6 0.7 0.6 22.6 1957 16.6 5.4 2.4 0.9 0.8 26.1 1958 15.2 7.6 3.8 1.2 1.1 28.9 1959 21.9 7.1 3.4 1.5 0.8 34.7 (percentages) 1948-1951 (average) 81 2 3 11 3 100 1952-1955 (average) 77 10 6 4 3 100 1956 71 16 7 3 3 100 1957 64 21 9 3 3 100 1958 53 26 13 4 4 100 1959 63 21 10 4 2 100 Source: Central Bank Taole 3e: DEUTINATIUN uF MARU i.AkU±TS, Ly5y (Percentages of total value) Bananas Coffee Cacao United States 69 65 49 Hest Germany 17 3 9 Belgium 8 1/ 4 Colombia. - - 20 Italy 1 lb 6 Chila 1 1 1/ 6 Others 1 10 11 100 100 100 Less than 0.5 Source: Ministry of Treasury Table 33: MERCHANDISE TRADE BY GECGRAPHICAL AREA, 1957-1959 (millions of U.S. dollars) 1957 1958 1959 EXPORTS United States 79.3 57.9 76.2 55.7 87.o 61.0 Canada 0.3 0.2 0.2 0.1 0.5 0.3 Latin America 15.9 11.6 12.9 9.4 12.1 8.5 Europe 40.3 29.4 45.4 33.2 4o.1 28.1 Asia 1.1 0.8 2.2 1.6 2.8 2.0 Others 0.2 0.1 - - 0.1 0.1 137.1 100 136.9 100 142.6 100 IMPORTS United States 45.9 46.6 45.8 44.8 42.1 43.8 Canada 2.5 2.5 4.o 3.9 4.6 4.8 Latin America 16.6 16.9 15.4 15.1 15.4 16.0 Europe 31.4 31.9 34.5 33.8 31.3 32.6 Asia 2.1 2.1 2.4 2.3 2.3 2.4 Others - - 0.1 0.1 0.4 o.4 98.5 100 102.2 100 96.1 100 B'UML hes export totals Udifer ut oly niegligibly, from1 those~ showx in Tables 28 and 29. Source: Central Bank Table 34: COKPOSITION OF IMPORTS 1950-1959 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 (millions of U.S. dollars) Total imports 41.6 52.4 58.5 63.7 100.2 96.8 88.8 90.8 94.5 89.2 (percentages of total imports) Consumers' goods 25.0 24.0 22.6 25.7 24.3 25.1. 20,l 21.9 22.9 22.9 Direct, of iich 5. 1. 1717.5 15.1 lY.,12. 1.2 1>4.1 14.1 antibitics . 0.9 0 0. 0.1/ 1.0 1h 1.h 1. 2 cigarettes 1.4 1.5 1.9 1.7 0.8 1.4 1.8 2.7 2.8 4.5 oats 0.7 0.1 0.7 0.3 0.4 0.6 0.6 0.6 0.6 c.6 Semi-durable, of which 2.6 2.4 2.3 2.1 3.2 3.7 3.0 2.6 2.7 2.7 dinner:.vare 0.3 0.5 0.2 0.2 0.2 0.2 0.22 0. 0.2 0.2 glassware 0.2 0.2 0.2 0.1 0.2 0.1 0.1 0.2 0.1 0.2 phono, records 0.1 0.1 0.1 0.1 0.1 0.1 Durable, of which 6.6 6.5 5.6 6.1 6.0 7.0 4.6 5.1 6.1 6.l rad0. 0.3 0. 5 0-4 0.h .5 Öh 0. U .h 0.5 refrigerators 0.6 0.7 0.6 0.6 1.0 0.6 0.4 0.6 0.7 0.6 sewing machines, marrual 0.2 0.3 0.2 0.4 0.3 0.7 0.8 0.h 0.7 0.3 Puelc and lubricants, of which 1.6 1.6 2.0 2.1 3.2 3.9 4.2 6.0 5.-1 5.0 gasoline 0.1 7.6T0.6 1.12 . 1 2.2 3.1 3.0 2.5 diesel and fluel oil 0.2 - 0.1 0.3 0.8 1.2 0.1 1.5 0.7 0.8 lubricants 1.0 0.8 1.1 0.7 1. 0.9 1.1 1.2 1.1 1.3 Raw materials and supplies, of ich 30.233.1 37.5 30.2 33.9 31.1 29.8 30.2 28.0 30.2 heat 1. 5. 37 artificial silk thread 0.8 1.1 1.2 0.8 1.1 1.2 1.1 1.3 1.2 1.1 newsprint 1.1 1.3 1.4 0.6, 0.7 0.8 0.9 1.1 1.0 1.3 Oapital goods, of which 43.1 41.5 38.2 41.7 38.8 40.0 45.5 42.0 44.2 42.0 truckrs 2.l 3.6 2.E. . 2 12 13 17 1. tires 2.1 2.5 2.5 2.4 2.1 2.0 2.3 2.8 2.5 2.8 truck chassis 2.5 2.8 2.0 3.2 3.0 3.1 2.11 2.h 2.7 2.3 - 1--4 - (Table 34 continued) 1/ Less than Ol. Source: Central Bank Note: The above import figures are based primarily on customs data, and do not include adjustments normally made for balance of payments purposes. Therefore, the totals shown here differ slightly from those shown in Table 28. The largest differences, which occur in the years 1956-1959, amount to no more than $7 to $8 million in any year. The items identified under each category currently represent the three largest in that category. Table 35: FOREIGN DIRECT INVESTMENTS IN ECUADOR, BY SECTOR AmD BY .nUNTRY OF nPTaTM 1COn 10VH End of Year 1950 1956 Sector Commerce 4.5 10.9 Industry 5.6 13.0 Finance 0.2 0.4 Agriculture 1.7 5.1 Petroleum 9.1 23.8 Construction 1.1 Public services 2.9 11.4 24.o 65.6 Country of Origin United States 420 Unit e Kingdrm 190 65.6 Less than 0.05 Source: Ministry of Treasury Table 36: INTERNATIONAL RESERVES OF THE CENTRAL BANK, 1950-1960 (millions of U.S. dollars) Assets Liabilities Payments Tforeign Payments End of Foreign Agreements banks Agreements Net same year's year Gold Exchange Oredits Total and IMF Debits Total Reserves imports c.i.f. 1950 18.8 14.0 3.7 36.5 1.3. 0.3 1.4 35.1 74 1951 22.4 5.4 3.1 30.9 1.5 0.6 2.1 28.8 47 1952 22.6 16.7 4.2 43.5 o.h 1.7 2.1 41.4 62 1953 22.8 13.6 2.4 38.8 1.1 2.8 3.9 34.9 48 195,4 22.9 11.2 4.4 38.5 o.8 1.8 2.6 35.9 32 1955 22.9 5.3 5.4 33.7 6.0 2.9 8.9 24.13 23 1956 21.7 4.9 5.0 31.7 4.5 1.9 6.4 25.3 23 1957 21.7 9.5 7.9 39.1 7.2 3.0 10.2 28.9 26 1958 21.7 5.5 8.1 35.3 2.3 2.0 14.3 31.0 27 1959 20.4 12.1 7.4 39.9 1.2 2.6 .3.8 36.1 33 1960 20.0 12.3 4.7 37.0 1.I 3.2 4.6 32.4 24 1/ May, 1960 36.6 May, 1961 17.1 Scurce: International Monetary Fund - ~ ~ / - ln = TArT, ~ ' Unit value of Terms of Exports Imports Trade 1951 100 100 100 1952 104 100 104 1953 101 98 104 1954 117 105 112 1955 99 110 90 1956 102 116 88 1957 101 123 82 1958 98 124 79 1959 95 120 79 Source: Central Bank Table 38: FREE MARET RATE OF EXCHANGE, 1950-1960 Sucres per End of U.S. dollar 1950 18.3 1951 17.2 195~2 17.h 1953 17.h 19 5). 17 1. .7..J4 Jý I --4 1955 17.h 1957 16.6 1958 16.*7 1959 17.0 1960 17.5 Source: International Monetary Fund Table 39: COST OF LIVING INDEX, 1950-1960 (1950 = 100) Year Index 1951 112 1 5 2 *1 . -L.7 ;' r-L.-LÅ+ 1953 115 1955 121 1956 n 1957 117 1958 117 1959 117 1960 119 Source: International Monetary Fund Table 4O: WHOLESAiE PRICE INDEX, 1954-1959 (1954 = 100) Category 1954 1955 1956 1957 1953 1959 Food products 100 98 95 98 97 95 Drinks and tobacco 100 102 103 102 102 102 Raw materials except fuels 100 119 117 126 119 119 Fuels and lubricants 100 103 102 111 111 110 Oils and fats 100 101 107 114 110 113 Chemical products 100 91 92 87 86 82 Manufactured articles 100 99 99 10h 102 101 Machinery and transport equipment 100 102 105 113 118 122 TOTAL 100 100 98 102 101 100