Argentina - Reforms for price stability and growth

 PUB7994 Argentina Reforms for Price Stability and Growth 4K HC175 .A8665 1990 c.2 Argentina : reforms for price stability and growth.  A WORLD BANK COUNTRY STUDY Argentina Reforms for Price Stability and Growth . · ·! n 7 w9o \(!~.f.~r: ,"-',:.~._:':-,-·, r.- --~~{. L::r HCCC'!-:~·:n.~.:;·~:·.!;·; ;:-,·nj l_,'': ;'-,\:~i:.;:;tfit":;flt • ,I.J.,_'I' ·~' "''l J~\ '~: :..~:~)I The World Bank Washington, D.C. Copyright © 1990 The International Bank for Reconstruction and Development/mE WORLD BANK 1818 H Street, N.W. Washington, D.C. 20433, U.S.A. All rights reserved Manufactured in the United States of America First printing April1990 World Bank Country Studies are among the many reports originally prepared for internal use as part of the continuing analysis by the Bank of the economic and related conditions of its developing member countries and of its dialogues with the governments. Some of the reports are published in this series with the least possible delay for the use of governments and the academic, business and financial, and development communities. The typescript of this paper therefore has not been prepared in accordance with the procedures appropriate to formal printed texts, and the World Bank accepts no responsibility for errors. The World Bank does not guarantee the accuracy of the data included in this publication and accepts no responsibility whatsoever for any consequence of their use. Any maps that accompany the text have been prepared solely for the convenience of readers; the designations and presentation of material in them do not imply the expression of any opinion whatsoever on the part of the World Bank, its affiliates, or its Board or member countries concerning the legal status of any country, territory, city, or area or of the authorities thereof or concerning the delimitation of its boundaries or its national affiliation. The material in this publication is copyrighted. Requests for permission to reproduce portions of it should be sent to Director, Publications Department, at the address shown in the copyright notice above. The World Bank encourages dissemination of its work and will normally give permission promptly and, when the reproduction is for noncommercial purposes, without asking a fee. Permission to photocopy portions for classroom use is not required, though notification of such use having been made will be appreciated. The complete backlist of publications from the World Bank is shown in the annual Index of Publications, which contains an alphabetical title list (with full ordering information) and indexes of subjects, authors, and countries and regions. The latest edition is available free of charge from the Publications Sales Unit, Department F, The World Bank, 1818 H Street, N.W., Washington, D.C. 20433, U.S.A., or from Publications, The World Bank, 66, avenue d'Iena, 75116 Paris,. France. ISSN: 0253-2123 Library of Congress Cataloging-in-Publication Data Argent1na : reforms for pr1ce stab111ty and growth. p. em. -- <A World Bank country study> ISBN 0-8213-1543-9 1. Argent1na--Econol1c cond1t1ons--1983- 2. Argent1na--Econctl1c pol1cy. 3. Econo11c stab111zat1on--Argent1na. 4. Inflatton <F1nance>--Argent1na. 5. Pr1ces--Government pol1cy--Argent1na. I. Sertes. HC175.A8665 1990 339.5'0982--dc20 90-35475 CIP  PREFACE On July 8, 1989, Carlos Saul Menem was Inaugurated as President of Argentina. This report was completed on the eve of the transition, and examines the structural problems that contributed to the stagnation of the economy In the 1980s and ultimately culminated In hyperinflation and deep recession. The report is based on a World Bank macroeconomic mission that visited Argentina from January 31 through February 14, 1989 as well as other smaller missions during the final months of the Alfonsln administration. Despite the wide-ranging character of the reform program of the new administration, the Intractability of Argentina's pressing economic problems will continue to make the analysis relevant for some time to come. The mission comprised the following members: Richard Newfarmer (Mission leader, Macro, External Finance) luca Barbone (Macro, Fiscal and Monetary Polley) Paul Beckerman (Monetary and Financial Polley) luc Everaert (Public Enterprise) Egbert Gerken (Trade and Industrial Polley) Other people have made contributions to this report, Including James Hicks and David Vetter (provincial government finance), William McGreevey (social security), Dale Gray (energy sector), Steven Oliver (agriculture), and luis Rlveros (labor markets). Roberto Manrique provided research assistance for the external finance sedlons, and Ann Mitchell prepared the projections and statistical appendix. Diane Blevenour and Alexandra Blackhurst provided secretarial support. iii  CURRENCY EqtiiVALENTS Currency Unit Austral (AI) Exchange Rates Effective August 16, 1989 Official USil.OO = Al660 Para I lei Exchange Rate (Montevideo) USil.OO = Al686/690 FISCAL YEAR January 1 - December 31 GLOSSARY OF ABBREVIATIONS AND ACRONYMS ANA Administracion Nacional de Aduanas Nat i one I Customs Admin is1;rat ion AyEE Ague y Energia Electric• Water and Electrical Ener·gy Company BANADE Banco Nacional de Desarrollo Nat i one I Development Banlc BCRA Banco Central de Ia Republica Central Bank of Argent i n11 Argentina BHN Banco Hipotecario Nacional National Housing Bank BONA VI Bonos Naclonales de Intereses Variable Interest Rate Bonds Variables CEN Corporacion de Empresas Nacionales Corporation of National Enterprises COGASCO Compania de Gas Centro-Oeste Center-Oeste Gas Company CONADE Consejo Nacional de Desarrollo National Development Corporation CRM Cuenta de Regulacion Monetaria Monetary Regulation Account DEP Directorio de Empresas Publica Public Enterprise Board DOl Direccion General Impositiva General Tax Administration DNPC Direccion Nacional de Promocion National Directorate of Commercial co-rcial Promotion ELMA Empress de Lineas Maritimes International Shipping Company EN TEL Empress Nacional de National Telephone Company Telecommunicaciones GDE Gas del Estado State Gas Company HISPASAN Steel Company HIDRONOR Hidroelectrica Norpatagonia North Patagonia Hydroelectric Company INOS Instituto Nacional de Obras Sociales National Institute of Social Insurance Funds IVA lmpuesto al Valor Agregado Value-Added Tax (VAT) JNG Junta Nacional de Granos National Grein Board MCBA Municipalidad de Ia Ciudad de Municipality of the City of Buenos Aires Buenos Aires NFPS Nonfinancial Public Sector OSN Obras Sanitarias Naclonal National Sewage Company PEs Public Enterprises PRES EX (PEEX) Programas Especiales de Exportacion Special Export Program SEGBA Servicios Electricos del Gran Electric Services of Greeter Buenos Aires Buenos Aires SIGEP Sindicatura General de Empresas General Comptroller of Public Pub I ices Enterprises TAR Temporary Admission Regime YCF Yacimientos Carbonales Fiscales State Coal Company YPF Yacimientos Petrolifero• Fiscales State Oi I Company iv  TABLE OF CONTENTS Page Nos. COUNTRY DATA viii EXECUTIVE SUMMARY xi PART I - MAIN REPORT CHAPTER I: STATE-LED GROWTH AND INFLATION ................ . 1 A. Background .......................................... . 1 B Growth, Investment and Savings ...................... . 1 C. Adjustment and External Transfers ................... . 3 D. Public Sector Deficits and Inflation ................ . 6 CHAPTER II: STABILIZATION EFFORTS AND EMERGENCE OF HYPERINFLATION . .............................. . 12 A. Stabilization Efforts from 1984 to 1987 ............. . 12 B. The Plan Primavera: August 1988-February 1989 ...... . 15 C. Performance Under the Program (August 1988- February 1989) .................................... . 17 D. Recent Developments: Emergence of Hyperinflation ... . 19 E. Main Short-Term Problems ............................ . 22 F. Short-Term Options .................................. . 24 CHAPTER Ill: FISCAL POLICY AND PUBLIC FINANCE ............ . 30 A. Introduction ........................................ . 30 B. The Public Sector: Struggling with the Deficit ..... . 30 C. The Tax System: Problems and Reforms ............... . 34 D. Federal-Provincial Relationships .................... . 40 E. Finances of the Social Security System .............. . 41 F. Public Sector Enterprises ........................... . 43 G. Recommendations ..................................... . 45 CHAPTER IV: MONETARY POLICY: DEALING WITH FISCAL AND QUASIFISCAL DEFICITS ....................... . 52 A. The Central Bank in the Financial System ............ . 52 B. Dealing with the Quasi-fiscal Deficit: 1985-1989 ... . 55 C. Constraints on the Operation of Monetary Policy ..... . 58 D. Reconunendations ..................................... . 61 CHAPTER V: MEDIUM-TERM PRICE STABILITY AND EXTERNAL FINANCE 63 A. Domestic Macroeconomic Objectives ................... . 64 B. External Financing .................................. . 72 v  vi PART II - ANNEXES PUBLIC SECTOR ANNEX CHAPTER I: PUBLIC ENTERPRISES •...................... 76 A. Main Issues ......................................... . 76 B. Revenues: Pricing Policy ........................... . 82 C. Expenditures ........................................ . 85 D. Transfers ........................................... . 92 E. Budgetary Process and Control ....................... . 98 F. Performance Issues in 1988-89 ....................... . 100 G. Policy Recommendations .............................. . 101 ANNEX CHAPTER II: PROVINCIAL GOVERNMENT FINANCE .......... . 105 A. Overview ............................................ . 105 B. Intergovernmental Fiscal Relations .................. . 107 C. Provincial Revenues ................................. . 110 D. Provincial Expenditures ............................. . 112 E. Deficit/Surplus and Sources of Credit ............... . 115 F. Recommendations ..................................... . 115 ANNEX CHAPTER III: SOCIAL SECURITY ....................... . 118 A. Introduction ........................................ . 118 B. Pension Program ..................................... . 118 C. The Social Funds and Health Services ................ . 124 SECTORAL ISSUES ANNEX CHAPTER IV: FINANCIAL SECTOR ....................... . 126 A. Overview ............................................ . 126 B. The Present Structure of the Financial System ....... . 128 C. Financial Liberalization and Centralization ......... . 130 D. Principal Financial Sector Policy Issues ............ . 134 E. Recommendations ..................................... . 139 ANNEX CHAPTER V: EMPLOYMENT AND LABOR ................... . 143 A. Introduction ........................................ . 143 B. Productivity, Wage Trends, and Wage Determination ... . 143 C. Employment and Unemployment Trends .................. . 147 D. Labor Market Regulation and Efficiency .............. . 149 E. Protective Regulations and Equity ................... . 150 F. Recommendations ..................................... . 150  vii ANNEX CHAPTER VI: TRADE POLICY ........................... . 152 A. Trade Performance ................................... . 152 B. Import Substitution Strategy ........................ . 152 C. Policy Reform ....................................... . 155 ANNEX CHAPTER VII: INDUSTRIAL POLICY ..................... . 163 A. Sector Performance .................................. . 163 B. Pol icy Impact ....................................... . 164 C. Recent Developments ................................. . 165 ANNEX CHAPTER VIII: THE ENERGY SECTOR ..................... . 168 A. Overview ............................................ . 168 B. Energy Subsidies, Pricing and Taxation .............. . 170 C. Petroleum and Gas Supply ............................ . 174 D. Natural Gas Utilization ............................. . 176 E. Refining Operations ................................. . 179 F. Electric Power Sector ............................... . 181 G. Energy Planning ..................................... . 183 ANNEX CHAPTER IX: AGRICULTURE ............................ . 185 A. Agriculture in the Economy ......................... .. 185 B. Agricultural Potential .............................. . 185 C. Disincentives to Agricultural Investment ............ . 187 D. Principal Policy Requirements ....................... . 188 ANNEX CHAPTER X: ANALYTICAL APPENDICES A. Projections and Macroeconomic Consistency .......... . 191 B. Macroeconomic Consistency Framework ................ . 198 STATISTICAL APPENDIX Tables 1.1 - 9. 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204 - 290  viii COt.JmRY OAT A - ARGENT INA AREA POf'\JLAT!ON DENSITY •I 2766.9 thou!'~. sq.km. 32.0 ,.; II ion (1988) JO. per sq.km 1. 51 annual growth 16 per aq.km of aral:de lend f'OPULATION CHAHACTER!Sl !CS •I HEALTtl bl CnJde Bi rt.h Rate (per 1000) ?.3. Population per physi-:ian (thoua.) 0.5 Cr·urle l>e11th Rate (per 1000) 8 9 ropulat..ion per hospital bed (thoua. 0.2 lnf•••t Horhlit,y (per 1000 ti ... e birt.hs) 34 4 DISTRIBIJT!ON OF LANJ OWilfRSHIP !I ')f nation•! income, highest quintile 50.3!1 I nwned hy top 101 of land I of national income, lowest quinti le 4.4lll I owned by smallest 101 of land owne ACCESS TO SAFE WATER (IQ80) ACCESS TO ELECTRICITY (198Q) I nf ropulation urbwn 65lll I of popu lat. ion 95lll I of population - rur•l 17lll NU1RITION •I EDUCATION Cld!>rie intake as I of require~n•nts 119.2lll Adult I iter-acy r-ate I (1980) 95lll Per capita protein int.ake (grains per day) ?9. 7 Primary echool enrollMent I a/ lOOlll CNP PER CAPITA IN IQ88 cl 2537 CROSS NATIONAL f'ROD\JCT IN I 988 d/ lll USI Hln. of CNP (current prices) 1970-75 tQ75 eo 1980-85 1988 GNP at market prices 75620.6 100.0 2. ~ 1.8 -3.4 -0.7 OrosA [)omest i c Investment 1009~ 4 13.4 .Q 4.4 -16.2 -4 7 Grnss N•tional S11vinga 7456 2 Q. 9 0 5 2.0 -13.8 2Q. Current AC"count Balanr:e -2639.2 -3.5 Ewport• of Goods &. tJfS 10337.3 13 7 -4 14.1 5.2 58.6 [mpo•· ts of Goods .l NFS 7849 10.4 0.6 13.3 -13.0 -4.5 0\Jl PUT, LABOR FORCE A~IJ f'ROO\JCT!VIfY Itl I Q88 Value Added (conatant pr-ices) V .A. Per Worker USI Min. Thousands USI Agricull:.ure t08Q7 15.2 1370 12.0 7Q51 0 Indust.ry 24291 :14.0 3586 31 4 6773.6 Ser-vices 36356 50.8 6464 56.6 5624 3 Total GOP at Fac-t.or Cost 71544 100.0 11421 100.0 6264.4 GOVERNMENT F !NA~.OCE f I Con!l..,lidat."'d N('nfinancial Public Sector g/ Central Government lll of COP Aust. Min lll of C'.OP 1981 1987 1983-87 1907 1~87 IQ83-87 54661 35.1 t~t;(lR Ill 5 Q 30 " Curr11mt Expend i t,ures 59995 33 ~7 .8 2<•527 11 .·~ 8 0 C:urr•nt Balance -5334 -~ 0 ·2 -113? -1 I l l C:tp i hI Exper1d i t.ures 9102 5. 7. 4 '551 0 3 0 4 Sur·plus h/ -13019 -1 4 -9 3 -121?3 -1 2 -8 9 Ex tern at Financ-ing (net) 1411 4 2 .8 6660 .B 1.8 a/ For the period 1982-1985. b/ f.('r the p•ri('d 1970·-1976. c/ Current US dollars. Est.i~ttated using Bank At. las met.hodology. d/ Current US dollar eat.imates, calculated from data in constant 1970 australes. e/ Calt:ulat.ed by applying 1980 cenaua aharea to 1988 population. f/ f'•ecuLfld budget eat.\mates in currertt auatralee. g/ E=•clud11a provincial goverflltlt!nta h/ Talcea into account all revenues and expenditures.  COU'lTRY OAT A - ARGENTINA HONEY, CRBJIT AI-D PRICES 1Q80 1Q81 1Q82 1Q83 1Q84 1Q85 1Q86 1Q87 (Mi II ions of australes; end of period) Money ar1d Quasi Honey 8.0 16.0 38 3 11Q3 .5 7624.5 44433 240353 Oome!lt. i c 9J~r~k Credit. to Pub I i c Sector 1 7 6. 4 22. 5Q6 8 2845. 18624 86274 l.lomestic Bank Credit to Private St~ctor 8.3 22.2 68. q 1Q02.1 8Q80.6 4881Q 222373 Money and Ouas i Money as I of COP 22.3 21.0 15 5 15.2 12 2 14 2 17 15. 17.4 Wholesale Price Ind~,. (lqeS,lOO) 0.067 0.188 0. 775 3.Q61 28.141 133.4 210 5Q3 3155.Q Ann11al percent.age chang•s in: General Wh<>lesale Price Inde• 55.8 100.6 312 2 411. 625 8 364.0 57. 181.8 431.6 fla11k Cr·edit t.o rub I ic Se<.:tor· 6Q. 8 282.8 251.7 237.2 681.6 376.7 100.7 226 2 363.2 Bank Credit. to Private Sector 108.5 166.0 210 5 321.Q 554 372.1 83.7 196 0 355.5 BALANCE OF PAYMEIITS 1Q75 1Q80 1Q85 1?88 HERCHAI'-IJISE EXPORTS (Average 1984-1988) (USI Hill ions) USS Min. "of Total f.• port-s of Goods, l"tFS 3704 10765 10242 11301 Agricultural goods dl 3822. q 4Q. 2 Imports of C:oods, Nr"S 4518 14024 sen 778Q Manuf. goods of agr i c. or i g. •I 2004.5 25.8 Rt~sourr:e Balance -814 -325Q 4351 3!>12 Manuf of industria! origin f I 1Q42 8 25.0 Total Merchandise Exports 7770.2 100.0 lntt~rest. Payments (net) -460 -Q47 -467Q -4467 Ot.her ractor Payments {net} a/ -1~ -584 -425 -660 EXTERNAL DEBT ( . . of Doc. 31, 1 Q88) g/ USI Hln Net, Current Transfers 5 23 0 0 Balance on Cur·rent Account -1284 -4767 -Q53 -1615 Total Debt Outstanding I. Disbursed (DOD) 58Q35 IBRD 2265 Oi rect ll"'vestment 788 Q1'l 1147 !DB 177Q IMF 3678 Tot.. I Mll T Leana (net.) -12 3400 2786 -252 Bilater·ala 4470 Oi sbursements 1018 5eoq 7564 Bonds 2808 A11t0rtization 1030 240Q 4778 Commercial Banks 43Q35 flt.her C•pit.al (net) h/ 1BQ -2217 -A81 2505 DEBT SERVICE RATIO, 1Q88 h/ 43.4. Changes in Gross Resen•es (- increase) 1107 27Q6 -1871 -1785 Gr·os" Rt~sfllrve• (end .veer) cf 4fi4 6743 4801 4QIQ N11t, Reserv4s (ttnd year) -520 6724 -7873 -1542Q IBRD/IDA LENDING, DECEMBER 31, 1Q88 (Min USI) RATE OF EXCHANGE ; / IBRD lOA 1Q80 1Q88 Outstanding l Disbursed 2265 Undisbursed USI .00 = AI 0.00018 USI . 00 AI 8. 7703 Out.stand i ng inc I . Und i •bur sed AI . 00 = USI 5382 AI 00 = USI 0.114') •I Direct investment. income plus other· factor service income. b/ lnr.ludes shor-1:.-t..erm capital, net IMF resources, changes in arrears, and vai•Jation adj•.Jst.menta. cj lrH:Iudes valuation and ot..her adjustme11t.s d/ Bt.'"RA cateQorie" I, II, and 111: I ivestock anoi other animal products; agricultural products; fats and oi Is. •/ fY.RA categories IV, VIII, and XI: i e manufactur·ed food, beverages and tobacco; leather, furs and related produrts; textiles and clothing f/ All other manufact.ured goods categor-ies a/ Pre! iminary est.imat.e hi Amort.i.r.at,i0n an~ int,er-est paymf!'nts on medium- anrf long-t.erll'l (MLT) de.,t, •• a percentage of exports of GlNFS. ExcltJdes ar·rean•: includes r-escheduling of dfllht il f"'eriod average ix  - xi - ARGENTINA: EXECUTIVE SUMMARY A. Introduction 1. In his inaugural address of July 8, 1989, President Carlos Menem emphasized that Argentina is facing the most difficult economic situation in its modern history, and promised the country only "sacrifice, work and hope." Inflation had surpassed 100 percent monthly, output was stagnating, unemployment was rising, and the Government was unable to mobilize credit either domestically or abroad. The current situation is the culmination of long-term trends emerging in the 1970s--slow growth in productivity and secular falls in savings and investn1ent. Savings and investment ratios are about half their mid-1970 levels. In spite of efforts at reform in recent years, gross national income per capita is about 23 percent less today than in 1977. Foreign debt, once quite small relative to GDP, has climbed to nearly 100 percent of GDP. 2. The experience of the last two decades indicates that without a permanent reduction in inflation, Argentine savings will not be invested in Argentina. Five stabilization programs in the 1984-89 period have failed, largely because of insufficient adjustment in the public sector. Each time inflation returned and surged to higher levels than on the previous occa- sion. Lack of social consensus and entrenched business and union power, together with the burden posed by the external debt servicing, conspire to maintain the demands on the public sector beyond its ability to garner resources--thus creating a chronic deficit. The key to controlling infla- tion is an immediate and sustained reduction in the deficit through a com- prehensive reform of the public sector. 3. But controlling inflation may not be sufficient to unleash the enormous productive potential of the country--and thereby provide the basis for increasing real wages over the lung term. To reverse declining trends in labor productivity and the productivity of investment, the Government as part of its comprehensive reform must remove price distortions and other policy interventions that have discouraged investment and job creation throughout the country. While achieving price stability is the first order of business, the Government must do so on the basis of a comprehensive public sector reform that makes financial stability permanent and permits sustained increases in productivity and income. Background 4. The growth of state spending during the 1970s contained three seeds of the crisis that was to become manifest in the 1980s. First, increases in public spending--public expenditures rose from about 25 per- cent of GDP in 1970-72 to over 38 percent in 1981-83--were not matched by a concomitant expansion of revenues, and so large deficits became common- place, ranging from 5 to 16 percent of GDP in 1973-83. After 1980, weak tax administration, excessive tax exemptions, low public enterprise prices and falling real revenues associated with inflation initiated a secular deterioration in public revenues relative to GDP that has continued until the present.  - xii - 5. Deficits in the late 1970s were initially financed through foreign and domestic borrowing and then, with the crisis in the financial system in 1980-82, the Government assumed the foreign debt of the private sector. The build-up in foreign debt during this period created an enormous external and internal transfer problem which hampered efforts at deficit reduction, and has made both foreign and domestic creditors increasingly reluctant to lend to the Government. 6. A third problem associated with the growth of the state was the proliferation of costly subsidies and associated economic distortions: Industrial promotion schemes subsidized domestic industry at a cost to public finances of roughly 5 percent of GDP. Consumers of public services enjoyed subsidies from tariffs that were often below costs. Many borrowers from public banks enjoyed implicit subsidies to housing, industrial invest- ments, and other uses. Only a small portion of these subsidies went to low-income families or the truly needy. At the same time, Government policies raised barriers to competition in several sectors, and oth1er inef- ficient regulations created additional economic distortions. The need to finance fiscal losses created a highly distorted financial system wherein the Central Bank was used to tap resources from financial intermediaries and channel them to loss-making public banks and the nonfinancial public sector, thus discouraging savings and efficient investment. These policies had the collective effect of directing investment into low producti,rity areas, and lowering the productivity of the whole economy. Recent Refonm Efforts 7. Inheriting a distorted economy, the Alfonsin administration (1983-89) initiated several reforms that had considerable effect in reducing the external and internal deficits. By keeping the exchange rate generally competitive after the Plan Austral in 1985, the deficit on current account of the balance of payments improved from over 4 percent of GDP in 1983 to under 2 percent in 1988. At the same time, expenditure compression, new tax measures, sporadic improvement in public enterprise pricing, and some adjustment in provincial public sector finance contributed to reducing the deficit of the combined public sector. Deficits of the combined public sector fell from over 20 percent of GDP in 1983 to under 7 percent in 1988. 8. But policies were not always consistent or sufficiently enduring to stabilize the economy. The new taxes, although easy to collect, were often inefficient and seen as temporary; export and energy taxes, for example, were among the most important new measures. Contending political demands prevented coherent action in controlling public finances; 1987 marked a severe setback to the gains in the previous two years, especially in expanding subsidies through the Public Housing Bank (BHN) and Industrial Bank (BANADE). Moreover, insufficient early attention was devoted to the structural problems that were the legacy of the previous decade. 9. The Plan Primavera, initiated in August 1988 against a backdrop of accelerating inflation reaching 30 percent monthly, attempted to remedy some of these problems. By introducing some structural measures--control  - xiii - (a) (c) GOP Growth: Long-Term Trend Origin of Saving: 1970-87 (10 Year Moving Average) .. of GOP 8,,----------------------------------. 40r--------------------------------. 30 ___cirou National Saving a -10~~~~~~~~~~--~~~~~~~-" 1870 1874 1871 1882 1888 (b) (d) Investment and Saving: 1970-87 Public Sector Primary Surplus and External Interest 1970-87 .. of GOP .. of GOP 35,------------------------------------. 30 25 20 Groaa National 15 SavlnQa 10 5 1870 1874 1871 1812 1811 Note: Primary surplus equa1a public sector balance before intereet paymenta. The deficit shown includes aa.e ...11 portioa of private sector foreign intereat peJ~~enta.  - xiv - of rediscounts and quasi-fiscal expenditures through the Central Bank, a tax reform designed to circumscribe some of the industrial subsidies, and a trade reform to open the economy--the program sought to introduce permanent changes in the state sector, intending to bring down the deficit of the combined public sector from 6.7 percent to under 3 percent in 1989. The trade ~eform succeeded in lowering the average level of protection and reducing the coverage of quantitative restrictions; financial sector reforms had substantially reduced the flow of rediscounts and maintained the regime of liberalized interest rates initiated in late 1987. By the end of the year inflation had fallen to single digits. 10. However, the political consensus to implement the announced fiscal measures and structural actions affecting the public sector was absent. Underadjustment in the fiscal accounts, as with the Plan Austral, threw the burden of stabilization on monetary policy; the Central Bank had to increase its debt to support the interest- and exchange-rate mix. The private sector, acutely aware that the structural fiscal deficit had not been eliminated, fearing the uncertainty of Argentina's first post-war democratic political transition, and doubting the capacity of the Central Bank to service its debt and support the exchange rate, began shifting its portfolio out of assets denominated in the domestic currency in mid-January 1989. This triggered a self-feeding run on the austral by the end of the month, which the outgoing government was powerless to stop. The free market exchange rate fell from A$16.8 per US dollar in January to A$380 in June. Monthly inflation rose every month to reach 123 percent by June and 203 percent in July. B. Short-Term Problems and Options Problems 11. The new economic team taking office on July 8, 1989 confronted four immediate economic problems: hyperinflat.ion, instability in the financial system, price misalignment in the public sector, and the threat of a major recession. 12. Hyperinflation. By May, the cash deficit of the Treasury had become extraordinarily large. Widespread tax evasion and falling real tariffs of public enterprises had driven revenues down. But more impor- tant, both fiscal and monetary policy had become almost completely endoge- nous to the inflationary process. The deficit continued to widen because of inflation itself: real revenues were falling and, given low and falling demand for money, public finances were unable to balance through the infla- tion tax, setting off an inherently unstable process. 13. Similarly, accelerating inflation produced destabilizing monetary expansion through the losses of the Central Bank. This is because interest expenditures on Central Bank lial•ilities exceed Central Bank interest earn- ings by an amount that tends to increase with inflation. Interest earnings are dominated by loans to the public banks, which carry a fixed interest spread above inflation, while liabilities are dominated hy forced invest- ments from the commercial banks, and are priced at market rates; so higher  - XV - nominal interest rates associated with accelerating inflation increase the quasi-fiscal deficit of the Central Bank. Moreover, the lag in interest earnings means that during periods of rising inflation, the quasi-fiscal deficit widens. 14. This situation created a massive imbalance between demand for and supply of money in the first six months of 1989, while the inflationary process left the Central Bank without instruments to deal with it. The collapse of the exchange rate led those who held dollar-denominated deposits in the domestic financial system to shift them abroad, putting pressure on Central Bank reserves and heightening fears about the future exchange rate. Also, the public debt, estimated at 16 percent of GOP, continued to grow explosively because high interest payment obligations by the Central Bank on the forced investments of the financial system were capitalized into new forced investments. Moreover, the Central Bank was being required to finance the payment of maturing government bonds that could not be rolled over. As inflation gathered momentum and confidence waned, the public shift@d its portfolio rapidly out of austral-denominated assets in order to avoid the inflation tax and the threat of default. With the demand for money falling, the Central Bank was forced to try to absorb the excess supply, but had to rely on ever higher reserve requirements (i.e. forced investments)--which bear interest and therefore ultimately require monetary expansion--to absorb money. The Government was left with the choice between hyperinflation and financial sector collapse. 15. Financial System. The proximate cause of the stress in the finan- cial system was the flight of austral-denominated deposits to dollars and other assets. Withdrawals have put enormous pressure on commercial banks, since the forced deposits of the commercial banks with the Central Bank are not formal reserve requirements and are not automatically released pari passu with deposit withdrawals. Moreover, other assets of the banks' port- folio were not performing, as many firms were reportedly unable to service debt with the banks and were receiving rollovers. The Central Bank pro- vided new rediscounts, eased forced investment requirements, and decreed sporadic bank holidays and limits on deposit withdrawals during May and June. 16. Price Misalignment. Public enterprise prices were severely mis- aligned. By end-June, real public enterprise prices were roughly 60 per- cent below levels prevailing at end-year 1988, the level necessary to gen- erate positive savings. This is the reason why the Government more than doubled real prices as a principal measure in its new program. Realigning these prices will necessarily affect the price level because of their own heavy weight in price indices as well as the fact that so many private sector prices are indexed to these. 17. Recession. At the same time, the real economy, already in its second year of recession, was contracting further. The appreciation of the austral in the waning days of the Plan Primavera had led to a mini-boom in external travel and import purchases of consumer durables, and the flight from australes to goods in February produced some increase in demand for industrial goods. However, the hyperinflation compounded the effects of  - xvi - the high interest rates on real sectors. The sharp reduction in real wages in February-June which cut private consumption, the shortage of trade credit and the inability of many business owners to determine what their own prices should be have led to a slowdown in economic activity. Designing Stabilization Programs: Lessons of the Past 18. The experience of the last five years suggests three principles for the design of a program to stabilize the economy. First, the short- term plan must be built upon a program of structural reforms that provides confidence for investors and th~ public at large that changes in the con- duct of public finances are indeed permanent. Second, the nominal public sector borrowing requirement must be credibly and immediately reduced to levels that can be financed through foreign credit--recognizing that in the immediate weeks ahead, until an agreement with external creditors can be put in place, the predominant foreign source will necessarily be a con- tinual accumulation of arrears. Third, the monetary component of the stabilization package will have to ensure that the public sector will not use the inflation tax to balance its accounts in the future. 19. As the Menem Government implicitly recognized in its July 9 pro- gram, past experience argues strongly that the Government take several structural measures prior to--or simultaneously with--putting the stabili- zation program formally into place. Indeed, the Government began formulat- ing its structural reform program immediately and announced key measures. This strategy inverts the past approach of first trying to close the fiscal gap with ad hoc revenue and other measures, and deferring structural measures until after stabilization is achieved. Simultaneous efforts at structural reform are necessary because the deficit remains high relative to available domestic and foreign finance, while the demand for austral- denominated assets remains low and volatile. As long as the deficit is seen to be eliminated in sustainable form through structural measures, the private sector will have no faith in the sustainability of the program. Lack of private sector confidence has also resulted in a secular decline in the holdings of financial instruments denominated in domestic currency, and increased the responsiveness of portfolio shifts and money velocity to inflationary expectations. The base of the inflation tax has been narrowed beyond a point where it can help close the accounts of the public sector. Furthermore, early elaboration of a comprehensive medium-term program and successful implementation will credibly convey a sense that price stability will be enduring and that the economy can recover. 20. A companion lesson from past stabilization attempts is that prices of public enterprises cannot be used as a mainstay of stabilization for any length of time. If real prices are allowed to deteriorate, it becomes virtually impossible for the sector to maintain savings at a level con- sistent with deficit reduction objectives. After the stabilization plans of recent years, falling real prices now raise inflationary expectations since the private sector is aware that tariffs will eventually have to be increased, and may even anticipate these with large price movements of their own.  - xvii - 21. Past experience also in~icates that a heterodox program--a social pact on prices, some adjustment in fiscal accounts, and tight monetary policy--entails important pitfalls. The major strength of a heterodox plan, the ability to abruptly bring to a halt inflation through the imposi- tion of wage and prices controls and/or some other form of social con- sensus, is also its fundamental weakness. In both the Austral and Primavera programs, the magnitude of the reform task was underestimated: The fact that the benefits of the program occurred at its inception removed pressure from the authorities and Congress, who then balked at paying the political price for some of the less popular measures. Once it became evident to the public that the structure and behavior of public finance had not changed fundamentally, inflationary expectations began refueling, the exchange rate-domestic inflation cycle took its course, the positive Olivera-Tanzi effect reversed, and the resulting deterioration in fiscal performance displaced whatever measures of a structural nature may have been under implementation. Policy Options 22. A thorough stabilization must therefore be predicated upon mutually reenforcing reforms of the public sector, monetary policy, the exchange rate, and external finance. Achieving objectives described below could be attained through various strategies. The key elements of each approach, however, must be the same: up-front fiscal reforms that include difficult-to-reverse structural nteasures, clear and transparent monetary and exchange rate rules, and an eventual accord with external creditors. 23. Public Finance Reform. The cornerstone of the program must be explicit political agreement on a comprehensive reform of public finances. The agreement would have to signal a complete change in policy regime: as such it would have to offer to the public concrete guarantees against reversal. The central component of the package would be a sharply declin- ing fiscal deficit which would remove the need to use the inflation tax; the objective would be an immediate primary surplus to service domestic internal debt and eventually recapitalize the Central Bank. This would be built upon integrated reforms aimed at reducing expenditures, rebuilding the tax base, and reducing the deficits of the public enterprises, social security system, and provinces. This would be enforced by the adoption of a transparent monetary rule stating that future currency emissions would be limited to increases in foreign reserves of the Central Bank. As a con- sequence, substantial and immediate adjustment of the public sector and public banks would be necessary, so as to reduce the public sector deficit to a level equal to net new borrowings of foreign resources. 24. Monetary Reform and Policy. A strong monetary reform that per- mitted monetary expansion solely as a function of increases in interna- tional reserves would Jlrovide the public confidence necessary to slow inflation. Monetary policy would be assigned a purely passive role. The policy would be based on an ex-ante judgment that the risk that this firm monetary rule might create a prolonged recession, and thus erode public support for the program, is less than the danger that the private sector will not believe the program is sustainable and will maintain its infla- tionary expectations.  - xviii - 25. Monetary reform would also involve a restructuring of the domestic internal debt, and eventually recapitalizing the Central Bank. This could be done through exchanges of debt instruments with the Central Government. The outstanding stock of forced investments from the commercial banks dPposited with the Central Bank would be converted into long-term secur- ities of the Government carrying a fixed nominal interest rate. To service these obligations, the Treasury has to mobilize a sufficient surplus to pay interest and amortization at the rate consistent with the stabilization strategy and targets. The only alternative is to write down the value of these assets, with its adverse implication for future creditworthiness. 26. Exchange Rate. The monetary reform (including the new rule on monetary expansion), together witl1 the change in the fiscal policy regime, would allow the Government to maintain a fixed exchange rate against the dollar or a basket of currencies. This would provide the nominal anchor necessary to operate a successful stabilization after hyperinflation. Since international reserves are low, an important element for success is the availability of foreign resources to provide reserves to back the new exchange regime. An early arrangement with the IMF is therefore particularly important. 27. External Finance. Garnering foreign support will be difficult. External creditors, like their domestic counterparts, have no alternative but to recognize the limited capacity of the Argentine state to service its obligations. As shown in the projections in Chapter V, it seems unlikely that Argentina can fully service its private commercial debts in the medium term; a strong fiscal program predicated on sharp deficit reduction has extremely limited scope for normal debt servicing in the years immediately ahead. Nonetheless, all external creditors share with the Government a fundamental interest in Argentina's medium-term price stability, growth and restored creditworthiness. Sustained price stability may eventually attract back some of the enormous capital flight that has occurred since 1980. In the short term, however, net transfers to commercial creditors will have to be restricted to a minimum; nonetheless, soon after a comprehensive medium-term program is in place and the stabilization is underway, the Government should initiate negotiations with the commercial banks to explore solutions to Argentina's long-term financing problem so that external transfers can be tailored to the country's capacity to pay at a time when the need for sustained growth is paramount. c. Main Components of Structural Reform Program: A Comprehensive Reform of the Public Sector 28. Deficit spending of the Argentine public sector has plagued econo- mic management in Argentina for decades. Noninterest expenditures as a share of GDP rose in the late 1970s because of increases in social security and provincial spending, and then rose even more sharply in the early 1980s, driven by continued provincial spending and the South Atlantic War. After the public sector absorbed the private foreign debt, interest expen- ditures put increasing pressure on public finances; interest payments rose from under 3 percent of current expenditures to over 20 percent.  - xix - 29. After reaching a peak in 1980, tax revenues began a secular de- cline that has been offset from time to time only with inefficient and transitory measures, including most notably export taxes, but also taxes on petroleum products, savings, checks, cigarettes as well as compulsory savings. While many of these had the advantage of being readily collect- able, they have progressively introduced significant distortions that dis- courage exports and reduce international competitiveness, discourage sav- ings and channel investment into low productivity areas. 30. At the heart of the inability to contain public finances has been the weak control over the various components of the public sector outside the central administration, including public enterprises, social security and provincial finance as well as the disguised fiscal expenditures through the Central Bank. At the beginning of 1988, the Government adopted a new principle for fiscal policy that enhanced accountability of these govern- mental sectors: It established clear guidelines for transfers between the sectors and established a rule of sectoral self-sufficiency. At the same time, the Government reduced discretionary expenditures through the Central Bank by slashing rediscounts to public banks and terminating the practice of allowing provincial banks to overdraw their accounts at the Central Bank. 31. These efforts have increased transparency and political awareness of the problem, but have not remedied the deficit of the public sector. For that, a comprehensive reform of the public sector is necessary. This would entail efforts to reduce expenditures, improve taxation, and reform public enterprises, federal provincial financial relationships, and social security. (Structural measures that would markedly enhance the strength of the stabilization program i f announced prior to or simultaneously with the program are denoted with an asterisk.) Expenditure Reductions 32. Expenditures of the nonfinancial public sector have fallen by about 10 percentage points of GDP since 1983. However, present expenditure levels at 30 percent of GDP are still high relative to capacity for mobi- lizing tax resources as well as relative to other countries at similar levels of per capita income. The process since 1983 has not been part of conscious government policy, but the result of successive marginal con- traction imposed by the threat of inflation; consequently, the pace of expenditure reduction has always been too slow to achieve stabilization goals and the process itself has been inefficient. Too often the Govern- ment has chosen to contract investment in the hopes that the fiscal crisis would pass, rather than make the difficult cuts in public employment and inefficient programs and subsidies. 33. A major component of a structural reform program would involve expenditure reductions. This would have to focus on employment reduction throughout the public sector. Employment increased by 20 percent in 1983-88 in the central administration and 28 percent in the provinces --despite acute budgetary constraints. Since average public sector wages  - XX - have fallen to very low levels, employment reductions should be deE~p enough to permit some increase in average wages even with some gains in n~ducing the overall wage bill. The Government should strive to mitigate the hardship imposed by lay-offs through programs of early retirement with full pension, severance pay, and temporary income-maintenance in accordance with workers' length of service. 34. Similarly, the Government must mount a comprehensive effort to identify programs that could be cut to achieve savings and improve the efficiency of the public sector. In the central administration, the health, education and housing budgets should be carefully scrutinized since there is a need for greater efficiency in delivering these services at the same time for additional savings are needed; in education, for example, expenditures for primary and secondary education have been reduced far more than expenditures on higher education, even though the latter entail sub- sidies to the relatively wealthy and could be supported through a combina- tion of increased direct charges with more scholarships and loans for poor youth who would otherwise qualify for entrance. In transportation, the Government could consider partial divestiture of the port facilitie·s, which are inefficient and costly; greater reliance on toll roads and privately constructed toll roads could increase badly needed investment in this sector as well as reduce the cost to the budget. In agriculture, reforming the National Grain Board (Junta Nacional de Granos) along the lines sug- gested in Annex Chapter IX would provide some savings. Additional expend- iture reductions can be achieved through measures in the public enterprise sector, such as divestitures and employment reduction, and in social secur- ity; these are discussed below. 35. These reductions in expenditures as well as other public sector reforms necessarily involve abrupt and disruptive changes in the lives of some Argentines--workers who are laid off from inefficient government pro- grams or enterprises, recipients of subsidies, and consumers of state enterprise products and services whose prices may be increased. While these social costs are relatively small when compared to the alternative of rampant inflation and prolonged stagnation, the Government should make every effort to maintain and strengthen the social support services for the poor--the social "safety net." This means carefully targeting remaining subsidies on low-income groups, improving the efficiency of delivery for existing social services, introducing user charges to recover costs from those who are able to pay, and improving collection and financial manage- ment of earmarked revenues. It also means improving the efficiency of regulations governing the private sector in the provision of these services. Finally, it entails channelling that component of shared revenues destined to service the poor to those provinces with a larger number of low-income families.:!_/ These efforts could substantially :mitigate the human costs of stabilization and reform. !/ While these ideas are not developed in this report, detailed suggestions to strengthen the social safety net are presented in the World Bank's report, Argentina: Social Sectors in Crisis, June 1988.  - xxi - The Tax System 36. The Argentine tax system has become increasingly deficient. Taxes have fallen and new taxes have been neither efficient nor equitable. The system has shown a relatively low buoyancy, largely because of the increas- ed use of the tax system to promote regional and sectoral industrial development. Ad hoc taxes have been imposed on several occasions; the Government has repeatedly granted tax amnesties, with lower revenue results. Meanwhile, the administration of taxes, beset by lack of resour- ces anJ excessive va~iability in legislation and management, deteriorated substantially. 37. Important changes were introduced through a tax package in December 1988. Although Congress rejected a proposal to generalize the value-added tax (VAT), the Government introduced changes in direct taxes that modified the industrial promotion system; i f sustained and implemented they could lead to a significant reduction of tax avoidance and evasion and of the economic distortions generated by industrial promotion. Still, these efforts did not go far enough. 38. A comprehensive tax reform is therefore necessary to overhaul the tax system. It should be guided by principles such as those outlined in the Law of Economics Emergency introduced as part of the July 9 program: namely, that all subsidies through the state be eliminated, except for those directed at poverty alleviation. A program of structural reform in tax regime would include: * (a) A refor.m of the value-added tax that would lower the rate and broaden the base as well as revamp the income tax to broaden its coverage and enforce its application. (This reform would encompass some of the other measures described below.) * (b) The permanent suspension of the general and the provincial industrial promotion regime to replace the proposed temporary and partial suspension (laws 21.608, 22.021, 22.702 and 22.973). * (c) The phase-out of the tax exemption regime for Tierra del Fuego. Some temporary financial transfers to the provincial budget could help compensate workers; benefits in the form of tariff exemptions could be retained i f the Government wished to convert the island to an export processing zone. * (d) Acquired rights of beneficiaries under the above industrial promotion could be capitalized via the issuance of secur- ities; these should he paid on the basis of audited state- ments of projected production (i.e., the "theoretical cost"j made at the time of original application for benefits. * (e) The permanent abolition of promotional schemes for exports --including the PEEX program and the export subsidies. The competitive exchange rate already provides sufficient incentive for exports and the fiscal savings are substantial.  - xxii - 39. Measures that would at the same time promote a more efficient utilization of resources, foster public enterprise reform and increase public sector revenues in the area of taxation of the energy sector, would include: (a) The imposition of VAT on all oil products; a simplification of excise taxes to be replaced by only one ad valorem tax, fixed on the supply price at the plant. (b) The state oil company, YPF, should be subject to income taxes and, if public finances require additional transfers, the Government should use its power to pay dividends as the means to extract profits from the sector. 40. Trade taxes distort investment and, therefore, the move away from them should be pursued with determination. (a) The exemptions from import tariffs on capital goods and other imports should be abolished. This would reduce the dispersion of effective protection rates, increase revenues, and increase employment. * (b) Product-specific export taxes should be rapidly replaced with a general tax reform that includes the agricultural sector. In the interim, export tax payments should be credited against value added tax obligations of producers. 41. Solving the problems of the tax administration will involve a determined medium-term effort on the part of the Government, as well as the implementation of measures in the tax system to simplify its administra- tion. This will involve among other things: * (a) Measures to increase General Tax Administration's (DGI) internal technical ability through improved organization, data processing, and better personnel procedures. * (b) Strengthen administration measures that would reduce the complexity of the tax system, through the abolition of low- yield nationally administered taxes. * (c) Abolishing the simplified VAT system and approving laws pen- ding in Congress that would substantially increase DGI's powers, including meaningful and appropriate sanctions for noncompliance by taxpayers. Public Sector Enterprises 42. Public sector enterprises have contributed substantially to the overall deficit of the public sector--about half on average during the 1980s. This poor performance is the result of sporadic reliance on public enterprise price adjustments to achieve (temporary) macroeconomic stability as well as the use of the sector as a source of resources to channel  - xxiii - subsidies to the private sector. The Government has pursued pricing pol- icies that have oscillated between providing sufficient resources to cover costs and compressing prices to achieve anti-inflation ohjectives as in the Austral and Primavera Plans. Legal constraints have been imposed on public procurement through the buy-Argentina law (Compre Argentino), resulting in inflated costs and massive subsidies to private industry and other sup- pliers. Similarly, entrenched unions have exploited their political power to saddle the sector with excessive employment, especially in the railways. Finally, pricing distortions have been accentuated by the use of the energy sector as tax collector to cross-subsidize losses in the railways, social security system, and provinces. 43. To deal with these problems, the Argentine Government has pursued a dual strategy. The first element consisted of clearly delineating the rules for the transfer policy to the sector. This was based upon limiting Treasury contributions to cover the servicing of medium-term commercial bank external debt and what is due on account of special funds. The second element of the strategy was the full or partial divestiture of selected enterprises. The most important efforts were the proposed partial privat- ization of ENTEL (the state telephone company) and of Aerolineas Argentinas, although these have not yet been carried out. Several smaller privatizations were concluded for smaller government equity holdings owned through Fabricaciones Militares, the armed forces' holding company. Through the Petroplan and the Plan Houston, the Government has relaxed the monopoly of the state oil company (YPF) on potentially oil-rich areas so as to permit private participation in oil exploration. However, additional measures to increase the role of the private sector are needed to increase further revenues for the Treasury as well as expand production. 44. These efforts permitted a substantial reduction of the value of transfers from the Central Government in 1988, to only 1.1 percent of GDP. However, insulating the central administration from the public enterprise sector has required an internal cross-subsidy system, whereby the profit- making enterprises (essentially YPF) have provided funds to finance the loss-making ones (essentially the railways). The continued viability of this system depends on guaranteeing sufficiently high real prices and reducing the deficit of loss-making enterprises. Strains have already appeared, as the Government has a perennial conflict between anti-infla- tionary targets and revenue needs; other unresolved issues (such as royalty payments to the provinces from the oil company that involve a strong sub- sidy element) also threaten the ability to generate sufficient resources. But the more fundamental problem with this approach is that it leads to greater distortions in prices and discourages investment in one of the country's highest return sectors, oil and gas, in order to maintain con- sumption in the railways, social security, and provincial governments. 45. A me(lium-term program of structural reforms would contain several urgent elements, which if enacted would markedly improve the basis for stabilization and growth: * (a) Prices. The Government needs to maintain the post-July level of real prices of output, which implies future adjustments that keep pace with increases in costs. By 1990, tariffs in  - xxvi - 47. The new coparticipation law that took effect in 1988 was designed to change this incentive framework. It increased the provincial share of coparticipated revenues to 57.5 percent, and set clear limits on discre- tionary contributions from the Treasury to a maximum of 1 percent of GDP. The law also provided a political mechanism for secondary distribution of the resources. The approval of the law was one of the crucial elements for the success of the "separation" strategy pursued by the previous adminis- tration. This agreement was also reinforced by the closing of the redis- count window for the provincial banks at the Central Bank, which had been an important source of deficit finance, particularly in 1987. However, the arrangement has proved tenuous. The provinces, unable or unwilling to increase revenues and reduce expenditures, requested and were granted addi- tional funding twice in 1988. 48. A program of structural reform would transform the provinces into agents of development which generate surpluses that they can invest wisely to increase total provincial product, thereby augmenting their future tax revenues. Specifically, this would include: * (a) Improving the information on provincial public finance. A first step in improving public sector finances for general macroeconomic planning should be to require the provinces to report existing data on their finances to the Central Govern- ment. Provincial governments should be required by law to report to the Treasury expenditures on a cash and commitment basis every quarter as a condition for receiving their share of revenues under the coparticipation agreements. The Treasury should establish an efficient information system for the collection and analysis of the provincial budget data. Fourth, information on the provincial banks' net asset posi- tion with provincial governments should be reported regularly to the Central Bank; * (b) The Government should declare its intention to maintain the current revenue sharing law, halt any further transfers, and oppose any additional appropriations in Congress during the budget year; (c) The Federal Government should work with the provinces to increase their own revenues, reduce expenditures and increase their efficiency. Revenue collection and personnel policy is of highest priority in the provincial governments. The Government could design an incentives system as part of future revenue sharing laws or investment financing from external credit sources to encourage these provincial efforts; and * (d) Disallowing Central Bank financing to provincial banks as a means of financing the provincial governments, including reintroduction of overdraft facilities and rediscounts.  - xxvii - Finances of the Social Security System 49. The social security system has had a strategic role in defining the shape of Argentina's public finances. The aging of the population has caught up with the system; the ratio of the economically active population to the number of retired beneficiaries fell by 13 percent between 1970 and 1985, and is expected to fall even further. At the same time, the pension program had virtually no earnings from invested capital, since the sur- pluses of the early years of operation of the system had been consumed by the inflationary episodes of the 1960s and 1970s. To make matters worse, the heavy burden of wage taxes--55 percent of net wages--has led to wide- spread evasion and under-reporting; moreover, inadequate attention to revenue record-keeping has permitted widespread abuse of potential benefits. 50. The initial reaction to the crisis consisted of arbitrary reduc- tion of benefits and increasing recourse to transfers by the central administration. From their legal level of between 70 and 85 percent of salary, payments have fallen to under 40 percent of salary in recent years. In 1987-88, the Government undertook several revenue measures, with the dual objective of gradually restoring benefits to their legal level and insulating the central adn1inistration from transfers to the social security system. The measures were comprised of increases in wage-related contri- butions to the social security system and the earmarking of taxes on cer- tain goods provided by public enterprises (gasoline, telephone, electri- city). 51. The additional revenues allowed the gradual closing of the finan- cial gap in the social security accounts in the very near term. However, projections of the medium-term deficit at current benefit levels imply that either contributions must keep rising, or that the revenues from the ear- marked taxes on goods must rise in real terms, or both. However, the scope for either of these measures is virtually nonexistent because wage taxes for social security and other programs are already very high. A continued increase in earmarked revenues would imply a continued undesirable increase in relative prices of the goods to whose prices the taxes are linked. Adjustments aimed at mobilizing more resources fur the current system--such as increasing formal-sector employment and reducing the current transfer of 10 percent of social security income to the health insurance fund for retired persons--offer no hope for increasing system revenues. 52. A program of structural reforms might focus on constructing a different pattern of benefits that would sharply reduce pension obligations at higher income levels to substitute for entitlements that will be unsus- tainable in the future. Benefits could be reduced in a way that could actually increase both the efficiency and equity of the benefits package: (a) Present low retirement ages--age 55 for women and 60 for men--drive the system towards deficit, even at high quota rates. There is no alternative to reducing benefits. One option is to increase the retirement age by 5 or 10 years so that years of contribution would rise relative to years of receiving benefits; alternatively, the Government could offer substantially lower benefits for an optional retirement at the earlier ages;  - XXX - the intermediation relationship between the Central Bank and the public banks. It would also imply that restructuring plans already contemplated for these banks would have to be accelerated or the institutions would have to be closed. E. Structural Reform Program: Trade and Industry 57. Argentina's postwar experience of persistent macroeconomic: insta- bility and secular decline was preceded by the closure of its economy to foreign trade. Prior to the Great Depression the share of imports in GOP kept close to 50 percent. This indicator of openness fell to 5 percent at the end of World War II, and again in the mid-1950s. Since then, the import share has remained near 10 percent. Exports as a share of GOP, while fluctuating due to weather and domestic demand conditions, have fol- lowed the general downward trend of imports. 58. Inward-oriented trade and industrial policies initiated during the 1930s were maintained and intensified in the 1950s, a time when other coun- tries then at Argentina's level of development were removing their external trade barriers and taking advantage of the rapid expansion of international trade. Successive governments opted for import-substitution through import restrictions hoping to foster investment and productivity growth through accelerated domestic industrialization. Instead, the economy became more dependent on selected machinery imports for industrial growth and on agri- cultural conmtodities for export growth. Recurrent balance of payments crises frequently cut short industrial expansion and led to recession because imports vital during the second stage of import substitutions for expansion became unavailable. Total factor productivity in the nonagricul- tural sectors (excluding government) has grown at less than two thirds of the rate achieved in the agricultural sector, and during the 1970s and 1980s, total factor productivity in industry has actually declined. While the share of industry in GOP has grown substantially in neighboring eco- nomies over the last decades, the industrial sector in Argentina remains at about the same level as four decades ago. 59. The closure of the Argentine economy, instead of reducing macro- economic instability, has contributed to the secular increase in the infla- tion rate and to the instability of the real exchange rate. The share of exports and imports in GOP turned out to be less important for the coun- try's exposure to trade shocks than the mechanisms that enable the open economy to cope with them. A price elastic aggregate import demand and capital flows tend to absorb a good part of the shock impact on the real exchange rate and thus on relative prices, while the discipline of intense competition keeps relative price changes from turning into a source of inflation. These mechanisms have been weakened. Increasing the import share of non-substitutable primary inputs and intPrmediates rendered aggre- gate import demand prices inelastic: intermittent balance of payments crises impaired the country's access to external credit; and the creation of sheltered domestic matkets fostered a pricing behavior that has added an inertial component to inflation. Moreover, pricing in entrenched oligo- polies undisciplined by competition has probably acted to accelerate infla- tionary impulses through expectation-based mark-up pricing.  - xxxi - 60. Also, trade and industrial policies undermined stability by adding to the deficit. Trade tax revenues have been an unstable part of the government budget. Revenues foregone, through industrial promotion incen- tives and overcharging on public sector purchases resulting from the "buy national" obligation of public procurement, have added up to 5 percent of GDP to the deficit. 61. Beginning in early 1987, the Government began to transform the consensus that the import-substitution strategy had run its course into an active reform policy. To have started and continued the reform is a major achievement because of the long-standing resistance of powerful vested interests. The new reform emphasized free trade status for exporters early in the reform process, coupled with a phase-out of various specific export promotion measures; a negotiated sector-by-sector approach to import liberalization; and an attempt, though not always successful, to maintain a competitive exchange rate for trade transactions. As a consequence, the average production-weighted tariff was lowered from 43 to 28 percent; quota coverage was reduced from 30 to 18 percent; and discretionary import licensing procedures were provisionally circumscribed. 62. A program of structural reform that would support sustained price stability and growth therefore requires that trade and industry reform not be postponed. In addition to the termination of the industrial promotion regime and of export taxation cited above, a program for structural reform would include: (a) The replacement of all quantitative restrictions that were exempted from the 1987-88 reform with ad valorem tariffs, and a subsequent tariff adjustment to bring the rates within the general tariff band. (b) The removal of specific tariffs; only for seasonal products should specific tariffs at non-prohibitive levels be consi- dered. (c) A narrowing of the tariff band and reduction in average tariff levels; the band should be narrowed as soon as possi- ble from 0-40 percent to 10-40 percent; a program should be announced to reduce the band to 10-20 percent in two years to reach an average of about 15 percent. (d) Removal of export license requirements. F. New Sources of Growth 63. As President Menem indicated in his inaugural address, there is every reason to believe that the sacrifice and work implicit in an ambi- tious program of deep-seated reforms would be rewarded with economic recovery and sustained growth. Ar·gentina' s productive potential in abundant resources, agricultural lands, and skilled labor is perhaps unsur- passed in Latin America. A sound program of consistent reforms could not only put people back to work, but create new jobs at a much higher rate than during the last decade.  - xxxii - 64. With macroeconomic stability resulting from a comprehensiv·e reform of the public sector and a program of structural reforms that removes price and other distortions, it is entirely possible to foresee a rather rapid recovery from the recession of 1988-89. Output could conservatively be estimated to expand at rates in excess of 3.0 percent annually for the 1990-94 period. If the Government's reform program were especially strong --extending to trade, finance, and the real sectors (energy, agriculture and industry)--it is entirely possible that foreign savings of Argentines would be attracted back, allowing for even more rapid rates of grm.tth. Argentine holdings abroad are estimated to be about US$45-60 billion--about the same size as its foreign deht; if only the annual income on these assets were to return, these flows could provide savings to fund a much more rapid and enduring recovery. 65. Stabilizing the economy--the most inunediate priority--will permit the recuperation of domestic savings and investment. If stability is to be sustained, savings--led by the public sector during the initial phase of recovery--must roughly double from their present extremely low rates by 1994 to finance increased domestic investment in productive activities. Private savings could well be a driving force financing growth in the financial system to channel savings to highly productive investments and inspire confidence among private savers and investors that their efforts will be rewarded. 66. The private sector would be a leading force during this period, increasing investment in response to new growth opportunities, exports and efficient import substitution. Such improvements in both saving and investment depend critically upon private sector confidence in the 1macro and sectoral policy framework and on the stability of these policies over time. 67. Exports would become one leading sector, based on industrial goods and nontraditional and processed agricultural goods. Assuming a consis- tently competitive exchange rate, there is also some room for the growth of agricultural exports beyond the growth of consumption in industrialized countries, as Argentina could readily regain the market share it has lost in recent years due to domestic supply factors. Nontraditional exports, led by new capacity in chemicals, plastics, machinery and transport pro- ducts, could grow at over 7 percent annually for the period. Industry too could be expected to grow in response to new demand for exports and effi- cient import-substitution activities. Finally, new investment would also provide a strong impetus to growth. If these possibilities come to pass, they could indeed mean that the sacrifice and work of today would unleash the abundant productive potential of the Argentina of tomorrow.  CHAPTER I: STATE-LED GROWTH AND INFLATION A. Background 1.01 State-led growth in Argentina has now come irretrievably to an end in a wave of macroeconomic instability and inflation. In the late 1940s, the State began to expand its role in the economy--to become ever more important as a net borrower of funds, investor, and source of subsidy for favored activities and interest groups. Subsidies took the form of tax exemptions and hidden transfers through the financial system. These eroded the tax base and with other factors compelled the state to rely increas- ingly on borrowing and the inflation tax. Large and chronic fiscal deficits became a central feature of the Argentine economy, and during the mid-1970s and early 1980s they exceeded 10 percent of GDP. State-led growth could therefore be sustained only through foreign borrowing and money creation. 1.02 The other dimensions of this state-led model were high protection for domestic industry and concentrated formal labor markets. High nominal tariffs, import prohibitions, quantitative restrictions, and opaque sub- sidies to industry (such as the tax exemptions in industrial promotion legislation and buy-Argentina policy of state enterprises) insulated the sector from international competition. Not only did the resulting price structure channel investment into activities with low productivity, it also reduced the importance of trade, enhanced the oligopolistic price setting power of industry, and made the economy more vulnerable to external price shocks. The highly organized labor sector succeeded in capturing some of the rent from the industrial system--through demands that the public sector increase employment as well as wages. This was possible as long as the economy was expanding. As the economy slipped into long-term stagnation, the system produced conflicts over income shares with sporadic destabiliz- ing effects on the price level. These policy interventions and structural characteristics of the economy led to declining trends in the productivity of labor and investment that would heighten the country's vulnerability to financial instability. B. Growth, Investment and Savings 1.03 The state-led model began to exhaust itself in the mid-1970s when the long-run growth path of the economy--as measured in the 10 year moving average of GDP growth--turned sharply downward (Figure 1.1). Investment, traditionally 20-23 percent of constant price GDP, began a sustained fall to 11-13 percent. While investment by the public sector has stabilized at low levels only slightly less than the early 1970s, the private sector has recovered to only 50-60 percent of those earlier levels. The investment rates of the economy are now so low that they are barely sufficient to replace depreciating capital stock, portending low growth for some years to come. 1.04 The savings performance of the economy also reflects serious structural problems. National savings rates have fallen from about 20 per- cent of GDP in the early 1970s to under 10 percent. Trends in public and private savings provide a clue to the erosion in national savings. Public savings fell steadily from 1970 to 1975, and then again from 1977 to 1982, with only partial recovery thereafter. Public savings before interest  - 2 - Figure 1.1 Investment Savings (a) (c) GOP Growth: Long-Term Trend Origin of Saving: 1970-a:r (10 Year Moving Average) .. of GOP 40.--------------------------------. 30 ---.Groll National Saving a (b) (d) Investment and Saving: 1970-87 Public Sector Primary Surplus and External Interest 1970-87 .. of GOP .. of GOP 10.--------------------------------, 35.-----------------------------------, 30 25 20 15 Groaa National Savlnga 10 5 -15 -5~~~~~~~~--L-~~~~~~~--~ 11170 1874 1178 11111 11118 1870 1874 1878 11112 1888 Nota: Primary surplus equals public sector balance before intaraat par-ante. The deficit shown includes ao.a a.all portion of privata aaetor foreign interest pa.,_u.  - 3 - payments had, by 1987, recovered virtually to the same level as those of 1970-72, about 5 percent of GOP, but these were still insufficient to generate a primary surplus. This underscores both the difficulty imposed upon Argentina's public sector because of the heavy weight of its external debt as well as its lack of sustained progress in controlling the non- interest deficit. Private sector savings continue to he a major problem; they are a little more than half their early 1970s levels. Economic condi- tions have led Argentines to save vast amounts abroad and, aside from understating private savings in national accounts, these resources abroad are unavailable for job-creating investment in Argentina. 1.05 The adjustment process which depressed national savings and investment in the 1980s entailed two related problems: adjusting to abruptly increasing external transfers which diverted domestic savings into foreign factor payments, and the struggle to control severe fiscal imbalances. The fiscal imbalance was attributable in part to the internal transfer problem associated with suddenly increasing debt service, but even more was a reflection of the inadequate control of public finances that had plagued the economy in the 1970s and indeed worsened in the 1980s. As the decade wore on, macroeconomic instability--manifest in endemic inflation- -and policy-induced distortions have become the main impediments to the recovery of savings and investment. C. Adjustment and External Transfers 1.06 The origins of the external component of the adjustment problem are to be found in the macroeconomic policies of the late 1970s. Beginning in 1976, macroeconomic policy relied on an appreciated exchange rate to combat inflation rather than fiscal adjustment. The Government liberalized the capital account in end-1976, and monetary policy kept real interest rates high to attract foreign capital inflows. The policy was continued with the "tablita" experiment beginning in January 1979 which, in effect, produced assured dollar rates of return in the domestic market and thus provided even greater incentive for massive foreign borrowing. The shift in relative prices through the sustained real appreciation of the exchange rate encouraged import growth while exports stagnated. The current account swung into deficit in 1979 and reached 7 percent of GOP in 1980-81. The foreign debt rose from US$8.2 billion in 1976 to US$27.2 billion in 1980 and to US$45 billion by 1983 (Figure 1.2). Whereas use of foreign savings had been relatively low in the early 1970s--and indeed was substantially negative in five of six years between 1973-78--macroeconomic management after 1978 discouraged domestic savings and the economy became dependent on external credit. The lack of consistency between monetary targets and the fiscal deficit doomed the economy to an unsustainable external position. 1.07 As the end of the Videla government approached in March 1981, the realization grew that the "tablita" experiment could not be sustained; private net foreign borrowing slowed and then turned into capital flight in 1980. The Government tried to sustain its exchange rate policy through accelerated public borrowing in 1980-81, but the run on the peso became severe. Private capital outflows and reserve losses between 1980-83 totalled US$23 billion. These outflows implied that 61 percent of  -4- Figure 1.2 (a) Argentina: Real Exchange Rate 1887. 100 SOOr---------------------------------------1 I- -- eo-.o~• ........ ....... _ -- ..... I (b) Trade Balance and Current Account 1870-1Q88 ..., 001' •.-------------------------------------~ • (c) External Debt, 1875·1888 (US$ Million) Thoueande 70~~~~----------------------------------, eo 50 40 30 20 1811 1814 1817  - 5 - resources supplied to the Argentine economy between 1979-83 financed capi- tal flight rather than the transfer of real resources.!/ Only 39 percent of borrowing financed the transfer of real goods and services in the form of the current account deficit. 1.08 The collapse of the 1978-81 model meant that the foreign debt could no longer be rolled over but had lo be serviced, which required the country to reduce expenditures relative to income to generate the foreign exchange necessary to service the debt. The Government had no choice but to begin what would be a series of devaluations. The devaluations imposed an inunediate real wealth loss on those with foreign liabilities, amounting to 15 percent of GDP in 1981 and 51 percent in 1982.~/ However, the public sector did not (or could not) reduce spending because, among other reasons, the South Atlantic war broke out, and it had to shoulder the increased interest burden of the public sector. This meant an explosion in the deficit financed primarily through the inflation tax.~/ 1.09 For the private sector, the devaluations had an inunediate effect in reducing spending, and drove many firms, long accustomed to low or even negative real interest rates and therefore heavily leveraged, into default. The Government in mid-1982 took action to relieve the pressure on private debtors by "liquifying" debts through inflation. This took the form of setting nominal asset and liability rates at levels significantly below the rate of inflation and depreciating the exchange rate. 1.10 In retrospect, the policy course of the early 1980s involved a high cost that has cast its shadow over the entire decade. Rather than adjusting quickly to the reluctance of private markets to lend voluntarily into Argentina's policy environment in 1980, the Government chose to defend the appreciated peso through massive foreign borrowing. Rather than main- taining an arm's length distance in the private sector's bilateral negotia- tion over the terms of the private debt, Argentina essentially absorbed the private liabilities and used inflation to impose losses on creditors (including the publicly owned banks). Rather than adjusting public expend- itures to accommodate higher interest payments, the Government financed accelerated spending through inflation, shattering any possibility of immediate recovery. !I Total sources of funds in 1979-83 included increases in external debt (US$32.6 billion), decreases in reserves (US$2.7 billion) and foreign direct investment (US$2.4 billion). This total supply of funds of US$37.7 billion was used to finance current account deficits of US$14.8 billion and increases in net foreign assets abroad worth US$22.9 billion. ~/ H. Reisen and A. Van Trotsenburg, Developing Country Debt: The Budgetary Transfer Problem, Paris: OECD, 1988, p. 60 ~/ External shocks, while secondary in influence to domestic policy, also played a role in the form of rising real interest rates. Between 1979 and 1980, Argentina's interest bill quickly rose from 1 percent of GDP to 5 percent, and peaked at 8.5 percent in 1983.  - 6 - D. Public Sector Deficits and Inflation 1.11 Public sector deficits were common in the 1950s and 1960s, but they became particularly large during the mid-1970s and early 1980s. Although their causes differed (as discussed below), their economic con- sequences were similar in that they eventually led to inflation. 1.12 The inflationary consequences of the deficit depend on the financing of the public sector and the willingness of the public to hold assets denominated in local currency, including money. The deficit of the public sector (including the Central Bank) can be financed through foreign borrowing, borrowing from the private sector, and the inflation tax. As long as foreign and domestic creditors are willing to finance the full deficit through holding Government paper, deficits neet.l not create infla- tion.~/ However, at no time in the past two decades has this condition held, and so the Government has had to rely on compulsory borrowing from the financial system (in the form of high reserve requirements or forced investments with the Central Bank) and the inflation tax to close the pub- lic accounts.~/ 1.13 A given level of unfinanced deficit can cause a higher rate of inflation when the public shifts its real balances out of austral-denom- inated assets in the financial system, reducing the base against which the inflation tax can be applied; this implies inflation (the tax rate) will rise in order to bring the public accounts into balance. Since demand for money balances falls as fears of inflation rise, the process is inherently unstable. The process becomes explosive when the demand for austral assets falls so low that increasing inflation rates reduces revenues from the inflation tax. 1.14 The link over the last two decades between public sector deficits and inflation has become more direct (Figure 1.3). In contrast to the period until the late 1940s--when price increases in Argentina were posi- tively correlated with demand pressures emanating frbm high levels of economic activity, low rates of unemployment, and expansionary monetary policies--in nine of the recessions since 1949, economic downturns have been positively correlated with accelerations in the inflation rate. Inflation since 1970 shows a strong upward trend with three particularly severe episodes, 1974-76, 1982-85, and 1988-89. Each inflation episode has left the country on a higher inflation plateau than the previous one and with an apparent greater potential for instability. !!_/ Strictly speaking, the Government can run a noninflationary deficit financed through seigniorage equal to the growth rate of the economy, provided money demand is stable. This is a relatively less important consideration in the Argentine context. ~/ The inflation tax is the inflation rate times the stock of net liabilities of the Central Bank (excluding credit to the Government).  - 7 - Figure 1.3 Fiscal Deficit and Inflation Deficit Inflation 20~--------------------------------------------~700 /~ . -' ~600 i \ I soo I \ ~ i •oo ::: ', I , . \~ \_~)[~ I .1 .--- 100 I 0 1965 1970 1975 1980 1985 -Deficit ----- Inflation The 1974-76 Episode and its Aftermath 1.15 High deficits emerged in 1973-75 after the second Peron adminis- tration sought to increase real wages, growth and public investment without undertaking concomitant revenue measures. In spite of renewed growth in 1973-74, public sector deficits became progressively worse and exceeded 15 percent of GDP in 1975. The Government resorted to Central Bank financing (Figure 1.4), and the inflationary impact was severe. 1.16 The new military government in 1976 sharply reduced public sector employment and the wage bill, improved public enterprise prices, and thus increased public sector savingR. But because investment continued at very high levels and public enterprise accounts were deteriorating, the overall deficit of the public sector--while reduced by half relative to 1974-75--remained quite large, one-third higher than 1970-72. The deficit then grew steadily after 1977.  8 Figure 1.4 ,., of GOP Financing Deficits 20.----------------------------------------------------, Financing of the Public Sector Deficit 15 10 5 0 1970 1974 1978 1882 1988 - Central Bank m Domestic Credit D Foreign Credit Figure 1.5 Falling Money Demand RATIO OF M 1 TO GOP (F>ercent) '6 15 •4 1J 12 11 10 g 8 6 5 4 3 70 11 12 13 14 75 76 n 78 79 eo et e2 eJ e• e5 e6 1!17 ee  - 9 - 1.17 The availability of foreign and domestic finance explains why the Government had some scope for deficit expansion without immediately nega- tive inflationary consequences (Figure 1.4). Borrowing domestically to finance deficits was viable as long as the public was willing to hold austral-denominated assets and the risk premium demanded for government paper was not excessive. The Government also relied on high reserve requirements in the financial system--about 45 percent--to ensure that Central Bank deficits would be financed. The appreciating exchange rate and, after 1979, official assurances to the private sector that the peso would not be devalued, encouraged the private sector to borrow abroad and then relend to the Government. This minimized the need for Central Bank finance. 1.18 The Government also benefited from relatively stable money demand. Even though the 1974-75 inflation had driven down real balances to a lower plateau, money demand remained around 7-8 percent of GDP during the period (Figure 1.5). This meant that seigniorage increases occurred on a stable base--and one that was high relative to later years--and so the Government could collect the inflation tax with less risk of unleashing an unstable inflationary process. The 1982-85 Episode 1.19 After 1980, the internal transfer problem associated with the foreign debt drove up the overall public sector deficit. The Government took steps beginning in mid-1981 that led to a progressive takeover of the private external debt.~/ From 1979-80, when the public sector held about 53 percent of the total external debt, the public sector's share of total external debt rose to 88 percent by 1986 (Figure 1.2 (c)). By the end of this periou, all but short-term conunercial credit lines had been trans- ferred to the public sector. ~/ To encourage refinancing of existing private debt as well as new foreign borrowing at a time when the macroeconomy was deteriorating, the Government--at the urging of foreign creditors and domestic burrowers--extended foreign exchange insurance worth US$5 billion to cover private renegotiation of external debt service payments and new inflows. Shortly thereafter, successive real devaluations more than doubled the real exchange rate, and the private sector's real debt was reduced at the expense of capital losses to the Central Bank. The exchange insurance program, initially terminated at end-1981, was renewed in July 1982 and then applied to more than US$10 billion. The average exchange rate for contracts coming due at end-1982 was 10 percent of the prevailing official rate. Since the Government did not have the foreign exchange to service the debt, the Central Bank assumed responsibility in November 1982 for all payment of the debt contracted under the program; as collateral, foreign creditors received a new government bond (BONOD) and promissory notes. These events transformed the responsibility for external liabilities in relatively short order. As described in Chapter IV, this became the origin of the external component of the Central Bank's quasi-fiscal deficit.  - 10 - Figure 1.6 Composition of External Debt by Borrower Thousands 70.-------------------------------------------------------, 60 50 40 30 20 10 o~LL~LL~-L~-L~~~~~~LL~-L~-L~-L~~~J-~~ 1975 1978 1981 1984 1987 D Private -Public I Millions of US Dollars 1.20 Interest payments for the economy increased substantially with the increase in the real domestic debt stock and high rates after 1979. Total interest payments rose from less than 1 percent of GDP in 1970-72, to 3.1 percent in 1978-79, to over 7 percent in 1980-83. By 1983, interest payments had come to comprise 15 percent of current expenditures of the public sector. The new debt burden meant that the Government had to generate a primary surplus (i.e. overall balance before interest payments) equivalent to the value of interest service, or seek refinancing of the difference and/or an increase in its net debt. 1.21 But the Government was unable to generate any surplus with 'Yirhich to pay its external debt service. As shown in Figure 1.1 (d), the primary deficit of the nonfinancial public sector actually worsened from 1980 to 1983 because of the effects of inflation in reducing real tax revenues (the Olivera-Tanzi effect), lack of buoyancy in the tax system associated with the tax expenditures in the industrial promotions law (see Chapters III and Annex Chapter VII), the inability to impose reductions on wages, and lack of control on expenditures as well as exceptional expenditures for the South Atlantic war. Moreover, the prices of public enterprises, used as a tool for reducing inflation and garnering foreign loans after mid-1978, continued to be low. To make matters worse, the budget process control continued to erode.  - 11 - 1.22 The GovernmE-nt, in the absence of adjustment in its fiscal accounts, and without financing alternatives, relied almost exclusively on Central Bank financing in 1982-83. This set off the second major wave of inflation. As with the previous episode, the rapid inflation drove down t.he demand for money as economic agents adjusted money balances and shifted their portfolios to escape the inflation tax (Figure 1.5). This meant that the inflationary process became inherently more unstable since even small fiscal deficits could now set off an explosive process wherein the infla- tion tax would not close the financing gap. This situation endowed the new constitutional governmPnt with a new, lower plateau of money demand that averaged between 3-4 percent of GDP, and eroded the base for a stable inflation tax. It also left economic agents with a skepticism about government instruments, high inflationary expectations and, with an open capital account, the capacity to adjust quickly to changes in expected inflation. 1984-89 1.23 Although inheriting an economy shackled with a huge foreign debt, large balance of payments and public sector deficits, and a budgetary pro- cess in disarray, the Alfonsin administration initiated several reforms that have had considerable effect on both external and internal disequilib- ria. By keeping the exchange rate broadly competitive since 1985, the current account of the balance of payments improved from an average of over 5 percent of GOP in 1980-83 to under 2 percent in 1988. The Government also made discernible progress in reducing the nonfinancial public sector deficit. Deficits of the nonfinancial public sector fell from over 16 per- cent of GDP in 1983 to about 5 percent in 1988. New tax measures, sporadic improvements in public enterprise pricing, and some adjustment in provin- cial public sector finance contributed to the improvement. 1.24 But policies were not always consistent, sufficiently forceful, or enduring to stabilize the economy. Contending political demands prevented sufficient action on the fiscal deficit relative to available financing, and 1987 particularly marked a severe setback to the gains in the previous two years. Moreover, insufficient attention was devoted to the structural problems that were the legacy of the previous decades: excessive private sector demands on public expenditures, a tax system badly eroded by past inflations and poor administration, many public enterprises that were over- staffed and inadequately managed, inadequate definition of taxing and spending responsibilities between the various sectors of government, increases in public sector employment (especially in the provinces), inap- propriate use of the Central Bank as a vehicle to capture and spend finan- cial resources, and a closed economy that channeled resources toward inef- ficient economic activity. In these circumstances, price stability proved elusive, and efforts to stabilize the economy ultimately failed with the hyperinflation of 1989, the subject of Chapter II.  - 12 - CHAPTER II: STABILIZATION EFFORTS AND EMERGENCE OF HYPERINFLATION 2.01 Argentina attempted four stabilization programs in 1984-89. Each time inflation returned and surged to higher levels than on previous occa- sions. The failure of the latest of these, the Plan Primavera, illustrates the difficulties of stabilizing the economy without deep-seated reform of the public sector. The collapse of the Plan left the economy spiralling toward hyperinflation, a crisis in the financial system and deep recession. While the new program of July 9 has abated the worst aspects of the crisis, only rapid implementation of comprehensive structural measures to reform the public sector can return the economy to a path of sustained growth. A. Stabilization Efforts from 1984 to 1987 The Plan Austral 2.02 After an ill-fated attempt to restore real wages and growth through expansionary fiscal policies in early 1984, and a tentative sta- bilization effort beginning in October 1984, the Government announced a comprehensive initiative in mid-June 1985, the Plan Austral. The program's objective was to break the "inertial" pressures arising from the effects of inflationary expectations on contracts and on asset demands. The measures included a wage-price freeze, tightened fiscal and monetary policy, and a fixed exchange rate following a steep devaluation. 2.03 The Plan Austral succeeded in establishing temporary price stabil- ity. Monthly inflation fell from about 30 percent to about 2 percent over· the second half of 1985. The economy achieved some remonetization as the M1/GDP ratio rose from 4 to 8 percent in 1986. Partly because the fall in inflationary expectations increased the willingness to hold money and partly because of the monetary restriction, real interest rates turned sharply positive. Real GDP contracted 4.4 percent in 1985, but a rebound in consumption and investment in the fourth quarter of 1985 and renewed confidence and rapid expansion of monetary aggregates led to a strong recovery the following year. Investment rose in real terms in 1986 after five years of contraction, and real GDP rose 5.4 percent. The trade sur- plus reached US$4.6 billion due to improved agricultural production and prices, as well as to lower imports resulting from the stabilization pro- gram. The program paved the way for Argentina to reschedule its external debt with commercial and official creditors in August 1985. 2. 04 The fundamental sources of instability in public finances, how- ever, were not decisively addressed. While the cash deficit of the non- financial public sector was reduced from about 7 percent of GDP in the first half of 1985 to almost zero in the third quarter of 1986, this was due almost exclusively to the operation of the positive Olivera-Tanzi effect and the use of temporary measures (such as the forced savings scheme) rather than to fundamental reform. Increases in the real prices of public enterprises relieved the pressure of their deficit on the Treasury, but only for a limited time, as inflation eventually overtook them. This cycle was repeated in 1988-89. The perceived lack of fundamental improve- ment in the fiscal accounts contributed to a progressive loss of confidence and eventual refueling of inflationary expectations. This was  - 13 - Figure 2.1 (a) Key Economic Indicators (Monthly Ill.) 200~--------------------------------~ 240.2 150 100 Plan Spring October Plan 50 Austral. Plan 1987 09/86 .0 INFLATION - OEVALUATION IAGR.I ...... INTEREST RATE Figure 2.1 (b) Average Real Exchange Rate 1987•100 250~~~-----------------------------------, 200 I~ ! I 150 100 50~ 751 771 711 111 131 Ill 171 Ill Uelng combined price Index  - 14 - compounded by a large money-supply increase in the second semester of 1985 that proved inconsistent with single digit monthly inflation in 1986. Other contributing factors included the inflationary effects of adjusting rela- tive prices that had been frozen "out of balance" as the price freeze was lifted, as well as some wage-push inflation, especially in July 1986. 2.05 These factors, together with the strong demand recovery in 1986, once again re-ignited inflation. By August, monthly inflation had crept up toward 8 percent. The Government put in place a new program based on a tight monetary program and price guidelines, but took no action on the fiscal situation, which was seen as essentially sound. But despite tight money and higher nominal interest rates, real wages and production remained relatively high. Both fiscal and monetary accounts deteriorated in the fourth quarter. 2.06 The fact that the large fiscal imbalance evident in the last quarter of 1986 remained in the early months of 1987 cast a pall over the credibility of the program and threatened the sustainability of the tight money policy. Many firms, perhaps anticipating the reimposition of price controls, appear to have overadjusted their prices in January and February. With the approach of legislative and gubernatorial elections scheduled for September 1987, the Government announced a new wage policy in early May that permitted public wages to increase while private prices would be sub- ject to government control. Fiscal policy during the first 9 months of 1987 was substantially more expansionary than the same period the year before, and inflation crept steadily upward from under 3 percent in April to over 25 percent in October. 2.07 Demand pressures and financial disequilibria therefore remained high in 1987 because of the increasing fiscal deficit over the period lead- ing up to September. The spending of several provincial governments, municipalities and certain public enterprises far exceeded their budgets and more than consumed the central administration's surplus. In addition, the Central Bank's quasi-fiscal expenditures sharply increased in the form of rediscounts through public banks that subsidized middle class housing, industry and other favored sectors. To make matters worse, falling world grain prices and reduced export tax rates lowered public sector revenues. The demands of the public sector on national savings accelerated, as the combined deficit for 1987 mounted to a high level of 8.3 percent of GDP. 2.08 In October 1987, the Government announced a new emergency E!ffort to control inflation. In contrast to the September 1986 plan, the program included some new ad hoc fiscal measures, but lacked a serious attempt to reduce Government expenditures; the program also reinstated a price freeze. I t succeeded in bringing down monthly inflation for the next two months. However, with the price thaw in the first quarter of 1988, inflation began to accelerate, and by June 1988 the situation appeared to have become uncontrollable. Revenues continued to fall because of the effects of inflation on lagged tax collections, tax exemptions eroding the value added and other taxes, and because of an apparent increase in tax evasion. Accelerating inflation in the first semester led to a decline in public confidence and the demand for money fell precipitously, putting further pressure on monetary policy. Inflation climbed to 30 percent in August 1988. The severity of the new inflation episode compelled the Government to act.  - 15 - B. The Plan Primavera: August 1988-February 1989 2.09 On August 3, 1988, the Government announced a new heterodox policy package, the Plan Primavera. The Plan, building on the experience gained during the execution of the Austral Plan, envisaged a series of revenue and expenditure measures that would be expected to reduce the demands of the consolidated public sector on the austral-denominated financial system to levels compatible with the inflation target and the desired accumulation of international reserves. At the same time structural reforms in the public sector, trade and finance were intended to buttress the credibility of the program by making changes that would be seen as permanent improvements. 2.10 Three elements were crucial to the achievement of the targets of the Plan: (i) a rapid decrease in the rate of inflation, along the lines of an agreement on the price guidelines negotiated with the industrialists; (ii) additional measures to boost government and public enterprise revenues above what could be expected from the operation of the positive Olivera- Tanzi effect, thus compensating for the fall in the inflation tax that would accompany success of the program; and (iii) the availability of suf- ficient external credit. Given these conditions, the economic plan was designed to avoid excessive strains on monetary policy, and to be con- sistent with relatively low real interest rates of 1-1.5 percent per month. 2.11 The heterodox character of the plan was reflected in its emphasis on four nominal anchors. After a large initial price adjustment, indus- trial groups agreed to hold monthly price increases to no more than 3.5 percent in September, to zero in October, and 4 percent through February 1989. The Government announced that public enterprise prices, after an increase of 30 percent just before the program was announced, would he kept unchanged until end-September; a 4 percent increase was then made in October and monthly increases after that time were to have kept pace with inflation. The Central Bank devalued the official rate of the austral by 11.4 percent at the start of the program, and froze the rate through September 30; a further devaluation of 3 percent took place in October, with a 4 percent monthly trajectory envisaged thereafter. Wages of the central administration were also frozen, but, in contrast to the Plan Austral, wages of the private sector were to have been determined through collective bargaining. 2.12 Stabilization implies a loss of revenues accruing to the con- solidated public sector from the inflation tax (provided that inflation is not extremely high).l/ Any credible and consistent effort at stabili- ll If inflation is above the level that makes the elasticity of the demand for money unitary with respect to inflation, then a reduction in inflation increaRes the revenue from the inflation tax. For Argentina, the revenue maximizing point for inflation (the unitary elasticity point) is between 20-25 percent per month, a level that was surpassed, during 1988 only in August. These models cannot be precise because the parameters governing the relationship between the demand for money and inflation are unstable. See F. Desmond McCarthy and Alfr:edo E. Thorne, "Argentina: Problems for Achieving Macro Stability", LAC Internal Discussion Paper, World Bank: January 1988; and R. Fernandez "Inflaci6n y economia del Estado," Buenos Aires: CEMA, 1986.  - 16 - zation must involve a corresponding increase in tax revenues. The planned reduction in inflation--from a monthly average of 18.7 percent during the first eight months of 1988 to an average of 5 percent during 1989--i.mplied that net revenues from the inflation tax (after accounting for the net exposure of the Central Bank vis-A-vis the financial system) would fall from an average of almost 5 percent of GDP during the first three quarters of 1988 to about 3-3.5 percent during 1989, depending on the strength of the remonetization of the economy during the period. The implied loss in nontax revenues of the public sector required that the tax revenue effort be increased, expenditures contained, and/or external resources mobilized for the public sector. 2.13 The 1989 budget was presented to Congress on September 29, 1988. Together with supplemental measures and an effective exchange rate tax, the budget contained targets intended to reduce the combined deficit from 4.6 percent of GDP in 1988 to 2.4 percent in 1989. This result would have implied a reduction of over two-thirds from the extremely high 1987 level (8.3 percent). This would also have produced a reduction in the non- interest deficit of the nonfinancial public sector (including public enter- prises, but excluding provincial governments) from the expected 1988 out- come of 0.9 percent of GDP to a surplus of about 1.9 percent. The turn- around in public finances was to be arihieved through an increase in total revenues relative to 1988 (excluding public enterprises) and a slight increase in expenditures (including the financing requirements of public enterprises). Revenue measures (including changes in the VAT legislation and modifications in the industrial promotion system) were colttemplated to take effect in January 1989. 2.14 External interest payments of the nonfinancial public sector and Central Bank were expected to absorb about 4.5 percent of GOP; domestic interest payments (after correction for the inflationary component) would increase the financing needs of the consolidated public sector by a further 0.6 percent of GOP. 2.15 The Government also placed all imports except oil as well as about half of industrial exports in the free exchange market. By buying foreign exchange from exporters at the official rate, the Government intended to realize an exchange rate gain when it sold this exchange to importers at the free market rate. It also introduced a weekly auction market at the Central Bank designed to set an upper limit on the movement of the free rate. This effective exchange rate tax was expected to yield revenues of about 0.5 percent of GOP on an annual basis in both 1988 and 1989 and thus reduce the quasi-fiscal deficit. The tax was made possible because of an unexpected rise in export prices of 20-50 percent in late June and July 1988. The Government committed itself to preventing the spread between the official and free exchange rates from going beyond 25 percent, and to uni- fying exchange markets gradually beginning April 1, 1989. 2.16 To finance these needs, the public sector was expected to increase its external indebtedness by about 1.4 percent of GDP, equivalent to one third of external interest payments coming due in 1989. It was also expected to be able to roll over the maturing stock of government debt. These financing levels would have been sufficient to guarantee that the  - 17 - combined public sector would not require resources from domestic financial ma~kets in 1989.!/ c. Perfoonance Under the Program (August 1988-February 1989) 2.17 The Plan Primavera brought down monthly inflation and the Govern- ment continued to implement some structural reforms intended to complement the anti-inflation program, most notably a substantial tariff reform and reduction in protection. Inflation fell for three consecutive months fol- lowing the announcement of the program in August to a low of 4.8 percent in November (combined index), and remained in single digits through January. Part of the initial reduction in inflation was due to the substantial dif- ference between list prices of industries (from which the wholesale price index is computed) and actual prices; the gap was initially large because entrepreneurs correctly guessed that price controls were in the offing and marked-up prices in late July and early August.2/ 2.18 The fall in the rate of inflation, coupled with the public's belief that both the price and exchange rate guidelines were sustainable in the short run, did in fact result in a strong increase in the demand for all monetary aggregates soon after the announcement of the Plan in August 1988. After hitting a floor of about 3 percent of GDP, M1 is estimated to have reached about 4.2 percent of GDP in January 1989; increasingly higher real interest rates also led to even brisker growth of broader aggregates, with M4 reaching 18.1 percent of GDP by January 1989. 2.19 Signs of strain in the execution of the program began to appear late in 1988. In the absence of quick fiscal action, monetary policy shouldered the burden of the stabilization and of maintaining the condi- tions for relatively low inflation rates. Given that no controls were imposed on the free exchange rate market, monetary policy was targeted on the free exchange rate to maintain it within a narrow band above the offi- cial rate, thus providing a nominal anchor that could allow an unwinding of inertial inflation. However, real interest rates became extremely high, as the public kept increasing its risk premium for holding australes and the Central Bank was bent on preventing incipient capital outflows that would otherwise bid up the dollar rate, and threaten the anti-inflation program. 2.20 The generally restrictive stance of monetary policy over the period is evident in the fact that the major source of expansion of the monetary base in the third and fourth quarters of 1988 was the external sector. In the absence of purchases of dollars by the Government to pay for external interest, and with the demand for dollars for imports largely satisfied through private dollar inflows, the surplus in the trade balance resulted in a massive creation of base money. The second largest source of creation of money was credit to the Central Government, mainly through the '!:_/ Annex 2 presents a detailed discussion on the consistency framework described here, including the integration of the public, monetary, balance of payments, and quasi-fiscal accounts of the Central Bank. 21 One indicator was that the WPI consistently outpaced the CPI for the second quarter of 1988, a tendency which was subsequently reversed. As costs rose, the "colchon" (wedge between list prices and actual prices) was consumed, and the price guidelines came under pressure.  - 18 - regular purchase by the Central Bank of government bonds coming to matur- ity. The August program had envisaged a complete roll-over of these bonds, but this assumption proved unrealistic. The flow of credit to the finan- cial sector through the rediscount mechanisms was kept well within the bounds anticipated. 2.21 Monetary authorities sterilized the base money creation through the active use of forced investments and additional reserve require·ments, together with the continued immobilization of credit due to the automatic capitalization of interest on Central Bank liabilities. This led to a progressive squeeze on credit and to higher interest rates, which rose from being slightly negative in real terms in June-August 1988 to an ave•rage of 4.7 percent per month in the fourth quarter. While the tightness of policy was sufficient to quell a mini-run on the austral in November, the higher level of real interest rates that followed inexorably led to a major crisis. 2.22 Th~ program hegan to unravel in late December. Inflation rose in December to 6.3 percent and continued to rise thereafter. The first omi- nous signs began to appear when wage settlements, following a series of bitter strikes by public sector employees in November-December, were sub- stantially higher than anticipated in the program. Signs of loss of con- trol over public finances also surfaced: transfers to the provinces had to be increased above the budgeted levels because provincial spending did not adjust as quickly as anticipated to the new revenue-sharing law; also shared revenues were less than anticipated because of an apparent increase in tax evasion, making the adjustment more difficult for the provinces and central administration alike. Public enterprise tariff adjustments were kept below the rate of inflation longer than originally envisaged. The Government decided to advance a substantial increase in pensions from July to Januat·y 1989. Finally, the tax reform, presented to Congress in December with the int~ntion of improving revenues by 1.5 percent of GDP, was approved with less than half that amount. Congress did not accept the proposed widening of the base of the value added tax, but insisted that it be lowered further to 14 percent (it had been lowered from 18 percent to 15 percent at the outset of the Primavera to elicit support of industrial- ists for the price agreements); the executive acquiesced to gain the sup- port uf key interest groups for a reform restricting tax expenditures in the industrial promotion law. By year-end it had become apparent that, without new policy initiatives, it would be difficult for the Government in 1989 to hold the combined deficit to less than 5 percent of GOP, more than twice the 2.4 percent target in the program. 2.23 Events outside the control of Government compounded the problem. The country suffered from an extensive drought which reduced production and exports. The drought caused severe and prolonged shortages in power supply throughout the country, as hydropower generation, which accounts for a third of total generation, fell. Also, Argentina's presidential campaign caused nervousness in financial markets about the course of future economic policy. Finally, discussions with external creditors remained deadlocked. All of this contributed to increased economic uncertainty.  - 19 - 2.24 The uncertainty and continuing imbalances in macroeconomic fun- damentals precipitated a run on the austral in the final days of January. The high real interest rates necessary to make austral-denominated assets attractive produced extremely rapid asset growth (through interest capital- ization)--growth at a faster rate than the austral equivalent of US dollar reserves (see Figure 2.1). Eventually the domestic asset stock capable of conversion into foreign denominated assets reached a point at which deval- uation became unavoidable, and speculators tried to escape australes before the collapse. The real exchange rate appreciation of 11 percent relative to July 1988 and the climbing interest rates had created an explosive policy combination; sagging confidence translated itself into an accelerat- ing demand for dollars at the Central Bank auction window in the last ten days of January. 2.25 At first, the Central Bank reacted with even tougher talk and actions than it had at end-November when a similar run transpired. As the demand for dollars reached US$300 million per day, it announced a new forced investment on January 30 that absorbed about A$7,000 million (4 per- cent of all deposits)--with the result that the monthly call rate rose from about 12 percent to 19 percent in the same period. This pushed the demand for dollars back down to US$100 million on February 1-2, and US$31 million on February 3. The fact that the Government had sold over US$900 million in the first 34 days of the year, together with the forced investments and increased reserve requirements, exerted a tremendous contractionary pres- sure on money markets. But these measures were not enough, as holders of austral-denominated assets had decided that it was time to shift their portfolios irrespective of the dollar price. On February 6, the Govern- ment decided to cut the parallel exchange rate loose by halting the dollar auctions of the Central Bank, thus ending the Plan Primavera. The stage was set for the deep crisis that would lead the country to hyperinflation in the next few months. D. Recent Developments: Emergence of Hyperinflation 2.26 The demise of the Plan Primavera in February gave way to several futile efforts by the Government to maintain control over inflation through the exchange rate. On February 6, the Government enacted a package of measures centered around changing the exchange rate regime from a dual exchange rate system to a three-tiered system. This regime was short- lived. As the parallel rate rose, exporters withheld their export earnings from the Central Bank or even preferred to store their exports and await a better rate. The progressive drying up of export earnings drove the free rate higher and added to the incentive to withhold future exports. The exchange gap with the commercial rate rose from a level of about 20 percent in the Plan Primavera to between 70-100 percent. Monthly interest rates on call money loans, meanwhile, hovered between 15-20 percent (about 5-6 per- cent real). By end-March, the run on the austral had become so severe that trade lines and sight deposits at the Central Bank had fallen and threat- ened depletion of liquid reserves.  - 20 - 2.27 On April 1 the Government unified and floated the exchang1e rate, enacting an effective 40 percent real devaluation. In a last effort to control inflation and raise revenues, authorities enacted an export tax with rates that were subsequently changed several times. ~/ Throughout April and May the austral entered a free fall and the effective real deval- uation was more than 100 percent; the Argentine currency reached its lowest real level since the waning months of the second Peronist administration in early 1976 (Figure 2.1). 2.28 The fiscal situation became desperate. Revenues fell sharply in real terms during March and April (Figure 2.2). Only part of the fall appears attributable to the Olivera-Tanzi effect; the remainder reflected the weakness of tax administration and enforcement as well as widespread expectations of a tax amnesty. (The Government in early May did enact a partial amnesty that included overdue taxes up to April 30, 1989.) Tariffs of public enterprises fell sharply in real terms until May. While a cum- ulative adjustment of 68 percent during May recouped some of the losses, prices were still substantially lower than at the outset of the Plan Primavera (Figure 2.2). 2.29 Soon after the election on May 25, the Government announcE!d a new package that comprised fixing the exchange rate, limitations in deposit withdrawals, and some new taxes. The latter included adjustments in the export tax (now 30 percent on agriculture and 20 percent on industrial products), a 4 percent emergency sales tax on the first sale transaction for selected agricultural products and measures to improve tax collection (including sanctions for nonpayment) as well as some expenditure cuts. In addition, on June 3, the Congress passed the Government's proposed legisla- tion providing for a temporary suspension of 25 percent of the industrial promotion benefits, a 3 percent across-the-board export tax, a permanent 5 percent agricultural sales tax on first transactions, indexation of VAT and excise taxes, payment of reimbursements of export subsidies with a new bond (TIFISO), a tax on foreign exchange transactions and several lesser measures. These measures failed to calm markets, however. Massive port- folio shifts to dollar-denominated and fixed assets, precipitously falling revenues to the public sector and exploding nominal interest rates, pro- pelled the momentum of hyperinflation. ~/ The initial rate was a 100 percent surcharge on all export dollar receipts above A$36/US$ on all exports, with the expectation that the rate would normalize in the range of A$40/US$. Unfortunately, the rate accelerated to much higher levels, averaging A$67 for April and topping A$100/US$ by the end of the month. On May 1, the surcharge was converted to a 20 percent tax on all exports. At end-May this was changed to 30 percent on agricultural exports and 20 percent on all other goods.  - 21 - FISCAL DEFICIT AND ITS CAUSES "' f"· "' !C!O ,,.,00, lin" of GOPI 110 100 90 6 Fig~re 2, 2 eo {a) 70 4 60 2 50 I CJ Ootlclt - P.U.TIIIffl - ...... ······ Alwenuel TAX COLLECTION {D'ec. 1987•100) 1201 Fi~tre 2.2 (b) 40 1---..£.-~- .1...-~--1--..1....__.1..-...L.-...__,____,_..J,._~-.l.-....i~....l 087 J88 F M A M J J A s 0 N D J89 F Ill A -vAT Sales Taxes PUBLIC UTIL1TY TARIFFS ~~~~~n~a·~·~O~•c~.B~7·~10~0~1--------------~ I I 110 ~ Figure 2,2 90 (c) eo 70 60 !10 01 • -s.n.,... •  - 22 - E. Main Short-Tenn Problems 2.30 The new economic team confronted four immediate economic problems: hyperinflation, instability in the financial system, price misalignment and the threat of major recession. 2.31 !!z.perinflation. With the failure of the Plan Primavera, the Government was left without effective instruments to deal with the crisis. The already precarious management of fiscal policy during 1988 collapsed with the failure of the tax reform and the Government could do nothing in the face of its own deteriorating credibility. Monetary policy was power- less in the face of the inelastic demand for dollars and to some degree captured by its own high interest rates, since very high market rates increased the Central Bank's own deficit and ultimately led to money crea- tion to cover losses. As normally restrictive measures were taken--for example, increases in forced investments--high real interest rates to be paid on those liabilities provoked a monetary disequilibrium, and the resulting uncapitalized portion (the smaller portion to be sure) increased the monetary base. The loss of control over monetary policy and the evaporation of confidence meant that there could be no control over the no1ninal exchange rate. Finally, price controls had completely lost any effectiveness--as seen in the closing days of April when the Government reimposed them in a last futile attempt to control the price explosion. 2.32 Inflation was driven on the fiscal side by the inability of public finances to balance through the inflation tax, and the instability produced by the inflation-deficit relationship. The deficit continued to widen because of inflation itself: real revenues were falling and extra- ordinarily high real interest rates further widened the quasi-fiscal deficit of the Central Bank. Furthermore, low public enterprise prices continued to put pressure on the deficit. 2.33 Inflation was driven on the monetary side by the free fall in mlmey demand (Figure 2.3). The Central Bank was being required to finance the payment on index-linked bonds (equivalent to half the outstanding money supply) which were coming due and could not be rolled over. The internal public debt, estimated at roughly 16 percent of GDP, continued to grow because high real interest rates paid by the Central Bank on the forced deposits of the financial system are capitalized. 2.34 Both fiscal and monetary policy became completely endogenous to the inflationary process. Accelerating inflation reduced real tax revenues because of time lags in collection, and this increased the deficit of the nonfinancial public sector. Similarly, higher inflation produced destabi- lizing monetary expansion because of the wedge between income on assets and interest expenditures on liabilities of the Central Bank; the former are dominated by loans to the public banks, which carry a fixed interest spread above inflation, while the latter are dominated by forced investments from the commercial banks, and are priced at market rates. Therefore, higher nominal interest rates associated with accelerating inflation endogenously increases the deficit of the Central Bank. Moreover, the lag in interest earnings means that during periods of rising inflation, the quasi-fiscal de fie i t widens.  - 23 - Figure 2.3 Monetary Variables Weekly Evolution of Real M1 105.-------------------------------------------~ ~· 100 f \\ (US$ 4110) I 95 90 (US$ 1927) 85 80 (US$ 1887) Jan Feb Mar Apr 1989 M4 in Dollars (Percent of GDP) 18 17 16 15 14 13 12 11 10 9 8 7 6 5 I 83 84 85 86 87 88 89  - 24 - 2.35 Financial System. The proximate cause of the stress in the finan- cial system was the flight of austral-denominated deposits to dollars and other assets. Withdrawals have put enormous pressure on commercial banks since the forced deposits are not formal reserve requirements and are not automatically released pari passu with deposit withdrawals. Moreover, other assets of the bank's portfolio were not performing, as many firms were reportedly no longer able to service debt with the banks. The Central Bank has had to increase rediscounts and ease forced investment require- ments to support liquidity of the banking system as well as impose frequent bank holidays and limits on deposit withdrawals during May and June. 2.36 Price Misalignment. Public enterprise prices were severely mis- aligned. By end-June, real public enterprise prices were roughly 60 per- cent below levels prevailing at end-year 1988, the level necessary to gen- erate positive savings. This is the reason why the Government more than doubled real prices as a principal measure in its new program. Realigning these prices will necessarily affect the general price level because of their own heavy weight in price indices as well as the fact that so many private sector prices are indexed to these. 2.37 Recession. At the same time, the real economy, already in its third year of recession, was contracting further. The real appreciation of the austral in the waning days of the Plan Primavera had led to a mini-boom in external travel and import purchases of consumer durables; the collapse of the program produced the flight from australs to goods in February and led to a short-lived boom for industry. However, the inflation in .June compounded the effects of the high interest rates on the real sectors. The sharp reduction in real wages in February-May cut private consumption, and the shortage of trade credit and the inability of many store owners to determine their prices also led to a slowdown in economic activity. F. Short-Term Options 2.38 The current situation does offer an important opportunity which, if capitalized upon, could ease the path towards sustained recovery. Iner- tial inflation common to the pre-Austral and Primavera programs has in fact been mitigated as contracts have been shortened to very limited periods; backwards indexation no longer carries inflation forward, and accounts are increasingly carried on a dollar basis, so that price movements are sub- stantially linked to movements in the austral/dollar exchange rate. Formidable challenges, however, also make the Argentine situation more difficult to handle than in similar hyperinflationary episodes. In parti- cular, the almost complete indexation to market interest rates of the pub- lic debt implies that hyperinflation will not, per se, erase the internal debt, but rather that it may increase its burden on public finances unless explicit action with high social and political costs is undertaken. Policy Priorities and Sequencing 2.39 The experience of the last five years suggests three principles for the design of a package to stabilize the economy. First, the short- term plan must be built upon a program of structural reforms that provide confidence for investors and the public at large that changes in the con- duct of public finances are indeed permanent. Second, the nominal public  - 25 - sector borrowing requirement must be credibly and immediately reduced to levels that can be financed through foreign credit--recognizing that in the short term the predominant foreign source will be arrears. Third, the monetary component of the stabilization package will have to ensure that the public sector will not use the inflation tax to balance its accounts in the future. 2.40 Past experience argues Rtrongly that the Government should take structural measures simultaneously with--or prior to--putting the stabili- zation program formally into place. The Government implicitly recognized this with its July 9 program, which contained several structural reforms. Ideally, the new program will be progressively broadened to include the Government's approach toward tax policy and subsidies, public enterprises, revE'nue sharing with provincial governments, tax subsidies to industry, policies toward the financial sector and trade policy. Policy options for such a program--with an indication as to sequence and priority--are out- lined in the Executive Su~nary and elaborated in subsequent chapters. 2.41 This inverts the usual approach of first trying to close the fis- cal gap with ad hoc revenue and other measures, and deferring structural measures untilafter stabilization is achieved. A major lesson of the last five years is that many structural measures, especially in the puhlic sec- tor, must precede--or at least proceed simultaneously with--stabilization measures. This is because the structural deficit remains high relative to available domestic and foreign finance and demand fur austral-denominated assets remains low and volatile. As long as a chronic deficit is present, the private sector will have no faith in the sustainability of the program. Early formulation of the comprehensive medium-term program and initial policy steps will ensure that stabilization measures are consistent with efficiency objectives and medium-term objectives of increased growth, savings and investment. Only in that way will reforms credibly convey a sense that price stability will be enduring and that the economy can recover. 2.42 A companion lesson from past stabilization attempts is that prices of public enterprises cannot be used as a mainstay of stabilization for any length of time. If real prices are allowed to deteriorate, it becomes virtually impossible for the sector to maintain savings at a level con- sistent with deficit reduction objectives. After the stabilization plans of recent years, falling real prices now raise inflationary expectations since the private sector is aware that tariffs will eventually have to be increased, and may even anticipate these with large price movements of their own. Program Options: Moderate-Inflation Option 2.43 Policymakers might attempt to formulate another program aimed at reducing inflation to under 5 percent per month. Recent stabilization failures have probably precluded the moderate-inflation option. The moderately high inflation equilibrium of the early 1980s is now unstable. Despite the lower financial disequilibria generated by the public sector in  - 26 - the second half of the 1980s compared to the previous ten years, it is apparent that the economy could function with short-term cycles of easy and then tight monetary policy only because it was traversing a relatively narrow course between deep recession and hyperinflation. That path is now closed. 2.44 This is because the structural deficit remains high relative to available domestic and foreign finance and demand for austral-denominated assets remains low and volatile. Lack of social consensus and entrenched business and union power, together with the burden posed by the external debt servicing, conspire to maintain the demands on the public sector heyond its ability to garner resources, thus creating a structural deficit. This has resulted in the secular decline in the holdings of financial instruments denominated in domestic currency, and the responsiveness of portfolio shifts and money velocity to inflationary expectations. This narrows the base of the inflation tax beyond a point where it can help close the accounts of the public sector. 2. 45 Using a conventional heter·odox program--a social pact on pt·ices, some adjustment in fiscal accounts, and tight monetary policy--is also now precluded. The major strength of a heterodox plan, the ability to abruptly bring to a halt inflation through the imposition of wage and price controls and/or some other form of social consensus, is also its fundamental ·weak- ness. In both the Austral and Primavera plans fundamental fiscal reform was recognized as a necessary condition for the ultimate success of stabi- lization. In both cases, however, the magnitude of the reform task was underestimated, and the authorities and congress balked at the prospect of paying the political price for some of the less popular measures. This was made doubly difficult because of the sequencing of the gains from the Olivera-Tanzi effects, which provide the temporary illusion of a politi- cally cost free adjustment. Once it became evident that the process had not changed fundamentally, inflationary expectations rose, the exchange rate-domestic inflation cycle took its course, the virtuous Olivera-Tanzi effect reversed, and the resulting deterioration in fiscal performance displaced whatever measures of a structural nature may have been und~~r implementation. 2.46 If this route is pursued by the incoming Government, any apparent success will likely prove purely transitory, and the hyperinflationary process will continue its course until lasting stabilization, pursued along more conventional lines, as suggested below, is achieved. Moreover, false starts at stabilization will make ultimate stabilization more difficult to achieve by any existing government, since credibility would be eroded. Program Options: Bold Reform 2.47 A more radical approach to stabilization would be predicated upon mutually reenforcing reforms of the public sector, monetary policy, the exchange rate, and external finance. The objectives described below could be attained through various strategies, including a currency reform. The key elements of each approach, however, must be the same: up-front fiscal reforms that include difficult-to-reverse structural measures, clear and transparent monetary and exchange rate rules, and an eventual accord with external creditors.  - 27 - 2.48 Public Finances Reform. The cornerstone of the program must be explicit political agreement on a con~rehensive reform of public finances. The agreement would have to signal a change in policy regime: as such it would have to offer to the public concrete guarantees against reversal. The main component of the package would be sharply declining fiscal deficit target, which would remove the need for using the inflation tax; this would be predicated upon an integrated package of reforms aimed at reducing exp~nditures, rebuilding the tax base, and redressing the deficits of the various components of the public sector. This would be enforced by the adoption of a transparent monetary rule, discussed below, stating that future currency emissions would be limited to increases in foreign reserves of the Central Bank. As a consequence, substantial and immediate adjust- ment of the public sector and public banks would be necessary, so as to reduce its deficit to a level equal to net new borrowings of foreign resources. 2.49 The objective would be to reduce the deficit immediately to a level that requires no financing from domestic sources. This will neces- sarily imply recourse to inefficient taxes--such as export and energy taxes--in the short run. However, structural reforms are necessary to replace these. As discussed in Chapter III, they should include expendi- ture reductions and fiscal reforms aimed at strengthening tax administra- tion, widening the base of the VAT and reducing tax subsidies on a per- manent basis through the industrial promotion schemes and Tierra del Fuego regime, and buy-Argentina legislation. In addition, reducing the deficit would require additional fiscal discipline in the provinces and continued institutionalization of financial relationships between the provinces and the national government. It would also require institutional changes in the public enterprises designed to subject them to the discipline of the market, divorce price setting from macroeconomic policy and make spending more efficient; sustained improvement must be predicated upon adequate and continued price-cost margins as well as some reduction in employment so that wages could increase without increasing the wage bill. Similarly, the social security system requires major changes in order to make it finan- cially viable over the medium term. Finally, reforms of the financial sector are necessary to disengage the Central Bank's operating performance from price instability. The Government's July 9 program has already put many of these reforms on the agenda. 2.50 Monetary Reform and Policy. A strong monetary reform that permits monetary expansion solely as function of increases in international reserves would provide the public confidence necessary to slow inflation. Monetary policy would be assigned a purely passive role, and the monetary authority would concentrate on its role as supervisor of the rebuilt finan- cial system. In contrast to the Austral Plan, monetary policy would not be designed to temper the usual appearance of high interest rates in the wake of any stabilization. The monetary rule that domestic increases be solely a result of Central Bank reserve increases would allow for sufficient liquidity to the private sector as it seeks to rebuild depleted balances. The policy would be based on an ex-ante judgment that the risk that this firm monetary rule might create a prolonged recession and thus erode public support for the program is less than the danger that the private sector will not believe the program is sustainable and will therefore maintain their inflationary expectations.  - 28 - 2.51 Both the Plans Austral and Primavera experienced high real interest rates in the wake of stabilization. However, in the Primavera, real interest rates were driven far too high to maintain the austral appre- ciation in the face of waning confidence of the public over the extent of changes in fundamentals; an important lesson is that the program must be credible. 2.52 Monetary reform would also involve a restructuring of the domestic internal debt, and, as a consequence, of the corresponding assets of the public. This could be done through exchanges of debt instruments with the Central Government. The outstanding stock of forced investments would be converted into long-term securities of the Central Government carrying a fixed nominal interest rate. To service these obligations, the Treasury would have to mobilize a sufficient surplus to pay interest and amortiza- tion at the rate consistent with the stabilization strategy and targets. The only alternative is to write down the value of these assets, with its adverse implication for future creditworthiness. This policy should be woven together with the other reforms of the financial system including the recapitalization of the Central Bank (see Chapters IV and Annex Chapter IV). 2.53 Exchange Rate. The monetary reform in the wake of the change in fiscal policy regime would allow the Government to maintain a fixed exchange rate against the dollar or a basket of currencies. This would provide the nominal anchor necessary to operate a successful stabilization after hypP.rinflation.~/ Since international reserves are low, an important element for success is the availability of foreign resources to provide reserves to back the new exchange rate regime. Strict adherence to the rule guarantees that new additions to the money stock are automatically hacked by foreign reserves. Since the initial stock of high-powered money is limited, this will guarantee that as remonetization proceeds virtually the entire money supply will be backed by foreign reserves. An early arrangement with the IMF is therefore particularly important to provide initial reserves. 2.54 External Finance. An important element for success is the avail- ability of important foreign support. In contrast to the Plan Primavera, the relative success of the Plan Austral as well as the more enduring suc- cesses in other countries in permanently stopping hyperinflation was par- tially attributable to the willingness of external creditors to support the program. In addition to providing badly needed reserves, a foreign finan- cing program enhances its credibility by providing much-needed finance to the public sector, by eliminating the uncertainty stemming from irregular relations with external creditors and by spreading confidence in the private sector that would lead to an adequate supply of regular trade finance. ~/ See R. Dornbusch and S. Fischer, "Stopping Hyperinflation: Past and Present", Weltwirtschaftliches Archiv, April 1986, Vol. 1, p. 47. Also M. A. Kiguel and N. Liviatan, "Inflationary Rigidities and Orthodox Stabilization Policies: Lessons from Latin America," World Bank Economic Review, Sept. 1988, pp. 273-298.  - 29 - 2.55 Garnering foreign support will be difficult. As shown in the projections in Chapter V, it seems unlikely that Argentina can fully ser- vice its private commercial debts in the medium-term; a strong fiscal pro- gram predicated on sharp deficit reduction simply has extremely limited scope for renewed debt servicing in the years immediately ahead. External creditors, like their domestic counterparts, have no alternative but to recognize the limited capacity of the state to service its obligations. Nonetheless, all external creditors and the Government have a fundamental interest in Argentina's medium-term price stability, growth and restored creditwo~thiness. These facts suggest that, while commercial arrears are likely to build in the short term, after the medium-term program is in place and the stabilization is underway, the Government should initiate discussions with private creditors with the objective of regularizing financial relations.  - 30 - CHAPTER III: FISCAL POLICY AND PUBLIC FINANCE A. Introduction 3.01 Insufficient control of the main components of the public sector has traditionally hampered fiscal policy in Argentina. The need to increase mobilization of domestic resources to service the external debt-- partly a consequence of the 1982 decision to nationalize the privately-held external debt--complicated this task. From representing less than 2 per- cent of current expenditures in the 1970s, external interest payments jumped substantially in the 1980s, and have since oscillated around 15 per- cent of current expenditures. This placed severe stress on the other com- ponents of expenditures and increased the burdens on the tax system. The adjustment process therefore entailed large fiscal deficits, a worrisome increase in inefficiency in the provision of services and the management of public enterprises, and the use of the Central Bank as a conduit for con- cealed subsidies outside the budget process. 3.02 The unraveling of the Plan Austral showed that a sustained decrease in inflation is impossible without a reversal of fundamental imbalances in the public sector. More recently, the Government began pur- suing structural reforms coupled with macroeconomic stabilization in an effort to provide a durable solution to public sector problems. At the beginning of 1988, the Government adopted a principle for fiscal policy that improved control over public finances: clear guidelines for the transfers to the provincial governments, the social security system, public enterprises and the application, within those guidelines, of the principle of budgetary self-sufficiency. At the same time, considerable efforts were made to rein in the sources of expansion of the deficit of the Central Bank (the quasi-fiscal deficit), culminating in the presentation to Congress of the annual budget of subsidies through the Central Bank. These reforms, however, have yet to resolve the structural imbalances in public finances. B. The Public Sector: Struggling with the Deficit Background: The Pre-1984 Period 3.03 The central role of the public sector accounts in determining Argentina's macroeconomic performance and steering the course of structural developments derives from its importance in relation to total economic activity and the pervasiveness of the public presence across economic activities. Total expenditures of general government were equivalent to about a third of GDP in 1987; including outlays of public enterprises, the size of the nonfinancial public sector (NFPS) exceeded 44 percent of GDP (Figure 3.1).!/ This is only a partial indicator of the importance of the !/ The data in Figure 3.1 are estimated on a budget basis, and includes revenues and expenditures of the provinces. Quarterly estimates of revenues and expenditures (with the exception of the provincial govern- ments) are available on a cash basis, and are discussed in the section on recent performance. The budget estimates calculate interest payments in real terms and therefore exclude from the computation of interest payments the part attributable to the reduction in real value of the debt due to the rate of inflation.  - 31 - Figure 3.1 Nonfinancial Public Sector Percent of GOP 50 40 30 20 10 0 1970 1974 1978 1982 1986 - Total Revenues -+- Total Expenditures D Deficit public sector; inJeed its sphere of action extends to many economic sectors, through a system of public enterprises that have long held sub- stantial monopolistic positions in steelmaking, transportation, teleconmu- nications, and a variety of services. 3.04 The overall public sector has been prone to budget deficits, which have absorbed a substantial share of national savings (Table 3.1). Since 1972, overall financing requirements of the NFPS have been lower than 5 percent of GDP only in 1977 and 1986. The upheaval of the early 1970s coincided with a rapid increase in the deficit, which ballooned to 15 per- cent of GDP in 1975. Substantial progress was made in the following two years, but starting in 1977 a steady widening of NFPS financing require- ments began, culminating in a peak of over 16 percent of GDP in 1983. This fragile financial position was the result of contrasting trends in revenues and expenditures, brought about by frequent changes in policies, and by a general inability to exercise an effective fiscal control.  - 32 - Table 3.1: ARGENTINA - NONFINANCIAL PUBLIC SECTOR ACCOUNTS, 1970-1987 (Percentage of GOP) Average Average 1970-74 1976-80 1981 1982 1983 1984 1986 ll986 1987 a/ Current Revenues 20.68 22.20 24.36 22.64 23.14 22.39 26.92 2Ei.18 19.67 Tax Revenues 17.61 18.90 20.34 18.73 18.66 18.16 22.01 21..93 17.62 Non-tax Revenues 2.98 3.3o 4.oo 3.82 4.68 4.24 4.91 ~1.26 2.o6 Current Expenditures 18.69 20.36 27.16 26.06 27.44 26.20 26.43 2~1.74 22.63 Personnel 9.36 8.73 9.68 7.66 9.76 10.68 9.69 9.06 4.17 Goods and Services 2.29 2.93 2.99 3.47 3.78 2.87 3.26 ~·.06 2.19 Interest on Debt 0.66 1.62 3.88 6.28 3.60 2.93 2.93 2.33 2.69 Domestic 0.36 1.36 2.76 3.86 0.46 0.49 0.23 0•.26 0.78 Foreign b/ 0.20 0.17 1.13 2.42 3.04 2.44 2.70 2.07 1.91 Current A Capital Transfers 6.40 7.19 10.71 8.64 10.40 9.82 9.66 9.29 13.67 Social Security Payments 4.28 4.34 6.08 4.86 6.08 6.66 6.69 6.62 4.96 Other 2.13 2.86 4.63 3.78 4.33 4.26 3.96 3.77 8.61 General Government Savings 2.00 1.83 -2.82 -3.61 -4.31 -3.81 1.49 1.44 -2.40 Public Enterprise Savings 0.64 0.29 -1.91 -3.87 -2.67 -1.44 -1.61 0.46 -0.61 Noninterest Current Account 0.94 1.26 1.61 0.22 -0.10 0.69 1.01 1.94 0.90 Interest Payments 0.40 0.96 3.62 4.09 2.46 2.03 2.62 1.48 1.61 Domestic 0.19 0.66 2.42 1.86 0.48 o.3o 0.66 0.07 0.06 Foreign 0.21 0.42 1.10 2.24 1.98 1. 72 1.97 1.42 1.46 Public Sector Savings 2.64 2.13 -4.72 -7.38 -6.87 -6.26 -0.03 1.90 -8.01 Capital Revenues c/ o.3o 0.60 1.11 0.88 0.48 0.43 1.00 0.91 0.77 Capital Expenditures (Gross) 8.31 11.29 9.66 8.66 9.69 7.82 7.06 7 . 11 6.14 Public Sector Financing Requirements 6.48 8.67 18.26 16.11 16.08 12.64 6.09 4.80 7.38 Memo: Primary Surplus -4.63 -6.19 -6.86 -4.74 -10.12 -7.68 -0.64 -0.49 -3.18 Central Bank Foreign Interest 0.06 0.46 1.66 1.72 1.20 1.10 Source: Ministry of Economy. a/ Excludes provincial governments. b/ Does not include interest on foreign debt by public enterprises or the Central Bank. c/ Includes forced savings. August 1989  - 33 - 3.05 Expenditures substantially increased throughout the 1970s and early 1980s, with only a moderate pause between 1975 and 1978. The share of the consolidated public sector in total output rose from about 25 per- cent in the early 1970s to almost 40 percent in 1983, fueled by the outlays associated with the South Atlantic War and the increasing deficit in the public enterprises. While many countries experienced a tendency towards a larger public sector, the post-war growth of the state was particularly marked in Argentina, and was a corollary of the import-substitution development model. 3.06 The tax system, on the other hand, was unable to provide an increase in revenues that could finance rising expenditures. Tax collec- tion virtually collapsed in 1975, in part because of the political upheaval of the time and because of the concomitant explosion in the rate of infla- tion, which sharply reduced the real value of taxes collected with a delay f~um the occurrence of the taxable event. Overall revenues fell by almost 7 percent of GDP, a third in real terms. In the following years revenues steadily recovered, and, buoyed by a series of reform measures (the most important of which was the adoption and progressive generalization of the VAT between 1974-80), reached an unprecedented 26.8 percent of GDP in 1980. However, the 1980s have witnessed a steady erosion of government revenues that has generally continued despite several reform initiatives starting in 1985. Progress in Reducing the Deficit 3.07 The restoration of the constitutional government in December 1983 marked a reversal of the trend towards bigger government and higher deficits--a process, however, that has been marred by setbacks and that is still insufficient to provide a stable macroeconomic environment. Total expenditures declined in relation to GDP in every year after 1983, with the exception of 1987, and are estimated to have fallen by nearly 10 percentage points of GDP to 30.3 percent of GDP in 1988, the lowest level in over a decade. However, public finances have remained fundamentally weak, and the reductions in expenditures have not resulted in a durable fall of the de- ficit to a sustainable level, chiefly because of the continued deteriora- tion of tax revenues. Although the overall financing requirements fell from the unsustainable levels of the early 1980s to 4.3 percent of GDP by 1986--helped in this by the early success of the Plan Austral in lowering inflation and reducing the loss due to the delayed collection of taxes (the Olivera-Tanzi effect)--progress has been substantially more limited after- ward. 3.08 Despite the implementation of repeated stabilization plans, the borrowing requirements of the consolidated public sector widened consi- derably in 1987, spurred in part by the spending concomitant with the fall elections. The deficit rose to 7.4 percent of GOP (on a budget basis), at a time when the quasi-fiscal deficit of the Central Bank also surged. As discussed in Chapter II, the fiscal performance in 1988 improved sontewhat because of much stricter control of expenditures made possible by the application of the separation principle. Nonetheless, the reduction in the deficit was modest because of the sharp decline in tax revenues, and 1988 ended with an overall deficit of an estimated 6 percent of GDP on a budget basis.  - 34 - 3.09 The lack of clear rules applying to the relationships beb~een the different bodies of government is one of the main reasons for the repeated crises in public finances. A major step forward towards a consolidation of fiscal policy was made with the decision in 1988 to set limits on the transfers from the central administration to the other three components of government--the provincial governments, the social security system, and public enterprises--after taking measures aimed at providing sufficient amounts of resources to each of them. However, this arrangement i:s extremely fragile and rife with derived inefficiencies. A more fundamental resolution of the structural shortcomings of the public sector will be needed in the years ahead. In addition to reducing expenditures (discussed in conjunction with the subcomponents of government), profound reform of the public sector should address the inadequacy of the tax system, the relationships between provincial and central governments, the social security system, and the control of public enterprises. C. The Tax System: Problems and Reforms Tax Revenues: Lack of Buoyancy and Growth of Distortions 3.10 The ideal function of the tax system is the collection of taxes, with due regard paid to economic efficiency and equity in taxation. The Argentine tax system has become increasingly deficient by all of these standards. The system has shown a relatively low buoyancy, and has been unable to ensure a streant of revenues that could reconcile desired domestic spending with the external interest obligations. 3.11 This, in turn, is attributable largely to the increased use of the tax system to promote regional and sectoral industrial development. As a result, revenues have lagged, horizontal and vertical equity has suffered greatly, and investment decisions are now subjected to arbitrary distor- tions in the structure of incentives. For these reasons, tax reform must remain an important item in the agenda for structural reform of th•~ public sector. 3.12 While high and variable.rates of inflation have undoubtedly con- tributed to a worsening of the tax performance, the lack of buoyancy is also attributable to the progressive extension of tax expenditures and of tax evasion. Table 3.2 shows that the "theoretical" fiscal cost of the industrial promotion law (excluding the special regime applicable to Tierra del Fuego) had grown to 2.6 percent of GDP over the period 1980 to 1987. This represents only the tax exemptions agreed to when the promoted project was approved (based on a forecast of output over the life of the project). Since the promotion law sets no limit on production levels, there ~~xists an incentive to expand production to benefit from subsidies beyond the "theo- retical" limits; thus, actual tax expenditures are almost certainly much larger. In addition, other tax expenditures have entailed large losses to the Treasury. Tax subsidies to selected imports, exports, Tierra del Fuego, and holders of government bonds cost the Treasury another 2.6 per- cent of GDP (Table 3.3). 3.13 With the major taxes being eroded by the special regimes, the Government increasingly looked for additional revenues in areas wh•~re col- lection was easy, but at the cost of increasing distortions. Thus,  - 35 - Tabl• 8.2: ARGENTINA - THE THEORETICAL COST OF INDUSntiAL PROMOTION (Percent of GOP) 1980 1981 1982 1983 1984 1986 1986 1987 1988_!1 Administered by SICE 0.67 0.66 0.32 0.86 0.69 0.62 0.80 0.77 0.10 Administered by four Provinces ~I 0.01 0.03 0.04 0.10 0.26 0.88 1.39 1.82 2.15 Total 0.67 0.67 0.37 0.96 0.84 1.50 2.19 2.60 2.26 Source: Secretaria de Hacienda .!1 Includes only projects approved through 1987. ~I Catamarca, La Rioja, San Juan, San Luis. Table 3.3: ARGENTINA - OTHER TAX EXPENDITURES, 1988 (Percent of GDP) Percent Exemption from Import Duties 1.1 Nontraditional Export Subsidies 0.6 Tax Rebates 0.4 Income Tax Exemptions (10 percent) 0.1 Exemption of Subsidies from Income Tax 0.1 Subsidies to Tierra del Fuego 0.8 Exemption from Income Tax for BONEX, Interest 0.1 TOTAL 2.6 Source: Gonzalez Cano (1988)  - 36 - taxation on energy-related products has become progressively more important,~/ contributing to distortions in relative prices, lack of trans- parency in the finances of the energy sector, and jeopardizing at times anti-inflationary objectives. Ad hoc taxes have been imposed on several occasions. Also, the Government has repeatedly granted tax amnesties, with lower revenue results. Meanwhile, the administration of taxes, beset by lack of resources and excessive variability in legislation and management, deteriorated substantially. Reforming the Tax System 3.14 A tax reform program was launched in 1985 as an integral part of the Plan Austral. Its principal aim was to increase revenues, but also to introduce changes in the structure of taxes to make the tax system more equitable, essentially through greater reliance on direct taxes. The re- form also included a series of measures to increase the powers of the DGI. The relevant laws and regulations were approved between September 1985 and September 1986, with the exception of a proposed national land tax, which failed to win Congressional support. In addition, the new co-participation law discussed below was approved in December 1987. The following were the main innovations introduced: ( i) Two laws substantially increased--at least in theory--the anti-evasion powers of the General Tax Administration (DGI), by establishing nominative equity shares and limiting banking and financial secrecy. These measures, advanced by international comparison, had a limited initial effect because of the administrative bottlenecks in the tax agency; (ii) The reform modified the VAT through a unification of the rates at 18 percent, that came at the exp~nse of a reduction of the base, and introduced a simplified system for small taxpayers, a "patent" assessed on the basis of objective indicators of economic activity; and (iii) The strengthening of direct taxes included several changes to the income tax,I/ an important adjustment in the inflation adjustment method, a strengthening of the capital gains tax, an increase in the marginal rates for the tax on capital and net wealth, a reduction in the taxable minimum, and the inclusion of shares in the base for the personal wealth tax (with credit given for the taxes paid by enterprises). 3.15 Also, a "forced savings" scheme was also introduced, wl1ich in effect amounted to a one-time tax (as the interest rate it supposedly car- ried was extremely low). The Government repeated the tax in 1988. ~/ Taxes collected by the energy sector now amount to about 20 percent of total revenues, an unusually large proportion of revenues in a country that does not have large energy exports. II Personal deductions were decreased, and their indexation system modified; deduction of interest was limited; the conceJJt of corporate income was extended; profits of limited partnerships were attributed to the partners. The period for carry-over of tax breaks was reduced from 10 to 5 years.  - 37 - 3.16 On balance, the reform fell considerably short of its objectives. The erosion of the tax base due to the system of fiscal incentives to industry increased, rather than decreased, because of separate legislative action. The fragmentation of the tax system was not reduced, and the revamping of the income tax turned out to be a timid one: the additional 1987 yield was limited to about 1.5 percent of GOP. More importantly, the system for inflation indexation may have in fact contributed to a further reduction of the tax liability of corporations. 3.17 Nur did the reform produce a durable increase in revenues (Table 3.4). After the strong recovery in 1985 (which was mostly due to the positive Olivera-Tanzi effect caused by the sharp reduction in the rate of inflation), total tax revenues fell in 1986 and 1987, and collapsed again in 1988. In terms of the yield of the taxes in the reform, dis- aggregated data are only available up to 1986; while the income tax doubled over the all-time low of 1984, it still remains at 1.5 percent of GDP. Only marginal gains were registered for the wealth taxes, and although VAT collections were higher than in earlier years, in 1986 they stood at 3.1 percent of GOP, a far cry from the high of 4.7 reached in 1981. 3.18 The Government reacted to the deteriorating fiscal situation in 1987 and early 1988 through the adoption of several ad hoc revenue measures. In March 1988 the tax rates on bank checks were increased; sur- charges on gasoline, fuels and telephone were approved in early 1988 and earmarked for the finances of the social security system and of the provinces; selected excises (particularly on cigarettes) were increased; the forced savings scheme was extended and moved forward to meet the Treasury's obligations at end-1988. 3.19 Important changes were introduced through a tax package in December 1988. Although Congress rejected a proposal to generalize the VAT and the Government introduced changes to direct taxes that modified the industrial promotion system, these changes, if sustained and implemented, could lead to a significant reduction of tax avoidance and evasion, and of the economic distortions generated by the promotion. The reform abolished the blanket tax exemption given to promoted firms, replacing it with a non- negotiable tax bond equivalent to the subsidy calculated at the moment of approval of the project. While this move leaves the value of the tax expenditures untouched, it would make it impossible to extend tax exemp- tions beyond limits that are known. Issues in Tax Administration 3.20 Another major cause of the problems of the tax system is the inability to effectively administer it. !!_I Several agencies are charged with collecting national taxes: the General Tax Administration (DGI), the Social Security Administration, the Customs Service, and other minor !!_I These issues are treated in depth in the forthcoming World Bank Study, Tax Policy for Stabilization and Economic Recovery.  - 38 - TABLE 3.4: ARGENTINA - TAX REVENUES BY SOURCE, 1970-1988 (Percent of GOP) Average Average Average 1970-74 1976-79 1980-84 1986 1986 1987 1988 National Tax Revenue 14.7 16.0 17.3 19.8 19.8 16.9 14.1 Income Taxes 1.9 1.3 1.3 1.0 1.3 1.6 1.2 Property Taxes 0.6 0.4 0.9 0.9 0.9 1.0 0.9 Capital Tax o.o 0.4 0.8 0.6 0.6 0.6 0.6 Net Worth Tax 0.0 0.0 0.0 0.0 0.1 0.1 0.1 Other 0.6 0.0 0.1 0.2 0.2 0.2 0.2 Sales and Excise Taxes 6.3 6.7 9.1 9.0 9.4 7.6 6.2 Value Added Tax 1.7 3.0 4.1 3.2 3.3 3.2 1.8 Unified Excise Tax 1.3 1.1 1.6 1.6 1.7 1.6 1.2 Tax on Bank Drafts o.o 0.1 0.1 0.4 0.6 0.4 0.9 Oils and Fuel Tax 1.3 1.3 2.2 2.8 2.8 1.7 0.8 Stamp Duty 0.4 0.3 0.3 0.2 0.3 0.2 0.1 Foreign Exchange Transaction Tax 0.1 0.1 0.1 0.1 0.1 0.1 0.1 Other 0.6 0.8 0.7 0.8 0.7 0.2 1.3 Foreign Trade Taxes 2.0 1.8 1.9 3.2 2.6 1.9 1.2 Import Taxes 1.0 1.0 1.1 1.0 1.3 1.6 0.9 Export Taxes 1.0 0.7 0.7 2.1 1.1 0.3 0.2 Other Trade Taxes o.o 0.1 0.1 0.1 0.1 0.1 0.1 Social Security Taxes 4.7 4.6 3.9 6.0 6.0 4.7 3.2 Other Taxes o.3 0.0 0.1 0.0 0.0 0.2 0.7 Forced Saving 0 0 0 0.7 0.6 0.0 0.7 Provincial Tax Revenue by Source 2.2 2.6 3.6 3.4 3.8 4.9 Property Taxes 0.4 0.6 0.8 0.9 0.9 Gross Income Tax 0.9 1.3 1.8 1.7 2.1 Automotive License Tax 0.2 0.2 0.3 0.4 0.3 Stamp Duty 0.6 0.4 0.4 0.3 0.6 Other Taxes 0.3 0.2 0.2 0.1 0.1 Total Tax Revenue 17.0 17.6 20.7 23.2 23.6 2:L. 8 14.1 Source: Secretaria de Hacienda; IBRD estimates.  - 39 - bodiPs. The DGI is, hy far, the most important of the agencies, both with regard to the amount of revenue collected and to its auditing and prosecut- ing powers. It operates over the entire national territory, and its main functions are the assessment of tax liabilities and the collection of revenues. It collects approximately 60 percent of total national revenues, corresponding in recent years to roughly 10 percent of GDP. It administers the income and capital taxes, the VAT on domestic products, the national excise taxes, and other minor taxes. Tax revenues are distributed to the National Treasury, the provinces, several special funds and, more recently, to the social security system. 3.21 One of the reasons for the inability of DGI to increase collection substantially--despite the numerous new revenue measures over the years--is that the tax system is excessively fragmented. Also it has been upset by great variability in legislation, confused or contradictory application of the law and of regulation, and often a disregard for the administrative viability of proposed tax changes. Tax amnesties, granted repeatedly in the attempt to raise revenues, have inhibited DGI's pursuit of evaders by the DGI, and created expectations of further immunity from prosecution of evasion. An additional constraint is the need of DGI to interact with other public bodies in its operations. The tax tribunal and the accounts tribunal deal with DGI's institutional processes, the first acting on tax- payers' appeals on DGI decisions, and the second verifying DGI's perform- ance and behavior. However, the legal powers of the DGI vis-a-vis the taxpayers are limited, and extremely lengthy procedures can follow an unfavorable audit before a final injunction is issued. This also has con- tributed to the impression of insufficient willingness to prosecute tax evasion. 3.22 The effects of this unfavorable external environment were com- pounded by increasing strains on DGI's resources and the absence of for- ward-looking planning. During the 1970s, the number of registered tax- payers increased dramatically as a result of the introduction and general- ization of the VAT and of other legislative modifications, as have the com11lex features of incentive schemes such as the industrial promotion law, which would require increased auditing ability. Resources available for these purposes, however, have failed to match the increasing demands posed by the evolution of the tax system and the increase in the number of tax payers. The total workforce of DGI has been relatively stable at less than 11,000 for the past few years (about 6,000 personnel assigned to operations in Buenos Aires, and the rest distributed among the provinces). Of the total, only 1,300 are tax inspectors, handling 1.6 million registered tax- payers. Many problems hamper the ability of the agency to retain and moti- vate qualified personnel. The DGI is organized as an autarkic agency, i.e., with a certain degree of independence from general public sector rules. This allows the agency to offer somewhat more attractive working conditions than other government bodies. However, the managerial scope in  - 40 - these matters is severely limited by existing union contracts that mandate an extremely flat compensation curve. As a result, private auditing firms have routinely utilized the DGI as a pool for qualified manpower recruit- ment. 3.23 The internal ability of the agency to process and utilize informa- tion has also been hampered by the lack of long-range planning and the failure to introduce more modern systems of information gathering and pro- cessing. DGI entered the 1980s without a clearly defined strategy to cope with increasing demands on its resources and with obsolete internal operat- ing and processing systems. Compounding these problems was a long--standing tradition of politicalization of key managerial positions and a very high turnover in the Director General position: the current administration appointed four directors in the first two years of its office, and no director has ever had a tenure of three-and-a-half years. D. Federal-Provincial Relationships 3.24 The rules governing the revenue sharing between provinces and the central administration have often been controversial and subject to arbi- trary changes. According to the Constitution, all revenues collected at the national level should be subject to sharing ("co-participation"), with the exception of those taxes that are specifically earmarked for some pur- pose. In practice, this general principle needs to be supplemented with a resolution of two other important issues: the proportion of revenues to be shared (the primary distribution), and the rule for the sharing among the different provinces (the secondary distribution). Both of these problems have represented perennial bones of contention between the central administration and the provinces. 3.25 During the military rule, the transparency of the primary and secondary distribution of resources decreased drastically, particularly as a result of the 1980 tax reform, which essentially resulted in a sharp decrease in revenues available for sharing, while the expenditure nespons- ibilities of the provinces were being increased. The co-participation law was allowed to expire at the end of 1985, and it was not until the end of 1987 that a new co-participation law was approved to apply to 1988. Mean- while, the distribution of resources from the Treasury to the provinces continued to be effected on an arbitrary basis. 3.26 The new law increased the provincial share of co-participated revenues to 57.5 percent, and set clear limits to discretionary contribu- tions from the Treasury at a maximum of 1 percent of GDP. The law also provided a political mechanism for the secondary distribution of the! resources. 3.27 The approval of the law was one of the crucial elements for the success of the "separation" strategy pursued by the Government. By setting clear limits to the extent of transfers, and decreasing the uncertainty regarding the amount of resources available for each province, the law was supposed to establish rules of the game that would compel the provinces to spend within their resources limit. This was also reinforced by the clos- ing of the rediscount window for the provincial banks at the Central Bank, that had allowed the provinces to finance their deficit particularly in 1987.  - 41 - 3.28 However, the law has fallen short of its objectives. Although transparency has--to a certain extent--been restored to the relationships between different levels of government, financial problems have not been resolved. Provinces continue to generate deficits because they too have experienced declining revenues associated with the erosion of co-par- ticipated taxes; also their expenditures have failed to adjust (Table 3.4). The Central Government relied increasingly on non-shared revenuf>s (for example, the forced savings schemes); thus, 1988 marked one of the worst years in collection of co-participated taxes, and, despite their increased share, the actual revenues going to the provinces decreased sharply in real terms. Changes made to the excise tax on combustibles resulted in the abolition of revenues subject to co-participation, exacerbating their plight. 3.29 The provinces, unable or unwilling to reduce expenditures, requested once again additional funding. This was granted twice in 1988, first in March through the approval of a specifically earmarked surcharge on cigarettes, and subsequently in December, through the granting of an additional A$3 billion transfer (theoretically repayable to the Central Goverrunent in two years). The imbalance in provincial finances is likely to continue in the future unless action is undertaken. E. Finances of the Social Security System 3.30 The social security system has had a strategic role in shaping Argentina's public finances, and represents one of the main points of uncertainty regarding the future. The problems of the social security system derive from the imbalance between benefits and the resources avail- able to finance them. From the late 1940s to the late 1960s, the social security system provided large surpluses, since the pool of recipients of social security payments was small compared to the number of contributors (Table 3.5). These surpluses funded the expansion of other government expenditures without incurring large deficits. Subsequently, however, the aging of the population caught up with the system; the number of retirees as a proportion of active population rose, and so did the potential liabil- ities of the system. The ratio of the economically active population to the number of retirees fell by one-third--from 3 in 1970 to 2.6 in 1985--and is expected to fall even further. This reduces the amount of resources that can be collected to finance the system on a pay-as-you-go basis. At the same time, the pension scheme could not count on virtually any capital revenues, since the counterpart of the surpluses of the early years of operation of the system had been wiped out by the various inflationary episodes of the 1960s and 1970s. 3.31 The reaction to the crisis initially consisted of a combination of arbitrary reduction of benefits and increasing recourse to transfers of the central administration. From their legal, generous level of between 70 and 85 percent of salary, payments have fallen to under 40 percent of salary in recent years. After several court cases successfully challenged the reduc- tion in benefits, the Government undertook a number of revenue measures,  - 42 - TABLE 3.6: ARGENTINA - PROVINCIAL GOVERNMENT FINANCES, 1e1o-88 (Percent of COP) Average Average 1Q70-74 1Q76-7Q lHO 1H1 1982 lQ83 1Q84 1H& use Current Revenuea 6.03 8.8a a.n 7,QQ 7.2Q 8.61 8.48 6.07 4.86 Tax Revenue• 4.82 6.H 8.30 8.91 8.24 6.18 6.27 3.80 3.81 Own 2.24 2.66 4.38 3.70 3.32 2.88 3.20 3.40 3.81 Copertlcipeted 2.68 3.3Q 3.Q4 3.21 2.Q2 2.60 2.07 0.40 -0.02 Non-tax Revenue• 0.88 O.Q& 1.21 1.08 1.0& 1.33 1.21 1.27 1.14 Tranefere fro. Central Ad.inietration •I 1.61 1.Q3 0.38 1.30 0.7Q 3.74 2.74 4.42 4.10 Other Tranefere 0.24 O.H 1.38 1.38 1.23 1.38 1.08 1.24 1.48 Current Expenditure• 6.84 8.38 8.02 8.63 7.04 8.61 Q.20 8.77 8.41 Surplue Before Inveet.ent 2.48 3.6Q 3.74 4.83 2.86 2.81 4.13 3.11 2.81 Capital Expenditure• (Net) 2.04 3.48 3.&3 3.42 2.48 2.88 2.82 2.18 2.11 Financing Requir...nte 0.42 0.13 0.21 1.21 0.17 -0.21 1.50 o.eo -o.o1 Source: Mlnietry of Econo.y. •I For 1Q8& and 1Q&e coparticipeted revenue• are included in tranefere fro. the Central Ad.inletretion due to the lack of • coperticlpatlon law. T•ble 8.0: ARGENTINA - SOCIAL SECURITY FINANCES !/ (Percent of GOP) 1960-69 1960-69 1970-79 1980-84 1986 1986 1987 1988 1989!!/ Revenues 4.4 4.9 4.6 4.2 4.1 4.8 3.3 Expenditure 4.2 6.7 6.6 6.6 6.1 6.2 4.0 Surpluses 2.76 0.02 0.2 -0.8 -1.1 -1.3 -1.0 -0.4 0.7 Source: Trsmite Psrlsmentsrio No. 108: Secretaris de Hscienda !1 Period sversge. !!/ Projected.  - 43 - with the dual objective of gradually restoring benefits to their legal level and insulating the central administration from transfers to the social security system. The measures comprised increases in wage-related contributions to the social security system and the earmarking of taxes on certain goods provided by public enterprises (gasoline, telephone, elec- tricity). The additional revenues allowed the gradual closing of the financial gap in the social security accounts in the near term. 3.32 However, this success may be only ephemeral. Projections over the next few years indicate a continued increase in the ratio of retired people to active population. In absence of changes in the level of benefits, a continued balance in the social security accounts must rely in a continued real increase in revenues. This, in turn, must imply that either employers' and employees' contributions must keep rising, or that the revenues from the earmarked taxes on goods must rise in real terms, or both. However, the scope for either of these measures is limited because social security contributions are already very high (amounting to 42 pe~­ cent of net wage). A continued increase in the earmarked revenues would imply a continued increase in relative prices of the goods to whose prices the taxes are linked. This, however, appears both improbable and undesir- able. F. Public Sector Enterprises 3.33 Public sector enterprises have contributed substantially to the overall deficit of the public sector--about a half on average during the 1980s (Figure 3.2). The continued deficits incurred in by the enterprises have been the result of several factors. The Government has pursued pric- ing policies that have oscillated between providing sufficient resources to cover costs and combating inflation through lagging real prices. Manager- ial criteria have seldom been used in formulating important business deci- sions. Legal constraints have been posed to public procurement, through the ~ompre Argentino law, resulting in inflated costs for the acquisition of inputs from the private sector. Noneconomic objectives, such as employ- ment maintenance, shackle the sector, particularly in the railways. Finally, pricing distortions have been accentuated by the need to utilize the energy sector, in particular, as tax collector to cross-subsidize losses elsewhere. 3.34 To deal with these problems, the Argentine Government has recently pursued a dual strategy of, on the one hand, privatization as a strategy tor some enterprises, and on the other hand, of strict predetermination of the rules regarding the transfers between the sector and the central administration. The most important efforts of privatization are the pro- posed partial sale of ENTEL (the state telephone company) and of Aerolineas Argentinas. While these have not yet been carried out because of con- gressional opposition, it is likely that they will bear fruit in the  - 44 - Figure 3.2 ARGENTINA: PUBLIC ENTERPRISES DEFICIT Percent of GOP 15 10 5 1980 1981 1982 B Source: Ministry of Economy 1983 PE Deficit 1984 D 1985 1986 Fiscal Deficit 1987 1988 J L - - - - - - · near future.~/ Through the Plan Houston and the Petroplan, private sector participation is being sought for oil exploration. On the other hand, the Government has sought to strengthen institutional and budgetary control through the creation of the Public Enterprise Board (DEP), which has been given broad authority on setting financial targets for individual enter- prises. This has been accompanied by the setting of a clear rule for the transfer policy from the Central Government, namely limiting Treasury con- tributions to cover the servicing of financial external debt and what is due on account of special funds. 3.35 This principle has permitted a substantial reduction of the amount of transfers from the Central Government in 1988, limiting them to 1.1 per- cent of GDP. However, insulating the public enterprise sector from the central administration has been accomplished by an internal cross-subsidy system, whereby the money-making enterprises (essentially the state oil company) have had to provide funds to finance the loss-making ones ~/ Privatizations have been concluded for small government participations in firms previously handled by Fabricaciones Militares.  - 45 - (predominantly the railways and social security). This system is dependent on reducing the deficit of loss-making enterprises, and guaranteeing suffi- ciently high real prices. Other unresolved issues (such as the royalty payments from the oil company that involve a strong subsidy element) also threaten the ability to genPrate sufficient resources. But the most funda- mental problem with this strategy is the distortions arising from the cross-subsidies, since they lead to greater distortions in prices, dis- courage appropriate investment levels, and affect final demand arbitrarily. G. Recommendations 3.36 The separation strategy pursued by the Government has been instru- mental in containing the deficit in 1988, and it should remain in effect for the future. However, the fundamental problems outlined in this chapter and in more detail in Part II of this report must be resolved if a viable public sector is to emerge from the present crisis. A separation strategy without fundamental structural reform can only lead to increasing cross- subsidization, insufficient provision of public goods, and deterioration of the quality in the public administration. The Government's structural reform agenda, therefore, must include action on reducing expenditures, tax policy, public enterprises, social security, and provincial finances. Expenditure Reductions 3.37 Expenditures of the nonfinancial public sector have fallen sub- stantially since 1983. Current expenditure levels are still high relative to capacity for mobilizing tax resources as well as relative to other coun- tries at similar levels of per capita income. The process since 1983 has been not part of conscious government policy, but the result of successive marginal contraction imposed by the threat of inflation. Consequently, the pace of expenditure reduction has always been too slow to achieve stabil- ization goals and the process itself has been inefficient. Too often the Government has contracted investment in the hopes that the fiscal crisis would pass rather than make the difficult cuts in employment and ineffi- cient programs. 3.38 A major component of a structural reform program would involve expenditure reductions. This would have to focus on employment reduction throughout the public sector. Employment increased by 20 percent. in 1983-88 in the central administration and 28 percent in the provinces-- despite acute budgetary constraints. Since average public sector wages have fallen to very low levels, the employment reductions should be deep enough to permit some increase in average wages even with some gains in reducing the overall wage bill. 3.39 Similarly, the Government must mount a comprehensive effort to identify programs that could be cut to achieve savings and improve the efficiency of the public sector. In the central administration, the health, education and housing budgets should be carefully scrutinized since there is a need for greater efficiency in delivering these services and for additional savings at the same time. In education, for example,  - 46 - expenditures for primary and secondary education have been reduced far more than expenditures on higher education, even though the latter entail sub- sidies to the relatively wealthy and could be supported through a combina- tion of increased direct charges with more scholarships for poor youth who would otherwise qualify for entrance. In transportation, the Government may wish to consider partial divestiture of the port facilities, which are inefficient and costly; greater reliance on toll roads and privately con- structed toll roads could increase badly needed investment in this sector as well as reduce the cost to the budget. In agriculture, reforming the National Grain Board (Junta Nacional de Granos) along the lines suggested in Annex Chapter IX would provide some savings. The greatest savings are to be found in the public enterprise sector where divestitures and other recommendations (see below) could achieve substantial savings, and the social security administration. Tax Policy 3. 40 A reversal of the deterioration of performance must reducE! lax expenditures, one of the main factors that has led to the progressive erosion of the tax base. The industrial promotion system, in turn,, is the main source of these problems. Reconunendations for future action would include: (a) A drastic reduction in the scope of the industrial promotion system. The Government should take advantage of the current suspension of the system, and avoid reinstituting it; (b) The special regimes for Tierra del Fuego and those favoring related industrial sectors should be abolished in a manner comparable to the promotion in the four provinces; (c) The exemptions from import tariffs on capital goods and other imports should be abolished, leading to a reduction in the dispersion of effective protection rates and an increase in revenues; and (d) Promotion schemes for nontraditional exports should be abol- ished and replaced by a more realistic exchange rate level. 3.41 Measures that would at the same time promote a more efficient utilization of resources, foster public enterprises reform and increase public sector revenues in the area of taxation of the energy sector, would include: (a) A simplification of excise taxes could be based on the following guidelines. All oil products should pay the VAT. Other excise taxes should be merged in only one ad valorem tax, fixed on the supply plant price. This tax could he set at a rate such as to generate a revenue equivalent to present levels; (b) Fuels used within the transportation sector (gaso- lines, diesel, and gas oil could have a higher tax rate than other derivatives to incorporate a concept  - 47 - of "road user charges." Equity and cost consi- derations might justify a higher tax rate on extra gasoline and a lower tax rate on kerosene; and (c) Finally, YPF should he subject to income tax; i f the finances of the public sector require additional transfers, the Government should use its authority to set dividends to do so. 3.42 Trade taxes have potentially distortive effects and, therefore, the move away from them should be pursued with determination. Regarding import duties, the Government should consider the removal of the exemption on capital goods imports, while maintaining the momentum towards a reduc- tion in dispersion and lower average rates. The recent policy shift towards higher export taxes should be t·eversed and, if a greater contribu- tion from the agricultural sector is desired, an increased role for income taxation or a national land tax should be considered. During a transition phase out of export taxes, an across-the-board uniform export tax could be used in lieu of product-specific export taxes; also, export tax payments be credited against value-added tax payments if and when made. A land tax already exists in most provinces, but is inefficiently administered; economies of scale could be obtained by combining the administration of a national tax with a revamped provincial tax. This would involve a sub- stantial overhaul of existing cadastres. 3.43 Solving the problems of the tax administration will involve a determineod medium-term effort on the part of the Government, as well as the implementation of measures in the tax system that will make its administra- tion more simple. DGI needs to proceed in its effort of modernization and productivity increase. This will involve: (a) a continued high priority given to the development of the computerized taxpayer current account; (b) a review of the working of the new organizational structure by giving more emphasis to the operational structures; (c) the upgrading of the com- puting and data processing function and reversal of the excessive cen- tralization of information processing; (d) a change in work practices aimed at generating exclusive dedication to DGI and increased workload; and (e) further development of the internal auditing function and of management control. 3. 44 Additionally, the strengthening of administration would involve political efforts to: (a) reduce the complexity of the tax system, through the abolition of low-yield nationally administered taxes; (b) exploit, as far as possible, the figure of the substitute taxpayers, thus reducing the administrative workload for DGI; (c) consider the possibility of the com- plete abolition of the simplified VAT system; and (d) approve the law pend- ing in Congress that would substantially increase DGI's powers. Public Enterprise 3.45 Prices. The Government soon needs to correct the level of real prices of output. In the near term, these should be raised in real terms at least up to the average level of the second quarter of 1988. By 1990, tariffs in the sector should be sufficiently high relative to costs so as to generate a surplus on their noninterest current account equal to about 3 percent of GDP, thereby covering about half of their investment after interest expenses. Improvements over 1988 levels could be made up of a combination of either expenditure reductions or real tariff increases.  - 48 - 3.46 As it adjusts prices, the Government should formulate the new pr~c~ng policy to reflect an efficient resource allocation at least in terms of producer prices. In the energy sector, prices should reflect, as automatically as possible, the opportunity cost of production. Prices received by YPF and GdE should be brought up to international levels. However, consumer prices of YPF production should not rise whereas end-user prices of gas need to be increased substantially. Prices of AyEE and Hidronor's output should increase to reach the level of the long-run marginal cost of producing electricity and to lower consumption which has been unusually high in Argentina compared to similar economies. Prices of train fares need to be inc:reased somewhat and should be kept at competitive levels afterwards. Prices of telephone services should recoup the real erosion experienced during the last semester of 1988. 3.47 Royalties. The issue of royalty payments to the provinces on petroleum and gas entail a heavy implicit tax on the sector to support provincial finances. The current reference price on which these royalties are paid dates from the early 1980s and is too high; it should be reduced to international levels as soon as possible. 3.48 Budgetary Control. The Government needs to enhance budgetary control over the public enterprises. The respective roles of the DEP (or its successor, if any), the Ministry of Economy, the SIGEP and the various Secretariates in the Ministry of Public Works should be clearly delineated. The collective budget for the public enterprises, the Ministry of Economy's cash and commitment budgets and the financial statements should all be drawn up within the framework of a uniform information system. 3.49 Institutional Framework. The market structure and regulatory framework of each sector requires definition so that enterprises are sub- jected either to the discipline of the market or well defined regulations regarding pricing. For those enterprises designated to function as regu- lated monopolies, the regulatory framework should be clearly established in the law so as to permit maximum managerial discretion within a carefully elaborated legal framework, thus minimizing the imposition of political and noncommercial objectives. 3.50 Enterprise Restructuring. Without enacting internal reforms with- in each enterprise to induce managerial responsibility, accountability, and autonomy, changes in the regulatory and competitive environment will not have their full desired effects. The Government should therefore continue and accelerate restructuring programs currently under discussion to strengthen management, improve personnel policies, and enhance financial controls. Management could be strengthened by restricting political appointments to boards of directors and/or a few senior-level posts as well as providing improved salaries, attention to qualifications in appointments and promotions, and sound training. These efforts could permit consider- able reduction in expenditures and improvements in long-term efficiency. 3.51 Procurement. The Compre Argentino law should be modified to allow foreign competition in the bidding for: contt·acts of the public enterprises. This would effectively abolish the implicit subsidy system to tlte private sector and reduce the operating costs of the public enterprises.  - 49 - 3.52 Employment Rationalization. Redefining the role of public enter- prises surfaces the need to examine employment levels and ways to reduce public employment without causing affected workers unnecessary hardships. The Government should examine programs of early retirement; in the railways alone, one-third of the workforce is over the age of 55. It should also consider programs of severance pay and/or programs of income maintenance for laid-off workers in accordance to their tenure with the enterprise. 3.53 Cross Subsidies. The Government needs to redefine the mechanisms and degree of cross-subsidization among the public enterprises and needs to establish a transparent scheme for resource transfers. If the Government wants to subsidize selected loss-making enterprises, it should transfer these to the budget so that these expenditures are annually subjected to the budgetary review process. Highest priority should be given to reducing the demand for expenditures in Ferrocarriles, which absorbs most of the cross-subsidies and accumulates losses of nearly one percent of GDP annually. 3.54 Expenditure Reduction through Divestiture and Closure. For those enterprises where national interests permits, the Government should con- tinue its privatization efforts. Maximum efforts should be made to accel- erate those planned divestitures and review for possible inclusion remain- ing enterprises and activities that could be privatized. Other activities --such as some passenger lines--could be closed with considerable public savings. For divestitures, it should ~stablish clearly defined legal pro- cedures to ensure an unbiased selection of private investors. Aerolineas and Ferrocargo should be subjected to public tender as soon as possible. Care should be taken to define the regulatory framework for the joint- venture between Telef6nica de Espafia and the state telephone company (ENTEL) to ensure transparent tariff setting mechanism based on clearly defined criteria. For enterprises deemed necessary to remain in the public domain, enterprises should be subject to the discipline of competitive market forces and be allowed to price independently of central government dictates. Provincial Finance 3.55 Although the Central Government managed to maintain the integrity of the new revenue sharing system, in the face of concerted demands for substantial new resources at the end of 1988, it is unclear how long it will be able to do so unless urgent reforms are undertaken to reduce the provincial public sector deficit, as well as to provide the provinces with longer term financing for their capital investments. The goal should be not just to reduce the deficit, but to transform the provinces into agents of development that generate savings surpluses which can be invested wisely to increase total provincial product, thereby augmenting their future tax revenues. The Central Government should work with the provinces to take several measures that would improve their finances. The Central Government should design incentives into future revenue sharing laws for the provinces to reduce their deficits. Provincial initiatives might include measures in several areas.  - 50 - 3.56 Increase Own-Source Revenues. Improved billing and collection procedures (e.g., better assessment, information systems and management techniques) could substantially increase provincial tax revenues without raising nominal rates (see Annex Chapter II). Improved fiscal performance would require not only better billing and more aggressive collection, but also improvements in the quality of services that should help increase the willingness to pay taxes and fees. 3.57 Nontax revenues could also be increased. To the extent possible, the cost of providing local services should be recovered from charges on the beneficiaries. Such charges should be related to individual consump- tion or, where this is not possible, to a measure of individual benefit received. This is clearly not the case in most of Argentina's provinces, where the "decentralized agencies" such as the public utility companies (e.g., Water and Sewerage, Electricity, etc.) often represent an important drain on public finance. Water is rarely metered, and delinquency in pay- ment is high due to inefficient collection procedures, and also to the perception that the amounts charged are unfair, given that they are based on constructed area rather than actual consumption. 3.58 Reduce Expenditures and Increase Their Efficiency. Personnel policy is of highest priority in the provincial government in any effort to increase efficiency and lower expenditures. Provinces must make efforts to shed excess labor hired over the last half-decade; this could be done with systematic programs of transitional income maintenance and vouchers for vocational or other training. If the number of unproductive worke:rs were reduced, remaining civil servants might be granted pay increases to regain some of the lost competitiveness with the private sector, while still reducing the overall wage bill. Each provincial government should receive technical assistance to do detailed studies on how to improve its effi- ciency in these and other ways. 3.59 Improved procurement procedures could reduce expenditures for goods and services by at least 10 percent, and would also be helpful to the modernization of industry (see Annex Chapter II). Buy-Provincial legislation should be eliminated. 3.60 Elementary improvements in organization and management could save much time and money for both the Government and those needing services. None of the six governments studied were investing more than token effort in these kinds of improvements. The use of computers could dramatically increase productivity in many areas. 3.61 Improve the Information Systems on Provincial Public Finance. It is impossiiJle to do macroeconomic planning without information on the pro- vinces when they are spending well over 12 percent of GDP and running up deficits of over US$1 billion per year. A first step in improving provin- cial financial management and the consolidated public accounts for macro- economic planning should be to establish an efficient information system for the collection and analysis of the provincial budget data.  - 51 - Social Security 3.62 To address the problems of Argentina's social security system, the Government might be attracted to adjustments aimed at mobilizing more resources for the current system: Increasing formal-sector employment, increasing the wage tax on the self-employed, and reducing the current transfer of 10 percent of social security income to the health insurance fund for retired persons. None of these options, nor any combination of them, offer much hope for increasing system revenues (let alone redressing the inefficiency and inequity of the present system). 3.63 A different pattern of benefits, based perhaps on an alternative theory of the function of social security, with sharply reduced pension obligations at higher income levels, may have to be introduced, to sub- stitute for entitlements that will be unsustainable in the future. Benefits could be reduced in a way that could actually increase both the efficiency and equity of the benefits package: (a) Present low retirement ages--age 55 for women and 60 for men--drive the system towards deficit, even at high quota rates. There is no alternative to increasing retirement age by 5 or 10 years so that years of contribution would rise relative to years of receiving benefits; (b) Reducing the rate of salary replacement from 82 percent to about 40 percent; alternatively, the government could permit a low, basic rate of salary replacement with voluntary pur- chase of additional coverage; and (c) Using an extended modest salary base for calculating pension rights (not the last salary but, for example, a 10-year real average). A gradual phasing in of benefit changes for future beneficiaries, as was done in the United States' social security reform of the early 1980s, might offer an acceptable way of reducing otherwise unsustainable obligations.  - 52 - CHAPTER IV: MONETARY POLICY: DEALING WITH FISCAL AND QUASI-FISCAL DEFICITS 4.01 The present hyperinflation is, in large measure, a manifestation of the erosion of the Central Bank's capacity to run monetary policy. The Central Bank has been tightly constrained by the need to secure financing for the nonfinancial public sector deficit and by the narrowness of austral-denominated financial markets. Yet monetary policy has often had to shoulder a disproportionate share of the burden of stabilization, lead- ing to unsustainably high real interest rates. In addition, the Central Bank has become a loss-making financial intermediary. The losses have complicated the conduct of policy by adding a source of expansion of the monetary base. The resources the Central Bank has drawn away from the commercial banks have gone to finance relatively inefficient, if not loss- making, public-sector activities, leaving the private sector starve•d of resources essential for working-capital and commercial finance. The scarcity of such finance has contributed to Argentina's disappointing real economic performance over the past fifteen years. A. The Central Bank in the Financial System 4.02 The Argentine Central Bank carries out monetary policy under an unusually strong set of constraints. The public has reduced holdings of domestic currency to a minimum, and the capital account remains virtually completely open. The balance sheet of the bank itself has been severely undermined by its utilization as a conduit for subsidies and for the absorption of the internal and external debts by the public sector. The virtual lack of access of the public sector to voluntary term lending has also thrown the burden of the financing of the deficit on the shoulders of the Central Bank. 4.03 While use of the Central Bank to pursue other objectives has a long history in Argentina, it is useful to recall the main developments in the past two decades, since they have shaped the current structure of the Central Bank balance sheet, contributed to the emergence of the problem of the quasi-fiscal deficit, and constrained the operations of monetary policy. The main events to be recalled are: the 1977 reform and the crea- tion of the Monetary Regulation Account (CRM); the nationalization of the private external debt; and the nationalization of the private internal debt. Reform: 1977-1980 4.04 The second Per6n government effectively nationalized the banking system between 1973-76 through the imposition of 100 percent reserve ratios. In contrast, the military government that took power in 1976 started to move in a more market-oriented direction. In a compromise between liberalization (which called for low reserve ratios) and the need to establish monetary control to deal with continuing high inflation (which implied a need to restrain monetary growth), the Authorities settled on the required-reserve ratio of 45 percent contained in the 1977 reform. To minimize the effect of the reserve requirements on borrowing-lending spreads (now freely determined in financial markets), the Central Bank was directed to pay interest on commercial banks' required reserves. In turn,  - 53 - the interest would be financed through a fee collected on demand deposits. The Central Bank fund through which these operations were carried out was called the Monetary Regulation Account (CRM). 4.05 Early operations of the CRM involved losses for the Central Bank. Continuing inflation discouraged the public from holding demand deposits, thus limiting CRM revenues; CRM expenses remained high because the reserve accounts on which it paid interest were high. This was an instance of Central Bank decapitalization--a problem that has persisted. However, the reform eventually gained temporary success. Decreasing inflation brought real bank-deposit growth, increased commercial bank lending and intensified bank competition. The M2/GDP ratio rose from 13 percent in 1976 to a 1978-1981 average of 21 percent (Table 4.1). By 1979 the CRM losses dis- appeared, and the Authorities gradually reduced commercial-bank reserve requirements. 4.06 Important weaknesses emerged in the liberalization process, how- ever, many of which have persisted. Regulation and supervision remained weak following the reform. The 1978-1981 macroeconomic policy, centered on fighting inflation through an increasingly overvalued exchange rate, effectively forced domestic interest rates to rise sharply in order to attract financial resources from overseas. As a consequence, banks began to compete for funds, and interest rate levels began to rise sharply. Sound banks were increasingly forced to match the higher interest rates offered by banks facing liquidity problems--in part because time deposits were insured. The liberalization process began to falter as credit opera- tions became over-extended and the Government's macroeconomic policies subjected the financial system to excessive strain. Interest rates rose so high in private financial markets that the explosive growth of real private debt became a significant problem. This problem was compounded by heavy public and private external borrowing. The stage was set for an eventual "rescue operation" by the Central Bank, that would further undermine its balance-sheet. Counter-Reform: 1980-85 4.07 A financial crisis erupted in early 1980, as several overextended banks and corporations either went bankrupt or required relief to remain in business. Meanwhile, the massive devaluation that ended the Tablita exper- iment also resulted in considerable difficulties for external debt service. By mid-1982 the external debt and the mushrooming corporate debt forced the Authorities effectively to bail out the entire system by ordering financial institutions to carry out a wholesale corporate-debt rescheduling for sixty months at negative real interest rates. The Central Bank effectively funded this by rediscounting it through a "consolidated loan" carrying sharply negative rates of interest in a period of near-hyperinflation. In addition, the Central Bank assumed virtually all of the private sector's external debt through an exchange-rate guarantee scheme, since it could no longer make foreign exchange available for private external-debt service. Controls on interest rates were reintroduced; marginal required-reserve ratios on regulated deposit accounts were increased virtually to 100 per- cent to allow the Central Bank to fund the purchase of the domestic debt. This "counter-reform"--carried out against the Authorities' longer-term objectives as an emergency measure to cope with an unprecedented crisis --returned the system to something much like its 1973-1977 structure. It  - 54 - Table 4.1: ARGENTINA - MONETARY AGGREGATES, ANNUAL AVERAGES 1970-1988 (Thousands of 1970 Australes; stocks at end of year) ---·---*---- M1 •I M2 bl ~----------------------------- --~ ------- ------------------ ------------ -- 1970 Annual Rate Percentage 1970 Annual Rate Percentage Prices of Change of GOP Prices of Change of GOP - - - - ------ --- --·-------------- ----- - - - - - - - - - - - - - - - - - - - - - ------------ 1970 6.36 16.4 8.9 26.7 1971 6.13 -4.3 14.0 8.7 -2.4 23.8 1972 4.26 -16.8 11.6 7.4 -16.7 20.1 1973 6.89 38.2 14.3 10.0 36.0 24.3 1974 7.01 18.9 16.6 11.7 16.6 26.7 1976 4.90 -30.1 10.7 6.4 -46.4 14.0 1976 3.62 -26.0 8.5 6.7 -10.4 13.4 1977 3.14 -13.4 7.2 7.6 32.0 17.2 1978 3.36 6.8 7.7 8.6 13.1 19.6 1979 3.37 0.8 7.2 10.6 23.3 22.6 1980 3.84 13.8 7.6 11.3 7.4 22.3 1981 2.70 -29.7 6.1 9.4 -16.9 21.0 1982 2.46 -8.9 6.0 6.3 -32.2 16.6 1983 2.34 -4.8 6.6 6.6 2.2 16.2 1984 1.94 -17.1 4.4 6.3 -17.8 12.2 1986 2.44 26.9 6.6 6.2 16.0 14.2 1986 2.73 11.8 6.9 7.9 28.4 17.1 1987 3.68 34.8 6.0 11.7 47.6 16.9 1988 cl 1.66 -66.0 6.8 7.7 -34.6 23.8 Source: Central Bank of Argentina (BCRA). •I Currency plus private sector demand deposits. bl Ml plus priv•te sector holdings of time deposits and certificates of deposit. cl 1988 figures are for end of third quarter.  - 55 - represented another instance of the extreme difficulty of carrying out structural reforms in the financial system under unfavorable macroeconomic conditions, and put a heavy mortgage on the Central Bank's future operating ability. 4.08 Several measures accompanying the counter-reform undermined mone- tary control. The increased public expenditure occasioned by the South Atlantic conflict in April 1982 and the external financing constraint that resulted from the eruption of the international debt crisis led to unpre- cedented nonfinancial public sector deficits, and to heavy domestic credit creation through Central Bank advances. The Government determined that public enterprises were henceforth to be financed exclusively by the Treasury; accordingly, a rediscount mechanism was established at the Central Bank, which was used to cancel outstanding public enterprise liabilities with domestic commercial banks. After July 1982, the CRM fell into sharp deficit, because it had to pay interest on the higher reserve requirements at the same time that the private sector's willingness to hold money and long-term bank obligations was decreasing. This was also accompanied by monetary-base creation, because the CRM developed the practice of capitalizing interest and other adjustments on the loans rescheduled by the commercial banks, while it paid interest on the reserve requirements on short-term time deposits received by the financial system. 4.09 The banking system that emerged from the 1980-1982 crisis was thus a peculiarly distorted one, in which the Central Bank, having absorbed the private domestic and external debts, operated as a loss-making intermediary between the commercial banks' devalued assets and their resource accumula- tion. The operation of the system tended to ensure, moreover, that the Central Bank's losses would be financed preponderantly through money crea- tion. B. Dealing with the Quasi-Fiscal Deficit: 1985-1989 4.10 The progressive undermining of the Central Bank's balance sheet has resulted in an increasing claim on domestic savings to cover losses on this account. In the Argentine debate this has been referred to as the problem of the quasi-fiscal deficit.!/ Depending on economic developments, the deficit can be substantial, as was the case in 1987 and early 1989. It is defined as comprising the operating loss (or profit) of the Central Bank on account of intermediation operations, plus any adjustments necessary to take into account the fact that some rediscounts issued to the financial system and other entities may never be recoverable, i.e. they represent expenses that should be part of the NFPS budgetary allocation. The deficit can be further decomposed into an external and an !/ Defining the quasi-fiscal deficit itself, however, has proven a contro- versial exercise. As discussed below, the annual submission of the rediscount budget to the Congress details the program of credit from the Central Bank to various entities that policy makers believe ought to be processed through appropriation by legislature. This definition --though important as it has been in limiting the recourse to Central Bank direct financing--is unduly narrow if the allocative effects of deficits of the public sector are at issue. In particular, there is no compelling reason to exclude from the deficit losses that arise from "pure" Central Bank operations.  - 56 - internal component. The first represents the loss that the Central Bank incurs when servicing external debt or providing an exchange rate guarantee (net of the interest earned on gross international reserves). The second represents instead the loss (or profit) on account of domestic operations. 4.11 Interest Rate Rules. The vulnerability of the Central Bank to its own deficit, revealed dramatically in 1987 and in early 1989, is partly the result of different interest rate rules applicable to individual categories of assets and liabilities. These were determined by the reforms initiated after 1985. The new economic team, acting to revitalize the banking system and to limit the contribution of the CRM to the worsening inflation rate, announced a banking-sector reform package. The required-reserve ratios on different kinds of bank deposits were reduced and made more uni- form. The fees on demand deposits that funded the CRM were eliminated. Commercial banks were authorized to set up unregulated time deposits with minimum seven-day maturities and subject to a series of other Central Bank regulations, which constituted an important liberalizing step. These measures enabled the banking system to capture and lend a significant quantity of resources that might otherwise have remained in the informal market. However, much of the lending was to be sequestered to finance public sector deficits. 4.12 One of the most important aspects of the reform was the institu- tion of 11 forced investments 11 which the commercial banks were requin:!d to hold with the Central Bank to replace the high reserve requirements. The crucial difference between forced investments and the previous high reserve requirements is that the forced investments' balances would generally be unavailable to the banks even when their deposits declined; in addition, a large proportion of the interest on forced investments would be capitalized in each commercial bank's account, rather than paid out. Recourse to forced investments was increased in late 1985 through the issue of the BONOR. The interest rate on the forced investments was generally linked to the average cost of funds for the banks, plus a generous intermediation spread. Interest on the BONOR was paid in cash, but in practice thE:! forced investment requirement was used to offset the resulting money creation. Several modifications were introduced to the system over the next two years, virtually guaranteeing the capitalization of most of the intE!rest due. 4.13 Both the interest rate rules for Central Bank assets and the inherent quality of those assets have contributed to compounding the~ problem. Most Central Bank assets, as discussed, are in the form of redis- counts to failed financial institutions or to public banks such as BHN and BANADE, whose ability to service the debt is minimal. Essentially in con- sideration of this, the average interest rate charged on assets has tended to be de-linked from market rates, and, albeit marginally positive in real terms, has exposed the Central Bank to severe losses whenever monetary policy or other influences have resulted in high real interest rates. The most eloquent example is the December 1988 - May 1989 period. 4.14 Overall, three interest rate rules have been in use during the past two years: interest rates linked to LIBOR and the exchange rate (in practice charged only on assets, particularly export financing); interest rates fixed in real terms (charged on most rediscounts to the financial  - 57 - system) and interest rates linked to financial market rates. Table 4.2 shows the relative shares of different interest rules at end-1988, together with the average nominal interest rate on assets and liabilities. Due to the high market real interest rates prevailing in December 1988, the average rate charged on assets was considerably lower than that on liabilities.~/ 4.15 Besides the losses that can be accumulated on account of interest rate rules, some Central Bank assets may turn out unrecoverable. Prudent practice suggests that provisions be made against these contingencies. Indeed, as discussed above, credit to the financial system has tradi- tionally been an important and not easily controllable source of money expansion. Rediscounts to the National Mortgage Bank (BHN) and to the Development Bank (BANADE), as well as to provincial banks have been a major vehicle for granting subsidies outside the budgetary process or for financing provincial government deficits outside the co-participation mechanisms. This process became particularly marked during 1987, when the monetary base gave way to powerful expansionary pressures. Important legislative and gubernatorial elections in September made it difficult to carry out restrictive policies during the second and third quarters of the year. Central Bank "rediscount" credit to financial institutions increased sharply. The Authorities carried out some costly interventions in troubled financial institutions. In addition, the Central Bank provided rediscount credit to the BHN, which had lost access to an important block of pension funds during 1985 in a reform associated with the Austral Plan but had continued nevertheless to lend heavily. The Central Bank also provided rediscount credit to the BANADE. Over the twelve months from October 1986 to October 1987, Central Bank rediscounts increased by a monthly average of US $183 million. 4.16 Strongly voiced doubts on the soundness of the assets underlying the expansion of rediscounts led to the setting of severe rules regarding some of the rediscount lines. Beginning in late 1987, provincial banks were disallowed use of their formerly automatic window at the Central Bank; rediscounts for BHN were limited to cover only the obligations with sup- pliers that could not otherwise be rescinded, and the BHN ceased issuing new housing contracts; and adequate loan-loss provisioning was begun for advances to banks in liquidation. In addition, the annual rediscount pro- gram is now annexed to the national budget presented to Congress. ~/ As discussed elsewhere, the interest accrued on both assets and liabilities is mostly automatically capitalized (less than 20 percent of interest on liabilities is paid out, and virtually no interest on assets is paid in). This, in turn, has raised the question of the economic significance of the normal loss/profit, since the ability of some of the debtors ever to repay the Central Bank has been considered doubtful at best.  - 58 - Table 4. 2: ARGENTINA: SELECTED ITEMS OF THE BALANCE SHEET OF ,rHE CENTRAL BANK - DECEMBER 1988 Percent of Percent Average Inte!rest GOP Rate Assets Total 10.3 100.0 8. 2. Market Interest Rates 2.2 21.1 Fixed Real Rates 5.4 52.4 Linked to Exchange Rates 0.8 8.0 Other 1.9 18.5 Liabilities Interest Bearing 8.6 100.0 11.4 Market Interest Rates 8.4 97.5 Fixed real Rates 0.0 0.4 Linked to Exchange Rates 0.2 2.1 Monetary Base 5.3 Source: Central Bank 4.17 Nonetheless, the burden on domestic resources of the Central Bank remains high (Table 4.3). Ironically, through its losses the Central Bank is preventing a full utilization of the inflation tax revenues by the non- financial public sector. c. Constraints on the Operation of Monetary Policy Instability Among the Sources of Monetary Expansion 4.18 Keeping the growth of monetary aggregates under control has often been difficult in view of the erratic nature of some of the sources of money base creation and of the high and variable interest rates. An important provision of the Austral Plan was the elimination of direct Central Bank financing of the nonfinancial public sector deficit, one of the main sources of expansion of the money base for a number of years. However, the public sector still represents a substantial source of direct and indirect money creation, via two main channels. First, the social security system utilizes the Central Bank as a "buffer" between the receipt of contributions and the payment of pensions. Any shortfall in revenues can thus be automatically financed through the use of the Central Bank window, leading to an increase in the base. Second, and most important in recent times, the Central Bank is also the lender of last resort in case  - 59 - Table 4.3: Quasi-Fiscal Surplus of the Central Bank, 1988 (Percent of QOP) --------- Q.I QII QUI QIV Annual -------·- Domestic R.. ult Interest received 10.0 16.8 16.8 11.6 13.& Interest paid 11.6 14.1 12.3 10.6 12.2 Net interest -1.6 1.7 4.6 0.9 1.4 Exchange operations 0.0 o.o 0.3 1.6 0.6 No11inal result -1.6 1.7 4.8 2.& 1.9 External Result -0.9 -0.2 -0.9 -0.3 -o.6 Provisions for BHN -1.9 -1.8 -2.8 -2.3 -2.2 (461 n011inal increase) Quasi-Fiscal Surplu• -4.4 -0.3 1.0 -0.1 -1.0 Adjustllents for Inflation Net interest-bearing ••••t• •I 1.8 2.0 3.2 0.& 1.8 Monetary Base 4.8 6.0 &.6 1.4 4.& Total 6.6 8.1 8.8 1.9 6.4 Source: Central Bank of the Republic of Argentina (BCRA) and IBRO •taff. •I Interest-bearing liabilitie• 11inus ••••t• net of 4&1 of BHN rediscount•. the Government is unable to roll over any amount of maturing debt. In the context of sharply reduced private sector confidence during 1988, this channel became one of the most important sources of monetary creation, since the Government was unable to roll over significant quantities of maturing debt without forcing interest rates up intolerably. 4.19 Another ~portant source of excessive money creation has been the monetary financing of the quasi-fiscal deficit of the Central Bank itself. As discussed, the Central Bank has been s~ultaneously increasing the pro- portion of market-related-interest bearing liabilities in its balance sheet, and has allowed an almost complete liberalization of those rates. As a consequence, the interest paid on its liabilities that is not auto- matically capitalized has also become an important source of money crea- tion, and one that grows worse when a restrictive monetary policy is applied. Thus, ironically, a restrictive monetary policy may lead to greater money creation in a vicious and unstable circle.  - 60 - Narrowing Austral-Denominated Markets 4.20 The variability and high level of real interest rates observed in Argentina in recent times are to a certain extent the result of the appli- cation of restrictive monetary policies to shrinking financial markets. Table 4.1 shows the dramatic decrease in monetization observed in Argentina in the past few years. Narrowly defined money (Ml, currency and unremuner- ated demand deposits) fell from 15.4 percent of GDP in 1970 to a low of of 2.4 percent at the end of the second quarter of 1985; the remonetization associated with the early success of the Austral Plan was quickly reversed when inflation picked up in 1987 and continued through the third quarter of 1988. A similar pattern is observable for other aggregates as well, albeit to a more limited extent: M4 (M1 plus time deposits and certain other assets), for instance, fell from a high of 27 percent of GDP in 1970 to about 15 percent in mid-1988. The stock of interest-bearing time deposits now amounts to about three times Ml. 4.21 Inflation has caused the sharp fall in the demand for money. As a result, the monetary Authorities have found themselves with an increasingly tighter scope for maneuver. Unexpected increases in the supply of ~~oney may in fact very rapidly lead to loss of international reserves or fuel inflationary expectations. Monetary Policy Practices: The Costs of Liberalization 4.22 The oscillation of policies vis-a-vis the financial sector between the complete nationalization of deposits and a relatively free interplay of market forces has produced considerable variation in the strategy and instruments of monetary policy over the years. Currently, Argentina's monetary programming, given a target for external reserve buildup and assumptions on inflation and growth of GDP, sets available credit to the private sector as a residual after net credit to the public sector has been determined. 4.23 To carry out the reconciliation of the demand for monetary base with the supply, the Central Bank has utilized a variety of instruments; more recently, given the difficulties involved in the use of government paper, the sterilization of excess money supply has been carried out mainly through the use of liabilities issued by the Central Bank, or through increases in forced investments. Market instruments consisted of short- term Central Bank bills (CEDEPs), whose yield was determined by the market. 4.24 The main considerations in the choice of these instruments have been cost, stability, flexibility and repercussions on the financial system. On the cost side, forced investments have not been much less expensive than Central Bank bills, although it can be presumed that, given the narrowness and proneness to nervousness of markets, an increased use of this instrument might lead to a higher risk premium being demanded. Addi- tionally, the use of Bank bills complicates money management, since, as seen, only a portion of the interest due on forced investments is actually paid out to the banks, but all of the interest on CEDEPs is; if restrictive policies result in increased real rates, a greater burden is placed on monetary policy.  - 61 - 4.25 The problems associated with the use of the CEDEPs led the Central Bank progressively to reduce their use, and to rely more aggressively on forced deposits and increased reserve requirements as an instrument of monetary control. While this represents a setback in the intent to give market forces a greater role in determining the allocation of credit, it is of relatively secondary consequence. The real issue, in fact, is the con- tinued need for recourse to austral-denominated credit on the part of the public sector, which leads to a sequestration of resources away from the private sector, whether this be in the form of market-driven bills or com- pulsory loans from the financial system. D. Recommendations 4.26 Argentina's Central Bank needs to be reformed and recapitalized. The objective would be to create an institution that would carry out mone- tary and exchange rate policy governed by well-defined, transparent rules. Such reform and recapitalization would require a law approved by Congress, with appropriate changes in the present organic law governing the Central Bank. One way or another, the law would effectively separate the present Central Bank into an "old" and a "new" Central Bank. The old Central Bank would incorporate at least the loans to bankrupt public and private sector banks, as well as those external obligations not normally part of a central bank's external obligations--essentially those arising from the Central Bank's assumption of private external debt in the early 1980s. The Govern- ment could purchase these assets at their nominal value from the present Central Bank in order to set up the old Central Bank; in this way, the new Central Bank could be recapitalized. The Government could pay with (for instance) a ten-year bond, which it would service by turning over market- able short-term bonds that the new Central Bank could use in open market operations. The Government might also provide some additional capitaliza- tion, perhaps through the proceeds of a foreign loan, or perhaps a special bond issue. The old Central Bank would be audited and then liquidated. 4.27 The present forced investments and rediscounts could be dealt with in various ways, depending on their relative magnitudes at the moment of the stabilization. (The magnitude might be relatively small if the hyper- inflation went on for relatively long.) The dynamics of the hyperinflation are such that Central Bank rediscounts to the private and public banks are rising rapidly while forced investments are being released. At the moment of stabilization, a commercial bank that still had a net liability position with the Central Bank could receive the balance in long-term government bonds (paying a relatively low real interest rate) or as new bank reserves (on which it would earn little or no interest). 4.28 If the hyperinflation continues, the Central Bank would have little choice but to release the entire stock of forced investments and/or increase the flow of liquidity rediscounts to prevent the commercial banks from becoming illiquid in the face of withdrawal demands. Eventually, the commercial banks' net liability position (i.e., forced investment less rediscounts) with the Central Bank would fall to zero--at which point the problem of the forced investments stocks would dissipate or even become negative. The commercial banks would disappear in the process, however, since the private sector will have drained their deposits from them. In the end, the commercial banks would have virtually no remaining deposit  - 62 - liabilities against a portfolio of uncollectable loans. The private sector would convert the currency withdrawn into dollars, so that the entire mone- tary system would disappear. This would amount to a complete "meltdown" of the monetary system. 4.29 The new Central Bank law would make the Central Bank directors politically independent, in the sense that, once appointed by the president and confirmed by the Congress, they might be removed only for close·ly defined impeachable offenses. Their terms ought to be relatively lengthy, and staggered. They would have full power to deny loan requests to any private or public agency. Rules regarding rediscounts and lending to the Government should be clear and well-defined; private credit recipients should be required to repay them in cash before subsequent credit can be granted. Credit to the Government should be prohibited. 4.30 Activities outside the normal purview of a monetary authority should be transferred outside the Central Bank. For example, in order to make public finances more transparent, and to make the Central Bank's profit-and-loss account (quasi-fiscal deficit) more accurately reflect the costs of monetary authority activity, all obligations arising from the 1983-1987 new-money and rescheduling agreements should be transferred to the Central Government. This would leave the Central Bank holding obliga- tions only to other central banks, and to the IMF. Second, deposit insurance and superintendency activities should be carried out by separate institutions. Establishing separate Authorities for these activities would enable the Central Bank's directors to concentrate on monetary and exchange-rate policy. Finally, Central Bank rediscounts should not be used for any subsidization. For example, at present rediscount operations for export activity incorporate a subsidy element that should be eliminated. 4.31 For the financial system, the following measures are suggested: The net flow of all Central Bank credits to the BHN, BANADE, and other public banks should cease immediately. This, together with the reforms of the Central Bank, would sever the intermediation relationship between the Central Bank and the public banks. It would also imply that restructuring plans already contemplated for these banks would have to be accelerated or the institutions would have to be closed.  - 63 - CHAPTER V: MEDIUM-TERM PRICE STABILITY AND EXTERNAL FINANCE 5.01 Putting Argentina on the path of sustained recovery and high growth requires steady improvement in the now stagnant domestic savings. This improvement has to be rapid enough to allow for increased investment and servicing of some portion of the external debt. A strategy to revive domestic savings would have to center on restoring price stability and therefore emphasize deficit reduction. The objective would be to reduce the nominal fiscal deficit immediately to levels of available foreign finance so that the Government would not have to borrow from the financial system or print money. However, the imbalance of the combined public sector is now so large--perhaps as much as 13 percent of GDP in 1989--that drastic measures--actions hitherto considered politically impossible--will be required rapidly to eliminate the structural fiscal deficit. 5.02 For the foreseeable future, voluntary borrowing by the Government in domestic capital markets appears impractical. A necessary requirement for price stability, consequently, will be the availability of sufficient external borrowing to finance the overall public sector deficit so as to eliminate recourse to domestic borrowing. In other words, if expenditures should rise (either for reasons of domestic policy or because of exogenous shocks, such as a rise in foreign interest rates or a real devaluation), inflation will be the ineluctable result--unless increased foreign finance is available. To achieve stability over the medium term, adequate foreign finance is therefore as essential as tight control of the fiscal deficit. 5.03 In the near term, conventional new money packages to support price stability seem out of reach. Argentina has accumulated about US$4.0 bil- lion in arrears tu external--mainly private--creditors, and ceased regular payment to commercial creditors in April 1988. Continued arrears seem unavoidable in the short term. However, the funding of a program for price stability and growth cannot long rely on a strategy of accumulating arrears. Failure to pay creditors creates uncertainty among private investors, undermines exchange rate policy, and threatens trade credit lines that are the lifeblood of foreign commerce. 5.04 Therefore, once a medium-term economic program is in place, dis- cussions with external creditors should seek to regularize foreign finan- cial ties, and reestablish the conditions for restored creditworthiness. This would aim: (i) to put the Government in a position to service its external debt without the need to refinance interest payments in new con- certed packages; (ii) to fund adequately the Government's stabilization efforts under reasonable assumptions of economic management; and (iii) al- low the private sector to attract suppliers' credits, trade credits and term finance. Since private term finance is unlikely to materialize with- out some price stability, controlling inflation is virtually inseparable from restored creditworthiness. 5.05 The projections in this chapter indicate that these conditions can be satisfied only through substantial reductions in the external debt. There appears to be no scenario--even prolonged recession--that would per- mit an adjustment in external accounts sufficient to reduce external financing requirements to the levels proposed by the commercial banks in  - 64 - September 1988. The banks proposed at t.hat time financing of US$2 billion, equal to 32 percent of interest payments for 1988-89--and this only with credit enhancement from the World Bank. Even assuming capitalization of arrears through end-1989, the economy would have to contract massively to allow the current account to move toward equilibrium at a rate consistent with these low levels of external finance. This would in effect replay the short-term pattern of adjustment in 1982-83, and would require a substan- tial further fall in living standards through a further real devaluation of the austral that would have to be sustained on a permanent basis. More- over, recession would reduce savings, and increasing the trade balance would imply lower investment. 5.06 But this is only part of the problem. Since the public sector does not own the country's exports, the Government would still have to raise the resources to service the debt. During a recession, revenues would fall without autonomous policy action, yet increasing taxes would depress private consumption even further and would be politically un- sustainable. Resorting to the inflation tax--the principal vehicle used in 1982-83--is no longer possible because a stable moderate inflation scenario no longer exists. 5.07 This chapter examines the magnitudes of the needed efforts--domes- tic and foreign--necessary to provide price stability and growth in Argentina. It presents a base-case scenario of stabilization based on imvroved public finances and then examines the foreign resource require- ments necessary to support these efforts.!/ It should be underscored that this projection is a scenario--not a forecast--and is predicated upon a strong program of stabilization and structural reform of the public sector; until the design and implementation of the program are clear, the projec- tions should be seen as illustrating the general magnitudes of the required internal and external adjustments; more precise projections can be prepared only after a well-defined policy course is charted. The first section focuses on realistic targets for the public sector, outlines growth objectives and draws implications for the current account of the balance of payments. The second section examines the magnitudes of external financing that would support a strong domestic program. A. Domestic Macroeconomic Objectives Public Finance 5.08 A successful stabilization effort can be defined as the substitu- tion of tax-based resources to finance expenditures for inflation-b~tsed financing. A prerequisite is a reduction of the overall demands on finan- cial markets through a decreased budget deficit. However, it is not suffi- cient that the deficit be brought down--the deficit must be reduced in a manner that assures sustainable progress and through instruments thatt do not introduce further distortions. The sustainability of the progress is as important as the size of the reduction of the deficit. The public will !/ The general form of the model and detailed assumptions are prese•nted in Annex 1.  - 65 - be willing to hold money and eventually government debt only if it per- ceives the process to be sustainable. Consequently, the reduction of the deficit must be achieved through institutional reforms that change rules and practices that in the past have been the major sources of what might be called the structural deficit. 5.09 The objective of fiscal policy should therefore be to bring down the combined public sector deficit to levels consistent with expected net foreign lending; in the short term, foreign resources would seemingly have to come primarily from the international financial institutions and arrears to the commercial creditors. Otherwise borrowing in domestic credit markets will maintain pressure on domestic interest rates, and borrowing from the Central Bank will perpetuate inflation. 5.10 This task may not be feasible for 1989 as a whole. The loss of control over inflation this year has decimated revenue collection in real terms, increasing the deficit of the nonfinancial public sector. Moreover, the unusually high interest rates have widened the quasi-fiscal deficit of the Central Bank beyond levels experienced in the past. Increases in external interest rates in 1988, together with real devaluation implicit in exchange rate movements in the second quarter, have added an additional 2.2 percentage points of GDP to fiscal expenditures. These factors are pushing up the combined deficit of the public sector, probably to its high- est level in the past five years. Finally, foreign finance is constrained, and so the deficit financeable with foreign resources obtained through orderly processes is considerably lower than in the past. 5.11 Fiscal Adjustments. The scenario discussed below presumes that a stabilization program will be enacted during the second semester of 1989. Moreover, it assumes that efforts will continue so that the deficit of the nonfinancial public sector will be eliminated by 1991. Assuming that the domestic component of the quasi-fiscal deficit of the Central Bank is zero,2/ the quasi-fiscal balance would then be limited to the external component of- the Central Bank's operating results. The combined deficit would be con- sistent with a declining growth of the nominal money stock, and long-term inflation rates falling sharply from over 30 percent per month in 1989 to 4 percent annually in 1991. ~/ It is difficult to project realistically the domestic component since it is the result of the spread between the asset side income rates (based upon an average real lending rate that is marginally positive) and costs of funds on the liability side (based upon market rates). In conditions of financial stability, it is reasonable to expect that the domestic component would be slightly positive. Therefore, an assumption of zero domestic deficit is not unwarranted.  - 66 - Tahle 5.1, Argentina (COMIR i t..ent 8aa i a .. - Puhl ic Sector • of Current ClOP) •I -------------------------------------------------------------------------------------------------------------------------------------------------------- 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 -------------------------------------------------------------------------------------------------------------------------------------------------------- Toto I Currant Revanuea 19.6 17.1 15.8 19.1 20.1 21.1 22.4 23.1 23.1 2-3.1 23.1 23.1 Toto I Current Expendit.urea 24.5 21.0 20.9 20.7 20.0 20.5 21.7 22.1 22.1 ZZ.1 22.1 22.1 Waoea A Salarlaa of General Oovern•ent 4.2 3. 7 3.4 3.4 3.4 3.7 3.7 3. 7 3.7 :J. 7 3. 7 3. 7 Ooocla A Sarv i caa of C.neral GovernMent. 2.2 1.9 1.8 1.8 1.8 2.0 2.0 2.0 2.0 2.0 2.0 2.0 Tranafera l Other CE 13.8 11.9 10.0 9.2 9.3 9.8 11.1 12.0 12.7 1:!.1 13.6 14.0 Intaraat 4.3 3.5 5.7 6.3 5.5 5.0 4.9 4.4 3.7 :!.3 2.8 2.4 Do.eatic bl 0.8 0.5 0.9 1.0 0.7 0.6 0.6 0.5 0,5 0.4 0.4 0.3 Foreign 3.5 3.0 4.8 5.3 4.8 4.4 4.3 3.8 3.3 :1.8 2.4 2.0 Pultl ic Savinga (3.0) (2.5) (5.2) 1.4 3.6 4.6 4.7 6.0 6.0 11.0 6.0 6.0 Public Entarpriaa Non-intereat Savinga 1.9 1.4 (0.1) 3.0 3.5 4.0 4.0 5.0 5.0 s.o 5.0 5.0 Capital E•pend i turea 5.1 4.4 3.9 3.9 4.3 4.5 4.5 4.9 5.0 5.0 5.0 5.0 O.neral Oovern .. nt 1.8 1.1 0.9 0.9 1.3 1.5 1.5 1.9 2.0 :i~ .0 2.0 2.0 Public Enter-priae 3.4 3.3 3.0 3.0 3.0 3.0 3.0 3.0 3.0 ~1.0 3.0 3.0 Nonfinancial Pu"l ic Sector (7.3) (5.9) (8.0) (1.4) 0.3 1.1 1.2 2.1 2.0 ~·.o 2.0 2.0 Quaai-Fiacal Surplua of Centr•l B•nk (1.0) (1.1) (5.5) (2.0) (1.8) (1.6) (1.5) (1.4) (1.1) (1.0) (0.8) (0. 7) Over-all Balance Financed by' (8.3) (7 .0) (13.5) (3.4) (1.5) (0.5) (0.3) 0.7 0.9 1.0 1.2 1.3 E•tern•l Borrowing (net) 2.0 0.2 (0.2) (1. 7) (1.3) (0.8) (1 ."1) (1. 4) (1.6) (1.8) (1. 9) (1.8) Net Arre•r• ond Unidentified 0.0 1. 9 6.0 4.3 2.7 1.5 1.6 1.2 1.0 0.9 1.0 0.8 Net Do.eatic Financing 6.3 4.9 7.6 0.7 0.0 (0.1) (0.1) (0.6) (0.3) (0.1) (0.3) (0.3) -------------------------------------------------------------------------------------------------------------------------------------------------------- Source: Anne• 1. •I E•cludea provincea. bl Includea only the real cQ~t~Ponent..  - 67 - 5.12 A first priority in reducing the nonfinancial public sector deficit would be to reverse the deterioration of tax revenues. This could be accomplished through: (i) an immediate reduction in tax expenditures (for example, a suspension of export subsidies, emergency suspension of the industrial promotion program and vigorous implementation of the new indus- trial bond scheme); (ii) increased efforts at strengthening the General Tax Administration (DGI); (iii) a rapid passage through the legislature of measures overhauling taxation of the energy sector, broadening the base of the value-added tax to replace export taxes, increasing the role of direct taxation (through an increase in the scope of personal income taxation and of land taxation); and (iv) a better integration of provincial and federal taxation on income and wealth. If these efforts were put into place, it should be possible to restore over 5 percentage points of GDP to the revenue base by 1992, including an additional increase from a positive Olivera-Tanzi effect (Table 5.1). 5.13 Current expenditures, already compressed, would have to remain under tight control. Substantial expenditure reductions would have to he achieved in the public enterprises, provinces and social security system. In the initial years (1990-91), increases in wages and purchases of goods and services would be held to the rate of growth of GDP, and rise only slightly after that time; a reform of the civil service rules which would allow for reductions in the overall workforce would permit some scope for the much needed increase in salary levels. Transfers to the provinces would have to be limited to amounts stipulated in the co-participation law, and, to offset automatic increases going to the provinces associated with revenue sharing in the tax reform; transfers to social security would have to fall by about 1 percent of GDP over the 1990-91 period, while transfers to the public enterprise sector (other than for agreed debt service) would have to remain at zero.l/ Meeting these targets would require additional fiscal discipline in the provinces and continued institutionalization of financial relationships between the provinces and national government as well as a major reform of the social security system. Interest expendi- tures in the short run are expected to increase because of the near-term rise in LIBOR and increased debt stock.!/ The overall objective, then, would be to constrain expenditure levels of the public sector to their current share of GDP, implying an absorption of the near-term increase in interest payments. ll In the projection, interest payments of the public enterprises are con- solidated with the central administration, and since transfers are limited to those interest payments, the assumption of no transfers is warranted. !/ The interest rate on commercial bank debt in Argentina is set roughly six months before due date, so interest rate changes have effect with a one semester lag. The annual rate for 1990 is 9.8 percent and 9.1 percent for 1991. Thus, when the text refers to interest rates applicable to 1990, it means the average prevailing in July 1, 1989 to June 30, 1990.  - 68 - 5.14 The public enterprises in 1987 ran a surplus on their consolidated noninterest current account, but that has eroded in the year since the Plan Primavera. Reforming the management in this sector would require institu- tional changes in the public enterprises designed to subject them to the discipline of the market, make price setting more autonomous from nlacro- economic policy, reduce expenditures, and make spending more efficient. Adequate pricing, liberating the sector from the shackles of the "buy national" legislation (which costs as much as 1 percent of GDP), and more efficient management could readily produce a 4 percent turn around in their noninterest current account. An aggressive program of whole and patrtial divestiture would begin to pay dividends in the form of lower currEmt expenditures over the medium term. These changes, together with tax reform and expenditure reductions, could increase public savings to over 4 percent of GDP by 1993. 5.15 This savings performance would permit some increase in public investment in 1991. At the same time, the austerity of this program would require that the public sector use its limited resources more efficiently. Since three-quarters of investment in the nonfinancial public sector (excluding the provinces) takes place in the public enterprises, they will have to be a central focus of efficiency gains. Highest on the reform agenda are elimination of buy-national procurement practices, improved competitive bidding, selective divestitures and new management arrange- ments, and better project selection. In addition, the Government should reallocate resources from low- (or negative-) return sectors--such as the railways--to high-return sectors, such as gas and oil production. 5.16 These measures could be expected to reduce the nonfinancial public sector deficit by more than three-fourths in 1990 relative to 1988 and eliminate it by 1991. This pattern of adjustment, after taking into account the quasi-fiscal loss of the Central Bank, virtually ends reliance on domestic borrowing from 1990 under the assumption that 2.6 percent of GDP in net foreign financing (including unidentified) is available in 1990 and 1.4 percent in 1991. External financing requirements will necessarily be met in the very short run through the accumulation of arrears to nonpre- ferred creditors until an internationally supported medium-term program can be worked out. Output and Growth 5.17 Stabilizing the economy will permit the gradual recuperation of domestic savings and investment. In this scenario, savings would have to increase from their present extremely low rates of less than 7 percEmt of GDP to nearly 14 percent in 1994 (Table 5.2). Increased domestic savings rates are necessary to finance continued high levels of external interest payments and increased domestic investment in productive activities.. The public sector, which has relied excessively on the inflation tax and sequestration of resources from the financial system, must play a leading role in the recovery of savings during the period of 1990-92, during which time private savings would be expected to respond timidly; after that, private savings could well be a driving force for growth. Stabilization has to proceed so that savers choose to save in domestic financial n1arkets  - 69 - Tabt. 5.2: Argentina - l<ey Mllcr"oecon~ic lnclicatora: Suat.ined Price St.alti I it.y Scenal"'io (In percent unlaaa otherwiaa apecified) 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 Annual Real Orowt..h Rat.ea: OOP (conat..ant. •arket prices) (0.2) (3.1) (2.2) 2.3 2.8 2.8 3.8 3.8 3.8 3.8 4.2 4.2 OOP ,.,. capita (constant. ••,.kat pr"icaa) (1. 7) (4.6) (3. 7) 0.8 1.3 1.3 2.3 2.3 2.3 2.3 2. 7 2.7 Pr'ivata Conau~~tPtion par capita (5.8) (2.3) (1.4) 0.1 (0.3) 1.7 1. 7 2.0 2.0 2.5 2.5 N.tional Accounta (ahara of curr"ant QOP): Total lnvaat.~~~ent 13.2 12.5 11.3 12.6 13.5 14.1 14.7 15.3 15.7 16 .I 18.5 16.9 Pri vat.a 8.2 7.5 7.4 8.7 9.2 9.6 10.2 10.4 10.7 11.1 11.5 11.9 Pub I ic 5.1 4.4 3.9 3.9 4.8 4.5 4.5 4.9 5.0 5.0 5.0 5.0 National Sav i nga 8.1 10.8 6.3 8.4 10.4 11.9 12.6 13.9 14.9 15.7 16.2 16.8 Privata u.o 13.3 u.s 7.0 6.8 7.3 7.9 7.9 8.9 9. 7 10.2 10.8 Pub I ic (3.0) (2.5) (5.2) 1.4 3.6 4.6 4.7 6.0 6.0 6.0 6.0 6.0 Foreign Saving• 5.1 1.7 5.0 4.2 3.1 2.2 2.1 1.4 0.8 0.4 0.3 0.1 Puhlic Sector (cOMIIIit.Ment baaia •• I of currant a:>P): Pub I ic: Savings (3.0) (2.5) (5.2) 1.4 3.6 4.6 4. 7 6.0 6.0 6.0 6.0 6.0 Capital E111pand i turaa 5.1 4.4 3.9 3.9 4.3 4.5 4.5 4.9 5.0 5.0 5.0 5.0 Nonfinancial Pub I ic Sact.or (7.3) (5.9) (8.0) (1.4) 0.3 1.1 1.2 2.1 2.0 2.0 2.0 2.0 Quaai-Fiacal Surplus of Central Ban!.: (1.0) (1.1) (5.5) (2.0) (1.8) (1. 6) (1.5) (1.4) (1.1) (1.0) (0.8) (0.7) Overall Balance (8.3) (7 .0) (13.5) (3.4) (1.5) (0.5) (0.8) 0.7 0.9 1.0 1.2 1.3 Exports <J.FS (real growth rata) 12.2 (10.3) 8.2 5.4 5.3 4.9 5.1 5.0 5.0 5.1 5.1 Li vaatock A Cereal a (5.8) (30.3) 3.7 \.6 1.6 1.6 1.6 1.6 1.6 1. 6 1.6 ~nufacturing 29.3 (5.1) 9.3 7.3 7.3 6.8 6.8 6.5 6.5 6.5 6.5 Exports of CNFS/Cu!"rant OOP 10.2 11.8 16.0 16.6 17.1 17.6 17.8 18.1 17.5 16.9 16.0 16.0 IIIIPOr"ta <»FS (rttal growth rata) (11.0) (17 .1) 5.2 6.1 5.6 7.6 7.6 7.4 7.5 7.8 7.9 I"'Porta of ONFS/Cu,·rant OOP 9.9 8.1 11.1 10.9 11.2 11.5 11.8 12.2 12.0 11.7 11.6 12.0 lRtPort Elasticity (including t<FS) 3.6 7.6 2.3 2.2 2.0 2.0 2.0 2.0 2.0 1.9 1.9 Raaourca Balance/Current. OOP 0.3 3.7 4.8 5.7 5.9 6.1 6.0 5.9 5.5 5.1 4.4 4.0 Cu.-rent. Account. Balance/Current CX>P (5.1) (1. 7) (5.0) (4.2) (3.1) (2.2) (2.1) (1.4) (0.8) (0.4) (0.3) (0.1) Te.-- of Trade Inde11 (1987 • 100) 100.0 115.0 111.7 107.5 108.5 109.6 110.6 111.8 113.0 114.3 112.4 110.5 Current. Account Balance ("li II ion USI) (4,238) (1,615) (3,263) (2,899) (2,276) (1, 761) (1, 768) (1.290) (841) (458) (396) (224) Net Financing RequireMent (•i II ion USI) a 39 2,108 4,511 3,436 2,296 1,327 1,547 1,329 1,162 1,268 1,553 1,325 Coverage Ratio b/ 5.8 67.6 56.6 61.8 71.6 80.9 82.2 90.8 99.5 107.3 110.2 116.4 Debt Ind i cat.ora: Total 000 (1111i II ion USI) cf 58,299 58,810 60,771 62,616 64,129 65,122 66,064 66,467 66,354 65,787 65,082 64,124 Tot. I DOD/Current OOP 70.4 61.3 93.1 90.9 86.8 82.2 77.1 71.6 62.8 54.6 47.1 42.7 Debt Service Total/Current CDP 8.3 8.0 14.6 13.5 12.5 11.7 12.0 12.3 11.2 9.9 9.0 8.2 lnt.ereat. Total (• i IIi on USI) 4,362 5,198 5,592 6,314 6,046 5,968 6,215 6,010 5,851 5,784 5,565 5,150 lntareat Total/Cu.-rent OOP 5.3 5.4 8.6 9.2 8.2 7.5 7.2 6.5 5.5 4.8 4.0 3.4 P.-eferential Debt Service/Current aoP d/ 6.4 7.2 11.1 11.1 9.6 8.7 8.0 7.1 6.0 5.3 4.5 4.0 Do11eatic: Inflation Index (annual <>) 424 3904 27 4 4 4 4 5 4 Real E11change Rate Inde11 100.0 90.3 133.6 144.3 144.3 144.3 144.3 144.3 137 .I 130.3 123.7 123.7 WP (bi II ion USI) 82.8 96.0 65.2 68.9 73.9 79.2 85.7 92.8 105.7 120.6 138.1 150.1 Source: Anne11 1. a/ Net credit fi"OWI eourcea other than IBRO, 108, IHI= and Bi laterala. tJ/ There~u.-ce balance •• a percentage of total i ntereat, c/ lncludea uae of IHI= c.-edit., aho.-t terM debt and debt ael"vice arreara d/ A1t10rtizationa to preferred creditor• plua total intereat •• a percentage of OOP.  - 70 - and investors choose to invest in Argentina. It also implies that reforms in the financial system have to be consolidated so as to permit financial markets to mobilize and mediate savings efficiently, that inflation must continue to decelerate and stabilize at a new low level to make saving attractive, and that domestic income must grow to provide a basis from which to generate savings. 5.18 Higher domestic savings rates, together with foreign savings, are needed to finance new investment--investment which is a sine qua no~ for expanded export potential. In the projection, investment is seen to grow from 11 percent of GDP in 1989 to 15 percent in 1994. Much of this would go to replace badly deteriorated capital stock. The private sector would be a leading force during this period, increasing investment in response to new growth opportunities stemming from the export sector. Such improve- ments in both saving and investment depend critically upon private sector confidence in the macro and sectoral policy framework and on the stability of these policies over time. Exchange rates, trade and financial market policies are among the most important in this regard. 5.19 In these circumstances, it is entirely possible to foresee a moderate recovery from the long recession of 1988-89. Output could expand at rates in excess of 3.0 percent for the 1990-94 period and over 4.0 per- cent after that time. Exports would become a leading sector, based on industrial goods and nontraditional and processed agricultural goods. Investment too would provide a strong impetus to growth. Increases in output at these rates assume incremental capital-output ratios (ICOR) that are slightly lower than those prevailing in the positive-growth year.s of the 1970-87 period.~/ If the Government were to implement structural reforms in trade, finance, and the real sectors (energy, agriculture and industry) and external finance were to be available, output might well expand more rapidly and the !COR could be expected to improve. 5.20 This scenario is austere. It would permit only a marginal recov- ery of per capita consumption beginning after 1992. Marginal savings rates are assumed to be high in 1990-94 (averaging .51) to support increases in investment. Only if investment were substantially more efficient than in previous periods and the economy were to grow more rapidly than in the last two decades would the austerity be eased. More rapid growth is not out of the question since reforms in the trade and industrial policy regime, agri- culture, energy and public investment could readily reverse declining pro- ductivity trends, in which case the austerity in this scenario would be eased. External Balance: Current Account 5.21 The medium-term adjustment in public finance and availability of external finance will influence the equilibrium in exchange markets, which is anticipated to make Argentine exports quite competitive. A potential ~/ The simple average of the ICORs for the 14 years with non-negative growth was 6.0; the assumption of the projection is 4.3 for 1990··94 and 4. 0 thereafter.  - 71 - near-term deterrent to exports has been the introduction of an emergency export tax on all exports; this is expected to be replaced with a more efficient tax system in any medium-term scenario. 5.22 The near-term external environment, while rema1n1ng open to Argentine exports, would be decidedly less favorable to growth than in previous years because of slower OECD growth and rising interest rates in the near term. Over the medium term, the external environment should be rather propitious, especially if the imbalances in the US fiscal accounts are reduced and protectionist sentiments do not gain ascendance. 5.23 In this base-case medium-term scenario, exports stimulated by reforms of the trade regime and the prevailing competitive exchange rate would play a leading role in economic growth, expanding by more than 5 per- cent annually for the period 1990-94. Although the drought in 1989 will probably have sharply negative effects, especially on soya production, rapid growth in nontraditional exports would be the dynamic sector. Slower OECD growth will mean continued slow expansion for nontraditional exports of cereals, grains, and livestock,~/ but there is also some room for the growth of agricultural exports beyond the growth of consumption in indus- trialized countries, as Argentina's loss of market shares in the recent past has mainly been due to supply factors. Nontraditional exports, led by new capacity in chemicals, plastics, machinery and transport products, could grow at over 7 percent annually for the period. Exports would rise from about 12 percent of GDP in 1988 to 18 percent by 1994. This policy scenario implies a competitive exchange rate for all exports, at least as high as the average level prevailing in 1987. 5.24 Imports, meanwhile, would be subject to the twin offsetting forces of trade liberalization and a higher exchange rate; after contracting in 1988-89, real imports are projected to rise rapidly at first--about 6 per- cent over 1990-94--as past severe contractions are overcome. 5.25 This would produce a trade balance that would rise from US$3.5 billion in 1989 to US$5.1 billion by 1994 and US$5.9 billion by 1997 (Table 5.3). The trade and nonfactor service balance would be sufficient to cover a rising share of the interest burden. In 1989, the ratio of the resource balance to total interest payments is anticipated to be about 56 percent; under the scenario assumption, this interest coverage would rise to nearly 80 percent by 1992, and surpass 90 percent in 1994 (Table 5. 3) . ~/ The IDB estimated that a sustained one percent fall (rise) in OECD growth produces a cumulative 0.8 percent fall (rise) in Argentina commodity export earnings over a six year period; the effect in the same year as the initial one percent growth change is 0.4 percent. See IDB, External Debt and Economic Development in Latin America, 1984: 131-137.  - 72 - 5.26 This trade performance, together with a LIBOR rate of 9.8 percent in 1990 falling to 8.4 percent in 1991 and roughly 8-9 percent thereafter, would produce some improvement in the current account balance over the coming years, albeit slowly. Fiscal adjustment will have to be a driving force in improving the net foreign asset position of the country over the medium term. In the short term, the rise in LIBOR will negatively affect the current account in 1989 and 1990, estimated to be US$3.3 billion and US$2.9 billion respectively. The deficit would decline to US$1.3 billion by 1994 as improvements in the trade balance would be partially offset by interest payments on increased indebtedness. Nonetheless, because the economy is growing at a reasonable and sustainable rate, the ratio of the current account deficit to GDP is projected to fall from about 5 percent in 1989 to under 2 percent by 1994. B. External Financing Financial Requirements under Austerity 5.27 Even with the strong efforts at public adjustment and austerity described above, Argentina would require large amounts of external finance in the form of new money or interest capitalization. The base scenario assumes that public external creditors continue to lend to Argentina while bondholders and financial markets do not.z/ For 1990-94, net borro~~ing requirements would average about US$2.0 billion per year (Table 5.4), roughly 50 percent of interest owed to commercial banks and suppliers of unidentified finance in 1990-94. It is important to note, however, that the trend over the period would be toward a lower current account dE!ficit. 5.28 The upside potential for additional finance should be underscored. Non-debt-creating flows in the form of foreign direct investment could well play a more important role if the policy environment were conducive. Official resources--from the Paris Club, !DB and World Bank--could be sub- stantially larger if the policy framework were especially strong. More- over, two to three years of financial stability could evoke potentially large reflows of flight capital. Argentine foreign assets are about equal to its foreign debt and some presumably large portion could be attracted back to Argentina if the macroeconomic environment were to provide evidence of sustained stability and open up potentially high-return private invest- ments. Nonetheless, these flows cannot be relied upon and would be justified only in the most optimistic scenarios. Zl Specifically, the scenario assumes that the World Bank and the IDB will each continue to contribute net disbursements in accordance with their lending programs of US$200-300 million per year over 1990-94 (Table 5.4). Bilateral creditors are assumed to provide US$400 Jnillion per year in new commitments; this level would be insufficient to prevent net negative disbursements of about US$200-300 million per year during the same period. Suppliers are expected to contribute US$50 million in 1990, rising to US$150 million per year in 1992 and thereafter; this would offset existing payment obligations and leave their net disbursements marginally positive. Commercial banks and bond holders would be repaid together with roughly US$1 billion per y1~ar of debt that is not refinanceable.  - 73 .. Table 5.3: Argentina - Balance of Pay•ent.e, 1987-1998 (In Hill ion• of Current US Dol lara) 1987 1988 1989 1990 19h 1992 1993 1994 1995 1996 1997 1998 Trade Balance 540 3,810 3,459 3,586 3,988 4,461 4,752 5,111 5,506 5,934 5,936 5,889 E•port.e of Ooocla 8,380 9,134 8,159 8,668 9,628 10,878 11,782 13,013 14,375 15,889 17,257 18,762 IMPort.. of Qoocla 5,820 5,324 4,700 5,083 5,642 6,217 7,009 7,903 8,889 9,955 11,321 12,874 JIFS Balance (285) (298) (295) 320 342 365 358 346 315 273 199 106 &ttort.a of JrrFS 2,112 2,187 2,279 2,744 2,978 3,229 3,503 3,800 4,121 4,473 4,860 5,274 I..,orta of NFS 2,397 2,465 2,574 2,424 2,636 2,864 3,145 3,454 3,808 4,200 4,661 5,168 Reaou rce Balance 255 3,512 3,184 3,904 4,328 4,828 5,111 5,457 5,821 6,207 6,135 5,994 Net. Factor lncCMte (4,485) (5,127) (6,427) (6,804) (6,804) (6,587) (6,878) (6, 747) (6,862) (6,665) (8,531) (6,219) Factor Recelttt.. 2111 211 254 240 229 232 255 255 261 276 283 280 Factor Pa,. . .nt.e of which: (4, 703) (5,338) (8,681) (7 ,043) (8,833) (8,818) (7 ,133) (7 ,002) (8,922) (8,941) (8,814) (8,499) Ohticlencl Repatdation (558) (660) (875) (729) (787) (850) (918) (992) (1,071) (1,157) (1,249) (1,349) tt...T i nt.ereat. (••c. IMF) (4,241) (4,605) (5,029) (5,776) (5,585) (5,518) (5,756) (5,578) (5,437) (5,376) (5,172) (4, 782) Other 96 (73) (977) (539) (480) (453) (459) (431) (414) (408) (392) (367) Net Current. Tranafera (8) 0 0 0 0 0 0 0 0 0 0 0 Current. Account Balance (4,238) (1, 815) (3,263) (2,899) (2_.276) (1, 761) (1, 768) (1,290) (841) (458) (398) (224) Net. Oi rect. lnyeat~Mtnt. (19) 1,147 734 793 888 959 1,036 1,118 1,208 1,305 1,409 1,522 Oetlt. Converaion 0 382 365 300 300 300 300 300 300 300 300 300 Other (19) 765 369 493 588 659 736 818 908 1,005 1,109 1,222 Ne~ HLT Flowa 1, 729 (252) (640) (949) (594) (237) (528) (879) (1,229) (1,800) (2,238) (2,285) IBRD 882 299 227 8 231 373 347 361 298 (93) (310) (325) IDB 29 78 325 163 289 387 392 459 386 258 187 124 Bilateral a 384 477 79 (170) (238) (162) (397) (313) (355) (244) (279) 23 Financial Harket.a 1,244 454 0 0 (263) (396) (793) (1,311) (1,573) (1,706) (1,832) (2,094) Bond• (96) (656) (666) (753) (562) (452) (118) (119) 0 0 0 0 Supp I i er Creel it.. (492) (686) (536) (31) 39 78 99 102 73 so 24 Private Non-guaranteed (2) (219) (69) (166) (90) (65) (58) (57) (58) (65) (28) 0 Net ST Flowa 113 (39) (1,530) (242) (140) (97) (76) (47) (45) (35) (20) (18) Unidentified Sourc:ea (Net) 39 2,108 4,511 3,438 2,296 1,327 1,547 1,329 1,162 1,268 1,553 1,325 Overall BOP Surp I ua (2,334) 1,358 (120) 139 174 191 210 231 254 280 308 339 Financing: <> in Nat Reaer••• ( -•Inc.) 2,334 (1,358) 120 (139) (174) (191) (210) (231) (254) (280) (308) (339) <> in Oro.• Reaervea ( -•Inc:.) 1,111 (1,786) 1,858 (139) (174) (191) (210) (231) (254) (280) (308) (339) Ne~ IHF 614 18 38 0 0 0 0 0 0 0 0 0 Purchaaea 1,253 541 750 689 970 865 590 968 932 723 779 950 Repurcha••• (639) (523) (712) (689) (970) (865) (590) (968) (932) (722) (779) (950) Other BCRA Reaervea 809 409 (1, 776) 0 0 0 0 0 0 0 0 0 HellO: Oro- Reaerve Level 3,075 4,860 3,002 3,315 3,508 3, 716 3,947 4,202 4,482 4,790 5,128 Liquid R•••rve• •I 1,617 3,363 1,505 1,818 2,009 2,219 2,450 2,705 2,986 3,293 3,831 Groaa Unidentified 39 2,108 4,511 2,303 1,685 2,656 3,011 3,228 3,615 4,337 4,259 Source: Anne11 1. •I Foreign ••chana• plua c~rcial tlanlc depoait.a in dol lara.  - 74 - New Money 5.29 It seems unlikely that amounts of this magnitude will be forthcom- ing in the conventional framework of new money arrangements of the 1980s. The discussions between Argentina and conunercial creditors in the wake of the Plan Primavera resulted in the commercial banks' offer of only US$2 billion for the 1988-89 financing period, about half the amount that the Argentine Government proposed as necessary to close the gap; moreover, this offer was contingent upon guarantees from official resources. 5.30 The fact that the Government ceased regular servicing of its external commercial long-term debt in April 1988 complicates any debt rescheduling. It paid two installments totalling US$170 million in interest in 1988 to facilitate on-going discussions with commercial banks. By end year 1988, arrears on commercial banks debt totalled US$2.0 billion. Other arrears brought the total to US$2.5 billion.~/ During the first semester of 1989, the Government accumulated additional arrears to the commercial banks for an estimated US$800 million. 5.31 No less important, indicators of creditworthiness, while showing some improvement over the ten-year period, are not sufficiently better to remove the shadow of uncertainty over private sector borrowing for term finance, let alone facilitate eventual future borrowing for the public sector. The debt-to-GOP ratio under the scenario of price stability would fall from over 90 in 1990 to under 50 by 1997; the intet·est burden, under the assumption of a LIBOR of 8-9 percent in 1992-98, is improved relative to the peak year of 1990, but would not fall below 5 percent of GDP until 1996 (Table 5.2). 5.32 Macroer:onomic management appears to have no alternative but to seek substantial debt service reduction. The projections show the need to lower the net external transfer in the short and medium term--and in a way consistent with sustained and substantial improvement in debt indicators. A strong macroeconomic program supported by an agreement to reduce debt service would position the Government to service its remaining external debt without the need to resort to new concerted lending packages; it would provide adequate external finance for the medium term, and thereby r,educe one source of uncertainty hampering private investment; and it would facilitate the private sector's efforts to obtain regular trade credits, suppliers' credits and term finance. The Government should, therefore, work as closely as possible with official institutions to design a strong macroeconomic program that would provide an incentive for all external creditors to participate in resolving Argentina's external financing problem in a medium-term framework. !/ Arrears to the Paris Club amounted to US$230 million; the remaining US$270 million was distributed among arrears to Bolivia (US$80 million), suppliers (US$80 million), bondholders and multilateral organizations.  - 75 - Table 6.4: Argentina -Financing Requirements, 1990-94 (In Millions of Current US Dollars) Average 1990 1991 1992 1998 1994 Total Annual ----------------------------------------------------------------------------------------------------------- Net Borrowing Requlr...nt: us.. 8,891 2,7&9 2,8&0 2,864 1,782 12,646 2,629 ------------------------------- Current Account Deficit 8,722 8,094 2,786 2, 748 2,202 14,496 2,899 Change In Gross Reserves 189 174 164 214 221 912 182 Other Capital Flows n.e.l. 0 0 0 0 0 0 0 Less: Direct Foreign Inve•tMent (471) (609) (649) (698) (641) (2,762) (662) Net Borrowing Requir...nt: Sources: 8,891 2,769 2,860 2,864 1,782 12,646 2,629 ----------------------------------- Identified Net Flows: (1,191) (817) (463) (949) (1,279) (4, 700) (940) World Bank 8 221 376 801 307 1,213 243 lOB 163 289 887 892 469 1,690 838 Bi laterals (170) (811) (294) (629) (446) (1,761) (860) Financial Markets 0 (268) (896) (793) (1,811) (2,768) (668) Bonds (763) (662) (462) (118) (119) (2,004) (401) Change in Central Bsnk Reserve Llab. •I 0 0 0 0 0 0 0 Others b/ (489) (191) (84) (202) (169) (1 ,086) (217) Unidentified Net Flow•: 4,682 3,677 2,813 3,318 8,061 17,346 8,469 M-o: ~of Pari• Club AMOrtization• 440 668 660 786 670 2,969 692 Financial Market A.ortization• 0 268 896 798 1,311 2,768 668 Net Financing Requir...nt c/ 4,142 2,760 1,867 1,784 1,080 11,624 2,326 ----------------------------------------------------------------------------------------------------------- Source: Annex 1. •I Include• net IMF. b/ Supplier credits plu• private non-guaranteed. c/ Unidentified net flow• le•s 901 of Paris Club amortization• and already rescheduled aMOrtizations to coMMercial banks.  - 76 - ANNEX CHAPTER I: PUBLIC ENTERPRISES A. Main Issues 1.01 The public enterprises in Argentina have, in the aggregate, con- stituted the most persistent and important source of deficit spending in the public sector. About half of the fiscal deficit can be attributed to the largest public enterprises (PEs). Repeated attempts to improve their performance have failed due to a combination of adverse political and eco- nomical circumstances, partially within the state enterprise sector but also related to the broader macroeconomic environment. The Government has been trying to reduce the financing needs of the PEs but has continued to impose a number of nonconunercial objectives and to use the price of public production in the pursuit of its anti-inflationary policy. At the same time special interests have created a regulatory environment that paralyses the PEs and that gives rise to a complex system of inefficient transfers. The Deficit of the PEs 1.02 In the last eight years, the deficit of the PEs before transfers ranged between 2.2 and 6.9 percent of GOP. These deficits represented between 40 and 60 percent of the overall nonfinancial public sector (NFPS) deficit (Annex Figure 1.1 and Annex Table 1.1). The magnitude of these deficits should be interpreted against the size of the major PEs. Annex Table 6.2 shows that the total value of public production has averaged around 11.5 percent of GOP. Its share in GOP has been declining during the last two years. The output of YPF (the State Petroleum Company) equals about 5 percent of GOP while the electricity companies represent 2 percent and the conununications and transportation sector each around 1.5 percent of GDP. 1.03 In the recent past, the deficit of the PEs has fallen in absolute value due to some cost reductions but, more importantly due to cuts in capital spending. In the period 1986-88, the deficit averaged at 2.6 per- cent of GDP while in the period 1980-85, its average was 5.4 percent. 1.04 The fuels sector has been responsible for the observed changes in the total deficit. Since 1986, both YPF and the gas company (GdE) have reduced their deficits to below 0.4 percent of GOP from more than 2 percent in 1984 (Annex Table 1.3). The three electricity companies (AyEE, SEGBA, and HIORONOR) have had a constant deficit of 1 percent of GOP. In the transport sector, Ferrocarriles (the railroad company) is responsible for a deficit of 1 percent of GDP as well. A striking observation is the fact that the deficit of Ferrocarriles is twice as high as its operational income. Though most of the other companies' financial borrowing require- ments are due to investment Ferrocarriles' total operational expenditure has been twice as high as its revenue. Institutional Environment 1.05 Public enterprises in Argentina are present in almost all areas of the domestic economy. In addition to the 13 most important enterprises under the supervision of the Public Enterprise Board's (DEP) and the PART II  - 77 - Annex Figure 1.1 ARGENTINA: PUBLIC ENTERPRISES DEFICIT Percent of GOP 1980 1981 1982 1983 1984 1985 1986 1987 19 88 1 & PE Deficit D Fiscal Deficit Source: Ministry of Economy  - 78 - AnH• Tebl• 1.1: ARGENTINA - P\a.IC ENTERPRIS£ ACCOUNTS AND THE FISCAL D£FICIT e/ (P•rcellt of QDP) 1HO 1981 1982 1H3 1H4 1986 1988 1987 1H8~/ Current. Account. -1.24 -1.91 -3.87 -2.67 -1.44 -1.61 0.46 0.00 0.87 Revenue 8.84 10.27 9.72 11.08 10.68 13.67 12.oe 11.46 11.46 Expendlt.ure 9.87 12.18 13.69 13.80 u.n 16.08 11.81 11.46 10.68 Peraonnel 8.86 2.98 2.20 3.08 8.21 8.08 2.91 2.71 2.82 Good and Service• a. 77 4.66 8.11 7.22 8.38 8.91 8.78 8.48 6.88 Int.ereat. 1.68 3.62 4.09 2.48 2.08 2.62 1.64 1.20 1.40 Ot.her 1.19 1.16 1.19 1.07 0.38 0.68 0.73 0.88 0.60 Caplt.al Account. -3.36 -8.38 -3.04 -8.78 -8.48 -2.76 -2.88 -3.36 -3.19 Revenue 0.21 0.18 0.38 0.16 0.14 0.19 0.11 0.10 o.oe Expendlt.ure 3.67 3.49 3.41 3.88 3.67 2.94 2.77 3.46 3.26 Financing Requir...nt. (1) 4.69 6.24 8.91 8.80 4.87 4.28 2.20 3.86 2.22 Flacal Deficit. (2) 7.48 13.28 16.11 18.08 12.84 8.09 4.30 7.48 6.00 (1) I (2) 0.81 0.40 0.48 0.39 0.39 0.70 0.61 0.46 0.44 Tranafera fro•: Treaaury 0.72 0.77 1.24 8.20 2.37 1.88 1.63 1.69 1.11 Special funda 0.78 0.78 0.87 0.84 0.87 0.81 o.88 0.80 0.90 Source: Mlnlat.ry of Econ0111y and DEP. a/ Include• 13 DEP ent.erpriaea and binat.lonala ~/ Prel i•inary 03-Mar-89  - 79 - Annex Table 1. 2: ARGENTINA - TOTAL OUTPUT OF DEP ENTERPRISl!:S (Percent of GDP) 1984 1985 1986 1987 1988 Combustibles 5.44 7.80 6.23 6.29 6.12 YPF 4.26 6.10 4.68 4.97 4.76 GdE 1.16 1.62 1. 48 1.27 1.29 YCF 0.02 0.08 0.07 0.05 0.07 Electricity 1.91 2.17 1.95 1.92 1.92 AyEE 0.73 0.87 0.78 0.73 0.68 SEGBA 1.06 1.14 1.03 1.03 1.07 HIDRONOR 0.12 0.16 0.14 0.16 0.17 Communications 0.94 1.27 1. 75 1. 41 1.48 ENTEL 0.70 0.96 1. 40 1.07 1.23 ENCOTEL 0.24 0.31 0.35 0.34 0.25 TransEortation 1. 65 1. 78 1. 58 1.59 1.64 FA 0.50 0.49 0.43 0.34 0.40 AA 0.72 0.85 0.81 0.89 0.84 ELMA 0.32 0.31 0.27 0.29 0.32 AGP 0.11 0.13 0.07 0.07 0.08 TOTAL 9.94 13.02 11.51 11.21 11.16 Source: DEP and company accounts.  - 80 - Annex Table 1.3: ARGENTINA - SELECTED PUBLIC ENTERPRISE DEFICITS (Deficit•+) 1984 1985 1986 1987 1988 Percent of GDP YPF 1.25 1.57 0.17 0.08 0.15 GdE 0.76 0.44 0.24 0.28 0.09 AyEE 0.37 0.50 0.44 0.46 0.33 SEGBA 0.26 0.26 0.16 0.40 0.20 HIDRONOR 0.24 0.23 0.18 0.15 0.18 Ferrocariles 1.42 1.02 0.98 0.96 0.81 ENTEL 0.14 -0.07 -0.19 0.33 0.32 Percent of enterprise revenue YPF 29 26 4 2 3 GdE 66 27 16 22 7 AyEE 51 57 56 63 48 SEGBA 25 23 16 39 18 HIDRONOR 200 144 129 94 105 Ferrocariles 284 208 228 282 200 EN TEL 22 8 14 31 26 Source: DEP and company accounts. 03-Mar-89  -81- bi-national entities, the Central Government owns nearly 100 small,er enter- prises including radio and television, hotels and airlines. Provincial and municipal governments own about 80 enterprises, and national and local gover·nments share the ownership of other 30 enterprises. Some of these enterprises were acquired to prevent their liquidation, while others were acquired for social and political reasons which may have long sinc1e lost relevance. 1.06 It has been difficult for the Government to improve control over the public enterprises. Most of the changes in the institutional environ- ment have been short-lived and did not lead to a durable improvement in the performance of the public enterprises. Since the beginning of 1988, DEP operates as a holding for the 13 largest public enterprises and controls the execution of the budgets of these 13 enterprises. This institution revives the idea of the Corporation of National Enterprises (CEN) that functioned between 1974 and 1979. A political struggle with the different Secretariats in the Ministry of Public Works ultimately led to the abolish- ing of the CEN. The DEP fa(·es the same problem, but has the additional disadvantage that it was established by executive decree rather than by law. The DEP has functioned independently in the first half of 1988, but thereafter became subordinate to the macroeconomic policy of the CEmtral Government. 1. 07 Although the creation of the DEP in its present form has helped to improve the efficiency of the PEs, it has not led to financial autonomy because of the continuing application of inefficient rules and regulations governing operations. Many of the public enterprises must keep a lar·ge amount of workers on their payroll, disregarding changes in business condi- tions under which they operate. They all must comply with the Compre Argentino law that regulates procurement and amounts to a subsidy of the private domestic industry. Social considerations keep prices of some public production deliberately low to subsidize particular consumer groups and there is a complex scheme of inter-enterprise subsidies and trBLnsfers within the public sector generally leading to inefficient investment deci- sions. Links with Macroeconomic Policy 1.08 On top of the intrinsic inefficiencies created by the over-regu- lateu environment and the problems with budgetary control, the Government has been using the public enterprises for two macroeconomic objectives: (i) balance of payments financing, and (ii) lowering inflation. Public enterprises incurred large amounts of foreign debt during the period 1978-82 in order to satisfy the Government need for foreign exchange. The burden of the ensuing debt service became so overwhelming that the Govern- ment decided to take over the debt service in 1983. Unfortunately, this foreign debt. is still present in the enterprises' accounts, preventing them from obtaining independent financing and distorting their financial picture. Repeatedly the Government used the price of public production to mitigate accelerating inflation. As a result real prices have been very volatile and their manipulation is linked to the size of the operational deficits of the public enterprises. Consequently, sources of deficit can be found on both revenue and expenditure side of the PE accounts.  -82- B. Revenues: Pricing Policy 1. 09 The Central Government has often overruled the price setting power of other institutions within the framework of its attempts to lower infla- tion. Under normal circumstances, the Secretariat of Energy sets energy prices while the DEP makes recommendations for all other companies under its purview. The Ministry of Puhlic Works subsequently endorses the recom- mendations of the DEP. This implies that the Secretariats of transport and communication have lost their role in the pricing policy concerning the enterprises in their sector. 1.10 Even i f one abstracts from periods in which prices of public pro- duction are used as an instrument of anti-inflationary policy, prices do not adequately reflect the cost of efficient resource allocation in the Argentine economy. They are often set to obtain specific targets related to the PE deficits or to a particular subsidy policy of the Government rather than in relation to costs. As such, these prices are not adequate to guide investment decisions in the domestic economy. 1.11 The anti-inflationary policy of the Government has induced a cyclical pattern in the real price evolution over the period 1980-88 (Annex Figure 1.2). After a period of falling real prices of public production, the need to mitigate the PE deficits or the failure of the anti- inflationary progran1 led to a recuperation of these prices. The period 1980-1988 is marked by three such episodes (Annex Figure 1.2): (i) in 1982, real prices fell by almost 20 percent below their average 1981 level and took more than two years to recover; (ii) in the second half of 1986 and throughout the first three quarters of 1987, prices of the public enterprises were used once again to try to reduce inflation. In the first half of 1988, real prices were allowed to recoup their past loss and in the second quarter of 1988 reached again their average 1985 level: and (iii) since the implementation of the Plan Primavera in August-September of 1988, real prices have deteriorated again during the Government's renewed attempt to reduce inflation. The Government anticipates a substantial increase in the real output price in mid-1989 to correct the current situa- tion. In terms of the enterprises' own cost, real prices fell in 1987 by about 5 percent and started to fall again in the third quarter of 1988 (after recuperating by 10 percent) as a result of the Plan Primavera (Annex Table 1.4).};_/ · 1.12 These fluctuations in real prices translate almost. by definition into similar fluctuations in the PE current account. The real price reduc- tion of 1982 is associated with a fall in PE savings by 2 percent of GDP, !_/ The real price index computed in Annex Table 1.3 overstates the volatility of the actual real output prices because it uses the nonagricultural wholesale price index as a proxy for the cost evolution in the public enterprises. A large part of these costs, inter-company deliveries, interest payments and salaries, do not. evolve according to that index. Unfortunately, comparable data using this weighted cost index are available only for 1987 and 1988.  - 83 - Annex Figure 1.2 ARGENTINA PUBLIC ENTERPRISES REAL OUTPUT PRICE (Net of Taxes) lnde:z: 1981•100 150~-----------------------------------~ ,.. . .. , I '\, \ \ I .. I 130 I ,/ \I I \ ,, ' I \ ,, ~I '"\I\\ ,, ~ "' ~ / / I I ,,_,, I I I , \ ,. f 110 • \ I " 90 I ···•····· 70 ·.. ·· . .... . 50 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 I 81 I 82 I 83 I 84 I 85 I 86 I 87 I 88 elg - Total En•ru Fu.l1 Trani. & Comm. Sourc•: SIGBP and DIP  .. 84 - """' M! I ~ - 18&. PIIJCE .. 1'\a.lC -.:naN ~ -·1-100 1 4: 1981 1_._/ n m IV IV Qtnta I ''"'I Fyele en- entrgy ~ l1L! ~ 1ZUQ ~ m..a UU:2 .w...ll ~ Fuel a 105.9 91.• 124.8 127.5 156.4 146.5 139.15 132.54 132.18 135.37 141.83 150.54 147.97 139.99 VPF 105.9 91.1 129.6 143.1 186.2 154.9 147 .as 140.27 139.71 143.21 153.47 163.54 161.84 153.47 ColE 105.0 93.3 99.8 88.1 106.0 106.7 104.A 100.06 100.54 102.44 93.93 96.32 90.51 84.33 VCF '12. 7 81.7 108.3 105.1 135.5 139.9 143.24 136.51 136.28 139.90 126.98 128.20 138.25, 126.46 98.9 75.4 80.3 75.7 79.6 80.6 81.78 75.36 74.98 78.67 74.42 79.05 82.63 77.51 98.5 74.0 79.4 74.6 79.4 80.7 75.20 69.32 88.59 71.70 16.65 73.94 83.89 80.16 99.8 19.0 82.4 78.1 79.9 82.5 91.33 84.:2 84.24 88.78 84.70 88.49 80.80 73.91 Trtna + 'OM.!" 12§...! !U ll..l ~ lU IU !la..J2 !i..1l ~ !§..H IZ..Ji zuz lL.H Traneport. 99.9 77.2 88.0 89.4 91.9 85.4 101.76 99.16 94.40 99.87 100.78 99.01 89.80 80.35 98.5 71.3 77.5 80.9 78.8 74.2 69.67 54.&1 54.31 60.81 63.40 74.46 78.22 73.54 101.5 83.8 108.2 105.7 117.4 ~12.0 118.52 116. '12 110.44 120.80 120.09 110.59 94.11 82 • • 102.6 98.6 88.8 97.0 104.4 02.7 93.56 88.08 83.08 84.88 93.13 108.12 100.25 89.88 eo-.n i cat. ion 109.4 78.5 61.0 61.2 73.7 77.6 54.38 60.33 57.51 53.74 54.54 56.54 52.10 48.39 109.4 81.2 u.s 59.2 57.0 51.6 46.58 43.98 41.57 31.42 37.47 37.89 35.32 32.75 109.5 75.4 60.7 63.7 95.0 110.3 134.21 124.49 120.02 113.85 121.49 129.A 117.91 109.75 Injyet;n en!!( Str"y i sg H...ll! a..l2 .a..JIZ n.JZ !LJQ 102.52 97.49 100.19 107.24 108.93 105.02 Source: Miniet.l"'y of Ec:Of'l~ and SICEP. !J Pl"ictl Ptrcti"ttl by Ent.erp,.iHe. NcMainal prict dtflat.e4 b7 non-•gricult.urel WholtAit Pl"ic•• ~ New •tight.: ah•re in 1911 buiget.  -85- and that of 1987 with a reduction in savings by 0.5 percent of GDP. In 1988, the impact of the Plan Primavera price reduction was offset by the rise in the price during the first half of the year and by cuts in real wages. Since the investment program is determined independently, these manipulations of the real price modify the overall deficit of the public enterprises in a straightforward manner. 1.13 These strong fluctuations in the real price of public production induced by policy considerations unrelated to the objectives of the PEs provide for a highly unstable environment and prevent the PEs from pursuing strategies aimed at improvements in efficiency. Together with other inefficiencies in tl1e regulatory environment this policy induces the need for transfers from the Treasury to cover operational losses. C. Expenditures Interest Burden 1.14 External Debt. The public enterprises were used as magnets to attract foreign capital needed to equilibrate the overall balance of pay- ments and to support the exchange rate. From 1978 to 1983 the pubLlc enterprises were strongly encouraged to borrow in foreign currency even as the peso was becoming increasingly overvalued. Initially, this was done to reduce the burden on the Treasury of financing enterprise deficits. Later it was used to defend the peso against a wave of capital flight induced by fears of a major devaluation. When the peso devalued in 1981-82, the service of the external debt became a threat to the solvency of the PEs. This policy had ultimately an adverse effect on the financing needs of the PEs as the total deficit before contributions increased from 3.3 percent of GDP in 78 to 6.9 percent in 82 while at the same time investment fell. In September 1983, the Treasury assumed full responsibility for servicing all of the then outstanding stock of external debt of the public enterprises. 1.15 The total stock of foreign debt rose from US$3 billion at the end of 1977 to US$11.7 billion at the end of 1983. Since 1983, the external debt has increased at a lower rate, the increase being due to investment projects in gas, oil and hydropower, and recently, also in telephone services (the MEGATEL plan). In June 1988, the total foreign debt amounted to US$14.9 billion (Annex Table 1.5). In absolute terms, YPF and GdE hold about half of the total stock, while Hidronor and AyEE together hold one fourth of it. The public enterprises, in the aggregate, would need about 23 months of sales to pay off the outstanding external debt. 1.16 Recently, rising international interest rates have increased the burden of this debt service to both the enterprises and the Treasury. The total stock of outstanding debt represented an interest obligation of US$1 billion in 1988. The Treasury assumes US$890 million while the enterprises themselves owe US$110 million on suppliers' credits. No amortization of this stock took place in 1988.  .. 86 - Annex Table 1.5: ARGENTINA - EXTERNAL DEBT OF DEP ENTERPRISES ~~ (US$ millions, end of period) 1979 1980 1983 1986 1987 1988~1 TOTAL 5,389 7,870 11' 715 13,641 14,875 14,884 Financial 4,035 6,417 9,929 11' 383 12,968 13,182 Commercial 1,354 1,452 1,786 2,258 1,907 1,702 Fuels and Energy 4,097 5,916 9,202 10,376 11,653 11!677 Fuels 2,426 3,476 5,810 6,605 7,504 7,627 YPF 1. 93 7 2,906 4,366 4,554 4,840 4,927 GdE 423 452 1,264 1,878 2,470 2,522 YCF 66 118 180 173 185 178 Energy 1, 671 2,440 3,392 3, 771 4,149 4,050 SEGBA 532 661 781 717 732 678 AyEE 873 1,497 2,221 2,201 2,366 2,392 Hidronor 266 282 390 853 1,051 980 TransQ.& commun. 1,292 1,955 2,514 3,265 3,222 3,207 Transport 1,143 1,653 1,930 2,600 2,529 2,521 FA 257 440 712 1,197 1,161 1,075 AA 316 516 713 840 867 786 AGP 26 33 20 10 8 7 ELMA 544 664 485 552 543 653 Communication 149 302 584 665 693 686 EN TEL 149 293 576 656 688 679 ENCOTEL 0 9 8 9 5 7 Source: SIGEP ~I Reported numbers follow accounting practices of individual enterprises, and are not entirely comparable. ~I June 30.  -87- 1.17 In addition, the foreign c..lebt assumed by the GovE>rnment still appears in the financial statements of the public enterprises. This makes it virtually impossible for any of the enterprises to obtain credits in international markets. In the case of YPF the transfer mechanism for the interest payments is particularly inefficient. The amount of transfers is denominated in australes and YPF is allowed to deduct this amount from its tax liabilities to the Government. However, the tax deduction is budgeted whereas the actual payments correspond to the austral equivalent of the dollar obligation. In 1987, the austral depreciated faster than was budgeted and YPF has a corresponc..ling gap in its financial statements resulting in their non-ratification by the audit company. Recently, a decree has been drafted that would give YPF a government bond paying the exact equivalent of the foreign interest payments. This would avoid recur- rence of the present situation, but it would not significantly improve YPF's chances to obtain independent financing. 1.18 Domestic Debt. Although public enterprises are no longer allowed to borrow from the domestic financial market, they still have a large amount of domestic debt outstanding. On March 31, 1988, total domestic debt amounted to US$3 billion representing 161 days of sales of the PEs. Recent preliminary data on the evolution of arrears of the PEs show a dramatic increase from US$85 million at the end of 1987 to US$1.1 billion at the end of 1988 (Annex Table 1.6). Among the reasons for this evolution are the fall in the real price of public output, the cutoff from foreign and domestic financial markets and the Government's decision not to finance operational deficits any longer. 1.19 The PEs owe more than US$1 hillion to the private sector and US$356 million to the national Government. On the other hand, the pro- vincial Governments owe the PEs US$302 million. Since September 1988 total arrears have increased by US$632 million. All of these claims are adjusted for inflation and most of them bear interest as well. The recent increase in interest rates in Argentina aggravates the arrears problem. All enter- prises are net debtors to the private sector and the National Government except Aerolineas, ELMA (the international shipping company) and OSN (water and sewerage). These three are net creditors to the National Government and OSN and ELMA ar·e also net creditors to the private sector. All com- panies except SEGBA are net creditors to the provincial governments. 1.20 The picture becomes even more complicated if one includes the int.er-PE arrears. On December 31, 1988, these amounted to US$371 million, an increase by US$220 million over December 1987. These claims gave rise to litigations between the public enterprises as the result of different inflation adjustment and interest imputations between different enter- prises. YPF, Gas del Estado and AyEE have been the largest creditors among the public enterprises, while SEGBA, YCF and Ferrocarriles have been the largest debtors. Wages and Employment 1.21 The public enterprises determine neither the quantity of labor nor the real wage rate paid to their employees. Both are largely set by polit- ical factors.  - 88 - Annex Table 1.6: ARGENTINA - DEP ENTERPRISES DOMESTIC ARREARS !/ (US$ Millions) 1987 ----- 1988 1988/87 12/31 9/30 12/31 % change Credits Intra-Co Debt £/ 152.9 266.9 371.4 142.9 National Adm. 168.3 107.9 177.4 5.4 Provincial Adm. 122.3 265.3 318.5 160.3 Private Sector 166.2 41.3 42.6 -74.4 Total 609.7 681.4 909.8 49.2 Debts Intra-Co Debt £/ 152.9 266.9 371.4 142.9 National Adm. SJ 215.5 286.4 533.0 147.4 Provincial Adm. 0.1 1.5 16.0 18197.5 Private Sector 326.5 616.0 1111.6 240.5 Total 694.9 1170.7 2032.0 192.4 Net Indebtedness £/ National Adm. £1 47.2 178.4 355.6 653.5 Provincial Adm. -122.3 -263.8 -302.5 147.4 Private Sector 160.3 574.6 1069.0 566.9 Total 85.2 489.3 1122.1 1216.7 Source: Public Enterprise Board (DEP) ~I Preliminary estimates. £/ Debt owed to other DEP public enterprises; figure taken from debtor company. £1 Includes debt with specific investment funds, disbursed primarily to DEP enterprises. £/ Debts - Credits. 03-Mar-89  -89- 1.22 The absolute level of employment reflects the social orientation of the ruling political party or the type of government. Under the Peronist Government the PE labor force reached a peak of 424,000 in 1975. The military Government reduced the amount of workers drastically, but under the new democratic Government total employment increased again since 1983 and now stands at 293,000 (Annex Table 1. 7). The Goverrunent recognized the need to reduce the labor force, but the effort stagnated in the light of the 1989 elections. Especially the railroad company, ~.rhich employs one third of the total, has an excessive amount. of workers. Its wage bill is almost twice as high as its total operational revenue. 1.23 Efforts to improve productivity through layoffs have been hampered by the application of a law that guarantees lifetime employment in civil service to a substantial number of PEs. Given the size of this labor force and its importance to the labor unions it will take a lot of political courage to modify the existing law. 1.24 Wages in the PEs are often negotiated in the same macroeconomic package that reduces real output prices in order to mitigate inflation. This is a necessary condition to keep a handle on the PE deficit during periods of anti-inflationary policy. However, labor unions are quite sensitive to cuts in the real wage. As a result this part of the austerity package is often the first to give way due to social tension and strikes. Real wages rebound faster than real prices and prevent a positive response of PE saving to a recovery of their real output price (Annex Figure 1.3). The evolution of the PE's current account in 1983 and 1987 clearly reveals this tendency. 1.25 As a consequence, total labor cost fluctuates beyond control of the PEs. It ranges between 2.2 and 3.2 percent of GDP and its share in total cost is largely determined by the level of employment (Annex Table 1.1). Goods and Services: The Compre Argentino Law 1.26 Almost 25 percent of the purchases of goods and services relate to transactions among the PEs themselves at regulated prices. These prices are often set by political authorities disregarding the economic cost of production. This system gives rise to an intricate network of cross sub- sidies and large outstanding claims among PEs. At this stage no compre- hensive overview of the cross-subsidy system and its implications exists, but some typical examples indicate the nature of the problem. YPF is required to sell gas to Gas del Estado below its own production cost and it buys coal from YCF at a price three times the international price of coal. 1.27 The claims resulting from these transactions often give rise to litigations among public enterprises. The DEP reports many non-matching claims between debtor and creditor companies resulting from different inflation adjustment and imputation of interest rates. This may be one of the reasons why half of the outstanding debt among public enterprise1; is more than six months overdue. 1.28 Purchases of the remaining inputs are regulated by the Compre Argentino law which favors the domestic private industry. Since most of the private industry is of an oligopolistic nature, sales to public enter- prises are often executed at a premium and imply subsidies to privat4~  .... 90 - Annex Teble 1.7: ARQENTINA - DEP ENTERPRISES: LEVEL OF EIPLOYMENT (NUIIber of Worker•) 1V70 1V7& 1V80 1V88 1V84 1V8& lvte 1V87 1V81~/ YPF 33,616 60,666 33,602 32,772 33,726 32,466 32,488 34,780 34,800 GdE 8,844 10,906 10,469 9,912 10,238 9,928 9,464 9,261 9,660 YCF 2,736 6,249 3,949 3,722 3,868 3,826 3,676 3,692 3,401 AyEE 13,834 26,044 19,468 10,667 11,249 11,446 11,266 11,074 11,260 SEG8A 23,809 26,334 21,774 20,130 21,336 21,667 20,999 21,636 21,764 HIORONOR 84 769 911 1,067 1,260 1,426 1,662 1,680 1,706 ENTEL 44,396 60,643 46,280 47,833 48,200 47,100 46,300 46,900 46,667 ENCOTEL 60,426 64,606 44,606 42,968 42,843 41,484 40,292 38,816 37,874 FA 147,476 163,308 96,936 103.102 107,837 102,941 99,897 97,218 97,300 AA 6,686 8,233 10,096 9,822 10,303 10,698 10,323 10,283 10,400 AGP 6,604 6,127 6,219 6,046 6,024 4,926 4,820 4,666 4,130 ELMA 4,864 6,268 6,294 6,387 6,234 6,003 4,808 4,726 4,842 OSN 21,693 26,296 13,296 9,434 9,202 9,603 9,374 9,346 9,360 TOTAL 363,764 424,127 311,248 301,761 310,299 302,391 296,268 293,766 293,143 I of Active 4.2 4.68 3.10 2.90 2.90 2.78 2.67 2.62 2.68 Source: Compsny response to the questionnsires end compsny finsncisl ststements. For 1988: SIGEP. ~/ Osts on Sept-ber 31. Prel iminsry for SEGBA, HIDRO, NOR, ENCOTEL.  - 91 - Annex Figure 1 • 3 ARGENTINA PUBLIC ENTERPRISES: REAL WAGES AND OUTPUT PRICES Index 1081=-100 140----------------------------------~ 120 100 80 60 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 I 81 I 82 I 83 I 84 I 85 I 86 I e7 I 88 s - Real Wages a/ - Real Prices b/ Source: SIGEP and DEP .; R.aulw to CPI b/ IWatiYe toa.•-•· WPI  -92- industries. Although it is difficult to quantify this phenomenon the fol- lowing observations may indicate the nature of the problem. In 1983, political authorities decided to contract out a large fraction of the main- tenance work that was traditionally done lJy the PEs and decided to reduce the own production of intermediate inputs by the enterprises themselves. The share of goods and senrices in total r·ecurrent expenditure immediately increased from 45 percent in 1983 to 52 percent in 1984 and reached 68 percent in 1985 (Annex Figure 1.4). Since then, the share has declined to 53 percent, but still remains higher than any period before 1983. A measure of the intermediate input per unit of production rose from 136 in 1982 to 165 in 1987. Under normal circumstances, this measure should fall indicating the presence of economies of scale in highly capital intensive industries, a characteristic of most of the PEs. Investment 1.29 The political decisions on investment are made in the respective Secretariats of Energy, Transportation, Communication and Industry. The often ambitious programs are financed through a system of special funds and by means of foreign and domestic borrowing. In recent years both sources of foreign and domestic financing have almost dried up. Public enterprises are no longer allowed to borrow in the domestic market and foreign private banks are unwilling to increase their exposure to the debt-burdened Argentine economy. 1.30 Special taxes on comiJustibles and electricity replenish special accounts from which funds are drawn for various investment projects. Unfortunately, only a fraction of the revenue is reinvested in the sector of the public enterprises. In addition, there is a substantial earmarking of funds so that efficiency concerns are not the primary criteria to decide on various investment projects. The revenue of the special funds fluctuates with the price of output, and is, therefore, heavily influenced by the episodes of anti-inflationary policy of the Government. On average, the special funds generate an amount of investment between 0.75 and 1 percent of GDP, about a third of total investment. 1. 31 Beca11Be of the reduction in available financing, real fixed investment fell from an average of 3.2 percent of GDP in 1981-84 to 2.5 percent in 1985-86. In 1987, some international institutions financed large projects for gas, hydropower and telephone services. Real investment picked up to 3.1 percent of GDP in 1987, but fell again to 2.8 percent of GDP in 1988 (Annex Table 1.8). The sectoral distribution of investment is shown in Annex Figure 1.5. D. Transfers 1.32 The public enterprises are linked with other sectors of the private economy and of the public administration through a complex system of transfers. Some of these transfers are implicitly reflected in low prices to consumers of public output or high prices to suppliers of goods and services, and consequently, difficult to quantify.  - 93 - Annex Figure 1. 4 ARGENTINA DEP ENTERPRISES a/ : SELECTED COST SHARES Percent of total production value 100~----------------------------------~ 80 ····································································································· 60 ···································································································· 40 20 0 80 81 82 83 84 85 86 87 - Goods and Services lill'ill Personnel Source: SIGEP a/ bcludina HIDRONOR and ELMA  - 94 - Annex Table 1.8: ARGENTINA - REAL FIXED INVESTMENT IN DEP ENTERPRISES (Percent of GOP) 1981 1982 1983 1984 1985 1986 1987 1988 TOTAL 2.99 3.17 3.32 3.18 2.75 2.25 3.11 2.76 Fuels and Energy 1. 99 2.29 2.38 2.09 2.13 1.60 2.13 1. 72 Fuels 1.03 1.34 1. 33 1. 32 1. 53 1.14 1. 59 1.19 Energy 0.96 0.95 1.05 0. 77 0.60 0.46 0.53 0.53 Transp. and Commun. 0.94 0.83 0.89 1.05 0.58 0.62 0.95 1.02 Transport 0.40 0.46 0.51 0.69 0.31 0.27 0.25 0.24 Conununication 0.54 0.37 0.38 0.36 0.27 0.36 0.70 0.78 Industry and Services OSN 0.06 0.05 0.05 0.04 0.04 0.03 0.04 0.02 Source: SIGEP  - 95 - Annex Figure 1 • 5 ARGENTINA DEP ENTERPRISES: SECTORAL DISTRIBUTION OF INVESTMENT Percent of GDP 1.8~-------------------------------------~ 1.6 ··························································································································· ································ 1.4 ··················································································· ··································· ································· 1.2 1.0 0.8 0.6 0.4 0.2 0.0 81 82 83 84 85 86 87 88 . . Fuels l!m] EnetJI a,/ ~ Communication c:::J Transportation Source: SIGEP and DEP. JL Does not include Binationall.  -96- 1.33 The tax administration, the social security, and the investment funds are major recipients of taxes that weigh most heavily on the fuel sector. Electricity and telephone services also provide revenue for the rest of the economy. Nevertheless, market prices are biased towards the use of electricity rather than combustibles as a source of energy. As a result of these differences between consumer and producer prices, it is difficult to base investment decisions on efficiency criteria. 1.34 On the other hand, the Treasury used to finance operational deficits and has been servicing a large part of the outstanding stock of foreign debt of the public enterprises. 1.35 Due to the lack of accurate data on the various transfer mechan- isms, it is very difficult to accurately describe the overall net position of the different entities that are part of the system. Nevertheless, the description of some major aspects of the transfer system is sufficient to indicate the nature and magnitude of the problem. 1.36 First of all, a large number of earmarked investment funds are financed by means of taxes on fuels and electricity. Revenue from these two categories amounted to 1.5 and 0.2 percent of GDP, respectively in 1987 (Annex Table 1.9). However, only 0.8 percent of GDP is invested in the public enterprises themselves and only 0.6 percent in the sectors that generate this revenue. Large amounts of these funds are channeled through to the bi-national enterprises, the provinces and the rest of the public sector. In the last two sectors, they are primarily used for road con- struction. The sectoral bias of these transfers is even worse; the fuel sector, contributing 1.5 percent of GDP to the funds receives only 0.6 per- cent. The reverse is true for the electricity sector that receives twice as much financing as it contributes. 1.37 The State Petroleum Company also pays royalties on the extraction of oil and gas to thE> provinces. Although this is a common feature of extraction industries in many countries, in Argentina the price on which the royalties are computed is artificially determined and does not reflect international prices. Since this artificial price has been much higher than the current international price in the recent past, the Government decided to compensate YPF for the excess payments. However, in 1988, the Government decided to change its policy and YPF now has to pay all royal- ties. The total payments implied a revenue for the provinces of 0.57 per- cent of GDP in 1988. Of this amount 0.33 percentage points is due to the difference between the artificial price and the actual well-head price of the products. YPF has refused to pay this excess amount and deducts this transfer to the provinces from the taxes it owes to the Central Government. 1.38 In January 1988, the Government issued a decree in order to raise revenue for the social security system by imposing a tax on fuels, 24 per- cent on naphtha and kerosene and 17 percent on natural gas and gasoil and telephone services (24 percent). This surcharge generated an estimated 1.1 percent of GDP in 1988 and its contribution is likely to increase in 1989 to a budgeted 1.6 percent.  - 97 - Annex Table 1.9: ARGENTINA - PUBLIC SECTOR INVESTMENT FUND:S SOURCES AND USES (Percent of GDP) 1985 1986 1987 Sources Fuels ~./ 1. 98 1. 61 1. 48 Electricity £1 0.19 0.24 0.24 Total 2.17 1.85 1. 73 Uses Public enterprises 0.81 0.66 0.80 Fuels c/ 0.14 0.02 0.06 Electricity ~/ 0.52 0.50 0.52 Binationals 0.16 0.14 0.22 National public sector ~I 1.21 1.04 0.80 Provinces 0.12 0.12 0.09 Private Sector 0.01 0.02 0.01 OthP.r il 0.01 0.02 0.03 Total 2.17 1.85 1. 73 Net use Fuels -1.84 -1.59 -1.42 Electricity 0.33 0.26 0.28 Rest of Economy 1.52 1.32 1.14 Source: DEP and Ministry of Public Works !1 10 percent tax on crude oil, SO percent on nafta, 10 percent on kerosene, fuel and diesel oil, 30 percent on gas oil and 10 percent on fraction of natural gas. £/ 21 percent tax on total sales of electricity. £/ YPF,YCF,Gas del Estado ~/ AyEE, SEGBA, HIDRONOR ~I Includes transfers to other national investment funds for projects mainly contracted out to the private sector. !/ Includes net use of loans, net transfers to/from previous/future periods.  -98- 1.39 In June 1980 the Government decided to limit its transfers to the public enterprises to the foreign debt service and it gave the DEP the power to or·ganize an internal transfer scheme among the pul.Jlic enterprises to finance the wage bill of Ferrocarriles. This enterprise received 0.15 percent of GDP from the rest of the 13 DEP enterprises that were obliged to deposit a percentage of their variable cost into a forced sav- ings account (Decree 683/80). Not all enterprises were al.Jle to deposit the required amount so that this scheme could lead to a net transfer of resources out of the more efficient companies where money could have been invested in profitable projects. 1.40 In the other direction, the Treasury has transferred on average 1 percent of GDP to the public enterprises in the period 1984-88 primarily for foreign debt service and to cover operational deficits (Annex Table 1.10). The Government recognized that these transfers were due to some nonconunercial objectives imposed on the enterprises. One example is the payment for gas to Bolivia at a price three times above the domestic end- user price. However, in mid-88 the Government decided not to finance oper- ational deficits any longer. This explains the fall in transfers for oper- ational deficit from 1 percent of GDP in 1987 to 0.7 percent in 1988. E. Budgetary Process and Control 1.41 The budgetary process for the public enterprises has involved the Ministry of Economy, the enterprises themselves and the different institu- tions that existed between those two levels at various points in time. Traditionally, individual Secretariats were responsible for the designated enterprises under their jurisdiction. An aggregate budget found its way down from the Ministry of Economy to the Budget and Planning Directorate of the Ministry of Public Works where i t was divided among the Secretariats. The individual enterprise budgets were reconciled with the aggregate budget at the Secretariat level. The control on the execution of the budget pro- ceeded along similar lines. Consequently the overall process of drafting and controlling the budget was a lengthy and inefficient one. At various points in time the Government attempted to shorten and depoliticize the process in order to gain control over the public enterprises. These attempts have been hampered by the absence of an integrated information system. 1.42 The Corporation of National Enterprises (CEN) was the first attempt to consolidate the budgetary process and control. However, the CEN soon became a bureaucracy of its own and the Secretariats criticized the concentration of power within the CEN. After a short life of five years the CEN was dismantled in 1979. Only the State auditing company (SIGEP) survived and became an independent entity. However, it only audited the financial statements of the public enterprises. SIGEP is not involved in the budgetary control process. 1.43 The Public Enterprise Board is the second attempt to simplify the budgetary process. Initially the DEP lacked decision making power and an inter-ministerial comn1ittee consisting of the Ministers of Public Works and  - 99 - Annex Table 1.10: ARGENTINA - TRANSFERS FROM TREASURY TO PUBLIC ENTERPRISES ~/ (Percent of GDP) 1984 1985 1986 1987 1988 Operational Deficit ~I 1. 21 1. 02 1. 09 1. 03 0.72 Debt Service 0.90 0.60 0.44 0.56 0.39 Other C:../ 0.26 0.22 0.0 0.0 0.0 TOTAL 2.37 1.86 1.53 1.59 1.11 Source: Ministry of Economy and DEP. ~/ 13 DEP enterprises and binational entities. £/ Includes compensation to gas del Estado for purchases from Gas Bolivia. £1 Includes repayment of domestic loans quaranteed by the government and not itemized transfers. 03-Mar-89  -100- Economy made final decisions. Since the beginning of 1988 the DEP started to work as an independent holding company and was vested with the power to make decisions on management, procurement and personnel of the public enterprises. The DEP is also responsible for the reconciliation of the consolidated public sector budget. with those of the individual enterprises. Although there has been an improvement in efficiency it still takes four to five months into the budget year before a final budget is agreed upon. 1.44 The DEP attenqJts to follow the budget execution on a monthly basis and has established its own independent information system. Unfortunately, this information system is not linked to the financial reporting of the public enterprises. The public enterprises merely respond to the informa- tion requests from the DEP. 1.45 The Ministry of Economy constructs a quarterly cash budget and monitors its execution independently from the DEP and other institutions. It has established its own cash reporting system since 1984. This informa- tion system is an extra-accounting process without links to the financial statements of the enterprises or the DEP system. As such it also suffers from the lack of independent control. The SIGEP was supposed to audit the cash reporting by the public enterprises, but has been unable to perform this task due to a lack of resources. The information on the cash execu- tion is often reported with a 3-4 month lag notwithstanding the legal obligation to report within 15 days after the end of each quarter. 1.46 The SIGEP has been the only independent control agency for the public enterprises. Its task has been limited to the auditing of the financial statements of the enterprises. The audits are often performed with lags of more than a year due to late reporting by the public enter- prises. For many years and for about half of the public enterprises under its supervision, the SIGEP reports an audit "with reservations" or simply refuses to affix its signature to the company accounts. F. Performance Issues in 1988-89 1.47 Financial Autono!!!1_. The performance of the public enterprises in 1988 was governed hy the dilemma between the long-run goal of improvement in efficiency and financial autonomy on the one hand, and the short-run macroeconomic goals of reducing inflation combined with the continued use of the public enterprises to serve noncommercial objectives. 1.48 During the first. half of the year the Government took energetic measures to achieve more financial autonomy for the PEs. It granted more power to the DEP and decided to clarify the financial relations between the public enterprises and the Treasury. The Treasury would no longer finance the operational deficits of the public enterprises and limit its transfers to interest payments on foreign debt. At the same time real prices of public production recovered their losses from the 1987 level. Although  -101- these measures were certainly dictated by the need to lower the overall fiscal deficit, they improved the efficiency of the public enterprises and constitute a first step on the way to deep restructuring of the public sector. 1.49 Unfortunately, the restructuring effort was stalled in the second half of 1988 when the Government was once again looking for a nominal anchor for the Argentine economy in order to mitigate accelerating infla- tion. Prices of puiJlic production have been falling in real terms since the Plan Primavera was enacted. 1.50 Compre Argentino. The real price reduction squeezed revenues of the public enterprises while at the same time very little effort was made to implement institutional changes that would lower the costs of th<e public enterprises. The amendment to the Compre Argentino law was not implemented so the public enterprises continued to subsidize the private domestic industry. Rules governing employment remained rigid and the wage guide- lines of the Government led to unr~alistically low real wages. Social tension and strikes during the last quarter provoked increases in real wages in the last months of 1988. 1.51 Cross-Subsidies. The Government continued to impose the pursuit of noncommercial objectives on the public enterprises and tried to reduce its own deficit by increasing the burden of royalty payments on YPF.. It did not relax its stance on operational deficit financing so that the com- panies had to finance the wage bill of Ferrocarriles by means of a forced savings scheme. Other aspects of the macroeconomic policy, rising real interest rates and an overvaluation of the exchange rate increased the financial burden on the public enterprises. In addition, public enter- prises were virtually cut off from domestic and foreign financing. 1.52 The logical outcome of this situation is a reduction in investment and a l>uild up of arrears with other sectors of the economy. The crisis in the electricity sector in the last quarter of 1988 shows the contradiction between the need to improve the quality of the capital stock and the cuts in the investment program as a result of the precarious financial situation of the Central Government. Arrears with the rest of the domestic economy more than doubled in the last quarter of 1988. Annex Table 1.11 shows the steady deterioration of the accounts of the PEs since the second quarter of 1988: a fall in savings, capital revenue and fixed real investment. G. Policy Recommendations 1.53 The Government has rightfully perceived the need to grant more financial autonomy to the public enterprises and to improve their effi- ciency. Its decision to severe the link with the Treasury for the finan- cing of operational deficits and the establishment of the DEP in its cur- rent format seem to have been taken primarily to reduce the impact of the PEs' financing needs on the Treasury's deficit and are not accompanied by structural changes that address the underlying inefficiencies. The Govern- ment still uses the price of public production for short-run macro-stabili- zation attempts disregarding its distorting effects on the allocation of resources.  - 102 - Annex Table 1.11: ARGENTINA - DEP PUBLIC ENTERPRISES BUDGET EXECUTION 1988 (Millions of 1988 Australes) Quarter Annual I II III IV Current Account Revenue 22,457.1 27,483.5 24,296.9 22,748.3 96,985.9 Expenditure 21,058.4 24,806.4 21,723.0 21,920.2 89,508.0 Savings 1,398.7 2,677.1 2,573.9 828.1 7,477.8 Capital Account Revenue 473.3 340.8 278.9 182.9 1,375.9 Expenditure 5,991.0 7014.8 5,802.8 6, 716.9 25,525.5 Real Fixed Invest. 5,918.5 6,970.0 5,769.9 5,453.2 24,111.6 Deficit~/ 4,019.0 3,996.9 2,950.0 5,705.9 16,671.8 Source: DEP ~I After contributions from the rest of public sector. 03-Mar-89  -103- 1.54 In the short term, the Government needs to correct the level of real p~ices of output, address the arrears problem and take measures to enhance control and prepare institutional reform. In the medium term the Government should enact a structural and institutional reform that "t.rill allow the public enterprises to operate autonomously in a competitive environment. 1.55 Prices. The Government needs to correct the level of real prices of output. In the near term, these should be raised in real terms at least up to the average level of the second quarter of 1988. By 1990, tariffs in the sector should be suffiriently high relative to costs so as to generate a surplus on their noninterest current account equal to about 3 percent of GDP, thereby covering roughly half of their investment after interest expenses. Improvements ovet· 1988 levels could be made up of a combination of either expenditure reductions or real tariff increases. 1.56 As it adjusts prices, the Government should formulate the new pr1c1ng policy to reflect an efficient resource allocation, at least in terms of producer prices. 1.57 Royalties. The issue of royalty payments to the provinces on petroleum and gas entails a heavy implicit tax on the sector to support provincial finances. The current reference price on which these royalties are paid dates from the early 1980s and is too high; i t should be reduced to international levels as soon as possible. 1.58 Budgetary Control. The Government needs to enhance budgetary control over the public enterprises. The respective roles of the DEP (or its successor, if any), the Ministry of Economy, the SIGEP and the various Secretariats in the Ministry of Public Works should be clearly delinPated. If the DEP is to perform its budget control task effectively, it should be equipped with the necessary means to verify the information received from the individual enterprises. The DEP budget, the Ministry of Economy's cash and conunitment hudgets and the financial statements should all be dratwn up within the framework of a uniform information system. 1.59 A uniform information system that would integrate the budget con- trol mechanism with the financial accounts of the companies needs to be designed and implemented. It will facilitate the control of the execution of the budget, increase the speed of reporting and make the various inform- ation sets consistent. At the same time, it could make the aggregate oper- ational and investment budgeting compatible with the planning at the level of the individual enterprise. 1.60 Enterprise Restructuring. Without enacting internal reforms within each enterprise to induce managerial responsibility, accountability, and autonomy, changes in the regulatory and competitive environment will not have their full desired effects. The Government should therefore con- tinue and accelerate restructuring programs currently under discussion to strengthen management, improve personnel policies, and enhance financial controls. Management could be strengthened by restricting political  -104- appointments to boards or a few senior level posts as well as improved salaries, attention to qualifications, and sound training. These efforts could permit considerable reduction in expenditures and improvements in long-term efficiency. 1.61 Institutional Framework. The market structure and regulatory framework of each sector requires definition so that enterprises are sub- jected either to the discipline of the market or well-defined regulations regarding pricing. For those enterprises designated to function as regu- lated monopolies, the regulatory framework should be clearly established in the law so as to permit maximum managerial autonomy within a carefully elaborated legal framework, thus minimizing the imposition of political and nonconunercial objectives. 1.62 Procurement. The ComEre Argentino law should be modified to allow foreign competition in the bidding for contracts of the public enterprises. This would effectively abolish the implicit subsidy system to the private sector and reduce the operating costs of the public enterprises. 1.63 Cross-Subsidies. The Government needs to redefine the mechanisms and degree of cross-subsidization among the public enterprises and needs to establish a transparent scheme for resource transfers. If the Government wants selected loss-making enterprises to maintain uneconomic activities and to keep a given number of workers on its payroll, it should set up a mechanism for this that would subject these expenditures to the budgetary review process. Highest priority should be given to reducing the demand for expenditures in Ferrocarriles, which absorbs most of the cross-sub- sidies and accumulates losses of nearly one percent of GDP annually. 1.64 Divestiture. The Government should announce its program of privatization. This should accelerate planned privatizations and review for possible inclusion remaining enterprises and activities that could be privatized. In the process, it should establish clearly defined legal procedures to ensure an unbiased selection of private investors and com- petitive bidding.  - 105 - ANNEX CHAPTER II: PROVINCIAL GOVERNMENT FINANCE A. Overview 2.01 The efforts to control Argentina's excessive fiscal deficit will not succeed unless they include the provincial governments. Provincial expenditures rose rapidly over the 1970-86 period, reaching 11.2 percent of GDP in 1986; meanwhile provincial tax revenues were only 5.0 percent of GDP in 1986, and had actually fallen from 5.6 percent of GDP in 1980 (Annex Figure 2.1). The fiscal deficit of the provinces in 1986 before transfers from the Central Government was 6.3 percent of GDP (about US$4 billion). After transfers, the provinces showed a slight surplus, but at the expense of helping transform the National Administration's before transfer surplus of 5.4 percent of GDP into a deficit of 4.6 percent of GDP after transfers (Annex Figure 2.2). 2.02 The provincial governments have resisted reforms and stopped sending data on their finances to the Ministry of Economy. Thus, mttional macroeconomic planning has been "flying blind" with respect to this important part of the public sector since 1986. Data from case studies of six provinces show that their combined fiscal deficit more than doubled in 1987 to US$1.1 billion (or 1.8 percent of GDP) after transfers, as own- source revenues declined and expenditures, especially for salaries, continued to rise.!/ For all 22 provinces and the Municipality of Buenos Aires, the total fiscal deficit after transfers was over US$2.8 billion or about 4 percent of GDP.?:_/ The decline in own source revenues stems partly from the rise of inflation, but also from the increasing inefficiency of the provinces in collecting taxes, as well as the reticence of taxpayers to pay taxes and fees for services of ever deteriorating quality. This reduced fiscal effort by the provinces has made them more dependent on transfers from the Central Government to cover their ever rising current expenditures. 2.03 Prior to 1988, incentives facing provincial officials favored deficit spending since transfers took the form of discretionary grants of the Central Administration. The heavy reliance on these grants had generated a perverse competition among the provinces to run up large deficits to get a larger share of total grants. The implementation of the !/ These data were collected as part of the World Bank's forthcoming study on provincial government finance. Field studies in six sample provinces (Buenos Aires, Chubut, Cordoba, Salta, Santa Fe and Santiago del Estero) were done in late 1988 in order to obtain finance data for 1987. These six provinces accounted for 69 percent of the 1985 national populations, 63 percent of households with unsatisfied basic needs in 1980, half of the floating debt in 1986, and 71 percent of total gross provincial product in 1980. ?:_1 Estimated using the results of the six case studies and the proportions of total revenues and expenditures in these six provinces during the 1981-86 period.  - 106 - Annex Figure 2.1 PROV. EXPEND AND OWN-SOURCE REVENUES AU. PRO><w1NCES AND THE I"EDEIW. CAPITAL 11 10 9 B 7 & 5 J 2 ro ~ n n n ~ n n ~ ~ m ~ ~ ~ ~ ~ ~ 'l'lAit C OWN-SOURCE ~NUES 1- TOTAL EXPENDITURES Annex Figure 2.2 PUBLIC SECTOR DEFlCIT: 1986 BEFORE AND AFTER TRANSFERS & 5 4 J 2 ~ 8 0 ~ -1 at -2 -J -4 -5 -& -7 Before Nter IZZl NATIOM. ISS! PIIOY ~ PSE ~ SOC. SEC.  - 107 - new revenue sharing law (Ley de Co-Participaci6n) in 1988 restricts discretionary grants from the Central Government to the provinces. Under the new revenue sharing law, grants are limited to only 1 percent of total transfers and sharing is done according to criteria fixed in the law. It is not clear, however, how long the Central Government can hold the provinces to the distribution criteria of this law, unless efforts are undertaken to reduce the explosive rise of provincial fiscal deficits. In 1988, the central government was compelled to ask Congress to provide some extra resources for the provinces in March and then again in December. 2.04 The fact that provinces borrow on a very short-term basis (mostly through suppliers and overdrafts on the provincial banks) accentuates their need to go to the Central Government for transfers. Short-term debt in 1987 more than doubled for the six sample provinces to US$842 million, accounting for about three quarters of all borrowing. A rough estimate of this short-term borrowing fur all 22 provinces and the Municipality of Buenos Aires is about US$2 billion in 1987, more than twice that of the previous year. 2.05 Provinces are using short-term basis through suppliers and over- drafts to finance their substantial capital investments. The provincial governments invested almost US$1.6 billion in 1986 (2.6 percent of GDP), slightly more than the public enterprises in 1986 and about 60 percent more than the National Administration. B. Intergovernmental Fiscal Relations 2.06 The new revenue sharing law that was passed in 1987 and became effective in January 1988 evolved from the previous revenue sharing law of 1973 (20.221). Not only did it increase the amounts shared with provinces, it also fixed the criteria for distribution among the provinces by law. Responsibility for th~ provision of many services was also transferred to the provinces in the late 1970s and early 1980s, such as primary education, medium-size hospitals, water, irrigation and electricity. The formal revenue sharing system was inten·upted from the end of 1984 when re·venue sharing law expired, until January 1988, when the current law was implemented. From 1985-87, a series of ad hoc agreements substituted the revenue sharing law. 2.07 However, even in the period before the previous law expired, a chief means of transfers to the provinces was Discretionary Grants (Aportes del Tesoro Nacional). For example, in 1984 (the year that the previous revenue sharing law expired) an amount equal to 4.30 percent of GOP was transferred to the provinces via both revenue sharing (1.8 percent of GOP) and discretionary grants (2.5 percent of GOP). The Prevailing Revenue Sharing Law 2.08 The prevailing revenue sharing law represents an important step towards more responsible fiscal federalism in Ar·gentina: Not only does it limit discretionary grants to only one percent of total shared taxes, but it also fixes the percentages of total revenues from shared taxes going to  - 108 - the provinces as a whole (i.e., primary distribution), and to each individ- ual province (i.e., secondary distribution). In primary distribution, the percentage of shared or ("coparticipated") taxes going to the provinces rose from 48.5 percent to 57.66 percent under the new law. Furthermore, taxes to be shared are deposited directly into the accounts of the provinces in the Banco de la Nacion Argentina in accord with the per- centages used in secondary distribution within 72 hours of their collec- tion. 2.09 Equally important, any additional transfers to the provinces must now be approved by Congress. This makes the revenue sharing system trans- parent, and raises the political cost to provinces of requesting financial assistance of the Central Government. The law is valid for two years, but will be extended automatically until a new one is adopted. As passage of revenue sharing laws has been difficult in Argentina, the current law could well stay in effect for some time to come. 2.10 The total amount transferred under the new law was projected to increase by about US$345 million over the 1984-86 average to US$2.5 billion in 1988. Total revenues of shared taxes dropped by about 11.5 percent in real terms for the first nine months of 1988 as compared to the same period of the previous year, thereby precipitating in part the crisis that will be discussed below. 2.11 The criteria used in dividing the total revenues of shared taxes among the provinces are very heavily weighted against Cordoba, Santa Fe and especially Buenos Aires whether the measure is population, output, or popu- lation with unsatisfied basic needs. Annex Table 2.1 shows that Buenos Aires received ottly 44 percent of its share relative to population and 51 percent relative to its share of the nation's poor. The Recent Political Confrontation over Revenue Sharing 2.12 In December 1988, the provinces requested A$4 billion (US$260 million) to help thent meet their payrolls and the second half of the annual bonus (aguinaldo) for public employees as well as other expendi- tures. Several governors organized demonstrations in Buenos Aires to underscore their claims. At stake in this confrontation was the integrity of the existing revenue sharing law. Finally compromising to additional transfers, the Central Government adeptly negotiated as a quid pro quo a major tax reform and measures to reduce and make more transparent the huge fiscal loss caused by the Industrial Promotion Program. 2.13 The final agreement involves two bonds: The Bono para El Saneamiento Financiero Provincial (hereafter, Bono Provincial), and Bono Federal: (a) Bono Provincial. The Bono Provincial of A$3 billion (about US$200 million) was a non-negotiable bond of the Central Government transferred to the provinces using the same percentages established for secondary distribution in the revenue sharing law. The provinces will pay the loan back to the Central Government in two years with one year of grace at an interest of 2 percent per year plus a monetary correction.  - 109 - Annex Table 2.1 Seconder, Dle\rlbutlon In ltovonuo Sharing end Dlet.rlbu\lon of Population, Crot1e Provincial Product. end Houeoholde with Uneet.leflod leelc Heodo b1 Provl~co ------------------------------------------------------------------------------··-- I for cro•• Hou..,_o Ide wl t.h Provine" S.Conar, Population Provincl•l Une•tleflod Dl•t.rlbu• Product. l•olc Neede tlon <•> A/I A/D ,.,, 1111 1811 1880 1110 (A) (8) (C) (D) (E) (If) (Q) --------------------------------------------------------------------------------- TOTAL 100.00 100.0 1.00 100.0 1.00 100.0 1.00 luenoo Alree 1t.tl 41.4 0.44 44.0 0.41 lt.4 O.ll Ce\Mirca 2.18 0.3 1.14 o.e 4.1t 1.1 2.N Chaco 1.11 2.t 1.77 1.7 1.01 4.7 1.U Chubut. 1.11 1.2 1.11 2.4 0.11 1.1 1.o·r Cordoba 1.22 1.1 0.14 10.1 0.81 1.2 1.11 Corrlentee I.N 2.7 1.41 2.0 1.11 1.1 o.• 1.07 1.1 1.40 1.1 1.41 4.2 1.11 , ....."'" Ot.ro a 1.71 1.2 1.01 o.e 1 •• 2.0 1.10 ... ,..,. JuJuJ 2.11 1.11 1.1 0.1 1.11 2.27 1.1 1.2 1.11 1... 2.7 0,7 1.10 2.14 ........ Ll RioJa Mlolo,... 2.11 4.11 1.41 0.7 1.0 2.1 1.17 0.17 1.11 0.4 e.o 1.7 1.11 0.72 2.01 0.1 1.1 1.1 2.12 1.12 o.• Nouctuen 1.14 1.1 1.11 1.1 o.u 1.2 1.24 Rio Metro 2.12 1.7 1.11 1.7 1.11 2.1 1.21 Sol to 1.11 2.1 1.41 2.1 1.10 4.0 o.• Sen Juon 1.11 1.1 1.82 1.4 2.11 1.1 1.11 Sen Lulz 2.17 0.1 2.72 0.1 2.11 1.0 2.41 Santo Cruz 1.11 0.1 2.71 1.1 1.27 0.4 1.12 Santo '• 1.21 10.0 0.11 11.1 0.70 1.2 1.01 Sgo. •• IaUro rue.... 4.21 .. ... 2.1 4.1 1.71 1.20 1.4 1.1 1.11 1.21 1.1 1.0 1.10 0.11 ........ ........ ···------------------- ICUCU1 &..1 • c.,."lcl,.clon, Capitulo 11 Art.. 4 1 Dlcl.-ro 22 1 1117. DIDIC, MGINTDIA 81 CZIIIAia TDIZTORID, Pobloclon la\1. . . ol 10/1/11. CMMJo , . .rei • bvorolo,..., lat.l•teo of Qrooo Provlnclol Product., INDIC, LA P..W IN LA AMINTINA 1 luonoo A1 r•, 1111. ••r••· NOTU1 (a) Por..,.to... uood In oocondar, dlot.rlbut.lon.  - 110 - Payments will be automatically deducted from the shared revenues of the provinces. The provinces transferred the bonds at face value to the provincial banks in payment of their debts. (b) The Bono Federal. This bond of A$2 billion (US$130 million) was to have been issued by the government, which was to receive 42.34 percent and the provinces 57.66 percent. The provincial share was then to be divided in accord with the percentages established in the t·evenue sharing law. However, due to the economic crisis, the bond was never issued by the Central Government. The total face value of the two bonds (A$5 billion or US$330 million or about 0.5 percent of GDP) would represent only about 4 percent of total provincial expenditures, 11 percent of projected revenue sharing and 7 per- cent of all transfers. 2.14 The Central Government managed to maintain the integrity of the revenue sharing law through these measures. However, its inability to issue the Bono Federal is proof of its limited ability to transfer resources to the provinces, and, therefore, of the urgent need for reforms to make them more fiscally autonomous. C. Provincial Revenues 2.15 Total provincial revenues from all sources tended to rise steadily during the 1970-86 period. The top line of Annex Figure 2.3 is total revenue from all sources, and the second, provincial own-source revenues. The gap between the two is the amount covered by transfers of all types from the Central Government, which increased greatly after 1980. Case study data shows that this positive trend in revenues reversed in 1987, when own-source revenues declined by 14.7 percent (discussed below). As this drop was partially compensated by a 2.7 percent rise in transfers from the Central Government, total revenues from all sources for the six provinces in 1987 suffered a real decline of 8.5 percent. 2.16 Tax Revenues. Total provincial tax revenue skyrocketed from only 1.0 percent of GDP in 1975, peaking at 4.4 percent of GDP in 1980, then dropping to 2.7 percent of GDP in 1983, before beginning a steady recovery to 3.8 percent in 1986 (Annex Figure 2.4). Total real tax revenues dropped by over 11 percent from the previous year, with all taxes showing losses in real terms. 2.17 The primary "motor" in this improvement was the turnover or gross sales tax, shooting from only 0.1 percent of GDP in 1975 to 2.1 percent of GDP in 1980, before dropping back down to 1. 5 percent in 1983. However, the real estate tax and the automobile tax also showed positive trends until 1986, with only the transfer tax (i.e. stamp tax) losing ground in recent years (Annex Figure 2.5). This temporal instability in fiscal performance can be explained by the Olivera-Tanzi effect in times of rising inflation, but also by shifts in the efficiency of collection and billing procedures. There is a wide margin for improvement.  - 111 - Annex Figure 2.3 PROY. TOTAL NIJ OWIHOtRCE R£VEJID N n ~ ~ n N N n Annex Figure 2.4 N N . • --- • • G M • • PROY OWN-SCUlCI aRRENT REV BY nPE 1~--------~~~,~~~.U~M~I~~~~~~~~-~~~-----------, a ----- - N n ~ ~ ,. 11 Annex N " N Figure 2.5 N • • • • • TAl • M • • . . . TAl PROYICIAL TAX REVDID BY TYPE ~ '~.0 .... ~ , ....... WIDI&. u 2.1 ..• 2 ... '·' ••• ..• 1.1 a ~ I.J 1.2 1.1 • ••• u I 0.7 ... ••• ... o.J ... 0.2 •N a ,.,..,., n ~ ~ n • II N IU. . . . . " - II 11 • - - • • • • .. M • •  - 112 - 2.18 Nontax Revenues. The performance on nontax revenues from fees, tariffs, etc. has been quite weak, with their total more or less stable at around 1 percent of GDP ln the 1980s. This low importance is partially due to the exclusion of the public utility companies from these Ministry of Economy data, as these are precisely the entities that charge user fees. For Buenos Aires, adding the utility companies boosts nontax revenues from 10.4 percent of total own-source provincial current revenues in 1987 to 22.7 percent. These nontax revenues including public utilities dropped by almost 38 percent in 1987 for the six provinces, adding to the longer-term negative slide. Clearly, there is a need for improvement to recuperate tariffs and user fees for public services. User fees are widely perceived as unfair because they are not closely related to services and many do not pay at all. D. Provincial Expenditures Total Expenditures 2.19 Expenditures for all provinces and the Federal Capital rose rapidly over the period from 7.5 percent of GDP in 1970 to 11.2 percent of GDP (or about US$8 billion) in 1986 (Annex Figure 2.6). The case study data shows that these expenditures rose in 1987 by 7.4 percent, even though total revenues declined. Current expenditures have risen much more rapidly in recent years, while capital expenditures have remained stable at about 3 percent of GDP. Current Expenditures 2.20 The 'driving force in the increase of current expenditures was clearly personnel, but transfers to municipalities and other entities were also important. 2.21 Personnel. Payments for personnel varied widely over the period, ranging from 3.13 percent of GDP in 1977 to a high of 5.8 percent of GDP in 1984 (see Annex Figure 2.7). Provincial public employment in only the consolidated Central Administration increased by over 230,000 (34 percent) in all 22 provinces during the 1983/86 period to 913,000 in 1986 (Annex Figure 2.8). This trend continued in 1987 for most of the six provinces studied. For this reason, total real provincial expenditures on personnel for the General Administration alone rose by slightly over 33 percent during the 1983-86 period to over US$3.9 billion, excluding the semi- autonomous entities. 2.22 The provinces argue that this great increase in employment was necessary to meet social needs in health and education, which had been ignored during the military regime. Employment in health and education did in fact increase, hut that employment in other areas of public admin- istration grew at almost exactly the same rates. The total public employment in these slx provinces increased by 123,000 over the 1983/87 period. The area of health and education increased at rates equal to those of the "other" category, including general administration.  - 113 - Annex Figure 2.6 TOTAL CUUUT All) CAPfTAL EXPENmRES ,_ + cunpr • QUIITAL Annex Figure 2.7 Annex Figure 2.8 -- NCREASE It PROY N1JC EMPI.On.ENT ~,--------------~~~,~~~~~·~~~----------------~ a Jl 1 ' ~ n ~ u u ~ ~ ~ ~ a a ~ ~ a • a ~ ~ ~ a •IIICIIfMI•-r  - 114 - 2.23 This growth of employment varied greatly among the six provinces. In Salta, total provincial public employment catapulted from 26,000 in 1983 to 55,000 in 1987, an increase of 29,000 or 111.5 percent in only four years. Of this, about 12,000 or 40 percent was in health and education with the other 17,000 in the general administration. The Province of Salta declat-eu itself an "employer of last resort," and is now considering a number of policies to reduce the payroll, including assistance in opening small businesses, and "privatizing" services such as transport, copying, etc. In 1987, 90 percent of total expenditures in Salta went for the pay- roll, which exceeded total current revenues by over 30 percent. 2.24 Rapid increases in employment could mean that the efficiency in the provincial public sector has declined, if it has produced inefficient mixes of inputs in the production of public goods (e.g., the teacher with- out chalk and the doctor without any medical supplies).l/ The gross indicators available show the need for much more detailed and careful analysis of the efficiency of the social sectors in the provinces to determine how they might be more efficient producers of these important services. 2.25 Goods and Services. The expenditures on goods and services amounted to about 1 percent of GDP (about US$700 million) over most of the 1980s. Most provincial administrators interviewed agreed that improved purchasing procedures could cut at least 10 percent from expenditures with no loss in quality or efficiency. Implementing such procedures, however, is no mean task. Provincial governments not only adhere to the Buy Argentina program, but also often have their Buy Provincial programs. 2.26 Interest Payments. Interest payments account for less than 1 per- cent of total expenuitures in all of the provinces, except Santa Fe where they reached almost 2 percent. The reason for this is that provinces "bor- row" mainly through suppliers. The interest payments are, therefore, implicit and are included in the price of the goods and services received. Just how much the suppliers charge for implicit interest depends on their perception of risk for late and nonpayment. 2.27 Transfers to ~~nicipalities and Other Entities. Provincial gov- ernments transfer resources to municipal governments via revenue sharing and discretionary grants, as well as to provincial enterprises and to social security entities. Of these, transfers to municipalities are normally by far the most important item. 2.28 Current transfers to municipalities, provincial enterprises and special organisms such as social security increased from less than 1 per- cent of GDP in the early 1970s to a peak of 2.6 percent of GDP in 1981, but tended to decline over the 1983-86 period, reaching 1.9 percent of GDP in 1986. In 1987, these transfers accounted for 22 percent of total expendi- tures in Santa Fe and about 16 percent in Buenos Aires. 11 David L. Lindauer, Goverrunent Pay and Employment Policies and Government Performance in Developing Countries, Background Paper for the World Development Report of 1988, Washington, the World Bank, pp. 7-12.  - 115 - E. Deficit/Surplus and Sources of Credit 2.29 The contribution of the provinces to the consolidated public sector deficit is high and probably rising. The fiscal deficit of the six provinces studied (excluding the non-consolidated entities and enterprises) jumped from US$554 million in 1986 to US$1.1 billion in 1987 (106 percent) due to both the decline of total revenues and grants of 8.5 percent and an increase in total expenditures of 7.4 percent. Including the non-con- solidated entities would increase the total need for borrowing to US$1.5 billion (by about 35 percent) in 1987 for the six provinces studied. The Importance of Short-term Credit 2.30 Almost all of the debt of these six provinces is financed through the variation of short-term assets and liabilities, which explains "'hy the floating debt is so large and apparently growing. For example, of the total need for borrowing in 1987 of US$1.1 billion, US$842 million "'as financed through variations in short-term assets and liabilities. 2.31 This short-term credit can take a number of forms, including: (i) unpaid payment orders that are not overdue (voluntary credit); (ii) un- paid payment orders that are in arrears (involuntary credit); (iii) unified checking accounts; and (iv) bank overdrafts, usually on the provincial bank. The unified checking accounts (Fondo Unificado de Cuentas Oficiales) involve combining the balance of all the provincial checking accounts. The province can then use up to a stipulated limit of the balance of this unified account. Finding out the distribution of the floating debt among these different forms is not easy, as shifts often occur daily. However, in Salta the breakdown was estimated as follows: unpaid bills (both ·within the established payback period and in arrears), 83 percent; overdrafts on the provincial bank, 14 percent; and other sources, 3 percent. 2.32 The provinces are now "financing" their capital investments with short term credit. The estimates of the floating debt for each expenditure item for Cordoba showed it to be highly concentrated in the capital 'expend- itures. 2.33 One form of "borrowing" currently being used by some provinces (Salta, Jujuy, Catamarca, Tucuman and La Rioja) is very close to the emis- sion of money, in that it consists of issuing "bonds" that have all of the practical characteristics of money. F. Recommendations The Need for Provincial Financial Reform 2. 34 Although the Central Government managed to maintain the intE!grity of the new revenue sharing system in the recent controversy over the float- ing of bonds to assist the provinces, it is unclear how long it will be able to do so unless urgent reforms are undertaken to reduce the provincial public sector deficits, as well as to provide the provinces with longer term financing for their capital investments. The goal should be not just to reduce the deficits, but to transform the provinces into agents of development which generate surpluses that they can invest wisely to increase total provincial product, thereby augmenting their future tax revenues.  - 116 - 2.35 The reconunendations for developing such a strategy will involve: increasing own-source revenues, reducing expenditures and raising their efficiency, borrowing to finance capital investment, and improvements in the information system to allow adequate macroeconomic planning at the national and provincial levels. 2.36 Ways of implementing such a strategy in provinces that are extremely heterogeneous by almost any indicator must be developed. One way to deal with this diversity would be to provide technical assistance for the provinces lo do their own financial and economic planning. Increase Own-Source Revenues 2.37 Improve the Efficiency of Tax Collection. Improving the efficiency of tax billing and collection procedures should receive top priority, as this would produce high fiscal returns in a short period of time. All six provinces studied could substantially increase their own- source tax revenues without raising nominal tax rates. This could be achieved through improving cadastres, information systems and general tax administration. In many cases, own-source tax revenues could be increased by over 25 percent with just these basic management reforms. More efficient tax collection would also be more equitable, as it would reduce Lhe very high existing levels of tax evasion and free-riding. Tax legislation, especially that regarding exemptions, should be reviewed. Tax administration should not be under-staffed, as is currently the case in some provinces. Qualified staff should he recruited as soon as possible either within the Government or by new hiring. Where feasible and cost effective, billing and collection should be privatized (e.g., the collection of delinquent property taxes in the province of Santa Fe). These measures to improve fiscal performance should be linked to those which improve the quality of services (see the section on improved efficiency below). This should, in turn, help increase the willingness to pay taxes and fees. 2.38 Increase Nontax Revenues. To the extent possible, the cost of providing local services should be recovered from charges on the benefi- ciaries. Such charges should be related to individual consumption or, where this is not possible, to a measure of individual ben~fit received. This is clearly not the case in most of Argentina's provinces, where the "decentralized agencies" such as the public utility companies (e.g., Water and Sewerage, Electricity, etc.) often represent a important drain on public finance. Water is rarely metered, and delinquency in payment is high due to inefficient collection procedures, and also to the perception that the amounts charged are unfair, given that they are based on con- structed area, rather than actual consumption. Reduce Expenditures and Increase Their Efficiency 2.39 Personnel Policy. Clearly, personnel policy is of highest prior- ity in the provincial government in any effort to increase efficiency and lower expenditures. Provinces must make efforts to shed excess labor hired over the last half-decade; this could be done with systematic programs of transitional income maintenance and vouchers for vocational or other train- ing. If the number of unproductive workers were reduced, remaining civil servants might be granted needed pay increases to regain some of the lost competitiveness with the private sector, while still reducing the overall  - 117 - wage bill. Each provincial government should receive technical assistance to do detailed studies on how to improve its efficiency in these and other ways. f!J 2.40 Procurement Procedures. The case studied revealed that improved procurement procedures could reduce expenditures for goods and services by at least 10 percent, and would also be helpful to the modernization of industry. Buy-Provincial legislation should be eliminated, and the Buy- Argentina law modified in the same way as suggested for public enterprises in Chapter IV and Annex Chapter I. 2.41 General Organization and Management. Elementary improvements in organization and management could save a lot of time and money for both the government and those needing services. None of the six governments studied were investing more than token effort in these kinds of improvements. The use of computers could dramatically increase productivity in many areas. Analyze the Impact of Access to Longer-Term Financing on Total Expenditures 2.42 Longer-term borrowing would certainly reduce the need for pressur- ing the Central Government to cover the borrowing needs for capital invest- ments, hut would have to be tied to the general structural adjustment already discussed. Provinces could be provided with technical assistance to not only do a financial action plan which would show how they coUlld raise their revenues or lower their expenditures to create a surplus suffi- cient to amortize longer-term loans. They should also receive assistance for doing a medium-term investment plan which would identify areas of high- est return for public sector investment in the province. Improve the Information Systems on Provincial Public Finance 2.43 It is impossible to do macroeconomic planning without information on the provinces, when they are spending well over 12 percent of GDP and running up deficits of over US$1 billion per year. A first step in improv- ing provincial financial management, and also the consolidated public sector accounts for general macroeconomic planning should be to establish an efficient information system for the collection and analysis of the provincial budget data. 2. 44 Pr<?_!!~~ia!_ GO!'!._rnments. The entire provincial public sector should be seen as a whole, including both the nonfinancial (that we have discussed here) and the financial subsectors (i.e. the provincial banks). The nonfinancial subsector must cover both the Central Administration and the decentralized entities and enterprises. 2.45 National Level. The provinces and the Central Government should be strongly urged to reach an agreement on how to set up an efficient information system for providing the consolidated public accounts as soon as possible after each exercise, as well as preliminary results during the exercise. This should be part of any new revenue sharing agreement. ~/ The Bank has been involved in numerous efforts to improve public sector employment policies. For a review, see: Barbara Nunberg, Public:_ Sector Pay and Employment Reform, Policy Planning and Research Working Papers, WPS 113, World Bank, Washington, D.C., October 1988.  - 118 - ANNEX CHAPTER III: SOCIAL SECURITY A. Introduction 3.01 The solvency of pension and health care funds has been eroding in the 1980s, and prospects for sustaining benefits without recourse to gen- eral Treasury revenues are poor. The average pension has already fallen far below levels specified in the law, and the prospect is uncertain that even these levels can be sustained without recourse to general Treasury resources. Social security deficits In the medium-term could undermine efforts to put public finances into balance. 3.02 The social security system in Argentina is in reality a heteroge- neous group of loosely coordinated accounts, some in reasonable balance (for example, the insurance fund for federal employees, where pensions are virtually a form of deferred compensation), others with histories of finan- cial distress (the fund for autonomous workers, many provincial employee funds). Retirement programs (including survivors' and disability benefits are separ·ate from the health programs, which are financed through social funds (obras sociales) which are discussed separately in this chapter. There are about 300 industry-associated funds that finance health-care services delivered in large part by private hospitals and physicians. 3.03 The social funds differ in clientele, financial soundness, the henefits they offer, and in the efficiency of their operations. However, they do share a lack of regulation and monitoring. The pension funds are overseen by the Secretariat for Social Security; the social funds by the Secretariat of Health. The major provincial retirement funds are linked to the Federal Government only by the latter's fiscal obligation to cover deficits they may incur. B. Pension Program Affiliates and Beneficiaries 3.04 About six milUon Argentine workers are affiliated to one or more of the pension and disability funds. Over three million inactive persons, including retirees, the disabled, and survivors of deceased contributors, receive payments from these funds (Annex Table 3.1)."};_/ The industry and trade fund has three million contributing affiliates; the fund for government employees 0.8 million, and the fund for the self-employed has 1.5 million. There are about 1.4 million persons receiving benefits. Uncounted additional thousands of affiliates are associated with provincial pension funds. !/ None of the systems has personal accounts, nor does any individual have an account number that would reveal whether he or she pays into, or receives benefits from, more than one of the many funds. An employee might avoid Jlayment into a fund by claiming that, through another job, he is paying into a different fund. Beneficiaries can simultaneously receive checks from, for example, a military pension, a civil service pension, and a self-employed worker pension, depending on past career service. There are currently no means available to the Social Security Secretariat to measure the frequency of such occurrences.  - 119 - Annex Table 3 .1: ARGENTINA - NUMBER OF AFFILIATES AND RETIREES, 1983 MAJOR RETIREMENT FUNDS (Millions of Persons) Number of Number of Fund Affiliates Retirees Industry and Trade 3.0 0.67 Public Employees 0.8 0.19 Self-Employed 1.5 0.54 Total 5.3 1.40 Source: Gnlbert and Lo Vuolo. "Aportes para un debate sobre previsiOn social" Mimeo. Buenos Aires: UNDP and Ministerio de Salud y Acci6n Social, 1988: p.19. Benefits 3.05 Argentine social security funds dispensed over 5 percent of GOP in 1989 through pension and disability benefit programs. Retirement ages in Argentina are generous by world standards, and even more so in light of the country's relatively long life expectancy: women can retire at age 55 and men at 60. Argentine legislation provides for pension benefits equal to 70 percent to 82 percent replacement of an employee's last working salary. Nonetheless, for most of the 1980s, actual benefits paid have been well below legally prescribed levels (Annex Table 3.2).~/ These data do show an unmistakable deterioration in the real value of pensions that government must be under considerable pressure to correct. Annex Table 3.Z: ARGENTINA - RATIO OF PENSIONS TO WAGES, 1980-87 Year Average Pension/ Average Wage 1980 .65 1981 .64 1982 .62 1983 .58 1984 .46 1985 .50 1986 Est. .20 1987 Est. .38 Source: Golbert and Lo Vuolo, £1?. cit, p.25. ~I Data for the two most recent years must be regarded as provisional because underlying statistical data have not been published in r~~cent years.  - 120 - Contributions 3.06 Wage taxes are extraordinarily high and amount to about 32 percent of the wage bill in the formal sector of the economy; 23.5 percent is assigned to pension benefits, 7.5 percent or more assigned to health care financed through the social funds. However, there is a high rate of avoid- ance by rejection of formal-sector employment to work in the informal sector: Evasion is estimated to be one-third of the obligated enterprises ami employees in 1986, the latest year for which government estimates are available. Some 2.6 million workers and their employers manage to avoid contributing.~/ Deficit Finance for Pension Benefits 3.07 Wage-bound revenues are not adequate to finance the legally- mandated benefits of retirees, their dependents, and disabled benefi- ciaries. Spending as a share of GDP rose through the 1970s from under eight percent to over ten percent. The crisis then brought on a precipi- tous decline to less than 5 percent of GDP for these services by 1984, this despite the fact that in the years 1981-84, Treasury payments to the re- tirements funds accounted for over 40 percent of the funds' total revenues (Annex Table 3.3). Annex Table 3.3: ARGENTINA - SOURCES OF PENSION FUNDS' INCOME, 1979-87 (Percentage Distribution) Aff:lliate Special Year and Employer Treasury Laws Other 1979 95.7 0.0 3.6 1980 86.4 8.0 4.2 1981 40.4 45.8 13.5 1982 40.9 47.9 12.0 1983 37.4 42.7 10.5 1984 45.2 43.0 4.1 1985 66.8 25.4 9.0 3.8 1986 63.3 23.3 6.4 8.0 1987 Est. 73.9 13.3 8.0 4.8 Source: Golbert and Lo Vuolo, ~cit, p.24. 3.08 In the 1980s, the gap between system revenues from currently employed workers, and system expenses for retired and disabled beneficia- ries, grew to several percentage points of GDP. That gap was filled by resort to general-purpuse revenues from the Treasury and a serious erosion- -about 55 percent--in the real value of payments to beneficiaries. The Treasury sought to extricate itself from the high level of obligations, during what was perceived to be a temporary situation, through special ~/ Golbert and Lo Vuolo, ~cit, p.18.  - 121 - budgetary legislation that paved the way for nonwage taxes on fuel to be used to pay fur pension obligations. The funds have become more obviously dependent on general revenues since 1986, when 1.4 percent of GDP was transferred to the Social Security Secretariat to pay for pension benefits. Special taxes on fuels are now earmarked to pay for pension benefits. Increasing the wage tax to close the deficit is not feasible because higher quotas will probably lead to greater tax evidence and evasion. 3.09 The new tax on fuels and certain public services will imply addi- tional resources equivalent to two percent of GDP for the pension system, and the new health insurance law, ready for passage by Congress and execu- tive approval, raises employer contributions from 4.5 percent to 6 percent of the aggregate salary bill. These taxes will not be enough to assure that no further general revenues will be necessary in the next five years. This is because pension payments are still below those provided by f!xisting legislation (Law 18.037), so there will be growing pressure to restore benefits to levels required by law. Technical staff of the Social Security Secretariat estimate that an increment of 17.2 percent in social security funds' revenues, beyond those already at hand, would be needed to pSLy for the legally-mandated benefits package. Long-Tenn Financial Viability 3.10 The changes enacted to-date have not established an equilibrium between pension obligations and the income from wage taxes. The aging of the Argentine population, with its implications for an increasing depen- dency burden on the labor force indicates that wage taxes will be too narrow a base for expanding pension obligations. The dependency ratio, in this case the over-60 population divided by the population aged 20-59 multiplied by 100, is expected to rise from 24.1 percent in 1980 to 28.6 percent in 2020. Imbalance between wage-based revenues and pension payments are certain to plague the systems because the burden per worker must grow. 3.11 The problems of financing benefits for the elderly will be consi- derable in the next century, but it will already be a serious burden in the 1990s. Nearly 19 percent of all Argentines will be eligible for pension and related benefits in 1990. There will be about 2.4 workers obligated to pay wage taxes to finance the benefits of each retiree. But because of the potential for· evasion, even fewt>r workers can he expected to contribute to pay for benefits. Further recourse to general revenues or special, addi- tional taxes are inevitable if the Government desires to maintain benefit payments. Inequality of Fund Resource Distribution 3.12 Political demands to extend coverage of social security benE~fits to poor and vulnerable groups, who now face health care costs and old age with no effective safety net, are likely to intensify. About 40 percent of the potentially eligible population, i.e., those old enough to retire and ill enough to require health care services, are outside the existing  - 122 - pension funds and social funds. They are eligible for public health care, but these services are widely regarded as inferior to those available through the social funds; most of these people come from the same poverty groups that do not qualify for retirement benefits. 3.13 Extension of the current Argentine system to provide 100 percent coverage could cost an additional three percentage points of GDP, increas- ing public-sector obligations for pension benefits and health care by 25 percent over current levels. The achievement of equity in caring for the elderly cannot be based on a simple extension of the current system. 3.14 Because there are three main funds, each with its own system of pensions and benefits, there is unequal distribution of payments and bene- fits. According to Annex Table 3.4 helow, the Industry and Trade Fund subsidizes those covered under the self-employed fund. The industry and trade fund collected about 66 percent of all revenues collected by the three funds but paid out, in 1983 only 44 percent of the benefits paid by the three funds. The fund for the self-employed collected 17 percent of revenues but received 29 percPnt of benefit payments. These differences may reflect cross subsidization that achieves some equity objectives, but there are no data addressing such a possibility. Moreover, such large cross subsidies may in part explain efforts by many workers to avoid or evade the wage taxes that pay for heavy cross-subsidy burdens on those who do pay. Annex Table 3.4: ARGENTINA - DISTRIBUTION OF INCOME AND EXPENDITURES BETWEEN FUNDS (Percentage, for 1982) Payments to Revenues Beneficiaries Industry & Trade 64 48 Public Employees 17 26 Self-Employed 19 26 Total 100 100 Source: Golbert and La Vuolo, 2£ cit, p.28. Options for Pension Refonn 3.15 Future governments can be expected to search for new sources of revenue, to consider means to reduce obligations to current and future beneficiaries, and to assess options for new approaches to providing basic social security protection on terms that are sustainable without excessive recourse to the limited power of the state to tax its citizenry. The Government might be attracted to adjustments aimed at mobilizing more resources for the current system: increasing formal-sector employment, increasing the wage tax on the self-employed, and reducing the current transfer of 10 percent of social security income to the health insurance  - 123 - fund for retired persons. None of these options, nor some combination of them, offer much hope for increasing system revenues. And even i f they did, they would leave the system with its current features of inefficiency and inequity that at some point will have to be addressed. 3.16 A different pattern of benefits, based perhaps on a different theory of the function of social security, with sharply reduced pension obligations at higher income levels, may have to be introduced at Borne point, to substitute for entitlements that will be unsustainable in the future. 3.17 Benefits could he reduced in a way that could actually increase both the efficiency and equity of the benefits package, the following options could be considered: (a) Increasing retirement age by 5 or 10 years, so that years of contribution would rise relative to years of receiving benefits; (b) Reducing the rate of salary replacement from 82 percemt to about 40 percent. or, as an alternative, to a low, baEric rate of salary replacement, with voluntary purchase of additional coverage; and (c) Using an extended modest salary base for calculating pension rights (not the last salary but, for example, a ten-year real average). A gradual phasing in of benefit changes for future beneficiaries, a.s was done in the United States' social security reform of the early 1980s, might offer an acceptable way of reducing otherwise unsustainable obligations. An Alternative Pension System 3.18 Another option would be to de-link pensions from wage; to offer a basic stipend only, and to enat:t legislation to facilitate private con- tractual savings institutions under public regulation.!/ According to a recent report, this alternative would provide a monthly benefit of about US$100 to each of 3.6 million qualifying persons because of age, dis- ability, or widowhood.~/ !I A cut in wage-based taxes could reduce the bias against use of labor in manufacturing and could also encourage production of tradeable goods. System changes could also favor provision of basic benefits to poor and vulnerable groups now left outside prevailing arrangements. These medium-term operational changes would of course be dependent upon more broad-based reforms of the macroeconomic setting. These options are discussed among Argentine experts who favor a mixed system of a basic benefit and voluntary complementary insurance such as has been recommended by C. Mesa-Lago for Costa Rica (Schultess 1988; Golbert and La Vuolo,££ cit). ~I (Golbert and Lo Vuolo, £E cit, pp.36-45).  - 124 - 3.19 The estimated cost in 1990 would be about 5.2 percent of a GDP of US$80 billion compared to the current system costing over 8 percent of GDP, yet leaving 40 percent of the aged poor without coverage. Under the pro- posed arrangement, a basic stipend could be provided to all the elderly, and that stipend could be financed with a wage tax (assuming no evasion) of 16 percent of the salary bill. The current system, as noted above, col- lects 23.5 percent of the salary bill, but it suffers from high rates of evasion, inequity, and low coverage of those most in need of a social safety net of income security. 3.20 In converting from the present arrangement, which provides pension entitlements to many persons at a level far above the assumed basic monthly stipend of US$100, the Government would presumably have to finance transi- tion costs of an estimated US$720 million in 1990 (and even larger amounts in subsequent years) to provide for these higher acquired benefits that, for public employees at least, are virtual deferred compensation. But even with these additional costs, this more equitable package would demand less public resources than the present arrangement. c. The Social Funds and Health Services 3.21 Health insurance operated by the social funds is separate from the pension funds, except for transfer from those funds that pay for health care provided to retirees. The disparate programs offer variable benefit packages depending on their financial capacity, but they offer at least minimal coverage to three out of four Argentines, i.e., including eligible retirees, survivors, and the dependents of affiliated workers. Some social funds are powerful entities with more than a million affiliates, such as those of conunerce employees, rural wor·kers, and metal workers, and others cover only a few thousand members. The 12 largest social funds account for half of all social funds' affiliates. A government institute, INOS, pub- lishes some data on the social funds, but has limited supervisory authority over them. 3.22 Social security health care is, unlike pension bPnefits, almost entirely financed by wage taxes; the Treasury's only contribution is an earmarked subsidy for retiree health care, equivalent to 5 percent of total financing. A tax of 7.5 percent (3.5 points deducted from the employee's salary packet, 4 points added to the employer's wage bill) is levied at the source, and paid to the employee's social funds. An additional one percent or more of wages is deducted for employees who have dependents, (depending on the number of dependents). A further one percent is deducted to finance retirement health care. An amount equal to 2.9 percent of wages is trans- ferred from social security revenues to the designated social funds. Each social fund is required in turn to transfer a share of its revenues to PAMI, the social fund created especially for retired persons and pen- sioners. 3.23 About two-thirds of receipts of the social funds are used to pay for the current health care of workers and their dependents; one-third of the receipts flows through PAMI to pay for the health care of retired per- sons and pensioners. There are about three million affiliates of PAMI.  - 125 - This large group, a tenth of the population but possibly a third of all voters, obviously constitutes an in~ortant interest group that presses for maintenance of a high level of benefits. 3.24 The National Health Insurance proposal recently enacted by the Argentine Congress seeks to extend minimum coverage to all; currently, one in four Argentines is not covered by this prepaid health insurance system. This new law will centralize the monitoring of premiums to improve account- ability through banks by assigning separate accounts for the inflow' and outflow of resources; it will consolidate the resources available and transfer a greater share of those resources to the poor. 3.25 The burden of health care costs will grow faster than income because of the rise in the incidence of chronic diseases, such as cancer, stroke, and heart ailments. Argentina spends about 7 percent of GDP on all public and private health care, perhaps the highest percentage in Latin America and higher, as a percentage of GDP, than the UK. The burden of an aging population could be noted especially in growing costs for health care through the social funds. RecoDJRendations 3.26 The burden of r1s1ng health care costs in the 1980s fell pro- gressively more heavily on the social funds as they gradually replaced private sector funding of health services. Without further change, the burden will grow further in the 1990s, eventually forcing the Government of Argentina, which has ultimate responsibility for funding public health care, to consider some system to ration health care services. The rising incidence of chronic disease and its high cost will in any case pose diffi- cult choices in resource allocation, especially between the needs of essen- tial basic health care for all citizens and the claims of social security beneficiaries on rurative hospital services. 3.27 The Government's decision to incorporate !NOS into the Health Secretariat late in 1988 was a useful step toward a rational process of obtaining value for money in health care in the future. Further steps could include the introduction of co-payments and deductibles to make users of health services aware of the costs of treatment and hence to curtail unnecessary demand. 3.28 Extension of health insurance to all people may be the only way to assure adequate basic care to poor and vulnerable groups. Argentina already spends more on public health care than many countries so that coverage extension should he traded for cuts in nonessential servic1~s, particularly costly curative care that middle-income groups could finance from their own resources. In extending coverage, policies could be developed that would encourage the social funds to compete among themselves for additional clientele by varying their benefit packages and payment schemes. Currently, each social fund has a designated, industry-based clientele, so that the change to a more open system of choice would repre- sent a major shift in institutional arrangements. Despite the difficulties that such changes would present, the injection of consumer choice and com- petition into health insurance could have more than adequate compensating benefits.  - 126 - ANNEX CHAPTER IV: FINANCIAL SECTOR A. Overview 4.01 Argentina's industry and agriculture need an efficient financial sector to mobilize and allocate financial resources to modern, job-creating capital formation. The productive economy requires flexible access to modern, cost-competitive financial services, including commercial and work- ing capital credit. and investment. finance. Because of Argentina's heavy external debt burden, international financial markets are unlikely to pro- vide any significant part of these services in coming years. An efficient domestic financial system will therefore be more necessary than ever to meet. the productive economy's needs. 4.02 The current macroeconomic crisis has subjected Argentina's fragile financial system to severe stress. Deposit withdrawals have generated liquidity problems throughout the financial system. Because many firms are finding it difficult to service their debt, doubts have arisen about finan- cial institutions' solvency. The monetary authority has found itself com- pelled to maintain liquidity to the banking system at a time when hyper- inflation would prescribe monetary contraction. Depending upon its evolu- tion, the crisis could severely decapitalize the financial system. The system 1nay then be forced to consolidate and reorganize in ways that cannot easily be predicted. 4.03 The crisis is partly the consequence of the financial system's structural problems. Persistent macroeconomic instability has distorted and impeded financial development. High, fluctuating and uncertain infla- tion, devaluation, and inter·est rates; the public sector's demand for credit; and lack of external finance have all combined to discourage finan- cial applications, so that the financial system is now small relative to the economy's size. Frequent policy changes have compounded the problem. The narrow base of the financial system has meant that monetary policy has had little room for maneuver, and this has contributed in turn to macro- economic instability. This vicious cycle has frustrated financial reform efforts. 4.04 The financial system's core structural problem is the peculiar Central Bank intermediation arrangement that has evolved to channel sub- sidies and to fund the public sector. In effect, the Central Bank borrows funds through the "forced-investment" mechanism from the private commercial banks, and passes these on through "rediscounts" to public sector financial institutions--mainly to the National Mortgage Bank (BHN), the National Development Bank (BANADE), and to the provincial banks. In recent years this problem has been aggravated because the Central Bank has been using the same mechanism to provide credit to the Treasury, to enable the Treasury to retire its maturing bond issues. This intermediation arrange- ment is the central obstacle to the financial system's medium-term develop- ment. Its alleviation is a prerequisite for other financial reforms.  - 127 - 4.05 This arrangement works badly for the following reasons: (a) The resources forcibly lent by the commercial banks to the Central Bank are diverted from the productive private sector. The consequent shortage of commercial and l\rorking capital credit contributes to high real interest rates, and is detrimental to productive activity; (b) The intermediation process--which channels funds from com- mercial hank depositors to BHN and BANADE borrowers--is inefficient, since it takes resources away from high-yield- ing production credit applications to subsidized, generally inefficient (and loss-making) housing and investment appli- cations; and (c) The Central Bank's intermediation stance compromises its capacity to carry out monetary policy, since it has virtually no assets that it can use for monetary absorption. Not only is it inappropriate for a central bank to hold so large a quantity of unmarketable assets; the assets in question appear in fact to be value- impaired. 4.06 The Central Bank was called upon to provide credit to the public banks because the macroeconomic instability has made it impossible for them to raise sufficient funds to finance their activities. Longer-term housing and investment finance have become unprofitable: because of the unstable macroeconomic conditions, most borrowers cannot pay the higher real interest rates that the same conditions induce wealth-holders to demand. While the private sector therefore withdrew from these activities, the public banks continued in them, decapitalizing themselves as a result, and effectively subsidizing their borrowers. The problem was compounded by the inefficiency of the public banks' operations. Once the macroeconomy is firmly stabilized, private financial institutions would provide more, if not all, of the housing and industrial finance activity. Even before then, however, BHN, BANADE, and the provincial banks need to be restructured and reduced in scope, so that they carry on no activities beyond what they can finance without draining resources from the Central Bank and the commercial banks. 4.07 The Alfonsin Government has carried out a number of fundamental financial system reforms. The liberalization of interest rates in October 1987 implied that interest rates now reflect the true cost of credit. This will encourage financial applications and, once the Central Bank reduces its demand for credit, promote better allocation of credit resources. The Central Bank has curtailed the flow of new credit to public sector banks (although it has had to capitalize the interest owed it). Since early 1987, the Central Bank has acted more resolutely in dealing with problem banks, quickly intervening in bankrupt private banks and sus- pending overdraft facilities to provincial banks that abused them. Important steps have been taken to introduce a deposit insurance system. These steps should more rapidly cleanse the system and reduce the costs to the system of bank failures. The Government has also taken initial steps to improve portfolio management in BHN and BANADE. In addition, the man- agements of these institutions have begun to consider restructuring.  - 128 - Macroeconomic instability, fiscal imbalance, and the Central Bank's inter- mf>diation role prevented these reforms from having immediate positive effects, but they will contribute to financial sector effectiveness over the medium-term. B. The Present Structure of the Financial System 4.08 The banking system constitutes the bulk of Argentina's institu- tional financial system. The number of commercial banks seems relatively large for the size of the market, although in recent years there has been some consolidation of privately-owned banks (the fall in the number of privately-owned institutions between March 1987 and September 1988 shown in Annex Table 4.1 reflects this trend). Seeking to clear up problem bank portfolios and to promote efficiency, the Central Bank has supported con- solidation. The decapitalization resulting from the present crisis is likely also to hasten this consolidation process. As of August 31, 1987 there were 20 financial institutions under intervention and another 180 in liquidation. 4.09 In Marr.h 1988, the 36 publicly owned banks accounted for 45 per- cent of the banking system's total deposits and provided 71 percent of all bank credit. They include two national commercial banks. Of these the Banco de la Nacion is the nation's largest, accounting in September 1988 for 15 percent of total deposits. There are 24 provincial banks, of which the Banco de la Provincia de Buenos Aires alone accounted for more than 9 percent of total deposits. The Banco de la Nacion and the Banco de la Provincia de Buenos Aires have the nation's largest branch networks. 4.10 The BHN (National Mortgage Bank) was founded in the late 1800s to provide term finance for industry, agriculture, and housing through mort- gage bonds. Through the first four decades of this century BHN was a prestigious institution capable of raising finance in international finan- cial markets. In the 1940s, however, BHN was drawn into financing lower cost housing, and it slipped into increasing reliance on Central Bank fund- ing. This was because its loans came to incorporate substantial subsidies that made it unable to pay for funds from the financial markets. BHN held 5 percent of total deposits in September 1988, although public institutions account for a large proportion of these deposits. BHN is now virtually the only source of housing finance for the middle class. In addition, the Government's National Housing Fund (FONAVI) provides subsidized housing finance intended for the poorest 40 percent. 4.11 BANADE was formed in 1970 from the Banco Industrial (originally founded 1944), to serve as an autonomous government-owned industrial development bank. It is now the only significant domestic source of term lending for Argentine industry. BANADE has been chronically troubled since its establishment, partly because macroeconomic instability has made it difficult to secure finance and has made its assets excessively risky, but also because its management has never succeeded in streamlining and modern- izing its operations. In addition, successive governments have used the institution to channel subsidies and "to rescue" failing industrial enter- prises. In recent years it has come to rely on Central Bank rediscounts for its funding, since it has been unable to secure a sufficient quantity of deposits or foreign credit.  - 129 - Annex Table 4.1~ ARGENTINA - FINANCIAL INSTITUTIONS March 1987 September 1988 Banks: 189 172 Commercial Banks: 183 166 Publicly Owned: 31 30 Federal (BNA) 2 2 Provincial 25 24 Municipal 5 5 Privately Owned: 151 135 Domestic Capital 121 103 Foreign Capital 31 33 Investment Banks: 2 2 Publicly Owned: 1 1 Federal 1 1 Privately Owned 1 1 Development Banks: 2 2 Publicly Owned: 2 2 Federal 2 2 Mort;_gage Banks: 1 1 Publicly Owned: 1 1 Federal (BHN) 1 1 Savings and Insurance Bank: 1 1 Publicly Owned: 1 1 Federal 1 1 Finance Companif!s 64 40 Savings and Loan Associations 11 7 Credit Unions 30 23 Total 294 242 Total Branches 4, 471 of which Commercial Banks 4, 377 of which, BNA 543 of which, BPBA 330 Total Employment 142,000 Percentage Employed by: Official Banks 56 58 Private banks 42 40 Other Institutions 2 2 Source: Central Bank of the Republic of Argentina, Departmento de Expansion y Servicios de Entidades  - 130 - 4.12 Non-uank financial institutions, including finance companies, savings and loan associations, and credit cooperatives, accounted for 2.6 percent of the system's total deposits and 2.2 percent of the system's total credit. There were 70 such institutions in March 1988, compared with 100 in June 1987 and 2'•3 in December 1981. 4.13 Apart from banks, there are several other kinds of financial intermediaries, including finance companies and insurance companies. They are quantitatively relatively unimportant. There are five stock exchanges. There is also an active inter-firm financial market, in which firms with spare resources lend to other firms. This disintermediated market arose largely as a consequence of the formal financial system's inability to meet corporate credit needs, partly because of interest-rate regulations, and partly because the public sector takes a large proportion of the system's available resources. Furthermore, there are informal markets that carry on over-the-counter trading in securities and provide various other kinds of financial services, such as linking companies with excess funds to others requiring funding and providing guarantees. c. Financial Liberalization and Centralization Background 4.14 Over the past decade and a half Argentina's financial policy has shifted between a centralized, controlled approach and a liberalizing approach. From 1973 to 1976, the Government effectively nationalized the banking system's deposits by means of a 100 percent reserve requirement. Under the system that resulted, commercial banks effectively passed their deposit proceeds to the Central Bank and provided credit on the basis of Central Bank rediscount allocations, all at regulated interest rates. The Government intended to use the Central Bank to direct financial mobiliza- tion and allocation. This approach worked poorly, because the credit allo- cation had no rational price basis and because the Authorities could not control inflation, which discouraged financial applications. 4.15 Since 1976, Argentina's governments have generally intended to liberalize, but have succeeded only partially. This was essentially because the persisting financial shallowness and the public sector's heavy bnrr·owing requirement meant that anti-inflationary measures either tended to force real interest rates excessively high or required the Government to force the financial system to lend to it. In 1977 a new government enacted a liberalizing reform that returned banking to a fractional reserve system, freed interest rates in the formal financial system, removed barriers to entry into the banking system, and liberalized foreign financial inflows. The required reserve ratio was 45 percent at first, because the Authorities feared that a lower ratio would prove too inflationary. The Authorities, therefore, instituted payment of interest on bank reserves, to enable banks to maintain relatively low spreads between asset and liability rates. 4.16 Beginning in 1977, the banking system expanded its operations in response to the policy liberalization. The private sector took on growing volumes of external debt. Unfortunately, the macroeconomic policies at this time--centered on the maintenance of an unsustainably overvalued exchange rate (see Chapter 1)--required high domestic interest rate levels. In March 1980 a bank crisis took place as a result of the excessively rapid  - 131 - expansion of bank activities. In mid-1982 a deeper crisis resulted from the combination of the sharp devaluations carried out over the preceding fifteen months, persisting high interest rates, uncertainties resulting from the 1982 conflict with Great Britain, and finally the onset of the world debt crisis. The devaluations and high interest rates drove domestically and externally indebted private firms--and consequently their banks--into virtual bankruptcy. The financial system had to provide fund- ing for the public sector deficit, which had widened under the same pres- sures. 4.17 To cope with the crisis, the Authorities reluctantly took policy measures that effectively reversed the liberalizing reforms. To relieve the pressure on the private sector, the Central Bank effectively assumed the private sector's external debt. The Government enacted a blanket rescheduling of private sector loans to domestic commercial hanks for a sixty-month period at negative real interest rate. To ensure that this did not decapitalize the banks, controls were reintroduced on deposit interest rates. These measures permitted the private sector to recover financially, and enabled the banking system to maintain its capitalization. The cost, however, was that the financial system was reestablished with high reserve requirements and interest rates inadequate to attract new deposits. The private banking system had to narrow its lending activities. Disintermedi- ation resulted, taking the form of a reinvigorated inter-firm financial market. 4.18 The Alfonsin Government tried to resume financial liberalization, and undertook a number of fundamental reforms, including the complet<e liberalization of interest rates in October 1987. Unfortunately, the public sector's credit needs remained substantial. In particular, the large public sector banks--the BHN, the BANADE and some of the provincial banks--came to require heavy financing after 1985. In the absence of other funding sources, the Central Bank was called upon to supply financing to the public banks, through such mechanisms as provision of "rediscount" credit to public sector banks, advances for social security payments, and, during 1988, amortization of the Govet·nment 's outstanding bond issues. 4.19 After 1985, the Central Bank came to rely on "forced investments" of the commercial banks as its principal tool of monetary absorption.. The Central Bank's heavy use of forced investments has contributed to the com- mercial banks illiquidity, and has severely impaired the commercial banks' capacity to lend. Over 1987 and 1988, the Authorities made determine!<;l efforts to reduce both the provision of rediscounts and hence the forced investments. However, despite the liberalization of interest rates, the Authorities failed to relieve the strain on the banking system caused by the public sector's heavy demand for credit. 4.20 Despite the banking system's central role in the system, inflation and macroeconomic uncertainty generally have discouraged the Argentii1Le public from holding monetary assets. Annex Table 4.2, which provides basic monetary indicators, indicates the unusually low money holding with ~·hich the economy has operated in recent years. Holdings of narrow money (Ml), have been on the order of only 5 percent of GOP since early 1986. They rose to 7 percent of GOP only when the 1985-1986 Austral Plan repressed inflation temporarily. During 1988 holdings fell below 4 percent of GOP. Holdings of M4, the broad money aggregate incorporating remunerated deposits, t·eached 19 percent' in early 1987, but then slipped to 14 percent  - 132 - in the third quarter of 1988. Holdings of M4 rose slightly toward the end of 1988, when the stringent monetary policy associated with the Primavera Plan elevat.~d real interest rates to unprecedented heights. For the most part, M4 holdings have fluctuated between 14 and 18 percent of GOP, follow- ing a pattern broadly similar to that of M1. Annex Table 4.2: ARGENTINA - MONETARY AGGREGATES: 1986:IV - 1989:1 (Billions of Dec. 1988 Australes, Percent of GOP) 1986 IV 1987 IV 1988 I 1988 II 1988 Ill 1988 IV 1989 I Billions of December 1988 Australes (average of daily values) M1: 88.7 62.8 61.2 50.3 43.8 51.7 57.9 M2: 157.9 89.7 85.8 69.8 60.6 70.8 78.7 M3: 260.9 211.7 222.0 204.8 192.2 226.4 257.6 M4: 262.8 212.9 222.7 204.9 192.3 226.5 257.7 MS: 264.4 213.2 223.0 205.1 192.5 226.7 258.0 M6: 264.4 213.2 223.0 205.1 192.5 226.7 258.0 As a percentage of GDP: M1: 6.3% 4.5% 4.4% 3.6% 3.2% 3.6% M2: 11.2% 6.4% 6.2% 5.0% 4.4% 4.9% M3: 18.6% 15.2% 16.1% 14.7% 14.0% 15.6% M4: 18.7% 15.3% 16.1% 14.7% 14.0% 15.7% MS: 18.8% 15.3% 16.1% 14.7% 14.0% 15.7% M6: 20.1% 18.1% 19.0% 16.9% 15.9% 17.0% M1 = Currency plus demand deposits, M2 = M1 plus regulated time deposits, M3 M2 plus unregulated time deposits and acceptances, M4 = M3 plus adjustable deposits, MS = M4 plus private bills, M6 = MS plus Austral-denominated bonds. Source: Carta Economica 4.21 Annex Table 4.3, which shows the monetary structure of the Central Bank's liabilities, indicates the degree to which the Central Bank absorbs commercial bank resources. While the reserve ratio of the basic liquidity aggregate, M4, to the conventionally-defined monetary base is relatively low, the implicit reserve ratio against the Central Bank's overall monetary liabilities--virtually all of which are the "forced investments" of the commercial banks--is debilitatingly high.  - 133 - Annex Table 4.3: ARGENTINA - CENTRAL BANK MONETARY LIABILITIES (Billions of December 1988 Australes) Dec 87 Mar 88 Jun 88 Sep 88 Dec 88 Mar 89 Billions of December 1988 Australes Conventional Monetary Base ~I 65.0 51.4 45.5 43.1 58.0 51.5 Effective Monetary Base ~/ 74.9 57.9 51.0 47.2 60.9 54.4 Monetary Liabilities ::._/ 155.8 140.1 132.1 141.6 170.8 157.3 Conventional Bank Reserves 25.8 21.1 21.0 19.9 24.2 20.1 Forced Investments 80.9 82.2 81.1 94.4 109.9 102.9 Broad Monetary Liabilities ~/ 155.8 143.6 136.3 151.4 170.9 157.3 Conventional money multiplier !I 3.5 4.3 4.4 4.7 4.2 4.9 Conventional reserve ratio !_I 13.9% 11.1% 12.1% 11.1% 11.5% 9.1% Broad money multiplier g/ 1.4 1.5 1.5 1.3 1.4 1.6 Broad "reserve" ratio !!./ 62.6% 59.8% 64.4% 71.1% 65.2% 57.2% a/ Currency plus bank reserves. ~/ Conventional monetar·y base plus "imputations," mainly advances for social security payments. £1 Conventional monetary base plus "forced investments." d/ Including Central Bank bills. ~I M41Cconventional monetary base). !/ (M4-currency)IConventional reserves. g/ M4/ (monetary liabilities). g/ (M4-currency) I (res. + fed. invmts.) . Source: Car·ta Economic a 4.22 The figures in Annex Table 4.4 regarding deposits and loans are also relevant to the financial sector's central issue. BP.cause of the heavy "forced investments" private banks are required to make in the Central Bank, their lending capacity is considerably below their deposit base. Their loan-deposit ratios have fallen from 64 percent in the third quarter of 1985 to 42 percent in the thirtl quarter of 1988. On the other hand, the loan-deposit ratio of all publicly owned banks taken together rose over the same period from 77 to 121 percent. These figures are heavily influenced by the BHN: largely because of its Central Bank support, the BHN managed to have a loan-deposit ratio exceeding 800 percent in mid-1988.  - 134 - Annex Table 4.4: ARGENTINA - BANKING SYSTEM LOANS AND DEPOSITS (Billions of December Australes) 1985 IV 1986 IV 1987 IV 1988 I 1988 II 1988 III Loan-dPposit ratio: 69.5% 79.1% 90.3% 92.0% 81.8% 78.4% Privately-owned banks 62.4% 57.0% 52.2% 50.9% 44.1% 42.3% Publicly-owned banks 74.5% 96.2% 130.8% 139.2% 124.8% 120.8% Billions of December 1988 Australes. Banking-system deposits 200 234 198 203 200 188 Privately-owned banks 83 102 102 109 107 101 Publicly-owned banks 117 132 96 95 93 86 Banking-system loans 139 185 178 188 165 147 Privately-owned banks 52 58 53 56 47 43 Publicly-owned banks 87 126 125 132 118 104 Source: G.F. Macroeconomia D. Principal Financial Sector Policy Issues Hyperinflation 4.23 The hyperinflation will inevitably damage the financial system's liquidity and its solvency. Uncertainty regarding inflation, devaluation and interest rates will encourage deposit withdrawals, inducing illiquidity. Demand for money and other financial assets is likely to erode further from already low levels. The deteriorating economy is nut only making it increasingly difficult for borrowers to make cash payments on their loans, thereby contributing to financial system illiquidity; it is also impairing the value of the loans, thereby contributing to financial system insolvency. At the same time, the monetary authority is likely to have no choice but to create money in order to relieve illiquidity and to prevent financial panic. 4.24 The financial system's illiquidity has been aggravated by the fact that deposits have been growing at much a slower rate than the interest paid hy banks on deposits. The increase in deposits was only 50 percent in April 1989 and 30 percent in May of the total interest capitalized into bank deposits. Time deposits grew 23 percent in April and 36 percent in May, against average interest rates of 35 and 103 percent respectively. As a result, the Authorities announced restrictions on cash withdrawals from banks. In addi- tion, toward the end of May the monetary authority announced that it would inject funds into the system by releasing almost 10 percent of the stock of forced investments.  - 135 - 4.25 The financial system's assets have also become increasingly illiquid, since private debtors have found their repayment capacity deteriorating. Many have found it necessary to draw down their deposit balances. Rising real interest rate levels have added to the pressure on private firms, particularly in view of the sharply diminishing real economic activity. At present the economy's real indebtedness to commercial banks remains relatively lo"' in real terms, perhaps 50 percent of its record level in early 1981 and 70 percent of its level in early 1982. Nevertheless, real interest rates are so high that the real indebtedness level could reach a record level through interest cap- italization by the end of July. Moreover, dollar-denominated indebtedness is believed already to be near an historic high. This would matter to the debtors if the interest on the debt were fully capitalized, but that would leave the banks extremely illiquid. 4.26 In an effort to reduce the pressure on financial institutions' solvency, the Central Bank has increased the rate of return on remunerated bank reserves. Nevertheless, independent analysts in Buenos Aires estimate that the typical Argentine bank may have suffered the loss of 10 to 20 percent of its capital position in April and May. The monetary authority is clearly hoping that, by releasing funds into the system in early June, it will succeed in reducing interest rates, and thereby reduce the pressure on bank solvency. The risk, of course, is that inflationary pressures will intensify. 4.27 While the precise outcome of the crisis cannot be predicted, it is clear that the financial system will emerge in worse condition. Public as well as private financial institutions are likely to find themselves severely decapitalized. If the hyperinflation persists, the financial system could be so decapitalized that it will require complete recapitalization and reconstruc- tion when the hyperinflation finally "burns out." It is therefore useful to look beyond the crisis, to consider the kinds of reform (or reconstruction) that will be required for the medium-term development of an effective financial system. The three core issue areas will be (i) the role of the Central Bank, (ii) the public sector banks, and (iii) prudential regulation. The Central Bank's intermediation role is discussed in Chapter IV; the present discussion is therefore confined to the two remaining issue areas. Public Banks 4.28 The same circumstances that discourage private long-term finance have contributed to decapitalization of the public sector's longer-term financial institutions, the BHN and the BANADE. Savers have been unwilling to place funds with the BHN because it could not remunerate them competitively, essen- tially because its mortgage holders have not bPen paying sufficient debt service to cover the institution's funding costs. Loan arrears have become significant. The BANADE, which has relied on public sector and externetl finance, has also had difficulties with arrears, partly because the economy has performed poorly. In addHion, both BHN and BANADE have had difficulties effectively managing loan recovery. Both the BHN and the BANADE have received substantial Central Bank financing.  - 136 - 4.29 BHN is now insolvent by reasonable standards. Its losses totalled US$367 million in 1987, US$329 million more than the previous year. Net equity was negative US$216 million. This recorded performance was better than the actual performance, since BHN has tended to accrue interest on many loans that are not genuinely performing. Even where loans are placed on non-accrual, the BHN has tended to avoid making provisions against them on the presumption that rf'covery will be possible through foreclosure. BHN's charter allows fore- closure without BHN having to go through the regular judicial process. Never- theless, BHN ltas been reluctant to initiate foreclosure proceedings. BHN's basic pr·ohlem is that the interest and adjustment on its loan portfolio, which is rf'latively old and incorporates considerable subsidies, is insufficient to pay current Argentine market interest rates. (This problem is worsened by the fact that adjustment indices applied to loans tend to lag behind actual infla- tion rates.) BHN's performance is worsened by its current overstaffing: almost three fourths of BHN's operating budget of US$52 million during 1987 went to staff. The staff totalled 4,200 (1,000 of whom were over the age of 50). 4.30 At the end of 1987 BHN's loan portfolio, constituting 78 percent of its total assets, amounted to about US$1.3 billion. There were about 250,000 borrowers, so the average loan was about US$5,200. The average contractual real interest rate was only about 2 percent per year and the average maturity about 30 years. (In fact, given the way in which BHN interest charges are calculated, the real interest rates are negative on average.) Loan delinquency was nonetheless severe: about. 25 percent of the loan portfolio was in arrears exceeding three monthly payments. In view of the context of high interest rates, this amounts to a subsidy that no one has authorized BHN to provide. To the extent housing subsidies are regarded as justified fur poorer people, it is appropriate that they be channelled through the National Housing Fund (FONAVI), which was created with the intention of providing such a subsidy. 4.31 The Central Bank was BHN's principal funding source. Credit out- standing by the Central Bank to BHN totalled about US$1.7 billion at the end of 1987. The pressure on BHN intensified over 1988, since it had made a large number of new loan commitmP.nts during 1987. BHN's competitive disadvantage in attracting deposits sharpened after October 1987, when commercial bank deposit rates were freed. Interest rates due the Central Bank were on the order of 8 percent, well above rates of return on the loan portfolio. Since BHN lacked the cash flow with which to pay the Central Bank, what it owed was capitalized, wh.i.ch was one of the main causes of the high growth rate of BHN's obligations to the Central Bank. 4.32 Like BHN, BANADE has effectively been decapitalized through a com- bination of the troubled macroeconomic context and inadequate management of its loan portfolio. BANADE's present management recognizes this problem, and has made a preliminary restructuring proposal. BANADE is now Argentina's only source of term credit for the private sector, because the macroeconomic instability has made such activities impossible for the private sector. Like BHN, BANADE effectively channels a disguised subsidy to industrial enterprises fortunate enough to secure access to its credit, since long-term industrial credit would cost far more if it were available from private sources. Never- theless, BANADE's recent performance indicates that it is unable to serve this function adequately. De~pite several organizational restructurings and recapitalizations undertaken by the Alfonsin Government, BANADE has been unable  - 137 - to reduce its reliance on inappropriate Central Bank financing. With the sus- pension of Central Bank rediscounts during 1988, BANADE was forced to halt its lending operations. Since at least 1985, BANADE's cash flow has been negative in real terms and tl1e institution has been insufficiently profitable to reverse its decapitalization. 4.33 At present its staff numbers approximately 3,000, spread through a main office, 33 branch offices and 8 mining area offices. Its assets total approximately US$5 billion and its loans about US$3.5 billion to a total of 4,300 different clients, although provisions total about 10 percent of the portfolio. In mid-1988, external funding accounted for about 70 percent of BANADE's resources, Central Bank rediscounts about 20 percent, and private deposits only about 5 percent. Since private domestic deposits are only avail- able at high interest rates for relatively short terms, such deposits are an inappropriate source of finance for BANADE. 4.34 BANADE's difficulties revolve around its loan portfolio problems, which dPrive in part. from the troubled macroeconomic conditions. BANADE's loan portfolio quality is also affected by political interference in lendLng deci- sions, a pervasive perception by borrowers that they need not repay, lack of financial standards for BANADE managers to follow, and lack of an eff,ective supervisory agency to monitor BANADE performance. The total value of BANADE's loan portfolio as of June 30, 1988 was US$3.4 billion. About 38 percent of the loan portfolio is to public enterprises and 58 percent to private enterprises, with the remaining 9 percent going to mixed enterprises. About 52 percent of this loan portfolio is classified as problem loans, 21 percent being in arrears of more than one year. There is an inadequate level of provisions for the bad debts, in the sense that problem loans not covered by guarantees net of pro- visions are about twice the institution's equity position. 4.35 In the years 1986-1988, BANADE failed to achieve a positive cash flow. Over the first six months of 1988 the cash flow deficit was about US$136 mil- lion, which had to be covered through borrowing at high short-term interest r·ates. New lending operations ceased when the Central Bank refused further rediscount credit. The share of cash income to capitalized (i.e., accrued only) financial income was only 5.37 percent in the first six months of 1988, down from about 10 percent in 1987. Collection efforts have been relaLtively unsuccessful, in part because few uncollectable loan cases go to judicial action, fewer are quickly resolved in BANADE's favor, and fewer still are executed. These problems are Ut1doubtedly affected by the concentration of BANADE's portfolio: the fifty largest debtors accounted for about 75 percent of total loans and 75 percent of all the problem loans. BANADE's equity position is clearly deficient: long-term unsecured debt was 8.8 times equity; total unsecured debt was 11.6 times equity; and total long-term debt was 27.1 times equity. 4.36 The provincial banks have received substantial quantities of "redis- count" finance (in many cases, through overdraft facilities) from the Central Bank, particularly since 1982. In this way, the provincial banks have often served effectively to channel Central Bank resources to provincial governments. The Central Bank has tried to curb this credit flow, and largely succeeded in doing so during 1988, although the outstanding credit of provincial banks to  - 138 - the Central Bank continues to grow through the effects of inflation adjustment and interest capitalization. Toward the end of 1987, for example, in the face of political opposition, the Central Bank temporarily suspended some provincial banks' overdraft facilities on the grounds that they had abused them. The Regulatory Environment 4.37 Prudential regulation of Argentina's financial institutions is less vigorous and efficient than it could be. A superior regulatory system would help instill public confidence in financial institutions. In recent years, a better bank examinations system would assuredly have resulted in significant savings for the Cetttral Bank, since it would have permitted speedier identifi- cation of problem banks, hence timely corrective measures or intervention at a less costly stage. 4.38 The Central Bank carries out the superintendency function for all financial enterprises. Broadly speaking, it appears to have the laws and regu- lations it requires to set and enforce regulatory standards, with the important exception that the Central Bank's legal capacity to regulate provincial banks is unclear. Banks are subject to conventional rules governing such matters as the largest allowable loans (as ratios to callable capital), lending to enter- prises judged to be "linked," minimum capital requirements, appropriate asset portfolio composition, and so on. In addition, banks must meet the Central Bank's minimum reserve and forced investment requirements. The Central Bank's exantinations staff is charged with verifying compliance with these standards. 4.39 The Central Bank has a standard loan classification system for finan- cial institutions. There appears to be a generalized view that the criteria for incorporating loans in the categories are insufficiently precise. A more important problem is that, in reality, it is the banks themselves who determine the classification of their assets. Moreover, the banks themselves determine whether loans should be placed on nonaccrual status. This is because the Central Bank's overstretched examinations staff has generally been able to do no more than verify that banks are complying with reserve requirements. It has heen unable adequately to examine loan classification, nor whether lending limits to linked institutions have been exceeded. 4.40 The Central Bank has the power to (i) require that banks present plans to regularize reserve deficiencies, (ii) authorize fusions and consolidations; and (iii) carry out "interventions"--i.e., appoint delegates to substitute for a troubled banking institutiort's board of directors. It may initiate judicial bankruptcy and liquidation proceedings. In order to facilitate a particular bank restructuring, the Central Bank Directorate has the power to permit excep- tions to its ncnmal rules for temporary periods. An important problem with the intervention proceeding is that, once initiated, it requires the Central Bank to cover· all deposits, whether insured or not. A further problem is that the judicial proceedings have tended to be lengthy, stretching in certain instances over several years.  - 139 - 4.41 The Central Bank has been more willing to initiate interventions in recent years. Nevertheless, since the public has concluded from experience that intervention is followed sooner or later by liquidation, announcement of intervention tends to induce deposit runs. Liquidation also impose!; severe costs on the Central Bank, since the Central Bank is required to assume the payroll, legal proceedings, severance pay, and so on, as well as the! funding for depositor compensation. Central Bank "rediscounts" to intervened institu- tions have accordingly tended to be quite substantial in recent years. 4.42 The Central Bank has considerable difficulty regulating publicly owned banks, especially the hanks owned by provincial governments. The provincial hanks are often established legally under provincial legislation, and in some instances this is understood to limit the Central Bank's regulatory power. (The looser r·egulatory environment for public banks amounts to discrimination against private banks.) 4.43 Relief of macroeconomic instability is a prerequisite to reestab- lishment of longer-term financial markets. Once the public believes that stability has been attained, private longer-term financial activity may develop spontaneously, beginning with housing finance. Until then, the management of the public sector banks will be an issue of critical importance, because the macroeconomic instability makes their activities almost inherently loss-making. In addition, relief of macroeconomic instability and restoration of control over the public sector deficit is the only ultimately sound basis for reducing the high real interest rates now burdening the financial system. E. Recommendations 4.44 It is essential that., while the Government deals with the present crisis, it also look beyond it to work out a medium-term financial development strategy. If the hyperinflation persists, the financial system will have to be reconstructed; in any case, it will need to be restructured, to ensure that it meets the needs of development over the corning decade and that it becomes a force for stabilization rather than destabilization. The restructuring process will be easiet·, of course, to the extent macroeconomic performance improves and to the extent the external constraint is relieved--in particular, thE~ more closely the public sector borrowing requirement can be limited and monitored, and the more external financing can be obtained for the public sector. 4.45 The essential core reforms can be grouped simply in three categories: those involving the Central Bank anJ the commercial banks, those involving the large public sector financial institutions, and those involving prudential regulation. First, a package of reforms is needed simultaneously (i) to remove the value- impaired assets from the Central Bank • s balance sheet, in E!xchange for a genuinely marketable asset that the Central Bank can use in open-market operations, i.e., use to back its currency issues; and (ii) to relieve the commercial banks' forced investment burden. The Central Government could carry out this recapitalization by gradually issuing bonds to buy the value-impaired assets gradually from the Central Bank. The recommended reforms involving the Central Bank and the commerr.ial banks are discussed in more detail in the mone- tary policy chapter.  - 140 - Public Banks 4.46 Where the BHN and the BANADE are concerned, it is increasingly clear that the public sector can no longer maintain these costly institutions. Since any SfHious stabilization effect must involve elimination of Central Bank credit flows to these institutions, it is likely that they would be forced into some sort of receivership, during which they would be drastically restructured or even liquidated. Current macro~conomic conditions make it impossible for the private sector, let alone the public sector, to carry on housing and indus- trial finance activities profitably. Eventually, once stabilization takes hold, the private sector should gradually begin to carry on efficient longer- term financing. 4.47 Titis suggests a restructuring strategy that would sharply reduce their size and improve their operating profit flow to the point of making them self- financing, at least until the macroeconomy stabilized sufficiently to restore the profitability of longer-term financial operations. The two institutions could do this by acquiring relatively small "core" portfolios of high-yield assets whose yield covers their operating expenses. This would require that their operating expenses be reduced to the minimum necessary to manage the "core" portfolio and to reduce losses on the existing portfolio. Recapitaliza- tion ought to be carried out only to the extent necessary to enable them to go into this "survival mode." Such recapitalization ought to be conditioned on thorough independent audits of assets and liabilities, agreement with the Central Bank regarding their obligations to that institution, more vigorous loan collection efforts, and measures to improve operating efficiency. At the same time, the Government needs to take hard decisions about these institu- tions' future role. To the extent private initiative l>ecomes willing to carry on their functions, it should be allowed and encouraged to do so. 4.48 The provincial banks' future role needs to be examined more closely, although given the nation's feder·al structure this will have to be accomplished largely on a province-by-province basis. Provincial governments should be encouraged to re-examine the role their !Janks play in their economies. The provinces' specific circumstances vary considerably, and there is scope for different approaches and objectives. In any case, the Central Bank's future relationships with provincial banks will have to be re-examined. While it is legitimate for provincial banks to have access on the same basis as any other bank to Central Bank liquidity rediscounts, the Central Bank cannot permit its funds to be used by provincial banks to finance their provincial government deficits. In any case, provincial governments should regard it as in their interest to have their banks take advantage of high-quality prudential regula- tion (see below). This could be made a condition of future access to Central Bank liquidity rediscounts. The Regulatory Environment 4.49 Along with the need to revitalize the private financial system, there is a collateral need to strengthen both the superintendency and deposit- insurance functions. It is advisable that both be made independent of the Central Bank. Independence of the superintendency would ensure that its determinations are not influenced by considerations of the short-run interven- tion costs. An independent superintendency, with full powers to examine finan- cial institutions as necessary and carry out interventions as required on tech- nical grounds, would go a long way toward reestablishing public confidence in  - 141 - the financial system and ensuring that small problems are dealt with expedi- tiously before they become large problems. In any case, the superintendency function needs to be strengthened by providing it with the personnel and com- puter resources to enable it to monitor all aspects of bank activity. In par- ticular, loan classification needs to he made fully technical. Establishment of a separate deposit-insurance fund should eventually make it possihle to. deal with bank failures witl1out the Central Bank directly having to create money. 4.50 Even before 1989, many financial enterprises were severely weakened, and the current hyperinflation has worsened this tendency. The regulatory staff may therefore be compelled to increase its activity. Since the financial crises of the early 1980's, many banks and non-bank financial institutions suffered decapitalization and weakened loan portfolios. Lax regulation has in~lied, among other things, that many financial institutions have made inade- quate provisions and have accrued too much income from doubtful assets. A large number of institutions continue under Central Bank intervention. The weakness of the system has made it vulnerable, and increased the dangers and costs of tightened monetary policy. The Central Bank's recent policy of encouraging consolidations will almost certainly have to continue.  - 142 - Annex Table 4.5: ARGENTINA - FINANCIAL INSTITUTIONS' NET ASSET POSITION WITH THE CENTRAL BANK March 87 September 88 Public National Banks, B. Prov. de B.A. Net Liabs. to the Central Bank/Deposits -20.3% -11.2% Rediscount Credit/Deposits 53.2% 68.1% - Reserves/Deposits -20.6% -25.0% - Forced Investments/Deposits -52.9% -54.3% Deposits/Total System Deposits 35.4% 25.0% Provincial and Municipal Banks Net Liabs. to the Central Bank/Deposits 64.8% 9.0% = Rediscount Credit/Deposits 65.7% 62.3% - Reserves/Deposits 0.0% -22.1% - Forced Investments/Deposits -0.8% -31.2% Deposits/Total System Deposits 10.3% 14.1% Private Banks, Argentine Capital Net Liabs. to the Central Bank/Deposits -50.0% -49.5% Rediscount Credit/Deposits 23.1% 16.0% - Reserves/Deposits -15.9% -11.5% - Forced Investments/Deposits -57.2% -54.0% Deposits/Total System Deposits 28.7% 32.4% Private Banks, Foreign Capital Net Liabs. to the Central Bank/Deposits -54.6% -51.1% Rediscount Credit/Deposits 12.5% 18.7% - Reserves/Deposits -15.2% -15.8% - Forced Investments/Deposits -51.9% -5lf,0% Deposits/Total System Deposits 14.3% 17.0% Cooperative Banks Net Liabs. to the Central Bank/Deposits -75.7% -52.8% Rediscount Credit/Deposits 5.5% 16.6% - Reserves/Deposits -18.8% -19.0% - Forced Investments/Deposits -62.5% -50.5% Deposits/Total System Deposits 8. 7% 9.1% Other Financial Institutions a/ Net Liabs. to the Central B~nk/Deposits -43.0% -34.8% = Rediscount Credit/Deposits 34.5% 12.7% - Reserves/Deposits -5.6% -7.0% - Forced Investments/Deposits -71.8% -40.6% Deposits/Total System Deposits 2.7% 2.4% Source: BCRA !1 Finance companies, savings and loan associations, credit companies and investment banks.  - 143 - ANNEX CHAPTER V: EMPLOYMENT AND LABOR A. Introduction 5.01 The most important medium-term objective of Argentine economic policy is to ensure adequate employment and to increase wage leveh. Average wage rates have fallen since the mid-1970s: 1987 real wages were only 60 percent of their 1975 value and 75 percent of their 1980 value (Annex Table 5 .1). Because of anemic growth in the 1980s, employm1mt growth has stagnated and unemployment has begun to drift up in rec1mt years. 5.02 Two related features dominate employment and labor patterns. First, labor productivity growth has been extremely disappointing. Although overall p~oductivity rose more than 7 percent between 1985 and 1987, it has apparently stagnated since then, and is now only 18 pE!rcent above its 1962 level and is still 9 percent below its 1980 level (Annex Table 5.1). Second, during the 1980s the public sector has been the principal source of net employment creation. Public sector employment rose 16.5 percent between 1980 and 1988, while the overall labor force partici- pation rate remained roughly unchanged at just under 40 percent. The present crisis clearly indicates, however, that the public sector will have to reduce its employment over coming years. That is~ labor must be effi- ciently reallocated, out of the public sector and into what must bE!Come an increasingly productive private sector. 5.03 A genuine increase in labor productivity is the only basis on which private sector employment and real wages can increase over the medium term. In order for the private sector to increase its demand for labor, private capital formation must increase and labor markets must be made more efficient. Wages need to be flexibly associated with productivity at the level of each firm. In particular, wage setting needs to be decentralized, so that wage determination is associated more directly with productivity. The job tenure system needs to be relieved, to enable employers to hire workers without having to assume that they must keep them indefinitely, and to permit workers to move freely in response to changing conditions and incentives. Provision of labor security must become less of a burden to private firms. More precisely, taxation of labor use must be relieved. B. Productivity, Wage Trends, and Wage Determination 5.04 The overall stagnation of labor productivity (Annex Table 5.1) masks some differences across industries (Annex Table 5.2). In agricul- ture, productivity has risen despite declining growth rates. In manu- facturing labor productivity has remained broadly constant over time, with output variations apparently not reflecting technical change nor changes in capital intensity. In the non-tradeable construction and services sectors there has been a declining productivity trend. However, from 1983 through 1987 productivity rose in the services sectors, mostly because of slowing employment growth.  - 144 - Annex Table 5.1: ARGENTINA - LABOR MARKET INDICATORS LFP E u U* W/P RER WT/WN LG PRO 1962 45 42 7.3 n.a. 83 125 0.83 96 100.0 1970 44 42 5.3 n.a. 100 100 0.89 100 106.2 1975 40 39 3.5 6.5 115 82 0.92 128 120.0 1980 39 38 2.8 5.1 93 46 0.89 121 126.4 1984 38 36 4.8 7.4 99 107 0.96 122 117.7 1985 38 36 6.4 9.8 81 133 0.97 124 110.9 1986 39 35 5.2 8.9 76 106 0.96 132 118.4 1987 39 35 5.6 9.9 67 107 1.04 137 119.0 1988 39 34 6.5 10.4 70* 111 1.03* 141 117.5 Source: Sanchez (1988); Lopez & Riveros (forthcoming) LFP Labor force participation rates; E Total employment divided by total population (1986-1988 are prelimi- nary); U (Urban) open unemployment rates; U* Underemployment rates (see text); W/P Real consumption wages (deflator: CPI) Index 1970 = 100; RER Real exchange rate: nominal exchange rate adjusted for changes in domestic and foreign prices (increase denotes depreciation); WT/WW=Ratio of wages in tradeables (Agriculture and Manufacturing) to wages in non-tradeables (Services and Construction, excluding government); LG Employment in the Public Sector (Central and Local Governments and Parastatals) Index 1970 = 100; PRO Overall labor productivity (Real GDP divided by LFP times estimated population). * Provisional (based on first quarter data). For tradeables we used wages in manufacturing and for non-tradeables, wages in construction. Annex Table 5.2: ARGENTINA - CHANGES IN SECTORAL OUTPUT AND EMPLOYMENT (Percent p.a.) 1970-1975 1975-1983 1983-1987 GOP (Factor Costs) 2.9 0.1 1.5 Employment 2.4 0.8 0.5 Agriculture Output 2.8 2.2 0.2 Employment -0.6 -1.1 -0.7 Manufacturing Output 3.4 -1.6 0.9 Employment 3.9 -1.8 0.9 Construction Output 1.0 -2.8 -4.1 Employment 2.1 -2.7 2.8 Services Output 2.6 0.3 2.4 Employment 2.7 2.7 0.3 Source: IBRll ( U8Fl)  - 145 - 5.05 Tlte poor productivity performance is the underlying reason for the poor growth rate~ of n'!al wages. Between 1940 and 1985 real wages never rose nor fell fur more than three consecutive years (Annex Table 5.3). In genE-ral, periods of decline tendE-d to follow brief periods of increase. RE-al wages wPre only 61 percent higher: in 1985 than in 1945, implying annual growth of only about 1 percent. This poor longer nm real ~rage per·formance has beE-n characterizE-d by intense short-run fluctuations. These result in 11art from the interplay of Argentina's macroeconomic con- straints and a centralized wage determination system (discussed below) that fails to rE>flPct productivity contlit.ions. 5.06 Nominal wages in most industrial sectors are determinetl either by institutionalized procedures for bargaining at the national level or set by the Government. Since the late 1960s the Government has generally announced thP periodic wage adjustmt?nt.s applicable to most workers under formal contracts.};_/ The Government's wage adjustments are compulsory for virtually all workers and fir·ms in the formal sector. 5.07 The centralized power of the trade unions, job security regula- tion~. and the protection granted cE-rtain industries from domestic and exter·nal competition have tfJgPthet meant that the wage adjustment has become an influential macr·oeconomic policy instrument, with a significant effect on prices, shor·t-term economic activity, and the balance of pay- ments. Unfortunately, it has limitPd influence on mP<..lium-tE>rm real wage levels. Whenever wage rates have exceeded their productivity basis, the consequence has tendetl to be additional inflationary pressure anti balance of payments problems. For example, the broad real wage increase that took place in 1984 contributed to the bur·st of inflation that preceded the Austral Plan. The more modest real wage increase that took place in 1986 contributed to the resurgence ot inflation (although tht?re was an accom- panying short-term productivity increase as a result of higher capacity utilization). The broad lesson appears to be that, while the centralized wage determination process is capable of increasing wages in the short- term, long-ter·m proJuct ivi.ty improvement is the only genuine basis for a sustained increase in real wages. 5. 08 Horeover. cent t·al ized wage setting has t.rouulesome microeconomic consef!HPnces. It is probable that the inability of firms to set their own wage increases has contributed to a longer-term tendency to more capital- intensive investment.. Since the wage adjustments apply essentially to fotmal activities in utban centers, the system effectively sustains a };_/ From 1958 through 1966 nominal wages were increased every year through national bargaining between uniuns and employers. In mid-1967 this systl?m was suspended in the context of a stabilization plan. An attempt to restore national bargaining was made in 1975, which resulted in wage increases of more than 100 percent and contributed to hyperinflation. The GovernmE-nt returned to dictating wage adjustments until 1979, when a short-lived system of wage bargaining at the level of the firm was created. This ended in the 1982 crisis, and the Government returned to dictating the adjustments.  - 146 - Annex Table 5.3: ARGENTINA - REAL WAGES (Index 1970=100) Real Real Un!lkilled Skilled W Skilled/ Minimum W/ Real Wages Wages W Unskilled W Unskilled Minimum W 1970 100 100 100 100 100 1971 103 97 99 102 108 1972 91 90 99 96 96 1973 99 97 98 103 112 1974 111 108 96 111 137 1975 99 101 102 90 103 1976 61 61 101 72 53 1977 64 65 102 75 51 1978 67 76 113 62 42 1979 75 90 121 67 47 1980 95 116 123 68 56 1081 81 100 123 68 64 1982 52 72 138 97 57 1983 72 75 104 97 85 1984 77 80 105 97 92 1985 60 63 104 80 62 1986 59 61 104 78 59 1987 61 66 105 85 65 Source: Sanchez (1987); Lopez & Riveros (forthcoming) and IBRD data (BESD) Note: Wages of unskilled and skilled labor correspond to manufacturing and are deflated by the price of tradeable goods (weighted average of the GDP deflator for agriculture, mining and manufacturing). The nominal monthly minimum wage is deflated by consumer prices. Figures for 1986 and 1987 are provisional.  - 147 - protected segment in the labor market. Because wage adjustment applies to the nation as a whole, relative wage movements fail to reflect differential regional labor market conditions. Finally, the fact that wage adjustments tend to apply more rigorously in urban centers has encouraged internal migration. 5.09 Wages set through a centralized process obviously cannot reflect labor productivity, since labor productivity is a matter for each individual firm. A firm that must adjust its wages according to a govern- ment guideline and follow restrictive job tenure policies (see belm·1) can- not adjust its staff to changing conditions; this partly explains why the slow employment growth noted above has accompanied erratic output growth since 1970. c. Employment and Unemployment Trends 5.10 Despite huge fluctuations in economic activity, Argentina's open unemployment has remained relatively low. The main reason for this has been that the public sector has continued to create employment. From 1974 to 1980, while GDP grew at a real average annual rate of only 1.9 p1!rcent, average unemployment (for Buenos Aires, 20 capital cities and 5 non--capital cities) remained at only 3.4 percent. GDP fluctuations in the 1980s pro- duced an average unemployment rate of 5.1 percent, the same level observed in 1981 and 1982, two consecutive years in which real GDP declined. 5.11 Annual employment growth averaged only 0.7 percent from 1975 through 1987. In manufacturing and agriculture total employment declined over that period. There was no significant change in the construction sector. Employment expanded in services, particularly in the public: sector; it undoubtedly expanded as well in the economy's extensive informal sector. 5.12 Labor force participation rates~/ have been falling and the working age population has declined as a share of total population, and these have contributed to keeping unemployment relatively low. Public sector employment is nevertheless the main reason why unemployment has remained relatively low. Public sector employment grew at an annual average rate of 3.5 percent from 1960 to 1980 and 3.3 percent from 1980 to 1987. By comparison, wage employment grew in the 1960-1980 period at a yearly average of only 1.4 percent and total employment (wage plus non-wage employment) grew at 1.3 percent (Llach and Sanchez 1984); from 1980 to 1987 total employment grew at an annual average rate of only 0.8 percent. 5.13 The most rapid increases in public employment have been in regional and local governments: employment was 28 percent higher in 1988 than in 1983 (see Annex Table 5.4). The central administration's employ- ment was 20 percent higher. Entployment in state enterprises was 6 percent higher in 1988 than in 1983. ~I The labor force participation rate is defined as the number of employed plus unemployed divided by working age population (15 years and older).  - 148 - Annex Table 5.4: ARGENTINA - EVOLUTION OF PUBLIC EMPLOYMENT, 1971-1988 (In Thousands) Puhlic Regional, Local Administration Enterprises Government Total ~I !!_I c:_l 1971 572.7 399.4 483.7 1455.8 1972 581.7 407.5 500.9 1490.1 1973 601.5 414.3 518.0 1533.8 1974 625.2 429.1 564.5 1618.8 1975 637.4 441.0 630.8 1709.2 1976 638.0 476.7 646.7 1761.4 1977 643.1 438.2 661.1 1742.4 1978 582.7 418.9 688.6 1690.2 1979 564.5 387.4 726.9 1678.8 1980 557.1 374.4 721.7 1653.2 1981 573.5 350.1 724.2 1647.8 1982 574.5 334.7 725.0 1634.2 1983 548.3 325.8 747.2 1621.3 1984 605.5 348.8 720.1 1674.4 1985 622.4 360.3 752.3 1735.0 1986 637.5 351.0 795.2 1783.7 1987 650.2 341.5 910.5 1902.2 1988e 658.0 346.1 956.2 1960.2 Source: Secretaria de Hacienda ~/ Central Administration, Special Accounts, and Decentralized Agencies. E_l Including the official Banking System. c:_/ Permanent Staff in Provinces, MCBA and Tierra de Fuego.  - 149 - D. Labor Market Regulation and Efficiency 5.14 Excessive labor market regulation and intervention has contributed to the disappointing wage trends as well as to inflexible intersectoral labor mobility. The centralized wage setting discussed above is, of course, one aspect of labor market regulation. Three additional aspects of labor regulation influence labor market efficiency: the job tenure system, heavy payroll taxation and the minimum wage legislation. 5.15 Employees are entitled to prior notice of dismissal and to a severance indemnity, both scaled to length of service. The severance indemnity now amounts to one month's current salary, up to a maximum equivalent to three times the officially established minimum wage, for each year of service. Seniority in formal sector firms averages about 12 years. For an average worker, accordingly, the total maximum dismissal ind,~nmity is about 36 times the monthly minimum wage. This is not high (given the current real level of the minimum wage), although it adds to the problems of firms undertaking adjustment that need to reduce staff. Probably more important, businessmen find they must deal with powerful labor unions and undertake intricate legal procedures in order to carry out such dismissals. In all, this effectively increases labor costs, discourages employmE?nt and encourages more capital intensive investment than would otherwise bH warranted over the long run. 5.16 Like other Latin American countries, Argentina has a system of payroll taxes that fund a variety of welfare programs. Employers' con- tributions go to pensions (12.5 percent of monthly earnings), housing (5 percent), family allowances (9 percent), unemployment (8 percent), and health (4.5 percent). In addition, there is a "thirteenth month's" wage payment each year and legal minimum vacations (which add another 3 percent to total wage costs. In total, non-wage labor costs to employers amount to 46 percent of wage costs!/ This ratio is high relative to other developing countries, particularly if compared in terms of per capita income. Employees pay part of their pension (another 11 percent), health insurance (another 3 percent), and certain other levies (about 2 percent), so that payroll levies on wages now total 58 percent.~/ There is a large difference between what firms pay for labor and what employees receive, which inevit- ably produces inefficiency. The benefits provided by the social security system are considered extremely deficient, particularly in view of their high cost. Workers who can afford to do so make supplementary contribu- tions to private pension plans. 5.17 The real minimum wage has fluctuated considerably during the past 15 years (see Annex Table 5.3). Real levels are lower in the 1980s than they were previously. The wage structure in formal sectors is generally substantially above the ntinimum wage. Given the fact that the minimum wage '}_/ These data have been obtained from the Price-Waterhouse report: "Doing Business in Argentina" (1984). ~/ In 1985, the non-wage costs as a percentage of per capita income was 64 in Argentina, 42 in Brazil, 50 in Mexico, 24 in Chile, 21 in Korea, 44 in the United States and 17 in Japan.  - 150 - is a "fluor" for formal sector wages, and that it still serves in some measure as an indicative index, its increase may shift the entire wage structure up, thus affecting inflationary trends.~/ 5.18 The increasing importance of the informal sector, which is partly a response to the burden of labor regulation, has reduced the effective coverage of the regulation in the economy. E. Protective Regulations and Equity 5.19 As noted earlier, Argentina's labor market comprises protected and an unprotected sectors. The protected sector is covered by mandated wage adjustment and labor regulations. It comprises government, formal services, import substituting industries, large agricultural firms and some export industries. The unprotected sector, which comprises small firms, informal activities and producers of agricultural goods for internal con- sumption, is nut covered by mandated wage adjustments and labor regula- tions. 5.20 The simultaneous existence of protected and unprotected sectors has the obvious distributional implication that workers in the unprotected sectors are in a relatively poorer position than those in the protected sectors. This is supported by the observed ratio of wages of skilled labor to unskilled labor (see Annex Figure 5.4 and Annex Table 5.3), which dis- plays a clear increase between the mid-1970s and 1982 amid huge fluctua- tions in aggregate real wages. F. Recommendations 5.21 The Government should consider vigorously cutting its inefficient activities and dismiss workers as necessary, not only with the severance pay to which they are entitled, but with programs of income maintenance, retraining, and placement. Private sector industrial federations might be asked to participate in these programs. In addition, early retirement programs might be introduced. The short-term costs to the public sector can be expected to be compensated by lower public sector costs and higher operating efficiency; over t.he medium term, as workers are hired in more productive private sector jobs, their increased productivity should ulti- mately provide the public sector with more tax revenue. 5.22 The present centralization of wage-setting needs to be reversed, so that wage rates can he set by each firm in accord with its own pro- ductivity conditions. That is, some loosening must be permitted of the present system under which firms revise their wage scales up with the cen- tralized wage indicator. 5.23 The present system of wage taxation needs to be relieved. The private sector must be allowed to provide a larger share of the benefit programs, since it could assuredly do so more effectively at lower cost. This would in turn reduce the Government's costs. The heavy labor taxation ~I This argument has been empirically substantiated in Paldam & Riveros (1988). See also Sanchez & Giordano (1988).  - 151 - burden must gradually be worked down over time, to reduce the cost to the private sector of hiring workers. Measures to relieve the stringency of job tenure would also be helpful to encourage the private sector to hire workers. 5.24 More innovative approaches that might usefully be considered over the medium term would include encouraging profit-sharing between owners and their labor forces. This would permit labor costs to vary with firms' performance. It should also have the effect of giving the labor unions and their members a more direct stake in the profitability of the enterprises in which they work.  - 152 - ANNEX CHAPTER VI: TRADE POLICY A. Trade Performance 6.01 Argentina's postwar experience of persistent macroeconomic insta- bility and a declining rank among countries according to per capita GNP was preceded by the closure of its economy to foreign trade. Prior to the Great Depression the share of imports (GNFS) in GDP kept close to 50 per- cent. This indicator of openness fell to 5 percent at the end of World War II, and again in the mid-1950s. Since then, the import share has remained near 10 percent without ever exceeding 11.5 percent in a single year (Annex Figure 6.1). Exports as a shar·e of GDP have followed the general trend of imports, but have fluctuated heavily as a result of volatile international commodity markets, stochastic shifts in domestic agricultural output supply and variations in domestic aggregate expenditures. Since the onset of the debt crisis, export earnings have exceeded import expenditures in all years, but have continued to oscillate. As a result, the resource balance has moved between a high of 7.5 percent of GDP in 1985 and a low of .2 percent in 1987. A new upswing occurred in 1988 (3.2 percent) and appears to continue into 1989. 6.02 The structure of Argentina's imports and exports reveals the dom- inating influence of the import substitution strategy (Annex Table 6.1). Tariff and nontariff protection has kept consumer good imports at less than 6 percent of total import expenditures, except for an average of 14 percent in 1979-81, when a trade liberalization episode coincided with a period of easy access to foreign credit. The remainder is taken up by primary inputs, intermediates and capital goods. Reflecting lower investment, the share of capital goods imports has declined from 20-24 percent before the debt crisis to 12-16 percent since. On the export side, primary products and agro-hased manufactures contribute about 75 percent to the country's export earnings. The policy of promoting the exports of non-agro-based manufac- turers ("industrial manufactures") has not until recently been successful in diversifying exports. Their export share has hovered between 13 percent and 21 percent before, in 1987, it jumped to 27 percent as a result of tumbling agricultural earnings. In 1988, however, the share increased further despite a strong recovery of agricultural export prices and supplies. While some of this improvement may stem from the recession beginning in mid-1988, this growth in nontraditional exports is also a response to a substantive reform of the export regime that began in early 1987. B. Import Substitution Strategy 6.03 The overall contraction of international trade resulting from the Great Depression and World War II was largely responsible for the initial loss of Argentina's exports and imports. Of more lasting importance, how- ever, were the inward oriented trade and industrial policies initiated during the 1930s, but maintained and intensified in the 1950s, when other countries were increasingly removing their external trade barriers and a rapid expansion of international trade flows took place. Successive governments opted for the import-substitution strategy hoping to: (i) foster investment and productivity growth through accelerated domestic industrialization; (ii) achieve a higher degree of macroeconomic stability by reducing the country's exposure to volatile world commodity markets; and (iii) support both targets with a policy of selective industrial export promotion. These hopes have been frustrated.  - 153 - Annex Figure 6.1- ARGENTINA-EXPORTS AND IMPORTS (GNFS), 1925-1987 (Percent~ge of GOP) 1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 X Exports Imports Sources: 1. (1925- 1984) Y. Mundlall, D. Cavallo and R. Domenech, Agriculture and Economic Growtn, Argentina 1913- 1984. Forthcoming. 2. (1985- 1987) World Bani!, World Tables, 1988- 1989 Edition. Table 11.1 ARGENTINA- COMPOSmoN OF EXPORTS AND IMPORTS, 19n-88 (in Percent) - ----- 19n 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988" ----- ---- EXPORTS 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Primary Produeta 40.8 41.1 40.4 39.8 45.5 398 48.6 46.5 43.8 36.9 27.5 41.0 Agro-baeed Manufacture• 39.0 38.8 41.0 36.8 31.5 32.6 33.7 35.4 30.9 39.2 44.4 27.3 lndullMI Manufacturea 19.8 21.3 17.9 18.8 18.1 20.4 13.3 13.8 18.4 21.7 28.5 30.0 Fuell 0.5 0.8 0.8 3.5 8.8 7.2 4.4 4.3 8.7 2.1 1.4 1.7 Unc:IUIIfied 0.1 0.0 0.1 1.1 0.1 0.0 0.0 0.0 0.2 0.1 10.2 0.0 IMPORTS 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 101).0 100.0 c.-Goode 20.5 23.7 19.8 21.5 22.5 14.7 14.2 13.2 15.7 11.7 1•1.7 15.7 lntenneclalel 80.4 59.2 53.5 50.3 53.8 85.9 70.5 72.4 88.8 73.3 88.3 89.0 Fuela 18.3 12.3 18.4 10.1 10.4 12.5 10.2 10.5 11.9 8.9 111.3 10.9 Conaumlr Goode 2.8 4.7 10.2 18.0 12.8 8.5 3.3 3.8 3.5 8.0 !1.5 4.4 Unc:IUIIfied 0.0 0.1 0.0 0.1 0.9 0.4 1.8 0.1 0.3 0.1 (1.2 0.0 - - - - --- Source: INOEC • Blnk Staff Elttmatea  - 154 - (a) The first., easy stage of inward-orientE>d industrialization (foodstuffs, textiles, clothing and leather products) was already completed in the late 1940s. Import substitution in the second, more capital intensive stage, would have required substantial dynamism to avoid foreign exchange shortages. Instead, recurrent external crises, foll,~ed by recessions have stifled industrial expansion. As a share of GDP, manu- facturing in the 1980s has returned to where it had been four decades earlier. Investment has reached high levels (28-30 percent of GDP) only in the late 1970s, hut is hovering between 10 percent and 13 percent since 1983. Most disappointing has been the contribution to productivity growth. A forthcoming study indicates that, over the long run, total factor productivity in the nonagricultural sectors (excluding government) has grown at less than two thirds of the rate achieved in the agricultural sector.!/ Indicators for the industrial sector suggest that total factor productivity has actually declined during the 1970s and early 1980s (para. 1.11). The momentum of industrial productivity has stalled as: (i) scale economies which tend to become increasingly important beyond the first phase of industrialization could not be realized on the narrow domestic markets; and (ii) import protection and domestic industrial policies have relaxed the pressures of competition that force managers to allocate resources efficiently and that tend to drive the process of innovation. (b) The closure of the Argentine economy, instead of reducing macroeconomic instability, has arguably contributed to the secular increase in the inflation rate and to the instability of the real exchange rate. The share of exports and imports in GDP turned out to he less important for the country's exposure to trade shocks than the mechanisms that enable the open economy to cope with them. A price elastic aggregate import demand and capital flows tend to absorb a good part of the shock impact on the real exchange rate and thus on relative prices, while the discipline of intense competition keeps relative price changes from turning into a source of inflation. These mechanisms have been weakened. Increasing the import share of non-substitutable primary inputs and intermediates rendered aggregate import demand price inelastic; intermittent balance of payments crises impaired the country's access to external credit; and the creation of sheltered domestic markets fostered a pricing behavior that has added an inertial component to inflation. To overcome the inertial forces, governments have repeatedly and unsuccessfully, in the context of stabilization programs, relied on fixing the nominal exchange rate, and have in the end increased the instability of the real exchange rate. !/ Y. Mundlak, D. Cavallo and R. Domenech, Agriculture and Economic Growth: Argentina 1913-1984, forthcoming.  - 155 - (c) To relax the import capacity constraint and to reduce the instability of export earnings, Argentine government~; have at various times since 1963 applied industrial export promotion incentives. Until 1987, however, neither the share of exports in total industrial production (fluctuating between 6 percent and 10 percent with the exception of 1985 'IIJhen it reached 13 percent) nor the share of industrial manufacturers in total export earnings (8-9 percent) have exhibited an upward trend. Two major reasons can be distinguished: (i) A selective promotion policy faces inherent difficulties that consecutive administrations have found impossible to solve: (a) the Government lacks the information to clearly identify the potential winners on export markets and, in the Argentine political environment, is unable to forge a lasting public consensus on the selection made. The incentives, therefore, remain subject to change, i.e. cannot influence the long-term investment decisions required for the expansion of export capacity and the access to export markets; and (b) selective promotion measures invite countervailing duties (CVD) on the side of importing countries, particularly the United States and the European Community. (ii) Equally important for the reluctance of Argentine industrialists to undertake irrevers- ible export investments has been the volatility of the real exchange rate for exporters which, in turn, has resulted from the interaction of inappropriate trade and macroeconomic pol- icies. In addition, trade and industrial policies have contributed to macro- economic instability through their impact on the public sector deficit. Trade tax revenues have been an unstable part of the budget while the revenues foregone through industrial prontotion incentives and overcharging on public sector purchases resulting from the "buy national" obligation of public procurement have added up to 5 percent of GDP to the deficit. To regain macroeconomic stability, therefore, the Government has correctly emphasized that trade and industry reform not be postponed. The reform can support the stabilization as i t impinges both on the underlying fiscal cause and on the inertial forces that have worked to give inflation a life of its own. C. Policy Reform 6.04 A political consensus has finally been established in Argentina that the import-substitution strategy has run its course. Beginning in early 1987, the Gt,vernment has transformed the consensus into an active reform policy. To have started and continued the reform is a major achievement considering not only the resistance of powerful vested interests, but also the legacy of an aborted previous liberalization attempt caught in the collapse of the 1979-81 stabilization program. The experience of the previous export promotion and import liberalization polid.es is reflected in characteristic elements of the current reform: (i) a strong emphasis on the free trade status for exporters early :ln the reform process, coupled with a phase-out of various specific export promotion measures; (ii) a negotiated sector-by-sector approach to :lmport liberalization; and (iii) an attempt, not always successful, to maintain a competitive exchange rate for trade transactions. In addition, recognizing the complementary relation between foreign trade and domestic industrial  - 156 - policy instruments, the Government has taken care to coordinate the trade reform with changes in the industrial policy. These will be discussed in Annex Chapter VII. The Export Reg~e 6.05 The supply of Argentine products to world markets has in the past been restrained by the export regime, in particular: (i) export taxes and equivalent differentials in the exchange rates for export and import trans- actions; (ii) export license requirements aimed at giving domestic market supplies priority over export supplies; (iii) tariffs and quantitative restrictions on imported inputs and capital goods used for export produc- tion; and (iv) the imposition of domestic indirect taxes on exports which amounts to double taxation as generally importing countries raise domestic indirect taxes in addition to import duties. Since late 1987, the Government acted on these barriers as follows: (a) The average export tax rate (on a production weighed basis) was reduced for agricultural goods from 18.2 percent to 4.1 percent, and for manufacturing goods from 9.5 percent to 0.6 percent. The production share of positions of the export nomenclature (NADE) which are subject to export taxation was reduced from 85.9 percent to 34.5 percent in agriculture and from 43.4 percent to 6.3 percent in manufacturing. However, after August 1988 the export tax equivalent of the multiple exchange rate system for trade transactions more then compen- sated for the direct export tax reduction. In the fourth quarter of 1988 the export tax equivalent came to 17.4 percent for agricultural commodities and to 12.7 percent for manu- factures (including agro-based manufactures). (b) The Government has simplified the export licensing process through a one-stop-window arrangement for exports (except grains) shipped through Buenos Aires. However, it has not yet reduced the number of NADE positions that are subject to license requirements. The production coverage for these posi- tions stands at 54.5 percent for agricultural commodities and 17.7 percent for manufactures. These controls continue to cause both uncertainty and resource costs for exporters. (c) The duty free admission of imported goods for use in export production (temporary admission regime-TAR) has been extended to all primary inputs and intermediates with small exceptions. At the same time, the general import liberalization measures have removed the control of domestic producer associations over the import licensing process of these goods, and have made import authorization fully automatic for about 85 percent of the imports affected by the TAR. The new TAR complements the older drawback scheme under which exporters can apply for the reimbursement of duty payments after exports have been shipped. In the inflationary environment of Argentina, a comprehensive and automatic ex-ante TAR is the key instrument for removing the direct effects of protection for imported inputs. The duty exemption part of this measure has reduced  - 157 - the average production cost of manufactured exports by 3 percent, while the cost equivalent of the automatic access is possibly higher. In addition, the Government has introduced a TAR for capital goods called ARGEX. Under this regime, applicants have to enter multi-year contractual export conunitments with the Government. Almost all firms hav•~ chosen to avoid such commitments, and have instead taken advantage of Decree 515/87 under which the Secretary of Industry and Foreign Trade can grant duty exemptions on capital goods on a case-by-case basis. (d) The reimbursement of indirect domestic taxes has been extended to the export of most industrial manufactures, though not to agricultural and mineral commodities and to agro-based manu- factures. The average rate of reimbursement (export-weighted) for industrial manufactures increased from 6 percent to 13 percent, but stayed below 1 percent for all other goods. While agricultural production is generally exempt from the value-added tax, a substantial share of mineral and agro-based production is not, i.e. the extension of indirect tax reim- bursement has stopped short of being complete. 6.06 Before the turmoil in the foreign exchange market rate put a halt to further reform measures in February 1989, the Government had been work- ing on a sweeping reform of export licensing for industrial goods (includ- ing agro-based manufactures). The reform would have removed all license requirements that currently enable the authorities to give domestic sup- plies priority over export supplies, except for purposes of national defense wl1ich are specified by law. Export licenses would only have heen required for goods that are subject to: (i) quality and sanitary controls; (ii) environmental restrictions; and (iii) international agreements on export restraints like the Multi-Fiber Agreement and bilateral voluntary export restraints. 6.07 The Government has reduceJ the selective export promotion granted through: (i) subsidies on incremental exports in the context of the PEEX program that calls for multi-annual contracts between the Government and the exporting firms; and (ii) Central Bank rediscounts of first-tier banks pre-shipment loans and of foreign trade bills (post-shipment financing) at subsidized interest rates. Since end-1987, the Government is grandfather- ing the PEEX program, i.e. neither entering new nor extending old con- tracts. The Central Bank has raised the interest rates on rediscounts in several steps from 1 percent (pre-shipment) and 4.5 percent (post-shipment) to 8 percent for both in August 1988. Commercial banks offer pre-shipment financing at LIBOR plus about 2.5 percent. The measures of the Central Bank have thus substantially reduced, but not removed the subsidy element. 6.08 Abstracting from the tax equivalent of the exchange rate, by end- 1988 the Government had made impressive progress towards extending free trade status to Argentine exporters; it has already started to move away from inefficient selective export promotion policies. The reform of the export regime, however, is less than complete. The major issue is the extension to agricultural and agro-based industrial exports. The export taxation for these goods to some extent compensates for a weakness of domestic indirect taxation (Chapter III), and this needs to be addrE!ssed.  - 158 - Beyond that, previous arguments for a general discrimination against agri- cultural exports have been discredited by Argentina's experience: (i) the country's vulnerability against terms of trade fluctuations has increased rather than abated in the wake of reduced agricultural exports; (ii) the rate of productivity growth in the agricultural sector has been higher than in the rest of the economy; and (iii) the static optimal tax argument for commodities has lost relevance, as the country's share in the world exports of its major commodities has fallen below 10 percent. In a number of specific cases, furthermore, prohibitive export tax rates (up to 38 per- cent) have served to create rents in user industries. Such rents are costly for the economy as a whole. 6.09 Since February 1989, the Government has been faced with a run out of the national currency, which has rapidly been transmitted into hyper- inflation. The Government has taken a succession of short-term exchange rate and export tax measures and has temporarily suspended the reimburse- ment scheme and the export financing facility of the Central Bank. Despite the various tax and tax-equivalent measures, however, the short-term incentives for exports have dramatically improved due to the nominal devaluation of more than 1,000 percent within three months. These are, of course, side effects of a hyperinflation that will eventually be stopped. It is important that the disinflation package not undo the reform of the export regime already achieved, but set the stage for the completion of the reform. Reconmendations 6.10 Recommendations for the export component of the stabilization package include: (a) the imposition of an across-the-board export tax be used to abolish all product-specific export taxes; (b) export tax payments and indirect tax reimbursement claims be credited against value-added tax payments if and when made; (c) imports and exports be transacted at the same exchange rate; Recommendations fnr the further reform steps, once the inflationary pres- sure has abated, include that: (d) the reform measures prepared for early 1989 be enacted; (e) the subsidy element in the export financing facility of the Central Bank be removed; allowing new exporters and small and medium-scale firms access to the facility while charging an adequate spread to cover the higher risk; (f) the access of indirect exporters to the TAR, the indirect tax reimbursement and to export financing be improved; and  - 159 - (g) the GATT code on subsidies and countervailing duties be signed as would become possible with the phase-out of the PEEX and other minor export subsidy programs and the removal of the subsidy element in the Central Bank export credit facility; as a signatory to the code, the Government would be able to contest the countervailing duties currently imposed by the United States and the European Community against a number of imports from Argentina. The Import Regime 6.11 The Argentine import regime has in the past ascribed to the execu- tive branch ample discretion over the issuance of import licenses, changes in the tariff schedule and duty exemptions on a project-by-project basis. The discretionary element has been complementary to the corporatist character of government-industry relations, most visibly in the work of honorary commissions through which domestic producer associations advise the Government on the issuance of import licenses to the private sector. The "prior intervention" of these commissions has developed into the equivalent of quantitative import restrictions (QRs) for goods that compete with domestic supplies. Importing by the public sector (including public enterprises) has only been possible with the approval of the Compre Argentino Commission that has been dominated by domestic suppliers. The Compre Argentino law stipulates that import requests are to be denied when domestic substitutes are available at "reasonable prices." In reforming the import regime the Government has rightly emphasized the reduction of the discretionary element. However, the Government has not considered it feasible to impose its concept of an optimal reform. Instead, it has nego- tiated the reform sector-by-sector, gaining leverage by bringing to the table the organized interests of both sides, i.e. the competing dom~stic suppliers and the industrial users, though not the unorganized consumers. The Government has in this way made impressive progress towards a mure rational import regime, thougl1 the outcome, as had to be expected, leaves much room for improvement. 6.12 Between the second quarter of 1987 and the fourth quarter of 1988, the Government has: (a) abolished the prior intervention of honorary conunissions required for the issuance of licenses for the import of goods under all but 2,033 of the 11,780 positions of the import- tariff nomenclature (NADI): thereby reducing the production coverage of QRs from 62 percent to 18 percent for manufactures and from 29 percent to 2 percent for agricultural commodities; (b) made the import authorization process fully automatic for 8,029 NADI positions (out of 9,747 positions that are no longer subject to the prior intervention of Honorary Commis- sions) by rescinding the discretion of the Secretary of Indus- try and Energy Trade, and transferring the authorization pro- cess to the conunercial banks;  - 160 - (c) implemented the GATT code on import valuation, abolishing official reference prices, rescinding the discretion of the National Customs Administrator to set normal prices and, instead, basing the calculation of duty payments on the invoice; (d) dissolved the supplier dominated Compre Argentino Commission without, however, appointing a new Government dominated com- mission; meanwhile "urgent" import requests are decided by the Secretary of Industry and Foreign whereas "non-urgent" imports are delayed; (e) reduced the level of tariff protection by abolishing the 15 percent across-the-board surcharge of the Plan Austral and in~talling a new schedule with the following characteristics (old regime in parentheses): (i) average production weighted tariff rate for manufactures of 28 percent (43 percent) and for agricultural goods of 20 percent (29 percent); (ii) tariff band of 0-40 percent for NADI positions with 98 percent production coverage (0-53 percent for positions with 95 percent production coverage); (iii) maximum tariff rate of 50 percent (115 percent); and (iv) the dispersion of effective protection (standard deviation of effective rates of tariff protection at the five digit ISIC level) has come down from 39 percent to 28 percent; (f) abolished the discretion of the Secretary of Industry and Foreign Trade to grant duty exemptions for capital goods imports on a project-by-project basis, and, instead, appointed a commission to advise on permanent tariff rate changes on a position-by-position basis. 6.13 In addition, prior to the turmoil on the foreign exchange market, the Government had been planning for the second quarter of 1989 to: (i) further reduce the production coverage of QRs for manu- factures from 18 percent to 15 percent; and (ii) expand the fully automatic import authorization process to all NADI positions not subject to QRs; this would also increase the share of fully automatic TAR positions from 85 percent to 100 percent. These measures were postponed as the Government became absorbed by the unfolding crisis. 6.14 After the core measures had been enacted in October 1988, the Government weakened the reform with three steps: (i) The Government imposed specific tariffs on 300 NADI posi- tions with a production coverage of 2 percent. Since these tariffs have been set at import prohibiting levels, they  - 161 - have the same effect as QRs, thus directly undoing a part of the October 1988 reform. Perhaps more importantly, intro- ducing specific tariffs has compromised the credibility of the program in the eyes of the Argentine public. (ii) In the context of the tax reform law of December 1988, the Congress reestahlished the discretionary power of the Sect·etary of Industry and Foreign Trade to grant duty exemp- tions on capital goods imports on a project-by-project basis. This distortion has in fact hecome more serious than it had been before the reform because the tariff reform had placed the rates for a large number of capital goods at the upper end of the tariff band, expecting that the Tariff Commission (para 10.10 (f)) would soon revise the whole schedule for capital goods. So far the Commission is inop- et·ative. (iii) The Government has opened six anti-dumping cases, thus departing from its long established and well-founded policy of utmost reservation against this instrument. Since the injury test under Article 717 of the Codigo Aduanero is particularly undemanding (and inconsistent with the GATT anti-dumping code), the experience of successful anti-dump- ing cases could easily lead to a flood of new applications. 6.15 In less than two years, the import reform has come a long way considering the political constraints under which the Government had to operate. Though superior to the previous regime, the new regime is not fully consistent with the Government's target of integrating Argentina into the world economy, allowing the citizens to detect and capture their dynamic comparative advantages. That target would be best served by a fully automatic import regime, for both the private and the public sector, without quantitative restrictions and with a flat moderate import tariff except for goods used in export production. The reform process, hmr~ever, has had a distinct influence on the public debate, raising the awareness in all major political parties that the remaining QRs, the new specific tariffs and the procurement practice under the Compre Argentino law do not serve the national interest well. The Government has thus opened the way for further progress that might eventually lead to the complete removal of QRs and to the repeal of the Compre Argentino law. Recommendations 6.16 The priority for disinflation requires that elements of the trade refln-m process be strengthened that can support the stabilization process. In addition, further reform steps should be planned so as to aid thE! private investment response to the trade reform. Reconunendations include that: (a) the structural reform package include the removal of all QRs (including fully automatic import authorization) that were exempted from the 1987-88 reform in conjunction with a temporary tariff surcharge; and a subsequent tariff adjust- ment bring ad valorem tariff rates into the band established in 1988, IV;  - 162 - (b) the structural reform package include the removal of specific tariffs; only for seasonal products should specific tariffs at non-prohibitive levels be considered; (c) the tariff hand be narrowed immediately from 0-40 percent to 10-40 percent; and work commence on a further narrowing of the band to 10-20 percent together with a much lower average tariff of about 15 percent; and (d) the Government use its decree power to restrict the applica- tion of the Compre Argentino law to the minimum required by the law, i.e. preference for local suppliers at prices equal to import pt·ices including duties and domestic taxes; and To support the private investment response to trade reform, attention should be given to the import and domestic production of capital goods. It is recommended that: (e) all capital goods not produced in the country be placed at the lower end of the tariff band; (f) specific tariffs on components and inputs of capital goods produced in the country be replaced by ad valorem tariffs at the lower end of the tariff band; (g) the "Informatica Program" (Resolutions ME 978/85 and ME 418/86) be repealed; the program has severely hampered the technological development of the country, particularly of the domestic capital goods industry; and (h) a program to unify the tariff rates for capital goods produced and not produced in the country be developed.  - 163 - ANHEX CHAPTER VII: INDUSTRIAL POLICY A. Sector Perfoonance 7.01 Rapid industrialization has been the central target of the twin policies of import protection and industrial promotion. For nearly two decades, however, the policies have failed to even prevent the relative decline of the industrial sector (Annex Table 7.1). Domestically, indus- trial value added has grown dismally slow and at a lower rate than GDP at factor cost. Int.ernat.ionally, the sector's contribution to GDP growth has been significantly lower than the average of relevant country groujpings (Latin America, middle-income and highly indebted countries). Though the stock of fixed capital has apparently grown rapidly before the negative trend shift of domestic investment that occurred in 1982, industrial employment has fallen dramatically, implying a rapid increase in capital intensity. The value added, labor and capital stock figures in Annex Table 7.1 strongly suggest that total factor productivity has declined through the 1970s and early 1980s and has since recovered slowly from a low level. Annex Table 7 .1: ARGENTINA - SELECTED INDICATORS OF INDUSTRIAL PERFORMANCE (Average Annual Growth Rates in Percent) 1970-82 1982-87 1970-87 GDP (at factor cost) 1. 06 1.60 1.22 Value Added ~/ -0.52 2.85 0.46 Employment ~/ -2.59 -0.47 -1.97 Fixed Capital l.!_l 5.97 0.35 4.29 Contribution to GDP growth £1 0.13 0.74 0.31 Memo items Contr. to GDP growth £/ - LAC 9_/ 1. 90 0.64 1.53 - MIC ~I 2.25 1.24 1. 95 - HIC !I 2.33 0.42 1. 76 ~/ Manufacturing sector. £/ Stock of nonagricultural machinery and equipment. c/ Industrial sector. ~/ Latin American and Caribbean. ~/ Middle-income countries. !/ Highly-indebted countries. Sources: World Bank, World Tables 1988-89 edition. INDEC. S. Goldberg and B. Ianchilovici, "El Stock de Capital en Argentina." Desarrollo Economico, No. 110 (July-SeptembE!r 1988).  - 164 - 7.02 The failure of the industrialization drive is recognized hy all political fo~ces in Argentina. The conclusions for industrial policy, however, are a matter of debate because industrial policy impacts on indus- trializatiutt only in an indirect way and in interaction with other policies and external events. Particularly, .it is asked whether an active promotion policy would not be successful in Argentina as it is perceived to have been in several East Asian countries, if only the macroeconomic environment were more stable and the measures of promotion would be planned more com- petently. A growing evidence, however, supports another view, namely lhat the policies of protection and pnmtotion have contributed to macroeconomic instability by: (i) fostering an export-shy but import-craving industrial sector (Annex Chapter V); (ii) allowing the fiscal burden of promotion to run out nf control; and (iii) bringing about a non-competitive market structure inducive to inflation inertia and to cost-push dynamics. The State, furth~rmore, appears to have been weakened to an extent that invest- ment incentives are bound to be appropriated by the incumbents of protected industries, allowing them to raise rents, expand market shares and avoid the need for adjustment and productivity enhancement. B. Policy Impact 7.03 Fiscal Burden. Estimates of the fiscal costs of the nwnerous ---- industrial promotion regimes are difficult to come by. In 1987, the so- called theoretical cost as a share of GOP amounted to 0.8 percent for the general promotion regime and 1.8 percent for the special regimes of four provinces (La Rioja, Catamarca, San Luis and San Juan). The true revenue foregone has probably been higher because the theoretical cost calculation is based on the downward-biased estimates at the time of approval. The fiscal cost for the Tierra del Fuego regime is estimated at close to 1 per- cent of GOP. No estimates are available for the small sector regimes (min- ing, forestry, fishery, shipbuilding, production and processing of wine, sugar, tobacco, yerba mate and cotton, and production of internal combus- tion engines). The core promotion instruments are tax exemptions and deferments that can last for up to 15 years. The practice of approving new projects on a massive scale has, for the foreseeable future, eroded the base for the value added tax and the profit tax. The temporary suspension of new project approvals under the general promotion regimes and the spe- cial regimes for four provinces, which is part of the tax law approved by the Congress in December 1988, has failed to restore the tax basis. The same is true for limits on the open-ended tax benefits which the tax admin- istration found difficult to enforce. In addition, the December 1988 law has not been effective in preventing new project approvals as late as May 1989. 7.04 Market Structure and Macroeconomic Instability. A recent Bank Study on the Industrial Sector has shown that import protection and indus- trial promotion have been instrumental in bringing about a dualistic market structure, most conunonly in subsectors producing intermediate goods, but also in various capital and consumer goods inJustries. The pattern is one of a small group of large firms that collude more or less openly in matters of price setting and sharing of investment incentives and supply contracts with the public sector. The oligopolists coexist with a fragmented fringe of small firms. The large firms enjoy substantial cost advantages, partly  - 165 - due to scale economies and partly to their ability to block the access of fringe firms to the investment incentives granted under the various indus- trial promotion regimes. 7.05 Without import competition, output prices under a colluding oligopoly tend to be more rigid downward than upward: a slack in demand might even push prices upwards as marginal costs increase because of scale economies or as firms follow a full-cost pricing rule. Frequent inter- sectoral demand shifts, which are typical for a country like Argentina exposed to volatile terms of trade, then ratchet inflation upwards. In addition, a colluding oligopoly tends to interact with strong unions in triggering wage-push inflation. In both cases, the Government is faced with the choice of either choking off the inflationary pressure through a severe recession or validating more inflation. 7.06 For the same reason, a policy of disinflation threatens to be extremely costly. The Government recognized this fact in the design of the Plan Austral when it complemented orthodox stabilization measures with direct price controls. In the Plan Primavera, the Government went a step further by directly soliciting the cooperation of industry leaders in the setting and overlooking of industrial output prices. The agreements, how- ever, turned out to be inherently fragile as the industry leaders asked for concessions (inter alia, on public sector prices and on tax rates) that tended to undermine the orthodox component of the package. It is different to envisage how the Government can avoid such inconsistencies without exposing the key subsector to the potential entry of competing imports. C. Recent Developments 7.07 In September 1988, the Congress passed a new industrial promotion law to replace the old general promotion regime and the r·egimes for La Rioja, Catamarca, San Luis and San Juan, though not the regime for Tierra del Fuego and the numerous small-sector regimes. The new law, which has not yet been enact.ed, would replace open-ended tax exemptions with a: fixed amount of tax credits. The low-value added bias would be removed and the capital-intensity bias reduced. The fiscal effect would be uncertain. Most importantly, the acquired rights of beneficiaries of the old regimes, that last for up to 15 years, would not be curtailed. In the context of the December 1988 tax reform, the Government suspended the approval of new projects under the old regimes and imposed limits on the tax exemptions. These measures appear to have been circumvented. 7.08 At this point, policies of industrial promotion have been thoroughly discredited in Argentina as instruments of fostering the indus- trial contribution to growth and of raising productivity. In addition they have prominently contributed to the fiscal collapse of the State. A radical departure from the promotion policies is, therefore, in order. Indeed, it is difficult to imagine that a package for stopping hyperinfla- tion could be credible without the cancellation of acquired rights.  - 166 - Reconmendations 7.09 It is reconunended that: (a) a stabilization package include (i) the cancellation of acquired rights under the old industrial promotion regimes (Laws 21608, 22021, 22702 and 22973), and (ii) the restric- tion of the Tierra del Fuego regime (Law 19640) to trade tax exemptions; to lend credibility to these measures, the Government might seek a constitutional amendment; (b) the industrial promotion law of September 1988 not be enacted, but a more efficient approach be taken to the regional and national targets of that law as well as of the Tierra del Fuego law: (i) the approach would assign the task of regional promotion to the system of financial co-partici- pation, leaving it to the Provinces to decide strictly within their budget limits on the allocation of resources between industrial promotion and public services; (ii) the approach would recognize that trade reform is essentially removing the rationale for the promotion of "priority projects" on a national level, except for the rare industrial cases of strong positive external effects; resources for the promotion of such exceptional projects could be sought in the Federal budget on a case-by-case basis, rather than by establishing ex-ante the amount of tax credits to be allocated annually to new projects; (c) to study the implications of the small-sector promotion regimes (mining, forestry, fishery, shipbuilding, production and processing of wine, sugar, tobacco, yerba mate and cot- ton, and manufacture of internal combustion engines) with the aim of integrating these sectors into the general system. Regulations 7.10 Barriers to Entry and Exi~. Opening the industrial sector to international competition, it becomes increasingly important to enable entrepreneurs to rapidly respond to new opportunities and allow firms to exit operations that have become unprofitable. The suspended promotion laws had virtually preempted new entries by concentrating benefits on incumbents. In addition, they included capacity restrictions in the spe- cial sector regimes. Continuing these policies would compromise the flex- ibility of the industrial sector. The investment response of entrepreneurs to new opportunities would be delayed as they would wait for the approval of benefits, lest they be surprised by the cost advantage of a competitor. On the exit side, firms are hampered by labor and by bankruptcy regula- tions. Compensation requirements add to the cnst of giving up a production line or a location. More restrictive a1'pears to be an extended bankruptcy procedure that binds resources in non-profitable activities. The dif- ficulty to exit discourages entrepreneurs from investing into export pro- duction which tends to be more risky than the production for a sheltered domestic market. Managers then tend to expand operations by incremental steps only, unwilling to shift resources to areas characterized by rapid  - 167 - demand changes and short product cycles. Furthermore, trapped in a certain activity, entrepreneurs are highly motivated to seek protection against changes in international market conditions. 7.11 Price Regulations. The Government has far-reaching powers of regulating prices and of intervening in the production and distribution of goods and services under the so-called supply law (Ley de Abastecimiento). Except for drugs and a small number of food items, however, these powers have not been used to pursue industrial policy targets. Price controls have intermittently been applied in the context of stabilization programs, though the controls appear to have been handled flexibly allowing for rela- tive price adjustments. 7.12 Public Procurement and Public Supplies. Weaknesses in public procurement planning and internal procedures have led to a situation in which a small number of large domestic firms share the market for goods purchased by the public sector. The rents obtained by colluding suppliers have not only added to the public sector deficit, they have also increased the leverage of these suppliers in the r·espective domestic markets. YPF and Gas del Estado have been obliged to give priority to domestic customers without being allowed to freely negotiate prices. In general, the n1ovement of their domestic supply prices has not reflected changes in international prices, resulting at times in substantial implicit input price subsidies to domestic user industries. The continuation of such subsidies would not only bear on the public sector deficit, it would also create new allocative distortions as the protection and the investment promotion of other sectors is reduced. RecoDDJlendations 7.13 It is recommended that the Government: (a) study, as a matter of urgency, possibilities for expediting bankruptcy procedures; (b) strengthen public sector procurement planning and internal procedures to emphasize cost effectiveness and accountability concepts; and (c) phase out the subsidy element in the supply prices of YPF and GDE. As stated before, it is further recommended that the Government use its decree power to restrict the application of the Compre Argentino law to the minimum required by the law, i.e. preference for local suppliers at prices equal to import prices including duties and domestic taxes.  - 168 - ANNEX CHAPTER VIII: THE ENERGY SECTOR A. Overview 8.01 Argentina's energy resources are abundant and diverse, and include oil, gas, hydropower and uranium. Since 1984, about half of the energy produced was from oil, one-third from gas, six percent from hydropower and nuclear, and the rest from biomass, coal and other sources. These resources have been developed primarily by the public sector. Because of inadequate pricing and taxation, distorted investment and regulatory policies which have compounded inefficiencies within the State owned energy institutions, energy sector development has placed a heavy financial burden on the public sector. 8.02 Energy prices are generally set by the Government and are without the discipline of linkage to international prices (for hydrocarbon fuels) and marginal costs (for electricity). The Government is continually being pressured by many different special interest groups (private companies, labor unions, the provinces, public companies, etc.) to receive favorable prices to resolve their financial problems. In attempts to accommodate all these interests on an individual basis, complex distorted pricing, regula- tory and taxation policies have evolved. Since prices are set by the Government, these interest groups have little incentive to reduce costs or save energy, but rather have a strong incentive to negotiate favorable prices and special treatment. 8.03 Energy prices received by producers have not reflected economic cost nor have they been high enough to cover financial costs. Public energy producing companies have not been able to recover their capital investments, to pay their operating costs or to receive a reasonable profit. Although producer prices are low, the high level of taxation on energy (particularly on oil products) tends to force final consumer prices of oil products above economic cost, while most consumer prices for gas and electricity remain below economic cost. Energy taxation is characterized by a high level of taxation, a complex system of specific taxes, inflexible earmarked funds, and multiple taxation at many stages. The overall impact of the pricing and taxation system is to create severe distortions for both producers and consumers, to create financial problems for public energy companies and to lead to wasteful energy use. 8.04 Energy demand is unusually high, reflecting wasteful consumption encouraged by low consumer prices for electricity, natural gas, and until the last few years, very low prices for oil products. Following the global oil price shocks of the early and late 1970s, most countries increased energy prices which promoted energy conservation. Argentina did not take these measures and continues to have an elasticity of energy consumption to real GOP greater than unity. (Countries which did adjust prices have elasticities less than unity). 8.05 The most notable structural shifts in demand have been the steady increase in final energy consumption of gas from 3 percent in 1960 to 27 percent in 1985 and the doubling of electricity use. Eleven percent of final demand for energy in 1985 was electricity, 27 percent gas, 50 percent petroleum products and 12 percent other fuels.  - 169 - 8.06 Energy investment has been undertaken primarily by the public sector and has been biased in favor of large scale power investment and generally against oil and gas investments. Although self-sufficiency in energy has been a major government objective, this goal has not been achieved. While production of electricity and gas has increased, oil pro- duction has fallen steadily since 1981, leading Argentina to become a net intporter in 1987. Production rates in recent years have exceeded additions to the resource base; the country has depleted this most essential resource to a critical level from which it will be difficult to recover. A recent reassessment of gas reserves has shown that reserves are only three quarters of former official estimates. Future supply will be seriously limited if reserves are not discovered in the near future. Significant potential exists to increase oil production and find additional low cost natural gas, but fulfillment of this potential is frustrated by low natural gas prices, lack of financial resources, distortions in the regulatory framework that discourage private sector investment, and inefficiencies in the State enterprises. 8.07 Investment in electric power supply to meet rapidly growing electricity demand has been based heavily on hydropower. This strategy has been financially costly because of high capital cost and delays in con- struction of large hydropower (and nuclear) projects. It has left the country vulnerable to power shortages during periodic droughts, as occurred this past year. Efforts to control the public sector deficit have com- pounded the distortions in investment by cutting the smaller, more flexible oil, gas, and rehabilitation investments while continuing to fund large ongoing power projects. Unfortunately, the end result of the energy investment strategy over the last decade has been to increase the share of investment in large inflexible power generation schemes, which have had low productivity for the macroeconomy, and to decrease the share of investment in oil and gas exploration and production which could have provided valu- able exports during the period of high world oil prices. 8.08 Regulatory Policies and Institutional Structure of the sector has resulted in overlapping responsibilities of many government agencies governing operations of the State energy enterprises. This has pre~rented the development of clear and consistent guidelines for operations and has discouraged public a11d private entities from pursuing the most profitable activities. 8.09 These pricing, investment and regulatory policies have imposed a heavy cost on the economy and will continue to do so, unless urgent reforms are undertaken. It is estimated that $10 billion in potential revenue for the Government and economy will not be realized over the next seven years, if no action is taken to: (i) restructure energy pricing and policies; (ii) redirect investment priorities; and, (iii) change the regulatory environment. Of primary importance is the need to reduce subsidies, increase producer prices and explicitly link hydrocarbon prices to inter- national prices. To do this properly requires reform of the energy tax system in order to simplify structure and adjust tax rates. These reforms are crucial to reducing wasteful energy consumption. They will also improve the financial position of State energy companies, so that important ongoing investments can be completed (such as the Yacyreta hydropower dam) and productive oil and gas investments can be made. Concurrently with the price and tax changes, certain regulatory and institutional changes are  - 170 - needed to eliminate overlapping regulatory functions and, within each sub- sector, to: (i) improve operational efficiency; (ii) increase private sector investment; and, (iii) encourage competition. Described below are issues and recommendations to reform the system of subsidies, pricing and taxation, to increase oil and gas supply, to improve gas utilization, to improve refinery operations and improve operations and investment strategy in the power sector. B. Energy Subsidies, Pricing, and Taxation 8.10 Many of the inefficiencies and problems in the energy sector, for both producers and consumers, derive from the current complex system of subsidies, pricing and taxation. Most producer prices received by State companies for crude oil, gas and electricity are below financial and economic cost; this exacerbates the financial problems of both these enter- prises and the public sector. There are large subsidies to private sector entities and the provinces. The heavy taxation of energy fuels is overly complex and is misapplied; this creates financial as well as economic dis- tortions. Accelerating inflation in 1989 has unfortunately reduced real energy price levels. However, the current crisis situation does provide an opportunity to make urgently needed reforms in the energy pricing, taxa- tion, and subsidy system. Subsidies 8.11 Many private sector entities that sell equipment and inputs to state enterprises, receive favorable prices above economic and financial costs. Those which obtain feedstock from state enterprises (such as private petrochemical companies and private refiners) pay prices below economic and financial cost. Financial distortions are particularly large in the hydrocarbons suhsector, where it is estimated that subsidies cost at least $2,200 million per year. This figure includes approximately $1,300 million in subsidies to private sector entities, $327 million to the provinces as excess royalty payments, and $500 to 600 million for costs of the "Compre Argentino" policy. This financial drain has contributed to the severe financial problems of YPF and GdE and, as a result, the country. Pricing 8.12 Retail prices paid by the final consumer for petroleum products during the fourth quarter of 1988 were generally much above economic cost (varying from 5 percent to 222 percent above, with gasoline being the high- est) due to large taxes on petroleum products. Natural gas and electricity are also taxed, but final consumers pay prices which are significantly below economic cost (particularly residential gas consumers, residential electricity consumers, and other gas consumers). As shown in Annex Table 8.1, in the fourth quarter of 1988 all gas prices (without taxes) were very low, 41 percent to 67 percent of economic cost, while residential electric- ity prices were 51 percent to 63 percent of economic cost. These consumer price distortions encourage wasteful consumption of electricity and gas and distort oil product demand patterns lending to costly refinery imbalances. Unfortunately, the accelerating inflation and sharp devaluations in 1989 have eroded the real energy price levels and reduced ratios of domestic to international prices. A permanent erosion of real prices will have serious economic and financial consequences for the sector.  - 171 - 8.13 The indirect and direct costs of pr1c1ng distortions to the economy have been large, in excess of $3 billion over the last 10 years. This is additional net revenue which could have been earned through: (i} increased oil and gas production; (ii) reduced waste of energy, improved production incentives; and, (iii) more efficient energy use. Taxation 8.14 Argentina imposes very high taxes on the energy sector. Taxes collected and paid by the energy sector have risen in the 1980s to account for a full 20 percent of national government tax revenue. This is unusual for a country that is not a significant exporter of energy. The rise in energy taxes has resulted in part from the deterioration in the collection of broad based taxes, such as VAT and income taxes at a time when the need to reduce to the consolidated public sector deficit is urgent. In addition to this high overall level, the structure of taxation has many serious problems. Numerous taxes at various levels distort incentives throughout the production process. There is a very complex inflexible system of ear- marked taxes. Little or no reliance is placed on corporate income tax. 8.15 This high level of taxation (which in most cases has not been completely passed on to the consumer) has had a negative financial impact on the public sector energy enterprises. The public energy sector (YPF, GdE, and national power companies) had an aggregate operating income of US$3.6 billion in 1987 and US$4.8 billion in 1988. However, after sub- tracting a myriad of sales taxes, fuel taxes, provincial taxes, federal taxes and royalties, the sector had a consolidated net loss of around US$2 billion each year. The cash flow for 1987 and 1988 is a negative US$0.9 billion. This has affected the ability of these companies to make invest- ments and has forced the Central Government to increase transfers to the sector. For example, in 1987 the Government received US$2.6 billion in taxes and royalties, but it also provided compensation to the sector of US$2.76 billion, leading to a net transfer to the sector of $0.16 billion. In 1988, after imposing large taxes on gasoline, the net transfer t-J•as a positive US$1.4 to 1.7 billion to the Government. Recommendation on Subsidies, Pricing and Taxation (a) Remove the subsidies to private sector entities as quickly as possible through a phased program of feedstock price increases and reduction in "Compre Argentino" costs. (b) Increase prices of crude oil, natural gas, and refined pro- ducts as quickly as possible to cover economic costs, and explicitly link these prices to the international value of these products. (This implies elimination of preferential industrial diesel and fuel oil prices, increases in natural gas prices (before tax) of about 50 percent, and increases in LPG prices (before tax) by about 20 percent to reach economic levels). Increase electricity prices (before tax) to cover marginal cost (this implies an increase of about 20 percent). Preserve lifeline rates for poor consumers of gas and electricity. (The price increases referred to here are approximate increases, above inflation, from prices prevail- ing fourth quarter of 1988).  - 172 - (c) Restructure the taxation of energy by: (i) merging all existing taxes (except VAT) into one ad valorem tax applied to the commercial price; (ii) reducing tax rates so as to create a more efficient and equitable structure; and (iii) applying VAT uniformly to all fuels. New ad valorem tax rates (as percent of commercial price, and also shown as "new taxes" in Annex Table 8) are as follows: Present Proposed Gasoline -Extra 193 165 to 180 -Regular 156 135 Gas-oil 105 105 Diesel 45 30 Kerosene 46 30 Fuel Oil 48 30 LPG 20 30 Natural Gas 44 30 Electricity 38 30 (d) All fuels would be subject to an ad valorem tax of 15 per- cent, for a single Energy Fund, a VAT of 15 percent, a road user charge for road funds of about 35 percent on transport fuels, and extra taxes on gasolines and gas-oil. (e) Commercial prices, on which taxes are based would be: ex- refinery inte~national prices for oil products, 90 percent of international fuel oil equivalent for natural gas and long run marginal cost (LRMC) for electricity. Oil products and gas prices should be explicitly tied to international prices. The ad valorem tax should apply to electricity to cover the higher financial costs of electricity (about 15 percent higher than LRMC), to contribute to investment and limit interfuel distortions. Also, income taxes and possibly an income surcharge tax should be applied to YPF, which will earn more income. 8.16 The potential net fiscal impact of the combined tax, price and subsidy recommendations would be $1,300 million per year, which should go to urgently needed investment and help reduce the fiscal deficit. (It would be proportionally less if subsidy reduction and price increases were phased in more slowly). While tax rates would decline, producer prices would increase and more tax revenue would be collected from income and windfall profits taxes. Revenues going to Energy and Road funds would be preserved at their present level. The impact on consumers would be minimized by the new lower tax rates and lifeline rates fur poor consumers. Energy price increases should have a small impact on poor households due to the small monthly energy expenditures by the lower income groups. 8.17 In addition to numerous improvements in efficiency and incentives, that could lead to large savings for the country, the price increases would dampen demand for energy. The immediate short-run effect of raising prices (above inflation from fourth quarter 1988 levels) is estimated to be an annual savings in oil equal to about $70 million/year increasing to savings of $200 million/year by the mid-1990's. Energy prices have fallen in real terms during the rapid inflation in mid-1989. If, for example, all energy  - 173 - prices were instead reduced permanently to 30 percent below the levt~ls of fourth quarter 1988 in real terms, the subsequent increase in demand is estimated to entail a loss of $180 million per year in the short run, grow- ing to $560/million per year by the mid-1990's. Argentina simply cannot afford to pursue such a costly strategy of low real energy prices. Anne• Tft!t 1.1: MIIINFDM - CUPMDON Ill' BeVf I'RICI!B IWJ CUITll PERCENTAQE RAT OS (Increl.tl!+ Deere•••-) to Co~~Mterci•l Pr-ice Co!Mitirci 1l Pr-ice CoMMerc:i 1l Price co-•rci•l Price go fro"' CoMMer"cill Price •lo t•••• w/taxea w/t.axea w/new t•••• RJEL to EconoMic Price to Econo•i c Price to Econowti c Price to EconOMic Price w/o tax•• w/o t•••• ''"'' t•••• w/o t •••• C.'lnew taxetl PETROIJil.!! PRQI2!.!!;T:i (A/cubic owotn.l0/88) O.aol ine -Regular 115 296 118 250 -151 -Pre11i UIR 109 322 115 280 -131 f<eroaene 96 140 107 130 -61 C1eoi I 94 194 92 210 81 Oieael - Induatry /Other 79 115 88 130 131 -Power Sector 52 78 67 115 48 Fuol - Induotry /Othor 123-149 86-105 66-80 130 so to 24 -Power Sector 78- 94 59-71 51-62 115 '~5 to 61 LPQ (A/45 kg) 84 100 77 130 29 NAT\IW. !lAS (USifHCF. 08/88) -Reai denti 1l /Corwttterci 1l 46-41 71-62 54-·49 130 113 to 103 - Induat,. i •I 67 100 79 130 27 -Power 62 94 82 115 21 -Refining 56 86 66 130 so ELECTRIC P!!!!!il! (USc/Kwh) Sogbo -Reai denti al 51 72 56 130 79 -COMIH rc i al 158 247 190 130 -52 - Induatr i 1l 76 119 92 130 Aver1g1 of 10 Mejor Uti I i ti •• -Reaidenti1l 63 87 67 130 so -COtMierc i 11 182 26Q 207 130 -48 - Induat,. i •I 87 126 97 130 3 Ca-er"cial pr"icea 1nd t•• r"ltea •• of October" 1988j economic pr"icea of g•a linked to ita oppor"tunity v1lue of the mlr"gin•l fuel (fuel oil) plua cfiffer"enti•l cfiatr"ibution coata for" r"eaidenti•l; economic pr"icea of electr"icity ,,.. b1aed on Wllr"gin•l cost. New t•wea ,..f.,. to pr"oposed new t•• r"ltea. EconCHIIIic p,.icea w/o taxea fo,. petr"oleuM p,.oducta baaed on lppr"owimate inter-national pet,.oleuJR p,.oduct pr"ices plus diat,.ibution coat in four-th qua,.ter" 1988.  - 174 - c. Petroleum and Gas Supply 8.18 Production of crude oil fell 14 percent from 1981 to 1987, and continues to decline (excluding a short-term surge in gas liquids produc- tion in 1988). YPF's production, which accounts for two-thirds of all crude oil production, fell 17 percent from 1983 to 1987. Fewer development wells were drilled during the period 1981-1987, largely because of lack of funds for new investments, although the total number of actively producing wells was higher by 1987 (up 18 percent), which meant that per well produc- tion had dropped about 27 percent between 1981-1987. Consequently, increasing investments would be required to maintain the same crude oil production, as per well production rates probably will continue to decline. If YPF's actual exploration and development investment continues to be only about US$500 million per year, oil production is likely to decline at 3 percent per year, leading to increasing crude oil imports (Minimum Supply Scenario as shown in Annex Figure 8.1). While new oil exploration and production contracts under Plan Houston have recently been signed, any additional oil production from Plan Houston is likely to occur only in the mid-1990's and is likely to be moderate. Petroplan, if implemented, would make only marginal additions to production. 8.19 Additional investments in oil and gas exploration are urgently needed to maintain and, if possible, expand production to avoid costly oil imports and gas shortages in the early to mid-1990's. Additional invest- ments of about $300 to $500 million per year could lead to increasing oil production and even oil exports (Maximum Supply Scenario, Graph 13.1). Such an expanded program would have large benefits for the economy; even under very conservative assumptions (i.e., assuming a low world oil price projection of $11/bbl, and relatively high production costs), the net present value of such a program is near $1 billion. The net present value is substantially higher, over $6 billion, if projected future world oil prices are at higher levels ($16/bbl) and local production costs can be reduced by 40 percent. Production costs could feasibly be reduced by 40 percent through a combination of: (i) efficiency improvements; (ii) lower local costs, due to a lower real exchange rate; (iii) higher effi- ciency of private sector investment; and (iv) reduction in "Compre Argentino" (which alone adds extra costs of 40 percent). 8.20 Mobilizing such large additional investments is very difficult, if not impossible, from scarce public investment funds. More private sector investment is needed. Since the oil sector has an advantage over other sectors in mobilizing domestic aud foreign private investment, petroleum policies should be oriented toward attracting as much private sector investment as possible. Investment undertaken by the private sector is also like to be lower cost and more efficient than public investment. Recommendations on Increasing Petroleum and Gas Supply (a) Increase investment in exploration and development for oil and gas, above levels of the last several years, through a combination of increased public and private sector investment.  I J ~ I . I.- ~ i ~~~~~~~~~~~. I S.la~aw YJ:qn:J UOllllW ~"  - 176 - (b) Adopt incentives for increased private sector participation in petroleum exploration and production operations, as follows: (i) increase the prices to be paid at the wellhead for newly found crude oil and natural gas and for any incre- mental production of these hydrocarbons; (ii) eliminate obstacles for more rapid approval of contracts for explora- tion and production under the Houston Plan; (iii) increase exploration in new areas by offering additional technical information: (iv) implement the so-called Petroplan, thus allowing the private sector to operate some of the YPF marginal areas; (v) move towards wider private sector participation in YPF's operations, through joint venture or traditional service contracts. (c) Improve efficiency of operations within YPF and GdE. YPF has already begun to undertake organizational changes and effi- ciency improvements. Key recommendations include: (i) Change organizational structure to allow operating departments to function as true cost/profit centers. (ii) Establish clear transfer prices between various operating departments. (iii) Improve strategic planning capabilities and prepare a long-term investment program. (iv) Improve efficiency in upstream and down- strPam operations through selected invest- ments and corresponding technical assistance. (v) Install management information system and increase training. (d) Establish an effective regulatory mechanism for setting and implementing petroleum policy which: (i) eliminates the present unproductive overlap of responsibilities, ( ii) sets clear guidelines for operations of public and private enter- prises; and, (iii) provides equal treatment for both YPF and private companies. D. Natural Gas Utilization 8.21 Natural gas is playing an increasingly important role in Argentina as a source of energy for powet· generation and industrial production and as a residential and commercial fuel for cooking and space heating. Over the past ten years, production has increased 5 percent per year, and it is projected to grow 4 percent per year through 2000. However, the policy of rapid development of natural gas was based on an overly optimistic estimate of proven natutal gas teserves. A recent review of the proven reserve base reduced natural gas reserves by about 25 percent and brought into question the advisability of promoting natural gas use. Argentina's proven natural gas reserves are adequate to meet current needs, but as consumption  - 177 - increases new reserves must be discovered to maintain an adequate inventory. The existing pricing structure provides little incentive to explore for and develop natural gas. If the nation's goal of increasing the use of gas to replace exportable liquid fuels is to be fulfilled, incentives to explore for natural gas must be provided and an accelerated exploration and development program must be initiated. 8.22 An accelerated program to develop additional gas resources will have significant benefits for the national economy. Net benefits of such a program over the next 10 years are estimated to be US$4 to 6 billion through the substitution of gas for more expensive oil products and electricity. Analysis indicates that the economic cost of producing and delivering gas to consumers is less than the economic net-back value for all projected uses, except for methanol and fertilizer production. Natural gas is more efficient and lower cost than many other fuels. More use of gas in the residential sector would be desirable, as the cost per unit of useful energy is lower titan substitute fuels (e.g. one third that of electricity). The financial cost of producing gas, including royalties, VAT, and income taxes, as well as a reasonable return on equity invested in gas production, is less than the internationally-based price of liquid products. An appropriate pricing structure based on the international value of the fuels that natural gas could replace would generate sufficient revenue to attract investment in gas exploration and development. 8.23 If no new reserves were developed, the economic cost of supplying natural gas for some petrochemical projects would exceed the net-back value. Therefore, gas should not be used for these purpose unless addi- tional reserves are discovered (as seen in Annex Table 8.2). The existing pricing structure for petrochemical feedstocks is complex and the retention price received by the feedstock supplier may not be sufficient to encourage development of new natural gas reserves. Even if gas reserves are increased by 40 percent over the next ten years, the economic benefits of some petrochemical projects, notably the methanol project in the Austral region, are marginal. If proved gas reserves are increased by about 8 percent (40,000 MCM) there will be enough gas supply for all the power sector thermal stations which are scheduled for installation through 2000. Annex Table 8.2: ARGENTINA - COMPARISON OF ECONOMIC COST AND NET-BACK VALUE ON AIC Supply Depletion Economic Net-back Sector Cost Allowance ( 5) Cost Value $/MCM $/MCM $/MCM $/MCM Residential 85 25 110 200 Comm/Inst. 83 25 108 203 Genl.Ind. 41 25 66 121 Cement 30-50 25 55-75 92 Power 38 25 63 79 Fertilizer 17 25 42 30 Methanol 17 25 42 15-25  - 178 - 8.24 Excess gas transport capacity is likely to become available in the NEUBA pipeline in the early to mid-1990's, so it is urgent to first accelerate exploration for gas in the Neuquen area (which is close to NEUBA). Policies must be implemented to accele~ate exploration and produc- tion of gas in other regions as well. In addition to developing new reserves, the delivery infrastructure must be expanded to meet growing demand. The timing of the expansion of the north (and possibly the south) gas lines, is dependent on the size of potential resources in Neuquen. If the pipeline system is not expanded, the capacity of the system, including the expanded Neuba II pipeline, will reach a limit in 1996. Even with assumptions nn relatively low growth in gas demand, there would be nn opportunity for further growth in gas supply, and the available gas would have to be conserved for the highest value user·s. An interruption or slow- ing of the pipeline expansion program would have significant economic costs since the value of the fuels that additional gas could replace would be much higher than production and new pipeline costs. If the expansion pro- gram were delayed five years, the cost of the extra liquids fuels burned during the 1996-2000 period would be about $200 million in present value terms. This clearly illustrates the benefits of expanding the pipeline system to keep pace with the growing demand. 8.25 An additional problem of gas utilization is the utilization and pricing of natural gas and natural gas liquids (NGL's) in petrochemical projects. The current p~icing system is inflexible and producer prices are too low to encourage development of new gas reserves. A new pricing formula is needed. A new formula could index the producer price to the international price of alternative feedstocks such as naphtha. This is somewhat similar to the method now used, but instead of the retention price and rebate structure, the supplier would negotiate directly with the buyer. A floor price for natural gas would have to be established, as well as the appropriate base price and indexation factors. For projects such as methanol or MTBE production, where dry natural gas is the feedstock, a product price based system would be preferred. The formula could provide for a fixed price during the start-up and market development period. Sub- sequently, if earnings exceeded a fixed level, the feedstock supplier would receive a share of the "excess" earnings. Recommendations on Improving Natural Gas Utilization (a) Implement a controlled transition to a new pricing system. During this transition period a new system of controlled prices would be put in place while needed studies and insti- tutional arrangements are completed. This would entail: (i) gradually increasing the controlled price to just below the international level of fuel oil, for the industrial sector, plus additional distribution costs for the other sectors; (ii) eliminating arbitrary transfer prices for natural gas anrl natural gas liquids; (iii) establishing a system for regulating downstream gas operations as public utilities; and (iv) ultimately eliminating retail price controls except the margin for delivering gas from the well- head to the consumer. The tax regime will have to be modified to assure that all types of energy which compete with natural gas are subject to the same unified energy tax (on an energy equivalent basis) as natural gas. The Govenunent should also capture a larger share of the economic  - 179 - rent from the producer in the form of an income tax and windfall profits tax. (b) Set the retail price of natural gas in the industrial and power market equivalent to, or nearly equivalent to, the price of fuel oil, the next best substitute and the marginal fuel displaced by incremental gas production. The price in the residential and commercial sectors should be set to cover the additional incremental transmission and distribution costs plus an excise tax, if needed, to reach kerosene equivalent. (c) Unless additional gas is discovered, do not use gas for methanol or fertilizer production. (d) Set up a regulatory system for natural gas transmission and distdbution. Increase competition in gas supply by allowing producers to sell gas directly to consumers. (e) Expand YPF exploration in the Neuquen area. Prepare a strategic plan for optimal least cost gas exploration/pro- duction and pipeline expansion options. (f) Establish and implement a new pricing formula for natural gas and natural gas liquids used in the petrochemical industry based on alternative feedstock and profit sharing principles. (g) Undertake studies on: (i) Gas demand, which account for different demand growth rates, different price assump- tions and cost/benefit analysis of gas use in each sector. (ii) Cost of service and tariffication to establish long-run marginal cost of pro- ducing, transporting and distributing gas. (iii) Institutional structure to regulate gas distribtition and transmission. (iv) Pricing options for NGL's used in petro- chemical sector. E. Refining Operations 8.26 In recent years large investments in refinery conversion have been made to convert lower value fuel oil into more valuable diesel and gas- oline. It had been hoped that increasing gas production would displace fuel oil which could be refined in the new conversion units. However, declining investment in oil production has reduced oil supply for refining and demand for gasolines has gone down sharply due to higher retail prices (from new taxes). Therefore, because of both reduced crude supply and a  - 180 - distorted demand pattern for oil products, the refinery sector cannot operate in an optimal manner. At present there is an excess of refinery capacity: there are surpluses of gasoline (which cannot be exported due to low quality and logistical problems) and shortages of fuel oil. Steps need to be taken to profitably utilize excess refinery capacity, improve opera- tional efficiency in refineries, and restructure the demand pattern for oil products. 8.27 The large installed capacity of Argentine refineries, almost twice domestic requirements, can be considered a resource waiting to be exploited. A US$1 per barrel marginal profit might be obtained from pro- cessing additional crude oil and exporting the products, which could earn US$35 million per year in revenue. In addition, the lack of optimization causes opportunity losses, worth possibly US$50 million per year, which could be earned if the products were to be brought up to international market quality and then exported. Marginal refinery capacity could be economically employed for generating exports and for arranging third party (foreign) processing agreements. However, the existing 10 percent tax on refined crude oil effectively kills the incentive to optimize this resource, in much the same way that unrealistic and unnecessary price con- trols distort demand and stifle efficiency of operations for the domestic market. Thus, a pre-requisite for optimizing the Argentine refining industry is to link crude oil and ex-refinery product prices to interna- tional values and eliminate of distor·tionary taxes, which reduce the effective use of this industry's potential. 8.28 Although the Argentine refining industry has moved to higher value production, there is further scope for improving yields, efficiency and profitability. Refining capabilities to produce these higher valued yields have not been fully utilized. The basic reasons for a consistent lack of optimization include the following: (i) import and export controls, which have reduced the refineries ability to balance crude slates and product yields with international market requirements and standards; (ii) industry reliance on government protected refinery margins; (iii) domestic price controls, which maintain overall prices at low levels relative to interna- tional markets, and which distort price spreads between different product grades; (iv) strategies by the private refiner to overcome, both the local regulations and distorted price structures, to increase private company profitability at the (partial) expense of YPF refineries; and (v) inability of YPF to act promptly as a profit seeking entity. 8.29 One solution to overcome these problems is to create an adequate operating environment for all the refineries, which would encourage better economic use of existing facilities, both to increase production to satisfy the domestic market and, at the same time, be able to export substantial volumes to maximize foreign revenue. These objectives may be reached by a combination of adequate regulatory changes and price and tax changes. Recommendations on Refining Operations (a) Improve refinery utilization. Options could include the award to refineries of throughput licenses to allow the utilization of various different kinds of domestic crude oils, to obtain the crude slates that can be utilized to  - 181 - max1m1ze profits. The combined value of potential optimiza- tion of domestic product qualities is estimated at US$60 million per year. (b) Expand physical port facilities and control infrastructure to expand import/export of crude oil and products. Upgrade marine terminals. (c) Take measures to improve refinery efficiency, reduce losses, improve product blending, handle high sulfur crudes, handle heavier crudes and export excess naptha. (d) Take steps to allow further increase of private sector participation in downstream operations, where the main options that can be considered include the following: (i) selling off specialty producing refineries and plants; (ii) disposal of the transport fleet; (iii) selling shares in the large YPF refineries and petrochemical plants; (iv) con- tracting out more of the drilling, well service and workover services; and (v) privatizing the pipeline transportation system for both crude oil and products. F. Electric Power Sector 8.30 Argentina has trarlitionally enjoyed reliable and extended electricity service, provided originally by private companies and, since 1960, with increasing participation of the national utilities. In the last 16 years the country has increased its total installed capacity at a rate of 6.4 percent p.a. and developed a large National Interconnected System (NIS) which covers a substantial part of the country supplying about 90 percent of public electricity services. Currently, about 95 percent of the total population has access to electricity. Past investment has been biased toward large hydropower investments. This bias has put a heavy financial burden on the sector and has resulted in power supply being excessively vulnerable to power shortages during droughts (as in 1988/89). Some large plants are not yet completed but are near completion. One major issue is how to make the power sector more financially self sufficient (through tariff increases and cost reduction) so as to be able to finish ongoing projects. However, the sector faces important problems arising from: (i) an inadequate legal/institutional framework, (ii) lack of con- sistent planning, (iii) deterioration of generation and distribution facil- ities as a result of the reduction in investment and poor operating and maintenance practices, and (iv) a weak financial situation characterized by a heavy foreign debt burden ami low level of internal cash generation, due mainly to rate levels which do not reflect costs. The economic difficul- ties now faced by the country call for an increased effort to conduct power activities efficiently and economically, thus reducing the sector's reliance on government support. To achieve this objective corrective measures should be promptly taken to: (i) improve the sector organization, ( ii) ensure that the sector expansion follows principles of economy ,and efficiency, (iii) improve the efficiency in the operation of the existing facilities, ( iv) promote energy conservation, (v) reduce technical losses and electricity theft, and (vi) reduce the level of investments and improve sector finances.  - 182 - 8.31 In the context of the Bank's lending for power, the Government is carrying out a program of reforms which will address the main sector issues: (i) ~ study on the sector organization and efficiency of public utilities, expected to provide recommendations to improve the institutional structure, is underway, (ii) the SE has committed itself to adhering to least cost principles in the updating of the expansion plan, (iii) the SE, SEGBA and AyE are preparing a program for the rehabilitation of thermal facilities, ( iv) SEGBA, the largest national utility, is carrying out a program for reducing losses and electricity theft, and (v) the Government began to implement a Financial Rehabilitation Program (FRP) to recover the sector's financial health. The following recommendations are possible ways of addressing issues which are not fully covered in the existing Bank/Gov- ernment agreements. Recommendations on Improving Power Sector Supply (a) Expansion Planning: (i) On the basis of Bank analysis of forecast methods, the SE should improve forecasting models. (ii) Expansion plan should be based on a low demand scenario. (Potential economic sav- ings in investment plus operation costs due to a lower level of demand may amount to about US$2 billion in the period 1990-2000.) (iii) Expansion should be based on more flexible, robust solutions which could save invest- ments and adapt better to demand fluctuations. (iv) Reliance on large capital intensive hydro- projects should be reduced. (b) Improve development program: (i) Government policies should reflect least- cost principles. Consideration should he given to the use of Combined Cycle Plants and Rehabilitation of existing thermal facilities. Complete ongoing study on thermal generation options on time and implement recommendations. (ii) Eliminate new nuclear plants (after Atucha II) from development plan. Reinforce planning team at the SE. (iii) Priority should be given to completion of ongoing works. (c) Improve Operations:  - 183 - (i) Complete ongoing studies on status of thermal installations and prepare rehabili- tation plans. Speed up implementation of SEGBA's loss reduction program. This could reduce losses in SEGBA's system from 22 per- cent currently to 13 percent by 1992. (ii) Expedite execution of the SEGBA V Project. (iii) Evaluate the actual market for coal in power generation, to define whether expansion of YCF's mine in Rio Turbio is justified. (d) Improve organizational and institutional structure: (i) Complete study under preparation by the special commission on sector organization and efficiency of power utilities and imple- ment recommendations. (ii) Increase private sector participation by modifying regulatory framework to provide a sound environment to private investors. (There is a potential for substituting US$200 million to US$400 million from public to private investment.) (e) Complete LRMC study and apply recommendations and increase electricity prices up to economic cost. (Impact on utilities finances of a cost recovery pricing policy could reduce financial deficit of national utilities from US$600 million in 1987 to zero by 1993). G. Energy Planning 8.32 The 1986 Energy Plan was a very useful integration of supply, demand and investment. However, the Plan is now out of date and many objectives have not been fulfilled. At present there is no official inte- grated investment program. Approximate investment levels in oil, gas, refining, and power for 1989-2000 based on analysis in this report range from a low of US$15 billion, to a high of US$27 billion for the 1989-2000 period. Power investment should be based on the low demand scenario. Oil and gas exploration and development investment figures for 1989 through 2000 range from an investment level to reach the Minimum Supply Projection of US$6 billion (assuming a continuation of recent investment trends) to an investment level of US$14 billion (from increased public and private investment), to reach Maximum Supply Projection. The other investments in gas and petroleum infrastructure are partially dependent on the level of oil and gas investment and optimal planning. The potential role of the private sector is large, between US$4 to US$12 billion of total energy investment from 1989 through 2000.  - 184 - Recommendations on Energy Planning (a) Update annually the Energy Plan, including alternative investment plans to meet different energy demand growth pro- jections, impact of price changes and interfuel substitution. (b) Evaluate the costs and benefits of each investment program and rank investment priorities according to economic criteria. (c) Evaluate energy conservation options, to complement price changes in each subsector.  - 185 - ANNEX CHAPTER IX: AGRICULTURE A. Agriculture in the Economy !/ 9.01 Agriculture is crucial to the recovery of Argentina's economy. Historically, export earnings from agricultural and agroindustrial products have ranged from 70 to 80 percent of total export earnings. Though this percentage has fallen somewhat in recent years (Annex Table 9.1), the capacity of the agricultural sector to generate increased export earnings, far exceeds that of any other sector. Annex Table 9.1: ARGENTINA - KEY AGRICULTURAL STATISTICS Level of Direct Argentine Ag.Exports and Indirect Grain Exports Agriculture as % of Taxation of as % of as % of Total Agric.Sector as World Grain Period GOP ~./ Exports '!!_/ % of Ag. GOP ~./ Trade 1971-75 13.2 76.2 18.0 11.7 1976-80 13.5 76.5 25.4 10.6 1981-85 15.1 74.2 45.6 10.9 1986 14.8 67.2 9.0 ~/ Source: Table 2.1-A, GEM '85 Source: Table 3.6, GEM '87, Categories I -- VI, VIII, & X Source: Stutznegger, Background Paper, Table 17b Average for 1985-87. 9.02 Agriculture contributes to GDP approximately 15 percent, and agro- industry approximately 20 per cent. In contrast to the pattern observed in many countries, agriculture's share in GOP has actually increased in the last 15 years. While industry stagnated during this time, agriculture and agro-industry expanded despite declining real prices for foodstuffs in international markets. In 1970, agriculture contributed about 13 perc,ent of GDP; by 1985, this share had increased to about 15 percent despite an adverse movement in the agricultural terms of trade. By contrast, industry's share declined from about 36 percent to under 30 percent during the same period. B. Agricultural Potential 9.03 The potential for rapid expansion both in the area planted and the productivity of Argentine agriculture, given favorable incentives, is enormous. Most agricultural products are produced in the central-east1~rn region of the country, one of the most fertile regions in the world for !/ A comprehensive review of the Argentine agricultural sector is contained in the recent World Bank report Argentina Agricultural SE~ctor Review, Report No. 7733-AR, June 26, 1988.  - 186 - temperate agriculture. Over 56 percent of the soils of this region are classified as Type I or Type II, that is, requiring little fertilizer under normal crop rotation and demanding only normal conservation measures. This natural productivity contributes to some of the lowest production costs in the world. Variable production costs in 1987 were US$35 per ton for wheat, US$27 for corn, and US$80 for soybeans, or roughly two-thirds to one-half the production costs in the United States. 9.04 The strong comparative advantage of Argentine agriculture is demonstrated in Annex Table 9.2. Using economic prices, estimates have been made of the domestic resource costs of production, or the amount of resources necessary to generate a dollar of foreign exchange. These estimates indicate the high economic returns associated with agricultural production: the foreign exchange generated is 2 to 3 times the cost of domestic resources used in production. Annex Table 9.2: ARGENTINA - COEFFICIENTS OF COMPARATIVE ADVANTAGE !/ IN GRAIN PRODUCTION Product 1981/82 1982/83 1983/84 1984/85 October 1986 Wheat 0.38 0. 3'~ 0.43 0.48 0.76 Corn 0.34 0.31 0.35 0.36 0.65 Grain Sorghum 0.43 0.41 0.50 0.39 0.64 Soybeans 0.31 0.14 0.32 0.18 0.32 Sunflower 0.33 0.41 0.31 0.31 0.60 Source: F. Cirio and M. Regunaga, 1986 ~I Domestic resource cost-coefficients divided by the official exchange rate. 9.05 Although the fertile plains of the pampa will most likely remain the center of Argentina's productive base in agriculture, a great diversity of micro-climates and soils permits the production of a range of crops from wheat, rice, and oilseeds to grapes and other fruits and even tropical products. Many of these crops can be produced at costs competitive with production costs elsewhere. 9.06 Though agriculture has grown faster than the economy as a whole, its performance has been substantially below potential. Investment in the sector has been minimal over recent years. Furthermore, its share of total world trade in grains has gradually declined (Annex Table 9.1). The unavoidable uncertainty arising from dependence on international markets has for many years been compounded by excessive explicit and implicit taxa- tion. Domestic policy has tended to use the agricultural surplus to finance industrial development. Estimates of this transfer indicate that, in the early 1980s, the agricultural sector conferred on average 45 percent of its GDP to the public sector and to other parts of the economy.~/ ~/ See World Bank, loc. cit.  - 187 - c. Disincentives to Agricultural Investment 9. 07 This has been brought about by a combination of export tax.es, price controls at the wholesale and retail levels, official prices for exports and export quotas. Indirect negative effects on the sector have resulted from an overvalued currency and protection afforded the industrial sector. Some compensatory mechanisms have been in effect at various times through subsidized credit and tax exemptions on the purchase of machinery. However, these compensatory subshlies have been insufficient by far to redress the high level of explicit and implicit taxation on output. 9.08 Other factors have contributed to reduce incentives to the sector. The infrastructure that supports agriculture has deteriorated and the price differential between FOB and farmgate price is excessive. This differen- tial reflects an inefficient transport system, high storage costs and a lack of transparency in the cash and forward grain markets. Furthermore, margins between Argentine FOB and international prices have been wide during the 1980s (Annex Table 9.2). Part of this is due to the ending of the US grain embargo on the USSR which had given Argentina's grain a premium. Another part of it is explained by the high cost of shipping grain from Argentine ports and the necessity to use smaller ships. 9.09 High margins can also be explained by the fact that the incentive system and the financial power in the market weigh heavily in favor of the major buyers. The bulk of agrarian exports are shipped by companies whose profits are maximized on a global basis, and the existence of export taxes (recently reduced), combined with foreign exchange controls and relatively easy access to pre-export finance by registered exporters, creates strong incentives for these companies, both national and multinational, to mini- mize declared prices in the FOB market. It is common practice for grain shipments to be traded several times off-shore before reaching their final destination. Of the 100 or so operators in the FOB market, no more than 15 are major on-shore purchasers of grain. 9.10 The financial power of the major grain buyers is strengthened by their access to pre-export finance. This is available to exporters up to 210 days before the harvest and is seen by the Authorities as a significant positive inflow of foreign resources into the financial system. Approxi- mately US$2-3 billion are brought into Argentina annually for this purpose, but only a small proportion actually enters the forward purchase market. Financial resources for post-harvest storage by producers are equally scarce. Consequently, the bulk of the grain crop is sold for cash at har- vest time, a situation which confers enormous market power on the major buyet·s. 9.11 The consequence of the disincentives described above has been the development of a low-cost extensive form of agriculture, with little capital stock (the average age of the tractor flePt is 18 years) and little debt. Of all the major agricultural producers in the world Argentina's agriculture is by far the least protected (in fact, it suffers strong nega- tive net protection). Nevertheless, it has continued to grow. The impli- cation is that with stronger incentives, the potential for new investment  - 188 - and growth is exceptional. Given the importance of the sector in GDP and exports and the positive coefficients of comparative advantage shown in Annex Table 9.2, a strategy of maximum growth for agriculture is clearly called for. Annex Table 9.3: ARGENTINA - DIFFERENCES IN PRICE OF EXPORT BETWEEN FOB ARGENTINA AND FOB GULF !/ Year Wheat Maize Sorghum Soya 1980 27 38 22 -24 1981 24 -11 -21 -31 1982 4 -7 -21 -14 1983 -17 -4 -17 -14 1984 -18 -6 -18 -18 1985 -32 -10 -11 -17 1986 -27 -16 -14 -3 1987 -24 -2 -13 2 Source: National Grain Board !I In US$ 1980 per ton, at peak commercial periods. D. PrinciEal Policz Reguirements 9.12 Macroeconomic Framework. The single most important element in the incentive framework for agriculture is the exchange rate. This applies to all subsectors (traditional and nontraditional) and to agro-industry. Growth depends exclusively on the expor·t markets. Maintenance of a stable competitive real exchange rate is crucial. There is also the potential for substantial macro shocks from price changes. 9.13 Cost Reduction. Investment incentives are adversely affected by the high costs associated with marketing agricultural conm10dities. These can be broken down into four categories, in all of which the Government has a key role to play: (a) Transport costs. Action by the Government in this area would include direct investment. At the same time, it is necessary to encourage a process which is already taking place whereby private, integrated systems of storage and transport are developing, covering the shipment of grain from farmgate to export terminal. Key elements in encouraging this process  - 189 - would be demonopolization of port facilities, privatization of rail car operations and privatization of storage facilities. (b) Stor~osts. The Junta Nacional (le Granos charges US$5 per ton for terminal stot·age. The private sector can perform the same service for US$2 per ton. The modernization of the Junta's terminal port facilities, their privatization and the demonopolization of the facility at Bahia Blanca are urgent priorities. Recommendations to that end have been mElde by a joint private/public sector commission and these havE! been endorsed by the Government. Intensive discussions are cur- rently under way among the Government, the JNG, the exporters and the country elevator operators to create an independent entity capable of taking over and operating the port ele- vators cut-rently owned by the JNG. (c) Marketing margins. Reduced marketing margins require a low- ering of perceived risks throughout the trading system and an increase in the market power of producers vis-a-vis the main buyers. Key to meeting these ends are development of more transparent forward markets, development of tradeable forward purchase securities, expansion of the operations of the Balsas, enhanced access to futures markets (both foreign and incipient domestic markets) for hedging price risks, and increased flows of pre-export finance to producers. The Government has a powerful regulatory influence over all these possible developments. A reorganized Junta Nacional de Granos (see para. 14.15) below would also have a key role to play. (d) Financial costs to farmers could be reduced by ensurLng a much larger flow of dollar-denominated pre-export financing to producers through forward purchase markets. This implies direct intervention to regulate use of pre-export funds by exporters and also requires development of more transparent, forward purchase markets themselves, as proposed abov4~. Specific proposals to this end are currently under discussion in Argentina and should be given high priority. 9.14 The Junta Nacional de Granos. Restructuring the Junta is a critical element in improving the grain marketing system. There is wide- spread acceptance of the need to divest the Junta of its role as an oper- ator of terminal elevators. At the same time, proposals are well advanced for restructuring the Junta based on an ! priori acceptance of the need for a public sector institution involved in the grain trade. It is essential that the new Junta created be professionally strong and financially inde- pendent. This would be a dramatic change from the present situation, but there is an emerging view in Argentina that such a change is necessary.  - 190 - 9.15 Such an institution should be autarkic and self-governing. Its management should be professional, appointed and promoted on merit, and remunerated competitively with the private sector. It would act as an independent export trader, with access to financing on its own strength. As a pre-condition for this, it would operate under conditions that make it competitive, in principle, with private traders. This applies in par- ticular to its relation with off-shore companies and external sources of financing. It would play a major role in the development of a market for traded forward purchase instruments referred to above and in the use of futures markets. 9.16 A continued role for the Junta as an executing agency for govern- ment programs (support for marginal farmers; domestic wheat purchases etc.) should he considered only under conditions of contract. Program offices should be established with contract personnel, hired temporarily for the management of the program in question. The Junta should account to the Government for its management, and should be able to refuse programs it considers flawed, for instance because of insufficient funding. 9.17 ~ricultural Taxation. The substantial lowering of export taxes, which occurred in 1986, was a very positive move. As suggested in Chapter II, export taxes, while justifiable in the context of a short-term stabilization effort, need to be phased out over time. In the interim, any use of export taxation should be uniform across products and sectors, and accordingly not discriminate against agriculture as in the past. At the same time a reexamination of the overall agricultural tax issue is needed. The introduction, as an emergency measure in 1988, of a dual exchange rate penalizing agricultural exports once again gave strong disincentive signals to the agricultural sector. A more stable, production-neutral system of agricultural taxation remains an urgent priority. The difficulties encountered in introducing a Federal Land Tax in 1987-88 should not deter efforts to reform the fiscal role of agriculture. These efforts should concentrate on the strengthening of the Provincial Land Tax (with possible Federal revenue sharing) and on improving income tax collection in both rural and urban sectors.  - 191 - ANNEX CHAPTER X: ANALYTICAL APPENDICES A. PROJECTIONS AND MACROECONOMIC CONSISTENCY 10.01 The projections that form the basis of Chapter V are derhred from a two gap model that integrates a public sector and financial sector with the Bank's revised minimum standard model (RMSM). The model consists of: (i) a set of consistent macroeconomic statistics for the base year 1987 that includes national income accounts, balance of payments, the financial sector, and external debt commitments; (ii) a series of exogenous variables and parameters, which consist of assumptions based on past performance or targets; and (iii) equations describing the relations among the variables that permit the computation of a consistent set of accounts. General Description 10.02 The general purpose is to project requirements for external financing and financing of the public sector, given targets for GDP, growth in monetary aggregates and inflation, and increases in international reserves. The model contains several characteristics that differ from the conventional RMSM, and these are the focus of the discussion that follows. Prices 10.03 Selected prices are given exogenously as part of the Bank's global projections exercise. These include movements in LIBOR, the manufa.cturing unit values, and the prices of commodities. Prices of both exports and imports are given by the World Bank's Commodity Division on the basis of global supply and demand models. 10.04 The model establishes targets for increases in the domestic price level in the form of the combined index of monthly inflation (page 120). After the hyperinflation of 1989, it was assumed that the price level under strong economic management could drop rapidly as given in the text. 10.05 With the benefit of the changes in external inflation given by the MUV and domestic price movements, it is possible to project a nominal exchange rate. A change in the real exchange rate can be entered exoge- nously as was the case for 1988 to reflect the slight appreciation that year against the US dollar; for 1989, we have assumed that the massive real devaluation already evident involves overshooting, and will end the year with a 40 percent movement. This real rate would then prevail for the pro- jection period. Balance of Payments 10.06 As with the RMSM, the model exogenously assumes that for a given policy regime and growth in the world economy export volumes can be expected to expand by the amounts shown on page 121. These were discussed in detail with sectoral experts in the Bank and in Argentina. Imports are  - 192 - projected on the basis of exogenous sectoral growth rates of the economy; import elasticities, shown on page 122, are consistent with the experience of the 1970-87 period, if somewhat lower to reflect the higher exchange rate. The ensuing trade balance, together with the assumed LIBOR times the debt stock to produce interest expenses, produces a current account balance. The current account plus assumed changes in reserves and net capital flows is then balanced through the unidentified finance line. 10.07 Arrears through 1988 are assumed to be capitalized as part of the loans from unidentified finance (the gapfill loan). In line with the rest of the capital account presentation, the unidentified finance line is shown on a net basis, so that future amortizations (assumed to begin in the fifth year after the loan is made) are assumed to be rescheduled. 10.08 Note the Government is assumed to have a sufficient number of future standbys with the IMF that its net exposure position remains con- stant. Public Sector Accounts 10.09 The base year numbers for the public sector, were adjusted forward insofar as Bank staff had information, and are reasonably accurate through 1988. One problem is the lack of consistency with past time series because of the absence of recent information on the provinces, which the Government has assumed to be in balance since end-1987. A second problem is the absence of budget basis accounts for 1988; the cash accounts were used to estimate the budget accounts for 1988, by adjusting expenditures up by the same proportion as in 1987 (about 1 percent of GDP). A third problem is that the inflation of 1989 and changes in tax regime make it difficult to obtain accurate estimates of the worsening of the public sector deficit in that year. 10.10 The projected financing needs of the public sector are then derived by assumed strong policy actions in the nonfinancial public sector that would reduce financing requirements to those consistent with available foreign finance. By specifying targeted levels of domestic credit to the public sector consistent with expansion of monetary aggregates and hence inflation, and knowing the foreign credit to the public sector available from the balance of payments, it is possible to formulate a view on the necessary degree of deficit reduction for the combined public sector to achieve the inflation reduction target. The exact apportioning of the improvements as between revenues, the noninterest operating surpluses of the public enterprises, and expenditure reductions is a matter of judgment; the objectives were specified based on policy changes suggested in Chapters III, V, VI, and VII, and allowing for a modest increase in public invest- ment. 10.11 The external financing component is derived from the flows expected to the public sector as coming from the balance of payments plus 100 percent of the unidentified finance. This includes 100 percent of disbursements of bonds, IDB, IBRD, and financial markets minus 100 percent of amortization to these creditors as well as commercial banks and hi- laterals. (Short-term and nonguaranteed private flows were assumed to finance the private sector). These are then converted at the nominal exchange rate.  - 193 - 10.12 A new feature of this model is the illustration of the impact of increased foreign debt, changes in international interest rates and real devaluation on public finances. The foreign interest bill of the public sector is given by consolidating the interest of the central administration and public enterprises into the current expenditure account of the non- financial public sector. The projected external indebtedness of the public sector as taken from below the line in the public sector accounts and from the balance of payments is then incorporated into the future public sector accounts. 10.13 The model also permits some treatment of the quasi-fiscal deficit of the Central Bank. This includes the external component of the quasi- fiscal deficit, given by the net foreign interest earnings on the Central Bank's foreign assets; the internal component of the quasi-fiscal deficit is assumed to be in balance, a fairly conservative assumptions under the presumption of medium-term price stability in the model. The net foreign interest earnings are equal to earnings on reserves as derived from reserve stocks in the balance of payments less 22 percent of the total non-IMF interest bill (the 1988 share of the Central Bank in the total public sector debt) plus IMF charges. Consolidating the quasi-fiscal deficit with the nonfinancial public sector allows for a consistent view of total financing requirements of the public sector. It also provides for sim- plicity in modeling since it circumvents the problem of apportioning the increases in debt stocks to the various sectors of government, including the Central Bank. National Accounts 10.14 National accounts are determined in the fashion of the RMSM. Given the growth in GDP, an investment parameter determines invest1nent levels. Private investment is the residual of the total minus public investment. Subtracting total investment and public consumption from GOP produces private consumption. Gross national savings of the private sector are derived from investment less foreign savings (the current account) and public savings. 10.15 In a purely technical sense, the long-term growth prospects of a country are determined by its ability to improve its capital formation and productivity. Present levels of investment are among the lowest in the last 20 years, and must be reversed for output growth to resume and accel- erate; this requires adequate foreign savings and increasing domestic sav- ings. The model has taken incremental capital outputs ratios consistent with those of the 1970s (although the !COR concept has limited application in an economy dominated by agriculture). Growth rates in GOP are con- sistent with historical experience, allowing for some improvement in the efficiency of investment associated with recommended policy changes toward the real sector and with price stability. Financial Sector and Monetary Aggregates 10.16 The financial system on the asset side is given by changes in net international reserves as taken from the balance of payments, and the expansion in domestic credit is determined as the residual of the combined public sector deficit less available foreign financing. On the liability side, the change in Ml plus other interest bearing liabilities are given by  - 194 - an assumption about projected remonetization consistent with past experience under conditions of medium-term price stability; to this are added net increases in private foreign liabilities, which are the residual of increased indebted as shown in the balance of payments less external financing to the public sector. The balancing itent is domestic credit to the private sector. External Debt 10.17 Stocks of external debt and amortization schedules were adjusted with information from the Government of Argentina through end-1988, and from the pipeline of amortization and interest flows. To these were added new commitments as described in the text. These amounts are those reason- ably expected under conservative assumptions about expected flows under conditions of medium-term price stability.  - 195 Exch•na• Ratea, Pricea and Inter"eat 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 -------------------------------------------------------------------------------------------------------------------------------- ------------------------- ER Real Index (I +•devaluation) -9. 7ll 48.01 8.01 0.01 0.01 0.01 0.01 -5.01 -5.01 -5.01 0.01 ER Real Index (1987•100) 100.0 90.3 133.8 144.3 144.3 144.3 144.3 144.3 137.1 130.3 123.7 123.7 ER No.inal Index (1987•100) 100.0 438.2 25231.5 31004.2 31018.3 31024.8 31011.2 31005.5 29458.2 27992.8 26610.0 26595.3 ER (auatralaa per 1USI) 2.1 9.4 540.0 863.5 663.8 663.9 663.6 663.5 630.4 599.0 569.5 569.1 ER (US I ••• 1 auatral) 0.5 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 ER Baae Year 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 fobnth Iy DofHat i c Int. (roo I) 0.441 1.301 1.201 0.801 0.521 0.471 0.491 0.461 0.441 0.431 0.401 0.381 Annual 0offteati c Int. (no11inal) 218. 7ll 511.81 4519.91 39.51 11.11 10.31 10.61 10.2!1 9.91 9.91 9 .6!1 9.21 LIBOR 7.31 8.51 9.01 9.81 9.11 8.81 9.11 8.71 8.41 8.41 8.1!1 7. 71 LIBOR (IBRO eatill'late) 7.31 8.11 9.81 9.8!1 8.4!1 9.21 8.91 8.41 8.4!1 8.3!1 7.9!1 7.4!1 Population Orowth 1.51 1.51 1.51 1.51 1.51 1.51 1.51 1.41 1. 41 1. 41 1.41 1.41 Population (Min.) 31.497 31.969 32.449 32.936 33.430 33.931 34.440 34.922 35.411 35.9<07 36.410 36.919 <»--P per capita 2,486 2,362 2,240 2,266 2,310 2,351 2,407 2,477 2,547 2,616 2,699 2, 787 ~ (Annual <>) 8.01 2.91 11.51 4.41 4.31 4.3ll 4.3ll 4.31 4.4ll 4.5!1 4.3ll ~ Index (Int. Deflator) 100.0 108.0 111.1 123.9 129.3 134.8 140.6 146.7 152.9 159.6 166.7 174.0 Average Monthly lnflat.ion 9.8ll 14.8ll 36.01 2.01 0.4ll 0.4ll 0.4ll 0.4ll 0.41 0.4!1 0.4!1 0.4!1 Do•••tic Index (Annual <>) 424.01 3903.71 26.8ll 4.4ll 4.31 4.3ll 4.3ll 4.3ll 4.41 4.5!1 4.3ll Dotlleatic Index 100.0 524.0 20979.6 26607.3 27779.7 28969.2 30209.6 31503.1 32852.0 34299.7 35854.0 37389.2 lnveat...nt Index (Annual <>) 424.01 3903. 7ll 26.81 4.41 4.3ll 4.31 4.31 4.31 4.41 4.5ll 4.3ll Invaat.Ment Index 100.0 524.0 20979.6 26607.3 27779.7 28969.2 30209.6 31503.1 32852.0 34299.7 35854.0 37389.2 c:•=•••••••••••=•••••••••••-••••-••-••••••---•••-••••••-=••-=•a••-•-••a•••••••=-=•c••••==:.:aa=•-=••••====a:z::.::z====•.::z-a=====::::=:zz:====•=z:=:==========  - 196 - 1987 Real Exports (Annual <>) 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 --------------------------------------------------------------------------------------------------------------------------------------------------------- Export.. of Goods 18.011 -13.71 8.31 5.91 5.81 5.11 5.51 5.31 5.31 5.41 5.41 Exports of CAN=S 12. :zs -10.31 e.:zs 5.41 5.31 4.91 5.11 5.011 5.011 5.11 5.11 1. Li veat.oclc 9. 011 -27.31 2.011 2.011 2.011 2.011 2.011 2.011 2.011 2.011 2.01 2. c.,. •• ,. -18.81 -33.81 6.011 1.011 1.011 1.011 1.011 1.011 1.011 1.011 1.01 3. Other Agr i cuI t.ur• Goods 14.31 -56.51 15.011 4.011 3.51 3.51 3.51 3.51 3.51 3.51 3.51 4. Fate A Oils 17.51 6.61 e. 011 5.011 3.51 0.51 3.51 3.51 3.51 3.51 3.51 5. H.nufac. , Food A Sever 4.61 1.51 8.011 6.011 6.011 6.011 6.011 5.01 5.011 5.011 5.01 6. PetroleuM 79.91 -4.41 5.011 5.011 5.011 2.011 2.011 2.011 2. 011 2. 011 2.011 7. Cheftlicala A Plastics 48.41 3.91 10.011 e. 011 B. 011 8.011 8.011 6.011 6.011 8.011 6.011 8. Leather A Wool -2.41 -9.81 5.011 5.011 5.011 5.011 5.011 5.011 5.011 5.011 5.01 9. Other Manufactures 45.011 -12.41 10.011 e.011 e.011 7.011 7.01 7.01 7.011 7.011 7.011 Non Factor Serv i cea -5.011 2.:ZS e.011 4.011 4.011 4.011 4. 011 4.011 4. 011 4.011 4.011 16.111 Ex porta in 1 ?87 HI n. USI 1. Li veatoclc 555 714 519 529 540 551 562 573 585 596 606 620 2. Cereals H7 608 401 425 430 .4~.4 43e 443 447 452 456 461 3. Other Agriculture Goods 626 716 312 358 373 386 399 413 428 443 458 474 .4. Fats A Oi Ia 546 642 684 738 775 802 806 835 864 e94 925 95e 5. Hanufac., Food A Bever. 1,337 1,398 1,419 1,532 1,824 1, 722 1,825 1, 935 2,031 2,133 2,239 2,351 6. Petro laun~ 125 225 215 226 237 249 254 259 264 269 275 280 7. Che ... icala A Plastics 466 692 718 790 853 922 995 1,075 1,161 1,254 1,354 1,463 8. Leather l Wool 419 409 369 388 407 427 449 471 495 519 545 573 9. Other Manufactures 1,439 2,102 1,840 2,024 2,1e6 2,361 2,527 2,703 2,893 3,095 3,312 3,544 Non Factor Serv i cea 2,112 2,007 2,051 2,215 2,304 2,396 2,492 2,591 2,695 2,803 2,915 3,031 Export Price Indicae (Annual <>) 1. Li veat:.oclc 4.:ZS 3. :zs -1. :zs 6.11 6.11 6.11 6.11 6.11 6.11 6.11 6.11 2. c.,. •• ,. 35.41 0.91 -13.61 4.51 4.51 4.51 4.51 4.51 4.51 5.31 5.31 3. Other Agriculture Oooda 46.31 -1.011 -9.91 4.91 4.91 4.91 4.91 4.91 4.91 -1.31 -1.31 .4. Fats l Oils 43.11 1. 71 -1. :zs 12.11 12.11 12.11 12.11 12.11 12.11 o.:zs 0.21 5. Hanufac., Food l Bever. 39.71 3.011 -4.11 3.31 3.31 3.31 3.31 3.31 3.31 2.011 2.011 6. Petroleum -18.61 10.71 7.11 5.61 5.61 5.61 5.61 5.61 5.61 9. 71 9. 7!1 7. ChaMicala l Plastics e.31 6.31 1.51 3.61 3.61 3.61 3.61 3.61 3.61 4.61 4.61 8. Leather l Wool 8.31 6.31 1.51 3.61 3.61 3.61 3.61 3.61 3.61 4.61 4.61 9. Other H.nufacturea 8.31 6.31 1.51 3.61 3.61 3.61 3.61 3.61 3.61 4.61 4.61 Export. Pr i ca Ind i cea (1987•100} 1. Li veatoclc 100.0 104.2 107.5 106.2 112.7 119.6 126.9 134.6 142.9 151.6 160.6 170.6 2. Cereals 100.0 135.4 136.6 118.0 123.4 12e.9 134.7 140.8 147.1 153.7 161.9 170.4 3. Other Agriculture Qooda 100.0 146.3 144.8 130.5 136.9 143.6 150.6 158.0 165.e 173.9 171.6 169.4 .4. Fats & Oils 100.0 143.1 145.5 143.8 161.2 1e0.7 202.6 227.1 254.5 265.3 2e5.9 2e6.5 5. Hanufac., Food l Bever. 100.0 139.7 143.9 138.0 142.5 147.2 152.1 157.1 162.3 167.7 171.0 174.4 6. Petro lewn 100.0 81.4 90.1 96.5 101.9 107.6 113.6 120.0 126.7 133.8 146.e 161.0 7. Ch••icala l Plastics 100.0 108.3 115.1 116.8 121.1 125.4 129.9 134.6 139.5 144.5 151 158.1 8. Leather A Wool 100.0 108.3 115.1 116.8 121.1 125.4 129.9 134.6 139.5 144.5 151. 158.1 9. Other Manufactures 100.0 108.3 115.1 116.8 121.1 125.4 129.9 134.6 139.5 144.5 151. 158.1 Export.• in Current. Hln. USI 1. Li vestoclc 655 H4 558 563 609 659 713 772 635 904 976 1,056 2. Cereale 747 821 548 502 530 559 591 623 656 694 736 765 3. Other Agriculture Oooda 626 1,047 451 46e 510 554 601 653 709 769 786 803 4. Fats A Oi Is 546 918 995 1,062 1,250 1,450 1, 634 1,895 2. 1 ~9 2,551 2, 646 2, 744 5. Hanufac. , Food A Bever. 1,337 1,953 2,042 2,114 2,315 2,535 2, 776 3,04(1 ·~. 2 ~7 3.576 3,630 4,102 6. Petro I aum 125 183 194 21e 241 26e 2e8 311 :'1._10. 360 403 451 7. Ch••icals l Plastic* 466 749 e27 923 1,033 1,156 1, 293 1, 447 1, r 1Q l ,612 2,047 2,312 8. Leather l 'Wool 419 443 425 453 493 536 583 634 750 624 905 9. Other Hanufactu res 1,439 2,276 2,119 2, 365 2, 647 2, 961 3,283 3. 630 -1 ,I 1.4 1. 472 5,005 5,601 Export Totals in Min. USS Export• of Goode (Conatant} 6,360 7,503 6,477 7,012 7,426 7 ,e54 e,255 8,707 9.167 9,655 10,173 10,723 Exports of GANFS (Constant) 8,472 9,509 8,528 9,227 9, 729 10,249 10,747 11,298 11,6~2 12,456 13,066 13,755 Export.s of Goode (Current) 6,360 9,134 8,159 e,66e 9,62e 10. 67e 11,762 13,013 14,375 15,669 17,257 16,762 Exports of a»FS (Current) 8,472 11,301 10,43e 11,412 12,606 13,907 15,265 16,813 16,496 20,362 22,117 24,036  197 !-.port El•eticitiee 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 liiiPorte of Ooode (Annu•l <>) -13.61 -11.11 6.~ 6.~ 6.11 8.61 8.61 8.11 8.~ 8.41 8.51 I "'Port. of OINFS (Annu•l <>) -11.~ -17.11 5.~ 6.11 5.61 7.61 7.61 7.41 7.51 7.81 7. 9ll IIIIPort El•et i city (IIIIP. wrt OOP) 3.6 7.6 2.3 2.2 2.0 2.0 2.0 2.0 2.0 1.9 1.9 1. Food A ConeUIQr Goode OOP 1.0 1.0 1.0 1.0 1.0 1.1 1.1 1.1 !.I 2. Petro letJIII COP 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 3. In terMed i •t.e Goode Induet.r-y 1.6 1.5 !.5 !.5 !.5 .5 1.5 1.5 !.5 4. Cep i tel Goode Inv . 1.6 1.5 1.5 .5 .5 5 5 1.5 1.5 Non Fector Serv i cea CI>P 1.5 1.5 !.5 1.4 1.4 .5 1.5 1.5 1.5 IMport• in 1987 Hln. USI 1. Food 6 Coneu~tter Gooda 320 227 188 192 198 203 211 219 228 :237 248 260 2. Petro I euM 657 471 390 391 392 394 395 396 398 ·'00 401 403 3. Int.erMediete Goode 3,987 3,425 2,838 2,916 3,073 3,239 3,516 3,817 4,143 4,497 4,888 5,314 4 . Cep i t• I Goode 856 905 750 919 1,059 1,176 1,320 1, 479 1,623 1.:781 I, 961 2,158 Non Fee tor Serv i cea 2,397 2,283 1,892 1,957 2,039 2,125 2,237 2,355 2,489 2,j)31 2, 795 2,971 IMport Price Indicee (Annuel <>) 1. Food A Coneu~tter Gooda 10.81 4.01 31 4.~ 4.~ 4.~ 4.01 4.~ 4.~ 4.~ 2. Petroleu111 -18.61 1o.n 7.11 5.61 5.61 5.61 5.6. 5.61 9.n 9. 71 3. lnterwted i •te Good a 8.31 6.31 !.51 3.6. 3.61 3.6. 3.6. 3.61 4.6!1 .61 4. Cepit.el Cooda 8.31 6.31 !.51 3.61 3.61 3.61 3.6ll 3.6. 4.6!1 4.61 IMport Price lndicea (1987..:100) 1. Food 6 Conau~tter Cooda 100.0 110.8 115.2 116.7 121.4 126.3 131.3 136.6 142.0 !47.7 153.6 159.8 2. PetroleuM 100.0 81.4 90.1 96.5 101.9 107.6 113.6 120.0 126.7 133.8 146.8 161.0 3. Inter~Hdiete Goode 100.0 106.3 115.1 116.8 121.1 125.4 129 9 134 6 139.5 144.5 151.1 158.1 4. Cep i tel Oooda 100.0 106.3 115.1 116.8 121.1 125.4 129.9 134.6 139.5 !44.5 151.1 158.1 htporta in Current Hln. USI 1. Food A Conau~Hr Oootla 320 251 216 224 240 256 277 299 324 351 381 415 2. Petro I euwt 657 383 352 378 400 424 449 476 504 535 589 649 3. Inter111ediete Oooda 3,987 3,709 3,268 3,407 3,720 4,062 4,568 5,137 5,777 6,4'97 7,387 8,399 4. Cepit.el Goode 856 980 864 1,074 1,282 1,475 1, 715 I, 991 2,264 2,572 2,963 3,411 !~~~port Totele in Hln. USI IMport• of Oooda (Conat•nt) 5,820 5,028 4,167 4,418 4,722 5,012 5,442 5,911 6,392 6, 915 7,499 8,134 !Mpori:.a of CANFS (Con.tent) 8,217 7,310 6,059 6,375 6,761 7,137 7. 679 8,266 8,881 9,5•l6 10,294 11,104 lwtport.a of Goods (Current.) 5,820 5,324 4,700 5,083 5,642 6,217 7,009 7,903 8,869 9,9S5 11,321 12,874 I"'Porta of OANFS (Current) 8,217 7, 789 7,274 7,507 8,278 9,061 10,154 11,356 12,675 14,155 15,982 18,042 Ter111a of Trede Index (1987•100) 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 Export Price Index 100.0 121.7 126.0 123.6 129.7 136.0 142.5 149.5 156.8 164.6 169.6 175.0 IMport Price Indu 100.0 105.9 112.8 115.0 119.5 124.1 128.8 133.7 138.8 144.0 151.0 158.3 TerMa of Tr•de Index 100.0 115.0 111.7 107.5 108.5 109.6 110.6 111.8 113.0 114.3 112.4 110.5 Terms of Tr•de Index (Annu•l <>) Export Price Index 21. 7ll 3.5ll -I. 9ll 4. 9. 4. 9. 4.8. 4 9ll 4 Oll 4. 9. 3.1. 3.11 lrwport. Price Index 5.9ll 6.5ll 2.0ll 3.9. 3.8ll 3.8. 3.81 := 8" 3.8. 4. 91 4.81 Terwta of Tr•de Index 15.01 -2.91 -3.8. 1.0. 1.0. 0. 9ll I 11 I I~ I I~ -1 , . -1.61  - 198 - B. MACROECONOMIC CONSISTENCY FRAMEWORK 10.18 This appendix analyzes the consistency between the demands on the domestic financial system generated by the consolidated public sector deficits and the desired reduction in the rate of inflation. The Budget Constraint of the Public Sector 10.19 Public sector deficits give rise to an increase in government financial liabilities; if the growth of the liabilities is inconsistent with the increase in the demand that can be expected of the public once external financing is discounted, then the underlying assumptions on growth, inflation or real interest rates are unlikely to be realized. The demand for money is a function of, among other things, expected inflation; given a desired (or feasible) accumulation of external and domestic debt, a target for the rate of inflation will, in the long run, be compatible with only one value of the consolidated public sector deficit. In the short and medium run, of course, cost-push shocks are probably a dominant factor in determining the dynamics of the rate of inflation. 10.20 The budget constraint facing the consolidated public sector pro- vides the starting point to assess the internal consistency of a macro- economic program. A deficit can in fact be financed in essentially three different ways: (i) issue of monetary base; (ii) increase in net external liabilities; and (iii) increase in voluntary and involuntary domestic bor- rowing. The latter two include any increase in domestic and foreign arrears. For ease of discussion, one can start from the financing of the non-financial public sector (NFPS): 1) DEFt + r(l + W)Bt-1 + ei*B* - ~b + e~B* + ~CRg where DEF is the primary deficit, r is the interest rate on real domestic debt (thus equal to (i-W)/(l+W)), Bt-l is the outstanding (beginning-of- period) stock of domestic debt, ~b is the real change in government debt (equal to Bt- B~-1(l+W)),l e is the exchange rate, i* is the foreign interest rate, B is the outstanding stock of net foreign liabilities of the NFPS, and CRg is the credit of the Central Bank to the NFPS (a cross product term wrB is ignored for simplicity).!/ Eq. (1) follows the current Argentine methodology, i.e. including in the definition of the deficit only the real part of the domestic interest bill, on the grounds that the inflation adjustment only represents accelerated repayment of principal, and should not thus be included in the financing needs of the Government.~/ !/ Throughout the appendix, lower letters indicate real changes of the capital letter variables, i.e. ~x = Xt- Xt-1(l+W). ~I As argued by Olivera-Tanzi et al. (1988), this is only legitimate if the Government can indeed roll-over its stock of real debt at unchanged real interest rates. This has not been the case in Argentina during 1988 and 1989, but the issues will nut be pursued any further here.  - 199 - 10.21 To arrive at the consolidated public sector financing needs, one must also include any profits/losses borne by the Central Bank. As dis- cussed in detail in chapter 4, the deficit according to eq (1) has a logical counterpart in a definition of the quasi-fiscal deficit of the Central Bank encompassing the operating result (for simplicity net of operating costs that can be disregarded) minus the loss in value of net domestic assets: 2) QFD = iFD- ei*NFA- iCRg - iCRfs -~/(1+~) (NW- eNFA) where NFA are the net foreign assets of the Central Bank, CRg is cr1edit to the Government, cRfs is credit to the financial sector, MB is the monetary base, equal to currency in circulation CU plus unremunerated reserv~:!s of the banking system, FD are involuntary investments of the banking system and NW is the net worth. This is equal to interest received minus interest paid minus the adjustment for inflation of the net worth (equal to net assets). The latter term is of particular importance, as it represEmts the inflation profit net of redistribution within the financial sector. Thus, defining the deficit in real terms implies considering the profits from the inflation tax as a revenue for the consolidated public sector, rather than a source of financing.~/ The deficit defined in (2) can be financed as follows: 3) QFD = Afd - eANFA - Acrg - Acrfs + Amb i.e. through an increase in net external liabilities or in real net domestic liabilities (gross liabilities minus increases in assets). Note that this does not include non-operating changes in the balance sheet, such as valuation changes on the existing debt. 10.22 The consolidated public sector budget constraint (real definition) is obtained by aggregating (1) and (2): 4) DEF + (i-~)/(1+~)B + ei*B* + QFD- Ab + eAB* + Acrg + Afd - eANFA - Acrg - Acrfs - Amb or: Primary deficit NFPS + real domestic interest payments + external interest payments + nominal quasi-fiscal deficit ~/ See L. Barbone and P. Beckerman, "Inflation, Monetary Policy and Quasi- fiscal Deficits: A Simple Model with Application to Argentina" dated March 20, 1989 for a discussion of the economic properties of alternative definitions of the quasi-fiscal deficit.  - 200 - - net inflation tax/profit equals change in real domestic bonds in the hands of the public change in consolidated NFA of public sector + change in real monetary base + change in real net interest bearing liabilities of the Central Bank vis-a-vis the financial system. Note that the term berg disappears, since it represents only an intra- public sector transfer, i.e. it does not involve a net creation of finan- cial liabilities. Argentina, 1988: How was the Deficit Financed? 10.23 The first application of the above framework consists in reconcil- ing the ex-post accounts of the public sector. This is done in Table 1, where both the nominal and real definitions of the deficit are presented. The primary deficit (total revenues minus total non-interest expenditures) of the non-financial public sector amounted, for the whole year, to 0.9 percent of GDP. Real domestic interest of the non-financial public sector amounted to 0.6 percent of GDP, and (accrued) external interest payments of the total public sector (including interest payments of the Central Bank) would have amounted to 4.3 percent of GDP. Finally, the Central Bank is estimated to have registered a (nominal) surplus of 1.7 percent of GDP on account of interest operations. The sum of the above yielded a financing requirement of about 4.1 percent of GDP. 10.24 On the financing side, the inflation tax provided by far the larg- est source of support: it is estimated that, after correcting for the Central Bank's exposure to the financial system, the loss of real value of net monetary and quasi-monetary liabilities yielded the Government 4.9 per- cent of GDP, a tax equivalent to 23 percent of total revenues of the general government, or more than four times the total income tax collection for the year. The downside of this was of course the fact that, in order to collect the tax, the economy had to endure an average rate of inflation of over 12 percent monthly throughout the year. 10.25 Other sources of financing contributed positively on a net basis. Public external debt rose by about 1.7 percent of GOP (before valuation changes), representing about SO percent of interest due on foreign debt.4/ The monetary base contracted sharply in real terms (minus 1.3 percent of- GOP), as a result of the increased opportunity cost for holdings of domestic currency. Similarly, real holdings of government bonds with the public fell by 0.7 percent of GOP, despite increasingly higher real interest raters offered, and deep discounts granted. Central Bank liabil- ities, on the other hand, rose (albeit marginally). It should be remem- bered that most of the Central Bank's interest bearing assets are on an involuntary basis. ~/ The financing was, for the most part, involuntary, as Argentina suspended servicing of external debt to non-preferred creditors in April 1988.  - 201 - 10.26 As Table 1 shows, there remains a sizable unexplained statistical discrepancy (0.9 percent of GOP). Several factors may contribute an explanation, ranging from differences in recording of foreign credits, and the attendant changes in the real exchange rate, to the possibility that the deficit of the consolidated public sector may have been larger than reported. There are indications, in fact, that additional financing was accruing during the year to the Treasury via the non-payment to the Central Bank of australes corresponding to certain external interest payments made on behalf of public enterprises, for which the public enterprises had paid the Central Government. 10.27 The quarterly data shown in the table also offer interesting insights on the reasons why the Plan Primavera may have failed. As can be seen, the inflation tax fell sharply at the outset of the plan. From a high of 7.7 percent of GOP in the second quarter of the year, it was in fact reduced to less than 1.4 percent in the fourth quarter. However (in sharp contrast to what had occurred in the initial phase of the Plan Austral in 1985) the fall in the inflation tax was not compensated for by an increase in "legal" revenues. Indeed, if anything, tax and non-tax revenues registered a sharp fall, on the order of almost two percentage points over the second quarter. As a result, given the seasonal increase in expenditures associated to the end of the year, the financing require- ments of the consolidated public sector (after collection of the inflation tax) rose by almost nine percentage points of GOP between the third and the fourth quarter, setting the stage for the subsequent hyperinflationa1ry explosion. Using the Model for Design of Stabilization 10.28 The above consistency equations can be used for assessing the internal consistency of stabilization programs. In order to do so, how- ever, the model needs to be supplemented with a model of the dynamics of the Central Bank's balance-sheet, as well as with an estimate of the determinants of the non-interest deficit of the non-financial public sector. This section presents a re-evaluation of the design of the Plan Primavera, based on a minimal set of endogenous relationships. The infla- tion targets of the plan are taken as exogenous, as well as the expected NFPS deficit, the planned increase in net external debt and in domestic NFPS debt with the public, and, what is most important, the expected real rate of interest. On the other hand, the monetary sector's behavior is entirely endogenized, following the model discussed in Barbone and Beckerman (1989). In synthesis, this part of the exercise consists in checking whether sufficient allowance had been made for (voluntary) finan- cing of the expected public sector deficit that would have prevailed during 1989. 10.29 The next section briefly discusses the main features of the model. Demand for Assets and Evolution of the Quasi-fiscal Deficit 10.30 The starting point for the analysis is the assumption that the demand for money is a stable function of the rate of inflation; that there exists a feasible or desirable path for the growth of external  - 202 - indebtedness, and that there are limits to the (voluntary or involuntary) recourse to domestic bond markets for given real rates of interest. This sets a maximum to the financing sources of the deficit. The deficit, in turn, is a function of inflation and real interest rates. Lack of cor- respondence between the two sides of the equality indicates an incon- sistency in some of the assumptions of the macroeconomic program. Money Demand Function 10.31 The demand for monetary base is derived from the demand for various monetary aggregates, and the applicable reserve coefficients. For simplicity, the demand for base derived from aggregates other than M1 is disregarded.~/ The velocity of Ml, in turn, has exhibited an upward trend throughout the 1970s and 1980s, as a result of financial innovation and of the secular dollarization of the economy. For purpose of the estimation of the model, the following regression for M1 was run with quarterly data over the period 1973-I 1988-I, constraining the incon1e elasticity of the demand for money to one and proxying the secular increase in velocity through a trend (t-statistics in parentheses): ln(M1IGDP)t = -0.32 - 0.218*INFLt - 0.0043*TREND + (2.27) (3.43) (2.47) + 0.75*(MliGDP)t-l (9.84) + Seasonal Dummies AdjR2=.926 Durbin's H =-.857 SEE = .112 The value of the long-run semi-elasticity with respect to infla- tion implied by the above estimates is 0.83.~1 In order to derive the demand for monetary base from the demand for Ml, the simulations utilized a historic value of the Ml multiplier (approximately 0.8). ~I The marginal reserve coefficients for aggregates other than M1 are negligible; the assumption made in the text is not utterly unrealistic. ~I The value of semi-elasticity is more or less in line with other estimates, and it implies a unitary elasticity with respect to the rate of inflation at approximately 114 percent per quarter, or 29 percent per month. The unitary elasticity also maximizes the inflation tax; some authors have suggested even higher values for the revenue- maximizing inflation. Cf, for instance, Melvick (1988), Rodriguez (1989).  - 203 - Annex Table 10.1: ARQENTINA- THE FINANCINO OF THE PUBLIC SECTOR DEFICIT, 1988 (Percent of GOP - Real Definition) Domestic NFPS Ext. Other Domestic Net Additional Total Non-Int. Primary Interest Interest Interest QFD Inflation Financing Revenues Expend. Deficit Payments Payments Payments Nominal Tax Requ i rements QI 26.96 28.98 2.03 1.21 3.16 1.30 1.49 -6.11 3.08 QII 28.79 27.46 -1.32 0.68 4.26 -0.41 -1.74 -7.66 -6.48 QII 26.43 27.08 0.66 0.01 2.08 1. 76 -4.80 -4.69 -4.91 QIV 26.92 29.17 2.26 0.49 3.17 1.17 -1.61 -1.39 4.09 1988 27.27 28.17 0.90 0.67 3.17 1.16 -1.66 -4.94 0.80 -------------------------------------------------------------------------------------------------------- Equals real change in: Pub I ic Central Other External Monetary Bank Govt. Credit Debt Base Liab. Bonds to Qovt.£/ QI 6.48 -6.67 3.03 0.93 -0.79 QII 1.26 -3.00 -0.68 -0.63 -2.43 QUI -2.66 -3.01 2.64 -3.48 1. 70 QIV 2.68 6.30 -3.39 0.66 -1.94 1988 !1 1.67 -1.33 0.38 -0.66 -0.87 Source: Secretaria de Hacienda; BCRA; Bank Staff estimates !/ Adjusted for intra-annual inflation. £1 Includes statistical discrepancy.  - 204 - ARGENTINA STATISTICAL APPENDIX TABLE OF CONTENTS 1. POPULATION 1.1 Population, 1960-1988 1.2 Distribution of Population by Jurisdiction, 1980 1.3 Unemployment and Underemployment Rates, 1975-1989 1.4 Population Age Groups and Settlement Structure, 1980 1.5 Enrollment by Level and Type of Education, 1985 1.6 School Enrollment and Literacy by Age Group, 1980 1.7 Education Level of Population by Age Groups, 1980 1.8 Economically Active Population, 1980 2. NATIONAL ACCOUNTS 2.1 Gross Domestic Product by Sectoral Origin, 1970-1988 (1970 Australes) 2.2 Gross Domestic Product by Sectoral Origin, 1970-1988 (Growth Rates) 2.3 Gross Domestic Product by Sectoral Origin, 1970-1988 (Percent of GDP at Factor Cost; 1970 Prices) 2.4 Gross Domestic Product by Sectoral Origin, 1970-1988 (Thousands of Australes) 2.5 Gross Domestic Product by Sectoral Origin, 1970-1988 (Percent) 2.6 Gross Domestic Product by Expenditure, 1970-1988 (1970 Australes) 2.7 Gross Domestic Product hy Expenditure, 1970-1988 (Growth Rates) 2.8 Gross Domestic Product by Expenditure, 1970-1988 (Percent of GDP, 1970 Prices) 2.9 Gross Fixed Investment, 1970-1988 (1970 Australf>s) 2.10 Gross Fixed Investment, 1970-1988 (Growth Rates) 2.11 Gross Fixed Investment, 1970-1988 (Percent of GDP, 1970 Prices) 2.12 Gross Domestic Product by Expenditure, 1970-1988 (1970 Australes Per capita) 3• BALANCE OF PAYMENTS 3.1 Nominal Exchange Rates, 1970-1988 (Annual Averages; Australes/US$) 3.2 Nominal Exchange Rates, 1980-1989 (Monthly Averages; Australes/US$) 3.3 Real Effective Exchange Rate Index, 1970-1989 (1987=100)  - 205 - 3.4 Balance of Payments, 1970-1988 (Millions of US dollars) 3. 5 Exports by Conunodity Groups, 1970-1988 (Millions of US dollars) 3.6 Exports by Commodity Groups, 1970-1988 (Percent) 3.7 Imports by Commodity Groups, 1970-1988 (Millions of US dollars) 3.8 Imports by Commodity Groups, 1970-1988 (Percent) 3.9 Direction of Trade, 1970-1988 3.10 International Reserves, 1971-1988 (Millions of US dollars, End of Period) 3.11 International Prices, Trade Volume Indices and the Terms of Trade, 1970-1988 4. EXTERNAL DEBT 4.1 External Debt by Borrower, 1975-1988 (Millions of US dollars, End of Period) 4.2 External Debt by Creditor, 1983-88 (Millions of US dollars, End of Period) 5. PUBLIC SECTOR 5.1 Public Sector Revenues, Expenditures and Financing, 1970-1987 (Thousands of Australes) 5.2 Public Sector Revenues, Expenditures and Financing, 1970-1987 (Percent of GOP) 5.3 Central Administration Revenues, Expenditures and Financing, 1970-1987 (Thousands of Australes) 5.4 Central Administration Revenues, Expenditures and Financing, 1970-1987 (Percent of GOP) 5.5 Decentralized Agencies Revenues, Expenditures and Financing, 1970-1987 (Thousands of Australes) 5.6 Decentralized Agencies Revenues, Expenditures and Financing, 1970-1987 (Percent of GOP) 5.7 Special Accounts Revenues, Expenditures and Financing, 1970-1987 (Thousands of Australes) 5.8 Special Accounts Revenues, Expenditures and Financing, 1970-1987 (Percent of GOP) 5.9 Social Security Revenues, Expenditures and Financing, 1970-1987 (Thousands of Australes) 5.10 Social Security Revenues, Expenditures and Financing, 1970-1987 (Percent of GOP) 5.11 Provincial Governments: Revenues, Expenditures and Financing, 1970-1986 (Thousands of Australes) 5.12 Provincial Governments: Revenues, Expenditures and Financing, 1970-1986 (Percent of GOP) 5.13 Public Enterprises: Revenues, Expenditures and Financing, 1970-1987 (Thousands of Australes) 5.14 Public Enterprises: Revenues, Expenditures and Financing, 1970-1987 (Percent of GDP) 5.15 Public Expenditure by Destination, 1970-1985 (Thousands of Australes) 5.16 Public Expenditure by Destination, 1970-1985 (1970 Australes)  - 206 - 5.17 Public Expenditure by Destination, 1970-1985 (Growth Rates) 5.18 Public Expenditure by Destination, 1970-1985 (Percent of GDP) 5.19 Public Expenditure by Destination, 1970-1985 (Percent of Total) 5.20 Tax Revenues, 1970-1987 (Thousands of Australes) 5.21 Tax Revenues by Source, 1970-1987 (Percent of GDP) 6. FINANCIAL SECTOR 6.1 Private Sector Holdings of Financial Assets, Quarterly 1970-1989 (Thousands of Australes, Stocks at the End of Each Quarter) 6.2 Liquidity Coefficients, Quarterly, 1970-1989 6.3 Sources and Uses of Bank Credit, 1970-1988 (Percent of GDP, 1970 prices) 6.4 Banking System Real Credit Expansion, 1970-1988 6.5 Financial Institutions by Activity and Ownership, 1979-1987 (Number of Institutions, Year End) 6.6 Interest Rates, 1977-1989 (Quarterly Average of Monthly Rates, Percent) 7. AGRICULTURE 7.1 Beef-Wheat Price Ratio in US and Argentina, 1961-1989 7.2 Principal Crops, Area Planted, 1970-1989 (Thousand Hectares) 7.3 Principal Crops, Area Harvested, 1970-1989 (Thousand Hectares) 7.4 Yield of Principal Crops, 1970-1989 (Metric Tons per Harvested Hectare) 7.5 Production, Imports and Sales of Principal Farm Inputs, 1970-1988 8. INDUSTRY 8.1 Value Added by Subsector, 1970-1987 (1970 Australes) 8.2 Value Added by Subsector, 1970-1987 (Percent) 8.3 Index of Value Added by Manufacturing Subsector, 1970-1987 (1970 = 100) 8.4 Employment Index by Manufacturing Subsector, 1970-1989 (1970 = 100) 8.5 Manufacturing Industry: Exports by Subsector, 1970-1987 (Millions of 1970 US dollars) 8.6 Manufacturing Industry: Exports by Subsector, 1970-1987 (Millions of US dollars) 8.7 Manufacturing Industry: Imports by Subsector of Origin, 1970-1987 (Millions of 1970 US dollars) 8.8 Manufacturing Industry: Imports by Subsector, 1970-1987 (Millions of US dollars) 9. PRICES 9.1 Principal Price Indicators, Annual Averages 1960-1988 (1970 = 100) 9.2 Principal Price Indicators, Monthly, 1978-1989 (1985=100) 9.3 Price Indicators, Monthly, 1978-1989 (1985=100) 9.4 Changes in Wholesale and Consumer Price Indices: Major Components, 1970-1988  - 207 - Table 1.1: ARGENTINA -POPULATION, 1960-1988 Census Mid-year Population Annual Fi ·ve-year Population a/ (Thousands) Growth Rate Gro11Jth Rate <"> In the Projection 1960 20014 b/ 20616 1.65 1.71 1965 22283 1.52 1.55 1970 23390 c/ 23962 1.54 1.46 1971 24352 1.63 1972 24764 1.69 1973 25189 1. 72 1974 25621 1.71 1975 26052 1.68 1.67 1976 26480 1.65 1977 26912 1.63 1978 27348 1.62 1979 27789 1.61 1980 27947 28237 1.61 1.61 1981 28694 1.62 1982 29158 1.62 1983 29627 1.61 1984 30097 1.59 1986 30664 1.56 1.68 1986 31030 1.62 1987 31497 1.50 1988 31969 1.50 Source: INDEC. •I 1980 census data. Next census will be held in 1990. b/ Census omissions are not included. cf Results obtained from sample. June 1989  - 208 - Table 1.2: ARGENTINA - DISTRIBUTION OF POPULATION BY JURISDICTION, 1980 a/ Population Area Density (Thousands) (Thousands of sq. kms.) ---------------------------------------------- TOTAL b/ 27947 2780.2 10.1 Capital Federal 2923 0.2 14616.0 Buenos Aires 10866 307 36.4 Catamarca 208 101 2.1 Cordoba 2408 169 14.2 Corrientes 662 88 7.6 Chaco 701 99 7.1 Chubut 263 226 1.2 Entre Rios 908 79 11.6 Formosa 296 72 4.1 Jujuy 410 sa 7.7 La Pampa 208 143 1.6 La Rioja 164 90 1.8 Mendoza 1196 149 8.0 Misiones 689 ao 19.6 Neuquen 244 94 2.6 Rio Negro a8a 203 1.9 Salta 663 166 4.3 San Juan 466 90 6.2 San Luis 214 77 2.8 Santa Cruz 116 244 0.6 Santa Fe 2466 133 18.6 Santiago del Estero 696 136 4.4 Tucuman 973 23 42.3 Tierra del Fuego 27 21 1.3 Source: INDEC. a/ 1980 census data. Next census will be held in 1990. b/ Not including Falkland Islands (Malvinas) and dependencies, South Sandwich Islands South Georgia, and Antarctic Argentina. July 1987  T•b le 1.3' ARce-rriNA - l.tEHPLOYHe<T N'V l.N>ffie!PLOYHENT RATES, 1<;75-1989 •I (Percent. of Ec:onotnic:ally Active Population) 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 Apr. Oct. Apr. Oct. Apr. Oct. Apr Oct. Apr. Oct. Ap~. Oct. Apr. Oct. Apr. Oct. Apr. Oct. Apr, Oct. Apr Oct. Apr. Oct. Apr. Oct. Apr. Oct. Hay TOT A.L l.tiEHPLOYHENT b / 3.8 5.2 •. 4 3.9 2.7 4.2 2.3 2.6 2.4 2.6 2.5 4.2 5.3 6.0 4.6 5.5 3.9 4.7 4.4 6.3 5.9 5.2 6.0 5.7 6.5 6.1 Cr. Buenos A i res 2 .• 2.8 •. 8 •. 1 3.4 2.2 3.9 1.7 2.0 2.0 2.3 ~.2 4.0 5.0 5.7 3.8 5.2 3.1 4.0 3.6 5.7 4.9 •. 8 4.4 5.4 5.2 6.3 5.7 "'!. 7 Cran R~ario 5.3 5.7 5.3 4.1 3.5 2.6 5.5 2.3 3.1 2.7 4.3 2.4 4.9 6.5 8.5 8.0 6.3 7.0 6.2 10.9 10.2 6.8 7.2 7.3 8.3 7.8 7.0 Cordoba 6.1 7.2 6.5 5.. 5.9 4.0 5.1 2.7 2.6 2.1 2.7 2.9 4.7 4.8 3 4.4 5 •. 4 5 5.3 4.7 6.4 5.1 4.9 5.5 5.0 5.9 Cr. San Hi guel 8.4 6.9 7.. 5.6 7.3 4.3 6.8 4.9 5.9 4.9 6.3 8.3 8.8 10.6 11.0 8 8.1 7.5 2/ 8 10 12.2 11.4 13.6 12.5 15.1 9.8 11.3 10.1 de TLJcu-n MenQoz• 4.1 4.4 5.9 4.8 4.4 4.4 2.9 S.5 2.8 3.4 1.4 3.1 4.2 5.3 4.8 3.3 4.5 4.5 3.3 3.7 3.6 3.7 4.9 3.3 3.6 3.1 4.7 4.0 N 0 TOTAL l.N>ffie1PLOYHENT c I 5.3 4.1 3.8 5.5 3.8 3.9 3.6 4.5 5.8 5.0 6.0 6.7 6.4 5.9 5.9 5.4 5.9 7.5 7.2 7.3 8.2 8.1 7.8 7.0. \D Source: II"C>EC. •I Includes 27 ul"ban centers in 1979 to 1981, and 26 since 1982. b/ Includes Taj i-Viejo. c/ Persons •lftPioyed leas than 30 hours per week. August 1989  - 210 - Table 1.4: ARGENTINA -POPULATION AGE GROUPS AND SETTLEMENT STRUCTURE, 1980 •I (Thousands) Urban Rural Age Group Total Male Female Total Male Total Male Female " Total 27947 13766 14191 23193 83.0 11216 11978 4754 17.0 2541 2213 0 - 4 3241 1640 1601 2691 79.9 1311 1280 660 20.1 329 321 6 - 9 2784 1407 1377 2213 79.6 1117 1096 571 20.6 290 281 10 - 14 2466 1240 1216 1945 79.2 973 972 611 20.8 267 244 16 - 19 2342 1174 1168 1918 81.9 941 977 424 18.1 233 191 20 - 24 2224 1100 1124 1866 83.9 909 956 369 16.1 191 168 26 - 29 2124 1060 1074 1791 84.3 870 921 333 16.7 180 163 30 - 34 1976 980 996 1672 84.7 816 867 303 15.3 166 138 36 - 39 1726 866 869 1466 84.3 709 746 270 15.7 147 123 40 - 44 1649 773 776 1301 84.0 636 666 248 16.0 137 111 46 - 49 1497 748 749 1267 84.6 619 648 230 16.4 129 101 60 - 54 1468 709 749 1243 86.3 589 654 215 14.7 120 96 65 - 59 1281 621 660 1098 85.7 518 580 183 14.3 103 80 60 - 64 1002 470 632 864 85.2 387 467 148 14.8 83 66 65 - 69 874 398 476 751 85.9 329 422 123 14.1 69 64 70 - 74 634 279 365 649 8<;..6 232 317 85 13.4 47 38 76 - 79 426 181 246 370 151 219 56 13.1 30 26 80 - 84 224 86 138 196 8.'. 5 72 124 28 12.5 14 14 86 and more 131 44 87 114 87.0 37 77 17 13.0 7 10 Source: INDEC. •I 1980 census data. Next census wi I I be held in 1990. May 1987  - 211 _, Table 1.6: ARGENTINA - ENROLLMENT BY LEVEL AND TYPE OF EDUCATION, 1986 (Thousands) Total National Provincial Municipal Private Level No. No. No. No. No. " " " " Pre-Primary and 6606 100 143 2.6 4038 73.4 242 4.4 1082 19.7 Primary Secondary and 1684 100 766 44.9 433 26.7 2 0.1 493 29.3 Post-Secondary Non-University 182 100 68 31.9 63 34.6 1 0.6 60 33.0 University 664 100 686 88.3 2 0.3 o.o 76 11.4 ~---- -·-· ~- ------------------------- ---------------------------------------- Source: Ministry of Education and Justice, Argentina. May 1987  Table 1.6: ARGENTINA - SCHOOL ENROLLioiENT AND LITERACY BY AGE GROUP, 1980 a/ (Thousands) Population: Currently Enrolled Not ~ of Attendance Age and Sex 5 years Total ------------------------------------------------ Graduated b/ Attended II literates --------------------- I of Literacy and MOre Pre-school El-ntery Secondary Higher Current c/ Total d/ TOTAL 24706 6374 462 4132 1333 447 16943 1389 126-4 25.8 94.4 94.9 5 - 9 2784 2376 462 1914 0 0 56 352 0 85.3 87.4 100.0 10 - 14 2456 2205 0 1829 376 0 224 27 80 89.8 98.9 96.7 15 - 19 2342 994 0 132 778 84 1309 38 70 .ol2 . .ol 98.3 97.0 20 - 24 2224 338 0 31 83 224 1839 47 72 15.2 97.9 96.8 I 25 - 29 212-4 1-45 0 29 30 86 1919 59 83 ('.,f, 97.'2 96.1 N 1-' N 30- 34 1975 74 0 29 18 27 1834 68 93 3.7 96.6 95.3 I 35 - 39 1725 51 0 27 12 12 1606 68 91 3.0 96.1 94.7 40 - 44 1549 40 0 25 9 6 1438 70 87 2.6 95.4 94.4 45 - 49 1497 28 0 18 7 a 1393 75 88 1.9 94.9 94.1 50 and MOre 6030 123 0 98 20 5 5325 585 600 2.0 90.3 90.0 lolales 12116 3201 232 2102 646 221 8280 635 589 26.-4 94.8 95.1 F_.les 12590 3173 230 2030 687 226 8663 754 676 25.2 9<4.0 94.6 Source: II'I>EC. •I 1980 census data. Next census wi I I be held in 1990. b/ Includes those who have not completed. cf Current enrollment/age group population. d/ Current enrollment plus graduates/age group population. Apri I 1987  - 213 - T8ble 1.7: ARGENTINA- EDUCATION LEVEL OF POPULATION BY AGE GROUPS, 1980 •/ (Percent) 14 + AGE GROUPS Educ•tion Popul•tion -~-- --~------- --- --- --------- ---- --- Level Attending I Attended School 14-19 20-24 26-29 30-34 36-39 40-44 46-49 60-64 66-611 80 l 1110re - --------~ TOTAL 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 El-nt•ry 84.7 48.2 48.9 64.8 69.9 86.0 89.8 74.9 78.2 80.3 84.2 Incomplete 31.6 22.0 17.3 20.9 26.4 29.8 33.0 37.3 41.2 44.2 60.8 Complete 33.2 24.2 31.6 33.9 34.6 36.4 38.8 37.8 37.0 38.1 33.4 Second•ry 27.8 60.6 38.1 30.9 28.8 28.2 23.8 19.7 17.1 16.7 12.8 Incomplete 17.3 48.8 20.8 18.7 14.7 13.6 11.8 9.7 8.1 7.3 6.9 Complete 10.3 3.7 16.3 14.3 14.1 12.7 11.8 10.0 9.0 8.4 8.8 Superior 1.7 1.1 4.0 3.0 2.3 1.8 1.1 1.1 1.0 0.9 0.7 Incomplete 0.7 1.1 2.8 1.0 0.8 0.4 0.3 0.2 0.1 0.2 0.1 Complete 1.0 o.o 1.4 1.9 1.7 1.2 0.9 0.8 0.9 0.8 0.8 University 8.0 2.2 11.0 11.3 9.0 7.2 6.8 4.4 3.8 3.0 2.4 Incomplete 3.6 2.2 10.2 7.1 4.0 2.9 2.3 1.7 1.3 1.0 0.7 Complete 2.6 o.o 0.8 4.2 6.0 4.3 3.3 2.7 2.3 2.0 1.7 Source: INDEC. •I 1980 census d•t•. Next census wi II be held in 1990. Apri I 1987  - 214 - Table 1.8: ARGENTINA - ECONOMICALLY ACTIVE POPULATION, 1980 a/ (Thousands) - ---·----··-----------~---~----- -~-----------------------~------------· ------ 14 + Economically Economically not Active Activity Age Population Active ----------------------------------------------- Ratio Total Retired Students House-care Other - -·· ----- ---------- --------- ------------------------------------~- ---------------- -~-------- ------------------------------ Total 19936 10034 9901 1944.3 1618 6449 990 60.3 14 470 67 403 0.1 338 27 38 14.3 16 481 122 369 0.1 280 39 40 26.4 16 473 166 307 0.2 224 46 37 34.9 17 470 192 277 0.2 190 64 33 40.9 18 473 229 244 0.1 133 66 46 48.4 19 446 222 223 0.1 86 72 66 49.8 20 447 268 178 0.2 66 83 30 60.0 21 432 276 168 0.3 48 87 23 63.7 22 447 287 169 o.3 38 100 21 64.2 23 466 297 168 0.3 29 110 19 66.1 24 443 289 164 0.4 22 116 16 66.2 26 - 29 2124 1388 736 3 46 622 66 66.3 30 - 34 1976 1287 687 6 9 620 63 66.2 36 - 39 1726 1117 607 10 4 649 44 64.8 40 - 44 1649 990 660 19 2 496 43 63.9 46 - 49 1497 917 680 43 2 489 46 61.3 60 - 64 1468 812 648 95 2 496 56 66.7 66 - 69 1281 698 683 192 1 433 67 46.7 60 - 64 1002 296 706 324 0 328 64 29.6 66 - 69 873 136 738 419 0 267 62 15.6 70 - 74 634 63 581 362 0 171 48 8.4 76 + 780 27 763 -!70 0 179 104 3.6 Source: INDEC. a/ 1980 census data. Next census will be held 'n 1990. May 1987  Table 2.1: AR<lB'ITINA - CROSS DOMESTIC PRODUCT BY SECTORAL ORIGIN, 1970-1988 (1970 Australes) 1970 1971 1972 1973 1974 1975 1976 19n 1978 1979 1980 1981 1982 1983 1Q84 1985 1986 1987 1988 GOP AT MARKET PRICES ens 9105 9294 9642 10163 10103 10102 10747 10400 11130 11295 10543 10021 10321 10585 10105 10656 10863 10531 NET INDIRECT TAXES 1000 1038 1061 1100 1159 1152 1152 1226 1186 1269 1288 1203 1142 1177 1207 1152 1215 1238 1201 GOP AT FACTOR COST 7n4 8067 8233 8542 9004 8951 8950 9522 9214 9861 10008 9340 8879 9144 9378 8953 9441 9624 9330 Agricultur-e 1023 1039 1059 1173 1205 1172 1227 1257 1292 1329 1256 1280 1370 1403 1446 1421 1375 1416 1421 Mining 178 192 197 192 196 193 198 215 219 233 246 248 249 250 248 242 232 233 255 Hanufactu r-ing 2099 2228 2317 2409 2550 2485 2410 2598 2325 2556 2465 2076 1970 2170 2253 2020 2280 2267 2109 Construction 503 534 529 467 504 527 606 680 647 644 652 567 437 380 304 284 311 357 305 Electr-icity, Caa and Water 181 198 217 234 248 263 272 285 295 326 351 347 358 387 412 418 449 476 499 Co-.rce, Restaur-anU and Hotels 1183 1221 1242 1273 1349 1342 1297 1401 1314 1491 1619 1464 1261 1315 1374 1260 1370 1390 1305 Transpor-t and C:O...unication 881 895 893 942 967 959 953 1004 982 1054 1061 1019 993 1034 1090 1049 1102 1131 1070 Banking 592 598 585 6~1 692 634 607 692 738 797 895 847 750 698 707 698 747 768 762 1574 1587 1605 N Pub I i c: and Private Ser-v i cea a/ 1135 1163 1193 1242 1293 1376 1380 1390 1403 1431 1462 1491 1490 1508 1545 1562 t-' \J1 Source: Central Bank of the Repub I i c: of Argentina (9CRA). a/ 1970-1975 figures for public and private aer-vic:ea are est"11Ut.ea. Auguat 1989  T•ble 2.2, ARc;e.ITINA - CROSS DOH$TIC PROCUCT BY SECTORAL ORIGIN, 1970-1988 (Growt.h R•tea) 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 19&1 1985 1986 1987 1988 COP AT MARKET PRICES 3.8 2.1 3.7 5.4 -0.6 0.0 6.4 -3.2 7.0 1.5 -6.7 -5.0 3.0 2.6 -4.5 5.5 1 9 -3.1 NET I~IRECT TAXES 3.7 2.2 3.6 5.4 -0.7 0.0 6.4 -3.3 7.0 1.5 -6.6 -5.0 3.0 2.5 -4.5 5.5 1 9 -3.0 COP AT FACTOR COST 3.8 2.1 3.8 5.4 -0.6 0.0 6.4 -3.2 7.0 !.5 -6.7 -4.9 3.0 2.6 -4.5 5.5 1. 9 -3.1 Agriculture 1.6 1.9 10.7 2.7 -2.7 4. 7 2.4 2.8 2.9 -5.5 1.9 7.0 2.4 3.1 -1.7 -3.2 3.0 0.4 Hining 7.8 2.9 -2.8 2.4 -1.5 2.4 8.5 1.9 6.3 5.8 0.6 0.5 0.2 -0.6 -2.6 -3.8 0.2 9.5 Hanufact.ur i ng 6.1 4.0 4.0 5.9 -2.6 -3.0 7.8 -10.5 10.0 -3.6 -15.8 -E .1 10.2 3.8 -10.3 12.9 -0.6 -7.0 Constr-uction 6.3 -1.0 -11.7 7.9 4.6 14.9 12.2 -4.8 -0.5 1.1 -13.0 -2:1.9 -!3.1 -20.0 -6.7 9.7 14.7 -14.5 Elect.r i cit.,, Cas and Wat.er 9.3 9.9 7.5 5.9 6.1 3.7 4.6 3.3 10.7 7.8 -1.1 3.1 8.0 6 5 1.4 7.4 6.1 4.9 C:O...f"ce, Restaurant.& and Hot.e Ia 3.2 1.7 2.5 6.0 -0.5 -3.4 8.0 -6.2 1~.5 8.6 -9.6 -13.9 4.3 4 5 -8.3 B. 7 1.4 -6.1 Transport and eo-..nicat.ion 1. 6 -0.2 5.5 2.7 -0.8 -0.7 5.4 -~-2 7.3 0.7 -4.0 -2.6 4.1 5 5 -3.8 5.1 2.7 -5.4 Banking 1.1 -2.2 4.5 13.2 -8.4 -4.2 13.8 6. 7 8.0 12.3 -5.3 -11.5 -7.0 1.2 -1.2 7.0 2.8 39.3 Pub I i c and P~ i vat.e Serv i cea a/ 2.4 2.6 4.1 4.1 6.4 0.3 0.8 0.9 2.0 2.2 2.0 -0.1 1.2 2.5 1.1 0.8 0.8 -52.0 N 1-' (J\ Source: Table 2.1 a/ 1970-1975 figures for public and pr-ivat.e •ervicea are eat.i . . tea. August. 1989  Toblo 2.3: ARCENriNA - CROSS DOMESTIC PRODUCT BY SECTORAL ORICIN, 1970-1988 (Percent of COP at Factor Coet, 1970 Pri cea) 1970 1971 1972 1973 1974 1975 1976 19n 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 COP AT MARKET PRICES 112.9 112.9 112.9 112.9 112.9 112.9 112.9 112.9 112.9 112.9 112.9 112.9 112 9 112.9 112.9 112.9 112.9 112.9 112.9 NET ItolliRECT TAXES 12.9 12.9 12.9 12.9 12.9 12.9 12.9 12.9 12.9 12.9 12.9 12.9 12.9 12.9 12.9 12.9 ~2. 9 12.9 12.9 COP AT FACTOR C"OST 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Agricult.ure 13.2 12.9 12.9 13.7 13.4 13.1 13.7 13.2 14.0 13.5 12.5 13.7 15.4 15.3 15 4 15.9 14.6 14.7 15.2 Mining 2.3 2.4 2.4 2.2 2.2 2.2 2.2 2.3 2.4 2.4 2.5 2.7 2.8 2.7 2.6 2.7 2.5 2.4 2.7 Hllnufac:t.ur"• ng 27.0 2?.6 28.1 28.2 28.3 27.8 26.9 27.3 25.2 25.9 24.6 22.2 22.2 23.7 24 0 22.6 24.2 23.6 22.6 Conat.ruct. ion 6.5 6.6 6.4 5.5 5.6 5.9 6.8 7.1 7.0 6.5 6.5 6.1 4. 9 4.2 3.2 3.2 3.3 3.7 3.3 Elect.ricit.y, 0•• and Water 2.3 2.5 2.6 2. 7 2.8 2.9 3.0 3.0 3.2 3.3 3.5 3.7 4.0 4 2 • 4 4. 7 4.8 4.9 5.3 Co-.rc:e, Reataurant.s and Hotel a 15.2 15.1 15.1 14.9 15.0 15.0 14.5 14.7 14.3 15.1 16.2 15.7 14.2 14 4 14.6 14.1 14 5 14.4 14.0 Tranapor't. and Co:•• -..un i cat·~ on 11.3 11.1 1C.8 11.0 10.7 10.7 10.6 10.5 10.7 10.7 10.6 10.9 11.2 11.3 11 6 11 7 11.7 11.8 11.5 Ban~ i ng 7.6 7.4 7.1 7.2 7.7 7.1 6.8 7.3 8.0 8.1 8.9 9 1 8.4 7 6 7 5 7.8 7. 9 8.0 11.5 Pub I ic: and Private Servieea a/ 14.6 14.4 14.5 14.5 14.4 15.4 1.5.4 14.6 15.2 14.5 14.6 16.0 16.8 16 5 16.5 17 4 16.7 16.5 e.2 N ...... Source: Table 2.1. -..J •I 1970-1975 figures for public and private aervicea are eatirutea. Auguat 1989  Tobie 2.4: ARGENTINA - CROSS DOMESTIC PRODUCT BY SECTORAL ORIGIN, 1970-1988 o/ (Thousands of Australes) 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 b/ CROSS DOMESTIC PRODUCT 8.775 12.518 20.690 35.485 48.647 143.0 758.7 2093.4 5234 14251 28336 54752 147613 682652 5281000 39592600 74309000 173109400 821468000 Agriculture 1.068 1.797 3.070 5.610 6.604 12.7 83.3 229.3 531 1504 2436 4939 17383 86377 668214 5010694 9404274 21908089 103961967 Mining 0.176 0.246 0.368 0.721 1.028 2.8 14.8 25.8 101 343 669 1590 4514 26955 208857 1565842 2938836 6846278 32488115 Manufacturing 2.641 3.781 6.349 10.119 13.929 46.4 250.5 650.1 1513 3951 7082 13147 41918 210154 1625994 12190368 22879379 53299540 252925990 Construction 0.507 0.749 1.183 1.794 2.743 11.2 54.8 147.6 381 991 2000 3306 7206 42344 327210 2453152 4604176 10725835 50898047 Electr"i city 0.204 0.266 0.429 0.743 1.035 2.6 19.1 55.3 145 304 718 1632 2513 17216 133050 997499 1872147 4361332 20696132 Ca-erce 1.464 2.002 3.474 5.299 7.440 22.4 132.0 351.5 884 2522 5106 9716 24499 112520 870239 6524341 12245148 28526157 135367145 Transport 0.840 1.064 1.733 2.783 3.808 1l.2 60.0 175.3 443 1143 2171 4414 9244 38661 299362 2244373 4212331 9812998 46566298 Banking 0.706 0.990 1.590 3.492 4.549 11.8 58.5 234.1 562 1659 3885 7583 21383 43522 336493 2522745 4734791 11030114 52341963 Covel"'n . .nt 1.169 1.623 2.494 4.924 7.511 22.0 85.7 224.4 674 1835 4270 8426 18952 104903 811450 6083585 11417920 26599057 126222342 Source: Cent~ol Bonk of the Republic of A~gentino (BCRA). a/ QDP distribution by sector for 1984-1988 are esti•ates. N 1-' 00 August 1989  Table 2.5: ARC&ITINA - CROSS DDHESTIC PRODUCT BY SECTORAL DRICIN, 197o-1988 a/ (Percen~) 1970 1971 1972 1973 1974 1975 1976 19n 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 CROSS DOHESTIC PROOUCT 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 98.6 100.0 100.0 100.0 100.0 100.0 Agricult.ure 12.2 14.4 14.8 15.8 13.6 8.9 11.0 11.0 10.1 10.6 8.6 9.0 11.8 12.7 12.7 12.7 12.7 12.7 12.7 Mining 2.0 2.0 1.8 2.0 2.1 2.0 2.0 1.2 1.9 2.4 2.4 2.9 3.1 3.9 4.0 4.0 4.0 4.0 4.0 H.nufactu ring 30.1 30.2 30.7 28.5 28.6 32.4 33.0 31.1 28.9 27.7 25.0 24.0 28.4 30.8 30.8 30.8 30.8 30.8 30.8 Construction 5.8 6.0 5.7 5.1 5.6 7.8 7.2 7.0 7.3 7.0 7.1 6.0 4.9 6.2 6.2 6.2 6.2 6.2 6.2 Electricity 2.3 2.1 2.1 2.1 2.1 1.8 2.5 2.6 2.8 2.1 2.5 3.0 1.7 2.5 2.5 2.5 2.5 2.5 2.5 eo-erce 16.7 16.0 16.8 14.9 15.3 15.7 17.4 16.8 16.9 17.7 18.0 17.7 16.6 16.5 16.5 16.5 16.5 16.5 16.5 Tranaport 9.6 8.5 8.4 7.8 7.8 7.8 7.9 8.4 8.5 8.0 7.7 8.1 6.3 5.7 5.7 5.7 5.7 5.7 5.7 Banking 8.0 7.9 7.7 9.8 9.4 8.2 7. 7 11.2 10.7 11.6 13.7 13.8 14.5 5.0 6.4 6.4 6.4 6.4 6.4 Govern~Dent 13.3 13.0 12.1 13.9 15.4 15.4 11.3 10.7 12.9 12.9 15.1 15.4 12.8 15.4 15.4 15.4 15.4 15.4 15.4 Source: Table 2.4. N •I QDP diatribution by sector for 1984-1986 are eatiaatea. . 1-' \0 August 1989  Tobie 2.6: ARCB'ITINA- CROSS 00>1ESTIC PRODUCT BY EXPellrn.RE, 1970-1988 (1970 .\uatrolea) 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1~8: 1~82 : ~E..3 ::;.;:..t. :Qe5 :;e£ :Q87 1988 Croaa Do111est. i c Proc:luct 8775 9105 9294 9642 10163 10103 10102 10747 10400 11130 :1300 10542 lOG:E : :':f: ::::2 :~54e 10870 10531 TeriiS of "il"ade Effect 0 107 134 302 138 -26 -:18 2 -84 58 258 328 :.e: -C9 -404 Croaa DoiHat. i c Income 8775 9212 9428 9944 10301 10077 9984 10749 10316 11188 :1558 10870 10051 ::333 107:: 1009: 10531 10391 10127 IMPort.a of Goods and NFS a/ 789 883 840 829 874 890 703 984 914 1413 2068 1869 1C77 1026 :oe; 932 1101 1161 1024 E.xpor-ta of Goods and NFS a/ 810 729 744 848 850 771 1014 1291 1406 1361 1291 1362 14D :5:17 :soe 1698 1560 1563 1752 Export.a A.djuat.ed by Tel"- o-f Trade 810 836 878 1150 988 745 896 1293 1322 1419 1549 1690 l.U3 154: 1€53 1687 1443 1084 1348 Reaou r-ce Cap b I -21 47 -38 -321 -114 145 -193 -329 -408 -6 519 179 -365 -5:5 -554 -755 -342 77 -3:<4 To'b I Expend i t.urea 8754 9259 9390 9623 10187 10222 9791 10420 9908 11182 12077 11049 9685 9818 10145 9336 10189 10468 9802 Conau-.tion 6843 7196 7305 7636 8179 8177 7605 7776 7685 8733 9403 9000 8041 83A8 8€3<; 820) 8954 9038 8486 Pub I ic 908 949 932 992 1069 1070 1119 1167 1204 1271 1288 1308 1215 1248 1274 1252 1318 Private 5935 6:147 6373 6644 7110 7107 6486 6609 6481 7462 8115 7692 6826 7100 7565 7039 7636 Croaa Doaeat i c Inveat....nt. 1860 2063 2085 1967 2009 2045 2186 2644 2223 2450 2675 2049 16~5 1470 1306 1046 1235 1430 1316 Changes in Inventor i ea -1 51 50 100 46 78 14 18 -67 5 99 -73 107 12 _z:, -126 -28 -21 59 Cross Domestic Fixed Investment 1861 2012 2035 1887 1963 1967 2172 2626 2290 2445 2576 2122 1538 1458 132€ 1172 1263 1451 1258 Pub! i c 708 780 795 661 684 778 989 1219 1068 1017 1010 907 712 671 4Q: 010 515 N Private 1153 1232 1240 1226 1279 1189 1183 1407 1222 1428 1566 1215 825 ?87 835 ~62 748 N 0 Cro. . Oomeat i c S.v i ngs c/ 1882 2016 2123 2308 2123 1900 2379 2973 2631 2456 2156 1670 2Cll 1985 Hr-'D 1801 !577 lSS<l 1841 Net Factor Incollttt Pay . . nt.a -96 -39 -120 -145 -117 -124 -:.27 -143 -174 -209 -308 -620 -766 -854 -85:" -712 -574 -578 -669 Net Transfers -1 -1 -1 3 0 1 4 7 10 6 4 -3 2 c c -1 0 Croaa Nlit i onal Sav i nga 1784 1976 2002 2166 2006 1778 2256 2836 2466 2253 1851 l2.t7 1249 1133 1::3 1089 1003 775 972 Cross Nation a\ Product 8677 9065 9173 9500 10046 9980 9979 10611 10236 l()q27 10995 9918 9256 9459 97oe 9390 100~4 10291 9882 Orca. tat i onal !nco. . 8878 9172 9307 9802 10184 9954 9861 10613 10152 10985 11253 10246 9289 9481 9853 9379 9957 9812 9458 Source: Centf"al S.nk of the Repub I i c of Argentina (BCRA) and IBRD at.aff eat i •tea. •I Balance of Pay . . nta fi gur"ea def Ia ted by reapec:ti ve pri c:e i nd i cea and conver-ted at 1970 exchange rat.e (3. 8 peaoa per- USI) b/ - (Expor-t.a adjuated by t.er-tu of tr-ade - i.-por-ta). cf Cr-oas d~ati c i nveat.. . nt. - r-eaour-ce gap .O.uguat 1989  Tob I• 2. 7: ARCEM"INA - CROSS DOHESTIC PRODUCT BY EXPEN:l!TI..RE, 1970-1988 (Growth Rote&) 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 :983 1984 1985 1986 1987 1988 Croaa Dowteat i c Product 3.8 2.1 3.7 5.4 -0.6 0.0 4 -3.2 7.0 1.5 -6 7 -5 0 2. 5 -4 4 5 4 2. 1 -3.1 Ter . . of Trade Effect 25.5 124.8 -54.3 -118.8 -353.8 101 7 -4300. 0 169.0 344.8 27.1 -BQ Q -33 559 1 -107 6 -963 6 -309.1 15.6 Q,..oaa Oomeat i c Inc:otne 5.0 2.3 5.5 3.6 -2.2 -0.9 7.7 -4.0 8.5 3.3 -6.0 -7.5 2.8 3 7 -5.8 4.4 -1.3 -2.5 !Mport.a of Gooda and NFS 11.9 -4.9 -1.3 5.4 1.8 -21.0 37.1 -5.2 54.6 46.4 -9.6 -42.4 -4.7 6. -14.4 18. 5.4 -11.8 Export. of Goods and NFS -10.0 2.1 14.0 0.2 -9.3 31.5 27.3 8.9 -3.2 -5.1 5.5 3 5 7 7 -0.7 12 -8. 0.2 12.1 Exports Adjusted by Ter- of Trade 3.2 5.1 30.9 -14.1 -24.6 20.3 44.3 2.2 7.3 9.2 9.1 -14.6 6.8 7.3 2. -14.5 -24.9 24.4 Resource Cap 322.3 -181.6 -737.4 64.5 227.2 -233.1 -70.5 -24.0 98.5 8750.0 -65.5 -304.5 -40 -9.5 -33.9 54.7 122.4 522.7 Total Expenditures 5.8 1.4 2.5 5.9 0.3 -4.2 6.4 -4.9 12.9 8.0 -8.5 -12.3 1. 4 3.3 -8.0 9.1 2.7 -6.4 Conautnption 5.2 1.5 4.5 7.1 0.0 -7.0 2.2 -1.2 13.6 7.7 -4.3 -10.7 3.8 5 -6.2 8.0 0.9 -6.1 Pub! ic 4.5 -1.8 6.4 7.8 0.1 4.6 4.3 3.2 5.6 1.3 1.6 -7.1 2.7 2.1 -1.7 5.3 Pri vat.e 5.3 2.0 4.3 7.0 0.0 -8.7 1. 9 -1.9 15.1 8.8 -5.2 -11.3 4.0 6.5 -7.0 8.5 Cross Oo... sti c Investment 10.9 1.1 -4.7 1.1 1.8 6.9 20 -15.9 10.2 9.2 -23.4 -19.7 -10.6 -11.1 -19.9 18.1 15.8 -8.0 Changes in Inventories 8616.7 -2.2 99.2 -54.3 72.3 -81.9 25.4 -478.7 107.3 1914.3 -173.8 246.4 -89.1 -272 4 -530.0 77.8 26.1 382.6 Cross Domeat i c Fixed lnveat.lftent 8.1 1.1 -7.3 4.0 0.2 10.4 20.9 -12.8 6.8 5.4 -17.6 -27.5 -5.2 -9.1 -11.6 7.8 14.9 -13.3 Pub I i c 10.2 1.9 -16.9 3.5 13.7 27.1 23.3 -12.4 -4.8 -0.7 -10.2 -21.5 -5.8 -26 8 -16.5 25.6 Private N 6. 9 0.6 -1.1 4.3 -7.0 -0.5 18.9 -13.1 16.9 9.7 -22.4 -32.0 -4.7 6. -8.7 -1.8 N 1-' Groaa Domeat i c Savings 7.2 5.3 8. 7 -8.0 -10.5 25.2 24. -11.5 -6.6 -12.2 -13.2 7.5 -1.3 -5.8 -3.7 -12.4 -14.2 21.2 Net Factor IncoMe PayMent.. 59.4 -207.7 -20.8 19.3 -6.0 -2.4 -12.6 -21.7 -20.1 -47.4 -101.3 -23.5 -11.5 -0.4 16.9 19.4 -0.7 -15.7 Net Transfer-a 3.2 -27.7 343.2 -100.0 0.0 244.4 62.2 43.6 -35.2 -42.4 -187.7 242.4 -50.7 -81.8 -100.0 0.0 -489.5 -100.0 Croaa Nat. i onal Savings 10.7 1.3 8.2 -7.4 -11.4 26.9 25.7 -13.1 -8.6 -17.8 -32.6 0.2 -9.3 -10.5 7.5 -7.9 -22.8 25.5 Croaa Nation a! Product 4.5 1.2 3.6 5. 7 -0.7 0.0 6.3 -3.5 6.8 0.6 -9.8 -6.7 2.2 2. -3.3 7.3 2.2 -4.2 c,..o_ Nlit ion a! Income 5.7 1.5 5.3 3.9 -2.3 -0.9 7.6 -4.3 8.2 2.4 -8.9 -9.3 2.1 3. -4.8 6.2 -1.5 -3.6 Source: Table 2.6. August 1989  Table 2.8, AACENTINA- CROSS DOMESTIC PRODUCT BY EXP~I~. 1970-1988 (Percent of COP, 1970 Prices) 1970 1971 1972 1973 1974 1975 1976 19n 1978 1979 1980 1981 1982 1963 1'18.4 1985 1986 1987 1988 Croaa Do.. at. i c Product. 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 JOO.C 100.0 100.0 100.0 100.0 100.0 Ter- of Tl"'•d• Effect 0.0 1.2 1.4 3.1 1.4 -0.3 -1.2 0.0 -0.8 0.5 2.3 3.1 0.3 0.2 l 4 -0.1 -1 1 -4.4 -3.8 Croa. DoiMat. i c In cOIN 100.0 101.2 101.4 103.1 101.4 99.7 98.8 100.0 99.2 100.5 102.3 103.1 100.3 100.2 101.4 99.9 98.9 95.6 96.2 I-.ort.a of Cooda and NFS 9.0 9.7 9.0 8.6 8.6 8.8 7.0 9.0 8.8 12.7 18.3 17.7 10 8 10 0 10.3 9.2 10.3 10.7 9.7 Export. of Goods and NFS 9.2 8.0 8.0 8.8 8.4 7.6 10.0 12.0 13.5 12.2 11.4 12.9 14. 14.7 14.3 16.8 14.7 14.4 16.6 E.xpor"t.a A.djuat..d by Tel"'aa of Trade 9.2 9.2 9.5 11.9 9.7 7.4 8.9 12.0 12.7 12.7 13.7 16.0 14.4 14. 9 15.6 16.7 13.6 10.0 12.8 Reaou r'Ce Cap -0.2 0.5 -0.4 -3.3 -1.1 1.4 -1.9 -3.1 -3.9 -0.1 4.6 1.7 -3.7 -5.0 -5.3 -7.5 -3.2 0.7 -3.1 Total Expend i t.urea 99. 8 101. 7 101.0 99.8 100.2 101.2 96.9 97.0 95.3 100.5 106.9 104.8 96.7 95.2 96.0 92.4 95.7 96.3 93.1 ConauiiiPt.ion 78.0 79.0 78.6 79.2 80.5 80.9 75.3 72.4 73.9 78.5 83.2 85.4 80.3 81 0 83.7 82.1 84. 83.1 80.6 Pub I ic 10.3 10.4 10.0 10.3 10.5 10.6 11.1 10.9 11.6 11.4 11.4 12.4 12. 12. 12. 12 4 12 4 Pl"'ivat.e 67.6 68.6 68.6 68.9 70.0 70.3 64.2 61.5 62.3 67.0 71.8 73.0 68.1 68 9 71. 69.7 71 7 Croaa Do.. at. i c Invest.•ent 21.2 22.7 22.4 20.6 19.8 20.2 21.6 24.6 21.4 22.0 23.7 19.4 16.4 14.3 12.4 10.4 11.6 13.2 12.5 Changes in Inventor i •• -0.01 0.6 0.5 1.0 0.4 0.8 0.1 0.2 -0.6 0.0 0.9 -0.7 1.1 0.1 -0 2 -1.2 -0.3 -0.2 0.6 Gl"'oaa Doateat i c Fixed Investment 21.2 22.1 21.9 19.6 19.3 19.5 21.5 24.4 22.0 22.0 22.8 20.1 15.4 14. 1 12.6 11.6 11.9 13.3 11.9 Pub I ic 8.1 8.6 8.6 6.9 6.7 7.7 9.8 11.3 10.3 9.1 8.9 8.6 7.1 6.5 4. 6 4.1 4.8 N p,.j vat.e 13.1 13.5 13.3 12.7 12.6 11.8 11.7 13.1 11.8 12.8 13.9 11.5 8.2 7.6 7. 7.5 7.0 N N Cl"'oaa Do.eat i c Sav i nga 21.4 22.1 22.8 23.9 20.9 18.8 23.6 27.7 25.3 22.1 19.1 17.7 20.1 19.2 17.7 17.8 14.8 12.5 15.6 Net Factor Inca.. Pay . . nt.a -1.1 -0.4 -1.3 -1.5 -1.2 -1.2 -1.3 -1.3 -1.7 -1.9 -2.7 -5.9 -7.6 -8.3 -8. -7.0 -5.4 -5.3 -6.3 Net. Transfers -0.01 -0.01 -0.02 0.04 0.00 0.01 0.04 0.06 0.09 0.06 0.03 -0.03 0.04 0.02 0 0 0.0 0.0 0.0 0.0 Croaa National Sav i np 20.3 21.7 21.5 22.5 19.7 17.6 22.3 26.4 23.7 20.2 16.4 11.8 12.5 11.0 9.6 10.8 9.4 7.1 9.2 Croaa National Pl"'oduct. 98.9 99.6 98.7 98.5 98.8 98.8 98.8 98.7 98.4 98.2 97.3 94.1 92.4 91.7 91.9 93.0 94.6 94.7 93.7 Croaa Nllt.ional IncotM 98.9 100.7 100.1 101.7 100.2 98.5 97.6 98.7 97.6 98.7 99.6 97.2 92.7 92.0 93.3 92.8 93.5 90.3 89.8 Source' Table 2.6. August. 1989  Tobie 2.9: ARCENTINA- CROSS FIXED INVESTHelT, 1970-1988 (1970 Aust,•lea) 1970 1971 1972 1973 1974 1975 1976 19n 1978 1979 1980 1981 1982 1983 1984 1Q85 1986 1987 1988 Croaa Fixed Investment, by sector 1861 2012 2035 1887 1963 1967 2172 2626 2290 2445 2576 2122 1538 1458 1326 1171 1263 1451 1258 Pub I ic 708 780 795 661 684 n8 989 1214 1068 1017 1010 907 712 671 491 410 515 331 274 Private 1153 1233 1240 1226 1279 1189 1184 1412 1222 1428 1566 1215 826 787 835 761 748 1120 984 Cross Fixed Investment, by aector 1861 2012 2035 1887 1963 1967 2172 2626 2290 2445 2576 2122 1538 1458 1326 1172 1264 1451 1258 Construction 1161 1244 1221 1089 1172 1226 1393 1531 1452 1449 1457 1279 998 885 738 670 716 818 698 Pub I ic 463 516 529 440 469 412 595 790 709 623 603 511 399 361 219 197 280 331 274 Private 698 729 692 649 703 814 798 741 743 826 854 768 599 524 519 472 436 488 424 Machinery and EquipMent 700 768 814 798 791 741 n9 1096 838 996 1119 843 540 573 589 502 548 633 560 Pub I ic 245 264 266 221 215 366 394 424 359 394 407 396 313 310 272 213 235 Private 455 504 548 sn 576 375 385 672 479 602 712 447 227 263 316 289 313 of which: Machinery, tools and furnitu 482 527 541 519 543 521 573 795 594 680 803 634 411 417 425 363 392 455 407 Oomeati c 274 305 322 356 388 344 416 500 335 358 303 204 187 254 281 211 260 273 227 Inopo,ted 208 222 219 163 155 1n 157 295 259 322 500 430 224 164 144 153 131 182 181 Transport Equipment 219 240 272 279 249 121 207 300 245 317 315 209 128 155 163 139 156 178 153 Domestic 215 230 257 269 240 109 196 244 209 250 252 147 115 138 144 128 154 173 147 N N lmpo,ted 4 10 15 10 9 12 11 56 36 67 63 62 14 18 19 1l 3 5 w Mento i t.•: Residential Construction 493 486 457 426 476 596 567 502 502 545 558 488 391 339 337 315 Non-residential Construction 668 758 764 663 696 630 826 1029 950 904 899 791 607 546 401 355 Sou,ce: Cent,•l B•nk of the Republic of A"gentin• (BCRA) •nd IBRD eatimotea. August 1989  Table 2.10: ARGENTINA- CROSS FIXB> INVESTMENT, 1970-1988 (Ccowth Rates) 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 Groas Fixed Investment, by sector 8.1 1.1 -7.3 4.0 0.2 10.4 20.9 -12.8 6.8 5.3 -17.6 -27.5 -5.2 -9.0 -11.7 7.9 14.9 -13.3 Pub I ic 10.2 2.0 -16.9 3.5 13.8 27.0 22.8 -12.0 -4.8 -0.7 -10.2 -21.5 -5 7 -26.8 -16.5 25.6 -35.6 -17.3 Private 6.9 0.6 -1.1 4.3 -7.0 -0.4 19.3 -13.5 16.9 9.6 -22.4 -32.0 -4.8 6.2 -8.9 -1.7 49.7 -12.1 Croaa Fixed InvestMent, by sector 8.1 1.1 -7.3 4.0 0.2 10.4 20.9 -12.8 6.8 5.3 -17.6 -27.5 -5.2 -9.0 -11.6 7.8 14.6 -13.3 Construction 7.2 -1.9 -10.8 7.6 4.6 13.6 9.9 -5.1 -0.2 0.6 -12.2 -22.0 -11.3 -16.6 -9.3 6.9 14.3 -14.7 Pub I ic 11.4 2.7 -16.9 6.6 -12.1 44.2 32.9 -10.3 -12.1 -3.2 -15.2 -21.9 -9.5 -39.3 -10.0 42.1 16.1 -17.3 Privat.e 4.4 -5.1 -6.2 8.2 15.8 -1.9 -7.2 0.3 11.2 3.4 -10.1 -22.0 -12.5 -1.0 -8.9 -7.8 11.9 -13.0 Machinery and Equipment 9.7 6.0 -2.0 -0.9 -6.3 5.1 40.7 -23.5 18.9 12.3 -24.7 -35.9 6.1 2.8 -14.6 9.0 15.5 -11.5 Pub I ic 7.8 0.8 -16.9 -2.7 70.2 7.7 7.6 -15.3 9.7 3.3 -2.7 -21.0 -1.0 -12.3 -21.7 10.3 Privat.e 10.8 8.7 5.3 -0.2 -34.9 2.7 74.5 -28.7 25.7 18.3 -37.2 -49.2 15.9 20.2 -8.5 6.3 of which: Machinery, tools and furniture 9.4 2.7 -4.1 4.6 -4.1 10.0 38.7 -25.3 14.5 18.1 -21.0 -35.2 1.5 1.9 -14.6 7.8 16.2 -10.5 Oolneatic 11.4 5.6 10.6 9.0 -11.3 20.9 20.2 -33.0 6.9 -15.4 -32.7 -8.2 35.6 10.7 -25.0 23.6 4.6 -16.9 I11pocted 6.7 -1.4 -25.6 -4.9 14.2 -11.3 87.9 -12.2 24.3 55.4 -14.0 -47.9 -27.0 -11.9 5.8 -14.0 38.6 -0.9 Transport Equip.ent 9.6 13.6 2.4 -10.7 -51.4 71.1 44.9 -18.3 29.4 -0.5 -33.8 -38.6 21.1 5.2 -14.8 12.4 13.7 -14.0 DoMestic 7.0 12.0 4.5 -10.7 -54.6 79.8 24.5 -14.3 19.5 1.0 -41.8 -21.9 19.9 4.7 -11.0 19.8 12.6 -15.4 I~~pocted 150.0 50.0 -33.3 -10.0 33.3 -8.3 409.1 -35.7 86.9 -6.4 -1.9 -78.2 31.9 8.4 -43.5 -75.2 66.7 40.0 N N ~ He.o it,em: Residential Construction -1.4 -6.0 -6.8 11.7 25.2 -4.9 -11.5 0.0 8.6 2.4 -12.5 -19.9 -13.3 -0.6 -6.5 Non-residential Construction 13.6 0.8 -13.2 4.9 -9.4 31.0 24.5 -7.7 -4.9 -0.5 -12.0 -23.2 -10.0 -26.6 -11.6 Soucce: Table 2. 9 August 1989  Tab I e 2. 11 : ARCENTINA - CROSS FIXED INVESTMENT, 1970-1988 (Percent of COP, 1970 Prices) 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 Croas Fixed Investment, by sector 21.2 22.1 21.9 19.6 19.3 19.5 21.5 24.4 22.0 22.0 22.8 20.1 15.4 1~ .1 12.6 11.6 11.9 13.3 11.9 Pub I ic 8.1 8.6 8.6 6.9 6.7 7.7 9.8 11.3 10.3 9.1 8.9 8.6 7.1 f ~ 4.6 4.1 4.8 3.0 2.6 Private 13.1 13.5 13.3 12.7 12.6 11.8 11.7 13.1 11.8 12.8 13.9 11.5 8.2 7 7.9 7.5 7.0 10.3 9.3 Croaa Fixed Investment, by sector 21.2 22.1 21.9 19.6 19.3 19.5 21.5 24.4 22.0 22.0 22.8 20.1 15.4 14.1 12.6 11.6 11.9 13.3 11.9 Construction 13.2 13.7 13.1 11.3 11.5 12.1 13.8 14.2 14.0 13.0 12.9 12.1 10.0 8.6 7.0 6.6 6.7 7.5 6.6 Pub I ic 5.3 5.7 5.7 4.6 4.6 4.1 5.9 7.3 6.8 5.6 5.3 4.8 4.0 3.5 2.1 2.0 2.6 3.0 2.6 Private 8.0 8.0 7.4 6.7 6.9 8.1 7.9 6.9 7.1 7.4 7.6 7.3 6.0 5.1 4.9 4. 7 4.1 4.5 4.0 Machinery and Equ i pMnt 8.0 8.4 8.8 8.3 7.8 7.3 7. 7 10.2 8.1 8.9 9.9 8.0 5.4 5.6 5.6 5.0 5.1 5.8 5.3 Pub I ic 2.8 2.9 2.9 2.3 2.1 3.6 3.9 3.9 3.5 3.5 3.6 3.8 3.1 3.0 2.6 2.1 2.2 Private 5.2 5.5 5.9 6.0 5.7 3.7 3.8 6.3 4.6 5.4 6.3 4.2 2.3 2.6 3.0 2.9 2.9 of which: Machinery, tools and furniture 5.5 5.8 5.8 5.4 5.3 5.2 5.7 7.4 5.7 6.1 7.1 6.0 4.1 4.0 4.0 3.6 3.7 4.2 3.9 Domestic 3.1 3.3 3.5 3.7 3.8 3.4 4.1 4.7 3.2 3.2 2.7 1.9 1.9 2.5 2.7 2.1 2.4 2.5 2.2 I101ported 2.4 2.4 2.4 1.7 1.5 1.8 1.6 2.7 2.5 2.9 4.4 4.1 2.2 1.6 1.4 1.5 1.2 1.7 1.7 Transport Equipment 2.5 2.6 2.9 2.9 2.5 1.2 2.0 2.8 2.4 2.8 2.8 2.0 1.3 1.5 1.5 1.4 1.5 1.6 1.5 Domestic 2.4 2.5 2.8 2.8 2.4 1.1 1.9 2.3 2.0 2.2 2.2 1.4 1.1 1.3 1.4 1.3 1.4 1.6 1.4 0.1 0.5 0.6 0.1 0.2 0.2 0.1 0.0 0.0 0.1 N IftiPorted 0.0 0.2 0.1 0.1 0.1 0.1 0.3 0.6 0.6 N VI HeiDO i t.ell: Residential Construction 5.6 5.3 4.9 4.4 4.7 5.9 5.6 4.7 4.8 4.9 4.9 4.6 3.9 3.3 3.2 3.1 Non-residential Construction 7.6 8.3 8.2 6.9 6.8 6.2 8.2 9.6 9.1 8.1 8.0 7.5 6.1 5.3 3.8 3.5 Source: Table 2.9. August 1989  Tob le :1.12, ARCEHTINA - CRG:,~ ~""E5T ;c PRODUCT BY EXPEN:>nl.ftE, 1970-1988 (1970 .lustr-a es Pe .. Cap 1 t.a) 1970 1971 1972 1973 1974 1975 :Q76 1977 1978 1979 1980 1981 1982 1983 1954 1985 1Q86 1987 1988 Cr-oaa Do.. at.i c Product 366 374 375 383 397 388 381 399 380 401 400 367 344 :. . . 4E 351 331 343 345 329 Ter- of Tr"'ade Effect Croaa Do.eat i c IncOMe 0 366 4 378 381 5 12 395 5 400 387 -1 -4 377 399 0 -3 377 2 403 409 9 11 379 345 349 356 -0 330 -· 339 -15 330 -13 317 lt~port.a of Goods and NFS 33 36 :,4 33 34 34 27 36 33 51 73 65 37 35 36 30 35 37 32 E•porta of Goods and NFS 34 30 30 34 33 30 38 48 51 49 46 47 48 51 50 56 50 50 55 Expor"t.a Adjuat.ed by Ter- of Trade 34 34 35 46 39 29 34 48 48 51 55 59 49 52 55 55 47 34 42 Reaource C.p -1 2 -2 -13 -4 6 -7 -1~ -15 -0 18 6 -13 -17 -19 -25 -11 2 -10 Tot.a I Expend i tu rea 365 380 379 382 398 392 370 387 362 402 428 385 332 331 337 305 328 332 307 ConauiiPtion 286 295 295 303 319 314 287 289 281 314 333 314 276 282 294 271 289 287 265 Pub I ic 38 39 38 39 42 41 42 43 44 46 46 46 42 42 42 41 42 Private 248 257 257 264 278 273 245 246 237 269 287 268 234 240 251 230 246 Cr"oaa Do. . at.i c: Inveat..ent 78 85 84 79 78 79 83 98 81 88 95 71 56 50 43 34 40 45 41 Changes in Inventor i •• -0 2 2 4 2 3 1 -2 0 3 -3 4 0 -1 -4 -1 -1 2 Cro. . Oo. .atic Fixed Inveat.lltent 78 83 82 75 77 76 82 98 84 88 91 74 53 49 44 38 41 46 39 Pub I i c 30 32 32 26 27 30 37 45 39 37 36 32 24 23 16 13 17 Pr i vat.e 48 51 50 49 50 46 45 52 45 51 55 42 28 27 28 25 24 N N 0\ Cr-o- Dolll8ati c Sav i nga 79 83 86 92 83 73 90 110 96 88 76 65 69 67 62 59 51 43 51 Net Fact.or Inc~ PayiMnt.a -4 -2 -5 -6 -5 -5 -5 -5 -6 -8 -11 -22 -26 -29 -28 -23 -18 -18 -21 Net Tr"anafera -0 -0 -0 0 0 0 0 0 0 0 0 -0 0 0 0 0 0 -o 0 Cr"oaa Nlit ion a I S.v i nga 74 81 81 86 78 68 85 105 90 81 66 43 43 38 34 36 32 25 30 Cr-oaa ~'at i onal Pr-oduct 362 372 370 377 392 383 377 394 374 393 389 346 317 319 323 307 325 327 30'1 Cl"oaa National In co.. 362 377 376 389 397 382 372 394 371 395 399 357 319 320 327 307 321 312 296 Sour"ce: Tables 1.1 and 2.6. August. 1989  - 227 - Table 3.1: ARGENTINA - NOMINAL EXCHANGE RATES, 1970-1988 •/ (Annual Averages; Austrsles/USI) Exchange Rete ·---·- · - - - · - - - - · - - · - - - - - - - 1970 0.00000038 1971 0.00000046 1972 0.00000050 1973 0.00000050 1974 0.00000050 1975 0.00000235 1976 0.00001400 1977 0.00004080 1978 0.00007960 1979 0.00013170 1980 0.00018560 1981 0.00044170 1982 0.00269000 1983 0.01063000 1984 0.06765000 1985 0.60406000 1986 0.94303000 1987 2.14509083 1988 8.77030000 Source: 1970-87 dsts ere from IMF, International Financial Statistics (IFS) end correspond to lines wf (rf), representing exchange rates of members maintaining s multiple exchange rete system. 1988 date is from Central Bank of the Republic of Argentine (BCRA) end corresponds to the official exchange market. August 1989  Table 3.2: ARGENTINA - NOMINAL EXCHANGE RATES, 1980-1989 a/ (Mon~hly ~veroges; ~us~rales/USI) 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 Annual Ave~age 0.0001858 0.0004419 0.0021712 0.0105300 0.0676 0.6018 0.9439 2.15 8.77 -------------- January 0.0001670 0.0002020 0.0009970 0.0051400 0.0249 0.1999 0.8005 1.29 3.90 13.67 February 0.0001710 0.0002250 0.0010050 0.0057200 0.0278 0.2424 0.8005 1.39 4.33 14.49 March 0.0001750 0.0002340 0.0010870 0.0064000 0.0309 0.3063 0.8005 1.54 4.92 15.29 Apri I 0.0001790 0.0003100 0.0011820 0.0071700 0.0350 0.3963 0.8280 1.54 5.72 51.07 Hay 0.0001830 0.0003280 0.0014020 0.0077700 0.0409 0.5247 0.8491 1.59 6.74 121.97 June 0.0001860 0.0004400 0.0015160 0.0085200 0.0476 0.7492 0.8731 1.70 8.07 211.14 .juiy 0.0001890 0.0004710 0.0020670 0.0094400 0.0563 0.8005 0.9027 1.89 9.53 571.64 August 0.0001910 0.0005120 0.0023260 0.0106400 0.0684 0.8005 0.9650 2.11 12.00 September 0.0001940 0.0005580 0.0026820 0.0121100 0.0834 0.8005 1.0500 2.44 12.00 October 0.0001960 0.0006040 0.0030730 0.0145100 0.1042 0.8005 1.0935 3.23 12.22 November 0.0001980 0.0006510 0.0041150 0.0175700 0.1318 0.8005 1.1500 3.50 12.67 0.0007680 0.1606 0.8005 3.51 13.13 N December 0.0002000 0.0046020 0.0213700 1.2140 N 00 Source: 1980-87 data are from IMF, International Financial Statistics (IPS) and correspond to lines wf (rf) in IFS, representing exchange rates for members maintaining a dual exchange rate system. 1988-89 data are from Central Bank of the Republic of Argentina and correspond to the official exchange market. ~ugus~ 1989  - 229 - Tobie 3.3: ARGENTINA - REAL EFFECTIVE EXCHANGE RATE INDEX, 1970-1989 (1987=100; incre•ae = depreciation of Australes) (conti nuea ... ) CotiHrlercial Free Free Rate Average Rot.e Index •/ Rot.e Index b/ Premium Rate Index c/ 1970 78.1 78.1 O.Oll II 78.9 79.0 0.1ll III 83.2 83.2 0.0!1 IV 76.4 81.6 6.8ll 1971 71.5 77.4 8.3ll II 71.0 81.4 14.6ll III 75.8 95.5 25.9ll IV 73.1 129.1 76.6ll 1972 61.6 121.9 98.0ll II 55.1 119.4 116.6ll III 50.1 128.5 156.6ll IV 45.8 115.5 152.2'1 1973 41.4 100.1 141.6ll II 38.3 93.7 144.6ll III 39.9 87.0 118.0ll IV 38.9 84.3 116.6ll 1974 39.5 95.3 141.0ll II 39.5 108.0 173.4ll III 36.8 128.6 249.0ll IV 33.4 141.5 323.0ll 1975 67.5 161.4 139. 1!1 II 86.6 201.5 13:>.8ll III 97.7 183.2 87.4ll IV 122.1 231.2 89.4ll 1976 95.0 245.0 157.8ll II 72.9 129.4 77.5ll III 63.5 113.2 78.1ll IV 68.1 93.9 37.9ll 1977 89.5 92.3 3.1ll II 92.3 93.4 1.1!1 III 86.7 66.2 -0.6ll IV 64.1 84.4 0.3ll 1978 I 84.8 84.6 -0.3!1 II 79.1 78.6 -0. 7!1 III 73.0 72.5 -0.7ll IV 67.3 67.6 0.4ll 1979 61.5 60.9 -l.Oll II 56.7 56.3 -0.6ll III 51.4 51.1 -0.7ll IV 50.1 51.3 2.4!1  - 230 - Tobie 3.3: AROENTTNA - REAL EFFECTIVE EXCHANOE RATE It-DEX, 1970-1989 (1987=100; increase = depreciation of Australes) Commercial Free Free Rate Average Rate Index •I Rat.e Index bl Premium Rate Index cl 1980 48.0 48.1 0.2!1 II 45.3 45.4 0.2!1 III 43.8 43.9 0.2!1 IV 40.0 40.1 0.2!1 1981 I 39.8 39.9 0.2!1 II 52.2 53.3 2.1!1 III 52.2 75.9 45.4!1 IV 54.9 85.7 56.1!1 1982 65.9 65.0 -1.4!1 II 73.3 114.4 56.0!1 III 125.3 163.2 30.2!1 IV 94.9 134.0 41.3!1 1983 90.3 121.8 34.9!1 II 88.3 109.7 24. 2!1 III 78.6 125.4 59.6!1 IV 78.6 108.8 38.4!1 1984 79.8 116.0 45.3!1 II 71.7 10'1.6 52.8!1 III 68.7 94.8 38.0!1 IV 75.8 89.8 18.5!1 1985 77.7 97.5 25.4!1 II 81.5 93.0 14.1!1 III 89.4 105.9 18.5!1 IV 90.9 101.5 11.6!1 1986 91.4 101.9 11.5!1 II 89.3 95.3 6.7!1 III 88.8 97.5 9.8!1 IV 89.7 106.5 18.8!1 1987 96.2 121.0 25.9!1 II 97.2 1.24.5 28.1!1 III 95.8 129.0 34. 7!1 IV 107.3 131.2 22. 2!1 1988 107.9 144.4 33.8!1 II 104.7 129.9 24.1!1 III 90.4 109.2 20.8!1 94.9 IV 82.4 100.1 21.5!1 91.3 1989 76.2 135.6 78.0!1 88.6 Source: IBRO estimates based on dot• from IMF, International Financial Statistics, Nominal free exchange rates from FIB-. •I Trade weighted geometric average of bilateral real exchange rates with Argentina's l,ading trading partners, U!ling commercial nominal exchange rates and combined pr-ice indices. bl Trade weight~d exchange rate hased on the free mark~t rate. cl A trade-weighted overage of the real exchange rates opplying to different typea of merchandise trade. Auguat 1989  - 231 - Table 3.4: ARGENTINA - BALANCE OF PAYMENTS, 1970-1988 a/ (Hi II ions of US dollars) 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 Exports (FOB) 1773 1740 1941 3266 3930 2961 3918 5651 6401 7B10 8021 9143 7624 7836 8107 8396 6852 6360 9134 Imports (CIF) 1694 1868 1905 2230 3635 3947 3033 4162 3834 6700 10541 9430 5337 4505 4584 3814 4724 5820 5324 Trade Sa I a nee 79 -128 36 1036 295 -986 885 1489 2567 1110 -2520 -287 2287 3331 3523 4582 2128 540 3810 Non-Factor Services (net) -12 -2 78 68 164 172 272 387 -100 -762 -739 -705 43 -341 -205 -231 -573 -285 -298 Receipts 424 457 458 557 861 743 836 1117 1314 1791 2744 2402 1901 1676 1921 1846 1865 2112 2167 Payments 437 459 3BO 489 696 571 564 730 1414 2553 3483 3107 1858 2017 2125 2077 2438 2397 2465 Balance of Coods and NFS 67 -130 114 1104 459 -814 1157 1876 2467 348 -3259 -992 2330 2990 3318 4351 1555 255 3512 Net Factor Service Income -223 -256 -334 -394 -333 -475 -508 -618 -681 -920 -1531 -3700 -4719 -5408 -5712 ··5304 -4416 -4485 -5127 Net Interest Payments -273 -317 -298 -460 -465 -370 -405 -493 -947 -2965 -4403 -4983 -5273 ·-4879 -3934 -3927 -4467 Interest Receipts 769 907 1228 885 523 440 264 253 357 218 211 Interest Payments 1174 1400 2175 3850 4926 5423 5537 5132 4291 4145 4678 Direct Investment Income -60 -78 -36 -16 -27 -208 -276 -427 -584 -735 -316 -425 -439 -425 -482 -558 -660 Other Factor Services -16 -40 Current Transfers (net) -3 -3 -4 11 0 5 18 31 48 35 23 -22 32 16 3 0 2 -8 0 Balance on Current Account -159 -389 -223 721 126 -1284 667 1289 1834 -537 -4767 -4714 -2357 -2402 -2391 -953 -2859 -4238 -1615 Total MALT Loans (net) b/ 229 208 -1 -136 8 -12 1230 875 907 2648 3400 8557 7401 2610 -756 2786 5763 2653 446 Disbursement 1018 2311 2123 4265 4064 5809 11969 10981 10490 3595 7564 7437 Amortization 1030 1081 1248 3358 1416 2409 3412 3580 7880 4351 4778 1674 Public MALT Loans (net) 83 128 -87 -98 106 -83 1351 356 -332 823 2511 7088 5182 1927 2652 673 1363 2676 565 Disbursement 437 1956 1064 2509 1633 3425 8370 7202 7628 3518 980 1808 Amortization 520 605 708 2841 810 914 1282 2020 5701 866 307 445 Private MALT Loans (net) 146 80 86 -38 -97 71 -121 519 1239 1825 889 1469 2219 683 -3408 2113 4400 -23 -119 Oisbursment 581 355 1059 1756 2431 2384 3599 3779 2862 77 6584 5629 Amortization 510 476 540 517 606 1495 2130 1560 2179 3485 4471 1229 Tota I Short-term Loons (net) 185 -398 -74 157 -62 226 -923 31 -1215 1635 -1780 -8093 -5446 -935 2340 -2384 -4186 -720 -1899 Disbursement 3503 8690 19063 24833 8647 3976 3680 Amortization 4718 7055 20843 32926 14093 4911 1340 Public ST Loons (net) 341 187 329 432 -782 758 822 -238 -648 Disbursement 691 813 824 2512 1027 1282 1495 Amortization 350 626 495 2080 1809 524 673 Pr·i vate ST Loans (net) -1556 1448 -2109 -8525 -4664 -1693 1518 -482 -1251 Disbursement 2812 7877 18239 22321 7620 2694 2185 Amortization 4368 6429 20348 30846 12284 4387 667 Direct Investment 136 274 265 788 927 257 183 268 919 574 -19 1147 Net Use of IHF Resources 216 235 -115 0 0 0 0 0 1178 0 :L007 145 614 18 Capital Transactions n.e.i. c/ -253 -1244 -218 198 431 -437 -135 -610 811 746 496 0 609 409 Changes in Cross Reserves -259 420 110 -864 45 1107 35 -1998 -1998 -4442 2796 3458 755 -1445 -207 -l.871 563 1111 -1785 (- = increase) Memo Items: Total Net Public Borrowing 83 128 -87 -98 106 97 113 -23 9 1010 2840 2349 5489 6371 4052 :l1481 1782 3537 2718 Total Net Private Borrowing 331 -318 12 119 -159 95 -220 1310 -317 3273 -1220 -1538 -1773 -537 -9 -762 -386 -505 -1370 Source: Central Bank of the Republic of Argentina {BORA); IBRD estimates. a/ For 1970-1974, private aector transactions include 1 banking 1 sector. b/ 1985-1987 data on public and private disbursements and amortizations ore IBRD estimates, boaed on data provided by the Central Bank. c/ Valuation adjustments, SORa, changes in arrears and errors and omissions. "ugust 1989  Table 3.5: ARGENTINA - EXPORTS BY COMMODITY GROUPS, 1970-1988 (Mi II ions of US dollars) 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 19St. 19es 1486 1987 1988 TOTAL EXPORTS (FOB) 1773 1740 1941 3266 3931 2961 3916 5652 6400 7810 8021 9143 7624 78S6 e"-07 8396 6852 6360 9136 I- Livestock and animal produc~ 349 340 624 712 350 240 478 621 798 1154 891 889 882 680 460 425 561 655 744 II- Cereals, oilseeds and o~her agricultural products 598 634 447 986 1545 1285 1465 2071 2200 2775 2688 3799 2612 3540 3475 3306 2205 1373 1868 III- Ani .. ! and vego~ablo fa~ and oils 104 82 56 139 203 91 176 371 391 540 524 395 428 538 930 993 656 546 918 IV- Food, beverages, and tobacco 282 290 282 468 710 443 574 857 846 1014 1174 1084 885 1148 1115 855 1169 1337 1953 V- Mineral produc~ 14 16 13 13 26 22 28 38 74 69 315 658 581 372 365 657 184 125 183 VI- Cho•ical produc~ 54 57 72 85 120 112 133 156 200 242 367 376 34S 298 270 330 298 344 526 VII- Plastic products and rubber ..nufac~uroa 11 9 12 20 34 10 11 23 31 27 26 34 57 80 87 92 74 122 223 VIII- Leather, fur and ~heir .anufac~roa 111 77 130 153 141 91 201 307 433 670 555 490 364 300 331 318 381 419 443 IX- Wood products 0 0 0 0 0 0 0 0 4 4 6 10 41 N VJ X- Paper and paper producta 17 17 21 39 61 29 32 130 54 59 69 58 47 39 43 52 53 79 136 N XI- Tox~i loa and clo~ing 121 79 95 213 132 152 239 387 473 363 474 398 338 224 307 323 246 314 512 XII- Foot.woar, •~c. 0 1 3 21 30 5 7 23 22 9 3 3 7 6 2 2 9 38 37 XIII- Non..tallic Mineral products 2 3 4 9 13 8 12 24 35 34 28 23 21 9 10 12 20 38 45 XIV- Procious . .tala and products 0 2 1 0 0 5 11 6 6 24 27 6 0 0 0 0 0 XV- Basic . .t.wl .. nufac~r- 39 47 56 138 179 61 131 129 302 305 325 450 514 318 316 509 474 532 913 XVI- "-chiner1 and elec~rical equip ..nt 55 63 82 148 208 222 202 244 286 304 345 307 296 181 211 268 280 270 384 XVII- Tranapor~ oquip. .n~ 12 19 35 105 161 175 201 231 218 182 174 126 216 92 168 236 212 135 171 XVIII- Opt.ic and acient.ific inatru-nt. 3 4 5 10 12 11 15 19 22 47 27 18 14 6 9 10 14 14 23 XIX- Ar. . and a-.unition 0 0 0 2 2 0 2 4 2 2 0 2 XX- D~or products toES 0 0 3 3 3 3 5 6 6 7 3 4 2 3 2 5 6 11 XXI- Antiques and ar~ objects 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 XXII- Saaploa and -11 packages 1 2 2 2 2 4 2 2 Sou reo : Iti>EC . August 1989  Table 3.6: ARGENTINA- EXPORTS BY COtotiODITY GROUPS, 1970-1988 (Pe•cent) 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 TOTAL EXPORTS (FOB) 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100 0 100.0 100.0 100.0 100.0 100.0 I- Livestock and animal p•oducts 19.7 19.5 32.1 21.8 8.9 8.1 12.2 11.0 12.5 14.8 11.1 9.7 11.6 8.7 5.7 5.1 8.2 10.3 8.1 II- Ce•eala, oilaeeda and othe• ag•icultu•al p•oducts 33.7 36.4 23.0 30.2 39.3 43.4 37.4 36.6 34.4 35.5 33.5 41.6 34.3 45.2 42.9 39.4 32.2 21.6 20.4 III- Aninal and vegetable fats and oi Ia 5.9 4.7 2.9 4.3 5.2 3.1 4.5 6.6 6.1 6.9 6.5 4.3 5.6 6.9 11.5 11.8 9.6 8.6 10.0 IV- Food, beve•agea, and tobacco 15.9 16.7 14.5 14.3 18.1 15.0 14.7 15.2 13.2 13.0 14.6 11.9 11.6 14.7 13.8 10.2 17.1 21.0 21.4 V- Hinual P•oducts 0.8 0.9 0.7 0.4 0.7 0.7 0.7 0.7 1.2 0.9 3.9 7.2 7.6 4.7 4.5 7.8 2.7 2.0 2.0 VI- Chemical p•oducts 3.0 3.3 3.7 2.6 3.1 3.8 3.4 2.8 3.1 3.1 4.6 4.1 4.6 3.8 3.3 3.9 4.3 5.4 5.8 VII- Plastic p•oducts and •ubbe• ooanuhctu•ea 0.6 0.5 0.6 0.6 0.9 0.3 0.3 0.4 0.5 0.3 0.3 0.4 0.7 1.0 1.1 1.1 1.1 1.9 2.4 VIII- Leathe•, fu• and thei• .anufactu•es 6.3 4.4 6.7 4.7 3.6 3.1 5.1 5.4 6.8 8.6 6.9 5.4 4.8 3.8 4.1 3.8 5.6 6.6 4.8 IX- Wood p•oducts 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.2 0.4 N w X- Paper and paper products 1.0 1.0 1.1 1.2 1.6 1.0 0.8 2.3 0.8 0.8 0.9 0.6 0.6 0.5 0.5 0.6 0.8 1.2 1.5 w XI- Texti lea and clothing 6.8 4.5 4.9 6.5 3.4 5.1 6.1 6.8 7.4 4.6 5.9 4.4 4.4 2.9 3.8 3.8 3.6 4.9 5.6 XII- Footwea•, etc. 0.0 0.1 0.2 0.6 0.8 0.2 0.2 0.4 0.3 0.1 0.0 0.0 0.1 0.1 0.0 0.0 0.1 0.6 0.4 XIII- Nonmetallic mine•al p•oducts 0.1 0.2 0.2 0.3 0.3 0.3 0.3 0.4 0.5 0.4 0.3 0.3 0.3 0.1 0.1 0.1 0.3 0.6 0.5 XIV- Precious .. tala and products 0.0 0.1 0.1 0.0 0.0 0.0 0.1 0.2 0.1 0.1 0.3 0.3 0.1 0.0 0.0 0.0 0.0 0.0 0.0 XV- Basic metal ..nufacturea 2.2 2.7 2.9 4.2 4.6 2.1 3.3 2.3 4.7 3.9 4.1 4.9 6.7 4.1 3.9 6.1 6.9 8.4 10.0 XVI- Machinery and electrical equip~nt 3.1 3.6 4.2 4.5 5.3 7.5 5.2 4.3 4.5 3.9 4.3 3.4 3.9 2.3 2.6 3.2 4.1 4.2 4.2 XVII- Transport equipment 0.7 1.1 1.8 3.2 4.1 5.9 5.1 4.1 3.4 2.3 2.2 1.4 2.8 1.2 2.1 2.8 3.1 2.1 1.9 XVIII- Optic and scientific instruments 0.2 0.2 0.3 0.3 0.3 0.4 0.4 0.3 0.3 0.6 0.3 0.2 0.2 0.1 0.1 0.1 0.2 0.2 0.3 XIX- Arms and aMmunition 0.0 0.0 0.0 0.1 0.1 0.0 0.1 0.1 0.0 0.0 0.0 0.0 0.0 o.o 0.0 0.0 0.0 0.0 0.0 XX- Othe• p•oducts NES 0.0 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.0 0.0 0.0 0.1 0.0 0.0 0.0 0.1 0.1 0.1 XXI- Anti quea and art objects 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 XXII- Saaples and a .. I I packages 0.1 0.1 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.0 0.0 Sou •ce : IIIDEC • August 1989  Table 3. 7: ARCENT"INA - IMPORTS BY CIHIOOITY CROUPS, 1970-1988 (Mi II ions of US dollars) 1970 1971 1972 1973 197-4 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 TOTAL. IMPORTS (CIF) 1694 1868 1905 2230 3635 3947 3033 -4162 383-4 6700 10541 9430 5337 4564 4584 3814 4724 5817 5324 I- Livestock and animal products 12 9 6 5 14 17 -4 25 30 69 108 76 29 31 21 20 40 55 27 II- Cereals, oilaeeds and other agricultural products 69 62 10-4 183 128 133 119 160 142 257 316 229 153 120 136 124 245 176 160 III- Ani .. l and vegetable fats and oils 2 6 3 4 8 9 6 7 6 ll 14 10 9 9 10 6 7 6 8 IV- Food, beverages, and tobacco 24 26 21 23 39 40 26 43 53 164 206 18-4 67 45 67 53 68 69 48 V- Mineral products 127 168 109 211 607 637 651 809 583 1292 1257 1174 816 600 614 570 571 823 708 VI- Che•ical products 214 2-49 286 299 64-4 638 516 590 528 8-48 1125 1016 920 942 1001 799 1036 1040 1033 VII- Plastic products and rubber manufac~ures 54 57 65 75 168 166 130 14-4 169 352 457 40-4 271 299 275 182 285 313 309 VIII- Leather, fur and their manufactures 0 0 0 0 0 2 5 9 17 7 3 3 2 3 4 5 IX- Wood products 72 72 51 57 99 102 36 53 54 123 193 134 65 63 62 33 55 52 43 N l.oJ X- Paper and paper products 111 105 9-4 116 201 199 139 159 181 246 398 370 198 150 Ql 75 123 142 106 """" XI- Textiles and clothing 43 46 43 39 79 65 47 -43 49 193 430 433 151 130 145 71 110 117 80 XII- Foot.wear, etc. 2 0 0 0 0 2 19 57 41 6 2 2 2 XIII- Non ..tallic ~ineral products 22 2-4 23 22 27 36 34 34 41 88 170 123 46 50 42 35 47 56 53 XIV- Precious . . tala and products 8 24 3 10 10 7 6 6 12 23 16 8 7 10 5 5 5 XV- Basic . . tal manufactures 368 363 395 549 802 997 505 516 380 608 971 681 538 492 514 325 396 567 655 XVI- Machinery and electrical equipMent 418 481 524 469 551 641 607 998 1097 1417 2994 2913 1478 1120 1061 1041 1197 1725 1528 XVII- Transport equipment 89 110 126 111 14S 149 14-4 -455 335 728 1114 991 341 304 349 294 283 351 256 XVIII- Optic and scientific instruments 51 58 48 62 105 96 55 10-4 154 199 518 457 196 172 157 157 224 288 261 XIX- Arme and ammunition 0 0 0 0 0 0 0 0 0 6 5 2 0 0 XX- Other products nea. 7 7 -4 4 8 10 6 14 22 67 170 138 35 22 22 20 24 25 43 XXI- Antiques and art objects 0 0 0 0 0 0 0 0 0 0 14 0 0 XXII- So~ lea and smal I packages 0 0 0 0 0 0 0 0 4 4 0 3 Source: It«>EC. August 1989  Table 3.8: ARCENTINA - IMPORTS BY CIM10DITY awui'S, 1970-1988 (Pe~c:ent) 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 19B4 1985 1986 1987 1988 TOTAL IMPORTS (CIF) 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.C 100.0 100.0 100.0 100.0 100.0 100.0 I- Liveatoc:k and ani .. l p~oduc:ta 0.7 0.5 0.3 0.2 0.4 0.4 0.1 0.6 0.8 1.0 1.0 0.8 0.5 0.7 0.5 0.5 0.8 0.9 0.5 II- c.~eala, oil . .eda and other agricultural producta 4.1 3.3 5.5 8.2 3.5 3.4 3.9 3.8 3.7 3.8 3.0 2.4 2.9 2.6 3.0 3.3 5.2 3.0 3.0 III- Ani .. l and vegetable fata and oila 0.1 0.3 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.1 0.1 0.2 0.2 0.2 0.2 0.2 0.1 0.2 IV- Food, beverages, and tobacco 1.4 1.4 1.1 1.0 1.1 1.0 0.9 1.0 1.4 2.4 2.0 2.0 1.3 1.0 1.5 1.4 1.4 1.2 0.9 V- Hine~•l p~oducta 7.5 9.0 5.7 9.5 16.7 16.1 21.5 19.4 15.2 19.3 11.9 12.4 15.3 13.1 13.4 14.9 12.1 14.1 13.3 VI- Che•i c:al p~oduc:ta 12.6 13.3 15.0 13.4 17.7 16.2 17.0 14.2 13.8 12.7 10.7 10.8 17.2 20.6 21.8 20.9 21.9 17.9 19.4 VII- Plaatic: p~oduc:ta and ~ubb•~ ..nufactu~•• 3.2 3.1 3.4 3.4 4.6 4.2 4.3 3.5 4.4 5.3 4.3 4.3 5.1 6.6 6.0 4.8 6.0 5.4 5.8 VIII- Leather, fur and tneir ..nufacturea 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.1 0.1 0.2 0.1 0.1 0.1 0.1 0.1 0.1 0.1 IX- Wood p~oduc:ta 4.3 3.9 2.7 2.6 2.7 2.6 1.2 1.3 1.4 1.8 1.8 1.4 1.2 1.4 1.4 0.9 1.2 0.9 0.8 N w X- Paper and paper producta 6.6 5.6 4.9 5.2 5.5 5.0 4.6 3.8 4.7 3.7 3.8 3.9 3.7 3.3 2.0 2.0 2.6 2.4 2.0 V1 XI- Textiles and c:lothing 2.5 2.5 2.3 1.7 2.2 1.6 1.5 1.0 1.3 2.9 4.1 4.6 2.8 2.8 3.2 1.9 2.3 2.0 1.5 XII- Foote.. ~, etc:. 0.1 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.3 0.5 0.4 0.1 0.0 0.0 0.0 0.0 0.0 0.0 XIII- Non•ete IIi c: •i ne~al p~oducta 1.3 1.3 1.2 1.0 0.7 0.9 1.1 0.8 1.1 1.3 1.6 1.3 0.9 1.1 0.9 0.9 1.0 1.0 1.0 XIV- Prec:ioua ..tala and product. 0.5 1.3 0.2 0.0 0.3 0.3 0.2 0.1 0.2 0.2 0.2 0.2 0.1 0.2 0.2 0.1 0.1 0.1 0.0 XV- S.aic . . tal -nufacturea 21.7 19.4 20.7 24.6 22.1 25.3 16.7 12.4 9.9 9.1 9.2 7.2 10.1 10.8 11.2 8.5 8.4 9.7 12.3 XVI- Machinery and electrical equipment 24.7 25.7 27.5 21.0 15.2 16.2 20.0 24.0 28.6 21.1 28.4 30.9 27.7 24.5 23.1 27.3 25.3 29.7 28.7 XVII- Transport equipment 5.3 5.9 6.6 5.0 4.0 3.8 4.7 10.9 8.7 10.9 10.6 10.5 6.4 6.7 7.6 7.7 6.0 6.0 4.8 XVIII- Optic and scientific instruments 3.0 3.1 2.5 2.8 2.9 2.4 1.8 2.5 4.0 3.0 4.9 4.8 3.7 3.8 3.4 4.1 4.8 5.0 4.9 XIX- Arms and ammunition 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 XX- Other products nes. 0.4 0.4 0.2 0.2 0.2 0.3 0.2 0.3 0.6 1.0 1.6 1.5 0.7 0.5 0.5 0.5 0.5 0.4 0.8 XXI- Antiques and art objects 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.0 o.o 0.0 0.0 0.0 0.0 0.0 XXII- Samples and smal I packages 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.0 0.0 Sourc:e: INDEC. August 1989  Table 3.9: ARGENTINA - DIRECTION OF TRADE, 1970-1988 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1982 198" :._ ~)!:': 2 99.[ 1987 1988 EXPORTS (Percent of Tota I Exports) ----------------------------- LAFTA 20.6 21.0 24.9 24.4 23.7 25.5 26.3 24.3 23.6 25.8 21.6 19.9 19.9 13.2 17.1 17.7 22.6 20.7 18.7 EEC 46.7 45.8 48.3 40.2 33.7 28.9 32.4 31.4 33.5 32.7 27.1 21.4 21.0 19.9 24.1 20.9 28.7 27.4 30.2 u.s. 8.7 9.1 9.5 7.8 8.1 6.4 6.9 6.8 8.4 7.3 8.7 9.2 13.2 9.7 10.5 12.0 9.9 14.1 12.9 Japan 6.2 5.1 3.0 4.1 4.5 4.6 5.3 5.4 6.0 5.0 2.6 1.8 3.7 4.8 3.3 4.2 5.7 3.5 3.6 Rest of the world 17.8 19.0 14.3 23.5 30.0 34.6 29.1 32.1 28.5 29.2 40.0 47.7 42.2 52.4 45.0 45.2 33.1 34.3 34.6 IMPORTS (Pe,cent of Total Impo,ts) ----------------------------- LAFTA 22.0 20.9 19.6 19.5 21.7 22.9 26.8 23.6 21.7 21.8 20.3 20.0 28.8 32.1 35.8 34.0 33 8 29.6 33.3 EEC 30.8 30.6 35.8 30.0 27.3 27.4 27.3 26.3 31.1 26.6 25.9 25.8 22.1 23.8 22.6 26.5 28 8 31.6 29.0 u.s. 24.7 22.2 20.2 21.4 16.8 16.2 17.7 18.5 18.4 21.1 22.4 22.0 21.7 21.6 18.3 18.0 17.5 16.1 17.1 Japan 5.0 8.4 7.5 11.5 10.8 12.5 8.2 8.7 7.0 5.3 9.3 10.2 8.0 6.8 8.2 7.0 7.1 7.6 6.6 Rest of the wo,ld 17.5 17.9 16.9 17.6 23.4 21.0 20.0 22.9 21.8 25.2 22.1 22.0 19.4 15.7 15.1 14.5 12.8 15.0 14.0 N w Source: Central Bank of the Republic of Argentina. (J'\ August 1989  Table 3.10: ARGENTINA - INTERNATIONAL RES~VES. 1971-1988 (Millions of US dollars, end of period) 1971 1972 1973 1974 1975 1976 l9n 1978 1979 1980 1981 1982 1983 1·;.o.:j ~C.E.5 198£ 1987 1988 TOTAL NET INT~TIONAL RES~VES 71.7 -84.5 536.7 587.2 -520.1 -556.2 1659.4 4905.3 9347.2 6724.3 3165 -3001 -5S73 -7317 -7873 -9948 -14049 -15429 Central Bank 194.1 135.6 801.3 858.4 -285.9 -86.1 2134.5 5284.0 9585.5 6737.3 2735 -1953 -4293 -5796 -6327 -8444 -13393 -15069 A. ASSETS 305.2 500.2 1364.4 1319.5 464.2 1623.9 3424.2 5305.4 9671.9 6743.3 3222 2507 2671 2632 4801 4287 3018 4979 Cold •/ 89.7 151.7 168.7 168.7 ~.7 rn.1 ~.7 ~-6 ~-6 ~.o 185 185 1421 1421 1421 1421 1421 1421 SORa 2.8 19.3 80.7 101.8 40.9 90.7 88.9 209.0 315.9 325.3 401 23 26 13 6 38 Reserve Position in the IHF 110.0 13.7 173.0 202.5 339.0 276 100 Foreign Exchange 69.8 293.7 1068.4 1027.7 246.8 1353.4 3063.4 4573.3 8878.7 6055.0 2584 2406 1172 1238 3273 2717 1410 3363 Bilateral (LAFTA) b/ 32.9 35.5 46.6 7.6 7.8 11.1 95.2 169.5 91.2 -161.0 -224 -184 55 -53 94 143 187 157 B. LIABILITIES 233.5 584.7 827.7 732.3 984.3 2180.1 1764.8 400.1 324.7 100.0 502 6058 9054 10904 13386 14857 18637 21988 Central Bank Liabilities 111.1 364.6 563.1 461.1 750.1 1710.0 1289.7 21.4 86.4 6.0 487 4460 6964 8428 11128 12731 16411 20048 IHF 188.9 209.9 77.8 293.4 528.7 414.2 1173 1139 2289 2719 3825 3678 Pr i vat..e Banks 99.0 167.1 337.3 267.8 387.0 1008.1 856.4 0 0 0 0 0 1250 1850 35'lf. 5059 6790 7479 N US banks 62.0 137.3 105.9 69.6 533.3 464.3 w European banks 80.1 200.0 161.9 104.7 454.8 392.1 -....! Other banks 99.0 25.0 212.7 20.0 Other 2.3 2.7 3.1 3.6 3.9 1.2 0.6 0.2 6.0 3 540 91 339 1178 1256 1744 2680 Export letters discounted abroad 6.7 5.5 Bilateral (LAFTA) 9.8 5.9 12.8 105.2 60.3 172.0 18.5 21.2 86.4 Foreign Currency Swaps 484 1380 1228 937 730 639 571 235 Arrears 2540 3222 4163 1718 544 583 2691 Paris Club 1617 2514 2898 3285 Treasur-y Liabi I ities 122.4 220.1 264.6 271.2 234.2 470.1 475.1 378.7 238.3 94.0 15 1598 2090 2476 2258 2126 2226 1940 External Bonds 79.8 166.3 244.6 255.1 222.0 461.8 470.5 376.1 236.6 94.0 15 1598 2090 2476 2258 2126 2226 1940 Other 42.6 53.8 20.0 16.1 12.2 8.3 4.6 2.6 1.7 0.0 Valuation and other adjustments c/ 81.0 445 550 810 955 712 622 1570 1580 Source: Centra I Bank of the Repub I i c of Argentina (BCRA), and IHF. a/ Before 1982, valued at USI42 per fine troy ounce; after 1982, valued at USS 325 per troy once. b/ Latin American Free Trade Association (LAFTA). For 1984: net bilateral. c/ Currency revaluation and statistical discr-epancies. August 1989  - 238 - Table 3.11: ARGENTINA - INTERNATIONAL PRICES, TRADE VOLUME INDICES AND THE TERMS OF TRADE, 1970-1988 ---- Export Import Export Import Terms Fuel MUV Volume Volume Price Price of Index b/ Index cf Index a/ Index a/ Index a/ Index a/ Trade 1970 100.0 100.0 100.0 100.0 100.0 100 100.0 1971 86.1 109.6 114.0 100.6 113.3 120 105.4 1972 83.8 107.9 130.6 104.2 125.3 140 115.1 1973 101.9 103.4 180.7 127.3 141.9 200 132.8 1974 97.7 107.3 226.8 200.0 113.4 800 162.2 1975 81.3 108.0 205.4 215.7 95.2 780 180.3 1976 111 .a 85.1 188.3 210.5 89.5 840 183.0 1977 164.6 118.7 193.7 207.0 93.6 920 200.8 1978 182.1 105.0 198.2 215.6 91.9 920 230.9 1979 173.7 156.2 253.6 253.2 100.2 1340 261.8 1980 149.6 242.2 302.3 256.9 117.7 2200 287.3 1981 165.8 223.0 311.0 249.6 124.6 2460 288.8 1982 166.6 128.4 258.2 245.4 105.2 2240 284.6 1983 189.9 116.4 232.7 228.4 101.9 2020 277.2 1984 185.9 121.4 246.0 223.0 110.3 1980 272.6 1985 215.8 97.5 219.4 231.0 95.0 1920 275.3 1986 199.1 116.1 194.0 240.1 80.8 980 325.9 1987 188.2 127.8 186.4 268.7 69.4 1240 357.5 1988 215.3 109.3 221.2 287.5 76.9 386.1 ·---------· --·- Source: Central Bank of the Republic of Argentina (BCRA), and IBRD estimates. a/ Indices refer to merchandise trade. b/ Based on current USI petroleum index. cf Manufacturing Unit Value index of manufactured exports from five industrial market economies to developing countries on a cif basis. August 1989  - 239 - Tobie 4.1: ARGENTINA - EXTERNAL DEBT BY BORROWER, 1975-19B8 (Millions of US dollo,a; end of pe,iod) 1975 1976 1977 1978 1979 1980 1981 1982 1983 ol 1984 198S· 1986 1987 1988 cl TOTAL EX1 ERNAL DEBT b I 7875 8280 9678 12496 19034 27162 35671 43634 45087 46903 48312 51422 58299 58810 ---------------------- PUBLIC SECTOR 4021 5189 6044 8357 9960 14459 20024 28616 33175 36139 39868 44722 ------------- A. General Government 1168 1425 1791 3759 4418 6344 9545 15951 17762 National Government 1117 1381 1755 3688 4024 5471 8361 14869 17156 Central Administration 733 991 1298 3024 2592 3100 5134 11417 13345 Binational Entities 748 1244 1373 1509 1529 Decentralized Agencies 384 390 457 664 684 1127 1854 1943 2282 Provincial Governments 45 36 30 58 367 829 1053 987 598 Municipal Authorities 6 8 6 13 27 44 131 95 8 B. Public Enterprises 921 1047 848 944 965 1370 1772 2682 11007 c. Mixed Enterprises 1170 1117 1972 3274 3983 5704 7324 7864 1457 D. Banhs 762 1600 1433 380 594 1041 1383 2119 2949 Central Bank 705 1547 1271 299 2427 Othe' Officio! Bonk• 57 53 162 380 594 1041 1383 1820 522 PRIVATE SECTOR 3854 3091 3634 4139 9074 12703 15647 15018 11912 10764 8444 6700 -------------- A. Commercial Debt 1441 1182 1393 1796 3279 3791 2759 1919 2160 B. Financial Debt 2413 1909 2241 2343 5795 8912 12888 13099 9752 Source: Central Bonk of the Republic of Argentina {BORA) and IBRO estimates. •I 1983 figu,ea o'e IBRD estimates. bl Includes IMF. c/ PF"eliminary estimate. August 1989  - 240 - Table 4.2: ARGENTINA - EXTERNAL DEBT BY CREDITOR, 1983-1988 •I bl (Millions of US dollars; end of period) 1988 1984 1986 1986 1987 1988 dl Total Debt 46087 46908 48812 61422 68299 68810 Medium and Long Term 86863 40383 44126 61422 64724 68810 Short Term 8284 6670 4186 NA 3676 NA el MLT Debt Outstanding and Disbursed (DOD) 86868 40388 44126 61422 68299 68810 Commercial Banks 28412 80063 32681 87607 40774 42089 fl Bilateral 1664 3290 8621 6182 6809 6686 Bonds 4208 4332 3817 8688 8628 2986 IBRD 688 649 622 920 2146 2266 IDB 878 986 1206 1406 2186 2268 IMF 1178 1178 2180 2720 3867 3673 MLT Disbursements (Gross) 8693 14961 8671 7984 6027 4298 Commercial Banks 6106 12698 6684 6446 2202 2662 Bilateral cl 704 1814 610 1288 671 477 Bonds 461 196 0 188 sa 0 IBRD 70 96 144 408 796 487 IDB 89 147 826 162 123 281 IMF purchases 1178 0 1007 647 1263 641 MLT Amortiztions 4209 11471 4778 2076 2490 2468 Commercial Banks 8214 11067 8966 688 1268 948 Bilateral 610 178 179 268 187 0 Bonds 400 72 616 646 179 666 IBRD 40 80 71 110 188 188 IDB 46 84 67 77 94 168 IMF repurchases 0 0 0 402 689 628 MLT Disbursements (Net) 4884 3480 8798 6908 2687 1886 Commercial Banks 2892 1641 2628 4868 944 1619 Bilateral 194 1686 331 980 884 477 Bonds 61 124 -616 -468 -96 -666 IBRD 30 16 73 298 662 299 IDB 44 68 269 86 29 78 IMF 1173 0 1007 146 614 18 Interest Payments 6423 6637 6182 4291 4862 6198 Commercial Banks 4427 3802 3098 2998 3467 Bilateral 189 297 122 482 613 Bonds 437 449 320 490 323 IBRD 36 66 46 76 91 164 IDB 66 80 72 108 180 168 IMF charges 74 90 140 169 121 282 Short Term 268 826 409 0 311 Source: IBRD staff estimates based on data from the Central Bank of the Republic of Argentina, the IMF and the IDB. •I Disbursments and amortizations may not explain changes in debt stock from year-to-year due to valuation changes. bl Figures adjusted by the changes in cross-rates between US dollar and other currencies. cl Bilaterals for 1986 includes new disbursements from bilsterals (USS mill. 288) plus USS mill. 180 capita~ized interest plus USS mill. 302 in interest arrears. dl Preliminary estimate. •I Short term debt is included in medium and long term debt for 1986 and 1988. fl For 1988-1989 all arrears are included in commercial banks DOD. August 1989  - 241 - Tobie 5.1, AROB'fTINA- PUBLIC SECTOR REVEHJES, EXPEH>IlUIES AND FINANCING, 1970-1987 (Thouaanda of Australes) 1970 1971 1972 1973 1974 1975 1978 1977 1978 1979 1980 1981 1982 1983 1~84 1985 1986 1987 •I 1- Current Revenues 2.77 3.51 5.44 9.62 14.93 34.6 210 685 1896 4722 10065 18954 47622 233246 1738773 160:!0000 27677400 54660QOO Tax Revenues 71 2.13 3.16 5.85 9.60 19.5 120 402 1093 2931 6590 11139 27644 126655 958400 8714100 16298800 31218900 Non-tall Revenues 1.06 1.38 2.28 3. 77 5.32 15.2 90 283 803 1791 3475 7815 19978 106591 780373 7315900 11318600 23442000 II- Cur.-ent E•penditures 2.20 3.09 4.81! 9.6?. 14.85 43.7 202 514 1612 4256 9745 21540 58512 280173 20!5951 160•10300 26268900 59994600 Personnel E•pendi turea 1.04 1.46 2.?.8 4.94 7.48 22.7 79 197 609 1640 3786 6866 14555 87050 728478 SOSS200 8942700 12832700 Cooda and Serv i r.ea 0.55 0.71 1.23 2.11 2.65 8.8 63 146 416 1023 1998 4129 14139 74172 487050 48:>0300 7098800 14732900 Interest on Debt 0.06 0.11 0.21 0.33 0.58 1.8 15 42 159 444 971 4052 15311 40705 261946 21!>7500 2833900 7452800 Om11eati c 0.03 0.05 0.11 0.22 0.38 1.0 12 29 129 372 747 2830 8438 6404 42191 309700 238500 1475800 Foreign 0.03 0.06 0.10 0.11 0.20 0.8 4 13 31 73 223 1222 6872 34301 219755 184-7800 2595400 5977000 Other Current Expend i tur-ea 0.01 0.01 0.04 0.00 0.38 0.4 2 4 37 45 358 632 !852 7227 20124 2:'8100 489400 1918600 Current i Capital lranafera 0.54 0.81 1.12 2.24 3.77 10.0 43 125 391 1104 2632 5861 12656 71019 518353 3779200 6904100 24047600 Economi •• 0.00 0.00 0.00 0.00 0.00 0.0 0 0 0 0 0 0 0 0 0 0 0 -1040000 0.57 0.42 0.57 0.00 0.08 -9.1 8 171 284 466 320 -2586 -10890 -46927 -277178 -10300 1408500 -5333700 Capital Account IV- Cap i t,al Revenues 0.03 0.04 0.06 0.03 0.24 0.2 8 33 44 89 136 726 1555 12542 99800 117800 456300 V- Cap i hI Expend i turea 0.75 1.01 1.80 2.63 4.28 12.8 99 277 656 1497 2694 5284 12638 66116 413056 2796900 5283600 9102200 Fixed Investments 0. 70 0. 96 1. 71 2. 48 3. 74 12.1 87 246 609 1409 2514 4515 11716 59837 377055 2580000 4865000 8169500 Mach j nery and Equipment 0.25 0.31 0.59 0.85 1.19 3.9 28 80 211 489 675 1356 3390 16405 122900 663800 1146600 3145500 Construction 0.45 0.64 1.13 1.64 2.56 8.2 59 166 399 921 1839 3160 8326 43432 254155 1916200 3718400 5024000 Changes in Inventories 0.00 0.00 0.00 0.00 0.00 0.0 0 0 0 0 so 130 182 733 4381! 22200 38300 65000 Financial Invest"'enta 0.05 0.05 0.09 0.15 0.54 0.8 12 32 46 81! 130 638 740 5546 31613 !94100 380300 1077700 Economies 0.00 0.00 0.00 0.00 0.00 0.0 0 0 0 0 0 0 0 0 0 0 0 -210000 VI-Financinq Due 0.00 0.00 0.00 0.00 0.00 0.0 0 0 0 0 0 0 0 0 0 261000 430500 379400 to F.connmi c Emergency VII-Capital from Previous Period 0.00 0.00 0.00 0.00 0.00 0.0 0 0 0 60 166 474 494 1713 10357 3·4600 130200 520900 VIIJ-C:ontribut.ions from: 0.31 0.48 0.88 2.11 3.65 15.8 72 115 288 959 1688 4077 10574 113857 566242 513MOO 9398700 1345?100 Central Administ.ration 0.23 0.40 0. 75 1. 75 2.83 13.6 62 79 154 457 971 2663 7174 96484 461760 4062800 7468500 10920100 Special Accounts 0.05 0.06 0.11 0.34 0. 77 2.1 10 35 125 323 669 1324 3183 16446 103682 106•1600 1881700 249~800 Decentr•l i z4d Agencies 0.03 0.02 0.01 0.02 0.05 0.1 0 2 16 48 90 218 927 800 0000 48500 45200 Provinces l HCBA 0.00 0.00 0.00 0.00 0.00 0.0 0 0 0 51 0 0 0 0 0 0 0 0 Pub! ic E=nterprisea 0.00 0.00 0.00 0.00 0.00 0.0 0 0 0 Ill 0 0 0 0 0 0 0 0 s.,ci•l Security System 0.00 0.00 0.00 0.00 0.00 0.0 0 0 0 0 0 0 0 0 0 0 0 0 IX- Contributions to: 0.30 0.48 0.89 2.11 3.65 15.8 72 116 288 960 1681! 4078 10573 113857 566242 513!1400 9398700 13459100 Centr•l Ad~t~inistr•tion 0.00 0.00 0.00 0.00 0.00 0.0 0 0 0 158 0 0 0 0 0 0 0 88700 Special Accounts 0.01 0.07 0.14 0.08 0.23 1.3 7 14 55 201 376 904 2418 10735 62608 443600 826800 2142500 lJec4ntr•l ized Agencies 0.11 0.15 0.27 0.63 0.97 2.5 13 29 77 175 388 860 2351 20260 102669 7lolli300 1163500 3183500 Provinces l MCBA 0.07 0.11 0.28 0.84 1.48 8.8 26 33 87 224 488 !465 2987 34831 202171 2240500 4646500 0 Pub I i c Ent-.rp r i sea 0.12 0.15 0.19 0.53 0.95 3.2 25 40 68 197 426 850 2817 48031 160236 !16ESOO !688200 6558400 Soci•l Security System 0.00 0.00 0.00 0.04 0.01 0.1 0 0 5 10 0 0 0 38558 570500 !073700 1486000 X- Revenues (I+IV+VI+VII+VIII) 3.11 4.03 6.38 11 76 18.81 50.7 284 809 2217 5786 12008 23641 59417 350371 2327914 21560800 37754600 6Q.76600 XI- Expend i turea (II•V•IX) 3 25 4. 59 7. 57 14 37 22.77 72.3 373 907 2556 6713 14127 30902 81723 460146 2995249 23972600 40951200 82555900 XJI- Fin•ncing Needs (XI-X) 0.15 0.56 1.19 2.60 3.96 21.6 89 98 339 927 2119 7260 22307 109775 667335 2411BOO 3196600 13079300 Xl 1!-Net Fi n•nc i ng 0.07 0.24 0.39 0.34 0.90 2.7 31 59 287 789 847 4399 9305 -11184 -52068 231400 2809600 8851400 Net Use of Credit 0.07 0.24 0.39 0.34 0.90 2.7 31 59 287 789 965 4532 9441 -9199 -51438 250100 2854800 9044400 Domeati c 0.01 0.09 0.18 0.29 0.47 2.5 23 32 185 538 433 2175 7485 -12923 -30804 -117300 -100800 1633600 Credit 0.07 0.17 0.32 0.68 1.00 3.7 28 56 223 777 753 3646 13494 884 $141 55000 77r>OOO 3812900 Amort.i z•tion 0.06 0.08 0.14 0.39 0.53 1.2 4 23 37 239 320 1471 6009 13807 34145 172300 875800 2179300 Foreign 0.06 0.15 0.22 0.05 0.43 0.2 8 26 102 250 532 2357 1955 3724 -20634 367400 2955600 7410800 Credit 0.13 0.23 0.46 0.52 0.77 1.3 15 43 149 551 83& 5132 23883 6!025 462899 6053100 6438100 11242400 Amort,iz•tion 0.07 0.08 0.24 0.47 0.34 1.2 7 17 47 301 303 2774 21928 57301 483533 5685700 3482500 3831600 b. Net Use of Adv•ncea 0.00 0.00 0.00 0.00 0.00 0.0 0 0 0 0 -118 -133 -!3.5 -1985 -630 -18700 -45200 -193000 Credit 0.00 0.00 0.00 0.00 0.00 0.0 0 0 0 0 0 146 105 92 719 100 900 900 Oebi t 0.00 0.00 0.00 0.00 0.00 0.0 0 0 0 0 118 280 240 2077 !349 18ll00 4E100 193900 XIV- Ovoroll Bolonco (X!U-XII) -0.07 -0.33 -0.80 -2.26 -3.06 -18.9 -58 -39 -52 -138 -1272 -2861 -13001 -120959 -719403 -2180•100 -387000 -4227900 0.30 0.30 0.37 1.58 2.72 13.9 26 51 45 -43 1017 2911 10767 113321 326936 0 0 Net V•ri•tion in P•ssive Fin•ncing-0.22 0.03 0.42 0.58 0.34 5.0 32 -12 7 181 256 -SO 2234 7638 392467 387000 4227900 Source: Ministry of Econottty. •I Excludes provincial govern~11enta after 1986. June 1989  - 242 - Toblo 5.2: ARCJENTINA- PUBLIC SECTOR REVENJES, EXPEN:>IT~ AH> FINANCING, 1Q70-1Q87 (Percent. of CDP) 1Q70 1Q71 1Q72 1Q73 1Q74 1Q75 1Q76 1Q77 1Q78 1Q7Q 1Q80 1Q81 1Q82 1Q83 1Q84 1Q85 1Q86 1Q87 •I Current Account I- Current Revenues 31.5 28.0 26.3 27.1 30.7 24.2 27.8 32.7 36.2 33.1 35.5 34.6 32.3 34.2 32.Q 40.5 37.2 30.8 Ta• Revenues 1Q.5 17.0 15.3 16.5 1Q.7 13.6 15.Q 1Q.2 20.Q 20.6 23.3 20.3 18.7 18.6 18.1 22.0 21.Q 17.6 Non-ta11 Revenues 12.0 11.0 11.0 10 10.Q 10.6 11.Q 13.5 15.3 12.6 12.3 14.3 13.5 15.6 14.8 18 5 15.3 13.2 II- Current Expenditures 25.1 24 7 23.6 27. 30.5 30.6 26 7 24.6 30.8 2Q 34.4 3Q.3 3Q.6 41.0 38.2 40 35.4 33.Q Personnel E11pend i tur-es 11.8 11.7 11.0 13.Q 15.4 15.Q 10.4 Q.4 11.6 11.5 13.4 12.5 Q Q 12.8 13.8 12.8 12.0 7.2 Goods and Services 6.3 5.6 6.0 5.Q 5.4 6.2 8.3 7.0 8.0 2 7.1 7.5 Q.6 10.Q Q.2 12.2 Q.6 8.3 Interest on Debt 0. 7 O.Q 1.0 O.Q 1.2 .3 2.0 2.0 3.0 3.1 3.4 7.4 10.4 6.0 5.0 5.4 3.8 4.2 Oomesti c 0.4 0.4 0.5 0.6 0.7 0.7 1.5 1.4 2.5 2.6 2.6 5.2 5.7 O.Q 0.8 0.8 0.3 0.8 Foreign 0.3 0.5 0.5 0.3 0.4 0.5 0.5 0.6 0.6 0.5 0.8 2.2 4.7 5.0 4.2 7 3.5 3.4 Other Current E•pend i tures 0.1 0.1 0.2 0.0 0.8 0.3 0.3 0.2 0.7 0.3 1.3 1.2 1.3 1.1 0.4 0.6 0.7 1.1 Current I. Capital Transfers 6.1 6.4 5.4 6.3 7.8 7.0 5.6 6.0 7.5 7.7 Q.3 10.7 8.6 10.4 Q.8 Q.5 Q.3 13.6 Economies 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -0.6 III- Suing• 6.5 3.3 2.7 0.0 0.2 -6.3 1.1 8.2 5.4 3.3 1.1 -4.7 -7.4 -6.Q -5.2 -0.0 l.Q -3.0 Capita I Account IV- Capital Revenues 0.3 0.3 0.3 0.1 0.5 0.2 0.2 0.4 0.6 0.3 0.3 0.2 0.5 0.2 0.2 0.3 0.2 0.3 V- Capital E~tpend i turea 8.6 8.1 8.7 7.4 8.8 8.Q 13.0 13.2 12.5 10.5 Q.5 Q. 7 8.6 Q. 7 7.8 7. 7.1 5.1 Fi ••d Investments 8.0 7.7 8.3 7.0 7.7 8.5 11.5 11.7 11.6 Q.Q 8.Q 8.2 7.Q 8.8 7.1 6 5 6.5 4.6 Machinery and Equipment 2.8 2.5 2.8 2.4 2.4 2.8 3.7 3.8 4.0 3.4 2.4 2.5 2.3 2.4 2.3 .7 1.5 1.8 Conatructi on 5.1 5.1 5.4 4.6 5.3 5.7 7.8 7.Q 7.6 6.5 6.5 5.8 5.6 6.4 4.8 4.8 5.0 2.8 Changes in Inventor i ea 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.2 0.2 0.1 0.1 0.1 0.1 0.1 0.0 Financial Investments 0.6 0.4 0.4 0.4 1.1 0.4 1.5 1.5 O.Q 0.6 0.5 1.2 0.5 0.8 0.6 0.5 0.5 0.6 Economies 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -0.1 VI-Financing Due 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.7 0.6 0.2 to Economic Emergency VII-Capital from Previous Period 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.4 0.6 O.Q 0.3 0.3 0.2 0.1 0.2 0.3 VIII-Contributions from: 3.6 3.8 4.2 5.Q 7.5 11.1 Q.5 5.5 5.5 6. 7 6.0 7.4 7.2 16.7 10.7 13.0 12.6 7. 6 Central Administration 2.7 3.2 3.6 4.Q 5.8 Q.5 8.1 3.8 2.Q 3.2 3.4 4.Q 4.Q U.1 8.7 10.3 10.1 6.2 Speci a! Accounts 0.6 0.4 0.5 O.Q 1.6 1.5 1.4 1.7 2.4 2.3 2.4 2.4 2.2 2.4 2.0 2. 7 2.5 1.4 Decentral i zed Agenc i •• 0.3 0.2 0.0 0.1 0.1 0.1 0.0 0.1 0.2 0.1 0.2 0.2 0.1 0.1 0.0 0.0 0.1 0.0 Provinces A MCBA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Pub! ic Enterprises 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Social Security System 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 IX- Contributions to: 3.5 3.Q 4.3 6.0 7.5 11.1 Q.5 5.5 5.5 6.7 6.0 7.4 7.2 16.7 10.7 13.0 12.6 7.6 Central Administration 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 Special Accounts 0.1 0.6 0.7 0.2 0.5 O.Q 1.0 0.7 1 0 1.4 1.3 1.7 1.6 1.6 1.2 1. 1.1 1.2 [)ec.,ntr•l i z.ed Agencies 1.3 1.2 1.3 1.8 2.0 1.8 1.8 1.4 1. 5 1 2 1.4 1.6 1.6 3.0 l.Q 1.8 1.6 1.8 Provinces A MCBA 0.8 O.Q 1.4 2.4 3.0 6.2 3.4 1.6 7 1.6 1. 7 2.7 2.0 5.1 3.8 5. 7 6.3 0.0 Pub I ic Enterprises 1.3 1.2 O.Q 1.5 2.0 2.2 3.3 l.Q 3 1.4 1.5 1.6 l.Q 0 3.0 2. Q 2.3 3. 7 Social Security Syatem 0.0 0.0 0.0 0.1 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0 0 0. 7 1 4 1. 4 0.8 X- Revenues (I+IV+Vl+Vll+Vlll) 35.4 32.2 30.8 33.1 38.7 35.5 37.4 38.6 42.4 40.6 42.4 43.2 40.3 51 44 1 54 " 5o e 3q. 2 XI- Expenditure• (II-tV+IX) 37.1 311.7 311.8 .W.5 46.8 50.6 49.2 43.3 48.8 47.1 4Q.Q 58.4 55.4 67 4 56.7 60.5 55.1 46.6 XII- Financing Need a (XI-X) 1.7 4.5 5.11 7.3 8.1 15.1 11.8 ~.7 6.5 6.5 7.5 13.3 15.1 If 12 6 I 4 3 7.4 XIII-Net Financing 0.8 l.Q 1.9 1.0 8 .Q 4.2 2.8 5.5 5".5 3.0 8.0 6.3 -1 6 l ., (1 '5 3.8 5.0 Net Uee of Credit 0.8 1. Q 1.9 1.0 1.8 1. Q 4.2 2.8 5.5 5.5 3.4 8.3 6.4 -1 3 I" ,, < 3 8 5.1 Dowleetic 0.1 0. 7 O.Q 0.8 1.0 1 e 3.0 1.5 3.5 3.8 1.5 4.0 5.1 -1 q -0 . (' ~ -0 1 O.Q Credit 0.8 1.3 1.6 1.Q 2.1 2 3.6 2. 7 4.3 5.5 2.7 6.7 Q.1 0.1 0. l l' I 1 0 2.2 AIROrtization 0. 7 0.6 0. 7 1.1 1. 0.8 0.6 1.1 0.7 1.7 1,1 2.7 4.1 2.0 0. 6 0.4 1.2 1.2 Foreign 0.7 1.2 1.0 0.1 O.Q 0.1 1.1 1.3 l.Q 1.8 1.Q 4.3 1.3 0.5 -0.4 O.Q 4.0 4.2 Credit 1.5 l.Q 2.2 1.5 1. 6 0. Q 2.0 2.1 2.8 3.Q 2.Q Q.4 16.2 8.Q 8.8 15.3 8. 7 6.3 A11t0rtization 0.8 0.6 1.2 1.3 0.7 0.8 O.Q 0.8 O.Q 2.1 1.1 5.1 U.9 8 4 Q.2 u 4 4 7 2.2 b. Net U.e of Advance• 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -0.4 -0.2 -0.1 -0.3 -0.0 -0 0 -0.1 -0.1 Credit 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.3 0.1 0.0 0.0 0.0 0.0 0.0 Dehit 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.4 0.5 0.2 0.3 0.0 0.0 0.1 0.1 XIV- Ovoroll 1111 lonco (XIII-XII) -0.9 -2.8 -3.9 -8.4 -8.3 -13.~ -7.6 -1.9 -1.0 -1.0 -4.5 -5.2 -8.8 -17.7 -13.6 -5.5 -0.5 -2.4 3.4 2.4 1.8 4.5 5.8 9.7 3.4 2.4 0.9 -0.3 3.8 5.3 7.3 18.8 6.2 2.3 0.0 0.0 Not Voriotion in Po. . ivo Finoncing -2.5 0.2 2.0 1.9 0.7 3.5 4.2 -0.8 0.1 1.3 0.9 -0.1 1.5 1.1 7.4 3.2 0.5 2.4 Source: Hi n i a try of EconOfiY. a/ Excludea ,rovincial govern . . nt.a after" 1988. June 1989  - 243 - Tobie 5.3, ARGENTINA - CENTRAL AIJHINISTRATIIJN, REVB'fJES, EXPENJITIJIES AM> FINANCING, 1970-1987 (Thouaanda of Australes) 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 •/ Current Account I- Curl"'ent Revenues 0.70 0.87 1.37 2.00 2.97 6.30 44.9 138 363 786 1743 3440 9193 40549 329159 4661300 8180900 18587700 Tax Revenues 0.63 0.75 1.14 1.74 2.75 5.18 38.2 119 278 663 1539 2975 8037 37167 281677 43il2100 7925600 18120300 Non-tax Revenues 0.07 0.12 0.23 0.26 0.22 1.12 6.7 19 85 124 204 465 1157 3382 4 7 482 359200 255300 467400 II- Current EJII'pendi tures 0.48 0.67 1.03 2.15 3.05 9.07 48.3 116 374 944 2000 4830 14202 56429 375554 2701000 4796700 20526900 Personnel Expenditures 0.31 0.40 0.61 1.35 1. 79 5.24 19.7 52 160 383 924 1799 3663 20073 147391 9:10100 1746900 4805300 Ooods and Services 0.07 0.10 0.17 0.30 0.39 1.28 10.7 23 65 159 288 560 1988 9787 37740 3:71000 748900 1739900 Interest on Debt 0.03 0.06 0.10 0.15 0.33 0.89 10.4 21 87 247 436 1658 7006 18204 129229 9114600 1515400 4238300 Domeati c 0.02 0.03 0.04 0.09 0.27 0.68 9. 7 19 80 236 362 1162 4351 1746 22836 :16700 164200 1286300 Foreign 0.01 0.03 0.06 0.06 0.06 0.21 0.8 2 7 11 74 496 2655 16458 106393 94 7900 1351200 2952000 Other Current Expend i turea 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0 0 0 0 0 0 0 0 0 0 0 Current l Capital Transfers 0.07 0.11 0.15 0.35 0.54 1. 66 7.4 20 62 155 352 813 1546 8365 61194 415300 785500 10518400 EconoMies 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0 0 0 0 0 0 0 0 0 0 -775000 III- Savings 0.22 0.20 0.34 -0.15 -0.08 -2.77 -3.4 22 -11 -158 -257 -1390 -5008 -15880 -46395 1960300 3384200 -1939200 Capital Account ]·>~- 1...apit.al Reven•Jes 0.00 0.00 0.01 0.00 0.02 0.02 0.1 0 0 0 0 2 10 10 100 300 220000 V-- Capital Expenditures 0.07 0.09 0.15 0.24 0.38 1.31 9.4 21 47 102 143 377 768 6076 16925 129400 193400 551400 Fixed Investments 0.07 0.09 0.15 0.23 0.37 1.26 7.6 19 46 101 131 290 607 3786 12524 74400 162600 545300 Machinery and Equiptnent 0.02 0.02 0.03 0.06 0.19 0.83 5.2 14 32 71 73 180 349 1308 3975 34800 108500 327800 Construction 0.05 0.07 0.12 0.17 0.18 0.43 2.4 5 14 30 58 110 257 2478 8549 39600 54100 217500 Changes in Inventor i •• 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0 0 0 10 40 45 448 2434 5500 6900 25600 Financial lnvest,..enta 0.00 0.00 0.00 0.01 0.01 0.05 1.8 2 1 2 47 116 1842 1967 49500 23900 50500 EconoMies 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0 0 0 0 0 0 0 0 0 0 -70000 VI-Financing Due 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0 0 0 0 0 0 0 0 261000 430500 379400 to Economic Emergency VII-Capital from Previous Period 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0 0 0 5 26 63 808 5432 11200 0 0 Vlll-Contr i buti on a from: 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0 0 158 0 0 0 0 0 0 0 88700 Central Administration 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0 0 0 0 0 0 0 0 0 0 0 Spec i al Accounts 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0 0 0 0 0 0 0 0 0 0 71600 Decentralized Agencies 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0 0 0 0 0 0 0 0 0 0 17100 Provinces l MCBA 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0 0 46 0 0 0 0 0 0 0 0 Pub I ic Enterpriaea 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0 0 111 0 0 0 0 0 0 0 0 Social Security Syatem 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0 0 0 0 0 0 0 0 0 0 0 I><- Contributions to: 0. 23 0. 40 0. 76 1. 75 2. 82 13. 62 61. 7 79 154 458 971 2664 7174 96484 461760 406~!800 7468500 10920100 Central Adminiatration 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0 0 0 0 0 0 0 0 0 0 0 Special Accounts 0.01 0.01 0.02 0.05 0.13 1.05 6.5 37 164 292 724 1896 8423 50747 297000 554900 1435800 Oecentral iz.ed Agencies 0.09 0.13 0.26 0.57 0.78 2.21 12.6 26 63 138 363 807 2272 20242 102584 71:!1800 1136700 3169700 Prov i ncea &. MCBA 0.06 0.11 0.28 0.74 1.24 7.84 20.6 14 23 48 101 710 1173 25509 144961 174S:7oo 3566800 0 Pub I ic Enterpriaee 0.08 0.15 0.19 0.35 0.67 2.43 21.7 29 30 102 205 424 1833 42310 124910 737800 1136400 4828600 Social Security Syatern 0.00 0.00 0.00 0.04 0.01 0.08 0.2 0 10 0 0 0 38558 570500 1073700 1486000 X- Revenuaa (I+IV+VI+Vll+VIII) 0.70 0.87 1.38 2.00 2.99 6.32 45.0 138 363 944 1748 3466 9258 41367 334601 4933600 8611700 19275800 XI- Ewpend i turea (II•V .. IX) 0.78 1.16 1.94 4.14 6.25 24.00 119.4 215 575 1504 3114 7871 22143 158989 854239 6893200 12458600 3199UOQ XII- F1 ancino ~~ ··1• (XI-X} 0.08 0.29 o.56 2.14 3.26 17.68 74.4 77 212 559 1366 4405 12885 117622 '196.38 19596oo 3846900 12722600 XIII-Net. Finane 1 ng 0.02 0.09 0.03 -0.00 0.26 2.03 24.5 23 136 334 -55 956 679 -6186 -59·18 148•200 2854600 8393900 a. Net Uae ot Credit 0.02 0.09 0.03 -0.00 0.26 2.03 24.5 23 136 334 -14 999 754 -6070 5948 148'200 2854600 8393900 Do.eati c: 0.01 0.07 0.06 0.15 0.24 2.19 21.7 21 117 292 -104 191 154 -9538 - 29('•)8 71 '100 -7200 1733700 Credit 0.04 0.12 0.13 0.35 0.51 2.98 24.5 40 133 337 74 591 4306 -2914 ![·• >0 7100 701000 3755000 A.-o,.tization 0.03 0.05 0.07 0.20 0.27 0.79 2.9 19 16 45 178 400 4153 6624 30508 79000 708200 2021300 For'aign 0.01 0.02 -0.03 -0.15 0.02 -0.16 2.9 2 19 42 90 808 600 3468 23060 220:100 2861800 6660200 Credit 0.04 0.05 0.10 0.10 0.22 0.27 6.0 7 33 70 112 .2283 4311 15772 32667 23591100 5124700 8280800 A.orti zation 0.03 0.03 :>.13 0.25 0.20 0.43 3.2 5 14 28 72 14715 3710 12304 9607 2139SOO 2262900 1620800 b. Net Uae of Ad .. anc:aa 0.()(\ 0.00 0.00 0.00 0.00 0.00 0.0 0 0 0 -41 -<43 -75 -116 0 0 0 0 C•ecli t 0.00 0.00 0.00 o.co 0.00 0.00 0.0 0 0 0 0 0 0 20 0 0 0 0 Debit 0.00 0.00 0.00 0.00 0.00 o.oo 0.0 0 0 0 41 <43 75 136 0 0 0 0 XI~- Ove•oll 8olonr.e flfTII-XII) -0.08 -o.20 -0.53 -2.14 -3.00 -15.65 -49.9 -5-4 -76 -2215 -1421 -3449 -12206 -123808 -525586 -181UOO -992300 -<4328700 Cent•ol Bonk 0.27 0.28 0.33 '1.151 2.42 11.110 24.0 151 415 -<43 1017 2911 10767 113321 290804 9207'00 0 0 Not Vodotion in Po. . ive Finoncing-0.21 -0.08 0.20 0.113 0.1!8 3.86 28.9 3 31 218 - !188 1<439 10487 234782 890700 992300 4321700 Source: Minia~ry of rcon019. a/ E•clu4ea provincial govern. .nta. June 1'189  - 244 - Toblo 5.4: AROfNTINA - CB'ITRAL AOHINTSTRATION: REVEHJES, EXP9DITI-"ES AK1 FINANCING, 1q10-1q57 (Percent. of CI>P) 1q1o 1q11 1q12 1q73 1q74 1q75 1q75 1q77 1q75 1q7q 1q80 1q81 1q52 1q53 1q54 1q55 1q86 1q57 •I Cur-rent Account 1- Current Revenues 1.q8 6.q5 6.62 5.64 6.11 4.41 5.q2 6.5q 6.q4 5.52 6.15 6.28 6.23 5. q4 6.23 11.77 11.01 10.4q Ta• Revenues 7.18 5_qq 5.51 4.qo 5.65 3.62 5.04 5.eq 5.31 4.65 5.43 5.43 5.44 5.44 5.33 10.87 10.67 10.23 Non-tax Revenuea o.8o o.q6 1.11 o.73 0.45 o.78 o.88 o.q1 1.62 o.87 0.12 o.85 o.78 o.5o o.qo o.n 0.34 0.26 II- Current E•pend i turea 5.47 5.35 4.q8 6.o6 6.27 6.34 6.37 5.52 7.15 6.62 7.06 8.82 q.62 8.27 7.11 6.82 6.46 11.58 Personnel Expend i t.urea 3.53 3.20 2.q5 3.80 3.68 3.66 2.60 2.48 3.06 2.6q 3.26 3.2q 2.48 2.q4 2.7q 2.35 2.35 2. 71 Goods and Services 0.80 0.80 0.82 0.85 0.80 o.8q 1.42 1.10 1.24 1.12 1.02 1.02 1.35 1.43 o.11 o.q4 1.01 o.q8 Interest on Debt 0.34 0.48 0.48 0.42 0.68 0.~ 1.~ 1.00 1.~ 1.73 1.~ 3.~ 4.~ 2.67 2.45 2.4q 2.04 2.3q Oo•eati c 0.23 0.24 0.19 0.25 0.56 o.48 1.:?8 o.q1 1.53 1.66 1.28 2.12 2.q5 0.26 0.43 o.oq 0.22 o. 73 Foreign 0.11 0.24 0.2q 0.17 0.12 o.15 0.10 0.10 o.13 o.08 o.26 o.q1 1.80 2.41 2.01 2.3q 1.82 1.67 Other Cur·rent Expendi turea 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 o.oo 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Current I. Capital Transfers o.8o o.88 o. 73 o.qq 1.11 1.16 o.q8 o.q3 1.18 1.oq 1.24 1.48 1.05 1.23 1.16 1.05 1.06 5.q4 Economies 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -0.44 III- Sav i nga 2.51 1.60 1.64 -0.42 -0.16 -1.q4 -0.45 1.01 -0.21 -1.11 -o.n -2.54 -3.3q -2.33 -0.88 4.q5 4.55 -1.oq IV- Capital Revenues 0.00 0.00 0.05 0.00 0.04 0.01 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.12 V- Capital Expend i turea 0.80 0.72 0.73 0.68 0.78 o.q2 1.24 1.00 o.qo 0.12 o.50 o.6q o.52 o.8q 0.32 0.33 0.26 0.31 Fixed Inveat"'ent.s 0.80 0.72 0.73 0.65 0.76 o.88 1.00 o.q1 o.88 o.n 0.46 o.53 o.41 0.55 0.24 0.1q 0.22 0.31 Machiner-y and Equ i p~nent 0.23 0.16 0.15 0.17 0.39 0.58 0.68 0.67 0.61 0.50 0.26 0.33 0.24 o.1q o.o8 o.oq 0.15 o.18 Construction 0.57 0.56 0.58 0.48 0.37 0.30 0.32 0.24 0.27 0.21 0.20 0.20 0.17 0.36 0.16 0.10 0.07 0.12 Changes in Invent.or i •• 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.04 0.07 0.03 0.07 0.05 0.01 0.01 0.01 Financial Investments 0.00 0.00 0.00 0.03 0.02 o.o3 o.24 o.1o o.o2 o.o1 o.o1 o.oq 0.08 0.27 0.04 0.13 0.03 0.03 EconoMies 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -0.04 VI-Fi nanc: i ng Due 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.66 0.58 0.21 t.o Economic Emer·g•ncy VII-Capital from Previous Period 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.02 0.05 0.04 0.12 0.10 0.03 0.00 0.00 VIII-Contributions from: 0.00 0.00 0.00 0.00 o.oo 0.00 0.00 0.00 0.00 1.11 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.05 Central AdMinistration 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Special Accounts 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.04 Oecentral i zed Agenc i •• 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.01 Prov i ncea l HCBA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.33 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Pub I ic Enhrpriaea 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0. 78 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Social Security System 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 IX- Contribution• to: 2.61 3.22 3.68 4.q4 5.80 q_52 8.14 3.76 2.q4 3.21 3.43 4.87 4.86 14.13 8.74 10.26 1o.o5 6.16 Centr•l Adminiatr•tion 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Speci •I Account. 0.11 o.oe 0.11 0.15 o.26 o.73 o.86 o.45 0.11 1.15 1.03 1.32 1.28 1.23 o.q6 o.74 o.75 o.81 Decentr•l i zed Agencies o.qq 1.02 1.21 1.61 1.60 1.54 1.66 1.26 1.20 o.q1 1.28 1.47 1.54 2.q7 1.q4 1.80 1.53 1.79 Prov i ncea I. HCBA o.63 o.q1 1.36 2.oq 2.56 5.48 2. 72 0.67 0.44 0.34 0.36 1.30 0. 1q 3.74 2.74 4.42 4.80 0.00 Pub I ic Enterpf'iaea o.8q 1.21 o.q3 o.q8 1.37 1. 70 2.87 1.37 0.56 0. 72 0. 72 0.77 1.24 6.20 2.37 86 1 53 2. 73 Soci•l Security System 0.00 0.00 0.00 0.11 0.02 0.06 0.03 0.01 0.03 0.04 0.04 0.00 0.00 0.00 0. 73 .44 .44 0.84 X- Revenues (l+IV+VhVII+VIII) 7.q8 6.q5 6.67 5.64 6.15 4.42 5.94 6.5q 6.q4 6.63 6.17 6.33 6.27 6.06 34 12 46 11.59 10.88 XI- Ex,en4it.uree (II+Y+IX) 8.88 q_:zc~ q.ae 11.11 12.es 1e.1e 15.76 1o.28 10.98 1o.ss 1o.qq 14.~ 15.00 23 2q 16.18 11 41 16.77 18.06 XII- Fi n•nci ng Needa (XI-X) 0.90 2.34 2.11 8.03 &. 71 12.36 q.82 3.6q 4.05 3.q2 4.82 8.04 8. 73 11 .~3 ·l.84 •. q5 5.18 1.18 XIII-Net Fi n•nci ng 0.23 0.72 0.15 -0.00 0.53 1.42 3.24 1.10 2.60 2.34 -0.1q 1.75 0.46 -0 q1 -•1.11 0.37 3.84 4.74 •· Net. U.e of Cre4it. 0.23 0.72 0.15 -0.00 0.53 1.42 3.24 1.10 2.60 2.34 -0.05 1 82 0.51 -0 8~ 11 0.37 3.84 4. 74 DoM!et.ic 0.11 0.58 0.2q 0.42 0.4q 1.53 2.86 1.00 2.24 2.05 -0.37 0.35 0.10 -1 40 ··•.55 -". 18 -0.01 o.qe Credit. o.46 o.q6 o.63 o.qq 1.05 2.08 3.24 1.n 2.54 2.36 o.26 1.08 2.q2 -o.43 ··•.o3 o.o2 o.94 2.12 A.orti &It ion o.34 0.40 0.34 0.58 0.56 o.55 o.~ o.q1 0.31 0.32 0.63 0.73 2.81 0.97 o.58 0.20 0.95 1.14 Foreign 0.11 0.16 -0.15 -0.42 0.04 -0.11 0.~ 0.10 0.36 0.2q 0.32 1.48 0.41 0.51 0.44 0.56 3.85 3.76 Credit 0.46 o.40 o.48 0.28 0.45 o.1q o.80 o.33 o.63 0.4'1. 0.57 4.17 2.q2 2.31 o.62 5.q6 6.qo 4.67 A.ort.i z1tion o.34 o.24 o.63 o.1o o.41 o.30 o.42 o.24 0.21 0.20 o.25 2.6q 2.51 1.80 o.18 5.40 3.05 o.q1 t.. Net U.e of Adv1ncee 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -0.14 -0.08 -0.05 -0.02 0.00 0.00 0.00 0.00 Credit. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 o.oo 0.00 0.00 0.00 0.00 0.00 0.00 Del:» it. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.14 0.08 0.05 0.02 0.00 0.00 0.00 0.00 XIV- O•oroll lalanco (lCIU-lCU) -0.68 -1.62 -2.5e -1.03 -1.17 -1o.q4 -1.58 -2.5q -1.45 -1.5e -!i.01 -1.30 -8.27 -18.14 _q_q5 -4.58 -1.34 -2.44 C.nioral Bank 3.08 2.08 1.12 4.27 4.98 8.25 s.1e 2.44 o.88 -o.ao 3.59 5.32 1 .2q 11.10 5.51 2.33 o.oo 0.00 Not Variation in Pa. . i•o Flnanclng-2.31 '-0.41 0.95 1.77 1.19 2.70 3.42 0.15 0.59 1.88 1.43 0.98 0.97 1.54 4.45 2.25 1.34 2.44 Sourco: Minlatry of &on-. •I E•cludee provincl1l govern. .nte. Juno 198q  - 245 Tobie 5.5: ARGeiTINA - DECB'(TRALIZED AGENCIES: REVENJES, EXPe.DITI.J!ES AN> FINANCING, 1970-1987 (Thousands of Auatr-alaa) 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 191~5 1986 1987 •I Current Account 1- Current Revenuea 0.22 0.27 0.45 0.71 0.95 1.90 11.66 35.8 107.3 278 443 592 1819 15314 117829 886600 1096900 3239100 Tax Revenuea 0.14 0.16 0.31 0.47 0.75 1.54 7.97 24.0 66.8 180 382 353 1102 5644 43284 383600 655500 2068400 Non-tax Revenues 0.08 0.11 0.14 0.24 0.20 0.36 3.69 11.8 40.5 98 61 239 717 9670 74545 503000 441400 1170700 II- Current Expenditures 0.19 0.25 0.44 0.88 1.31 3.21 12.13 32.9 113.5 270 626 1325 4752 23170 166904 11930()0 1514400 4728200 Peraonnel Expenditure• 0.12 0.16 0.29 0.63 0.87 2.21 6.99 17.8 59.1 157 366 646 1608 10924 91108 596400 716600 2124800 Goode and Sel"v i cea 0.06 0.06 0.11 0.18 0.29 0.70 4.00 11.2 34.2 60 152 267 1068 7415 45122 337700 402700 1103200 lntereat on Debt 0.00 0.00 0.01 0.02 0.03 0.05 0.54 2.0 12.9 32 59 322 1794 3488 17669 1479(10 187900 470100 Dotfteati c 0.00 0.00 0.01 0.02 0.01 0.03 0.24 1.3 10.8 28 49 199 1142 775 2617 357(10 21300 83900 For"ei gn 0.00 0.00 o.oo 0.00 0.02 0.02 0.30 0. 7 2.1 3 10 123 652 2713 15052 1122(10 166600 386200 Other Current E11pendi turea 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 0 Current A Capital Transfers 0.01 0.03 0.03 0.05 0.12 0.25 0.60 2.0 7.4 22 49 90 283 1343 13005 111000 207200 1161100 Economi ea 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 -131000 III- Savings 0.03 0.02 0.01 -0.17 -0.36 -1.31 -0.47 2.9 -6.3 8 -183 -733 -2933 -7856 -49075 -306400 -417500 -1489100 Capital Account IV- Capital Revenues 0.00 0.00 0.00 0.00 0.01 0.01 0.03 0.2 0.4 3 5 22 433 1700 2700 3500 V- Capital Expend i turea 0.11 0.16 0.33 0.49 0.53 1.15 13.10 37.4 92.6 186 332 664 2301 10491 56030 40440~ 728400 1981900 Fixed Inveat.Menta 0.11 0.16 0.30 0.45 0.49 1.01 12.57 34.7 77.3 159 287 609 2179 10052 53216 3854()~ 699800 1962900 Machi nary and Equipment 0.01 0.01 0.02 0.03 0.05 0.15 0.94 2.3 5.3 13 21 44 99 715 5396 54100 76700 221300 Construction 0.10 0.15 0.28 0.42 0.44 0.86 11.63 32.4 71.9 146 266 565 2080 9337 47820 331300 623!00 1741600 Changes in Inventories 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 2 2 33 7 40C) 1400 8800 Financial lnveat111enta 0.00 0.00 0.03 0.04 0.04 0.14 0.53 2. 7 15.3 27 43 54 120 406 2807 1860<) 27200 74200 Econon~iea 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 () 0 -64000 VI-Financing Due 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 0 to Econolft i c Emergency VII-Capital from Pr·evioua Period 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 8 34 101 40 324 2628 10600 47000 175000 VIII-Contributions frolfl: 0.10 0.14 0.27 0.61 0.94 2.49 13.43 29.1 77.0 175 388 859 2351 20260 102669 714300 1163500 3183500 Central Adndniatration 0.09 0.13 0.26 0.57 0.78 2.21 12.61 26.3 ~2.9 138 363 806 2272 20242 102584 713800 1136700 3169700 Spec i •I Accounts 0.00 0.00 0.01 0.03 0.14 0.23 0.81 2.1 13.3 36 24 51 75 14 43 lOCI 500 13800 Decentr•l i zed Agenc i •• 0.01 0.01 0.00 0.01 0.02 0.05 0.01 0. 7 0.8 0 1 2 3 4 42 400 26300 0 Provinces A HCBA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 " 0 Public Enterprises 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 " 0 Social Security System 0.00 0.00 0.00 o.oo 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 IX- Contribution a to: 0.02 0.02 0.01 0.03 0.06 0.09 0.01 2.2 8.9 16 48 90 217 927 800 8000 48500 45200 Centr•l Adlflinistr•tion 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 17100 Special Accounts 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.1 7.3 14 32 72 189 817 554 3700 17000 28100 Decentr•l i zed Agenc i •• 0.02 0.02 0.01 0.03 0.06 0.09 0.01 0. 7 0.8 0 2 3 4 42 400 26300 0 Provinces I. MCBA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.3 0.0 2 15 14 25 101 204 3900 5200 0 Pub I ic Enterpriaea 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 1 1 1 5 0 0 0 0 Social Security System 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 0 )(- Revenues (l+IV+VhVII+VIII) 0.32 0.<41 0.72 1.32 1.90 4.40 25.12 65.0 184.6 462 868 1557 4232 35977 223559 1613?00 2310100 6601100 XI- Expenditures (II+V+IX) 0.112 0.48 0.78 1.40 1.90 4.45 25.24 72.6 215.1 473 1006 2079 7270 34588 223734 1605400 2291300 8755300 0.00 0.02 0.06 0.06 0.00 0.05 0.12 7.5 30.4 11 138 522 3039 -1389 I 7~ -7800 -18800 154200 XIIJ-Net Financing 0.01 0.02 0.06 0.08 -0.01 0.06 0.12 7.5 27.1 22 73 476 -43 -.~. 1 ~-l -2300 11500 349100 a. Net U.e of Credit. 0.01 0.02 0.06 0.08 -0.01 0.06 0.12 5 27.1 22 103 513 -6~ <l3789 t•'X> 13400 369100 Do.eatic 0.01 0.00 0.01 0.06 0.00 0.08 0.29 .3.1 22.5 21 33 306 -.te7 45c 1(!~,.I() 9100 29400 Credit 0.01 0.00 0.01 0.07 0.06 0.14 0.69 4.4 30.9 54 70 310 2012 1299 73:' 13100 16600 32200 A,..,rtization 0.00 0.00 0.00 0.01 0.06 0.06 0.40 1.3 8.4 34 37 3 146 1786 283 2600 7500 2800 Foreign 0.00 0.02 0.05 0.02 -0.01 -0.02 -0.17 4.4 4.6 1 70 207 -3 421 -34230 -9100 4300 339700 Credit 0.00 0.02 0.05 0.02 0.02 0.04 0.39 5.5 9.3 14 108" 255 344 950 7820 33300 73400 513200 A1t0rtization 0.00 0.00 0.00 0.00 0.03 0.06 0.56 1.1 4.7 14 38 48 347 529 42059 42400 69100 173500 b. Net U.e of Advancea 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 -30 -37 -17 23 -362 -3700 -1900 -20000 Credit 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 3 27 111 37 0 900 900 Dolo It 0.00 0.00 0.00 0.00 o.oo 0.00 0.00 0.0 0.0 0 30 40 44 88 399 3700 2800 20900 XIV- O•erell S.lonce (XIII-XU) 0.01 0.00 0.00 0.00 -0.01 0.01 0.00 -0.0 -8.4 11 -64 -46 -1198 1346 -34326 5500 30300 194900 0.00 0.00 0.00 o.oo 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 0 Net Verletion in Pe. . 1. . Flnenclng-o.01 -0.00 -0.00 -o.oo 0.01 -0.01 -0.00 0.0 8.4 -11 64 46 1198 -1346 34326 -5500 -30300 -194900 Source: Hiniatry of Eeon011y. •I Exclude• ,rovincl•l eovern..nt.a. June 1989  - 246 - T•ble 5.6, ARGEffi'lNA - DECEffi'RALlZED AGENCIES REVEHJES, EXPENllTlJ!ES I>HJ FlNANClNO, 1970-1987 (Percent of COP) 197o 1911 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 •I Current Account I- Curnu•t Revenues 2.51 2.16 2.17 2.00 1.95 1.33 1.54 1.71 2.05 1.95 1.56 1.08 1.23 2.24 2.23 2.24 1.48 1.83 Tall Revenues 1.60 1.28 1.50 1.32 1.54 1.08 1.05 1.15 1.28 1.27 1.35 0.64 0.75 0.83 0.82 0.97 0.88 1.17 Non-tall Revenues 0.9! 0.88 0.68 0.68 0.41 0.25 0.49 0.56 0.77 0.68 0.22 0.44 0.49 1.42 41 1.27 0.59 0.66 II- Current E11pendit.ures 2.17 2.00 2.13 2.48 2.69 2.24 1.60 1.57 2.17 1.90 2.21 2.42 3.22 3.39 3.16 3.01 2.04 2.67 Personnel E11pend i tures 1.37 1.28 1.40 1.78 1.79 1.55 0.92 0.85 1.13 1.10 1.29 1.18 1.09 1.60 .73 1.51 0.96 1.20 Goods and Services 0.68 0.48 0.53 0.51 0.60 0.49 0.53 0.53 0. 65 0.42 0.54 0.49 0. 72 1.09 0.85 0.85 0.54 0.62 Interest on Debt 0.00 0.00 0.05 0.06 0.06 0.03 0.07 0.09 0.25 0.22 0.21 0.59 1.22 0.51 0.33 0.37 0.25 0.27 Oomeati c 0.00 0.00 0.05 0.06 0.02 0.02 0.03 0.06 0.21 0.20 0.17 0.36 0. 77 0.11 0.05 0.09 0.03 0.05 Foreign 0.00 0.00 0.00 0.00 0.04 0.01 0.04 0.03 0.04 0.02 0.04 0.22 0.44 0.40 0.29 0.28 0. 22 0.22 Other Current E111p.,nd i turea 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Current l Capital rransfers 0.11 0.24 0.14 0.14 0.25 0.17 0.01! 0.10 0.14 0.16 0.17 0.16 0.19 0.20 0.25 0.28 0.28 0.66 Economies 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -0.07 Ill- Savings 0.34 0.16 0.05 -0.48 -0.74 -0.92 -0.06 0.14 -0.12 0.05 -0.65 -1.34 -1.99 -1.15 -0.93 -0.77 -0.56 -0.84 Capital Account IV- Capital Revenues 0.00 0.00 0.00 0.00 0.02 0.00 0.00 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.00 0.00 0.00 V- Capital t:.xpenditur"ea 1.25 1.28 1.59 1.38 1.09 0.80 1.73 1.79 1.77 131 1.17 1.21 1.56 1.54 1.06 1.02 0.98 1.12 Fixed Investll'lents 1.25 1.28 1.45 1.27 1.01 0.71 1.66 1.66 1.48 1.12 1.01 1.11 1.48 1.47 1.01 0.97 0.94 1.11 Machinery and Equipment 0.11 0.08 0.10 0.08 0.10 0.10 0.12 0.11 0.10 0.09 0.07 0.08 0.07 0.10 0.10 0.14 0.10 0.12 Construction 1.14 1.20 1.35 1.18 0.90 0.60 1.53 155 1.37 1.02 0.94 1.03 1.41 1.37 0.91 0.84 0.84 0.98 Changes in Inventor i ea 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Financial Investments 0.00 0.00 0.14 0.11 0.08 0.10 0.07 0.13 0.29 0.19 0.15 0.10 0.08 0.06 0.05 0.05 0.04 0.04 Economies 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -0.04 VI-Financing Due 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 to Economic Emergency VII-Capital from Previous Period 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.06 0.12 0.18 0.03 0.05 0.05 0.03 0.06 0.10 VI II -Con tr i but ion a from: 1.14 1.12 1.30 1.72 1.93 1.74 1.77 1.39 1.47 1.23 1.37 1.57 1.59 2.97 1.94 1.80 1.57 1.80 Central Administration 1.03 1.04 1.26 1.61 1.60 1.55 1.66 1.26 1.20 0.97 1.28 1.47 1.54 2.97 1.94 180 1.53 1.79 Special Accounts 0.00 0.00 0.05 0.08 0.29 0.16 0.11 0.10 0.25 0.25 0.08 0.09 0.05 0.00 0.00 0.00 0.00 0.01 Decentral i zed Agencies 0.11 0.08 0.00 0.03 0.04 0.03 0.00 0.03 0.02 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.04 0.00 Provinces l HCBA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Pub! ic Enterprises 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Social Security System 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 IX- Contributions to: 0.23 0.16 0.05 0.08 0.12 0.06 0.00 0.11 0.17 0.12 0.17 0.16 0.15 0.14 0.02 0.02 O.C7 0.03 Central Administration 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.01 Special A.crnunt!l. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.05 0.14 0.10 0.11 0.13 0.13 0.12 0.01 0.01 0.02 0.02 Decent.r11l·r .. d I',Je'" 0.23 0.16 0.05 0.08 0.12 0.06 0.00 0.03 0.02 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.04 0.00 Pro" i nee"' • I'll tM 0 00 0.00 0.00 0.00 0.00 0.00 0.00 0.02 0.02 0.01 0.05 0.03 0.02 0.01 0.00 0.01 0.01 0.00 Pub I ' Ent•tPI os<!IS 0 00 0.00 0 00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 S0r· al <-;"'' ,. l.) s) .,._ .. [" 0 00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 r<e..-eo• ·tts lldY v\+YJI•VTTI) 3 65 3.28 3 48 3.-r2 3 Ql 3.08 3.31 3.11 3.53 3.24 3.06 2.84 2.87 5.27 4.23 4 07 3.11 3.73 3 65 3 H 3 77 3 95 3 91 3.11 3.33 3.47 4.11 3.32 3.55 3.80 4.93 5.07 4.24 4.05 3.08 3.81 X11· ,_ i n•nr 1 ng Need• (XI-X) 0.00 0.16 0.29 0.23 0.00 0.04 0.02 0.36 0.58 0.08 0.49 0.95 2.06 -').'?(' 0.00 -0.02 -0.03 0.09 Xlll-Net. Fin•ncing 0.11 0.16 0.29 0.23 -0.02 0.04 0.02 0.36 0.52 0.15 0.26 0.87 25 -0.01 -0 65 -0.01 0.02 0.20 Net IJ•e of Credit. 0 11 0.16 0.29 0.23-0.02 0.04 0 02 0.36 0.52 0.15 0.36 O.Q4 .26 -0.')1 -l' 64 n.oo 0.02 0.21 I.JoMeati c 0.11 0.00 o.os 0.17 0.00 0 06 0.04 0.15 0.43 0.15 0.12 0.56 .26 -0.07 ('J_il (l 03 0.01 0.02 -. ttd' t 0 11 0.00 0.05 0.20 0 12 0 10 0.09 0.21 0.59 0.38 0.25 0.57 36 0.1Q <' 01 0.03 0.02 0.02 Alti0-1 •; at •on 0.00 0.00 0.00 0.03 0 12 0 04 0.05 0.06 0.16 0.24 0.13 0.01 0.10 0.26 0.01 0.01 0.01 0.00 Forei gr- 0.00 0.16 0.24 0.06 -0 02 -0.01 -0.02 0.21 0.09 0.01 0.25 0.38 -0.00 0.06 -0.65 -0.02 0.01 0.19 Cred' t 0.00 0.16 0.24 0 06 0 04 0.03 0.05 0.26 0.18 0.10 0.38 0.47 0.23 0.14 0.15 0.08 0.10 0.29 A"'orl1 zat •on 0.00 0 00 0 00 0.00 0 06 0.04 0.07 0.05 0.09 0.09 0.13 0.09 0.24 0.08 0.80 0.11 0.09 0.10 P'let ·~• c)f A.•.lvances 0 00 0 00 0 00 0 00 0 00 0.00 0.00 0.00 0.00 0 00 -0.11 -0 07 -0.01 0.00 -0.01 -0.01 -0.00 -0.01 l · ed' t 0 00 0 00 0.00 0 00 0.00 0.00 0.00 0.00 0 00 0.00 0 00 0.01 0.02 0.02 0.00 0.00 0.00 0.00 Ueh it 0 00 0 00 0 00 0 ()() 0.00 0.00 0.00 0 00 0 00 0.00 0.11 0.07 0.03 0.01 0.01 0.01 0.00 0.01 0 11 0 00 0.00 0.00 -0 02 0.01 0.00 -0.00 -0.08 0.08 -0.23 -0.08 -0.81 0.20 -0.65 0.01 0.04 0.11 C.ntr., Net a... v.,;.t;"" ;. P•••;•• 0.00 0.00 0.00 F;n•n<;ng-0 i1 -0.00 -0.00 -0.00 0.00 0.00 0.00 0.00 0.02 -0.01 -0.00 0.00 0.00 0.00 0.00 0.08 -0.08 0.00 0.23 0.00 0.08 0.00 0.00 0.81 -0.20 0.00 0.00 0.00 0.85 -0.01 -0.04 0.00 -0.11 Sourc•: Hiniet.ry of Econ~. •I E.xcluclee pro~incial govern-nt.a. Juno 1989  - 247 - Table S.7, ARCENTINA- SPECIAL ACCOU'fTS' REVENIJES, EXPI'K>ITI..!lES At«J FINANCING, 1970-1987 (Thoua•nds of Australes} 1970 1971 1972 1973 1974 197S 1976 1977 1978 1979 1980 1981 1982 1983 1984 198S 1986 1987 •I Current Account I- Current Revenues 0.11 0.13 0.24 O.S7 1.34 2.76 12.0 S1.9 1S9.6 484 1086 1586 4270 22168 13SS92 133S700 2614500 5847000 Tax Revenues O.OS 0.07 0.12 0.44 !.OS 2.20 !0.2 36.7 !3S.6 3SI 736 IOQI 2938 16237 1042S9 1102500 1951100 4343000 Non-ta• Revenues o.os 0.06 0.12 0.13 0.29 O.S6 1.8 1S.2 24.0 133 350 49S 1332 S931 31333 233200 663400 1504000 II- Current Ewpendi tures 0.04 O.OS 0.09 0.20 0.43 I IS 4.8 13.9 4S.I 174 382 719 1934 8176 61~48 48S600 948900 5062700 Peraonnel E.-pendi tures 0.02 0.02 0.03 0.09 0.17 0.49 2.2 S.2 13.3 39 92 167 339 18S7 14600 99400 200600 SIOOOO Coods and Services 0.02 0.02 0.04 0.08 0.14 0.3S 2.3 7.6 27.8 98 !93 32S 809 2888 18140 178100 3S3600 1040100 Interest on Debt 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0.1 4 0 2 250 980 6987 8400 15000 62100 Oo~nesti c 0.00 0.00 0.00 0.00 o.oo 0.00 0.0 0.0 o.o 4 0 0 0 37S 1 0 4100 13800 Foreign 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0.0 0 0 2 250 60S 6986 8400 10900 48300 Other Current Expenditures 0 00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0.0 0 0 0 0 0 0 0 0 0 Current A Capital Transfers 0.01 0.01 0.02 0.03 0.11 0.31 0.3 1.0 3.9 33 97 22S S36 24SI 21921 199'700 379700 3584500 EconoMies 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0.0 0 0 0 0 0 0 0 0 -134000 III- Sav i nga 0.07 0.08 O.lS 0.37 O.QI 1.61 7.2 38.0 114.S 310 704 867 2336 13992 73944 8SO!OO 166S600 784300 IV- Capital Revenues 0.00 0.00 0.01 0.00 o.os 0.01 0.1 0. o. 7 IS 42 220 1072 7!100 16800 64100 V- C•pital EJCpenditures 0.03 0.03 0.06 0.13 0.46 0. 79 4.5 18 45.5 132 193 433 765 3316 9273 72000 298100 599800 Fi ••d Investments 0.02 0.03 o.os 0.08 O.IS 0. 74 4.4 18.5 43.7 122 167 361 626 2553 6637 4SSOO 121500 462300 Machinery and Equipment 0.01 0.01 0.02 0.03 0.07 0.39 3.3 1S.1 31.4 89 119 2S6 4Sl 1837 41S9 t6E;oo 47000 256800 Construe t ion 0.02 0.02 0.03 0.06 0.08 0.3S 1.0 3.4 12.2 32 48 lOS 17S 716 2478 281100 74500 205500 Changes in Invento,.ies 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0.0 0 8 12 10 22 86 11'00 14800 30600 Financial Investments 0.00 0.00 0.01 o.os 0.31 o.os 0.1 0.1 1.8 11 18 60 129 741 2SSO 24EIOO 161800 182900 EconoMies 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0.0 0 0 0 0 0 0 0 0 -76000 VI-Financing Due 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0.0 0 0 0 0 0 0 0 0 0 t;o Economic Emergency VII-Capital fron~ Previou• Period 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0.0 46 97 310 354 500 ] 999 9900 83200 345900 VIII-Contribut.ions froM~ 0.02 0.01 0.03 0.09 0.26 1.31 7.4 13.6 S4.6 201 376 904 2419 10735 62608 443600 826800 2142500 Central Administration 0.01 0.01 0.02 0.05 0.13 1.05 6.5 9.4 37.1 164 292 724 1896 8423 50747 292000 554900 1435800 Special Accounts 0.00 0.00 0.00 0.03 0.11 0.23 0.9 3.0 10.2 23 53 lOB 334 1495 11307 147900 254900 678600 Oecentral i zed Agencies 0.00 0.00 0.01 0.01 0.02 0.03 0.0 1.1 7.3 14 32 72 189 817 554 3700 17000 28100 Provinces l HCBA 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0.0 0 0 0 0 0 0 0 0 0 Pub I ic Enterprises 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 o.o 0 0 0 0 0 0 0 0 0 Social Secur i t.y Sy•ten~ 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0.0 0 0 0 0 0 0 0 0 0 IX- Contributions to: 0.05 0.06 0.12 0.33 0. 76 2.14 10.3 34.6 124.7 323 670 1324 3182 16446 103682 1064600 1881700 2493800 Central Administration 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0.0 0 0 0 0 0 0 0 0 71800 Special Accounts 0.00 0.06 0.12 0.03 0.11 0.23 0.9 3.0 10.2 23 53 108 334 1495 11307 14791)0 254900 678800 Decentral i zed Agencies 0.00 0.00 0.00 0.03 0.14 0.23 0.8 2.1 13.3 36 24 51 75 14 43 100 500 13800 Prov i ncea l HCBA 0.01 0.00 0.00 0.10 0.23 0.96 s.s 18.S 62.9 168 372 741 1789 9221 S7006 487900 1074500 0 Pub I i c Enterprises 0.04 0.00 0.00 0.18 0.29 o. 72 3.1 11.0 38.3 9S 220 42S 984 S716 35326 428700 551800 1729800 Social Security System 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0.0 0 0 0 0 0 0 0 0 0 X- Revenues (I+IV+VI+VII+VIII) 0.13 0.14 0.28 0.66 .65 4.08 19.5 65.6 214.9 732 1566 2816 708S 33623 201271 1797')()0 3541300 8399500 XI- Expencli turea (II+V+IX) 0.12 0.14 0.27 0.86 65 08 19 67.1 215.3 629 1244 2476 5881 27938 17460' 1622200 3128700 8158300 XII- Financing Neecla (XI-X) -0.00 0.00 -0.01 0.00 -0.00 -0.00 0 1.5 0.4 -104 -322 -340 -1204 -56Pc, : '6~" -17•900 -412600 -243200 XIII-Net Financing 0.00 0.00 0.00 0.00 0.00 0.00 0.1 8.6 0.4 -7 -65 -81 -814 -330·1- 1 ~~n~ 1 1.~'400 -12500 -33000 Net Uae of Cred i t 0.00 0.00 0.00 0.00 o.oo 0.00 0.1 8.6 0.4 -7 -43 -70 -696 -14~2 ];tJ•l 14300 ·11000 -33000 Dotleati c -0.00 0.00 0.00 -0.00 -0.00 -0.00 -0.0 -0.0 -0.0 -8 -5 -11 -4 -1440 ':'I 'I ]1.1(") 14500 -38000 Credit 0.00 0.00 0.00 0.00 0.01 0.00 0.0 0.0 0.0 0 0 0 0 I) 0 0 1700 A..ortization 0.00 0.00 0.00 0.00 0.01 o.oo 0.0 o.o 0.0 8 5 11 4 1440 26~ 157CO 14500 39700 Foreign 0.00 0.00 0.00 0.00 o.oo 0.01 0.1 8.6 0.4 1 -38 -59 -692 -12 -16845 1400 3500 5000 Credit 0.00 0.00 0.00 0.00 0.00 0.01 0.1 8.6 0.5 ,1 57 36 296 2362 14800 21400 117700 A..orti zation 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0.1 0 39 116 728 308 I 92C7 13400 17900 112700 b. Net Uae of Advance• 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0.0 0 -23 -12 -119 -1852 -94' -1100 -1500 0 Credit 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0.0 0 0 0 0 1 0 0 0 0 Oobit 0.00 0.00 0.00 o.oo 0.00 0.00 0.0 0.0 0.0 0 23 12 119 1853 946 1100 1500 0 XIV- Ovo•oll Bolonco (XIII-XII) 0.00 0.00 0.01 -0.00 0.00 0.01 0.0 0.0 -0.0 97 256 258 389 2381 8609 159400 400100 210200 0.00 0.00 0.00 o.oo 0.00 0.00 0.0 o.o o.o 0 0 0 0 0 0 0 0 Not Yo•iotion in Po-ivo Flnoncing-0.00 0.00 -0.01 0.00 -0.00 -0.01 0.0 0.0 0.0 -97 -256 -258 -389 -2381 -8609 -15940~ -400100 -210200 Source: Hini•try of Eeono.y. •I Exclude• provincial govern . .nt.. Juno 1989  - 248 - Tob le 5. 9, ARO&ITINA - SPECIAL ACCOIMS: REVEH.JES, EXP9()ITURES AI'[) FINANCINO, 1970-1987 (Percent. of OOP) 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 •/ Current Account I- Current. Revenues 1.24 1.04 1.16 1.61 2.75 1.93 1.58 2.48 3.05 3.39 3.83 2.90 2.89 3.25 2.57 3.37 3.52 3.30 Tax Revenues 0.62 0.56 0.58 1.24 2.16 1.54 1.35 1.75 2.59 2.46 2.60 1.99 1.99 2.38 1.97 2.78 2.63 2.45 Non-ta• Revenues 0.62 0.48 0.58 0.37 0.60 0.39 0.23 0.73 0.46 0.93 1.23 0.90 0.90 0.87 0.59 0.59 0.89 0.85 II- Current. Expend i turea 0.49 0.40 0.43 0.56 0.88 0.80 0.64 0.66 0.86 1.22 1.35 1.31 1.31 1.20 1.17 1.23 1.28 2.86 Peraonne I Expenditures 0.21 0.16 0.14 0.25 0.35 0.34 0.29 0.25 0.25 0.28 0.32 0.31 0.23 0.27 0.28 0.25 0.27 0.29 Coods and Services 0.21 0.16 0.19 0.23 0.29 0.24 0.31 0.36 0.53 0.68 0.68 0.59 0.55 0.42 0.34 0.45 0.48 0.59 Interest on Debt 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.03 0.00 0.00 0.17 0.14 0.13 0.02 0.02 0.04 Do~t~eati c 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.03 0.00 0.00 0.00 0.05 0.00 0.00 0.01 0.01 Foreign 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.17 0.09 0.13 0.02 0.01 0.03 Other Current Expendi turea 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Current l Cap i hI Transfers 0.07 0.08 0.10 0.08 0.24 0.22 0.04 0.05 0.08 0.23 0.34 0.41 0.36 0.36 0.42 0.50 0.51 2.02 Economies 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -0.08 0.74 0.64 0.72 1.04 1.88 1.13 0.95 1.82 2.19 2.18 2.49 1.58 1.58 2.05 1.40 2.15 2.24 0.44 Capital Account IV- Capital Revenues 0.03 0.00 0.05 0.00 0.11 0.01 0.01 0.00 0.01 0.01 0.02 0.03 0.03 0.03 0.02 0.02 0.02 0.04 V- Capital Expend i turea 0.29 0.24 0.29 0.36 0.96 0.55 0.59 0.89 0.87 0.93 0.68 0. 79 0.52 0.49 0.18 0.18 0.40 0.34 Fixed Investments 0.25 0.24 0.24 0.23 0.31 0.52 0.57 0.88 0.83 0.85 0.59 0.66 0.42 0.37 0.13 0.11 0.16 0.26 Machinery and Equ i pRtent 0.08 0.08 0.10 0.07 0.14 0.27 0.44 0.72 0.60 0.63 0.42 0.47 0.31 0.27 0.08 0.04 0.06 0.14 Construction 0.17 0.16 0.14 0.16 0.17 0.24 0.13 0.16 0.23 0.23 0.17 0.19 0.12 0.10 0.05 0.07 0.10 0.12 Changes in lnvent.or"iea 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.03 0.02 0.01 0.00 0.00 0.00 0.02 0.02 Fi nanc i a I Investments 0.03 0.00 0.05 0.13 0.65 0.03 0.01 0.01 0.03 0.08 0.06 0.11 0.09 0.11 0.05 0.06 0.22 0.10 Economies 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -0.04 VI-Financing Due 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 to Economic Emergency VII-Capital from Previous Period 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.32 0.34 0.57 0.24 0.07 0.0.( 0.03 0.11 0.20 VIII-Contr;but;ons fro": 0.18 0.08 0.14 0.25 0.53 0.92 0.98 0.65 1.04 1.41 1.33 1.65 1.64 1.57 1.19 1.12 1.11 1.21 Control Ad,.;n;atrot;on 0.11 0.08 0.10 0.14 0.27 0.73 0.86 0.45 0.71 1.15 1.03 1.32 1.28 1.23 0.96 0.74 0.75 0.81 Speciol Accounto 0.02 0.00 0.00 0.08 0.23 0.16 0.12 0.15 0.20 0.16 0.19 0.20 0.23 0.22 0.21 0.37 0.34 0.38 Decentrol;ud Agone;•• 0.05 0.00 0.05 0.03 0.04 0.02 0.00 0.05 0.14 0.10 0.11 0.13 0.13 0.12 0.01 0.01 0.02 0.02 Prov;nces A MCBA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Publk Enterpdoeo 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Sociol Secudty Syote" 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 IX- Contr i buti on• to: 0.61 0.48 0.58 0.94 1.57 1.49 1.36 1.65 2.38 2.26 2.36 2.42 2.16 2.41 1.96 2.69 2.53 1.41 Central Administration 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.04 Special Accounts 0.02 0.48 0.58 0.09 0.22 0.16 0.12 0.15 0.20 0.16 0.19 0.20 0.23 0.22 0.21 0.37 0.34 0.38 Decentralized Agencies 0.04 0.00 0.00 0.07 0.28 0.16 0.11 0.10 0.25 0.25 0.09 0.09 0.05 0.00 0.00 0.00 0.00 0.01 Pro-vinces A MCBA 0.13 0.00 0.00 0.27 0.48 0.67 0.72 0.88 1.20 1.18 1.31 1.35 1.21 1.35 1.08 1.23 1.45 0.00 Pub I ic Enterprises 0.43 0.00 0.00 0.51 0.59 0.50 0.40 0.53 0.73 0.67 0.78 0.78 0.67 0.84 0.67 1.08 0.74 0.98 Social Security System 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 X- Revonuoo (l+lV+VI+VII+VIll) 1.44 1.12 1.35 1.118 8.40 2.85 2.57 3.13 4.11 5.14 5.53 5.14 4.80 4.93 3.81 4.54 4.77 4.74 XI- Expendi turea (II+V+IX) 1.39 1.12 1.80 1.86 3.40 2.85 2.58 3.20 4.11 4.41 4.39 4.52 3.98 4.09 3.31 4.10 4.21 4.60 XII- Fi n•nc i ng Needs (XI-X) -0.05 o.oo -o.os o.o1 -o.oo -o.oo 0.01 0.01 0.01 -0.73 -1.14 -0.62 -0.82 -o.e~ -•J.so -o 44 -0.56 -0.14 XIII-Net Financing 0.01 0.00 0.00 0.00 0.00 0.00 0.01 0.41 0.01 -0.05 -0.23 -0.15 -0.55 -0 ·~ ··'.34 ·0.04 -0.02 -0.02 •· Net Use of Credit 0.01 0.00 0.00 0.00 0.00 0.00 0.01 0.41 0.01 -0.05 -0.15 -0.13 -0.47 -0.21 "".32 -0 04 -0.01 -0.02 Do•••ti c -0.00 0.00 0.00 -0.00 -0.00 -0.00 -0.00 -0.00 -0.00 -0.05 -0.02 -0.02 -0.00 -0.21 -'.>.01 ').04 ·0.02 -0.02 Cf'edi t 0.00 0.00 0.00 0.00 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 ".00 <1.00 0.00 0.00 A11t0rt i zat ion 0.00 0.00 0.00 0.00 0.01 0.00 0.00 0.00 0.00 0.06 .0.02 0.02 0.00 0.21 0.01 0.04 0.02 0.02 Fo,.ei an 0.01 0.00 0.00 0.01 0.01 0.00 0.01 0.41 0.01 0.00 -0.13 -0.11 -0.47 -0.00 -0.32 0.00 0.00 0.00 Credit 0.01 0.00 0.00 0.01 0.01 0.01 0.01 0.41 0.01 0.00 0.00 0.10 0.02 0.04 0.04 0.04 0.03 0.07 A..orti z•t.ion 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 o.oo \ 0.14 0.21 0.49 0.05 0.36 0.03 0.02 0.06 It. Net Uae of Advances 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -0.08 -0.02 -0.08 -0.27 -0.02 -0.00 -0.00 0.00 Credit 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Deltit 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.08 0.02 0.08 0.27 0.02 0.00 0.00 0.00 XIV- Ove~oll S.lonce (XIII-XII) 0.05 o,oo 0.05 -0.00 0.01 0.01 0.00 0.00 -0.00 0.68 0.90 0.47 0.26 0.35 0.16 0.40 0.54 0.12 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 o.oo 0.00 0.00 0.00 Ne\ Yorio\ion in PoNivo Finoncing-0.05 0.00 -0.05 0.00 -0.01 -0.01 0.00 0.00 0.00 -0.68 -0.90 -0.47 -0.28 -0.35 -0.18 -0.40 -0.54 -0.12 Soul"'ce: Ministry of Econ~. •I Exclude• provinciel 80¥ern. .nt.e. Juno 19119  249 - Tobie 5.9, AROENTINA - SOCIAL S~ITY' REVENJES, EXPENliTURES NC FINANCINO, 1970-1987 (Thouaanda of Australes) 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 •I Current Account I- Current Revenues 0.40 0.57 0.77 1.64 2.46 6.15 29.91 85.0 226.2 685 1652 3338 7229 35481 141899 1765900 3143000 7176800 Tax Revenues 0.40 0.57 0.76 1.60 2.43 6.13 29.17 74.4 220.8 669 1581 2936 6358 32254 135384 1421200 2936300 6687200 Non-taw Revenues 0.00 0.00 0.01 0.04 0.03 0.02 0. 74 10.7 5.4 16 71 402 871 3227 6515 344 700 206700 489600 II- Current E•pendi turea 0.38 0.56 0.76 1.46 2.33 5.73 25.04 69.9 241.7 697 1668 3329 7174 41479 293628 2215000 4103900 8783600 Personnel Expenditures 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 0 Cooda and Serv i cea 0.00 0.00 0.00 o.oo 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 0 Interest on Debt 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 0 Domeati c 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 0 Foreign 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 0 Ot.her Current Expendi turea 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 22 50 92 0 0 0 0 0 Current A Cap i hI Transfers 0.38 0.56 0.76 1.46 2.33 5.73 25.04 69.9 241.7 688 1646 3279 7082 41479 293628 2215(>00 4103900 8783800 Economies 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 0 0.02 0.01 0.01 0.18 0.13 0.42 4.87 15.1 -15.5 -12 -16 55 -5998 -151729 -449100 -960900 -1606800 Cap i tal Account IV- Capital Revenues 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0 14.6 2 0 0 0 0 0 V- Capital Expenditures 0.01 0.00 0.01 0.00 0.00 0.00 4.87 15.1 0.0 0 0 0 0 0 0 0 0 0 Fi ~ted InvestMents 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 0 Machinery and EquipMent 0.00 0.00 0.00 0.00 0.00 o.oo 0.00 0.0 0.0 0 0 0 0 0 0 0 0 0 Constr-uction 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 0 Changes in Inventor i ea 0.00 0.00 0.00 0.00 0.00 o.oo 0.00 0.0 0.0 0 0 0 0 0 0 0 0 0 Financial Investment• 0.01 0.00 0.01 0.00 0.00 0.00 4.87 15.1 0.0 0 0 0 0 0 0 0 0 0 Economi •• 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 0 VI-Financing Due 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 0 to Economic Emergency VII-Capital fro111 Previous Period 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 0 VIII-Contribution• from: 0.00 0.00 0.00 0.04 0.01 0.09 0.24 0.3 1.4 5 10 0 0 0 154155 5705(1() 1073700 1486000 Central Administration 0.00 0.00 0.00 0.04 0.01 0.09 0.24 0.3 1.4 5 10 0 0 0 154155 5705(1() 1073700 1486000 Special Accounts 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 0 Decentralized Agenc i ea 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 0 Prov i ncea A ~BA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 0 Pub I ic Enterprises 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 0 Social Security System 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 0 IX- Contributions to: 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 Central AdMinistration 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 Special Accounts 0.00 0.00 0.00 o.oo 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 Oecentral i zed Agenc i ea 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 Provinces A MCBA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 Pub I ic Enterprises o.oo 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 Social Security System 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 X- Rovonuoo (I+IV+VI+VII+VIII) 0.40 0.57 0.77 1.68 2.47 8.24 30.15 85.3 242.2 699 1884 3339 7233 35481 296054 233640(> 4218700 8882800 XI- &oondi~uroe (II+V+IX) 0.39 0.56 0.77 1.46 2.33 5.73 29.91 85.0 241.7 697 1868 3329 7174 41479 293628 221500C> 4103900 87113600 XII- Financing Needa (XI-X) -0.01 -0.01 0.00 -0.22 -0.14 -0.51 -0.24 -0.3 -0.5 -3 -10 -59 599B 242Jli -12J 4()CI -112800 12080() )(III-Net Financing o.oo 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 ., 0 0 a. Net U.e of Credit 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 <) 0 0 Oo.eatic 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 Credit 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 A...orti zation 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 0 Foreign 0.00 0.00 0.00 o.oo 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 <) 0 0 0 Credit 0.00 0.00 0.00 0.00 0.00 o.oo 0.00 0.0 0.0 0 0 0 0 0 0 0 0 0 AMOrtization 0.00 0.00 0.00 0.00 0.00 o.oo 0.00 0.0 0.0 0 0 0 0 0 <) 0 0 0 b. Net Uae of Advances 0.00 0.00 0.00 o.oo 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 0 Credit 0.00 0.00 0.00 o.oo 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 0 O.bi~ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 0 XIV- Ovoroll llo I on co {XIII-XU) 0.01 0.01 0..00 0.22 0.14 0.51 0.24 0.3 0.5 3 -4 10 59 -5998 2426 121400 112800 -120800 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 38132 0 0 0 He~ Voriotion in Po. . ive Finoncing-0.01 -o.01 0.00 -o.22 -0.14 -0.51 -o.24 -0.8 -0.5 -3 4 -10 -59 5998 -38558 -121400 -112800 120800 Source: Hi n i at.ry of EconG~~Y. •I Ea:clullllea ~trovincial govern. .nta. ""'"" 1989  - 250 - Tobie 5.10' AROelTINA- SOCIAL SECUUTY' REVB'f.JES, EXPEN:HT~ES IKl FINANCINO, 1970-1987 (Per-cent of CDP) 1970 1971 1972 1973 197. 1975 1976 1977 1978 1979 1980 1981 1982 1983 198. 1985 1986 1987 •/ Curr-ent Account 1- Cur.-ent Revenues •. 56 4.55 3.72 •. 62 5.06 4.30 3.94 4.06 4.32 4.81 5.83 6.10 4.90 5.20 2.69 4.46 4.23 4.05 Tax Revenues •. 56 •. 55 3.67 •. 51 5.00 4.29 3.8. 3.55 •. 22 •. 70 5.58 5.36 4.31 4.72 2.56 3.59 3.95 3.77 Non-tax Revenues 0.00 0.00 0.05 0.11 0.06 0.01 0.10 0.51 0.10 0.11 0.25 0.73 0.59 0 .• 7 0.12 0.87 0.28 0.28 II- Current Expend i turea •. 33 4 .• 7 3.67 4.11 4.79 4.01 3.30 3.34 4.62 •. 89 5.89 6.08 4.86 6.08 5.56 5.59 5.52 •. 96 Personnel Expend i turea 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Oooda and Serv i cea 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Interest on Debt 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Do~t~eatic 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Foreign 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Other Current Expenditures 0.00 0.00 0.00 0.00 o.oo 0.00 0.00 0.00 0.00 0.06 0.08 0.09 0.06 0.00 0.00 0.00 0.00 0.00 Curl"ent l- Capital Tranafera •. 33 4.47 3.67 •. 11 4.79 4.01 3.30 3.3. 4.62 •. 82 5.81 5.99 4.80 6.08 5.56 5.59 5.52 4.96 EconoMies 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 III- S.vinga 0.23 0.08 0.05 0.51 0.27 0.29 0.64 0.72 -0.30 -0.08 -0.06 0.02 0.04 -0.88 -2.87 -1.13 -1.29 -0.91 Capital Account 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 IV- Capital Revenues 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.28 0.07 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 V- Capital E11pend i turea 0.11 0.00 0.05 0.00 0.00 0.00 0.64 0. 72 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Fixed lnveat•enta 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Machi ner"y and EquipMent 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Construction 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Changes in Inventor i •• 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Financial lnveat..enta 0.11 0.00 0.05 0.00 0.00 0.00 0.64 0.72 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Econo•i•• 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 VI-Financing Due 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 to Econo111i c t:.Rergency VII-Capital fro11 Previou~ Period 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Vlll-Contributiona from: 0.00 0.00 0.00 0.11 0.02 0.06 0.03 0.01 0.03 0.04 0.04 0.00 0.00 0.00 2.92 1.44 1.•• 0.8. Central Adrniniatration o.oo o.oo o.oo o.11 0.02 o.o6 o.o3 o.o1 o.o3 o.o4 o.o• o.oo o.oo o.oo 2.92 1.44 1.44 0.8. Special Accounts 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Oecentral i zed Agenc i ea 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Provinces A HCBA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Pub I ic Enter-priaea 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Social Secu r i t..y Syatem 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 IX- Contr ihutiona to: 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Cent.l"'•l AdiRiniatl"'ation 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Speei•l Aeeounta 0.00 0.00 0.00 o.oc 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Decent!"'• I ized Agenciea 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Pl"'ov i nee a A HCBA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Puhl ic Entel"'pl"'iaea 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Soci•l Security System 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 X- Revenu . . (l+IV+Vl+VII+VIII) 4.58 •. 515 11.72 •. 73 5.08 •. 36 3.97 4.08 4.83 4.91 5.87 8.10 4.90 5.20 5.61 5.90 5.87 4.89 XI- Eapendi t.ur•• (II+V+IX) 4.4. 4 .•7 3.72 4.11 4.79 4.01 3.9. 4.08 4.82 •. 89 5.89 6.08 •. 86 6.08 5.56 5.59 5.52 •. 96 XII- Finoncing Nee4o (XI-X) -0.11 -0.08 0.00 -0.62 -0.29 -0.36 -0.03 -0.01 -0.01 -0.02 0.01 -0.02 -0.04 0 PB -0.05 -0.31 -0.15 0.07 XIJJ-Net.. Financing 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0 '"' •).00 0.00 0.00 0.00 •· Net U.e of Credit 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 ".00 0.00 0.00 0.00 eo..... ti c 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 ., 00 ').00 0.00 0.00 Credit 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0 00 ., 00 <) 00 0.00 0.00 A110rtiz•tion 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Fore•gn 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Credit •).00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 o:oo 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 A110rtiz•tion 0.00 0.00 0 00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 It. Net U.e of Adv•ncea 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Credit 0.00 0.00 <'.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Deltit.. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0 00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 XIV- Ov . . oll Bolonce (XIll-Xll) 0.11 0.011 0.00 0.82 0.29 0.36 0.03 0.01 0.01 0.02 -0.01 0.02 0.04 -0.88 0.05 0.31 0.15 -0.07 C...trol Bonk 0.00 0.00 0.00 0.00 o.oo o.oo 0.00 0.00 0.00 o.oo 0.00 0.00 0.00 0.00 0.88 0.00 0.00 0.00 Net Vorlotion in Po-i,.• Finencing-0.11 -0.08 0.00 -0.82 -0.29 -0.36 -0.03 -0.01 -0.01 -0.02 0.01 -0.02 -o.a. 0.118 -0.73 -0.31 -0.16 0.07 Source: Hi n i e~ry of EcortCMt)f. •I Exclude• lfi"'OYinci•l govern . .nte. June 1919  - 251 - Tobie 5.11: AROENTINA - PROVINCIAL GOVERNMENTS: REVEHJES, EXPelliTURES loKJ FINANCING, 1970-1986 (Thouaanda of Auat.ralea) 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 Current Account 1- Current Revenuea 0.59 0.71 0.96 1.86 3.05 5.51 38.3 168.8 460.5 1240 2694 4374 10765 44428 342346 2007700 3677600 Ta• Revenues 0.49 0.58 0.83 1.60 2.62 43 34.6 147.8 391.5 1068 2352 3784 9210 35353 278199 1504700 2830300 Non-tax Revenues 0.10 0.13 0.13 0.26 0.42 08 3.7 21.0 69.0 172 342 590 1556 9075 64147 503000 847300 II- Current Expandi turaa 0.47 0.64 1.03 2.22 3.66 11 27 41.0 114.5 340.0 935 2272 4670 10390 58096 485776 3474200 6276400 Pe,..-onnel Expendit.urea 0.33 0.46 0.74 1.62 2.60 8.23 26.7 65.6 218.7 614 1456 2634 5696 33773 305877 2210900 4067300 Oooda and Serv i cea 0.07 0.09 0.13 0.24 0.37 0.95 4.8 16.2 44.8 116 300 488 1261 5710 50322 405800 768400 lnter"eat on Debt 0.00 0.00 0.00 0.01 0.02 0.05 0.2 0.4 0.8 7 27 144 223 1232 972 19300 12900 OoMeati c 0.00 0.00 0.00 0.01 0.02 0.05 0.2 0.4 0.8 7 27 144 209 253 670 18000 0 For"ei gn 0.00 0.00 0.00 0.00 0.00 0.00 o.o 0.0 0.0 0 0 0 14 979 302 1300 12900 Other Current E~~~:pendi turea 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0.0 0 0 0 0 0 0 0 0 Current A Capital Tranafer"a 0.07 0.10 0.16 0.35 0.67 2.04 9.3 32.3 75.8 197 489 1404 3210 17381 128605 838200 1427800 Econofllies 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0.0 0 0 0 0 0 0 0 0 III- Su· i nga 0.12 0.07 -0.06 -0.36 -0.61 -5.76 -2.8 54.3 120.5 305 422 -295 375 -13668 -143430 -1466500 -2598800 0.01 0.01 0.01 0.01 0.06 0.05 0.4 0.9 3.2 16 26 119 234 3811 15200 15200 V- Capital Expenditures 0.20 0.24 0.44 0.64 1.18 3.89 25.4 82.1 205.2 518 1016 1897 3777 19750 142258 1028000 2007700 Fixed lnveet.~ttenta 0.19 0.24 0.42 0.61 1.12 3.79 24.8 76.0 198.5 501 961 1518 3447 18822 128463 959600 1953700 Machinery and Equ i plltent 0.02 0.02 0.03 0.04 0.10 0.23 1.5 6.5 13.0 21 43 61 127 725 6218 40200 47100 Construction 0.17 0.21 0.40 0.57 1.01 3.56 23.3 69.5 185.5 480 918 1457 3320 18097 122245 919400 1906600 Changes in Inventories 0.00 0.00 0.00 0.00 0.00 0.00 o.o 0.0 0.0 0 30 77 125 230 1861 14600 15200 Fi nanci at lnveat•anta 0.01 0.00 0.02 0.02 0.06 0.10 0.5 6.1 6. 7 17 25 302 205 698 11934 53800 38800 Economies 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0.0 0 0 0 0 0 0 0 0 VI-Financing Due 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0.0 0 0 0 0 0 0 0 0 to Econo111i c Emergency VII-Capital from Previoua Period 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0.0 30 37 37 81 298 2900 0 VIII-Contributiona from: 0.07 0.13 0.32 0.84 1.48 8.81 26.1 32.6 86.9 218 488 1465 2987 34831 202171 2240500 4646500 Central Adftliniatration 0.06 0.11 0.28 0.74 1.24 7.84 20.6 13.9 23.1 48 101 710 1173 25509 144961 1748700 3566800 Special Account• 0.01 0.02 0.03 0.10 0.23 0.96 5.5 18.4 62.9 168 372 741 1789 9221 57006 487900 1074500 Oecentral i zed Agenc i •• 0.00 0.00 0.00 0.00 0.01 o.oo o.o 0.3 0.9 2 15 14 25 101 204 3900 5200 Pr-ovinces ,l HCBA 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0.0 0 0 0 0 0 0 0 0 Pub I ic Enterpriees 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0.0 0 0 0 0 0 0 0 0 Social Security Syetellt 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0.0 0 0 0 0 0 0 0 0 IX- Contribution• to: 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0.0 52 0 0 0 0 0 0 0 Centr•l Adminiat.r•t.ion 0.00 0.00 0.00 0.00 0.00 0.00 o.o 0.0 0.0 46 0 0 0 0 0 0 0 Special Account• 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0.0 0 0 0 0 0 0 0 0 Oecen tral i zed Agenc i •• 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0.0 0 0 0 0 0 0 0 0 Province• A. HCBA 0.00 0.00 0.00 0.00 0.00 o.oo 0.0 0.0 0.0 5 0 0 0 0 0 0 0 Pub I ic Enterpriaee 0.00 0.00 0.00 0.00 0.00 0.00 o.o 0.0 0.0 0 0 0 0 0 0 0 0 Soc i •I Sec-urity SysteM 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0.0 0 0 0 0 0 0 0 0 X- Revenuea (I•IV•VI+VII•VIII) 0.66 0.85 1.29 2.71 4.59 14.36 64.7 202.3 550.6 1472 3229 5902 13908 79574 S486~f> 4266300 8339300 0.66 0.89 1.47 2.85 4.84 15.16 66.4 196.6 545.2 1504 3288 6566 14166 77qtt,::; r.280~4 4502200 8284100 XII- Fin•ncing Neecfa (XI-X) 0.00 0.04 0.18 0.14 0.25 0.80 1.7 -5.8 -5.4 32 59 664 258 . 1 i:·~ 7Q4(1f! 23~900 -55200 XIII-Net Fin•ncing -0.01 0.01 0.05 0.02 -0.00 0.30 0.3 -0.2 1.8 33 38 316 16 t:'l\ 143' -38500 -76800 a. Net U.e of Cr-eclit -0.01 0.01 0.05 0.02 -0.00 0.30 0.3 -0.2 1.8 33 38 315 17 12f:. 144~' -38300 -76800 Oo. . atic -0.01 0.01 0.05 0.02 -0.02 0.28 0.3 -0.2 1.8 33 38 315 33 ll'l 44') -3~1100 -73000 Cr-edit 0.00 0.02 0.06 0.04 0.04 0.37 0.7 0.3 2.5 38 49 344 41 403 981 2S700 0 A-.,r-ti zation 0.01 0.01 0.01 0.02 0.06 0.09 0.4 0.4 0.7 5 11 30 8 284 53~ 60800 73000 Foreign 0.00 0.00 0.01 0.00 0.01 0.02 o.o 0.0 0.0 0 0 0 -16 6 991 -3200 -3800 Credit o.oo 0.00 0.01 0.00 0.02 0.03 0.0 0.0 0.0 0 ·o 0 84 34 2189 1900 110200 A.ort.i zat;ion o.oo o.oo o·.oo o.oo o.oo o.o1 o.o 0.0 0.0 0 0 0 100 28 1198 5100 114000 b. Net. U.e of Aclvancea o.oo 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0.0 0 0 2 -2 -4 -200 0 Creel it. 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0.0 0 0 2 I () 100 0 Debit 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0.0 0 0 0 2 0 300 0 XIV- Overoll hlonce (XIII-XII) -0.01 -0.03 -0.13 -0.12 -0.25 -0.50 -1.4 5.6 7.2 -21 -348 -243 1854 -77972 -274400 -21600 Centro! hnk 0.00 0.00 0.00 0.00 0.00 0.00 o.o 0.0 o.o 0 0 0 0 0 0 0 0 Net Voriotion in PoNivo Finoncing 0.01 0.03 0.13 0.12 0.25 0.50 1.4 -5.6 -7.2 -1 21 3411 243 -1854 77972 274400 21600 Source: Hinlat.r~ of Econ~. Horch 1981  - 252 - Table 5.12: AROENTINA- PROVINCIAL 00Vffilf19IT5: REVENUES, EXf'ei)IT~ES AKJ FINANCINO, 1970-1986 {Percent of GOP) 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 Current Account 1- Current Revenues 6.70 5.67 4.66 5.24 6.26 3.85 5.04 8.07 8.80 8.70 9.51 7.99 7.29 6.51 6.48 5.07 4.95 Ta• Revenues 5.55 4.64 4.03 4.50 5.39 3.09 4.56 7.06 7.48 7.49 8.30 6.91 6.24 5.18 5.27 3.80 3.81 Non-ta• Revenues 1.15 1.02 0.62 0.73 0.87 0.76 0.48 1.00 .32 .21 1.21 1.08 05 1.33 . 21 1. 27 1. 14 II- Cur,.ent Expendi turea 5.32 5.14 4.97 6.25 7.52 7.88 5.41 5.47 50 56 8.02 8.53 7 04 8.51 20 8.77 8.45 Personnel Expendit,urea 3.73 3.67 3.56 4.55 5.35 5.75 3.52 3.13 4.18 4.31 5.14 4.81 3.86 4.95 5.79 5.58 5.47 Oooda and Serv i cea 0.76 0.68 0.64 0.67 0.75 0.66 0.63 0.78 0.86 0.82 1.06 0.89 0.85 0.84 0.95 1.02 1.03 Intereat on Debt 0.04 0.03 0.01 0.03 0.05 0.04 0.03 0.02 0.01 0.05 0.10 0.26 0.15 0.18 0.02 0.05 0.02 Do~t~eati c 0.03 0.03 0.00 0.03 0.04 0.03 0.03 0.02 0.01 0.05 0.10 0.26 0.14 0.04 0.01 0.05 0.00 For"ei gn 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.01 0.14 0.01 0.00 0.02 Other Current Expendi turea 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Current A Capital Transfers o.80 o.n o.n o.~ 1u 1.~ 1.~ 1.~ 1.a 1.M 1.n 2~ 2.u 2~ 2.« 2g 1.~ Econolftiea 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 III- Savings l.M 0.52 -0.31 -1.01 -1.26 -4.03 -0.36 2.59 2.30 2.14 1.49 -0.54 0.25 -2.00 -2.72 -3.70 -3.50 Cap i tal Account IV- Capital Revenues 0.08 0.04 0.05 0.03 0.11 0.03 0.05 0.04 0 06 0.05 0.06 0.05 0.08 0.03 0.07 0.04 0.02 V- Capihl Expendi ..~urea 2.23 1.94 2.13 1. 79 2.42 2. n 3.34 3.92 3 92 3.63 3.59 3. 46 2. ss 2.89 2. 69 2. so 2.10 Fixed lnveetmenta 2.14 1.90 2.05 1.72 2.29 2.65 3.27 3.63 3.79 3.52 3.39 2.77 2.34 2.76 2.43 2.42 2.63 Machinery and Equip"'ent 0.25 0.20 0.14 0.12 0.21 0.16 0.20 0.31 0.25 0.15 0.15 0.11 0.09 0.11 0.12 0.10 0.06 Construction 1.89 1.70 1.91 1.60 2.08 2.49 3.07 3.32 3.54 3.37 3.24 2.66 2.25 2.65 2.31 2.32 2.57 Changes in Inventor i •• 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.11 0.14 0.08 0.03 0.04 0.04 0.02 Financial lnveat111enta 0.09 0.04 0.08 0.07 0.12 0.07 0.07 0.29 0.13 0.12 0.09 0.55 0.14 0.10 0.23 0.14 0.05 Economies 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 VI- Financing Due to Economic Eme 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 VII-Unused Capital fr-o111 Previoua P 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.04 0.11 0.07 0.03 0.01 0.01 0.01 0.00 Vlii-Contributiona from: 0.76 1.04 1.53 2.37 3.05 6.16 3.44 1.56 1.66 1.53 1.72 2.68 2.02 5.10 3.83 5.66 6.25 Central Ad1•11inistration 0.63 0.91 1.36 2.09 2.56 5.48 2.71 0.66 0.44 0.34 0.36 1.30 0.79 3.74 2.74 4.42 4.80 Special Account• 0.13 0.13 0.16 0.27 0.48 0.67 0.72 0.88 1.20 1.18 1.31 1.35 1.21 1.35 1.08 1.23 1.45 Oecentral i zed Agencies 0.01 0.00 0.00 0.01 0.01 0.00 0.00 0.02 0.02 0.01 0.05 0.03 0.02 0.01 0.00 0.01 0.01 Provinces A HCBA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Pub I ic Enterprises 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Social Security System 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 IX- Contribution• to: 0.00 o.oo 0.00 0.00 ').00 0.00 0.00 0.00 0.00 0.36 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Central Administration 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.33 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Special Accounta 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Oecent.ral i zed Agenc i ee 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Prov i ncea l MCBA 0.00 0.00 0.00 O.O'J 0.00 0.00 0.00 0.00 0.00 0.04 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Pub I ic Enterprises 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Social Security System 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 X- Revenueo (I+IV+VI+VII+VIII) 7.155 6.75 6.23 7.64 9.43 10.04 11.53 9.67 10.52 10.33 11.39 10.78 42 11.66 10.39 10.78 11.~ XI- Eapon4 i t.ureo (II+V+IX) 7.~ 7.011 7.10 8.04 9.94 10.80 8.75 9.39 10.42 10.~ 11.60 11.99 9 60 11.40 11 ~9 11.37 11.15 XII- Financing Neecle (XI-X) 0.00 0.32 0.87 0.40 0.51 0.56 0.~ -0.28 -0.10 0.23 0.21 1.21 0 11 ~.25 50 0.60 -0.07 XIII~Net. Financint -0.11 0.06 0.26 0.06 -0.01 0.21 0.04 -0.01 0.03 0.23 0.13 0.58 0.01 0 •)2 0.03 -0.10 -0.10 a. Net Uae of Credit -0.11 0.06 0.26 0.06 -0.01 0.21 0.04 -0.01 0.03 0.23 0.13 0.57 0 01 ,, "~ (>03 -0.10 -0.10 O.O..ati c -0.11 0.05 0.23 0.06 -0.04 0.20 0.04 -0.01 0.03 0.23 0.13 0.57 C>.O~ (• ··~ <• •>1 -0 09 -0.10 Credit 0.00 0.12 0.30 0.11 0.09 0.26 0.09 0.01 0.05 0.27 0.17 0.63 0.03 0.·>6 . (> •)2 0 06 0.00 A11t0rti &at ion 0.11 0.07 0.07 0.05 0.13 0.06 0.05 0.02 0.01 0.03 0.04 0.05 0.01 0.•)4 0.01 0.15 0.10 Fore ion 0.00 0.02 0.03 0.00 0.03 0.01 0.00 0.00 0.00 0.00 0.00 0.00 -0.01 0.00 0.02 -0.01 -0.01 Credit 0.00 0.02 0.03 0.00 0.03 0.02 0.00 0.00 0.00 0.90 0.00 0.00 0.06 0.00 0.04 0.00 0.15 A~~arti&ation 0.00 0.01 0.01 0.00 0.01 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.07 0.00 0.02 0 01 0.15 It. Net Uae of Advancea 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -0.00 0.00 -0.00 -0.00 0.00 Credit 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Delo j t 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 XIV- Overoll lolonce (XIII-XII) -0.12 -0.28 -0.81 -0.34 -0.52 -0.33 -0.18 0.27 0.14 0.01 -0.011 -0.84 -0.16 0.27 -1.48 -0.69 -0.03 Control Bonk 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Net Vorlot.ion in Poooivo Finonci 0.12 0.28 0.81 0.84 0.152 0.35 0.18 -0.27 -0.14 -0.01 0.011 0.84 0.16 -0.27 1.48 0.89 0.03 Source: Mi n latry of Econa.y . Horch 191111  - 253 - Toblo 5.13: ARGENTINA- PUBLIC ENTERPRISES: REV!NJES, EXPEM>ITI..tiES ANl FINANCINO, 1970-1987 (Thousands of Australes) 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1/ Current Account 1- Current Revenues 0.75 0.96 1.65 2.84 4.16 12.03 73.7 205.6 580 1249 2447 5624 14346 75306 556351 5372800 8964500 19810300 Tax Revenues 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 0 0 Non-tax Revenues 0. 75 0.96 1.65 2.84 4.16 12.03 73.7 205.6 580 1249 2447 5624 14346 75306 556351 537"2800 8964500 19810300 II- Current Expend i turea 0.64 0.92 1.53 2.71 4.07 13.28 70.8 167.4 498 1236 2797 6667 20061 92823 632441 5971500 8628600 20893200 Personnel E»rpendi turea 0.26 0.42 0.61 1.25 2.05 6.50 23.4 56.8 158 446 948 1620 3249 20423 169502 1218400 2211300 5442600 Oooda and Serv i cea 0.34 0.44 0.78 1.31 1.46 5.53 41.0 88.0 245 591 1065 2489 9014 48372 335726 35~"7700 4825200 10849700 Interest on Debt 0.03 0.05 0.10 0.15 0.18 0.83 4.1 18.3 59 155 448 1926 6038 16801 107089 997300 1102700 2682300 Oo11eati c 0.01 0.02 0.06 0.10 0.06 0.28 1.6 8.0 37 96 309 1325 2737 3255 16067 219300 48900 91800 Foreign 0.02 0.03 0.04 0.05 0.12 0.55 2.5 10.2 22 58 139 601 3301 13546 91022 778000 1053800 2590500 Other Cur" r-ent E~rpendi turea 0.01 0.01 0.04 o.oo 0.38 0.42 2.3 4.3 37 45 336 632 1760 7227 20124 228100 489400 1918600 Current I. Capital Transfers 0.00 0.00 0.00 o.oo 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 0 0 Econo•i•a 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 0 0 III- Savings 0.11 0.04 0.12 0.13 0.09 -1.25 3.0 38.2 81 13 -350 -1043 -5715 -17517 -76090 -598700 335900 -1082900 Capital Account 0.02 0.03 0.03 0.02 0.10 0.14 0.6 7.3 14 25 60 89 538 1012 7216 7.5000 82800 168700 V- Capital Expend i tu rea 0.34 0.49 0.81 1.14 1.729 5.635 41 5 103.0 266 559 1010 1913 5028 26483 188570 116:3100 2056000 5969100 Fixed Inveat~~tenta 0 0 1 1 1.62 5.34 37.6 97.6 244 527 968 1738 4857 24624 176215 111!5100 1927 400 5199000 Machi nary and Equ i p•ent 0.19 0.25 0.49 0.69 0.78 2.34 16.7 41.8 129 294 419 815 2364 11820 103152 511~100 867300 2339600 Construction 0.12 0.19 0.30 0.42 0.84 3.00 20.9 55.8 115 233 549 923 2493 12804 1060100 2859400 Changes in Inventor i ea 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 Financial lnveatmenta 0.03 0.05 0.02 0.03 0.11 0.29 3.8 5.5 22 32 42 176 170 1859 12355 411000 128600 770100 Econo~t~iea 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 0 0 VI-Financing Due 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 0 0 to Econollt i c Emergency VII-Capital from Previous Period 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 0 0 VIII-Contributions fr"oM: 0.13 0.20 0.26 0.53 0.95 3.15 24.8 39.8 68 202 426 850 2817 48031 160236 116!;500 1688200 6558400 Central Administration 0.08 0.15 0.19 0.35 0.67 2.43 21.8 28.8 30 102 205 424 1833 42310 124910 731"800 1136400 4828600 Special Account• 0.04 0.04 0.07 0.18 0.29 0. 72 3.1 11.0 38 95 220 425 984 5716 35326 42!1700 551800 1729800 Oecent.ral i zed Agenc i •• 0.01 0.01 0.00 0.00 0.00 0.00 0.0 0.0 0 0 5 0 0 0 0 Prov i ncea A HCBA 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 5 0 0 0 0 0 0 0 0 Public Enterpriaea 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 0 0 Social Security Syatem 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 0 0 IX- Contribution• to: 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 111 0 0 0 0 0 0 0 0 Central Ad1tliniatration 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 111 0 0 0 0 0 0 0 0 Special Accounta 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 0 0 Oecentr•l i zed Agenc i •• 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 0 0 Prov i ncea A HCBA 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 0 0 Pub I ic Enterpriaea 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 0 0 Social Security Syatelft 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0 0 0 0 0 0 0 0 0 0 X- Rovonuoa (I+IV+VI+VII+VUI) 0.90 1.19 1.94 3.39 5.21 15.32 99.1 2152.7 662 1476 2933 6582 17701 124349 723803 6614300 10735500 26537400 XI- &~ondi turee (II+Y+IX) 0.98 1.41 2.84 8.85 5.80 18.92 112.3 270.4 764 1907 3807 8580 25089 119306 821011 7134,500 10684600 26862300 XII- Fi none i ng Noode (XI-X) 0.08 0.22 0.40 0.46 0.59 3.60 13.1 17.8 102 431 874 2018 7387 -504.3 "172•)8 520:300 -50900 3:14900 XIII -Not Fi none i ng 0.05 0.12 0.25 0.24 0.65 0.30 6.4 19.9 122 407 856 2732 7580 -1777 4654 13~·100 32800 141400 1. N.t. Uae of Credit 0.05 0.12 0.25 0.24 0.65 0.30 6.4 19.9 122 407 881 2775 7503 -173~ ~f'l72 1!'3l')() 74600 314400 Oo.eatic: 0.00 0.01 0.08 0.06 0.25 -0.01 0.8 8.5 44 200 471 1374 5437 -1577 ~..1~'7 1:'; 100 -15200 -91500 Credit 0.02 0.03 0.12 0.22 0.38 0.21 1.6 11.0 56 347 560 2401 7135 2096 L'? ~100 57400 24000 AIROrtization 0.02 0.02 0.08 0.16 0.13 0.22 0.8 2.5 12 147 89 1027 1699 3673 2554 14:100 72600 115500 Foreign 0.05 0.11 0.19 0.18 0.40 0.31 5.7 11.4 78 207 410 1401 2086 -159 6399 158:100 89800 405900 Credit 0.09 0.16 0.30 0.40 0.51 0.96 8.9 21.9 106 466 564 2537 19109 43973 417861 3643500 1108400 2430700 AIROrt i zat ion 0.04 0.05 0.11 0.22 0.11 0.65 3.2 10.5 29 259 154 1136 17043 44132 4114~2 3485<100 1018600 2024800 II. N.t. Uee of Advanc:ea 0 0 0 0 0 0 0.0 0.0 0 0 -25 -43 77 -41 682 -!3i'OO -41800 -173000 Credit 0 0 0 0 0 0 0.0 0.0 0 0 0 142 77 -41 682 0 0 0 Debit 0 0 0 0 0 0 0.0 0.0 0 0 25 185 0 0 0 131'00 41800 173000 XIV- Ov . .oll .lonce (XIII-XU) -0.08 -0.10 -0.15 -0.22 0.08 -3.30 -6.7 2.2 19 -24 -18 714 193 3266 -92554 -3801100 83700 -183500 Centro! ••k 0.08 o.04 o.04 o.o1 o.ao 2.13 1. 9 o.o 0 0 0 0 0 0 0 0 0 0 Not Vorlotlon In PoHive Flnonclne 0.00 0.08 0.11 0.15 -0.36 1.17 4.8 -2.2 -19 24 18 -714 -193 -3266 92554 380~100 -83700 183500 Sourc:e: Minie\ry of Econ~. 1/ &clu4ea ~trovinc:ial eovern-.nt.e . ...... 1989  - 254 - Toblo 5.U, ARGENTINA- PUBLIC ENTERI'RISES' REVEH.JES, EXPENliTl.'IES Ai'll FINANCING, 1970-1987 (Percent. of OOP) 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1/ Current Account I- Current Revenues 8.55 7.67 7.97 8.00 8.55 8.41 9.72 9.82 11.07 8.76 8.64 10.27 9.72 11.03 10.53 13.57 12.06 11.18 Tax Revenues 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Non-tax Revenues 8.55 7.67 7.97 8.00 8.55 8.41 9.72 9.82 11.07 8.76 8.64 10.27 9.72 11.03 10.53 13.57 12.06 11.18 II- Current Expenditures 7.29 7.35 7.39 7.64 8.37 9.29 9.33 8.00 52 8.68 9.87 12.18 13.59 13.60 11.98 15.08 11.61 11.79 Personnel Expenditures 2.96 3.36 2.95 3.52 4.21 4.54 3.08 2.72 3.01 3.13 3.35 2.96 2.20 2.99 3.21 3.08 2.98 3.07 Coeds and Services 3.87 3.51 3.77 3.69 3.00 3.87 5.40 4.20 4.67 4.15 3.76 4.55 6.11 7.09 6.36 8.91 6.49 6.12 Interest on Debt 0.34 0.40 0.48 0.42 0.37 0.58 0.54 0.87 1.12 1.08 1.58 3.52 4.09 2.46 2.03 2.52 1.48 1.51 Domestic 0.11 0.16 0.29 0.28 0.12 0.20 0.21 0.38 0.71 0.68 1.09 2.42 1.85 0.48 0.30 0.55 0.07 0.05 Foreign 0.23 0.24 0.19 0.14 0.25 0.38 0.32 0.49 0.41 0.41 0.49 1.10 2.24 1.98 1.72 1.97 1.42 1.46 Other Current E•pend i tures 0.11 0.08 0.19 0.00 0.78 0.29 0.31 0.20 0.71 0.31 1.19 1.15 1.19 1.06 0.38 0.58 0.66 1.08 Current l Cap i t..l Transfers 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Economies 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 III- Savings 1.25 0.32 0.58 0.37 0.1Q -0.87 0.39 1.83 1.56 0.09 -1.24 -1.91 -3.87 -2.57 -1.44 -1.51 0.45 -0.61 Capital Account IV- Capital Revenues 0.23 0.24 0.14 0.06 0.20 0.10 0.08 0.35 0.27 0.18 0.21 0.16 0.36 0.15 0.14 0.19 0.11 0.10 V- Capital Expenditures 3.87 3.91 3.91 3.21 3.55 3 94 5.47 4.92 5.08 3.92 3.57 3.49 3.41 3.88 3.57 2.94 2.77 3.37 Fi •ed Investments 3.53 3.51 3.82 3.13 3.32 3 74 4.96 4.66 4.66 3.70 3.42 3.17 3.29 3.61 3.34 2.82 2.59 2.9:! Machinery and Equipment 2.17 2.00 2.37 1.94 1.59 64 2.21 2.00 2.46 2.06 1.48 1.49 1.60 1.73 1.95 1.31 1.17 1.32 Construction 1.37 1.52 1.45 1.18 1.73 2.10 2.76 2.67 2.20 1.63 1.94 1.69 1.69 1.88 1.38 1.51 1.43 1. 61 Changes in Inventor i •• 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Financial Investments 0.34 0.40 0.10 0.08 0.23 0.20 0.51 0.26 0.41 0.23 0.15 0.32 0.12 0.27 0.23 0.12 0.17 0.43 EconoMies 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 VI-Financing Due 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 to Economic Emergency VII-Capital from Pre¥ious Period 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 VJII-Contr i buti on a from: 1.48 1.60 1.26 1.4Q 96 2.20 3.27 1.90 1.30 1.42 1.50 1.55 1.91 7.04 3.03 2.95 2.27 3.70 Central Administration 0.91 1.20 0.92 0.99 .37 1.70 2.87 1.37 0.56 0.72 0.72 0.77 1.24 6.20 2.37 1.86 1.53 2. 73 Special Accounts o.46 o.32 o.34 o.51 o 5q o.50 o.4o o.53 o.73 o.67 o.78 o.78 0.67 o.84 o.67 t.o8 o.74 0.98 Dec en tra I i zed Agenc i •• 0.11 0.08 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Provinces J. MCBA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.04 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Pub I ic Ent.erpriaes 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Social Secu,.. i ty System 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 IX- Contributions to; 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.78 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Central Administration 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.78 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Special Accounts 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Oecentral i zed Agenc i ea 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Prov i ncea l MCBA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Pub I ic Enterprises 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Socia I Security System 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0 00 0.00 0.00 X- Revenues (1-tiV+Vl+VII•VIII) 10.26 9.51 9.38 9.55 10.71 10.71 13.06 12.07 12.64 10.36 10.35 11.99 11.99 18 22 13.71 16 71 14.45 14 98 11.17 11.28 11 31 10.85 11.92 13.23 14.79 12.92 14.59 13.38 13.44 15.67 17.00 17.48 15 55 18.02 14.38 15.16 XII- Financing N.eds (XI-X) 0.91 1.76 1.93 1.30 1.21 2.52 1.73 0.85 1.95 3.02 3.09 3.69 5.00 0 74 1.84 I 31 -0.07 0.18 XIII-Net Financing 0.57 0.96 1.21 0.68 1.34 0.21 0.84 0.95 2.32 2.85 3.02 4.99 5.14 -0 ~r, •\.oq 0 35 0.04 0.08 Net U•• of Credit 0.57 0.96 1.21 0.68 1.34 0.21 0.84 O.Q5 2.32 2.85 3.11 5.07 5.08 -0 ~~ ,, 08 0 39 0.10 0.18 DotRe•ti c 0.00 0.08 0.29 0.17 0.51 -0 01 0.10 0.41 0.84 1.40 1.66 2.51 3.68 -0 ;'3 ' 1' 0."' <) 01 0.02 -0.05 Credit 0.23 0.24 0.58 0.62 0.78 0.15 0.21 0.53 1.08 2.43 1.98 4.39 4.83 0"' '.00 '.' 02 0.08 0.01 A1110rtization 0.23 0.16 0.29 0.45 0.27 0.15 0.11 0.12 0.24 1.03 0.31 1.88 1.15 0.54 •) 05 0 04 0.10 0.07 Foreign 0.57 0.88 O.Q2 0.51 0.82 0.22 0.74 0.55 1.48 1.45 1.45 2.56 1.40 -0.02 0.12 0.40 0.12 0.23 Credit 1.03 1.28 1.45 1.13 1.05 0.67 1.17 1. OS 2. 03 3. 27 1. 99 4. 63 12.95 6. 44 7. 91 9. 20 1. 49 37 A..orti z.ati on 0.46 0.40 0.53 0.62 0.23 0.45 0.43 0.50 0.55 1.82 0.54 2.07 11.55 6.46 7.7Q 8.80 1.37 1.14 b. Net U•• of Advances 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -0.09 -0.08 0.05 -0.01 0.01 -0.03 -0.011 -0.10 Credit 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.26 0.05 -0.01 0.01 0.00 0.00 0.00 Oebi t 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.09 0.34 0.00 0.00 0.00 0.03 0.06 0.10 XIV- Ovoroll lllllanco (XIII-XII) -o.34 -0.80-0.72-0.62 0.12-2.31 -0.89 0.10 0.37 -0.17-0.011 1.30 0.13 0.48 -1.75 -O.Q6 0.11 -0.10 0.34 0.32 0.19 0.20 0.62 1.49 0.25 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Not Variation in PaNivo Financing 0.00 0.48 0.53 0.42 -0.74 0.82 0.63 -0.10 -0.37 0.17 0.011 -1.30 -0.13 -0.48 1.75 0.96 -0.11 0.10 Source: Minietl'".)' of EconOII.)'. 1/ E•cluclee Pl'"ovincial OQYern. .nte. Juno 1989  - 255 - Tobie 5.15: AROB'iTINA - PU8LIC EXPet>ITl.f!E BY DESTINATION, 1970-1985 (Thou•anda of Auat.,.•l•a) 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 TOI AL EXPEIVITl.f!E'S 2.95 4.12 6.65 12.31 18.89 56.59 299.7 793.0 2283.0 5862.6 12441 26895 71112 35:1336 2416541 18745442 A- Gt!'nflral Administration 0.18 0.26 0.39 0.1!7 1.34 3.74 18.6 59.8 166.4 470.0 804 1849 4039 2•1335 53320 445137 B- Defense 0.17 0.23 0.38 0.65 0.81 2.92 18.0 50.9 141.9 372.8 768 16S6 4807 20251 93841 6355i'1 C- S«curi t.y 0.13 0.17 0.27 0.54 0.83 2.52 13. 35.7 93.5 236.7 615 1149 23a4 1:!137 33594 224269 0- Heal t.t-1 o.14 o.19 o.a1 o.61 1.11 3.51 15 41.0 125.2 305.4 626 1285 2145 ta655 27164 214725 E- Education and Culture 0.31 0.43 0.68 1.43 2.18 6. J.4 20.4 55. 2 189. 7 499 8 1137 2255 4817 2e1155 90758 612945 CuI ture 0 -'>1 0.02 0.02 0.03 0.05 0.12 0.4 0.8 4.4 11.4 28 64 137 698 1809 15992 Elementary Education O.l~ 0.20 0.33 0.70 1.11 3.10 10.0 26.4 92.2 229.4 524 915 1944 12'681 3830 245S3 Secondary Educatinn 0.08 0.11 0.17 0 ..•7 0.55 1.71 6.0 16.5 54.1 148.8 343 695 1472 7709 50486 315846 Higher Ed. and University 0.05 0.07 0.10 0.21 0.30 1.02 3.0 8.4 28.2 76.9 178 380 803 4272 30120 218340 Unclassified 0.03 0.04 0.06 0.11 0.17 0.19 0.9 3.2 10.8 33.3 64 201 461 2605 45!3 38214 F Er·onomic Developfflent 1. 47 2.01 3.38 5.81 8.26 25.72 150.8 389.3 1059.0 2596.7 5391 11509 33900 167851 998201 8362841 LJ~nd Jmprovement 0.02 0.03 0.05 0.10 0.17 0.51 2.4 9.9 20.9 39.3 117 142 336 1965 1492 3698 Agr i c-•J I t.ure and L i Yes tack 0.04 0.04 0.06 0.10 0.13 0.57 1.6 3.9 10.1 27.6 64 121 284 1530 6651 48834 fn•u·qy 0.57 0.61 1.27 2.33 3.77 11.90 80.8 193.0 567.6 1365.5 2757 6243 21052 96875 622397 5743777 Hi ning ().(!() 0.00 0.<>2 0.09 0.07 0.18 1.5 4.4 7.2 4.3 38 22 47 205 699 4397 Industry 0.17 0.22 0.45 0.65 0.44 1.32 5.9 15.6 47.2 100.0 224 456 1337 7640 29721 218914 Tourism 0.00 0.01 0.01 0.02 0.03 0.13 0.4 1.5 2.4 4.8 15 19 22 161 141 723 Ra i I way transport 0.16 0.22 0.38 0.64 0. 78 2.72 13.6 26.8 75.6 231.7 5H 1093 2374 11:321 101377 5Qil996 Road Transport 0.19 0.22 0.44 0. 74 1.00 2.77 16.4 50.3 118.9 268.4 529 861 2000 10'758 33432 246253 Maritime Transport 0 07 0.11 0.17 0.28 0.45 1.35 8.3 22.2 42.3 119.2 201 469 1208 7 1 ~47 32166 234043 Air Transport 0.04 0.05 0.09 0.1~ 0.?.6 1.00 6.2 13.3 41.5 110.7 203 489 1!'">07 4:133 43124 383704 CnmmtJnications 0.13 0.21 0.31 0.55 0.67 1.92 6.8 29.1 78.4 195.6 473 1068 2217 121160 70132 51?917 Tr-ade and Storage 0.02 0.04 0.04 0.06 0.13 0.36 1. 7 4.6 12 .I 34.0 56 114 257 1:!48 8504 690'11 Fin11t1C'fll &nd ]nsurance 0.05 0.03 0.03 0.06 O.Oil 0.24 1.6 4.S 5.8 8 0 33 48 362 5:!19 37251 236422 Unclassified 0.02 0.03 0.07 0.07 0 28 0 75 3.5 10.2 29.0 87.5 160 364 897 51'8Q 11114 54071 G- SociAl Wt"~lf~re 0.~1 0. 78 1.08 2.16 3.88 1('1 711 H.Q 132 7 394.2 1059.3 25R4 5324 11792 68075 375036 2829ll7 SociOtl Security 0 .... 4 0.66 0.90 1. 74 2.88 7.29 36.7 105.4 301.3 859.5 2065 4517 9883 5!>1 76 341732 25006/8 t ilbor 0.00 0.00 0.00 0.00 0.03 0.10 0.3 o. 7 2.1 5.3 10 18 38 177 1[•83 13303 Housing and llrhan DevelorMent 0.04 0.06 0.07 0.20 o.•Q 1.8!1 7.8 10.8 35.6 89 6 333 31!9 1152 8253 5523 61352 Social As!'li'lt.ance 0.02 0.02 0.03 0.07 0.14 0.40 2.0 4.4 9.7 26.5 51 94 175 1067 8797 110555 Sp0rts and Hecreation 0.01 0.02 0.03 0.06 0.13 0.68 2.2 8.4 31.7 33.7 51 78 212 1675 6047 51109 Unclassified 0.01 0.02 0.05 0.09 0.20 0.44 0.9 2.9 13.8 44.6 74 228 332 1727 11354 92121 H- Science and Techno I ogy 0.00 0.00 0.05 0.09 0.12 0.32 1.7 5.9 18.8 48.6 107 232 562 2816 16026 144485 0 00 0.00 0.00 0.00 0.00 0.00 0.0 o.o 0.0 0.0 0 0 0 0 616267 4428100 J- Pub I i (" fJf'bt. 0 04 0.06 0.11 0.17 0.36 0. 94 11.3 22.4 94.3 273.5 409 1636 6116 15051 112334 848243 March 1988  - 256 - Tobie 5.16: ARQENTIN~- PUBLIC EXPENDITURE BY DESTIN~TION, 1970-1985 (1970 ~ustrol es) 1970 1971 1?72 1Q73 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1965 TOT~L EXPENDITURES 2950 2991 2957 3319 3923 3939 3989 4119 4519 4547 4892 5120 4669 4691 3186 3340 A- General Administration 181 166 174 234 279 260 246 311 329 365 316 352 265 338 70 79 8- Defense 169 164 170 174 169 203 240 265 261 289 302 315 316 261 124 113 C- Security 129 126 122 145 172 175 174 165 185 184 242 219 153 166 44 40 0- Hea I th 141 141 137 164 230 244 211 213 246 237 246 245 160 190 36 36 E- Education and Culture 310 310 300 385 4.53 427 272 287 375 366 447 429 316 391 120 109 Cui ture 11 11 8 6 10 8 6 4 9 9 11 12 9 10 2 3 Elementary Education 153 144 145 190 230 216 134 137 182 176 206 174 126 176 5 4 Secondary Education 76 79 77 100 115 119 60 65 107 115 135 132 97 107 67 56 Higher Ed. and University 45 49 45 56 62 71 40 44 56 60 70 72 53 59 40 39 Unclassified 25 27 25 31 36 13 12 16 21 26 25 38 30 39 7 F-- Economic Development 1470 1~59 1504 1566 1715 1790 2008 2022 2096 2014 2120 2191 2226 2330 1316 1490 Land Improvement 23 21 20 26 35 35 32 52 41 30 46 27 22 27 2 Agriculture and Livestock 37 31 25 28 28 40 21 20 20 21 25 23 19 21 9 9 Er1ergy 565 586 564 626 763 626 1075 1002 1123 1059 1084 1169 1362 1345 821 1023 Hining 2 3 6 24 14 13 20 23 1.t 3 15 4 3 3 1 1 Industry 168 156 200 174 91 92 79 81 93 76 66 67 66 106 39 39 Tourism 4 6 5 6 9 6 6 5 4 6 4 2 0 0 Rai I way transport 162 157 171 172 161 169 182 139 150 160 202 206 156 157 134 107 Road Transport 165 159 197 200 207 193 219 261 235 208 208 164 131 149 44 44 M~ritime Transport 67 77 76 75 94 94 111 115 64 92 62 69 79 110 42 42 Air Transport 43 39 40 35 54 69 62 69 82 66 60 93 99 60 57 66 Communications 125 152 138 147 140 134 91 151 155 152 166 203 146 179 92 93 Trade and Storage 16 30 19 16 27 25 23 24 24 26 22 22 17 17 11 12 Finance and Insurance 49 20 13 16 16 17 22 23 11 6 13 9 24 72 49 42 Unclassified 22 22 29 20 59 52 47 53 57 68 63 69 59 60 15 10 G- Social Welfare 514 563 461 562 605 750 664 669 780 822 1016 1014 774 945 495 504 Socia I Security 441 476 400 469 599 507 489 547 596 667 812 860 649 766 451 446 Labor 0 0 0 0 7 7 4 4 4 4 4 3 2 2 2 2 tbusing and Urban Development 36 41 31 54 101 131 104 56 70 70 131 74 76 115 7 11 Social Assistance 16 17 15 16 29 26 26 23 19 21 20 16 11 15 12 20 Sports and Recreation 9 12 14 17 27 46 29 44 63 26 20 15 14 23 6 UncI a as if i ed 12 15 21 24 42 30 12 15 27 35 29 43 22 24 15 16 0 0 H- Science and Technology 0 0 21 23 25 23 22 31 37 36 42 44 37 39 21 26 1- Uncloaaified 0 0 0 0 0 0 0 0 0 0 0 0 0 0 613 789 J- Public Debt. 36 40 46 46 75 66 150 116 167 212 161 311 402 209 146 151 Source: Ministry of Economy, National Directorate of Budgetary Programming. March 1986  257 Table 5.17: ARQENTINA - PUBLIC EXPENDITURE BY DESTINATION, 1970-1985 (Orowt.h Rat.ea) 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 198:1 1983 1984 1985 TOTAL EXPENDITURES 1.4 -1.1 12.2 18.2 0.4 1.3 3.3 9.7 0.6 7.6 4. 7 -8.!1 4.8 -34.9 4.8 A- General Administration 3.9 -7.4 34.5 19.2 -6.6 -4.8 25.2 6.0 10.7 -13.3 11.4 -24.i' 27.4 -79.2 12.8 9- Defense -3.0 3.7 2.4 -2.9 20.1 18.1 10.4 6.2 2.9 4.4 4.4 O.l -10.9 -56.0 -8.5 C- Security -2.3 -3.2 18.9 18.6 2.0 -0.9 6.6 -0.1 -0.8 31.8 -9.6 -29.~· 9.9 -73.7 -9.8 D- Heal t.h 0.0 -2.8 19.7 40.2 6.3 -13.5 0.8 16.3 -4.4 3.9 -0.6 -26.~ 5.2 -81.1 6.8 E- Education and CuI ture 0.0 -3.2 28.3 17.7 -5.7 -36.4 5.5 30.9 3.3 15.3 -4.0 -26.3 23.6 -69.4 -8.7 CuI ture 0.0 -27.3 0.0 25.(1 ··1').3 -30.8 -28.1 117.4 0.8 24.9 10.8 -26.2 7.7 -75.4 19.5 Elementary Education -5.9 0.7 31.0 :.!1.1 -6.1 ·:!8.2 2.8 32.9 -2.5 15.8 -15.4 -26.7 37.9 -97.1 -13.4 Secondary Education 3.9 -2.5 29.9 15.0 3.7 -32.5 6.2 25.3 7.8 16.9 -2.0 -27.0 10.7 -37.8 -15.5 Higher Ed. and University 8.9 -8.2 24.4 10.7 14.2 -43.7 9.6 27.6 6.9 17.4 3.3 -27.1 12.5 -33.0 -2.1 Unclassified 8.0 -7.4 24.0 16.1 -63.3 -6.6 32.6 30.5 20.8 -3.2 53.1 -20.9 28.6 -84.7 14.4 F- Economic Development -0.7 3.1 4.1 9.5 4.4 12.1 0.7 3.6 -3.9 5.3 3.4 1.6 4.7 -43.5 13.2 Land Improvement -8.7 -4.8 30.0 34.6 1.2 -9.3 60.5 -20.0 -26.2 51.1 -41.2 -18.4 23.7 -92.8 -66.5 Agriculture and Livestock -16.2 -19.4 12.0 0.0 41.2 -45.7 -5.5 -1.5 7.0 16.9 -7.9 -19.1 13.9 -58.7 -0.8 Energy 3.7 -3.8 11.3 24.7 5.8 29.8 -6.8 12.1 -5.7 2.3 9.6 16.3 -2.7 -39.0 24.7 Mining 50.0 166.7 200.0 -41.7 -9.0 54.8 15.0 -37.5 -76.2 344.9 -72.1 -26.3 -7.8 -67.6 -15.0 Industry -7.1 28.2 -13.0 -47.7 1.2 -14.6 3.2 15.2 -17.0 13.4 -1.3 1.1 20.8 -63.1 -0.5 Tourism 50.0 -33.3 25.0 20.0 49.7 -37.9 41.3 -38.8 -22.7 60.9 -39.7 -60.1 54.7 0.0 0.0 Rai !way transport -3.1 8.9 0.6 -6.4 17.4 -3.9 -23.3 7.4 20.2 12.4 3.0 -25.1 0.8 -14.9 -20.2 Road Transport -14.1 23.9 1.5 3.5 -6.9 13.6 19.4 -10.0 -11.5 -0.1 -21.2 -19.9 13.7 -70.5 -0.5 Maritime Transport 14.9 -1.3 -1.3 25.3 0.2 17.7 3.8 -27.2 10.3 -11.3 8.9 -11.2 39.1 -61.6 -1.7 Air Transport -9.3 2.6 -12.5 54.3 28.4 18.9 -16.1 18.7 4.6 -6.8 16.4 6.3 -39.2 -5.5 20.2 Communications 21.6 -9.2 6.5 -4.8 -4.3 -32.3 66.4 2.8 -2.3 22.6 9.3 -28.4 22.6 -48.2 0.2 Trade and Storage 66.7 -36.7 -15.8 68.8 -6.2 -11.1 6.8 -0.6 10.2 -16.6 -1.3 -22.2 2.7 -35.3 9.8 Finance and Insurance -59.2 -35.0 23.1 0.0 5.7 27.2 8.8 -51.0 -45.7 108.7 -29.7 160.1 204.8 -32.2 -14.2 Unclassified 0.0 31.8 -31.0 195.0 -11.9 -10.2 13.7 8.3 18.1 -7.2 10.0 -15.0 36.5 -81.8 -34.3 0- Social Welfare 9.5 -14.6 21.0 38.3 -6.8 -11.5 3.8 13.2 5.3 23.7 -0.2 -23.6 22.1 -47.7 1.9 Social Security 8.4 -16.3 17.3 27.7 -15.3 -3.6 12.0 8.9 11.8 21.8 5. 9 -24.5 18.0 -41.2 -1.1 Labor 0.0 0.0 0.0 0.0 -2.5 -44.4 0.4 11.4 -2.7 -3.1 -14.3 -27.2 -1.5 -15.1 13.6 Housing and Urban Development 13.9 -24.4 74.2 87.0 29.2 -20.1 -46.0 25.0 -1.3 88.5 -43.5 2.1 51.5 -93.6 50.1 Social Assistance 6.3 -11.8 20.0 61.1 -4.9 -5.6 -11.6 -16.6 7.1 -2.7 -10.5 -35.8 28.9 -21.7 69.8 Sports and Recreation 33.3 16.7 21.4 58.8 76.3 -38.3 48.5 44.1 -58.3 -23.6 -25.8 -6.3 67.1 -65.7 14.2 Unclassified 25.0 40.0 14.3 75.0 -27.4 -61.5 30.2 78.3 27.0 -16.2 49.7 -49.8 10.0 -37.6 9.6 H- Science and Technology o.o 0.0 0.0 8.7 -9.8 -1.3 38.7 20.6 1.1 11.5 5.2 -16.5 5.9 -45.9 21.8 I- Unclassified J- Pub I ic Debt. 11.1 20.0 -4.2 63.0 -12.7 129.5 -22.6 60.5 13.7 -24.1 93.5 28.9 -48.0 -29.1 2.0 Source: Table 5.16. March 1988  - 258 - Table 5.1B: ARGENTINA - PUBLIC EXPENDITURE BY DESTINATION, 1970-19B5 (Percent. of COP) 1970 1971 1972 1973 1974 1975 1976 1977 197B 1979 19BO 19B1 19B2 1983 1984 1985 TOTAL EXPENDITL~ES 33.6 32.9 32.2 34.4 3B.9 39.6 39.6 3B.O 43.7 41.2 44.0 49.1 4B.2 51.6 45.B 47.3 A- General Administration 2.1 2.1 1.9 2.4 2.B 2.6 2.5 2.9 3.2 3.3 2.B 3.4 2.7 3.6 1.0 1.1 8- Defense l.Q l.B l.B l.B 1.7 2.0 2.4 2.4 2.7 2.6 2.7 3.0 3.3 3.0 1.8 1.6 C- Security 1.5 1.4 1.3 1.5 1.7 1.B 1.7 1.7 l.B 1.7 2.2 2.1 1. 6 1.8 0.6 0.6 0- Heal t.h 1. 6 1.6 1.5 1.7 2.3 2.5 2.1 2.0 2.4 2.1 2.2 2.3 1.9 2.0 0.5 0.5 E- Education and Cult.ur·e 3.5 3.4 3.3 4.0 4.5 4.3 2.7 2.6 3.6 3.5 4.0 4.1 3.3 4.1 1.7 1.5 Culture 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.0 0.0 Elementary Education 1. 7 1.6 1.6 2.0 2.3 2.2 1.3 1.3 l.B 1.6 1.9 1.7 1.3 1.9 0.1 0.1 Secondary Education 0.9 0.9 O.B 1.0 1.1 1.2 O.B O.B 1.0 1.0 1.2 1.3 1.0 1.1 1.0 O.B Higher Ed. and University 0.5 0.5 0.5 0.6 0.6 0.7 0.4 0.4 0.5 0.5 0.6 0.7 0.5 0.6 0.6 0.6 Unclassified 0.3 0.3 0.3 0.3 0.4 0.1 0.1 0.2 0.2 0.2 0.2 0.4 0.3 0.4 0.1 0.1 F- Economic Development 16.8 16.1 16.4 16.2 17.0 1B.O 19.9 18.6 20.3 18.3 19.1 21.0 23.0 24.6 18.9 21.1 Land Improvement 0.3 0.2 0.2 0.3 0.3 0.4 0.3 0.5 0.4 0.3 0.4 0.3 0.2 0.3 0.0 0.0 Agriculture and Livestock 0.4 0.3 0.3 0.3 0.3 0.4 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.1 0.1 Energy 6.4 6.5 6.1 6.5 7.B B.3 10.7 9.2 10.9 9.6 9.B 11.4 14.3 14.2 ll.B 14.5 Mining 0.0 0.0 0.1 0.2 0.1 0.1 0.2 0.2 0.1 0.0 0.1 0.0 0.0 0.0 0.0 0.0 Industry 1. 9 1.7 2.2 l.B 0.9 0.9 O.B 0.7 0.9 0.7 O.B O.B 0.9 1.1 0.6 0.6 Tourism 0.0 0.1 0.0 0.1 0.1 0.1 0.1 0.1 0.0 0.0 0.1 0.0 0.0 0.0 0.0 0.0 Railway transport 1.8 1.7 1.9 1.B 1.6 1.9 l.B 1.3 1.4 1.6 l.B 2.0 1.6 1.7 1. 9 1.5 Road Transport 2.1 l.B 2.1 2.1 2.1 1.9 2.2 2.4 2.3 1.9 1.9 1.6 1.4 1.6 0.6 0.6 Maritime Transport 0.8 O.B O.B 0.8 0.9 0.9 1.1 1.1 O.B O.B 0.7 0.9 O.B 1.2 0.6 0.6 Air Transport 0.5 0.4 0.4 0.4 0.5 0.7 O.B 0.6 0.8 O.B 0.7 0.9 1.0 0.6 O.B 1.0 Communications 1.4 1.7 1.5 1.5 1.4 1.3 0.9 1.4 1.5 1.4 1.7 2.0 1.5 1.9 1.3 1.3 Trade and Storage 0.2 0.3 0.2 0.2 0.3 0.3 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 Finance and Insurance 0.6 0.2 0.1 0.2 0.2 0.2 0.2 0.2 0.1 0.1 0.1 0.1 0.2 O.B 0.7 0.6 Unclassified 0.3 0.2 0.3 0.2 0.6 0.5 0.5 0.5 0.6 0.6 0.6 0.7 0.6 O.B 0.2 0.1 0- Social Welfare 5.9 6.2 5.2 6.0 B.O 7.5 6.6 6.4 7.5 7.4 9.1 9. 7 B.O 10.0 7.1 7.1 Social Security 5.0 5.3 4.4 4.9 5.9 5.1 4.B 5.0 5.B 6.0 7.3 B.3 6.7 B.1 6.5 6.3 Labor 0.0 0.0 0.0 0.0 0.1 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Housing and Urban Development 0.4 0.5 0.3 0.6 1.0 1.3 1.0 0.5 0.7 0.6 1.2 0.7 O.B 1.2 0.1 0.2 Social Assistance 0.2 0.2 0.2 0.2 0.3 0.3 0.3 0.2 0.2 0.2 0.2 0.2 0.1 0.2 0.2 0.3 Sports and Recreation 0.1 0.1 0.2 0.2 0.3 0.5 0.3 0.4 0.6 0.2 0.2 0.1 0.1 0.2 0.1 0.1 Unclassified 0.1 0.2 0.2 0.2 0.4 0.3 0.1 0.1 0.3 0.3 0.3 0.4 0.2 0.3 0.2 0.2 H- Science and Technology 0.0 0.0 0.2 0.2 0.2 0.2 0.2 0.3 0.4 0.3 0.4 0.4 0.4 0.4 0.3 0.4 I- Unclassified 0.0 0.0 0.0 o.o 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 11.7 11.2 J- Public Debt 0.4 0.4 0.5 0.5 0.7 0.7 1.5 1.1 1.8 1.9 1.4 3.0 4.1 2.2 2.1 2.1 Source: Table 5.15. March 198B  - 259 - T•ble 5.19: AROENTINA- PUBLIC EXPENDITURE BY DESTINATION, 1970-1985 (Percent. of Tot.• I) 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 TOTAL EXPENDITURES 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 A- General Administration 6.1 6.3 5.9 7.1 7.1 6.6 6.2 7.5 7.3 8.0 6.5 6.9 5.7 6.9 2.2 2.4 B- Defense 5.7 5.5 5.7 5.2 4.3 5.2 6.0 6.4 6.2 6.4 6.2 6.2 6 .I~ 5.7 3.9 3.4 C- Security 4.4 4.2 4.1 4.4 4.4 4.5 4.4 4.5 4.1 4.0 4.9 4.3 3.:3 3.4 1.4 1.2 D- Healt.h 4.8 4.7 4.6 4.9 5.9 6.2 5.3 5.2 5.5 5.2 5.0 4.8 3. 11 3.9 1.1 1.1 E- Education and Culture 10.5 10.4 10.1 11.6 11.5 10.8 6.8 7.0 8.3 8.5 9.1 8.4 6.0 8.0 3.8 3.3 Cult.ure 0.4 0.4 0.3 0.2 0.3 0.2 0.1 0.1 0.2 0.2 0.2 0.2 0.2 0.2 0.1 0.1 Elementary Education 5.2 4.8 4.9 5.7 5.9 5.5 3.3 3.3 4.0 3.9 4.2 3.4 3.6 0.2 0.1 Secondary Education 2.6 2.6 2.6 3.0 2.9 3.0 2.0 2.1 2.4 2.5 2.8 2.6 2.]. 2.2 2.1 1.7 Higher Ed. and University 1.5 1.6 1.5 1.7 1.6 1.8 1.0 1.1 1.2 1.3 1.4 1.4 1.l. 1.2 1.2 1.2 Unclassified 0.8 0.9 0.8 0.9 0.9 0.3 0.3 0.4 0.5 0.6 0.5 0.7 O.E; 0.8 0.2 0.2 F- Economic Development 49.6 48.8 50.9 47.2 43.7 45.4 50.3 49.1 46.4 44.3 43.3 42.8 47.7 47.6 41.3 44.6 Land Improvement 0.8 0.7 0.7 0.8 0.9 0.9 0.8 1.3 0.9 0.7 0.9 0.5 o.s 0.6 0.1 0.0 Agr·iculture and Liveatock 1.3 1.0 0.8 0.8 0.7 1.0 0.5 0.5 0.4 0.5 0.5 0.4 0.4 0.4 0.3 0.3 Energy 19.2 19.6 19.1 18.9 20.0 21.0 26.9 24.3 24.9 23.3 22.2 23.2 29.6 27.5 25.8 30.6 Mining 0.1 0.1 0.3 0.7 0.4 0.3 0.5 0.6 0.3 0.1 0.3 0.1 0.1 0.1 0.0 0.0 Indust.ry 5. 7 5.2 6.8 5.2 2.3 2.3 2.0 2.0 2.1 1.7 1.8 1.7 1. 9 2.2 1.2 1.2 Tourism 0.1 0.2 0.1 0.2 0.2 0.2 0.1 0.2 0.1 0.1 0.1 0.1 0.0 0.0 0.0 0.0 Railway transport 5.5 5.2 5.8 5.2 4.1 4.8 4.6 3.4 3.3 4.0 4.1 4.1 3.3 3.2 4.2 3.2 Road Transport 6.3 5.3 6.7 6.0 5.3 4.9 5.5 6.3 5.2 4.6 4.3 3.2 2.8 3.1 1.4 1.3 Maritime Transport 2.3 2.6 2.6 2.3 2.4 2.4 2.8 2.8 1.9 2.0 1.7 1.7 1.7 2.3 1.3 1.2 Air Transport 1.5 1.3 1.4 1.1 1.4 1.8 2.1 1.7 1.8 1.9 1.6 1.8 2.1 1.2 1.8 2.0 Communications 4.2 5.1 4.7 4.4 3.6 3.4 2.3 3.7 3.4 3.3 3.8 4.0 3.1 3.6 2.9 2.8 Trade and Storage 0.6 1.0 0.6 0.5 0.7 0.6 0.6 0.6 0.5 0.6 0.4 0.4 0.4 0.4 0.4 0.4 Finance and Insurance 1.7 0.7 0.4 0.5 0.4 0.4 0.5 0.6 0.3 0.1 0.3 0.2 0.5 1.5 1.5 1.3 Unclassified 0.7 0.7 1.0 0.6 1.5 1.3 1.2 1.3 1.3 1.5 1.3 1.4 1.3 1.6 0.5 0.3 0- Social Welfare 17.4 18.8 16.3 17.5 2D.5 19.0 16.6 16.7 17.3 18.1 20.8 19.8 16.6 19.3 15.5 15.1 Social Security 14.9 16.0 13.5 14.1 15.3 12.9 12.3 13.3 13.2 14.7 16.6 16.8 13.9 15.7 14.1 13.3 Labor 0.0 0.0 0.0 0.0 0.2 0.2 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 Housing and Urban Development 1.2 1.4 1.0 1.6 2.6 3.3 2.6 1.4 1.6 1.5 2.7 1.4 1.6 2.3 0.2 0.3 Social Assistance 0.5 0.6 0.5 0.5 0.7 0.7 0.7 0.6 0.4 0.5 0.4 0.3 0.2 0.3 0.4 0.6 Sports and Recreation 0.3 0.4 0.5 0.5 0.7 1.2 0.7 1.1 1.4 0.6 0.4 0.3 0.3 0.5 0.3 0.3 Unclassified 0.4 0.5 0.7 0.7 1.1 0.8 0.3 0.4 0.6 0.8 0.6 D.8 0.5 0.5 0.5 0.5 H- Science and Technology 0.0 D.O 0.7 0.7 0.6 0.6 0.6 0.8 0.8 0.8 0.9 0.9 0.8 0.8 0.7 0.8 I- Unclassified 0.0 0.0 0.0 0.0 0.0 0.0 D.O 0.0 0.0 0.0 0.0 0.0 0.0 0.0 25.5 23.6 J- Pub I ic Debt. 1.2 1.3 1.6 1.4 1.9 1.7 3.8 2.8 4.1 4. 7 3.3 6.1 8.6 4.3 4.6 4.5 Source: Table S.lS. March 1988  Table 5.20, ARCeoiTINA - T.t.X REVENUES, 1970-1987 (Thousands of .l.uatrales) 1970 1971 1972 1973 1974 1975 1976 1977 197B 1979 1980 1981 1982 1983 196~ 1985 19B6 1987 a/ I- NATIONAL T"X REV9UE BY SOLR:E (Cross) 1.41 .7B 2.64 4.B7 6.25 16 76 99 7 324.2 6B6.3 25~4 5617 9621 ~4606 :l..:.::s~ ~~--=-s:- -c:!:2t.4~ ::..;t:-:-~css 29890648 NATIONAL T.t.X REVENUE BY SOLRCE (Net of Deduct;ons) 1.41 .7B 2.64 4.B7 B.02 16 41 96.4 316.2 B66. 2467 5526 9382 23607 112496 f-:)25.:: 7752767 14076273 28303973 A. !nco•• Taxes 0.20 0.23 0.33 0.64 O.B5 1.14 9.0 37.5 90.7 170 446 924 2069 760& .:: l2 ~ 2- 4C•l3B3 449701 2777146 Personal and Corporate Income 0.19 0.22 0.31 0.53 0. 71 1.07 B.6 35.4 B6.0 158 41B B66 1Q73 fEff :7'08: 37B795 B90021 2612226 Tax on For-eign Investment Income 0.00 0.00 0.00 0.00 0.00 0.04 0.1 0.7 1.2 2 5 24 2B :9' 2402 13643 35824 CaJ'ital Cains Tax 0.01 0.01 0.02 0.03 0.02 0.00 0.1 1.0 1.8 5 13 15 25 105 666 f506 12457 ~520 Other Incoffte Taxes 0.00 0.00 0.00 0.08 0.12 0.03 0.1 0.5 1.6 4 19 42 459 3265 13680 33580 73575 B. Propel"'ty Taxes 0.05 0.07 0.~ 0.1B 0.~ 0.06 1.8 11.5 33.3 110 237 445 1628 7753 40~58 341592 688482 1717201 Capital Tax 0.00 0.00 0.00 0.00 0.05 0.02 1.2 10.1 29.2 100 21B 424 1517 6119 28635 247931 457227 1041193 Net Worth Tax 0.00 0.00 0.00 0.00 0.02 0.00 0.0 0.3 0.5 2 5 10 20 100 964 8792 108970 258784 Ta• for Areaa Affected by Flood 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0.0 0 0 0 0 1194 8913 62137 76854 260199 Tax on Financial Aaaet.a 0.00 0.00 0.00 0.00 0.00 0.00 0.5 0.4 1.1 3 4 11 91 340 2046 22731 45431 14269ll Other Property Taxes 0.05 0.07 0.~ 0.18 o.u 0.04 0.2 0. 7 2.4 5 9 0 0 0 0 0 0 14329 0.05 0.07 0.~ 0.18 0.19 0.04 0.6 _1.1 3.5 B 13 11 91 1534 10959 84869 122285 417228 C. Sa lea and Excise Taxes 0.50 0.65 0.~ 1.59 3.~ 6.~ 38.7 153.7 4-46.5 1153 2530 5555 14101 59298 439356 3561~ 7020632 13317276 Value Added Tax 0.16 0.22 O.M 0.43 1.02 2.ro 20.7 68.5 175.8 510 1223 2B15 6627 24992 152413 12721144 2459996 5648349 Unified Exci . . Tax 0.14 0.18 0.~ 0.41 0.~ 1.00 5.5 23.3 77.9 227 493 990 ~7 10383 62902 591615 1248336 ~21 Tax on S.nk Deb i t.a 0.00 0.00 0.00 0.00 0.00 0.00 1.0 4.8 12.7 1 0 0 1 635 15275 170027 408933 740737 Oi Ia and Fuel Tax 0.09 0.13 o.u 0.43 1.02 1.80 5.5 26.8 99.3 188 354 1087 3283 16207 167B71 109894-4 2101622 3097328 Sta.., Duty 0.04 0.05 0.06 0.13 o.u 0.35 1.8 7.0 15.9 51 117 187 4-41 1560 B129 76398 198321 345369 Foreign Exchange Transaction Tax 0.01 0.01 0.02 0.04 0.06 0.~ 0.8 2.4 6.5 16 38 95 219 970 5243 54796 89947 206001 N Electr; city ConaulftPtion Tax 0.01 0.01 O.M 0.02 0.05 0.06 0.4 3.5 12.6 32 66 125 ~1 1146 4111 77119 175431 D 0\ Petroleu• Production Tax 0.01 0.01 O.M 0.03 0.~ C.20 0.6 2.7 1C.3 19 ~7 9B 264 1725 10107 B1512 64350 0 0 Other Taxes 0.05 0.05 0.08 O.ll 0.~ 0.~ 2.4 14.7 35.6 109 193 157 358 1681 13306 :i38593 273696 37M71 D. Foreign Trade Taxes 0.17 0.23 0.48 0.74 0.97 2.37 18 6 40.4 77.2 238 561 921 2337 15966 102887 1256279 1868531 3422302 I.-port Tax 0.11 0.14 0.22 0.23 0.46 1.07 6.B 24.3 ~.5 184 475 79B 1450 5720 37361 380677 975259 2694989 Export Tax 0.06 0.08 0.25 0.49 0.46 1.19 11.2 13.4 15.5 29 45 93 819 10131 64688 836054 835124 611288 Other Trade Tax 0.00 0.00 0.01 0.02 0.05 0.12 0.6 2.7 6.1 24 40 29 67 116 838 39547 58147 116045 E. Social Security and Contributory Taxes 0.42 0.59 0.81 1.71 2.67 6.31 31.4 B1.0 238.4 843 1843 1775 4450 22355 189ll58 1998517 3735027 rtr74926 - Social S.cu r i ty Syat.e• 0.41 0.58 0.80 1.70 2.65 6.27 31.2 80.5 236.8 720 1533 14-47 3328 16406 151992 1661765 3029335 6705410 Contributions for Pub I ic Housing 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0.0 119 M1 320 1~1 5935 37592 336546 704&46 15118580 Un•IIP I oy ...nt 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0.1 0 0 10 74 206 846 Other Contr i but.ory Taxes 0.00 0.00 0.01 0.01 0.02 0.03 0.1 0.4 1.5 4 8 2 5 0 0 0 0 F. Ot.her Taxes 0.07 0.01 0.00 0.01 0.33 0.19 0.1 0.1 0.2 1 2 23 1605 11213 14007 3137 357129 C. Forced Saving 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0.0 0 0 0 0 0 0 27'l015 414179 24668 H. Tot.•l Deductions (-) 0.00 0.00 0.00 0.00 0.24 0.35 3.3 B.1 20.3 47 91 239 1001 2090 1244-4 99877 603415 15116675 II-PROVINCI.t.L T.t.X REVENJE BY SOLRCE 0.24 0.29 0.41 0.6B 1.08 1.40 12.3 60.3 183.0 535 1235 202B 4904 18269 169209 1345563 2845627 A. ?roperty T•x•• 0.05 0.05 0.09 0.14 0.20 0.31 1.5 10.8 37.1 106 248 457 1123 4032 45291 338156 6390&4 8. Cross In coiN! Tax 0.10 0.12 0.16 0.26 0.44 0.19 6.7 32.6 95.B 264 594 1005 2563 10009 87871 688747 1551380 C. Aut.o1110tive License Tax 0.02 0.02 0.03 0.05 O.OB 0.1B 0.5 2. 9 10.2 46 102 1B1 412 :i726 18570 162605 254728 0. Stamp Duty 0.05 0.06 O.OB 0.14 0.23 0.45 2.0 9.5 28.2 B3 199 2B5 574 2164 14712 127088 341954 E. Other T•xes 0.03 0.03 0.05 O.OB 0.13 0.27 .6 4.6 11.B 36 93 99 233 338 2765 28967 58481 TOT.t.L T.t.X REVENUE 1.65 2.07 3.05 5.55 .34 1B.l6 111 384.6 1069.4 3050 6852 1164B 29513 132855 984194 9198207 17525315 29890648 Source· Ministry of Economy, National Directol""ate of Budgetary Pl""ogr-amming. a/ Excludes tax revenues of pr-ov1ncial go.,er-nment.s. May 19B9  Tobie 5.21' ARCENTINA - T"X REVEHJES BY SOlRCE, 1970-1987 (Percent of a>P) 1970 1971 19:'2 1973 1974 1975 1975 1977 1978 1979 1980 1981 1982 1983 1984 198.5 1985 1987 o/ I- NATIONAL T"X REV&IJE BY SOlRCE (Croaa) 16.0! 14.20 12.77 13.71 15.98 11.72 13.14 15 49 15 93 17.64 19 112 17.57 15.57 1~ 78 1;::; 43 19 83 19 75 16 87 NATIONAL TAX REVBIJE gy SOl..RCE (Net of Deduct·~ on 16.01 14.20 1:.77 13.71 15 49 11.48 12.70 15.10 15.55 17.31 19 50 17.13 . ~- -.,;., :; .58 18 <;4 15.97 A. lncOfH Taxes 2.26 1.87 1. 51 1. 79 1 75 0.80 1.19 1. 79 1. 73 1.19 1.57 1.69 4C ~~ I. 01 1.28 1.57 Per-sonal and Col"'por-ate Inco•e 2.12 1.77 1. 50 1. 48 1. 46 0.75 1.14 1. 59 1.54 1.11 1.47 1.58 .N (· 5~ 0.96 1.20 1.47 Tax on Foreign Invest.ntent Inco111e 0.00 0.00 0.00 0.00 0 01 0.03 0.01 0.03 0.02 0.02 0.02 0.04 0 o: ( 01 0.01 002 0.02 Capital Cains Tax 0.14 0.10 0.11 0.09 0.04 0.00 0.02 0.05 0.03 0.04 0.05 0.03 O.Cl::: ~0 C• 0! 0.02 0.02 0.03 Other Inco. . Taxes 0.00 0.00 0.00 0.22 0.24 0.02 0.02 0.02 0.03 0.03 0.03 0.03 0.03 0.07 C• 06 0.03 0.05 0.04 8. Pl"oper-ty Taxes 0.£2 0.53 0.43 0.50 0.53 0.04 0.24 o.~ 0.~ 0.77 0.83 0.81 1.10 w 0.77 0.86 0.93 0.~ Capital Tax 0.00 0.00 0.00 0.00 o.w 0.01 0.15 0.~ 0.~ o.ro 0.77 0.77 1.03 0.% O.S. 0.83 0.62 0.59 Net Wor-th Tax 0.00 0.00 0.00 0.00 0.04 0.00 0.00 O.M O.M O.M 0.02 0.02 0.01 O.M 0.02 0.02 0.15 0.~ Tax for Areas Affected by Flood 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.17 0.17 o.u 0.10 o.u Tax on Financial Aaaet.a 0.00 0.00 0.00 0.00 0.00 0.00 0.06 0.02 0.02 0.02 0.02 0.02 0.06 0.05 0.04 0.06 0.06 0.08 Ot.her Pl"operty Taxes 0.52 0.53 0.43 0.49 0.~ 0.03 0.02 0.00 0.00 0.04 0.03 0.00 0.00 0.00 0.00 o,oo 0.00 O.M 0.52 0.53 0.43 0.50 0.~ 0.03 0.09 0.02 0.02 0.06 0.05 0.02 0.06 0.22 0.~ 0.~ 0.16 0.~ c. S.lea and Excise r •••• 5. 74 5.~ 4.48 4.48 5.53 4.58 5.10 7.N 8.53 BM 8. 93 10.14 9.~ 8.~ 8.32 9.00 9.45 7.~ Value Added Tax 1.85 1.77 1.45 1.20 2.W 1.89 2.73 3.V 3.38 3.58 4.32 5.14 4.49 3.88 2.M 3.~ 3.31 3.H Unified Excise Tax 1.58 1~ 1.23 1.15 l.U 0.70 0.73 1.12 l.U 1.59 1 74 1.81 1. 79 1.~ l.H l.U 1.88 1.64 Tax on Bank O.bit.a 0.00 0.00 0.00 0.00 0.00 0.00 0.14 0.~ 0.~ O.M 0.00 0.00 0.00 O.M 0.~ 0.~ 0.55 0.~ o: Ia and Fuel Tax .08 1.~ 0.91 1.22 2.M 1.25 0. 73 1.~ 1.~ 1.32 1.25 1.99 2.22 2.~ 3.~ 2.n 2.83 1.n Staoop Duty 0.45 0.~ 0.30 0.35 0.38 0.24 0.24 0.33 0.30 0.38 0.41 0.34 0.30 0.~ 0.~ 0.19 0.27 O.H Foreign Exchange 'Tr-ansaction Tax 0.08 O.M 0.08 0.10 0.~ 0.12 0.10 0.~ o.u 0.11 0.!3 0.17 0.15 o.u o.w o.u 0.12 0.~ Electr-icity Conau"'f)t.ion Tax 0.12 O.M 0.07 0.07 0.11 0.04 0.05 0.15 0.~ 0.22 0.23 o.~ 0.18 0.17 0.08 0.19 0.24 0.00 N Petr-oleu• Production Tax 0.07 0.~ 0.06 0.08 0.~ 0.14 0.08 o.u 0.20 o.u 0 15 0.18 0.18 0.25 c. .19 0.~ 0.09 0.00 0\ Other' Taxes 0.52 0.~ 0.38 0.30 0.38 0.28 0.31 o.ro 0.~ 0.77 0 58 0.29 0.24 0.25 ( .25 0.38 0.37 0.21 1-' 0. 71 o.m 0.52 0.45 0. 71 0.45 0.44 1.00 1.12 1.12 .08 0.69 0.50 0.~ 0.52 o.n 0.69 0.~ D. For-eign Tr-ade Taxes 1. 91 1.00 2.33 2.09 1.99 1. 65 2.46 1.93 Q 1.~ . 98 1.88 1.58 2.N 1.95 3.17 2.51 1.~ liiiPOI"t Tax 1.23 1.~ 1.07 0.55 O.M 0. 75 0.90 1.15 .06 1.29 1 58 1.46 0.98 0.84 0. 71 0.% 1.31 1.~ Export Tax 0.66 0.~ 1.20 1.39 0.% 0.83 1.48 0.~ 0.30 0.~ 0 16 0.17 0.55 1~ 1.22 2.11 1.12 O.N OUler- Trade Tax 0.02 0.~ 0.06 0.05 O.M 0.08 0.08 o.u 0.~ 0.17 0.14 0.05 0.05 0.02 0.02 o.w 0.08 0.~ E. Social Secur-ity and Contr i but.ory Tu:es 4.74 4.70 3. 91 4.82 5.50 4.41 4.13 3.87 4.55 5.91 6.50 3.24 3.01 3.27 3.59 5.05 5.03 4.67 Social Security Syate• 4.70 4.67 3.88 4.79 5.46 4.39 4.12 3 .8.5 4.52 5.05 5.41 2.64 2.25 2.~ 2.88 4.20 4.08 3.78 Contt" i but ion a for Pub I i c Hen.: a i ng 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.84 1.06 0.58 0.76 0.87 0. 71 0.8.5 0.95 0.89 Une-., loyntent 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Other Contributory Taxea 0.04 0.03 0.03 0.03 0.04 0.02 0.01 0.02 0.03 0.03 0.03 0.01 0.00 0.00 0.00 0.00 0.00 0.00 F. Other Taxea 0.74 0.12 0.01 0.03 0 58 0.13 0.01 0.01 0.00 0.00 0.00 0.00 0.02 0.24 0.21 0.04 0.00 0.20 C. Forced Saving 0.00 0.00 0.00 0.00 000 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0. 70 0.56 0.01 H. Total Deductions (-) 0.00 0.00 0.00 0.00 0 49 0.24 0.43 0.39 0.39 0.33 0.32 0.44 0.88 0.31 0.24 0.25 0.81 0.90 II- "ROVINCII.L HX REVENJE BY SOl.flCE 2.79 2.30 1.97 1.92 2.23 0.98 1.52 2.88 3.50 3.75 4.36 3.70 3.32 2.88 3.20 3.~ 3.83 ". Property Taxea 0.53 0.43 0 42 0.41 0. 41 0.22 0.20 0.52 0. 71 0. 74 0.87 0.114 0.76 0.59 0.86 0. 8.5 0.86 8. Cross IncoiH Tax 1.14 0.95 0.78 0. 74 0. 91 0.13 0.88 1.56 .83 1.8.5 2.10 1.84 1.74 1.47 1. 66 1. 7.& 209 C . .A.ut-o==oti v: Li can a.• T•• 0.22 0.19 0.15 0.15 0.15 0.:3 0.07 0.14 0.19 0.32 0.35 0.33 0.28 0.25 0.35 0.41 O.N D. Sta"'P Duty 0.52 0.45 0.39 0.41 0 48 0 31 0.25 0.45 0.54 0.58 0. 70 0.52 0.39 0.32 0.28 0.32 0.46 E. Other Taxea 0.37 0.28 0.22 0.21 0.25 0.19 0.21 0.22 0.23 0.25 0.33 0.18 0.15 0.05 0.05 0.07 0.08 TOTAL T"X REVENUE 18.80 15.m 14.74 15.53 19.21 12.10 14.75 18.37 20.43 21.40 24.18 21.v 19.99 19.46 18.64 ~-~ 23.58 15.87 Source: Ministry of Econo~Wy, Nationai Dir-ect.orate of Budgetar-y Programming. a/ Excludes tax revenyes of pr-ovincial governMents. Hay 1989  - 262 - Table 6.1: ARGENTINA- PRIVATE SECTOR HOLDINGS OF FINANCIAL ASSETS, QUARTERLY 1970-1989 a/ (Thousands of Australes; stocks at the end of each quarter) (continues ... ) Money (M1) Quasi-Money H2 Accep- M3 Total Currency Demand Total Savings Time b/ tances d/ Deposits Accounts Depoai ts cf 1970 1.5 0.8 0.7 1.0 0.9 0.1 2.5 0.0 2.5 1971 1.5 0.7 0.8 1.1 1.0 0.1 2.6 0.0 2.6 II 1.6 0.7 0.9 1.2 1.1 0.1 2.8 0.0 2.8 III 1.7 0.8 0.9 1.~ 1.1 0.2 3.0 0.0 3.0 IV 2.0 1.0 1.0 1.4 1.2 0.2 3.4 0.0 3.4 1972 I 2.1 0.9 1.? 1.5 1.3 0.2 3.6 0.0 3.6 II 2.2 1.0 1.2 1.7 1.4 0.3 3.9 0.0 3.9 III 2.3 1.0 1.3 1.8 1.5 0.3 4.1 0.0 4.1 IV 2.9 1.3 1.6 2.1 1.7 0.4 5.0 0.5 5.5 1973 I 3.2 1.3 1.9 2.4 1.9 0.5 5.6 0.6 6.2 II 3.8 1.6 2.2 2.7 2.2 0.5 6.5 0.8 7.3 Ill 4.5 1.9 2.6 3.3 2.7 0.6 7.8 0.9 B. 7 IV 5.6 2.6 3.0 3.9 3.3 0.6 9.5 1.0 10.5 1974 I 5.8 2.4 3.4 4.6 3.9 0.7 10.4 1.1 11.5 II 6.7 2.8 3.9 5.3 4.4 0.9 12.0 1.2 13.2 III 7.4 3.2 4.2 5.7 4.7 1.0 13.1 1.4 14.5 IV 8.9 4.3 4.6 5.9 4.8 1.1 14.8 1.5 16.3 1975 I 9.4 4.1 5.3 6.3 5.0 1.3 15.7 1.7 17.4 II 11.3 4.9 6.4 6.3 5.0 1.3 17.6 1.9 19.5 III 16.2 7.0 9.2 6.5 5.2 1.3 22.7 2.6 25.3 IV 26.0 12.4 13.6 7.8 6.5 1.3 33.8 3.3 37.1 1976 I 36.0 15.0 21.0 9. 7 8.2 1.5 45.7 4.7 50.4 II 54.1 19.6 34.5 18.8 12.1 6.7 72.9 9.9 82.8 III 68.6 25.4 43.2 31.9 17.9 14.0 100.5 15.0 115.5 IV 92.6 41.0 51.6 53.1 24.6 28.5 145.7 21.2 166.9 1977 I 103.8 41.8 62.0 76.6 26.3 50.3 180.4 28.4 208.8 II 142.4 59.9 82.5 138.2 37.6 100.6 280.6 21.0 301.6 III 156.4 69.7 86.7 210.6 34.2 176.4 367.0 9.6 376.6 IV 208.4 107.3 101.1 291.6 37.4 254.2 500.0 8.0 508.0 1978 I 239.4 116.2 123.2 400.0 52.8 347.2 639.4 6.4 645.8 II 330.8 162.2 168.6 546.8 68.6 478.2 877.6 3.4 881.0 III 362.5 188.7 173.8 743.0 87.9 655.1 1105.5 2.6 1108. 1 IV 563.4 333.2 230.2 / 868.1 104.3 763.8 1431.5 3.3 1434.8 1979 I 633.1 323.3 309.8 1203.5 131.3 1072.2 1636.6 4.3 1840.9 II 825.0 421.6 403.4 1649.4 170.2 1479.2 2474.4 4.9 2479.3 III 918.6 476.3 442.3 2252.7 184.2 2068.5 3171.3 6.1 3177.4 IV 1382.9 787.0 595.9 1 2914.8 254.1 2660.7 4297.7 7.1 4304.8  263 - Tobie 6.1: ARGENTINA- PRIVATE SECTOR HOLDINGS OF FINANCIAL ASSETS, QUARTERLY 1970-1989 a/ (Thousands of Australes; stocks at the end of each quarter) Money (M1) Quasi -Money M2 Accep- M3 Tot.al Currency Demand Tot.al Savings Time b/ tancos d/ Deposits Accounts Oeposi ts c/ 1980 I 1550.4 803.5 746.9 3557.7 328.1 3229.6 5110.8 9.9 5120.7 II 1854.5 996.8 857.7 3862.0 441.6 3420.4 5716.5 10.0 5726.5 III 1998.6 1099.6 899.0 4772.7 520.6 4252.1 6771.3 7.0 6Tl8.3 IV 2735.0 1641.8 1093.2 5282.2 627.6 4654.6 8017.2 5.2 8022.4 1981 I 2166.3 1332.4 833.9 5986.5 637.5 5349.0 8152.8 0.4 8153.2 II 2625.7 1610.0 1015.7 7011.0 713.8 6297.2 9636.7 5.3 9642.0 III 2941.7 1737.1 1204.6 9582.5 938.9 8643.6 12524.2 14.7 12538.9 IV 4609.5 3020.7 1588.8 11368.2 1195.8 10172.4 15977.7 11.4 15989.1 1982 I 4338.8 2550.8 1788.0 14840.9 1500.5 13340.4 19179.7 1.3 19181.0 II 6446.7 3914.7 2532.0 17106.6 2238.2 14868.4 235511.3 4.3 23557.6 III 8780.6 4760.2 4020.4 18282.3 2368.5 15913.8 27062.9 0.0 27062.9 IV 14864.3 8736.0 6128.3 23458.4 2977.4 20481.0 38322.7 0.0 38322.7 1983 I 16557 9811 6747 36239 4146 32093 52800 0 52800 II 25060 13951 11109 49863 8344 41519 74923 0 74923 III 33902 19910 13992 72269 14525 57744 106171 0 106171 IV 69953 46342 23611 123645 30842 92803 193598 20960 214558 1984 I 103823 65652 38171 205658 52820 152838 309481 4750 314231 II 170790 109235 61555 292345 76656 215689 463135 22358 485493 III 232682 147965 84717 473961 130122 343839 706643 69039 775682 IV 434804 313400 121404 758691 240231 518460 1193495 95947 1289442 1985 I 625684 433901 191783 1337949 502381 835568 1963633 172921 2136554 II 1470616 980176 490440 3074244 1087798 1986446 4544860 13 4544873 III 2076272 1272467 803805 3941708 1282061 2659647 6017980 0 6017980 IV 3014321 2022272 992049 / 4610147 1476689/ 3133458 7624468 0 7624468 1986 I 3029811 1861442 1168369 5737789 1606535 4131254 8767600 0 8767600 II 3747440 2387367 1360073 6731689 1904256 4827433 10479634 0 10479634 III 3865811 2533439 1332372 82'..11209 2164159 6057050 12087020 0 12087020 IV 5587480 3989617 1597863/ 10641529 2562314/ 8079215/ 16229029 258333 16487362 1987 I 7174000 3782000 3392000 14829000 2884000 11945000 22003000 124000 22127000 II 8375000 4386000 3989000 17754000 3212000 14542000 26129000 150000 26279000 III 9161000 4834000 4327000 22924000 4298000 18626000 32085000 214000 32299000 IV 13980000 7683000 6297000 30453000 5423000 25030000 , <~c 44433000 210000 44643000 1988 I 15527000 8518000 7009000 46024000 6313000 39711000 61551000 109000 61660000 II 22970000 11627000 11343000 71453000 8658000 62795000 94423000 33000 94456000 III 37885000 19461000 18424000 129939000 14446000 115493000 167824000 59000 167883000 IV 57648000 33913000 23735000 182705000 20122000 162583000 240353000 218000 240571000 1989 I 75124000 43375000 31749000 266210000 25878000 240332000 341334000 84000 341418000 II 262359000 126956000 135403000 845227000 57268000 787959000 1107586000 69464000 1177050000 Source: Central Bonk of the Republic of Argentina (BCRA). •I Does not include deposits issued by non-bank financial institutions. b/ M1 plus quasi-money, c/ Includes acceptances issued by finance companies. d/ M2 plus acceptances. August 1989  - 264 - Tobie 6.2, AROB'rTINA- LIQUIDITY COEFFICIENTS, QUARTERL.Y, 1970-1988 Hl/ H2/ H3/ GOP GOP GOP 1970 15.4!1 25 7ll 25. 7!1 1971 14. 0!1 23.8ll 23.8!1 1972 11.6!1 20 1!1 22.1!1 1973 10.6!1 18. 6!1 20.6!1 II 10.4ll 17 .8!1 20. 0!1 Ill 17.4!1 21. 6ll 24.1!1 IV 14.3lll 24.3ll 26.8!1 1974 I 14. 2!1 25 5!1 28.1ll II 14.4!1 2~ Rll 28.3!1 III 14. 9!1 26 4ll 29. 2!1 IV 15.5!1 25 7!1 28.3!1 1975 I 13.8!1 23.0!1 25.5!1 II 12. 1!1 18.9!1 20.9!1 III 9.6!1 13.5!1 15.0!1 IV 10. 7!1 U.O!I 15.3!1 1976 I q 6!1 12 .2!1 13.5!1 II 7 6!1 10.2!1 11 6!1 III 8 0!1 11 7!1 13.5!1 IV 8 5!1 13. 4!1 15.4!1 1977 I 7 .4ll 12. 9!1 15.0!1 II !1.0!1 15 0!1 16. 9!1 III 6.8!1 16 1!1 16 5!1 IV 7. 2!1 17 2!1 17. 4!1 1978 I 7 .1!1 19.0!1 1? 2!1 II 7.3!1 19 4!1 19 5!1 III 6.4!1 19. 4!1 19 .5!1 IV 7.7!1 19 5ll 19. 5!1 1979 I 6. 7!1 19. 6ll 10 .6!1 II 6.6!1 19. 9!1 19. 9!1 III 5.7!1 19. 7!1 19. 8!1 IV 7.2ll 22.5ll 22.6!1 1980 t 7 .2!1 23.7ll 73.8!1 II 7. 2!1 22.3ll 22 4!1 Ill 6.6!1 22.3!1 22. 4!1 lV 7. 6!1 22.3!1 22.4!1 1981 I 5.9!1 22.2ll 22.2!1 II 5.6!1 20.5!1 20.~!1 III 5.0!1 21. 2ll 21.2!1 IV 6. J!l 21.0!1 21. 0!1 1982 I 5.1!1 22.5ll 22.5!1 II 6.5!1 23.8!1 23.8ll III 5.5!1 17 .Ill 17 .1!1 IV 6.0!1 15.51 15.5ll 1903 I 5.7!1 18.2ll 18. 2!1 II 5.8!1 17. 4!1 17 .4!1 III 4.6!1 14 .4ll 14.4!1 IV 5.5!1 15. 2!1 16 .All 19M I 5.2!1 15.6!1 15.8!1 II 5 . .!I 13 .Ill 14 4!1 III 3. 9!1 I I .9ll 13. I !I IV 4. -iS 12 2" 13.HIIi 1985 I 3 6!1 1 I 4ll 12. 4!1 II 3.9!1 12 7!1 12 2!1 III 4.1!1 17.(11 12.0'1 IV 5.6!1 14 ~~" 14 ?" 1986 I .15.4~ 15 6, 15 61 II 5 7!1 lf' 01 16 (II$ III 4 ~, 1 ~. fl'll 1!:> !)ill IV 5 ?ll 17 1" 17 4'1 1987 I 5~ 1'1 8!1 lQ Q" II .2'1 IQ 3!1 19 4" 11. 6!1 11 ~· IJI 5.0'1 IV 5.0!1 15 9!1 H 0!1 !988 I 4. 6'1 18 \!1 18 !!I II 4 2!1 1i 11 17." Ill 3. 7!1 16 6!1 16. 6!1 IV 4.2!1 17 4!1 17. 4!1 1989 I 4 5!1 20 21 20. 2!1 II 3. 9!1 16 5!1 17. 6!1 Source: C:ent.,-al Bank of Argentina (BCRA) and Table 6.1. •I Stocks in current australes at~ the end of ead1 quarter" divided by four ti"'•• the level of OOP for the quarter. Monetary aggregate definition• al"e •• in Table 6.1. Auguot 1989  Table 6.3 ARGENTINA- SOUlCES At.IJ USES OF BAN< CRBliT, 1970-1988 (Per-cent of COP, 1970 p,..·, ces) 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 ~ oe: !98~ 1985 1986 1987 1988 u. . . of c,.edit. 27.89 26.20 23.73 57.37 61.12 36.07 35.60 31.35 33.68 38.96 43.74 57.99 75.34 58.54 52.67 61.05 60.25 63.47 80.16 Caah in Vault 1. 74 1.11 1.11 1.85 2.08 .82 1.54 72 1.51 1.43 1.42 1.36 1.23 1.59 .53 2.20 1. 60 1.20 1.27 Net For-eign Aaaet.a -0.65 -0.40 -0.28 -0.19 0.03 -0.71 -0.79 -1.92 -2.40 -3.83 -3.76 -9.10 -13.00 -12.36 -10.93 -10.32 -8.80· -11.15 -9.73 Creda to the Covern-nt of wh;ch' 3.36 2.28 2.47 4.37 5.06 3.36 2.51 3.38 5.10 6.04 5.87 9.44 9.77 6.13 6.18 14.89 17.14 16.82 18.13 Fol'"ced Invest. . nt.a 8.~1 9.87 8.49 10.83 Cred;t to the Pr;vate Sector 19.43 19.11 16.50 19.89 20.48 10.90 10.13 14.44 18.61 24.38 29.12 32.55 29.74 23.33 1•.68 20 43 21.00 21.84 20.11 Unre-..mel"'at.ed Reserves with Centr-al Bank 1.04 1.25 1.25 3.83 3.84 3.44 4.72 7.30 3.99 1.89 1.21 1.65 12.53 9.84 E. 82 4.83 2.28 0.72 1.04 Other 2.97 2.85 2.56 27.61 29.62 17.27 17.50 5.42 6.86 9.07 9.89 22.07 35.07 30.01 30.2< 29.03 27.02 34.03 49.35 N 0' Sour-ces of Cr-edit. 27.89 26.20 23.73 57.37 61.12 35.07 35.60 31.35 33.68 38.95 43.74 57.99 75 34 58.54 5: .-- 05 GC :.:, 63.47 80.16 VI O.posit.a 21.14 19.31 17.49 25.25 27.83 15.57 15.32 19.95 22.14 25.32 28.51 25.73 19.42 17 53 l6 .32 20.92 22.96 20.77 22.91 Pub I i c Sector 4.07 2.93 2.37 3.88 5.20 3.43 3. 73 4.54 4.36 4.10 4.93 4.26 3. 65 2. 94 2.18 5. 51 5.04 2 90 3.01 p,.j vat.e Sector 17.07 15.38 15.12 21.38 22.53 12.25 11.59 !5.41 17.78 22.22 23.59 21.48 15.75 14 69 ]4. ]4 15.41 17.92 17.87 19.90 Rediscounts •/ 1.38 1. 74 32 25.52 26.02 15.13 13.45 1.39 1.95 63 s 74 4.42 15.77 5. 97 3.55 10 85 ll.23 13.57 19.96 Net. Wol"'th 2.75 2.33 1.87 2.69 2.79 1.38 2.12 3.55 4.15 4.93 5.52 7.07 8.86 7. 98 7. 77 84 89 7. 73 6. 56 Ot.her 2.52 2.81 3.05 2.80 4.48 3.89 4. 71 6.45 5.43 5.08 5.97 20.77 31.29 26.95 25.01 21.43 18.17 21.40 30.53 Sour-ce: Central Bank of the Republic: of Argentina (BCRA). •I Befor-e 1985 int.ereat on rediscounts is included under •ot.her 1 . June 1989  - 266 - Table 6.4: ARGENTINA - BANKING SYSTEM REAL CREDIT EXPANSION, 1970-1988 Total Domestic Percentage of Domestic Credit Expansion to: Credit Expansion (" of GOP) Public Sector Private Sector 1971 -0.69 163.02 -64.63 1972 -2.11 -11.47 100.36 1973 31.02 6.41 12.64 1974 6.94 16.28 27.09 1976 -23.96 7.18 40.61 1976 -1.40 61.47 64.79 1977 -4.08 -26.22 -120.69 1978 6.61 29.14 66.86 1979 10.92 11.62 64.03 1980 6.99 -1.24 86.18 1981 16.97 19.73 8.49 1982 7.16 -2.36 -63.28 1983 -13.00 26.91 42.83 1984 -1.89 -10.43 163.46 1986 6.62 149.87 -2.70 1986 4.12 73.34 39.26 1987 8.86 0.30 14.34 1988 12.02 6.36 -21.62 Source: Central Bank of the Republic of Argentina (BCRA). a/ Private, public and other credit of the banking system. July 1989  Tobie 6.5, ARC&ITINA - FINANCIAL INSTrTliTIONS BY ACTIVITY AN> OWNERSHIP, 1979-1987 (Nultber of inst-it,utions, year-end) 1979 1980 1981 1982 1983 1984 - ~E: 196f 1987 HQ 81"anches HQ 8r"anchea fit Sr"'anehea HQ Branches HQ Br-anches HQ Branches H:l r ... - - H~ 8'"anche& HQ Branches Ca.aercial Banks 211 3720 207 3714 199 3767 197 3957 203 4236 203 4420 191 :.:~( ..:. l8E 4354 172 424! Federal eo,.,.n. . nt owned 573 570 572 2 553 2 553 2 554 :,,.jf 2 547 2 546 St.at.e owned 24 1056 24 1083 24 1104 24 1122 24 1133 24 1152 25 1:8< 25 1198 24 1216 Hun i c i pa I i t.y owned 5 59 5 62 5 65 5 67 5 69 5 69 ,- s !-9 5 68 Privat.e Do.estic 161 1814 151 1784 137 1705 133 1869 140 2140 1~0 2305 128 122 2~:'() 109 1989 Private For"e i gn 20 218 26 215 32 341 33 346 32 341 32 340 31 ~.~: :;1 34(1 32 422 Deve I op~~tent Banks 2 33 2 33 2 33 2 32 2 33 2 33 2 2 33 2 33 Federa I Cover"nMent. owned 33 33 33 32 33 33 33 33 State owned 0 0 0 0 0 N 0\ Inveat.. .nt S.nks 0 3 0 0 3 0 3 0 3 0 3 2 2 ...... St.at.e owned 1 0 0 0 0 0 0 Private Do.eatic 2 0 0 0 0 0 0 Private Foreign 0 0 0 0 0 0 Mortgage Banks Fedel"'al Cover-n ...nt owned 52 52 53 53 53 53 52 53 53 Savings Banks Federal Covern. . nt owned 40 40 49 50 51 53 53 53 53 Cr-edit Cooperat ·, ves a/ 104 13 92 24 92 26 76 23 71 24 48 16 33 10 3C 25 7 F 1 nance Coapan i •• •I 142 205 135 216 126 218 111 214 102 208 87 183 71 :ss b4 137 56 114 Sav i nga and Loans Aaaoc a/ 31 43 28 40 25 33 22 35 19 36 15 32 13 28 11 18 8 17 Consu,..,. Credit Assoc. •I Total 496 4106 469 4l1Q 449 4199 413 4364 402 4641 360 4790 3l5 ·~96 29!- 4657 267 4518 Source: Central Bank of' 't.he Repub I·, c of Argentina, Depar-t111ento de- Expans; on y Serv i c i os de Ent i dadea. a/ Pr i vat.e sect.or March 1988  268 - Tobie 6.6: ARGENTINA- INTEREST RATES, 1977-1989 (Quarterly Average of Month! y Rates, Percent) Deposit Rate •/ Lending Rate b/ Nominal Real c/ 4.5 -1.0 4.5 II 5.5 -0.7 5.5 Ill 7 3 ~3. 4 8.2 -2.6 0.9 IV 10.1 2.5 13.2 5.4 3.1 1978 I 8 6 0. 7 11.3 3.2 2.7 II .3 -3.4 8.2 -2.6 0.9 III -1.7 7 -0.6 1.1 IV -1.5 -0.6 0 1979 5 -0 2 -0.2 0 7 II .5 2.3 7.2 -1.7 0. 7 III 2 0.5 -1.1 0.5 IV 6. 4 3.0 7. 3.7 0 1980 5.3 1 2 0 1.9 0 II 4.8 -0. 5.5 -0.0 0 III 5.1 .4 6.2 2.5 .1 IV 4.8 2 7 5.6 3.5 0.8 1981 6.8 2 6 8.8 4.6 2.0 II 8 5 -4 5 9.8 -3.2 1.3 III 0.2 11.7 2.0 1.8 IV -2.1 8.5 -0.7 1.4 1982 7. -1.0 8.4 0.3 1.3 II 2 -2.9 8.5 -1.6 1.3 III 5. 7 -15.3 6.6 -14.4 0.9 IV 8.0 -3.3 8.5 -2.8 0.5 1983 10.2 -2.7 11.0 -1.9 0.8 II 9.6 -0.6 10.6 0.4 1.0 III 12.0 -5.9 13.0 -4 9 1.0 IV 14 5 -2.7 15.5 -1.7 1.0 1984 10 -4 11.5 -3.7 .0 II 13.0 -5 4 14.0 -4.4 .0 III 15.5 -5.2 17.0 -3.7 1.5 IV 17.0 -0.7 19.0 1.3 2.0 1985 18.5 -3.7 20.5 -1.7 2.0 II 23.3 -11.7 25.3 -9.7 2.0 III 3.5 3.1 5.0 4.6 1.5 IV 3.1 2.3 4.5 3. 7 1. 4 1986 3.1 2.4 4.5 3.8 1.4 II 3.2 -0.3 4. 6 1.1 1.4 Ill 4.4 -2.7 5.9 -1.2 5 IV 5.3 0.9 6.8 2.4 5 1987 4.8 -1 9 6.0 -0.7 2 II 5.1 0. 6 6.1 .6 -1 0 III 11.0 -2.6 10.4 -3.1 0 6 IV 13. 0.8 12.2 -0. 0.9 1988 14. 0.8 14.1 0.2 0.6 II 18. -3.3 17.6 -3.7 0.5 III 14.6 -6.4 14. -6.9 0.5 IV 10.7 5. 9 10 5.8 0.1 1989 18.6 17 6.1 1.0 II 116.2 18.0 102 5 4.2 13.8 Source: CEF'Al. a/ Unti I second quarter 1982, weighted average of rate offered by banks on 30 day deposits; from third quarter 1982 through third quu·ter 1987, regu I a ted rates; from fourth quarter 1987, average of depoai t rates between enterprises with Government dollar bond (BONEX) quarantee. b/ Unti I second quarter 1982, average of rates charged by banks to priMary clienta; from third quarter 1982 through third quarter 1987, regulated rates; from fourth quarter 1987, average of lending rates with Government dol I ar bond (BONEX) quarantee. c/ Defloted by WPI. August 1989  - 269 - Table 7.1: ARGENTINA- BEEF-WHEAT PRICE RATIO IN US AND ARGENTINA, 1961-1981~ •I - - - - - - - - - ·--------------· Year United States Argentina 1961 7.11 3.70 1962 7.13 3.85 1963 7.00 3.70 1964 6.50 4.76 1965 9.67 6.25 1966 9.13 5.88 1967 10.75 4.76 1968 12.63 4.55 1969 12.88 4.35 1970 13.71 6.25 1971 14.43 7.69 1972 12.83 9.09 1973 6.60 6.26 1974 6.46 4.83 1975 5.96 3.03 1976 7.50 3.85 1977 9.67 5.26 1978 10.64 4.35 1979 12.36 6.67 1980 10.22 5.56 1981 9.43 5.00 1982 10.67 5.00 1983 10.72 5.56 1984 6.92 1985 5.12 1986 6.98 1987 7.83 1988 January 6.70 February 6.30 March 5.90 Apri I 5.60 May 4.00 June 3.40 July 3.70 August 4.00 September 6.30 October 7.10 November 5.90 December 6.30 1989 January 6.90 February 6.90 March 6.60 Source: Ministry of Agriculture, S.N.E.S.R. •I One kg. wheat equivalent to 1 kg. of beef liveweight. August 1989  Table 7.2o AllCENTINA- PRINCIPAL CROPS, AREA PLANTED, 1970-1989 a/ (Thousand Hectares) Crowth Rates 1969/ 1970,1 1971/ 1972/ 1973/ 1974/ 1975/ 1976/ 1977/ 1978/ 1979/ 1980/ 1981/ 1982/ 1983,' l''- _ :o! lQf"" 1988 I 1969,'70 70 11 12 73 74 75 75 77 78 79 eo 81 82 83 s• c"" eE e~t 1988/89 D/ PP.INCIP.t.L CEREAL CROPS Wheat 6239 4468 4986 5627 4252 5183 5753 7192 4600 5230 5000 6196 6566 7410 7210 600C E"':'\00 4Q3.5 4530 0.36 Col"n 4666 4993 4439 4251 4134 3871 3696 29eo 3100 3300 3310 4000 3695 3440 3484 362C 3€.2( 3650 2825 2485 -2.03 Cr-ain sorghum 2568 3122 2759 2974 3114 2602 2358 27eo 2650 2530 1884 2400 2712 2657 2550 2040 140(• 1127 1075 820 -5.09 Oat.a 1129 1026 1098 1= 1154 1200 1341 1471 1480 1545 1680 1718 1615 1856 1800 1775 1739 2530 1960 1830 3.68 PP.INCII>AL IIOJSTRI.t.L CROPS Cott.on 464 388 435 536 557 513 433 543 621 702 585 343 404 373 486 462 353 292 495 465 -1.07 Sugarcane 203 227 256 299 350 348 351 360 356 351 337 353 351 354 354 358 355 356 355 2.11 Tobacco 76 71 74 78 89 93 82 81 70 78 64 53 50 67 66 53 55 60 55 -2.44 PRINCIPAL Oii.. CROPS Sunf I ower 1472 1614 1533 16!:2 1342 1196 1411 1460 2200 1766 2000 1925 1733 1<l30 2131 23eo 314C 189(' 2117 22€5 2.90 Linseed 952 973 538 509 415 520 471 722 950 893 1070 780 851 910 810 620 750 758 670 570 0.57 Cleanut.a 215 314 321 389 350 383 335 368 452 400 287 201 180 125 14€ 146 17f 212 194 152 -4.73 Soybeans 31 38 eo 169 377 370 443 710 1200 1640 2100 1925 2040 =6 2920 3300 3340 .::-:-::..0 4413 4600 25.02 N -..I 0 VECET ABLE CROPS Potat.oea 199 86 55 124 29 3 0 5 3 20 2 104 109 115 107 109 105 113 E.06 Sweet pot.at.o.a 48 46 44 44 45 43 40 37 35 35 34 34 32 29 31 32 32 35 29 21 -3.08 Dry beans 46 64 63 83 5 15 185 54 236 243 2 236 229 199 193 230 171 11.94 TotMt..o.a 26 28 29 33 37 35 33 32 33 3 3 23 30 32 34 39 39 38 27 28 0.4S Source: Ministry of Agriculture, SIESR. a/ Cr-op year: July through June. b/ Where aeries are inco~~Piet.e, gr-owth ratea are for the longest continuous aeries. August 1989  T•bio 7.3, ARCENTINA- PRINCIPAL CROPS, AREA HAAYESTEl, 1970-1989 o/ (Thouaand Hectares) cr-t.h R.- 1969/ 1970/ 1971/ 1972/ 1973/ 1974/ 1975/ 1976/ 1977 I · 1978/ 1979/ 1980/ 1981/ 1982/ 198~. 1984 ~~e.-: !996.' 1987/ 19BB/ 19S9/70 - 70 71 n n u n n n 78 79 80 8! 82 83 8• eo Bf 97 88 89 19BB/89 b/ PRINCIPAL CEREAL CROPS Wheat 5191 3701 4295 4965 3956 4233 5271 6428 3910 4685 4787 5023 5923 7320 7073 5900 5382 4893 4875 4468 1.24S Corn 4017 4066 3147 3565 3486 3070 2766 2532 2660 2800 2490 3394 3170 2720 3024 3497 3340 3231 2437· 1627 -1.87S Crain SorghuM 1872 2235 1419 2131 2324 1937 1834 23n 2254 2044 1279 2100 2510 2520 23?0 1965 1280 9n 956 636 -3.41S Oota 327 300 357 399 395 282 338 383 430 500 410 350 298 408 410 434 333 312 476 446 0.98S PRINCIPAL Il'llUSTRIAL CROPS Cotton 452 367 398 457 474 505 414 518 607 669 568 282 399 343 469 447 339 273 492 460 -o.- Sugarcane 192 211 243 272 298 293 339 350 343 306 314 319 308 309 313 318 ,286 296 297 l.SlS Tohaec:o 69 65 68 74 83 Be 79 75 62 75 57 47 55 60 62 49 49 51 53 -2.48S PRINCIPAL OIL CROPS Sunflower 1347 1313 1267 1338 1190 1005 1256 1233 2000 1557 1855 1280 1673 1902 1989 23SO 3046 1735 2032 2129 3.64S Linseed 791 834 451 441 390 501 446 674 1184 817 978 n6 818 864 804 603 68B 744 655 557 l.2ft Peanut.a 2!1 310 294 379 345 357 309 367 428 393 279 197 179 125 146 146 173 212 190 152 -4.49S N Soybeans 26 36 68 157 344 356 434 660 1150 1600 2030 lBBO 1986 2116 2910 3269 3314 3510 4373 3- 25.38S '-I ..... VECETABLE CROPS Potatoes 190 179 147 117 127 111 lOB 111 115 110 112 117 102 lOB 113 106 107 103 113 -2.2311 Sweet. Potatoes 44 42 35 42 33 41 38 36 34 34 34 24 32 271 31 32 32 34 29 21 -l.13S 0r"y Beans 41 61 62 79 lOB 137 147 171 136 231 205 211 230 200 172 191 227 171 9.25S TOtUtoea 20 24 26 30 34 33 27 29 30 26 29 19 27 31 30 37 38 37 27 28 1.22S Source: Miniatr"y of Agricul-tur-e, SNESR. a/ c,.op year: Ju ty t.h,.ough June. b/ Where aeries are inc:o.~plate growt.h rat.ea are fo,. longest continuous aeries. August 1989  Tab! o 7. •: ARCBITINA - YIElD OF ~INCIPAL CROPS, 1970-1989 •I (Metric Tons Per- ~rveat.ed Hect.are) Growth Rllt.e• 19691 19701 19711 19721 19731 19741 19751 19761 1977 I 1~781 19791 19801 19811 1982' 19831 J.Q84 : ~F! 1Q86/ 1987 I 19881 1969170 - 70 71 72 73 74 75 76 77 78 79 80 81 82 83 a. et Sf 87 ee 89 1988189 bl PRINCIPAL CEREAL CROPS Wheat 1.35 1.33 1.27 1.59 1.66 1.41 1.63 1.71 1.36 1. 73 1.69 1.55 1.40 2.05 La. 2.30 1. 62 206 2.20 1. 70 2.061 Co•" 2.33 2.« 1.86 2.72 2.M 2.51 2.12 3.28 3.65 3.11 2.57 3.80 3.03 2.98 3.1. 3.56 3. 74 3.19 3.77 2.80 2.221 Crain aol"ghuM 2.04 2.09 1. 66 2.33 2.54 2.49 2.76 2.78 3.19 3.03 2.31 3.60 3 19 3.27 2.91 3.15 3.12 3.07 3.35 2.52 2.321 Data 1.30 1.20 1.33 1.42 1..2 1.16 1.28 1.38 1.32 1.35 1.27 1.2. 1.14 1.56 1.45 1.65 1.20 1.59 1.51 1.30 0.521 PRINCIP"L It-llUSTRI"L CROPS Cot.to<> 1.00 0.78 0.73 0.93 0.88 1.07 1.07 0.99 1.18 0.86 0.85 1.00 1.21 1.09 1.30 1.20 1.11 1.18 1.73 2.501 Sugar-cane 50.55 .8.53 53.00 62.00 52.08 53.21 .2.19 45.71 39 65 46.20 54 78 46.47 .8.77 48.77 48.09 48.62 .9.05 48.82 .9. 76 -0.351 Tobacco 0.95 0.95 1.10 0.96 1.18 1.11 1.20 1.20 1.02 0.93 1.09 1.12 1.26 1.24 1.25 1.23 1.35 1.39 1.36 1.751 PRINCIPAL OIL CROPS Sunflower 0.85 0.63 0.64 0.66 0.82 0.73 0.86 0.73 0.80 0.92 0.89 1.00 1.18 1.21 1.10 1.45 1.35 1. 27 1.43 1.30 4.21111 Linaeed 0.81 0.82 0.70 0.75 0. 76 0.76 0.85 0.92 0. 92 0.73 0.76 0.81 0.73 0.85 0.82 0.83 0 67 O.M 0.82 0. 7• -o.021 Peanut.a 0.78 0.88 0.60 0.81 0.59 0.74 0.77 ! .14 0 61 1.20 0. 74 0.86 1.15 1.28 1.51 1.64 150 .33 1.63 1.20 4.591 Soybean a 1.03 1. 62 1.1. 1. 73 1.« 1.36 1. 60 2.12 2.17 2.31 1. 72 2.01 ~.19 1.69 2.40 2.00 2 u 1 99 2.26 1. 65 2.591 ~ N va:ET "BLE CROPS Potat.oea 12.32 11.00 9.10 13.09 17.16 12.18 U.1B 15.89 13.80 15.47 13.94 19.26 17.77 18.60 18.60 21.11 18.90 lB.« 25.34 3.821 Sweet. pot.at.oea 9. 91 10.80 9.« 11.33 8.99 10.21 9.21 9.17 9.41 9.53 9.99 10.11 11.54 11.20 10.50 11.77 12.7. 12.35 16.10 1•. 50 1.921 Dry beans 0.96 0.97 0.93 0.93 1.07 0.79 1 16 0.97 0.98 1.02 0.71 1.06 1.11 1.08 0.99 1.03 1.05 1.01 0.511 To•toe• 18.00 17.30 18.70 16.60 18.90 18.30 18.27 18.23 19.13 19.49 18.89 19.72 21.31 19.71 19.53 20.60 21.20 21.6 24.93 2•. 80 1.551 Sour-ce: Hiniatry of Agricult.ure. a/ Crop Year, July thr-ough June. b/ Where dat.a al"'e not avai I able for t.he entire aeries, growth rat.ea are for the longest continuous ael"iea. August 1989  - 273 - Table 7.6: ARGENTINA- PRODUCTION, IMPORTS AND SALES OF PRINCIPAL FARM INPUTS, 1$170-1988 --------------------------------THOUSAND TONS------------------------- THOUSAND UNITS Seed Pr-oduction ---------------------- Fer-ti I izer- Pesticide Fencing wir-e Tr-actor- Maize Soy beans Consumption •I Impor-ts bl Sales Sales -··~------------------------ 1970 7.4 8.:a 11.3 1971 107.6 76.4 7.6 11.1!1 13.7 1972 73.0 0.2 76.1 7.9 13.1 14.2 1973 87.6 1.4 71.4 9.0 9.C) 18.8 1974 78.6 9.0 62.6 13.6 6.1J 20.7 1976 68.6 8.4 64.1 9.6 6. ;r 16.2 1976 66.0 11.4 34.7 9.0 8.:! 21.0 1977 86.7 4.8 66.9 9.8 6 . ., j 22.0 1978 87.1 18.6 63.3 8.2 3. ~~ 6.6 1979 98.3 82.3 99.0 16.6 6.~1 6.9 1980 102.3 82.4 94.4 10.7 6.1. 6.0 1981 124.8 60.1 66.2 9.2 4. ~~ 3.1 1982 87.4 94.4 76.2 13.3 6.5. 4.4 1983 96.9 97.4 96.4 16.0 8.6 8.0 1984 80.6 123.3 127.8 17.8 6.7 12.4 1986 122.2 96.6 143.8 11.8 3.1 6.7 1986 94.7 109.6 101.2 16.8 7.6 1987 69.3 133.1 16.2 3.9 1988 66.6 131.3 140.9 16.7 6.3 Sour-ce: Ministr-y of Agr-icultur-e, SNESR. •I In plant nutr-ients of N, P end K. bl Insecticides, fungicides end her-bicides. Augud 1989  Tab lo 8. 1, ARCfNT'INA - VALUE ADDED BY SUBSECTORS, 1970-1987 (1970 A.uatr•lea) 1 9 8 7 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1982 U;;..,,! :98.: 198€ II III HANJFAC:T\RINC INJUS'TRY 2496.0 2641.5 2751.3 2865.9 3011.9 2945.2 2866.8 3071.6 2759.7 3043.0 2941.0 2501.1 2388.8 2641.2 2751 9 2485.2 2789.2 2488.1 2891.4 2873.7 1. Food p roducta 372.9 357.6 378.9 383.5 393.0 405.0 423.2 428.9 422.4 433.1 433.4 427.1 396.9 408.5 420. 427.8 448.4 425.2 447.8 441.3 2. Bever-ages 124.3 127.8 130.6 131.1 162.1 154.1 135.8 120.5 109.5 128.7 141.8 128.8 106.9 120.2 142.9 135.2 170.0 213.0 159.8 133.9 3. Tobacco 95.5 97.5 103.2 108.6 123.2 123.8 120.4 120.2 120.1 124.3 123.6 115.3 105.7 112.6 127.0 127.4 130 124.3 121.7 123.0 4. Te•ti lea 219.0 228.6 225.7 236.9 259.5 247.3 233.6 243.8 213.9 241.9 201.8 165.9 165.9 195.5 203.2 154.3 194.4 152.5 204.3 204.1 S. Clot.hina 60.3 64.3 69.8 67.0 80.1 75.3 69.9 65.9 51.3 60.2 53.7 33.8 29.7 32.0 33.0 23.2 26.5 17.7 24.2 22.1 6. L.eat.her pr-oduct.a 23.4 23.0 27.6 24.7 22.8 24.5 26.5 28.9 29.5 25.9 21.8 20.9 23.6 20.6 17.3 19 20 18.9 19.6 17.3 7. Footwear 20.7 19.7 15.1 15.8 17.7 15.5 12.9 12.0 10.3 10.3 10.0 8.9 8.0 7.5 8.5 0 4. 9 7.0 5.2 8. Wood pr-odueta 39.9 37.7 38.0 38.5 43.0 40.2 34.8 34.3 32.2 33.6 32.0 26.7 21.7 22.3 22.1 178 20.4 14.5 20.6 21.3 9. Furn i t.ure 16.5 10.9 15.1 15.0 18.3 16.0 11.2 13.8 15.3 19.2 19.3 17.9 16.0 13.8 11.6 11.1 13.9 15.5 22.1 15.7 10. Paper- 57.4 60.5 64.3 70.1 :"5.9 72.2 62.6 66.0 68.3 76.0 62.5 46.7 58.6 65.8 65.7 60.8 66.8 66.8 62.0 67.7 11. Pl"int.ing 71.1 70.6 72.4 74.3 77.4 82.1 72.6 69.2 71.3 66.2 70.0 61.7 55.8 56.7 58.1 58.9 56.7 54.0 54.6 54.7 12. S.aic: che•ic:ala 66.1 76.7 85.0 92.8 94.9 88.8 84.7 91.6 82.2 99.7 86.1 77.6 93.9 103.8 108.1 92.0 117.3 105.9 115.4 127.6 13. Other" che•ic:ala 137.9 155.9 155.9 180.3 162.9 195.7 192.6 179.7 156.8 171.9 183.2 187.3 165.4 177.9 206 5 207.1 225.1 172.2 257.1 246.1 N 1•. Pet.l"oleu• ,..fineries 199.2 209.5 215.8 219.4 207.7 189.4 202.9 213.1 215.4 225.7 239.0 231.6 229.0 239.4 232 5 239.2 238.3 217.8 219.4 218.8 -....1 15. Other petrol au• product. 12.7 11.3 11.5 11.8 10.8 9.6 9.5 11.7 9.6 11.4 11.4 12.1 10.5 11.3 10 :.1.8 11.4 12.3 12.6 11.9""" 16. Rubber" producta 55.7 62.7 70.0 74.1 72.2 76.0 83.4 83.6 70.3 88.0 82.9 55.4 56.4 78.2 81 4 58.6 72.5 54.8 73.6 83.1 17. Plastic products 24.5 26.9 34.5 37.3 34.1 31.3 27.4 29.6 26.7 33.3 33.4 25.2 26.5 30.4 35.1 27.1 29.4 24.2 24.8 25.2 18. Cia)' pr-oduct.a 1l!.7 14.3 15.1 15.7 16.4 15.0 15.0 12.5 11.1 13.0 12.9 6.5 7.9 10.8 9 9 6.2 9.2 5.9 10.0 9.4 19. Cia-are 27.4 26.7 27.3 24.7 26.5 32.8 28.4 26.2 28.9 32.2 29.3 22.7 20.8 24.2 23.9 15.9 21.6 20.8 22.0 25.9 20. Non•t.al ic Mineral a 89 4 99.1 102.1 95.6 103.6 101.4 100.6 103.4 102.6 107.5 105.2 92.4 81.7 88.2 80.4 66.8 78.0 78.1 80.8 93.2 21. I ron and at.eel 108.3 119.4 128.5 134.9 137.4 134.8 125.1 143.8 137.9 156.6 138.9 125.3 141.5 149.0 140.2 136.6 151.2 151.8 180.8 186.6 22. Nonfer-rous . . t.ala 26.8 31.9 33.6 34.2 36.3 31.9 25.6 29.2 25.7 34.8 37.2 28.0 30.8 34.5 37.1 28.9 35.0 28.6 38.5 39:4 23. Met.a I p r-oducta 179.7 202.3 211.7 205.2 225.4 232.5 226.8 256.8 221.5 245.5 235.3 192.2 179.6 217.9 234.5 197.7 226.7 199.0 264.3 235.9 24. Nonelectric •chinery 125.1 136.6 140.1 172.2 184.4 166.0 205.0 254.9 187.3 205.5 180.5 128.4 119.2 130.6 123.3 88.1 99.2 66.5 100.9 107.5 25. Electric -chiner-y 95.2 104.2 107.3 109.8 1!5.2 115.1 93.0 107.5 94.0 100.3 96.8 75.5 70.3 75.2 83.1 71.9 94.8 68.8 101.6 109.7 26. Transpor-t equip . .nt 222.1 249.7 255.4 274.0 284.4 245.8 218.8 294.9 220.2 270.3 280.2 173.7 155.3 200.0 218.4 179.2 207.6 159.5 224.8 225.7 27. Scientific eQuip . . nt. 11.2 12.1 16.8 18.4 26.7 23.1 24.5 24.6 25.4 27.9 18.8 13.5 11.2 14.3 17.0 15.3 14.7 14.6 21.1 21.4 Source: Centr-al Bank of the Republic of Ar-gentina (BCRA). July 1989  Tobie 8.2, ARGENTINA - VAUJE ADDED BY SUBSECTOR, 1970-1987 (Pe,.cent.) 1 9 8 7 1970 1971 1972 1973 1974 1975 1976 19n 1978 1979 1980 1981 1982 1983 1984 1985 1986 II III HAH.JFACT\.f!INC It«lUSTRY 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 1. Food product.a 14.9 13.5 13.8 13.4 13.0 13.8 14.8 14.0 15.3 14.2 14.7 17.1 16.6 15.5 15.3 17.2 16.1 17.1 15.5 15.4 2. Bever-ages 5.0 4.8 4.7 4.6 5.4 5.2 4. 7 3.9 4.0 4.2 4.8 5.1 4.5 4.6 5.2 5.4 6.1 8.6 5.5 4.7 3. Tobacco 3.8 3.7 3.8 3.8 4.1 4.2 4.2 3.9 4.4 4.1 4.2 4.6 4.4 4.3 4.6 5.1 4.7 5.0 4.2 4.3 4. Te.-ti lea 8.8 8. 7 8.2 8.3 8.6 8.4 8.1 8.1 7.8 7.9 6.9 6.6 6. 9 7.4 7.4 6.2 7.0 6.1 7.1 7.1 5. Clot.hing 2.4 2.4 2.5 2.3 2.7 2.6 2.4 2.1 1.9 2.0 1.8 1.4 1.2 1.2 1.2 0.9 1.0 0.7 0.8 0.8 6. Le•th•r pl"oduct.a 0.9 0.9 1.0 0.9 0.8 0.8 0.9 0.9 1.1 0.9 0.7 0.8 1.0 0.8 0.6 0.8 0.7 0.8 0.7 0.6 7. Footwear 0.8 0.7 0.5 0.6 0.6 0.5 0.4 0.4 0.4 0.3 0.3 0.4 0.3 0.3 0.3 0.3 0.2 0.2 0.2 0.2 8. Wood p roduct.a 1.6 1.4 1.4 1.3 1.4 1. 4 1.2 1.1 1.2 1.1 1.1 1.1 0.9 0.8 0.8 0.7 0.7 0.6 0.7 0.7 9. Furniture 0.7 0.6 0.5 0.5 0.6 0.5 0.4 0.4 0.6 0.6 0.7 0.7 0.7 0.5 0.4 0.4 0.5 0.6 0.8 0.5 10. Paper- 2.3 2.3 2.3 2.4 2.5 2.5 2.2 2.1 2.5 2.5 2.1 1. 9 2.5 2.5 2.4 2.4 2.4 2.7 2.1 2.4 11. Pr-inting 2.8 2.7 2.6 2.6 2.6 2.8 2.5 2.3 2.6 2.2 2.4 2.5 2.3 2.1 2.1 2.4 2.1 2.2 1. 9 1.9 12. Beaic: che•'rcals 2.6 2.9 3.1 3.2 3.2 3.0 3.0 3.0 3.0 3.3 2.9 3.1 3.9 3.9 3.9 3.7 4.2 4.3 4.0 4.4 13. Other che•icals 5.5 5.9 5.7 6.3 5.4 6.6 6. 7 5.9 5.7 5.6 6.2 7.5 6.9 6. 7 7.5 8.3 8.1 6.9 8.9 8.6 14. Pet.roleu• refineries 8.0 7.9 7.8 7.7 6.9 6.4 7.1 6. 9 7.8 7.4 8.1 9.3 9.6 9.1 8.4 9.6 8.5 8.8 7.6 7.6 ~ 15. Other pet.l"oleulll product.a 0.5 0.4 0.4 0.4 0.4 0.3 0.3 0.4 0.3 0.4 0.4 0.5 0.4 0.4 0.4 0.5 0.4 0.5 0.4 0.4 l.n 16. Rubber products 2.2 2.4 2.5 2.6 2.4 2.6 2.9 2.7 2.5 2.9 2.8 2.2 2.4 3.0 3.0 2.4 2.6 2.2 2.5 2.9 17. Plastic pr"oducta 1.0 1.0 1.3 1.3 1.1 1.1 1.0 1.0 1.0 1.1 1.1 1.0 1.1 1.2 1.3 1.1 1.1 1.0 0.9 0.9 18. Clay p roducta 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.4 0.4 0.4 0.4 0.3 0.3 0.4 0.4 0.2 0.3 0.2 0.3 0.3 19. Cia-ware 1.1 1.0 1.0 0.9 0.9 1.1 1.0 0.9 1.0 1.1 1.0 0.9 0.9 0.9 0.9 0.6 0.8 0.8 0.8 0.9 20. Non•t.al i c •i nerala 3.6 3.8 3.7 3.3 3.4 3.4 3.5 3.4 3.7 3.5 3.6 3. 7 3.4 3.3 2.9 2.7 2.8 3.1 2.8 3.2 21. Iron and at.eel 4.3 4.5 4. 7 4.7 4.6 4 6 4.4 4.7 5.0 5.1 4.7 5.0 5.9 5.6 5.1 5.5 5.4 6.1 6.3 6.5 22. Nonferrous . . t.ala 1.1 1.2 1.2 1.2 1.2 1.1 0.9 1.0 0. 9 1.1 1.3 1.1 1.3 1.3 1.3 1.2 1.3 1.1 1.3 1.~ 23. Metal p ,.oducta 7.2 7.7 7. 7 7.2 7.5 7.9 7.9 8.4 8.0 8.1 8.0 7.7 7.5 8.3 8.5 8.0 8.1 8.0 9.1 8.2 24. Nonelectric . . chinery 5.0 5.2 5.1 6.0 6.1 5.6 7.2 8.3 6.8 6.8 6.1 5.1 5.0 4.9 4.5 3.5 3.6 2.7 3.5 3.7 25. Electric . . chinery 3.8 3.9 3.9 3.8 3.8 3.9 3.2 3.5 3.4 3.3 3.3 3.0 2.9 2.8 3.0 2.9 3.4 2.8 3.5 3.8 26. Transport equip . .nt 8.9 9.5 9.3 9.6 9.4 8.3 7.6 9.6 8.0 8.9 9.5 6.9 6.5 7.6 7.9 7.2 7.4 6 4 7.8 7.9 27. Scientific equip . . nt 0.4 0.5 0.6 0.6 0.9 0.8 0.9 0.8 0.9 0.9 0.6 0.5 0.5 0.5 0.6 0.6 0.5 0 6 0.7 0.7 Source: Centl"'al Bank of the Republic of Ar-gentina (BCRA) July 1989  Table 8.3, ARCeiTINA - IlollEX OF VALUE~ BY HAN.JFACTI.IUNC SUBSECTOR, 1970-1987 (1970.100) 1 9 8 7 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1961 1982 1983 1984 1985 1986 II III HANJFACTUUNC IIOJSTRY 100.0 105.8 110.2 114.8 120.7 118.0 114.9 123.1 110.6 121.9 117.8 100.2 95.7 105.8 110.3 99.6 111.7 99.7 115.8 115.1 1. Food p~oduct.a 100.0 95.9 101.6 102.8 105.4 108.6 113.5 115.0 113.3 116.1 116.2 114.5 106.4 109.5 112.7 114.7 120.2 114.0 120.1 118.3 2. Beverage• 100.0 102.8 105.1 105.5 130.4 124.0 109.3 96.9 88.1 103.5 114.1 103.6 86.0 96.7 115.0 108.8 136.8 171.4 128.6 107.7 3. Tobacco 100.0 102.1 108.1 113.7 129.0 129.6 126.1 125.9 125.8 130.2 129.4 120.7 110.7 117.9 133.0 133.4 136.8 130.2 127.4 128.8 ~- Texti lea 100.0 104.4 103.1 108.2 118.5 112.9 106.7 113.6 97.7 110.5 92.1 75.8 75.8 89.3 92.8 7C.5 88.8 69.6 93.3 93.2 5. Clothing 100.0 106.6 115.8 111.1 132.8 124.9 115.9 109.3 85.1 99.8 89.1 58.1 49.3 53.1 54.7 38.5 43.9 29.4 40.1 36.7 6. Leather produc:t.a 100.0 98.3 117.9 105.6 97.4 104.7 113.2 123.5 126.1 110.7 93.2 89.3 100.9 88.0 73.9 82.5 88.9 80.8 83.8 73.9 7. Foot.wear 100.0 95.2 72.9 76.3 85.5 74.9 62.3 58.0 49.8 49.8 48.3 43.0 38.6 36.2 41.1 33.8 32.4 23.7 33.8 25.1 8. Wood produc:t.a 100.0 94.5 95.2 96.5 107.8 100.8 87.2 86.0 80.7 84.2 80.2 66.9 54.4 55.9 55.4 44.6 51.1 36.3 51.6 53.4 Q. Ful"nit.ure 100.0 90.3 91.5 90.9 110.9 97.0 67 83.6 92.7 116.4 117.0 108.5 97.0 83.6 70.3 67.3 84.2 93.9 133.9 95.2 10. Paper 100.0 105.4 112.0 122.1 132.2 125.8 109. 115.0 119.0 132.4 108.9 81.4 102.1 114.6 114.5 105.9 116.4 116.4 108.0 117.9 11. Printing 100.0 99.3 101.8 104.5 108.9 115.5 102. 97.3 100.3 93.1 98.5 86.8 78.5 79.7 81.7 82.8 82.6 75.9 76.8 76.9 12. Basic c:he•icals 100.0 116.0 128.6 140.4 143.6 134.3 128. 138.6 124.4 150.8 130.3 117.4 142.1 157.0 163.5 139.2 177.5 160.2 174.6 193.0 N 13. Other che•icala 100.0 113.1 113.1 130.7 118.1 141.9 139 7 130.3 113.7 124.7 132.8 135.8 119.9 129.0 149.7 150.2 163.2 124.9 186.4 178.5 ....... 1<4. Petl"oleu• refiner"iea 100.0 105.2 108.3 110.1 104.3 95.1 101 9 107.0 108.1 113.3 120.0 116.3 115.0 120.2 116.7 120.1 119.6 109.3 110.1 109.8 0\ 15. Other petroleu111 product.. 100.0 89.0 90.6 92.9 85.0 75.6 74 8 92.1 75.6 89.8 89.8 95.3 82.7 89.0 85.8 92.9 89.8 96.9 99.2 93.7 16. Rubber product.s 100.0 112.6 125.7 133.0 129.6 136.4 149 7 150.1 126.2 158.0 148.8 99.5 101.3 140.4 146.1 105.2 130.2 98.4 132.1 149.2 17. Plaati c product.& 100.0 109.8 140.8 152.2 139.2 127.8 111 8 120.8 109.0 135.9 136.3 102.9 108.2 124.1 143.3 110.6 120.0 98.8 101.2 102.9 18. Clay pr-oduct.a 100.0 104.4 110.2 114.6 119.7 109.5 109 5 91.2 81.0 94.9 94.2 47.4 57.7 78.8 72.3 45.3 67.2 43.1 73.0 68.6 lQ. Cl•-••r• 100.0 97.4 99.6 90.1 96.7 119.7 103 6 95.6 105.5 117.5 106.9 82.8 75.9 88.3 87.2 58.0 78.8 75.9 80.3 94.5 20. Non. . wl ic •inerala 100.0 110.9 114.2 106.9 115.9 113.4 112 5 115.7 114.8 120.2 117.7 103.4 91.4 98.7 89.9 74.7 87.2 87.4 90.4 104.~ 21. lr"on and at.eel 100.0 110.2 118.7 124.6 126.9 124.5 115.5 132.8 127.3 144.6 128.3 115.7 130.7 137.6 129.5 126.1 139.6 140.2 166.9 172.3 22. Nonferl"'oua . . tala 100.0 119.0 125.4 127.6 135.4 119.0 95.5 109.0 95.9 129.9 138.8 104.5 114.9 128.7 138.4 107.8 130.6 106.7 143.7 147.0 23. Metal p roduct.a 100.0 112.6 117.8 114.2 125.4 129.4 126.2 142.9 123.3 136.6 130.9 107.0 99.9 121.3 130.5 110.0 126.2 110.7 147.1 131.3 2.tl. Nonelec:t.r- i c -chine r-y 100.0 109.2 112.0 137.6 147.4 132.7 163.9 203.8 149.7 164.3 144.3 102.6 95.3 104.4 98.6 70.4 79.3 53.2 80.7 85.9 25. Electric •chinery 100.0 109.5 112.7 115.3 121.0 120.9 97.7 112.9 98.7 105.4 101.7 79.3 73.8 79.0 87.3 75.5 99.6 72.3 106.7 115.2 26. Transport. equip•nt. 100.0 112.4 115.0 123.4 128.1 110.7 98.5 132.8 99.1 121.7 126.~ 78.2 69.9 90.0 98.3 80.7 93.5 71.8 101.2 101.6 27. Scientific equipiHnt. 100.0 108.0 150.0 164.3 238.4 206.3 218.8 219.6 226.8 249.1 167.9 120.5 100.0 127.7 151.8 136.6 131.3 130.4 188.4 191.1 Soul"ce: Central Bank of the Republic of Argentina (BCRA). July 1989  Taole 8.4: ARCENTINA- 8'1PLOYHENT INDEX BY MANJFACTl.fUNC SUSSECTOR, 1970-1989 (1970 = 100) 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 a/ MANJFACTUUNC IJIIXJSTRY 100.0 103.0 105.3 109.2 115.0 119.4 115.1 107.9 97.8 95.8 88.1 77.1 73.0 75.4 77.6 74.7 71.7 71.3 72.1 69.3 1. Food p•oduct& 100.0 106.2 108.1 113.4 122.2 120.3 123.2 117.7 105.0 104.7 99.4 93.6 98.5 101.9 101.7 102.4 96.0 94.9 92.4 77.0 2. Beverage& 100.0 100.3 106.1 108.3 117.8 126.5 121.0 119.1 111.1 114.6 116.9 108.3 95.1 93.4 99.9 102.4 106.9 108.3 125.6 137.3 3. Tobacco 100.0 97.5 101.9 100.0 102.8 112.6 117.6 97.8 92.7 94.4 90.8 81.3 80.3 79.7 89.5 77.3 77.2 75.2 87.0 63.4 4. Text.i lea 100.0 100.5 98.2 97.7 105.6 109.2 105.3 96.8 84.8 75.8 60.4 45.5 48.4 52.6 56.8 51.7 50.3 50.2 52.7 46.7 5. Clot.hing 100.0 104.8 107.9 110.4 118.0 119.1 111.9 99.2 87.9 82.7 65.0 57.4 52.2 54.4 57.4 52.1 47.3 41.4 42.7 40.8 6. Leat.he• p•oduct.s 100.0 109.6 123.3 139.8 154.3 149.2 152.2 159.8 161.9 146.3 118.1 99.4 98.2 99.9 105.7 98.1 94.6 94.6 89.1 79.1 7. Foot&••• 100.0 97.8 88.4 91.7 94.1 90.8 83.1 69.3 58.7 60.3 53.7 51.5 43.3 42.8 41.8 39.7 37.5 33.9 33.0 39.2 8. Wood P•oduct.s 100.0 103.6 105.4 106.8 113.8 139.3 136.3 130.2 114.3 103.6 93.0 83.7 79.1 79.6 79.8 77.5 74.3 72.8 70.7 71.5 9. Fur"'nit.ure 100.0 91.7 93.3 94.8 94.3 89.1 71.9 61.8 58.1 57.9 64.0 65.0 60.0 62.6 56.1 53.0 55.6 52.4 48.0 38.4 10. Pape• 100.0 103.9 108.3 116.0 117.3 122.0 121.1 115.9 119.0 117.1 100.8 93.8 92.6 95.0 97.9 96.7 95.9 99.5 100.5 104.7 11. Print"rng 100.0 98.8 94.6 94.4 97.3 97.7 85.4 74.4 70.6 69.3 75.0 72.8 66.8 66.9 67.4 67.2 65.2 61.4 57.0 57.2 12. Baaic che•icals 100.0 99.9 106.7 109.5 113.4 121.3 124.6 115.2 106.6 102.2 95.9 82.9 79.9 82.8 90.0 82.3 82.9 84.0 85.2 85.9 13. Other chemicals 100.0 107.0 107.5 106.1 106.2 114.3 111.6 106.1 95.5 91.4 88.6 79.9 73.6 71.5 68.5 66.7 66.2 62.8 58.9 51.9 14. Petroleum ,..fineries 100.0 101.6 113.3 117.6 126.2 137.4 161.1 145.3 136.1 120.6 108.7 102.8 100.5 98.1 98.7 96.2 100.0 100.8 104.3 115.8 15. Other petroleum products 100.0 91.7 91.5 87.5 90.2 96.1 98.6 96.7 87.5 84.3 81.1 78.1 74.4 75.4 74.5 71.4 67.6 60.9 61.8 69.3 16. Rubbe• p•oducta 100.0 106.7 116.1 121.5 131.6 141.5 141.8 140.7 125.7 134.3 125.2 10€.2 94.4 104.0 114.0 108.8 102.6 100.0 102.4 91.8 17. Plastic producta 100.0 99.5 110.7 19C.3 200.7 207.2 179.5 154.9 136.5 144.2 149.2 134.0 132.1 15Z.8 156.0 147.4 142.5 14:.4 136.1 120.8 N 18. Clay p•oduct.a 100.0 106.5 110.7 112.3 114.0 113.7 115.5 100.1 87.0 96.3 95.4 64.0 60.5 73.8 76.5 69.3 78.5 75.6 78.8 75.3 '-1 '-1 19. Claaaware 100.0 95.9 105.1 103.3 104.9 113.6 103.8 106.6 109.0 99.6 89.1 71.2 63.5 64.7 72.2 56.4 48.9 47.7 53.9 50.3 20. Non . . talic minerals 100.0 101.7 100.2 96.5 103.6 107.0 102.9 95.2 91.9 91.2 85.6 80.1 73.1 75.8 75.7 70.2 65.4 71.5 92.9 89.4 21. Iron and steel 100.0 107.8 111.0 121.4 128.5 134.2 129.1 126.0 117.5 117.3 112.6 97.9 91.6 96.4 103.6 105.2 98.0 96.5 94.0 86.7 22. Nonferrous Metals 100.0 123.3 134.4 137.6 137.3 147.0 140.6 137.1 127.2 128.4 126.2 119.2 111.4 113.3 117.7 114.5 112.6 106.1 106.1 103.7 23. Metal p•oduct.a 100.0 104.2 107.7 112.9 118.2 119.0 111.1 105.7 97.8 99.9 91.6 77.5 72.5 75.4 74.7 70.2 67.7 68.9 73.3 64.6 24. Nonelectric aachinery 100.0 99.4 102.6 107.2 114.9 116.5 109.4 106.3 95.6 89.2 71.5 48.9 41.5 46.2 51.8 48.8 45.3 44.1 39.2 35.0 25. Electric Machinery 100.0 102.3 103.2 101.5 101.4 99.4 91.8 88.5 81.3 78.6 71.7 56.9 49.8 49.1 52.0 48.5 45.9 43.9 44.8 37.5 26. Transport equipment 100.0 103.5 110.5 117.3 121.7 137.6 131.8 118.8 101.7 104.3 101.8 87.0 72.1 73.0 76.5 71.8 69.5 71.5 68.7 61.5 27. Scientific equipment 100.0 101.0 105.8 123.8 144.1 163.4 158.0 145.5 143.1 131.5 95.9 79.0 67.9 62.0 66.4 67.4 69.5 75.6 77.1 66.9 Sou •ce: It«>EC. a/ Firat quarter average. Auguat. 1989  Table 8.5· ARGENTINA - H.t.NUFACTI.JUNC li'[)USTRY: EXPORTS BY SUBSECTOR. 1970-1987 a/ (Hi IIi ons of 1970 US do liars) 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1Q82 19~ 19B-4 1965 1986 1987 b/ HAN.JFACTI.JUNC IICJSTRY 478.7 479.8 522.8 831.3 1,084.3 665.7 879.8 1,220. 1,284.2 1,292 1,247.4 1,116.3 1,518.0 1,803.2 1.858.1 1,845.1 1,451.0 1.165.6 1. Food p roduc:t.a 255.6 240.8 216.9 255.5 422.0 202.5 316.8 476.0 427.7 487. 441.8 378.7 336.3 804.4 883.2 628.5 499.9 409.7 2. Beverages 3. 7 11.9 10. 13.7 12.0 0 15. 1 26.5 36.4 35. 27.7 20.0 18. Q 12.9 11 3 11.0 9.0 6.2 3. Tobacco 0.2 0.2 0 4 4.5 10.2 0.5 0.4 0.7 0 0.5 0. 0.1 0.1 24.9 21 5 27.4 . 20.0 17.4 4. Texti lea 4.6 2.5 3.6 18.7 12.4 1. 9 23.0 35.4 ~ 16.4 21. 1:!.3 16.6 110.5 137 0 139.8 100.1 92.3 5. Clothing 15.7 5.2 7.8 26.0 29.9 13.1 30.0 63.4 105.3 120.7 90 6 44.2 24. 1.5 1. 17.4 27.7 34.5 6. Leat.her pr-oduct. 1.2 1.3 2.2 3.4 5.5 3.1 7.5 13.0 14.0 15.7 23.0 11.8 11.6 149.8 148.1 13.8 20.5 24.7 7. Footwear- 0.3 1. ::.9 17.6 21.9 3.3 4.3 14.5 12 4 3.5 1.0 1.2 3 4 2.8 1.1 1.1 4.4 15.2 B. Wood products 0.0 0.1 0.1 0.1 0.2 0. 0.1 0.2 0.3 0.2 0.1 0.5 0.6 0.4 1.8 2.1 3.2 3.8 9. Furniture 0.1 0.1 0.2 0.5 0 1.1 1.5 .8 2.2 2.2 2.7 0.8 0.2 0.0 0.0 0.0 0.0 0.0 10. Paper- 1.8 2. 7 4.2 13.0 25.6 2. 7 4.1 11.8 11.5 10.2 7.5 4.6 6. 10.5 12.0 3.9 3.5 10.9 11. Pr-inting 15.0 13.9 16.1 21.6 17.9 15.0 15.1 63.6 18.3 18.5 22.5 18.3 17 Q 9.0 7.2 9.2 10.7 8.7 12. Basic chem i ca Is 28.4 29.0 38.8 33.0 41 42.9 536 62.5 70.8 79 2 120.0 100.0 123 5 132.8 • 102.2 122.1 104.3 95.2 13. Ot.!-lt~r chemicals 24.3 26.7 33.6 37.7 36. 24.9 25 5 28.5 38.5 37 6 55.8 50.2 56.4 15 7 l!• 9 14 1 :?3. 8 10.7 N 14. P• t.rc.i eu• refineries 0. 7 2.6 1.5 0.!> .6 0.2 3./ 4.4 8.8 .8 36.5 71.7 26!. 0.0 v.o 0.0 0.0 0.0 ..... 15. Other pet.roleu• products 8.0 5.4 4.1 4.3 4 2 10.9 11.5 13.2 19.3 17 8 21.8 11.8 5~.8 174.1 154 9 308.2 82.8 37.1 co 16. Rubbe!" product. 4.1 0.6 3.1 7.2 4.6 2.1 2.3 4.7 8. 7 3.9 3.6 10.0 11.7 13.2 12.4 21.1 15.7 13.9 17. Plastic produc:t.a 2.4 2.9 4.5 6.7 4.4 2.1 3.5 6 9 6.0 6.5 5.5 3.8 17.7 26.6 26.9 23.6 21.7 28.4 18. Clay ar-ocfuct.s 0.1 0.1 0.2 0.3 0.6 0.3 0.5 0.5 0.5 0.6 0.5 0.9 .2 1.6 1. 9 0.9 2.0 4.1 19. Cia-ware 1.6 1.9 2.6 5.5 7.0 2.0 5.1 9.9 14.6 12.9 10.0 7.1 8.1 3.0 2.3 3.8 6.4 8.0 20. Non . . t.al i c •i nerals 0.7 0.6 0.9 2.1 1. 9 1.5 1. 9 3.6 2.8 2.2 0.9 0.5 1.4 3.8 3.7 1.2 1. 7 1.6 21. Iron and steel 28.0 32.9 34.4 93.3 86.0 12.7 47.6 40.6 99.5 80.8 54.3 100.7 181.2 111.0 90.7 173.5 172.7 138.7 22. Nonf e r r-oua Me'toa Is 2.0 1.8 2.8 4. 9 3. 9 0.4 2.5 3.3 9 7 26.5 57 0 56.1 57.3 43.3 40.8 63.4 57.0 53.8 23. Met.a I p roduct.a 9.3 11.5 15.0 20.0 26.1 23.6 22.7 23.5 34.2 2~.5 22.7 l!. .4 2£.7 12.2 8.9 9.5 9.0 6.8 24. Monelect.,- i c •ch i nery 48.1 55.8 67.9 119.6 150.2 148.3 119.2 133.7 145.1 140.6 89.6 108.6 129.1 76.0 76.5 102.5 116.5 84.8 25. Elect.r i c -chi ner-y 8.2 8.5 13.5 29.5 34.5 24.9 23.0 27.7 36.5 47 5 31.7 20.2 23.6 14.2 13.7 27.6 24.6 ""19.1 26. Transport equip . .nt 10.1 15.2 29.3 82 9 113.1 108.3 129.0 138.3 112.7 79.1 80.2 56.1 111.6 46.0 78.8 114.5 106.8 54.2 27. Sci ent.i fi c equ i D . .nt. 4.5 4.8 5.5 9.1 9.3 8.0 10.5 12.1 12.3 15.7 19.2 7.7 7.0 3.0 4.2 4.7 7.2 5.6 Source: IN>EC. a/ 1970-&4 figures in current US dollar-s are adjusted by US iiiiPI icit def'l•t.o,. f'o,. •nuf'act.u,.ing v•lue •dded; 1985-87 f'igur"ea •djuated by US industl"'i•l WPI def'l•t.o,.. b/ Eati••t.e b•aed on d•t• t.hr"ough Novellber' 1987. July 1989  Table 8.5: ARCS./TINA- HIHJFACTL-'liNC It()USTRY: EXPORTS BY SUBSECTOR, 1970-1987 a( (Mi I I ions of US Dollars) 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 :983 1984 •I 1985 1986 1987 •/ HAN.JFACTUUNC IPOJSTRY 478.7 488.0 564.0 1,024. 1,500.4 1,026.7 1,388.7 1,996.9 2,369. 2,671.6 2,902.3 3,087.6 2,943.4 3 fl4 3,819.0 3,806 2,886.4 2,421.5 1. Food produc:ta 255.6 241.3 243.6 369.5 595.9 334 0 495.1 748.3 802.0 1,018.0 927.4 812.0 652.0 1f:.l.2 1813.3 1295.9 993.1 835.5 2. Bever-agea 3.7 12.2 11.1 14.8 14.9 13 0 23.2 47. 64.5 67.0 57.2 43.5 36.7 25.8 23.2 22.7 17.9 12.7 3. Tobacco 0.2 0.2 0.4 5.3 13 0. 7 0.6 1.1 0. 7 0.9 0.3 0.2 0 2 EO 0 44.2 56.6 39.7 35.5 4. Texti lea 4.6 ~-5 3.8 21.6 16.1 2.4 31.7 50.8 53.0 25.8 36. 24.7 32.1 221.4 281.3 288.2 198.8 188.3 5. Clothing 15.7 5.3 8.1 27. 34.9 15.8 37.8 84.1 144.6 174.4 140.7 73.6 46 3.0 2 3 3€.5 !6 .1 71.7 6. Leather p roduc:t.a l.2 1.4 2.9 5.1 7.9 4.4 1<>.1 24.2 31.0 51.9 66.4 35.3 22.4 300.1 304.0 28.5 40.7 50.4 7. Footwear 0.3 1.1 3.2 20.3 27.1 4.3 6.0 21.7 20.1 6. 7 2.0 2.9 .6 5.5 2 3 2 4 B. 9 31.6 8. Wood produc:t.a 0.0 0.1 0.1 0.1 0.3 0.2 0.2 0.4 0 7 0.5 0.2 1.2 .2 0.7 3.6 4.2 6.1 7.5 9. Fur-niture 0.1 0.1 0.2 0.6 1.1 1.5 2.0 2.6 3.4 3.6 4.9 1. 6 0 4 3.1 4 2 1. 4 2.8 2.5 10. Paper 1.8 2.8 4.4 14.2 34.3 4.2 6. 7 20.6 21.3 21.2 17.4 11.5 11.9 20.9 24.6 8.1 7.0 22.1 11. Print.'•ng 15.0 14.1 16.9 24.4 25.1 23.6 25.1 109 .s 33.1 37.5 51.8 46.2 34 8 18.0 14.9 19.2 21.5 17.8 12. Basic ehimic:ais 28.4 29.2 36.2 46.9 80.0 70.0 87.9 111. 140.2 181.2 242.1 235.9 239 5 266.1 209. 251.8 207.2 194.2 13. Ot.h•r chi•icala 24.3 27.2 34.3 40.6 52.6 44.2 46.6 53.7 74.9 81.7 142.2 141.2 100.4 31 .f. ~2 (· 29 0 47.3 21.8 N 14. Pet.rCJleulll refiheries 0. 7 2.7 1.6 0.7 3.6 0.4 10.0 13.5 28.0 30.1 243.8 587.0 bl5.l> 0.0 (J .'J 15. Other petroleu• product.& 8.0 5.8 4. 6 5. 4 8.3 25.3 28.8 37.8 58.7 68.7 118.0 117.0 116.0 348.8 318.0 b3&.S lti4 f '/5.7 ""' 1.0 16. Rubber p roduct.a 4.1 0.6 3.1 7.4 5.6 2.9 3.4 7.3 14.3 7.4 7.8 22.9 22.6 26.5 254 43.4 3.1.2 28.3 17. Plastic product. 2.4 2.9 4.5 6. 9 5.5 2.9 5.2 10.6 9. 7 11.6 11.0 11.3 34.3 53.2 55.3 48.7 43.1 57.9 18. Clay produc:t.a 0.1 0.1 0.2 0.3 0.7 0.4 0.7 0.8 0.9 1.1 1.1 2.1 2.3 3.2 3. 1.8 3.9 8.3 19. Claaawear 1.6 2.0 2.9 6.3 9.5 3.1 8.4 17.5 28.8 28.3 25.0 19.5 15.8 6.0 4. 7. 6 1:2 ... 15.9 20. Non . . t..lic •inerala 0. 7 0.6 1.0 2.4 2.5 2.2 2.9 6.2 5.3 4. 7 2.1 1.3 2.8 7.6 7 2.5 3.4 3.3 21. Iron and steel 28.0 34.8 38.4 110.4 133.4 22.2 89.2 81.2 219.2 198.2 143.9 288.7 351.3 222.4 186.3 357.8 343.2 28S.O 22. Nonferrous . . tala 2.0 .7 2.6 5.3 5.9 0.6 3 6 5.2 16.2 55.5 139.1 127.9 !ll.l 86.7 83.7 130.7 113.2 109.7 23. Meta I p r-oduct.a 9.3 11.7 15 9 22.8 38.5 37.5 38.1 42.1 66.5 54.4 55.8 29.3 51 7 24.5 18.2 19.6 17.8 13.9 24. Noneleet.r'•c Machinery 48.1 57.9 n 130.7 188.0 214.8 182.9 218.1 255.5 270.0 192.8 256.5 250.3 152.2 157.0 211.3 231.3 172.8 25. Electric •chinery 8.2 B. 7 14 3 32.9 47.1 37.8 36 47.4 67.7 98.5 73.0 49.9 45.7 28.4 28.2 57.1 48.9 39.1 26. Tr-anaport. equ i p . . nt 10.1 16.0 31.9 91.3 135.8 146 7 186 s 213.4 187.1 142.3 158.8 126.3 216.3 92.2 161.8 238.2 212.1 110.6 27. Scientific equip . . nt 4.5 5.0 5.9 10.0 11.9 11.6 16 1 19.8 21.7 30.4 41.4 18.1 13.6 5.9 8.6 9.7 14.3 11.4 Sour"ce: IN>EC. a/ 1984 figure baaed on dat.a through October 19EW; 1987 figure b•a•d on dat• through Noventber 1987. July 1989  Table 8.7: ARCle<TINA - HANJF"CTI.JUNC INJUSTRV: IMPORTS BY SUBSECTOR OF ORICIN, 1970-1987 (Hi II ions of 1970 US dollar-a) 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 19~ 1985 1986 1917 •I MNIJF"CTUUNC IIOJSTRY 1,357.0 1,420.2 1,.S0.3 1,465.9 1,799.5 1,853.5 1,314.4 1,771.1 1,598.2 2,448.9 3,796.1 3,211.8 1,700 .603.9 1,591.8 1,288.4 1,671.9 1,836.7 1. Food p rodu ct.a 14.4 12.4 8.1 6.7 13.9 10.9 22.3 2e.3 7~.8 87.6 35.0 Q. Q 20.0 31.7 21.5 31.0 27.2 2. 8e¥eraoea 6.5 7.4 6.0 7.3 5.0 7.7 6.0 4.2 7.-4 22.-4 23.1 15.7 4. 6 :2.8 1.7 3.6 2.5 2.7 3. Tobacco 0.6 0.4 0.1 0.1 0.2 0.1 0.1 0.6 1.2 1.8 4.6 4.3 o.e 0.8 0.5 0.5 0.1 0.2 4. Text.i lea 25.7 20.3 16.9 14.2 30.6 23.2 19.7 14.4 17.7 73.3 134.3 15-4.2 64.9 61 9 68.3 33.3 55.2 46.0 5. Clothing 2.4 1.1 0.1 0.3 0.3 0.8 0.9 l.1 3.3 24.3 100.7 93.2 16.0 5.2 7.-4 3.6 4.1 2. 7 6. Leather pr"oducb 0.2 0.1 0.0 0.0 0.0 0.0 0.0 o.o 0.2 1.0 2.9 2.8 0.5 0.5 0.9 0.4 0.8 0.3 i. Foot.ear 0.1 0.0 0.0 0.0 0.0 0.1 0.1 0.2 0.5 4.7 17.7 13.2 1.7 0.8 0.8 0.4 0.6 0.6 8. Wood product.. 1.1 1. 9 1.6 1.4 1.6 4.0 1.6 1.2 0.8 3.9 12.-4 -46.5 23.1 2-4.9 24.0 12.6 21.9 17.0 9. Furniture 0.2 0.3 0.2 0.1 0.2 0.1 0.2 0.4 0.7 2.2 7.8 8.7 1. 7 0.6 1.1 0.6 0.9 0.7 10. Paper 66.2 57.4 53.2 56.8 81.9 70.3 47.1 59.0 60.-4 61.5 100.8 86.0 38.1 36.4 21 3 18.6 33.0 32.7 11. Pr"int.ing 11.6 10.7 8.2 7.4 9.4 10.1 5.8 9.1 1-4.8 23.-4 -41.-4 31.1 9.4 4.5 2.6 3.1 2.9 2.0 12. S.ai c chetni cats 124.4 144.6 186.9 126.7 227.3 268.5 211.4 216.2 164.2 251.4 317.2 269.8 247.9 252.4 254.3 198.6 292.9 231.6 13. Other d1eMi cals 79.6 91.8 100.4 101.1 135.3 108.8 89.0 101.4 92.5 110.5 162.6 135.5 108.~ 17?. 7 18fl.(, 142 ~ 1~.8 156.6 N 14. P.t.,.oleu• refineries 0.1 11.9 1.2 24.4 20.4 26.2 23.5 :>4 .9 9.7 98.1 16.5 13 4 1:,..7 63.7 Cf,.O 60.8 .o;&.O 79.5 00 15. Ot.he r pet.ro leu• p roduct.a 32.4 19.1 10.0 7.2 8.9 9. 7 10.8 8.9 8.6 13.0 12.1 9.9 9.2 0.0 0.0 0.0 0.0 0.0 0 16. Rubber product.. 5.8 5.8 5.9 5. 7 7.8 12.1 7.4 12.4 13.1 20.2 33.5 43.5 36.3 47.8 39.9 20.8 30.9 24.5 17. Plaatic product.. 23.3 26.7 33.2 34.0 85.0 79.2 48.5 46.8 57.3 122.3 122.2 101.3 83.9 82.5 77.9 57.2 95.8 86.9 18. Clay procluct.a 5.9 8.6 8.5 5.7 5.5 9.8 11.5 8.6 10.3 22.8 32.2 28.7 9.5 9.9 8.3 6.9 8.3 7.7 19. Cl•-••,.• 11.3 10.7 9.7 10.8 11.9 11.7 8.2 7.6 8.5 15.0 22.0 16.8 5.8 6.3 4.8 3.2 4.5 4.1 20. Non . . tal ic •iner-als 10.9 4.5 3.2 3.3 4.5 5.0 3.7 4.5 5.6 16.7 25.9 4.5 2.7 3.2 3.0 3.2 5.8 5.5 21. I ron and at.eel 243.5 224.1 222.0 317.0 327.7 427.5 190.1 178.6 99.1 1-49.7 224.-4 165.4 127.8 119.9 122.0 75.0 86.8 100.0 22. Nonferroua . . tala 86.1 98.7 110.0 113.0 151.3 119.0 61.3 51.9 -43.9 68.9 66.2 50.3 61.0 -45.9 51.9 32.7 56.1 58.2 23. Het.al product.. 38.4 31.7 33.2 26.5 31.0 25.2 30.9 35.2 -46.1 -42.9 9l2 .8 39.8 15.0 14.0 13.1 10.1 10.7 10.0 24. Nonelect.l"ic -chinery 345.5 366.5 392.6 310.9 329.3 355.6 321.7 498.8 47Q.8 565.0 911.2 726.2 360.9 292.1 258.7 267.2 280.5 337.6 25. Elect.r"ic •chinery 97.1 125.9 122.6 140.2 120.0 105.6 90.5 148.7 180.2 212.3 5-43.2 4~.1 226.2 146.3 149.6 131.7 194.9 201.1 26. Tr"'ane,por"t. equip. . nt 78.8 91.2 106.4 95.6 113.8 98.8 92.0 267.-4 179.0 372.1 518.0 43Q.O 142.8 120.1 141.5 118.6 118.5 115.2 27. Scientific equip . . nt 45.0 46.3 40.1 49.3 76.8 83.7 25.7 46.5 65.0 76.6 162.9 192.8 79.1 68.6 61.2 61.1 90.5 87.9 Sou rca : lloi>EC . •I &a. .d on dat.a through October 1987. J"ly 1989  Tablo 8.8: ARGENTINA - Hol.NJFACTI.JUNC ItollUSTRY: IMPORTS 8Y SUBSECTORS, 1970-1987 (Mi If iona of US dol Iars) 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 19117 •I HANJFACTUUNC IIOJSTRY 1,357.0 1,459.8 1,541.6 1,682.8 2,621 2,927.5 2,166.2 3,053.2 2,935.5 5,166.8 8,351.4 7,797.2 4,329.2 4369.1 4431.3 3654.5 4448.9 45'11.1 1 . Food p roduct.a 14.4 12.4 9.1 9.7 19.7 18.0 10.8 35.1 53.1 152.2 183.9 75.1 23.1 47.3 76.7 52.3 72.4 65.3 2. Beverages 6.5 7.6 6.3 7.9 6.2 11.0 9.2 7.5 13.2 41.9 47.7 34.2 104 6.5 4.0 8.4 5.6 6.4 3. Tobacco 0.6 0.5 0.1 0.1 0.2 0.2 0.2 0.9 2.2 3.4 9.4 9. 7 2.0 1. 9 1.2 1.4 0.3 0.6 •· Text.i lea 25.7 20.6 17.9 16.4 39.8 29.8 27.2 20.7 26 4 115.3 229.9 287.2 123. 119.4 134.6 66.0 106.3 90.0 S. Clothing 2.4 1.2 0.1 0.4 0.4 0.9 1.1 1.5 4.5 35.1 156.4 155.4 27. 9.2 13.2 '6.5 7.2 4.8 6. Leather products 0.2 0.1 0.0 0.0 0.0 0.0 0.0 0.1 0.4 3.4 8.2 8.2 1.5 1.4 2.5 1.1 2.3 1.0 7. Foot.ear 0.1 0.1 o.o 0.0 0.0 0.1 0.1 0.2 0.8 9.1 36.5 31.9 3. 7 1.8 1. 7 1.0 1.2 1.3 8. Wood pr-oducta 1.1 2.1 2.0 2.1 2.6 6.2 3.0 2. 6 1.9 10.4 31.8 120.4 58.1 63.4 62.4 32.1! 55.1 44.0 9. Furniture 0.2 0.3 0.2 0.1 0.2 0.1 0.3 0.6 l.l 3. 7 14.3 17.0 3.1 1.2 2.1 1.2 1.6 1.4 10. Paper- 66.2 59.0 55.8 62.2 109.7 109.6 77.3 103.2 112.1 127.3 233.2 216.0 99.0 95.4 57.0 50.2 85.5 87.0 11. Printing 11.6 10.9 8.6 8.4 13.1 15.9 9. 7 15.7 26.7 47.3 95.3 78.6 25.0 12.0 7.2 8.5 7.7 5.5 12. Baa i c: che• i Cit: Ia 124.4 145.7 174.6 179.9 437.5 437.7 346.5 387.1 325.3 575.4 640.1 636.4 610.6 628.3 646.6 507.1 720.8 584.9 13. Ot.her chemicals 79.6 93.6 102.3 108.8 194.3 193.0 162.9 191.3 180.0 240.3 414.1 380.0 309.6 499.2 f-3.."J:.2 423.7 528.1 45'1.2 N 1•. Pet.r·oleu• refineries 0.1 12.6 1.3 31.0 45.1 66.8 64.2 75.9 30.7 431.8 110.4 110.0 100.0 470.1 490. j 460.4 423.4 595.8 CXl 15. Ot.her p,et.roleu• product.s 32.4 20.6 11.3 9.1 17.5 22.4 27.1 25.4 26.1 50.0 65.8 65.0 60.0 1-' 16. Rubber product. 5.8 5.8 5.9 5.9 9.5 16.5 11.0 19.3 21.5 38.1 72.9 100.2 85.0 113.2 96.6 50.5 72.3 58.9 17. Plastic product. 23.3 26.8 33.4 35.2 106.6 109.6 71.1 72.2 92.3 218.9 244.5 302.1 186.4 185.4 178.7 131.9 212.7 198.2 18. Clay pr-oduct.a 5.9 9.0 9.1 6.4 6.8 13.4 17.1 14.1 18.5 45.3 67.9 65.3 22.3 23.6 20.1 16.8 19.6 18.7 19. Cia-are 11.3 11.6 10.8 12.4 16.1 18.0 13.5 13.5 16.7 33.0 55.0 46.0 16.5 18.0 14.1 9.5 12.7 12.0 20. Non. . tal ic Minerals 10.9 4. 7 3.5 3.8 5.8 7.3 5.7 7.7 10.5 34.9 59.8 11.3 7.0 8.5 7.9 8.7 14.9 14.5 21. I ron and at.eel 243.5 237.2 247.6 375.2 508.4 746.1 356.4 357.5 218.5 367.4 594 9 474.2 375.7 356.1 370.4 228.7 255.0 301.5 22. Nonferrous . . tala 86.1 91.6 102.9 122.1 226.4 163.4 89.0 81.1 73.0 144.3 161.5 114.7 123.9 94.1 108.8 68.8 113.7 117.0 23. Het..l product.a 38.4 32.3 35.2 30.1 45.6 40.1 51.8 63.0 89.8 95.3 227.6 102.4 38.8 18.6 35.0 27.2 27.7 21.4 24. Nonelectric -chi ne,.y 345.5 380.0 415.6 339.7 412.1 515.2 493.5 813.7 844.6 1,084.9 1,961.4 1, 715.0 903.1 738.7 668.4 693.5 701.4 Ml.4 25. Electric •ach i nery 97.1 129.4 129.7 156.3 163.7 160.6 145.4 254.5 334.3 440.3 1,2£2.6 1,195.3 575.2 375.9 392.7 347.2 495.2 524.4 26. Transport. equ i p-nt 78.8 96.3 115.7 105.4 136.7 133.8 133.0 412.8 297.2 669.8 1,026.1 988.9 341.2 289.9 349.2 293.8 282.8 282.2 27. Scientific equip-nt 45.0 48.1 42.8 54.4 97.9 91.9 39.4 75.9 1.4.5 148.2 350.3 455.9 196.2 172.0 156.9 157.3 224.4 223.7 Source: IN>EC. a/ Baaed on data through Oct.ober 1987. July 1989  Tab I e 9.1: ARC91TINA - PRINCIPAL PRICE Il'lliCATORS, AI-NJAL AVffiACES 196Q-1988 (1970 c 100) WHOLESALE PRICE Ii'DEX CONSUMER PRICE INDEX CONSTRUCTION Non-agriculture COST Total Agriculture -------------------------- Year General Domestic Domestic Total Oomesti c Impo,ted Genera I Food 1960 17.6 17.6 17.3 17.7 17.7 18.3 14.7 15.3 13.5 1961 19.1 19.1 18.3 19.4 19.5 17.7 16.4 16.9 16.4 1962 24.9 24.9 25.1 24.7 24.8 23.5 20.9 21.5 21.4 1963 32.0 32.1 34.0 31.2 31.4 28.6 26.2 26.9 26.6 1964 40.4 40.7 43.5 39.1 39.5 32.6 32.0 33.9 32.1 1965 50.0 50.4 47.7 51.0 51.6 42.4 41.3 43.4 45.7 1966 60.0 60.5 57.8 60.9 61.6 50.7 54.7 54.1 58.9 1967 75.4 75.6 72.8 76.5 76.8 71.7 70.7 69.8 75.8 1968 82.6 82.9 80.0 83.7 84.2 77.5 81.8 81.0 81.6 N 1969 87.7 87.7 86.4 88.2 88.3 85.8 88.0 86.0 89.4 :)) 1970 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 N 1971 139.5 140.3 148.3 135.9 136.7 123.1 134.7 141.7 130.9 1972 246.9 246.9 288.8 229.8 228.6 247.0 213.8 231.4 201.9 1973 370.5 417.3 346.0 351.1 389.7 383.0 342.2 359.1 347.7 1974 444.7 439.8 452.6 441.4 434.1 550.3 444.4 413.2 482.6 1975 1,300. 7 1,269.7 1,108.7 1,379.3 1,339.9 1,967.2 1,202.7 1,134.7 1, 696.2 1976 7. 791.7 7,430.5 6,980.0 8,123.9 7,626.9 15,548.6 6,543.1 6,552.5 7,812.6 1977 19,436.0 18,702.7 18,399.9 19,859.6 18,834.4 35,175.4 18,060.9 18,621.5 15,423.6 1978 47,810.1 47,155.3 44,456.0 49,181.6 48,331.8 61,877.1 49,759.1 49,009.5 36,547.6 1979 119,189.1 119,179.2 111,486.3 122,338.4 122,532.7 119,434.6 129,130.2 131,671.5 95,451.0 1980 209,090.3 209,132.3 181,737.3 220,285.5 221,082.1 208,382.0 259,248.4 256,872.3 199,492.5 1981 436,936.4 432,184.5 348,249.2 469,673.1 463,928.9 562,660.1 530,101.3 511,571.1 393,559.0 1982 1,561,073.1 1,514,496.9 1,386,209.4 1,632,630.3 1,570,436.7 2,561,755.9 1,403,584.9 1,424,129.8 1, 072,448.4 1983 7,195,435.4 7,010,734.3 6,563,856.1 7,453,802.9 7,205,531.3 11,162,788.4 6,229,234.2 6,252,514.5 5,743,988.5 1984 48,469,294.1 47,352,561.7 42,850,310.1 51,196,506.2 49,618,283.1 74,669,045.4 45,269,187.6 46,196,884.8 42,946,287.1 1985 370,557,710.8 356,735,436.5 252,885,271.6 406,620,854.9 390,059,230.1 647,197,073.7 349,559,533.7 334,528,550.9 280,806,886.2 1986 607,209,698.6 585,925,669.8 534,824,512.5 642,976.984.5 615.821,335.8 1, 036.891,840.2 664,490,246.8 662,747,665.5 476,202,594.8 1987 1,353,310,616.0 1,301,184,096.8 1,156,077,994.4 1,439,977,923.9 1,374,148,886.8 2,392,105,796.3 1,537,171,784.9 1,542,630,231.0 1,083,226,347.3 1988 6,936,110,282.9 6,632,630,858.9 5,530,173,714.3 7,456,755,816.0 7,079,990,896.9 12,887,815,985.5 6,808,979,626.1 6,756,514,351.9 5,119,556,333.3 Sou,ce: Il'llEC. August 1989  Table 9.2: ARCetriNA - PRINCIPAL PRICE IN>ICATDRS, HONTK..Y, 1978-1989 {conti nuea ... ) (1985d00) WHOI.ESAL.E PRICE Il«lEX CONSU1ER PRICE I"'>EX COI·JSTRCICTION Non-agriculture Total Agr i cuI t.ure COST Year General Do. . atic: Oo..atic Total DoMetic: loopo~tad General ~cod 1978 0.013 0.013 0.018 0.012 0.012 0.010 0.014 0.015 0.013 January 0.008 0.009 0.011 0.008 0.008 0.008 0.009 0.009 0.009 Februar-y 0.009 0.009 0.011 0.009 0.009 0.008 0.009 0.010 0.009 .-~c:h 0.010 0.010 0.013 0.009 0.009 0.008 0.010 0.011 0.010 Ap~i I 0.011 0.011 0.014 0.010 0.010 0.009 0.012 0.012 0.011 H.y 0.012 0.012 0.015 0.011 0.011 0.009 0.013 0.013 0.012 June 0.012 0.012 0.016 0.012 0.012 0.010 0.013 0.014 0.013 July 0.013 0.013 0.016 0.012 0.012 0.010 0.014 0.014 0.013 August 0.014 0.014 0.019 0.013 0.016 0.008 0.015 0.016 0.014 S.ptaoobe~ 0.015 0.015 0.021 0.014 0.014 0.010 0.016 0.017 0.014 Oc:tobe~ 0.016 0.017 0.023 0.015 0.015 0.011 0.018 0.019 0.015 Novelaber 0.017 0.018 0.025 0.016 0.017 0.011 0.019 0.020 0.016 O.ceMer 0.019 0.019 0.026 0.017 0.018 0.012 0.021 0.022 0.019 0.000 1979 0.032 0.044 0.030 0.031 0.037 0.039 0.034 N 0.033 0.018 00 January 0.021 0.021 0.028 0.019 0.020 0.013 0.024 0.026 0.021 w February 0.022 0.023 0.030 0.021 0.022 0.013 0.026 0.028 0.022 Ha~c:h 0.024 0.025 0.032 0.023 0.024 0.014 0.028 0.030 0.024 Ap~i I 0.025 0.026 0.034 0.024 0.025 0.015 0.030 0.031 0.026 H.y 0.028 0.029 0.037 0.026 0.027 0.016 0.032 0.033 0.030 June 0.031 0.032 0.042 0.029 0.030 0.018 0.035 0.037 0.033 July 0.033 0.034 0.046 0.031 0.032 0.019 0.037 0.039 0.036 August 0.038 0.039 0.055 0.035 0.036 0.021 0.042 0.046 0.039 Septaoobe~ 0.040 0.042 0.058 0.036 0.038 0.021 0.044 0.049 0.041 Oc:tobe~ 0.040 0.042 0.054 0.038 0.040 0.023 0.046 0.049 0.044 Novellber 0.042 0.043 0.056 0.039 0.041 0.024 0.049 0.051 0.045 Dec:eoobe~ 0.043 0.044 0.056 0.040 0.042 0.024 0.051 0.053 0.047 0.000 1980 0.056 0.059 0.072 0.054 0.057 0.032 0.074 o.on 0.071 January 0.045 0.046 0.059 0.042 0.044 0.026 0.055 0.057 0.050 February 0.046 0.048 0.060 0.044 0.046 0.027 0.058 0.061 0.052 .-~c:h 0.048 0.050 0.061 0.046 0.048 0.029 0.061 0.064 0.054 Ap~i I 0.050 0.052 0.064 0.048 0.050 0.029 0.065 0.068 0.056 H.y 0.053 0.055 0.069 0.050 0.052 0.030 0.068 0.072 0.060 June 0.057 0.059 O.Oi6 0.053 0.056 0.031 0.072 o.on 0.065 July 0.058 0.061 o.on 0.055 0.058 0.033 0.076 0.079 o.on August 0.060 0.062 0.079 0.057 0.060 0.034 0.078 0.081 0.081 September 0.002 0.064 0.081 0.059 0.061 0.035 0.082 0.084 0.085 Oc:t.obe~ 0.065 0.068 0.079 0.063 0.066 0.037 0.088 0.089 0.087 November 0.067 0.069 0.081 0.065 0.068 0.038 0.092 0.094 0.091 O.c:eaaber 0.067 0.070 o.on 0.067 0.070 0.039 0.096 0.096 0.095  Table 9.2: ARC&ITINA- PRINCIPAL PRICE UDICATORS, HtJNTl-LY, 1978-1989 (continues ... ) (1985=100) WHOLESALE PRICE ItDEX CON5U'ER PRICE INDEX CON~·TP:UCTION Non-agr i cuI t.ure Total Agriculture COST Year General Do~Natic DoMestic Total Doaeatic Iooported General F~od 1981 0.118 0.121 0.138 0.116 0.119 0.087 0.152 0.153 0.140 Januar-y 0.069 0.071 0.076 0.069 0.072 0.040 0.100 0.101 0.098 February 0.072 0.075 0.080 0.073 0.076 0.044 0.105 0.105 0.103 March 0.076 0.079 0.083 0.076 0.080 0.047 0.111 0.111 0.108 Apri I 0.085 0.088 0.093 0.086 0.089 0.058 0.120 0.118 0.115 Hay 0.092 0.095 0.098 0.093 0.097 0.062 0.129 0.129 0.121 June 0.109 0.112 0.126 0.108 0.111 0.082 0.141 0.143 0.131 July 0.123 0.126 0.143 0.122 0.125 0.098 0.155 0.158 0.143 August. 0.135 0.138 0.159 0.133 0.136 0.101 0.167 0.170 0.150 Sep t.eoobe r 0.145 0.148 0.173 0.141 0.146 0.104 0.179 0.181 0.160 Dct.ober 0.153 0.158 0.184 0.150 0.155 0.109 0.190 0.187 0.171 November 0.170 0.175 0.217 0.163 0.168 0.119 0.203 0.204 0.185 December 0.188 0.194 0.240 0.181 0.187 0.131 0.221 0.227 0.196 1982 0.421 0.425 0.382 N 0.548 0.402 0.403 0.396 0.402 0.426 00 January 0.215 0.220 0.266 0.208 0.213 0.166 0.248 0.258 0.237 ~ February 0.227 0.232 0.275 0.222 0.227 0.173 0.261 0.252 0.248 March 0.237 0.242 0.279 0.234 0.239 0.187 0.273 0.280 0.262 Apri I 0.252 0.257 0.305 0.246 0.251 0.200 0.284 0.289 0.271 Hay 0.275 0.278 0.331 0.269 0.271 0.254 0.293 0.297 0.285 June 0.317 0.320 0.413 0.302 0.304 0.290 0.316 0.327 0.301 July 0.405 0.409 0.538 0.384 0.381 0.416 0.368 0.397 0.367 August 0.471 0.472 0.641 0.442 0.439 0.469 0.422 0.450 0.426 Sept.eoober 0.561 0.566 0.771 0.525 0.526 0.519 0.494 0.542 0.530 Oct.ober 0.617 0.622 0.829 0.582 0.583 0.574 0.556 0.608 0.617 Nove.ber 0.703 0.704 0.939 0.664 0.659 0.721 0.619 0.669 0.706 Deceeber 0.775 0.776 0.993 0.742 0.739 0.781 0.685 0.724 0. 796 1983 1.941 1.965 2.595 1.833 1.847 1.725 1.782 1.869 2.047 January 0.888 0.893 1.142 0.850 0.850 0.862 0.795 0.842 0.813 February 1.006 1.013 1.329 0.954 0.954 0.954 0.898 0.964 0.904 March 1.114 1.119 1.404 1.074 1.072 1.093 0.999 1.059 1.035 Apri I 1.191 1.196 1.488 1.151 1.059 1.170 1.102 1.136 1.198 Hay 1.312 1.318 1.624 1.273 1.272 1.289 1.202 1.216 1.337 June 1.503 1.515 1.961 1.431 1.435 1.405 1.392 1.457 1.523 July 1.675 1.696 2.192 1.594 1.608 1.485 1.565 1.603 1.755 August 1.976 2.007 2. 799 1.826 1.844 1.671 1.835 1.921 2.008 Sept.eaober 2.459 2.514 3.636 2.233 2.273 1.882 2.227 2.425 2.494 October 2.875 2.911 4.203 2.622 2.641 2.475 2.605 2.792 2.963 Novelllber 3.338 3.379 4.475 3.149 3.172 2.963 3.107 3.286 3.771 Deceaober 3.961 4.015 4.889 3.844 3.890 3.452 3.656 3.728 4.758  Table 9.2: ARGENTINA - PRINCIPAL PRICE Ir.DICATORS, HONTl-t...Y, 1978-1989 (19~100) WHOl.ESAI..£ PRICE DI>EX CIINSU'1ER PRICE INDEX CONS-:-RUCT!()N Non-agricultur-e Total Agricultur-e COST Year- General Do. .atic Domestic Total Domestic Impo•ted General Fo-od 1984 13.078 13.273 16.942 12.592 12.718 11.539 12.950 13.810 15.302 January 4.414 4.448 5.702 4.219 4.229 4.158 4.114 4.241 5.140 Febr"uar-y 5.116 5.166 6.934 4.807 4.823 4.699 4.813 5.211 5.837 Mll•ch 6.056 6.128 8.299 5.666 5.700 5.399 5.788 6.484 6. 914 Ap,i I 7.247 7.358 9.821 6.809 6.886 6.165 6.859 7.533 8.233 MII.Y 8.256 8.756 11.538 8.122 8.237 7.154 8.030 8.619 9.506 June 10.040 10.175 13.309 9.509 9.599 8.n3 9.468 9.971 11.713 Jui.Y 11.600 11.765 14.192 11.287 11.438 1C.018 11.200 11.490 13.851 August. 14.141 14.363 18.037 13.671 13.868 12.020 13.758 14 .394 16.647 Saptembe• 17.639 17.964 24.112 16.859 17.135 14.538 17.548 19.372 20.369 October 20.348 20.648 27.124 19.532 19.775 17.488 20.939 22.686 24.189 November- 23.334 23.499 29.112 22.638 22.742 21.766 24.075 25.400 28.096 December 28.747 29.005 35.119 27.980 28.181 26.290 28.812 30.315 33.132 1985 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 N 00 Januar-y 34.828 35.145 41.258 34.054 34.321 31.811 36.052 38.766 38.815 V1 Febr-uary 41.042 41.240 45.137 40.548 40.715 39.145 43.504 46.376 46.066 March 52.412 52.731 52.582 52.392 52.751 49.376 55.032 57.980 58.221 Ap•i I 68.923 69.329 64.735 69.428 69.948 65.049 71.247 74.115 74.132 Ha.Y 90.433 90.719 75.103 92.280 92.824 87.706 89.142 88.826 96.602 June 128.665 128.341 102.928 131.765 131.766 131.751 116.361 113.951 133.469 Jui.Y 127.452 126.828 112.166 129.293 128.805 133.401 123.569 118.586 125.590 August 129.412 129.050 129.076 129.452 129.046 132.864 127.355 125.340 125.756 Sapt.eoobe• 130.1n 129.993 136.465 129.420 129.121 131.930 129.896 128.924 125.067 Oct.obe. 131.141 131.084 140.450 130.020 129.822 131.686 132.424 130.379 124.827 Novelllber 132.115 132.092 146.543 130.377 130.144 132.335 135.561 135.206 125.576 December 133.400 133.447 153.556 130.972 130.737 132.947 139.859 141.549 125.880 1986 163.864 164.247 211.489 158.127 157.879 160.213 190.094 198.114 169.197 Januar-y 133.367 133.443 152.474 131.065 130.878 132.640 144.096 147.055 128.737 February 134.412 134.283 155.703 131.847 131.396 135.634 146.531 150.197 129.178 Mll•ch 136.309 136.015 157.709 133.731 133.091 139.111 153.339 159.609 130.847 Ap•i I 140.370 140.276 163.036 137.640 137.208 141.269 160.598 167.493 139.284 Ha.Y 144.218 144.300 174.072 140.622 140.288 143.432 167.065 173.727 143.604 June 150.797 150.940 187.181 146.415 146.055 1~9.441 174.559 181.486 1.52.584 Jui.Y 158.491 159.145 193.815 154.236 154.472 152.259 186.470 192.466 172.490 Auguat 173.348 174.113 234.720 165.956 165.944 166.056 202.851 214.032 182.840 Sept.elllber 185.101 185.746 266.239 175.328 174.896 178.959 217.520 230.910 194.155 Oct.obe• 194.839 195.895 290.403 183.328 183.156 184.768 230.683 242.070 210.939 Novelllber 204An 205.476 294.726 193.606 193.446 194.951 242.899 255.022 217.737 December" 210.634 211.327 267.788 203.750 203.717 204.033 254.412 263.300 227.971  Table 9.2: ARGENTINA - PRINCIPAL PRICE INDICATORS, MONTHLY, 1978-1989 (1985=100) WHOLESALE PRICE INDEX CONSUMER PRICE INDEX CON::-T~UCTION Non-agri cuI ture Total Agri cuI ture COST Year General Domestic Domestic Total Domestic Imported Genera I ~::od 1987 365.209 364.753 457.201 354.133 352.292 369.610 439.745 461.136 385.755 January 221.829 222.704 278.189 215.040 215.226 213.480 273.644 284.207 243.499 February 237.128 238.200 299.740 229.587 229.906 226.901 291.439 302.995 255.675 March 255.752 256.520 332.523 246.504 246.276 248.426 315.336 331.829 265.535 Apri I 260.674 261.654 340.685 251.036 251.002 251.324 325.945 341.516 271.677 Hay 273.392 274.614 372.692 261.498 261.394 262.367 339.551 356.567 292.484 June 291.712 293.193 391.282 279.718 279.972 '277.580 366.722 389.952 329.872 July 319.163 320.648 426.551 306.228 306.374 305.000 403.832 429.359 341.533 August 365.760 367.791 505.024 348.985 349.294 346.389 459.225 500.628 382.744 September 426.531 427.228 571.957 409.013 407.721 419.882 512.891 565.320 449.741 October 556.444 550.988 637.399 546.688 539.341 608.473 613.144 637 400 571.771 November 580.455 575.138 651.427 571.902 564.855 631.161 676.107 683 606 599.110 December 593.670 588.357 678.946 583.394 576.147 644.337 699.108 710 250 625.416 N 1988 1871.803 1859.285 2187.052 1833.835 1815.107 1991.328 1947.874 2019.712 1823.159 CXl January 665.286 657.455 777.767 651.854 641.239 741.113 762.675 788.113 710 385 0\ February 754.333 745.804 855.812 742.105 730.977 835.682 842.239 870.247 776.688 March 876.925 867.815 952.256 867.846 856.434 963.822 966.378 995.621 908.790 Apri I 1024.541 1012.595 1057.480 1020.568 1006.545 1138.487 1132.905 1154.818 1028.783 Hay 1262.993 1250.349 1239.619 1265.803 1251.794 1383.605 1311.011 1293.491 1275 890 June 1566.699 1552.619 1698.548 1550.811 1532.949 1701.016 1546.530 1530.831 1500 899 July 1958.699 1948.918 2243.465 1924.396 1909.217 2052.039 1943.075 1982.857 1822 503 August 2584.139 2558.918 2875.524 2549.029 2516.240 2824.750 2479.855 2566.511 2361.112 September 2749.888 2742.796 3467.943 2663.395 2645.056 2817.608 2769.807 2889.418 2600.758 October 2875.584 2864.105 3709.640 2775.115 2750.140 2985.134 3018.908 3197.561 2746.098 November 2986.698 2969.767 3596.527 2913.236 2885.288 3148.254 3191.414 3371.091 2917.000 December 3155.852 3140.282 3770.039 3081.866 3055.399 3304.427 3409.692 3595.988 3229.002 1989 January 3374.891 3356.988 4134.926 3283.324 3252.132 3545.516 3713.909 3947 682 3333.944 February 3658.685 3635.514 4686.020 3534.916 3493.922 3879.642 4070.117 4336 181 3655.340 March 4350.312 4292.830 5894.917 4154.221 4076.806 4898.467 4762.228 5134.184 4211 907 Apri I 6873.079 6493.805 8413.676 6687.235 6235.035 10489.857 6351.518 6804.585 6490 452 Hay 14052.762 12985.774 17089.484 13686.216 12432.655 24227.621 11335 411 12155 040 1365:.502 June 32639.896 31012.566 41096.122 31620.127 29653.453 48!58.202 24314.457 27871.506 31960 342 Source: INDEC. August 1989  - 287 Table 9.3: ARGENTINA - PRICE INDICATORS, MONTHLY, 1978-1989 (continues ... ) WPI CPI WPI CPI ----------- ----------- ---------- ---------- 1985=100 1985=100 1985=100 1985=100 Combined Price Year Monthly Monthly Quarterly Quarterly Index 1978 0.013 0.014 January 0.008 0.009 February 0.009 0.009 Mar-ch 0.010 0.010 0.009 0.010 0.009 Apri I 0.011 0.012 Moy 0.012 0.013 June 0.012 0.013 0.011 0.012 0.012 July 0.013 0.014 August 0.014 0.015 September 0.015 0.016 0.014 0.015 0.015 October 0.016 0.018 November 0.017 0.019 December 0.019 0.021 0.017 0.020 0.018 1979 0.032 0.037 January 0.021 0.024 February 0.022 0.026 March 0.024 0.028 0.022 0.026 0.024 Apri I 0.025 0.030 May 0.028 0.032 June 0.031 0.035 0.028 0.032 0.030 July 0.033 0.037 August. 0.038 0.042 September 0.040 0.044 0.037 0.041 0.039 October 0.040 0.046 November 0.042 0.049 December 0.043 0.051 0.042 0.049 0.045 1980 0.056 0.074 January 0.045 0.055 February 0.046 0.058 March 0.048 0.061 0.046 0.058 0.052 Apri I 0.050 0.065 Moy 0.053 0.068 June 0.057 0.072 0.053 0.068 0.061 July 0.058 0.076 August 0.060 0.078 September 0.062 0.082 0.060 0.079 0.069 October 0.065 0.088 November 0.067 0.092 December 0.067 0.096 0.066 0.092 0.079 1981 0.118 0.152 January 0.069 0.100 February 0.072 0.105 March 0.076 0.111 0.072 0.105 0.089 Apri I 0.085 0.120 Moy 0.092 0.129 June 0.109 0.141 0.096 0.130 0.113 July 0.123 0.155 August 0.135 0.167 September 0.145 0.179 0.134 0.167 0.151 October 0.153 0.190 November 0.170 0.203 December 0.188 0.221 0.171 0.205 0.188  - 288 - Table 9.3: ARGENTINA - PRICE INDICATORS, MONTHLY 1978-1989 (continues ... ) WPI CPI WPI CPI ----------- ----------- ---------- ---------- 1985=100 1985=100 1985=100 1985=100 Combined Price Year Mont.h ly Month I y Quarterly Quarterly Index 1982 0.421 0.402 January 0.215 0.248 February 0.227 0.261 March 0.237 0.273 0.226 0.260 0.243 Apri I 0.252 0.284 May 0.275 0.293 June 0.317 0.316 0.281 0.298 0.290 July 0.405 0.368 August 0.471 0.422 September 0.561 0.494 0.479 0.428 0.453 October 0.617 0.556 November 0.703 0.619 December 0.775 0.685 0.698 0.620 0.659 1983 1.941 1.782 January 0.888 0.795 February 1.006 0.898 March 1.114 0.999 1.003 0.897 0.950 Apri I 1.1'11 1.102 May 1.312 1.202 June 1.503 1.392 1.335 1.232 1.284 July 1.675 1.565 August 1.976 1.835 September 2.459 2.227 2.037 1.876 1.956 October 2.875 2.605 November 3.338 3.107 December 3.961 3.656 3.391 3.123 3.257 1984 13.078 12.950 January 4.414 4.114 February 5.116 4.813 March 6.056 5. 788 5.195 4.905 5.050 Apri I 7.247 6.859 May 8.256 8.030 June 10.040 9.468 8.515 8.119 8.317 July 11.600 11.200 August 14.141 13.758 September 17.639 17.548 14.460 14.169 14.314 October 20.348 20.939 November 23.334 24.075 December 28.747 28.812 24.143 24.609 24.376 1985 100.000 100.000 January 34.828 36.052 February 41.042 43.504 March 52.412 55.032 42.761 44.863 43.812 Apri I 68.923 71.247 May 90.433 89.142 June 128.665 116.361 96.007 92.250 94.128 July 127.452 123.569 August 129.412 127.355 Sep t.ember 130.177 129.896 129.014 126.940 127.977 October 131.141 132.424 November 132.115 135.561 December 133.400 139.859 132.219 135.948 134.083  - 289 - Table 9.3: ARGENTINA - PRICE INDICATORS, MONTHLY, 1978-1989 \IPI CPI WPI CPI ----------- ----------- ---------- ---------- 1985:100 1985=100 1985=100 1985:100 Combined Price Year Monthly Mnnthly Quarterly Quarterly Index 1986 163.864 190.094 January 133.367 1~4. 096 February 134.412 146.531 March 136.309 153.3:;9 134.696 147.988 141.342 Apri I 140.370 160.598 May 144.218 167.065 June 150.797 174.659 145.129 167.441 156.285 July 158.491 186.470 August 173.348 202.851 September 185.101 217.520 172.314 202.280 187.297 October 194.839 230.683 November 204.477 242.899 December 210.634 254.412 203.317 242.665 222.991 1987 January 221.829 273.644 February 237.128 291.439 March 255.752 315.336 238.236 293.473 265.855 Apri I 260.674 325.945 May 273.392 339.551 June 291.712 366.722 275.259 344.073 309.666 July 319.163 403.832 August 365.760 459.225 September 426.531 512.891 370.485 458.649 414.567 October 556.444 613.144 November 580.455 676.107 December 593.670 699.108 576.856 662.786 619.821 1988 January 665.286 762.675 February 754.333 842.239 March 876.925 966.378 765.514 857.097 811.306 Apri I 1024.541 1132.905 May 1262.993 1311.011 June 1566.699 1546.530 1284.744 1330.149 1307.446 July 1958.699 1943.075 August 2584.139 2479.855 September 2749.888 2769.807 2430.909 2397.579 2414.244 October 2875.584 3018.908 November 2986.698 3191.414 December 3155.852 3409.692 3006.044 3206.671 3106.358 1989 January 3374.891 3713.909 February 3658.685 4070.117 Mat·ch 4350.312 4762.228 3794.629 4182.085 3988.357 Apri I 6873.079 6351.518 May 14052.762 11335.411 June 32639.896 24314.457 17855.246 14000.462 15927.854 Source: INOEC. •I A simple average of the CPI and the \IPI. August 1989  Table 9. 4, ARGENTINA - CHANCES IN WHOLESALE .oKl CONSUER PRICE I~ ICES' MAJOR COMPONENTS, 1970-1988 (Annual average per-centage changes) WPI we;gnt 1970 1971 1972 1973 1974 1975 1975 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 WHO~.t.LE PRICES WHOLESALE PRICES a ' General Index 100. 0 14. 1 39 . 5 77. 0 50. 0 20. 0 192. 5 499. 0 149 . 4 145. 0 149. 3 75. 4 109 255.2 360 573.6 Generii I lnde) 664.2 63 122.9 412.5 Domestic Goods 95.2 14.3 40.3 75 49.5 19.2 188.7 485.2 151.7 152.1 152.7 75.5 107.4 249.2 362.9 575.4 Domestic Goods 650.3 64 122.1 409.7 Domeati c Agri cuI ture 25.5 15.8 48.5 94 42.5 10.0 144.9 529.6 163 141 150.8 63.0 93.9 293.4 373.5 552.8 Domestic Agriculture 490.2 111.5 116.3 378.3 Domestic Non-agricultur-e 58 7 13.2 35.7 67.2 53.3 23.9 208.6 469.2 146 9 156 153.5 80.4 112.2 234.8 358.8 588.6 Oo!Mistic Non-agriculture 686.0 57. 123.1 408.4 Food I. Beverages 19.4 27.8 48.3 52.6 55.7 12.7 134.5 511.9 192 2 151 2 154.7 75.5 113.0 214.7 307.7 552.7 Food, Beverages &. Tobacco 785.5 71.7 144.5 402.0 Tobacco 1.5 1.0 3.3 33.5 72. 1 53.5 90.5 554.5 271.8 159 131.9 92.2 87.0 131.1 420.4 425.1 Textiles, Clot.h,ng &.. Leather 432.0 57 142.8 300.2 Text.i lea 9. 1.3 33.2 75.7 55 0 29.1 17€.3 417.5 154.5 152.7 150 5 75.9 120.9 279.4 419.9 538.0 Wood l Furnitu:-e 632 4 58.9 124.9 373.5 Clothing 5 0 3.5 35.4 86.1 35. 1 29.2 225.2 551.6 77.8 172.8 162 9 84.6 103.7 235.7 400.4 647.0 Paper l Products 715 0 62.4 134 4 343.5 'Wood 3.0 9.0 28.8 89.1 71.7 33 0 236.7 408.2 95.2 129.8 187 3 120.6 102.4 229.5 455.4 582.4 Chemicals, Oil&. Rubb~r Products 755.8 51 4 112.6 452.2 Paper '.5 9.3 32.5 62.0 40.0 44 5 255.9 381.2 122.3 151.1 170 9 78 5 120.7 234.9 400 3 505.4 Non-meta I I c Products 1 714 6 50.6 107.9 410.4 ~ Cnemicals 4.9 4.4 24.1 57.4 45 5 23 2 271.4 519.8 149.9 155.3 125 8 91 7 127.9 243.9 329.1 450.7 Basic Metals 830.7 51.9 11!.2 465.4 0 Oi I Products 2.7 3.8 34.5 54.1 81.2 73 3 208.4 335.2 158.6 155.5 102.3 95.7 142.2 174.0 515.0 753.2 Me't.al Products, Mach1ner.v &. Equ•P 568.8 56.1 117.9 451.6 1 Rubber 0 9 0.8 13.7 59.4 384 17.1 184.0 554.4 159.1 154.1 125.9 97 4 148.5 321.5 319.9 491.8 Leather 2 2 10.0 29.0 89 2 50 3 21.7 284.3 452.4 135.6 145.3 208.1 51 8 97.7 310.4 345.3 688.9 Nonmetal I i c mi nera Is 2.7 5. 0 27.1 44.9 45.0 37 2 280.4 484.5 125.9 207.1 157.8 93.5 115.0 209.1 340.5 544 5 Metal, excl.111achinel"'y 5.2 7. 9 28.3 58.0 51.5 33.9 370.6 429.0 126.5 137.7 129.4 84.0 103.6 277.5 323.7 500 Veh i c 1 es and . . chine ry 5.8 4.3 24.0 70.3 57.8 28 9 309.5 431.7 115.5 130.8 130.5 92.4 102.5 247.1 418.0 599 Electric machinery 2.5 5. 7 15.2 67.3 38.9 22 2 318.5 492.4 102.5 143.7 122.4 80.1 94 9 239.3 355.5 577 0 Extractive i ndu&tl"'y 1. 2' 8. 7 35.8 60.6 39.8 28.1 497.1 424.0 129.4 190.0 132.8 75.3 111.7 214.3 520.7 603.8 !~~ported Cooda Imported Coods Non-agr i cuI ture 4.8 16.6 23.1 100.0 62.7 36.9 257.5 690.4 125.2 75.9 93.0 74.5 157.7 377.1 335.7 568.9 Non-agr 1 cuI ture 754.7 60.4 130.5 438.8 CONSU1ER PRICES CONSU-IER PRICES Genera I Index 13.6 34.7 58.7 60.1 29.9 170.6 .... 1 176.0 175.5 159.5 100.8 104.5 164.8 343.8 626.7 Genera I lndeK 672.2 90.1 131.3 343.0 Source: II'I>EC. a/ The cat.egories for domestic non-agricultural wholesale price indices were changed in 1985. May 198Q  Distributors of World Bank Publications ARGENTINA FINLAND MALAYSIA Far SIIIIH:ripCiml arlen: Carlos Hirocll. SRL Akateeminen I<Ujokauppa Univ-ty oi Malay• Cooperative lntematimal Suboalption Servia. Caleria Cueaus P.O. Box 128 llookahap. Limited P.O. Box 41095 Florida 165, 4th floor-Ole. 453/465 SHlOIOI P.O. Box 1127, )olan Pantot Baru CrllighaD 1333 Buenos Airea HeloinldiO Kuala Lumpur Johannesburg 2024 AUSTRALIA. PAPUA NEW GUINEA. FRANCE MEXICO SPAIN FIJ~SOLOMON ISLANDS, World Bank Publicatioea INFOTEC Mundi-Prenaa Libroo. SA VANUATU, AND WESTERN SAMOA 66, nsue d'linl Apartado Plllllal22-860 Caotello37 DA. Boob &Jourruola 75116Paria 14060llalpan. Medea D.F. 28001 Madrid 648 Whitehorwe Road Mitduun 3132 GERMANY, FEDERAL ltEPUBLIC OF MOROCCO l.ibrerf.o lntomodonal AEIXJS Victorio UNO-Verlag Societe d'Etudes Marketing Marocaine CoNell de c..,~ 391 Poppeladorfer Allee 55 12 rue Mozart. Bd. d' Anla 08009Barc:elona AUSTRIA 0-5300 Bone I Caoablanca Gerold and Co. SRI LANKA A.ND THE MAWIVES Graben3t GREECE NETHERLANDS Lake H.,... Bookoltop A-1011 WierL KEME InOr-Publikaties b.v. P.O. Box244 24., lppodamou Street Platia Pla&tir• P.O.Box14 tOO. SirOU-•palomA. Gardiner BAHRAIN Athena-11635 72«lBALochan Mawath.a BWain Research and Conaultam.y Colombo2 ~ate.Ud. GUATEMALA NEW ZEALAND P.O. Box 22103 Ubrerias Piedra Santa Hilla library and Informalion Service SWEDEN Manama Town 317 Centro Cultural Piedro Santa Private Big FM :rio&l<lilla: 11 alle 6-50 zana 1 NewMarket Fritzeo Fllckbobl<m!!aig.. BANGLADESH Gua....,..oCity Aucklond Regering~!sotan 12. Box 16356 Miao lndU8triee Development 5-103275oockholm AoaiBtaruE Society (MIDAS) HONG KONG, MACAO NIGERIA HouaeS, Road 16 Aaio 2000 !Jd. Univ-ty Pr.. Umited ForSII~.ioRoNers: Dhonmondi R/Ar.. Mongkok Pc.t Offiao 'I'hree Crowns Building jericho W""""'8J"ft-WilliamoAB DhaJ<,o 120!1 Bute Street No. 37 Private Moil Bag 50515 Box 30004 MCilgkok, Kowloon lbadan 5-104255oockholm B""'choffUs: Hong KCI1g I~ Nur Ahmod Sarak NORWAY SWITZERLAND OUtugCilg 4000 HUNGARY Narveeen lnform.ation Center Forsiltg~til.lcr: Kultura Bert:rmd Nuveaena vei 2 Ubl'airiePayot 76, K.D.A. Avmue P.O.Boxl39 P.O. Box 6125 Ettenlad 6.,naeCrenWI Kulna 1389 Budapest 62 N-ll602 o.to 6 c.. pc.tal381 CH12t1Genev,•ll BELGIUM INDIA OMAN Publications dee Nations Uniea Allied Publishers Private Ud. MF.MRB InfcniUition Services Far•~•wiers: Av.du Rot202. 751 Mount Road P.O. Box 1613, Seeb Airport l.ibrairie Payot IOOOB..-Ia Madr•·600002 Muoat Service de. Abonnenent:a c.. pc.tal331 <! BRAZIL B....ch offUs: PAKISTAN CH1002l.auJune Publicacoes Temicas lntemadonam IS J.N. Heredia Mug Mina Book Agency LtdAI. Ballard Eotato 65, Shahroh+Quoid~Azam TANZANIA Rua Peixoto Gmnide, 209 Bombay- 400 038 P.O. Box No. 729 Oxlord Univ-ty P,.. 01409S.o Paulo, SP Lah""'J P.O. Box 5299 13/14Aoof Ali Road Dar e. Salaam CANADA New Dolhl- 110 002 PERU I.e l:lilf,_.,- Editorial DeoarroUo SA THAILAND C.P. &5, I !il!B rue Ampmo 17 Olittaranjan A venue Apartado 3824 Centro! Department Stano BoudtervWe, Quebec Calcutto -700 072 Uma :Jl6 Silom Rood J4BSF.6 Bangkok Jayadeva Hoote!Buildlng PHILIPPINES CHINA 5th Main Road Gandhinagar National Book Stare TRINIDAD 6: TOBAGO, ANTIGUA China flirulndal It Economic Publi&hing Bangalore • 560 009 701 Rizal Avenue BARBUDA. .AIOBADOS, Houoe P.O. Box 1934 DOMINICA. GRENADA. GuYANA, II. Da Fo SHlongJie 3-5-1129 Kadtiguda Crooo Road Metro Manila JAMAICA. MONTSERRAT, ST. Beijing Hyderabad - 500 027 KITTS 6: NEVIS, ST. LUCIA. POLANO ST. VINCENT a~ GRENADINES COLOMBIA Prarthana fla.., 2nd floor ORPAN Syllematiao Studieo Unit Enlace llda. Near Thakore B.ug, Navrangpwa Patac Kultwy i Nauld f9Watta5treet Apartado A....., 34270 Ahmedabad - 380 009 00-901 Wanzawa Curepe BogotaD.E. Trinidad, Weot Irldieo Paliai.IHOI>Ie PORTUGAL COTE D'IVOIRE 16-A Aahok Mal! Uvrarta Portugal TUIIKEY Centre d'Edition et de Di/fuoion Lucknow- 226 001 Rua Do Carmo ~74 Haoet Kitapevi. AS. Africainf!ll (CEDA) 1200 lJobcm t.tilda.l Cadds ~/o. 469 04 B.P.541 INDONESIA lleyoglu Abidjan04 Plateau PL Indira Umited SAUDI ARABIA. QATAR lotanbul Jl. Sam Ratulangi ~ Jarir Book Sttte CYPRUS P.O. Boxl81 P.O. Box 3196 UGANDA MEMRB Information Servicee Jakarta Puoat Riyadh 11471 Ugondo Bookah"'P P.O. Box 2098 P.O. Box 7145 Nicosia IRELAND MEMRB lnlonnation Servicee K.mpala TDCPubliahero B....choffUs: DENMARK 12 North Frederick Street AI Alaa Street UNITED ARAB I!MIRATES Sam.fundaLitteratur Dublin I AI Dahna Center MEMRB Gull Co. Rosenoerns All~ 11 FintRocr P.O. Box 6097 DK-19'/0 Frederibberg C ITALY P.O. Box 7188 Sharjoh Ucar.a Commiaeionaria Sansoni SPA Riyadh DOMINICAN REPUBUC Via Benedetto Fortini,. 120/10 UNITED KINGDOM Ed.itora TaUer, C. por A. c-na Pootale 552 Haji Abdullah Alin!zo Building Miaotnlo Ltd. Restauradon e Isabella Catolica 309 !ilt25 florence King Khatod Street P.O. 8ox3 Apartado Plllllal2190 P.O.Box3!169 Alton, Hampahire GU34 2PG Santo Domingo JAPAN Damm.on England Eastern Book Service ELSALVADOR ~-3,HCilgo 3-Chome, Bunkyo-ku I !3 33, Mohammed Hasan Awad Street URUGUAY Fuoadeo Tokyo P.O. Box 9978 lnolituto Nacional dellibro Avenida Manuel Enrique Araujo 13530 Joddah San)-1116 Edifido SISA, ler. Piao KENYA Mon.tevideo San Salvador Africa Book Service (EA.) Ltd. SINGAPORE, TAIWAN, MYANMAR, P.O. Box 45245 BRUNEI VENEZUELA EGYPT, ARAB REPUBLIC OF Nairobi Information Publicatiou Librerl.odel Eote AIAhram Private, Ltd. Aptdo. 60.337 AI Galaa Street KOREA, REPUBUC OF 02~ Ill fl.Pei-Fu lndulllri.t Carac.l~A Cairo Pan Korea Book Corporation Bldg. P.O. Box 101, Kwangwhamun 24 New lndual:rial Road YUGOSLAVIA The Middle East Obaerver Seoul Singopcn 1953 Jugoolovenoka Knjlga 8 Otawarbi Street P.O.Box36 Cairo KUWAIT SOUTH AFRICA. BOTSWANA rrs Republike MEMRB Information Services For siltg~ tiller: YU-11000 llelgrado: P.O. Box 5465 Oxfurd Univ-ty P,.. Southern AErie. P.O. Box 1141 Cape Town lllOO The World Bank Headquarters E European Office 1818 H. Street, N .W. Tokyo Office 66, avenue d'Iena Washington, D.C. 20433, U.S.A. Kokusai Building 75116 Paris, France 1-1 Marunouchi 3-chome Telephone: (202) 477-1234 Chiyoda-ku, Tokyo 100,Japan Telephone: (1) 40.69.30.00 Facsimile: (202) 477-6391 Facsimile: (1) 47.20.19.66 Telex: WU! 64145 WORWBANK Telepho~e: (3) 214-5001 Telex: 842-620628 RCA 248423 WORLDBK .;; Facsimile: (3) 214-3657 Cable Address: INTBAFRAo ;'"" Telex: 781-26838 WASHING"IONDC ,., '