Ecuador - Recent economic developments

RETURN TO I.u -.- ..- -- ... . RESTRICTED m r I A N I ID.J A l K Report N o. W H - 13 3a ONE WEEK This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION X..L1 N I r- %1UINI.j W1I I.; - T-. V - UrNLLIN j T-14 IN ECUADOR January 16, 1964 Department of Operations - We st ern H-eM isphere CURRENCY EQUIVALENTS (December 1963) Official Rate U. S. $1 = Sucres 18.18 1 Sucre = U.S. $0. 055 1, 000, 000 Sucres U. S. $55, 000 Free Rate (December 13) U.S. $1 = 18. 70 Sucres 1 Sucre = U.S. $0. 053 Approximately 80% of all transactions take place at the Official Rate. TABLE OF CONTENTS PAGE BASIC DATA ........... STTMMAIV AhN CNTCT.TTTONIS - . - - .--- -- - TNT1PoTj PTr)M 1 T DAQT1 VLArrTTD7q OL' A MUM 7TTADnTAT TMY TT pI?Lmrum Dr)T Tn'Tt'AT AT vonT TYT 00U707 A(TZ _L. ILI:kil.n-' I .L ...J.L. .LQZiVU I --V -L. - V -' . AND SHORT-TERM PROSPECTS .......................... 3 A - Gross National Production ...................... 3 B - Aggregate investment ........................... Private Investment ....................... 4 Public investment ......... ..... ........ 4 C - Money, Credit, Prices .... ................... 6 D - Balance of Payments ............. 7 Exports .. ............. . ........................ 7 Imports ....................................... o Capital Account ............................... 8 III LONG-TEERM DEVELOPYENT PROGRAM ........ ...... 9 A - Investment Program .. .......................... 10 Ev.uation ............... .... 10 B - Balance of Payments ........... ... 12 IV CREDITWORTHINESS .................................. 15 STATISTICAL APPENDIX - 1 - BASIC DATA Area 102,000 Square miles Population: (1962) 4,596.,000 Annual rate of increase 3e Gross National Product: Total GNP (1962) 1q_'Nn millinn imres 1961 Increase 9 64 1962 Increase 3.6% Per capita GNP 3,435 sucres Per capita GNP at the rate of 18.82 Pq__ to theA (w. ighted avera e of official and free rates) )182 Gross Investment (1962): 17% of GNP Public Sector Budget %of GNP Total Revenue 227 22 ± ~ ~ ~ ~ ~ ~ ~ C tJa. 1~j'±4. ±4/0 CLLI/0 of which: le Merchandise Account +23/ III. Medium and Long-Term Capital (net) +22.6 v o[o LIU ukapiUl Ineb) aak Errors ad Omissions + .2 v. increase in neserves +2. Cost of i1ving: Change during 1961 +aC Change during 1962 +5% Wholesale Prices: Change during 1961 +5% Change during 1-62 +1 - ii - External Public Debt (December 31, 1962 with major reported additions to April 4, 1963) Total (including undisbursed) $ 122 million IBERD 38 mi lion Other $ 84 million Gross Forei.gn Exchange Reserves December 31, 1961 US $ 38 million December 31, 1962 US )iR million September 30, 1963 US 4 h3 million iii SUPTMARI AND UUNULUSIUNS i. The rate of Ecuador's economic growth continues to be dominated largely by the rate of growth of exports. During the 1950's output grew at an average annual rate of 5 percent, stimulated mainly by rapidly in- creasing exports, largely bananas. A slowdown in the growth of exports and outout occurred in the latter part of the decade, In recent years, the growth of output has not been appreciably more than the increase in total population. 2. With per capita income of $182 and population increasing rapidly; Ecuador continues to face a serious problem of economic and social develop- ment. At the same time Ecuador has a sound foundation for accelerating growth. For one thing, she has extensive undeveloped natural resources, particularly for growing tropical crops. These resources, especially in the coastal region, can be developed through investments in transportation, agricultural credit, research, and extension programs. 3. Prospects for rapid expansion of the private sector are favorable. A dynamic and flexible group of entrepreneurs are active in commercial agriculture, industry and commerce, ready to respond. to market opportunities and incentives. Investment activity in the pri- vate sector increased. substantially in 1962. As a result total invest- ment rose to more than 16 percent of gross domestic product despite de.- clining public investment. Private investment continued.to increase in 1963 with growing business confidence and incentives offered under a new Industrial Encouragement Law. 4. The volume of public sector investment declined in 1962 hPanse of nmnpletion of ortain works unrr wv and efforts to nurb the budget deficit. The Governmentts ability to finance development nrnarnmq in mnh nrinrity fields as transort. nower. and ePncatiion is being handicapped.because of continuing earmarking of available revenues among numerous atonomons aencies, Thf Arnnnrnpna rGove.rment. -vas repl acedr in Jul 19i63i by a fomir- man military junta which is revising the constitution and undertaking economic and social -rPeorm. The new gove-rnTn+ is- also attack1ing t.hem problem of the budget deficit by a combination of economies in operating expeandituresvracclen"nvaredn tax collecioAnnsc ndA increanae in t.vax-vriesc The main increase under consideration is an increase in the gasoline tax to hepfnance the- national highway pogra, fo whchetena.inning, has been requested from several agencies. The government is also reducing eawr,akng o-f rvernues or n. nn speeile pv,ro-r-afms in. the caapit_al buge k a+nd considering the abolishment of autonomous agencies or their merger however, in view of strong sectional pressures and the difficulties of technicl man powerIt ar.sor. This sho.rtaLgU. willalsUoLbeLan.alU to1U. technical manpower are short. This shortage will also be an obstacle to iv rapid growth of the private sector. 6. During 1963 Ecuador has continued her traditional policy of monetary restraint which was resumed in mid-1961 after a brief period of rapid monetary expansion. Prices and wage rates have been increas- ing only slightly in 1962 and 1963. Growing confidence in the sucre was reflected in an appreciation of the exchange rate in the free market and an inflow of short term capital. 7 Export earnings increased 10% in 1962 and have continued to rise in 1963. After increasing only slightly in 1962, imports have been rising substantially in 1963 as a result of trade liberalization, rising domestic income, and restoration of confidence, Ecuadorts limited foreign exchange reserves are not likely to increase as rapidly as was the case in 1962 when net reserves of the Central Bank increased from 919 to AAl Mlion_ R3The Government i now completing a development plan for the decade 1964--73 which has as a major objective an average annual increase f % in ro oUUmestiU proUct. Ine plan provides for a rapid expansion of public and private investment, Top priority is being given to trans- pOru investment because of its importance for agricultural development0 The composition of the public investment program appears on the whole to be appiupriabe except that the percentage projected for education (2.6%) appears low in relation to the importance of this sector, particularly in overcoming the present severe shortage of trained manpower. Success in the program of improving education requires greatly increased emphasi3 on project preparation. 9. The plan calls for a rapid expansion of both domestic savings and external credits to finance the investment nrogram. but it currentlv appears doubtful that either category will increase as rapidly as projected, Domestic savings have been relatively high in comparison with other Latin American countries. Their growth will, however, be handicapped by strong pressures of consumer demand, rising operational expenditures of governnnt, and slower growth of incomes than projected in the plan because of a prospective shortfall in exports, summarized below. 10. The fIT.T n? Av+.rnnal credit i 4s prjced + ;s tel t o 156 million in 196h and average the same amount annually during 1964-68. A more reaIs qti( '-.CtA_q' f . r the1, fM v rst fe - year of, th prga is - --4 to $35 million in viewcf problems in utilizing existing external loans ,qnd tjimp rPrmJi-ir4)r +.n, mInn ! r Jhn-;_ ,- , - T.T - , - V _ _ - e--- - -.1 pm ecs W~i success jin Government efforts to improve in project planning and execution, larger nmniints of exera credJts be Jnr ~ -~ sbsqetyas -aply increasing exports are of key importance for the success of the development program through stimulating domestic activity and prc-. V viding financing of necessary imports and debt service. While Ecuador has ex t-ernsive n atu -r al reSlourC eS, World- deUn fo it trad IUI'J Iional eUport IIULUAJVIs-U L not expanding rapidly and serious organizational and technical problems need to be overcoME fr rapid expansLn o1 prouction for exportU CurreU prospects are that exports will increase roughly 3% to 4% annually through 190u rather than the higner rate k ;,I ) projeAed in the plane Ao a re- sult, the growth of output and incomes is likely to be somewhat slower Uan projected in the general plan. 12. For progress toward the export goal and other targets of the general plan, it is essential that, as contemplated under the second phase of the planning effort, detailed project and sector plans are prepared. To approach the ambitious targets set out for 1964-73 it is desirable that the planning authorities, in their action program, recommend specific measures needed to increase savings, improve utilization of public funds, provide export incentives, etc, 13 Outstanding external public debt repayable in foreign currency totalled 'l22 million at the end of 1962. Service on existing debt totals &23 million in 1963 or about 15% of export earnings and declines to about 4 percent of prospective export earnings in 1970. Ecuador has followed a cautious policy of balance of payments and debt management and the proportion of medium-term supplier debt is relatively small. Ecuador's debt servicing capacity is limited however, because of current heavy reliance on export earnings from a few tropical crops for which the de- mand is not likely to be strong in world markets. Extensive time and efforts will be needed to expand and diversify exports. The amount of additional external debt on conventional terms which Ecuador can pru- dently contract falls short of the external capital requirements under the Development Plan. Accordingly, a blend of external borrowing on conventional and special terms is indicated. 14. Provision by IDA of a portion of the external financing on special terms for the Ecuadorian program would appear appropriate in view of Ecuador's poverty and economic performance. In addition to cautious financialand external debt management, trade and foreign ex- change policies have been designed to encourage foreign investment and exports. Ecuador also has had relatively high rates of taxation and domestic savings during the 1950's, each averaging about 14%. Effective use of governmental resources has, however, been handicapped by their widespread dispersion in response to sectional nressures rather than on the basis of economic priorities. The government is taking steps to reduce this disnersion, increase governmental revenues available to finance high priority investment, and improve the planning and execution of development Droiects- T7KTfPDnT)TnrPTAT The last economic report on Ecuador (WH-124a), issued u y cr, 7, pecu6sea primarily on the economic situation in 1961 and 1962. The preceding report (WH-104b), issued June 27, 1961, Ln Luded a review of Ecuador's progress during tne 1y>u's. 2. is report summarizes recent economic and political develop- ments and briefly reviews Ecuador's new development plan. As background the main features of the Ecuadorian economy, as summarized in previous reports, are briefly outlined below. 1: BASlU FEATURES UI THE ECUADORIAN ECONO]MY 3. Ecuador consists of three major areas divided by the Andes: a tropical, low-lying coastal area with much agricultural potential; a heavily populated high Sierra with relatively limited natural resources; and a large, relatively unknown, thinly-settled jungle area east of the Andes. The development of a road network in the Coastal area during the 1950's and early 1960fs opened portions of this area to development and contributed toward greater export production and economic integration of the coast and Sierra areas, 4. In contrast with thd rapid growth of exports and national pro- duction in the first half of the 1950's, economic developments in the last half of the 1950's and the early 1960's were much less favorable. Export earnings, after rising 12% annually in the early 1950's, increased only 2% annually in the late 1950's and actually declined by 11% in 1961 be- cause of adverse market conditions. The rate of growth in gross national product declined from 6.5% annually in the early 1950's to roughly 3% in 1961. Exports had been a dynamic factor in Ecuador's develrpment and the slow-down in the growth of exports resulted in a slower rate of economic expansion both directly and indirectly by retarding the ex- pansion of domestically-oriented industry. Ecuador's dependence on export earnings from three main products (bananas, coffee and cacao) in the face of weakening world markets for these commodities substantially reduced her prospects for rapid growth. 5. Living standards in Ecuador are among the lowest in Latin America. with per capita income eauivalent to nnnroxmatlyUS l 8in 1962. The economy is heavily dependent on agriculture and most farmers live in the relatively resource-noor Sierrn Mirtion f-rnm +.h e- 'i to the coast has occurred with the construction of roads in the coastal area. Further onnortunities eyi.st for such miration t.+h aceleaed development of the coastal area. 6. Structural weaknesses include heavy dependence on a few agricultural e3rnorts_ a small Jn+oY-nn1 mrketP,1m a h4ih -4.-acra -2- and backward population, especially in the Sierras, extreme dispersion of authority over public expenditures, and growing problems of securing non-inflationary financing of development expenditures of the Central Government. On the other hand, a dynamic and flexible private business sector has developed and there has been increasing recognition of national development problems and the important role of the public sector in pro- viding a base for economic growth. Ecuador also has a relatively free trade and exchange system and effective monetary and balance of payments management. - 3 - 1I: RJK1CENT OLITIUAL AN) ECUNUMIU DEVELUDH'T'S ANU SHUMT-TEM PRUSPEUTS 7. A -man military junta replaced the Arosemena Government in July 1963, Serious concern had existed in Ecuador regarding the lack of leadership of President Arosemena. In the absence of strong leader- ship, economic and fiscal actions necessary to accelerate development and reform the fiscal system were lagging, The new Government is re- vising the Constitution and. undertaking economic and social reforms to establish the basis for a more effective civilian government. The current cabinet consists of 3 military and. 7 civilian members. The new government has announced its intention to ca ry forward the development plan now being completed by the Planning Office and to concentrate avail- able resources on priority economic programse A: Gross National Production 80, The rate of growth in the volume of gross national product was somewhat greater in 1962 than in 1961 (3,6%o and 2.6% respectively).. Pro. duction in agriculture, which forms more than one-third of total output, increased roughly 6%, Substantial increases also occurred. in the in- dustrial, transport, and commerce sectors (Table 4). Economic growth is being stimulated. by the recovery of exports (summarized in para, 19 below) and increased domestic investment (summarized in para. 10). 9. Total output has continued to increase in 1963 with the stimulus of the further growth of exoorts and. improved confidence in the business community, Prior to the recent change in government, prospects for further expansion in 196h were dimmed by the general expectation among financial and. business leaders that the prospective Presidential election in 196)1 would- as in the nst. nase a nperind of hesitancy and uncertainty. Initial actions and policy statements of the junta were effective in establishing confidence in the new government. Accordingly, there are now good prospects for economic expansion at a somewhat higher rate than the W% growth rate of 1961.62. B: Aggregate Investment 10. Investment activity continued to increase in 1962 both in fhomute vnlim GPn199andqgqof Grosc ntinal P190roin g 14 in 1 from 15.2% in GNP in 1959 and. 1960 to 16,,6% in 1962). 1. Gross Fixed Capital Formation - (in millions of 1950 sucres) 1959 1960 1961 1962 Private Sector 847 812 856 1,0h5 Public Sector 627 735 755 708 Total 1,474 1;547 1,611 1,753 a/ For breakdown and source see Tables 5 and 6. Private Investment 11. The growth of investment in 1962 was due entirely to the private sector. Prospects for further increases in private investment are favorable because of increasing business confidence and the grow- ing availability of foreign and domestic financing. Foreign enterprises have been showina an increasing interest in investment under Ecuadoris new Industrial Encouragement Law under which foreign investors in several maior induitrial cateories receive a series of special tax advantayes. A further stimulus is offered by the preferential treatment given Ecadorian e)norts inder the T.tin American Vra AoTnt.-inrjn 1E1nCe of Errnrts position as one of the least developed members. In addition, action is now being taken to accelerate the utiliz.ation of linr rf prcrt.rom +.he Tn"'.r- American Development Bank and the U. S. Agency for International Develop- men+ for nai +nl l and industrial loans +hurn-vnh +ho U nnal Dolon ment Bank. Approximately I20 million of these loans were undisbursed as of -' ,CJA' Public Investment 12. Total investment by the public sector in con3tant prices de- c Lined abo%utv %1 in" 1962 fJ-rom. a peklevel attane in O 1--V- activity by the Central Government declined more substantially but was pmJ L.L, ovy. s e t by a uw C%a.VLum i .U Y vy CLU L'i uilu o for a wide variety of activities, frequently of low priority. Wross ~ 1EUU.L.LC ± V Lve Jt-ILII L11 ULAWrU %UIJ.LUCL-L -L7,)7-1c (in millions of current sucres) 1959 1960 1961 1962 Central Government 225 2o4 342 26j Autonomous Entities 276 335 328 354 Provincial Councils 25 22 32 62 Municipal Councils 212 241 244 230 Total 738 882 945 9(0 a/_For further information and source see Table 9. -5- 13. The reduotion of Central Government investment in 1962 re- flected a combination of the completion of expenditures under an IBRD highway loan in 1962 and efforts to curb the budget deficit. In 1962 the Central Government again incurred a substantial budget deficit (S/224 million", althcugh the total was roughly half as large as the peak deficit'in 1961 (S/517 million). In contrast with 1961, when Central Government savinas were neeative. savings occunred in 1962 hp- cause of cutbacks in current expenditures and transfers0 These savings were sufficient to finance only about one-fourth of the inve.fmPnt expenditures of the National Government during 1962, The remainder of its investments were financed in equnT nropori ons by externl nand domestic borrowing. Central Government Budget, 1959-1962 (millions of current Sunro.) 19L49 1940l 10Q1 lo Revenue 1I8 1JiP7 1,541 1,57 Consumption expenditures 696 790 976 856 Transfers 493 790 7)n 6r5 Savings 1/ 149 - 92 -175 59 Investment exoenditures 2261 2 3h2 28 Budget surplus, or deficit (-) - 77 - 376 - 517 - 224 a/ For breakdown nnd sonrno -P T:nhip In0 1/ Revenue minus consumption expenditures and transfers. As in the past, the Central Government's budget problems were aggravated by the heavy assignment of revenues +. + m --4-;+4-- Atie- s fers of funds to these agencies, the Central Government had control of only roughly one-third of total pubic revee in 100 A-- capital budget, as approved by the Congress for 1963, transfers to other entities would have been three times as large in 194-3 a 162 creasing from 65 to 189 million sucres. This increase was largely in resnonse to sectinal pressur-e rather than on the basis of e-u-no-n-d and social priorities. Thus the capability of the Central Government to rh,qnrol revenues to finance its- -r investment wol h-ve bee reduced--- - -- further. 14. A budgetary deficit of roughly 400 million sucres was in rospe- o 1 n July when the Miitary Junta assumed power. To reduce the 1963 budget deficit the new government has undertaken to accelerate the colcetion of tax revenues, increase tax levies, and economize on operating expenditures. These actions are expected to reduce the 1963 budget df iou roughly 250 million sucres. To provide for financing of the portion of this deficit which cannot be liancea from other sources, the il nas approved a request for a 50 million sucre increase in the amount of Central Bank credit which can be advanced to the public sector under the present "standby" agree- mento 15. In line with the military junta's intention to concentrate available tax revenue on investment programs of priority importance for Ecuador's development, the Government is now considering the abolition or various decentralized agencies and the consolidation of other agencies to obtain greater efficiency and economy. Actions thus far include the consolidation of two agencies in the social security field, consolidation of the two government railway systems, elimination of the salt monopoly, and reorganization of several government ministries, To attack the pro- blem of excessive earmarking of revenues, the government is planning to establish a National Development Fund. Under present plans, most of the revenue under the capital budget will flow into this Fund rather than earmarked for specific projects and will be available to provide local financing for projects partially financed with external credits. 16. To assure the local financing for the National Highway Program the government is considering an increase in taxes on gasoline' in con- juntion with external financing which has been requested from several agencies. A 30% increase in tariffs of the Quito Power Company is now being made. C: Money, Credit, Prices 17. In mid-1961 Ecuador resumed her conservative monetary Dolicy of the 1950's which had been interrupted by rapid monetary expansion for a brief period beginning in late 1960. This policy has involved specific commitments under standby agreements with the IMF. As a re- sult of traditional conservative monetary and financial nolicies prices have been relatively stable, as measured by both the cost of living and wholesale prices (Table 13). 18. During 1962 and the first half of 1963. the money supply increased substantially, paralleling the increase in foreign exchange reserves, without being accompanied by rm idly risine Drices. This situation occurred because of a combination of increased confidence in the monetary situation and an expanding need for means of circulation with rising national production. Prospects are favorable for continued monetary stability in view of current nolicies of the Ecuadorinn govern- ment, although problems exist in raising the local funds needed to fi- nance the devePmeTnnt. nrnanm- Means of Payment in Circulation and Cost of Living 1961-63 Means of Payment Cost of in circulation Living (inmillions of Period Sucres) (195.100) December 194-1 1,778 106 December 1962 2,000 111 June 1963 2,017 115 September 1963 2,155 117 D: Balance of Payments Exports 19. During 1962 exports increased 10f5, approaching their 1960 level after the slump which had occurred in 1961. The largest increase was in coffee exports, mainly as an outgrowth of a very good crop in 1962 in contrast with a poor one in 1961. Banana earings al;o partly because of the development of a subsuant l rkt 1 a Minor exports also increased, particularly sugar and fish prodCI3. Exports - 1960-1962 (in millions of dollars) 1960 1961 1962 Bananas 89.8 80.19 8f.0 Coffee 21.9 15.7 21,1 Cacao 21.J 17-2 1 .A Other 15,6 l18.8 23,7 Total 148.7 132.6 145.6 Source: Central Bank 20. Exports have continued to increase in 1963. Short-run Drospects for exnorts nnnear favorable, nrticumrIV in view of continuing favorable opportunities for bananas, sugar and fish pro- ducts. (Lonzer-run nrosnects are evlinate in pararasn l6-'R el w)IA IorS 21. The total volume of commercial imports was only slightly higher in 1962 than in 1961. The growth of imports during 1962 was limited because of business uncertainty regarding the policies of the Arosemena Government ad expectations during the first half of the year of a reduction in import duties under a revision in customs schedules which was then pending. 22. During the first half of 1963, the flow of imports as measured by both licenses issued and payments, was running at a rate 20% higher than in the first half of 1962. In part, the increase re- flects reDlenishment of stocks which had been deleted during the period of hesitancy in 1962. The expansion in imports is both a barometer of business confidence and a source of anreciable additional governmental revenue. Canital Account 23. The stabilization policies since mid-1961 and rising forei,n exchange earnings have restored confidence in the sucre. As a result, the sucre became annpreniably stronger on the free market. an4 A nPt in- flow of short-term capital occurred reversing the previous outflow in 1960 and 1961. During 1962 the internntional reserves of the Centrn1 Bank also increased by '12 million in comparison with a lose cf about the same amount in 191_ With imnnr-t ineasing substantially currnt prospects are that reserves are not likely to continue to rise as rapidly 'q i n I )2P -9- III. LONG TERM DEVELOP1TNT PROGRAM 24- The Government of Ecuador is now completing the preparation of a comprehensive lu-year development program for the period 1964-73 to succeed the interim plan which was reviewed in the last Economic Report (WH-124a, pages 17-20). The new program consists of two parts3 (a) a "general plan," essentially an analysis of Ecuador's economic problems and prospects and a statement of targets regarded as feasible for the economy as a wholeaid its major sectors, and (b) a more detailed "action plan" for various sectors of the economy. The general plan was completed in September in preliminary form and is now being reviewed by an ad hoc panel of experts under the Alliance for Progress. The second part is now being completed. 25. The general objective of the plan is to achieve a 6% annual rate of growth in gross domestic product during 196L-73. a somewhat higher rate than occurred during 1950-61. Achievement of the target calls for a very substantial increase in the rate of growth of the economy from that achieved in recent years when gross domestic product increased less than 4% annually. 26. The nlan stresses the imnortnnce of exrnrding exnorts for Ecuador's future economic growth. It also calls for a very rapid expansion in investment. during the dor1.- Undpr the plan, grOsS investment would rise to 20% of gross domestic product by 1973. Gross Domestic Product and Investment 1960-73 Gmnnon+.s n Doillest ic 1CA3 rno -S S Year Product Investment % of GDP 1960 14,094 2,081 14 8 1961 lb 1 A2 , 1 Q 1, o 1964 17,277 2,541 14.7 1973 30,198 6,156 20.4 , - e Cener aL I .LI ld~~ lbD Sucres- equalled US f,pl tret the relating eXIa16e L t-LA-7U .4bie nlJYSIS 101-LOWS 1LI LEMS ofUl planlrlu-gu investment and the balance of payments. The evaluation is necessarily preliminary penudig te completion of the "acuon plan" for attaining the targets. The success of the development program will depend largely on the abiliby of Ecuador to plan and carry out a series of measures to increase exports rapidly, expand investment in priority fields, and assure the growth of both public and private savings. -10- A. INVESmEN.IT PROGRlIK' 27, The Ecuadorian development plan calls for a rapid acceler- ation of both private and public investment between 1964 and 1968, 40% and 65% respectively. The plan then provides for a further steady increase in both public and private investment between 1968 and 1973. Summary data on investment and its financing are presented below. (See also annex tables 14-22). Projections of Gross Domestic Investment and Financing in General Plan (in millions of 1960 sucres Investment Financing Public Private Total Gross Internal External Tnvestmnt Tnvestment Investment Saving CaWital 1O4 ch 1 lh .9 .49h 499 1964 1,166 1,375 2,541 1,752 789 1973 2,532 3,624 6,156 5,005 1,151 Source: General Plan; for breakdown see table 18. oRTh-lc rnTnTczi +i n~n nf' +ha i n rrq+r.r-n. r-no.it-nm n nT-,,n tc , generally appropriate at this stage of Ecuador's economic development, In the public sector the major categories a+ Trnpre.Ic' ~~ and Sewerage (10%), Energy (91o), and Agriculture and related activities nO} h onod n invioz+mnon+ in +Tnnon mi nlyir hichyli-nv. ann.onars warranted in view of its contribution in opening new areas for devel- cpme nt a nd redu c i ng5 ,n tco _t- T h app r opr i a te sQi z e nd nmpo , tion of the power and transport programs are likely to depend largely other hand inadequate emphasis appears to be given to education in rela tio ou ot er ec o rus . T uive o mUL U 4 . U - - uuL u, Lun v C vLy 2.6% of the projected investment (totalling 521 million sucres over t.e LU yeal JJeriou). IiUw p i,g LZJ PrULU.1=y rC1L.LsU.Lu _Ln Uhe early years of the plan in view of limited project readiness. However, a larger percentage should be feasible over the decade wiun in'ensu-ea efforts and appears necessary if the manpower requirements of the development program are to be met. - 11 - 29. Tn t.hp n-rivnt.p et. invPqtmPnt wnild he mainly in the fields of industrial manufacturing (33%), Agriculture and related activities, 15 nnr) and Housing (9h%) The emnhasis on industrial manfacturinp appears appropriate in view of the priority importance of expanding n gricruiiIt+uiiraI p-deto fr" epnort i nn-roneasa n capacit tov+ n-ocess these products, and. developing import substitutes. While a great need. exists fr rc vr expandi ng housi,, - "n ai+ qusin may ris as to whehe 4-iTil+--Iimit. _%r re sources and economic priorities will permit as high a volume of housing -; -4 -A 4 n 4-1 , -1 aJrnU 30, The increase in investment projected for 1964 appears attain- able. There are substantial incentives currently for expansion in the private sector, as mentioned in paragraph 11. The 1964 investment target for the public sector also is attainable provided the government is successful in overcoming present problems in the operation of housing, water, and sewer programs which have delayed the rapid utilization of existing credits and the new national highway program is carried forward on schedule. Most of the financing for the highway program would. be provided. through loans now under consideration by external lending agencies, 31. Major problems are likely to arise in expanding both public and private investment as rapidly as nrojected after 1961. Extensive work will be required. in the public sector to complete detailed plans for various proiects and train the administrators and technicians needed to carry out the public investment program. Private investment also is likely to fall short of tarret.s hennu of the shortage of' engineers, agricultural technicians, and other specialists. 32. The plan calls for a very large increase in domestic savings both in absnite amount, a indicnte in the prpeeein table and n percentage of gross domestic product. Ecuadorys domestic savings have been relatively high anonr Tn+in Amony non n n n)nalling abon+ percent of GDP in the 1990's. Under the plan such savings would equal 10 nprrnt of GDP in 19( nmnared ri+h 11 in 161 and ris o +.n percent by 1973. The general plan does not outline the concrete policies measures recommended. to achieve the saving tnrgetS. At the present. time it appears doubtful that the savings percentage will rise as rapidly as projected because of t'he pressure of consumer demand and r- 4± operational expenditures of the government. The quantity of savings 40 alson 141elar +0 Call belowy +he +argetb ecase of a loer volume of , _..J. n AY V.. . " U... LJ_A.0 U1 UO... U' ~ c1U LJ .JJ C..JAJV± L UI .1 exports and incomes than projected, as discussed below. 33. The plan also projects a rapid increase in disbursements of "va1neL ured us as a source uf fiuancing tont utevezauLtPmen_1Upogm r- ing from $21 million in 1961 to 156 million in 1964 and averaging 856 mI-l-li-on during 1967U68 Thi iL crL6 lti 1Vt _lke ly tO b)e atta.Lned -12- because of the problems in utilizing outstanding loans and the current status of project planning. The undisbursed portion of existing credits, including those repayable in local currencies, totalled more than $60 million as of June 30, 1963. Because of problems of management and match- ing local finance, disbursements have been relatively slow thus far under credits contracted during 1961 and 1962 for the agriculture, industry, housing and water and sewerage sectors. The government is seeking to over- come these problems, but progress is likely to be slow particularly because of shortages of administrative and technical skills. 34, The preliminary list of projects for inclusion in the develop- ment plan is now being reviewed by the Planning Office and. preparation of detailed plans is under way for various projects. In the case of most of the projects in the plan considerable time is likely to be needed for the completion of detailed planning and review by external agencies, Under current conditions and prospects, disbursements are not likely to exceed '30 to q'35 million annually in the initial years of the plan, With success in current Ecuadorian efforts to strengthen project planning a larger flow of external aid will be feasible in subsequent years. B: Balance of Payments 35. Major features of the general plan are: (i) an expansion of exorts averaging q1 annually during 196)L-73 (ii) st.dilv ris'ng imports to meet the demands of the rapidly expanding investment pro- gram and growina consumer demnnd and (iii) n arwinu net deficit of service transactions and transfers. The Balance of Payments deficit on current anonint wul rise from .91 million in 1961 to $71 million by 1970, as indicated in an accompanying table. This deficit would be finann~eri larC-rgl tirougah fn orlncr n A i-_ creasing foreign private investment. Balance of Payments on Current Account (in millions of US dollars) 19061 19(:) 19608 1973 1.* Merchandise Exports fob I 13. ff4 203 ')en '7 2. Merchandise Imports fob -109.3 -145.8 -176.4 -208,5 Trade Balance 23.3 10.8 27.1 44.2 Service Transactions & Transfers - 44.6 - 59.4 - 85.3 -1151 -C nn n, fn__Ag -,A CZ.,'..,- and Transfer Accounts - 21.3 - 48.6 - 58.2 - 70.9 Source: General Plan - 13 - 36, Attainment of the export targets is of key importance for the success of the Ecuadorian development program because of the resulting stimulus to domestic economic activity and increased capability to finance imports and service external debt. Possibilities for import substitution are limited in view of the relatively small domestic market. Under the Ecuadorian plan increases in export earnings during 1964-68 would be mainly from added sales of traditional export products. particularly bananas. During the last half of the period exports of other agricultural products and. industrial nroducts would add increasirnlv to exPnort Parninf,s (a projection of exports under the develcpment plan is presented in Table 23), 37. Prospects are favorable for the expansion of Ecuadorian exports but a omneunsve -nntenn niao an and. an inensinve onnuAn1ing onv+ Aive will be needed, to approach the targets of the plan. Possibilities exist for ra;ni r-li Nr 1 nr- ng3productiofnP 0fwd vaityo-ropclpout because of favorable climatic conditions and.the availability of rich vi raina_qro -rr)" crlr -m- Ex_-pansiJ_on. of ari c, lt ur al1 out put and lower costs of production can be substantially assistedby the intensi- particularly in the field of tropical crops. There are serious problems, skills which will be needed to expand production rapidly for export. cause of relatively inelastic demand in major markets, (e.g. exports of bananas t o uthIle UTev. Saes an the compeitive s uuauon in other markets, including preference given in the European Common Market to Umpuot from V1rici sou.rces., There are also limitations in the develop- ment of export markets for other products such as processed. tropical fuis, because of thne problems which must be overcome in developing adequate sources of supply meeting quality standards and.developing sales outlets abroad. 0In the completion of the Ecuadorian Development Plan, ex- tensive consideration is being given to the actions which will be needed ou acLueve th export targets of the plan. Taking into account the factors discussedabove, and.the existence of the long-term coffee agreement, tentative projections for 1970 follow: Exports ($ US Millions) 1962 1970 Actual Projected Bananas 85 116 Coffee 21 29 Cacao 16 20 Others 2h 35 Total 146 200 -1)4- The achievement of these projections would represent an annual growth rate for total exports of 3-hfo, whereas the Development Plan postulates $% Pending further progress in formulating plans to promote pro- duction and exports, the following analysis of Ecuador's creditworthi- ness is based on the assumption that exports will increase at the more realistic rate of 3%, - 15 - . At the end of 1962 Ecuadorls external public debt repayaule in foreign currency totalled ;$122 million, of which $26 million was un- disbursed. Debt service is 23 million in 1963 or about 570 of pros- pective export earnings. Because of rapidly declining payments on privately placed debt and U. S. government loans, service on existing debt falls rapidly after 1963 (see Table 2), 4O., Ecuador has on the whole followed a cautious external debt management policy. Although some public projects have been financed on unfavorable terms, less than 20% of total external public debt at the end of 1962 consisted of suppliers' credits with from 2 to 7 years repayment period. 41. Ecuador is likely to be able to utilize effectively 30-35 million of new external credits annually during the initial years of the development plan. Larger amounts will be needed in subsequent years with intensified efforts to improve project planning and execution. Should new credits of the magnitude required all be contracted on-con- ventional terms, total debt service would exceed the level Ecuador can prudently assume in view of the expected relatively slow growth in ex- ports. Export earnings are largely derived from a few tropical crops for which the demand in world markets is not likely to rise rapidly. Extensive time and efforts will be needed to diversify exports. Under current conditions and prospects a portion of the external financing of priority development projects needs to be provided on special terms. 42. A blend of Bank - IDA financing is justified in view of Ecuador's limited capability to service loans on conventional terms, low per capita income, and economic performance. Ecuador has followed cautious domestic monetary policies and sound balance of payments manage- ment, including relatively liberal trade and exchange policies designed to encourage foreign investment and exports. In addition, Ecuador has had relatively high rates of taxation and domestic savings. Effective use of governmental resources has been handicapped, however, by widespread dispersion of public investment funds. The government is currently acting to reduce this dispersion, increase public resources available for high priority investments and improve the planning and execution of development projects. STATISTICAL APPENDIX Table No. External Public Debt 1 Ecuador-Extprnal Piiblin n hi4not.TnAJnorTnr1inc Tn disbursed as of December 31, 1962 with major reported additin to April I 1263 2 Estimatedonracua Sevie ametsoEtenl 2ubi Debt Outstanding Including Undisbursed as of December 31, '-yJV1 UUU .-%.A1AL V_LA±10 W F -L. 14, _L7 v-) uu TP -n Gross National Prooyc becorn 9 nuo 61 Gross Fixed Ca Itna-- Fomaio by th Privat Secor - n '--,-/ uGros Fixed Captal Formation by the Central Government, l9b9-lyb2 8 Gross Fixed Capial Formation by the Rest of the Public Sector, L959-1962 9 Finances of the Public Sector, by Authority, 19c9-1962 10 The Central GovernmentGns Budget, 1999-1962 11 Summary Balance of Payments, 1959-1963 12 Changes in Bank Credit by Origin and Destination, 1959-1963 13 Wholesale Prices and the Cost of Living Projections in General Plan 14 Supply and Utilization of Resources 1961 and as Projected in Development Plan 15 Gross Value of Production by Origin, 1964-73, as Projected in Development Plan 16 Gross Domestic Product and Investment 1960-61, and as pro- jected in Development Plan -2- 17 ross DoaMM+4, T%wn+ 10A1 onA on +4rA Development Plan 18 Gross Domestic Investment by Sector, 1964-73, as projected in D --V e 1 -- .f 4- n t a 10 (r-vnocaT s -+ 'k- 1 EO --Ai n- as- 4 Development Plan 20 Projected Capital Account of the Public Sector 21 Projected Capital Account of the Private Sector 22 Breakdown of Gross Savings 1961, and as projected in Development "lan 23 Projection of Exports in the Development Plan TABLE 1: ECUADOR-EXTERNAL PUBLIC DEBT OUTSTANDING INCLUDING UNDISBURTED AS OF DECEFBER 31, 1962 WITH MAJOR REPORTED ADDITIU-S TO APRIT b,19-3 Debt Repayable in Foreign Currencies (In thousands of U.S. dollar equivalents) Debt as of December 31, 1962 Major additions Net of Including January 1 - undisbursed undisbursed April 4, 1963 TOTAL EXTERNAL PUBLIC DEBT 95,441 121,514 790 Publicly-issued bonds 6,626 6,626 Privately-placed debt 16,68 16,688 - IBRD loans 35,822 38,190 - IDB loans 245 9,812 - U.S. Government loans 34,083 88,221 790 Exort-Import Bank 16,02 16,207 790 AID (formerly ICA) 2,074 2,074 - AID (formerly DLF) L.98h 9.9h0 - AID 11,000 20,COO - Colombian Government loans 1,977 1,977 Statistics Division IBRD-Economic Staff August 26, 1963 Tablo 2 ECUADOR - ESTIMATED COUTRACTUAL SERVICE PAYMENTS O'! EXTIERAL PUBLIC DEBT OUTSTANDING INCLUDING UNDISBURSED AS OF DECElBER 31, 1962 WITH MAJOR REFORTED ADDITIONS TO APRIL 4, 1963 /i Debt Repayable in Foreign Ciurrenci.es (In thousands of i.S. dollar equivalents) Debt out- standing Total servicepaLnents_by_ca tegory of debt Year plus un- Payments duringyear Fublicly Privately U.S. Colombian disbursed Amorti- In- issued placed IBRD Govt. Govt. IDB Januarv_.1 __tipnt.__...t. .-__Total bonds debt-__ loans loans loans loans Total debt 1963 121,514 18,348 4,312 22,660 292 9,794 4,855 7,352 287 80 1964 103,956 8,203 3,958 12,161 292 4,392 4,150 2,696 278 353 1965 95,753 5,250 3,725 8,975 292 1,767 3,387 2,714 270 544 1966 90,503 6,038 3,544 9,582 292 1,578 3,386 2,777 308 1,241 1967 84,465 5,543 3,289 8,832 292 545 3,387 3,103 203 1,302 1968 78,922 5,559 3,080 8,639 292 139 3,387 3,415 196 1,210 1969 73,363 5,764 2,851 8,615 292 3,386 3,593 159 1,155 1970 67,599 5,744 2,607 8,351 292 3,386 3,459 181 ;,033 1971 61,855 6,358 2,356 8,714 292 3,:386 3,657 174 1,205 1972 55,497 5,985 2,091 8,076 292 3,388 3,066 167 1,163 1973 49,512 6,025 1,823 7,848 292 3,387 3,054 160 955 1974 43,487 5,685 1,574 7,259 292 3,386 2,508 153 920 1975 37,802 5,719 1,326 7,045 292 3,386 2,482 885 1976 32,083 5,032 1,086 6,118 292 3,169 2,397 26o 1977 27,051 4,893 868 5,761 292 2,951 2,366 152 / Includes all debt listed on Table 1 prepared Au,ust 26, 1963 Statistics Division IBRD-E"conomic Staff August 26, 1963 TABLE 3: E0'PNDTURES ON GROSS NATIONAL PRODUCT, 1959-1962 (millions of sucres at current market prices) 1959 1960 1961 1962 Consuiption Expenditures 10,803 11,925 12,817 13,30 Private 9,270 10,112 10,750 11,170 Public 1,533 1,813 2,067 2,260 Gross Investnent Expenditures 1,921 2,081 2,312 2,555 Fixed capital 1,734 1,856 2,016 2,230 Private 997 974 1,071 1,330 Public 737 882 945 90r Tnvetories 187 225 296 325 nnnOSs nagn11TTnfs MavTT.ART.R FOR DOMESTIC USE 12,72h 14,006 15,129 15,935 Net Exports of Goods and Services - 100 ~ 3h - 517 - 595 Exports 2,454 2,530 2,52h 2,897 T-pots -29 - 2 ,4 -2,51 -2 ,92 Services (net) - 385 - 398 - 460 - 550 týn, " CC -NTAMTr,',\AT nDT)~n m nn r n in 4n] 1 e1 ' -il. 41 n -i c' nnnl GROS NTUINALC RLDUCT 12,62l 3,662 14,2J-LL 15,9 GNP at 1950 prices 10,726 11,385 11,680 12,099 Gross Investment as % of GINP 15.2 15.2 15.8 16.6 Gross Investment as % of Gross Aailable Retsouarces for Dmsi Use 15.1 14.9 15.3 16.0 Source: Central Bank. rri T Å ~ nT "L- ' M ACmITr)TTT IDD =TT('I DV n~DTfl*rN. «i n 1OA nX.- of I «5 8-8c 16i. 34 170. -1 40. ~ Qu - '4ý 4 L> -L nJuu: ii47 eL4-1 ;5 D2U .U 1U 0 ±U. Y Co,merce 13 170.1 1.7 189-,1 197.0 Services 9 149.9 153,9 1.i 160<.5 Ownership of buidings 8 134.5 134.6 134.1 11.6 Public Administration and Defense 6 151I6 166.2 185.1 185.1 Transport 5 1h5.9 1h5.6 145.0 154,1 Construction 3 218.3 243.9 242.2 24hh Mining, petroleum 2 132.0 173.3 180.7 184.7 Banking, insurance 2 297.9 302.1 328.7 33612 Power, water, sanitation 1 344.1 361.8 438.2 461.8 TOTAL 100 151.2 161.0 167.3 175.4 Source: Central Bank TART.P CW (1O!1 FTYTD CAPTTAL FORWATTON. BY SECTOR AND PURPOSE.l9r9 19"2 (mnilinn r)f 1cI fl surs est. TOTAL: 1,47h 1,5L7 1,611 1,753 87 purpose: Transportation 221 277 3b9 315 roads, bridges 186 190 218 173 railroads 1 9 6 airports 22 19) ) 138 ports 30 $6 106) Electrification 97 1 I9 Irrigation 8 l 16 17 Housing 20 202 218 20 Non-residential buildings 131 179 156 176 Other construction 121 113 163 13 Vehicles, machinery and equipment 656 663 684 809 Source: Central Bank. TADLE 6: GROSS FIXED CAPITAL FORMATION BY THE PRIVATiE SECTOR,199-1962 (millions of 1950 sucres) 1959 1960 1961 1962 est Hous ing 174 166 17h 200 Other building and construction 84 51 90 123 Vehicies, machinery and equipment 589 595 592 722 TOTAL 847 812 8556 1,045 Source: Central Bank. TABLE -7; GROSS FIXED CAPITAL FOVATION BY THE CENTR4L GOVERN 1959-6;2 (millions of 1950 sucres) est. T ransportatio 0-1 173 22 7) roads, bridges 317 1L9 raL-ilroads---~--- ports 19 23 30 11 Electrification ---- - Irrigation --- 2 Buildtngs and other construction 20 h2 26 26 Water, sewage 3 9 --- --- Communication 5 --- 6 8 Vehicles, machinery and equipment 10 11 l 16 TOTAL 192 237 273 223 Source: Central Bank TABLE 8: GROSS FIXED CAPITAL FORIUATION BY THE REST OF THE PUB3LIC SECTOR, 1959-1962 (millions of 1950 sucres) 1959 1960 1961 1962 ______est. Transportation 67 104 121 12 Roads, bridges 51 h0 40 24 Railroads 1 9 Airports 4 22 ~ Ports 11 11 Electrification 97 1), ),9 ) Irri;,on R 12 on 17 Build ings and other construction Housing 66 36 ho ho Non-residential buildings 46 100 49 59 Water and sewage ).7 46 3 Urban Affairs 26 37 65 55 te 16-LU - 1115 C uci 5 1i -n Vehicles, Machinery, Equipment 57 TOTAL 3 h98 482 485 Source: Central Bank TALE 9: FIN^NC S OF THE PUBLIC SECTOR, BY AUT10RITY, 1959-1962 (millions of sucres) 1959 1960 1961 1962 est. 9eeu 7no 9 Q'( 'A) 3,369-OC Non-investment expenditure 1,940 2,170 2,526 2,751 Investment Expenditure 733 882 9h5 900 IdurpWlus, or. deJ _L LL U _J_L .~ ~* Total expenditure 2,678 3,052 3,471 3,651 Investment as % of total expenditure 27 29 27 25 Daving as % o.L revenue uv Central Government Revenue 975 860 1,09 1Y139 Non-investment expenditure of7 970 1 1 u(a- Saving 178 -110 -163 57 investment expenditure 225 28o 8) 2o; Surplus, or deficit (-)-77 -394 -5 -6 Total expenditure 1,052 11 e ±,>54 i,j5 investment as 7% of total expenditure 21 23 22 21 Saving as % of revenue 15 -13 16 5 Autonomous Entitic6 Revenue 1,327 1,520 1,550 1,073 Non-investment expenditure 866 899 985 1,244 Saving 461 627 573 429 Investment expenditures 276 335 328 354 Surplus, or deficit (-) 292 20 (5 Total expenditure T71j2 1,23 1,313 1,598 Investment as % of total expenditure 24 27 25 22 Saving as % of revenue 35 41 37 26 Provincial Councils Revenue 35 39 36 37 Non-investment expenditure 9 12 9 18 Saving 26 27 27 19 Investment expenditure 25 22 32 32 Surplus, or deficit (-) 1 5 -5 -13 Total expenditure 34 34 41 50 Investment as o of total expenditure 73 65 78 64 Saving as / of revenue 74 69 75 51 ..... continued Table 9 Continued: 1959 1960 1961 1962 Revenue 32 51a 504 520 Non-lanvestment expenditure 239 289 320 hu0 Saving 1 112 investment expenditure 2 21 214i4 C__ 3 Surplus, or deficit (-)9 Total expenditures 451 )40 investment as ;6 of total expenditure t47 43 3/ Saving as fo of revenue 36 h3 36 22 Central Government as 5, of Total Fublic Sector Revenue 36 29 33 34 Non-investment expenditure 43 45 48 39 Saving 19 -14 -.26 9 Investment expenditure 30 32 36 31 Total expenditure 39 41 45 37 Source: Central Bank Note: These data reflect the public sector finances after consolidation,. Revenue for each segment of the public sector is shown here after transfers from the Central Government to the rest of the public sector, Revenue does not include proceeds of loans or cash balances, expenditure does not include amortization of debt. TABLE 10: THE CENTRAL GOVERMIENT 'S BUDGET, 1959-1962 (millions of sucres) 1959 1960 (Revised) Preliminary _____________1961 196:2 -everues Indirect taxes 958 1,034 1,07 1,002 on: imports 550 639 052 00 consumption 30 299 262 269 others 96 96 133 127 Direct taxes 290 280 331 397 on: .ncome 1b6 173 207 220 exports 90 84 99 1-4 others 34 23 25 :32 Other revenues 90 113 163 171 Total 1,338 1,27 1,541 1,570 Current Expenditures and Transfers 1,189 1,519 1,716 1,511 Consumption 696 790 976 356 Transfers 493 729 740 6-, Savings 149 -92 -175 59 Investment Expenditures 226 284 342 283 Budget Surplus, or deficit (-) -77 -376 57 Financed by External borrowing (net) 13 138 289 117 Gross borrowing 91 194 332 211 Less: Amortization 78 56 43 94 Domestic borrowing (net) 6h 238 228 107 Central Bank -7 2TT -17 National Security Commission 107 92 63 Social Security Fund -5 - 82 Borrowing from private sector -21 -21 28 Use of cash balances -18 -89 66 Other 8 12 6 Siirc: Cpntral Bank - 19q9-1962 Iinistry of Treasury - 1963 TiBLEI: eu'ARY BALANCE OF PAVENTS (in nillions of U.S. dollars) 1959 - 1963 Prei. Proj. 1959 1960 1-961 1962 1963 2/ i. Yerchandise exports, fob 1/ 1AW.2 148.7 132.6 139>7~ 147.5 2. Merchandise imports, fob 1/ -96.1 -110.2 -1093. -116,3 2.IL5 3. Trade Balance (1+2) 48.1 38.5 23.3 23J4 25XO 4. Service transactions & transfers (net) -67 .- -_5 -4,6 -73 8 5. Balance on goods and services and transfer accounts (3+4) 0.5 -11.0 -213 -3.9 -18i8 6. Private long-term capital (net) 10.4 11,3 11.6 13,0 11.5 7. Private short-term capital (net) - -7.7 -14.3 5.0 75 8. Official capital (net) -0.1 10.6 10.9 9.6 9.5 9. Gold subscription to IMF -1.3 - - - - 10, Errors and enissions (net) -3.0 -64 1.1 -0.8 11. Net international reserve movements (increase -) -6.5 3.2 12.5 -12.9 -9.7 a. Central Bank reserves (-5.9) (5.2) (1128) (-12.2) (-8,3) b. Commercial bank reserves (-0.6) (-2.0) (0.7) (-0.7) (_0,9) Source: IMF Staff 1/ including nonmonetary gold 2/ Does not refject upward revision of i 5.9 million subsequently made by Central Bank Staff in banana exports. rr. A T I iT n -1Nl rlA ,r n flr -i nrlr, A rn - - f mr:. I -- T' I -I- I (millions of sucres) FirsT half 1959 1960 1961 1.962 1963 1/ ORIGIN: Central Bank Credit 10 1h7.7 378.3 39.5 70.7 Gentral Government: -12.8 54.1 148.8 -27T8 1483 Lrans & Investrerit -11.0 229.9 -21.5 -222 1186.9 Less: De;osits -1.8 -215.8 170.6 -5.6 1. 4 Rest of Public Sectbr 3 .i 41.7 37.6 61.9 -95,2 Loans & Investment 42.8 75.6 2.2 50.2-31T5 Less: Depcsits -7-4 -33.9 35.4 11,7 -638 Private Sector 2/ -6.1 94.1 121.5 5.8 21.6 Commercial Banks 1.3 0.1 -0.6 188 -1i,' Development Banks -16.8 -'12.3 71.0 .19.2 6,5 Commercial Bank Credit 216.4 2314J 77.2 544 9L8 Loans and Investments to Private Sector 217,7 234.2 76.6 73.2 85.3 Less: Financing through Central -1.3 -0.1 0.6 -18,8 10,5 Bank Development Bank Credit -12,.6 22.9 18, 1L.2 171 To: Central Government (Deposits) 0.3 -247 - Rest of Public Sector (Deposits) 1.2 -3JL 1.2 -6.6 -..8 Private Sector -30.9 -13.7 83.5 3,0 27o7 Less: Financing through Central Bank 16.8 L2.3 -70-0 192 -6.5 Total BankinL System Credit Central Government -12.5 51.8 153.6 -29.2 148,,0 Rest of Public Sector 6.6 A R A 38 Q 00 Private Sector 180.7 31L.6 281,6 82,0 131.6 Total 204.8 404.7 474.0 108.1 183.6 ..continued Table 12 Continued: First half l// 1959 1960 1961 1962 1963 DES TIATION: Private Holdings of Bank debt 298.3 299,2 300.2 181.1 150.4 CurrenCy in Circ.ulation 42.1 96.4 33.2 69.1 -5.2 Demand deposits 127.4 72.2 26.0 136.6 28.,2 Total Money supply 169.5 168.6 59.2 205.7 23.0 Mortgage Bonds 112.4 86.1 18.6 -5.4 42.4 Time, Savings and Foreign 16.4 44.5 222.4 -19.2 85.0 Exchange Deposits Gold Pnd Foreign Exchange Holdings of Banks (increase -) -76.2 55.2 -107.3 -1804 134.9 Capital, Reserves and Other TNet) Liabilities -17.3 50.3 281.1 107.4 -101-7 TOTAL 204.8 40L.7 474.0 108.1 183,6 1/ Provisional 2/ Includes advance import deposits Source: Central Bank. Table 13: WHOLESALE PRICES AND THE COST OF LTVINTG (1958 100) Wholesale Prices Cost of Tiving Year General Foodstuffs (Quito) 1956 97 98 98 1957 100 100 99 1958 100 100 100 1959 99 97 100 1960 97 96 102 1961 102 100 106 1962 103 99 109 1963: January 107 102 112 February 107 102 113 March 107 103 114 April - - 114 May - - 114 June - - 115 July - - 116 August - 117 September - 117 Source: U.N. Monthly Bulletin of Statistics M - L - QTTTTIF AM TTrPTTT rAInTM (o V CTMP7CZ 1 o1 iUVLt-- O u rr.i. 11111.u ( j-L.LLL.L'j1q i x <."' IADJL IA. rLUJ.., TI J 1 L TT-2V YLXJ± T'V MAI 1Ililions of Sucres at 1you prices 1961 1964 1968 1973 Supply Gross Domestic Product 14,671 17,277 21,731 30,198 Imports 2,364 3,uo8 3,o u L a, acy Total 17,035 20,361 25,381 34,667 Utilization Consumption 12,466 14,888 17,820 23,991 Investment 2,193 2,541 3,891 6,156 Exports 2,376 2,932 3,670 4,520 Total 17,035 20,361 25,381 34,667 Source: Development Plan, 1964-1973 Table 15: rCQ VAL? P.-r MDUTITON BY (IPTrI\T IQ6-73, A 'Z 7ýDi. ) r, T?.1 7 1ýTI' T l 'TI P3T A UýT (in-millionsofT1960 sucres) SECTORS 1964 1968 1973 Agriculture 6,377 7,586 9,225 h.h 4.0 4.2 Fisheries 1,706 2,169 3,061 6.2 7.1 67 Iines 792 1,077 1,636 8.0 8.7 8.4 Food Processing 2,249 2,794 3,85 5.6 0.0 6.2 Textiles and footwear 2,332 3,040 h,h93 6.9 8.1 7.6 Non-metallic i.ndustry 1,224 1,97h 3,565 12.7 12.h 12.5 Hetallic industry 33h 658 1,282 18.5 14.3 .16.1 Construction 1,267 2,018 3,392 12.3 11.0 11,6 Energy 309 h0h 607 7.0 8.5 7.8 Services 8,029 10,053 14,215 5.8 7.2 6ý6 TOTAL 24,619 31,774 45,312 6.6 7.3 7.0 Source: Development Plan, 196h-1973 Table 16: GROSS DOMESTIC PRODUCT AND INVESTIENT 1960-61, AND AS PROJECTED IN D7VELO?ENT PLAN (Amounts in millions of 1960 sucres) Gross Domestic Gross Investment as Year Product investment p of GDP 1960 14,094 2,081 14.8 1961 14,671 2,193 14.9 1964 17,277 2,541 14.7 1968 21,731 3,890 17.9 1973 30,198 6,156 20.4 Source: Development Plan, 1964-1973 Table 17: GROSS DOH7STIC INVESTMlENT, 1961, AND AS PROJECT7D IN DEVELOPMEFNT PLAN (in millions of 1960 sucres) Public Private Total Gross Year Investment Investment investment 1961 948 1,245 2,193 1964 1,166 1,375 2,541 1968 1,646 2,244 3,890 1973 2,532 3,624 6,156 1964-1973 17,713 23,294 41,0O7 Source: Development Plan, 1964-1973 TABLE 18: GROSS DOMESTIC INVESTMENT BY SECTOR, 196-73) (in millions of 1964 sucres) ruuiL;I r.Lv Ue Sector % Sector o Total % A-griu.U Uare adl related activities ** 1,716 8,7 6,219 24.0 7,935 17.4 ring and Petroleum 76 0.4 2.1 631 lou Industrial Manufacturing 116 0.6 8,588 33.2 8,704 19.2 Handicraft 6 Ul 68 U) 7o U0Z Transport 4,668 23.6 1,666 6.4 6,334 13.9 Communication 583 3,0 - - 583 103 Energy 1,728 8.8 1,116 4-3 2,44 6.2 Water & Sewerage 1,864 V.5 -- 1,0-4 4,i Education 52l 2.6 - - 521 1.1 Health 802 4.1 - - 802 1.8 Cooperatives 7 0.1 69 0.3 76 0.2 Housing 1,790 9,1 6,225 24,1 8;015 17.6 Basic Research 135 0.7 - - 135 03 Other 5,664 28.7 1,374 56 7,038 15.4 TOTAL 19,678 100.0 25,880 100 0 45,558 100,0 Excluding financial investment * Includes: Agriculture, Forestry, Colonization, Fisheries, Agrarian Reform, Irrigation and Rural Development. Source: Development Plan, 1964-73. rpU1 -1 IlDnC!C TtT TQTA.TkT'P DV Q 7 OWD 100)4~1 I U.LaL yt- 7 ; V UILJJ'J LY) V .>) .11 1 14 1. 1J . L -A 'r) A C' r7r, n r." t' 'P T T T h1 n7T~T7 t'rM\ T DT P IN / U-i. I~. ';. j -L:~ ill J V I .~ jI -1 1950-61 % 1964-73 % Agriculture, Forestry and Fishing 1,627 8.4 6,905 15,2 Mining and Petroleum 291 1.5 631 1> Industrial Manufacturing 2,849 14.6 8,780 19,3 Energy, Water and Sanitary Services 1,591 8.2 , 8 Transport, Distribution and Communications 6,399 32.9 7,000 15.h Buildings 2,775 1h.3 8,015 17.6 Construction and Other 3,922 20.1 9,519 208 TOTAL 19,454 100.0 45,558 loo.0 Source: Development Plan, 1964-73 1/ Real investment, excluding financial investment TABLE 20: PROJECTED CAPITAL ACCOUNT OF THE PUBLIC SECTOR (in millions of 1960 sucres) Expenditures ' Income Direct Indirect Amortiz- Total 'Putlic External Other Total invest- invest- ation of Expendi- 'Sector Loans Income Income Year ment ment 1/ external tures 'Saving 2 debt 196L 1,166 363 1h3 1,672 626 878 168 1.,672 1968 1,646 628 231 2,505 1,171 1,065 269 2,505 1973 2,532 8o 400 3.736 1,530 1,3o4 902 3,736 1/ Transfers of capital from the Public Sector 2/ Additional loans to thp Private Spotor Sourn Developnment Plqn- 19-73. I. -r 'in millions of 19ou sucres) Expenditures Income Addi- Transfer tional of capi- Remit- loans Real tal to tances Total from bup- Foreign Total Invest- public abroad Expen- Private Public plier Invest- In- Year nent Sector 1/ ses Saving Sector redits ment come 1964 1.375 16d 125 1.668 1.126 363 31 148 1,663 1968 2.244 269 126 2.639 1.774 628 37 200 2o639 1973 3.624 902 94 4.620 3.475 804 47 294 4.620 1/ Includes amortization of external loans and increase of international monetary reserves, Source: Developrment Plan, 1964-73 AStnr PJTED'flT~ IN D5' VDO P T PLA Internal Saving Year Public Private Capital Financing 1961 46o 1,134 599 2,193 1964 626 1,126 789 2,51L 1968 1,171 1,774 945 3,890 1973 1,530 3,475 ,1516,5 1964-73 11,473 20,670 8,864 41,007 Source: Development Plan, 196h-73 Tabhleo 93 PROJEnTmjorI OF EXPOPTS TN T7- DEEOPENT PLAN (in yillions of US 3 at 1960 prices) Year Bananas Cacao Coffee Other Total 1960 88,900 21,414 21,946 12,2h0 144;500 1964 96,228 20,293 24,289 25,632 166,442 1968 117,537 23,215 26,705 40,674 208,131 1973 131,290 27,480 30,065 6,khO 253,275 Rate: 64-68 5.13 3.42 2.LO 10.9 5.75 68.73 2.24 3.43 2.40 96 4.01 64-73 3.51 3.42 2.40 10.8 4.78 Source: 1960 International Financial Statistics, 196L-73 Development Plan.