Argentina - Economic position and prospects (Vol. 5 of 5) : Industry

|"ETURN TO l JT-TA AA ~~~~~~~~~~~~~~IX7Epo-rs I AA1s1- l"~~ORTS DEi ueN j lE CVOL. 5 L...~~jI"r LV LUr I This reFort 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 The report may not be published nor may it be quoted as representing their views.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 ECONOMIC POSITION AND PROSPECTS OF ARGENTINA ANNEX IV: INDUSTRY May 5, 1965 Western Hemisphere Department  fr%ATn%ToTrr' DAOZT'7nT AtMT DDr 13TVEr"-I N'L AT -EOTTTTA ANiEX IV: INDUSTRY TABLE OF CNrTINTS Page No. SUNlI4tLY AND CONCLUSIONS .*.................. . .....*9 *... I. THE GROWTH AND STRUCTURE OF INDUSTRY ..............a..... ..... 1 A.. The Pattern of Inputs and Outputs ..... e 0.0........... 3 B, Location and Ownership ** ... * 6 C., Cost Factors .................. ,00*0 .... lO-*.. D. Industrial Developments Outlined in National Development Plan *..... .... o.... 13 II. INDIJSTRIAL POLICY *.........* . .......************** ***** ** 15 A., Promotion of Industry ... 16 B. Protection ..*. . 18 C., Export Promotion ,, ............ 24 D. Conclusions ........ ..... ,.e 26 III. THIE FINANCING OF INDUSTRY .................................... 28 1. TYPICAL FINANCIAL PROBLEMS ............. .. ...... ... 28 General Effects of Inflation 28 Possible Erosion of Capital .......................... 28 Tndebtedness in Foreign change . 28 Fiscal Arrears ............ . 29 2= SOURCE^S OF CAPITA .L 29 3. THE STOCK MARKET . . ..... 30 Size of Market - -.... 30 Share Prices ....... ....... 32 New Stock issues.. Problems of Project Financing 34 R,to.m..J.ujL4u.AJ.aJt 99999999999*X***** 3 .J4 4. THE ROLE OF THE INDUSTRIAL BANK .... ..35 SozXu r ces of Cwapitca] 35 SJ,.JLl. '~ 'JJ. .Ja~J L U . J. 99 9 9 9 9 . 0a. ...... 00 *. O.0. . . 99 9 99 9 0 Credit Volume 35 .........3 CrediJt Plcs I 036. c i .e.s...... cs 9 3 9 - Current Operations ... 37 Special Account Ouperation 3 Problems created by Special Account Operations ... 39 Recommendation on Special Account Uperations 40 5. FOREIGN LOANS AND INVESTMENTS ............................ 40 Loan Capital .............. .......... 4o Direct Foreign Investment .2 US Direct Investment 42 Outlook ........... 43 (Contid)  TABLE OF CONTENTS (Cont Id) Page No. IV. EFFICIENCY AND COMPETITIVENESS .............. . 0. .4 . A. Differences in Efficiencv and Cost by Industrial GrouD ..... B. Widespread Types of Inefficiency ....... O ...... ......... h6 Te ch-no logy-v oecoa4ecct 1 46 Management Controls ............ - ...... 0 ..... 46 C Tmproving PEfficiency and Low.ering n Costs= = = Institutional .---*............................ 52 Technical Educatio5 TTLI OF MAnTBL Table 1. Growth and Structure of Industry by Sector ........ .............. 2 2. Imports *by Type of Commodity ......O..* *............. 4 3. Compos:ition of Imports by Class of Product and Stage ofL Processig.., 1U96 .*O ........... ..............*s . ) 4. Dependence on Imported Inputs, by Sector, 1960 ................ 5. Principai. Items of Industr:ial Exports ,................... . 0 6. lDestination of industrial Production, by Sector, 1959 and 1963 9 ' 7. Share of Public Sector in Industrial Output by Branches - 1962 1. 1 8. Industrial Wages and Productivity, 1954-63 ...... Z. 9. Illustrative Rates of Customs Duties and Surcharges ... ... 20 10. Authorizations to Increase Share Capital . ...........3J............ 3].  Annex IV SUIN?ARY AND CONiCLUSIONS 1. .A major problem appears to be the lack of a coherent industrial policy. The mission has the imoression that this will be cor.ected only in part in the Development ':lan until such time as the essential decisions on industrial policy are taken by the authorities. 2. In particular, there is an urgent need for an overhaul of the current system of' industrial protection which is both haphazard and excessively high. The revis o.in should take qnn t, oF' emnplvmnt ani fnreign exrhan.e aspects, irnfant industry arguments, and the need for compensatoriy protectior -in case wher irvnp.r themselve are protePte.P Tt. shold 21so :-iake allowiance f'or the need of nrotection of already established industries ijhich are wnlilenlT to become cor%..petl -in the. foreseahle fuIre A gradual but systematic lowering of existing protection is highly desirable. Preliminary S+te-S. forv -4 t,atrf ,, -,, ., ,+ b'k-4-q +n -n b,i +Inn in-i c!Q r r,nn~ nn+ steps _or . t&A-ff -eie -bat the mlssion ^oes not have the impression that this is likely to lead to a substantially loler t3ariff struhCtuea. A. , ~J .