Report on the economy of Uruguay

 NOg E 27/49A BEST AVAILABLE COPY RESTRICTED 66871 This report is re5tri~;ted to use within the Bank iNTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT • REPORT ON THE ECONOMY OF U1QUGUAY February 18, 1.949 • Economic Department Prepared by - Dr Harold W Larsen 0 o  URUGUAY ESS~~TIAL STA~ISTICS I 72,153 square miles Population: 2.3 million Currency: Unit: Peso Parity: No par value declared. Con trolled sell ing rate 1.899 pesos per dollar Trade: Imports 1947: US$ 215.3 million (from US: US$ 82.3 million) Exports 1947: US$ 162.5 million (to US: US$ 47.0'million) 1/ Imports 1948rate:~ US$ 201.1 million (from US: US$ 67.0 million) ~9rts 1948 rate: US$ 170.7 million (to US: US$ 47.7 million) • Total Gold and ~hange Reserves: December 1946: .December 194~: December' 194 : US$ 291 million US$ 255 million US$ 241 million Total Revenues of N~~~onaI Treasury: 19if7: 240.9 million pesos .~: 258.5 million pesos Treasury Surplus 1947: 9.1 million pesos Treasury Deficit 1948: 4.7 million pesos ~ Internal Debt of National 637.7 million pesos • Government, December 1948: Funded: External Debt; December 1947, Bonded: US$ 116.1 million Eximbank: US$ 14.0 million December 19~,'8 est. Bonded: US$ 102.6 million . EXlmbarik: US$ 13,4 million Undisbursecl Ex~inbank: US$ 0.58 million Annual ~bt Service: US$ 9. 3 mill~on Co st of L1 vint~ Index: December 1946 - 153 (1937 = 100) December 1947 - 177 September 1948- 178 Y On the basis 11 months figures. :# Yield on internal' bonds August 1948, 4.98%.  ~. ~. + + Zq' -i- I + + -L. ,,' • " L A R G 0 '\, '\. \ '\ I '\. + ),:' " C9 lL' • + A 71 L -,4. -LV T I ("Y + + + URUGUAY POLITICAL MAP o + + .. -r e -.I- '7" ,~. W 5" ~ UnIted States TartTf CommIssIon-Dec 1944  C0 l~' '1 ~ NT S Page I. Uruguayan Economic Development (General Observa- tions and Conclusions) .. • • • • • • • • . · ·· · i II. Land and People .. • • • .. • , ··. .. 1 III. Occupations and Income • , • • • .· ·• ... • .. .. • • 4 .. • .. g IV. Bural Production and Marketing. ·• •· II V. l~~ufacturing Production . • • .. . • ·. •· f) · ..• 18 • VI~ VII. VIII. Fuel and Power • • • It Transport arid Communication • Commercial Banking and Domestic Finance It • · .. • .. • • . .. · .. e .. . . ·• • .. • · · · .. ·• • • • ,. • 23 28 30 IX. Central Banking • • • .. • .. . .. • · • 34 X. Public Finance . • .. .• • w • .. · .. · .. It , e · 40 XI. External Trade and. Trading Policies • ~ • . . • . .. 47 XII. Balance of Payments • • • • .. · .. ,. • • " . 6\ . 56 XIII. Exchange Controls and Markets ·, ,. • • .' II .. .. .. 62 • XlV. ~ternal Debt History . .• • • .• • • .. .. ,. 70  STATISTICAL TABLES Page Total Gross Annual Production, 1946 . 5 . . It • • • • • • • • !II • • Rural Land Use in Uruguay and New Zealand , • • , t' • ,. ~ S Livestoelc • ~ • • • • e • • • ~ • • • • • • • • Wool Y1 elds ~ Uruguay and New Zeeland , • • • , A Uruguayan Manufacturing, Raw IVlateriFJ.s and Packing Used, .. . . ·. ~ • • • • 0 0 12 16 Year 1936 • .' • • • • • • , • ~ 20 ., C) • •fJ • " • • • • • • • • flAn .,.. UruguaYat.L Manufacturing, 1936 ••• • • , • • !I 22 "Btl - Uruguay-em, Manufacturing, 1936-1946 " e , .. .., 22 Coal and Petroleum I~orts ••• 0 • • • ~ ~ Production and Tr~det Refined Petroleum Products ,. ~ • • • • · .. 23 24 • Consumption of FUel and Power , • ~ $ • • ~ • • • • • • • • • Rail Trafr"i c • 0 • • • • • • • • , • • • • • • • • • • • • • Commercial Banlti,ng, AUgust 31, 1948, • • • • , e • • • • ., Advances of Banco de la Republica • 0 • • • • • Montevideo Stock E~change, Year 1947 • 4 • • • • • • • • • • 0 • • • • 0 • • II 25 28 31 32 33 Notes Issued and. Holdings, August 31, 1948 •••••••• , 35 Reserve Gold Held by Banco de la Republica ~ • • • • 0 • • It 36 Lending Operations of the Banco de la Republica • , • ~ ~ 0 • 38 W'ar-~ime Increases of Money Supply and Cost of Living •••• 39 Expenditures of Ordinary Budget. , • , • ~ • • • 0 • • • , • 42 Principal Treasury Revenues • • • • .. • • • • • • • " ~ " • 6 45 Compositton of EKports, Selected Years e 5 ••• ., •••• 48 ... .. Direction of Exports, 1947 • • • • • • 49 · II , , • j) .. • I) • • • " Composition of Imports, Selected Goods • • • • .. 50 External Trade Qt. • e •~ " II • • • • • , • • ., ·..... 52 Trade Ba1.ances with Principal European Countries , • • • • • 53 Balance of Payments, 1943-l-947 • ~ • " • • ., ., • II • C 'I • ' 61 External .Debt 'I ~ II • • , • • • " .. " " .,Q • , , • • • II ·. 71 Export-Import Bank Loans to Uruguay.." June 30, 1948 • II • • Q 72 Uruguay I s Ext ernal ~bt and Service Payment s • " • • 73  I. URUGUAYAN ECONOl,:rC DKVEI0P2~!:GlJT (General·Obse±-vations and Conciusions) By comparison with many underdeveloped countries, Uru~~ayan economic development is well advanced. In Latin America she has achieved a national income per capita second only to that of the ll.rgentine, and one roughly equal to that of a Wester'n :European country such as France. Yet, despite close social and economic similarities with Nevlf Zealand, she has not yet attained an income per capita comparable to the NeYi Zealand • level. The correspondence. between Uruguay and New ZeaJ.a nd in teY'l.:ns of area, climate, natural resources, ~)opulation and main economic acti vi ties su~gests that Ururuay should be able to apDroach t.he NevY Zealand income level Dore closely, and more detailed examination of the structure of main productive activities in the ~vo countrie$ rives clear indicaticn of hOYT increase of total production anl~ nat~_onal incor~e per cilpi ta in Urur;uay could emer ge • The Uru[11ayan peo.ple already effectively OCCu"~y their y!hole • national territory, and have already achieved a transport system permitting production by present methods from the 'Hhole area occupied. tical advance lies in change of these mett-ods of production themselves, The next cri- basically to widen and. deepen mechanization in both ar,rj cultural and j",1anU- facturing l)roduction. In pastoral arricul ture, the sector originating pre- sent princi'lal e)..'"Ports, a ch.:nge from 8xtensi ve to intensive methods, si11lilar to and involving some mechanization, is indicated. In other words, of future total Gapital fornO-tion (over, say, the next decade) a relatively hirh Droportion could 1rtost uE;eful1y fl(;v[ i  into im})roving actual processes of cO:i11IDodi ty production) By increasing capital equipment per worker, in tools, machinery, bet.ter anirllals and pastures, output per worker can increase. The ground work of past capital forr:1ation" without which such output increase would now be severely hampered, has already been lIaicl. Social capital formation, in the form of roads, cO:Tilllunications, houses, health services:and education has proceeded and is proceeding. Fuller utilization of the resulting material equipment and human abilities is • rLOW at least as important as further addition to such ment and abilities. h steady social capital formation of course continues; but developrlent has clocial" Economic development being cumulative, the need for equi~ reached a stage requirine steady and 1.)er~laps e;rovrinr: speciali.zed capital Ior}:1ation. In this respect Urv. cuay rnay be in a some-:That critical stare of advancement. In nevrly establisl1ed nanui'acturinc; act.ivities she is • able to draw upon recent technological iJl1l?rovemeD~j elsewhere; and dOl~lOstic markets for financial capi tal, tOf~ether with selective i~port controls, work to p~rmi t modern mechanization of such nevr acti vi ties. In aldol' and mere traditional activi ties, however, advance l!lay be YllOre difficult. For exaYlple, a sizable pro1)ortion of pastoral agriculture is in ole: u.n(~ larc;e famil~.r holdings farmed by customary methods. No p:reat increasG 0:[' produc- tion, and hence of e:;q)f)rts, seerr:e likely under these c '.wtomar:T nc::t]lOQS of extensive pasture, 1.1nder Yfhich the land is probably at a tenroorary ljJ::i t of utilization. ii  Change of pasture methods, tovrards a new but hir,her limit of intensive utilization, 'would involve considerable CC:i.pi tal investment, in both financial and real terms, in soil and pasture improvement, fencing, livestock imy>rovement, and mechanization of hand1ine and P1anager,1cnt. Y·Fhe- ther present pastoral agriculturists dispose of the necessary fin.ancial resources and experience any significant incentive towards erabarlcinc; upon nevv investment in intensive pasture is therefore a critical question. It nay be ~~hat incenti Va:3 can be strengthened through improvement in orc ani - • zation of ~roduce markets, Qnd that financial resources can, if necessary, be channelled through present rural credit facilities. In any event, it is clear that ~olicy should seek to remove any i.r.medirlonts to gr0111Jth of mechanized production, and to strengthen incentivES to mechanization. Through ensurine; adequate domestic credit (both urban and rural) for such pur1!0ses, by selective import controls so long as balance of DaY[:J.ents ctLfficul ties persist, by improvement of . 1/ .' comrnodi ty marketing nethods,- much can be done alonr these lines • • For both urban and rural production crovvth will involve in- creased 1.i.8chanization per vJor!-;:er wherever possible. Provision of im- :!lroved poyer facilities is, whiTe one sta2"e removed frol1 actual Droduct- ion, a project very central to out}')ut growth. Uru[uay pos S8sses no n~:1tive fuel rcso'Lu'ces, and has almost com~)leted tho initial phase of utilization of lir.li ted hydr o-electric pas sibili ties. Porler shorta.[:,e, inacti vat.inG pre- sent or potential mechanization, l'fOuld inhibit continued econom"Lc clevelo,- ment, which now lies precisely alont the lines of inclneased Y)ovrer utili- zation viherever practicable in production. y "notably in wool exporting. iii  The fina.nce of continued economic development does not nre- sent for Uruguay domestic problems as intractible as those often en- countered in under-developed countries. Reflecting and sustaining her present staGe of development, there is a e;ood flow of' voluntary cloLlestic savings channelled through public and private financial institutions. Internally, present nroblems are qualitative, concerning best ljrodu;,;tive use of savi!J.f: s , rather th~...n quantitative, arising from absolute inade- quacies of saving • • For Uruguay as for other countries, however, there is no close linkaGe bet-Freen domestic saving and the balance of payments position. relatively high level of domestic savinGS can be accom9anied by balance A of nayments1jressures, particularly v!hen such savinr;s are directed to the 1/ finance of the mechanization of -or oduc ti en "- The effective use of savin:s <•• may thus require lonE-continued controls upon imported conSWller coods, and the current availabili ti.es of foreiGn exchange can becoY:1e a factor [';overn- ing the rate of development • • Here Uruguay' s difficulties have been increased by- the circU1:1- stances cf the post-war world~ Her customary current account bal['~nce of payments' surpluses with the Eurogean area haiTe been continued, but have boen of restricted use to her, due to E;:,ropean export difficulties u!1d in- convertible currencies. So long as t he position continues, Urun_lay can suffer from a shortar:e of hard dollar currencies n.lati va to t: le :i :,,~:,ort requirements of develo'!1ment c.',Gspi te a satisfactoI':r over-all balance 01 Y""';r- l-:lents ~)osi tion and adequate domestic savin[s. y givinG rise to deIl1and for ir:lported ~i~ac hi.ner~t • -iv  A further aspect of telative development is a complexity of financilal pf\a~i:1ces and exchanfG markets armroaching those of more ad- vanced countries. lecent Urucuayan Dolicy has been to nermit maximunl lJri vate freedom in such matters, a 'Jolicy "iThich re<1uires skill in the manacement of central finances. Official misjudr:ements can occasion los ses, 9articularly of exchan~e, 'which are sudden, spectacular, and measura'ule, but which ~)robably involve no f~reater real '!raste than nls- judgements under rigid controls, and should be more readily avoidable,. • • v -  110 LAND il.ND PEOPLE La Republica Oriental del Uruguay (the P..e,-!ulJlic E":Lst of the Uruguay Hi vel" ), 011(,9 a Drovince of Brazil, declared its inde:gendence in 1825. Its only land L . . ontier is vvi th Brazil, across Yfhich moves 80r:1e transit trade bet-ween southernmost Brazil and the port of l1ontevideo. Across the Urucuay River to the 1,';est, and the Hio de la Plata to the south Trest, lies the Arr.entine • • I.iontevideo is alr.lOst GJr.actly in the same south latitude as Ca:!!e T·ovm' the Republic in area is 20% smaller than the United Kingdom, and a little larger th::tn the state of lJorth Dakota. The land is mostly flat, YJith small hills, but no mountains, and no natural forest. Its natural -oastures have been used E;ince the first settlements for r:razine;, virhich is still largely in tho form of extensive ranching. Hich arable land is scarce, and there SeeIT1S little ~rosPect of developrrent of export cereal production in present pasture areas such as hCis occu.rred in the Ar- • r;entine. The country is not 1.'[el1 endovred with rainfall, and in a c7;rcle of some 27 years there have been serious drouf,hts with heavy rec~uction of live- stock a.nd cereal crop failures. Occasional locust nlaf:,ues amnlify the in- stability inherent in agricultural and 11astoral production under. these conditionSe ;-; Uruguay lacks any knovm exploitable iliineral d.eposi ts or fuel sources. The flat nature of the terrain, and the rainfall char,-~cteristics, restrict hydro-electric ?Jossibilities.  2 - In this land there has been settled a people Euro~ean in culture and outlook; a people who have no Indian elements of blood or;")opulation. S;::>aniah and Italians predominate, but elements from all Europe, including the United Kine:dom, exist. There is a genuine respect for 'Pt~rlil.~r..~:n~ and democratic political procodures, and complete religious liberty. Universal and compulsory suffrage for males over 18 was initrod.uced in 1919, suffr~!.ee for wonen in 1937. Since 19h6 ;j';o!:len enjo::r fu~l leec::.l equality 'with men. The death penalty 'Nas abolished as early as 1907. • Since 1899 there have been 13 presidents; all comnleted their term of office except one yrho died in office. There has been no Y)opulation census since 1908, when enUl:ler- ated population totalled 1,0b,2,686 - divided into 86l.sLGh native-born, and 181,222 immigrants; of the total, there vrere L~30 ,095 C atholi.cs at that ti11e. In 1947, total PO}JuJ. ation 1Has estimated at 2.3 million, which is about the population of the state of Io"wa. Arc;entina then had a popu- lation of 16.1 million and Brazil 1r7,6 million.. A~)out 35% of the popu- • latio,l lives in a single cit~r, r-lontevideo, and only in the acricultural area of t!.le scuth and west is there any density of rural population. Outside three :cepartments in this area, all De:")artnents in Uru2,uay are less densely populated than the state of Texas. The three northern-most Departments of Uruguay taken together have only 56% of the 1)opuJ.ati.on density of the adjoinine southern-most state of' Brazil. In the ten years, 1937 to 19h7, the pODulation of Uruguay in- creased by 220,000 - or ll.l%~ a rate of human r;rovrth almost e:~.actly that of the United states over the same period. Durin£:: the same ten :rears,  - 3- the population of Brazil increased by 8.98 million (23.3~), Arcentine by 2.00 million (lh.2%), Paraeuay by 289,000 (30.9%) and Chile by 950,000 (20.850. In terms of both absolute and relative gro1i\rth of population, Uruguay has been dililinishing in size amon~ her neighbors. Both her birth rates and death rates are the lowest in Lo.tin America • • •  111* . OCCUPATIONS AND INCOME ..~,.. '!!ii thout a census, accurate figures of persons m:lployed are unavailable. An estimat.e made in 1937 gave the follo-wi.ng distribution of employed population. A[,ricul ture h5.0% LIining and Quarrying 0.3% 1.1anufacturine 13.1% Services hl.6~b • 100.0% It is probable that the proportion enga~ed in aGriculture has since fallen, because it seems that subsequent increment of DO:!JU- lation has largely flowed to the city of l,lontevideo, instead of re- maining in or moving to rural areas. An international national incone cOTI1:;Jarison for ~"estern He!:li- sphere countries made for 191+0 places Uruguay v,ri th a national incor.le per • capita of 209 comparable dollars -~?er capita, second only to l't.r Gentina in rankin~ of nationaL income per capita in Latin America, and ·pri th Chile (16h comparable dollars per capita) next. At 1948 prices, this 19ho national income :'fould oeco:TJ.e about US~; 350 per capita, a fi£ure which takes no account of' Drobablc increase of output per ca:pita. An estimate of r:ross COr.1HOdity production i~ 19116 (c iven in the next parap;raph) suggosts an income per ca:!ita of aoout US~~ t~bo at that date, and income Der capita in 19h8 may be taken as from US;:~ hoo to 450 J.:::e r capita at 19L~8 prices, ·Thns UruGuay securt':d a national  - 5- income per CalJi ta roughly equal to that of a ~'Testern EUrOT)ean country such " 1/ - as France, but less than that of the United Kingdom.- Relative to areas conunonly called under-developed, Uruguay is a vreal thy country. The Economic Department of the Banco de la Republica has pre- pared an estimate of gross c~)}mnodi ty production for 1946 uhich is inter- esting in its proportionate make-up as well as its absolute values. Total Gross Annual Production, 191+6 • I:Iillions of Pesos Percent Ir..dustrial: 1Ianuf ac turing 631q2 53.6 Power, ~':ater, Gas, etc. 31.5 2.7 Building 29.3 2.5 Hining 5.0 697,0 o.L 59.2 Rural: -'--pastoral I',Ieat and Hides 117.0 10.0 Wool 97fl7 211. ~ '7 0.3 18.3 Aerieul tural Cereals 166.7 14.1 Fruits 40.8 3.5 • I~Iilk, Ebgs, etc. Total 57.6 265.1 1,l7b:'B' These rough estiraates suggest that value of l")roduc.tivity per h.9 22.5 100.0 y In this connection, nutrition levels are of interest. Per canita consumption in various countries in 19h7 (or 194 7-1.~8) '!.'fas: __________________r_Ja_1~ories Protein Fat (rr~s) (~rans) ------'----------~----~--------~~---~------- Chile 2,393 73.5 43.0 France 2,322 75.1 66.9 Urueuay 2,1+99 88.6 86.3 Hew Zea1and 3,17h 112.4 118.9  capita in industry may be sooe three times productivity per capita in rural activities, giving a very high relative rural l;roductivity per capita compared to most under-developed countries, and particularly ~~th countries which are both under-developed and densely populated. Pastoral productivity per capita may indeed approach closely to industrial productivity, since in Uruguay pastoral activities employ very much less labor than ae;ricultural activities. An annual incor.le ner capita fiCure is more lIlF,;anin[!ful in UruC-U::l.y • than in nost under-developed countries. There is a remarkable absence of individual poverty of the deryth or 1"fidth frequen"l..,ly encountered e1se'.'[11e1'e, even in advanced countries,; the Slur.1S of r~ontevideo are a garden suburb c or.lpared 1~ri th those of Liverpool. This results partly fro:.: structurz.l circur.1stc..nces, partly frOLl conscious social "prlicies. '.L'here is no depressed class, isolated from the 111ain stream of opportunity b"" tlood, belief or leeal di.scrinination. Free • and universal education operates to equalize onportunities for ryersonal ca- reers, and incidentally to secure the de~loyment of available nersonal tal- ents in nroduction and cornmerce. It is true that very laree land hold.ings exist, narticularly in pastorai!rOduction, conferring upon their mmerS social status and high income.- But such holdings are cash-cro9ped for the market, even if not always in full efficiency, and labor remains there rur\il.l l~nd holdinpn ~:ere: 101+,129 properties of leGs than 100 hectares 25,312 " It 101 to 1,000 n 3,058 " " 1,001 to 10,000 " 46 " If r.lOre than 10, 000 n  --7- because the life or the wage is attractive, not because for 1eEal or econ- ornie reasons exodus is ~npossible. Add:Ltionally, however, in Uruguay the stat.e has for a 8ene l"- .ation pursued social policies desif;ned to assist or Drotect the €;conor:Lic- ally vreak, policies uhich \i,rere IJegun before the revolutionary I'lovenents of the first ""[orld war, and in tiraing and structure shot'r an interestinE re semblance to those of Ne'vr Zealand • • There is comprehensive legal code covering labor and social Tn,atters in the field nO"'.'[ known as "social security legislation". hour day, 48 heur workinr: 'week was established as earl;! as 1915. 1-in eiEht- :.lnL:-tum Yfage legislation began in 1923. Pension systems were started carl~r in the cElntury, and progressively extended until nri.I; t:ley cover the bull: of the em~lloyed ~opulation; education is universal, and free through the universities. These !xilicies ap:lear to have protected the ":')osi tion of TTage earn- ers, and even resulted in some relative im;)rovement for them. • Official statistics of wages in nanufacturing industries indicate r:rO"."tth of real "NaEes in rilanufacturin~ froffi--t't 36- '46' ~\:i:i..h r:cncy "'-:C.. f"t:.S li scr~c1;h:~t ~lir.hor pro- 1/ !10rtion of the money value of nanufacturing 1)I'oduction.- Indices, Dase 1936 ~ 100 Haces as per Cost cent of lfIoney of Real !.:anuf ac t urine 1Tages Living Pages Production 1938 105.4 102.4 103.2 1945 155.0 1h2.7 108.7 1946 190.9 157.4 121.3  - 8 - IV. RURAL PRODUCTION AND IJiRK:.:TINr~ The area in occupancy and use in rural nroduction is 7h% of the total area of the Republic, a very high Droportion comnared 'Vvith many other 1/ countries. - 0!1.1~r some 7% of the occupied area is devoted to agricultural lJroduction, as the following table shows: Rural Land Use in Urue;uay and New Z.Galand U~UGUAY 'I00.T Z.: JUJl~m ~O""'O~O~H~e-ct~a-r-e-s-----Per cent - -!Ser Cent _--.._ _ _ _ _ _ _ .,1~91....:_~4.:..-_ _':""'"1S-.-;:;..)3-7--~9h4 19j6Z1__~943Z4 1...;..9~37.:._,__ 840.4 1.3 • Food Crops Industrial Crops 132.9 1.1 1 .. 3 0,,3 Forage Crops and Sown Pastures 366,,4 456.5 Natural Pastures 12,600.0 11,920.9 1~1.2 a/ Forest 601.3 2.S-- In Rural Use 14,500.9 13,852.5 100.0 100'.0 100.0 100.0 lTrban Use and Unproductive 4,18Sa7 L.,ahO.l Total Area 18,692.6 18,692.6 • ~ replanted forests ,--------------------'---- Al though the area ...:leyoted to ar.ric~ll tu:'.."e is s;':3.11 comnared 'wi th pD:.storal land use, ac:r icul ture il3 im~')I)rtant j.n the U'l'ur;l1uyan econony, both 2/ for its ,roduct, the value of wh:!.ch ar:rr;rOJd~':1ately 8<1uals l')astoral o~t1)ut,- and. for its e:'lDloyment of Deople. In the ind:Lvidual fooet and industrial In 11e':r Zealand the proportion is 51/;. The occuDied rural area of 1!r- ueuay is alnost exactly equal to the occupied rural area of He1Y Zealand, in \!'hich Much of the terrain is mo\mtainous. Y Accordinr: to the E)stirnate of the Econor.1ic Je~artJ.l(~nt of the :Danco de la Republica quoted above, page 5.  - 9- crops both area sown and crop taken is highly variable, the first due largely to switch between crops planted or betvTeen cropping and the use of land for forage and pasture, the second to variable climate conditions. The result is highlY variable annual crop volume in i:ldividual agricultural :rro- ducts, and fluctuating import or export volumes, with at times a switch fron export to iw..port and vice versa. No standard crop rotation is f·olloYled. The follovnng taole illustrates, as an exanple, so~e variations in i~~ortant 8.Ericul tural cro~)s in 1>'h2 and 19L3: • Crops Change in area S01"mcompared 1N-ith year before Crop Yields (000 hectares) (kilos per hectare) i94~ 1943 1941 1942 1943 1941 Exnorts (.J) or In~orts Product c-) (000 file tric t(~ns ) 134~ of 19Ti3-- -::n1eat f79.8 -55.0 513 819 8h4 -91!.e9 I 6~o f12.6 Maize -19.6 ,-27.1 511 551 251 -17.h -IL~ .2 ~59.1 Oats -29.1 fI6.1~ 209 S7tf L~98 -12 .t~ - 7.9 -35.5 Linseed -86.3 i~1.7 322 )53 336 f32.4 1-37.0 f39.3 Sunflower -44.5 -29.7 1!49 526 204 -10.4 115.6 - 5.1 Total Cereal Crops !-31.7 -66.9 Total Indus- trial Crops -127.7 !-23.5 • The food crop area has not changed greatly over the d.ecade 1937-47, and no significant crop trend appears, 0xce-pt i 0r rice, in which area j s steadtly increasing-. . 1 Potatoes have reD] aced boans in a sj~p'nificant 1/ SOi,r.n1 area, but leaving the total area in veretables virtually unchanged.- The area devoted to industrial crops increased some 100,000 hectClres (orcO:;) in the decade, sunfloTIer cultivation increasing greatly, and sUR~r beet area .averace annuaJ_ irlnc~t,s of potatoes j~n the decade 1?J7-1;:>J t7 were 23,558 Y1etric tons, 40~~ of naticnal cons1.1..11l'nti..or.  - 10 - 1/ doub1ing.- The total agricultural area was 155,600 hectares (or 16.5%) larger in 1947 than in 1937, a change affectine 1.127~ of the whole rural occupied area. The number of aericu1 tural holdings shovvs no Great change over the past 20 years, but the proportion of small holdings (less than 50 hec- tares) is decreasing as the medium and large holdings increase in nlunoer, e;reatest relative e;rowth being in the holdings of 101 to 300 hectares. At the same time, the number of tenant farmers has increased absolutel~r, and • in relation to total Droperties, reducine the rroportion of o'::ner farmers. There is a marked increase of waLe 18.'0 2/ '::l::::,10yed.- ±7 Statistics of principal crops are: Average 1937-1941 1947 1950 Area ,,, Production Area Production Production (000 hec- (000 metric (000 hec- (000 TIctric Forecast tares) tons) tares) ,- tons) (aoo 1:1 tons) (:[heat Ll62 317 371 1=32 400 Uaize 218 131 199 115 130 Oats 88 38 68 20 35 23 12 • Barley 19 13 Ri:)e 5 17 10 35 Potatoes 8 30 8 30 }-t5 Sweet Potatoes 10 41 11 h9 50 Beans 10 4 .5 1 4 Linseed 174 95 1L~9 72 Sunflower 32 16 78 24 '!:[ine (erapes) 16 96 18 100 Alfalfa h 15 5 20 ?J Agriculturists annua;'ly at work: PerbOnfJ of "'Tare Years Farmers ~he family Labor Total 1925/6 34,603 54,287 7,540 96,1+30 1938/9 39,8h8 51,338 19,125 110,306 19h5/6 38,1+24 53,562 22,3bh 114,330  11 - Urueuayan acriculture does not, as yet.; a~Jpear to be higbJ.y mechanized, but the trend in that direction is strong. Africult~ral ir.Dlements such as,iloughs are of steel, but are in r.lost l)art still . - 1/ dra,.nm 1Jy oxen or horses. - Tractor im,orts are a1):)arently freeJ-y 11- 2/ censed, -and the number of cOlTbined harvesters in US8 he.s increased 3/ marked.ly.- There is active official seed sartin:," and classification, with distribution of aJ?Jroved seeds to af;ricu1.tlu·alists. In terms of rural land area engaeed, and. of resultinc ex.~orts, • ~)astdJ'Ct.: nroduction is the most important ir~dustr;/ in Urueuay; 90~; of t.he ~ area lS rura1 1 ana meat and hides.~ . pas +- L/ - vOr8J., ,1.n ana ., 01.7 73,.1 ..I••:L.j., ;0 f o~ e:C9ort S b . -;r va1 'UB TJore ':ofOO1 , The table on the next "'lage shows chan~es ir.. the livestock pOl")u- lation of Urur,uay; it 'will CE: noticed that oot1: cattlo and sheep ponula- tions '·. .01'·0 in 191~6 T:'lUch lesS t11an in 1]0'3, and sOr.1erhnt less than in 1930. • Zealand, al thoueh in 1~08 NevT Zea1.::"nd n8.GtUl"'cd feTfer [;}Jco'! thD.n Uru~uay • for e:;:anple, in l~ll~~ 600,000 catt1t: and 5 1.:i11ior! shsc~) ~er'Ls~'18d, and in 1916-1;,,5 r11illion cattle. In nddition to these losses, to 'hich New Zealand is not su.bject, there seeP.1 to be ir:rpcI·tant tec!1!lical dii'.L'orsnces in" the y In 1946 there were reported to be 111,972 "010u[h8 and 67,223 hQrroYTs on ar,ricultural holdin~s, vlI'i.th 3,172 tractors 3.nd 229,617 oxen. A sarlT'le check reve';J,ls that in three !l1onths of 19hf) (Cay, J'une and July) licenses .;rere ['"ranted for current import of 1, }~D2 trartors of a value of US,l~ 1.86 miJ.lion. From 128 in 1930 to 1,289 in 19h 7, 1T.i.th diminution of thrashers from 1,21.1.6 to 1.~96 over the same period. CoY(narable percentaGes VTere 80 in 1929 and 81 in 1?37.  - 12 - URUGUAY Livestock (thousand head) New Zealand Year Cattle Pigs Ho:rses Sheep Year Sheep 1860 3,632 6 518 1.~90 1888 15,042 1900 6,827 94 561 18.609 1900 19,355 1908 8,193 180 556 26,286 190B 22,449 1916 7,802 304 555 11,473 1916 24,788 • 1924 1930 1937 8,432 7,128 8,29721 251 308 346 550 500 644 14,443 20,558 17,931 1924 1930 1937 23177 6 3011841 31,306 1946 6,B2O?i 273 575 19,559 1944 33,200 ~ Of which 409~500 were milch cattle. Ei Of which 570,300 were milch cattle • • Proportion of Cattle to Sheep h Total Cattle Non-Dairy Cattle Uruguay 1946 35.0 per cent 32,,0 per cent New Zealand :\.944 13.4 per cent 4.9 per cent  - 13 - two types of pastoral economy which nay be presontl~r operating to re- strict grmvth of Uruguayan pastoral production. Most important is the fact that in Urur.uay pasture is still ]argely upon natural and uni~~roved nastures, whereas in New Zealand the 1/ area in forage crops and SO\:\'n pastures nov! exceeds natural 1;astures.- It is, of course, true that in the DomInion much of the cultivated grass- land supports dairy cattle.; nevertheless, New Zealand has underr:;one a type of intensive :)Cl,sture improvement that has not occurred in UruflUav. "2/A sim- • <- ilar i] lUI1inatinc comparison is betvreen the Ar[:,entine and Uru['uay.-· Apart from the ,asture itself, it is noticable in the Uruguayan country-side that there are f8"TV trees for aniDal shelter from ~{ind and sun. In the early afternoon, the stock (both C2.ttle and sheep) cro·wd tOGether under every available cluster of trees, in the i:1T:1ediate vic1_nity ()f lyhich the grasses are grazed much more heavily than in the treeless e:·::")C},nses of the large fields. and in New Zealand, 2S~; of the sovm grasslands are top-dressed with fertilizers annuallYe Y From Jones, Economic Geo,V'aphy, pp. 126 and 128; "Alfalfa now occupies more land than any other crop in Ar~entinao Good alfalfa Dasture is vvorth four times as much as the best combination of native SlLl7lI11er and YlTinter p,rasses. Normally, from 4 to 7 acres of native grasses yrill sUDport one full-rrovm steer, whereas 2 acres, or slightly less, will support one animal. Alfalfa pasture, combined 1.'lri th year-round crazinG, fattens steers f or market a year younger than native fl"'aSses. 1I liThe country (UruLuay) as a yrhole haG raade Ii t,tlc nse of alfalfa -:!astures; oats furnish the chief introduced fodder~ Hor.rever, native erasses are soncwhat richer than those of Ar~entinaon  - 14 - Uruguayan !,astoral 1}roduction ix'ould seem to be still in the stage or extensive ranchine r&.ther than intensive farminG, and may be inca~CLble of ::::ro,,-;th TJi thout a shift of ~astoral techniques from the \3X- tensi ve to the intensive, a shift involving sir~nificant ljrivate rUY.'al investment :tn pasture in~rovement and stoch: He.nagement., Rotational erazine, for example, and 1:101"e careful breedinc control involves ~Tire fencinc_ Pasture im9ro'l,rement, YTi th increasinr area of cultivated grass- • lands and forage crops, would Drobably require creatly increased use of fertilizer. At present, the only domestic output of fertilizer is as a bY-!,Jroduct of meat freezing and 'Jacking" and small amolmts of chemical fertilizers c Volu.rne of Y)asto1"al nroduction does not degend only upon Cl[!gregate livestock 1')opulations, but also u1Jonyield 1)81" anilrtal. Pasture im~)rovement is likely to lead to p'ain on t.his score also; meat can be fa.ttened quicker and y • to a better 1i;eight, and -rreiCht of i.ndividual Y'foo1 fleece can increase, In cattle ~'asturin1:: the:t'2 is a·'yrmrently an 0::1 stine and un- resolved tension of comnetitive l:J.nc.~ use vh-Lch -,rill Drobzi.bly ~)ersist l'T--rn indication of the ann"l,al vax'iatj,on of 1,"TGi[:ht of cattle is Ci '\"(:;n -- by the fol1owin~ statistics of l:le.at killed in the freGzinG norks of l.Iontevideo: Head of Cattle Averace ":ei n-ht 1)8I' Yoar Killed 'Q t (1 . J~' \ _~~_~l .os~..-_ 19h2 979,058 --- 38h~2 19h3 1,100,261 328.8 19h4 586,662 It43.B 1945 531,3 21 }J.6,1~1'1 191.16 619,L+86 h22.Lt 1947 h71,92l l.~hO .6  -15 - until pasture improvement widens in area. Cattle fatten only in the summer, and export lcil1ings are thus seasonal. But the fresh meat re- quirements of the urban concentration of Montevideo are not seasonal, and 'winter fattening for this donestic r:1arket is at present possible only in the narrow agricultural area of the south and Trest. r,x~ansion of forage crops and temporary pastures have at times been at the expense of cereal crop are~J.s, notably l,'Theat , with the result that in the recent past wheat shortage alternates with meat shortage on the domestic 1r.d.rket, • with consequential and alternating import necessities. video is experiencing meat shortage, and live cattle for slaughter are being inported from the ArGentine. Currently jJonte- At the sam.e time there were vrheat flour eX(lOrt!ilast year, replacing heavy wheat imoorts over the .'lrevious three years; UruEUay has signed the 1?h9 Internati9nal 1"Theat A;-:reement as an e:;~!)ortinG country. Consider-able i:rt,)I'ovenent in YJ"eight of averaGe '''[001 fleece has occurred, although this may be eon.nected ~artl:r 1'":1t11 cha.nGine: t:V,}18 of • sheep used. In 1900 the average Yiej.ght of fleece per sheep shorn Tras 1.76 ki10s; in 1937 2 Q 45 kilos; in 1 1943 3.09 kilos and in 1946 Nevertheless, Uruguayan lNool yields are still substantially 2~98 kilos~ DPI01/ those of Y Crop .yields are, of course, influential in this result~ Ikvertheless, ~crop areas are significant. In the years 1947-h8, vrheat area SOl'm in- creased 154,689 hectares, or hI.6% over area smnm tho year before, and linseed 38,557 hectares or 25.W~. Livestock inr~orts VveYe valued at US~ 3.23 million for the 9 months January-Sentember 19h7 (US~", 0.36 million same period 1946) and US$ 10.31 million for the same 9 months of 19L~8. Official Driee-fixing Dolicies for T'leat and 1."{heat on the domestic market have probably contributed to this r8sult o  - 16 - 1/ New Zealand. - An addition of one-half ki!bo of 1"rool per sheep shorn in 1946 vrould have increased Url1.f3uayarJ. wool exports by about U~:; 7 l'1illion· o.nd at that time yields 1;yere about one and one-half 1(ilos less f8 r sheep shorn than in New Zealand. 'Teight of fleece ner sheep depends largely (cli:llate 2/ apart) upon nutrition, exercise clone by the animal, and shearing methods.- In New Zealand, for example, sheep are handled by trained dogs, and seldom permi tted to run during mustering~ in Uruguay dor:s are rarely lJ.sed, shep- herds using horses only • • Even after the season's shearing has yielded a given qual1- tity of wool of given quality, imp:-'ovement of cOl;rrnercial ~·ilethods posal would increase both the foreign exchange income received, and the of dis- proportion accruing to grovrers themselves 9 y In 191../.6 Urucuayan sheep ·were h8. 6% eros s-bred 17i th high ~rol)ortion of HevI Zealand impcrted stock; in 1944 New Zealand sheep vrere 67% cross-bred. Yields 1Tere: Avg. per • Sheep Sheep shorn Shorn Total sheep (excluding ':iool (exclu- Poprlation lambs) Per Cent Production ding (r1il1ions ) ~~~i11ions ) Shorn llnillion kes) Lambs) Uruguay 1946 19056 16.57 84e91 58.50 3,531 New Zealand 1944 33.2 29.80 89.75 149.69 5.023 In Uruguay tn 1946 there \·vere 15,293 sheep shorn per sheerinG mach- ine in use; in New Zealand in 1942 there were 728 sheep shorn per sheering machine in use (both excluding lambs shorn).  - 17 - Prices are made and eA~orts affected by wool export af,ents acting upon cabled instruction frC':u overseas" In Australia and New Zealand the annual 'Nool clip is almost wholly disposed of through local p1.1blic auction, 'wi th buyers' representatives from all interested markets bidding in open competition, a method. which ensures that a genuine 'world price is taken. Uruguayan wool export agents obtain their wool suuplies either from wool commission agents or by direct treaty with the rrorJers, fre- • quently under contract made before the vmol is clilJped. ensure that growers are ay·rare of current prices, the Uruguayan In an effort to of Acriculture broadcasts by daily 'wireless bulletin details of current I~inistry wool prices in l:Iontevideo, but the grower can still remain at a (~isadvan­ tage of market iruoTInation 1'·"hen bargaining. These considerations sue:gest that, even aparc) f rom iY.T~)rovement of pastoral techniques, improvement of lilTOOl handling etnd. laarketing Plight • significantly increase both the foreign 8xbhange income on aCCoill1t of wool, and the loca.l incomes of nastoralists themselves, v'lfi th ac1c1.ed ability and incentive to improve "Qastoral methods.  - l~ v. WL!llilUFACliURIIJG PRomCTION UruguaYan industrial production is increasing in volume and employment, and spreading geographically froID the urban concentration of i';ontevideo to the smaller to"'IlS of the south and west.::I 'ilhile the largest industrial activities are still the processing of pastoral pro- ducts for export (notablY meat freezing and packing) there is signifi- cant growth of commodity production for domestic use. In many indus- • tries, however, production represents the processing or assembling or imported semi-manufacture.d material s or parts. Urugu~ has consistently and for a long time followed a policy of encouragement to men'lfcaturing industry. In addition to high import duties on manufactures, a quota systeffi has been used to favor domestic DUh~ufactures, particularly since adoption of a policy of attempted bi- lateral trade bala11cing during the depression of the 30' s. During the recent war ir~ort shortages re-inforced protective encouragement, and • currently import licensing in conservation of foreign exchange operates as comp'.ete protection in many activities. It is doubtful vThether in- dustry in Uruguay could have expanded greatly outside the fields of pro- cessing agricultural and pastoral products wi thout these various forms of protective encouragement f since the ct/untry lacks many of the custo- mary industrial requisites. There are no domestic sources of fuel~, and the only local In this, reduction in 1946 of eleGtric power rates in the interior to a uniform scale vlith rates 81most equal to those in Montevideo has been an important factor.  -19 - power potential is hydro-electric on lilIli ted scale. There are no ..gnificant stands of timber mineral resources, and insi. The domestic con~er market is small, of about the size and income structure of the State of IOl'7a; large-scale industrial production, therefore, depends upon export possibilities. At the same time, many of the industrial plants now in Uruguay are modarn and efficient, due to their comparatively recent establish- ment; there is very little obsolete equipment. Horeover, the Republic • possesses an alert and intelligent populace with free access to general and technical education, As a result the level of technical abilities is high, and the capacity to organi ze and administer industrial and other productive processes exists. This in itself constitutes a. valuable natural resource partly offset-cing the absence of physical industrial resources. The possession of industriel skills could itself permit sound inc'iustrial growth of specialized production (including export) when those skills are scarce, as they are in Latin. America" Thus the two • bro"ad categories of industrial production saitable in Uruguayan conditions are the further processing of domestically produced agricultural and pas- toral products, such as leather and wool, and the manufacturing of light consumer and capital goods for ~!hich value added by manufacture is high in relation to materials used. The first category alrea.dy possesses overseas markets when exported at a lower stage of processing, the second might well find export markets in other Latin American Republics wi th less developed indu~'trial skills. And for the second categol'Y im- port of any or all of the necessary raW or semi-manufactured materials would be acceptable.  -20- Development of basic heavy industries IIUst awai t discovery of sui table mineral resources either '"'i thin the Republic or along the river systems adjoining its territory, and the utilization of neTI power sources presently unknown. stati stical mate:t"ial illuminating the structure of Uruguayan manmacturing is not available for any recent date; the last industrial census was in 1936G At thGl.t date, of 11,470 industrial establishments reported, 8,434 or 73.51b employed 1 to 3 workers each, and only 220 or • 1.;ft1, ellIployed 50 or more l"orkers each. Y A very great part of so- called "industry" \'I:as at that time handicraft production; no brecl<down by numbers of markers engaged in types of activity is unfortunetely, avc:J.lable. For 1936, the t\JTO princi?Jal types of ma.11.ufacturing mentioned earlier (the processing of rural cO!ilffiodi ties I and. the \,'orking up of im- ported materiEls) are clearly distin&uishable, as the follo 1'.'ing table • shows: Urugu.ayan Manufacturing Raw Materials and Packing Used, Year Total Value of 1936 Raw Materials National Forei~ end Packing Origin Origin (million pesos) (per ct~nt) (per cent) Food, Drink, Woolen, Textiles & Leather 96.7 89. 4 10.6 All. Other Ivianuf acturing 36.4 32.2 67.8 Construction 8.2 B1.2 18.8 Y And only 99 (0.9%) more than 100 workers eac~.  -21- The tables (on following page) bring out the relevant differences between these two categories of manufacturing as they existed in Urugtlc;lf in 1936. Those using a high proportion of imported materials are typi- c[uly smaller t use less motive power per 'rorker, and add much more value to raW materials used than do the more purely processing industries. Nevertheless, the added value per worker is someVThat smaller than in the processing industries, a not surprising result in view of the smaller horse-power per ,,"l'orker used • • Available statistics of growth of manufacturing between relatively to the processing industries. 1936 1946 show that manufacturing using much imported raw materi.als is gro1J!ing No data is available revealing and possible changes of value of productivity per capita in the two cate- gories, although relative movement ot grCG$ value of product per worker suggests there may have been some small shift in fayor of "other manufac- turing". Remembering that the Uruguayan countryside is liglltly 9 0 pulated, • and not likely to provide any important manpo'lJ'!er potential for future manufawGuring gro"Nth, the differing rate of manpower growth in the two categories of manufazturine; is very interesting. Relative to over-all increase of workers engaged in manufacturing, processing has been losing manpOYler to other manufacturing. COL.lparison with New Zealand suggests that this is a process which can continue, 1i7ith relatively greater groyrth of mechanization in the processing industries than in the other}:! y Uruguay 1936 l\few Zealand 1936-37 Persons Occu ied H.~. Per Persons OC~ ied H.P. Per Total ~orker Total Worker ood, Dr~nk. lJoolen Textiles & Leather 30.558 46.3 1.54 23,64~ 26.2 4.57 All Other Manufacturing 35,404 53.6 1.31 66,648 73.8 Total 65.962 100.0 1.41 90,291 100.0 !I Leather included in "all otherlf.  •Urugga:tnn Manufacturin~l 1216 • Table uAu ~'Tumber of POl·rer Installed Ra\,l 1.;ateri17 Add.ed Ve:lue Establish- Persons Occu12ied Total H.P. per ConsumeCLb Total As % of ments Total Per JTIstab. H.F. Person (Jnillion ]2e soo) (ill. 1)8 so s) Re.,., IvIat e rinl Food, Drink, Woolen Tex.tiles and Leather 3,990 30.5.58 76.6 47,04rJ 1. 54£J 96.65 46.99 48.6 All ether Manuf ac turing 6.559 35.404 5L,·.0 46.252 1·31 36.Jl l 44.)6 121.8 Con~truction 817 15,.596 190.9 422 8.23 8.20 99.7 ~ vloolen textile R.l? installed included under lIall other". ~/ Including :::>acking materials. , f\) f\) Uruguayan Manufacturing, 1916-194·6 Table liB" 1--9-----z:}o~ 1 9 3 6 (Indices: 1936 ~ 100) I 946 Gro s s Va.lue Gro s s Value Adde d Value Gross Value \1orkers of Product per Worker per Worker \~orkers Gross Value Gross Value per \~orker Engaged (million _-p.) _ (pesos) ("esos) Engaged of Product 'Per ~lorker (peso s) Food, Drink and Leather 24,985 136.9 5,478 1,740 127.9 229.6 179.9 9,832 All Other Manufacturing 31,346 90.5 2.895 1,462 159.6 300.7 188.0 5.442  - 23- VI ~ FUEL MID POWER There are no useful resources of fuel in Urub~ay, and the only internal hydro-electric power resources are dependent upon the Fio lTegro in flat COlli"'ltry of uneven rainfall. Totel -PO'l7'er possibilities of Pia Negro are estLuated a.t 458.000 kw and above 500 million kwh annually. In addition, the Uruguay River offers one site (Salta Grande), but must be developed jointly with the Ar~ntine. At present one hydro-electric plant with 128$000 kva is installed on Bio Negro • • Fuel is imported mainly as oil; greatly over the past 10 years,Y coal imports have diminished with disruption of the earlier British shipping pattern of coal outward bound and foodstuffs and agricultural raw materials inward bound. Over one-qu,arter of the coal imported is re- eXforted, mainly in ships bunkers.?:! Imports of cIUo.e petroleum have increased markedly and con- tinuously, countries of supply being Venezuela, Ecuador, Peru and. Arabia. 2l Y Coal imports (in tons) were by countries of origin; • Britain South Africa Total 322,822 401,618 333,016 394,241 5,423 161,880 255,005 74,245 173,343 64,291 8,729 127,447 Y Re-exports were in 1946; 62,574 tons in 1947, and 23,304 107.762 tons tons January ta October 1948, being 42%. 36% and 22% respectively of imports for the respective periods. 21 SO'Ul"ces of crude petroleum imports (quantities in thousands of barrels): Year 1937 19~9 19 6 1947 Venezuela 158 904 927 Ecuador 675 1,495 922 533 , Peru - 1,033 Arabia Total 675 1,653 2,187 2,811 4,338 Oct. 1948 2,559 673 232 !I Included in Ecuador.  -24- Imported crude oil is refined by an official Autonomous Entity (.AHC.AP) for sale through both its own distribution system and by private companies.}} Part of the increase of :refinery production (and conse- quently of crude oil import s) has been in replacement of coal imports and of oil products, imported and refined, and part has gone into increase of re-e:r.port and ships bunkers. 5./ Average annual illllJOrts of fuels and lubricants were valued at • uS$ 10.5 million in 1935-39 (18;'0 of all imports), uS$ 1404 million in 1947 (77~' of imports) t and US$ 16.2 million annual rate in 1948 (816 of all imports).2J y Product ion ~ the .Al\fC.AP Re:' iner~~ (quantities in thousands of baI'rels) Crude Yeax Treated Petrol Kerosene Gas-oil Fuel-oil 1937 123 416 141 52 III 1,765 789 ~56 159 i§~~ J8Q 2,501 795 421 226 943 1947 ~t955 813 488 244 1,325 • Oct • 5./ 1948 ,130 980 Trade in Refined Fuel-Oils 559 (quanti ties in thousands or' barrels) 212 2,243 Imports of refined Re-e]qJorts and Year fuel oils for dO~S- bunkel~S of re- tic consumption fined fuel-oils 1937 1,601 23 19a9 1,811 a 71 19 6 1,297 733 1941 1,237 1,419 Oct. 1948 asl 972 !:I Imports of refined fuel oils for available. re-e~ort and bunkers not ~ On January to October figures.  - 25- In 1943 UT;,Jwhich supplied 99.5% of power consumed (exclusive of po'wer produced by industries for their OVID. use) utilized an installed c&pacity of 165,000 kw of which 75,000 ~1 were thermal, 23,000 1a~ diesel end 64,000 kw hydro. In 1949 the hydro \'Irillbe increased to l28~OOO kvl, bringing the total to 225,,000 kw. The 1936 industri?~ census estimated private generating capacity installed in industries of all types, exclu- sive of tramways, at 16,001 kilowatts.Y The tramways installations are now used chiefly as standby, as the tramways purchase 909b of their energy from UTE . • 1.8 million kwh. In 1947 Montevideo and vicinity. UTE sold 370 million kwh, 36i, of which was consumed in Privately owned public utilities supplied about There is no data on the all1mmts produced by industry for its own use or the installed capacity in industry in 1947. At. the industrial census of 1936 Uruguayan rnanufactu~ing reported 93,299 installed horsepower, of "vhich 63, 343 horse-pol~jer (18%) Was derived from electric power purchased from public utilities. Jf Since that time sales of fuels and electric power for domestic consUIr[>tion have increased • considerablY.'tzj Y JI Domestic consumption of fuel oil (including diesel) Voi.ces Lloctricas y los Telefonos del Estado (an autonomous Govtt. Corp.) 2/ 13.177 kw in manufac,turing plan.ts alone. Installed manufacturing horse-power in 1936 was: Steam 16,927 Internal combu~tion 12,829 Water power 200 Electricity - purchased current 63,343 Total 93,299 Domestic Consumption of Fuels and Power (thousands of barrels) a l (million kwhlb/ Year Petrol Kerosene Gas-oil ruel-oil 2:/. Electric PoweJ:-=1 1937 815 318 52 1,194 172.8 11993~ 853 334 119 1,3BZ 212.5 46 84~ 426 175 1,576 340.9 1947 1,080 548 210 1,858 370 0 ~I Oct. 1948 1,008 541 221 1,763 366:5 ~ !::I Not including sales to u'll}. ~ Sale~ by UTE It ::J Estimat~d.  - 26- increased 51% from 1937 to 1947. and 78% to 1948 annual rate, kwh of elec- tricity sold by UTE increased 115~b and 155)b over the same periods; the de- mand for electric power was 587& industrial in 1947. These differential rates of growth suggest that industry may now be using a higher proportion of purci1ased electric current to total installed horse-power than in 1936. Despi te the large grol;~h of electrical kwh sold by UTE, purdases by UTE of diesel and fuel-oils for generation of electricity have not in- creased at a similar rate. UTE purchases from AHC.AI', which were 316,384 • barrels in 1937. were 432,901 barrels of diesel and fuel oils in (37;b increase), and 523.542 barrels on 1948 annual rate (66% increase) compared with increase of energy sales (kwh) of 115% 1937-1947, 1947 and 155% 1937-1948. Thi s reflects the contribution of hydro~current generated c,n the ~u site at Binco~. the first units of which came into production in December 1~45.!I The growing consumpt:lon of fuel and power in Uru~ is indica:.... • tive of economic development, in the sense of grovJing mechanization of production and transport. Although Uruguay is, by Latin American stan- dards, already well advanced in this respect, com:parison with a similar, but more developed, economy suggests that such growth will continue as output and income increases. lic:r. example, in Ulugllay in 1944 total con- sumpt10n of electric power was 123 kwh per capita of populat ion, cOL1pared !I Energy Generated: 1944 1946 ...,...--- 1947 1948 Thermal Plants 91.7 61.1 16.8 16.6 Diesel Plants Hydro Plant~ ~.3 7.7 31.2 a· 7 .0 2 9.9 73.5 Per Cent lOQ.O 100.0 100.0 100.0  - 27- with 1,152 kwh per capita in New Zealand. In 1936, Uruguayan manufactur- ing reported an installed horse-power equivalent to .045 horse-power per capi ta of total populati 0.1, cOIllpared ,on. th ,154 ho rse-power per ~iPi ta of total population in New Zealand manufacturing in the SaIIle year.- • • Y Use of this average, rather than h.p •• per manufacturing i;'1orker, em~ braces differences of manufacturing employment as proportion of active population, and of active to total population. It thus reveals the mechanization of manufacturing in relation to the whole economy. It is of interest to notic;e that in New Zealand the index shows steady growth, being .137 in 1932; .154 in 1936 and .201 in 1943 (installed manufacturing horse-power per capita of total population at each date) •  - 28- VII. TRAl\iSFORT.AND COMI'!m~IC.A.TION Uruguay and Argentina are the only countries in South America with well developed railway systems. In Uruguay, 1,874 miles of track were in 1948 con~olidated 'l).nder State oVlmership and management by pur- chase of British railway companies. The system is radial, with lines mainly converging on Montevideo. 1tIuch old eQuipment is in use, and both passenger and freight rates are comparatively high. Traffic of freight and passengers ~ not increased significantly over the past decade, re- • fleeting the comparatively early establishment of railways and the sub- sequent grmvth of road traffic):.I The national roads of Uruguay have a total length. of 2,611 miles, and there are about 5,900 miles of departmental roads, constituting one of the best and mo st modern highway systems in South America. In January 1946 registered motor ve~~cles included 47,800 passenger cars (49. 4%made in the United States and Canada), 19,000 trucks (10.5ro) and 1,550 busses • (20.3~). During 1946 and 1947 a total of 6,822 passenger 5,7 43 trucks, busses and chassis for trucks and busses were imported, to an increasing extent from European sources as they r~-opened~ vehi~les and ~v.hile Uruguayan transport is well developed in South America, it is not so by Ne\,.r Zealand standards, a result similar to that found in tJ Bail Traffic 1938 1946 1947 .Passengers (000) 5,715 6,451 6,547 ]'reight - .A..Ylimal s 505 403 309 (000 tons) ~ Other 1,322 1,661 1,432 Total Frei~t 1,827 2,064 1,744  -29- agricultural and manufacturing prOduction}:.! Nevertheless, it does not seem that present lack of transport facilities is impeding economic develop- ment in Uruguay as it may be in less developed countries. Progress will involve transport improvement and extension, occurring in pace with develop- mel1t itself rather than as a condition permittip.g development!> • • Transport Facilities: Number of Population Per Unit Uruguay Ne~~T Zea1a.~d Railway miles 1,217 482 Road miles 268 31 Passenger cars 47.7 7.4 Trucks 120,0 33.3 Telephones 38.3 (,.1  -30- VIII. COMI·/LERCI.A1 BANKll~G AN]) IDl.IESTIC FIN.ANCE The Banco de la Republica is a State-ovITled b~, founded in 1896. While not purely a central bank, it performs central banking functions in addition to a considerable volume of commercial banking business, in much the same manner as the Commonwealth J3cmk of Australia. It is di vided i~to an Issue Department and a Banking Department (in this respect like the Ba.Ylk of England), the former concentrating the central bank functions, the latter conducting ordinary cOUllnercial banking business, and carrying • the State acco-unts. l'he Banco de la Republica operates 6 agencies ~n Montevideo and 56 branches in the country. has as subsidiary the Caja Nacional de Aborros y Descuentos (National Savings and Discount Co~ora­ tion),Y and owns ap.d administers the lilercado r de Frutos, a. warehousing system facilitating commodity credits. Other State financial institutions are the State Post Office Savings Barn.:: (similar in operation to the English system, but some\;!Jhat dif- f erently admini stered) , the State HOI'tgage Bank (selling mortgage bonds and • re-lending the proceeds) ,gj and the Insurance Bank (conducting all in- surance business under ~ legal monopoly t not yet effectively complete pending liquidation of some private corporations). There are 9 foreign comr~ercial baru{s, of which most prominent are the Bank of London .;md South .An!erica, the National Oi ty Bank of New -y In fol~owing statistics this subsidiary is not shown separately. Y The Mortgage Bank. founded in 1912, is interested in facilitating ownership of both urban and rural homes, and in aiding small-soale land-ownership among farmers. It has undertaken to facilitate imrni.,.. gration and the colonization of rural areas. It conducts about half the mortgage business of the country~  - 31- York, and the Royal Bank of Canada, and 42 national banks, of which 29 are III ral., Commercial ba~ lending is conducted principally upon the English over-draft system, although latelY there is a gro"ving practice of maintain- ing a :,?roportion of loans against notes and bills re-discQuntable with the Ban(;o de la IrepUJJliCa • Y Interest rates on over-draft loans on unquestioned credi t are 6c 510 to 7. 5~b, depending upon vo lume Q me following table shows principal aggrega.te commercial ba..Ylking • figures for a recent date. The high proportion of time and savings d,eposits permi ts a volume of advances which is very high in rela.tion to sight or short-term depositsli Facilities for domestic savings through cO!ilffierciaJ,. and savings banks are well developed, with those insti tutions re-lending such savings in the ordinary course of financial business. U:ruguay: Commercial Banking as at August 31, 1948 (000 pesos) D e p its 0 ,f3 • Capital and Less than. 30 days & over Reserves 30 days and savings Advances Banco de 1a Republi~Eil 93,655 106,631 146,868 186,579 state Post Office Savings Ba.$ 4,309 72,056 bL ,;:/ 15,525 ~ 22T;716 state r.:iortgage Ban Commercial Banks: National 80,400 ~,475 222,530 343,129 F(reign 10,861 .199 10,353 51,270 204,750 249,305 451,630 808,694 Totals Y Excluding ell business with Government and Government enterprises, and commerc i81 banks t depo sit s .. EI Pesos 72,7 million of ti tIes in custody of Banco de la Republica. ::J November 1947 (latest available figures). 9J Pesos 215.5 million mortgage banks issued. y This is convenient to the commercial banks because of the managerial dif- ficulty of lll8intaining daily the legally required reserves against ~eposits.  - 32- An additional flow of money savings not revealed in the banking fi~es arises from the pension system. Compulsory deductions from salaries and wages and employer contributions accrue to the administrative custody of the various Cajas de Jubilaciones, which re-invest sub stan - tially in internal Government securities, Holdings of internal Government bonds by these pension organizations were 203.5 million pesos at Ju.ne 3C', 1948. A breakdown of commercial banking 10ens made by the Banking De- • partwent of the Banco de la Republica (given i.n next table) shOt':'s that over the past five years greatest increase 118.5 been in loans to producers, ':,1. th cOilil!1erciel lending increasing relatively Ii ttle. Advances of Banco de la Republica (excluding bcnking re-di scounts and Q£vernment ousiness) (thousand pe so s ) DECEEBER 31 1938 1942 1946 ~947 30,672 34,779 42,610 55,9\t8 • Pastoralists Agricul turali st s ~,972 9,842 14,011 20,069 Industrialists ,253 9t921 15,686 29,757 ". Total 42,897 54,542 72,307 l05,774 Merchants 8,831 12,036 13,024 19,317 Professional 1,263 2,036 2,553 3,110 Proprietors 5,150 4,076 2,773 2,691 Various 7,872 9,225 9,148 11,237 Total 23,116 27,373 21,303 36,355 Grand Total 66,013 81,915 99,610 l4Z,129 There is a functioning stock exchange t"tith call-overs twice daily_ The administrative practices of the exchange sO~.le·~:hat restrict the maximurn volume of business that can be handled daily. but do not at present operate as a restraint, since the marWet is still thin 'I although tending to grow.  - 33- URUGUAY Montevideo Stock Exchange) Year 1947 TOTAL ISS{JED BOWS ~ Nominal .. TOTAL DEALINGS Market ~, Average- .AND STOCKS Nominal Dealings Value Value Price Value as 'fo of (000 issue at (000 pe,so s) pesos) nominal values Government Bonds 73,767 72,183 97.85 579,513 12.7 • Municipal Bonds Mortgage Bonds 10.635 53,518 10,354 52,738 97.36 98.54 78,936 215,503 13.5 24.8 Shares and Debenture s 60,401 166.344 139,377 43.4 Totals 198,321 301,619 1,013,329 19·7 ~ At end of year • •  . -··34- IX. CENTRAL BANKING The central banking function of note issue is in the hands of the Issue Department of the Banco de la Republica, which issues notes against fiduciary backing to defined legal limit, and thereafter against 100'; metallic cover. The fixed fiduciaxy element is 60 million pesos, being the capi- tal (excluding reserves) of the Banco de la Republica, and the variable • element is commercial paper re-discounted by the Banking Department to a maximum of 50 million pesos. to a limit of 12 million pesos; Y The metallic backing may include silver thereafter cover can be only gold, as lOYfo cover to additional notes issued. These requireillents, combined with the Banking Departmentfs obli- gation to maintain 20% reserve in gold or notes against d~osits, result in large gold holdings by the Banco de la Republica. The position at .August 31, 1948 is shown in the table on the follo?:ing page. At that date, tl1e note • issuing authority held pesos 202.7 million in gold against notes held out- side itself of pesos 281.9 million, a gold reserve r~·~;te ag8.inst notes "in circulation ll of 71.9%. The Banking Department, ho~ever, is itself required to maintain a 20jb reserve in notes or gold against its deposits.. Tre8.ting the Issue and the Banking Departments at1 a single entity, iI;illlobilized gold holdings increase to pesos 229.6 milliOn,,2} and the Bank's gold reserve TIith prohibition of re~discount of any Government short- or long- term pa~er •. , The Banking Department's \"Thole note holdings and pesos 26.87 nr.j.llion of that Depart~entls gold holdings were irumobilized as required reserve ag~unst deposits, See footnote to table on next page.  - 35- against notes in circulatio~ outside itself (pesos 242.6 million), and its deposit liabilities (pesos 331.C million) becomes 40%. Notes Issued and Holdings, August 31 J 1948 (thousand pesos) Reserves against total issue: Fixed fiduciary 60,000 Be-discount s _~,500 68,500 Silver 10,957 Gold 202,136 Total notes issued 282,193 • Held by Banco de la Republica Issue Iepartment Circulation out side Banco de la Republica Held by Bal1king Department 28~~1 39,32P ~.~~ 2 , Commercial and Savings Banks 42,469 The Public 200,112 242,581 ~ All of ~hich, or their i:,old equivalent, were immo bili zed by re- serve requirements of the J3ruL'ting Department. T.18 situation was: • BarLdng Department: 1\lotes held - 39,323 Gold held - 81,144 120,467 2~ reserve against deposits of 331 million pesos 66,194 Available gold (notes if gold tro..1').s- ferred to Issue Department) 54,273 Increase of note circulatio~ a~d of deposit liabilities of the Banco d~ la RepUblica r~s necessitated i~creased gold holdings by both Department s of the Bank.  - 36- Reserve Gold Held by BaIlco de la Republica (millions of US$) Banking Issue Departrnent Department 1938 - :ceCa 31 13.2l 53. 42 1940 - Dec. 31 16.66 53. 42 1943 - Dec. 31 16.66 73. 46 1945 - Dec. 31 16.66 83.46 1946 - Dec. 31 16.66 113.46 • 1947 - 1948 - Dec. Aug. 31 31 16.66 16.66 113. 46 133. 46 The I ssue Department has absorbed US$ 80 million of gold sillce 1938, and both ~partments together TJS$ 83.5 million. l.1hether any of tillS gold becomes available for balance of payments purposes depends, so long as present banking laws remain, upon possible future decrease of note circula- tion and/or the Banco de le Republica's deposit liabili ties. Such decrease • could start 1,ti th economic recession emer5ing eiljher internally or impacting upon Uruguay from overseas. But at such a time it is very probable that in pur sui t of policies of "full employment II the authorities would tal{e action offsetting, decrease of internal money supply, and release of gold would at most be ver-J smal~. The release of gold from reserve requirements by other methods would require variation of the statute lews governing those requirements. At a time of economic recession end/or acute bAlance of )ayTnent difficul- ties, the aut:norities would have to consider the advantage of a once-over  - 37- increase in availDble gold against the nore inta'1gible di sadvantage s of any change of public esti!nate of the soundness of the currency. Action "."[hich tended to precipitate any flight from the currency could bring hea~l pres- sure upon all available gold and exchange. In addition to the quasi-mechanical function of note-issue, the Issue Department of the Banco de la Republica·:.;arries out more general central banking functions, exercisirg sernt illy over the lending policies of the cODllTiercial banks with power to advise the GoverTh-nent upon a'1Y • legislation or administrative changes thought necessary. cOll1J.ilercial banks, and t]:1..is Was done. In advised -ehe Government to increase the legal minimuIn cash reserves of the 1944 the Bank Minitm.lIll reserve requirements were doubled, from 16~b and 8% of sight and time deposits respectively to 3q~ and 16'/0, v!i th total expansion of deposits for each commercial bank linli ted to five 'Gimes its capital. T:lis increase of other banks' reserve requirements was in pur- • suance of a!lti-infla:t~ionGl'Y policies by the Banco de 18 Repl.lblica, which in its Annual Reports has shown itself aware of the inflationary conse- quences of favorable balance of payru3nts duri::.1g wBr-tit1e. These policies were carried through into i ts own lending, the influence of wIlieh is con- siderable, since it is both banker to the State and official enti ties and by far "G:1e lergest commercial banker in the CO\Lytt~T. The table on the next J?age Su..:L·'.f1rizes aggrege.lce changes in the main loan categories. ;Dur- ing the period 19~3 tllrough 1946 polic~T was one of heavy offset, with care that u.efl£",:'tiioi_Bi'Y pressures so origirJ.G.'=L-ting did not impact upon producers.  Over the whole period 1941 through 1947 , only loens to producers (pas- toralists, agriculturalists and industrialists) Sh017l material growth, net accommodation to the State decreasing considerably. Lending Operations of the Ben~ID de la. Republica (thousand peso s) Aggregate Changes during Years 1941 1943 1941 1942 through 1947 through 1946 1947 • Loans to the State Loans to the Autonomous Entities Loans to Producerd /15,450 I- 334 I- 7,454 -13,009 - 8,413 1-17,765 70 122, 263 I-8,807 /33,467 f 9,052 /-24,704 /- 728 1-58,686 I- 9,662 Loans to Commerce f 630 Re-di scount s by Other Banks - 1,662 1-16,586 Net Accommo~ions to the state t1 3,438 -29,967 f 1,926 -14,603 Autonomous Entities t 2,661 -14,599 /-12,221 f 283 ~ Pastorali st s, agriculturists, and industrialists. • E1 Loans to, less deposits of, the State and the Entities. The result of these Oan..\dng policies cOlubined v'Jith conservative state fiscal policies has been an increase of money supply which is small by c04~arison with other Western Hemisphere countries, as the following table shows. Price inflation has also been less thai. in other Lat:Ln American countries.  - 39 - War-Time Increases of Money Supply arl':~~'po st of Living (Indices: 1938:: 100) Money Supply Cost of Living 1946 . 19tr7 1947 1948 Urugu,ay 288 302 179 179 July Brazil 355 392 337 362 Oct. Argentina 373 453 182 193 March Chile 455 551 363 342 Aug. Mexico 474 473 ~cr;J! .... t..t . 33#lNov. • Peru Uni ted S'Gates 559 346 638 357 255 151 345 Dec. 171 Nov. 21 Btetail prices . •  -40- x. PUBLIC FIHA.w''CE Uni tary 'budget practices are not followed in Uruguay. In cen- tral Government finance there is a general budget covering the greater :part of current fiscal revenues and expelldi tures, certain S"pecial non- budgetal"Y accounts also handling current funds, al1d Government expendi- tures on capital account principally ageinst internal loan funds. The Goverl~ent~ however, often operates throu&~out an entire fiscal year wi thout ~JY formally approyed budget - as was the case in 1947 . Current • stat elllent s of Government revenues and expenditures are presented in a form different froln the budget, al1d comparison of such statements 'With the bud- get sis in consequence unrevec,ling in detail. It is the general fiscal objective to achieve a balance in the General Bu.dget and cllrrent Special .Accounts -- that is, i~ the ctlrrent revenues and expenditures of Government. ~he capitel cost of ne,~! public works are not borne by the buclget, but financed by issue of internal bonds • whose service becomes a budgetary charge. A public works plan covering a number of years is Gll?proved by Congress, together vlith authority to issue corresponding internal bonds; and the works are executed at a pace deter- mined by bond sales, labor and rmachinery aveilacilities, etc. T~e current fi ve-~lear public l':orks plan, kno':'Jn as the "Berreta Pi an II was approved in DeC8illber 1944, to a total of 70 million pesos; on October 31, 1::;48, cor- respo_'lding internal debt amoQl1ting to 44.3 million pesos had been issued' 41 Public works covered include State railways, new roads, irrigation works, public buildings and the like. External loans are seldom sought for these purpo sese  .... 41- Despite the fact that such capital e~~enditures are not a direct budgetary charge, the objective of current account budgetary balance Was not acnieved during the War years. .After a period of b.udgetary surpluses, deficits~emerged from 1939 through 1945, with a return to small y surplus in 1946. These war-time deficits, totaling pesos 104,,6 million for t:le seven deficit years, were funded by issue of internal bonded debt at 5~:' interest rate, 'Irithout c:ny prolonged recourse to CentrC'J. 3ank float- . lng delbt • Y • materially since Expenditures through the Ordinary Budget have increased get expenditures from 1939, mostly during recent years. Increase of total bud- 1939 to 1942 was 16.7%, and "from 1942 to ~946 48.510, giving a total increase froril 1939 to 1946 of 73. qa. All groups of expenditure increased in much the same proportion.}} refense constituteo. about 127~ of total budget costs in the period --- sOtlle1:vhat smaller than edu- cation, which was abou-G 1310. Budgetary cost of total debt services, both in:liernal end external, v/ere about 23% of the budget over the whole pl;::;riod • • The unchanged relative in the re1ati ve costs I.)f ~xrden of debt services conceals a change interna.l and external debt services. getary costs of internal debt services increased materially, from lC1ib to Net 'bud- 1T}6, while the budgetary cost of external debt service diminished frOID 1947 budgetary details not a:vailable. For the period 1941 through 1946, net budgetary deficits totaled pesos 94.2 mi1lion~ At December 31, 1946 corresponding inten1al 5% debt re- maj.ning outstanding totaled pesos 81.0 million, plus pesos 10.4 million 2 1/416 debt issued to fund advances from the Banco de la Republica. 11 See Table on next page.  - 42- UEUGUAY Expendi tures of Ordinary Budget 000 Pesos Per Cellt 1939 1944 1946 1939 1944 1946 Defense 11,423 15,1.78 19,999 11.8 11 . 4 11.9 Public Health 6,957 10,975 13,572 7.2 8.2 B.l • Other Nlinistries 29,138 37,17B 42,075 30,1 27.9 25~1 Total Executive 47,518 63,331 75,646 49.1 47.5 45.1 Presidency, Legislative and Judiciary 2,901 3,549 4,166 3.0 2·7 2.5 '. 'I Education " ) 11,162 ) 12.9 ) / t, ,~ 13,5?9 ; \ 24~430 / \ l' 14.0 t I \ 14'1t6 ( .. Other Autonomous lJon- \ \ I \ Commercial Items 308 .! .I ,i 0.2 • N~t Debt Services - Internal - External Other Items 9'957~ 11,261 1l.,482 31,894 17,158 28,239 9,978 24,928 lO,3~ 11.7 11.9 23.9 12.8 17·0 5.9 14.9 Total Budgetary ~illxpendi ture s 96,678 13,402 167,387 100.0 100.0 100.0  - 43- 12% to 670 of the bUdget.1:.I Much of the internRl public debt is held by Government pension, insurance and savings agencies and the autonomous entities; in June 1948 the proportion of total internal debt so held was 67%. Thus less than half of internal debt service represents direct inter-personal income transfer. Besides the ordinary or general budget, there are a number of sp\:;- cial funds and accounts, both clu"rent and capital, which if included would lilaterially increase total Government expenditures on current account. A • statemenT; given the Mission indicates tha.t total current official expendi- tures in 1947 were about 335 million pesos (approximately 21% of na'tional incowe), with an ordinary budget of 216 million pesos (ap:proximately 14% of national income). Apart from such semi~autonomous official agencies, the most i~or- tant special non-budgetary fund administered by the Treasury is the Ey..change Profits Fund, whose revenue in terms of pesos arises out of the differen- • tial exchange rete system. in Revenue from the source was pesos 34.3 million 1947, of which pesos 2109 million Vlere expepded upon cost of living sub- sidies, not anJ~!here included in the ordinatY budget. A close analysis of the stnlcture and incidence of the Uruguayan tax system has not been possible; full knowledge of fiscal law and pre..ctices would be required. It is qpparent, however, from scrutiny of Urllguayan ~ No details of the 1947 budget are yet available, but one statement given the Mission indicates that total 1947 budget expenditures vI/ere pesos 216 million, with internal debt services, pesos 31.8 million (14. 7J~), and external debt services, pesos !.O,2 million (4, 7};).  -44- budgets that there is heavy reliance upon indirect taxation of cornroodi ties. Y For eXaLllple, import duties were 32 million pesos in 19l t6, and excise taxes 30 million pesos; together these two items were 3710 of budget revenues. Income taxes upon private cOI)?orations were 13 million pesos, and profit contributions from official autonomous entities 12 million pesos; together, this element of income taxation amounted to 14% of budget revenues.~ In addition fees for various private corrune~cial transactions contributed 11 million pe~os (6. 5%) ~ Inheritance 'taxes amounted in 1946 to 9 million • pesos (5~~ of budget revenues), and land and real estate taxes included in the Central Budget amoUl1ted to 6 million these major items constituted 67% of bud§et revenues.lI pesos (4% of revenues). In total, Uruguayan budgets appear after long delays, 9nd current informa- tion upon Government revenues end expenditures is provided by the Ministry of Finclllce in a form different from the budgetary. The following table shows the principal it8ms of revenue so reported. 'l'he f al~ in customs receipt s al1d exchange Itprof its II during the • war, cO~l1pensated from the table. by the rise 01 internal and direct taxes e is apparent Wi th continued increase of internal and direct ta.\:e.s, and introduction of an excess profi ts tax, this relative change in the structure The description "direct" and lIindirect" given in E(,ldgets refers to the office of collection rather than the economic nature of the tax. An abbreviated officia~ budget statement for 1946 list s 216 sources of revenue. There is no personal income tax in Uru@lay. The figllres ar~ not directly co~[)arable w~th ~he fo~lowipg i:;e..ble -upon officiel revenues, being based on someYiThat different ouogetary classi- fications s  • URUGUAY • Principal Treasury Revenues (000 pesos) YEA R PER CENT 1939 1944 1946 1947 1948 1939 1947 ~948 Customs Receipts 41,943 29,714 53,433 72,390 49J·696 44.4 30ct} 19-.3 Direct Taxes 27,996 37,833 58,096 62,336 77,156 29.6 26.1 29.. 8 Internal Taxes 7,055 17 !896 34,670 33t170 39,316 7·5 13.8 15~2 Postal Revenues 1,696 1.,942 2,367 2,837 3,366 1.8 11)2 1.,3 Exchange "Pl~ofi ts tI 101'410 6,671 18,086 34,.274 41,607 11.0 14.2 16.1 l- National Lottery 5,398 5,82l 7,738 9~2:d 11,475 507 3.8 4$)+ ..t=' \J1 I Telecommunications ~ 1,288 1,586 1,850 2,035 0.8 0.8 Excess Profits Tax 7.656 23,673 33.894 9..8 13.1 Totals 94,498 101,157 183,631 240,379 258.544 100.0 100.0 100.0 !:I Not sho~m separately in 1939.  .... 46- of taxation has persisted. Even in 1947, a year of heavy imports, customs receipts and exchange "profits" together nere 44.5i~ of currently disclosed revenue, cOulpared with 55.45b in 1939; in 1948 these tmo items fell to 35.~~o, Even with the change, revenue accruing from external trade re- mains a high proportion of total revenues, and over-all revenues corres- pondingly vulnerable. There remains available, ho\'Jever, the presently virtually untapped source of inco me taxes, ~hich are probably practicable in the Uruguayan social and economic environment. • Treasury disbursements are currently disclosed under only three he~:adings, namely, 'fbudget", Jltreasury" and IIpublic works u • The original capital cost of public works is not, ho'l:ever, a Budget item, being financed by internal bond issue. It is nevertheless possible to discern the general structure of aggregate Treasury receipts and disbursements fr(')ID 1941 through 1947. For these seven years disclosed Treasury revenues totaled pesos 943.0 million, witil Hcurrent H expenditures (ltbudgetH a.Tld IItreasuryu) of 747.9 million, and "pubJ.ic l!:orkslf expe~ditures, pesos 386.1 million. This • gives a seven-year deficit of pesos 191.0 million, lrhic.l.l appears to have been financed as follows (in thous~nd pesos): Internal bonds issued to cover budgetary deficltJJ 94 ,832 Internal bonds issued to finance general public v:orks 108.150 Internal bonds issued to fund Banco de la Republica accomruodat ion 9,359 212,341 Increase of Treasury g.~count in Eanco de 1a Republica 1939 to 1~6 13,477 198, gt;l+ Trea~ deficit 1~1,043 Errors and omissions 1,821 In all cases bond issues are shown at the amount remaining in circu- lation on December 1946~ since amortization subs~uent to is~~e is alrea;:ly included as a Treasury disburs6ment.  - 47- XI. ~iiilij1\L TRADE fuill TRhDING POLICIES Uruguayan exports can be classified under five headings: wool, meat, hides, agricultural products, and other, the last being seldoo more thall lOic of total exports by value. Of these, wool is the staple, as shown in Table, IIUruguay: Composition of Exports, Selected Years". In post-war year 1947. and first 8 months of 1948 the United States took about 30% of Uruguayan exports, compared with 14% in 1937, • and 1070 in 1926-30. The iJn!)ortant increase was in wool; of the 5 cate- gories of exports, the United States took in of exports of each category in narenthesis) 1947 (with 1937 percentage '·'001 58.4% (21.4), meat 14.3Jb (12.9), hides 6.3% (9.3), agricultural products under 0.1% (under 0.1) apd other exports O.51b (0.5). Both in 1947 and 1937, meat exports went principally to Europe (mainly Britein) t hides to Europe, and in 1947 agricultural products mainly to ~'urope, whereas in 1937 such products were sent mainly to other Latin .Alnerican countries • • Imports in fuels (39~ of total imports in 1946 and 1947 were over one third raw materials and grown in relative import importance from 1946 rold 37~ in 1947)~ 1929 This item has (17~b) a.s have machinery and vehicles (from 8;6 in 1929 to 1710 in 1947). Simultaneously, there has been SOille relative decline in imports of foods and construction materials, The hea~J growth of raw material and fuel import s over the past 20 years can be associated 'I."!ith manufacturing development occuring over that period. in part encouraged by protectionist policies. Uruguay traditionally shows a deficit in its commodity trade  - 48- URUGUAY Composition of ~rts, Selected Years (millions of dOllars) 1929 1937 1946 1947 Per Per Per Per Value Cent Value Cent Value Cent Value Cent Total 91.7 100 55.4 100 152.8 100 162,.5 100 Wool 28.3 31 25. 4 46 52.3 34 71 .1 44 • Meat and by-product s Hides 33·2 11.8 36 13 11.8 7·7 21 14 40.1 22.3 26 15 25.8 20.6 16 13 Agricu.l tural products 9.1- 10 5.5 10 21.9 14 35.9 2l Others 9.3 10 5.0 9 16.2 II 9.1 6 •  .... 49- URUGUAY Direction of E~orts, 1941 (millions of dollars) Western Hemisphere Europe 1 \70 rId USA Other Total UK& OtherY Total Other Total Pass. Wool 41.5 ~ 41.5 ~ 23.6 23.6 6.0 71.1 Meat and by'-product s 3.7 4.5 8.2 13.1 3.7 16.8 0.8 ~5·8 Hides 1.3 0.9 2.2 7.3 9.0 16.3 2.1 • 20,,6 Agri cultural products ~ 0.5 0.5 6.2 23.4 29.6 5.8 35.9 Other 0.5 6.2 6·7 0.5 1.3 1QB 0.6 9.1 ,Totals 47.0 12.1 59.1 27·1 61..0 88.1 15.3 162.5 Per Cent 1947 28.9 7.5 36.4 16.7 37.5 54.2 9.4 100.0 Per Cent 1948 14.1 13.2 zr.3 24.1 35.c;J 60.0 12.11 100.0 • ~ ~ !d Less than $50,000. Holland, 13elgium, SwitzGrland, France, Sweden, Italy and Poland. Gennany' 13 .. 4 per oen t. 9l Japan 9.8 per cent.  • URUGUAY • Oomuosition of Imuorts, Selected Goods (millions of dollars) 1929 123$-32 1946 _ 1241 Value d!. 70 Value % Ve.,lua ~ jD Value _% 147.4 lCO 215.2 100 TOT..i\L 93.3 100 69.8 100 14.4 24 46.0 31 65.4 30 Raw Materials 16.2 17 11 • .5 8 14.4 7 fuels eJ ~ 10., 18 Textiles and 10 22.? Wearing Apparel gJ ~ 6.4 11 13.5 9 16 6.2 10 20.9 1Lr 18.1 9 Fcods 15·3 Constructicn Materials 16.5 18 5 ..5 9 15.0 10 15) 7 3?-4 17 ~ JIoiachinery and Vehicles 7.4 8 4~4 ? 19.1 l3 2.1 1 1.5 2 Seeds and Feeds 3.3 4 1.9 3 16 2.6 4 3.2 2 5.2 3 Hard\'lare s 15·3 1.7 1 4.3 2 Electrical App1ia~ces 4.1 5 1.5 3 Drugs, Chemicals 1 1.6 1 2.7 and Pharmaceuticals E1 E./ 1.1 2 12 Others 15.2 16 15.3 9 12.8 lQ 24.9 J?J Included under ra~1 materials. W Included under "others".  with the United States and the rest of the ',iestern Hemisphere, and s\l.b- stantial surpluses in its trade with Europe. It is thus in a particu- larly difficult situation when European currencies are inconvertible and Europe is at the same time unable to supply required imports, as was tne case in 1947. Change in either factor would correspondingly relieve her extenlal position. Considerable increases of wool exports to the United States have somewhat eased the difficulty rather than removed it, since the United States remained the only ready impo:rt source, supplying • 38% of imports in 1947 (and 337b Janue,ry to August 1948), compared with 1416. 1936-40. In trade policies, Uruguay has long been heavily protectionist, not only to obtain revenue through customs, but also as de1ib~rate policy in encouraging domestic manufacture. To this latter end, many raw materials are on the free list. CustO.•lS duties are nominally ad valorem, but are assessed upon official (not market) values, Bnd hence are in effect specific. It is said that the only way of a3certaining the duty • pay~\b1e t;;l)on an import is to make a trial shipment. Changes affecting rates of duty, tariff classification and official valuation for indj, vidual import conEodities, as distinct from the gen~ral schedule, have probably been made with greater frequency i.n Uruguay since 1939 than in any other South American country. Such changes, however, are similar in effect upon internal prices of imported cowuodities (and hence upon levels of effective pro~ tection) to changes made in other countries in import classification lists under mul tiple exchange rate systems. The Uruguayan multiple  - 52- UBIJGUAY External Trade (millions of dollars) Western Heoisphere USA Other Total Europe Other Total (1Yiillions US$) Jan. ,... Hov. 1948 Export Values 43.~ 2l:.f) 64.9 84.6 7.0 1 56·a Import Values 61. 51.8 11~.2 57.1 8.1 184. I • Balances -17.5 -36.8 -5z+.3 /27.5 - 1.1 -27.9 19~\I Export Value s 47.0 14.d 61.1 96.~ S.IEi 162.5 Import Value s 82.3 74.1 157.0 ~.l 6.0 215.1 Balances -35$3 -Eo.6 -95·9 ~2 - 0.9 -52.6 1946 '(annilal averages) (millions of pesos) Balances - 2.6 -47.7 -50.3 156.5 - 0.5 f 5.6 1936-1940 Balances f 6.0 -10.0 - 4.0 1-26.2 /15. 2 {27.J!} • 1926-1930 Balances 1911-1915 Balances -15.7 - 0.7 ~ 0.8 f 3.6 -16.5 I- 2.9 +26.4 !-11.8 f 0.3 f 0.1 /-lo.id f14.i91 ~ Not comparable with table au Direction of Export f:., 1947, which in- cludes countries not itemized for export cOulpOsition in nOthern. Bl Averae,""e annuru. exports (million pesos) 1956-40, 99.5; 1926-30, 97. 1 ; 1911-15, 58.3.  URUGUAY Trade Balances with Principal European Countries (thousands of dollars) ~946 1947 1948 (Jan.-Nov. ) Austria I- 18 44 Belgium f 937 f 5,747 f 7,364 Czecho slovakia I-1,031- I- 430 597 Denmark f 1,697 f 1,473 t 587 • Finland f 546 f 874 t 985 France f 7,453 I-5,697 f 235 Germany f 428 I- 791 f 2,470 Greece f 979 I- 198 f ~78 Holland I- 7,072 t11 ,408 f 9,733 Italy f 3,481 - 3,683 f 4,346 NorwaY of 615 ... 173 272 Po~and t 206 f 4,358 {- 1,821 Portugal f 796 I- 732 Russia f 5,146 t 2,454 11 Spain - 1,198 - 1,726 727 Sweden of 3,171. t 5,966 - 3,941 • Switzerland f 2,034 I- 2,700 f 1,744 United Kingdom 121,660 I 2,112 t 1,273 Yugoslavia f 2 f 3,151 f 1,070  - 54 - exchange rate system has a single (instead of the more customary triple) commodity import rate, imports officially considered unessential being restrained by quantitative licensing~ Such quanti tati ve licensing. which applies to all imports. con- stitutes a more rigorous and effective protective device than the customs tariff alone. Import licenses are granted or withheld in the light of two principal considerations; the supply of the commodity concerned fro~ domestic production, and resources of required foreign currencies. The • first constitutes administrative protection t.O any plant in actual produc- tion, the second is an a,spect of management of external finances. In its trading facet, such external financial management seeks to direct e::q>orts to countries with ,:vhom Uruguay is in current trading deficit, and to the extent possible increase imports from countries show- ing current trade ~rp~us. Import licenses specify country of origin; 1/ all exports are made under license,- which (when rnarkeiP offer) are • granted or withheld according to foreign. currency of payment. Trade con- trol thus aims at unilaterally balDllced external trade, an administrative ideal which has never been fully achieved. Exchange and trade controls along these lines were adopted duri~g the depression of the thirties, and raa,i~1tnined '.~!ith varying rigor since then. UruguaY has in the past three years entered into trade and payments agreement with some European countries, with the object of ex- panding bi-lateral 'bal.anced trade, in line with principles long held in tI As an element of exchange control ensuring surrender of exchange pro- ceeds e  ~ 55- UI1,l.guay. Those with Italy and Bi-zone Germany are agreements for ex- change of specified quantities of commodities; the remainder providesin every case for mutual. credi t limits upon b;i-lateral clearing acco'lmt balances. If emergent balences exceed these limits, provision is made for settlement in dollars if desired. Country Date Non-transferable Credit Limit Belgium ':Wle 1946 50 million BE France and September 1946 T million pesos Uruguayan approximately 790 million FF) • franc area Czecho slovaki a January 1941 Approximately 50 million korunas (equivalent of US$ 1 million) Netherlands November 1948 250,000 gQilders In September 1948 Uruguayan holdings of European currencies under these payments agreements were substantial, of the order of US$ 20 million equivalent., l)uring the war Uruguay accumulated sterling hold.i~gs. In • July 1947 ~ stg. 17 million of these were blocked and allocated for pur- chase of certain British investments in Uruguay. current sterling earnings were to be transferable. Under this agreement S~~ce suspension of sterling transferability, such current sterling earnings are freely expendable only Vii thin the sterling area.  - 56- XII. BALANCE OF PAYMENTS In 1947 officially licens~d exports were 77% of estimated balance of payments receipts on current account c> Unlicensed exports were estimated at 16 mdllion pesos, bringing estimated e~~ort receipts to 84% of current accQunt exchange revenues. The largest single "service" reve- nue was from tourism, yielding exchange estimated at lq~ of all cornmodi ty exports, and a net exchange income (deducting Uruguayan tourist expendi- • tures overseas) of US$ 15 million equivalent in 1947. On the expenditure side. balance of payments estimates place interest end dividends at 3.9% of all current account receipts in 1947 t and 5.6$b in 1946. Over the period there was a continuous inflow of private capi- tal, estimated to amount to US$ 118 million for the period 1943 through 1947; net capital inflo\~.T over the five years is estimated at uS$ le<) mil- lion. Only a small part of these funds, however. seem to have represented genuine direct investment; the bulk '..If the movement was refugee in • character, and much of it appears to have originated in the Argentine • Such refugee capital is said to be invested within Uruguay in urban land and buildings, Government bonds and bank savings accounts, rather than in directly productive enterprise. Just as the inflow has been a sj~aablE;. support to the Urumrayan balance of payment s, su(lden and simultaneous efforts to repatriate funds could be severely embarrassing, During the later war years, and until 1947 t the balance of pay- ments showed substantial su~luses and consequent growth of gold and foreign exchange holdings. Much of the increased holding of foreign  - 57- exchange was, however, in blocked sterling; by December 1945 blocked sterling balances amounted to uS$ 61 7 million equivalent. These balances t are being currently liquidated by purchase of certain Bri ti sb publi.c utility assets in Uruguay, namely the British-01med section of the rail- ways. and the Montevidean streetcars and water-works. Uruguay has followed a practice of converting exchange held in foreign currencies into gold whenever possible, as a hedge against devalua- • tion of such currencies. In wcember 1945, for example, gold held over- seas amounted to US$ 95 million, with foreign currency holdings (out- side blocked st erling) of Ie ss than US$ 2 million. During 1946 total gold held increased US$ 4.8 million, but gold available for exchange purposes diminished about US$ 25 million, bec~~se US$ 30 million Was transferred to the Issue Department of the Banco de la Republica as note- issue cover. In 1947 available gold diminished further about US$ 25 mil- lion under a passive over-all balance of payments. • The posi'cion may be sumrrarized by saying that in December 1940, Uruguay held gold overseas and unblocked exchange to cover imports at the 1940 rate, in December 1945 to cover 11.3 months imports 4.4 months at the 1945 rate. and ';'n December 1947 to cover 3.8 months imports a,t the 1947 rate. By September ~948 overseas gold and unblocked exchange had fallen to 2.2 months imports at the 1948 import rate,}} Thus under a combination of gold absorption for note-~ssue Y Reserve gold held against note-issue and deposits by the Banco de la P.spublicl1 is not .included in this computation. If it were, the 1948 import ratio would become 12.8 months imports.  - 58-. cover, the blockiD~ of sterling balances and recent unfavorable balances of payments, her war-time growth of gold and exchange has been completely absorbed. The Uruguayan balance of payments problem arises from import pressures, and is made more acute by 1liropean currency inconvertibility. The position in 1947 illustrates the difficulty. An over-all current account balance of payments deficit Of uS$ 39.4 million was ~on estimates) made up of a hard currency deficit with the Western Hemisphere of some US$ 71 million. H partlY offset by European currency surpluses of about • US$ 31 million equivalent. (US$ 14 The hard currency deficit in million) ~as ~pparently covered by some conversion of European currencies million) by draw down of gold and dollar reserves 1947 (US$ 71 (US$ 24,9 mil- lion) and by capital inflow from the Hemisphere (US$ 31 million). As with many other countries, 1947 Was probably the most difficult recent yeat'; 1948 should show considerable improvement, but complete removal ot the causes of such balance of payments difficulties l.s unlikely in any short period • • So long as European currencies are inconvertible, Uruguay is likely to confro4t a problem of hard currencies shortage. is relative, and of variable absolute importance; Such shortage to the extent that re- quired imports Can be obtained from Europe 1'vithout special disadvantage, both its size and its consequences for the Urugu~yan economy are reduced. If compet=.ti ve E..l.ropean import sources progressively reopen, serious hard currency shortage may not reo-emerge. even though some tightness of hard ~ The Western Herrdsphere trade deficit of US$ 95.9 million was partly met by invisible earnings.  - 59 - currencies for all purposes persists. In a developing economy, however, a continuing lack of foreign exchcmge for all purposes is to be expected. Both the equipment import requirements of development and growing consumer demand for ir~orts fo1- lowing increase of domestic incomes render improbable any useful but unused residuals on balance of payments current account. Over any period in a developing economy, import replacement projects pen~it substitution gro~Ting • of new for old iIIq)orts rather them avoidance of aggregate import demand. Long-range balance of payments yrospects are incapable of exact evaluation. The stable exports of 1'/001, meat and hides are not suscep- tible of any quick increase of volume; in a long run, volume could be . lncreased. ,y There is~ however, some danger that a pastoral expnnsion which is purely at the expense of agricultural land r:ould lead to cereal imports. The futu.re of prices for the staple exports does not depend to • any important extent upon Uruguay. As a primary produce expoI'ter, she is vulnerable to price declines induced by econorrUc recession, and in a favorable position in the event of Vlar. Over a decade, it is possible that new exports will develop, along the lines of industrialization of products nOl:.r exported ra\.... There 'Would seeiO to be opportunity for this in 'I,~,Tool and. hides t for exarJfle. Such industrialization of present exports and development of ne~ exports (for Effecti ve wool export volumes could be relatively quickly increased by improvement of shearing methods.  - 60 .... example, butter and cheese, edible vegetable oils) may in a long period make a sensible difference to export proceeds • .An invisible which may increasingly earn dollars and Euro:~"ean currencies is tourism; the Uruguayan "Ri viera" may become a Sll:.'U',.;er re- sort of the wealth of the Northern Hemisphere (who ~!ould thus avoid the northern ~inter) as ~ell as for closer neighbors. Expectations . . 'egarding the future of private capital lIimportsll • are necessarily tenuous. generatil1fE, income. The bulk of such import of capital in the recent past seeillS to be refugee in character ratDer tr~ direct investment ':7hether such :refugee capital \"Jill continue 'Co flo~ in or will. soon seek repatriation depends wainly upon conditions oatside Uruguay. Over the next decade, there will probatly be development of in- dustries and rural production in replacement of present imports. EY..afu""Ples would be d~velopment of hydro-electric power to reduce f:.lel irJPortatior.. , • increase of sugar areas, a more stable resolu.tio!~ dilemma, and. growth of consumer goods industries. of t£..e l":le::l,'C-fresh .l€at involve, hOYleVer, a reduction of aggregate iLIpo.ct demnIt:J3; ~l·. .is ;ioeG not necessaril;,t as national inco ,Ie rises, nev' and additional import requirements lI'ill emerge. 1:;ever- theless, an import control of given severity may in the future imp~ct less upon present necessities of life rendering curre~t payments for invisibles less burdensome.  • URUGUAY pplancp. of Pl'Yments. 1941-1q41 (thouapn~s of US dollars) • _~ _ _ _ _- _ _--~--~''"'''~-'''''''-~-- ...--.-.--->I£''. _ ... _ _ _ _ _"'- ~ ~"'."'""---------"" __ -w<~~_ _~ ... ~--- -- -- ~..,;---,.; ___-----------------l~.~~) ..._ 19~_"---.-124~~.--,' ___ ~Q~:6 ___ 1947 A. Receiuts I. Current Acco~lft: 16u,664 178,503 (a) Export eJ!! 109)588 106,259 131,,510 200 700 1,000 1.700 1~677 (b) Interest and dividends 5,391 P,298 1;<.963 15.368 21.524 ~c) Tourism 9, 28t~ 3,158 9t 858 9,708 10,607 \d) Other Services 210.988 1~L.JJ1. 1~t;111~ 1'16,181 192,119 Total Current Account 2. Capitol Movements: J-o,ono 28 °00 (a) lie\'! foreiF;n investment "6 t- } 411 16,000 ~Q.Q. 1 1?~J6Bl 202.'319 2~~x,988 TOT..;L .HECEIPTS 1!!9,7 4 8 161,115 :a • Payment ~ 1. Current Acco~~t: 1:')1,878 226,206 t (n) Impo rt s!1t 71,488 79,203 15Sp813 8,698 8.902 10,993 10,756 8,312 ~ b) Interest and dividends 5.95 2 6,41Io c) Tourism 3,823 5,140 5 157 t I 5,274. ;',679 7,124 8,238 9,1l22 t d) Other Services 89.281 99.124 125,1'12 180,7.51 2~0,J80 Total Cnrrent Account 2. C8pi tnl Movements: 1,864 1,995 ~a) Public debt amortization 1,590 1.598 1,809 (b) Nntionnlization of publiC 7.312 service enterprise Totnl Canital Movements 1,520 1,~98 1.809 1.864 2.-L1Q1 2.0,8?~ 100,722 126.961 IB2 t 623_ 2'i9.681 T~ PAi..~;TS o~ BA1:lnces: -)9.392 13 4 •0 54 ;25,991 +31.029 -/-11,,50.0 (a) Current Account tb) Capital r·iovements f2b. ,821 tJ4, lJ 02 -1-15,69 1 1- f1,136 -118,693 460,193 ~20 +19,"716 -20,699_ NET BALANCE -1-'58,825. D. l~et Gold and J!?n.\dng Changes (a) Gold holdings hI f.31,421 1:36 , OJ!} flJ.1.328 L~. 76lJ. f. 16 u -24,940 {b} Barucs t overseas asset~ fZ8.379 f22 1 834 f 3~838 t ,53 f 6~444 NET BALANCE /59,800 +58,868 445.166 +21.298 -18,490 Errors and Omissions (n-C) f 925 - 1,525 - 1,554 f 1,582 f 2.203 jJ Trade figures ndjusted for estimate of exports and imports outside official controls. iJ Apparently not \.,rho11y foreign exchange.  - 62- Exchange control was initiall:; adopted by Urufuay in 1931 d~lr­ ine; difficulties arising from j:..ne c1epressi0n s:)readtn!: at that ti;;1E~. !:)..ir- inE; 1933 the control beean to restrict cxc11anre allot!~.ents :"'or i;:"If)rts fran various countries in 'JroT)orti011 to their nurchasos ::ron Urue:uay, ::'Y!i- tiatine ~:le attenpt to cl;'.:1nn~~lj ze foreicn trade on a. bi-J.ilteral bc.:sis. Since then, the restrictive crorClcter of iJ!'"'.l[':uayan excl1an:e cor~trol l"!as • val'icc:. 1ilith the state of the trae.e ~Jalance. In 1932 and 1933 control wes re,-ere, and afain tn 1?35. :testrictjor..s rre~:'e rela):ed in 1)36 and 193.7, but u::ain tifhtened in 1938; in this year, i:!'1orts fror:l the !Jnited 5:tatos -V{G1"C' not F~ranted any control1ocL exchange. Durin£: and since ,oorld l··ar II 0y:ch:;.n~~e contral 1:['8 beer: "o..:~~CC~, 1yi th increasing e~nhasis to encourare eXDorts. I~ it,C"' '''''V'essnt o~":;~"aticr., all e~~ports are liconsed oE:fore shiDr&:rtt is :)ernitted, "~i til l~rovisi.on th~'.t e:::chanr:e proceeds be 'wholly surrenderee!. to the Banco de 1a. -"'(:Dutlica o • EX1.1orts are not lict:;rlsed to a:;:-eas of active trade balancE:! for c.ny CO)1- modi ties in der.~and 5.n. c0untries of "/as fji ve tralle bc..lc:nce. ~0rts are li.ccnsed or l~" 'I,·.rhen~ na.:r; ,ent is in US~$ It 7h,lS ~'rc'cl ex- At. "the end of the '::001 season, when i t ~ S (J.:muroEt that, re~·[a-:'ni n~: (~ccond quaJ. Lt"T:) ':rl.(·l st.ccks ~;e;,'r non-staple (;X!)()rt~) arc enco'.lrared b:'r a rjj i'ferclltial exchanr,c rate systeu, erjjo(.~;ying a (:0f.1estic currency B~.lbBidy to thE; t?}~crtl:'r. ! x- chanre nrodeeds from star>lo e:::ports £1:"C :Jure ha2ed at a r;}.te o.~~ Desos 1.519  - 63 - to the US$, and for various ~,th(jr OGr.:,)si'A1ul and non-GtapJ.e e~:::'1rtf; buy- have received the hirhest rate tire cheesb, :,erfu!:1e s:,a~'\, l'ruits and vef8- tables. nrovidod for all categories of i!1ljorts at 1. ~?? to the The • Y)CSOEl tie) 1 ~r.: The Bane 0 de J a, .'~C :Pts and otner • as I.:1,nistrZT 0f Finance. "1 :;'" ' Sir.ce July 19t 7.  -64- of the official market (US::S; 1)2 miJ 1io;;, of ":'hich US~; Ih~ nillion Vlere fror.1 exports) ':rere 6;;% of t/)tal cGti:r:ate(l bal[t:1r::e of na:r.:'ents receiIJts (us,., 23? 4lillion). The socond principal e:~cha.n 'e ma.rket is t116 u")ur(l] leI!! ".:1.r:>:t., a ctJ!\:'.llctely .ires and lCE(ll r:1Clrkct of ""'rivute (lealc)rs onen r,c; ar.y !'~ol1-~~ra.:.1e transaction. It is ettima1ed that. net recei.pts (ar~(: !'e-s{,~les) 0f t hi.::; r:ar~:et. (vrhich ! ial-:r.:s r!ostatistical returns) may ha'.7G ar:l'::'Hlnted to US:'~ J') ~JO 50 r'l.il- lion in 1?1~7. Quoted rate~ vary c..latly i!; rnSDonse tc ::!o.rkot "1rp,B~".Jrp,s !':lOdi- • .fied b~r b[~y;;: like '':'n Ururuay interv0ntion. plote freedom for 'r)rivate capital It rxistt)l-:CB of thin r:over~ents, rlar!~r;t ~res;'nt,l~T c.:)n::f~l~S co;;t- c.:i\i(l<:nd services, arid The G'1vernr!1ent is r(;lucta1-.t to nup""'ress or G0ntrol ~.:,hp. tllf.! tlpa.r£..12,(~11t market, LcJ~ie,:r'Ln~ -t.!1;. . t '1 ts p:::istence encf)Jrd.(cs ""'Ir~; v:~te c:"'i ttal ~ nflo~'J', un il,;')ortant b~lar;.ce of '1a~,1Y:i?r:ts i. ten: tn r0.r:ert ?C?arc • • fret; i.ar;-:(:ttl comn1 etol:,r ":Y'utor;ts (.;lxnort pxckann-; ('<[Jrn: '~l'.,.s (ft,C F~' !,bY)] e) frl"'i1n captto.l flirht, arl/itrar(} tr ri[~a,~t,ions ~itth Btv·r. .... s idren" etc.) 'Lut lG~Vf"S  the "parallel market n ratE free tv move to any level equating receints and sales of exchance through that market. Reluctance to accept pa.rallel market rates so enere;ing (l)erhaps because of resu} tint adverse d('l:.'f'stic or £oroi[,;n opinion regardine the stronr;th of the currency .::.nd expect::lt.ions 1"e- t4ardin[; deyaluation) might im~)el the Banco de la Re1)ublica to re-eutcr 1J11e "controlled free market" to influence the non-offj cial rates. If ill-jud'.~ed, such intervention coulo. lead. to rapid 10ss of' official eXC~lal1;8 1"'\J\.~:inrs. Front this point of view, the 1:l0st vulnerable inter·vrcr!·l~iol1 :i G an • undertakil1f'" to cover both sales and purchases of exchance r.ladr:: by the "con- trolled free market" (i.e., cQ!":!'1ercial banks) to T.iaintain a rate JQf'i I'prl in that market by the Danca de la He:,ublica. Thon anyorle "?ossessinG Urll.- [uayan pesos can obtain, ffor cxar.lple, dollars; and Ur'lu'1tayan "ecos can lie purchased, for example, vri th Arr;8r~tine nesos, boldinr;s ,')1: ".Thich accuI'uli.ite, n~t in the r.Iarkets (YIi th conser.:lWy;.t t~,epressivG e,£'fects unan cross-rates) but in the Banco de la ~epublica. .' de la ceiY'tr; ! er.>ublica' 5 o~· Suspension of covc·r onl:,/" to 01,'i11 ..~Y.:cllc'ln~e VIP cor:.tro1 1od free st;.lf:'f~ tif e;:chanre r)rotocts the Banco rC00urces, hl!t. nreS8":!re lP?Of' t.hr:- (~XC l~ilr~pe re- ;.~n" ~'ara11el r::ar~~0t.c c::: n "'0t;t.~ flue. T}1f> ;-~r I.ce Banco de In. !lepublica 1s conttn',d rc to C(Wf:r currpncjT :)urchur:cs. 11,~r f>US- DE lldinC 1?urchase of currenc:r in hE';;":":~" 8'lrpl~,r, the'! ~an('o t .•. f? In.  - 66- peroit,s free rates i'uJ.l;r t·n !'j~l!ll ssnre ncn-UrU;'1ta:ran ,h,... ...,.",1_":. •'r"ren !~: 4, .; nn) .. V"-".\"; r l :-. '-_,~ ~'.·.l_ t "_1 .,:,.0 '::eak- There can . e no rule-of-thlL,,:ib in SUC1~ r.1ati.JE!rS, but ii.~ ;_8 'qrf)uable 1/ that ~:~hel: Ururuayan free r.rarkets ~~re "Ul~(:er raid!! frotl ()vcrscas,-t.he '.:JGst • chases f)f exchance. disco:...rLire the tUyinf- nressure If t.he rcsul tinE" !larclen'l.nr of ('ross-rates oriri!':atLn~ externally, 5usncnsicn of coyor C1! •. (~t: rl0t. to sal(~s 1':oulL; til. cor.!e nece~sary, ":i t!; .::tcce'!1tance of the cor:sGqlle~"'t i'ree- y ra"t.e. 'llhis • 8uC''.:'CGsful rate if the nreDfureD 3.'1near lonC"-liveti. or tL0 nl(! 1"·1.1.e i"~' t'le'"T . 3/ " !-- .- :it have di ssipatcd, - In taking dec 1cions of thio nntnre, t, ;}'.~ 11':': is o:t y i.e., y:hen ~.:()ntevide~n exchange ;'lurkc:ts arp 1Je:tn(~ u}ied Ly recj.dunts of oth~.:r Lutin ltl1crir.an. cCllntrios as a t'o~n-'('e of LtJ.!·l~ c'tY'"·'enci0o. ao ':!il5 done in July 19h7. On AUfUEt 11, 19h8 t!10 ;';U!lCO \,.e 1a -JGY)i.lLl i.ca ' 1tt:(;re~'r itG sUll n ort (at 1 .. 9Q pesos ner doJlar) fro!'l the i'r~e ";ark8t, n.nd C'n Septer.lber 6 rcsUlned OD(;ration on the .free r:1ar}ret at 2 2G '1E~Sf)S "It~r c:ollar. II  - 67 - e;reat importance, for a delay of wi thdravral of Banco de Ja T~epublica operations on the free 171arket (or a too early resUl:mtion) could re- sult in heavy loss of official exchange holdinGs. (b) to maintain cover of sales, vii th scrutiny of the orir:in ,and '1/ purpose of individual operations.- If effective, hovJever, this rerre- sents a step tOYvard selective control of the free raarkets i4hich in principle the Uruguayan authorities are reluctant to ta\.b,; i.n vi8\~J, as has boen said earlier, of possible discourae;elaent to ca~)ital inj"lovr. • lInch of such inflow has, hm"rever, been refugee in character, in fl.~ce of simultaneous desires to rel?atriate such refup:ee cnnital (in dis- tinction to arbitrage pressures originatinc: overseas) the 'lh"ur:t1.ayc.n authorities would probably be forced to control n~esent .i.'ree rt~;.rkf..ts. Such pres sures to repa triat.e or re-lo0ate refnr:.ee c[~pi t.;.:.l c ')nld. arise either from a relative vIorseninr of the UruPleJ.;-r.l.l1 s'1. tuution (a ;1'Ash pressure) or from a relative ir!lprOVef.'lent e1G8"!.·rl:ere (u. DuJl :Yr'cs::·urc). Thus, improved stability outside 'Jrucua:l (for oxa>;luJ.e, : n -tho llr~-er.Vi..nc) • could introduce instabilit~.r in the UruQlayan cxchances. "~'Klthcr t.he sures were push or pull, however, they".-ould., if heay;r, 'i.!'l!"cl ,:~·jt.~v.?l' cor.trcl of free exchanEe markets or devaluation of the GrUf!Ua;yu.n neso. y)Y'8S- r,:' ~t I ~G"·""c..lu- c:..tion under such circumstances would also affect. Urnr:l.u~rar.. t-:~tr!rr 3.1 tr':(e 'with inflationary donestic impact, and may well be undesira1.1f: ·:r:.tlrLn ~r:e;' whole structure of the position a.t the time. Y As was (Lone ir.. Jul~/ 19.'.~8 jU~Jt ::cfore '·rLth'~r:-x·n.ll ('t' f:'p')"t"'lort ·':c-r:ti.('l};.(ld in the r>rcvious f0otnote.  Argentine introduces a link bet. .·reen t~he external values of the Uru(uayan nne. the Ar[entine peso. Doth cO'..lntries export 1.':001, ;neat an6 hides and sor.:e a'~ricul tur.::~l "Jroducts i!~ co~.pleti ticr. t"or tl:e S:.i.!:C !':ar1:ets • • correc;)ond?nr.; freedo::, of action. (the In •  - 69 - , for theGt:: exports Gl:\erre, Uru~~ua:r ',IQuIri 00 tinian devaluation. If she did not so follo-rr, i3ru;''-4.a;.~an dOI!l(\f,t.ic Cl'.rrnnc:." prices for staple e~orts 'would necessarily fall 'l')ari DClGSU "Tt th 1'0.11- (of foreir,n curroncy prices of Arcentinian exports, to .TV0ic1 lOBa of e)..-port volUI!1e. This, hOl'fCVer, ~::ould introduce stronp.- mOEe",r inco:'.10 defl c.:tion in Uru0lay, "...hich 170ul<1 be noli tically very difficult and econom.ically doubtful, • •  - 70 -- The total debt outstandinG at the \)n(: of 19ha is c:stinated to "I, US·'; 4, 74° u, 000 ,. ana Int eres t lla.)l111en - ts f TTS)'\ 0_ ~, "I) J ,-'1? -i).' h .. , 000 I ~ t tl' 0;(1 ... ~ ..!.l1 f ,; N PS;I. '0 ',I ~,290,COO, are called for. This rate of naJ~011t c::)nti..nu88 throur'h 175)3, the years that this stud:! covers. t"..bout 6o~ of these serv1 ce ~).~l.yr:lonts are required in sterling and the remainder in US~~. • Uruguay! s i'orei Ll1 borrowinp.: COl::r:1encE:d i.n 1871 tracted a 3;,3,500,000, 6~; loan. The eel"vice on t!lis debt '1,';£1.s GUS"1(4:!C~C(: .~n ~"hen Uru;11a;r C0Yl- reduction in the interest rt':t.o ('n the le71 1 ?tll1 to 3. t);: :\I~ ~:.. ~)o!'·l.od of • cluding the 5t s of 1883 ("::hich had l)een issac(: '·It:.rt2.~r i1: (;Xc\l::n:c for the ~R(' no ~oti3.ted set t.lecent • Note: (fron pai:~e 73) - T:!esc cal\~u1 ut.i, nr iC' r:r:t i.nrl'.:.cle intpr . ~~t. 3r:<': <J!'1ortization ~a~n:':8nts ()r~ U1C ""1"1 ti sh-.".. ··np.ll ~;l"u;"uay.an !,3.ilr~':H1 r r debt. a fir-!ul at:ree:~~ent bGt'l:~ccn ;j!'ll f '1.':1:."" .::nd a co·'.r.:·U~t.rE rC'nr("~!'1p! :/i.nr1' t.hcf:e r.3. i 11~Oat'~ lJ1'~ r!. ro(,·~ tl1lc1 f'n T 7, ,_,,\..1,'" .... " ....... ~ ... ~t ...... V "'" (I'(Y'; n·~ll •. ""''):''1,1 1 n"'r.'''r I.lr: . . 1."'1' 1 F'n '1;V) ,...,._ ~I ~ ".~.""''''.4A.c -i Oll) ..1.r.. "",l;,J. ... j, .. ~1I.f .'_ ~ .. f .L. . . . :J.S a T'urch.:1~e ~)rice ~'0r ::,11 0" the ~'r·1.t.LSh-0'T;t:rl r:~jlrl)':?('!s ..nd "their sGcuri ties. T!:':sG Fund.: :..... 't(. b·ir.'· r4~.1 ocai..cd to thE:.: 2':~cur"!. ty-Loltlcrs nnw antI .J.Jhe Uru '1.luyac f1 . . . vnr!1:::,~nt . °ill :. V(.: ("'I: '"\1(,,+-(· r:f':"'LPrchip of the railroc.:x~s. Since i..heSt) ronde .:l:!"'C ' .. c1.nc ~'\'~~'c:;~[.:.!"'t·d :: ] :11"r(; [.~tcr­ ling 'uala,nces, no tut.l.l:;."e GxtGrnaJ. ~;,el t ch.lr~er. . 'ill r~. G:.~J:t • Prepared by - !.x. Jru:1es Lynch.  - '11 - bxternal :Lebt Amount Amount Outstanding Outstanding 1947 1947 in currency EilJressed of issue ~ in $ Bonds Assented to Readjustment Plan Republic of Uruguay, External Readjustment t 3-1/210, 1/1/84 $ 569,500 $ 569,500 Republic of Uruguay, External Readjustment, 4-1/2%, 2/1/78 $ 5,213,000 5,213,000 Republic of Uruguay. External Readjustment. 4-1/8%, 5/1/79 $36,052,500 36,052,500 Republic of Uruguay, External Conversion, 4-1/8%, 5/1/79 $ 1,524,400 1~524,400 Republic of Urug,uay, External • ConVerSiQll, 4=5/16, 12/1/78 $ 2,041,700 2,041,700 Republic of Uruguay, E..xternal Consolidated, 3-1/2/0, 8/1/99 .fJ11, 847 v 130 47.727,348 Republic of Uruguay, External Conversion Gold, 3-1/C/o, 1/1/79 (a) -±s 3,208,165 l2~924,414 Republic of Uruguay, External 3-1/~, 1/1/79 (a) ~ 764,867 3,081,343 Republic of Uruguay, External 3-1/25b , 1/1/78 728,160 2,933,465 T ":tJ Republic of Uruguay, External 3-1/~bt 1/1/78 o±J 412,380 1,661,314 Ci ty of Eiontevideo, External 3-l/~b, 1961 .±.J 368,07 8 1 ,:'~82, 839 $115,211,823 Bonds Non-Assented to Readjustment Plan (b) • Republic of Uruguay, External Gold, 5%, 7/1/52 $ 417,000 417,000 Republic of Uruguay, External Sinking Fund, ~or 5/1/64 $ 268,000 26B,000 Republic of Uruguay, External Sinking Fund, 65&, 5/1/60 $ 386,000 386,000 Repub~ic of Uruguay, External Sinking Fund~ 8%, 8/1/46 $ 266,500 266,500 City of Montevideo, External Sinking Fund, 7%, 6/1/52 $ 125,500 125,500 Ci ty of lv~ontevideo, External Sinking FtL~d (Series A), 6%, 11/1/59 $ 74,000 74,000 $ 1,537,000 Expo rt- Impo rt Bank Outstanding 6/30/48 $l},276,067 13,276,067 Unutilized 6/30/48 $ 695,267 695,267 $ 13,971,334 $:J-30,720, 157 (a) Also paYable in French francs. (b) It is assumed that these ",ill assent to the Reaijustment J?lan.  • • Export-Import Bank Loans to UruE;uay -- J1lll8 30, 1948 Credit Authorized Cancellations ..,tUllount Principal Hum- Int- Disbursed Outstanding ber exest Terms Purpose Date .Amount and Rate Expirat ions 4/22/42 12,000,000 - 11,304,732 •. 86 11,304,732.86 331 4% PRyable in Yiaterials, I 15 Jears . equipment, semi-annua1Jy; services - begin June RIONE for 15, 1951 Rincon del Bonete Electric l' Project --..l I'\) 2/2/43 20,000,000 17,705,000 2,295,000.00 1,915,200.00 345 41~ Payable in Roads, :t 11 years bridges, semi- Cf\nually; airfields. begin .Aug~ etc. (Pub- 15, 1948 lie f;';orks) 4% Payable in Printing 4/22/4? 85,000 6,125 78,875.00 56,133.83 333 15 years Press - remi.-amuaJJy R. Hoe & begin June Co., Inc. 15, 1951 32,085,000 17,711.,125 13,599,732 •.86 13, 276~066~ 69  - 73 - Uruguay's. External :;ebt and ~:ery~ce Pa~/~.,cntG ( 000 or.~i t ted;- 19L9 1950 17~1 1?~3 Dollar Bonds: Assented Bonds Amount Outstanding t:i4;772 43;426 h2;OlO IJO, 520 Princi.pal Payment 1,077 1,133 1,192 1,2Sh Interest Payment 1,866 1,810 1,751 1,f.39 Irotal Payr:lent 2, 91.~3 2;943 2,9LJ3 2,?h3 l)Non-assented Bonds Anount Outstanding '1,570 1,550 1,529 1,008 i,h?i5 Principal Payment 16 16 17 18 19 Interest PaYJ:lent 65 63 62 (1 60 Total Pa;ynent 81 79 79 '70 :" 79 • :S:-:nort-Ir.mort Bank 2)utilized POrtion llr.10unt outstanding 11,995 13,128 12,71.6 12,761 Principal Payment 437 184 18h :37 Intorest Payment 296 331 326 J17 Total PaYT.1ent 733 515 510 1 ?r:'I. - , ..·;/4 3)UnlltilizQd Portion J~ount outstanding 3h8 675 (,?5 t:L;) - 603 Principal PaYl:1ont 46 h(~ h6 Interest Payment Ih 28 28 2(. 24 Total 7ayments Ih 28 7~ 72 70 Total Dollar Debt Amount outstanding 5[3,337 5~, J.! 72 3'"1, 200 ~5-:; SOS ~2, 933 r:n , 276 ..,. . Principal Payment 1,511.~ 1,333 1,392 2, 2.5!~ 2, 321 2,390 Interest Payment 2,162 2,220 2,168 2,096 2,n03 1,?08 Total PaY"T".en":':' 3,fS76 3,5~3 3,560 L, 350 }~, 321.! 1,,29R Sterling Ronds Mr~lOunt outstanding 16~S9j 10,890 Ilt, 8l~3 13,749 12, 675 1 ~02 ] ... ,,/ ,/ !:'Principal Payment. 803 838 875 860 866 90L tInterest Payment 591 556 519 l.Lf1l J.t11h L06 bTotal Pa.yment 1,394 1,39h 1,39h 1,)41 J,310 1,310 ~M.rnount Outstanding 68,037 63,997 59,7Bo SS,37G 51,oh9 [rl~ , (H7 ~ .... ..- $Principal ?aymcnt 3,23h 3,375 3,524 3,h61+ 3,h A8 3,61.;1 ~~Intf;rest D ayment 2,380 2,237 2;090 1,937 1,788 1,635 :'\Total Pa;y:ment 5,614 5,61h 5,61h S,hCll ~,276 5,276 Grand Total Amount Outstandinr; 126,374 122,439 116,980 110,R79 103,982 96, ~)t3 Principal Pa~~ent h,7L.8 )4,708 it.,?16 ~,718 5,609 (,031 Intel"(lst Pa:vnent h,5J.t 2 h,h59 h,2:,8 b,033 3,7?1 3, ~143 Total Payment 9,290 9,167 7,174 9,751 9,6co 7,574 1) It is aspumed that all these "':i}] (Hi~ont to the Ho-;...djuotr.:.ent P] an. 2) Based on the f.l.r.cunt outstc:mdinr ao of 6/3n/.:.~S. HCY'rever, the 1?h8 ~a;~rrr.rnt covers the full year. 3) Unutilized portion as of 6/30;48.. I'!mJevcr, lx:t"' rr:Cl1 7/1/:i.r;~ ;:'1!:d ''/3i/!/:' d~;11P,u ?711 ltt" , + • 64 of' thJ..·s h"Cl' l'oen ...... .I. ~ t U,-, ~ (,f r : . . . . 'nl ('0"'1 ~ J1 ~ It;c ',J''''-'''Uffi'''(' tll'~+ fl'A ,--'1'''1'"' - 4 " .. .&. • .. .. i:) I ',- .' ,. ,\~ .. \. "~.J>, t .. ~ V -~ ... t"~ ".f I ~ unutj.lized portion will be drawn dO"v"m, ()ne-h0.1f in thr; r~~;:\&in(:pr ()f 1?I~i1 and one-half in 1749. (See r:otc - pace 7(:')  one year after the close of ~ ~'rld 1"ar I. .. ith rcs:-'E:ct to tLe 3.~~ 10:1n of 1391, it ":w.S Gtipul;.:.tnrl that, ii' t,l:t';- c~stor.s !'e~ei~~ts exceeded (~cr .. · c.... t all"! '.er ... '.. ... • r:n all E:xterna1 loans -:~:ere ""~c1/?e at tho rate of 3.. 5:6 ~"(:::''' aLmr~. ., ~ ;1. c 1 "' .iI' ,c.~>,.+ ;., . . f ~,T S r 1 ?2f-· due s.f . • t.:1rY'!·' 1 0....... of 1)21, . "t- v\.:.· .... \...l,.,L r V9 • C' '<>.,." and h% - h.:;~b. .;.aturi.i.i(:s of the n01;( loans are 1978-7:; :::.r:,d l)RL. At t.he oT')on nnt,il fu~tht.:r notice .. bonc:s 1';ere converted 0 tlcgotiat.ed settlo!·!f:r.t" First offer unilateral uC' tiot~ - c ~l:..mp"('cl . or -Lhrou7h a nr~;;otiatcd spttlr,;~ent. '  - 75- to thf.! t1nd of l)h 7 • • •