Ecuador - Current economic position and prospects

PUB- 14 International Bank for Reconstruction and Development The Current Economic Position and Prospects of Ecuador October 1973 The World Bank Group issues country economic reports in two series. This report is part of an in- formal series wholly based on a document prepared for use within the Bank. The text is not meant to be definitive, but is offered so as to make some results of internal research widely available to scholars and practitioners throughout the world. Other titles in this series include: Employment in Trinidad and Tobago (March 1973) Current Economic Position and Prospects of Peru (forthcoming) Another series of country reports is published for the Bank Group by Johns Hopkins University Press. Individual studies in this series are available in clothbound and paperback editions. CURRENT ECONOMIC POSITION AND PROSPECTS OF ECUADOR This report is based on the findings of an economic mission which visited Ecuador during March and April 1972 and subsequent staff visits and discussions with the government authorities. The mission was composed of Messrs. R. Echeverria (Chief of Mission), J. Balcazar (investment program adviser), G. Novak (general economist), S. Malik (general economist), P. Dax (general economist), A. Parra (petroleum specialist-consultant), S. Lerner (industrial economist-consultant), R. Kahil (fiscal economist- consultant), N. Nowak (tax administration specialist- consultant), W. Kupper (power specialist), and Miss B. Protas (secretary). This report also draws from the findings of an IBRD Agricultural Sector Review Mission which visited Ecuador in the fall of 1970. The petroleum prospects reflect the situation as of February 1973. International Bank for Reconstruction and Development 1818 H Street, N, W. Washington, D. C. 20433 UoS.A. October 1973  CURRENT ECONOMIC POSITION AND LONG-TERM PROSPECTS OF ECUADOR TABLE OF CONTENTS VOLUME I Page No. COUNTRY DATA AND CURRENCY EQUIVALENTS*......................... v-vii SUMMARY AND CONCLUSIONS ............... ................. ix-xiv I. INTRODUCTION ...................1................ 1 II. GROWTH AND STRUCTURAL CHANGE ................ .......... 4 A. Recent Growth Performance -.......... ...... 4 B. Population, Employment and Income Distribution .. 10 III. DEVELOPMENT PROSPECTS AND POLICIES ................. 12 A. Introduction ................................. 12 B. Agriculture .................. ................ 12 C. Manufacturing ................................... 28 D. Petroleum ... ............................. ...36 E. Issues and Public Investment Possibilities in Other Sectors .... ........ .................. 40 F. Overall Investment Requirements ................. 53 IV. FINANCING OF DEVELOPMENT .................. ......... 61 A. Private Sector Financing ........................ 63 B. Public Sector Financing ..................... 64 V. EXTERNAL TRADE AND FINANCES ....................... 84 A. Recent Trends ...................................... 84 B. Future Prospects ................................... 92 MAPS VOLUME II STATISTICAL APPENDIX VOLUME III ANNEXES ANNEX A - Technical Note on National Accounts ANNEX B - Technical Note on Basic Statistics ANNEX C - The Petroleum Sector ANNEX D - Long-Term Macro-Economic Projection Model  COUNTRY DATA - ECUADOR AREA 2/ POPULATION!/ DENSITY 271,000 lur 6.5 million (mid-1972) 24 per kwA2 Rate of Growth: 3.4% (froml960 to 1971) 200 per kis of arable land a/ b/ POPULATION CHARACTERISTICS (19707 HEALTH (1968) Crude Birth Rate (per 1,000) 48 Population per physician 2,770 Crude Death Rate (per 1,000) 14 Population per hospital bed 450 Infant Mortality (per 1,000 live births) 87 5/ c/ INCOME DISTRIBUTION (19707 DISTRIBUTION OF LAND OWNERSHIP 419,,) % of national income, lowest quintile 2.7 % owned by top 107 of owners 76 highest quintile 73.2 % owned by smallest 30% of owners 1 ACCESS TO PIPED WATER (1969) ACCESS TO ELECTRICITY (962) % of population - urban 92 % of dwellings 32 - rural 9 e/ NUTRITION - EDUCATION f/ Calorie intake as % of requirements (1964-66) 74 Adult literacy rate 7 (1962) 68 Per capita protein intake, grams (1962) 48 Primary school enrollment % (1967) 741 GNP PER CAPITA in 1970 : US $290 GROSS NATIONAL PRODUCT IN 1971 ANNUAL RATE OF GROWTH (7. constant prices) US $ Io. 7% 1960-65 1965-70 1971 GNP at Market Prices 1,606 100.0 4.6 5.5 7.0 Gross Domestic Investment 371 23.1 2.5 12.6 19.6 Gross National Saving 141 8.0 0.5 4.7 -28.0 Current Account Balance -230 -14.3 Exports of Goods, NFS 257 16.0 2.9 3.2 7.2 Imports of Goods, NFS 466 29.0 5.1 9.8 36.8 OUTPUT, LABOR FORCE AND PRODUCTIVITY IN 1971 2/ Value Added Labor Force7 V. A. Per Worker 31US $NMn. 7, Mfyn. 7.%$ 7 Agricultqrg 432 28.5 1.1 55.0 393 14.2 Industry47 405 26.7 0.4 20.0 1,012 36.7 Services :/ 678 44.8 0,5 25.0 1,356 49.1 Unallocated ..- - - Total/Average 1,515 100.0 2.0 100.0 2,761 100.0 GOVERNMENT FINANCE 6i Public Sector Central Government ( / Mil.) % of GDP ( / M1n.) 7 % of GDP 1971 e 1971 e 1965- 7 171 1965-1 Current Receipts 7,091 17.2 14.4 4,864 11.8 9.3 Current Expenditure 5,988 14.5 12.3 4.L69 10.6 .5 Current Surplus 1,103 2.7 2.1 1L95 1.2 0.8 Capital Expenditures 2,594 6.3 5.1 1,410 3.4 2.5 External Assistance (net) 563 1.4 1.4 . . * Staff Estimate not available not applicable V COUNTRY DATA - ECUADOR MONEY, CREDIT and PRICES 1965 1969 1970 1971 (Million S/ outstanding end period) Money and Quasi Money 5,446 9,660 11,539 12,619 Bank Credit to Public Sector 541 1,365 1,810 2,583 Bank Credit to Private Sector 4,106 6,388 7,527 8,321 (Percentages or Index Numbers) Money and Quasi Money as % of GDP 26.2 31.7 32.8 30.6 General Price Index (1963 = 100)7/ 107.2 127.2 135.7 148.8 Annual percentage changes in: General Price Index 3.9 4.7 6.7 9.8 Bank credit to Public Sector 362,4 66.4 32.6 42.7 Bank credit to Private Sector 1,7 9.7 17.8 10.5 BALANCE OF PAYMENTS MERCHANDISE EXPORTS (AVERAGE 1965-71) 1969 1970 1971 0S$Mln % (Millions US $) Exports of Goods, NFS 220 256 257 Banana 107.5 52.3 Imports of Goods, NFS 330 361 466 Coffee 36.8 17.9 Resource Gap (deficit = -) -1T0 -T3 C700 Cacao 24.6 12.0 Sugar 9.0 4.4 Interest Payments (net) - 8 - 10 - 11 All other commodities 27.6 13.4 Workers' Remittances .. .. .. Total 205.6 1OQE0 Other Factor Payments (net) - 20 - 24 - 24 Net Transfers 12 14 13 EXTERNAL DEBT, DECEMBER 31, 1971 Balance on Current Account -126 -125 -230 US $ MLEn Direct Foreign Investment 75 90 157 Net MLT Borrowing 16 31 23 Public Debt, incl. guaranteed 390.1 Disbursements 30 47 46 Non-Guaranteed Private Debt Amortization 14 16 24 Total outstanding & Disbursed Subtotal 91 121 1,180 9/ Capital Grants - 4 4 DEBT SERVICE RATIO for 197 17 Other Capital (net) - - - % Other items n.e.i 40 -.1_ I Increase in Reserves (±) 5 2 - 30 Public Debt, incl. guaranteed 12.0 Non-Guaranteed Private Debt Gross Reserves (end year) 65 83 63 Total outstanding & Disbursed Net Reserves (end year) 58 56 27 RATE OF EXCHANGE IBRD/IDA LENDING, (March 31, 1973XMillion US $): Through 1970 (August 16) IBRD IDA US $ 1.00 S/ 18.18 1.00 = US $ 0.055 Outstanding & Disbursed 35.7 14.8 Undisbursed 8.2 18.7 Since - 1971 (August 17) Dutstandirg incl. Undisbursed 43.9 33.5 US $ 1.0= S/ 25.25 1.00 = US $ 0.04 1/ Ratio of Debt Service to Exports of Goods and Non-Factor Services. 2/ Annual Growth ratio relates to period 1966-71. 3/ Contains agriculture, livestock, forestry, fishing and hunting. 4/ Includes manufacturing, mining, public utilities and construction. 5/ Includes trade, transportation and public and private services. 6/ Excludes Social Security Institute j/ GDP deflator. 8/ SDR's allocation. 9/ Ratio of debt service to exports of goods and non-factor services. Sources: a/ National Planning and Coordination Board, Ecuador; b/ PAHO-Nealth Conditions in the Americas 1966-68, September 1970; c/ Ecuador: Encuesta Agropecuaria Nacional, 1968; d/ UN Statistical Yearbook, 1971; o/ UN, Demographic Yearbook, 1970 and FAO, Production Yearbook, 1970; f/ UNESCO, Statistical Yearbook, 1970; 4/ UN, Statistical Bulletin for Latin America, 1970 Latin America and the Caribbean May 1, 1973 vi CURRENCY EQUIVALENTS Currency Unit = Sucre (SI) S/1.00 = US$0.04 US$1.00 = S/25-00 S/1 million = US$40,000 GLOSSARY OF ABBREVIATIONS BEV - Ecuadorian Housing Bank BNF - National Development Bank CENDES - Industrial Development Center CEPE - Ecuadorian State Petroleum Corporation CFN - National Finance Corporation CIDA - Inter-American Center for Agricultural Development COFIEC - Development Finance Company EEQ - Electrical Company of Quito ENPROVIT - State enterprise regulating trade in key commodities ENTEL - National Telephone Company EMLEC - Electricity Company of Ecuador IEOS - Ecuadorian Institute of Sanitary Works IERAC - Ecuadorian Institute of Agrarian Reform and Colonization IESS - Social Security Institute INECEL - Ecuadorian Institute for Electrification INERHI - Ecuadorian Institute for Water Resources INIAP - National Institure for Agricultural Research IPPF - International Planned Parenthood Federation GOVERNMENT OF ECUADOR FISCAL YEAR January 1 to December 31 vii  SUIARY AND CONCLUSIONS The development potential of Ecuador's considerable natural resources has not materialized significantly in the past. Economic growth in the last twenty years has been modest--about 5 percent per annum--and has stemmed almost exclusively from the expansion of agricultural export crops: first cacao, then coffee and more recently bananas. Although Ecuador was at one time the largest world exporter of cacao and bananas, the benefits of this growth have been largely concentrated, and the low purchasing power of large segments of the population inhibited the development of a domestic market which would stimulate the growth of manufacturing and the creation of new jobs. Unemployment and underemployment seem to have been increasing, and the average standard of living of the large majority of the population remains low. The major obstacles to the mobilization of Ecuador's development potential have been the low and fluctuating capacity to import, the limited savings capacity of the economy, strong regionalism combined with a rigid social structure, and protracted political instability. Ecuador is currently confronted with a great opportunity and challenge to achieve a faster and more balanced economic growth. Higher levels of foreign exchange earnings from petroleum exports should enable the economy to finance higher import levels of intermediate and capital goods and thus achieve much faster rates of growth of output and per capita income than in the past. Substantial tax revenues from petroleum should strengthen public finances, thereby enabling the government to support a high level of current expenditures and an increased public investment program without resorting to excessive borrowing. Although in terms of its contribution to aggregate growth petroleum should play a leading role during the next several years, its direct effect on the standard of living of the population will be small. The spreading of the petroleum-generated wealth and opportunities over significant segments of the population will be one of the major problems facing the Ecuadorian authorities in the 1970s. Another major problem will be the growth and the diversification of the country's productive base so that when the expansion of the petroleum sector eventually levels off, other sources of growth will permit the country to continue self-sustained development. An appropriate development strategy for the 1970s will necessarily have to focus on the expansion potential of the petroleum sector and its possible contribution to output, foreign exchange earnings and public revenues, and on the use of these additional resources to expand output in industry and agriculture and to broaden the social and economic opportunities open to the mass of the population. With 55 percent of the active population employed in agriculture, Ecuador still has a predominantly agrarian economy. In spite of its rich natural endowment, suited for a great variety of agricultural production, livestock and forestry, agriculture has expanded at a slower rate than the overall economy. The relatively slow growth of export crops in the recent past and their limited prospects for further expansion can be attributed to a large extent to rigidities in external demand beyond the control of Ecuador. The most sluggish components of agricultural output have been, however, production for the domestic market. As a result, agriculture has been unable to keep up with rising urban demand for food and raw materials, and has not increased the income levels of subsistence farmers sufficiently to bring a significant number of them into the market economy. Apart from welfare consi- derations, so long as the bulk of rural population remains in small-scale subsistence farming, the agricultural sector cannot generate a significant demand for industrial products. While market signals have in the past led to efficient allocation of resources in export agriculture, neither market forces nor government efforts to stimulate agricultural production for the domestic market met with much success because of inherent rigidities in the productive structure. Among these rigidities are the unequal distribution of land, primitive systems of land tenure, inefficient marketing mechanisms, lack of credit and the paucity of technical improvements. The removal of these obstacles to agricultural development for the domestic market will require the government's active involvement in the formulation and implementation of comprehensive agricultural policies and appropriate public investment in these areas. The contribution of manufacturing to output, export diversification, employment and income distribution has thus far been limited and its develop- ment potential has remained largely untapped. The main constraints to a more vigorous expansion of manufacturing have been the small size of the domestic market; high production costs and limited entrepreneurial interest in penetrat- ing external markets; insufficient human, physical and financial infrastructure; and the absence of a sound national industrialization policy combined with coordinated government action to stimulate and regulate manufacturing expan- sion. While manufacturing output has increased rapidly in recent years, its contribution to total output and employment is still quite small. While profitable opportunities arising from an expansion of domestic incomes and demand as well as from regional integration may be expected to provide an impetus to industrial growth, over the longer term it is unlikely that domestic and regional markets alone will generate sufficient momentum to substitute for petroleum induced growth, and increasing emphasis will have to be given to the promotion of industries oriented to broader markets. To open up these markets to Ecuadorian manufacturers will require an integrated and government-supported industrial production and export program, based on research, development and promotion; the program will also have to provide adequate guidance and incentives to attract both domestic and foreign financial, technical and managerial resources. In view of the anticipated higher levels of economic activity induced by the production of petroleum (Chapter III, Section D), the substan- tial development potential in other productive sectors (Chapter III, Sections B, C and E), the improved financial position of the private and public sectors - x - (Chapter IV) and the favorable prospects for the external sector (Chapter V), GDP growth targets of the order of 10 percent for the whole economy and 8 percent for the nonpetroleum segment appear to be feasible in the period 1973-77, provided that sound economic policies are followed. These levels of growth would result in an average per capita income 30 percent higher in 1977 than at present and, hopefully, in a better distribution of income. To meet these growth targets, gross domestic fixed investment would have to increase by almost 10 percent annually during 1973-77, yielding a cumulative volume of investment 75 percent larger than in the previous five-year period. While the bulk of investment in this period will be in the petroleum sector, both public and private nonpetroleum investments will have to be considerably larger than in the past. It will be of utmost importance for the realization of projected petroleum investments--and of the overall growth targets of the economy--that reasonable incentives and staoility of rules are maintained. This is especially important because oF the early stage of development of the petroleum sector in Ecuador. An analysis of the public investment require- ments in the various sectors and the technical and managerial capabilities at present available in Ecuador indicates that public fixed-investment growth rates of about 9 percent in 1972, 19 percent in 1973 and almost 22 percent in 1974 will be required if the projects currently in the pipeline are to proceed as scheduled. Somewhat lower rates of growth in public investment in subsequent years should suffice and be consistent with the overall growth targets of the economy. There remains the danger, however, that political pressures will lead to excessive increases in current expenditures, and that the absorptive capacity of the public sector will not increase as we expect, which would reduce the level of public investment. Indeed, if the capacity of the public sector to prepare and execute high priority investment projects does not increase as suggested in this report, it might well be advisable to develop petroleum resources at a slower pace than could be technically feasible to avoid wasting them in superfluous expenditures. The effects of petroleum activity will be of such magnitude that the economy should not suffer from a savings constraint, provided that both the private and public sectors do not permit their consumption to exceed reasonable and adequate limits. In these circumstances, gross domestic sav- ings could be expected to grow from the present 10 percent of GDP to over 20 percent in 1977. Over the period 1972-77, national savings could cover about 74 percent of domestic investment, compared with 56 percent in 1966-71. A pressing issue would be the removal of the institutional and technical bottlenecks that might obstruct the achievement of the private and public investment requirements and a more equitable distribution of the benefits of the development process. In order to utilize fully its own resources, as well as possible loans and credits from abroad, the government will have to expand substantially the capacity of the public sector for identifying, preparing and executing development projects. However, this expansion will tax the present very limited human resources of the public sector heavily and will require a massive training and organizational effort necessitating the government's full and immediate support. This, and the need to keep current nondevelopment expenditures under tight control, are the preconditions for obtaining lasting benefits from the petroleum boom. - xii - In the recent past, the management of the Ecuadorian economy has been hampered by recurrent fiscal crises leading to inflationary financing from the Central Bank and to balance-of-payments difficulties. The under- lying cause of these deficiencies in fiscal management has been the weakness of economic policy tools available to the fiscal authorities. Almost 50 percent of the public sector revenues have been earmarked and accrued automatically to various autonomous institutions and agencies in the rest of the public sector. The central government has lacked the mechanisms and the power to influence and coordinate the growth and allocation of those agencies' current and capital expenditures to conform with the priorities and availability of financial resources of the public sector. The present government is taking steps to increase control over budgetary allocations, to improve the level of knowledge and control of the finances of the rest of the public sector, to make periodic evaluations of the expenditures of the various components of the public sector, to centralize and increase control of external public borrowing and to relate budgetary appropriations to the objectives and priorities in the forthcoming National Development Plan. All these changes would contribute to creating an administrative system better suited for adequate financial and developmental policies. Without these measures, the likelihood of the government's carrying out a balanced investment program that would permit a sound allocation of the public revenues and foreign exchange generated by the petroleum sector is dim, since without a minimum control of revenues and expenditures no satisfactory allocation of current and capital expenditures can be expected. Total public investment, fixed and financial, for 1973-77 is estimated at S/25.5 billion in 1971 prices. In addition, the public sector will require S/3.4 billion to cover amortization payments on existing external debt. Thus, total resources needed are estimated at S/29.3 billion. During this period, aggregate public savings are expected to anount to S/21.6 billion, provided the authorities restrain current expenditures to an annual real growth rate not in excess of 10 percent, which should be ample to achieve the several objectives postulated in this report, including activities aimed at increasing employment. Besides, some S/2.1 billion of gross official capital are expected from the existing pipeline of undisbursed loans, and a S/8.6 billion equivalent would be disbursed from new loans for prospective projects in which external multilateral and bilateral financial agencies are likely to exhibit an active interest. Thus, a gross inflow of external capital of a S/10.7 billion equivalent (US$428 million, or an average of US$86 million per year) would be forthcoming. Since amortization payments on the new debt are estimated at S/1.9 billion during the period, a total net inflow of external capital of S/5.4 billion would take place. This would be consistent with a much needed increase in foreign exchange reserves --the equivalent of three to four months import requirements by the end of the period. Moreover, the continuing participation of external development financing agencies might well be essential to achieve the required levels of public investments in terms of identification, preparation and execution of high priority projects which would help to meet the government's objectives - xiii - in the field of growth and improved income distribution. It should be noted that to help implement these objectives, official lending agencies are likely to find themselves associated with sectors and projects where the foreign exchange component is very small, and may find it necessary to finance a portion of local currency expenditures to achieve a meaningful level of involvement. In the past few years, rapidly increasing import requirements, coupled with stagnating trends in major exports, have resulted in serious balance of payments difficulties, expanded external borrowings and depletion of foreign exchange reserves. Ecuador's capacity to import and thus to sustain economic growth and consumption will be substantially enlarged during this decade as a result of petroleum exports. Petroleum will be the single most important export item in 1973, and by 1976 it will earn more foreign exchange than all other commodities combined. The emergence of petroleum as Ecuador's major export, however, entails some risk of future distortions. By strengthening the balance of payments, petroleum exports may hide unfavor- able developments in price-cost relationships and in the competitive position of the country's traditional and nontraditional exports, which from an employ- ment point of view will remain far more important than petroleum. Thus, Ecuador's future exchange rate policy will have to be geared explicitly to taking into account not only the overall balance-of-payments situation, but also the international competitiveness of the main employment-generating activities. Relatively high levels of imports will be required to sustain the rates of growth of the economy envisaged for the 1970s. Consumer goods imports are expected to grow at a faster rate than in the past, partly as a result of higher government consumption and more socially oriented investment expenditures, and partly because of increased overall levels of economic activity. High growth of nonpetroleum intermediate and capital goods imports will reflect the accelerated levels of economic activity in general and of manufacturing and construction in particular, as well as the import requirements emerging from the increased public investment program. Direct investments by foreign petroleum companies in exploration, drilling and pipeline construction --with an import component estimated at about 70 percent--are expected to continue, peaking in 1976 and declining thereafter. Balance-of-payments equilibrium will require gross capital inflows totaling US$911 million in the period 1973-77, compared with a total of US$675 million in 1967-71. Direct foreign investment is expected to be the main source of external capital and is estimated to cover almost two-thirds (US$595 million) of the gross requirements. Most of these foreign investments (US$426 million) would be destined for the petroleum sector. Gross public capital inflows are estimated to provide the balance and would yield US$467 - xiv - million, or an average of around US$93 million annually. */ Within this total suppliers credits are estimated to furnish some US$24 million annually (slightly higher than the levels disbursed in the past several years), and the remainder would come from external development financing agencies. Because of the large amortization and interest payments falling due in the period, the net transfer of external resources over the period would be much smaller, of the order of US$110 million. These levels of external financing would permit the accumu- lation of international reserves which will peak at the equivalent of almost four months' imports by 1977. This pattern of financing would also lead to an improvement in the structure of the public external debt. The average terms of gross public capital inflow are assumed at twenty-two years maturity, 5.5 percent rate of interest and 3.5 years grace, better than in the past; these averages result from the expected terms of different sources of external finance which may be available. With these terms and on the basis of the foreseen large expansion in exports, the debt service ratio is expected to fall from 15 percent of exports of goods and services in 1972 to a little over 10 percent in 1977. At the same time, the capacity to import will be expand- ing at a high rate. In spite of petroleum prospects, Ecuador will continue being for some time a less developed country in Latin America. Although the government has decided to tackle some of the problems and obstacles that have traditionally inhibited the development of the country, such as the low saving capacity of the public sector and its limited power to orient economic activity, the sluggish growth of the agricultural sector, and the insufficient development of nontraditional exports, to overcome these problems will require significant changes in the economic and administrative structure of the country which can only be brought about gradually. During this transition period Ecuador should continue receiving a part of its external financing on concessionary terms. With respect to the longer run, the terms of borrowing should depend on the prospects for further development of the petroleum sector, on the changes that take place in the productive structure, and on the degree of success achieved by the five-year development plan approved by the government in 1972. */ Balance-of-payments financial flows are expressed in current US dollars, while the dollar equivalents mentioned above are expressed in constant 1971 prices. This explains the small discrepancy in the figures. I. INTRODUCTION Ecuador is one of the smallest and, despite its considerable natural resources, one of the less developed countries in Latin America. Among the ten major South American countries it ranks ninth in territory (above Uruguay), eighth in GNP and GNP per capita (above Paraguay and Bolivia) and seventh in population (above Paraguay, Uruguay and Bolivia). Its rich natural resources include a wide variety of climates, soils and topography, which provide the productive base for numerous agricultural crops, livestock and forestry. The Coastal Region (Costa) with its rainy tropical climate and fertile soils is suited for most tropical and semi- tropical products, as well as for beef cattle. The Sierra Region with its diverse altitudes is suited for raising most temperate crops and livestock. The Oriente Region, largely unexplored and undeveloped, is believed to have an important agricultural potential, and has recently attained economic pre- eminence through the discovery of considerable petroleum deposits. Moreover, lying at the confluence of the warm Equatorial Current and the cold Humboldt Current, the Ecuadorian seacoast is rich in marine resources. The development potential of Ecuador's natural resources, however, has not significantly been utilized. Economic growth in the last twenty years has been modest--about 5 percent per annum--and has stemmed almost exclu- sively from the expansion of agricultural export crops: first cacao, then coffee and more recently bananas. Although Ecuador became in its time the largest world exporter of cacao and bananas, the benefits of this growth have been highly concentrated, and large segments of the population have remained at the subsistence level. Their low purchasing power inhibited the development of a domestic market which would stimulate the growth of manufacturing. As a result, the creation of new jobs appears to have lagged behind new entries into the labor force. Transport and power infrastructure are still insufficient, and health, education and housing facilities are very limited. The major obstacles to the realization of Ecuador's development potential have been the low and fluctuating capacity to import, the limited savings capacity of the economy, strong regionalism combined with a rigid social structure and protracted political instability. Foreign exchange earnings have been dependent on a few tropical agricultural products, highly vulnerable to fluctuations in demand and prices in export markets. Their stagnating trend, combined with increased import demand generated by rising incomes and a rapidly growing population resulted in mounting pressures on the balance of payments. Before the oil discoveries, these pressures had emerged as an insurmountable obstacle to higher rates of growth. Secondly, the relatively low savings ratio, coupled with the high population growth rate, has kept Ecuador in the vicious circle of low saving and low investment. With an incremental capital output ratio of 2.8 and a - 2 - population growth rate of 3.4 percent, almost 10 percent of GDP has had to be invested just to avoid a reduction in the existing levels of per capita income; i.e., about two-thirds of the total savings effort expected in 1972 will have to be dissipated in maintaining the standard of living of the popu- lation. This pressure has been particularly strong at the government level, which had to provide the infrastructure and social services for the increased population. However, the tax system, eroded by evasion and multiple exemp- tions, has not been generating sufficient resources to meet these needs, and has led to the postponement of infrastructural works necessary to achieve higher levels of output and income. Thus, the limited saving capacity of the economy and the insufficient mobilization of financial resources by the public sector have acted as another limitation on Ecuador's development. Thirdly, sharp geographic contrasts, limited communications and different ethnic origins of the population in the Sierra and the Costa, have resulted in the development of different economic structures with conflict- ing social, political and economic interests. Economic activity in both regions is predominantly agrarian, but in the Costa it is oriented toward plantation agriculture for export markets, and to import and export trade; in the Sierra it rests on haciendas producing for local markets and on small subsistence farms. Coastal mercantile interests have supported liberalization of foreign trade-currently the major source of tax revenues--and increases in money wages of the low-paid tenant laborers of the Sierra, with the objec- tive of generating a market for imported consumer goods. This has been in direct conflict with the Sierra hacienda agriculture and manufacturing inter- ests, based on production for the domestic market with the use of cheap labor; these groups have generally opposed social legislation and the lowering of protective tariffs. This cleavage--spearheaded by the city of Quito in the Sierra, the seat of government and the political center of the country, and the coastal city of Guayaquil, the economic and financial center--has taken place within the framework of a rigidly stratified society where wealth, prestige, religion, language and ethnic origin have differentiated a small economic and political elite in both regions from the large Indian and mestizo populations. 1/ It is worth noting, however, that in the last few years a growing process of internal integration has taken place, stimulated by the development of transport and communications and the accelerated migration from the Sierra region to the Costa. The struggle for economic and political predominance has been largely confined to the upper classes of the two regions, focusing only marginally on the pressing social and economic problems of the great mass of the population. As a result of this excessive preoccupation with region- al as against national objectives, Ecuador's history has been characterized by a high degree of political instability, where the strife for personal 1/ Although there are no official statistics of the ethnic composition of the population, estimates of the white population range between 10 and 15 percent; those for Indians vary between one-third and one-half of total population; and the rest is taken up by mestizos and a very small segment of Negroes and mulattoes. Spanish is the official language, but most of the Indians continue speaking Quechua, in some cases to the total exclusion of Spanish. - 3 - power has generated frequent changes in government, and the slow pace of social progress has led to recurrent civil unrest. Political changes have been responsible for lack of administrative stability reaching down to relatively low levels of government, and have limited the horizons of policy makers to the resolution of pressing current problems, precluding the adoption of policies aiming at achieving a faster and more balanced economic growth over the longer term. Ecuador is currently confronted with a great opportunity and chal- lenge to achieve a faster and more balanced economic development. The pre- vious major constraints--especially balance-of-payments difficulties and limited public sector savings--could be overcome as a consequence of dis- covery of petroleum if appropriate policies are pursued to control consump- tion growth in both the public and the private sectors. The new government which came to office in early 1972 has recognized the substantially improved prospects for economic and social development and has prepared a Development Plan for 1973-77 which takes up the challenge posed by petroleum opportunities. This plan aims not only to accelerate economic growth, but also to cope with problems of social welfare which have been neglected by the pattern of previous growth. II. GROWTH AND STRUCTURAL CHANGE A. Recent Growth Performance Sectorial Origin of Growth Ecuador's economic growth appears to have accelerated from an aver- age annual rate of 5 percent in the 1950s and most of the 1960s to 6 percent in 1969, 8 percent in 1970 and 7 percent in 1971. 2/ The major forces behind this acceleration have been the substantial investments by foreign companies in the petroleum sector, coupled with a continued expansion of the manufactur- ing sector and construction activities, and the recovery of banana production. Over the last two decades, the structure of the economy has wit- nessed a slow shift of activity from the agricultural to the nonagricultural sectors. Agriculture's contribution to GDP is now around 29 percent, down from the 38 percent average of the 1950s. Within the growing nonagricultural activities, the services-producing sectors (including trade and government) have been the major contributors to long-term GDP growth. Although overall agricultural growth trends have been less than satisfactory, there have been important changes in the composition of output. The most remarkable one has been the rise in importance of bananas as an export crop from less than 30 percent of total commodity exports in the early 1950s to over 50 percent in the late 1960s. Having earmarked a part of bananas export taxes for subsidizing a systematic spraying of banana planta- tions, and being virtually immune from storms, Ecuador has become the most reliable supplier of bananas. Further expansion of production, however, has been hampered by Ecuador's locational disadvantage vis-a-vis other producing areas. The contribution of the agricultural sector to export earnings has remained relatively constant (about 85 to 90 percent of the total) since the increase in banana exports has been offset by a relative decline in earnings from cocoa and coffee. Next to agriculture, the manufacturing sector provides the highest contribution to GDP, with some 16 to 17 percent over the last two decades. Factory manufacturing, stimulated by government incentive and financial sup- port, has grown at 10 percent or more in recent years. However, the apparent relative stagnation of small scale and handicraft industries has pulled down the average growth rate for the manufacturing sector to around 5 percent in the late 1960s. The overall real growth rate is probably underestimated because of excessive deflation (see Annex A for further details). Within the 2/ See page 8 on problems for measuring economic growth in Ecuador. - 5 - manufacturing sector, food, textiles and chemicals have made a major contribu- tion to growth. Ecuador started most of its metal processing, engineering and other advanced manufacturing industries in the last five to ten years. Being still in their infancy, they are small in size and their contribution to total manufacturing growth is relatively minor. Construction has also made an important contribution to the total GDP growth. Starting with a 3 percent share in 1950, construction grew at a rate of 9 percent in the 1950s. Growth slowed in the early 1960s but further rapid growth in recent years expanded its share to 6 percent of GDP in 1971. Growing at an estimated 25 percent in 1970 and 17 percent in 1971, its contribution to growth rivaled that of manufacturing. Construction of roads and completion of the petroleum pipeline played an important role in the recent acceleration of its growth. Housing construction (estimated from building permits) apparently also increased but at a slower pace. In response to a strong demand for electricity, the public utili- ties sector (electric power, water supply, and sanitation) experienced the highest growth rate among the major productive sectors (15 percent per year in the 1950s). Although this growth slowed in the 1960s, the share in GDP expanded from 1.0 percent in 1960 to 1.8 percent in 1971. Being still relatively small, the public utilities sector has contributed less than 3 percent to total GDP growth. Value added by the mining sector has fluctuated around 2 percent of GDP over the last twenty years. With the discovery of petroleum in the Costa provinces in the 1950s, prospects for rapid growth in this sector appeared bright, but subsequent experience proved disappointing. After the initial moderate expansion of petroleum extraction, production actually de- clined in the 1960s. Output of nonfuel minerals also stagnated. The pre- sent petroleum activities in the Oriente region are being reflected mainly in the construction, transport and services sectors. With the recent ini- tiation of petroleum production, this sector will, however, grow greatly in importance in the future. Within the services sector, trade has been the largest group in the past, although recently it has been exceeded by private services. To- gether these activities accounted for one-fifth of total GDP in the 1950s, but they have grown faster than the rest of the economy, expanding their combined share to almost one-fourth of GDP in recent years. The national account estimates for private services and trade are quite weak. Together with public administration and defense, private services are derived as a residual from the total GDP. Therefore, growth estimates of these sectors as well as the apparent acceleration of GDP growth in recent years could well be spurious. -6- Table 1: INDUSTRIAL (RIGIN OF GDP GROWTH: TRENDS CKTRIBUTION AND STRUCTURE, SELECTED PERIOD AND CALENDAR YEARS 1950-71 (Percent) Sectors and Industries 1950 1951- 1960- 1965- 1967 1968 1969 1970 1971 1959 1964+ 1969 Average Annual Rates of Growth in Percent (GDP at Constant Factor Cost) f GDP at factor cost .. 4.7 4.5 4.9 4.8 5.0 6.5 8.8 7.6 Agricultural sector .. 3.4 4.4 2.2 0.9 - 0.9 5.2 6.2 1.7 Nonagricultural sector .. 5.5 4.6 6.3 6.8 7.6 6.8 9.9 10.2 Commodity producing .. 5.4 6.0 5.9 8.8 5.0 8.9 10.2 9.5 Mining and quarrying .. 4.5 5.7 5.3 6.4 6.4 3.1 0.9 4.4 Manufacturing .. 4.3 6.3 4.7 7.0 4.4 8.1 7.1 7.5 Construction .. 9.5 4.1 9.5 18.8 5.9 12.4 25.3 16.4 Electricity .. 15.0 8.8 9.1 4.8 11.7 15.0 10.7 9.5 Services producing .. 5.6 3.8 6.5 5.7 9.2 5.6 9.8 10.8 Transportation .. 3.9 1.7 2.9 0.5 5.5 5.4 8.5 6.5 Trade 4 .. 6.9 5.5 4.8 6.9 6.3 7.4 5.8 10.7 Banking 5 .. 14.0 6.2 4.7 5.9 5.7 14.4 15.5 12.5 Ownership of dwellings .. 4.0 5.1 3.7 3.5 3.1 5.8 5.0 5.8 Services .. 4.8 3.2 12.2 14.2 13.5 5.6 10.3 9.9 Public adm. and defense .. 5.4 6.6 6.o - 4.3 16.7 - 0.3 18.4 17.6 Contribution to Growth, by Industrial Origin (Percent of GDP Increment) 16 Agricultural sector .. 27.9 35.8 15.2 6.5 - 9.1 25.9 21.8 6.6 Nonagricultural sector .. 72.1 64.2 84.8 95.5 109.1 74.1 78.2 93.4 Commodity producing .. 24.7 30.5 29.8 44.7 26.9 55.4 50.5 32.1 Mining and quarrying .. 2.0 2.8 2.4 2.9 2.8 1.1 0.2 1.1 Manufacturing .. 14.2 21.8 16.6 24.6 14.7 21.6 15.9 16.7 Construction .. 5.9 3.5 8.1 15.8 5.7 9.0 14.1 12.1 Electricity f2 .. 2.6 2.4 2.7 1.5 3.7 3.7 2.1 2.2 Services producing .. 47.4 33.7 55.0 48.8 82.2 38.7 47.9 61.3 Transportation 3 .. 4.1 1.7 2.3 0.4 4.1 5.1 3.4 Trade /4 .. 16.1 8.3 10.7 14.9 14.3 12.5 7.2 18 Banking 15 .. 49 3.7 2.8 5.5 2.5 6.4 4Z 5.2 Ownership of dwellings .. 6.4 4.8 5.0 4.6 4.2 5.7 5.5 4.5 Services .. 9.3 6.4 25.7 31.8 33.7 11.3 14.7 16.5 Public adm. and defense .. 6.6 8.8 8.5 - 6.4 25.6 - 0.5 14.5 17.2 Relative Shares of the Industrial Structure (Percent of GDP) /7 Agricultural sector 38.8 37.9 36.9 52.7 55.1 31.2 30.9 30.2 26.5 Nonagricultural sector 61.2 62.1 63.1 67.5 66.9 68.8 69.1 69.8 71.5 Commodity producing 21.5 21.7 25.4 25.1 25.5 25.4 25.9 26.3 26.7 Mining and quarrying 2.5 2.1 2.3 2.2 2.2 2.2 2.2 2.0 1.9 Manufacturing 16.0 15.4 15.9 17.0 17.0 16.9 17.1 16.9 16.9 Construction 2.7 5.2 3.9 4.4 4.6 4.7 4.9 5.7 6.1 Electricity /2 0.5 1.0 1.3 1.5 1.5 1.6 1.7 1.7 1.6 Services producing 39.7 40.4 59.7 42.2 41.6 43.4 43.2 4).5 44.8 Transportation /3 4.8 4.9 4.1 5.7 3.6 5.6 3.6 3.6 3.6 Trade /4 10.5 11.4 11.1 10.7 10.6 10.5 10.9 10.6 +10.8 Banking /5 1.4 1.9 2.8 2.8 2.8 2.8 3.0 5.1 3.5 Ownership of dwellings 8.1 7.5 6.8 6.3 6.3 6.2 6.2 6.0 5.9 Services 9.3 8.9 8.7 11.7 11.7 12.7 12.6 12.7 +13.0 Public adm. and defense 5.8 5.8 6.2 7.0 6.6 7.3 6.9 7.5 + 8.2 fl Average annual rates of growth for periods are based on the least squares of logarithms. Base year precedes the years indicated for growth rates. 2 Includes electric power, gas, water supply, and sanitary services. Includes transportation, storage, and communications. Includes wholesale and retail trade. 5 Includes banking, insurance, and real estate. Contribution to growth for periods is computed from the trend values derived by the least squares of logarithms. 7 Shares for periods are computed from unweighted annual percentages to give equal weight to all years. Sources: Tables 2.3 and 2.4 of the Statistical Appendix. -7- Major Uses of Resources Consumption constitutes the major use of resources. Growing faster than the GDP, consumption expanded its share in GDP from 83 percent in 1950 to 90 percent in 1971. On the average, consumption increases absorbed four- fifths of the GDP growth in the 1950s. With import deficits mounting in the 1960s, consumption increments began to exceed the increments in GDP; the relationship rose from 1.02 in the early 1960s to 1.47 in 1971. Comparing the relative claims of both private and public consumption on growth, it appears that while the government contained its purchases of goods and ser- vices within the same or even a declining share of GDP, private consumption expanded considerably faster and used up over the years relatively more of the available resources in absolute as well as in relative terms. Prior to 1970, the long-term share of the gross domestic investment (GDI) of CDP remained at about 15 percent, although annual investment expen- diture fluctuated widely. Since 1968, and after a period of slow growth in the early 1960s, GDI started growing rapidly--about 20 percent per year-- mainly as a result of stepped up investment in exploration and pipeline con- struction by foreign petroleum companies. This acceleration of investment in the last four years claimed one-half, and in 1971 three-fifths, of the increments in GDP. The combined increase in consumption and investment ex- penditures was one and half times the increase in GDP in 1968-69 and more than twice the GDP increase in 1971. The additional resources have been provided by rapidly munting increases in net imports. The public sector has maintained its level of investment at some 5 percent of GDP over the last twenty years. However, in a traditionally free enterprise economy such as Ecuador's, public fixed investment figures underestimate the government's efforts in investment activity since in sev- eral important sectors the policy has been to stimulate private investment indirectly through credit lines financed with public funds. These financial investments have been increasing over time and have been particularly signi- ficant in manufacturing, agriculture and housing. After a period of relatively slow growth in the 1950s, private investment expanded relatively faster in 1960s and accelerated considerably in the late 1960s. With the exception of the petroleum sector, there are no data on sectorial composition of private investment. Indirect evidence points out, however, that the most important areas of private investment activity have been the conversion from Gros Michel to Cavendish bananas, the stepped-up expansion of factory manufacturing, residential and nonresi- dential construction and petroleum development. Foreign trade has provided the resources which permitted Ecuador to expand simultaneously its consumption and its gross domestic investment beyond the limits set by its GDP. With exports accounting for about one- fifth of GDP and imports somewhat lower, Ecuador enjoyed a favorable balance - 8 - of trade with an export surplus amounting to an average of about 2 percent of GDP in the 1950s. However, unfavorable long-term trends eliminated the export surplus in the early 1960s. Continued and rapidly accelerating growth of imports finally led in the mid-1960s to large import deficits which reached almost 13 percent of GDP in 1971. The rate of growth for net factor payments abroad has also increased in recent years pari-passu with the ac- celeration of GDP growth, as the expanding import deficits required larger external capital inflows. Thus, net factor payments still represent the equivalent of 2 percent of GDP. The Problem of Measuring Growth There is no doubt that the Ecuadorian economy has been growing and diversifying. It has become, however, increasingly difficult to measure this growth and structural change. The coverage and particularly the quality of national accounts and the related basic statistics has deteriorated notably (see Annexes A and B). While national accounts for the 19501 and early 1960s were based on independent annual statistical information, in recent years they have been projected from the earlier estimates. In turn, the projected data have been fed as actuals in regression equations to estimate additional years, generating cumulative biases which distort the real pattern of struc- tural change. National accounts are estimated in current prices. To measure growth in real terms, the Central Bank and the Planning Board have been using a general deflator constructed from the consumer and wholesale price indexes. In 1970, however, the calculation of the wholesale price index was discontinued, leaving the consumer price index as the only indicator of price changes in Ecuador. While the consumer price index may be relevant for deflating private consumption expenditure, it is inadequate for deflating each and every one of the components of national accounts. Where specific price increases exceed the consumer price index changes, the difference would be interpreted as real growth, and vice versa, introducing significant distortions in the measure- ment of structural change. Although some partial measures of economic activity are being continuously recorded by numerous agencies, much of the data produced is incomplete, not comparable over time, outdated and, in general, insufficient for the estimation of national accounts (see Annexes A and B for further details). The formulation of short-term economic policies and the long-term planning of a changing economy require opportune and reliable statistics. During the next few years, while Ecuador absorbs the important impact that the rapid development of petroleum resources will have on its economy, the availability of high quality economic statistics will be essential for making appropriate policy decisions conducive to a rational allocation of scarce resources and an equitable distribution of the benefits of economic growth. Considering the long lead time for the development of an efficient statistical system and for the building of time series necessary for dynamic analyses of the economy, the correction of the present deficiencies should receive immediate government attention. -9- Table 2: GROWfH OF EXPENDITURE (N GDPt TRENDS, CONTRIBUTION AND STRUCTURE, SELECTED PERIODS AND CALEDAR YEARS, 1950-71 (Percent) Expenditure 1950 1960- 1965- 1967 1968 1969 1970 1971 Expndtur 150 1959 1964 1969 Average Annual Rates of Growth in Percent (Expenditure at Constant Market Prices) fl GDP at market prices .. 4.8 4.5 5.0 6.2 4.9 5.8 8.3 7.0 Consumption .. 4.6 5.4 5.4 7.1 5.6 6.1 5.4 11.7 Private /2 .. ( 4.9) (5.2) ( 5.4) ( 6.8) ( 4.2) ( 6.4) ( 4.7) (13.0) General govt. /2 .. ( 2.7) ( 6.2) ( 5.9) ( 9.5) (15.3) 4.3) ( 9.9) ( 3.8) Investment .. 8.7 2.6 10.1 12.8 20.5 19.0 24.6 19.6 Fixed investment .. 9.6 1.9 10.8 13.9 22.0 20.1 24.5 19.5 Private '2 .. ( 7.8) ( 4.2) (12.9) (17.3) (29.9) (29.2) (28.8) (252) Public 7 .. (12.9) (-1.1) ( 7.4) ( 9.6) (11.0) ( 5.1) (16.0) (5.8) Exports / .. 5.5 2.4 2.0 3.3 1.5 - 0.8 16.7 7.2 Imports .. 7.7 5.2 8.4 13.5 17.5 12.3 15.5 36.8 Net exports /.. Z5 /5 15 /5 -184.0 -60.8 -12.7 -107.3 Net factor income .. 6.9 - 5.9 5.0 -4.3 12.0 -1.0 15.0 8.5 Net indirect taxes .. 5.5 3.6 6.4 22.5 7.5 0.9 3.5 0.8 OFCCA .. 2.8 5.9 - 0.5 - 0.3 1.0 - 3.4 22.5 19.7 Distribution of Growth (Percent of GDP Increment at Constant Market Prices) /6 Consumption .. 80.6 101.7 95.3 100.0 101.1 92.4 57.7 183.4 Private /2 .* (73.0) (83.7) (81.6) (95.5, (61.1) (73.9) (39.9) (136.8) General gfft. /2 .. ( 7.6) (18.0) (13.7) ( 4.5) (40.0) (18.5) (17.8) ( 6.6) Investment 3 .. 23.9 8.7 27.6 26.5 56.1 50.7 51.9 56.1 Fixed investment .. (29.2) ( 5.7) (25.6) (24.7) (53.0) 47.5 46.1 49.2 Private /2 .. 11.8 7.2 (18.3) (17.3) (41.9) (42,7) (36.1) (44.6) Public 77.. 10.4 (-1.5) ( 7.2) ( 7.4) (11.1) (.4.6) (10.0) ( 4.6) Net exports A .. - 4.5 - 10.4 - 22.9 - 26.5 - 57.2 - 43.1 - 9.6 -99.5 Net factor income .. - 5.8 3.2 - 2.0 1.5 - 4.7 0.4 - 3.5 - 2.5 Net indirect taxes .. 10.8 6.9 11.4 28.9 14.1 1.5 3.8 1.0 GnCV! .. 3.0 6.5 - 0.4 - 0.2 0.9 - 2.4 10.9 12.7 Relative Shares (Percent of GDP at Current Market Prices) f/ Consumption 83.0 84.c 85.7 87.9 87.9 88.5 88.8 86.4 89,9 Private /2 (69.2) (71.7) (72.6) (73.8) (74.4) (73.7) (73.8) (71.2) (78.0) General govt. 2 (15.8) (12.3) (13.1) (14.1) (13.5) (14.8) (15.0) (15.2) (11.9) Investment /3 10.8 14.3 14.4 14.6 13.6 15.6 17.5 20.1 22.5 Fixed investment 8.5 12.2 12.8 12.7 11.8 15.7 15.6 17.9 19.9 Private/2 (5.8) $ 7.7) ( 7.3) ( 7.7) ( 6.9) ( 8.5) (10.4) (12.3) (14.4) Public 72 ( 2.7) ( 4.5) ( 5.5) ( 5.0) ( 4.9) (5.2) ( 5.2) (5.6) ( 5.5) Exports & 19.2 18.8 18.3 15.9 15.9 15.4 14.4 15.6 15.5 Imports 13.0 17.4 18.4 18.3 17.4 19.5 20.7 22.1 28.2 Net exports A 6.2 1.7 - 0.1 - 2.5 - 1.5 - 4.1 - 6.3 - 6.5 - 12.6 Net factor income - 2.4 - 2.9 - 2.5 - 2.1 - 2.0 - 2.1 - 1.9 - 2.1 - 2.1 Net indirect taxes 8.8 9.7 8.6 8.7 9.2 9.5 9.0 8.6 8.1 GFCCA 5.5 4.8 5.0 4.6 4.6 4.4 4.0 4.6 5.1 /1 Average annual rates of growth for periods are based on the least squares of logarithms. Base year precedes the years indicated for growth rates. /2 Data after 1964 relate to public and private sectors as defined by the NEPCB and are not comparable with preceding years. /3 Gross domestic investant, including increase in stocks. 7! Includes merchandise and nonfactor services. 7! Import deficit appears in one or more ears. 76 Contribution to growth for periods is computed from the trend values derived by the least squares fitted to logarithms. 7 Shares for periods are computed from unweighted annual percentages to give equal weight to all years. Sources: Table 2.1 and 2.2 of the Statistical Appendix. - 10 - B. Population, Employment and Income Distribution Ecuador's 6.5 million inhabitants are unevenly distributed through- out the country. The Costa and Sierra regions hold some 49 percent of the population each, and the largely unexplored Oriente region holds the remaining 2 percent. Total population growth seems to have accelerated from about 2.8 percent per year in the early 1950s to 3.4 percent in the 1960s. Because of lack of employment opportunities in rural areas, the major cities, especially Quito in the Sierra and Guayaquil in the Costa, have been major centers of attraction of domestic migration. Thus, while the rural population growth rate is estimated at 2.2 percent per year, urban growth rate, at 5.3 percent, is two and one-half times higher. This demographic increase, among the fastest in the world, imposes a tremendous stress on the existing social and economic infrastructure. The age structure of the population is characteristic of a devel- oping country with a very high population growth rate. Dependent population is over 50 percent of total population (48 percent under 15 years of age and about 3 percent 65 years and older), and thus the dependency coefficient is higher than 100 percent, compared with about 85 percent for all Latin America, and less than 60 percent for developed countries. As health measures continue reducing infant mortality (which at present is still very high) faster than total mortality, the population pyramid will become even "younger." Despite the high rates of urban growth, Ecuador still remains a predominantly agrarian economy. Almost 60 percent of the population live in rural areas, and a large part of those classified as urban are in effect engaged in activities directly or indireclty related to agriculture. Active population is about 32 percent of total population, and is estimated to be growing more or less at the same rate as total population. Employment in agriculture and manufacturing, the major productive activi- ties, has been growing slower than the overall rate of growth of active population. More serious yet, the less than 3 percent growth of manufactur- ing labor force is far below the rate of growth of urban population, and substantially below the rate of increase of industrial output. Tertiary activities (trade and services) have had to absorb most of the increases in labor force, in most cases contributing to disguised unemployment in super- fluous intermediary occupations. Recent data seem to indicate a continued increase in the overall rate of unemployment. The 1962 census registered about 60,000 unemployed or 4 percent of the labor force. The 1968 house- hold survey showed a 5.5 percent rate of unemployment and a 19 percent rate among young men between the ages of 15 and 19. Since 1969, additions to factory payrolls fell to 4 percent per annum, from rates between 6 and 8 percent in the 1964-69 period. - 11 - With almbst half of the total population under 15 years of age, the rate of growth of the active population should increase substantially in the future. Together with the strong rural-urban migration and a pos- sibly higher participation of women in the labor force, greater demands for new employment will emerge in the coming years. Unless substantial modifi- cations in existing productive practices are adopted--such as changes in land-labor relations or the use of more labor-intensive manufacturing pro- cesses--the present productive structure will be unable to cope with these demands. Small and scattered public and private efforts in family planning are currently being made. The Social Security Institute's Medical Department runs a family planning program which it launched with its own resources. The Ministry of Public Health, with financial assistance from USAID, provides limited family planning assistance mainly through rural health stations. In addition, the Association for the Welfare of Ecuadorian Families has a family planning program in operation at two centers, one in Guayaquil and the other in Quito, with financial support from the International Planned Parenthood Federation (IPPF). Ecuador has an extremely unequal distribution of income. The lowest two deciles of the economically active population earn about 2.5 percent of income, and the lowest half less than 10 percent. On the other hand, the top two Dercent of active population benefits from 30 percent of total incomes (see Table 1.5, Statistical Appendix). Agricultural incomes, taken separately, are similarly unequally distributed (see Table 7.4, Statisti- cal Appendix). Low and unequally distributed incomes are associated with very low standards of living. Life expectancy-57 years for the whole country-is below the average for Latin America, and 15 years shorter than in the United States. The average daily caloric intake of the population is 25 percent below the average for Latin America, and the protein intake is one-third smaller than the Latin American average. Of every 100 live births, an average of 9 babies die before one year of age. Any effort to improve income distribution must involve providing better employment opportunities for the more than 50 percent of the present labor force that is currently at the margin of the development process. Thus, in addition to absorbing the new additions to the labor force, the economy should be able to provide improved living conditions to the existing labor force. More than two-thirds of this marginal population are under-employed rural workers. Their underemployment is mainly due to the unequal distribu- tion of land and the patterns of land tenure that, even in the presence of abundant land in some parts of the country, prevent the productive absorption of labor (see pages 21-23). Thus, improvements in the overall employment and income distribution situation will be closely linked to progress in the modification of the present agrarian structure. III. DEVELOPMENT PROSPECTS AND POLICIES A. Introduction Ecuador has a considerable development potential. Besides its rich agricultural endowment and the largely unexploited fishing resources, the recent discovery of important petroleum deposits in the Oriente region puts the country in a privileged position among developing countries in terms of opportunities for economic development and social progress. Although in terms of a contribution to aggregate growth petroleum will play a leading role during the next several years, its direct effect on the standard of living of the population will be small. Ecuador will continue to remain for some time a fundamentally agrarian economy, with a major part of its popula- tion dependent on agriculture for food and income. The spreading of the petroleum-generated wealth and opportunities over a large segment of the population will be one of the major problems facing the Ecuadorian authorities in the 1970s. The other major problem will be to expand and diversify the productive base of the country so that when the expansion of the oil sector eventually levels off, other sources of growth will permit the country to continue on a self-sustained development path. An appropriate development strategy for the 1970s will necessarily have to focus on the expansion poten- tial of the petroleum sector and its possible contribution to output, foreign exchange earnings and public revenues, and on the removal of the most serious constraints for expansion and distribution of income in the major nonpetroleum productive sectors. This chapter reviews the major trends and policies in the various sectors with the view to identifying their development potential as well as the major issues on which economic and social policy will probably have to focus. B. Agriculture Land Use Ecuador can be divided into three agricultural regions distinguished by different geography, climates, patterns of production, land tenure, and settlement. Present land use and potential in the three regions are as follows: - 13 - Table 3: ACTUAL AND POTENTIAL LAND USE BY REGION, 1968 (thousand hectares) Crop Cultivated Natural Region Land (%) Pasture (%) Pasture (%) Total (%) West Coast (Costa) Potential /a 1894 788 410 3092 Present use lb 1295 (61) 777 (66) 229 (27) 2301 (55) Unused 599 11 181 791 Highlands (Sierra) Potential 922 691 1310 2923 Present use 820 (38) 286 (24) 624 (73) 1730 (42) Unused 102 405 686 1193 Eastern Lowlands (Oriente) Potential 435 2025 - 2460 Present use 27 (1) 112 (10) - (-) 139 (3) Unused 408 1913 - 2321 Total Country Potential 3251 3504 1720 8475 Present use 2142 (100) 1175 (100) 853 (100) 4170 (100) Unused 1109 2329 867 4305 /a Indicative notions prepared by the National Planning Board. 7 Estimates from the 1968 Agricultural Survey. The Oriente region is a largely uninhabited hinterland of unknown agricultural potential, except for favorable conditions for European-type cattle down to an altitude of about 800 meters. Development is taking place by spontaneous colonization, but up to now less than one percent of the country's cattle population is located in this area. Export-oriented plantations are the characteristic farm type in the tropical lowlands of the Costa. All the major export crops-bananas, coffee, cacao, and sugar--are produced in this region. Most pasture lands are being used very extensively and the area has a much larger potential for livestock production than the land use figures indicate. The Sierra region provides most of the country's domestic food consumption. A wide variety of climates and soils allows a great diversity of production. Population pressure is highest in this region and crop land is increasingly scarce. - 14 - Agricultural production in Ecuador traditionally grew by the extension of cultivated area rather than the adoption of improved techniques. In the Sierra, area under crops grew by 2.7 percent while production increased by 3.5 percent during the 1954-68 period. With the spread of new plantations on the Costa, land under cultivation increased even faster than production, the rates being 4.5 percent and 3 percent, respectively, during the same period. This pattern of output growth cannot continue for long, especially in the Sierra. Raising the productivity of labor and land will have to replace extension of area under cultivation. Organization of Production Production for the domestic market takes place in a fundamentally different environment from production for the export market. The export economy of the Costa is of a more recent commercial origin than the hacienda economy of the Sierra-the breadbasket of the country--whose institutions date back to colonial times. Export production grew by credit, the develop- ment of an outward-oriented marketing system and access to technological improvement, all in contrast to autarkic hacienda production in the Sierra. While export-oriented plantations use predominantly full-time wage-labor and migrant workers at harvest time, resident tenants on the hacienda provide their own subsistence goods as well as a cheap source of labor to the land- lord. Both on the output and input sides, therefore, a lower level of commercialization and integration with the market characterizes production for domestic consumption. This in large part accounts for the greater adaptability and quicker response to changing market requirements in the agricultural export sector, and for the failure of production for the domestic market to keep up with increasing demand. Overall Output Growth With 55 percent of the active population employed in agriculture, Ecuador still has a predominantly agrarian economy. Mainly because of the high proportion of nonmonetized subsistence agriculture, agricultural pro- duction and its growth are difficult to measure. Thus, estimates of agri- cultural growth in the sixties vary from 2.7 percent to 4.3 percent per year, with actual performance probably closer to the lower limit. The results in 1971 do not appear to have been different, since the increases in livestock production were to a large extent offset by declines in banana and coffee production and a poor wheat crop. What seems clear is that per capita pro- duction of foods has not risen significantly, if at all, during the past decade. Because of the slower growth rate of agriculture, its share in GDP declined from about 37 percent in 1960 to about 29 percent in 1971. Despite its considerable development potential, agriculture has acted as a drag on the economy, resulting in inflationary pressures and contributing to increasing food imports. Imports of agricultural products have been rising at the rate of 8 percent per annum in the last decade and, at over $50 million in 1971, they represent a significant drain on the balance of payments. On the other - 15 - hand, in the past agriculture has earned almost all of Ecuador's foreign exchange. Banana exports alone accounted for slightly over half of total foreign exchange earnings (an average of 53 percent between 1965 and 1971), and the four largest agricultural export products (bananas, coffee, cacao, sugar) for approximately 88 percent. Trends in selected Products In terms of value of production, bananas are by far the most important agricultural product, accounting for over one-fourth of total crop value. They are followed by rice, potatoes, coffee and sugar cane, each accounting for 8 to 10 percent of total crop value, and corn and cacao with about 5 percent each. In terms of area of production, however, corn dominates with about 300,000 hectares harvested, followed by the major exportable products--cacao, coffee, bananas and sugar cane--with areas fluctuating between 125,000 hectares (sugar cane) and 250,000 hectares (cacao). While banana is the major export product, corn is still the basic staple for most of the small subsistence farmers in the Sierra. i. Crops Mainly for Export Bananas grow in most of the coastal lowlands of Ecuador. In fact, they are so abundant that a portion of production is not harvested. Banana production is estimated at 2.5 million metric tons in 1971, but in the past it has fluctuated widely as it depended more on the level of production of other world suppliers than on domestic production conditions. Bananas are found on small and large farms, and productivity is largely independent of farm size. However, they are mainly a food crop for small farmers, with most of the marketable output coming out of larger plantations. Until 1964, Gros Michel was the only banana variety grown for export. With the appearance of Panama disease and changes in export markets and consumer preferences, a conversion in export production from the Gros Michel to the more resistant Cavendish variety had to be made. The Cavendish variety has higher yields but also higher water and nutritional requirements than Gros Michel; it needs to be grown under irrigation. The coastal belt of El Oro province, however, has excellent soil, water and climatic conditions for growing Cavendish bananas. There are no strong winds and the disease problems are not severe. In addition, all the plantations are near the coast and the export outlet, Puerto Bolivar. The remarkably fast and successful conversion to the Cavendish variety, together with the absence of natural hazards that plague Central American production, increases the prospects of Ecuador keeping its world market share instead of remaining as the residual supplier that it has been. Coffee is the second most important export crop with production, largely of Arabica variety, ranging from 39,000 to 70,000 tons per year depending on weather. Coffee is typically a small holder crop, with over four-fifths of the coffee growers operating farms each of less than five - 16 - hectares. The coffee areas in Ecuador, although relatively free from pest and diseases are not fully suitable for Arabica coffee because of low altitude and erratic rainfall distribution. However, at present coffee prices, there is no alternative use of this land that would be more profitable to the farmers, particularly in the low income Manabi province. Future coffee prospects are limited by quota allocations and world supply and demand conditions. Ecuadorian production has generally exceeded the quotas of the International Coffee Organization (ICO). In 1972 Ecuador was expected to produce a coffee crop at least equal to, if not higher than the 1971 crop. The government had expected to take some 26,000 hectares of allegedly marginal coffee out of production, with financial assistance from the ICO. However, price increases generated by recent Brazilian production shortfalls are likely to inhibit further diversification of coffee areas. Ecuador was once a major supplier of the world cacao market, but production has been stagnant since the 1920s. Yields have been falling as a result of fungus diseases, and plantations have been neglected because of the greater profitability of coffee and bananas. The volume of production has been maintained mainly through additional plantings, particularly in the provinces of Los Rios, Guayas and Manabi, which together account for about 90 percent of output. The National Institute for Agricultural Research (INIAP) has developed disease-resistant varieties, but farmers were not familiar with the advanced agricultural techniques required, and first com- mercial experiences have been less than satisfactory. The new varieties will make expansion of production possible, especially to replace bananas, but this will require intensive governmental assistance in the form of extension services and credit facilities. Most of Ecuador's cacao is exported as beans. Production and exports in 1972 are expected to be approximately the same as in 1971. The Ministry of Production, in cooperation with USAID, is helping farmers to prepare cacao beans and improve plantation management. The pro- duction and export of processed cacao has benefitted from the introduction of a tax credit subsidy in the amount of 7 percent of the export value. Sugar production has more than tripled since 1960 when a quota in the U.S. market was obtained. All cane is grown under irrigation. In addition to the five large sugar mills, there are many small producers of brown sugar (panela), particularly in the highlands. This type of sugar is still popular among the Indian population, but output and consumption are declining in relation to centrifugal sugar. With relatively high cane yields and extraction rates, the sugar industry appears to be efficient and forward looking and further progress can be expected. Although domestic consump- tion has been growing steadily, the record 1971 production of 275,000 metric tons has generated large year-end stocks and will contribute to making more than 125,000 short tons of sugar available for export in 1972. Until recently sugar exports were wholly dependent on the U.S. quota. However, with in- creased production and higher world market prices, it might be possible for Ecuador to find new outlets for its sugar. - 17 - ii. Products mainly for Domestic Consumption Wheat is grown in selected areas in the highlands, at altitudes ranging from 2,200 meters to 3,400 meters, and covers around 70,000 hectares. It is a cash crop for some 30,000 farmers; of these, 80 percent are small holders who plant an average of 1.3 hectares of wheat. In spite of price supports and the development of high-yielding wheat varieties for each of the main zones by INIAP, production has fluctuated around 65,000 metric tons throughout the 1960s. Due to increasing demand, imports increased from 40,000 metric tons in 1960 to 110,000 metric tons in 1971. Barley is an important food crop in the highlands, and production averages around 100,000 metric tons per year. It usually occupies land which is too high or too poor for wheat. However, malt barley, developed by the breweries, is planted on the better soils and competes with wheat. Out of the 136,000 hectares of barley, about 45,000 hectares are under malt barley. The breweries operate farms and also contract with farmers. Corn output averaged slightly under 240,000 tons annually in the 1969-71 period. The present rate of growth in output of corn is higher than that of the other cereals. Corn is grown in all parts of the country. The area planted to corn was estimated in 1970 at 292,000 hectares (237,000 hectares in the highlands, and 55,000 hectares on the coast). Yields average 900 kilograms per hectare and are slightly lower in the highlands than on the coast. The highlands produce a starch-type corn which is used for food. The lowlands produce a flint-type corn which is used only for feed. Flint-type corn from the lowlands is shipped to the highlands. However, corn is pre- dominantly a subsistence crop, and it is estimated that only about 40 percent of total output is sold off the farm. Potatoes are second only to corn as a food crop in the highlands. They are planted mostly in the high rainfall areas at elevations from 2,500 to 3,400 meters. Production increased from 187,000 tons in 1960 to 400,000 tons in 1971, but it fluctuates greatly from one year to another. Rice is grown in the coastal lowlands. Planted area is estimated at about 100,000 hectares. Average paddy yields are around 2,600 kilograms per hectare. About two-thirds of the total production of 240,000 metric tons upland rice and one-third from the irrigated crop. Production fluctuates sharply (for example, 145,000 tons in 1968 and 288,000 metric tons in 1969). These fluctuations are mainly because of weather, but planted area also varies from year to year. Most of the rice growers are small tenant farmers, and a larger proportion of output is consumed on the farm. Rice exports averaged around 30,000 metric tons per year in the early 1960s. However, none has been exported since 1966, and resumption of exports is unlikely in the near future. Animal products are the only dynamic element in agricultural pro- duction for the domestic market. Growth has accelerated from an average annual rate of 4 percent in the 1954-68 period to rates between 6 and 8 - 18 - percent since 1969, in response to a rapid expansion of demand. The levels of per capita consumption are, however, still low: 7.5 kilograms for cattle products, 1.3 kilograms for mutton and 2.4 kilograms for pork in 1968 and, because of their high income elasticity, an acceleration of domestic demand is likely in the near future. Ecuador has about 2.5 million cattle, two-thirds of which are beef type and one-third dairy. Most of the cattle is found in the western low- lands (1.4 million head) and in the highlands (1.0 million head) where, through the use of more productive breeds, somewhat improved pastures and better range management, the herd has experienced sizable increases in the last decade. Although in the western slopes of the Andes there are abundant grazing areas, the density of cattle is very low and there is substantial scope for further livestock development. Dairy cattle number about 800,000 head, and are concentrated in the temperate highlands. Ecuador has a large potential for expanding both beef and dairy products and has been receiving external financial assistance from various sources for this purpose. Three Bank Group loans and credits have been made for livestock development: a loan of US$4 million in 1967, a credit for US$1.5 million in 1970, and a credit for US$10 million in 1971. The first project assisted the development of coastal beef ranches and associated technical services, and the second project continued this program on an interim basis. The third project will continue to support coastal beef ranching but also will finance dairy develop- ment in the highlands as well as research, training and seed multiplication and certification. Milk production is estimated at 700,000 liters per day. About 400,000 liters are pasteurized and sold for consumption as fluid milk. The Government establishes the price received by farmers for milk. The present price f.o.b. plant is S/1.60 to S/1.80 per liter (equivalent to U.S.6.1 4 to U.S.6.8 J per quart), according to the area. Milk processing plants have suffered from a squeeze between rising production costs and a price that has been fixed for more than a decade. Unlike in livestock, processing plants are mostly owned by big manufacturers and the processing industry rather than milk producers absorb the squeeze. Pork and mutton production has been growing at an estimated rate of about 12 percent annually. Favorable prices and a rapid turnover on capital have been important stimulating factors in this rapid growth, which is taking place largely without credit. On the other hand, prices have been relatively low, discouraging large-scale, market-oriented production. In the case of hogs, most of production takes place in small enterprises, with poor practices and low yields; about half of sheep's wool is processed and consumed on the farm. INIAP has been testing low-cost hog feeds made out of bananas, maize and cassava, with some success. With appropriate price- cost relationships and technical assistance, the prospects for expanding port production are good. The National Association of Sheep Breeders, a private organization with government support, has been upgrading the sheep - 19 - industry by importing purebred wool sheep and providing technical assistance. Further expansion of mutton and wool production can take place by making better use of the natural pastures in the highlands (paramos). Poultry production is estimated at 9,000 metric tons and may be growing at 15 percent a year. Feed producers estimate that about 30 percent of the nation's poultry-meat and 50 percent of the eggs are produced by commercial operations. Feed prices are high. But the rapid capital turnover and product prices, considerably higher than for beef and pork, are providing sufficient incentives for the expansion of larger scale commercial poultry enterprises. Despite the large forest area, forestry development is limited to the 1.7 million hectares of forest in the coastal lowlands. The 3 million hectares of Andean forests fulfill a protective function and should not be cut, and inaccessibility is likely to prevent for some time commercial exploitation of the approximately 10 million hectares of eastern forest. Most of the western forestry potential lies north of the Esmeraldas River, and an inventory and preliminary development plan has been prepared by United Nations Development Program. However, the heterogeneous nature of the forest and the uncertain market acceptability of many of the species has prevented commercial development to date. There is potential for developing fast-growing Pinus species to replace large imports of kraft paper used for banana packaging, and expanded reforestation of the Eucalyptus species in the highlands also appears promising. However, careful analysis of the economic and financial feasibility of the various proposals is needed. Integrally related to forestry development in the highlands is the problem of erosion, which causes severe losses in production potential. It is estimated that more than 200,000 hectares currently cultivated in the high- lands are suitable only for forestry, and that this area is increasing to meet population growth. Agricultural Potential Ecuadorian agriculture has a large potential for increased output through improved use of land and of labor resources. There are great possibilities for increasing the productivity of land through irrigation. Dry coastal areas as well as the Guayas river basin could be converted to more intensive cultivation by irrigation both from river systems and ground water. About 180,000 hectares are now under irrigation and at least another 250,000 hectares could be profitably irrigated. In the Sierra region, about 90,000 hectares are under irrigation, often with small and inefficient systems, but this area could be doubled. Productivity of labor in agriculture has not increased appreciably in the sixties--it is estimated to have grown by only 0.3 percent per annum. This indicates very limited progress in the use of improved techniques of production, such as selective mechanization and the use of modern inputs. - 20 - While mechanization of agriculture can only be brought about successfully through an integrated program which includes consolidation of small holdings, the application of the results of agricultural research can raise productiv- ity within the existing structure of land tenure. A great deal of very valuable knowledge exists in this area. Founded in 1963, the National Agricultural Research Institute (INIAP), with a competent staff of over 100 professionals and considerable technical and financial assistance from abroad, has been turning out useful research results. INIAP has stressed field crop improvement and has developed improved seeds for most of the annual crops. Unfortunately, little or no payoff has been extracted from the investment in INIAP and its output of improved planting material, be- cause the necessary complementary arrangements have not been made. Seed multiplication and distribution has not been organized, and the extension service is inadequate. As a result, the product of INIAP's research has had a limited impact on agriculture. There is an increasing recognition on the part of the government that the application of research is as important as research itself, and UNDP and FAO are assisting with a $3 million project aimed at improving the Extension Service with the view of spreading more effectively the results of research and thus increasing agricultural produc- tivity. Development Issues and Policies Production for the domestic market has been the most sluggish component of agricultural output. As a result, agriculture has been unable to keep up with rising demand for food and raw materials from urban areas, and has not increased the income levels of the rural population sufficiently to bring a significant number of them into the market economy. Apart from the welfare considerations, as long as the bulk of rural population remains in small-scale subsistence farming 3/, the agricultural sector will not generate a significant demand for industrial products. In the past, Ecuador's growth has depended largely on the import capacity generated by its traditional export crops, and substantial private and public resources have been channeled into export agriculture. The emergence of petroleum as a new source of foreign exchange, coupled with the limited prospects of growth in external demand for traditional export crops would permit shifting the emphasis and increase the relative importance that production for the domestic market can have in the future social and economic development strategy of the Ecuadorian government. Because of the large proportion of the active population depending for its living on domestic- oriented agriculture, improving productivity, employment and income oppor- tunities there would have a significant impact on the overall living condi- tions in Ecuador. It would also reduce the rural-urban in-migration to the Guayaqyil and Quito areas, which is at present creating excessive demand on urban facilities and rising unemployment. 3/ The Planning Board has estimated that over one-third of Ecuador's popula- tion live in rural areas at subsistence levels, that is, at the margin of the market economy and with no saving capacity that would permit an improvement in their standard of living over time. - 21 - While market signals could lead to efficient allocation of resources in export agriculture--as it happened with the rapid conversion of Gros Michel bananas into the Cavendish variety--the removal of obstacles to development in agriculture for the domestic market will require the govern- ment's active involvement in the formulation and implementation of compre- hensive policies related to marketing, land tenure and distribution and agricultural technology. In the past, the government attempted to exert influence mainly by interferences with the price mechanism through price controls or price support schemes. However, price controls have not been enforced and have on the whole been unsuccessful to prevent rising prices and speculation. Similarly, the experience with price support programs suggests their inadequacy to stimulate production. Price support programs have been in effect for two major crops, rice and wheat. Prices paid to farmers in 1971 were equivalent to $102 Der metric ton of wheat compared to the $72 Manitoba price. Millers must buy the domestic crop at this price in order to qualify for a supply of imported wheat. The National Wheat Commission finances the program partly with the proceeds of import taxes on wheat. However, the dispersion and smallholdings of wheat farmers, the lack of adequate storage capacity, the limited access of wheat growers to technical improvements 4/ and, in some cases, adverse climatic conditions, have reduced the effectiveness of the price support program. Thus, statistics show wide fluctuations in pro- duction but no growth or only slight increase (depending on the source) since 1960. Rice production is more competitive with world prices than wheat production; in fact, Ecuador used to export rice until the early sixties. In 1970 the support price was $150 per metric ton compared to $143 per metric ton for Thailand rice. As with wheat, most of the production comes from small farms, but a much higher percentage is subsistence production and thus is insensitive to prices. Despite the price support program, rice production has also fluctuated sharply and has not expanded significantly since the mid-1960s. With rising internal demand, the prospects of regaining an export position are dim. Lapidi growth of production, in particular cases where price-cost relations an9 -arketing conditions have been favorable, shows that in general farmers do respond to profit incentives. The failure to induce changes in production for the domestic market via the price mechanism points to other rigidities that render price signals ineffective. Among these are the unequal distribution of land, systems of land tenure, inefficient marketing systems, lack of credit and unavilability of technical improvements. The unequal distribution of land (see Table 7.3, Statistical Appendix) generates underemployment, inequality of rural incomes, and mis- allocation of land. The concentration of subsistence production on inef- ficiently small holdings results in the overcultivation of these holdings as well as the underemployment of their cultivators. An Inter-American 4/ Although INIAP has developed improved wheat varieties for most of the country, only about 15 percent of total acreage is planted with certified seed. - 22 - Committee for Agriculture Development (CIDA) study estimated that 267,000 families, or 61 percent of the total, operated insufficient land to provide full and productive employment for a family whose work capacity under normal labor practices is equivalent to two man-years. 5/ Another 96,000 family units were landless rural laborers. The lowest decile of rural population earned only 2 percent of agricultural income and the lowest half only about 13 percent. In contrast, the top decile earned 58 percent of agricultural incomes (see Table 7.4, Statistical Appendix). The unequal distribution of land and the inherent unequal dis- tributions of income are common features of the Costa and the Sierra. However, prevailing systems of land tenure in the Sierra, where minifundio production is generally linked to haciendas, reinforce inefficient patterns of pro- duction. In various forms of land tenure the small subsistence plots have traditionally represented usufruct rights granted by landlords in exchange for labor obligations. 6/ Since minifundios are too small to absorb the labor potential of the families they sustain, the haciendas can draw on this labor force at abnormally low wage rates. The availability of cheap labor discourages the adoption of new techniques on the hacienda, while the cultivators of the intensely cultivated minifundios have no access to such improved techniques. As a result, since 1960, productivity per worker in agriculture has increased only 0.3 percent per annum, pointing to a low density of capital and stagnation in production methods. This system results in the undercultivation of hacienda lands: just as labor is underemployed on the minifundio, land is underemployed on the hacienda. The pattern is substantiated by the inverse relationship between the productivity of land and farm size (see Table 7.5, Statistical Appendix). A more recent statistic shows that labor productivity varies directly with farm size (see Table 7.6, Statistical Appendix). Both relation- ships together confirm that labor intensity is inversely related to farm size. More equal distribution of land, i.e., the enlargement of minifundios at the expense of haciendas would increase productivity by reducing the underemploy- ment of both land and labor. The present misallocation is even greater than the above relationships indicate if we consider that small farms are generally located on inferior lands and hillsides while hacienda lands occupy the most fertile areas. Efficient land use requires that more factors be applied to better land than to worse land. (Monoculture on subsistence farms and the fact that many of the intensively cultivated smaller farms are situated on unprotected hillsides has also led to severe soil erosion as each year large tracts of crop land under labor-intensive cultivation become unsuitable for agricultural production.) 5/ CIDA, Tenencia de Tierra y Desarrollo Socio-Economico del Sector Agricola- Ecuador, 1965, p. 15. 6/ For example, huasipungueros, a class of laborers attached to the land, had to work four to six days a week at wage rates ranging from nothing to half the wage rate of free labor, in exchange for the small plot and usually for some other privileges such as grazing cattle and gethering firewood on the landlord's land. - 23 - The Agrarian Reform and Colonization Act of 1964 set up the Ecuadorian Institute of Agrarian Reform and Colonization (IERAC), an auton- omous agency entrusted with carrying out the aims of the law. Tables 7.7 and 7.8,- Statistical Appendix, summarize IERAC's activity up to 1970. The Agrarian Reform Law specified the liquidation of huasipungueros and other "precarious" forms of tenure within twenty months after its passage. IERAC gave first priority to this task by seeking to establish the ownership rights of small holders and tenants. But there are strong indications that while servile forms of tenure were abolished on paper, the Reform has not succeeded in changing the economic relationship between the hacienda and the mini- fundio. A comparison of the Agricultural Census data of 1954 and of the Agricultural Survey of 1968 indicate that there has been no significant change in land tenure over a relatively long period of time (see Table 7.9, Statistical Appendix). In most cases, the reform only gave tenants title to the subsistence plots they had previously cultivated in exchange for obligations, leaving the hacienda intact. The average holding awarded to ex-peones for ten years of service to the haciendas was approximately 2.8 acres, leaving most families in economic dependence on the haciendas. After the reform, landlords often withdrew previous rights to grazing land and firewood from their ex-tenants, leaving them even worse off than before. Thus, the pattern of inefficient land use was not remedied by merely granting ownership right to small plots. While land distribution and tenure reform will remain a precondition for the efficient use of factors of production, they are not sufficient to make production responsive to domestic market signals. Inefficient marketing organizations, lack of access to credit and improved techniques, and the residual nature of cash farming in small-scale farms prevent the responsive- ness to domestic market conditions. Implicit in the promotion of domestic production is a greater support of small-scale farming than in the past. In contrast with export crops, the production of domestic crops is concentrated in smaller farms (see Table 7.10, Statistical Appendix). But most credit, improved inputs and technical assistance continue to flow into large-scale farming, and in the absence of government programs to support small farmers, a growing imbalance in patterns of production and income distribution seems inevitable. 7/ Such continued domination of credit and services by large-scale commercial farming would be to the detriment of the balanced growth of the whole economy. Not only does it lead to more unequal income distribution and patterns of production, but it prevents the generation of demand for ianu- factured products from the farm sector. 7/ For instance, dairy farming,has become increasingly concentrated in large-scale farms. While total production and productivity are increas- ing due to improved inputs and techniques on larger-scale commercial farms, the lack of apprpriate channels to obtain and finance these inputs, coupled with a milk price freeze has curtailed the expansion and improvement of small-scale dairy farming, with the result that the overall number of milking cows has dropped. - 24 - Although data on the distribution of agricultural credit by size of a farm and crop are very scarce, it appears that hardly any credit is avail- able for small-scale farming for domestic production. If only from an administrative point of view, private banks prefer to give loans to larger and more highly commercialized farms and plantations. In addition, much of small-scale farming is carried out under "precarious" forms of tenure or without any title to the land, and hence does not legally qualify for loans. Indivisi- bilities in machinery and equipment as well as lack of technological know-how of small farmers further reduce the feasibility of mechanizing individual small farms. Also, improvements in the production of goods that are not marketed cannot generate the monetary returns that are requisite to com- mercial financing, no matter how much labor or resources they may save. The large proportion of foodstuffs consumed on the farm is, therefore, another impediment to the flow of private resources into small-scale farm- ing. 8/ Partly because of problems of small size, IERAC considers that cooperative projects are the only way to modernize small-scale farming. Several cooperative projects started as joint ventures of various institutions, e.g., IERAC would provide the land, INIAP would set up an extension service, the National Development Bank (BNF) would provide credit for production and the Ecuadorian Housing Bank (BEV) credit for housing. The success of projects is easily thwarted by the failure of any one of the institutions to cooperate. Banks in particular have been reluctant creditors to projects initiated by IERAC. This fragmentation of resources and effort has been conditioned by IERAC's scant human and financial assets. Strengthening the institutions responsible for land reform is necessary to transform scattered and unsuccessful projects into an integrated reform plan. It is estimated that on the average, marketing costs run about 30 percent of oroduction costs in domestic agriculture. Inefficient and/or monopolistic marketing systems are a serious impediment to the commercializa- tion of small farming, and vice versa the lack of market outlets to small farmers serves the interest of the middleman. Larger commercial producers often market the surplus produce of small farms which they purchase at abnorm- ally low prices. The lack of integration of subsistence farming to the money economy also serves the roving middleman who collects the surplus produce of small farms by truck. As a consequence of such marketing systems, market signals are not readily transmitted to the small producer, and increases in demand may merely add to intermediaries' profits. For example, livestock normally changes hands five to ten times before it reaches the slaughterhouse, and while prices paid to the beef grower rose from S/2-3 pound to S/3-4 pound over the last decade, the average retail price doubled from S/7 pound to S/14 pound. Lack of adequate storage facilities is another aspect of deficient marketing systems. For off-farm storage of grains, there are some 83,000 tons of silo capacity and 92,000 tons of warehouse space compared with a total annual output of corn, wheat, barley, and paddy rice of around 620,000 tons. All but about 20,000 tons of this capacity is privately owned and operated. 8/ About half of corn, potato and barley, as well as minor livestock is consumed on the farm. The proportion is even higher for rice. Most wheat, however, is sold to local mills. - 25 - The storage deficit would be critical if a large proportion of corn and rice were not consumed on the farm. This deficiency, nevertheless, inhibits trade between the Costa and the Sierra and aggravates price fluctuations, thereby adding powerful disincentives for production. For example, the principal reason for the large month-to-month fluctuations in the price of potatoes is the almost complete lack of storage facilities. Large amounts of potatoes were wasted or fed to cattle in 1971. An association of producers sent representatives to other Latin American countries to explore export opportunities, but these efforts failed. Public investment in storage will be essential to avoid monopolistic practices in marketing and storage, which in the past have led to speculation especially in rice and wheat. The public marketing agency entrusted with regulating trade in key commodities, ENPROVIT, has had inadequate powers and resources to acquire adequate buffer stocks to eliminate speculation. The government has started to give increased attention to marketing problems. A permanent FAQ study group attached to the Ministry of Production researches marketing problems. In December 1970, Spain lent $5 million to Ecuador for the purchase of grain silos, driers and related equipment, as the first phase of a general marketing project for all agricultural commodi- ties. A project to stabilize the maize trade between the Coast and the high- lands is financed by Swiss capital, as well as by National Development Bank and National Finance Corporation. Only increased public participation in marketing systems can hope to reduce the number of intermediaries and the power of speculators. One step in this direction was the recent authorization of ENPROVIT to import wheat in competition with private importers. ENPROVIT will also operate new supermarkets in urban areas. Following recent punitive action against unscrupulous intermediaries in livestock, the government is expected to become increasingly active in livestock marketing as well, includ- ing nationalization of some major slaughterhouses. In its "Philosophy and Plan of Action," the new government gave implicit recognition to the above problems by committing itself to land distribution, including compensated expropriation, and at the same time to the protection of efficiently run farm property. It pledged itself to the "democratization" of credit, to a massive step-up in the dissemination of technical information and aid, particularly to this reform sector, and to the improvement of present marketing systems and the control of intermediaries' margins. Unless these pronouncements are rapidly and effectively put into practice, there is little chance that agriculture, and with it the majority of the Ecuadorian population which depends on agriculture for a living, will play any significant role in or will enjoy the benefits of development in the years to come. Public Investment The share of fixed public investment in agriculture has remained relatively constant, oscillating around 10 percent of total public fixed - 26 - investment during 1966-71. In addition, there have been some credit lines financed by international organizations and channeled mainly through the Central Bank and the BNTF. These credit lines have been mainly for livestock development and farm improvements, as well as for the purchase of agricultural machinery with suppliers' credits financing (Table 5.13, Statistical Appendix). A major deficiency of public institutions in the agricultural sector, which largely explains the relatively low levels of public investment in agriculture, has been their laxity in the identification and preparation of adequate investment projects. In the past, public investment has been directed mainly to small colonization schemes, the construction of some storage and marketing facilities, and the purchase of agricultural machinery. At present, with the exception of irrigation projects, there are very few projects in a sufficiently advanced stage of preparation to be considered for investment in the near future. Among these, the government intends to continue the strengthening of research and extension facilities of INIAP with the assistance of the IDB; a foot and mouth disease eradication pro- gram, likely to be supported by the International Development Bank, should get started in 1973; a study to be financed by a United Nations Development Program grant scheduled to start in early 1973, will look at the economic feasibility of exploiting the forests in the northwestern lowlands, evaluating various alternative exploitation proposals and their requirements for infra- structure and processing equipment; and a number of official credit lines, with the financial assistance of AID, IDB and the World Bank, will provide funds for private investments leading to increased production of oil crops, African palm, cacao and livestock. Because of its considerable effect on agricultural productivity, investment in irrigation deserves close attention and evaluation. Only about one half of the potentially irrigable agricultural land is presently being irrigated, and apparently it would be economically justified to expand the area. Lack of financial resources has been a major constraint in the past. Only 2.7 percent of public investment funds were budgeted for irrigation during 1966-70, and not all these amounts were actually made effective. The Ecuadorian Institute of Hydraulic Resources (INERHI), which is in charge of developing and managing the irrigation resources of the country (with the exception of the Guayas River basin), has been in the past technically strong on the civil engineering side, but substantially less equipped to deal with the agronomic and economic aspects of irrigation. This technical imbalance has prevented INERHI from developing and implementing a well-justified long- term irrigation program. Irrigation development should, however, accelerate in the future. The present Government assigns high priority to irrigation in its investment intentions, and this should be reflected in the forthcoming Development Plan for 1973-77. Also, approval in May 1972 of a Water Code which regulates the use of water and authorizes INERITI to fix and collect water charges to recover investments made from public funds could, if effectively implemented, contribute to the administrative and financial strengthening of the sector. Technical assistance to INERIII is now being provided by the IDB but further strengthening would still be essential in - 27 - order to carry out an enlarged irrigation program. In the longer run, however, the government should make a conscious effort to diversify its investment in agriculture, moving into projects that have a greater impact on the major socio-economic problems of the sector. With respect to specific projects in the field of irrigation, the Montufar project in the Province of Carchi is the only major project currently under construction; the project is receiving financial support from the IDB and is expected to irrigate some 3,750 hectares by 1975. The Milagro project in the Guayas Province got underway in 1973 with financial assistance from the World Bank. It covers the irrigation of about 7,000 hectares and will benefit over 300 farms. Apart from Montufar and Milagro, there are a number of projects at an advanced stage of preparation and, if economically justified, they should be ready for the investment stage in two or three years from now. Such is the case of the Babahoyo and the first stage of the Daule-Peripa projects in the Guayas basin, the Carrizal-Chone project in Manabi, and the Cotopaxi Plan. The possibilities of utilizing for irrigation the residual waters of the recently constructed Poza Honda water supply scheme are also under study. Other major projects for which studies are expected to be carried out over 1973-74 include the Puyango-Tumbes project to be developed jointly by Peru and Ecuador, the Danco de Arena-Yaguachi project near the ilagro project and the Jubones project near Machala in the heart of the banana-growing area. In the future, a very important part of the public investment effort in agriculture will have to be made indirectly through credit lines for on-the-farm investments and improvements to be executed by private farmers. When completed these various irrigation projects are likely to generate a high demand from farmers for financial and technical support to bring newly irrigated lands into full production. Thus, supervised credit lines will have to be made available to complement these irrigation invest- ments. In addition, if the government engages in a process of agrarian reform, substantial needs for additional financial investment in the form of land purchases and credits for the beneficiaries will emerge. Increased public revenues from the petroleum sector, together with the financial assistance of international development agencies, are likely to provide sufficient funds to establish these credit lines. The major constraint, however, will be the technical assistance component that these credit lines will require. At present, financial intermediaries are not adequately staffed to handle these increased requirements, and agricultural technicians and extension workers are in short supply in the country. Unless a program for preparing medium level agricultural technicians is simultaneously carried out, the effectiveness of these investments will be greatly diminished. - 28 - C. Manufacturing Recent Growth Trends During the 1950s, manufacturing structure was dominated by small artisan and handicraft shops, not only in terms of the number of persons employed but also in the value of manufactures. In fact, over half of the total manufacturing output was from these nonfactory sources. Starting in the early 1960s, however, output of such handicraft or artisan operations began to stabilize, and recent increases in production have been the result of greater output by the factory sector. Although factory production has become dominant both in value of production and employment, a significant portion of total manufacturing out- put and employment still arises in the handicraft-artisan sector. These activities are basically labor-intensive, with minimal use of machinery. The passage of the Industrirt' 'evelopment Law in 1957 and the con- version in 1963 o' the Government's financial agency--Comision de Valores-- to a full develoDment finance agency-Corporacion Financiera Nacional (CFN) --with funds for capital development of industry, seem to have been major stimuli to the expansion of manufacturing. Thus, in the early 1960s pro- duction started to react to the availability of fiscal incentives and credit, and manufacturing value added averaged 6.3 percent annual growth against average GDP increases of about 4.5 percent. This shift in growth was re- flected in manufacturing's share of CDP going from about 15 percent in the 1950s to around 17 percent in the 1960s. Factory manufacturing appears to have been expanding much faster, accelerating its growth to close to 10 per- cent in the last years of the decade. The acceleration and particularly the diversification of manufac- turing brought with it proportionately greater emphasis on intermediate in- puts and consumer-durable goods, which at present account for about 50 per- cent of manufacturing output as compared with about one-third in the early sixties. Most of production is oriented to the domestic market, with indus- trial exports accounting for around 5-10 percent of industrial output in the last few years. Half of these exports consist of sugar. The expansion of consumer-durable goods production seems to have been limited mainly by the reduced size of the domestic market, and the high production cost in relation to external markets. There has been an increasing trend in the use of imported raw materials in manufacturing (46 percent of the value of output in 1961 against 52 percent in 1969), probably because the newer industries--those making metal products, machinery, chemicals and pharmaceuticals, paper and synthetic fibers- are largely based on foreign technology and more dependent on external sources for inputs. Most of the remaining inputs are agro-based or consist of proces- sed fisheries products. - 29 - Unprocessed agricultural products have traditionally dominated exports. However, manufacturing exports--chiefly processed agricultural prod- ucts and some manufactured goods-have recently begun to grow rapidly, although from a relatively low base. In 1971, these nontraditional exports increased by more than 60 percent over the previous year, mainly in response to the incentives provided by tax credit certificates and the interregional tariff reductions granted to Ecuador by other Andean Pact countries. Labor Productivity, Employment and Wages Labor productivity in manufacturing is regarded to be not only below the productivity levels in industrialized countries, but also below average for Latin America. This is a consequence of relatively less mechani- zation, obsolete equipment in some industrial branches, inadequate production planing and supervision and poorly trained workers. Increases in employment have not kept pace with factory output, especially since 1969 when additions to factory payrolls dropped below 4 percent per annum; during 1964-69 they had ranged from 6 to 8 percent annually. Starting in 1968-69 investment to modernize and expand existing firms rose to 84 percent of all factory investments, with little increase in employment. This trend has undoubtedly continued and, although it has increased marginal investment per employee and output per worker, it has generated new factory employment at a rate substantially below the growth of urban economically active population. The average annual wage and.salary cost per employee has risen 6.2 percent per annun (in real terms) between 1964 and 1969. The real increase to the workers in the food industry, who made up almost 30 percent of all factory workers in 1969, was less than one percent. Some portion of the indicated pay raises reflect the greater expansion by 1969 of factories employing more skilled workers who receive higher wages than lesser skilled workers. As a result of the acceleration of inflation in the last two years, wage increases may have barely kept pace with the inflation rate. Concentration of Output Hanufacturing industry in Ecuador is highly concentrated, both in terms of size of plants and geographical location. In 1969 less than 4 per- cent of plants accounted for 40 percent of factory employment, 60 percent of industrial payroll and 70 percent of production and value added. In some cases two or three plants account for the total output of the industry. This structure, while in part justified by the limited size of the market, does not provide for much competition nor for incentives to improve quality and reduce costs. About 80 percent of Ecuador's manufacturing industry is geographically located in the Quito and Guayaquil areas. The government, through its incentive - 30 - laws and regional development programs, has attempted to encourage the de- velopment of manufacturing outside the two urban provinces of Guayas and Pichincha. There has been very little change, however, whether determined on the basis of employment, value of production or value added, since 1964. It seems that the location of a few factories outside of the two largest urban provinces responds more to the need of being near raw material sources (e.g., cement and other nonmetal mineral plants, sugar mills, fish canneries, petro- leum refineries and some agricultural processing plants) than to the fiscal incentives for decentralization. Manufacturing Investment New fixed investment in manufacturing has increased rapidly in the 1960s, going from S/547 million in 1964 to S/1,001 million in 1969. Although the dominant and growing share of such investment (over two-thirds of total industrial investment in the period) resulted from expansion of existing firms, the latter accounted for only 41.5 percent of the new employment, indicating a shift towards more capital-intensive technology in existing plants. Requests for classification of new factories under the Industrial Development Law in the period 1969-71 indicate investment intentions of the order of S/1.2 billion. If these investment intentions are carried out, they could bring an important increase in new plant investment, opening new prod- uct areas and encouraging a faster expansion in manufacturing. Because of their importance for longer term industrial viability, such planned new ven- tures should be closely monitored by the government and the implementation of the most promising ones should be actively encouraged. Past Industrial Policies The expansion of manufacturing in the past has been left largely to the initiative of the private sector. The government's action to stimulate and orient manufacturing development has been centered in the granting of fiscal incentives, the promotion of specific industries through various public and semi-public institutions and the provision of credit through public fi- nancial intermediaries. Incentives. The Industrial Development Law, enacted in 1957 and amended several times, grants total exoneration of import duties on capital equipment and substantial reductions on imported inputs; also, reinvested profits are exempted from income tax. The high point in terms of numbers of firms classified under the Law was during the period 1963-65, averaging seventy-five firms per year. During the following years--1966-71--the average fell to forty-eight per year. Likewise, the total planned investment declined from an average of approximately S/600 million per year in 1963-65 to an annual average of about half this amount thereafter. This would seeri to indicate that the effects of long-term credit availability--through the National Finance Corporation (CFN), starting in 1963--and the promotional efforts of the Industrial Development Center (CENDES), initiated in 1962, have complemented the incentives of the Law, encouraging investment intentions which otherwise might have not materialized. - 31 - On the whole, the Industrial Development Law has most probably stimulated new investments. The results seem to be, however, below expec- tations, considering the high cost for the Treasury in tax revenues fore- gone. The criteria of eligibility of industries to benefit from the Law have been too broad, and the screening of industries has been poor. As a result, the employment creation and the saving of foreign exchange objectives have not been met. When compared with actual results as recorded by the in- dustrial censuses, the investment intentions declared by applicants for clas- sification under the Law overestimated the labor requirements and the volume of exports, and underestimated the use of imported inputs. An important ingredient missing has been a continuous and coordinated evaluation of the actual uses and results of investment benefiting from fiscal incentives, with particular emphasis on the employment and foreign trade effects, to determine if corrective actions or policy changes are necessary to prevent a departure from the goals of industrial development. Promotion. Industrial development and promotional activities are the main responsibility of the Industrial Development Center (CENDES), a public institution with representation from various public and private or- ganizations and agencies. It prepares industrial feasibility and marketing studies, assists national and foreign investors with their investment plan; provides technical assistance to private firms, and is called upon by the public financial intermediaries (CFN and BNF) to assist their clients. A number of other agencies and institutions, among them CFN, COFIEC (a private development finance company), the Institute of Foreign Trade and the National Planning Board, engage in industrial studies and investigations, in some cases with external assistance. On the whole, a significant amount of human and financial resources seem to be allocated to industrial promotion, and numerous studies have been made on export possibilities of a wide variety of products. Many have re- ceived favorable appraisals from both foreign and domestic prospective in- vestors. However, the majority are still only "possibilities" due to mar- keting, infrastructure, legal, or other constraints, which did not receive any remedial attention from the government. Frequently, studies made under contract and receiving external financing have not been followed up and their recommendations have been ignored. Investigating businessmen have been dis- couraged by these problems-mostly ones which could not be effectively con- trolled or altered by any single firm. There have been many instances of duplication of efforts largely as a consequence of lack o coordinated plan- ning and control. To some extent there has been a spirit of "free enterprise," with many agencies mving into areas where they believe technical assistance is needed and where the results would be helpful to the agency involved. There is, therefore, an urgent need for establishing and implementing a coordinated program for industrial promotion which will lead to the deter- mination of priorities, the distribution of assignments in the field, the proper support of technical assistance projects by public agencies and the avoidance of duplication and poor utilization of information. - 32 - Credit. Until the mid-1960s no long-term credit was provided by financial institutions in Ecuador, except for some very limited amounts granted by the National Development Bank (BNF). Extensions of short-term credit by commercial. banks took care of some medium-term needs, but this was available mainly for financially strong enterprises. A substantial portion of the de- velopment finance companies (COFIEC and CFN) loans were for working capital rather than fixed capital purposes. Those establishing new factories depended in large part upon their own and foreign financial participation, plus private equipment supplier credits. It has only been since 1968 that increasing amounts of longer-term credit have been available. The amounts available, however, still seem inadequate, accounting in 1971 for only 10 percent of the total credits advanced to manufacturing industries by the financial system. This has been a severe limitation for a faster expansion of the manufacturing sector. The Andean Subregional Agreement Andian Subregional Agreement was signed two years ago with the objective of creating a substantial market for Ecuador, Bolivia, Chile, Peru, Colombia and eventually Venezuela. Because of the less developed position of both Ecuador and Bolivia, they were given trade privileges and longer time periods for adjusting to a more open or integrated subregional market. Decision 29 of the Andean Commission set aside forty-nine products which Ecuador could ship to its then-three major Andean associates, starting January 1, 1971, without payment of duty and free of other restrictions. Only seven products were exported in 1970, valued at $659,000. In 1971 when the program was initiated, fifteen additional products were added to the above seven and the total official exports went up to $3,172,000. Depending upon the policies followed by the Andean governments during the next few years, and more particularly upon the reaction of producers of competitive products in the Andean Subregion, exports of the apertura products could in fact amount to as much as $10 million per year. Decision 28 of the Andean Commission also reserved thirty-seven products for Ecuador which were not produced by any country in the subregion. Ecuador has twelve to eighteen months to prepare and present feasibility studies with an additional four to six years for the establishment of factories, after which the other Andean countries could move in where Ecuador has failed to implement. This listing is dominated by measuring devices for automotive use, time keeping mechanisms, small tools and equipment, special paper products and chemicals. These products present a number of production and marketing difficulties, requiring mass markets for economical operations and depending on satisfactory development of complex assembly processes using skilled labor and technology not abundant in Ecuador's present manufacturing environment. Others are subject to patent protection. In fact, the Institute of Foreign Trade and Integration analysis of the twelve more promising projects revealed that ten of these would require the use of foreign patents and supportive technical assistance. Although some estimates have been made that exports of these products could reach $10 million within four or five years, there is very little basis for such a projection, and it is - 33 - unlikely that these products will make a significant contribution to the export of manufactures during the 1970s. The backbone of the Andean Accord is the Industrial Development Program (Decision 25) embracing some fifteen basic industrial groups. The intention is to plan production to meet likely area demand irrespective of national boundaries, and on scales appropriate for efficient production. Each participant is to present feasibility studies to the Andean Board which will in turn make recommendation to the Commission on the assignment of specific industries to countries. Approved factories will have free trade privileges within the subregion. These basic industries will require sizeable investments, and most likely the state will have to play a major role in their establishment and financing, possibly associating with foreign producers. Currently there are no concrete Ecuadorian proposals being studied and, because of the size and prolonged gestation period of these products, they can only be considered a long-term possibility. The Government of Ecuador attaches relatively high priority to subregional integration. The implementation of the Industrial Development Law is being structured to give the highest incentives to projects that would fit into the Andean programs, and is allocating financial and human resources to preparing studies and investigations related to the Andean market. The benefits-of Andean integration are, however, going to take some time to be achieved. Of the total nontraditional exports of $45 mil- lion in 1971 (including some agricultural products) only about 15 percent were for the subregion. Over three-fourths of all exports to the region are still bananas and cacao beans. Even the major exports to this region, processed fish and cacao products, so far constitute only 10 to 15 percent of the total exports of these products. The speed and comprehensiveness of the integration effort would have to be stepped up substantially to have a significant impact on manufacturing development in Ecuador in the fore- seeable future. Prospects for Industrial Development The manufacturing sector has an important role to play in the economic and social development of Ecuador. Together with agriculture, manufacturing has the potential to generate new productive jobs in the inter- mediate period to absorb the fcreseeable increases in the labor force as well as part of the current unemployment and underemployment. In the longer-term, it should replace the petroleum sector as the main generator of growth in the Ecuadorian economy. In the past, the development potential of manufacturing has re- mained largely untapped, and its contribution to output, export diversifica- tion, employment and income distribution has been limited. The main con- straints to a more vigorous expansion of manufacturing have been the small size of the domestic market; the high production costs and limited entre- preneurial initiative to penetrate external markets; and insufficient human, - 34 - physical and financial support for infrastructure. Although in the 1963 Development Plan, the government formulated a clear industrialization policy and established the legal framework for the implementation of this policy-- including the creation of an interagency commission for the application of the Industrial Development law, which has been meeting regularly--in the past there have been some weaknesses in the administration and control of industrial incentives, as well as a poor coordination of the various agencies in charge of the application of industrial policies. Domestic demand for manufactured products will undoubtedly expand as a result of the rapid growth of the economy and higher levels of public expenditure made possible by the petroleum sector expansion in the next few years. This demand could be reinforced if the government's stated inten- tions of improving living conditions and the levels of income of the poorest segments of the population are carried out. While the profit opportunities arising from an expansion of internal demand will give some impetus to in- dustrial growth, the limited size of the potential domestic market will still preclude the development of industries very sensitive to economies of scale. To the extent that Andean integration effectively reduces trade barriers, Ecuador will have preferential access to a market with a popu- lation ten times its own and a domestic product eighteen times as large. Thile there is little doubt that subregional integration has the potential to generate additional opportunities for Ecuador's manufactures, the limited progress achieved to date indicates that it will be a slow process. In any case, it is unlikely that in the longer-term domestic and regional markets alone will provide sufficient momentum for industrial production to substitute for petroleum induced growth. Considerable emphasis will have to be given to the promotion of industries oriented outside of the region. Because of the limited number of skilled workers and industrialists with sufficient managerial experience and commercial aggressivity, Ecuador would have to concentrate initially on those product lines in which it has the greatest comparative advantage (i.e., labor intensive products, using cheap domestically produced inputs and oriented primarily to the protected domestic and regional markets). Ecuador must, however, build on this first step and organize an integrated and government-supported industrial produc- tion and export program based upon research, development, and promotion, providing sufficient guidance and incentives to attract both native and foreign financial, technical and managerial resources. This program must aim at a rapid transfer of technology and managerial knowledge into the country to enable it to compete successfully in world markets. Especially in those branches of manufacturing requiring more advanced management and technical know-how as well as marketing expertise in world trade, it will be necessary to encourage foreign participation in industrial equity and financing, according to national and subregional guidelines and regulations. Some of this technical knowledge exists in the subregion, and the Andean - 35 - Development Corporation could help to mobilize. Most of it, however, will have to be sought outside of the region, in which case the technical and financial assistance of bilateral and multilateral development agencies can be of crucial importance. While the broadening of the enterprise and product base for future industrial expansion is likely to be carried out largely by the private sec- tor, the government will also have to play a key role orienting, supporting and also participating directly in selected industrial activities. In this sense, the government has expressed its intention to reserve for the public sector those industries that could be considered as basic or strategic, such as steel, cement, basic chemistry and those derived from petroleum and other minerals. This increased government participation will require a substantially improved coordination between the industrial pro-ramming, financial and promo- tional activities carried out by public agencies. The application of the Industrial Development Law will have to stress even nore than before the employment generation capacity and the export orientation of industries aspiring to obtain tax incentives. Adequate follow-up procedures have to be instituted to ensure that the objectives of the Law are achieved in practice. There is a danger that, by strengthening the balance-of-payments position, earnings from petroleum exports will permit imports of a variety of goods which might otherwise be produced domestically at lower costs and contribute to the expansion of employment. This situation cal.ls for an appropriate exchange rate policy and also for some degree of protection, within the framework of regional integration agreements, for infant industries. Such tariff protection, however, must be gradually reduced to encourage efficiency and competitiveness in external markets, and will have to be closely related to the levels of fiscal incentives and other export promotion efforts. Feasibility studies should evaluate the economic significance of the use of domestic raw materials and additional manpower, as well as the convenience of -eographic decentralization of industries. Promotional programs should also conform to the national guide- lines for industrial development. The availability of public financial resources in the next few years will enable the government, with the assistance of international financial agencies, to provide increased financial assistance to the private sector, and to use the credit mechanism to orient industrial development to those production lines considered most dynamic and desirable for the balanced development of the country. In the past, industrial credit has been available mainly to large and medium-size firms. To achieve a faster expansion of manufacturing, it will be necessary to channel credit also to smaller enter- prises, which have difficulty in obtaining credit at reasonable terms. This will in turn require more supervision and technical assistance from financial intermediaries than is considered "normal" in business operations, and will call for a strengthening of the technical staff of financial intermediaries, particularly by CFN and BNF. - 36 - But the ultimate results of the government's efforts to stimulate the manufacturing sector will depend not only on policy changes or improved coordination within the industrial sector. Complementary government action will be required in the education field to improve the skills and produc- tivity of workers and the efficiency of management transport and power infra- structure must be planned and provided, marketing channels for domestic and external markets will have to be developed, technological know-how appropriate for the particular combination of productive Cactors and inputs have to be found and, probably most important, the lower income groups, presently operating at a nearly subsistance level, must be upgraded and integrated into the stream of economic life of the country. This can be accomplished by broadening the domestic market and increasing the effective demand for manufactured products. Appropriate government action in some of these fields will clearly be a precondition for accelerated industrial expansion. D. Petroleum 9/ Past Production and Prosnects Petroleum was discovered in Ecuador on the Santa Elena peninsula in 1923. Production gradually rose to a maximum of 10,140 barrels daily in 1955, enabling the country to export small quantities. In 1956 production from the existing Santa Elena fields started to decline, and by 1958 Ecuador again became a net importer of crude petroleum and refined products. By 1971, domestic production contributed only 15 percent of local requirements while net imports accounted for an outflow of some US$17 million, the largest single drain on foreign exchange for the Ecuadorian economy. A new phase in Ecuador's economic development began with the discovery of petroleum in the Oriente region in March 1967, the gradual development of a hydrocarbons resource base, the construction of the first major pipeline across the Andes and the beginning of petroleum exports in August 1972. The area under concession in Oriente covers 6.6 million hectares of which about 1.1 million are controlled by a Texaco-Gulf partnership. The rest is held by a variety of foreign companies ranging from large international concerns to small independent companies. Petroleum exploration has been both costly and difficult, owing to the Oriente's remoteness and dense forestation. Thile most of the region has been already explored by geological and geo- physical methods, only a very small portion has been proven by drilling. Actual and probable reserves in the Texaco-Culf concessions are estimated to be in the neighborhood of 3 to 4 billion barrels--a potential production level of 400,000 barrels daily. Reserves in the rest of the basin area are more speculative. In 7,cuador, the availability of crude petroleum east of the Andes is not sufficient to create a capacity for exports. Reserves must be such as to warrant the construction of Dipelines. Because of the distance (500 kilometers) these pipelines have a capacity of not less than 150,000 barrels daily. 9/ See Annex C for a more detailed review of the Petroleum Sector. - 37 - It is technically feasible for Texaco-Gulf to connect new fields and increase pipeline capacity from the present 250,000 barrels daily to 400,000 barrels daily by 1975. On the premise that further discoveries are made in other areas, it is assumed that some 200,000 barrels daily would be available for export by mid-1979 and a second pipeline, possibly to the Guayaquil area, would have to be completed by that date (see Table 8.27, Statistical Appendix). These estimates imply the progressive development of a potential oil area huge in size and so for only barely explored. 4arketing of Petroleum Initially some 50 to 60 percent of Ecuadorian exports of crude petro- leum will go to refinery markets east of the Panama Canal, the balance being distributed along the Pacific Coast of North and South America. Oil moving through the Panama Canal will be refined principally in Trinidad, Puerto Rico and at Colon in Panama. In the longer run, an increasing proportion of crude exports is likely to move into the Caribbean and U.S. East Coast markets because of its product yields and its relatively low sulfur content.10/ In the Andean group, Chile and Peru are net importers of crude and refined products and both could provide a market for Ecuadorian petro- leum during the next few years. Recently Peru has discovered oil in the same sedimentary basin area as Ecuador, and as a result it may become a net exporter of petroleum by the end of the decade. In Chile the outlook is different, since output of petroleum has stabilized while domestic demand is growing at around 8 percent annually. At this rate, Chilean imports could triple within the next ten years from the present level of 50,000 barrels daily. Colombia's petroleum production has been declining for some years, and if this trend persists, it would eventually become a market for petro- leum from northern Ecuador. During most of the 1960s, the price of petroleum experienced continued declines in the international markets. Events in 1970 and 1971 reversed this downward trend and resulted in increases of both f.o.b. realized prices and tax reference prices at the principal export centers. The major contributing factors were the sharper than expected increase in world demand, the constraints placed on the availability of oil by the closure of the trans-Arabian pipeline and the cutback in Libyan production, and the short- age of tankers which resulted from the increased reliance on long-haul crudes from the Persian Gulf. Further negotiations between the major oil exporting countries and the international oil companies are still taking place, and the upward trend in prices is likely to continue for some time. These develop- ments have improved considerably the expectations of Ecuador with respect to government revenues and foreign exchange earnings from oil operations. 10/ Texaco-Gulf exports crude with an average API gravity of 280 and a sulfur content of 0.9 percent. The sulfur content of Ecuadorian crudes is not as low as the Indonesian (0.1 percent), Nigerian (0.15 percent) or Libyan (0.25 percent) crudes, but it is lower than most Venezuelan or Middle East crudes. - 38 - Contribution to Growth Petroleum activities will generate significant contributions to public revenues and to foreign exchange earnings. Net foreign exchange earnings would increase from US$72 million in 1972 to US$290 million in 1977, and public revenues from about US$30 million to about US$190 million equivalent in 1977. Total contribution of petroleum to GDP is expected to increase from 2.6 percent in 1972 to about 9 percent in 1977. The capital intensive nature of the petroleum industry severely limits its direct contribution to develop- ment, with most of the income-creating effects being achieved indirectly through the use of government revenues. Table 4: IMPACT OF PETROLEUM DEVELOPMENT, 1972-77 (millions of U.S. dollars) 1972 1973 1974 1975 1976 1977 Foreign Exchange (current prices) Investment 108 48 68 52 129 129 less Imports 76 34 48 36 90 90 Total 20 16 39 T Exports 53 192 193 240 328 322 less Remittances 13 45 44 53 71 71 Total 46 147 149 187 257 251 Total Foreign Exchange Earnings 72 161 169 203 296 290 Value Added (constant 1971 prices) Total CDP 1,823 2,099 2,239 2,434 2,693 2,880 Payments to Government /a 33 116 115 140 190 187 Wages and Salaries 2 5 6 8 10 12 Investment Income and Depreciation 13 43 42 49 65 63 Total 48 T64 163 197 265 26T % Share of Petroleum Sector in GDP 2.6 7.8 7.3 8.1 9.8 9.1 /a Including 90 percent of profit sharing. Development Issues The major issues concerning future petroleum development in Ecuador are related to: (a) the structure of the tax system; (b) the contractual ar- rangements with foreign companies; and (c) the government's institutional and technical set-up to administer petroleum resources. The first two issues have a bearing on the incentives to carry out a sustained exploration and development program. The importance of these elements cannot be overem- phasized. Under Ecuadorian conditions, it takes four to five years from - 39 - discovery to develop and bring an oil field into production. Thus, while a reduction in the exploratory effort will not affect oil exports in the short-term, it will have a determining effect on the longer-term produc- tive capacity. The last issue reflects on the government's ability to protect the more immediate interests of the country adequately and at the same time ensure the longer-term viability and development of the resource. The system of petroleum taxation in Ecuador comprises four major elements: royalty, income tax, export tax and employees' participation in profits. These last two elements set the Ecuadorian system apart from the existing systems of taxation in most petroleum producing countries, which are composed only of royalty and income tax. Thus, compared to other petroleum producing countries, the share of revenues related to the level of production is higher (55 percent) and that related to net profits, lower (45 percent). This system makes the tax structure relatively inflexible to changes in production costs in the different petroleum producing areas and could lead to the use of the tax reference price as an adjustment mechanism. The disadvantage of using the tax reference price as to reduce the tax burden and preserve the competitive position of crude exports in external markets, is that it does not lend itself to comparisons with other oil producing countries. In general, it would be desirable that the tax and participation system in Ecuador be brought into harmony with the system prevailing in the OPEC member countries. The Hydrocarbons Law promulgated in September 1971 reduced the exploitation period after which the concessions revert to the State and in- creased minimum work obligations in comparison with existing concessions and contracts. While a subsequent decree softened up somewhat the dis- positions of the Law, it forces the reversion of some four million hectares to the government in 1973 (to be developed directly by Ecuadorian State Petroleum Corporation or under exploitation contracts with private companies), leaving less than two million available for the companies. Whether or not the resulting size of the concessions will be sufficient to support a succes- sful venture in Ecuador will very much depend on the results of explorations, costs of production and accessibility to markets, and the possibility of assembling a volume of production large enough to justify the construction of additional pipeline capacity. The outstanding fiscal and contractual issues are very complex and can only be approached through the negotiation of a global and stable package of taxes and interrelated regulations. The aim is a maximum level of benefits from the point of view of the country without eliminating in- centives for the further development of hydrocarbon resources. Since oil is a worldwide commodity, the tax-profit relationships can only be set ac- cording to Ecuador's position in the world oil economy vis-a-vis other pro- ducing countries regarding costs of production, distance to markets, quality of the crude, and stage of development of the resource. - 40 - Negotiations with the oil industry involving some of the most techni- cally sophisticated companies in the business will require from the government a great deal of technical preparation and internal coordination. The Ministry of Natural Resources and Tourism (Directorate of Hydrocarbons) together with the Ecuadorian State Petroleum Corporation (CEPE) are in charge of the execu- tion of petroleum policies. While the Directorate of Hydrocarbons has been operating for some time in the petroleum field, it would have to be substan- tially strengthened both in terms of organizational structure as well as in technical capacity (see Annex C for details). CEPE was created by law in 1971, but remained inactive until mid-1972 when the present government approved a revised version of the original Law. It will take at least one year to organize CEPE, select personnel and draw up a minimum work program. The appropriate staffing and organization of CEPE is of utmost importance and urgency, since at least 1.6 million hectares should have reverted to the State during July-August 1973 as part of the agreements governing the "model" contracts. The State may explore or exploit these areas only through CEPE. In addition CEPE will be in charge of managing the national refinery, now in the planning stage. 11/ E. Issues and Public Investment Possibilities in Other Sectors- Fisheries Ecuador's fisheries industry has a large potential. Ecuadorian offshore waters are influenced by the cold Humbolt current (which flows up the west coast of South America), by the warm Equatorial current and by the flow from the Guayas river. The currents and the river are rich in nutrients and bring about appropriate water temperatures and abundant fish populations. Both skipjack and yellow-fin tuna as well as shrimp and lobster, are found in the waters of Ecuador. Fish production has undergone extraordinary growth in recent years, stimulated primarily by high U.S. demand for shrimp, lobster and tuna. Ex- ports, most of which are processed, rose from $6.4 million in 1965 to $9.6 million in 1970 and $17.7 in 1971. The fishing fleet is privately owned, and is made up of some 300 or more vessels ranging up to 100 feet in size. Apparently this rapid expansion has led to overfishing of shrimp and over- investment in shrimp trawlers in relation to known shrimp resources. The fish-processing industry has been stimulated by tax advantages and import privileges granted to new industries. However, the growth has been unbalanced to the extent that no similar stimuli has been given to ex- tractive activities, leading to overinvestment in processing facilities 11/ For projects in the 1972-74 Pulbic Investment Program see Tables 5.1 to 5.13 in the Statistical Appendix. - 41 - relative to fishing vessels and harbor construction, which now represent the main bottlenecks to future expansion. A further imbalance in past ex- pansion of the fisheries industries is that growth in the export market has not been paralleled by growth in domestic consumption. One reason is un- doubtedly the lack of marketing facilities for fresh seafood, particularly a lack of ice-producing and unloading facilities at fish-landing sites. In contrast to export production, production for internal consumption is a nonmechanized artisan trade. Not only could fresh seafood become a more important source of food supply, but fishing should provide more of the fishmeal needed in the expansion of livestock and poultry production, as well as alleviate Ecuador's deficit in edible oils. Even fish oils con- tinue to be imported at a rate about twice the domestic production. Apart from studies for the improvement of fishing harbor facili- ties to be carried out with financial assistance from the World Bank, no significant investments by the public sector are foreseen for the immediate future. The government's plan to build a fisheries complex comprising a fleet of purse seiner vessels and onshore facilities, for which international bids were requested in December 1970, has been postponed. It is not yet clear when these plans might get underway. The government has decided to strengthen the administrative structure of the fisheries sector, and for this purpose has recently created the Directorate of Fisheries in the Ministry of Natural Resources. Within this institutional framework it also envisages the creation of the National Fisheries Enterprise. Transport The topography of Ecuador and the location of its two major cities have determined to a great extent the manner in which the country's transport sector has evolved. Until the mid-1950s Quito and Guayaquil were connected by railroad and air service, but there was no suitable all-year road connec- tion. In the late 1950s and in the decade of the 1960s, Ecuador undertook a major effort to improve its road system, and by the end of 1970 a basic road network had been built linking the most important centers in the high- lands and the coast. The transport infrastructure also includes 980 kilo- meters of railways connecting Quito, Guayaquil and Cuenca, a network of nineteen all-weather commercial airports serving the country's domestic and international requirements, three navigable rivers in the coastal region and seven maritime ports of which the most important is Guayaquil. While the emphasis on road construction is expected to continue in the next few years, the government has indicated that it also intends to carry out a major expansion of the nation's air transport facilities, and to undertake further development of the country's port system. Railway and inland waterways are used to a much lesser extent and, apart from a railroad rehabilitation program temporarily stalled but expected to resume in 1973, there are no immediate plans for major new investments in these areas. Highways. Despite recent accomplishments in highway construction, large areas of Ecuador, such as the lowlands east of the Andes and most of - 42 - the northern coastal region, remain isolated. There also appears to be a large deficit in feeder roads from the rural zones to the main highways, which constitutes a hindrance to agricultural development. Over the period 1966-70, road construction received by far the largest share of all fixed investment by the government, when more than one-third of all public investment was directed to this subsector. In this period the government carried forward its Second Highway Plan and various parallel programs, and completed a total of 1,008 kilometers of new roads and 1,866 kilometers of improved roads, including 1,874 kilometers of paved highways. This gave Ecuador, at the end of 1970, a road network of nearly 23,000 kilometers, including approximately 2,900 kilometers of paved roads and about 8,150 kilometers of gravel roads. In 1969-70, Ecuador prepared its Third Highway Plan envisaging the construction of some 1,100 kilometers of roads. At the same time, the government approached the IDB for financial assistance for a separate pro- gram calling for the construction of nearly 400 kilometers of roads whose feasibility had been established by studies carried out under the Second Highway Plan. Implementation of the Third Highway Plan started in 1970, but some months thereafter the government began facing problems of cost overruns and insufficiently prepared projects. The new government has indicated that it intends to reexamine the suitability of several of the proposed invest- ments under the Third Highway Plan, and asked the IBRD to help finance a study for this purpose. The study got underway in September 1972 and, pend- ing its completion in mid-1973, most work under the Third Plan stopped. Some of the new roads under the new IDB financed program, which got underway in 1972, will open virgin areas in the eastern slopes of the Andes, establishing the first links in Southeast Ecuador between the highlands and the lowlands. Under future plans, these roads would be extended further to the north to link up with those being constructed to support oil development activities in the northeast. The development of highway management has not been commensurate with the expansion of the country's highway system. While principal respon- sibility for the national network rests with the Ministry of Public Works, highway functions are still shared in varying degrees by many different re- gional and local authorities. This fragmentation of functions and resources has been a hindrance to effective planning and control and has led to the undertaking of projects without sufficient preparation and financing, giving rise to cost overruns, undue delays during construction, and unfulfilled contracts. Highway maintenance has not kept pace with the expansion of the road network either. This has led to a progressive deterioration of many highways. A study of highway maintenance undertaken by consultants under the Second Highway Plan recommended various steps to strengthen road main- tenance administration, including the reorganization of the Department of Road Maintenance within the Ministry of Public Works, and procedural changes in the budgeting, cost control and procurement phases of road maintenance. - 43 - Due mainly to shortages of funds and staff, these changes had been only partially implemented as of the beginning of 1972. Enforcement of the vehicle weights and dimensions regulations reviRed under the Second Highway Plan would go a long way in avoiding damage to roads from overloaded trucks. The implementation of these regulations, opposed by truck owners, has been postponed a number of times, but there are indications that the new govern- ment soon intends to make them effective. Public Investments in Highways: 1972-74. While road construction may be expected to continue receiving the largest share of public investment over the period 1972-74, the relative importance of this subsector is expected to decline from a level of about 35 percent of total public investment in 1971 to about 23 percent in 1974. One explanation for the decline is the govern- ment's desire to reexamine its Third Highway Plan, but perhaps a more im- portant reason is the government's intention to shift the top priority in infrastructure development to the power sector. Of the total S/2 billion estimated to be invested during 1972-74, some S/900 million will be devoted to completing ongoing projects under the Second Highway Plan and parallel programs. The Consortium Highway Program is expected to come to an end in 1973 with the completion of the maintenance part of the project and the improvement of some roads. Construction of some section of the Ambato-Banos-Puyo-Macas from the highlands to the Oriente got underway in 1972 with IDB financial support. As part of this project, the IDB will provide technical assistance for the training of personnel in maintenance operations. The government is also expected to carry forward some regional systems, giving emphasis to the Manabi and Loja Plans. A start towards solving the deficit in feeder roads from the rural areas to the main highways should be made in 1973-74 when the government begins a study with AID financial assistance to assess requirements in this area; consultants for this study should be selected in 1973. Ports. Of Ecuador's seven ports, Guayaquil is by far the most important. In 1970 Guayaquil handled over 60 percent of the total volume of exports and imports. Of the six remaining, the ports of Boliviar, Esmeraldas and Manta have gained in importance in recent years. Puerto Bolivar, located some 70 kilometers south of Guayaquil and completed in 1968 to serve the new banana growing area, is now handling nearly 50 per- cent of all banana exports from Ecuador (estimated at 1.3 million metric tons in 1971); the rest goes mainly through Guayaquil. Esmeraldas, in northern Ecuador, is being enlarged to handle the additional traffic ex- pected from petroleum export operations. The Port of Manta, located some 100 kilometers northwest of Guayaquil is becoming an active fishing port. In the last few years almost all investment in new port facilities has been directed to the development of the latter three ports. - 44 - Tr an attempt to centralize port policy and improve administration, the government passed a decree in September 1970 reorganizing the country's port system under the Ministry of National Defense. A second decree, enacted in January 1971, regulates the operation of the country's ports under separate Port Authorities. While the new structure represents considerable improve- ment over the past, the number of entities entrusted with responsibilities for overseeing port affairs seems unnecessarily large, and can lead to over- lapping of functions and a general slowing down of the decision-making process. Ecuador has a discriminatory port tariff policy, maintaining port charges at the smaller ports below Guayaquil rates to attract traffic. This has caused Guayaquil traffic to decline in the late 1960s, although it has since recovered to some extent. This policy, added to the lack of a com- prehensive ports development plan, constitutes an obstacle to the rational use of Ecuador's ports. The government is aware of the problem and has ap- proached the United Kingdom for assistance in carrying out a general ports study to serve as a basis for determining priority investments in this area, and, at the same time, to assess matters related to port management and administration. This study might get underway in 1973. Public Investment in Ports: 1972-74. Total investments in ports in the years 1972-74 is expected to amount to about S/358 million, represent- ing 4 percent of total fixed investments by the public sector during the period. Of the estimated expenditures, close to 60 percent is expected to be spent in the further improvement and expansion of the Port of Esmeraldas. Since the general ports study referred to above should examine the Esmeraldas project, the planned expansion might be delayed if revisions in the project are found necessary. Additional capacity in the Port of Guayaquil should not be required until at least 1975, but a program for renewal of equipment has been drawn up by the Guayaquil Port Authority and should get underway in 1973. The additional facilities at Manta, which include a deepwater pier, wavebreakers and new storage facilities, were completed in 1972. The development of El Oro Province in southern Ecuador will give additional traffic to Puerto Bolivar. A recent U.K. supported study for the development of the Jubones River basin, which lies in the area being served by Puerto Bolivar, has recommended an expansion program for the port to handle anticipa- ted exports of orange juice, pineapples, cotton and processed fish. More detailed studies are planned before this expansion program can be carried out; if these studies can be undertaken in 1973, the expansion program should get started in 1974, assuming its priority is confirmed by the national ports study mentioned above. Air Transport. Air transportation of passengers and freight has been rapidly increasing in the last few years. It has been estimated that the domestic service carried 347,000 passengers in 1970, representing an in- crease of more than 200,000 since 1965; the international air service carried 185,000 passengers in 1970 which is more than double the number carried in 1965. Freight traffic grew at a rate of about 20 percent for domestic and - 45 - 35 percent for international traffic. The growing demand has increased the pressure on the government for improved air transport service. To meet the new requirements some new runways and terminal facilities have been built and others have been improved, and outmoded equipment has been replaced. In spite of these investments, several airports, including the country's two major airports at Guayaquil and Quito, are rapidly becoming inadequate to handle the growing traffic; moreover, except for the Guayaquil airport, they are operative only during daylight hours. In anticipation of an even faster rate of growth due to the impact of petroleum development, the Civil Aviation Directorate, which is the agency in charge of civil aviation matters, is preparing the groundwork for the expansion and improvement of various airports, including the Guayaquil and Quito international airports. AID will help finance the feasibility studies for the latter two airports for which consultants have recently been selected. Ecuador runs the risk of being excluded from future trunk-routes of western South America unless the expansion of its international air transport facilities is carried out in the near future. Without necessarily postponing the most immediate requirements, it is important that future expansion of the system be undertaken within the context of an integrated air transportation development plan that would take into account the development of other modes of transportation as well. Such a plan would also need to consider the relevant institutional aspects. While the Civil Aviation Directorate has performed adequately in the past, it would need to be strengthened to operate, maintain and manage an expanded air transportation system. Public Investment in Airports: 1972-74. Total public investment in airports in the years 1972-74 is expected to amount to about S/143 mil- lion, representing less than 2 percent of the total fixed investment by the public sector during the period. Studies for the expansion of the Quito and Guayaquil international airports are expected to get underway in 1973 with AID financial support. The studies should be completed in 1974 and the investment program begun in 1975. The expansion and/or improvement of the airports at Pastaza in the Oriente, Tulcan in the highlands, and Machala and Manta in the coastal region are also expected to be carried out during the period. Telecommunications Ecuador's telecommunications system grew reasonably fast in the period 1964-70. With regard to domestic service, the number of subscriber telephone lines increased from 46,800 to 95,600; an interurban telephone system with automatic dialing and a capacity of 600 channels was installed between Quito and Guayaquil, and telephone service from these two cities was extended to nearby cantonal seats. Concerning international service, telex terminals increased from 17 to 180, and traffic increased at an an- nual rate of about 30 percent. The Quito and Guayaquil telephone companies accounted for about three-quarters of the total investment during the period. - 46 - The country's telecommunications have not always been effectively administered in the past. The former three state enterprises-National Telephone Company, Quito Telephone Company and Guayaquil Telephone Company-- functioned often without proper coordination, to the detriment of efficient service and adequate planning. A reorganization of the administrative setup was undertaken on the basis of legislation passed in February 1971. This legislation replaced the existing organizations with three agencies: Empresa de Telecomunicaciones Norte, Empresa de Telecomunicaciones Sur and Empresa de Cables y Radio del Estado. In October 1972 the government has taken a further step towards centralizing the system by creating the Instituto Ecuatoriano de Telecomunicaciones. Under the aegis of the Ministry of Public Works, the new Institute, which absorbs the above three agencies, is charged with the responsibilities of planning, administering and operating all telecommunication systems in the country. The new setup should lead to a more efficient administration of the system. Public Investment: 1972-74. Telecommunications accounted for about 4 percent of total fixed investment by the government in 1966-70. Investments planned over 1972-74 are estimated at about S/515 million, representing 5.7 percent of the total public investment for the period. Expansion of the telephone service in Quito and Guayaquil and the interurban telephone system, being financed with suppliers' credits, will continue. Extension of the telex system for domestic and international service, also financed with suppliers' credits, will get underway. The expansion of the microwave system between Quito and Guayaquil and interconnections to provincial capitals, originally planned to start in 1972, has been postponed until 1974. A great improvement in international communications in 1972 has been the construction of a station to connect to the satellite communication system. Electric Power The development of Ecuador's power sector has not kept pace with the nation's electricity requirements; the result is that some 60 percent of the country's population is still deprived of the benefits of electric energy. Statistics for plants larger than 100 kilowatts (there is also an undetermined number of smaller plants) show that installed capacity increased from 175 megawatts in 1964 to 304 megawatts in 1970, or 10.1 percent annually. Generated energy for the same period increased from 524 gigawatt to about 949 gigawatts, or 10.3 percent annually. The 159 kilowatt-hours per capita genera- tion in Ecuador in 1970 was quite low compared to Latin America's estimated average of about 480 kilowatt-hours per capita for the same year. Electric power consumption is concentrated in the Guayaquil and Quito areas which are served, respectively, by Empresa Electrica del Ecuador (EMELEC), a subsidiary of Boise-Cascade, and Empresa Electrica Quito (EEQ), jointly owned by the Municipality of Quito and the Social Security Institute (Instituto Ecuatoriano de Seguridad Social). In 1969 EMELEC and EEQ together accounted for about 65 percent of the total generation in the country. Gaining importance as a power company is the Instituto Ecuatoriano de Electrificacion (INECEL), which was established in 1961 as a state power company with functions of a regulatory agency. Since 1964 INECEL has created three subsidiary companies and has bought shares in several others. In 1970 - 47 - INECEL and its associated companies owned about 19 percent of the country's installed capacity, generating about 15 percent of all electric energy. In a few years, INECEL is expected to become Ecuador's principal power company, financing, constructing and operating practically all new generating and transmission facilities in the country. In August 1970 INECEL lost its autonomy to become an agency under the Ministry of Natural Resources and Tourism. Increased power supply is essential to Ecuador's industrial growth, which is expected to accelerate in coming years due to oil development and Andean integration. In an effort to meet this challenge, the government has earmarked 50 percent of its royalties from oil production in the Texaco-Gulf concessions during 1972-75, and 35 percent thereafter, for a national electri- fication fund to be administered by INECEL. At the same time, INECEL has drawn up a development program for generation and transmission to meet main power requirements through 1990 comprising (i) the consolidation of the many small systems into ten regional companies, and the renovation, extension and interconnection of the individual distribution and generating systems in each region, (ii) the construction of four major hydroelectric stations--in Pisayambo, Paute, Toachi and Montufar--which would add some 450 megawatts in installed capacity in the next ten to fifteen years and (iii) a transmission system which would in due course integrate the whole country. While construc- tion of the initial stage of Pisayambo has begun, the status of studies for subsequent phases of the program is such that much uncertainty now surrounds their opportune execution. Also, with the discovery of oil in the eastern part of Ecuador, the program may have to be modified if it it can be shown that the construction of steam-electric plant in the northern part of the country near the oil pipeline-which pass or somewhat south of Quito--would be justified.12/ Moreover, INECEL's organization will have to be strengthened and its operational procedures improved to carry out the programs and construct and operate the plants. The implementation of INECEL's program calls for a considerable effort in terms of financial resources. Initial estimates place the cost of the program, including the program for regional companies, at about S/1.3 billion (US$52 million) to be spent over 1972-74, and as high as S/6.3 billion (US$250 million) for the decade. While the National Elec- trification Fund will help to finance local costs of generation and trans- mission facilities, electricity companies will have to contribute with their own funds towards the expansion of their own distribution facilities. At present, however, average revenues of electricity companies, except for EMELEC, EEQ and Empresa Electrica Cuenca, hardly meet the operational cash requirements due to low tariffs. In order, therefore, to allow the com- panies (or regional companies if created) to make a reasonable contribution 12/ EEQ's consultants will study the possible location and justification of such plant in close cooperation with INECEL with funds being provided under the IDA credit for EEQ's Nayon project. - 48 - toward their expansion programs, adequate tariffs would have to be set and maintained and considerable institutional improvements would have to be un- dertaken. Public Investment: 1972-74. Electric power has accounted for 5.3 percent of total public investment during 1966-70. As electric power now ranks highest in the government's list of priority areas for develop- ment, a substantial portion of public investment is expected to be directed to this sector within the next several years, reaching levels of about 22 percent of total public investment in 1973-74. Aside from the current ex- pansion of Quito's electric system, which will add 48 megawatts to Quito's 1970 installed capacity of 63 megawatts, construction of the main works of Pisayambo's first stage (Pucara plant, 70 megawatts, at a cost of approximately US$40 million, started in the latter part of 1972 for completion by the end of 1975 or early 1976. Pisayambo's first stage, to be supported by a US$25 million loan from the IDB, will serve Quito and Ambato and intermediate towns in the central part of the country. Final engineering for the first stage (200 megawatts of the Paute project is also being financed by the IDB. This project, estimated to cost about US$100 million would serve Guayaquil and the main towns in southern Ecuador. Feasibility studies for the Toachi (150 megawatts, US$40 million) and Montufar (62 megawatts, US$23 million) projects, which would serve several northern provinces, should also get underway soon. Spain is financing the Montufar study, and Switzerland the feasibility study for Toachi as well as consultant services to advise INECEL on various aspects of its development program in generation. Part of the income derived from oil royalties will also serve to promote the development of the regional systems until they gradually become integrated into the national system. AID will support the regional program through a US$3.55 million loan recently approved. Financial assistance amounting to about US$8 million has been obtained under a bilateral agreement with the United Kingdom. Based on INECEL current plans, the whole country would be integrated by 1985-89. Education Despite some progress promoted by an educational reform introduced in 1964, education in Ecuador continues to face serious problems. The il- literacy rate remains high, with an estimated 30 percent of the population still unable to read or write. There is also a problem of inadequate physi- cal facilities, since rapidly rising enrollment is not being matched by a corresponding increase in the number of classrooms and related facilities. It has been estimated that the ratio of fifty-one students per classroom in primary schools in 1963-64, when 698,000 students were enrolled, had increased to sixty one in 1969-70, when over 900,000 were enrolled, with no prospects of arresting the trend. In the case of secondary schools, average classroom size grew from 38 students per classroom in 1963-64, when 96,000 students were enrolled, to 54 in 1969-70, when over 160,000 were enrolled. Enrollment - 49 - in higher education has also been increasing rapidly; the leven institutions-- five universities and two polytechnics--reported a population of nearly 34,000 students in 1969-70, or an increase of about 180 percent since 1963-64. Aside from inadequate physical facilities, the quality of Ecuador's education system remains low. There is a serious scarcity of trained teachers and teaching methods and curricula are often out of date. The dropout rate is quite high: of those enrolled in the first year of each level, only about 33 percent finish primary school, about 51 percent finish the first cycle of secondary schooling, and about 68 percent finish the second cycle. There is also too much concentration on the humanities and little on technical education. ,hus, of those enrolled in secondary schools in 1969, some 62 percent were pursuing the humanities, 34 percent were taking up commerce and arts, and only 4 percent were enrolled in industrial and agricultural technical schools. The system is also hampered by administrative weakness and by the fact that the amounts earmarked for capital expenditures in the Ministry of Education's budget have not only been proportionately very low compared with those earmarked for current expenditures, but a consistently low percentage of the amounts earmarked have actually been made effective in recent years. Ecuador has received considerable technical and financial support from international agencies in support of its educational efforts, but the shortage of counterpart funds has often hampered a more rapid implementation of these programs. The AID-supported primary school program which began in 1966 had aimed at constructing 3,000 classrooms by 1970 at a total cost of $11 million to accommodate some 84,000 students. However, only 748 class- rooms had been built as of the end of 1971, and on the basis of current projections and revised costs it would appear that only about one-half of the originally projected classrooms will be constructed by the time the loan is completely disbursed in December 1973. At the secondary level, IDA is helping to finance a school construction program involving the expansion of twelve technical and general secondary schools, and the construction of sixteen new schools comprising one agricultural, four teacher training and eleven general secondary schools. Considerable time lost due to counterpart financing problems is gradually being recovered. When completed in late 1973 or early 1974 these schools should increase enrollment by over 13,000 students and have an output of 5,600 graduates per year. The IDB has assisted in financing the expansion of facilities at the universities of Quito and Guayaquil, and has also approved loans for the construction of new buildings and laboratories at the National Polytechnic School in Quito and at the Polytechnical School in Guayaquil. UNESCO and other U.N. agencies as well as several bilateral programs have also supported various projects mainly aim at improving the quality of the country's educational system. The government has recently created an Educational Credit Institute which is expected to receive financial assistance from AID. The institute will provide low interest loans to qualified students, act as a broker between institutions offering scholarships and students seeking financial support, provide general guidance to students in career and educational opportunities, and offer placement services to students completing their education. - 50 - Public Investments: 1972-74. Fixed public investment in educa- tion has been consistently low, amounting to only 6 percent of total public investment over 1966-1970. The share increases slightly in the ensuing years, and is estimated to have reached about 7.8 percent in 1972; it is expected to remain at that level in 1973, and then decline again to about 5.7 percent in 1974 when the current AID and IDA supported programs phase out. The second phase of these programs should, however, begin in 1974-75, bringing the level of investment to higher levels after 1975. AID is considering undertaking a sector study in 1973 prior to determining how best to provide new assistance to Ecuador's education, and a UNESCO mission is currently preparing a project identification report to help define the scope of possible further IBRD assistance to the secondary school development program. At the higher level, the Polytechnic Schools of Quito and Guayaquil will expand their facilities and strengthen their curricula with financial support from the Inter-American Development Bank. Of crucial importance to the success of future development pro- grams will be the availability of counterpart funds in adequate amounts. The participation of the education sector in the national budget has been increasing in recent years (from 21 percent in 1970 to 25 percent in 1972) and may increase slightly more in the next few years, but the tendency has been to assign only a small percentage of these increases to capital expend- itures. With the forthcoming petroleum revenues, the government should be able to reverse this trend. A one-cent tax on each barrel of exported oil has been earmarked for educational purposes, and hopefully it will be used mainly in support of further investment programs. Health and Sanitation While progress has been made in recent years in improving the country's health situation, serious problems remain demanding urgent solu- tion. In 1970, overall mortality stood at 11.7 per thousand inhabitants, and infant mortality at 91.1 per thousand inhabitants. It is estimated that 50 percent of the deaths are due to causes technically classified as preventable or which are responsive to present preventive techniques. Health services are limited in number and on the whole deficient in quali- ty and cannot therefore be expected to cope with the increasing needs. Trained personnel are very scarce and approximately 65 percent of the pop- ulation has very limited or no health services at all. In 1969 in the rural areas there was one medical doctor for every 10,000 persons and one dentist for every 33,000 persons. The health problem is aggravated by the scarcity of drinking water and sewerage services. Although by 1970 over half the urban population was being served by water and sewerage systems, the percentage of rural popula- tion so served was insignificant, as shown by the table below. - 51 - Table 5: POPULATION SERVED BY WATER AND SEWERAGE SYSTEMS, 1970 Drinking Water Sewerage Population Served Population Served 1970 Population Adequately Adequately (thousands) (thousands) Percentage (thousands) Percentage Urban 2,579 1,553 60.2 1,337 51.8 Rural 3,598 260 7.2 50 1.4 Total 6,177 1,813 29.4 1,387 22.4 Source: National Planning Board. The public health sector is extremely decentralized in Ecuador. The Ministry of Health, created in 1967, has been only partially successful in its efforts to adopt a unified approach to the solution of health prob- lems, and there are still a large number of independent or semiautonomous agencies often functioning without sufficient coordination. The inadequacy of the existing mechanism prevents, among other things, the collection of meaningful health statistics to serve as a basis for the planning of rational health programs. Clearly in need, therefore, is an institutional reform that would further centralize control of the sector under the Ministry of Public Health, thus assuring the effective utilization of scarce resources through adequate investment planning. The Ecuadorian Institute of Sanitary Works (IEOS) was created in 1965 as the agency responsible for the provision of drinking water and sewer- age works to all urban centers in the country, except Quito and Guayaquil, where such responsibilities remain with the respective municipal companies. This attempt toward centralization has not worked well in practice, however, because the Institute, not having been vested with sufficient authority from the beginning, cannot impose its policies or programs on the municipalities, but must first negotiate agreements with them. This causes delays in the execution of programs and prevents the adoption of a unified policy, includ- ing a rational tariff policy. With regard to the latter, current municipal legislation empowers the municipalities to establish tariffs to cover op- eration and maintenance costs. Few, however, do so. Public Investment: 1972-1974. Investment in public health during the period 1966-70 was alarmingly low, as it amounted to around 2 percent of total public investment in each of those years. Sanitation facilities, how- ever, received greater attention, as 11.5 percent of total public invest- ment during 1966-70 was spent on water and sewerage works. The bulk of this investment went toward expanding the sewerage works of Quito and the water supply and sewer systems of eighteen other urban centers under a program which received financial support from IDB. - 52 - The level of investment in public health over the period 1972-74 should increase from 4.5 to 5.1 percent of total investment, which is a sig- nificant increase as compared with the period 1966-70. A major drive in the construction and equipment of health centers, mainly in the rural areas, will be undertaken with financing provided by suppliers' credits. The Guayaquil and Loja hospitals are expected to be completed during the period and, barring unforeseen delays, construction of the Guayaquil Children's Hospital and the Machala and Esmeraldas Provincial Hospitals should begin in 1974. Due to major projects in Quito and Guayaquil, expenditures in drinking water and sewerage works are expected to increase considerably in the next few years. The 1972 share of 12.8 percent of total public in- vestment should increase to about 14.5 percent in 1973 and 1974. The capi- tal city of Quito will benefit most from this investment through the expansion and improvement of its water supply system at a cost of over S/750 million. This project, begun in 1969, is receiving financial support from the IDB. Planned for completion in 1972, it has suffered a number of delays; a some- what enlarged project should now be completed by 1975. The expansion of the Guayaquil sewerage system will get underway in 1973 with IDB financing, and work will continue on a number of projects being financed with suppliers' credits. As a follow-up to an earlier IDB supported program, IEOS hopes to begin in 1973 a project to supply water and sewerage services to a number of cities not covered in the first plan. IEOS also hopes to carry out over the next three years a few smaller projects using its own resources. However, while considerable progress is anticipated in the provision of water and sewerage to many of Ecuador's urban centers, most of the large rural popula- tion will continue to be deprived of these essential services. Greater at- tention, backed by adequate resources, is required to improve this situation in the years to come. Housing Although only limited statistical information is available, the housing problem appears to be acute in Ecuador. The Ecuadorian Housing Bank (Banco Ecuatoriano de la Vivienda, BEV) estimates that 70 percent of the nation's housing units are below minimum standards. The rapid spread of urban slums (especially in Guayaquil) with no access to water, sewage dis- posal or electricity, constitutes a serious problem. Rough estimates in- dicate that some S/4.5 billion would be needed to meet present needs using the minimum acceptable type of housing unit. Housing activities in Ecuador to date have not responded to the needs of the lowest income segments of the urban pouplation, and most proj- ects have been directed at middle-income groups. The average cost of a publicly financed housing unit is estimated at S/80,000 which is well beyond the means of the poorer urban dwellers. There are two public institutions financing private housing construction: the Social Security Institute (In- stituto Ecuatoriano de Seguridad Social, IESS) and BEV. In the period 1964- 65, about 54 percent of all housing investment was financed by these two - 53 - agencies, and another 32 percent by foreign sources. The IESS, an autonomous institution, has been more active, using its accumulated savings to provide mortgage loans to insured persons. BEV depends for its operations on gov- ernment's budgetary transfers which have never been too significant. There- fore, it has had to rely extensively on foreign lending and bond issues which private banks are required to purchase. BEV also promotes housing investment through savings and loan associations of which there are now ten in the coun- try. The public sector will have to assume increasing responsibilities for improving the conditions of urban growth. As an urgent step, it will have to exert greater efforts in providing the necessary housing infrastruc- ture to absorb rapidly growing urban slums. AID is considering assisting BEV in a "sites and services" demonstration scheme in Guayaquil designed to serve families with monthly incomes of $100 or less. Under this project, expected to reach some 2,500 families, the site and the essential installa- tions will be provided, and the houseowners will be required to install interior walls and carry out other work with their own resources to com- plete the houses. It is expected that this demonstration project will in- duce BEV to use more of its future resources for low-cost housing. F. Overall Investment Requirements In view of the higher levels of economic activity induced by the production and exportation of petroleum, the substantial development potential in other productive sectors (Sections B, C and E of this Chapter), the im- proved financial position of the public sector (Chapter IV), the favorable prospects for the external sector (Chapter V), and the profit opportunities emerging from the petroleum boom, GDP growth targets of the order of 10 per- cent for the whole economy and 8 percent for the nonpetroleum segment are feasible in the period 1973-77 provided that sound economic policies are followed. These levels of growth would result in average per capita incomes 30 percent higher in 1977 than at present and, hopefully, in a better dis- tribution of these incomes. Average consumption per capita could grow at about 4 percent per year in the same period, improving considerably the standard of living bf the population. The overall investment requirements emerging from these growth targets are formidable: gross domestic fixed investment would have to grow by almost 10 percent per year in 1973-77, yielding a cumulative volume of investment 75 percent larger than in the previous five year period. While from 1950 through the mid-1960s the investment ratio fluctuated around 13 percent of GDP, in the 1970s it will have to be consistently above 20 percent of GDP. The bulk of investment will be in the petroleum sector. However, both public and private nonpetroleum investments will have to be considerably larger than in the past. As discussed in the previous sections of this - 54 - chapter, the needs and opportunities for public and private investments in the various sectors are considerable. To materialize, these investments will require adequate incentives, appropriate and stable economic policies, realis- tic planning for the public sector and orientation for the private sector and, most important, a complement of human resources in the form of capable admi- nistrators, innovative entrepreneurs and qualified workers. Since most of total investment--including petroleum--will still come from the private sector, the public share in total investment, despite the considerable expan- sion expected for public investment, will drop in the early 1970s, but then may go back again to around one-third of the total as petroleum investment declines. The considerably larger investment requirements, the possible admin- istrative and technical bottlenecks, and the higher levels of public invest- ment expected to be going into indirectly productive or social sectors would point to a gradual decline in the overall productivity of investment. Thus, the incremental capital output ratio is expected to increase from the current 2.50 value to 2.85 by 1977 and remain at that level thereafter. Private Investment By far the major component of total private investment in the 1970s will be investments for exploration and development of the petroleum sector. In line with expected petroleum production, total petroleum invest- ment (exclusive of new refineries) in the period 1973-77 should amount to S/10 billion, of which about 70 percent is expected to represent imported goods and services and the rest local currency expenditures. All this has been assumed to be direct foreign investment, although the recently created State Petroleum Company (CEPE) could participate directly in exploration and production activities. In the previous five years direct foreign investment in the petroleum sector reached about S/9 billion. Assuming the discovery of new fields in 1973-75, investment will peak in 1976-77 as a result of the development of those fields and the initiation of construction of a second pipeline. The critical date for a number of companies as far as investment decisions are concerned, will come in 1973 when they must decide whether to convert to exploitation arrangements, possibly under new rules, or to turn back their concessions. It will be of outmost importance for the materialization of projected petroleum investments - and of the overall growth targets of the economy - that reasonable incentives and stability of rules are provided. This is particularly relevant because of the early stage of development of the petroleum sector in Ecuador. Nonpetroleum private investment requirements will also be extremely important, particularly in the manufacturing sector, if the diversification of the economy and the increased absorption of labor necessary during the 1970s are to take place. Direct foreign investment in nonpetroleum activi- ties is expected to be necessary in those manufacturing industries heavily dependent on sophisticated technologies and marketing know-how not available - 55 - within the country. Since these direct foreign investments must conform to the guidelines for treatment of foreign capital adopted by the Andean Pact members, and part of it is likely to be associated with domestic capital, the levels projected are not very much above the investments recorded in the past few years. Domestic nonpetroleum investment will, therefore, have to in- crease considerably, going from an average of about 8 percent of GDP in the 1960s to an average of about 12 percent of GDP in the 1970s. The increased economic activity and induced domestic demand generated by the petroleum sector are already stimulating private investments in various sectors. But undoubtedly to increase the private investment ratio to the levels projected will require substantial government assistance in the form of promotion and fiscal incentives, financial assistance, provision of productive infrastruc- ture and a climate of administrative and political stability that stimulates private confidence. As mentioned earlier, properly administered the present system of incentives and promotion could go a long way in fostering and orienting private investments. In addition, there will be substantially improved prospects for capital transfers from the public to the private sector in the form of long-term credit lines for industrial and agricultural investments, for housing construction and, eventually, for equity participa- tion in private enterprises. These types of government participation might even compensate for shortfalls in the public investment targets. Domestic private investment requirements are going to be higher in those activities most immediately connected to the foreseeable increases in demand, such as food processing, textiles and small appliances industries, urban construction, and agricultural products for direct consumption, par- ticularly livestock products because of their high income elasticity. Most of these activities are relatively labor intensive and should have, if pro- perly oriented, important employment generating effects. Public Investment The level of fixed public investment in Ecuador remains low, although it increased from 4.9 percent of GDP in 1965 to 5.5 percent in 1971. From 1966 to 1971 fixed public investment grew at an average of about 8 percent per year, in real terms. The central government and the autonomous agencies together accounted for about 85 percent of public investment during 1966-70; the provincial and municipal governments shared the rest. Constraints to a faster growth in public investment have been the country's limited capacity to prepare projects, the shortcomings in its ad- ministrative and managerial ability, and the frequent shortages of counterpart funds which have interfered with the execution of externally assisted projects. Also, a wide dispersion of investment functions among numerous entities has led to coordination problems and has adversely affected the utilization of available resources. In an attempt to reduce the latter problem, an admin- istrative reform was undertaken in 1970-71 which aimed at a centralization - 56 - of the government machinery by bringing a number of autonomous institutions under the control of the relevant ministries. It is too early to evaluate the effects of this reform, but it is felt that, unless a proper mechanism to exercise the intended control is developed within each of the relevant Ministries, the results will be minimal. Another constraint is imposed by the lengthy bureaucratic procedures and lack of continuity at various levels in the Administration which have caused considerable lags in the utilization of external resources, on which public investment has depended heavily in the past. Table 6: FIXED PUBLIC INVESTMENT BY SECTORS, 1966-71 (percentages) 1966 1967 1968 1969 1970 1971 Agriculture 8.1 7.6 6.5 6.8 7.8 7.9 Irrigation 2.5 1.7 3.0 3.0 2.3 2.1 Energy 2.4 4.1 7.6 5.3 6.2 9.6 Transport 36.6 46.1 43.8 33.8 39.0 38.8 Highways (34.0) (43.3) (39.7) (30.8) (34.1) (35.0) Airports ( 1.6) ( 1.5) ( 1.5) ( 2.1) ( 2.7) ( 1.1) Telecommunications 6.1 1.2 5.6 4.8 3.3 2.7 Water and Sewerage 15.9 19.3 7.8 7.8 8.6 8.8 Education 4.4 4.3 7.3 7.0 6.5 3.9 Public Health 0.9 1.6 2.0 1.5 1.8 2.0 Others 23.1 14.1 16.4 30.0 24.5 24.2 Total 100.0 100.0 100.0 100.0 100.0 100.0 Source: Table 5.1, Statistical Appendix. Table 6 above indicates the shares of individual sectors in total public investment during the period 1966-71. An irregular sectorial behavior occurred in individual years, especially prior to 1969, reflecting adminis- trative and financial constraints as well as the bunching of some major proj- ects. Clearly standing out, however, is the heavy concentration of public investment on the development of infrastructural works. Among these, the main emphasis has been--albeit at a decreasing rate-on the transport sec- tor. The share of this sector reached a peak in 1967 and declined ever since, although it continued to increase in absolute terms. The major portion of public investment in the transport sector during 1966-71 went to highway construction; a railway rehabilitation program was also undertaken, but ports and airports were relatively neglected. The heavy investments in the transport - 57 - sector were justified in view of the urgent need to establish in the country a basic highway network, which has now been practically completed. Water and sewerage have also accounted for a considerable share of public investment during 1966-71. This was also justified because of the need to remedy, at least in part, serious deficiencies in these services in several important cities. The share of the energy sector, low during 1966-70, rose after 1970 with the initiation of some major projects. Weak planning and inadequate tariffs, which have prevented electric companies from undertaking urgent expansion programs, have been two major causes for the low level of public investment in the energy sector prior to 1970. The situation is expected to change rapidly in response to the government's declared intention to give the energy sector top priority in the area of infrastructure develop- ment. The agriculture sector (including irrigation) does not show any noticeable variations from year to year, maintaining its share of about 10 percent of total fixed investment since 1966. There has been a general lack of well-conceived programs in this area due to institutional weaknesses in project preparation. Studies of some important irrigation projects are now underway, however, and public investment in irrigation, which ranks next to power in the government's priorities for future infrastructure development, is expected to accelerate rapidly increasing the share of agriculture in total government spending. Investment in education has taken only a small share of public investment in the period 1966-71. Were it not for financial assistance from international sources, capital expenditures in education would have probably remained at the pre-1968 levels of less than 5 percent of total investment. Investment in the health sector has been alarmingly low, having remained at levels of 2 percent or less during the period. Clearly greater efforts and resources are needed in this sector if many pressing problems are to be solved. The government's historical sectorial investment series list all equipment and machinery separately instead of classifying it by sectors. The mission's attempt to identify some of this equipment and machinery and assign it to the corresponding sectors has been only partially successful. Much of the machinery and equipment has remained, therefore, unclassified and has been incorporated in the "Others" category. This explains the high percentage and irregular behavior of the "Others" item and also distorts to some extent the actual shares of sectors, such as energy, telecommunications, and transport, during the 1966-71 period. Ecuador does not have a fully projectized public investment program at present, but one is being formulated within the framework of the 1973-77 National Development Plan recently prepared by the National Planning Board. Ecuador's first attempt at investment planning was made in 1963 in conjunction with the 1964-73 National Development Plan. However, because the plan was probably somewhat optimistic from the start, and also because of uneven executing capacity of the public entities in charge of public in- vestment, wide deviations occurred between the programmed composition of - 58 - public investment and actual implementation. In 1970 a new program for the period 1970-73 was formulated, but fiscal difficulties and lack of political support prevented this new plan from being officially adopted. Ecuador's new government has indicated that it intends to restore to the National Planning Board the primary role it once had in the formula- tion of economic policy, and a first step in this direction has been the preparation of the 1973-77 economic plan. At the time of the Bank mission's visit, only provisional and still incomplete data on the new plan itself and on the public investment program were available. Accordingly, the 1972-74 public investment program presented in the statistical Appendix of this report (Tables 5.1 to 5.13) is partly based on an inventory of pro- jects containing only preliminary data and preliminary projections as fur- nished by the National Planning Board, various government ministries, and some of the major operational agencies. It is also based on data obtained and discussions held with the major international lending agencies on the status of current projects. The mission has adjusted some of these figures whenever, in its judgement, time-lags were likely to occur in the prepara- tion and/or execution of projects. In any case, the Planning Board's final investment program is most likely going to be somewhat different than the one formulated by the mission, and thus our estimates should be considered as indicative of investment levels that the mission considers feasible for the next few years. Within the technical and managerial capability at present avail- able in Ecuador and with the financial resources which the government will have at its disposal from both internal and external sources (Chapters IV and V), the overall levels of investment for 1972-74 emerging from a detailed analysis of investment possibilities in the various sectors are, in the mis- sion's view, attainable. These investment levels, which are fully consistent with the overall investment requirements discussed in previous paragraphs, would imply real increases in public fixed investment of about 9 percent in 1972, 19 percent in 1973 and almost 22 percent in 1974. Although no sector analysis has been made for subsequent years, we feel that somewhat lower rates of growth, declining gradually to about 15 percent in 1977 and 10 per- cent in the 1980s, should also be feasible. Considering the length of the period over which these sustained rates of investment are projected and the vagueness of the project content after 1974, these levels of investment will imply a substantial government effort in the identification, preparation, execution, and administration of high priority investment projects. According to the projects currently being considered and their likely calendar of execution during the next two or three years, the trans- port sector will still be the largest recipient of public investment with 29 percent of the expected public investment during 1972-74, followed by energy which is expected to receive nearly 20 percent, and water and sewer- age with about 14 percent of total public fixed investment. While agricul- ture and public health are likely to increase slightly in relative terms, - 59 - their levels of investment will continue to be low. Direct fixed public investment in the industrial sector will be negligible. With the possible exception of projects in the energy and irrigation fields, there is an inadequate number of viable projects in a sufficiently advanced state of preparation to be carried out in the immediate future. Therefore, to shift the sectorial emphasis of public investment away from the physical infrastruc- tural sectors and more towards the directly productive and social sectors - which is the present government's stated intention--will require a concerted effort to strengthen the agencies operating in these more difficult fields. The assistance of the international development agencies for this purpose might prove of crucial importance. Table 7: INVESTMENT RATIOS, 1965-71 and PROJECTIONS, 1972-77 (in Millions of 1971 Sucres and percentages) Gross Gross Private GDI GDI as percentage Share of GDI Domestic Domestic of GE Product Investment 1/ Petro- Public Petro- (GDP) (GDI) Total leum GDI Total leum Public Private Public 1965 28850 3871 2471 - 1400 13.4 - 4.9 74.2 25.8 1966 30163 3859 2414 161 1444 12.8 - 4.8 62.6 37.4 1967 32036 4354 2772 156 1582 13.6 - 4.9 63.7 36.3 1968 33609 5236 3480 449 1756 15.6 1.3 5.2 66.5 33.5 1969 35567 6229 4383 1373 1846 17.5 3.9 5.2 70.4 29.6 1970 38517 7760 5619 1732 2141 20.2 4.5 5.6 72.4 27.6 1971 41232 9283 7018 3175 2265 22.5 7.7 5.5 75.6 24.4 1972 45578 10841 8377 2700 2464 23.8 5.9 5.4 77.3 22.7 1973 52479 10581 76-hh 1376 2937 20.2 2.3 5.6 72.2 27.8 197A 55984 11930 8358 1635 3572 21.3 2.9 6.4 70.1 29.9 1975 60839 12679 826h 1225 4215 20.5 2.0 6.9 66.2 37.8 1976 67334 16019 1150 2980 4889 23.8 4.4 7.3 69.5 30.5 1977 71996 17235 11612 2921 5623 23.9 4.1 7.8 67.4 32.6 1/ Includes increase in stocks Source: Table 2.2, Statistical Appendix, and IBRD Staff Estimates. - 61 - IV. FINANCING OF DEVELOPMENT Recent levels of gross domestic savings have stagnated around 11 to 12 percent of GDP, in contrast with rapidly increasing investment activities. The low average savings rate has resulted in an increasing share of capital formation in Ecuador being financed with external resources, mainly direct external capital from abroad destined to the petroleum sector. The sluggish behavior of savings applies both to the private and the public sectors, and in recent years is in sharp contrast with the rapidly increasing resource gap, as shown in Table 8. With net factor payments abroad at a relatively constant level of about 2 percent of GDP, gross national savings exhibited a similar trend to that of domestic savings. To achieve the growth objectives that we believe feasible for the Ecuadorian economy in the 1970s, increased levels of investment and corres- pondingly higher levels of savings will be required. The effects of petroleum investment and production will be, however, of such magnitude that the savings capacity is not likely to be a constraint on growth provided consumption expenditures, public and private, are kept under control. During the 1970s the saving potential of the economy should be considerably higher as indicated by the smaller resource gap, and should permit the accumulation of badly needed foreign exchange reserves (in mid-1972 they were negligible). Gross domestic savings are expected to grow from the present 10 percent of GDP to over 20 percent in 1977. Over the period 1972-77, domestic savings should be capable of covering about 90 percent of domestic investment and national savings about 74 percent, compared with 68 and 56 percent respectively in 1966-71. The extent to which the increased saving requirements of the econ- omy are going to be met by the petroleum sector can be best illustrated by the ratio of nonpetroleum savings to nonpetroleum GDP. As shown in Table 8, this _ratio need not be higher than 12 percent over 1972-77 to meet the over- all saving targets. These savings requirements are of the same relative order of magnitude as those achieved prior to the petroleum discoveries with considerably lower levels of economic activity. Because of the increased external contribution, the overall increases in savings can take place simultaneously with a growth in per capita consumption of about 44percent per year in the 1970s. A pressing issue will be the removal of the institu- tional and technical bottlenecks that might obstruct the achievement of the private and public investment requirements and a more equitable distribution of the benefits of the development process. Another issue of critical significance is not to permit consumption to increase beyond reasonable pro- portions; this is of particular significance with respect to government non- development expenditures which have shown a continuing tendency to increase sharply in the past. /1 Table 8 : SAVING! AND INVESTMENT, 1965-71 AND PROJECTIONS 1972-77 (Percentages of GDP) Gross Domestic Gross Domestic Saving/GDP Gross National Resource Non-petroleum Savings/ Investment/GDP Total Private Public Savings/GDP Gap/GDP Non-petroleum GDP 1965 13.4 12.9 11.2 1.7 10.7 0.5 1966 12.8 12.8 10.2 2.6 10.6 - 1967 13.6 12.1 8.2 3.9 10.1 1.5 1968 15.6 11.5 9.2 2.3 9.4 4.1 1969 17.5 11.2 9.2 2.0 9.3 6.3 1970 20.2 13.6 11.1 2.5 11.6 6.5 1971 22.5 9.9 7.2 2.7 7.8 12.7 1972 23.8 15.2 11.6 3.7 13.0 8.5 10.9 1973 20.2 20.0 12.9 7.1 15.9 0.2 11.5 1974 21.3 20.7 13.8 6.9 16.5 1.9 11.3 1975 20.5 19.8 13.2 6.7 15.9 0.7 11.2 1976 23.8 23.1 15.4 7.7 18.9 0.7 11.9 1977 23.9 22.1 15.1 6.9 18.1 1.9 11.8 1 For sake of consistency with available historical data, in this table savings have been calculated as the difference between investment and the resource gap, with no adjustment for change in terms of trade. Source: Table 2.6, Statistical Appendix, and IBRD staff estimates. - 63 - A. Private Sector Financing The stagnating trends of private savings and investment in recent years have been the result of a combination of factors, including the scarcity of profitable investment opportunities owing to the small size of the domestic market, limited government support in terms of complementary policies and infrastructural investments, and uncertainties associated with continued political instability. Monetary and credit policies in Ecuador have been extremely vulner- able to the action of various pressure groups, including some within the central government. The vicious circle of uncontrolled expenditures and expanding deficits increasingly led to recurrent budgetary crises and infla- tionary financing from the Central Bank in 1960s. While the government was competing for credit with the private sector, the strong influence of the private sector in the formulation of monetary and credit policies resulted in sizeable increases in credit to the private sector in the last two years. 13/ Table 9: EXPANSION OF CREDIT BY THE BANKING SYSTEM (in million Sucres and percentages) 1969 1970 1971 (1) Credit to Central Government (net) 1,567 2,134 2,770 Gross credit to private sector 6,388 7,527 8,321 Less: advance import deposits -952 -1,181 -693 (2) Net credit to private sector 5,436 6,346 7,628 (3) Total Domestic Credit (net of advance import deposits) 8,110 9,796 12,145 (4) Liabilities to Private Sector (net of advance import deposits) 8,708 10,358 11,926 Percentage increases in: Net credit to Central Government (1) 46.8 36.2 29.8 Net credit to private sector (2) 0.9 16.7 20.2 Total domestic credit (3) 9.8 20.8 24.0 Liabilities to private sector (4) 9.9 18.9 15.1 Source: Table 6.1, Statistical Appendix. In an economy as open as Ecuador's, the excessive liquidity generated by such large credit expansion did not significantly affect the price level (price increases accelerated from 6.2 percent in 1970 to 9.6 percent 19/ The Monetary Board which is the supreme monetary authority of the country in charge of formulating policies in the monetary, tariff and exchange fields has been composed--until its modification by the present govern- ment-mainly by representatives of the private sector. - 64 - in 1971), but instead spilled over into the balance of payments in the form of increased imports and corresponding losses of reserves. Thus, in spite of unprecedented inflows of direct foreign investment associated with the oil sector, net reserves of the banking system declined by almost $30 million in 1971, corresponding to a sharp deterioration of the resource balance as imports grew by 29 percent and exports remained constant at the 1970 level. Even if the net increase in imports by the oil sector is excluded, the growth of imports would still be of the order of 18 percent. This left total net reserves at the end of 1971 at only $26.5 million, equivalent to about three weeks of imports of goods and nonfactor services. This critical short-term situation was brought under control through the application of several emergency economic measures, including the reintroduction of a dual exchange market and advance import deposits, the arrangement of a t$40 million budget support loan from a U.S. commercial bank, an IMF stand-by operation for $18 million equivalent, and a fiscal and monetary program restricting Central Government spending and borrowing from the Central Bank, and imposing some curbs on the overall expansion of credit by the banking system. Provided that sound economic policies are pursued, the situation after 1972 should begin to improve considerably as a result of petroleum pro- duction and exports. The saving capacity of both the public and the private sector should increase considerably. The central government, in a competitive position vis-a-vis the private sector with respect to funds, should be able to become a net lender through increased financial transfers and credit lines to the private sector. The main issues concerning private sector financing will not be so much the availability of credit, but the orientation and quality of credit. As discussed in the agricultural and manufacturing sectors, the availability of credit has been heavily biased towards medium and large borrowers, and towards short-term working capital loans. Government monetary and credit policies must reverse these trends if the realization of the development potential of the country is to take place. In addition to this expanded role of financing, the quality and effectiveness of financing should be improved, bolstering the administration and supervision of credit, giving wider use to modern project evaluating techniques and expanding the invest- ment options of the economy by making financing available for preinvestment and feasibility studies of promising project ideas. B. Public Sector Financing Historically, one of the major constraints on Ecuador's economic growth has been the low level of domestic savings which in turn limited the possible levels of investment. In recent years, the need to maintain fiscal - 65 - equilibrium in the central government in the face of continued pressure to increase current expenditures and transfers has led to periodic upward re- adjustments in taxes. As a result, tax revenues accruing to the public sec- tor grew from less than 9 percent of GNP in the mid-1960s to some 13 percent in 1971 14/. However, since these increases were tailored to meet circumstan- tial demands from pressure groups, they were simultaneously consumed by non- developmental expenditures without any positive effect on the already eroded saving capacity of the public sector. Petroleum revenues will permit the public sector to break away, at least temporarily, from this trap of low savings and low investment, and in doing so they will relieve the immediate pressure on the nonpetroleum tax system to provide sufficient revenues to achieve fiscal equilibrium. However, the misallocation of resources and the distributive inequities resulting from deficiencies in the structure and per- formance rof the tax system will remain and, unless the government takes cor- rective measures in this area, are likely to be magnified by the unbalanced growth generated by the petroleum sector. The major problems and weaknesses of the fiscal system in Ecuador, which have to a large extent prevented an adequate management of public finances, fall into three categories: (a) On the revenue side, a substantial part of the public sector revenues has accrued outside of the central government and has been earmarked for various institutions and agencies in the rest of the public sector. These entities, in addition, have claimed substantial transfers from the central government to cover their deficits while, by contrast, the central government has been unable to capture part of the surpluses generated by other agencies. Another weakness has been the excessive dependency on foreign trade taxes with the result that, while import taxes have been eroded by widespread and uncontrolled industrial promotion exemptions, export taxes have been subject to political pressures of power- ful exporting interests. The limited importance of the internal tax system reduces the government's ability to use taxes as an effective tool of economic policy and makes public revenues extremely-vulnerable to fluctuation in external trade; (b) On the expenditure side, the central government has not had the mechanisms nor the power to control and influence the growth 14/ The total tax ratio (including taxes accruing outside of the public sector as defined by the National Planning Board) has, however, remained relatively constant at some 13 to 14 percent of GNP (see Table 5.19, Statistical Appendix). In comparative terms, Ecuador's total tax effort in the period 1966-1968 ranked above Colombia, Bolivia, Paraguay, Mexico and all the Central American countries in terms of tax ratios to GNP. It was, nevertheless, behind countries like Brazil, Chile and Venezuela, which had ratios of taxes to GNP of the order of 20 percent. See R.J. Chelliah,"Trends in Taxation in Developing Countries", IMF Staff Papers, (Washington, D.C., July 1971). - 66 - and allocation of current and capital expenditures to conform with the priorities and availability of financial resources of the public sector; (c) On the financing side a similar dilemma exists since the various autonomous and semiautonomous bodies have had power to contract internal and external debts without conforming to national priorities, and in many cases the central government has had to assume responsi- bility for the service of these debts. In these circumstances, the central government is extremely prone to develop unfinanced gaps which can only be covered by Central Bank borrowing with the consequent destabilizing influence on monetary and balance-of- payments management. To overcome these weaknesses will require some administrative changes which strengthen central government control over public finances and a substantial improvement in fiscal discipline to avoid inordinate expansion of expenditures. The present government is taking some steps to increase control over budgetary allocations; improve the level of knowledge and control of the finances of the rest of the public sector; make periodic evaluations of the expenditures of the various components of the public sector; centralize and increase control over external public borrowing; and relate budgetary appropriations to the objectives and priorities set up by the Overall National Development Plan. To achieve the latter objective, a biennial budget will be closely linked to short-term operational development plans. All these changes would contribute to creating an administrative system better suited for adequate financial and developmental policies. Without these measures, the likelihood of the government carrying out a balanced investment program that would permit a sound allocation of the public revenues and foreign exchange generated by the petroleum sector is dim, since without a minimum control of revenues and expenditures no satisfactory allocation of current and capital expenditures can be expected. The speed with which these measures are adopted, as well as their effective- ness will weigh heavily on the actual outcome of public finances in the 1970s. Public Revenues In Ecuador, the central government (including the "special accounts" and some state enterprises) receives approximately half of the total tax yield. The other half is earmarked for "the rest of the public sector" which includes the 108 municipalities, nineteen provincial councils and hundreds of semi-public and private organizations. In addition, the central govern- ment transfers to "the rest of the public sector" some 10 to 15 percent of its own tax receipts so that it has at its disposal less than 40 percent of ptotal taxes collected. - 67 - The serious constraints such a system presents for the efficient management of public finances have been recognized and the tax system has undergone a series of radical reforms in the past ten years. The first im- portant step towards remedying the excessive fragmentation of taxes was taken in 1964 when the then existing several hundred central, provincial and munic- ipal taxes were sharply reduced in number. A parallel effort at reducing the excessive fragmentation of the public administration to make it operate more rationally met with only partial success. The Planning Board's recommendation that the Provincial Councils be suppressed was not implemented because of political opposition. Likewise, an attempt made in 1969 to rationalize the fiscal system through a requirement that the Provincial Councils prepare four-year financial plans have so far remained a dead letter. On the other hand, the municipalities have improved somewhat their financial management since their reorganization in 1966. Yet, they are still lacking in efficient administrative and technical personnel and have not made serious efforts in increasing their own revenues. The biggest administrative and financial burden is probably that of the "other autonomous entities" which comprise, in addition to a few important agencies, a large number of small organizations included in the public sector mostly under political pressure, and whose financial situation is generally precarious and subject to no control on the part of the central or local governments. In 1970 and 1971, two further policy measures were taken with a view of simplifying and rationalizing the fiscal system. The first consisted of suppressing a number of regional development agencies of doubtful value and of attaching them to Provincial Councils or to various central government departments. The second and more important one consisted of the establish- ment of the "Fondo Nacional de Participaciones," which deserves brief exami- nation. Until 1971, a substantial proportion of the funds earmarked for the various levels of government and public and private autonomous agencies was allocated to them not in the form of fixed sums periodically adjusted in accordance with genuine needs but of percentage shares in a large number of taxes and fees. Thus, when the yields of certain taxes rose or fell, the revenue of an unknown number of public and private agencies increased or declined irrespective of the services they were supposed to perform. Such a system was clearly inimical to public saving. For whereas a sudden increase in revenue tended to induce a corresponding increase in expenditure, financial difficulties resulting from an increase in expenditures or from an unexpected loss of revenue had to be generally solved by obtaining transfers from other public entities. To remedy this situation the decree establishing the Fondo de Participaciones reserves for the central government (Services and Develop- ment Budget) a number of major taxes and allocates other taxes to the rest of the public sector. The major advantage of the Fondo is that it enables the Finance Minister for the first time: (a) to know with precision the exact amount of funds allocated to each of the various entities and (b) to refuse any unjustified increase in these funds. With these new powers the Minister will be able to require that the entities adopt standardized accounting procedures and that their books be regularly audited by central government - 68 - officials. He will furthermore be in a position to recommend, whenever necessary, that the recipients of public funds accruing to the Fondo de Participaciones should attempt to raise more of their own revenue, restrain their current expenditures and establish a rational order of priority for their investment plans. A case might be made for earmarking taxes on grounds that (a) the automatic allocation of funds to local governments and public enterprises would improve the efficiency of spending by isolating these funds from the continued political changes of the central government; (b) the earmarking of revenue for specific projects reduces costs as it ensures continuity in the supply of funds and thus diminishes the risk of wasteful interruption of works; and (c) the reserving of local taxes for the satisfaction of local needs would make the community generally more willing to contribute the funds required. Ecuador's experience however, fails to demonstrate that these advantages have materialized. Public enterprises and local governments have been just as vulnerable to political changes as the central government, 15/ and the earmark- ing of taxes to solve their short run isolated problems led to an excessive fragmentation of public finances, making control and evaluation extremely difficult and resulting in misallocation of resources. Secondly, despite the earmarking, projects in Ecuador have been frequently interrupted for lack of funds. Thirdly, regardless of the earmarking of local funds for local govern- ments or institutions, in many cases they were insufficient and had to be supplemented by government transfers or by foreign or local borrowing. Except in those cases where there is a clear advantage for earmarking, diversion of funds from one part of the public sector to another should take the form not of earmarking, but of straightforward transfers through appropriate channels that guarantee that these funds would be properly used and adequately audited. The situation of public enterprises should in particular be the subject of a special study with a veiw to ascertaining that they follow rational price, wage and employment policies, that their accounts are properly audited and that they are efficiently run under a stable management. Next to the earmarking of taxes, the most striking characteristic of the Ecuadorian tax system is the inordinately high reliance on foreign trade taxes. Taken together, import duties and export taxes contribute over 50 percent of total tax intake (excluding social security contributions). 15/ The Ecuadorian railways, for example, have had no less than 34 general managers in twenty seven years from July 1, 1944--when they were nationalized-- to April 15, 1971. In some years, such as 1966 and 1970, three general managers administered the railways in succession. Finally no one knows how the railways have used their funds since July 1964 when the Central Government Audit Department (Contraloria) was last enabled to examine their accounts. Junta Nacional de Planificacion y Empresa de Ferroca- rriles del Estado, La Rehabilitacion de la Empresa de Ferrocarriles del Estado y las Alternativas para Continuar su Operacion. Quito, 1971. - 69 - This structural weakness affects the stability of the tax. system--it makes it fluctuate with foreign trade fluctuations--as well as the flexibility of the system to serve as a useful tool for economic and fiscal policy, and limits seriously the government's ability to carry out serious financial programming. It might be relevant to note that the forthcoming petroleum taxes will also to a large extent fall in the foreign trade category. The most important individual tax categories are Import Duties, Export Taxes, Income Tax, Property Taxes, Value Added Tax, and the Tax on gasoline. These taxes are the ones that have also the greatest potential to generate additional government revenues through improved administration and enforcement. Import Duties: The rates of customs duties on the c.i.f. value of imports generally range between 20 percent on "essential" goods and 50 percent on consumer goods. For various consumer goods, however, they rise to much higher levels. Duties on cars which vary between 140 and 230 percent are clearly consumption taxes on luxury goods against which no valid objection can be raised. So far, they have not led to the establishment of a costly local automobile industry. Thus their positive revenue and re- distribution effects have not been counteracted as yet by negative allocative effects. With most other consumer goods the situation is different, however. As customs duties rise to 170 to 190 percent for clothing, footwear, beverages and canned food, the-old-established industries producing similar goods for the internal market are permitted to enjoy a degree of protection that cannot be justified by "infant industry" arguments. The protection both of new and of traditional industries is further strengthened by the requirement of prior import deposits now ranging between 100 and 130 percent of the value of imports, depending on the degree to which they are regarded as nonessential. With only few exceptions, the high level of protection has led to poor quality and high cost of domestic production and widespread smuggling. Export Taxes: Export tax yields amount in normal times to roughly 8 percent of the total value of exports. But as some minor exports are exempt from the tax while others are subsidized, the effective rate of the tax on major exports is slightly higher than 8 percent. Most of the tax yields come from banana, coffee, cacao and sugar exports, which together represent roughly 80 to 90 percent of the total. Besides providing the government with additional revenue, the existing export taxes serve several useful purposes. For coffee and sugar, which are subject to international quota arrangements, they are a convenient means of adjusting supply to a strictly rationed market. The cacao tax, which is supplemented by a subsidy to the exporters of cacao derivatives, aims primarily at promoting the export of the manufactured goods at the expense of their raw materials, and it can further be justified by the fact that the major cacao producing countries levy their own exports taxes which are both steeply progressive and generally much higher than Ecuador's. Cacao trees require a combination of climate, soil and altitude seldom found, so that the supply of cacao must be regarded - 70 - as fairly rigid. While the export tax on banana might be placing Ecuador at a disadvantage with its competitors in the Caribbean, it must be observed, however, that in Ecuador an important part of the proceeds from the tax go back to banana planters through a plant disease control program sponsored by the government. For the above reasons, taxes on traditional exports could not only be maintained but might be made to rise with the sucre prices of these exports in relation to internal prices 16/. On the other hand, Ecuador needs to stimulate and diversify as much as possible its exports of nontradi- tional products (at present manufactures, fisheries products, and specialty crops). The prevailing fiscal incentives and subsidies for minor exports (those with an export value of less than US$3 million in 1969) have undoubtedly contributed to the increase in these exports in the last few years. While in the past these incentives have been quite onerous for the Treasury, particularly in view of the tight financial situation which the government has had to endure,17/ the revenues that will accrue from the petroleum sector would permit the continuation of these incentives until technological expertise and new markets for these products have been developed and the levels of output permit producers to take advantage of economies of scale. An important requisite would be that beneficiaries are scrutinized more rigorously than in the past and that the specific incentives be periodically reviewed to ensure that they are promoting development and not encouraging productive inefficiency or excessive profits. Income Tax: The income tax is a progressive tax which, because of personal exemptions and corporate exclusions, has a very narrow base. These exemptions and exclusions, plus constant changes, make the law difficult to administer. Effective administration requires a high degree of technical 16/ A different problem is that of windfall gains of the traditional export a sector following a devaluation, and the impact that a substantial expansion of the exporters income might have on the price level and on the volume of imports. There is little doubt that windfall gains must be severely taxed, both on grounds of equity and because they serve no useful economic purpose. That they had to be taxed in Ecuador, when the sucre suffered a 39 percent devaluation in 1970, was even more necessary to counteract the additional upward pressure on prices and consequent aggravation of the disequilibrium in the balance of payments induced by the persistent and substantial budgetary deficit, which coincided with the expanding money income of the export sector. In these circumstances the 10 to 15 percent supplementary export taxes which were, in fact, decreed by the authorities could be regarded as mild, and their later decision to lower the supplementary tax on bananas is the more difficult to justify. It is true, that, before devaluation, the maintenance of a fixed exchange rate, despite slowly rising internal prices, constituted an additional tax on exports. But as these were all the time increasing in vlume, it cannot be argued that the predevaluation profits of exporters were inadequate and had to be increased through devaluation. 17/ In March 1972 the government suspended the use of Tax Credit Certificates for tax payments until the second semester of 1973, to avoid a further drain of public revenues before the proceeds of petroleum taxes are on stream. - 71 - knowledge plus a system geared to keep current the regulations and inter- pretations. All countries have this problem; however, in Ecuador it seems particularly acute. As a result the tax base is so eroded that the rates have to be high in order to secure enough tax intake to run the government. The high level of evasion is partially caused by the complexity of the law. Efforts should thus be directed not to raising the rates but to preventing evasion. So far, the income tax accounts for only about one-tenth of tax revenue, and the ratio of income tax yields to GDP has invariably remained below 2 percent. This is clearly too low and a reasonable aim could be to double the ratio. Even if half the country's income is exempt from the tax the remaining half could reasonably be expected to pay it at an average rate of 8 percent. An important defect of the present income tax law is that it does not encourage corporate saving since undistributed profits are taxed at the same rate as dividends on nominal shares (20 percent). Real Estate Tax: The property tax, rural and urban, is 2.5 percent of the total tax intake, which is low compared with countries similar to Ecuador. The trend indicates it is falling further behind. As a result the municipalities and provinces, which depend mainly on this tax, need increasing transfers from the central government to make up their budget deficits. Possibly more important, it reduces the incentive to make full use of productive farm land. A reasonable property tax would provide the provinces and municipalities enough resources to be self-supporting. The intake from the taxation of urban and rural property in Ecuador has been as follows: (in million sucres) 1964 1965 1966 1967 1968 1969 1970 Urban 86.4 91.3 101.5 109.5 113.0 116.4 121.0 Rural 48.6 48.8 47.1 48.1 45.3 38.1 40.3 TOTAL 135.0 140.1 148.6 157.6 158.3 154.5 161.3 Comparing these data with national accounts, it follows that the increase in value added by agriculture from 1964 to 1970 was 57 percent (in current prices), while the rural property tax intake actually decreased during the period by 17 percent. The increase in collections on rural property is surprisingly low in light of the new construction and the inflation which has taken place. Very little accurate cadastral information is available in Ecuador. Municipal authorities maintain lists of property with generally self-assessed valuations. The actual area of much of the rural land is unknown although there are lists, called Catastros de Predios Rurales, which are used by the officials of each canton as a basis for collecting rural property taxes. - 72 - The first step in the imposition of an adequate real estate tax that would make the municipalities and provinces independent with respect to their budget is an accurate and well-recorded cadastral survey that identifies each piece of land, rural and urban, in the country. This should provide enough information for a reasonable assessment of value of land. The second step is agreement on the standards and the preparation of the charts with which information above can be translated into an assessment. In the case of Ecuador, the assessment could be at 100 percent of the value, but with a relatively low structure of rates, set with the expectation that a good amount of untaxed land initially would be added to the rolls, and later on taxed at higher rates. The total tax intake, urban and rural, during the first year should not be more than double in order not to undermine tax- payer compliance. The Value-added Tax: From 1966 to July 1970 industrialists had to pay a sales tax of 3.5 percent on the value of their output. No deduction was made for the tax already paid by the producers of their inputs, so that the sales tax was clearly cumulative. Yet from 1965 to 1969, its annual yields did not rise in real terms but oscillated between roughly S/71 million and S/86 million (at constant 1970 prices). The replacement of this tax in May 1970 by a 4 percent value-added tax collected at the retail end and payable on all merchandise transactions almost immediately led to considerably higher yields: S/172 million in the last five months of 1970 and S/450 million for the whole of 1971. 18/ This tax is now being attacked on the grounds that it has caused an acceleration in the rate of inflation. However, it is doubtful that the tax itself could be held responsible for the rise in the cost of living from around 5 to 6 percent in 1970 to 9 to 10 percent in 1971. The increase in import prices and, more importantly, the considerable expansion in the income of the export sector resulting from the August 1970 devaluation, added to the overall credit expansion and the growing government deficit, are more than sufficient to explain the higher rate of inflation. The introduction of the value-added tax must be regarded as an important improvement in Ecuador's tax system for--quite apart from its revenue raising effect--it has a distinct economic advantage over other forms of indirect taxation: that of equalizing the tax burden on the various categories of producers and traders and hence of creating no distor- tion in the allocation of resources. The Tax on Gasoline: The present consumption of gasoline has been rising rapidly at an average rate approximating 10 percent per annum. In 1970, it amounted to 3.18 million barrels, that is, roughly 133.58 million gallons, and can thus be estimated at nearly 146.9 million gallons 18/ It has been said that the increase in yields was due not to some virtue in the value-added tax but simply to the widening of the base and the increase in the rate of what fundamentally remains a sales tax. This deserves to be investigated. In any case, however, the tax must be given a reasonable chance to work. - 73 - for 1971 and 161.6 million gallons in 1972. Total revenue from the tax was about S/228.4 million in 1970 (S/1.71 per gallon). Revenues are estimated to be roughly S/251.3 million in 1971 and to S/276.4 million in 1972. But the decision of the authorities to maintain the price of imported gasoline unchanged at its predevaluation level (S/2.79 for low- octane and S/3.29 for high-octane gasoline per gallon) and to compensate importers by means of Tax Credit Certificates has led to the grant of a sizeable subsidy to gasoline consumers amounting to roughly S/159 million in 1971 and S/192 million in 1972. This means that, despite the state's growing financial difficulties, the authorities have deemed fit to reduce the effective tax on gasoline from around S/228 million in 1970 to S/92 million in 1971 and S/84 million in 1972. On a per-gallon basis it will have declined from S/1.71 (7 U.S. cents) in 1970 to less than S/0.63 (2.5 U.S. cents) in 1971 and to nearly S/0.52 (2.08 U.S. cents) in 1972. This is difficult to justify. The improvement of the road system in Ecuador is likely to have reduced the cost of operating motor vehicles substantially. It is thus only fair that part of this gain should revert to the State. The owners of lands adjacent to the new highways, as well as the road users--particularly the owners of passenger cars--could be expected to finance both the maintenance of the roads and overhead costs. Furthermore, the marginal cost of using the road has been estimated for some countries of Central America at roughly 0.1 U.S. cent per vehicle/kilometer, that is, about 5 U.S. cents per gallon for passenger cars. 19/ On this basis the present effective rate of the tax (2.08 U.S. cents) is obviously too low even to cover half the physical cost of using the road. Both the savings on operating expenses and the marginal cost of using the roads would call for increases in gasoline taxes. Instead of increasing the nominal tax and maintaining the subsidy, the authorities could simply remove the subsidy and keep the tax at its present level. This alone would have the effect of restoring to the State substantial revenues (S/192.4 million this year) of which it has been deprived. At a later stage, depending on the state of public finance, the Government will be able to determine whether or not the tax should further be raised, particularly on high-octane gasoline. From the analysis of the previous paragraphs, it appears that the failure of public revenue to raise sufficient funds to meet the public sector needs has been due not so much to defects in the tax system or in the levels of rates, but to laxity in its application. An additional factor complicating tax administration has been the extraordinary number of changes in the tax laws in the last few years. 19/ See A.A. Walters, The Economics of Road User Charges, World Bank Staff Occasional Papers, No. 5 (Washington, D.C., 1968). - 74 - In the immediate future, rather than seek the imposition of new taxes or the modification of those now existing for the purpose of expanding the volume of public saving, the authorities should direct their efforts to the effective application of the present tax system, its improve- ment, and, if need be, its further simplification and rationalization. The greatest potential in these areas appears to be in the income tax and in real estate taxes. In the long run, however, some changes in the tax system may well be needed. Both for reasons of equity and to ensure a proper allocation of resources, import duties particularly on finished consumer goods should be revised downwards in the light of rationally planned industrialization, employ- ment and trade policies, aiming to provide Ecuador with viable industries, capable of competing on equal terms-if not now, at least in the foreseeable future--with foreign industries. Also, additional public revenues can be obtained for financing road construction if its major beneficiaries--road users and the owners of land adjacent to public roads--are made to contribute in proportion with the benefits they derive from their use. Estimates of public revenues for the 1970s have been made independ- ently for the various nonpetroleum taxes, and for petroleum taxes. Nonpetro- leum revenues have been estimated by assuming individual elasticities for major taxes with respect to relevant variables. These elasticities imply some degree of improvement in tax administration and enforcement of collec- tions, particularly in the income and property taxes, as discussed in previous paragraphs. Export tax elasticity reflects the government's intentions of gradually eliminating some of nonpetroleum export taxes. Consumption and income taxes reflect the gradual monetization of the economy and the increases in per capita incomes. Barring changes in the tax rates or the introduction of new taxes, the overall tax elasticity (nonpetroleum) would be unlikely to exceed 0.9. However, with some minor changes in the tax systeum that would make it more progressive and administratively manageable (such as reassess- ment of real estate taxes, both rural and urban, and a reasonable tax on gasoline), the overall tax elasticity could be brought at least up to 1.0, increasing nonpetroleum tax intake by an additional S/1 billion during 1973/77. In the projections it has been assumed that such additional changes will be made. 20/ 20/ Assumptions on tax elasticities for projections Export tax = 0.95 wrt merchandise exports Import tax = 1.00 wrt merchandise imports Consumption tax = 1.10 wrt private consumption Income tax = 1.05 wrt GDP Property tax = 1.00 wrt GDP Other tax = 1.00 wrt GDP Nontax = 1.05 wrt GDP - 75 - The basic parameters that will influence total government revenues from petroleum include the volume of production, net exports and local sales, operating costs, tax reference prices and the system of taxes and contribu- tions. In Ecuador, further revenue may arise from: (a) bonus payments and direct investments by the industry in public works projects (obras de compensacion) in lieu of cash bonuses; and (b) investment income from contracts of "association." These latter payments have not been incorporated in the revenue estimates, nor are all of them applicable over the period under consideration. It is recognized that there are a number of issues yet to be resolved regarding the level and composition of taxes. However, for our fiscal projections, we have adopted the following assumptions: (a) royalty at 16.0 percent (as per the Hydrocarbons Law); (b) export tax at the full rate of 15 percent; (c) 15 percent of net income for profit sharing, of which one-tenth would go to the workers and nine-tenths to the government; (d) income tax of 44.5 percent; and (e) miscellaneous taxes amounting to 9 cents per barrel. The absence of production or operating experience in northern Ecuador makes it necessary to estimate operating costs without reference to accounting records. A conservative figure of 60 U.S. cents per barrel for average operating and pipeline costs has been assumed for the purpose of projecting government revenue. 21/ On the basis of the above tax and cost conditions, and assuming a reference price of $2.50 per barrel, we obtain a government revenue of $1.36 per barrel. Conceptually this figure would be consistent with the per barrel revenue derived from the application of the Venezuelan or Middle East systems to cost conditions in Ecuador but at higher reference prices. For Ecuador, similar results can be achieved by raising the reference price above the $2.50 level and lowering or eliminating export taxes. 21/ The cost estimate is based on an initial production rate on the order of 2,500 barrels daily from wells of less than 10,000 feet. Depending on sustained production rates, these figures suggest average direct operating costs of between 25 and 35 U. S. cents per barrel including depreciation. On a comparative basis, operating costs in the Middle East are 5 to 12 U.S. cents per barrel for sustained production rates of 8,000 to 12,000 barrels daily per well and in Venezuela average costs are on the order of 42 to 49 U.S. cents per barrel. The actual level of costs will be heavily influenced by the natural decline of the producing fields and by the policies adopted with respect to deprecia- tion. Assuming a fifteen-year period for both initial and subsequent investments, depreciation would amount to approximately 15 U.S. cents per barrel. Taking into account total investment, pipeline and marine terminal operating costs are calculated at 20 to 30 U.S. cents per barrel. An increased rate of throughput above its rated capcity would be reflected in lower unit operating costs. - 76 - Reference Illustrative Gov't Tax-Paid Price Cost Revenues Cost ----------- (U.S. dollars per barrel) ----------- Ecuadorian System 2.50 0.60 1.36 1.96 Middle East System 2.70 0.60 1.31 1.91 Venezuelan System 2.70 0.60 1.41 2.01 The tax paid cost for Ecuadorian crude shown above also falls within the limits which allow it to be considered as an alternative source of supply in a wide variety of markets. Adjustments for quality in some markets would enhance its attractiveness to the refiner. Total public revenues for September-December 1972 from petroleum were initially estimated at S/828 million (US$33 million). 22/ In 1973, the first full year of operations, revenues will increase to S/2,900 million (US$116 million). For succeeding years through 1977, petroleum revenues are forecast to increase by about 13 percent annually. These forecasts assume that production will average 400,000 barrels daily by 1976 (see Table 8.27, Statistical Appendix). Given the uncertainties, these forecasts are highly conjectural; they represent the mission's best estimates of the implications of a given set of assumptions, which while reasonable are by no means certain. The various assumptions include: (a) forecasts of output based on the expec- tation that further reserves will be found; (b) estimates of costs under uncertain conditions of reservoir behavior; (c) assumptions that the per barrel revenues resulting from the application of calculated reference prices and tax rates will protect the interests of the country and at the same time allow Ecuadorian crude to enter world markets competitively in terms of tax paid cost; and (d) premises that realized f.o.b. prices will give the concession holders a share of net profits sufficiently attractive to allow for the future flow of investments directed toward the development of the resource. 23/ Public Expenditure Public consumption: Encompassing government purchases of goods and services and wages and salaries, public consumption is the most critical policy variable in the hands of the government. When properly administered 22/ The estimates of fiscal revenues in this report assume a petroleum production rate of 220,000 barrels per day starting September 1, 1972. In practice, this rate of production has been achieved only towards the end of 1972, with the consequent reduction in the reduction in the public revenues expectd from petroleum in 1972. 23/ For the fiscal projections, domestic sales have been valued at cost (including royalty and minor taxes) plus 20 percent as stipulated in the original Texaco-Gulf agreement. - 77 - and framed in an overall development plan, it is fairly difficult to compress, since an important part is made up of indispensable expenditures for operation and maintenance of basic infrastructure (teacher's salaries, road maintenance teams, etc.) as well as expenditures on needed social services (health clinics, police, etc.), all of which have an important bearing on development. On the other hand, public consumption is also the easiest policy variable to get out of control. On various occasions, previous governments in Ecuador have succumbed to political pressures for unjustified expenditures or have permitted the proliferation of an unnecessary bureaucracy. In other cases, there have been superfluous purchases of goods and services. These unjustified increases in public consumption, particularly since 1967-68, have eroded the saving capacity of the public sector and have had a crippling effect on the ability of the government to promote development. Though responsibility for the inordinate increase in public consumption must primarily be attributed to the central government, it must be recognized that the latter's distribution of expenditure between its major functions was reasonably well balanced: the general services had the smallest share in the expansion of expenditure, and social and economic services, the largest. On the other hand much of the increase in expenditure on social services can be attributed to an expansion of the bureaucracy and higher wages and salaries in some sectors. This lack of concern for budgetary equilibrium became particularly apparent in 1967-68 when the authorities decided to expand public consumption at the very time that they were embarking on an ambitious investment program without attempting at the same time to expand public revenue by a more thorough application of the existing tax laws. And it is this decision which must be regarded as primarily responsible for Ecuador's present financial difficulties: the deficit financed expansion of consumption and investment gave rise, on the one hand, to a substantial increase in imports, growing balance of payments disequilibria and a mounting foreign debt and, on the other, to a sharper rise in the internal price level which was fed by, and in its turn led to, successive salary increases and growing budgetary deficit, so that a vicious circle developed, which became more and more difficult to break. In our fiscal estimates for the 1970s, current expenditures of the public sector (public consumption plus interest payments and current transfer payments to the private sector and abroad) are projected to increase at about 10 percent per year in real terms. This 10 percent rate of growth compares with an average increase of 5.4 percent in real terms in the 1965-70 period. This increase, in addition to providing improved remune- rations for the public sector, would permit the necessary allocation to developmental expenditures complementary to the public investment program, and would leave sufficient room for a moderate level of expenditures on general services and defense. The increased current expenditures should enable the government to achieve its desired improvement in the quality of - 78 - these services. However, they do not leave much room for administrative wastage and presuppose that the government's present drive to increase admi- nistrative morality and efficiency is successful. A sensitivity analysis of government expenditures indicates that any substantially higher growth rate of current expenditures would seriously undermine the public sector saving capacity and would hamper the government's overall growth objectives. Financing of Public Investment Public savings financed an important proportion of public invest- ment expenditures (fixed and financial), averaging between 30 and 40 percent in the period 1965-71. Total domestic financing, including internal borrow- ing and capital receipts covered some 75 to 90 percent of public investment expenditures, with external resources increasing in the latter years. On the average, the central government has been an important contributor to public saving, if transfers are not taken into account. But every year between 10 and 15 percent of its current revenues are transferred to the rest of the public sector--especially to autonomous institutions-and to the private sector. Through the transfer mechanism, however, the deficits of the autonomous institutions were shifted to the central government increas- ing its deficit and forcing it to have recourse to Central Bank borrowing and issuing of bonds. While the central government borrowed heavily from the banking system, the rest of the public sector ran surpluses after invest- ment in most years. An important part of these surpluses were channeled back to the private sector through equity investments and purchase of assets, or by being deposited in accounts in commercial banks. The central government and other public entities expanded their investments considerably from 1967 to 1970 at the same time that their consumption of goods and services accelerated. As they failed to increase their revenues at the same pace, the overall deficit of the public sector began to grow rapidly from 1967 onwards and is now roughly twice as high as in 1965-66. Only part of the deficit could be covered by foreign loans and bond placements in the internal market. Since 1968 an important and growing part had to be financed by the Central Bank and in some cases the Government had to pay contractors of public works with dollar bonds, at a heavy cost to the Treasury. Though the Social Security Institute is a major saver on current account and a minor spender on fixed capital formation, it cannot be relied upon to finance a substantial part of the public sector deficit by the purchase of government bonds, for a significant proportion of saving accumu- lated by the Social Security Institute is channeled into loans which it extends to insured persons, mostly on mortgages, and both the insured persons and the Institute tend to regard this financial assistance as part of the benefits provided by the social security scheme. Furthermore, the Institute - 79 - has substantial and rapidly increasing claims on the central government--now exceeding S/3.2 billion--arising from the latter's nonfulfillment of its legal obligation to pay social security contributions in its capacity as employer. Of this debt, roughly S/2 billion have been consolidated, and S/700 million are awaiting consolidation. The remainder of around S/500 million consists of government bonds. The Institute is reluctant to increase its government bond holdings (it has, in fact, tended to reduce them), as it is unwilling to immobilize an important part of its savings in long-term low interest bonds. With the exception of commercial banks which are permitted to maintain part of their statutory reserves in the form of interest-bearing government securities, neither public nor private bodies or persons have been interested in buying government bonds unless these are purchased on the stock exchange where they can be obtained at a heavy discount. This is because of their long maturities (twenty years) and low interest rates (8 percent) in a context of increasing internal prices. Public fixed investment has been projected to grow rapidly in the next few years, as the backlog of postponed and unfinished projects is eliminated. Towards the end of the 1970s, the rate of growth is projected to decline to about 10 percent per year in real terms. This still implies substantial increases in investment in absolute terms, since the growth is measured from a much larger base (the absolute level of investment may triple between 1972 and 1980). Together with the increase in public fixed investment, there is an important increase in public credit lines made available to finance private investment. On the basis of the prospective operations identifiable at the time of the mission, public financial investment in credit lines is projected to increase from about S/400 million in 1972 to over S/1 billion in 1975, or the equivalent of 25 percent of public fixed investment. From 1976 onwards we have assumed that public financial investment in credit lines to the private sector is maintained at a level equivalent to 15 percent of fixed investment. While these levels of investment are still well within the financial possibilities of the public sector, they assume a capacity to identify, prepare and execute investment projects that may well be beyond the immediate reach of the public administration, as past experience would seem to indicate. The public investment requirements identified in Chapter III, Section F, would amount to a total of S/25.5 billion (expressed in 1971 Sucres) in the period 1973-77, including both fixed and financial invest- ments. For the same period, the aggregate of public savings would amount to S/21.6 billion, i.e., about what would be required to cover 85 percent of the investment program. Table 10: PUBLIC INVESTMENT EXPENDITURES AND THIR FINANCING, 1965-71 (million sucres) 1965 1966 1967 1968 1969 1970 1971 Public Investment Excpenditures 1206 1221 1488 1569 1774 2361 2609 Financed by: Public Saving 363 597 968 613 629 871 1103 Capital Receipts 168 179 216 315 358 287 288 1/ Foreign Borrowing (net) 112 166 406 568 280 664 557 Domestic borrowing (net) 563 279 -102 73 507 539 661 O (Banking System, net) 2/ (424) (122) (-237) (401) (549) (445) (773) (Net transfer from financial entities and private sector) (139) (157) (135) (-328) (-42) (94) (-112) 1/ As shown in the Balance of Payments (Table 3.1), converted into current sucres by the corresponding official exchange rates (17.82 for 1965-69, 21.28 for 1970 and 2h.75 for 1971). 2/ As shown in the monetary accounts. Source: Tables 5.16, 3.1, and 6.1, Statistical Appendix. - 81 - As can be seen from Table 11, the revenue generating capacity of petroleum is such that it could finance some three-quarters of total public investment in the period 1973-77. Clearly, public savings should not be a constraint to the growth of public investment in the 1970s, and eventually in the late 1970s public savings could contribute to the financing of part of private investment (over and above the credit lines assumed on financial investment) through equity participations in mixed enterprises, provided that adequate control over current expenditure growth is maintained. In addition to the estimated public savings (we have assumed no net internal borrowing by the public sector), Ecuador could expect gross official capital inflows of some S/2.1 billion over the period 1973-77, on the basis of the existing pipeline of undisbursed foreign loans. Taking into account the prospective projects in which external multilateral and bilateral agencies are likely to exhibit an active interest, and the cost sharing prin- ciples which they have followed in the recent past, S/8.6 billion equivalent in external financing for new projects could be forthcoming during 1973-77. Over the same period, however, some S/8.2 billion in amortization and interest payments would fall due (S/5.2 billion on existing and S/3.0 billion on new loans), leading to a total net transfer of resources of only S/2.5. Gross external disbursements would amount to about 42 percent of total public investment expenditures, and net disbursements to about 21 percent. The justification for the reliance on additional external capital inflows rests partly on balance of payments grounds, to finance the imported goods and services required to achieve the overall growth targets of the economy. The continuing participation of external development financing agencies, moreover, might well be essential to achieve the required levels of public investment in terms of identification, preparation and execution of high priority projects which would help to meet the Government's objectives in the fields of growth and improved income distribution. Provided the behavior of public finances develops as expected and public savings and external borrowing reach the magnitudes indicated in Table 11, there should be no scarcity of financial resources. Indeed, were it not for absorptive capacity constraints, a larger public investment pro- gram would be warranted. It is, of course, quite possible that the govern- ment's administrative capacity to raise revenues and restrain current expenditures will fall short of the targets suggested in our earlier analysis, and a larger investment-savings gap might emerge. Moreover, under our assumptions of growth of petroleum output, the rate of expansion of petroleum revenues declines rapidly, and by 1977 an absolute decline takes place as total petroleum output stagnates in the face of increasing domestic consump- tion. Thus, another justification for a continued and sizable involvement of international development agencies assisting financially and technically the Government in its public investient efforts, is the time-bound nature of the financial relief provided by the discovery of petroleum, on the assump- tions regarding petroleum developments which can now be made. - 82 - While in the determination of the cost sharing of externally financed projects we have assumed that external agencies will finance only the foreign exchange cost of projects, in areas such as education, agriculture and sanitation, where the requirements of imported goods and services are very small, it might be necessary to finance part of the local currency component in order to have a meaningful level of involvement in the prepara- tion and execution of the projects. Table 11: PUBLIC SAVINGS AND INVESTMENT, 1971-77 (In milions of 1971 sucres) 1971 1972 1973 1974 1975 1976 1977 Total I973-77 Public Investment 2,602 2,865 3,675 4,531 5,198 5,622 6,146 25,92 Fixed 2,265a/ 2,465 2,939 3,575 4,215 4,889 5,623 21,241 Financial 34-d- 400 736 956 983 733 8L3 4,251 Public Saving 1 1,696 3,749 3,601 4,066 5,214 4,996 21,626 Current revenues 7,091 8,275 10,976 11,541 12,790 14,798 15,525 65,630 (Petroleum) - (828) (2,900) (2,879) (3,497) (4,738) (4,683) (18,697) (Other) (7,091) (7,447) (8,076) (8,662) (9,293)(10,060)(10,842) ([6,933) Current expenditures 5,988 6,579 7,227 7,940 8,724 9,584 10,529 44,004 co Investment-saving gap 1,506 1,169 -74 930 1,132 408 1,0 3,866 Foreign borrowing (net) 557 2,904 1 1,045 812 1,208 1,244 5,397 Disbursements 1,148 3,787 2,236 2,231 2,040 2,108 2,178 10,793 Amortization 591 882 1,148 1,186 1,228 900 934 5,396 Overall surplus (-) 949 -1,735 -1,162 -115 320 -800 226 -1,531 a/ Purchase of existing assets and transfers to private sector and abroad. E/ Includes capital receipts. c/ Change in deposits in the banking system, and net domestic borrowing. - 84 - V. EXTERNAL TRADE AND FINANCES Balance of payments constraints have in recent years seriously hindered economic growth. Historically, export earnings were used to make relatively stable factor income payments and the balance was spent on imports. Direct investment and other capital flows played a relatively minor role. In the second half of the 1960s, however, rapidly increasing import requirements, coupled with stagnating trends in major exports, have resulted in rising current account deficits requiring expanded external borrowing and depletion of foreign exchange reserves. Ecuador's capacity to import and thus to sustain rising consumption and economic growth will be substantially enlarged during this decade as a result of petroleum exports. Petroleum will be the single most important export item in 1973, and by 1976 it will bring in more foreign exchange than all other commodities together. The emergence of petroleum as Ecuador's major export, however, entails some risk of future distortions. By strengthen- ing the balance of payments, petroleum exports may hide unfavorable develop- ments in the price-cost relationships and in the competitive position of the country's traditional and nontraditional exports, which from an employment point of view will remain far more important than petroleum. The income and balance-of-payments effects of petroleum exports may also put pressures on domestic costs. To avoid the danger inherent in the possible development of an exchange rate out of line with internal-external costs relationships, Ecuador's future exchange rate policy will have to be geared explicitly to taking into account not only the overall balance-of-payments situation, but also the international competitiveness of the main employment generating activities. A. Recent Trends The deterioration in the trade accounts which started in mid-1960s has continued into the 1970s and was quite prominent in 1971. The deficit on current account increased from $125 million in 1970 to $227 million in 1971. This happened in spite of the fact that merchandise exports, in the face of falling prices, maintained the record earnings of the previous year. A major portion of the approximately 34 percent increase in merchandise imports can be associated with the development of the oil sector. The direct foreign investment related to the oil sector increased from $64 million in 1970 to $127 million in 1971. The net public capital inflow declined slightly and the deficit on current account had to be financed by a reserve drawdown of the order of $30 million. - 85 - Table 12: BALANCE OF PAYMENTS, 1969-71 (US$ million) 1969 1970 1971 Resource Balance -110 -105 -209 Net Factor Payments -27 -31 -31 Private Transfers 12 14 13 Current Account Balance -125 -122 -227 Direct Investment 75 90 157 Net Public Inflow 16 31 23 (Gross) (30) (47) (46) (Amortization) (14) (16) (24) Others 39 3 18 Reserve Change (- = increase) -5 -2 30 Source: Table 3.1, Statistical Appendix. Merchandise Exports: For the period 1965-70, the four major exports (bananas, coffee, cocoa and sugar) accounted for about 88 percent of Ecuador's foreign exchange earnings. In 1971, there was a significant increase in minor exports (especially seafood and cocoa products) and their combined share of foreign exchange earnings increased to almost 20 percent. The government was instrumental in bringing about this increase by the implementation of export subsidies and other incentives for exports of industrialized products. - 86 - Table 13: COMMODITY EXPORTS, 1965-71 (US$ million) Growth Rate /a 1965 1969 1970 1971 1965-71 Bananas 96 207 123 112 2.9 Coffee 38 27 50 36 1.3 Cocoa 19 24 22 25 5.0 Sugar 7 11 9 14 11.0 Major Exports (% share) (89.0) (86.2) (88.0) (80.8) Minor Exports (% share) (11.0) (13.8) (12.0) (19.2) Seafood 6 11 10 18 15.6 Cocoa Products - 2 2 5 59.4 TOTAL 180 196 233 232 4.3 /a Growth rates calculated by the method of least squares. Source: Table 3.3, Statistical Appendix. Though still the largest export item, banana's share in total ex- ports 23/ declined from 53 percent in 1965 to approximately 48 percent in 1971. 23/ Banana exporters in Ecuador have traditionally undervalued their exports regarding the foreign exchange they surrender to the Central Bank. The following table on export prices prepared by FAO, even though it is only indicative since the unit values for indvidual countries cannot be fully substantiated, clearly brings about the vast differences in prices between Ecuadorian bananas and other exporting regions. Unit Export Value, FOB (US$ per ton) 1967 1968 1969 1970 Ecuador 83 80 85 85 Central America 105 104 105 104 Caribbean 126 127 110 120 Asia 132 123 118 134 For purposes of balance of payments, both the Central Bank and the Planning Board adjust the prices upwards on the basis of information received from their embassies and consulates abroad. - 87 - International trade in bananas has been confined almost entirely to exports from developing countries to the high income markets of North America, West- ern Europe and Japan, with the volume of world trade growing at an annual compound rate of 4.1 percent between 1964-66 and 1969. Ecuador's main competitor has been Central America. Both regions are ideally suited to banana cultivation with Ecuador's geographical disadvantage being offset by extremely favorable climatic conditions, in particular the absence of recurring natural hazards such as windstorms and floods. Central America increased its world market share from 25 percent in 1964 to 37 percent in 1969, mainly at the expense of Ecuador. After 1969 Ecuador benefited from three years of production shortfalls in competing countries. The opening of the vast Japanese market due to crop damages in Taiwan resulted in Japan becoming the largest importer of Ecuadorian bananas. Table 14: VOLUME OF ECUADORIAN BANANA EXPORTS, 1967-71 (Percent) 1967 1968 1969 1970 1971 Germany 26 24 22 15 18 Japan 7 20 22 35 32 U.S.A. 38 30 26 25 21 (Share in World Trade) (23) (22) (20) (23) (20)La /a Provisional. Source: National Planning and Coordination Board. The share of coffee exports in total exports declined from 21 per- cent in 1965 to just 15.5 percent in 1971. Production of coffee in 1971 is estimated at 1.2 million bags (72,000 metric tons), about 100,000 bags less than the record production of the previous year. On the average, coffee exports have hardly grown in the past several years. Cocoa bean production in 1971 is estimated at 65,000 metric tons, about 10,000 tons more than the 1970 crop due to favorable climatic conditions and the use of hybrid varieties which permit year-round harvesting. The exports of cocoa were about 39 per- cent higher in volume in 1971 but an 18 percent decline in world prices resulted in only a 14 percent increase in export value. Production of centrifugal sugar is estimated at a record 275,000 short tons in 1971, a 10 percent increase over the 1970 crop and exports have grown at an average of around 11 percent per year in 1965-71. - 88 - Among the minor exports (mostly manufactured items), seafood and cocoa products almost doubled in value compared to 1970 levels, thus increasing the share of minor exports from about 12 percent between 1965 and 1970 to a little over 19 percent in 1971. Imports: In the period 1965-70 merchandise imports have been increasing gradually. The ratio of total imports to gross domestic product increased from 13.6 percent in 1965 to 15.8 percent in 1970. In 1971 imports increased by about $90 million and the import/GDP ratio jumped to 21.2 percent. A considerable portion of this increase is associated with the development of the petroleum sector. Nonpetroleum im- ports, however, also registered a considerable increase in 1971 compared to the 1970 levels. As a result of recent expansions in the manufacturing sector, some import substitution in consumer goods has taken place over the last six years, as reflected by the declining proportion of consumer imports to total imports (19.5 percent of total nonpetroleum imports in 1971 compared to 23.8 percent in 1965). On the basis of import permits issued and revised series prepared by the Central Bank 24/, merchandise imports are estimated to have increased by approximately 18 percent in 1971 or by 34 percent including petroleum sector imports. Imports associated with the development of the petroleum sector increased from $30 million in 1970 to $77 million in 1971. To meet the expanding demand for inputs for a rapidly growing manufacturing sector, imports of raw materials and intermediate goods increased by 23 percent. Capital goods imports increased by approximately 14 percent, due to a 35 percent increase in imports for manufacturing and a decline of 7 percent in capital goods imports for agriculture, transport and construction. The need to supplement the poorest wheat crop in many years, resulting from a combina- tion of above average rainfall and low temperatures, accounted for an important part of the 15 percent increase in consumer goods imports. Another factor contributing to this increase was the removal of advance deposit requirements on most imports in June 1971. 24/ Import data are revised to include petroleum sector imports and some other imports for which no licenses are required. A net contraband estimate averaging about US$10 million is also included and is spread between consumer imports (75 percent) and capital imports (25 percent). - 89 - Table 15: STRUCTURE OF COMMODITY IMPORTS, 1965-71 (Percent) Growth Rate 1965 1969 1970 1971 1965-71 Consumer Goods 23.8 17.6 17.6 15.2 6.2 Fuels 7.5 5.2 6.3 5.9 9.9 Intermediate Goods 31.5 27.6 28.7 26.5 11.1 Capital Goods 37.0 37.0 35.7 30.3 10.6 Petroleum Sector - 12.4 11.5 22.0 - 100.0 100.0 100.0 100.0 Imports/GDP (%) 13.6 15.2 15.8 21.2 14.4 Source: Table 3.4, Statistical Appendix. Terms of Trade: Since the mid-1960s Ecuador enjoyed relatively favorable terms of trade, particularly in the period 1968-70. While the terms of trade moved unfavorably in 1971, they were still almost identical with the 1965 level. The rate of growth of the purchasing power of exports is estimated to have been 10.7 percent between 1965 to 1970 as compared to the 6.7 percent rate of growth in export earnings during the same period. Table 16: TERMS OF TRADE, 1965-71 1965 1966 1967 1968 1969 1970 1971 Export Price Index 88.4 92.6 93.7 100.2 106.7 105.0 100.0 Import Price Index 88.5 90.0 91.2 90.4 93.8 98.0 100.0 Terms-of-trade 99.9 102.9 102.7 110.8 113.8 107.1 100.0 Source: Table 3.9, Statistical Appendix. Services Account: One of the factors responsible for the growth of the current account deficit has been the rapid deterioration on the services account. Since 1965 the deficit on services account has consistently been higher than the deficit on trade account. Nonfactor service payments increased by 17 percent between 1965 and 1971, while - 90 - receipts from the same grew at only 6 percent during the same period. A major portion of the net increase in payments has been the mounting net balance on freight, insurance and other transportation. Capital Account: Until the mid-1960s direct foreign investment and other capital flows played a relatively minor role. In recent years, however, the rapidly deteriorating current account balance has been financed mostly by increased direct investments, especially in the petroleum sector, and by stepped up government borrowing (including loans from suppliers), averaging $42 million gross per year between 1968 and 1971 compared to only $22 million per year in the 1965-67 period. In 1971, however, even these growing capital inflows were not sufficient to cover the current account deficit and the Government had to resort to a reserve drawdown of the order of $30 million. Table 17: EXTERNAL CAPITAL INFLOWS, 1965-71 (US$ million) 1965 1969 1970 1971 Balance on Current Account -18.1 -125.0 -121.9 -226.9 Direct Investment 9.9 75.3 90.0 157.0 (Petroleum Sector) (-) (47.9) (64.5) (127.0) Net Public Inflow 6.3 15.7 31.2 22.5 Other Inflows (net) -9.5 38.5 2.5 17.8 Change in Reserves (- equals increase) 11.4 -4.5 -1.8 29.6 Source: Table 3.1, Statistical Appendix. Disbursements on loans to Ecuador by international development agencies (IBRD, IDA, IDB) and U.S. AID have been relatively small in the past. Because of increased commitments of these agencies in 1970, their share in total disbursements increased to 43 percent of gross disbursements in 1971 (28 percent excluding AID). However, disbursements still remained at levels lower than forecast at the time of making the loans. Delays in making loans effective and in the procurement phase of project implementation as well as shortages of counterpart funds are among the main reasons for disbursements having remained below expectations. New commitments by the three agencies in 1971 were very low, with AID signing new loans totalling $5.8 million, the IDB one loan for $2.8 million and the World Bank Group one loan for $8.0 million. The IDB approved during the year, however, three additional loans for a total of $30.3 million which were signed in April 1972. - 91 - Utilization of suppliers' credits and contractors' financing was particularly high in 1970 and out of a total of $50 million disbursed in that year, 66 percent came from these sources. Utilization of suppliers' credits and contractors' financing continued to be heavy in 1971 when credits totalling $39 million were signed, against $33 million in 1970. As a result of rapidly increasing borrowing, debt outstanding went up from $106 million at the beginning of 1967 to $219 million at the end of 1971 (from $206 million to $390 million including undisbursed). The increased use of contractors' financing is symptomatic of the tight budgetary situation since it eliminates the need for nimediate budgetary contributions. It also reduces the need for maintaining high project standards and effecting institutional improvements, which generally are preconditions for lending by international agencies. The Government, confronted by immediate budgetary difficulties but with the prospect of substantial oil revenues in the near future, chose to bridge the gap by borrowing against future income. In early 1972, the Government borrowed a US$40 million budget support loan from U.S. commercial banks. Financial terms related to long-term borrowings, extremely soft in the late 1950s, have been progressively hardening. Due to heavy reliauce on suppliers' credits, the debt service ratio (as percentage of total foreign exchange earnings) increased from 6.3 percent in 1965 to 8.8 percent in 1970 and 12.0 percent in 1971. The structure and average terms of public debts contracted in the period 1965-71 are, however, still within satisfactory margins, with over 50 percent of debt having maturities of ten years or over, and an average interest rate of about 7 percent. Table 18: PUBLIC EXTERNAL DEBT TERMS MATRIX (Debts Contracted Between Jan. 1, 1965 to Dec. 31, 1971) (in thousand US$) Interest Maturity Rate 1-5 5-10 10-15 Over 15 Unknown Total 0-3 - 26,400 1,044 50,156 - 77,600 3-6 - 20,652 4,874 24,892 - 50,418 6-9 885 90,565 52,814 26,082 - 170,346 Over 9 - - - 6,000 - 6,000 Unknown - 39 198 - - 237 TOTAL 885 137,656 58,930 107,130 -304,601 Average Interest Rate = 6.982% Average Grace Period = 4.1 years Average Maturity = 16.3 years - 92 - B. Future Prospects Export Possibilities The medium-term prospects of traditional exports (bananas, coffee, cocoa and sugar) are not very bright, even though the supply of the main products will be adequate to meet domestic and export demands. As a re- sult of the leveling out of import demand in high-income countries, world trade in bananas in the present decade is expected to grow at a much lower rate than in the 1960s. Because bananas are a highly perishable commodity grown in the tropics but marketed in temperate zone importing countries, the production and distribution of bananas is marked by a high degree of integration. Ecuador is probably the only major exporting country where producers are not firmly linked by contract to major marketing organizations, a factor which might have limited its entry into the U.S. market which is dominated by a few companies with important producing/exporting interests in Central America. While Ecuador has been remarkably successful in con- verting from the Gros Michel variety (now with very limited outlets in world markets) to less fragile Cavendish varieties which in quality match the best Central American fruit, it is at a locational disadvantage in the U.S. market vis-a-vis Central American exports. Notwithstanding, the vulnerability of Central American production to climatic hazards is likely to induce the marketing companies to maintain or even increase Ecuador's share of the U.S. market to ensure a minimum stability of supply. Per capita consumption of bananas in the United States has, however, stabilized in the 1960's and, with the declining population growth rate, relatively little increase in demand for Ecuadorian bananas could be expected from this market over the medium-term. A new factor in the world banana trade pattern is the rapid expansion of commercial production in the Far East, particularly the Philippines, oriented mainly to the Japanese market. In the near future Ecuador may ship only marginal quantities to Japan and in the longer run it seems reasonable to assume that trade in bananas in the Far East will become increasingly intraregional. Exports to the USSR and Eastern Europe, although small, have been growing rapidly and are expected to continue to increase in the future. Given the expected slow growth in world demand for bananas and the expansion of output in a number of areas, in the absence of an interna- tional marketing agreement, there is a possibility of strong price competition in world markets. The strongest competition is likely to take place between Central and South America in particular, but pressure on prices is likely to be felt also by producers elsewhere. 25/ At best, prices are not expected to 25/ The possibility of a serious imbalance appearing in the world banana market has led the FAO Study Group on Bananas to consider the feasibility of international arrangements. However, the Group concluded that it was still too early for any form of quota arrangement. - 93 - show any improvement; as a result, the overall value of Ecuadorian banana exports is likely to grow at a very slow rate. The volume of production and exports of coffee is likely to continue growing at some 5 percent per annum during the next few years. During 1971, the Government began to implement a program to control further expansion of coffee production. However, the program has not been successful because bananas are being interplanted with coffee as a way to increase small farmers' incomes. The government also has plans to convert the poorer coffee areas to other crops such as corn and oilseeds, but financing for this program has not yet been found. In any case, at the present price, coffee is probably the most profitable alternative for those areas, reducing the atractiveness of coffee diversification schemes. Coffee prices, which increased substantially in the second half of 1972 with respect to earlier months, are expected to remain high at least for the next four or five years, and come down gradually thereafter as coffee stocks are rebuilt. In any case, the recent coffee price increases are likely to generate additional foreign exchange earnings of at least $60 million over the next five years, over previously expected levels. Until the mid-1950s, cacao was the major export crop. However, production and yields have declined steadily because of plant diseases and poor cultivation practices. In the last few years production has gone up as a result of new plantings. However, the majority of the plantations are old, poorly kept and low yielding. Many will soon go out of production. The Ministry of Production in cooperation with international agencies has been developing disease resistant varieties with satisfactory results. These varieties, however, need advanced cultural practices and modern inputs which will require several years before they are sufficiently spread to have an impact on output. Ecuadorian cacao should command a premium price because of its desirable flavor. Improper processing methods, however, have deteriorated quality, limiting the acceptability of the beans and reducing the prices it commands in external markets. Prices are expected to remain stable more or less at the present level during the current decade. The value of cacao exports is, therefore, expected to grow very slowly during the next several years. The expansion of sugar production during the past two years has created for the first time a sugar surplus. The record production in 1971 resulted in more than 125,000 short tons available for exports in 1971. Until now, sugar exports have been wholly dependent upon the quota for the U.S. market. Although sugar production is relatively efficient, the price of sugar in other importing countries in recent years has not been high enough to enable Ecuador to enter the international market in scale. Now, with an increased production and higher international prices, Ecuador will be in a position to look for new markets for its sugar. In any case, sugar consumption in the major importing countries is likely to grow slowly in the present decade due to the anticipated lower rate of population growth and to a high level of per capita consumption already achieved by these countries. -94 - Among the minor (or nontraditional) exports, only seafood and cacao products have shown significant increases recently. Other products which have some potential for growth are tea, abaca (Manila hemp), specialty crops (such as mushrooms), flowers and some fruits. But the main thrust could be expected from industrialized and semi-industrialized products initially based on agricultural raw materials and maybe later on chemicals and petrochemicals. The Andean market offers some immediate scope for nontraditional exports. Long-term growth will have to depend, however, on exports outside the subregion. In the period 1965 to 1971, nontraditional exports have grown on the average by 12 percent per annum in dollar terms, although from a low base. It is expected that this growth will at least be maintained in the present decade. Petroleum exports began in September 1972. Initial production was on the order of 220,000 barrels daily, and is expected to rise to 250,000 barrels daily in 1973 and 400,000 barrels daily by 1976. This projection assumes that the Texaco-Gulf partnership will connect new fields and increase pipeline capacity to 400,000 barrels daily by the second half of 1975 (cost: $15 to $20 million). For 1972, the realized price of Ecuadorian oil has been calculated at an average of $2.38 per barrel. In terms of similar crudes, the market price as a netback to Esmeraldas would result in a minimum of $2.25 per barrel and a maximum of $2.50. The f.o.b. realized price, however, is expected to increase, at least until 1975. It is assumed that the tax reference prices will increase and that the added costs in the form of taxes will be reflected in a 6 U.S. cents per barrel per year increase in the f.o.b. price of Ecuadorian crude 26/ Implicit in the pricing assumptions are judgments as to the distri- bution of petroleum exports. In view of import demand, market structure and the integrated nature of the industry, shipments from Ecuador will tend to move eastwards to the U.S. East Coast via the Caribbean refinery market. It is estimated that initially about 60 percent of Ecuadorian exports will go to these markets. With the higher volumes of production envisaged for 1973-74 and thereafter, the proportion could increase to around 65 or 70 percent. The effect of petroleum trade and capital movements on Ecuador's balance of payments is shown in Table 19. The net foreign exchange contribu- tion of the sector will be on the order of $290 million in 1977, as against $72 million in 1972. 26/ The assumption is in line with the price and tax increases included in the Teheran agreement. The agreement states that prices will be increased by 2.5 percent per year plus 5 U.S. cents per barrel in January each year until 1975. In practice, however, price increases could be higher as a result of fast growing demand in major consuming countries and a decline in the purchasing power of the U.S. dollar. - 95 - Table 19: EFFECT OF PETROLEUM SECTOR OPERATIONS ON BALANCE OF PAYMENTS, 1972-77 (US$ million) 1972 1973 1975 1977 Exports 53 192 240 322 Imports 76 34 36 90 Trade Balance -23 158 204 232 Investment Income 13 45 53 71 Current Account -36 113 151 161 Direct Investment 108 48 52 129 Net Effect 72 161 203 290 Source: IBRD staff projections. The structure and growth rates of exports resulting from the assessment of export possibilities are summarized in Table 20. Traditional exports will grow at around 4 percent per year in the period 1971-77, compared with approximately 19 percent for total exports, and their share will drop from four-fifths to about one-third of merchandise exports. By 1977 petroleum exports will account for almost 50 percent of commodity exports. Table 20: STRUCTURE OF MERCHANDISE EXPORTS, 1971-77 (Percent) Growth Rates /a 1971 1972 1973 1977 1971-77 Bananas 48.3 35.5 24.8 19.3 2.5 Coffee 15.7 16.5 11.5 10.0 8.5 Cocoa 10.9 7.7 5.2 4.4 2.8 Sugar 5.8 6.3 3.7 2.9 3.2 buDcocai 80.8 66.0 45.2 36.6 4.0 Other (nontraditional) 19.2 16.2 12.4 13.9 12.6 Total Nonpetroleum 100.0 82.2 57.6 50.5 5.9 Petroleum - 17.8 42.4 49.5 - Total 100.0 100.0 100.0 100.0 18.6 /a Based on trend values. Source: Statistical Appendix Table 3.10. I P6 - The expansion of nontraditional exports (other than petroleum) will depend upon appropriate exchange rates, incentives and export promotion policies and, to some extent, the result of subregional and regional integration efforts. While the export potential of petroleum could generate enough foreign exchange to maintain high levels of economic growth during the 1970s, failure to implement a strong export diversification program would result in the reappear- ance of the balance-of-payments constraint once petroleum exports level off, and would be reflected in a sharp reduction of overall growth, or in increased external borrowing, higher debt service burden and a faster depletion of foreign exchange reserves. Import Requirements Relatively high levels of imports will be required to sustain the rates of growth of the economy envisaged for the present decade. Consumer goods imports are expected to grow through the mid-1970s at a somewhat faster rate than in the past, partly as a result of higher government consumption and more socially oriented investment expenditures, and partly because of increased overall levels of economic activity. Consumer goods imports are therefore expected to increase from an average of 3.5 percent of total con- sumption in the period 1965-71 to almost 4 percent in the period 1972-77. While initially the manufacturing sector will not be able to meet the sharp increases in demand--leading to a high initial growth of consumer imports-- it is expected that a gradual process of import substitution will take place, encouraged by sound industrial policies and a reasonable degree of control of imports of nonessential consumer goods. The projected high growth of nonpetroleum intermediate and capital goods imports (13 and 12 percent per annum, respectively) reflects the expected stepped up levels of economic activity in general and of manufacturing and construction in particular, as well as the import requirements emerging from the increased public investment program. Total nonpetroleum merchandise imports are expected therefore to increase from a level equivalent to 15 to 16 percent of nonpetroleum GDP in 1965-71, to almost 17 percent in 1972-77 (Table 3.16, Statistical Appendix). Direct investments by foreign petroleum companies in exploration, drilling and pipeline construction-with an import component estimated at about 70 percent--are expected to continue, peaking in 1976 and declining thereafter. Changes in the overall merchandise import coefficient will be heavily influenced by the fluctuations of petroleum investment. - 97 - Table 21: IMPORT REQUIREMENTS, 1971-77 (US$ million) Growth Rates /b 1971 1972 1975 1977 1971-77 Consumer Goods 53 57 72 85 8.2 Intermediate Goods 92 110 159 196 13.0 Capital Goods 105 115 159 207 12.1 Subtotal 271-- 282 390 488 10.7 Petroleum Sector 77 76 36 90 3.1 Total 348 358 426 578 9.3 /a Including fuel imports. /b Based on trend values. Source: Mission projections The nonpetroleum merchandise imports elasticity with respect to nonpetroleum GDP implied in our projections is 1.3 for the period 1972-77, which compares with an elasticity of 1.2 in the 1965-71 period. The elasticity of total imports to total GDP comes to 0.9, as a result of a decline in petroleum sector imports after the investment peak is reached in 1976. Failure of the authorities to implement a program for development of an endogenous manufacturing capacity relying increasingly on domestic inputs, and for curtailing unnecessary consumer goods imports, would lead to balance-of-payments problems earlier than anticipated in this report. The levels of external borrowing requirements and the resulting debt service ratios are quite sensitive to unrestrained consumer goods imports. External Capital and External Debt Given the current account projections discussed above, balance- of-payments equilibrium would require gross capital inflows totaling some $911 million in the period 1973-77. This compares with a total of $675 million in the five-year period 1967-71. The expected sources and uses of this gross capital inflow are summarized on Table 22. The negative balance of goods and NFS which in the past has been a major claimant of external capital would now become considerably smaller in the period 1973-77, mainly as the result of increases in net petroleum exports, which more than offset the increased imports associated with petroleum development and with the carrying out of a much larger public investment effort. Table 22: EXTERNAL CAPITAL REQUIREMENTS, 1971-77 (US$ million) Actuals Preliminary Projected ' Total Average 1971 1972 1973 .1974 1975 1976 1977 ' 1973-77 Required Gross Inflow 251 221 131 180 170 187 243 911 182 USES I Deficit on Current Account -227 -185 -83 -130 -117 -147 -201 -678 -136 Goods and NFS bala.4ce -2 --5O -7 -7-1 -771 - 92 -2V -7 Factor payments -31 - h1 -90 - 93 -105 -126 -129 -543 -109 Interest payments (-7) ( 13) (-21) (- 22) ( 24) (- 25) (- 28) (-120) (- 24) Investment income (-24) (- 28) (-69) (- 71) (- 81) (-101) (-101) (-423) (. 85) Transfers 13 15 17 18 19 20 20 94 19 Amortization of Debt -24 - 36 -48 - 50 - 53 - h0 - 42 -233 - 46 SOURCES Direct Investment 157 138 78 100 86 1l 141 2. iiZ (of which Petroleum) (127) (18) T47) (68) (52) (129) (129) , (426) Gross Public Capital 46 108 9 95 88 93 98 4 667 93 Existing loans 47 79 1F. 27 -7 2 2 T o New Loans 1/ - 29 42 68 82 91 96 75 (Supplier ,credits) (19) (70) (30) (28) (21) (21) (21) (H)(2) Other Inflows- 18 47 - - - - - - - Reserve Changes (- increase) 30 -7__ -0 -T1 -7 --71 - 2 -11 -30 Reserve Level 26 98 138 152 156 227 249 Net Public Capital Inflow 22 72 45 45 35 53 56 ' 234 47 iesource Balance/GDP ($) -12.7 -8.6 -0.4 -2.2 -1.0 -1.2 -2.7 Debt Service Ratio 12.0 15.0 14.2 14.6 13.8 9.7 10.2 1/ Includes private financial institutions. T/ Includes SDR allocations, short term capital and errors and omissions. - Source: IBRD staff projections. - 99 - Direct foreign investment is expected to be the main source of external capital and is estimated at US$595 million. Most of these foreign investments (US$426 million) would be destined to the petroleum sector. Gross public capital inflows are estimated to provide US$467 million, or an average of around US$93 million annually. The level of public borrowing in 1973-74 emerging from the mission's analysis of public investment possibilities can be considered a reasonable target according to the present state of prepara- tion of known projects and the negotiations carried out with major interna- tional lenders. However, the project content of the public investment pro- gram for the latter years is still rudimentary, and the achievement of the projected levels of public investment will depend on the government's ability to step up considerably the identification, preparation, evaluation and execu- tion of investment projects. Present capacity in this area is relatively limited, and it could benefit greatly from the accumulated expertise of inter- national lending institutions. These new loans will help meet the resource gap and also enable the exchange reserves to recover to th( equivalent of somewhat less than four months import requirements by 1977. The new loans will help in meeting technical assistance requirements, investment planning and institution building, and will facilitate a continued relationship with international lending agencies once petroleum earnings start to level off. The financing assumes disbursements on supplier's credits (excluding private financial institutions) of the order of $24 million per year, slightly higher than the levels disbursed in the past several years ($16 million per annum in 1967-71). This pattern of financing would lead to an improvement in the structure of the public external debt. The average terms of gross public capital inflow are assumed at 22 years maturity, 5.5 percent rate of interest and 3.5 years grace, better than in the past; these averages result from the expected terms of different sources of external finance which may be available. With these terms and on the basis of the foreseen large expansion in exports, the debt service ratio is expected to fall from 15 percent of exports of goods and services in 1972 to a little over 10 percent in 1977. At the same time, the capacity to import will be expanding at a high rate. The alternative to pursuing the foregoing pattern of external borrowing is much less attractive. If the project preparation process does not proceed at the expected pace or does not meet the standards of evaluation of the international agencies, or if consumption expenditures get out of con- trol, an increased level of supplier's credits would have to be included in the public capital mix and lending by international agencies would be propor- tionally reduced. This would lead to a deterioration of the structure of ex- ternal public debt, larger debt service payments, and possibly less efficient investments (higher Incremental Capital Output Ratio), than projected in Table 22. The situation described in the previous paragraphs, i.e., a de- clining resource gap and a sustained accumulation of foreign exchange reserves, can be expected to persist through the mid-seventies. Barring petroleum discoveries above those assumed in our projections, these trends would reverse themselves in the early eighties. A sharp drop in direct investment - 100 - in the petroleum sector and the expansion of the resource gap as a result of stagnating petroleum exports and continued increases in public expenditures will call for a rapid increase in net public capital inflows and a drawdown of reserves. If a growing part of these inflows would have to be obtained from supplier's credits on relatively more unfavorable terms, the debt service ratio would mount from its low of less than 10 percent in the mid-1970s to over 15 percent in the 1980s. This underscores the urgent need to utilize the resources available in the next several years to implement the previously indicated structural changes so that self sustained growth is not undermined. The key assumption of the analysis in this report is that petroleum production will increase in successive steps to 400,000 barrels per day by 1975 and 600,000 barrels per day by 1980 (Statistical Appendix Table 8.27) and remain at that level thereafter. This assumption necessarily has a relatively high element of uncertainty. 27/ Should a different pattern of development of petroleum resources take place, its effects would, however, have a bearing mainly in the late 1970s, postponing or advancing the time when, in the face of growing domestic demand, petroleum export earnings start declining and thus exerting pressure on the balance of payments and on public finances. If additional reserves are not found, or if the present producing wells decline in yields very rapidly (as happened in neighboring Colombian fields), our estimate of output, while conservative in regard to expectations, could turn out to be optimistic compared with actual results. Also, if the petroleum companies and the government do not reach long-lasting agreements that, while protecting the interests of the country, provide adequate incentives for further development of the resource, exploration might be slowed down even if the prospects of success are good, again rendering our estimate optimistic. On the other hand, if exploration activities proceed normally and there are no unexpected declines in yields of productive wells, production possibilities could be larger and extend over a longer period than we have assumed. In spite of petroleum prospects, Ecuador will continue being for some time a less developed country in Latin America. Although the government has decided to tackle some of the problems and obstacles that have traditionally inhibited the development of the country, such as the low saving capacity of the public sector and its limited power to orient economic activity, the sluggish growth of the agricultural sector, and the insufficient development of nontraditional exports, to overcome these problems will require significant changes in the economic and administrative structure of the country which can only be bought about gradually. During this transition period, and given the uncertainties regarding the extent to which the development of the petroleum sector would permit counteracting the stagnation or slow growth of its tradi- tional exports, Ecuador should continue receiving a part of its external financing in concessionary terms. With respect to the longer run, the terms of borrowing should depend on the prospects for further development of the petroleum sector, on the changes that take place in the productive structure, and on the degree of success achieved by the five-year development plan recently approved by the government. 27/ This uncertainty stems partly from the fact that there is still no official overall evaluation of proven and probable petroleum reserves. The govern- ment has engaged a consulting firm to provide such evaluation by mid-1973, and intends to use the results of this evaluation as an important ingre- dient in formulating its future petroleum policies. In the meantime the government is operating with a petroleum production perspective similar to the one assumed in this report. IBRD - 296IR 긔  [ （乙【Ot a건9-  VOLUME II - STATISTICAL APPENDIX LIST OF TABLES I. POPULATION AND EMPLOYMENT 1.1 End of Year, Census Data, and Mid-Year Population Projections, by Major Regions, 1950-76. 1.2 Population Growth by Region, 1950-76. 1.3 Composition of Population by Region, 1950-76. 1.4 Urban and Rural Population by Major Regions, 1960-75. 1.5 Population Projections by Age and Sex, 1960-80. 1.6 Population Growth by Age and Sex. 1.7 Male and Female Population by Age, 1960-80. 1.8 Labor Force by Major Economic Sectors, 1950-85. 1.9 Estimate of Income Distribution of Active Population, 1970. 1.10 Average Product of Labor by Sector, 1960, 1970, 1972. II. NATIONAL ACCOUNTS 2.1 Expenditure of GDP at Current Market Prices, 1950-71. 2.2 Expenditure of GDP at Constant 1971 Market Prices, 1950-71. 2.3 Industrial Origin of GDP at Current Factor Cost, 1950-71. 2.4 Industrial Origin of GDP at Constant 1971 Factor Cost, 1950-71. 2.5 Saving and Investment at Current Market Prices, 1950-71. 2.6 Saving and Investment at Constant 1971 Market Prices, 1950-71. 2.7 Growth of Saving and Investment: Trends, Sources and Financing, 1950-71. 2.8 Area, Population, GNP Per Capita, and Average Annual Growth Rates, Major South American Countries Ranked by Size of Population, 1970 and 1961-70 Period. 2.9 National Accounts Projections, 1972-77. - 1i - III. BALANCE OF PAYMENTS 3.1 Balance of Payments, 1965-71. 3.2 Balance of Payments, 1965-71. 3.3 Merchandise Exports, 1965-71. 3.4 Merchandise Imports (f.o.b.), 1965-71. 3.5 Index - Major Commodity Exports, 1965-71. 3.6 Exports (f.o.b.) to Andean Countries, 1965-70. 3.7 Imports (c.i.f.) from the Andean Countries, 1965-70. 3.8 Imports by Country/Region, 1965-70. 3.9 Gains from Trade, 1965-71. 3.10 Export Price Index, 1960-70. 3.11 Import Price Index, 1960-70. 3.12 Merchandise Exports, 1972-77. 3.13 Merchandise Imports, 1971-77. 3.14 Effect of Petroleum Sector Operations on Balance of Payments, 1972-77. 3.15 Balance of Payments, 1971-77. 3.16 Merchandise Imports in Relation to Consumption, Investment and Product, 1965-77. IV. EXTERNAL DEBT 4.1 External Public Debt Outstanding as of December 31, 1971. Debt Repayable in Foreign Currency. 4.2 Past and Projected Transactions, 1967-86, on External Public Debt as of December 31, 1971. Debt Repayable in Foreign Currency. 4.3 External Public Debt Outstanding as of December 31, 1971. Debt Repayable in Local Currency. 4.4 Past and Projected Transactions, 1967-86, on External Public Debt as of December 31, 1971. Debt Repayable in Local Currency. - iii - V. FISCAL STATISTICS 5.1 Fixed Public Investment by Sectors, 1966-77. 5.2 Fixed Investment by Public Sector, 1972-74. 5.3 Public Investment Program, 1972-74. Agriculture (Ebccluding Irrigation). 5.4 Public Investment Program, 1972-74, Irrigation. 5.5 Public Investment Program, 1972-74, Transport: Highways. 5.6 Public Investment Program, 1972-74, Transport: Ports. 5.7 Public Investment Program, 1972-74, Transport: Air. 5.8 Public Investment Program, 1972-74, Telecommunications. 5.9 Public Investment Program, 1972-74, Electric Power. 5.iO Public Investment Program, 1972-74, Water and Sewerage. 5.11 Public Investment Program, 1972-74, Education. 5.12 Public Investment Program, 1972-74, Public Health. 5.13 External Financing of Public Sector Credit Lines, 1972-76. 5.14 Cash Operations of the Central Government, 1967-71. 5.15 Functional Classification of Central Government Expenditure, 1965-72. 5.16 Central Government Operations, 1965-71. 5.17 Operation of State Enterprises, 1965-71. 5.18 Operations of Local Governments, 1965-71. 5.19 Operation of Autonomous Institutions, 1965-71. 5.20 Consolidated Operations of the Public Sector, 1965-71. 5.21 Central Government Current Revenues, 1965-71. 5.22 Rest of Public Sector Current Revenues, 1965-71. 5.23 Total Public Revenue and Central Government Share, 1965-71. - iv - VI. MONETARY STATISTICS 6.1 Summary Accounts of the Central Bank, Commercial Banks and the National Development Bank, 1965-71. 6.2 Summary Accounts of the Banking System, 1965-71. 6.3 International Reserves of the Banking System, 1965-71. VII. AGRICULTURAL STATISTICS 7.1 Area Under Main Agricultural Crops, 1962-70. 7.2 Production of Main Agricultural Crops, 1962-70. 7.3 Number of Farms and Area, by Size and Form of Tenure, 1968. 7.4 Agricultural Income Distribution, 1965. 7.5 Percent Distribution of Agricultural Production by Size of Farm and Regions, 1954. 7.6 Value of Production per Person by Size of Farm, 1968. 7.7 Families Settled by the Agrarian Reform and Colonization Program, September 1, 1964 through June 30, 1970. 7.8 Area Settled by the Agrarian Reform Program, September 1, 1964 through June 30, 1970. 7.9 Changes in Size Distribution of Farms from 1954 to 1968. 7.10 Distribution of Production of Selected Crops Production by Size of Farm, 1968. 7.11 Distribution of Total Value of Crop Production and Area in Crops by Size of Farm, 1968. 7.12 Value of Production per Worker and Average Farm Size, by Regions and Provinces, 1968. 7.13 Regional Distribution of Agricultural Production by Crops, 1968. 7.14 Changes in Land Use, 1954-68. 7.15 Bank Credit to the Agricultural Sector, 1950-71. - v - VIII. MANUFACTURING AND PETROLEUM 8.1 Industrial Power Sales by Four Major Utility Self Generators of Power, 1968-71. 8.2 Industrial Purchasers of Electric Power, Number and Yearly Percent Change, 1967-71. 8.3 Imports for Industrial Use by Type, 1965 and 1970. 8.4 New Fixed Investments in Factory Manufacturing, 1964-69. 8.5 Total New Investment Registered Under Industrial Promotion Law, National and Foreign, 1957-70. 8.6 Firms Registered Under the Industrial Development Law (Ley de Fomento), Number, Employment, Investment, Production, Value Added, Materials Used and Origin - New and Existing, 1957-71. 8.7 Industries Classified Under the Industrial Development Law, 1951-71. 8.8 Industries Classified Under the Industrial Development Law Between 1957 and 1969, Number of New Firms, Amount of Investment, By Classification, Category and Subindustry. 8.9 Total Industry Credits Through Ecuadorian Financial Institutions, 1965-71. 8.10 Total Internal Financial Institution and Foreign Suppliers' Credits (Private) to Industry, 1965-71. 8.11 CFN Loan Approvals and Project Costs, 1963-71. 8.12 CFN Loan Disbursements by Sector, 1963. 8.13 Economic Impact of CFN Loans: Investment, Employment, Salaries and Balance of Payments, 1963-71. 8.14 COFIEC Manufacturing Loan Disbursements, 1966-71. 8.15 Number and Value of Loans Granted and Renewed to Small Industry and Commerce During 1964-70. 8.16 Foreign Private Supplier Credit For List 1 Items, 1969, By Term. - vi - 8.17 Official Exports By Category and Principal Products, 1960-71. 8.18 Exports of Ecuador to Andean Subregion, 1970 and 1971. 8.19 Estimates of Possible Exports of 25 Products to Andean Subregion (Products Free of Duty, January 1, 1971). 8.20 First Tranche from the Common List of L.A.F.,T.A. 8.21 Products Not Produced in the Subregion and Not Reserved for Sectoral Industrial Development Programs to be Maufactured by Ecuador. 8.22 Oil Concessions in Eastern Ecuador. 8.23 Geographical and Geophysical Activities, 1966-70. 8.24 Wells Completion in Ecuador, 1966-70. 8.25 Wells Completed in Eastern Ecuador, 1967-72. 8.26 Crude Petroleum Production, 1951, 1961, 1966-71. 8.27 Petroleum Production and Investment, 1972-80. 8.28 Petroleum Investment, 1964-71. 8.29 Domestic Consumption of Refined Products, 1961, 1966-71. 8.30 Net Imports of Petroleum, 1961, 1966-71. 8.31 US Demand and Supply of Petroleum, 1970-85. 8.32 Supply and Demand of Crude Petroleum and Refined Products in Chile and Peru, 1970. 8.33 Caribbean Refineries Owned by Potential Producers in Ecuador, 1962. 8.34 Distances and Duration of Voyages between Esmeraldas and Some Principal Ports. 8.35 Comparative Tax Paid Costs of Some Representative Crudes, January - March, 1972. 8.36 Tax Paid Costs of Some Representative Crudes, January - March, 1972. - vii - 8.37 Price and Tax Paid Cost Comparisons, F.O.B. Esmeraldas, 1972. 8.38 Worldscale Freight Rates. 8.39 Freight Differentials to Esmeraldas. 8.40 Estimated Government Unit Petroleum Revenue, 1972-77. 8.41 Summary and Comparison of Some Clauses of the Hydrocarbons Laws, Concessions and Contracts in Force in Ecuador. IX. PRICES AND WAGES 9.1 GDP Deflator, Wholesale Price Index, Major Consumer Price Indexes, and Weighted Average Annual Echange Rates, 1950-71.  I. POPULATION AND EMPLOYMENT Table No. 1.1 End of Year, Census Data, and Mid-Year Population Projections, by Major Regions, 1950-76. 1.2 Population Growth by Region, 1950-76. 1.3 Composition of Population by Region, 1950-76. 1.4 Urban and Rural Population by Major Regions, 1960-75. 1.5 Population Projections by Age and Sex, 1960-80. 1.6 Population Growth by Age and Sex. 1.7 Male and Female Population by Age, 1960-80. 1.8 Labor Force by Major Economic Sectors, 1950-85. 1.9 Estimate of Income Distribution of Active Population, 1970. 1.10 Average Product of Labor by Sector, 1960, 1970, 1972.  rable 1.1: END OF YEAR, CENSUS DATA, AND MID-YEAR POPULATION PROJECTIONS BY MAJOR REMIONS, 1950-76 (Thousands of persons) End of Census Mid-Year Year Date a Mountains Coast Orient Galapagos Year Total Total Total (10 Provinces) (5 Provinces) (4 Provinces) Islands Thousands of Persons 1950 .. .. 3,231 1,872 1,310 46.9 1.4 1951 .. .. 3,318 1,904 1,364 48.4 1.5 1952 .. .. 3,409 1,938 1,420 50.0 1.5 1953 .. .. 3,506 1,975 1,478 51.8 1.6 1954 .. .. 3,608 2,014 1,539 53.8 1.7 1955 .. .. 3,717 2,057 1,602 56.0 1.7 1956 ** ** 3,831 2,103 1,668 58.3 1.8 1957 .. .. 3,952 2,150 1,739 60.9 1.9 1958 .. .. 4,080 2,202 1,812 63.7 2.0 1959 .4 .. 4,214 2,258 1,887 66.7 2.1 1960 4,428 4,414 4,356 2,316 1,967 70.2 2.2 1961 4,579 4,565 4,506 2,375 2,055 73.7 2.3 1962 4,734 4,721 4,659 2,435 2,144 77.h 2.4 1963 4,896 4,883 4,818 2,502 2,232 81.5 2.5 1964 5,064 5,050 4,981 2,570 2,323 85.8 2.6 1965 5,237 5,223 5,150 2,640 2,418 90.2 2.8 1966 5,416 5,401 5,326 2,712 2,517 95.0 2.9 1967 5,601 5,585 5,508 2,786 2,619 99.9 3.1 1968 5,792 5,776 5,697 2,862 2,726 105.2 3.3 1969 5,990 5,973 5,892 2,941 2,837 110.6 3.4 1970 6,194 6,177 6,093 3,021 2,952 116.4 3.6 1971 6,402 6,384 6,297 3,102 3,070 122.2 3.7 1972 6,617 6,598 6,508 3,184 3,192 128.3 3.9 1973 6,838 6,819 6,727 3,270 3,318 134.6 4.1 1974 7,068 7,048 6,952 3,357 3,450 141.3 4.3 1975 7,305 7,284 7,185 3,446 3,586 148.3 4.5 1976 7,549 7,532 7,426 3,538 3,728 155.6 4.8 a Ceusus date refers to November 25th. Sourcest Ministry of Economy, First Population Census of Ecuador, 1950, (Quito: General Bureau of Statistics and Censuses, June 1954), Vol. I, p. 7. NEPCB, Population Projections of Ecuador, 1960-1980, (NEPCB, Technical Department, Division of Statistics and Censuses, no date), Table 6, pp. 19-20. NEPCB (unpublished estimates prepared by the Section of Human Resources Programming, no date). Mission estimates (for 1950-61). Table 1.2: POPULATION GROWTH BY REGION, 1950-76 (Percentage) End of Census Mid-Year Year Date la Mountains Coast Orient Galapagos Year Total Total Total (10 Provinces) (5 Provinces) (4 Provinces) Islands Annual Growth Rates /b 1950 . .. .. .* 1951 .. .. 2.7 1.7 1.1 3.2 1.1 1952 .. .. 2.8 1.8 4.1 3.4 4.2 1953 .. .. 2.8 1.9 4.1 3.6 4.3 1954 .. .. 2.9 2.0 4.1 3.8 4.4 1955 .. .. 3.0 2.1 4.1 4.0 4.5 1956 .. .. 3.1 2.2 4.1 4.2 4.6 1957 .. .. 3.1 2.3 4.1 4.4 4.7 1958 .. .. 3.2 2.14 .1 4.6 4.8 1959 .. .. 3.3 2.5 4.1 4.8 4.9 1960 .. .. 3.4 2.6 4.2 5.0 5.0 1961 3.4 3.4 3.4 2.6 4.2 5.0 5.0 1962 3.4 3.4 3.4 2.6 4.2 5.0 5.0 1963 3.4 3.4 3.4 2.7 4.1 5.0 5.0 1964 3.4 3.4 3.4 2.7 4.1 5.0 5.0 1965 3.4 3.4 3.4 2.7 4.1 5.0 5.0 1966 3.4 3.4 3.4 2.7 4.1 5.0 5.0 1967 3.4 3.4 3.4 2.7 4.1 5.0 5.9 1968 3.4 3.4 3.4 2.7 4.1 5.0 5.0 1969 3.4 3.4 3.4 2.7 4.1 5.0 5.0 1970 3.4 3.4 3.4 2.7 4.0 5.0 5.0 1971 3.4 3.4 3.4 2.7 4.0 5.0 5.0 1972 3.4 3.4 3.4 2.7 4.0 5.0 5.0 1973 3.4 3.4 3.4 2.7 4.0 5.0 5.0 1974 3.4 3.4 3.4 2.7 4.0 5.0 5.0 1975 3.4 3.4 3.4 2.7 4.0 5.0 5.0 1976 3.4 3.4 3.4 2.7 4.0 5.0 5.0 a Census date refers to November 25th. b Annual growth rates were computed from unrounded estimates using compound table. Before 1962 growth rates were smoothed to show trends. Source: See Table 1.1 Table 1.3: COMPOSITION OF POPULATION BY RMION, 1950-76 (Percentage) End of Census Mid-Year Year Date Mountains Coast Orient Galapagos Year Total Total Total (10 Provinces) (5 Provinces) (4 Provinces) Islands Percent of Total 1950 .. .. 100.0 57.9 40.6 1.5 0.0 1951 .. .. 100.0 57.4 41.1 1.5 0.0 1952 .. .. 100.0 56.8 41.7 1.5 0.0 1953 .. .. 100.0 56.3 43.2 1.5 0.0 1954 .. .. 100.0 55.8 42.7 1.5 0.0 1955 .. .. 100.0 55.3 43.1 1.5 0.1 1956 .. .. 100.0 54.9 43.5 1.5 0.1 1957 .. .. 100.0 Sh.h 44.0 1.5 0.1 1958 .. .. 100.0 53.9 44.4 1.6 0.1 1959 .. .. 100.0 53.5 44.8 1.6 0.1 1960 101.6 101.3 100.0 53.2 45.1 1.6 0.1 1961 101.6 101.3 100.0 52.7 45.6 1.6 0.1 1962 101.6 101.3 100.0 52.3 46.0 1.6 0.1 1963 101.6 101.3 100.0 51.9 46.3 1.7 0.1 1964 101.6 101.4 100.0 51.6 46.6 1.7 0.1 1965 101.7 101.4 100.0 51.2 46.9 1.8 0.1 1966 101.7 101.4 100.0 50.9 47.2 1.8 0.1 1967 101.7 10l.4 100.0 50.6 47.5 1.8 0.1 1968 101.7 101.4 100.0 50.2 47.8 1.9 0.1 1969 101.7 101.4 100.0 49.9 48.1 1.9 0.1 1970 101.7 101.4 100.0 49.6 48.4 1.9 0.1 1971 101.7 101.4 100.0 49.3 48.7 1.9 0.1 1972 101.7 101.4 100.0 48.9 49.0 2.0 0.1 1973 101.6 101.3 100.0 48.6 49.3 2.0 0.1 1974 101.6 101.3 100.0 48.3 49.6 2.0 0.1 1975 101.6 101.3 100.0 47.9 49.9 2.1 0.1 1976 101.6 101.3 100.0 47.6 50.2 2.1 0.1 Source: See Table 1.1 Table 1.4: URBAN AND RURAL POPULATION BY MAJOR RIDIONS, 1960-75 (Thousands of Persons on November 25 of Each Year) Mountains Coast Orient Galapagos Grand Total (10 Provinces) (5 Provinces) (4 Provinces) Islands Year Total Urban Rural Urban Rural Urban Rural Urban Rural RUra 1960 4,414 1,506 2,908 712 1,618 784 1,226 9.6 61.7 2.2 1961 4,565 1,592 2,973 746 1,649 835 1,257 10.2 6h.9 2.3 1962 4,721 1,683 3,038 782 1,679 890 1,288 10.9 68.1 2.5 1963 4,883 1,779 3,104 819 1,709 948 1,320 11.6 71.6 2.6 1964 5,050 1,881 3,169 859 1,740 1,009 1,351 12.3 75.2 2.8 1965 5,223 1,968 3,235 900 1,770 1,075 1,383 13.1 79.0 2.9 1966 5,401 2,094 3,307 940 1,803 1,140 1,417 13.8 83.1 3.0 1967 5,585 2,206 3,379 961 1,836 1,210 1,452 14.6 87.4 3.2 1968 5,776 2,324 3,452 1,025 1,870 1,284 1,486 15.5 91.8 3.3 1969 5,973 2,448 3,525 1,070 1,904 1,362 1,521 16.4 96.5 3.4 1970 6,177 2,579 3,598 1,117 1,937 1,445 1,555 17.3 101.5 3.6 1971 6,384 2,707 3,677 1,162 1,974 1,526 1,592 18.2 106.5 3.8 1972 6,598 2,841 3,757 1,209 2,012 1,613 1,629 19.0 111.9 4.0 1973 6,819 2,981 3,838 1,257 2,049 1,704 1,667 20.0 117.4 4.2 1974 7,048 3,129 3,919 1,308 2,067 1,800 1,705 21.0 123.2 4.4 1975 7,284 3,283 4,001 1,360 2,124 1,901 1,743 22.0 129.4 4.6 Source: NEPCB (unpublished estimates prepared by the Section of Human Resources Programming, no date), and mission estimates. Table 1.5: POPULATION PROJECTIONS BY AGE AND SEK, 1960-80 (Thousands of Persons on November 25 of Each Year) Age and Sex 1960 1965 1970 1975 1980 Groups Total 4,413.7 5,222.8 6,177.1 7,284.5 8,590.1 0-9 1,530.1 1,830.7 2,125.3 2,440.2 2,824.1 10-11 225.1 282.7 344.9 401 .9 462.2 12 and over 2,658.5 3,109.4 3,706.9 4,442.4 5,303.8 12-14 300.6 377.6 468.7 557.4 645.3 15-19 424.0 518.1 651.9 804.4 949.7 20-44 1,339.7 1,537.3 1,797.3 2,156.1 2,626.9 45-64 452.0 523.5 613.6 718.0 836.0 65 and over 142.7 152.9 175.4 206.5 245.9 Male Total 2226.i 2,611 .7 3,088.0 3,641 .4 4,295.2 0-9 775.2 922.6 1,068.2 1,227.0 1,421.8 10-11 114.9 143.5 174.2 201.7 232.2 12 and over 1,316.0 1,545.6 1,845.6 2,212.7 2,641.2 12-14 152.9 192.2 236.8 260.8 324.0 15-19 210.9 264.0 331.4 406.3 477.0 20-44 657.7 755.4 890.6 1,076.3 1,319.0 45-64 227.0 260.8 303.0 351 .4 405.7 65 and over 67.5 73.2 83.8 97.9 115.5 Female Total 2,207.6 2,611.1 3,089.1 3,643.1 4,294.9 0-9 754.9 908.1 1,057.1 1,213.2 1,402.3 10-11 110.2 139.2 170.7 200.2 230.0 12 and over 1,342.5 1,563.8 1,861 .3 2,229.7 2,662.6 12-14 147.7 185.4 231.9 273.2 321.3 15-19 213.1 254.1 320.5 398.1 472.7 20-44 682.0 781.9 906.7 1,083.8 1,307.9 45-64 225.0 262.-7 310.6 366.0 430.3 65 and over 74.7 79.7 91 .6 108.6 130.4 Source: NEPCB, The Population of Ecuador, Its Main Characteristics (Document No. 03-02, reprinted January 19, 1972, prepared for the XIIIth Pan- American Congress on Childhood), and mission estimates. Table 1.6: POPULATION GRDWTH BY AGE AND SEX (Percentage) Age and Sex 1960-65 1965-70 1970-75 1975-80 Groups Average Annual G'rowth Ratea Tootal 3.7 3.7 3.6 3.6 0-9 3.9 3.2 3.0 3.1 10-11 5.1 4.4 4.7 3.0 12 and over 3.4 3.8 4.0 3.9 12-14 5.1 46.8 3.8 3.2 15-19 4.4 5.2 4.7 3.6 20-W 2.9 3.4 4.0 4.4 45-64 3.2 3.4 3.4 3.3 65 and over 1 .4 2.9 3.5 3.8 Average Annual Growth gate Male Total 3.7 3.6 3.6 3.6 0-9 3.8 3.2 3.0 3.2 10-11 5.0 4.3 3.2 3.0 12 and over 3.5 3.9 4.0 3.9 12-14 5.1 4.7 3.7 3.1 15-19 5.0 5.1 4.5 3.5 20-44 3.0 3.6 4.2 4.5 45-64 3.0 3.2 3.2 3.1 65 and over 1 .7 2.9 3.4 3.6 Averge Annual Growth RAtgs Female Total 3.7 3.6 3.6 3.6 0-9 4.1 3.3 3.0 3.1 10-11 5.3 4.5 3.5 3.0 12 and over 3.3 3.$ 4.0 3.9 12-14 5.0 5.0 3.5 3.5 15-19 3.8 5.2 4.8 3.7 20-44 2.9 ).1 4.0 4.1 45-64 3.4 3.6 3.6 3.5 65 and over 1 .3 3.0 3.7 4.0 Source: See Table 1.5 Table 1.7: MALE AND FEMALE POPULATION BY AGE, 1960-80 (Percentage) Age-and Sex 1960 1965 1970 1975 190 Groups Male Total 100.0 100.0 100.0 100.0 100.0 0-9 35.1 35.3 34.6 33.7 33.1 10-11 5.2 5.5 5.6 5.5 5.4 12 and over 59.7 59.2 59.8 60.8 61.5 12-14 (6.9) (7.4) (7.7) (7.7) (7.5) 15-19 (9.6) (10.1) (10.7) (11 .2) (1 .1) 20-44 (29.8) (28.9) (28.9) (29.6) (30.7) 45-64 (10.3) (10.0) (9.8) (9.6) (9.5) 65 and over (3.1) (2.8) (2.7) (2.7) (2.7) Female Total 100.0 100.0 100.0 100.0 100.0 0-9 34.2 34.8 34.2 33.3 32.6 10-11 5.0 5.3 5.5 5.5 5.4 12 and over 60.8 59.9 60.3 61 .2 62.0 12-14 (6.7) (7.1) (7.5) (7.5) (7.5) 15-19 (9.6) (9.7) (10.4) (10.9) (11 .0) 20-44 (30.9) (29.9) (29.3) (29.7) (30.5) 45-64 (10.2) (10.1) (10.1) (10.1) (10.0) 65 and over (3.4) (3.1) (3.0) (3.0) (3.0) Source: See Table 1.5 Table 1.8: LABOR FORCE BY MAJOR ECONOMIC SECTORS, 1950-85 (page 1 of 2 pages) (thousands of persons and p+rcent) Major Economic Sectors 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 Thousands of Persons Agriculture /a 626.1 644.0 662.4 681.2 700.7 720.6 741.2 762.3 784.1 806.5 Mining 5.0 4.9 4.7 4.6 4.5 4.4 4.3 4.1 4.0 3.9 Manufacturing 152.3 156.7 161.1 165.7 170.4 175.3 180.3 185.5 190.8 196.2 Construction 26.5 27.9 29.3 30.9 32.5 34.2 36.0 37.9 39.8 41.9 Electriiy /b 1.1 1.2 1.4 1.6 1.8 2.0 2.3 2.6 2.9 3.3 Trade /C 67.9 70.1 72.3 74.5 76.9 79.3 81.8 84.4 87.1 89.8 Transportafion /d 27.4 28.5 29.6 30.8 32.0 33.3 34.6 36.0 37.4 38.9 Servic / e 110.8 116.0 121.6 127.4 133.4 139.8 146.4 153.4 160.7 168.3 Other 45.6 45.5 45.5 45.4 45.3 45.2 45.1 45.0 44.9 44.8 Total 1,062.7 1,094.8 1,127.9 1,162.1 1,197.5 1,234.1 1,272.0 1,311.2 1,351.7 1,393.6 Annual Growth Rates Agriculture /a .. 2.9 2.9 2.8 2.9 2.8 2.9 2.8 2.9 2.9 Mining .. -2.0 -4.1 -2.1 -2.2 -2.2 -2.3 -4.7 -2.4 -2.5 Manufacturing .. 2.9 2.8 2.9 2.8 2.9 2.9 2.9 2.9 2.8 Construction .. 5.3 5.0 5.5 5.2 5.2 5.3 5.3 5.0 5.3 Electricity /b 9.1 16.7 14.3 12.5 11.1 15.0 13.0 11.5 13.8 Trade f/ .. 3.2 3.1 3.0 3.2 3.1 3.2 3.2 3.2 3.1 Transportation /d 4.0 3.9 4.1 3.9 4.1 3.9 4.0 3.9 4.0 Services / . 4.7 4.8 4.8 4.7 4.8 4.7 4.8 4.8 4.7 Other /f .. -0.2 0.0 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 Total .. 3.0 3.0 3.0 3.0 3.1 3.1 3.1 3.1 3.1 Percent of Total Agriculture /a 58.9 58.8 58.7 58.6 58.5 58.4 58.3 58.1 58.0 57.8 Mining 0,5 0.5 0.4 0.4 0.4 0.3 0.3 0.3 0.3 0.3 Manufacturing 14.3 14.3 14.3 14.3 14.2 14.2 14.2 14.1 14.1 14.1 Construction 2.5 2.5 2.6 2.7 2.7 2.8 2.8 2.9 2.9 3.0 Electricity /b 0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.2 0.2 0.2 Trade /C 6.4 6.4 6.4 6.4 6.4 6.4 6.5 6.5 6.5 6.5 Transportation /d 2.6 2.6 2.6 2.6 2.7 2.7 2.7 2.8 2.8 2.8 Services /e 10.4 10.6 10.8 11.0 11.1 11.3 11.5 11.7 11.9 12.1 Other /f 4.3 4.2 4.1 3.9 3.8 3.7 3.5 3.4 3.3 3.2 Major Economic Sectors 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 Thousands of Persons Agriculture /a 829.5 853.1 877.5 896.7 916,3 936.4 964.5 993.5 1,023.3 1,053.9 Mining 3.8 3.7 3.6 3.7 3.8 3.9 4.0 4.1 4.2 4.3 Manufacturing 201.8 207.5 213.5 218.8 224.3 229.9 235.6 241.5 247.6 253.8 Construction 44.1 46.4 48.8 51.9 55,2 58.7 62.5 66.7 71.2 75.9 Electricity /b 3.7 4.2 4.7 5.0 5.3 5.6 6.0 6.4 6.9 7.4 Trade /C 92.7 95.6 98.7 102.2 105.8 109.6 114.3 119.3 124.4 129.8 Transportation /d 40.4 42.1 43.7 45.5 47.4 49.4 51.9 54.4 37.1 59.9 Services / 176.4 184.8 193.5 199.9 206.4 213.1 221.8 230.9 240.3 230.2 Other f 44.7 44.6 44.5 44.3 44.2 44.0 43.9 43.8 43.7 43.6 Total 1,437.1 1,482.0 1,528.5 1,568.0 1,608.7 1,650.6 1,704.6 1,760.6 1,818.7 1,878.8 Ann,al Growth Rates Agriculture /a 2.9 2,8 2.8 2.2 2.2 2.2 3.0 3.0 3.0 3.0 Mining -2.6 -2.6 -2.7 2.8 2.7 2.6 2.6 2.5 2.4 2.4 Manufacturing 2.8 2.8 2.9 2.5 2.5 2.5 2.5 2.5 2.5 2.5 Construction 5.2 5.2 5.2 6.3 6.3 6.3 6.5 6.7 6.7 6.6 Electricity /b 12.1 13.5 1t.9 6.4 6.0 5.7 7,1 6.7 7.5 7.2 Trade /C 3.2 3.1 3.2 3.5 3.5 3.6 4.3 4.4 4.3 4.3 Transport tion /4 3.8 4.2 3.8 4.1 4.2 4.2 5.1 4.8 5.0 4.9 Servicqs / e 4.8 4.8 4.7 3.3 3.2 3.2 4.1 4.1 4.1 4.1 Otherf -0.2 -0.2 -0.2 -0.4 -0.2 -0.4 -0.2 -0.2 -0.2 -0.2 Total 3.1 3.1 3.1 2.6 2.6 2.6 3.3 3.3 3.3 3.3 Percent of Total Agriculture /a 57.7 57.6 57.4 57.2 57.0 56.7 56.6 56.4 56.3 56.1 Mining 0.3 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 Manufacturing 14.0 14.0 14.0 14.0 13.9 13.9 13.8 13.7 13.6 13.5 Construction 3.1 3.1 3.2 3.3 3.4 3.6 3.7 3.8 3.9 4.1 Electricity /b 0.2 0.3 0.3 0.3 0.3 0.4 0.4 0.4 0.4 0.4 Trade / 6.5 6.5 6.5 6.5 6.6 6.6 6.7 6.8 6.9 6.9 Transport4tion /d 2.8 2.8 2.9 2.9 3.0 3.0 3.0 3.1 3.1 3.2 Servic / e 12.3 12.5 12.6 12.8 12.8 12.9 13.0 13.1 13.2 13.3 Other/f 3.1 3.0 2.9 2.8 2.8 2.7 2.6 2.5 2.4 2.3 Table 1.8: IABOR FORCE BY MAJOR ECONOMIC SECTORS, 1950-85 (page 2 of 2 ages) (thousands of persons and percent) Major Economic Sectors 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 Thousands of Persons Agriculture /a 1,085.4 1,119.2 1,154.1 1,190.2 1,227.3 1,265.8 1,305.0 1,345.4 1,387.2 1,430.2 1,474.4 1,518.0 1,562.9 1,609.2 1,656.8 1,705.6 Mining 4.4 4.5 4.7 4.8 5.0 5.1 5.3 5.4 5.6 5.8 5.9 6.1 6.2 6.4 6.5 6.7 Manufacturing 260.1 266.6 273.3 280.1 287.1 294.3 301.7 309.2 316.9 324.8 333.3 341.3 349.9 358.6 367.6 376.7 Construction 81.0 86.3 91.8 97.7 103.9 110.5 117.2 124.4 132.0 140.0 148.5 146.9 165.9 175.4 185.4 195.9 Eet y b 7.9 8.3 8.9 9.4 10.0 10.6 11.2 11.9 12.6 13.4 14.2 15.1 16.0 16.9 17.9 19.0 Trade C 135.4 141.5 147.7 154.3 161.2 168.4 175.8 183.5 191.6 200.0 208.8 217.7 226.9 236.5 246.5 257.1 Transportat*on /d 62.9 66.0 69.2 72.6 76.2 80.0 83,9 88.1 92.4 96.9 101.7 106.5 111.4 116.6 122.1 127.8 Servicelf e 260.3 271.3 282.7 294.6 307,0 319.9 333.3 347.2 361.7 376.9 392.7 408.6 425.2 442.4 460.3 479.0 Other ft 43.5 43.4 43.3 43.2 43,1 43.0 42.9 42.8 42.8 42.7 42.6 42.5 42.4 42.4 42.3 42.2 Total 1,940.9 2,007.1 2,075.7 2,146.9 2,220.8 2,297.6 2,376.3 2,458.0 2,542.8 2,630.7 2,721.8 2,812.7 2,906.8 3,004.4 3,105.4 3,210.0 Annual Growth Rates Agriculture Ia 3.0 3.1 3.1 3.1 3.1 3.1 3.1 3.1 3.1 3.1 3.1 3.0 3.0 3.0 3.0 2.9 Mining 2.3 2.3 4.4 2.1 4.2 2.0 3.9 1.9 3.7 3.6 1.7 3.4 1.6 3.2 1.6 3.1 Manufacturing 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.6 2.4 2.5 2.5 2.5 2.5 Construction 6.7 6.5 6.4 6.4 6.3 6.3 6.1 6.1 6.1 6.1 6.1 5.7 5.7 5.7 5.7 5.7 Electrici;y /b 6.8 5.1 7.2 5.6 6.4 6.0 5.7 6.3 5.9 6.3 6.0 6.3 6.0 5.6 5.9 6.1 Trade / 4.3 4.5 4.4 4.5 4.5 4.5 4.4 4.4 4.4 4.4 4.4 4.3 4.2 4.2 4.2 4.3 Transport tin /d 5.0 4.9 4.8 4.9 5.0 5.0 4.9 5.0 4.9 4.9 5.0 4.7 4.6 4.7 4.7 4.7 Services/ e 4.0 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.0 4.1 4.0 4.0 4.1 Other I -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 0.0 -0.2 -0.2 -0.2 -0.2 0.0 -0.2 -0.2 Total 3.3 3.4 3.4 3.4 3.4 3.5 3.4 3.4 3.4 3.5 3.5 3.3 3.3 3.4 3.4 3.4 Percent of Total Agriculture /a 56.0 55.8 55.6 55.4 55.3 55.1 54.9 54.7 54.6 54.4 54.2 54.0 53.8 53.6 53.4 53.2 Mining 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 Manufacturing 13.4 13.3 13.2 13.1 12.9 12.8 12.7 12.6 12.5 12.4 12.2 12.1 12.0 11.9 11.8 11.7 Construction I 4.2 4.3 4.4 4.5 4.7 4.8 5.0 5.1 5.2 5.3 5.5 5.6 5.7 5.8 6.0 6.1 Electriiry /b 0.4 0.4 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.6 0.6 0.6 0.6 0.6 Trade IL C 7.0 7.0 7.1 7.2 7.3 7.3 7.4 7.5 7.5 7.6 7.7 7.7 7.8 7.9 7.9 8.0 Transportatin /U 3.2 3.3 3.3 3.4 3.4 3.5 3.5 3.6 3.6 3.7 3.7 3.8 3.8 3.9 3,9 4.0 Services / e 13.4 13.5 13.6 13.7 13.8 13.9 14.0 14.1 14.2 14.3 14.4 14.5 14.6 14.7 14.8 14.9 Other If 2.2 2.2 2.1 2.0 1.9 1.9 1.8 1.7 1.7 1.6 1.6 1.5 1.5 1.4 1.4 1.3 / aIncludes agriculture, livestock, forestry and fishing. Inclades electric power, gas, water supply and sanitary services. /C Includes wholesale and retail trade. ZIncludes tranaportation, storage, and co,munications. eIncludes public and private services other than trade and transpor tation, Includes activities not adequately defined. Sources: NEPCB (unpublished estimates prepared by the Section of Human Resources Programing in September 1970), andflMssion estimates. , sucoPoreso nOpebr17)  Table 1. 9: ESTIMATE OF INCOME DISTRIBUTION OF ACTIVE POPULATION, 1970 Income Class No. of People % of People % of Income (sucres/year) (thousands) (Cumulative) (Cumulative) Less than 2,000 356 18.8 2.3 2,000 - 3,000 572 48.5 8.5 3,000 - 5,000 237 60.9 12.2 5,000 - 7,000 128 67.6 15.7 7,000 - 10,000 11 73.6 19.9 10,000 - 15,000 126 80.2 26.8 15,000 - 20,000 84 84.6 33.7 20,000 - 25,000 90 89.3 42.9 25,000 - 30,000 56 92.2 49.5 30,000 - 40,000 48 94.7 57.1 40,000 - 50,000 33 96.4 63.6 5o,ooo - 60,000 29 97.9 70.6 60,000 - 100,000 21 99.0 79.2 Mbre than 100,000 19 100.0 100.0 Source: National Planning and Coordination Board. Table 1.10: AVERAGE PRODUCT OF LABOR BY SECTOR, 1960, 1970, 1972 (in 1970 sucres) Growth Projected Rate Growth Rate Sector Average Product % % 1960 1970 1972 1960-70 1972-77 Agriculture 8,663 9,54o 10,308 0.96 2.28 Manufacturing 19,748 26,870 29,760 2.73 6.01 Construction 18,925 22,692 26,651 1.83 0.07 Services 24,378 26,764 27,645 0.93 0.71 Petroleum 400,000 2.83 Average 14,141 17,399 18,971 2.10 4.63 Source: National Planning and Coordination Board. II. NATIONAL ACCOUNTS Table No. 2.1 Expenditure of GDP at Current Market Prices, 1950-71. 2.2 Expenditure of GDP at Constant 1971 Market Prices, 1950-71. 2.3 Industrial Origin of GDP at Currerit Factor Cost, 1950-71. 2.4 Industrial Origin of GDP at Constant 1971 Factor Cost, 1950-71. 2.5 Saving and Investment at Current Market Prices, 1950-71. 2.6 Saving and Investment at Constant 1971 Market Prices, 1950-71. 2.7 Growth of Saving and Investment: Trends, Sources and Financing, 1950-71. 2.8 Area, Population, GNP Per Capita, and Average Annual Growth Rates, Major South American Countries Ranked by Size of Population, 1970 and 1961-70 Period. 2.9 National Accounts Projections, 1972-77.  Table 2.1: EXPENDITURE ON GDP AT CURRENT MARKET PRICE, 1950-71 (Millions of Current Sucres) a. 1950-60 Items 1950 1951 1952 1953 1954 1955 1956 1957 1956 1959 1960 Available resources 6,798 7,726 8,374 9,171 10,337 11,030 11,272 11,755 12,165 12,724 14,071 Total consumption 6,015 6,722 7,466 7,908 8,706 9,224 9,492 9,944 10,393 10,803 11,920 Private consumption 5,018 5,672 6,343 6,654 7,372 7,850 8,125 8,537 8,980 9,270 10,107 General govt. consumption 997 1,050 1,123 1,254 1,334 1,374 1,367 1,407 1,413 1,533 1,813 Gross domestic investment 783 1,004 908 1,263 1,631 1,806 1,780 1,811 1,772 1,921 2,151 Increase in stocks 166 149 98 261 249 268 220 250 256 187 254 Gross domestic fixed investment 617 855 810 1,002 1,382 1,538 1,560 1,561 1,516 1,734 1,897 Private 420 602 530 653 922 901 977 997 949 997 986 Public 197 253 280 349 460 637 583 564 567 737 911 EKports of goods & NFS 1,390- 1,229 1,708 1,716 2,153 2,070 2,097 2,377 2,312 2,454 2,524 Less: imports of goods & NFS 943 1,194 1,228 1,538 2,043 2,051 2,103 2,125 2,120 2,169 2,455 GDP at market prices 7,245 7,761 8,854 9,349 10,447 11,049 11,266 12,007 12,357 13,009 14,140 Less: net factor payments 177 147 306 286 273 308 369 376 304 385 395 G5at market prices 7,068 7,614 8,548 9,063 10,174 10,741 10,897 11,631 12,053 12,624 13,745 Less: net indirect taxes 634 798 777 912 1,021 1,078 1,083 1,232 1,198 1,240 1,285 GNP at factor cost 6,434 6,816 7,771 8,151 9,153 9,663 9,814 10,399 10,855 11,384 12,460 Less: Depreciation 402 421 436 460 490 498 510 556 575 610 684 Mational income 6,032 6,395 7,335 7,691 8,663 9,165 9,304 9,843 10,280 10,774 11,776 b. 1961-71 1961 1962 1263 19b4 1965 1966 1967 1968 1969 1970 1971 Available resources 15,193 15,995 17,371 19,667 20,892 22,829 25,512 28,601 32,340 37,427 f452 Total consumption 12,879 13,760 14,922 16,966 18,103 19,908 22,097 24,322 27,011 30,349 37,169 Private cons. /a 10,812 11,605 12,690 14,376 15,427 17,425 19,279 20,937 23,316 26,020 32,243 General govt. cons. /a 2,067 2,155 2,232 2,590 2,676 2,483 2,818 3,385 3,695 4,329 4,926 Gross domestic invest. 2,314 2,235 2,449 2,701 2,789 2,921 3,415 4,279 5,329 7,078 9,283 Increase in stocks 267 276 303 362 383 406 446 505 585 780 1,042 Gross domp;tic fixed investment 2,047 1,959 2,146 2,339 2,406 2,515 2,969 3,774 4,744 6,298 8,241 Privat& /a 1,088 1,168 1,316 1,393 1,397 1,422 1,728 2,339 3,165 6,315 5,976 Public /a 959 791 830 946 1,009 1,093 1,241 1,435 1,579 1,953 2,265 Exports of goods & NFS 2,630 3,047 2,996 3,211 3,573 3,736 3,997 4,227 4,390 5,463 6,422 Less: imports of goods & NFS 2,746 2,938 2,930 3,464 3,678 3,731 4,381 5,362 6,301 7,760 11,642 GDP at market prices 15,075 16,104 17,437 19,414 20,787 22,834 25,128 27,466 30,429 35,130 41,232 Less: net factor payments 465 435 333 357 465 494 490 572 593 727 865 GNP at market prices 14,610 15,669 17,104 19,057 20,322 22,340 24,638 26,894 29,836 34,403 40,367 Less: net indirect taxes 1,237 1,212 1,524 1,816 1,665 1,832 2,322 2,600 2,746 3,030 3,348 GNP at factor cost 13,373 14,457 15,580 17,241 18,657 20,508 22,316 24,294 27,090 31,373 37,019 Less: Depreciation 763 782 817 1,027 1,067 1,113 1,150 1,210 1,225 1,600 2,100 National income 12,610 13,675 14,763 16,214 17,590 19,395 20,166 23,084 25,865 29,773 34,919 Ia Data after 1964 relate to public and private sectors as defined by the NEPCB and are not comparable with preceding years. Sources: Central Bank of Ecuador, National Economic Flaming and Coordination Board, and Mission estimates. Table 2.2: EXPENDITURE OF GDP AT CONSTANT 1971 MARKET PRICES,1950-71 (Millions of Constant 1971 Sucres) a. 1950-59 Items 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 Available resources 13,577 14,809 15,535 16,731 18,133 18,779 19,493 20,075 20,646 21,562 Total consumption 12,013 12,885 13,851 14,427 15,272 15,705 16,415 16,982 17,639 18,307 Private consumption 10,022 10,872 11,768 12,139 12,932 13,364 14,050 14,580 15,241 15,709 General govt. cons, 1,991 2,013 2,083 2,288 2,340 2,341 2,364 2,403 2,398 2,598 Gross domestic investment 1,564 1,924 1,684 2,304 2,861 3,074 3,078 3,093 3,007 3,255 Increase in stocks 332 285 182 476 436 456 380 427 434 317 Gross domestic fixed invest. 1,232 1,639 1,502 1,828 2,425 2,618 2,698 2,666 2,563 2,938 Private 918 1,215 1,025 1,284 1,712 1,639 1,812 1,815 1,702 1,895 Public 314 424 477 544 713 979 886 851 861 1,043 Exports of goods and NFS 2,776 2,356 3,168 3,131 3,777 3,524 3,628 4,059 3,924 4,159 Less: imports of goods and NFS 1,884 2,289 2,278 2,806 3,584 3,492 3,638 3,629 3,598 3,676 GDP at market prices 14,469 14,876 16,425 17,056 18,326 18,811 19,483 20,505 20,972 22,045 Less: net factor payments 353 282 567 522 479 524 638 642 516 652 C-NP at market prices 14,116 14,594 15,858 16,534 17,847 18,287 18,845 19,863 20,456 21,393 Less: net indirect taxes 1,266 1,529 1,441 1,664 1,791 1,835 1,873 2,104 2,028 2,101 GNP at factor cost 12,850 13,065 14,417 14,870 16,056 16,452 16,972 17,759 18,428 19,292 Tess: depreciation 803 807 810 838 860 847 881 949 976 1,034 '!ational income 12,047 12,258 13,607 14,032 15,196 15,605 16,091 16,810 17,452 18,258 b. 1960-71 Items 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 Available resources 23,410 24,071 24,805 25,842 28,334 28,996 30,157 32,525 34,998 37,801 41,034 46,62 Total consumption 19,831 20,405 21,339 22,199 24,443 25,125 26,298 28,171 29,762 31,572 33,275 37,169 private /a 16,815 17,130 17,997 18,879 20,712 21,411 23,018 24,579 25,620 27,253 28,529 32,243 Ceneral govt. Ia 3,016 3,275 3,342 3,320 3,731 3,714 3,280 3,593 4,142 4,319 4,746 4,926 Gross domestic investment 3,579 3,666 3,466 3,643 3,891 3,871 3,859 4,354 5,236 6,229 7,760 9,283 Increase in stocks 423 423 428 451 521 532 536 569 618 684 855 1,042 Gross dom. fixed invest. 3,156 3,243 3,038 3,192 3,370 3,339 3,322 3,785 4,618 5,545 6,905 8,241 Private Ia 1,640 1,724 1,811 1,957 2,007 1,939 1,878 2,203 2,862 3,699 4,764 5,976 Public /a 1,516 1,519 1,227 1,235 1,363 1,400 1,444 1,582 1,756 1,846 2,141 2,265 Fxports of goods and NFS 4,199 4,167 4,725 4,457 4,626 4,959 4,935 5,096 5,172 5,131 5,990 6,422 less: imports of goods &NFS 4,084 4,354 4,556 4,359 4,990 5,105 4,929 5,585 6,561 7,365 8,508 11,642 CDP at market prices 23,525 23,884 24,974 25,940 27,970 28,850 30,163 32,036 33,609 35,567 38,517 41,232 Tess: net factor payments 657 737 675 495 514 645 653 625 700 693 797 865 ChP at market prices 22,868 24,147 24,299 25,L45 27,456 28,205 29,510 31,411 32,909 34,874 37,720 40,367 Less: net indirect taxes 2,138 1,960 1,880 2,267 2,616 2,311 2,420 2,960 3,182 3,211 3,322 3,348 c-NTP at factor cost 20,730 21,187 22,419 24,178 24,840 25,894 27,090 28,451 29,727 31,663 34,398 37,019 Less:depreciation 1,138 1,209 1,213 1,216 1,480 1,480 1,470 1,466 1,480 1,432 1,754 2,100 National income 19,592 19,978 21,206 21,962 23,360 24,A13 25,620 26,985 28,247 30,231 32,644 34,919 ra -ata after 16 relate to public and private sectors as defined by the NEPCB and are not comparable with the preceding years. Soirce Central Bank of Ecuador, National Economic Planning and Coordination Board, andMission estimates. Table 2.3: INDUSTRIAL ORIGIN OF GDP AT CURRENT FACTOR COST, 1950-71 (Millions of Current Sucres) a. 1950-60 Sectors -1950 1951 1952 1953 1954 1955 1956 M95 1958 1959 1960 GDP at factor cost 6,611 6,963 8,077 8,437 9,426 9,971 10,183 10,775 11,159 11,769 12,855 Agricultural sector /a 2,565 2,704 3,327 3,388 3,671 3,598 3,756 3,936 4,005 4,250 4,731 Nonagricultural sector 4,046 4,259 4,750 5,049 5,755 6,373 6,427 6,839 7,154 7,519 8,175 Commodity producing 1,419 1,507 1,675 1,805 2,002 2,162 2,254 2,357 2,475 2,663 2,973 Mining and quarrying 150 149 161 162 200 243 228 232 222 233 311 Manufacturing 1,055 1,137 1,237 1,324 1,437 1,499 1,564 1,625 1,739 1,830 2,011 Construction 180 181 222 248 279 311 354 380 388 462 499 Electricity /b 34 40 55 71 86 109 108 120 126 138 152 Services producing 2,627 2,752 3,075 3,244 3,753 4,211 4,173 4,482 4,679 4,856 5,151 Transportation. /c 318 365 405 426 486 508 491 522 530 546 548 Trade Id 678 716 859 888 1,006 1,257 1,271 1,306 1,338 1,357 1,482 Banking /e 94 96 105 114 159 173 186 241 286 330 341 Ownership of dwellings 534 549 579 608 702 768 777 805 826 845 877 services 621 636 699 731 841 900 821 976 1,049 1,096 1,150 Public administration, /f 382 390 428 477 559 605 627 632 650 682 753 b. 1961-71 Sectors 1961 1962 1963 1964 1965 1966 1967 1966 1969 1970 1971 GDP at factor cost 13,838 14,892 15,913 17,598 19,122 21,002 22,806 24,866 27,682 32,100 37,884 Agricultural sector /a 5,127 5,689 5,960 6,191 6,482 7,227 7,556 7,771 8,562 9,693 10,804 Nonagricultural sector 8,738 9,203 9,953 11,407 12,640 13,775 15,250 17,095 19,120 22,407 27,080 Commodity producing 3,180 3,366 3,709 4,371 4,749 5,110 5,762 6,301 7,1d4 8,441 10,119 Mining and quarrying 315 326 369 389 392 453 500 552 596 641 734 Manufacturing 2,112 2,283 2,523 3,039 3,299 3,501 3,884 4,209 4,764 5,438 6,412 Construction 574 560 593 698 788 845 1,040 1,147 1,350 1,803 2,302 Electricity /b 179 197 224 245 270 311 338 393 474 559 671 Services pr6ducing 5-531 5,837 6,244 7,036 7,891 8,665 9,488 10,794 11,936 13,966 16,961 Transportation. /c 595 600 649 701 725 789 822 902 995 1,149 1,342 Trade. /d 1,555 1,620 1,772 1,921 2,080 2,185 2,420 2,680 3,012 3,397 4,121 Banking., e 386 405 443 536 543 589 647 699 837 1,012 1,249 Ownership of dwellings 950 1,002 1,080 1,154 1,238 1,345 1,442 1,548 1,715 1,919 2,226 Services 1,180 1,293 1,313 1,573 1,989 2,245 2,657 3,141 3,474 4,086 4,925 Public administration /f 865 917 987 1,151 1,316 1,512 1,500 1,824 1,903 2,403 3,098 Ia Includes agriculture, forestry, hunting and fishing. lb Includes electric power, gas, water supply and sanitary services. IC Includes transportation, storage and communications. Id Includes wholesale and retail trade. /e Includes banking, insurance, and real estate. If Includes defense. Sources: Central Bank of Ecuador, National Economic Planning and Coordination Board, andmission estimates. Table 2.4: INDUSTRIAL ORIGIN OF GDP AT CONSTANT 1971 FACTOR COST, 1950-71 (Millions of Constant 1971 Sucres) a. 1950-60 Sectors 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 GDP at factor cost 13,203 13,345 14,984 15,392 16,535 16,976 17,610 18,401 18,939 19,944 21,387 Agricultural sector /a 5,123 5,182 6,172 6,181 6,440 6,126 6,495 6,722 6,797 7,202 7,871 Nonagricultural sector 8,080 8,163 8,812 9,211 10,095 10,850 11,115 11,679 12,142 12,742 13,516 Commodity producing 2,834 2,888 3,107 3,293 3,512 3,681 3,898 4,025 4,201 4,513 4,946 fining and quarrying 300 285 298 296 351 414 394 396 377 395 517 Manufacturing 2,107 2,179 2,295 2,415 2,521 2,552 2,705 2,775 2,951 3,101 3,346 Construction 359 347 412 452 489 529 612 649 659 783 830 Electricity /b 68 77 102 130 151 186 187 205 214 234 253 Services producing 5,246 5,275 5,705 5,918 6,583 7,169 7,217 7,654 7,941 8,229 8,570 Tr2nsportatiorl /C 635 700 751 777 853 865 849 891 900 925 912 Trpde I 1,354 1,372 1,594 1,620 1,765 2,140 2,198 2,230 2,271 2,300 2,466 Bankin. Ie 188 184 195 208 279 295 322 412 485 559 567 ownership ot dwellings 1,066 1,052 1,074 1,109 1,231 1,307 1,344 1,375 1,402 1,432 1,459 Services 1,240 1,219 1,297 1,334 1,475 1,532 1,420 1,667 1,780 1,857 1,913 Public administration /f 763 748 794 870 980 1,030 1.084 1.079 1,103 1,156 1,253 b. 1961-71 Sectors 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 GDP at factor cost 21,924 23,094 23,673 25,354 26,539 27,743 29,076 30,427 32,356 35,195 37,884 Agricultural sector /a 8,123 8,822 8,866 8,920 8,996 9,547 9,633 9,509 10,008 10,628 10,804 Nonagricultural sector 13,801 11,272 14,807 16,434 17,543 18,196 19,443 20,918 22,348 24,567 27,080 Commodity producing 5,038 5,220 5,518 6,297 6,591 6,750 7,316 7,710 8,397 9,255 10,119 Hining and quarrying 499 506 549 560 544 598 637 675 697 703 734 Manufacturing 3,316 3,510 3,754 4,378 4,579 4,625 1,952 5,150 5,568 5,962 6,412 "onsLruction 909 868 882 1,006 1,093 1,116 1,326 1,101 1,578 1,977 2,302 Electricity /b 281 306 333 353 375 411 431 181 551 613 671 Services producing 8,763 9,052 9,289 10,137 10,952 11,146 12,097 13,208 13,951 15,312 16,961 Transportation /c 943 931 966 1,010 1,006 1,042 1,048 1,101 1,163 1,260 1,312 Trade /d 2,46 2,512 2,636 2,768 2,887 2,886 3,085 3,279 3,521 3,721 1,121 Banking. /e 612 628 659 772 754 778 825 855 978 1,109 1,219 Ownership of dwellings 1,505 1,551 1,607 1,663 1,718 1,777 1,839 1,891 2,005 2,101 2,226 Services 1,869 2,005 1,953 2,266 2,761 2,966 3,388 3,844 4,060 1,180 4,925 Public administration. If 1,370 1,422 1,468 1,658 1,826 1,997 1,912 2,232 2,221 2,635 3,098 /a Includes agriculture, forestry, hunting, and fishing, /b Includes electric power, gas, water supply, and sanitary services. Ic Includes transportation, storage, and communications. /d Includes wholesale and retail trade. /e Includes banking, insurance, and real estate. / f Includes defense. Sources: Central Bank of Ecuador, National Economic Planning and Coordination Board, and 1ssion estimates. Table 2.5: SAVING AND INVESTMENT AT CURRENT MARKET PRICES, 1950-71 (Millions of Current Sucres) a. 1950-59 Items 90 1951 1952 1953 1954 1955 1956 1957 1958 1959 Gross Domestic Saving (DS) and Gross Domestic Investment (ODI), by Sector Private sector /a Gross domestic savings 1,163 873 1,224 1,287 1,396 1,351 1,297 1,513 1,457 1,575 Gross domestic inve7t. 586 70 606 884 1,133 1,162 1,168 1,224 1,181 1,165 General government /a Gross domestic savings 67 166 164 154 345 h74 477 550 507 631 Gross domestic invest. 197 26h 302 379 498 644 612 587 591 756 Foreign sector Net imports of goods & NFS -47 -35 -48o -178 -11 -19 6 -252 -192 -285 Plus: net factor payments 177 147 306 286 273 308 369 376 304 385 Net capital inflow -270 112 -174 108 163 289 375 124 112 100 Net current transfers 13 22 2b 18 26 14 16 32 43 56 Sources of Savint- GDP at market prices 7,245 7,761 8854 9,313 10,447 11,043 11,266 12,007 12,357 13,009 Less: consumption 6,015 6,722 7,466 7,908 8,706 9,224 9,132 9,944 10,393 10,803 Gross domestic savings 1,230 1,039 1,388 1,441 1,741 1,825 1,774 2,063 1,964 2,206 Private 1,163 873 1,224 1,287 1,396 1,351 1,297 1,513 1,457 1,575 General government 67 166 164 154 345 474 477 550 507 631 Revenue 1,258 1,368 1,485 1,629 1,885 2,113 2,04 2,247 2,245 2,518 Expenditure 1,191 1,202 1,321 1,475 1,540 1,639 1,607 1,697 1,738 1,887 GDS, incl. net current transfers 1,244 1,061 1,412 1,459 1,767 1,839 1,790 2,o95 2,007 2,262 GDS, incl. net current transfers 1,067 914 1i16 1,173 1,494 1,531 1,421 1,719 1,703 1.877 Financing of Gross Domestic Investment (G Gross domestic investment 763 i,W04 908 1,263 1,631 1,806 1,7830 1,811 1,772 1,921 Less: net capital inflow -270 112 -174 108 163 289 375 124 112 100 Gross national saving 1,053 892 1,082 1,155 1,468 1,517 1,405 1,687 1,660 1,821 Less: depreciation 402 421 236 460 490 498 510 556 575 610 Netnational savings 651 2471 6246 695 978 1,019 895 1,131 1,085 1,211 b. 1960-71 Items 1960 1961 1962 1963 19624 1965 1966 196 1963 1969 1970 1971 Gross Domestic Saving (GDS) and Gross Domestic Investment (GDI), by Sector Private sector /a Gross domestic savings 1,615 1,492 1,669 1,553 1,231 2,321 2,329 2,063 2,531 2,789 3,910 2,960 Gross domestic inve0t. 1,215 1,328 1,416 1,589 1,719 1,742 1,787 2,129 2,793 3691 ,047 6,914 General government j a Gross domestic savings 605 704 675 962 1,217 363 597 968 613 629 871 1,103 Gross domestic invest. 936 986 819 860 982 1,0247 1,1324 1,286 1,2486 1,638 2,031 2,369 Foreign sector Net imports of goods & N-S 369 118 109 -66 253 105 -5 384 1,135 12911 2,297 5,220 Plus: net factor payments 395 2465 435 333 357 2465 4924 490 572 593 727 865 Net1capital inflow 326 583 326 267 61 570 489 874 1,707 2,504 3,024 6,085 Net current transfers 117 133 1242 117 201 137 186 210 217 244 313 32,5 Sources of Saving GOP at market prices 14,140 15,075 lo,104 17,437 19,414 20,787 22,o34 25,128 2t,46 30,29 35,130 41,232 Less: consumption 11,920 12,879 13,760 14,922 16,966 18,103 19,908 22,097 24,322 27,011 30,349 37,169 Gross domestic savings 2,220 2,196 2,344 2,515 2,24248 2.6824 2,926 3,031 3,1424 3,218 4,781 4,063 Private 1,615 1,492 1,669 1,553 1,231 2,321 2,329 2,063 2 2, 9 3,910 2,960 General government 605 7 83 675 962 1,217 31 97 96 7 1513 29 171 1,103 Revenue 2,860 3,276 3,540 3,913 4,612 3,557 3,671 4,335 4,667 5,136 6.176 7,091 Expenditure 2,255 2,572 2,865 2951 3,95 3,194 3,074 3,367 24,054 24,507 5,305 5,988 GDS, il. net cur. trans. 2,337 2,329 2,2486 2,632 2,649 2,821 3,112 3,241 3,361 3,662 5,094 4,388 DS, icl. net cur. trans. 1,9242 1,86b 2,051 2,29 2,292 2,356 2.618 2,751 2,789 3o6 04.367 3,523 Financing of Gross Domestic Investment (GDI) Gross domestic investment 2,151 2,314 2,235 2,244Y 2,701 2,7639 2,92, 3,2415 4,279 5,329 7,07-8 9,283 Less: net capital inflow 326 583 326 267 610 570 489 8724 1,707 2,504 3,0224 6,015 s national saving 1,825 1,731 1,909 2,182 2,091 2,219 2,432 2,541 2,572 2,825 24,054 3,198 Less: depreciation 6824 763 782 817 1,027 1,067 1,113 1,150 1,210 1,225 1,600 2,100 Net national savings 11141 968 1,127 1,365 1,064 1.152 1,319 1 8391 11,361 1,60C 2,454 1.098 / a Data after 19624 relate to public and private sectors as defined by the NRPCB and are not comparable with preceding years. Sources: Central Bank of Ecuador, National Economic Planning and Coordination Board, andmssion estimates. Table 2.6: SAVING AND INVESTMENT AT CONSTANT 1971 MARKET PRICES, 1950-71 (Millions of Constant 1971 Sucres) The". 1950 1991 1952 1953 1994 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 Gross Domestic Saving (GDS) and Gross Domestic Investment (GDI), by sector Private ,cctol- /a Gross domestic savings 2,232 1,673 2,270 2,348 2,449 2,299 2,243 2,584 2,473 2,669 2,688 2,364 2,588 2,310 1,774 3,221 3,076 2,630 3,097 3,260 4,287 2,960 Gross domestic inv stment 1,170 1,418 1,124 1,613 1,987 1,978 2,020 2,090 2,004 1,974 2,022 2,104 2,196 2,364 2,476 2,418 2,361 2,714 3,418 4,314 5,533 6,914 General government / a Gross domestic svings 134 318 304 281 6o5 807 825 939 860 1,069 1,006 1,115 1,047 1,431 1,753 504 789 1,235 750 735 955 1,103 Gross domestic investment 394 5o6 560 691 874 1,096 1,058 1,003 1,003 1,281 1,557 1,562 1,270 1,279 1,415 1,453 1,498 1,640 1,818 1,915 2,227 2,369 Foreign sector Net imports of goods & NFS -892 - 67 -890 -325 -193 - 32 10 -1i30 -326 -483 -115 187 -169 - 98 364 146 - 6 489 1,389 2,234 2,518 5,220 Plus: net factor payments 353 282 567 522 479 524 638 642 516 652 657 737 675 495 514 645 653 625 700 693 797 865 Nfet capital inflow -539 215 -323 197 286 492 648 212 190 169 542 924 5o6 397 878 791 647 1,114 2,089 2,927 3,315 6,085 Net current transfers 26 42 45 33 46 24 28 55 73 95 195 211 220 174 290 190 246 268 266 285 343 325 Sources of Saving GDP at market prices 14,469 14,876 16,425 17,056 18,326 18,811 19,483 20,505 20,972 22,045 23,525 23,884 24,974 25,940 27,970 28,850 30,163 32,036 33,609 35,567 38,517 41,232 Less: consumption 12,013 12,885 13,851 14,427 15,272 15,705 16,415 16,982 17,639 18,307 19,831 20,405 21,339 22,199 24,443 25,125 26,298 28,171 29,762 31,572 33,275 37,169 Gross domestic savings 2,456 1,991 2,574 2,629 3,054 3,106 3,068 3,523 3,333 3,738 3,694 3,479 3,635 3,741 3,527 3,725 3,865 3,865 3,847 3,995 5,242 4,o63 Private 2,322 1,673 2,270 2,348 2,449 2,299 2,243 2,584 2,473 2,669 2,688 2,364 2,588 2,310 1,774 3,221 3,076 2,630 3,097 3,260 4,287 2,960 General government 134 318 304 281 605 807 825 939 86o 1,069 1,o06 1,115 1,047 1,431 1,753 5o4 789 1,235 750 735 955 1,103 Revenue 2,512 2,622 2,755 2,972 3,307 3,597 3,604 3,837 3,810 4,267 4,758 5,190 5,490 5,821 6,644 4,937 4,849 5,527 5,711 6,003 6,771 7,091 lEpenditure 2,378 2,304 2,451 2,691 2,702 2,790 2,779 2,898 2,950 3,198 3,752 4,075 4,443 4,390 4,891 4,433 4,060 4,292 4,961 5,268 5,816 5,988 GDS, incl. net current transfers 2,482 2,033 2,619 2,662 3,100 3,130 3,096 3,578 3,406 3,833 3,889 3,690 3,855 3,915 3,817 3,915 4,111 4,133 4,113 4,280 5,585 4,388 GDS, inc. net current transfers 2,129 1,751 2,052 2,140 2,621 2,606 2,458 2,936 2,890 3,181 3,232 2,953 3,180 3,420 3,303 3,270 3,458 3,508 3,413 3,587 4,788 3,523 Financing of Gross Domestic Investment (GDI) Gross domestic investment 1,564 1,924 ,6864 2,304 2,861 3,074 3,078 3,093 3,007 3,255 3,579 3,666 3,466 3,643 3,891 3,871 3,859 4,354 5,236 6,229 7,760 9,283 Less: net capital inflow -539 215 -323 197 286 492 648 212 190 169 542 924 5o6 397 878 791 647 1,114 2,089 2,927 3,315 6,085 Gross national saving 2,103 1,709 2,007 2,107 2,575 2,582 2,430 2,881 2,817 3,086 3,037 2,742 2,960 3,246 3,013 3,080 3,212 3,240 3,147 3,302 4,445 3,198 Less: depreciation 803 807 810 838 860 847 881 949 976 1,034 1,138 1,209 1,213 1,216 1,480 1,481 1,470 1,466 1,48o 1,432 1,754 2,100 Net national savings 1,300 902 1,197 1,269 1,715 1,735 1,549 1,932 1,841 2,052 1,899 1,533 1,747 2,030 1,533 1,599 1,742 1,774 1,667 1,870 2,691 1,098 /aData after 1964 relate to public and private sectors as defined by the NEPCB and are not comparable with preceding years. Table 2.7: GROTH OF SAVING AND INVESTMENT: TREiTk, SOTRCES AND FINANCING, 1950-71 (Percentage) 1951- 1960- 1965- Sources and Uses 1950 1959 1964 1969 1967 1968 1969 1970 1971 Gross Domestic Saving by Sector /b Growth rates : /a Total .. 5.9 -0.6 2.1 -0.0 -0.4 3.8 31.2 -22.5 Private .. 2.7 -6.6 2.9 -14.5 17.8 5.3 31.5 -31.0 General government .. 23.5 10.4 0.3 56.5 -39.3 -2.0 29.9 15.5 Contribution to growth: /c Private .. 48.6 -271. 4/d 97.2/d .. /e .. /e 110.1/d 82.4 -112.6/d General government .. 51.4 171.4 /d 2.8/d .. /e .. /e -l0.1/d 17.6 12.6/d Relative shares: /f Private 94.5 78.6 63.2 79.2 68.0 80.5 81.6 81.8 72.9 General government 5.5 21.4 36.8 20.8 32.0 19.5 18.4 18.2 27.1 Gross Domestic Investment by Sector Growth rates: /a Total .. 8.7 2.6 10.1 12.8 20.3 19.0 24.6 19.6 Private .. 6.8 4.8 11.6 15.0 25.9 26.2 28.3 25.0 Public .. 12.8 -0.9 7.4 9.5 10.9 5.3 16.3 6.4 Contribution to growth: /c Private .. 57.5 112.5 72.9 71.3 79.8 90.2 79.6 90.7 Public .. 42.5 -12.5 27.1 28.7 20.2 9.8 20.4 9.3 Relative shares: If Private 74.8 66.4 61.2 64.1 62.3 65.3 69.3 71.3 74.5 Public 25.2 33.6 38.8 35.9 37.7 34.7 30.7 28.7 25.5 Financing of Gross Domestic Investment Growth rates: /a Net national saving .. 7.6 -3.2 3.3 1.8 -5.9 12.2 43.8 -59.2 Depreciation .. 2.8 5.9 -0.5 -0.3 1.0 -3.2 22.5 19.7 Net capital inflow .. -6.1 21.1 31.1 72.7 87.3 40.2 13.3 83.6 Net current transfers from abroad .. 9.6 16.4 2.9 8.9 -0.8 7.4 20.4 -5.4 Contribution to growth: /c Net national saving .. 92.1 -68.9 17.0 6.5 -12.1 20.3 53.6 -104.6 Depreciation 23.1 75.5 -2.4 -0.8 1.6 -4.8 21.1 22.7 Net capital inflow -15.2 93.4 85.4 94.3 110.5 84.5 25.3 181.9 Relative shares: /f Net national saving 83.1 58.5 48.0 37.8 40.7 31.8 30.0 34.7 11.8 Depreciation 51.3 34.1 34.3 32.3 33.7 28.3 23.0 22.6 22.6 Net capital inflow -34.4 7.4 17.7 29.9 25.6 39.9 47.0 42.7 65.6 Net current transfers from abroad 1.7 1.8 5.9 5.4 6.1 5.1 4.6 4.4 3.5 /a Average annual rates of growth for periods are based on the least squares of logarithms. Base year precedes the years indicated for growth rates. /b Data after 1964 relate to public and private sectors as defined by the NEPCB and are not comparable with preceding years. /C Contribution to growth for periods is computed from the trend values derived by the least squares of logarithms. Id Positive (negative) signs indicate above (below) average contribution either to positive or to negative increments. Ie Positive and negative contributions tend to offset each other and relate to a relatively small net total. If Shares for periods are computed from unweighted annual percentages to give eaual weight to all years. Sources: Tables 2.5 and 2.6 of the Statistical Appendix. Table 2.8: AREA, POPULATION, GNP PER CAPITA, AND AVERAGE ANNUAL GROWTH RATES, MAJOR SOUTH AMERICAN COUNTRIES RANKED BY SIZE OF POPULATION, 1970 AND 1961-70 PERIOD Area Mid-Year Population GNP Per Capita (Million of 1970 1961-1970 1970 1961-1970 Country Sq. Kms.)(Thousands) (%)/a (US$) () Brazil 8.5 92,764 2.9 420 2.4 Argentina 2.8 23,212 1.5 1,160 2.5 Colombia 1.1 21,632 3.2 340 1.7 Peru 1.3 13,586 3.1 450 1.4 Venezuela 0.9 10,399 3.5 980 2.3 Chile 0.7 9,780 2.3 720 1.6 Ecuador 0.3 6,093 3.4 290 1.7 Bolivia 1.1 4,931 2.6 180 2.5 Uruguay 0.2 2,886 1.3 820 -0.4 Paraguay 0.4 2,379 3.1 260 1.3 /a Base year precedes the year indicated for growth rates. Source: World Bank Atlas (1972). Table 2.9: NATIONAL ACCOUNTS PROJECTIONS, 1972-77 (in millions of 1971 sucres) Growth Rate /a 1971 1972 1973 1974 1975 1976 1977 1972-77 1. Gross Domestic Income fl(iii) + 3(iii_/ 41,232 452 5387 828 60,624 66J20 71,392 9.1 (i) Gross National Product 40,367 44,581 50,307 53,791 58,411 64,492 69,127 9.0 (ii) Factor Income Payments 865 997 2,172 2,193 2,427 2,842 2,869 19.4 (iii) Gross Domestic Product 41,232 45,577 52,479 55,984 60,838 67,334 71,996 9.3 2. Gross Domestic Investment _,283 10,841 10,581 11,930 12,479 6,039 17,235 10.9 Gross Fixed Investment 8,241 10,060 9,780 11,061 11,550 15,038 16,180 11.2 Public Investment 2,265 2,464 2,937 3,572 4,215 4,889 5,623 18.1 Private Investment 5,976 7,595 6,842 7,489 7,335 10,149 10,558 8.4 Increase in stocks 1,042 781 802 869 929 1,001 1,055 6.6 3. Resource Balance f3(iv) - 3(i)7 -5]220 -3,903 - 172 -1,220 - 618 - 821 -1,943 1.5 (i) Imports of Goods and NFS 11,642 11,863 11,840 13,022 13,663 16,135 17,250 8.5 (ii) Exports of Goods and NES 6,422 7,960 11,761 11,957 13,260 15,657 15,911 13.5 (iii) Terms of Trade Effect /b - - - 92 - 155 - 215 - 343 - 604 (iv) Adjusted Exports of Goods and NFS 6,422 7,960 11,668 11,802 13,045 15,314 15,307 12.7 4. Gross National Savings L - 1(ii)/ 3198 591 _8,23 _8,17 _,434 12,376 12,423 15.4 5. Gross Domestic Savings 2+3F 4,063 6,938 10,409 10,710 11861 15,218 15,292 16.0 Public Savings 1,103 1,696 3,749 3,600 4,066 5,214 4,995 20.4 Private Savings 2,960 5,242 6,660 7,110 7,815 10,004 10,297 14.3 6. Consumption Ll-5/ 37,169 38,639 41,978 45,118 48,763 51,772 56,100 7.6 Public Consumption 5,988 6,578 7,227 7,940 8,724 9,584 10,529 9.9 Private Consumption 31,181 32,061 34,751 37,178 40,039 42,188 45,571 7.1 As Percent of GDP Domestic Investment 22.5 23.8 20.2 21.3 20.5 23.8 23.9 Domestic Savings 9t8 15.2 19.8 19.1 19.5 22.6 21.2 Resource Balance -12.7 - 8.6 - 0.4 - 2.2 - 1.0 - 1.2 - 2.7 Terms of Trade Effect - - - 0.2 - 0.3 - 0.4 - 0.5 - 0.8 Basic Parameters: 1972-77 Incremental Capital-Output Ratio 2.2 /c Import Elasticity 0.90 /d /a Growth rates are calculated by least square method (log Y = a + bt) /b Defined as equal to (XPI/MPI - 1) *Xc, where XPI and MPI are the export and import price indices and Xc is the value of exports in constant prices. /c ICOR = EIt-1 the ICOR for the non-petroleum sector increases from 2.55 in 1972 to 2.80 in 1977. yt- Y0 /d Elasticity of nonpetroleum merchandise imports to nonpetroleum GDP is projected at 1.25. Source: IBRD Staff projections.  III. BALANCE OF PAYMENTS Table No. 3.1 Balance of Payments, 1965-71 3.2 Balance of Payments, 1965-71 3.3 Merchandise Exports, 1965-71 3.4 Merchandise Imports (f.o.b.), 1965-71 3.5 Index - Major Commodity Exports, 1965-71 3.6 Exports (f.o.b.) to Andean Countries, 1965-70 3.7 Imports (c.i.f.) from the Andean Countries, 1965-70 3.8 Imports by Country/Region, 1965-70 3.9 Gains from Trade, 1965-71 3.10 Export Price Index, 1960-70 3.11 Import Price Index, 1960-70 3.12 Merchandise Exports, 1972-77 3.13 Merchandise Imports, 1971-77 3.14 Effect of Petroleum Sector Operations on Balance of Payments, 1972-77 3.15 Balance of Payments, 1971-77 3.16 Merchandise Imports in Relation to Consumption, Investment and Product, 1965-77  Table 3.1: BALANCE OF PAYMENTS, 1965-71 (US$ million) 1971 1965 1966 1967 1968 1969 1970 (Prel.) 1. Exports of Goods and NFS 197.7 203.3 218.0 225.1 219.7 256.1 256.9 Merchandise 180.3 186.2 201.0 210.7 196.1 232.8 232.1 Nonfactor Services 17.4 17.1 17.0 13.4 23.6 23.3 24.8 2. Imports of Goods and NFS 201.0 201.2 234.1 277.7 329.9 361.1 465.7 Merchandise 155.2 151.3 175.7 210.8 242.7 259.9 347.9 Nonfactor Services 45.8 49.9 58.4 66.9 87.2 101.2 117.8 3. Resource Balance -3.3 2.1 -16.1 -52.6 -110.2 -105.0 -208.8 4. Net Factor Payments -25.0 -25.2 -24.9 -27.1 -28.4 -33.5 -34.6 Interest Payments -4.8 -5.4 -6.3 -7.2 -8.1 -9.9 -10.6 (Public Debt) /a/b/d (-3.9) (-3.8) (-5.0) (-6.0) (-6.8) (-7.0) (-7.1) (Private Debt, net) (-0.9) (-1.6) (-1.3) (-1.2) (-1.3) (-2.9) (-3.5) Investment Income -20.2 -19.8 -18.6 -19.9 -20.3 -23.6 -24.0 5. Transfers 9.3 9.4 12.7 13.2 12.3 13.7 13.0 Private 2.2 2.8 5.0 4.7 5.3 5.4 5.0 Public 7.1 6.6 7.7 8.5 7.0 8.3 8.0 A. Balance on Current Account -19.0 -13.7 -28.3 -66.5 -126.3 -124.8 -230.4 B. Capital Account 1. Direct Investment /c 9.9 19.3 32.5 50.3 75.3 90.0 157.0 (Petroleum Sector) (-) (5.0) (5.0) (15.0) (47.9) (64.5) (127.0) 2. Public Long-Term (Net) /d 6.3 9.3 22.8 31.9 15.7 31.2 22.5 Gross Disbursements /e 14.8 18.4 31.6 44.6 29.5 46.7 46.4 Amortization /b 8.5 9.1 8.8 12.7 13.8 15.5 23.9 3. SDR Allocation - - - - - 4.2 3.5 4. Short-Term Capital /f -8.6 -2.7 -18.6 -24.6 39.8 -1.2 17.8 5. Change in Reserves/g (- = increase) 11.4 -12.2 -8.4 8.9 -4.5 -1.8 29.6 Public Debt Service /d/a/b 12.4 13.0 13.8 18.7 20.5 22.5 31.0 Debt Service as % of Foreign 6.3 6.4 6.3 8.3 9.3 8.8 12.0 Exchange Earnings /a On public and public-guaranteed debt with a maturity of over one year. b Only on debt repayable in foreign currency. /c Includes net private long-term capital in 1965-70. /d As shown in IBRD external public debt statistics. /e Loans disbursed in foreign currency, repayable in foreign and local currency. If Includes errors and omissions and difference between IBRD and Central Bank public long-term capital inflows. /g As shown in the monetary statistics. Source: Central Bank and IBRD staff estimates. Table 3.2: B~LANCE OF PAIMENTS, 1965-71 (U.S. $ .illon) 1965 1966 1967 1968 1969 ro1 Oredit Debit Balance Credit Debit Balane Gredit Debit Be f M it Bala Gredit Debit Balance Credit Debit Balance Cri Ebt Goods and Serice . 2260 - 28.3 203 2264 - 2j1 218 0 259.0 - _10 2259 25 - 79.7 220.1 358 - 13.6 256, 395.0 - _ 257.8 501. - 1385 Merchandi,e f.o.b. 180.3 155.2 25.1 186.2 151.3 34.9 201.0 175.7 25.4 210.7 210.8 - 0.1 196.1 242.7 - 46.6 232.8 259.9 - 27.1 232.1 347.9 - 27.1 Kon-onetary gold 0.4 --- 0.L 0.3 --- 0.3 --- 0.9 - 0.9 -.- 1.9 - 1.9 --- 2.3 - 2.3 --- 2.4 . 2.4 --- 2.4, 2.4 Freight and insuran --- 17.9 - 17.9 --- 20.9 - 20.9 --- 24.3 - 21.3 -.- 28.0 - 28.0 --- 31.9 - 31.9 --- 36.5 - 36.5 --- 51.2 - 51.2 Other transportatio -- 5.4 - 5.4 0.2 6.1 - 5.9 0.9 7.2 - 6.3 1.0 8.8 - 7.8 1.1 9.2 - 8.1 1.1 9.3 - 8.2 1.1 9.5 - 8.4 Trv1el 7.4 7.6 - 0.2 7.5 8.2 - 0.7 7.7 8.1 - 0.4 8.0 8.6 - 0.6 9.4 9.1 --- 10.0 9.8 0.2 10.0 9.0 1.0 Factor payment. --- 25.0 - 25.0 --- 25.2 - 25.2 --- 24.9 - 24.9 0.8 27.9 - 27.1 0.4 28.8 - 28.4 0.4 33.9 - 33.5 0.9 35.5 - 36.6 i) Interet paymentB (----) ( 4.8) (.- 4.8) (---) (5.4) (- 5.4) () (6.3) (- 6.3) (0.8) (8.0) (- 7.2) (0.4) (8.5) (- 8.1) (0.4) (10.3) (- 9.9) (0.9) (11.s)- 10.6) ii) Invetent 1ncom (--) (20.2) (- 20.2) (---) (19.8) (- 19.8) (--) (18.6) (- 18.6) (---) (19.9) (- 19.9) (---) (20.3) (- 20.3) (-) (23.6) (- 23.6) (--) (24.0) (- 24.0) 0o-ernment 3.3 3.4 - 0.1 2.6 2.2 0.4 2.1 3.0 - 0.9 2.3 2.0 0.3 2.3 2.4 - 0.1 2.3 2.7 - 0.4 2.3 3.2 - 0.9 Other 6.3 11.5 - 5.2 6.5 12.5 - 6.0 6.3 11.9 - 8.6 3.1 17.6 - 14.5 10.8 32.0 - 21.2 9.9 40.5 - 30.6 11.4 42.5 - 31.1 Tranefer 2._ 0. .6 0.2 2.4 12.9 2.2 127 L3. 0.2 13.2 12.7 2- 12.3 14.5 0.O 1.7 14. _.4 13o Private (2.3) (0.1) (2.2) (2.9) (0.1) <2.8) (5.1) (0,1) (5.0) (6.8) (0.1) <1,7) (5.5) <0.2) (5.3) (5.6) (0.2) (5.1) (5.0) Goernment (7.2) (0.1) (7.1) (6. 7) 0) (.6) (0.1) (8.5) (7.2) (0.2) (7.0) (8.9) (0.6) (8.3) (8.0) Balance on Current Accont 207.2 226.2 -19.0 212.9 226.6 -3_. 230 259.2 ..28. 232 3 -å -30 65 232.8 3 . -. 126.3 271.0 3.. -8 14 272 2 -230 Capital Account Direct Inveotment la 2.9 z=- 9.9 19.3 19.3 32.5 32.5 03 0 - 3 90- 90.0 1570 --- 157.0 (Petroleum Sector) (--- ) (-) (--- ) (5.0) (---) (5.0) (5.0) (---) (5.0) (15.0) (---) (15.0) (47.9) (4--) (7.9) (64.5) (.--) (64.5) (127.0) (---) (127.0) Public Long-Tera /b L .L 1.3 2. iii U.6 8. 2.8319 -9 5 46.7 -kj 31- 2 9.1:ä 22- S.D.R. Alatioffi - -" =~-- .-2 2".-- Short Te Cital -.6 - 1.6 .6 26 4.6 .24.6 2. -- 39.0 - 1 2 -1.2- 11.8 n e (- = incease)12.2 -4 8.9 1.8 2 Includes not private long-ter capital in 1965-70. As shown in IBRD external public debt statistics. -Incldes errors and os uions and diffrenen between 1BRD and Central Bank public long-te- capital inflows. A, shoun in the ~onetary statistics. Sourco: Central Bank and IBRD staff estimates. /a Table 3.3: MCHANDISE EXPORTS, 1965-71 (Volume in thousands of metric tons, value in US$ million) 1965 1966 1967 1968 1969 1970 1971 Major Exports Bananas: Voiume 1,200 1,265 1,263 1,252 1,190 1,36h 1,351 Unit Value (0/kg) 8.0 8.1 8.3 8.4 9.0 9.0 8.3 Value 95.9 105.3 o.8 1o.7 107.1 122.8 112.1 Coffee: Volume 47.6 43.1 57.9 49.2 38.2 52.6 46.4 Unit Value (0/lb) 36.5 13.9 31.2 31.6 11.7 43.6 35.8 Value 18.2 12.1 39.8 14.2 26.6 50.5 16.5 Cacao: Volume 19.1 12.2 45.0 65.5 12.6 36.7 50.9 Unit Value (0/lb) 22.1 24.1 25.0 27.0 14.2 27.6 22.7 Value 19.1 17.2 24.8 38.9 24.5 22.3 25-. Sugar: Volume 65.1 59.3 67.7 70.9 101.2 64.6 85.9 Unit Value (0/1b) 5.1 5.1 5.0 5.1 4.9 6.6 7.1 Value 7.3 6.6 7.5 7.9 10.8 9.4 13.5 Subtotal 160.5 161.2 176.9 185.7 169.0 205.0 187.5 Ta-s--o7total) (99.0) 767) TBW.-) T771) TF7 TMU) T707) Other Exports 19.8 25.0 24.1 25.0 27.1 27.8 44.6 Seafood 6.7T F 107W 9T 17.7 Pharmaceuticals 1.6 1.8 1.5 1.6 1.9 1.h 1.7 Oilseeds and Products 2.0 1.2 1.3 1.3 1.8 1.8 1.8 Cocoa Products 0.1 1.4 1.3 2.5 2.1 2.5 4.5 Banana Products 0.7 0.7 0.6 0.6 0.7 0.8 0.8 Straw Products 1.1 0.7 0.7 0.9 0.8 0.6 2.0 Pyrethrum 1.7 1.5 1.4 1.6 1.4 1.1 1.0 Wood and Wood Products 2.7 3.6 4.5 4.3 4.2 3.4 4.0 Minerals 0.6 1.4 1.1 1.0 1.0 0.9 2.0 Other 2.9 6.3 2.9 3.2 2.6 5.7 9.1 TOTAL 180.3 186.2 201.0 210.7 196.1 232.8 232.1 /a Banana and seafood prices have been adjusted for underinvoicing. Source: Central Bank. Table 3.4: MERCHANDISE IMPORTS (F.O.B.), 1965-71 (US$ million) 1965 1966 1967 1968 1969 1970 1971 Consumer Goods 36.9 33.7 34.5 38.2 42.8 45.8 53.0 Nondurable 22.5 20.0 20.6 22.7 26.0 27.6 34.6 Durable 14.4 13.7 13.9 15.5 16.8 18.2 18.4 Fuels and Lubricants 11.7 6.6 9.6 9.9 12.7 16.4 20.6 Intermediate Goods [8.9 46.9 56.5 59.3 67.1 74.7 92.2 Agriculture 3.0 2.9 3.2 4.1 4.9 4.6 3.3 Industry 45.9 hh.0 53.3 55.2 62.2 70.1 88.9 Capital Goods 57.4 62.8 73.6 96.9 89.9 92.7 105.4 Construction 6.2 8.6 6.0 8.6 9.7 11.0 8.5 Transport 14.3 16.7 19.1 29.6 32.3 32.1 31.6 Agriculture 3.5 3.3 3.6 3.6 5.7 4.3 3.8 Industry 33.h 34.2 44.9 55.1 42.2 45.3 61.5 Oil Sector - 1.0 1.4 6.0 30.0 30.0 76.7 Others 0.3 0.3 0.1 0.5 0.2 0.3 - TOTAL lMPORTS 155.2 151.3 175.7 210.8 242.7 259.9 347.9 Source: Central Bank of Ecuador. Table 3.5: INDEX - MAJOR COMMDITY EXPORTS, 1965-71 (1971 - 100.0) 1965 1966 1967 1968 1969 1970 "t97I Bananas Volume 88.8 93.6 93.5 92.7 88.1 101.0 100.0 Unit Price 96.4 100.0 100.0 101.2 108.4 108.4 100.0 Value 85.5 93.9 93.5 93.4 95.5 109.5 100.0 Coffee Volume 102.6 92.9 124.8 106.0 82.3 113.4 100.0 Unit Price 102.0 94.7 87.2 88.3 88.5 121.8 100.0 Value 104.6 87.9 109.0 93.7 72.9 138.4 100.0 Cacao Volume 77.2 63.3 88.4 128.7 64.0 72.1 100.0 Unit Price 97.4 107.0 110.1 118.9 150.7 121.6 100.0 Value 75.2 67.7 97.6 153.1 96.4 87.8 100.0 Sugar Volume 75.8 69.0 78.8 82.5 117.8 75.2 100.0 0 Unit Price 71.8 71.8 70.4 71.8 69.0 93.0 100.0 Value 54.1 48.9 55.6 58.5 80.0 69.6 100.0 Source: Statistical Appendix, Table 3.3. la Table 3.6: EXPORTS (F.0.B.) TO ANDEAN COUNTRIES, 1965-70 (Thousand US$) % Share Growth Rate /b Average in () 1965 1966 1967 1968 1969 1970 1965-70 Total 1965-70 Bolivia 133 181 99 74 91 74 109 0.1 -14.0 Chile 1,982 3,725 ,398 4,769 5,162 5,600 4,273 2.6 19.6 Colambia 6,066 4,197 6,035 5,911 5,668 4,978 5,476 3.4 -0.3 Peru 1,018 941 565 288 345 1,010 694 0.4 -10.1 Total Audeen 9,199 9,04 11,097 U,042 11,266 11,662 10,552 6.5 5.4 other LAFTA 1,514 3,096 3,036 3,590 4,223 5,047 3,18 2.1 22.6 Total IAFTA 10,713 12,140 14,133 14,632 15,89 16,709 13,969 8.6 8.9 Total World 133,790 17,499 166,036 176,559 151,88 201,477 162,874 100.0 6.5 /aBased on Export Permits. /b Based on trend values. Source: Central Bank of Ecuador la Table 3.7: IMPORTS (C.I.F.) FROM THE ANDEAN COUNTRIES, 1965-70 (Thousand US$) As % Growth Rate Average of (%) 1965 1966 1967 1968 1969 1970 1965-70 Total 1965-70 Bolivia - - - - 4 - 1 - - Chile 1,651 1,702 1,966 2,413 3,218 3,929 2,480 1.1 20.2 Colombia 4,550 4,271 5,974 6,889 15,363 18,471 9,253 4.3 36.9 Peru 806 552 829 1,483 2,006 2,578 1,376 0.6 34.1 Total Andean Countries 7,007 6,525 8,769 10,785 20,591 24,978 13,109 6.1 33.1 Other LAFTA Countries 12,461 7,470 13,710 14,781 15,007 9,584 12,169 5.6 2.5 Total LAFTA 19,468 13,995 22,479 25,566 35,598 34,562 25,278 11.7 18.0 Total World 168,904 171,934 202,685 244,451 261,885 247,578 216,240 100.0 10.1 /a- Based on Inport Permits Granted. Source: Central Bank of Ecuador. la Table 3.8: IMPORTS BY C0UNTRY/REDION, 1965-70 (percent distribution) 1965 1966 1967 1968 1969 1970 Canada 3.0 1.7 2.7 3.1 2.2 1.6 USA 40.8 38.5 38.9 35.0 32.4 32.6 Caribbean 1.6 1.4 1.5 1.5 1.4 2.3 Europe 34.8 40.8 36.1 40.5 36.2 34.7 of which (EEC) (22.2) (26.1) (24.7) (23.5) (25.2) (22.4) (Germany) (12.1) (16.0) (15.4) (12.6) (12.8) (12.5) Asia 7.2 8.0 8.4 7.8 9.7 11.1 (Japan) (6.1) (7.0) (7.4) (7.1) (8.8) (10.6) LAFTA 11.5 8.1 11.1 10.5 13.7 14.0 Soviet Bloc 0.8 0.9 1.0 1.3 4.0 3.1 Africa 0.1 0.2 0.1 0.2 0.1 0.1 Oceania 0.2 0.2 0.2 0.2 0.4 0.4 TOTAL 100.0 100.0 100.0 100.0 100.0 100.0 /a Based on import permits granted. Source: Central Bank of Ecuador. Table 3.9: GAINS FROM TRADE, 1965-71 Exports Export Price Exports Import Price Terms of /a Index (Current US$ Index (Constant Index Trade Effect XPI X 100 Million) (1971=1.000) US$ Million) (1971=1.000) (US$ Million) MPI 1965 197.7 o.884 223.6 0.885 -0.3 99.9 1966 203.3 0.926 219.5 0.900 6.3 102.9 1967 218.0 0.937 232.6 0.912 6.4 102.7 1968 225.1 1.002 224.6 0.904 24.3 110.8 1969 219.7 1.067 205.9 0.938 28.3 113.8 1970 256.1 1.050 243.9 0.980 17.4 107.1 1971 256.9 1.000 256.9 1.000 - 100.0 /a Terms of Trade Effect = (XPI/MPI - 1). Xc; where XPI and MPI are the export and import price indices, and Xc is the value of exports in constant prices. Source: Statistical Appendix Tables 3.1, 3.10 and 3.11. /a Table 3:10: EXPORT PRICE INDE, 1960-70 (1970 = 100) 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 Weights Major exports 6.8 77.6 87.6 87.6 92.1 82.3 86.3 85.6 82.4 86.4 100.0 87.9 Bananas 9. . 87. 77 737 '3.1 90.0 90.1 . 0.-3 100.0 08.7 Coffee 62.8 48.9 52.6 58.2 58.8 83.8 77.6 71.6 72.4 72.4 100.0 18.1 Cacao 115.3 105.6 104.4 101.9 140.9 80.8 87.8 90.6 97.5 123.8 100.0 16.4 Sugar 48.9 63.8 64.9 81.9 84.0 76.6 76.6 76.6 76.6 73.4 100.0 4.8 Other primary 50.4 58.3 58.3 52.0 59.8 67.7 74.8 93.7 111.8 93.7 100.0 6.5 Other manufacturing 63.3 78.9 66.1 78.9 118.3 75.2 101.8 111.9 181.6 168.8 100.0 5.6 Chemicals & pharm. 107.7 92.3 U47 U47.6 100.0 92.3 92.3 b4.6 92.3 107.7 100.0 2- Seafood 80.0 66.7 80.0 93.3 93.3 80.0 100.0 93.3 93.3 113.7 100.0 0.8 Others 53.1 79.0 60.5 75.3 125.9 71.6 103.7 119.8 212.3 188.9 100.0 0.7 All exports /b 74.4 76.5 84.5 84.8 91.4 81.0 86.5 87.6 89.9 91.5 100.0 100.0 (All exports /c) (ZTTT 7. 77T - .75.0 T0.q U4.3 F.- E9.1 95.J 101.0 100.0 (All exports /d) (65.8) 66.8 73.8 74.1 79.9 84.2 88.2 89.2 95.4 101.6 loo.0 /a Including all commodities with the exception of mining wastes and re-exports. The combined weight of these three is insignificant. /b Based on unadjusted export permits. /c Adjusted for banana prices from 1965 onwards. /d Adjusted for both banana and seafood prices from 1965 onwards. Source: Central Bank of Ecuador. /a Table 3.11: IMPORT PRICE INDEX 1960-70 (1970 = 100) Import Unit Export Price Indices Price U.S.A. Europe Japan Index (weights) (41.9) (44.5) (13.6) (100.0) 1960 81.5 89.0 96.3 86.8 1961 83.1 89.9 93.6 87.5 1962 82.5 90.8 90.9 87.3 1963 82.4 91.7 90.0 87.5 1964 83.2 93.6 88.9 88.6 1965 85.8 95.4 87.8 90.3 1966 88.5 96.3 87.9 91.8 1967 90.3 96.3 90.6 93.0 1968 91.3 93.6 90.7 92.2 1969 94.6 97.2 94.8 95.7 1970 100.0 100.0 100.0 100.0 /a In 1970, the US provided 32.6 percent of Ecuador's imports, Western Europe 34.7 percent and Japan 10.6 percent. The remaining 22 percent came from LAFTA countries (14 percent), Eastern Europe (3.1 percent), Caribbean Countries (2.3 percent), Canada (1.6 percent), Oceania (0.4 percent) and Africa (0.1 percent). The Import Price Index for Ecuador corresponds to the unit export price indices of the U.S., Western Europe and Japan, weighted by these countried relative importance in Ecuador's imports. Source: Yearbook of International Trade Statistics and International Financial Statistics. Table 3.12: MERCHANDISE EXPORTS, 1972-77 (Volume in thousands of metric tons, value in US$ million) Estimate Projected 1971 1972 1973 1974 1975 1976 1977 Major Exports Bananas: Volume 1,351 1,272 1,348 1,179 1,403 1,432 1,460 Unit Value (0/kg) 8.3 8.3 8.4 8.4 8.4 8.6 8.6 Value 112.1 105.6 112.9 115.5 117.5 123.1 125.5 Coffee: /aVolume 46.4 49.6 52.1 54.7 57.4 60.3 63.3 Unit Value (0/lb) 35.1 45.1 45.5 45.9 46.2 46.4 46.6 Value 16.5 49.2 52.2 55.2 58.3 61.5 64.9 Cocoa: Volume 50.9 45.0 46.3 47.4 49.2 50.6 52.2 Unit Value (0/1b) 22.3 23.0 23.3 23.7 24.0 24.4 24.8 Value 25.4 22.8 23.8 24.8 26.0 27.2 28.5 Sugar: /b Volume 85.9 106.3 98.7 96.3 98.8 101.5 104.2 Unit Value (0/lb) 7.0 8.0 8.0 8.0 8.0 8.2 8.4 Value 13.5 18.7 16.6 16.4 16.9 17.8 18.7 Sub-total 187.5 196.3 205.5 211.9 218.7 229.6 237.6 Minor Exoorts 45.5 48.2 56.4 63.5 71.4 80.4 90.4 Total Non-Petroleum 232.1 24_4.5 261.9 275.4 290.1 310.0 328.0 Petroleum:Volume (mn. barrels) - 22.34/c 78.85 77.15 93.60 128.10 125.70 Unit Value ($/barrel) - 2.38 2.44 2.50 2.56 2.56 2.56 Value (million $) - 53.2 192.4 192.9 239.6 327.9 321.8 Total Merchandise Exports 232.1 297.7 454.3 468. -29.7 637.9 649.8 /a Coffee projections take into account the expected increase in prices due to the damage to Brasilian crop. /b Volume includes 25,000 tons to the free market in 1972, declining to 10,000 tons in 1974. U.S. quota assumed to increase at the same rate (3%) as private consumption in the U.S.A. Price refers to the quota price; free market price same as the quota price in 1972, declining to 5.5 0/lb. in 1973. /c September-December. Source: mission projections. Table 3.13: MERCHANDISE IMPORTS, 1971-77 (US$ MILLION) Actual Estimate Projected 1971 1972 1973 1974 1975 1976 1977 Consumer Goods 53.0 57.3 61.9 67.0 72.4 78.3 84.6 Intermediate Goods 112.8al 110.3 130.1 143.9 159.0 176.7 196.0 Capital Goods 105.4 114.9 129.8 143.6 158.8 185.5 207.0 Subtotal 271.2 282.5 321.8 354.5 390.2 440.5 487.6 Petroleum Sector 76.7 75.6 33.6 47.6 36.4 90.3 90.3 Total 347.9 385.1 355.4 402.1 426.6 530.8 577.9 a/ Including fuels and lubricants valued at US$ 20.6 million. Source: mission projections Table 3.11: EFFECT OF PETROLEUM SECTOR OPERATIONS ON BALANCE OF PAYMNTS 1972-77 (US$ million), 1972 1973 1974 1975 1976 1977 Exports 53.2 192.4 192.9 239.6 327.9 321.8 Imports 75.6 33.6 47.6 36.4 90.3 90.3 Trade Balance -22.4 158.8 145.3 203.2 237.6 231.5 Investment Income -12.9 -44.6 -44.0 -53.0 -71.4 -70.9 Current Account Balance -35.3 114.2 101.3 150.2 166.2 160.6 Direct Investment 108.0 48.0 68.0 52.0 129.0 129.0 Net Effect 7- 162.2 16Z_} 202.2 295.2 289.6 Table 3.15: BALANCE OF PAYMENTS, 1971-77 (US$ million) Actuals Preliminary Projected r7= --T77-r= I I~ J,L4 7 1. Exports of Goods and NFS 256.9 2 .7 481.6 497.0 559.9 669.6 683.0 Merchandise 232.1 297.7 M-3 7* 79*7 67380 M9* (Petroleum) () (53.2) (192.) (192.9) (239.6) (327.9) (321.8) Nonfactor Services 24.8 26.0 27.3 28.7 30.1 31.6 33.2 2. Imports of GooaA and NFS 465.7 432.5 493.9 551.7 590.6 710.7 775.1 Merchandise 347.9 35$.1 355.5 02.l 426,6 530.8 577.9 (Petroleum) (76.7) (75.6) (33.6) (47.6) (36.4) (90.3) (90.3) Nonfactor Services 117.8 124.4 136.4 149.6 16h.0 179.9 197.2 3. Resource Balance -208.8 -158.8 - 10.3 - 5h.7 - 30.7 - 41.1 - 92.1 4. Net Factor Payments -34.6 -40.7 -90.4 -93.1 -105.0 -125.5 -129.2 Interest Payments -10.6 (-12.5) (220.) (-27.) (-23.9 -27. -7.9 (Public Debt) (-7.1) (-12.5) (-20.8) (-22.5) (-23.9) (-25.4) (-27.9) (Private Debt) (-3.5) (-) (-) (-) (-) () (-) Investment Income -24.0 -28.2 -69.6 -70.6 -81.1 -100.1 -101.3 (Petroleum) (-) (-12.9) (-4L.6) (-44.0) (-53.0) (-71.4) (-70.9) 5. Net Transfers 13.0 15.0 17.0 18.0 19.0 20.0 20.0 A. Balance on Current Account -230.4 -M5. -2. 9 -29.8 --nZ7 -i-.7 -201.3 B. Capital Account 1. Private Long-Term 157.0 137.6 78.2 99.8 85.5 164.3 167.3 (Petroleum) (127.0) (106.0) (48.0) (68.0) (52.0) (129.0) (129.0) 2. Net Public Inflow 22.5 72.0 45.2 44.4 35.2 53.3 56.0 Existing Loans 22.5 . 20.3 _ -26.2 -252 Gross Disbursements 46.4 77 51,3 27. 77 2. 1 Amortization 23.9 36.0 31.0 31.8 31.8 28.7 27.4 New Loans - 29.2 2h.9 48.8 61.1 79.5 81.7 Gross Disbursements - 29.2 _777 6 7T 90.6 Amortization - - 16.8 18.5 21.3 11.1 14,7 3. SDR Allocation 3.5 3.5 - _ _ 4. Short-Term Capitalla 17.8 ), a, - - - - 5. Change in Reserves (- = increase) 29.6 -71.6 -39.8 -14.4 - 3.9 -71.1 -22.0 /a including errors and omissions. Source: IBRD staff projections. Table 3.16: MERCHANDISE IMPORTS IN RELATION TO CO SUMPTION, INVESTMENT AND PRODUCT, 1965-77 (million 1971 sucres and percentages) Gross Nonpetroleum Total Total Fixed Inter- Gross Nonpetroleum Gross Merchan- Gross Consumer (2)/(1) Invest- Capital (5)/(4) mediate National (7)/(8) Merchandise Domestic (10)/(11) dise Domestic (13)/(14) Consumption Imports % ment Imports % Imports Product % Imports/a Product % Imports Product % (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15) Actuals 1965 25,125 1,042 4.1 3,339 1,620 48.5 1,380 28,205 4.9 4,385 28,850 15.2 4,385 28,850 15.2 1966 26,298 935 3.6 3,322 1,772 53.3 1,302 29,510 4.4 4,175 30,163 13.8 4,202 30,163 13.9 1967 28,171 945 3.4 3,785 2,055 54.3 1,550 31,411 4.9 4,778 32,036 14.9 4,815 32,036 15.0 1968 29,762 1,055 3.5 4,618 2,845 61.6 1,640 32,909 5.0 5,665 33,609 16.8 5,830 33,609 17.3 1969 31,572 1,140 3.6 5,545 3,195 57.6 1,788 34,874 5.1 5,668 35,567 15.9 6,468 35,567 18.2 1970 33,275 1,168 3.5 6,905 3,130 45.3 1,905 37,720 5.0 5,865 38,517 15.2 6,630 38,517 17.2 1971 37,169 1,325 3.6 8,241 4,553 55.2 2,305 40,367 5.7 6,780 41,232 16.4 8,698 41,232 21.1 Estimate 1972 38,640 1,404 3.6 10,060 4,705 46.8 2,703 44,581 6.1 6,922 44,118 15.7 8,812 45,578 19.3 ?rojected 1973 41,978 1,489 3.5 9,779 3,946 40.4 3,128 50,307 6.2 7,738 47,427 16,3 8,561 52,479 16.3 1974 45,119 1,578 3.5 11,061 4,528 40.9 3,390 53,791 6.3 8,353 50,984 16.4 9,497 55,984 17.0 1975 48,762 1,673 3.4 11,550 4,528 39.2 3,674 58,411 6.3 9,016 54,808 16.5 9,874 60,838 16.2 1976 51,772 1,773 3.4 15,038 6,287 41.8 4,001 64,492 6.2 9,975 59,192 16.9 12,062 67,334 17.9 1977 56,100 1,880 3.4 16,180 6,641 41.0 4,351 69,127 6.3 10,826 63,928 16.9 12,871 71,996 17.9 /a Including fuel ad lubricants, and other imports. /b Imports in this table correspond to the dollar value of imports as shown in the Balance of Payments deflated by the Import Price Index (Statistical Appendix) Table 3.11) and expressed in 1971 sucres at the 1971 exchange rates. Source: Appendix Tables 2.2, 3.4 and Mission estimates. IV. EXTERNAL DEBT Table No. 4.1 External Public Debt Outstanding as of December 31, 1971. Debt Repayable in Foreign Currency. 4.2 Past and Projected Transactions, 1967-86, on External Public Debt as of December 31, 1971. Debt Repayable in Foreign Currency. 4.3 EKternal Public Debt Outstanding as of December 31, 1971. Debt Repayable in Local Currency. 4.4 Past and Projected Transactions, 1967-86, on External Public Debt as of December 31, 1971. Debt Repayable in Local Currency.  PREIWMNARf Table 4.1: EXTERNAL PUBLIC DEBT OUTSTANDING AS OF DECEMBER 31#1971, DEBT REPAYABLE IN FOREIGN CURRENCY (IN THOUSANDS -OF UaSs DOLLARS) PAGE 1 DEBT OUTSTANDING DECEMBER 31#1971 CREDITOR COUNTRY UNDIs* TYPE OF CREDITOR DISBURSED SURSED TOTAL FANCr 5*175 13044 18.#459 AFRMANY (FFo,QFP.-.1F) 5S603 - 5p693 HIMN-APY 1PJA1 ?(oO l 341 TTALY 199722 70100 26o822 JAPAN * 6#191 60191 i,FyJIn 3.391 4.934 7p625 SPATN 10.531 5000t1 16s531 SwrifFA M 8 11 t1?74 200085 Uk,TTFnl 19 0 ," 1 079 * 1,079 4A 2439 21.400 23#839 VFNF71f 0 1 !44 * 144 SUPPLIEPS 58.166 71#683 129s849 FPAf,cr 645 1Q955 2p610 TTALY * ?.'i44 2p444 SlqTT7RL41n 330 2P404 2.734 ts 4P732 20,ta 6s742 PRIVATE BANKS 5P707 8#813 14p520 IMT T F T " 50 L) a i ?.697 * 2.6 7 PUBLICLY ISSUED HONPS ?.747 * 2#747 " A * 10.11s 1C0 16 PRELIMINARY 06/21/72 Table 4.1: EXTERNAL PURLIC DEBT nUTSTANDING AS OF DECEMBER 31It971 DEBT REPAYABLE IN FOREIGN CURRENCY (IN THnUSANOS OF U.S. DOLLARS) PAGE 2 DEBT OUTSTANDING DECEMBER 31s1971 CREDITOR COUNTRY UNDIS- TYPE OF CREDITOR DISBURSED BURSED TOTAL PRIVATELY PLACED BONDS * 10'016 100016 FQAvCF 253 2137 2#390 110A 1sv490 11W)21 13,213 MIILTTPLF !FNJFRS * 5#934 5,934 OTHER PRIVATE FINANCIAL INST. 2#243 19#294 21s537 TApD 31P952 14o090 46,042 1r)a I> 5 16735 24*600 T 1)A3o578 3,930 175 111 LOANS FROM TNTL. ORGA'IZATIONS 53s395 34755 8815o C A A 1s253 -1 93 crtn rMoIA 124 - 124 r7rC mSLt, a I 1si43 3p164 4p312 GFkmAKIY (FF0.PFP.lF) ij,952 50751 l11*797 k,F)ICI 100 llo Sr r LAWn a rs * o 00 Pni ANn 3p038 * 3p038 SlTT7 kLAvl * 732 232 1I,4 Tr KTmrDrk 1s733 19047 7I0 A.I.D, 51;p 2 45 1 3 1 37 ik2p&17 IPORT-IDORT BOX 14#414 2p157 16p775 U%A 4 43.71)3 15p,4 - 999192 LOANS FROM GOVERNMENTS 97#046 26pt92 123*238 06/21/72 Table 4.1: EXTERNAL PUBLIC DEBT OUTSTANDTNG AS OF DECEMBER 31#1971 DEBT REPAYABLE IN FnREIGN CURRENCY (IN THOUSANDS OF U.S. DOLLARS) PAGE 3 OFBT OUTSTANDING DECFMBER 31#1971 CREDITOR COUNTRY UNIS* TYPF OF CREnlTOR DISBURSED BURSrD TOTAL TOTAL EYTEPNAL PUBLIC IFRT 219P304 17o?53 390057 NOTFf DFPT WTTH A MATURITY OF OVER ONE YEAR FCONOMIC AND SOCIAL DATA DIVISION ECONOMIC PROGRAM DEPARTMENT JUNE 26, 1972  PRELIMINARY 06/21/72 Table 4.2: EXTERNAL PUBLIC DEBT AS OF DECEMBER 31s1971 DEBT REPAYABLE IN FOREIGN CURRENCY (IN THOUSANDS Of U.S. DOLLARS) PAGE 1 To I AL DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING OF PERIOD CANCEL- LATIONSO DISBURSED INCLUDING COMMIT- DISBURSE* SERVICE PAYMENTS ADJUST* YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS (1) (2) (3) (4) (5) (6) (7) (8) 1967 10S676C 206P218 570916 31o57t 87b1 4969 13P750 "9P783 1906 126t270 245>570 45s665 44*134 12P691 60044 18P735 -244 1969 159p964 278500 13P952 27P451 13770 6#774 20s544 96 1970 173p7au 27#8770 76P512 43P316 15,0484 7*017 22*501 -431 iY71 201*3 7 3390375 66054( 41*161 23*892 7P111 31#003 6*027 1972 219plull 39()Pu57 7 785 36P056 12P528 48P584 *612 1973 ?61P5C5 353o389 - 51P297 30,968 15#7u2 46s669 * 1974 2P1*A36 322j421 - 27P452 31#829 16P486 48S316 * 1975 2770457 290P592 * 5b66 31P760 15P776 47P535 * 176 P51P964 25P8832 2P494 28*714 140194 42P907 * 1977 225P345 230119 1,f93 27P400 12*428 39*828 * 1976 1vQ,,6 3 2u2s719 2111 26*094 10767 36P862 - 1979 174>95'o9 175#922 - 560 16P186 9#430 25*616 1 1990 159P346 159P737 q 8u 13P572 10370 21*942 1941 145sF5a 146P165 73 31o531 7#550 390081 19qq 114396 114P634 - 231 9P813 6P891 16"705 1'83 1k)dR? 104P2U * 2 9P655 6P254 15s908 - 194 is9'166 95P166 - 8601 5*627 14*229 - 19er t6,56a 86564 - - 7,548 50070 12P618 * 19 6 7901l6 790016 * 7P277 4P570 11*847 * NOTE: Includea service on all debt listed on Table 1 prepared June 26, 1972, with the exception of the following for which repayment terms are not available: Suppliers - $612 This table excludes Repurchases of foreign currencies to the International Monetary Fund in the amount of $*.0 million during 1971, Repurchases to be made in 1972 in the amount of $6.7 million, and a Stand-by Arrangement of $17.9 million in 1972. PREFDINARY 06/21/72 Table 4.2: ExTERNAL PUBLIC DEOT AS OF DECEMBER 31s1971 oEeT REPAYAOLE IN FOREIGN CURRENCY (IN THOUSANDS OF U*So DOLLARS) PAGE 2 SUPPLIERS DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING OF PERIOD CANCEL* LATIONS# DISBURSED INCLUDING CUMMIT- DISOURSEs SERVICE PAYMENTS ADJUST* YFAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS (1) (2) (3) (4) (5) (6) CT) (8) 19' 7 7P415 281573 38P57b 8,#45U 2*135 847 2P982 '2p860 14P 13s73-k 62156 25#037 22.347 5v049 1#341 6s390 3 1969 31,031 82.147 3pd09 OP68V 3s943 10749 5P692 85 1970 36#399 Pe2^09b 33,427 25*834 50719 1s692 7s411 1100 1971 St,0alA 109#706 29,592 11.522 10,982 110U9 12#091 1.533 1972 516A 129049 * 31s923 20#799 3#045 23s845 *612 1973 6Pv7t0 10t#43b " 23-378 13,739 30277 17P016 * 1974 7fi4v1 94A699 14#481 14,295 3#250 17s545 * 1975 7t3*517 h0.404 10816 14760 3Ob6 170845 i97t 65.'45 65P645 - 11.602 2P352 13s955 1977 5P043 54U43 - * 10#632 1.658 12#2a9 1Y78 43.411 43*411 * 11#721 10000 12P?22 - 1979 3)P947 30.987 * 3P019 590 3,609 U 190 27,p6e 27PY68 * 2p6b1 389 3#070 * 19"1 ?5p2t8 25-2bb * 21.926 240 22#166 U 19P2 3P362 3-362 * 292 214 506 U 19A3 3,p670 3p70 -* 292 195 487 - 1914 ?P777 2P777 * 292 176 468 * 1115 2 4 5 2,4p514 * 292 157 449 * 19. I1 3 2p193 - 292 138 430 PRELIMINARY 06/21/72 Table 4.2: EXTERNAL PUBLIC DLBT AS OF DECEMBER 31s1971 DEBT REPAYABLL IN FOREIGN CURRENCY (IN THOUSANDS OF U*S* 0OLLARS) PAGE 3 PRIVATE BANKS DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING OF PERIOD CANCEL* LATIONSP DISBURSED INCLUDING COMMITo DISBURSE0 SERVICE PAYMENTS ADJUSTo YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS (1) (2) (3) (4) (5) (6) (7) (8) 1yf7 2P60 ?680 4s338 146 10024 217 1.241 * 1 11P09 5*994 2,530 2.152 775 331 1s106 13 196( 3.1 1 7o76k 865 30? 1#180 285 1#465 -235 1,o7o 20 7P232 6.?11 1*143 705 186 891 5 1,71 ?#744 12P743 2.3v2 4.19 867 217 1s104 362 17 57t7 14#520 * 5p966 1p775 3#698 5.474 1973 12P745 2.30.s 1#266 5238 6#505 * 1971 10193/A 11,47b 544 p.119 5*525 6.643 * 1975 10p3tb 10360 - 3 3s119 5#299 6#418 1976 9P241 9OP241 - 10119 5#038 6.157 I77 etP122 8p122 - 1o119 4.778 5#896 197M 7,oo0t 70004 928 4#522 5.450 b 1979 6p()76 6.070 * * 993 4s277 5#270 l'fSp3 5su83 - 493 4.028 4.521 19m1 45C, 40590 * 493 3s808 4.301 * 19 ? 4*097 4.0697 - - 221 3s587 3.808 * 19;3 3.875 3.875 * - 221 3.390 3#612 - 19 4 3#654 3#654 * U 221 3.194 3.415 * 19P5 3,432 3#432 U * 221 2.997 3s219 1 6 3v?11 3#211 * - 221 2o801 3#022 06/21 /72 Table 4 .2: EXTERNAL PUBLIC DEBT AS Of DECEMBER 31s1971 DEBT REPAYABLE IN FOREIGN CURRENCY (IN THOUSANDS OF U*S. DOLLARS) PAGE 4 PUBLICLY ISSUED BONDS DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING OF PERIOD CANCEL* LATIONSo DISBURSED INCLUDING COMMIT- DISBURSE* SERVICE PAYMENTS ADJUST* ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS (1) (2) (3) (4) (5) (6) (7) (8) 1967 4,27 4P227 * 170 124 294 -182 14P 3OP75 3,075 * 178 101 279 a123 19 9 3.;74 3,574 - 182 85 267 0142 1970 3,950 3P250 * 192 75 267 *158 1971 2p900 20o 158 t6 244 5 1972 2.p747 2P747 - - 212 b0 292 * 1973 ?.535 235 - 218 74 292 197d 2,317 2s317 - U 225 67 292 * V95 ?P049 2P092 * 231 61 292 * 1o76 1At61 1P861 * - 238 54 292 1977 1s623 1623 - 245 47 292 1y76 1s378 1,378 253 39 292 * 197'9 1125 11125 * * 244 32 276 w 1y"0 A81 s61 251 24 276 w 19 1 63o 630 a * 259 17 276 a 1 ?02 i71 371 do 263 9 273 a 19',3 10o7 107 * * 107 2 109 m 1 (U - * * " " U " PRELIMINARY 06/21/72 Table 4.2: EXTERNAL PUBLIC DEBT AS OF DECEMBER 3101971 DEBT REPAYABLE IN FOREIGN CURRENCY (IN'THOUSANDS OF U*S* DOLLANS) PAGES PRIVATELY PLACED BONDS USA OFFICIAL LENDING DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING OF PERIOD CANCEL* LATIONSP DISBURSED INCLUDING COMMIT& DISBURSEw SERVICE PAYMENTS ADJUST- YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS c) (2) (3) (4) (5) (6) C?) (8) 1971 - * 10#016 m * * * 19'? * 10016 aU.U16 m * * 1973 10 0 16 lO.o6 - 1252 776 2#028 * 1974 e.764 W.764 IP 1252 676 1.928 * 1Y75 7,5'12 7#512 1#252 576 1.828 IY76 6,960 6A260 * * 1s252 476 1728 - 1977 5oue 5.u08 * 1#252 376 1#628 197P 3.756 3.756 a i252 275 li527 * 1979 2P504 2P504 * 1s252 175 1#427 1910 1052 1.252 " 1#252 75 1.327 - PRELIMINARY 06/21/72 Table 4.2: EXTERNAL PUBLIC DEBT AS OF DECEMBER 31#1971 DEBT REPAYABLE IN FOREIGN CURRENCY (IN THOUSANDS OF UoSs DOLLARS) PAGE 6 PRIVATELY PLACED BONDS DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING OF PERIOD CANCEL* LATIONSs DISBURSED INCLUDING COMMIT& DISBURSEO SERVICE PAYMENTS ADJUST* YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS (1) (2) (3) (4) (5) (6) (7) (6) 1971 - 10#016 m s a 1972 - 10 016 " 10 U 16 0 7 * * 173 lo016 10,016 * * 1'252 77 2*028 1974 Vp764 bo764 - - 1#252 676 1#928 1975 7r51; 70512 - a 1#252 576 1,828 * 1976 6026r0 6P260 - - 1*252 476 1728 * 1977 5PO0i 5.00Od 1#252 376 1,628 * 1977 3P756 a * 1#252 275 1*527 * l979 2P504 1*252 175 1*427 * 1910 i1252 a 1#252 75 1*327 PRELIMINAr 06/21/72 Table 4.2: EXTERNAL PUBLIC DEBT AS OF DECEMBER 31s1971 DEBT REPAYABLE IN FOREIGN CURRENCY (IN TMUSANDS OF U*S* DOLLARS) PAGE 7 OTHER PRIVATE FINANCIAL INSTs OEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING OF PERIOD CANCEL LATIONSP DISBURSED INCLUDING COMMITO DISBURSE* SERVICE PAYMENTS ADJUSTo YE.AR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS (1) (2) (3) (4) (5) (6) (7) C8) I968 * 0 6601 "6 1 - b661 295 2#200 - " * 1970 Pppoo 6P606 11.066 1.555 1o755 346 2#101 * 1971 ?oouo 16.119 60170 3#396 3*153 664 3#837 401 1972 9;943 21#537 - 8.212 19638 207 1#845 * 1Y73 8.oA17 19P899 7s750 2324 722 3#046 * 1974 14.?43 17#575 - 3s332 20400 1#116 3#516 1975 15175 150175 * 2#654 1s147 3#801 * 1976 120s2? 12.522 - - 2.654 940 3.593 * 1977 9968 * 6 2#654 733 3s386 * 1478 7,014 7.214 * 2s654 526 3.179 - 1979 4.561 4#561 - 2s402 279 2.681 * 1yR '150 2#159 * 756 130 886 i9i I403 i1403 - - 156 95 251 * 191? 1.?47 1v247 * 156 85 240 - 19A3 1,091 fiU91 - - 156 74 230 toM4 Q3; 935 * * 156 63 219 - 1 RS 779 779 - - 156 52 208 - 194 624 624 - 156 41 197 * PREIIMINARY 06/21/72 Table .2: EXTERNAL PUBLIC DEST AS OF DECEMBER 31s1971 DEBT REPAYABLE IN FOREIGN CURRENCY (IN THOUSANDS OF Uo&* DOLLARS) PAGE 8 LOANS FROM INTL& ORGANIZATIONS IBRD DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING OF PERIOD CANCELs LATIONSP 1 00'00 NLUDING CONIT* DISBU[tSE" SERVICE PAYMENTS ADJUSTo YEAR W1NA ;dioURSED 0NTS MENTiS ; iNCIPAL INTEREST TOTAL MENTS (1 2 3) 00) (5) (6) (7) (a) 1967 34,1 1 39.00p 0000 l61. 1o718 1.916 3,636 * 196p 34.on7Q 41284 5o300 103lt 1816 10930 3.746 * 1969 34 p176 44P768 30 2,038 1.994 4-032 - 1970 33PA46 420730 - 2t05% 2281 20025 4#306 - 19(71 33o624 40,449 uoQu 73. 2.407 1.990 4.397 197 31o952 46o042 - 3si39 2.550 10898 4#448 1973 39,041 43P492 3t16 2#913 1.972 4P885 - 197u 33#244 40.579 210374 3P077 1.996 5P073 175 32.73m 37o502 It 47' 3o500 1962 5.462 * 1976 30,712 30002 * 7 3.985 1.835 5.820 1977 7>502 30,017 * J62 3P991 1.646 5P637 - 1q7A ?4o)73 26#026 1942J 2.325 1.466 3p791 * 1979 23#177 23P701 264 2o481 1p4U 3,889 1 19'o 20.960 21#221 - 18 2P633 1.261 3P894 - 1981 1p345 18P588 - 5 2o799 1.097 3P896 * 1"? 15P551 15.789 * 238 2P973 930 3#903 * 1;'3 12.> 16 12.816 * 3#165 749 3.914 - 1yk4 9>es1 9.651 - 2P265 566 2s831 a 19!t 7-3 6 7,386 * - 2s205 418 2P623 * 19A6 5p11 5,181 * 20095 281 2p376 * PRELIMINARY 06/21/72 Table 4.2: EXTERNAL PUBLIC DEBT AS OF DECEMBER 31#1971 DEBT REPAYABLE IN FOREIGN CURRENCY (IN THOUSANDS OF U*S* DOLLARS) PAGE 9 LOANS FROM INTLa ORGANIZATIONS IDA DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING OF PERIOD CANCEL LATIONSP DISBURSED INCLUDING COMMIT* DISBURSE* SERVICE PAYMENTS ADJUST* YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS (1) (2) (3) (4) (5) (6) c( ) Ca) 1057 63 8369 - 1968 63? 8p000 5p100 1 492 - 32 32 1969 1pQ24 13p100 1 1s774 - 61 61 1970 3'098 13p100 1105u0 2>143 a a * 1971 'Pl41 24-600* 2,024 43 43 1972 7,865 24600 2*627 - 63 63 1973 1u,a9? 24p0U 4#069 86 86 19711 14p .6 1 24600 3.a585 40 116 156 1975 1i,1U6 24560 2P476 80 141 221 1)76 20#.0 2'448 1,719 e0 157 237 1977 22,141 24,400 1s131 80 168 248 1978 23,19 24#320 682 106 175 281 1q79 23s76Q 24p215 a 316 131 179 310 1i0 23,954 24P(084 a 62 146 160 326 191 ;3>P7o 23P93b - 6o 246 179 425 19"? 23,692 23#692 * a 246 177 423 19,3 23s446 23s446 - a 246 175 421 1944 ;3,co 23p200 a * 326 174 500 19A5 ??,87 22,674 * * 406 171 577 14 6 2P 46b 22P466 * 406 168 574 PRELIKNAHE 06/21/?2 Table 4.2: EXTERNAL PUBLIC DEBT AS OF DECEMBER 3lo1971 DEBT REPAYABLE IN FOREIGN CURRENCY (IN THOUSANDS OF U*S. DOLLARS) PAGElo LOANS FROM INTL@ ORGANIZATIONS 10B DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING OF PERIOD CANCEL* LATIONSP nISBURSED INCLUDING COMMIT" DISBURSE= SERVICE PAYMENTS ADJUST* YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS (1) (2) (3) (4) (5) (6) (?) (e) 19,7 ,520 12,341 2p5U0 1#711 766 337 1*103 19fl 7P464 14su74" 3p226 834 436 1s270 169 9P56 13p240 2#686 859 541 1s400 1970 11,6b3 12381 4*5uU 346 998 619 1#617 1971 11#031 15'883 196 5'811 1-363 790 2p153 2#792 1972 13#57A 17p5U8 2PO71 1#291 766 20057 1973 14P35e 16P217 1sI6 1'552 784 2P336 - 1974 14P669 14>665 - 1#814 762 20576 * 1975 12PA51 12P851 - * 1,526 663 2#189 - 1976 11s325 11#325 B 886 581 1#467 1977 10s439 10439 " B 886 519 1I405 1978 9#553 9P553 * B 886 457 1s343 B 1079 8p667 8#667 B 886 395 1s281 1990 7o781 7,781 B " 886 333 1#219 B 19N1 6,#695 6P895 - - 954 271 1225 - 1yt2 5-941 5#941 - * 954 209 1sl63 * 1983 4*9t7 4P987 * 755 149 905 * 19P4 4,232 4232 * 542 100 642 1 9P5 3t9o 3.69U B B 328 76 404 B 1%J6 3.9162 3'362 328 61 389 - PRELIMINARY 06/21/72 Table 4.2: EXTERNAL PUBLIC DEBT AS OF DECEMBER 31s1971 DEBT REPAYABLE IN FOREIGN CURRENCY (IN THOUSANDS OF U.S* DOLLARS) PAGE 11 LOANS FROM INTLs ORGANIZATIONS DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING OF PERIOD CANCEL- LATIONSP DISBURSED INCLUDING COMMIT- DISBURSE- SERVICE PAYMENTS ADJUST- YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS (1) (2) (3) (4) (5) (6) (7) (8) 1467 4UP7t4 59#343 6p5UU 30696 29484 2#255 4#739 n1 172 4oQ75 63'35b 10*400) 6>531 2o65U 2.39b 5P048 - tyfo 45jq56 71s1Ub * 6,268 2#897 2P596 5,493 - 197C 49s027 68#211 16,oo0i 4P54t 3,279 2#644 5P923 1q7l 50o496 8o932 8#196 bp570 3,770 2#823 6,593 2#792 197? 53P395 88,150 6.9337 3,841 20727 es568 1I73 57*R91 84#309 9s045 4#465 2P842 79308 - 197a 647o 79P644 * 6#156 4P931 2#875 ?P806 * 1975 63P695 74#913 * 3095U 5#106 2,765 7#871 1y7f 62*539 69PO7 - 2s494 49951 2*573 7s524 * 1977 60onb2 64P856 1s694 4957 2*333 7#290 * 197, 56* 18 59,199 - 20111 3,316 2*098 5s415 1,74 55#613 56p583 - 58L 3,498 1,962 5480 1 19L0 52,695 53#0o - i0 3o665 o 774 5o438 1981 49,11C. 49#421 * 73 3,999 1s547 5#546 19p2 45,lba 45P422 - 236 4#173 1#316 5489 193 41#?49 41s249 * 4#166 10074 5P240 * 1994 37,0b3 37,08p - 3p133 839 3s972 19R5 33,95( 33#950 * 2*939 665 3,604 - 1996 31sol *3 1 * 2p829 510 3P339 - PRELIMINARY 0-6/21/72 Table 4.2: EXTERNAL PUBLIC DEBT AS OF DECEMBER 31s1971 DEBT REPAYABLE IN FOREIGN CURRENCY IN THOUSANDS OF U.S* DOLLARS PAGE 12 LOANS FROM GOVERNMENTS CANADA DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING OF PERIOD CANCEL* LATIONSP DISBURSED INCLUDING COmMITm DISBURSE- SERVICE PAYMENTS ADJUST- YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS (1) (2) (3) (4) (5) (6) (7) (8) 14^7 1#166 " 14 14 * 1 1l66 " 536 - 14 14 19 c39 1 166 - 457 * 15 15 1 993 1s166 104 16 16 81 1971 >16 6 1 247 - 81 16 16 6 1o72 1?53 1#253 * 9 9 1973 1?53 1'253 a * 9 9 t974 1PP53 I253 a * 9 9 1979 1s?51 1*253 a * 9 9 1976 1053 I25i 15 9 25 a 1977 1IP3 1'23t s " 31 9 40 * 11y77 1,207 31 9 40 * 1 y17s7 1176 a " 31 9 40 1 u 1145 1o145 * 31 i 39 * 19s1 1I114 1.114 " 31 a 39 m 19 42 1pOt3 10083 a a 31 t 39 a 19Y3 1sn5 1.o52 - 31 8 39 f 1Io y 021 1 (21 1 a 31 8 39 a a45 9a9 990 31 7 38 a 1o9 959 - * 31 7 36 a IPRELIMINARY 06/21/72 Table 4.2: EXTERNAL PUBLIC DEBT AS OF DECEMBER 31s1971 OEBT REPAYABLE IN FOREIGN CURRENCY (IN THOUSANDS OF UsS. DOLLARS) PAGE 13 LOANS FROM GOVERNMENTS COLOMBIA DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING OF PERIOD CANCEL- LATIONSP DISBURSED INCLUDING COMMIT- DISBURSE- SERVICE PAYMENTS ADJUST* YEAR ONLY UNDISSURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS (1) (2) (3) (4) (5) (6) (7) Co) 1967 367 367 - 25 15 40 *26 1 316 316 * e 45 18 63 a9 1 99 ?62 262 * - 43 10 53 *6 1970 713 213 - u 41 9 50 *6 1 71 160 166 m 42 5 47 - Iq7 12L, 124 - * 46 5 51 1973 7 m, 7* 46 3 49 - 1Y74 32 32 * * 32 1 33 * PRELIINARY 06/21/72 Table h.2: rXTERNAL PUBLIC DEBT AS OF DECEMBER 31s19?1 DEBT REPAYABLE IN FOREIGN CURRENCY (IN THOUSANDS OF UsSe DOLLARS ) PAGE 14 LOANS FRUM GOVERNMENTS CZECHOSLOVAKIA DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING OF PERIOD CANCEL* LATIONSP DISBURSED INCLUDING COMMIT* DISBURSE* SERVICE PAYMENTS ADJUST- YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS (1) (2) (3) (4) (5) (6) (1) (8) 1967- 5,000 * a * a 1964 5p000 " 621 " " 196 621 5p0o0 " * 209 3 212 v41' 4P791 a 1#202 162 03 265 1971 1d3? 4p60q - 297 172 469 1972 t1l43 4P312 a 2pu(u 1s725 86 810 1473 1,418 2,587 1 1*16Y 14725 49 1#774 1974 46? b62 * 862 22 884 FRELIMNART 06/21/72 Table 4.2: EXTERNAL PUBLIC DEBT AS OF DECEMBER 31#1971 DEBT REPAYABLE IN FOREIGN CURRENCY (IN THOUSANDS OF U.S* DULLARS) PAGE 15 LOANS FROM GOVERNMENTS GERMANY (FED#REPeOF) DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING OF PERIOD CANCELs LATIONSP DISBURSED INCLUDING COMMITO DISBURSE* SERVICE PAYMENTS ADJUST* YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS (1) (2) (3) (4) C5) (6) (7) (8) 1967 4#209 3 5 5 2 196M 13 4'211 *43 2 1969 126 4#209 2*16 679 * 22 22 391 1970 16 6P786 a 10509 33 33 * 1971 203?5 6*786 3.9765 3P14tl 79 67 166 1#215 197? 5*c5? 11'707 0 v439 e 241 241 1973 7P391 11707 " 2s877 * 284 284 1974 1?6t 11,707 - 1s439 370 370 * 1975 1107o7 11'707 * * 166 411 577 * 1976 115'41 11p541 * a 415 402 817 1077 1101?7 11127 - 664 382 IP046 * 107A 10P463 10#463 - - 664 358 1,022 - 1979 9P79A 90798 - - 664 333 998 * 190 9013i 9P134 * * 664 309 974 1981 47(0 8.470 664 265 949 a 927,06 7P606 * a 664 261 925 1 7P14> 7#142 * 664 237 901 a 19RI 6a47P 6,47,- 664 213 877 a 15A SAjiA 5P14 - a 664 189 853 a 1*6 'l51449 a * 664 165 829 a PRILIMINARY 06/21/72 Table 4.2: EXTERNAL PUBLIC DEBT AS OF DECEMBER 3101971 DEBT REPAYABLE IN FOREIGN CURRENCY IN THOUSANDS OF U*Se OULLARS PAGE 16 LOANS FROM GOVERNMENTS MEXICO DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING OF PERIOD CANCELs LATIONSP DISBURSED INCLUDING COMMITO DISBURSEN SERVICE PAYMENTS ADJUST* YEAR ONLY UNOISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS (1) (2) (3) (4) C5) (6) (7) CS) 1967 - - 500 m - ** * 1(961 - 500 SO50 5 0 16 66 * 1969 4504504 5 0 150 18 168 1970 300 * l 100 8 108 19 71 200 200 - 104 11 115 4 1o72 1u0 100 * * 50 6 56 * ;73 50 50 50 2 52 * PRELIMINARY 06/21/72 Table h.2: EXTERNAL PUBLIC DEBT AS OF DECEMBER 31o1971 DEBT REPAYABLE IN FOREIGN CURRENCY (IN THOUSANDS OF U.S DULLARS) PAGE 17 LOANS FROM 4OVERNMENTS NETHERLANDS DERT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING OF PERIOD CANCEL LATIONSP DISBURSED INCLUDING COMMIT* DISBURSE* SERVICE PAYMENTS ADJUST* YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS (1) (2) (3) (4) (5) (6) (7) (8) -s 49( * * * 3 I 7 Li a a 1 72 - 5(I 500 21 29 1-73 47: 479 - a 42 30 72 ,. A 113w 43b - 4 42 28 69 1795 396 * 42 25 67 - 1 i7' 354 4 * £2 22 64 - 1.9773 313 * * 42 20 61 * 17,71 271 * * 42 17 59 - 1970 ?2 2 42 14 56 * 1 in 113 d 42 12 53 * 14W1 1'4, 146 a * 42 9 50 * t 10, - a 42 6 48 a 63 * - 42 3 45 * 14 21 - * 21 1 22 * PRFLI4MINRY 06/21/72 Table 4.2: EXTERNAL PUBLIC DLBT AS OF DECEMBER 31.1971 DEUT REPAYABLE IN FOREIGN CURRENCY (IN THOUSANDS OF U.S* DOLLARS) PAGE 18 LOANS FROM GOVERNMENTS POLAND DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING OF PERIOD CATEO LATIONSP DISBURSED INCLUDING COMMITo DISBURSE0 SERVICE PAYMENTS ADJUST* YEAR ONLY UNDISBURSEU MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS (1) (2) (3) (4) (5) (6) (7) C8) 1969 - 800 2P84t 600 205 * 205 1970 c95 3p443 22 4 26 1971 573 3P421 - 2,846 383 25 408 * 1972 3.O3 3 o3U * * 448 180 628 1973 20590 2o590 * 448 152 600 * 1974 2o143 2#143 * * 448 124 572 1975 1,695 1'695 * U 448 96 544 1976 1o?47 1*247 U U 393 68 461 1,y77 A54 554 * - 342 46 388 1y513 513 * * 342 26 367 197Q t71 171 * 171 5 176 PREIM4INARY 06/21/72 Table 4.2: EXTERNAL PUBLIC DEBT AS OF DECEMBER 31s1971 DEBT REPAYABLE IN FOREIGN CURRENCY (IN THOUSANDS OF U.Ss DOLLARS) PAGE 19 LOANS FROM GOVERNMENTS SwITZERLAND DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING OF PERIOD CANCEL* LATIONSP DISBURSED INCLUDING CUMMITO DISBURSEO SERVICE PAYMENTS ADJUST* YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MINTS (1) (2) (3) (4)(5) (6) (7) Cs) 1969- 232 * * 1970 * 232 b * . 1971 * 232 - * 1972 - 232 232 77 4 81 1973 155 155 77 5 83 1974 77 77 * 77 2 80 PREIMI3NARY 06/21/72 Table 4.2: EXTERNAL PUBLIC DEBT AS OF DECEMBER 31s1971 DEBT REPAYABLE IN FOREIGN CURRENCY IN THOUSANDS OF UoS. DOLLARS PAGE 20 LOANS FROM GOVERNMENTS UNITED KINGDOM DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING OF PERIOD CANCELS LATIONS, DISBURSED INCLUDING COMMITO DISBURSEO SERVICE PAYMENTS ADJUST* YEAR ONLY UNoISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS (1) (2) (3) (4) (5) (6) Cr) (a) 1967 32-168i l 371 4 42 42 *240 196P 61Q l440 - 514 " 50 50 1959 1.133 10440 492 185 * 62 62 - 1970 1.31t 1#932 a 122 * 79 79 * 1971 144() 1#932 736 253 93 110 203 205 1972 1733 2P78U * 19047 50 130 160 - 1973 2730 2#73U - 55 169 224 * 197a ?675 2,675 * 89 165 255 - 1975 2586 2'586 9 - 94 160 254 - 1976 P 491 2 491 0 99 154 253 - 1977 2392 2*392 104 148 252 197 P 2 2 7 2 287 - - 106 141 248 1979 21i 20181 * * 104 134 239 19 0 2 0)7 t 2 u?6 - a 106 128 234 191 1,970 197u * - 104 121 226 1 1982 1P66 1866 * - 106 115 221 19 3 1 759 1*759 " 104 108 213 - 19A4 1A59 11655 * - 106 102 208 - 1 9 5 1 .0 94 A 1 #4 8 * * 1 0 4 9 5 1 9 9 1913 1A444 1.444 * 106 88 195 * PRELIMINARY u/21/72 Table 4.2: EXTERNAL PUBLIC DEBT AS OF DECEMBER 31#1971 DE8T REPAYABLE IN FOREIGN CURRENCY (IN THOUSANDS OF U&Ss DOLLARS ) PAGE 21 LOANS FROM GOVERNMENTS USA ATD DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING OF PERIOD CANCEL LATIONSs DISBURSED INCLUDING COMMITs DISBURSE* SERVICE PAYMENTS ADJUST* YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS (1) (2) (3) (4) (5) (6) (7) (8) 1907 4U657 75P464 2000 120407 996 1#006 2P002 03#175 196i 52#06P 73P293 a 5>644 1'o3d 1#040 2s078 0125 1v9q 56*675 72*130 3P295 3*650 1*896 1s110 3*008 1 1,07c 5Pa42 73*528 6o806 60931 1*280 1*032 2s312 "i 1971 64pri7Q 79#053 5*750 7*475 20269 996 3*265 -117 1972 69s?85 P2P417 * 7P935 2*895 1*305 4*200 1973 74o325 79P522 U 3#597 2*904 1*332 4P236 * 1V74 75,017 76*617 1p50u 3P814 1*600 5*414 1975 72.704 72#804 - 100 4P083 1*611 5*694 * 1976 680721 68.721 - * 40538 1*668 6*205 1977 64PI83 64Pl83 * * 4#549 10537 6P086 * 1978 59.63u 59#634 * * 3#994 1i439 5#433 * 1979 55>640 55640 * * 2P978 1*327 4#306 * 190 52P669 52*662 ? * ?*843 1265 4P108 1 1 49sA19 49P819 " 3P070 1P240 4#309 * 19 46.7a9 46*749 " " 3*076 1#157 4*233 U 1993 43*673 43P673 3 P 3082 1,074 4#156 * 19p4 40p591 40P591 * U 3-189 990 4P178 19Q5 37P 402 37P402 U U 2*976 904 3*880 * 1996 34P426 34P426 U U 2*976 820 3.796 U PRELIMINARY 06/21/72 Table 4.2: EXTERNAL PUBLIC DEBT AS OF DECEMBER 31s1971 DEBT REPAYABLE IN FOREIGN CURRENCY (IN THOUSANDS OF UsS* DOLLARS ) PAGE 22 LOANS FROM GOVERNMENTS USA EXPORT-IMPORT BANK DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING OF PERIOD CANCEL* LATIONS* DISBURSED INCLUDING COMMIT& DISBURSE* SERVICE PAYMENTS ADJUST* YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS cl) (2) (3) (4) (5) (6) (7) (8) 1967 90325 23P509 6*000 op425 1#947 444 2,391 *3P301 1968 13p8o2 24#261 5#244 2P906 735 3P641 *1 19'9 16P139 21*354 " 4P216 3s063 819 3P882 *1 197. 1,?1 18*290 3puu 37U 2#209 810 3P019 *252 1971 15452 18P829 " 641 io675 77w 2#445 -379 1972 14P418 160775 1*179 2#479 796 3#275 - 1973 13,PI18 14296 " 1179 2#356 734 3#090 * 1974 11,940 11*940 - * 2#244 655 2,899 1975 906V6 90696 1 * 0806 529 2#336 * 1976 7#p9t 7p890 * 1s396 437 1#833 1977 6ol493 6P493 * - 810 363 10173 1978 5.6b3 5.683 - - 791 317 10108 1979 4.892 4#892 - * 788 271 1#060 19F0 4004 4104 * 788 226 19014 1991 3P316 3.316 * 788 180 968 1982 2p5?8 2*528 - 788 135 923 1qe3 1.7140 1.740 * 78d 89 877 1V4 951 951 788 43 831 * 1I5 163 163 * 163 4 168 - PRELIMINART 06/21/72 Table 4.2: EXTERNAL PUBLIC DEBT AS OF DECEMBER 311971 DEBT REPAYABLE IN FOREIGN CURRENCY (IN THOUSANDS Ot US* DOULLARS) PAGE 23 LOANS FROM GOVERNMENTS USA DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING OF PERIOD CANCELs LATIONSP DISBURSED INCLUDING CUMMITO DISBURSEf SERVICE PAYMENTS ADJUST* YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS (1) (2) (3) (4) (5) (6) (7) (8) 1967 49P92 98P973 8p00O 18P832 2#943 1#450 4,393 -6#476 1Q68 65pm7' 97,554 * 10#88b 3,944 1#775 5#719 0126 1969 72so14 930484 3P295 7P866 4#961 10929 6P890 1970 75P719 91p818 9.406 7#301 3'489 1j842 5#331 *253 1Q71 799531 97P882 5P750 b*116 3P944 1,766 5*710 -496 1972 83P703 999192 9#114 5,374 2P101 7*475 * 1973 67,443 93ob1b * 4P776 5#260 2D066 7s327 1974 P6,95 86P558 - 1#50u 6*058 29255 8s313 * 1975 e2,40o 82500 100 si8t9 2p141 8s030 * 1976 76610 76#610 * * 5,934 2*104 8#038 1977 7U676 7(1676 - 50359 1.900 7#259 - 197t 65*317 65,317 0 4,785 1*756 6#541 - 1979 60o53? 60#532 * 3.766 1'599 5P365 19FC 56>766 56#766 " 3P631 10491 5p122 19F1 53s134 53p134 - 30858 1'420 5278 19012 49P?77 49P277 a - 3#864 1*291 5,155 * 19 3 45*413 45P413 - a 3P870 1sl63 5,033 * 19Ai 41P949 41P542 * 3#977 10033 5,010 * 1995 37s566 37*566 a - 3-140 9U8 4#048 * 19)6 34,426 34P426 - P ?>976 820 3,796 * PRELIMINARY 06/21/72 Table 4.2: ExTERNAL PUBLIC DEBT AS OF DECEMBER 31s1911 DEBT REPAYABLE IN FOREIGN CURRENCY $N THOUSANDS OF UoS* DOLLARS) PAGE 24 LOANS FROM GOVERNMENTS DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING OF PERIOD CANCEL* LATIONSP DISBURSED INCLUDING COMMIT- DISBURSE* SERVICE PAYMENTS ADJUST* YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS (1) (2) (3) (4) (5) (6) (7) (8) 1967 50067LI 111'395 8o500 19#286 2,968 1526 4P494 m6p740 196! 66oA8 110.187 10297 130104 4#039 1.873 5#912 "137 196Q 75,942 107P306 9s053 9.987 5.*568 2,059 7#627 388 1970 M0,366 111'181 9*806 10230 3#834 2#074 5#908 -178 1971 F6jA33 116#975 10#271 14.454 4.942 2#192 70134 934 1972 97,soA6 123p236 14P332 7s791 2P769 10s560 w 1973 103P587 115P447 8.822 7*703 2#7?1 10#474 f 197a 104p705 107P744 2P939 7#609 2.977 10s585 - 1975 100,036 100*136 " 100 6#639 2.842 9.481 * 1976 93,a97 93#497 * 6.898 2.760 9P658 * 1977 86.599 86P599 - " 6P542 2#504 9P046 - 197e bo 057 a80o057 - 5.97u 2-306 8#276 * 1979 7 4'3b7 74p0b7 - 4.778 2.095 6#873 m Iy c 69p3 9 69,3o9 - 4.475 1#948 6P423 a 19fl1 64p.A34 64.83 -* 4P699 1.843 6P542 * 19e? 60,135 60s135 0 4.707 1.682 6.389 - 193 ' 5p42 55.426 - * 40711 1.519 6P231 - 19M4 50717 50.717 * * 4#799 1#356 6P155 * 19815 45P917 450917 * 3s939 1'200 5#139 - 1986 4 1p97M ta197d - " 3.778 1.081 4.858 - ECONOMIC AND SOCIAL DATA DIVISION ECONOMIC PROGRAM DEPARTMENT JUNE 26, 1972 06/21/72 Table 4.3: EXTERNAL PUBLIC DEBT OUTSTANDING AS OF DECEMBER 31, 1971 DEBT REPAYABLE IN LOCAL CURRENCY IN THOUSANDS OF U.S. DOLLARS DEBT OUTSTANDING DECEMBER 31, 1971 CREDITOR COUNTRY UNDIS- TYPE OF CREDITOR DISBURSED BURSED TOTAL DISBURSED IN LOCAL CURRENCY 1,549 1,549 JAPAN - 1,549 1,549 DISBURSED IN LOCAL CURRENCY 34 - 34 UNITED KINGDOM 34 - 34 SUPPLIERS 34 1,549 1,583 DISBURSED IN FOREIGN CURRENCY - 659 659 FRANCE 659 659 OTHER PRIVATE FINANCIAL INST. - 659 659 DISBURSED IN LOCAL CURRENCY 28,050 2,097 30,147 DISBURSED IN FOREIGN CURRENCY 9,949 40,847 50,796 IDB 37,999 42,944 80,943 LOANS FROM INTL. ORGANIZATIONS 37,999 42,944 80,943 DISBURSED IN LOCAL CURRENCY 5,419 - 5,419 USA 5,419 - 5,419 LOANS FROM GOVERNMENTS 5,419 - 5,419 TOTAL EXTERNAL PUBLIC DEBT 43,452 45,152 88,604 NOTE: DEBT WITH A MATURITY OF OVER ONE YEAR. ECONOMIC AND SOCIAL DATA DIVISION ECONOMIC PROGRAM DEPARTMENT JUNE 26, 1972 t t 06/21/72 Table 4.-: ExTERNAL PUBLIC DEBT AS OF DECEMBER 31sI971 DEBT REPAYABLE IN LOCAL CURRENCY (IN THOUSANDS OF U.S* DOLLARS) PAGE 1 TOTAL DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING OF PERIOD CANCEL- LATIONSP DISBURSED INCLUDING COMMIT= DISBURSEO SERVICE PAYMENTS ADJUST* YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS (1) (2) (3) (4) (5) (6) (7) (8) 1967 33P031 56J'413 2,500 3P906 1'641 1,9046 2P687 02#058 196P 33s?37 55P214 3.000 4,037 2,010 1'252 3P262 -240 1969 35,?e5 55'964 1o500 3p959 2#243 1)055 3,298 311 1970 36P930 54P910 400931 6P685 30022 19175 4197 *706 1971 39o95M 89p113 2.034 6b211 2*719 1#461 4*180 176 1972 43P452 88,604 18.856 3-219 1248 4s467 1973 59p()89 85*385 15P712 3,699 1*759 5,458 1974 71,10? 81P686 9#601 3,967 20035 6*001 1975 76o737 77s/19 " 982 5492 2*066 7,558 - 1976 72?27 72P227 " " 5o479 1s914 7,393 * 1977 66749 66P749 - - 5p400 1s751 7,151 1978 61,348 61*348 " 4,895 1*595 6s490 * 1979 56P44 560454 4 * ,s825 1*452 6P277 19Fc 51,629 51s629 * 4s755 1,316 6PO70 * 19 1 46,74 46,874 = - 4#753 1*181 5,934 * 19Q2 42,121 42*121 - 4,681 10047 5*728 * 19e3 37P440 37P440 - * 4#135 922 50057 * 19,4 33p 315 33,305 p 4062 818 4,880 * 19F9 29,243 29P243 - 3*632 715 4,346 a 19af 25*612 25*612 * * 3*308 626 3P936 NOTE: INCLUDES SERVICE ON ALL DEBT LISTED IN TABLE 1 PREPARED JUNE 26, 1972. 06/21/72 Table 4.4: EXTERNAL PUBLIC DEBT AS OF DECEMBER 31s1971 DEBT REPAYABLE IN LOCAL CURRENCY (IN THOUSANDS OF U*S* DOLLARS ) PAGE 2 DISBURSED IN LOCAL CURRENCY SUPPLIERS DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING OF PERIOD CANCEL* LATIONSP DISBURSED INCLUDING COMMIT- OISBURSE* SERVICE PAYMENTS ADJUST* YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS (1) (2) (3) (4) (5) (6) (7) (8) 1970 - *1 31 * * 1971 31 31 1s315 * 177 1972 34 I583 * 0033 144 25 169 1973 o22 1F439 * 516 144 123 267 1974 1,994 1#294 * - 144 136 280 1975 IP150 IP150 * 144 120 264 * 1976 10005 I0005 * 144 105 249 * 1977 A61 e61 144 89 233 * 197P 717 717 * 144 74 218 1979 572 572 - * 144 58 202 19pp 42A 428 - * 144 43 187 - 14k1 23 283 * 143 27 170 19f4 Jal 141 * 141 12 152 06/21/72 Table 4.4: EXTERNAL PUBLIC DEBT AS OF DECEMBER 31s1971 DEBT REPAYABLE IN LOCAL CURRENCY (IN THOUSANDS OF U.S. DOLLARS) PAGE 3 DISBURSED IN FOREIGN CURRENCY OTHER PRIVATE FINANCIAL INSTa DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING OF PERIOD CANCEL* LATIONSo DISBURSED INCLUDING COMMITO DISBURSE* SERVICE PAYMENTS ADJUST* YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS (1) (2) (3) (4) LS) (6) c( ) Co) 1971 - * 659 a " " 197? 659 * 439 T 8 8 1973 43o 65Yi 220 101 37 138 197k 55P 558 - 101 37 139 197 456 45o 101 30 132 1976 355 355 * 101 23 124 1977 253 253 * * 101 16 117 197? 152 1 S 101 9 110 1979 51 51 * * 51 2 52 06/21/72 Table 4.4: EXTERNAL PUBLIC DEBT AS OF DECEMBER 31#1971 DEBT REPAYABLE IN LOCAL CURRENCY IN THOUSANDS OF U*S* DOLLARS PAGE 4 LOANS FROM INTLe ORGANIZATIONS luB DISBURSED IN LOCAL CURRENCY DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING OF PERIOD CANCELs LATIONSP DISBURSED INCLUDING COMMIT* DISBURSE" SERVICE PAYMENTS ADJUST* YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS (1) (2) (3) (4) C5) (6) (7) (6) 1967 17,?33 29P569 3'797 432 454 686 1 1968 200599 29#138 30571 629 540 1#169 *4 1969 23#540 28*005 100 10940 760 567 1s327 *310 1970 24,720) 27P535 4,5U0 3#227 874 706 1s580 -20 1971 2,7,074 31P141 1*970 993 737 1730 *1 1972 28p50 30P147 - 917 1#395 542 10937 1v73 27p572 28P752 798 1#543 542 2s085 1974 26i127 27.209 " 382 10609 531 2p140 1975 25600 25.*600 1s733 506 2#240 1976 23#867 23P667 - 1#694 470 2.164 1977 22p17? 22.172 " 1*694 435 2P130 197P 2Q.47r 200478 j 1694 401 2p095 1979 18763 18.783 - a 1s694 366 2#060 19F0 17pob9 17'089 " " 1s694 331 2P026 - 19p1 15o394 150 J94 1.694 297 1s991 19 ? 13p7un 13.*70(* 1.694 262 1#956 * 1983 12,r'06 12A006 " " i498 228 1726 * 19aa 1(#00 10s506 a 1o425 199 1624 a 1)5 9,rM3 9-083 - o 1s228 171 1o399 - 19i6 7,P5c 7#855 1.0137 148 1#285 a 06/21/72 Table 4... EXTERNAL PUBLIC DEBT AS OF DECEMBER 3101971 DEBT REPAYABLE IN LOCAL CURRENCY (IN THOUSANDS OF U*S* DOLLARS ) PAGE 5 LOANS FROM INTL* ORGANIZATIONS 1oB DISBURSED IN FOREIGN CURRENCY DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING OF PERIOD CANCEL- LATIONSP DISBURSED INCLUDING COMMIT& DISBURSE* SERVICE PAYMENTS ADJUSTo YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS (1) (2) (3) (4) (5) (6) C?) (a) 1967 - 100700 25u0 * 45 45 * 1968 13P200 3.000 466 66 66 1969 466 16p20u 19400 2uv19 e 108 108 1970 2.4485 170600 36#4u0 30427 * 177 177 -3o0o 1971 5P912 51,OU a 4,o241 204 475 679 * 1972 9s949 50#796 * 16#467 209 503 711 1973 2600?u 50#587 a 14#178 1po41 926 10967 1974 39,345 49,547 - 9P219 1'395 1'228 2P624 * 1975 47,169 48P151 * 982 2o796 1,333 4#128 1976 45P35r 45P355 * 2#846 1#265 4*111 1977 42,510 42#510 - * 2#846 1s163 4#029 1978 39p66i 39P664 * 2P846 1*102 3P947 * 1979 36PA1I 36o61b d 2P846 10020 3P865 * 19R0 33P972 33P972 * 2#846 938 3P784 1981 31st26 31*126 2P846 856 3#702 199? 28? 0 28#280 * 2P846 774 3s620 1993 251-35 25*435 29637 694 3#331 1994 22P798 22*798 * 2,637 619 3*256 * 1Y15 20,160 0s160* * 2,404 543 2s947 19"6 17,757 17*757 * 2#170 480 2P650 06/21/72 Table 4.4: EXTERNAL PUBLIC DLBT AS OF DECEMBER 31s1971 DEBT REPAYABLE IN LOCAL CURRENCY (IN THOUSANDS OF U.S. DOLLARS ) PAGE 6 LOANS FROM INTL& ORGANIZATIONS IDB DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING OF PERIOD CANCEL* LATIONS* DISBURSED INCLUDING COMMITO DISBURSE* SERVICE PAYMENTS ADJUST* YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS (1) (2) (3) (4) CS) (6) (7) (8) 1967 17#?33 40#269 2*500 30797 432 499 931 1 1968 20,590 42P336 3s000 4037 629 606 1s235 m4 1969 24P,)06 44P705 1p500 3*959 760 675 I435 M310 1970 27,9 45*135 40s900 6#654 874 083 10757 *3#020 1971 32s9n6 82.141 - 6#211 1.197 1212 2#409 *1 1972 37,999 80*943 * 17.384 10603 10045 2P648 1973 53.7bo 79o340 - 14#976 2*584 1*468 4#052 1974 66.172 76.755 ft 90601 3#004 1*759 4*763 * 1975 7?p769 73P751 - 982 4#529 10839 6*368 a 1976 69s?22 69*222 * 4*540 1p735 6#276 1977 64#66? 64682 - a 4#540 1*619 6#159 1979 60s142 60P142 * * 4.540 1.502 6.042 * 1979 55p6u1 55P601 * 4*540 Is386 5*926 * 1910 51,061 51*061 * * 4.540 1.269 5.809 1941 46,21 46P521 * * 4*540 1s152 5*693 1992 41p9F0 41.980 a * 40540 1*036 5.576 a 19i3 37P440 37.440 * 4#135 922 5*057 * 19R4 33,305 33P305 a * 4*062 818 4*880 1915 29.?43 29.243 - * 3#632 715 4*346 a 19%6 25,o12 25.612 * * 3s308 628 3P936 * 06/21/72 Table h: EXTERNAL PUBLIC DEBT AS OF DECEMBER 31s1971 DEBT REPAYABLE IN LOCAL CURRENCY (IN THOUSANDS OF U.S* DOLLARS) PAGE 7 LOANS FROM GOVERNMENTS USA DISBURSED IN LOCAL CURRENCY DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING OF PERIOD CANCEL* LATIONSP DISBURSED INCLUDING COMMITO DISBURSEm SERVICE PAYMENTS ADJUSTo YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS (1) (2) (3) (4) (5) (6) (7) (8) 1967 15P79P 16,144 * 109 1.209 547 1p?56 "2P059 196812p63f 12Pb76 - 1.381 646 20027 -236 1969 11s?59 11#259 P 1.483 3bo 1.863 *1 1970 9P715 9.775 - " 2#148 292 2.440 *686 1971 6P941 6941 " " 1522 249 1o771 1972 5419 5.419 - * 1.471 171 1o642 1973 3#946 3P948 869 132 10001 * 1974 3,078 3#07b * * 717 103 820 1975 2P362 2.362 * 717 77 794 * 1976 1P645 1,645 * 692 51 744 1977 952 952 * - 614 27 641 * 1Y7F 33P 338 - * 109 11 119 1979 229 229 U U 89 7 96 1940 140 140 o 70 4 74 * 19"1 70 70 70 2 72 * ECONOMIC AND SOCIAL DATA DIVISION ECONOMIC PROGRAM DEPARTMENT JUNE 26, 1972  V. FISCAL STATISTICS Table No. 5.1 Fixed Public Investment by Sectors, 1966-77 5.2 Fixed Investment by Public Sector, 1972-74 5.3 Public Investment Program, 1972-74, Agriculture (Excluding Irrigation) 5.4 Public Investment Program, 1972-74, Irrigation 5.5 Public Investment Program, 1972-74, Transport: Highways 5.6 Public Investment Program, 1972-74, Transport: Ports 5.7 Public Investment Program, 1972-74, Transport: Air 5.8 Public Investment Program, 1972-74, Telecommunications 5.9 Public Investment Program, 1972-74, Electric Power 5.10 Public Investment Program, 1972-74, Water and Sewerage 5.11 Public Investment Program, 1972-74, Education 5.12 Public Investment Program, 1972-74, Public Health 5.13 External Financing of Public Sector Credit Lines, 1972-76 5.14 Cash Operations of the Central Government, 1967-71 5.15 Functional Classification of Central Government Expenditure, 1965-72 5.16 Central Government Operations, 1965-71 5.17 Operation of State Enterprises, 1965-71 5.18 Operations of Local Governments, 1965-71 5.19 Operation of Autonomous Institutions, 1965-71 5.20 Consolidated Operations of the Public Sector, 1965-71 5.21 Central Government Current Revenues, 1965-71 5.22 Rest of Public Sector Current Revenues, 1965-71 5.23 Total Public Revenue and Central Government Share, 1965-71  Table 5.1: FIXED PUBLIC INVESTMENT BY SECTORS, 1966-76 (Millions of 1971 Sucres) Actual Investment Mission Estimates Projection Sector 1966 1967 1968 1969 1970 1971Ab 1972 1973 1974 195 19tb 1977 Agriculture 117 121 115 126 166 178 168 187 211 Irrigation 36 27 53 55 49 h7 93 111 185 Energy 34 65 133 98 133 218 395 651 731 Transport: Highways 491 685 698 568 729 794/c 630 637 827 Transport: Ports 14 21 46 16 48 62 104 101 153 Transport: Airports 23 24 26 39 57 24 40 55 48 Telecommunications 88 19 99 88 71 61 193 133 189 Water and Sewerage 230 306 137 144 184 200 315 428 518 Education 64 68 129 130 140 88 193 228 204 Public Health 13 26 35 28 38 45 110 141 184 Others. /a 334 220 288 553 525 548 224 267 325 Total 1444 1582 1759 1845 2140 2265 2465 2939 3575 4215 4889 %623 a Figures from 1966 to 1971 include investments in machinery and equipment, buildings and miscellaneous (see textCh. III F). For 1972-74 a 10 percent allowance has been made for "16thers" to account for miscellaneous minor investments in unlisted sectors and unforeseen capital expenditures. /b Based on preliminary figures by the National Planning Board and adjusted by the mission. /c Excludes investment in road construction by Texaco-Gulf (estimated at S/285 million). Source: National Planning Board (for actual investments, 1966-70), mission estimates (see Statistical Appendix Tables 5.3 to 5.12.) Table 5.2- FIXED INVESTMENT BY PUBLIC SECTOR, 1972-74 SUMMARY BY SECTORS (In millions of 1971 sucres) Total 1972 1973 1974 1972-74 Dom. Ext. Dom. Ext. Dom. Ext. Dom. Ext. Total Finan- Finan- Total Finan-Finan- Total Finan- Finan- Total Finan- Finan- cing cing cing cing cing cing cing cing Agriculture 168 103 65 187 111 76 211 124 87 566 338 228 Central Government 149 168 190 507 Rest of Public Sector 19 19 21 59 Irrigation 93 35 58 111 47 64 185 73 112 389 155 234 Central Government 49 80 125 254 Rest of Public Sector 44 31 60 135 Energy 395 113 282 651 216 435 731 246 485 1,777 575 1,202 Central Government 175 476 635 1,286 Rest of Public Sector 220 175 96 491 Transport: Highways 630 L22 206 637 395 242 827 533 294 2,094 1,350 74h Central Government 510 507 687 1,704 Rest of Public Sector 120 130 140 390 Transport: Ports 104 104 - 101 91 10 153 86 67 358 281 77 Central Government 104 101 153 358 Rest of Public Sector - - - - Transport: Airports 40 15 25 55 18 37 48 16 32 143 49 94 Central Government 40 55 48 143 Rest of Public Sector - Telecommunications 193 - 193 133 - 133 189 - 189 515 - 515 Central Government 193 133 189 515 Rest of Public Sector - - - Water and Sewerage 315 130 185 428 173 255 518 197 321 1.261 500 761 Central Government 98 218 257 573 Rest of Public Sector 217 210 261 688 Education 193 99 94 228 115 113 204 101 103 625 315 310 Central Government 146 161 143 450 Rest of Public Sector 47 67 61 175 Public Health 110 27 83 101 36 105 16 52 132 435 115 320 Central Government 82 108 146 336 Rest of Public Sector 28 33 38 99 Others 224 105 119 267 120 147 325 143 182 816 368 448 Central Government 155 200 257 612 Rest of Public Sector 69 67 68 204 Total 2565 1,153 1,312 20939 1.122 1.617 1,7q 1 -71 Phd 8 979 b )6 . o33 Central Government 1,701 2,207 2,830 6,738 Rest of Public Sector 764 732 745 2,241 Source: Statistical Appendix, Tables 5.3 to 5.12. Table 5.3: PUBLIC INVESTMNT PROGRAM, 1972-74 AGRICULTURE (EXCLUDING IRRIGATION) Total 1972 1973 1974 1972-7 (In millions of 1971 Sucres) A. Central Government 149 168 190 507 INIAP - Agricultural Development, /a 25 25 11 61 Forestry Development (Esmeraldas) /b - - 25 25 Foot and Mouth Erradication. /c - 15 23 38 Rural Development and Agrarian Reform /d 124 128 131 383 B. Rest of Public Sector 19 19 21 59 Rural Development /d 14 14 15 43 Other Programs 5 5 6 16 Total A + B 168 187 211 566 Domestic Financing TU3 TTT T 338 External Financing 7 7 7 ME /a The IDB has lent $2.2 million towards this project estimated to cost a total of $3.45 million, completion likely in 1974. /b Feasibility study, to be financed in 1973 by a UNDP grant, is not included here. Scope and cost of project will depend on findings of feasibility study, but investment is foreseen to start in 1974 with an estimated 50 percent of requirements being externally financed. /c The IDB is said to be considering a loan of about $3.0 million for this project expected to be implemented over a four to five year period. /d In the absence of adequate information, these are mission projections based on historical data. Sources: National Planning Board, Ministry of Production, mission estimates. Table 5.4: PUBLIC INVESTMENT PROGRAM, 1972-74 IRRIGATION Total 1972 1973 1974 1972-74 (In millions of 1971 Sucres) A. Central Government 49 80 125 254 Montufar /a 35 46 44 125 Milagro /b - 13 38 51 Cotopaxi Plan /c 5 5 $ 15 Carrizal-Chnpe./d 4 4 8 16 Poza Hona /e - - 10 10 Studies /f $ 12 20 37 B. Rest of Public Sector 44 31 60 13$ Babahoyo /g 9 6 38 53 Guayas (Daule-Peripa) /h 29 17 12 58 Other works by Municipalities and Provincial Councils 6 8 10 24 Total A + B 93 111 185 389 Domestic Financing 371 External Financing 7 7 112 234 /a Project started in 1971 and includes an agrarian reform program in addition to irrigation. Total cost of project estimated at $6.0 million of which $4.1 million is being financed by the IDB. /b Assumes a loan of about $4.5 million from the World Bank; project completion likely in 1976. /c 1972-74 program covers studies being financed in part by IDB. /d Program for 1972-74 covers feasibility studies being financed in part by the German Government. /e Assumes 60 percent of costs will be externally financed. If Includes studies for Puyango-Tumbes (for which a loan of about $2.5 million is said to be under consideration by the IDB), Banco de Arena/Yaguachi likely to be financed by the World Bank under its loan to the Milagro project, Jubones (no external financing indicated), and miscellaneous studies. /g Current studies, being supported by the IDB, should be ccmpleted in 1973; construction should start in 1974 at an estimated total cost of about $6.4 million, including on-farm development. The IDB has been requested to finance the project. /h Program for 1972-74 covers feasibilities studies being financed in part by the IDB. Sources: National Planning Board, INERHI, mission estimates. Table 53.: PUBLIC INVESTMENT PROGRAF1972-74 TRANSPORT: HIGHWAYS Total 1972 1973 1974 1972-7- (In millions of 1971 Sucres) A) Central Government 510 507 687 1704 Second Highway Plan and Parallel Programs: Consortium Highway Project 138 15 - 153, /a Quito-Ibarra-Tulcan (all sectors) lb 60 80 100 240 Biblian-Gun-San AntQnio-Empalme con Chilcales/Bucay /c 70 77 78 225 Panamericana Norte (all sectors) /d 20 30 40 90 Guanujo-Guaranda-Babahoyo and others in same sector /e O 60 100 200 Third Highway Plan. /f 65 65 135 265 Roads in IDB supported Program. /g 56 80 120 256 Penetration Roads to the Orient /h 18 20 20 58 Regional Programs Manabi Road Plp, 4 i 21 28 37 86 Loja Road Plan. /h 12 - - 12 Other Roads /h 10 15 15 4o Feeder Roads Program - 4 12 16 /j Maintenance Equipment, /k - 33 30 63 B) Rest of Public Sector 120 130 140 30 Total A + B 630 637 827 2 4 Domestic Financing 22 M 1 External Financing 20d 216 2 /a Consists of the undisbursed portion (3/102 million) of the loans by the Consortium of Agencies at the end of 1971 plus the corresponding counterpart contribution until completion of the project. /b Currently estimated total cost of 246 Km. of roads is S/617 million; about S/377 million had been spent as of March 1, 1972. /C Currently estimated total cost of 115 Km. of roads is S/534 million; about S/309 million had been spent as of March 1, 1972. /d Currently estimated total cost of 163 Km. of roads is S/298 million; about S/19 million had been spent as df March 1, 1972. /e Currently estimated total cost of 254 Km. of roads is S/614 million; about S/257 million had been spent as of March 1, 1972. If This plan, which should be completed in 1976-77, includes the following roads: Cuenca-Naranjal, Alausi-Bucay, Jipijapa-Manglaralto, Tulcan-Tulfino-Maldonado, Riobamba-Banos, Baba-Casa de Tejas, Loja-Zumba, Pindo-Zaracay, Puerto Ayora-Canal de Baltra, Otavalo-Garcia Moreno, Ambato-Guaranda, Santa Marta-Palenque, Quevedo-Moraspungo, El Tingo-La Merced. Thus far, supplier's credit financing for only the Loja-Zumba road (the major road in the Plan) has been sought. The investment program assumes that only one-third of the investment originally planned for 1972 and 197, will be made effective (see text), and that 40 percent of the Plan will be externally financed beginning 1973. Current estimated cost of the entire Plan is S/1.36 billion. 1IDB is financing US$18.0 million of total project cost estimated at US$29.1 million; completion in 1975-76. Roads covered by this program include Ambato-Banos, Puyo-Macas, Boliche-Puerto Inca, Milagro-Yaguachi, Banos-Puyo. /h Financed fully by Central government. Ii Supplierts credit financing has been sought; estimated total cost S/165 million, about S/79 million spent as of March 1, 1972. /i Estimated cost of feasibility study (assumed 80 percent AID financed). K Requirements for maintenance equipment are based on recommendations by the consultants under the Second Highway Plan; about S/25 million worth of these requirements are expected to be procured in 1972 under the Consortium Highway Project loans. Sources: Ministry of Public Works, National Planning Board, mission estimates. Table 5.6: PUBLIC INVESTMEKT PROGRAM, 1972-74 TRANSPORT: PORTS Total 1972 1973 1974 1972-74 (In millions of 1971 Sucres) Central Government 104 101 153 358 Esmeraldas /a 70 70 70 210 Manta 33 - - 33 Guayaquil - Equipment Renewal /b - 14 48 62 Puerto Bolivar Expansion - /c - 8 25 33 River Ports 1 2 2 5 /d Studies - 7 8 15/e TOTAL 104 101 153 358 Domestic Financing 104 91 86 281 External Financing - 10 67 77 /a Total cost of expansion program has been estimated at S/ 250 million with completion scheduled for 1975. No external financing being sought. /b Cost of equipment renewal program is based on estimates of the Guayaquil Port Authority. Most urgent requirements amounting to S/ 14 million are expected to be financed by the Authority in 1973; remainder S/ 48 million are assumed to be externally financed. /c 50 percent of expansion program assumed to be externally financed. /d Covers mainly improvements in the ports of Quevedo and Babahoyo. /e This represents the estimated cost of a national ports study; financial assistance for the study is said to be under consideration by the United Kingdom. The program assumes 80 percent of the cost will be externally financed. Sources: National Planning Board, Guayaquil Port Authority, Ministry of Public Works, mission estimates. Table 5.7: PUBLIC INVESTMENT PROGRAM,1972-74 AIR TRANSPORT Total 1972 1973 1974 1972-74 (In millions of 1971 Sucres) Central Government '40 55 48 143 Quito Airport 16 20 16 52 /a Guayaquil Airport 10 20 19 49 /a Expansion and/or improvement of various existing airports, including equipment /b 14 15 13 42 Total 40 55 48 143 Domestic Financing 17 17 IT 7 External Financing 2 37 32 /a Includes improvements to existing facilities and estimated cost of feasibility study for major expansion; 60 percent external financing of improvements has been assumed*The feasibility study, assumed 80 percent AID financed, should be completed in 1974. /b Includes airports at Pastaza, Tulcan, Machala and Mantaj 60 percent external financing has been assumed. Sourcess National Planning Board, mission estimates. Table 5.8: PUBLIC INVESTMENT PROGRAM, 1972-74 TELECOMMUNICATIONS /a Total 1972 1973 1974 1972-74 (In millions of 1971 Sucres) Central Government 193 133 189 515 Expansion of Telephone Systems in Quito and Guayaquil 75 75 83 233 Inter-urban Telephone System 13 13 13 39 Mnnabi Program - 20 30 50 Telex-Gentex System 15 25 25 65 Expansion of Microwave System - - 25 25 Satellite Conmunication Station 90 - - 90 Expansion of Telephone Systems in various cities - - 13 13 Total 193 133 189 515 Domestic Financing - - - - External Financing 193 133 189 515 /a Excludes postal service. Sources: National Planning Board, mission estimates. Table 5.9: PUBLIC INVESTMENT PROGRAM, 1972-74 ELECTRIC POlER Total 1972 1973 1974 1972-7L (In millions of 1971 Sucres) A. Central Government 175 476 635 1286 Interconnected National System:, Pisayambo (Stage I: Pucara) /a 75 250 300 625 Paute (Stage I: Molino) /b 13 43 50 106 Regional Systems: /c North (Tulcan-Ibarra) 20 17 13 50 North Central (Riobamba-Ambato) 35 38 56 129 South Central (Cuenca-Azoques) 3 17 20 40 South (Loja) 3 11 9 23 Esmeraldas - 6 26 32 Manabi 12 15 30 57 Guayas-Los Rios 10 ho 75 125 El Oro - 10 15 25 Quito-St,o.Domingo 1 11 13 25 Studies /d 3 18 28 49 B. Rest of Public Sector 220 175 96 491 Empresa Electrica Quito: Nayon Expansion /e 220 170 61 451 Empresa Electrica Quito: Further Expansion /f - 5 35 40 Total A + B 395 651 731 1777 Domestic Financing 113 2 76 777 External Financing 29 0 1TO2 /a Total cost of Stage I is about US$40 million, of which IDB is financing US$25.0 million; completion likely in late 1975 or early 1976. /b 1972-74 program covers final studies and engineering for which IDB is financing US$2.7 million. /c Includes investment by the Municipalities. External financing sources include AID (US$3.55 million) and UK Government (about US$8 million; negotiations not concluded). /d Include studies and engineering for Toachi and Montufar, and further planning of interconnected national system. /e Total cost of project is US$18.7 million of which IDA is financing US$6.8 million; completion in late 1974 or ea early 1975. /f La Mica or thermal alternative; studies to be financed by IDA under Nay6n credit. Sources: INEDEL; National Planning Board, and vission estimates. Table 5.10: PUBLIC INVESTMENT PROGRAM, 1972-74 WAT'ER AND SEWERAGE Total 1972 1973 1974 1972-74 (In millions of 1971 Sucres) A. Central Government 98 257 573 Water supply and sewerage for 16 Cities /a 18 54 72 144 Water supply for various urban centers /b 25 63 75 163 Jipijapa - Pa.an Project (water supply) /c - 25 33 58 Cayambe-Pillaro-Atacames Project (Water supply)- /d 6 3 - 9 Azogues Water Supply /d - 12 10 22 IEOS Rural Program /d - 11 17 28 Ministry of Public Works Programs /j h9 50 50 189 B. Rest of Public Sector 217 210 261 688 Quito Water Supply (Pita-Tambo) /e 75 75 81 231 Pita-Tambo (Complementary wor,ks) /f 15 45 90 150 Guayaquil Sewerage Pro oct /g 60 75 75 210 Guayaquil Water Supply /h 15 15 15 45 Poza - Honda f1 33 - - 33 Centro de Rehabilitacion Manabi /b 19 - - 19 Total A + B 315 428 518 1261 Domestic Financing 130 173 197 500 External Financing 19 _25 321 76T /a A loan of about US$10.9 million has recently been approved by IDB to support this program; completion likely in 1975 /b These projects are being financed fully with suppliers' credits. /c Assumes 50 percent external financing will be required. /d No external financing required. /e IDB has lent US$12 million towards this project. /f IDB, which is financing the first phase of the water supply expansion program for Quito, is said to be considering financing a major part of the complementary works. The program assumes that8o percent of the additional works will be externally financed. /g IDB is financing US$7.6 million of project cost estimated at US$11.6 million. /h Based on a supplier's credit contracted late last year by Empresa de Agua Potable Guayaquil. No counterpart contribution has been assumed. /i This is a combined water supply/irrigation project being financed in part by the Federal Republic of Germany. /j Covers sewerage and water supply for Pujiti and sewerage for Riobamba; 1972 figure is Ministry's estimate. No external financing required. Sources: National Planning Board, IEOS, Ministry of Public Works, mission estimates. Table 5.11: PUBLIC INVESTMENT PROGRAM,'1972-74 EDUCATION Total 1972 1973 1974 1972-74 (In millions of 1971 Sucres) A. Central Government 146 161 143 450 Primary School Development Program /a 43 44 - 87 Secondary School Development Program /b 95 105 28 228 Primary School Development (Phase II) - - 75 75 Secondary School Development (Phase II) - - 25 25 Other Primary, Secondary & Teacher Training Schools 8. /c 12 15 35 B. Rest of Public Sector 47 67 61 17$ Escuelp Politecnica, Quito./d 21 25 14 60 Escuela Politecnica del Litoral /e 11 26 30 67 Other schools and educational institutions 15 16 17 48 Total A + B 193 228 204 625 Domestic Financing 99 11 1031 External Financing 97 113 103 /a This program began in 1966 with AID financial suDnort in the amount of $5.3 million. /b Cost of program, begun in 1968, is estimated at $10.2 million of which IDA is financing $5.1 million; covers secondary general and secondary vocational schools. /c Includes S/ 3 million from Education Ministry's Budget and S/5 million from National Fund of Participations. /d Project cost estimated at $2.55 million of which IDB will finance $1.5 million; completion likely in 1974. /e Project cost estimated at $3.9 million of which IDB will finance $2.6 million; completion likely in 1975. Sources: Ministry of Education; National Planning Board; mission estimates. Table 5.12: PUBLIC INVESTMENT PROGRAM,1972-74 PUBLIC HEALTH Total 1972 1973 1974 1972-74 (In millions of 1971 Sucres) A. Central Government /a 82 108 146 336 Health Centers /b 32 63 63 158 Loja Hospital /c 25 25 28 78 Guayaquil Suburban Hospital 25 20 - 45 Guayaquil Childrel's Hospital- /d - - 20 20 Machala Hospital. /d - - 20 20 F,smeraldas Hospital /d - - 15 15 B. Rest of Public Sector: /e 28 33 38 99 Hospitals and Fquipment 28 33 38 99 Total A + B lau 141 184 435 Domestic Financing 27 -3 -3 115 Eixternal Financing 7- li0 132 320 /a Malaria erradication program, being financed by AID, has been treated as current expenditures and not included here. /b This program, 80 percent financed with supplier's credit, covers mainly rural areas. Contract completion date, initially 1972, will have to be renegotiated because of slow progress. /c Fully financed with supplier's credit, completion in 1974. /d Project under study, suppliers' credits covering 60 percent of cost has been assumed. /e Figures for Rest of Public Sector were not available; projections shown are based on historical data. Source: -inistry of Public Health, mission estimates. Table XTERNAL F.NAM1 0 N' r? PUBL1C 4 ECTOR > R10 D1T LINE. 0972-7o inhousand of J.S. dollars. Etimated Disbur.soment A_ol 12/3171 1972 1973 1974 1971 1976 Total Etreral iternally Extarnally ternally Sxtorral y Externally Fereign Lender Domestio Agency Financing _ inancing Total Total Floanced Total Fnanced Total Financed Total Finanoed Total Fnaced Ariculture Livestock I IBRD Min. Prodction 4,ODO 4,000 , 50 4 1 40 - - - - Livaetock II IDA Min. Productlo 1,500 1,500 1,039 461 461 - - - - - - Livestock III I A C.B. Trost Fund/Min. Prod. 10,000 10,000 - 1,800 1,800 2,500 2,500 3,000 3,000 2,100 2,100 690 600 Liestok P.ograms C OUdetmnei.d (IBRD likely) C.B. Trust Fund/Min. od.. 13, 13, 13,000 - - - - - - - 1,000 1,000 3,000 3,000 Agrtoultral Credit , Under Consideration by IBRD C.B. Trust Fund/DNF 8,8,000 - - - 500 000 1,500 1,3,000 000 2,000 2,000 2,000 Agriculture Credit - Under Consideretion by AID C.B. Trust Fund 10,000 10,000 - - - - - 2,000 2,000 2,500 2,500 3,000 3,000 Aric Der. & Diversification /bAID c;,B Trot Fund/Min. Frod. 7,800 7,200 - 650 500 1,650 1,500 2,150 2,000 2,150 2,300 1,200 1,200 Land Sale Guatrty AID Mia. Prodotion 3,600 3,600 500 100 000 700 700 1,000 1,000 1,000 1,700 300 300 Cooperotive Development AID Cooperative Bank 1,200 1,200 - 350 350 050 050 - - - Agriculture & Indutatry 1DB BNF 6,000 6,000 4,015 1,200 1,200 785 785 - - - - Afrecan Palm/Agrie. Cred,t /e Under Gonsideration by IDB BNF 12,000 12,000 - - - - 1,000 1,000 3,000 3,300 3,000 3,000 Agoic. & Industrial Equipment Bank of Cnechoslovakia BNF 5,000 5,000 2,320 400 400 610 600 600 600 600 6o 480 480 Agricultural Equipment Bankasaar (Spain) BNF 5,000 5.000 - - - .o000 - 1.000 0 1 .50 l1,5 00 1.500 1,000 1.000 11,464 5,371 5,221 8,585 8,435 12,750 12,600 15,850 15,700 14,580 14,580 Fi4,71 ,710 138 1,200 1,200 1,300 1,300 1,410 1,410 662 062 - Fisherlen T Undetrmined (IERD likely) Min. atur. Res./CFN 8 o,000 8,000 z-.. - - 138 1,200 1,200 1,300 1,330 1,410 1,410 1,662 1,662 2,000 2,000 Industry CFN 4 996 5,000 2,793 1,200 1,200 1,003 1,003 - - - Industrial Developmsent 1DB '500 1,500 . 300 500 600 600 600 600 - - - Industnial De v el en > IDB CFN ,500 1,500 186 400 400 500 500 414 414 Industrtal Dev(Pereintmet) ID CFN 10,000 ,,0000- 500 500 1,500 1,500 2,500 2,500 3,000 3,200 2,500 2,500 induStrial DeeoantID 00 650 500 1,650 1,500 1,250 1,600 1,650 1,500 - 50 Smalrt Crerpie Assistance AIS 0C.B, Trt Fund/Mi. Prd. ,00 5,00 -.. - 2,000 1,000 4,000 2,000 3,000 1,500 1,000 500 Eport Credir AID- Trust 0,000 8,000 2 500 2,500 4,000 4,000 1,500 1,500 - Dp 1 Undr CFN - COFIEC 8,000 8,0 500 500 2,00 2,500 3,500 3,500 3,500 3,500 Smal IIdner en rUnder Censideratin by TBRD FN - O FC O 15,100 0,000 - - - 750 750 1,000 1,000 1,20 1,250 smal Industri.e Under Consideration by IBRD C.B. T0t FundMin. Prod. 50 1,000 1,000 000 900 - - - Industrial Development Gnerm Genenb~ t CF0 3,190 3,190 - 300 300 1,000 1,000 1,00 1,000 890 090 - Industrial Development Selen GankGo C12 2,320 2,320 920 700 700 70 700 Industrial Development Sias Banks CFN ,23o 230 100 130 130 Industrial Develoment Svisb GOveren CFN 50500 d50 250 250 - Industrial Developmn Dutch Goverment eCFN i500 150 400 400 4o0 4o0 400 40G 300 30Ø Ind. Dev. & Feasibility Studies Mediobanca (Iraly) 1,500 1,000 - - .. 0 500 50-000 400 500 300 300 Industrial Development E.oma.nek Reportedly C.0. Trust Fond 2,000 2, Approached 4,099 7,930 7,780 14,753 13,603 15,414 13,764 14,440 12,790 9,050 9,050 Edncation 00 - - 1,500 500 3,000 1,250 2,500 1,250 2,000 - Education Development Credit AID Nat. Pl. Board/EIES 9,000 3,00 Huin Federal ne 6,000 1000 000 1 000 1,000 1,000 1,500 1,500 1,500 1,500 - - Houing ProgramFedral e 1oan BEV 26000 21 400 - 1,000 1,000 2,000 2,000 3,000 3,000 3,000 3,000 3,000 3,000 Hing can di Hale internationan BEV 2,400 3,00 - 500 500 1,000 1,000 1,000 1,000 500 500 sits and Sevices Under Consideration by AID BEV 3,00 . 1.000 0,000 2 00' 2.000 2.000 ,2 ,o00 2.000 2 Housing Ude Consideration by BEV 10,co Proe1.p (Colombia) 1,000 2,000 2,000 4,500 4,500 7,500 7,500 7,500 7,500 5,500 5,500 127,511 16.501 16.21 30,638 28,338 40,074 36,524 41,952 38,902 31,130 31,130 ToTAL a¯ Including diebureemente of creedite to private sector carrying a Government gaate bil co01nver naean and nil ceopsB enotbern part ef Guayas BasBn. C Hill never general agriculture. d will oover pltry, pigs ond on-Farm develpment ,but bøth prOJ8ct5 aY be ceøbinød into a øingle projet of about $10 - 12,000. e BNF is preparing separate proposals far Agricultural Credit ($10,000) and African Palm ($7,600), Total amount of IBRD loan Is $5.3 illin O which $0.59 million is earsarked fora raiing peogram and port studies. Source: mission eatimates. Table 5.14: CASH OPERATIONS OF THE CENTRAL GOVERNMENT', 1967-71 (In millions of Sucres) 1967 1968 1969 1970 1971 Current revenue 2372.6 2 27.3 2924.8 3713.8 4 0.6 Tax revenue 221 .7 82 2513.1 348.08.9 Direct taxes Export taxes 127.3 147.2 121.0 482.4 520.2 Income taxes 292.5 311.2 384.3 55k.7 738.8 Taxes on banking operations 11.2 18.1 3k.7 42.4 34.8 Property taxes 24.4 22.3 21.9 32.4 29.7 Indirect taxes Import duties 1293.6 1383.5 1399.2 1515.6 1766.1 Industrial production and consumption taxes 2k6.7 264.5 334.7 540.0 925.7 Transport taxes 13.0 13.2 14.1 28.5 36.4 Stamp taxes 104.0 132.0 145.4 165.3 114.0 Other taxes 44.0 16.2 57.8 46.9 60.0 Minus: CAT's & compensated revenues - - - -4.5 -354.7 Plus: Estimated oil revenues - - - - - Nontax revenues 21 .9 219.1 411.7 310.2 269. Fees 5. 10.2 169.7 Property income 30.6 k6.8 223.8 106.5 26.8 Transfers from other public sector 8.4 16.7 18.4 18.8 18.3 Other income 125.7 87.8 115.1 80.7 54.9 Total Expenditure -2413.4 -3k24.1 -3686.7 -6-56.8 -50956.5 Deficit (-) -ko.8 -896.8 -761.9 -943.0 -915.9 Financing 40.8 -896.8 -761.9 -943.0 -915.) External (net) 3TT 70T T- -9 Disbursements 127.9 164.l1 107.9 1UT. 103.7 Amortization (-) -89.8 -94.0 -129.3 -108.7 -163.2 Internal bond issues (net) .7 338.9 224.1 220.2 452.0 Placements 177. 420.0 150.7 2734.0 Amortization (-) -141.7 -226.9 -195.9 -210.5 -282.0 Other public entities & cash 10.9 9.6 -7.4 -13.8 124.3 Central Bank (net) /a -185.0 545.0 496.0 551.0 627.0 Operations in transit /b 141.1 -66.8 70.6 130.7 -227.9 /a As shown in Central Bank accounts. /b Difference between Central Bank accounts and Treasury accounts. Sources: Central Bank and Ministry of Finance and staff estimates. Table 5.15: FUNCTIONAL CLASSIFICATION OF CENTRAL GOVERNMENT EXPENDITURE, 1965-72 1966 1967 1968 1969 1970 1971 /b 1922/ General Services 316 268 265 291 290 - 330 405 Presidency and Congress 76 76 26 39 20 1 17 Judiciary Affairs 53 35 34 44 L2 42 53 64 Foreign Affairs so 46 h3 ha 48 59 79 96 Finance AdIinistration 17 108 99 103 111 120 120 144 Others 26 23 112 70 50 60 70 8h Social Services 596 583 651 924 1,036 1 180 1 356 Education 173 h63 5 2 913 1,500 Health - - - 77 91 150 166 205 'Welfare /c 171 100 100 25 30 30 30 36 Economic Se-rvices 591 534, 671 77E 37 00 1,214_ fh70 Public Works L7 T5 hl 747 700 990 1,200 Agriculture ) 146 /d 69 80 143 60 74 )224 /e ) 270/e Lndustry and Com,merce ) 20 22 18 30 35 ) ) Defen3e and Police /f 5614 597 579 691 878 1 .0t5 1 7L 1.330 Defense 725 ULE3W 527 71(f 1,100 Police 136 116 123 164 164 205 230 280 Total 2,067 982 2,166 2.68 1 ,C l 3,343 4,O8 01996 Unallocable Expenditure 1 316 897 927 1 552 1.712 2 164 2,601 ] 96 Pensions 56 - 7WL7- 103 co Transfers 71 236 199 524 43Q 356 395 652 Interest 223 258 258 294 37C h9 733 755 Amortization 246 295 331 416 619 570 750 760 Other 49 5h 83 216 219 720 620 720 Grand Total 3,383 2,879 3,093 4,233 4,753 5,507 6,681 8,086 /a Includes some state enterprises and "special accounts", which represent some 10-12 percent of total. /b Mission estimates based on Central Bank partial figures for 1970 and Ministry of Finance provisional accounts for 1971 together with latest revision of 1972 budget rigures (Aprij 197e) /c Presuiably included health in 1965-67. /d Expenditure of Ministries of Development, Commerce and Banks. /e The Ministries of Agriculture and Industry and Commerce have been replaced by the Ministries of Production, and of Natural aosources and Tourism. /f Ircludes expenditure on internal affairs. Source: Central Bank and Ninistry of Finance. Table 5.16: CENTRAL GOVERNMENT OPERATIONS, 1965-7'a (in millions of sueres) ACTUALS Estimate 1965 1966 1967 1968 1969 1970 1971 Current receipts 2184 2207 269 2817 3261 4167 4864 of which: transfers from state enterprises -T) -T) ) ) -T) -) -T) transfers from local governments (7) (7) 9) (14) (14) (15) (16) transfers from autonomous institutions (6) (5) (3) (4) (4) (5) (6) Current expenditure 2206 1949 2143 61 3227 3 4362 Purchase of goods and services 1W WOT 1610 6 2 2293 2= 3277 Interest payments 235 305 275 315 386 609 691 Current transfers 272 240 258 384 548 392 401 of which: to state enterprises (-) (-) (-) (-) (-) (-) (-) to local governments (-) (4) (4) (21) (34) (1) (-) to autonomous institutions (138) (94) (126) (204) (297) (237) (251) Current surplus -22 _2-8 556 _6 34 322 495 Capital receipts lb 10 16 8 18 91 26 29 of which: transfers from state enterprises ) -T) -7 7) ) TT) T17) transfers from local governments (-) (-) (-) (-) (1) (1) (1) transfers from autonomous institutions (1) (-) (1) (1) (1) (1) (1) Investment expenditure 748 776 82 1004 1018 11110 Fixed investment 571 -62 P 2 Purchase of existing assets 95 88 154 71 21 265 170 Capital transfers 82 63 31 175 178 245 318 of which: to state enterprises (7) (53) (3) (66) (59) (37) (45) to local governments (34) (2) (4) (14) (67) (35) (50) to autonomous institutions (-) (-) (19) (83) (2) (151) (187) Overall surplus (+) or deficit (-) -760 -502 -265 -930 -89 -930 -886 /a Includes General Budget, Independent Government Entities ("Entidades Adscritas"), Special Accounts and Schools. /b Includes sales of existing assets and incoming capital transfers. Source: National Planning and Coordination Board and mission estimates. Table 5.17: OPERATION OF STATE ENTERPRISES, 1965-71 /a ACTUALS Prelim. Estima&e 1965 1966 1967 196M8 1969 1970 1971 Current receipts 202 213 29 31 339 373 of which: transfers from Central Government ) - ) -) transfers from local governments (-) (-) (-) (-) (-) (-) (-) transfers from autonomous institutions (-) (-) (-) (-) (-) (-) (-) Current expenditure 158 146 164 191 183 201 224 Purchase of goods and services 122 12 * IC 1i 15 173 Inter est payments 12 14 - 1 - - - Current transfers 24 4 18 21 27 28 30 of which: to Central Government (-) (-) (-) (-) (-) C-) (-) to local governments (-) (-) (-) (-) (-) (-) (-) to autonomous institutions (-) (-) (-) (-) (-) (-) (-) Current surplus 44 67 87 104 134 138 149 Capital receiptst /b 7 53 3 66 59 37 45 of which: transfers from Central Government (7) (53) (3) (66) (59) (37) (45) transfers from local governments (-) (-) (-) (-) (-) (-) (-) transfers from autonomous institutions (-) (-) (-) (-) (-) (-) Investment expenditure 6 61 76 120 226 436 460 Fixed investment 12 . 37 --W 7 329 3!0 Purchase of existing assets 9 2 5 7 85 80 80 Capital transfers 5 6 7 42 27 27 30 of which: to Central Government (5) (6) (7) (17) (18) (17) (19) to local governments (-) (-) (-) (-) (-) (-) (-) to autonomous institutions C-) C-) (-) (-) C-) (-) (-) Overall surplus (+) or deficit (-) -9 14 50 -33 -261 -266 /a Includes National Telecommunications Enterprise, National Railroads Enterprise, State Alcohol Enterprise, National Mail Enterprise, and Suppliers, Warehouses and Printing Enterprise. lb Includes sales of existing assets and incoming capital transfers. Source: National Planning and Coordination Board and mission estimates. Table 5.18: OPERATIONS OF LOCAL GOVERNMENTS, 1965-71 /a (illions of Sucres) ACTUALS Estimate 1965 1966 1967 1968 1969 1970 1971 Current receipts 500 523 696 743 765 857 of which: transfers from Central Government -) ) ) (21) (34) (1) () transfers from state enterprises (-) (-) (-) (-) (-) (-) transfers from autonomous institutions (-) (-) (-) (-) (-) (-) (-) Current expenditure 348 369 397 h3 476 04 81 Purchase of goods and services -32 7 0 1 46 7 542 Interest payments - - - - - Current transfers 23 24 28 34 35 37 39 of which: to Central Government (7) (7) (9) (14) (14) (15) (16) to state enterprises (-) (-) (-) (-) C-) (-) (-) to autonomous institutions (-) C-) (-) C-) (-) (-) (-) -Current surplus 152 154 160 253 267 261 276 Capital receipts /b 60 28 33 52 107 66 80 of which: transfers from Central Government 7j) T7) 71) M) TW) 737) (70) transfers from state enterprises (-) (-) (-) C-) C-) (-) (-) transfers from autonomous institutions (2) (2) (5) (3) (5) (4) (5) Investment expenditure 176 161 170 223 287 330 381 Fixed investment -1i 19 212 217 312 362 Purchase of existing assets 20 10 9 7 .14 14 14 Capital transfers 2 1 3 4 6 4 5 of which: to Central Government (-) (-) (-) (-) (1) (1) (1) to state enterprises (-) (-) (-) (-) (-) (-) () to autonomous institutions (1) (1) (3) (4) (5) (3) (4) Overall surplus (+) or deficit (-) +36 +21 +23 +82 +87 -3 _.21 /a Includes Municipalities, Provincial Councils and Municipal Enterprises (Public Entities). /b Includes sales of existing assets and incoming.capital transfers. Source: National Planning and Coordination Board and mission estimates. Table 5.19: OPERATION OF AUTONOMOUS INSTITUTIONS, 1965-71 /a (Millions of Sucres) AGTUALS Estimate 1965 1966 1967 1968 1969 1970 1971 Current receipts 822 8 O 1102 1164 1163 1270 of ihich: transfers from Central Government (132) r1W) 1 t29) (237) (2T1) transfers from state enterprises (-) (-) (-) (-) (-) (-) transfers from local governments (-) (-) (-) (-) (-) (-) (-) Current expenditure 6 72) 80 902 0 1013 1087 Purchase of goods and services 53O 69 ~77 W 5TU "lM Interest payments - - - - - - Current transfers 103 114 112 157 165 168 174 of ihicha to Central Government (6) (5) (3) (4) (4) (5) (6) to state enterprises (-) (-) (-) (-) (-) (-) ( to local governments (-) (-) (-) (-) (-) (-) Current surplus 189 118 166 200 194 1 183 Capital receipts. /b 141 149 21 6 2 9 607 6 of which: transfers from Central Government -) ) (151) (187) transfers from state enterprises (- (-) (-) (-) (-) (-) transfers from local governments (1) (1) (3) (4) (5) 3) (4) Investment expenditure 276 2 _0 410 401 66 Fixed investment 2M2 265 -375 394 -j7 31 Purchase of existing assets 31 23 74 10 14 15 15 Capital transfers 3 2 6 6 8 7 9 of whicht to Central Government (1) (-) (1) (1) (1) (1) (1) to state enterprises (-) ( ) (-) (-) (-) (-) (-) to local governments (2) (2) (5) (3) (5) (4) (5) Overall surplus (+) or deficit (--) +54 -23 -76 +15 +52 -9 -26 /a Includes decentralized or autonomous entities, and public or private institutions with a social or public purpose. Excludes public financial entities (e.g. social security). /b Includes sales of existing assets and incoming capital transfers. Source: National Planning and Coordination Board and mission estimates. Table 5.20: CONSOLIDATED OPERATIONS OF THE PUBLIC SECTOR, 1965-71 (Millions of Sucres) ACTUALS Estimate 1965 1966 1967 1968 1969 1970 1971 Current receipts 3557 3671 43k5 4667 5136 6176 7091 Current expenditure 3194 3074 3367 405 507 5305 5988 Purchase of goods and services 2=7 - U 2818 3385 369 329 492 Interest payments 247 319 275 316 386 609 691 Transfers to private sector and abroad 271 272 274 353 426 367 371 Current account surplus 363 597 968 613 629 871 1103 Capital receipts /a 168 179 216 1 358 287 288 Investment expenditure 1206 1221 1488 1 69 177k 261 2594 Fixed investment 1009 1093 M k3 7 19 3 ZW Purchase of existing assets 155 123 242 95 13k 37k 279 Transfers to private sector and abroad 42 5 5 39 61 3k 50 Overall surplus (+) and deficit (-) -675 -445 -304 -641 -787 -1203 -1203 /a Includes National Telecommunications Enterprise, National Railroads Enterprise, State Alcohol Enterprise, National Mail Enterprise, and Suppliers, Warehouses and Printing Enterprise. Source: National Planning and Coordination Board and mission estimates. /a Table 9.21: CENTRAL GOVERNMENT CURRENT REVENUES 1965-71 (in millions of sucres) ACTUALS EST%Mlg 1965 1966 1967 1968 1969 1970 1971(b Current Revenue 2373 2408 2938 3094 3560 h86 5 Petroleum - - - - - - - Nonpetroleum 2373 2408 2938 309 3560 486 5215 1ax 1797 Ir!T UK 77 2()7, T3 '"T5 Export 1T7 7 199 210 16 Tport 896 998 1302 1388 1396 1521 1624 .Sales and excise 223 217 268 311 386 60 1001 Income 278 293 312 331 h17 560 580 Property 28 29 30 27 27 30 Other 173 1W8 195 200 293 289 332 Nontax 576 534 632 627 895 952 10,0 /a Includes General J'Dudget, independent Government Entities ("Entidades Adscritasu). State enterprises, special accounts, and schoola. /b Based on Ministry of Finance partial data.. Source; Natiozial lanring and Coordinatioz, Bo;rd, Ministry of Finance and mission estimates. /a Table 5.22: REST OF PUBLIC SECTOR? CUiRET REVENu&; 1965-71 (in millions of sucres) ACTUALS EST hATE 1965 1966 1967 196d 1969 1970 1971 Curr citil, vue- 118 1263 1397 1573 1575 1690 1876 Pctroloum Non-et, 1184 1263 1397 1573 1576 1690 1876 Tax -91 723 75 917 920 1019 1177 Export 01 35 5 T T5 7 Import 17t 138 1 134 156 203 233 Sales and excise 216 218 17} 212 259 207 203 Income 27 11 3 85 85 97 112 Propcrty 115 131 115 164 160 271 302 Other 111 159 236 269 212 201 178 Nontax 493 5Lo 609 656 656 671 698 /a Includes MunicipaLities and Municipal Enterprises, Provincial Cou-cils, decentralized or autonomous entities, and public or private institutions with a soc:.al or public purpose. Source: National Planning and Coordination Board for 1965-70, and MinIstry of Finance partial data and staff estimates for 1971. /a Table 5.23: TOTAL PUBLIC REVENUE AND CENTRAL GOVERNMENT SHARE, 1965-71 (million sucres) 1965 1966 1967 1968 1969 . 1970 1971 Total CG/b Total CG Total CG Total CG Total CG Total CG Total CG Total 3,906 1,8 4,254 2,192 5.000 2,626 5,517 2,911 6,6 3,356 6,9 3,791 6,987 4,120 Taxes 2,624 1,695 2,871 1,849 3,310 2,268 3,688 2,510 4,000 2,717 4,894 3,557 5,204 3,626 Export Taxes 290 152 276 130 282 140 307 153 301 157 613 515 770 480 Import Duties 1,018 806 1,201 962 1,568 1,303 1,703 1,460 1,739 1,447 1,882 1,565 1,823 1,520 Income Tax 370 295 400 323 429 337 433 358 536 453 759 577 717 546 Property Taxes / c 246 48 276 42 304 45 333 45 366 51 365 77 320 61 Transp. Taxes 45 24 47 27 52 30 63 37 78 48 61 31 88 62 Sales and Excise 533 274 529 265 560 285 640 300 738 399 911 574 1,107 838 Stamps 130 90 134 97 166 123 194 157 212 159 259 167 259 110 Others 10 6 8 3 9 5 15 - 30 3 51 51 120 9 Nontax Revenue 1,264 285 1,383 343 1,690 358 1,829 401 2,365 639 2,101 234 1,783 494 Fees 526 169 580 191 662 216 717 250 787 267 750 110 952 217 Income from Property 500 17 543 18 647 20 737 71 1,221 241 784 72 245 76 Oil Royalties Other Income 238 99 260 134 381 122 375 80 357 131 567 52 586 201 Tax Revenues as % of GDP 13.0 12.9 13.4 13.7 13.4 14.2 12.9 Total Revenues as % of GDP 19.2 19.0 20.3 20.5 21.3 20.3 17.3 / a Total public revenue excludes revenue of Social Security Institute and other public financial entities. lb CG= Central Government. /C These include rural and urban property taxes, taxes on inheritance and gifts, and other taxes lumped together under the title "Impuestos de Capital." Observations: The figures from the two sources are calculated on an accrual basis. Central Bank figures include certain state enterprises and Cuentas Especiales in Central government figures - whenever necessary allowance was made for them in Ministry of Finance figures. Both sources regard the Entidades Adscritas as public entities other than the Central government. The sharp increase in the 1969 figures for income from property is partly due to advance payment of oil royalties. Sources: Central Bank data for Cntral gvernment 1965-70, and for total 1965-69. Ministry of Finance data for total 1970 and for central government and total export taxes and import duties in 1971.  VI. MONETARY STATISTICS Table No. 6.1 Summary Accounts of the Central Bank, Commercial Banks and the National Development Bank, 1965-71 6.2 Summary Accounts of the Banking System, 1965-71 6.3 International Reserves of the .Banking System, 1965-71  Table 6.1: SUMMARY ACCOUNTS OF THE CENTRAL BANK, COMMERCIAL BANKS AND THE NATIONAL DEVELOPMENT BANK, 1965-71 (In millions of sucres) 1965/a 1966-/a 1967 /a 1968/a 196/a 1969/b 197C/b _9_l b a. Central Bank Net international reserves 687 889 1049 846 924 1283 1379 661 Domestic credit 1582 1745 1716 2394 3298 2969 4174 4899 Central Government (net) 563 701 I 1 1550 2101 2727 Rest of public sector (net) 8 1 -52 -172 -89 -93 -247 -117 To banks 296 264 320 367 585 585 601 566 To private sector 562 585 549 712 825 825 1094 1154 Unclassified assets (net) 153 194 383 426 420 1OVC 625 569 Liabilities to banks 611 770 81 98 1289 1316 l66 16 Commercial banks 6 677 730 ;6 1165 1192 1471 1770 Development banks 65 95 89 116 121 124 185 196 Liabilities to private sector 1570 1773 1855 ?154 2841 2844 01 393 Currency outside bank 121 1320 W 1702 1702 2273 32 Demand deposits 95 84 63 54 82 82 93 80 Advance import deposits 189 310 366 436 952 952 1181 693 Other 71 59 55 100 105 108 254 378 Capital and surplus 88 91 91 103 92 92 9 101 b. Private Commercial Banks Net international reserves 64 81 73 1 118 164 23 39 Domestic reserves 587 7 833 1035 1 1400 1652 2066 Domestic credit 2998 3224 3943 047330 5 89 666 Central Government (net) 2 7 17 17 33 q3 Rest of public sector (net) 23 21 27 33 29 29 85 159 Development bank 2 1 - - 3 3 4 6 Private sector 2537 2707 3286 3894 4099 4099 4878 5419 Unclassified assets (net) 432 493 624 799 892 917c 859 1036 Liabilities 3282 3684 4399 5 5936 6043 6831 16 To Central Bank 3- 3i 66 91 t 123 To development bank - - - - - - - - To private sector 3217 3651 4332 5293 5845 5952 6708 7934 Capital and surplus 386 3 617 617 76 8 Interbank shares -19 -20 -23 -27. -29 -29 -3 o. National Developent Bank Net international reserves Domestic reserves 2 92 84 107 1.( 1_2 15 179 Domestic credit 1086 1022 1094 1174 T62 1522 115 1684 Central Government (net) - - - - - - - - Rest of public sector (net) -57 -62 -71 -102 -138 -138 -162 -229 Commercial banks 1 - - - - - - - Private sector 1007 1006 1108 1215 1464 1464 1555 1749 Unclassified assets (net) 135 78 57 61 136 19&'C 65 164 Medium and long term Foreign liabilities 2 148 149 2 j 188 Domestic liabilities 447 82 82 3 4 To Central Bank 202 222 229 63 To commercial banks 41 48 59 73 73 73 89 126 To private sector 204 204 187 204 184 184 231 299 Capital and surplus 540 492 54 5 634 634 681 31 /a Accounts denominated at the rate of S/18 per US dollar. /b Accounts denominated at the rate of S/25 per US dollar. /c Includes devaluation adjustment. Source: Superintendency of Banks, Central Bank of Ecuador, and IMF. Table 6.2: SUMRY ACCOUNTS OF THE BANKING SYSTEM, 1965-71 (In millions of US dollars) /a la la la la /b /b /b 1965 1966 1967 1968 1969 1969 1970 1971 Net international reserves 1 970 1122 961 1042 1447 1402 700 Domestic credit 56 5766 64 6 80 9297 9062 10977 12838 Central Government (net) 7 703 522 1o I17 137 2134 2770 Rest of public sector (net) -26 -4o -96 -241 -198 -202 -324 -187 Private sector 41o6 4298 4943 5821 6388 6388/c 7527 8321 Unclassified assets (net) 720 765 1064 1286 148 1217 1550 1769 Interbank float 26 40 63 100 85 92 90 165 Mbdium- and long-term foreign liabilities /d $8 18 149 9 15 215 19 188 Liabilities to private sector 446 6096 8691 8 950 9660 11,39 12619 Mney 9 2931 3281 3 4311 - 2 5 Currency outside banks 121 1320 1371 1 1702 1702 2273 2342 Demand deposits 1384 1611 1910 2281 2659 2659 31$5 3716 Quasi-money 2847 3165 3634 4413 5189 5299 6111 6561 Advance inport deposits 189 310 39 436 952 952 EYE _693 Other 2203 2387 2727 3370 3557 3667 4131 4975 Private capital and surplus 455 468 541 507 680 680 799 893 Official capital and surplus /e 540 492 554 48 634 634 681 731 /a Accounts denominated at the rate of S/18 per U.S. dollar. /b Accounts denominated at the rate of S/25 per U.S. dollar. /c Includes devaluation adjustment. /d Includes counterpart funds and funds in administration. /e National Development Bank. Sources: Superintendency of Banks, Central Bank of Ecuador, and IMFo Table 6.3: INTERNATIONAL RESERVES OF THE BANKING SYSTEM, 1965-71 (In millions of US dollars) /a 1965 1966 1967 1968 1969 1970 1971 Total net reserves 41.7 53.9 62.3 53.4 57.9 56.1 26.5 Central Bank (net) 38.1 49.4 58.3 47.0 51.3 55.2 24.9 Assets 7 I7 . 7T 7 U__7 Gold 11.2 =2T 2 M. 19.0 Foreign exchange 30.4 45.2 43.6 17.6 27.5 40.6 27.9 IMF gold tranche position - - - 0.5 - - SDR?s - - - - - 0.1 3.3 Payments agreements - - 3.7 7.1 8.1 9.0 7.4 Other assets 4.3 4.9 4.7 5.9 7.3 14.6 5.5 Liabilities 7.8 11.7 10.8 10.3 13.7 28.1 37.9 To IMF - TO 17 - T2 177 T5. Other liabilities 1.8 0.6 0.4 9.9 1.2 8.3 29.0 Payments Agreements - 0.1 0.2 0.4 0.2 6.1 3.4 Commercial Banks (net) 3.6 4.5 4.0 6.4 6.6 0.9 1.6 /a Until the third quarter of 1970 the exchange rate used is S/18 per U.S. dollar. Afterwards it is S/25 per U.S. dollar. Source: Central Bank of Ecuador.  VII. AGRICULTURAL STATISTICS Table No. 7.1 Area Under Main Agricultural Crops, 1962-70 7.2 Production of Main Agricultural Crops, 1962-70 7.3 Number of Farms and Area, By Size and Form of Tenure, 1968 7.4 Agricultural Income Distribution, 1965 7.5 Percent Distribution of Agricultural Production by Size of Farm and Regions, 1954 7.6 Value of Production per Person by Size of Farm, 1968 7.7 Families Settled by the Agrarian Reform and Colonization Program, September 1, 1964 through June 30, 1970 7.8 Area Settled by the Agrarian Reform Program, September 1, 1964 through June 30, 1970 7.9 Changes in Size Distribution of Farms from 1954 to 1968 7.10 Distribution of Production of Selected Crops by Size of Farm, 1968 7.11 Distribution of Total Value of Crop Production and Area in Crops by Size of Farm, 1968 7.12 Value of Production per Worker and Average Farm Size, by Regions and Provinces, 1968 7.13 Regional Distribution of Agricultural Production by Crops, 1968 7.14 Changes in Land Use, 1954-68 7.15 Bank Credit to the Agricultural Sector, 1950-71  Table 7.1: AREA UNIER MAIN ACRICULTURAL CROPS, 1962-70 (In thousands of hectares) 1962 1963 1964 1965 1966 1967 1968 1969 1970 Domestic Crops Rice 110 113 109 103 111 114 112 92 87 Barley 151 166 164 157 143 144 135 126 134 Corn 197 246 300 307 267 254 255 291 292 Wheat 84 67 71 69 65 80 79 79 76 Potatoes 33 32 39 44 44 48 45 41 47 Beans 42 48 56 55 82 79 86 85 82 Expor tables Bananas 111 122 169 210 187 203 195 190 192 cacao 147 167 363 247 291 264 253 226 226 Coffee 135 159 1ik 166 218 208 191 23A 215 aearame 66 72 93 97 113 119 122 12 125 30o=4s Hatiomal PumiAg Dowd. Table 7.2: I MKTIG OF mAW AGICLURAL CHoPS, 1962-70 (Thoasands of metric tons) 1962 1963 1964 1965 1966 1967 1968 1969 1970 Domes tic Crops Rice 103 105 91 86 111 111 65 83 117 Barley 104 121 80 92 77 81 76 78 110 Corn 137 190 127 189 175 228 129 141 170 "heat 77 67 62 65 63 79 83 94 81 Petatoes 332 296 320 391 347 399 510 457 %2 Beans 21 27 25 31 36 38 35 38 41 Exportables Bananas 2,308 2,296 3,037 3,067 2,744 4,355 3,920 5,388/a 3,688 Cacao 44 45 34 47 51 61 50 48 54 Coffee 53 55 46 65 74 66 63 56 60 Sugarcane 5,917 6,442 7,652 8,087 9,004 7,528 9,829 9,994 10,075 /a This figure was later revised doinwrds to 3,870.499 metric tons by the Ministry of Production. Source: National Planning Board. Table 7.3 A OF FAS AMD AMA, BY SIZE AD POWN OF TOURE, 1966 All Forms of Tenure Owner-Operated Other Form of Tenure Number of Farms Area Number of Farms Area Number of Farms Area Farm Size Groups Percent Percent Percent Percent Percent Percent (Hectares) No. of Total Heatwres of Total No. of Total Hectares of Total No. of Total Hectares of Total All Sizes 633,218 100.0 6,937,520 100.0 480,479 100.0 5,736,428 100.0 152,739 100.0 1,201,092 100.0 Less than 1 206,273 32.6 93,018 1.3 169,955 35.4 74,196 1.3 36,318 23.8 18,822 1.6 More than 1 to 5 264,074 41.7 615,556 8.9 181,354 37.7 420,660 7.3 82,720 54.2 194,896 16.2 More than 5 to 10 68,527 10.8 466,315 6.7 51,096 10.6 345,796 6.0 17,431 11.4 120,519 10.0 More than 10 to 20 36,228 5.7 485,572 7.0 29,118 6.1 388,805 6.8 7,110 4.7 96,767 8.1 More than 20 to 50 32,746 5.2 1,018,315 14.7 28,090 5.8 870,319 15.1 4,656 3.0 147,996 12.3 More than 50 to 100 15,555 2.5 976,653 14.1 12,447 2.6 810,074 14.1 3,108 2.0 166,579 13.9 More than 100 to 500 8,467 1.3 1,647,904 23.7 7,246 1.5 1,448,554 25.2 1,221 0.1 199,350 16.6 More than 500 to 1,000 922 ( -0- 634,554 9.1 806 ( -0- 548,201 9.5 116 ( -0- 86,353 7.2 0.2 ( 0.3 ( 0.8 More than 1,000 426 ( -0- 999,633 14.5 367 ( -0- 829,823 14.5 59 ( -0- 169,810 1U.1 Searces Rbemesta Agapecuaria acimel, 1968, JabLe-7-4: AGRICULTURAL iNca DISTRIBUTION, 1965 Income Per Percent of Total Income Active Person D2q110 Total Income (millions of sucris) (ures) First (lowest) 2.0 171.1 1,820 Second 2.4 205.2 2,183 Third 2.6 223.2 2,374 Fourth 3.0 257.4 2,738 Fifth 3.4 291.6 3,102 Sixth 4.6 392.h 4s,7 Seventh .0 628. 557 lighth 6.6 565.2 6,013 Ninth 12.4 1,060.2 11,278 Tenth (1. 4,299.o 12,7gg TOTALS 100.0 8,53.6 9,100 (arg.) Sour cet ECLA, El Se;nando Decenio de la NaCiones UniA.s rara el De3arrollo--61 Desec rolloricl -o nerz Latina, Docu'ent U9 /.1 1o 9 (199?T :it in fcuador, Junta Nacional de Flanificazion y Ocordinacian Econoica, Secretaria General de Planeacion Lconomica, L egaroLollo dal Eicador, 1970-1972. Table 7.5: PERCENT DISTRIBUTION OF AGRICULTURAL PRODUCTION, BY SIZE OF FARM AND REIONS, 19Mh (Total Production in Sucres) % of Production Size of Total No. Value of Andean Coastal Production Farm (has.) of Has. Production Total Region Plain per ha. Less than 1 46,o0 52,274,100 1.6 3.6 0.7 1,136 1.0 - 4.9 386,200 478,271,700 14.2 25.3 9.5 1,238 5.0 - 9.9 271,500 327,775,200 9.8 11.4 9.1 1,207 10.0 - 19.9 294,300 363,165,600 10.8 10.0 11.2 1,234 20.0 - 49.9 591,500 593,971,500 17.7 12.0 20.1 1,ook 50.0 - 99.9 547,200 409,799,500 12.2 11.0 12.7 7h9 100.0 - 199.9 462,900 282,395,700 8.4 6.6 9.2 610 200.0 - 499.9 693,400 297,235,700 8.9 7.5 9.5 429 500.0 and over 2,706,700 549,705,400 16.4 12.2 18.0 203 5,999,700 3,35,494,400 100.0 99.6 100.0 559 (avg.) Source: Agricultural Census - 1954 Table 7.6: VALUE OF PRCDUCTION PER PERSON BY SIZE OF FARM, 1968 Thousands of sucres Size of Farm (has*) per wprker All sizes 3,290 0 - 1 575 1 - 4.9 1,426. 5 - 9*9 2,630 10 - 19.9 4,206 20 - 49.9 4,838 50 - 99.9 6,760 500 - 999-9 13,552 1,000 and more 7,586 Source: Encuesta Agropecuaria Nacional, 1968. Table 7.7: FAMILIES SETTLED BY THE AGRARIAN REFORM AND COLONIZATION PROLRAM, SEPTEMBER 1, 1964 THROUGH JUNE 30, 1970 196h/d 1965 1966 1967 1968 1969 1970 /6 Total If - - - - - - - - - -- - - - Numerof famlis- - - - - - - - - - - - -- Land Redistribution Through Expropriation/a 0 460 874 531 432 1,510 136 3,943 Through Tenancy Conversion /b 831 12,157 2,913 2,792 760 549 71 20,073 Of Public Lands /c 0 0 925 1,129 692 1,404 98 4,248 Total 831 12,617 4,712 4,452 1,884 3,463 305 28,264 Colonization 728 2,686 2,708 1,567 1,408 1,525 1,186 11,808 Total /f 1,559 15,303 7,420 6,019 3,292 4,988 11 40.072 /a And other means of making private land available for redistribution (i.e., reveviones and negociaciones). /b Convicting "Formas Precarias de Teneneis" to ownership status. /c Land held by the social security system. /d September through December. /e Through June. If Because of rounding data may not add to totals shown. Source: IERAC, Estadisticas De Las Adjudicaciones Legalizadas En Reforma Agjaria Y Colonizacion, September 1970. Table 7.8: AREA SETTLED BY THE AGRARIAN REFCRM PROGRAM, SEPTEMBER 1, 1964 THROUGH JUNE 30, 1970 1964 /d 1965 1966 1967 1968 1969 1970/e Total/f - --T=sand Hectares - - Land Redistribution Through Expropriation /a 0 10.1 10.5 7.5 9.8 14.7 2.5 55.0 Through Tenancy Conversion/b 2.2 46.5 14.6 12.7 8.8 2.8 0.2 87.8 Of Public Lands /c 0 0 1.7 4.9 2.4 3.2 0.3 12.6 Total 2.2 56.6 26.8 25.1 21.0 20.7 3.0 155h Colonization 17.6 97.8 92.1 58.4 43.0 59.6 47.2 a15.8 Total /f 19.8 154.4 118.9 83.6 64.0 80.4 50.1 571.2 la' And other means of making private land available for redistribution (i.e., reversiones and negociaciones). /b Convicting "Formpi Precarias de Teneneis" to ownership status. /c Land held by the social security system. /d September through December. /e Through June. /f Because of rounding data may not add to totals shown. Source: IERAC, Estadisticas De Las AdjudicacionesLegalizadas E Reforma Agraria Y Colonizacion, September, 1970 Table 7.9: CHANGES IN SIZE DISTRIBUTION OF FARMS FROM 1954 TO 1968 Percent tistribution Number of Farms Total Area Average Size No. of Farms Total Area Size of Farms Percentage Percentage 1954 1968 Increase 1954 1968 Increase 1954 1968 1954 1968 1954 1968 Less than 5 Has. 251,686 470,347 86.9 432,000 709,000 64.1 1.72 1.51 73.0 74.2 7.2 10.2 5 to less than 10 Has. 36,250 68,527 89.0 271,500 466,315 71.5 7.49 6.80 10.5 10.8 4.5 6.7 10 to less than 20 Has. 21,400 36,228 69.3 294,300 485,572 65.0 13.75 13.40 6.5 5.7 4.9 7.0 20 to less than 50 Has. 19,415 32,746 68.6 591,500 1,018,315 72.1 30.47 31.10 5.6 5.2 9.9 14.7 50 to less than 100 Has. 8,327 15,555 86.8 547,200 976,653 78.5 65.71 62.79 2.4 2.5 9.1 14.1 100 to less than 500 Has. 5,787 8,467 46.3 1,156,300 1,647,904 42.5 199.81 194.63 1.7 1.3 19.2 23.8 500 to less than 1,000 Has. 664 922 38.8 464,700 634,554 36.5 699.85 688.24 0.2 0.2 7.8 9.1 1,000 or more 705 426 - 39.4 2,242,000 999,633 - 55.4 3,180.14 2,346.55 0.1 0.1 37.4 14.4 Total Republic 344,234 633,218 83.9 5,999,&00 6,937,946 15.6 17.43 10.96 100.0 100.0 100.0 100.0 Source: 1954 -- First Agricultural Census. 1960 -- National Agricultural Survey. Table 7.10: DISTRIBUTION OF PRODUCTION OF SELECTED CROPS BY SIZE OF FAR, 1968 Share in Harvested Area and total No. of Farms Crop Total Less than 5 Has. 5 - 99.9 Has. areater than 100 Has. % of % of % of %of %of %of %of %of Harvested Number Harvested Number Harvested Number Harvested Number Area of Farms Area of Farms Area of Farms Area of Farms Corn 100.0 100.0 45.0 75.7 38.0 23.2 17.0 1.1 Yucca 100.0 100.0 30.6 47.7 51.9 50.2 17.5 2.1 Potato 100.0 100.0 39.2 83.7 27.2 85.0 33.6 1.3 Kidney Bean 100.0 100.0 39.8 69.5 38.6 28.8 21.6 1.7 Wheat 100.0 100.0 28.2 73.4 34.6 25.2 37.2 1.4 Rice 100.0 100.0 24.2 60.3 34.6 37.5 141.2 2.2 Coffee 100.0 100.0 16.3 41 .9 55.0 55.4 28.7 2.7 Cocoa 100.0 100.0 6.0 27.1 46.1 68.2 47.9 4.7 Banana 100.0 100.0 3.0 26.6 26.9 66.2 70.1 7.1 Sugar Cane 100.0 100.0 10.1 50.6 26.9 45.9 63.0 2.5 Cotton 100.0 100.0 14.5 51.1 29.5 45.1 56.0 3.8 Source: Encuesta Agropecuaria Nacional, 1968. Table 7.11.: DISTRIBUTION OF TOT4 VALUE OF CROP PRODUCTION AND AREA IN CROPS /a BY SIZE OF FARM, 1968 Size of Farms Value of Crop Production Area in Crop Value/Hectare Hectares Sucres Percent Percent Hectares Percent Percent Sucres cumulative Cumulative 0 to 1 147,831,694 3.2 3.2 76,498 3.9 3.9 1.932 1 to 5 652,978,934 14.1 17.3 417,402 21.5 25.5 1.564 5 to 10 439,654,674 9.4 26.7 257,351 13.3 38.7 1.708 10 to 20 473,760,537 10.2 36.9 203,919 10.5 49.3 2.323 20 to 50 756,468,074 16.3 53.2 285,300 14.7 64.0 2.651 50 to 100 580,091,658 12.5 65.7 197,381 10.2 74.2 2.939 100 to 500 943,320,196 20.3 86.0 306,453 15.8 90.0 3.078 500 to 1,000 392,062,061 8.5 94.5 123,408 6.4 96.3 3.177 1,000 and over 255,745,201 5.5 100.0 71,374 3.7 100.0 3.583 All Farms 4,641,913,029 100.0 1,939,086 100.0 2039b /a Refers only to crops included in the calculation of Total Value of Crop Production. Source: Encuesta Agropecuaria Nacional, 1968. Table 7.12: VALUE OF PRODUCTION PER WORKER AND AVERAGE FARM SIZE, BY,REGIONS AND PROVINCES, 1968 Value of Prod. Average Per Worker Farm Size RIegions and Provinces (sucres) (hectares) 3cuador, total 3,290 11.0 Sierra, total 2 141 6.8 Pichincha 27' 'archi 2,978 11.7 arlar 2,h08 6.9 Imbabura 2,025 6.8 C otopaxi 2,120 6.2 Bolivar 1,904 5.9 Loja /a 909 5.3 Chimborazo 1,776 .7 Aztuay 770 3.8 Tungurahua 1,*716 2.3 ;osta, total 4,728 17.8 Esmeraldas 9s752 -3T Los Rios 7,08 26.3 Guayas 4,915 16.3 M1 Oro 3,871 19.4 Aanabi 2,935 13.8 /a Suffered particularly hard from the 1968 drought. Source: %cuesta A&ropecuaria Nacional, 1968. Table 7.13: REGIONAL DISTRIBUTION OF AGRICULTURAL PRODUCTION BY CROPS, 1968 (In percent) Total Sierra Coast Oriente Cotton 100.0 2.2 97.8 - Rice 100.0 2.3 97.7 - Bananas 100.0 23.7 76.3 - Plantains 100.0 14.3 77.6 8.1 Coffee 100.0 11.3 87.4 1.3 Cacao 100.0 8.2 91.8 - Corn 100.0 59.0 38.0 3.0 Peanuts 100.0 20.2 78.1 0.7 Pineapple 100.0 22.2 69.7 8.1 Cabbage 100.0 99.6 - 0.4 Green beans 100.0 81.8 18.2 - Dry beans 100.0 95.9 3.3 0.8 Lima beans 100.0 98.7 1.3 - Potatoes 100.0 99.8 0.2 - Onions 100.0 100.0 - - Wheat 100.0 99.9 0.1 - Barley 100.0 100.0 - - Peas 100.0 100.0 - - Milk 100.0 76.9 19.2 3.9 Livestock (stock) 100.0 5h.2 41.6 4.2 Livestock (slaughtered) 100.0 Sh.6 34.4 11.0 Source: Encuesta Agropecuaria Nacional, 1968. Table 7.14: CANGES IN LAND USE 1954-1968 1954 1968 Increase Rate of Growth Census Encuesta (Percend (Percent (hectares) Per Year) Total area 27,067,000 Number Gf farms 3h ,234 633,218 83.95 4.4 Area in farms 5,999,700 6,937,520 15.63 1.0 Percent of total area in farms 22.17" 25.630 Average acreage per farm 17.43 10.96 -37.12 -2.8 Size of modal farm 2.14 1.9 -20.83 -1.37 Area in annual crops 896,600 1,220,600 36.14 2.2 Area in seni-permanent crops 396,9558 Area in perianent crops 315,300 575,940 82.66 / 4.4 Area in all crops 1s214,900 2,193,098 e0.52' 1,.3 Area in fallow or restinS 348,000 445,955 28.15 1.8 Total crop land 1,562,900 2,639,053 68.86 3.3 Cropland in food crops 1,070,560 1,883,240 76.38 4.1 Average cropland por 4arn 4.53 4.17 -7.95 -0.5 Cultivated pasture 520,800 1,176,767 125.93 6.0 Total tillable land 2,181,000 3,815,820 74.96 1.1 Average per farm 6.140 6.03 -5.78 -0.4 Ratio tillable land to area in farms 34.69 55.00 Ratio tillable land to total area 7.69 14.10 Natural pasture 1,254,500 865,614 -31.00 -2.6 Total pasture 1,774,300 2,042,381 5.11 1.0 Total cropland and pasture 3,335,500 I,681,431 10.35 2.5 Average cropland and pasture per farm 9.69 7.39 -23.74 -1.55 Cropland and pasture as % of land in farms 55.59 67.48 Cropland and pasture as 9 of total area 12.32 17.30 Source: ?riner Censo Agroricuario. Nacional 1954* Ministerio de economia, Quito 196. Encuesta Agropocuario Nacional 1968. Sdcretaria General de ?lneacion Economica, Junta de Planificacion y Coordinacion, Quito 1969. Table 7.15: BANK CREDIT TO THE AGRICULTURAL SECTOR, 1950-71 (Millions of current sucres) Agricultural Credit by Type of Banking Agricultural Institution Total Credit as a % Banco Ncl. Central Private Bank of Total Bank de Fomento Bank /a Banks Total Credit Credit 1950 192.1 154.8 31.3 378.2 1,723,3 21.9 1951 161.3 149.9 20.2 331.4 1,924.7 17.2 1952 186.8 39.0 20.5 246.3 2,049.7 12.0 1953 195.0 23.3 31.2 249.5 2,218.9 11.2 1954 199.7 27.2 45.3 272.2 2,462.2 11.1 1955 260.6 36.1 53.2 349.9 2,823.6 12.4 1956 253.7 44.4 51.9 350.0 3,030.9 11.5 1957 301.6 36.8 67.7 1o6.1 3,383.5 12.0 1958 265.6 58.9 83.5 408.0 3,246.4 12.6 1959 189.5 40.0 93.6 323.1 3,281.1 9.8 1960 188.8 36.3 109.1 334.2 3,682.1 9.1 1961 234.2 114.2 102.5 450.9 14,044.2 11.1 1962 183.9 108.5 93.9 386.3 4,009.0 9.6 1963 201.9 104.4 98.8 405.1 4,382.6 9.2 1964 246.9 101.0 161.2 509.1 6,275.0 8.1 1965 253.4 133.1 344.0 /C 730.5 6,292.8 11.6 1966 304.8 153.2 482.4 940.4 6,487.0 14.5 1967 354.0 186.3 469.8 1,010.1 7,592.0 13.3 1968 438.9 148.1 481.4 1,068.4 8,984.5 11.9 1969 470.1 198.1 585.3 1,253.5 9,303.6 13.5 1970 531.0 215.3 840.5 1,586.8 11,309.5 14.0 1971/b......... /a Direct credit by the Central Bank. Excluded are Central Bank credit to banking institutions, Central Bank credit for future exports, and utilization by the government of overdrafts on the Central Bank. /b Partial figures for 1971 are: .Private Banks: BNF 1970 Jan-June 403.1 1970 Jan-Aug. 346.1 1971 Jan-June 369.8 1971 Jan-Aug. 364.9 /c The substantial increase from the previous year is largely fictitious, since in order to meet a new legal stipulation to maintain agricultural credit at least 15 percent of their sight and term deposits, many loans merely secured by agricultural assets were simply reclassified as agricultural. Moreover, a large but undetermined fraction of all agricultural credit is for short-term working capital and as such not linked to net investment. Source: Central Bank  VIII. MANUFACTURING AND PETROLEUM Table No. 8.1 Industrial Power Sales by Four Major Utility Self Generators of Power, 1968-71 8.2 Industrial Purchasers of Electric Power, Number and Yearly Percent Change, 1967-71 8.3 Imports for Industrial Use by Type, 1965 and 1970 8.4 New Fixed Investments in Factory Manufacturing, 1964-69 8.5 Total New Investment Registered Under Industrial Promotion Law, National and Foreign, 1957-70 8.6 Firms Registered Under the Industrial Development Law (Ley De Fomento), Number, Employment, Investment, Production, Value Added, Materials Used and Origin - New and Existing, 1957-71 8.7 Industries Classified Under the Industrial Development Law, 1951-71 8.8 Industries Classified Under the Industrial Development Law Between 1957 and 1969, Number of New Firms, Amount of Investment, By Classification, Category and Subindustry 8.9 Total Industry Credits Through Ecuadorian Financial Institutions, 1965-71 8.10 Total Internal Financial Institution and Foreign Suppliers' Credits (Private) to Industry, 1965-71 8.11 CFN Loan Approvals and Project Costs, 1963-71 8.12 CFN Loan Disbursements by Sector, 1963 8.13 Economic Impact of CFN Loans: Investment, Employment, Salaries and Balance of Payments, 1963-71 8.14 COFIEC Manufacturing Loan Disbursements, 1966-71 8.15 Number and Value of Loans Granted and Renewed to Small Industry and Commerce During 1964-70 11 Table No. 8.16 Foreign Private Supplier Credit For List 1 Items, 1969, By Term 8.17 Official Exports By Category and Principal Products, 1960-71 8.18 Exports Of Ecuador To Andean Subregion, 1970 and 1971 8.19 Estimates of Possible Exports of 25 Products To Andean Subregion (Prodxts Free of Du.ty, January 1, 1971) 8.20 First Tranche From the Common List of L.A.F.T.A. 8.21 Products Not Produced In the Subregion and Not Reserved for Sectoral. Industrial Development Programs to be Manufactured by Ecuador 8.22 O01 Concessions in Eastern Ecuador 8.23 Geographical and Geophysical Activities, 1966-70 8.24 Wells Completion in Ecuador, 1966-70 8.25 Wells Completed in Eastern Ecuador, 1967-72 8.26 Crude Petroleum Production, 1951, 1961, 1966-71 8.27 Petroleum Production and Investment, 1972-80 8.28 Petroleum Investment, 1964-71 8.29 Dorestic Consumption of Refined Products, 1961, 1966-71 8.30 Net Imports of Petroleum, 1961, 1966-71 8.31 US Demand and Supply of Petroleum, 1970-85 8.32 Supply and Demand of Crude Petroleum and Refined Products in Chile and Peru, 1970 8.33 Caribbean Refineries Owned by Potential Producers in Ecuador, 1962 8.34 Distances and Duration of Voyages Between Esmeraldas and Some Principal Ports 8.3 Comparative Tax Paid Costs of Some Representative Crudes, January - arch, 1972 111 Table No. 8.36 Tax Paid Costs of Soms Representative Crudes, January - March, 1972 8.37 Price and Tax Paid Cost Comparisons, F.O.B. Esmeraldas, 1972 8.38 Worldscale Freight Rates 8.39 Freight Differentials to Esmeraldas 8.40 Estimated Government Unit Petroleum Revenue, 1972-77 8.41 Summary and Comparison of Some Clauses of the Hydrocarbons Laws, Concessions and Contracts in Force in Ecuador  Table 8.1s INDUSTRIAL POWER SALES BY FOUR MAJOR UTILITY SELF GENERATORS OF POWER, 1968-71 (in millions of kwh) CLASS OF 1967 1968 1969 1970 1971 POWER GENERATOR Total EMELEC, EE Quito, EE Cuenca. EE Amibato - 157.7 176.4 191.1 208.3 Total Industrial Power Consumption in Ecuador (public and private) 215.9 242.9 283.5 320.8 359.2 Percent Four Utilities of Total Indus trial Power Consumption - 64.9 62.2 59.6 58..0 Annual Growth of Four Public Utilities (percent) - - 11.8 8.4 9.0 Annual Growth of Total Industrial Power Use in Ecuador (percent) - 12.5 16.7 13.2 12.0 Source: INECEL Table 8.2: INDUSTRIAL PURCHASERS OF LECTRIC/a NUMBER AND YEARLY PERCENT CHANGE 1967-71 1967 1968 1969 1970 1971 EMELEC - Guayaquil Number 1184 1242 1301 1375 14654 Percent Change - 4.9 4.8 5.7 5.7 E.E. Quito Number 922 993 1027 1104 1170 Percent Change - 7.7 3.4 7.5 6.c E.E. Cuenca Number 272 303 320 351 390 Percent Change - 11 .4 5.6 9.7 11 .1 E.E. Anbato Number 294 317 348 366 383 Percent Change - 7.8 9.8 5.2 4.6 btal of above Number 2672 2855 2996 3196 3397 Percent Change - 6.8 4.9 6.7 6.3 /alndustrial.power users include small industry and artesan shops and possibly service establishrents in addition to factories. Source: INECEL Table 8.3: IMPORTS FOR INDUSTRIAL USE BY TYPE, 1965 AND 1970 Product Categories Value of Imports f.o.b. Average Annual U$thousand) Growth 1965 1970 Intermediate and Primary Products for Industry 50,408 71,652 7.3 Food 7,061 8,792 45 Non-food agricultural 18,269 17,272 -1.1 Mineral Products 14,547 24,499 11.0 Chemicals and Pharmaceuticals 10,531 21,089 14.9 Capital Goods for Industr 26,224 43,383 10.6 Office and Scientific Machinery and Eauipment 3,618 5,218 7.6 Equipment 915 1,506 10.5 Parts and accessories for Industrial Machinery 2,472 4,285 11.6 Industrial Machinery 15,031 27,427 12.8 Other Fixed Eauipment 4,188 4,947 3.4 Data based on import permits; actual imports may be less than indicated by permits granted. Source: Central Bank Bulletins. Table 8.: NEW FIXED INVESTMENTS IN FACTORY MANUFACTURING, 1964-69 (Amounts in thousands of sucres) Investment in Existing Firms New Expansion of as % of total Year Total Firms Existing Firms Investment 1964 546.5 238.2 308.3 56.4 1965 400.7 106.0 294.7 73.5 1966 537.2 168.9 368.3 68.6 1967 951.4 463.7 487.7 51.3 1968 899.7 286.3 613.4 68.2 1969 1001.0 160.2 840.8 84.0 1964-1969 Total 4336.5 1423.3 2913.2 67.2 Increase in Employment (Number) ;15731 8266 7465 47.5 New Invest- ment per Employee Added S/276,000 S/172,000 S/390,000 -- Source: National Planning Board, Industrial Census (Annual) TablTOTAL N54 INVNETHENT REGISTERED UNDER INUJSTRIAL PMOTION LAW, NATIONAL AND FOREIGN, 1957-70 Total Investment National Investment Foreign Investment Year (in S/ million) (in S/ million) (in % of total) (in S/ million) kin A of total) 1957 52.936 30.812 58 22.124 42 1958 U .309 4o.079 97 1.230 3 1959 102.832 90.232 88 12.600 12 1960 63 .473 63.473 100 - ,961 69.991 49.093 70 20.898 30 1?62 127.465 122 .225 96 ,.240 4 1963 135.217 100.807 74 346.l10 26 1964 290.610 231.108 30 59.5o2 20 1965 309.088 226.605 73 82.483 27 1966 175.220 90.535 52 84.685 48 1967 175.748 L33.75 76 42.573 2h 1968 181.765 179.110 98 2.655 2 1969 316.131 214.55 67 1o3.581 33 1970 166.269 98642 59 67.727 I urceax Vinistry of Production Table 8.6: FIRMS REGISTERED UNDER THE INDUSTRIAL DEVELOPMENT LAW (LEY DE FOMENTO), NUMBER, EMPLOYMENT, INVESTMENT, PRODUCTION, VALUE ADDED, MATERIALS USED AND ORIGIN - NEW AND EXISTING - 1957-71 Classi- Number Value of Value Primary Foreign Primary Years fication of Employ- Investment Production Added Materials (S'O00) as % Materials Firms ment (S'000) (S'OOO) (S'000) National Foreign of Total Total (S'000) 1957 New 6 327 52,936 113,746 21,244 1,793 64,706 97.3 66,499 Existing - - -- -- -- -- -- -- -- -- 1958 New 13 663 44,081 74,158 19,966 42,090 5,602 11.7 47,692 Existing 2 216 9,586 4,886 2,490 1 ,979 60 2.9 2,039 1959 New 9 675 100,438 156,010 32,828 48,886 25,523 34.3 74,409 Existing 5 1 ,30 78,927 43,423 23,214 9,036 7,743 46.1 16,779 1960 New 17 434 69,130 126'675 26,357 69,483 15,141 17.9 84,624 Existing 8 1 ,889 204,113 85,920 30,129 19,799 24,026 54.8 43,825 1961 New 15 644 197,420 261,935 74,837 58,892 80,491 57.7 139,383 Existing 13 1 ,468 472.404 229,85L 61,561 58,679 27,360 31 .8 86,039 1962 New 28 1 ,08 127,618 123,819 31,951 43,615 24,800 36.3 68,415 Existing 16 2,029 316,476 258>006 62,700 81,558 51,816 38.8 133,374 1963 New 43 1 ,489 119.179 341,260 92,588 48,152 157,985 76.6 206,137 Existing 25 2,460 533.923 302,017 105,096 85,881 51,253 37.4 137,134 1964 New 49 1 ,863 286,628 334,080 96,628 59,226 115,689 66.1 174,915 Existing 22 1 ,412 285.148 183,951 47,449 37,694 49,631 56.8 87,325 1965 New 58 2,132 304.508 600,129 162,265 156,030 201,230 56.3 357,260 Existing 27 2,308 318,730 299,609 81,968 70,117 99,175 58.6 169,292 1966 New 26 732 175,908 200,960 49,553 61,177 49,990 50.0 111,167 Existing 24 1,241 138,483 130, 293 28,172 38,571 34,773 47.4 73,344 1967 New 34 1,146 175,747 459,914 87,102 278,124 40,402 12.7 318,526 Existing 18 1,231 192,049 137,787 44 518 49,118 16,196 24.8 65,314 1968 New 32 978 181 ,766 3Z,000 85, 070 110,158 67,125 37.9 177,283 Existing 10 533 97,576 165,661 23,874 88,535 23,933 21 .3 112,468 1969 New 41 1 >8o0 336,761 53h,989 150,437 175 828 123,368 41.2 299,196 Existing 17 645 105,903 176,059 37,762 59,571 34,617 36.7 94,188 1970 New 32 1 ,384 166,268 332,939 102,243 66,119 80,333 54.8 146,452 Existing 13 559 92,340 814,291 21,767 22,847 16,641 42.1 39,488 1971 New 25 1 .483 728,897 596,683 28,809 181,994 52,656 22.) 234,650 Existing 16 1 306 109.842 227 999 62,154 102,191 31 0040 23.3 133,231 Total 677 35:402 6,022,785 6 931 0c2 1,91 ,732 2,127,143 1 05 3 n - W New 1L28 2 7q 07,285 01 27 1>281,>78 1705,7 2 -05 60 _Ao_ Excis ting 21 1760T4 2 29 ' 7 63 2 85 725 576 19380 Table 8.7: INDUSTRIES CLASSIFIED UNDER THE INDUSTRIAL DEVELOPMENT LAW, 1957-71 Number of Firms, Investment and Category (Value In Th,ua.nds of Sucres) YEAR CLASS NO OF FIRMS INVESTMENT DEBT SPECIAL CATEGORY A CATEGORY B INICRIBED TOTAL No. INVESTMENT No. INVESTMNT No. INVESTMENT No. INVESTMENT 1957 New 6 52,936 8,823 - 2 8,575 4 44,361 Existing - ------ I""- 1958 New 13 44,081 3,391 - 4 13,509 7 29,472 2 1,100 Existing 2 9,586 4,793 - 1 9,347 1 239 1959 New 9 100,438 11,160 - 4 87,914 4 11,024 1 1.500 Existing 5 78,927 15,78 5 -- - ---- 5 78,927 - ---- 1960 New 17 69,130 4,066 - 3 24,012 9 39,693 5 5,425 Existing 8 204,113 25,514 - -- 3 40,266 4 149,383 1 14,464 1961 New 15 197,420 13,161 - 2 162,000 8 28,632 5 6,788 Existing 13 472,404 36,339 - .-- 3 417,450 9 53,101 1 1,853 1962 New 28 127,618 4,558 - 6 104,760 13 14,279 9 8,79 Existing 16 316,476 19,780 --- 3 224,315 12 90,761 1 1,400 1963 New 43 119,179 2,772 - 10 39,064 25 73,555 8 6,560 Existing 25 533,923 21,357 - ---- 7 392,424 15 132,962 3 8,537 1964 New 49 286,628 .5s650 4 0,303 12 107,567 28 91,699 5 7,059 Existing 22 285,148 12,961 - ---- 4 181,661 15 96,756 3 6,731 1965 New 58 304,508 5,250 1 16,114 17 156,404 29 113,634 11 18,356 Existing 27 318,730 11,805 - - 2 71,027 15 217,389 10 30,314 1966 New 26 175,908 6,766 2 -4,934 6 35,351 12 61,039 6 4,584 Existing 24 138,483 5,770 0 3 38,971 8 29,416 13 70,096 1967 New 34 175,747 ,169 - ---- L3 127,842 14 41,335 7 6,570 Existing 18 192,049 10,669 - ---- 4 -96,730 7 58,054 7 37,265 1968 New 32 181,766 6,680 2 72,500 7 37,971 22 68,592 1 2,703 Existing 10 97,576 9,758 - 2 55,380 6 35,304 2 6,892 1969 New 41 336,761 8,214 5 129,408 9 98,234 24 96,585 3 2,534 Existing 17 105,903 6,230 ---- 2 16,678 14 86,921 1 2,303 1970 New 32 166,268 5,196 1 7 22 2 Existing 13 92,340 7,103 1 2 7 3 1971' New 25 728,897 29,156 2 1... Existing 16 109,842 10,652 - 11 - Total 644- 6,022,785 18 383,2y 156 2,538,877* 362 1,707,327* 117 295,975* New 428 3,067,285 17 381,259* 109 994,628* 23 678,114* 72 116,11.9* Existing 216 2,955,500 1 49 1,544,249* 127 1,029,213* 45 179,856* *Excludes 1970 and 1971 .ource, Ministry of Production Table 8.8: INDUSTRIES CLASS1FIED UNDER THE INDUSTRIAL DEVELOPMENT LAW BETWEEN 1957 AND 1969 NUMBER OF NEW FIRMS, AMOUNT OF INVESTMENT, BY CLASSIFICATION, CATEGORY AND SUBINDUSTRY (Values in Thousands of Sucres) Industrial C A T E 3 0 R I E S No. of Total _____________________________________ Code Category Firms Investment Special "An 1B" Inscribed No. Investment No. Investment No. Investment 20 Food 95 5.6,603 4 79,194 49 365,414 37 68,788 5 5,207 21 Beverages 20 36,317 - --- 2 17,812 2 1,795 16 16,710 23 Textiles 51 196,253 - --- 4 27,240 43 165,013 4 4,000 24 shoes and Clothing 2 3,32 - --- - --- 2 3,432 - -- 25 Wood and Cork 11 65,458 2 35,630 4 24,209 4 4,688 1 931 26 Furniture 5 19,985 - --- 1 15,448 3 3,856 1 681 27 Paper 10 217,079 1 70,000 1 42,000 7 103,879 1 1,200 28 Printing 6 10,272 - --- - --- - --- 6 10,272 29 Leather and Skins 1 917 - --- - --- 1 917 - -- 30 Rubber 4 33,181 - --- 1 24,000 3 9,181 - -- 31 Chemicals 35 329,732 1 42,696 14 237,021 16 48,161 4 1,854 32 Petroleum and Coal 5 63,148 - --- 1 13,655 4 49,493 - -- 33 Non-metallic Minerals 30 230,858 2 39,860 3 100,901 23 88,625 2 1,472 34 Basic Metals 4 151,369 2 105,369 2 46,000 - --- - -- 35 'fetal Products 30 133,874 2 10,510 3 52,495 14 43,887 11 26,982 36 Non-electric Machinery 3 12t678 - --- 1 10,000 1 1,178 1 1,500 37 Electrical Machinery 17 44,713 - --- 4 9,914 12 33,271 1 1,528 38 Transport 5 12,898 - 3 8,18 1 3,000 1 1,380 39 Miscellaneous 37 91,350 - --- - --- 24 48,949 13 42,401 Totals 371 2,172,117 14 383,259 93 994,527 197 678,113 67 116,118 ,ource: Ministry of Production Table 8.9: TOTAL INDUSTRY CREDITS THROUGH ECUADORIAN FINANCIAL INSTITUTIONS, 1965-71 (in millions of S/) Central Private C.B. and Total Total Bank Banking Private Development Internal Years (Direct) System Banks Banks Credits Amount Change Amount Change Amount Change 1965 647.4 491.0 1,138.4 - 64.3 - 1,202.7 - 1966 54.7 580.0 1,124.7 -1.2 169.5 163.6 1,394.2 15.9 1967 454.2 638.5 1,092.7 -2.8 233.2 37.6 1,325.9 -4.9 1968 623.4 681.8 1,305.2 19.4 289.9 24.3 1,595.1 20.3 1969 692.1 853.6 1,545.7 18.4 347.2 19.8 1,892.9 18.7 1970 904.2 1,134.3 2,038.5 31.9 365.8 5.4 2,404.9 27.0 1971 847.4/a 1,457.7/a 2,305.1 13-1 460.3 25.8 2,765.4 15.0 Annual Average Change 1965-1971 12.5 38.8 14.9 /a Data for first semester of 1971, expanded to annual total by ratio of first semester 1970 to total 1970. Note: Development banks, include Banco Nacional de Fomento, CFN and COFIEC. Private foreign suppliers' credit excluded. Data for CFN and COFIEC are disbursements; for BNF, credits granted. Source: Central Bank. Table 8.10: TOTAL INTERNAL FINANCIAL INSTITUTION AND FOREIGN SUPPLIERS' CREDITS (PRIVATE) TO INDUSTRY, 1965-71 (Amounts in millions of Sucres) Credit to Industr y from Private Foreign Domestic Fin. Inst. Supplier Credits /a Percent Percent Total Years Value Change Value Change Value 1965 1,202.7 - 1,081.2 - 2,283.9 1966 1,394.5 15.9 1,030.0 -4.7 2,424.5 1967 1,325.9 -4.9 1,076.1 4.5 2,402.0 1968 1,595.1 20.3 1,434.3 33.3 3,029.4 1969 1,892.9 18.7 1,701.9 18.7 3,594.8 1970 2,404.9 27.0 3,204.4 88.3 5,609.3 1971 2,765.4 15.0 2,561.8 -20.1 5,327.2 /a 1971 estimated, basis January-May data 1970 and 1971. Note: Some private supplier credits are to importers of consumer products, and for uses by nonindustrial sectors. In 1969 term credit to private importers of List 2 products (largely consumer goods) was 17.6 percent. The amount of such nonmanufacturing credit is not known. Source: Central B-nk. Table 8.11: CFN LOAN APPROVALS AND PROJECT COSTS,1963-71 1963-71 Invest- CFN Percentage CFN Loans ment Approved Distribution as Percent Total Loans of CFN Loans of Investment (in millions of SI) () Fishing 98.2 65.5 4.8 66.7 Mining 9.4 3.9 0.3 41.5 MANUFACTURING Food, Beverages and Tobacco 622.1 340.2 24.9 54.6 Textiles Clothing, Shoes and Leather Products 641.2 220.1 16.1 34.3 Furniture and Wood Products 18.2 7.8 0.6 42.8 Paper and Printing 271.7 86.0 6.3 31.6 Chemicals 273.2 194.2 14.2 71.1 Nonmetallic Products 225.3 97.4 7.1 43.2 Basic Steel 40.2 16.3 1.2 40.5 Metal Products and Machinery 206.2 110.6 8.1 53.6 Miscellaneous Manufacturing 5.2 2.8 0.2 53.8 Total Manufacturing 23P3.3 1077.4 7. 77. Electricity 1205.3 104.2 7.6 8.6 Restaurants 1.5 0.6 40.0 Hotels 241.2 115.5 Grand Total 31 Less than .005 Source: CFN Table 8.12: CFN: LOAN DISBURSEMENTS BY SECTOR, 1963 (Amounts in S/millions) Total 1963-67 1968 1969 1970 1971 1963-71 Fishing - 1.2 8.5 2.3 1.8 13.8 Mines and Minerals - - - 2.7 1.2 3.9 Manufacturing Food Beverages and Tobacco 55.2 45.6 50.4 42.5 25.2 218.8 Textiles, Clothing and Leather 42.5 18.1 9.3 12.4 38.6 120.9 Wood including Furniture 0.5 0.6 1.5 0.2 1.8 4.7 Paper and Printing 22.6 7.8 13.0 24.7 5.1 73.1 Chemicals, Pharmaceuticals and Petroleum Products 0.3 14.0 2.2 20.9 23.3 100.7 Nonmetallic Minerals 5.3 5.3 3.7 4.5 38.3 57.0 Basic Metals 7.9 0.3 1.6 - 1.8 11.7 Metal Products and Machinery 16.9 22.1 7.0 10.5 21.7 78.3 Other Manufacturing 0.8 0.1 0.3 - - 1.3 Total Manufacturing 192.2 113.8 89.0 115.6 155.8 666.5 Electric, gas and water - 0.6 1.6 13.5 15.1 30.8 TOTAL 192.2 115.6 99.1 134.1 173.9 715.0 Source: CFN Table 8.13t ECONOMIC IMPACT OF CFN LOANS: INVUSTMIENT, EKPLOYMNT, SALARIES AND BALANCE OF PAYMNTS, 1963-1971 (Value in million sucres) Inve stment Balance of Payments Imptct CFN New Average Loans Other Employ- Salary Import Export Years Total Approved Funds ment (No.) (sucres) Savings Earnings 1963-67 916.5 375.3 541.2 2450 .25,hoo 181.6 90.9 1968 579.6 182.3 397.3 908 29,500 99.6 100.7 1969 435.1 175.8 259.2 876 28,400 104.4 42.6 1970 326.5 1.-8 180.7 715 30,700 72.8 58.0 1971 1744.6 41.1 1333.5 2425 36,900 223.4 174.0 Source: CFN Table 8.14: COFIEC MANUFACTURING LOAN DISBURSEMENTS, 1966-71 Share of Loan Disbursements Annual Average loan Mfg. Loans in No. of (in thousands Percent (thousands Total amount Year Loans of sucres) Change of sucres) of Loans (percent) 1966 41 47,820.3 - 1,166 82.7 1967 78 111,319.3 132.8 1,427 79.0 1968 146 137,620.1 23.6 943 67.0 1969 357 208,979.6 51.9 585 56.4 1970 287 199,111.2 -4.7 694 55.3 1971 287 228,913.4 15.0 798 51.5 Source: COFIEC Table 8.15: NUMBER AND VALUE OF LOANS GRANTED AND RENEWED TO SMALL INDUSTRY AND COMMERCE DURING 1964-70 Amount Year Number (S/000) 1964 3,959 104,737.2 1965 3,582 64,149.9 1966 3,198 67,800.4 1967 3,558 94,117.0 1968 3,757 95,712.6 1969 3,871 122,854.9 1970 2,647 111,338.2 Source: Banco Nacional de Fomento (BNF). Table 8.16: FOREIGN PRIVATE SUPPLIER CREDIT FOR LIST 1 ITEMS, 1969, BY TERM Percent of Camulative Term (Value US$ c.i.f.) Total Percent Up to 90 days 31,951 25.5 25.5 90 - 180 days 40,957 32.6 58.1 180-270 days 5,992 4.8 62.9 270 - 1 year 26,410 21.1 84.0 1 - 3 years 11,919 9.5 93.5 3 - 5 years 5,280 4.2 97.7 5 - 10 years 1,850 1.4 99.1 more than 10 years - - - Indeterminate 1,101 0.9 100.0 TOTAL 125,460 100.0 Source: Central Bank, Bulletins. Tale,o 8.17: OFFIlAL EXPORTS BY CAT0RY AND PRINCIpAL PRODUGTS, 1960-71 (Data on '000's>) 1960 1961 1962 963 1964 1965 1966 1967 1968 1969 1970 1971 Artiles N let titos 1 K t Kios F Not i Net Kil $ $ FiB Net Kilos $ F jB Net Kios $ F08 Not Kilo~ $_B Nt KiloEB $8 Nt l FOB . 1 KiNot 1i Agriclittre 1 017,272 94,491 948,390 83,835 996,947 102,520 1,142,088 112,347 1,184,129 111,631 988,037 112,139 1,186,326 124,142 1,262,375 140,466 1,387,918 149,709 1,266,243 120,826 1,448,097 171,070 1,477.284 168,037 Forestry 5,321 1,385 4,814 1,267 6.163 1,381 8,896 1,629 11,126 1,847 14,409 2,278 13,567 2,832 15,184 3,754 11,790 3,845 12,918 3,741 12,060 3,210 14,126 3,827 Livestock 86 162 125 149 53 138 337 264 666 390 31 114 33 139 28 133 33 124 30 110 388 234 4,168 2,033 Fisheri- 5,107 1,440 6,756 2,285 5,590 2,393 4,850 2,229 6,075 2,359 7,299 3,016 7,404 3,173 12,309 3,928 9,216 3,588 14,041 5,275 11,317 5,269 17,678 10,875 Poultry - - 8 2 - - 2 - 15 2 8 2 - - minlng 993 798 555 693 24,443 1,110 26,462 1,220 19,874 1,436 24,667 583 62,667 1,434 38,000 1,087 43,528 958 47,463 1,043 44,299 913 97,716 2,019 Mnufacturing 46,418 4,162 46,016 6,291 92,786 9,785 84,310 10,429 84,013 12,076 134,277 15,193 107,263 15.369 115,391 16.319 104,555 17,865 136,509 20,686 143,889 20371 166,6 29949 CheMicole & Phatooeticls 200 911 288 1,117 275 1,000 265 962 038 1,153 385 1,557 424 1,760 416 1,493 390 1,61 404 2,83 330 1,423 229 1,748 lta & Other stra- Artille 122 1,116 53 408 53 470 41 385 57 606 87 999 58 628 78 834 1,181 218 50 176 3 249 89 Fruit JuiceS 6 P*lrves - - - 667 220 1,302 421 1,558 536 287 4 175 41 110 2 24 846 123,133 10,9809 130,792 10,138 1459206 14,173 Sogar & Panels 42,586 1,230 39,831 2,733 87,675 6,525 77,100 6,431 78,063 7,473 120,553 7,901 94,573 7,032 102,020 8,70 92,7 , 2 2 7 15 - Sluble Coffe - - - - 15 18 4 4 - - 5 24 1 451 2 2,442 2,075 3,173 2,548 5,653 4,545 C5 Products 30 26 23 24 5 5 8 9 9 13 186 112 1,645 1,431 1,775 1,313 2,450 2, 505 1,4 7 ,0 810 2,653 5 Proceseed Banans Products 75 27 305 110 - - 9 8 5 3 1,923 719 2,047 706 1,612 557 1,760 6 2,937 11 2,250 10 7,81 752 'ocessed Fieb 968 508 2,922 1,330 1,878 1,006 1,671 1,016 1,985 1,181 2,450 1,277 1,663 2,059 2,615 1,625 2,308 3 619 1,469 2, 1,581 34 7 1 Py-ethruo Extracts 7 123 22 364 21 355 45 867 60 1,234 38 1,655 73 1,529 62 1,389 74 13635 76 967 21 849 266 Wood Prodots - - 2 1 - - - 559 185 1,276 416 2,803 772 2.836 780 2,557 413 1,746 51 62 50 1,8 26 Animal Food 2,231 114 2,478 74 2,081 83 3,654 153 1,243 56 6,912 366 3,497 190 3,716 138 2,583 126 1 51 6 50 8 88 Vegetable lite 102 67 74 39 103 42 - - 10 5 162 15 92 50 45 39 533 375 2,963 63 6,177 1,609 Others 97 38 181 11 11 11 211 175 206 149 73 107 212 170 105 117 337 82 W-ete ond Re-expott 1,231 123 1,108 150 1,549 102 3,213 319 4,140 123 9,029 465 7,336 410 7,380 348 3,968 470 2,736 205 6,004 410 4,380 283 Total 1.076.428 102.560 007.772 94,672 I 127531 117,429 _1270.158 128437 130.038 130.364 1,177,757 133,790 1.384.596 147.499 1,450,667 166.036 1.561.008 176-Ž2 1.479.945 i$t_886 1,66054 201,477 1L782,012 217.023 anc1udes centrifugal and non centrfugal sugar (patola) and syrup. Soc: Ministry of Fnano ond Oentra Bank of Ecuador, Table 8.18: EXPORTS OF ECUADOR TO ANDEAN SUBREIGION, 1970 AND 1971 (Thousands US$) County and Product 1970 1971 Percent Change Total 659.1 3,172.0 381.3 Colombia 5h5.6 2,276.7 317.3 Peru 0.5 h59.4 818.8 Chile 113.0 435.9 285.8 Products Tuna 158.8 522.7 229.2 Sardines 385.4 1,715.7 3h5.2 Cocoa Producbs 50.7 409.8 708.3 Plywood - 143.2 - Stoves, Iefrigerators, and Household Products 34.4 20.0 493.0 Other /a 29.8 176.6 L93.0 Total 659.1 3,172.0 381.3 /a Principally, clothing, zippers, machetes, canned pineapple, canned meat. Source: Institute of Foreign Commerce and Integration Table 8.19: ESTIMATES OF POSSIBLE EXPORTS OF 25 PRODUCTS TO ANDEAN SUBREGION (PRODUCTS FREE OF DUTY, JANUARY 1, 1971) (Thousands US$) Item Possible Exports Minimum Maximum Cheese 480 960 Canned meat 150 400 Canned tuna 260 1,040 Canned sardines 290 1,160 Cocoa butter 800 1,600 Cocoa products 230 795 Canned pineapple and juice 120 300 Common salt 21 81 Scalopine 534 534 Food dyes of vegetable origin 205 354 Detergents for textiles 425 600 Fiberglass bathroom products 76 266 Fiberboard and plywood 100 334 Twine, cordage, rope of jute, hemp or similar fibers of synthetic 110 275 Outer garments and their accessories, knitted or crocheted, not elastic nor rubberised, made of artificial or synthetic fibers 1,440 4,000 Nonelectric stoves for domestic use 4o 188 Collapsible tubular containers, of aluminium 60 120 Aluminium kitchen articles 80 1,263 Machetes (hewing tools) 60 360 Electric refrigerators for domestic use 740 1,512 Non-electric refrigerators for domestic use 193 386 Wood furniture, parts 180 1,500 Brushes (pig bristles) 85 140 Zippers 270 4o5 Ballpoints, including parts 210 420 TOTAL 7523 18,993 Source: Institute for Foreign Trade and Integration, Quito. Table 8.20: FIRST TRANCHE FROM THE CONMON LIST OF L.A.F.T.A./a 07.01.0.04 Fresh garlics 08.01.0.02 Bananas 09.01.1.01 Raw grain coffee 11.04.0.01 Banana flour 13.03.1.02 Pyrethrum extract 15.07.2.10 Purified palm oil 18.01.0.01 Raw grain cocoa 18.o.0.01 Cocoa oil, cocoa butter 18.05.0.01 Nonsweetened cocoa powder 20.06.1.10 Canned tropical papaya, natural 20.06.2.10 Canned tropical papaya, in syrup 20.07.1.99 Tropical papaya jiiice 23.01.1.02 Fish meal 38.11.1.01 Pyrethrum insecticides 44.23.0.01 Parquet flooring 46.02.1.01 Mocora or Toquilla straw fabric 65.02.0.99 Toquilla or Mocora straw headpiece hats /a Ecuadorian export products liberated from import restrictions by Chile, Colombia and Peru as of April 14, 1970. Resulting increase in Ecuadorian exports in 1970 estimated at $2.0 million. Source: Institute for Foreign Trade and Integration, Quito. Table 8.21: PRODUCTS NOT PRODUCED IN THE SUBREGION AND NOT RESERVED FOR SECTORAL INDUSTRIAL DEVELOPMENT PROGRAMS TO BE MANUFACTURED BY ECUADOR Period of Time Period of Time Probin ts to study the to carry out project the project 29.04.3.07 Sorbitol (Hexano-Hexanol) 1 years 5 years 29.10.1.08 Piperonil butoxide 1 year 4 years 29.16.3.01 Salicylic acid 1 year 4 years 43.01.1.04 Protective paper for checks 1 years 6 years h8.01.9.02 Condenser paper 1 years 6 years 48.01.9.04 Paper manufactured with 100% cotton or hemp fibers, ungummed and free of 1 years 6 years mineral compounds 48.01.9.99 Electrical insulation paper 1 years 6 years 48.01.9.99 Wrapping paper 1 years 6 years h8.01.9.99 Stiff cardboard with specific gravity greater than 1, manufactured by machine 1 years 6 years 74.17.1 .01 Cooking stoves, exclusively of Primus type 1 year 4 years 74.17.8.01 Parts and spares for Primus type stoves 1 year 4 years 82.04.0.04 Blowtorches 1 year 4 years 83.07.1 .01 Oil or kerosene pressure lamps 1 year 4 years 83.07.8.01 Parts and spares for oil or kerosene pressure lamps 1 year 4 years 84.15.9.01 Airconditioners, sealed units whose nower is equivalent to or greater than 1/2 h.p. 1 year 4 years 84.50.1 .01 Gas blowtorches (gas apparatus from welding and cutting) 1 year 6 years 84.50.8.01 Parts and spares for gas blowtorches 1 year 4 years 84.01.9.99 Pneumatic tire valves 1 year 4 years 85.05.0.01 Manual electromechanical tools and machine tools (with motor attached) 1 years 5 years 85*19.8.01 (Nonheating)carbon resistors 1 years 5 years 90.23.0.99 Thermometers for motor vehicles 1 years 5 years 90.2L.9.02 Motor vehicle gasoline gauges 1 years 5 years 90.27.0.01 Speedometers 1 years 5 years 90.28.5.01 Thermometers for motor vehicles 1 years 5 years 90.28.6.99 Electric Thermometers for motor vehicles 1 years 5 years 90.29.0.01 Electric gasoline gauges for automobiles 1 years 5 years 90.29.0.01 Parts and spares for motor vehicle thermometers 1 years 5 years 90.29.0.02 Parts and spares for motor vehicle gasoline gauges 1 years 5 years 90.29.0.04 Parts and spares for speedometers 1 years 5 years 90.29.0.05 Parts and spares for motor vehicle electric thermometers and gasoline gauges 1 years 5 years 91 .02.0.90 Other watches or clocks (including alarm) with small-sized mechanisms, nonelectric 1 years 5 years 91.08.0.02 Dashboard clocks for automobiles 1 years 5 years 91 .04.0.03 Tower and building clocks and the like 1 years 5 years 91 .04.0.99 Other clocks with other than small-sized mechanisms 1 years 5 years 91 .07.0.01 Small sized mechanisms, finished, for watches and clocks listed under item 91 .02.0.98 1 years 5 years 91 .08.0.01 Other finished mechanisms for watches and clocks 1 years 5 years 91.10.8.01 Parts and spares for cases of other watches and clocks 1 years 5 years 91 .11 .9.01 Main spring for watches and clocks 1 r years 5 years 91 .11.9.02 Hands of watches and clocks 1 years 5 years 91 .11 .9.99 Other parts and spares for watches and clocks 1- years 5 years Source: Institute -or Foreign Trade and Integration, Quito. Table 8.22: OIL CONCESSIONS IN EASTERN ECUADOR Date of Contract Area .000 Hap. '000 Acres Texaco de Petroleos de Ecuador C.A. and March 5, 1964 and Gulf Ecuatoriana de Petroleos S.A. Revised June 27, 1969 500.0 1,235.5 Cia Petrolera Pz4taza C.A. and February 23, 1966 Aquarico S.Aia Revised June 26, 1969 650.0 1 606.2 Total Texaco/Gulf 1,150. d 2,541.7 Anglo Ecuadorian Oilfields Ltd. July 12, 1968 400.0 988.4 Cia. Ecuatoriana de Petroleos S.A. July 12, 1968 395.3 976.8 Anglo Ecuadorian Oilfields Ltd. July 12, 1968 400.0 988.4 Cia. Ecuatoriana de Petroleos S.A. July 12, 1968 400.0 988.4 Superior Petroleum del Ecuador S.A. July 12, 1968 395.1 976.3 Cia Minera del Napo S.A. July 12, 1968 383.4 974.4 Total Anglo Consortium/b 2,373. 5,892.7 Cia. Minas y Petroleos S.A/c August 26, 1961, and Revised July 12, 1968 437.5 1,081.1 Cia. Petrolera Yasuni C.A./d July 16, 1968 400o.0 988.4 Total Amerada Hess Group 837, 2,069.5 Cia. Petrolera Curaray S.A/e July 12, 1968 400.0 988.4 Amoco Ecuador Petroleum Co/f July 14, 1970 400.0 988.4 Total Amoco 500.0 1,976.8 Shenandoah Oil Corporation August 2, 1968 380.0 939.0 Grace Oil and Minerals Inc. (Sun) August 2, 1968 332.0 820.4 Compania OKC Corp. /g February 20, 1970 400.0 988.4 Cayman Corporation /8 March 6, 1970 335.0 827.8 TOTAL T,70.3 16,356.3 /d Norsul Oil and Mining Ltd. and Phoenix Canada Oil Co. Ltd. have a 2 percent overriding royalty. /b Inglo Consortium comprisas Anglo-Ecuadoriai Oilfields Ltd. (6,7%), Suporior Oil Company (33.3%) Union Oil (33.3%) and Standard Oil, California (16.7'). / Norsul Oil and Mining Ld. anid Phoenix Cnnada Oil CD. Ltd. r:ain a p1rcant carried nterst present royalties rate for this concession is only 6 perceTt, 'd Norsul Oil and Mining LM. and Phoenix Canada 011 Co. Ltd fetaln a 15 Tero.cet carriJd intrast. Cia. Petrolera Curaray S.A. retains an 8 porcent oarricd interet. /E Contract uf Association; participation in :quity by tha St-to up to 3,3 'crdi0 to to 1rel of production once the original invstmnt has been reuovtr'd1 /g Contracts of Association. Table 8.23: GEOLOGICAL AND GEOPHYSICAL ACTIVITIES, 1966-70/a (Party Months) 966 -1967 1968 1969 1970 Surface Geology 30.00 16.00 14.25 13.00 11.20 Seismograph 19.50 26.50 30.50 34.oo 57.6o aravimeter 4.00 - - 1.00 0.50 Air Magnetometer 1.50 0.25 2.75 4.oo - Aerial Photography - - 1 - - Total 55.o o 2. 49. 53.00 69.30 /a Includes activity in the coastal area, offshore and Oriente. Source: Ministry of Natural Resources. Table 8.24: WELLS COMPLETION IN ECUADOR, 1966-7oja Oil Gas Dry Total % Susp. Abandoned Success Exploration 1966 22 1 8 31 7T (3) 1967 12 0 2 1h 86 1968 5 - 3 8 63 1969 7 - 1 8 88, 1970 12 2 6 20 70 Development 1966 15 - - 15 100 1967 19 0 1 20 95 1968 12 - - 12 100 1969 5 - 1 6 83 1970 15 - 2 17 88 Total 1966 37 1 8 46 83 (3) 1967 31 0 3 34 91 1968 17 - 3 20 85 1969 12 - 2 14 86 1970 27 2 8 37 78 /a Includes wells completed in the coastal area, offshore and Oriente. Source: Ministry of Natural Resources. Table 8.25: WELLS COMPLETED IN EASTERN ECUADOR, 1967-72 1967 1968 1969 1970 1971 1972/a Texaco/Gulf 5 6 8 28 35 40 Minas y Petroleos - - 4 2 - Anglo Group - - - 2 4 Cayman - - 3 1 Amoco - - - 2 Sun - - - - 2 Total 5 6 8 32 42 49 /a Mission Estimate. Source: Company reports to Ministry of Natural Resources. Table 8.26: CRUDE PETROLEUM PRODUCTICN, 1951, 1961, 1966-71 Year B1s. B/d 1951 2,741,935 7,512 1961 3,027,136 8,294 1966 2,660,130 7,288 1967 2,271,6o 6,224 1968 1,815,083 4,959 1969 1,607,618 4,40o 1970 1,80,037 4.,054 1971 1,354,389 3,711 Average Annual Rate of Change 1961-66 -2.6 1966-71 -12.6 1961-71 -7.7 Source: Ministry of Natural Resources. Table 6.27: PETROLEUM PRODUCTION AND INVESTMENT, 1972-80 Output/a Investment /b '000 bls/d mil.bls. mil. US$ 1972 200 /c 26.8 108 1973 250 91.3 48 1974 250 91.3 68 1975 300 109.5 52 1976 400 146.0 129 1977 400 146.0 129 1978 400 146.0 129 1979 500 182.5 66 1980 600 219.0 43 /a Petroleum output estimate assumes that Texaco- Gulf connects new fields and increase pipeline capacity to 400,000 barrels per day during the second half of 1975. The development of new fields continues and by 1976-77 a decision is made to construct a second pipeline to start operating in mid-1979 and bring total production to 600,000 bls/d by 1980. /b It has been'assumed that an investment of $600 is required to fund and develop a barrel/day of initial productive capacity, and that there is a 12 percent decline in productivity of existing wells. In addition, allowance has been made to cover the increase in capacity of the Texaco-Gulf pipeline and the con- struction of a second pipeline and the related invest- ment in trading and storage facilities at the meritime terminal. /c September-December, 1972. Source: IBRD staff estimates. Table 8.28: PTROLEUM INVESTMENT, 1964-71 (millions of sucres) Current Constant (1971) Expl. Pipe- Roads Total Expl. Pipe- Roads Total Dev. lines Dev. lines 1964 32.3 - - 32.3 46.5 - - 46.5 1965 53.3 - - 53.5 74.0 - - 74.0 1966 71.0 - - 71.0 93.9 - - 93.9 1967 197.0 - - 197.0 251.1 - - 251.1 1968 421.7 - - 421.7 515.9 - - 515.9 1969 536.3 160.4 5.0 701.7 626.9 187.5 5.8 820.2 1970 699.1 817.6 285.0 1801.7 766.5 896.h 312.5 1975.4 1971 2167.1 1170.7 285.0 3622.8 2167.1 1170.7 285.0 3622.8 Source: Based on data from National Planning Board. Table 8.29: DOMESTIC CONSUMPTION OF REFINED PRODUCTS, 1961, 1966-71 (barrels daily) Annual Growth Rates 1961 1966 1967 1968 1969 1970 1971 - 1961-1966 966-1971 1961-J9L Products Gasoline 4,59L 6,299 7,096 7,773 8,319 9,225 9,799 6.5 9.2 7.9 Kerosine /a 957 1,978 2,231 2,582 2,960 2,954 2,497 15.6 4.7 10.0 Diesel Oil 1,953 2,882 3,272 3,840 4,107 4,787 5,579 8.1 14.0 11.1 Residual Fuel Oil 3,052 3,646 3,815 4,647 5,421 5,927 6,482 3.6 12.2 7.8 LPG 15 64 75 110 127 192 186 33.6 23.8 28.6 Others 291 658 472 657 639 790 457 17.7 -7.0 4.6 TOTAL 10,862 15,527 16,961 19,609 21,573 23,875 25,000 7.4 10.0 8.7 (Per cent Distribution) Gasoline 42.-) 40.6 41.8 39.6 38.5 38.6 39.2 Kerosine /a 8.8 12.7 13.2 13.1 13.8 12.5 10.0 Diesel 011 18.0 18.6 19.3 19.6 19.0 20.0 22.3 Residual Fuel Oil 28.1 23.5 22.5 23.7 25.1 24.8 25.9 LPG 0.1 o.4 0.4 0.6 0.6 0.8 0.8 Others 2.7 4.2 2.8 3.4 3.0 3.3 1 .8 TOTAL 100.0 100.0 100.0 100.0 100.0 100.0 100.0 /a Includes turbo-fuel Source: National Planning Board Table 8.30: NET IMPORTS OF PETROLEUM, 1961, 1966-71 CIF Value CIF Price Barrels (thousands of (U.S. Dollars Year (thousands) U.S. Dollars) per barrel) 1961 1,131 2,604 2.30 1966 3,039 6,727 2.21 1967 3,962 9,072 2.29 1968 5,720 13,304 2.33 1969 5,969 12,952 2.17 1970 6,904 14,560 2.11 1971 8,490 17,690 2.08 Source: National Planning Board, Central Bank of Ecuador. Table 8.31' U.S. DEMAND AND SUPPLY OF PETROLEUM, 1970-85 (thousands of barrels daily) 1970 1975 1980 1985 Total Demand 114,986 18,581 22,549 26,186 Domestic Production Lower 48 States 11,328 10,480 9,760 9,180 North Slope - 600 2,030 2,030 Total 11328 11,080 11,790 11,210 Impor ts Crude Petroleum 1,324 4,090 6,520 10,190 Fuel Oil 1,528 2,200 2,800 3,100 Other 566 800 950 1,100 Total 3,418 7,090 10,270 14,390 Changes in Stocks, Loss, etc. 240 411 489 586 Source: National Petroleum Council. Table 8. 32: SUPPLY AND DEMAND OF CRUDE PETROLEUM AND REFINED PRODUCTS IN CHILE AND PERU, 1970 (thousands barrels daily) Chile Peru Domestic Demand 88.5 91.0 Production of Crude 34.1 72.0 Imports Crude 40.1 10.8 Products 13.9 10.9 Total 54.0 21.7 Changes in Stocks and Bunkers 0.4 -2.7 Source: U.S. Bureau of Nines. International Petroleum Annual. Table 8.331 CARIBBEAN REFINERIES OWNED BY POTENTIAL PRODUCERS IN ECUADOR, 1962 Company Place Refinery Capacity Texaco Point-a-Pierre Texaco Trinidad Inc. (100%) 355,000 Texaco Colon Refineria Panama S.A. (66.6%) 100,000 Texaco Forte-de-France S.A. de la Raffinerie deux Antilles (11 .5%) 11,000 Gulf San Juan Caribbean Gulf Refining (100%) 40,000 Ameraaa Hess St. Croix Hess Oil Virgin Islands(100%) 450,000 Standard(California) Freeport Bahamas Oil Refining Co. (50%) 250,000 Table 8.34: DISTANCES AND DURATION OF VOYAGES BETWEEN ESKERALDAS AND SOME PRINCIPAL PORTS Distance Voyage (Days) /a (nautical miles) at 14 knots at 16 knots lb Esmeraldas - Los Angeles 6,258 22.63 20.30 Esmeraldas b Valparaiso 4,458 17.27 15.61 Esmeraldas Lb Philadelphia 4,764 20.18 18.40 Esmeraldas Lb Trinidad 3,152 15.38 14.21 /a The voyage refers to the round trip and includes 3 days for lay time (for loading and discharge) and one day for approach time to ports. An additional day is included for each crossing of the Panama canal. /b Distances from Tamac= have been used. Table 8.35: COMPARATIVE TAX PAID COSTS OF SCE REPRESENTATIVE CRUDES, JANUARY - MARCH 1972 (US$ per barrel) Arabian Arabian Iranian b Crude Venezuelan Venezuelan Venezuelan Heavy Medium Light Iraq a LibyaNigeria API Gravity 170API 200API 310API 270API 310API 340API 300API- 40oAPI 340API FOB Port W. Venez. W. Venez. W. VeneZ. Rastanura Rastanura Kharg Isl. Tripoli/Banias Libyan Ports Bonny Base Posted/Tax Price 2.763 2.901 3.035 2.059 2.187 2.274 2.971 3.217 3.022 Adjustment for Devaluation - - - 0.175 0.186 0.193 0.266 - - Temporary Premium-Suez - - - - - - 0.120 0.120 0.120 Temporary Premium-Freight 0.050 0.050 0.050 - - - o.o45 0.049 0.034 Price for Tax Purposes 2.813 2.951 3.085 2.234 2.373 2.467 3.402 3.386 3.176 Royalty 0.400 o.557 0.579 0.279 0.297 0.308 /a 0.423 0.397 Operating Cost 0.490 0.420 0.420 0.150 0.120 0.120 0.16 0.300 0.350 Taxable Net Income 1.923 1.974 2.086 1.805 1.956 2.039 /a 2.662 2.429 Income Tax 1.116 1.145 1.210 0.993 1.076 1.121 /a 1.465 1.336 Fiscal Participation Royalty 0.400 0.557 0.579 0.279 0.297 0.308 /a 0.423 0.397 Incane Tax 1.116 1.145 1.210 0.993 1.076 1.121 /a 1.465 1.336 1.516 1.702 1.789 1.272 1.373 1.429 2.034 1.888/d 1.753c Tax Paid Cost 2.006 2.122 2.209 1.422 1.493 1.549 2.194 2.188 2.103 /a Caloulation based on a border value of $3.074. Tax paid costs include payments to Syria. /b Les than 0.25 percent sulfur. /c Int;ludesUS$0.020 for harbor dues /d Excludes $0.090 for retroactive payments. Source: Mission Estimates. Table 8.36: TAX PAID COSTS OF SCHE REPRESENTATIVE CRUDES, JANUARY - MARCH 1972 (US$ per barrel) Crude f*o.b* API Costs Taxes Tax Paid Costs Venezuela TJL W. Venez. 310 0.420 1.789 2.209 TJM W. Venez. 260 0.420 1.702 2.122 Bachaquero W. Venez. 170 0.490 1.516 2.006 Persian Gulf Iranian Light Kharg I1. 340 0.120 1.429 1.549 Arab Medium Rastanura 310 0.120 1.373 1.493 Arab Heavy Rastanura 27o 0.150 1.272 1.422 Indonesia /a Minas umal 350 0.200 1.632 1.832/a /a Bank estimate. Source: See Table 8.35 for details. Table 8.37: PRICE AND TAX PAID COST CCPARISONS, FOB ESMRALDAS/a 1972 (US$ per barrel) API Tax Reference Prices/b Tax Paid Costs Gravity W75 80 W85 W75 w80 w85 U.S. East Coast Venezuelan 260 2.729 2.717 2.705 1.950 1.938 1.926 Arabian 310 2.807 2.849 2.891 1.927 1.969 2.011 Trinidad Venezuelan 20o 2.692 2.678 2.664 1.913 1.899 1.885 Arabian 310 2.706 2.74 2.782 1.826 1.864 1902 U.S. West Coast Venezuelan 200 3.008 3.079 3.091 2.289 2.300 2.141 Arabian 310 2.858 2.90 2.950 1.978 2.024 2.070 Minas 350 3.153 3.158 3.185 1.980 2.006 2.032 Yokohama Arabian 31o 2.120 2.111 2.101 1.240 1.231 1.221 Minas 350 2.396 2.368 2.339 1.217 1.189 1.159 Valparaiso Venezuelan 260 3.106 3.120 3.133 2.327 2.341 2.354 Arabian 310 2.881 2.928 2.973 2.001 2.048 2.093 /a Netbaek values obtained adding freight from point of origin to port of discharge less freight to esmeraldas. For some long voyages a spread of worldscale of 10-20 points has been used. No adjustments have been made for quality differentials. /b Published by Petroleum Intelligence Weeklyr February 7, 1972. Venezuelan prices, Bank estimate. Table 8.38: WORLDSCALE FREIGHT RATES. a Base W=100 US$/Long Ton US$/Bi. W60 W65 W70 W75 W80 W85 W90 W95 W100 To Los Angeles Dumai 35' API 7.22 0.95792 0.575 0.623 0.671 0.718 0.766 0.814 0.862 0.910 0.958 Rastanura 340 API 9.91 1.32280 0.794 0.860 0.926 0.992 1.058 1.124 1.191 1.257 1.323 Rastanura 310 API 9.91 1.34733 0.808 0.876 0.943 1.010 1.078 1.145 1.213 1.280 1.347 Punta Cardon 310 API 4.66 0.63356 0.380 0.412 0.443 0.475 0.507 0.538 0.570 0.602 0.634 Punta Cardon 260 API 4.66 0.65365 0.392 0.428 0.458 0.490 0.523 0.556 0.588 0.621 0.654 Esmeraldas /b 280 API 3.11 0.43075 0.258 0.280 0.302 0.323 0.345 0.366 0.388 0.409 0.431 To Valparaiso Dumai 350 API 9.41 1.24847 0.749 0.812 0.874 0.936 0.999 1.061 1.124 1.186 1.248 Rastanura 310 API 9.23 1.25488 0.753 0.816 0.878 0.941 1.004 1.067 1.129 1.192 1.255 Punta Cardon 260 API 4.28 0.60035 0.360 0.390 0.420 0.450 0.480 0.510 0.540 0.570 0.600 Esmeraldas /b 280 API 2.43 0.33657 0.202 0.219 0.236 0.252 0.269 0.286 0.303 0.320 0.336 To Yokohama Dumai 350 API 3.15 0.41793 0.251 0.272 0.293 0.313 0.334 0.355 0.376 0.397 0.418 Rastanura 310 API 5.91 0.80350 0.482 0.522 0.562 0.603 0.643 0.683 0.723 0.763 0.804 Esmeraldas /b 280 API 7.08 0.98062 0588 0.637 0.686 0.735 0.784 0.834 0.883 0.932 0.981 To Philadelphia Rastanura 34' API 10.00 1.34282 0.806 0.873 0.940 1.007 1.074 1.141 1.209 1.276 1.343 Rastanura 310 API 10.06 1.36772 0.821 0.889 0.957 1.026 1.094 1.163 1.231 1.299 1.368 Punta Cardon 310 API 2.04 0.27735 0.166 0.180 0.194 0.208 0.222 0.236 0.250 0.263 0.277 Punta Cardon 260 APH 2.04 0.28615 0.172 0.186 0.200 0.215 0.229 0.243 0.258 0.272 0.286 Esmeraldas /b 280 APH 3.73 0.51663 0.310 0.336 0.362 0.387 0.413 0.439 0.465 0.491 0.517 To Trinidad Rastanura 310 API 8.67 1.17874 0.707 0.766 0.825 0.884 0.943 1.002 1.061 1.120 1.179 Punta Cardon 260 API 1.01 0.14167 0.085 0.092 0.099 0.106 0.113 0.120 0.128 0.135 0.142 Esmeraldas /b 250 API 3.03 0.41967 0.252 0.273 0.294 0.315 0.336 0.357 0.378 0.399 0.420 la 1972 base rates as modified. lb These rates are calculated in terms of the base worldscale rate from the Port of Tumaco to the north of Esmeraldas. Table 8.391 FREIGHT DIFFERENTIALS TO ESMERALDAS (U.S. Dollars per Barrel) U.S. EAST COAST TRINIDAD U.S. WEST COAST YOKOHAMA VALPARAISO WORLDqCAT.E TJM 260 API ARAB 310 API TJM 260 API ARAB 310 API TJM 260 API ARAB 310 API MINAS 350 API ARAB 310 API MINAS 350 API TJM 260 API ARAB 310 API W60 -0.138 0.511 -0.167 0.455 0.134 0.550 0.317 -0.106 -0.337 0.164 0.536 W65 -0.150 0.553 -0.181 0.493 0.145 0.596 0.343 -0.115 -0.365 0.178 0.604 W70 -0.162 0.595 -0.195 0.531 0.156 0.641 0.369 -0.124 -0.393 0.191 0.649 W75 -0.172 0.639 -0.209 0.569 0.167 0.687 0.395 -0.132 -0.422 0.205 0.696 W80 -0.184 0.681 -0.223 0.607 0.178 0.733 0.421 -0.141 -0.450 0.219 0.743 W85 -0.196 0.724 -0.237 0.645 0.190 0.799 0.448 -0.151 -0.479 0.232 0.789 W60-70 0.459 0.413 0.506 0.273 -0.204 -0.435 0.524 W65-75 0.502 0.451 0.553 0.300 -0.213 -0.463 0.571 W70-80 0.544 0.489 0.598 0.326 -0.222 -0.491 0.617 W75-85 0.587 0.527 0.644 0.352 -0.231 -0.521 0.663 W60-75 0.434 0.392 0.485 0.252 -0.253 -0.484 0.508 W65-80 0.476 0.430 0.531 0.278 -0.262 -0.512 0.555 W70-85 0.518 0.468 0.577 0.305 -0.272 -0.541 0.600 W55-75 0.333 W60-80 0.371 W65-85 0.409 Freight from the export point to the principal market less freight to Esmeraldas. Freight differentials with two worldscale rates are based on the premise that larger tankers are utilized for the longer haul and that relatively less time is spent loading and discharging. Table 8.40: ESTIMATED GOVERNENT UNIT PETROLEUM REVEgUma 1972-77 (U.S. dollars per barrel) 1972 1973 1974 1975 1976 1977 Royalty/Export Tax 0.66 0.69 0.71 0.74 0.74 0.74 Income Tax o.k 0.47 0.51 0.53 0.53 0.53 Profit Sharing /b 0.11 0.14 0.14 0.15 0.15 0.15 Others 0.09 0.09 0.09 0.09 0.09 0.09 Total 1.340 1.3 1.45 1.5 151 15 /a Unit figures are lower if local sales are included. Basic costs $0.60/Bl. Initial reference price $2.OAl and initial realized price $2.38/bl. lb Represents profit sharing less 10 percent estimated to be distributed either directly or indirectly to industry workers and employees. Source: Mission Estimates. Table B.l: SUMMARY AND COMPARISON OF SOME CLAUSES OF THE HYIROCARBONS IAWS, CONCESSIONS AND CONTRACTS IN FORCE IN ECUADOR HYDROCARBONS LAW TEXACO-GSLF AMDCO ANLO SEPT, 1971 CONCESSION CONTRACT OF "MOEL" CONCESSION 1969 ASSOCIATION, 1970 1968 1. Duration 5 years if no commercial 5 years exploration 5 years exploration 5 years exploration production achieved. followed by 40 years period followed by followed by 40 years 20 years from the date exploitation period, 40 years exploitation exploitation period of commercial production, renewable for a period. renewable for a renewable for a further further 10 years. further period of period of 10 years. 10 years. 2. Area 200,000 has. Originally 1.h3 400,000 has. 400,000 has. million has. Reduced to 0.5 million has. 3. Exploration $8.00 per ha. per year. First year $160,000 Minimum investment Obligations Minimum one well per Second year $320,000 $1.2 MM. in exploration 100,000 has. &so - Third year $600,000 phase. topletlon of $90,000 per hr in Fourth & Fifth year at least one exploratory first 3 years of ex- $1 .32 MM. Minimum well. ploitation period. of 3 exploratory wells. Also $360,000 per year in exploitation period until oil in commer- cial quantities is found. 4. Bonuses - Minimum $2.00 per ha.- $650,000 on signature Signature exploration. $2.4 MM when produe- Minimum $6.00 per ha.- tion reaches 50,000 exploitation, bld. 5. Bonuses - Minimum $8.00 per ha. $35.5 milion over a Compensatory of the exploitation 10 year period for Investents area. construction and maintenance of highways. 6. Rentals Exploration period First 10 years, Exploration period, Exploration period $0.90/ha. For first $0.20/ha. Second 10 $0.20/ha. per year. $0.04-0.08 per ha. five years of exploita- years $0.24/ha. Exploitation period per year. Exploitation tion period, $2.00 per Third 10 years $0.32/ha. per year. period. First 10 years - ha. per year and there- $0.28/ha. Fourth 10 $0.20/ha. Second 10 after $9.00 per ha. years $0.32/ha. years - $0.29/ha. Third per year. 10 years - $0.28/ha. Fourth 10 years - $0.32/ ha. 7. Relinquishment 60% of the total area Concessionaire may Company must relin- Company onet relinquish at end of exploration relinquish acreage at quish up to 150,000 up to 150,000 has. by period. No one may any time. has. by end of the end of the explo- retain more than 160,000 exploration period. ration period. has. during the exploi- tation period. 8. Royalty 12.9% of crude oil 11.5% of clean oil 12.5% of clean oil 10% of clean oil produced up to 29,999 bld; produced. Price for produced. Oil valued produced. Oil valued 19.0% up to 59,999 bld.and royalty purposes cal- on either actual on actual sales price 16.0% aver this amount. culated on a formula sales price to third to third party or for Royalty valued on basis of basis for inter- party or in accordance inter-affiliate sales reference price. affiliate sales, and with FOB prices in in accordance with POB on actual market price other export centers price in other export for third party sales. plus a freight diffe- centers plus freight rential to markets differentials to market where Ecuadorian where Ecuadorian crude crude is sold. is sold. 9. Income Tax Prevailing rate calcu- Prevailing rate. Prevailing rate. Prevailing rate. lated on reference price base. 10. Transport State may construct, Ownership of Lago If company constructs if company constructs operate and manage Agrico-gsmeraldas a pipeline, once a pipeline, once pipelines, gasolines line will pass to amorti.ed, it will amortised, it will and other means of Government after become the property become the property transportation. amorti-ation. of the Government. of the Government. Participation by State A variable percent not less than 5% of of pipeline tariff pipeline tariff. will be paid to Preference shall be Government. given to national flag tankers. 11. Natural Gas Natural gas belongs to the State but may be used for exploitation, - reinjection into reservoir, and trans- port operations. 12. Ecuadorian Technical 75% Technical 50% Technical 50% Technical 50% Personnel Administrative 90% Administrative 80% Administrative 85% Administrative 80% Other 95% Other 90% other 99% Other 95% 13. Supply of Ministry -y demand When oil is supplied Ministry may demand Ministry may demand Oil for supply of cil for for refining needs up to 20% of produc- up to 20% of production Domestic industrial and in the country, price tion belongs to including royalty oil. Purposes refining needs in will not be below cost company. Price will Price will be set on the country. of production and trans- not be below the the basis of actual port plus 20% of this effective cost plus cost plus a percentage cout. a percentage to be to be determined. determined. 19. Participation - - 15 to 35% according - to production level, net of cost once initial investment has been recovered by the company. 1/ Converted at a rate of S/25.0- $1-00.  IX. PRICES AND WAGES Table No. 9.1 GDP Deflator, Wholesale Price Index, Major Consumer Price Indexes and Weighted Average Annual Ekchange Rates, 1950-71  Table 9.1: GDP DEFLATOR, WHOLESALE PRICE INDEX, MAJOR CONSUMER PRICE INDEXES AND WEIGHTED AVERAGE ANNUAL EXCHANGE RATES, 1950-71 (1965=100) Exchange Rate Weighted Average Parity GDP National OPI Sacres Sucres Year Deflator WPI Quito Guayaquil Index Per US$ Per US$ 1950 69.5 .. .. .. 87.9 16.02 15.15 1951 72.4 .. 76.3 76.0 90.1 16.43 15.15 1952' 74.8 .. 78.9 .. 86.0 15.67 15.15 1953 76.1 .. 79.3 .. 85.8 15.64 15.15 1954 79.1 88.3 82.2 .. 86.0 15.67 15.15 1955 81.5 87.9 83.3 .. 88.1 16.07 15.15 1956 80.3 86.6 79.4 . 88.8 16.20 15.15 1957 81.3 89.6 80.0 85.5 88.7 16.18 15.15 1958 81.8 89.5 81.3 86.0 86.5 15.76 15.15 1959 81.9 88.2 81.h 85.6 89.2 16.26 15.15 1960 83.4 86.8 82.6 85.4 89.2 16.25 15.15 1961 87.6 91.0 86.0 90.2 97.8 17.82 18.18/a 1962 89.5 92.3 88.5 91.1 107.4 19.57 18.18 1963 93.3 95.3 93.7 91.9 101.9 18.57 18.18 1964 96.3 98.8 96.9 95.2 99.8 18.18 18.18 1965 100.0 100.0 100.0 100.0 100.0 18.22 18.18 1966 105.1 102.7 104.1 103.3 101.6 18.53 18.18 1967 108.9 104.7 108.1 109.1 102.4 18.66 18.18 1968 113.h 106.2 112.7 111.3 104.7 19.08 18.18 1969 118.7 111.0 119.9 116.6 104.5 19.05 18.18 1970 126.6 116.6 126.0 123.1 117.5 21.42 250c/a 1971 138.8 .. 136.6 135.2 138.1/b 25.17/b 25.00 /a Change occurred in July. /b Mission estimates. Sources: Central Bank of Ecuador, National Economic Planning and Coordination Board; National Institute of Statistics; Institute of Economic and Political Research of the State University of Guayaquil; mission a,timates.  VOLUME III - ANNEXES LIST OF ANNEKES A. TECHNICAL NOTE ON NATIONAL ACCOUNTS B. TECHNICAL NOTE ON BASIC STATISTICS C. THE PETROLEUM SECTOR D. LONG-TERM MACRO-ECONOMIC PROJECTION MODEL  CURRENT ECONOMIC POSITION AND LONG-TERM PROSPECTS OF ECUADOR TABLE OF CONTENTS Annex VOLUME III Page No. ANNEX A - TECHNICAL NDTE ON NATIONAL ACCOUNTS T. Introducti.on ........................................ 1 JI. Summary of Major Findinps and Recommendations o. ...o.. 1 III. Estimation of GDP at Current Market Prices ............. 3 IV. Major Components of the Expenditure on GDP ............... Private Consumption ............... .... .. ......... 9 General Government Fxpenditure . 7 Gross Domestic Fixod Investment . 10 Depreciation ........oo........................... 10 Increase in Stocks ................. ..... ........ 10 Exports and Imports ................................ 10 V. Estimation of GNP at Market Prices and the National Income 13 Net Factor Payments .......co........................... 13 Indirect Taxes and Subsidies . 17 VI. Industrial Origin of GDP at Factor Cost . 19 Agriculture GT)P ..o......... .......... ...... 19 Mining GDP .....o......*....*e....... 36 Manufacturinq GDP ........................... h2 r,onstruction GDP ...... ............................. 7 Electricity, Water Supply,and Sanitation Services GDP ..0 Transportation, Communications, and Storage GDP 6.00.... 1l Wholesale and Retail Trade GDP .........................6 Finance, Tnsurance, %nd Real Estate ...............5. 6 Ownership of Dwellings .5...9....................... Services GDP .......................................9 Public Administration and Defense .................... 61 VII. The Daflation Problem ..........o.................... 61 ANNEX A Page ii LIST OF TABLES Annex Table Page No. A-1 GDP at Current Market Prices, Ecuador, Estimating Procedure for 1970-1972 ................................. 4 A-2 General Government and Public Sector Consumption Expendi- ture at Current Market Prices, Ecuador, 1960-1970 ....... 6 A-3 Public Sector Gross Domestic Fixed Investment at Current Market Prices, Alternative CBE and NEPCB Estimates, by Type of Asset, Ecuador, 1964-1970 9...................... 8 A-4 Estimation of Total and Private Sector Gross Domestic Fixed Investment at Current Market Prices, Ecuador, 1964-1970.. 9 A-5 Gross Domestic Fixed Capital Formation at Current Market Prices, Ecuador, Estimating Procedure for 1969 and 1970.. 11 A-6 Gross Fixed Capital Consumption Allowances, Ecuador, Esti- mating Procedure for 1968-1970 .......................... 12 A-7 Exports and Lmp etQa Zooc d- ai Cnfactor Services, Factor Payments, and Capital InfLow, Comparison of Alternative Estimates, Ecuador, 1960-1971 ........................... 14 A-8 Net Factor Payme'oa, Estimating Procedure, Ecuador, 1968-1970 .................. 00 15 A-9 Net Factor Payments, Comparison of Alternative Estimates, Ecuador. 1960-1970 ...0....0.*. .*. .. ..***.**...... 16 A-10 Net Indirect Taxes, Ecuador, 1960-1970 ..... ............ 18 A-l Major Agricultural Crops--Volume, Prices and Value of Pro- duction, Ecuador, Estimating Procedure for 1969-1972..... 20 A-12 Bananas and Plantains--Volume, Prices and Value of Pro- duction, Consumption and Exports, Ecuador, Estimating Procedure for 1969-1972 ....... .............. ........... 21 A-13 Cocoa--Volume, Prices and Value of Production, Consump- tion and Exports, Ecuador, Estimating Procedure for 1969-1972 ...................... ..................... ... .. 23 A-1 Coffee--Volume, Prices antd Value of Production, Consump- tion and Exports, Ecuador, Estimating Procedure for 1969-1972 ..........o.. . . . .. . . . . .. . . ....... 24 ANNEX A Page iii Annex Table Page No. A-15 Minor Agricultural Crops--Volume, Prices and Value of Production, Ecuador, Estimating Procedure for 1969 ...... 25 A-16 Selected Agricultural Crops--Volume, Prices and Value of Production, Consumption and Exports, Estimating Proce- dure for 1969 ............... ... ...... ..... . 27 A-17 Gross Value of Meat Production, Ecuador, Estimating Proce- dure for 1969-1972 ........................ ............ .. 29 A-18 Production of Milk, Eggs and Wool, Ecuador, Estimating Procedure for 1969-1972 ................................. 30 A-19 Output of Livestock and Kindred Products, Ecuador, Summary of Estimates for 1969-1972 ............ *............... 31 A-20 Gross Value of Agricultural Production, Ecuador, Summary of Estimates, 1960-1972 .......... ......*........... 32 A-21 GDP at Current Factor Cost Originating in Agriculture, Hunting, Forestry and Fishing, Ecuador, Estimating Procedure for 1960-1965 *. ................................. 34 A-22 GDP at Current Factor Cost Originating in Agriculture, Forestry, Hunting and Fishing, Ecuador, Estimating Pro- cedure for Calendar Years 1969- 1972 ....................... 35 A-23 GDP at Constant 1960 Factor Cost Originating in Mining, Ecuador, Estimating Procedure for 1965 and 1966 ......... 37 A-24 Independent Variables Used in Regressions for Estimating Mining and Quarrying GDP, Ecuador, Selected Years 1957-1970 ........ .. ........... ..... ... ... ... ... 39 A-25 GDP at Current Factor Cost Originating in Mining and Quarrying, Ecuador, Estimating Procedure for 1969 and 1970 ...................... o ....... o..................... . . . . . 40 A-26 Independent Variables Used in Regressions for Estimating Manufacturing GDP, Ecuador, Selected Years 1957-1970 .... A-27 GDP at Current Factor Cost Originating in Manufacturing, Ecuador, Estimating Procedure for 1969-1972 ....0 ....... 45 A-28 Independent Variables Used in Regressions for Estimating Construction GDP, Ecuador, Selected Years 1957-1970 ..... 48 ANNEX A Page iv Annex Table Page No. A-29 GDP at Current Factor Cost Originating in Construction, Ecuador, Estimating Procedure for 1969 and 1970 ......... 49 A-30 Independent Variables Used in Regression for Estimating Electric Energy, Water Supply and Sanitary Services GDP, Ecuador, Selected Years 1957-1970 ....................... 51 A-31 GDP at Current Factor Cost Originating in Electric Energy, Water Supply and Sanitary Services, Ecuador, Estimating Procedure for 1969 and 1970 ............. ................ 52 A-32 Independent Variables Used in Regression for Estimating Transportation GDP, Ecuador, Selected Years 1957-1970.... Sh A-33 GDP at Current Factor Cost Originating in Transportation, Ecuador, Estimating Procedure for 1969 and 1970 ......... 55 A-34 Independent Variables Used in Regression for Estimating Domestic Trade GDP, Ecuador, Selected Years 1957-1970.... 57 A-35 GDP at Current Factor Cost Originating in Domestic Trade, Ecuador, Estimating Procedure for 1969 and 1970 ......... 58 A-36 Industrial Origin of GDP at Current Factor Cost, Alterna- tive Estimates of the CBE and NEPCB, Ecuador, 1969, 1970, and 1971 ....................................... ......... 60 A-37 Deflation Bias in GDP and Its Major Components, Ecuador 1962-1969 ............ . .. ............ .......... ...... 63 ANNEX A Page 1 TECHNICAL NOTE ON NATIONAL ACCOUNTS I. Introduction Annex A presents the findings and recommendations on Ecuador's national accounts; the related basic statistics are reviewed in Annex B below. The discussion focuses on the estimating procedures and alternative estimates produced by the Central Bank of Ecuador (CBE) and the National Economic Planning and Coordination Board (NEPCB).. The summary of major findings and recommendations focuses on major problems, the details being given and supported by a more camprehensive discussion and tables in the subsequent sections of this Annex. The recommendations relate to various improvements in the estimating procedures of national accounts. The basic statistical sources and methodology, however, also require a thorough review to establish more meaningful priorities for data collection and processing The mission is aware of the extremely limited human and budgetary resources available for the statistical work in Ecuador, and especially for the national accounts. The various methodological shortcomings encountered by themission are frequently the result of shortcuts and expediency rather than lack of the necessary expertise. Although Ecuador provides little professional training in statistics, it nevertheless has several competent experts in national accounts and basic statistics with varying degrees of foreign training who are aware of the major deficiencies and who would be able to bring about considerable improvements if the necessary resources were made available. II. Summary of Major Findings and Recommendations This summary outlines the methodologies used by the CBE and the NEPCB for deriving the major aggregates of national accounts. The CBE prepares most of the original estimates; the NEPCB updates, projects, and adjusts them for long-range planning and policy purposes. Both agencies use the old system of the U.N. national accounts. In view of considerable data problems, the new U.N. system may not be adopted for several years. The immediate improvement of the existing system of national accounts is of greater importance. ANNEX A Page 2 The CBE makes global estimates of the GDP at current prices, aerives the major expenditure components of the GDP, and estimates the GDP by industrial origin. It also prepares in considerable detail the revenue and expenditure accounts of the general government and the external trans- actions, showing in condensed form the other accounts of the oldU.N. system-- all at current prices. Prior to 1968, the CBE used to calculate a general price index for deflating all GDP components. In recent years, apparent deficiencies in consumer price indexes and a complete absence of wholesale price indexes compelled the CBE to suspend temporarily the deflation of national accounts. The NEPCB has carried on the deflation work, even without the most inadequate price deflators, because it needs the national accounts at constant prices for planning purposes. Tn the preparation of national accounts, the CBE has tried to allow and make necessary adjustments for the deficiencies in the basic statistics. Whenever feasible, the CBE conducted its own surveys and made numerous inquiries every year to collect the data necessary for the national accounts. It employed up to eighteen full-time economists in the 1950s for evaluating and incorporating all the basic relevant data into an almost complete set of national accounts. With a gradual deterioration of basic statistics, the burden of providing all the necessary data for the national accounts increased and priorities shifted to other areas. The CBE gradually reassigned its national accounts experts, reducing their number from eighteen to only one part-time specialist. Such a drastic staff reduction accompanied by a gradual deter- ioration of basic statistics compelled the CBE to modify its approach to the work on national accounts in the middle 1960s. Instead of aggregating the various components of national accounts from basic data, the CBE started regressing them on several readily available time series. Moreover, to cut corners, the CBE consolidated many detailed breakdowns and less impor- tant series into broader aggregates, finally abandoning all attempts to deflate the national accounts. While the use of regressions may produce sufficiently meaningful extrapolations for a few years, this shortcut method often results in misleading and estimates--of which the Ecuadorian experience has contributed several examples pointed out below. Their number would have been larger if the CBE experts had not employed various tests of consistency and reasonableness by deriving some estimates from alternative sources. The National Institute of Statistics (NIS) has recently been reorganized into an autonomous agency associated with the NEPCB although it still appears to be weak in modern sampling techniques and data processing. At present, it has no staff for constructing the estimates for the national accounts. However, after the NIS has been sufficiently strengthened to produce meaningful, relevant, and timely statistics, it should establish a National Accounts Division (NAD), which would assume the responsibility for ANNEX A the national accounts work of the CBE and the NEPCB. As a major user of basic statistics, the NAD would exert a beneficial influence on the NIS priorities and standards with respect to its basic statistics (see Annex B for further details). Price and production indexes should be improved and better adapted to the deflation needs of national accounts. The present deflation based on OPI's is inadequate. Each component of national accounts should be deflated with the most appropriate component of the CPI or the WPI. The price indexes of various cities should be aggregated, by components with proper regional weights, into national CPI and WPI. Whenever appropriate, industrial and agricultural production indexes should be computed and used for extrapolating the corresponding components of the national accounts at constant prices. The estimates at current prices would then be obtained by means of specific price indexes. The following discussion presents a general picture of the CBE and NEPOB methodologies with selected illustrations drawn from recent experience. The mission tried to use the same data and methodology with a few changes whenever they produced significantly improved results. The primary objective of the mission in the area of national accounts has been to ascertain the basis for the present estimates rather than to develop a new set of national accounts. The latter undertaking would not have been feasible with the time and basic data at the disposal of the mission. III. Estimation of the GDP at Current Market Prices For 1969 and 1970, the CBE has estimated the GDP at current market prices by simple linear regression from the average monthly means of payment at the disposal of the public. The latter variable is readily available, and it has shown a remarkably stable relationship--even for the years when the two variables were estimated independently--of about eleven percent of GDP in the 1950s and 12 percent for most of the 1960s (see Table A-1), implying a slight decline in the velocity of the circulation of money. Such a secular decline has been observed in many countries. The expansion of the monetized sector tends to replace the barter economy of the subsistence sector. This has a double effect. More money is needed: (1) for transactions--as a medium of exchange, and (2) for value transfers in time and place--as a store of value. Instead of goods, means of payment are used for accumulating wealth. Thus, relatively, more money is needed per value unit of the GDP. Therefore, the increasing ratio of the money supply to the GDP is very plausible for Ecuador. The preliminary GDP estimate extrapolated by the regression on the means of payment is then adjusted on the basis of changes in foreign trade, current and capital expenditure of the public sector, construction permits, output of selected industrial products, and various ANNEX A Page 7 Table A-1: GDP AT CURRENT MARKET PRICES, ECUADOR, ESTIMATING PROCEDXJRE FOR 1970-1972 GDP at Current Means of Payment Means of Market Prices at the Disposal of the Public Payment (Millions (Monthly Averages in (Percent Year of Sucres) Millions of Sucres) of GDP) Y X % 1950 7,26 803 11 1951 7,761 866 11 1952 8,854 947 11 1953 9,349 1,080 12 1954 10,447 1,205 12 1955 11,049 1,215 11 1956 11,266 1,239 11 1957 12,007 1,311 11 1958 12,357 1,362 11 1959 13,009 1,474 11 1960 14,140 1,627 12 1961 15,075 1,731 11 1962 16,104 1,840 11 1963 17,437 2,054 12 1964 19,414 2,362 12 1965 20,787 2,411 12 1966 22,834 2,615 11 1967 25,128 2,962 12 1968 27,466 3,398 12 1969 30,717 3,693 12 1970 37,575 4,549 12 1971 44,673 5,435 12 1972 53,205 6,500 12 The above variables produced the following estimating equation for GDP at current market prices: Ti = 1,130.33 + 8.01147Xi This equation produced the following estimates: Y1970 = 37,574.5 Y1971 = 44,672.6 Y1972 a 53,204.9 The CBE computed a slightly different estimating equation (Yj = 1,130.13 + 8.011311kX). Source: Central Bank of Ecuador, National Income Division; mission estimates. ANNEX A Page 5 other indicators. In addition, the CBE takes into consideration expert appraisals produced by various government agencies and international organizations. The integration of all this information in a GDP estimate cannot be objective. It usually results in several tentative hypotheses, the most plausible of which is finally accepted. This estimating procedure can be illustrated by GDP estimates prepared for recent years. Given the inflation rate by the Quito CPI of 5.0 percent in 1970 and the increase in the GDP at current market prices of 21.6 percent implied by the regression on the means of payment, the real rate of growth of 15.8 percent appeared to be on the high side. Making allowance for higher price changes, the CBE estimated the price deflator at 7.1 per- cent for 1970. However, even with this higher price deflator, the real growth of GDP comes to 12.4 percent for 1970. In order to bring it down to a more reasonable level of about 8 percent, the CBE reduced the GDP at current market prices from 37,574 (as given by the regression) to 35,743 million sucres. For 1969, the preliminary GDP estimate of 30,317 million sucres implied only 1.85 percent rate of growth in the per capita national income. This estimate appeared on the low side, and four other alternative estimates with higher growth in the per capita income were considered (30,843; 31,048; 31,282; and 36,112). The lower of the latter four estimates appeared most plausible, and it was finally adopted for 1969. Similar considerations determined the estimates of GDP at current market prices in 1968, 1967, 1966 and 1965. For 1964 and earlier years, the GDP was estimated by the aggregation of value added by sectors. These procedures are discussed below. The NEPCB estimated the GDP by converting exports and imports from the balance of payments dollar values with different exchange rates, and although it used essentially the same consumption and investment estimates as the CBE, its estimates of imports became larger and those of GDP somewhat smaller. The details of these NEPCB estimates are discussed below. IV. Major Components of the Expenditure on the GDP Private consumption. This GDP component is derived as a residual by subtracting gross domestic capital formation from the available resources. In the 1950s, the CBE tried to check this component by estimating independently private consumption expenditure. The absence of necessary data made such estimates of private consumption expenditure almost impossible, and their preparation has been suspended. General government expenditure. The Nati*apl Incore Division (NID) of the CBE estimates general government consumption expenditure from the accounts of Central, provincial, and municipal governments. The consumption expenditure of the Ecuadorian Social Table A-2: GENERAL GOVERNMENT AND PUBLIC SECTOR CONSUMPTION EXPENDITURE AT CURRENT MARKET PRICES, ECUADOR, 1960-1970 (Millions of Current Sucres) Consumption Expenditure 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 Central Bank of Ecuador Estimates Employee Compensation General government 1,158 1,166 1,252 1,373 1,576 1,766 2,008 2,091 2,751 3,234 n.a. Plus: other entities -48 91 74 48 55 59 66 81 97 110 n.a. Public sector 1,110 1,257 1,326 1,421 1,631 1,825 2,074 2,172 2,848 3,34h n.a. Purchases of goods and servicesi/ General government 655 901 903 859 1,014 1,072 1,211 1,311 1,308 1,326 n.a. Public sector 576 739 751 761 896 906 830 902 1,259 1,312 n.a. Consumption expenditure General government 1,813 2,067 2,155 2,232 2,590 2,838 3,219 3,402 4,059 4,560 4,980 Public sector 1,686 1,996 2,077 2,182 2,527 2,731 2,904 3,074 4,107 4,656 n.a. National Economic Planning and Ooordination Board Estimates Public sector consumption **.2,387 2,628 2,809 3,158 3,743 4,171 5,115 1/ Purchases of goods and services exclude purchases from within the specified sector, Therefore, the general government purchases (and consumption expenditure) may exceed those of the public sector as a whole. Sources: Central Bank of Ecuador, National Income and Fiscal Studies Divisions; National Economic Planning and Coordination Board. ANNEX A Page 7 Security Institute is also included while the consumption expenditure of government enterprises and public corporations is excluded from general government and implicitly included in the private sector. These classi- fications are consistent with the U.N. system of national accounts. The Fiscal Studies Division of the CBE and the NEPCB h.ie also estimated public consumption which includes over 500 autonomous entities, government enterprises, and public corporations. According to the CBE estimates, general government accounts for about 97 percent of the employee compensation of the public sector. The general government purchases of goods and services exceed those of the public sector. This is possible because the intrasector transactions are excluded and the general government agencies make purchases from the rest of the public sector. The latter are included in the general government but are excluded from the public sector (see Table A-2). The NEPCB has also estimated public sector consumption which tends to be lower (except in 1967 and 1970) than that estimated by the OBE (see Table A-2). The methodological details of the latter estimates are not available. Gross domestic fixed investment (GDFI). The National Income Division of the CBE estimates first the public GDFI from the data compiled by the Fiscal Studies Division for the public sector as a whole (which includes government enterprises and public corporations). The latter Division classifies annual expenditure of each entity, aggregating new GDFI by major components. The National Income Division adds financial investments of the public sector in land, buildings, and other real estate to the new GDFI to obtain its own estimate of gross domestic fixed capital formation which it uses in the national accounts (the t.N. system of national accounts excludes financial investment). The NEPCB makes further upward adjustments in the public GDFI, including several additional autonomous entities as well as the deferred payments for financing public GDFI of the preceding year (see Table A-3). The methodological details of these adjustments are not available. A comparison of the CBE and the NEPCB estimates of GDFI by type of asset shows that the NEPCB estimates tend to be higher than those of the CBE for other construction although they tend to be lower for machinery and buildings (see Table A-3). These differences may partly be attributed to the different coverage of autonomous agencies although an exhaustive comparative study of the two sets of data for all of the 500 autonomous entities could not have been undertaken within the scope of the present mission. The CBR estimates the private GDFI as a residual by subtracting the public GDFI from the total GDFI. The NEPCB adopts the CBE estimate of the total GDFI and derives the private GDFI by subtracting its own estimate of public GDFT (see Table A-4). Thus, both agencies use the same total GDFI and different estimates for the private and public sectors. ANNEX A Page d Table A-3: PUBLIC SECTOR GROSS DOMESTIC FIYED INVESTMENT AT CURRENT MARKET PRICES, ALTERNATIVE OBE AND NFPCB ESTIMATES, BY TYPE OF ASSET, ECUADOR, 1964-1970 (Millions of Current qucres) 1964 1965 1966 1967 1968 1969 1970 Public new GDFI 875 886 844 998 1,242 1,522 1,874 Plus: land, etc. 1/ 71 47 38 130 26 75 n.a. GDFI in CBE national accounts2/ 946 933 882 1,128 1,268 1,597 n.a. Plus: adjustment 2 7 111 245 154 243 38 n.a. GDFI inNEPCB national accounts- 953 1,044 1,127 1,282 1,511 1,635 2,013 Public new GDFI, by type of asset, total: CBE 875 886 844 998 1,242 1,522 n.a. NEPCB 908 1,009 1,093 1,246 1,371 1,453 1,846 Machinery and equipment: CBE 144 188 171 166 206 239 n.a. NEPCB 123 170 204 219 159 205 394 Buildings: CBE 150 113 94 134 206 245 n.a. NEPCB 87 78 49 91 151 120 169 Other construction: CBE 581 585 579 698 830 1,038 n.a. NEPCB 698 761 840 936 1,061 1,128 1,283 1/ Includes CBE estimates of land, buildings, and other real estate financial investments of the public sector. 2/ CBE estimates of public GDFI used in CBE national accounts. 7 Includes deferred payments for financing public GDFI of the preceding year and additional autonomous entities. 4/ NEPCBestimates of public GDFI used inNEPCBnational accounts. Source: Central Bank of Ecuador; National Economic Planning and Coordination Board; mission estimates. ANNEX it Page 9 Table A-hs ESTIMATION OF TOTAL AND PRIVATE SECTOR GROSS DOMESTIC FIXED INVESTMENT AT CURRENT MARKET PRICES, ECUADOR, 1964-70 (Millions of Current sucres) 1964 1965 1966 1967 1968Y 196911 1970-/ Central Bank of Ecuador Estimates Regressed total GDFI 2,339 2,406 2,515 2,969 3,272 3,963 4,296 CBE adjustment - - - - 502 781 n.a. CBE total GDFI 2,339 2,406 2,515 2,969 3,774 4,744 n.a. Less: CBE public GDFI 946 933 882 1,128 1,268 1,597 n.a. CBE private GDFI 1,393 1,473 1,633 1,841 2,506 3,147 n.a. National Economic Planning and Coordination Board Estimates CBE total GDFI 2,339 2,406 2,515 2,969 3,774 4,744 6,298 Less: NEPCBpublic GDFI 953 1,044 1,127 1,282 1,511 1,635 2,813 NEPCBprivate GDFI 1,386 1,362 1,388 1,687 2,263 3,109 3,485 1/ Preliminary. Source: Central Bank of Ecuador, National Income Division; National Econanic Planning and Coordination Board ANNEX A Page 10 The CBE estimates the total GDFI by regression. It first converts the GDFI from the current into constant prices, expresses the latter as an index, and regresses it for 1969-70 on three related indexest (1) GDFCF of the general government (which is not available and is replaced with public sector GDFCF), (2) unweighted volume index of cement production and (3) quantum index of imported capital goods (see Table A-5). The latter index has not been available since the middle 1960s and it had to be estimated from other data on imports. It was apparently lagged one year although this could not be established with certainty because the computational details of this quantum index are not available. It was computed from the volume of imported capital goods and the 1960 unit price. The cement production was similarly calculated from the metric tons and the average 1960 cement price. The results at constant prices were converted to index numbers which the CBE used in the regression for deriving GDFCF estimates as far back as 1964. Depreciation. The CBE estimates the provision for fixed capital consumption as a percentage of preceding year's GDFCF. The latter are further adjusted by the statistical discrepancy in the reconciliation of the account showing the finance of gross capital formation. In the latter account, the CBE reconciles the depreciation with the surplus or deficit of the nation on current account, gross domestic saving, and the gross capital formation. The depreciation allowanceshave thus been significantly adjusted, especially for recent years (see Table A-6). Increase in stocks. The CBF has estimated the changes in stocks from the data of the Finance Ministry for 1950-53. It first estimated increases in stocks at current prices, deflated them with the GDP deflator, and calculated an average annual increase per capita. In the 1960s the NID has used the changes in the volume of exports and imports rather than the population growth. The changes in stocks have been further adjusted in recent years to show smooth and gradual increases. Exports and imports. The CBE National Income Division derives exports and imports of goods and nonfactor services from the balance of payments data in U. S. dollars. It converts each entry at the exchange rate applicable to each foreign exchange market. Thus, in 1968 and 1969, the CBE distinguished between exchange rates in the official market (17.82 sucres for exports and 18.18 sucres per U. S. dollar for imports) and those in the free market (22.15 and 22.26, res- pectively). For the first half of 1970 (through June 21), it used 21.55 and 21.71 sucres per U. S. dollar for the free market. From June 22 till August 17, in the so-called parallel market, the CBE used 23.20 as a buying and 23.43 sucres as a selling rate, and from August 17 till the end of 1970, the CBE used again two sets of rates: 24.75- 25.25 sucres for the "unified" and 27.00-28.00 sucres for the "black" market. Aggregating separately the dollar and the sucre amounts, the ANNEX A Fage 1e Table A-5: GROSS DOMESTIC FIXED CAPITAL FORMATION AT CURRENT MARKET PRICES, ECUADOR, ESTIMATING PROCEDURE FOR 1969 AND 1970 Gross Fomestic Fixed Capital Formation Independent Variables (Millions of Sucres) (Indexes, 1965 = 100) Current At 1965 Index Year Prices Prices Y 1 X2 X 1957 1,561 1,920 79.8 61.0 52.2 47.7 1958 1,516 1,853 77.0 6h.2 53.9 52.2 1959 1,734 2,117 88.0 81.1 52.9 47.8 1960 1,897 2,272 94.4 97.6 61.6 60.1 1961 2,047 2,337 97.1 102.8 67.0 58.4 1962 1,959 2,186 90.9 84.8 65.3 46.6 1963 2,146 2,300 95.6 89.0 79.1 58.0 1964 2,339 2,426 100.8 101.4 89.2 80.8 1965 2,406 2,406 100.0 100.0 100.0 100.0 1966 2,515 2,393 99.5 94.5 115.8 107.0 1967 2,969 2,726 113.3 120.9 131.6 126.5 1968 3,272 2,893 120.2 133.01/ 146.1 140.2 1969 3,963 3,289 136.6933 171.2 153.5 153.3 1970 4,296 3,330 138.4013 176.3(p) 154.2 158.7 1/ The index value computed from the CBE data for 1968 is 135.9. Independent Variables: 11 = GDFCF of the general government X2 = Cement production I3 = Quantum index of imported capital goods. The above variables produced the following estimating equation for GDFCF at constant 1965 factor cost: Yi = 5.0670 + 0.4311X1 * 0.2375X2 - 0.1216X3 This equation produced the following final estimates: Y1969 = 3,289 Y1970 = 3,330 The CBE computed the same estimating equation. Source: Central Bank of Ecuador, National Income Division. Table A-6: GROSS FIXED CAPITAL CONSUMPTION ALLOWANCES, ECUADOR, ESTIMATING PROCEXJRE FOR 1968-1970 (Millions of Current Sucres and Percent) 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 GDFCF 1,897 2,047 1,959 2,149 2,339 2,406 2,515 2,969 3,774 4,744 6,298 Unadjusted GFCCA (as 43% of the GDFCF in preceding year) - 816 880 842 924 1,005 1,035 1,081 1,277 1,623 2,040 Plus: reconciliation adjustment - -53 -98 -25 103 62 78 69 -67 -398 -440 Adjusted GFCCA 684 763 782 817 1,027 1,067 1,113 1,150 1,210 1,225 1,600 GFCCA in percent of adjusted GDFCF of the preceding year - 40.2 38.2 41.7 47.8 45.6 46.3 45.7 40.8 32.5 33.7 Sources: Central Bank of Ecuador, National Income Division; mission estimates. I1 >4 ANNEX A Page 13 CBE has derived for 1970 the average weighted exchange rates of 21.33 for exports and 21.49 for imports, with an overall weighted average of 21.42 sucres per U. S. dollar. The Foreign Trade Section of the NEPCB has used somewhat different exchange rates and made other adjustments in converting the balance of payments data from US dollars into sucres. Further discre- pancies arise from the different treatment of services. In addition to investment income, the NID classifies services and commissions on loans and donations as factor payments; the balance of payments and the NEPCB include these as nonfactor services with imports. To this extent, the NID tends to understate the imports and to overstate the net factor payments. The net capital inflow data show relatively smaller discre- pancies than its two major components (see Table A-7). Using the balance of payments data and the NID weighted average exchange rate for imports, the Mission estimated the total value of imports in sucres which approxi- mates the NEPCB estimates (see Table A-7). The same procedure produced also the NEPCB estimates of exports. V. Estimation of the GNP at Market Prices and the National Income The "BE and the NEPCB estimate the GNP at current market prices by deducting net factor payments to abroad from the GDP at current market prices. Subtracting the net indirect taxes from the GNP is obtained (see Tables 2.1 and 2.2 of the Statistical Appendix to the main report). The factor payments are overstated and the indirect taxes understated by items which are classified differently by the IBRD, the IMF, and the U.N. system of national accounts. The major discrepancies are discussed below. Net factor payments. The CBE derives factor payments from the balance of payments data, converting the U. S. dollars into sucres at various exchange rates (similarly to the foreign trade data). The items classified as investment income payments include dividends and interest on direct investment as well as other dividends and interest (IMF charges, interest on external debt, bank interest and net portfolio investment income). Moreover, real estate transactions Table A-7: EXPORTS AND IMPORTS OF GOODS AND NONFACTOR SERVICES, NET FACTOR PAYMENTS AND NET CAPITAL INFL)W, COMPARISON OF ALTERNATIVE ESTIMATES, ECUADOR, 1960-71 Alternative Sources 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 Exports of Goods and Nonfactor Services in Millions of Current Sucres NID (CBE) exportsl/ 2,530 2,524 3,081 3,024 3,245 3,618 3,726 4,041 4,258 4,183 5,437 Plus: discrepancy -6 +106 -34 -28 -34 -45 +10 -44 -37 -19 -43 . 'EPCB exporta! 2,524 2,630 3,047 2,996 3,211 3,573 3,736 3,997 4,221 4,164 5,394 6,(2 Mission estimates 2,524 2,630 3,047 2,996 3,211 3,573 3,736 3,997 4,227 4,390 5,463 6,422 Imports of Goods and Nonfactor Services in Millions of Current Sucres NID (CBE) importsl/ 2,476 2,581 2,929 2,940 3,334 3,574 3,604 4,209 5,134 5,842 7,043 .. Plus: discrepancy -21 +167 +9 -10 +130 +104 +127 +172 +214 +486 +552 NEPCB importsi/ 2,455 2,748 2,938 2,930 3,464 3,678 3,731 4,381 5,348 6,328 7,595 11,642 Mission estimates 2,455 2,748 2,938 2,930 3,464 3,678 3,731 4,381 5,362 6,301 7,760 11,642 Net Imports o? Goods and Nonator Services in Millions of Current Sucres NID (CBE) -54 57 -152 -bn b9 -44 -2 163 d7b 1,659 1,606 Plus: discrepancy -15 61 43 18 164 149 117 216 251 505 595 NEPCB -69 118 -109 -66 253 105 -5 384 1,127 2,164 2,201 Mission estimates -69 118 -109 -66 253 105 -5 384 1,135 1,911 2,297 5,220 Net Factor PaMents in Millions of Current Sucres- NID (CBE) 398 0 439 333 4W5 566 6 662 751 9B5 1,43 Plus:discrepancy -3 5 -4 0 -131 -101 -119 -172 -177 -392 -666 NEPCB 395 465 435 333 357 465 494 490 574 593 766 Mission estimates 395 465 435 333 357 465 494 490 572 593 727 865 Net Caital Inflo i~n Mill-ons- o? Current Mauc s NID (CBE) 344 -70-7 577 522 491 530 1,627 2,644 3,03 Plus:discrepancy -18 66 39 18 33 48 -2 44 74 113 -71 NEPCB326 583 326 267 610 570 489 874 1,701 2,757 2,967 Mission_estimates 326 583 326 267 610 50_ 8 7 ,0 ,0 ,2 :8 NetIncludes goods and nonfactor services Sources: NEPCB, Foreggn Trade yeabook (for 1957 through 1969), Central Bank of Ecuador;mission estimates. 398 ~~ ~ ~ ~ ~ ~ ~ ~ ~ ;6-3 3 8 6 13 62 71 95162 . Table A-82 NET FACTOR PAYMENTS, ESTIMATING PROCEDURE, ECUADOR, 1968-1970 (Millions of Current Sucres) 1968 1969 1970 1. Investment payments 570.3 592.6 727.2 a. Dividends and interest on direct investment 441.4 445.2 513.8 b. Other dividends -10.7 -7.5 15.8 c. Interest on external debt 138.2 141.8 194.3 d. Bank interest ** 7.3 q * e. IMF charges 3.6 3.6 5.5 f. Portfolio investment -2.2 -2.2 g. Net lease, rent, and income of the US embassy in Quito 2.2 2. Other factor payments 1 1.8 3. Net factor payments: (1) Mission estimates 572.1 592.6 727.2 (2)NEPCB estimates 574 593 766 4. Nonfactor payments 2 179.3 392.6 704.8 a. Services and commissions on direct investment 219.5 460.2 b. Services and commissions on public debt 86.8 c. Services and commissions on loans 83.6 43.6 122.5 d. Services and commissions on donations 129.5 119.9 e. Film rentals 8.9 2.2 5. Net factor payments: CBE estimates 751.4 985.2 1,432.0 1/ Comprises payments to foreign technicians. 7/ The CBE classifies these non-factor services as factor payments. w Sources: Central Bank of Ecuador, Department of Economic Research; National Economic Planning and Coordination Board. Table A-9: NET FACTOR PAYMENTS, COMPARISON OF ALTERNATIVE ESTIMATES, ECUADOR, 1960-70. Alternative Sources 1960 1911961 1963 1 964 1 96 1966 1967 1968 1969 1970 Millions of US Dollars Balance of payments investment income 22.8 23.2 19.9 16.7 19.3 25.0 25.2 24.9 27.1 28.4 33.5 Millions of Sucres Balance of payments investment incomell 345 422 362 304 351 455 458 453 493 516 609 N8PCB net factor payments 395 465 435 333 357 465 494 490 574 593 766 CBE net factor payments 398 460 439 333 488 566 613 662 751 985 1,432 1/ Based on the official selling rate of 15.15 sucres per US dollar for 1960 and 18.18 sucres for 1961-70. Sources: IMF Balance of Payments Division, Balance of Paments Yearbook Vols. 17-22 (for 1966-1970); n Memoria (issues from 1962 through 196)T and unpublisheestmaYes for 1968-1970; National Economic Planning and Coordination Board; mission estimates, ANNEX A Page 17 such as the lease, rent and income of the U. S. embassy in Quito are also included in investment income. Other factor p.yments include payments to foreign technicians. No estimate is included for %buadorian labor income earned abroad because it is believed to be negligible. The sun of the above net amounts approximates net factor payments (see Table A-8). The CBE has included certain other items as factor payments which appear in the unpublished statement of the balance of payments. A detailed breakdown and description of these additional items is not available, and their classification as factor payments may not be established with certainty. They include services and commissions on direct investment, public debt, loans and donations. To some extent these finance charges are akin to other returns to capital, and they could be classified as factor payments. However, the IMF and the IBRD normally classify them with nonfactor services rather than with factor payments. Payments for film rentals belong also to nonfactor services (see Table A-8). The net factor payments of Ecuador thus consist mostly of investment income which appears in the balance of payments. Relatively higher amounts in sucres and a higher implicit exchange rate for the NEPCB factor payments indicate that they are more inclusive than those shown in the balance of payments (see Table A-9). Prior to 1964, the CBE and the NEPCB made relatively small adjustments and they differed insignificantly. Starting in 1964, however, the National Income Division of the CBE began including considerable additional amounts into net factor payments. This dicrepancy increased from 37 percent in 1964 to 87 percent in 1970 (see Table A-9). The NEPCB estimates are, on the other hand, close to those prepared by the ission for 1968-70, and in the absence of more detailed data, they have been adopted also for earlier years. Indirect taxes and subsidies. The U.N. system of national accounts includes as indirect taxes all taxes assessed on producers for the production, sale, purchase or use of goods and services which they charge to production expense. The indirect taxes estimated by the CBE comprise import duties (including consular rights and import permit stamps), consumer taxes (including net value of consumption for monopoly products), taxes on transactions (excise taxes and registration fees), and other indirect taxes (see Table A-10). The U.N. system of national accounts requires that the operating surplus of fiscal and similar government monopolies be reduced by the normal (or average) profit margin earned by private business firms in the same industrial branches. It appears that the available data do not permit such adjustments in Ecuador. Moreover, the CBE classifies the export taxes as direct, following apparently the argument that Ecuadorian exporters face perfectly elastic demand in the world markets for their products. Being unable to raise prices by the amount of export taxes, the exporters Table A-10: NET INDIRECT TAXES, ECUADOR, 1960-1970 (Millions of Current Sucres) Taxes and Subsidies 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 Central Bank of Ecuador Estimates Import taxes 1/ 642 655 669 861 1,060 1,018 1,201 1,568 1,703 1,739 n.a. Consumer taxes / 437 434 4b8 467 557 454 432 462 533 686 n.a. Transaction taxes 3 35 36 38 41 47 65 53 64 75 75 n.a. Other indirect taxes 191-/ 172 193 198 248 265 285 325 379 370 n.a. Total indirect taxes 1,305A 1,297 1,318 1,567 1,912 1,782 1,971 2,419 2,690 2,870 n.a. Less: subsidies 20 60 106 43 96 117 139 97 90 124 n.a. Net indirect taxes 1,285 1,237 1,212 1,524 1,816 1,665 1,832 2,322 2,600 2,746 n.a. NEPCB Estimates Net indirect taxes 1,285 1,237 1,212 1,524 1,816 1,665 1,832 2,322 2,600 2,746 3,030 Mission Estimates Export taxes 175 212 265 267 360 290 276 282 307 301 n.a. Total adjusted net indirect taxes 1,44o 1,h9 1,657 1,791 2,176 1,955 2,108 2,604 2,907 3,047 n.a. 1/ Includes consular rights and import permit stamps. 7/ Includes net consumption value of state monopoly products. / Includes certain excise taxes and registration fees. 2/ For 1960, the FSD of the CBE estimated other indirect taxes at 171 mil. sucres and total indirect taxes at 1,285 mil. sucres but the NID caised the latter to 1,305 mil. sucres, apparently to keep the net indirect taxes of 1,285 mil. unchanged after 20 mil. sucres of subsidies had been estimated. Sources: Central Bank of Ecuador and National Economic Planning and Coordination Board. ANNEX A Page 19 charge these taxes to profits rather than to production expenses. This controversial issue has been raised in several countries, and it remains open for discussion in Ecuador. The exclusion of export taxes understates the GDP at market prices. The NEPCB uses essentially the CBE estimates of indirect taxes and subsidies (see Table A-10). Subsidies are relatively small in Ecuador. They include tax credit certificates which can be credited to future tax payments. Subsidies also include the cost of pesticide fumigation of banana plantations. VI. Industrial Origin of.the GDP at Factor Cost The CBE estimates the industrial origin of the GDP by regressing each GDP component on selected indicators. The NEPCB adjusts these estimates further for consistency with its estimates cf exports, imports, and the GDP. The NEPCB adjustments are relatively minor. The following discussion focuses on the CBE methodology for deriving the GDP by industrial origin. Agriculture GDP. Agriculture is still by far the largest economic sector in Ecuador, employing more than half of its people. Its relative importance in total GDP has declined, however, from 37 percent in 1960 to 31 percent in 1970. Agriculture GDP includes estimates for 13 major and 59 minor crops, livestock products, poultry and eggs. Rough estimates for hinting, forestry and fishing are also included. The volume of crop production, which accounts for about 70 percent of the Fross value of output in this sector, is estimated from the 195h Census of Agriculture and the Ministry of Production data based on the annual reports of agricultural extension workers. For the 1950s and most of the 1960s the CB has estimated first the gross value of output and then derived the value added by subtracting the nonfactor inputs. Since 1969, the CBE has used regressions for deriving the agriculture GDP. The CBE estimates the gross value of agricultural production for thirteen major crops, which account for over 80 percent of the total value of all agricnltural crops, multiplying the volume of output by estimated prices of each commodity (see Table A-11). Special adjustments are made for major exports. Thus, for banana and plantains, which account for about one-third of the total value of all crops, their gross value is estimated separately for exports and for domestic consumption (see Table 1-12). Inasmuch as the export permit declarations are understated, the CBE has used the estimates of the National Banana Bureau (NBB). The CBE has also adjusted upwards the banana export prices for most of the 1960s. Given the volume of domestic production and exports of bananas T A i u A AGSJICLTURI.AL RPS-- , ID1S AID VALE OF PRODUCTIOX, ECUADOCR, ESTIMATING PROC7DURE FOR 1969-1972 = = = =1.5--7 0 1 9 7 1 1 9 7 2 Agricultaral Metric Prices Aetric Prices Crops Tons Sucres per Million Tons Sucres per Million Million Million (000) uintal 14. Ton Sucres (000) Quintal M. Ton Sucres Sucres Sucres 13 Eajor Crops 1. i3rBanas 4,316.0 b/ 3,314.5 b/ b/ b/ 3,740.7 3,834.9 3,916.3 2. Barley 77.7 90.98 1,977.9 153.6 110.0 90.3 1.903.0 215.9 250.0 280.0 3. 3eans 37.9 307.48 6,684.6 253.3 41.3 307.6 6,687.0 276.2 310.0 340.0 4. Castor beans 23.8 b/ b/ 45.2 16.5 c1.8 1 .995.7 32.9 35.0 40.0 5. Cocoa 48.0 // 614.8 b/ b/ b/ 599.6 751.6 715.5 6. Coffee 55.9 -/0/ 643.3 -10/ B/ 1,239.3 1,175.3 1,222.0 7. Corn 222.5 3/ B/ 533.8 271.5 10.0 2,377.8 637.4 720.0 810.0 8. Cotton (raw) 23.6 176.70 3,871.5 90.5 7.6 193.7 4,210.9 32.0 46.0 60.0 9. Onions 96.0 111.25 2,418.6 232.1 94.9 118.8 2,582.6 245.1 280.0 320.0 1J. addy 288.0 151.25 3,288.2 947.0 407.2 161.4 3,508.7 1,428.7 1,500.0 1,700.0 11. Potatoes h56.7 78.45 1,727.2 783.8 541.8 85.8 1,865.2 1,010.6 1,130.0 1,270.0 12. Sugar cane 11,886.6 .. 87.8 1,043.6 (9,500.0) .. (90.0) 855.0 1,060.2 1,200.0 13. Wheat 94.1 118.08 2,567.1 241.6 81.0 .. (2,700.0) 218.7 250.0 300.0 Major crops 17,626.8 .. .. 8,902.1 .. .. .. 10,532.1 11,353.0 12,173.8 59 Minor Crops Minor crops 1,130.8 .. 2,163. .. .. .. 2,136.7 2,425.0 2,800.0 t2 Agric_ultural Crops _ _ Total 18,757.6 .. .. 11,065.6 .. t .. . 13,788.0 14,973.8 1/ Includes plantains. See detailed calculations in tables below. C/ Output in metric tons adjusted to the level of output reported by the National Committee for Rice. o > Sources: Central Bank of Ecuador, National Income Division; Ministry of Production, General Bureau of Planning, Division of Statistics; mission estimates. Table i-12: BANANAS AND PLANTAINS--VOLUME, PRICES, AND VALUE OF PRODUCTION, CONSUMPTION AND EXPORTS, ECUADOR, ESTIMATING PROCEDURE FOR 1969-1972 Jan.-July Aug.-Dec. Items 1969 1970 1970 1970 1971 1972 Volume in Thousands of Metric Tons Domestic production a/ 4,3160 .. .. 4,136.7 3,805.8 3,800.0 Less: NBB exports 1,189.7 .. .. 1,364.0 1,351.0 1,319.0 Domestic consumption 3,126.3 2,772.7 2,454.8 2,481.0 Domestic and Export Prices Domestic price per 30 kgs. bunch (sucres) 12.71 .. 11.50 12.60 13.80 Domestic price per metric ton (sucres) 423.67 .. .. 383.33 420.00 460.00 Export price per metric ton, unadjusted (US$) 56.03 .. .. 69.12 74.87 75.82 Plus: export price adjustment (US$) 30.84 .. .. 20.89 8.15 8.33 Export price per metric ton, adjusted (US$) 86.87 .. .. 90.01 83.02 84.15 Value of Production, Consumption, Exports, and Balance of Payments Adjustment Exports (thousands of Us$) 66,653 )4,532 49,745 94,277 101,154 100,000 Exchange rate (sucres per US$) 17.82 17.82 24.75 21.48 25.00 25.00 Unadjusted exports (mtl. of sucres) 1,187.7 793.5 1,231.2 2,024.7 2,528.9 2,500.0 Balance of payments adjustment (thousands of US$) 36,700 24,492 4,008 28,500 11,000 11,000 Exchange rate (sucres per US$) 21.86 21.86 24.75 22.92 25.00 25.00 Balance of payments adjustment (millions of sucres, 802.3 554.0 99.2 653.2 275.0 275.0 Adjusted exports (thousands of US$) 103,353 69,024 53,753 122,777 112,154 111,000 Adjusted exports (millions of sucres) 1,990.0 1,347.5 1,330.4 2,677.9 2,803.9 2,775.0 Domestic consumption (millions of sucres) 1,324.5 .. .. 1,062.8 1,031.0 1,141.3 Production (millions of sucres) 3,314.5 .. .. 3,740.7 3,834.9 3,916.3 a/ Includes plantains. Sources: Central Bank of Ecuador, National Income Division; Ministry of Production, General Bureau of Planning, H Division of Statistics; mission estimates. ANNEX A Page 22 and plantains, the CBE derives the implicit domestic consumption and values it at unweighted average consumer prices reported by the MInistry of Production (see Jable B-15), supplemented by estimates of its own (see Table A-15) . The prices for bananas, plantains and other agricultural crops are generally higher than the farm-gate prices. Thus, the gross value of production includes transportation costs and trade margins. The CBE follows a similar estimating procedure for deriving the volume, prices, gross value of production, consumption and exports of cocoa, coffee, castor beans, corn and six minor selected crops with sizeable export shares (see Tables A-13, A-14 and A-16). In each case, the volume of exports is subtracted from the domestic production to estimate implicit domestic consumption. The latter is multiplied by averaee domestic prices to obtain the total value of domestic consumption. The addition of the value of exports and the value of domestic consumption gives the value of total production. The remaining eight major and fifty- three minor crops are valued at domestic wholesale prices (see Tables A-11 and A-15). Finally, the CBE aggregates the gross value of production for all thirteen major and fifty-nine minor crops (see Tables A-11). Livestock and kindred products, which account for about a fifth of the total value of agricultural production in Ecuador, comprise meat, milk, eggs and wool. The estimates of meat production are built up from the per capita consumption of beef, lamb, pork and poultry 28 The CBE tries to review the basic data cautiously and judiciously, rejecting or adjusting inadeauate statistical information. Never- theless, the overwhelming inadequacies and continuous revisions of basic statistics make it very difficult to avoid occasional slipups. Thus, estimating the 1969 GDP at factor cost originating in agriculture, the CBE used a preliminary estimate of 5,833,562 metric tons of bananas reported for 1969 by the Ministry of Product- ion and arrived at an estimate of 8,874 million sucres for the agricultural GDP in 1969. Subsenuently, the Ministry of Production published a revised estimate of 5,388,099 metric tons which it later revised further down to 3,870,499 metric tons of bananas for 1969 (see errata to the Ministry of Production, General Bureau of Planning, Department of Statistics, Estimation of Harvested Area and Agricultural Production of Ecuador, Year 1969, no publica- tion date). Using the latest figure shown in the errata, the GDP in agriculture is reduced from 8,874 to 8,462 million current sucres and its real growth drops from 8.7 to 4.0 percent in 1969. The OBE will probably lower its estimate in the next round of revisions. Table A-13: COCOA--VOLUME, PRICES, AND VALUE OF PRODUCTION, CONSUMPTION AND EXPORTS, ECUADOR, ESTIMATING PROCEDURE FOR 1969-1972 Jan.-July Aug.-Dec. 1969 1970 1970 1970 1971 1972 Volume in Metric Tons Domestic production h7,993 .. .. 53,584 65,900 60,300 Less: exports 32,649 23,290 13,396 36,686 50,900 45,000 Domestic consumption 15,344 .. .. 14,606 15,000 15,300 Domestic and Export Prices Domestic price per 46 kg. quintal (sucres) 534.7 .. 467.1 390.0 400.0 Domestic price per metric ton (sucres) 11,625 .. .. 10,154 8,478 8,696 Export price per metric ton (US$) 750.10 618.94 586.37 607.04 499.00 517.00 Values of Exports and Production Exports (thousands of US$) 24,490 14,415 7,855 22,270 25,376 23,300 Exchange rate (sucres per US$) 17.82 17.82 24.75 20.26 25.00 25.00 Exports (millions of sucres) 436.4 256.9 194.4 451.3 634.4 582.5 Domestic consumption (millions of sucres) 178.4 ** 148.3 127.2 133.0 Fotal production (millions of sucres) 614.8 ** ** 599.6 761.6 715.5 D Sources: Central Bank of Ecuador, National Income Division; Ministry of Production, General Bureau of Planning, Division of Statistics; mission estimates. TableA-li),: COFFEE--VOLUME, PRICES, AND VALUE OF PRODUCTION, CONSUMPTION, AND EXPORTS, ECUADOR, E9TIMATING PROCEDURE FOR 1969-1972 Jan.-July Aug.-Dec. Items 1969 1970 1970 1970 1971 1972 Volume in Metric Tons Domestic production 55,893 .. 60,427 64,400 68,600 Less: exports 38,161 16,911 35,664 52,575 46,400 49,600 Domestic consumption 17,732 .. 7,852 18,000 19,000 Domestic and Export Prices Domestic price per pound (sucres) 4.3 .. .. .6 4.1 4.4 Domestic price per metric ton (sucres) 9,505.6 .. .. 12,362.0 9,050.8 9,713.0 Export price per metric ton (US$) 696.34 .. .. 960.84 736.64 837.00 Value of Exports and Production Exports (thousands of US$) 26,639 15,599 34,917 50,516 36,494 41,500 Excnange rate (sucres per uoe) Jt.of i(.o Z4. UZ.01 ;).UU ;e.UU Exports (millions of sucres) 474.7 278.0 864.2 1,142.2 912.4 1,037.5 Domestic consumption (millions of sucres) 168.6 ** ** 97.1 162.9 184.5 Total production (millions of sucres) 643.3 1,239.3 1,*7*.3 1,222.0 Sources: Central Bank of Ecuador, National Income Division; Ministry of Production, General Bureau of Planning, Division of Statistics; mission. estimates. ANNEX A Page 25 Table A-15: MINOR AGRICULTURAL CROPS--VOLUME, PRICES AND VALUE OF PRODUCTION, ECUADOR, ESTIMATING PROCEDURE FOR 1969-1972 Domestic Prices in Sucres Value in Metric per 46 Kg. per Metric Sucres # Minor Crops Tons Quintal Ton (000) 1. Abaca 3,500 b/ b/ 18,700 2. Anise 276 900.00 19,576.00 5,400 3. Annato 1,150 b/ b/ 8,776 4. Apples 4,546 281.00 6,108.94 27,771 5. Apricots 280 250.00 5,435.00 1,522 6. Avocados 23,768 251.00 5,456.74 129,696 7. Bananas (oritos) 8,015 10.00 217.O 1,742 8. Beans (lima) 10,963 161.62 3,513.62 38,520 9. Beets 3,142 85.70 1,863.12 5,854 10. Cabbage 92,906 72.00 1,565.28 145,424 11. Carrots (white) 2,760 84.00 1,826.16 5,040 12. Carrots (yellow) 3,477 78.60 1,708.76 5,941 13. Cassava 390,177 44.20 960.91 374,925 14. Cauliflower 4,745 212.00 4,608.88 21,867 15. Cherimoya 7,700 183.32 3,985.38 30,687 16. Chili 2,009 163.30 3,550.14 7,131 17. Citron 21,015 21.00 456.54 9,594 18. Coconuts 42,785 64,.00 1,391.36 59,529 19. Flax 20 700.00 15,218.00 304 20. Garlic 3,830 404.00 8,782.96 33,639 21. Goosefoot 828 72.00 1,695.72 1,404 22. Grapes 1,285 1,040.00 22,609.60 29,053 23. Grapefruit 10,219 50.21 1,091.56 11,154 24. Lemons 15,324 181.20 3,939.29 60,365 25. Lentils 1,12 536.61 11,665.90 13,322 26. Lettuce 10,982 61.00 1,326.14 14,563 27. Lupines 1,461 159.92.a 3,476.66 5,079 28. Mamey 2,189 135.00 2,935.00 6,424 29. Mandarins 11,058 248.00 5,391.52 59,619 30. Mangoes 12,007 30.00 652.20 7,831 31. Melons 715 b/ b/ 750 32. Oats 221 207.00 4,521.92 999 33. Oranges 154,866 61.00 1,326.14 205,374 34. Oranges (small green) 25,150 144.00 3,130.56 78,733 35. Papaya 29,738 76.o 1,660.94 49,392 See footnotes at end of table. ANNEX A Page 26 Table A-15 -- Continued Domestic Prices in Sucres Value in Metric per 46 Kg. per Metric Sucres # Minor Crops Tons Quintal Ton (000) 36. Palm (African) 10,050 116.70 2,537.06 25,497 37. Peaches 2,489 183.50 3,989.29 9,929 38. Peas (green) 11,103 179.30 3,897.98 43,279 39. Peanuts 5,858 345.00 7,500.30 43,937 40. Pears 2,934 131.50 2,858.81 8,388 4i. Pineapples 57,292 b/ b/ 107,014 42. Plums 1,840 280.00 6,077.20 11,200 43. Potatoes (sweet) 11,311 61.10 1,328.31 15,024 44. Pyrethrum 1,586 b/ b/ 9,548 45. Ranunculus 12,079 6E.00 1,371.36 16,806 46. Rye 2,622 135.00 2,934.90 7,695 47. Sapota 7,341 50.00 1,087.00 7,980 8. Sesame 1,675 291.1l 6,335.25 10,611 49. Sisal 21,839 253.00 5,500.22 120,116 50. Sour grass 7,820 65.00 1,413.10 11,050 51. SoyaL 472 90.00 1,956.60 9h3 52. Soya2/ 552 90.00 1,956.60 1,080 53. Squash 19,269 31.00 673.94 12,986 54. Sweet lime 603 120.00 2,608.80 1,572 55. Tea 273 180.00 3,913.19 1,068 56. Tobacco 1,494 b/ b/ 19,190 57. Tomatoes 25,194 192.00 4,1714.08 105,162 58. Watermelons 5,481 164.82 3,583.19 19,639 59. Other 15,407 .. .. 77,677 Total for 59 minor crops 1,130,831 .. .. 2,163,515 a/ The 1968 price for lupines (item 27) of 145.b6 sucres per quintal was raised by 9.94 percent which corresponds to the average increase in food prices for the city of Quito. b/ See tables below. c/ Soya beans appear twice with the same prices and different quantities. Sources: Central Bank of Ecuador, National Income Division; Ministry of Production, General Bureau of Planning, Division of Statistics. Table A-1 : SELECTED AGRICULTURAL CROPS--VOLUME, PRICES AND VALUE OF PRODUCTION, CONSUMPTION AND EXPORTS, ESTIMATING PROCEDURE FOR 1969-1972 Exports DomQstic Consum)tion Production Price per U.S. Price per Metric M. Ton Dollars Exchange Sucres Metric M. Ton Sucres Metric Sucres Tons (uS$) (000) Rate (000) Tons (Sucres) (000) Tons (000) Selected Major Crops Castor beans 16,159 111 1,793 17.82 31,951 7,614 1,739 13,242 23,773 45,194 Corn 200 55 11 17.82 196 222,286 2,401 533,653 222,486 533,849 Selected Minor Crops Abaca 456 265 121 17.82 2,156 3,044 5,435 16,544 3,500 18,700 Annato 161 211 34 17.82 606 989 8,261 8,170 1,150 8,776 Melons 242 79 19 17.82 339 473 870 411 715 750 Pineapples 1,681 169 284 17.82 5,060 55,611 1,833 101,953 57,292 107,014 Pyrethrum 143 699 100 17.82 1,782 1,443 5,382 7,766 1,586 9,548 Tobacco 18 3,556 64 17.82 1,140 1,476 12,229 18,049 1,494 19,190 Source: Central Bank of Ecuador, National Income Division. r4 N) ANNEX A Page 28 projected for 1969-1973.29 Meat prices also reflect transportation costs and trade margins. The per capita consumption multiplied by the mid-year population of Ecuador yield total consumption which is assumed to be roughly equal to the volume of production. Multiplied by corresponding prices for each of the four meat types, the CBE obtains the gross value of meat production (see Table A-17). The production of milk is estimated from the projected number of milking cows multiplied by the projected average annual milk production per cow. The former projection assumes an accelerating rate (from 2.8 percent in 1970 to 3.7 percent in 1972) and the latter is based on a decelarating rate (3.7 percent in 1969 and 2.6 percent in 1972), the production growing at about a constant rate of 6.2-6.4 percent per year. Estimating the total human consumption of milk, the CBE adjusts these production data (provided by the Ministry of Production) for the milk consumption by calves and for small losses and additives. The total milk consumption is then multiplied by the average consumer price per liter of milk to estimate the gross value of milk production. The gross value of egg production is similarly estimated from the projected per capita annual consumption of eggs multiplied by the total projected population and by the consumer prices for eges. The gross value of wool production is based on the projected sheep herds, the average annual production of wool per head projected by the Ministry of Production and adjusted upward according to the estimates prepared by the National Association of Sheep Growers (ANCO) and the consumer prices for wool (see Table A-18). The above national accounts estimates of livestock and livestock products are projections which are based either on constant or on accelerating growth rates. The use of wholesale and retail instead of farm-gate prices tends to raise the level of the estimated production. Although the higher level of production is to some extent corrected by regressions, the projections nevertheless impart a continuous growth to the estimated livestock production, as the estimates for meat are aggregated with those of the other livestock products (see Table A-19). The estimates for hunting, forestry and fishing are very crude extrapolations based either on the assumption that the output failed to increase at all (e.g., hunting in 1966, 1967, and 1969 and forestry in 1969) or that the increase reflected upward price changes, or some real growth, e. g., the fishing in 1967 and in 1971. Inasmuch as the forestry and fishing account for less than 10 percent of the total gross value of the agricultural sector, the limitations of these estimates add relatively little to the range of uncertainty which pervades the estimated total agricultural production (see Table A-20). 29 Nelson Jaramillo, Projections of Livestock Population, 1969-1973 (Quito: Ministry of Production, Department of Livestock, no publication date). ANNEX A Page 29 Table A-17: GROSS VALUE OF MEAT PRODUCTION, ECUADOR ESTIMATING PROCEDURE FOR 1969-1972 1969 1970 1971 1972 Consumption per capita: 1 Beef (kgs.) 7.11 7.21 7.38 7.58 Lamb (kgs.) 1.12 1.16 1.24 1.34 Pork (kgs.) 4.06 4.38 4.82 5.33 Fowl (kgs.) 1.50 1.60 1.70 1.80 Mid-year population (:000) 5,889.5 6,092.5 6,297. 6,508.3 Total consumption a production Beef (m. tons) 41,875 43,930 46,473 49,333 Lamb (m. tons) 6,596 7,068 7,809 8,721 Pork (m. tons) 23,911 26,687 30,353 34,689 Fowl (m. tons) 8,834 9,749 10,705 11,715 Total production (m. tons) 81,216 87,434 95,340 104,458 Prices (sucres per kg.): Beef 15.79 16.53 18.53 0. 0 Lamb 13.00 13.22 14.82 16.30 Pork 14.59 14.99 16.80 18.50 Fowl 23.81 24.25 27.43 30.20 Gross value of production: Beef 661.2 726.2 861.1 1,006.4 Lamb 85.8 93.4 115.7 142.2 Pork 348.9 400.0 509.9 641.7 Fowl 210.3 236.4 293.6 353.8 Total (mil. sucres) 1,306.2 1,456.0 1,780.3 2,144.2 Sources: Ministry of Production, Department of Livestock; Central Bank of Ecuador, National Income Division; National Institute of Statistics, Division of Price and Labor Statistics; mission estimates. ANNEX A Page 30 Table A-18: PRODUCTION OF MILK, EGGS AND WOOL, ECUADOR, ESTIMATING PROCEDURE FOR 1969-1972 Indicators - 1969 1970 1971 1972 Raw Milk Production Milking cows (thousands of heads) 437.3 453.6 46.7 476.8 Annual production per cow (liters) 1,280 1,310 1,360 1,h1O Total gross production (mil. lit.) 559.7 594.2 632.0 672.2 Less: consumed by calves (mil. lit.) 2.8 3.0 3.2 3.4 Unadjusted consumption (mil. lit.) 556.9 591.2 628.8 668.8 Losses and additives (mil. lit.) 0.2 -0.2 0.2 0.2 Adjusted consumption (mil. lit.) 557.1 591.0 630.0 670.0 Price (sucres per liter) 1.76 2.0 2.2 2.4 Total gross value (mil. sucres) 980.6 1,182.0 1,386.0 1,608.0 Egg Production Consumption per capita (Kg.) 4.0 h.5 4.8 5.0 Mid-year population (thousands) 5,889.5 6,092.9 6,297.2 6,508.3 Total production (metric tons) 23,558 27,418 30,227 32,542 Price (sucres per kg.) 14.70 1.8 18.26 21.0 Total gross value (mil. sucres) 346.h 406.8 551.9 683.3 Wool Production Sheep herds (thousands of heads) 2,230.9 2,307.6 2,388.8 2,474.1 Wool production per head (grams ) 439 64 507 546 Total wool productiona/ (m. tons) 980 1,070.0 1,210.0 1,350.0 Adjusted for undervaluationb, (m. tons) 1,990.6 2,060.0 2,h60.0 2,750.0 Price (sucres per kg.) 16.34 19.40 21.73 24.34 Total gross value (mil. sucres) 32.5 40.0 53.5 66.9 a/ Ministry of Production, Department of livestock. 5/ The National Association of Sheep Growers (ANCO) adjusted for the undervalua- tion in 1969, the Central Bank of Ecuador made the adjustment for 1970, and the mission adjusted for 1971 and 1972. SourcesL Ministry of Production, Department of Livestock; Central Bank of Ecuador, National Income Division; National Institute of Statistics, Division of Price and Labor Statistics; mission estimates. ANNEX A Page 31 Table A-19: OUTPUT OF LIVESTOCK AND KINDRED PRODUCTS, ECUADOR, SUMMARY OF ESTIMATES FOR 1969-1972 (Gross Value of Production in Millions of Current Fucres) Livestock and Kindred Products 1969 1970 1971 1972 Beef 661.2 726.2 861.1 1,006.4 Lamb 85.8 93.4 115.7 142.2 Pork 348.9 400.0 509.9 641.7 Fowl 210.3 236.4 293.6 353.8 Milk 980.6 1,182.0 1,386.0 1,608.0 Eggs 346.4 406.8 551.9 683.3 Wool 32.5 40.0 53.5 66.9 TOTAL 2,665.7 3,084.8 3,771.7 4,502.3 Source: Tables 17 and 18 above. ANNEX A Page 32 Table A-20: GROSS VALUE OF AGRICULTURAL PRODUCTTON, ECUADOR, SUMMARY OF ESTIMATES, 1960-1972 (Millions of Current Sucres) 13 Major Annual and 59 Minor Hunt- Growth Year Crops Livestock -nm Forestry Fishing Total Rate 1960 5,867.6 1,303.6 2.4 432.7 168.4 7,77h.7 1961 6,307.2 1,397.6 2.3 462.9 189.8 8,359.8 7.5 1962 7,342.3 1,507.4 2.3 481.6 175.8 9,509.4 13.8 1963 7,673.3 1,660.5 2.4 510.3 191.4 10,037.9 5.6 1964 7,980.9 1,656.4 2.5 551.0 176.1 10,366.9 3.3 1965 8,970.1 1,801.3 2.6 600.2 230.7 11,604.9 11.9 1966 9,581.6 1,973.8 2.6 653.7 228.8 12,h0.5 7.2 1967 9,943.6 2,113.6 2.6 711.9 320.9 13,092.6 5.2 1968 9,661.9 2,178.6 3.0 861.3 325.7 13,030.5 -%).- 1969 11,065.6 2,665.7 3.0 861.3 330.1 14,925.7 14.5 1970 12,668.8 3,084.8 3.2 930.0 359.1 17,o45.9 14.2 1971 13,778.0 3,771.7 3.3 1,000.0 575.0 19,128.0 12.2 1972 14,973.8 4,502.3 3.4 1,O.0 660.0 21,239.5 11.0 Sources: Central Bank of Ecuador, National Income Division,mission estimates. ANNEX A Page 33 Agricultural nonfactor inputs are subtracted from the gross value of agricultural production as a whole, that is, from the total value of crops, livestock products, hunting, forestry and fishing. Such a global adjustment can only be very crude. For the 1950 s. the CBE adopted average Latin American ratios for agricultural non- factor inputs, as reported at a national accounts conference in Rio de Janeiro in the mid-1950s. For the 1960s, the CBE replaced the average Latin American estimates by Ecuadorian nonfactor input ratios, as estimated by the NEPCB in 1963 (see Table A-21). The NEPCB esti- mates for 1963 were extrapolated backwards to 1960 and forwards to 1968 for all the relevant major agricultural expenditure categories. First, the CBE made the adjustment for the higher retail and wholesale prices by subtracting the transport and handling cost and the wholesale margin from the gross value of production to arrive at the farm-gate value of production. Next, it subtracted the total intermediate consumption, including seeds, fertilizer, pesticides, fodder, vaccine and medicine, fuel and lubricants, packing and binding, maintenance and interest and commissions. Since the detailed components were estimated only for 1963, the CBE extrapolated their combined value for all the other years of the 1960s. Subtracting it from the value of production at farm-gate, the CBE obtained the GDP at market prices (or gross value added) in agriculture. For the 1950s and most of the 1960s, the CBE estimated separately for agriculture net factor payments to abroad, indirect taxes, and subsidies in order to arrive at the GNP and GDP at factor cost originating in agriculture (see Table A-21). These estimates were then integrated in the national accounts as a GDP at current factor cost originating in agriculture, hunting, forestry and fishing (cf. 4,731 million sucres for 1960 in Tables A-21 and A-22). 9tarting in 1969, however, the above procedure of subtracting the extrapolated 1963 values of nonfactor inputs and other components was replaced with an alternative procedure based on the regression of the value added or GDP on the gross value of production in agriculture, hunting, forestry and fishing (see Table A-22). The latter method is not necessarily inferior to the former inasmuch as hardly any basic data are available for estimating the various components of nonfactor inputs.30 30 Although the regression method may be considered superior on analytical grounds, it is probably inferior to the ratio method in practical work because it is cumbersome and mechanical. It obscures the crude nature of basic estimates and makes it more difficult to introduce fragmentary information into the estimates. In the absence of computer programs, arithmetic errors tend to creep into the calculations of regressions. Notwithstanding the erudition of the CBE professional staff, the CBE has obtained different estimating equations than the results produced by an electronic computer for the same data and regression method. Thus, the CBE estimated agriculture GDP at 10,271 million current sucres in 1970 although the regression equation which it used yields only 9,652 million sucres for the same year. Moreover, the same basic data fed into an electronic computer produced a somewhat different estimating equation which yielded a still different estimate of 9,693 million sucres for 1970. The correction of these apparent arithmetic errors reduces the 1970 agricultural GDP by 6 percent. A ratio method would probably have avoided the arithmetic errors. Moreover, requiring less laborious computations, the ratio method can be used with greater ease and speed for revisions at more frequent intervals, as new basic data become available. ANNEX A Page 34 !aole A-21 : GDP AT CURRENT FACTOR COST ORIGINATING IN AGRICULTURE, HUNTING, FORESTRY AND FISHING, ECUADOR, ESTIMATING PROCEDURE FOR 1960 - 1965 (Millions of Current Sucres) Major Output and Input 1960 1961 1962 1963 1964 1965 Expenditure Categories Gross value of production 7,660 8,381 9,256 9,794 10,003 10,702 Less: transport and handling cost 980 1,098 1,222 1,273 1,251 1,370 Less: income of wholesalers 844 965 1,055 1,117 1,100 1,220 Value of production at farm gate 5,836 6,318 6,979 7,404 7,652 8,112 Less: intermediate consumption 828 913 1,009 1,076 1,061 1,178 (a) Seeds ** * 254 .. (b) Fertilizer ** ** 72 (c) Pesticides ** ** ** 72 (d) Fodder ** 281 (e) Vaccine and medicine ** 10 (f) Fuel and lubricants 0* .. 33 .. (g ) Packing and binding .. 115 . (h) Maintenance .. 132 (i) Interest and commissions 107 GDP at m.p.{value added) 5,008 5,105 5 ,970 6,328 6,591 6,934 Less: net factor payments to abroad -30 -28 -19 -4 -38 -27 GNP at market prices 4,978 5,377 5,951 6,324 6,553 6,907 Less: indirect taxes -334 -338 -353 -411 -497 -487 Plus: subsidies 57 60 72 43 97 35 GNP at factor cost 4,701 5,099 5,670 5,956 6,153 6,h55 Plus: net factor payments to abroad 30 28 19 4 38 27 GDP at factor cost 4,731 5,127 5,689 5,960 6,191 6,482 Source: Central Bank of Ecuador, National Income Division. The data are based on a study by Jan B. Van As and Manuel Arias B., Program of Agricultural Development, Goals and Projections, 1963-1973 (Quito: NEPCB, March 30, 1964). ANNEX A Page 35 Table A-22: GDP AT CURRENT FACTOR COST ORIGINATING TN AGRICULTURE, FORESTRY, HUNTING AND FISHING, ECUADOR ESTIMATIN1G PROCEDURE FOR CALTDAR YEARS 1969-1972 (Millions of Sucres at Current Factor Cost) Agriculture, Hunting, Forestry, and Fishing GDP Gross Value of Production Year x 1960 4,731 7,774.7 1961 5,127 8,359.8 1962 5,689 9,509.4 1963 5,96o 10,037.9 1964 6,191 10,366.9 1965 6,482 11,604.9 1966 7,227 12,440.5 1967 7,556 13,092.6 1968 7,771 13,030.5 1969 8,562 14,925.7 1970 9,693 17,065.9 1971 10,804 19,128.0 1972 11,930 21,239.5 The above variables produced the following estimating equation for GDP at current factor cost originating in agriculture, forestry, hunting, and fishing: Y. = 602.02734 + 0.53333X 2. i This equation produced the following estimates: Y1969 = 8,461.8 Y1971 10,803.6 Y1970 = 9,693.1 Y1972 11,929.7 The CBE computed a different estimatirgequation (Yi = 671.01111 + 0.52688X. i) which led to different estimates: Y1969 = 8,874 Y1 970 = 9,652 (CBE estimate is 10,271) Source: Central Bank of Ecuador, National Income Division; mission estimate. ANNEX A Page 36 Reviewing the agricultural value added estimates of Ecuador for the last two decades, it must be borne in mind that there is a limit to the improvements which can be brought about by various estimating procedures. This limit may still not have been approached in Ecuador with respect to the value added estimates in the agricultural sector, although further improvements depend largely on the availability of basic data. The use of average Latin American nonfactor input ratios for the 1950s and the lower Ecuadorian ratios for the 1960s resulted in an understatement in the level of the agricultural value added for the 1950s, a break in this series, and an overstatement in the rate of growth in 1960. The extent of these inaccuracies is not known because the CBE has never derived the two series so as to overlap in the same year. The accuracy of the Ecuadorian nonfactor input ratios for 1963 and their relevance to the 1950s and the 1970s is also open to question. However, the importance of these considerations is overshadowed by the apparent deficiencies of the basic statistics on output and prices. It is possible that the national accounts estimates could be improved by resorting to the FAO estimates, even though the latter are based on yields and harvested areas quite different from those reported by the Government of Ecuador (see the discussion of basic statistics in Annex B). It would be far better, of course, for the Government of Ecuador to improve its own statistical system which would generate meaningful agricultural data by modern sampling techniques. Mining GDP. Although expanding petroleum production is expected to make mining one of the most important industries in Ecuador, for the last two decades mining has grown little and its share amounts to only about two percent of the GDP. Mining and quarrying GDP includes the mining of metal and nonmetal minerals as well as petroleum extraction and refining. The CBE has also tried to include a rough estimate of value added for stone, clay, sand and salt, although relatively few data are available for these activities. Petroleum extraction and refining could not have been separated in the 195Cs, and to preserve the consistency with the 1950s, both these activities were also included with mining in the 1960s. For a benchmark year, the CBE estimated the value added data from the 1955 industrial census and for the 1950s and the early 1960s, from its own special surveys and inquiries. For more recent years, the General Bureau of Geology and Mining (Ministry of Natural Resources and Tourism) has provided annual data for licensed mining establishments which had reported their data. The CBE has used these data for the national accounts rather than the results of the NIS industrial surveys, especially for the period since 1965. The basic data on mining and quarrying had deteriorated to such an extent in the mid-sixties that the CBE decided in 1967 to use regressions rather than to continue deriving the mining value added directly from the basic data. After some experimentation with several available production series, the CBE projected the index of ANNEX A Page 37 Table A-23: GDP AT CONSTANT 1960 FACTOR COST ORIGINATING TN MTNTNG, ECUADOR, ESTIMATING PROCEDURE FOR 1965 -ANTD 1966 Mining and Quarrying GDP Year (Millions of Sucres Independent Variables at Current at Constan Sucres 1960 Sucrel Y X1 2 I XL 1956 228.0 235.7 .. 143.7 15.3 52.0 115.8 1957 232.0 238.2 .. 134.0 17.1 61.3 109.7 1958 222.0 226.5 130.6 20.0 84.5 120.1 1959 233.0 237.5 115.9 18.6 162.6 107.2 1960 311.0 311.0 .. 115.8 15.2 126.4 107.9 1961 315.0 300.0 .. 122.9 15.2 101.2 111.1 1962 326.0 303.8 .. 108.1 20.6 128.1 124.0 1963 369.0 330.1 .. 101.4 21.0 121.8 160.8 1964 389.0 324.7 117.4 16.9 117.1 137.8 1965 .. 379.1 .. 119.7 11.5 70.0 113.2 1966 .. 398.5 .. lo8.8 10.9 76,7 68.9 Indexes (1956=100) 1956 100.0 100.0 100.0 100.0 100.0 100.0 100.0 1957 101.8 101.1 100.3 93.2 111.8 117.9 94.7 1958 97.4 96.1 95.4 90.2 130.7 162.5 103.7 1959 102.2 100.8 100.0 80.7 121.6 312.7 92.6 1960 136.4 131.9 130.9 80.6 99.3 243.1 93.2 1961 138.2 127.3 126.3 85.5 99.3 194.6 95.9 1962 143.0 128.9 127.9 75.2 134.6 246.3 107.1 1963 161.8 140.1 139.2 70.6 137.2 234.2 138.9 1964 170.6 137.8 136.7 81.7 110.5 225.2 119.0 1965 .- 160.8 .. 83.3 75.2 134.6 97.8 1966 .. 169.1 .. 75.7 71.2 147.5 59.5 Independent Variables: X1 = Petroleum products (thousands of gallons). X2 = Gold production (thousands of troy ounces). X3 = Silver production (thousands of troy ounces), X4 = Lead production (thousands of Kilograms). Estimating equation for GDP at constant 1960 factor cost originating in mining: Y = 422.58 - 2.6415X1 - 0.8088X2 - 0.1264X3 + 0.3532X4 Sources: CBE, National Income Division. ANNEX A Page 33 mining GDP at constant 1960 prices by regressing it on the indexes of petroleum, gold, silver and lead production (see Table A-23). As the composition of the mining output changed, the CBE has used other independent variables for these regressions. Thus, for 1969 and 1970, the mining employment, petroleum production, production of metals and nonmetals and the imports of mining inputs served as independent variables for estimating the mining GDP (see Table A-24). Although such changes in the independent variables have contributed to certain inconsistencies in the estimates over time, drastic changes in the composition of mininF may, nevertheless, have required occasional elimination or substitution of certain variables. Thus, while the total mining output increased, petroleum production has tended to decline in Ecuador in the late 1950s and throughout the 1960s. This negative covariation resulted in a nerative coefficient of net regression for petroleum production (see Table A-2L). With a substantial increase in petroleum extraction expected to take place in 1972 and thereafter, the estimating linear equation which includes petroleum would project a drastic reduction in the total mining activity--an obviously absurd result. Therefore, the mining GDP cannot be meaningfully estimated in the future by regression on the past declines of petroleum production. The latter variable must now be eliminated from the set of independent variables (see Table A-24). In addition to the production of crude petroleum, the CBE uses four other independent variables for estimating the GDP in mining and quarrying. The mining employment has the highest coefficient of net regression (see Table A-25). Inasmuch as the mining employment has remained either stable or even declined in the 19608 (see Table A-2h), this coefficient is negative; therefore, it is not suitable for making estimates as the expected sharp increase in the production of crude petroleum is not likely to be associated with a pronounced decline in the mining employment. Moreover, the mining employment data which the CBE has used are actually the NEPCB projections of economically active population. These projections include employment as well as unemplo7- ment and they are not responsive to annual changes in output. They show upward trends for the 1970s are quite detached from the expected annual changes, and are, therefore, not suitable for making value added estimates. The production data on metal and nonmetal minerals which the CBE is using as independent variables accounts for a very small share of the total mining (about 3 percent for metals and 0.1 percent for non- metals). Moreover, both of these series fluctuate avite dirferently from the mining as a whole. Thus, -while the value added of mining showed an increase of about one third in 1960, the metals declined 20 percent ANNEX A Page 39 Table A-20t INDEPENDENT VARIABLES USED IN REGRESSIONS FOR ESTIMATING MINING AND QUARRYIEG OP, ECUADOR SELECTED YEARS 1957-1970 Variables and Indexes 1957 1960 196 1969 1970 X1 = Mining employment (000) 4.4 4.0 4.0 4.3 4.4 Index implicit in data 110.0 100.0 100.0 107.5 110.0 Index used for GDP estimates 110.0 100.0 100.0 107.5 110.0 X2 = Petroleum production (mil. of US gal.) 134.0 115.8 119.7 65.8 60.7 Index implicit in data 111.9 96.7 100.0 54.9 50.7 Index used for GDP estimates 111.9 96.7 100.0 55.0 50.7 X = Mining of metals (mil. of sucres) 10.4 11.0 13.5 19.5 22.8 Index implicit in data 76.9 81.4 100.0 144.7 170.0 Index used for GDP estimates 92.4 93.0 100.0 10. 151.7 X4 = Mining of nonmetals (thous. of sucres) 62.0 54.0 627.0 223.0 16,981.0 Index implicit in data 9.9 8.7 100.0 35.3 2,709.3 Index used for GDP estimates 14.5 12.8 100.0 52.1 54.7 X5 = Imports of mining inputs (mil. of US ) 12.7 13.6 16.7 28.8 28.0 Index implicit in data 76.0 81.4 100.0 172.4 167.6 Index used for GDP estimates 76.2 81.4 100.0 172.2 167.2 Sources: X1 = NEPCJ Division of Human Resources (projections of economically active population). 2 = Bulletin of the Central Bank of Ecuador, XLV, Nos. 531, 532, and 533 (Oct. - Dec., 1971), 271, and earlier issues. X3 = Ministry of Industry and Commerce (after 1970, Ministry of Natural Resources and Tourism), General Bureau of Geology and Mines, Mining Statistics (annual issues for 1932-66, 1967, 1968, 1969 and 1970). X = Ibid. X5 = Bulletin of the Central Bank of Ecuador, XLV, Nos. 531, 532, and 533 (Oct.-Dec., 1971), 209-213, and earlier issues (line 50--raw materials and intermediate products for manufacturing derived from foreign mineral products). ANNEX A Page 4O Table A-25: GDP AT CURRENT FACTOR COST ORIGINATING IN MINING AND QUARRYING, ECUADOR, ESTIMATING PROCEDURE FOR 1969 AND 1970 Mining and Quarrying GDP Millions of Sucres) Independent Variables Year at at (Indexes, 1965 = 100) Current 1965 Index Prices Prices 1965=10 0 Y X, X, X AXp X 1957 232 285 72.7 110.0 111.9 92.4 14.5 76.2 1958 222 271 69.1 107.5 109.1 110.1 61.6 77.7 1959 233 284 72.5 105.0 96.8 120.4 115.5 63.7 1960 311 372 94.9 100.0 96.7 98.0 12.8 81.4 1961 315 360 91.8 95.0 102.7 94.5 49.4 84.8 1962 326 364 92.9 90.0 90.3 135.4 8.6 76.0 1963 369 396 101.1 92.5 84.7 157.3 102.6 97.4 1964 389 404 103.1 95.0 98.1 140.8 148.2 117.8 1965 392 392 100.0 100.0 100.0 100.0 100.0 100.0 1966 453 431 110.0 102.5 90.9 107.2 91.3 101.4 1967 500 459 117.1 105.0 77.1 109.2 73.0 139.3 1968 552 488 124.5 105.0 61.8 148.4 104.6 176.8 1969 588 495 126.3792 107.5 55.0 144.4 52.1 172.2 1970 604 477 121.7095 110.0 50.7 151.7 54.7 167.2 1971 678 489 124.7757 112.5 45.3 155.0 45.0 180.0 1972 238 156 39.7962 117.5 300.0 160.0 50.0 200.0 Independent Variables: X1 = Mining employment X2 = Petroleum production X = Production of metal minerals X = Production of nonmetal minerals X = Imports of mining inputs The above variables produced the following estimating equation for GDP at constant 1965 factor cost originating in mining and ouarrying: Yi = 286.0759 - 1.2531 X1 - 0.6425 X2 - 0.3567 X3 + 0.0504 14 + 0.3434 X This equation produced the following estimates at constant 1965 prices: Y1969 = 495 Y1970 = 477 Y1971 = 489 Y1972 = 156 The CBE computed a slightly different estimating equation (Yi = 285.2460 - -1.2503 X1 - 0.6393 X2 - 0.3548 X3 + 0.0482 14 + 0.3450 x5) Source: Central Bank of Ecuador, National Income Division; mission estimates. ANNEX A Page 41 and the nonmetals went down 90 percent. The coefficient of net regression for metals is negative and that for nonmetals approaches zero (see Table A-25). Moreover, the CBE purports to use the data reported by the G3neral Bureau of Geology and Mines (GBGM). However, the latter agency publishes data which yield different indexes than those used by the CBE (see Table A-24). The latter show less growth. Although the CBE has not given any explanation for these differences, the data may have been deflated or adjusted to a wider coverave. Thus, while the GBGM reported an increase of 7,600 percent in the gross value of output for nonmetals in 1970 (larqely due to the new mining of sulphur), the CBE index for nonmetals increased from 52.1 to 54.7 or only 5 percent (see Table A-24). The only variable suitable for the estimates would have been the time series on the imports of mining inputs. The CBE has tried to use such a series with virtually no adjustments (see Table A-24). This time series refers, however, not to mining inputs but to raw materials and intermediate products for manufacturing which are derived from imported minerals.31 These import data are not relevant to mining activity in Ecuador. The data on the imports of mining inputs are not readily available. An additional distortion is introduced by the regression of the dependent variable (Y) at constant prices on the independent variables which are at current prices (X3, X, and X5). The price changes of the latter are fed as a part of real growth into the dependent variable. These dependent variable estimates are not deflated. On the contrary, the CBE inflates them to current prices with the adjusted cost of living index (see Table A-25). This repeated inflation results in an upward bias. Where there is no growth, upward price movements in the independent variables generate upward changes which appear as real growth in the dependent variable shown at constant prices.32 It would have been more meaningful to deflate the independent variables before correlating them with the value added at constant prices (or alternatively, inflating all variables to current prices--an economically less meaninpful procedure because e.g. , employment at current prices lacks a meaninRful interpretation although mathematically the results may not differ significantly). 31 Cf. Bulletin of the Central Bank of Ecuador, XLV, Nos. 531, 532, and 533 (Oct.-Dec., 1971), 209-213, line 5c. 32 An earlier IBRD report tried to correct for these deficiencies, assuming that the CBE series for manufacturing and construction value added at current prices related in fact to constant prices. Therefore, it inflated the series at current prices, thus superimposing a third inflationary bias on the others which the CBE had built in its original estimates. Cf. Current Economic Position and Prospects of Ecuador, Report No. WH-208a (Washington, D.C.: IBRD, September 22, 1971), Table 2.4. ANNEX A Page T2 A further distortion is introduced by expressing all variables as indexes for the purpose of regression. This procedure attempts to get around the problem of having different and arbitrary units of measurement for the various independent variables in a multiple repression, but it introduces a new problem of assipning all variables the same weights. This procedure does not solve the original problem and is almost just as arbitrary. The estimating equation measures the unweighted average relationship. The use of multiple correlation with five independent variables gives a misleading impression of a sophisticated analysis which supposedly underlies the CBE estimates. The multiple regression technique obscures the various deficiencies. The elaborate mathematical computations of these regressions which the CBE carries out on a desk calculator, contain occasional errors which make the results even less meaningful. Having computed the index values with the estimating equation and having converted them to value added in constant and current sucres, the CBE reviews the result in terms of level and annual changes. At this final stage, the CBE may adjust the regression results according to alternative data and various judgements, thus in effect ignoring the regression and substituting other estimates which appear to be more plausible. Although the regression based on the CBE data and inflated with the reciprocal of the GDP deflator yielded 588 and 604 million current sucres for 1969 and 1970, respectively, the OBE calculated with its estimatinR equation 596 and 621 million current sucres for the same years. Having reviewed the latter estimate in the light of partial reports on the increase of mining output in 1970, the CBE raised its estimate to 641 million sucres. It has made such last-minute adjustments also for other years and industries (see Table A-36). In view of these adjustments, the regression appears to 1.ay an auxiliary role which yields to estimates based on additional information and on subjective judgements. Manufacturing GD?. The share of manufacturing in the total GDP increased from about 1 percent in 1960 to about 7 percent in 1970. Manufacturing includes large, medium, and small-scale establishments as well as cottage (household) manufacturing industry. Depending on the definition, the share of the cottaze and small-scale industry has been estimated from a high of 61.5 percent in 1960 (for establishments with less than 300,000 sucres annual production)33 to a low of about one-third of the total value added by manufacturing (for establishments with less 33 Central Bank of Ecuador, Sources of Information and Procedures Employed in the Estimation of National Income of Ecuador (Quito: CBE 1964) p. 12. ANNEX A Page 43 than five employees and 120,000 sucres annual production). For the 1950s, the CBE estimated that the share of small-scale and household industry increased from 57.7 percent in the middle 1950s to 61.5 percent in 1960,34 and for subsequent years, the CBE has generally maintained the value added by the small-scale industry at about the same level, allowing its relative importance to decline below 40 percent, as the medium and large-scale industry continued to grow at an apparently accelerating pace in the 1960s. These general working hypotheses underlie the GDP estimates for manufacturing. Similarly as with the mining estimates, the CBE used the 1955 Industrial Census and its subsequent annual surveys for estimating the value added by large-scale manufacturing, making an adjustment for small-scale and household manufacturing industry. With a gradual deterioration of the basic data and a reduction in the staff of the NID, the CBE decided in 1967 to use regressions of manufacturing value added on readily available indicators. Having experimented with several related indicators, the CBE selected the most suitable and has used them for making the estimates since 1965. Preparing the GDP estimates of manufacturing for 1969 and 1970 (the latest available), the CBE computed an index of the deflated value added with a 1965 base (Y) and regressed it on four independent variables (see Table A-27). Most of the limitations discussed above with respect to mining apply also to manufacturing. Moreover, the independent variables on which the CBE regresses the manufacturing GDP relate to inputs and not to manufacturing output. Two of these independent variables relate to nonfactor inputs. Nevertheless, the sales of electric energy to industry (Xl) has a fairly meaningful positive coefficient of net regression. Although the electrification of manircturing is not directly related to the growth in its value added, their cTg-variation is not necessarily spurious. The greater use of electric power may go hand in hand with a greater capital intensity and higher capital consumption allowances, higher paid labor, multiple shifts, and a general expansion of manufacturing. Imports of industrial raw materials represent another nonfactor input which is, however, less closely associated with the growth in manufacturing factor inputs. According to our calculations based on the CBE data, this independent variable shows a slight negative coefficient of net regression which may be partly explainpd by the deliberate Ecuadorian policy aimed at import substitution. Although the relationship is 14 Ibid., p. 12. 35 The CBE estimating equation shows a higher and a positive coefficient of net regression for the imports of industrial raw materials. However, the OBE estimating equation for manufacturing appears to suffer from a deficient arithmetic. ANNEX A Page 41T Table A-26: INDEPINDENT VARIABLES USED IN REGRESSIONS FOR ESTIMATING MANUFACTURING GDP, ECUADOR, SELECTED YEARS 1957-1970 Variables and Indexes 1957 1960 19 1969 1970 XA = Sales of electric energy to industry (mil. of kwhs.) .. 126.7 188.9 283.5 320.8 Index implicit in data .. 67.1 100.0 150.0 169.8 Index used for GDP estimates 51.7 64.6 100.0 14.5 160.7 X2 = Imports of industrial raw materials (mil. of US $) 40.03 41.92 57.78 87.06 82.25 Index implicit in data 69.3 72.5 100.0 150.6 142.3 Index used for GDP estimates 69.3 72.6 100.0 150.7 142.3 XA = Imports of industrial capital goods (mil. of US $) 13.59 17.03 29.67 44.19 49.03 Index implicit in lagged data 47.8 54.3 100.0 152.8 .. Lagged index used in GDP estimates 4.2 46.4 80.3 142.3 149.0 XL = Manufacturing employment (000) Employment, large-scale 37.9 43.9 59.9 79.1 81.0 Employment, total 177.3 193.3 227.0 241.8 250.0 Economically active population 185.5 201.8 229.9 253.8 260.1 Indexes implicit in data: Employment, large-scale 63.2 73.2 100.0 132.0 135.2 Employment, total 78.1 85.2 100.0 106.5 110.1 Economically active population 80.7 87.8 100.0 110.A 113.1 Index used in GDP estimate 82.8 89.9 100.0 114.1 116.9 Sources: Xi = Unpublished data provided by the Statistical Section of the Euadorian Institute of Electrification (INECEL) for 1964-1970. The source of the - 1960 data could not be ascertained. X2 = Bulletin of the Central Bank of Ecuador, XLV, Nos. 531, 532, and 533 TOt.-Dec., 1971), 209-213. X3 = Ibid., 209-213. = National Economic Planning and Coordination Board, Division of Human Resources (unpublished estimates dated September, 1970). ANNEX A Page 45 Tqbl, A-27: GDP AT CURRENT FACTOR COST ORIGINATING IN '1ANUFACTU1RTNr, ECUADOR, ESTIMATING PROCEDURE FOR 1969-1972 Manufacturing GDP (Millions of Sucres) Independent Variables at at Index (Indexes, 1965;10O) Year Current 1965 1965=100 Prices Prices X YX X2 Lagged Lagged XL Data Index Index 1957 1,625 1,999 60.6 51.7 69.3 47.8 44.2 82.8 1958 1,739 2,126 64.b 54.4 66.8 42.9 45.8 85.1 1959 1,830 2,234 67.7 55.9 63.5 54.5 51.7 87.5 1960 2,011 2,408 73.0 64.6 72.6 54.3 46.4 89.9 1961 2,112 2,411 73.1 74.6 73.9 44.1 58.8 92.4 1962 2,283 2,548 77.2 78.4 74.0 52.9 58.7 96.0 1963 2,523 2,704 82.0 82.3 86.1 74.3 47.6 97.0 1964 3,039 3,152 95.5 91.0 110.0 92.5 57.3 99.0 1965 3,299 3,299 100.0 100.0 100.0 100.0 80.3 100.0 1966 3,501 3,331 101.0 103.8 102.2 118.7 100.0 101.3 1967 3,884 3,567 103.1 113.5 131.0 131.6 108.1 102.6 1968 4,209 3,721 112.8 130.0 143.3 137.8 128.4 111.3 1969 4,917 4,142 125.5531 144.5 150.7 152.8 142.3 114.1 1970 5,565 4,396 133.2608 160.7 142.3 160.0 149.0 116.9 1971 6,450 4,650 140.9516 175.0 149.0 166.b 155.0 122.L 1972 7,579 4,963 150.4451 190.0 158.0 179.3 167.0 128.3 Independent Variables X1 = Electric energy consumption by manufacturing in kwhs. X2 = Raw material imports for manufacturing. X3 = Imports of capital goods for manufacturing. X4 = Manufacturing employment. The use of an index implicit in the lagged data produced the following estimating equation for GDP at constant 1965 factor cost originating in manufacturing: Yi = 6.6975 + 0.2959 x - 0.0199 X2 + 0.2287 X3 + 0.3871 X4. This equation produced the following estimates: Y1969 = 4,142 Y1970 = 4,396 Y1971 = 4,650 Y1972 4,963 The CBE, using lagged index, computed a different estimating equation (Yi = 69.6422 + 0.9422 X1 + 0.0977 X2 + 0.1091 X3 - 0.6807 X4) which produced higher estimates. Sources: Central Bank of Ecuador, National Income Division; mission estimates. ANNEX A Page 46 weak statistically, it is quite significant economically inasmuch as the value of imported manufacturing inputs amounts to about 40 percent of the manufacturing value added. Therefore, this independent variable is usually considered to be suitable for estimating the manufacturing GDP. The value of imported capital goods for manufacturing amounts to about 25 percent of the GDP originating in manufacturing. The coefficient of net regression is positive (see Table A-27). Its absolute value is eleven times higher than that for imported raw materials. Moreover, the imported capital goods contribute directly to factor inputs. Therefore, this series appears to be suitable for the regression. The use of the value of imported capital goods for the regression reauires the lagging of the data by one year because the monthly data show that these inputs are usually more or less evenly distributed throughout the year. Taking the mid-year as the average arrival date for the year and allowing six months for the installation of capital goods, training of manpower, and starting of production at reasonable capacity levels, the data on imported capital goods for any given year tend to be related to the output of the subsequent year. Instead of lagging the absolute data on these imports, the CBE has lagged the index, shifting its base from 1965 to 1966 (see Table A-27). This procedure resulted in a certain inconsistency because the weight of the lagged index became relatively smaller. However, in view of the general arbitrariness introduced by the use of equal weights for all independent variables, the implicit assignment of a smaller weight for 13 is not necessarily a step in the wrong direction. Manufacturing employment is most closely related to the total factor inputs in manufacturing. Its coefficient of net regression is positive and higher than that of any other independent variable (see Table A-27).36 However, the index used in GDP estimates differs signi- ficantly from that implicit in the manufacturing employment data which the CBE made available to the Mission (see Table A-26). It appears that the CBE derived its index from the total economically active population in manufacturing, including small-scale and household manufacturing. The latter has grown less rapidly, as indicated by the CBE index. Having estimated the index of the dependent variable, the CBE derived the manufacturing GDP for 1969 and 1970 at 4,201 and 4,590 million constant 1965 sucres. Multiplying the latter by the general 36 The CBE equation shows a negative coefficient of net regression for employment. This seems to be the result of a faulty arithmetic because both series show steady growth in all years and there is no apparent reason for a negative covariation. ANNEX A Page 47 deflator with a 1965 base, the GBE obtained its first estimates of 5,062 and 5,921 million current sucres for 196) and 1970, respectively. Before publishing them, however, the 0C38 revised them downward (see Table A-36). The downward revision appeared to be necessary in view of the lower large-scale manufacturing GDP indicated by the 1969 Survey of Manufacturing (3,034.7 million current sucres in 1969 as compared to 2,659.0 million sucres in 1968). Inasmuch as manufacturing grew (at current prices) only 14.1 percent in 1969 and the CBE has assumed hardly any real growth in handicrafts and small-scale industry, The growth in manufacturing GDP which includes handicraft had to be reduced below 14.1 percent. The CBE reduced it to 13.2 percent in 1969 and made a corresponding downward adjustment for 1970. Using the same independent variables and indexes as the CBE, the mission has obtained different regression results by means of an electronic computer. These differences are quite significant, especially for 1970 (see Table A-27), and they may partly explain the need for the CBE revisions of the 1969 and 1970 regression results (see Table A-26). A further revision of manufacturing GDP may be necessary in 1970 to bring its growth rate in line with the results of the 1970 Manufacturing Survey and the assumed zero growth of handicrafts and small-scale industry. Construction GD. -- Gonstruction accounts for about 5 percent of total GDP. It includes value added of public construction, heavy private construction, and residential construction in urban and to some extent in rural areas. The CBE Fiscal Studies Division provides most of the needed data for the public sector from the accounts of government agencies and public enterprises. The CBE National Income Division used to collect similar data for the private sector from the private construction companies. In addition, the CBE has used cons- truction permits, municipal cadastral surveys, and other sources for various ad hoc estimates of factor inputs in construction. Having focused its efforts on construction enterprises, the NID appears to have underestimated the construction by nonconstruction enterprises and private residential construction, especially in rural areas. The latter data were quite incomplete and as much as five years out of date even in the 1950 s. There has been apparently no systematic effort to survey construction sites in Ecuador. The NID has also made little use of the 1962 Census of Housing for developing a meaningful frame for its surveys of residential construction activity. With a general deterioration of basic statistics since 1965, the CBE has replaced the direct estimation of value added with multiple linear regressions of construction GDP on cement production, imports of construction materials, and fixed capital formation in the public sector (see Table A-28). Of these three independent variables, cement showed the highest positive coefficient of net regression. This ANNEX A Page 46 Table A-28: INDEPENDENT VARIABLES USED IN REGRESSIONS FOR ESTIMATING rONqTRTCTTON GDP, ECUADOR, SELECTED YEARS 1957-1970 Variables and Indexes 1957 1960 1965 1969 1970 X1 = Cement production (thous. of m. tons) 141 183 297 456 458 Index implicit in data 47.5 61.6 100.0 153.5 154.2 Index used in GDP estimates 52.2 61.6 100.0 153.5 154.2 X2 = Imports of construction materials (mil. of US $) 5.o4 4.80 8.35 14.98 13.70 Index implicit in data 60.4 57.5 100.0 179.4 164.1 Index used in GDP estimates 60.4 57.5 100.0 179.4 164.1 X3 = Capital formation in buildings, construction, and public works (mil. of sucres) .. 799 698 1,282 .. Index implicit in data .. 114.4 100.0 183.6 Index used in GDP estimates 80.4 114.5 100.0 184.5 189.5 Sources: X1 = 3ulletin of the Central Bank of Ecuador, XLV, Nos. 531, 532, and 533 (Oct.-Dec., 1971), 274. X2 = Ibid., 209-213. X3 = Central Bank of Ecuador, Fiscal Studies Division. ANNEX A Page I9 Table A-29: GDP AT CURRENT FACTOR COST ORIGINATING IN CONSTRUCTION, ECUADOR, ESTIMATING PROCEDURE FOR 1969 AND 1970 ConstructionGDP (Millions of Sucres) Independent Variables Year at at (Indexes, 1965 = 100) Current 1965 Index Prices Prices 1965=100 Y XY X2 X3 1957 380 467 59.3 -52.2 60.4 80.4 1958 388 474 60.2 53.9 48.2 69.9 1959 462 564 71.6 52.9 46.2 94.4 1960 499 598 75.9 61.6 57.5 114.5 1961 574 655 83.1 67.0 48.6 119.1 1962 560 625 79.3 65.3 43.8 94.3 1963 593 636 80.7 79.1 47.8 98.6 1964 698 724 91.9 89.2 51.6 104.7 1965 788 788 100.0 100.0 100.0 100.0 1966 845 804 102.0 115.8 148.2 96.6 1967 1,040 955 121.2 131.6 109.8 119.2 1968 1,140 1,008 127.9 146.1 162.2 148.4 1969 1,329 1,120 142.0922 153.5 179.4 184.1 1970 1,446 1,142 144.9370 154.2 164.1 189.5 1971 1,663 1,199 152.1540 163.3 174.0 199.0 1972 1,918 1,256 159.3797 173.4 188.0 207.0 Independent Variables: X1 = Cement production X2 = Imports of construction materials X3 = Fixed capital formation in buildings, construction, and public works The above variables produced the following estimating equation for GDP at constant 1965 factor cost originating in construction: Yi = 16.2866 + 0.6587 X1 - 0.0807 X2 + 0.2127 X3 This equation produced the following estimates: Y1970 = 1,142 y1971 = 1,199 Y1972 = 1,256 The CBE computed the same estimating equation (Yi = 16.2865 + 0.6587 X1 - - 0.0807 X2 + 0.2127 X3). Sources: Central Bank of Ecuador, National Income Division; mission estimates. ANNEX A Page 50 probably reflects the emphasis on heavy and urban construction where cement is more widely used than in rural areas which appear to be largely excluded from the estimates. The small and negative coefficient of net regression for imported construction materials may reflect to some extent the gradual import substitution, although statistically the result is primarily due to the lack of growth in the imported construction materials prior to 1965 and very large increases concentrated in a few subseauent years. For the fixed capital formation of the public sector, the coefficient of net regression is positive but three times lower than that for cement although public construction accounts for a large part of the total (see Table A-29). It is possible that the accuracy of public capital formation estimates leaves much to be desired although statistically inadequate estimates of construction GDP could equally be responsible for the relatively weak covariation of these variables. The inconsistencies between the value added by construction and expenditure on capital formation should be further investigated and explained. Ecuador lacks construction and fixed capital formation estimates by industrial origin. The latter estimates could be developed first for the public and then for the private sector. Partial data for such estimates could be prepared by the Fiscal Studies Division of the CBE for the public sector and by the NIS for the private sector. Electricity, water supply, and sanitary services GDP. -- Thsse public utilities account for only about two percent of total GDP. They exclude gas and some private comanies whose relative importance cannot be readily ascertained. For t e 1950 s and the early 1960s, the CBE estimated the value added by sur%ying municipal services and compa- nies in a few selected cities. The 62-63 Electrification Census provided additional benchmark data for the electric power estimates. Since 1965, the CBE has regressed the GDP estimates for these utilities on the production of, electric energy in kilowatt-hours and on water charges reported by municipal governments in millions of sucres (see Table A-30). The coefficient of net reqression is about 12 times higher for electricity than that for water charges. In fact, the data on water charges given at current prices may contribute little more than some distortion to the estimates. If they were properly deflated, the data on water charge; at constant prices would reveal more clearly their lack of relevancy as their coefficient of net regression would probably tend to approach zero (see Table A-31). Therefore, the CBE may consider eliminating the wazer charges series from the independent variables, basing its regression entirely on the production of electricity and then adjusting the results for the other services. ANNEX A Page 51 Table A-30: INDEPENDENT VARIABLES USED IN REGRESSIONS FOR ESTIMATING ELECTRIC ENERGY, WATER SUPPLY, AND SANITARY SERVICES GDP, ECUADOR, SELECTTD YEAS 1957-1970 Variables and Indexes 1957 1960 1965 1969 1j70 X1 = Electric energy production (mil. of kilowatt-hours) 298.8 387.0 575.2 843.2 948.8 Index implicit in data 52.0 67.2 100.0 146.5 164.9 Index used in GDP estimates 51.9 67.3 100.0 147.8 164.1 X2 = Water charges (mil. of sucres) 15.5 28.6 34.8 53.7 .. Index implicit in data 44.5 82.1 100.0 154.3 .. Index used in GDP estimates 44.2 81.5 100.0 153.0 159.0 Sources: X1 = Unpublished estimates provided by the Statistical Section of the Ecuadorian Institute of Electrification (INECEL) for 1965-1970. The estimates for 1957 and 1960 were provided by the CBE. The primary source of the latter estimates could not have been ascertained. X2 = Unpublished estimates provided by the Fiscal Studies Division of the CBE. ANNEX A Page 52 Table A-31: GDP AT CURRENT FACTOR COST ORIGINATING IN ELECTRIC ENERGY WATER SUPPLY AND SANITARY SERVICES, ECUADOR, ESTIMATING PROCEDURE FOR 1969 AND 1970 Electric Energy, Water, and Sanitation GDP (Millions of Sucres) Independent Variables Year at at (Indexes, 1965=100) Current 1965 Index Prices Prices 1965=10 Y (X-X 1957 120 148 54.8 51.9 44.2 1958 126 154 57.0 56.3 42.7 1959 138 168 62.2 60.7 69.8 1960 152 182 67.4 67.3 81.5 1961 179 204 75.6 74.7 63.5 1962 197 220 81.5 78.6 78.6 1963 224 240 88.9 82.5 96.0 1964 2L5 25b 94.1 91.0 104.0 1K'6 270 270 100.0 100.0 1C0.0 1966 311 296 109.6 105.8 117.7 1967 338 310 11h.8 115.2 1L2.7 1968 393 347 128.5 132.0 1L1.3 19o9 466 393 145.6291 147.8 153.0 1970 548 433 160.2829 164.1 199.a/ 1971 646 466 172.6343 177.0 175.0 1972 758 497 183.9715 189.0 187.6 Jata estimated on the basis of the 1958-69 trend. Inde2endent Variables: X1 = Electric energy production X2 = Water charges The above variables produced the following estimating equation for GDP at 1965 constant factor cost originating in electric energy, water supply, and sanitary servicess yi = 6.1390 + 0.8743 X1 + 0.0671 X2 This equation produced the following estimates: 1969 Y1970 4 33 y1971 466 Y1972 = 497 The BE computed a similar estimating equation: (Yi 6.3892 + 0.8763 X1 + 0.0671 X2)* Source: Central Bank of Ecuador, National Income Division. ANNEX A Page 53 Transportation, communications, and storage GDP. These activities account for about four percent of the total GDP in Ecuador. They are small as their development has lagged and there are considerable underestimation problems. For the 1950s and the early 1960s, the CBE estimated the transportation value added on an ad hoc basis; it surveyed a few trucking cooperatives and bus companies, and obtained some data from the railroads for 1950-1958, from Panagra and a few domestic airlines for 1950-1959, and from the Great Colombian Merchant Company. For the subsequent years, even the railroads ceased to provide statistical data and the crude estimates for earlier years had to be extrapolated on the basis of trends. River transport has apparently never been included in the estimates; warehousing and storage has been assumed to be negligible in Ecuador and these activities have also been excluded from the estimates. The public communication enterprises provided some data on factor inputs which the CBE included in the national accounts estimates. The value added of radio stations was excluded from the communications and included implicitly as a residual with services. The above estimates of GDP originating in transportation, storage, and communications have been extrapolated since 1965 by a linear multiple regression on three independent variables: (1) index of registered motor vehicles, (2) consumption index of petroleum production, and (3) in- dex of transportation employment (see Table A-33). The number of registered motor vehicles is rather poorly related to the changes in the value added of this sector: the coefficient of net regression is low and negative. Many of the registered motor vehicles are passenger cars which divert passenger traffic from carriers whose factor inputs are included in the national accounts. Registered motor vehicles include also many trucks whose transportation services are counted as a part of agriculture, construction, manufacturing, trade, and other economic branches. There- fore, it would have been more appropriate to regress the transportation value added on the number of busses and trucks used by the common and private carrier enterprises. Consumption of petroleum products has a higher and a positive coefficient of net regression and it is somewhat more suitable than the total number of registered motor vehicles for regressing the transportation value added because the common and private carriers consume relatively more gasoline per vehicle than those operated by other sectors or those used for pleasure. Transportation employment has about the same coefficient of net regression as the consumption index of petroleum products. However, the employment index is actually derived from the economically active population which the NEPCB projected from the 1962 Population Census. These population projections show continuous growth which outpaces the value added growth. In fact, the factor and the ANNEX A Page Sh Table A-32: INIEPENDENT VARIABLES USED IN REGRESSION FOR ESTIMATING TRANSPORTATION GDP, ECUADOR, SELECTED YEARS 1957-1970 Variables and Indexes 1957 1960 196 5 1T969 1970 11 = Registered motor vehicles (000) .. 28.3 37.9 55.8 Index implicit in the data ... 7.7 100.0 17.2 .. Index used in GDP estimates 57.2 74.7 100.0 147.3 165.6 X2 = Consumption of petroleum products (mil. of US gal.) 86.4 173.6 229.4 322.3 362.1 Index implicit in the data 37.6 75.6 100.0 140.5 157.8 Index used in GDP estimates 54.8 75.0 100.0 150.9 151.6 I3 - Transportation employment (000) 35.8 40.0 48.0 59.9 62.9 Index implicit in the data 74.5 83.4 100.0 124.8 131.0 Index used in GDP estimates 74.7 83.3 100.0 124.8 131.0 Sources: X1 - CBE, National Income Division. X2 - Bullatin of the Central Bank of Ecuador, Vol. XLV, Nos. 531, 532 and 533 (Oct.-Dec., 1971), 271. X3 - National Economic Planning and Coordination Board, Division of Human Resources (unpublished estimates dated September, 1970). ANNEX A Page 55 Table A-33:. GDP AT CURRENT FACTOR COST ORIGINATING IN TRANSPORTATION, ECUADOR, ESTIMATING PROCEDURE FOR 1969 AND 1970 Transportation GDP (Millions of Sucres) Independent Variables Year at at (Indexes, 1965=100) Current 1965 Index Prices Prices 1965=1oo V X1 1957 522 642 88.6 57.2 54.8 74.6 1958 530 648 89.4 61.5 60.9 77.3 1959 546 667 92.0 69.8 65.5 80.4 1060 548 656 90.5 74.7 75.0 83.3 1961 595 679 93.7 81.1 77.6 86.5 1962 600 670 92.4 83.1 77.0 91.0 1963 649 696 96.0 91.9 83.9 93.1 1964 701 727 100.3 96.0 92.)4 96.5 1965 725 725 100.0 100.0 100 0 100.0 1966 789 751 103.6 109.3 109.2 104.0 1967 822 755 104.1 127.5 118.8 107.9 1968 902 798 110.1 138.8 136.4 119.0 1969 980 826 113.9410 1L7.3 150.9 124.8 1970 1,050 829 114.3842 165.6 151.6 131.0 1971 1,193 860 118.7045 178.0 168.3 137.7 1972 1,365 894 1 123.3040 196.0 187.1 145.0 Note: The 1970 figure is revised to 1,149 because it is considered to be underestimated. Independent Variables: X, = Registered motor vehicles X2 = Consumption of petroleum products Xj = Transportation employment The above variables produced the following estimating equation for GDP at constant 1965 factor cost originating in transportation: Yi = 63.6904 - 0.0530 X1 + 0.2164 X2 + 0.2036 X3 This equation produced the following estimates: Y1969 = 826 Y1970 = 829 Y1971 = 860 Y1972 = 894 The CBE computed the same equation. Source: Central Bank of Ecuador, National Income Division; mission estimates. ANNEX A Page 56 nonfactor related inputs show faster growth than the value added of this sector (see Table A-33). The implied decline in the average productivity cannot be readily justified on any ground other than the deficiency of the basic data. An inescapable conclusion emerges that the growth, as well as apparently also the level of this sector, have been qreatly understated. It should also be noted that the regression excludes completely communication variables. Wholesale and retail trade GDP. The wholesale and retail trade accounts for about 11 percent of the total GDP. These are crude estimates based on income tax returns of trade establishments and foreign trade data. Foreign trade establishments account for about 60 to 70 percent of domestic trade and the CBE has assumed the same proportion for the value added, based in part on a st,idy of trade margins carried out in 1950-195. Starting in the middle 1960s the CBE began extrapolating the trade GDP estimates with regressions. At first, it based the regression entirely on the combined value of exports and imports. In more recent years, the number of independent variables was increased to four indexest (1) agriculture GDP, (2) manufacturing GDP, (3) value of exports, and (4) value of imports (see Table A-34). While all three GDP series are at constant 1965 sucres, the index based on the value of export permits indicates faster and that on import permits shows slower growth than the indexes which the CBE has used in trade GDP regressions. It is possible that the latter two indexes were also deflated with different price deflators for exports and imports. The selection of the independent variables for the regression of trade GDP is more appropriate than for the other regressions: agri- culture, manufacturing and foreign trade reflect the commodity flows of the country. Nevertheless, the relationship of exports to domestic trade is very weak--the coefficient of net regression on exports is almost zero. This independent variable may be eliminated from the regression (see Table A-35). Manufacturing shows also a relatively small coefficient of net regression. This is consistent, however, with the relative importance of domestically manufactured products in the total volume of domestic trade. The coefficient of net regression for agriculture is about twice as high as for manufacturing, and that for the imports is the highest. Although the level of trade activity may be underestimated, its projection over time is generally in line with the overill quality of the national accounts. Financo, insurance3 and real estate. -- These activities account for about three percent of the GDP in Ecuador. The CBE estimates ANNEX A Page 57 Table A-34: INDEPENDENT VARIABLES USED IN REGRESSION FOR ESTIMATING DOMESTIC TRADE 1TP, ECUADOR, SELECTED YEARS 1957-1970 Variables and Indexes 1957 1960 1965 1969 1970 X1 = Agriculture GDP (mil. of constant 1965 sucres) 4,841 5,672 6,482 7,211 7,655 Index implicit in data 74.7 87.5 100.0 111.2 118.1 Index used in GDP estimates 74.7 87. 100.0 113.6 115.9 X2 = Manufacturing GDP (mil. of constant 1965 sucres) 1,999 2,408 3,299 4,142 4,396 Index implicit in data 60.6 73.0 100.0 125.6 133.3 Index used in 3DP estimates 60.6 73.0 100.0 127.3 139.1 X3 = Value of exports (mil. of US $) 98.7 102.6 133.8 151.9 201.5 Index implicit in data 73.7 76.6 100.0 113.5 150.5 Index used in GDP estimates 70.5 82.1 100.0 108.8 129.1 X4 = Value of imports (mil. of US $) 97.8 115.2 168.9 261.9 247.6 Index implicit in data 57.9 68.1 100.0 155.0 146.5 Index used in GDP estimates 63.5 70.7 100.0 156.4 167.5 Sources: X1 = CBE, National Income Division. X2 = Ibid. X = Bulletin of the Central Bank of Ecuador, XLV, Nos. 531-533 (Oct. -Dec, 1971), 209-213, and 237-240. X4 = Ibid. ANNEX A Page 58 Table A-35: GDP AT CURRENT FACTOR COST ORIGINATING IN DOMESTIC TRADE, ECUADOR, ESTIMATING PROCEDUJRE FOR 1969 AND 1970 Domestic Trade GDP (Millions of Sucres) Independent Variables Year at at (Indexes, 1965=100) Current 1965 Index Prices -rices 1965=100 Y X, X9 X4 1 X 1957 1,306 1,606 77.2 74.7 60.6 70.5 63.5 1958 1,338 1,636 78.7 75.5 64.4 75.9 65.9 1959 1,357 1,657 79.7 80.1 67.7 79.5 61.9 1960 1,482 1,775 85.3 87.4 73.0 82.1 70.7 1961 1,555 1,775 85.3 90.3 73.1 73.2 69.9 1962 1,620 1,808 86.9 98.0 77.2 82.4 72.2 1963 1,772 1,899 91.3 98.6 82.0 83.4 76.5 1964 1,921 1,993 95.8 99.1 95.5 89.5 90.2 1965 2,080 2,080 100.0 100.0 100.0 100.0 100.0 1966 2,185 2,079 100.0 lo6.1 101.0 103.3 97.5 1967 2,420 2,222 106.8 107.0 108.1 111.5 113.2 I968 2,680 2,370 113.9 106.0 112.8 116.9 135.8 19=9 3,039 2,560 123.1 111, 125.6 108.8 156.4 1970 3,397 2.683 129.0 118.1 133.3 129.1 167.5 1971 4,330 3,122 150.1 120.1 141.0 129.9 231.7 1972 4,987 3,266 157.0 120.6 150,4 182.1 251.2 3--- 20__ _.4_ 1 50-4__ 1 _1_251. Independent Variables: X, = A,riculture :? X2 = aDPcturi D X, = Value of exoorts X4 Value of imrts The above variables orou,.ed the following estimating equation for GDP at ocnstant 1j' factor cost originating in domestic trade: = 32.5597 + 0.241 X + 0.1315 X2 - 0.0082 X3 + 0.3057 X4 This equation produced the following estimates: 90 2,683 1971 = 3,122 Y1972 = 3j2 .. The 0BE estimatin equation has a positive sign for the X3 coefficient (Yi = 32. 92 + 0.24127 X1 + 0.1 3145 X2 + 0.0082 X3 + 0.3057 X4) which produced sli;htlr higher estimates. So'urces: Central Bank of Ecuador, National Income Division; mission estimates. ANNEX A Page 59 the value added of banking and insurance companies by aggregating compensation of employees, rents, interest, depreciation and profits of financial intermediaries. The Superintendent of Banks provides these data from the accounts of financial intermediaries which it supervises. Real estate is considered to be quite unimportant in Ecuador and it is largely excluded from the estimates, although the CBE has made a rough estimate for 8,000 brokers without a permanent business location. The ownership of dwellings is estimated separately (see below). Prior to 1958, the CBE made no imputation for banking services. In subsequent years, the CBE imputed the banking services as a difference between interest and dividends received less interest paid. There is, however, no indication that the imputed service charge has been properly divided between the business and the household sectors. The Superintendant of Banks may not have the bank deposits properly classified by type of depositor to enable the NID to estimate the enterprise share of the imputed service charge and to deduct it as a business expense from the gross profits. Ownership of dwellings. -- This sector accounts for about six percent of total GDP, It includes imputed rents of owner-occupied dwellings of the private sector. The irputed rents of public buildings are included in the government sector. For 1940-56, the CBE derived the estimates from the rent registers of Quito. Guayaouil, and from municipal cadastral surveys of a few other cities. For subsequent years, the CBE extrapolated these estimates on the basis of trends. Services GDP. -- Private services accounted for 9 percent of GDP in the early 1960s. Since 1965, the CBE has estimated them toqether with public administration and defense as a r,esi.dual, that is, total GDP less all the separately estimated sectors. The CBE estimates of the 1950's were considerably understated. Services included education, health, religious institutions, welfare and social services, independent professions, entertainment, general services rendered to enterprises, hotels, bars, barber shops, beauty parlors, etc. Many service enter- prises could not be properly classified between the private and public sector. The major stumbling block remained the lack of basic statistics on services. In the middle 1960s, the CBE tried to extrapolate private services by regressing their value added for previous years on five indexes: (1) index of matriculated students, (2) index of incomes by educational level, (3) index of incomes by health level, (4) index of public entertainment, and (5) index of imported books, records, and paper. These extrapolations, however, failed to produce meaningful estimates and the CBE finally decided to combine the services with public administration and defense. ANNEX A Page 60 Table A-36: INDUSTRIAL ORIGIN OF GDP AT CURRENT FACTOR COST ALTERNATIVE ESTIMATES OF THE CBE AND nPCB, ECUADOR, 1969, 1970 AND 1971 (Millions of Sucres) CBE Estimates CBE in Mission Estimates Year NEPCB of NEPCB Based on Final Regressed Published Estimates Estimates Regression Estimates Agriculture 1969 6,074 8,974 8,716 ' 101.8 8,62 8,462 1970 10,271 10,271 10,008 102.6 9,693 9,693 1971 .. .. 11,343 .. 10,804 10,804 . ............Mining and Quarrying 1969 5 9 596 5d5 '101.b8 586 5 971 1970 621 641 630 101.7 604 641 1971 .. 773 .. 678 734 Manufacturing 199 76 680 101.7 6,917 4,764 1970 5,921 5,657 5,555 101.8 5,565 5,438 1971 .. .. 6,735 .. 6,450 6,412 Construction 1969 1,350 1,350 1 1,324 101.9 1,329 1,350 1970 1,473 1,803 1,770 101.8 1,446 1,803 1971 .. .. 01,92 .. 1,663 22302 Electricity Gas Water Supp and Sanita Services 1969 T 74 474 4bb 101.7 466 474 1970 559 559 549 101.8 548 559 1971 .. .. .. 6 Transportation and Communication 1969 995 995 977 101.8 980 995 10 1,069 1,149 1,12S 101.8 1,050 1,169 ** ** 1,26 ** 1,193 1.342 Domestic Trade 9769 3,106 3,012 2,9 TT 10113 3,032 3,n12 1970 3,528 3,528. 3,64 101.8 3,397 3,397 T971 6.. .. 3,94> .. 4,330 4,021 Total qDP at Current Market ?rices 1969 30,716 30,843 30,338 101.6 30,717 30,429 1970 37,574 35,743 35,159 101.6 37,575 35,t30 1971 44,095 .. L1,27 .. 4L4,073 41,020 Sources: Central Bank of Ecuador, National Income Division; Naticnal Economic Planning and Coordination Board, Division of General Programming. ANNEX A Fage of Public administration and defense. -- Public a,iministration and defense accounted for 7 percent of total GDP in 1964, the lqst year for which the CBE estimpted this sector separately. Since 1965, it estimated the value added of this sector as a residual, together with the private services. Separate defense estimates are available only prior to 1960. Fixed capital consumption allowances could not have been estimated for this sector at any time. VII. The Deflation Problem The CBE and the NEPCB derive the national accounts at current prices and then deflate them with a general price index constructed from the consumer and wholesale price inJexes. In recent years, as the Central University suspended the preparation of the WPI, the CBE confined its work to national accounts at current prices. The Peneral price index is still computed but in view of its shortcomings, it is not used for deflation purposes. The CBE constructs the deflator by calculating an unweighted averaFe price index from the WPI and the CPI for Quito, Guayacuil and Cuenca. It averapes the annual point changes in these indexes for a given year and adds the result to the deflator of the preceding year. Being aware of the limitations of this procedure, the CBF prefers to update the deflator with the Quito CPT. The averaging merely obscures the fundamental issue which underlies the general deflation problem in Ecuador. A CPI may be a relevant price index for deflating private consumption expenditure, but it cannot be meaningfully applied across the board to all components of national accounts. Where specific price increases exceed the CPT changes, the remaining price increases are interpreted as real growth and vice versa, where specific price increases are smaller than the CPI changes, the deflation procedure eliminates some of the real growth in addition to price changes. The use of a general price deflator has a different economic interpretation than that of an implicit deflator. The general price deflator corrects the national accounts for changes in the purchasing power of money for the basket of goods to which the general price index refers. The relative price changes are not affected. This has the advantage of showing the relative importance of components and the disadvantage of measuring the sector growth in terms of the purchasing power of a certain given basket of goods and services. Since the purpose of deflation is usually the measurement of growth based on constant prices of the same sector, the use of the CPI may introduce significant distortions. ANNEX A Page 62 The available CPI and WPI comoonents and various production indexes are not sufficiently appropriate for deflating the major com- ponents of the national accounts. With the CPI components, the CBE could deflate the consumption expenditure and the ownership of dwellings. vor other components, it has to construct sectoral price indexes, using the WPI components and agricultural prices collected by the Ministry of Production. If the CBE or the NIS succeed in developing agricultural or industrial production indexes, the latter could be used for extra- polating the value added at constant prices,provided that the indexes are sufficiently comprehensive. In the absence of specific price deflators, sectoral growth cannot be meaningfully inferred from the national accounts. The exclusive use of the CPT would probably underestimate the real growth in the GDP because the GPI shows considerably higher price increases than the WPI. Replacing the GDP deflator, which is partly based on the CPI, with the major WPI component for food products, the GDP growth originating in agriculture increases from 2.5 to 3.3 percent per year between 1961 and 1969. A specific deflator based on two-thirds of API components and about one-third on CPI groups (the latter had to be used because the relevant WPI groups have not been computed in Ecuador) can be computed with the 1965 Census of Manufacturing weights adjusted for handicrafts at the two-digit industry level. Even such an imperfect specific deflator raises the average annual rate of growth for manufacturing GDP from 6.6 percent to 8.3 percent for the same period. A production index cnmputed with adjusted 1960 weights shows a -3.2 percent decline per year between 1961 and 1969, while the mining GDP grows at 4.3 percent per year during the same period. The npt impact of these adjustments on the total GDP growth is, of course, considerably smaller (see Table A-17). The adjusted GDP grows at 5.4 percent instead of at 5.0 percent with base- year weiphts. With 1969 weights, the differences would, of course, be even smaller. The use of specific deflators is thus far more important for measuring the growth of GDP components than for determining the changes in the overall economic activity. On the whole, the CPT is more appropriate than the WPI for deflating the total GDP because of the large relative importance of consumption expenditure. Moreover, the limitations of the WPI, especially in Ecuador (see the technical note on basic statistics in Annex B), must also be considered. If the WPI is understated by about 15 percent, as the findings on the basic statistics may indicate, the above deflation bias would be reduced by one-half, or it may be even found to be a bias in the opposite direction. ANNEX A Page 63 Table A-37t DEFLATION BIAS IN GDP AND ITS MAJOR COMPONENTS, ECUADOR, 1962-1969 1962-1969 .eriod Annual Indicators 1961 1969 Growth Growth Rate Ratio (Percent) Adjustment of Agriculture GDP GDP price deflator (1965=100) 87.6 118.7 1.355 3.8 WPI for food products (1965=100) 90.9 115.6 1.272 3.0 Deflation bias for agriculture .. .. 1.065 0.8 Agriculture GDP at constant 1970 factor cost (mil. sucres) Unadjusted 7,409 9,021 1.217 2.5 Adjusted 7,409 9,602 1.296 3.3 Adjustment .. 581 1.065 0.8 Adjustment of Manufacturing GDP GDP price deflator (1965=100) 87.6 118.7 1.35 3.8 WPI for manufacturing (1965=100) 91.7 109.3 1.192 2.2 Deflation bias for manufacturing .. .. 1.137 1.6 Manufacturing GDP at constant 1970 factor cost (mil. sucres) Unadjusted 3,052 5,078 1.664 6.6 Adjusted 3,052 5,774 1.892 8.3 Adjustment .. 696 1.137 1.6 Adjustment of Mining and Quarryink GDP Index of production for mining and quarrying (1965=100) 142.0 109.6 0.771 -3.2 Mining and quarrying GDP at constant 1970 factor cost (mil. sucres) Unadjusted 455 635 1.396 4.3 Adjusted 351 0.771 -3.2 Adjustment .. -284 1.811 -7.7 Adjustment of GDP GDP at constant 1970 factor cost (mil. sucres) Unadjusted 19,997 29,512 1.475 5.0 Adjusted 19,997 30,505 1.525 5.4 Adjustment .. 993 1.034 0.4 Source: Mission estimates based on official data.  CURRENT ECONOMIC POSITION AND LONG-TERM PROSPIECTS OF ECUADOR TABLE OF CONTENTS VOLUME III PAGE No. ANNEX B - TECHNICAL NOTE ON BASIC STATISTICS I. Introduction ...................................... 1 II. Summary of Findings and Recommendations ... 1 III. Demographic Statistics ............................ 5 IV. Agricultural Statistics ........................... 11 Reports of Agricultural Extension Workers 11 First National Agricultural Census of 1954 11 Second National Agricultural Census of 1961-1962 13 National Agricultural Survey of 1968 ........... 18 FAO and USDA Series for Ecuador ................ 19 Proposed National Program for the Improvement of Agricultural Statistics ................... 20 The 1973 National Register of Farms ............ 20 The 1974 National Agricultural Census .......... 25 Annual Agricultural Surveys .................... 26 V. Selected Nonagricultural Statistics ............... 27 Mining and Quarrying ........................... 27 Manufacturing .................................. 27 Administrative Sources of Statistics on Manufacturing ................................ 29 Indexes of Industrial Production .............. 31 Indexes of Industrial Employment and Wages 31 Construction Statistics ....................... 33 Transportation Statistics ...................... 33 Electric Power Statistics ...................... 34 Domestic Trade Statistics ............... 35 Foreign Trade Statistics ..................... 35 Financial Statistics ........................... 36 Private Services Statistics ................... 39 Health Statistics ............... .......... 39 Government Accounts Statistics ................. 39 Price Statistics ............................... 40  LIST OF TABLES TABLE Page No. B-1 Comparison of Population Census Results and Alternative Estimates, Ecuador, 1950 and 1962 ................... 7 B-2 Total, Economically Active, Inactive, Employed and Unemployed Population, By Major Economic Branches, Ecuador, 1950-1975 .................................. 8 B-3 Major Agricultural Crops, By Selected Provinces, Ecuador, 1954, 1962, 1968 ........................... 14 B-4 Survey Data and Agriculutral Extension Workers' Estimates of Major Agricultural Crops, Ecuador, 1954 and 1968 . 21 B-5 Official Government and Foreign Expert Estimates of Major Agricultural Crops, Ecuador, 1968 ............. 22 B-6 Ministry of Production and FAO Estimates of Major Agricultural Crops, Ecuador, 1960-1969 .............. 23 B-7 National Agricultural Register, Census and Annual Survey, Ecuador, 1973-1975 .................................. 26a B-8 Mining and Quarrying, Gross Value of Production and Value Added, Ecuador, 1958-1969 ..................... 28 B-9 Manufacturing Employment and Value Added, Comparison of Alternative Estimates, Ecuador, 1962-1969 ........... 30 B-10 Index of Industrial Production, Comparison of Alternative Estimates, Ecuador, Selected Years 1957-1966 ........ 32 B-11 Exports and Imports of Goods and Nonfactor Services, Comparison of Balance of Payments and Alternative National Accounts Estimates, Ecuador, 1960-1971 ..... 37 B-12 Public Sector Current Account, Comparison of Alternative Estimates, Ecuador, Calendar Year 1960-1971 ......... 43 B-13 Consumer Price Indexes, Weights and Trends, Ecuador, Selected Years 1967-1971 ............................ 44 B-14 Wholesale Price Index, Weights and Trends, Ecuador, Selected Years, 1954-1969 ........................... 45 B-15 Annual Average Consumer Prices for 71 Agricultural Commodities, 1960-1970 .............................. 46  ANNEX B Page 1 I. Introduction This Annex presents a brief review of readily available basic statistics which are relevant to national accounts. For the most part, the basic statistics are reviewed cursorily, special emphasis being placed on selected major problems. Inadequate and changing coverage of the statisti- cal universe, unreasonable delays in data collection and processing, and conflicting results derived from various sources receive special attention. There is no attempt, however, to review the statistical system as a whole. Such a systematic review must be postponed for some future date. Neverthe- less, the mission has made several recommendations on the improvement of the statistical system which should be given an early consideration by the govern- ment. The narrow scope of these recommendations reflects the limitations of this review rather than the extent of possible improvements of basic statistics in Ecuador. II. Summary of Findings and Recommendations Ecuador '4as produced a fiirly large volume of basic statistics. Within the last two decades, Ecuador conducted a major economic and two population censuses, followed by annual surveys. In addition, several government agencies have maintained regular reporting systems in the areas of their responsibility. Major universities are engaged in collection of price data, while trade associations compile statistics from various independent sources. Notwithstanding a relatively large flow of economic statistics, the available information is generally outdated and beset with numerous other deficiencies which make the data less than suitable for planning and national accounts purposes. While the need for and uses of economic statistics have increased substantially in recent years, the scope and quality of national accounts and some basic statistics have markedly deteriorated. Thus, the agricultural census covered 9 percent of farms in 1954, but having encountered enormous difficulties, it had to be abandoned in 1962. After this failure, only a 3 percent sample survey was conducted in 1968, and the results turned out to be too poor to be used in national accounts because of the gross in- consistencies with the alternative estimates prepared by the agricultural extension service. However, the latter in turn have often been distorted by subjective judgments of agricultural extension workers. The 1962 Popula- tion Census showed a 10 percent lower manufacturing labor force than the 1950 Census because the latter had erroneously classified a large number of farm workers with the active population in manufacturing. The 1962 Population Census understated the total population of Ecuador by about 200,000. Most of the economically active population estimates are projected hypothetically from these deficient benchmark data. The railways discontinued the processing ANNE.,X B Page 2 of their traffic data althogether after 1959. The mining and manufacturing statistics cover only large and medium establishments, with varying coverag from year to year. The public sector statistics suffer from changes in definitions and classifications. The data are even less adequate in other sectors if they are available at all. In view of the above deficiencies, the statistical system of Ecuador should be reviewed in its entirety and its performance raised to an adequate level. The present system is not meeting the minimum require- ments of providing information for making decisions on current economic policy, long-range planning and preparing meaningful national accounts. The organizational structure and management of the statistical system should be more centralized to make the best possible use of rela- tively scarce statistical skills, qualified manpower and other resources. The management of the National Institute of Statistics (NIS) should be strengthened and its work program reviewed with a view towards establishing more effective priorities. At the same time, other agencies and institutions should curtail their data gathering activities, limiting them to areas of their direct responsibility. They should present their requests for general statistics well in advance to the NIS which should have the opportunity to develop the necessary capacity for producing them, obtain the appropriate budget authorizations, and accept sole responsibility for them. In the interim period, which may extend over several years, all agencies responsible for general statistics should consult with the NIS about the statistical standards, methodology, and priorities. The centrali- zation process should be gradual and commensurate with the NIS's absorptive capacity. Every effort should be made to secure overlapping time series for a reasonable length of time to ensure the comparability of series and their linking if necessary. In order to ensure more effective field operations, the NIS should consider establishing a small field staff in key locations. In addition to its branch office maintained in Guayaquil, the NIS should maintain branch offices or at least have its permanent representative station in several other important provincial capitals such as Cuenca, Loja, Ambato, Manabi and Esmeraldas. These regional offices and representatives should provide local support to the NIS surveys, developing and maintaining survey frames, checking inadequate response and nonresponse, and cooperating with the CBE, Ministry of Production, universities, and othe/ agencies in the field operation of their surveys. The latter cooperation should be pursued with the view to assuming increasing responsibility for all field work concerned with basic statistics. Strategically located branch offices, reinforced with supervisors and statistical technicians from Quito at the time of major censuses and surveys, would be responsible for securing all data on time from the ANNEX B Page 3 respondents and, after a preliminary check for consistency and completeness, for forwarding the data to Quito for final review and processing. In cooperation with the Heaquarters, the branch offices would also serve as centers for training the field staff and staging the field operations of censuses and surveys. The NIS priorities should be reviewd in the light of modern statistical methods based on estimating the totals and averages from well- designed probability samples. The present censuses and most of the surveys attempt a complete coverage of the whole statistical universe with detailed questionnaries. This procedure is very inefficient. It imposes a heavy burden on the respondents, interviewers, and data processing. More interviewers are used with relatively less training and experience. The results are adversely affected by higher response and processing errors. These errors are usually substantially higher than the sampling errors of a well-designed probability sample based on a reliable frame. Therefore, the NIS should concentrate its efforts on securing complete statistical frames with short questionnaries containing three to five basic items. On the basis of these frames, probability sampling with multiple stages and phases would provide all the necessary details. The 1973 Population Census should be based on modern probability sampling methods. The complete population canvass should be limited to the usually recommended simple questions on age, sex and perhaps major economic activity. This basic information would serve for developing the frames for various demographic and economic surveys, including the agricul- tural survey to be carried out in 1974. The NIS should use a varying sampling fraction, lowering it for large and increasing it for small samples. The proposed constant fraction for the various zones of the 1974 Agricultural Census would impose an unnecessary burden on the large zones and produce excessive sampling errors for the unusually small samples. The samples should be stratified by major characteristics to reduce the sampling fraction to a level at which the sampling errors would roughly be comparable to the response errors. The NIS should conduct its proposed annual agricultural surveys (to be started in 1975) in cooperation with agricultural extension workers who may be able to contribute their expertise. The survey should be based on the modern crop-cutting techniques rather than on the opinions and sub- jective information provided by farmers and agricultural extension workers. Once the vast discrepancies between the NIS surveys and the reports of agricultural extension workers compiled by the Ministry of Production have been reduced (or at least explained), the NIS should assume full responsibil- ity for the agricultural statistics--provided that it would be able to furnish them at least as expenditiously as the Ministry of Production. ANNEX B Page 4 The NIS should review its annual industrial survey with a view towards introducing probability sampling which would cover medium, small, cottage and handicraft establishments. The complete coverage should be continued with respect to large industrial establishments. However, the present practice of delaying the release and publication of the results until all the establishments have returned the questionnaires should be replaced with a system which would produce tentative estimates for non- reporting establishments on the basis of their previous reports or some other indirect information. The priorities for other economic and social surveys should be reviewed in the light o' the needs for data and available resources. It appears from the review of the national accounts that the present NIS surveys fail to provide the necessary data even for the national accounts. The collected data supply a very inadequate basis for the estimation of trends and levels of economic activity in construction, transportation, trade and services. The accounting and reporting practices of the public sector should be reviewed and modernized. The basic discrepancies between the CBE and the NEPCB definitions and estimating procedures should be reviewed and the needed data obtained in the most efficient way at the earliest possible date. The present processing of public accounts is entirely too slow and unreliable to be of much use for the national accounts and public finance policies. The Government of Ecuador should establish operational defini- tions and reporting procedures at the agency and public enterprise levels rather than expect the CBE experts to reclassify ex post the accounts of all government agencies and public enterprises every year. These annual exercises are inefficient and their modus operandi should be thoroughly reviewed at an early date. The procedures for estimating the balance of payments data should be reviewed to determined the extent to which they reflect the actual flows of payments (cash flows). The export and particularly the import permits are poor indicators of payments for merchandise transactions with respect to trends, levels and timing. Many balance of payments components are crudely estimated by various ratios and other indirect methods. The CBE should make a greater effort in ascertaining the actual flows from more direct information which should be used in estimating the final results. The Central University of Ecuador should resume its calculation of wholesale price indexes (WPI's). It should replace the 1954 weights with more recent data as soon as possible. The WPI's of the various cities should be combined into national WPI's with proper weights such as the provincial data on agricultural and industrial production. The CPI's should also be weighted for each city with provincial or regional data on consumer spending. The latter may be approximated from the population of economic regions. ANNEX B Page 5 Whenever feasible, all important indicators should be derived on semiannual and quarterly basis in order to make it possible to estimate the annual totals on the basis of semiannual and quarterly data. Timely data are essential for many policy decisions while accurate data are needed for more penetrating analyses, especilly for the determination of annual changes and long-term trends. III. Demographic Statistics Ecuador conducted its First National Population Census in 1950, the Second in 1962 and the Third Census is planned for 1973. The results of the 1950 and 1962 censuses were published with relatively little delay. The Second Population Census was combined with the First Housing Census in 1962. Moreover, the results of the First Census appeared in five volumes 37/, those of the Second Census included eight volumes 38/. In the preparation for the 1973 Census, a pilot census was conducted in Vilcabamba and its results published in 1971. Surveys of fertility were conducted in Quito and other major cities and selected districts in 1966 - 1968. The intercensal data indicated population growth of slightly over 3.0 percent per year in the 1950's, while the fertility surveys raised this figure to 3.4 percent for the 1960's. Censuses provide frames for subsequent sample surveys and establish a basis for benchmark estimates. Being aware of these needs, the NIS has tried to maintain data continuity by using similar questionnaires for all population censuses. The basic questionnaires contain fourteen items on housing, and twenty-two items on population characteristics. Many of these thirty-six questions have up to ten multiple choice subitems which include specific questions on employment, occupation, wages and salaries, etc. Instead of shifting the details to a probability sample, the Census attempts to canvass the entire population, imposing an unreasonable and unnecessary burden on the census takers and the respondents. Consequently, the response errors increase, the data processing is delayed, and the cost of the census remains higher than that with a concurrent sample survey of detailed character- istics, the complete coverage being limited to only four or five basic questions related to age and sex characteristics. 37/ Vol. I-(Population by Age and Sex); Vol. II-(Population by Maritual Status); Vol. -III (Urban, Suburban, and Rural Population); Vol. IV -(Population by Languages and Dialects); Vol. V- (Literacy of Population). 38/ In addition to the four basic volumes, it included volumes with preliminary results, provincial data, and two volumes on population projections to 1980. ANNEX B Page 6 The processing of a three percent sample of the latest population census taken in 1962 showed relatively minor differences with respect to the final results. In fact, the preliminary results based on a 3 percent sample of Census questionaires were found to be generally more accurate than those based on a 100 percent coverage; the preliminary results tended to be higher than the final Census returns, thus making some allowance for the persons whom the Census takers had missed. When the final Census results had been analyzed and corrected for various deficiencies, the revised NEPCB estimates turned out to be significantly higher--4.7 million instead of 4.5 million recorded by the 1962 Census (See Table B-1). The distribution of the economically active population recorded by the 1950 Census showed even greater deficiencies. According to the popu- lation census, active population in manufacturing declined from 295,000 in 1950 to 210,000 in 1962. Subsequent inquiries established that about one-third of manufacturing labor force in 1950 consisted of farm smallholders who worked sporadically in manufacturing and were thus erroneously classified by the Census takers. 39/ The NEPCB projections of the economically active population in manufacturing lowered the 1950 Census results from 233,000 to 152,000. Similarly, they lowered the economically active popula- tion in services from 141,000 to 111,000. The adjustments in other sectors were relatively small (see Table B-1). A recent NEPCB study has found that the 1962 Census understated the economically active population by about 40,000. 40/ Although it had the total employment of Ecuador grew about 0.4 percentage points slower, on the average, between 1q50 and 1962, than the population as a whole. How- ever, this result appears to be consistent with the accelerating population growth inasmuch as more children are added to population than the additions to the labor force and employment. Nevertheless, the estimates of the female labor force in rural areas remain rather shaky and are probably understated. The NEPCB estimates of the economically active population and employment are shown by major sectors in Table B-2. The Ecuadorian population censuses contain obvious errors and biases which can be attributed to large response errors. the latter could have been reduced by focusing the efforts of better trained interviewers on a smaller number of respondents in a carefully selected probability sample. The importance of this issue is brought to the attention of the Government of Ecuador which is responsible for improving the quality of the proposed 1973 Population Census. 39/ Cf. United Nations, Department of Economic and Social Affairs, Case Studies of Arrangements for Evaluation and Utilization of Population Census Results, Report III, The Republic of Ecuador (New York: United Nations, 1960),p. 13. 40/ National Economic Planning Coordination Board, Section of Human Resources Programming, Cvrrection of Census Figures of Economically Active Population and Its Projection to 1980 (Quito: NEPCB, July 1971), p. 19. Table B-1: COMPARISON OF POPULtTION CENSUS RESULTS AND ALTERNATIVE ESTIMATES, ECUADOR, 1950 AND 1962 (Thousands of Persons) 1950 1962 Major Population Census 7 NEPCB a/ Census a/ NEPCB a7 Categories Final Corrected Estimates Preliminary Final Estimates Total population 3,202.8 00 3,271.1 4,514.8 4,476.0 4,721.1 Urban 913.9 92o.6 1,617.2 1,612.3 1,650.9 Rural 2,288.8 , 2,30 2,897.6 2,863.6 3,070.2 Population under 12 years 1,137.7 ** 1,707.2 1,688.2 1,877.5 Population 12 years and over 2,065.1 ** ** 2,807.6 2,787.8 2,843.6 Economically inactive b/ 1,966.2 .. 2,208.h 1,323.9 1,345.2 3,192.6 Economically active c/ 1,236.6 1,205.3 1,062.7 1,483.7 1,442.6 1,528.5 Agriculture d/ 610.9 640.6 626.1 839.4 801.7 877.5 Mining 5.2 5.0 5.0 3.4 3.5 3.6 Manufacturing d/ 294.7 233.3 152.3 209.3 210.4 213.5 Construction 27.3 26.8 26.5 47.5 48.0 48.8 Electric energy 1.3 1.3 1.1 2.7 4.6 4.7 Transportation 27.7 27.4 27.4 42.1 43.0 43.7 Trade 70.1 75.1 67.9 91.7 97.1 98.7 Services 144.7 141.2 110.8 197.0 190.7 193.5 Unclassified 54.7 54.6 45.6 50.7 43.8 44.5 Employed population ** ** 1,021.6 1,437.5 1,380.0 1.411.3 Unemployed population ** ** 41.1 46.2 62.6 117.2 a/ Refers to November 25th. b/ Economically inactive population included the unemployed in 1950 and excluded them in 1962. It comprised 1,040,600 housewives, 264,100 students, and 40,500 other economically inactive persons in 1962. of In 1950, economically active population referred to persons with remuneration and thus excluded the unemployed. In 1962, it included both the employed and the unemployed. d/ The 1950 Census results showed irregularities with respect to economically active population in agriculture and manufacturing inasmuch as the enumerators included within the latter small farmers that occasionally worked in manufacturing. A study conducted by the General Bureau of Statistics and Censuses arrived at the conclusion that 124,236 persons could be substracted from manufacturing and added to agriculture. This change resulted in estimated 735,139 persons in agriculture and 170,494 persons in manufacturing. See The Population of Ecuador (Cuenca: > NEPCB, 1960), p.90. Sources: NEPCB, The Population of Ecuador (Cuenca: NEPCB, 1960), Annex Tables 1, 2, 5, and 6. D Ministry of Economy, First Population Census 1950, Summary of Characteristics (Quito: General Bureau of w Statistics and Censuses, 1960) Single Volume, Table 38, p. 181. NEPCB, Second Population Census and First Housing Census 1962 (Quito: Division of Statistics and Censuses, 1964), Tables 27 and 33, pp. 131 and 224. NEPCB, Correction of Census Figures of the Economically Active Population and Its Projections to 1980 (Quito: NEPCB, July 1971), Tables 1, 6, 7 and 13. Table B-2t TOTAL, ECONOMICALLY ACTIVE, INACTIVE, EMPLOYED, AND UNEMPLOYED POPULATION, BY MAJOR ECONOMIC BRANCHES, ECUADOR, 1950-1975 (Thousands of Persons) Major Population Categories 1950 1951 1952 195- 195h 1955 1956 1957 1958 1959 Total Population 1,2'0.5 ),28.7 1.h29.9 i,5l.2 1,61.6 ),752.1 1,866.b 1,98.9 L,105.0 h,229.8 Economically inactive 2,167.8 2,231.9 2,102.0 2,72.1 2,bhb.1 2,518.2 2.59.4 2,672.7 2,753.) 2,8'6.2 Economically active 1,062.7 1,09L.8 1,127.9 1,162.1 1,197.5 1,21h.l 1,272.0 1,111.2 l,'51.7 1,191.6 Agriculture 626.1 6hh.0 662.h 681.2 700.7 720.6 7h1.2 762.' 78h.1 806.5 Mining 5.0 h.9 h.7 h.6 h5 h.h h. ) .1 h.0 '.9 Manufacturing 152.! 156.7 161.1 165.7 170.h 175.' 180., 185.5 190.8 196.2 Construction 26.5 27.9 29.' 30.9 12.5 h.2 16.0 '7.9 19.8 h1.9 Electric energy 1.1 1.2 1.4 1.6 1.8 2.0 2.4 2.6 2.9 1.1 Transportation 27.h 28(. 29.6 10.8 )2.0 11.1 M.6 '6.0 '7.b '8.9 Trade 67.9 70.1 72.3 7h.5 76.9 79.1 81.8 8.h 87.1 89.8 Services 112.8 116.0 121.6 127. 1 ,b 1*9.8 16.h 15,).h 160.7 168.3 Unclassified 65.6 h5.5 h5.5 h6.5 b5., h5.2 h5.1 h.0 bb.9 hh.8 Employed population 1,021.6 1,08.9 1,077.0 1,105.7 1,136.2 1,165.6 1,196.6 1,228.7 1,261.6 1,295.h Agriculture 60.8 618.2 631.7 646.1 658.h 673.h 687.7 702.' 717.0 712.1 Mining h.8 L.7 h.6 h.L b.1 h.2 h.1 h.0 3.9 1.8 Manufacturing 15.5 11h9.? 153.6 158.1 162.7 167.5 172.1 177.A 1N2.6 187.8 Construction 25.5 26.9 28.3 30.0 1)J. h 1.0 -AL.7 16.5 8.2 h40.2 Electric energy 1.1 1.2 1.h 1.6 1.8 2.0 2.' 2.6 2.9 1.1 Transportation 25.8 27.6 28.8 0.0 '1.0 '2.1 .5 '4.8 '6.2 -7.6 Trade 65.h 67.4 69.5 71.6 71.8 76.1 78.h 80.8 8n.7 85.9 Services 109.8 112.8 118.h 12h.0 130.1 116.h 1h'.0 1h9.8 157.0 16h.2 Unclassified 40.9 h0.8 b0.7 40.9 h0.7 L00.6 .6O.6 W).6 hO. 40.5 Unemployed population h1.1 645.9 50.9 56.b 6'.1 68.6 75.h 82.5 90.1 98.2 Agriculture 21.1 25.8 10.7 16.1 h2.' h7.2 5?.5 60.0 67.1 7h.h Mining 0.2 0.2 0.1 0.2 0.2 0.2 0.2 0.1 0.1 0.1 Manufacturing 6.8 7.h 7.5 7.6 7.7 7.8 8.0 8.2 8.2 8.L Construction 1.0 1.0 1.0 0.9 1.1 1.2 1. 1.A 1.6 1.7 Electric energy 0.0. 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 M M Transportation 1.6 0.9 0.8 0.8 1.0 1.0 1.1 1.2 1.2 1. ' co Trade 2.5 2.7 2.8 2.9 '.1 .2 .6 .6 '.8 .9 Services 1.0 3.2 3.2 3.h . .L .4 .6 '.7 b.1 Unclassified h.7 h.7 h.8 h.5 L.6 h.6 h6 h.h h.h 2.3 TableB一2一Con七inued(Thousands of Peroons) 抑：。 Table B-2 -- Continued Major Population Catepories 1970 1971 1972 1973 1974 1975 Total population 6,177.1 6,384.2 6,598.3 6,819.5 7,048.2 73284.5 Mconomicall-y inactive 4,236.2 h,377.1 4,522.6 4,672.6 41827.4 4,986.9 Economically active 11940.9 2,007.1 2,075.7 2,146.9 2,220.8 2,297.6 Agriculture 1,o85-h 1,119.2 1,154.1 1,190.2 1,227.3 1,265.8 Mining 4.4 4.5 4.7 h.8 5.0 5.1 ManufacturinR 26o.1 266.6 273.3 280.1 287.1 294.3 Construction 81.0 86.3 91.8 97.7 103.9 110.5 Electric energy 7.9 8.3 8.9 9.4 10.0 10.6 Transportation 62.9 66.0 69.2 72.6 76.2 80.0 Trade 135.4 141.5 147.7 154.3 161.2 168.4 0 271 282 294.6 Services 260.3 .3 .7 307.0 319.9 Unclassified h3.5 43.4 43.3 43.2 43.1 43.0 Emplo red Population 1,765.5 1,830.6 1,903.9 1,977.3 2,053-9 2,133.6 Agriculture 95R.0 993.0 1,029.3 1,067.0 1,106.1 1,146.6 Mining 4.4 4.5 4.7 4.8 5.0 5.1 Manufacturing 250.0 254.0 263.5 270.4 277.6 285.0 Construction 71.8 76.8 82.1 87.9 94-o 100.5 Electric energy 7.5 8.o 8.5 9.0 9.6 10.2 Transportation 58.7 61.7 65.0 68.5 72.1 75.9 Trade 128.8 135.0 141.4 148.1 155.2 162.5 Services 246.9 258.1 269.7 281.9 294.6 308.0 Unclassified 39.4 39.5 39.6 39.7 39.7 39.8 Unemployed population 175.4 176.5 171.9 169.6 166.9 164.0 Agriculture 127.4 126.2 124.8 123.2 121.2 119.2 Mining 0.0 0.0 0.0 0.0 0.0 0.0 Manufacturing 10.1 12.6 9.8 9.7 9.5 9.3 Construction 9.2 9.5 9.7 9.8 9.9 10.0 Electric energy 0.4 0.3 0.4 0.4 0.4 0.4 Transportation h.2 4.3 4.2 4.1 4.1 4.1 Trade 6.6 6.5 6.3 6.2 6.o 5.9 M M Services 13.4 13.2 13.0 12.7 12.4 11.9 x Unclassified 4.1 3.9 3.7 3.5 3.4 3.2 Sources: Nation-d Economic Planning and Coordination Board, Section of Human Resources ProgrammIng, and Mission Estimates. ANNEX B Page 11 IV. Agricultural Statistics Ecuador has two major sources of agricultural statistics: (1) annual reports of agricultural extension workers compiled by the Ministry of Production (TP) and (2) agricultural censuses or surveys conducted by the NIS. Both sources use subjective methods based on the opinions and judgements either of extension workers or farm operators. Crop cutting and similar objective methods are considered to be too expensive in Ecuador and are neither used nor proposed for the 1970s. The quality and quantity of agricultural statistics have significantly deteriorated in the 1960s to a level which hardly meets the minimum data requirements of a rational agri- cultural policy and the national accounts. The data generated by the two alternative sources show gross inconsistencies in levels and trends. The methodology and major results are briefly discussed below. Reports of agricultural extension workers. About seventy agricul- tural extension agents, stationed in most agriculturally important cantons, compile annual (and starting in 1972, also quarterly) reports on the harvested areas, volume of production, and annual average consumer prices for about forty-five agricultural commodities. The agricultural extension workers prepare the estimates on the basis of their knowledge and judgment about the conditions prevailing in their rural areas. In addition, special agricul- tural programs (such as the program on grains and cereals, cotton, bananas, etc.) also provide information which contributes to the estimates. The agents rely on conversations with farmers and their own visual observations which are often affected by subjective judgments. Crop cutting and other objective methods are not used. The agricultural extension workers make the estimates for their cantons and report the data to the provincial offices. The latter aggregate the data by provinces and report the results to Quito. The general Bureau of Planning, Ministry of Production, submits these data to a special committee for a review before releasing them for general use. These are the only available annual time series on agricultural output of Ecuador. They differ significantly for most of the selected major crops, however, from the alternative estimates for 1968 prepared by the NIS on the basis of its 1968 Agricultural Survey (see Table B-4). First National Agricultural Census of 1954. Ecuador conducted its first and most successful agricultural census in 1954. The census covered fifteen of the nineteen provinces (three oriental provinces and the Galapagos Islands were excluded because their agricultural activities were negligible) and the sample included 32,146 of the 356,342 operated farms listed in Ecuador, or 9 percent of the total. 41/ The preparatory work on the 1954 Census began in the second half of 1953, an FAo adviser arrived 41/ The coverage was considerably greater in terms of harvested areas and production because all large farms were included in the sample with a 100 percent certainty. ANNEX B Page 12 in January 1954, the Census was taken in 1954 (except in the Loja Province where it was taken in October 1955 with data collected for 1954 and 1955), and the final results were published in July 1956. The Census covered planted (or sown) and harvested areas as well as production of fourteen major and twenty-two minor crops, livestock, and poultry. For cocoa and coffee, instead of areas, the total number of trees planted and the number of trees of productive age were counted. The analytical part of the Census showed ten tables with sampling errors for most of the important data. A national sample survey of fishermen was also carried out in 1954 as a part of the agricultural census. 42/ The Census was conducted in two phases. The first phase provided a list or a directory of operated farms which were registered on cards con- taining the following basic information: (1) geographic location; (2) identification of the producer; (3) type of operation (crops, livestock, or mixed); (4) area owned and area worked; (5) number of livestock heads and three main crops. In the five coastal provinces, the complete enumeration collected additional information on the number of coffee and cocoa plants and the sown areas to rice and banannas. The second phase consisted of the sample selection, enumeration, and data processing. The Census used a single-stage stratified probability sample, each of the eighty cantons in fifteen provinces constituting independent sampling universes. Farms with twenty or more hectares were used as sampling units while smaller farms with fifteen to nineteen hectares were combined in two-farm clusters and those with less than fifteen hectares, in clusters of four farms. The sampling fractions varied with the size of farms. All large farms with 100 or more hectares were included with certainty, i.e., 100 percent coverage. 43/ All smaller farms were divided into two groups: (1) temperate climate and (2) tropical and subtropical. Each of the above climate groups was in turn divided into three subgroups: (1) crops, (2) livestock and (3) mixed. Finally, each of these subgroups was subdivided 42/ Ministry of Economy, First National Census of Fishermen, 1954 (Quito; General Bureau of Statistics and Censuses. November 1955), 180 pp. 43/ The Census defined "large" farms as those with 100 or more hectares or 100 or more heads of cattle. In certain provinces with many small farms, a "large" farm wasdefined as having 50 or more hectares, while in coastal provinces, large farms included those with 10,000 or more cocoa or coffee plants or 30 or more hectares planted to bananas, or with rice regardless of planted area. More than a quarter of all selected sampling units were large. ANNEX B Page 13 into six strata by size: (1) less than 0.5 hectare, (2) 0.5 to 4.9, (3) 5.0 to 9.9, (4) 10 to 19.9, (5) 20 to 49.9, and (6) 50 to 99.9 hectares. If the number of sampling units within each such stratum was so small that at least two units could not have been selected, such small strata were combined. The sampling fractions declined with the size of farms to 2.5 percent for farms with 0.5 to 4.9 hectares. No data were collected at all for farms with less than 0.5 hectare. The sample selection was based on the systematic random sampling. The reciprocals of probabilities served as blow-up factors in the estimation of totals for each stratum. The latter were aggregated by cantons, provinces, regions, and finally for the nation as a whole. Generally, the sampling errors amounted to less than 4 percent for provinces and to less than 2 per- cent for the national estimates. These sampling errors were most likely smaller than the response errors. The FAO expert recognized this in his concluding statement--"generally, the net errors are probably lower than those which we would have arrived at if we had carried out a complete enumeration." 44/ The response errors were large because, as the FAQ adviser pointed out, the producers did not really have themselves the required data and occasionally they were not inclined to tell the truth. The enumerators and supervisors also failed to adhere strictly to Census instructions, and data processing contributed its share to the overall nonsampling error. Unfortunately, these findings have received little attention in the planning of the subsequent surveys in Ecuador. Following the 1954 Census, the so-called Permanent Office of Agricultural Statistics conducted only two annual surveys, one in 1956 and another in 1957 before discontinuing its activities. A few years later, an attempt to collect detailed data from all farms in Ecuador ended in failure. Second National Agricultural Census of 1961-1962. Disregarding the above timely advice of the FAO expert, Ecuador embarked in 1961 on an overambitious project of canvassing all the operated farms with detailed Census questionnaries. This Census encountered serious difficulties and delays. It was finally conducted in 1962 with the help of Point IV statis- tical experts who also acknowledged that Ecuador "did not place sufficient confidence in a statistical system of inquiry based on a sample census" and therefore, "it was decided that the 1962 Census of Agriculture would be carried out by a complete enumeration, that is, of all operated farms units." 45/ The fallacy of this decision was finally somewhat mitigated by allowing to proceed with a 10 percent sample of all medium and small farms 44/ /Pei-Ching Tang, FAO technical adviserl First National Agricultural Cnsus, 1954 (Quito: General Bureau of Statistics and Censuses, 1956), p. v. 45/ Jose A. Guarderas L., Synthesis of the Technique Used in the Planning, Enumeration, and Tabulation of the Agricultural Census of Ecuador, 1962 (Quito: Point IV, 1963), p. 4. Table B-3t MAJOR AGRICULTURAL CROPS, BY SELECTED PROVINCES, ECUADOR, 1954, 1962 AND 1968 Harvested Areas Yields Production (Thousands of Hectares) (100 Kgs. per Hectare) (Thousands of Metric Tor) 1954 1962 1968 1954 1962 1968 1954 1962 1968 Bananas Bolivar 2.2 1.02 0.8 159.5 174.0 133.2L/ 35.1 17.4 63.4 Carchi 0.2 .. .. 150.0 6 .. 3.0 .. .0 Canar 1.9 32. 4.8 50.5 46.3 132.3P' 9.6 14.8 63.5 Inbabura 0.04 0.ha/ 0 200.0 190.0 .. 0.8 7.6 Loja 4.4 4o6./ 1.9 263.8 171.5 131.12b 116.1 78.9 2.9 Manabi 19.5 18.0 14.6 209.6 160.7 126. b/ 408.7 289.3 187.1 Pichincha 7.2 3.82/ 37.3 139.3 355.5 124.5- 100.3 135.1 464.6 Barley Bolivar 10.6 6.6 9.0 5.2 6.1 4.4 5.5 4.0 4.0 Carchi 4.2 3.3 4.3 7.4 7.6 5.8 3.1 2.5 2.5 Canar 4.7 4.7 6.7 5.7 6.2 4.6 2.7 2.9 3.1 Imbabura 8.9 5.6 6.6 4.9 5.2 5.6 4.4 2.9 3.7 Loja 5.5 3.3 6.7 3.6 3.6 3.1 2.0 1.2 2.1 Manabi .. .. .. .. Pichincha 11.5 13.2 2.7 5.7 7.3 8.0 6.5 9.6 19.8 Coffee Bolivar 3.52/ 4.32/ 7.7 0.3A/ 0.39. 3.5 0.9 1.1 2.7 Carchi ** * .o . . .o .W . Canar .. 0.42/ 2.3 .. 0.2!/ 1.7 . 0.1 0.4 Imbabura .... . . .. .. .0 0. Loja 7.9c/ 11.82/ 7.4 0.24/ 0.24/ 3.4 1.8 2.3 2.5 Manabi 43.12/ 46.121 91.0 0.64/ 0.64/ 3.4 27.0 25.2 30.7 Pichincha .. O.71/ 0.9 0.2d/ 2.2 0.2 0.2 See footnotes at end of table. Table B-3 -- Continued Harvested Areas Yields Production (Thousands of Hectares) (100 Kgs. per Hectare) (Thousands of Metric Ton 1954 1962 1965 1954 1962 1966 1954 1962 1968 Corn Bolivar 12.9 12.2 14.0 5.0 4.2 5.1 6.5 5.1 7.2 Carchi 4.7 6.6 10.1 7.0 5.3 8.1 3.3 3.5 8.2 Caflar 9.9 10.5 22.1 6.7 4.4 5.2 6.6 4.6 11.6 Imbabura 19.3 22.3 22.8 6.8 6.1 7.2 13.1 13.5 16.4 Loja 30.2 36.2 39.4 6.1 5.5 2.6 18.3 19.8 10.4 Manabi 10.4 28.6 104.7 11.6 8.4 4.0 12.1 24.0 42.1 Pichincha 24.5 31.6 23.3 6.9 5.5 7.1 17.0 17.4 16.6 Potatoes Bolivar 2.1 1.6 3.2 24.3 18.1 17.2 5.1 2.9 5.5 Carchi 2.7 3.6 8.4 64.4 28.3 71.8 17.4 10.2 60.3 CaRrar 1.7 2. 9.5 17.1 24.2 50.2 2.9 5.8 47.7 Imbabura 1.4 2.5 2.8 39.3 21.6 73.9 5.5 5.h 20.7 Loja 0.4 0.5 1.8 27.5 8.0 32.8 1.1 0.4 5.9 Manabi *. Pichincha 6.3 8.1 12.6 43.3 52.8 78.7 27.3 42.8 99.1 Paddy- Bolivar 0.4 0.1 .. 12.5 10.0 s 0.5 0.1 6 Carchi 0.2 .. 5.0 .. .. 0.1 . Cafiar 0.2 2.3 9.3 10.0 7.0 2.0 0.2 1.5 1.9 Imbabura 0.2 .. .. 5.0 ,, 00 0.1 ,, Loja 0.6 1.4 1.6 13.3 5.7 0.6 0.8 0.8 0.1 Manabi 4.8 14.6 34.5 12.5 9.7 2.1 6.0 14.2 7.2 Pichincha 0.5 1.2 1.0 6.0 9.2 6.0 0.3 1.1 0.6 See footnotes at end of table. Table B-3 -- Continued Harvested Areas Yields Production (Thousands of Hectares) (100 Kgs. per Hectare) (Thousands of Metric Ton) 1954 1962 1968 1954 1962 1968 1954 1962 1968 Wheat Bolivar 5.9 8.2 8.9 4.9 6.1 5.5 2.9 5.0 4.9 Carchi 15.6 12.9 17.1 8.1 6.8 5.6 12.6 8.8 9.6 Canar 0.7 1.8 6.9 7.1 6.7 6.8 0.5 1.2 4.7 Imbabura 4.1 7.9 12.9 6.1 7.8 9.2 2.5 6.2 11.9 Loja 2.6 2.9 7.7 2.7 4.1 4.9 0.7 1.2 3.8 Manabi . .. .... Pichincha 12.5 17. 26.h 6.3 9. 11.2 7.9 16.3 29. a/ Calculated on the basis of 16 sq. m. per tree. b/ Calculated on the basis of 33 kgs. per bunch as recommended by the FAO, Production Yearbook,1968, Vol. 22 (Romeyl969) p. 760. c/ Millions of coffee trees. d/ Kilograms per tree. / The 1968 Survey estimates of yields and production appear to be underestimated. Sources: CBE, First National Census of Agriculture and I-vestock, 1954 (Quito: Ministry of Economy, July 196). Ministry of Economy, National Census of Agriculture and Livestock, 1961 (separate publica- tions with preliminary data for the provinces of Bolivar, Carchi, Cafar, Imbabura, Loja, and Pichincha; no facts of publication are available). NEPCB, National Census of Agriculture and livestock 1961, Preliminary Data for the Province of Manabi. (No facts of publication are available). NEPCB, National Survey of Agriculture and Livestock, 1968 (Quito: Division of Statistics and Censuses, November 1969). ANNEX B Page 17 which were covered with a long or extended questionnaire (boleta ampliada). this long form covered also all large farms. A short form (boleta reducida) covered completely all the other farms. The short questionnaire was far from being just a means of securing a statistical frame for a probability sample. it contained six sections with several items each: (1) identification of the farm and the producer; (2) land tenancy; (3) land use in 1961; (4) crops harvested area or number of plants, and production for 1961 (data on eleven most common crops in mountain, coastal, and oriental provinces); (5) livestock and poultry; (6) production of milk, wool, and eggs. The long form contained a larger number of items in each of the above sections as well as additional sections on the six breeds of cattle, employment, motive power, etc. The inadequately trained and overburdened enumerators resorted to all kinds of short-cuts and expendiencies, including a partial or complete filling out of questionnaires prior, subsequent to, and sometimes irrespective of interviews. The enumeration extended over an eight-month period and to some extent coincided with the preparation and taking of the Population and Housing Census in November of 1962. The funds available for the Agricultural Census were insufficient to provide for an adequate field supervision and sub- sequent data processing. The sample was too large to reduce the burdens appreciably to a level where meaningful data would be collected and processed. The processing of the 1961-62 Agricultural Census remained limited to only a few major characteristics, such as the distribution of farms by size and a few provinces. The NEPCB General Bureau of Statistics and Censuses published the Census results for Manabi 46/ and the Department of National Censuses of the Ministry of Economy published them for at least six other provinces 47/ before further data processing and publication were discontinued. Gross inconsistencies and other deficiences in the data did not warrant a fur- ther processing, and the published results could not have been made useable. 48/ 46/ National Agricultural Census 1961, Preliminary Data for the Province of Manabi (Quito: GBSC, no data). 47/ It covered the provinces of Bolivar, Canar, Carchi, Imbabura, Loja, and Pichincha. Cf. National Agricultural Census 1961, Preliminary Data for the Province of Bolivar (Quito: Ministry of Economy, Department of National Censuses, no date). 48/ FAO and IASI, Third Session of the Subcommittee on Improvement of National Statistics, Washington, D.C., September 19-24, 1966, Livestock and Live- stock Products Statistics in the American Region, Part I, Statistical Organization, Methodology, Concepts, and Definitions Used (Washington, D.C. IASI, 1966), P. 41. ANNEX B Page 18 A comparison of preliminary data on selected crops published for seven provinces with the corresponding crops and provinces of the 1954 and the 1968 surveys showed that the 1962 data are generally consistent with the 1954-68 levels and trends, notwithstanding the earlier findings discussed above (see Table B-3). It is possible that the 1962 data withheld from publication would have fit less neatly into the 1954-68 picture. At any rate, the available data support the general conclusion that the 100 percent coverage is not necessarily superior to sampling results. National Agricultural Survey of 1968. The NEPCB has maintained a statistical frame of large farms since 1954 which was updated in 1961, 1962 and 1964. In January 1968, the NEPCB revived the permanent Committee for the Improvement of Agricultural Statistics. This committee consisted of the NEPCB, CBE, National Development Bank, Ministry of Agriculture and Livestock, and an FAO adviser on agricultural statistics. The Committee recommended and the NEPCB Division of Statistics and Censuses (which preceded the NIS) conducted a 3 percent sample survey of agriculture in 1968 in all twenty provinces, including the Galapagos Islands. The sample design and the sample selection differeed considerably from those used by the 1954 Census. Generally, the 1968 Survey used a wider definition of "large" farms. It limited the complete coverage to very large farms with 1,000 or more hectares, taking a 20 percent sample of the farms with 500 to 1,000 hectares and a 10 percent sample of those with 100 to 500 hectares. The medium and small farms were covered by a two-stage area sampling based on parachias and the 1962 Population Census blocks of about forty households each. Within each province 20 parochias were first selected by a simple random sampling with replacement to keep the expansion factors constant and the cost of travel low. This procedure yielded 12 to 19 parochias selected in each province or a total of 224 out of 677 parochias in the mountain and coastal provinces. Within each parochia, all areas (or census blocks with forty households) were listed and also selected with equal proba- bilities (that is, sampling with replacement). A correspondingly larger number of areas were taken from parochias which were selected several times. Thus, the number of selected areas within each province was brought up to twenty. Within the selected areas, all farms were canvassed except those listed separately as "large." The latter were surveyed separately as indicated above. The sample selection in the three oriental provinces was based on probabilities proportional to population, and the Galapagos Islands enjoyed a complete enumeration of all farms. The estimation of totals was based on the reciprocals of probabilities (adjusted for nonresponse) which served as blow-up factors for large farms. For medium and small farms, the estimation of totals proceeded in five steps on the basis of sampling areas. 49/ A comparison of the results of the 1968 49/ See National Agricultural Survey 1968 (Quito: Division of Statistics and Censsuses, 1969), pp. X-xi. ANNEX B Page 19 Survey with those of the 1954 Census and with the estimates of the Ministry of Production based on the reports prepared by the agricultural extension workers suggests that the 1968 Survey may have missed the mark for several crops by a wide margin of error (see Table B-4). Nevertheless, the FAO has given preference to the 1968 Survey over the alternative sources (see Table B-5) for some of its estimates. For such important crops as bananas, beans and potatos, the Survey showed lower output (mostly due to lower average yields) than the data reported by the Ministry of Production. The diferences in the areas--sown, planted, or harvested--are also startling. The planted area reported by the Survey is twice as large for rice and four times as large for cotton as the corresponding harvested areas estimated for 1968 by the Ministry of Production. On the other hand, the areas for sugar cane are only half as large and those under beans are only one third of those reported by the agricultural extension workers (see Table B-4). The yields of rice are particularly low: the Survey gives a lower yield for paddy than the Ministry of Production reports for hulled rice. In comparison with the 1954 Census, most planted areas reported by the 1968 Survey increased (particularly for bananas, corn, cotton, potatoes, rice and sugar cane), while most average yields declined (except bananas, potatoes and wheat). According to the agricultural extension workers, the yields have also declined, although less markedly than the Survey data showed. This decline in yields has usually been attributed to a relatively small invest- ment in agriculture. In addition, the expansion of planted areas may have brought less fertile lands under cultivation. From a statistical point of view, however, it must be remembered that no objective methods have ever been used in Ecuador for measuring the agricultural yields. It must be borne in mind that all data, including the census results, are based on the verbal statements of farmers about their past or expected harvests. Whether inten- tionally or inadvertendly, these subjective judgments are generally quite unreliable, particularly with respect to output and yields. Although area may be more difficult to reveal to some extent an atttempt to understate the volume of production and the average yields. FAO and USDA series for Ecuador. The FAQ agricultural experts have generally used for most of the 1960s the harvested areas and the yields reported by the agricultural extension workers of the Ministry of Production (see Table B-6). Starting in 1968, however, the FA0 has generally stopped using the Ministry of Production data, giving some preference to the 1968 Survey (barley, corn, etc.) and coming out with estimates of its own for 1968 and more recent years. These FAO estimates appear to be based on inter- national and intertemporal comparisons. For paddy, the FAQ cut the area in half and tripled the average yield which resulted in a significantly higher production than reported by any other source. For banans, the FAQ has the smallest area and a yield somewhat higher than that of the 1968 Survey (see Table B-5). To the extent that the FAO had significantly changed its ANNEX B Page 20 estimates in 1968, there may be a break in its series which have been generally raised in 1968 and then continued at the higher levels (see for example area for corn in Table B-6). On the whole, the FAO estimates for recent years follow levels and trends which are distinctly different from those of the Ministry of Production (see Table B-6). The USDA agricultural production data for Ecuador generally differ from all the other sources discussed above. Some of the USDA estimates are very crude and remain at the same level for many years (e.g., "exportabletype" banana production, harvested areas for barley and corn) while others fluctuate erratically (e.g., cotton yields). Generally, the USDA production data tend to show a lower and slower growth than the other sources. The details of the USDA methodology for Ecuador estimates are not readily available. Proposed National Program for the Improvement of Agricultural Statistics. The need for better agricutlural statistics has been recognized by the Government of Ecuador and the IBRD. 50/ The proposed 1973 Population Census offers an opportunity to compile a statistical frame for an agricultural census and the surveys which are now planned for 1974 and subsequent years. There is, however, no apparent attempt to combine the 1973 Population Census with the proposed 1973 National Register of Farms. Instead of combining the two related field operations, the NIS plans to carry out first the registration of all farms during a six--month period (June - November 1973) immediately preceding the taking of the population census in November of 1973. The 1973 National Register of Farms. This Register proposes to collect the following information from the estimated 733,000 farms: (1) Name and location of the farm; names and addresses of producer and owner; (2) land use: areas cultivated, fallow, pastures, forest, etc. (3) tenancy conditions: number of parcels, etc; (4) crops: sown area of four major crops; (5) livestock: heads of cattle, sheep, pigs, and poultry. The Register proposed to group all twenty provinces and the Galapagos Islands into nine zones with a rather unequal distribution of farms which ranges from 131,602 farms for zone VIII to only 279 farms for zone IX (see Table B-5). The 310 enumerators covering, on the average, 15 farms per day are expected to register all 733,000 farms within a six-month period. The 50/ Article 5 of the IBRD loan contract No. 501-EC, signed in June 1967, stipulated that Ecuador would carry out a study of the livestock industry. Ecuador complied in part with this commitment by carrying out the 1968 Survey. Plan for the Establishment of the National System of Agricultural Statistics (Quito: NEPCB, 1971). Table B-h: SURVEY DATA AND AGRICULTURAL EXTENSION WORKERS' ESTIMATES OF MAJOR AGRICULTURAL CROPS, ECuADOP, 1'954 ANT) 1968 Area eroduction (Thousands of Hectares) (100 Kgs. per Hectare) (Thousands of Metric Tons) Selected NIS M NIS MP NIS MP Major 1951 1968 19 1956 16 1968 1954 1968 1968 Crops Har- Har- Hr-ar- Planted vested Planted vested Planted vested Planted vested Bananas 160 115 2081a 195 108.7 151.2 128.2 200.9 1,739b/ 2,6670/ 3,920 Plantains 39 46/ 38 .. 138.5 94.8 127.0 540/ 436d/ 484 Barley 124 119 123 135, 4.8 4.9 5.0 5.6 59 62 65 Beans .. 22 29 86- .. 2.9 2.8 4.1 7 8 35 Cocoa 141f 115L/ 252a/ 253 0. 0:. h 1.8 2.0 29 45 50 Coffee 107T/ 839/ 178af 191 0.3/ . 3.0 3.3 35 53 64 Corn .. 183 383 255 .. 6.1 4.6 5.1 111 176 129 Cotton (seed and lint) .. 6 83 20 .. 3.3 2.2 6.6 2 18 14 Potatoes 42 37 72 49 34.0 38.6 51.0 104.0. 143 367 511 Rice (paddy) 62 51 284 112 13.7 16.7 5.2 5.81/ 85 148 65V Sugar cane 50 41 86a/ 122 .. .. .. 810.0 .. .. 10 Wheat .. 57 118 79 .. 6.0 8.1 10.4 34 95 83 a/Productive age plantations only. U/Calculated on the basis of 28 kgs. per bunch, as recommended by the FAO for Ecuador before 1964 in Production Yearbook, 1968, Vol. 22 (1969), p. 760. c/Calculated on the basis of 33 kgs. per bunch, as recommended by the FAO for Ecuador after 1964 in the source mentioned above, d/Calculated on the basis of 20 kgs. per bunch, as specified by the Ministry of Production in Harvested Areas and Agricultural Production Estimates, 1969 (Quito: General Bureau of Planning, Dept. of Statistics, no date) p. 9. e/Green and dry beans. f/Total number of trees (in millions). g/Trees of produetive age (in millions). h/Kilograms per tree. i/Hulled rice. Sources: CB, First National Census of Agriculture and Livestock 1954 (Quito: Ministry of Economy, July 1956). cw NEP7B, National Survey of Agriculture ad Livestock 1965 (Quito: Division of Statistics and Censuses, x November 1969). Ministry of Production, General Bureau of Planning, Statistics Dept. (unpublished - 1 estimates for 1968). ANNEX B Page 22 Table B-5t OFFICIAL GOVERNMENT AND FOREIGN EXPERT ESTIMATES OF MAJOR AGRICULTURAL CROPS, ECUADOR, 1968 Alternative Harvested Area Yields Production Sources (Thousands (100 Kgs. per (Thousands of of Hectares) Hectare) Metric Tons) Bananas MP 195 200.9 3,919 NIS 20Brz 140.0 2,904 FAO 180 150.0 2,693 USDA n.a. n.a. 2,500 Barley MP 135 5.6 65 NIS 123l/ 5.0 62 FAO 123 5.0 62 USDA 107 10.3 110 Coffee MP 191 3.3 64 NIS 204/ 2.6 53 FAO 178 3.0 53 USDA n.a. n.a. 60 Corn MP 255 5.1 129 NIS 383%/ 4.6 176 FAO 383 4.6 176 USDA 210 8.6 180 Cotton (Includes Seed and Lint MP 20 6.6 14 NIS 8)3W 2.2 18 FA0 23 7.4 17 USDA 21 4.5 9 Rice (Paddy) M? 112 6 NIS 28 14 FAO 135 16.1 21 USDA 60 21.2 1276 - Productive age plantations only b/ Sown area c/ Hulled rice c/ Paddy Sources: Ministry of Production, General Bureau of Planning, Statistics Department (unpublished estimates for 1968). FAO, Production Yearbook 1970, Vol. 24. (Rome: 1971). NEPCB, Nati nal Survey of Agriculture and Livestock, 1968 (Quito: Division of Statistics and Censuses, November 1969). US Department of Agriculture, ERS, Indices of Agricultural Production for the Western Hemisphere, 1962-1971 (Washington, D.C.: USDA, March 1972). Table B-6: MINISTRY OF PRODUCTION AND FAO ESTIMATES OF MAJOR AGRICULTURAL CROPS, ECUADOR, 1960-1969 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 Alternative Harvested Areas (Thousands of Hectares) Sources Bananas MP 115 114 i1 122 169 210 187 203 195 190 FAO 114 111 122 169 210 187 203 180 180 Barley MP 118 93 151 165 164 157 143 144 135 126 FAO 93 151 165 164 157 143 144 123 125 USDA 118 83 101 110 105 105 107 107 107 110 Coffee MP 163 165 152 158 164 166 218 208 191 214 FAO . 158 158 166 218 208 178 Corn MP 209 228 212 247 300 307 267 364 255 291 FAO 209 228 212 247 300 307 267 364 383 370 USDA 210 210 210 200 210 210 210 212 210 215 Cot+on (Includes Seed and Lint) MP 15 20 24 21 23 27 24 24 21 22 FAO 18 20 24 21 23 27 24 24 23 20 USDA 18 20 21 14 22 27 24 18 20 20 Rice (Paddy) a/ MP 91 95 112 113 109 103 111 114 112 92 USDA 91 95 110 110 104 90 100 105 60 100 a/ Ministry of Production data compiled from the reports of agriculture extension workers. Table B-6 -- Continued 1960 1961 1962 1963 1964 1965 1966 1967 1966 1969 Production (Thousands of' "etric Tons) Bananas vP 2,22 2,204 2,308 2,296 3,037 3,067 2,744 4,355 3,919 3,870 FAO 1,790 2,204 2,109 2,098 3,300 3,304 2,956 3,163 2,693 2,700 USDA 2,075 2,050 2,115 2,200 2,300 2,400 2,500 2,500 2,500 2,500 Barley MP 90 76 105 121 80 92 77 81 76 78 FAQ 78 70 106 130 81 93 78 82 62 62 USDA 91 113 83 97 89 96 95 10 110 100 Coffee 45 48 53 55 46 65 74 66 64 56 FAO 41 33 S4 43 50 66 7L 67 53 72 USDA 45 51 48 42 39 62 58 70 60 42 Corn "rF) 173 157 137 190 127 189 174 228 129 222 IAO 160 153 138 192 129 191 177 231 177 210 USDA 160 153 150 130 160 170 175 185 180 210 Cotton (Includes Seed and Lint) v 7 11 11 9 14 18 18 16 14 24 rAO 9 10 11 9 14 19 17 16 17 17 USDA 6 8 10 9 14 17 6 6 9 9 ice (Paddy) S 93 112 103 105 91 86 111 111 65 F3 FAO 186 163 187 191 167 157 185 173 218 288 USDA 175 203 209 211 161! 173 204 182 127 220 a/ Ministry of Production data compiled from the reports of agriculture extension workers. Sources: "inistrv o( Production, 'Iarv,ested Areas and Agricultural Production Estimates, 1969 (Quito: eneral Planning lureau, tatistics Department, no date) and unpublished estimates for 1960-68. 'AD, Production Yearbook Vols. 16, 17, 22,and 24 (come, selected years, 1963-1971). U.S. Department of Agriculture, E>LS, Indices of Agricultural Production for the _-estern Hemisphere 1962-1971 (W.ashington, D.C.: USDA, arch 1972). ANNEX B Page 25 estimated budget for this Register amounts to about 22 million sucres, including about 15 million for the field operations (adjusted 10 percent for unforeseeable expenses and 8 percent for inflation). The Register is scheduled to be published in June 1974. The 1974 National Agricultural Census. This Census is supposed to canvass 10 percent (or 73,000) of the farms to be listed by the 1973 Register. The enumeration is also supposed to take six months (June - November, 1974) and the publication of results is planned for Arpil - September 1975. The total cost of this 10 percent samnle survey is estimated at about 11 million sucres or only half as much as that of the Register. A total of 106 enumerators, fifteen supervisors, and seven zonal chiefs would be required to cover 73,000 farms, that is, about one-third the enumerators needed for the Register. The sample design and the questionnaire proposed for the 1974 Census follow closely those used by the 1968 Survey except that the 1974 Census will cover 10 percent and the 1968 Survey covered only 3 percent of all farms. Accordingly, the 1974 Census will cover all large farms (about 13,000) and an area sample of medium and small farms. About 12,000 primary sampling units (PSU's) with 40 to 80 farms each are stratified by their greographic location, total areas, type of crops and the number of cattle heads. A total of 1,200 PSU's are to be selected by simple random sampling and all farms are to be canvassed within each selected PSU. The questionnaire contains fourteen groups of items, including the following: (1) farm location and number; name and address of producer; name and address of owner; land use; tenancy conditions, etc.; (2) annual crops: sown area, harvested area, and production obtained; (3) semipermanent and permanent crops: planted area, area occupied by trees of productive age, nonproductive age, number of dispersed trees and plants, and production obtained; (4) Cattle: stocks, by sex and age; births by sex; deaths by sex; total number of miling and dry cows; and the production and uses of milk; (5) sheep (similar items as for cattle except for milk); (6) pigs (similar items as for sheep); (7) stocks of agricultural machinery (owned and leased) used in operations; (8) types of energy used in cultivation and harvesting; ANNEX B Page 26 (9) stocks of agricultural machinery (owned and leased) used in operations; (10) area irrigated and irrigation systems, area fertilized and quantity of fertilizer used, etc; (11) use of agricultural production, by crops; (12) agricultural employment by sex, age, and status; (13) credit and its use; (14) technical assistance. The data refer to areas harvested in 1974, including those sown in 1973 and exclduing those to be harvested in 1975. The stocks are recorded as of the date preceding the enumeration, and the production relates generally to the year preceding the enumeration day. The employment refers to the week preceding the enumeration. Annual agricultural surveys. These surveys are scheduled to be conducted every year starting in 1975. The sample design of this survey is largely patterned after the 1968 Survey. it will cover completely all very large farms with 1,000 or more hectares, 5 percent of those with 500 to 999 hectares, and 10 percent of farms with 100 to 499 hectares, that is, a total of 1,800 or about 14 percent of the estimated 13,000 large farms. It will also cover 3 percent or about 21,600 farms of the medium and small farms. The estimated cost of this annual survey is 3.5 million sucres or three times less than the estimated cost of the 10 percent survey in 1974 and six times less than that of the 1973 Register of farms. The estimated 24,000 farms to be included in the sample could be covered by only fifty enumerators within four months. The results would be published in April following the year of enumeration. The proposed national register of farms, the 1974 Census, and the ensuing annual agricultural surveys go a long way towards remedying an almost intolerable absence of meaningful agricultural statistics in Ecuador. How- ever, the continued reliance on the statements of farmers about their past and expected production introduces a weak link in the chain of improvements. Ecuador needs more objective methods for determining its agricultural pro- duction, in particular the yields. Crop cutting and similar objective methods should seriously be considered. The cost of the Register (which is six times higher than that of the 3 percent annual surveys) could be considerably reduced and quality improved if the field work on the Register were combined with the 1973 Population Census. The efficiency of the sample design could also be improved by increasing the sample size in zones VI and IX and by reducing it in other zones as necessary (see Table B-7). ANNEX B Page 26a Table B-7: NATIONAL AGRICULTURAL REGISTER, CENSUS, AND ANNUAL SURVEY, ECUADOR, 1973-1975 Number of Farms Covered b Number of Enumerators-/ Zone Number of 1973 1974 1975 1973 1974 1977 Provinces Register Census Survey Register Census Survey I 3 99,986 9,958 3,271 49 17 7 II 4 112,429 11,198 3,678 57 17 8 III 3 103,456 10,303 3,385 49 17 8 IV 2 106,076 10,564 3,470 49 17 8 V 2 70,410 7,018 2,306 33 9 6 VI 1 14,147 1,4o9 463 8 8 1 VII 1 94,555 9,417 3,094 49 17 7 VIII 3 131,602 13,106 4,3o5 65 25 12 IX 1 279 28 28 2 1 1 Total 20 733,000 73,000 24,000 361 128 58 a/ Includes zonal chiefs and supervisors. Source: Committee for the Improvement of Agricultural Statistics, Plan for the Establishment of National Agricultural Statistics (Quito: no date), pp. 6, 19, and 29.  ANNEX B Page 27 V. Selected Nonagricultural Statistics Mining and quarrying. The NIS collects basic statistics from large and medium mining and quarrying establishments (with 5 or more employees for censuses and with 7 or more employees for the annual surveys). It has conducted two decennial censuses (in 1955 and 1965) which were followed by annual surveys in 1956-59, 1962-64, and in 1966-71. The 1969 Survey covered only seven mining establishments with a total of 886 employees. The General Bureau of Geology and Mines (GBGM), Ministry of Natural Resources and Tourism, also collects data on the gross value of production for about half a dozen of licensed mining companies which report some produc- tion. The value of metal ore mining output shown by the NIS and GBGM is roughly comparable except for a few selected years (see Table B-8). for the other mining industries, comparable data are not readily available. The relative importance of petroleum and other nonmetal mining and quarrying is considerable (see Table B-8). A more complete coverage of small quarrying establishments would most likely increase the share of stone quarrying, clay, and sand pits. Manufaturing. Ecuador has conducted annual surveys of manufacturing almost every year since 1955, including three so-called censuses in 1955, 1959-60, and 1965. They covered neither the complete universe nor were they based on a probability sample which could have been used for estimating the totals and averages. The 1955 Census covered about 1,000 establishments with two of the following three characteristics: (a) five or more workers; (b) 100,000 or more sucres annual production; (c) 200,000 or more sucres fixed assets; Establishments with two of the above characteristics were selected from a list of 18,982 establishments. 51/ The NEPCB conducted a census or a survey of handicrafts and small industrial establishments in 1959-60, although the methodology and the results of this survey are not readily available. 52/ The 1965 Census of Manufacturing covered all large (2,961, includ- ing 455 which failed to respond) establishments and about 7 percent (1,476 of the 21,371) small establishments listed. The "large" establishments 51/ First Industrial Census 1955 (Q-ito: June 1957), pp. v-vi. 52/ Sed Sources of Information and Procedures for Estimating National Income of Ecuador, (Quito: CBE, 1964), p. 5 and p. 12. Table B-8: MINING AND QUARRYING, GROSS VALUE OF PRODUCTION AND VALUE ADDED, ECUADOR, 1958-1969 Mining Industries and Data Sources 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 Gross Value of Production (Millions of Sucres) Metal Ore Mining: GBGM /a 12.2 13.5 10.9 11.6 18.2 21.2 19.1 13.5 14.4 14.4 20.6 19.5 NEPCB 13.6 15.9 15.9 .. 18.5 20.7 19.4 20.2 14.5 14.6 .. 19.4 Value Added (Millions of Sucres) Total Mining and Quarrying 35.3 41.9 47.5 .. 29.5 31.5 32.8 38.4 33.3 34.1 .. 60.4 Metal Ore Mining 9.1 11.7 11.7 .. 12.3 14.3 12.8 13.5 9.0 9.5 .. 12.3 Crude Petroleum and Natural Gas 25.2 28.1 28.5 .. 5.8 6.3 6.4 7.6 5.7 3.5 .. 14.2 Stone Quarrying, Clay and Sand Pits 1.0 2.1 7.3 .. 11.4 10.9 12.3 15.3 18.6 21.1 .. 28.1 Other .. 1.3 2.0 .. .. .. 5.8 Value Added (Percent of Total) Total Mining and Quarrying 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Metal Ore Mining 25.8 27.9 24.6 .. 41.7 45.4 39.0 35.2 27.0 27.9 .. 20.4 Crude Petroleum and Natural Gas 71.4 67.1 60.0 .. 19.7 20.0 19.5 19.8 17.1 10.3 .. 23.5 Stone, Clay and Sand 2.8 5.0 15.4 .. 38.6 34.6 37.5 39.8 55.9 61.9 .. 46.5 Other .. .. .. .. .. .. 4.0 5.2 .. .. .. 9.6 a General Bureau of Geology and Mines which was the General Bureau of Mines and Hydrocarbon before 1970. Sources: NEPCB, Economic Indicatorso Vol..II, No. 4 (July 1970), H-11. Ministry of Industry and Trade, Mining Statistics, 1932-1966 January-June (Quito: Ministry of Industry and Trade, Novenber 1966) and Mining Statistics for 1967-1969. NIS, Manufacturing and Mining Survey 1969 (Quito: NIS, 1971), Table 1, p. 1 co W ANNEX B Page 29 were defined differently than by the 1955 Census. In 1965, the large establishments referred to either those with 5 or more workers or to those with one to four workers and with a monthly income of 10,000 sucres or more. There is no readily available information to what extent this sample was a probability sample and what methods were in fact used in estimating the totals. It appears that the Census compiled the frame by a direct canvass of provincial and cantonal capitals. The preparation of the frame in rural areas was left to local authorities. An estimate of establishments omitted from the list could not have been made. 53/ Nevertheless, the Census estimated that the 2,961 large establishnents accounted for about 12 percent of all establishments and about 90 percent of the total production. 54/ The annual surveys of manufacturing have covered fewer establish- ments than the censuses. The 1969 survey covered 1,027 of the 1,170 selected from about 1,400 listed establishments with either seven or more workers or 180,000 or more sucres annual production. 55/ The frame for these surveys is largely based on the incomplete membership lists of the provincial chambers of industry. As a result of their more restricted coverage, the annual surveys do not provide information which can be compared with the censuses, and the latter are also inconsistent with each other. Moreover, in times of relative prosperity, the coverage is enlarged to include all the establish- ments with the temporary workers and additional production, while in lean years, the decline is exaggerated as establishments are deleted from the survey because their production declines. Thus, the survey results fail to measure trends as well as the level of manufacturing activity. The addition of a few workers in each of the small establishments may make them eligible to be covered by the survey. This tends to exaggerate growth. Administrative sources of statistics on manufacturing. Under a special Development Law, the Ministry of Production promotes about thirty to forty industrial enterprises, half of which withdraw and are replaced with another contingent every year. The employment of these enterprises amounts to about 2,000 workers or about 5 percent of the total covered by the NIS surveys and 1 percent of the total manufacturing. The value added reported by these enterprises to the Ministry of Production amounts to about 200 million sucres or about 5 percent of the total covered by the NIS surveys and about 3 percent of the value added estimated in the manufacturing in- dustry as a whole (see Table B-9). These data are not suitable for esti- mating the level and trends of economic activity in manufacturing as a whole. 53/ Second Census of Manufacturing and Mining, Vol. I (Quito: NEPCB, January 1969), p. ix. 54/ Ibid., p. x. 55/. Survey of Manufacturing and Mining 1969 (Quito: NIS, 1971), p. iii. Table B-9: MANUFACTURING EMPLOYMENT AND VALUE ADDED, COMPARISON OF ALTERNATIVE ESTIMATES, ECUADOR, SELECTED YEARS 1962-1969 Sources of Indicators 1962 1965 1966 1969 1962 1965 1966 1969 aplo ent Number of Persons Raployed Percent of Total Manufacturing Bmployment Population census projections /a 213,500 230,000 235,600 253,800 100.0 100.0 100.0 100.0 Manufacturing census 7,629.. 20.7 Manufacturing survey 36,409 .. 38,253 45,707 17.0 .. 16.2 19.4 Large-scale manufacturing enterprises Registered with the MP: 3,077 4,440 1,976 2,445 1.4 1.9 0.8 1.0 Old registration /b 2,029 2,308 1,244 1,800 0.9 1.0 0.5 0.7 New registration r 1,048 2,132 732 645 0.5 0.9 0.3 0.3 yalue Added Millions of Current Sucres Percent of Manufacturing GDP Manufacturing GDP 2,276 3,282 3,488 4,680 100.0 100.0 100.0 100.0 Manufacturing census .. 2,059 .. .. .. 62.7 Manufacturing survey 1,225 .. 2,069 3,095 53.8 .. 59.3 66.1 Large-scale manufacturing enterprises Registered with the MP: 95 244 78 188 4.2 7.4 2.2 4.0 Old registration /b 63 82 28 38 2.8 2.5 0.8 0.8 New registration 7c 32 162 50 150 1.4 4.9 1.4 3.2 /a NEPCB projections based on economically active population reported by the 1962 Population Census. b5 Includes enterprises which reported data for the preceding year to the Ministry of Production. Te Includes enterprises which started reporting data during the specified year to the Ministry of Production. Sources: NEPCB, Second Census of Manufacturing and Mining 1965 (Quito: NEPCB, January 1969), p. 11. NEPCB, Manufacturing Survey 1962 (Quito: NEPCB, August 1964), p. 1. 1: NEPCB, Manufacturing and Mining Survey 1966 (Quito: NEPCB, no date), p. 2. NIS, Manufacturing and Mining Survey 1969 (Quito: NIS, 1971), p. 1 Ministry of Production, Bulletin of Statistical Information 1957-1969 (Quito: General Bureau of Manufacturing Enterprises, Statistical Section, no date), Table 18. NEPCB (unpublished estimates prepared by the Section of Human Resources Programming in Septeber 1970). ANNEX B Page 31 The General Bureau for the Promotion of Handicrafts and Small- Scale Industries, Ministry of Production, has some data on a few handicraft and small-scale manufacturing establishments 56/, but these also account for a small share of the total, their universe is changing and they provide no basis for estimating either the totals or meaningful averages for the industry as a whole. Several other agencies collect miscellaneous informa- tion from small manufacturing establishments with which they are concerned-- i.e., the provincial chambers of handicrafts and their national federation, the Ecuadorian Vocational Training Service (SECAP), the Ecuadorian Trade Organization for Handicrafts Products (OCEPA), the Ecuadorian Social Security Institute, the General Bureau of Cooperatives, the Credit Section for Handi- crafts of the National Development Bank and numerous provincial and local agencies. These data cannot be used for estimating the totals of the industry as a whole. the names and addresses of establishments may be useful, however, for checking and updating the statistical frames. Indexes of industrial production (IP). The CBE prepared an annual IIP for 1950-60 which included all two-digit manufacturing industries although small-scale manufacturing and handicrafts were excluded. The NEPCB prepared a parallel IIP for 1955-1962 which covered all two-digit manufactur- ing industries except the primary metals (34), nonelectrical machinery (36), electrical machinery and equipment (37), and transport equipment (38). In 1963, the CBE again assumed the responsibility for preparing an IIP with a mofified coverage: excluding furniture (26), primary metals (34), and nonelectrical machinery (36). The CBE compiled this index for 1963-68--the latest IIP available for Ecuador (see Table B-10). All three production indexes show different rates of growth because they relate to different industries, size of establishments, and basic sources. The CBE has conducted special surveys to collect data for the IIP's, while the NEPCB has relied primarily on its annual surveys of manufacturing. In both instances, the IIP's relate to large-scale estab- lishments with a coverage significantly different than that for which the value of production is readily available at current prices. Although implicit price deflators cannot be easily derived from IIP's, the produc- tion indexes are nevertheless useful in estimating (at constant prices) some of the GDP components for two-digit manufacturing industries. Indexes of industrial employment and wages. Using the statistical frame of the 1955 Census of Manufacturing and Mining, the NIS has conducted quarterly surveys of the largest 500 establishments; it has collected monthly data on employment and wages since 1956. The 1955 list has not been updated and the data refer to the same grouo of establishments selected in 1955. Therefore, these indexes may be somewhat more meaningful than the indexes of 56/ General Bureau for the Promotion of Handicrafts and Small-Scale Industries, Statistical Abstract of Handicrafts and Small-Scale Industries, 1965-1968 (Quito: Ministry of Production, September 1969), 163 pp. ANNEX B Page 32 Table B-10: INDEX OF INDUSTRIAL PRODUCTION, COMPARISON OF ALTERNATIVE ESTIMATES, ECUADOR, SELECTED YEARS 1957-1966 (1965-100) Alternative Sources 1957 1960 1963 1964 1966 Manufacturing GDP 60.6 73.1 81.9 95.6 101.0 CBE index .. .. 74.4 89.7 108.9 NEPCB index 43.5 55.4 72.4 87.2 104.9 Large-scale manufacturing enterprises index 54.5 57.1 80.5 91.2 100.4 Sources: CBE, Memoria 1969 (Quito: CBE, no date), Statistical Annex, pp. 12 and 121. NEPCB, Economic Indicators, Vol. II, No. IV (July, 1970), H-11. NEPCB (unpublished estimates of a deflated value added index for large- scale manufacturing industries, 1963-1970, based on CBE data and the NIS annual industrial surveys). ANNEX B Page 33 industrial production which refer to a changing universe of establishments. The monthly employment and wage data could be used for updating the production indexes. Unfortunately, the quarterly survey results become available only after excessive delays. At the beginning of 1972, the latest available data related to 1968. 57/ The 1969 and more recent quarterly surveys have not been published because some establishments have still not submitted the required information, and the NIS is not prepared to make estimates for these delinquents. Construction statistics. For the public sector, the CBE, NEPCB, and the Department of Public Works compile some expenditure data on public construction. Without reviewing these data in detail, it appears that they may cover different public enterprises, have inappropriate classification of current and capital expenditure, and relate to expenditure rather than to the volume of construction put in place. For the private sector, the 1962 Census of Housing provided some crude benchmark data. The First Census of Construction (conducted in 1966) collected some data from large construc- tion enterprises rather than the volume of surveys (conducted in 1967-71) have collected data on construction permits issued, the declared value of construction, number of rooms, dwelling units, and floor space. These are not comparable to the 1962 and the 1966 censuses and they cannot be used for estimating the totals and averages for the construction industry as a whole. Nevertheless, the statistics of issued urban construction permits are useful for making crude estimates of the volume of construction activity in urban areas. Ecuador has no information about private construction in rural areas. Transportation statistics. Ecuador has no comprehensive statistics on the volume of frieght and passenger traffic carried by all modes of transport. The Great Colombian Merchant Fleet Company compiled some statistics on maritime traffic for 1950-57, while the State Railways Agency compiled statistics on railroad traffic for 1950-58--although apparently no data could have been obtained from these sources after 1958. River and road traffic statistics have also not been available in the 1950's. 58/ Starting in 1965-66, the Division of Statistics and Censuses of NEPCB initiated an annual publication of secondary transport statistics. 59/ This compendium contains detailed data on registered motor vehicles, the number of highway accidents, railroad freight and passenger traffic, number of domestic passengers originating at river and sea ports, number of interna- tional passengers and tons originating and terminating in Ecuadorian ports, 57/ Statistics of Labor, Indexes of Employment and Wages (Quito: NEPCB Division of Statistics and Censuses, November 1969), 49 pp. 58/ See CBE, Department of Economic Research, Sources of Information and Procedures Employed in the Estimation of National Income of Ecuador (Quito: CBE, 1964), p. 7 and p. 18. 59/ See Yearbook of Transportation Statistics, 1968-1969 (Quito: NEPCB, September 1970), 155 pp. ANNEX B Page 34 etc. Ton-kilometers are available only for railroads, and even for them there is no breakdown by major commodity groups. This makes it impossible to construct meaningful indexes of the volume of traffic, especially since the necessary value weights for ton-kilometers are also not available. Special studies of costs and traffic have been prepared on an ad hoc basis by a few carriers to remedy these serious gaps in transport statistics. The Ministry of Public Works preDared a cost study on road traffic. The Municipal Planning Office of Quito has a study of passenger flows and costs of carrying passengers by city buses. The former National Transit Council made a survey of intercity passenger traffic in 1968. The Bureau of civil Aviation collects administrative statistics compiled by airlines. Although the Mission has not reviewed these sources in detail, their data are likely to fall far short of the minimum requirements for policy making and the national accounts. Electric Power statistics. The General Bureau of Water Power Resources and Electrificatin of the Department of National Electric Services of the Ministry of Development conducted a national census of electrification in 1962-63. This census covered all power stations with the installed capacity of thirty or more kilowatts. The first stage of the census collected data from August to December 1962 from the three coastal provinces; the second stage, carried out in May - October 1963, related to the mountain and oriental provinces. Thus, the data on the power generated in 1962 represents in part estimates apparently based on the installed capacity. Moreover, although a total of 1,112 power stations were canvassed, only 14 of them had statistical data on the production, distribution, and consump- tion of power and basic economic data. 60/ Nevertheless, the census showed several national totals of power generated with detailed breakdowns by cantons and provinces, by ownership, and by type of consumer. In addition, the census provided data on installed capacity, long-distance transmission lines, and the total length of the distribution grid by cantons. The Ecuadorian Institute of Electrification (INECEL) continued to compile annual data for all power stations with 100 kw or more installed capacity starting in 1964. Although the INECEL data cover a large part of the total electric energy generated in Ecuador, the data are far from complete, the number of power stations to which they relate is not given, and the methods used for obtaining the data are generally not disclosed. The INECEL has published its data in annual bulletins; the latest edition shows data for 1970. 61/ 60/ First National Census of Electrification, 1962-1963 (Quito: General Bureau fo Water Power Resources andElectrifiaation, April 7, 1964), p.2. 61/ Ministry of Natural Resources and Tourism, Ecuadorian Institute of Electrification, Bulletin No. 5 (1970), Electricity Statistics and the Operation REports of Major Producing and Distributing Enterprises of Electric Energy of Ecuador (Quito: INECEL, no date), 154 pp. ANNEX B Page 35 Domestic trade statistics. The NEPCB conducted the First Census of Domestic Trade in 1965, and this was followed by regular annual surveys starting in 1966. the NIS conducted the latest such survey in 1969, with the results published in 1972. 62/ The use of the self-enumeration method caused most of the delay in the completion of the survey. The frame of the 1965 Census, updated by the membership lists of chambers of commerce, yielded 1974 wholesale and retail trade establishments of which 1,818 responded. In addition, the NIS surveyed 681 members reported by the chambers of commerce of which 117 were found to be sufficiently large to be covered by the survey, that is, they had five or more employees and/or 500,000 or more sucres annual revenues. The latter definition is confusing because the "and" can be interpreted that both conditions must be met (five employees and 500,000 sucres) before an establishment is calssified as eligible for the survey, whereas it is apparently sufficient that either one of the two conditions is fulfilled. A different interpretation placed on this crucial definition may change significantly the coverage of some ISIC groupings. Further, the chambers of commerce membership is on purely voluntary basis. Firms which join the latter are likely to be covered by the NIS survey thus increasing the apparent volume of domestic trade. The NIS surveys of domestic trade compile data on the number of wholesale and retail establishments with five or more employees or with 500,000 or more sucres annual revenues. For these establishments, the NIS also compiles the data on the number of employees, compensation of employees, cost of merchandise, other expenses, stocks investment expenditure on new fixed assets, total revenues, sales and other revenues. If statistical deficiencies, particularly with respect to covereage, could be reduced to a more reasonable level, these data would be useful for estimating value added, trade margins for the commodity-flow analysis, and perhaps even for estimating the changes in stocks. Foreign trade statistics. --Ecuador has tow sources of foreign trade statistics: (1) customs documents and (2) import and export permits. The NIS branch office in Guayaquil processed the customs documents and the NEPCB published the results for 1965-1969. 63/ Exessive publication delays and other considerations led to a recent transfer of this function to the Ministry of Finance which is now responsible for the checking, processing and publishing of the export and import trade statistics based on customs documents. The CBE has been able to obtain dependent estimates of foreign trade statistics, updated almost on a daily basis, by processing export and import permits issued (permisos concedidos). In addition, the CBE has 62/ See National Institute of Statistics, Annual Survey of Domestic Trade, 1969 (Quito: NIS, 1972), 90 pp. 63/ Yearbook of Foreign Trade Statistics published for 1965, 1966, 1967, 1968 (2 vols.) and 1969. The results have been tabulated and are available since 1957. ANNEX B Page 36 processed used import permits (permisos liguidados), although, these data relate to payments which are frequently made considerably after the arrival of imported goods. The issued export permits are also closely related to the shipping dates and the value of exports. Nevertheless, the value and volume of foreign trade based on customs documents appear to be significantly lower than the data based on the permits (see Table B-11). This discrepancy is partly explained by the difference in time periods to which the data refer, partly by technical smuggling (undervaluation and improper classification of goods to avoid the paying of higher import duties), and partly by the fact that some of the issued import permits are never used. A comparison of the data based on issued and used import permits indicates to some extent- the importance of the latter although the defaults etc. obscure the comparison (see Table B-11). Comparing the CBE and NEPCB foreign trade estimates with the customs data, we further note that the latter tend to be considerably lower for exports than either the CBE or the NEPCB estimates. The latter are higher because the CBE and the NEPCB base them on the balance of payments data adjusted for smuggling and the undervaluation of banana and some other exports shown in the export permits (the Customs compile the data as reported in the customs documents at the time shipments cross the international borders--the national accounts concept, while the export and import permits relate to the time period for the movement of goods--a less accurate concept used in the balance of payments). On the other hand, the customs data for imports tend to be higher than the corresponding imports estimates of the CBE and the NEPCB because the customs data include import shipments for which no import permits are required (e.g., donations). Although the balance of payments makes crude global adjustments for imports without permits (e.g., by petroleum companies), imports financed by grants and loans (for which import permits are not required), and estimates that only 85 percent of permits issued would be utilized, these estimates cannot always be sufficiently accurate to avoid a serious underestimation of imports. In addition to merchandise exports and imports, the CBE and the NEPCB national accounts include nonfactor services. The adjustments for conventional and particularly for technical smuggling are made only for a few selected commodities, such as bananas and seafood. Imports appear to be more understated and they are less adequately adjusted than exports. Financial statistics. the Superintendent of Banks compiles, condenses, and consolidates the accounts of banks, insurance companies, and other financial institutions. His annual reports show, among other things, the operating results (surpluses or deficits) but not wages and salaries, director fees, rents, depreciation allowances, interest paid to households, interest paid to business and other operating expenses. 64/ The Mission could not ascertain to what extent such data could be obtained directly from the Office of the Superintendent. 64/ Cf. Annual Report of the Superintendent of Banks to the National Congress, 1968 (Quito: Publisher not specified, June 30, 1969), 150 pp. Table B-11: EXPORTS AND IMPORTS OF GOODS AND NONFACTOR SERVICES, COMPARISON OF BATANCE OF PAYMENTS AND ALTERNATIVE NATIONAL ACCOUNTS ESTIMATES, EGUADOR, 1960-71 Alternative Sources 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 t svts of Goods and Nonfactor Services BPD (CBE): goods 18.1 132.0 14. 150.4 161. 180.3 1.2 201.0 210.7 19.1 2. 232.1 nonfactor services 8.8 9.6 10.8 13.8 17.6 17.4 17.1 17.0 14.4 23.6 23.3 24.8 total 156.9 141.6 159.4 164.2 179.0 197.7 203.3 218.0 225.1 219.7 256.1 256.9 Customs and National Accounts in e mions of Current Sucres Customs: goods -T;TW35 ,570Y 2.,114 2,311 2,347 2,375 2,515 2,t745 3..513 2.,745 00 NID (GBE): goods 2,380 2,31 2,817 2,730 2,907 3,259 3,402 3,665 3,02 3,671 4,899 Nonfactor services 150 193 264 294 338 359 324 376 356 512 538 Total exports 2,530 2,524 3,081 3,024 3,245 3,618 3,726 4,041 4,258 4,83 5,437 Plus: discrepancy -6 +106 -34 -28 -34 -45 +10 -44 -37 -19 -43 NEPOB: total exports 2,524 2,630 3,047 2,996 3,211 3,573 3,736 3,97 4,221 4,164 5,394 6,422 Mission estimates 2,524 2,630 3,047 21996 3,211 3,573 3,736 3,997 41227 41390 5 63 6,422 Average Exchange Raes for E vpo E5s CBE: official 14.85 17.82 17.82 17.82 17.82 17.82 17.82 17.82 17.82 17.82 . 24.75 NID (CBE): implicit 16.12 17.82 19.33 18.42 18.13 18.30 18.33 18.54 18.92 19.04 21.23 2. NEPOB: implicit 16.09 18.57 19.12 18.25 17.94 18.07 18.3a 18.33 18.75 18.95 21.06 CBE: weighted . . . . . . . . 18.78 19.98 21.33 Imp orts of Goods and Nonract-or- Services !Blneof Payet-- M of- US Current Dollars BPD (CBE): goods -098105 2 .11.71 4075 15~.2 15.3 17.7 21. 24.7 259 7.9 NDnfactor services 42.5 38.1 37.9 38.5 49.5 45.8 49.9 58.4 66.9 87.2 101.2 117.8 btal 152.3 146.6 150.0 157.2 189.5 201.0 201.2 234.1 277.7 329.9 361.1 465.7 Customs and National Accounts in Millions of Current Sucres Customs: goods 28 702,1 9 ,3 - 2,3 2,97 3, 3 5 .. . NID (2BE): goods 1,766 1,887 2,165 2,194 2,554 332 ,73 3,27 39 4,611 5,51 .. Nonfactor services 710 694 764 746 780 741 831 932 1 5 12 1,492 .. Total imports 2,476 2,581 2,929 2,940 3,334 3,574 3,604 4,209 5,134 5,842 7,043 Plus: discrepancy -21 +167 +9 -10 +130 +14 +127 +172 +214 +486 +552 NET-B: total imports 2,455 2,748 2,938 2,930 3,464 3,678 3,731 4,351 5,48 6,28 7,595 11,642 Misionestiates2 2, 2,996 3,21 3,673 3,736 3,99 5,362 6,301 __ 637 6,60 642 Table B-11 - Continued _________ __Page 2 Alternative Sources 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 Imports of Goods and Nonfactor Services Average Exchang Rates for In-ports CBE: official selling 15.15 18.18 .18 18.1b 18.18 18.18 18.18 18.18 18.18 1.18 .. 25.25 NID (CBE): implicit 16.26 17.61 19.53 18.70 17.59 17.78 17.91 17.98 18.49 17.71 19.50 NEPCB: implicit 16.12 18.74 19.59 18.64 18.28 18.30 18.54 18.71 19.26 19.18 21.03 CBE: weighted .. .. .. .. .. .. .. .. 19.31 19.10 21.49 Sourcest Central Bank of Ecuador; NEPCB; Foreign Trade Yearbook (for 1957 through 1969); Mission estimates. 00 ANNEX B Page 39 Private services statistics. This NIS conducted the First Census of Services in 1965 and an annual survey of large and medium service establish- ments (five or more employees and/or 100,000 or more sucres annual revenue) since 1966. the 1965 Register of service establishments has been updated by lists compiled by the CETURIS and the Fiscal Lottery Department of the Finance Ministry which provided 227 establishments, including 66 qualifying for the survey. In addition to the 66 establishments mentioned above, the NIS Register contained 682 establishments of which 658 responded. 65/ The total of 724 establishments supplied essentially the same data as the domestic trade establishments discussed above. Their data shortcomings are also similar. Health Statistics. The General Burasu of Public Assistance has collected and the General Bureau of Statistics and Censuses has coded, processed, and published hospital statistics for 1955 and 1956. 66/ Subse- quently, the latter Bureau has conducted annual surveys at all hospitals in Ecuador. The 1957 survey covered only forty-six hospitals, and the response has also not been good in more recent years. The statistics cover the number of discharged patients, by sex and by the degrees of diagnosed imporvement. The data are published with a delay of about five years. The Medical Department of the Ecuadorian Institute of Social Security has recently published similar but more detailed statistics, including some data for clinics. 67/ The publication of these data started in 1965 and they are expected to.be continued every year. The Mission has not reviewed these data in detail. It appears that there may be some over- lapping of data and duplication of effort. Government accounts statistics. The CBE's Fiscal Studies Division (FSD) consolidates the accounts of the Central Government, 20 provincial and 108 municipal governments, and of about 500 autonomous public entities-- a total of about 650 agencies. The CBE consolidation excludes 898 local governments (194 urban and 704 rural "parachias"). They are very small and many of them have neither accounts nor budgets because unpaid volunteers serve on their staff. For the consolidation purposes, the FSD requests the data in greatest available detail directly from the 650 agencies which apparently supply them rather promptly. The CBE examines these accounts, classifies, 65/ National Institute of Statistics, Annual Survey of Services, 1968 (Quito: NIS, no data), 46 pp. 66/ General Bureau of Statistics and Censuses, Hospital Statistics, 1957 (Quito: GBSC, 1962), 48 pp. 67/ Ecuadorian Institute of Social Security, Medical Department, Yearbook of Hospital and Clinic Statistics, 1967 (Quito: National Service of Biostatistics, April 13, 1971) 245 pp. ANNEX B Page 40 and aggregates the various items by hand into about 125 standard items of revenue and 85 items of expenditure. Each of these subtotals is then assigned a six-digit code for a final aprocessing with an IBM computer. The consolidation process takes about six months. The compensation of employees is classified by three items and the consumption of goods and services is grouped by five standard items. All accounts are processed for each entity at one time, and it is not possible to process some of the items on a priority basis in consideration of the national accounts and other urgent needs. The primary objective of the consolidation is its publication in the annual report of the CBE, which is sometimes delayed for several years. Preliminary data for 1969 were not published even at the beginning of 1972. The NEPCB makes further ajustments in the CBE consolidations and carries out partial consolidations of its own. The NEPCB applies a different classification to the pu lic sector and uses somewhat different definitions which result in significantly different estimates (see Table B-12). The Mission did not have the opportunity to review the government accounts in detail. Price statistics. Ecuador has four consumer price indexes (CPI's), a national wholesale price index (WPI), and agricultural consumer prices reported by the Ministry of Production. The CPI's are published monthly with little delay, while the publication of the WPI has been suspended since 1969. The NIS is directly responsible for the Quito CPI, providing some technical assistance and coordination to the universities of Guayaquil and Cuenca which prepare CPI's for their cities. In addition, the Technical University of Manabi started recently a CPI for the city of Portoviejo. The CPI weights are based on the average expenditure pattern of low and middle income families with an average monthly range from 83 to 830 sucres per capita. The NEPCB conducted a survey of living conditions in Quito in 1964-1965. From a list of 1,500 families, 400 were selected at random and 361 of them provided acceptable data. A similar survey was carried out in Guayaquil in 1965, in Cuenca in 1963, and in Portoviejo in 1969. A comparison of these weights (see Table B-13) shows that the Quito weights are not significantly different from those of Guayaquil and Portoviejo (the Cuenca weights are not readily available). Moreover, the differences in weights tend to be compensated by differential price move- ments in various cities. Thus, the smaller weight of food in Quito is compensated by a more rapid rise of food prices, while in Guayaquil, the smaller weight of clothing is to some extent offset by faster price increases of these items. The combination of smaller weights with higher prices in some components tends to reduce the differences in the overall price indexes for these cities. The relative size of consumer expenditure components appears to converge to a national pattern, at least for these urban areas. This tendency makes the Quito CPI a more suitable index for the analysis of the national price level, including the deflation of the national accounts. ANNEX B Page 41 Consumer prices are collected once a month by two price collectors at four Quito markets. They price about 150 products, pruchasing some of them and using samples for others to make sure that the quality remains the same. The price quotations are averaged for all markets without weights. Cuenca prices are collected by three collectors, while Guayaquil has a high turnover of price collectors. The training and experience of price collectors varies considerably. The NIS has a somewhat better quality control of the CPI in Quito than it is apparently possible in other cities. The Portoviejo CPI is particularly suspect because no technical details on its weights and price collection are available, and although the Technical University is publishing the CPI weights, the index appears to be unweighted, at least the major groups with respect to their subgroups. The WPI has been prepared by the Institute of Economic and Financial Research (IEFR) of the Central University in Quito for 1954-69. The IEFR started collecting wholesale prices in 1952 in seven cities (Quito, Guayaquil, Loja, Tulcan, Riobamba, Manta and Bahia). It collected a total of 116 prices for five selected commodity groups (food, building materials, metal products, leather and chemicals). Without using any weights either for cities or commodity groups, the IEFR constructed and published a national WPI for 1952-54. In spite of its obvious limitations the NEPCB hailed this index as undoubtedly an important statistical achievement at the national level. Having obtained the results of the 1954 Agricultural Census, the IEFR proceeded to construct weights for its new WPI. It used 313 specifica- tions of 193 products selected from nine major and twenty seven minor commodity groups (see Table B-14). The weights represented the output in physical units for 320 products rather than the value added of total produc- tion accounted for by these groups or by the economy as a whole. Thus, while the weighting constituted an improvement over the completely unweighted index, it nevertheless fell far short of a national WPI. To expand the regional coverage, the IEFR added Ambato and Cuenca to the other seven cities which collected the wholesale prices, although Riobamba stopped sending them in 1963 and Mant dropped out from this effort in 1964. The IEFR has collected wholesale prices for Quito, the University of Guayaquil collected them for that city, while the CBE branch offices have collected prices in Ambato, Bahia, Cuenca, Loja and Tulcan. The collected price data have generally been of very poor quality. Many prices were missing. Some CBE branch offices quoted prices of preceding months and years. The wholesalers have often been too busy to fill out accurately lengthy questionnaires. In response to further queries, they usually gave quick replies--"no change" or "same prices as las month". Sometimes whole- sale prices could not be obtained at all and retail prices had to be substituted. The IEFR has found that as a result of these inaccuracies, the WPI has tended to be understated by about 10 to 15 percent. ANNEX B Page 42 In addition to the downward bias due to the shortcomings of the collected prices, the TPI is subject to a wide margin of error in view of its deficient weighting. No meaningful weights exist at the following stages of aggregation: (a) aggregation of 313 different brands and specifications into 193 products for which weights exist; (b) aggregation of different price quotes by two or more whole- salers in the same city; (c) aggregation of prices for seven cities; (d) aggregation of monthly data into annual averages. Moreover, the use of inappropriate quantity weights which relate to the gross rather than to the net value of production and to a few more or less arbitrarily selected products rather than to the total volume of domestic production and imports results in a WPI which cannot be interpreted and used with confidence. When the President of Ecuador closed the Central University in June 1970, the work on the WPI was temporarily suspended although the Central University in Quito and the Guayaquil Thiversity continued to collect some wholesale prices in 1970 and in 1971. In 1972, the work on the WPI was resumed. A study is under way to revise the 1954 weights, updating them to 1968 on the basis of the 1968 Agricultural Survey. The inadequacy of the latter, as pointed out above, is likely to make the 1968 weights quite meaningless. The IEFR needs urgently competent technical assistance to raise its work on the WPI to an adequate level. The CBE has subsidized the NPI program of the IEFR at about 300,000 to 400,000 sucres per year, but it is apparently unable to provide the necessary technical assistance. The IEFR Director has requested the Mission to help the Institute in obtaining the required technical assistance at an early date. The Ministry of Production collects monthly agricultural prices for eighty-one varieties of thirteen major and fifty-nine minor crops in nineteen provincial capitals. Each of these prices is averaged without weights for all markets, cities, and months. The price quotations relate to sales of agricultural products to consumers. The data are available by month and by year for 1960-1970 although some prices are not available for all products, cities, months and years (see Table B-15). Table B-12: PUBLIC SECTOR CURRENT ACCOUNT, COMPARISON OF ALTERNATIVE ESTIMATES, ECUADOR, CALENDAR YEARS 1964-1971 (Millions of Current Sucres) Alternative Sources 196W 1965 1966 1967 1968 1969 1970 1971 A. Surplus on Current Account CBE-NID 1,217 825 998 1,503 1,296 1,691 ... CBE-FSD 1,069 738 1,126 1,672 1,180 1,588 .. NFPCB 513 199 369 460 61 -231 -78 Mission .. 363 597 968 613 629 871 1,103 B. Current Receipts CBE-NIID 4 2 4,51 -5,5 5.77 6.25 7,37 . CBE-FSD 4,476 4,429 4,957 5,704 6,276 7,506 NEPCB 3,338 3,558 3s670 ,334 4,667 5,135 6,165 Mission .. 3,557 3,671 4,335 4,667 5,136 6,176 7,091 C. u-rrent Expenditure cBE-NID 3,395 3,709 4,057 4,272 4,959 5,656 CBE-FSD 3,407 3,691 3,831 4,032 5,096 5,918 NEPCB 2,825 3,359 3,301 3,874 4,606 5,159 6,254 Mission .. 3,194 3,074 3,367 4,054 4,507 5,305 5,988 1. Purchases of Goods and Services CBE-NID 2,590 2,838 3,219 3,02 4,059 4,560 CBE-FSD 2,527 2,731 2,904 3,074 4,107 4,656 NEPCB 2,412 2,628 2,009 3,158 3,756 4,171 5,155 Mission .. 2,676 2,483 2,818 3,385 3,695 4,329 4,926 2. Interest Paments and Other Transfers to Private Sector and Abrood CBE-NID 80 t71 d3d 870 900 1,126 .. .. CBE-FSD 880 960 927 958 989 1,262 .. .. NEPCB 413 585 1,292 716 850 988 1,099 .. Mission .. 518 591 549 669 812 976 1,062 Sources: Central Bank of Ecuador, National Income Division and Fiscal Studies Division; NaiTnal Economic Planning and Coordination Board; Mission estimates. Table B-13: CONSUMER PRICE INDEXES, WEIGHTS AND TRENDS, ECUADOR SELECTED YEARS 1965-1971 Weights Consumer Price Index (1965-100) No. of Guaya- Porto- Major and Minor Groups items in Quito quil viejo Quito Guayaquil Fach Group 1965 1965 1969-1970 1970 1971 1970 1971 Total 154 100.0 100.0 100.0 126.0 136.6 123.1 135.2 Food and beverages 54 41.8 49.8 48.1 134.8 143.6 125.9 136.0 Cereals 4 10.2 10.7 7.9 128.7 144.6 a* Meat 3 6.8 10.2 8.6 143.0 151.3 * Fish and sea food 2 0.5 1.9 2.2 135.2 170.2 Edible fats and oils 3 2.9 4.2 3.3 152.4 177.5 Milk and eggs 3 6.1 5.9 6.2 134.9 142.0 Fresh vegetables 11 2.3 2.9 2.8 144.3 166.8 .. Tubers 2 2.7 1.8 1.0 200.2 149.7 ** Leguminous 4 0.3 1.2 1.0 146.8 167.4 . Fresh fruit 7 1.9 2.5 3.7 98.6 110.3 Sugar, salt, and spices 4 3.2 3.2 2.8 104.0 112.2 * Coffee, tea, and carbonated 4 1.8 2.3 1.7 116.6 121.8 ** Miscellaneous foods 3 0.3 0.7 0.9 128.2 146.1 ** ** Beverages at home 1/ 1 2.3 1.9 5.3 119.6 133.8 00 ** Food outside of haei/ 1 2.3 1.9 5.3 119.6 133.8 * Housing 38 19.7 22.9 17.5 115.7 127.7 117.1 130.6 Rentals 1 9.0 11.7 3.4 113.3 118.3 ** ** Real estate taxes 1 0.3 0.4 0.4 100.0 100.0 00 ** Fuel 5 4.1 4.5 3.7 101.9 109.6 ** ** Laundry 7 3.5 3.0 5.6 131.9 161.0 ** Home fabrics 6 0.8 0.5 0.8 99.1 111.3 * Home furnishings 7 0.7 0.9 1.4 138.5 162.5 ** Furniture 7 0.9 1.5 1.6 139.3 165.8 ** ** Appliances 4 0.4 0.4 0.6 121.6 135.5 ** ** 1 Alcoholic beverages consumed at home. 2/ Food and beverages consumed outside of home. ANNEX B Page 45 Table B-14s WHOLESALE PRICE INDEX, WEIGHTS AND TRENDS, ECUADOR, SELECTED YEARS 1954-1969 No. of 1954 a/ Major and Minor Group Items in Weights 965 Each Group __(% 1954 1960 1969 Total 193 100.0 88.3 86.8 110.9 I. Food 44 57.9 93.2 86.8 115.6 Meat 3 6.0 78.1 83.3 126.4 Milk and eggs 5 10.4 100.3 98.1 110.4 Fish 3 7.3 86.7 103.9 126.9 Cereals 14 16.7 82.5 77.6 108.7 Fruits and vegetables 12 7.4 104.9 85.7 134.4 Sugar 2 3.4 95.4 91.9 100.0 Coffee and cocoa 2 5.0 162.6 81.6 98.5 Miscellaneous foods 3 1.7 98.2 81.8 107.1 II. Beverages and tobacco 10 7.1 95.1 94.5 105.8 Beverages 8 6.0 92.9 92.4 105.0 Tobacco 2 1.1 108.8 107.7 110.4 III. Raw materials 16 2.6 75.0 83.0 112.7 Oil seeds 1 0.4 86.1 74.4 180.6 Lumber and cane 11 1.5 60.1 68.0 102.3 Minerals 4 0.7 155.7 186.3 100.0 IV. Fuel and lubricants 9 8.2 78.1 85.2 105.1 V. Oils and fats 6 1.4 76.0 86.4 104.2 VI. Chemicals 24 3.3 136.8 106.8 102.6 Chemical compounds 10 0.3 94.6 92.8 105.6 Pharmaceuticals 10 2.9 145.3 109.4 102.2 Perfumery and toiletry 4 0.1 82.0 109.8 102.6 VII. Manufactured products 59 10.8 91.7 92.1 105.6 Leather products 8 1.3 99.5 81.2 117.2 Rubber products 4 1.2 92.2 111.0 100.7 Paper 9 0.9 81.0 92.1 106.8 Nonmetal minerals 10 4.5 92.8 86.7 104.9 Ferrous metals 18 2.4 97.7 98.4 103.3 Fabricated metals 10 0.5 66.8 84.0 102.3 Table B-15: ANNUAL AVERAGE CONSUMER PRICES FOR 71 AGRICULTURAL COMMODITIES, 1960-70 (In Current Sucres) page 1 Unit 1969 Agricultural of Prices Measure- 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 Used in Commodities ment National j Accounts 16 Major Crops Bananas a! .. 1,235 985 970 1,030 990 975 1,028 1,100 1,190 1,140 1,300bY Barley q 39 54 62 56 76 66 67 69 76 80 90 91 Beans (kidney) q 161 193 182 172 241 241 245 242 236 272 301 307 Cocoa q .. 310 339 381 383 333 381 382 473 461 467 535 Castor beans q .. . . .. .. . .. 0.. .. 92 80 Coffee q 379 364 395 395 515 469 385 371 373 420 560 430 Corn q 90 109 110 108 139 141 132 130 133 131 108 78 Cotton (lint) q 123 130 150 199 194 .. ** .. 177 194 177 Onions q .. 118 116 93 125 142 107 104 121 131 119 111 Plantains q .. 1,484 1,333 1,217 1,362 1,328 1,230 1,240 1,300 1,320 1,220 1,3 00b' Potatoes q 70 73 57 79 79 62 80 74 63 95 86 78 Rice q 133 145 140 137 141 182 167 172 213 224 183 151 Sugar cane mt . . . . o ** ** ** ** ** ** ** 88 Wheat q 86 89 186 92 106 101 107 110 116 118 123 118 57 Minor Crops Abaca mt .. .. . . .. .. .. 250 Anise q .. . q. 867 676 978 1,070 1,170 .. .. .. 900 Annato mt .. 235 235 257 374 428 424 402 276 340 .. 380 Apples (00) .. 201 214 55 84 105 238 254 .. 141 187 281 Apricots q .0 00 .0 .. .. .. *. * . .. .. 250 Avocados (00) .. 49 47 50 49 50 52 54 54 65 67 251 Bananas (oritos q .. . . .. .. .. .. .. .. 10 4- Beans (lima) 104 118 117 112 150 11 147 148 142 170 177 162 Beets o. 59 68 63 65 62 59 61 61 64 79 86 Cabbage (00) .. 134 162 200 220 247 189 193 235 216 187 72 See footnotes at end of table. CURRENT ECONOMIC POSITION AND LONG-TERM PROSPECTS OF ECUADOR TABLE OF CONTENTS VOLUME III Page No. ANNEX C - THE PETROLEUM SECTOR Background ....................................... 1 Concessions .......... ........*.*..*.*. 2 Exploration ........ ..... .. ............... 3 Resource Base ... ..................... 4 Productive Capacity .................... 5 Petroleum Investment .............................. 7 Domestic Consumption .............................. 8 Tanker Fleet .............................. 10 External Market Factors ........................... 10 Petroleum Taxes and Costs ......................... 13 Petroleum Development Policies .................... 18 Longer-run Prospects ............................. 20  ANNEX C Page 1 THE PETROLEUM SECTOR Background The prospects for Ecuador as a petroleum producer were significantly altered with the discovery of commercial quantities of oil in the Oriente Region in March 1967. In Ecuador, the petroleum industry has evolved through a number of stages. The early stage was characterized by the discovery of oil along the coast, by the enactment of the first hydrocarbons law and by the search for oil, albeit unccessful, in Oriente to the east of the Andes chain. Petroleum was discovered at Ancon on the Santa Elena Peninsula in 1923. Later, as many as ten fields were found in the same general area. Proved reserves were never large as compared to those of neighboring countries. Production from Santa Elena gradually rose to a maximum of 10,140 barrels daily in 1955. Although modest, the level of production, nevertheless enabled Ecuador to become a net exporter of oil. Concurrently with the effort to find oil along the coastal strip, Leonard Exploration was granted a consession to explore Oriente in 1921. The first Ecuadorian oil law was promulgated in 1921 and the second in 1937. This latter law remained in force until very recently. As with much of the legislation at that time, the law allowed long concession periods, large areas and low royalties. Subsequent to the promulgation of the 1937 law, Shell obtained a concession which covered most of Oriente. Esso joined Shell in 1948. In all, some US$35 million were invested and six wells were completed, none of which proved sufficient oil to warrant further development. The factors contributing to the lack of success of these companies were the difficultuy of the heavily forested terrain, the isolation of the area and its inaccesi- bility except by river and the state of technology at that time. As from 1956 production from the existing Santa Elena fields had commenced to decline. By 1958, Ecuador had been converted into a net importer of crude petroleum and refined products. Imports of oil were to become the largest single drain on foreign exchange for the Ecuadorian economy. By 1971, domestic production contributed only 15 percent of local requirements for petroleum products while net imports accounted for a net outlfow of froeign exchange of some US$17 million. A new phase was ushered in with the third round of concessions in Oriente. Minas y Petroleos obtained a concession in 1961 and the Texas/Gulf partnership some three years later. Petroleum was discovered at Lago Agrio in March 1967 when the first well drilled by the partnership was tested at a daily rate of 2,640 barrels, equivalent to two-thirds of the total output from the Santa Elena fields. Under the conditions for "model" contracts and contracts of association, a number of companies applied for and obtained exploration leases in Oriente during 1968 and 1970. Some of these companies have found petroleum reserves. 68/ This brief appraisal of the petroleum sector in Ecuador reflects the situation as of mid-1972. ANNEX C Page 2 The development of an increasing hydrocarbons resource base and the construction of the first major pipeline across the Ecuadorian Andes points to the potential importance of oil for the country in terms of fiscal revenue, foreign exchange earnings and national income. The final testing of the pipeline was successfully completed in early July, and exports began in August 1972. Concessions. Ecuador possesses two extensive sedimentary areas; one stretches along the coast both onshore and offshore from the Colombian border to the Gulf of Guayaquil and the other covers most of the Oriente. This latter basin is of outstanding geological interest in view of the discovery of petroleum in northern Ecuador, in southern Colombia and in Peru. The basin, which covers an area of some 8.5 million hectares (33,000 square miles) is tilted southwards so that it widens and becomes progressively deeper along an axis running from north to south. Petroleum was found at a depth of 6,500 feet at Orito in the Putumayo (Colombia), at around 9,000 feet in the Texac--Gulf fields in northern Ecuador and, to the south, Amoco completed two unsuccessful wells at a depth of 15,000 feet. Another characteristic of considerable importance is the gravity and sulfur content of the crude petroleum in place. Texaco-gulf have found a variety of crudes which range from 270 API to 360 API; the export stream, however, will average 280 API with a sulfur content of 0.9 percent. Further to the east of these discoveries, heavier crude reserves have been found. There is some speculation as to the relative amounts of heavy crudes to be found in Ecuador; some geologists believe that in terms of total resources in situ, the proportion of heavy to light and medium oils may be as much as 5:1. The area under concession in Oriente in mid-1972 covered 6.6 million hectares of which about 1.1 million fell within the Texaco-Gulf concession (see Appendix Table 8.22). Approximately 77 percent of the Oriente basin area was under concession or contract to foreign-owned oil companies. In Ecuador, the petroleum sector comprises a variety of companies from the very small independent to the major international oil companies. The relatively small acreage in the hands of the majors (23.4 percent) reflects the attitude of these companies in relation to supposedly marginal petroleum areas in the late 1960s. Until 1970, only Texaco-Gulf, among the majors, had acquired acreage. The independents which were originally awarded most of the acreage in Ecuador, have been faced with increasing cash difficulties in meeting their commitments; consequently, in the last years the proportion of the medium sized internationals has increased through farm outs and the outright purchases of equity. Amerada Hess bought a controlling equity share (57 percent) of Minas y Petroleos S.A., Sun acquired the Grace Oil concession, Marathon joined Shenadoah and Amoco became the operator for the Curaray concession. The composition of the industry is of significance with respect to possible market outlets and prices; the influx of bigger companies with refineries in the United States and the Caribbean has improved the market prospects for Ecuadorian oil. ANNEX C Page 3 Area under Concession (Oriente, 1972) Hectares Percent Company (Thousands) Distribution Major Internationals 1,546 23.4 Medium Sized Internationals 3,189 48.3 Independents 1,873 28.3 Total 6,608 100.0 Exploration in Ecuador has been both costly and difficult owing to the remoteness and heavily forested nature of the area. The Oriente is separated from the coast by the Ecuadorian Andes chain. The industry, never- theless, has pursued an intensive program of geological and geophysical investigation, particularly in the Texaco-Gulf and Anglo Consortium areas. Over 56 percent of the Oriente basin has been explored by seismic means and approximately 15,100 kilometers of seismic lines have been shot to date of which Texaco-Gulf-Anglo account for almost 70 percent. A seismic party in Ecuador requires from 400 to 700 persons and must be assisted by a helicopter, resulting in higher total costs of seismi. .ork than elsewhere with the exception of Alaska. Including helicopter support, the average cost of a seismic party is $150,000 per month in Ecuador compared to $52,000 in Mexico, $60,000 in Argentina and $100,000 in Venezuela. The estimated investment in seismic studies alone totalled about US$32 million. This amount is far in excess of the sum of the minimum explora- tion commitments required by the lease agreements. In line with the model contracts, the companies had to invest US$1.2 million for each 400,000 hectare block during the exploratory period with the exception of the Amoco contract of association which stipulated a commitment of $3.72 million in exploration funds including exploratory drilling. These obligations amount to only $18.1 million for the entire Oriente concession area. In Ecuador, geophysical studies have in general shown structures which are not clearly defined. But in the Texaco-Gulf concession, 13 out of the 16 structures tested by the drill have found oil. This represents a success ratio of about 80 percent. For the country as a whole, almost 70 percent of the exploratory wells have been successful. In Venezuela, one in five exploratory wells discovers oil while in the U.S. only one in 42 wells finds a reservoir containing more than one million barrels of oil. While much of eastern Ecuador has been explored by geological and geophysical methods, only a very small part of Oriente basin has been proved by drilling. On the basis of past performance, the probability exists that significant additional amounts of oil will be found in the future. In the judgment of the mission a sustained exploration program including exploratory ANNEX C Page 4 drilling is essential to ensure the future proved reserves' position of the country. The importance of this cannot be overemphasized. A reduction or an interruption in the exploratory effort will not affect the deliverability of oil in the short run; its impact will be on the larger term productive capacity. In Ecuador it takes about five years from discovery to develop and bring an oil field into production. Resource Base. The present status of work in the Oriente Region carries with it several important implications with respect to reserves and investment. In the first place, it is difficult to arrive at meaningful figures of recoverable reserves except for those areas which have already been drilled. Second, a very substantial net inflow of capital will be required to develop additional capacity. Under Ecuadorian conditions from $600 to $800 are required to find and develop a barrel/day of initial productive capacity. In addition, between $480 and $600 must be invested in order to move a barrel daily by pipeline from the producing field to the export terminal. Thirdly, the rate of new investment in oil exploration will be determined to a large extent by the economic and plotical constraints affect- ing the industry. In Ecuador, proved petroleum reserves are estimated to have reached 0.8-1.2 billion barrels as of December 31, 1971. These figures refer only to the Texaco-Gulf concession. Approximately 25,000 hectares have been proved equivalent to 2.2 percent of the concession area. The first estimate of reserves is based on a 25 percent recovery factor and the second on a 40 percent factor. The 1.2 billion barrels estimate also takes into considera- tion artificial lift which probably will have to be brought in within a short period after beginning operations owing to the low oil-gas ratio and poor porosity of most of the reservoirs. The basic point to be made, however, is that these reserve estimates were undertaken without the benefit of producing experience and at a time when only two of the thirteen fields discovered had been completed. This would indicate substantially more oil to be recoverable than that reported as proved reserves by Texaco-Gulf. Again from an operational point of view, a venture aimed at sustaining a production level of 250,000 barrels daily would require a back-up of recoverable reserves of approximately 2 billion barrels. If a sustained level of production of 400,000 barrels daily is to be achieved, there must be a reasonable certainty of a total amount of recoverable reserves from known fields in the neighborhood of 3 to 4 billion barrels. A recent independent study substantiates the above assertion. i9/ The study, using a 40 percent recovery factor and 20 to 26 percent porosity factor and assuming a water drive mechanism, indicates total proved and probable reserves to reach 3.2 billion barrels. 69/ Rudolf Martin & Associates, Calgary, Alberta, Canada, quoted in Oil and Gas Journal, April 17, 1972. ANNEX C Page 5 RESERVES IN THE TEXACO/GULF AREA (billion barrels) Proved Reserves Texaco/Gulf Estimate 827 UN Estimate 1,225 Proved and Probable Reserves Rudolf Martin & Associates 3,233 Proved, Probable and Possible Reserves Rudolf, Martin & Associates 4,607 The rest of the basin area is more speculative. Texaco-Gulf have some twenty promising structures which have not yet been drilled while most of the other companies are in the initial stages of their exploratory drilling programs. A figure of 1.39 billion barrels of recoverable reserves has been estimated for the Minas y Petroleos discoveries while the Cayman may have found reserves of the order of 0.5 billion barrels if their productive capacity estimates are correct. The sum of the total recoverable reserves mentioned above amounts to 6.5 billion barrels. Productive Capacity Production from the existing coastal fields averaged only 3,711 barrels daily in 1971. These fields have reached their peak production and are declining rapidly. Their contribution to the future production potential of the country is unimportant. In Oriente, production has started from three fields - Lago Agrio, Sacha, Shushufindi - which Texaco has connected to the main pipeline to Esmeraldas, originating at Lago Agrio. Taken together, these three fields have an initial productive capcity of 270,000 barrels daily. It is too early to be sure about the behavior of these fields. To the north at Orito in the Putumayo (Colombia), the reservoir behavior has been disappointing; the fields have declined at rates faster than indicated by engineering studies. In Ecuador, the reservoirs of the fields in question are undersaturated, that is, there is no gas cap or free gas present. The solution gas-oil ratios are low, in the order of 250-300 cubic feet of gas per barrel of oil. Lago Agrio and Sacha are thought to have decline rates of 12 percent per year while that for Shushufindi may be higher. Workovers will reduce this rate. Nonetheless, Shushufindi will require artificial lift by the end of 1973 to help offset the decline in production. Texaco- Gulf had a 40-well drilling program in 1972 to bring the three fields up to capacity. After 1972, the group will need a continuing drilling program employing up to two rigs to maintain production at the 250,000 barrels daily level. During 1973-74, three additional fields will be connected according ANNEX C Page 6 to company plans. These are Aguarica (32* API), Yuca (27.4-29.70 API) and Auca (26.9-31* API). A drilling program of two exploratory wells each during 1973 and 1974 will be implemented. Field storage at Lago Agrio amounts to 750,000 barrels. As the additional fields are developed, they will be connected into the Lago Agrio- Esmeraldas pipeline system. Storage at the terminal at Esmeraldas totals two million barrels. Loading will be through two six to seven mile long offshore lines with a water depth of 145 feet, enabling the largest tankers afloat to utilize the port of Esmeraldas. A number of fields have been discovered by other companies. Cayman Corporation, which holds a block to the east of the Texaco-Gulf concession, has completed three successful exploratory wells, one of which was tested at 3,300 barrels daily. Three more exploratory wells are planned for the period 1972-73. The size of the Cayman finds have not been appraised but they appear to have a productive capacity of some 50,000 barrels daily. The Timing for Cayman's development program depends on its ability to get pipe- line capacity. The company has various alternatives including the utilization of spare capacity in the Orito-Tumaco line and the construction of a new pipeline jointly with other concession holders such as Sun. South and east of Texaco, Minas y Petroleos S.A. has completed four successful and two dry wells. The company believes that it has found a structure capable of producing on a sustained basis up to 30,000 barrels daily. This and other widely scattered fields cannot be brought into produc- tion until the reserves' position warrants the construction of a pipeline. The concession area of the Anglo Consortium covered 58,600 square kilometers equivalent to twice that of the Texaco-Gulf partnership. The company has undertaken two year's intensive geophysical work and has completed eight wells with disappointing results. Only one of these wells turned out to be economically productive, after which Anglo relinquished over 90 percent of its original concession, retaining about 200,000 hectares in the most promis- ing area. Amoco's first two exploratory wells, which were held as a link to the gological relationships between the north Ecuador fields and the recent discoveries in Peru, have been completed at depths of 10,000 to 15,000 feet, and turned out to be dry. As a result, Amoco suspended operations and decided to relinquish all its concession. In addition OKC and Sun (Grace) have some successful exploratory wells, but the level of petroleum reserves and the economic feasibility of their exploits have not yet been established. Estimates of production over the next five to ten years which, in view of the stage of development described above, entails the problem of assuming that oil would be produced from as yet undiscovered reserves. In Ecuador, the constraints to increases in production are those related to production capabilities and pipeline transport rather than external markets. The availability of crude east of the Andes chain in itself is not sufficient to create a capacity for exports. This fact acts as an effective restriction ANNEX C Page 7 on the size of production increments. reserves must be such as to warrant the construction of pipelines which because of the distance (500 kms.) cannot have a capacity of less than 150,000 barrels daily. The assumptions on which the mission based its estimates of production include short-run industry programs, the rational development of known fields, the further discovery of oil outside the Texaco-Gulf concession, the completion of a second pipeline and mutually acceptable government policies. The timing of the first produc- tion increase will depend on (a) completion of the Auca-Yuca drilling program; (b) connection of these and other fields to the pipeline systems; (c) installa- tion of additional pumping capacity on the Lago Agrio-Esmeraldas pipelines and (d) completion of increased storage capacity at the maritime terminal. Within this frame of reference, it is technically feasible for Texaco-Gulf to connect new fields and increase capacity would amount to $93 per barrel day. On the premise that further discovereies are made in other areas, it is assumed that some 200,000 barrels daily would be available for export by mid-1979. A second pipeline, possibly to the Guayaquil area would have to be completed by the above date. (Table 8.27 Statistical Appendix.) In arriving at these figures, the mission has placed particular emphasis on the progressive development of a potential oil area which is huge in size and whose exploratory activity in all its phases is just commencing. It may be worth recalling, however, that the only firm commitment by the industry relates to a level of production of 250,000 barrels daily as from September 1972. Petroleum Investment. In line with expected petroleum production, the mission has estimated that total investment (exclusive of new refineries) in the period 1973-77 should amount to US$426 million, of which approximately $128 million would go for local currency expenditures. Part of these funds have already been committed. In the previous five-year period direct foreign investment in the petroleum sector reached $363 million. In the event that no further discoveries are made in eastern Ecuador, the rate of new invest- ment will decrease to an estimated $170 million in the next five years. This latter figure presupposes that exploration continues and that all legal commitments to drill are met by the concession holders. In the past three years, during which most of the investment in Oriente has been disbursed, the local currency component has averaged 23 percent for the entire region and 26 percent for Texaco-Gulf operation. As more national factors are incorporated into the investment works, in parti- cular labor and materials, the proportion of imports will decline. It is expected that during the period through to 1977, the local costs will represent about 30 percent of total investment and average $26 million per year. Assuming the discovery of new fields in 1973-74, investment will peak in 1977 as a result of the development of those fields and the construc- tion of the second pipeline. The critical date for a number of companies, ANNEX C Page 8 as far as investment decisions are concerned, will come in 1973 when they must decide whether to convert to exploitation arrangements, possibly under new rules or to turn back their concession area. The decision must be based on their appraisal of the size of discoveries and the probability that untested structure will yield recoverable oil reserves. Domestic Consumption. Ecuador has been consuming increasing volumes of imported energy. In 1971, imports of crude petroleum amounted to 23,000 barrels daily. These imports comprise Orito crude (350 API) from Colombia and a reconstitued crude (450 API) from Lake Maracaibo in a propor- tion of about 65:35. The latter crude is specially blended for the structure of the Ecuadorian market by the addition of middle distillates. The domestic market is notably oriented toward the light and middle distillates which represent over 70 percent of total demand while residual fuel oil consumption amounts to only 25 percent of the total. This product demand pattern is to be expected in a developing country with only a relatively small industrial base and with hydroelectric power as an alternative industrial source of energy in some areas. Lubricating oils and greases and liquified petroleum gases (LPG) are also imported in small quantities. There are periodic shortages in Quito of LPG which is used mainly for cooking purposes. It is estimated that the domestic consumption of refined products will grow from 12.4 million barrels in 1972 to approximately 20.3 million in 1977 in terms of crude inputs into the refineries. In order to meet its present requirements, Ecuador possesses three refineries with a total throughout capacity of 36,300 barrels daily. Refineries in Ecuador, 1972 Input Capacity Cracking Catalytic Company Place (barrels daily) Reforming Anglo Ecuadorian La Libertad 28,000 9,000 - Gulf La Libertad 7,300 - 1,000 Texaco Lago Agrio 1,000 - Total 36,300 9,000 1,000 The Anglo and Gulf refineries were located at La Libertad on the coast at the time when the Santa Elena fields were the main source of crude inputs. As recently as 1967 both refineries were modified and new atmospheric distillation units were added to process a mixture of Orito and reconstituted lake crudes. In the period 1969-71, after a decade of decline, there was a strong upsurge in demand for residual fuel oil. Unless this trend continues, the introduction of a heavier crude such as Lago Agrio will probably force the refier-s to increase the proportion of reconstituted crudes or further modify thr 2fineries. ANNEX C Page 9 Percent Distribution of Domestic Demand 1961 1966 1971 Light and middle distillates 71.9 76.5 74.1 Residual Fuel Oil 28.1 23.5 25.9 Total 100.0 100.0 100.0 With the start up of production in Oriente Province, local crude petroleum will be substituted for imports on a net basis. Domestic crudes from the Lago Agrio area are heavier and produce a higher yield of residual fuel oil under Ecuadorian refining conditions than is required by domestic demand. Therefore, part of local refinery inputs, in the form of light or reconstituted crudes, will still have to be brought in from abroad, probably on an exchange basis with domestic crudes. Under the concession agreements and the Law of Hydrocarbons presently in force, producers must deliver sufficient oil to cover local market requirements. The obligation to supply oil at cost to domestic refineries is shared by all producers in relation to their relative partici- pation in total domestic production of crude petroleum. At present, this signifies that Texaco-Gulf must cover almost 100 percent of domestic refinery inputs and, therefore, approximately 13 percent of the initial planned availability of oil from the Texaco-Gulf area will have to be directed to the local market. The National Planning Board now anticipates domestic requirement to outstrip refining capacity by the middle of the present decade. Ecuador plans to expand refinery capacity by constructing a totally new refinery probably at the deep water port of Esmeraldas. If the final feasibility studies, process engineering, procurement of materials and financing go ahead on schedule, the refinery could go on stream in 1977, with an estimated throughput capacity of 40,000 - 50,000 barrels daily. It will be owned and operated by the Ecuadorian State Oil Company (CEPE). While other sites such as Quito and Guayaquil have been mentioned and have their merits, the location of the refinery at Esmeraldas has certain advantages from the point of view of accessibility to crude supply and export facilities. For domestic con- sumption, products would presumably have to be shipped by coastal tanker to Guayaquil and transported by pipeline as far as Quito. A six-inch poliduct from Duran to Quito has already been completed. Initially there would be a substantial exportable surplus, the extent of which would depend on the level of operation of the existing refineries. The arrangements for the supply of crude or the disposal of the products have not yet been worked out. It is not known whether the industry will supply crude on a throughput fee basis or on buy back arrangements for certain products. ANNEX C Page 10 Tanker Fleet. Ecuador does not possess a tanker fleet. However, the transportation of petroleum by national flag tankers is one of the stated aims of petroleum policy and forms and integral part of current legislation. Recently the government has opened international bids to form a mixed company (TRANSNAVE) which will transport 50 percent of total ship- ments of crude petroleum. The winning bid was presentd by a Japanese company (Kawasaki Kisen Kaisha) which will be associated with the Ecuadorian Navy and will provide tankers (own or chartered) to be operated under Ecuadorian flag; it will also provide equipment, technical assistance and training to TRANSNAVE personnel. On the basis of the volume of planned net exports, total shipping tonnage to move Ecuadorian crude into the world markets should reach approximately 0.6 million deadweight tons. This would imply twelve to thirteen tankers of 40,000 - 60,000 hundredweight. Ecuador would require, therefore, six to seven tankers to comply with the policy objectives set down in the petroleum legislation. The size of tankers is closely linked to the destinations of the crude; tankers of over 40,000 hundredweight cannot use the Panama Canal. Probably half of the tankers will be required for this route. Tankers for the Pacific routes could be in the 60,000 hundred- weight class. A typical oil company fleet includes owned tonnage (40 per- cent) and tankers which are chartered in for periods extending from one year to the useful life of the ship. It is usual also for a company to charter part of its requirements on the "spot" or single voyage market. With the exception of Pemex (Mexico) and Petrobras (Brazil) no other state entity in developing countries has yet acquired sufficient tankers to transport 50 percent of its requirements or exports. The European state oil entities, for the most part, have followed transport policies very similar to those of the private oil companies. External Markets Factors As a preliminary judgment, it is estimated that initially at least 60 percent of Ecuadorian exports of crude petroleum will go to refinery markets east of the Panama canal, the balance being distributed long the Pacific coast of North and South America. Preliminary industry plans show that the oil moving through the Panama canal will be refined principally in Trinidad, Puerto Rico and at Colon in Panama. In the longer run there are good reasons for estimating that an increasing flow of Ecuadorian oil will move into the Caribbena and East Coast markets in the light of crude quality, transport factors, growth in market demand and the integrated structure of some of the companies operating in the country. Ecuadorian crudes vary in specific weight, but on the basis of discoveries to date, they tend to be concentrated in the medium to heavy gravity ranges. Texaco-Gulf will export only one composit crude stream with an API gravity of 280 and a sulfur content of 0.9 percent. Assay tests show that upon straight run distillation, the yield of fuel oil was 48.5 percent with 1.48 per sulfur by weight. Ecuadorian crudes cannot be considered low sulfur crudes in the same sense as Indonesian (0.1 percent), Libyan (0.25 percent) or Nigerian (0.15 percent) oils but their sulfur con- tent is lower than that of most Venezuelan or Middle East crudes. The single ANNEX C Page 11 crude stream gives Ecuador less flexibility than, say, Venezuela with respect to market options. it cannot blend its products to meet specific refinery situations. Nevertheless, Ecuadorian crude is suitable for the Caribbean and U.S. East Coast both in terms of its product yields and because of its relatively low sulfur content. Straight run residual fuel oil produced from Ecuadorian crude cannot be utilized directly in many areas of the U.S. East and West Coasts on account of the air pollution laws and regulations. In these areas, the allowable level of sulfur oxide emissions into the atmosphere impose limits on the sulfur content of fuels which may range from 0.3 to 1.0 percent. there are two alternatives for reducing the sulfur content of Ecuadorian residual fuel oil; it may be blended with natural low sulfur fuels or desulfurized. For blending purposes, Lago Agrio has advantages over Venezuelan residual fuel oil. One barrel of Nigerian fuel oil will produce 2.38 barrels of one percent sulfur fuel when blended with Ecuadorian material as compared with 1.59 barrels when Venezuelan fuel oil is used. Taking into account fuel oil yields as well as sulfur content, Ecuadorian crude can be expected to have a small premium when blended in offshore refineries with lower sulfur fuel oils vis-a-vis Venezuelan or Middle East crudes. The cost of desulfurization of Ecuadorian fuel oil is estimated to be in the range of 25-35 U.S. cents per barrel. These cost ranges are applicable for the reduction of the sulfur level to 0.5 percent. Desulfurization costs may be expected to go down slightly as there have been significant improvements in the operations of desulfurizing units, particularly with respect to the catalysts employed. In addition, the vanadium content of Ecuadorian crudes seems to be lower than that for Venezuelan crudes (vanadium has an adverse effect on costs by reducing the efficiency of the catalyst). Most recent petroleum demand projections for the U.S. arrive at figures of around 22 million barrels daily in 1980 and 26 million barrels daily in 1985. There are some differences as to how this expected consump- tion will be met (see Appendix Table 8.34). Nevertheless, when Alaskan oil comes into production, total offshore imports into the West Coast may amount to only half the present levels. Moreover the makret structure in the U.S. West Coast area (gasoline 40 percent, fuel oil 14 percent) does not encourage the utilization of medium or heavy crudes such as are found in Ecuador if alternatives are available. This situation will in the longer run affect adversely the prospects for Ecuadorian crude on the U.S. Pacific Coast. On the other hand, offshore imports into the rest of the United States are estimated to triple by 1980. Fuel oil imports along the Atlantic seaboard alone will reach 2.8 to 3.2 million barrels daily in 1980 with low sulfur fuel oil representing about 75 percent of this total. Concurrently, supplies of crude out of the Caribbean may not increase. Venezuelan heavy and medium crudes are the principal source of residual fuel oil for the electric utility and industrial markets. The anticipated demand for fuel oil in this area is of particular significance to Ecuador in view of the high fuel oil yield of its crude petroleum. The strong upward demand trends predicted for fuel oil (after years of stable consumption) is attributable to electicity con- sumption, the shortage of gas and the air pollution regulations which have severely cut into coal consumption. ANNEX C Page 12 Most of the increments in U.S. East Coast import demand are esti- mated to be made up by Eastern Hemisphere oil, mostly as crude but also as residual fuel oil after processing in offhsore refineries. The capacity of these refineries, predominantly in the Caribbean area, is being expanded. Longer run plans include the expansion of the Virgin Island refinery to a throughput capacity of 800,000 barrels daily. The extent to which Ecuadorian crudes will participate in this growing market will depend on their avail- ability and average cost including taxes. The market prospects in the Andean Group are limited by the size of the market and the domestic availability of petroleum and natural gas. Both Chile and Peru are net importers of crude and refined products and both in the next few years can provide a market for Ecuadorian crude. Recently Peru has discovered oil in the same sedimentary basin area that covers most of the Ecuadorian Oriente. As a result of the recently concluded "produc- tion-sharing" contracts with numerous oil forms, Peru may become a net exporter of petroleum by the end of the decade. In Chile, the outlook is different. The output of petroleum has stabilized while domestic demand is growing at around 8 percent annually. At this rate, Chilean imports could triple within a ten year period from the present level of 50,000 barrels daily. In Colombia, petroleum production has been declining for some years. If it continues to do so, Colombia may become a market for oil from northern Ecuador. Ecuadorian crude is ideally suited to the Japanese market. How- ever transport costs to Yokohama are lower from both the Persian Gulf and Indonesia; in the first case, when compared to Ecuador, the freight advantage is 22 U.S. cents per barrel and in the second 49 U.S. cents per barrel. To compete in this market, Ecuador would have to measure the cost of foregoing sales elsewhere. For example, at term freight rates, Ecuadorian crude should be priced at $1.63 to 1.69 f.o.b. to meet today's prices for Iranian light and heavy crudes in the Japanese market. 70/ Some of the oil companies operating in Ecuador have extensive in- vestments in the growing Caribbean and offshore U.S. refinery market. These refineries all optimize fuel oil yields. Texaco and Gulf taken together account for an export refinery capacity in the Caribbean of almost half a million barrels daily. Texaco's refinery in Trinidad with a capacity of 355,000 barrels daily is well located to utilize Lago Agrio crude as part of its refinery outside San Juan, Puerto Rico, in conformity with the air pollution abatement regulations. Other potential producers such as Amerada Hess and Standard Oil (Cadlifornia) have also major fuel oil refineries in the Caribbean (see Appendix Table 8.34). 70/ Iranian Light (340 API), $1.917 per barrel f.o.b. and Iranian Heavy (31* API) $1.855 per barrel f.o.b. ANNEX C Page 13 During the period from 1957 to the end of 1969, the price of oil in the international market declined although the rate of decrease had started to slow down by the late 1960s. Events in 1970 and 1971 reversed this downward trend and resulted in increases of both f.o.b. realized prices and posted prices 71/ at the principal export centers. The major contributing factors were the sharper than expected increase in world demand, the con- straints place on the availability of oil by the closure of the trans-Arabian pipeline and the cutback in Libyan production, and the shortage of tankers which resulted from the increased reliance on long-haul crudes from the Persian Gulf. In September 1970, Libya negotiated an increase in prices and tax rates. This was followed by a general increase in tax rates in the Middle East and Venezuela and an upward adjustment in the f.o.b. posted price of some crudes. Further negotiations between the major oil exporting countries and the international oil companies took place in 1971 and 1972. A number of agreements were signed incorporating substantial increases in f.o.b. posted or tax reference prices which ranged from 32 percent to 66 percent. The above increases in posted prices have shifted upward the ex- pectations of Ecuador with respect to government revenues and foreign exchange earnings from oil operations. The price level at which oil from Ecuador enters the world market should be similar to that of competing crudes after taking into account geographical location, markets, crude quality and operating costs. Petroleum Taxes and Costs The system of petroleum taxation in Ecuador comprises four essen- tial elements: royalty, export tax, employee participation or profit sharing contribution and income taxes. The first two taxes are calculated as a fixed percentage of a given price and are payable irrespective of the level of profits while the latter two depend on net income. The royalty rates are ifferent according to whether the contracts or the Hydrocarbons Law is applied. In the Texaco-Gulf agreements as revised, the royalty had been set at 11.5 percent of the value of the crude petroleum produced. The Law, however, indicates a sliding scale method with a minimum royalty of 12.5 percent for less than 30,000 barrels per day to a minimum of 16 percent for a rate of production of over 60,000 barrels daily. There are other royalty rates in existence. The "model" concessions pay a flat 10 percent while the contracts of association include a 12.5 percent rate. Moreover, there is one remaining block, belonging to Minas y Petroleos S.A., still assessed at an 8 percent royalty rate. In a recent decree (430 of June 7, 1972) the Government compelled all oil companies to reconvert to the Hydrocarbons Law within a year of the promulgation of the Law (October 1, 1971) under a type of contract that will be similar for everyone. The royalty is valued at the export terminal and, as stipulated in the 1971 Law, reference prices will be --used as a basis for computing the royalty, export taxes and income taxes. -4/ In most exporting countres, posted or tax reference prices form the basis for calculating royalties and net income for tax purposes. These prices, which are not identical with realized or market prices, give producing countries a degree of certainty in arriving at unit fiscal revenues and at the same time afford the industry a yardstick for calculating future tax obligations. ANNEX C Page 14 Together with the devaluation of the sucre in 1970, an ad valorem export tax was levied on all major exports at various rates ranging from 5 to 15 percent. The Ecuadorian government has officially advised the indus- try that this general export tax will also be applied to oil exports at the full rate. In Ecuador all industrial enterprises must distribute among their workers an amount equivalent to 15 percent of net profits before taxes. The contribution is deductible for income tax purposes. The oil industry will be subject to this 15 percent employee participation contribution. For purposes of its fiscal calculation, the mission assumes that one-tenth of the profit sharing will be distributed as bonus payments to employees, the balance going to the public sector. Income tax represents a flat rate of 44.4 per- cent of net income before taxes (calculated in terms of tax reference prices rather than realized profits before taxes). In addition there are a number of minor taxes and fees which the mission estimates reach $0.09 per barrel including pipeline fee ($0.03), lease rentals ($0.01) and grant to the Educa- tional Credit Institute ($0.01). The feature of an export tax and an employee participation contri- bution of 15 percent set the Ecuadorian system apart from the existing systems of taxation in mist petroleum producing countries where there are only two major taxes: royalty and income tax. In the Ecuadorian system the impact of the export tax can be compared to that of an additional royalty. If the profit sharing is not distributed to the employees, it would fall within the realm of government revenue. If all the taxes in the Ecuadorian system are computed on the of a tax reference price similar to the one pre- vailing in other petroleum producing countries, the resulting costs of produc- tion would price Ecuadorian petroleum out of competition in world markets. Even if reference prices are adjusted to give a reasonable level of total unit revenues for the Government, the solution cannot be considered as anything but a temporary one. Technical operating costs' conditions in one area may be much higher than those in another producing area. The rela- tive weight assigned to the royalty makes the tax structure relatively in- flexible to changes in these costs. If costs increase, the tax system may become inoperative. One of the criteria in petroleum taxation is that there should be sufficient flexibility (through reliance on income taxes) for government's share to vary with the cost conditions in the area under exploita- tion. In Ecuador, the royalty plus export tax represents almost 50 percent of per barrel government revenues while in the Middle East and Venezuela the relative weight is 20 and 32 percent, respectively. Royalty rates in these areas are 12.5 percent (Middle East) and 16.6 percent (Venezuela). ANNEX C Page 15 COMPARATIVE TAX SYSTEMS (percentages based on posted tax reference prices) Middle Ecuador East Venezuela Royalty 16.0 12.5 16.6 Export Tax 15.0 - - Total Royalty Equivalent 31.0 12.5 16.6 Employee Participation 15.0 - - Income Tax 44.4 55.0 60.0 Total Effective Income Tax 52.5 55.0 58.0 Comparing the Ecuadorian tax system with the prevailing Venezuela or Middle East tax structures--using similar sets of assumptions as to costs and tax reference prices--the level of most taxes resulting from the applica- tion of the Ecuadorian system is higher than the other two (see Appendix Table 8.43 for details). If we take a tax reference price of $2.70 or $2.80, which would seem reasonable under Ecuadorian conditions, total tax payments and contributions to the Government would reach $1.54-$1.61 per barrel, while in the Middle East and Venezuela they would be $1.39 and $1.50 respectively. If instead we take into account actual operating costs and transport costs to principal markets (landed tax paid cost), we can get a more accurate picture of Ecuador's competitive position vis-A-vis other producing countries. ANNEX C Page 16 A. GOVERNMENT REVENUE -a (US$ per barrel) Tax System/Reference Price 2.40 2.50 2.60 2.70 2.80 Ecuadorian System 16% Royalty 1.37 1.43 1.49 1.54 1.61 11.5% Royalty 1.32 1.37 1.43 1.48 1.54 Venezuelan System 1.24 1.31 1.37 1.44 1.50 Nuddle East System 1.15 1.21 1.27 1.34 1.39 B. F.O.B. TAX PAID COSTS (US$ per barrel) Ecuadorian System 16% Royalty 1.92 1.98 2.04 2.09 2.16 11.5% Royalty 1.87 1.92 1.98 2.03 2.09 Venezuelan System 1.79 1.86 1.92 1.99 2.05 Middle East System 1.70 1.76 1.82 1.89 1.94 /a Taxes were computed in relation to the various alternative tax reference prices. Profit sharing was based on the net realized income and is, therefore, responsive to changes in market prices. Costs were assumed to average 55 U.S. cents per barrel including pipeline costs but exclud- ing fee payable to the Government. Freight rates are an important element to assess the competitive position of a specific crude; for example, they represent almost half of the total landed cost of Persian Gulf crude at U.S. East or West Coast ports. From the peak attained in 1970, tanker freight rates have declined and are expected to continue downwards for the next two or three years, reducing Ecuador's geographical advantage over Middle East crudes in the U.S. East Coast market, but improving its competitive position vis-a-vis Venezuela. Tax paid costs can be placed on a comparable basis with calculated Lago Agrio costs f.o.b. Esmeeraldas by adding or subtracting the relevant freight differentials. A number of these crudes are considered to be com- parable to the segregation of Ecuadorian crudes which will be exported. Minas crude, however, in view of a sulfur content of 0.1 percent commands a premium in markets characterized by clean air regulations. ANNEX C Page 17 The f.o.b. export termian1 tax paid cost of some typical crudes, without taking into account quality differentials and, utilizing published average operating costs and posted or tax reference prices, is: Venezuelan 260 API, $2.122 per barrel; Arab medium 310 API, $1.493 per barrel and Indonesian 35* API, $1.832 per barrel. Applying worldscale 80 as the freight cost, we obtain a series of values for tax paid costs which go from $1.86 per barrel to $2.02 per barrel (Table 8.40, Statistical Appendix): these values indicate that the tax paid cost of Lago Agrio crude should not move higher than the values suggested above if it is to remain competitive in its potential markets. With a $2.70 to 2.80 tax reference price, which the mission would consider appropriate for Ecuadorian conditions, the resulting tax paid cost of Ecuadorian crude would be $2.03 to 2.09 per barrel. Such a tax structure would place the cost of Ecuadorian crude above that of alternative sources of supply in most areas and would probably limit exports to markets geographically close to the country. Any attempt to market the crude in a wider area would be with the knowledge of lower per barrel returns (as taxes do not vary with market prices) to the company and at the present stage of oil field develop- ment could retard the rate of future investment in exploration and exploita- tion activities. In summary the use of an appropriate tax reference price ($2.70 to 2.80/bl) and the present structure of the tax system would place Ecuadorian crude at a disadvantage both when we compare tax arrangements in force in different countries with Ecuadorian conditions and by a comparison of landed tax paid costs. If we use instead a $2.50 to $2.60 tax reference price, the Ecuadorian tax system gives relatively similar government revenues as a $2.70 to $2.80 price under alternative tax systems. However, the disadvantage of using the tax reference price as an adjusting mechanism is that it lends itself to unfavorable and out-of-context comparisons with other oil producing countries and might lead to frequent renegotiations between the government and the oil companies, generating uncertainties which might discourage long- term investment. It must be stressed that in the above estimates no attempt has been made to adjust the different crudes for quality differentials. The values given here are only indicative and should serve merely as a guide. As soon as some actual production and marketing experience is accumulated, a detailed study of costs, taxes and the competitive position of Ecuador in the leading markets for its oil must be made and, if necessary, corrective action must be taken to insure both that the interest of the country are well protected and at the same time that there is a minimum level of incen- tives to encourage the long-term development of petroleum resources. More- over, with a different freight level as the base for these calculations, different results will be obtained. ANNEX C Page 18 Petroleum Development Policies. Total foreign exchange gains from oil arise from payments to the government, wages and salaries and the purchase of goods and services in the country not covered by local currency expendi- tures. Net foreign exchange earnings would increase from US$72 million in 1972 to US$290 million in 1977. By 1976, petroleum activities would furnish more foreign exchange than all other commodities together. Petroleum activities will generate a significant addition to govern- ment revenue. Apart from payments to the government, however, the capital intensive nature of the industry severely limits its contribution to the local productive factors. The direct contribution of the petroleum sector to develop- ment is small; its main income-creating effects are indirect through govern- ment revenues. Total value added is estimated at US$48 million in 1972, and US$164 million in 1973. Total contribution of petroleum to GDP is ex- pected to increase from 2.6 percent in 1972 to 9 percent by 1977. IMPACT OF PETROLEUM DEVELOPMENT, 1972-77 (millions of U.S. dollars) 1972 1973 1974 1975 1976 1977 Foreign Exchange (current prices) Investment 108 48 68 52 129 129 less imports 76 34 48 36 90 90 Total 32 14 20 16 39 39 Exports 53 192 193 240 328 322 less remittances 13 45 44 53 71 71 Total 40 147 149 187 257 251 Total foreign exchange earnings 72 161 169 203 296 290 Value Added (constant 1971 prices) GDP 1823 2099 2239 2434 2693 2880 Payments to government /a 33 116 115 140 190 187 Wages and salaries 2 5 6 8 10 12 Investment income and depreciation 13 43 42 49 65 63 Total 48 164 163 197 265 262 Total share of petroleum sector in GDP 2.6 7.8 7.3 8.1 9.8 9.1 /a Including 90 percent of profit sharing. ANNEX C Page 19 Stated in the most general terms, announced oil policy in Ecuador aims at the rational development of the hydrocarbons resource base and the optimization of returns ot the nation consistent with the maintenance of a sound reserves' position, Implicit in these policy aims, though not clearly defined, are investment, tax and conservation policies. The strategy employed by the Ecuadorian Government to carry out the basic objective of petroleum policy is based on the petroleum contract and concession agreements and on the Hydrocarbons Law and at a later stage it will involve the state petroleum entity (CEPE). 72/ In addition to the tax matters already mentioned, there are several issues still outstanding which are potential areas of conflict and will require the government's attention in the near future. The Hydrocarbons Law promulgated in September 1971 reduced explora- tion and exploitation acreage, reduced the exploitation period after which the concessions revert to the state and increased minimum work obligations in comparison with existing concessions and contracts. With regard to the reduc- tion of acreage, the Law stipulates that the maximum exploitation area that any contractor may hold is 160,000 hectares. The government recently issued a decree (No. 430 of June 6, 1972) complementing the Hydrocarbons Law and regulating the reversion to the State of the excess area. This decree softens up somewhat the dispositions of the Law, establishing that during the period of exploration the companies can hold the totality of area specified in the existing contracts. Once the exploration phase is completed, they can retain up to 40 percent of contracted areas (if higher than the maximum allowed by the Law) for two more years, at the end of which they will be permitted to hold a maximum equal to the average between the amixum permissible by the Law and the 40 percent retained at that moment. Those companies already in the phase of exploitation at the time of the decree will have to return to the state before December 31, 1972, 60 percent of the excess area over the maximum allowed by the Law. These reductions, alghouth not going as far as the Hydrocarbons Law, will still make over 4 million hectares available to the government (CEPE), leaving less than 2 million available for the companies. Whether or not this size is sufficient to support a successful venture in ecuador will very much depend on the area in question and on the barrels of oil in situ per acre-foot, porosity, recovery factors, location and accessibility to markets. The reduction of the exploitation period from forty to twenty years, in both cases renewable for an additional ten years 72/ The Law creating the Ecuadorian State Petroleum Corporation (CEPE) was approved by the present government on June 20, 1972. CEPTE will be in cbarn of mamin the cnuntog's oil iceenFaigcra uIre ly or oulh serv ce or assol on cn de n aecexigration, exloltation, transport, refining, marketing and industrialization of petroleum and derivates. ANNEX C Page 20 coincides with most modern petroleum legislation. The reduction in the life of the contract is also perfectly compatible with the smaller acreage allowed the contractor. Work obligations have been increased both as to minimum investment and wells to be completed. The minimum exploration investment of US$8.00 per hectare annually is equivalent to $1.6 million per hectare. This amount would cover the employment of a seismic party for ten and half months. Instead of one exploratory well per 400,000 hectare block, one well each 100,000 hectares of exploration acreage is now required. In comparison with recent contracts in other parts of the world, the obligation does not seem excessive. The minimum investment requirement may be used for drilling purposes. The 1971 Law also contemplates minimum signature bonuses of $2.00 per hectare (US$400,000 per block) in the exploration stage and $6.00 per hectare (US$450,000 per 80,000 hectare block) once conversion to exploitation conditions has taken place. While the concessions and contracts are explicit, in the area of pipelines the Law is quite vague. The Law merely reaffirms the right of the state to construct and operate pipelines but it does not cover the reversion of privately held pipelines. On the other hand, the contracts state in unequivocable terms that once depreciated, pipelines con- structed by the concession holders will become the property of the State. The main provision of the Law and existing contracts are summarized and compared in Appendix Table 8.46. Under the 1971 Law, the traditional concession contract disappears. Foreign investors are permitted to operate as contractors to CEPE, to take up contracts of "association" or to form mixed companies. None of these contractual forms need act as impediment to contractors as long as the basic provisions of each contractual form are set down clearly. The outstanding issues, covering fiscal and other matters already discussed above are very complex and can only be approached through the negotiation of a global package of taxes and interrelated regulations aiming at a maximum level of income from the point of view of the country without eliminating incentives for the further development of the hydrocarbons re- sources. Since oil is a worldwide ommodity, the level of unit income can be set only by reference to Ecuador's position in the world oil economy vis-a-vis other producing countries. Negotiations with the oil industry, involving some of the technically most sophisticated companies in the business, are likely to be long and recurrent and would require from the Government a great deal of technical preparations and understanding of the global oil situation. One of the methods employed by other countries or groups of countries (OPEC) when preparing for negotiations of legal or policy issues is to set up a Policy Level Task Force. This policy group would be supported by a working level secretariat and advisers charged with the preparation of position papers and background documents which would serve as the technical basis for polciy decisions. Longer Run Prospects. The prospects for Ecuadorian oil in the 1980s will be influenced by the success of past exploration, the continued growth in demand for offshore imports into the U.S. market and by the avail- ability and cost of oil and other energy forms from alternative sources. ANNEX C Page 21 There are two considerations of potential interest to the future growth of the Ecuadorian oil industry which should be mentioned. There is evidence of the existence in Oriente of very extensive deposits of extra heavy oil, that is of crude with an API gravity of 100 or less. If such reserves were proved, their development economically would depend on the state of technology. These extra heavy crudes are thick and extremely viscous and may have to be produced by combustion in situ or by steam-soak methods. Such techniques have been applied in other oil producing zones. Possibly new or improved refinery processes would have to be introduced to make the material less viscous before moving it to coastal points. An analogous case in point is that of the Orinoco heavy oil belt where there are said to be 700 billion barrels of oil in place of which 10 percent may be recoverable. Research is going ahead in Venezuela on heavy crudes but it is doubful whether commercial production from the oil belt would be feasible on a large scale before 1980. In Ecuador the problems of exploiting extra heavy crudes are much greater due to the long distances to markets. Offshore Ecuador, in the Gulf of Guayaquil, natural gas has been discovi5ed. It would appear that present proved reserves are too small - 1 x 10 cubic feet - 1o undertake any major project. Contingent on the discovery of say 5 x 10 cubic feet a major Liquified Natural Gas (LNG) project for exports to the U.S. would exploring the Gulf of Guayaquil and U.S. natural gas and pipeline companies. In view of the time lags involved, even if more gas were found within the next two or three years, it is doubtful whether an LNG plant could go on stream before 1980.  CURRENT ECONOMIC POSITION AND LONG-TERM PROSPECTS OF ECUADOR TABLE OF CONTENTS VOLUME III Page No. ANNEX D - LONG-TERM MACRO-ECONOMIC PROJECTION MODEL The Petroleum Sector ................................1 Output and Prices .......................... Petroleum Investments ... .......... 2 Taxes and Costs on Exports ................... 3 Taxes and Costs on Domestic Sales ............. 4 Non-Petroleum Sector ........... .... .......... . 5 Exports, Imports and Terms of Trade ................ 6 The Overall Economy ............ ........ ........... 9 Balance of Payments and Debt Model ................. 9 External Debt ........................................ 10 Private Sector ..................................... 13  ANNEX D Page 1 LONG-TERN MACRO-ECONOMIC PROJECTION MODEL The economy has been divided into two sectors, petroleum sector and nonpetroleum ("other") sector. It has not been possible to divide the "other" sector further into subsectors for example, sgriculture, manufactur- ing, etc., since data on prices and sectoral investments are not available. The model is essentially a trade gap model, but some of the functions were later inverted so as to carry out a senstivity analysis with respect to public sector current and capital expenditures. The Petroleum Sector The development of an increasing hydrocarbons resource base and the construction of the first major pipeline across the Ecuadorian Andes points to the potential importance of oil for the country in terms of fiscal revenue, foreign exchange earnings and national income. Thus, in this model petroleum has been treated as an independent subsector of the economy, to illustrate explicitly the interrelationships among the most important variables within the subsector as well as in relation to the rest .of the economy. Output and Prices. It has been assumed that the petroleum produc- tion rate would be of the order of 250,000 barrels daily as from the beginn- ing of September 1972. 73/ The assumptions on which future estimates of production are based include short run industry programs, government policies encouraging the development of new petroleum fields, and direct foreign investment leading to the completion of a second pipeline by 1977. Based on these assumptions production is estimated to reach 400,000 barrels daily in 1976 and 600,000 barrels per day by 1980. Thus, in our model petroleum out- put (Q) is given exogenously. Q =Q (1) Ecuador has been a net importer of crude petroleum and refined products since 1958. In 1971, domestic production contributed only 15 percent of local requirements. The requirements for domestic consumption have been estimated by the National Planning board 74/ and these are used in the present exercise. Thus, given domestic requirements (Q1), the volume available for exports (Q2) is a residual. 73/ Petroleum production and exports started on August 16, 1972, but the 250,000 barrels per day level is expected to be reached only towards the end of 1972. 74/ The elasticity of domestic requirements of petroleum to overall output is well above unity. ANNEX D Page 2 Q1 1 * (1 + g), where g is the rate of growth 0 of domestic consumption (2) Q2 = 1 (3) Three different prices, the export or market price (XP), the tax reference price (RP), and the domestic price (DP) are used for the petroleum sector. In most exporting countries, tax reference prices form the basis for calculating royalties and net income for tax purposes. These prices which are not identical with realized or market prices, give producing countries a degree of certainty in determining fiscal revenues and at the same time provide the industry with a yardstick for calculating future tax obligations. The export price was assumed to be US$2.38 per barrel in 1972, and is expected to increase by 6 cents per barrel per year stabilizing at $2.56 in 2975. The corresponding reference price is assumed to be US$2.50 per barrel in 1972; it increases by 10 cents per barrel per year, stabilizing at $2.80 in 1975. Domestic price is based on operating costs, miscellaneous taxes and royalty. The hydrocarbon's law provides for a 20 prercent profit taxes and royalty. The hydrocarbon's law provides for a 20 percent profit margin above production cost in calculating the domestic price. Therefore, XP = (4) RP = RP (5) DP = (ROY + OC + MISC T) + 0.20 (ROY + OC + 1ISC T) (6) Thus, the value of output for exports (XPET), tax purpose (0 PET) and domestic sales (DS) is XPET Q2 * XP (7) 0PET Q2 *RP (8) DS 1 *DP (9) Petroleum Investments. In line with the expected petroleum produc- tion, the total investment (exclusive of new refineries) is estimated to be US$534 million in the period 1972-77. Out of this, imports (MPET) will represent 70 percent and the other 30 percent will be local currency expen- ditures (LCE). The investment figure includes an amount of US$225 million to cover the completion of the Texaco-Gulf pipeline in 1972 and its increase in capacity in 1974 as well as the construction of a second pipeline and the related investment in loading and storage facilities at the maritime terminal. The balance of some US$310 million would be directed toward exploration expenditures, the maintenance of production in existing fields and the development of new areas. Assuming the discovery of new fields in 1972-73, investment will peak in 1976 as a result of the development of those fields and the construction of the second pipeline. ANNEX D Page 3 IPET I PET (10) MPET - 0.70 * IPET (11) LCE = 0.30 * IPET (12) Taxes and Costs on Exports: The expenditure (EXP) incurred by the oil companies consists of royalty (ROY), depreciation (DEP), operating cost (OPEC), transportation (TC), export tax (XTAX), and miscellaneous taxes (MISC T). Based on the experience of oil companies elsewhere in the world, costs (depreciation, operating cost, and transportation) are assumed to average 60 cents per barrel. Miscellaneous taxes /transportation fee (TF), rentals (RENTAL), and other minor taxes (OT)7 amount to 9 cents per barrel. Royalty and export taxes are assumed to be 16 percent and 15 percent of the tax value of exportable output. Government revenue (GREV) is composed of royalty, export tax, miscellaneous taxes, profit sharing ( w SH) or employee participa- tion and income taxes (ITAX). With the exception of profit sharing 75/ which is based on the net realized income and is responsive to changes in market prices, other taxes are computed on the basis of tax reference price. Income tax is caluclated on the basis of net taxable income. OC = DEP + TC + OPC (13) = 154/b + 30 4/b + 154/b = 604/b MISC T = TF + RENTAL + OT (14) = 34/b + 24/b + 44/b XTAX = 0.15 * 0PET (15) ROY = 0.16 * PET) EXP = OC + ROY + MISC T + XTAX (17) Thus, the net real income (NRY) and net calculated income (NCY) are NRY = XPET - EXP (18) NCY = 0PET - EXP (19) Profit sharing is based on net real income. Tr SH = 0.15 * NRY (20) Thus, the net real income of the oil companies before income tax will be NRY (= NRY - 7r SH) and income tax will be computed on the basis of NCY1 (= CY -T SH). ITAX = 0.444 * NCY1 (21) 75/ Under Ecuadorian law all industrial enterprises must distribute among their workers an amount equivalent to 15 percent of net profits before taxes. This contribution is deductible for income tax purposes. ANNEX D Page 4 Revenues accruing to the government and (investment) income of the oil companies is given by equations number 22 and 23. Depreciation will be a part of the outflow since it is only an accounting item. GREV = ROY + MISC T + XTAX + 0.9 * H LSH + ITAX (22) IIPET = NRY - ITAX + DEP (23) Taxes and Cost on Domestic Sales. The procedure is similar to the case of exports, except that the domestic price is much lower and there are no export taxes. Royalty and other taxes are still calculated on the basis of the tax reference price. For purposes of converting the petroleum data into constant sucres (for fiscal and national accounts), we have used the price indices for exports (XPI), imports (MPI), output (RPI - reference price) and domestic sales (DPI). The present exchange rate (ER) equilibrium is assumed to continue in the projected period. Export price, reference price, and domestic price indices have been constructed from the prices discussed earlier, and an inflation rate of 2 percent is used for imports. With the aid of these price indices, we then calculate exports, imports, investment, government revenue and investment income in constant sucres. XPET = (XPET/XPI) * ER (24) c ME = (MP /MI) * ER (25) PET PET I PET c = (I PET/NPI) * ER (26) GREV c = (GREV/RPI) * ER (27) II PET =(IPET /XPI) * ER (28) c The share of petroleum sector in total gross domestic product is assumed to be equal to the value of exports plus the value of domestic sales. YPET = XPET + (DS/DPI) * ER (29) c c To calculate the real purchasing power of petroleum exports and thus the gross domestic income (GDY) generated by the petroleum sector we define the terms-of-trade effect (Z) as follows: 76/ It is assumed that 10 percent of 7 SH will be distributed as bonus pay- ments to employees, the balance 90 percent will fall within the realm of government revenue. ANNEX D Page 5 Z = (XPI/NPI - 1) * XPET (30) c GDYPET = Y + Z (31) PETc Non-Petroleum Sector Lack of historical investment data for the various productive sectors precludes a sectorial breakdown of the non-petroleum segment of the economy. Taking the nonpetroleum sector as a whole, we can establish a functional relationship between the growth rate of gross domestic product and the coresponding levels of investment in the period 1950-70. This function would permit us to estimate the approximate investment requirements associated with various alternative target growth rates of non-petroleum gross domestic product. Assuming the growth rate of Y (nonpetroleum gross domestic product) as given we have Y = Y * (1+r) (32) OTH OTH t t-1 where "r" is the growth rate. In order to determine the level of investment required to achieve this target growth rate, we tried to fit a few alternative functions relat- ing the incremental capital-output ratio (defined as, ICOR = It /(Y - Y ) to Y , increase in Y , and their reciprocals. However, none of+1he t rela onships yielded SO Htistically significant esults. The ICOR series is typically marked by cycles; abonormally high values indicating the creation of unutilized capacity and abnormally low values indicating that capacity is being untilized faster than it is being created. In the past the ICOR has fluctuated between 1.05 in 1951 and 8.74 in 1960. Since the series for fixed investment exhibits cycles, we fitted a nonlinear function relating fixed investment to increase in income, YOT (=YO - Y ) 2 GFI = 4.579 (A Y0) - 0.003 ( A Y ) 0TH 0T TH t n = 20 t1 = 7.6 t2 = -4.1 Both the "t" values are significant at ovjr 99 percent confidence levels. 77/ However, the coefficient of (A Y ) turns out to be negative 0TH (-0.003) implying a declining investment over longer periods as also with higher growth rates. A simple function relating this year's investment to next year's output also gives a resonable fit 77/ When the constant term in a regression equation is suppressed, the coefficient of correlation is no longer a relevant test of the fit, since there is no longer a limit to the lower bound. ANNEX D Page 6 GFI = 275.0 + 0.115 (Y ) OTHtOT R2 = 0.88 t = 11.3 DW = 1.64 The underlying economic relationship of a function of the above type is that the marginal rate will remain unchanged in the future. This does not appear to be a realistic assumption in the present case, since the petroleum earnings provide the unprecedented opportunity to have an ambitious Development Plan. A more realistic assumption will be to assume that both the average and the marginal rates will vary, but the elasticity. will remain unchanged and use a function of the following type. log (GFI ) = Log a + B log (Y ) (33) OTHtOT This function, which we have used in projecting investment requirements, gives a value of -3.8 for a and 1.18 for 6 . (Other statistics: R2 = 0.85 t1 = 3.6 and t = 10.6). The value of 6 greater than unity implies the investment/income ra?io to gradually increase over time. Increase in stocks ( A STK) is made a function of private consump- tion, lagged one year (CPVTt-1 ). A STK = 0.025 * CPVTt-1 (34) t = 12.5 Thus, gross domestic investment (GDI) in the "other" sector is GDIOTH = GFIOTH + A STK (35) Exports, Imports and Terms of Trade On the basis of individual projections for the major commodities and target growth rates for the nontraditional exports, we arrive at the value of total merchandise exports (XGOTH) in current dollars. XGOTH = XGOTH (36) Since in Ecuador there are no foreign trade price indices we have constructed an export price index (XPI OTH) with the information on projected export prices and base year volumes. XPIOTH = XPIOTH (37) Exports of nonfactor services (XNFS) have been projected with an exogenously given growth rate (n) ANNEX D Page 7 XNFSt = XNFSt-1 * (1 + n) (38) and XOTH = XGOTH + XNFS (39) Exports in current U.S. dolars, when deflated by the export price index will give us the value in constant dollars, and assuming the present exchange rate equilibrium will continue, we have converted the constant dollar exports into constant sucres. XOTH = (XOTH/XPIOTH) * ER (40) c Where ER is the exchange rate. U.S., Japan and Europe accounted for approximately 80 percent of Ecuador's imports in 1970. Using their individual relative shares as base year weights, we have constructed a weighted import price index from 1960 to 1970, based on the unit export price indices of these three exporters. Merchandise imports are classified into consumer, intermediate and capital goods. Capital goods imports (MCAP) were tried as a function of fixed investment yielding the following results. MCAP = -1547.3 + 1.205 (GFI OTH) -2 R = 0.83 t = 7.6 d.w. = 1.4 Though the fit is reasonable, this function in the long run will yield a very high elasticity (imports of capital goods will exceed fixed investment by 1980). In order to test the extent of import substitution over the sample period (1956-69) we related the capital imports in year "t" (MCAPt = (1 -a ) MCAP 1 + a (GFI - GFI H ) tt- 2 This function yields a value of -0.082 for a and 0.498 for . (R = 0.91; t1 = 22.5; t2 = 1.5; d.w. = 2.5). Since the value of a is negative, it would imply a negative import substitution. The function implies, however, that even if fixed investment does not grow, imports of capital goods will increase by 8.2 percent over previous year imports. Next, we separated the fixed investment into domestic component of fixed investment (FIDC) and nonpetreoleum direct foreign investment (DFI TH) in order to test the degree of foreign investment induced demand for capital imports. Using multiple regression, we fitted the following capital import function. MCAP = 0.295 (FI DC) + 1.1 (DFI ) (41) t1 = 20.5 t2 = 22.0 ANNEX D Page 8 Both the "t" values are significant at over 99 percent confidence levels. Other statistics are irrelevant, since the constant term has been suppressed. The coefficient of DFIOTH is greater than unity, reflecting the foreign investment induced demand for capital imports. We have used this function in projecting imports of capital goods. Imports of raw materials and intermediate goods (MINTER) were expressed as functions of gross domestic product at factor cost (GDP ), manufacturing output (MFR), and gross national product (GNP), with th following results: MINTER = -469.1 + 0.91 (GDPfc) -2 R = 0.91 t = 10.9 d.w. 1.5 M = -228.0 + 0.457 (MFR) 'INTER -2 R = 0.92 t = 11.6 d.w. 1.1 MINTER = -479.1 + 0.0855 (GNP) (42) -2 R = 0.93 t = 12.7 d.w. = 1.6 The results are relatively similar. However, since we are not estimating independetnly future manufacturing output, we have chosen GNP as the explanatory variable for projecting intermediate goods imports (equation 42). Imports of consumer goods (M cos) have been made a function of private consumption. MCONS = -1.1 + 0.032 (C PVT) (43) -2 R = 0.82 t = 7.3 d.w. = 1.8 For the latter part of the projection period the parameters of the equation are modified to reflect some degree of substitution especially in manfuactured imported consumer goods. Imports of nonfactor services ('NFR) have been projected at the historical rate of growth. Thus, total imports in the "other" sector in constant sucres will be MNFSt NFS * (1 + 1) where 1 is the rate of growth (44) "ZSt t-1 MOTH = MCAP MINTER + MCONS + MNFS (45) The import prices in the last five years have grown on an average by 2 percent per annum. Our projected import price index (MPI) is built on the assumption that this inflation rate will prevail in the future. ANNEX D Page 9 MPI = MPI (46) The terms of trade for the "other" sector (') are calculated as g' = ((XPIOTH /MPI ) X (47) c The Overall Economy Combining the two sectors ("petroleum sector" and the "other" sector) we arrive at overall values for the economy, expressed in constant sucres. YTOT PET OTH /total gross domestic product/ (48) t/t = E + a' /terms of trade effect/ (49) GDY = YTOT + t/t /gross domestic income/ (50) ITOT =PET + CDIOTH /total gross domestic investment/ (51) XTOT = XPET + XOTH + t/t /exports-capacity to import/ (52) c c MTOT = MPET + MOTH /imports of goods and NFS/ (53) c c c RG = MTOT - XTOT/ Resource gap/ (54) GDS = ITOT - RG /gross domestic savings/ (55) GNP = YTOT - FIP /gross national product/ (56) GNY = GNP + t/t /gross national income/ (57) CTOT = GDY - GDS /total consumption/ (58) GNS = GNY - CTOT /gross national savings/ (59) FIP = II + II + INT /net factor income payments/ (60) PET OTH c c c FIP (factor income payment) is composed of IIPET (investment income in the "petroleum" sector), II (investment income in the "other" sector) and INT (interest on debt). YnTerest is determined endogenously in the debt section of the model. IIOTH is projected exogenously. Balance of Payments and Debt Model The constant sucres imports of the "other" sector have been expressed in current dollars at the prevailing exchange rate inflated by the import price index. ANNEX D Page 10 OTH$= (MOTH * MPI)/ER (61) MTOT$ 'PET + MOTH$ (62) RG $ XTOT$ 'TOT (63) FIP $ IIPET$ OTH$ OTH$ + INT $ (64) The deficit on current account would be DOCA = RG + FIP - TR. (65) where TR stands for private net transfers. Assuming further that direct foreign investment in the other sector is also given exogenously, we have the total foreign investment. The amount of gross public borrowings required to fill the gap would be GPUB = DOCA + AMT - DFI (66) where AMT is the amortization of debt which, like the interest payments, is also calculated endogenously. New borrowing requirements would be the dif- ference between gross public borrowings and the loans already in the pipeline. NPUB = GPUB - PIPE (67) DS = AMT + INT (68) NETTR = GPUB - DS (69) DSR = (DS/XTOT) * 100 (70) DS is the total public debt service, NETTR is the net transfer of external resources and DSR is the debt service ratio. The loans have been split into IBRD, USAID, USEXIM, IDBORD, IDBFSO, OTHBIL, according to the average terms of each institution. Suppliers' credits are determined as a residual. If in any year the requirements for suppliers' credits is negative, the corresponding amount is shown as reserve accumulation. External Debt We have used the standard World Bank debt routine to project future debt service burden. Assumptions have been made regarding the commitments by various multilateral and bilateral agencies. Suppliers' credit has been treated as a residual and we have assumed that disbursements equal commitments in each year. The disbursement patterns used for other agencies are as follows: ANNEX D Page 11 Percent of Commitment Disbursed in Each Year Year 1 2 3 4 5 6 7 8 9 10 Agency IBRD 3 13 20 20 17 12 6 4 3 2 IDA 2 12 19 16 15 13 10 7 4 2 US EXIM 15 25 20 15 15 10 - - - US AID 15 25 20 15 15 10 - - - IDB ORD 10 30 20 15 10 10 - - - IDB SPL 10 30 20 15 10 10 - - - BIL OTH 15 25 20 15 15 10 - - - SC I 100 - - - - - - - - SC II 100 - - Suppliers' Credit I (SC I) refers to the US$40 million loan from private US. banks contracted in 1972. It has been treated separately due to the difference in terms compared to the standard Suppliers' Credit (SC II). The terms assumed for each category of loan are given in the terms matrix below. ANNEX D Page 12 TERMS MATRIX Maturity Grace Interest rate Type (No. of years) (No. of years) (Percent) IBRD 23 3 7.25 IDA 48 8 0.75 US EXIM 13 1 7.50 US AID 38 8 3.00 IDB ORD 23 3 8.00 IDB SPL 28 4 3.00 BIL OTH 24 4 3.00 SC I 3 1 7.50 SC II 8 1 8.00 AVERAGE 20 3 5.83 Current revenues of the public sector (REVPUB) have been split into export taxes (XTAX), import duties (MTAX), income tax (ITAX), consump- tion tax (CTAX), property tax (PTAX), other taxes (OTAX) and nontax revenues (NTAX). Each component of the current revenues has been projected indepen- dently assuming tax elasticities consistent with the present government's likely fiscal policies. Petroleum revenues (PET) are determined in the petroleum section of the model. Current expenditure (CPUB) is one of the key policy variables of the model, and has been estimated exogenously for the central government (CCG) and for the rest of the public sector (RPS). Capital expenditures of the public sector (IPUB) have been determined exogenously on the basis of the aggregation of the various sectorial fixed and financed investment pro- jects lists. Thus, ANNEX D Page 13 IPUB = IPUB (71) REVPUB = XTAX + MTAX + ITAX + CTAX + PTAX + OTAX + NTAX + PET (72) CPUB = CCG + CRPS (73) CCG = CCG * (1 + n) where "n" is the rate of growth of central government consumption (74) CRPSt CRPS t * (1 + m) where "m" is the rate of growth of the rest of the public sector consumption (75) SPUB = REVPUB - CPUB (76) I-SGAP = IPUB - SPUB (77) Private Sector Private sector savings (SV), investment (IOVT) and consumption (CPT ) are calculated as residual items: IPVT ITOT - IPUB (78) SPVT = GDS - SPUB (79) CP = CTOT - CPUB (80)   International Bank for Reconstruction and Development 1818 H Street N.W., Washington, D.C. 20433 U.S.A.