Uruguay - Industrial Development and Export Expansion Project

CIRCULATtG COPY FILE py o BE RETURNED TO REPORTS DSK DOCUMENT OF INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Not For Public Use Report No. P-1698-UR REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLICA ORIENTAL DEL URUGUAY FOR AN INDUSTRIAL DEVELOPMENT AND EXPORT EXPANSION PROJECT November 20, 1975 IThis report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report.  CURREINCY EQUIVALENTS Exchange Rates Effective September 29. 1975 Commercial Rate Buying US$1.00 = UrN$2.34 Selling US$1.00 = UrNT$2.37 Financial Rate Buying US$1.00 = UrN$2.68 Selling US$1.00 = UrN$2.70 WEIGHTS AND MEASURES Metric System GLOSSARY OF ABBREVIATIONS AG Advisory Group AID Agency for International Development BROU Banco de la Republica Oriental del Uruguay CIPE Center for Export Promotion CB Central Bank of Uruguay DFT Directorate of Foreign Trade II)B Inter-American Development Bank IEPF Industrial Export Promotion Fund INPROME Impuesto Minimo a la Productividad Media LATU Laboratoric de Analisis Technologico del Uruguay LIBOR London Interbank Official Rate PBO Planning and Budgeting Office TAU Technical Assistance Unit UNDP United Nations Development Programme UN/GATT United Nations/General Agreement on Trade and Tariffs GOVERNMENT OF URUGUAY FISCAL YEAR January 1 - December 31  REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN FOR AN INDUSTRIAL DEVELOPMENT AND EXPORT EXPANSION PROJECT TO THE REPUBLICA ORIENTAL DEL URUGUAY 1. I submit the following report and recommendation on a proposed loan to the Republica Oriental del Uruguay for the equivalent of US$35.0 million to help finance the proposed Industrial Development and Export Expansion Project. The loan would have a term of 18 years, including 5 years of grace, at an interest of 8-1/2% per annum. The proceeds of the proposed loan would be made available to the Central Bank on the same terms and con- ditions. The Central Bank would onlend the proceeds to commercial banks which in turn would lend them to selected export enterprises for the following purposes and on below specified terms: (a) loans in US dollars for imported working capital items with a minimum maturity of six months at an annual interest rate equivalent to the LIBOR rate (London Interbank Offered Rate for deposits for 180 days) plus one-half percentage point; and (b) loans in US dollars equivalent for imported capital goods for four to ten years includ- ing one to three years of grace, at 8-1/2% per annum. The commercial banks would lend the funds to enterprises for imported working capital items with a spread of three percentage points; in the case of subloans for imported capital goods a two-and-one-half percentage points spread would prevail. The Government would assume the exchange risk, if any, between the US dollar and the currencies used in Bank disbursements. PART I - THE ECONOMY 2. An economic mission visited Uruguay in December 1974 and again in March 1975. The resulting economic memorandum (498-UR) was distributed to the Executive Directors on September 17, 1975. A summary. of Country Basic Data is attached as Annex I. Background 3. After having become one of the most prosperous countries in Latin America, Uruguay's economic performance deteriorated steadily over the past two decades. Development was thwarted by persistent inflation and periodic balance of payments crises. This was the result of policies which favored urban consumption and industrial import substitution at the expense of invest- ment, exports and growth. 4. An educated and predominantly urban population generated increasing demands for high employment, better public sector services and social benefits. The attempts to meet these demands took the form of fiscal, exchange rate and price policies which resulted in a growing transfer of income away from the resource rich agricultural and livestock sector. Simultaneously, the indus- trial sector, stimulated by World War II shortages of consumer goods and subsequently fostered through a deliberate import substitution cum protection  policy, grew at a rapid pace (about 8% annually during 1945-57) and provided increased employment. 5. In the 1958-67 decade, however, total output levelled off. Agri- cultural production, productivity and exports declined. Moreover, industrial import substitution possibilities in the small domestic market were largely exhausted. Unemployment rose sharply. Attempts by the Government to main- tain per capita real income and consumption levels through price controls, liberal wage readjustments, over-valued exchange rate and expansionary credit policies, resulted in strong inflationary pressures, capital flight and serious misallocation of resources. Increased government intervention curtailing private initiative depressed domestic incomes and demand and, after 1970, political and social unrest marked by terrorism and labor strife, discouraged savings and investment and dampened any initiative to expand output and exports. 6. The dramatic changes in the world economy which began in late 1973 had a staggering impact on the debilitated Uruguayan economy. The three-fold increase in the price of imported oil (upon which the country is totally dependent), followed by substantial increases in other import prices and culminating in the closure of the EEC to meat imports brought the country to the brink of economic disaster. The terms of trade loss produced by these developments was equivalent to 2.2% of Gross Domestic Income (GDY) and resulted in a sharp turnabout in the balance of payments--from a current account surplus of US$37 million and net reserve gain of US$66 million in 1973 when beef and wool prices were at historic highs, to a current account deficit of US$105 million and net reserve loss of US$58 million in 1974 (despite substantial external borrowing). Furthermore, a severe fiscal problem developed. In an effort to sustain real income levels, budgetary subsidies for basic imports were increased while import levies were reduced, producing a fiscal deficit equivalent to 30% of expenditures in 1974. The fiscal deficit, inadequate monetary management and a wage and price policy which generated a wage-price spiral by attempting to maintain incomes of producers and consumers in the face of declining GDY, pushed domestic inflation beyond 100% in 1974. 7. The economic crisis jolted the Government into recognizing the urgency for a fundamental reorientation of economic policy towards relative price stability and growth. A new economic team was installed in July 1974 and, after a period of consolidating support for its views, began introducing a major economic reform program. The program is not only aimed at overcoming the current economic problems, but also at repairing the damage inflicted on the productive sectors by decades of excessive government intervention and isolationist economic policies. 8. The main thrust of the program is the liberalization of domestic prices and of the foreign trade and payments systems designed to improve resource allocation and productive efficiency. Substantial progress towards this goal has already been made. Frequent exchange rate adjustments during Lhe second half of 1974 and early 1975 (minidevaluations) have maintained a realistic relationship of the peso to other currencies for commercial trans- actions, thus stimulating exports, and the financial foreign exchange market  - 3 - has been completely freed from all forms of restriction and intervention. Indexing of medium- and long-term financial instruments is being broadened, and loan and deposit interest rates of financial institutions (including the introduction of dollar denominated public and private obligations) have been raised to levels which should stimulate financial savings, contain the demand for credit and allocate real resources more efficiently. 9. An Industrial Promotion Law was approved in 1974, creating the basis for stimulating capital investments through credit assistance and tax relief. A new Foreign Investment Law, designed to operate in conjunction with the Industrial Promotion Law, accords foreign investments approximately the same treatment as domestic investments, plus quite liberal profit remittance provisions. Making full use of its advantageous geographical location close to the major markets of Brazil and Argentina--which have a combined population 50 times larger than its own--Uruguay has signed favor- able trade agreements that should greatly encourage the export of manufactures to these countries. 10. The Government has also taken a number of positive steps to free the economy from excessive direct government intervention, such as the removal of quotas on raw materials imports, reduction of high import sur- charges, elimination of prior import deposits for goods to be processed and re-exported (plus reductions of prior deposits on other imports), an easing of prescribed foreign financing requirements on imports, and elimination of price controls on all but a limited group of basic consumption items. Also, the authorities are rationalizing the tax system, eliminating a large number of low yielding taxes and shifting the revenue base from import and export taxes to taxes on imputed agricultural income (IMPROME) and on value-added. Tax credit rebates (reintegros) are being selectively granted to non-tradi- tional exports, and the export taxes for wool and beef have been considerably reduced to offset the fall in world prices for these products. While progress is being made on practically all economic fronts, in some areas the Government is still being constrained by the weak balance-of-payments, inflation, unem- ployment and the fiscal problem. As progress is made in the economic reform program, it should be possible to intensify the liberalization drive. 11. Perhaps the most significant indication of the Government's new economic policies is the fact that it has recently concluded a Stand-by Agreement with the LMF. The monetary and fiscal programs incorporated in this agreement should result in considerably improved price, fiscal and balance-of-payments performance in 1975. Substantial progress has already been made in stabilizing the economy as evidenced by reduction in the rate of inflation. Thus, in the first eight months of 1975 the cost of living index rose 32.6% compared with 50.7% and 68.8% in the corresponding periods of 1974 and 1973, respectively. Development Strategy and Prospects 12. The Government's revised development strategy is one of fostering capital accumulation in the private sector and supporting this further by  - 4 - using public sector funds supplied through financial intermediaries to accel- erate the growth of private sector production. Viewed as an intuitive and pragmatic application of a strategy of rapid growth and increased employment, it appears sound. Moreover, it has worked well in the past, particularly during the 1940 decade. The Government's stated priority objectives are: sustained growth with financial stability through the expansion and diversi- fication of exports, increased employment and reduced underemployment, and reactivated capital and money markets in order to finance increased private sector activity and foreign commerce. 13. While, in view of the disappointing performance over the past two decades, much more in terms of sustained accomplishments will be necessary to reactivate the economy, the response of the private sector so far has been quite encouraging. As a result of the Government's export oriented policies in the first seven months of 1975 non-traditional exports rose by about one- fourth to US$100 million over the corresponding period of 1974. The increased export activity has led to a revival of crop and industrial production, the latter showing the most significant increase in fifteen years. This and the country's resource base presage well for Uruguay's medium- and long-term pros- pects. For an export-led growth strategy, Uruguay has certain advantages--a highly skilled and well-educated labor force, a strategic location between the large and expanding markets of Southern Brazil and Buenos Aires, an adequate transport infrastructure to both markets, ease of long distance ocean transport for both imports and exports through the port city of Montevideo and a distinct natural resource advantage in the intensive and extensive exploita- tion of export-oriented agricultural production, especially beef and wool, and in the manufacture of leather and textile goods. There is a largely untapped export potential in crop agriculture, food and fruit processing, fish products, nonmetallic mineral products (cement, glass, ceramic wares and tile), granite blocks and slabs, and wood pulp from natural and cultivated forests, principally eucalyptus. In addition, Uruguay's capital and money markets were among the most advanced in Latin America during the 1940s. As confidence in the country's economic management is regained and the Government continues to make progress towards establishing positive real rates of interest throughout the economy, it should be possible to reactivate these markets. 14. The successful implementation of the Government's stabilization and economic reform program, however, will not be easy. The program will have to be carried out within the context of a generally depressed world economy, exacerbated in Uruguay's case by adverse near-term price and market- ing prospects for its principal exports (beef and wool). Nevertheless, given the Government's strong determination to improve economic conditions in Uruguay, with substantial external assistance forthcoming, it should be possible to implement the program successfully. 15. With a recovery of Uruguay's principal exports and an expansion of non-traditional exports, GDP growth could be gradually accelerated to an annual average of 4.0% during 1975-80. This would be a marked improvement over the 1.4% annual growth rate of the preceding five years and would provide  -5- for rising employment. The growth pattern would require domestic savings to increase from their depressed level of about 8% of GDP in 1974 to about 12% in 1980. The implied marginal savings effort would partly result from an improvement in Uruguay's terms of trade expected later in the decade. 16. Assuming the reopening of the EEC market and an upswing in the prices of beef and wool, exports may increase more rapidly than imports in the latter part of the period 1975-80. Nevertheless, because of unfavorable near-term prospects and the heavy import requirements associated with more rapid GDP growth and industrial rehabilitation both the trade and current account deficit can be expected to widen in 1975. While in 1976 these deficits would remain fairly high, they would start declining. By 1980, exports and imports would be approximately in balance and, as a result, the current account deficit would be relatively small. The deficit could reasonably be covered by medium- and long-term capital inflows, provided satisfactory economic policies continue. 17. As of December 31, 1974, Uruguay's outstanding and disbursed external public debt repayable in foreign currency was estimated at US$559 million. The Bank share in the debt was 13%. External debt is expected to increase substantially (by about 12%) in 1975 due to the need to finance the balance- of-payments gap. Thereafter, and in line with the expected improvements in export performance and the ongoing efforts of the Government to improve the country's external debt structure, external public debt should grow at a more moderate rate (about 9% annually). The debt service ratio was 30% in 1973, 29% in 1974, and is expected to climb to 41% in 1975. The Bank share in the debt service was 7.7% in 1973, 7.8% in 1974, and it is expected to decline to 4.7% in 1975. The high debt ratio in 1975 is largely a reflection of a poor term-structure rather than an absolute size of the debt; Uruguay has sufficient foreign exchange reserves (equivalent to about twelve-months' imports) and should have no difficulties in meeting its external debt obliga- t.ions during 1975. Debt service should decline to about 23% and 16% of exports of goods and nonfactor services by 1976 and 1980, respectively, if required medium-and long-term external credits can be mobilized to improve the country's debt structure. In this context, Uruguay has already contracted new long-term external loans with the Bank, IDB, AID, the Government of South Africa and a US$130 million seven-year Eurodollar Loan was recently obtained from a group of US, Canadian and European private banks. PART II - THE BANK GROUP OPERATIONS IN URUGUAY 18. Uruguay has received US$155.2 million (net of cancellations) in Bank loans. As of September 30, 1975, the Bank held US$73.9 million, including US$4.0 million undisbursed. On a sectoral basis, Bank assistance to Uruguay (11 loans in total) has been 53% for power, 35% for livestock and 12% for transport. Execution of Bank-financed projects has, on the whole, been satis- factory. So far, IFC has not made any investments in Uruguay. Annex II contains a suumary of Bank loans as of September 30, 1975, and notes on the execution of ongoing projects.  - 6 - 19. The FY 76 program includes the recently approved Fifth Livestock Development Project and the proposed industrial development and export expansion project. In addition, work is underway on power and agricultural diversification projects for possible consideration by the Executive Directors during the next two years. 20. In lending to Uruguay, the Bank tries to assist the Government in achieving four major objectives, which are interdependent and complementary. One objective is to bring about a recovery of the economy by supporting programs leading to increased output, income and employment. A second objec- tive is to help Uruguay increase and diversify its export earnings. A third objective is to encourage institutional improvements in the management of the economy, particularly in the formulation and implementation of sectoral policies. A fourth objective is to transfer sufficient external resources to complement Uruguay's domestic savings and provide the necessary funds for maintaining an adequate level of investment in a framework of sound domestic finances and a viable balance of payments. 21. While the last objective primarily influences the size of the Bank program in Uruguay, the other three jointly determine its structure. The industrial development and export expansion project is designed to support the Government's efforts to rehabilitate the industrial sector and to expand manufactured exports in order to encourage sustained economic growth, rising income and employment. In this context, emphasis would be given to estab- lishing channels of long-term finance and to strengthening export promotion agencies. Bank lending for agriculture is aimed at increasing crop produc- tion to assist Uruguay in achieving self-sufficiency in grains and in increas- ing and diversifying its export earnings. Lastly, Bank assistance for power is designed to help the country meet its growing power demand, while helping to increase the reliance on local energy sources. PART III - THE INDUSTRIAL SECTOR Employment and Structure 22. The importance of the industrial sector to the Uruguayan economy may be readily gleaned from the fact that as far back as the late 1950's it provided employment for nearly two-fifths of the labor force. Uruguay's highly trained and skilled labor force had grown to rely on the sector for employment opportunities. However, the failure of the sector to continue even modest growth during most of the 1960's and the erratic progress in recent years has resulted in a shrinkage of employment opportunities. According to latest data, employment in manufacturing has dropped to less than one-third of the labor force. This has led to serious unemployment of industrial workers in the Montevideo area, where most of industry is located, which in 1973 was estimated at some 8.5%. This constituted an increase of almost 75% over the level recorded in 1970. The revival of industrial production in 1974 and since appears to have somewhat mitigated  - 7 - the situation. A survey conducted by the Government's Planning and Budgeting Office in February 1975 observes that the level of unemployment among indus- trial workers in the Montevideo area has declined to under 7% and working hours in manufacturing increased. 23. The industrial sector's importance as a source of employment stems from its generally labor intensive structure. The sector consists of about 1,700 enterprises, most of them small employing between 50 and 100 persons. Manufacturing accounts for about 23% of GDP. In terms of total value of output, the most important branches are: food processing (22.5%), beverages (11.1%), textiles (10.3%), nonmetallic minerals (7.8%), chemicals (6.6%) and transport equipment (6.5%). Exporting Industries 24. Several industries have already grasped selective export oppor- tunities. These include manufacturers of leather apparel, shoes, leather accessories (handbags, belts, billfolds, etc.), finished leather, wool yarn, textiles, clothing, tires, auto parts, cement, fertilizer, prepared foods and ceramic tile. The proportion of output flowing to exports from these industries varies widely, ranging from about 95% of total production in the case of leather clothing and accessories to less than 5% in the case of cotton and synthetic textiles. As a consequence of even these modest efforts, the contribution of manufactures to total commodity exports increased from 11% in 1965 to 26% in 1974. Manufactured Exports, 1965-74 (in millions of Current US dollars) Product Groups 1965 1972 1974 Tanned and Finished Leather 5.7 19.3 22.7 Leather Clothing, Shoes and Articles - 4.4 19.3 Yarns, Textiles and Clothing 2.7 3.1 11.7 Tires and Rubber Products 0.6 0.9 5.3 Chemicals and Fertilizers 0.4 1.7 5.1 Auto Parts - 0.5 4.5 Other Manufactures 11.8 10.7 30.5 Total Manufactures 21.0 40.6 99.2 Total Export of Goods: 191.2 214.1 382.2 Source: Bank of the Republic  -8- The Export Drive 25. The Government is fully cognizant of the important role that indus- trial exports must play in the revival of economic growth and is providing a vast assortment of encouraging measures. In order to achieve the GDP growth target of 4.0% during 1975-80, exports will have to increase from 12% of GDP in 1974 to 17% of GDP by 1980. This increase subsumes a substantial expansion of non-traditional exports, particularly manufactures. The target is ambitious but within the possibilities of the Uruguayan economy, provided sound economic policies are continued. It entails that manufactures achieve an average growth rate of about 23% per annum in current prices during 1975- 80 (about 15% in constant prices). Given the present relatively low base and that manufactured exports rose by 69% in 1973 and 122% in 1974, the attainment of this target appears feasible. The neighboring countries offer, through trade concessions established by the Latin America Free Trade Association (LAFTA) and bilateral arrangements, an opportunity for Uruguay to expand exports of a number of intermediate goods. Moreover, Uruguay has made a late but significant start (in the form of leather and textile goods) of exporting to markets in the industrial countries which import items with relatively large labor inputs. Further export opportunities exist in these markets as Uruguayan manufactured exports at present account for considerably less than 1% of such imports by the US and Europe. Export Industry Prospects and Requirements 26. While the Government's new export-oriented economic policies augur well for the future of manufactured exports, several constraints will still need to be removed if the export drive is to be successful. The most impor- tant among these are: (a) inadequacy of imported raw materials and shortage of short-term credit; (b) lack of medium- and long-term credit to finance the renovation and expansion of plant capacity; and (c) deficient institutional support for the promotion of exports and excessive protection of domestic industries. 27. The revitalization of manufacturing industry and its reorientation towards export markets will require large imports of raw materials and capital goods. While in most instances imports of capital goods can be postponed for some time because of unused capacity, the need for imported raw materials is immediate. Although the Government's export development program is based on the production of goods with a high domestic value added, the low level of raw material imports that has prevailed over the past years and the quality standards of new export markets will require a higher level of permanent imported working capital items in the inclustrial sector. As evidence of this need and consistent with the Government's import liberaliza- tion program, in 1975 imports of intermediate goods and raw materials (exclu- ding petroleum and derivates) are projected to total $260 million compared with $143 million in 1973 (an increase of about 82%). These imports include a wide spectrum of raw materials, spare parts and semifinished goods. 28. Reasonably full utilization of productive capacities of potential export industries is likely to continue or even accentuate the above trend  - 9 - of increasing imports. A survey of capacity utilization carried out by the Planning and Budgeting Office in May 1975 shows that industries which have already reoriented their output to export markets, although rapidly approach- ing capacity utilization, could expand output by means of additional shifts provided they have adequate supplies of imported raw materials. Over the medium-term their need for capital investments is also likely to rise sub- stantially if they are successful in export sales. The second group of industries consists of metal fabrication, food canning, fertilizer mixing and cotton textiles. These suffered from overexpansions at the outset and have been subject to growing obsolecence; they supply the domestic market and export a small fraction of their output. With their present equipment and sufficient imported inputs they could make a significant contribution to the export drive. Over the near- to medium-term they will also require imported equipment for renovation and modernization to sustain exports. Unutilized Capacity in Selected Industry Sub-Groups, May 1975 Approximate Percent of GDP Percent of Unutilized Capacity 1974 0-10 11-20 21-30 31-40 41-50 Ceramics and decorative tile 0.4 x Brick and tile 0.3 x Leather handbags and articles 1.0 x Leather clothing 3.0 x Shoes 2.5 x Wool yarn and cloth 3.5 x Vehicle tires 2.0 x Chemical products 1.0 x Zippers and fasteners 0.1 x Cotton and synthetic textiles 4.0 x Leather tanning and finishing 2.5 x Stone quarrying and working 0.1 x Fertilizers 1.5 x Canned fruits and vegetables 1.0 x Metal fabrication and auto parts 3.0 x Source: Survey conducted by Planning and Budgeting Office in May 1975. 29. The Government has already taken steps to increase the supply of imported raw materials. It has reactivated the use of the "temporary admis- sion system", an export promotion scheme, which permits imports of industrial  - 10 - raw materials and intermediate products, free of taxes, with the condition that they are processed and re-exported within a predetermined period of time (Annex V). This scheme is effectively supervised by the Laboratory of Tech- nological Analysis of the Ministry of Industry and Energy. With the improved conditions for non-traditional exports emerging from the readjustment of exchange rates and the beginning of trade liberalization measures in 1974, the growth of "temporary admission" imports has accelerated markedly over the past two years, from US$8.9 million in 1972 to US$22.1 million in 1974. On the basis of mid- 1975 data it is estimated that such imports will total US$32 million in 1975 and, in line with the expected growth of non-traditional exports, "temporary admission" imports should be in the order of US$52 million in 1976. This exceeds by about US$30 million the amount estimated when the new Government program was put into effect. While the Government has made considerable efforts to increase the supply of imported raw materials, severe limitations are being imposed by the unfavorable near-term prospects for the country's principal exports. 30. The Government's policy and efforts to stimulate exports are rendered more difficult by its simultaneous objective to place ceilings on the expan- sion of commercial bank credit in line with its stabilization policy. This has led to an increased shortage of working capital, particularly for covering the foreign exchange cost of imported industrial inputs. Resolution of this dilemma would be greatly helped by the provision of external resources in support of the export drive. 31. The previously mentioned survey by the Planning and Budgeting Office also revealed capital goods import requirements of nearly US$43 million, consisting of US$1.5 million for balancing equipment, US$16 million for plant renovation and modernization and US$25 million for plant expansion of indus- tries participating in the export drive (Annex 4 gives a brief description of these industries). Years of economic stagnation and inflation inhibited development of capital markets and medium- and long-term finance; this has contributed to the deterioration of the financial structure of most firms. Moreover, there is no public or private development finance company in Uruguay to finance industrial renovation and expansion. Recently, however, AID approved a US$5 million loan to help finance the importation of capital goods for agro-industries and KfW is considering an addlitional loan for imported equipment. While these loans should help in meeting part of the industries' requirements for capital goods, the need still is such that unless additional external resources are made available to enterprises on appropriate terms, they will not be able to increase exports. 32. In addition to the above, implementation of a successful export drive will require a sound export promotion scheme. The Government is cog- nizant of this need and the Directorate of Foreign Trade (DFT) of the Ministry of Economy and Finance has already initiated a partial program of promotion of non-traditional exports with assistance from the Inter-American Center for Export Promotion (CIPE) and the UN/GATT Export Assistance Group. While as a result of this action general marketing information and a few specific  - 11 - market studies have become available, much more in terms of support to exporters is necessary. The limited financial resources and insufficient technical expertise have prevented DFT from playing an active role in this regard. During negotiations the Government has stated that it plans to allocate addi- tional resources to DFT starting in 1976. UNDP has also agreed in principle to extend aid in this area, including the provision of experts to assist DFT in the preparation of a master export promotion program. Moreover, the Government proposes to formulate, with the assistance of consultants, a comprehensive program for export expansion and diversification, including the adoption of measures which are conducive to the development of exports, before December 31, 1976 (Section 6.02 of the Loan Agreement). 33. The Government is aware that by and large Uruguayan industry must become more efficient before it can compete successfully on world markets and that the economy stands to gain if industry producing for the domestic market is subjected to more competition. The Government's policy is to encourage and even force greater efficiency. Recently, effective levels of protection have been lowered by import liberalization measures. However, import tariffs and other forms of protection are still high by most reasonable standards and unless the Government persists in its effort to achieve selective and general reductions, the goal of opening up the economy may prove elusive. Furthermore, the Government's intentions regarding further policy measures and a schedule of steps to lower effective protection would give enterprises adequate time to adapt their productive structure to gradually increasing levels of competition. To this end, the Government has agreed to prepare, before the end of 1976, a study of the effective level of protection afforded by Uruguay's tariff and non-tariff barriers on imports of intermediate and finished manufactured goods and, on the basis of its recommendations, prepare and carry out a plan of action for gradually increasing the levels of com- petitiveness of Uruguay's industry in world markets. (Section 7.03 of the Loan Agreement). The Bank's Approach 34. The Bank's approach to industry in Uruguay would be to assist the Government in its efforts to reactivate industrial output through the expansion of manufactured exports. Rising industrial production would encourage increased employment, while expanded manufactured exports would contribute to diversifying export earnings and to making the balance of pay- ments less vulnerable to fluctuations in world demand and prices for beef and wool. In view of the resource gap, and in support of the Government's economic liberalization program, the Bank would assist in financing incre- ments to the imported working capital requirements and renovation and expan- sion of plant capacity of industrial exporting enterprises. Furthermore, the Bank would contribute to setting up a financial mechanism that would: (a) finance the cost of importing raw materials; and (b) provide medium- and long-term credit to finance plant renovation, modernization and expansion. In so doing, the Bank would contribute to reactivating the financial market by bringing to it interest rates similar to those prevailing in major financ- ial centers around the world and at the same time help improve the financial  - 12 - structure of exporting enterprises. Lastly, the Bank would also contribute to the formulation of sound sectoral policies and to the strengthening of public sector agencies responsible for evaluation of industrial projects and export promotion. PART IV - THE PROJECT Background 35. The proposed project would be the first Bank operation in the industrial sector in Uruguay. In the past, external financing for industry was mostly provided by suppliers and bilateral credits and to a limited extent by multilateral sources such as the Inter-American Development Bank (IDB). 36. The project was identified in March 1975. Two preparatory missions visited Uruguay in April and May 1975, and were followed by an appraisal mission in June-July 1975. Negotiations were held in Washington from November 4 to November 7, 1975. The main features of the loan and project are summarized in Annex III. Project Description 37. The proposed project would support a lending program to industrial export enterprises to finance the cost of imported working capital and machinery and equipment. The project would have three components, namely: an imported working capital component of US$24.5 million, a medium- and long-term investment financing component of US$10 million and a technical assistance component of US$0.5 million. 38. Imported Working Capital Component. US$24.5 million or 70% of the proposed loan would take the form of credits denominated in US dollars to selected export enterprises to finance imports of raw materials, spare parts, other components and packing materials entering into the manufacture of non- traditional exports under the regime of "temporary admission." (Section 4.01 of the Loan Agreement). A revolving line of credit would be established in the Central Bank for this purpose (Section 3.03 (g) of the Loan Agreement) and repayments of principal and interest not required to service the Bank Loan would be relent for additional "temporary admission" imports. This feature would enable the Government to maintain a high level of "temporary admission" imports, which is considered necessary for a successful export drive. In line with the expected progress in the import liberalization pro- gram, the regime of "temporary admissions" is expected to terminate in about five years and, hence, it is planned that the proposed Bank supported credit line would only be maintained for a maximum period of five years from the date of loan effectiveness, (Section 3.03 (a) (i) of the Loan Agreement). After this time, funds accumulated from tthe financing of "temporary admissions" would be allocated to finance plant renovation and expansion of industrial export enterprises.  - 13 - 39. Medium- and Long-Term Investment Financing Component. US$10 million or 28.6% of the proposed loan would finance medium- and long-term credits to industrial export enterprises for the importation of machinery and equipment in connection with specific investment plans. While the aforementioned survey (the survey of the Planning and Budgeting Office of May 1975) esti- mated the immediate foreign exchange needs for plant renovation and expansion at about US$43 million (paragraph 31), the proposed amount of US$10 million is considered consistent with the still incipient technical capabilities of the unit that would be responsible for the appraisal of subprojects (para- graph 51) and the availability -- albeit with limited procurement flexibility-- of other external credit lines. 40. To complement medium- and long-term credits that would be financed with the proceeds of the proposed loan and to finance local currency costs related to project implementation and start up, purchase of locally manufac- tured machinery and equipment, industrial premises and permanent working capital, the Government would contribute Ur$ 7.0 million (US$2.5 million equivalent) (paragraph 57). The requirement for local currency financing, however, would be reviewed periodically during the commitment period of the proposed loan. During negotiations the Government has given assurances that it will make additional contributions as needs arise and that, as a condition of effectiveness, it would initially contribute Ur$1.4 million (US$0.5 million equivalent). (Section 9.01 (d) of the Loan Agreement). 41. Technical Assistance Component. US$0.5 million or 1.4% of the proposed loan would finance technical assistance_consisting of: (a) experts and consultants on short-terma to provide the technical un-t th-at" would be r'esponsi'blef f-the-appraisar-of-i'd--triai subprojects-(paragraph 56) special expertise in connection with the evaluation of specific proposals, and to undertake feasibility, marketing and sectoria"l studies;(b) experts to complement the assistance planned by UNDP to the Directorate of Foreign Trade in the formulation of a comprehensive export promotion program; and (c) con- sultants to undertake specific studies to assist the Government in relation to the economic liberalization program and the reduction of the effective level of protection to domestic industries. Administration of the Project 42. To carry out the project the Central Bank (CB) would open a special account (the Industrial Export Promotion Funid (IEPF)), in which there would be four s idia-.yaccounts: AcotX"(? rYadmission loans), Account "B" (medium- and long-term loans in foreign exchange for renovation and expansion of plant capacity), Account "C" (medium- and long-term loans in local currency for renovation and expansion of plant capacity) and Account "D" (technical assistance). (Section 3.03 (a) of the Loan Agreement). CB would be the depository of all funds under the project. In this capacity, it would handle all financial transactions and would submit disbursement  - 14 - applications to the Bank. The Industrial Export Promotion Fund would be audited by independent auditors acceptable to the Bank. The audited accounts would be submitted to the Bank within four months of the close of each fiscal year. 43. The commercial banks, with the technical support of Laboratory of Technological Analysis (LATU) of the Ministry of Industry and Energy, would handle sub-loans for "temporary admission" imports. An exporting enter- prise interested in obtaining financing for imported working capital under the "temporary admission" regime would request LATU authorization to so import. Upon LATU's approval, the enterprise would arrange a US dollar loan with a commercial bank of its choice to pay for the import. Once the import takes place and the foreign supplier is paid, the commercial bank would apply to the Industrial Export Promotion Fund (IEPF) for a rediscount. To that end, it would furnish IEPF with: (a) a properly endorsed debt instrument; (b) a copy of the official resolution authorizing the "temporary admission" import; (c) import shipping documents; and (d) evidence of payment to the foreign supplier. Once the operation is approved, IEPF would credit the commercial bank's foreign exchange account in the Central Bank with the amount of the debt instrument. 44. A Coordinating Committee composed of a representative each from the Central Bank, who would act as Chairman, the Ministry of Industry and Energy, the Ministry of Economy and Finance and the Planning and Budgeting Office, would be responsible for the administration of medium- and long-term subloans for renovation and expansion of plant capacity. The Committee would receive technical support from the Advisory Group (AG) of the Ministry of Iiindustry and Energy in the evaluation and supervision of subloans. An export enterprise seeking this type of fTHahcing would submit a project proposal to a commercial bank of its choice. The commercial bank would ensure that the proposal meets the eligibility criteria agreed upon with the Bank (paragraph 45 below), and would assess the financial soundness and credit risk of the project and its sponsor and, if satisfied, would present the proposal to AG. AG would appraise the technical, economic and financial viability of the project and present an appraisal report to tH6-C6rdinating Committee recommending action. Upon approval by theC6ordinatinig C'ommittee, the Industrial Export Promotion Fund would make the funds available to the commercial bank for relending to export enterprises. 45. Projects eligible for financing would be those that (a) create new capacity or rehabilitate existing capacity for the production of non- traditional exports (defined as all exports with the exception of unprocessed beef and mutton, crude and semi-processed hides, greasy wool, unprocessed grains, and in addition, automobile assembly operations); (b) generate enough net foreign exchange earnings to repay the foreign exchange cost of imported equipment, machinery, and permanent working capital prior to the fourth quarter of the estimated economic life of the investment project or seven years, whichever is lower; and (c) export at least 40% annually of their output after the second year of operation. Each application for subloans  - 15 - above US$200,000 would have to be supported by a detailed project appraisal, including internal financial and economic rates of return calculations. As the thrust of the Government's liberalization policies is towards reactivating the private sector, financing would not be available to public enterprises. (Sections 5.03 and 1.02 (i) of the Loan Agreement). 46. The Planning and Budgeting Office (PBO) would be responsible for administering all technical assistance under the project. PBO would approve contracts for consultants and/or studies on the basis of individual proposals, which would include detailed terms of references, after receiving prior Bank approval. (Section 6.01 of the Loan Agreement). Resources and Procedures of the Industrial Export Promotion Fund (IEPF) 47. The following resources would be available to IEPF: (a) the proceeds of the proposed loan; (b) the funds made available by the Government (an initial contribution of US$2.7 million equivalent); (c) the recently approved AID loan of US$5 million; (d) any funds made available in the future by the Government and external lenders; and (e) repayments and interest from IEPF's lending operations. 48. An operating manual, acceptable to the Bank, would regulate the administration-of-the resources of the Industrial Export Promotion Fund (IEPF), and would describe, inter alia, the following: (a) activities eli- gible for financing; (b) sources and uses of resources; (c) duties and responsibilities of the Central Bank; (d) duties and responsibilities of the Coordinating Committee; (e) duties and responsibilities of the Laboratory of Analysis and Testing; (f) duties and responsibilities of the Advisory Group; (g) duties and responsibilities of the commercial banks; and (h) methods of loan processing, loan approval and supervision, and terms and conditions of loans (Annex VI gives a brief description of the contents of the operating manual). The issuance of the operating manual is a condition of effective- ness of the proposed loan. (Section 9.01 (c) of the Loan Agreement). The Laboratory of Technological Analysis 49. The Laboratory of Technological Analysis of Uruguay (LATU) is a semi-public organization in the Ministry of Industry and Energy created under Law 13640 of December 26, 1967. LATU is managed by a Board of Directors represented by several members of the industrial community, a President, who is a delegate from the Ministry of Industry and Energy, and a Secretary, who is a delegate irom the Chamber of Industries. The Chamber is a private in- stitution that represents industries nation-wide. 50. V). LATU is funded entirely out of the payments received from private enterprises for its services. For these purposes it has highly qualified staff, equipment and facilities. The Advisory Group 51. Established in the Ministry of Industry and Energy under the Indus- trial Promotion Law of 1974 to assess the eligibility of industrial projects  - 16 - for special credit assistance and tax exemptions, the Advisory Group (AG) has been effectively functioning since October 1974 and consists of three well qualified industrial engineers. Although to carry out its functions AG can call upon the technical expertise of all government agencies, in practice it has almost exclusively relied on the support of the Technical Assistance Unit (TAU) in the Ministry of Industry and Energy. Created in 1973 under the Budget Law, TAU started operating only in April 1975 under a two-year UNDP Cooperation Program designed to assist the Ministry of Industry in setting up mechanisms to identify, evaluate, and promote industrial projects. Until recently AG and TAU were neither hierarchically nor legally linked. In light of the key operational role to be played by AG and the need to ensure a reliable and expeditious evaluation and approval mechanism under the proposed loan, at Bank request the Government has placed TAU under the direct authority of AG. 52. While with the support of UNDP TAU has improved substantially its technical capabilities, it still lacks expertise in project supervision and financial, marketing, and economic analysis. To help overcome this constraint and to cope with the workload expected under the proposed loan and the recently approved AID loan, the Government has agreed to expand TAU's present staff (nine professionals, of which three are UNDP experts) and hire one marketing specialist and two experienced financial analysts before any sub-loan for plant renovation and expansion is submitted to the Bank for approval. (Section 5.08 of the Loan Agrement). Finally, to limit personnel turnover and ensure the hiring of highly qualified professionals, the Govern- ment has indicated during negotiations that it will extend preferential salary treatment to TAU's high level staff. The Commercial Banks 53. Confronted with slow economic growth, stagnant industrial develop- ment, high inflation, strict Government regulations, and declining deposits, Uruguay's commercial banking system has in recent years been struggling for survival (Annex VII). To cope with this adverse environment, the commercial banks have become risk averting and operationally conservative. To prevent an overly stringent financial evaluation, and/or excessive collaterals, and to motivate bankers to extend financing to export enterprises, special incen- tives would be provided under the proposed loan. To that end, the Government has agreed to: (a) exempt any transaction financed under the loan from the 8.2% tax on banking activities; this tax discriminated against the private commercial banks as the state-owned Banco de la Republica did not have to pay it; and (b) to exclude any transaction financecl under the loan from the overall credit ceiling established by the central bank for the participating banks; and, (c) to insure medium- and long-term loans to industrial enterprises for fixed investment. (Sections 3.05 and 5.07 of the Loan Agreement). The Government, with the assistance of AID and the Bank, is working on the es- tablishment of an Industrial Credit Guarantee Fund by early 1976, to insure up to 60% of medium-and long-term loans made by participating banks for plant renovation and expansion (Annex VIII). The Fund's resources would be  - 17 - provided and administered by the Central Bank. To help maintain an adequate reserve loss coverage, a minimum fee of 2.5% on the guaranteed portion of the loan, paid at once in pesos on the basis of the dollar exchange rate prevailing on the commercial market at the time of the transaction, would be charged to industrial enterprises benefitting from the scheme. The establishment of the Fund would be a condition for submitting any subproject for Bank approval under the medium- and long-term investment financing component of the pro- posed project (Section 5.08 of the Loan Agreement). 54. Commercial banks would need to be in good standing with the Central Bank to participate under the project. Commercial banks would have to assist the Advisory Group, when appropriate, in appraisal and supervision of sub- projects. Eight commercial banks -- three foreign, and five local, including the government-owned Bank of the Republic, have indicated willingness to participate in the proposed arrangement. Relending Terms and Conditions 55. The proposed Bank loan to Uruguay would be for 18 years including 5 years of grace. The term of the loan reflects Uruguay's need to obtain development finance on suitable terms, to improve its external debt profile and to ease the debt service burden on the balance of payments (see paragraph 17). The proceeds of the loan would be passed on to the Central Bank (Indus- trial Export Promotion Fund) on the same terms as the Bank loan. The Central Bank would relend to the participating banks on terms intended to provide them with an appropriate spread. Exporters would receive working capital and investment loans from the commercial banks at realistic positive interest rates and on terms appropriate for these purposes. 56. Loans for "temporary admission" imports would be in US dollars and would be extended for a minimum period of 180 days and a maximum period of 395 days. The loans would finance up to 100% of the cost of imports of raw materials and other intermediate inputs entering into the manufac- turing of non-traditional exports under "temporary admission." The maximum annual interest rate charged to sub-borrowers, payable in dollars, would be 3-1/2 percentage points above the LIBOR rate (London Interbank Offered Rate for Deposits for 180 days) quoted as of 3 p.m. (London time) two business days before the date of the sub-loan contract. The equivalent of the LIBOR rate plus 1/2 of one percent would be retained by the Industrial Export Promotion Fund (IEPF). The commercial bank would receive a maximum spread of 3%. 57. Repayment of principal and interest would be withheld from the proceeds of export sales. To this effect, at the time the commercial bank would surrender the foreign exchange value of the export to the Central Bank, it would compute the amounts that would be applied to the cancellation or amortization of the subloan and to paying interest due to IEPF. The export- ing firm would thus receive only the local currency equivalent of the remain- ing foreign exchange proceeds. The commercial bank would, at the time of credit approval, establish an amortization schedule compatible with the  - 18 - enterprise's expected export program. Interest would only be paid at the time of each principal repayment and would be calculated on the amount then outstanding. 58. Loans for renovation and expansion of plant capacity would finance up to 100% of the foreign exchange cost of imported machinery and equipment of individual export-oriented projects. The loans would be expressed in US dollar equivalents and be repayable over four to ten years, including one to three years of grace. The interest rate to sub-borrowers would be 11% per annum of which 8-1/2% would cover the Bank interest rate, and 2-1/2% would be the spread for the commercial banks. Repayments of principal and interest by sub-borrowers would be made in pesos on the basis of the dollar exchange rate prevailing on the commercial market at the time of each maturity. Sub-loan repayments would be retained in a separate account in local currency (Account "C") in the Industrial Export Promotion Fund and would be used only to finance similar projects. Sub-loans in local currency (Account "C") would be complementary to the ones provided in foreign exchange (Account "B") and would be made on the same terms. To prevent a few relatively large projects receiving a disproportionate share of the funds available to finance plant renovation and expansion and to ensure that investors make a reasonable finan- cial contribution the aggregate financial assistance for any project, both in foreign and local currency, would not exceed 85% of total individual investment cost or US$1.0 million equivalent, whichever is lower. (Schedule 2A(b)(3)(ii) of the Loan Agreement). 59. In view of the Advisory Group's still limited project appraisal capability, and to ensure adequate project appraisal review and technical assistance by the Bank, sub-loans over US$200,000 would require the Bank's prior approval. (Section 5.01(c) of the Loan Agreement). This limit would be reviewed from time to time and would be increased as the appraisal capabi- lity of the Advisory Group improves. With the average sub-loan expected to amount to about US$350,000, some 15 export projects would be reviewed by the Bank during the commitment period of the proposed loan. Procurement and Disbursements 60. For the imported working capital component of the project disburse- ments would be made against the foreign exchange cost of imports required in 1975/76 by a wide range of exporting industries under the "temporary admission" regime, with the exception of automobile assembly operations. In 1976 it is estimated that these disbursements would finance about half of the projected total "temporary admission" imports bill and as such would cover approximately the incremental foreign exchange requirements generated during that year by the Government's export diversification program. Since procurement for imports to be financed under this loan component would deDend on the decision of many enterprises for a large number of small items, international competitive bidding would not be required. There would be no retroactive financing but goods imported under licenses or letters of credit issued before the date of signing but paid for after that date would be eligible for reimbursement. The Central  - 19 - Bank would be responsible for collecting, through the commercial banking sys- tem, invoices, evidence of shipment, and evidence that the foreign suppliers have received payment. Such evidence would be forwarded to the Bank in support of withdrawal applications when claiming reimbursements of loan funds. The Central Bank would have to certify that it has not claimed financing for these imports from any other bilateral or international development finance institution. In the light of the present trends on temporary admission imports, it is expected that this portion of the loan would be disbursed within twelve months after loan signing. 61. Procurement and disbursement procedures for the medium- and long- term investment financing component of the project would be the same as under standard DFC operations and would finance 100% of the foreign exchange cost of imported goods. On the basis of the applications received through June 30, 1975 by the Ministry of Industry and Energy under the Industrial Promotion Law, and the Planning and Budgeting Office's survey of May 1975, this loan component is expected to be fully committed within 24 to 30 months from the date of loan effectiveness, and disbursements are expected to be carried out within 30 to 36 months from that date. 62. Contracts for technical assistance would be awarded to consultants from member countries of the Bank and Switzerland in accordance with Govern- ment's practices, which are consistent with the guidelines on "The Uses of Consultants by the World Bank and its Borrowers" issued in April 1974. Dis- bursements for this purpose would be made against normal documentation which would be submitted by the Planning and Budgeting Office through the Central Bank. Technical assistance funds left unused upon commitment of the Bank loan would be re-allocated for onlending to export enterprises for renovation and expansion of plant capacity. All financial charges related to this por- tion of the loan would be borne by the Government. PART V - LEGAL INSTRUMENTS AND AUTHORITY 63. The draft Loan Agreement between the Republic of Uruguay and the Bank, the Report of the Committee provided for in Article III, Section 4 (iii) of the Articles of Agreement of the Bank and the text of a resolution approving the proposed loan are being distributed to the Executive Directors separately. 64. In addition to the specific features of the Loan Agreement which are referred to in Parts III and IV above, the following additional condi- tions of effectiveness have been included: (i) that the Industrial Export Promotion Fund has been established (Section 9.01 (a);  - 20 - (ii) tthat the Coordinating Committee has been appointed (Section 9.01 (b); (iii) that the Operating Manual has been issued (Section 9.01 (c); (iv) that the Government's initial contribution to the Industrial Export Promotion Fund has been made (Section 9.01 (d). 65. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART VI - RECOMMENDATION 66. I recommend that the Executive Directors approve the proposed loan. Robert S. McNamara President Attachments Washington, D.C. November, 1975  ANlj,EX I Page 1 of' pages CONMT DATA - U-RUONAT anE POPULATION gNNSITy 177,500 kmS 2.6i10 (mid-1972) .. P., Imaof arable land SOCIAL INDICATORS Raference Countries OR? MER CAPITA US8 (ATtAS oASIS) /I 760 /a 800 La 1,300 ~j 3,670o DEI9MAPHIC Crudebir-th rate (per thousand) 22 21 30 22 bc1.3 ki Crude death r.te (per thousand) 9 10/96 Infat mrtality rate (per thousand live births) 4.7 0 7920 cd.LU.a Lif epec'tancy at birth (Fears) 69 /6 70 If 62 ZA 68 73 h Grss.e.o.. i, rae 141 .1.tf 2 2~f 2.0 ~ 72 Population growth rate L]7 ~~~~ ~~~~~1.5 1. 3 2.3 i 2.2 Li. Population growth rate - urban 2.2 2 36 6.2 Age etruoture- percat) ii, ~ ~~~~~~~~~~9 28/ a9 3 231h /d 61.n 6 ~~~~~55 5 a 61.7 65 and ovr 8 96 1. Age dependenc ratio 0.64 0 . 0:8 0. Od Economic dependency ratio 1.0 Li 1 16 1.3 0.8 Urban population as peroent of total 75 /j 78 L 76A ~ 100 /I 80 L Panil,? plann,ing, No. of anoeptors oumulative (thous.) ... 193 Ro. of users (% of married womeen) ..*. 1..7 msLnymml Total lbor fror (thousands) 1,000 / 1,100 3,000 /d 730 2,4.00 Percentage employed in agrcutue OL 17 /419 / 3 9 5 Percentage unemployed 9 94 5 d4 701. 2.1. _ IN01M DISTRIBrtJION P.re.__oT =.t a1income receiled by highest 5% ..2 Ls 3OLrA, 22-4L2 Percent ofnational jocose, rceived by highest 20% ..71. 57ZI ~ 48 -!j Percent o' national income receive by lowest 20% 4. 4 Lr. .1 . Percent ofa-nional innom rece.ived by lnosat 4.0% . 1 1 3.4..11 L Lr MISTIBIUTION OF LOND OWNERSHIP % owneo by top 10% cf owners... E -o-n- by smalleot 10% of owners .. RMALTH AND NUTRITION Popultio0n_p_e_r physicin 880 Le 91.0 2,010 / 1,520 690 Population per nursing person 5,4.10 3,560 5,320 4i160 210 Peoulatimn per hosfpital bed 190 160 /x 250 270 100 Per capita calorie oupply as % of requiremnts/ 115 / 107 102 103 9 120 Per capita protein supply, total (grmas per dayT/6 110 /4 96 66 63 Li 91 Of wthich, anmal and pulse 71 / 61. 32 34. 59 Death rate 1',, yeorc, /7 1.5 /4 1.3 3 /4 0.5 /,80.7 EDUCATION Adj3uated /8 primary school enrollment ratio us5 118 /5 kg 219PLL-& 105 /a 98 Adjusted Imscondry achol enollment ratio 37 56 29 1.7 87 Years of ochtling provided, first and second level 12 12 12 12 132 Vo-ationa erlmnt as8o a.school enrollast 23 22 /433 9 32 Adult liter:Cy rate% 90 4 91 ,j90 /4.x 75 Lg. 99 41 ;OUSfl9 Arverage No. of persons per room (urban) 1.5 .. 4mm1.3 at & 2.9 'ad 0.9 Per cent of occupied uwits without piped water 1.1 & M LO 1.0 20 3 Accesas to electricity (as % of total population) 78 .. 8as 87 Peaet of #u.. I populatio, connected to electri city 29 ZR .. 30r R.io~iv per.1000 population 285 507 /411.9L 150 /4 327 / Passe.nger cars Per -000 population 4.1 42 19 82 232 / Electric poser consumption (kwt P. c.) 512 836 /4890/ i,1.64./ 3,1425 Z Newsprint convuoption p.c. kg per pear .8.7& 7.4 5.7 10.4 35 L Notso, Figures rater either to the lat.at periods or to account of aevircuote u ti~eS eaa e the latent years. tatet pe-iodo refer in pr~inciple to distrdbutim by age md am mf national paplatimna. the years 1956-60 cr 1966-70; the latest years . in rin Protain etMaLrde (rwiequ