El Salvador - Current economic position and prospects

SRETURN TO IREPORTS DESKJ E RESTRICTED WITHN I YReportN o. WH-100a This report was prepared for use within the Bank. It may not be published responsibility for the accuracy or completeness of the contents of the report. I- TNTIRNATTONAT. RANI FOR RFCON1rVTRTjTT NJ ANT) T1PVRT(n OPMRNT CURRENT ECONOMIC POSITION AND PROSPECTS OF L-T C AT TTA tf/D 4=#+ LL1Jj v LA July 20, 1960 Department of Operations western Hemisphere CURRENCY EQUIVALENTS U.S. $1 = 2. 5 colones ((Z) a1 = U.S. 40 cents 0G1 million = U.S. $400. 000 TABLE OF CONTENTS Page No. Basic Data i SmTnary qnd Cnnclioin i I. Introduction II. Eonomic Growth A .DPrID nF ECNMjCT EDATn:M. 1919-19&7 1 1. TUE REDIIMr *ON:T. 195r- n1 J .£ ECNLID IrETVIR. 196c^ III MoM.etary Developments 6 IV. Government Finances V. LongRange Prospects 10 BASIC DATA PoDulation. mid-1959 2.06L.000 AnniAl RAtA nf PM-nnltnin r,ut.h- 19qA-194Q ,VPrqA 3.7c Per nni.qa-g!nTna,.-+je Pr;0ct 199 27 % of G.D.P. 18 % Commodity Exports, 1959 $112 million Coffee $ 71 million ,V us otual exports U4 Cotton $ 19 million 7or otal exports 21 % Gold and Forei&n Exchange Reserves December 31, 1959 $ 36 million % of imports o Government Finance J)f a i'Lyu* Tin million colones) Rever 167.7 156.7 165.0 Expendi-tire current 141.0 139.5 138.0 capital 28.9 25 8 27.0 169.9 165.3 165.0 Surplus or deficit (-) - 2.2 - 8.6 - Public Exjternal Debt, 1959 Outstanding $31.5 million disbursed $23.4 million undisbursed $ 8.1 million Peak Service of Total Debt Outstanding $ 3.8 million % of 1959 export receipts 3.4% SUNMARY AND CONCLUSIONS 1. During the decade ending in 1958, El Salvador enjoyed economic prosperity with the gross domestic product expanding by almost 5% per year. This was the result of a spectacular expansion of the export sector, the increasingly effective use of domestic resources and a large inflow of foreign capital. Social and political stability and sound fiscal and monetary policies also promoted the growth of the economy. 2. With the collapse of the coffee boom in 1958, however, lower profits and expectations that the export sector would remain depressed for some time. resulted in a reduction in private and public investment. Industrial firms operated below capacity and unemployment increased. Public revenues declined sharolv in 1958 and 1959 and the Government drew on its cash balances with the Central Bank to finance part of its expenditures- In 1959. the balance of avnments on current account ended with a deficit, and income growth came to a halt. 3. The monetary and fiscal authorities took effective measures to Pnqp the naditment nf thA Anonmy to the nivorqP 8rPlonments. Starting in 1958, the Central Bank reduced rediscount facilities. The Government tok stan +t oAn= +.hr t an hairan ravann and erninAi+.nrr and e.VnPts to balance the 1960 Budget. Earlier this year the Central Bank further rates. 4. El Salvador faces the future in a strong position, and the long range outlook ^-P +he e-cnmym is faoabl&.e. '01W4- .-A A-v-n+ - - -+ma-+- of recent years are beginning to bear fruit and investment in human skill and -stlt%=s or pyn off more and more in ~poutv y h diversification of exports is tending to lessen El Salvador's dependence on offee, anu new IusuUrial eterpriStM Uru proviuing employment opportunities and helping to offset the decline in coffee income. I. INTRODUCTION 1. Thew a e=-t-4ion exressed.- 4- +,k l~' nnas ri.rn,+ Salvador (WH-87a, dated April 10, 1959) that sound economic and financial coffee exports, has been borne out by subsequent events. The short-term problems that aeU the UvermUentU were vigorouly MUAleU, and the neces- sary adjustments were made with a large measure of success. 2. El Salvador's basic problems - the rapid growth of its population, the need to increase employment opportunities in the face of meager Land resources, and the heavy dependence on coffee for foreign exchange earnings - remain the same. But, efforts made over the past decade to overcome them have met with some success and have helped to provide foundation for con- tinued economic growth. The trend toward diversification of production and increased integration with neighboring countries holds promise that these problems will be alleviated and ultimately solved. II. ECONONIC GROWTH 3. Over the decade ending in 1958, the economy of El Salvador prospered, with GDP expanding at nearly 5% per annum. This was the result of a spectacular expansion of the export sector, the increasingly effective use of available resources, and an inflow of capital from abroad. Economic growth was also helped by social and political stability and by sound fis- cal and monetary policies. 4. Export earnings which on the average accounted for almost 25% of the gross domestic product, strongly influenced the pace and direction of economic growth. The rise in export earnings, from $55 million in 1949/50 to $ l.2 million in 1956/57. or at 14.5% annually, helped to accelerate the growth of the domestic sector. When the coffee boom came to an end in 1958, however, income growth slowed down, and ceased altogether in 1959. A. Period of Economic Exoansion: 1949-1957 5. During the years of the export boom, rising export incomes and profits provided a strong stimulus to increase the production capacity of the economy. The high level of investment. in turn. resulted in rising levels of employment and output. In the agricultural sector, coffee pro- dunprR innrPaiA thA nimbAr mf nnffA trAARn nd annlied imnrnvd methnas of cultivation to increase the yield of existing plantations. The volume of coffeepot nrose, vnannd wit.h pries r-isming from 29 TU.S- ce-ntsn penr poundl in 1949 to 64 cents in 1957, coffee export proceeds increased from $48 millin + an allt4ma ank tf $110 mill4n, (Table 10). and because of the growing awareness of the risks of monoculture, land- - 2 - owners, and especially coffee growers, turned to cotton. The availability of fertile soils and an amnle sunnly of farm labor encouraged this devel- opment, which was financed largely from high coffee profits. The area under ntton incrAsAd frmm 14-o hAtnrAn in 1QZ9/q0 tn qA-000 hentares in 1956/57. This increase was accompanied by an increase in yield; pro- diintinn nAr hPn+na in 1Qgr-19 1aFin fA niktlQ e%rnmnqAA with Q niiin- tals in 1949-54. Total production increased almost fivefold between 1949 Aind 1 QA7. Avorrop oarmnl n_n+1-+^r--~v nn-n. aania Ly- AIMAtvl. hrAA AMA greater in 1955-57 than in 1950-54, and the share of cotton in the combined vmlue of all eportc ron from 9C 4n 1O9 O 114 in 1497 1/ 7. The= eansio4n of 4nc^me, --1u+4- frmlrgre-ot-nd-vr able terms of trade, also brought about an expansion of the output of goods onA4'o --,,nnC..,~nranva~n~4a,~A --A-a~r. I +Un. -u-_bn _P 4nvnaea imports without endangering the country's external financial stability. -,4,,aa. C10 n 10157, imot inrae b 141%OwF Tte ris n imprt 4a. mas,. accompanied by a significant change in their compositionj the share of ditures on machinery, equipment and raw materials necessary for industrial PrLJUoUUCU_L aUL1 %1MUI~J.Md "/ L11 J-7: CaP.LI.U.± guOut JLIpurl-b UU11O LLU~U 45% of total imports, against 35% in earlier years. 8. With the help of higher tax rates on coffee exports and increased revenue from imports, the Government was in a position to play an important role in accelerating the growth process. Development expenditures provided basic services and facilities which created new opportunities for private investment. Construction of the coastal highway made additional land resources accessible, led to greater production and permitted a partial resettlement of the population. Increased expenditures on education and vocational training, on hospitals and public health measures contributed to increase the supply of skilled workers, and to raise the productivity of labor. 9. The Government's development efforts were channelled in various directions. Several new institutions were set up. The Comision Ejecutiva del Rio Lempa (CEL) expanded its power facilities to meet the rapidly grow- ing demand. The Instituto de Colonizacion Rural (ICR) fostered agricul- tural development, and provided technical assistance to small producers. The Instituto de Vivienda Urbana (IVU) constructed low cost houses that were sold to low income groups and laborers. The Instituto Regulador de Abastecimientos (IRA) was established to stimulate production of basic food crops and to stabilize their prices. 10. To help finance development, the Government and its agencies borrowed from abroad, mainly from IBRD, and some of the autonomous agencies obtained part of their resources through local sales of bonds. But by far the greater part of the necessary finance was provided by budgetary appropriations. I/ By 1959, cotton exports constituted 21% of total export receipts. - 3 - 11. The private sector responded to the export boom and the Government's activity by increasing its capital investment outlays from V75 million in 1950 to 9'181 million in 1957. The investment was financed partly by the repatriation of assets held abroad, but primarily out of current profits. As a result. eross capital formation increased and its share in GNP rose from 12% in 1950-53 to 16% in 1954-57. The share of private investment in total canital formation rose from an average of 74% in 1950-53 to an average of 86% in 1954-57, (Table 7). 12. An expanding domestic market, together with social and political stability. and freedom from exchange control. attracted a large and con- tinuous flow of direct foreign investment and created favorable conditions for obtainino annital from offininl -eumrn nhroA Tht fnvorable annrais- al by foreign investors of profit prospects in El Salvador was enhanced by th Government1s nrantA of' granting gnorons tariff nrnftntion and other privileges. The "Law of Development and Transformation of Industries", duties on equipment and raw materials, and from various other taxes. Under the law- 1/; mtmaim.nto were etu or axanAnde 1049 anA 107 with a declared capital investment of 075 million, (Table 8). 1V 13. With regard to official capital inflows, the Government guaran- teedA a tl!. 541millio n I loa to - the T__o Lempa I-i o (L) In/94 to finance the foreign costs of the first stage of the Rio Lempa hydro- IBRD loan to help finance additional power generating capacity. In the 4.4 L. fm ,-4 +. -' '-..L. 1 ..L_J _ ._. I ___ _r%-r P4_)A u + anuportmetUi, le UoVKLUllU UU ULIU uWU VuUs Iron lu A.rw one, in 1954, for $11.5 million for the construction of the coastal high- way, and a second, in 15, for 45.U million for feeder roads. 4. The rict in public and private investment resulted in a steady expansion and diversification of output in both agriculture and manufac- turing. The expansion of agricultural output not only provided increased exports but also met the growing demand by local industry for such raw materials as cotton, henequen, vegetables and fruit. It also provided markets for the expanding output of industry. The growth of output in mnuLaUcuring was even more pronounced than in agriculture. Indexes or industrial production indicate during the period 1949-57 a rate of growth 01 '17, against less than j7 in agriculture. In the same period, power generation grew at a rate of 15%. The differences in growth rates resulted in changes in the shares of UNP by origin; between 1950 and 1957 the share of manufacturing and power increased from 12% to 15%, while that of agriculture declined from 44% to 37%. 1/ By 1960, the number of establishments had risen to 206, and declared investment was $173 million. .L.,1 0 J.11 L1 L~1J.J. J C~1AJ L % , V4. V .J. Vey , "11IJ_ AL 11=U ~ ~ IAJ .Y UL L~ Latin American countries in 1957 and 1958, did not influence El Salvador u4vil v-1 & cI au_ r-In Q T -L u-1u n "I e-ve" of J vestmeut whln uh na -3 v-4-v"-u U-ILL U.1k 11Z-lU U.L JL;)UW lilt; iL.L611 LCVV.L .L .LL IVV ULULJL Wil±lul flau S UCAMVU with the coffee boom in 1949, continued through 1958. This helped retard, and _Laer on cushion, the i1pacV on the economyl uWt tUne Urastic ucliue of prices of the country's major exports. Thus, while coffee prices dropped ±rIL )4 U .~.c~ia ei .uu11 ..0 UV 14 U. a~1L n1 '-,) ai uV.igp exchange earnings from coffee were 23% lower in 1958 than in 1957, the impact was Les severe than thee extent of tne decline in coffee earnings. The tradition of selling a large part of the coffee crop on the futures market made it possible to hedge against the Dull impact of the price decline. Moreover, the coffee withholdings required under the Washington Agreement were absorbed by the local soluble coffee plant and sold in that form in foreign markets at favorable prices. Finally, a 20% increase in the volume of cotton exports and a rise in the value of *other" exports partly offset the loss in coffee export earnings. As a result, total exchange earnings from exports in 15 were only 16% below the 157 peak and 3% higher than in 1956, (Table 10). 16. Production of goods and services for the domestic market was somewhat higher in 1958 than in 1957. Agricultural production was 5% higher, and electric power consumption rose 16%. Public works helped maintain employment at the 1957 level. Only the output of manufacturing industries declined by 2%. On the whole, the gross domestic product expanded by 2.67, somewhat less than the rate of population growth. 17. In 1959 the value of total exports declined 3, although cotton earnings were almost one-third higher. At the same time, domestic activity declined and the upward trend which the economy had maintained since 1949 came to an end. With the exception of government services, activity declined in all sectors, (Table 6). Agriculture, which accounted for over 37% of the total domestic product, was dowm by 3%. Construction sharply decreased, and resulted in a rise in umemployment. Manufacturing output contracted, with textile producers operating below capacity. The gross domestic product declined by 1.8%. 18. The Salvadorean authorities took measures to adjust the economy to the decline in export earnings, and to restore confidence in business circles. As a result of strict fiscal and monetary measures the money supply increased only fractionally, import demand declined and the cost of living index remained virtually stable. The scope of the "Law on Development and Transformation of Industries" was broadened to attract more investment. The Rio Lempa Commission (CEL) went ahead with its plans to increase facilities and construction work at the Guayabo Dam progressed satisfactorily. The Salvadorean Legislative Assembly ratified the Multilateral Trade Treaty and other agreements in preparation for a common market for Central America. -5- C. Economic Recovery: 1960 19. In the first half of 1960, the downward trend seems to have come to a halt and the economy is showing signs of recovery. Coffeeprices con- tinued firm around 41 U.S. cents per pound and the 1959/60 crop set a new record. According to the International Coffee Agreement, El Salvador (like all other countries with an exportable production of less than two million bags of 60 kilos each), can export during the year ending September 30, 1960, the higher of 88% of its exportable production, or 90% of its high- est annual exports during the period 1949-58. Therefore, out of an export- able production of 1,540,000 bags, El Salvador's ouota for 1959/60 is -, 1,355,000 bags, about the same as exports during the preceding season.;/ 20. The 1960 cotton production is expected to be 25% lower than last year. But, the general increase in prices. together with an improvement in quality, should partly offset the impact of smaller production. Foreign exchange earnings from cotton exports are estimated at $17 million. or 16% below the 1958/59 peak. 21. Present estimates place total export earnings from coffee, cot- ton and "other" Arnorts in 1960 nt a sliohtv higher IevAl than list var. At the same time, the production of goods and services for domestic con- snmntion is pynAntAa tn ------ - thp rnrt of 19On0 and avan morp in 1961. As a result of the opening of new lands in the coastal zone, some in.nncn q?'p m-m r.tfarl in crj-r4 nnrl -f- 1 r%vfN1ir.A^n T^ a c +.hp Omnle)v-~ ment situation, public construction works have continued in full force and the building of feeder radsA is epecte to startson Plansmre ready for the construction of warehouses at the Acajutla pier before the 1n at,1() A _-Pmm m w+ s +I- Ma+n o De-l, +1-+ -4- w-lA -14hak e 14- S,j/ JJ . . s .- -l", asn WlU.. UtI i . -1 u.o JJ seas Ja.n UtLoL U .LV U .Lu _LJ..j" A .Lb credit to finance the construction of new houess and the building of addi- utinall ow-cous, houseo auu uraz ocuouS y le CGuVeruLimenu 1u11Ug Institute (IVU), has helped to raise the rate of construction to a level ~L U~ ~ L. LU L=O. 7; J. Q*O 22. Indutrial production has already recovered; the recovery is attributed to improved expectations regarding income growth. Moreover, several new manufacturing enterprises have starteu operation, anu several others are to go into operation soon. A sugar refinery costing V7 million, 1/ Coffee stocks, which under the terms of the Agreement had to be retained and could not be exported during the withholding period, were in the past years bought from producers by the Compania Salvadorena de Cafe at a price of 16-20 U.S. cents per pound. Profits on subsequentsales were evenly divided between the Government and the producers. In 1960, the Compania agreed to purchase coffee withholdings at prevailing prices, and bear the risk of price declines at the end of the withholding period. Financing of these stocks is to be arranged by the Compania from its own resources, sup- plemented, if necessary, by bank borrowing. the first in Central America, started production for the local market The success, in earlier years, of joint ventures - a Japanese-Salvadorean -textile~ p.lan-t- andL ant± Mmer-Lcn-loa"Lv-au-u-c-I 1 ~.11-- -1±~ -- I_± U___ repeated with U.S. participation in a paint factory, costing %3 million, and an alminum pLant E milLiUn), Unu with U.O., Uerman, Dutch anU Central American participation in a chemical and fertilizer plant (N25 million). SL.Lour iLL.L U5 U.LcnF PU I ulln, nlow uJIUUr CU1,irUC-UlOn, 1. eXpecTea 3o TAL-U operation in the latter part of the year. An Investment Guarantee Agreement between the Goverinment of the Unites States and El Salvador, signed in January, 1960, may help to stimulate private foreign capital inflow. A '0 million Esso oil refinery and distribution system project is under way. and a similar investment by the Royal Dutch Shell is expected to take place soon. 23. Despite the growing importance of industry, however, El Salvadorl s economic growth prospects in the years immediately ahead will continue to be largely shaped by income from coffee and cotton, which together constitute over 22% of GNP and account for 85% of the countryts foreign exchange receLpts and about 60% of Government revenue. On the whole, if the International Coffee Agreement is continued on the present basis, and if favorable cotton price projections materialize, income from the export sector should resume its upward trend, and national production should grow at a rate significantly higher than population growth. III. MONETARY DEVELOPIETS 24. El Salvador enjoys a good reputation for the prudent conduct of its finances. The country has been able to avoid serious deflationary and inflationary repercussions of the fluctuations in its export earnings and to maintain, without recourse to exchange controls, a stable rate of exchange. 25. Monetary expansion during the period of high export earnings helDed to speed up El Salvador's economic growth. The expansion of com- mercial bank credit, in part made possible by Central Bank rediscounts, was justified by the expansion of production, stable prices and large exchange reserves. Claims of the banking system on the private sector rose from $51 million in 1949 to 0286 million in 1957. The monetary im- pact of credit expansion was partially offset by an improvement in the net position of the Government vis-a-vis the banking system. As a result, money supply grew less rapidly than private credits, (Table 16) and although imports expanded, their expansion was not excessive and the net foreian exchange position of the bankinp system improved. 26. The weakening of the coffee market. torether with the unfavor- able prospects for other exports, led the Central Bank to revise its monetrv noliv and adiust it gradual1v tn the chaned conditions. Earlv in 1957, the Central Bank raised its rediscount rate to 35 on agricultural - 7 - --'s ~ ~ --A 4--~ 10 - - - -',V -n, ' - - - the tighter money policy, however, was not felt until the end of 1958, whna cu. in. I~'±ai Uu.n& .L u.i' uvn F_C%.V 41 -- rise in non-monetary liabilities, public holdings of mortgage bonds, time and saving deposits, and in bank capital ad rUs.Lv, resultU in a %P reduction in money supply. Imports also declined by 6%, while foreign exchange reserves rose, (table 15 ). AT Tne ena of 19 I, ne, gUlu ad for- eign exchange reserves of the banking system were $46 million, equivalent to more than five months imports, and providing an almost 100 cover for the currency in circulation. 27. The curtailment of credit in 1958 was not across the board, but was applied on a selective basis. While bank credit ror consumption ana imports was increasingly difficult to obtain, it was adequately available for production purposes. Central Bank loans and rediscounts were increasea for coffee and other agricultural production, frozen for commerce, and drastically cut for personal loans,(Table 17 ). 28. In 1959, the situation became more difficult because of the deterioration in government finances and an expansion of credit to the private sector. Faced with rising expenditures and declining revenues, the Government reduced its deposits with the Central Bank from 44to 06million over the course of the year; credit to the private sector also expanded by V24 million. However, the expansionary impact of deficit financing and private credit was offset in part by an increase in savings deposits and in bank capital, and a balance of payments deficit of U.S.$10 million. As a result, total money supply expanded but little (V4 million) and the price level remained almost stable. 29. The balance of payments deficit on current account was financed by drawing on IMF and by short-term borro.vlgof $5 million from the New York Fed-Aral Peserve Bank and $2 million from the Chase Manhattan Bank. The loss in reserves was caused to an important extent by delays in coffee shipments rino thp intter nnrt of 1959 and the fact that exporters did not repatriate all their foreign exchange receipts. They took advantage of the rplativelv high vields in the money markets of the United States. Mexico and Canada, investing their holdings in short-term paper abroad, while using Cnral Bane mrriint reilities to satisfy their domestic needs. in To correct +him situation and for.t,,11 a further drop in foreign exchange reserves, the Central Benk decided at the beginning of 1960 to .A,-+ -not,v%^. -+t.ne metre f.-onl "Rnk rpvn1vina nredits were replaced by straight discounts and the rediscount rates were raised from ~X01 ~ A~+a n"A I',~ +. L49 on Aginuituiral jand industrial loans. These measures, together with a more thorough screening improvement in the fiscal position of the Government, eased the pressure Mac 1960,~ ctra1 B.. Ans- 4an Pd.;- invt+ met woAe 6 I +lowe tha tr on± Cet al ValmJ QJLS. 'U_L±U UUIL-L.1r ""L LIO VCL.L W _j -_O. -_ -_J March 1960, Central Bank loans and investments were 6% lower than at the end o1 1varori 2 Ifese developme~nts wer ev%.V -jC,1 1LJ4J . do 8 the forae exhange recone t oe the +l icnt +_ pva its short-term obligation to the New York Federal Reserve Bank and to Chase Manhattan Bank anrd ed +,e its + +r% +h Te+.%+4rmnT Monetary Fund. Of the t7-5 million drawing on the Fund, only $2 million . .. UQJ LA U11%- kjq;,11.LE_ WCUUN. ~ 41 1 .L% J1~L~ WC 1 expansion of commercial bank credit to the private sector in the first five months11 of. 1960,j reULtngAr in a rather _laUre in1crase in1 theW 1UMy supply. As a consequence, foreign exchange reserves declined in recent II~~~~J11U110,~~-- -- 1 110 -~ U11 1) I~. __I~J L,IX. i IA1 ILI.I3 A)I sion continues during the rest of the year, it may result in a further loss of foreign exchange. c.1L uLnanca siaU-_L1y is to oe preserveQ, T. SalvaWr'S oanK- ing system will have to limit credit expansion. The drawing down of balances of the Government expected in 190 actually may make it necessary to restrict bank credit to the private sector, if domestic inflation is to be avoided and foreign exchange reserves are to be maintained at adequate levels. The imposition of severe restrictions on credit to the private sector may, however, hamper FU Salvador's economic growth, since many of the investments which would be financed by such credit would accelerate production for local consumption and export. This makes it especially important and timely to supplement domestic resources with external re- sources to finance imports of capital goods needed for agricultural and industrial development. IV. GOVERNMENT FINANCES 33. The growth of the economy over the period since 1950 has been reflected in the growth of public revenues and expenditures. During the years of rising export income, 1950-1957, government current revenues increased by 115%, while the domestic product grew by 53%. In the mean- time, expenditures increased more slowly than revenues and the Government was able to accumulate deposits amounting to 064 million by 1957, more than one-third of the Government budget in that year. 34. As the growth of the economy slowed down in 1958, government revenues dropped by 022 million, or 12%. Lower yields of import duties and export taxes were mainly responsible for the decline. Government expenditures, on the other hand, were maintained in the face of lower income and less employment in the private sector. A cash deficit of 2 million was incurred and was financed from the Treasury's accumulated cash balances with the Central Bank, (Table 24). 35. The small increase in expenditures in 1958 was associated with a reallocation in government spending. With the exception of defense expenditures which were kept at about 10% of the budget, expenditures on general administration, education, health and social security and welfare. were increased, while those on agriculture and public works were reduced. Appropriations and subsidies to autonomous agencies were also curtailed, and the Government stretched some investment projects over a longer period of time. As a result, the 1958 economic development budget absorbed only 17% of total government expenditures, against 20% in 1957 and 23% in 1956. 36. In view of a further decline in coffee and cotton prices in 1959, and the general slackening of economic activity, the Government took vigorous measures to reduce the gap between revenues and expenditures. Through a revision of the tariff system and an acceleration and improve- ment in tax assessment and collections, government revenues were increased V16.5 million above original budget estimates; but they were still 1l mil- lion, or 7%, below the 1958 level. Expenditures were limited to those absolutely essential; subsidy payments to autonomous agencies were further curtailed; cuts were made in administration, defense and public works, while expenditures on education remained unchanged. As a result, the deficit, originally budgeted at V30 million, was only V8.6 million, or 5% of total expenditures. However, in addition there were V11 million of payments obligations, on which payment was deferred to 1960 and subsequent years. 37. The budget for 1960 provided for wnpnditurAs of 181 million, the same amount as in 1959. Revenues were estimated at V,164 million, leaving a definit of V17 million to be finannnA from annmint. halannoAn with the Central Bank. Since a deficit of this magnitude might reduce forRian Aehange reserves onPc unomfotb 1 lhtal anrl net +he. stage for a period of inflation, the Government decided to set a ceiling of 1I 6 millinn nn it =rnanr1i.turma on +han+ rAh rrnues exected +n be slightly higher than the budget estimate, a deficit will be avoided. 38. On the basis of the performance in the first quarter of 1960, will be realized. Ordinary revenues were V6.5 million higher than in the leaving a surplus of V19.2 million, the highest since 1957,(Table 23 ). revenues during the later months of the year. Under these conditions, the JvsJ~1V L 4v ~LAd L. LLL W--.L Le possib.le £o pay off a.uuuu Y).4 11UL.L011O of the obligations of Al million, deferred from 1959, and it proposes to draw on its accumulated balanCes with the CenUral Bank to 1nance tneM. a deficit of this magnitude is not likely to upset monetary stability. 39. It will not be easy, however, to achieve a balanced budget without cutting development expenditures. Budget allocations for public investment in 1960 are the lowest since 1957. But the Government is try- ing to maintain investment expenditures at a higher level than could be supported from current revenues by seeking loans from abroad. The Government - 10 - is supporting a loan application to the IBRD by CEL ($3.8 million) to finance the foreign cost of power expansion and has asked for a $3 million loan to finance the importation of capital goods for agricultural development and light industries. These loans would help maintain a satisfactory level of capital investment without straining government resources or the balance of payments. The impact of these loans would be felt more in 1961, and sub- sequent years, than in 1960. VI. LONG RANGE PROSPECTS 40. El Salvador faces the future in a strong position. It has weath- ered successfully the short-term effects of the coffee collapse. Some of the large investments undertaken in recent years are beginning to bear fruit. Work on the coastal highway which was started in 1957 is likely to be com- pleted by the end of 1960 and should make a substantial contribution to the eynansion of fond nrns and raw materials, nrticularly as the feeder road program is carried forward. Power has been in adequate supply and industrial dP.vP1onmnt i. enininer Tnmentim Tnvtmnt rin himn skill nnrl antitudes by means of education, technical training and social and health facilities will nnir ff n coIvely 4m 4mnrVIA nAnrfl44y r.ntiniina rivpozifi- cation of exports tends to lessen El Salvador's dependence on coffee, and now inAnaqt.riol onomin ov8 a miuetaruiinay.n holn to offset the decline in coffee income. 41. The long range prospects for exports and economic growth are seasons suggests that coffee producing countries will have to continue similar accords if a precipitous fall in_ the- leve of I wol-cfe 4pie is to be avoided. If the agreement continues as expected, the current coffee may be expected to continue for .some time. But, a decline cannot be ruled out because o. n wor±a surplus situation, and a price 01 nvu more than 35 cents may be expected in the mid 1960's. With these prices, but allowing for an increase in exportable production by 2 per year and for the expansion of soluble coffee exports, not subject to restrictions, cotton exports are more favorable than those for coffee. Production in the crop year 19ov/61 is expecueu to reach again the 195o/59 volume, Unu with prices likely to remain around the present level of 26-27 U.S. cents per pouna .o.o.., export proceeds are expected to rise Dy around 5 per annum. Exports of "other" commodities, mainly manufactured goods, are also likely to increase. Trade statistics show a sharp rise in "other" commodity exports, from $6 million in 1955 to $13 million in 1957. After 1957, exports of these commodities declined to around $9 million, but showed an upward trend again in 1959 following improvement in the economic situation in neighboring countries. 42. The efforts being made to abolish trade barriers among the Central American countries could bring about a further gradual increase in the export of manufactured goods. The reduction of trade barriers will greatly benefit the country. Its central location, together with - 11 - excellenti porti an road YUVLU J;I.L _N2 .UU1 W- LULI dU UPFV1rkL"i± LUY to develop further its manufacturing activities. With such development, +I-e Irans'er uf 'iauvorean farm ou uouancnrsmyomwa VL4 L, ±~ A. . 1 LvauI-w ±I-1 aitUVU1 ±LU( Ul-L)U11 CutUru MU~Y juLiitwl1l relieve the chronic condition of under-employment in rural areas, one of the 1Uainj obsUCtc_les toU imroj-Vi_g agricultural productivitye 43. Though investment of the commercial banks and the financial institutions in Government bonds and Central Bank certificates has been small, the prospects for a progressive growth of the capital market appear good. Bonds issued by CEL, the Comision Ejecutiva del Puerto Acajutla (CEPA), and the Mortgage Bank have been well accepted by the general puolic. The 'non-banking' private sector had invested, by the end of 1959, V14 mil- lion in official bonds; this was apart from V78 million invested in Mortgage bonds, (Table 18). Out of a recent Government guaranteed bond issue of 12.5 million floated by GEFA, q8.5 million were subscribed in ten days. 44. In summary, on the expectation that the balance of payments between now and 1966 develops along the lines suggested above, and foreign investment continues to supplement domestic savings in an environment of fiscal, monetary and social stability, sufficient investment should be forthcoming to make possible in the next few years an annual rate of income growth of the order of 4%, significantly higher than the expected rate of population growth, which in view of the increasing possibilities of emigration to neighboring countries, is likely to be somewhat smaller than in recent years. STATISTTCAL APPENDTX LIST OF TABLES TAPTr MA 1 Summary of External Public Debt Outstanding, including 2 Service on External Public Debt Outstanding, by Lender, 3 Service on Public External Debts, by Borrower, 1-JOu-I' 14l Production Trends 4 Area, Production and Yield of Basic Crops 5 Production of Selected Industries 6 Gross Domestic Product, 1950-1959 7 Gross Domestic Investment and Sources of Financing 8 investment in Industries Attributable to industrial Development Law 9 Building Construction Trade and PayMents 10 Volume and Value of Principal Exports 11 Composition of Imports 12 Export and Import Prices and Terms of Trade 13 Export Earnings and Projections 14 Balance of Payments 15 Net International Reserves Monetary Statistics 16 Factors of Expansion and Contraction of Money Supply 17 Commercial Bank Borrowing from, and Rediscounts with, Central Bank, by Purpose 18 Selected Indicators of Private Savings 19 Cost of Living Index 20 Public Internal Debt Government Finance 21 Government Expenditures, by Purpose 22 Central Government Receits. by Source 23 Central Government Fiscal Account: Cash Basis 24 Current and Capital Expenditures, Deficits and Sources of Financing TABLE 1 EL SALVADOR: EXTERNAL PUBLIC DEBT OUTSTANDING (In thousands of U.S. dollar equivalents) Item Debt Outstanding TOTAL EXTERNAL PUBLIC DEBT 31,515 a/ Publicly-issued bonds 2,771 U.S. dollars 2,165 Sterling 586 IBRD loans 28.7h4 L2 a/ Of this amount $8,122,000 was undisbursed.. TABLE: 2 EL SALVADOR: ESTIMATED INTEREST AND AHIoRTIZATION PAYIENTS ON XTF lALPUBlC EBT 0UTSTAI5N" LDFR £/ (In thousands of U.S. dollar equivalents) Total icT ly-issued bonds IÈRD Loans Year Debt out- Payments during year Debt out.- Payments during year Debt out- Payments during year standing Amorti- In- Total standing Aorti- In- Total standing Amorti- I January 1 zation terest Janu 1 zation terest Jæ uarv 1 zation terest Total 1960 31,515 2,424 1,062 3,486 2,771 708 92 800 28.744 1,716 970 2,686 1961 29,091 2,254 1,o45 0 3,299 2,063 434 69 503 27,028 1,820 976 2,796 1962 26,837 2,249 1,186 3,435 1,629 261 54 335 25,208 1,968 1,132 3,100 1963 24,588 2,659 1,140 3,799 1,348 284 [6 330 23,240 2,375 1,094 3,469 1964 21,929 2,775 1,019 3,794 1,064 287 36 323 20.865 2,488 983 3,471 1965 19,154 2,896 892 3,788 777 291 26 317 18,377 2,605 866 3,471 1966 16, 258 3,018 76) 3,778 486 292 17 309 15,772 2,726 743 3,469 1967 13,240 1,363 641 2,004 194 194 7 201 13,046 1,169 634 1,803 1968 11,877 1,227 576 1,803 - - - - 11,877 1,227 576 1,803 1969 10,650 1,287 515 1,802 - - - · 10,650 1,287 515 1,802 1970 9,363 1,352 452 1,804 - - - 9,363 1,352 452 1,804 1971 8,011 1,417 385 1,802 - - - - 8,011 1,417 385 1,802 1972 6,594 1,488 315 1,803 - - - 6,594 1,488 315 1,803 1973 5,106 1,562 241 1,803 - - - - 5,106 1,562 241 1,803 1974 3,544 1,34o 162 1,502 - - - 3,544 1,340 162 1,502 a/ Includes all ·the debt listed in Table 1 as of December 31, 1959 Table 3 EL SALVADOR: ESTIMATED= NTRACTUAL INTE-REST AND AMORTIZATION PAYMENTS ON EXTERNAL PUELIC DEDT BY BO R.R af (JIn tnousenas of U.. dollar equivalent) DEBT OF AUTONOMOUS AGENCIES T 0 T A L DEBT OF NATIONAL GOV RN åNT GUARANTEED BY NATIONAL GOVT. Debt out- Amor- Debt out- Amor- Debt out- Amor- Year standing tization Interest Total standing tization Interest Total standing tization Interest Total Jan. 1 Jan. 1 Jan. 1 1960 31,515 2,24 1,062 3,h86 17,690 1,9h3 607 2,550 13,825 -81 [55 936 1961 29,091 2,254 1,Oh5 3,299 15,747 1,725 611 2,336 13,3h 529 434 963 1962 26,837 2,2449 1,186 3,35 14,022 1,630 602 2,232 12,815 619 58 l 1,203 1963 21,588 2,659 1,140 3,799 12,392 2,013 581 2,597 12,196 646 556 1,202 1964 21,929 2,775 1,019 3,79 10,379 2,098 193 2,591 11,550 677 526 1,203 1965 19,1514 2,896 892 3,788 8,281 2,189 396 2,585 10,873 707 496 1,203 1966 16,258 3,018 760 3,778 6,092 2,281 295 2,576 10,166 737 165 1,202 1967 13,2110 1,363 641 2,0014 3,811 592 209 801 9,429 771 432 1,203 1968 11,877 1,227 576 1,803 3,219 1422 179 601 8,658 805 397 1,202 1969 10,650 1,287 515 1,802 2,797 546 15 600 7,853 811 361 1,202 1970 9,363 1,352 652 1,8014 2,351 472 129 601 7,012 880 323 1,203 1971 8,011 1, 417 385 1,802 1,879 1499 101 600 6,132 918 284 1,202 1972 6,594 1,488 315 1,803 1,380 528 72 600 5,214 960 243 1,203 1973 5,106 1,562 241 1,803 852 560 i 601 1,251 1,002 200 1,202 1974 3,514 1,34o 162 1,502 292 292 8 300 3,252 1,048 154 1,202 a/ Includes all the debt listed on Table 1 as of December 31, 1959. TABIE h EL SALVADOR: AFEA, PRODUCTION AID YIELD OF BASIC CROPS 1970-199 (Area and production in 1,000* 19/1T15/219 1923/7191/5 195556 9 7 1975 1958/59 19=96 ) FOOD CROPS Corn: Area 117 155 201 186 177 173 166 156 178 182 Production h,41o 3,865 3,945 3,9h5 :3,808 3,319 3,.5 3,229 3,077 3,400 Yield 37.7 24.9 19.6 21.2 21.5 19.2 20.7 20.8 17.2 18.7 Beans: Area 39 25 25 24 23 35 27 25 17 17 Production 579 438 142 382 336 4h7 406 292 226 262 Yield 14.8 17.5 17.6 15. 9 14.6 12.8 15.1 11.7 13.4 15.6 Rice: Area 14 15 16 12 12 10 16 15 13 13 Production 414. 381 334 349 289 338 393 319 285 300 Yield ..5 25.4 20.9 29.1 24.1 33.8 25.3 21.6 22.5 23.14 Sorghurn: Area 82 86 93 94 107 122 97 83 89 84 Production 2,058 2,367 1,980 2,357 2,590 2,696 2,511 1,876 1,689 1,628 Yield 25.1 27.5 21.3 25.1 24.2 22.1 25.9 22.5 18.9 19.3 EXPORT CROPS Area 119 L13 122 94 115 115 115 115 118 118 Production 1,559 1,280 1,697 1,303 1,668 1,578 l,98, 1,825 2,017 2,017 Yeld 13.1 11.3 13.9 13.9 14.5 13.7 17.2 15.8 17.1 17.1 Cotton Area ý19 30 28 21 30 46 38 40 54 40 Production 135 214 2314 281 445 669 70,4 782 86,3 650 Yield 7.1 7.1 8.h 13.3 15.1 14.7 18.3 19.6 16.0 16.3 Sugar' Cane : Areå 7.1 6.1 6.7 7.2 6.3 6.1 6.8 7.0 7.0 7.0 Prodiction 573 591 672 658 754 776 995 931 99,4 ,036 Yield 80.7 96.8 100.3 91.4 119.6 127.2 146.3 133.0 142.0 148.0 Preliminary Area in hectar, )f 2.h acres; Froduction in quintals of 146 kilograms each; Yields are in quintals per hiectare. Source: Office of Statistics and Census rr,AnT' v r T,r Q' AT ITA Trf%n - ri-MnTYTn1Mmr^Wr M C'VT YT Vnrr~ T1 lThTm - v r% rli -i e%e Lin mIflions 01 coJ-UesJ Food & non- Liquors Textiles Cement & Al --1-14 -J~t, all '"A r----4U Beverages Beer Cloth Products OtherslJ Total 1951 14.4 11.8 14.9 1.0 23.7 65.8 1953 12.5 18.8 14.4 3.8 28.5 78.0 ±L.4 300.0 17.7 6 9 4 20". 0 01 1954l.9 19.0 13.5 6.5 34.3 88. 2 195o 27.0 19.1 13.5 7.0 37.8 10L.4~ 1957 34.7 22.2 18.9 8.3 4l.5 12r.5 1958 30.7 18.4 20.3 8.5 42.7 120.5 1959 (p) 28.5 16.4 20.2 7.8 43.3 116.2 (p) Preliminary. 1/ Includes soap, vegetable oil, cigarettes and henequen products. Source: Office of Statistics and Census TABLE 6 EL SALVADOR: GROSS DOMESTIC PRCDUWT,BY SECTOR 1950-1959 (In million colones, at 1950 prices) -1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 Agricultural production 366.7 329.7 358.2 3L0.5 388.8 397.5 404.7 4>0.8 465.1 451.9 Minerals 5.8 5.2 5.5 5.6 4.3 5.0 5.0 >4.9 5.0 4.9 Manu'facturing 97.1 101.8 113.9 129.4 136.6 141.1 154.9 172.5 169.7 169.1 Construction 44.4 44.1 42.9 55.0 69.h 79.6 116.6 108.7 111.5 1014.7 Electric Power 3.9 4.6 5.1 5.9 6.6 7.7 9.2 10.5 12.3 11.7 Comrrerce 174.0 170.7 186.2 167.9 216.4 224.6 239.7 255.5 262.1 257.3 Transportation 10.6 12.0 12.7 14.0 14.7 16,.8 17.6 16.3 17.1 17.1 Governrænt ýservices 48.2 56.3 56.7 63.6 66.7 63.-4 65.2 71.8 66.6 72.0 Private services _95.2 91.8 99.0 101.7 114.5 118.6 130.0 137.0 140.0 137.4 TOTAL 845.9 816.1 880.3 903.7 1,018.1 1,054.3 1,142.8 1,218.2 1,249.9 l,226.7 % Rate of Growth of GDP +2.9 -3.5 7.9 2.7 12.7 3.6 6.7 8.3 2,6 -1.8 Agricu.ltural production. 43.1 >4E.4 -4. Ter-e )- ---------------------- A c ui43.4 4,.4. 4.7 37.7 38.2 37.7 35.4 36.2 37.2 36.8 Minerals 0.7 0.6 0.6 0.6 0.4 ci.5 0.4 0.4 0.4 0.4 Manufacturing 11.5 12.5 12.9 14.3 13.4 13.4 13.6 14.2 13.6 1*3.8 Constýruc,tioii8n 81 . Elestriction 5.3 5.4 4.9 6.1 6.8 7.6 10.2 8.9 8.9 8.5 Electric Power 0.5 o.6 0.6 0.7 0.7 0.7 0.8 0.9 1.10 .1.0 Commerce 20.6 20.9 21.2 20.8 21.3 21.3 21.0 21.0 21.0 21.0 Transportation 1.3 1.5 1.4 1.6 1.4 1.6 1.6 1.3 1.4 1.4 Government services 5.7 6.9 6.5 7.0 6.6 6.0 5.7 5.9 5.3 5.9 Private Services 11.3 11.3 11.3 11.3 11.3 11.3 21.4 11.2 11.2 11.2 TOTAL.* loo.0 100.0 100.0 100.0 100.0 100.0 100.0 10O,( 100.0 100.0 Source: ECLA and Ministry of Economy Diserepancies due to rounding. TABIE 7{ EL SALVADOR: GROSS DDME3TIC INVEsTMENT' 1950-1958 (In million colones at 1950 prices) Year to Sources of Financir Type of Investnent Year Total Year Public Private Construction Machinery Other 5- -Chag e Of total 1950 96.1 18.,3 21.h 71.7 77.7 h3.h 36.7 16.0 1951 112.5 17,.0 26.5 8h.0 74.6 43.1 50.6 18.8 1952 105.2 .. 6.5 32.0 73.1 69.5 41.9 45.7 17.5 1953 117.+ 11,.6 36.6 80.8 68.1 53.7 44.1 19.6 195h 1h9.7 + 27.5 31.7 118.0 78.8 67.9 56.9 24.9 1955 171.1 + 14.3 20.6 150.5 88.0 77.8 64.8 28.5 1956 196.9 + 15.1 23.9 176.0 89.4 90.2 7h.h 32.3 1957 208.2 + 5.7 27.0 18L.2 87.0 106.2 67.2 34.8 1958 220.7 + 6.o 35.2 180.7 81.8 108.9 73.6 38.2 Source: Depertfent of Econonic Studies, Mirnstry of Economy TABLE 8 EL SALVADOR: EIVESTHLNT IN INDUSTRIES m T fm Tunt Arr nrrmnT. lT -M, n n nTrm 1 - n.N 1r nzl^ ATiRlDUkRDL IU iilmUUallAr1 L ULVEiUEALvi VM l'-1U Declared Investment Year Number of Number of Annual Cumulative Establishments Employees ( million) 1952 4 2.,400 4.8 4.b 1953 26 3,700 14.7 19.5 1954 28 3,100 21.5 41.0 1955 21 1,100 5.2 46.2 1956 36 2,400 18.1 64.3 1957 28 1,100 6.1 70.4 1958 20 800 5.5 75.9 1959 16 1,400 19.0 94.9 1960 1 27 2,000 78.0 172.9 xI-rellranar-y Source: Department of Economic Promotion, M4inistry of Economy. TABLE 9 EL SALVADOR: BUILDING CONSTRUCTION, 1950-1959 Number of Building Estimated Value Permits ( million) San Salvador only: 1950 377 l.9 1951 271 12.3 1952 344 11.5 1953 345 13.3 1954 18L 131 1955 328 11.4 Entire Country: 1956 565 29.1 19r7 1 075 32.5 1958 979 20.6 or : 0El S a Sr.l1 Source: El Salvador Statistical Yearbook. TABLE 10 EL SALVADOR: TOTAL EXPORTS AND VOLUNE AND V!kLUE OF PRINCIPAL EXPORTS (F.O.B.) COFFEE COTTON Value Volume Value Volume - Value of 1/ As % of total Year in million Thousand sacks in million in million Total Exports export value colones of 69KG. colones Kg. in million colones Coffee Cotton 1950 154.5 992.2 6.5 4.2 173.8 88.8 3.7 1951 190.1 942.2 10.2 4.0 213.8 88.9 4.7 1952 194.0 972.2 13.2 7.4 220.7 87.0 6.0 1953 191.5 94.3.5 16.0 9.5 224.0 85.5 7.1 1954 230.0 891.1 16.3 9.1 262.6 87.0 6.2 1955 228.8 1,008.9 22.8 13.9 267.3 85.6 8.5 1956 218.4 927.0 44.0 29.6 281.8 77.5 15.1 1957 274.6 1,206.2 39.6 27.1 346.2 79.3 11.4 1958 210.3 1,166.9 45.2 32.5 290.0 72.4 15.6 1959 (P) 178.3 1,203.2 58.0 47.2 280.3 63.6 20.7 (P) -Preliminary ./ The export.values in this table differ from those shovn in Table l4 (Balance of Payments), in hat coffee exports are here calcul ated on basis of market prices while in Table . are based on the exporters' declaration to Customs. Source: Central Reserve Bank ZIT 6A+1~TAnnVD. . e1n?ffDnTnTn?'! nts T1Ir)MC I nr'2- K "A4J LJIM.LJV1%J.V1Le V%1 .\JJ* .L L%J.1 \J.V _.LILL \J.'! 66Pa. 7JJ.L /J- (in million colones) 1953 1954 1955 1956 1957 1958 As percentage of total 16.2 16.5 14.7 15.0 12.6 15.4 2. Beverages, tobacco and non-edible raw materftals (except Duel) IV0.1 11. 10.4 10.9 11.0 10.1 As percentage of total 5.5 5.1 4.5 4.2 3.8 3.7 3. Manufactured goods (except machinery and~~fI~ (aso0 oo.2 0V.9Y Y0o.o 1. As percentage of total 40.6 40.7 39.5 37.6 38.6 36.5 4. Machinery and equipment 37.2 42.7 51.5 58.9 65.5 60.1 As percentage of total 20.3 19.6 22.4 22.5 22.8 22.2 Of wiich: P for agriculture 6.0 5.5 6.5 4.9 for industry 24.6 31.6 31.0 26.2 p for transportation 16.1 17.3 19.2 17.8 5. Fuel and mineral lubricants 12.5 13.0 13.8 16.7 18.7 18.3 As percentage of total 6.8 6.4 6.0 6.4 6.5 6.7 6. Chemical products 19.3 25.1 29.5 37.3 44.8 41.6 As percentage of total 10.5 11.6 12.8 114.2 15.6 15.4 Total Imports 183.5 216.9 229.7 261.8 297.6 270.2 Annual rate of change 18.2 5.9 11t.o 9.8 - 6.1 Source: Office of Statistics and Census TABLE 12 EL SALVADOR: INDEXES OF VOLUE AN1D PRICES OF EXPORTS AND IMPORTS, i950-1959 (1953 =100) 1950 1951 1952 1953 1954 1955 1956 1957 1958 3.959 Volume of exports 100 95 98 100 93 110 115 142 143 Coffee 105 100 102 100 9h 109 98 12:6 123 Cotton 45 43 78 100 97 143 321 292 345 Volume of imports 76 86 96 100 120 130 141 154 146 Export prices 89 101 100 100 125 109 110 109 91 84 Coffee 89 97 100 100 127 110 117 114 92 Cotton 90 148 108 100 105 99 85 85 82 Import prices 88 101 99 100 98 97 101 102 101 98 Term of trade 101 100 101 100 128 112 109 107 90 90 Source: International Finance Statistics. EL SALVADOR: EXPOPT EAPNGNUS, 1955/56-1958/59. AND PROJECTIONS 1959/60-1965/66 17 (In million of U.S. dollars) Uther C,ofee E,xports ~ CottonI Exports--- Ar"g_OrAt Cents Cents Total -1 fnfl TT M W-1 9.. 1 flf T TV- 1. 1.. TP.- --A L,UU U.S. Value 1,000 U.S. Value v aL;u l Lo, Quintals per Quintals per Value lb i b. Actual J955/95b 1,424 01 04--J 00O1Y4 J-flu to I 1956/1957 1,844 63 112.9 705 26 15.8 12.8 14.5 1957/1958 1,716 50 8 7.?8 7324 018. 9.;?L. 1958/1959 1,892 41 76.7 863 .24 20.7 14.5 112.8 Projection 1959/1960 2,123 .+1 o7.0 6o5 06 17.3 12.7 117.0 1960/1961 2,265 2/ 41 92.8 850 26 22.1 13.0 128.0 1965/1966 2,560 ;g 35 90.0 1,080 ; 27 9.u 6.0u 14,).U lJ Ekportable production including soluble coffee exports; crop years beginning0ct- 2/ Based on 2% annual increase in exportable production plus exports. of the Listo Soluble Coffee plant. / Based on an annual rate of growth of 5%. TABLE 14 EL SALVADOR: BALANCE OF PAYMENTS, 1953-1958 1/ (in mill-ion of colones) 1953 L95h 1955 1956 1957 1958 A. Current Transactions and Donations 21.7 22.h 5.1 15.1 7.3 4.7 Exports f.o.b. 235.1 261.5 266.2 307.3 317.7 295.0 Imports c.i.f. -185.9 -2-17.3 -230.2 -262.4 -288.0 -270.8 Trade Balance 0 29.7 Foreign travel (net) - 15. 5 - -16.6 - 21.6 - 19.4 - 17.6 - 8.9 Investment income (net) - 6.1 - 6.5 - 6.6 - 6.7 - 6.2 - 8.3 Other services - 7.5 - 0.2 - 3.9 - 6.5 - 1.7 - h.2 Donations 1.6 1.5 1.2 2.8 3.1 1.9 Total Services and Donations - 27 - 1. 9 - 22.h - B. Capital Transactions - 3.2 - :14.0 - 16.0 5.3 - 0.4 4.7 Private long-tei capital (net) - 6.9 - L1.9 - LO.9 - 4.4 - 4.3 2.0 Private short-term capital (net) - 5.8 - 1.0 - 2.9 2.3 - 5.1 1.0 Official loans received 10.7 1.7 0.9 9.6 10.9 5.0 Officia. repayments - 1.2 - 2.8 - 3.1 - 2.2 - 1.9 - 2.3 Other - - - - - 1.0 C, Net Errors and Omissions - 18.1 - 1.9 - 43- - 28.8 __ 9.3 - 8 7 Total (A through G) 0.4 6.5 - 15.2 - 8.4 16.2 0.7 Mloneýtar Movemnenits eWt IM position - - - 6.3 - 9.4 - Banks' short-term liabilities - 1.2 3.0 0.9 - 1.7 3.9 Banks' portfolio securities (increase - )- 4.9 - 4.7 0.6 0.7 0.9 1,4 Bank's short-term assets (increase . ) 3.7 - 3.9 10.8 - 0.3 2.3 - 6.1 Monetary Gold (increase -) 0.8 0.9 0.8 0.8 - 8. 0.1 Total 0. _° -16.2 - o.7 _/ No sign indicates credit; minus sign indicates debit. Includes nonmonetary gold. Soirce: IMF Balance of Paynents Yearbook TABLE 15 rlr RIJRVL AET MI. U'%f RU Alll r,tll Tr 10 AA nlffL1%ZSETmTnh' , "L 'r 9 5 nt1.9 'in millions o U.S. dollars) Central Reserve Bank Other Banks Fnd of Foreign Foreign Year Gold Exchange Total Exchange Total 1950 23.02 16.38 39.41 1.84 41.24 1951 25.71 12.54 38.25 1.64 39.89 1952 29.39 12.68 42.08 2.61 44.68 1953 29.07 12.10 41.17 2.75 43.92 1954 28.72 14.53 43.25 4.54 47.79 1955 28.42 7.55 35.97 5.69 41.66 1956 28.11 5.38 33.49 5.26 38.75 1957 31.43 8.43 39.86 5.17 45.03 1958 31.38 4.90 36.28 9.61 45.89 1959 30.40 - 3.23 27.17 8.82 35.99 TABLE 16 EL SALVADOR: FACTORS OF EPDANSION AND CONTRACTION OF MONEY SUPILY, 1950-196o (in million colones End of March 1950 1951 1952 1953 1954 1955 1956 «1957 1958 1959 1959 1960 I. Net International Reserves1 103.1 99.7 111.7 109.8 119.5 104.1 96.9 112.6 11.7 90.0 128.3 121.7 Central Bank 9 7 956 103.2 13. Ö108.1 90.0 83.7 100.0 90.7 67.9 98.4102.2 Other Banks 4.6 4.1 6.5 6.9 11.3 i4.2 13.1 13.0 2..0 22.0 30.0 19.5 II. Net operations of Central Bank li.6 22.6 3 36.2 58.4 8h.0 109.2 106.7 92.0 93.5 79.9 70.0 Loans and investnents 17.0 27.7 h0.3 t2.2 60.8 7. L .12. 29. 100 8. 77.3 Other assets 1.0 1.1 1.2 2.5 6.5 6.6 6.8 7.4 9.7 9.8 9.9 9.8 1inus: Non monetary liabilities 6.4 6.6 7.3 8.5 8.9 10.2 12.0 12.9 13.2 16.9 12.6 17.0 III. Net operations of other banks 23.0 28.h 30.3 39.0 L2.6 h7.4 60.0 61.0 h2.0 41.5 38.5 50.0 Loans, discounts & investments . 3 .6 8. 13 205 27.2 Other assets ,i 8.4 8.0 8.7 11.4 12.2 15.3= 18.5 20.9 24.8 29.0 28.0 30.0 _us: Non monetary liabilities-/ 70.4 78.0 85.1 90.3 123.h 173.h 217.2 251.1 268.5 297.0 266.2 295.1 IV. Subsidiary coin 5.3 5.6 6.6 6.6 7.3 7.h 7.8 7.8 7.9 7.9 7.8 77. V. Goverrment Deposits with Central- Bank 14.4 11.2 lh.7 15.6 34.9 44.7 48.3 62.7 43.9 16.h 42.h 28.9 MONEY SUPPLY (I+II+III+IV.V- VI+VI) 12.7 15.2 168.2_176. 192.8 198.1 225.5 22 221.h VI. Currency in circulation 7-.9 8T.0 96.2 97.3 105.1 98.3 1027. -99. 100. 92.6 9.5 Currency outside Central Bak 7.6 100.9 102.4 112. 3 10C.6 l17.9 . i 1.2n3 105.8108.5 Minus: Currency in other banks 2.6 3.6 4.7 5.1 7.1 6.3 7.7 10.5 1'1.6 13.4 13.2 14.0 VII. Sight depositsä/ 52.8 61.2 72.0 78.7 87.7 99.8 15.3 117.8 113.0 116.1 119.h 126.9 In Centra.Bank .9 1.5 16.0 12.5 9.2 10.9 13 .6 1.2 10 13.4 12.7 J In other banks 39.9 45.7 56.o 66.2 78.5 88.9 :101.7 106.6 102.2 102.7 106.6 112.8 1/ Net international reserves of the Central Bank include net holdings of gold and foreign exchange plus net participation in IMF. International reserves of other banks constitute their net holdings of exchange & short-term foreign investanents. 2f Mainly bonds in circulation, foreign exchange deposits, long-term and saving deposits in colones. 2/ Excluding deposits of government and official institutions. TABLE 17 EL SALVADORtt._11,.RQL_BjlK BORROYIENGS FROM AID REDISCOUNTS (in millioloones ) Other Total Coffee Agriculture Manufacturing Commerce Others Jan - Dec 31 1956 136.7 100 40.7 29.7 4l.8 30.6 1.8.7 13.7 21.5 15.7 14.1 10.2 1957 143.9 100 50.0 34.7 33.1 23.0 19.8 13.8 17.1 11.9 24.0 16.7 1958 164.5 100 54.8 33.3 45.6 27.7 20.5 12.5 30.8 18.7 12.7 7.7 1959 138.1 100 4D.9 29.6 35.8 25.9 24.5 17.8 28.4 20.5 8.5 6.L Jan - Mar 31 1959 12.9 100 .1.0 8.0 1.6 12.4 1.9 15.1 7.0 5.1. 1.,3 1.L 1960 L8.1 100 2.4 13.6 2.6 14.5 5.6 31.1 7.2 40.. 0.1 0.7 1]/ Including borrowing and rediscournts of Compania Salvadorena de Cafe Source: Central Reserve Bank TABLE .18 EL SALVADOR: SELECTED INDICATORS OF PRIVATE SAVI!GS. 1950-1960 (i-n millionclns End of Year 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 Holdings by the Public Savings deposits in commercial banks 1.8 1.9 1.6 2.6 3.3 4.8 8.7 Mortgage bank bonds 133 1.2 1Q. 20.5 967 92.1 55.4 65.5 69.5 78. 80.0 CEL bonds 1/ 2.9 3.4 3.6 4.1 4.5 4.8 4.6 4.6 4.1 3.9 3.8 CEPA honds, / - - - - - - 5.7 9.0 10.3 10.0 10.0 ÅAs ofP arch 31, 1960 l/ Rio Lempa Comission /Acaul -PoCnmsso Zource: Central Reserve Bank, and Mo0rtgage Bank EL SALVADOR: COST OF LIVING IN SAN SALVADOR 1955-1958 (June 1954 =-100) 1955 .................... 105.1 1956 ...................... 106.7 1957 .................... 102.0 1958 .................. . 107.7 1959 ........ .. ... 107.0 1st Quarter 1958 .................. . 107.4 1959 ... ................... 108.0 1960 . ................ 106.7 Source: Central Reserve Bank TABLE 20 EL SALVADOR: PUBLIC INTERNAL DEBT 1952-1960 (in million colones) December 31 March 31 1952 1953 1954 1955 1956 1957 1958 1959 1960 Issues C.E.L. bonds 1/ 12.5 15.0 18.0 17.9 23.2 23.6 22.3 20.8 20.6 Treasury notes 9>0.0 9.4 9.5 10.0 4.0 4.0 4.0 1.6 1.0 Valle de la Esperanza bonds:/ - - - - 7.3 7.9 7.6 7.2 7.2 CEPA bonds j/ - - - - 7.2 13.4 16.9 18.3 18.7 TOTAL 22.5 24.4 27.5 27.9 41.7 48.9 50.7 47.9 47.5 Bondholders Government and official institutions 12.2 12.9 16.4 12.9 17.2 13.4 17.3 16.3 15.8 Banco Central de RePsRrv 3.6 9.6 4.0 5.6 9.3 193 15.8 15.1 14.9 Commercial Banks 2.0 2.0 1.9 1.8 3.2 2.7 2.3 2.8 3.1 n thP.-rc 47t ; 52 7.6 19. 13.6 15.3 13.9 38 I/ Pn--s e ^f . P. T.E., f os f i 1- h bn in +t hIn~ a ^f +heo nrovrnent, Official Institutions and the Central Bank. 2/ Held by Central Bank and Government Institutions. 2/ Bonds of the Acajutla Port Commission. ./ lainly the general public. Source: Central Reserve Bank TAKE 21 EL SALVADOR: GOVERNMENT EXPENDITURES BY PUTPOSE 1954-196o Tin million colones) 1 5 8 1 9 5 9 1960 A c t u a 1 ActuaL Actul 1-77 1.95 18 1957 Budget Cash Budget Cash Budget Basis BsLs I General administrationl/ 44.h I 6.3 43.6 57.2 66.2 59.5 6:2.7 56.2 57.7 II. Defense 19. 16.4 15.9 18.1 19.4 18.1 16.9 15.6 16.7 III. Social and Economic Development,.9 1) Agriculture, public works and economic development 29.7 30.5 35.3 33.5 37.5 28.9 31.0 25.8 32.5 2) Cultural, health and social welfare 44.2 37.3 1..0 43.5 48.3 hS.0 48.0 4:.5 51. 3) Pension and social security 11.6 12.7 13.8 13.1 15. 14.4 15.4 15.2 15.6 IV. Public debt service 4.7 10.2 3.4 3.6 4.2 4.0 7.0 7.0 7.1 TOTAL 1.40 153. 153.0 169.0 191.0 169.9 181.0 165. __1810 As.-grcent of Total I. General administration 28.8 30.2 28.5 33.8 34.6 :35.0 34.7 33.9 31.9 II. Defense 12.6 10.7 10. 10.7 10.2 10.7 9.3 9.3 9.2 III . Social and Economic Development 1) Agriculture, public works and economic development 19.3 19.8 23.1 19.9 19.6 17.0 17.1 15.6 18.0 2) CulturaL, health and social welfare 28.7 2h.3 26.7 25.7 25.:3 26.5 26.5 27.5 28.4 3) Pension and social security 7. 8.3 9.1 7.8 8.L 8.4 8.5 9.2 8.6 IV. Public debt service 3.1 6.6 2.2 2.1 2.2 2.4 3.9 4.2 3.9 TOTALL 100.0 100.0 100.0 100.0 100.0 100.0 1010.0 100.0 100.0 1/ ResiduaL 2/ Covering 1) Ministries of Agriculture and Public Works; 2) Public Health and Education; 3) Ministry of Social Security, Labor and. others. Source: Ministry of Finance TABIL 22 EL SALVADOR: GoVERNENT RECEIPTS, BY MURCE 1954-1960 (In million colones) 1954 1955 '1956 1957 1958 1959 1960 ln. -March Budget Actul Eudget Ac_tu_ Bget 1959 1960 1. Import duties 53.14 55.4 59;o 63.1 58.3 59.4 57.6 58.4 6&-c 14.0 16.5 2. Eport taxes 46.2 49.0 43.5 54.9 31.0 35.5 21.4 24.8 24.6 11.2 13.9 Sub-total 99.7 1014.4 102.5 118.0 89.3 94.9 79.0 83.2 84.6 25.2 30.4 As % of all Governiæ nt revEnues 59.'5 63.4 60.1 62.2 58.5 56.6 52.6 53.1 51.6 53.7 55.8 3. Consumption & mantufacturing taxes 25.7 26.0 27.9 29.7 27.3 28.0 27.4 27.4 28.6 7.5 8.0 4. Income tax 13.5 :13.6 -15.2 -16.1 L5.0 18.6 19.7 19.7 21.6 7.5 8.1 5. Estate and donation taxes 8.8 1.7 4.3 3.4 1.5 4.0 2.5 2.3 4.0 1.3 0.5 6. Other taxes 1/ 6.8 6.9 7.9 8.4 7.3 8.o 7.9 8.•4 9•3 1.8 3.3 7. Other source's: a Sale of property & goods 1.5 1.7 1.7 1.7 1.4 1.6 1.5 1.6 1.7 0.1 0.1 b Services 5.5 5.7 6.1 6.5 5.9 6.5 6.3 6.6 7.0 1.6 1.9 c Concessions anc rights 1.6 1.6 2.0 2.0 1.9 2.1 1.9 2.2 2.3 0.7 0.8 d) Fines and confiscations 0.14 0.4 0.5 0.4 0.4 0.4 0.4 0.5 1.2 0.1 0.3 e) Other receipts 3.9 2.7 2.6 3.4 2.6 3.6 3.5 4.7 3.7 1.1 0.9 Tota Governent Receipts 167.4 16h.7 170.6 189.7 152.6 167.7 2-50.2_13M 146-._5!'.- 7 Iniudos Rtn n taxes. motor vehicle eåsid iers Source: Ministry of Finance, Budget office TýABLE 23 EL SALVADOR: CENTRAL G0VERNNT FISCAL ACCOUNT: CASH BASIS 1955-1960 (in rillion colones) 3st Quarter End of Period 1955 -1956 1957 1958 1959 1960 Ty5{ .L5r-J.57 ly9U Estimate Governmerit ordinary revenues 164.8 170.6 189.7 167.7 156.7 165.1 67.4 54.1 46.9 53.4 Government Expenditures L1 153.4 153.0 169.0 169.,9 165.3 165.1 36.4 43.9 38.9 34.3 Surplus or deficit (-) 11.4 17.6 20.7 - 2.2 - 8.6 - 31.0 10.2 8.0 19.2 GOVERNlF'NT CASH BALAi\LE WITH CENTRAL BANK Government deposits 45.8 48.9 6.0 44.7 17.0 17.0 64.1 43.0 28.0 1./ Includes debt amortization Source: Central Reserve Bank TABILE 2 EL SALVADOR: CURRENT AND CAPITAL EXPENDITUREES CASH DEFICITS AND SOURCES OF FINANCING, 199-1960 (in million colones) 1 T 1 - -9 9 9 A c t u a 1 Budget ActuIA Budget Actual Original Revised ___1 795T Budi'e Revenues 88.4 167.4 164.8 170.6 189.7 167.7 167.7 150,2 156,7 164.0 165.1 ilo Current Eed -66 ,2 -119,-6 -1-12,7 -114.2 -1-31.9 -4A - 7- -14 0, 1 0 -132.5 -141.4 -=131.0 Surplus on current account 22.2 47.8 52.1 56.4 57.8 24.3 30.7 7.2 24.2 :22.6 34.1 2. Economic Develop.L Expend e r19.6 -29.7 -30P5 -35. j- -3 _ -28.9 L. 2$.8 -32.6 -27.0 Gross surplus or ideficit 2.6 18.1 21.6 21.1 24.3 -.13.0 1.8 -23.8 - 1.6 - 9.9 7.1 3. Debt Amortization -2.-5 .7 -10.2 - 3.4 - 3.6 -- 4.0 - 4-.0 - 7.0 - 7.0 7.1 - 7.1 Net surplus or deficit (-) 0 113.7 11.7 17.7 20.7 --17.C0 - 2.2 -30.8 - 8 -17.0 - Financig of deficit or use of cash Deposit with Central Bank (-) -0.1 -13.4 -11.4 -19.2 -.20.7 Withdrawal of cash balances 2.2 8.6 L/ Total government expenditures minus expenditures on economic development and debt amortization. 2] Expenditures on public works, agriculture and economic development; see table 21 on Government Expenditures by Purpose. Source: Compiled from information from Ministry of Finance and the Central Reserve Bank.