Peru - Current economic position and prospects

RETURP. TO REPORTS DESK RESTRICTED WITHIN Report No. WH-121a ONE WEEK FILE COPY This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION CURRENT ECONOMIC POSITION AND PROSPECTS OF PERU September 28, 1962 Department of Operations Western Hemisphere CURRENCY EQUIVALENTS 1 US$ = 26. 8 Soles 1 Sol (S/.) = 3. 7 US cents 1 million Soles = US $37, 300 TABLE OF CONTENTS Page No. BASIC DATA ......................................... SUMMARY AND CONCLUSIONS ............................. iii CHAPTER I - INTRODUCTION .......... 1 CHAPTER II - THE ECONOMY ........................... 2 Uneven Growth ...................... 2 Agriculture ........................ 3 Industry .......................... Mining and Petroleum ............... 7 CHAPTER III - DOMESTIC FINANCES, PUBLIC SAVINGS AND PUBLIC INVESTMENT ..... 8 Money and Credit ................... 8 Public Finance ..................... 9 Public Investment .................. 11 CHAPTER IV - EXTERNAL FINANCES ..................... 13 Exports ............................ 13 Imports ............................ 14 CHAPTER V - CREDITWORTHINESS ...................... 15 APPENDIX A: Export Prospects ...................... 17 STATISTICAL APPENDIX ................................ 2 BASIC DATA Area: 482,300 square miles Population (preliminary estimate of 1960 census): 11-12 million Annual rate of increase 1955-60 2.9% Gross National Product, 1961: 58 billion Soles % originating in agriculture 25% % originating in mining 14% % originating in industry 18% Average annual rate of increase in real terms, 1950-1961 4.5% GNP per Capita in 1961: US$ 180 Cost of Living: Average annual increase in 1952-61 6% Average annual increase in 1960-61 5% Balance of Payments (in US$ millions): 1950/52 1956 1960 1961 Exports 235 321 445 500 Imports -204 -341 -319 -393 Balance of Trade + 31 - 20 +126 +107 Services - 65 - 80 -105 -120 Balance on Current Account - 34 -100 .' 21 - 13 Merchandise Exports, 1961: % of total exports M 'ajor agricultural products and fish products 47 Major minerals 46 Other exports 7 Exports as % of GNP (1960) 23 Capital inflow in 1956-1960 as percentage of total investment: 17% - ii - Gold and Foreipn Exchange Holdings of the Central Bank: February 1961 US$ 63.7 million February 1962 US$ 86.h million Government Finances, 1961: Revenues 10,266 million soles Expenditures 10,155 million soles Revenues as % of GNP 17.5% Monetary Developments: 1959 1960 1961 Increase in bank credit 13% 12% 12% Public sector 27% 4% - 1% Private sector 5% 19% 18% Increase in money supply 24% 15% 13% External Public Debt: Outstanding, December 31, 1961 US$ 287 million Debt service payments as % of exports in 1962 9% - iii - SUMMARY AND CONCLUSIONS 1. The last economic report on Peru (November 1959) concluded that with a favorable financial environment Peru's longer-term prospects for economic growth were good, but that the traditionally very large regional discrepancies in income would probably not change much as economic ex- pansion would continue to be concentrated in the commercial sectors of the economy, mostly in the coastal area. Events of the past two-and-a-half years do not provide ground for altering these conclusions. 2. Three years ago a critically bad and deteriorating financial situation resulting from large budget deficits financed by Central Bank credit, excessive over-all credit expansion and dwindling foreign exchange reserves dominated the Peruvian scene. This situation has since been cor- rected, more rapidly and completely than many would have dared hope for in mid-1959. Foreign exchange reserves have been reconstituted and the single free market rate of exchange has been stable in the past 2 years. The readjustment was greatly eased by the coming into production of sub- stantial mining investments and the phenomenal expansion of the fishmeal industry. Over the past two years exports from these industries alone expanded total exports by nearly two-fifths and greatly stimulated activ- ities in other directions as well. Total output rose by some 6-7 percent per year in 1960 and 1961. 3. Although export growth is not expected to be as dynamic a factor in over-all growth as in the past decade, prospects for a generally favor- able economic and financial clinate and for rising pubilic and private investment should assure that expansion continues at a rate above popula- tion growth. h. With a satisfactory financial situation and with rather good prospects for further economic groith in the next few years, attention has again become focussed on the longer-term problems. The uneven economic growth in various parts within Peru and the already difficult social con- ditions in urban areas resulting from the heavy immigration from the Sierras have increasingly been matters of ccncern to the authorities. A shift from concentrating public efforts on "economic" overhead investment predominantly in the coastal area to countrywide investment in housing, hospitals and other social services is already clearly discernible in the composition of external credits obtained in recent years. This tendency towards a broader and more social emphasis in public investment is likely to continue. 5. There is no over-all public investment and financial plan in Peru, and so far little has been done to prepare such a plan. However, if most of the projects now under preparation are implemented, total pub- lic investment will increase substantially over recent levels. The pace at which they will increase will depend on the adequacy of project preparation, - iv - the availability of domestic funds for public investment and Peruts credit- worthiness for new external. debt. While the lack of projects fully studied and ready for implementation should not constitute a serious bottleneck for an expansion if the Government concentrates its efforts on the most important projects, shortages of domestic funds may prove to be a more serious limiting factor. Despite substantial increases in tax revenues in recent years, most of these increases have been absorbed by current ex- penditures. Government savings have risen only slightly in real terms since 1958 and have actually fallen as a percentage of GNP. Although external credits are likely to finance a much higher proportion of future public in- vestment than in the previous decade, considerable increases in domestic finance for public investment-and debt amortization will be necessary if present public investment plans are to be implemented at a satisfactory rater In view of the political pressure for increasing current public expenditures and of the limited domestic capital market, such increases in domestic finance will be difficult to achieve. To keep total public expenditures with- in limits which can be financed by domestic and external resources and still provide adequate margins for financing debt amortization and needed public works will be a continuing test of government budget management. 6. External credits should be available in amounts to finance large increases in public investment. Over the past two years the Government has obtained large external credits for development projects. Mainly be- cause of inadequate project preparation, disbursement of these loans has been slow and undisbursed commitments at the end of 1961totalled about $150 million, about equivalent to total public investment in the last four years, Additional external financing is being sought or envisaged for a variety of projects in agriculture, transport, power and in the social field. Service on the present public external indebtedness, amounting to $46 million in 1962, equivalent to 9 percent of gross export earnings or 12 percent of net export earnings, cannot now be regarded as excessive. As export earnings in the next few years will no longer be rising consider- ably faster than total output, the balance of payments position will probably be tighter than in the past. However, the service burden of existing debts is diminishing, falling to 5 percent of expected export earnings in 1965, or 7 percent of net export earnings and substantial margins for new external borrowing remain. 7. But favorable growth prospects and an apparent capacity to incur large additional amounts of conventional debt should not obscure the sub- stantial elements of risk in the Peruvian picture. As economic growth will continue in the immediate future to take place mainly in the coastal area, the disparity in income levels between the coastal area and the heavily populated and poor agricultural areas in the Sierras, which are home for more than half of the population and include levels of living among the lowest on the continent, will probably widen still further. Furthermore, continued large migration from the Sierras to the rapidly growing coastal urban areas will aggravate already serious social conditions if nothing is done. This imbalance in the economy provides a base for, at worst, politi- cal disturbance or, at best, pressures for public outlays in excess of amounts that can be wisely financed. Furthermore, the understandable drift of public expenditures and investment to social objectives may yield im- portant and necessary benefits but may have few productive consequences - v - for many years. The continuing absence of coordination of public invest- ment and proper project preparations at a time when the investment effort is increasing enhances the danger of disorderly investment and, above all, of investment without clear foreknowledge of total size and consequences. The burden of debt service appears manageable at its present level; but with the prospective growth of net export earnings far below that of the past decade and no greater than the present rate of population growth, and in view of the difficulties in increasing public savings vigilance in fiscal, monetary and external debt matters will be needed to guard against the re-emergence of imbalance in the external and the domestic finances. 8. In view of the difficulties in increasing public savings and the tight balance of payments situation in prospect, Peru would be prudent to borrow only for high-priority projects and not to increase, and perhaps even reduce somewhat, the present burden of debt service in the years immediately ahead. This latter could be achieved without compromising the growing demand for public sector investment by seeking conventional debt on more appropriate terms than has often been the case in the past and by obtaining some external finance on special terms. But borrowing on special terms can only be recommended to the extent that the Government acts along the lines, previously suggested, to prepare projects fully before they are implemented, to coordinate public investment, to pursue sound fiscal and monetary policy and to increase as far as possible domestic finance available for public investment. I. INTRODUCTION 1. The last Bank economic report on Peru (WH 89a) was written late in 1959, very shortly after the initiation of efforts to correct a critical deterioration in the Peruvian finances. Growing budget deficits financed increasingly through the Central Bank, excessive overall credit expansion and declining foreign exchange reserves had been the pattern of domestic financial deterioration for several preceding years. As exchange reserves approached exhaustion and a sharp depreciation of the sol, the reimposition of trade and exchange controls and disruptions in the economic and social fabric threatened, a political crisis and a change of Ministers occurred. At that time, the resolution of immediate financial problems clearly dominated the economic and financial situation. 2. In the two and one-half years which have since passed, Peru's domestic finances have been rehabilitated, more rapidly and completely than many would have dared hope in mid-1959. Overly severe corrective measures were not required to accomplish this result since measures of budget and monetary restraint coincided roughly in time with the appearance of new expansive forces in the economy. Export earnings jumped rapidly with the coming into production of new minerals investments and with very rapid increases of fishmeal production for export, and were accompanied by parallel increases in activity in the related commercial sectors of the economy. Exchange reserves have been reconstituted and government financing is no longer the claimant for bank credit that it once was. The general financial situation is now satisfactory. Attention has accordingly become focussed again on longer term problems and prospects, especially in recent months with advancing preparations for the national elections to be held in June 1962. 3. The conclusions of the last economic report as to these longer term prospects for the Peruvian economy were summarized in the following terms: "With a favorable financial environment, Peru's growth potentials are good ... The further growth of the commercial sector of the economy -- mining, the commercial agriculture of the coast, and industry -- seems well assured... Improvement in the heavily- populated agricultural areas in the Andes will at best be slow, and the very large and traditional regional discrepancies in income and growth will therefore continue, But overall, there is no reason to expect that increases in the national product will not be perceptibly higher than the rate of population growth!, (page ii) 4. Events of the past two and one-half years do not provide grounds for altering these conclusions. However, in the changing climate for develop- ment in Peru, with the increasing emphasis in maty quarters on a better sharing of the benefits of growth, the prospect of continued regional disparities in economic welfare has become a matter of increasing preoccupation. Public policy may in coming years reflect this preoccupation more sharply than it has, by and large, to dateo - 2 - II. THE ECONOMY Uneven Growth 5. The dominant characteristic of the Peruvian economy is the marked disparity in regional development and resource endowment. Industry and commerce are concentrated in the coastal urban centers, mainly in the capital city of Lima, where the bulk of the national income is received; and the agriculture of the coast is for the most part modern and efficient However, the majority of the population live in rural Andean valleys and are engaged predominantly in low-yielding and traditional labor-intensive agricultural pursuits. 6. Because of Peru's very difficult geography, agriculture, industry and mining are carried on in relatively small densely-populated pockets of the country. The bulk of Peruts land area lies east of the Andes, difficult of access, thinly populated, and readily cultivable only in limited parts. The rest of the country, in which most Peruvians, live, consists of physically and climatically rugged Andean country and a rather narrow coastal plain which is desert except where water is available for irrigation. Peru's close to 12 million inhabitants as a result live on and cultivate less than 2 percent of the total land area. New irrigation works are expanding the cultivable area and increasing productivity on the Pacific coast and new transportation facilities are opening up some cultivable land east of the Andes. But even a (very optimistic) doubling of the usable land area in the coming years would still leave Peru densely populated in relation to its usable land. 7. The rather impressive expansion of the Peruvian economy over the past two decades, averaging 4 to 5 percent per year over the period as a whole as compared with an average population growth of nearly 3 percent per year, has not reduced long-standing regional disparities in growth and welfare. Economic expansion has been concentrated overwhelmingly in the coastal economy. In response to the accompanying increases in economic opportunities and incomes in these areas -- average per capita incomes of about $300 per year on the coast, are between three and four times those of the Sierra -- there has been persistent migration from the mountains to the coastal cities, whose populations have as a result been increasing rapidly with all the consequent problems of very rapid urban growth. But more than half of the total population still live in the relatively resource- poor Sierra. As the pace of Peruvian development will for a considerable time continue to reflect primarily the rate and content of development in the dynamic coastal centers of the country, these people will probably continue for a long time to remain outside the mainstream of economic change. 8. Economic expansion has also been uneven through time. The overall performance of the economy has for the most part reflected developments in Peru's export earnings. During the early part of the fifties, when exports were rising rapidly, economic expansion averaged close to 6 percent per year. During the latter part of the decade, when export earnings re- mained fairly level and,in the face of deteriorating export markets and domestic inflation even declined in some years, overall output increased only by about 31 percent each year on average (Table 5). Since 1960 both exports, which now account for almost one-fourth of the national product, and total output have been rising again at a more rapid rate. The steady expansion of home-oriented industrial activity is reducing gradually the role of exports as a primary income generator in the Peruvian economy, but the economic fortunes of Peru will continue in the years ahead to be in- fluenced very heavily by the ebb and flow of export earnings. 9. According to the published national accounts, national savings rates have been consistently high, averaging in recent years slightly more than one-fifth of the national product (Table 4). With substantial capital inflow, especially for investment in capital-intensive mining projects, adding to available resources, investment rates have been higher still. Comparison with broadly similar economies may raise questions as to the absolute level of these aggregates, but there is little doubt that the investment effort has been substantial. 10. The bulk of this investment has been private and, with continued stability in the financial and economic environment, will undoubtedly re- main so. Government policy has consciously recognized this characteristic of the Peruvian economy and has endeavored to encourage it, especially in the past two years, with good results. Private investment has continued to grow fairly steadily in pace with total product. 11. However, the same cannot be said for the public sector. In the mid-fifties, about one-fifth of the total gross domestic investment was carried out by the Government. In the latter part of the fifties, both the share of the national product disposed of by the Government and the rate of Government investment declined. Since 1960 Government revenues rose sharply both in amount and as a proportion of the total product with the efforts that were made to balance the Government's over-all finances, but the funds available for new investment expenditures did not increase in step. The expansion of non-investment expenditures of the Government has tended to limit and at times even reduce public saving and investment; this tendency is perhaps the most critical and continuing characteristic of Peru's public finances. Agriculture 12. Many of Peru's current economic and social problems derive from the broad structure and performance of its agricultural economy. Some 60 percent of the Peruvian population are engaged in agricultural pursuits, but these agricultural pursuits generate only about one-fourth of total income. A large part of this agricultural income originates in the re- latively capital-intensive commercial agriculture of the coast. The majority of the persons engaged in agriculture are close to subsistence farmers in the Sierra, whose present incomes are very low and whose pros- pects for rapid income growth are not bright. 13. Agricultural output as a whole increased in volume during the 1950's only by about one-fourth, or less than 21 percent per year, which is somewhat less than the growth in total population during this period. Individual commodity production data (Tables 7 and 8) reveal that most of this increa:,e was the result of increasing production of cotton and sugar and, very recently, coffee -- all commodities produced primarily for export. Except for a fairly rapid rise in output of livestock products, most home- oriented agriculture did not increase very much. 14. The overall implications of this picture are not encouraging. The joint FAO-IBRD mission report on agriculture published in 1959 re- commended that substantial effort be initiated to raise the rate of growth in agricultural output to an average 3 percent per year, which would be roughly in line with population growth, and that most of this effort would be directed to improving yields. As the potential for raising productivity in most branches of Peruvian agriculture is large, this direction of effort would be a much less expensive way of raising output than bringing new land into production. With the conspicuous exception of sugar and livestock pro- ducts, past increases in agricultural output have resulted mostly from ex.- panding acreage; and most of the recent and current efforts to expand pro- duction have continued to emphasize opening new lands rather than raising productivity. Some of the joint mission's recommendations for strengthen- ing the public administration in agriculture in order to expand extension services have been followed. The Inter-American Cooperative Service for Agriculture, which had been outside the Government since it was founded 19 years ago and has been the principal agent for technical assistance to agri- culture, was recently incorporated into the Ministry of Agriculture and its resources have been enlarged somewhat. But the improvement of training and extension services has been slow and is expected to continue so for some time because of inadequate trained personnel. 15. On the basis of current performance, increases in agricultural production will thus probably continue to be determined primarily by the rate at which new lands can be brought under cultivation. A rate of agricultural expansion in future years below the target rate of 3 percent per year formulated by the agricultural mission would therefore seem to be in prospect unless investments in transportation, irrigation and coloni- zation can be raised even more substantially than the mission recommended. At the moment this does not appear likely. During 1955-58, which were peak years of public investment, public investment in agriculture amounted to some $16 million equivalent per year, and in transportation to another $16 million per year. The mission recommended expenditures $22 million and $33 million respectively, i.e., to about 175 percent of the 1955-$8 level. With the various efforts cited in the following paragraph, these levels are being approached, but they are not likely to be surpassed for some time. 16. With assistance from the World Bank agricultural credit has been expanding rapidly in the past two years, by 10 percent to 15 percent per annum, and is expected to continue to increase. In 1960 the Institute for Agrarian Reform and Colonization was established for the purpose of initiating the development of new agricultural areas. The Institute is at the moment concentrating on settling the 40,000 hectares of the San Lorenzo irrigation project. The completed civil works had been lying idle for several years because of unresolved problems hindering the sale of land, but settlement has finally begun to get under way. Fairly detailed surveys of the agri- cultural potential of the Apurimac Valley and the San Martin area in the eastern foothills of the Andes have been prepared and studies of other areas east of the Andes and on the coast are under way. To finance these and re- lated projects, new external credits totalling $69 million were obtained in 1960 and 1961 for irrigation and colonization and for the construction of penetration roads, road improvement and road maintenance, and additional borrowing is being contemplated for irrigation and colonization. However, most of the funds still lie undisbursed. Much effort has yet to be devoted to finalizing project plans and raising complementary domestic financing for these projects if all these plans are to materialize and even the existing credits be fully utilized soon. A draft Agrarian Reform Law intended ulti- mately to improve the utilization of land was submitted to Congress in 1960, but it has not yet been passed. 17. Official programs of investment for agricultural development must not obscure the fact that pastagricultural expansion in Peru has reflected overwhelmingly the investment responses of private farmers to market oppor- tunities for particular products. In recent years the Government has en- deavored to encourage these responses and has removed many obstacles to the transmission of market incentives to producers. Responding to the rather discouraging prospects of declining land-man ratios in Peru, there are some who would re-impose restraints on agriculture for the purpose of enlarging the proportion of Peruts limited land area now devoted to producing food- stuffs for home consumption. Near the coastal urban areasfarmers must, by law, even now devote a minimum proportion of their cultivated land to the production of food products. However, the prevailing view at present is to continue to use scarce land to maximize value productivity and thereby, through trade, make available much larger quantities of foodstuffs for Peru- vians than a policy of increaselself-sufficiency in foodstuffs could ever achieve. Industry 18. Industrial expansion in Peru has accelerated substantially in recent years from an average annual rate of increase of 5 per9ent during 1950-59 to more than double this rate in 1960 and 1961 (Table 9)1. Industry's contri- bution to the gross national product rose from 15 percent in 1950 to 18 percent in 1961 and its share of the labor force rose from 17.5 percent to about 19 percent in the same period. 19. The climate in which this recent expansion has taken place promises to encourage still further industrial growth in line with market prospects. An energetic and enterprising business community has emerged in recent years. Good profits, especially in newly-established enterprises, a rela- tively light tax burden, and an inflow of capital and technical know-how have strengthened considerably the financial position of the industrial sector. The general economic and financial environment continues favorable and markets are freely accessible and flexible. Tariff protection is on the whole moderate, averaging between 20 percent and 30 percent for industrial goods. Furthermore, specific steps are being taken to accelerate the develop- ment of Peruvian industry. An industrial promotion law was introduced in 1959, which grants exemption from import duties for industries producing 1/ The more rapid increase from 1950 to 1960 of the industrial production index (based on deflated gross value of production) than of the industrial GNP (based on deflated added value), can mostly be attributed to the rising proportion of the gross value of input from other sectors. The use of the wholesale price index for deflating GNP seems, however, to have resulted in some understatement of the growth in recent years. - 6 - basic materials and exemption from all taxes for new industries for periods varying from 3 years in the Greater Lima area to 15 years for industries locating east of the Andes. An increasing number of firms are being regis- tered under this law, representing capital investment currently of the order of $15 to $25 million per year. The Industrial Bank is being reorgan- ized to enable it to promote and develop new industry much more than it has up till now and, once reoganized, the Bank may be able to obtain loans from abroad. 20. With a steady increase in the urban population in prospect, indus- trial manpower should be in ample supply for any likely expansion in coming years, though special efforts will have to be given to enlarging facilities for training if shortages of skilled workers are not to become acute. Industrial energy requirements should also continue to be ample. The supply of electric energy expanded by an average 8 percent to 9 percent per annum during 1950-60 and is expected to increase even more rapidly in coming years. According to tentative plans, installed capacity will in- crease from 840,000 KW at the end of 1960 to 1,200,000 KW by early 1964. Most of this additional capacity would be hydroelectric, increasing the proportion of hydroelectric power to the total from 56 percent in 1960 to 65 percent in 1964. By 1968, completion by the Lima Light and Power Com- pany of the second stage of the Huinco installation will probably add another 120,000 KW to its capacity. On this basis, a rate of increase in the power supply of 12 percent to 14 percent per annum over the next 5 years seems well assured. A number of possible hydroelectric sources for meeting needs after 1968 are under study. 21. Except for part of the petroleum refining industry and the rapidly- expanding fishmeal and metal refining industries, Peruvian industry is entirely domestically oriented. Foodstuffs, beverages, tobacco and tex- tiles accounted for half of the gross value of industrial production (Table 10) and of factory employment in 1960. 22. In one respect, Peruvian industry is similar to agriculture. The bulk (over 80 percent) of the industrial labor force works in small artisan-type enterprises, low in productivity, which contribute less than 20 percent to the gross value of all industrial production. The main flow of industrial output originates in relatively large capital-intensive factories. 23. Small artisan-type industry is not likely to expand in significantly new directions or amount. But prospects are good for continued rapid ex- pansion of the factory-operated industries, especially in such fairly new lines of production as chemicals, metal refining and fishmeal where the growth in recent years has been impressive. Substantial new investments in these sectors are now being made. The Government-owned Santa Corpora- tion is constructing a new steel mill at Chimbote. The mill is being financed by a 10-year supplierst credit of $38 million, and will process domestic ore that will be made available at a substantial discount from market values. Steel capacity is projected to increase from the present 60,000 metric tons per year to about 240,000 tons. The traditional food, beverage and textile industries will, of course, continue to expand with the growth in population and the gradual extension of the monetized parts of the economy. In all, an annual rate of industrial expansion of 7 per- cent to 8 percent is probable over the next five years. Mining and Petroleum 24. Mining has been growing in importance in the Peruvian economy. Minerals output about trebled from 1950 to 1961 and the contribution of the mining sector to the gross national product rose from 11 percent to 14 percent, though mining still absorbs less than 2 percent of the labor force. Except for petroleum and coal, about 90 percent of this production is for export. In 1961 exports of minerals accounted for almost half of the total exports. 25. Mineral expansion has been the result of new initiatives in new directions, largely financed by foreign companies and with external credit, which have diversified further an already very diversified extractive industry. Copper capacity was quadrupled with the opening up of the $240 million Toquepala mine at the end of 1959 and iron mining, virtually non-existent in 1950, expanded rapidly in the latter part of the 1950's. Petroleum, lead, zinc and silver, which accounted for over 80 percent of total value of minerals produced at the beginning of the fifties, as a result comprised less than 40 percent of mineral output in 1960 (Table 19). Copper and iron accounted for more than 55 percent of the value of all minerals produced in 1960. Other min3rals are relatively unimportant. Gold, antimony, bismuth, cadmium, tin, mercury, manganese and some other metals represent less than 5 percent of total output. There are deposits of molybdenum, vanadium, nickel, cobalt, platinum, coal, sulphur, lime, phosphate, salt, gypsum, saltpetre and borax, but, except for coal, these various deposits have so far not been exploited. 26. Further expansion of the mining industry in Peru will, as in previous years, mainly depend on private investment. Since mining on the whole is a capital-intensive industry, and since the domestic capital available for mining is likely to continue to be small, external capital inflow and thus foreign investors' confidence in the Peruvian economy will continue to be the major determinant of its further expansion. With rather unfavorable market prospects for a large part of Peruvian metals, minerals output is expected to expand at an annual rate of only about 2 percent in the coming years. Details about the prospects for the principal metals are given in Appendix A. Government participation in mining so far has been confined to providing small amounts of credit, mainly for working capital, through the government-owned Mining Bank. A $45 million government-owned lead and zinc refinery plant is being planned, but thus far it is still at a fairly preliminary stage. 27. Output of petroleum has increased only slightly in recent years. Efforts are being made to expand oil resources but so far no spectacular finds have been made, though expectations of new oil discoveries in the Amazonian river basin have improved recently. Large deposits of natural gas were recently reported in the same region which might provide the basis for commercial exploitation. The present outlook for the petroleum " 8 - industry 4s thus for coatinuing production at about current levels. In the face of expanding domestic demand, petroleum product imports may be expected to grow gradually in coming years. III. DOMESTIC FINANCES, PUBLIC SAVINGS AND PUBL IC INVESTMENT 28. Following several years of rising prices, pressure on the exchange rate and losses in reserves caused primarily by excessive public spending, Peru initiated in mid-1959 a series of measures designed to restore order to the countryts domestic finances. The program was successful and very largely responsible for restoring the business confidence which has contributed importantly to the subsequent resur- gence of economic activity. 29. The annual rate of expansion in the money supply was reduced from 24 percent in 1959 to 15 percent in 1960 and 13 percent in 1961. The price level increased by only 3 percent during 1960 and 7 percent during 1961, compared to an average annual increase in the cost of living of 10 percent in 1955-59. Money wages rose by about 10 percent in both 1960 and 1961. After a depreciation of the exchange rate of about 30 percent in 1958 and 1959 and the replacement of the dual ex- change rate system by a single fluctuating free rate, the rate of exchange appreciated somewhat in 1960 and has since remained stable. Foreign exchange reserves rose from $3 million in mid-1959 to $86 million at the end of February 1962, when they were equivalent to more than two months of imports. Money and Credit 30. Since the introduction of the new stabilization program in mid- 1959, efforts to keep monetary expansion within reasonable limits have met with markedly greater success than before, primarily because of the decision by the Government to eliminate as far as possible recourse to the banking system for expenditure financing. Net expansion of bank credit to the Governm..nt declined from an annual rate of between 20 per- cent and 28 percent in 1957-59 to 4 percent in 1960, and contracted in 1961 (Table 15). Credit to the private sector has also been restrained. The reserve requirements of the commercial banks were increased to off- set the monetary effects of rapid exchange reserve accumulation in the past two years, and were applied much more effectively than had earlier been customary. Marginal reserve requirements on deposits in commercial banks during most of 1960 were 100 percent, and 90-91 percent during 1961; they were reduced to 80 percent in January 1962. 31. In 1960 total bank credit expanded by about 12 percent. Commer- cial and savings banks expanded their credits by 24 percent, the Development Banks by 12percent, and the Central Bank reduced its credits by 8 percent. In 1961, credit expansion from private banks and the Development Banks continued at about the same rate as in 1960 while total credits from the Central Bank remained about unchanged. In view of the large increase in production that has taken place and after the increase in prices, wages and exchange rates in 1958/59, this credit expansion of the past two years does not seem to have been excessive. In fact, with the return of confidence, a large part of this credit expansion has been neutra- lized by sizeable increases in private time and savings deposits. 32. A new Central Bank law was promulgated in January 1962. The law has improved the mechanics of monetary policy execution and control generally, and has also defined a new area of Central Bank responsibility. The Bank is now authorized to fix maximum rates of interest for all lending institutions within the limits set by this law. The maximum rate for commerical loans is now fixed at the legal maximum, 12 percent per annum plus 1 percent commission. Maximum rates on time deposits are 7 percent; savings deposits, 5 percent; and sight deposits, 1 percent. These new rates are between 1 and 3 percentage points lower than those prevailing in 1961. It is still too early to appraise the responses to this effort to the lower cost of money in Peru by regulation. Public Finance 33. The stabilization program also marked a new turn in the Government's finances which, for several years earlier, had been in substantial deficit financed mainly through the banking system. The overall budget deficit for the full year 1959 was much reduced from that of 1958 and a sizeable overall cash surplus, equivalent to 9 percent of revenues, was attained in 1960. Despite substantial increases in expenditures, the 1961 budget also showed a small overall surplus. The deficit of about S/.900 million (8 percent of revenues) envisaged for 1962 reflects entirely planned drawings on external credits (Table 11). 34. The improvement in the budget position since 1958 has been a- chieved primarily through increases in revenues. Tax revenues rose by almost 50 percent in real terms from 1958 to 1961, and as a percentage of GNP, from 15 to 17.5 percent. This increase reflected both expanded activity in the commercial sector and new tax measures. The most important increases in tax rates were in stamp taxes, import duties and business profits taxes (Table 12). Further tax increases introduced in February 1962 -- on petroleum, sugar and fishmeal -- are expected to contribute about half of the roughly S/.1,000 million estimated 1961/62 increase in total tax revenues. 35. This increase in revenue has corrected the problem of imbalance in the Government's finances. However, it has not enabled the Government to expand its savings. Rising non-investment expenditures, mainly for a rising wage and salary bill (rather than increased public employment) to correct relatively low government salary levels, have absorbed virtually all of the increases in government revenues. The direction of expenditures appears to have improved in one sense. Education and labor expenditures increased from 18 percent of total expenditures in 1958 to 21 percent in the 1962 budget and agricultural expenditures increased from 1 to 4 percent while military expenditures declined from 23 to 20 percent (Table 13) - 10 - But as for as public savings are concerned, there has been retrogression. Government savings have risen only slightly in real terms since 1958, and as a percentage of GNP they have actually fallen from an average of 3.4 percent for the years 1950-58 to about 2 percent in 1959-61. The budget for 1962, which is an election year, envisages public savings equivalent to about 2.5 percent of GNP. 36. The public investment picture is similar to the savings picture since much of the budget-balancing has been at the expense of investment. In 1959-61 they were only half the level of 1958 and one-third of the 1955-58 peak level. The 1962 budget plans on the basis of increased drawings on external credits for a more than doubling of investment ex- penditures equivalent to 4 percent of GNP, as compared with about 5 per- cent in 1955-58 but to implement such a large increase in investment from one year to the next is proving difficult, even though financing is avail- able. 37. Because of Peru's limited public savings, high levels of public investment have typically been accompanied by expanding public indebted- ness, mainly abroad; where there has been substantial domestic borrowing it has mainly been from the Central Bank with highly expansionary mone- tary effect. Recently, the Government was able to place S/.300 million of 2-year bonds in the domestic market, and if Peru manages to maintain financial stability it should be possible gradually to widen the domes- tic government bond market and to sell bonds on longer terms. However, the principal sources of additional non-inflationary supplementary financing for new public works will probably still continue to lie abroad for some time. 38. Looking ahead, the urge to expand public investment, already apparent in the 1962 budget, is likely to be a continuing feature of the government finances in coming years, and future governments will probably find it increasingly difficult to balance budgets at the expense of in- vestment expenditures as in the recent past. To keep total public expen- ditures within limits which can be financed by domestic and external resources and still provide adequate margins for financing debt amortiza- tion and needed public works will thus be the continuing test of govern- ment budget management in Peru. This test will be difficult to meet. Amortization payments on external debt have increased substantially in recent years and in the 1962 budget absorb about half of government savings. Political pressure to increase government expenditures for improving social and educational conditions in the urban areas as well as to accelerate development in the Sierra and the Selva is increasing. To preserve con- tinued growth in the economically important commercial, agricultural and manufacturing sectors on the coast, the Government will have to maintain, and perhaps even increase, its infrastructure investment in this region. Encouraged by the increased technical and economic assistance in prospect under the Alliance for Progress program, the Government has, in fact, already committed itself to social and economic development programs. There is no immediate reason to expect a return to inflationary deficit financing, but neither is there any reason at this time to expect large new domestic margins for public investment financing to appear. - 11 - Public Investment 39. The level and composition of the public investment effort will thus probably continue to reflect the volume and composition of capital inflow from abroad, especially in the absence of any over-all financial plan. A Central Office of Studies and Programs was established in the Ministry of Finance in August 1961 but so far little has been accomplished. 4o. Since 1960 $176 million of new credits for public sector in- vestments have been obtained abroad. The following table shows total public investment in the past decade as compared with the amount and com- position of these external credits, which are of interest as an indicator of current trends and prospects of public investment in Peru. (In millions of U.S. dollar equivalents) Total public investment expenditures Commitments Amounts undis- Peak yrs. obtained in bursed at the 1950-60 1955-58 1960 & 1961 end of 1961 (annual averages) (totals) Agriculture 9 16 19 17 Industry 6 9 41 31 Power ) 4 2 Roads ) 12 16 9 4 Other transportation) 9 9 Water and sewage 2 4 11 6 Public buildings 13 17 12 9 Other (including housing) 10 15 32 32 Total 52 77 176 150 NOTE: This table does not include purchases of or credits for military equipment, nor does it include a $24-million IBRD credit to the privately-owned Lima Light Company nor a $1.5-million Export- Import Bank credit to the privately-owned railroad, the Peruvian Corporation. Source: Central Bank and IBRD Economic Staff. The projects to be financed by these credits and the lenders are identified in Table 14. 4. In addition to the credits already secured, external financing is being sought or envisaged for a variety of other projects. In agricul- ture, several irrigation and colonization projects are under preparation. For the rehabilitation of the economically depressed Puno area, Peru ob- tained a $6 million credit from the United States in February 1962. In power, - 12 - plans llve '.een drawn up for further expans4on of public plants which would add some 1-1,5000 Kl. by 1964/65. Even though the feasibility studies have not .et been completed, the Government is preparing to harness the huge power potential of the upper bends of the Mantaro river with large suppliers' credit financing. A tentative plan for electrification and irri- gation .n the Tacna area in southern Peru envisages external credits of $0 milLion. For roads, the Coverdale and Colpitts highway survey report of Octeber 1961 has recommended a road investment program of $110 million for thi 1962-66 period, for which external financing will be needed. An IBRD loan to the privately-owned Peruvian Corporation of $15 million is under consideration. Other projects are under preparation for extending and improving airports and seaports. A tentative plan for seaports alone estimates the total investment needed at about $60 million over the next six years. In addition to credits already obtained for improvement of urban water and sewerage systems, a $16 million IADB credit was obtained in February 1962 for the metropolitan Lima area. Other projects in the social fields are under study. 42. The composition of the new credits obtained in the past two years and of those others being contemplated points to important shifts in the emphasis of public investment. Whereas the Government in the past decade tended to concentrate both "economic" and social investment efforts in the coastal area and especially in Lima, more emphasis is now being given to countrywide projects for housing, hospitals and other social services and to the economic development of the Sierra and the Selva. Two-thirds of the $49 million worth of credits obtained for road construction and mainten- ance, for example, are for the construction of penetration roads into the Selva. 43. The new external credits obtained in 1960 and 1961 are substantailly greater than in any other period in Peru's recent history. In fact they ex- ceed the total amount drawn on all external public credits during the whole decade 1950-60. However, this does not mean that the level of public invest- ment will increase in similar proportion, for external credits are now inten- ded to finance a much greater proportion of total investment costs than be- fore. In the 1950-60 period the average proportion was about one-third. The proportion planned in the 1962 budget is about 70 percent. 44. If most of the projects now under preparation are implemented, total public investment will increase substantially over recent levels, if not over the peak levels of the mid-fifties when public investment expenditures were being made at an annual rate of $80 to-$90 million at today's prices. The pace at which they can be implemented is problematical, however. Shortages of projects in final form, fully studied and ready for implementation, have been limiting the rate at which these credits could be used. With more concentration of effort on the most important projects, these shortages should not seriously hamper future expansion. ioreover, there are indica- tions that the Government might proceed to implement projects even before they have been fully prepared. However, shortage of local currency finan- cing may prove to be a serious limiting factor. Even though external credits are financing a higher proportion of public investment expenditures than in the past, local financing is still needed in increasing amounts as the total of investment expenditures and amortization of debt increase. Because of the limited domestic capital market, most of these funds have to be provided out of a public savings stream which has not been increasing adequately. 13 - To strive for levels of oblic investment which are excessive in relation to domestic savings could weaken the whole financial situation once again. IV. EXTERNAL FINANCES 456 The underlying position of the Peruvian balance of payments position is strong6 Exports are unusually diversified and have been rising impressively over the years. Private investment capital inflow has been large and fairly steady while imports have proved to be very flexible in times of crises. Financial instability and domestic inflation generated severe pressure on the balance of payments and a 30 percent depreciation of the currency in 1958/59. However, since the start of the stabilization program in mid-1959, the current account on the balance of payments has practically been in equilibrium (Table 16) and foreign exchange reserves have recovered substantially from a low of $3 million to $86 million at the end of June 1962, when they were equivalent to some two months of imports (Table 21). Peru has had standby arrangements with IM4F since 1954 and a $30 million standby arrangement was renewed in February 1962 for another years but no drawings have been made since 1959. The single free market rate of exchange has been stable in the past two years. In recognition of this underlying improvement and of the confidence of the Peruvian authorities that it can be maintained, Peru undertook in February 1961 to relinquish its rights under Article XIV of the IMF charter to impose restrictions on exchange and became the first South American country to declare its currency freely convertible under Article VIII of the IM,F agreement. Restrictions can no longer be imposed without the prior approval of the Fund. Exports 46. Exports have expanded more rapidly than the economy as a whole. From 1950 to 1961 the volume of exports rose one and a half times (or at an average rate of 8.5 percent) while total output rose by about 60 percent (Tables 17, 18 and 19). The expansion in exports largely reflects the coming into operation of new copper and iron mines in the last half of the 1950's. Exports from these mines accounted for about one-quarter of the $490 million of exports in 1961. Other exports rose at an average annual rate of 6.5 percent over the entire period, but slightly less rapidly since 1955 (5-5 percent) than during the first half of the 1950's (7 percent). Peruvian exports, which consist of a variety of mineral products (copper, zinc, lead, silver, iron, oil) and agricultural products (cotton, sugar, fishmeal and other fish pr:ducts, wool) have become increasingly diversified. Copper, which -s now the most important export product in Peru, accounts for not more thani one-fifth of total exports, while other products each represent from 3 percent to 17 percent of total exports. 47. Exports are likely to increase much less in the coming years than the 8.5 percent annual average rate of increase in 1950-61. An increase of 3-4 percent per year seems more probable for the next 4 or 5 years, with fishmeal and other fish products and metals accounting for most of the increase. Details of the projections for the various commodities are given in Appendix A. - 14 - 48. The price fluctuations of Peruvian exports as a whole have been moderate. Taking 1950 prices as 100, average prices for all exports fluctuated between a low of 95 and a high of 119 in the 1950-60 period; since 1951 import prices have varied even less, between 113 and 119. Terms of trade have thus on the whole moved up and down with export prices, and in recent years upward (Table 22); except for the year 1958, year-to-year fluctuations in the terms of trade were never more than 10%. Average export prices are by the mid-1960's expected to be about the same as in 1961. 49. Because of large investment in Peru by foreign companies during the past decade, especially in mining, private remittances abroad and debt service on private external debt have incr-ased substantially from about $10 million in 1950 (equivalent to 5 percent of exports) to $72 million in 1960 (16 percent of exports). Service of loans and remittances in con- nection with the large Toquepala copper investment accounts for most of this total. This category of exchange payments is expected to increase still further in the coming years and exceed $100 million by the middle sixties. Subtracting these income payments on foreign investment and debt service on external private debt from gross export earnin;s, the yearly increase in net export earnings may be about 3 percent in 1961-65 as com- pared with 7.5 percent in 1950-61. Imports 50. From 1950 to 1961 the volume of imports rose by about 110 percent, or by 7 percent each year on average, i.e., about twice as fast as the rise in total output but less rapidly than the increase of ex- ports. On the whole, imports of consumer goods, especially of textiles and clothing, have risen less rapidly than total exports while imports of raw materials and fuels have risen more rapidly (Tables 20 and 21). As a proportion of total imports consumer goods decreased from h percent in 1950 to 38 percent in 1961 while raw materials and fuels increased from 18 percent to 25 percent in the same period. Imports of capital goods have risen at about the same rate as total imports. 51. Developments in recent years have shown that Peruvian import demand is flexible and responsive to changes in economic conditions. As a result of slower economic activity, higher tariffs and a 30 percent depreciation of the exchange, total imports (fob) declined by $107 million or by 25 percent between 1957 and 1959. The decline was particularly sharp in raw materials and capital goods but there was also a decline in consumer goods. With renewed expansion of economic activity and export earnings in 1960 and 1961, imports rose by about $170 million (or by 58 percent), enough to more than make up for the earlier con- traction so that 1961 import levels were 17 percent higher than in 1957, the previous peak year. Current imports are how at the same level that would have been reached had imports increased at a steady 5.5 percent each year over the last five years. - 15 - 52. Even if total output continues to expand at the same average rate as in the 1950-60 period, imports in coming years may rise less rapidly than in the past decade. With good prospects for further expan- sion of industry, especially in such new directions as chemicals, metals and durable consumer goods, import substitution may play a more important role than in the past decade. Imports for major investment expenditures both in the private and public sectors will probably increase, but as the pace will continue to reflect the pace of new capital inflow, this part of the import bill will probably continue to be "self-adjusting", subject, of course, to the residue of an increased burden of remittances and debt service for future years. However, the over-all balance of pay- ments position will still probably be tighter than in the past, for export earnings will no longer be rising considerably faster than total output. A vigilant fiscal and monetary policy will thus be required to prevent the balance of payments from becoming a major obstacle to further economic expansion. V. CREDITWORTHINESS 53. Peru has undertaken substantial new external commitments in the past two years. During 1960 and 1961, new borrowing for public sector purposes amounted to $148 million (not including $h million of debt re- payable in local currency). After repayment of $80 million in these years, total indebtedness rose from $223 million at the end of 1959 to an estimated $287 million at the end of 1961. Lack of projects ready for implementation and lack of domestic funds to complement external credits have limited the rate at which the public sector has been able to use these external commitments, and undisbursed amounts at the end of 1961 totalled $154 million i/ compared with $37 million at the end of 1959. 54. Service on present indebtedness declines gradually from $b6 million in 1962, equivalent to 9 percent of gross export earnings or 12 percent of net export earnings, to $29 million in 1965, equivalent to 5 percent of expected gross export earnings or 7 percent of net export earn- ings at that time. The rapid rate at which presently scheduled service payments decline reflects the excessive reliance in past years on relatively short-term supplierst credit financing. In 1961, suppliers' credits accounted for only one-third of total external indebtedness but two-thirds of total service on this debt. 55. In the next 4-5 years, the balance of payments position will probably be tighter than in the past, as export earnings will no longer be rising considerably faster than total output. However, substantial new borrowing could be incurred without raising the proportion of export earnings absorbed by service payments on external debt above its present level. Together with the $150 million of still undisbursed commitments, impressive amounts of external credits could thus be utilized, provided that the Government can overcome its present difficulties in obtaining non-- inflationary domestic finance for investments. 1/ $4 million of this total is for military purposes. - 16 - 56, In view of the marked improvement of Peru's finances, both exter- nal and domestic, and good prospects for continued expansion, a debt bur- den of 9 percent of gross export earnings in 1962 cannot be regarded as excessive at this time. Exports have increased markedly over the past years and at the same time have become more diversified. The external accounts have been in balance over the past two years. Exchange reserves have been reconstituted and the exchange has been stable. The Government budgets have shown small overall surpluses. Export growth is not expected to be as dynamic a factor in the overall growth as in the past, but a con- tinued gradual extension of the monetized sectors of the economy and in- creasing public as well as private investment should provide market opportu- nities for accelerated growth in the domestically oriented industries. The vigor of the growing private business community should ensure that available opportunities will be seized and that growth in total output will be maintained, probably at about the same rate as in the past decade. Official policy appears to be directed to these ends. 57. But favorable growth prospects and an apparent capacity to incur large additional amounts of conventional debt should not obscure the sub- stantial elements of risk in the Peruvian picture. As economic growth will continue in the immediate future to take place mainly in the coastal area, the disparity in income levels between the coastal area and the heavily populated and poor agricultural areas in the Sierras, which are home for more than half of the population and include levels of living among the lowest on the continent, will probably widen still further. Furthermore, continued large migration from the Sierras to the rapidly growing coastal urban areas will aggravate already serious social conditions if nothing is done. This imbalance in the economy provides a base for, at worst, political disturbance or, at best, pressures for public outlays in excess of amounts that can be wisely financed. In addition, the under- standable drift of public expenditures and investment to social objectives may yield important and necessary benefits but may have few productive consequences for many years. The continuing absence of a clear priority for the various projects under consideration, and coordination of public investment at a time when it is increasing, enhances the danger of disorderly investment and, above all, of investment without clear foreknowledge of total size and consequences. The burden of debt service appears manageable at its present level; but with amortiZation of external debt absorbing half of government savings and with the prospective growth of net export earnings far below that of the past decade and no greater than the present rate of pop- ulation growth, vigilance in fiscal, monetary and external debt matters will be needed to guard against re-emergence of external and internal imbalance, 58. In view of the difficulties in increasing public savings and the tight balance of payments situation in prospect, Peru would be prudent to borrow only for high priority projects and not to increase, and perhaps even reduce somewhat, the present burden of debt service in the years immedi- ately ahead. This latter could be achieved without compromising the growing demand for public sector investment by seeking conventional debt on more appropriate terms than has often been the case in the past and by obtaining some external finance on special terms. But borrowing on special terms can only be recom-mended to the extent that the Government acts along the lines, previously suggested, to prepare fully projects before they are implemented, to coordinate public investment, to pursue sound fiscal and monetary policy and to increase as far as possible domestic finance available for public investment. - 17 - APPENDIX A EXPORT PROSPECTS Total Exports 1. Total exports from Peru rose from 5194 million in 1950 to $270 million in 1955, to $314 million in 1959 and to 9490 million in 1961. The average annual rate of expansion was 7 percent per year in 1950-55, [ percent in 1955-59, 27 percent per year in 1959-61, and for the period as a whole 8.5 percent. Exports of main agricultural products, including fish products, about doubled in these years while exports of minerals rose about 3.5 times. In the coming years, the average annual rate of expansion in export values will be lower, about 3.6 percent. Metals exports are expected to expand in volume by about 2 percent per year on average and agricultural products by about 5 percent. Average export prices are expected to be about the same in the mid-1960ts as in 1961, lower prices for cotton, sugar and cof.ee prices being offset by small price increases for fishmeal and most metals. Details of the projections for the principal export products are given below. Agricultural Exports Cotton 2. Cotton is the most important agricultural export crop in Peru, representing about 37 percent of agricultural exports. Yields per hectare have fluctuated erratically since 1950. In 1960, Peru was among the higher yielding countries and her yield was about 2.6 times the world average. 3. The medium-term outlook for the world cotton market is not very bright, and export prices for Peruvian cotton are expected to remain relatively low. Under these circunstances, further increase in the cotton area is likely to be small. Cotton fibre nroduction might increase by 3 percent per year from 1960 to 1965, compared with 5.5 percent per year in 19 0-60, attaining a level of about 150,000 tons by 1965. 4. Domestic consumption of cotton is expected to increase at a somewhat higher rate than the growith in population, leaving a cotton export potential of some 130,000 metric tons in 1965, of which 25 percent would consist of extra long staple Pima cotton. At an average price of 28 cents per pound (the 1961 price was 31.3 cents) cotton exports in 1965 would have a value of $81 million compared with 73 million in 1961. Sugar 5. Sugar is the second most important agricultural export crop. Production is concentrated in the irrigated parts of the northern coastal region. Sugar cane represents only about 3.5 percent of the total cultivated area but contributes 12-13 percent to the total value of all agricultural production. At present prices the yield in value per hectare is nearly four times the average for agriculture in Peru, and prodtction per hectare in Peru is second only to Hawaii. APPENDIX A - 18 - 6. Sugar production rose by 92 percent from 1950 to 1960 as a result of a 28 percent increase in acreage and 50 percent rise in yield. Since 1961 exports have increased further in volume but much more in value since the United States sugar import quota was switched from Cuba to other countries in the free world and Peru was able to raise the proportion of its sugar exports going to the United States market from about 15 percent to about 90 percent. Export prices on the United States market are about 60 percent higher than on the free market. This switch in markets has given a substantial boost to the Peruvian sugar growers and raised sugar export values by $18 million in 1961. 7. However, the short-term prospects are cloudy. The persistent rise in recent years of world sugar production relative to the world consumption has resulted in a declining price trend in the free world market. The reallocation of the Cuban share in the United States market to other countries, some of which had not exported sugar before, has contributed to the expansion of sugar production and added to the marketing difficulties for countries supplying the free market. With the breakdown of the quota system in the International Sugar Agreement in November 1961, world sugar prices fell from about 3 cents to about 2.3 cents per pound, which is probably below production costs for most sugar producers. 8. Great uncertainties surround the future world sugar price, which will be affected by whether and how much of the free world sugar the Soviet Bloc will purchase and consume, whether the United States will maintain or radically revise its import policy and cease to be a preference area for sugar, and how the International Sugar Agreement will operate in the coming years. If the present low prices continue, high cost producers (outside the preference areas) may be expected to disappear from the market, resulting in the world sugar price rising to a level of nearer 4 cents per pound. 9. With the high efficiency of the Peruvian sugar producers it seems likely that production will continue to expand even if the United States market should cease to be a preference market for Peruvian sugar. An annual rate of increase of sugar production of about 4 percent should be within re- ach over the next five years, compared with 6.5 percent in the past decade, bringing the output up from 827,000 metric tons in 1960 to about 1,000,000 metric tons in 1965. 10. Domestic sugar consumption is expected to increase at a rate of 4.5 percent per year and to reach a total consumption of about 350.000 metric tons by 1965. This will leave an export surplus of about 650,000 metric tons. Providing Peru will be able to maintain her present quota in the United States market and her former quota in the rest of the world, sugar exports from Peru would, at an average export price of 3.5 cents per pound, approximate $51 million in 1965, compared with $59 million in 1961. Coffee 11. Coffee production in Peru rose from 5,600 metric tons in 1950 to 32,500 metric tons in 1960, while exports rose from 11000 metric tons kPPENDIX A - 19 - to 26,400 metric tons during the same period. Coffee has thus become an important export item, representing about 10 percent of total agricultural exports in 1960. 12. Coffee growing in Peru is spread all over the eastern slopes of the Sierra at altitudes between 2,500 and 6,000 feet and its quality is generally very good. With a high value per unit of weight, it can stand the high transportation cost to the coast and is thus very important as the only "cash" crop which can support farmers opening up new land in the Montana, especially as it is well suited for small-scale farming. There has been a large-scale planting of coffee trees in recent years, and production should grow further, to between 45,000 metric tons and 50,000 metric tons by 1965. 13. Domestic consumption is estimated to be increasing by 4 percent and should reach 7,000 metric tons by 1965, leaving an export potential of some 40,000 metric tons at that time. There are some uncertainties whether Peru will be able to sell this coffee. Peru joined the International Coffee Agreement in 1960. Its quota for 1960/61 was 24,300 metric tons and it had a quota of 11,776 metric tons for the six months period beginning October 1, 1961. Peru has, however, in 1960 and particularly in 1961 been able to export coffee in excess of its export quotas, partly to countries which are not members of the coffee agreement but mostly to member countries. In the first eleven months Peruvian exports of coffee thus amounted to some 31,000 metric tons. As PeruTs quotas under the coffee agreement is likely to increase rather slowly, Peru will have to continue to sell considerable amounts in excess of its quotas in order to export 40,000 metric tons by 1965. The glut of coffee in the world market has brought prices down in the United States market from 58 cents per pound (Santos No.h fob New York) in 1956 to 34.5 cents in February 1962. The coffee price may decline to about 32 cents per pound by the mid-1960's which may result in a decline in Peruvian export price from 31 cents to 27 cents per pound. If Peru is successful in finding sufficient markets outside its quotas to sell its export potentialcoffee exports may approximate $24 million in 1965, compared with an estimated $23 million in 1961. Fish 14. Exports of fishmeal from Peru have expanded at a phenomenal rate in the last five years, from 26,000 metric tons in 1956 to 509,000 metric tons in 1960 and 620,000 metric tons in the first 10 months of 1961. A temporary over-supply resulted in a sharp fall in world market prices for fishmeal from $155 per ton in 1959 to less than $65 per ton in the summer of 1960 and an international fishmeal agreement was concluded in late 1960. Under the agreement Peru has an export quota of 600,000 metric tons for 1961 (60 percent of world exports). Fishmeal prices recovered in 1961 and in the late summer reached $105 per metric ton, 15. Fishmeal is a high-quality, low cost fodder product and a further growth in world consumption seems likely, Ultimately Peruvian exports of fishmeal will be limited by available resources of live fish. F.A.0. is currently studying the fishing potential. Provisionally, a fish catch APPENDIX A - 20 - equivalent to 1 million metric tons of fishmeal is thought to be the limit, with this maximum being attainable by 1965. vith 950,000 metric tons for export, and assuming a price of $75 per ton as compared with $71 per ton in 1961, the export value would approximate $70 million by 1965 compared with an estimated 50 million in 1961. 16. Exports of canned and frozen fish and fish-oil for food consumption have risen from about 'll million in 1956 to about $13 million in 1960. Exports of these products rose substantially in 1961 (by about $6 million) and some further increase is likely to occur in the next few years. Total Agricultural Exports 17. Total agricultural exports may increase by some $27 million from 1961 to 1965, mainly as a result of larger fishmeal exports. Exports of wool are assumed to continue at a rather stable level. Average export prices at the mid-1960ts are expected to be about '& percent lower but volume will increase by some 26 percent. The annual rate of increase in volume is projected at some 4.5 percent as compared with 7.5 percent in 1950-61. 18. On a long-term basis, possibilities exist for a broadening of agriuultural exports, especially of such new products as tea, cacao, oil- seeds, fruits and vegetables. But except for products such as tea and cacao which have a relatively high value per unit of weight, these products will have to be grown on the coast in order to be competitive on the world market. Fuller utilization of existing irrigation works and extension of the irrigated area on the coast therefore still seem to remain the prime mover for an expansion of Peruvian agricultural exports. Great potentials exist for growing cacao and for expanding the production of high quality coffee in the Montana and the Selva which would be able to compete effectively on the world market. The realization of these potentials will take many years. Mineral Exports Copper 19. With the coming into operation of the Southern Peru Copper Corporation's open-pit copper mine of Toquepala in December 1959, exports of copper rose from 49,000 metric tons in 1959 to 168,000 metric tons in 1960, and reached a level of 192,000 metric tons in 1961. Present installations in Toquepala represent a production capacity of about 135,000 to 145,000 metric tons of copper (metal content) per year, the higher level being limited to the first few years of operation. Production in other copper mines in Peru has experienced some decline in recent years (from 54,000 tons in 1958 to 4s,000 tons in 1960), reflecting the fall in prices from the peak in 1956, and is not likely to recover beyond 50,000 metric tons by 1965. Total copper exports are thus estimated at about 185,000 metric tons in 1965, mostly blister. 20. Increases in world production capacity should be quite adequate to meet a projected 4 percent annual rise in world demand through mid-1960, APPENDIX A .21 - But present surplus capacity is expected to decline from 16 percent in 1960 to about 7 percent by 1965 and export prices (fob) from Peru to recover somewhat from the 1961 level of about 24 cents per pound of metal content to about 26 cents per pound. At these prices, Peruvian copper exports would amount to some $106 million by 1965 compared with $102 million in 1961. Lead, Zinc and Silver 21. Lead, zinc and silver are generally mined together in Peru and variations in production of these products are on the whole similar. In recent years the generally depressed markets for zinc and lead and favorable market for silver have led to a concentration of mining on veins with a relatively high silver content. From 1950 to 1960 the volume of exports of silver has increased by 130 percent, zinc by 105 percent and lead by 90 percent. Exports in 1961 were running at a substantially higher level than in 1960. 22. World market prospects for lead and zinc are uncertain. Excess supply of these metals on the world market has resulted in growing stocks and declining prices. In January of 1962, the prices of lead touched a post-World War II low level (7.22 cents per pound in London), while zinc prices at 8.55 cents per pound were the lowest since 1958. The United States prices were 10.0 cents and 12.5 cents per pound, respectively. Though no appreciable improvement is expected in the near future, the market is expected to strengthen somewhat in the longer run due to a small but steady increase in demand with production remaining stable or even decreasing following some abandonment of marginal mines. Lead and zinc prices may accordingly rise to a 10 cents per pound (London prices) level by 1965. 23. In contrast to zinc and lead, the world market for silver has improved steadily and export prices of silver from Peru have increased by nearly 25 percent between 1950 and 1960. Prices continued to advance in 1961 and the decision by the United States Government in late 1961 to suspend fixed-price sales of Treasury silver to United States industry has led to an increase in the United States market from the former ceiling price of 91 cents per ounce to 102 cents per ounce. But as this decision will enable the United States Treasury to cover the need for silver for coinage purpose by drawing on its own stock for the next 3-4 years instead of buying on world markets, it will probably prevent any appreciable further increase in world prices of silver, at least in the medium-term. On this basis the export price of silver from Peru is projected to remain at about the same level as late 1961, or about 15 percent above the 1960 price. 24. Mining of silver, zinc and lead in Peru is spread over many small enterprises, which are able fairly rapidly to respond to changing market conditions. With relatively favorable price for silver, exports of this metal are expected to increase from about 1,030 kg in 1961 to 1,150 kg in 1965 or 3 percent per year. An expanded silver production may also involve some further rise in exports of zinc and lead and exports of these - 22 - metals are expected to increase respectively to 190,000 metric tons and 145,0O0 metric tons by 1965. 25. Expected increases in Peruvian refining capacity will result in a somewhat larger increase in average export values than would arise from the expected increase in volume and prices alone. Exports of refined products yield from 50 percent to 150 percent higher net prices per unit of metal content than concentrates. The expected rise in refining capacity in Peru from 25,000 tons to 50,000 tons for zinc and from 60,000 tons to some 100,000 tons for lead will thus increase export earnings by some $12-$15 million. Prices (net) in 1960 for Peruvian exports of refined lead and zinc respectively 10 cents and 11 cents per pound were appreciably higher than the prices obtained in the fall of 1961. Export prices in 1965 are based on an average of about 10 cents per pound for lead and 10.5 cents per pound for zinc, which corresponds to a United States price of between 12 cents and 13 cents per pound and United Kingdom prices of about 10 cents per pound. 26. In 1960 about 40 percent of Peruts lead exports and one-third of zinc exports went to the somewhat higher priced market in the United States (about 10 percent higher (net) than the London market). This is somewhat less than the quotas Peru has been allotted in the United States market. The United States quota system is assumed to remain in force throughout the period under review. 27. Exports of zinc, lead and silver would on these assumptions increase from $64 million in 1960 to $89 million in 1965, as summarized in the table below: 1960 1965 Volume Price Value Volume Price Value 1,000 t $ per ton Mill.$ 1,000 t $ per ton Mill.$ Lead: Ore 57.8 146 8.6 45 145 7 Refined 59.9 222 13.3 100 220 22 Total 117.7 186- 21.9 1fl 200 29 Zinc: Ore 131.6 95 12.5 1ho go 13 Refined 24.5 240 5.9 50 230 12 Total 157.1 --1 18.7 190 132 25 Silver: 0.923 26,000 2400 12150 30,000 35 TOTAL 64.3 89 Source: Mining Bank of Peru APPENDIX A - 23 - Iron 28. Exports of iron rose about six times between 1955 and 1960, from 0.5 million metric tons in 1955 to 3.1 million metric tons (metal content) in 1960. The new Acari Iron Vanes, which started production in 1959, have an annual capacity of about 1.5 million metric tons ore of 65 percent iron content. Marcona Iron Mines expanded its operations during the 1960's and plan to expand further in the next decade. A new benefication plant, with a capacity of upgrading 1.4 million tons of iron ore of 58 percent iron content into pellets, free of sulphur and with an iron content of 70 percent, was completed in 1960. The plant, together with improvement of the port at San Nicolas Bay, represents an investment of $22.5 million., Still further extension of the bene- fication capacity is planned. By 1965 production of iron ore should reach about 4.8 million metric tons metal content; of which 0.2 million will be for domestic use. The new steel plant at Chimbote, with an estimated final capacity of 240,000 metric tons of steel, has the right to buy 300,000 metric tons of 61 to 62 percent iron ore from arcona at a price of $3.50 per ton, a very substantial discount from the export price. 29. A gradual increase in the proportion of ore exp orted as pellets will increase the average price per ton. World market prices on iron improved in 1960 and it is assumed that prices will remain at about this level. The value of exports of iron is estimated to increase from $33 million in 1960 to $53 million in 1965: Metal Content 1960 1965 of ore Volumej/ Price2/ Value!/ Volumel/ Price2/ Value2/ Marcona Ore 58% 2.4 10.0 24.5 2.3 10.0 23.0 Acari Ore 60% 0.7 11.8 8.3 0.9 11.8 10.6 Pellets 70% - - - 1.4 13.5 19.0 Total 3.1 10.6 32.8 4.6 11.5 52.6 1/ Million metric tons of metal 2/ $per metric ton of metal content 3/ Million U.S.$ 30- Further expansion at the Marcona plant is expected in the late 1960's, up to an annual capacity of about 6 million metric tons of iron, of which the greater part will be exported as pellets. The value of iron exports might thus reach $80 or $90 million in late 1960's. The assuned prices are equivalent to fob Peru price of $5.80 for 58 percent ore ($10.30 per delivered ton less $4.50 per ton for freight and tolls). APPENDIX A Petroleum 31. Over the last five years domestic production of petroleum increased by 12 percent while domestic consumption rose by 40 percent. As a result, exports of petroleum declined from 7,200 tons in 1955 to 5,900 tons in 1960, while imports rose from 2,000 tons to 4,000 tons in the same period. Exports from Peru have since 1959 been limited to 20 percent of total domestic production. Notwithstanding Peruvian efforts to expand the country's oil resources, no spectacular finds have been made although recent discoveries in the Amazon region have been moderately encouraging. Some uncertainties face the largest private petroleum company in view of Congressional discussions about its future status. 32. The present trend towards less exports and more imports of petroleum products is likely to continue and by mid-1960's exports are not likely to exceed $12 million compared with about $16 million in 1961. Total Mineral Exports 33. Altogether, annual mineral exports should increase from about $226 million in 1961 to $260 million in 1965. The estimated annual increase in mineral exports of 2 percent in volume and 4 percent in value from 1961 to 1965 is very much lower than the rate experienced in the last decade. From 1950 to 1961 exports of minerals rose at an annual rate of 11 percent (10 percent in volume) but about 80 percent of the increase can be attributed to the recent large expansion of foreign-owned copper and iron mines. 34. Under more favorable price conditions, possibilities exist for a substantial higher rate of expansion. There are also possibilities for a further diversification of mineral exports. Improved loading facilities in the port of Callao, which would reduce loading cost of bulk ores from $3-$h to $1-$1.50 per ton might open up export possibilities for such products as clinker, barytes, chalk and gypsum. Large phosphate deposits in Sechura in northern Peru might also be developed in the somewhat more distant future. - 25 - STATISTICAL APPE'NDIX Table No. 1 External Public Debt Outstanding Including Undisbursed as of December 31, 1960, with Major Reported Additions,January 1 - November 20, 1961. 2 Interest and Amortization Payments on External Public Debt, 1954-1975. 3 Gross Available Resources and Their Use, 1950-1961. 4 Gross Investment and Savings as Percentage of Gross National Product, 1950-1961. 5 Gross National Product, by Origin, 1950-1961. 6 Gross National Product at Factor Cost, by Origin, 1943-1961. 7 Agricultural Production Indices, 1950-1960. 8 Agricultural Production, Acreage and Yield of Some Major Crops in 1950-1959. 9 Industrial Production Indices, 1950-1960. 10 Industrial Production, by Sectors, 1950-1960. 11 Central Government Cash Budget, 1950-1962. 12 Consolidated Central Government Revenues, by Source, 1955, 1958 and 1960. 13 Central Government Expenditures, by Ministry, 1951-1962. 14 Public External Borrowing, 1960-1961, by Project and Lending Agency. 15 Monetary Assets, 1950-1960. 16 The Balance of International Payments, 1950-1961. 17 Merchandise Exports, 1950-1960 and Projected for 1965. 18 Major Agricultural Exports, 1950-1961 and Projected for 1965. - 26 - STATISTICAL APPENDIX (Cont' d) Table No. 19 Major Mineral Exports, 1950-1961 and Projected for 1965. 20 Merchandise Imports, by Value, 1952-1961. 21 Merchandise Imports, by Volume, 1952-1961. 22 Terms of Trade, 1950-1960. 23 Official Gold and Foreign Exchange Reserves, 1949-1962. TABLE 1: External Public Debt Outstanding Including Undisbursed as of December 31, 1960 wih iaior Renorn. Allitions Januarv 1- November 20, 1961 (Thousands of U. S. dollar equivalents) Debt outstanding Major reported December 31, 1960 additions Item Net of Including January 1 undisbursed undisbursed November 20, 1961 TOTAL EXTERNAL PUBLIC DEBT 161,267 271,524 53,200 Publicly-issued bonds 60,652 60,652 - Privately-placed debt 53,110 94,676 30,592 IBRD 32,754 71,382 10,000 U. S. Government 9,887 39,950 11,158 Export-Import Bank 202 28,302 2,008 Others 9,085 11,648 9,150 Inter-American Development Bank - - 1,450 Government of Argentina 4,865 4,86- 1/ These figures do not include the following loans which are repayable in local currency: U. S. Government $ 9,150,ooo Suppliers' credits 5,273,000 Inter-American Development Bank 26,250,000 Total 440,673,000 Source: IBRD Economic Staff. TABLE 2: Irterest and Amortization Payments on External Public Deht, '9"-1975 (Thousands of U. S. dollar equivalents) Total Suppliers' and bank credits Othernd Debt out- Debt out- Debt out- standing Payments during year standing Payments during year standing Payments during year Year porti- plus un- plus un- disbursed Interest Total disbursed Interest Total disbursed Interest Total January 1 zation January 1 zation January 1 zation Estimated Actual Payments 1954 115,035 6,644 2,707 9,351 21,932 2,769 873 3,642 93,103 3,875 1,834 5,709 1955 120,920 12,333 3,323 15,656 20,313 9,511 933 10,h4 100,607 2,822 2,390 5,212 1956 231,004 25,014 4,600 29,614 92,318 21,149 1,965 23,114 138,686 3,865 2,635 6,500 1957 215,363 22,400 5,125 27,525 81,539 16,747 2,178 18,925 133,824 5,653 2,947 8,600 1958 205,286 21,519 5,358 26,877 72,412 16,627 2,282 18,909 132,874 4,892 3,076 7,968 1959 215,208 14,779 2,808 17,587 66,984 10,626 1,425 12,051 148,224 4,153 1,383 5,536 1960 222,605 43,590 6,645 50,235 58,209 16,636 2,319 18,955 164,396 26,954 4,326 31,280 Projected Paymentsv 1961 271,524 36,344 5,717 42,061 94,676 258779 1,8L8 27,727 176,848 10,1t65 3,869 14,334 1962 287,179 37,383 9,090 46,473 99,389 25,330 2,495 27,825 187,790 12,053 6,595 18,648 1963 248,529 30,132 8,837 38,969 74,059 16,696 1,84h 18,540 17)4,470 13,436 6,993 20,429 1964 217,061 22,508 10,293 32,801 57,363 12,066 3,538 15,60 159,697 10,42 6,755 17,197 1965 193,146 19,476 9,439 28,915 45,297 9,012 2,920 11,932 147,849 10,161 6,519 16,983 1966 172,185 18,648 8,417 27,065 36,285 8,909 2,350 11,259 135,900 9,739 6,067 15,806 1967 151,971 16,384 7,361 23,745 27,376 6,606 1,814 8,420 124,t95 9,778 5,50o 15,325 1968 133,936 15,367 6,400 21,767 20,770 6,599 1,373 7,972 113,154 8,768 5,027 13,795 1969 116,826 15,L,88 5,463 20,951 14,171 6,940 907 7,87 102,655 8,548 L,556 13,104 1970 99,502 15,18 4,385 19,803 7,231 6,637 306 6,9L,3 92,271 8,781 4,079 12,860 1971 82,117 9,078 3,676 12,754 594 594 18 612 81,553 8,1,84 3,658 12,142 1972 71,026 8,315 3,216 11,531 71,026 8,315 3,216 11,531 1973 60,627 8,123 2,774 11,197 60,627 8,23 2,774 11,197 197 50,007 7,3L9 2,325 9,674 50,007 7,3L9 2,325 9,674 1975 41,310 6,094 1,976 8,070 11,310 6,09 1,976 8,070 1/ Payments on all the debts shown in TABLE 1 T/ It is assumed that bonds would be retired through purchases in the open market at prices below par at approdmately present yields Soureet IBRD - Economic Staff. TABLF 3: Gross Available Resources and Their Use, 1950-1961 (Millions of soles, current prices) 1950 1951 1952 1953 195 1955 1956 1957 1958 1959 1960 1961 estiLmase Gross national product 15,148 18,706 20,964 22,647 25,082 28,540 31,626 33,711 36,936 h2,196 51,265 57,800 Net imports 56 518 733 1,093 230 725 1,784 2,708 2,)483 835 -865 1)0 Gross available resources 15,204 19,224 21,697 23,74o 25,312 29,265 33,ln 36,19 39,419 h3,031 50,400 57,900 Consumption 12,108 14,145 16,147 18,108 19,436 21,633 24,685 26jU8 29,831 35,261 39,700 45,300 - private 10,815 12,789 14,88 16,170 17,201 19,327 91,229 22,901 25,530 30,240 33,700 38,700 - government 1,293 1,356 1,659 1,938 2,237 2,306 3,456 3,547 4,301 5,021 6,000 6,600 Fixed investnent, gross 2,700 L,373 5,061 5,224 5,352 6,968 8,170 91 9 , 6,6 6,77, 9.,h0 10 300 - private 2,368 3,670 4,090 L4,1142 b,470 5,20h 6,5L7 7,411 7,181 5,728 8,429 10,000 - government 332 703 954 1,082 882 1,764 1,623 1,738 1,L62 946 971 1,300 Inventories 396 706 506 108 522 664 555 822 945 1,096 1,300 1,300 Source: Central Bank. TABLE 4: Gross Investment and Savings as Percentage of Gross National Product, 1950-1961 Estimate 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 Gross investment 20.4 27.2 26.5 24.9 23.4 26.8 27.6 29.6 26.0 18.4 21.0 22.0 Net exports .. -2.8 -3.5 -4.9 -0.8 -2.6 -5.6 -8.2 -6.7 -0.2 +0.2 Gross domestic savings 20.4 24.4 23.0 20.0 22.6 24.2 22.0 21.4 19.3 13.2 21.2 22.0 Of which: Public 3.3 4.1 3.9 3,4 2.8 3.7 4.1 3.1 2,1 1.5 3.1 2.5 Private 17.1 203 19.1 16.6 19.8 20.5 17.9 18.3 17.2 16.7 18.1 19.5 = less than 0.1 Source: Central Bank. TABLE 5: Gross National Product. by Origin, 19501961 (1950 = 100) 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 196I 19612 Agriculture 100 105 102 104 98 97 86 8 3 88 96--2 Mining 100 169 118 122 135 155 163 151 144 138 180 189 Manufacturing Industry and Handicraft 100 97 106 119 128 132 144 160 155 156 170 188 Services 100 105 113 116 111 120 137 150 155 158 170 182 Commerce 100 105 115 122 113 133 145 147 151 142 145 152 Finance 100 115 133 174 173 189 213 241 257 244 280 296 Public Administration 100 104 149 157 151 166 150 160 171 147 143 148 Other 100 108 131 149 135 169 197 194 197 196 200 208 TOTAL 100 106 112 120 116 127 132 133 135 128 138 145 1/ Preliminary estimates Note: The above volume index of the GNP has been calculated by the Central Bank by deflating values in current prices by the wholesale price index. This procedure appears to have resi.lted in an understatement of the growth in GNP. In the agricultural sector, a Central Bank index of total agricultural production, based on the output of various crops weighted with 1950 prices, shows a 26% increase from 1950 to 1959 (See TABLE 7). According to the GNP data shown above, agricultural product decreased by 14% during the same period. The production index probably reflects the actual change in agricultural GNP more accurately than the GNP figures as there is no evidence that inputs into agriculture from other sectors have increased relatively more than total output. In the mining sector, an index of minerals production prepared by the Central Bank shows a 28% increase from 1953 to 1959, while the GNP data in 1950 prices shows only a 13% increase during the same period. (Continued, see next page) (Note, continued:) The extent to which the GNP appears to have been underestimated because of the understated growth in agriculture is shown below: Index: 1950 = 100 1950 1954 199 1959 GNP according to table above 100 116 127 128 GNP corrected on the basis of the agricultural production index 100 124 134 144 Source: Central Bank. TABLE 6: Gross National Product at Factor Cost,by Origin. 1943-1961 (percentages) 1943 1946 1949 1952 1955 1957 1958 1959 1960 1961 Agriculture 32 28 34 34 28 23 24 25 24 24 Mining 11 8 11 11 13 12 12 12 l4 14 Manufacturing 14 21 17 14 15 18 17 17 18 is Services 13 7 6 5 5 6 6 6 7 7 Commerce 14 21 17 17 17 18 18 18 17 17 Finance 3 2 2 2 3 3 3 3 3 4 Government 7 8 10 12 1L 16 16 l4 12 12 Other 6 5 3 5 5 4 4 5 5 4 100 100 100 100 100 100 100 100 100 100 Source: Ministry of Finance, TABLE 7: Agricultural Production Indices, 1950-19601/ (1950=100) Weight Pr o duction indices 1950 1955 1958 1959 19601 Export products 25 100 147 163 166 190 of which: Cotton 16 100 141 155 158 177 Sugar 8 100 150 157 163 192 Coffee 1 100 207 380 400 580 Other crop products 54 100 96 92 97 97 of which: Potatoes 16 100 102 90 89 84 Wheat 3 100 105 89 112 107 Corn 4 100 107 106 120 122 Vegetables 14 100 75 79 79 81 Animal products 21 100 140 143 151 152 of which: Meat 7 100 138 154 173 n.a. Milk 3 100 205 195 209 n.a. Wool 2 100 113 106 117 n.a. TOTAL 100 100 118 120 126 131 1/ Index of output valued at 1950 prices. These indices differ from the GNP indox in TABLE L, which is calculated by deflating current values by the wholesale price index 2/ Based on production values in 1950 3/ Preliminary estimates Source: Central Bank. TABLE 8: Agricultural Production, Acreage and Yield of Some Major Crops in 1950 and 1959 1950 1959 1000 1000 tons 1000 1000 tons metric hectares per metric hectares per tons hectare tons hectare Export products: Cotton 73 134 0.5h5 116 231 0.500 Sugar 451 52 8.700 733 67 10,900 Coffee 6 11 0.545 22 45 0,487 Other crops: Potatoes 1,364 228 6.0 1,217 221 5.5 Vegetables 1,050 183 5.75 945 163 575 14heat 144 162 0.89 161 158 1.02 Corn 276 188 1.47 333 262 1.27 Barley 220 185 1.19 201 190 1.06 Fruits 1,400 70 20.0 720 36 20.0 Rice 113 42 2.7 193 69 2.8 Total (1950 = 100) 100 100 100 119 116 103 Source: Central Bank. TABLE 9: Industrial eroduction inuzicez', m -±yu (190 = .00)) 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 Food products 100 101 107 120 122 133 135 142 153 207 276 Beverages 100 120 142 166 180 188 186 223 215 219 267 Tobacco 100 97 96 106 122 121 99 113 115 107 99 Textiles 100 106 111 119 136 142 146 153 150 156 186 Shoes and clothing 100 105 106 127 133 141 143 158 161 223 213 Wood 100 102 115 109 116 130 135 1[2 111 111 128 Paper and pulp 100 160 149 162 198 194 254 282 280 319 370 Printing 100 126 114 124 149 174 195 198 165 161 184 Leather 100 103 107 115 116 135 112 122 126 138 161 Rubber 100 10 106 157 154 164 188 218 196 208 227 Chemicals 100 110 115 119 143 17 174 213 224 294 346 Petroleum products 100 111 113 114 120 122 130 130 133 128 135 Non-metallic products 100 101 111 142 157 172 178 182 203 182 188 Mechanical and metallurgical products 100 114 132 138 154 181 186 201 181 222 343 TOTAL 100 107 113 125 136 146 151 162 163 184 218 Source: Industrial Bank. TABLE 10: Industrial Production by Sectors, 195o-1960 (percentage of gross value of production) 1950 1955 1960 Food 26 26 33 Beverages 6 8 8 Tobacco 5 1 2 Textiles 20 19 17 Shoes & Clothing 4 4 Wood 2 2 1 Paper 1 1 2 Printing 3 3 2 Leather 2 2 1 Rubber 1 1 1 Chemicals 7 5 7 Petroleum 10 8 6 Non-metallic 7 9 6 Mechanical and metallurgical 6 8 10 Total 100 100 100 Source: Industrial Bank. TABLE 11: Central Government Cash Budget, 1950-1962 (Millions of soles, in current prices, calendar year) 1950 1951 1952 1953 1956 1955 1956 1957 1958 1959 1960 1E961 1962 Estimate Budget Revenues: Ordinary budget 1,696 2,148 2,205 2,119 2,h51, 2,841 2,951 3,180 3,132 3,777 5,610 6,871 7,638 Special accounts 387 452 669 84 1,091 1,285 1,525 1,956 2,098 2,666 3,016 3,300 3,692 Other 13 96 16t 187 107 201 -p0 219 297 167 129 95 87 Total 2,100 2,696 3,038 3,150 3,652 4,22? 4,766 5,355 5,527 6,590 8,755 10,266 11,217 Non-investment expenditures 1/ 1,597 1,924 2,230 2,374 2,953 3,166 3,667 4,289 b,766 5,961 7,159 8,855 9,762 Current surplus (*) or deficit (-) 503 772 808 776 699 1,061 1,299 1,066 763 629 1,596 1,L11 1,655 Investment expenditures 332 703 956 1,082 882 1,766 1,623 1,738 1,h62 966 971 1,300 2,3 L Overall surplus (+) or deficit (-) +171 +69 -166 -306 -183 -703 -324 -672 -699 -317 +625 +111 -899 Financed by Drawing down cash balance -38 -4l 36 -96 -5 -70 -23 -67 92 -120 -237 -611 29 Increased indebtedness -133 -28 110 402 188 773 347 739 607 637 -388 300 870 Total -171 -69 +166 +306 +183 +703 +326 +672 +699 +317 -625 -111 +d99 Change in indebtedness: -133 -28 110 602 188 773 347 739 607 637 -388 300 870 of which (a) Domestic indebtedness -75 20 131 293 133 19 321 567 593 666 -128 220 -29 New borrowing 5 163 248 376 257 287 963 762 1,530 776 50 600 516 Less anortization -80 -123 -117 -81 -126 -268 -662 -195 -937 -110 -178 -180 -565 (b) External indebtedness -58 -68 -21 109 55 756 26 192 l1 -229 -260 80 89? New borrowing , 117 56 67 186 13b 990 607 618 531 369 679 929 1,662 Less amortization -175 -102 -108 -77 -83 -236 -381 426 -517 -598 -739 -869 -763 1 The non-investment expenditure figures shown here have been obtained by deducting the investment expenditures shown in TABLE 12 and the amortization expenditures from total expanditures. Note: "Ordinary budget" figures represent all revenues and expenditures during the calendar year, including revenues and expenditure5 duinn the first quarter of each Zear in liquidation of the preceding year's budget. 1Special accounus" revenues re-resert total actual receipt2, i.HAluding revenues of the rondo Nacional de Dessarrollo Economico since 1957; no adjustment has been made for revpnues transferred to the ordinary bud get. Source: Ministry of Finance and I.M.F. TABLE 12: Consolidated Central Governryent Revenues, by Source, 1955, 1958 and 1960 (illions of soles, fiscal year) 1955 1958 1960 Taxes on Income and 1ealth Interest 29.5 0.8 69.2 1.3 170.4 1.9 Real estate 59.3 1.5 92.4 1.7 165.0 1.9 Business profits 321.0 8.1 455.4 8.2 1,063.4 12.2 Liberal professions 2.0 - 3.0 - 3.9 - Wages and salaries 163.5 4.1 306.7 5.5 501.7 5.7 Tax on foreigners 2.9 - 17.0 - 10.0 - Complementary income tax 245-0 6.2 3233 5.8 605.1 6.9 Total taxes on income U23.2 20.7 1,267.0 22.5 2,519.5 20.6 Succession taxes 26.8 0.7 45.1 0.8 59.7 0.8 Total 50.0 21.4 1,312.1 23.3 2,579.2 29.4 Taxes on Exoorts and Imports Export taxes 467.9 11.8 391.6 6,9 634.0 7.3 Import duties 789.3 19.8 1,213.4 21.6 1,513.7 17.3 Total 1,257.2 31.6 1,605.0 28.5 2,147.7 24.6 Consumption taxes 337.5 8.5 553.2 9.8 677.5 7.7 Transactions taxes 346.8 8.7 624.1 11.1 1,240.4 14.2 Other taxes 306.8 7.8 433.3 7.7 635.0 7.2 Fines 0.3 - 0.4 - 0.4 - Total tax revenues 3,098.6 78.o 4,528.1 8o.4 7,280.2 83.1 Government monopolies 010.0 10.4 468.9 8.4 595.7 6.5 Fees, etc. 454.8 11.6 623.8 11.2 890.7 10.1 TOTAL GOVENiENT REV,JUE 3,963.4 100.0 5,620.8 100.0 8,766.6 100 Note: Total revenues differ from those in TABLE 10, which are on a calendar-year (cash) basis, Source: Ninistry of Finance. TABLE 13: Central Government Expenditures1, by Ministry, 1951-1962 (millions of soles, fiscal years) 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 (budgeted),T Legislature 24 29 33 40 45 50 so 60 71 74 70 72 President's Office 4 6 7 8 11 10 7 7 7 7 8 8 Judiciary 22 26 28 32 35 45 52 56 69 76 93 94 Government and Police 351 389 425 488 533 639 678 807 957 1,o43 i1168 1,234 External Relations 43 47 54 60 61 64 70 87 103 102 l 113 Justice and Culture 39 49 54 58 64 77 95 105 110 121 143 143 Education 339 376 418 471 520 779 898 1,121 1,314 1,488 1,762 1,909 Finance and Commerce 499 555 562 690 709 897 993 1,169 1,225 1,304 1,768 1,732 Labor 6 7 8 9 11 15 18 23 28 28 38 38 Army 339 329 408 414 457 578 611 668 729 792 950 1,030 Navy 75 86 96 104 116 144 239 314 285 376 400 449 Air Force 89 112 120 138 191 209 358 354 358 382 485 177 Public Works 312 437 506 524 658 695 675 767 809 981 1,001 1,121 Public Health 198 311 356 383 436 632 664 637 95i11/ 1,091/ 1,347 1,410i/ Agriculture 37 39 43 47 48 56 66 83 197 199 326 401 TOTAL 2,378 2,798 3,116 3,465 3,900 4,894 5,477 6,259 7,215 8,064 9,670 10,231 1/ Except for 1961-62 these represent only actual expenditures made through the ordinary budget and special accounts. Expenditures financed in other ways are not included here; these figures are thus less than those shown in TABLE 11. 2/ These figures are not comparable to those of earlier years as they include contributions to pension funds which were not formerly in the budget. Source: Ministry of Finance. TABLE 14: Public External Borrowing, 1960-1961, by Project and Lending Agency (in millions of U.S.; equivalent) Suppliers' IBRD DLF Exinbank IADB Credits Total Agriculture Agricultural Bank 5.0 5.0 10D ColonizRtion 9.0 9.0 Total 190 Industry Santa Corporation Steel Mill 38.0 38.O Other industries 3.0 3.0 Total 10 Power National Electrifica- ticn Plan 4. 4_4 Roads Aguayatia-Pucallpa 5.5 6.5 10.0 Penetration road in San Martin 8.0 8.0 Otler penetration roads in the Selva 12.0 12.0 Road in Apurimac 1.8 1A Other roads, rainly Central Highway 7.0 7.0 Road Maintenance 10.0 10.0 Total IT67 Railro-dt Cuzco-Santa Ana 5.0 5.0 Airport: Ca2lao 3.9 i"9 Water & Sew-7age: Areouipa 3.9 3.9 Other towns 6.7 6.7 Total 10 Pub2ic Buildings: National Hospitalization Plan 11,8 11,8 Other: National Housing Plan 7.5 23.8 31.3 Other 0.2 0.2 Total 359 TOTAL 20,5 22.8 28.0 27.? 7j70 176(0 Source: IFBHD, Economic Staff. TABLE 15: Monetary Assets, 1950-1960 (millions cf seles ca end of year) 1950 1951 1952 1953 1954 1955 1956 1957 1953 1959 1960 I 10UETARY ASSETS 1/ b~ney 2,276 2,718 SS16 3,5 14704.09 Currency: private sector 955 1,0C2 1,215 1,404 1,557 1,656 1,980 2,0'5 2,384 2,923 3,157 Sight deposits: private sector 1,030 1,350 1,503 1,632 1,916 1,939 2,237 2,237 2,352 3,240 4,119 public institutions 7 16 13 44 27 43 59 110 72 236 20 government 284 270 357 368 330 456 527 593 553 331 581 7ear Honey _/133 - -.013 2.20,3 2.51 ,864 161 /,427 5.1A3 private sector 1,262 1,342 1,662 1,957 2,244 2,797 3,237 3,749 4,025 4,50 5,077 public institutions 38 55 56 23 16 15 19 17 35 63 51 government 13 33 74 33 33 49 77 90 101 14 15 Total monetarygassets 3.589 4,1 3 4.96 j j51 6.073 6.944 8.135 931 0 2 11 3,2 private sector 3,247 3,774 4,60 5,043 5,617 6,331 7,454 121 0,761 10,513 12,353 public institutions 45 71 69 67 43 53 77 127 107 239 341 government 297 30 431 401 413 505 604 6,3 654 345 596 ORIGI.1 OF EOHETARY ASSETS Gold and 'oreign exchange held by the banking system 7B4 37 794 752 991 1,051 1,294 790 3,6 1,363 1,903 Loans and investments made by the Ioanking system: 3,130 3.853 786 )C 9 6 9 ?,'L' 3b4 private sector 2,133 2,777 3,524 4,023 4,345 5,297 5,962 6,956 7,144 7,650 9,030 public institutions 20 23 19 20 34 43 58 115 government 977 1,053 12/k- 156 1 721 12657 lx932.,P7 .081 ,J07_Y 19 3,9c,14 4,690 5,590 6,150 7,035 c ,029 9,256 10,20" 1-1,173 13,143 15,237 Less capital and reserves 373 566 711 845 920 1,011 11094 1,278 1,343 1,407 1,533 other obligations (net) -43CI -29/ -o1 -206 92 '74 27 37 308 79. 414 325 537 620 639 1,012 1,085 1,121 1,65 1,656 1,936 ,15,7 7,_; _____ 35 4,153 4,960 5,511 6,073 61944 2,135 3,931 9,522 11,157 13,290 SCurrency and debt created by the banking system, which includes the Central Bank, commercial and savings banks, the development banks and the mortgage bDank. ~/Time and savings deposits, foreign exchange deposits, mortgage bonds. Souroe: Central BaniL. TABLE 16: The Balance of International Payments, 1950-19261 (millions of U. S. dollars) Annual averages 1950-52 1953-55 1956 1957 1958 1959 1960 1961 (estimate) Merchandise exportsi/ 234.9 255.9 320.9 332.7 291.8 323.0 445.2 499.6 Merchandise imports (fob) -203.9 -244.2 -341.1 -397.2 -330.6 -273.5 -319,l -3925 Trade balance 31.0 11.7 -20.2 -64.5 -38.8 49.5 126 107.1 Transport and insurance -38.0 -33.1 -46.8 -55.3 -47.5 -37.3 44.1 -53.9 Investment income -17.2 -21.9 -32.1 -33.2 -32.3 -51.1 -62.0 -65.7 Other services -9.5 -1.5 -1.3 -3.1 03 0.1 1,2 -0.2 -8.7 -56.5 -80.2 -91.6 -79.5 -88 3 -lo4.9 -119.8 Current account balance -33 7 -44.8 -100.4 -156.1 -117.3 -38.9 21.2 -12.7 FINANCED BY: Donations 5.5 6.9 13.1 17.2 12.8 9.5 10.8 9,o Direct investments (net) 24.1 29.9 39.9 48.3 49.4 34.6 7.0 6,6 Long-term capital (net): Private 0.7 6.7 10,6 36.4 45.7 32.4 0.8 3.4 Official -10 3.3 23.3 18.5 3.5 -18.6 -13.7 8.1 -1,7 10.0 33,9 54.9 492 13,8 -12.9 116 Short-term capital (net): Private 7.1 -2.8 42.2 15.9 7.5 -11.0 5.0 19.9 Official -2,1 2.3 -14.1 26.2 14.8 -1300 -25.3 -36,6 5.0 -0.5 28.1 42.1 213 -24.0 -20.3 -16T Errors and omissions 0.9 -1.8 -14.6 -6.4 -16.4 4.9 -5.8 2.3 1/ Including non-monetary gold Source: IMF. TABLE 17: Merchandise Exports. 195C0-1960 And Projected For 1965 (millions of U.S. Dollars) Annual Averages (Estimate) (Projected) 1950-52 1953-55 1956 1957 1958 1959 1960 1961 1965 Major a.ricultural exports 1/ 128 126 151 159 151 176 199 231 258 Major minerals exports 2/ 79 97 136 137 109 115 209 226 Other exports 3/ 23 26 31 24 21 23 25 35 45 TCTAL 230 249 318 322 281 314 433 492 563 1/ Details in TABLE 18 2/ Details in TABLE 19 1/ Largely hides and skins, cotton seed cake, rose oil, non-monetary gold Source of historical data: Ministry of Finance. TABLE 18: Major Agricultural Exports, 1950-61 and Project:di- for 1965 Annual averages 2/ 1 1953 -5 1956 1957 1958 1959 1960 1965-' _ Projected Volume ('000 metric tons) Cotton 73 86 109 82 108 115 100 108 Sugar 292 460 439 515 438 5c4 553 555 650 Coffee 2 6 7 11 17 20 26 32 4O Fish - edible 19 24 32 32 35 36 38 55 66 Fish - meal 6 14 28 62 112 281 509 708 950 Wool 6 5 5 7 5 8 5 5 7 Unit Value (U.S. dollars per metric ton) Cotton 1,078 766 77F 832 701 604 733 688 620 Sugar 112 76 75 97 78 72 86 105 78 Coffee 1,044 1,232 1,256 1,164 910 78L 715 675 6Co Fish - edible 320 363 355 345 253 380 345 350 350 Fish - meal 140 160 115 110 113 77 71 7-5 Wool 1,693 1,581 1,475 1,485 1,220 1,125 1,420 1,400 1,220 Total Value (millions of US$) Cotton 77.6 66.1 85.7 681 75.4 69.5 73.3 73 t1 Sugar 32,4 3)49 32.9 50.1 34.3 36.2 47.7 59 51 Coffee 2.1 6.9 9.0 13.2 15.8 15.6 18.6 23 2.4 Fish - edible 6.0 8.7 11.2 11.1 7.6 11.6 13.1 19 23 Fish - meal 1.9 4.4 7.1 11.6 20.7 38.9 59 70 Wool 9.8 7.7 8.0 9.8 6.1 9.0 7.1 7 9 TOTAL 127,9 126.2 151.2 159.4 150.8 175.6 198.7 231 258 1/ Exports in the first 10 months on a yearly basis 2/ These projections are developed in detail in Appendix A Source of historical data: Ministry of Finance. TABLE 19: Major Mineral Exports, 190-1961 and Projected for 2965 Annual Averages 6 1950-52 1953-55 1956 1957 1958 1959 1960 1961- 196521 projected Volume (000 metric tons of metal content) Copper 31 37 44 51 54 49 168 192 185 Lead 77 107 121 120 136 115 118 144 145 Zinc 96 119 144 147 137 157 156 200 190 silver2/ 437 572 661 657 759 835 923 1,030 1,150 Iro;i3 - 0.9 1.6 2.2 1.5 2.0 3J1 3.4 4.6 Petroleum5/ 1 0.8 1.0 1.0 oM 0.6 0.8 0.7 0.5 Unit Valuell (U.S. dollars per metric ten) Copper 441 595 764 684 410 510 565 532 575 Lead 253 226 259 245 179 183 186 160 200 Zinc 142 84 98 103 83 89 118 95 132 Silver 23 25 27 27 25 24 26 27 30 Ironw! - 10 10 10 11 10 11 11 11.5 Petroleum 21 22 23 26 23 27 23 21 21 Total Value (millions of US$) Copper 14 22 34 25 22 25 95 102 106 Lead 20 24 31 29 24 21 22 23 29 Zin3 14 10 14 15 11 14 18 19 25 Silver 10 14 18 18 19 20 24 28 35 Iron - 9 15 23 16 19 33 38 53 Petroleum 21 18 24 27 17 16 18 16 12 TOTAL 79 97 136 137 109 115 210 226 260 1J Average price per unit of metal content 2/ 1000 kilograms 3 Millions of metric tons Dollars per kilogram / Millions of metric tons 6/ Exports in the first 10 months on a yearly basis 7/ These are developed in detail in Appendix A Source of historical data: Ministry of Finance. TABLE 20: Merchandise mports, By Value, 1952-1961 (millions of dollars) Annual Averages 1952-54 1955 1956 1957 1958 1959 1960 1961 Estimate Foods, drinks and tobacco 42 45 44 56 57 49 53 61 Live animals 3 3 3 5 5 2 2 4 Meat 4 3 3 4 3 4 1 3 Dairy products 4 6 7 7 6 5 6 5 Cereals - grain 20 21 20 25 28 26 30 36 manufactured 4 4 4 5 5 4 4 3 Others 7 8 7 10 10 8 10 10 Edible fats 5 6 8 9 8 10 8 11 Chemical products and pharma- ceuticals 23 29 30 35 35 38 43 47 Rubber, wood, leather 6 7 8 9 7 6 11 8 Paper 7 8 9 10 8 8 9 12 Textiles and clothing 25 23 23 26 18 19 24 25 Fuels and lubricants 6 11 13 17 13 14 19 18 Non-metallic minerals and products 7 8 8 8 6 5 5 7 Metals and products 136 141 188 202 163 131 184 231 Iron and steel 18 19 29 26 18 16 22 27 Iron and steel products 15 18 22 21 16 12 16 20 Machinery & equipment - electrical 18 18 25 28 25 22 26 30 non-electrical 49 52 67 72 61 45 67 85 Vehicles and transoort equipment 33 32 42 52 41 32 49 63 Other 2 2 2 5 2 4 4 6 Various 18 21 29 27 21 16 19 23 TOTAL 277 300 361 400 335 294 375 443 Source: Ministry of Finance. TABLE 21: Merchandise Imports, by Volume, 192-1961 (thousands of metric tons) Annual averages 1952-54 1955 1956 1957 1958 1959 1960 1961 (estimate) Foods, drinks and tobacco 316 376 381 434 450 414 454 566 Live animals 10 9 10 20 20 6 5 13 Meat 8 6 5 8 7 9 4 7 Dairy products 10 16 16 17 15 12 12 11 Cereals - grain 248 299 303 329 347 338 379 485 - manufactured 24 26 25 30 35 26 26 20 Others 17 20 22 30 26 23 28 30 Edible fats 18 20 28 27 25 35 29 36 Chemical products and pharmaceuticals 75 108 103 138 152 178 221 224 Rubber, wood and leather 51 49 54 58 35 34 53 53 Paper 27 37 36 39 33 33 42 57 Textiles and clothing 18 21 22 28 18 23 29 26 Fuels and lubricants 55 252 307 359 224 349 553 740 Non-metallic minerals and products 84 51 83 74 44 30 40 48 Metals and products 202 210 272 251 188 162 215 284 Iron and steel 101 109 149 116 87 79 101 130 Iron and steel products 21 26 29 24 19 16 22 25 Machinery and equipment - electrical 11 11 13 14 12 11 12 15 non-electrical 37 37 45 47 38 27 46 54 Vehicle and transport equipment 31 25 34 37 30 27 32 58 Other 1 2 2 13 2 2 2 2 Various 18 18 24 19 15 13 14 16 TOTAL 864 1,142 1,310 1,427 1,184 1,269 1,65o 2,050 Source: Ministry of Finance. TABLE 22: Terms of Trade, 1950-1960 (1950 = 100) Unit Value in Terms of U.S. Dollarsof. Trade Exports Imports 1950 100 100 100 1951 118 113 104 1952 108 -15 94 1953 95 112 85 1954 100 111 90 1955 103 112 92 1956 107 116 92 1957 119 119 100 1958 100 118 85 1959 105 117 90 1960 114 117 97 Source: Ministry of Finance. TABLE 23: Official Gold and Foreign Exchange Reserves," 1949-1962 (millions of U. S. dollars) Freely End Disposable Foreign exchange of Gold Assets/Liabilities Net Total 199 96 22.3 - 2203 31.9 1950 12,6 226 - 22,6 35.2 101 273 14. - 14.4 41.7 1952 27.3 9.7 - 9.7 37.0 1953 179 12.4 - 12.4 30.3 1954 1615 20,9 - 20o9 370 1955 6.5 16.9 - 16.9 3306 1956 16,7 31.8 - 31-8 48.5 1957 9.456 - 5.6 15.0 1958 0.7 12.0 11.0 1.0 1.7 1959 9.6 20,3 15.5 8.8 18.4 1960 24.0 26.2 - 26.2 50.2 1961 29.0 54.7 - 54.7 83.7 June 1961 29,0 26.8 - 26.8 55.8 1962 29.0 38.4 - 38,4 67.4 1/ These figures do not include $18.4 million of "untouchable" gold. with the change in the law for the Central Bank in February 1962, this amount is now part of the freely available reserves. 2/ Drawings on IMF and Export-Import Bank Stabilization Loan. Source: International Monetary Fund. 斗 JANUARY 1962 IBRD一63乙R kk, p 0, MOYOBAM"BýA ARCA TRUXLIL0 PUCAI---ý. HUANUCO CERRO de PASCO .0 0 f' HUANCAYO *LIMA -7 ^N w BANCAYRJ'.- l C A-1, PERU POPULATION EACH DOT REPRESENTS APPROXIMATELY 700 rNHABITANTS PUN böAREQUIPA 0 100 200 300 400 Km ffi *One-fifth of the population (approximately 2.1 million) is located in the greater Lima Area. TACNAO MAY 1962 IBRD-634RI