Uruguay - Current economic position and prospects

RETURN TO REPORTS DESK RESTRICTED Report No. WH-120b WITHMN ONE WEEK 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 The report may not be published nor may it be quoted as representing their views.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 URUGUAY August 22, 1962 Department of Operations Western Hemisphere CURRENCY EQUIVALENTS U.S. $1.00 = 11.00 pesos I peso = U.S. 9 cents 1 million pesos = U.S. $90, 000 TABLE OF CONTENTS Page No. BASIC DATA ............................... i SUMMARY AND CONCLUSIONS ................... ii I. INTRODUCTION ........................... 1 II. THE ECONOMY ......................... 1 Agriculture .................9...6........ 3 Industry .......... .. ..... 5 Power ............................... 6 Transportation ....... ............ . 6 III. DOMESTIC FINANCES . ..................... 8 Credit ..*. ............*... 8 Government Finances and Investment ..... 9 IV. BALANCE OF PAYMENTS AND EXPORT PROSPECTS .. 12 Export Prospects ................e...e. 13 V. CREDITWORTHINESS ...*........*........... 16 STATISTICAL APPENDIX i BASIC DATA Population (1960): 2.8 million Average annual rate of increase 1950-1960 1.5% Area: 72,000 square miles Gross Domestic Product: No estimates available Per Capita Product: Generally thought to be about U.S. $400 Balance of Payments: (million U.S.$) 1954 1959 1961 Current Account -34 -51 -5 Exports 249 98 175 Imports 274 170 209 Travel (net) 1 22 30 Capital Account (net) - 2 2 - Official Reserves and Short Term Capital Novements -42 -34 Central Government's Finances: (1960, million pesos) Budget Revenues 1,446 Budget Expenditures 1,380 Money and Prices: Dec. 1959 Dec. 1960 Oct. 1961 Mloney Supply (million pesos) 1860 2545 2645 Annual % change 41 37% 4 Cost of Living Index (1953 - 100) 267 363 400 Annual % change 49% 36% 10% External Public Debt (June 30, 1961): Total (million dollars) $ 128.5 Bonds 50.8 IERD Loans 59.4 U.S. Government Loans 11.1 Gold and Foreign Exchange Reserves 1954 1959 1961 of the Bank of the Republic (million dollars) 178 27 77 ii SUMIARY AND CONCLUSIONS 1. Though Uruguay is the smallest of the South American republics, rich and readily accessible land, a good climate and an environment which attracted people, capital and ideas, made it possible for the country to attain a relatively high standard of living for its people more than 50 years ago, and to become an internationally important producer and exporter of agricultural and pastoral commodities. Since the 1930's it has also developed a well diversified domestic industry producing mainly consumers' goods and services for the home market and processed pastoral products for export. There are no data on the distribution of income, but it is apparent that average per capita incomes are high and rather evenly distributed. Uruguay's social legislation is one of the oldest and most comprehensive of all Latin American countries and, in some respects, more advanced than in most countries anywhere. Largely as a result of the even distribution of wealth and the advanced social services, social and political conditions have been peaceful. 2. The latter years of the '50's were difficult years for Uruguay. Bad financial management in the form of distorted exchange rates and excessive credit expansion bore especially heavily on the agricultural economy and on the supply of exports. Unusually bad weather in 1957 and 1959 aggravated matters and initiated an accelerating deterioration in the domestic and external finxnces. A dr.-stic exchange reform at the end of 1959, which eliminated multiple exchange rates and devalued the peso sharply, and a tighter credit policy, have since brought about a marked improvement in the financial situation, restored incentives for production and made possible a recovery of economic activity to pre-1957 levels. In spite of t-e dismal record of previous years, there is a sizeable potential for further grouth, especially in the field of agricultural production for exports. However, much effort will have to be made to release this potential in the immediate future; limiting factors are such that te prospects for increasing output and exports are now only modest. 3. There are a variety of obstacles to expansion that must be overcome. The dominant characteristic of agriculture is that productivity is low. Production could be increased greatly if readily applicable techniques were introduced which would raise the productivity of pasture and crop production. Uruguay's transportation system, which consists of an extensive but worn-out railroad system and an inadequate road network which largely duplicates the rail network, is an obstacle to further economic development. Industry is typically high-cost; except for meat and wool tops, it is unable to compete in export markets and requires substantial tariff protection. Because of high costs and the small domestic market, rapid growth of industrial production does not at present anpear likely. iii 4. To cope with its long-run problems, the Uruguayan authorities have been planning for some time to enlarge the public investment effort. So far there is no integrated official investment program, but to help improve and rationalize public investment in future years, an Economic Planning Commission was recently established. Projects now under way or under consideration include an agricultural development program designed to introduce, with the help of an IBRD loan, modern production techniques; road construction, railroad rehabilitation, and further expansion of electric power. To carry out these projects, external borrowing of about $75-$100 million during the next three years is being planned. 5. The present external public debt, $135 million as of December 20, 1961, is not excessive. The total service on this debt requires approximately $12 million annually until 1970, equivalent to about 7% of 1961 export earnings. Provided that Uruguay's finances are managed care- fully from now on to prevent financial deterioration similar to that in the recent past from recurring, Uruguay could prudently assume additional foreign debt at this time. The prospects for such financial management appear fairly good; however, in view of the fact that the economy has not grown for a number of years, that prospects for further growth in output and exports are modest and that presently scheduled debt service does not decline significantly until 1970, new borrowing should be care- fully phased and its terms carefully tailored so as not to introduce potentially troublesome peak payment periods in future years, and limited to projects that would help to enlarge Uruguay's growth potential. I. INTRO DUCT ION 1. Uruguay suffered unusually severe storms and floods in 1957 and 1959, which caused agricultural production and all related activities to decline sharply and exports to fall in those years to roughly half their average 1951-56 level. The economy as a whole was badly hit, Continuing credit expansion in the face of this overall contraction pushed domestic prices as measured by the cost of living index up by 30% annually between 1957 and 1960, much more rapidly than at any time in the recent past, and drained away much of Uruguay's foreign exchange reserves. 2. At the end of 1959, the Government of Uruguay introduced an economic reform program intended to correct this accelerating deteriora- tion of the country's finances. The measures that were taken and the results expected were described in the last economic report (IjH-106a, June 21, 1961). The improvements that were beginning to be seen then have continued and the critical financial problems of the recent past now appear to have been overcome. Production and exports have returned to more normal levels and the rate of recent price increases although still high - 10% in 1961 - has been much reduced. 3. But while the measures designed to deal with pressing short- term economic problems seem to have been successful, little has been accomplished toward solving Uruguay's continuing long-term problems. Though well advanced by most standards of comparison, the economy has not been growing for a number of years. An IERD report seven years ago wrote (WH1-40a, May 3, 1955): ... In contrast with most other Latin American countries, Uruguay's economic development started early and travelled far. Now the pace of advance has slackened. ..." Such statistical and other indications as are available suggest that the pace of advance has not only slackened in recent years in the principal sectors of the economy, but stopped. To inject new vigor into the economy and to take advantage of the country's still unused development potential is now Uruguay's overriding economic problem. II. THE ECONOMY 4. Though Uruguay is the smallest of the South American republics, rich and readily accessible land, a good climate and an environment which welcomed immigration of people, capital and ideas, made it possible for the country to become an internationally important producer and exporter of agricultural and pastoral commodities more than fifty years ago. Since the 1930's, it has also developed a well diversified domestic industry producing mainly consumers' goods and services for the home market and processed pastoral products - meat and wool tops - for export. - 2 - 5. Uruguay's land is fully utilized but thinly settled except in and near hontevideo. One-third of Uruguay's 2.E million inhabitants live in this large urban nucleus and three-fourths of the value of all indus- trial output is produced there. This extreme concentration of the nation's very welfare-minded population in the main urban centre has helped to give Uruguay many of its distinctive features. There is much vertical mobility between social and economic groups. The middle class is large and politi- cally very active. Education is free through the university level and the population is very literate. Uruguay's social legislation is one of the oldest and most comprehensive of all countries in Latin America and, in some respects, more advanced than in most countries anywhere. Retirement and pension benefits were first provided to public school teachers in 1896 and to public employees in 1904. Similar benefits have since been extended to all employed and self-employed persons. Universal accident and health insurance, old age pensions to all indigent persons over 60 and to all invalids are among the other widespread social benefits enjoyed by every Uruguayan citizen. 6. There are no data on the distribution of income, but it is apparent that average per capita incomes are high - some estimate them to be over US$ 400 annually - and rather evenly distributed. There are no extremes of poverty among the lower income groups. The various social benefit laws have undoubtedly acted as income redistributing devices of importance through the years. In this environment, and with fairly steady, if gradual, economic expansion, there have been no extremes of political acrimony or dispute. Uruguay has been outstanding among countries through- out the world in that for half a century there has been social peace and political stability. 7. But the more thoughtful among Uruguay's leaders are beginning to wonder how much longer this happy pattern can continue, for there are many signs that the economy has ceased to grow. As yet, there is no wide- spread sense of urgency about the problems and prospects of the Uruguayan economy. Income levels are high and Uruguayan institutions spread the burdens of economic adversity very widely. But the indicators of economic change, if limited in number, are consistent in the directions in which they point. 8. Until recently, the economy of Uruguay had been growing at a fairly satisfactory rate. Between 1935-39 and 1954, agricultural produc- tion had been increasing, if irregularly, at the equivalent of about 4S a year and industrial production by an average annual 67 a year. Accor- ding to available statistics, this expansion has since stopped. Agricul- tural output was 20) lower in 1960 than in 1954 and industrial production was at the same level in 1959 as in 1954. 9. In an economy so largely influenced by agricultural developments which have been subject to wide fluctuations on the supply as well. as on the denmnd side, it is difficult to deduce from short-period production developments the long-tern te:idencies of the - 3 - Uruguayan economy. Furthermore, the latter years of the 1950's were years of bad financial management, during which distorted exchange rates and excessive credit expansion, aggravated by unusually bad weather in 1957 and 1959, bore especially severely on the agricultural economy and on exports. However, the following brief examination of the major economic sectors suggests that, while there is a sizeable potential for further growth over the years, there are important limiting factors to economic expansion. Agriculture 10. The dominant characteristic of all phases of Uruguayan agri- culture is that productivity is low. Readily applicable techniques which could raise the productivity of pasture and crop lands have yet to be widely introduced. Uruguay's good soils and climate have made it possible for it to be amone the leading agricultural countries in terms of produc- tion per capita, both in livestock and crops, but productivity per hectare and per animal are very low. As long as this situation remains, there is little prospect for agricultural expansion since all readily cultivable land is being used fully. The further development of Uruguayan agricul- ture, and indirectly, of the Uruguayan economy as a whole, will depend on the extent and rapidity with which agricultural productivity can be raised. 11. vool. Production has not been increasing in recent years. During the 1950's, annual output ranged between 80,000 to 90,000 tons. On present pastures, no significant further increases in wool production are expected without introducing new breeds and a variety of other measures designed to raise productivity. The consensus of expert opinion is that there is no reason why much higher productivity levels could not readily be achieved. Sheep farming conditions in Uruguay are not too different from those of New Zealand and Australia. Much time would be needed, but the benefits could be impressive. Raising present yields by one-third, i.e.,to Australian levels, with all the resulting increase in production becoming available for export, would increase Uruguay's present wool export potential by almost 30,000 tons, or '3, million above the $;5 million level reached in 1961. Average Annual Sheep kumbers and Wool Production during 1955-1960 Country Number of sheep Wool production Vool production (millions) (thousand tons) per head of sheep (kgs.) New Zealand 43 236 5.5 Australia 145 725 5.0 Argentina 46 184 4.0 South Africa 38 145 3.8 Uruguay 22 82 3.7 Source: FAO. Production Yearbook, 1960. - £4. - 12. Teat. Cattle numbers have fluctuated around a fairly level trend since the turn of the century, ranging between 7 million and 8.4 million. Productivity is very low by comparison with other beef producing countries. The number of cattle grazed on a hectare of land and the amount of beef that can be produced each year without depleting herds could readily be increased substantially. 13. A lower than normal proportion of breeding cows in herds (one- third), a low percentage (60%) of live calves born to breeding herds and an unduly long interval before calves are sufficiently grown for slaughter make the annual productive potential of Uruguayan herds much lower than those of other countries. After accounting for mortality, the annual pro- duction rate has been equal to only about 17% of the total Uruguayan herd compared to a ratio of about 50% for the United States. If Uruguay could achieve the same level of productivity per animal as, say, Argentina, production could increase by over 40% to 440 thousand tons without any increase in present herds. Since the bulk of any increase in meat produc- tion would be available for export - per capita meat consumption is already the highest in the world - an increase of this magnitude would make it possible for annual meat exports to increase from their present 30 mil- lion level almost fourfold to over $110 million. Number of cattle Beef nroductior Cattle to produce Country Lthousands) (thousand tons) one ton beef' Great Britain 11,000 800 14 France It ,000 1,300 14 west "ermany 12,CO e50 14 United States 95,000 6,500 13 Argentina L2,CCO 2,500 17 Australia 16,000 850 19 Uruguay 7,500 280 27 Source: TAO, Production Yearbook, 1960. 14. Crops. Production is concentrated primarily near kontevideo, the largest market. The major products are grains (wheat, corn, rice, oats, barley, rye); industrial crops (linseed, sunflower, peanuts, sugar beet, sugar cane, grapes); and truck crops (potatoes, vegetables, fruits). Only wheat and linseed are exported. Though the land used is quite fertile and rainfall is normally adequate, yields are very low compared with other countries with similar resources. Yields are low even compared with the much lower world average. The world average for wheat in 1959-60 was 1,270 kg. per hectare; the average yield in Uruguay during the last few years has been about 800 kg. per hectare. 71ith corn, the difference is even greater. For the last ten years, Uruguayan corn yields were less than 600 kg. per hectare compared with a world average of over 2,000 kg. per hectare. 15. Lack of knowledge 7nd of a will to apply modern agricultural techniques seem to be the key explanations for the fact that low produc- tivity characterizes virtually all of Uruguayan agriculture, though lack of adequate agricultural credit and of skills needed to apply improved techniques are undoubtedly also important. The fact that no concerted effort has as yet been made to deal with this situaticn is surprIsing in a country as advanced in other respects as Uruguay. However, the following explana- tions are generally ventured for the large and the small landholders, who farm close to half of the total cultivated area. 16. The large landowners, who could most readily improve farm practices, have often found it more convenient to invest their capital elsewhere. One-third of the total land under cultivation is in holdings larger than 2,500 hectares, the owners of which live in Montevideo and frequently have businesses there, too. These absentee owners reportedly have little contact with their land and little urge to improve production techniques. The small landowners, with farms of less than 100 hectares, account for only about 10% of the total rural area and are mostly located close to Montevideo and other cities. These small holdings have had their original fertility depleted by continuous cropping over the last 100 years and yields have become very low. The small land holder generally can neither save enough out of his meagre income nor borrow readily to improve his property. 17. The problem of low productivity and stagnation has been known for some time. A joint IBRD-FAO mission to Uruguay in 1950 concluded that, in pastoral production, "the situation is one of stagnation and relatively low rates of productivity." Since no new land is available for agricultural exploitation, the mission recommended that "improved techniques of livestock raising, successfully developed elsewhere, should be tested for adaptability to Uruguayan conditions as a means of increasing productivity." The findings and recommendations of the mission eventually resulted in the initiation in 1960 of a pilot program to incrense productivity in pastoral production. The Plan Agropecuario, financed in part by the IBRD, is tie first organized attempt to attack this problem. Under this program, technical and financial aid is being given to about 600 farmers. It is hoped that the rest of the agricultural community will observe the positive results of improving pro- duction techniques and productivity on these farms and also adopt new techniques. It is too early to assess at this time the final impact of what is so far only a pilot program, but the project itself is progressing well Industry 18. Uruguayan industry is of fairly recent origin - it developed since the 1930's and consists largely of processing of locally-produced materials, principally meat and wool. Foods and textiles together account for almost half of the value of all industrial production. About half of the total textile production consists of wool tops for export and about one-fourth of total food production is meat and meat products for export. Other industries produce almost entirely for the local market. - 6 - 19. Between 1936 and 1954 industrial output and employment increased by about 6% annually. This was the period in which the present range of in- dustrial activities was first established and in which meat and wool exports were also growing. But since then, with no further growth in exports and with local market limitations rapidly being reached in many fields, overall output does not seem to have been able to increase much further. The limited statistics available are contradictory. Since 1954 total output has not in- creased, but industrial employment has risen. However, the consensus in Montevideo is that recent industrial expansion has been very limited. 20. Uruguayan industry is typically high cost and, except for meat and wool tops, is unable to compete in export markets. With heavy social welfare charges adding to the wage bill, labor is expensive and capital costs are also high. Suppliers for the small local market are well protected by tariffs. In the absence of increased meat and wool tops exports or of sub- stantially increased construction activity, the prospects for important change in the present industrial picture do not now appear bright. 21. There is one problem in the industrial sector which calls for urgent remedy. The equipment of all but one of the major meat packing plants has been allowed for a variety of reasons to deteriorate so much over the yeas that the ability of the industry to meet existing contract obligations is now in doubt. Exports have already been affected adversely. Major investments in1 this area of industry are required now, and will be needed even more in the future, if present efforts to raise productivity in the livestock industry are successful. Power 22. The one sector of Uruguayan activity that has been expanding steadily and promises to continue to do so is electric power. Since 1949 electricity production has increased in pace with demand by about 9% a year. In spite of the limited industrial expansion in sight, future expansion, mainly for further electrification in urban centres, is now planned to meet an expected consumption growth of 8% a year. Power is generated and dis-- tributed by a single, Government-owned corporation, the Usinas Electricas y Telefonos del Estado (UTE), which operates a large thermal station near Montevideo, numerous small diesel stations throughout the country, and two large hydroelectric stations. The present total installed capacity of about 400 MW has been developed since the war, about 200 MW with the help of several IBRD loans. In the near future UTE plans to expand its facilities by adding generating units to its existing power facilities. After 1965 it plans to construct a new hydro plant at Paso del Puerto and a new steam plant at Montevideo. The Argentine and Uruguayan authorities have been considering for some time a hydro-power project on the river Uruguay near Salto; the execution of this project would first require agreement between the two Governments. Transportation 23. Uruguay's basic transportation system was built years ago. The original transport net consisted of a railway systcm built for the most part by the British late last century to link the various commodity- producing areas of the interior to tne Montevideo market and through its port to the meat and wool markets of the world. In tne absence of an alternative means of transportation the railroad system was extended to cover the country. Only few places are more than 30 miles from a rail line. In later years a road system was added, but instead of complementing the existing railroad it was built to compete with the then foreign-owned railroad. When the Government purchased tie entire railroad system in 1948 it became owner of an extensive but unbalanced transportation system ccnsisting of duplicate under-utilized facilities. 24. The transport system now consists of rail and road trunk routes, all converging on iontevideo, which are for the most part badly run down and grossly inadequate secondary facilities, connecting up with the main routes. The inadequacies of this transport system inhibit efforts to raise productivity and output. Because of a lack of earning power due to insufficient volume of traffic, the railroad equipment has been allowed to run down for decades and major re-equipment expenditures are now required if service is not to deteriorate and costs increase even more sharply than in the past. The Administracion de Ferrocarriles del Estado (AFE), the Government corporation that was established in 1952 to operate the entire railroad system, h.s hrd a chronic lack of earning power. In addition to too little traffic, engines, cars and track with average ages of 50 years or more make the operation expensive. As for roads, since the purchase of the railroads by the Government, little has been done in the way of maintenance or irprovement. Most trunk roads have not been surfaced and are in very poor condition. Travel is not only uncomfortable but very costly in terms of wear on vehicles and damage to cargo. Furthermore, many sections of the main roads become impassable during the rainy season. 25. The Government is now endeavoring to make improvements in the transport system. AFE is planning a .P24 million improvement program over the next ten years to dieselize tae system, replace worn-out freight cars, track and equipment and thereby reduce operating costs. A start was made in February 1962 when M6 million worth of diesel engines were purcriased with credit from French suppliers to dieselize the system fully. With the traffic in orospect, AFE will continue to require subsidies from the Govern- ment, but at a much lower rate than at present once the improvement program is completed. About half of AFE's expenditures were covered by Government subsidies in the past few years, though about one-tiird of the subsidies are not properly chargeable to the railroads as they represent the cost of free transportation which AFE is obliged to provide to certain categories of persons in the public service and in schools and colleges. As for roads, a program for the reconstruction of the main trunk roads is now being formulated. - 8 - 26. At present the railway system provides a transportation service essential to the economy. Further investment in the railroads is justified to the extent that it would lower the oresent real cost of rail transport to the economy and would enable the Government to reduce the subsidy that would be required for a re-equipped system. But the Government also plans to improve the present road system as well as to extend it. In this situation, there is a clear and pressing need for information that would provide a basis for Uruguay and for possible lenders to decide how and where investment in transport improvement could best be made in the coming years. III. DOMESTIC FINANCES Credit 27. Recent monetary developments have reflected the ending in the mid-1950's of the economic expansion with stability of previous decades. When output levelled off, and even declined in some of the more recent years, monetary expansion was continued deliberately in an effort to prevent incomes from declining. Severe inflationary pressures were the result. The average annual increase in the cost of living after 1955 was 20% compared with an annual 2% between 1929 and 1944 and an average annual increase of 8% between 1944 and 1954. Exchange reserves declined from a high of $235 million in 1953 to a low of $27 million in 1959. 28. Recent monetary expansion has been entirely the result of in- creased credit to the private sector, largely to help finance rising wage and social benefit costs of business. There has been no net credit expan- sion to the Government in the past few years. Central Bank rediscounts contributed importantly to the monetary expansion. Rediscounts increased by about 280% between 1956 and 1961, from 179 million pesos to 746 million pesos, facilitating a growth of commercial bank credit to the private sector of 180% during this five-year period. Most of the credit expansion took place after the disastrous weather conditions of 1957. The money supply, which had been increasing by 8% to 10% annually before 1957, increased by 31% in 1958, 41% in 1959 and 37% in 1960. 29. To cope with the sharply deteriorating situation, the Uruguayan Government undertook a radical exchange and monetary reform and adopted a new line of economic policy at the end of 1959. By a law of December 15, 1959 which eliminated multiple exchange rates and established a single exchange market with a fluctuating rate, the peso was sharply devalued. Credit restraint was delayed because the Bank of the Republic had to make large net cash payments to fulfill exchange sale contracts incurred at pre- reform rates. In 1960, losses on these contracts amounted to 288 million pesos, or to over half of the expansion in the money supply in that year. But in 1961, money supply rose by only 4%, mostly with the reconstitution of the Bank of the Republic's exchange reserves. Credit to the private sector rose by only 9% in 1961 as compared with 30% in 1960. - 9 - 30. aonetary stability now appears to be a major objective of official policy once again. To improve and make more flexible the machinery of moetary control, a bill was recently passed by Parliament waien makes it possible for the first time for the exe- cutive to change the legal reserve requirements of tae commercial banks. Previously, tney had been fixed by law. The power to change reserve reQuirenents was given to the Linister of Finance. The auflorities plan to double reserve requirements in the near future. The Sovernment is also making stronr efforts to contain wage increases whieb have been the principal cause of monetary expansion in these years. The salary councils which consist of representatives of workers, Government and industry have in the past few years largely given in to all demands of labor for wage increases, Dy taking a firmer stand in all the councils and providing more reliable statistics on cost of living and productivity, the Government intends to keep wage increases to a minimum. In all, the prospects for reasonable stability again after the aberrations of the past few years appear fairly good. Government Finances and Investment 31. The public sector of Uruguay is large and very diffuse. There are no consolidated accounts for the Government finances, nor any readily available picture of the overall finances of all the many government-owned corporations which engage in a wide variety of com:odity producing activi- ties - cement, petroleum refining and distribution, meat packing and processing and electric power to mention only the largest - as well as the full range of public service activities in the fields of health, sanitation, education, social security and so on. From the point of view of the Central Government's budgets, however, which include transfers of various kinds to the rest of the public sector, the public sector has managed regularly to operate within the resources available to it through normal revenues and through borrowing from the social insurance funds and other non-bank sources. The public finances have not normally leaned on the tanking system for exrenditure financing. 32. The Central Governmert's finances consist =rincipally zf thr-ee budgets. The General Budget normally includes only the current expendi- tures of the Government. The Public Works Fund, a special budget to which special revenues are assigned - largely taxes on fuels, land, roads, import surcharges and export taxes - finances public works expenditures and trans- fers to municipalities and other public agencies. The Exchange Profit Fund, a special budget to which other earmarked taxes - currently import surcharges and export taxes on wool and mat - are assigned, finances cost of living subsidies, agricultural development, road improvements and transfers to other parts of the public sector. 33. The recent performance of these budgets may be sumarized as follows: - 10 - 1959 1960 1961 (million pesos) Revenuesl/ General Budget 900 1446 2138 Exchange Profit Fund - 385 537 Public Works Fund 43 110 153 943T 191 - 2 Expendituresi/ General Budget 820 1380 2158 Exch,n,e Profit Fund - 365 hb7 Public Jorks Fund 50 100 100 /2705 - These filiures include small transfers among the various budgets. Source: Tables 19-22. 34. Very substantial increases in revenue nave taken place since 1959. The total of revenues accruing to the three budgets listed above were three times greater in 1961 tnan in 1959, and exceeded by a large amount the increase in prices during tais period. This 100"" increase in real revenues was m.de possible both by raising tax rates and by establishing new taxes, in the course of which important innovations in Uruguay's tax structure were made. For the first time, a progressive tax on total personal and corporate incomes was introduced. This cnange should make Uruguay's Government revenues more responsive than in the past to changes in the level of activity and in prices. For the first time, too, a tax intended to stimulate a better use of land was intioduced. Once this tax becomes effective, land owners will have to pay a tax assessed as a percentage of the value of production that this land is presumed capable of producing. 35. In 1961 total revenue of the General Budget, the Exchange Profit Fund and the Public Works Pund amounted to 2.8 billion pesos. In 1962 the rate of increase is expected to level off but total revenue should exceed 3 billion pesos, probably equivalent to about one-fifth of the national product (assuming that per capita incomes in Uruguay are Pt least as high as in Argentina). About one-fifth of this revenue is being allocated for capital expenditures. If the presumption as to per capita incomes is at all reasonable, this means that the Uruguayan Government is saving and investing at a rate equivalent to some 4% of the national product. Total public sector investment, which would include the investment expenditures of all state enterprises would be still higher. These estimates are ebwlously subject to a wide margin of error, but tney do suggest that the public sctor in Uruguay absorbs a large share of the national product, that public Savings are substantial and that a large investment effort could continue to be financed internally without increasing taxation mnuch further. - 11 - 36. Uruguay has been considering for some time a number of public investment projects which have so far not been classified by priority nor arranged into an integrated program. The full list of projects which was presented to Congress in 1960 as an investment program includes projects of the Government and of independent state enterprises. Some of these projects are already being carried out and others should be under- taken soln, as resources have already been earmarked for them, but some are only tentative and are not likely to be carried out during the next decade. The projects that have been started or are likely to be underway before 1965 include a program to expand electric power facilities with a foreign exchange cost of $35 - $60 million, a highway improvement program with a foreign exchange cost of $25 - 130 million, and a railropd rehabilitation program with a foreign exchange cost of i 22 million. Of the latter, $6 million in supplier credits have already been incurred. This list appears to include the most urgent projects in the field of power and transportation. While it is not comprehensive, total borrowing over the next three years does not now appear likely to exceed 375 - 100 million. 37. The creditworthiness implications of borrowing in these amounts is discussed in paragraph 62 below. Domestic financing requirements for these projects should be manageable as current annual rates of public savings are nuch higher than those required for the projects under consideration. 38. To help improve and rationalize public investment in future years, the Uruguayan authorities have recently established an economic planning commission. The commission will, in the course of its work, develop now incomplete or nonexistent statistical infor- mation about tne Uruguayan economy, including a complete system of national income accounting. Specific industrial and sector studies are also planned. It is being guided and assisted by an advisory team from the Organization of American States, the Inter-American Development Bank and the U.N. Economic Commission for Latin America. The planning commission is not likely to influence investment decisions very soon; however, once some informational groundwork is developed, it may bewin to participate intimately in the public investment planning process. - 12 - IV. BALANCE OF PAYMENTS AND EXPORT PROSPECTS 39. The economy of Uruguay depends very heavily on exports of agri- cultural products. Total exports probably exceed 20% of GNP. Virtually all exports consist of agricultural commodities, which are exported both raw and with processing. In recent years, raw wool has, on the average, accounted for over 35% of total exports and wool tops, a semi-processed form of wool, has accounted for another 15% to 20% of exports. Meat and meat products provide about another 30% of total export earnings. Wool and meat together thus account for some 85% of the total value of exports. The remaining 15% consists of other agricultural commodities and a very varied but small amount of manufactured products. 40. Since the end of World War II, the value of Uruguay's exports increased steadily from $122 million in 1945 to a peak of $270 million in 1953. Since then exports have been declining. They fell particularly sharply in 1957 and 1959 when weather conditions were unusually severe. Total export earnings amounted to only $98 million in 1959. 41. Declining export prices and bad financial management were the principal causes of this decline, though the pattern of year-to-year changes has also reflected the withdrawal from time to time by wool producers from the market in expectation of more favorable prices or exchange rates. The effective export rates obtainable during the years before the 1959 monetary reform when multiple exchange rates were in use, in the face of declining export market prices and rapidly rising domestic costs, made agricultural production for exports very unattractive. 42. As imports fell only with a considerable lag and capital inflow has been negligible, trade deficits and declining exchange reserves character- ized almost all these years, and by 1959 foreign exchange reserves were virtually depleted. 43. To remedy this rapidly deteriorating condition, the Uruguayan Government introduced a radical exchange reform in December 1959 in which all multiple exchange rates were abolished and a single exchange market was established with a fluctuating rate. The resulting sharp devaluation of the peso finally removed the disincentives to export created by the pre- vious pattern of multiple exchange rates and restored price incentives for exports once again. By 1961 the level of production had returned to the levels before the flood disaster and exports also increased again to $175 million. Foreign exchange reserves recovered from $27 million at the end of 1959 to $77 million in December 1961. Sharply rising foreign exchange receipts from tourists during these years - mostly Argentines who, for many years previously, had not been able to travel abroad - added another $30 million to total export earnings. Uruguay is making strong efforts to increase this tourist income further. However, as tourism is affected directly by - 13 - conditions in neighboring exchange markets, its further growth will probably be inhibited by the recent devaluation of the Argentine peso, and tourist revenues should continue at about their 1961 level. 44. Imports have fluctuated around the J'200 million level since 1055. More than 50% of these imports have consisted of raw materials, fuels and lubricants. Machinery imports which before 1955 accounted for more than 15% of total imports have since accounted for less than 10%. The rest consists of imports of automobiles, building and construction materials and other manufactured products. 85. The years of changing multiple exchange rates and import restrictions do not provide much basis for commenting on the nature of Uruguay's import demand, except to note tnat imports have been fluctuating around a t200 million level both in the post- as well as the pre-exchange reform years. These were the years of little economic expansion and this level of imports seems to have been adequate for current levels of activity. Imoorts will probably rise if real incomes grow, however, as production for export seems at the moment to be the nost I ikely avenue of growth and of rising income, Uruguay should be able to pay for the resulting expansion of imports. Export Prospects 46. Uruguay's most important export commodities are wool, meat, hides, wheat and linseed. These are discussed briefly below. 47. Wool is Uruguay's major export commodity. In 1061 over 60% of total exports consisted of wool and wool tops. While wool production has been relntively stable for many years, exports of wool have fluctuated widely, largely because wool producers have occasionally withdrawn from the market in expectation of better prices. Raw wool exports before 1957 amounted to about $90 million and wool tops to about $30 million. Partly because of a decline in prices but also because of a drop in volume of exports due to weather conditions, export earnings nave since declined in some years to less than half the pre-1957 level. In 1961, raw wool exports were up again to $85 million. This was still below the 90 million level of earlier years, though above in volume. Furthermore, the 1961 level would have been even lower had not part of the 1960 raw wool crop been withheld and exported in 1961. - 14 - 8. Wool export prospects depend primarily on what happens to pro- duction. As was described in paragraph 11 above, wool production could be increased very significantly if the objectives of the Plan Agropecuario are realized. Uruguay should be able to sell whatever increase in wool production it can achieve in the coming years; it is a marginal supplier to the world wool market. Uruguayts traditional share of the world market has been about 5%. This share has declined somewhat in recent years, but could be recaptured. 49. World per capita wool consumption is not expected to grow by more than 1.7% a year, e.g., at the rate of population growth. On this basis, world wool consumption should be about 3.5 million pounds in 1966. 4-5% of this level of consumption would amount to exports valued at over $90 million. This total is appreciably higher than the export levels which are current or in immediate prospect. During 1958 to 1961, annual wool exports averaged $57 million. 1961 raw wool exports were as high as $86 million only because part of the 1960 wool crop was sold in 1961. Wool exports in 1966 are not likely to be much above $80 million. However, if the agricultural improvement program becomes generally accepted, exports of raw wool could well exceed $100 million in later years, 50. Exports of wool tops are not likely to expand much under present cost conditions. A reasonable expectation would be that Uruguay will in- crease exports of wool tops moderately, by no more than 1-2% per year to about $27 million in 1966. 51. Uruguay's second most important export commodity is meat. Meat exports have for some years earned about $30-35 million per year. Apart from the sharp recent decline due to weather conditions, they have been fairly stable. Meat export prospects will depend, like wool, on what happens to productivity, but also to what happens to the processing plants. All the major meat packing plants, but one small one, are operating with such old and outdated equipment that exports are already being hampered. 52. As a marginal supplier to the international meat trade, Uruguay has thus far always been able to sell all its exportable supplies. However, market prospects are now uncertain and a matter of some concern because cf developments in the European Common Market. 53. At this moment, meat exports are projected at about the average export levels before 1957. A level of $35 million is therefore projected for 1966. Sh. Exports of hides and skins are likely to behave similarly to meat exports. In 1961 about $17 million worth were exported. Assuming that the 1957 level will be regained, about $20 million worth of hides and skins should be exported by 1966. - 15 - 55. Between 1951 and 1956 Uruguay exported on the average 260,000 tons of wheat valued at about $23 million. Between 1957 and 1959, wheat exports declined bec-use of unfavorable export prices and poor weather conditions. Prices for producers have improved somewhnt since the devaluation and it is likely that wheat exports will recover somewhat. Uruguay has a steady market in Brazil for a large proportion of exportable supplies. However, because of prevailing conditions in the world wheat market, wheat exports are unlikely to recover to the point where pre-1957 levels will again be reached. With world prices at present levels, wheat exports should thus amount to about 47 million in 1966, or 25% below the average 1951-1956 level. 56. Uruguay exported on average .48.5 million worth of linseed oil annually during 1951-1956, $4.7 million during 1957-1960 and $6.5 million in 1961. In the face of markets whica are not expected to expand signifi- cantly linseed oil exports will probably continue at about present levels. 57. The remaining exports consist of other agricultural products and few minor industrial products like pharmaceuticals. These exports should, at the new exchange rate, at least recover to their 1957 level of about lp20 million by 1966. 58. In total, Uruguay's export earnings five years hence could amount to about "206 million compared to 175 million in 1961. The increase would imply an annual increase of 3.5% over the 1961 export level. The projected 1966 level is still well below the pre-1957 average earnings, mostly because world prices for some major exports have declined considerably from the 1951-1956 average: wool prices have declined by 24%, linseed oil by 19%, wheat by about 35%, hides and skins by 20%. Only prices for meat and meat products have remained relatively stable. 59. Should present efforts to improve agricultural production turn out to be successful, exports could be considerably higher. If productivit,f of wool and meat production per animal could be increased to tne levels achieved respectively in Australia and Argentina, total exports could increase by 120 million or by more than 50%. However, there is little prospect thr,t tris could be acnieved in as brief a period as five years. - 16 - V. CREDITWORTHINESS 60. Ample resources in relation to population, a high level of income and standard of living, a long tradition of political stability, the absence of serious social problems, conservative borrowing practices in the past and a good record of debt repayment are very impressive positive components of Uruguayan creditworthiness. The present external public debt, %135 million as of December 20, 3961, principally long-term publicly issued bonds (h5) and IBRD loans (46%), is not excessive. The total service on this debt requires approxi-m;tely 12 million annually until 1970, equivalent to about 7% of 1961 export earnings. 61. Provided that Uruguay's finances are managed carefully from now on to prevent financial deterioration similar to that of the recent past from recurring, Uruguay could prudently assume additional foreign debt at this time. The prospects for such financial management now appear fairly good. However, in view of the fact that the economy has not grown for a number of years, that prospects for further growth in output and in exports are modest and that presently scheduled debt service does not dcline significantly until after 1970, new borrowing should be carefully phased and its terms carefully tailored so as not to introduce potentially troublesome peak payment periods in future years and limited to projects that would help to enlarge Uruguay's growth potential. STATISTICAL APPENDIX 1. External Public Debt Outstanding as of June 30, 1961 with M.ajor Reported Additions July 1 - December 28, 1961 2. Estimated Contractual Service Payments on External Public Debt Outstanding as of June 30, 1961 with Major Reported Additions July 1 - December 28, 1961 3. Land Use, 1951, 1956 4. Indices of Agricultural Production, 1935-1960 5. Wool Production, 1901-1960 6. Meat Production, 1950-1959 7. Number of Livestock, 1860-1956 8. Agricultural Production, 1899-1961 9. Area Sown to Agricultural Crop Production, 1899-1961 10. Yields of Main Agricultural Crops, 1.899-1961 11. Index of Value of Industrial Production, 1936, 195L-1959 12. Basic Data of the Industrial Sector, 1889-1959 13. Bank of the Republic Credit, 1956-1961 14. Commercial Banks; Main Assets and Liabilities, 1956-1961 15. Total Bank Credit, 1956-1961 16. Money Supply, 1956-1961 17. Cost of Living Indices, 1950-1961 18. Gold and Foreign Exchange Reserves of the Bank of the Republic, 1952-1961 19. Central Government Revenues, 1958-1962 20. Central Government Expenditures, 1958-1962 21. Exchange Profit Fund, 1960, 1961 22. Public I'orks Fund, 1959-1961 23. Balance of Payments, 1953-1961 24. Exports by Principal Commodities, 1952/56/58-61 25. Imports by Principal Commodities, 1952/55/58-61 26. Exports to Najor Countries, 1952/55/58-60 27. Imports from Major Countries, 1952/55/58-60 26. Export Prospects, 1966 TABLE 1! Ext'2rnal Public Debt Outstanding as of June 30. 1961 titj ReDorted Additions to D)ecember 28. 1961 (thousand dollars) Debt outstanding June 30,1961 Major additions Item Net of Including July 1 - undisbursed undisbursed December 28,1961 Total External Public Debt 112,714 128,528 5,483 Publicly-issued bonds 57 983 57,983 - IBRD loans _0,886 59,1- Inter-American Development Bank - - 2,993 U.S. Government loans 3,86 1,0 2,7490 Export-Import Bank 3,600 3,600 2,149 Development Loan Fund - 7,255 - Maritime Administration 245 2145 Source: IBRD, Economic Staff. TOTBLE : E timated Contractal Se-vtco TrmentL on Fxternal Public De'bc ritsf.anding as of June 30161 Gith Major Reported Adtitions to Deceimber 28] 901 /1 (*1housand dollars) Debt out- Payments during year Debt out- Payments during_year Year standing Amorti- In- standing Amorti- In- January 1 zation terest Total January 1 zation terest Total Total debt Publicly-issued bonds 1961 128,528 /2 6,343 5,288 11,631 57,983 /2 3,082 2,670 5,752 1962 129,867 6,737 5,034 11,771 56,079 3,220 2,092 5,312 1963 122,600 7,131 4,976 12,107 52,329 3,365 1,947 5,312 1964 114,907 7,838 4,647 12,h85 48,402 3,519 1,793 5,312 1965 106,1469 8,68 4,282 12,750 44,283 3,677 1,635 5,312 1966 97,364 7,953 3,888 11,8 1 39,969 3,847 1,465 5,312 1967 88,734 8,67 3,759 12,106 35,445 4,023 1,289 5,312 1968 79,367 8,839 3,349 12,188 30,702 4,128 1,105 5,233 1969 69,818 9,077 2,933 12,010 25,864 4,275 917 5,192 1970 59,985 8,658 2,513 11,171 20,833 3,960 727 1,687 1971 50,522 7,899 2,106 10,005 16,068 3,600 543 4,143 1972 41,766 6,901 1,749 8,650 11,611 2,797 375 3,172 1973 33,953 5,622 1,442 7,064 7,902 1,409 257 1,666 1974 27,360 5,639 1,167 6,806 5,522 1,310 173 1,483 1975 16,730 3,914 902 4,816 3,178 1,345 91 1,436 IBRD loans Other 1961 59,445 /2 2,252 2,453 4,705 11,100 2 861 161 1,022 1962 58,194 2,656 2,619 5,275 15,594 861 323 1,184 1963 55,538 2,905 2,654 5,559 114,733 861 375 1,236 1964 52,633 3,458 2,513 5,971 13,872 861 341 1,202 1965 49,175 3,813 2,340 6,153 13,011 978 307 1,285 1966 15,362 3,871 2,152 6,023 12,033 235 271 506 1967 41,491 3,932 1,962 5,894 11,798 692 508 1,200 1968 37,559 3,997 1,766 5,763 11,106 714 478 1,192 1969 33,562 4,064 1,568 5,632 10,392 738 448 1,186 1970 29,1198 3,934 1,371 5,305 9,654 764 415 1,179 1971 25,564 3,509 1,181 4,690 8,890 790 382 1,172 1972 22,055 3,287 1,025 4,312 8,100 817 349 1,166 1973 18,5768 3,367 873 4,240 7,283 846 312 1,158 1974 15,401 3,454 717 4,171 6,437 875 277 1,152 1975 11,947 1,662 573 2,235 5,562 907 2,18 1,145 1 Incluc'es service on all debt listed in Tablb 1 ozcept 5290,000 from the Export-1m-rcrt Bank for whic! rcpayment terms are not readly available., 2 outstanding as of June 30th; payments for full year 1961. Source: IELD-Econolaic Staff, TABLE 3: Land Use, 1951, 1956 (thousand hectares) Area 1951 1956 Total Area under Pasture 15,060 14,852 of which: Natural Pasture 13,967 13,689 Sown Pasture 472 458 Volunteer Ley 229 271 Natural Woodland 392 434 Total Area under Agriculture 1,434 1,660 if which: Vegetable Farming 60 46 Orchards, Vineyards 56 36 Croplands 1,224 1,439 Timber 94 120 Unproductive Land 480 248 TOTAL 16,974 16,750 Scurce: Ministry of Agriculture. TABL: 4: Indices of Agricultural Prcduction, 1935-1960 (in constant prices, 1935-39=100) Total Agriculture Year and Livestock Livestock Wool Cattle Agriculture 1935-39 100 100 100 100 100 1940 109 113 116 105 100 1942 107 106 103 104 107 1944 115 109 130 76 135 1946 120 111 145 62 119 1948 110 100 120 63 129 1950 132 132 141 114 126 1951 140 137 156 112 156 1952 141 139 158 107 139 1953 147 146 169 114 149 1954 158 140 160 95 187 1955 148 131 144 89 182 _956 150 138 157 83 173 1957 153 148 171 94 159 1958 146 127 147 75 191 1959 132 128 149 79 135 960 125 129 125 90 108 Soirce: Ninistry of Finance. TABLE T: Wool Production, 1901-1960 / Thousand Thousand Years-- Kilograms Year Kilograms 1901 - 1905 35,395 1950 74,070 1906 - 1910 43,433 1951 84,114 1911 - 1915 51,093 1952 85,411 1916 - 1920 40,917 1953 95,649 1921 - 1925 40,449 1954 88,355 1926 - 1930 59,407 1955 93,000 1931 - 1935 50,702 1956 91,605 1936 - 1940 54,834 1957 85,690 1941 - 1945 62,004 1958 75,380 1946 - 1950 73,216 1959 80,198 1951 - 1955 89,306 1960 84,027 1956 - 1960 83,380 /1 Yearly average Source: Ministry of Finance. TABLE 6: Meat Production, 1950-1959 Total Slaughter Meat Production Cattle Sheep Pigs Cattle Sheep Pigs Year (thousands) (thousand tons) 1950 1,228 3,574 238 323 61 20 1951 1,563 2,906 208 317 51 18 1952 1,444 3,607 228 302 62 18 1953 1,537 3,651 228 325 64 20 1954 1,271 3,437 248 271 58 20 1955 1,151 3,818 266 259 67 21 1956 1,223 3,748 239 272 64 19 1957 1,263 3,282 243 278 56 19 1958 1,026 3,091 251 215 62 20 1959 1,039 2,938 253 218 59 20 Source: Iinistry of Finance. TABLE 7: Number of Livestock, 1860-1956 (thousands) Year Cattle Sheep Pigs 1900 6827 18601 94 1908 8193 26286 100 1916 7802 11473 304 1924 8432 144 3 251 1930 7128 20558 308 1937 8297 17931 346 1946 6821 19559 274 1951 8154 23409 259 1956 7433 23303 381 1961 8671 21482 - Source: Ministry of Finance. TA13LE 8! gricultural Production. 1899-1961 (thousand metric tons) Period Wheat Linseed Oats Barley Barley Birdseed Corn Peanuts Sunflower Rice (beer) 1899 - 1903 150.4 6,8 0.1 0.8 - 0.6 96.3 - - 1904 - 19o8L 180.1 16.3 1.6 1.2 - 1.4 107.9 - - 1909 - 1913 156.7 17.1 10.9 1.3 - 0.1 153.1 - - - 1914 - 1918 205.8 12,2 31.0 2.3 - 0.9 190.4 0.1 - - 1919 - 1923 194.3 18.5 24.2 1.3 - o.6 154.3 0.5 - - 1924 - 1928 320.7 44.1 36.3 2.1 - 1.0 137.7 0.4 - - 1929 - 1933 269.4 84.4 33.9 3.1 - 1.3 129.7 0.4 - 1.3 1934 - 1938 360.7 81.4 42.3 8.6 1.1 2.3 133.2 0.9 0.9 12.7 1939 - 1943 318.3 79.0 37.2 9.8 3.7 1.4 113.7 2.4 22.0 17.8 1944 - 1948 260.7 95.4 40.9 9.8 _.6 1.4 126,4 5.3 31.2 28.3 1949 - 1953 469.0 lo6.3 44.1 9.1 14.4 1.9 155.5 6.1 83.8 44.3 1954 - 1958 738.3 64,6 47.6 9.7 27.2 2.5 211.5 5.9 91.1 61.8 1951 434.7 90.0 34.2 10.4 14.2 100 278.5 8.6 118.4 36.8 1952 477.6 141.6 37.7 6.9 11.0 0.4 117.2 3.2 109.4 47.2 1953 462.5 108.6 38.5 6.7 15.5 0.4 208.0 3.9 91.7 52.5 1954 818.6 64.5 59.7 13.1 27.3 1.0 212.2 5.7 81.4 61.7 1955 853.6 63.0 32.9 10.7 30.6 1.5 191.9 5.1 85.0 68.4 1956 832.8 49.8 37.8 5.8 21.8 2.0 208.9 5.9 79.7 64.0 1957 588.9 72.4 55.7 9.7 34.4 6.8 168.2 7.4 78.7 57.0 1958 597.8 73,4 52.2 9.0 22.0 1.5 276.2 5.6 130.8 57.8 1959 359.7 72.0 32.8 8.4 16.2 1.8 133.0 3.0 48.3 49.3 1960 182.8 50.3 21.4 7.3 22.0 1.3 78.4 5.3 72.4 53.2 1961 412.6 66,9 63.3 15.0 33.9 0.6 197.4 6.6 98.0 54.0 /1 Four-year average SGUrce: Ministry of Finance. TABLE 9: Area Sown to Agriclltural Crop Production,_1899-1961 (thcusand hectares) Period Wheat Linseed Oats Barley Barley Birdseed Corn Pea- Sun- Rice (beer) nuts flower 1899 - 1903/1 287.5 3.6 0.1 1.1 - 1.1 133.6 - - - 1904 - 1908- 262.3 23.2 1.7 1.9 - 1.6 182.5 - - - 1909 - 1913 237.6 34.2 14.7 1.7 - 0.3 223.0 - - - 1914 - 1918 356.1 28.0 47.8 3.8 - 1.9 274.6 0.3 - - 1919 - 1923 299,1 29.0 38.5 1.6 - 0.9 215.8 0.9 - - 192p4 - 1928 404.8 63.7 52.4 2.5 - 1.7 191.8 0.7 - - 1929 - 1933 418.3 144.2 59.3 4.3 - 2.6 200.5 0.8 - 0.4 1934 - 1938 478.7 134.2 81.9 10.6 1.7 3.5 223.9 1.7 2.1 4.o 1939 - 1943 441.6 162.4 83.5 14.4 6.4 2.9 211,9 4.7 47.6 5.3 1944 - 1948 382.6 175.7 85.4 13.9 8.8 3.3 194.9 7.9 73.0 8,6 1949 - 1953 525.6 197.8 75.4 11.1 17.5 3.6 253.2 9.9 164.2 13.6 1954 - 1958 754.7 121.5 74.3 11.3 34.0 5.4 311.0 7,6 181.8 18.5 1951 495.7 156.2 63.9 11.7 18.6 1.9 352.6 9.3 189,4 12.4 1952 583.9 190.6 57.2 9.1 12.8 0.7 259.2 7,8 217,1 12.8 1953 513.9 231.8 62.4 7.8 18.7 0.8 301.1 5.8 182.9 14.5 1954 747.9 97.0 74.1 13.2 29.4 1.7 277.6 6.2 146.8 17.4 1955 771.6 97.2 44.5 11.2 37.4 2.5 266.1 7.8 176.1 19.8 1956 787.6 110.2 49.7 10.2 25.2 5.0 323.5 7.4 183.2 19.4 1957 688.5 135.4 82.5 11.2 50.1 14.1 331.3 8.9 209.0 19.1 1958 777.9 167.8 120.7 10.8 27.8 4.0 356.7 7.5 193.8 17.1 1959 690.7 118.0 89.6 15.5 51.4 4.6 310.2 8.0 258.8 17.8 1960 293.3 98.1 39.4 10.3 34.0 2.5 259.4 8.4 179.7 14.5 1961 522.7 117.5 79.9 18.7 48.1 3.2 236.8 8.7 153.1 15.6 /1 Four-year average Source: Ministry of Finance. TABLE 1Q Yields of Main Agricultural. Crops _.899-1961 (kilograms per he ctarT Period Wheat Linseed Oats Barley Barley Birdseed Corn Peanuts Sunflower Rice (beer) 1899 - 1903 576 712 764 675 - 551 571 - - - 1904 - 19o8/1 693 694 844 835 - 668 588 - - - 1909 - 1913 533 426 618 553 - 517 687 - - - 1914 - 1918 560 436 632 627 - 466 691 171 - - 1919 - 1923 646 630 601 775 - 558 717 512 - - 1924 - 1928 787 692 683 845 - 616 707 537 - - 1929 - 1933 634 586 557 692 - 518 636 420 - 1,949 1934 - 1938 755 615 512 802 259 587 594 542 247 3,198 1939 - 1943 715 479 453 681 589 376 529 539 469 782 1944 - 1948 673 561 480 704 629 457 627 691 o40 - 1949 - 1953 906 544 592 817 855 425 427 430 375 2,o44 1954 - 1958 975 548 557 844 818 484 682 472 5o 3,319 1951 877 576 535 890 910 - - - - - 1952 818 743 659 755 860 524 452 413 504 3,679 1953 960 468 617 855 826 574 691 672 501 3,621 1954 1,095 665 806 994 930 581 764 911 554 3,555 1955 1,106 648 739 955 819 583 720 652 483 3,456 1956 1,052 452 136 567 863 402 646 797 435 3,298 1957 855 535 674 871 687 481 508 - 376 2,987 1958 768 438 432 835 791 373 774 - 675 3,301 1959 521 610 366 538 316 388 429 747 187 2,771 1960 623 512 542 715 647 543 302 632 403 3,679 1961 789 569 792 802 706 636 834 758 640 3,451 /1 Four-year average Source: Ministry of Finance. TABLE 11: Index of Value of Industrial Production, 1936, 1954-1959 (1954=100) Industries 1936 1954 1955 1956 1957 1958 1959 in % of total Food 17 100 106 120 129 153 225 25.0 26.4 Beverages 12 100 107 117 129 155 183 7.8 6.7 Textiles 7 100 106 127 130 162 219 11.7 12.1 Garm-ants 18 100 94 116 152 180 234 4.4 4.9 Paper and cardboard 8 100 111 109 298 196 363 1.4 2.3 Newsprint 10 100 121 132 163 186 248 2.2 2.6 Chemicals 7 100 105 107 150 173 238 5.2 5.8 Petroleum and carbon byproducts 0.1 100 99 89 89 84 98 7.1 3.3 Construction materials 10 100 101 120 144 170 215 3.5 3.5 Meallurgical 8 100 110 131 148 174 238 4.6 5,1 1Iectrical 3 100 145 143 196 220 296 2.2 3.0 Cnnstruction 9 100 100 110 144 155 197 7.9 7.3 Electric light, water, gas 17 100 118 135 186 183 173 3.5 2.8 Other 10 100 104 138 161 181 224 13.5 14.2 Total (million pesos)264.8 2472.4 2572.8 2933.7 3445.9 3906.3 5174.0 100.0 100.0 Total (index) 11 100 104 119 139 158 209 Cost of Living Index 35 100 109 116 133 156 218 Source: Ministry of Finance. TABLE 12: Basic Data of the Industrial Sector, 1889-1959 Output per capita Number of Value of Value of Output per Adjusted for Year Establishments Employment Production Capital Machinery capita Cost of Living (thousands) (m i 1 1 i o n p e s o s) (pesos) (pesos) 1889 2355 17.9 - 18.3 -- - 1908 16017 67.4 35.9 201.8 - 533 533 1930 7160 74.2 211.2 155.1 - 2846 3329 1936 11470 90.1 264.8 247.3 83.5 2939 3602 1954 25331 205.3 2427.3 1585.2 493.2 11823 5003 1955 26331 208.2 2572.8 1685.1 567.8 12357 4808 1956 28349 235.5 2933.7 1916.8 618.8 12457 4540 1957 30968 256.0 3445.9 2115.3 722.7 13461 4277 1958 32406 263.2 3906.3 2365.2 786.2 14842 4014 1959 34583 279.5 5174.0 2886.2 1002.8 18754 3636 Source: Ministry of Finance. TABL' 13: Bank of the Republic Credit, 1956-1961 (million pesos) D- CEM,,IBER 1956 1957 1958 1959 1960 1961 To Public and Private Sectors: Total 769 942 1,038 1,018 1,256 1,254 Public Sector Net Credit 201 254 257 68 -136 -229 Credit 368 399 412 423 502 507 Deposits 167 145 155 355 638 736 Private Sector 568 688 781 950 1,392 1,483 To Banking System (Rediscounts): Total 197 214 318 378 468 746 Commercial Banks 197 197 294 342 449 739 Mortgage Bank - 17 24 34 19 7 Source: Bank of the Republic. TABLE 14: Commercial Banks; Main Assets and Liabilities, 1956-1961 (million pesos) DECEMBER 1 1956 1957 1958 1959 1960 1961 Currency and Deposits in Central Bank 136 159 193 283 497 553 Credit to Private Sector 1,255 1,453 1,896 2,429 2,919 3,509 Deposits Total 895 1,000 1,258 1,644 2,019 2,489 Demand Deposits 261 289 413 625 809 933 Time Deposits 634 711 845 1,019 1,210 1,556 Capital and Reserves 224 249 286 348 451 601 Credit from Central Bank 197 197 294 342 449 739 /1 Totals are not homogeneous since for some series only monthly averages are available Source: Bank of the Republic. TABLE 15: Total Bank Credit, 1956-1961 (million pesos) D F C EM B E R 1956 1957 1958 1959 1960 1961 Total 2,191 2,540 3,089 3,802 4,813 5,499 3ank Credit to: Public Sector 368 399 412 423 502 507 Private Sector All Banks 1,823 2,141 2,677 3,379 4,311 4,992 Bank of the Republic 568 688 781 950 1,392 1,483 Frivate Banks 1,255 1,453 1,896 2,429 2,919 3,509 Soirce: Bank of the Republic. TABLE 16: Money Supply, 1956-1961 (million pesos) DECEMBER OCTOBER 1956 1957 1958 1959 1960 1960 1961 Total Money Supply 924 1,003 1,315 1,860 2,55 2,287 2,645 Currency in Circu- lation 514 552 709 897 1,222 961 1,229 Demiand Deposits: Bank of the Rep. Total 149 162 194 339 514 547 528 State Enterprises 27 16 21 82 84 102 102 Other 122 146 173 257 430 445 426 Private Banks 261 289 413 625 809 779 888 Source: Bank of the Republic. TALE 17: Cost of Living Indices, 1950-1961 (Dec. 1953=10C) Year Cost of Living Index Percentage Change December 1950 68 - 1951 82 20.6 1952 92 12.2 1953 100 8.6 1954 108 8.0 1955 119 102 1956 126 5,8 1957 150 191 1958 179 193 1959 267 49.2 1960 363 36.0 1961 400 10.2 1 9 6 0 1 9 6 1 Cost of Percentage Cost of Percentage Yonth Living Index Change Living Index Change January 274 2.6 379 4.4 February 286 4.4 378 -0.3 blarch 280 -2.1 369 -2.4 April 286 2.1 365 -1.1 Day 292 2.1 383 4.9 June 305 4.5 385 0.5 July 311 2.0 389 1.0 August 334 7.4 391 0.5 September 350 4.8 396 1.3 October 358 2.3 395 - November 338 -5.6 399 1.0 December 363 7.4 400 0.3 Source: Ministry of Finance. TABLE 18: Gold and Foreign Exchange Reserves of the Bank of the Republic, 1952-1961 (million dollars) December of: Net Gold and Foreign Exchange 1952 216.1 1953 235.3 1954 177.9 1955 141.1 1956 147.0 1957 59.5 1958 43.7 1959 27.3 1960 46.6 1961 77.0 Source: Bank of the Republic. TABLE 19 Central Government Revenues, 1958-1962 / (million pesos) 1958 1959 1960 1961 1962 (estimate) Import taxes 36.3 52.9 132.8 207.0 260.0 Excise taxes 122.1 155.8 193.3 255.0 370.0 Business taxes 193.8 255.1 353.0 574.0 730.0 Real estate taxes 21.5 29.4 23.4 43.0 45.0 TIn-over taxes 55.3 81.1 133.6 121.0 160.0 Stamp tax 59.3 79.5 147.2 308.0 430.0 Gambling taxes 22.5 22.2 22.0 36.0 75.0 Other taxes 20.4 43.9 32.0 29.3 72.5 Registration charges 3.3 3.5 4.3 6.0 7.5 Fostal charges 7.5 7.3 9.2 15.3 15.0 Other charges 4.0 5.4 6.8 7.8 8.0 Other income 63.5 63.3 218.5 316.7 200.0 Reimbursements 90.4 100.0 169.3 217.8 234.5 Total Revenues/ 700.8 900.1 1445.9L3- 2138.3 2609.5 /1 Does not include special budget resources shown in Tables 21, 22 LI May not add because of rounding /3 The published total is 1454.9 Source: Ministry of Finance. TAELE 20: Central Government Expenditures, 1958-1962A (million pesos) Estimate 1958 1959 1960 1961 1962 Parliament 10.7 12.2 39.1 - - Government Counsel 1.5 1.6 2.1 - - Vinistries of: Defense 70.1 69.9 117.3 - - Finance 32.6 32.2 41.8 - - Industry & Labor 19.7 19.4 25.2 - - Education 31.0 30.4 41.6 - - Interior 53.2 52.4 83.9 - - Public Works 9.7 9.5 12.6 - - Foreign Affairs 4.2 4.3 7.3 - - Public Health 60.9 64.3 84.6 - - Agriculture 13.2 12.9 17.2 - - Justice Department 12.6 12.1 17.5 - - Contributions to Public Entities, Education, Pension Fu1nd 195.1 206.5 345.6 - - Other (debt service) 233.2 247.8 454.4 - - Special Appropriations 15.8 44.3 89.3 - - Total Expenditures 763.5 819.9 1379.6 2158.1 2617.0 /1 Does not include special budget expenditures shown in Tables 21, 22 Sources: Ministry of Finance. TABLE 21: Exchanne Profit Fund, 1960, 1961 (million pesos) 1960 1961 Receipts Export charges 347.3 319.5 Import charges 37.7 197.8 Total 138.0 517 Expenditures Cost of living subsidies 49.8 96.7 Agricultural development 62.8 23.7 Improvement of roads 57.8 6.8 Transfers to: Ministry of Defense - 0.3 Foreign Office 10.7 11,3 Public Works - 0.2 External Public Debt - 60.5 PLUNA 3.0 15.4 ACAP - 51.7 AFE 7.0 10.0 OSE 3.0 3.5 UTE 20.0 14.3 SOY - 1.0 Meat packing plants 26.4 3.6 Other 55.7 32.0 Transfers to Departments 69.8 116.2 Total 365.1 447.2 Ealance 19.1 70.1 19.1 Balance transferred to next yearzi 19.1 89,2 1! May not add because of rounding Source: Ministry of Finance. TABLE 22: Public ,orks Fund, 1959-1961 (million pesos) Revenues 1959 1960 1961L1 Taxes on fuels and lubricants 29.3 28.4 71.0 Land taxes 8.0 12.3 11.8 Taxes on use of roads 5.3 8.8 9.7 Import surcharges and export retentions - 49.1 50.0 Other 0.2 11.8 10.3 TOTAL 42.8 110.4 152.8 Expenditures Narch 1, 1959-Dec. 31, 1961 Road construction Construction of 31 bridges and 252 km. of roads 94.5 Improvement of 8800 km. of roads 70.2 Improvement of 817 km. of pavement 32.8 Repairs and maintenance of machinery 24.0 Building construction 23.3 Yaterways 5.2 TOTAL 250.0 /1 Estimated Source: Ministry of Public Works. TABLE 23: Balance of Paym,ents, 1953-1961 (million dollars) 1953 1954 1955 1956 1957 1958 1959 1960 1961 Merchandise Account 76 -25 -43 5 -98 5 -72 -99 -35 Exports, f.o,b, 270 249 183 211 128 139 98 129 175 Imports, c.i.f. 194 274 226 206 226 134 170 228 209 Service and Donations Account -8 -9 -8 -6 2 5 21 18 - Travel 2 1 1 2 10 14 22 26 30 Transport and Insurance - - - 1 1 - 1 - - Investment Income -5 -5 -5 -5 -5 -4 -3 -4 - Donations -2 -2 -2 -2 -2 -2 3 -2 - Government and Miscellaneous -3 -3 -2 -2 -2 -3 -2 -2 - Capital Account, Excluding Official Reserves and Official Short-term Capital -2 -2 -14 18 -1 1 2 60 - Private long-term capital - - -10 20 - - - - - Private short-term capital -9 -9 - - - - - 45 - Official long-term capital 7 7 -4 -2 -1 1 2 15 - Loans utilized (11) (12) (1) (5) (8) (7) (8) (24) - Amortization (-4) (-5) (-5) (-7) (-6) (-6) (-6) (-5) - Other - - - - (-3) - - (-4) - Errors and Omissions -2 -6 -13 -1 32 -16 15 12 - Official Reserves and Short-term Capital Movements 64 -42 -78 16 -65 -5 -34 -9 Bilateral Payments Agreement 29 -52 -23 38 -22 -24 -28 -1 - Other short-term capital 14 10 -43 7 -36 20 -7 -8 - Monetary gold 21 - -12 -29 -7 -1 1 - Source: Bank of the Republic. TABLE 24: Exports by Principal Commodities, 1952/56/58-61 (in , of total) Jan.-Oct. Jan.-Oct. Commodity 1952 1956 1958 1959 1960 1961 1960 Greasy wool 27.2 31.1 38.2 24.7 25.9 40.5 23.8 Semi-washed wool 0.1 - - - - - - Washed wool 5.4 10.7 6.9 10.5 9.0 7.1 8.6 Textiles 11.6 19.9 15.6 23.8 20.5 16.4 20.0 Meat and meat products 19.5 10.5 10.6 18.9 23.8 17.5 26.9 Hides and skins 11.2 7.5 6.5 10.3 12.2 9.6 11.9 Live cattle 0.6 0.7 0.1 0.4 0.4 0.4 0.3 Processed agricul- tural products 17.9 5.6 8.4 6.7 5.5 5.6 5.6 Other agricultural raw materials 5.8 13.3 11.9 4.1 0.6 1.6 0.6 Ixtractive industries 0.1 0.2 0.1 - 0.1 0.3 0.2 Chemical and pharma- ceutical products - - 0.1 0.1 0.2 0.1 02 Other industries 0.6 0.5 1.0 0.5 1.8 1.0 1.9 TOTAL 100.0 100.0 100.0 100.0 100.0 100.0 100.0 TOTAL (million dollars) 208.9 211.1 138.6 97.8 129.4 148.2 111.1 Source: Banco Comercial. TABLE 25: Imports by Principal Commodities, 1952/55/58-61 (in f of total) Jan.-Oct. Jan.-Oct. Commodity 1952 1955 1958 1959 1960 1961 1960 Raw materials 27.5 32.4 41.7 38.2 38.5 34.2 39.6 Fuels and lubricants 13.2 11.8 21.5 36.0 24.0 13.4 24.0 Machinery 14.8 16.5 8.4 7.5 7.1 10.7 6,6 Automobiles 13.5 8.0 5.3 3.5 9.4 15.6 8.4 Building and construc- tion materials 8.8 9.4 5.6 3.2 4.8 4.9 4.9 Salt and foodstuffs 4.8 4.6 3.6 3.0 2.7 4.7 4.8 Electrical materials 2.2 3.4 3.4 2.0 1.3 3.0 1.1 Medicinal and pharma- ceutical products 1.4 2.1 2.7 1.9 1.7 2.1 1.7 Vegetables 2.0 1.6 1.6 1.4 1.8 - - Seed, fodder, plants and trees 0.6 1.0 2.8 0.8 4.0 1.2 4.5 etals and manufactures 2.2 1.7 0.6 0.5 0.7 - - usical instruments, radios, etc. 1._2 1.2 0.5 0.5 0.9 3.7 0.8 Orthopedic, surgical etc. equipment 0.9 0.8 0.5 0.4 0.6 0.6 0.5 Clothing 3.2 2.9 0.4 0.3 0.3 0.4 0.3 Newsprint 1.2 1.0 0.3 0.3 0.6 1.8 0.6 Other 2.5 1.6 1.1 0.5 1.6 3.8 2.2 TOTAL 100.0 100.0 100.0 100.0 100.0 100.0 100.0 TOTAL (million dollars) 236.2 225.0 134.7 214.0 244.4 157.9 206.5 Source: Banco Comercial. TABLE 26: Exports to Major Countries, 1952/55/58-60 (in % of total) Country 1952 1955 1958 1959 1960 United States 24.1 8.9 7.7 11.8 13.6 Netherlands 4.5 23.3 10.2 9.7 11.5 Germany, West 10.2 3.9 6.4 9.4 8.5 United Kingdom 15.9 13.5 15.2 9.3 24.2 Russia - 2.5 11.7 8.6 0.5 Hungary - 0.6 2.1 5.6 - Yugoslavia 0.1 1.9 2.6 5.2 0.8 Italy 5.0 3.9 3.2 4.3 6.7 Czechoslovakia 0.5 1.3 3.1 3.5 2.7 Finland 0.1 1.2 1.9 3.4 0.2 Switzerland 1.3 2.7 4.3 3.3 1.1 Bulgaria - - c,6 2.9 0.2 Poland 0.1 1.2 1.0 2.9 1.0 France 8.7 5.4 7.4 2.9 6.2 China - - 0.7 2.8 1.4 Spain 0.6 0.2 3.9 2.0 3.0 Belgium 3.0 2.3 1.0 2.0 3.2 Brazil 12.0 14.3 6.5 1.4 1.0 Germany, East - - 1.6 1.2 2.1 Other Countries 13.9 12.9 8.9 7.8 12.1 TOTAL 100.0 100.0 100.0 100.0 100.0 TOTAL (million dollars) 208.9 183.7 138.6 97.8 129.4 Source: Banco Comercial. TABLE 27: Imnorts from Major Countries, 1952/55/58-60 (in % of total) Country 1952 1955 1958 1959 1960 Venezuela 6.1 5.5 13.3 26.1 15.4 United States 25.7 19.4 12.2 15.0 26.9 Brazil 7.8 16.9 18.2 10.9 6.3 France 4.1 5.0 9.0 5.7 2.9 Germany, West 8.0 7.8 4.4 5.6 7.3 Italy 2.7 4.1 4.8 3,6 2.2 United Kingdom 12.1 10.9 6.0 3.1 7.8 Russia - 1.2 3.0 5.3 Switzerland 1.3 2.7 3.7 2.7 2.2 Eetherlands; Antilles 0.2 1.4 3.5 2.5 0.5 Trinidad - 2.5 Sweden 3.6 4.0 1.4 2.2 2.1 Finland 0.6 0.7 1.8 1.7 0.5 Netherlands 2.6 3.4 1.3 1.4 2.1 Czechoslovakia 0.4 0.6 1.0 1.3 0.9 Argentina 0.2 0.5 2.0 1.2 4.1 Chile 1.3 1.3 0.8 1.2 0.8 British halaya 0.5 0.9 1.0 1.1 1.7 Eelgium 3.7 2.7 1.2 1.0 2.9 India 1.2 1.7 1.1 0.9 Yugoslavia 1.6 0.9 0.5 Germany, East - 0.1 1.5 0.8 0.6 Poland 0.4 C.6 Paraguay 2.8 0.7 1.0 0.5 0.6 Other countries 15.1 9.7 7.6 4.5 6.7 TOTAL 10010 100.0 100.0 100.0 100.0 TOTAL (million dollars) 236.2 225.1 134.7 214.0 244.4 Source: Banco Comercial. TABLf 28: Export Prospects, 1966 Annual Average Commodities 1951-56 1957 1958 1959 1960 1961 1966 Meat and Meat Products Volume (million pounds) 129.7 132.3 55.4 76.6 L L - Value (million dollars) 34.1 27.5 14.6 18.5 30.8 27.4 35.0 Price (cents per pound) 26.0 21.0 26.0 24.0 Zi L Hides and Skins Volume (million pounds) 67.3 51.9 41.9 41.2 L Ai Value (million dollars) 19.9 10.8 8.9 9.8 15.3 16.8 20.0 Price (cents per pound) 30.0 21.0 21.0 24.0 Li L - .heat Volume (1000 metric tons) 260.0 147.2 286.3 59.3 Value (million dollars) 22.9 9.4 17.2 3.2 L 17.0 Price (dollars per ton) 88.1 63.9 60.1 54.0 - inseed Oil Volume (1000 metric tons) 25.5 25.7 17.7 18.1 19.2 26.3 - 'Value (million dollars) 8.4 5.8 4.3 4.1 4.8 6.5 7.0 Price (dollars per ton) 329.4 225.7 242.9 226.5 240.0 250.0 - oCl Volume (1000 metric tons) 54.2 27.9 58.7 35.1 35.5 72.3 - Value (million dollars) 91.0 44.9 63.4 34.4 45.1 85.6 80.0-100, Price (dollars per ton) 1679.0 1577.0 1080.0 980.0 1270.0 1184.0 - L'2,) Tops Volume (1000 metric tons) 11.0 7.3 10.0 12.3 9.6 11.6 - Value (million dollars) 30.2 19.9 17.0 19.9 21.7 24.3 27.0 Price (dollars per ton) 2745.0 2726.0 1700.0 1618.0 2250.0 2100.0 - TOTAL (Value) 206.5 117.4 125.4 89.9 117.7 160.6 186.0-206. Other Exports-Value 19.6 10.7 13.2 8.0 11.7 14.1 20.0 TOTAL EXPORTS 226.1 128.1 138.6 97.9 129.4 174.7 206.0-226 / Not available