Mexico - Recent economic performance

_a R ERESTRICTED RE ,RS D E COPY Report No. WH- 174a This report was prepared for iuse 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 RECENT ECONOMIC PERFORMANCE OF MEXICO October 18, 1967 Western Hemisphere Department  CUR,RENCY EQUIVALENTS U.S.$1 = 12.50 pesos 1 peso (Mex$) U. S. $0. 08 1 million pesos = U. S. $80, 000. 00  TABLE OF CONTENTS Page Number BASIC DATA ........................................................ i - iv SUM4ARY AND CONCLUSIONS. i -iii I. INTRODUCTION .*............... 1 II. PERFORWANCE IN 1966. 3 A. Goals and Achievements .. 3 B. Savings, Investment ami Growth . . 3 C. Public Sector Finances and Savings ...................... 4 D. Money, Credit and Capital Market ................. . . 6 E. Prices and lwages. . . 7 F. Balarnce of' Payments ..8 F. Baane f ayens .............. ................................... 8 III. PROGRAM FOR 1967 ...11 A. Introduction. . ... 11 B. Growth Targets and Constraints .... 11 C. Public Finance Plan .....12 D. Public Sector Investmenit Program. 15 E. Monetary Program for 1967 ..... 20 F. Prices and Wages ........................................ . 21 G. Balance of Payments Projection . ..... 22 IVe EXTERNAL BORROWING REc J]IRI'NTS e 26 This report is based on the findings of a mission in June-July 1967 to Mexico composed of Messrs. Ross, Ballesteros, Pichler and Otten.  BASIC DATA * Area: Total 760,000 seuare miles Arable land (appnrximately) 85,000 square miles Population 1966: 14.3 million Rate of growth 3.6 percent Population density: overall average per square mile 58 related to arable land area per sq.mile 521 Gross National Product (Current Prices) 1966 US$21.8 billion (Mex$272.1 bil.lion 1.967 US$24.0 billion (Mex$300.0 Annual rate of growth (4) In 1950 Constant At Current Prices Prices 1]950-66 (average) 6.2 12.8 2.966 7.5 12.1 1.967 7.0 10.3 Per capita 1966 US$h91 (Mex$6,140) Origins of Gross Domestic Product 1950 1965 1966 (estimate at 1950 prices)T- Agriculture, livestock, forestry fishing 22.5a 17.3% 16.5% Manufacturing and electricity 21.4 26.8 27.6 Mining arni petroleum 5.8 L.9 L4-7 Others 50.3 51.0 51.2 Percent of GNP at Market Prices 1965 1966 1967 Gross fixed investment 18.8 19.3 19.8 Gross national savings 16.9 17.7 18.3 Deficit of the balance of payments on current account 1.9 1.6 1.4 Interest and profit of private foreign capital 1.2 1.2 1.2 Federal Government current revenues 8.2 7.6 7.6 Resource Gap as Percent of Investment 9.8 8.2 7.3 oney and Credit Conversion: 1 Mex. peso = US$ .08 1 US$ Mex. pesos 12.50 Relationship to large monetary or customs area: Member of LAFTA * 1967 data, where given, are estimates.  - ii - Money and Credit (continued) Dec 31, 1965 Dec 31, 1966 Dec 31, ?967 In Mex$ Billions) Total money supply 29.5 32.7 36.0 Time and savings deposits 9.8 11.0 n.a. Commercial bank credit to private sector 13.7 15.3 n.a. Price Indices (Mexico City) 1965 1966 1967 Average Annual T7nnual Averages, 1954 = 100) Rate of Change 196o-66 Wholesale Prices General Index (210 Commodities) 150.9 152.8 156.6 1.8% Consumer Goods 155.4 158.h '63.0 2.3 Production Goods 144.6 145.1 147.7 1.3 Cost of Living 166.5 172.8 175.5 2.2 (Retail Prices, 16 commodities) *) Half-yearly average (January-June) Federal Government Operations 1965 1966 1967 Current revenues 19.8 20.8 22.9 Current expenditures 16.4 18.1 19.7 Surplus on current account 3.4 2.7 3.2 Revenues on capital account 0.2 0.9 0.2 Direct investments 4.2 4.'1I 5.1 Indirect investments 1.2 1.14 1.3 Overall deficit - 1.8 - 2.2 - 2.9 Consolidated Public Sector Operations 1965 1966 1967 Public Sector Fixed Investments 13.5 14.1 16.0 Public Sector Savings 9.9 9.3 10.5 (surplus on current account) Capital Account Revenues 0.2 0.9 0.2 Domestic borrowing from banks (net) 4.7 1.2 5.0 Gross foreign borrowing 4.1 7.0 5.6 Amortization of external debt -4.1 -5.7 -4.5 Financ:ial investment and statistical discrepancies -1.3 -1.6 -0.8 External Public Debt 1/ 1962 1963 1964 1965 1966 1'367 (In U-S Millions) Total debt end of period (including undisbursed) 1429.3 1626.8 1981.9 2053.9 2235.9 - Total anmnal debt service 2/ 296.5 286.14 26.5 h52.9 164.5 455.0 Ratio debt service/foreign exchange earnings (%) 18.7 16.8 23.2 22.8 21.6 19.7 1.! As reported by IBRD, Statistical Services Division Z/ Projected (amortization p:lus 4interest)  Balance of Payments 1965 1966 1967 vProj) (In US$ Million`F Export of Goods and Services 1989.1 2153.5 2307.0 Commiodity exports 1113.9 1192.4 1289.0 Tourism and border trade 774.4 849.4 910.0 Others 100.8 111.7 108.0 Imports of Goods and Services 2364.8 2499.3 2652.0 Commodity imports 1559.6 1605.2 1698.0 Tourism and border trade 414.2 467.6 500.0 Interest and profits of private foreign capital 236.2 250.6 275.0 Others 154.8 175.9 179.0 Balance on Current Account -375.7 -345.8 -345.0 Errors ancd Omissions (net) 21381 3 88 3 _ Long-term capital 172.3 286.7 300.0 Direct private investment 213.9 186.1 250.0 Official capital (net) 1/ - 41.6 100.6 100.0 Short-term capital - 30-7 153v5 - Changes in Central Bank Reserves - 21.0 + 6.1 - Commodity Concentration of Exports 2/ 1961 1962 1963 19614 1965 1966 1967 (Percent of Total Eixports) Cotton (rELW) 19.9 244.2 20.9 16.7 19.0 18.6 17.2 Coffee 8.9 7.8 5.3 9.3 6.6 7.0 6.7 Sugar and molases 9.1 5.1 7.4 8.8 6.6 5.6 5.7 Non-ferrous metals 3/ 9.6 8.0 7.8 7.1 6.5 6.0 6.2 Shrimp 5.4 5.1 5.5 5.3 3.8 4.5 4.2 Beef cattle & fresh & frozen meat '7.1 8.2 6.8 4.2 4.9 5.7 4.7 Sulphur 3.6 3.4 3.7 3.7 3.0 3.0 2.9 Tomatoes 1.8 2.2 2.6 3.3 3.2 5.3 14.7 Wheat - - 0.5 3.5 3.7 0.3 1.8 Con- - - 1.6 6.9 3.9 7.0 TOTAL 65.4 61h.0 60.5 63.5 64.2 59.9 6J11 1/ Includes the net balances of government debt and trading in securities, and export credits. 2/ Based on the value of the 10 largest items or groups of commodities in 1965. 3/ Zinc concentrates (1965 including bars), lead and copper (bars).  IMF Position 1961-64 1965 1966 (In US$ Millions) Quota 180 180 270 Drawings (outstanding at end of period) - - - Foreign Reserves Dec 31,1965 Dec 3141966 Dec 31 1967 1966/65 1967/66 Annual Change in % t,75.2 581.2 * 630 + 1.0 + 8.L * equivalent to l.1 months o' estimated 1967 commodity imports.  SUMMARY AND CONCLUSIONS 1. The Mexican economy has continued to be managed satisfactorily and a high rate of growth was experienced in, 1966. GNP increased by 7.5 percent in real terms and per capita income grew by almost 4 percent. The major sectors contributing to this growth included manufacturing, construction and commerce. Output of agricul- ture increased by only 2.b percent, largely because of adverse climatic conditions for cotton and reduced price supports for wheat. Gross fixed investment was maintained at approximately 19 percent of money GNP. 2. Fiscal management appears on the whole to have been reasonably well coordinated with the restraining efforts of monetary authority in order to fore- stall overheating the economy in 1966. However, public sector savings registered a small drop in 1966 as a result of the reorganization of the revenue system to foster private investment. Public sector investment was somewrhat higher than in 1965. Recourse to domestic borrowing was considerably less than during the preced- ing year, but reliance by the public sector on external resources was considerably greater. 3. Balance of payments management in 1966 was quite satisfactory. The current account deficit decreased by about 9 percent to US$3h6 million. This improvement was largely achieved as a result of increases in exports by 7 percent and in net tourist earnings by 23 percent, while imports rose by only 3 percent. In order not to impair the gross foreign exchange reserves of the Banco de Mexico, the public sector resorted to short-term borrowing abroad toward the end of 1966 of about US$100 million. External debt management was greatly hampered by the tightness in world capital markets which impeded "stretching-out" of maturities. Nevertheless, four long-term bond issues in the total amount of US$70 million were placed externally. L. The national economic policy for 1967 envisages a growth in GNP by some 7 percent in real terms and a price increase of about 3 to 3.5 percent. Monetary and fiscal measures consistent with these targets have been adopted. The growth rate during the first half-year reputedlly exceeded the target, but the authorities intend to moderate the expansion with the view of avoiding excessive pressures on the supplies of skilled manpower and other resources and the inflationary pressures which such pressures may generate. To this end, both public and private investment will be contained and private consumption will be reduced by means of indirect taxes already enacted or to be presently introduced. 5. By far the most significant development for 1967 is the introduction of effective budgetary controls over public sector investment and expenditures. Although this procedure is relatively novel and a number of obstacles to its full effectiveness remain to be overcome, it represents a positive step in the direction of formulating annually a realistic public investment program and a sound financ- ing plan. By mid-year practically all the domestic financing had been arranged as well as about 90 percent of the external resources required by the public investmeni program for 1967. The major uncoordinated aspect of public investment at this stage is that of the Federal District and it constitutes the most serious threat over the near-term to the determination by the monetary and fiscal authorities to maintain relative price stability. This is especially important because of the large on- going and impending investments and other expenditures related to the 1968 Wiorld Olympic Games in MZexico City.  - ii - 6. The public finance situation is likely to remain basically sound this year, albeit very tight. Measures were taken to raise government revenues and overall puiblic sector savings are expected to increase by some 13 percent this year. This would be equivalent to about 65 percent of the projected gross fixed investment by the public sector. In part because of heavy debt repay- ments, external borrowing by the public sector continues to be somewhat exces- sive both in relation to the iuture debt service burden as well as to what may reasonably be expected in the way of a fiscal effort on the part of a country in Mexico's stage of development. The fiscal authorities are fully aware of the need to strengthen the public finance system and have prepared a new revenue program composed of several additional taxes which are expected to increase the tax yield by about Mex$l billion (about 5 percent) in 1968. A cardinal feature of their policy is to keep the rate of growth of current expenditures below that of revenues, thereby assuring rising public sector savings. 7. The balance of paymerits prospects for 1967, which are consistent with the overall goals for the economy, are reasonably promising. In spite of the somewhat unfavorable first quarter, exports are expected to increase this year at least as rapidly as in 1966, largely due to greatly increased corn and wheat supplies and a further relatively dynamic growth in exports of manufactured goods. Imports are also likely to rise at a faster rate than last year. No appreciab:le change in the current account deficit is projected this year. The Banlc of Mexico expects to be able to add somewhat to its gross foreign exchange reserves with the continuing high level of capital inflow both in the form of direct foreign investment and in loans. 8. The medium- and long-term external public debt of Mexico increased last year by approximately US$180 million and amounts to US$2.2 billion. The service payients on this debt amount to about US$455 million in 1967 - roughly 20 percent of estimated foreign exchange earnings. Although the maturity structure of the external debt was irnproved somewhat last year, a full third of the debt is for periods of under eight years, and it is essentially the service requirements on this portion which weigh heavily on the balance of payments. Continuation of the Government's policies to further "stretch-out" these shorter maturities, to Limit the volume of new external borrowing and improve its terms, and to strengthen the current account of the balance of payments, should progressively reduce the burden of the debt service. Given the prospects for large scale gross capital inflows in the form of direct private investment as weL:L as in loans and credits, the near-term outlook for successfully managing the extearnal debt service appears quite favorable. Over the longer-term, Mexico's abi:Lity to attract the necessary volume of external capital on reasonable tenns will largely depend on the determination with which the Mexican authorities carry out the policies to which they are committed for the successful solution of some of the major problems confronting the Mexican economy at this stage.  I. INTRODUCTION 1. The last ccmprehensive report on the Mexican economy was prepared in the suimmer of 1966 and was distributed to the Executive Directors in October of' last year. The report underscored the very impressive record of sustained growth and structural transformation achieved by the Mexican economy in recent years. It noted, however, that in spite of these great achievements, Mexico continues to be confronted with the need to resolve the problems which stem fr'om a rapidly rising population, a shortage of cultivable lands, inadequate supplies of skilled manpower, and an insuf- ficiently competitive industrial complex. The report observed that as a result of the development strides already made, Mexico was rather well equipped to cope with these basic development problems provided proper policies were carried out in a. number of key areas. 2. The report pinpointed the key problems which may present difficulties to orderly future development unless they are timely and adequately resolved. These include the fields of agriculture, public finances, balance of payments, and management or the external debt. In the case of agriculture, the report underlined the need to raise the level of the subsistence sector both with the view to increasing its productivity and enhancing its demand for the rapidly rising output of the Mexican manufacturing industry. With regard to public finances, after observing the rapid rise in current expenditures, subsidies and transfer payments, the report placed emphasis on the need to restrain further increases in these expenditures with the view of attaining a higher level of public sector savings. The observation regarding the need to raise public sector savings stemmed only in part from the fact that interest payments on public debt were beginning to make a serious encroachment on public revenue. An even more compelling reason for raising public sector savings, as well as overall domestic savings, is dictated by the need to prevent from increasing the current account balance of payments deficits. While noting that Mexico has managed to finance the overwhelming bulk of its investinent effort from rising domestic savings, the report nevertheless pointed out that the burden of servicing external debt service obligations is now substantial and further increases in it should be avoided. 3. The report concluded that the medium-term prospects of the Mexican economy would depend to a large extent on the Government's success during 1967-68 in increasing the amount of resources available for public sector investment, containing the current account balance of payments deficits within manageable proportions, and preventing the external debt service payments of the public sector from increasing further. 4. The purpose of the present report is to review briefly the performance of the Mexican economy during 1966 and the measures which have been adopt;ed for 1967. This somewhat narrow focus stems from the fact that a comprehensive analysis of the Mexican economy through 1965 was made  - 2 - only a year ago and that at this point it is desirable to concentrate on the extent to which the issues raised in the Bank report have been confronted by the Mexican authorities. The time span of the present report is aLso limited by virtue of the fact that no concrete plans exist beyond 1967. The plan for 1968 is still being formulated and is not expected to be ready until late this year. Within the narrow horizon, this report examines and analyzes specifically: (a) the measures taken by the Mexican authorities to raise public sector savings in 1966-67; (b) the efforts made to prepare a coordinated public sector investment program for 1967 and the organizational and administrative facilities created to assure its being reasonably adhered to both in terms of magnitudes and composition; (c) the adequacy and realism of the 1967 financing plan for public sector investment; (d) the use of the budget as a means of controlling public sector expenditures; and (e) the behavior of the balance of payments and the management of the external public debt. The public investment program and financing plan for 1968 is still in a preliminary stage of preparation and will have to be dealt with in a subsequent report.  IT. PERF0RMIANCE IN 1966 A. Goals and Achievements 5. The main goals for the Mexican economy were set out in a volumin- ous document prepared last year by the Inter-Secretarial Commission for the Formulation of Plans for the Economic and Social Development and en- titled The Economic and Social Development of Mexico, 1966-70. The basic objective as set forth in the document was to pursue a set of policies which would assure the contimnation of economic development and the achieve- ment of an average annual rato of growth in GNP of approximately 6 percent. This would be accomplishe(d by strengthening agriculture; expanding and improving the efficiency and competitiveness of industry; adjusting region- al and sectorial imbalances; improving income distribution; improving social conditions including education., sanitation, housing, etc; raising the level of domestic savings; maintaining relative price otability and a stable exchange rate; and introducingt basic reforms in public administration in order that it may make its maWdmum contribution to the development process. 6. Needless to say, these ambitious and at times even conflicting goals, could at best be only partially achieved during the first year of the plan. What is significant, however, is that progress was made in a number of important directions. The growth rate of GiP exceeded the tar- get by some 25 percent, Although this high rate of grcwth produced some strains and the price level inereased by 4.5 percent, it did nct cause the economy any serious dislocation, Savings continued their upward trend and investment of domostic ancl foreign capital flourish.ed. The increased foreign capital inflow, combined with a somewhat reduced cur -nt account deficit, rendered the baLance of payments situation quite manageable. In spite of the stringent conditions in the world capital rarkets, the matur- ity structure of the external debt was improved and the gross reserves of the Banco de Mexico were slightly increased. In varying degress, atten- tion was focused on the necessary measures for the improvement of the con- ditions in the agricultural sector, for the strengthening of the industrial base of the economy, and for achieving some of the social objectives of the plan. B. SavingS, Investment and Growth 7. The Mexican economy enjoyed a very satisfactory economic growth during 1966. Gross domestic product increased by 7.5 percent in real terms in 1966 as compared with 5.4 percent during the preceding year. IEith an estimated population increase of 3,5 percent, real income per capita rose by almost 4 percent in 1966. The major sectors contributing to t1his growth included manufacturing, construction and commerce. Output of manufacturing industry increased by 11 percent and that of commerce by 8 percent. The largest single increase took place in the construction secbor where output rose by 15 percent. The output of the agricultural sector as a whole  - 4 - (crops, livestock, forestry and fisheries) increased by only 2.4 percent - the lowest rate of growth during the past four years, This is largely attributable to a drop in cotton production by- 14 percent because of ad- verse climatic conditions and a reduced wheat harvest by some 11 percent as a consequence of a lower support price for the 1966 wheat crop. 8. Much of the growth in GDP during 1966 appears to have been in- vrestment or-iented, Bolstered by the domestic savings boom and the heavy inflow of external capital, gross fixed investment rose sharply by some :L5 percent in 1966, bringing the level of investment activity to about 19 percent of GNP. Both private and public investment activity increased in 1966. However, the increase in public sector investment was rather moderate as a matter of policy and with the view of avoiding the kind of inflationary pressures which were precipitated by excessive public invest- rnent activity in 1964. Thus, public investment,which exceeded 7 percent of GNP in 1964 and w!as deliberately restrainedto' 5.5 percent of GNP in 1965, was permitted to rise somewhat in absolute terms in 1966 but as a percent- age of GE? it further declined to about 5.3 percent. On the other hand, private investment was most buoyant and climbed from 12 percent in 1964 to 13 percent in 1965 and attained some 14 percent of GNP in 1966. There is good reason to believe that abolition of the excess profits tax and the tax on undistributed profits contributed to this end. 9.0 The healthy investment boom of 1966 also made its contribution to increased consumption expenditures. Both private and public consump- tion increased. Taking into consideration a population growth of about 3.5 percent and a price increase of about 4.5 percent, real consumption per capita rose on the average by approximately 2 percent during 1966. In money terms overall consumption increased by some 10 percent and in real terms it increased by some 5.5 percent, as against an increase in GNP by 7.5 percent in real terms. The savings rate of 17.7 percent in 1966 exceeded the average savings rate of 16.4 percent for the period of 1960-65; and the 1966 marginal rate of savings of 24 percent was substantially higher than the 17.6 percent figure for 1960-65. C. Public Sector Finances and Savings 10* The management of public sector finances in 1966 was reasonably satisfactory and on the whole well coordinated with monetary policy with a. view to stimulating orderly expansion of the economy without endangering price stability. 11. Revenue collections in 1966 increased much less than customary, The principal reason was the elimination of the excess profits taxes and of taxes on undistributed profits, These taxes, which previously yielded about Mex$800 million, were abolished in 1965 in order to encourage re- investment of profits. A lower tax on distributed profits at rates ranging from 3.5 to 20 percent was substituted for theme Another reason is that the method employed in Mexico for current payment of the business tax introduces a lag elenen.t. Business firms make three partial payments on their estimated  tax liability for the current year in the months of May, September and December. The base for determining estimated tax liability is current gross receipts, while the rate is last year's ratio of taxable to gross income. Consequently, years of high level activity and profits result in relatively higher current payments in the following year and vice versa. These factors explain the behavior of business income tax receipts in 1965 and 1966 ancl their relative decline in the latter year. 12. Production and consumption taxes, and taxes on imports and exports, also either increased little or even declined. The behavior of import, production and consumption taxes is largely explained by the "mexicaniza- tion"during 1966 of sectors of the automobile industry which entitled it to substantial tax concessions in all these categories. Thus, tax collec- tions on automobile assembly alone went down from Mex$228 million in 1965 to Mex$60 million in 1966. Export tax receipts continued their downward trend as export taxes were reduced to compensate for rising domestic costs and prices. However, the statistical record does not refLect improvements made in the structure of the tax system, especially in the area of income taxation. These reforms have been accompanied by the establishment of the necessary administrative machinery to implement them and to judge by experience since 1962, when the process was initiated, hold out further promise for the future. 13. On the whole, some success was achieved in restraining the growth of current expenditures during 1.966. In spite of the fact that administra- tive expenditures, particularly for wage and salary payments, grew in 1966 slightly in excess of previous years, overall current expenditures grew by only 10 percent as compared with 20 percent during the preceding year. This success was, however, due to a rLumber of non-recurring special factors. The relative stabilization of interest payments in 1966 reflected the completion of the process of the Government's assumption of the debts of various public entities wh.ich produced rapid increases in interest payments during 1964 and 1965. In a somewhat similar manner, the success in stabilizing 1966 transfers at the 1965 level was largely made possible by the shift to private employers of one-half of the contribution the Government previously made on behalf of their workers to the Social Security System. Furthermore, transfers to the agriculturaL sector were kept below 1965 only because the price support agency (CONASUPO) was permitted to borrow up to Mex$500 million from the Banco de Mexico in 1966. This practice, unless eliminated, will lead to an accumulation of indebtedness which may have to be assumed by the Govern- ment in future years with thie same serious impact on the level of interest payments as occurred in 1964 and 1965. Current transfers to the railroads experienced a sharp increase in 1966. The Government is keenly aware of the seriousness of this problem and has established a special commission to study it and make recommendations for its solution. INo progress has been made up to this time, however, and additional efforts will be required. 14. As a consequence of the very low rate of growth in revenues and the modest but nevertheless higlher rate of growth in current expenditures, the budget surplus on current account suffered a considerable reduction i.n 1966 - a 20 percent drop, as compared to a 5 percent drop it 1965.  15. No momentous developments took place during 1966 in the finances of the Fledral District or of the decentralized agencies. The Federal District's current account surplus registered a small decrease but con- tinued to exceed investments, and as a result the Federal District's deposits with the Banco de Mexico increased to Mex$1.6 billion by the end of 1966, The current account surplus of the decentralized agencies never- theless continued to grow. However, since their investments exceeded their savings by approximately Mex$2.5 billion they had to rely in 1966, as in previous years, on capital transfers from the Federal Government as well as on domestic and foreign borrowing. 16. The total level of gross public investment carried out in 1966 amounted to Mex$14.1 billion and was some 5 percent above that of 1965 but well below the boom level of 196h. Most of the increase in public investment in 1966 apparently took place in the Federal District. The carrying out of a higher level of public investment in the face of somewhat reduced public savings confronted the authorities with a serious financing problem. The magnitude of the Treasury s financing was only partly alle- viated by the contribution of PEMEX to the Treasury on account of previous debts, a sum of Mex$770 million. The Government had to arrange financing for an estimated amount of Mex$11,162 million - about Mex$3, 360 million more than in 1965. Because or the pressures on the domestic capital mar- ket, internal financing was kept down - Mex$4,200 million in 1966 as com- pared with Mex$4,651 million in 1965 - and external financing sharply increased to almost Mex$7 billion gross or to nearly Mex$3 billion above that in 1965. But in spite of the stringent conditions in the world capi- tal markets, this borrowing abroad was carried out in a manner which had the overall effect of improving the external debt profile. The only ex- ception appears to have been the borrowing of some US$100 million equiva- lent toward the end of 1966 on a less than one-year basis, but these credits were reputedly largely repaid by mid-1967. D. Money, Credit and Capital Market 17. Monetary and credit policies were put to a severe test in 1966 because of the stringency which prevailed in the money and capital markets of the United States on which Mexican financial institutions and same of the larger enterprises in Mexico are normally dependent in substantial measure. In the face of these difficult circumstances, real GNP was able to increase by 7.5 percent, with an increase in the price level of only 4o5 percent. To some extent, these results were made possible by the increased volume of external borrowing on the part of the Mexican Govern- ment. 18. Monetary expansion by the Banco de Mexico amounted to about Mex$l.l billion in 1966 and the increase in total money supply to Mex$3.2 billion, which represnnted an U percent rise during the year. The result- ing ratio of money supply to GNP remained stationary at approximately 12 percent and in the prevailing circumetanc.es of free convertibility, the mpinbenaniee of this ratio appears to be of particular significance in  - 7 - relation to the demand for foreign exchange, The resources of the banking system grew in 1966 by some 16 percent and enabled it to expand its volume of financing to the private and public sectors by about Mex$15 billon, The net financing of the public sector from domestic resources is estimated at about Mex$4.2 billion which co,mpares favorably with the projected amount of Mex$4 billion in the last Bank economic report. 19. The most striking single development in the Mexican financial system in 1966 and one which greatly affected the money and capital mar- kets was the successful introduction of certificates of deposit by the private investment banks (fimancieras). This new financial instrument was responsible for a very substantial shift in the flow of funds away from the commercial and mortgage banks and into the investment banks. The mag- nitude of this shift is best indicated by the fact that the volume of the newly-introduced deposit certificates by "financieras" in 1966 amounted to Mex$207 billion by the end of the year. These certificates of deposit have maturities of from tvro tco ten years and carry interest rates between 9.6 percent and 106 percent. The deposit certificates of the commercial banks witlh a maximum yielcl of 8 percent found it difficult to compete with the more attractive new iristrument and the banks began to actually lose deposits in early 1967. The Central Bank reacted to these developments by doubling the effective reserve requirements of the private "financieras" - from 20 to 40 percent and by limiting authorizations for the issue of new certificates, At the same tinme, previously existing interest rate ceilings, which applied to other private financial institutions, were partially re- laxed. The objective was not to raise the general level of interept rates but to encourage a balanced growth of the financial system. Additional measures designed to make the return on conmercial banik deposits more com- petitive are under consideration0 In spite of the significant diversion in the flow of funds generated.by the new certificate of deposit of the private tfinancieras," it has not thus far led to genuine market trading in this instrument. Although officially non-redeemable, the prevailing strong demand has reputedly enabled holders to dispose of them at par by arrangement lith the issuing institutions. E. Prices and Wages 20. Relative price stability prevailed in Mexico in 1966, particular- ly when judged against the rather strong price pressures which developed in the U.S. and elsewhere abroad. This containment of prices in Mexico undoubtedly reflects the effectiveness of the overall policy guidelines adopted by the authorities and the soundness of the monetary program followed last year. 21. According to the most general index of prices, the GNP deflator, the overall level of prices rose by about 4.5 percent. This rate was about 2 percent higher than in 1965 but growth of real GNP in 1966 also exceeded the 1965 rate by slightly more than 2 percent. It is believed that the rising costs of services for which no specific index exists, constituted a very significant factor in this overall increase, since the  - 8 - avai2able indexes for commodity prices in Mexico City rose substantially less. The general wholesale price index rose by only 1.3 percent ( a 1.9 percent rise in consumer goods and only 0.3 percent in raw materials, fuels, etc.) last year as against about 2 percent in 1965, A sharper increase was observed in the cost of living index which rose by 3.8 percent in 1966 or by about twice the rate experienced in 1965, reflecting a stronger price movement iith respect to consumer goods. This index, which, however, is based on the retail prices of only 16 selected commodities, is considered to be no Longer very representative and out of line with the actual con- sumer behavior, Revisions of both the wholesale price and cost of living indexes are currently under review and improved indexes are planned to be introduced in the near future, 22. On the basis of the rather limited infonmation available on wage trends in Mexico, it is believed that real wages on the average increased by some 6-7 percent in 1966; i.e., slightly less than the 7.5 percent growth in real GNP. Since an increase in employment undoubtedly took place, it would appear that real wage increases may well have exceeded producti-vity gains and thereby exerted some minor pressures on prices during last year. F. Balance of Payments 23. The main developments in the balance of payments situation of 1966 were a modest reduction in the current account deficit, a substantial increase 'in the recorded inflow of capital and a small increase in official foreign exchange reservesO 24. The current account deficit declined from US$376 million in 1965 to US$346 million in 1966 or by about 9 percent. This favorable develop- ment was mainly brought about by an increase in commodity exports by 7 per- cent and by a very sharp rise of income from tourism which increased by 20 percent. Commodity imports increased by less than 3 percent while money GNP grew by more than 12 percent. The composition of imports experienced a shift as raw materials, fuels and capital goods rose by 4.5 percent while consumersl goods actually declined by 4 percent compared by 1965. 25. Tne substantial increase in commodity exports is all the more significant since agrioultural, exports actually stagnated during 1966, due mainly to a sharp drop in the exports of wheat and corn as a reaction to CONASUPO's policy of reducing the support price for these commodities. Compared to 1965, earnings from wheat exports declined by more than 90 percent and those from corn by about 40 percent in 1966. Com3pensating to a certain extent these adverse developmerit3 were the marked increases in the e ;orts of tomatoes (up 75' pez'cent) and in beans ar;d safflower, both of which experienced a six-2fold increase. Other coTiLodities which con- tributed to the overall increaLse of exports included incats (+52 percent), shrimp (+25 percent), crude oil (+40 percent), processed fruits and vege- tables (+t,1 percent), and textiles (+51 percent).  - 9 - 26. While the behavior of imports in 1966 was most satisfactory, Twith an increase of less than. 3 percent against a growth in money GNP by 12 percent, it constitutes something of an enigma. To begin with, in -the absence of reliable information on inventory variations, it is difficult to make a sound judgment regarding the actual utilization of imported commodities by the Mexican economy during 1966. Moreover, the classifica- tion of imports makes it difficult to pinpoint the strategic factors in the growth cycle which influence the magnitude of the import bill. None- theless, it appears from historical data that imports of capital goods are more closely correlated with the relative changes in money GNP than are imports of other commodities. This relation was vividly demonstrated in 1966 when capital goods imports rose by 4.5 percent while consumers' goods imports actually declined. It was essentially this apparent possibility to restrain imports of consumerst goods in the face of a rising GNP that kept down the overall level of commodity imports in 1966 and greatly con- tributed to the satisfactory evolution of the current account of the balance of payments. 27. A most significant contribution to the somewhat improved current account in the balance of payments of 1966 was also made by the continuing rising level of earnings from tourism. These earnings rose fromri US$275 million in 1965 to US$338 million in 1966. This increase of US$53 million by itself was some US$20 million in excess of the total improvement in the current account during 1966. On the other hand, the net surplus from border trade registered a decline of US$15 million as it dropped from US$204 million in 1965 to US$189 million in 1966. The current deficit on payments to foreigners in the form of interest, dividends, royalties, etc. rose in line with earlier trends and increased by some US$35 million in 1966 to a gross remittance figure of almost US$380 million. Thus, the greatly increased earnings from tourism offset the somewhat reduced surplus from border trade and the increased financial transfers to foreigners, with the result that the overall positive balance on "invisibles" remained in 1966 at approximately the same 'Level of US$70 million as in 1965. 28. The main feature of the capital account in the 1966 balance of payments was the sharp increase both in the inflow of capital and in the service payments on the public external debt. 29. Capital inflow in the form of direct private investments declined from US$21L million in 1965 to US$186 million or by 13 percent. This was the result of a larger volume of reinvestments combined with a sharp drop - by almost 20 percent - of new investments. This undoubtedly reflected the stringency which prevailed in the world capital markets during last year and created a problem in the management of the balance of payments. To cope with this problem, the monetary and fiscal authorities increased their reliance on external resources. Utilization of external resources by the public sector increased by almost 50 percent - from US$378 million in 1965 to US$576 million in 1966.  - 10 - 30. Management of the external public debt constituted a task of major proportions in 1966. Amortization payments on external public debt accoro- ing to balance of payments data reached the amount of US$476 million in 1966 - an increase by 13 percent over 1965. These amortization payments together with some US$80 million of interest payments raised the grand total to US$556 mi:Llion - a figure not much below the gross capital inflow to the public sector during the year. This high level of payments on external public debt ostensibly included a substantial volume of repayments of short- term credits. So far as medium- and long-term debt is concerned, according to the most comprehensive record of external debt based on official sources, the public sector debt-service requirements in 1966 were US$465 million - US$383 million amortization and US$82 million interest. Mexico's external debt manajgement during 1966 has been on the whole satisfactory, particularly, when judged against the background of the tight situation in the world's major financial markets. Although the authorities pursued their policy objective of "stretching-out" the maturities of the external debt, they were hampered in their efforts by the extremely stringent conditions which prevailed in the world money amd capital markets. Nevertheless, their efforts proved successful to a degree and they were able to place external-ly four issues of bonds in the total amount of US$70 million.  - 11 - III. THE PROGRANM FOiR 1967 A. Introduction 31. The key issue for domestic policy in 1967 is whether the growth under condit:ions of relative price stability achieved in 1966 can be successfully repeated this year. The dangers of "over-heating" the economy are particularly relevant because of the current private investment boom associated lith the 1968 Olympic Games and the launching of several major public works (subway, water supply and drainage) for Mexico City by the Federal District Government. The mcnetary and fiscal authorities are fully cognizant of the dangers involved in overexpansion to both the domestic price level and to the balance of payments and have under consideration a number of measures to avoid 11over-heating'the economy. The primary task confronting the authorities is how to impose sound restraints and still achieve the target rate of growth. 32. The basic guidelines for this year's national economic policy include a somewhat lower rate of growth than last year, a monetary policy predicated on the provision of adequate credit to meet the legitimate financing requirements of both the private and public sectors while seeking to avoid an excessive competition for financial resources between them, and a flexible fiscal policy. The cornerstone of fiscal management this year is the use of the budget as an effective means of controlling all public sector expenditures, especially investment expenditures. As part of this exercise, an agreed level of public sector investment and a reasonably realistic financing plan were established in February by the Ministry of the Presidency and the Ministry of the Treasury. This plan sets a ceiling on public sector investments for 1967 and in the event the Federal District Government accelerates its investment activity, it is envisaged that the Treasury wi:Ll have to make compensatory reductions in Federal investment expenditures, tighter reins over credit to the private sector will have to be adopted, or some combination of the two will have to take place. Another key element in the fiscal program is the curtailment in the rate of growth of currenit government expenditures and the holding down of private consumption through better enforcement of existing taxes as well as through the imposition of new ones. These component parts of the national economic orientation for 1967 are on the whole consistent with the growth aspirations and with the manageability of the balance of payments. B. Growth Targets and Constraints 33. The Government's target for 1967 is to raise the Gross National Product by 7 percent in real terms over 1966, somewhat lovwer than the 7.5 percent achieved last year. Gross fixed investment is expected to rise to Mex$59 billion or by slightly more than 11 percent over 1966 and should constitute a slightly higher level than the 19 percent of money GNP attained last year. The proportions of private and public investment are expected tc remain the same - rougly. three-fourths private and one-fourth  - 12 - public. As in 1966, overall consumption and consumption per capita are expected to increase in 1967, but at a rate somewhat below that of output with the sought for result of a continuing increase in the marginal savings rate abow^ethe average and a further encouragement of investment activity. All these targets appear to be broadly consistent with the balance of payments outlook for the economy this year. 34. The actual performance of the economy during the early part of the year dieviated substantially from the target. The results of the first quarter revealed that the growth rate was proceeding at 8.4 percent and that this excessive pace was having adverse effects on the domestic price level and especially on the balance of payments. Monetary and fiscal authorities were in the process of taking corrective measures at mid-year - higher consumption taxes and tighter credit - for the slowing down of the rate of growth to its originally projected target for the year. An "over-heating" of the economy remains the most important single danger to guard against over the near-term. C. Piblic Finance Plan 35. By far the most significant single development in public finances during 1967 has been the introduction of effective budgetary controls over public sector investment expenditures. Unlike in previous years when large "carry-overs" of investment expenditures were permitted, all investment authorizations not uti'lized during 1966 were cancelled in February of this year. It is estimated that in 1966 alone between 20 and 25 percent of investment authorizations for that year was unutilized. New investment authorizations are now made for one year's effective expenditure only and all unutilized balances automatically lapse at year-end. In this manner the Ministries of the Treasury and of the Presidency have finally laid the administrative basis for formulating and executing realistic annual public sector investment financing plans. Together with the introduction of this procedure to exercise more effective control over public investment expenditures, plans have been laid for a substantial recovery of public sector savings during 1967. 36. The Government's tax program for 1967 aims at an overall increase in current revenues from Mex$20.8 billion in 1966 to Mex$22.9 billion in 1967. This increase of 10.6 percent appears to be realizable on the basis of an increase in money GNP by 10 to 10.5 percent and because of a number of special tax measures already taken. Most of the increase is expected from the projected growth in GMP. The tax reform launched in 1962 which has been responsible for a substantial change in the proportions of direct and indirect tax collections (income taxes increased from 36 to 46 percent) has also by now rendered the overall tax system substantially more elastic than previously. Thus, an increase in money GNP by 10 to 10.5 percent might be expected to result in a not too much lower increase in revenues. More- over, given the inherent characteristics of the Mexican tax assessment system where a current year's revenue performance is substantially influenced by the preceding year's level of economic activity, tax revenue collections in 1967 should benefit from the high level of economic activity which  - 13 - prevailed during 1966. An additional contributing factor to the growth in taxes this year is the continuing improvement in tax administration and enforcement procedures which had demonstrated their effectiveness in recent years. 37. The special tax measures already taken promise an increase of MEX$635 million and to be responsible for 30 percent of the overall projected rise in revenue in 1967. These measures and the amounts they are expected to yield are summarized below: Measure Mex$ (Millions) Business income tax 170 Personal income tax 80 Automobij use tax 75 Tobacco tax 250 Petroleum tax 60 Total 035 38. Additional reforms are presently under consideration which, together with those already introduced in 1967, are designed to increase tax revenues further by approximately Mex$I billion in 1968. The new measures largely concentrate on improvements in the turnover and other indirect taxes. Mexican authorities stated that the guiding purpose of the new tax measures was to increase the magnitude of the current account surplus, thereby lessening the dependence on borrowing for the execution of the public investment program in 1968 and thereafter. 5q. Fiscal authorities have formulated plans for current expenditures in 1967 in line with the overall guidelines wjhich seek their growth at a rate belowi that of cuirrenit revenues. Current expenditures of the Federal Government are intended to increase by only 8.5 percent in 1967 against revenue growth by 10.6 percent. The projected level of current expenditures for 1967 at Mex$19.7 billion, however, raises a number of serious questions. An increase in wage and salary payments of only 7.5 percent is projected against increases by 14.4 percent in 1965 and 15.7 percent in 1966. Interest payments are projected to increase only 2.1 percent in 1967 as against an increase by 20.3 percent in 1966 in spite of the fact that net domestic borrowing is expected to rise by nearly 20 percent w:ith respect to 1966. An allowance for increased current transfer payments by only 4.1 percent is made. This implies no increase in transfers to the agricultural sector (CONASUPO, Banco Ejidal, and Banco Agricola) over their 1966 level of Mex$945 million. Moreover, transfers to the railroads, which increased from Mex$733 million in 1965 to Mex$1,079 million in 1966, are expected to diminish to Mex$990 million. Actual expenditures in one or more of the above-mentioned categories may well exceed the projected figures and, in recognition of this, an allowance for contingencies of Mex$5'00 nillion has been made by the Treasury in the current expenditure projectiorLs for 1967.  - 14 - L0. Current revenues of the Federal District are expected to increase by 12.9 percent in 1967 or roughly at thie same rate as in 1966. The pro- jected increase appears to be reasonable in view of the buoyancy of two major elements of Federal District's revenues, namely, the turnover and real estate taxes. 11. After an increase of 28.3 percent in 1966, current expenditures of the Federal District are expected to remain unchanged in 1967. This situation is largely expected to evolve from a moderation in the rate of increase of payments for personal services. These experienced an abnormally high increase of nearly 26 percent in 1966; for 1967 a growrth of only 3.8 percent is contemplated. Small increases or actual reductions are expected in other quantitatively less Significant categories of expenditures which again experienced abnormally high increases in 1966. 42. Current revenues and expenditures of the decentralized agencies are expected to increase by 6.8 percent in 1967. Although the agencies are under some pressure to achieve higher savings by limiting the growth in current expenditures, no deve'Lopments were ascertainable which pointed toward achievement of concrete results in this direction this year. The single exception was the Mexican Institute of Social Security,which after a reorganization in 1966 improved collections of contributions, achieved better control over current expenditures and increased its current account surplus by almost 70 percent. A further increase in savings by 60 percent is projected for this year. 43. The Mexican tax system has been revised and considerably improved over the last five years, and may now be regarded as resting on relatively solid foundations. Tax revenues have become increasingly dependent on income tax collections which have increased their share in total revenues from 36 percent in 1960 to 46 percent in 1966. As was previously suggested, this phenomenon, given the overall progressive nature of income taxation, must have rendered the overalL tax system more elastic with respect to changes in income than in the past. Consequently, other things unchanged, the proportion of tax revenue to total GNP should increase in future years as income increases. The overall structure of public expenditures indicates a relatively high degree of efficiency in the management of public funds. Defense expenditures, contrary to the experience in other countries, continue to decline in relative importance, and amounted in 1965 to only 5.3 percent of total fecderal government expenditures. 144. In order to maintain the efficiency of the fiscal system and to further enhance it, the Mexican authorities need guard against certain prevailing weaknesses wrhich if allowed to persist will not only prevent its further strengthening but will actually weaken it. Foremost among the present weaknesses are the high levels of transfers to the railroads and to the Government surplus commodity corporation (CONASUPO). The com- mission which has been studying the railroad problem has thus far failed to achieve zny progress and its efforts need to be intensified in order to forestall the railroads' deficits from negating all efforts made to raise public sector savings. If operating costs cannot be significantly reduced over the near term and the raising of freight rates would prove prejudicial to exports, as a minimum program an equitable upward adjustment of passenger rates could be undertaken.  - 15 - 45. The large-scale operating losses of CONASUPO, which stem primarily from relatively high supports for wheat and corn, can also probably be greatly recuced. The support price for wheat was lolowered wqithout apparent detriment to exports this year. There are some indications that the international wheat price is sufficiently high to maintain production and exports at least in key areas. This needs to be carefully and promptly explored with the vie.w of eliminating losses by the Treasury on wTheat exports. The support price for corn presents a more complex prob:Lem. The price is deliberately set high to help the small producer to increase his cash income at the expense of the urban consumer who has reaped most of the benefits of economic growth. It is a policy essentially aimed at income redistribution rather tharn output increase. The policy has, however, had the effect in some areas and on the part of large producers to greatly increase output. Nhile helping to bolster overall production and exports of corn, it has proved very costly to the Treasury since domestic support prices exceed inter- national prices. It should be possible, however, to reduce the burden on the Treasury withlout sacrificing either the objective of income redistrIbution or of exports. The combined objectives can probably be bes-t achieved by a steeply graduated scale of support prices in relation to the volulme offered for sale. In this manner, the small producer would continue to be benefited as appears to be the aim of the public authorities, while the large one will cease to be sub- sidized by the Treasury. Prompt action in this direction is necessary to avoid CONASUPO's losses vitiating the Government's efforts to raise public sector savings. 46. As a consequence of the measures already taken in the revenue and current expenditure fie:Lds, a substantial recovery in the generation of public sector savings is projected for 1967 by the fiscal authorities. The magnitude of public sector savings for 1967 is estimated by them at Mex$10.5 billion - an increase of 12.7 percent over 1966. As mentioned previously, the revenue targets appear most reasonable and provided current expenditures do not exceed the limits set by the Treasury, the savings target for 1967 appears plausible. The use of these savings for the financing of the public investment program is discussed in the next section. D. Public Sector Investment Program 47. This year marks a milestone in public sector investment programming in Mexico. An inter-ministerial committee consisting of members from the Ministry of Finance and the Ministry of the Presidency have prepared an investment program for the entire public sector and a coordinated and reasonably realistic financing plan. The significance of this step lies in the fact that the Ministry of the Presidency, which has the sole responsibility for authorizing public sector invest- ments, has integrated its efforts with those of the financing agencies which carry the responsibility of providing financial resources. The Ministry of the Presidency will authorize a total of Mex$19.6 billion in gross fixed investments to be carried out in 1967. The actual financing burden that these investments are expected to constitute for the Treasury and for the Banco de Mexico are of the order of Mex$16 billion. 1/ 1/ For explanation of the difference see Tables 12(a) and 12(b) and accompanying notes Annex II.  - 16 - 48. The essential features of the financing plan are that public sector I;avings will reach Mex$10.5 billion in 1967. As explained in the preceding section, this appears to be a reasonable target. Secondly, borrowing in the domestic market will be in the order of IMex$5 billion. This is consistent wiith the overall monetary and credit program for 1967 discussed in the next section. The financing plan also envisages gross external borrowing of the order of Mex$5.6 billion, which is in line with the balance of payments expectations for 1967 discussed in a subsequent section. These three sources w.hich are expected to yield Mex$21.1 billion should adequately cover the investment financing requirements of Mex$16 billion, the amortization of external debt of Mex$4.5 billion, plus some other minor balancing items. The details of the financing plan are contained in the attached table. 19. The financing plan for 1967 is an improvement over 1966 in that it is based on a higher proportion of public sector savings and a reduced reliance on external resources. Recourse to domestic borrowing this year is somewhat higher than last year but still distinctly within the pos- sibilities of the domestic money and capital markets and in line with providing the bulk of nationaL savings to be used by the highly dynamic private sector. The overall reliance on borrowing (internal and external) this year is below last year's. However, the Treasury failed to provide in its financing plan almost Mex$800 million which are expected to be furnished by suppliers. Since the suppliers may be expected to rely on bank credit for their financing, this is likely to become a charge against the planned Mex$11 billion of credits to private sector and will reduce its availabili- ties accordingly. Thus the need to further reduce Treasury borrowing by raising public savings must remain a high priority on the Treasury agenda. 50e Public investmernts in 1967, as in 196b, are heavily oriented toward improvements in infra-structure and further develoDment of the country's basic industries. Together, the amounts allocated to these purposes account for more than two-thirds of all public sector investments. The following table summarizes the planned sectoral distribution of public investments in 1967: Public Investment Program for 1967 Group Amount Percentage _ ____________________ (In Mex$ mil.) Agriculture 2,094 11 Petroleum and Petrochemicals 5,756 29 Power Supply 2,612 12 Transport and Communications 4,591 24 Potable 14ater Supply 1,168 6 Social Services 1,416 7 Administration and others 1,105 6 Education 880 5 Total 19,622  17 - Mgxico: Public Sector Reszurces for Investment, 1960-1967 (million pesos) 1966 1967 1960 1961 1962 1963 1964 1965 (preliminary) (projected) I. SOURCES A. Current Account Surplus 7,695 7,169 7,545 8,140 9.259 9,910 9 325 10,511 1. Federal Government 7 2,037 2,153 , 592 3, 27 2,687 3,219 2. Federal District 819 946 1;026 1,035 1,167 1,145 1,130 1,463 3. Decentralized Agencies 3,623 4,186 4,366 4,299 4,500 5,338 5,508 5,829 a. Reporting Agencies (3,123) (3,686) (3,866' (3,799) (4,000 4(,838) (4,908) (5,229) bo Other ( 500) ( 500) ( 500) ( 500) ( 500)( 500) ( 600) ( 600) B. Capital Account Revenues 18 27 36 42 48 218 864 200 C. Borrowing 5,661 5 568 7,619 8 057 12,655 8 802 11 162 10 600 1. Internal (net) 1,700 3,109 4 ,833 45,0 2. External (gross) 3,961 4,020 4,510 4,779 7,822 4,151 6,962 5,600 TOTAL RESOURCES 13,374 12,764 15,200 16,239 21,962 18,930 21,351 21,311 II. USES A. Gross Fi.Ned Investment 8,909 8,931 10,049 12 045 16,435 13,470 14.107 16 015 1. Federal Government 2,765 2,6; 2,7 T 2, 1 3,913 4,246 4,435 2. Federal District 478 414 702 772 1,263 637 1,C00 1,432 3. Decentralized Agencies 5,666 5,863 6,596 8,463 11,259 8,587 8,672 9,498 a. Reporting agencies (4,981 (5,403) (5,315) (6,657 (9,293) (6,464 (6,517 (7,785) b. Other ( 6853 ( 460) (1,281) (1,8063 (1,966) (2,1233 (2,1553 (1,713) B. Amortization of External Debt 2,154 2,081 3,032 2,594 3,798 4,0 5,720 4,500 C. Financial Investment 2,311 1,752 2,119 1 600 1,729 1 360 1,524 796 1. Federal Goverrment 7155 445 7 50