The currency system and foreign trade pattern of the French dependencies

1 /!mce # 1 A I ~~~~~~~~~~I-I -.( U!!OtTsaE3EcYa SY~4 AD WtPORINTADZPAm Zoonomle Department Prepared lW: Sv6nt Anderson. Date: Xarch 10, 19:a9.  Roonomic Department Genral Studies Svei Andwere. Marlch 10, . !1!S CM=C 1Y A=m POO U Pj OM( n JWIUBA8. S, 3lometa Uits an hohba. Btes:- 1-9 (maci.) (1) fte Mstropolitan franc Zo30s- 2 (2 The America Teritoriess- 3 (3) te Afrlan Pro Zone:- 4 (4 9the Pacitfic gra Zons- 6 (5) !ni-Oia: 6 (6) Te f hin es 7 nS.~ n e *on 8utoo:- 11 se Orgoneatiow: 13 Note Isasing Poweres- 13 CaUt Activitys- A UTI. PAu n h i -mj ose. 19-20 (mci,) nT. ~h aac f __LTri f7aesOesa eedni- 21-31 (mde.) irench West Africa~1an I ogo):- 26 Preach 3iuatowial Africa (and Ocroon) I - 26 Inezcb, at Africa (ft. Somali Coast, Madagacar, Rewi,on) t. 27 St. itee and Mipwotn- 27 Toe Caribbean Posesions- 2? 4 Oceanias. 27 indo-hia- 28 6.3A Pro&wtion:- 29 1. Note Circlation in the Frenh Depamsenes. 2 a a a a a , convrted, into U.S. dolars* 3. Balanc Shet of the aigdse Central.". 4. _Sumary of VoriA fred of Wrench Overe Desendenis. 5a. International Trad, of 7rench North Africa. 5b* AH.?. an Tog.. See "'J.. and, asroono Sdl, p renh bat Africa, et*. 5*. g ' StPierre and, Mqelone Sf. ' 0 Prancel Caribban Territories. 590 a a froaWjsg Pacific Possessions. 5k. ' InL..Oina 6. Tre of Jface with Specified Dependecies. 7. 1'. B. Trade with Preach Depenaeces.  Iconalo Deprmn Oven Anewase. Marh 10, 1949. 9!UJ 0UM=C0 SM( AIM POI"O !RAY JAZEL,M ZE MNMM S, In the preet paper the monetary mochanim of the froach overseas ei8s describedl tgogther with their fo"i trade position. the latter In viewed here solea from the balance of payzents afgle, with no anaa7sle of commodities. !he purpose is to present the monotary framwork In a wide uens vitbln which the economies of the inaividual territories vork. Us fining =y b sunuaris.d as follo: , 1. With the exception of IZdo-Ohina and the small 2reach establis nts ( In InAia proer, the Pran n monetry unit of all the depntienose. In Indo-Ohin the Vsastre (torerwly eq%l to Prs.10), anA In the landes the rupee (euALI to the Indan rupee), are the lega tende. 2. !be w and itis aftermth Involving a series of sucessive devaluatlons of the yrsnc yrmo,0 ha sd the montary uity of the Preach Umpire to break down. Oa2y the North African Trano bas followed the Ketropolitan currency cor pletely for the other pats of 'Overseas lra=" difrnt cotwess have been adopted. Tor instace, the Prane of the Psaific Possessions IS no worth more than 5 Netrepolita iaswg, Ihile the OIA..raso - the urrea of the African .ipendeoi.s except North Africa - m.ow als 2 Netrwoptan 7anos. Ths lrsmch ezchae rate sytem vith its 'free' and, 'avrage' rates has further comn pioted the Situation, 1a, at times, distorte cesrstrates vith third, COMeOaOIs hv bese In effect in a mmber of colonies. 3, In spito of the divergence of ter exchange rates, all parts of the Jench Union are meber of the Piano aea and pool their foeign crenc 1.  2. receipt, em expenitur. 4. T!he Issue of looal curreny Is entrusted to a number of special bsnk, so' Of which ae ovned by pivate stook.holar and carry oa ordinary commercal activities besies acting as note-losing banks. In Zqvatorial Africa and the Wester Moshre dependencies,, hWver, nott isuXig powers are rW vSbted In the 0O0lsse Cestrals d. is Trance d'Otte Nor", an aesnc crated durig the war for the financing of the fre rench Goverment. So $Gdatse Central.' eets considerable infuece also In w"es e tho direct note ise is stil In the bAn of other boks, and it mar vel be that the 'Caisse Central." wll eventualy reah the status of a genine Central Ban for most of Overs"e 3rnc (probab3 ot for North Africa and IrAo-China) * bSusds pefortmg its moeta&ry fntions, the 'Oats. Centrals' also plaps an igmortant role In the financing of the colonial devlopent r . . ffie monetary system of Oeseas Trawe is lses closely liaked to tht of the Mother Country than is the case in the 3ritish Colonies. the mony volme cam expand or contract on the bass of loca assets (gowerpental or private), and need not passively reflet the balance of pments position. Holw- ever, ther are limtatios to this freedom, and, in most cses, the tina sw is with the Paris aUhorities. 6. Inflation during ad after the vwr has bean the gsr rule also in Oversea trac. In North Africa, prlcos bave folloed. the tropolitan course, and is InDc..ChUa te soared even higher, but in most remaining torritorioe the pices level ha Increased on half or less than half as sharply. sed on rude ,cmparisons of prices ad mon volue, the present exchange rtso of the vaiots overseas currendes do not sem conspicuouly unrealistic. 7. Weo the var, tane overs peoi contribted. nearly two  3. percnt of tho worl's latuational trad. Nore than half of the trad, was carried oat bw Ptench North Africa. !ho eports of the depandenclos as a whole are now rou&ly back to the prar lwoel, bat exports are loging bobia, (patimlar those of Algeria and TIdo-Ohina). As a onmequence, tho postwr pe8 ha v boson mark' by large trade ficits, wroupA 500 dillon both in "1?7 and 194*8, whilo the prewar position was well lanced. More tban two-fifths of the 1947 diCit, nd one third of its 1948&aounterpart, were vith the U. 8. Xn 1948, the dependencies bai also a very large deficit with Prane heelfo, but 9 * this vas *o2y oan account of North Afric. and Indo-Oina, while ost othr aroea ha retuodL to their tradtoral role, of maintaining export urplases with the Nother 0ontriy. But as yet iquatorial Africa is the on3r ara with an overall trade surpus. 8. In torms of foreign cnies, the french depoenencies used to > oigily self-suwortig. Their present large dollar a sterlin deficits, added to the North African andL Indo.Chinese doficits vith Metropolitn Pranoe, plac heavy burden on tho latterts already stralnd foreign dmchang position, 1Indiret and lon..run benefits mar outvwigh the disadvantage. 9. gold production In the oeseas territories is a rady but smll soore of hard Currenc for the fraw area. nh prew output was ear to $10 million a year: rising production costs abd blac marketeering ha reduced official prodnation to $4 million ansually in tho postwar period. heo fignre for 198 has not been pblished yet, bat is prolably somewhat higOr as a rosult of a more literal gold price polier, hich mw oke criticism from the Mntary TWA. Iquatorial Africa and. Preoh GuIana ae the main gold, produciog areas of Oversea Prnc; ther ae supposed to be good technica possiblities of ino. creasing the output In both these areas.  Gnral 8tuGies A March 10, 1949. in 8M sm w q I ________ Ed=__-arm___n____I_I__a__ 1. 8M RAM, Befor the war, therrency nit of the whole Preach, hpl.e vas the Pran, with the Imprtant exception of the Ino-Chin.ese piatro (equal to ton Preach francs), am the minor exception of the PrenobuIntan rup*e (equal to aprozaA t 12*7 fraes in 1938). Uh currenies of ths vaio s everse teritories wor kept at p with the Metropolitai Prian, Iat wvo lsmvad 1W special s1titutlons. ge war cased the unity of the moetavy system to break dovt aM the wsubequsot lvaliations ansd refoms of the Preach exchwe sytes hav coqpUcat. matters further. As a general rule, the closer a territory ha be to Prane, goe- gaiol and economically, the closer ha its esodhan rate structure follow- e1 the Metropoltan pattrn the extrme aro repesentd, on the oam bad, by kmkZ1__ 1,h~Lea~ wher adherenc to the renc h patter Is ompete, an&, on the other eA of the scale, te ifig lands, where the currec has rMad constat ia terme of foreign echane sinc the antua of 1944, am tefor has ore asno tha 5-anib1.l Its value In tem of Metropolitan Praf. te remaining aras coW varo in positions. Partherwe, the plication in Prace of ffesret (amd fluexhage rates for co_er- cali ad financial perposes Implies that the colois hae haed either to apt a similar stem theselves, or to quote xal (and. possibly flutUatin) ates for the mther crenc. Different comromise soiu+tioea to this probles hav be worke out, he situation wa particarX2y complicated from Jenaxy to October 1948, &rIM vhieh period the "free" qaetatiOn Iu Paris of some 1.  2. crencies, (U.8.&ollws, Portuvese escudos, and later, Swiss francs), cased a distortion of the orosumtes betwee doll, etc.. and othor foroiCn currencies, wh ouaitoad via the French frao. (Trade in the frew qnoted curenies Vass in pinciple, based on the avero between the "free asd the 'official' rates, trade In other currecies was performd accoridig to thelr official rates). nh refom of October 1.948 brouht abot soe simplification althoh - a certain 5distortion still deits where financal transactions are invrolve. * At present, the Prench overseas denencies fall into sit carrency pomps (not incluing the now swoer state of Xaebanon, which li still linked to the Pafo area. Us mpe wet (1) !!he Xetropolitan Francsono (2) the meian terrtories, (3) the 'Africn Francs sow. (4) the Paoific iraul son, (5) Ind*o0In&, and (6) the 3Presh Indies (bench colonles on the mainlanA of nia) ) he devlo ant West state of the currency rate In each of these six groVp is desribe below. (1) i Ib t!mslits Ir . lAne *hi son coposes Ailgria, fudsia and orocc (reh North Africa). The currecy, Issued yi the Zen"* d'Algsrie et de la !uidsio (for Aleria and !uniSi) an& the Banque W Rtat di Mro (for Morocoo), has followed all the mvsats of the Metroolitn Prance fixed at 50 Ire. to the V. S. dollaw after the lberation of France, It wa devalcd to 119 Prs. pe