RETURN TO RSRCE RErURIQ TO -~~~~~~~~~R E S T R I C T E D REPORTS DESK WITHIN CIRCULATING COPY R e po rt N o. WH-60a ONE WEET E N E DNJ TO ARCHIY DiSION This report was prepared for use within the Bank. In. making it available to others, the Bank assumes no responsibility to them for the accuracy or completeness of the information contained herein. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT THE ECONOMY OF ARGENTINA August 30, 1957 Department of Operations Western Hemisphere CURRENCY EQUIVALENT Currency Unit - Peso (symbol m $n) Par Value US $1 a 18 Pesos Free Rate (floating) around US $1 . 40 Pesos TAELE OF CONTENTS Page No. Basic Data Summary and Conclusions i I. The Setting 1 Geography 1 Population 2 History 2 II. The Economy 4 General Characteristics 4 Foreign Trade 6 Financial Structure 7 Investment 9 Foreign Debt 11 Banking 12 Labor Relations 13 III. Current Position 14 General 14 Agriculture 14 Power 15 Petroleum 16 Transportation 18 Industry 19 The Balance of Payments 20 Inflation 22 IV. Prospects 24 Short-term Outlook 24 Longer-run Prospects 26 Annex - Banking and Currency Reforms 28 Statistical Tables 29-61 STATISTICAL TABLES Table No. Page No. External Debt 1 External Public Debt Outstanding December 31, 1956 29 2 Interest and Amortization Payments on External Public Debt 30 National Accounts 3 Main Sectors of the Economy 31 4 GNP, Consumption and Investment 32 5 Investments in Detail 33 6 Gross National Product 34 7 Participation of Labor and Capital in Net National Income 35 Fiscal Data 8 Fiscal Data 1947-55 36 9 Participation in Tax Revenues of the National and Provincial Governments 37 10 Total Public Debt Outstanding: 1946-55 38 11 GNP and Public Debt 39 Monetary Data 12 Origins of Money Supply 40 13 Monetary Expansion 41 14 Loans and Deposits 42 Foreign Trade and Payments 15 Free Market Rates: U.S. Dollar 43 16 Balance of Trade and Terms of Trade 44 17 Foreign Trade 45 18 Regional Trade Balances for Selected Years 46 19 Main Exports 47 20 Main Imports 48 21 Meat: Production, Consumption, Exports 49 22 Production and Exports of Principal Agricultural Products 50 23 Foreign Direct Investment 51 24 Cost of Repatriation of Foreign Debt and the Nationalization of Foreign Firms, 1946-48 52 25 Balance of Payments, 1951-55 53-54 Statistical Tables (Cont'd.) Table No. Page No. Industry 26 Fuel Output and Imports 55 27 Petroleum: Estimated Production and Consumption 56 28 Petroleum: Estimated Future Consumption and Refineries' Capacity 57 29 Electric Power 58 30 Industrial Production 59 31 Industrial Employment and Wages 60 32 Railroad Operations 61 M A P S General .. . . ... .*.. after Basic Data Natural Regions .................. . . .. after Page 1 Production . . . .. . . .. ...... ........... after Page 4 Oil Fields and Pipelines.............. ........ after Page 16 Transportation ...... .... .... .... ........... O-* after Page 18 BASIC DATA Area 1,079,965 square miles (78% arable and pastoral) Population 18,919,000 (1955) Rate: 1.9% yearly GNP (at constant in 1955 1950 prices) Pesos 69 billion Per Capita: Pesos 3,659 (about US$400) Trade (& million) 1951 1952 1953 1954 1955 1956 Exports 1,169 678 1,099 1,027 928 943 Imports 1.477 1,8 795 979 1,172 1,128 - 308 - 503 d 304 ^ 48 - 244 1i6 Budget Exnenditures (million pesos) Ordinary and canital i.expendltures (ex- cluding debt armiort- ization) 14,925 17,355 20,017 21,941 24,648 n.a. Deficit 5,641 6,072 8,500 9,451 12,500 Net Sale of Bonds 3,456 4,722 7,678 7,599 7,563 Morney SunTpl (million pesos) 26,742 30,429 37,720 43,869 51,624 60,272 Cost of Living (1946=100) 289 401 Z17 432 486 551 Internal Public Debt (millicn pesos) (Lnd of year) 21,428 26,092 33,734 41,307 51,469 External Public Debt Yillion US' ea,u.ivalent 164 147 136 147 185 686 1/ Includes funding- of con.,iercial debts to '.estern European countries and Japan. / M~~~~~~od,ejone JUJUY E .bonol S ' f H W--<1, C~~~A, Solto / 0 * ~~~~~ASUNCION \ % 1 ot/ Lc RsoiC s^/ wo > t- IF0rmnso \ CU jS NJAN 1 C H A CO N T R ,~. SA TIAGPO 4Iwr 4 2 h °Rfu delEnte tMes .~~~~~~~~~ ' EL -X -__ --- - -d - - - / .9~c '],n R\ E E Rt,C CORRIEN /~~~~-~ '/ ' ! | A'RES ani ,J Vc | BotrarceO /~~~~~~~~~~~V ( X t | BAHIA PTr~~~~~~~~~~~~~~~ENTR ARde PLAT \ 2 1 > COto I vi3L'1 C SAN JUAN I I CORDOBA San S ANTA FE RIO S Onnd,no / J4444on., RDOBA , 00i L. deCuyo % S A N Mon W MENDOZA so~ ViR( l UR~UGU A SANTIAGOO / 0 L U eI I BUENOS z I GHmI U E Nt J Pico, 'AA SON% A enqee p ~~~~~~~~o tx SOn J org'e A ARGENTINA ~~~~~~~~~. . . . . . ... ..**,.. .. ...... .... ........ . .. . .. . .. . .. . .. . 50 ......50 40 40 30 I1-10,A1 TLE AND AGRICULTURE 30 20 20 _~MINING, AND INDUSTRY 1 , ; ~~~~~~BUILDirt; > 0 0 1935 1940 1945 1950 1955 GROSS NATIONAL PRODUCT AND PER CAPITA INCOME (AT CONSTANT 1950 PRICES) (INDEX, 1943- 100) 200 YEARL 200 YEA RLY z~~~~~~~~~GROSS NATIONAL PRODUCT 150 150 IoO 0 __ - -_ PER CAPITA INCOME 1o0 50 1 1 50 1935 1940 1945 1950 1955 7/8/57 1281 IBRD -Economic Staff ARGENTINA MONETARY EXPANSION AND THE ECONOMY (INDEX, 1946 100) 800 1 I I I I I 1 800 YEARLY 70070 MONEY SUPPLYS / 600 600 500 5oo 400 GROSS NATIONAL PRODIUCT '-COST OF LIVING 400 (AT CURRENT PRICES) 3 300 300 100 100 ol 0 l l l l l l o 1946 '47 '48 '49 '50 '51 '52 '53 '54 '55 '56 1957 COST OF LIVING AND WAGES (INDEX, 1943 I00) 1200 I I I 1200 YEARLY I 1000 / 1000 AVERAGE WAGE 800 BOO 600 / 600 ./VNICOST OF LIVING(Incl. rent) 400 / 400 200 =REAL WAGES 200 1943 1945 1947 1949 1951 1953 1955 1957 7/8/57 1282 IBRD - Economic Staff ARGENTI NA MEAT*: PRODUCTION, CONSUMPTION, AND EXPORTS (MILLIONS OF TONS) 3.01 1 3.0 AVERAGES YEARLY l 2.5 TOTAL PRODUCTION> 2.0 .. ...2.0 1.5 1.5 5 5 O 0 1915 1926 1936 '46'51 '52 '53 '54 '55 '56 '57 -1925 -1935 -1945 `50 INDIVIDUAL CONSUMPTION OF MEAT* (Kg. PER CAPITA) 115 1 115 AVERAGES YEARLY 110 I110 100 { to 9 0 . _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 9 0 80 80 O 0 1915 1926 1936 '46'51 '52 '53 '54 '55 '56 '57 -1925 -1935 -1945 -'50 * Beef, lamb, and pork 7/8/57 1283 IBRD- Economic Staff ARGENTINA PRODUCTION AND EXPORTS OF WHEAT AND CORN (MILLIONS OF METRIC TONS) WHEAT 101 10 AVERAGES YEARLY 8 PRODUCTION 6 6 4 4 2 ' ~~~~~~~~~~~~~~~~~~~ oe~~~~~~~~~~~~A ________ \/~~~~~~~~~'-EXPORTS 0 ¢¢n4 4 5 '52 '5 5 CORN 78/5 AVERAGES YEARLY E 6- ~~~~~~~~~~~~~~~~~~6 I I ~~~~~~PRODUCTION 2 2/ I EXPORT 0 I) 0 0 I-It -a- _ _ _ _ _ _ _ _ _I o o - r~o I 4 ro '48 '50 '52 '54 '56 I~ I~ IO I I I 0 IO I o 0 p C. N N) N") IT T 7/8/57 1284 IBRD -Economic Staff ARGENTINA PRINCIPAL EXPORTS (BILLIONS OF DOLLARS) 1.5 1.5 YEARLY __TOALOTE 1.0 1.0 .5 °gS ;,l O 0 I951 1952 1953 1954 1955 1956 1957 TERMS OF TRADE (INDEX, 1950z I 00) 110 1 -110 YEARLY 100 100 90- 9 0 80- 80 70 170 1951 1952 1953 1954 1955 1956 1957 BALANCE OF TRADE (BILLIONJS OF DOLLARS) 0 O .5 1.0 1.5 ',,, EXPORTS (f.o.b.) 1951 l T- -IMPORTS (c.i.f.)_ 1952 : :: : ::::.::: . .. 1953 1954 : :. . .. ... ' ~ . ' ' .: ': ' ' ' .. : :'' :: : 1955 7/8/57 1285 IBRD- Economic Staff ARGENTINA ENERGY CONSUMPTION PATTERN, 1955 (PERCENT OF TOTAL) NATURAL GAS 4% COAL 8% g WOOD 90/1 CHARCOAL 30/ PETROLEUM PRODUCTS 690/ RESIDUES 6%/ HYDRO-ELECTRICITY 1% TOTAL: 15.4 MILLION METRIC TONS OIL EQUIVALENT 7/8/57 1286(R) IBRD -Economic Staff SUI{HARY AND COIJCLUSIONS Geography 1. The Argentine Republic, with an area of over 1 million square miles and a population of 19 million people, is second in size among the countries of South Amaerica. Extending through almost 34 degrees of latitude, the country possesses a wide range of climatic conditions which are also affected by great varieties of altitude. Thanks to the country's diversified climate, agricul- tural production is varied and flexible. 2. While the mighty Plata system drains the northern part of the country and some smaller rivers cross the arid south, there are no navigable rivers in the main pampa region, the principal area of agricultural production in the center of the country. To remedy this deficiency, a great system of railroads, the fifth largest in the world, was built to tie the inland centers of produc- tion to ocean harbors. Government 3. General Juan D. Peron, President since 196, was overthrown on September 19, 1955. Power is now in the hands of the Frovisional Government headed by General Pedro Eugenio Aramburu, whose prime objective is the restora- tion in Argentina of constitutional and democratic government. A constituent assembly was elected in July 1957 to approve a new constitution by November of this year. The Provisional Government has pledged that a democractically- elected president would take over by Ihay 1958. Structure of Production 4. The main natural resource is the rich soil of the pampa. The principal exports are grains, cereals and linseed, beef, mutton, pork, hides and wool. In addition, the Republic is self-sufficient in sugar and cotton and has a rising production of fruits, tea and tobacco. During and since the second World War, exceptional impetus was given to domestic manufacturing whose contribution to GNP is higher today than that of livestock and crop agriculture combined. Although her mineral resources are still largely unexplored, Argentina possesses known but undeveloped resources in petroleum and natural gas. There also exist possibilities for developing hydroelectric power but mostly at great distances from the present industrial centers. 5. On assuming power, the Provisional Government inherited a country in economic decline. Consumption was high at the expense of capital investment. This excessive consumption was made possible by incurring substantial foreign debts, principally on bilateral accounts, by decapitalizing the transportation system as well as the productive sectors of agriculture and industry. Recent Economic Measures 6. The Provisional Government has taken several measures to begin remedy- ing the economic situation. By devaluing the peso, it created considerably higher domestic prices for exports. iMarket forces were re-established. when - i - - ii - most of the consumer subsidies and price controls were abolished, and trading in futures on the Grain Exchanges was re-instituted. Since one of the major obstacles to economic growth is currently the inefficiency of transport fa- cilities, particularly railroads, the greater part of a recent $100 million Export-Import Bank loan is being used for the purchase of railroad equipment, particularly locornotives. Some additional equipment has also been acquired on suppliers' credits, but more will be needed to restore the efficiency of the railroad system. 7. Little has yet been done in the industrial sector. The integrated steel mill of San Nicolas, expected to increase domestic production to about one-half of consumption, will not be in production until 1960. The production of electric energy is lagging far behind requirements and the output of pe- troleum covers less than 40% of a continuously rising demand, in both cases partly because of unresolved policy questions regarding public versus private operations. The lack of adequate energy compels most of the industries in the Buenos Aires area to interrupt production for several hours on frequent occa- sions. External Debt 8. The present external debt amounts to almost $700 million. Atnnual serv- ice on this debt is estimated to be $57 million equivalent in 1957, increasing to a maximum of $84 million by 1960. Thereafter, it will rapidly decline to $13 million by 1970. If it is assumed that annual exports will be around $1,100 million by 1960, the peak service of $84 million would represent 7-1/2% of export earnings, these latter being estimated on rather conservative bases. Service on existing external debt would thereafter decline, while export earn- ings should continue to increase. Prospects 9. In the Government's view, economic recovery demands a substantial in- crease of production. This will need considerable industrial re-equipment, as well as an expansion of basic services such as transportation, electricity and petroleum. This in turn depends on the ability to finance imported equipment. 10. The prospects both for short-term economic recovery and the future growth of the economy thus depend upon the rate at which foreign exchange receipts can be increased. Because the immediate prospects for an increase of agricultural exports are limited by domestic conditions and the absorption capacity of overseas markets, the rate of growth of output during the next few years will greatly depend on the size and terms of the foreign credits and private capital inflow the country can attract. -lowever, a substantial inflow of foreign long-term capital can only be expected if the Government's economic and fiscal policy is conducive to balanced growth. At the same time, it is important that any borrowing be undertaken on reasonable terms, otherwise service obligations arising from ill-judged borrowing would bear heavily on the future balance of payments. - iii - 11. The financial problem thus presents two aspects: while the immediate increase of output deDends on whether the country can obtain appropriate credits, the amount of prudent foreign borrowing depends partly on the long-term outlook of exports. A healthy manufacturing industry able to compete in export markets would undoubtedly improve the foreign exchange position of Argentina; however, this is a long-term proposition, and in the foreseeable future Argen- tina will necessarily rely upon exports of her traditional agricultural prod- ucts. Assuming the return of monetary stability, the long-run prospects for these exports are for steady, but not rapid, growth. 12. A serious inflation would undermine Argentina's economic prospects. Recognizing this, the Provisional Government has taken some preventive meas- ures, consisting mainly of an attempted restraint upon the growth of bank credit and Government expenditures, and the freezing of wages up to March 1958. How- ever, the social and political situation may force the Government to relax thes. policies, particularly on the wage front. This would be all the more dangerous because a continuing inflation would not only distort the domestic cost-price structure and the relationship between external and internal. prices, but it would almost certainly also be accompanied by a re-emergence of controls and subsidies. I. THE SETTING Geography 1. The Argentine Republic is second in area and population of the countries of South America. Its mainland area (including Tierra del Fuego) is 1,079,965 square miles. Located in the south of the South American continent, Argentina has the shape of a triangle, with its base on the Tropic of Capricorn and its apex at 55 degrees south; it thus shares with Chile the distinction of possessing the most southerly mainland territory of any country in the world. On the west, the Andes Range (Cordilleras) forms the boundary with Chile (2,980 miles). To the east, the Atlantic Ocean and the Plata estuary form a 1,615-mile coastline. The Uruguay River continues the eastern boundary for 745 miles, separating Argentina from Uruguayr and Brazil. To the north, the Pilcomayo, Paraguay and Parana rivers separate the country from Bolivia and Paraguay (994 miles), 2. Wide contrasts characterize the landscape. In the northeast is the Chaco Plain (150,000 square riles), largely covered with subtropical scrub forest, while the so-called Nesopotamia, betwieen the Parana and Uruguay rivers, is a fertile subtropical belt of some 74,000 square miles, produc- ing mainly citrus fruits. The entire western part of the country and most of the northwestern is mainly desert where wine, sugar and fruits are pro- duced in irrigated valleys. In the south are mountain lakes, tourist resorts, sheep ranches and oil fields, and finally, below latitude 46, the bleak Sub-Antarctic area where the Andean Range breaks up into rocky bays and isles, and constitutes the southern end of the American continent. 3. The heart of all this is the flat, treeless, grassy, extremely fertile pampa; within the approximate limits of a 400-mile radius from Buenos Aires, the pampa covers about 250,000 square miles. Here the chief cereal crops are grown and cattle and sheep are bred and fattened. 4. Extending through almost 34 degrees of latitude, the country pos- sesses a wide range of climate which is also affected by varieties of altitudes. The highlands of the northwest are cold although some shel- tered valleys are warm, the northeast is hot, humid and rainy, Patagonia is cold, dry and windy. The pampas have mild winters, hot summers and rain falls mostly in the surmer. 5. The mountains belong to four systems. The Andean, by far the most important (highest peak Aconcagua 23,380 feet, several other peaks above 20,000 feet), the central system (Sierra de Cordoba), the southern system in the south of Buenos Aires province and the Misiones Range forming part of the Brazilian system. 6. The three great rivers that form the Plata system-the Paraguay, Parana and Uruguay--with their tributaries, drain the northern part of Argentina. The rivers of the mighty system have a total length of 2,330 miles and are navigable throughout 1,997 miles. The Rio de la Plata is an ample but generally shalloaw estuary, about 100 miles long and 23 miles 0~~~~~ X I E'/ N.- I a --I~~~~~I \ Ee. C _ -AI ARG NTINA L OBA FE ENE RiOS $\Q\m~SA g A R / OZA'. \ X E E~~~~~~O Nl1 DiESER UNE~~~~~~~~~~~~~~~~~~~~~~~ 1957 LA PAMPAS I ~ ~ ~ PAPA 1/I~~~~~~~~~~AI I. ~~~~~~17777 ) /~~~IRR E DSR FUENTUAGRGIN IIIIIII 200I 300I 400 PAMPAS JUNE1957 ~ ~ ~~~~~~~~~~~UIBD-35 - 2 - wide, the confluence of the Parana and Uruguay rivers. The central part of the pampa is almost entirely without running streams; its southern margin is crossed by the Colorado and Negro rivers, both navigable and both being used for irri- gation purposes. 7. Except Bahia Blanca, there are few natural harbors in Argentina. The greatest port of Argentina, Buenos Aires, as well as the port of La Plata, are artificial harbors, expensive to construct and maintain. Ocean-going vessels penetrate several Argentine rivers; the port of Rosario, 260 miles inland from Buenos Aires, is the second port of the Republic. The Port of Santa Fe, 360 miles inland, is also accessible to overseas steamers. Population 8. The population has increased from 0.3 million in 1800 to 1.2 million in 1850, 5.6 in 190o, 17.2 in 1950, and at the end of 1956, it was estimated at 19 million people. Tle average rate of annual growth in recent years (1935-55) was 1.9%. 9. The population is almost exclusively of European origin, -with predomi- nance of descendalts of Italian and Spanish imnigrants. There are nlow only about 400,000 Indiains in the coLuntry, about 2% of the population, living in sparsely-settled areas in the highlands and in Patagonia. About twfo--thirds of the population live in the area between Buenos Aires and Santa Fe which com- prises only one-fifth of the total territory. The urban population of Greater Buenos Aires, about 5 million, is over 25% of the total. The population lives predominantly in cities (about 40% in towns of nore than 100,000), and the tendency towards urbanization continues to increase. History 10. From the very begimning, in the early sixteenth century, Argentine history was already shaped by two opposing political forces. WShile Buenos Aires, thanks to its strategic location, soon began to be the center of over- seas trade, the people of the interior were linlked to the older Spanish settle- ments of the Pacific Coast. Buenos Aires was in fact founded by settlers coming downstream from Asuncion, Paraguay. As it was evidently cheaper to import via the Atlantic Ocean than over the towering mountains of the Andes, the business of Buenos Aires increased from year to year and accentuated the relative poverty of the interior. In political terms, the rivalry between the Federal capital and the provinces toolc the form of a conflict between the Unitarios and the Federales. Originally, the Jnitarios were predominantly townsmen who wished to have a strong centralized government in Buenos Aires, wThile the Federales were more for decentralization. 11. The Constitution of 1853, although very liberal in the enumeration of basic freedoms, gives more concessions to the Unitarios than to the Federales. It allows extensive powers to the President of the Republic, and the presidents of Argentina have often made use of then. General Juan D. Peron, who dominated Argentine political life from 1944 until his overthrow on September 19, 1955, went so far as to abolish the 1853 Constitution altogether and to promulgate a new one in l949. 12. The present Provisional Government of General Pedro Eugenio YAranburu revoked the Peron constitutlon and restored that of 1853. It considers itself a caretaker government* A ionstituent assembly was elected in July 1957 to approve a new constitution by November of this year. It will decide whether the Constitution of 1853 sbould be transformed, possibly along more Federalist lines. The Provisional Gofernment has pledged that a democratically-elected president would take over by May 1, 1958. - 4 - II. THE ECONOMY General Characteristics 13. Until 1948, Gross National Product, at constant prices, showed an increase of 4.9% yearly. In the period 1948-55, however, GNP increased by only 0.8% per annum and, due to demographic reasons, per capita GNP even declined by 10.3% in 7 years, i.e., an average of 1,5% per annum. (Per capita income represented 3,659 Argentine pesos in 1955, corresponding to about US$40O per annum.) 14. Argentinals main natural resource is the rich soil of the Pampa. It covers, in a depth often exceeding 10 feet, an area of 60 million hectares. Properly utilized, it should be able to meet demands upon it for generations to come. 15. Argentina has great and mostly untapped resources in petroleum and natural gas. There also exist possibilities to develop hydroelectric power, but mostly at a great distance from the present industrial centers, partic- ularly Buenos Aires. Minerals are still largely unexplored, except for relatively small quantities of coal, iron ore, and some nonferrous minerals, mostly in the Andes mountains. 160 The main export crops are wheat, corn, oats, barley, rye, sunflower seed and linseed. In addition, Argentina is self-sufficient in sugar and cotton and has a growing production of fruits, tea and tobacco. The main livestock products are beef, lamb and pork. Due to Peron's price policy, but also to severe droughts and new developments on the world market, the produc- tion of cereals declined from a total of 16 million tons to 13 million tons in the last 20 years. Most of the loss occurred in corn. In that same period, the production of meat increased from 1., million to 2 million tons yearly. However, as the annual domestic consumption of meat increased from 93 to over 110 kilograms per capita and population grew, the export surpluses of meat remained below their average level during 1936-45. 17. The Argentine economy is essentially dependent on the products of agriculture and stock breeding which, in addition to providing food in satis- factory quantities to the growing population, pay for practically all the imports of the country. However, the scarcity of overseas industrial products during the war years gave an exceptional impetus to domestic industry. In the post-war years, industrial expansion was also accampanied by a shift of man- power from agriculture and by a general rise in wages leading to an increased money demand for manufactured goods. As a result of the rapid and often t"forced" industrialization process, the relative importance of agriculture and livestock declined in the 20-year period l935-55 from 25.0 to 18% of GNP; in that same period, the manufacturing industry alone increased its share from 14.8 to 23.6%. Adding to this last figure utilities and construction, the share of industry would amount to 39% of the total. The rise of domestic industry made it possible to modify somewhat the structure of imports; by 1955 the share of finished consumer goods diminished to 5% while more than one-half / M Iner/ MI NJ~~~N p ~ ~~~ I UUv 0 >_ ReJFnr Ouboh > ) -' _~> _ f / a| _-' >- %Sugdr,4SANTIAGO HC . \ Cs,7 54X/ SA N T : GO IC H A C O 0 DEL ----- e Tobcco f ' 4, \\ \ ,' ISSANTA / i A' ce / 'I ,N ( 1 ' /07, )" 51 O/SO F E 1 I ! ~~I I COR D OBA h Cott/e/,ENTR \ \ SAN JUAN C I r D 0 RAOCot Barley '"1 4-R S A N / Re C 4'fine~~I~U~~~h\ I ~ Wheo?yj ~~ N Refinerles 1 t. FouS t L U I sK Cor/ Fr,)t 1-- LU-- S Cot//e---- 2 tZLA PAMP AMPBr/ IQ 0/ N < -t -- ott/e ~- Su f o d I N I / Sheep,v Mnr/ .MO RIO NEGRO S l4i'nprols N L oL') ' 'C U; \ ~~C H U B U T ----------- R nery A RGENTIyNA ,3 j X ~~~~PRODUCTION Mi j ,n,b - °- 0 10( 200 7 40D 600 KM L eT ~~~~~~~~~TERRA DEL JUNE 1957 IBRD-336R - 5 - of total imports was in the form of raw materials and semi-finished goods. However, that achievement had been obtained at the cost of great losses on the field of agrarian production and a great reduction in the country's foreign exchange reserves. Gross Domestic Product by Major Economic Sectors (percentage of contribution by gross aggregate value) 1935 1945 1955 Agriculture 15.3 9.2 9.6 Livestock 10.5 10.9 8.3 Fisheries 0.1 0.1 0.1 Mining 1.2 1.4 1.0 Industry 14.8 22.5 23.6 Building 2.0 3.5 5.0 Trade 13.4 15.3 14.9 Transport and Communications 10.3 8.7 lO14 Other Public Services 2.2 1.4 1i1 Income from Housing, Banking and Insurance 13.0 11.4 7.5 Personal Services 9,0 8.1 8.2 Government Services 802 7.5 10.3 Total 100.0 100.0 100.0 Source: Producto e Ingreso de la Rep. Arg. p. 114 18. An increase of agricultural output and a greater retention by the countryside of its own population increase is expected from the price in- centives now accorded to the agricultural and livestock sector. 19. In the last 20 years, the number of industrial plants increased from 40,600 to 252,500 (more than 180,000 in the province of Buenos Aires) and the number of industrial workers from 500,000 to 3,100,000. Due to the importance of agrarian production, the meat and dairy processing industries are among the most developed in the country. Industries with non-agrarian raw materials have been under heavy protection consisting mainly of import and exchange restrictions; they produce practically all consumer goods ab- sorbed domestically, some of them, however, assembling imported comrponents. Several of these industries are foreign-controlled, particularly in the field of chemistry, pharmaceutical production and the output of cars and tractors. A number of industrial establishments were confiscated from their German owners toward the end of World War II and worked under the denomination 'DINIE", as a system of Government enterprises. Their return to the original German owners is now being worked out. 20. In the post-war years, the production of energy, basic raw materials and heavy industry has attracted increased official interest. The production of electric energy is lagging far behind needs, and the yearly output of pe- troleum, although it had surpassed the 4-million-ton mark in 1956, covers - 6 - less than 40% of a continuously rising demand. Some promising results were obtained in the production and transport of natural gas. Finally, the ex- isting steel mills produce only 200,000 tcns yearly; a $60 million loan was granted by the Export-Import Bank for the integrated steel mill of San Nicolas, being built near the city of Rosario; the mill is expected to increase total domestic ingot production to nearly 850,000 tons, about 50% of total consump- tion. 21. Mining only represents 1' of GNP. There are lead, zinc, copper and tin mines around the city of Jujuy, manganese, sulphur and wolfram near San Luis, iron ore at Bahia Blanca and coal near Rio Gallegos in southern Patagonia. 22. In the first 5 years of the Peron regime, the proportionate share of net national income received by labor increased while that of management (entrepreneurs, professional workers and investors) declined in almost equal proportions; labor iniereased from 41.5% to about 49%, and the entrepreneurs declined from 55.3 to 44%. Thereafter these proportions remained practically unchanged. Foreign Trade 23. The value of Argentina's exports in current prices declined from a prewar level of US$1.5 billion to less than $1 billion in 1955-56; the decline would be even greater if calculated in dollars of constant value. In volume terms, cereal exports declined from an annual average of 11 million tons in 1930-34 to 5 million tons in 1950-54. The termns of trade, which were favorable to Argentina during the immediate post-war years, when demand for agricultural produce was high, took a sharp turn for the worse at the begin- ning of the 50's. Partly for this reason, but also because the Government (IAPI) bought agrarian export products at less than world prices, thereby discouraging production, cereal exports never recovered the high level which prevailed before the second World W4ar. In the years 1951-56, the aggregate trade deficit was almost US$900 million. 24. The pattern of exports showed the following changes since the first World War: Average Average Share of 1920-39 1946-55 1955 1956 (%) (%)- Livestock 37 47 57 57 Agriculture 59 45 34 38 While roughly one-half of Argentine earnings of foreign exchange before the second World War were derived from grain exports, including linseed, the ratio of agricultural exports has fallen to a little over one-third of the total because of poor crops, falling prices of grain in relation to other commodities and shrinking corn and linseed exports. The increase in the pro- duction of meat was offset by the considerable increase in domestic consumption. -.7 - Meat exports during 1951-54 were only a little over a third of their 1936-45 level, and, despite a big recovery in 1955 and 1956, were in 1956 still below the 1936-45 level. Other important livestock exports are hides, wool and dairy products. 25. Shortage of foreign exchange has greatly restricted imports in recent years, while at the same time, there have also been significant changes in the import pattern. Imports of fuel, chemicals, iron and steel products and raw materials for industry have all increased. Imports of con- sumer goods, particularly textiles, have fallen off because local manufactures have replaxed th?m. The policy of the Government to industrialize was in- tended to reduce the countryts dependence on imports; however, owing to ever- increasing demands for the import of raw materials, fuel, equipment and spare parts, it made Argentina more dependent on foreign trade than before. In recent years, machinery and vehicles have become the most important import group, iron and steel being second and fuel third. Next in order are food- stuffs, terxtile, raw materials, timber and chemicals. Fuels, raw materials and capital goods now account for about 80% of total imports. 26. Under Peron, Argentina's foreign trade policy was based upon bilat- eralism: bilateral agreements were concluded with all major trading partners except the United States. These took various forms. There were so-called agreements of economic union with Chile, Bolivia, Paraguay and Ecuador. The agreements with Western European countries were mostly confined to regulating the payments for exports and imports while trade with Communist countries was made through large-scale barter operations transacted by State trading organ- izations on each side. In most of these agreements, nontransferable currency units were used as currency of account. The objective of the system was to preserve the gold and dollar reserves. Unfortunately, it had the adverse effect of contributing to the distortion of the trade pattern and price system, for it obliged Argentina to buy only from countries buying Argentine exports. Therefore, although Argentina often sold her own products at high prices, her imports were made at similarly high or oftei higher prices and Argentina de- prived herself of the advantages of international competition. The Provisional Government is seeking to restore international competition by negotiating mul- tilateral trade and payments agreements (details of the agreements are contained in a subsequent chapter). 27. About one-half of Argentina's foreign trade is conducted with Europe. The United Kingdom is the main market, particularly for chilled meat, and the sterling area Argentina's main supplier. Trade with the Wester Hemisphere is less than with Europe, about one-half of it is with the United States and Canada, the other half mainly with Argentina's neighbors and Venezuela. Nor- mally, surpluses tend to develop in Argentine trade with Europe, and deficits with the Western Hemisphere. Financial Structure 28. In the period 1947-55, there was a great increase in the activities of the Government. The social insurance system was extended to cover the entire working population, and Government intervened in economic life in all forms, through commercial and industrial operations as well as payment of subsidies. As a consequence of these new governmental economic activities, as well as of domestic inflation, the size of the budget increased consid- erably; in current prices current and capi&-i expenditures rose from 3.7 billion pesos in 1947 to 2406 billion in 1955, an increase of about sixfold. In real terms, using the somewhat fragile cost of living index, Government expenditures may have increased by about 30%. In addition, during the Peron regime, certain important Government operations which incurred deficits, like those of the State trading organizations and the transport agencies, were omitted from the budget. 29. The growth in expenditures WSs due to an increase in consumption rather than to additional capital formation. Under Peron, the number of Government employees increased by about 80%. The growth in current transfer payments, for social insurance benefits and subsidies to agricultural and livestock production and marketing, served predominantly to raise consumer demand. The bulk of subsidies was paid through the Argentine Trade Promo- tion Instit-ate, commonly called IAPI, Peron's most important instrument of economic inuervention. With the exception of wool, IAPI exercised a trade monopoly in the entire field of agricultural marketing; it acted as an im- porter of machinery and industrial raw materials; the purchase of the British-owned railroads was entrusted to it; and finally, IAPI executed the barter agreements between Argentina and other countries. As a consequence of the deterioration of the terms of trade, and the overvaluation of the peso, IAPI, instead of making profits, was soon forced to begin to subsidize the domestic producer as wenl as the importer. The deficit of IAPI was financed partly from the budget and partly with banking credits. When the Provisional Government decided to liquidate the organization, its debts to the banking system amounted to 20o5 billion pesos. 30. The revenues of the Government consist of direct and indirect taxes. Income tax is the major source of revenue, while there is also a graduated excess profits tax and a capital gains tax. There are numerous indirect taxes, like the sales tax, but the majority are allocated in advance for specific purposes of the provinces and municipalities. The Provincial Governments as well as the Municipality of Buenos Aires also receive a share of the direct taxes levied by the Federal Government. Although they remained considerably smaller than expenditures, the revenues of the Federal Government showed some increase during the last 10 years. 31. The most important source of non-tax funds for the Government sector was and is the social insurance contributions of participants and employers. Owing to the broadening of coverage and increases in contribution rates, total contributions to the social insurance institutions rose, at 1950 prices, from 1.3 billion pesos in 1945 to 4.2 billion pesos in 1955. The combined employer and employee contributions are equivalent to 25% of wages and sal- aries throughout industry and trade; in agriculture they represent 12%. As the benefit payments are lagging, for the time being, far behind receipts from contributions, the margin is being invested in government bonds and the proceeds are being used by the Government for budgetary and other purposes. The social security institutions are able to purchase government bonds because they are not investing into mortgage bonds which are now almost - 9 - wholly financed by the Central Bank (cf. subsequent chapters on Banking and Inflation). The social insurance institutions have become the most important purchasers of government bonds which in total increased from 10.8 billion pesos in 1946 to 51.5 billion at the end of 1955. 32. In spite of these forced borrowings, the expenditures of the Govern- ment sector exceeded, in the period 1947-55, the total of receipts by about 13 billion pesos. There is not enough information available to explain how this residual deficit of the public sector was financed. It is clear, how- ever, that the major part of the deficit must have been covered by borrowing from the banking system. 33. Budgetary data for 1956 are not yet available. However, some con- clusions can be drawn from the changes appearing in the origins of money supply (Table 12). According to these data, Government borrowing from banks for fiscal necessities remained unchanged in 1956 at the level of 13 billion pesos. The debt of IAPI declined by 500 million. The increase in Government bank debt due to subsidies was reduced from 4 billion pesos in 1955 to a little over 2 billion in 1956. Thus, the total amount of Government bank debt increased in 1956 from 34 to 36 billion pesos. However, at the same time Government deposits, which absorb money supply, increased from l0.8 bil- lion in 1955 to 15.8 billion in 1956. Investment 34. According to official national income estimates, investment appears to have been running at a high level in recent years. From 1947 to 1952 gross investment (including inventories) was consistently about 20% of GNP; in 1955 it was 19.9% of GNP, or 18.5% excluding inventories. This apparently high rate of investment is somewhat paradoxical in view of the deterioration of in- come per head wlhich occurred during the same years. The principal explanation is the small proportion of investment flowqing into directly productive purposes; public and private construction represented 59% of total gross investrent in 1955, while net investment in capital equipment was 28% of gross investment or 5% of GNP in the same year. It is also noticeable that betwieen 1946 and 1953 there was a significant fall in the amount of gross investment devoted to main- tenance which reached a low of around 8% in those years compared with around 13% prewar and a similar 13% in 1953 through 1955. 35. Private capital was originally accumulated mainly by a relatively few landholding families. Although most of them still hold their estancias, they do not seem able to regain the economic and political position they enjoyed before Peron. Important new concentrations of capital have developed in industries such as textiles, food processing, chemicals and metals, wihile labor developed new political power. 36. The Government is engaged in a broad range of industrial activities. Among the most important Government enterprises is the Iron and Steel Company of Argentina (SOMISA). At present,, SOMISA is the sole importer of ingots and other steel products. It is using its import profits to finance the costs of building an integrated steel mill in San Nicolas. With an initial capacity - 10 - of 600,000 ingot tons per year, the mill will cost about US,$1OO million (of which 860 million is being borrowed from Eximbank) and about USYS40 million equivalent in EPU currencies. The mill is expected to be ready by 1960. In the first stage, it will use iron ore from Brazil, Peru, and Chile and coke from the United States. In a later period, the Government hopes to use Argentine iron ore from the Sierra Grande near Bahia Blanca and coal from Rio Gallegos. Twenty per cent of its ownership is private, and part or all of the rest may be sold to private capital at a later stage. 37. Most of the petroleum industry is controlled by the National Petro- leum Board (YPF). The National Administration of State Industries (DINIE) administers formerly German-owned industrial concerns, sequestrated during the war and producing a wide variety of products, including pharmaceuticals, electrical equipment and metal goods. In addition, the Peron Government tried to enter many fields with its own corporations. Among others, the Army began to produce metal products for civilian use, the Air Force motor vehicles, the Ministry of Commerce was also a meat packer, and the Ministry of Agriculture a dealer in cereals, Most of these enterprises are now in liquidation. 38. Foreign investments developed in the following way in Argentina: TOTAL FOREIGN PRIVATE INVESTMENT Direct and Portfolio (mil[ions of dollars) Year Great Britain United States Others Total 1900 900 -- 200 (e) 1,100 1930 2,026 654 981 3,661 1945 1,414 565 672 (e) 2j651 1955 324 466 747 1,537 (e) Estimated. Source: M. Kybal. Working paper for ECLA. 39. British capital has been associated, in some measure and at some time, with almost every sector of Argentina's economy, the preponderant share being in the railways, banking and insurance, livestock and chemical industries. The abrupt decline of British investments began in 1946, chiefly as the result of Argentina's acquisition of the railways. In 1955, Britain's share in Argentine investments represented only the equivalent of $324 million. 40. Activities of United States firms began to take importance shortly after the turn of the century when the first American-owned packing house was organized. At present, American interests own meat-packing plants, oil concessions and refineries, and plants to manufacture or assemble motor cars, farm equipment, and a wide range of consumer goods. A few branch operations were established, particularly in the field of pharmaceuticals, but the most important investments are in the form of joint arrangements with established local concerns. Foreign Debt 41. External borrowing by Argentina started in 1824 when ;1- million was raised in London by the province of Buenos Aires. After having been in default from 1828 to 1857 the obligations under this issue were taken over by the National Government in 1880, in which year total foreign debt service was 60% of exports. Apart from an interruption in service payments during the 1890ts the National Government has always met all payments on its external debts. However, most issues of the political subdivisions fell into default in 1932 and 1933. The service on the external bonds of the province of Buenos Aires, which accounted for the bulk of the foreign bonds of the polit- ical subdivisions, was resumed in 1935 under a debt refunding and conversion agreement with representatives of foreign bondholders. Similar arrangements were made in subsequent years regarding the foreign bonds of other political subdivisions. As a result of redemptions all external public indebtedness, except for two small issues in sterling, had been retired by 1947. 42. External borrowing was resumed when in 1950 the Export-Import Bank established a line of credit of $'125 million in favor of a consortium of Argentine banks to liquidate commercial accounts owfing to U.S. exporters. About $97 million of this credit was utilized. In 1955 the Export-Import Bank granted another loan for $60 million to be used for equipmenb in the San Nicolas steel mill. A third loan granted in 1956 for $100 million is being used mainly for the purchase of locomotives, with some road-building and port equipment. In addition to this long-term debt, suppliers' credits were obtained in Europe and the United States. Arrears on commercial account and overdue swing balances--other elements of the new debt-are to be funded on a 10-year basis under agreements being concluded between Argentina and the members of the Paris Club and Japan. The Government is also faced with an undetermined amount of claims of foreign companies for properties which have been xpropriatedr. 43. Altogether the present national debt (including debt guaranteed by the Central Bank) amounts to almost $700 million equivalent. This includes commercial arrears and other indebtedness to members of the Paris Club countries and Japan where, as mentioned above, consolidation on a 10-year term is being negotiated. Assuming that consolidation takes place according to present plans, annual service of total external debt would be $57 million equivalent in 1957, increasing to a maximum of $84 million by 1960. There- after it would begin to decline to $62.5 million in 1965 and $13 million in 1970. At the 1960 peak $32 million, or 38% of total service, would be payable in dollars. 41&. The estimated peak (1960) service of $84 million represents about 9% of 1956 exports. The 1956 exports were, however, low even compared with the level of the previous 5 years. It is reasonable to expect that by 1960 export will have increased significantly, particularly if weaknesses in Argentina's productive apparatus have been effectively attacked by then and a reasonable level of economic stability has been attained. Banking 45. The Central Bank of Argentina is a banker's bank. Conmnercial banking is done partly by-Government-owned banks, partly by Argentine or foreign-owned private banks. The Central Bank was nationalized in 1946. In that same year, the Government "guaranteed" all deposits with the official and private com- mercial banks. According to the new system, the banks kept their deposit resources at the disposal of the Central Bank, and with minor exceptions, could lend only funds re-obtained from the Central Bank in the form of "re- discounts". In this way, the Central Bank was free to direct the credits to the banks of i-ts choice. Because of this "nationalization" of the banking system, the Central Bank, or indirectly the Government, had unlimited powers over the entire field of credit policies. 46. On the other hand, the powers of the Central Bank to restrict credit were weakened when it was decided that mortgage bonds, formerly privately placed by the National Mortgage Bank, would be wholly taken up by the Central Bank. Thereafter, mortgage loans were no longer covered by domestic savings, but were financed by straight Central Bank issues. The total amount of out- standing mortgage loans increased from 1.9 billion in 1946 to 25 billion pesos in-1956. 47. Although some bank credit was extended to the public sector, the Government's direct share in the total monetary expansion was considerably less important than credit to the private sector. BANK CREDIT OUTSTANDING (billions pesos at year end) 1946 1951 1956 Private 14.o 18.4 42.3 Mortgage 1.9 7.9 25.3 Government 5.9 16.3 36.0 Total l.82 103.6 One of the main public borrowers (see Table 10) was the Argentine Trade Pro- motion Institute (IAPI). The amount of subsidies, mainly to agriculture and, until 1955, the operational deficits of the nationalized transport system, also were met by borrowing from the banks. At present, the transportation deficit is included in the national budget. Finally, a small percentage of long-term public bonds also figures in the portfolio of the Central Bank. 48. As a result of the above-mentioned private and public lendings, money supply increased in 10 years (1946-56) from 8.4 billion to 60 billion pesos. 49. The Central Bank, in addition to directing credit policy, also manages the exchange system. Under Peron, there were two official rates of 5 and 7.50 to the dollar, and an "official free rate" (controlled by the Central Bank) of 14 pesos. These rates were often "mixed"; in consequence, commercial life was in complete uncertainty about which effective rate would be applied in the - 13 - future for given exports and imports. As the inflation pushed up internal prices, the official rates became unreal and import pressure stronger. Selective import control was implemented by import licensing and, with few exceptions, outward transfers of a financial nature, such as profits, etc., were not allowed. Labor Relations 50. About five million employed persons are organized in trade unions, affiliated to the General Confederation of Labor (COGT) which, during the Peron regime, cooperated with the Government in a policy of keeping trade unions under close control. Strikes were reduced to a minimum. By 1952, the real income of the industrial worker fell below the level of 1947; in consequence, Peron allowed wage increases. The cost of living rose sharply and, by 1955, real wages declined again; the increase of the wage bill had not been accompanied by any increase in production or productivity. 51. Howaver, it would be somewhat over-simplified to attribute the entire responsibility for all this to labor; the misdirection and waste of available capital, the lack of export earnings, power shortages, inadequate raw mate- rial and capital goods supply, as well as poor transportation, also contribu- ted to the existing difficulties. - 14 - III. CURRENT POSITION General 52. On assuming power, the Provisional Goverrment extended an invita- tion to Raul Prebisch, Executive Secretary of ECIA, to examine the economic situation. Mr. Prebisch submitted his first report on the Economic State of the Nation in October 1955. In several subsequent reports, he presented more detailed analyses. His findings can be sunmarized as follows: The courntry is in a state of economic stagnation, evi- denced by the fact that over a period of 10 years per capita product had increased by only 3-1/2%. Consumption was high at the expense of capital invse.tment. This excessive consumption was made possible only by Lncurring substantial foreign debts and decapitalizing the transportation system, as well as the produoGive sectors of agriculture and industry. Argentina possesses a large potential for future growth, but there are three important obstacles to achieving this. The country lacks capacity to import necessary raw materials, fuel, and capital goods; secondly, the shortage of electric power is becoming chronic because the Government neither installed the necessary capacity itself nor created the conditions necessary for private enterprise to do so; and thirdly, the transportation system, especially the railroads, had fallen into serious disrepair and is incurring large operating deficits. Not only had indis- trialization been excessive, but it had been misdirected. There had been a failure to adopt either import-substituting indus- tries or-those basic industries which would provide an infra- structure for Argentina's consumer goods industries. In addi- tion to the increasing shortage of electric power, which has served as a brake on industrialization, the development of petroleum resources has been neglected, so that petroleum imports, more than 60% of domestic consumption, were a heavy charge on the balance of payments. 53. The immediate recommendations of the Prebisch reports may be reduced to the folloving points: (1) restore incentives to the agricultural pro- ducers - (2) rebuild the economic infra-structure of Argentine industry - (3) ease the strain on the balance of payments - (4) check inflation. 54. The Provisional Government accepted these recommendations, and they serve today as a blueprint for Argentina's rehabilitation. Agriculture 55. The decline of agriculture during Peron may be ascribed to manifold reasons. The drive to industrialize and the rise in agricultural labor costs resulted in a decrease in agricultural labor on the farm. Prices paid by IAPI failed to keep pace with rising farm costs, so that farmers had little incentive to produce. Agricultural machinery has become scarce; - 15 - Argentina possesses only 50,000 tractors, most of them more than 10 years old, and agriculture could usefully employ at least another 50,000 tractors apart from replacements. Agricultural deve2opment has also suffered from the deterioration of the transport system and the inadequacy of storage facilities. The marketing of the principal agricultural and pastoral pro- ducts was the responsibility of the Government wJhich periodically fixed the prices to be paid to farmers and stock raisers. As a consequence, bureauc- racy took the place of the market vhich no longer reflected the conditions of supply and demand. Finally, the conservatism of large landlords and difficulties of making the small farmer more productive also militated against a rapid increase in production. 56. The Provisional Government took several measures to remedy the situation. By establishing a new official exchange rate of 18 to the dollar, it created considerably higher domestic prices for export farm products (details of the currency reform are outlined below). IAPI is now under liquidation. The newT National Grain and Meat Boards became autonomous entities with the main purpose of giving technical advice to the producers. The subsidies on food were abolished (with the exception of bread of the most common type and meat in Buenos Aires), while trading in futures has again been authorized on the grain exchanges of Buenos Aires and Rosario. Finally, some improvement was obtained in land tenure: under Peron, the tenant could not be evicted and the rent he paid was frozen, but now a new decree enables the landowner either to recover his land or sell it to his tenant at a realistic price. 57. Argentine conditions of climate and soil permit great elasticity in the production of a wide range of livestock and arable products, with quick response to changes in demand and price incentives. This flexibility con- stitutes an element of strength in meeting changes in the world demand for Argentine exports. 58. Experts believe that Argentine agriculture would obtain optimum results if land were rotated more between pasture and crops; arable crops would rejuvenate and clean the pasture land while pasture would restore fertility for crops. To attain this end, it is necessary to have competi- tive prices for farm output as well as equipment and supplies, better farmer education and perhaps, in addition, a system of penalties for land mismanagement. Power 59. The average consumption of electric energy in 1954 was 309 kwh per head for the entire country. In the Greater Buenos Aires area, the figure is much higher, 800 kwh per head. Due to the fact that potential hydro- electric sites are at a great distance from Buenos Aires, which would be practically the only market for large plants, hydro power, on the basis of kwh generated in 1954, was only 5.2% of total production in Argentina, a very low figure compared to the average of 63.5% for Latin America. As imports supply more than 60% of oil consumption, and over 90% of coal consumption, thermal electricity is costly in terms of foreign exchange. _ 16 - 60. The recently created Direccion Nacional de Energia, responsible to the ffinistry of Commerce and Industry, is -he Government authority respon- sible for the coordination of planning in the generation of electric energy. In 1954, the total energy generated amounted to 6,442 million kwh; of this, almost 80% was produced by several privately-owned companies, 14% was cap- tive power, the remaining 6% was government and cooperatives. In Argentina, power production has grown by less than 6% per annum between 1946 and 1955, as against an average annual rate of growth of about 9 in Brazil or Chile. The supply of energy does not yet represent a serious problem in the prov- inces, but in the Greater Buenos Aires area, a conglomeration of over 5 million people and by far the most important center of industrial produc- tion, the lack of electric energy has become an important obstacle to growth. While several relatively small power stations are being built in the interior, the only important new generating plant is the Government-owned thermal sta- tion at San Nicolas, on the Parana River, with a total capacity of 300,000 kw. Much Argentine industry, including the new iron and steel plant, will be con- centrated in the area of San lNicolas. High tension lines now carry some power produced at San Nicolas to Rosario (Santa Fe province) and when extended to Buenos Aires, will add about 180,000 kw to the power supply of the capital. 61. Unfortunately, San Nicolas is far from sufficient for Buenos Aires. It is estimated that an additional 300,000 to 400v000 kw would be needed immediately for public utility services to return to normal. This should be followed by annual increases of 100,000 kt'r for the first few years. The Government has called for the survey and construction of a thermal plant on Dock Sur, Buenos Aires, expected to produce 600,000 kw. Although the com- pletion of this work would certainly ease some of the difficulties in the area, the major problems still remain. 62. There are basically two elements in Argentina's powser problem. The first element is institutional and turns on the issue of government versus private power: within the government sector itself there is also the inter- nal issue of federal versus provincial production and control. The second element is the inadequacy of rates which destroys any remaining incentives to expand private capacity and makes the increase of government capacity a heavy fiscal burden. Petroleum 63. The proven oil reserves of Argentina are placed at 350 million tons. There are oil and gas fields in Comodoro Rivadavia (province of Chubut), r4endoza, Neuquen, Salta and at the southern tip of the country (Tierra del Fuego). On the basis of concessions granted in 1916, Standard Oil of New Jersey and the Royal Dutch Shell group hold small fields in the provinces of Chubut and Salta. However, some years later the granting of concessions to private companies became the exclusive privilege of the National Petro- leum Board (YPF), which did not in fact grant any; its own participation now actually represents 84.2% of total extraction. The private companies have been restricted for more than 30 years to fields which are almost exhausted, and their production is decreasing. " \ r~'- -/>oA Dur6n-Modrejones / Emi roco F (t 1 * \ \ ', I \.I (Mendozo) Son j L ujn de Cuyo -. Lorenzo / iU ff i ~~~~~~~ ~~Bohi,a / ) \ <> 3iOn~~~~iaco, b/ ) n~~~~~~~~o n / o EJ ) {~~~tS.o,aoro ( j j ARGENTINA OILFIELDS and PIPELINES &;7 \ g OIL REFINERIES EXISTING GAS LINES PROJECTED GAS LINE - - - EXISTING OIL LINE I, Pataonia PROJECTED OIL LINES (Tierrdl OIL AREAS ~~ F~uego)) V=1 so0 100 200 300 400 500 KM JUNE 1957 IBRD-334R - 17 - 6h. Of the 16 existing refineries, 6 are operated by YPF, the most important being in La Plata with an annual capacity of 5 million tons. The others belong to private companies, in particular the ESS0 and Shell groups. Total refinery capacity is 11 million tons annually. Imported crude oil is mostly processed by the private companies. Total petroleum consumption in 1956 amounted to 12.4 million tons of which over 60% was imported. Total fuel imports cost US$250 million, or about 25% of export proceeds. In the period 1948-56, petroleum imports nearly doubled, where- as domestic output increased by only 30%. It is estimated that the normal development of industrial activities, as well as the urgent need to modern- ize railroad equipment, thermo-electric plants, etc., will result in a rise in consumption of petroleum products from 12 to 16 million tons by 1960. 65. The importance of closing the fuel gap is generally recognized as one of the country's most pressing problems. According to YPF, the known oil fields are sufficient to double production in 3 to 4 years, if the problem of jil transportation can be solved. At present, Argentina has only 152 kilometers of oil pipeline, just completed from the Bolivian frontier to Pichinal; from there, limited quantities of crude oil will be transported by rail and waterway to the refinery in San Lorenzo. There is also a system of gas pipelines connecting Comodoro and Plaza Huincul with Buenos Aires. Petroleum from Comodoro Rivadavia can be transported only by sea and that of M,endoza by rail but at present only a few tank wagons can be used daily on the line. The worst situation is in the Campo Duran fields of the north; although their discovery dates back to 1951, produc- tive wells are still capped for lack of transportation. 66. YPF is therefore planning the following projects: (1) an oil pipe- line from Campo Duran and HIadrejones to the refinery at San Lorenzo, 1,500 kilometers, capacity 9,200 cubic meters per day - (2) a gas pipeline from Campo Duran and IIadrejones to Buenos Aires, 1,700 kilometers, capacity 7 million cubic meters per day - (3) an oil pipeline from Lujan de Cuyo (Mendoza) to Buenos Aires and La Plata, 800 kilometers, capacity 6,300 cubic meters per day - (4) a plant to treat gas coming from the Campo Duran and ladrejones fields, capacity 10 million cubic meters per day. 67. In April 1957, YPF opened bids for these worlcs presented by more than 30 firms of the Western World. A syndicate, called International Contractors and Suppliers Association (ICSA), comprising groups of Belgian, French, Italian and United States firms, offered to complete not only all the works mentioned in the calls for bids but also the enlarging of the refineries in Lujan de Cuyo and La Plata. The offer of ICSA amounts, in foreign exchange expenditures, to US$190 million equivalent, payable partly in dollars, partly in EPU currencies; in addition, Argentine pesos would be needed up to the equivalent of US$80 million. 68. According to newspaper reports, the Provisional Government has authorized YEF early in August to reject the bids submitted by ICSA and enter into direct negotiations with a group called TIPSA, made up of North American Utility and Construction International Company, Fish Engineering Corporation, Fish lNorthwest Constructors and Tip^^, an Argentine company. - 18 - Construction plans call for 1,015 miles of a 24-inch gas pipeline from Campo Duran to Buenos Aires, a 12-inch oil line from Campo Duran to San Lorenzo and field installations at the oil :ields. A fourth project, consisting of an oil line from Mendoza to San Lorenzo, has been shelved. The reports suggest that the conditions of the project are still under discussion. 69. YPF also called for tenders (June 1957) to drill 40 wells in Tierra del Fuego. The wells already drilled by YFF evidenced a field there, which has two advantages over those of Salta; it is only 2,000 meters deep instead of over 4,000, and its distance from the coast is only about 20 kiloneters. 70. YFF expects that the new pipeline systerL would enable a doubling of domestic production (at present about 5 million tons) by 1960. How- ever, in the opinion of some experts, even such a spectacular increase would not solve the problem. According to private estimates, the yearly consumption of oil, with its use de facto restricted as it is today, may reach 16 or 17 million tons by 1960. In other words, even if Argentina's 1956 production doubled by 1960, the gap between production and restricted consumption would remain about the same, and Argentina would continue to spend about the same on imports of petroleum as she does today. Moreover, some Alrgentine experts argue that YFF does not have the financial means to obtain thiese results, and in addition to helping YFF in every respect, the Government should also allow private capital, even foreign, to explore and exploit new concessions. Transportation 71. As previously stated, to solve the problem of her economic dis- equilibrium, Argentina will have to produce more. However, it would be vain to produce more in the interior as long as the products cannot be transported. Thus the present inefficiency of transportation is a serious obstacle. Out of 2140,000 lms of highways, only about 25% could be con- sidered all-weather roads. Because of neglected maintenance during the Peron regime, as well as the use of recently purchased trucks which are too heavy for most of the highways in Argentina) practically the entire highway net is now in a poor condition. This is all the more disturbing because the lack of road maintenance increases the costs of truck trans- portation considerably. 72. At present, the railroads are under the direction of the Empresa Ferrocarriles del Estado Argentino, an autonomous Government institution. The EFEA manages a system of some 44.,000 kms of which about two-thirds were purchased in 1947-48 from their British and French owners. The personnel of the railroads was increased from 1147,000 in 1946 to 213,000 in 1956, mostly for political reasons. SA; = < ,) MONTIAG ON i ~~~~~~~~Both;o Blonc Necocheau \, / / 0~~~~~~~~~~~~~~~~~~~~~~~~~ r~~~~~~~~~ lErloche SANTI,ARGENTINA -. i RAILROADS R41 LROADS ,) .) ~~~~~~~~<~Deseodo 0 100 200 300 400 500 600 KM 4~~~~~~ ~~~~ G olleqos c- JUNE 1957 1BRO-333 - 19 - 73. Because of inadequate track maintenance and the bad state of the rolling stock, particularly locomotives, tle railroads now are simply unable to meet the demands upon them. Hence, several million tons of goods are either directed toward high-cost truckc transport or are waiting at freight sidings all over the country. The number of passengers increased from 282 million in 1946 to 594 million in 1956, while no increase worth mentioning occurred in passenger coaches. 74. In October 1956, the Export-Import Bank granted a $100 million credit to Argentina, According to present plans, most of this amount will be used for purchases of locomotives, other railroad equipment and materials. The railroads have also bought some additional diesel locomotives and spare parts on private credit terms (3 to 8 years) in the United States, Canada and EPU countries. Tn consequence, the situation is being eased somewhat, but is stil'l far from remedied. 75. Dua to antiquated material, superfluous employees and inadequate tariffs, the railroad system estimated a deficit of 3.4 billion pesos for 1957. The deficit may in fact be smaller, as a result of recent tariff increases between 20 and 40% for passengers and freight. Industry 76. As mentioned previously (paragraph 17), industry is now contribut- ing more to Gross National Product than the agricultural sector. Industrial development was particularly marked during the second World War and the Peron regime when industrial growth was deliberately fostered. In fact, Peron's policies, at least during, his early years of power, favored urban activities at the expense of agricultural output, in part because Peron was politically opposed to the "rural oligarchy", and in part in an attempt to achieve an illusory "economic independence". As a result there emerged an imbalance between agriculture and industry, which is now to be remedied, not by industrial decline, but by the increase of agricultural production. 77. It is not at present possible to measure by world standards the competitive position of Argentine industry; due to exchange shortages, full competition from imports has not been permitted. It is clear, however, that at present industrial costs are unduly high due to a complex of causes. In the first place, the main industrial region of Greater Buenos Aires has frequent electric power cuts, resulting in a forced under-utilization of industrial capacity there. Secondly, much industrial equipment is today in bad repair and some of it probably obsolete, due to industry's inability to obtain imported replacement parts and new machinery. Thirdly, there has not in recent years been free access to new industrial techniques being adopted elsewhere; and finally, Argentine industry is only now developing the basic services which underlie more mature industrial complexes. - 20 - 78. Fortunately, all these factors can in time be modified. Able entre- preneurs exist in Argentina as well as workers who readily acquire indus- trial skills. Given reasonable financial stability leading to a favorable atmosphere for private investment and enterprise, and the development of a domestic capital market, facilitating finance of industrial enterprise, Argentine manufacturing output should be able to grow on a sound basis. The Balance of Payments 79. The new official rate of exchange is 18 pesos to the U.S. dollar, while the free market rate oscillates around 40. The proceeds of Argen- tina's agricultural exports have to be surrenderecd to the Central Bank at the official rate and serve for the payment of essential imports. Finan- cial transactions on account of invisibles, including dividends and some capital movements, can be made without restrictions through the free market. Ihese transactions represent roughly one-third of total free market volume while the rest are derived from trade in the following way: the proceeds of industrial and certain agricultural exports (like fruits and wine) can be sold on the free market while the equivalent of some capital goods, spare parts and certain less essentials have to be settled in free exchange. To avoid exaggerated oscillations of the free rate, the Government tries to reduce the demand for free dollars by using monetary weapons as well as quantitative import restrictions. Thus, as can be seen in more detail in the Annex, the Argentine exchange system is actually a complicated multiple rate structure, with effective rates ranging everywhere from 13.5 to 60 pesos, or in the case of automobiles, to as much as 200 pesos for the dollar. The Government does not deny that the exchange system is complicated and that the multiplicity of rates is undesirable, but believes that multiple rates should for the present continue to be used to slow domn increases in the domestic prices of export products, to restrain import demand and to stimulate certain exports. Its ultimate objective is a unified rate. 80. One of the most formidable legacies of Peron is the scarcity of foreign exchange. In 1946, the foreign exchange reserves of the Argentine- Central Bank amounted to the equivalent of US$1,686 million. In that year, the Government took the decision that the foreign debt be liquidated and the foreign-held utilities, particularly the railways, be nationalized. The transaction cost $959 million, an amount far in excess of Argentina's economic possibilities at the time. In the years following the national- izations, the balance of trade of Argentina became on the whole unfavor- able; in the period 1951-56, the over-all deficit amounted to almost $900 million. These measures of repatriating and nationalizing thus had fateful consequences for the Argentine economy. The subsequent scarcity of foreign exchange compelled severe import restrictions. The ensuing scarcity of raw materials and finished goods contributed to the creation of a black market and, in consequence, to a continuing distortion of domestic prices. As there was no foreign exchange available for the transfer of profits, foreign capital refused to enter the country. Finally, the scarcity of foreign exchange forced the Government to use supplierst credits and credits under - 21 - bilateral accounts whose total amount reached about $500 million at the end of 1955. In this way, after having spent over US$950 million in 1946-48, "to make her economy independent", ArgentLia, in. reality, only shifted from a long-term to a short and medium-term debtor pcsition. 81. The shortage of foreign exchange reserves became particularly threat- ening in the course of the last two years. According to data contained in the first report of Raul Prebisch to the Provisional Government, the foreign exchange reserves of Argentina declined from US$1,686 million in April 1946 to $450 million in October 1955. The Provisional Government took energetic measures to cliniinte the balance of payments deficit. In foreign trade, it tried to increase exports and discourage nonessential imports. However, severe droughts reduced the quantity of exportable goods, especially corn, in 1956. As far as imports are concerned, their contraction beyond a certain limit may have unfavorable consequences on the level of domestic production. 82. In the Government's view, only foreign credits can help in such a situation. Until May 1957 the import of capital goods was allowed only to foreign investors, as part of their capital investment in Argentina. A recent decree allowed the Argentine industrialists also to import machinery against payment through the free market on credits to be extended by the foreign supplier. Minimum credit terms are set at 4 years from the non-dollar area and 8 years from the United States. 83. The greater part of Argentine trade is with Europe. While, as men- tioned above, foreign trade under Peron was on the basis of bilateral treaties, the so-called Paris Club Agreements, signed in July 1956, provisionally introduced a system of multilateral trade and payments with the United Kingdom and a number of Western European countries. Simultaneously, the commercial debts with those countries, which in September 1955 amounted to about $450 million equivalent, would be consolidated and funded with 10 annual payments at an average rate of interest of 3-1/2%. The agreements on consolidation are not definitive until accepted by all participating countries, and nego- tiations with Western Germany were completed only in mid-June 1957. Japan has also agreed to a 10-year consolidation of its trade debts amounting to $69 million under conditions similar to those contained in the Paris Club Agreements with payments in transferable sterling. When these negotiations are completed, total consolidated commercial debt will approximate $520 million equivalent. (cf. Table 1.) 84. While there are good prospects that in coming years European trade will be favorable to Argentina, a trade deficit is likely with the United States. This is mainly due to the fact that while Argentina continues to need U.S. equipment and dollar oil, the agrarian exports of the two coun- tries supplement instead of complement each other. Argentina's trade with the Communist bloc is relatively small, except for some exports of wool and hides and some imports of rolling stock and machinery. Finally, a tendency toward multilateralism in trade and payments may also be mentioned within the South American Continent itself. However, this is still in the stage of theoretical discussions; at present, Argentine relations with her neigh- bors are based upon bilateral agreements covering about 20% of her exports and imports. - 22 - 85. Argentina is also using official credit lines in addition to private suppliers' credits. The first Eximbank loan for $96 million was granted in 1949 to fund private commercial arrears in dollars. A second credit of $60 million will be used for equipment in the San Nicolas steel mill. A third loan of $100 million is being used mainly for the purchase of railway equipment, with some road building and river equipment. Finally, in April 1957, the International L'bnetary Fund granted a $75 million drawing to the Argentine Government. 86. The authorities hope that important amounts of foreign private capital will seek in-vestment in Argentina. During the 10 years under Peron only about $12 million had been invested in the Argentine, while about $20 million have come to the country in the 18 months of the new regime. I-ost of this latter amount will be used for new investments to be made by the pharmaceutical and automobile industry, as well as some assembly plants. Profits accumulated after October 1955 can be transferred through the free market, and so foreign investments are no longer hampered by foreign exchange restrictions. Nevertheless, a substantial increase in foreign investments is not likely to take place as long as there persists the threat of infla- tion and uncertainty in wage costs conditions. lœoreover, capital inflow may well be hampered by doubts regarding the policy the Government intends to follow on the participation of private capital in electric utilities and the exploration for petroleum. Inflation 87. iHost of the present financial problems of Argentina have their roots in the Peron era. Peron wanted to carry out a great industrial development program within a short period of time. New sources of income had to be created to meet the substantial expenditures of the Government. At the beginning, IAPI derived large financial resources from the spread between the low prices it was paying to domestic agrarian producers and the high prices it was receiving on the world market. Whlen this spread became negative, IAPI, that is the Government, was forced to pay high subsidies to agriculture, while losses were also incurred on the import side due to the overvaluation of the foreign exchange rate of the peso. As a conse- quence of these transactions, the bank debt of IAPI rose to 20.5 billion pesos by the end of 1955. 88. Part of the growing Government deficits was financed from the sale of bonds to the pension funds, and in a smaller extent to the banks. The internal public bonded debt increased from 10.7 billion pesos in 1946 to 51.5 billion by the end of 1955. The rest of the deficits was financed with straight bank credit. 89. The Government tried to solve the housing shortage by requiring the Central Bank to grant credits for the construction of houses; such Central Bank loans, which stood at zero when Peron was elected President, represented 25 billion pesos at the end of 1956. - 23 - 90. Inflation boosted the cost-of-living index from 100 in 1946 to 211 by 1950, and 550 in 1956. Rising pric s gave a continuous stimulus to labor to demand higher wages, and wage .ncreases were granted without regard to productivity; nevertheless, real -ages declLied by over 9% in the period 1948-55. 91. The increase in costs resulted in strong pressures on the banking system for additional credits, not only to the Government but also to private business and individuals. Total credit granted by the banking system, public and private together, was boosted from 6 billion pesos in 1946 to 93 billion at the end of 1956. In that same period, money supply increased from 8.4 billion to 60.2 billion pesos. 92. In short, the economy of Peron fell into the grips of the well- known spiral created by the pressure of a population which tries to consume more than it produces. 93. The Provisional Government took several measures to slow down the pace of inflation. A number of costly food subsidies were abolished. State trading is being reduced and the direct ministerial operation of several state enterprises has been discontinued. While rents continue to be controlled, at least for the time being, the new rules introduced by the Provisional Government also give some protection to the landlord. The recent increases in railroad tariffs give hope that the deficit of the railroads (estimated to reach 3.4 billion pesos in 1957) can be reduced. Finally, an encouraging step was taken in March 1957 when, after having increased wages by 10% in 1955 and by 40 to 75% at the beginning of 1957, the Provisional Government decided to freeze the wage level for a minimum of 1 year. 94. Opinion in Argentina is divided on what should be done next. Some are of the opinion that very severe austerity would be the answer. The recent measures creating somewhat tighter money market conditions (cf. Annex) can be ascribed to this school of austerity. However, the majority of the Government, and also of public opinion, does not back such a policy whole- heartedly. The main argument used is that any contraction, instead of curbing the inflation, may simply lead to a depression; Peron had built up a complete inflationary apparatus to serve his purposes; its replace- ment without any transition would probably cause economic and political chain reactions which might prove fateful for the country. Therefore, continues the argument, some controls will also have to be used in the future and the fiscal deficit cannot be eliminated immediately. On bal- ance it appears that the Provisional Government will adopt measures to slow dotim the rate of inflation, but it is not likely to stop it completely. - 24 - IV. PROSPECTS Shorter-term Outlook 95. The overriding objective of the Provisional Government is the resto- ration of constitutional and democratic government. Rightly or wrongly- probably rightly--President Aramburu and his supporters believe that this is their primary task and that history will judge their achievements in the light of success in accomplishing it. 96. It follows that economic matters are, at times, given only secondary attention by the Provisional Government. They have acted, and probably will continue to act, on matters which are economically or politically urgent and inescapable, or which are unlikely to arouse social or political controversy and opposition. It can be expected that the Provisional Government will attempt to postpone or avoid decisions which are outside these two categories, such as a clear decision on the role of private capital in the exploitation of petroleum. They have not so far regarded themselves as having a mandate to resolve such controversial issues. 97. As outlined earlier in this report, the economic program of the Provisional Government eonsists essentially of increasing production, both to expand exports and replace imports, re-equipping and expanding basic services, such as transportation and electricity, and attempting to maintain financial stability. They believe that it will not be possible quickly to achieve the desired rehabilitation and expansion of capital equipment from current exchange earnings alone, and are accordingly seeking external credits for this purpose; for example, the importation of industrial machinery against current payments is, with some exceptions, prohibited, whereas import licenses are granted for such imports against supplierst credits. They hope that ex- ports can be expanded sufficiently to permit the import of adequate supplies of fuels and raw materials and still leave an adequate margin for service on the credits now being sought. 98. This program would be seriously impeded by severe domestic inflation. Not only would inflation distort the domestic cost-price structure and the relationship between external and internal prices, but it would almost cer- tainly also be accompanied by a re-emergence of controls and subsidies. It is therefore of the greatest importance that reasonable financial stability be maintained. This, however, is not easy in the present circumstances. The rehabilitation of the Argentine economy itself involves heavy pressure on available resources, requiring skilled and firm monetary management. This, the monetary authorities are technically and professionally capable of achiev- ing. The dangers reside rather in the political aspects of such policies. The urban workers, now largely organized in powerful trade unions, had under Peron become accustomed to regular and massive wage increases and are likely to become restive if there is no visible improvement in their economic status, even though that improvement be nominal rather than real. 99. If the Aramburu administration is unable to satisfy the aspirations of labor without resort to wage increases which run ahead of productivity, a wage-cost inflation will follow. This in turn will lead to balance of payments difficulties, both by hampering exports and by padding import dem.and. If the balance of payments deteriorates in this manner, the possi- bility of obtaining external credits would probably also diminish. It follows, therefore, that the tightening of credit policies and maintenance of restraint upon wage increases would be essential. 100. This is clearly recognized by the Aramburu administration which is opposing, as strenuously as politically possible, demands for wage increases, subsidies and credit expansion. Last March, Araiburu announced a one-year wage freeze. However, in the social and political situation now prevailing, a strict maintenance of this line will require great political courage. 101, It is unlikely that inflation can be completely avoided under present circumstances, particularly as long as the pressure for wage increases is so strong and a certain lack of consistency continues to characterize the Govern- ment's fiscal and economic policy. Measures to restore economic freedom are often closely followed by other actions which re-establish some subsidies, price controls or new exchange rates. The consequence is, of course, uncer- tainty in private economic planning and a continued tendency toward rising costs, 102. Short-run prospects depend essentially on the speed with which pro- ciuction can be increased; there are no longer "surplus" exchange holdings to draw upon, and a reduction of consumption levels (e.g., to obtain higher export surpluses) could be politically explosive because the Argentine people are not accustomed to the acceptance of austerity, even for limited periods. There is little doubt that both urban and rural production could be expanded fairly rapidly, say, within 3 to 5 years. Production increase depends upon adequate incentives to the agricultural producer, and upon a considerable degree of re-equipment in industry and transport as well as upon an increasing availability of petroleum products and electric power. Except in agriculture these requirements add up to the need for a large importation of capital goods and equipment. The fact is that Argentina's agricultural and manufacturing output is being hampered by bottle-necks which are known and which can be removed, provided the importation and installation of necessary capital equip- ment can be financed. It follows that the prospects both for short-term economic recovery and the future development of Argentina depend upon the growth of export earnings and upon the type and volume of external credits that can be attracted, 103. As far as export market prospects are concerned, it can be said that the position of all major cereal exports is overshadowed by the existence of U.S. surpluses of the same commodities, while at the same time the development of Western European agriculture has made that region relatively less dependent on imported feed for livestock than before World War II. Argentinats live- stock industry provides four main export commodities, namely, frozen beef, chilled beef, canned beef and wool. To each of these, different circumstances apply. The main outlets for frozen beef are now Western Europe and the United Kingdom, while that for chilled beef (higher-grade product, much more closely akin to fresh beef in consumption centers) is the United Kingdom. Argentine canned beef is exported on a world-wide basis, including the United States, - 26 - and it appears that Argentina could export without difficulty appreciably larger quantities if she can produce them. Wool exports are also world-wide, and prospects for that commodity appear good. 104. Over the short-term, the problem is not so much whether the markets will be able to absorb Argentina's exports, because during the next 3 to 5 years Argentina is not likely to produce and transport to her ports any con- siderably increased export surplus of meat and cereals and there should be no difficulty in marketing available supplies. 105. It is, however, clear that over the same short-term, say, 3 to 5 years, Argentine export earnings are not likely to be sufficient to enable her to finance with her own resources a rapid re-equipment of transport facilities and urban industry, and at the same time expand electric power, construct oil and gas pipelines and maintain "normal" imports of capital equipment. Yet it is upon this re-equipment and expansion that both the rate of immediate recovery and the longer-run growth of Argentina's output depend. Moreover, if nothing is done in the critical sector of petroleum, future oil imports are likely to grow at a pace which could dominate the balance of payments. 106. Thus, the short-run perspective can be surmed up by saying that with- out foreign credits the growth of output for both domestic consumption and exports and, in the case of petroleum, import replacement, will be slowed. Foreign capital will only be obtained if the Government succeeds in creating a reasonable level of economic stability. It is important that borrowing be at sound terms, otherwise service obligations arising from ill-judged borrowing would bear heavily on the future balance of payments. Longer-run Prospects 107. It is necessary, even in considering short-term prospects, to take into account the longer-run situation in which Azgentina may find herself. If this be done, the outlook becomes more encouraging. The climate and the soil of the pampa endow Argentina with considerable natural advantages in both crop and livestock agriculture. With a growing world population it is hard to conceive that the peoples of the world could afford to dispense with the foods and materials (e.g., wool, leathers) that Argentina is technically capable of producing efficiently. The Argentine farmer has often proven that he is able to change production from one commodity to another, or in the case of meat, from one quality to another, in response to market demands. While the mineral possibilities are still largely unexplored, experts agree that petroleum shows great promise. Up to the present, the newly discovered fields have scarcely been tapped; if petroleum resources can be fully exploited, an important part of potential balance of payments deficit would disappear. 108. The Argentine is well endowed with human talents. Argentine and foreign industrialists are generally of the opinion that the workers are in- telligent and industrious. This factor offers the possibility that, given conditions of financial stability leading to the development of a domestic capital market and a favorable atmosphere for investment and enterprise, as well as adequate supplies of fuels and energy, Argentina may be able slowly - 27 - to develop exports of manufactures. Over the long-run, the paucity of raw materials and domestic energy sources need not by themselves inhibit this development; Western hurope is now deficient in both. 109. In the meantime, however, Argentina Vill necessarily rely upon exports of agricultural products, and such exports will remain important to her for a very long time. It seems reasonable to assume that the present overhang of surpluses in many of her important cereal exports will tend to disappear. Long-run prospects for cereals in European markets would then depend partly on the growth of European population and income and partly on political factors guiding European Governments on the degree of protection they afford their own domestic agriculture. The possible fears regarding dependence on overseas sources of food supply are relevant here. At the same time, however, it is very possible that growing population and income elsewhere in the world, par- ticularly in areas nowJ underdeveloped and overpopulated, would create new world demand for Argentine exports. 110. Much of the same long-run considerations apply to meat. As regards chilled meat, the United Kingdom is not likely to welcome imports from Argen- tina in a volume which would displace supplies from either domestic or Dominion meat producers, but will probably permit Argentina to retain her share of a growing British market. This suggests a steadily and persistently growing volume of Argentine exports of chilled meats to the United Kingdom, in step with increase of British consumption, i.e., about 2% per annum. Similar lpng-run prospects appear likely for frozen beef which now goes prin- bipally to Alestern European countries. The growth in canned meat may be somewhat more rapid since this product can enter new markets in, for example, Africa and the East, without the necessity of specialized transport and skilled distribution. Similarly, the prospects for wool are for steady growth of world demand despite the increasing use of synthetic textiles, and Argentina is rea* sonably well placed to increase her wool production without encroaching upon other rural output. 111. Thus, given conditions of economic and financial stability, the long- run prospects for traditional exports is for steady, but not rapid growth, There are also possibilities for export of products now relatively minor, such as wines, fruits, and later perhaps processed dairy products such as powdered milk. There may ultimately prove to be a potential for fruit exports to Northern Hemisphere countries since the Argentine season differs from that of the Northern Hemisphere. As their standard of living improves, areas which are now underdeveloped may show an increasing demand for protective foods such as milk powder, as well as meat. 112. It thus appears that there is a "place in the world" for Argentina's agricultural exports despite the fact that they are in the main supplementary rather than complementary to the present high-income areas of the world. The possibilities of growth, however, depend upon Argentina producing things which the consumer would like to buy at a price wshich he can afford, since she does not produce essentials which cannot be obtained elsewhere. This means that Argentinats economic future depends upon her being an efficient low-cost producer. For this, nature has amply endowed her; the rest is in the hands of her Government and people. - 28 - Annex BANJKING AND CURRENCY REFORMS 1. A Government decree of 1956 grantcd technical and administrative auto- nomy to the Central Bank. The reorganization of the central Bank is expected to be the start for a general overhaul of the banking system, providing espe- cially for the return to the commercial banks of their "nationalized" deposits. 2. The Central Bank is the administrative authority for monetary and foreign exchange policy. The peso was substantially devalued in October 1955. The former official rates of 5 to 7.50 were replaced by a new "single" rate of 18 pesos to the dollar and a free market was introduced. The free rate of the dollar oscillates around 40 pesos. 3. The so-called single rate is not really a unitary rate. The most es- sential imports, including fuel and raw materials, are imported at the official rate. Less essential items and some capital goods (e.g., electric generating plants) are admitted at the free market rate. The free market also serves for the transfer of business profits, and some capital movements, provided they originated after June 1955. Finally, certain specified goods, e.g., spare parts for machinery and automobiles, may be imported at the free market rate plus a surcharge established by the Ministry of Finance. The lowest surcharge is, at present, 20 pesos per dollar on c.i.f, value; the graduated surcharge on cars amounts to several times the factory unit value. According to the legislation, the proceeds of these surcharges will be paid to the newly estab- lished Fund for the Recovery of the National Economy. The resources of this Fund will be devoted to the technical development of agriculture and the pay- ment of temporary subsidies to mitigate the incidence of increased costs of living. 4. Importers using the free exchange market (except for certain industrial machinery and electric generators) are also required, before initiating customs clearance, to make prior peso deposits ranging between 20% and 100% of the value of the merchandise. These deposits remain blocked for at least 90 days, with subsequent release permissible only upon presentation of a customs clear- ance certificate. The banks are prohibited from granting credit to meet the prior deposit or to pay the surcharges on certain imports. As a result of these measures, purchases of foreign exchange, chiefly by truck and automobile importers, have been substantially curtailed. 5. All staple commodities are exported at the official rate of exchange, but in order to prevent excessive profits following the devaluation, the Central Bank may retain up to 25% of the peso proceeds; wool, for instance, is subject to a retention of 25%. Other commodities, like fruit, wine and manu- factured products, can be exported at the free market rate. In order to ensure the surrender of exchange proceeds, the Central Bank fixes unit prices ("aforos") which set the amount to be surrendered at the official rate. If the exporter can obtain a higher price abroad, he is entitled to convert the excess at the free exchange rate. 6. In this way, by fixing the amount of the T"aforo", the Central Bank practically fixes a separate exchange rate for each export. The "aforo" is also being used in the case of imports; if the importer buys at a higher price than the "aforo", he will have to cover the difference on the free market. - 29 - Table 1 DLRISI.AL PUBLIC DLBT CUTSTAi,DIING DG-V CB- R 31. 1956 11ITH MAJCR REPCh'LD ALD2lICLiw5 Tl7iitt GH 1X 1; 19T National and Central Bank Guaranteed Debt. and Debt of Political Subdivisions SUMIARY (amounts in thousands of U.S. dollar equivalents) Item Amount % TOTAL DEBT O-JTSTANDiNG DECE'2ER 31, 1956 686,k82 100.00 Disbursed and still outstanding 495,582 72.19 Undisbursed 190,900 27.81 U.S. DOLLARS 2&4,270 41.41 PrivatelyJ-placed debt 53 616 7.81 Disbursed and still outstanding 3.31 Undisbursed 30,900 4 50 Loans from Export-Import Bank 230,654 33.60 Disbursed and still outstanding 70,654 10.29 Undisbursed 160,000 23.31 POUNDS STERLING 69,447 10.12 Publicly-issued bonds 4 T77 0.65 Japanese Government loan 65,oo0 9.47 ARREARS IN VARIOUS CUJRRENCIES (to be funded) 327 00 47.71 FRENCH FRANCS (Privately-placed debt) 5.265 0.76 MAJOR REPORTED ADDITIONS JA1\'UARY 1 - MAY 1, 1957 11.316 100.00 U.S. DOLLARS (Privately-placed debt) _ 446 3.94 POUNDS STERLING (Privately-placed debt) 9,800 86.60 BELGIAN FRA14CS (Privately-placed debt) 1,070 9.46 NOTES: 1) This table was compiled before definitive details on the consolidation of European arrears were available. 2) Does not include 475 million drawing on LIF. Source: IBRD - Economic Staff Table 2 INTEREST AND AMORTIZAgION PAYMEFTS ON ZXTENA4L PUBLIC DEBT: ESTIMATED ACTUAL PAYMENTS 1946-56 AND ESTIMATED CON- TRACTUAL PAThWrS 1957-71 ON DEBT OUTSTANDING DECEMBER '11 19S6 WITH MAJOR REPORTED ADDITIONS TEROUGF MAY 1. 127 National and Central Bank Guaranteed Debt and Debt of Political Subdivisions (in thousands of U.S. dollar equivalents) Total Service ayento bZ currency _________ Debt out- _ yIMents durinir eaE_ Year standing Amorti- Interest Total U.S. Pounds Various Belgian French Swiss Argentine January 1 zation dollars sterling currencies francs france francs pesoe 1946 310,348 140,363 12,348 152,711 141,598 7,179 _ __ 295 3,612 27 1947 169,873 120,069 6,556 126,625 50,597 61,497 - 14,504 27 1948 49,804 7,653 1,642 9,295 1,590 7,678 -- - - 27 1949 42,151 4,379 1,410 5,789 26 5,736 - - _- 27 1950 55,499 13,739 1,736 15,475 4,650 10,254 - 552 __ __ 19 1951 172,767 13,382 6,786 20,168 8,368 4,791 - 546 6,445 18 1952 164,344 10,011 4,565 14,576 9,335 4,695 - 528 - 18 1953 146,664 10,739 4,819 15.558 10,781 4,248 - 511 - 18 1954 135,923 18,562 4,474 23,036 21,332 1,174 - 493 -- 37 1955 147,200 22,439 4,834 27,273 18,474 314 5,000 3,077 408 o 1956 184,761 149,543 3,405 152,948 19,190 4,680 128,900 - 178 RROJECTE 1957 686,482 52,?24 20,023 7z,747 21,787 10,991 39,379 - 585 -- 5 1958 643,558 56,557 23,775 80,332 28,350 11,417 39,379 -- 1,181 -- 5 1959 587,001 59,546 22,230 81,776 30,074 11,189 39,379 - 1,129 - 5 1960 527,455 63,849 20,204 84,053 32,628 10,963 39,379 - 1,078 - 5 1961 463,606 65,926 18,029 83,955 35,424 8,121 39,379 -- 1,026 -- 5 1962 397,680 65,998 15,672 81,670 33,417 7,894 39,379 975 - 5 1963 331,682 65,027 13,341 78.368 31,325 7,659 39,379 - - 5 1964 266,655 55,074 11,119 66,193 19,377 7,432 39,379 - 5 1965 211,581 53,345 9,124 62,469 15,881 7,204 39,379 - - 5 1966 158,236 53,621 7,158 60,779 14,418 6,977 39,379 -- -- -- 5 1967 104,615 9,077 5,148 14,225 13,971 249 -- -- 5 1968 95,538 9,086 4,696 13,782 13,528 249 -- -- - 5 1969 86,452 9,094 4,244 13,338 13,084 249 5 1970 77,358 9,102 3,791 12,893 12,639 249 - - -- 5 1971 68,256 9,109 3,338 12,447 12,193 249 - -- 5 - 31 - Table 3 IvAIN SECTOF:S OF THE FrONO.NY (percent of G.N.P. at facLzr prices) Cattle and Mining and Year Agriculture Industry Building Services Total 1935 25e,9 16.0 2.0 56.1 100 1936 25,8 16.9 2.2 55.1 100 1937 28.6 16.2 2.6 52.6 100 1938 24.2 17.4 3.1 55.3 100 1939 23.4 18.5 2.9 55.2 100 19410 23.2 18.3 2.7 55.8 100 1941 24*0 19.5 2.8 53.7 100 1942 23.4 21.2 2.9 52.5 100 1943 21.8 22.9 3.0 52.3 100 1944 22.4 24.5 3.3 49.8 100 1945 20.2 23.9 3.5 52.4 100 1946 23.2 24.1 3.8 48.9 100 1947 19.1 24.3 4.3 52.3 100 1948 17.5 23.6 5.9 53.0 100 1949 15.9 24.9 7.1 52.1 100 1950 15.7 24.4 7.3 52.6 100 1951 17.5 23.6 6.3 52.6 100 1952 16.6 23.4 5.8 54.2 100 1953 21.8 20.8 5.0 52.4 100 1954 18.8 22.7 5.5 53.0 100 1955 18.0 24.6 5.0 52.4 100 Source: Producto e Ingreso de la Republica Argentina, 1955. Table 4 GNP, CONSUMPTION AND INVESTME,NT (million pesos) Year GNP Consumption Investment At Current Prices % of GNP At Current Prices % of GNP 1935 8,797 7,806 88.7 949 10.8 1936 9,361 8,145 87.0 1,063 11.3 1937 10,868 9,188 84.6 1,264 11.6 1938 10,604 9,195 86.7 1,943 18.3 1939 11,083 9,753 88.0 1,455 13.1 1c{40 11,556 10,268 88.9 1,491 12.9 1941 12,b444 10,493 84.3 1,908 15.3 1942 14,037 11,976 85.3 1,798 12.8 1943 14,903 11,820 79.3 1,928 12.9 1944 16,950 13,918 82.1 1,902 11.2 1945 18,893 15,286 80.9 2,332 12.4 1946 25,638 19,692 76.8 4,237 16.5 1947 35,622 26,306 73.9 8,452 23.7 1948 43,755 31.527 7291 11,961 27.3 1949 52,532 41,698 79.4 11,409 21.7 1950 62,249 48,282 77.6 13,584 21.8 1951 87,512 69,224 79.1 21,032 24.0 1952 100,203 81,218 81.1 22,353 22.3 1953 111,923 92,221 82.4 17,965 16.1 1954 126,675 101,190 80.4 23.864 19.0 1955 145,777 116,675 80.0 28,978 19.9 Note, Net investments abroad were omitted; therefore details do not add to GNP. Source: Producto e Ingreso de la Republica Argentina, 1955. Table 5 INVESTCENTS IN DETAIL J (million pesos: current prices) 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 Machines and Motors: New 160 207 395 1,099 1,985 1,536 1,6'57 2,475 2,179 2,007 1,796 2,672 Repair 37 43 48 64 68 90 118 172 189 196 206 301 Vehicles: New 37 47 235 1,044 763 368 333 1,173 907 857 633 1,483 Repair 283 315 376 496 639 893 1,082 1,602 2,296 2,638 2,648 3,181 Others (Tools, Fittings, Rail- road repairs, etc.) 261 361 605 1,188 1,459 1,t406 1,619 2,587 2,509 2,410 2,492 3,319 Sub-Total 778 973 1,659 3,891 4,914 4,293 4,809 8,009 8,o80 8,108 7,775 10,956 4~~~~~~~~~~~~~~~~~~ Construction 1,389 1,610 2P194 3,051 5,410 7,647 9,452 11,289 12.094 11,608 14,250 16,022 Total 2,167 2,583 3,853 6,942 10,324 11,940 14,261 19,298 20,174 19,716 22,025 26,978 1/ excluding inventories. Source: Ministry of Finance, Argentina - 34 - Table 6 MOSS l,ATICNAL PRCT1iJCT (million pesos: constant 1950 prices) Percentage Percentage Increase over Per Increase over Year GNIP Preceding Year Capita Preceding Year 1935 35,170 2,718 1936 36.899 t 4.9 2,806 t 3.2 1937 41,841 t 13.4 3,129 t.11.5 1938 39,408 - 5.8 2,896 - 7.5 1939 140,268 e 2.2 2,909 t 0.4 1940 41,292 t 2.5 2,938 . 1.0 1941 43,255 i 7.4 3,028 + 3.1 1942 44,177 + 2.1 3,043 t 0.5 1943 44.,497 *> 0.7 3,015 - 0.9 1944 49,532 t 11.3 3,302 * 9.5 1945 48,028 - 3.0 3,147 - 4.7 1946 54,106 + 12.7 3,486 + 10.8 1947 629654 * 15.8 3,969 . 13.9 1948 65,890 t 5.2 4,093 * 3.1 1949 62,757 - 4.8 3,799 _ 7.2 1950 62,249 - 0.8 3,670 - 3.4 1951 64,A06 t 2.9 3,676 . 0.2 1952 59,715 - 6.8 3,344 - 9.0 1953 62,971 * 5.5 3,1455 + 3.3 1954 65,914 t 4.7 3,551 + 2.8 1955 69,223 + 5.0 3,659 * 3.0 Total Percent 1935 - 1955 . . 96.8 .................. 34.6 Average Percent Per Year .. . 14.6 ................. + 1.6 Source: Producto e Ingreso de la Republica de Argentina, 1955. Table 7 PARTICIPATION OF LABOR AD CAPITAL IN NET NATIONAL INCOME (per cent) Year Wages Social Security Employers' Con- Total Share Net Income Net Trans- Total Share Total Contributions tribution to of Labor of Capital fers Abroad of Capital of Worker Social Security (a) (b) (c) b 4 c = d a - d 1935 44.7 0.9 1,0 46.6 47.1 6.3 53.4 100.0 1936 44.8 1.0 1.0 46.8 47.5 5.7 53.2 100.0 1937 42.5 0.9 0.9 44.3 50.7 5.0 55.7 100.0 1938 44.6 0,9 1.0 46c5 48.8 4.7 53.5 100.0 1939 44.3 0.9 1.0 46.2 48.5' 5.3 53.8 100.0 1940 43.9 1.0 1.0 45,9 50.0 4.1 54.1 100.0 1941 43c3 0.9 0.9 45.1 50.7 4.2 54.9 100.0 1942 41.3 0.8 0.8 42.9 52.7 4.4 57.1 100.0 1943 42.1 0.9 0.9 43.9 52.8 3,3 56.1 100.0 1944 42.8 0.9 0.9 44.6 51.7 3.7 55.4 100.0 1945 42.3 1.7 1.7 45.7 51.7 2.6 54.3 100.0 1946 41.5 1.5 1,7 44.7 53.0 2.3 55.3 100.0 1947 40.4 2.1 2.5 45.0 54.0 1.0 55.0 100.0 1948 44.0 2.6 2.9 49.5 50.4 0.1 50.5 100.0 1949 49.2 2.9 3.3 55.4 44.5 0.1 44.6 100.0 1950 49.3 2.8 3.9 56.0 43.9 0.1 44.0 100.0 1951 46.6 2.4 3.1 52.1 47.5 0.4 47.9 100.0 1952 49.6 2.9 3.9 56.4 43.5 0.1 43.6 100.0 1953 47.7 3.1 4.5 55.3 44.6 0.1 44.7 100.0 1954 49.2 3.4 4e8 57.4 42.5 0.1 42.6 100.0 Sourze: Ministry of Finance, Argentina Table 8 FISCAL DATA (million pesos) 1947 1948 1949 1950 1951 1952 1953 1954 1955 a. Current Revenues 3,522.3 5;48S.2 5,159.1 6,095.7 9,464.8 11,492.3 11,780.5 12,782.3 12,550.7 b. Current and Transfer Expenditures1 2,994.9 4 020.0 5,100.0 6,148.5 9,334.6 11,547.5 12,442.3 14,033.4 19,614.7 c. Current Surplus or Deficit 527.4 1,468.2 59.1 - 62.8 130.2 - 55.2 - 661.8 -1,251.1 -7,064.0 d. Capital Expenditures 1,223.3 3,096.4 3,166,2 3,338.8 4,799.4 4,502.6 6,197.4 6,203.8 5,032.8 e. Deficit 695.9 1,628.2 3,107.1 3,401.6 4,669.2 4,557.8 6,859.2 7,454.9 12,096.8 f. Amortization 78,3 109.2 104.7 127.2 180.4 209.9 263.9 292.6 403.5 g. Deficit of Transport Agencies -- 42.6 190.3 207.0 791.3 1,304.8 1,376.9 1,703.8 -- h. Total e, f, g 774.2 1,780.0 3,402.1 3,735.8 5,640.9 6,072.5 8,500.0 9,451.3 12,500.3 i. Sale of Bonds (net) 1,09o0i0 1,609.2 2,343.2 3,003.8 3,456,2 4,722.4 7,675.7 7,599.0 7,563.0 1/ excluding amortization. 2/ Since 1955 the deficit of the transport agencies is comprised in the budget. Source: Ministry of Finance, Argentina: Mensajes del Poder Ejecutivo. - 37 - Table 9 PARTICIPATICq IN TAX REVED1UES OF THE IHATIOIPX. A'.D PP.OV7T-CIAL GOVfR3ERI*1TS (million pesos) 1947 1948 1949 1950 1951 1952 1953 1954 195 Total 2,198 2,574 2,949 3,869 69044 7,032 6,901 7,965 8,928 National Gov- ernment 19732 22000 2,138 2,712 4,218 45792 4,518 5,305 5,546 Provinces and Federal Cap- ital 466 574 811 1,157 1,826 2,240 2,383 2,660 3,382 Source: Mensajes del Poder Ejecutivo, 1947-55 and Eugenio Blanco, former Minister of Finance of Argentina: La Politica Presupuestaria, 1956, pp. 30-31. - 38 - Table 10 TOTAL PUBLIC DEBT OUTSTAi,DING: 19h6-55 (million pesos) EXTERNAL B ONDED DEBT INTERNAL DEBT CONSOLIDATED FLOATING Bonds Credito with Total .Argen- Social Total Internal tino In- Secur- Consol- Public End of terno 2 ity Other idated Debt 1946 1o91: 5o580-3 1,813.5 447.5 7,841.3 2,879.9 10,721.2 1947 97.h 5,5ol.8 2,925.0 516.2 8,9h3.0 2,)498.2 11,441.2 1948 63.7 5,463.8 4,688.5 433.6 10,585.9 2,290.4 12,896.3 1949 51.5 5,530.6 6,982.8 427.9 12,941.3 2,201.7 15,143.O 1950 38.5 5,459.9 10,075.4 422.8 15,958.1 2,099.4 18,057.5 1951 25.8 5,369.1 13,640.2 417.8 19.,427.0 2,001.2 21,428.2 1952 12.1 5,273.3 18,476.6 413.2 24S163.1 1,929.1 26,092.2 1953 - 7S237.5 2h,203.7 409.7 31,850.9 1,882.9 33,733.8 1954 8,726.8 30,316.5 406.6 39,449.9 1,856.7 41,306.6 1955 - 10,207.7 36,422.1 383.1 477,012.9 4,455.8 51,468.7 1/ Mostly in the portfolio of the Central Bank. / Total Debt of National Government ................................... 51,468.7 Additional Debt (as of December 31, 1955): a) Provinces and the Municipality of Buenos Aires ................. 8,367.5 b) Debt of IAPI with the banking system ........................... 20,482.2 Grand Total ................................................. ......... 80,318.4 Source: Ministry of Finance. Eugenio Blanco, former Minister of Finance: Realidad Economica Argentina, 1956. - 39 - Table 11 GNP AND PUBLIC DEBT (mililion pesos) Year GNP Public Debt / 1946 25,638 10,830 1947 35,622 11,538 1948 43,755 12,940 1949 52,532 15,194 1950 62,249 18,096 1951 87,512 21,454 1952 100,203 26,104 1953 111,923 33,733 1954 126,675 41,306 1955 145,777 51,468 Indices, Base 1946 100 1946 100.0 100.0 1947 138.9 106.5 1948 170.7 119.5 1949 204.9 14o.3 1950 242.8 167.1 1951 341.3 198.1 1952 390.8 241.0 1953 436.6 31a.5 1954 494.1 381.4 1955 568.6 475.2 / Interral debt nlus e*ernal bonded debt: cf. Table 11. Source: Tables on GNP and Public Debt, Argentina. Table la OBIGINS 0' MONEY SUPPLY (million pesos) 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 I. Internal factors 1. Private Credit (Commercial and Mortgege) 5,966.9 8,580.3 11,959.0 14,7n7.1 19,364.2 26,293.5 33,115.6 38,148.4 46,166.8 54,876.4 67,572.4 2. Loans to Goverzments a) Fiscal Necessities 4,924.9 5,706.6 6,510.2 7,574.9 8,522.6 9,088.9 9,469.8 10,559.6 11.704.4 13,472.1 13,648.1 b) Subsidies 281.0 -- 437.6 1,157.8 406.2 560.3 1,471.2 4,608.2 8,267.0 12,464.2 14,727.4 c) Other (including part of IAPI) 678.5 2.881.9 s 014, 6.11i.5 6.391, 6.697.4 J.5.4 7.642. 8 .220. 8.231 2.6s2. Total Government 5,884.4 8,588.5 11,982.2 14,848.2 15,320.4 16,346.6 17,495.9 22,810.2 28,192.1 34,167.7 36,027.7 II. External lactors Z/ 6,093.8 4,908.6 4,284.3 3,837.2 5,189.0 4,646.4 2,614.4 4,871.1 5,153.0 6,704.9 12,630.1 III. Total (I and II) 17,945.1 22,077.4 28,225.5 33,402.5 39,873.6 47,286.5 53,225.9 65,829.7 79,511.9 95,749.0 116,230.2 IV. Minus 1. Items of Deferred Liquidity (Savings Accounts, etc.) 8,136.8 9,160.2 11,888.1 13,298.0 15,126.0 16,941.7 19,006.4 22,840.2 27,639.6 33,277.4 40,194.8 2. Government Deposits i47, 2Q6 8 2.S70.8 2,530.1 2.7Q01. 3.6o2.7 3Q790Q. S.269. 802.9 10.847.2 1i.811, Total 9,484.1 11,836.0 14,458.9 15,828.3 17,827.0 20,544.4 22,797.2 28,110.1 35,642.5 44,124.6 56,008.7 V. money Supply 8,461.0 10,241.4 13,766.6 17,574.2 22,046.6 26,742.1 30,428.7 37,719.6 43,869.u 51,624.4 60,221.5 }/ including bonds sold to banks / change in peso value of foreign exchange held by banks Source: Central Bank of Argentina - 41 - Table 13 iEONETARY EXPANs!;'.TCH (million pesos) Cost of Living Year Honey Supply GNP Index 1/ (at current prices) (1943 = 100) 1946 8,461.0 25,638 140.5 1947 10,241.4 35,622 159.5 1948 13,766.6 43,755 180.9 1949 17,574.2 52,532 236.5 1950 22,ol06.6 62,249 296.9 1951 26,7142.1 87,512 405.8 1952 30,428.7 100,203 562.9 1953 37,719.6 111,923 585.3 1954 43,869.4 126,675 607.5 1955 51,624.4 145,777 682.3 1956 60,221.5 n.a. 773.8 Indices: 1946 = 100 1946 100 100 100.0 1947 121 139 113.5 1948 163 171 128.4 1949 208 205 168.3 1950 261 243 211.3 1951 316 341 288.8 1952 360 391 400.6 1953 446 437 416.6 1954 518 494 432.4 1955 610 569 485.6 1956 712 n.a. 550.7 1/ including rent Sources: Central Bank of Argentina Producto e Ingreso, 1955 and Indices del Costo de Vida, larch 1957 - 42 - Table 14 LOANS AND DEPOSITS (million pesos) Banking System Central Bank Year Loans Deposits Portfolio iliay 31 - 1946 5,956.8 9,481.8 5,728.9 End of - 1946 7,369.1 11,229.3 9,539.6 " "1 - 1947 12,561.4 12,802.8 15,479.7 it "I - 1948 19,435.5 16,728.4 21,641.1 It "- 1949 24,609.7 19,820.7 28,060.7 it - 1950 29,579.0 22,501.9 33,030.0 it "- 1951 36,954.o 25,584.3 42,313.1 " " - 1952 44l,599.7 27,708.5 49,072.7 , - 1953 53,069.3 35,187.0 57,844.6 " at - 1954 65,370.8 42,039.9 69,533.0 ,, "l - 1955 78,213.8 48,858.8 85,167.5 - 1956 92,603.6 63,744.4 104,844.6 Source: Central Bank of Argentina - 43 - Table 15 FREE MARKLT RATES: U <. DOTLAR 1955 1956 1957 January- 27.53 39.53 37.98 February 28.11 42.61 37.32 March 28.15 40.77 39.38 April 29.02 39.49 n.a. May 31.57 37-24 June 32.85 33.81 July 30.76 31.93 August 31.19 30.65 September 30.13 31.49 October 27.84 31.73 November 2/ 32.61 34.18 December 35.89 35.86 1/ Until October 1955 cross of Argentine Peso. and U.S. Dollar on the Montevideo market. 2/ The Peso was devalued at the end of October 1955, the official rate being changed from 5 and 7.50 to 18 to the dollar. Source: Central Bank. Table 16 BA1AI.CE OF TRADE Ai'L 7ZHcS OF TRADE (million dolla-§s Exports Imports Terms of Trade Year FOB CIF Balance (195o0 = 100) 1951 1,169 1,477 - 308 103.4 1952 678 1,181 - 503 79.9 1953 1,099 795 * 304 91.4 1954 1,027 979 4 h8 85.0 1955 928 1,172 - 24L4 84.i 1956 9?. 1,128 - 18 77.7 Total - 87 Source: Ministry of Finance and Direccion Nacional de Estadistica, Argentina. Table 17 FCRUIG' TRALS (Indices: 1950 100) Terms of Volume of Volume of Year Trade Exports Imports 1935 67.7 139.6 102.5 1936 83.h 127.8 105.7 1937 93.6 146.9 143.1 1938 76.5 104.3 135.9 1939 73.5 127.5 111.8 1940 68.8 104.4 97.1 1941 71.0 105.8 74.7 1942 64.5 97.3 62.3 1943 66.4 107.0 42.6 1944 61.7 106.3 43.7 1945 86.5 106.1 44.4 1946 96.o 123.0 81.5 1947 101.3 115.5 162.5 1948 117.6 97.3 165.4 1949 101.0 72.5 116.8 1950 100.0 100.0 100.0 1951 103.4 78.6 114.2 1952 79.9 51.0 82.3 1953 91.4 88.9 70.5 1954 85.0 94.9 88.6 1955 84.1 85.6 99.8 Source: Economic Bulletin for Latin America, Vol. I, No. 1, p. 30 and Prodacto e Ingreso de la Republica Argentina, 1955, pp. 153-5. Table 18 REGIONAL TRADE BALANCES FOR SELECTED YEARS (million dollars) Western Hemisphere Euro-e 1/ Asi 1/ Overall Year Exports Imports Balance Exports Imports Balance Exports Imports Balance of Trade 1938 92.7 147.9 - 55.2 355.9 313.3 - 42.6 5.5 26.6 - 21.1 - 29.8 1948 338.1 935.0 - 596.9 1,198.8 619.2 4- 579.6 70.4 17.7 4- 52.7 1 36.3 1955 324.5 461.1 - 136.6 543.0 502.8 4- 40.2 23.9 164.4 - 140.5 - 244.0 1956 238.8 525.9 - 287.1 606.6 432.2 - 174.4 41.7 134.4 - 92.7 - 184.0 1/ excluding Soviet Russia Source: Direction of International Trade and Direccion Nacional de Estadistica Table 19 MAIN EXPORTS (million dollars) 'Live _etockgriculture __ Year Meat Fides Wool Dairy and Total Per Cereals and Vegetable Fruits and Total Per Other Total other Cent Flaxseed Oils other Cent Exports Exports 1951 175 110 176 67 528 45.2 322 190 64 576 49.3 65 1,169 1952 132 82 119 38 371 54.7 122 80 49 251 37.0 56 678 1953 150 73 181 57 461 41.9 405 95 76 576 52.4 62 1,099 1954 165 62 121 59 4G7 39.6 445 84 47 576 56.1 44 1,027- 1955 215 55 124 58 452 48.7 343 45 33 421 45.4 55 928 1956 242 63 119 62 486 53.3 291 56 27 374 41.0 52 544 Source: Direccion General de Estadistica, Argentina Table 20 MAIN IMPORTS (million dollars) Iron and other Year Fuel and Metals and Machinery Textiles Chemicals Timber Other Total Petroleum Manufactures Imports 1951 220 316 218 137 115 128 343 1,477 1952 248 203 175 106 58 95 296 1,181 1953 194 103 185 68 50 53 142 795 1954 181 203 172 63 89 90 181 979 1955 203 264 215 48 91 139 212 1,172 1956 251 225 261 26 78 82 200 1,126 Source: Direccion General de Estadistica, Argentina Table 21 MEAT: PRODUJCTION, CONS'AvP TT hPCTS (Beef, Lamb, Pori) (yearly or yearly averages) Total Domestic Individual Production Consumption Consumption Exports Year (1000 tons) (1000 tons) (kg per cap.) (1000 tons) 1915-1925 1,255 616 82.1 639 1926-1935 1,509 900 89.3 609 1936-1945 1,675 1,052 93.0 623 1946-1950 1,983 1.,451 103.2 532 1951 1,879 1,623 104.6 256 1952 1,788 1,513 96.4 275 1953 1,766 1,535 96.7 231 1954 1,815 1,583 97.6 232 1955 2,147 1,732 103.3 415 1956 2,515 1,900 110.6 615 Source: National Meat Board, Argentina. Table 22 PRODUCTION_ ND EXPORTS OF PRIN'CIPAL AGRICULTURAL PRODUCTS (yearly or yearly averages in thousands of metric tons) Wheat Flax Corn Oats Barley Rye Year Produc- Exports Produc- Exports Produc- Exports Produc- Exports Produc- Exports Produc- Exports tion tion tion tion tion tion 1900-04 2,538 1,493 526 475 2,858 1,518 37 17 15 3 / 1/ 1905-09 4,302 2,789 869 780 3,661 2,036 254 215 26 9 1 1910-14 4,003 2,118 790 679 4,869 3,194 788 604 36 18 14 9 1915-19 4,558 2,405 684 602 4,776 2, 250 753 509 52 40 10 2 1920-24 5,485 3,724 1,278 1,150 5,680 3,505 709 459 139 76 55 42 1925-29 69,770 4,233 1,839 1,618 7,076 5,521 922 456 321 201 148 115 1930-34 6,214 3,603 1,738 1,569 7,744 6,397 956 550 504 323 194 117 1935-39 6,634 3,209 1,702 1,503 7,892 6,072 748 339 503 278 254 133 kn 1940-44 6,279 2,498 1,464 531 8,064 678 659 92 571 147 292 43 o 1945-49 5,061 2,010 824 34 4,201 1,747 827 154 799 478 362 180 1950-54 5,325 2,151 509 73 2,709 1,002 794 288 712 315 586 333 1946 3,907 1,387 964 38 3,574 2,200 797 333 836 656 293 156 1947 5,615 2,284 1,034 - 5,815 2,366 685 68 1,171 612 552 247 1948 6,500 2,174 901 1/ 5,200 2,534 824 89 804 661 471 151 1949 5,200 1,847 433 - 3,450 1,o63 733 196 613 196 305 199 1950 5,144 2,767 676 139 836 794 540 390 395 92 277 171 1951 5,796 2,455 559 181 2,670 298 733 112 763 155 631 203 1952 2, 100 62 313 26 2,040 652 438 39 336 105 81 117 1953 7,386 2,527 584 10 3,550 1,083 1,269 219 1,175 557 1,335 343 1954 6,200 2,943 410 11 4,450 2,185 991 680 894 662 607 830 1955 7,690 3,617 405 - 2,546 362 890 92 1,112 519 844 328 1956 5,250 -- 231 _- 3,870 - 723 __ 951 - 654 - 1/ less than 500 metric tons Sources: 1) Revista de la Bolsa de Cereales, Numero Estadistico 1956 2) Argentina: Estadisticas Agricolas Basicas (working paper ECLA) Table 23 FOREIGN DIRECT IRE3TWT (million dollars and per cent of total) 1909 1953 US$ ~~~US$ Government Bonds 667 30.7 8 0.5 Railroads 776 35.6 _ - Public Services 166 7.6 391 26.3 Industries 28 1.3 470 31.7 Trade 193 8.9 217 14.6 Banks - - 128 8.8 Others, (minl. Insurance) 3h7 15.9 273 18.1 Total 2,177 100.0 1,487 100.0 Source: M. Kybal: Inversiones Extranjeras en la Argentina. (Working paper for ECIA.) Table 2b COST OF REPATRIATION OF FOREIW3 DEBT AKD THE NleATIONALIZATIGN OF FOi?IJ. .,i S , 1940-1948 (million U.S. dollar equivalent) 1946 1947 1948 Total Repatriation of Foreign Debt Dollars 121.5 49.1 - 170.6 Pounds Sterling - 48.2 - 48.2 Other Currencies 10.1 2.1 - 12.2 Sub-Total 131.6 99.4 - 231.0 Nationali,ation of Firms (ncl. Railroads) Dollars 98.6 - - 98.6 Pounds Sterling - - 613.1 613.1 Other Currencies - 12.8 3.5 16.3 Sub-Total 98.6 12.8 616.6 728.0 Total 230.2 112.2 616.6 959.0 Source: M. Kybal: Inversiones Extranjeras en la Argentina. (Working paper for ECIA.) Table 25 BAL,ANCE OF PAYHRI7TS, 1951-55 (million U.S. dollars) 1951 1952 1953 1954 1955 Credit Debit Credit Debit Credit Debit Credit Debit Credit Debit A. Goods and Services 1,406.7 1,623.3 861.0 1,267.4 1,239.3 891.1 1,162.2 1,078.9 1,089o.6 1,3.3 1. Merchandise / 1)169.l 1,475.0 677.6 llbiL.0 1,099.4 795.1 1,029.5 979.0 925.1 1,172.5 2. Nonmonetary gold -- -- -- -- -- -- -- -- -- 3. Foreign travel -_ __ __ __ __ __ __ __ __ __ 4. Transportation 73.3 41.8 98.7 37.5 76.9 40.2 86.2 34.9 86.1 41.4 5. Insurance 2.1 3.6 1.3 3.8 0.9 6.3 1.1 8.1 0.6 4.7 6. Investment income 6.5 39.5 4.3 14.2 2.9 14.0 3.3 18.1 2.9 24.1 7. Government, n.i.e. 4.0 28.0 3.1 25.3 3.5 30.0 4.6 27.5 5.6 25.2 8. .lliscellaneous 151.4 35.4 76.0 5.6 55.7 5.5 37.5 11.3 66.3 36.4 '- Net goods and services -- 216.6 -- 406.4 348.2 - 83.3 _ _ _ _ 214.7 B. Donations 0.8 13.5 0.4 19.9 0,5 12.1 0.4 3.0 0.2 2.9 9. Pr=LVte 07 13.5 0.4 19.9 0.7 12.1 0.4 3.0 0.2 2.9 .10. Official -- -- -- -- -- -- -- Net donations -- 12.7 -- 19.5 -- 11.6 -- 2.6 -- 2.7 Net total (1 through 9) -- 229.3 -- 425.9 336.6 -- 80.7 - -- 217.4 Net total (1 through 10) -- 229.3 -- 425.9 336.6 -- 80.7 -- -- 217.4 C. Capital and Monetary Gold 359.4 -- 184.9 -- -- 345.1 14.9 206.6 -- Private, excluding banks 14.6 -_ 9.5 __ 10.8 -- 14.9 -- 9.3 -- 11. Long-term liabilities 5.3 -- 7.0 -- 6.2 -- 4.5 -- 3.8 __ Direct inve-stment 2.4 -- 4.0 -- 4.2 __ 1.4 -- 0.5 -- Securities 1.7 -- 3.0 -- 1.6 -- 3.6 __ 2.0 -- Other 1.2 -- -- -- 0.4 -- -- 0.5 1.3 -- 13. Long-term as&ets 9.3 -- 2.5 -- 4.6 -- 10.4 -- 5.5 -- 12, 14. Short-term capital -- Table 25 (continued) BALANCE OF Pif,X.aJTS, 1.951-55 - MITh 13E~ d6ifaFs~7- 1951 1952 93 1954 1955 Credit Debit Credit Debit Credit Debit Credit Debit Credit Debit Official and Banking Inctitutions 344. 8 - 175.4 -- -- 355*9 -- -- 197.3 -- 15. Long-term liabilities 76.3 __ __ 8.6 -- 2.5 -- 9.7 -- 13.7 Official loans received 92.0 -- 4.5 - Official repayments -- 7,4 -- 3.4 -- 2.9 __ 9.6 __ 9.6 Other -- 8.3 -- 9.7 0.4 -- -- 0.1 __ 4.1 16. Short-term liabilities 97.1 __ 84.3 __ __ 175.0 25.3 -- 89.1 17. Long-term assets -- -- -- -- -- -- -- -- -- 18. Short-term assets 227.9 -- 119.6 93.5 -- 15.6 121.9 _ X Payments agreements 145.8 -- 50.4 93.0 1 4.6 -- 104.2 -- Other 82.1 __ 69.2 -- __ 0.5 _ 30.2 17.7 19. Mlonetary gold -- 56. -- 19.9 __ 84.9 __ __ __ Net errors and omissions -- 130.1 2h1.0 __ 865 -- _ 95.6 10.8 j Exports mainly f.o.b.; imports mainly c.i.f. Source: I.M.F. Balance of Payme-its Yearbook, Volume 7. Table 26 FUEL OUTPUT AN-D IMIPORTS (thiousand toiis) Domestic Output Imports Total Con- Year Petroleum Natural Gas Coal Charcoal Petroleum Coal sumption of (Crude Oil Petroleum Equivalent) 1948 3,132 n.a. n.a. n.a. 4,759 n.a. 7,891 1949 3,118 518 11 2,973 4,313 1,006 7,431 1950 3,157 580 16 2,847 5,253 1,085 8,410 1951 3,255 638 24 2,763 5,720 2,225 8,975 1952 3,280 690 67 2,953 6,277 1,784 9,567 1953 3,454 716 49 2,854 6,145 1,129 9,599 1954 4,241 758 64 2,860 6,154 1,551 10,395 1955 4,315 n.a. n.a. n.a. 7,098 1,274 11,413 1956 4,192 n.a. n.a. n.a. 8,234 1,814 12,426 Source: Direc-: on General de Estadistica and Private Industry, Argentina - 56 - Table 27 ESTIMATED PRODUCTION AN-D CONSUMPTION OF PETROLEtTM (thousand tons) Production Consumption Private P ble Potential Year Y.P.F. Companies Total Total Deficit Total Deficit 1958 6,goo 710 7,610 15,400 7,790 16,960 9,350 1959 8,950 680 9,580 16,300 6,720 19,600 10,020 1960 8,900 630 9,530 17,300 7,770 22,400 12,870 1961 10,000 610 10,610 18,300 7,690 23,700 13,090 1962 114100 600 11,700 19,400 7,700 25,100 13,400 1/ with de facto restrictione _/ without any restrictions Source: Data obtained from private industry - 57 - Table 28 PETROLEUM: ESTIMATED FUTURE CCNSU1FIPTIG> AID 2BTF.iY.IES' CAPACITY (thousarid tons Total Refineries Year Consumption Capacity 1957 13,700 12,406 1958 15,000 n.a. 1959 16,100 n.a. 1960 17,300 16,000 1961 18,300 16,000 1962 19,800 16,000 1963 21,100 16,000 1964 22,500 16,000 1965 2h,000 16,000 1/ According to present plans, domestic production would reach a level of 10 to 12 million tons by 1960. Source: Data obtained from Private Industry in Argentina. - 58 - Table 29 ELECTRIC POIJER (by source, in million kwh) Year Thermal Hydro Captive Total 1938 2,227 101 440 2,763 1946 3OS45 165 635 3,845 l954 5,202 340 900 6,,442 Source: Ministry of Industry, Argentina. Table 30 ITDUSTRIAL PRODUCTION (indices: 19i93 _ 100) M a n u f a c t u r i n g Durable Non-Durable Gas and General Year Total Goods Goods Electricity Mining Average 1944 113.4 120.9 110.2 106.6 100.1 112.2 1945 114.2 120.5 111.5 103.5 92.1 112.2 1946 128.8 141.7 123.3 113.7 80.8 125.3 1947 148.4 187.1 131.7 124.6 88.3 143.5 1948 150.3 179.6 137.5 135.8 88.2 146.2 1949 144.4 162.3 136.6 140.6 85.3 141.4 1950 148.4 165.9 140.7 151.5 86.8 146.0 1951 152.1 177.2 141.0 159.6 91.5 150.1 1952 140.9 165.9 129.9 158.3 95.9 140.6 1953 138.0 160.0 128.2 166.6 103.1 139.2 1954 149.9 176.7 138.1 180.1 108.5 150.9 1955 163.5 202.7 146.3 192.4 113.9 164.0 1956 161.3 182.8 151.7 205.5 115.4 163.5 Source: Direccion General de Estadistica, Argentina. - 60 - Table 31 ThDUSTRIAL EIVPLOYMELuT 'lND VJAOQS Cost of Total Average Liring Wages Paid Employment Wlage (incl. rent) Real Wages Year (a) (b) (c = a:b) (d) (e = c:d) 1943 100l 100.0 100 .0 100.0 100.0 1944 119.3 108.9 109.6 99.7 109.9 1945 137.8 115.1 119.7 119.4 100.3 1946 1304 123.7 145.8 140.5 103.8 1947 269.1 130.3 206.5 159.5 129.5 1948 371.2 113.7 281.9 180.4 156.3 1949 500.1 l1A.)l 383,5 236.5 162.2 1950 595.5 128.2 464.5 296.9 156.4 1951 758.5 128.9 588,4 405.8 145.o 1952 900.2 12475 723,,l 562.9 128.5 1953 929.2 117.4 791.5 585.3 135.2 1954 i.094.4 118.5 923.5 607.5 152.0 1955 1.276,1 123.1 1.036,6 682.3 151.9 Source: Direccion General de Estadistica, Argentina. Table 32 RAILROAD OPERATIOYS FREIGHT PASSD GERS Average Ra.tio of Average Ratio of' Tons Distance Cost to Number of Distance Cost to Year Transported Transported Revenue Persons Transported Revenue (in thousands) (kIM) (in thousands) (km) 1946 35,408 431 o.83 282,094 27.3 1.41 1947 34,251 426 1.10 313,763 28.2 1.76 1948 34,248 440 1.38 350,666 29.4 1.96 1949 31,690 483 1.1S 470,174 29.0 2.19 1950 32,849 491 1.17 490,987 26.9 1.96 1951 32,966 498 1.33 524,837 26.6 2.03 1952 29,677 514 1.02 531,264 25.3 2.08 1953 30,540 492 1.02 541,053 25.2 2.13 1954 31,042 490 1004 572,197 25.8 2.25 1955 29,167 527 1.(05 578,636 25.4 2.11 1956 28,464 / 510 1.31 593,744 25.4 2.56 2 The sharp decline is due to the low capacity of the railroad; several million tons of goods are either directed toward truck trr.nsport or waiting at freight sidings. Source: Ministry of Transport, Argentina.