,. '''-V'''''''i'-''''''~'....--"1-"I·~''''t-'-'IlIIlII.,_.... . . - - _ -.....- - - - - - - " ; , .· __-.- , I L-\ <6 ,\-------~~'.~~' .. INTERNATIONAL BANK FOR · RECONSTRUCTION AND DEVELOPMENT . . ·· CHILE LOAN APPLICATION ... , ~" REPORT · by the WORKING ,. PARTY RETURN TO ARCHIVES IN HB1.001 ISN # £, 'I';;;; t/ "2 ACC# r< 1'1 ~~~' - c;'~3 BOX # g,-::)':;:~ -L r!... NUS LOCATION RETURN TO G ~ ! Fa! E'S n!}T il.1\ll.hi';L II. · '. 'I.' .,~ \"i., . __ ___ ~_"_)!!'_!l~!i;; ,ij'_U'_'LM_'_'_ ____ ... .... ...''____ _ _ ,_#""""''''._~...,_M'''__ ~ .. ... _ lIU_Iit'_'· _ _ _ U _;0___ c CHILE LOAN APPLICATION - andtopage numbers see each APPENDIX) (tor detailed indexes Index APPENDIXES APPEUDIX I A. The Chilean Loan Application B. T~')£ Applicants C. Eligibility of the Loan under the Articles of Aereement of the Bank D. Tables APPENDIX II A. Analysis of the Projects (1) Eleotric Power (2·) Forest Industries (3) Urban and Suburban Transportation (4) Port Mechanization . (5) Railway Electrification B. Tables C. Maps APPENDIX III A. Description of Chile's Political and Economic Structure (1) Geography (2) Government Organization and Broad Political Trends (3) Eeor-amio Structure (4) National &~~~cts (S) Intornal and E::ternal Public Debt (6) E.,t""nW. Debt Reeor':: (7) Currency and Banking (e) Trends in Prices, Wages and Production (9) Exchan"e Rates (10) Gvv~rru;ent Control of ~?ortsJ Exports and Foreign Exchange (11) Foreicn Trade (12) Balance of Payments B. Tables APPENDIX IV A. Balance of Payments; Chile's Abilitr to Service the Loan (1) Gold and Foreign Exchange Holdincs of Chile, 1936 to 1945 and Projection throueh 1951. (c) Summary of Bank' s Conclusions (2) Analysis of the Balance of Trade (3) Invisible Trade (h) Movements and Service of Canital c (5) Chile's Commercial Agreements (6) Comment on 1946 and 1947 Balance of Payments B. Tables tAMiLI 1& $lHt Uil !!idit c ANNEXES A. Letter of Authorization dated October 7, 1946, signed by 'Air. Luis Davila. B. Letter of Application dated September )0, 1946, signed by Mr. Roberto Vergara and concurred in by Mr. Hamiro Pinoehet, C. Lett~r from Frederick Snare Corp., dated January 22, 1947, on Forest Industries Projects of Fomento. D. LGtttr from Frederick Snare Corp., dated January 29, 1941, on Hydroelectric Projects of Fomento. E. Letter from Chilean Ambassador, undated, to U, S. Department of State, granting U. S. Export~Import Bank priority on certain Chilean revenues, c - I o ~.~-----------r-'-'------------------------------------------~~------~ APPBDIl I gun,., 'IQtI .6lAIC4fIOI CHILEAJ LQA.I .AlP.tXCA!IOI Anoun' and Form - 1 1 (a) f7peeof7orelgn Ixchange Required 1 AUthorized Negotiators 1 \ Purpose 2 Terms 2 DoOUT.1ents Supplied by Jorrcwers 2 m.tlOAJnS 4 · Oorpctraelon d.e r.~Jlento d.e 1e. hoduccion de Obile (foaento) . 4 (8.) Hlsto17 andl)Ovel_plent of Tomento 4 ('b) The Long ~ Progratl of Focento 10 \ .. ' '( Ohllean ~tateRailw~8 1~' (e.) Histo17 and: Development 10 , (b) The Long Ba:nge Pro~ of' the Ohi1ean 11 , Stat.e Ra.l1wqs 12 15 ... 3S APPENDIX I At THE CHILEAN I&Al! e:RLtQATION (1) ,ArlPugt and Fom The Ohilea~ Governoent, in a letter dated 7 October 1946 to the President of the International Bank froo Mr. Luis Davila, Alternate Governor of the Bank and ~ssistant General Manager of the Central J3apk of Chile. has authorized Oo~)oracion de Fooento de Ia Produccion de Chile (hereafter called EOrJant) and the Chilean State Bailways to request a loan of US $40,000 1 000 froD the Bank. with the Governoentts guarantee. The request wasnade in a letter to the Bank dated 30 Septeober 1946, signed by Mr. Boberto Ver~arat of the New York Office of Fooento, and concur:red in by Mr.· Ran1ro Pinochet for the Chilean State B.ailw~s. (8,) trqes of Foreisn E;ch~be Regu~r~d In his conversations with officials of the Bank neither Mr. Ver gara nor Mr. Pinochet have stated finally the types of currencies required in the loans applied fort They would prefer to oake a definite stateoent after the loans for the various prOjects are assured in prinCiple ana ~~r kets, priees and delivery dates can be studied. However, reference has been constan.tly nade to purchasES in the United States, the only exception being to the possibility of obtaining certain t~)es of electrical transportation equipnent in C~~da. (2) .Aythorized Negotiators Mr. Vergara, and in his absence, Iii+,. Fernando Salas, is designated, in the letter of Octobe:r 7. 1946, above Dentioned, ~to serve as adviser on the Comoittee which is to be forwed by 'he Board of Directors to study said request. II (3) ~ose us $22,000,000 of the US $40,000,000 are to be used for the follow init projects Sl)Onsored by Fonento itself: (a) ElectrloPower Plants, as anended US $9,500,000 (b) Forest Industries 6,000,000 (0) Urban and suburban transportation 5,000,000 (d) Port Mechanization 1,500,000 US $22,000,000 The renaininG US $18,000.000 are for the electrification of a portion of the Chilean State Railways. (4) ;erps FODento requests that the Bank grant it a loan of US $22,000,000 and the Chilean State Eailways a loan of US $18,000,000 to be utilized dur ing 1947. 1948 and 1949, that interest be payable seni-annually fron the dates of drawings and that the loan be anortized in equal l'Ulnual p~Tllents beginning after June 1952. Mr. Vergara ha~ stated verbally that an an~rti- zation period of 15 years would be acoeptable. (5) poqunents Suj?p11ed by Borrowers Fonento subnitted the following dOCUIjents in support of its application for the loans reported on herein: (a) "Chile: Prograrl and Progress - Econonic Report" (b) tfTrans-yortation Facilities Plan fOr Chile" / (c) nForest Industries Plan for Ohile" (d) ftElectrification Plan for Chi).e lt 3· The Staff Loan Cogo1ttee: Mr. C. C~ Pineo, Cha.irman Mr. D~ Crena de Iongh Mr. C A. McLain .· Mr. L. B. Rist 4. J3. !l:HE APPLICAUTS · I (1) qornoracion de locanto de la Produccion de Chile (lonento) (a) HistoJi{ tWd Developtlent of Fonento locento was created by Chilean Law 6334 of 4~ril 29, 1939. This law, together with aoendnents oontained in provisions ot Laws 6364 and 6610, was restated in Law 6640, ot Januar,y 10, 1941, pertinent extracts of which are shown as TADLE 9. Fooento is a "legal personl't, charged "lith fostering the developoent of the nationts productive reSouroes. 4dr.1inistration and direction are lodged 1n a Counoil, presided over by the Minister of Finanoe~ The Council includes representatives of the exeoutive and legit:J-: lative branches of the Governoent, of the se~i-f1f3oal institutions concerned with natt.onal production, of :;:lrivate agricultural, industrial, mineral, and oomme~cial organizations, of the Institute of Engineers, and of the Confe~ erat~on of Workers. ~he Coullcil elects, from outside ito membership, an E:lI:ecutive Vice President, who Presides 1n the absence of the Minister of Finance, carries out administrative details, and acts as leg~ representative. Power I ~he principal powers of the Council are as follows: (1) To formulate a general plan for the promotion of national produe t10n desi@led to raise the stan~rd of living by developing national ra- SOUrces and decreasing oosts of production, to improve the condition of the balanoe of payments. to maintain a p:rcrper balance in the development of'mm...,. ing, agricultural. tndustrial, and commercial activities in the various ~~ g~ons of the country_ (2) In collaboration with fiscal, semi-fiscal, or private developmental · institutions, to make s~d1es of the best means of creatin~ new production or 8. the: lJrefetred stockholders. 'The ~es~ective shares of ?rivnte investors and of Fooento in pro jecrs already a~~roved or being aP1Jlied for to Exinbank and the International ]ank. according to figures supplied by Focento in its Eeonocic Report of Oct abel' 1946, is shown belaw~ (e~u1valent of OOO,OOO's of us $) IvtsmBt'agturing In.c\ustries; Pr!vate C~nitAl Fope~to Woad 7.. 0 2,6 Copper 3,4 l10 Oecent 2.8 , 2,4 Fish 1,0 0.8 Steel 8~0 7,0 Electric ~ower 12·7 :'Petroleun Transportation ~oBfces of?oreiGnEPnds ]y law 6640, of Jroluary 10, 1941, the President of the Republic was authorized for a l)eriod of five years to contract loans in torei 6n currencies up to a suo equivalent to 2,000,000,000 ?SSOS, or about US $64.500,000, The prooeeds were to be divided equally between Fopento and the Reconstruction and J,~id Oo~ora,.tiol1. which were both erected at the sane tine, However, the fUed caxi!:1Ul;l interest rate of 3% and an anortization per:iod of not less than 10 years have, accordinG to Fonento, pade it iopos sible to obtain loans undef this law. ~rticle 37 of Law 6640 created new t?Xes and increased certain exist1~ taxes :for the benefit of Fon~nto. Seven ex1:;paord.inary t!Ptes were establiehe~, '-ncludinG an incor.'le tax on the cop:)er coO')a.nies, ,aya.ble in 9. i I foreiGn By a later law. ~o. 7046. of Septenber 1941, shown in I TABLl!j 5. the forei5n ~ch~ge produced by the copper tax was preferentially I reseJved foir Fooento f'or the service of its foreign de'bt_ These ta."'{es are I)aid into the Treasury of' ChUe and placed in a deposit account subject to the order af FOQento_ The aoounts for the years 1941 to 1945 O.re shown in Law 6640 allocated these tax revenues to Fonento for a period of' only fi~e years fron the date each tax becane effective. By a clause of Law 7046, a pOrtion of' the revenue was allocated for fifteen years, In Se,teober 1943, Law llo_ 7552 allocated the renainder to Fonento until Decenber 1948, Fooento 1 s total incone fran taxea including both local and foreign cUrrencies, aveI'aGed the equivalent of' US $6,600,000 annually durin.,,; the period 1940 to 1944, as sihown in TP.:8LE 7'1 ¥;i9}ba.nJt, gr~g.!ts If Fooento COr].')oration had been forced to dela..v initiation of its projects until SUCh tioe as sufficient'funds were accunulated, several years would Probably have ellllJSed. However, it was able to initiate its pro gran alnost ~ooediately_ with the aid of ~1I'lbank funds. Before granting Credits to Fooento,Exinb~~ required the guarantee of the Chilean Go'Vernnent. l'hh r;u,arantee \"Ias a:l,lthorhed in Law 7046 of Septeober 22, 1941, sho\vu ~n ~~ 5 which also directed the segregation, for the servicinG of Fooento. s e:,;te;rnal debt, of the forei;;n e:ltchan<"C'e Produced by ~one of the taxes on cop)er created by Law 6640, The first ~oan froq Exinbank to Ch~le was granted in May 1941. and. a.t10unted to US $12,000,000, The interest rate. was 4% a;.'1d the re!'aynant period was 10 years, It "'ias ~-;:reed that Fm:lento \'iould Bubn!t to the Pred.,. deD,t of the Republic a plan for J)1.U"cllase of nachinary and equipnent solely in the U~ited States. ~inb~~k was to interest su~pliers to partici,ate in 10, the +edito Ate R9.il wr7f. have already obtained a loan of US $14,000,000 from the Eximbank: and addgir, al credits of' US $1,200,000 from foreign manufacturers, The Jlresent a~r11ca t.ion is to finance the elect4"i:UcaUon of the Santiago.-San Fernando aecHen representing the first stage in a program eventually to eleotrifY the Santiago- Concepcion line~ (0) ELIGIBILITY OF TEE LO..s.N Ul'WEII. THE .c\ll.TICLES OF Ag.RmlI(!jjNT OF mE :rw::K (1) The" I*n,": of ,the LaM i~ ,in Aac?rQ!!.nce, wi th ~h}e l?urnoses o~ the Bank ~rt~cle I af the Ar~io~es of Ar,ree~ent provides that, among others~ the :)ul1')oses of the :Bank are: "To assht in the reconstruction and developlJent of territoTi(;s of members by faol1~tating the investment of ca~ital for productive purposes. inc~uclin,::; the restoration of economies destroyed or 416 rupted by~, the reconversion of productive facilities to peace~ time needs and the encouragement of the development of productive facilities and resources in less develolJed countries." The Loan is inten4e4 to finanoe certain projects for the developnent of Ptoduot~ve facilities and resources in Ohile, These projects are part of a general plan of development and will assist Ohile in carrying out other phases of this p~an. Th~ Loan will be u,sed for the t'develol:lOent of produc tive facilities and resources ll in a ;tess developed country, U~)Qo9Pl*ance with Artiole, tIl, Section 4 of the .:\.rticles of ,Ag,reement of th~ :Bank Article Ill, Section 4 of the ~rt~cles of Agrccccnt sets forth a nWJber of conc\itions wntcn r.lust be cOl:Tl)lied with before the Bank nay oake a loan,!, (a,) .Article III. Section 4 (i) provides tnat, "when the nenber in whose territories the project ts located is not itself the borrower, the nember or the central bE:\.nk; or sooe oonparable aGency of the tlenber which is acceptable to the Bank, f'Ully guaran~ees the repa;y'tlent Of the l')rinoipal and the pa;y'cent Of interest and other ohargep on the loan." ';eha Loan will be r.'lade to Fooento and will be fully guar.aQteed as to principal, interest, and other charges by t:,eG'lV!'Orl"!.::i(lnt of Chile, (b) Artiole Iii, Section 4 (HJ provides tl1a.t the :Bank tlust ,be ~at1stied that in t~e preval~1ng oarke\ conditione the boffoYa~ ~oU1d be unabie othe~ wise to obtain the loan under conditions which in the op1n!on of the Bank ar~ reasonable to the borrower, Fomento has stated in its application for a loan dated Septcmr0r " 1946, that the application 18 being made to the :;Bank IIbecause no other sourc'f. are available for the financing Qf projecta ot this nature." Informal in quiries on the part ot the Bank and such other i!~o~mation as is available a!,)pear to confirm the accuracy of this representation. (c) ~rticle lII, Section 4 (iv) provides that in the opinion of the ~ank the rate of interest and other charges must be reasonable and the schedule for repayment of principal ~Bt be appropriate to the project, Recommendations with respect to interest and other charges, and the schedule for the repay ment ot principal will be ma4e in the Interim Report. (d) J\rticle lIl~ Section 4 (v) provides that in making or g'l.lAranteeing a loan. the Bank shall pay due regard to the prospect that the borrower will be in position to meet its obligations under the loan, and it further pr~ videa that the Bank shall act prudently in the interests both of the parti cUlal member in whoBe territories the project is located and ot the members as a whole, The conclUsion has been reached in Appendix IV, A (1) (e) that there are reasonable prospects that Chile will be in a position to meet its obligations under tho ~oan, (e) Article III, Section 4 (vii), of the Articles of Agreement of the Bank provides that loans lllade or guaranteed by the Bank shall, except in special oircumstanoes, be for the purpose of specific projects of reconstruc tion or development. 14, The proe~eds of the loan will be used by Fomento to finance certain specific projiects ef development. , . .A detailed description of these proj ects is included. in tni s repert in Apllendix II. (f) !t'he l"epol"t required by Article III, Section 4 (Ui) will be pre pared~ !t'he remaining conditions listed in Article III, Section 4 are not applicable to the Ohi1ean ~oan~ ~l FOMENTO OOIrPORATIOU COllDUSED MaW iSBl!lE!r, AOCORDfliIG 1'0 N!QTION ,AS OF DEOEMBER )1 t 1945 (equivalent of ooo.ooo,s of US dolla~s) AssETS a Available funds; Oash balance $0:1 :aank deposits ..l.& $2.1 Loans. Investments. Fixed and Current Asse~s Agriculture and livestock 7,9 Power and fuel 22,3 Mineral deve1opmen~ ,5,0 Industrial development 13,,5 Commeroe and transportation 7.6 Publ:Lo housing ~ 60;8 Other assets 0.6 $63·,5 LI.A:BIMITIES AND NET ''IOBTH ¥ . . · Corporation funds and reserves 40.3 Liabilities fors Agrioulture and livestock 0,4 Power and fuel (1) Mineral development 0,1 Industrial develcpment 0,6 Commerce and transportation 0.2 Pub1io housing 4.9 6.2 Foreign iiebt: E:r.1mbal1k 11,4 u.s. suppliers 0,4 Foreign banks 0.7 Others Other liabilities -0.4 12,9 Total liabilities ~ 2.4 Net receipts in present fiscal period 1 1 Total liabilities and net \,lorth $63:5 C I (1)' Less than 50.000 dolla.~s 16. ~ TAJ3LE 2 ~ FOME~TTO. COIID1lmSED ;t!AMNCE SHEETS. DEcm-mER J11 1240'2 AJ:ID JU.NE JO. 124J (equivalent of OOO,OOO's of US dollars) ASSETS: Dee. 31. 1945 June 10. JS:...:. Ay!ilable tunas; · . Cash balance $0:1 $0:2 Bank deposits 2.0 $2:1 ..Q.t1. $0.9 Fi31ed assets: Real estate 1,1L 0.2 Fur~ture & equipment (net) (1) (1) ko§ns; E~erimental mac~ner.r 0.2 1 ·.3 - 0.2 To credit institutions, direct and as intermediaries 1,,3 , 2,9 Direct loans 4.5 5.0 Public housing .!hJ 10.1 3A 11.8 In;restmep.ts: Stocks 24,9 5,2 :Bonds 21'2 3,3 Debentures 0,4 0~7 Treasury notes 0.1 0,2 Contributions to enterprises 2,,3 1,5 Electrical systems 0 ,3.6 Other investments 6p4 36.,3 .2.!i.. 15.0 Dutrent assets: Nercrondise and equipment 0.5 ,3.0 Various receivables 1,7 ,3,2 Loans, contributions and investments in proc.ess 4,9 1,5 Documents to cover (notes, pledges) 4.7 , 2.,3 Pending operations ..LS 1,3,1 1.2 11..2 Other assets: ~ "3.7 TOTAL ASSETS: $63." $42.8 ;;:;;p; . LIA:9ILITIES A1ID NET tiORTH COrPoration Funds; Realization Fund ,33,5 20,0 Fomento tund, La," 6640 1,,3 0,4 Public Housing Fund 4.8 4.0 Reserves S.l.1- $45.0 ~ $27.1 c (1) Less than 50,000 dollars 'i', · Internal Debt: I Banks $0.6 $0,2 Supt~ of ]aa~s (Fntcsa.) 2,0 'ITarious creditors ....L.J :IDxternal Debt ~ §ight~ Foreign banks Other 1,0 2.1 Long-tern;; Ex~mba.nk 11,4 U~S, su:ppliera 0,4 Other 0.1 8.1 ~ $10,2 S~ecial Fomento funds 0.,3 Otber liabilities 0.6 Net receipts in Present fi~cal period TOTAf LWI,LltDliS M!R }T.ET Wg&H t _______ , . f (1) L~ss than 50,000 dollars 18. TA;BLE 3 OUTS~~T1)ING FOME~O LOANS DEO, 1*' 1945 AND~ JO. 1943 (equivalent ot OOOIS ot US dollars) Dec. 31. 1245 June JO, 1943 To c~edit institutions direct and as intermediaries, 13%: Caja de Credito Agario $870.4 $2.347,1 Inst i tuto de Foment 0 Ind, & Min. de Tarapa,c~ 66.2 Instituto de Fomento Min~ & Ind. de !ntofagasta . 64~9 ll.5 .1 Institute of Industrial Credit 192,4 3.53,0 Ca,ja de Oredito !Unero 8J,6 1,277,.5 29.'22.937,6 D~raot loans, 4.2~: ~U.ning 1,22.5,7 Agricu1t'Ur e 1,,99.5,9 IndustriE)s 191.2 Co.mrneroe and transport~tion 673.2 power and fuel 422. 1 4,.51.5.1 Pqb1!o HousiM, 4~; . 4,292.,5 . . l'OTAL ~OJUTS $10,085,1 $11,772.8 c TABLE 4 STOCKS ommn ,:BY :FON3NTO, AT'DEOEUBER ;1. 1945 (equivalent of OOO's of US dollars) Empresa ltacional de ElectriQl4ad S.A. (EltDESA) $ 15,407~4 Oia Electro Siderurgiea a Ind. de Valdivia 1,584.0 Fa~oquimica del PaclflQo.S,A. 701,6 Indus tria Naaional de l'l"euma.tiaos S.A. (INSA) 660,0 Manufacturas de Oobre B.A. (MADEOO) 554,4 Laboratorl0 Ohile S.A. 502,4 Empresa. lII'aeional de Transportes Oolectivos S.A. (E~!TCSA) 495,,0 Oorporaalon de Radio de 'Ohile S.A. 440,,0 Mar~tima de Ohile S.A·. 372,9 Soc. General de Comeraio S.A. 330,0 Oia.. Pesquera Arnauco B"A. 390,~ Vinas de Ohile, VinexS.A. 326,7 Oia.. Agri cola y Ganade ra Ruoainanqul 297,0 Maderera del Sur StA. 219,8 Sooiedad Hotels de Cord~llera. S.A. 201,3 Ind;u.striasVinicas Pa.trias S.A. 192.4 Estudios Clnernatograficos .de Ohile ..,. Ohile Films S.A. 171,6 Oonsorcio Ho1ielero de Chile B.A.' 165.0 Others (27 stocks, none exeeedfng $150,000) 1,682.3 20. WLE 5 LAW NO. 7046. (Published in the"Dia.rio Ofioial lt No. 19066 of Sept. 22, 1941) ---_ ........ The National Oongress has given its approval to the fo11owing~ PROJECT OF LAW Article 1: The President of the Republic is authorized to give the guarantee of the State to tho Corporacion de Fomento de 1a ~roduccion with respect to t~e obligations contracted by it with the ExportM Import Bank of Washington in the agreement of June 1). 1940. between both institutions. Article 2: The President of the Republic 1s likewise authorized to give the guarantee of the state with respect to the obligations which the said Oorporation contracts outside of the coun~ry wiph the same or other credit institutions, for new credits to be used for the accomplishment of the purposes set forth in Law No. 6640. Article 3: The loans in foreign money authorized to be contracted by Article 31 of Law No. 6640 nust be reduced,in an amount corresponding to the guarantees which the Fisco (National Treasury) grants in perfor mance of the provisions of the present law. Article 4: The foreign' money produced by the 1et~ers (0), (f), and (g) of Article 37 of Law No. 6640 are preferentially destined for the ser vice of the loans contracted pursuant to this law. With this object these taxes will be taken into the General Treasur,y of the Republic and will be collected in a deposit account $ubJect to the order of the Oorporacion de Fomento de ~a Produccion. This Oorporation can withdraw directly the said money through order to the Treasur,y without the necessity of a supreme decree. The tax created by letter (g) of Article 37 of Law No. 6640 is hereby given permanent character· . This tax will be received by the Oorporacion de Focanto during fifteen years counting from the date of the dictation of the present law. 21. , Artiale 5: FrOD the funds produced ~ythe application of Law No. 6640 tfle "orporacion de Reconstruccion y .A,u.xllio will rece~ve. at ioast, a sUn in national money equivalent to the value of the receipts, in foreign Doney. received by the Oorporacion de Fomento. For this pur pose foreign Doney will be valued at the export exchange rate. The Copore.cion de Fomento must sell preferentially to the Cor poraaion de Reconstruccion y Auxil~o the foreign Doney which it needs to accoI:lplish its purposes, i f there is nn excess after the service O'~ the loans to which this l?-w refers. These funds will 'he sold. at tho sane price at which they were received ~y the Corporacion do Fonento from the General Treasury. Article 6; The present Inw will trure effect fron the date of its pU'blication in tho "J'iario Oficial ll · Fornal clauses., ·· ,. .22. TABLE 6 FOf.-tEIIJ"TO CORPOBJ\.T I01:J' S REVE!JUES FROM PROCEIDS OF Ii' J\XES 011 QOPP.ER COHPl.N~S (equiv,"lent of obots of US dolla.rs) 1941 1942 1943 1944 19~'5 Law 6334, Income of 4th category - 2% 722 803 670 509 560 Law 63J4. Additional tax on income of foreign cor-porations - 3'~ 1,084 1,205 1,007 764 840 Law 6JJ4. Surtax on in come of the 4th category - 10% 3.612 4,017 3,32.5 2 t .54.5 2,800 23. T,A]tE 2 FOMENTO BEOE~nS ~D ~DITUEES! 1940 to 1244 (eq~ivalent of OOO,OOOls US dollars) :1840 1941 1942 12 Lj.3 1941.J. Rece!pti' Proceeds from taxes $ 6.4 $ 8.8 $ 6.0 $ 5.9 $ 6.0 Proceeds from investments. eale$, interest, commissions 0.1 3.5 6,4 7.9 9,4 E:dmbank 1.7 4:6 3.6 61'3 4.. 0 :B~nks , J p..nu.a.tY ( 1 ) 2.1 1,3 ~ 1.4 21'3 Total 10.3 18.2 16.9 21.5 21.7 ~en,di ture s; Loans and investments 8.8 17,0 14,0 15,9 14~5 Salaries and fees 0.1 0.2 0.4 0.6 0.7 Studies and various expenses y 0.2 0,.5 0,7 0.9 Eximbank:: Interest .., y 0.2 0.3 0.5 ~ortization 0,4 , 1.7 2.9 Total 8.9 17. 4 15..5 19.2 19,,5 In :Bank, December 31 1I $ 1.4 $ 0,8 $ 1,4 $ 2.3 $ 2,"2 1I The balances in Banks are f~ds deposited in New York, which are almost entirely invested in the first week of January of each year for servico on Exim'bank loans to Fom~mto. gj Less than 50,000 dollars. 24" TAJ3LE 8 FOREIGN C~ITAL ~g.UIBJl2:iEl.'l'TS OF FOMENTO I S LONG RANGE PRQGEUU~ ~lDOF THE ELECTRIFI~ION O~ TEE OHI~EAlr ST~E ~LWAYS (OOO,OOOI S of US dollars) Received Received Supplied. Sought Probable Tot from from by fll'om future Eximbank foreign Chile Inter- require suppliers nation- menta* al Bank Fomento rrojeots Electrio Power 11.0 1.2 1.0 9.,5 20.0 421'7 Forest Produots 0~5 6.0 18 t O 24.5 Tre.nsport aU on 3.5 0.3 0~3 5~0 5.0 14,1 Port Mechanization 1,5 1,5 Petroleum Devpt 0,6 11 5 10,0 12~1 Agrioultural Maohinery 91 1 2.9 23.0 35,0 Oopper 2,2 0,2 2,4 Oement 4.5 0., 1 4_6 Fisheries 0,1 0,5 20.0 20,6 Steel 28,0 5.0 5~0 38.0 Other ...LJ. ~ 7.8 Totals 66,3 9~4 9.6 22.0 96.0 203.3 Chl1~an ~tAte Railways Railway Eleetrifi~ cation ::Projec1,i l!!& -1.4 - 18.0 ~ 39.2 Grand !I'otal 80.3 10.. 6 9.6 40.0 102.0 242.5 * Fomento has not stated the expocted source of these funds exoept to suggest that fisheries may be financed by private oapital and further elect:r'io pOl"er m~ be developed under the finanoial pro visions of the p:r'oposed Ohile-Argontino Treaty. 2.5. ~A]LE 9 LAW NO, 6640 APPROVES THE AMENDED TEl"T OF LAW NO, 6,334 ~mICH CREATED THE RECONSTRUCTION Al':m RELIEF CORPORATION AUD FOMENTO No. 2,800. Santiago, August 30, 1940. By virtue of the power granted me by Article 1 of Law 6,610 of August .5, 1940. I' ;Decree: ~hat the text of Law 6.334 which created the Reconstntction and Relief Oorporation and Fomento, amended by Laws 6,364 and 6,610, shall be as follows: LAW :nnvrnER 6J 640 TITLE I Conoerning the RecQnlit~ction ru1d R21i~f Corporation Article ~ juridical person is created with the name of Recon struction and Relief Oorporation, which shall be charged 'Id th everything relating to loans, expropriations, reconstruction and aid to the victims in the provinces affected by the earthquake of January 24, 1939, TITLE II Concerning Fomento Article 22. A legal person is created \I/'ith the name of Cor:poracion de Fomento de Ia Produccion (Fomento), hereinafter called IItfiEl Coryoration ll , charged with a plan for the promotion of national production. The Oorporation shall be administered and directed by a Council composed of the following members: 1) The Minister of ;Finance, who shall be president thereof~ 2) The Minister of Development; 26. 3) The Minister of Agriculture; 4) T\'/'o members and two alternates appointed by the Senate \'1ho shall be elected by the two highest majorities, in t"IO elections at each of which each person shall cast one vote only (votaciones unipersonales); the first election for electing the memoers. the second for the alternates. 5) Two members and two alternat~s appointed by the Ohamber of Deputies in the same manner ae the above, 6) The President of the ~anco Oentral de Ohile; 7) The President of the Amortization Institute; 8) The president of the Foreign Exchange Commission; 9) The President of the Import License Commission; 10) The President of the Mortgt'tge Cred:it Institute; 11) Tho President of the Agricultural Crodit Institute; 12) The President of the I'1iningCred1 t Institute; 1,) The President of the Institute of Industrie1 Credit; 14) The President of the ~gricu1tura1 Coloni~ation Institute~ 15) The President of the Public Housing Institute; 16) The President of the National Agricultural Society; 17) The President of the National lUning Society; 18) The President of the Society for the Promotion of M&~ufacture; 19) The President of the Institute of Eng~neers of Chile; 20) The President of the Chamber of Commerce of Chile: e~1d 2l) The Secretary G-cmeral of the lV'orkers Oonfederation of Chile. The members indica.ted oy numbers 6 to 21, lnclusive, may be represented, in case they cannot attend the meetings of t:1e Council, by the perso.ns who sUQsti tute for than in a.ccordance with the "rovisions which govern the organization to which they belong. Article 23. The Council shan elect by a vote of at least two third$ of tJi,e Councillors. and. from outside its members. an Executive Vice I l?resi~ent who shall have the legal representatton of the Corporation ~L'1.d sue'1 I powers as may be conferred upon him by Council. The Vice-President shall have voice and vote in the debates of tL, Council and shall take the place of the President in the latter's absence. The Vice-Pli'esident shall have a remunera,tion of 120.000 pesos per year. The Councillors shall have a remuneration of 100 ~esos per meeting of the Oouncil wp.ich they attend, such remuneration not to exceed 1,000 pesos monthly for each. Employment by the Corporation shall be incompatible with the enj9Y ment of any fiscal. ~emi-fiscal or nunicipal pension or retirement stipend. Article ~ In tho B,bsenco of the President and Vico-~rcsident, the meetings shall be presided by the melllber of the Council a~JPointed by those present at the meeting. The Council of the Corporation shall be considered to havo a Cl.uor'lt: 1 when 11 of its members arC present, and ~esolutions shall be passed by an absolute majority of those present, except in cases where a special Majority is required. In case of,a tie. the President shall decide. Article 25 t The Conncil shaU have the follo'fTing powers: a) To draw up a generf'l.l plan for the promotion of national pro duotion intended to raise the sta.ndard of 11ving of the population by T.1CanS of development of the natural reSOurces of the country and by decreasing the cost of production, and to improve the condition of the balance of inter national payments, keeping, in carrying out the plan, due proportion in the development of mining, agricultural, industrial and commercial activities, 28. and atltoLlpti!ng to satisfy tho M:lds of the various regions of the country. The approval of this plan and any modifications theroof must hl3.,"C1 I the favor!'tble vote of two-thirds of the members of the Council; b) To ca:rry out, in cellaboration \vith fiscal, sS!!li-fiscal or private pro!notion institutions, studies intended to find the nost adcqu.e.,te !!leans of crea.ting new products or increasing present production, improving the conditions of production as to qu.ality, yield ~cl cost of production, and studies intended to facilitate the transportation, warehousing and salo of products, in order that the same may be used in their most satisfactory con dition end at the !!lost convenient pr~ces; c) To effect, in a,ccordanco ""i th the results obtained in tho studies mentioned in the foregoing clause, experiments in production or conmerce on such Beale and with such aid as may Qe deemed convenient; d) To aid manufacture ",,1 thin the country, or the importation of, machinery and other materials for procluction~ e) To propose and aid in the adoption of measures intended to in crease the consumption of national products or to obtain a greater particip~ tion of Chilean interests in industrial ?~d co~~ercial activities; f) To study neans for general financing of the plan for the pro motillm of prQduction 01' for the specific financing of various \I!orks provided for by the s~~e and to gTant loans in the manner set forth in articles 29 and 30; g) To receive voluntary gifts and contrioutionSl h) To !ub!!lit to the President of the Republic the General Regula tions of the CorpQration and their amendments. and to issue internal regula tions for the same~ and i) In general, to do 1':'11 the acts nnd enter into all the contracts which may be necessary for attaining the purposes of the Corporation. 29. The promotion plan will nocessarily take into consideration the funds! foI' rEiJpair and construction of cOI!Lllunication lines atld means of tra..ns- I porta~:i.on. in accordanee . \·d th the studies and projects worked out by the Department of Public Works~ Article 26*. In order to meet tho expenses required for fuIfi:.'.~ the duties of the Oorporation provided for in letters a) to :0 of the fore· going article. and the oxpenses of the working of the same, a IIProduction Pronotion :Fund!! is created which shall be fomed as follows, a) By 2% of the product of the 10ens referred to in Article 28 up to a max10un amount of 20,000,000 pesos; 0) By the difference between the interest en lo~ns made in accord ance with tho provisions of ~rticle 26 and the interest on loans cont;racted for by virtue of tho provisions of Articles 28 and 29: c) ~ the income fron the sales tux referred to in 01ause 3 ~f Article 38~ d) By contributions from the Fiscal Government and gifts or con tributions received by the Oorporation for general or specific purposes; and e) By interests and amor~izations, rents, collections for services and other income of the Oorporation. Article 22, Tho Pfoduction Promotion Fund may only be invested for the purposes indicated in the fi;rst clause of tho foregOing 8xticle, subject to special resolution, in each case, of the Oounci1, whose ~embors sha~l be jointly responsible for any resolution they may adopt en such a matter. · In the compilation and restatement of the Fomento lawnade in Law No. 6640 some of the previous laws were renumbered. Apparently, through in advertence, the references in tho text of Article 26 (b) of Law No .. 6640 to other Articles of that law were not changed so as to refer correctly to the renumbered Articles. Art~cle 26 (b) refers to Articles 26, 28 and 29 whe~eas the reference should be to Artioles 29, 31 and 32. 30. Article 28. In order to carry out the works and other purposes con tem~la.ted by the general plan for Production :Promotion approved by the Council, the Corporation shall have at its disposa.l 50';1, of the loans provided for its , I pu~ose in Article 31 and all of the lOan provided by Article 32 as the same are contracted, in annual quotas which shall not exc~ed 20% of the total of such loans, and in t:p.e manner set forth in AI'ticle 6. Article 2~h The Corporu.tion may grDnt lo&"'ls under coned tions dete:rmined in each case, to natural or ju.ridical Chilea.'1. persons, To this end juridical Chilean persons sh8~1 be those established in accordance with the laws of the country~ provided 60% of their members are Ohileans in case of Societies, and that 6C1fo of ita sharos are held py Ohileans or by naturlll Chilean juridical persons, in case of Corporations. Requests for loans sl~~ll be handled, respectively, by the Institute of Mortgage. Agrioul tural or lUning Cred.i t, 'by the Institute of Industrial Oredit or tl1e Agricultural Oolonization Institute and the Institutes of / Mining and Industrial Promotion of Tarapaca and .,A.ntofagl1sta. and wil'J. immediately pass to the Council of tl1e Corporation for consideration. These operations shall be governed by tho provisions of Articles 7 and 8. Without prejudice to the provisions of the for8going clauses and of Articles 7, 8 and 30 of this law. the Oouncil of the Corporation may execute and leg~ize loans or credits directly, setting up such. regulations for the transaction of the same as tho Oouncil may resolve upon. The po1tH.lrs a..'ld duties granted and .stabUshed 'by tho· srdd, articles shall in such case's be carriod out and fulfilled 'by the Corpore>tion. Article 30. The loans "Thieh in accordance with the provi sions of Article 32 shall be intended for tho construction of public housing for employees and workers shall be hr~dled 'by the Public Housing Institute and shall be su'bject to the approval of tho Oorporation, in the ma..'lner and under :31. the conditions set forth in the foregoing article. TITLE III E~traordiA&Y ~oan§ for Roconstrgction, Relief and Promotion Article 31. The President of the Republic is hereby authorizocl :i"l' a period of five years to execute conh"acts as he deems it necossa.ry, for loans in foreign currency up to an amoun1i totalling the l3:luivalcnt of 2,000,000,000 pesos in na.tional currency. Interest on such lOans me~ not exceed 3% per ennum, and the amorti zation thereof m~ not be for a period of less th~~ 10 yoaxs. Loans shall be placed at par. ~he amount of these loans shall be received by the Amortization Institute and 50% of the same shall bo devoted to tho operations of the Reoonstruction and {tellef Corporation in .the zono A.ffected 'by the earthquake of January 24, 1939. and the remaining 50% to tho operations of Fomonto, Tho president of the Republic may arrango for adv&~cOs from 'banks up to an amount equal to B.. third of the total of such loans, the samo being charged against the loans. Such adv~mces mAY not earn interest at a r~.te of more thf>~ 6% per annum. ~ho amounts not invested 'by the Reconstruction end Relief Corpor~ tion shall pass to Fomento ~~d shall be devoted to the purposes set forth in Article 25. 4rtiQ~o 3,. ~he ~rosident of the Republic may likewise contract wi th Commercial 13a..n..l:cs and Savings insti tutions of the country 1d thin [1, period of 6 years for loe~s ~p to an amo~t of 500,000,000 posos, to be devoted to . the constX'Uction of low-cost d\,wllings. preferably \'ll thin the devastated zone. Such loans she.ll b8 entered into at the rate of 100,000, 000 pesos per year as a r.::ax{muL" end. thu <"""uounts therefron sh9.l1 likewise be received by the ~ortization Institute, Until ~ch ti~es as the President of the Republic arranges the loans i ind.i~ated:in the foregoing art!ole, he m~ employ for the purposes of .i.rticlo 4 the funds created by this,Article. He may likewise use the funds referred to under Article 1 of Law Uo. ,5580 of Jtmuary 31 t 1935, these funds being re turned when such lo~s are completed, Article 3;. Banks and institutions mentioned in thG foregoing artiele may furnish sums required of them for the purpose indicated in pro portion to the total amount of cash (encaje) 'l;fhich they are obliged to ha;ye in accordance with the requirements of Article ?J of t~o General B~~ Law. Such proportion m~ be as high as 80% of the said cash. In order to carry out this provision, documonts showing lo~s granted in accordance with this article shPll bo considerod aa cash. ~hc Government she'11l pay for such loans 2% interest per annum. and 2~ amortization, l1km'lise per rumulu, "lithout any other lending charge ("pres tacion ll ) · Arti«le )4, In qualified cascs ruld subjoct to 1". favor8.ble ropo!'t from tho superintendency of ~ar~s, the Savings Bureau and the Commercial Benke having on hand the documents referred to in the preceding Article, m~ di SClOunt tho !;'arno at the Banco Central de Chilo, "'hich Ban.¥: shall charge for thi s operation ~ in~erest per annum, 1111 thout other cht"Lrgo. Artiglc ;2. Payment of charges on obligations contracted by virtue of the authorization granted in ~r~icles 31 and 32 of this law s~qll bo nado through the ~o~tizat!on ~nstitute · . Article 36. Tho Prasider-t of the Republic is hereby authorized to add to the obligations of tho Govorr~ent in favor of tho Banco Central ~c Chile which \-lOre converted and c~msol1datcd in [',ccorclp,nco wi th 1a\1rs lJos, ~ 1938, and under tho scme conditions esk.olishod in tho first of those la~1s, the balance of 'ill 75,000,009 pesos to which the obligation undertaken by. the Government by virtue ~ of L4w No, i6, OIl of January 30t 1937 t has boen roduced. Oreation end Modlficntion of Taxes j Article ;7. ~he following extraordinary income taxes are created: a) 2% on income subject to the second category: b) 1% on income subject to the third category; c) 2% on indome subject to the fourth category; d) 1% on income subject to the fifth and sixth categories; e) 10% increase on w~~~ is at present paid under supplementary tax on total income (tmpuesto global conpleoontario) on income of up,to 200,000 pesos and 2~ on the t~x corres ponding to ~ excess over that l~nit; f) ~ on income subject to additional tax; and g) 10% on income subject to the fourth category. earned since January 1. 1939 by ple.nts producing or treating, by any process, the products ind~cated in clause 1 of Articlo 3 of tho mining code, provided they employ over 200 persons as employees and laborers. Plants producing or treating the substances mentioned above, whose raw or treated pro ducts fall below 40% of fineness or which produce gold or silver ingot~, shall not be subject to this tax, ~his tax shall not prejudice the one established by letter c) of this D.r~icle, Article 38. ~ surcharge of 5~ on tho Inheritance ~ld Gift tax established by Law No. 5,427 of Februn.ry 26, 1934, is created, While this aur9harge is in force the aff~cts of the l~st clause of Article Z of said La¥ No. 5.427 e~~ll be suspended. Article ~24 Grantees of boronand boron conpound claims may protect their grants by paying in DAdition to the annual license fees established by the Mining Oode, a licen~e of 20 pesos per year pClr each hectare, for bencH t of the Fiscal Government. Payment of those licenses shall be effected in t,.,o equnJ.. quotas in 34. the ~onths of J~e and November of each year, L~w No. 2,989 of March 5. 1915 is hereby repealed, Atticle 40. For the service of the obligations contracted by virtue of .AIjticles 31 and 32 of this law, the Treasury General of the Republio shall place at the disposal of the ~ortization Institute the revenue from the ta:'lt( 3 created by Articles 37 and 38. The Presidep.i; of the Republic nay devote t.h.ese sums to the purposes contemplated ?Y Articles 4 and 25, while he h arranging the loans indicated in Article 31,. '" * · ... · Article 4lh. The General Controllership of the Republic shall open a special account in which it shall enter (3.11 income and outgo 1)earip.g relation to the funds provided by this law. It shall likewise have a complete record. specifying nanes, salari0~ and posts of officials of. any class whose remuneration shap be eharged agains" the funds of this law, whether plant or contract employees, excepting p~ents to day-la'borers and wor~ers, which shall '1)6 noted down in the usual way. On the 15th day of each month the Oontrollership shall send to the Ohamber of Deputies a complete copy of such pay~ro~l and of the general move ment of fUl'l.ds occurring during the preceding month. For the purposes of the foregoing clauses ench ~~e of the Ministries and of the entities handling or receiving funds derived from the application of this law, shall send. befo;-o the fifth day of each month, to the Oontroller·· ship the data above mentioned, otherwise the latter shall not take co~izanco ther'eof and the Treasuries may not make new p~8nts again.st such funds. A~tic10 45. Tho use of the fund.s contemplated sy this lew which are I I prescIi'ibed by the same, m~ not be changed by any decree of "insistence" I ("dec~eto de inslsten~ia"). I ~I~LE VI Qn.. the period for wbioh this law 9,pd the taxes created thereb:r: ,shall be in fOlge Except ~s concerns the second and fif~h categories, the income taxes created under letters b), e), d), e) and f) of Article 37 of this law shall be offect from Januar,y 1, 1939 and sh?~l therefore be computed on the income produced in 1938. In the sarne w~. the changes. made in Law No. 5.169 "by article 42 of this law shall govern from January 1, 1939. and the provisions of avticle 39 shall also apply from JanUk~ 1, 1939~ Article 47. ~he taxes created ty articles 37 and 38 of this law shall apply for a period of five years counted in the case of each tax from the date when it goe~ into effect, Article 48.... This la.." sl'.all go into effect from the date of its publication in the Diario Oficial t its enforcement shall 'l;e in Clk'1.rge of the I' Minhtry of finruloe. and. the auditing of the revt3nue and investments shall 1'6 under the General Controllership of the Republic. * · *· **·· * · APPENDIX I I CSILEAN.LOANAPPLIC~ION · ~7SiS of Projeots I (If Electric power 1 I , I (a) ~ndeaa and1omento 1 I (b) The Pl'ojeqt 1 I (1) Los Molles (2) Los Girones 3 5 I ! (3) Guanehue 9 (4) Secondary Distributien ;1.1 (5) Mechanical Irrigation 14 (c) Technical Feadbility 15 (d) Economic Feasibility 15 (1) Savings in Coal Gas and Diesel Oil 15 (2) Reduction in rates l~ (e) Electrio Power Supply in Chile 18 (1) Pre-Foment 0 18 (2) FGmentots Program 22 (3) Analysis of Electricity Demand 23 of the Three Regions to be Served lorest Industries 29 (a) The Incidence of Forestry in the Ohilean 29 Economy (b) Fomento's Forest Industries Plan 35 (c) Analysis of Sawmill Project 41 (d) Analysts of Paper Pulp Mill ~roJect 51 (e). Anal.7sis of the Insulating and Hardboard .5.5 Plant PrOject I (f) Analysis of the Yood ~reaervation Plant Project 60 (~) Urban and Suburban Transportation Project 64 . i (4) Port Mechanization Project 70 I ·. (~) Railway ~lectrificat1on Project 70 , :e. T bles I i 0.. M~s I I" 1 APPENDIX II A. .ANALYSIS or PROJECTS (1) EIJ!)OTltlC POWD. (a.) J Elf.llESA. and FOMENTO The hfdroelectric power project of lomento has been designed and will be built and operated by the Empresa laclo~l de Eleetrieldad S. A. (ENDESA) a subsidiary of Foment.. ENDESA has a completo engineering organ ization which makes the plans. studies. designs. builds and ~erates all of the installation. It has an authorbed eapUal of 500, -.': \0 '")0 pesos. eq,u1.valent to U.S. $16.1'~.000, of which. at the date of its .,eation in 1944. 90% consist~ ed of C9mmon stock subscribed entirely by Fomento, and the remainder in tho fel"m of preferred stock for publio eale. !rhe :Board of Dire~tors of ElmESA is composed of seven members, six appointed by Femento and one representing the preferred stockholders, Fomento does not intend at present to withdraw from INDWSA the capital now invested but the returns on the capital so invested will be used to finanee ad~itional hydroelectrie eapacity. (b) The electrifieation of Chile represents the utilization of an impertant national resouree, i.e., water power. Ftlmento . h as alread;y arranged with the Eximbank for financing the construction of three hydroe+getrie plants for public utility services (in addition to othe~ electriQ plants for industrial consumption) of a total of 169,500 m1 installed capacity and involving imported equipment costing U.S. $9.,24.100, pamely, sauzal of 76.000101, Abanico of 80~OOOK"!.~;l(i?i1mairfunn of 13.500 :raJ. In the p~oject submitted to the International Bank, which is the 2. se'1ondl sta.ge of a vast plan. Fomento applies for a U.S. $9 ·.500,000 loan, to be lused I ak follows: Investment for Equipment to be Investments in p~c~sed outside of Chile Project. the country (in U,5.$) (equivalent in U.S.$) 1- Los Malles Hydro Power Plant (16~000 XW) 1,100.000 1 ·.567 t 700 2- Los Glrones Hydro Power Plant. (.52,300 KlJ) 3,2.50,000 6,046,.500 3- Guanehue Hydro Power Plant (36.000 ~i) 2,7.50,000 3 ·.532,000 4- Secondary Distribution Program 700.000 .5- Mechanical Irrigation 200,000 6- Contingencies and Construction ~quipment 1 ·.500,000 9 ·.500,000 11,146,200 The construction of the plants is scheduled to commence in 1948 and to be completed by 19.50...19.51. Fomento asserts that the plants are neces sail'Y because of an expected shortage of power by 19.51 in the regions that they will serve ·. They will permit decrease in rates per IDYH, and bring about saVings in foreign exchange resulting from decrease in diesel oil, gasoline ~ , and ooal consumption through the shutting down of non-hydroelectric plants. The information received on the secondary distribution and mechani cal irrigation projects is summa.ry~ as the Chileans themselves want to be able to determine later the exact location of the projects and the ntilba tlon ~f the funds applied for. However. mechanical irrigation will be con- f~ned to the Los Girones area, and will be carried on experimentally in three valleys of the South Central Region. It is one phase of Fomento~s plan to i~prove Chile1s agriculture. 3. ~omento j ustifies the projects on the following broad e~ssum·)t i:'!;: a. Ohile's power requirements are not now being satisfied and the Chi~eani demand for electric power is inoreasing 8% yearly; b. Ooal, diesel and gasoline power plants are inefficient, their costs and rates per IDfH are high and their operation causes a drain on the foreign exchange reserves of the countrY; c. Establishment of a connecting grid between the hydroelectric plants of Chile depends on the installation of the three new plants contemplated in the prese~t plan. (1) LOS l~OLr;ES Los Molles will be situated in the middle of Geographical Region 2. the Ovalle-Coquimbo area. The peak capacity of Los Molles will be 16,000 Kit; its normal operating capacity. 10,000 IDi. Outside of the usual constructions such as intake eanal, re~lating tanks, penstock, power house, discharge canal, a power line of 66 rof will be built between Los Molles and the Ovalle Diesel Plant, of 1,000 rof·. Ovalle will be connected on a 66 ~1 line with Serena an4 the Juan Soldado Cement Plant of 15.500 IDf. and with Andacolla and Punitaqui. Estimate of Investment; MOs Molles Investments in Chile Eq\l.iva1er.t in {l) Civil Works Chiletln Pesos U.S. $ Roads 2,200,000 71,000 Expropriations of land and reparations of irrigating canals 1,100,000 35,500 Intake and sand trap 1,050,000 34,000 Main canal including tunnels, bridges, etc. 16,400,000 530,000 Foltebay, peak: tank and spillway 4,400,000 142,000 - i (1),JJ1vi~)(IW (Contd) ChUeU, le~08 Jquivalent 1', U.S.~j __ , .~' . Grf)'I~".d ,:pr~pa.raUons a~d foundations . tor 'pensto6k:a 3 t 500,000 11).,000 Power ~OU8et dlscba~~ canal and eompen8at iug tank :3.,200 ,000 105,000 Salari.si materials and fr~lght for erection of mechanical equipment in Chile 1.200 , 000 38,700 Civil works for pumping station 700,000 22 ·.5 0 0 Housing facilities for the pers,onnel ;,500,000 113~000 Civil engineering f~r su~stati,ns 2,0.50.000 66 .. 000 39,JOP1 000 1,270,700 (2) Eleotrical EguiEment Erecti.n nnd freight for the 2,100,000 68,000 electrical equipment Material for transmissiqn lines 229.000 9.200,000 297;000 Tntal of investments 1nQhile 48,,500,000 (l) Mechanical Equipment u.s.$ Turbines 164,000 Penstocks 160,000 Pumping Equipment 21,000 ,tner mechanical equipment 22,000 367 1 000 -. Generators 126,000 46.000 .' '. 5. - i I(Z} ElectriAAl equipment for the poW'ar house (contd) U.8.$ Ind~or sW'itchgear 2,5,000 Outdoor switChgear 41,000 Other eleotrical equipment 57,000 295,000 (3) Substations "ut do or awi t chgear 111,000 Indoor switchgear 14,000 Power transformers 36,000 ~ther equipment 6,000 167iOOO (4) power lines 65 km. double circuit 66 kv line 65,000 Materials for III km. of concreto poles 66 kv single cirC'Uit 35,000 100,000 (5) Miscellaneous and construction equipment ~otal of electrical equipment 991,000 Freight on the above equipment 109,000 Total invos~ent for equipment $1,100,000 (2) LOS GtROJmj1S Los Girones '-rill be situated in the south of Geographical Region 3, the Linares-Rancagua area. ~he final installed capacity ~f the plant will be 72.)00 ~f produced by three generators. Tho present loan application conte~lates the installation of two generators totalling 52,300 m~. 6. A new road of 14kms, new facilities for the personnel, substations I and ~ransm1ssion lines to Villa Alegre, to Talca and Linares and to Teno and Sauzal will be constructed. These will link Los Girones with the new Sauzal and Volcan Plants and the network of the Cia Chilena de Electricidad, around a~ntiagb and Valparaiso. Estima,te of Investments: Los Girones Investments in Qhile ; Equivalent in (1) Civil Works Chilean Pesos U,S. § . Dam and Spillway 16,000\000 61 7,000 Intake \'Torks 2,200,000 71 ,000 Tunnel. Ex~~vation and Concrete Coating 86,000.000 2,770fOOO Surge Tank. Excavation and Concrete Lining 8,500,000 274~OOO Penstock, Exoavation and Concrete Coating 9,600,000 310;0?0 Power House, Excavation and Building 12,500,000 40 3;000 Evacuating ~~nel 4,400,000 142 ? 000 Housing Facilities for Personnel 6,500,000 210,000 Roads 5,800,000 219,000 Purchase .f Land 4,200.000 135,000 Salaries, Materials and freight for erecti~n of mechanical equipment 2~800,oOO 90,5 00 Civil engineering for substations 5,000~000 161,000 , 164,500,000 5,402,500 (~) Electrical equipment, Erocti.n and Freight for the electrical equipment 5,000,000 161,.000 Material for T:ansmission Lines 15,000,000 483;000 20,000,000 644,.000 lf34.500,oOO . , 6,046.. 500 Est1matioD 0:( 008' of the lng'l&l?ment to.\e PIlrcbMed outalde tbeQoyatrz 1 - Power Rouse (a)14:e9hanioa. EguipmeAt TUrbinee and Gove~erl 510.000 ~utterfly Valv8s 60,000 Penstocks 60.000 Other meohanical equipment )0,000 660.000 Generators 480.000 )00,000 17.000 ~ndo.r switchgear 50.000 Cooling Pumps. eleetr~o crau.~ piPing, v'ntllat1on equipment. lnsta1latlon$ materials and ot~er materials 168.000 Outdoor 154 XV 8witchgear 225,000 Outdoor 66 XV 8witehgear 26,000 :2 - Su~statiop.s (a) 154 tv Substatien (Teno) Transff'Jrmer 110.000 Outdoor switcbgear 85.000 Indoor switchgear ,0.000 Installation Material and ot~r materia.l 36,000 ,- 261,000 8. (~) 66 ltv Substation (Teno and Villa Allegre) u,s. $ Tra:ijsfotrmers .52,000 Outdoor s~itchgear 91,000 Indoors\\fitchgear 14,000 Installation materials and other materials 6,000 163,000 3- Tr~nsmission Lines 1.54 lCV' lines 22.5.000 66 KV lines 90,000 31.5,000 4 - Miscellaneous and Construct;on EqUipment Communication and miscellaneous equipment 3.5.000 Oonstructi.n equipment 140,000 17.5,000 ~otal for EqUipment $2,840,000 Total Freight 410,000 G RAN D TOT A L: · . · ~ · ~ · The last section of the road that will connect the City of Talca with Los Girones is lUlder construction and some of the permanent buildings for the personnel are also under constvuction. The entire survey and geological studies in connection ~ith the project are completed. The preliminary design of the civil '\forks is comp).eted and the construction design for the dam and pO\'ler hou.se is under ,·JaY. The construction design of the SUbstations and structures is no,", being prepared. 9. (3) ~IrQE - ~he Guanehue will be built in the center of Geographical Region 5 I wh~ch ~s ithe Temuc~-Valdivia area. Fomento expects this power plant eventu- I ' I . , ally to have a total capacity of 72,000 mf in four generating units, two of which totalling 36,000 XI are 80ntemplated in the present loan application. Besides the basic construcU.on involved in the program such as dams I weirs. valves f power- house. etc., houses will be built fpr the personnel, a new road of 25 kIns will be constructed, substations and power lines will con- neat the plant with ~oncoche, Temuco and Valdivia. ~stimate of, Investment: Guanehue Investments inOhile Equivalent (1) Civil i10rks Chilean Peso§ in U,S, $ Dams No, 1 and No. 2 and Spillway 21,600,000 697,000 3,800,000 123,000 , Tunnel excavation and concrete lining 16,600,000 535,000 Power' house 8,800.000 284,,000 Ro~ds (Impr~ement and Construction) 4,800,000 155,000 HousiIl 5.300,000 171,000 Purchasing of land 16,000,000 516,000 Salaries, materials and freight for ,erection of mechanical equipment 3,800,000 122,,000 Oi~i1 Engineering for substations 4,800.000 155,000 85,500,000 2,7.58,000 (2) Electrical Equipment Ere1ction and freight for the electrical equipment 6,500,000 210,000 Mat1eria.ls for Transmission Lines 17,500,000 564,000 24,000,000 774,000 ~ot§l Investment in Oh!le 129.50Q,OOO 3,532,000 ~nv,stment for Equipment to be Purehased outside the Cmxnt~ 1 - Fojer; House u.s. $ ($.) MechaniAAol equipment Tur~ines and Governors 420,000 :Butterfly va.lves 50,000 Penstocks 40,000 Other mechanical eq~ipment 40,000 550,000 (b) Electrical eguiPmenta.nd a.ccessories Generators 350,000 Main tra.nsformers 196,000 Auxiliary transformers and emergency grou.p 15,000 Indoor switchgear 50,000 Cooling pump, electric cra.ne, piping, installation , materials and other materials 96,000 11$ kv Outdoor switchgear 100,000 807,000 2 - Substations (a) lli..-kv (Lop-cache and Temuco) outdo()r switchgear 260,000 5,000 XV! Transformers 62,000 10 1.000 KV'A Transformers 84,000 7,,00 IVA A~t~~tra.nsformers 33,000 Indoor switchgear 60,000 Installation materials and other materials 50,000 :54 9,000 - (i) 66 XV (Loncoche and Valdivia) I u.s. $ Outfoor switchgear lndbor switchgear 25,000 7,500 IVA transformers 40,000 Installation materials and other materials 15.000 158,000 3 - Tr~nsmission Lines 123 kms of 110 XV Line 135,000 73 kms of 66 XV Line 55,000 190,000 4 - IUsce11aneous and Constru.ct.~on eguinment Communication and miscellaneous equipment 3.5,000 Construction equipment 110,000 145,000 Total of Equipment 2,399,000 Total Freight G RAN D TOT A L: · . ., . . $2,750,000 ~e surveying work in connection with the power plant design is completed and the geological studies including test dri11ings are also com plated, The preliminary design of the civil works and of the SUbstations is completed and the surveying werk for the power line is under way, (4) SECONDARY DISTRIBUTION _ ElIDESA 1;1111 itself handle secondary distribution in areap inadequate ly supplied with electric power. ror the three projects under consideration, Fomento has estimated I - I that fqr , : ~he first stage of the electrification program, ap~roximately I I . 20.900 IXllA. will be distributed to final consumers by ~JDESA through rural ! lin~s or distributing subsidiar1es of ENDESA , and for this, about 500 kIDs of 13.2 XV distribution lines will be required. An estimate of the investment for equipment to be purchased outside of the country, for this purpose, is given below: !rran@formers Sing~e Phase 8 1 000/230 volts 600 units of 3 KVA 300 units of 5 ltVA 100 units of 7.5 I~A 50 units of 10 KVA $100,000 3=Pbase. 13.800/400 volts 150 units of 15 ltVA 120 units of 25 IrVA 50 units of 50 IrVA 40 units of 75 K:VA 30 units of 100 J!XA 20 units of 150 JrYA 270,000 $370 , 000 Disconnecting Switches and Fuses. 15 KV 2,000 Fuse disconnects 10,000 soo XV disconnecting switches 2,500 12,500 13. 011jc1rCUit;Breakers. 15 XV ~o )-phase reclosers 10,000 80 single~phase reclosers 10,000 $20,000 Qutioor Meter Equipment (Potential and Current transfo~ers) 50 metering outfits. 3-phase 40,000 50 metering outfits, single phase 1.5,000 $.5.5.000 Meters 10,000 IDig meters, single phase 6.5.000 l,OOOKl1.H, 3-phase 3 2 ,000 $97,000 Materials for 1}.2 XV Distribution Lines 50 kIns steel cable (3/8" and til diameter) 5 ·.500 40.000 15 XV insulators 1.5,000 10,000 600 volt insulators 1,500 Clamps and fittings 23,000 $45,000 Oo~struetion Toolsand various instruments $10.500 Total of Equipment · · · · · · · , .. ~ $610,000 Freight · . · · , · . . . .. . . . . . . . 90,000 G nAN D TOT A L: . · . · · . . · · · $700,000 14, (5) M.!CWICAt PUUGATION Several projects of mechanical irrigation have been studied by Fomento in the z~ne to be supplied by the Los Girones power plant. which will be 1nter~connected with the Sauzal power plant, The total capacity to be connected will amot4~t to approximately 1,000 Elf for four pumping stations~ The following are the characteristics of the main mechanical irrigation pro jeicts under consideration and the est:i.mate of investment for the equipment required is: Casa Blang§ Valley (between the cities of Santiago and Valparaiso) Pro,jeot Fo. 1 A~ea to be irrigated 1,000 hectares Pumping elevation (no storage pond) 20 meters 2 motor pump units will be required, each one of 1,100 lts/sec., 250 h,p. @ . $20.000 each "$40.000 Project No.2 Area to be irrigated 500 hectares Pumping elevation (no storage pond) 25 meters 1 motor pump unit will be required. of 1,000 lts/sec ·· )00 h.p ·· @ $24,000 each $24,000 SaA Fernando Valley l:ro,j ect ~To, 3 Area to be irrigated 1,500 hectares Pumping elevation (storage pond for nightly regulation) )0 meters 2 motor pump units will be required. each one of 750 lts/sec,. 3.50 h"p ·· @ $30,000 each $60,000 Mataq~1to Valler I Project No.4 I Area to be irrigated 1,000 hectares Pumping elevation (no storage pond) 20 meters 2 motor pump units will be required, each one of 1,000 lts/sec ·· 250 h.p., @ $20,000 each $40,000 Total Value of equipment for Pumping Stations; 164,000 Spares for the above Pumping Stations: 8,000 $172.000 Freight 28,000 T 0 'l' A L: . ... It ········· ,. ···· ~200!000 (0) TJi)qmnCAL FEA§IBILJ;Tf' OF THE pOWEF. PRO:1ECTS Fomento has provided certain engineering data regarding the three hydroelectric projects under consideration, The :Bank has submitted this ~ta to the Frederick Snare Corporation, Consulting Engineers, in New York, who have reviewed it but did not make a field inspection, As shown in Annex D, they have reported to the :Bank that with a slight increase in the proposed rate schedules, the projects, in their opinion, are well conceived and worthy Of approval. They also pointed out that the costs of equipment should be raised due to increased prices and Fomento has revised its application to the figures used in this report. (k) IE CPiCMIC lEASIBILITY OFTRE POWER PROJECTS (1) Savings of Coal ~s and Di§sel oil. One of the strongest arguments made by Fomento for replacement of e~isting steam and diesel plants by hfdroeleQ~r~c plants is the reduction in 4¥MIIIl'S l l _ f __ _t!1~"''''''* ._ '_.'' ' _.1_.____ 16. coal and oil consumption that would occur. Diesel oil imports in 1945 c amounted to U.S. $1,500,000 and coal production in Chile fails to satisfy domestic demand and will fall far short .f requirements as Chile's industry expands. However, precise determination of the savings in these fuels from the present projects is difficult, as adequate statistics of the exact amounts of cQal, diesel oil and gas utilized for the production of electrici ty, are not available. The Bank has ca~culated, however, from standard con sumpti~n rati5s that if all steam and diesel power plants in Chi~et in areas where hydroelectric resources exist, were replaced by hydroelectric power, the savings in coal and oil imports, at 1945 prices, would amount to about U.S. $6,800,000. On this basis pr.bab~e annual savings arising from ,the . three hydroelectric plants considered herein are estimated at U.s. $2,000,000. (2) Reductiqn in rates The estimated cost of installation per IDi of the new hydroelectric plants projected in Foment6 l s overall program is: Financed by Eximbank: Sauzal U.S. $ 163.50 ,Abanico U,5, $ 95.00 Pilmaiquen U.S. $ 122.00 To be financed by the Eank~ Los Molles U.S. $ 162,60 Los Girones U.S. $ 158.50 Guanehue U.S. $ 193.00 On Fomente's estimate of probable ~oads and with allowances of a 4% annual charge for depreciation and a1.2% to 2.0% annua+ charge for opel""" ation costs, the average 1951-1955 cost per la'IH delivered from primary sub c stations would be, in U,S. $~ - Los Molles! 0.0055 Los Giranes: 0.0038 Guanehue: 0.0062 The new rates to consumers, compared to the current rates in the varioUs regions, would be, in U.S~ $: Present rates New Plants Industrial Average Average Los Molles; 0,03 2 0.048 0.012 Los Girones: 0,019 0.026 0.011 Guanehue: 9.023 0.048 0.011 On the more conservative annual basis of 4% depreciation, 29& .per atlon coats, 4% on the Bank1s loan, 9% on Chilean capital, and on the 1955 IDiH consumption expected by Foment" the costs per roiH delivered from prima ry substa.tions, would be, in V.S~ $: Los Molles: 0.010 Los Girones: 0.008 Guanehue: 0.011 Nevertheless. existing rates to consumers could be substantially lower than the rates charged by the present plants. These rates now include what must be a large pr~fit margin · . At present prices, the fuel costs alone of coal and diesel oil produced electrioity amount h U.. S.$ 0.013 a KWH for coal and U.S .. $ 0.011 a DiH for diesel oil. ~otal oosts of production are approximately U.S. $ 0.0174 for diesel plants and U.S, $ 0.0170 for steam plants. This explains why the 6peration of all diesel and steam plants in the P1lma1qu~n area. ceased except in stand-by capacity when the power plant , ( .'-" was recently put into operation there. . It can be assumed that as Boon as the proposed new hYdro-plants are built, the old plants will cease operati.ns +ceIlt in etand-by o"pao1 ty · The policy of )' oment o. however. 1 s to ""ll' -,1. the "mall and large diesel and. steam plants to ;remain in operation a.na. to , i th:.ts·end_ current is sold to them for distribution and their plants are available as stand-by in case of shortage. (e) EIfCTRIC FnllllE S:pFPlJ.IN .OHIPl (1) Pre Jomentc (a) Fower Potential and Existing Oapagity Electricity is the chief source .of power in Ohile, Chilean coal is of pOOr quality. and reserves are small. Th~ development of petroleum resources is in its infancy but the slopes of the Andes a.nd the plentiful ~ainfal1s of central and southern Chile provide the country with many sources of hydroelectric power, Ji'omento estimates the potential hydro""!' eleqtric power capacity at 6.000,000 K\1, The installed capacity of all generating plants :l.n 1942wa.s 447,000 K\f. of which sef%, was based on water :power~ At the present time installed capacity is in the neighborhood of 532.000 lC\1, (b) Regional Distribution ofpow~r, po~ential, production and conswnRtion The souroes of hydroelectric power are concentrated in the central region of Chile while most of the industrial demand for power .has been con ce,ntrated in the north. which is in great part a barren and dry desert I un suited to hy~oelectrlc development. The plants of the north generally utili~a steam ·or diesel power. In the central region, there is no single source of hydroelectric power sufficient to satisfy all the needs. If no adequate grid system can be installed, the area. must depend on a numbe1' of small hydroelectric plants, the output of which will be utilized locally. The southerupart of Chile belOW Puerto Montt is economically undeveloped except for a few h&rbors, and any hydroelectric power potential tnat may exist there is ~cluded fr.~ the present analysis. (0) Background ~f Fomentors Program In the table below, the capacity of Chile's power plants, by source of power, is shown for each _f seven broad geographic zenes of Chile in 1942 . when Foment~ commenced its hydroelectric development program. In that year, t~e far northern area had 42% of the installed capacity, the north central' 46% and the remaining five areas, only 12%. These geographic zones are shown in the Ecenomic Map of Ohile at the end of Appendix II. Summary of 1242 Electric Power Resources in Chile Geographical Capac!tx tn XW Total Region Steam Diesel Capacitx 110. 1 Far North 4.325 o 189,035 1'1'_. 2 North (Coquimbo) 293 1.000 2.394 167 9,854 No, 3 Nerth Central (Santiago) 136.944 1,112 208,529 No.. 4 Central (Concepcion) 689 25 t 929 3.005 zo:e 29.885 l~o. 5 South Central (Valdivia) 1,981 356 9.049 No" 6 and 1 South (Magallanes) 151 1,300 110 76 TOT~ 144,395 253,065 48,6?2 1,913 441,995 A - Geogra,;ehial ~egion No. 1 Far N~rth The mining region in the far north. in the area bordering on Pe~ and ~olivta, c8ntains many of the ~ortant mining centers of Ohi1e and 1& a ~eaty ~onsumer of power. The total ~o~r potential there in 1942 amo1~ted t~, 189,OSS KW.The nitrate companies and the copper mines have very large . " e~ectric power plants which consume c~l or diesel oil. Their total poten~ t~al amounted in 1942, to 180,7S0 XW. Vario~s small companies supplied the t~wns. mainly I qUique and Antofgasta, with electricity and their total ca~ pacity a;mounted to 8.285 !Of. B - Geographioal Region UI!l. 2 liorth Sputh of Va11enar lapp. North of Valmraiso !I'he. preoip1tat ion in this r"l!Ig1on 1s rather proal1 ~ EVen with hldroelectric plants, ~teant power plants will always be neoessary1n order to me:et peak loads at low water perio4s. The 1942 capaoity of the region t~taled 9.854 XW. The power plant of the ~ethlehem Steel Company at Oruz Gtande has a capacityof 7,1.,50 Elf and the installat ions of small companies, whioh .meet the oom.bined requirements of the public and ind1,lStries, had. in 1942,. a capacity of 2,704 XW. Most of the installations are antiquated; ra~es and production costs are ~gh. C ... Geog:raphica;J. negion No~ :3 North Cent:ral Fro,ValParai@o to LiPAres This region is densely pop~ated. includes Santiago and large cIties and is the moet highly industrialized part of Obi.le. lts electric power capacity in 1942 was 208.529 Elf ot which 67.000 KW were owned and oper ated fot their own use by large manufact~ing and mining enterprises. A mnl trJa.l1ufacturing paper and cardboard owned a 22, 000 X't'1 steam plant. The large copper mine, El ~eniente, utili~ed the power produoed by a 40,000 Elf hfdroelectric plant of its own. The rest of the industrie~ and the public ~n the area were sup i plied by plants with 140,389 IDf capacity. the Chilean Electrio C~ ."""-" owned bJdroelectric plants of 84,134 ~I capacity and steam plants of 51,755 21. KW capaeity. Some small plants of limited local interest add 4.500 ~f. A serious shortage manifested itself in 1942. Demand on.the Ohilean Electric Oompany increased by 11% annually from 1940 to 1942 up to 120,000 ~f though its maximum capacity at low water in the winter when the demand was greatest, did not amount to more than 100,000 !W. D - Geographical Region No. 4 Oentral ~etween Li~es and Vic~oria .; . This region which was relatively little developed economically until 1943. seems t~ have been chosen by Fomento for an experiment in region a1 industrial development, centered on the steel mill which is to be es tablish$d with Eximbank funds in the vicinity of Ooncepcion, on eoal mines, and on the forest products industries to be developed with International Bank funds. The present steam and diesel electric plants of the region supply it ''lith a 30,000 K\f potential. The peak load consumption amounted to 23,000 XW in 1942. The cost of production of this electric current is high, due to the inefficiency of the plants and in general to the high cost of the coal consumed. E -'Geographical Region No ·. 5 South Central $ouih of Victori~ down to Puerto Montt The average precipitation in this region is very heavy. The rivers are characterized by a large flow of water and moderate inclines. The 1942 electric capacity amounted to 9,000 Kif, all the plants deriving their power from oil or coal. Their consumption of fuel and the cost of production are F- ~ographical Regions Nos. 6 and Z South Although llYdroelectric power resources exist in this undeveloped part of. the country, no expansion programs have been projected for the near future~ ~he present ~c~ty ~f plants .in the region is 1,643 ~1 of which only 157 Kif ;i.s hydroeleotric. 22. (2) Foment 0 's Electric Pm'Ter Program (a) From 1942 to 1948 In 1942, the electric pm'ler situation in Ohile 118..S critical. Fomento, therefore, established a program of electrification l·rhich bcluded: (1) The construction of central stations and of high tension lines, (2) The creation of rural electrification cooperatives. (J) The development of mechanical irrigation. Its plEins ,,,ere based on the principles. namely. that pOl-rer is needed to stimulate economic development, that po\·rer should be supplied a.t cost and should be available in. a9-va..l1ce. of demand. For these pUZ"poses. U.S. $ 11,926.000 ,'rere borrow'ed from the Eximbank and from suppliers, to construct hydroelectric plants of 247.000 K\1 ca;;Jaci ty and steam and diesel plants of 12,500 1\\'1 capacity as shO\m in Table 1. By 1946, '77.000 :KiT had been added to the ca,)acity existing in 1942. bringing tote,l Chilean installed electric capacity to 520,905 1m. Some of the installations Here made b;;1 private Chilean firms. although Fonento pur chased the naterials. This :)rogram is expected to meet consumption require menta until 1948 at l:rhich time the installed capac:i.ty is to reach 68,5,596 ID1. An 8% annual increase in demand is expected by 7omento, especially if the stimulation in consumption through 10\" co at s, ready supply and rural electrificat:l.on, is accompenied by a ne," de!l1and for nel-' industries such e,s forest industries, railroad electrification, harbor installations and fisheries. (b) After 1948 After a period of temporary satisfaction of consunption require~ c ment s. nffiV' shortaee s are expect ed to develop. Thi s '''as one of the consider ations that motivated the Ohilean Government in its application to the 23. - Irl.temational Bank for the Los Molles, Los Girones. Gu.a.nehue pln.I'.ts. This expected shortage is based on an 8% yearly increase in demand, a~ce~tuated by the shutting down to standby operations of inofficient plants. Even if the three proposed new plants are bu~lt, the following situation would ensue by 1951 and 1955 as detailed in Tables 2 and 3. Excess or deficit capacity in :retl llil illi Region 2 f 14.390 f 10.109 Region :3 f 329 - 90.671 Region 4 - 8,968 - 26.790 Region 5 f 29.847 f 22.087 The excess capacity in Region 2, in 1955 would tend to disappear in low water periods. The excess capacity in Region 5 may be overstated. as the basis for its calculatio~namely. the figure for 194Z consumption in Region 5. reflects only the condition prevailing in an area inadequately supplied With electric power. Some excess capacity must exist, in order to warrant an efficient operation of a.~ electrical system. The total electric capacity of Chile, after the installation af the three proposed plants would be 790.265 n1 as shown in Table 1. (3) ~llsis of Eleptricity Demand of the three Regions, to be served The construction of the Loe Molles, Los Gipones and Guanehue hydroelectric plants is justified by Fomento ~n three assumptions; (a., - That the demand will !ncrease 8% yearly, - (b) That the coal, d1ese~ and other ineffic~ent plants will cease . operations e~cept for standby opera.t~ons; (c) That with existing plants no grid can be installed ,...,hioh 00l'.lc1 effectively supply the regions to be electrified. with ti."le surplus capacity yielded by plants in other areas. (a) :rite 8% inorease in demand Although no general study by areas of the past increases in con sumption has been submitted, Fomento has supported its assumption of an 8% annual increase in demand tor the areas to be served by each of the three proposed plants in the manner described bal~l. It should be ntentioned that even a thorough study of the past would, f~r present purposes, be inadequate. Nobody knows what the increase in de maud would have been, had electricity been distributed everywhere at the low rates per Ktffi made possible by the new projects, The analysis of typical cases in the following pages is, in this instance, just as revealing as a thoroughgoing statistical survey of the Situation, Moreover, it should be noted that the manufacture of electrical appliances has been developing at a substantial rate in Ohile. (b) Ooal and diesel plants Most of the existing diesel and coal generating units are antiquat ed and inefficient and will be held for stan~-by purposes only, after hydro electric power is available. No precise information is available as to the necessity of renewing these plants. HmlTever, it is known that such plants. were already installed in 1938 and that since then no renewals have been made or are conternp~ated. The expectation of power from Volcan, Sauzal, Abanico, Pilmaiquen, at a low cost, seems to have discouraged any plan for such replacements, In fact, ENDESA has agreements with the existing plants regarding the future of their operations. E'D.'DESA ,...,U1 supply power and they wi,ll distribute it. 25. (c). The ~roblem .0£ the Grid Fomento's reasoning concerning the location of the Ex.imbank financed plants and the plants to be financed by the International »ank has been based on the assumption that the best way to serve a region inadequately supplied with electric power was t.o build a plant in its center. If a grid were possible, which would transport electricity from any part of the central region to any other part of the central region, the necessity 'of building the three new proposed plants could be contested. ~he creation of a grid is not \~rranted 'at this time because of the small distance over whioh electricity can be transported economically and because generating capacity will not justifY a grid until the three proposed plants under con sid~ration are built. ~he construction of a grid system after 1951 will make unnecessary the creatio~ of any new capacity in Eegion 3 prior to 1955, even if the B% yearly increase in consumption maintains itself. 26. , LOS MOLLES The two most important load centers for the area served by the Los Molles plant are the cities of Serena and Ovalle which are taken as typical. During 1945 and 1946, consumption has been restricted in Serena. by inadequate generating capacity and for this reason demand has fallen slightly behind an 8% theoretical increase. The city Df Ovalle, however. has had, sufficient generating capacity since 1943 when Fomento installed a new diesel generating . . plant and consumption there has increased far beyond the 8% yearly rate. The figures shown below are illustrated graphically on the following page: Actual PeaIgoad Demand, 6% Theoretical increase ~.£ Ovalle Serena Ovalle Serena XW KW Kif Kif 1940 160 1,200 160 1,200 1941 205 1.220 172 1,296 ... ,1942 200 1,300 185 1,400 1943 305 1,450 199 1.512 1944 430 1.600 216 1.632 1945 60S 1.680 233 1.762 1946 665 1.700 253 1.903 Fomento has estimated the 1951 and 1955 total demand on Los Molles will be 9.800 Kif and 13.300 XW respectively, The Bank's estimates, however, applying an 8% cumulative yearly increase in consumption from 1942 (Which has be~ntaken as a basetsince in that year peak load demand was satisfied by available installed capacity) indicate a probable demand of 5,314 KW in 1951 ~nd 7,184 KW in 1955. lnspite of this difference, the need for capacity which Los Molles will provide is clear, I . - 1 LOS !VOLLeS SYSTel'1 -------6% INCRI!I151: / ---- 1_ I -~ 1/ -- ~--- · , ~ <:> t\a Ir) ~ '0 "" ~ ~ ~ ~ i ~ .... .... .... '" ~ "" Y~AI2 - '--' LOS GIROlr.ES For the zone to be served by the Los Girones power plant, we have a 25-year recovd of peak load dema~d for the system of Cia. Chilena de Electrlcidad serving the Santiago-Valparaiso area which will receive power from the Los Girones plant. This is illustrated in the graph in the follo~t ing page which shows a cumulative increase in demand of 8% annually. The demand in the City of CUrieo, which is in the center of the area to be served, for the seven years 1939~1945, inclusive, is shmfn below. For the three final years demand was in excess of an 8% ~ate of increase: Actual Peak load Demand 8% Theoretical Increase Tear Ri·t Xt1 1939 805 805 1940 860 869 1941 890 939 1942 980 1,014 1943 1.180 1,095 1944 1,230 1,182 1945 1.350 1,276 Fomento estimates the total demand on Los Girones will be 44,200 XW in 1951 and 53,400 !Win 1955. This estimate includes, in addition to the 8% yearly increase in consumption, new uses of power in rural areas and the de livery of 18,000 rof to Cia. Chilena de Eleetricidad in Santiago" The Bank's own estimates concur. 2 - 2 · / / / c---/40000 /j I LOS' a/RONeS SYSrEH __120000 -I----------+---------+---------~-------~I/--------T_------~ rl I CUR/col V) I ~~ ~~ q~ I I sl ~~r-------~------~------~ . . I ~ ~__- -__~__~r__+--_r- '" a If) ~ ... ~ ~ C\I ... . ~ , ~ ~- '-" ~ ~ I' , '" C\I .. T '" · \D N m 0 If) Ol'''. in 1945· . Srun.tld tho :,)roscnt loan '00 gr!1.ntod i t is likely th..'1.t inporh of !:'jpber and' wood 'products "rill net "~':lou:nt to nore t!t~n US $:1:1'250,,000 annually after 1948~ Wood pulp noroallyaooounts for about 60% of the total value of these illlporlta,~ Exoept for small quantities of :lull? for manufacture of rayon, these ' imports will cease when the pulp mill contemplated in the present loan al?plica tion is Completed. Rough lumber imports are of the softwood variety and declined to a.- bout US $100.000 in 1945, With the development of insignis pine plantations in Chile these imports will probably fall even further and m~ cease altogether.. The remaining imports consist principally of raw caterials such as oork. gum and rubber tllat cannot be produced in Chile and of specialt;v ma.nu faotures which will probably not be replaced by Ohilean enterprise in the im mediate future. (5) JxpOtt§ of, Fore&t Products 1n TABLE 6 are presented Chile's exports of forest products and wood manufactures from 193? to 1945, inclusive. ~he value of th~se exports has in oreased considerably over the past deoade, mainly as a result of ~r1ce 1ncreas es. Unprooessed lumber and plywood aocount for nearly 9ry:t} of the value of these eXports. 'omenta has stated tha.t the 1946 rate of e,X?orts, both in volume and 3.5 · c in value, lias: ruch higher than that of 194,5 but statistics to substantia.te tis trend Jre ~acking. By way of illustration, however. Fomento states that the val ! urne of lurnper exports alone was ruoost twice as great in 1946 as in 194,5" The sa\fmills proposed in the :present application will increase poten tial lUL1ber exports by 60.000,000 board feet annually. Foc~'to, however, bo~ lieves that the 10cediate increase in e~orts will be only about 8,000,000 board feet t valued at US $4,50.000". ~o support its forecast of an increase in Ohile's export. of lUIlber. Fooento cites the fact that Latin Al'lerican countries are now icport~ng about 20.000,000 board feet iron Ohile, that their total icports of luober from all sources are currently well oVer 300,000,000 boa.rd feet and that ! the prices now l')o.id for such iJ:r)orts are well above the costs of '?roduction in Chile. lomento esticates that Latin American ~arkets for insulating and har~ board will take at least US $400,000 annually of Ohilean products fran tho new plant included in the present loan application. For the irnnediate future no increa!se in exports of plywood is anticipated by Chile. In order to take care of expanding dooestic needs for forest ?roducts, to reduce ioports. to increase exports, to increase the efficiency of the forest industries generally, and to prepare the w~ for a deteroined effort to reduce fOrest depletion, Fonento has under study a long-range plan for the davelopnent of the forest indu~tries. Lon~lange ~an: ~he lomento plan, as presently and tentatively constituted, calls for the erection of the following: Industr,v No. of Plants .aIU?-un~ Cn.ra.city ,Present CnlY-tel t;t , Sawnlll 13 400,000,000 bd. ft. 290,000 ,000 bd. ft. Chenical Paper pulp 1 75,000 tons none Insulating & hardboard 2 100,000,000 sq. ft. none 36. ,,-., '-" [Indhstlry No .. of Pl:mts APaual Ca:Qaci tl ~~es~ntCaDac!ty I · (c:ontd) (cOl.ltd) . (contd) (contd) Wood·iDp~eg.nation 1 2,000,000 cu.ft. none Rayon putLp 1 37.,00 tons none Fiberboard containers 1 3,500 tons none Wood l1ydrolysis 1 800,000 gallons none Wood distillation 1 15,000 tons not given LWlber yards 6 not g.1ven not given Cooperage 1 170.000 bbls. not given Wood briquetting 5 5,000 tons none Plywood 1 150,000 cu.f~. 3 00 ?000 cu.ft. Furn~ture 2 not given 9,000,000 bd.f~. Prefabrication 2 ,5,000 houses none The sawoills will include kiln drying and reoanufacturing facilities, as well as oodem hauling and fire fighting equi~Dent. In addition, it is planned to Dodemize eXisting portable sawr.11ll operations. Stepsha'O'e already been taken to oodernize lWlber distribution practices. As shown in ~LE 7 the total cost of the above program has been estimated at US $24,000,000 for ioported equipoent and the equivalent of US $17,000,000 for installations in Chile. Forest properties will probably cost the equivalent of an additional US $14,000,000.. Working capital requireoents are estioated to be the equivalent of US $14,000,000. Fooento estirJates that when oompletedabout 1970, its long-range prograo will involve the eoploynent of 5,980 workers, output valued at the equ!valen\ of US $34,000,000 a.:mually. probable annual exports of US $11,900.000 and displaced i~2orts valued at US $2.700,000 or a gross saving in foreign excllange of US $14,600,000 annually. IOlJediate Plan: The pr~sent loan application contenplates the cooplet:i.on of about 25% of the above total ioport progran. Specifically. the loan is ro quested for the following: IJldustry No, 01 Plants AnnuaJ. ". Capac i t;r Saw nill 4 60,000,000 bd.ft. Papal" pulp 1 25.000 tons Insulating and hardboard 1 25,000.000 sq.ft. Wood iopregnation 1 2.000,000 cu.ft. ~he total investnent involved, of which the lo&~ application is for ioported equipnent only, is mown below: I r.1J.) ort ad InstDllations: " li'orest Working Ipdu§tr:C Jgutpi:JQnt " "" lin Ohile" ?IoTJ~tUes C~"piit'!l j Total", Sawnllls $)~26l.000 $3.000,000 $2,400,000 $1.5 0 $10,161,000 °.°°0 Pal)el" pUlp 1.440,000 900,000 1,SOO,OOO 400,O()O 4,240,000 lnsu1ating & hc.rdboard l,ZOO.OOO 360,000 ,no,ooo 1,860,ono Wood Preser vations ,00,000 , 190,000 ~OOIOOO f -, } « ~OO.OOO ,¢. 1,t220 ,000 ~CY.rAL $6,101,000 $4,650,000 $4,100.000 $2.700,000 $17,551,000 Fonento estimates that the present program will involve the eoploy tlent of 1.140 workers, an annual output valued at US $7.200.000, annual e:Jt ports aoounting to US $1,800,OCl O and displaced imports with an annual value of US $1,200,000, or a gross annual saving in foreign exc~~e of US $3.00~tOOO. Location: The installations proposed in the present loan application are to be located in Geogra:phic Groups 3 and 4. A cap of these Geographic Groups, entitled Forest Products Plan, can be found at the end of 4\PPENDII II. Near Concepcion in Geograph~c Group 3. one sawoil1, a paper pulp mill, a wood pre servation plant and an insulating and hardboard plant are to be installed. ~ The total value of these installations, exclusive of the value of forest pro~ perties ~d of working ca:Jital. is estinated by Fonento at the equivalent of US $6,120.000. of which US $3,657,000 repr eSent s ir:rported equiptlen t a..."l.d the renainder, installations in Ohile. ~o additional sawmills are to be located in ~he northern part of Group 4 and a third in the southern part of the sane area; the total value of the investnent in these is estinated at the equivalent of US $4,631.000 of whioh US $27444.000 are for lnported equipcent p The value of forest properties and of working capital is again excluded fron the above figures. It will be seen that the present plan locates production units close to the narkets except that the ~roposed sawnill to be located near Puerto Montt in the southern part of Group 4 is a reflection of the geographic trend that locento believes the forest industries will take in the future, as a result of depletion in the more northerly stands. In fact, during the next decade, . Fomen to plans additional installations near Puerto Montt, valued at US $11.000,000, of which US $7.200,000 represent imported capital. ~§okgt0uaA gf FQmento Plana The Fomento plan represents a development, with modifications, of the recommendations made by a staff group of the Forest Se~ vice Qf the U.S~ ~epartment of Agriculture, which are embodied in an unpublished report entitled IIForest Resources of Ohile R· These broad recommendations were made on the assumption that Fomento would in each case analyze carefully the technical and economic elements involved before embarking on any of the specific projeets, and inoluded the following: (a.) Installation of permanent band mills. 0;'1:' combinations of band and portable mills , in ('Iufficient number to bring about a. reasonable balance between small an~ large mill operations and furnish the basis for integrated industrie~.particularly those based on the uttlization of woods and mill waste, (b) Expansio~ of cooperative effort. aimed at improving small mill 39. operation$ through the furnishing of marketing facilt ties and competent tee' 'i cal ~idance:, including advice on equipment and logging and milling operations, (c) Improvement of related industries, including drying, planing, furni ture and shingles, through better integration. methodology and equi~9m0nt, (d) Expansion of the veneer and plywood industry into new markets through the manufacture of new types and kinds of ma.terials, but no expansion of present plant capacity other than that now planned at existing plants, (e) Expansion of the wood distillation industry to include, ultimata ly, a series of modern plants capable of corbonizing 720 cubic meters of wood per day, (f) Installation of a sulphate pUlp mill in the ConcepCion area with a capa.city of 50 to 80 tons per day, with prOvision for ultimate expansion to 2 to 3 times this size, (g) Installation of a treating plant in the Talcahuano area for the creosoting of poles and railroad ties, (h) Further investigation of the suitability of Chilean woods and the economic feasibility under existing conditions of producing such additional materials as p~~ood panels and other items for prefabricated houses, dimension stock, sawn ties, briquettes from sawdust, dissolving pulp for r~yon, hardboard, and plastics. alcohol and protein food. Gener~l §tatement on ?roj~cts in Present Appligationt Each of the forest pr~ ducts projects for \vhich Fome:::l.to is presently seeking a loan from the Bank re presents a new departure for Chile. There are no permanent sawmills in Chile, no chemical paper pulp plants, no wood preservation plants, no hardboard and insulating board plants. Chile has, therefore, no previous experienoe on which the technical success Qf the proposed plants can be based. It is Fomentors - praotice to eIllploy foreign technioians for new enterprises if experienced per sonnel are lacking in Chile. Fomento has stated that it plans to use skilled 40. i foreigrers in' those phases of the new forest industries requiring trained per sonnel'. Chile is, of course, not completely without personnel trained for occupations similar to those involved in the proposed operations~ Mechanical wood pulp and straw pulp are produced in Chile for manufacture of paper. Pl~ wood is manufactured in Chile and some of the processes used are similar to those in the insulating and hardboard industry. ~utt treatment of poles has been practiced in Chile, but the experience gained therein can probably not be applied to the proposed preservation plant. Permanent sawmills have some of the characteristics of the portable sawmill. Entirely llew markets will have to be pioneered only in the case of the insulatir~ and hardboard plnnt. L~~ber and chemical lJUlp have established markets in Chile. Chilean lumber has long been marketed abroad. ~reated ties have not been sold in Chile but tho need for them has boen recognized for some time. The proposed fOrest industries have a two-fold aim, namely, to raise the Chilean sta'''').dard of living nnd to improve that nation's foreign exchange position. A general statement about the latter goal is given below. Fomento expects ehilets foreign exchange position to be improved to the extent of the'equivalent of US $3,000,000 annually as follows: Indugtr;y Increased ~orts RcduceG imPorts Total Ve~u.ed in US $) Pulp 1,200,000 Lumb¢r 1,400,000 Insulating & hardboard 400,000 - Totals 1,800,000 1,200,000 3,000,000 Jomento's estimate of foreign exchange savings resulting from the new VUlp mlll seems conservative; they will probably prove to be closer to In. us $l.1600,ooh. The forecast of exch_e earned from increased lumber OX.·0r~, is so~ewh~t ~isleading. Fooento1s estimate represents total a!ll1ual lwnbor ex- I I I ports. The :Bank estimates that addi tiona1 exports arising fron the s'1Wl::!iJ.l pro ject will a.rJount to only US $1,000,000. Fooento's reasoning is that if th0 ')ro posed plants are not constructed future Chilean lumber production will be used in its entirety dO!:lestically and none will btl a.vailable for export. As will be shown at page 57, the forecast of insulating and hardboard exports is not conclusively established. If Argentina should, however, give Chile tariff a.d vantages on all these products Fomento's forecasts may prove to be correct. (c) ANALYSIS OF SA~IMIAA PRODQ1: Fomento plans the construction of four permanent band sawoills: one in tho Insignis Pine Region, near Concepcion in Geogra:;::>hic Group 3. one at Anti huala near Lebu and one near Temuco in the rich na.tural forest area of northern Group 4. o..,.'ld finally 1 one at Puerto Montt in Geographic Group 5~ The first of these will be based on the softwood speCies, insig!1ia 'PillO. the other three on hardwoods. For each of the mills, forest operations. log hauling. millir~, dry tng, and reoanuiacturing will be integrated. About 21% of the conte~plated imported equipownt will be for forest oper~tions and log haQling. about 49% for nilllng, 11% for dT,Ying and 19% for ren~ufacturing. The ~orests: The Insignis Pine Region r.1ill.the ?uarto gontt r.ull a..'ld the Antihuala mill will ~1loit their own forest yroperties. The bulk of the for est properties l.X:t)loited bY' the Cherquenco nill will also be o~,med b;'J" it; the balance will be operated under concession froT.'! the Chilea'l Governnent at 25% of tbe ~revailing stunpage rates. - Jooento states that the forest properties will be OXlJloited on a self-sustaining basis. This will involve annual plantings of ab0ut 500 acreS each in the forests eKi,loited by the 4ntihual~ and Cherquenco oi11s of 42. lO,OOO.qoo ~oa.rd feet annual out:iut. The !nsignis Pine Region is alrea.d8' oper ated on i a pC\.antation basis a..."'ld its 0111 will have a 20;000,000 board feet yearly outlJUt. The area to be erploited by the Puerto Montt plant is ver.y large and will, according to Fonento. be sustained through natural growth, at the assuned rate of exploitation of 20,000,000 board feet yearly. Road construction equipnent is to be ioported for each of the projects. The roads to be built will serve ~rinarily to reduce costs of operation in the forests. Iacidentally, according to Fonento, they will aesist naterially in the national effort to dininish losses through fire. The new onterprises will not r~ve forest fire fighting equipnent. Acccrdlng to Fouanto, the checkinG of such fires is the Governoent's responsibil ity. looento will, however, continue its canpai,gn of fire prevention which it clains has achieved considerable success since its institution two years ago" It points to the fact, too, that fire losses have been n~~ligible on pl~"'lta tiona as an indication that adequate fire preventive ueaSures are oore ioportant than fire fighting equipnent in Ohile. Value of :ior~;>t Pro-,}ert ies The value of forest properties to be exploited ia widely, different. This nakes an CtCcurate estiu"Cte of the annual stunpo'ge value per 1,000 board feet, Le ·· the theoretical value of the wood in the forest, rather difficult. Fotlento assunea that, in areas which have been already exploited by snaIl operators usin the portable sawnille, the stunp~~c value of its forests properties is equivalent to the stunpage value of other forest properties while in the case of unerploited terrain such as Puerto Hontt, a theoretical figure is used. Forest Qpetations According to Fonento, the old nethods of production consisting of soalll po:rtable sawnills and log hauli~1{; by OXen, is inefficient and absolete. \ A new S Jatel:.,, ~ ~s proposed, which should lower the costs, better the quality of wood :;:JrJducts, and in general, increase the standard. of living of the workers involved. in Forest Industries. (a) Felliru~ and Bucking. A large scale operation of the kind ~ro- ~osed by Fo~ento warrants the use of power saws~ Since the old systen of nill ing could not absorb the daily output of power saws, it had to confine itself to axe felling. Each fellir~~ crew, operatinb with power saws, produces 35,000 board teet a~. The pemanent plants can handle fron 87,500 to 175,000 board feet a day. whereas the lar(,;est portable uill can only handle 8,000 board feet a day. As a result, the cost of felling and bucking, instead of ranging ~ound us $1.15 a thousand board feet for the old systen of operation, could drop, in the new sawnills, to US $0.25 to 0.40 ver thousand board feet. (b) Loe; !:iaula.ge to Sawr.lil:ls a.~d Auxil ia.tx Roads .... The traditional oethod of haulage in Chile is the conbined operation of oen and oxen. Both are expensive a.."ld ineffiCient. Foo.ento pro:LJoses to re]lace tl1er.:l by trucks and cranes, except in the case of the Puerto Montt nill, where lo(;s, after being hauled to the seashore, will be floated or ca.rried in barges to the peroanent sa'Wr.lill s · Fonento cOl!!pares the cost of ha.uling in the old and new operations as follows, as described in ~LE 8: Lop; Haular-;e to Sg,wnill 1) Portable sawoills; US $4.11 per 1,000 board feet 2) Snall peroanent oills of 10 oillion boa.rd feet annual outputJ US $4.· 61 per 1,000 board feet J) LarGe pemanent r.lills of 20 olllim.1 board feet annual. output: us $5.04 per 1,000 board feet Insignis Pine (flat terra.in, easy forest penetration): us $2.68 per 1,000 board feet. IJi t~e case of the portable saWT.lills, the haul to the 1:1111 is ;1' t ~"'O I only trapspbrt operation which has to be made. Portable sawmills are usuaJl:r situate¢ at the center of the woods. and far from the railroad stations and af ter the cutting of the lumber, it must still be hauled to a railroad siding at US $7~SO per 1,000 board feet average cost making total hauling costs, US 611.61 per 1,000 board feet. (c) Aux1lia~ Roads ~enetration into the forests requires new side roads. ~he utilization of tractors between point of felling and established roadways, obviates the necessity of new auxiliary roads and thus decreases the cost from US $1.70 per 1.000 board feet in the case of portable sawmills to US $O.SO to US $1.00 in ~he case of permanent sawmills. (d) Sawmilling TABLE 9 details the cost of Production in two tjjpical perman$nt mill operations of one and two shifts per operation. The costs per 1,000 board feet, respectively US $14.)0 and US $8.70 compare favorably with the costs of operation of portable mills namely. US $14.47, However, in the case of the Cherquenco and of the Antihuala Mills operating on one shift and producing 10,000,000 board feet a year, US $0.30 per 1,000 board feet is added by Fomento to the theoretical cost of sawmilling. for "contingencies". These costs include electric power units, the need for which can be contested, since the area of Lebu. where the Antihuala mill is located could be linlced to the Abanico power grid and the Temuco area, where Cherquenco is located will be linke' to the Pi lmaiquen" power grid in 19S1. Contingencies of US $0.44 per 1,000 board feet are taken into account in the caso of the Puerto Montt mill. Only the large capacity permanent sawmills can thus be operated at lower costs than the portable mills. (e) Dtying and RemonytactR£i~ These two processes have never thus far been combined with milling operations in Chile~ At present, the cost of remadufacturing. in cons~tion centers, varies from US $18,00 to US $2).00 - per I, doo boa,rd feet. I Fomento contomplatiils complete air d.r;ring and kiln drying installations at the sawmills although, the eventual elimin~tion of air drying is plaMed·. As described in TABLE 9, the cost of kiln dr;ring amounts to US $4.75 per 1.000 board feet a~d US $3.60 per 1,000 board feet respectivoly, for small and large capacity permanent mills. Air drying costs are US $1.40 per 1,000 board teet for the 20,000,000 board feet mills and US $1.58 per 1,000 :Joard. feet for the 10,000,000 board feet mills. The addition of kiln drying was deemed necessar.r, because of the great quantity of moisture contained in the hardwolod species to be processed which cannot be elimiIl-:lted entirely by the air drying process. Remanufacturing which costs US $10.00 to US $15~00 per 1,000 board·feet involves the preparation of wood for imnediateuse, namely, calibra tion of planks, be~~s, rounds and triangles. (f) Frgight Three of the four projected plants are situated in areas 600 to 700 kms. distant from Santiago and their wood products will be carried by rail. In the case of Puerto l'-iontt, about 900 kms~ from Sa..'ltiago, maritime freight can be utilized. In contrast with the products of the portable mills" the finished products of the perma"lent mills are dried, and the waste wood eliminated. This represents a 22% saving in volume, a~d reduces average freight rates per 1,000 board feet from US $15.00 to us $11.70~ , Location Thirteen areas were studied for the location of the four permanent sawmills under consideration, Sites at Antih~~la, Cherquenco, Insignis Pine and Puerto Montt were chosen as the best locations, for various reasons: (1) Size of forests and log hauling distance (all four sUes) - (2) Proximity to supply of labor (all four sites) (3) Proximity to railway connections (Antihuala, Cherquenco, In signia Pine) (4) Proximity to consuming center (Antihuala a~d Oherquenco) 46. - ....., d) , Proximity to harbor (Puerto Montt) (6) Long rotation period (Puerto Montt) (1) Existence of favorable freight differentials (Puerto Montt} (8) Possibility of resorting to reforestation (Ant1huala and Oherquenco) (9) Special qual! ty of wood (Insignia pine) (10) Easy accessibility of forests (Insignia :pine) (11) Economic and social consi~erations (Puerto Montt is located in an undeveloped area of Ohile in which the Government wishes to foster industrial projects), According to Fomento, the installation of permanent sawmills is advocated only for certain locations, in a program tending to reach a reason able balance between small and large operations, Fomento sees the following adv8ltlta£es in permanent sawmills, a) The nocessity of divers~ficatlon in production, and of improvement in qual i ty. b) The possibility of reduction of waste c) Labor saving devices can be installed d) !etter working conditions can be established ~he U,S. pepartment of Agriculture report states that 'larger band mill operation, at a fixed ~ate, would seem to be a lound business propositio~~ OonsUMption of luober usod for construction. furniture, boxes and crates in Ohile increased from 188,800,000 board feet in the period 1942 and 19~3 tQ 236,000,000 board feet in 1944 and 1945. A 30% increase in the ~se of COIl!stll'Uction lumber wbich was 185.000,000 board feet in 1944 and 1945. is I i expected by Fomento during the naxtdecade and thus justifies the present sawmill project, which Would add 60.000,000 board feet a year over 1945 47. produ~tiqn. : The contention that the product of the new sawmills can be market- I . ed is tenable for various reasonsl 1) The selling priceo! finished lucber in Santiago in 1946 rar~ed from US $100 to US $150 pef 1,000 board feet. The delivered cost at Santi ago of the new production would not exceed US $61.00 per thousand board feet. Even if the expected increase in consumption failed to naterialize,the produ~ts of at least tl'iO :1il1s, narJely, Insignis Pine and Pu0rto ~ntt, could undersell any other finished lumber in Chile. 2) The backlog deoand in the construction of houses is considerable, and this great potential d~oand for lunber has never had an opportunit,y to materialize. owing to the lack of complementary housing naterials such as cenent, steel. etC. These latter products are expected soon to becone abundant in Chile. 3) Yearly lunber exports for 1936 to 1941 averaged 11,200,000 board feet and increased to 20,000,000 board feet in the period 1943 to 1945. Fome~to estioates that 40,000,000 board feet Cal1 be reached by 1954. Savings ill foreign exchange of US $1,000,000 a year would result even if the increase in exports amounted to no oore than 10.000,000 board feet. a conservative ~rpothesist if the growing neods of lucber in Argentina are considered.. III short. the existence of a oarket which should absorb the whole of the conter.1plated increase :i.n Chilea.l1 lu.r;;... \ ) ber roduction, is probable. Ec°Aonies Apart froLi the o,.~kets for the l)roduct, the econi)oic advantages of peroanent saWLiills depend upon relative costs. These cOrJparative costs are shoWn in ~LE 8. The cost of production in portable mills can be reduced if $odernmethods of felling and hauling are adopted and if £our or five 48. porta~le 1til~S are concentrated in a single area. However,Fomento claims there lis a waste~f ~o% in sawing by portable mills as compared to perman~nt , I I , I , mills land ttiis mea:ns that 20% more timber must be processed in order to obtain I : ; · the 840me volume o.f lumber. In these circumstances the cost of producUoll per I 1,000 i board feet in a modern porta.ble sawmill would be US $26.48 as against US $24.61 In a sma.J,l scale pe:rmanent mill. The largest lumber producing firm in Chile, Bosques e Industrias Made;ras, S~A., CB. I.~r~A,,) will operate the sawmills. and also the insulating and. hardbo~d plant. The present capt tal of B,I.M.A. is the equivalent of U.S~$:3 ·.500,000 with U.S. $300,000 reserves. :S.I.f1iI.A. will suWly all the nece$sar,v Chilean capital for the installation of the four sawmills, and of the insulating and hardboard plant. The firm has been in operation since 1924. ~ As s~~cd below, the value of 1m ported equipment needed for telling. hauling, sawing, drying and remanufactu~ ing will amount to US $3,261.000~ Fomento states that the equipment can be delivered between 8 and 24 months after the placing of the order. 10,000.000 board feet mills (Antihuala and Cherquenco) 22 s t c( ,~9;:& i:Q!I!el} t D2r)aUl! "I! ' h I I (l,OOOls US$) Road Building Equipment 37. 4 Logging equipment 66.0 Log loading equipment 60.0 ~Og hauling equipment 70.0 Sawmill ~qutpment 148.5 :Beltill and saws 1:,.5 ,,-, ?ower plants 125.0 ~ . ld,ooo,oOO board feet mills (Antihuala and Cherquenco) . Cost of equipment per mill (contd) (l,OOOt a US$) Filing room equipment Lighting 5.0 Dry Kilns " Fire fighting 29.6 Remanufacturing 60.0 TOTAL 647.0 20% increase in price. plus freight i 110.0 GRAND TOTAL 20,000,000 board feet Insignis Pine Region mill, Cost of eauipment Same elements as in 10,000.000 b,f. 647.0 Additional lumber carriers and cranes 50.0 Lucber transport to dry kilns 8.0 Larger dry kilns 25.0 More fire fighting 4.·4 Add! tio:p.al trucks 70.0 Addi tiona1 power saws 2.1 Minus power plant - l25!0 TOTAL 681.5 20% increase in price, plus freight 135.5 GRA11D TOTAL 817.0 20,000,000 board feet Puerto Montt mill, Cost of egv4pment (1,000' s '05$) Same as Insignia pine 681.5 50. ;20,000,000 board feet Puerto l-tontt mill. l· Cost of egyiRQent (contd) (l,ooot s US$) Additional logwa.ter carriers 60.0 TOTAL 2~% increase in ~rice. plus freight GRAHD TOT.AL 890.0 Sunmary: Cherqu6nco .'\,ntihuala - 777,000 777,000 Il:signis pine 817,000 ?uerto i10ntt 89Q.OOO Total cost of imported equipment US $3,261,000 (b) Chil~~ Ca~ital: The Chilean c~pital requ1red for building constr~ction, fences, installation of equipn6nt is 6stinated by Fooento to be equivalent to US $3,000,000 as follows: ~ntihuala and Cherquenco Insignis Pine Region & ·Pureto It10ntt 12.000.000 bOard feet plants 20,000,000 board fQet 1')1·9.nts US $ us § Buildings 390,000 511,000 Yards, roads :Bui lding la...'1.d Studies 118,000 I 141,900 Installation 77.290 84,720 737,620 SUJ:lr.1ary: Cherquenco 585.990 ,An t 1hu,al 0. .585,990 Puert 0 Iv10nt t 737,620 Ins1gnis l?ino 737,620 Contingencies 352.Z80 Totlal Chilean construction costs, 6quivalout of US $ 3,000,OQO 51. i (c) · Value: of Fo;:e§t, properties, The value of the forest properties is given / by ~ooento as follows: us $ Puerto Montt 9)),000 Insignia Pine 1,000,000 Cherquenc0 2)8,100 Antihu.a.la 170,000 The total has been rounded by Fooento to US ~ 2,400,000 (d) \(orkWg Capital: The peso \'lorking capital needed is estimated by FOT.1ento to be equivalent to US $ as follows; All tihu.':l.la 250,000 Cherquenco 250,000 Puerto r.ron tt 500,000 Insignis Pine 500,000 Total i'lorking Capital $ 1,500,000 (e) Tot~ CapitgJ Reguired: The total capital required for the four ollIs, equivalent to US $, is tht~; Foreign capital 3,261,800 Chilean cap 1 tal ),000,000 Forests 2,400,000 Working capital 1,500.000 TOTAL $ 10,161,000 The following discussion of Fonento 1 s plan to build a sulphate paper pulp Dill is based on infornation obtained fron Fonento, the U.S. De partment Qf Agriculture, Forest Service's ~Forest Resources of Chile," and frOD Esta4istica Ohilena. 52. F(')o~t9'~S 1ao eglate PrQgl'a.o: The present loan appli.caticln is f'or a plant wi th an annual capacity of' 24, 000 tons, invo1ving the following Investment; Item knvesto§nt - (V. 8 , m or egu1valeht) Ioported Equipoent 1,440,000 Installations in Chile 900,000 Forest Properties 1,.500,000 'Working Capital 400,01')0 TOW. ~.20e.oea l i . i !'In all put routes of very heavy traffic. As stated previously, howevor, it has preJont~d no data on the traffic density of specific routes. :Fomento estimates that 36% more foreign oxchange would bereq'.:tired to purchase street Ca.l'S of carrying capacity equivalent to the 250 trolley Motal' :su.sses; ( , Foment. has estimated that motor bus operating ~osts per,passenger are 50% higher than those by trolley coach. Nevertheless. some mot,r busses have reeently been purchased because oi delays in deliveries oi trolley coaehes. It is also planned to continue the use oi motor busses in feeder service 4>perations. Evalyat10A oi the Fomento Progr§ID; Fomento has not ~resented.a traffic flow map for eitner Santiago or Valparaiso. It has stated, however, that ~.mpl~te traffic statistics are kept by the ~~O and that on the basis of these statistics the present plan was adopted.. ~b~O's decision. since the original application to the Bank, t~ recondition 169 street cars and retain them.1n service as described above would indicate that the plan was not thoroughly engine~red in the first instance and this casts some doubt on the revised plan, a doubt that may an1y ., . whether the urgency of the be cl.issipated by an on..,the-spot examination, cl.se , transp~rtat1on Such examination would als. dis needs of Valparaiso and Santiago are 80 great as to warrant the immediate purchase, of tr~11ey coaches ,- rather than the renewal ot the present traction systems of the two cities over a peri~d Qf four or five yeats. - , , Authofit~ t~ Finance the Projeot; : ' I ! Under Article 4 of Law No·. 81)2 of June 16. 194.5 which established ENTO,: the President of Chile is authorized t~ give the guaranty of the Republio to foreign loans up to a total of US $11,000.000 contracted by Fomento,for impro~ing.and expanding the public transportation system. Of this sum, US $1,000,000 were paid to the American and Foreign Power Oompany as partialpa;j'" re:"_t lor t~'l.8 existi~J.g tractioi.1. S;lstSr:l. !t'he Central Bank of Chile is authorized to sell directly to Fomento the foreign exchange necessary t. service sUQh loans without the intervention of th.e Oonsejo Nacional de Comercio Exterior.' ENTCt!l Ability to Service the Loan: Fomento estimates that the 2.50 troller co~hes will increase El~Ols net income by the equivalent of more than US $1,000,000 annually. This calcu lation rests partially on the intention to raise fares by 1.50% over those now charged on street cars. Fomento has stated that provision has been made for increasing fares on all new vehicles used by ENTC in those cities and that eventually the street car tares will be increased by the same amount. With the above increases in net income, E~O would be able to purchase such foreign exchange necessary to service the loans, as is made available by the Oentral Bank. ~ure of the Loan: The loan is to be used to replace a system'of transportation, a large part of which is completely worn out as well as obsolete. Reserves have not been accumulated in the past to finance the proposed replacement, although the present operating company has been in existence for only a year and is not responsible for past failures. !t'he replacement of a \l1'o.rn out transportat ion system can scarcely be ¢lasBi:tiied as a development project although Fomento claims that it "7ill c tne,easi ~e tempo of economic activity in Santiago and Valparaiso. I : (4) PORT 11ECMNIZATIOn ;pROJECT Fomento has.applied to the ]ank for a loan of U. S. $1,500,000 for bulk cargo handling equipment for the following ports: Investment Chilean Installations U·. S. Dplle.rs , 'Equivalent in Ur S. Do.larg) · 4 ,t. . ; Antofagasta 515.000 77,000 Coq:uimbo 392,000 59,000 Valpa.raiso 444,000 67,000 San Antonio 146,000 22,000 Tote.l 1,497,000 225.000 Fomento proposes to purchase t.rtth the proceeds of the loan: (a) for each of these ports, an unloading tOl11er of a brealtcio\'.rn cap~it7 of about 300 to 350 tons of coal per hour;~ (b) for Antofagasta. B.nd Coquimbo, loading towers; (c) for Antofagasta., Coquimbo pnd Valp?raiso, belt conveyors. ed) for Antofagast~. B.nd possibly for Coquimbo, cargo stackers; and (e) for Coquimbo rpilroad tr~cks ~nd hoppers. '.'Cbe specific debils regerding the above equipment have not been pres~nted. But Fomento has eng~ged the services of the Frederick Snare Co~rat:loll to l'll8ke e. dat('>.iled stv.dy of the specificB,t ions of the me.chine17 and .qu~~ment reouired. The a.bove estimate of costs was me.de in cOllabora tioniwith that corporation. '!he bullt c~.rgo handling fe,cilities at the four ports mentioned above are ¢rudie. :But in other Chilean ports very efficient}u!ndling facilities have ,been iinstalled. }10dern bulk cargo handling facilities have been inst#lled at Cruz Grande by the :Bethlehem Steel Corporation for loading iron ore tor export to the United StF.'tes pnd l!,t Coronel and Lota by the C;ch,.,ager 71. Coa1Compa~ end Lota coal mines. respectively. for the loading of coa,1. c The tt.itr~te i companies e,re n01., inst?lling mechanical bulk loading facilities at Iquique [l.nd Tocapilla, through '·rhich the major part of Chilean nitr~tes are ~xported4 It is planned also to install bulk unloading facilities for doa1, iron ore and limestone at San Vincente »ay. This will be done by the tt.e", steel mill ,·rhich ,dll be the major beneficiary. As !:tlready sbted. Fomento he,s engaged the Frederick Snare Corpora tion to make det~iled specifications of the e~ipment re~uired in the four port.. It ha"s not therefore been able as yet to present those specifications to t~e 'Bank. Provisionally, hot·rever. it should be noted that meche.nice,l bulk hand~lng facilities M.ve been successfully oper~,ted in other Chilee,n ports as alre~dy indicated. Uo labor diffiqu1tlea should be encountered in m~king the new in8te~lations. At both Antofagasta and r.!oquimbo additional employees 'Ifill be reQUired. At each of the other t\,10 ports, San Antonio and Valpara.iso, Fomento has estimated that only six regu.1ar employees ,·Till he~ve to be disc~rged. OVne[§hi) apd QperAtiona Fomento plans to org1'lnize a eompe,ny representing itself ~nd the major private enterprises ,·,hleh 'fill profit by the insta.llations; the ateel mill,. the Lota and Schwager Coal Comp,;nies, Vene, del Mare Sugar Refinery, Juan Soldado Cement Plant, the Melon Cement Pl~nt and others. This company will the~ ~dertake the acquisition and installation of the facilities and ,,1111 ~ither transfer them to the Port Administration J\uthorlties for me.nag~me~t or \·1111 oper~,te them itself f:1nd pay a royalty to the Port Administratton. Fomento states that until the loan is granted final steps in this lIe.tter Qa,nnot be taken. Ne1!d tor I Hod§rn :Bulk Qs1rgo HeJadling Fa.cilities c Leading ports for bulk ea.rgo in Chile ~re: 1. Tocopilla 2. Lata 3. Coronel 4. I qui que .5. Cruz Grande 6. San Antonio 7. ValpA.raieo 8. Antofagasta 9. Coquimbo As already noted. bulk ~.ndling facilities h8.ve been or are be~llt£ l.ns~alled by pl'ivl".te interests at each of the first five ports above. In pre"'ar ye~rs. about 300.000 tons of cOElI eMus.lly \<'ere unloaded at 1\1'£..lpl"r!l.1so. Since the 1;'ar, this tonnege has incree.sed to a.bout JL!·O,OOO tons annually. All the coal. at present about 380.000 tons e~ually. consumed in the Santiago Zone is unlof!"ded at S~n Antonio. ·'ith the eompletion of the ete.l mill ,.,hieh ,,1111 provide gas 'by pipe line to the Santiago Gt'ts Plant and ,·ritl the electrification of the State Rail'~'a'ys. for '-thich a loan h~.~also been requested of the Inte~.tional E~ru~. tonnage is expected to decrease to 200~000 annually. AntofA£B.sta. has long been an import~nt port for exports of nitr~tes. Its activity is expected to increase very substantially \11th the opening of the steel mill 9.nd subaidl~.ry pIents. for very large quantities of hitherto une~lolted limestone are found in the area. Fomento estimates that annual limestone requirements of the steel mill. a carbide pl~t. a cement mill, a lime and fertilizer plpnt ~.nd Qther chemica.l plants. all to be located in the San Vincente Bay area. ~ill be about 330,000 tons annually in 1950 and thereafter. Present a.nnual coe.l unloadings of 40.000 tons ~.nnually at this c. port are expected to continue. to u~e the facilities for loading nitrates. In the beginning at least. it is not planned ~he installation of the , Juan Soldado Cement illl in 1946 and t1ctiTities jof other factories in the area ZW.ve raised coal req_uirements in ! I the 1eg~on around Coquimbo from less than 40,000 tons annually in the pre 1,'rar peri~d to 1,00,000 tons annually at present. Fomento expects these require mentl\l to increase to 140,000 tons in the near future. The new Steel 14ill will talce about 40 ,000 tons annually of manganese ore from the Coquimbo a.rea, and fertilizer plants in the neighborhood of the Steel Hill are expected to take about 30,000 tone annually of apatite from this area. Ceme~t from the Juan Soldado PIEnt is now loaded in begs. The possibility of d$liTering it in bulk is no,., being examined. The loading facilities for ~hich a loan is requested are, according to Fomento, adequate to ta.~e care of bulk cement in addition to apatite and manganese. Econgmio jffll'§,ibUity pf t;b& . 4 . ~guiment The savings anticipated by Fomento as a result of the installation of ,bulk handling facilities at the four ports are of two kinds: (a) Savings of ship time a,nd so a reduced requirement for ship;Jin.g space. (b) Savings in ~ort handling charges. The former type of economy ce.l'l also be translE!ted into foreign exchange savi:.1gs. a. S,"viDEs drf Ship Time; Fomento st"',tes that the averD,ge layover time per shil! of h800 tons of bulk cargo at present is t for each of the port ~. as follows: Lgyovet Time (days) Antoi"agasta Coqulmbo Talpe,raiso San Auto:::lio c These figures t 800 - 1350 tons per dey, compare very favorably "rUh the ~xperl.nce of ports in other countrtes in which bulk cargo is loaded Bnd unlo~ded ,d.thout mechanical equi}?ment. 74. Fomento estimates that a ship of 4800 tons of coal can be unloaded c ",ith mepbailical facilities in one day and the,t loading time is even less. i ! I: It ~oin~s out that one of the nelll boats of 18,000 tons deadweight of the Bethlehem Steel Corpnration completes loading in Cruz Grande in 4 hours and that 4800 tons of coal are loaded in 19 hours in Coronel. Since loading and unloading can be carried out almost simultaneously, the !dual operation reo:uires relatively little more time than e.ither separately_ Fomento estima,tes the savings in ship time as a result of the instjallat ion of mechanical handling facilities rather conservatively as follows: With Bechanical Present ~erations Fa.ciliq,es Ammal Ho. of Days per Tote.l De.ys per Total Total ~ort Tonnag~ Boat Tri12s· Bola.t Daile EOS1:t Dail s Savings ~ 111* Ant oifagast a 120,000 17 5 85 1"8 26 59 Coqujimbo 170,000 21 6 126 2 42 84 Val~raiso 300,000 6; 3~ 221 l~ 95 126 Sen lAntonio 200,000 42 :f 3""> 147 I-\. 63 84 ~otal 790,000 143 579 226 353 Sinee manganese, limestone and apatite load more heavily than coal the tonnase per boat is greater in Antofagasta than in the other ports. irhe 21 ships required to bring 100,000 tons of coal into Coquimoo \·,ill ~arry 70.000 tons 0 f mangane se B.nd apatit e out. *. One day layover for loading limestone and two day layover for unloading coal and loading limestone. Of the 17 ships carrying limestone, nine \~ill haul coal. The above table indicates that the installation of mechanical loa:d:ing and. unloading facilities in the four ports would save a totf!l of 353 ship (of 4800 tons) dl'tys annually, The tonna,'Ses represented for each port are, however, minimum. In fact, as alre."!.dy pointed out, Fomento expects Antofagasta to handle 330,000 tons annually in 1950 and thereafter, Valparaiso to handle 340,000 tons annually and Coquimbo, 200,000 tons c - OJ 1i4! ~f the higher tonnage figures were used the follo~ing results c ,·,oulq. be: 01:ltained~ Hith I·fecha.nical Present Ooe;tp.tion& ;fF1dJ,it1es . Annual Ho. of D~s per Total Days per Total Tote,l Por~ , lJ:on!!li!g~ Boilt Tti:es Boat ~ :Boat Da;'£s S~,vings Antofa~sta )30,000 47 5 235 for 9, 2 56 179 , forj3. 1 Coquimoo 200,000 )0 6 180 2 60 120 Valpara.i$o 340,000 72 3-l 252 l'~ 108 144 San AntloniO 200,000 42 3; 147 li 63 84 Totlal 1,070,000 191 814 287 527 If the above tonlU'ges are a.ctually handled 8.S Fomento forecasts, 527 ship d~s ..., ill be saved annually as a result of instr-.lling mechanicral handling facilit1ies. If due e,llo\'Te,nce is oode for idlo time far ship oointenance and repair,: it appears that t,·,o ships ennually "r1l1 be saved or relep.sed for other services if mechanic~:tl handling fF.tcilities /?,re installed in the four ports. Apptoxiootely the sarne conclusion "'B.S ree.ched by Fomento B,nd outlil19d in a co~ication dated April 7, 1947 to the :Bt'tnk, 80S follo\1s: The shippiDt~ tonnage necessary to move the tot@.l future bulk ca:rgo would 1;Ie: Without Port Fa,cilities 28,700 tons With " " 18.800 tons ~hippitl tonnage saved 9,900 tons According to Fomento t the cost of shipe of the type needed for Chile1s bulk ca.-go trgde is between U. S. $300 and 320 per ton of cape.city. T'{tTO 4800 ton shi]ls ':muld therofore cost l'\oout U. ~. $3,000,000. OIl still another be.sis, Fomento . estimates th8,t the l'I.nnua1 gain in foreign exchange from the saving. in layover time Md consequent relee.se of ships "lould be about U. s. :';600,000 per year. 'lIhis is 'based on the I'l.ctual net foreign exchange earnings of Chilean ships m~'I!1 eilg~t;ed in foreign trpde (note tM.t this is M1 net profit). The release or saving of ship}?ing discussed above is real and not C theorettcal. 'rhe present tonnfl.ge of Chile1s mercha.nt ma:rine is 270,000 tons '16. dead"",.,igl'1t .! U~der Chilean La,., tall coastt·rise shipping in Chile must be c performed. bt Chilean ships and in the coa.st~·ris' I ~vent of e. short?ge of ships for the q:'ade. Chilean ships may be t?ken off foreign trade routes by order of tnb Government. The authority of the C-overnment in this respect has been exer~ised in tll.e ;;>ast and ','ill be exercised to a grea.ter extent in the fllture unlesis the merchant marine is expanded. The total foreign tonnage carried in Ohilean pottoms in 1945 ~",a.B more than 30% less than in 1941 and 10% less than in 19~9. In the latter year, 18~ of Ohile's foreign treAe, exclusive of petr~leUII and iron ore ~ t'1aS carried in Chilee;n ships. in 1941, 27%. and in 1945. only 15%. Of the 270,000 tons at present in operation. 220,000 are suit~ for foreign trade. 140reover~ according to Fomento. Chilean steamship compejniee plan to -'buy in the ne~r future 123.000 tons of shipping, of "Thich 49,000 tOns ,·ril1 be devoted to coastwise tre,de end the remainder. 91.~.000 tons, tp fo~eign trade. The savi~s lnvt Ived in reduced layover time may a.1so be cl'!.leule,ted on tHe basia of (1) demurrage ra.tes and (2) de.ily costs of chartering vessels in Chile. Fbmento estimates that the tot~,l cost of operE!,ting a. ship in port is t~e equive,lent of U. s. $850 per dey. Therefore, the savings that \'Till resuljt from. the installation of mechanics,l fa.e11it1ee in the four ports will range fr<:>m tbe equivalent of U. S, $300,000 to 4.50,000 @nuallyl' Demurrage rates in Chile have not changed in accordance with prices in g~neral e,nd shipping coets in particular. They a.Te tbe equivalent of U. S, $200 tor each of the first three days, 500 for the fourth and 900 for the fifth and each succeedi~ day. InstfJ.llation of mechanical handling · facilities should. therefore, res~t in a reduct1o~ of total demurrage char$es in the fo~r ports by the equivalent of U. S. $150,000 to 200,000 c ann~lY. b. R~c~ion of Port ijgndling Charges! Bulk cargo '8 handled in the ports at c preselljt ~or the equ1ve,lent of U. S. $0.47 per ton during the POrIII8,l work I. , sh~ft i(8 am - 4 pm) and at a 50% higher rate between 4 pm and 12 pm. Since 10d-ding arn.d unloading is generally done durillf2: both shifts, avere,ge handling coats are the e~uivalentof U. s. $0.59 per ton in San Antonio and Va~paraiSo'I In Coql,limbo the entire cargO B,nd in .Antofagast e, half of it requires double handling. ~l,.:barge to or from the ship. Accordingly. the average cost of handling is the equivalent of U. S. $1.18 and 0.88 ~r ton, re$peotively, in those t,·,o ports. In the follo'·ri~ teble the handling costs with mechanical equipment, as estimated by Fomento, are compared with those of :present operations~ The former costs ~nolude a royalty to be collected by ;the Port Administration on the meehan~ca1 equipment and amounting to the e~valent of U. S. $0.15 per ton. PORT Rate Per Ton (p. !. «911ar eguivglent ) Ant 9 iega,st e. C99uimbo Valparaiso San Antoni9 ~er e~iBting operations 0.88 1.18 0.59 0.59 If!ith mech.·'nica1 equipment 0.73 0.48 0.40 0.27 S~viJ.')gs per ton 0.15 0.'70 0.19 0,32 The O<":lculation of expenses of handling bu.J.k cargo ,.rith mechanical equipment appears to be conserative. They "'ere be.sed on the assumption of minllIIlWll rlll.ther than the potentiallY much larger tonnages in the various ports. About 57% of the total expenses are estimated to be for depreciation and interest. The latter item is estimated at 3~% for the proposed Int.,rnatioJla1 :Bank Loan. :But even if raised to ~t the costs per ton ,,,ould be lnoreased by less than the equivalent of U. S. $0.05. Power costs 1trhich represent somewhat less than 4% of the total are based on the cost of present operations from steam and diesel plants although the installations in c Valparaiso. San Antonio and Coquimbo "ri1l '\,lse re1$.tively 10,"1 rates. ~droelectric energy at ,·rages and salaries '1hioh represent about 30;; of the __ J""U"_1_______ Ulli _ _ _ _ _ _ _........_ _________ ......._ _ _ _ _ _, __ " " ! ~ W 1 , _ ~ ~ _ . " 78. c total , COist~i ' are based on prevailing rates; i f anything they ere some't'1r.a.t higher. The number of salaried and annual employees estima.ted by Fomento for each port appears to be reasonable. The rema.ining 9% are for reps.irs and contingencies ~nd are conservative. c. Tot~~ S'lvings: The total savings in reduced layover time and in lo,:rer port handi1ng costs have been estimated by Fomento as follows (in U. S. $ e.quivalEtnts) ; Layover Handling Tot~,l faIt ner Ton Ret Ton :eet Ton Jumy,al Antofagasta 0.42 0.15 0.57 68.000 Coquimbo 0.42 0.70 1.12 189.000 Valparaiso 0.36 0.19 0.55 164,000 San Antonio 0.36 0.32 0.68 135,000 Total 556,000 The annual ee,vinge are sho\'ln at the eC!.uiv~.lent of U. S. $556.000. They, are based on minimum cargoes for each port. Accordingly the slight adj~tment that might have to be made for interest and for any other small errors in calO'Ulat iug costs must be offset age.inst the probable greater saviJlgs from the larger tonnages actually anticipated by Fomento. The forego ing discussion may be sUI!lDl8ori zed as foll01:1B: An invest... ment of the equivalent of U, S. $1,722,000 of which 1,500,000 is to be in foreign exchange, "rill probably yield savings eQ,uivalent to \.rell over U. s. $500,,000 annually and may increpse Chile's net foreign exchange posit ion by as mUch as U. S. $600,000 per year. Conc~usion The Chilean economy "rill profit by the USE! of a loan of U. s. $l,5PO,OOO for the p'I.lrche,se of bulk handling equipment for Antofagaste,. Coquambo. ValparaiSO and Sa.n Antonio. Annual savings from the use of such c equipment "'ill be the equivalent of U. s. $500,000 annually or more. If the equitpment I.e not installed, at least one and probably t\'TO ships \·,ill bave to , ' " . _ ._ _ _ _ _ _ _. . . . . . .....",fl",,·._nlll_-_9_ ],ftI , tK ' ......._ _ a ...._ _ _..._ _ _ _ _ _ _ _ _ _ _ _ __ ......... ' , ItJ " , ~ ! I c be ~~h2_,ed at a foreign exchange cost equivalent to U. S. $1.500.000 per Shi~. I iA1iernative1Y, added foreign ship:oing ';1i11 be necessary to carry 1 ' Ch1~e'~, foreign trB.de ",ith a foreign exchP,nge outlay r~,nging up to the i eq,u~valen~ of U. s. $600,000 annually. Fomento has estima.ted that the use of Jliechanlca1 ~ndling facilities in the folU" ports t·,il1 reduce ship layover tim$ t;lnd port handling costs by an amount eQuivalent to at least U. S · · $556.000 annually, so that the totB~ investment in the port equipment to be purchased '''lith the Interbanlt loel1 could 'be written off in a.bout three years; it ijs \-TCrth noting in passing that the estimated life of most of the eQuiipment is 25 years and of the rems,inder, 10 years. Some of Fomento's cost, estimates for the net" eQ:uipment, particule,r1y tha.t for interest, IlItly be un~uJ1y lot·,_ But the estimates of tOIU\ages to be handled in each port are very' comservative I'Ind aotual savings mpy be greB_ter than those estimated by Fomel1to, l~chenical handling facilities for bulk cargo have been operated very, sucoellisfully in some Chilean ports for many years. There is, ther~fore, little doubt th8t equal efficiency in operating the equipment for ",hioh a loan is SOUght from the Interbank "'ill be e.ohieved. c _ _ _ _ _ _ _ _ ' _ 1 _ 1 ' _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ 80. c (,5) RAIL~!AY ELECTRIFICMJiION PRQJ:;CT !rhe Chilean Ste,te Raih/RYs have reouested a loA.n of U. S. $18,:000.000 for electrification of the Sp.n Antonio - Se,ntiago - San Fernf.'udo line. Deb.iled information on this project ,-ras only recently submitted to the 'Bl3.nk alld is under study. The de,h, have re.ised questions \·rhich are being discussed tdth the representatives of the Re.ihrays. The :e~nlt is not reedy to repo~t on this project. c _ _ _ _ _ _ _-1 ___,_., _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ () o !OUl APP.RO%IMA.'l'B I:JVESTMEES II' MOS'!' IMPORl"ART :lUCTlllCAL VOlWl II CHILIl SPOI'SORiUl AID J'IlllI'CID BY 'tBE CORPOlIAC'l'IOIl' DB J'OMDTO 'O'lIDn If! CREDlrrs WIn THI EXPORT .&:I'D IMPaRl! BAR CJ.. PJ..'CITY C C S '!' (!n U. S. Currenc'rl Da.te of NQ Name of GENER~L DESCRIPTICP K'!1. i::-. E.F. i::: CO!!l- Invest!!lents Total Cost of the Project genera Equipment toro 1 Toco-::li1la A distribuHng concern formed btl' the Co!"")ornc:!.on ce FO!llC'nto in 0 0 1942 $ 13 ·.500 : $ . 33.400 $ 46.900 cooperation ~dth the mu::'licipp,l ,!'Overn:nent of Toco,il'.!'. Sells power ge~erated in the C''":.i1e bxploratior.. COZll'lany'iS T.lo·:!6r plant. 2 Copiapo A distributing COlD:?IIDY ,·,hich gar..erates its 01''!'l 1)o~"er in a 948 1.12.5 1943 92.600 100.200 192.800 Diesel Plant. The cO:llmny was f{)r:ae;l \·,ith ')articipation of the Coryoracion de Fomento Rnd the !nunici~aJ. government. of Coniapo. 3 Juan Soldado J, steam power plant. forming })art of the J~.lI1.n Soldado Cement 10 · .500 1h.300 194.5 4.50.000 420.000 870.000 Plant Installations. 'This is a stock cor'1)or['tion ir.. 'ihich the Corpuracion de Fo~ento fi~anced a large ~hnre of its cost. 4 Coquimbo Sys The equipment included in this tf,ble covers P. 1. 500 KiTA sub ~ 0 0 1945 27.600 60.000 87.600 tem statio::! in Pll..rl'Ltaquo' a!lJia 1.000 XV.". substatioi:l in Dvalle~ The ' cost in Ohile covers also the ccst of e transmission line. 5 Puc1arc Seco~d hand equipment originRlly ~rchused for Puclaro ~roject. 0 ¢ ... : 36.700 0': 36.700 6 Cvalle i, distributi:",g co:;rpan:r which gener:l.tes its O"'!'l newer in a 948 1.12.5 1943 114.800 llO.OOO 224.800 Diesel Pll'llt, 'built bY' the Corporacion de FOJ1ento (::ndesn). 7 Los Q;uilos A hydro-electric plant utilizing the waters fro~ the l"concaqUc'l. 20.000 24.000 1943 .522.700 3.373.000 3.89.5.700 and Colorado rivers. This project includes the transmission line to Calera Elrod the step-do'o1Tl substntior:.s. It belongs to Sociedad Cement 0 "!l Melon". 8 REI Melon" J. reserve Diesel Plant of the Sociednd Ce!'lento "El Melon". ! 2.600 2.920 1942 70.400 60.000 130.400 Diesel Plant 9 Vo1can A hydro-electric plant ruilt by Compa!1in Chilena d.e Electrici 14.4.50 17.7.50 1944 .545.900 4.660.000 .5.20.5.900 dad in the Volcan River () () (Cont1d) 10 Puntilla N'r 2 J.:n enll\rgement of the Pu.nt111a InstRl) ption which includes the 10.000 12.000 1944 : $ 217.)00 1 $ 78);000 1.000.)00 the construction of a new intnke I'.nd snnd trflT.ls. enlnrgement of the cAnal. Rnd inBtAllntion of R new unit. It belongs to ~ Gompanin de Pnpeles y Gnrtones, S.~. 11 Los Bnjos J. hydro-electric pl:'lnt in the Ml1.iT.lo River, bunt by ItFnbricn 6.000 7.500 1945 16).100 930.000 1.09).100 la-cioMl de Cl'.rburo". r : 12 SI\U2:Al A hydro"le1ectric plnnt in the CP.cm'"opl River, buUt by the 96.000 100.800 1946 ).400.000 ~ 12.600.000 16.000.000 Corporacion de Fomento (END3Sj,). It includes the new trl'.ns ~ mission lines R.nd substl".tions in this zone. ·. ! 1) El J.bllIlico A hydro-electric plnnt in theL~jl\ River, built by the Corpo 86.000 107.600 191.!6 4.940.700 6.55).000 11.493.700 racion de Fomento (ENDESJ.). It will M.ve l'\ finRl instl".lled :. : Cl".pacity of 129.000 XVA ",hen the fifth FInd sixth units I"xe t : installed. It includes the trnnsmission lines and substations 'I: : of the 2:one served. 14 Pilma1quen hydro-electric pll'nt in the Pilmniquen River, built by the ~A 16.800 20.600 1944 1.183.400 1.710.000 2.893.400 Corporacion de Fomento (ENDESI,). Two units of 5.600 !VA Rre t .: .: Rlrep~y in operation p~ n third one is under construction. In ~ : ! the fUture, two more units of 10.000 XVA will be installed, : giving the ulpnt a totl\l cR~city of 45.800 XVA. t .: i 15 t Other Invest- : Loans mRde by the Corporacien de Fomento in ChUe to seven>.l ments ~ municipalities, power distributing oompanies, and contribu o o l~ 147.600 1.100.000 1.247.600 I -: tions for reser.rch /'Ind educntioM.1 purl)Cses in connection with the develo~ent of electric "power. ~ 1 TOTALS: 264.246 : 309.720 ·· $11.926.)00 : $)2.492.600 $ 44.418.900 1 j TO BE FIN'lJlCED BY THE OOBPORl.CION DE FOMENTO t .: UNDER APPLIED INTERBAll'X CREDITS t I 16 Los Molles : A hydro-electric plnnt in the Los Kolles River, to be built by 17.700 1.100.000 1,,500.000 2..600 ..000 r the Corporncion de Fomento (ENDESA). Includes tr"nsmission : lines Md Bubst".tions of the zone served (Junn SoldRdo - Penon t And~collo - Ov~lle - Los V~lles). f () () (Cont1d) ! 17 Los Girones A h1dro-electric n1ant in the Maule River. to be built by the 64.000 $ J.250.000 : $ 5.800.000 : $ 9.050.000 Corporacion de Fomento (ENDESA). It will have a final instAl I led capacity of 85.500 KW when the third unit will be installed.: Includes transmission lines and Bubstptions of the zone served 1 ~ (Los Girones - feno - Curico and Girones Vila Alegre Talce). ~ A hydro-electric 1'1Allt in Cu.lefquenl~ke. to be built by the 40.000 2.750.000 4.200.000 6.950.000 ! 18 Guanehue ! l Corporacion de Fomento (ENDESA). Includes trAllsmission lines " ~ and substations of the zone served (Gunnehue - Loncoche - Te1ll\lco and Gunnehua - Vl'lldivia). ! ! 7.100.000 11.500.000 19 Secondary Dis-: In regions served by Los Mo11es - Los Girones ~ Gunnehue. * 700 ,000 050.000 1.750.000 tril:ution ~ t 20 Mechanical Irrigation San ll'ernando Valley development - l/.a.taquito Vel1ey Deve1opment falca Ejlld Villa Alegre deve1(jT)lIIent - : t 200,000 :(1) JOO.OOO 500.000 ! Contingencies and Construction E~ipment 1.500.000 1·500.000 f oJ :' T,O TAL: 121.700 $9.500.000 $12.85u.000 $22·350.000 TO :BE FIlWlCED I!Y FCMENTO UNDER-PROJECfED CREDITS 21 El Abanico Instnllation of fifth and sixth units. 44.000 22 Plllll!!.iquen Instl'lllation of 2 units - 10.000 XVA. 20.000 :' : 2J Los GirlPnes ; Installation of third unit. 21.500(2) 24 GUc'Ulehue Instnl1ation of two lIl.re units. 40.000 (1) Assumed average 1.5 Chllenn Cfl.Jlitpl for 1.0 U.S. capitnl (2) Or 29.000 XVA () (} TABIE 2 <"" ~< CHILEfS ElECTRIC POWER CAPACITY - PRESENT AND FUTURE QeograEhical Installed Capacity in 1942 in lOY Planned Planned other Region Plants Hydro -- --steam TIre-se1 nas «< _. Te-tal Increase Increase Posaib.'16~ -, ...·..... ,~ -, - ., -< 1 - Far a) Industrial ~~~ - --« North Chile Exploration ,llO,,"OOO t Andes Copper 4,300 36,000 AnglCt Nitrates 1,3,700 Lautaro Nitrates 16 ..750 180,'750 b) Public Utilities General 25 34 8,226 I Copiapo 8,285 1,000 'lUTAL 4.325 146 ·.034 38.676 189.035 1.000 2 - North a) Industrial Bethlehem Steel 7,000 150 7.t 150 5,000 Juan Seldado Cement 10.500 b) Public Utilities 293 2,244 167 Ovalle 1,000 Los Molles 16,000 Botaqui 4,600 Cogoti 3,000 Guyaean 2.704 6~000 , TOTAL 293 7,000 2,394 167 9,854 16,500 16,000 13.600 3 - North a) Industrial Central Papelea Cartones 12,000 10,000 8,000 Azucar 5,000 2,500 Braden Copper 40,000 Cem.ent Melon 17,500 Cia Neal Carburo 67.000 _ 6..000 b) Public Utilities Cia Chilean) 4,000 Other Cos ) 84,944 < 54,239 1.t234 ,112 Vole an 13,000 Bauzal 76,000 Los Girones 52 .t300 20,000 405,000 " ¥8r~ - .- --" _.. _. 141,529 -- ,--- .- ,,- , --- - , -. ., - - .... ... - - - 29 ,5 ...... ~- 52,3' - --. 425, ~ .-.-. ...... ... ( l ( TABLE 2 (continued) Geographical Instaii~d--Capaeity in 1942 in KV! Planned Planned Other Region Plants Hydro Steam Diesel Gas Total Increase Iner05l.se Possible -, ..........- ........ -, . .. --------_. 4 - Cen a 1 Industrial tral. Abanico , 40,000 40.000 . bl Public Utiliti.es Concepcion 25,286 , Others ' 689 643 3,065 202 29,855 . Abanieo 40,000 TOTAL 689 25,929 3,065 202' 29,855 80,000 40,000 - 5 - South a) Industrial Central b} Public Utilities 1,987 3,5'3 3,14.3 356 Pilmaiquon 13,500 24,000 Guanehue 36,000 36,000 1la.nio 500,000 Coli~o La~ Chapo RallrUl 9,049 - TOTAL 1,987 3,563 3,143 356 9,049 . 13,500 .36,000 ,60,000 --''* 6 and 7 - bl Public Utilities 157 1,300 no 76 1,.643 South . GRAND TOTAL: 1.44,395 253,065 48,.612 1,913 447,965 238,000 104,300 1,038',600 TOTAL (a) ,6,300 168,000 30,600 254,900 79,000 Industrial TOTAL (b) 88,095 85,065 18,022 1,913 193,065 159,000 104,300 1,038',600 ~ Publio utilities .. . .. '\ (, ( ) TABIE 3 CHIlE'S PUBLIC UTILITIES: EXPECTED DEMAND AND SUPPLY OF ELECTRIC POWER Geographical Region Expected Supply Expected Demand E.xe:eSSQI' Defici:tu-Capacit, 1951 1955 1942 1951 1955 1951 1955--- . ~- - -.-.~ ~ - 1- Far North 9,285 9,,825 8,285 16,534 20,811 -7,249 -11,526 2 - North 14,204 30,204 2,704 5,314 7,184 +8,890 +23,020 .2 - North Central 234,529 286,829 120,000 286~500 377,500 -51,,971 -90,671 !z - Central 69,855 69,855 23,000 49,657 67,479 +20,198 +2,376 '.' 5 - S.uthCentral 22,549 58,549 6,000 21,640 29,.400 "-909 +29,149 6 and 7 - South 1,643 1,643 1,643 3,200 4,428 .;.1,557 -2,785 " TOTAL 352,065 456,365 161,6,32 382,845 506,802 -30,870 -50,437 , . ---- ~----- ? - , .-, ( I (. TABlE 4 ANl'HJAL GROWTH AND DEPLETION BY GEOORAPHIC GROUPS A...""ID TYPE OF WOODED AREA IN CHILE (000'8 of Cubic Feet) Geographic Natural Fcrest Plantation Woodland TOTAL Group Depletion Growth Net DepletIon G~ Net Depletion rrro1rik~ Net DepletIOnl1rowth Net ~w- +w- .~- .~- cr \ 1 425 ;03 +78 31' 40 -27' 740 543 -lcrt 2 7,226 4,262 -2,964 31,201 22,922 -8,279 20~177 7,144 -13033 ,s,604 34,328 -24,216 -3 18,834 9,1,6 -9,678 15,.413 49,.l61 -4-33,748 12,56, 7,739 -4826 46,812 66,0,6 ~19,244 4 694,082 275,'70 -418,512 7,015 21,,076 +14,061 ',454 2,.682 -2772 706,"1 299,.328 -4tJ7,223 5 41.3,520 266,468 -147,052 1- +1 413,520 266,469 -147,051 6 1ll,841 63,41.6 -48,425 1ll,841 63,.416 -43,425 TOTAL 1,245,503 618,872 -626,631 54,054 93,663 +39,,609 38,'11 17,605 20906 ~,338,068 730,l.4O -607,928 -~.-.- .......... ~ ....... - . -- - '-- . -- -- -- L - . -_ _ ........ _.~ -- ....... -.~ ....... - Source: U .S.D.A. Forest Survey ( " () TABLE 2 .i.. __ .. VALUE OF ll1PORTS OF LUMBER i WOOD PRODUCTS AND OF MECHANICAL AND CHEMICAL WOOD PULP IN CHILE 'Equ:ivalent OOQl S of US $) 12j2-12~2 Y 1937 1938 1939 1940 1941 1942 1943 1944 1945 gj Rough lumber 448 297 89 51 172 131 2B5 125 100 (mainly pine) Processed lumber 21 li8 B3 93 66 54 51 37 67 84 Cabinetwork and other 85 77 83 40 34 413 68 88 137 wood manufactures y Pulp TJ6 952 613 1,.171 1,,646 2,051 555 1,505 1,681 Other forest raw 241 208 294 392 598 682 298 46ti 900 materials 21 ,Tc:rtal 1,..628 1,617 1,172 1,720 2,504 2,963 1,~4.3 2,245 2,902 11 Source: Annuario ~Com,ercio Exterior, 19.37-1944 Y Source: EstadisticaChilena" Dec .. 1945 and Preliminary Import Code Sheets, 1945· .JI Veneer for furniture, pe~s', planed or dovetailed wOf\"d for construction, wood in strips for walls or grillwurk, wood ,in planks for boxes andsaddletrees, and planks or beams af wood fiber pulp_ y Wo<-d manufactures, ·varnished,. 'veneered, waxed or painted; wood manufactures, carved or sculptured; trunks; valises; smoking pipes; buttons; containers; pipes and tubes; handles f"or tools and equipment; wooden furniture.. . 21 Charcoal, vegetable wax,. cork and peat, sheets of Dark, roots for medicine and industry, medicinal plants, gunlr rubber, resins, dried mushroems, firewo('d, chips ... ( J ( ~ TABlE 6 VALUE OF EXPORTS OF FOREST PRODUCTS OF CHILE, 1937-1945 11 . (Equivalent OOO's of US$) 1937 1938 1939 ~ 1941 1942 1943 1944 1945 Unprccessed lumber 1,.072 1.122 1,438 829 649 994 1,364 2,029 2,100 & other forest products Y Processed l~er JI 129 155 52 55 96 14.3 / 453 571 481 Cabinetwork & wood 12 17 23 27 120 160 23 24 42 manufactures TOTAL 1,213 1,294 1,513 911 865 1;297 1;840 . --2,.624 2,623 11 Sources: l~nnuario de Comercio Exterior, 1937-1944, and Estadistica Chilena, Dec. 1945. y 85 to 90% represents lumber; the remqinder, charcoal, firewood, sawdust end ShoWings, quillay bark, willow rods, and reilro~.d ties. 21 Woed for construction, polished or stained strips, wood for roofs, plywood. W Barrels, boxes, moldings, doors, furniture, heels for shoes, broomsticks, tool handles. (, () TABLE 7 INVESTHENTS IN FOREST INDUSTRIES IN CHILE TO BE MADE UNDER '1.'.HJLLOAN APPLICATION TO THE BANK AND'THOSE INVOLVED IN F0100IT0' S LONG-R1J-lGE FOREST INDUSTRIES PRG'GRAM (all Values expressed in U. S. $) PROJEG.TS Imported Equipnent Installations in Chile Werking Capi tal Present Program Total Program Present Program Total Program Present Program Total Pre.', Four Sawmills $ 3~61,000 $ 12,221,000 $ 3,000,000 $ 10,900,000 $ 1,500,000 $ 8,300,00( Pulp mill 1,440,000 4,190,000 900,.000 2,500,000 400,000 2,200,00( Insulating & hardboarc 1,200,000 2,800,000 360,000 880,000 300,000 900,OO( mill ~a Preserving Plant 200,000 200,000 390,000 390,000 500,000 500,00r. SUBTOTAL · 6,.l01,000 ll~411.t000 Jp 4,650,000 $ 14,670,000 $ 2,700,000 $11,900,00( Lumber- yards 380,.000 100,000 Saw Mill Modernizatior 940,000 500,000 Cooperage Plant 25,000 16,000 100,OOr: Prefabricating Plant 200,000 100,000 400,00( Furniture 200,000 150,000 200,00:, Fiberboard Containers 100,000 50,000 20,00i Wood briquetting 100,000 20,00' 20,00!: . Wood Hydrolysis 1,000,000 600,000 400,00(' Wood Distillation . 700,000 400,000 60,00(. Plywood 500,000 300,000 .300,.00(7 TOTAL iP ~lOl.OOO $ 23.556~000 $ 4.650,000 $ 16.906.000 $ 2.700,000 $13,)+00 J OO~ % of total 24% 29% 18% 20% 12% 17% I Source: Fomento "Fo'rest Industries Plan for Chile". I· ! ( ) ( ) TAmE 8 COST OF PRODUCTION OF FINISHED l!ND ROUGH LUMBER IN CHILE UNDER V.'.RYING CONDITIONS {in U.. s. i) Existing Portable Puerto Montt Insignia pi..'le Cherquenco Antihuala Estimate for lIlO(i sawmills _mill mill . mill . mill . Portable Sawmill 1) Stumpage value 4.80 4.00 6.00 4.00 4.00 4..80 2) Felling and Bucking 1.75 0.17 .0.25 0.40 0.40 0.48 .3) Log Haulage to Sawmill 1.78 5.04 2.68 4.61 4.61 5.53 Oxen f 2.33 4) Auxiliary roads 1.70 0.70 0.50 1.00 1.00 1.20 5) Sawing and Stcckil:Ag 14.47 9.14 8.70' 14.60 14.60 14.47 TOTAL 26.83 19.25 18.13 24.61 24.61 26.48 6) Lumber ha.uling to Railway 7.50 Station 7) Stocking at Railway Statior. 0.80 TOTIJ. .35.13 19.25 18.1.3 24.61 24.61 8) Air drying -. 1.40 1.40 1.58 1.58 9) Kiln drying - 3.60 3.60 4.75 4.75 1Q Remanufacturing - 10.00 10.00 15.00 15.00 11) Freight - 14.00 13.00 15.00 - 14.00 TOTAL - 48.. 21) 46.13 60.94 59.94 () () TABLE 9 PERMANENT SAWMILLS IN CHIlE: COST ESTnUtTES FOR EACH OPERATION (All Values in U. S. $) I [ . SAWMIu.s (1) (2) AIR DRYING (1) (2) KILN DRYING "[3) (4) REMANUFACTtJR:IID (5) {b}u i ' ITEM Supervision 55.00 60.00 7.20 7.90 4.00 4.· 00 12.00 16 ..80 Labor 102.00 171.50 7.50 12.00 16.00 23.00 60.50 105.00 Sncial Security: 11.l.J{$ . f wage s 11.J( 19.00 0.84 1.34 1.~78 2.56 6.70 11.70 19.6S% of sala.ries 11.00 20.5) 1.42 1.55 0.79 0.79 2.36 3.30 Accident Insurance: 7CJ% of wages and salaries 7.77 11.48 1.00 1.30 1.40 1.90 5.10 8.50 Fuel and Oil 2.00 4.00 0.30 0.60 1.30 2.60 Misce11&nE*»;ts supplies and expenses 12.00 13.00 1.20 1.41 4.00 5.00 10..00 11.50 Buildings, repairs and main tenance - 1% 5.30 5.30 8.49 0.68 3..2C 5.00 6.60 8.50 Equipment and insta.llatlens, repairs and maintenance (0.5% - 1%) Insurance on equipment and buildings (22% of total 8.70 17.50 0.70 2.88 1.08 3.63 3.00 6.00 l I investment) 52.00 54.40 4.20 8.10 12.20 19.00 28.50 32.80 Taxes: 12% of total investm. Depreciation: buildings, ma chinery and equipment (5%) Insurance on lumber stock(35%) 28.50 29.50 120.00 124.00 7.00 14.00 2.30 4.40 6.60 10.40 27.80 0.20 15.50 17.90 I Interest on invested capital-6% 142.00 149.00 33.40 1 Interest on working capital-6% 9.10 12.60 1.56 i TOTAL DAIU EXPENSES 573.67 699 .. 88 ~ ~ Cost Der 1.000 board feet L :Mt..!'30 8.70 1 (1) One Shift Operation - 40,000 board feet daily production- (5) One Shift Operation - 20,000 I ~ (2) Two 911ft Operation - 80,000 boa.rd feet daily production - beard feet daily production en One Shift Operation - 24,000 board feet daily production - (6) Two Shift Operation - 40,000 (4) Two Shift Operation - 48,000 board feet da~ production - board feet daily productien EMUCO ~ ( ,---- q 1'. ";" C to.~ , 'l f . , -I Z_'I.:.l&;,; ,o~.:'.;:'--t.~"i# . »( .,. J( I I . l7Z~, Q ... $ 1> 1 I \ \ . ... , ".. 'GUANE"UE POWER PLAN T ... VALDIVIA llAKES REGION SAWMILL PLANT 1.600.000 20.000.000 bd.U. . .,. ... " , RANCO LAKE REGION SAWMILL PLANT "' .... 'I' $1,600,000 20,000,000 bd.ft . ... It l' PILMAIQUEN i POWER PLANT : SOMASUR SAWMILL PLANT. 1.,600,000 : 20,000,000 bd.ft. ~ .... L I ... ! g I\ (~ ~PLYWOOD PLANT I : $ 800,000 J 150,000 cu.ft. i ~().()OO.IfIfIP 1;'-/1 .i..fJ) . -t WOOD DISTI4LA'TION PLANT IC. l( Jr' I ,I OO,OO~ 15,000 tons Charcoal I a By·Products . J,¥7£AA·;A T/PA"A,l. SAN J( .(1)/tAr' A PP.t It" If TlO~' .I( 74 ECtJIVO.NIC ..I't4P 01= Cl-lil.E = To La Paz, {o, --- Bolivia · \ "'-. ) 2 · . · Chuquicamaf m. . ( ) 3 0 Salamanca 3 0 Tronsondine RI To Buenos Ai Argentina Paper, Ro! Modeco Cc . / { In80 Rubb~ Modem8o I 3 0 THfRIJ \ FIHlitTH Ii c. Pulp Mill} Sawmill o F/!:'URTH CEC'(iIlAPllli;;;: C#""p Rai Iways Already Santiago To V and Los AI 40 0 Proposed Railway tion: Santiago To C Santiago To SI ~ RailroadS,narrow gc Railroads,broad .go Forest Industries Steel Mi II Fish Industries · Power Plants ~ "'If_ 6,.,,,. - - 4. \ Copper ~ Iron 42 0 Manganese Nitrate · APPENDIX III i mlWiitldMl mWOAtI91 i I i~ ~artption ot ~ limd IcOllOlUO structure 0bi1s'. Political , til) Geograp~' 1 <, Gove1'!lllent Organization and :Broad Political Trend. 2 I (j. lDao.-o Structure 6 " (a) Population Trends 6 (b) Labor and lIIBp10yment 7 (0) Agricu1ture 10 (d) Forestry 17 (e) Fisheries 17 ~!~ Mining Industries 18 Manufacturing In4u.etrles 18 (h) Other GatnNl l\U"aui ts 21 (4' NationelJadgets 21 i: (5~:, Internalaad External Public Debt 24 , (6) :1!I:rlernal Debt Record 27 , (7) Currency and :Banldng ,6 ,;(8) Trends in Priees. Wages and Produetion 39 :(9) Exchange Bates 42 if '(It) Gove1'!lllent 00nt1'01 of Imports, hports . i and Foreign Ixohange 43 i " ~ 11) Foreign Trade ,. 46 (1,) :Balp.nce of P~ents 48 i j' ~. i !l!a¥1es 1 - 33 .49 ... 89 I I i~~ I. 1. c APPENDIX III A. Description of Chile's Political and Economic Structure ~, ; (1) Geof2;raphy Chile extends approximately 2,600 miles along, the west coast of South America; and its width varies from 46 to 250 miles from the Pacific coast inland to the crest of the Andean mountain ran:e. Its total area, 286,396 square miles or 741,767 square kilometers, is 1ar:er than that of any European country e~cept Russia and sliehtly smaller than the combined area of California, Oregon, and Washington in the United States. Bordering Chile on the north is Peru, and on the east, Bolivia and Argentina. The greater part of the country is a series of valleys between the Andes and the much lovJ'er coastal range. Below latitude 42° South, the coastal range becomes a series of islands which fringe the mainland. Numerous rivers, none of which is navigable for any great distance, flow from the Andes to the Pacific, more or less at right angles. Chile is a oountry of practically every variety of topography and climate. The Northern section, extending from the Peruvian border to about o latitude 32 South, consists of sandy desert and barren mountains con taining nitrate and borax deposits in the far north changine southward to seroi-desert with a great variety of minerals. A1thoueh the climate is extremely arid, there is sufficient rainfall in the southern part of the region to allow limited agriculture, with the aid of irrigation. Central Chile, extending from Valparaiso to Puerto Montt, or from c about latitude 320 South to 42° South, is the most thickly populated area, as well as the center of agriculture and manufacturing activities. 2, In this Central Valley are~ the summers are hot and dry but the winters are mild, with plentiful rainfall. In the southern part of this region are extensive forests ~d mineral deposits. The Southern region of Chile, from about latitude 42° South to Cape Horn, is a wet and cold reeioncontaining dense forests up to elevations 'of 6~OOO feet and vast pasture lands for cattle and sheep.' In some parts of this region, the rainfall is as much as 200 inches a .year. Government OrJ;anization and Broad Political Trends '. . Cbile is a oonstitutional Republic. Three stages can be perceived in the development of its institutions. The first, which closed with the adoption of the Constitution of 1833, was distinguished by a condi tion of political turbulence punctuated by the administrations of three powerful dictators. During the seoond constitutional periQd, Which ended in the revolution of 1891, a democratic system of government began to emerge from the oligarchical conditions under which the Constitution had been adopted. The t!lird staee, from 1891 to the present, SaY, the eclipse of the 1833 basic law and the adoption in 1925 of a n~~ Consti tution under which Chile has become one of the most democratic Republics in the Western Hemisphere. The promulgation of the 1925 constitution climaxed a struggle be tween the executive and legislative branches of the Government, and its provisions in many respects represent an attempt to establish a dynamic, working equilibrium between tbetwo. Governmental functions are divided among a Legislative, an Execu - tive, and a Judicial Branch. 1he bicameral Congress S.S composed of a Chamber of Deputies of 141 members and a Sc.tl.04te ~ 4$. Both Deput1es 3. and Senators are directly elected through a system of proportional representation which provides for the representation in Congress of minority political groups. Deputies are elected for 4-year terms on the basis of one De9uty for every 30,000 inhabitants, and the entire Chaalber is renewed once every 4 years. Chile is divided into nine Senatorial districts, each of which elects five S~~tors for terms of . six years. The Executive Branch is headed by the President, who is directly elected for a 6-year term, and is ineligible for immediate re election. There is no permanent Vice President. For Congressional and Presidential elections, all literate male oitizens of 21 years of age or over are elieible to vote. For munic~pal elections, women and foreigners of five years' residence are eligible to vote. All voting is by secret ballot. Inasmuch as almost 75% of Chile's population is literate, a large percentage is eligible to vote. In the 1941 Congressional election, 89% of those qualified to vote did so. Among its powers, Congress is authorized to coin money and regulate its value, levy taxes, borrow money, approve Government contracts, ap prove the national budget presented by the Executive, and ratify treaties. The President is empowered to maintain diplomatic relations with other Governments, declare war, command the armed forces, formulate and promulgate decrees to administer Con-ressional laws, compile and present to Congress the annual national budget, ascertain that all administrative expenditures are duly made in accordance with the purposes for which funds are appropriated, grant corporation charters, call special sessions of Congress, and appoint all members of the higher courts. The President -- is assisted by a Cabinet of.Ministers, selected by him without legisla tive confirmation. Eleven Cabinet trd.nisters head Departments of the Government as follows: Interior; Foreign Affairs; Communications and Public Works; Labor; National Defense; Justice; Public Lands and Co'lonization; Education; Agriculture; Public Health and Social Assist... ance; and Economy, Commerce and Finance~ All Chilean law stems from the Constitution, and is administered by a single national system of courts. The Supreme Court exercises jurisdiction over nine judiCial circuits headed by Appellat~ Courts and . .. . . including Superior Courts and other lesser Courts. Chile is subdivided into units for administrative purposes, but the sub~divisions possess neither sovereignty nor constitutional autonomy, and function chiefly as a means of administration of national policies at regional and iocal levels~ The various divisions are known as PrOVinces; Departments and other smaller subdivisions. Chile has a multiparty system, which is very fluid and subject to continual regrouping. A large number of parties exist, none of which . has been able for many years to command a majority of the seats in ' Congress, with the resulting necessity of government by coalition or alliance. During the last several years, the mlljor political parties in Chile have been the Radicals, Conservatives, Liberals, Socialists and Communi,sts. TABLE 1 shows the voting strength and congressional repre sentation in the 1941 and 1945 elections. Under President Acuirre Cerda, (1938-41) the Radical, Socialist, Democratic and Communist Parties were allied in a I1popular Front". President Cerda 1 s successor, Juan Antonio Rica, was supported by a somewhat similar loosely-joined group, of Itleftistsll with the Liberals and Conservatives forming the major opposition parties. In the last congressional elections in March 1945, a deadlock re sulted betv:reen the "leftistn a.nd "ri,::htistlt elements. In the Chamber of Deputies, the "rie;htists" elected 73 members to the "leftists" 74; in the Senate, the former obtained 23 seats, while the latter secured 22. In the presidential election on September 4, 1946, following the death of President RiDS, Gabriel Gonzales Videla, a left-wing Radical, received the highest number of votes, followed by Eduardo Cruz Coke, the Conservative oandidate, but neither candidate received a majority of the votes east. In accordance with a constitutional provision, Con~ress was called upon to elect a president from the two candidates receiving the highest number ot popular votes, and on October 24, 1946, it named Sr. Videla the new President, by 138 votes to 46. Sr. Videla had been a rival of Rios for the presidency in 1942; in fact, his withdrawal from the race in favor of Rios was a major factor in assuring the latter's victory. Vfhen he took office President Videla named a Cabinet composed of the following parties: Interior Radical Foreign Affairs Radical Education Radical Labor Radical Ecc.nomy, CGr;t;srce and Fin-nce No party affiliation Communications and Public Works Communist Agriculture Communist Public Lands and Colonization Communist National Defense Liberal Justice Liberal Public Health and Social Assistance Liberal It will be noted that among the C~binet Ministers were three members of the Communist Party. Although the Communists were included in President Cerda's nPopular Front" and were also among the "leftists" supporting President Rios, they did not previously have Cabinet repre sentation~ The other parties represented ~n the Cabinet are the 6. Ru~icals, with four positions and the Liberals with three, there being also one Minister without party affiliation. President Videla's 9rogram includes industrialization, increased production, and wider distribution of wealth, through the follm\l'ing measures: nationalization of insurance, oil, gas and electricity; suppression of monopolies; creation of a state Bank and control of credit; control of the circulatinc me~ium ~~th a view to eliminating speculation and inflation, state purchase of tea, sugar and coffee; and regulation and lowering of rents. -------,--------- Economic St~cture (a) Population Trends The population of Cl-.ile b~s risen steadily trom 1,010,332 in 1835, when the first official national census was compiled, to an estimated 5,448,000 in Se,tember 19h6. T:,e c,;(;r.~ity of population in 19t~0 was 6.8 persons per square kilo meter, or 17.5 per square mile. The most thickly pO'.lu1ated area com :?rises the provinces of Vc..l;;.;.r.;.iso and S.:;.r.tia::o with densities of 88.2 and 7~.· 3 ,ersons, respectively, :?er square kilometer. In these two provinces is concentrated one-third of the total population of the entire country. In fact, 80 ,erccnt of the total ,o!,u1ation inhabits the central valley area of Chile, inc1udinr the tY,TO above-named provinces and either others, as described in TABLE 2 at the end of this APPENDIX III. AL~ost half of C~nl~'~ ~oou1ation is urban, and almost one~third lives in cities of 40,000 or more people. The two largest cities are Santiago, with a population of 950,000 in 1940, and V lp.r.rai~o, with a ... ,opu1ation of 210,000, Antofagasta, Chil1an, Concepcion, Talc~, TemucQ~ and Vina del Ma~ also have more than 40~OOO inhabitants. Four census enumerations have been made in the present century namely, 1907, 1920, 1930, and 1940. Fro~ a ri;~e of 3,249,279 in 1907, Chilean populat1o~ increased 15.5% to 3,753,799 in 1920; 14.7% to 4,287,,445 in 1930; and 17.2% to 5,02),5J9 in 1940. During the trrenty-year period 1920-40, Chile's !:,o;:>u1at1on increased by 1,269,,740 or 34% as compared vrith corres1)onding increments of 37;& in Mexieo, 36% in Brazil, and 27% in the United States. Assumin~ a continued increase in too Chilean po'Oulation at the rate of the past twenty years, the total would be 5,800,000 in 1950 and 6,500,000 in 1960. (b) Labor and ES?loiJl:D-en~ The labor force in Chile w...s estimated in 1943 to number slightly under 1,700,,000 persons out of the total population of ,,200,000. This working population was distributed among various eate gories approximately as follows: Number Percent.of Total ,.. Agricultural 565,000 33 Industry 293,000 17 Services 262,000 15 CO;l;:'.erce 140,000 8 Government 99,000 6 Transport 96,000 6 "" .. 1.:,.n:;..ng 88,000 5 Construction 66,000 4 Finance 22,000 1 Public Utilities 16,000 1 Others 43,000 4 --~--------------,--".~-- 1~690JOOO 100 Fomento states that by 1945 the number of ;:>ersons recorded as gainfully employed had increased to about 1,750,000. An industrial census of 1942, including 13,501 establishments, reported 251,404 workers, of whom 92% .;ere cl;.;.ssed as "obreros" (m.o..nual workers) and B% OlS "empleados" ("white collar" e~'Ip1o:Tees), as 8. sho~r.n in the following table: Pereent of EmpIeado !, Obreros ., Total Total Minors 179 10,116 10,295 4 Foreieners 516 3,729 4,245 2 N.:..tive Aciults 18,881 217,983 236,864 94 Men 16,468 . 178,62.3 , . 195,091 78 ~,7omen 2,413 39,360 41,773 16 TOTALS: 19,576 -.......-. 231,828 251,404 ------ ------ 100 Wa;:.es of both manual ~'Vorkers and salaries of "white col1artl emvlo:~es have increased considerably since 1940. According to official Chilean statistic s, the ave;rae:e 194.5 income per waee earner in various occupational groups, as conpared 1dth 1940 was as follows: Annual 'I'lar;~~ .. ~n Equivalent of u. S!-L Income Group Agriculture and fishing - 80 1940 - 1945 157 .. Percent Increase 96 Mining 235 510 117 Manufacturing 165 385 133 Construction 110 260 136 Trade 200 370 85 Transportation and utilities 270 900 233 . There is a lack of adequate information on unemp1o)~ent in Chile. HOi'l'"ever, the situation can be partially estimated by statistics of ap:>licants for employment at the Labor Of.Cice in Santi<.;.go. During the last five :,rears, the averar,:e number of applicants was about 4,000 to 5,000 at any (iven tim~, as com?ared to a figure of 6,000 to 7,000 in the 'jrears i:nunec~iately preceding the war. Another inc~ication of the extent of unemployment is a recent national income study, which states that the number of non-gainfully occu?ied persons avera:,:ed 150,,000 - during the last ten years, reprcsfmting about 3 percent 'of the total population. The question arises as to whether Chile has an adequate labor - force to carry out the ambitious development program of the Government. Fomento has estimated that its programs may require almost immediately 7,000 to 10,000 laborers plus an additional 10,000 to 15,000 vdthin the next few years. Fomento representatives admit the probable existence of only a very small group of unemployed persons on which to draw, but point to the in~ oreased availability of labor that is continually resultinG from the mechanization of industry and the introduction of more efficient opera tions. For example, in recent months, about $,000 to 10,000 employees of the nitrate and other mines have been released through efficient operatine techniques. There is also the ~ossibility of adding both skilled and unskilled reserves to Chile's labor potential by means of immigration. Since its organization in l,I.::;.:: 1945 J a s!1ecia1 Commission on Coordination of Immi gration has been engaced in formulating a plan for future immigration, particularly with the purpose of securing teqhnicians, specialists, farmers, fishermen and others who would contribute to the productive capacity of the country. Since the legal recognition of labor unions in 1928, the Chilean labor movement has played an increasingly important role in the national life of Chile, espeoial1y through its activities in the fields of c011ec tive bargaining, social legislation and politics., The largest federation of unions is the Confederacion de Trabaja dores de Cbile (CTCh) formed in 1936 by the merger of the Cou:mun1st and Socialist labor federations, and affiliated "lith the powerful Confederacion de Trabajadores de America L~tina (CTAL). Membership in CTCh in 1943 was reported as 400,000. Some of the most important affiliated unions are the national federations of mine, metal, maritime 10. - and port, railway, textile, building trades and lumber workers, teachers and bakers. The strongest unions are in the nitrate and copper industries where approximately 80% of the workers are union members. Chile is well known for her progressive labor legislation, most of which was enacted during the early 1920 1 s. A Labor Code guarantees basic rights of both industrial and agricultural workers and regulates the length of the worl\ing day, collective contracts, strikes, the work of minors and women, holiday and discharge pay. There is a comprehen sive system of social security, providing for compulsory insurance protecting workers against undue financial loss as a consequence of sickness, disability, and old age. In 1941, more than 1,500,000 persons, including practically all wage earners and salaried employees, were covered by the operations of the 'various social security funds. A minimum wage lavr for "v;hite collar tl employees was enacted in 1937, including provision for sliding wage scale depending on eost of living and length of service; and establishing a family allowance system, an unemployment fund, and a discharge pay fund. There is also a Preventive Uedicine Act, which establishes preventive medical services for workers. (c) A~riculture Agriculture, althoueh of major im?ortance to the Chilean economy from the point of view of national production, employment and foreign trade ,fails to provide a sufficient food supply for the Chilean population, and yields a relatively low level of living for most of the farm population. Use and distribution of land. Onl~~ a small part of the land is arable. ; ¢ " Preliminary findings of the Agricultural Census of 1942 to 1943 divide the total area of 74,100,000 hectares (roughly 290,000 square miles) 11. into the following: agricultural lands, 26%; rarest areas, 17%; and "unproductive ll · 5.3%. Of the 19,600,000 hectares of agricultural land, almost one-third is listed as arable, the balance representing pasture land, as shown in TABLE :3. or the arable land, roughly 67% is pasture land. 20% is used fOT grains and other crops, 10% is tallow, and t~\ re~ning 3% contains vineyards and orchards, as shown in TABLE 4. About 1/, of the arable land is under irrigation. Agricultural activity is concentrated in the central valley of Chile, oomprising an area nearly 800 miles long and 20 to 40 miles wide, extending from the Province of Aconeagua in the north to Bio.Bio in the south. This region, which represents only 15.,% of the total land area of Chilo, ;-;ossesses 56.5% of the arable land and 66.9% of the portion of arable land which is under irrigation. The far northern part of the country,composed chiefly of desert and mountains, is generally unsuited for cultivation, as is the vast region of Southern Chile, consisting of natural forests and grasslands, some of which, however, is good grazing and pasture land. In terms of climate, fer tility of soil, and marketability of produets, the Central V;;J.ley constitutes the natural locus ot Chtlean agriculture. Land Tenure. Most of the agricultural land of Chile is eoncentrated in . ; the t..ands of a few mmers as shown in TABLE S. A small group of only 626 properties, each exceedin£ 5000 hectares in size and together · representing only 0.3% of the total number of properties, accounted for 5?'~~ of the aggregate land area in 1937. Tr~s group at properties, together with an additional 2,180 ranging from 1000 to 5000 hectares - each, aggregating only of the agg~egate 1.4% land area. of the total holdings, accounted for 75.)1 12. On the other ~, 67,790 properties each compriSing less than - 5 hectares, and together representing almost half the total number of properties, accounted f or less than 1% of the total land area. A group of 150,568 holdings, of'50 hectares or less, representing three-fourths of the total number of proprties, accounted for only 5.2% of the aggre~ gate land area. In the Province of Santiago, the JIIOst fertile of the entire country, a few families own two-third.$ of the agricultural land. 11+ some central provinces, such as Aconcagua and Valparaiso, not only are large propor tions of the land held by a sm.all group of ovmers, but entire political divisions within the provinces often constitute large single estates. Title to these lands dates back to the royal grants of the colonial period. In Southern Chile, concentration is even more pronounced. As a result of huge land concessions and auctions to foreign and native concerns in the early years of the century, approximately 5,500,000 hectares of the best public land of the region were transferred into the hands of 46 corporate landowners. As a rule, the greater part of these large estates are either devoted to grazing or kept idle, In the C~ntral V~lley there are several districts in which a system of amall farm holdings has developed. However, most of these eotablish menta are excessively small, and the land is usually of mediocre quality, poorly irrigated, and located far from the transportation centers. ~Sricultural population and income, Agriculture employs and supports more people in Chile than any other type of activity. The agricultural population increased 10% between 1930 and 1940 as against a 17.2% in crease in the total population, According to the 1940 Census, 1,927,055 persons, or 38% of the total population, were in sone measure dependent upon agriculture a.s a means of livelihood, as follows: Active: Owners 151,844 Supervisors -4),847 Workers 413,272 608,963 Inactive: Members of familyl,287~177 Servants 30,823 Unemployed 92 1,318,092 Total !,927,055 The ,income of farm \"l'orkers is low. In 1943, the average daily cash wage paid to permanent farm ,rorkers (inquilinos) ranged from the equiva lent of U. S. 13.5 cents in the northern part of the agricultural region to about U. S. 31 cents in the south. Benefits other than cash income, including shelter, land, food rations, etc., yielded from U. S. 49 to U. S. 74 cents a day. Thus the total average income per day worked, varied from about U. S. ~l cents to U. S. $1~02, depending on the location. Working days ranged from 180 to 265 days a year, yield ing an average annual income varying from a minimum of U. s. $127.80 to a maximum of ~. S. t270.30. . Transnortation and markets. " .............. ~ Most of the agricultural products not consumed on the farms, except wool and mutton from the Magall~nes area, are shipped, principally by rail, to the cities of Santiago, Valparaiso, and Concepcion. Relatively little hauling of agricultural products is done by truck, except in the case of wine. Storage facilities are limited, and production is definitely curtailed by the lack of ware houses and refrigeration. .Government . aid. D~ine the last few years special efforts have been made to remove the conditions retarding Chilean agriculture and to - foster positive policies of development. In addition to the :Ministry of Agriculture,tbe chief agencies connected with agriculture are the Agrarian Credit Bank, which supplies short-term and intermediate loans; 14. the Agricultural Colonization Agency, established to form colonies of small, independent farmers; the Institute of Agricultural Economy; and Fomento itself, which is fostering a program of mechanization of agricultural processes largely through the importation of farm machinery. Principal Crops. The Central Valley yields a wide variety of agri cultural products. Total crop production has remained relatively stable during the last decade as outlined in TABLE 6. Foremost in acreage and produQtion are the cereal and grain crops, of which the most important are wheat and oats. Almost two-thirds of the entire area devoted to agricultural crops is used for wheat, and its ~roduction far surpasses that of all other agricultural products in quantity and value. Average annual production during the period 1937 to 1944 was 865,000 metric tons. T.1e wheat crop is entirely consumed locally, and, in fact, has to be supplemented practically every year by imports from Argentina. 90% of the Chilean wheat is of th~ soft variety and the balance is durumwheat. Oats rank second in area and production, although in the last two years production has fallen below that of rice. Average annual production of oats durinE the period 1937 to 1944 was 98,000 metric tons. Before the war~ the major ~art of the cro~ was exported, principally to European countries, primarily Germany. In 1942J however, because of an imminent shortage,of feedstuffs, - an embargo was placed on exports of oats and other grains. Rice is a comparative newcomer to the Chilean agricultural . scene. Commercial plantines we;re started in 1931, at which time - Ch!le was importing 20,000 metric tons of rice annually. By 1941, imports had ceased alto~ether, and in the period 1943 to 1945, ex ports averaged 31,000 metric tons, primarily to C1..O.0a., Bolivia, and Arge:ntj,na.. R.ice is grown chiefly on irrigated land north of the Bio-Bio.· Barley, corn, and rye are other important grains oroduced in , Chile, Prio~ to the war, a substantial portion of the barley crop was the forage type for exports to Europe. However, during the war, malting barley became more important because of' demand in the Western Hemisphere, particularly in Brazil, Bolivia and Pc~u. Annuwl pro~uc tion of barley averaged 91,000 tons during the period 1937 to 194h. Corn and rye are produced for local consumption and do not enter into foreign trade except in negligible quantities. ~m-thirds of the corn produced is used for feedstuffs. Production averaged 67,000 tons from 1937 to 19L4, while average rye production was 7,000 tons per year. Vbbetable crops are second only to grains among Chile's aericul tural products, Potatoes rank second to wheat in quantity produced, averaging 460,000 tons per year in the period 1937 to 1944, and are almost entirely consumed domestically. On the contrary, a large proportion of the production Gf beans, lentils, peas, and chickpeas is exported. A widev~riety of fruits is produced in Chile, practically all under irrigation except for wine grapes, olives, and, tG some extent, apples. Most of the dried fruit output comes from valleys in the north - central and northern zones of the country. Commercial apple and pear production is distributed over the north central, south central, and southern zones. The pro~uction of wine is one of the oldest industries 16. in Chile. The grape acreage has averaged around 90,000 hectares in - reoent years, and annual production of wine averaged almost )00,000,000 liters during the period 1937 to 1944. Most of the wine is utilized locally, although efforts are bei~e made to increase exports. aemp is an important Chilean crop, being raised primarily for export. Chile is almost completely self~U£ficientin tobacco. Some oilseed is ~roduced locally,but at least 50% of the domestic consump. tion of edible vegetable oil is supplied by im~orts of oilseed, consist ing, before the war, principally of cottonseed from Peru and Egypt, but superseded, durinc the war year$, by sunflower seed from Argentina. Pastoral ~ndustrl' Cattle ranchinc is second only to ,'[heat farming amon!: ae:rioultural pursuits in Chile. Sheep farm1n: also ranks high in importance. In 1936 the l'11,1111ber of head of cattle in Chile was about 2,600,000, while sheep numbered 5,9«>,000, as shown in TABLE 7. Domes tic cattle fail to meet the demand for beef, and, as a result, considerable quantities are imported from 4rgentlna. In general, about one...fourth of the estimated 125,000 tons of beef consumed annually in Chile is from imported cattle. Almost half the cattle population is located in southern Chile. The same is true of sheep raising, the Province of Magallanes being the ,rincipal sheep ranch area. Cattle, sheep, hoes, and ~oats are slauchtered locally for domestic consumption and some for export as shovvn in TABLE 8. A dairy industry exists in Chile, but ,roduction of milk, cheese and butter is small. There is a thrivine ,oultry industry, which usually provides a surplus of eggs for export. ~o~aris?n,with fo~r other ~eo~raphtc are~. A study of Chile's agricultural po~ition as compared with other areas similar in size of population, in territory, Qr in climate, is given in TABLE~. The principal conclusion to be dra~n is that although Chile compares favorably "lrith California, Sweden, SVritzerland, and NeW' Zealand in amount of aericultural land, her aericultural industry is relatively unproductive. Forc~try " This subject is considered in detail in Appendix II. (e) .. Fisheries · Chile has 3,000 miles of coast line and possesses waters that abound in numbers and varieties of fish. Talcahuano, on the B~y of Ar...\4CO in Cl;;ntro;.l Chile, is tho cluef fishin:;; :,)ort and Valparaiso, further north, ranks second. The annual fish catch during the period 1938 to 1942 ranged from 31,000 to 40,000 metric tons. Hake, S"l'Tordfish, herrinp and sardines account for ahout 2/) of the total catch. Other important species are tuna, conger eel and flounder. The most imnortant port for shellfish is Puerto l~ontt J near the Island of Chiloe, on the / south-central coast. Amone the shellfish cau[ht are mussels, clams and lobsters, The number of men and craft enUaged in fishinC has declined in reeent years, largely due to poor living conditions arid the exclusion of fishermen from social legislation. There are about 25 fish canneries in Chile, scattered from Iquique in the north to Punta Arenas in the South. Approximately 75t~ 0: tl-.e 9ro~uction comes from three concerns; Sociedad Chilena Industrial de Pasca, S. A. at Antofagasta and San Vicente, Sociedad Industrial Pesquera de Tarapaca, at Iquique and San Vicente and Conservas y P.o~uctos Pesqueros~ S. A. at Talcahuano. In 1942 the prpduction of canned fish was approximately 4,000 metric tons. 18. - Less than 1% of the total fish catch is exported. Until recently, fi$h imports have far exceeded exports, imports running about 500 metric . tons a year and consisting chiefly of canned salmon and sardines. In 1942, exports exceeded imports for the first time and this export surplus has been increasing ever since. Annual per capita consumption of fish in Chile is 3.6 kilos, or only abQut half that for the United States; yet it is the highest of all South American countries. The major factors in the low figure of fish consumption are a long-established preference for meat, lack of transportation, high freight rates, high middlemen's profits and in~ adequate storape facilities. The Cpilean Government, through Fomento, has recently taken steps to organize and develop the fishing industry, vdth a view to increasing internal consumption and eA~orts. (f) Mining Industries Z I " This subject is treated in detail in Appendix IV. (g) ~~nufacturi~g Industries Manufacturing in Chile consists mainly of the production of light consumer coods, most of which are used within the country. The principal articles produced are foodstuffs and bevera,s8s; textiles of cotton, wool, rayon, linen, and other fibers; chemical and pharmaceuti cal products; leather and leather goods; light machinery and apparatus of various kinds; liEht iron, steel, and other metal products; paper products; lumber and wood products; cigarettes, cigars, and other~ tobacco products; cement, class, tile, and brick; and rubber goods. Industrial development in CilHe has passed throush a number of distinct staces. Pri.or to 1903, the principal industries were those - producing articles of general consumption, such as flour and textile pro~ucts. D..rin. this period" the i1ssociation for Manufacturing De.... velo,ment (Sociedad de Fomento Fabril), organized in 1883 to stimulate industrialization, aided in establishing 17 trade schools in different parts of the country. In 1903, 3,695 establishments of all kinds eITf!jlo;ying about 30,200 YTorkers, "Tere reported to be iJl operation, The period 1904 to 1913 was one of eeneral industrial prorress. During World TIar I, manufacturing was stimulated by the shortage of co~nodities previously imported, and this stimulus carried over into the immediate post-war years. In the period 1928 to 1929, general ~ariff increases were enacted to protect domestic industry, and a substantial influx of foreign capital, principally in the form of government loans for ryublic works, ereatly stimulated industrial expansion. Activity was curtailed during the depression follow1n: 1929, but after 1932, manufacturing output again resumed an u~vard trend. The present period of industrial development dates from April 1939, when Fomento was established. No adequate (ata are available to show the growth of Chilean manufacturing industries before 1938. Statistics Ylere published before that year, but they included a creat many establishments which rank as handicraft industries, and the coverage varied considerabl,:r from time to time. Beginning in 1938, the Chilean Office·of Statistics adopted a new· procedure by which only the :orincipal manufacturing el:ltablishments were canvassed. In 1938 there were reported to be 3,541 such establish ments,employing a total of 97,743 workers, and having an output valued at about 4,000,000,000 pesos equivalent to u.s. ~ 128,000,000. In 1939 the statistics covered 3,566 orincipal establisrnllents, employing 102,413 - workers, and producing goods valued at about 4,200,000,000 pesos, equi~a1~nt to u. S. C 134,000,000, The census of 1940 covered 4,169 prtn~!pa~ manufacturing e~t~Bl!§~B~i, 8*siy~iY~ Af ~J~ public utilities, These represented a oombined investment of 4,800,000,000 pesos, equivalent to about U, S. $ 155,000,000, produced :oods valued at ,,000,000,000 pesos, equivalent to about U. S. $ 161,000,000 and employed a total of 116,493 persons. Thus about 10 percent of the total population was directly or in~ directly dependent on wages received from manufacturing industries, The principal manufacturinz industries in 1940, named in the order of the reported value of production, are listed in TABLE 10, On tl~e basis of the re:')orted number of establishments, number of em,loyees, capital invested, and value of production, the two most important industrial groups in 1940 were those producing food and textile oroducts. Th~ chemical products Croup ranked third, e:{cept in number of em1)lo~rees. These three groups, food, textile, and chemical proQucts, accounted in 1940 for more than two-.-fifths of the total number of establishrllnts and workers reported, for nearly tyro-thirds of the total capital investment, and lor approximately three-fifths of the total value of ~roduction. AlthouGh there are some large factories and plants in ChiJ.e, much of the manufacturing reported by the census takes place in small shops employine only a fe~g persons. l e returned "'hen the 10~s in foreign currency 8,uthorised in La\1 ;io, 6334 have been contracted, Law No · .5580 provides that .50~ of the receipts ' of the Amortization Institute derived pursuant to Article 1 of that law shall be used for the p~1Ulent of interest on the bonds of the external public debt. direct and indirect, of the Republic of Ohile and of the municipalities, subject to the provision that such payment shall not ~xeeed the rate of interest specified in the particular loan eontract. It further provides that the balance of these receipts, after deducting the expenses incident to the application of the law. shall be employed by the Amortization Institute f91" redemptions or amortizations of bonds of the said external debt. The Amortization Institute is authorized to redeem or ~mortize extraordinarily any bond of the external debt 9f the Republic, direct or indirect, and of the municipalities. Redemption or amortization is to be m~e by direct purchase below par in the mar~et or by drawings at par. As provided in Decree No. 3837 of October 24, 193? set forth in TABLE 23. acceptance o.f the plan establi shed by Lm., No. 5.580 in no '-Ile.~' modifies the original obligations insofar as the principal amount of the debt is concerned, but binds the bondholders permanently to accept the plan for the service of the. bonds in substitution for the servipe plan originally stipulated. Assentto the plan established by La,., 1~0 · .5580 by the bondholders of certain bonds extinguishes the obJJgation of the I.iortgage Oredi t Insti tute, the municipalities, the Trans-Andes Rail,.,ay Oompany, and the 'fater Oompany of Valparaiso ,·rmch were obligors on such bonds, end makes the Goverrupent of Ohile the sole debtor ~s provided in the la\" and in Decree lio. 3837 of October 24. 1938. ]ondho+ders are required to assent to the plan in order to receive interest. The interest allocab~e to non-assenting bondholders is added tO,that portion of the Fund which is used for the redemption of bonds. As of December 31. 1944, the holders of 90% of the dollar bonds, 99% of the Sterling bonds, and 94% of the 31. , S\'/199 Franc bonds outstanding as 9f that date he.d e.ssented to the plan. Since the adoption of Law no. 5580, payments to the Amortizapion Insti tute have been made in accordance \'Ti th the terms of that 1at-T. The total amount received by th~ Amortization Institute fro~ 1935 through 1946 pursuant to Law Ro.5580 is US $ 97.384,238.54 ·. Detailed figures shot'1ing the yearly receipts by the Amortij!:ation Institute and the sources thereof are presented in TABLE 17. FiftJ~ percent (50%) of the amounts received by the Amo~tization Insti tute have been applied yearly ~o the. PS9II1ent of interest in accordance with the te~ms of Law No. 5580. During and after the "Jar difficulty was encountered in procuring S\1is8 exchange for making p~ents of interest on the Swiss F~anc bonds. The Amortization Institute holds dollars for the amount due on these bonds as interest but is w~thho1ding payment because Swiss Franc exchange cannot be obtained. The fo11o'1ing table sho,"s the amounts that have been ex pended or set aside for the payment of interest, and the pe~eentage of principal which the payment represents: (ooo's of US dollars) %of Face Value Amount of Bonds 1935 US $ 2.064 0,475 1936 2.460 O~605 1937 3.053 0,786 1938 7,068 2,0925 1939 lj',728 1,5225 1940 4,728 1".539 1941 4,743 1.558 1942 5,068 1,680 1943 4,284 1,428 1944 3,313 1,126 1945 3,.449 1.202 1946 3.735 1.415 US $ 48,693 c 32. - From 1935 to 1939 all of the funds received by the Amortization Institute allocated for ~he retirement of bonds, in acoordance ''lith. the prOVisions of La'1 lTo. 5580, ,-,ere actually used for this purpose. Follol-ring an earthquake in January 1939 a large portion of the funds allocated for amortization and retirement were transferred in dollars to the Reconstruction and Relief Corporat~on for earthquwte relief and other public ",'orks pursuant to Law ~:ro. 6334, s~t forth, in part, in TABLE 28, and various decrees issued thereunder. Such tr~sfere continued through 1945, and amounted in total to $23,742,929.59. A detailed, account of ~he amounts so transferred is set forth in TABLE 19. Decree ~10. 1307 of 14a..rch 7, 1946 directed that all receipts allocated for amortization ,.,ere henceforth to be fully utilized by . the Amortization Institute to retire bonds as provided und~r Law No. 5580, and since that date all such funds have been so used. The Chilean Government has follow~d the policy of purchasing its bonds at a discount on the open mar~et. Such ponds have been re purchased at an average of about 17.76% of par. The total amount expended for the repurchase of bonds from 1935 to 1946 is $25,611,927.02. The total principal amount of oonds redeemed" converted to a dollar basie, is the equivalent of $144,274,000. The yearly redemption of each category of bonds and the year~y amounts spent for such redemption are set forth in TABLE 18. The yearly receipts and,disbursements of the Amortization Institute pursuant to Law No. 5580 and the reconciliation ~f its accounts as of December 31, 1946 are set ;forth in TAl3LE 20. The receipts of the Amortization Institute pursuant to Article 1 of Law TIo. 5580, particularly the receipts from the copper industry, bave been controlled through other laws having direct and indirect , effech on such receil?te eo that onl~r a small portion of the fiscal receipts of the government from copper have been used for debt service. Bondholders claim that this is contr~r to representations made to them to induce them to accept the plan provided for in La\,1 }io. 5580. In a memorandum set forth. in part, in TABLE 28, presented in 1935 by the Ohilean Special Financial Oommission to repr~sentatives of the bondholders, it '"as stated that, in enacting La\,1 l!o. 5580, Ohile hed decided to allot to its foreign creditors IInot merely a. part I but the entire return to the government from t,1o major sources, namely J the entire fiscal revenues from the nitrate and copper industries". The Special Financial Oommission acknowledged that the fiscal revenues from copper and nitrate in 1935 \'rere not great but repre sented that "if \,10rld demand and world prices for copper and sodium nitrate improve lt the amortization and interest payments "will increase at a. rapidly accelerating rate." World prices and world demand, particularly for copper, did increase considerably over the 1935 level, but only a small portion of the resulting increased revenue of ~he Ohilean government inured to the benefit of the bondholders. At the time La", Ho. 5580 ,\"as enacted. all of the fiscal revenues of the government from the copper industry "Iere in fa.ct d,evoted to debt service. These revenues \;rere derived from a 12% tax on income of the fourth categorY (mining companies). and a 6% income tax on for'eign eorporations. Since that time Ohile has imposed surtaxes totalling 4% on foreign corporations, and a sur tax of 1% on income of the fourth ca.tegory both of ,,,h1c);1 ta.."tes are covered into the general revenues of the government. Ta.."\:es of 3% on foreign corporations, and t~es and surtaxes totalling 12% on income of the fourth categorY were imposed and set,aside for Fomento and the Reconstruction and Relief Corporation. These additional taxes, while not decreas~ng the yield of the copper tax allocated to debt service by Law no. 5580, nevertheless created additional "fiscal reyenue from the copper industryll which was not used for debt service. In addition, Ohile enacted Law no. 7160 of January :31, 1942, set forth, in part, in TABLE 29, imposing a 50% tax on excess profits of copper companies resulting from increased prices of copper over certain basic prices set forth in the law as described in AF'PElrDIX IV at (2) (a) (1) (a). The total e:r.eess proft ts are then exempted from other taxes and are deductible IIfrom tnxab~e income for the purposes of applying taxes on income. ~f La\1 ~~o. 7160 thus directly reduces the revenue produced by La"l Ho .. 5169 \'I~ch is used for debt ser~'ice under ~he plan established in La,'r lifo.5580, The revenue derived from Law lto. 7160 is nm-l used for public Horks. Under the exchange control laws of Ohi1e, described in Secion 10 of this APPENDIX III, the copper companies are required to cover their costs of production by. purchasing pesos for d911ars at the official exchange rate of 19.:31 pesos to the dollar. The effective rate of exohange for most, other purposes is the "D.P," rate 'VThich is 31 pesos to the doL.ar. The difference is, in effect, a tax on the expenditures of the copper compan~es. and represents net fiscal revenue to t!1e Chilean Government. It ts at p-reseltt, "\lsed for governmental expenditures, a portion being specifically allocated to national defense. - For the years 1941 through 1945 the !lentire fiscal revenues" of the Chilean Government from the copper industries were 35. us $ 171.376,610. Of this amount only US $ 29.243,222 was allocated, though because of the transfers to Reconstruction and Relief COrPoration, not entirely used, for debt service pursuant to Law l~o. 5580. TABLE 30 of this appendix sho\'1s the yearly totals of the fiscal revenues of the government from the copper industry. the sources of such revenue, and the yearlY,amount allocated for debt service for the years 1941 through 1945. (b) Short Term Obli§tlon§ In 1931 Chile's non~funded obligations to American and British Banks and investment bankers amounted to the equivaJ.ent of between US $ 40,000,000 and US $ 50,000,000, mostly s.rndic~te loans made in 1929 and 1930, generally at 5!% interest per annum. At the time the loans "lere made it "las cant emplated that tl1e~r 1"Toul.d be repaid out of the proceeds of subsequent bond issues. The bonds '-fere never 1 saued, and the loans were therefore not paid at maturity. Chile has secured several modifications of the terms of the original loan agreements including several extensions of maturity. However, all such modifications have been arrived at through bi lateral negotiation. and ~ve been assented to by the holders of the respective obligations. In general the extension agreements negotiated provide that interest ,,111 be paid at the rate of 1% per annum, and that principal \ofill be amortized at: the re.te of ~ per annum. l?~ents have been made acc(:)"rding to the terms of the agreement s. The Chilean Government in 1943 offered to exchange Chilean internal 7% bonds for olltstanding short term extern~l obligations at the rates of pesos 6.4;8 p.er dollar and pesos 31.43 per pound sterline. Several holders of dollar obliga~ionst and a fe\-, holders of sterling obligations accepted this offer. The peso bonds acquired through thi s exchange were then so}.d to the :Banco Central mostlJ~ at 86j- although a fe,'1 were sold at 84. The :Banco ,oentral exchanbsd the pesos realized by the sale of internel bonds for dollars, "lhich could be ,-ri thdratm from Chile. at the rate of pesos 31 per dollar. The net result of these transactions \'ras that holders of non-funded obligations received in free dollars or sterling ~bout 18% of the amount of the obligations previously held by them. Through amortization, and exchange for internal obligations, Chilean e~ernal short term obligations have been reduced so that, at Deeember 31, 194.5 the remaining outstAnding balances 'l:lere us $ ;,775,.5.50 ·.56 and ~ 2,829,639. Interest and amortization on these outstanding balances are 'being paid in. accordance \"i th the terms of the respective extension agreements. The TABLES 31 and 32 show the balances outstanding, the amounts paid for interest and amortization, and the amounts amortized by exchange, for internal obligations from December 31, 1939 to December 31, 194.5_ (7) Currency and :Banking Currency The gold peso cras eptablished £,s the offieial Chileen nonetary unit, on October 10, 1925. It ,-fE-S originally assigned a gold content of 0.1830;7 grrms of fine f~old. Sinee 1932, ,-rhen the Government suspended gold convertibility for the note issue of the 3aneo Centril, the gold peso, although retaining the sam~ nominal gold content. has served, solely to measure the statisti~a}. vs+ue of imports and exports_ ,The gold peso is n(m \lorth U.S. $0.2060 but is not in cireulation. The v~lue of circulating pesos in terms of :37. fo~eign currencies, 1s discussed in Section (9)~ :BanJdng 'BM90 CentrS'~ The 'Banco Central de Chile was c~eated in 19Z5, and as of the end of 1943, ownership was.as follows: (in Chilean pesos) a) The Government ~ 20,000,000 b) Domestic banks ":" .51 ,000,000 c) Foreign bank:s .,.. 42,000,000 d) The pu.blic - 6,200,000 · Total capital, fully paid 119, ZOO, 000 The CentrBl banking functions of :Sanco Central e..re note issue, rediseount, and depositorJ for the reserves of commerci~~ banks, but it also finances governmen~£ll erf.:dit . establishments and encia';es in general banking aetivities. Notes i ssued ~r Banco Centrl!'!l are not redeemable in gold. The minimum gold reserve requirement \'Tas eet at .50%. in 1935. though 3anco Centr~l was freed of the obligation of maintaining reserves on clU'renoy notes issued for the purpose of advances to the Govern"!' ment. In 1940, the notes in circulation and t~e deposits at the Central Bank amounted to 1,301,000,000 pesos, 60% of the paper pesos \,1ere ",1 tbout reserve. cover and Banco Central had l'eached the legal maximum of issue. ~t ~·lP.,S then freed of the reCluirement of carrying speCific reserves·. B9\."eve~. it adopted the policy of ma1ntainin~ the equivalent of U.S, $30,00°,000 in gold (eq~i~alent to 930,000,900 circulating pesos) as a backing to the notes in circulation. On September 1.5, 1946, note oirculation amounted to 4,103.000.000 38. pesos. and at that date gold reserves amounted t~ 22%. In effeet there is no limitation to the issue of currency. Banco Central currently maintains a discount rate and lends money to the public at 6%. to participating banks ~t * and to parastatal entities at rates ranging from 1% to S%, Commercial :Banks 14 national banks and ; foreign banks operated in Chile in 1943, tilth 89 offices in 36 cities. The minimum reserve reqUired in cash or demand deposits "lith ~anco Central is 20~ of demand deposits and B% of time deposits, Loans to singl~ borrowers may not exceed 10% of a bank's c~ital and surplus. Demand deposits of cOlD1!lercicl banks in Chilean pesos rose fron 2,019,000,000 pesos -in 1939 to 3,300,000,000 peaos in 1943 and to 6,297,000,000 pesos as of December 1946. Savings :Banks Only the following, which are governmental institutions, may accept savings deposits in Chile:' \1) The CaJa lTacional d~ Morros '''hich can also engage in commercial banking activities. It pays 4% interest on savings deposits. From 1939 to 1943, its savings deposits increased from 614,000.000 pesos to 1,162,000,000 pesos and reached ),OS4.000,000 pesos a,s of August 19l~6. (2) The Ca.ja de. Credito Popular, ,..rhich is permitted to pay interest a,s higha,sS.S% and '."hich, also lends money on jet'lelry, clothing, automobiles and chattels. Its tota~ savings deposits at the end of 1943 amounted to 1;5,000,000 pesos. I.lort~age Ban1qi There are three mortgage ba,nks, one of 1;rhich enjoys a semi-official 39, status, which grant loans, secured by first mortgages on rural and urban properties. Their total loans as of June 30. 1944 amounted to ..<1W' 2.984.000,000 pesos. (8) Trends in Pr!ce@t Wages and Production Chile has experienced continual inflation during the past decade. The data available, ,·,hile incomplete, indi~ate that in March 1946 / ...rholesale prices for Chile as a \'Thole averaged nearly 2i times the 1936 level. TABLE 3' shows that in August 1946 ret~dl prices in Santiago averaged 2.7 times thos~ of 1939 and that Chile's daily wage rates in August 1946 were 3.1 times as great as in 1939. Currency in circulation and demand deposits rose from a total of 3.168.000,000 pesos in 1939 to 10.515,000,000 pesos in December 1946, an increase of 232~ as shotm "oelo\'T: (in OOO.OOOls of pesos) Demand lifote issue Total Index of Average Depoaits of Central Circu,;" totals figure in Com.... Bank plus lating (1939 = for mercial Demand De.... l·ledia 100) :8@ks posi ts in same 1939 2,019 1,149 3.168 100 1940 2,202 1,301 3.503 110 1941 2,409 1,525 3,934 1%4 1942 2,699 1,977 4,676 147 1943 3.300 2,571 5,871 185 1944 3,824 2,960 6,784 214 1945 4,554 3,289 7, 8L~3 21j.7 8 Dec.1946 6,297 4,218 10,515 332 During the same period industrie~ production increased only 2ff/, and the physical 1Tolume of imports increased 35~. Agricultural .. ........., 40. - produotion increased but at a slower rate, for example, wheat produc tion in 1943 had risen only 1.5% over 1939. Thus, an overall increase of perhaps 30% in the total of goods available for consumption he.s been confronted with a 214% increase in a7a~lable circulating media and this has led to a general rise in prices. Commercial loans and discounts were 3i times as great in 194.5 as in 1936 and 2i times as great as in 1940, despite a steady rise in discount rates from 7% in 1935 to 9% in 19 45_ There is no indication that the infla.tionary ~rend ,1111 be re versed or even decelerated in the immediate future. In fact, the co at of living in Santiago was ~ higher ill 1,1a.rc!1 19 46. and 18% higher in August 1946, than the average for 1945. The total of currenoy in circulation and demand deposits was 30% greater in August 1946 then the average for 1945. The increase in monetary supply and the rises in prices and \'1ages in recent yeers reflect in part the large increase in the gold and foreign exchange ho1dines of Chile, due to war-stimulated demand for Chilea.n exports and the import limitations due to and foreign ex~hange restrictions imposed because of \'Torld-'1ide scarcities. In addition to this passive role in what may be termed a "foreign tradel! inflation, the Bank of Chile and the Government have played an active role in the inflationary trend, by extending credit in large amounts to various state-sponsored developmental insti tutions. Price Control E'nd R?,tioning Res~onsibility for price control is vested in the Presi~ent. , acting through the Ministry of Economy. Commerce and Finance, Actual administration of price control legislation is vested in the Commissar - iat of Subsistence and Prices, aided by a Uatiopal Council of repre sentatives from government, business, and labor. Among the po.. " ers conferred upon the Oommissariat are to recommend government expropria tion, for public use. of private lands and enterprises producing essential articles; to distribute articles declared a monopoly by the government; to require the declaration of stocks; to requisition and sell hoarded articles; to establish transportation priorities; to seoure preferred allocation of foreign exchange from the Foreign Exchange OO~llission; to prohibit the reexport of prime necessities and to establish 881es outlets for these commodi ties ~'ith the ot-mers compelled to sellon consignment at 10\" prices. Enforcement of price control regulations has been relatively ineffective, largely because of administrative d1fficulties~ and. the absence of adequate price control formulae "'hich permit increases proportionate to rising costs ~nd the continuous monetaIjr expansion. Violations of the latlT have been so \"idespread ?nd common that the sanctions imposed by the Commi~sariat have reached only a small portion of the evaders and speculators. Until 1943, no allocation of budget ary funds was made for the price contr9l office, the only source of income being fines levied on violators. A reorganization of the Commissariat in 1945 refocussed attention on the broad pO\'lers granted over articles of ''prime necess! ty or habitual use or consumption" and was follO\lTed by a. campaign against speculative practices in the foodstuffs market. Among the measures taken were the requisitioning of hoarded articles ~d resale to the public; the closing of stores \'lhich violate price ceilings or refuse to sell articles in stoclq the control of inter-city transportation of foodstuffs, and the restriction or prohibition of the export of foodstuffs if domestic needs have not - been supplied. Rationing has been confined to, tires, tubes, gasoline, kerosene, steel produots, trucks and tractors. For all praotical purposes, car o\'mers are the only segmetlt of the popula.tion which has been greatly affected by rationing. RatiOning of drugs and pharmaoeu~icals has oonsisted largely of a system of allocations to distributors. (9) Exchange Rates The inflationary trend described in the preceding section has been acoomp~ied ~y,a decline in the value of Ohile's currency in relation to the U.S. dollar and the pound sterling but i'li has been m~c~ less than the relative price trends in Chile, the U.S. and the U.K. would indica,te. Ohile operates a m~l~iple system of exchange rates, A ra~e.of about 31 pesos to the U.S. dollar (referred to below as the "D.P." rate) applies to the bulk of imports and of exports, "'ith the import ant e~ceptions of copper, nitrates and iron ore ~xports as described below. A preferential rate of 25 pesos to the U.S, dollar ~pplies to the importation of,sugar, cellulose,.o~lseeds and newsprint. A special rate of 19.37 pesos to the U.S. dollar applies to the returns from exports of copper, nitrates, and iron ore and ~s the effect of a special tax on the produotion of such co~odities. Gold is pur chased from miners at especially high rates. Finally, a very small number of transac~ions have taken p1-a~e at a so-called ufree market" rate wluch was 39.14 pesos to the U.S. dollar in December 1946. Aeoording to reoent nel'lS reports from Ohile, the importance of this free market is increasing. In 1936, a rate of 25 to 26 pesos to the U.S. dollar applied to 43, imports and to exports, except copper, nitrates and iron ore. As already indicated that rate has gradually been replaced by the current rate of 31 pesos, a decline of about 2~~ During the s~e period, however, .Chilean price levels and wage rat~s. r9se by more than 50% relative to prices and wage rates in the U.S. . , A rate of about 40 Chilean pesos to the U. S. dollar lITould appear to reflect the internal,values of the two currencies more accurately than the existing rates. Haintenance of the 31 peso rate has been possible only beaguse of the controls over dealings in foreign ex change and over imports \'Thicn were facilitated during the "Tar years by "Torld 'lrride scarei ties. (10) Government Control of Imports and E~ort~ and Forei@ E.'ltchange Foreign exohange control "Tas establi shed, in Chile by Decree ~a"T No. 4973 in July 1931 and Qy Congressional Law No. Sl07 in April 19;2. Control 1I1as placed under a seven-member Foreign Exchange Commission (Comision de Cambios Internacionales). and transactions ",ere to be carried out through the :Banco Central as follo'lrTs: (a) The Banco Central ,,,as to 'Oe the sole purchaser and seller of foreign exchange and was to fix exchange rates daily, (b) The Co~~ission was to allocate foreign exchange for imports to applicants, giving preference to purchase of raw materials and articles of primary necessity, (c) The OOllLllission . . r as to control exports by a system of permits. Exempted were nitrates, iodine, copper, and - --- .. iron, producers of . . t hich "rere to sell to the Central Bank a quota of foreign exchange equal to their !lcost -- of production" in Chile; In practice, Eanco Oentral's authority became subordinated to that of the Foreign. Exchange Commission, '''hich soon after 1931 de veloped a system of multiple exchange rates and left to Eanco Central the fi;ing of only an official rate which was of very limited app1i cation, Ey 1939. a system of five exchange ra~e~ was in existepce. The official rate was then 19.37 pesos to the U.S. dollar, the only one contemplated by the exchange control law, and was used, princi~al1y, as a means of taxing exports through the requirement that certain portions 9f the prooeeds of exports be sold to Eanco Central at that rate. It was also used for acquiring foreign exchange for' servioe of the foreign,debt. Almost no exchange ,..ras available to importers at this rate. An "export draft It rate ,..ras first Cluoted in August 1931, and was used by exportel"s ,,,ho sold goods abroad and brought in imports themselves or arranged to sell fQreign. exchange to importers of products approved by the Commission. After a period of fluctuation, the e~ort draft rate \'Ias fixed at 25 pesos to the dollar in August 1937. An uncontrolled curb or free rate existed, which, ,.,hile npt legally recognized, \-laS tolerated for non commel"cial transactions. ~t.the end of 1936, a sa-called gold rate of 29 to 3" pesos to the U. S. dollar was established because of a serious shortage of exchange available at the then current export draft ra~e, and this rate '\Tas used for imports of so-called luxury articles. In March 1939,. a uDisponfbilidades Propias lt or "D.P." rate of 31 pesos to the U.S. dollal" was established. as an attempt to divert into official channels the funds which had formerly entered the curb market. However, the ourb market continued to operate and during 1940 offered for U. S. dollars a premium of 6 pesos over the "D.P. II rate, first to encourage the repatriation of fund~ from abroad, and then becoming increasingly applicable to imports. In 1941. the Comnission required that the IID.P.1I r~te be used for all import transactions except a small list of prime necessities such as sugar, newsprint and cellulose "fMch "Iere assigned the export draft rate. There. ~s been a similar trend to\'lard the "D,P." rate for other exports, e.g·· in 1940 the Oommission authorized all exporters of ores containing gold, silver, copper and.o~her metals, to sell their entire foreign exchange proceeds at the "P.P." rate and in 1941 certain agricultural e;xports "Jere assi~ed this rate. The En:\ergency PO"rers Act, La,,, lio. 7200 of July 1942, simplified the control system by combining the Foreign Exchange Oommi ssion "fUh the other bodies which had previoul;lly controlled exports and imports to form the l~atioIl{:!.l Oouncil of Foreign Trade (Oonsejo Uaciona! de Comerdo lllxterior). It "las ag?-in provided that ::Banco Central was to fix all foreigll exchange rates ·. The term "official" rate '''aD abeUahed: the rate of 19.37 peso to the U. S. dollar nov! became a II special II rate and,continued to be applied to exporters of nitrates, copper and iron ore. Although the export draft rate of 25 pesos to the U.S, dollar \'Ias cont inued, it, b!")came relatively unimportaut because the D,? rate of 31 pesos per U.S. dollar \"as established as the "normal" ra~e for all exports and i~ports other than those specifically excepted. In Decree No. 1423 of December 15, 1944, th~ powers of the National Oouncil of Foreign Trade 1I1ere redefined. Although the Council still applies e~l co~trol regulations, it is not exclusively responsible for their initiation. The Ministry of Economy. Commerce end Finance is primarily responsible for commercial policy and, instead of ::Banco 46. Central.fixtlS foreig!, e:;:c..'lra.nge rates. The Ministry of Agriculture d;c1des "'hieh agricultural prod1,lcts m~ be exported, and '''hich must be kept to neet domestic demand. A1though the Goverzunent has made official statements from time to time that foreign e;lCchange would be productively used and not extende9- to luxuries, exchange reserves have recently sho\'ln a serious decline. Libera! authorization of imports during the first half' of 1946 together with a reduction in foreign exchange receipts beoause of strikes in export industries and fo~~ard purchases of foreign exohange by 1mport~rs, have combined to oause a very tight foreign exohange situation. Banks are o~ent1y reported to be upable to supply foreign exohange to manr holders of valid import permits. (11) Foreign Trade In 1938 Chile ra.n1ted sixth among the nations of Latin America in value of foreign trade and fourth among th9s~ of South America. Its exports were valued at the equivalent of U.S. $ 141,000,000. or about 8% of £4.1 Latin American exports and nearly 10% of those from South ~eriea. Imports into Ohile in 1938 amounted to the equivalent of U.S~ $ 103.000,000 or 7% of the value of all commodities imported into Latin American oo~triest and nearly 9% of those imported into South Amer~c~ Republios. In 1945 its exports ~o~ted to the eq~ivalent of U.S. $ 210,700,000, and its imports, U. S. $ 156,020,000. The value of exports from Ohile usually exoeeds that of imports. The average annual export. b(:l.1anoe in the ten years, 1929 to 1938, was the equivalent of about V.S. $ 47,000,000. In 1938 the export sur plus \'las equivalent to U.S., $.39,000,000 whereas in 1937. it had reaohed the equivalen~ of U.S. $ 107.000,000. In 1945. it amounted to the equivalent of U.S. ~ 54,700,000. Mining enterprises are largely controlled by foreign companies; a substantial part of the value of Chilean mineral exports, t~erefore, does not,become available to the country in the form of foreign exchange. The most notable features of the Chilean export trade are the dominant positions occupied by copper and nitrate (and the reversal in the relative positions of these two COIDm9dities) and the small volume of agricultural and pastore~ exports. In the ptTiod 1900 to 191), nitrates acco~ted for 75% of all Chilean exports, while copper constituted only 5%; by 1938, hO\'TeVer, exports of copper represented ~early 50% of total exports whereas nitrate had dec~ined to about 20%. The principal markets for Chilean exports in 1938 were the United,Kingdom, 22%; the United States, 16%; Germany, 10%; and Belgium, 8%. During the war the Un! ted States becam~ ~he largest customer for copper a~d,nitrates and in 1945 purchased,U.S,$10),100,OOO Horth of copper e.nd U.S.$ 37,600,000 1,1orth of nitrates. In the decade 1929 to 1938 Ohile's import trade ""as greatly influenced by the develo:pme~t of domestic manufacturing, which was stimulated by import duties, the depreciation of the peso, and the policy of the Exchange Oontrol Oommission in allocating exchange only for oo:lllmodi ties considered essential and not manufa.ctured \1it'!:lin the country., Chilean imports consisted chiefly of textiles and their manufacbures; unliTorked iron and steel and iron and steel manufactures; machinery, accessories, ?Dd too~s; chemical products; transport material and aeceBsori~s; and miscellaneous manufactured products, chiefly consumer goods. In 1938 manufactured products, not including processed foodstuffs, accounted for more than three-fourths of total 48 · - . imports, in 'Vt'lJ.u~ ·.. !l!he pri:p.;::'!:pe1 ""~1r~O~ vJ: 04.t.~._ _ ~-:r·\""ts in 1938 we~~ the United states, 28~; Germany, 26%; and the United Kingdom, l~. :puring the \-lar, the Un! ted states became the main sO'Urce of supply. The volume of imports increased only slightly, ~u~ the rise in world. prices has resulted in imports va+u~d at U.S.$l?l,OOO,ooo. in 1943, at l!.S. $149,400,000 in 1944, and at U.S. $156,000,000 in 1945~ (12) :Balanoe of Pa.yments The first thorough-going attempt to calculateChUe f s balance of p~ents, since the \'lorld, economio crisis of 1930-1935. was made in 194 2 by the Banco Central., The system which was then adopted is still under constant revl,sion. A d~te,i1ed analysis of the bala,nce of payment sis given in APPENDIX IV.. TABLE 1 VOTING STRENGTH Alf.D CONGRESSIQNAL REPRESENTATION :BY PAroIE§ IN THE 1941 84 1945 ELECTIONS IN CHILD 1941 l2!±i TOTAL 433.31:7 f;S1.768 Parties of t:Q~ Right 167,613 213,652 Conservative 77,243 98,665 Liberals 60,997 79,295 Agrarian 7.723 . 11 ,983 Independent & Fractional 21.650 23.709 Pgrties of the Left 265.700 238,116 Radicals 93.419 103.985 Socialists 80.377 38.551 Oommunists 53,144 51,)27 Democrats 19.202 25.151 Falange Nacional 15,553 19,102 Independent & Fraetional 4,005 Congressional Representation 1941 l2!±i Senatorp Deputies Senatorf? Denuties - , TOTAL ~ 147 ~ 147 Conservatives 11 33 10 35 Radicals 13 43 12 39 Communists 4 15 5 16 Liberals 8 23 10 29 Others 9 33 8 28 Source: State Department. () () TABL~ CHILEAN POPULATION STATISTICS 1940 Pop.... in- Pop. dis- Provinces Estimate Cefl6us of Area. {194Q2. POEulation densitz crease tribution Sq. ron. TOTAL - 5,023>539 4,287,445 3,753,799 3,249,279 741,767 for 19l.-3 5,237,432 1930 1C)!:,.O 1907 1920 Sq.mi1es Per sq.Km. per sq.mL... 1930-40 286,396 6.8 'II~ 17.2% 1940 17.5 100.0% Tacna. Tarapaca 11 99,724 11 1C4:097 1:1 113,331 38,912 100,553 28>748 11 110,036 55,287 11 21,346 !I 1.9 Y 11 -8.1 11 2.1 4.9 Antofagasta 154,087 145,147 1'78,765 172,330 113,323 123,063 47,515 1.2 3.1 -1808 2.9 Atacama 90,105 84,312 61,098 48,413 63;968 79,883 30,843 1.1 2.7 38.0 1.7 Coquimbe 250,953 245$009 198,336 160,256 l'/!':;. 021 39~889 15,401 6.2 15.9 23.8 4.9 Aconcagua 121,206 118,049 417,5t.4 116,914 128,486 10,204 3,940 11.6 30.0 14.6 2.3 Valparaiso 476,737 425,065 320,398 281)1385 4'p818 1,860 88.2 228.5 17.9 8.; Santiago 1,463,41...1 1,261~ 717 967,603 61'. .10· 3'-8 >;. ;; 515,780 16,988 6;559 74.3 192.. 4 30.4 25.1 O'Higgins 201,599 200,297 :JI 118,.591 93,429 7,112 2,746 28.. 2 72.9 17.4 4.0 Colchagua 133,491 138,036 295,971 166,342 159,030 8,865 3,423 15.6 40.-3 10.0 2.7 Curico 90,490 81,185 W 108,148 107,095 5,737 . 2,215 1.4.2 36.7 6.8 1.6 Talca 149,920 157,141 218,227 133}957 131,957 ' 9,640 3,.722 16.3 42.2 10.. 5 3.1 Maule 65,418 70;;497 197,468 J.:!.3,231 110)316 5,626 2,172 12.5 32.4 -5.2 1.4 Linares 133,705 134,968 2/ 119,284 109,363 9,820 3,791 13.7 35.6 9.7 2~7 NubIa 226,904 243,185 231,896- 170,425 166,245 14,211 5,487 17.1 44.3 4.9 4.8 Concepcion 335,281 303,241 329,495 2A6,670 216,994 5,701 2,201 54.1 140.. 0 14.8 6.1 Arauco 68,870 66 l07 j 60,233 61,538 5,756 2,222 11.5 29.8 8.2 1.3 Bio-Bio 118,578 127.,312 1Wc;,688 107,072 97,968 11,248 4,343 11.3 29.3 12.3 2.5 Malleco 145,299 154~174 'J.L 1:1:0429 109,775 14,277 5,512 10.8 28.0 9.3 3.1 Cautin 348,756 374//.19 383,791 19~,628 139,553 17,370 6,707 21.6 55.9 20.8 7.4 Valdivia 210,256 191,6L~2 236,1l5 175,141 118,277 20,002 7,723 9.6 24.8 28.6 3.8 Osorno 80,299 10'1,341 ~ -;/ :;>1 y 10,015 3,B67 10.7 27.8 23.3 2.1 Llanquehue 113,087 117;225 2J 137,206 105,043 18,407 7,107 6.4 16.5 26,,7 2.3 Cbiloe 91,355 101~706 183,499 1l0,348 88,619 23,446 9,052 4.3 11.2: 11.8 2.0 Aysen 16,700 17,014 9,711 19/ W 88,984 34,357 0.2 0.5 7562 0.3 Magallanes 51,171 48,813 17,913 28,960 17,330 135,418 52,285 0.4 0.9 28.8 1.0 \.n 0 · ( ;, « i t Sources: U. S .. Bll:,e~u of Census: Chile, Dt;;lllograph:ic Data., July 1943 or.fi.~e of Inter-Am.er:l.c8."l Affairs J Ha"ldbook of Latin American, u.. S.. Population Data, Januar,y 1945 ~ Footnotes Returned to Peru i:1 1930 Included with Aooncagl.!a from 1928 to 1936 ~ Included with Colchagua fram 1928 to 1933 Included wH,h Talca frl.)ln 1')28 t.o 1936 ~ Includ~d with Maule fr'lll 19:!8 to 1.9;;6 'E! Included with Concepcion from 1928 to 1933 11 Included with Cautlll from 1928 to 1936 §I Creat·ed by Law, J anua!"'J 19, 191+0 2/ IncluJdd with Chiloe from 1928 to 1936 1§J Not shown separately prior to 19300 · \J'\ I-' 52. .... TABLE: 3 NATURE OF LAND IN CHILE Agricultural Oensus, 1942 - 43 T'otal Area Agricultural Land Arable Land Irri~'ltod Land Hectare Hectare Hectare Hectare Provinces (million) .~ (mill-ion) ~ (million) ~ (minion) % Northern: 29c8 40.2 1.6 8~1 0.1 2.2 8.1 9.1 (Tarapaca, " Antofagacta, ,fi.tacama, Coquil'lbo) North Central f 6e9 902 4.1 20.7 L3 20.3 0 6 0 49 ..1 (.Aconcague" Valparaiso, Santiago. 001 ehagua, O'Hig gins ·. Curico, Talca , Maule) South Oentral: 4.7 6.3 3.4 17 .. 2 2.3 36.2 0.5 37.8 (Linares, Nuble, Concepcion, Arauco~ Bio-Bio) Southern: 10.4 14..0 4...0 20.6 2.5 40.9 II 4.0 (Malleco, Cautin, Val divia, Osomo Llanquihue, Ohiloe) ,4llst.ral; 22 .. 3 30.3 6.5 33.4 l/ 0.4 11 (Aysen, Magall anes) TOTAL 74 .1 100.0 19.6 100.0 6.2 100.0 1.2 100.0 II Less than 50,000 hectares Source: U. S. Department of Agriculture, Chile's P~ttern of Agricultgral - Pro~cfion ~~ Trade, from Foroign Agriculture, August and September, 1946. 53. TABLE 4 DrSTRI~UTIQN OF All~LE LAND ,." IN C:ITLZ. 1942-43 Millions of Percent of Hectares total Pasture! lte,tive pasture I.) Trone pasture and hay crops b.2. 4.2 67.2 Annual and other crops; Grains 0.9 Truck crops 0,2 Industrial crops 0.02 VegetaiJles Q,JU 1.2 19.7 Fallow 0.6 10,1 Vineyards and orchards 0.2 ~ TOTAL 6.2 100.0 Source: Preliminary returns of 1942-43 Agricultural Census of Chile. 54. TABLE 5 L.AND DISTRI:BUTION MID DtiNERSHIP 11; CHILE, 1937 ~ Holdipgs Agt!;re~te Area Range of area of {In OOO's of h21 e.i!1&s\ Number Percent hectares i , Percent 0- 5 hectares 87.790 49.2 139 0.. 6 S'"'! 20 " 41,437 23·1 469 1,,8 20 - .so 1/ 21.341 12.0 691 2.8 50 ... 100 \I 11,007 6.1 772 ';.1 100 ... 200 " 6,958 4.0 96.5 3..8 500 It 6.6 200 - '.323 3·0 1.673 500 - 1,000 II 2,220 1,2 1.5Z5 6,,0 1,000 - 2,000 II 1,342 0,,7 1.823 7,,3 II 10.2 2.000 - 5,000 838 0..4 2.542 5,000 and over If 626 0.3 11+,486 57.8 100.0 25.085 · 100.0 Sourcel M'atthe1. Dr .. Adolfo. La Agricultura en Chile y la Politica Agraria Chilena, Santiago. 1939 ~ p. 114. The above per cen ta.ges \-rere calc'llla. ted by the :Ballk .. '\ f) ( ) TABLE 6 AGRICULTURAL AREA AND PRODUCTION OF PRINCIPAL CROPS, 1937 TO 1945 Area Production C01I1II1odi ty (000,50£ hectares) (OOO,s of metric tons) 19'.Jl/38 38/39 39/40 40/41 41/42 42/43 43/44 1937/38 3fJ/39 39/40 40/41 41/42 42/43 43/44 Cereals: Wheat 765 828 828 781 730 751 797 814 966 860 783 783 856 994 Oats 121 137 107 80 68 88 102 120 153 85 68 67 78 114 Barley. 98 82 53 52 49 47 44 163 109 73 75 69 73 75 Corn 43 43 45 52 48 55 53 56 63 77 65 68 69 71 RYe 13 14 13 10 8 9 9 8 9 6 6 5 6 7 Rice 4 8 13 13 15 29 39 13 33 53 45 61 109 150 Legumes: Beans 88 80 96 99 86 84 79 79 71 92 80 69 70 77 Lentils 54 32 31 33 23 II 13 52 29 22 30 15 II Peas 24 28 26 29 28 27 23 19 20 20 23 2l 22 19 Chickpeas II 10 II 10 7 8 9 4 5 6 4 3 4 4 Potatoes 51 54 46 54 52 55 53 4rt 487 417 428 522 512 414 Hemp: 7 7 5 8 14 20 5 Fiber 7 7 5 8 15 20 6 Seed 6 6 5 4 13 18 6 Tobacco 3 4 5 3 2 3 5 7 8 10 6 4 5 10 Wines* 92 86 95 96 89 90 355 359 282 266 278 271 285 *Production in ooo,ooot 5 of llters Sources: Agricultura e Industrias Agropecuarias, 1942~43 Annuario de Comercio Exterior, 1937-44 \J\ Estadistica Chilena, Dec. 1942, 1943, 1944, 1945 \.n · Plan Agrario~ 1945 () () TABLE '1 , 19;36 {OOOIS~ Cattle Sheep Horses Pl.gs GOats MUles Asses Provinces No.. % No. %, No. % No. % No. % No. % No. % Northern 165 6 240 4 46 9 IS 3 434 54 13 32 40 77 (Tarapaca, Antofagasta, Atacama, Coquimbo) N~t.h Central 797 31 972 17 205 39 149 26 l44 18 20 49 9 17 (Aconcagua,.. Val~araiSO, San iago, O'Higgins, Co1chagua., Curico, Talea, Maule) South Central 487 19 639 11 . 112 21 125 22 77 9 3 7 1 2 (Linares, Nuble, Concepcion, Arauico, BiO-Bio} Southern 1083 42 ll04 19 139 26 276 48 151 19 5 12 2 4 (Ualleco, Cautin, Valdivia, Osorno, Llanquehue, Chiloe) Austral 41 2 2974 49 26 5 3 1 4 (1) (1) (1) ~Aysen, Uagallanes) TarAt -- 2573100 -- 5929 100 52S 100 571 100 S10 100 41 100 -- 52 100 (1) Less than 500 Source: Agricu1tura e Industrias Agropecuarias,. Ano Agricola, 1942-1943 \.n Q'-. 57 ~ TABLE 8 LIVESTOCK KILL"ED m SLAUGH~RHOUSES IN CHILE ],,936-1942 (OOOIS of metric tons) ill2 wz. l2J§. 13..l2 l.2!:!i !2&! 1942 Cattle 112 103 98 106 114 120 121 Sheep 20 19 22 23 24 25 25 Hogs 15 14 15 15 18 21 20 Goats 1 1 1 1 1 1 1 TOTAL 148 137 1;5 -145 1.57 - 167 167 Source; Agriculture. e Industr1as Agt;"'opecuaria.s, Ano Agricola., 1942-4; - 58. . ....... TA13LE 9 COMPiRISON OF CBI~~AGB±CUL~~ C~QTERI.§TICS ANP PRODUCTIQN :'llTH FIVE REGIOl!S (I) Oal- Switzer- New Agricultural Charaoteristics Chile ifornia i $\1eden lAAi-, *ee1an4 Population (millions) 4.3 5.67 6.23 4.06 1.4 (1930) (1930) (1934) (1930) (1936) Area (Million hectares) Total 74 .2 4l~0 44,9 4,1 26.8 ·.irable 5.6 3~8) 1.0 }.{eadows 12p2 12,3 1.1) 2,2 7.0 Total agriculture, ex cluding forests 17.8 12.3 4.9 2.2 8.0 Area per oapUa (hectares) Total 17.3 7.2 7.3 1.0 19.1 Arable 1.3 0.6 0.7 Total agrieulture, ex- eluding forests 4.1 2.2 0.8 0.5 S.7 Agricultural production Total (millions of metric tons) 2.3 9,3 7.6 4.,5 5.5 Per capita (millions of quintals) 5.4 16.3 12.2 11.1 39.2 Per hectare for araole and meadow land (millions of quintals) 1.3 7.5 15.5 20.5 6.9 Oommodities (thousands of metric tons) Fruits Milk 80.6 228.0 3,443.0 1,550.0 2,300.0 657.0 2.784.0 4,290~0 Meat 160.0 183.0 304.0 205,0 631,,0 Wine 222.0 468.0 50,.6 ... Oereals and potatoes 594.0 1.739..0 4,731.0 746,0 451,.0 Wool 2.9 11.8 0.6 0.3 133*,8. Cotton and tobacco 6.8 99.5 0.6 0.9 0.5 :Beet sugar 1,939.0 266.0 (1) Figures represent the middle years of the 1930-40 decade, chiefly 1935. 1936. 1937. Source: Oited by Ellsworth, P.T ·· Qhi1ei An Economt in Treqsition, New York 1945. 59. TABLE 10 SlI-:4:/IARY OJ<' na'L'A RELATHW. TO PRIlWI?AL IWTIJFACT(JRIEG ll:nUSTRITIS n~ CElt:El. 19LW. l{umber of lTumber of Ca:9 ital Value of Industrial Group establish workers Invested Production ments (OOOls of ~esos) (OOOls o~ ~esos) Food l)roduct s 1,308 24.159 1,281 ·.306 1,882,761 Textile products 351 18,845 804,388 679,1+41 Chemical products 307 6,856 378,504 419,938 Leather and leather products 370 12,764 337,439 365,825 IvIetal products 359 13.222 384.922 348,630 ?apel' product s and printing 366 10,482 450,906 ']25,371 Lumber and tTood products 468 9.907 382,324 235,40'7 :Beverages 178 3,574 293,216 194,264 Tobacco J;>rooncts 12 1.573 118,691 187,009 , Clothing 159 ,4,710 147.709 176,685 Stone and earthen products 236 6,044 227,519 158,429 Glass products 35 3,643 71,977 60,551 ~hlsical instr~ents and bames 20 714 40,230 14,084 ,----,- TOTAL 4 t 169 116tL~93 4,820,131 5,048,395 Source; Oompiled by the US Tariff Commission from Chile, Direction Gen eral de :Jstadj,.stica, Annuario do IYldustria., 1_~'0! 1943. 60. . '-' TA13LE 11 NATIONbI: ORDINARY :BUDGMS OF CHILE1 1240-124 5 i , (OOO.OOOIS 'of pesos) Item 1940 1241 , 1942 124J 1244 :t245 TotDl ordinar,y revenuo 2.052 21496 g,2S4 ,J,2J8 , . 4,089 5.5J1 N.?,tiona1 properties 29 28 36 40 51 50 National serv~ces 160 179 207 222 276 293 Taxes 1.522 1.222 '.O§J '.22 6 , ,.822 J.,S2Z Import duties 602 . 595 507 448 475 g:;l Income t axes 245 300 446 619 682 831 Real eatate taxes 83 145 117 130 170 216 Special import taxes 226 317 513 544 824 976 Tobacco & liquor tax 133 196 241 274 332 371 Other taxes JQ~ ::tZ6 2S2 I J~ )j :182 50, Earmarked funds from specif~c laws 266 196 218 952 518 1.192 Other revenue 164 410 188 372 469 Total ordina.I7 expenditure ,.202 2,221 2. 05, J.96q 4,472 S,z41 National defense 556 676 758 1,221 1,308 1,650 Interior 398 457 518 574 703 807 Education 300 517 511 657 760 969 Public Works 238 258 272 281 342 582 TreaSU17 :345 411 47:3 550 6:34 841 Public Health 165 202 257 :323 339 406 Juetice 76 84 91 116 133 177 Labor 39 43 49 61 74 94 Foreign Relations 31 33 36 41 37 4.5 Oolon!zati on 9 23 16 16 16 19 Agrioul ~ure 21 22 32 3:3 37 39 Economy & Oommeroe ... 43 41 40 Other expe%¥iit'l1re 24 JS J2 44 46 22 Surplus (/-> or deficit (-) - 150 ... 265 .... 98 - 222 - 383 - 210 Sources: Memoria de 1a Contro1eria General y ~Blance General de 1a Haoienda Publica, 1943. 1944, 1945 EstaAlstica Ohilena U. S. Department of Commerce, ,Chile. ~iov. 194.5 f) () TABLE 12 COMPOSITION AND MANAGEMENT CF CHILEAN TREASURY OVERDRAFT (000,000 pesos) Net Treasury overdraft 1939 1940 1.941 1942 - 1943 1944 1945 (~nd of preceding year) - 99.5 -323.0 -540:",7 -613.4 -591.4 -569.3 Annual Balances Ordinary budget I- or - -150.2 -265.1 - 98.2 -222.1 -382.8 -210.5 Extraord. budget .J. or - - 69.3 I- 39.8 - 36.8 - 79.6 ;'262.6 /112.9 Cash Internal Revenue position f. or - . - 4.·0 t 7.6 f 2.3 - 5.6 - 4.. 4 - 1.4 Borrowings - exceptional 1-146.7 f 81.5 Special tax proceeds (copper) /389.3 Net Treaaury Overdraft (end of . current year) - 99.5 -323'f'0 -540.7 -673.4 -591.4 -569.3 -586.8 Cumulative balances at the end of current year: Ordinary budget f 30.1 -120.1 -385.2 -483.4 -705.5 -1088.3 -1298.8 Extraordinary budget -123.1 -192.4 -152.6 -189.4 -269.0 6.4 f 106.5 Cash Internal Revenue Posi Borrowings tion - 6.5 - 10.5 - 2.9 - 0.6 - 6.2 - 10.6 f 146.7 - 228.2 f 12.0 Copper taxes proceeds ;'389.3 I- 389.3 f 389.3 - 99.5 -323.0 -540.7 -673.4 I -591.4 - 569.3 - 586.8 0> I-' !rABLE 13 62. OHlLE: EXTElmAL DEBT. 193~4S Floatin~ Debt (in thousands) Payable in Payable in U. S. Dollars , Pound Sterling :Bank Treasury l3ank: Treasury Port Dee. 31. 1945 Advances 3.~SO Notes 2,52.5 Advances 2,260 Hotes 108 -- Debts 461 Dee. 31, 1944 3.366 2,614 2,))8 112 477 Dec. 31. 1943 9,740 2,703 2.431 116 494 Dec. 31. 1942 21,416 2.192 2·.510 120 510 Dec ~ .31t 1941 22,16) 2,881 2·.589 123 .526 Dec. 31. 19lKl 22.849 2,967 2.661 127 542 Dec, Dec. Dec. Dee~ )1. 1939 31, 1938 Jl, 1937 31. 19)6 2).536 24,222 24,813 2.5·.521 3.0.58 3. 147 ),236 3,.32.5 2,146 2,824 2,890 2.9.54 1)1 13.5 138 141 - .5.58 -- - Funde~ debt 'in m~l~!Q~s) i U.S. Dollar Pound Sterllng S.. .l~SS Frattc Os!imti9U§ ,ObJ,i.Q+t1Qns Obl1&@:t1o;s ; Deet 31. 194.5 $ 1.50.5 it 27,.5 Sw.Fcs 108~6 Dec, ,I, 1944 1.57,0 27,7 108~7 Dee. Jl, 1943 162.7 27.7 108.? Deo · .31, 1942 164.4 27.· 7 108.7 Dec. 31, 1941 167.1 27 t 8 108,7 Dec. 31, 1940 170.2 27,8 108.7 Dea. 31. 1939 ;1.76.4 27.8 109,0 Dec. 31, 1938 182y) 27.9 110,0 Dec. 31. 1937 216.1 29.1 116.9 Dec · .31, 1936 233.6 29 ·.5 118.6 f) ( TABLE 14 CHILE" S FUNDED STERLING OBLIGATIONS Outstanding Redemptions 1935-46 Outstanding ~ _ .· Issued 12/3lj34 Law #5580 Extraordinary 12/31/k6 Direct Oblisat.J.ons 01 l.;nJ.J.e: ChUean GO'V'tt 4i% P.C .. Loan of lBB5 r. 808,900 t .38,200 t 3,700 t 200 t J4.1~ If 41% P.C. lean of 1886 6,010,000 1,063,900 204,100 100 859,700 II .4 %P.C. Loan of' 1887 1,160,,200 146,100 22,500 200 123,kOO Republic of Chile k!% P.C.. Loan of' 1889 1,5k6,1.+00 626,832 9k,_800 532,032 Chilean 5 P.C. Loan of 1892 1,800,000 662,000 140,900 200 520,900 " Gov t t4!% Loan 1893 630,000 212,100 54,700 kOO 157,000 If ki% P.o. Loan of 1895 2,000,000 831,000 l44,100 100 686,800 " P.C. Loan of 1896 4,000,000 1,773,700 235,200 200 1,538,300 Coquimbo Railway ki% P.C. 265,000 108,560 15,840 60 92,660 Chilean Govtt 5 P.o. Loan of 1905 1,350,-000 685,400 1.14,koo 100 570,900 If If 5 It II 1909 3,000,000 . 2,2-)0,900 338,400 100 1,892,koo tI tf " ki " Law 7th Sept. 1910 5 If 1910 2,600,000 1,415,880 262,200 20 1,153,660 " If It If 5 " Loan of 19l1 fIst. Issuej 275,000 4,905,000 101,160 2,777,180 36,600 k94,800 20 40 64,-540 2,282,340 II If 5 If Loan o~ 1911 2nd. Issue 5,000,000 2,970,780 611,140 40 2,359,600 Cramto Longitudinal Norte 5% 3,055,750 1,644,987 1,644,987 Creditos N.os 11 al 9. Longitudinal sur 5% Chilean Govft 72 P.C. Loan of 1922 !,~~~,~g 2,118 ,051 2,178,051 1,511,4°O 298 700 200 1,214,500 " If 8 If It 1922 '825~OOO 7 , 'flO 18k~880 537,110 Republic of' Chile 7-2% Govtt Bond 1922 123,000 92,900 92,900 Chilean Govtt 6 P .e. Loan o~ 1926 2,.809,000 2,721,700 360,900 300 2,360,500 fJ " 6 " " 1928 Credito N.o 10, Longitudinal Sur 5% 2,000,000 168,612 1,947,000 130,8~ 318,100 400 1,628,500 130,841 Republic of Chile 6% 1% Gov1t Bond 1928 129,100 125,000 76,700 48,300 Chilean Gov rt 6 P.C... Loan of 1929 21;000 2000 1 z958.!200 326 z100 200 1 2 631 z900 t 28,677,761 :r, 4,338,760 :r, 2,880 :t 2k~.336,121 Obliga.tions With the Guarantee of Chile: City of Valparaiso Waterboard Loan of 1912 ~ 1'. 250,000 t 121,800 t 16,000 :r, 200 t 105,600 n tf Antofagasta 5% Loan of 1914 200,.000 78,800 9,600 100 69,100 " n Vina del Ifar 5% Loan of 1913 200,000 97,140 13,300 100 83,740 Trasandino Debentures 7ff1; 542,000 494,361 345,952 288 l..48,121 Municipality of Concepcion 5~ - 2% 150,000 l..40,400 79,100 200 61,100 Total Guaranteed Obligations in Sterling t 932,501:t 463,952 t 888 t 467,661 1'01'AL IN STERLING t 29,610,262 t 4,802,712 1'. 24,803,782 ~ :t 3,768 ==================================~. () (, TABLE 15 CHILE t S FUNDED SWISS FRANC. OBLIGATIONS Outstanding Redemptions 1935-46 QJ.t standing Issued 12/31/34 . Law #5580 Extraordinary l2/31/46 (Sw. Fr.) (Sw. Fr.) (Sw. Fr.) (Sw. Fr.) (Sw. Fr.) Direct Obligations of Chile: Republique du Chile 6%~ June 1929 25;000;000 24,476,000 1,136,000 23,340,000 " it It 6%, Jan~ 1930 60,000,000 .59,070,000 3,131,000 55,939,.000 Total Direct Obliga.ti~s; Swiss Francs 83,546,,000 4.267,000 79,2:79,000 Obligations vIith the GUarantee of Chile: Caja, Hipbtecarla 5% 1912 S$,82.3,000 13,982,000 4,2,31,500 9,750,;00 stadt, Santiago 6% 1929 25,000,000 23,099,000 952,000 2,517 ,000 19,610,000 TotialGuaranteed Obligations, sWiss Francs 17,081,000 5·.183,500 2,-537,000 29,,360,500 ToTAL IN SWISS FRANCS 120,62:7,000 9,450.;00 2~5.37,OOO lOO1c639 ,500 . 0'\ .{::" (') ( ) TABLE 16 CHILEtS FUNDED DOlLAR OBLIGATIONS Outatanding Redemptions 1935-46 Outstanding _---=I=s-=-.:sued ____ 12/31/34 Iaw,#S580 Extraordinary _ l?-(31/46 Direct Obligations of Chilet Republic Qf Chile 20 Yrs. 7%, 11/1/22 $18,000,000 $15,089,000 $5,584,000 $9,505,000 tt " n 6%, 10/1/26 42,500,000 40,11.6,000 17,159,000 22,957,000 II It n 6%, 2/1/27. 27 ,500,000 25,935,000 11,667,000 14,268,000 If " II Railway fJ1" 1/1/23 n,198,050 10,768,786 10-,768,786 It tI II 6%, 9/1/28 16,000,000 15,577,000 7,420,500 8,156,500 tI " II 6%, 3/1/29 10,000,000 9,790,000 4,U7,500 5,372,500 II " " 6%, 5/1/30 22z500tOOO 22 2270!500 12 2342 2°00 92928 2500 Total Direct O bligations U.S. Dollars $139,546,286 $69,35 8,786 $70,187,500 Obligations with the Guarantee of Chile: Water Co. of Valparaiso. 6%.~9/15 $ 480,000 $ 229,000 $ 122,000 $ l07~OOO Mtge. Credit Institute 6~, 6 ~25 20,000,000 16,236,000 6,074,000 $1,111,500 9,050,500 n If "6-3/4%, 6 30 26 20,000,000 9,81.3,000 3,742,000 766,500 5,.304,500 " " If 6%, Agr. Notes 12/31/26 10,000,000 8,503,000 4,537,000 419,000 3,;47,000 " 6%, 4/30/28 II II 20,000,000 16,791,500 6,614,000 1,698,000 8,479,500 " 6%~ 5/1/29 II If 20,000,000 17,155;500 6,074,000 818,000 10,263,500 Republic of Chile, RaUway, 6%, 1/1/28 34,713,950 33,383,214 13,836,214 19,547,000 tf tt "6%, May, 1930 2,500,000 2,474,500 2,474,500 Total Guaranteed Obligations U.S. Dollars $104,;85,714 $40,999,214 $4,813,000 $58-,773,500 Obligations without the Guarantee of Chile: Chilean Consolidated Municipal 7% Sept.. 1, 1929 $15,000,000 ~;14,684,000 $7,311,000 $ 7,373,000 City of Santiago, 21 yrs. 7%, 1/2/28 4,000,000 3,600,000 2,323,500 1,276,500 If tf If 7%, 5/1/30 2,200,000 2,175,500 1,095,500 1,080,000 Total Unguaranteed Obligations U.s. Dollars $20,459,500 $10,730,000 $ 9,729,500 ~ \J\ TarAL IN U. S. DOLLARS $264,591,500 $121,088,000 $4,813,000 $1)8,690,500 · 66, - ~. TA::BLE 17 SOURCE OF REOEIPTS OF .AHORTr~TIOf~. nTsTrroTE OF OHILE (equivalent otOOOs of USdollars-) · Prof1 ts of In.,,:,, Dut~ ~uotas on Petroleum ImBorted trate &: Iodine Tax on Oopper For the ~Ti trate .For theOopper Sales Corp.. Oompa.nies Industry Oompanies· - , Totals ...,.. 1935 1936 1937 1938 $ 2.691 2,671 2.982 2.747 $ 1,437 2,249 3,125 11.264 $ - 45 $ --.. -80 $ 4,128 4.920 6,107 14,136 1939 2,980 6.)48 65 63 9.456 1940 3.469 5t 865 60 64 9,458 1941 2.639 6.666 74 107 9.486 1942 2,661 7.305 61 109 10.1,36 1943 2.357 6,044 S8 108 8,567 1944 1,729 4.713 60 123 6.625 1945 2.244 4,515 54 84 6.897 1946 4.256 3.081 52 80 7,.469 $ 33. 426 $ 62,612 $ 529 $ 818 $97.385 '. ! , · I , , . ' 67. TABLE 18' RETI~ OF :BOlWS BY CH:g&JgAMOR1!IlItTIQB INS~ImTE AND COST OF BETlREMl!1Nm j i (in OOOs) Pr1nelpal Amount Principal Amount Pr1nc~pa.l Amount. Cost of Retire of US Dolla.r of' Sterling of S\11ss l;'ranc ment in US Year Obligations Obligatiol+8 Ob':l-igat:1ons Dollars ;" i.t 1935 1936 $ 14.674 15.83~ ;. 14 72 S"T~Fr .. -. 839 $ 1.981 2.375 19:;7 13. 198 :;83 1.727 2,964 1938 33.1'2;7 1,255 6,.577 6,.949 1939 ,S,882 120 228 883 1940 6,216 1 30 186 1941 3.113 1 19 363 1942 2.659 18 8 384 1943 1944 . 1~700 5.703 1 1 - - 309 986 1945 6.479 228 1.5 1.391 1946 11,864 2.709' 7 6.241 .1 $ 121,114 ;'.,4,803 Sw.Fr. 9.450 $ 25.612 Extra";' ordinary 4,813 4 2,547 TQ~ $ 125.927 I! 4,807 Sw.Fr. 11,997 - 68. TABLE 19 ~SFEBS OF F!fflDS FROM CRILlllAN . ; i AMORTIZATION INSTITUTE . TO RECOIWTRUCTION AND RELIEF CORPORATION ; 1 ;, ; 1940 December 20 3753 of 12/ 3/ 1 10 us $ 6.000.000.00 1941 February 7 276 of 1/22/41 2,000.000.00 March 27 772 of 3/13/41 500,000,00 A,pril 19 1064 of 4/ 9/41 500.f 000 .00 April 19 ?"l2 of 3/13/41 500,000.00 April 30 1183 of 4/31/41 309,677.42 Nay 12 1183 of 4/31/41 890.322 ·.58 June 2 1513 of 5/19/41 400,000.00 June 1 1793 of 6/10/41 250,000.00 July 28 1992 of 6/30/41" 400.000.00 October 20 3337 of 10/14/41 600,000.00 November .5 3530 of 10/24/41 500.000~00 December .5 3729 of 11/11/41 300,000.00 1942 January 9 4277 of 12/30/41 200,000.00 .August7 283.5 of 8 / 3/42 1,000,000.00 December 22 4407 of 12/17/42 3,000.000.00 December 23 4428 of 12/22/42 519,377.17 December 23 4431 of 12/22/42 383,552,,42 1m May 12 1478 of 5/ 6/43 200,000,,00 August 18 2516 of 7/31/43 2,000,000,,00 September 3 2845 of 8/20/43 640,000.00 1944 August 11 2896 of 7/28/44 ~ .· OOO.OOO .00 ~ October .5 4256 of 9/29/45 6,50.000,.00 ., TOTAL - &9. D:Af!.YJY BECEIPTS .AND. EXPE111)rroBES .13YTlDl CHILEAN AMORTIZATION INSTITUTE 4 , ~~ RECONCILIA~ON ,, , , , ; 1 ' ; OF p ACCOUl~S (equivalent to OOOs of U. S. dollars) Unexpended Ba1 Interest Administrative Rep1U"cMse ance Amortiza. Year . Receipts Payments Expense of ;Bonds tion Account 1935 1936 $ 4.128 4,920 $ 2,064 2,460 83 85 $ 1.981 2.375 $ - - - 1937 1938 1939 1940 6.107 14.136 9,456 9.458 3.053 (,068 4,728 4,728 89 119 311 166 2.964 6.949 883 786 - 3.534 3.776 1941 9.486 4.743 132 362 4,249 1942 10,136 5,068 165 384 4.519 1943 8,567 4.284 171 309 3,803 1944 6,625 3,313 182 986 2,145 1945 6,897 3.449 195 1,391 1,86; 1946 7,469 3,734 284 3.24() 211 , .. ; TOTAL $97,385 $48,692 $ 1.982 $22,610· $ 24,100 " , Une~ended Balance Amortization Account $ 24,100 Add; Unclaimed Interest for Uonassenting :aond~ holders Deduct: 1946 Retirement of ::Bonds Not Oharged Against Current Account 3,001 Balance Amortization Acoount Dec. 31, 1946 $ 24,137 Of "lh~ch: Transferred to Reconstruction and Relief Corporation $ 23,743 Net Available 3alance i~ AmortizatlonAccount Dec, 31, 1946 $ 70. !I.!A:BLE , 21 Decree Law No. 595 of September 9. 1932 of Chile Chapter I Definition and Object "Article 1. An autot\omous ~nstitution for the a.mort~zat1on of the public debt is established, for the purpose of attending the service and amortization of state obligations. "This Institute shall he.ve juridical personality and shall enjoy financial autonomy. lilt shall have as its objectives: n(a) To effect the service on the internal debt of the state contracted prior to the &~ te of this law. n (b) To effect, in accordance ,·ri th the prOVisions of this law, the service of the new deb~s i'rhich the state may contract. "(c) To oo~solidate and establish the service of the shor~term external obligations ot the state and of the municipalities. "(d) ~o reestablish, in accordance with the legal provisions which may be dictated, the service of the consolidated external debt of the state and ot the municipali ties. "For these objects, the Amortization Institute shall opera~e ill repre~enta tion of and for acoount of the government and of debtor corporations ,'rithout further authorhation tllan that "Thich is granted it by this law. It sha;l.l, "lith the approval. of the Presiden:t; of the Republic and ";ithin the legal authorizations relative io each loan, make agreements uith creditors and sign the respeotive contracts whioh shall bind the government and debtor corporations in the same manner as thoug~ they had been signed by them. IIArtiole 2. For the objects to which Art .. 1 refers, the iUliortha.tion ID$titute shall dispose of the resources and excise te.xes enumerated in Cpapter II of this law. IIArtiele,3, The administr1:1tion of the Institute sru:ll be in charge of a counoil of seven members, formed by: ··*********** Ohapter II The Income or Resouroes of the Institute - "Article 4. The income of the Amortization Institute shall be comprised of~ ************. 71, (c) It The dep,si ts in Chilean currency "thich the government and mu,nioi,... palities haye made or may make in the Central ~ank of Chile for the service of their short-term external obl1gatlo:p.s so long asLa"ls lTo, 4972 of JuJ.y 30, 1931 and No. 5107 of April 19. 1932 are in effect. and the amounts which the respeotive budgets may later provide for the amort1zation of the capital or the servtee of the o'bligations referred t.o; these deposits shall be kept in a special acoount and their proceeds shall be used 'for the purposes set forth in letter (e) of Art. 1. II (d) The quotas deposited or ~lhich may be deposited in the Central :Bank of Chile in acoordance \,li th La\"ls l'ios. 4972 and 5107 and those which may be provided in the ordinary budgets of the Il,a t~onal and of the municipali ties \'lhen these laws are no longer in effect or ".. .h ieh may be contr1buted by third parties for the 'service of the e:)ttef~l debt of the state and of the munj,ci.. pali Ues; these deposits shall be kept in the special E!,ccount and shall be used for the purposes named in letter Cd) of Art, l~ *********** "Article 5. lJ!he resQurces to lv'hich letters (0) and (d) of Article 4 ~efer and that part of the reserve fund ",hich the 0(,)\111c11 agrees on shall be converted into gold or foreign ourrency according as this may be possible. It 72. Law NQ(,.S..S80 of January :31. 1935 of Chile IIArtic+~ 1.. Beginning. January 1,. 1935 t the rec~ipts of the governmerit from its pE,rticipa tion in tlie 'Profits of the Chilean Hi trate and Iodine Sales Corp., as provided in Ar'U~le 18 af La,., SJ50, of ~anua.ry 8, 19:34, and likewise tho.se from taJCes of the fourth oategory ,and additional taxes provided for in Income Tax 118.,'1 No .. 5l69~ of Nay jO,' 193:3, \>lh1ch it obtains fl'om companies lV'hich oper£;·..~e or work copper mines in the o ountry, she.ll form part of the l'eSOUrCEIs o:f" the Caja Autohoma. de Amortizacion de la De'llda.Publica (Amortization Institute) e, lI~hesereceipts shall be used eXclusively to comply ,d,th the present la,,, and oannot be embargoed. nArt:l.cl~ 2. The AmOl'tization Institute is author:hed to rene..r; in confor mi ty '\'11 th the provisions of the present la\'[" the' service of the 'bonds of ,the external publio debt. direct 8.nd indirect, of the State and of the municipal... i ties. ~tTo effect tl1e service of the debts indicated in the present article," the Amortiza.tion Inst! tute may not Use funds other than those derived from' the receipts assigned to it by Article I of this law. IIFifty percent (50%) of the receipts indicD,.ted shall be used for the payment of interest on the total debts aud in, no case shall the payment exceed the rate of interest corresponding to eacl1 loan. The balance. of these receipts, after deducting the expenses incident to the application of th:J.s la:,'1, shall be employed by the Amortization Institute for redemptions or amortizatiofl,s of bonda ef the external debt. under the conditions determined in the follo\ling article, n~he holder of bondeof the extertia.l debt of the State, direct 'and in direct, and of the' muni,cipali ties, "'rho'a:ccepts the form of service established by the present la~'Jt sl:udl del1veJ':theoldest unpaid ooupon upon reeeiviilg the amount declared by the Amortization' Insti tute for the payment of interest, the obligation of payment of said coupon being totally 8attled in tlU,s manner" "The acce:pt~noe by the l10lder ofl:)onds of the payment of a coupon ;1.n the manner established in the preeedingparagraph shall extinguishtne original responsibili ty of the debtor t1fho shall then only be bound by the terms of the present la,,, lI~he sums reserved for the payment of interest on those bonds ,,,hos:e" holders have not accepted the fOl\m of service \·rhieh tll1sla\1 establishes shall be used to incl'ease the funds 'uhieh are to be applied to l'edemption or amortization frol11 the moment in ':1hlch the ?resident o:f' 'the Republic so detel'\ mines. "Article J. The "\.mol"thation Iristi tute is e:u.thoriied to redeem or 'amortize extraordinarily any bond of the external debts of the. ste.te, direct or indirect~ and of the municipal! ties. Redemption oramortiza tiOD. of bonds which affect 73. the respons:1bili ty of the Oaja. de Ored! to Hipotecario (I'!ortgage Oredi t Institute) shall be made :l.n accordance "lith the supervision of this institution. IIRedemption or amortization s~ll be m.s.de by direct purchase bela", par in the mi",rket or by drawings at par. "Article 4. Article 64 of La", 5169 of May 3D, 1933 is hereby repealed. IrArticle 5. The pr~~t l·aw sh~J!l becolrie e:ti:tecti'll'e from the d?te of its publicEtion in the IDiario Oficiall. II T.A:BLE 23 ~eoree No. 3837 of October, 24, 1938 of Chile (Consolidating and supplementiD.g Deoree :ro. 1730 of May 17, 1938 and Deoree ITo. 37 of January 4, 1936) In view of the provisions of srticle 72 of the ?olitical Con$tltution of th~ He,.tion a.nd of Le;IIT lIo. 5580 of Jan1U..ry 31, 1935, and taking into account: . ls~ That in the deoree regulatOry of that La,,, issued as lIo. 37, dated January 4, 1936. it ''laS provided that certain of the provi$ions ,·rou1d have only provisional character, in order to take account subsequently of the modifioatiolls whioh might be deemed advisable as a result of the experienoe gained from their~pp1icat1on during the f~rst years; 2nd-- That after hearing the opinion ~f the Bondholders Councils repre senting the creditors. there "las enacted the supreme decree of the Uin:istry of Finance lro. 1730 of May 17, 1938, "'hioh oomprises vC',rious provisions complementary to the regulations of Law No, 5580, now in effect; and 3rd- That in aocord:.l.nce ,d"tll the provisions of said Decree trOw 1730 of May 17, 1938, its provisions must be included in the new regulations, I DECREE That there be approved the following Regulations for the application of La,,, Ho, 558~ of January 21, 1935; General PrOVisions Article 1. La,., No, 5580 in no ,-ray affects or modifies the original obliga tion of the bonds in sO far as the capi tal o'tTed is concerned, accon ding to that obligation. Article 2. The La", only establishes a plan for the service of the bonds, interest e.nd amortization, in substitution of the servioe plan originally stipulated. Article 3- In accordance ":ith the provisions of Clause Ho. 5 of Article 2 of La"1 no. 5580, the Government of Chile becomes the sole debtor of the bonds issued by the f.!or'cgage Credit Institute, the Municipalities. the TranSl"'Andes Raihray Company and the i1"ater Company of Valpa.ra1so~ ",hich assent to the provisions of tba t la~1, th1;1s terminating the original -responsi bility of the above enumera.ted institutions and all of these bonds to be considered in the future as though issued by the Government. of Chile. Artiole 4. As regards the bonds assenting to lal,;! :'To. 5580, ,';!hich may c not have been redeemed p~ior to the expiration date indicated in each one of them. such ma t'J..:i ty j, f;;\ unde;.'s toad to be extended for the time "'hieh r ~ may be necessary for the effects of compliance and development of the plan of service and amortization es~&'blished in that la\'!. Article 5. In all other respects, except the foregoing substitutions the original bonds remain unmodified. Concerning Revenues and Their Distribution Article 6. The Am~rtization Institute, once the revenues specified in Article 1 of Lav! No. 5580 have been received. and not later than December 31 of each year, shall publish a statement of the revenues received and alloc{;. ted to the service of the external debt. Article 7 If The total of the revenues to 't'rhich the preceding article refers shall be divided into tv10 equal parts, one of them consti tut1ng the fund allocated to the payment of interest and the other the fulld allocated to redemption or amortizationo From the latter fll.:...d there sb3.11 be deducted, in accordant;;e "ri th the provisions of Article 2 of La'1 20" 5580, the expenses required for the car~ing out of the Law during t~e applicable period. Article 8. The fund 'IIrhich is allocated to the payment of interest, in. accordance with tlle preceding arttcle, shall be CJnV9l."te<;i the "tetically to a com.-on or single money and shall be divtded by the total of the numinal value of the bonds of the different loans ill circulation. For this purpose said value shall be prev3.ously conver-iled to the 53-me common money in accol"o dance with the rate of exchange prevailing in the security market at that time. The foregoing calculation determines the pe~~entage of interest to be paid by the Amo~tization Institute to the external bonds in circulation whose holders ~ay desire to accept this service. Article 9, This calculat10n having be9n made9 the actual conversions of funds shall then be made in order to make available in the appropriate currencies the necessary amounts to be applied to the service of in-Gerest of each group of loans. The Amortization Institute shall deposit these amounts to its order in banking institutions of high standing and in due course shall make them available to the fiDa,.Jlcial agents "rho are to make the payment of interest. Concerning the Payment of Interest Artlcle 10. The payment, of interest shall be made annually by the financial agents to the bondholders, on the dates to be determined, a~inst delivery of the oldest unpaid c',Jupons corresponding to the peri09- of one year. tf "the bondhl..llder l'I' a g:ven issue shall have delivered all of the I coupons a.ttached '.) the ').:ra.(i~ in co:.lect~r.g the vario'.ls payments declared '"-,, by the AIlor.tizat~...,:.;. I!lsii -~llte~ ile shall have the righ't to receive an add.! tional 76. sheet of coupons \,rhich will permit him to collect subsequent payments. Article ll. The amounts reserved for the payment of interest on those bonds whose holders shall not he,ve assented to the form of service which . Law No. 5580 esta,blishes shall be applied to increase the funds allocated to redemption or amortization, after the lapse ot twelve months from the date on wh~ch the amount declared by the Amortization Institute for the payment of interest in any one year first reaches 2% ofiihe nominal value of the bonds 0 AI'tirle 12. The bondholder ,.,ho assent", to the interest service afte:v the lapse of tha period to ,,,hich the preceding article refel's shall onl~ have the right to', receive those a:nnual interest payments "r~oh may be subsequently declared b;)" the Amortlzat,,"on lnst~ tute. anc. shall be required '~o de:.iver. in order to r~ceive payment. the coupons corresponding to the annual p~yments "th:J.ch he, recaiveslI and also, and ,-r1 thout additional co\npensaMo!lt t:'ld earlier Cv't'p'jns called fyr paynent from tha entel'hg :!nLo eff~u"; d Law' No. 5580. Concerning Redemption or Amortization Article 1:3. The quota of .,50% of the :!'\V'3nUilE:$ which the Amorthation lnsti tute receives l:1nnually for the ser'V'J,Cd l:f t'~H external debt, after dec.uction of the expenses required in c.:>nllect... Ol1 ",ri'c!:.. the carryiL:g out of the Lf;l.w, shall be applied to the redemption or am)l't!zation of bonds. The redemption or amortization may be made w~th respect to any issue without distinc1iion. Article 14. Within the period to which articles 6 and 8 of these Regulations refer, there shall be published the list of bonds redeemed each year in conformity wi th the preceding article~ "lh:'.ch shall be retired from circulation and shall not participate in the pro ~..ata d;;'stribution vf interest. General Provisions Article 1.,5. Any conditions or treatment different from tha~ which the present Regulations establish, "rhich may be accorded in the :f'u.ture t for any reason, to ponds in circulation on the date of the present decree shall be deemed to be aocorded at the same time to all the bonds to which Law No. 5.580 refers, Article 16. The prer.ent J1~gu1a tions l"ry.ll be in force from the date of their publication i~ :.;he .ir':.a.rio Ofic:'...al .. ii ,wi ~hout prejudice to sueh modification" of t::n.e e:t: proceiure as the ?rE;sid::J:':ll:. of the Republic may determine fvr the l)E;t;~&r app11 ';a:tion of La.lIT No ... .5380 0 . there being maintained ",1 thout al tera t1o!.i.~he p o:-ovi S:'.v:;LS to "'hieh there has been g.i,. ven permanent I......... 77, chexacter in Decree No. 37 of January 4, 1936 and no. 1730 of May 17.. 1938.* Let i t be recorded, communicated, published and inserted in the appropriate publications. ALESS..,NDRI F. G..\RG41S Cl.tl.NA --.~--- * The prOVisions given permanont character L1 Decrees lio. 37 and 1730 are those contained in articles I, 3, ,5, 11, :i.2 and 1,5 of Decree lio. 3837. The latter Decree '-las T)ublished in the Diario Oficial of the Republic on November 28. 1938. 78. Income ['ax La:!;1 5169 of l..fay 30. 1933 of Chile (In part) "Article 31. There is imposed a tax to be assessed, collected and ':paid annually, upon the net ta:xs.ble income de:i':!.vecl from practice of mining and metallurgy. "This tax shall be 7% upon taxable income not exceeding 10,000 pesos per a;.1nUJll, 9% for taxable income in excess of 10.000 pesos per an.mm. Ul) to 50,000 peaos per annu'1l, and 12% for taxable inc ..'rne in excess 0; .50.000 pesos per e,nnum .. UArticle .56. There shall be imposed, collec~ed a,nd paid an adeli tional tax upon income in the follo"tling cases: It (a) The enterprises, companies or jm:id.ical persons organized without the countrY1 whieh have branch offices or representative agents in Chile. including those ,·rhich are organized undel' 0hilean la"\'1 and establish their clomicile in Ch: Ie shaJl pay an addi,tional tax of 6% upon the profits or income Lor;} t.c.e "Ihole of the busi:less or investment "Thieh they may conduct ")1 h&.ve in vhile. "Article 64,. Income in foreign money s:Bll be converted to Chilean money. \I :!cTote: Article 64 was repealed by Article 4 of Lau .5.580, ,so that the copper enterprises muet pay the tax in. the money in 'I1hich the profits are made. 79. TABLE 25 ',,- Article 18~ The profits of the C~rporation shall be the difference be h'een the price paid by the Corporation for the nitrate and iodine acquired by it t as provided in Articles 10 and 16, and the selling prices obtained by the Corporation. after deducting its expenses. and all other profits uhich it may obtain from its secondary activities, Tt'lOllty-five per cent of the profits shall correspond to the :il'iscus, as the price of the transfer or lease referred to in Article l~ One-fifth of this fiscal share shall be destined to tho furtheranoe of mining and industrial production in the Provinces of Tarapaca and J4~tofagastat .r in accordance ,'l'i th the provisions of the ox-ganio 1m', of the provincial assem: blies, lacking these, of other special laws. 'The balance of tho profits remaining shall correspond to the px-oducers. The Corporation with this balance, shall pay preferentially the interest and amortization on the bonds referred to in Article 24. Before making this paym0nt thoro sw,ll be separated from the prOfits available therefor, the pt'.rt of such profits ariSing out of tho s0.10 of stocks of nitrate in Chilo on July 1, 1933. and those sr~ll be ~ppliod to such service only to the extent that the remainder of the available profits s11&11 not suffice therefor. The remainder, after service of the bonds, shall be delivered to the re~ spective producers; but i'lhen they shall have received from this remainder, as profits of a nitrate year, a sum equal to the annual service of the bonds, 30% of the excess shall be destined for extraor~~nary amortization of the said bonds and 70% shall be delivered to the producers. Thore shall not be applied to extraordinary amortization the profits ariSing from the salo of existing stocks of nitrate and iodine. The profits shall be distributed among the producers pro rata according to thej,;t sales quotas, but after adjusting the prioe alreadr paid by the Corporation to the producers in such maIU10r that the total price por ton of nitrate and per kilo of iodine, ,,,nether from stocks or frOm ne'1 production shall DO the same for all. Any pending differences in any nitrate year on this account shall bo adjusted in the subsequent years. The provisions of this articlo in rospect of ~ond service s~All apply to the profits of tho entire nitrate indus,try, "Tith the solo exception of tho ~rQfits derived from nitrate lands and nitrate ~lants not inscribed on January 2. 1933, in the name of Compm'lia do Salitre do -Chilo. Tho Lautaro Nitre,to Compan~r) Limited, or Compania Salitrera Anglo-Ohilena. The sl'k?re recognized in favor of the Syndicates by Article 402 of Decree with F:>rce of L~l,w No. 178, vhich Codified. the J;;abor L0.1,,[s, shall correspond to the laborers of the industry even though they be not organized in syndicate. L 8C~ TAELE 26 - ...., Lal·r Ho, 615£.Qf.January 6, 1938 of Chile Article 6. There is levied on the various tTpes of petrolet~ of Section 43 of the Customs Duty La1:1S an import tax of ti'!elve pesos ($12.00) T. :3 .. 'Ihe petroleum destined to the i'larshi-ps of the !rational Navy is free of this tax. Article 7. From the revenue of the impost which is established in the preceding Article. there ''1ill be delivered to the Amortization Institute, for the ~9U!"}Joses established in LaW" No!! .5580 a Cluantity eq,u.al to the decrease '''hich is produced in the ti'10ntY""'fivc per cent (2.5%) of the profits of the Nitrate and Iodine Sales Corporation, and in the eighte8n per cent (18%) of income of the copper enterprises, in consequence of the increase in taxes on potro1eum uhich is ostablished in th0 1)resent 1mf. - 81. ~xccrpts from La'''' no. 6;34 of ~)?rn 29. 1239 9f Chile TI::'LE I. Ooncerning the Reconstruction and Relief Corporation~ Article 1. There is created a legal entity "lith the name of'Recollstrnction and Relief Corporation, \1hich shall have in its charge everything aOl1xlOcted \'lith the loans, expropriations, reconstruction and relief to those '1ho have suffered loss in the provinces affected by the earthquake of January 24, 1939. '" ... III ... TITLE II. Concerning the Production Development Corporation (Fomento). Article 19. There is created a legal entity 'Vlith the na:ne of Production Development Corporation, horeafter called the !lOor-flOTation,lI entrusted "lith a plan of development of national production. TITLE III. ;B1xtraordinary Credits for Reconstruction, Relief and pevelopment. Article 28. The President of the Renublic is authorized for a ~eriod of five years to contract. in the lllanner in ,-rhich he may deem necessary, loans in foreie,'Il money up to an aggregate a.mount of tNO billion pesos in national money. The interest on these loans may not exceed three per cellt per annum and their amortization may not be carried out in a period of les3 the,n ten years. The loa.ns must b(o) -placed at par. The ~Jroceeds of these loans shall be receiY l d by the Auilortization Institute and there shall be destined rift;;," ner cent thereof to carrying out the pUT".fJoses of the Reconstruction and Relief Oclrporation in the zone affocted by the ear'thqu.alro of Je,nuary 24, 1939. and t1:).e remaining fifty per cent for the purposes of the Production Develo11ment Corporation. The President may contract, of the amount of loans authorized in this Article, oa~lcing credits u? to one-third of the total amount of said loans. These credits shall not bear interest greater thai.'l. six 'Per cent per annum. The sums "lhich the reconstruction and Relief Corporation shall not iUV'8St sl1all be transferreQ to the production Development Corporation and shall be applied to the purposes indic~ted ia Article 22. Article 29. The l'resident of the Re:9ublic may a.lso contract "ith the commercial banks and savi:1gs i:;:1.st1tutions of the country. uithin a ::~eriod of six years loans up to an amount of five hundred million (500,000,000) pesos which shall be destined to the construction of 10"T-cost di-fallings. preferably in the devastated zone. c t. . ,*-., These loans sball be contracted at the rate of one hu.ndred million (100,000,000) pesos per annum as a hlaximum and its income shall be received also by the Amortization Institute. Until the ?resident of the Republic contracts the loans referred to in the prevj.o1.1.s Article, he may apply to the purposes referred to in Article 4 the revenues created in this Art :lcle. lie may also make use of the revenues rer"erred to in Articlo 1 of La't'T l~o .. 5.580 of January 31. 1935, "Thich shall be retur:led ':lhen the said loans are contracted. '" '" * '" --- TAj3LE 28 EXTRACT JROlvI j·lElvlORA.A1'DU}I:i OF THE CHlLEAlI S?EC IAt ]TJ.A~WI;u, CmrnSSIOH IJIi::.rglL1S..J;.2J.i Turning nO\1 to the present plan, 1'1hich is set forth in tho 1m', of January 31, 193.5 ap:,jended hereto. 11e wish to advance certain explaIk1.t ions which ue believe '''ill sho1:1 that the proposed arrangements are the bMt possible under the circumstances. If we were to suggest a flat cut in interest as a permanent arrange ment, it 1:lOuld have to be at a considerable reduction from the contract'L1al rate HI"dch 1·tould be unfair to our creditors and ~muld not .justly reflect the continuing desire of Chile to meet its obligations to the fullest ext enG of its national ability. A:n:y such arrangement into l1hich 't're could enter today \"hen ~:l'e are, as \1e believe and hope, only beginning to emeJ'ge from the depths of our economic cycle, would fall far short of 0'L'Ll' ulti~~te capacity to pay once recovery has been full~r reestablished. Hence, in deference to the legitimate rights of our creditors and our respect for our Ik1.tional obligations, on the one l1and, and with due regard to the v1cissitudes of economic forttme, on the other hand, ~'re offer a graduateci. scheC!.ule of payments varying in accorfu:mce uith oUr changing capacity to :nay. l'Te believe the,t this arrangement vill be mOl'e acceptable to our creditors than any outright and permanent slash in tntorest payments. lIe have therofore decided to allot ta our forei&n creditors, not merely a part. but the ent ire roturn tot ho Govornmon t from ti'lO me,j or S ourCGS _ namely, the entire fiscal revenues from tho nitrate and copper ~ndustries. The incomes from these e~1)orts have been and are today the main anes which provido a constant and certain source of foreign exohange, and hence the only resource that can be relied upon, from one yea,r to another, as a basis for meeting service upon our external obligations. 1'nlile these t1:10 sources of revenue ,·rill suffice to provide only a small proportion of service at the present time, it may be pointed out that there is rea8011 to believe that a reviva.l in 'Ilorld trade may restore them, probably not to the 1929 levels, bl.lt at least to the average level of the la-year period from 1921 to 1930, If the present Plan had been in effect during this la-year period, there ,,,auld have been available thereunder an average of ap~roximately $24.000,000 per annum, for the service of the foreign debt. As a further featUre of the present plan, vIe wish to clarify the :pro-- visions that are to be made for the gradual retirement of this debt. The Govern.'l1ent of Chile did not cons ider it proper to fol101:1 the policy pursued by many other governments at this t1.me, namely, to reduce interest rates to minimum peroentages, and then covertly and 1:11 thout public announcement, to buy back as many of their oblib~tions on the opon market as it could ci.o at consequently depreciated prices, Instead the Chilean Government has seen fit openly to ~nnounce its intent~on to devote half of the total fiscal revenues from the copper and nitrate industries t~ meet interest payments upon our foreign debt, and to employ the remaining half of this inoome for 84-, .r""" the retire:!lent of our bonds by purch.:'1.se in the open m&,rket. The purchase by '-' the Amorthation Institute of bonds year by year entails undoubtedly advantages for the bondholders. AlthouE;h there are many holders l:rho are in a position to retain their bonds over a period of time and thus secure even great~r returns, there are some "'ho are forced by circumstances to liquidate t regardless of the IIlfl,rket priee. In the P<;l,st it has been impossible to dispose of such bondS except at a ruinous sacrifice, for, not only \'Iere prices low, but there \',as so little market for these obligations that the offer of 10 or 20 bonds "nots sufficient to CaUse prices t1fall to even more disastrous levels. We believe that any impartial person considering the situation would recognize that the employment of substantial funds for tho purchase of Chilean bonds in the market '\-!ould be more beneficial to the bondholders than a slight present increase in the interest rate~ Further. such purchase of bonds '.rill have the automatic effect of increasing the rate of interest pa.yable ~-'ith res~oect to the smaller amolmt of bonds uhich "rill thereafter be outstanding~ Chile is thus, it is seen, desirous of meeting its responsibilities, not merely tm-Iards those bondholders i·r~'lO a.re in a position to hold their investment to maturity but towards those 'l'Tho are forced to liquidate even under present adverse circ'rmstances. Those creditors \Tho retr..in their holdine;s may look fonrard to seeing their bonds appreciate year by year inasmuch as the gradual retirement of the outstanding obligations will mean that the revenues devoted to that purpose Nill be divided each year amongst a smaller number of outstand.... ing bonds, ,-ri th consequent expectation of a steo,dy increase tn aru'lU8,l i:J.terest rates~ IlioreoTer, if \,rorld demand and ~·torld1?rices for co:p~!Jer' and sodiul'll nitrate improve, and. '"0 sincerely believe that this uill be the case, these repurcroses and interest payments '\Jill incre£1,se at a rapidly acceleratinb rate, It must be realized hore that ':to arc not EJX\Jressing hopes based merely upon our desire to render this progre,m attract ive to our creditors. On the contrary. ,,,,e nr<.1st stress the fact tr..at the economic ,-tell-being of the Chilean }lation, and even the very existence of our population, depend in large measure upon the prosperity of thoBe industries. In other '7 32,282 256 98,293 3,237,764 1942 3,237,764 31,331 230 98,293 3,139,471 1943 3,139,471 30,379 228 98,293 3,041,177 1944 3,.041,177 29,269 225 97,776 15,986 2,927,415 1945 2,927,415 28,323 223 97,776 2,829,639 . !?j () (1 TABLE 32 CHILElS DOIJ.ARSHORT TERM OBLIGATIONS Balance Regular Extraordin.ary Balance Year Jan·. 1 Interest· Commission Amortization Amortization Dec. 31 1940 26,594,328.93 263,251.10 2,426.30 775,.398.74 25,818,930.1.9 1941 25,818,930.19 255,587.16 2,397 ·.18 775,398.74 25,043,531.45 1942 25,,043,531.45 247,919.70 2,348.59 775,.203.95 24,268,327.. ;0 1943 24,268,.)27.47 240,246 ..36 2,.330.88 775,398.74 n,o;o,OOO.OO 12,442,928.73 1944 12,442,928.13 59,853-.22 458.33 205,208.16 6,258,017.06 5,979,703.51 1945 . 5,979,703.51 57,517.34 449.38 204,152.95 5,775,550.56 ()) ()) · . I 89. ,... ,.. TAl3LE 33 INDEX FI~§, ,Ql! ,OHIL~ P~,O~~! WAGiSAND ,PRODqOTION August November 12.22. 1944 1246 1246 :&:iv!n~in S~tiago: 1 . .,Co,~.t of ,j'l \', . , ; ,\ . -March 1928 e 100 Food 210.4 465·.5 582,5 636~9 fuel and Ltght 162,6 306,8 543.3 336~8 Rousing 157~7 262.8 306,6 306,6 · Olothes 199.9 .50.5 .4 810~2 897.7 Others 146.1 276.4 J1],5 ;364.. 8 ~otal 186.7 ;325.0 5,02.9 553.5 2~h ProQ;uctign: , '. , ' 1927/29 ;:: 100 Mines 87.1 103.0 9.5,,0 82.6 Industrial 190.9 162,9 192,5 240.Q Gas and Electricity 278.1 421,4 ... Textiles (In cluded in lndustrial) 120,0 1.51.8 168.1 Wheat 8.6 9~9 (in million metric tons) 3. ~ai,lil ,H~E( Rate: i927/29 :: 100 General 237·5 542.0 740. 871. 4.,Fore~sg Trade; .J Volume. 1927/29 =100 Exports 82 91 96 Imports 65 57 88 o II: l APPENDIX IV 'au 1 tow AID FOREIGN EXClWifGE HOLDINGS OF CHILE. 1936 !OO " i1945 AND PROJEC!rION' SOUGH 1.951 1 a) Ch.anges since 1941 1 b)' Current Holdings 1 c) Fomento's Or~ginal Forecast 3 d) lomento's Revised Forecast. 4 e) Suooar,v of Bank1 s Conclusions. 4, ,&NALYSIS OF !rEE lW.JBCE OF .TBADJ 9 [a) ~orts 9 ; (1) Metals and Minerals 9 a) Oopper 9 , b) Nitrates 13 . ~~~ c) Other Ketals and Minerals 17 , (2) Other libtports 21 (b) Ioports 23 (3 IS I:BLETB.Alllil. Z7 a) Ooaoercial Transactions 2? b) Freight and Comounications 2S c) CuJ. tural. 29 d) Governoent and Militar.v Expenditures.Abroad 29 e) Adcinistrative Expenses of Business Enterprises 30 f) Foreign Exchange Profits 31 (4 OVliK1!lN!l!S AND SERVIOE OJ CAPITAL 32 a) Loans to locanto and Chilean State Bail~s 32 b) Service of Capital ot Foreign Enterprises in Chile JJ 0), Service of the Long Tero llatlonal External Debt d} Servioe of the Short Tem National EXternal Debt e) Other movements of' Capital ~ 34 (5 CHILE'S OOMMmlOIAL AGlUIIEMEN'TS 36 (a) General . "' ., ')6 Cb) 1inancial and CotlIlercial Agreement between Argentina and Ohi1e . 37 "~OMMlllmT Oll 1946 .AND 1947 llAIANOE OF PAYMENTS 45 46....65 0, -". ,.~-, ilr'~" &!1t j ... I I APPEnDIX IV c A. TOE OF ?AYMENT~ CHILE'S AIULI TO SERVICE TEE LOAN.. §UGH 1951 (a) Chan~es since 1941, According to ~fficial figures submitted to the Monetary Fund by the Government of Chile the holdings of gold and foreign exchange increased fr~m the equivalent of US $49,100,000 on December 31, 1941, to the equivalent of US $132iOOO,OOO on Deoember 31, 1945, a ~in ~f US $82,900,000. as set forth in WLll 1. The Bank: has a.nal;rzed, in this connection, the various other official figures published. such as the ]alanza de Pagos of the Central ]ank: of Ohile, the annual reports of Fomento and of the Amortization Institute, the official statistics of Estadiatica Chilean and finally the specific sustain,1ng data submitted by Fomento with its loan application to the :Bank. There is a wide vp,ri~tion in the rep~rts of these sources and in an attempt to reconcile the dif~erences, the Bank has conol~ded that the actual gnin , ... -. was pro~ably equivalent to about US $103,000.000. Whatever the correct total ~in. i t seems clear that an item of US $16,000,000, included therein, was sh~rt term in ~~ture arising partly out of United S~~tes Commeroial Comp~ advances against minerals t~ be exported ~t a later date and partly from the prooeeds of the sQ,le of ships by OhUe to be offset in 1946 by the acquisition of ~ther ships. As such the item ~,S bound to disappear rapidly. (b) Current Holdings. The officinl gold and foreign exchange holdings of Chile on Sept c ember 12, 1946, amounted to the equivalent of US $103,900,000, as set forth in de~il in TABLE 2. They were distributed as follows: , JI§ _ .1-. J Ji_~¢<\\"/;"!~1 "'::""'M_IbM"_ _ _.1......_ _ _ _ ··_ "t!"" ......., _ ,_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ , , 2. (Equivalent in 000,000 1 S of .u.S. dollars) Gold. 72,9 U. S. dollars 15.3 Other currencies 0.1 Unspecified (Holdi~gs of F:)mento and Cor:nnercial Banks principally in U. S. dollars) 14.3 Total 103.9 In addition probably the equivalent of US $10,000,000 was held at that ti:roe in private D,CCOunts as the result of oper"tions on the' free currency market. Such holdings arc not within the control of th~ Chilean Govornment nor freely a.vailable at the official rate of exchange. It is not k110wn how much of the above total of foreign exchange we,s e:::.1i'marked for specific purposes as of September l2 t 1946 but on December 31. 1945t when total ho~dings were reported as equivalent to US $132,000,000 as set forth in TABLE 2, the following earmarkings were reported by the Internet.tional !,fonetary lUnd; (Equivalent in OOO.OOOfS of U. S. dollars) Ourrency backing 31.5 Commitments to International Nonetary ]Und 11.0 Commitment to Steol Industry 10.0 Guarantee to Corporacion de Fomcuto (Urban Transportntion) 11.5 Total 64.0 11,,$,," I"~ r M,-,c_,,,::-,~,)j bit It I d ·· I 'I I 3· ! 1- lftho S<.:J:lO o.I:lounts "lOro on.:rt:ll:'.rkbd [1.S of September 12.1946, the c ftfreef gold and foreign exc~,nge holdings. of Ohile would have then amounted to thp equivalent nf about US $40,000,000. But, earmarking in Ohilo is I , I apparently a manifestation of intent ~.ther than a definite segregation and use of earmn.rked fun(is to meet temp.rP~ry fluctua. tions in the demand for exchange is possible. On the other he,nd, it appears to be .the policy of the Exchange Oontrol Commission to roo.1ntain its ovorall foreign exchange comln1tments very close to total holdings. (c) F~mentots OrigiIlc~l Foreoast. At the time Fomento submitted its lOan npplicntion to' the Barll~t it included estimates of Chilet~.~Uln~.l bal~nce of payments through 1955, st[',rting l>1i th December 31, 1945. ['his projection indicated the follo\1ing yearly surplusos of gold and foreign exch:'1.nge, as dotrdled in TABLE ,3: (Equivalent of OOO,OOOIS of u.s. dollars) 1946 24.1 1947 31.1 1948 28,5 1949 261'9 19S0 31.3 1951-55 31 .7 The cumulative total of expected foreign exchange reserves at the Dnd of each year would thus amount to: (Equivalent nf OOO.OOOIS of U.S. dollars) 1945 132.0 c 1946 156.1 4. ~ 1947 187~2 ~ 1948 215~7 1949 242~6 1950 273. t 1951 305~6 1955 432.4 It NUS, however, Foment.ls view th.'l.t a backlqg of needed imports arising during the war years, equivalent to US $200.000,000, would be made up in 6 to 8 years and would reduee the above foreign exchange re serves accordingly_ (d) Fomento 1 s RevisedJFcreoast On Maroh 27. 1947, fomento submitted a partial revision of its original f6recast whioh sets the value sf .epper exports at a hig~er level for the next 5 years, and reduces projected imports substantially. F~ment. did not, however, submit a ~evised tabulcr forecast of expeoted inoreases in foreign exchange holdings comparable with the abeve. but stated its position to be: Foreign exchange receipts are expeoted to be high in th~ next few years and will therefore make possible a high volume of imports. If and when foreign exchange reoeipts decline. etrresponding reductions in the vo~ume &f imports will be possible beca~se ~cal industries are expanding, and luxury imports can be curtailed. Fomento. thus, states th.'l.t in the long run, and in the absence of a world wide economic orisis, Chile will be able t~ service thQ proposed l.an from the Bank. in ad~tion to tts other foreign o9mmitments. (8) S~~tl tf \he Bank ' s Oonc+usi~. ~he Bank has anaJ,.yzed in detail the material submitted by Foment.. In ertain categories Fomento gives only total figures ",ithout breakdo\"n c in etai1. The ~ank is at variance with Fomento on some of these totals, but since the method of calculation was not given in Fomento1s original esttmates, it was necessary for the Bank to make independent computations. For example, the Bank t s calculations of income to the Ohi1ean Government from copper exports is described in Section (2) (a) (1) (a); the Bank's calCulation of invisible trade items is set forth in Section (3); th~ Bank's calc~ations of capital movements is described in Section (4). While these differences are not of major importance, they are mentioned here as elements in the ~ankrs analysis, The Bank's conclusions as to the future of Chile's palance of payments are less favorable to Ohile than Fomentots estimates. The principal ppints of difference in outlook are the following: Oopper. It is clear that the. prospects for Chilean copper for the ne~t few years are,bright. World prices are now high and there is strong demand. The 13~ feels, hO\,Tever, that the longer term outlook is less favorable. By 1949 it is expected that world copper prices will tend to decline and competition from 9thcr copper producing countries may make itself fe~t in phile. After 1951 production problems may be confronted in Chile, The ore reserves,of Andes Oopper Company (Anaconda) will be near ex haustion. The Chile Exploration Oompany (Anaconda) will have to invest around US $125,000 1 000 between 1951 and 1960 to con vert its plants from sulplrl,de to oxide ores. Chile 1 s proven copper reserves are the largest in the wo:rld and it appears probable that this investment will be made but concGssions in c Chile's present taxation policy are likely to be sought and correspondingly to red~ce the Government's foreign exchange ! ___ __ Jl""_ _ _ _ _........ ,_ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ &* ..... , , , , , , " . ~ 6. eturns from this source. A full discussio~ of this subject is ivan in Section (2) (a) (1) (a). itrates. While current outl~ok for Chilean natural nitrates ts favorable, the Ba.nk considers it probable thr, t competition from synthetic nitrates, when peak post-war demand tends to subside after the next few years, will corre~pondingly reduce thilets returns from natural nitrate expertse. This subject ls fully discussed in Section (2) (a) (1) (bJ. Fomento1s estimate tf the level of essential imports lnto Chile in future years, ~ppears to the Bank to be lower than would be indicated by the record of the r~cent p~st and the official actions of the Chilean Government. The expansion of home production will clearly obviate the necessity of certain lmports but many of the projects are in the devel~pmental stage and as yet unproven. Ohilets officia.l foreign exchange budget for 1947, shown as ~LE 20, as recently submitted to the J.{onekry :Fund, provides for imports, exclusive of Fomento. valued. at US $220,000,000 and currently outstand~ng import licenses amount to US $80,000,000 over and above this sum. As against this Fomento 1 s initial estimc~te of 1947 imports was US $166,000,000 · · Detailed discussion of Chilean imports is to be found in Section (2) (b). ,xports. As mentioned in Section (2) (a) (2), Fomento's projected l~vel of ngricul tUl'l::tl and industrial expt'lrts is based on erroneous price and volume statistics covering exports in c ~944 a.nd 194.5. On the basis of the correct dnta the figures Uilfl - ¥ b given by Fomento would he.ve been substantially lower. c Reserves of Foreign Exchange, Fomentots original estimates forecast, as set forth above in Section (1)- (a), an incr~se equivalent to 05,$24,100,000 in Chile's reserves of foreign exchange in 1946. This proved to be at wide variance 1n th subsequent events since a decline of about US $40,ooo,OQO occurred between December 31, 1945, and the end of 1946. As a result of its studies, the ]ank is in agreement with Fomento estimates of an ample inflow of foreign exchange to Chile during the ne~t few years due to high copper and nitrate prices (;'.ndstrong world derocmd. The ]ank would e~ect tru,t such foreign exchange, however, will be immedie.tel~ used by Chile to pay for increased imports above normal requirements, ba cause of the derletion in Chilean inventories during the war, of internal dernend bolstered by population incree.ses, high wages and high internal price levels and fi~~lly by the high foreign prices of imported goods. :By the end of 1949. the EaIlk feels th£.t declining copper prices L.nd the competition of synthetic ni tm tes will n:'I.ve started a decrease in Chile's yearly receipts Of foreign exchange, as discussed in Seotions (2) (a) (1) and (2) (a) (2). Prior thereto Chile could accumulate large reserves but this does net appear t~ be its present p~licy. Chile may therefore be faced in a few.years with the necessity of reducing imports if a stable reserve of foreign exchangQ and equilibrium in the nation's internntional a.ccounts is tl) be In<'1intained. tWle, a.s Fomentofs figures indioate. such a reduction in i~ports appears possible and practicable, it shoUld be pointed out that it \-,ould mean strong efforts c by Chilean capital and labor and perht1.ps a curtailment of present consumer 8. c stan~rds and habits. It also implies a will on the part of the Govern- I ment ~o control imports effectively, indeed, ruthlessly, if need be. , Such drast~c limitations were 1~posed and were politically possible during the yl(l)r1d econcmic q,risis cf 1931"'1935, but they only 'Qecame operative after default in Chi1e 1 s foreign debt then outstanding. The combined effect pf Eximbank loans now approved, of the loan from the Bank now applied for and especially of the fillancial clauses of the prop~sed Chile-Argentine Treaty, discussed at length in Section (5) (b), if carried out, should in the long run and in the absence of a world wide economio crisis, enable Chile to adjust its international economic positi1on to any future decline in the returns from copper and nitrate.s. Chile,1 s ability to pay its debts in the future will therefore depend on its abili.ty to carry out successfully ita various progra.ms of economic develo:.p ment and on it~ \d11ingness to restrict conslunption of imported products when necessary. Fomento claims that Chile has the technical and adminis trative capac~ty and the ma~cwer necessary.and needs only the required foreign loans. The Bank should keep closely informed as to the progress of Chile's developmental programs and ehould" closely supervise the.. use of the precaeds ~f any leans made to Chile,. The Bank should also require a defi~ite undertaking on the part of the Government to restrict non essentia:t. imports whenever neaessary to maintain ample f"reign exchange reserves. - (2) ANAL}{SIS OF TEE :BALANCE OF TRADE (a) :!¥ports (1) Metals and Minerals a) Qcnmer The first Fomento forecast submitted in October 1946, projected annual eopper exports up to 1955 at values ranging between the equivaients of US $103.000,000 and US $115,000,000. Ohilean production was expected to range between 375.000 and 400,000 metric tons per year and the world price equiva lent to from 12.5; to 13¢ a pound. In March 1947. partially as a result of recent world price increases. Fomento r.eVised its forecast of average annual c9pper exports to 430,000 metric tons and of average world prices to about 17; a ~o~d, FOB Chile. The value of such exports would be about US $161,000,000 per year~ '''orld Outl,oQk for Oopper As a result of the wotld demand forreconstruct1on and reeqUipment, the price of copper today is very high, namely, 20; to 21; a pound. Faced with such unprecedented demand. -Ohilean producers will do their utmost to in crease production to the m~imum extent. In a few years, however, the abnormal demand created by the war and its aftermath is expected to subside, and al~ though the aggregate needs of the world are likely to be higher than in the prewar era, some world production overcapaoity is probable, This situat~on is likely to lead to $ progressive drop in world cop per prices, and therefore, to the closing of some marginal Chilean mines. Ql1.ilean aoduct ion 90% to 95% of Chilean copper is produced by 3 large mines. The reserves of one of them, Andes Copper Corpora.tion (Anaconda) may be exhausted in from 6 to 10 years. ~he reserves of the two o,the1"B, Chile Exploration Co. rl' -, ~'-r- f · 1tZi I 10. c (Anaco' ) and Braden Copper Co. (Xennecott) t are the largest kno1:m reserves in Exploitation of Chu,!uicamata, the largest of the mines .. m1ned by J Chile ~loration Co., will in the long run involve a shift in production methods, from sulphide to oxide ores. At the present rates of production, t.he combined outyut of the three large mines should average about 430,000 metric tons a ;year. It is doubttul that the present world price of 20¢ to 21¢ a pound \,lill continue for more than a year. " Hm"ever a reversion to prei"ar prices of 11 or 1.2 cents is not to bo expected; rather f prices \Jill probably stabilize at 13¢ ,to 14¢ a pound, At these prices a substantial profit could still be expected by tho large mines in Chilo. As outlined in TABLE 4 prc~mr Chiloan production never exceeded 413,300 motric tons. But during the war years the combined production of the three large Chilean mines and of the small marginal producers, the latter accounting for 7,000 to 10,000 metric tons a year, amounted to 484,400 to 497.100 metric tons annually. An estimate putting normal production at 430,000 metric tons thu.s seems reaaonable as long as the price does not fall belo'" 13¢ to 14¢ ,a pO'Qlld. Such Volume of production at a price FaB Chile of17¢ a pound. ,,,ould l1ret returns to Chile e~uivalent to about US $95,000,000 per year. Net Fo~eign Exchange ret~ns from CouDer to the Ohilean Economy Fomento did not present estimatea of the net foreign exchange returns from cClpperto the Ohilean Government. This aspect of the balance of payments is. ne~ertheless, important, for roughly 2/5 of the total returns from copper exports do not enter into Chilels foreign exchange holdings but remain abroad c for purchases by the mining companies, provisions for corporate reserves, ad minist~ative expenses and on account of profits and oxcess profit of the 11. c I mining 1ompanies. , t , The returns in foreign exchange from the sale of cOpper accruing to the Gov$rnment are used for redemptiOn of Ohile's consolidated external public debt. fGr amorti~ation and service of Fomento's foreign debts, for budgetary uses and for execution of vast public works programs. In TABLE 5 a breakdown of the returns of the copper industries is anal1~ed for the period, 1941 to 1946. The following comments are to be made: Starting from the FOB Ohile price, taxable ~ncome is calculated by deducting administrative expenses of companies, purchases of the companies abroad, legal costs of production excess profits and excess profit taxes. The legal cost of prod~ction is a theoretical concept. It is ob tained by the conversion into dollars of the actual peso cost of production at the rate of 19.37 pesos to the U,S. dollar, instead of at t:w o:c:icial rate of 31 per dollar. Excess profits. The excess profits, as defined by law. are equal to ~he difference between actual New York prices and a hypothetical minimum New York price of 9.9¢ a pound calculated as the average between IO¢ a lb. for electrolytic copper and 9-3/4¢ and 9-5/8¢ for smelter copper and fire refined copper., ~he excess profits left to the mining companies are equal to the total ~ofits minus a 50% excess profits tax. The dollar proceeds of this tax are to be used to finance the public works program. It appears that they have never been completely so utilized, mainly because most of the public works to. be financed have required only peso expenditures. A part is thus utilized to increa$e the foreign exchange assets of the Ohilean Government. It should be c noted 'bhB.t ue%.ceptional n freight charges are first deducted from the New York price, that if the tax yield is less than 1;.¢ a. lb., the excess profits tax will b$ computed on a theoretical basiS, i.e ·· 9.9 t (1* x 2) ~ 12.4¢ a lb., ptft ill .. j MI 1 Jj U III ILUII: $ e!~; I if 12. c that trtns1tional agreements determine the 1942-1943 rates of taxation and that the smail mines pay excess profits taxes on the basis of the difference between i New Yort prices in 1942 and current New York prices. Thes'e factors explain why the yield of the tax between 1942 and 194.5 does not correspond to 50% of lithe differe~ce between actual New York prices" and 9,9¢. All taxes on copper and the use of the proceeds may be summarized as folloV1Sl a. A tax of 18% of the net income, which for example, was equivalent to 4% of the total value of exports in 1945. is assigned by Law 64.57 to the service of the Ohilean consolidated external public debt. b. A 3% tax on net income of the copper companies 1s dedicated to budget ary uses by Law 7145. c. By Law 6334. a 1.5% tax is levied on the net incQme of copper companies, th~ proceeds-of which are assigned to the service of Fomento's foreign debt. d. As described above, what is tantarriount to an "exchange tax ll is levied on the legal cost of production, by the forced conversion of dollars at the rate of 19~37 pesos. If the copper companies were permitted to b~ pesos at the usual 31 peso rate of exchange per US dollar, they would have been able, in 194.5. for instance, to cover their Chilean costs of production with US $26,400.000, instead of US $43,100,000. As can be seen, a heavy tax burden is thus carried by copper, v,hich ~nefits government budgets and foreign exchange reserves. Copper aCC01lnts for .50% to 60% of the foreign exchange accruing to Ohile, .,A.n unexpected in crease in costs of production, strikes, a decrease in world demand, a refusal c on the part of American corporations to submit to constant decreases in profit margin ... any of these contingencies "lould seriously affect foreign "exchange reserve:s, the ba1anoe of 'payments, the "Service and amortization of the con , ft , ...._ _..._ n""'S.J..,gtUJi"J.""'t ........ ... I ______ U ya""._ MU......................................... fiNl I8JtiI ......._ r_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ iU ~ r ' t - « i t ~ , o < ; · ~ ' { # 13. c solidat d external public debt. the service of Fomento I s foreign debt and the p:J;'ogresib of public works. I b)! Nitrates Genera~i deseription. Nitrate production in Ohile ranged from 1,216.000 to 1,488,000 metric tons annually during the nitrate years 193~36 to 1941-42, as shown in ~LE 6, It reached 1,621,000 metric tons in 1945 and about 1,700.000 in 1946. ~hls rate of output, although far above the depression low of 450,000 tons in 1932-33, was substantially less than potential Ohilean capacity. ~ee large producers, the Lautaro Nitrate 00 ·· Ltd., Oia. Salltrera Anglo-Ohilena, and Oia. Salitrera Tarapaca y ~tofagasta, aocount for approxi~ mat ely 90% of total output, the remainder being supplied by small independent companies operating plants of the so-oolled "Shanks" types. ~he first two companies mentioned above operate the .two large modern pla~tst Pedro de Valdivia and Maria Elena, which produce more efficiently than the older type IIShankSti plants, since they are highly meohanized, utilize lower grade deposits, and usethe new IIGuggenheim" freezing process which require's less fael and labor. The combined capacity of these two plants is sufficient to protuoe all the nitrate which could be disposed of in the world markets at current rates of consumption, ~he restriction of production to modern low- east p~ants would appear to be absolutely necessary if Ohile is to face post war co~petition successfully. The Oia. Salitrera Tarapaca yAntofagasta, which operates a number of old-style plants, is now constructing what will be the third modern mechanized plant in Ohile. It is the expressed opinion of the nitrate interests that chile can only compete in the post-war nitrogen market if production is confined to modernized plant~ ~orts of Nitrates in the ]alance of i!Yments. Fomentors forecast of the 1liMJ!.JU iI$1~(t,M",""~~"'~l-"""' I ~~ .. ' I '""'"" " ........_ _ _ _ , JlJ!&_""'!!iJi_l@fl_llflsM;'_Uru_es_M:_ _...._ _ _ _ _... U1l1 '[ _ _ _ _......._ _....'_ _ _ _ _ __ ... *II' t............ , ' btlS 14. export of Ohilean nitrates is as follows: Total Value Volume of Nitrogen Oon... Price FOB Ohile in equivalent (OOOls metric tent (OOOls of in US dollars Year of US dollars tons) metric tons) per metric ton 1946 39,000,000 1.700 272 23.00 1947 41,000.000 1.800 288 23.00 1948 39.000#000 1.709 272 23.00 1949 37.000.000 1,600 256 23.00 1950 37.000,000 1,600 256 23.00 1951-5.5 34,000,000 1,500 240 23.00 World ~oductioB Oapacitl. ~LE 7 summarizes the world potential in nitrogen production according to the International Emergency Food Oommittee (!EFO) for 1934 and foreoast for 1951, In the latter year, it forecasts world capacity to prod~ce at 6,082,000 metrio tons as against present world oapacity of about 5,200,000 metric tons. Actual current produotion is. however, far below ca pacity due to difficulties ~n distribution arising from trade and foreign exchange considerations. Current demand is therefore in exoeSs of aotual supply. 1forld gonsBmPtion. The lEFe estimates world requirements for nitrogen from 1946 to 1950 at 3,316.000 metric tons annu&lly, After 1950 actual production is lik~ly to be in excess of demand and warrants the expeotation of price oompetition. Av&ilable evidenoe indicates that Ohile ~ill not be able to maintain her present production of nitrates in a severe competitive ~rket~ Priqes jand Oosts. Ohi1ean nitrates have to compete on the world markets with synthe~ic nitrates, of Which the most important are sJnthe\to ammoD1~nitrate, and sy.nthetio sodium nitrate. Synthetio ammonium nitrate has a high nitrogen c conten~, 33%. but acidifies the soil on whioh it is used~ This makes it advis able far the coneumer to add oalciwn and magnesium to the produot. This R , eXPlains!w}v in 1941, for instanco, natural sodium nitrate could sell a.t US I $1.81 per 20 pounds of nitrogen content, in competition with synthetic am monium ~trate at $1.38 per 20 pounds nitrogen content. Synthetic sodium ! nitrate ~oes not differ technically from the natural nitrate. The 1944: ceiling prices in the United States were as follows: Synthetic ammonium nitrate, $50.00 per short ton, FOB plant, 32% nitrogen content, or $156.00 per ton of nitrogen Synthetic sodium nitrate, $27.00 per Bhort ton, FOB plant, 16% nitrogen content, or $170.00 per ton of nitrogen Natural Ohilean sodium nitrate, $30.00 per short ton, OIF US, 16% nitrogen content, or $187.00 per ton of nitrogen Only shortages of nitrogen and the high agricultural prices pre vailing at the time could justify such differentials in prices. As production increases, the price of the natural Ohilean product will have to approach that of the eyntnetic sodium nitrate in order to maintain sales volume, Synthetic sodium aitrate can sell at lower prices than $27.00. The minimum price is estimated to be $18 a short ton, and $25 a short ton is considered the most likely level at which the price will be stabilized, Oan natura~ nitrates compete at these prices' Prodp.ct ton. Three methods of production are used in Ohile, having theoretical costs of production, equivalent to the following, stated in US dollars~ Shanks $22.30 per short ton or $24.50 per metric ton $13.40 per II or $14.70 per Guggenheim II " Irystal $11.00 per 11 fJ or $12.00 per II II Of the above costs per metric ton, $1.10 in 1946, represented what is tantamount to a tax on conversion ot foreign exchange which Ohile cou~d waive if necess~ry and $1.50 per metric ton represented depreciation charges. 16. Thus ealoulation of costs could be reduced by US $2.60. to meet competition. As can be Been from the cost figures in TABLES 8 and 9. the Shanks process has to be subsidized even at present world prices. The minimum.cost of Ohilean nitrate production. stated in US.....dollars, assuming that all of the Shanks plants are replaced by Guggenheim or Xrystal plants, in the ratios shown, would be; 66% Guggenheim $14.70 minus $2.60 · $12.10 per metric ton JJ% Xrystal $12.00 minus $2.60 :: $ 9 .40 per metric ton The lower cost of Krystal plant pr~duction as above given is speeu lative and remains to be demonstrated. However. assuming an average cost of production of $12.00 a metric tQn and assuming further that the exchange tax and the depreciation allowance be waived. that freight costs will decrease by 30% attar 1947 and that purchases abroad by t1}e mining companies as well as profits are each kept to a min1tm.un of US $1.00 per ton although they bave been around US $4.00 and US $6.00 per ton in recent years. the 011 New York ,"ost of natural Chilean nitrate would be lowered to US $20.00 1'er short ton !!II" US $22.00 per metric ton, Representatives of the Chilean ni trateeompanies go furtPer and asseFt that they could eonee~vablY lower the~r setling price to US $20.00 a metric ton, although they consider the need fors'Q,ch a drastle \ redUction unlikely in order t~ meet competition. In a competitive market. Ohilean nitrates will net be in a favorable position t~1afds synthetic pr~ducts, Small variations in freight rates. or s~ll deCT~ases in prices offered ~y synthetic producers would make it very . difficult fo:, the OhUean companies ts maintain their export sale~. In fact. if synthetic producers are forced intc vigorous eempetition. the Chilean market c . I may be $onfined to those farmers who have a preference for the nat~a.l ~roduct and are willi~ tQ pay ~o% more fer it than for synthetie nitregen; or t8 C~ 17. c tries wlere freight costs give Chilean nitrates an advantage. 'I The likelihood t1'!at prewar ~~tel arrangements I whichw'ould greatly i · help 0hfle~ producers, will be restored is considered small and has been I discounted in this analysis. In addition, Chilean nitrate interests have I I stated that they do not wish the restoration of the former cartel arrangements. Ohilean natural nitrates do have some advantages in some consuming markets. Many farmers still believe natural nitrates to be superior to the synthetic produ.ct. Accordingly, a 300,000 metric ton per year market exists in India, parts of Europe and in the Southern section of the U.S., where cotton planters show a definite inclination towards the natural product, espociailly when cotton prices are high, The neighbors of Chile have started to expand their use of all kinds of fertilizers, and their normal source of supply, because of lower transportation costs, is Chile, This is e;q>ected to add 200,000 metric tons per year to demand for Chilean nitrates. Furthermore, Ohile could, in spite of competition, maintain a market of 250,000 to 500,000 metric tons of nitrates per year, by offering differ ential freight rates, or by bargaining for return freight, or through bilater al agr$ements. France, the United Kingdom, Japan, Germany, all of which were pre1rr n~trate customers of Chile, remain on the list of prospective buyers. c) Other Metals and Minerals Fomento expects that ex-ports of "Other Metals and Minerals" will in the future amount to the equivalent of US $8,000,000 annually but presents no complete breakdown of this estimate. In the discussion below all metals and minerals, except gold and silver ar: treated and it would appear that, on this basis, that Fomentots estimate is about US $2,000,000 too high. (1) ~on Ore. For a number of years, annual production averaged 1,500,000 c metric tons of iron ore. Proven reserves are reported to be about 58,000,000 i Jill. j 18. c tons, nd probable reserves, about 120,000,000 tons. A large part of the output is now exported to the United States, wherea~ around 200,000 tons annually are consumed by the Ohile~n domestic iron i and st~el industry. Exports to the United States practically ceased in the I middle! of 1942 owing to the shipping shortages; they were resumed in 19lf4. and seem to have regained their prewar level in 1946. A new steel mill bei~g constructed near Ooncepcion with an Eximbank loan and to be completed in 194~1949J will absorb 1/3 to 1/2 of the present production. New ore bodies are expected to be brought in very soon and there fore increased internal demand for iron ore will thus not decreaso the export potential. Fomento calculates that exports ,dll axnount to the value of US $2,000 1 000 to US $3,000,000 annually in the next few years, which appears to be a reasonable expectation. (2) Mpn ferroBs metals. In the category of non ferrous metals (manganese, molyb~num, sulfur, coal, sodium salts, iodine, kieselguhr and mercury) past statistics are misleading and contradictory, For example, wartime exports of . some ~pn-ferrous metals, such as manganese, have been statistically grouped toget~r with exports of marginal cQpper. T.A.:BLE 10 ShO'ofS the best information which ~ppears to be available on the items of this category·. It indicates I avera~ exports valued at US $4,200,000 OVer the last 8 years. the highest I year being us $6.900,000 in 1943. In the future exports of manganese and coal are bound to decrease substantially. owing to the in~ernal dema~d , created by the proposed steel mill p:r;-esently being erected in the OoncerJ'hion area. At most. exports of all non-ferrous metals could reach the equivalent Of US $),700,000 to US $4,000.000 in the next fe'" years. (3) :§jituminous Coal and J;:igp.ite. Chilean production, imports and exports of · .I.'''''' ""-'" I'~rl«" II" ,,! 'j' ! JUJU ttL ,Uti! 1 i1 19. "i I c:; coal d lignite, have been as follows: (Volume in OOOIS of metric tons) V 1ume of Imports Exports Vohune of Pr duction Volume 0001s US $ Volume OOOI:S us'm, Consu..rnption 1936 1,874 18. 132. 1,760 1937 1.988 0 55. 1,933 1938 2.043 0 58. 1,986 1939 1,850 0 35. 1,814 1940 1.938 220. 2.467 32. 186 2.126 1941 2,060 69. 806 ,50, 592 2,079 1942 2,150 17. 268 86 866 2,081 1943 2,265 20. 438 59. 503 2,216 1944 2,279 15.5 335 46. 324 2,248 1945 2,050 0.5 11 55~ 493 1.995 Coal produotion is oentralized in the Concepcion area. In 1942, the Lot!., Schwager and Curanilahue fields employed 15.746 workers. The reserves of coal are described as 100,000,000 metric tons theoretically with ,50,000,000 tons eeonomical1y exploitable. New mining equipment was imported by the min ing companies in 1940. The prospects of expansion, according to Fomento, are favoralle although exploitation is difficult. as the fields extend up to 3 miles ~der , the sea. Justification for the construction of additional hydroelectric power plants in Chile and for the expansion of railway electrification has been based On an expected shortage of domestically produced coal. The new steel pla~t being financed by an Eximbank loa~ will consume 350,000 metric tons a year at first and eventually 700.000 metric tons a year. The first require c ment, it is stated. will be met by a new shaft presently being opened at the It! 20. c Schwagr and Lota Mines. 60.000 metric tons of coking coal w111 have to be .d annually for the steel mill at first but Fomento expects eventually to 01 inate such imports. Lignite produotion, constituting approximately ~ of the total coal produciion, i8 loca.11led in the Valdivia-Magellanes area and employs 2,620 worker.. 100 years of reserves have been explored. This lignite is of a good quality and i8 mainly utiliEed in household consumption. It offers good possibilities of future expansion. (4) Liquid Fuels. All of Ohile 1 s requirements for liquid fuels, as shown in u:B~ 11, are now imported. In 1941, Fomento engaged U.S. geologists to make a study of the posSibilit¥ of petroleum development in the Southern part of Chile. mhe first exploration yielded satisfa.ctory results and a new team of geologists carried turt~tf tDYe.ti~t1ons in 1943 in the Brunswick pe~ insUla. Three favorable It~~e8 were located and Fomento initiated drill ing, wUh equipment b~t wUh Ex1111'be.nlc funds. .AJ.ready three good wells have been located, and it 1s likely ~ba.t within 5 to 10 years the production will be sufficient to c~ver most of Central Chile's needs. Further savings are exp,cted OWing to the scrapping of gasoline and diesel oil power plants. (5) Pfocious 14etals. As described in the table below, which is made up from incomplete and sometimes conflicting statistics, production of gold has always been S\1.bstantial. altho1.lgh it consists only of the subsidised "placer" pl"O duction by casual miners. or the b~product of the mining of other ores. Exports of gold ore dropped cOn$iderably d~ing the war as a result of shi~ ping s'hol,"tages. According to Fomento equipment has beenor will be shortly c sent t·o Ohile, which will enable the oountry to modernize its gold mining 1ndust~Yt and to export gold and preciQus metals in the future, t 1 ill. AJ!\i JJ .,. J · At present, the production of gold is centralized in the hands of the c "Caja de! Credito l'-tlneroll which se1ls the entire production to the ]e,nco Central de Chile (Coo,ooor s of US dollars) Annual :El.xnorts of Gold Annual Production of Gold 1938 4.4 n.a,. 1939 4.6 11.4 1940 5.2 l2~0 1941 3.4 9.3 1942 0.4 6.4 1943 1.9 6.1 1944 2.7 7.1 194.5 6.4 n.a. Although Fomento does not shm'l gold separately in ita estimates of Chi1e l s balance of payments, the :Bank considers that annual gold production, ,1hether ,ex-ported or in the ~lands of the Central :Bank, constitutes an effective increase in reserves and should therefore be taken into account. (2) Ot~er Exuorts In 194.5, total exports of non-metallic products were equivalent to US $55.900,000 according to official Chilean statistics. Fomento sets the pro jection of this figure at US $76.600,000 for the next 4 years. and US $81,000,00C thereafter, and this forecast is based on assumed 1945 exports of US $73,000,000, which is an erroneous figure. As discUssed in the sections belo~"" the ::Sank feels that total exports can reasonably be expected to rise from the correct 194.5 figare to a value of US $62,QOO,OOO witbin a ~eriod of S years and are only likely to reach the level c t 18i1i Ii 22 · of US ·000,000 forecast by 10mento, in 15 years. c 'ricultural ?roducts. As outlined in TA3LES 12 and 13, agricultur 801 expo1s are the largest item ill the non-mineral eXjJorts class. Exce:::lt in three fi~ldst namely forest products, Wines and fish, no increase i~ e;~orts I i can be ehcpected. In fact, o't"ling to the shift of manpm1er from farm to factory i i which Forento states Will be required by Chile's overa.ll industria.lization I program,1 and o~ring to the increase in the consuming populatiol1 at home, exports i of agricu.ltural products ma~~ have a tendency to decrease in the future. Foment 0, h01 lever, believes that the mechanization of at;riculture t 't.".hich it is fostering, i "rill more than offset any such decrease. EX'lJorts pf ttines and Liquors. The \-,ine industry has been financially assisted i i by Fomenio to the extent of the equivalent of US ~500.000. This partially accounts: for the increased ar~Lual wine exports from about US $1,000,000 in the prev-lar ~e.rs. 1937 and 1938 to ",,15 $2,400,000 in 1944. Other im",?ortant fe,ctors, hOHever ·. \-rere the increase in \forld prices and the cessation of UwS. im:;)orts of French ,,,ines during the 't-rar, 1:1hich enabled t:le Chileans to establish them selves more firlllly in the U.S. marlcet. Competition of French '-fines can be ex pected to be keen i,n the future and it seems lilcely that future Chilean uine exports ~ill not increase much above the value of US $2,400,000. Fisherief' An ]ximbank loan of US $800,000 a~d the equivalent of US $1,500,000 , in Chile~n capital have been dedicated by F¢mento to the building of fish process1~g and caIU~ing factories, and to the improvement of a fishing fleet. The primary objective to be l=hieved is a 100% increase of internal fish COi.l'u.rn:Ption but education of the Chileans to consume fish ,will tal;:e con siders,bl. time and the great bulk of the added. catch in the early years is ex pected t~ be exported. Er'Jorts arc sA'}lected by Fomento to reach, after ten c years, a noa.:: equiv£',lent to US $20.000,000 annuall;r. The tota.l catch in such 23. case wo d have to amo'.mt to 220,000 tons a year as com~ared to an 8.ctv.a.l catch tons in 1945. Realization of Foment0 1 s expectations "rill reCluire the ion of many processing plants, a large exyansion of the fishing !leet and the ~eveloument of foreign markets, As this \1ill be a gradua.l 'Jrocess, the I .Bank CO::lJ~iO_ers that an increase in fishery eX??orts equivalent to US $800,000 I a 7ear i~ the next fe.. .' years can reaso:.:.ably be eX}.Jected. I Forest ?foducts, Pa-per and ?ulp. ]'omento has a~J:'.Jlied to the Bank for a loan of US $~lOl,OOO and intends to devote this am{'lunt together vith the equiva.lent of about US $8,000,000 in. Chileall capital to the deve10:9ment of its forest re sources. As more fully described in .A:??:S:::ODC II, four saw mills, 1 ,"ood pre serving plant, 1 hardboard plant and 1 pulp mill are projected. On the basis of 1945 prices, the ]al~~ expects that when these projects are completed eroorts of lumber ,·rill increase by the equivalent of US $1,000,000 per year and of hardboard by the equivalent of US $200,000 per year. Ex-aorts pf other goods. Textiles, chemicals, machines and various manufa.ctures are ttn~ortant exports for Ohile, and no great changes from 1945 figures are eXpected to occur, The opening of the proposed steel mill ~/ill enable Chile to exoort ferro manganese of a. value equivalent to US $1,100,000 per year. Past imT)orts of Chile, as sho'-In in ~LE 14, rose from the eCluivalent of US $lOL~,OOO,OOO in 1940 to US $~55,600,000 in 1945. 20mento's first estimate of Chilefs future imports gave the figure of US $166,900,000 as "normalimpoJ'ts" for 19L!·6, and projected a gradual decrease to US $148, lOa, 000 for 1951 and there after to 1955. This was to be the. result of industrial development in Chile fostered mainly by Fomento. Foment 0 I s o··rn im'9orts under Eximban..:C and Il1ter national Bank loans as ,."ell as an 'Jimport backlog" of the equivalent 0;; US c 1~1't,_ 1 1 rtf; 24. $200,000 000. resulting from the yent-U":? demand created De the 'l:m.r scarcities, 'Io,ere tretted separately by Fomel:to as "extraordinary illi3Jorts ll · I I On 1-18.rch 27, 1947. Fomento :presented a ne\" forecast average ',normal im:Dorts" valued at approximately US $136,000,000 a ~re8.r were I according to Nhich eX:flected for the perio~ 1947-19.51. Moreover, the previously estbf.ted Ifinrport backlog U !\-taS reduced to approximately US $.5.5,000,000. The stated bases for these re~uctions are given in the f'ollouing paragraphs. I~ports ~f Cotton and Text~les. Cotton. The Chilean Cotton textile industry now has .57,000 spindles e,nd 3,000 looms. Outstanding orders, the bulk of ~Thich have already been paid for, will increase installations to 1.51,000 spindles and 4,000 looms by 19.50. As a result, costly imports of cotton piece goods are expected to be replaced by imports of ra~:r cotton. Rayon. .Current orders for machiner7 will increase the capacity of Chilean rayon plants five-fold. At the beginning, soma of the ra'" materials, such as cellulose, \\7111 have to be im:t=lorted, b'\lt by 19.50-.51 a rayon pulp mill t1111 be installed in Chile ,·rhich "rill eliminate the need for any imports for the rayon industry. Jute, Uool ~nd ReI[2.. Small decreases are exoected to occur in the imports of these products. In the s')ecific case of 1:1001, selective bree,dlng of Chilea;.'l. sheep is to il'l.CreaSe the local quality and there fore decrease the need for imports of high grade uool. In short, 1omento states that total imports of all textiles, i~cluding raw cotton, are expected to decrease from the value of US $21.400.000 in 1946 c to a.n a.verage of US ~1.5,.s70.000 for 194'9-19.51. kiLt. tilt :t:tN · · b IJ:.· J!; 1iolsd1! I orts of ~aehines and Transport Eg~ument. Future imports in these categories c are expcted by Fomento to maintain the 1946 level valued at US $26,800,000, exclusie of FOlliento l s own developmental "extraordinary imports ll · ~is repre sents a·j reduction from the prewar volume of normal imports of this tyge, which I would altount to approximately US $34,400.000 at 1946 prices. An importa.nt factor ~n this is that imports of Wire a.nd cable, and incandescent bulbs will be cons'!1derably decreased as a result of the recent erection in Ohile of a copper manufacturing plant and an electrical bulb plant. In addition imports for the,.Ohilean railroa.ds formerlr claSSified as "normal importsll as well as imports through loans from Eximbank and the International J3Q.nk and about 50% of the former "normAl imports U of agricultural ~.chines a.nd tractors ~re to be included in Fornento 1 s "extraordint'l,ry impDrts". 'rhe ne'" steol mill in Concepcion will. when completed, satisfy the 1000.1 demand for ra~ls and reduce yearly im ports of steel products by the equivv~ent of US $11,000,000. Rubber tires are now malll.ufactured in Chile and imports are expected soon to cease altogether. Agricultural Products. The main agricultural imports of Ohile are sugar, cattle and cotton. Cotton imports are dealt with above. Fomento forecasts that annuaJ sugar lmports will remain at about 160,000 tons. But, although 1946 sugar prices approached US $150.00 a ton, and are now even higher, Fomento expects a deoline to US $50.00 or US $60.00 a ton.' Fomento attributes tne increE1.se in imports of cattle during the last three years to loc~l drought conditions and a decrease is expected in future years, Other ~mports. Cement imports Will be eliminated. as a result of the instnl lation of ndditio~~l cement mills. OO1\cly.sion. The figure of US $136,000,000 now esti'llo.ted by Fomonto as II norIllt'.l . avera,e im:portstl for tho next four yec:.rs is considered by the Ennk to be un c reaso~.bly low. The expected reduction in imports due to tho crenttanof new ,_ _........"'Ui"",il!4 tt.FtI'1 _ _ ,. ... , , ...... .., ...... J.I!........._ _ ~ "'i*_,..._ _........ .. .... ·· _;-._ _ "'-U"'\iil.""""'-k_ _ _ _ _ _.. '_IU_ _ _ __ ... -~~ H!_W(_ ._. 11 _ 26. I industrits can only be gradual and saving'$,';_d. , , .........._ ..... 1 ' ..........1_1 ' ........."""_ _ _ _.... '- [ __ _.... !k , U1.... ..... '!In ItfLl ' A ""*_' _._ _..._ _ _..............._ ._ _ _br~ fol owing. c Rail traffic between Chile, Argentina and Bolivia yields nat recipts t~ Chile equivalent t. appreximetely US $400,e~0 a year. Theso are:expected to remain at the same level ·. A similar. stability in re- I , ce1~ts and in payments is expeeted in such small 1tems as the rental of : for~ign vessels, pnst, telegraph, radie, and the c~sts in~rred by foreign Tessels in Chilean harbors. (c) Cul tural. TABLE 15 shows recant annual deficits in this item equivalent te US $3,000,000 to US $4,000,000. The Bank feels thi..t this deficit "lill tend to increase. Tourist reeeipts and payments are e;xpeeted to increase in the next few years with the revival of opportunities for Chileans to vacation abroad, especially in Euro~e and with the resumption of travel by foreigners t~ Chile and past history indicates that expenses pf Chilean tourists abroad are eensiderably higher than expenses of·foreign ers in Chile. Movements of foreign exehange both ways resulting trt>m sfl}entific and educational endeavors, emigrant l'emit~~nees and payments f~r patents are likely to increase in abeut the same proportion as tourist expenditures. Governmental and Militatz ; E~e~ditures Abr~d. .,.--- '.$ .' f The war brought about a Qonslderable mil~tary m~vement for Intero-Americo.n defense, whioh is likely to de,crease nnd thus is expected to reduce both foreign exchange reeei~ts and payments about equally, The Chilean Diplomatic Corps is now aole to resume cperatio~s in Europe ~~nd the number of EuropeD.ll dipl(!)mats in Chile 1s inoreasing. The expected c growth of f"reign commeroe and movement of tourists v.nd buSinessmen will 30. pr ably increase Oonsular receipts and payments at about the same rates. c Bank expects. these items to continue to show a slight deficit in fo eign exchange. (e) Administrative E;penses of Business Enterprises. Fom~nto has submitted no specific information on the items under this heading. O~Jper and Nitrate Coppanies. This item is included under the heading "profi ta, reserves and expenses~) in the analysis of the nitrate indust~~t in Section (2) (a) (1) (b) and under the item tfreserves end administrative expenses ll , in the copper indust~ analysis in Section (2) (a) (1) (a). A rational segregation of the various items involved ~der these general headings is difficult. if not impossible. The nitra~e and oopper industries must maintain offices, sales representatives, etc., outside Ohile at all times smd such expenses will probably not fluctunte greatly. Deducting an estimate of these, based on the exporience from 1942 to 1945. from the total of projected profits, reserves and expenses of tho companies for the next few years, :71e10_s an' estimate of ad.':1i:'listra:tive 0:~}C::lSes outs:i.de·Chile ec~'\)_ivalent to a-J:J'\.'.t ":;13 $6.000.000 :)er year. 1qmento and the Ohilean State Ba1h-raxs. These two parasta~l a.gencies mnintain lcrge staffs of engineers and technicians in New York. The avera.ge expenses of each of tho years 1944 e.nd 1945, ,na,mely, US $600.00Q ean be deemed as representative of fu. ture 0\1 tlays · other enterprises. c The iron mining companies c~d other small~r mining companies as ... Jill:! III I 1 31. w· 1 as various other "Chilean and foreign owned enterprises, have c a inistrative expenses abroad which are not expeoted to vary great1y.from t e 194Lh1945 level equivalent to US $500.,000 to US $700,000 per year. (f) F~reign Exchaage Pr~fits These consist of taxes levied in :f'~reign exchange 'by the Cbil~an Treasury through a sales tax on foreign exchange transactions on other than copper, nitrates and iron transactions and~f receipts from the sale to.commerclal banks of foreign exchange not accruing from regular exports. The receipts from these two items is estimated to reme.in constant in the next few y~ats, at the equivalent of US $100,000 and US$6,OOO,OOO.respectively. I n, _ _ _ _.......,_ _ _ , u ..............._ _ _ _ _ _ _ _ _ _, _ ,...._ _ _ _ _ _ _ _ _ _ _ _ __ , I ~ ~ " ' - ~ ~ · ' · " < a : ~ , 32. 4 MOVEMENT AND SERVICE OF CAPIW c While Fnmentc does n~t show in detail all nf the items treated b~ the :Bank under this heading lit sets forth in TABLE 3 under "Capital I M~vements" receipts and payments (')f the last few years and estimates to 1951 and beyond~ For the 10 years beginning with 1946 annual payments ate. shown to exceed annual receipts by the equivalent of over'1JS$.3:S,OOO.Coa. The.Bank's analysis under the 5 s~bdivisions indicated below leads to the conclusion that Fomentofs es~imates are too lew by the equivalent of about US $10.000,000 per year, (a) Interest and Amortization of Loans to Fomento and the Chilean State Railways (b) Service of Capital of Foreign Enterprises in Chile (1) Grea t Mines (2) Others (c) Interest and Amortization of the Long Term National External Debt. (d) Interest and Amortization of the Short Term National External Debt. (e) Other Movements of Capital, such as liquidation of funds by foreigners and purchase of foreign securities, lend~lease obligations, blocked funds, service of private debt. (a) Interest and AmortizatiQn of L~ans to Fomento and the Chilean State Railways. Fomento has submitted data to the Bank. estimating the follo~ iUg receipts from foreign loans to Chile, w.lued in 000, 000 I s of U·. S. dollars: c _ _ _ _. . . . . . , _..... _J$~4It.,.§'Ir;'<'~ . 1 ........ - - - , . . " . '\»\'j'r'_,"". . . , ""kt_'... ____ ...._""._ _ _ __ _ _ _ _ _ _ _ _ _ _ __ ~'!III_n_'_i_OiIIIH· U. 33. 1942 -1944 5.4 1945 2.0 - - 1946 1947 10.4 - 1948 42.0 - 1950 :1:10 tal 122.3 ° Te official Balanza de Pagos, howeTer, reperts US $5~200tOOO in 1943 a4d us $6,100.000 for 1945 and as the total of loans applied for by F~mento and the Chilean State Railways amounts to US $137,000,000, the above figures should be reTised as follows and this would correspondingly iacrease future annual interest and amcrtization payments: 48.0 45.6 10.0 3.0 137.0 (b) Service of Capital ('If Foreii$n Enterprises in ClUle Foreign Exchange :l:lransfarredAbroad by the Large Mining Companies. Saction (2) (a) (1) dealing with nitrates and copper indicate the movements of capital in this category and ~LE 16 shows specifically the volume of fereign,exchange left abroad as a result of these operations from 1942 to 1945. :I:Ihe Bank calculates that this volUl!l8 which varied from us $18,000,000 to US $40,000,000 during the war could well reach a peak of US $55~000,000 in 1947 after which ~gradual decline to around US $30,000,000 in 1951 can be expected. :l:lransfer of Prof!ts of other Companies. Every year, Gther private firms, which are totally or partially foreign o~ed, transfer ab~ut US $6,000,000 of their profits and reserves abroad. I~.is likely tl"lP.t these profits will slowly increase in the next few year;. (c) Service of the Long Term NatioEAl External Debt. In 1935 payments of interest end bond redemption were equivalent to US $3,900,000 and in 1940, US $5,500,000 and in 1945, US $5,000,000, c as shown in T.ABLE 17. At the present rate of redemption the existing I I i I I i 34. extlrnal publie debt, not ineluding obligations to Eximbank and the c lnt~rnational Bank: which are i discussed separately, will be liquidated in r.bou t 15 or 20 year,. Because "f Chile I s default in its long term I deb~ i n 1931, the complete record is set forth in detail in A?PE1"DIX UI. (d) Service ~f the Short ~erm National External ~ebt. Annual interest and amortization on the short term national i ext~rnal debt averaged the equivalent of US $l,5t:lO,ooo from 1942 to 1945 and ~re estimated to continue at the rate of US $1,600,000 per year after 19~. Since the present indebtedness was at,one time in default, this subject is treated in detail in APPENDIX III. (e) Other Movements of Capital Liquidation of funds by foreigners ~~d purchase of foreign securities. Manw foreigners living in Chile acquire investments in Chilean obli~tions, which they liquidate. when leaving the country and ngainst which they but foreign exchange. On the other hand, they devote a part af their inoome derived in Chile to the purchase of securities abroad. The total of these movements represents an average annual drain of US $200,000 on the foreign e~change reserves of Chile which is expected to continue at toot level. Lend Lease Obligetions. Chile sign~d a lend lease agreement with the U. S. Government on March 2, 1943. As ~f Februa~ 28, 1946, Chilo had been formally billed fer US $20.300,000 and is expected to meet its total obli~tion by the end of 1948 · . Blncked Funds. Since the economic criSiS beginning in 1931, c va~ous funds representing Chilean payments for merchandise purchased in ,dm JLta '?Ala 11 . ope were blocked. Liquidation is still under way, and is eXl)ected c continue for several years and to require payments equivalent to $200.000 per year. Service of Private Debts. Annual interest on short term external , obligations of private. Ohilean individuals amounts t!':l the equivalent of about US $1,500,000. c 36 ·. c (5) OHIIJ!P S COMMEROIA!: AGBEEMENTS (a) 'General Chile has tariff agreements with the following countries: Countrz Date drawn up Argentina· 1933 !elgium-Luxembourg 1936 ;Bolivia 1904 Brazil 1936 Canada 1943 Colombia 1936 Cuba 1937 Denmark 1907 Ec<.uador 1937 . Egypt 1930 Italy 1898 Japan 1897 N'o~way 1927 Peru 1941 Spain 1844 - 1944 Sweden 1936 Switzerland 1897 Venezuela 1942 * Expected to be superceded by new Ohile-Argentine Agreement discussed below. c. In addition, Chile has two provisional agreements of 1940 1945 in force with the United states, one of 1943 with Great Britain, and ~d one af 1936 with the Netherlands. Negotiations are in progress on a pre 37. c I visiqnal agreement with France to replace that which was terminated in 1945. All ~f these agreements contain the most-favored-nation clause and about half provide for tariff reductions. P~ents agreoments with Great ~ritain, France and Holland. and clearing agreements with ~razil and Swit~erland are still. operative. The effeet of these agreements on Chilefs balance of payments. however, is insi~nificant when compared to the importance of the Chile-Argentine Agree . ment, analyzed in the following pages. (b) Financial and Commercial Agreement between Argentina and Chile. This agreement is of far reaching importance to the economic life of Cbile, and is therefore treated soparately in this report. ~t has not yet been ratified, and is opposed by a segment of Chilean public opinion. Infomationconcerning the financial clauses has been given informally by Fomento. ~Fa~ Provisions. All tariffs are suppressed between Chile and Argentina; however, each is entitled to submit to the other within six months a list of pro ducts which will be excluded from the free list. ~cial Provisions. ~l)Argentina is to lend the equivalent, in Argentine pesos, of OS $ 25,000,000 to Chile in order to co~er an exp~cted deficit in the Chilean-Argentino balance of trade in the years, 1947. 1948 ,and 1949. The average annual deficit of Chile in this.res~ect, as recorded for the years c 1943 and 1944 was equivalent to US $ 12,300.000 as shown in terms of this advance which is similar in nature to the International T~ 18. The Monetary Fundts operations, are as follows: 38. Amortization starts in 1949. and equal p~~ents are to be made every six months for 5 years. (b) Interest is 2-3/4% yearly, payable quarterly and beginning with the utilization of the credit. (2) Argentina will make' available to Ohile investment funds equivalent to US $ 75.000,000. A Ohilean-Argentino Oorporation will be croated to collaborate with Fomento in order to promote Ohilean production in fiolds which will yield e~ortable surpluses for Argentina. The Oorpo ration will have first priority to purchase goods of which it has financed the p'toduction and which are in e:x;cess of Chilean roquirements. The du ration of the advance is SO years during which Chile will pay interest at 4% a year on the amounts used. Repayment of principal is guaranteed by the Chilean Govornment at the end of SO years. Probable devolopments. aceoraing to Fomento, will be the following: . (a) Export of Chilean nitrates to Argentina. Fomento indicates that this would not mean Argentine investment in Chilean nitrates nor increased outlets for Chilean nitrate but that Argentina. for military and economic reasons, wishes to have an assured source of nitrogen. Argentina originally pl~~ed to create a synthetic nitrate plant of its own in Argentina and the agreement with Ohile will prevent this. (b) Copper production, Fomento has financed a oopper manufacturing plant in Chile with an Eximbank loan, Its capacity is too largo for Chile's needs and the agreement with Argentina will provide an outlet for present excess ~apacity and the further expansion of the enterprise which Argentina c would finance. A new smelter and electrolytic refinery for processing the production of marginal copper mines, are contemplated. The production of \-','<''''··. . . _....... . ...... _ ' IIIW_'''' Ul! _iUHi..,,._._ '''''tu.... ... ... titS&!l_· _ .._ , .. .. pi'(jf_-......_ _ _.............._ _ __ , _ . - ._ _ _ _ _ _ _ _ _ . . . . . . .' _ ' . . ' .. ~_~.~ __ ·· .~ 39 .. c this ~lgh cost copper, with gold as a by-product. is stated t~ be justified by e~ected benefits to the Ohilean balance of payments. Marginal mines produetion coul~ re~ 20,000 tons of electrolytic copper ~er fear valued at about US $ 7.000tOOO. It would also yield about US $ 1.500,000 in gold. (c) Electric power. According to Fomento t the Ohi1e-Argentine Agree ment has no bearing on powe~ projeots financed by Eximbank or Internatio~l Bank loans. It is proposed. however, with the help of Argentine capital., to finance the third stage of Fomento1s hydroelectrio development progr~. especially in the Ooncepcion-Puerto Montt area. Fomento states that 500,000 KW is available in that area whioh could supply adjacent regions of Argen tina with cheap power. (e) Ooal. Present production of coal in Ohile is barely sufficient for internal requirements and any development of coal resources in the , oentral region of Chile, would do no more than satisfy the demand of the projected Ooncepcion steel plant. However, enormous deposits of low grade coal have been discovered, in the Mage1lanes area. Mining costs would be low, according to Fomento, and o~al could be delivered to Buenos Aires or Valparaiso at the equivalent of not more than US $ 5.00 a metric ton. The coal contains 40% impurities and after taking this loss into account, the OIF eost, 'Buenos Aires, would be about US $ 8.00 per metric ton which is competitive. ~gentina would thus no longer be dependent on England and the United States for its coal supply. (f) Steel and Iron. Fomento doubts ver3 much that Ohilean iron ore will be exported to ~rgentina as Argentina lacks the other essential raw c materials required in the production of steel. a one million ton per year market for steel products and has so far been But Argentina represents * H L t ~ SA ~ II 40. c i depen~ent on the United States and Europe. To achieve less dependence on I I these! sources. Argentine capital may be applied to further development of the p~ojected Ohilean steel mill at Ooncepcion. The addition of a seoond blast furnace of capacity estimated at 200,000 tons a year would double production of raw steel for which rolling mill capacity would already exist. (3) Argentina under the Agreement is to lend to Ohile the equiva lent of US $ 75.000,000 in Argentine pesos, at 3-J/~ interest and 2.45% amortization per annum, payable semi~annually. The funds must be used for public works, the ultimate aim of which is to stimulate trade between Ohile and Argentina, Argentina will supply the equipment required on a competitive basis - which means that if no equipment is availaple in Argentina, it will be bought elsewhere with US dollars or sterling, provided by Argentina. A board composed of 3 Argentines and 3 Ohileans must ~ree unanlmously on the projects to be financed. According to Fomento, these projects may include Bome of the folll!'lwing: A tunnel, at low altitude, for railroads and automobiles across I the Oordillera between Valparaiso and Mendosa. The Ohilean segment of a railroad between Antofagasta in Ohile and Salta in Argentina. The Ohilean part of a railroad between OoncepCion in Chile and Neuquen in Argentina~ This project would involve a second tunnel through the Andes. Three highways between Ohile and Argentina. c C,olllll'fllIlicat ions.. The Ohile-Argentine Agreement provides for recipX'ocal free I c transtt for im~ort and export commodities, a most-favored-nation clause in trfl1s:)ortation, .free zones in the harbors of both cO'llltries, !'. prefer i enti~ utilization of Ohilean and Argentine shipping by both parties and the d~velopment of airlines" International Implications of the Agreement. The Chile~Argentine Agreement is one of the mnny planned or executed by Argentina which would appear to estab~ish a sphere of economic infl~nce. On June 25, 1946, and on $eptember 17, 1946"agreements were made between Argentinn and the United States and England" resJ?ect~vel~rf according to "fhich ap:?ro:;:imately the equivalent of US $ 1,500,000,000 belonging to Argentina, \1ere unfrozen,. This improvod. the foreign exchange :position of Argentina 1,,,hich hnd been built up 'by substantial e:x:ports of Argent ino food products during the i'Tnr at a time i-Thon com x'l.ro,tively smnll 1 amount s of :British and l.rnerican manufactures ,.,ere availablo for purchase b~ Argentina" On October 16, 1946, a. commercial and financio,l agreement was made with Spain under which the equivo,lent of US $ 100,000,000 was loaned to Spain at a 3-3/4% interest rate, This treaty involves supplies of i~ont agrioultural and othor machinery from Spain to Argentina, and supplies of meats, cereals and food from Argontina to Spain. On October 19. 1)146. an agreoment wns reachod betvoenArgpntina and :Brazil covering ex change of Argentinian wheat for Brazilian crude rubber, auto tires, cotton textiles, pig iron, '.. .ood products, and sheot glass. Similnr agreements have beon reachod vrith :'1olivia, Ecuador tLl1d Sov'ict Russia_ . Tho !gree'Uol}t a."'ld Ohilean Economics. Provided tho agreement is not in the long run utilized for c }?olitical ,ur~osos, its impl'.ct on the 0conomy of Chilo is li',:oly to bo ' _ _ _ _ _...._a]"""_1\1i: _ , _ ;p",I~.it- ·<-"·{.. '-'0'.,,;;11 '"', . n.........."".a_ _....."" ........ P '''''fIt~...._ _ _ _ _..... """'1.... ' , U llI ' ..............__........- - - - - - - - - - - - - - - - - - ! i 44. I c fiCi~ effocts on Ohile frem the economic point of view. admitistered and utilized to the fullest by the Ohtloans, it will yield If properly largf foreign exchange savings and place Ohile in a financial position I WhiC~ will onable it to meet its foroign obligations ~ore easily than I otherwiso, and to pursue its endeavors in the direction of a better standard of living", In tho lang run, hm-tcver, the agroGmont might pos sibly bo used by Argentina to restrict Ohile's trade with other coun c Fomento's earlier estimate of Ohile's 1946 balance of payments i diff~rs i considerably from the figures subsequently realized, as revealed by t~e Btatement of gold and foreign exchange holdings recently issued by tAe Oentral Bank of Chile. As against 3anco Central holdings of the equivalent of US $ 109,900,000 on Dece~ber 31, 1945, shown in TABLE 1, the later fi~~res, as detailed in TA.'5LE 19 and read as fol10"Ts1 (equivalent of US dollars) September 12, 1946 83,315,000 October 1, 1946 79.700,000 December 31, 1946 74,100,000 March 4, 1947 74,500,000 According to Fomen~ors computation, the holdings of Banco Central on December 31. 1946, should have been the equivalent of US $ 134,000,000. Changes in other foreign exchange balances during the same period are as yet unpublished, but they are likely to be reduced for three main reasons, A strike in the cop~er mines during 1946 reduced expected copper returns by at least US $ 20.000,000·. Ohi~et s. "normal imports" gre,,, from approxi mately the equivalent of uS $ 154,000,000 in 1945, to US $180,000,000 in 1946·. United States Oommercial Company 1 s previous advances led to exports in 1946 from which no current returns accrued. Thus at the end of 1946, the total foreign exchange and. gold reserves of Chile could not, it is estimated, have exceeded the equivalent of US $ 100,000,000 against Irlhlch import licenses ,ralued at US $ 80,000,000 c were ~utstand1ng. 1 iii .Hatr xi .1&_' :14 ti!:i k 46. TABLE 1. JJJ ISIS OF THE HOLDINGS OF GOLD ND FOREIGN EXCHANGE OF CHILE (equivalent of OOO,OOO's of U.S. dollars) Dec.31. Dec.)l, Dec.31. July 31, 1941 1944 1945 1946 Banco Central ~e Chile 1) Old ReserVe: Monetary reserves in gold 30.4 30.8 31.1 31.4 31.5 2) New Reserve: a) Salea and purchases of foreign ,exchange at rates of 31 and 25. in foreign exdhange 'b) Purchase of Chilean ° 0.2 0.1 1.8 gold and conversio~ 9f unso1d.foreign exchange into gold in the U.S·· in gold 0 20.5 25.0 38.7 3) Third Parties (Funds): Purchase of foreign ex change of copper. nitrate, iron, iodine companies at the 19 ...37 peaos per dol lar. ,Revenues of d~cree law No.646 on other ex ports. Sales of F.E. to entities ohosen by Consejo Nacional de Oomorcio Exterior a) in Fore1gn Exchange 5.6 11.1 17.6 25.8 6.1 b) in gold 0.4 0, 3.1 12.2 5.6 ~i UP t· . 9 /. Total Hold1nge of Banco Central 36.4 48.2 72.2 Commeroial Banks' Holdings 7.8 9.0 11.8 8.8 14.4 Holdings of private parties: Fomento 4.7 0.9 2.0 2.4 Caja 0.2. 4.0 4.2 5.3 Shipping Companies o 6.0 (1 ) Grand Total of Foreign , 96.2 c Exchange Holdings 49.1 62.1 132.0 (1) !he U.S~ $6,000,000 for Ships is ~xcluded from official statistics for Dec. 31, 1945: if included it would bring totel holdings to U.S~ $138,000,000 as of that date. "k>'k~"'J""~''':f~11 ,.. ,>~·,~, ...._i!4l18~UI!lllim. fA · tli J j., n ._" , .11!i T t... d T1'· ·. ~ _ _)" tili.tU~f J 1- , LJ" JII. I I TABLE 2 '17 I 100000IGli UplWfGJ AlfD GOLD . 8 Of I CHIlli I September 12, 1 C I - ~=~- cmm1_:BI.l!E 0'1 !:mlU a) 00141 b) US $ c) 10 : .... Orie;inaJ. PigtU'es in currencY' of issu1pg coqnt17 (1) J28.7oo.769.2J 2.426.684,J8 US$ 4,855 250.252-1-10 US$ 4.025 US$ 0.235 briti" (2) Equivalents ip US $ 67.70J.,,6,OO 2.426.684.J8 1.007.264.66 1.668,27 %2D1.I. 71.1)9.17J.Jl d) :rr. ·· 7.099,00 I B - PUR~S roa ml!D PARTUS a) US $J 2.J22.254.19 2.J22.254,19 2.J22.254,19 C - :nOMi THIRD PAllTIIIIS 1 - IrSID 1,,,,ttop a) Gol4: (1) 1.064.745.75 US$ 4.8" 219.J09,11 9.749.962,99 592.204,09 592.204.09 c) US b) · .' 18.925-1a..4 US$ 4.025 76.176.75 d) Jr. J.112.40 0.008409 · (,) 26.17 e)' ~. IJ.062.,1 0,2977' · (J) J.889.04 f) 'r. S. 768.85 · 0.235 (2) 180,68 g) $ BalLiv. 62J.955.09 0.024 · (4) 14.974.92 h) Pr. ,. 1. 295.JS 0.022844 · (J) 29.59 · 0,153 ~.§f::~ i) Otbell' 158,53 (4) 2 - loE!l!l! gA11 .. 41 .lm2!:UllQi. a) 0014: (1) 19.17J.424 ,22 $ 4,8" J.9'I9. 211 ,90 b) US *' 1.467.04J.70 1.467.04J,70 c) It 8.719..0-8 US$ 4.025 35.094.10 d) $ Arg. 14. LI07.07 · O,0977J (J) 4.289,42 e) :l'r. IS. 198.12'.96 · 0,235 (2) 46.559,1' f) $ Boiliv. 655.J50.12 · 0,024 (4) 15.728,40 g) Otheir 150,4J · 0.153 (4) S,SiZI~:~~ J - Iran pthers $ 4,855 .' 918.178.80 a) Gol& (1) 4.457.758.08 b) US · 2.J14.192 ,90 2.,14.792,90 c) It 18.5J7-12-2 1J8$ 4,025 74.61,.84 d) DiD&l"B 27.685.58 · O,022J97 (,) 620.07 e) $ Ar,g. '7.064.57 0.2977) (J)· 11.035,2, f) Lir.. 575.46 0,004434 (J) 0,235 · (2) 2,,, 2.184,,6 g) :l'r.S. 9.295.15 " h) $ BQl1v. 157.12'.35 US$ 0.024 (4) JIZzgI2~ JIJ2l,J.~.Zl D - 0'l'BIR ACCOUBTS l2!tIJ2ZI~ (Jold (1) S06.B49~22 US$ 4.855 104.J97,J6 f!2i1ol. ip QwEll I!a5 8J.J15.787.85 11 - W6 1i'UQR(JlA mi .11:19mliIQIPI 6. 285. J11.53 a) US $i 6.156.640.42 6.156.640,42 b) It Jl.ll7-J-6 US$ 4,025 125.246.61 c) Pr. ~. 14.)72.J6 · 0,2JS (2) J.424.50 III - C~RAQI9D DE ICKQTO m; LA PRQDUCCIOlf 700.000,00 IV - pcurOL\L I F (5) 1J.581.898.oo a) Dep*1ts abroad 468.554.268,53 b) DebtiB abroad 47.515.408.6J US$ 10J.882.997.18 c (1) P&soa:of 0.183057 grains fine gold canten' (2) hom .emor1a de CaJa de ,bortir:ac1an. 1945. pap 66 - (J) J'8derfU. Beserve Bulletin, Jun. 1946, Page 701 - (4) SitcU.,n of e:xchange - Cen'ral Bank of Chile - (.5) S:ltuaUon"Se3)tember Jrcl, 1946 - o o ~ ~ TABLE 3 FoUENTOtS'ESTIMAfE OF CHIJ:.EAH BALAlfCB OF PADENTS F.IOl 1942 THROUGi 194-5 AND PROJECTED ANNUAlLY FI!OK 1946 TO 19'5, INCLUDING LOANS APPLlID POR sr FOUEIft'O .ANI) '!'HB stATE lUIIJ{AlS PROJECl'S (ooo,ooos ot U.S. dollars) .lli!! Bsttd. Eattd. Esttd. Esttd. Esttd. Esttd. Ave. l242 l24~ l2M l~~ l2b:2 l2~Z l2!t8 l2!t2 19~0 l2~l-~~ !!!.:. f!.l:. !!!.:. f!l£ !!!.:. f!l£ !!!.:. J!!l:. !!!.:. .!".U::. !!!::. f.!Z:. !!!::. f!l£ 1!!2.:. f&::. !i!!!.:. f!l£ !!2.:. f!l£ Kerchandiae trade l79.0 128.2 182.0 l31.3 203.9 149.4 222.7 l74.0 227.6 l77.3 240.9 208.2 2)8.6 203.3 236.3 l6).3 236.3 l53.3 228.4 148.l Copper aports US.O l07.0 ll4.0 lO3.2 l03.0 ll5.0 ll5.0 ll5.0 ll5.0 l05.0 Nitrates exports Other Mineral exports 21.' 8.0 22.0 11.0 2l.8 6.7 37.6 8.0 39.0 8.0 41.3 8.0 39.0 8.0 36.7 8.0 36.7 8.0 )1..4 8.0 No~neral exports Total exports 34.' l79.0 42.0 182.0 6l.4 203.9 73.9 222.7 76.6 227.6 76.6 240.9 76.6 2)8.6 76.6 236.3 76.6 236.3 8l.0 228.4 Food" &gr. imports 29.6 35.6 41.0 53.3 48.5 48.5 48.5 48.5 48.5 45.5 TextUe imports 19.9 19.7 2l.3 l7.7 18.4 17.8 l7.8 l7.8 l7.8 l7.6 Other mtrs. imports 74.5 68.5 82.9 lOl.o- loo.O 97.0 95.0 90.0 87.0 85.0 Total regular imports 124.0 123.8 145.2 l72.0 l66.9 l63.3 l6l.3 l56.3 l53.3 l48.l FOIIIIInto imports 4.2 7.5 4.2 2.0 lO.4 44.9 42.0 7.0 Service transactions 15.l 7.6 27.0 2l.2 28.8 24.9 28.0 23.7 30.0 23.9 30.3 23.9 3l.l 24.5 31.4 24.5 31.7 24.6 32.2 24.7 IIdie. (Ft. " Ins.) 5.7 3.0 l6.8 9.7 l7.3 9.4 l6.0 9.3 l6.3 9.4 l6.6 9.4 l6.9 9.5 l7.2 9.5 l7.5 9.6 l8.0 9.7 Govtt. (Dipl. " Mil.) l.l 2.2 2.2 ).8 ).4 4.2 3.4 3.l 4.l 3.2 4.l 3.2 4.l 3.2 4.l 3.2 4.l 3.2 4.l 3.2 Private (Funds, tonrist, etc.) 8.3 2.3 8.0 7.7 8.2 ll.3 8.6 11.3 9.6 11.3 9.6 11.3 lO.l 11.8 lO.O 11.8 lO.l- U.8 lO.l 11.8 Cap1tal lIovement; 4.2 41.5 8.) 36.2 1).6 46.3 l).2 5).6 2l.4- 5).7 50.9 58.9 48.0 6l.4- lO.O 63.0 ).0 6l.8 ).0 59.l FOIIIDto (Notes, Amort. Int.) ).6 l.4 7.0, l.9 5.4 ).4 2.0 5.5 lO.4- 4-.6 44.9 8.8 42.0 ll.3 7.0 12.9 11.7 9.0 Other Long term (Gavt. '" Priv.) O.l )8.0 l.2 27.5 0.3 39.9 0.5 44.3 l.O 46.0 l.O 47.0 l.O 47.0 l.O 4-7.0 l.O 4-7.0 l.O 47.0 Short Term (Gavt.) l.6 3.4 l.8 0.8 l.6 l.6 l.6 l.6 l.6 l.6 Other (Special '" Priv.) 0.' l.5 O.l l.l 7.9 2.l lO.7 3.0 lO.O l.5 5.0 l.' 5.0 l.5 2.0 l., 2.0 l.5 2.0 l.5 Net Total 198.3 l77.3 2l7.3 188.7 246.3 220.6 263.9 25l.3 279.0 -254-.9 322.l 29l.0 3l7.7 289.2 277.7 250.8 27l.0 239.7 263.6 231.9 Unaccounted For. 7.8 8.9 3.9 0.7 Gold and Exchange Balance 13.2 37.' 2l.8 11.9 24.l 3l.l 28.5 26.9 31.3 )l.7 Total 198.3 198.) 226.2 226.2 246.) 246.) 26).9 26).9 279.0 279.0 322.l 322.l 317.7 317.7 277.7 277.7 27l.0 27l.0 263.6 26).6 Source: Corporacion de Fo.ento de la Produccion Banco Central de Chile Estadistica Chilena Note: It 1II.ll be noted that in the above TABLE, as submitted by Fomento, there are apparent minor errors in addition. .f U u -J f'l I. :_ j . if hl TABLE 4 Q H I L ljlS ~ORTS AFD ERODUCTIQN OF CQFfii Sources~ (1) Este.distica Chilena 194$. page 646. Production and exports are given in thousands of metric tons. Value of exports is given in millions of U. S. dollars at 1939 prices. (2) Fomnto 1s Economic Report, pages 42 and 77. c 50. TABLE 5 BREAKDOWN OF CHILEIS ~1S FROM COPFER 1944 1945 1946 Volume of Exports (OOOIS of metTie tons) (1) 494.4 449.4 482,.1 431~3 430. . (2) 465,4 421,0 449~0 409,6 OIF Uew York - U.S~ centl!l per lb. 11~8 11~8 11,8 11,8 15 FOB Chile _ fI II II II 10.8 10.8 10,,8 10,8 14 FOB Chile - II II n kil~. 23.8 23,8 23.8 23.8 30,9 Cost of production per kilo. 7~4 10.4 9~9 10,52 11,46 Purchases of mining companies per kilo. 4.2 4.0 3.4 3.1 3.197 Reserves 3.5 1.52 4.85 3.24 3.24 FOP Price of Exports 118.2 108.0 114:5 103.2 110,8 100!'Z 107.0 97!'5 Minus non-taxable elements: Cost of pr~duction 34:9 43.8 44:7 43:1 Purchases of mining companies 19,7 17,0 15,5 13,1 Administrative expenses and reserves 16.2 21.8 Excess prof! t ... lIa.."Il:S.ble Income 40.0 25.0 28.0 Taxes 18% Bondholders 6~O 4~5 5,0 3% :Budget 1,0 1,2 0,8 15%.Foll\ento ,.0 3.8 4.2 Excess Profit Tax 12.6 12.6 12.3 lnceme ait~r Taxes 8.4 Net Income 8.4 Administrative expenses and r~serve8; 21.8 Administrative expensel 2.6 Reserve!!! 19.2 (1) All mines. (2) Great mining enterprises only. c 51. TABLE 6 QHIJ',i§!fS llTlm~ ~ lo;QIlr;m EXPORT§ (;l.l ~Values in OOO,OOO's of US dollars at 1939 prices) i ·. (Tonnages in 000 1 s of metric tons) I I ! , I Va ~'ue .of Exports I Tonnage of Exports Export pr~ces Qf 111tt~t~ Prices iH tlrate Iodine Total Nitrate Iodine Total FOE Chile in ys cel)ts ;per lb. 1937 )4.4 4.6 39.0 1608.0 3.8 1611.8 1938 29.1 2.3 31.4 1572.8 0.6 1573.4 1939 29.4 1.7 31.1 1584.5 0.4 1584.9 1940 26.4 2.6 29.0 1424.0 1.3 1425.3 1941 23.6 1.8 25.4 1270.5 0.9 1271.4 1942 23.0 1.6 24.6 1270.0 0.7 1270.7 0.82 1943 22.6 3.6 26.2 1060.0 1.5 1061.5 0.97 .1944 24.7 1.8 26.5 1077.1 0.7 1077.8 1.04 1945(2) 37. 6 0.9 ;38.5 1621.0 0.4 1621.4 1.05 " (1) Source; Anuario Estadistico de Comercio Exterior International Reference Service, page 34 Vol. II. Nov. 1945. Nr 37 (2) Preliminary figure CA.Pt CITY OF !HT3.QG:~N PRQDUCTIO:}i OF TWU i'iDELD AS :SSTIMAT:SD BY TlG UTTERl,'fATIONAL !:M,"RGENCY FOQD COWUT'!'R (lm'C) Qo;gntry Oapacitl (in OOO's of metric tons) 1914 1951 U"S. 454 1.318 U.K. 350 577 URSS 180 272 Japan 272 544 Italy 136 136 Chile 590 590 Germany 1.318 1.318 France 327 .327 Other 987 1.000 4.614 CHILENI '~fITRA':'3S (Ii.~CIIl;"DIrG IO.JINlJ). j·-:ZAIillQi:I::i Ol!' li1U~l l~cSTS .?JR ;L.TRIC i'011 . (equivi?lcnt in US c1.o11ars) Probable Cost of De~)rc E::ch:?.nge FOB elF -)l"o(.luc Competi ci~t1on -';ron t price FroieLt -,rice tion from tion s;\"'nthetics 1942 9.70 1.50 0.70 11.90 3.70 3.70 19.30 1943 11.20 1.50 0.60 13.30 L~. 70 6.70 2L~. 70 1944 11.40 1.50 0.60 13.50 4.40 6.70 2l~.60 19l~5 12.40 1.50 0~60 11:-. ,50 3.80 .5 .l}() 2).70 1946 12.80 l.5 0 1.10 15. 1}0 L~. 70 3.70 23.80 11.00 34.80 27.70 ~) f"l { £ ! . .::t \II TABLE 9 CH1LEJ\N NITRATES RETURNS FRon EXPORTS {OOO,OOOts of US dollars} Cost of Depre- Ex- Legal Pur- Net profit 25% tax FOB Hetrie i Year Producti.on elation Allow- change tax cost of pro- cha.ses abroad and a.drninis- trative ex- on gross income, price tons I i anee duction penses a- -for bond- broad holders 1 1941/42 1943 1944 12.4 1l.9 12.3 1.9 1.6 1.6 0.9 0.6 0.7 15.2 14.1 U·.6 4..7 5;.0 4.7 2.0 4.8 5.5 2.7 2.3 1.7 24.6 26.2 26.5 1.270 1.060 1.077 I 1945 20.1 2.4 1..0 23.5 6.2 6.6 2.2 38.5 1.621 55. WIJIl ;lQ gH,LE!S ~QRTS oE Q~ MlNERAL~ (equivalent of 000,0001s of US dollara) ~ 19,8 12'32 1240 I 1941 1942 1*' 1244 1945 !~angane5~ 0.2 O~l 0,2 0.:3 O.l ... 0.1 1.9 Molybd8!ll'Ulll ... 0 0.6 0.2 0.8 0.9 1.2 1.2 Sulfur 0.2 0.2 0.8 0.6 0,8 l.~ 0., 0.2 O~al 0.3 0.2 0.2 0.6 0.9 0.6 0., 0.; Sodiun Sa.1 te 0.7 0.1 O.l O.l. 0.3 0,2 ... .,. ~odine 2., 1.7 2.6 1.8 1.6 3.6 1.8 0.9 Varif us (1) .... - - "I" 0.2 0.) 0.2 0.2 44 TOTAL ',7 2.3 4., ).6 4.7 6,9 ).9 4.9 (1) Includes Kieselguhr. Mercury. etc. t "4il1_.0 0_1_ _ _ _ . _0"_M.l"tI<'"I~'t11.4'0"~;p lt'_'''''f1 _ _ _ _ "'_uJ_811_._'"'_,_ _11_"_'_0_._,_j·l_ _ _ _ _ _ ~_-, _ .. _ _ _ _ _. ~\I 56. ." TABLE 11 OHillil!l' § IMP~2 Ql liIg,ul;Q MI!Q (Volume in metr1c tons) (Value in equivalent of ooots of US dollars) Crude Eetro1emn Diesel Qi1 vas Qline I , I Volume Value Volume Value Volume Value Mot.tons ~hol.Ul la, Met. tons TlJ,oy,s ,$ ijet.tgns TOO,*s.$ 1937 6:33. 6 4.981 37.0 459 75 2.062 1938 574,,0 4.921 39.8 591 89 2.224 1939 443.8 3.243 89.1 1.066 94 2.151 1940 607.0. 5.903 60.3 831 lOS 2.381 · 1941 762.3 7.500 44.5 767 120 2.787 1942 684.6 9.540 57.3 1.152 101 2.943 1943 793.7 12.621 83.2 1.481 90 2.860 1944 676.9 9.5.55 44~5 878 86 2.526 194:5 580.0 7.891 9~ 1.495 98 2.631 c () 0 · L'- VI TABLE 12 CHIIE: VALUE OF TRADE IN AGRICULTUR..'\L ProDUCTS, ANIMAL PRODtCTS, PROCESSED FOODSTUFFS VJINES LI liORS 'roSACCO 1I.ND FOREST PRODUCTS 1937-1945 ... in 000,000 1 5 of US dollars Experts 1937 1938 1939 1940 1941 1942 1943 1944 1945 .-----"~-- 'IDTAL 36.1 27.9 24.3 19.. 1 22.8 23.6 29.1 32.-9----l;±.5 1. - A~ricultural 15.2 13.8 10.8 8.8 10.9 12.2 12.6 14",8 20.9 a) Cereals 3.1 3.4 . 1.6 1.0 1..3 1.0 3.0 4.2 n.av Oats 1..6 1.2 0.7 o:e; 0.4 0.1 Y 0..3 0,,3 Rice y y y y 0.3 0.9 2.9 3.9 5.7 Barley 1..5 2.2 1·.0 0..4 Y Y Y b) LegumeII' 7.2 6..4 4 ..5 4.7 4a5 3.6. 3.4 4.4 n.a. Beans 2.5 2 ·.0 1.9 2.5 2 ...0 2.3 1':6 2 · .3 4.5 Lentils 4..1 3.7 2.0 1.2 1.4 0.7 0.5 1..0 1.3 Peas 0.4 0.5 0.5 0·.8 0.9 0.5 0.8 0.7 0.8 Chickpeas 0.2 0.2 0.1 0.1 0.2 0.1 0.3 0...4 0.5 c) Fruits z Tubers z Vegetables 2.2 2.1 2.9 1.2 1.2 1.5 1.7 2.3 n.a. d) Raw Vegetab1es l TeXtile Mhteria1s 1.1 1.0 1.0 1.2 2.6 4.9 3.6 2.9 n..a. Hemp. fiber 1.0 0.9 0.9 1.1 2.4 4.8 3.3 2.7 3.. 5 e) Other y 1.6 0.9 0.8 0,/1 0..9 n.a. 2. - Animals and Animal Products - 15.3 9.0 8..6 6.6 1.3 8.3 -!d 7.0 9.8 ..b.Q 8.1 10.4 Wool 8.9 5.2 5.7 4.8 6:2 "4.6 6.0 4.9 T.8 . Hides and Skins 5.0 2.5 2.1 1.3 1.5 1.6 2.6 1.9 1.7 ot.her 21 1.4 1.3 0.8 0.5 O.b O.S 1.2 1.3 1.9 3. - Processed Foodstuffs 3.5 3.1 2.7 2.7 . 2.5 2..8 4.2 ~ 601 Meats -r::6 1.4 1.4 1.·4 0.9 1.3 1.5 1...4 L3 Malted Barley 0.4 0.5 0.6 0.8 0.9 1.1 1.4 2.6 302 Conserves and prepared foods 0.3 0..2 O.J 0·.1 0.2 0.2 1.3 1.2 L2 Other JJ! 1..2 1..-0 0.4 0..4 0.5 0..2 Y 0.4 0.4 4. - Wines and Liquors 1..0 0.9 0.8 0.2 0.. 5 0.. 6 1.1 2.4 200 ) Wines 1.0 0.9 0.8 0.2 0.4 0.5 1.0 1.8 n.a~ ) 5. - Forest Products 1 Less than 100.000 do11ars 1.1 h.1 1.4 0.8 0.6 --- -1.0 1.4 y. Includes beverages,. spices, animal feed,. liTe plants.. and seeds and oUseeds 2.0 2.1 ~ Includes apiculture,. aviculture, sericu1ture Includes grease, milk, cheese, butter, edible oils, starches, flour fl (l . c...o TABLE I) U"', CHILE'S EXPORTS 19)6 1937 19)8 19)9 1940 1941 1942 194) 1944 1945 -I GRAND TOTAL Thou.sancl metric tons 3.,.661 4,273 4,.227 4,.098 3,988 3,779 2,490 1,860 1 ,91±fL_--=--;-c~_ Million gold pesos 362 947 682 671 696 781 869 877 959 1,022 Million U.S. dollars 115.8 195.2 140-.6 138.) 143.5 161.0 179.1 180.8 197.5 210,7 Value per ton (unita) )1.6 45.6 )).2 )).7 )5.9 42.6 71.9 96.3 10L,8 (000,000t5 of U.S. dollars) Copper 44.0 103..8 67.6 68.2 78.4 97.4 118.-2 107.9 116.0 103.1 Nitrate 34.4 29.1 29.4 26.4 2).6 2).0 22.6 24.7 37.6 Iodine 2.) 1.7 2.6 1.8 1.6 3.6 1.8 0.9 Gold & silver & precious metals 6.-3 8.8 9.3 6.4 2 ..8 3.7 2~7 6.,4 Iron 2.6 2.7 2.8 3.0 2.8 0.7 0.5 0,.4 Sulfur 0.2 0.2 (}.8" 0.6 0.8 I.) 0.) 0.2 Manganese · 0.2 0.1 0.2 0.) 0.1 0.1 1.9 Molybdenum 0.6 0.2 0.8 0.9 1.2 1.2 Sodium Salts 0.7 0.1 0.1 0.1 0.) 0.2 Coal 0.) 0.2 0.2 0.6 0 .. 9 0.6 0.3 0.5 TOTAL: 109.4 111.-5 121.6 1)).8 149.2 140.8 147.6 152.2 Agricultural products .36.1 27.9 24.3 19.1 22.8 2).6 29 .. 1 ,32.9 41.5 Textiles 0.2 0.2 0.1 0.1 0.3 0.4 1.2 1.9 1.9 Chemicals , 0.3 0.4 0.4 0.6 1 ..0 2.0 2 ..0 ).3 2.8 2.4 Machines and Transport Equipment 0..-1 0.1 0..1 0.1 0.1 0.1 0.3 0.) 0.5 0,,9 Meta:lJ.urgical Industries 0.1 0 ....1 0.1 0.2 1.5 1.8 7~2 7.6 Various manufactures 0.4 0.4 0.4 0.4 0 .. 3 0.5 0.8 1.4 \ L5 L6 '57.-3 28.9 25.5 20.,9 25.6 28.6 )7.1 4608 55.9 TOTAL: 138.3 137.0 l42.5 159.-4 177.8 177.9 194.4 200 ,1 ------------------------------------------------------------------------- () c. ) . 0" \Jl TABLE 1~ CHILE'S IMPORTS (1) 1936 19J7 1938 1939 1940 1941 1942 1943 1944 1945 Thcusand metric tons 1,002 1.-366 1;422 11232 1~652 1,638 1,592 1,615 1~552' 1,633.~ Million gold pesos 346 429 499 410 506 525 621.5 637 698 757 Millic::n u.s. $ 71 88 103 85 104 108 128 131 144 156 Value per ten in units 70.9 i:J4.4 72..4 69.0 63.0 65.9 80.4 81.1 96.0 95.5 'Pig Iron - Tin - Zinc - 0.7 1.0 1..4 1.5 2·.9 1....5 2...6 2.8 Coal 2.4 0..8 0.3 0.4 0.3 Petroleum 4.9 4.9 3.2 5.9 7.5 9.5 12...6 9.5 7.8 Diesel Oil 0.5 0.6 1.0 0.8 0 ·.8 1.1 1.5 . 0.9 1.5 Total:r Mineral: 6.2 5.2 10 ..5 10..6 13.8 15.9 13.3 12.1 - Agricultural Products 16.-3 16.7 15.0 17.·9 17.9 30.6 36.6 41.7 54.4 Textiles .15 ..2 15.1 15.4 13.6 16.8 16..6 19...9 19..6 21.3 17.7 Chemicals 9.0 li.O 11.$ .1104 14.4 15..6 19.8 17.0 18.7 19..7 Machines & Transport Equipment 16.4 17.5 30..8 20.0 22.6 24.6 19.9 16.9 20.4 22 ..9 Metallu~gical Industries 9.l 12.7 11...7 10.7 \ 12 ·.6 11.9 11.3 10..5 12.2 13.2 Various manufactures 6.8 8...6 9..6 8.6 9.2 10.7 12.2 14.1 15.·9 15.6 Total,. other than Mineral: 81.2 96.1 79.3 93.5 97.,) 113.-7 114..7 130.2 143.·5 GRAND TOTAL: 102...3 84.5 104..0 107.9 127.5 130.6 143..5 155.6 (1) Source: Estac:listica Chilena - Ano XIx - no 9 -, Septiembre 1946 (l () . I TABLE 15 CHILE'S INVISIBLE TRADE (1) (in Equivalent of OOO,OOO's US dollars) I i ! .~ 1942 1943 1944 194-5 Pay Re Pay Re Pay Re Pq.;;.-------rte;;..-------------- ~ ments ceipts ments ceipts ments ceipts menta - ---ceipta ___~____ Fomento total (1) 7.6 15.1 21.2 27-.0 24.9 28.8 23.7 28.0 Commercial transactions 1.3 1.6 1.3 1.5 Freight -Communications Shipping 6.4- 14.9 7.0 13.8 Air 0.8 0.8 ot:.bElrs 0.5 0.9 0.7 0.2 Cultural 7.4 . 1.7 5.2 2.2 Government Diplomatic 1.5 2 ·.6 1..-9 2.7 ltilitary 2.7 1..2 Administrative Expenses Great Mines 2.6 5.2 Others 0 ..7 0.1 0.5 0.1 Foreign Exchange Profits . a) 6.3 6.3 b) 0.7 0.7 Bank total 23.9 28.8 23.8 27.5 (1) These totals were submitted by Fomento, with a diff'"erent sunmarized breakdown. The Bank's own breakdown adds up to a slightlY different total. 61. TABLE 16 """" ~ CAPITAL PAYMEl\fTS P..ESULTING FROH THE EXPLOITATION Q!. NI'rRATES Alm THE LARGE OOPPER MINES. IN CHILE. 1242 1243 1244 1,21;+5 1) ~iet Profit, Copper 22,7 8.4 2,9 5.7 2) Reserves, Copper 16.2 6.4 2ll'8 1:3,3 3) Uet Profi t. Ni trat es 2p O 4,8 5,5 6p 6 4) Depreelation, Nitrates 1.9 1.6 1.6 2,4 5) Deduet toea! Adminietra- 42~8 21.2 ,1;8 28 .. 0 tive Expenses (1) 2.5 2.5 2.6 5,2 Total D8preciation, Profits and Reserves t,ans ferred abrGad 40.:3 18.7 29'~ 22,8 Taxes assigned to bondholders: From Copper 7.' 6.0 4.7 4:5 From nitrates .kZ ...tt.l ....L2 ~ 'htal available 10.(9 8.:3 6.. 4 6.7 Tsta1 paid to bond~ holders 5.4 4.6 4.3 5.0 (1) Aocounted tor in invisible trade movements. 62. c TAl3LE 17 CHILEAN PUBLIC DEBT (In OOO.OOO's US dollars) Amortiza.tion I ' Interest ~otal 1935 1,9 2,0 3,9 1936 2,3 2,5 4,8 1937 2.9 3,0 5,9 1938 6,9 7,0 13,9 1939 0,8 4,7 5,5 1940 0,8 4,7 5,5 ·1941 0.4 4,7 5,1 1942 0.4 5,0 5,4 1943 0,3 4,.3 4,6 1944 0.9 3.4 4.3 1945 1.6 3.4 5.. 0 Source: Caja. Autonoma de Amort1zacion. for years 1935 to 1942 incl. So't.rce: !alan-za. de pagoS of Chile. for years 1943 to 1945 incl. c 63. ~ ~ TABLE 18 TRADE :BETlfi3lEU CHILE .AND ARGEl~INA --rln thous~nd Chilean gold pesos = 4,85 to the U,S, dollar) 1944 ~ A) Chilean Imports - Cattle 32.732 39.539 Sheep 5,874 5,635 Wool 2.. 849 859 Wheat 1.161 1,283 Cotton yarn .685 680 Wool yarn 7,:330 2,258 l~achines 1.236 1.975 Oement 1,133 1,167 Seeds 11!018 Butter 3.821 2.903 Vari@us 56.261 .52,621 . TOTAL 124,100 108.920 13) Chilean Exports - Sulfur 1,,0.5' 2.222 Ooal 1,482 2.305 Lumber (RauB) 1,061 .947 Lumber (Other$) 2,,639 1,;90 Dried peas 1,69; 1,.695 Nuts 2,,508 1,621 VegetAl fibl"ee 4,274 2.092 Varioutl 61.988 24.228 .. p TOTAL ...J.bZOO j6,700 C) UnfavQrable Balance for Chile (Thousand gold pe~os) ..·.······· ~ ··· 47,400 72,!20 (in thousand UoS. $ ) ·······. "., ····· 2.771 14.690 c w. " T~~LE 19 EXCHA::mE RESERVES OF THE FO:R]]IG~~ BAHCO CEl'TTRAL DE CEILE (equivalent of OOO,OOO's of US dollars) Oct. 1, Dec. 31, Iv:tarch 4. 1946 1946 1947 Old Reserve :31,5 :31,6 Hew Reserve 38,8 33,.8 Purchase for third parties 1.3 minus guexantees for ;;old c01'tificates a..'1d dol l.c.r c;rtificate~ held b~l third parties _-~1~.9~ __.____-=1~t7~__________~ - Total 70.3 65.0 Depssits of Caja IT of Bureau of Internal Revenue 0,3 II of others 1.0 1.1 2.1 S~ecial depositr, of Gold and silver Various Monotary :E'lnd Tc..tal bci, j g. M · TA13LE 20 FOREIGN EXOHAl)TGE BUDGET OF CHILE i~ OOO,OOO's U.S. dollars Exports Imports Oopper (net) 100.7 Mining Products 14-3 Iron (net) 1.S Forest II 1.+ Nitrate (net) 30.5 Animal &I 19.2 Oopper returns ear- Agri oul tural II 23.1 m£,rked for purohases Foodstuffs 25~4 Small mines Liquors - Tobaoco 0.6 Agricultural Products Textiles 34.7 I ndua t rial II Chemicals 22.6 Metallurgical Prod. 18..5 .Maohines 21.5 Transport Equipment 18.9 Varioua manufactures 15.2 Unexpected 7.1 Fomento 20.0 TO!ML 224.0 240.2 ; I Invisible Trade Beceipts Inyjsible T~dde PaYments Freight 13.. 5 Freight 2.6 Insurance 0.8 Commissiot\. ;.0 Consular Service 1.2 Insuranoe 1.0 Taxes in Forei~ Diplomatio & Consular 1.5 E~change ~rivate transactions 1.5 S~i~ntific Inst. Expenses of Fomento 0.7 Admin41 Expenses & Railroads :P,.£l, ads Others 24,,7 12.8 I ; i) Capital Regeipt~ Capital I10vemellt Utilization foreig:l Amortization Fomento ' 5.4 crecti t 20.~ n Public Debt J.5 Service Fomento 3.3 " Public Debt 3.5 TOTAL 20,,0 15.7 Unused Im~o~t licenses 80 0 0 1946 Import Licenses 80,,0 TOTAL R3CEIPTS 348.. 7 TOTAL PAYMENTS o i r ) I" .. c INTERNATIONAL ~ANK FOR RECONSTRUOTION !lID DEVELOPMENT Washington. D.C. 7 October 1946. ~r. Eugene Meyer, President Internat iona1 lla.nk for Reconstruationand Development 1818 H Stll"set NW WashingtOln, .D.C. My deEU" Mr. Meyer: In oocordance "lith instructions recctved from my Government, in my capacity as Alternate Governor of the International ~ank'f.2r Reconstruc tion and Development in representation of Chile, and Assist11ht General Manager of the Central ~nk of Ohile,I am pleased to inform you that the I'tOorporaaion de Fomento de la. Produccion" has been authorized to pi-asent to the International ~ank a reCluest for credit amounting to US $40,000,000. ·r avail myself of this opporttL~ity to advise you that my Government has instructed me to inform you that Hr. Roberto Vergara. of the Corpora cion de Fomento de le. Produccion, . s beer.. dasig!l<"1ted to serve a1;l , adviser on the Committee which is to be formed by the Board of Directors, in order to study said'reCluest for loan. Hr. Fernando Salas. also ot the Oorporacion de lomento, will serve as adviser in the absence of Mr. Vergara. With the assurances of my highest esteem, I am, Oordially yours. (Signed) Luis ravila Alternate Governor of the International l3a.nk for Reconstruction and Development. c ANNEX B. September 30th, 1946 International Bank for Reconstruction and Development, Washington, D. C. Gentlemen: During the past seven years a vast and integrated pro gram has ~een under way in Chile having as its objective the economic development of the country. ~his program has been undertaken by va rious branches of the Government, particularly ~ the Corporacion de Fomento de la Produecion, with the cooperation of private capital. Thus far the purchase abroad of the necessary machinery and equipment has largely been financed b:r the EJrPort-Import Bank: of Washington. and costs of development, bUildings, installation of equip ment, etc. has been financed by local Chilean capital. Inasmuch as the International Bank for Reconstruction and Development has been established for the purpose of assisting in the realization of programs such as that of Chile, we hereby make application for loans aggregating up to $40,000,000 to be used in connection with the following cate goriee - . a) Electric Power Plants $7,5°0,000. b) Forest Industries 6~000~000. c) Railways Electrification 18,000,000. d) Urban and Sub-urban Transportat ion 5fOOO~000. e) Port Mechanization 2,000,000. f) Contingencies and Con struction Equipment Total $40,000,000. This figure of $40,000,000 is based on prevailing prices and quotatiQns received from suppliers with an allowance for adjustments. It is customary for some of the larger suppliers to partiCipate in our long term financing for a small percentage of our orders, but such parti~ oipation WOUld, no doubt, compensate for possible higher prices. ~lthough it is eXpected that no'funds will actually be required until the years 1947, 1948 and 1949, nevertheless we are desirous of obtaining the approval of this loan before the end of the year. With your commitment we will be able to start placing orders immediately, de ; i Intern~tipna1 BarL~ for ReconSrruption and Development - 2 ; livery of which for certain types of equipment could not possibly be expected for some time honce. We prefer that the terms and conditions governing the interest and repayment of 'this l03.n stipulate that inter8st be paid semi annually from the dato of the drawings under the Credit up ll.."1til June 1952, and thereafter the loans be amortized in equal annual payments (in cluding interest and repayment of face amount). Our reason for this is that we believe it is proper to start the repaying of a loan of this type after the r8lative projects are in oper,-~tion, and wo desire this arrange ment to avoid putting an undue stress Oil Chile's balance of payments. If the Credits grantod by the Export-Import Bank of l'iJashington to both Fomento and the Chih;an State Railways are added to the: Credit covored by this application, service requireD:mts will ap proximate ClQ,OOO,OOQ per armUffi, as can be seon from the table attached hereto. We would like to point out that when the projects covered by Credits already granted by the Export-Import Bank Washington and those projects covered by this application ar0 in operation, Chile's balance of payments will bo irnprovad annually by appr,-xiaatcly C25,ooo,OOO resulting from savings on f ormJrly imported items which v;111 [;8 r.:lanui'acturud locally, and additional incGmG from new experts. This improvement in the baJ.ance of payments represents firstly, an added assurance of Chile 1 s ability to ser. vice these i:::xtornal loans and, secondly, the ability t(} purchase abroad, in the future, more highly fabricated products whiCh h'lS not been possiblG in the past and which will tend to improve the standard living and aid fur ther in the developmnnt of tho c ountx-J. Up t~) the present timG Crudits of this nature from the Export-Import Bank of Washington total ~pproximately 086,000,000. ~lthough this a.mount h3.5 been earr.l·3.rkQd in its ~ntirety t) cover orders already placed with suppliors or allocated for orders ready to bo placed, actual availmonts under the Credits to aggregate '~nly about 027,000,000, of which amDunt approxim!!tcly 50% has No. 5139 EXIMB;:~Nl CREDITS TO FOMENTO , Various t!'4" 000 ,voJu ·.... 'iii .", N'r;""1 Steo1 Ifill 28,000,,000.00 TO CHILRi.N ST:~TE R:~ILTJi",YS UOe 313 5,000,000.00 Electrical Export Corp. h,OOO,ooo.oo Baldwin Locomotive Co. 1,200,000.00 Various 5,000,000.00 i ~86,200,000.00 LESS REP,;~YMENTS TO 6/3 0/46 ... Repaid by Fomento Repaid by Chilean State Railways 1J.,809,556.74i" $7h,39 0 ,hh3.26 INTE.TfNATIOI%.L B:JJK CREDITS UNDER CONSIDEE."'.TIOlJ ~~pp;Lied for by FOUENTO 22,JOO,OOO.OO Applied for by CHILE&N STATE R:'.. ILWli.YS 18,000,000.00 . $11h,39 0 ,ill.t3. 26 ~:n.mx C i I ,Q,J.'.I.'l.W · ! I DIFFICULT FOmIDAP:I~S-PIERS A..~ \'1AREHOUSES-:BUILDI1TGS':'POifER PLANTS-BRIDGES-PORT "'ORKS FRI!lDERICK SUARE CORPORATION Contracting Engineers Frederick Snare ~ Cllairman t'loolworth Building Cable Address, Santee :Nmt'York A.V. :Buttenheim ' President 233 Broadway Pa..mee Havana E.S. Skillin Vice President Snarecorp Lima G.P. Seeley Vice President Snarecol :Bogota Randall Cremer Vice President Snareven Caracas Manuel Gamba Vice President Portee San Juan Hugh Peters Secly & Treas. Ntlw York 7, N.Y. ,Telephone, BARCLAY 7-1890 22 January 1947 I~. Charles C. Pineo. Loan Director, International Bank for Reconstruction and Development, 1818 a Street, N. tf., Washington 6, D. C. Dear Mr. Pineo: I am enclosing, in duplicate, our report on the Forestry Program as developed by the Corporacion de Fomento de la Produocion de Chile which report is based on our study of the var ious documents which were submitted to us by the Corporacion, to,...,. get her w1th others that were loaned to us by you and which have been oonsidered by us as confidential. Incidentally, these particular papers we are keeping here temporarily, until we hear if there is any thing further that you may 1011sh from us on this progra.m. As you can understand, the time that has been allowed us to study these very voluminous doauments has been rather 1imihd. and of course our present experience in Chile has not in cluded any projects connected with forestry so that Our conclusions are based soleIyon these documents which have been given to us for o'~ perusal. We do hope very much, however, that you will find our conclusions reasonable and that they will assist you ~n reaching a definite conclusion a.s regards this reQuested loan. Should you ,-dsh anT further copies of our report, I will be very glad indeed to fur nish them to you on reQuest'. We are working away now on the t~xee hydroelectric projects and I hope and expect that by Monday or Tuesday of next week we will be able to get off to you a report on the same. In the mean , while t if you have any comments on the way 101hich we have gotten up the Forestry Report and ,v-hich you would wish to have roflected in future reports. I hope you will not hesitate to let us know. i11th best regards, c Sincerely yours, (Signed) G.P. Seeley Vice President. gp8/1~r encla. I I I DIFFICULT FOUl~T*OUS-J?IERS .AND '1,ABEHOUSES-'BUILDIUGS.,.?Ot1ER PI.AlTI:S-:BRIDG3JS"'?ORT li03KS c i FR'EDllRICK S~T.A.RE Contracting Engineers COBPORATIO:!:l Frederick Snare Ohairman Woolworth 'Building Cable Address I Santee l'l'e'" York A. '1. Buttenhein1 President 23.3 :Broadway Pa'1Ilee He,vans. E.S. Skillin Vice President Snare corp Lima G.? Seeley V:i,ce President Snare col :BoB;ota Bandall Cremer Vice President Snareven Ca.racas Manue 1 Gamba Vice President Hugh Peters Sec-ty & Treas. He\-rYork7. N.Y. Telephone, BARCLAY 7-1890 22 January 1947 International :Bank for Reconstruction and Development, 1818 H StJ;'eet. N. i'l,., 1faahington 6, D. o. Dear Sirs: In accordance with your recent request, we are pleased to give you, as 1'oll01·IS. our op;i.nion as regards the program proposed by the Oorporacion de Fo~ento de la Produccion de Ohile for forestry develolJ mont in Chile. The Forest Industries Plan for Chile as outlined in the report dated September 1946, prepared by the Corporacion de Fomento de la Prod.uccion is summarized by the Corporacion as justifying an immediate program which would provide for the installation of four saw-mills, one paper pulp mill, one insulating and hardboard plant and one wood proserva tive pla.nt, requiring total outlays of $6,000,000 for imported eqUipment, $4,500,000 for installation costs in Ohile and $3,000,000 for working capital; in all a t~tal investment of ~13,500,000, plus the cost of timber lands e$timated by them at $11,800,000. This immediate investment is the first step ~n a larger program for forestry deve~opment totaling approxi mately $81,500,000. The statement is made that the value of the annual product!on resulting from the immediate program c~n be estimated at $7,000,000 and theL~nediate improvement in Chile's foreign exchange w~ll amount to $2,500,000. We have reviewed this Forest Industries Report as care fullr as has eaen possible in the time at our disposal and have also review ed the report of the united States Forest Service. which is based on field investigations carried on by representatives of the United States Forest Service. ';rhe report of the United States Forest Service is SO cOll1:Jlete and. is from such an auth9ritative source that we feel little could be gained ey any further investigation conducted by us in the field. It is quite apparent from this report that the Corporacion de Formento de la Produccion is fully justlfied in their assumption that the exploitable forest areas are of sui' c - 2 I c fiCieJt ~izeto warrant a serious investigation of the proposed program for tae utilization ·of the timber resources that are available and which are f111t described in the report of the Oorporacion which they have submi te4. to you. Our examination of this Forest Industries Plan gives every evidence that the Oorporacion has made a most careful and exhalls~ tive ~nalysis of the factors which affect the conclusions reached by them. ~he details submitted are too voluminous to make it possible to check the accuracy of each calculation or comment on same, unless it was deemed necessary to spend a long time verifying the various conclusions which were reached. We wish to state, however, that we are favorably impressed with the manner in which the analysis was made, and if prompt action is necessary, we feel justified in stating that after going over both reports, we believe that you would be warranted in accept ing these reports as being reasonably accurate, with the following except lonsl In Paragraph 1 of this letter, we quote the statement that the immediate improvement in Ohile's foreign exchange will ~ount to $2,500.000. The best information available to us indicates that the quality of lumber available at the present time from the saw-mill opera tions now being carried on in Ohile has not been such as to make t:lis lumber competitive for ordinary structural purposes with the lumber from the West Ooast of the United States or other foreign souroos which may be expected in the future to compete 'nth lumber which Chile hopes to export. This is due to no small extent to the fact that the mills now in operation are not modern and that kilns for drying the lumber have not been available, and also no doubt to no small extent to the fact that the types of lumber 'l'lhich a~e indigenous to Chile are not as suitable for or dinary building construction as the types of lumber with which Chile may have to compete in the futtlre. In spite of this fact, as there is a world shortage of lumbe~, and this shortage is likely to continue f~r many years to come. the lumber which could be produced in Ohile with modern equipment should find a readY market. It must be borne in mind, however, t~t it will certa:in1y take Chile some time to install tl1e ne'~ equipment, train their natives in the operation of the mills and the handling of the finished product. In spi te o~ this qualification, we feel it reasonable to assume tbatif the new equipment is properly installed and operated, a considerable export llIarket should be available once the ne''''' equipment is operating and local demandS ean be satisfied; and "'hile local demands are being filled it will mea.n immediate relief in the exchange situation to the extent of todayfs lumber imports. - .3 c i i lVJhile the proposed investment in the wood preserving plant isi a Iminor one and one ,,,hich we tMnk is fully justified, attention should be Galled to the fact ·that it is proposed to use creosote coal tar I ' solutio~ a$ a preservative and that Fomento is counting on obtaining this from th~ operation of a new steel mill which is to be located at Concep cion. As it will no doubt take some years before this new steel mill can be put into operation. it is evident that if this wood preserving plant is to be put into operation in advance of the completion of the steel raill. other sources of creosote coal tar will have to be found. While the United States Forest Service reports in detail on the various types of trees which are available for the pur20ses ~f carry ing out the Forest Industries Plan for Cllile. their report does not indicate that there are large quantit~es ,of the types of timber most suitable for construotion work or the sizes needed for the heaviest types of dimension timber. On the other hand. their report indicates that with proper drying . and treatment, a good. many of the difficulties due to war-ping which have been enoountered in the past may be eliminated. Estimated production costs appear ~ple and market value of lumber in Chile as compared with imported leaves a considerable margin of profit. Pv;r.F HILL. As we felt that you would be particularly interested in the adequacy of the estimates which have been made of the costs of the plants that it is proposed to build, and noting that the pulp mill which it is p~oposed to build near Concepcion represents a very oonsiderable ex penditure, we have contacted Mr. Stewart E. Seaman, who is one of the largest importers of pulp in the United States. and who is an authority in the design and construction of pulp mills. Mr. Seaman Was very enthu siastic about the plans which Fomento has for building the pulp mill, stating that he felt it was a project in 'tlhich private capital in the United States would have been willing to invest had they been able to do so on the same basis as that available to the Corpcraoion. He looks for a continued demand for many years to come, well in excess of the available pulp, and therefore feels that Chile will be able to readily dispose of any pulp which they manufacture in excess of the local demand. He further informs us that the present price for pulp quoted by Fomento, i.e ·· $80.00 per ton at Ameri can ports ~s much below the present price. ~he minimum cost of pulp f.a.s. American ports at the present time is stated by him as being well over $100. instead of $80. as given by the Corporacion. The pulp mill projected by the Corp~racion is for a daily capacity of 100 tons which, aocording to the study made by the mission of the Forest Service of the U.S. Department of Agriculture. is the maximum oapaoity possible at present on account of the limitation in pulp wood now available. The future program of the Oorporacion is to increase the capacity of this mill as increasing quantities of pulp wood become available and it is the belief of the Forest Service Mission that within about tilmnty years tp.ere c - 4 c i , will be~wd to three times the quantity of pulp wood available as com- I I pared w~hthe present supply. The main purpose of the'presently planned pulp mill is to s~ly pulp solely for use in Chiie, exports of pulp would follow ~ater when more pulp wood was available, and the mill is increased in size. ~he Corporacion states that there is at present in Chile suffi cient bleaching capacity to bleach all of the out~ut of the presently pla:;.lned mill and therefore in their estimate of cost they have not in cluded any equipment for bleaching nor for drying, both of which are items which ru~ into. considerable e~ense. Wet and Mr. Seaman, are of the belief, however, that the east estimate prepared by the Corporacion for the equipment and materia~s which are to be purchased outside of Chile, and' consequent~y finanoed. through the loon which they are seeking from you, are rather on the low side. It is. of course, true that no definite plans have been made and., consequently, no detailed estimates of cost have been prepared of the project, and since it is our belief that you would prefer to have the lOal credit arranged for on a conservative basis, rather than be faced with a possible request for increasing the credit befa:re the plant is completed, we would recommend that you give consideration to an in crease in this particular part of the Forest Industries Plan of up to say $500,000 in order to cover costs which can only be determined when com plete plans are available and to cover the increases that have occurred overpaet months in the cost of all equipment of this nature, ocean freights, etc. . Mr. Seaman and we believe that the estimated cost of producing pulp as shown on Page 70 for the Forest Industries Plan is well worked out and should prOVe to be quite accurate; therefore, thore would seem to be a very considerable saving in cost, or very considerable pro fit to be earned through the manufacture of this pulp in' Chile as com pared with pulp to be imported from abroad.' Furthermore, through avoid ing the importation of this tonnage of pulp, Chile immediately betters its foreign exchange position to. that extent. In general. and in order to spot check the statement as to the estimated costs of some of the projects referred to in the Forest Industries Plan. we have contacted the United States l!fallboard Company to determine whether the 20% the Comision have added to the quotation from this company to cover freight is adequate.. We have a statement from this company in writing that the increases in the cost of machinery due to ad vances in prices since the quotation was made should not exceed 5~ and that the freight to Chile should not be over 5% of the cost of the machinery. Therefol"e. it is reasonablo to assume that with/the possible exoeption of the pulp mill mentioned above, the allo''lance of 20% should be adequate even if there is some further increase in freights or equipment costs between the time that the plan is approved and the date on which orders are placed and shipments made, . -5 , c i Throughout the Forest Industries Plan numorous local produJtipn costs are indicated. As these depend on the costs and skill of lOiallabOr, tllese field costs are difficult to check but appear reaso,able in view of the costs given by the United States Forest Seryice. There is no way in which we can check from here the value of the forest properties which Fomento proposes to acquire by con demnation or otherwise. To sum up, there seems no question whatevor but what Ohile has a large forest area. They have already taken active steps in conneotion with reforestation. The species of trees now being planted will. wh~n thoy mature, be entirely suitable for the Forest Industries which are under consideration. Tree growth is rapid in Chile. and there fore 1f the program under discussion is carried out under capable manaeament, it seems to us the type of project which deserves the' assist ance of the International ]ank for Reconstruction ana Development, if the policy of the ]a.rut is to aid growing industries which oan give reasonable assurance of being seli-liquidating in the future. Yours very truly, FREDERIOK SN~ CORPORATION (Signed) G, P. Seeley gps/ljr Vice President. c , I I ANNEX D, DIFFICULT Fo4T ONS-PI:ERS .AND W.A:REHOUSE5-:BUILDINGS-PCMER PLANTS-:BRIDGES-PORT WORKS FREDEBICK SNARE COBPORA~ION Contracting Engineers Frederick Snare Ohairman Woolworth Building Cable ,,\dd.reslJ. Santee l1evYolk A.W. :ButtenheiQ President 233 :Broadwa;9" Pawnee Havana E.S.. Skillin Vice President Snarecorp Lima G.P. Seeley Vice President Snarecol :Bo~ Randall Cremer Vice ;J;>reddent Snareven Oara::las Manuel Gamba Vice President Portee San Juan Hugh Peters Secty & Treas. Telephone, :Barc1~v 7-1a9O NEW' yoBIt 7, N.Y. 165) 29 January 1947 Mr. Charles C.. pineo, Loan Director, . International :Bank for Reconstruction and Development, 1818 S Street, N, W., Wa$hington 6, D. C. Dear Mr. PineoC- We take pleasure in sending you enclosed, two copies of the report that we have prepared for you in connection with the hydro electric developments in Chile. I hope you will find that this will serve your purpose, but should there be any questions at alltor any further tnformation wh1ch you. would like. and which we can furnish you, we will be only too happy if you will let us know. As was the case with the previous report on the ForestrJ Development, I am keeping here, temporarily, the original report made by Mr. Fitch which you loaned to us, and whic."1 we have considered confidential, this simply as against the possibility that you may want further information which this report may assist us in working up. With best regards, Sincerely yours, (signed) G. P. Seeley gJ)s/ljr Vi ce President .. enc11. c DIFFICULT r~IO~S-pIE.BS AND WAllEHOUSl!l5-:BUILDINGS-POWER PL.t\NTS-13lUDG:E.-POl1!J! 'YOJijtS FREDERICK SNARE CORPOBATION' . CotitniQting qineera.·' Frederick Snare Chairman .Woo1worth :BUilding OableAddress, Santeo Ire'W ,Yolk 4\." W :Butt enbe:lm ~ Pl;'esident 233 :Broadway Pawnee Havnna E~S. Skillin Vice Pl;'esident Snarecorp Lima G.E> ~ Seele.r Vice President Snarecol :Bogoia llandall Creme::r Vice President Snareven Carams Manuel Galiba Vice President Ii~b Peters Seely & Tress, NEW Yota{ 7, ··T. 16.53 29 January 1941 International~ank for Reconstruction and Development, 1818 Ii Street, N. W., Washington 6. D. O. Dear S::lrsl- We take pleasure in giving you, as follows, the results of the stu;~:which we have made, at your :-equest, of the Electrification Plan for Chne as outlined in the ul!lconomic Reportll and UElect;-ificatton Plan" prepared by the Corporacion de Jo~to de la Produccion de Ohile dated Sept emler, 1946, which proposed the construction of three neW hydroelectric generating plants as necessary to p:-ovide for growIng service demand. The proposed new stations are summarized in the two Jomento reports as adding to the output of plants now in operation~ and others now under construction. The amount of power to be made available by these three proposed new plants 1s to supplement and relieve the overload on a vailable sources, and to permit normal growth of usage and industrial ex pansion, The application calls for theaddttion of 109.000 EW in generatlDig CapaCity in these three plants at an investment of $18,600,000, of which $7,100,000 is the OIF cost of imported equipment, and $11,.500,000 composed of Chile~ investment. In this report which we are now makincyou, we submit our comments on the financial and technical phases of the power program as outlined in the Chilean loan application" Addt tiona! data pertalningto the proposed development in the form of schematic preliminaT,r plans and . estimates as furnished by Fomento have also been considered in our st~dyt and s'UrPplementing this data we l'lave had conve;rsa.tions with the· Chilean en gineeI's in the New York otfice of the Oorporaclon.regarding certain points which were not entirelY clear, or Whicn we had questioned. -2 The scheoatic prelininar,y ?lans and estinates are the only ones which have been prepared to date; however, this is not unusual in a project of this nature since the preparation of final })lans 8T.d es tioates for .?lnnts of this kind is a rather serious undertakin~ which, . until furthe;L" progress is nude on the oatter of the loan, has not 'been considered as a justifiable expense. The need for additional power to provide for present needs and future growth has been fully explained in the COTporac1on report and for ~uriioses of analysis is suonarized for zones. Due to the gaoGra phical shape of Chile' extending fron S-19° to $-41-1/2 0 for that 2.Jortion of Chile inCluded in the electrification plan, the north and south distances are sO breat as to linit the transfer of yower by transnission to noderate blocks ot power between adjacent zones only. ~e zones as set u, are napped 1nthe t1lDlect:r1ficatiOl'l Plan" showing geo&;raphlcal regions and Ijower zones as referfec't to in the reports. The first geoGraphical regitln involves 48% of the n~rth to south extent ot the· five regions, ~he power zones are de fined tror.1 north to south with relation to the geograllhical regions, as folloWs. Geographical L A TIT U DES Ree:iop. Fran 'l'o Po\VER ZaIrE #2 S-29 5-32 Serana - Ovalle #3 S-32 S"'36 5-32 S-34.8 "- Sauzal S"'34.8 ± 5-36 Talea #4 S-36 S-38 · 1 ! Abanico #5 S-3 8 · 1 .±, Not defined S-38.1 8-39.7 + Tenuco S-39.7 ... 5-41.5 + Pilnaiquen There are six power zones, four of which are within regions #2 to #4 and two within but not \-[holly conprising #5. New developnents which are enbodied in the Econonic Report, located within the power zones, will affect the denand for l)ower. Within the Se~8i'-0va11e Zone.,. prOposed new :)rojects consist of dock installations at Coqu!obo. The Los Molles new hydroelectric plant is conteDlJlated in this zone. c ... :3 Proposed new projects in the Sauza! Zone inciude~ Electrification of railroads, Rubb~r tire plant at Santiago, Addition of Electric trolley busses in the U~ban transportation aysten in the Cities of Santiago and Valparaiso~ Port iqprovenents at Valparaiso and San Antonio. Increased resultant power denand on present plants ia relieved by the contenplatedLos Girones developJ:lent in the 'ralca Zon.e, 'rhe 'ralca Zone is next adjacent to the south of the Sauza! Zone and contains the proposed Los Girones developnertt which will s~pply this area with power, a.~d feed 18,000 lW into the SauzalZone at San Fernando, In the next adjacent Abanico Zone new projects consist of: steel Plant at Concepcion, Saw Hill at Oh1l1an; Insulating and hardboard :plant and Wood pulp plant at Ooncepcion; Wood preserving and R. R. tie plant at Taleahuano.. 'rile power txoansJ:lission syaten of this zone is tied into .that of the SauzalZone~ through the Talca Zone thus ooking an integrated systeD of these three ZOnes as separated fran the Serana-Ovalle Zone to the north and the Ter.ro.co and Piloaiquen Zones to the South. In the Ter.ro.co Zone there is no specific reference to new enterprises. 'rhe proposed Guanthue plant developnent lies near tlle south axon bordef of this zone and willsuppleDent available ~ower in the Piloaiquen Zone in add!tion to furnishing power in the 're::ru.co Area, through new txoans nission lines furnishing hydroelectric power .into present isolated syatens in this area. In the P11oa1quen Zone a saw Dill is projected at Puerto Montt. Tlle addi tiona! plant faci11 ties as :;?roposed in the 10an application consist of three hydroelectric lJlante, one for each of the three integmted power systeos, nanely: Los Molles for the syaten in the Serana-Ovalle Zone; Los Girones for thesysteo in the Sauzal. Taloaand Abanico Zones; Guanihue, for the systen in the 'rernuco and PilL'l8.iquen Zones. Predicted deoands and annual loads, predicated on present demand. nornal increase in load. plus anticipated growth due to industrial expansion have been suboitted, pertaining to the portion of each syste~ demand to be carried by the new units. 'rhese loads ara given fer Los ~olles together with the corresyonding unit 2)ower costs based u!)On 4% del)reciat;l.on and ~ operation cost. No allowance for interest c'r &r.lortizatioll 1s in oluded in these costs. Corres:)ondi!lr'; data for Los Girones is Given based u:;on 4% depreoiation and 1-1/2% operation costs. S1n11ar data. for Guanihue uses allowance of 4% deprecia tion and 1.2% operati,on costs. c - 4 Power as generated by the hydroelectric plants is to be sold at their respective substations to distributing cotrpanies by Endesa. Los Molles to Ecrpresa Nacional de Elec'd. A. A. and others. Los Girones and Guanihue to Cia. Chilena de Elec'd. and to Cia General de Electd. Industrial, various ounicipalities and others. We have reviewed the proI.'osed plans for the developoent of the three new projects. They are well chosen to su,pleoent the availa~le sources in the three integrated systens. The ?rediated load g~owth is a logical $rpectancy and schenatic developoent of the yower sites is proper~ but we feel that we should oall attention to the following itens which night be questtoned: The proposed Los Molles plant requires the suppleoenting of water flow in the Loa Molles River by y'Ul':lping water fron the lower level stre8n i_to the Los Molles Canal intake. This has been provided fot in the proj act ,sUnate during periods when .the flow of the Los MolleS River is less thai t~at necessary and the pW:1ping plant will operate using a :portion of the pOwe~ generated, which will then linit the output fron this plant a.vailable for other pur:poses to 9t400 KW. . During' periods of high flow in the river the naxioUJ:l de mand, as outlined in the "Electrification Plan", pabe 74, nay be obtained. < This ind1cates that the plant will be fully utilized ir.lDediately upon COD pletion with no reserve for growth beyond 1951. The Los Nolles Plan also calls for the utilization of a total hydraulio head of 1.15~ neters in a single stage plant. This is a ouch hi@iler head than is usually deeDed advisable with Pel ton Wheels and nay require SOoe oodification of the plan 8.0 as to divide the available head into two silages. Fonento have considered this oontingency and are request ing bids: iron nanufacturers, and will probably be governed by the linitations of available equipDent in the developoent of the final plans. It is also probable that early action on further power developoent of the Mostazal additi6n. using the Los Molles Canal. as des cribed in 1Ihe plan will be required in order to neet the l:)ower needs of this a.rea. In the Los Girones project the naxinuo'output obtainable during nart of the year will be lower than the deoand requirenents f this be ingUnUed. by available streao flow which is esti;Jated at 19 cubic neters per second with 90% tine probabili tYt with a cOrresI)onding eleotrical output of 4l,OQO lW. .) c - 5 On the Guanihue the maximum demands as called for can be' fully met by the available hydraulic flow with an overage of some 10,000 XI. It is our opinion that the full deyelopment is justi fiable and worthy of approval. Further e:-:::pansion than specifically requested in the first two zones will probably be required in a short time. The rate of load growth may require a longer period of time to arrive 'at the values given but should undoubtedly be obtainable with normal expectancy. The load predications are based upon an 8% normal annual load growth, which is in agreement wlth records of load growth encountered in the United States accord ing to the Federal Power Oommission data; by experience of the Electric Bond & Share Qo_, on foreign developments, and is also indicated by the load curves prepared by Fomento. The rate schedules projected in the applications to pro vide for proper revenue to cover the loan charges, as submitted in the "Eoonomic Reportll.on page i12. are considerably lower than existing rates and do not app~ar adequate, and we are advised by Fomonto that these fig~es are be~ng revised and checked against the costs as tabulated in the ftElectri ficatlon Plan", and that whiie the final rates will be higher th~~ those at present projected, ~hey wi],l, nevertheless, be materially lower than are the existing schedules now in effect. With proper correction and revision of this rate structure. the revenues can be adjusted to properly cover capital expense, without at the same time reaching the rate structure now in effect. We have questioned tho Corporacion regarding the allow ance for the cost of eqUipment, which it is noted are costs that were in effect a. of September, 1946. The Corporacion advise that they have allowed for a po.sible 5% increase in prices above that level. It is our opinion that before this equipment can be actual13~ ordered and delivered, the cost will have advanced beyond, this 5% - in fact, on some items this has already taken place. and it is our feeling that a 15% ailowance for incroases would be more nearly adequate to cover the price rise, and also possible modifica tions in the plans when further details nre developed. This would mean a 10% ~dition in the CIF equipment investment, which would then amount to $7.800,000. Until more detailed plans are developed this figure is, we be lieve. reasonably correct. As far as the estimate of Ohilean investment is cencerned, it is practically impossible to work up accurate figures without having avail able further detaiied plans and local informatieD,. The estimates-t as submit ted' by the Oorporaciont- have been predicatl:ld on unit costs of' past construct ion, some still under way and some completed during the last 12 months. The unit 0081 per XW of plant capacity for the proposed new plants is not increased o?er the plant cost per KW of this completed work. Records of cost of work in Chile show a labQr cost inorease of practically JJ% during tho past 18 ~onths and it is our opinion that up to possibly 25% should be added to the e'ti~ates prepared by the Oorporacion on the Chilean investment in order to more nearly bring'these up to date. Adding this percentage would bring the total investment, including equi~~ment cost and local costs in Ohile to$22,1?5.000. - 6 - ]ased on limitations of water flow and a consequent total maxim'\;llll output of the three new plants of 70,000 Kif with an annual load factor of 32%. and an annual output of 172.8 million rom, an average rs,te of 1.4; per rom would yield 5% on the total Investment after deduct ing 2% to cover operating costs and 4% depreCiation. Interest and'amo:r- tization on the investment would be covered by this 5%. If the projected rates are adjusted to this level of 1.4; per IDfH they would still be well belnw the average existing rates as shown on page 112 of the Econ~mic Report. We have mentioned the geographical difficulties with respeot to !II. completely integrated power system. Inter-connection by higp voltage ~ission lines is not justified at present load density; ~he hydroelectric sites are of moderate size and generally distributed in a north to south direction, with larger reserves at the southern end. Continued development may eventually result in closing the existing gaps between ihe present three systems and the eventual feeding of power from the mere plentiful sources of the Temuco-Pilmaiquen area to the Abanico area and other inter-zone pcr\"1er transfer for adjustment of station loads. With the rate structures at present, different rates are set up for the three plants. This is an important point in that var~ ing rate structures may cause future difficulties as areas become inter connected. Also. the rate structures within anyone integrated system should not be based upon the min:t,nl'um station cost, but upon the weighted average eost for all sources \1ithin the area. covered by the rate structure, unless it is desired to offer lower rates to preferred customers. System rate strttctures should be such as to equitably distribute net revenue returns so as to cover capital, interest and amor~ tization charges and protect present capital liability on the system. Oheap power, such as these plants would provide. has been shown to be a most desirable development for the economy of any coun try. To develop a similar amount of power by other means would result in two things: First, an increase in costs and consequently such an increase in the r.tes which would have to be charged as would probably preclude its use, and. Second. the purchase abroad of approximately $864.000 of coal or oil which would be needed in order to supplement the alr.eady over-taxed demand for Ohilean coal. or to provide fuel oil which up to now has not been found in that country. ]y the furnishing of this hydroelec~ric power Chile would benefit from t~e many advantages to be gained therefrom, with out at the same time baving tpeir fOreign exchange position suffer through the need for purchaSing fuel abroad, c - 7 To sum up, we are of the opin~on that with the increased. allowance for the CIF value of tho equipment, and contingent upon rate' schedules being satisfactorily adjusted. this plan is well conceived., and is worthy of approval. Yours very truly. FR1!lDERICK SNA...'ttE CORPORATION (Signed) G. p, Seeley gps/ljr Vice Prosident. c ~:----.!--:'------------------~--------------------------------~--- . _ _ '_b · · _ . ._ _. ._ _ _ _ _ _. . . , ; i I : · Seoretary ofl Strte Excellency: i I I I have ~he honor to inform your Excellency that my Government has instructed ~ to state that: 1. The I Golvernment of the Republic of Chile, recognizing that Corporacion de Fomento 11 l~ Produccion (hereinafter cailed the "Corporation") I as a corporate en ity under Supreme Law, is legally authorized to contract loans in domestic or . oraign currencies, and recognizing the desirability of assisting the Corporat~o~ in carrying out the provisions of Law No. 6))4, as amended by L...i1 No. 664q~ hias, pursuant to the enabling po'Vrers contained in LaW' l10. 7046 and by Supre,,-e ~ecree No. 3lJ 5 authorized the guaranty of the Rcpul;;lio at Claile to be attac~d t.o all promissory notes of the Col';loration i:;;sued pursuant to any contractu.al ~bli.'igations beti'V'een the Corporation and Ex:;ort-Import Bank o~ Washingtotl, ~nd for the payment of which notes so guaranteed the Government of . the Rcpub[ic' o~ Chile has pledged its full faith and credit. 2. The! Gdvernnwmt of the Republic of Chile will, accordingly, extend to the corpa.. ra~ O~.all itS. oooperation anda.SSistance" in order. that the Corpora ·. : tion may co 11 ~trictly with any Aereements with Export-Import Bank of Wasm-ng ton whicb it ~ contracted and which it may contract ill the future and, in particu18/l",1 ~t it may attend in appropriate form to the servicinz in dollars United State~ qurrenc::y of the interest and amortization of any loans obtained or which i t ty obtain under such A~reements. PrinQipal and interest on all an I such loans : be serviced in dollars Un1ted States currency prior to the servicina·o 4llY other obligations of the Corporation heretofore or hereafter incurred. ~e!~Qllar revenue~ resulting from the extraordinary t~B levied e pursuant to Wflean I,aw No_ 63;4, as incorporated by reference in Law No ·. 6640, or which :ui be estab~ished 'by any other law hereafter enacted, will be set aside and u~il~zed to the extent necessary to cover the. payment of principal and interest on ithe obligations issued under all such A6reements between the Corpo ration and ~~Q.t~L~~ort Bank of Washington. J. In lth~ event tl:\.e Pre~1ort B.:Ulk of 'Wils!:ineton. I . The a.s~uranoes contained in this letter apply specifically" but not ex... clusivell, .0 ~he credits made available to the Corporation by Export-Im90rt Bank of Was~ntton pursuant to the terms of the Agreement entered into as of June 13" 1940, i as amended by the Agreements of ~iay 22, 1.9h2 and April 18, 1943, the Agreeme~ Gf February 23, 19h3, and the Agreement as of December 30, 1944, which said latter Agreement is hereby approved, Sinoerely yours, c Ambassador