Report No. 2988-AR Economic Memorandum on Argentina July 10, 190 FILE COPY Latin America & the Caribbean Regional Office FOR OFFICIAL USE ONLY Document of the World Bank This document has a restricted distribution and may be used by recipients or,iy in the performance of their official duties. Its contents may not otherwise be disclosed without Wolld Bar. authorization. CURRENCY EQUIVALENTS Currency Unit Peso ($a) Exchange Rate Effective June 30, 1980 US$1.00 $a 1860 $a 1,000 US$.54 $a 1,000,000 US$537.63 FOR OFFICIAL USE ONLY TABLE OF CONTENTS Page No. SUMMARY AND CONCLUSIONS . ....................... ...... i-x INTRODUCTION * * *..*.....*.................................. ....1........ I. INFLATION AND STABILIZATION IN HISTORICAL PERSPECTIVE .. 2 Previous Stabilization Efforts 2........................ 2 Stabilization through Controls and Corrective Inflation 1953-57 . ............... *................... 3 The 1959 Shock Treatment ...... .... ............ 4 Price Stabilization and Trade Liberalization 1966-69 ... 5 II. INFLATION AND STABILIZATION ATTEMPTS: 1975-1978 ....... 7 Excessive Demand and Crisis in 1974/76 .... o .......... 7 Attempts to Control Inflation and Restructure the Economy: 1976/78 . ..... . ...................6............ 9 Stabilization Attempts, Economic Growth and Employment.. 14 The Role of External Sector Imbalances .... o.......... o.. 16 III. THE 1979 PROGRAM AND ITS IMPACT ON INFLATION ... o........ 18 Stabilization through Increased External Competition ... 20 The Supplementary Role of Aggregate Demand Policies .... 22 Impact of the Program in 1979 .o.......o................. 24 Prospects for 1980 .1.9 80. . .... . . .0.. ..... ... . IV. MEDIUM- AND LONG-TERM ISSUES AND PROSPECTS .... o......... 33 Exchange Rate Policy and Tariff Reform ............... ... 33 Monetary Policy, Interest Rates and Capital Market Development . .. ........... . . .. .. . . . .. .o..o..o.oo o . . . .. . *.0.. *. 37 Public Sector Prices and Investment ....o ............ . 38 The Public Investment Program ....................o.-ooo 41 Financing Public Investment ......... ..............to.... 44 Balance-of-Payments Prospects and External Capital Flows 45 ANNEXES A. The Monetary Approach to the Balance of Payments and Its Relevance for Current Argentine Economic Policies B. Inflation and the Dispersion of Relative Commodity Prices in Argentina This report is based on the findings of a mission which visited Argentina in November 1979. The mission was led by Mr. Gerald Alter and included Messrs. Jan Peter Wogart and Jose Marques. In addition to background papers prepared by Messrs. Mario Blejer, Clark Reynolds, Pedro Rado and Jan Peter Wogart, Joaquin Martinez and Julio Duran contributed special sections to this report. This document has a restricted distribution and may be used by recipients only in the performance of their ofhcial duties. Its contents may not otherwise be disclosed without World Bank authorization. List of Tables in Text Table 1: Quarterly Indices of Major Monetary and Price Indicators, 1977-1979 Table 2: Wages and Unemployment Indicators, 1976-1979 Table 3: 1979 Policy Guidelines for Public Sector Tariffs, the Exchange Rate, Wages and Money Supply Table 4: Schedule of Tariff Reductions, 1979-1984 Table 5: The Convergence of the Inflation Rate Table 6: Change in Price Differentials Between Foreign and Domestically Produced Industrial Goods, 1977-1979 Table 7: Foreign Exchange Rate Movements, 1976-1980 Table 8: Changes in Employment, Production and Relative Prices of Public Enterprises Table 9: Projected Flows and Indicators of the External Sector, 1980-1985 List of Tables in Annexes Table Al: The Variance of Relative Price Changes (VP ), MIay 1977 - June 1979. t Table A2: The Variance of Relative Price Changes and the Rate of Inflation. Regression Results for Argentina (May 1977 - June 1979) Dependent Variable: VP t Table A3: The Variance of Relative Price Changes and the Components of the Rate of Inflation. Regression Results for Argentina (May 1977 - June 1979) Dependent Variable: VP ANNEX -, IBRD-12432R 4 ' > nEa, de" } ,'.94- I/ ' .. X< M A C nr6 |~ ' : R t/ f -; 3. C SAN~~~1 ~~_TAO / 44,~~~~~~~~~~~~~~~~~~~~6 A mow,O ra)~~~ ~i 5' .vE.!/ - V / DMA ANTIAGENIN O \, T '' f > 1 ,- \ , C ~~~~~~~~~~-s-- - Primry ced tstiC 4ag r !0e O N ER,ood l- . I b2no t %-~~~~~~~~~~~~~~~~~~~~~~~9 LO1CH ZTE9S d 4,0 WPOt N,,- 04* /t,, ,t,octO 4-2. 0.04,. any 1444,rim0y r0,4 iR 0 tg C > ^ENDZ V/ J Po ici o.dre St' _;RDALl-0 $4'AG'V5tP,' UrrA 4,4*00,4,640004 Oo0044naFn ire 0 200 400 690 300 44!~~~~~~~~~~~~~~~~~~~~4oo C3 'd.11t O/k S-1!fL ~ tNg AR CGF E N* T I- tI A M J§zq,,,,M;~~~~~~F" R - Parve or °g02L rave 4roadsg furu/wtrtirvirubvrrLs4rw"Renesa ~ ~ ~ ~ ~ ~ Eart roadsLE frft¢j¢o¢.47tA., T Pinipa arprt tsr;~~~~~~~~~~~~~~~~~~~~~~~rvrca boundaries Page 1 of 2 pages COUNTRY DATA - ARGENTINA AREA 2 POPULATION DENSITY 2,776.9 km2 26.7 million (mid-1979) 9.4 per km2 Rate of Growth: 1.3 (from 1970 to 1979) 15.0 per km2 of agricultural land POPULATION CHARACTERISTICS (1970-1979) HEALTH Crude Birth Rate (per 1,000) 21.0 Population per physician 530 (1977) Crude Death Rate (per 1,000) 8.0 , Population per hospital bed 170 (1971) Infant Mortality (per 1,000 live births) 59.0 INCOME DISTRIBUTION (1970) HOUSING 7. of national income, highest quintile 50.3 Average size of household 3.8 lowest quintile 4.4 Average number of persons p. room 1.4 ACCESS TO PIPED WATER (1974) ACCESS TO ELECTRICITY (1960) % of population - urban 76 ¾ of population -79 - rural 26 NUTRITION EDUCATION Calorie intake as % of requirements 129 Adult literacy rate % 93 (1977) Per capita protein intake 107 Primary school enrollment % 108 (1975) 1, GNP PER CAPITA in 1979 US$2,280 GROSS NATIONAL PRODUCT IN 1979 ANNUAL RATE OF GROWTH (3e constant prices) US $ Bn. % 1965-70 1970-75 1976-78 1978-79 GNP at Market Prices 61.53 100.0 4.1 3.8 -0.8 8.5 Gross Domestic Investment 15.57 25.3 7.0 2.0 3.6 14.7 Gross National Saving 15.13 24.6 5.0 -0.4 15.5 10.8 Current Account Balance - 46 -0.7 - - - _ Exports of Goods, NFS 9,58 15.6 5.3 4.8 28.6 8.3 Imports of Goods, NFS 9.03 14.7 5.0 2.1 3.9 59.6 OUTPUT, LABOR FORCE AND PRODUCTIVITY IN 1975 2/ Value Added Labor Force- V. A. Per Worker US $ Mln. % Mln. % US $ % Agriculture 5.076.5 11.0 1.42 14 3,575 79 Industry 20,115.5 43.6 2,94 29 6.842 150 Services 20,912.0 45,4 5.78 57 3.618 80 Total/Average 46,104.0 100.0 10,14 100.0 4,551 100 GOVERNMENT FINANCE 3/ General Government - 'Ireasurv (_$a P,ln.) % of GCP (Sa Bln. ) 7 of GDP 1977 1979 1976-78 1977 1979 1976-78 Current Receipts 41.24 29.5 31.2 8.95 6.4 5.8 Current Expenditure 33.37 23.9 25.8 11-03 7.9 1I2 Current Surplus 7.87 5.6 5.4 2.08 1.5 4.4 Capital Expenditures 12.99 8.8 12.5 ,73 0.7 0.8 External Assistance (net) 1.96 1.4 1,5 .69 1.5 0.41 1/ The Per Capita GNP estimate is preliminary and follows World Bank Atlas methodology. All other corversions to dollars. in this table are at the average exchange rate prevailing during the period covered. 2/ lotal labor force; unemployed are allocated to sector of their normJl occtupation. "Unallocated" consists mainly of unemployed workers seeking their first job. 3/ Consolidated public sector. Page 2 of 2 pages COUNTRY DATA - ARGENTINA MONEY, CREDIT and PRICES 1974 1975 1976 1977 1978 1979 (Billion $S outstanding end period) Money and Quasi Money 123.2 373.5 1697.3 5896.2 17169.3 '49604.0 Bank Credit to Public Sector 73.0 232.0 690.0 1994.u 4500.0 10975.0 Bank Credit to Private Sector 122.1 313.6 1341.2 4750.9 12409.6 40023.0 (Percentages or Index Numbers) Money and Quasi Money as ¾ of GDP 26.6 27.9 22.4 28.4 32.h 36.7 Consumer Price Index (1974 = 100) 100.0 270.6 1472.2 4t063.7 11195.8 29054.3 Annual percentage changes in: Consumer Price Index 29.9 170.6 444.1 176.0 175.5 159.5 Bank credit to Public Sector 65.9 217.8 197.4 189.0 125.7 144.0 Bank credit to Private Sector 59.5 156.8 327.7 254.2 1l6.1 228.b BALANCE OF PAYMENTS MERCHANDISE EXPORrS (AVERAGE 1976-79) 1976 1977 1978 1979 US m.Mln , (Millions US $) Exports of Goods, NFS 4752 6769 7689 9568 Cereals 1302 22.0 Imports of Goods, NFS -3612 -4892 -4901 -9025 Oilseeds S Oil 759 12.6 Resource Gap (deficit = -) 1140 1877 2788 543 Beef, Hides, & Skins 715 12.0 IndListrial Exports 1338 22.5 Interest Payments (net) -465 -370 -387 -495 All other cormmodities 1831 10.7 Workers' Remittances - - Total 5945 1 Other Factor Payments (net) -43 -248 -428 -545 Net Transfers 18 31 48 35 M< EXTERINAL DEBT, DECEMBER 31, 1979 Balance on Current Account T6750 T7T7 ry -462 US S Mln Direct Foreign Investment - 146 290 235 Net MLT Borrowing Public Debt 8.265 Disbursements 2311 2123 4328 3771 Non-Guaranteed Private uent 6.421 Amortization -1081 -1248 -2579 962 Total outstanding & Disbursed 1r,686 Subtotal 1230 875 1749 2809 Capital Grants - - - - DEBT SERVICE RATIO fo, 1)79 - Other Capital (net) -923 31 -1598 1560 Jse of IMF Resources 235 -115 -414 - Increase in Reserves (-) -1192 -2227 -1998 -4142 Public Debt, incl. guaranteed 2o.0 Non-Guaranteed Private Debt 6.0 Gross Reserves (end year) 1589 3816 5814 9956 Total outstaniding & Disbursed Net Reserves (end year) -555 1659 5303 9745 RATE OF EXCHANGE IBRD/IDA LENDING, ((ece mber 1979)(Million LIS $) June 30, 1980 IBRD IDA US $ 1.00 = $a 1860 - Sa 1.00 = USc .05 Outstanding & Disbursed2/ 367.0 - Undisbursed 2/ 745.7 - Outstanding incl. Undisbursed 1112.7 - 1/ Ratio of Debt Service to Exports of Goods and Non-Factor Services. 2/ Exchange variation not incltuded SUMMARY AND CONCLUSIONS i. This report focuses on a new stabilization strategy introduced by the Government of Argentina in 1979, which simultaneously attempts to reduce the rate of inflation and to induce the modernization and restruc- turing of the economy. Acting from a position of unprecedented strength in the external sector, the opening of the economy is to provide increased competition which is expected to: (a) constrain domestic prices; and (b) lead to better resource allocation through specialization according to com- parative advantage. This program differs from previous stabilization attempts in Argentina in its reliance on supply-increasing rather than demand-reducing policies, on the one hand, and its eschewal of direct price controls on the other. The Lessons of Previous Stabilization Efforts ii. Argentina is a semi-industrialized country with a per capita income of about US$2,300 in 1979, a sizeable middle class and a fairly even distribution of income. Postwar GDP growth has averaged 3.5% but has been subject to strong cyclical fluctuations. Sharp swings from expansionary fiscal, monetary and wage policies to restrictive stabilization programs have occurred five times since 1950. Although it is difficult to separate the political from the economic variables which contributed to the failure of previous stabilization efforts, the historical evidence shows: (1) the impossibility of holding down inflation for very long with direct price controls, given the negative impacts on output, exports and the balance of payments; (2) the difficulty of simultaneously lowering the overall rate of inflation and correcting relative prices; (3) the difficulty of restrictive demand management in a highly politicized environment; and (4) the importance of international trade policy in facilitating or dampening a wage-price spiral. The 1976/78 Program of Stabilization and Economic Restructuring iii. The economic crisis, which came to a head in 1976, began in 1970 when large increases in public investments, nominal wages and credit resulted in strong inflationary pressures, temporarily suppressed by price controls. Growth of domestic output, together with a fixed exchange rate, led to rapidly increasing imports. In mid-1974, poor weather, falling world grain prices, and an EEC ban on beef imports halted export growth. Deterioration of the foreign sector coincided with an intensification of domestic economic and socio-political conflict, which was temporarily contained by the nego- tiation of a "social pact". Attempts to improve the external sector situa- tion through devaluation and adjustments in public sector prices failed, as labor and other powerful interest groups reacted to maintain their respec- tive income shares. Caught up in a wage-price spiral, inflation rose to over 300% in 1975 and accelerated to an annual rate of about 800% by early 1976. A rapidly increasing external debt and a drastic fall in foreign exchange reserves brought the country close to defaulting on its external obligations. iv. The new Administration, which came to power in March 1976, had as its initial objectives strengthening the balance of payments, restructuring the external debt and preventing hyper-inflation. Measures such as the lowering of export taxes and the raising of interest rates had an immediate - ii - positive effect on the balance of payments. Monetary and fiscal policies, supported by wage controls, succeeded in bringing the rate of inflation down from 780% during the year ending in April 1976 to 150% a year later. No further progress was made, however, in reducing inflation during the remainder of 1977 and 1978, despite further attempts to reduce the public sector deficit and to contain wage increases. v. External sector policies, most of which were introduced in 1976, immediately produced favorable balance of payments results. Exports exceeded imports by over US$1.5 billion in 1977 and by US$2.5 billion in 1978. The current account surplus was accompanied by substantial capital inflows. At the beginning, the public sector was the primary borrower, but starting in 1977 high domestic interest rates induced the private sector to borrow abroad on an increasing scale. Although the authorities introduced some controls in 1978, long-term capital continued to flow into Argentina, and by the end of that year gross foreign exchange reserves stood at US$6 bil- lion, compared with less than $100 million in March 1976. vi. The 1976-78 stabilization attempt was accompanied by serious efforts to restructure the economy. First, the Central Bank instituted a banking reform which decentralized deposits and freed interest rates for the first time in the post-war period. The impact of this measure on external capital flows was particularly important. Secondly, in order both to improve resource allocation and to dampen inflation, a tariff reform was introduced in late 1976, with additional reductions in 1977 and 1978. Never- theless, given the high degree of redundancy in previous tariff levels, 1/ and an exchange rate policy of compensatory devaluation, import competition remained weak, and domestic inflation and resource allocation were initially little affected. Thirdly, the Government began to reduce its direct role in the economy, curtailing public employment and wages and restraining public investment. The 1979 Program vii. In late December 1978, the Government announced a six-point program consisting of: predetermined schedules for adjustment at declining rates of (i) exchange rates, (ii) prices of fuels and public sector services, (iii) wages, (iv) and monetary resources of internal origin; combined with (v) a five-year tariff reduction program, and (vi) the formal reopening of the capital market to international transactions. Foreign competition was to reduce the rate of domestic price increase of tradeable goods to the level determined by: (a) the rate of price increase abroad; and (b) the rate of depreciation of the peso. It was recognized, however, that possible tariff redundancy and lags in the adjustment of imports would delay this "convergence" of domestic and foreign inflation rates. 1/ Tariff redundancy is defined as the difference between nominal tariffs and the actual protection needed for the domestic producer to compete equally with the foreign producer at current prices and exchange rates. - iii - viii. The new tariff schedule provided for major reductions in tariffs on goods produced in Argentina. By the beginning of 1984 import tariffs are to be reduced to a range of 10% to 40%, as against 10% to 85% at the beginning of 1979; the average tariff will have fallen from over 50% to less than 25%. Shortly after the announcement of the 1979-84 liberalization schedule, the Government introduced a supplementary program of temporary tariff reductions for goods whose domestic price increases exceeded international price increases and the rate of devaluation. In March 1979, tariffs for capital goods were eliminated in order to facilitate the re-equipment and modernization of Argentine industry. That tariff cut, similar to other "temporary" reductions, was originally to be in place for only one year but has now been extended for a second year. ix. The current stabilization strategy is not exclusively relying on exchange rate and tariff policies to lower prices, but monetary and fiscal policies are conceived as having a lesser role. By pre-fixing the peso vis-a-vis the dollar, along with the elimination of capital controls, the monetary authorities cannot directly influence the portion of the monetary base that originates from the external sector. For each quarter in 1979, however, quantitative targets for monetary resources of domestic origin were set to limit the increase in public sector domestic borrowing as well as to influence the distribution between external and internal monetary resources. Fiscal policy is viewed to be of secondary importance, insofar as short-term stabilization objectives are concerned. The "crowding out" effect, which is normally expected to result from heavy public borrowing in credit markets, does not occur when the supply of foreign capital is highly interest-elastic as is presently the case for Argentina. However, in the medium and long run, control over fiscal expenditures has remained a major goal. As a consequence, the authorities have not only continued to set targets for lowering the Treasury deficit, but also have attempted to control external borrowing of the public sector in general and the state enterprises in particular. Results of the Program x. Most of the policies outlined above were implemented during the course of 1979. The key variable--the exchange rate--was moved according to plan; the tariff reform was applied; public sector prices and tariffs were adjusted as envisaged; and the monetary resources of internal origin expanded only slightly more than projected. On the other hand, the accumulation of foreign exchange reserves accelerated much more than expected, mainly as a consequence of a rapid increase in the demand for credit, which accompanied the high increase in international and domestic prices. Wage targets were not met, as nominal wages increased more rapidly than scheduled. 1/ In September of 1979, the Government eliminated the legal limitations on wage increases, retaining only the 4% monthly increases in minimum wages. 1/ Average private sector wages rose by 10% to 15% in real terms. - iv - xi. The new approach did not begin to work immediately to reduce inflation. Through the first eight months of 1979 the wholesale and consumer price indices showed a continuation, and even signs of acceleration, of the rates of inflation experienced in 1977 and 1978. Among the factors involved was the unusually rapid rise in international prices, particularly of primary products exported by Argentina. The external price component of the wholesale price index increased at about two to three times the average rate of increase during 1978. Another part of the divergence between actual and expected price behavior can be explained by lags in private sector recognition of import opportunities, combined with organizational problems and a lack of confidence in the durability of the strategy. As a result, excess demand was not fully absorbed by imports, at least during the first three quarters of 1979. Although excess demand is difficult to prove because of substantial excess capacity in early 1979, several indicators point at new demand-pull factors. Increased economic activities required monetary and credit expansion to continue at a high level which, in turn, given the targets set for monetary resources of internal origin, led to heavy capital inflow. Unemployment was further reduced from 3.1% in 1978 to 2.4% in 1979, and wages were adjusted more frequently. Real wages and aggregate consumption expanded by over 10%. xii. Since September 1979 there have been clear signs that the new approach is taking hold, as wholesale and consumer price indices have begun to decelerate. The rise in the general wholesale price index, which had averaged 8.3% per month from January to August, increased by an average of only 3.3% per month from September 1979 to March 1980. This rate of infla- tion, which amounted to less than 50% per annum, resulted in a real depre- ciation of the peso vis-a-vis the dollar, higher real wages and positive real interest rates. The deceleration in September and October seems attribu- table in large part to decreasing prices of primary products, while the impact of increasing exposure to competitive forces in the case of manufacturers became discernible in November and December. Preliminary data for the first quarter of 1980 are confirming this trend. As expected, the industries most clearly exposed to foreign competition, those where tariff redundancy was first eliminated or where other measures to reduce protection were applied, are those showing price deceleration most clearly. 1980 Developments and Short-term Prospects xiii. The Government has decided to continue the strategy in 1980. The exchange rate schedule called for a devaluation of 2.8% for January 1980, the rate of adjustment declining by 0.2% in each of the following months. In addition, the authori.ties expect to reduce the public sector deficit from 4% to 3% of GDP by restraining public investment expenditure and increasing tax revenues. Should excess demand develop in 1980, it is expected to be increasingly reflected in the balance of payments on current account. Effects of the past appreciation of the peso in real terms and tariff reductions which are only now being felt in the economy should thus lead to a further deceleration of inflation. With increasing pressure on domestic prices of traded goods, demand should shift from nontradeable to traded goods, and the wage transmission mechanism should have a decelerating impact on the prices of non-tradeables. -v - xiv. A study of the magnitude of tariff protection of Argentine industry over the last two years suggested an average redundancy level of 80% in June 1977. This redundancy was rapidly decreased through the combination of ex- change rate and external tariff policies. By August 1979, the situation had reversed, with domestic prices now averaging 30% above the prices of imported goods, tariffs included. For firms in this situation, competitive survival requires the reduction of costs and places a limitation on future price increases. Since the major industrial subsectors used in the study have about a 40% weight in the wholesale price index, the elimination of negative redundancy through price reductions could lower the inflation rate about 10 percentage points below the convergence rate of inflation. xv. The lowering of tariffs and the real appreciation of the exchange rate have not only lowered the overall rate of inflation but have also affected the relative costs and prices of domestically produced goods and services. To the extent that human or institutional rigidities impede the adjustment of-prices and wages and the mobility of factors of production, a slowdown in economic activity and a loss of employment opportunities may result. xvi. The above consequences would be reduced to the extent that those Argentine industries which are now most exposed to foreign competition enjoyed economic rents derived from previous protection. In that case reductions in negative redundancy would not come at the cost of industrial unemployment and bankruptcies but rather the reduction of excess profits. Argentine authorities believe that such profits have been reaped by many of the industries. Although some partial evidence seems to support that view, more reliable information on the cost structure of Argentine industries is needed. xvii. With imports booming by the end of 1979 and exports slowing down, the current account surplus of recent years turned into a deficit of US$460 million. Preliminary projections indicate a deficit on current account of US$2.5 billion for 1980. Such a deficit could trigger expectations of a large devaluation of the peso and a consequent capital outflow. This possibility is recognized by the authorities and is a risk they are willing to take. The policy makers have reiterated their determination to accept whatever internal adjustments in output and employment might be necessary to avoid a large-scale devaluation, which would in their view start a new round of inflationary impulses. With the large exchange reserves available, moreover, the likelihood of any such crisis in the foreseeable future is small. xviii. A temporary critical situation arose, however, in April and May 1980 when the Argentine public shifted deposits from domestic private banks to public and foreign banks, after one of the most important private banks went bankrupt. Besides increasing depositors' insurance and providing ample rediscount possibilities, the monetary authorities increased the interest rate of the Treasury bills and raised reserve requirements by one percentage point. Although the loss of international reserves reached US$1.6 billion during a period of less than sixty days, the crisis was contained by the end of May 1980. - vi - Medium- and Long-term Policy Issues xix. With possible self-sufficiency in petroleum by 1983, and a modernized industrial structure as well as an agricultural sector which is increasingly utilizing its potential through technological change Argentina's economy should look forward to a more vigorous and balanced long-run growth than achieved in the last thirty years. However, several potential medium-term problems are of concern and warrant further consideration by the authorities. a. Exchange Rate Policy and External Tariff Reform xx. The Government apparently is continuing the policy of gradually declining nominal peso devaluations so as to eliminate the difference between domestic and international price increases by early 1981. As a central element in the price stabilization strategy, the exchange rate was allowed to appreciate by between 25% and 30% in real terms during the last two years. Any calculation of an equilibrium exchange rate would be tenuous at this point, given the substantial structural changes that have occurred in the last few years and are still in process. Nevertheless, the exchange rate appreciation that has taken place could create increasing problems for Argentina's trade balance. The question is whether the shift in relative prices between the export, import-competing, and non-tradeable sectors provides investment and production incentives consistent with external accounts balance and efficient resource allocation. xxi. After rapid expansion in recent years, the growth of exports leveled off in 1978, with an actual decline in industrial products in 1979. On the other hand, imports have increased rapidly in late 1979 and early 1980. As a consequence, the large trade surplus of the last few years turned to a negative US$50 million in the first quarter of 1980. Because of the expenditure of Argentine tourists abroad and rising debt service, real and financial service accounts experienced rapidly increasing deficits, which surpassed the 1979 trade surplus by about US$500 million and already reached another US$500 million during the first quarter of 1980 alone. Since unfavorable climatic conditions will probably reduce exports of traditional products in 1980/1981, it is estimated that Argentina will face a current account deficit of about US$2.5 billion in 1980. xxii. There are basically three alternatives for future exchange rate policy: (a) a one-step, relatively large devaluation, followed by the maintenance of a fixed exchange rate; (b) the continuation of the current program of declining exchange rate adjustments; and (c) an intermediate position, which would retain the current rate of devaluation of about 2% per month in order to alleviate the process of structural change. With respect to the first alternative, evidence in Argentina shows that higher prices for tradeables are rapidly transmitted to the rest of the economy, eroding the effectiveness of a large devaluation in setting the right signals for produc- tion and export incentives. - vii - xxiii. The authorities believe that the second alternative is the only viable policy. It has been successful in bringing down the inflation rate decisively in the last nine months, and it is viewed as the most promising strategy to reduce inflation to international levels. In order to fight inflation successfully without facing a renewed balance-of-payments constraint, however, adequate production and export incentives must be maintained in the major sectors, and prices of non-tradeables must follow the decelerating trend of the tradeables. With respect to the maintenance of incentives, the sectors facing increased import competition experienced a decline in output, although overall industrial production rose by 3% in the first quarter of 1980 because of sustained expansion in the automobile sector. Agricultural terms of trade have now reached the lowest point of the last three years, and exports of non-traditional goods have continued their downward trend. Some agricultural and processed product exports have been recently receiving increased tax reimbursements to cushion the negative impact of falling relative world prices. xxiv. With respect to the convergence of domestic and international price movements, developments in the first five months of 1980 show that the real rate of exchange has been maintained. However, for domestic wholesale price increases to continue to decelerate pari passu with the rate of devaluation, the price trend of non-tradeables has to be brought down to the same rate in the near future. As indicated by the consumer price index, most non-tradeable prices increased by a monthly average of 2 percentage points more than whole- sale prices. 1/ In this context, the behavior of wages is critical. Indus- trial wages have been slightly reduced in real terms during the first three months of 1980, after having risen rapidly in the last quarter of 1979. If industrial wages, along with pay rates in other sectors, can be contained, an important step towards greater price stability will be achieved, and the squeeze being placed on profitability in the traded goods sectors can be alleviated. Other variables of considerable importance-are the costs of credit and construction. Both have been increasing more rapidly than the wholesale price index. Increases in the cost of construction have averaged 5.2% in the last 8 months, and interest rates have recently been raised by about one percentage point a month as a consequence of Central Bank policy of reversing the sudden withdrawal of deposits. xxv. The Argentine authorities should weigh carefully the trade-offs involved in maintaining the present exchange rate policy. With inflation now reduced, a policy of holding to the present monthly rate of devaluation may be warranted to give an opportunity to monitor the transition process. Indeed, the twin objectives of price stabilization and allocative efficiency might be better served in the future by continuing the current rate of devaluation of about 2% per month compensated by an accelerated tariff reduction differentiated among products to achieve a more uniform level of effective protection. 1/ It should be noted that the cost-of-living contains a large number of tradeables, with non-tradeables contributing only 30-35% to its total weight. - viii - b. Monetary Policy, Interest Rates and Capital Market Development xxvi. A crucial component of the 1976 program was the freeing of interest rates for both borrowers and savers. Since then realistic interest rates have affected the saving behavior of the public and required a more careful analysis of investment projects. As a consequence of the banking reform and the attempt by the monetary authorities to fight speculative hoarding and infla- tionary expectations, interest rates rose to high levels. The strong external sector position and the reduction of exchange and capital controls provided Argentina's public and private firms with increasing amounts of medium-term financing at decreasing interest rates. Although domestic interest also fell, becoming negative in real terms from the last quarter of 1978 to September 1979, they remained high enough in the context of present exchange rate policy to induce businessmen to borrow from abroad and attract capital for deposit in Argentina. In early 1980 domestic rates fell to only one percentage point above rapidly rising international rates and Argentine devaluation. However, since April the interest rate differential between Argentine and foreign rates have again opened up, as international rates declined and domestic rates were increased by the Central Bank as a response to the banking crisis. This policy has been effective in dampening the sudden capital outflow. xxvii. While the close integration of the Argentine financial market with the world international capital markets made it possible for the Government and the larger companies to engage in medium and sometimes long-term borrowing, the high inflation rate kept the majority of the domestic transactions on a 30-day basis. In early 1980, increasing amounts of money were deposited and borrowed for a period of 180 days, but the banking crisis in April interrupted that development. Since the stock market has not yet been able to attract substantial sums to finance new capital ventures and the expansion of existing firms, most long-term finance within the country is still handled by the National Development Bank (BANADE). As long as inflation remains substantially above international levels it will be difficult to build up a viable capital market, without indexing. More long-term credit and venture capital will, however, become necessary for the re-equipment and modernization of industry. Since the private sector is expected to take on a number of tasks, formerly undertaken by the public sector, the flexibility and efficiency of the Argentine financial system will be seriously tested. The authorities are aware of this fact and cite this as one major reason why the fight against inflation with the current strategy is of such importance. c. Public Sector Investment and Financing xxviii. As part of the long-run goal to lower the relative weight of the public sector, the authorities have decided to decrease government investment from 9% of GDP in 1980 to less than 7% in 1989. At the same time decentrali- zation of public investment is planned, with the provinces expected to execute nearly 50% of total public investment by the end of the decade. The authori- ties are convinced that market forces and greater local government participa- tion will result in a better mix of investments, carried out at lower costs and at a more rapid pace, with political factors playing a lesser role in the selection process. With respect to private sector response, the oil and gas sector has been able to attract private domestic and foreign capital; it is still too early to evaluate private participation in other sectors dominated - ix - by the public sector. In the case of provincial investment it is still more difficult to judge the current attempts of transferring vital public services such as water and electricity. Once the organizational structure has been set up, it will be necessary to analyze the distribution, content and financing of provincial capital expenditures. xxix. Total net financial requirements of the public sector are expected to decrease from 4% to less than 2% of GDP during the 1980-1989 period, not only because of the relative decline of public investment, but also because of increased public sector savings which are expected to rise from 5% in 1980 to over 6% of GDP in 1984/85. These increased savings are expected from higher public revenues in general and improved economic and financial performance of the public enterprises in particular. While efficiency has already been increased in most public enterprises, their financial problems have remained serious, partly because of relatively high indebtedness, and partly because the 1979 public sector tariff adjustments were stipulated at decreasing rates in advance. As a consequence, public sector prices decreased by about 20% in real terms during the first nine months of 1979. The situation was reversed by September of 1979, and real tariffs are expected to reach 1979 average levels by mid-1980. xxx. The pricing of public services during the 1976-78 period reflected the Government's desire to reduce distortions in the economy, have public enterprises self-finance an increasing part of their investments, and reduce the rate of inflation. Although government-controlled goods and services make up only 9% of the cost-of-living index, the overall impact of increases in public sector prices on rates of inflation is larger because of their indirect effects and their presumed influence on inflationary expectations. The preannounced 1979 schedule, together with the exchange rate devaluation schedule and other parameters, was to reverse those expectations. Besides forcing public enterprises to absorb cost increases, the Government asked for a fiscal contribution, to be replaced by regular tax payments by 1980. Given the weak financial situation of several important public enterprises in 1980, increased borrowing may be required to prevent cutbacks in public investment unless the Treasury's net transfers are increased, a policy which would be inconsistent with the Government's fiscal objectives. Future Prospects xxxi. The outlook for output growth is uncertain for the next two years, as the restructuring process is carried out in industry, and the agricultural sector recuperates from the recent drought and floods. In the early 1980s, however, investment incentives for agriculture should improve, given: (a) expected favorable prices of Argentine products in international markets, and (b) lower input prices. By that time also, falling domestic inflation should have halted the real appreciation of the exchange rate and, indeed, some real depreciation may have occurred. xxxii. Exports have grown over the past three years at an average annual rate of 25%. Prospects are weak for 1980-81, but export earnings are projected to increase by an average of 19% annually between 1981 and 1985. About 85% of that increase would be generated by agriculture and agro-industry, and about 15% would come from the manufacturing sector. xxxiii. Although Argentina is currently supplying 90% of its petroleum domestically and expects to be self-sufficient by the mid-1980s, moderni- zation of infrastructure and industry as well as more vigorous growth of GDP through the early eighties suggests that imports may increase by annual rates between 20% and 22% through 1985. The current account balance is thus projec- ted to turn negative from 1980 onward, restoring Argentina to the category of a net capital-importing country appropriate to its income level and stage of development. Gross inflows of medium- and long-term capital are projected to increase from US$2.9 billion in 1980 to US$10.5 billion in 1985. As in the past, the bulk of these capital requirements should be available from export credits, world financial markets, bilateral arrangements, and direct private investments. Official multilateral sources can continue to play an important role by providing financial support combined with technical and organizational assistance and by stimulating capital flows from other sources. xxxiv. Argentina's medium- and long-term external public debt amounted to US$8.3 billion at the end of 1979, an increase of US$1.5 billion over its 1978 level. Medium- and long-term private external debt expanded more rapidly from US$2.7 billion to US$6.4 billion. External public and total debt service ratios were 20% and 26%, respectively. Earned interest on foreign exchange reserves amounted to 7% of exports in 1979, reducing the total net debt service ratio to 19%. Since planned public investment is growing less than expected export growth, the public debt service ratio is projected to fall below 20%. Although private indebtedness will probably increase more rapidly, the overall net debt service ratio is unlikely to rise beyond 30% in the mid-1980s. The current level of foreign exchange assets of over US$9 billion provides a comfortable margin to counteract any sudden capital outflows. With prudent management of major economic policy tools, Argentina will continue to be creditworthy in the years to come. INTRODUCTION 1. This report focuses on a new stabilization strategy initiated by the Argentine authorities in late 1978 to reduce the rate of inflation and to ac'ieve the modernization and restructuring of the economy in general and the industrial sector in particular. The new effort differs from previous attempts in Argentina to decelerate inflation and restructure the industrial sector by its heavy reliance on foreign trade policy: namely, the simultaneous application of a predetermined schedule of decreasing exchange rate devalua- tions and a 5-year program of tariff reductions. As redundancy is removed from the tariff and exports are freed of virtually all controls and taxes, external competition progressively limits price rises across the whole economy. 1/ The various components of Argentina's highly diversified indus- trial sector must either adapt or perish. 2. This new approach does not, at least in its early stages, rely on the conventional tools of aggregate demand management; neither does it rely for its success on a prolonged period of recession and large-scale unemploy- ment to destroy inflationary expectations. The new program requires little action by the Government, relying largely on self-regulating market mechanisms to prevent disequilibria from enduring for any prolonged period. It does require, however, control over domestic credit and a strong external position, which can withstand a deterioration of the balance of payments for some time. In this respect it also differs markedly from previous efforts which used direct price and import controls to limit inflation and avoid balance-of- payments disequilibrium. 3. By identifying sources of strength and weakness of the current approach, the report will assess its chances for success. The limited evi- dence on recent price developments will be examined for consistency with the expectations of the authorities. Changes in relative prices, which have arisen out of market forces (including price increases abroad), modified by a still incomplete tariff reform, will be examined, and their longer-term implications will be explored. In particular, some concern is expressed that the alterations now occurring in the relative prices of export products, import competing, and non-tradeable goods and services could have negative consequences both for short-term output and employment and for longer-term resource allocation and balance of payments. Analysis of the past and recent evolution of the exchange rate, the external tariff reform and public sector tariffs will lead to a brief review of the public sector investment program and its financing as well as of the prospects for exports and imports in the Argentine economy. 1/ Tariff redundancy is defined as the difference between the nominal tariff and other fees imposed on an imported product by a country and the price differential of a domestically and a foreign produced item. It measures the margin a domestic producer has to increase prices without fear of losing the market to his foreign competitor. - 2 - 4. While primary attention is given to the recently inaugurated approach, the historical record will be examined with regard to its relevance in understanding and interpreting the current strategy. In that context, four previous stabilization efforts are reviewed, each of which will throw some light on the major problems policy makers are facing currently and the chances for success of the present approach. CHAPTER I INFLATION AND STABILIZATION IN HISTORICAL PERSPECTIVE 5. The intractability of Argentina's inflation in the face of vir- tually all types of anti-inflationary programs has been long evident. In the 25 years from 1954 to 1979 there were only four years of single-digit inflation, as measured by the wholesale price index. Until the recent years of triple- digit inflation, annual price increases have typically fluctuated between 10% and 40%. Rate of Inflation 1/ Number of years (M) 0- 9 4 (2) 10 - 20 4 (5) 21 - 30 6 (8) 31- 40 5 (3) 41- 60 0 (2) 61 -100 1 (0) Over 100 5 (5) While successive policymakers placed varying degrees of priority on their respective attacks against inflation, viewing differently the costs and benefits of various types of anti-inflationary programs, most governments recognized the undesirability of inflation and devoted considerable attention to checking it. Previous Stabilization Efforts 2/ 6. There is no difficulty in explaining the high inflation rates of the immediate post-war period, when the Peron regime combined expansionary monetary 1/ Annual average changes in wholesale prices. Numbers in brackets relate to cost-of-living increases in Buenos Aires. 2/ This account is based on previous Bank economic reports and draws heavily on Mallon, R.D. and Sourouille, J.V., Economic Policymaking in a Conflict Society, Harvard University Press, 1975; as well as Diaz Alejandro, C.F., Essays of the Economic History of the Argentine Republic, Yale University Press, 1970; and Diaz Alejandro, C.F., Exchange Rate Devaluation in a Semi-Industrialized Country: The Experience of Argentina, 1955-1961, MIT University Press, 1965. and fiscal policies with wage and price measures which redistributed income from the agrarian export sector to the urban sector and particularly to wage earners. Beginning in 1949, it was becoming increasingly apparent to the authorities that the redistribution policies needed to be partially reversed, if primary exports were to expand at a rate permitting even the import substi- tuting sectors to fill their import requirements. However, the urban trade unions, one of the two major sources of government support, were not prepared to cooperate. The resulting urban-rural struggle over income shares, taking place against a background of balance-of-payments weakness and a drop in per capita output (attributable in part to unfavorable weather), yielded an inflation rate averaging about 30 percent per annum in 1949-1952. Stabilization Through Controls and Corrective Inflation 1953-57 7. The first post-war stabilization effort took place during the last two years of the first Peron regime (1953-1955). Direct wage and price controls, combined with the lagging of exchange rate devaluation, led to a reduction of inflation rates to single-digit levels, but was accompanied by a significant deterioration in agriculture's terms of trade and with it stagnation in its output and exports (Tables 9.5 and 3.14). Real economic growth of industry and other sectors outside traditional agriculture was high during the period, and so was the increase in bank credit to both the public and private sectors. The 1953-1955 price stabilization attempt was thus characterized by effective wage and price constraint policies which failed to eliminate underlying inflationary pressures. There was excess demand and price relationships were distorted. 8. The overthrow of President Peron in September 1955 inauguratect a policy of assistance to the rural sector, mainly through correction of the exchange rate. In addition, a 10% limit was decreed on wage increases. The post-Peron realignment of the price structure, however, was directed by a politically weak government subject to great pressures from all interest groups. Economic ministers were not able to get a simultaneous hold on exchange rate, budget, credit and wage policies. Devaluations and other attempts to change relative prices in favor of exportables and viable import- competing activities were carried out amid financial and political disorder, as each sector resisted bitterly measures detrfmental to its real income. Thus, despite restrictions placed on the right to strike, it became impractical to stick to the limited money wage increases, aind within a year it was neces- sary to graljt another large wage adjustment which maintained the momentum of the inflationary process. 1/ A one-year wage freeze instituted a year later was also ineffective, and money wages increased even more than the cost of living in 1957. While wage policies alienated the labor movement, they were unsuccessful in restraining money wage increases. Moreover, the Provisional Government was not prepared to risk a recession by adopting severe monetary and fiscal restrictions. The increase In bank credit was equivalent to over 7.5% of GDP in 1956-1957, thereby sanctioning not only a big increase in real GDP but also a further acceleration of prices. Finally, the rural 1/ The 10% limit had probably been too severe in any case, having been based on a serious underestimate of the impact on domestic prices of the devaluation and removal of price controls. -4- sector was slow in responding to somewhat more favorable circumstances. The rigidity shown by rural output during the mid-fifties contributed to pressures on exports and the current account balance; international reserves fell by over $350 million during the 1956-58 period (see Table 3.15). 9. Under better political and social conditions, and with higher resource mobility, the post-1955 realignment of relative prices might not have had the acute inflationary effect that it, in fact, did have. Upward pressure on the price level could have been expected from corrective increases in the exchange rate and in other prices that had lagged behind the pre-1955 inflation, but the failure of post-Peron governments to keep public budget deficits under control and to persuade trade unions to accept wage restraint, led to the spiraling of corrective price increases. This in turn made necessary further exchange rate devaluations in order to preserve real rural income gains, leading to fresh wage demands and new twists in the spiral. 10. It may be concluded that the sectorial and exchange disequilibria created by misguided policies during the latter half of the 1940s gave autono- mous Argentine inflation its first potent push. Although the inability to correct such disequilibria may be explained by government weakness in hand- ling fiscal, monetary and wage policies, the 1956-58 experience also suggests that price inelasticity in the traditional export sector was an important con- straint, and it became clear that in the long run stabilization efforts would fail, unless the increase of exchange earnings kept reasonable pace with the desired overall annual growth rate. The need to strengthen sectors producing new exportable goods (whether agricultural or manufactured) thus became increasingly obvious. The 1959 Shock Treatment 11. After gaining broad support from the wage-earning classes and conducting a political campaign with a strongly nationalistic and populistic flavor, the Government of President Frondizi embarked in 1958 on a program of large general wage increases and expansionist monetary and fiscal policies. There followed a massive outflow of capital and a foreign exchange crisis, which in turn precipitated a sharp reversal of the Government's economic policy. The results of the ensuing "shock" approach are instructive for evaluating present policy. 12. Aggregate demand was to be brought under control by monetary and fiscal restraints; wage increases were to be held below price increases in 1959, and then were to be frozen for two years. At the same time the exchange rate was massively devalued, quantitative trade restrictions were eliminated and an aggressive effort was made to attract foreign capital. The resulting sharp recession, which witnessed the only annual decline in real GDP in the decade from 1952-1962, began in the second quarter of 1959 and lasted for about a year. Nevertheless, the rate of inflation sharply accelerated. It is noteworthy that in a year when real wages declined by over 20%, the cost of living and wholesale price indices rose by over 100%. - 5 - 13. Subsequently, inflation decelerated, as the exchange rate remained fixed, and both real wages and GDP began to increase. This recovery was short-lived, however. Efforts at stabilization broke down, as concessions made to labor demands were breached. Official incomes policies and government borrowing did not stay within established ceilings. The Government refused to adjust the exchange rate, which was considered one of the cornerstones of its development program, and exports fell as agriculture's internal terms of trade deteriorated once more. Other factors contributing to the breakdown of the stabilization attempt in 1961 were poor weather conditions and a precipitous outflow of short-term capital. 14. One conclusion from the 1959-61 experience is that stabilization programs that try to stop inflation and to correct exchange rate distortions with shock treatment, relying on devaluation, monetary and fiscal stringency, as well as wage controls are likely to result in severe contractions in real output without achieving more than temporary relief from price increases and balance of payments difficulties. As any sensible stabilization plan must allow for some corrective inflation--i.e., the catching up of prices that had beLn artificially restrained and cost increases that had occurred before the plan--it cannot result in an immediate end to inflation. Conflicts over maintaining income shares are intensified in the recession, which may then force abandonment of the stabilization effort. If, at the same time, current account performance is weakened by a fixed exchange rate within a framework of a closed economy, instability in the capital balance may follow. Price Stabilization and Trade Liberalization 1966-69 15. A different policy was adopted during the Government of President Ongania between 1966 and 1969. The approach was based on the reduction of inflation by means of an incomes policy under which business firms entered into "voluntary" agreements with the Government to limit price increases at the same time that labor's relative position was maintained by adjusting wages in small steps before they were frozen for over 2 years in 1966-67. The exchange rate was again pegged after a substantial devaluation, which was partially compensated by a reduction of import duties and increased taxes on traditional exports. Little weight has been placed by analysts of this program on the price competition with imports which resulted from the substan- tial tariff reduction--the first in modern Argentine history. The attempt to subject the industrial sector to increased competition, and thereby achieve both greater price stability and improved allocation of resources, had already been tried during 1956/57. Then, however, import liberalization covered mainly non-competing product lines and had little effect on industrial struc- ture. It was only during the 1967/69 stabilization program that policy makers lowered external tariffs sufficiently to make international competition an actual threat to domestic industry. 1/ Sound fiscal and a cautious monetary 1/ Computations of tariff redundancy show that excess protection in import competing industries was relatively small and close to the situation of early 1979. See Berlinski, J. and Schydlowsky M., "Incentives for Industrialization in Argentina," Ch. I, to be published by Johns Hopkins University Press, 1980. - 6 - policy also played an important role in that program, which achieved price stabilization together with growth in output and employment. Positive real interest rates emerged, not because of a freeing of nominal interest rates, which were still subject to control, but as the result of the sharp reduction in the rate of inflation. This emergence of positive real interest rates in the banking system did not prevent expansion in private investment and a substantial increase in GDP. 16. In economic terms the anti-inflation program implemented in 1966-69 seems to have been the most successful one. Inflation declined from annual rates of 26% to 6%, and economic growth accelerated from 3% to 9%. In addi- tion, unemployment remained relatively low and real wages recovered. It was only during this period that an effective attempt was made to open the economy. There is some evidence that the combined effect of the exchange rate freeze, tariff cuts, and the gradual reduction of export taxes (after the initial increase) was to reduce the relative price of industrial products to levels not reached in years. This was a healthy development in view of the structural readjustments required for Argentina to grow in a more balanced manner, but it also made it more difficult to continue with the price truce, which was imposed during the first two years of the stabilization program. Once the political base of the Ongania regime was eroded in May 1969 the program became imprac- tical, mainly because its success depended on keeping prices in the productive sectors in line with exchange rate, wage, and public sector policies. Prices began to rise more rapidly after the price truce was abandoned, and the peso was devalued in mid-1970. 17. None of the anti-inflation programs undertaken in the period 1954- 1975 had much room for maneuver on the international side. With export earnings remaining stagnant, rising current account deficits and falling international reserves in six of the nine years when stabilization was attempted, it was difficult for the country to risk an overall balance of payments deficit because of uncertainty in world export markets and the danger of increasing short-term capital movements. The importance of foreign markets and interna- tional terms of trade as factors affecting anti-inflation programs in Argentina has been fully documented in previous Bank economic reports. 1/ Highly volatile foreign price movements had a powerful destabilizing influence on the Argentine economy. Domestic policy under earlier programs attempted to compensate for external variations. In this context, export taxes applied to meat and other export products did at times play a useful role, particularly during the program of 1966-69, when they were applied first to compensate for the devaluation and were then reduced under the fixed exchange rate regime to help support agricultural exports. In earlier and later periods, however, export taxes were more vulnerable to political pressures of the urban classes which, over a period, converted them into instruments which adversely affected production and export incentives. 1/ For example, IBRD, "Current Economic Position and Prospects of Argentina," Report No. 5406-AR, February 20, 1975. 18. The question remains, however, whether compensation for, or adjust- ment to international economic forces is the appropriate strategy for Argentina. The history of Argentine anti-inflation efforts is not very useful in evaluat- ing this question, since the compensation strategy was virtually always adopted. It would appear, however, that governments might have underteken too great a policy burden in opting for compensation. The information system available to the Argentine authorities for managing aggregate demand, for designing and implementing incomes policies, and for establishing an appropriate role for direct controls improved only slightly and spasmodically over the years. Political pressures, built up to influence the government in its use of various instruments of monetary, fiscal, labor and commercial policies, became increasingly a part of the problem. Thus, it may well be that fewer objectives as well as more reliance on self-regulating market mechanisms are worth a try, although it should not be overlooked that at the same time when Argentina is opening its economy the frequency of destabilizing external shocks appears to be growing, and the pressures for protectionism in the industrialized countries are increasing. CHAPTER II INFLATION AND STABILIZATION ATTEMPTS: 1975-1978 19. The experience of the current Administration in its first two and one-half years in office, from April 1976 to December 1978, was not dissimilar to many episodes in Argentina's past experience. It did, however, represent a distinct break from the policies of the previous Administration. Excess Demand and Crisis in 1974/75 20. In late 1974 an economic crisis emerged, resulting in large part from a breakdown in political authority and a consequent inability to obtain support for needed economic policy decisions. The crisis was precipitated by a drastic reversal of the export boom of the previous period, during which it was possible to limit inflation to the 30%-60% range only with rigid price controls. Management of effective demand was virtually eschewed between the end of 1972 and 1974, with a consciously expansionary domestic policy adding to the effects of the export boom. That boom came to an end in mid-1974, when, in addition to a fixed exchange rate policy and high export taxes, as well as an EEC ban on beef imports, production of grains declined by 15% because of poor weather and weakening world grain prices. Deterioration of the external sector coincided with an intensification of internal social and political strains following the death of President Peron in 1974. In the difficult political situation which followed, management of the domestic economy was effectively abandoned, and the inflationary pressures built up during 1973 and early 1974 were unleashed. Prices, which had begun moving upwards in mid-1974, accelerated from annual rates of 20% to 250% within one year. - 8 - 21. In 1975, the country found itself locked into a vicious wage-price spiral. Despite deteriorating terms of trade and shrinking domestic income, nominal wages were adjusted upward continuously in a vain effort to increase the level of real wages. Inflation was exacerbated by a rapidly deteriorating fiscal situation, caused by lags in tax collections, a breakdown in tax administration, excess outlays for large public investment projects and accelerated hiring of new public sector personnel. Monetary expansion continued unchecked, propelled by heavy Treasury borrowing from the Central Bank, automatic Central Bank rediscounting to commercial banks and the expan- sionary effects of rollovers of about US$1.2 billion of short-term borrowings abroad by private companies, which led to peso losses incurred by the Central Bank as a result of the forward exchange purchase guarantees given to importers. 22. Various attempts to reduce inflation and improve the balance of pay- ments in 1975 were unsuccessful. A shock program in June, consisting of a massive devaluation, adjustments in public sector tariffs and wage restraints, backfired, as the Government was unable to control union demands for wage increases which more than compensated for the devaluation. Prices increased by over 60% within two months. In September 1975 a new economic team attempted to combine fiscal-monetary restraint with the maintenance of high urban incomes and employment. Although external funds through the Oil Facility and the Compensatory Financing Facility of the IMF provided balance of payments support, the mutual incompatibility of the Government's goals and the inability to reverse inflationary trends led to a further deterioration of the economy. GDP declined in 1975--the first time in 12 years--with adverse effects on employment and incomes in the private sector. 23. By March 1976 economic difficulties had reached critical proportions. The annual rate of increase in domestic prices, which had reached 335% by the end of 1975, accelerated to an annual rate of over 800% in the first quarter of 1976. The fiscal situation had deteriorated to the point where Treasury revenues were covering less than 20% of expenditures by the end of the first quarter of 1976. The current account deficit widened, short-term capital continued to flow out, and net foreign exchange reserves were nearly exhausted. The authorities were incapable of regaining effective control over the economy. This, together with growing social and political unrest, led the military to intervene. 24. The 1974-1975 experience is worth recapitulating here, because for the first time hyper-inflation was approached. This must have had a major impact upon the behavior patterns of all economic agents in the subsequent period. The rapidity of price/wage responses and the tendency for quick transmission of inflationary impulses from one sector of the economy to the others, for some time one of the salient features of the Argentine economy, must have been reinforced. The 1974/75 experience is also interesting in the light of recent research suggesting that the most damaging effects of inflation on resource allocation and economic development flow from its intertemporal and intersectoral variability, both of which are highly cor- related with rate of price changes. 1/ During accelerated inflation, the 1/ See for example; Gaffee, D. and Kleinen, E., "The Welfare Implications of Uneven Inflation", in Lundberg, E., ed., Inflation Theory and Anti- Inflation Policy, McMillan, 1977, pp. 285-307. unexpected component of inflation has a particularly strong disruptive effect on relative prices. The speed at which suppliers adjust to unexpected changes in demand is different across sectors, depending on the characteris- tics of production functions, the availability of intermediate inputs, the magnitude of storage costs and other commodity-specific attributes. These attributes play a considerably lesser role when changes in demand are fully foreseen, and adjustments can be planned in advance. When relative price variability is great and cannot be foreseen, therefore, market prices become less reliable as allocative signals. The consequent price-cost uncertainties increase risk and reduce investment as well as lower returns on investments already made. Resource misallocations among industries may be generated to the extent that these effects are distributed unevenly across sectors. Finally, higher inflation and price variability have negative effects on portfolio composition and make monetary management difficult. 25. There is evidence for the relevance of these considerations to Argentina, where the monthly dispersion of relative price increases during the 1977-79 period was significant and positively correlated with the rate of inflation, particularly when changes in the rate of inflation were unantici- pated by the public. 1/ In addition, comparison of monthly inflation rates and their variability over the past 25 years reveals a threshold for the rate of inflation beyond which intertemporal variability increases disproportion- ately. The regressions showed that in Argentina variability becomes markedly higher when inflation rates exceed 50% to 60%. 2/ While it would be wrong to attribute the disorder and stagnation of the Argentine economy in 1975 to the variability of inflation alone, it may explain some of the problems experi- enced in raising efficiency and output in subsequent years. Attempts to Control Inflation and Restructure the Economy: 1976-78 26. The Administration which came to power in March 1976 adopted a gradualist approach, the main features of which were described in the 1978 Bank Economic Report. 3/ Its primary objectives were to redress the external imbalances and to eliminate the danger of hyper-inflation. Monetary and fiscal policies, supported by wage controls, succeeded in bringing down the rate of inflation from 713% during the year ending in April 1976 to 150% a year later. No further progress was made, however, in reducing the rate of inflation during the remainder of 1977 and 1978. What follows is a summary assessment of the Government's efforts to control inflation gradually, while keeping output and employment at relatively high levels. 1/ See Annex B, "Inflation and the Dispersion of Relative Commodity Prices in Argentina." 2/ The elasticity of inflation variability with respect to the average rate of price increases was around 0.5 for periods averaging inflation of 45% and less; that elasticity increased to 1.2 when the average rate of inflation accelerated to 70% or more. 3/ IBRD, "Economic Memorandum on Argentina," Report No. 2209-AR, November 26, 1978. - 10 - 27. On the fiscal side, the overall public sector deficit was reduced from nearly 16% of GDP in 1975 to 4% in 1977, as follows: 1975 1976 1977 1978 1/ (percent of GDP) Current Revenues 24.2 26.3 31.9 35.5 Current ExDenditures 31.0 25.1 23.4 29.0 Current Surplus/Deficit(-) -6.8 1.2 8.5 6.5 Capital Revenues 0.2 0.1 0.4 0.8 Investment Expenditures 8.9 12.4 12.8 12.4 Deficit -15.5 -11.1 -3.9 -5.1 Over half of the improvement in the 1975/77 public sector finances steyn.ned from better and faster collection of taxes and the introduction of several emergency taxes. The remainder derived from (i) reductions in real current expenditures, (ii) improvement in social security finances, and (iii) the recovery of public enterprise finances, which together more than compensated for a 3.1 percentage point rise in the share of public investment in GDP. 28. No further progress was made in 1978 in reducing the public sector deficit, which is estimated to have been about 5% of GDP. While current revenues were increased, despite a rather sharp recession in economic activ- ity, current expenditures rose to almost 30% of GDP, a share it had previously reached only in the crisis years of 1974 and 1975. Although some part of that increase was apparently a result of the 1978 border conflict (military expendi- ture is estimated to have been 3.3% of GDP vs. 2% a year earlier), a more important source was higher wages and social expenditure for government employees. 29. Given the decline in private investment and consumption which occurred in 1978 (see Table 2.3b), it is hard to argue that the failure to reduce further the public sector deficit was a primary factor in maintaining a rate of inflation of 150%. If one takes the view that only a continuing decline in the fiscal deficit is going to break inflationary expectations and/or the self-sustaining momentum of the inflationary process, one can point the finger at the public sector. It is doubtful that such importance in the formation of inflationary expectations can be attributed in Argentina to relatively small changes in public sector finances. 30. The contractionary fiscal policy of 1976/77 was supported by changes in the financing of the public sector deficit. The share of Central Bank borrowing was reduced from 65% in 1975 to 40% in 1977, while the share of domestic bonded debt increased from 11% to 20%. In line with the authorities' efforts to build up the Central Bank's fragile foreign exchange position, recourse to foreign financing was increased from an insignificant proportion 1/ Revised Budget. - 11 - in 1975 to 37% of the overall financial requirements in 1977. The need of the public sector to finance its deficit in the capital markets has led to a higher interest burden in more recent years. 1/ 31. While fiscal policy does not appear to have been unduly expan- sionary, particularly in 1976 and 1977, the money supply has grown rapidly throughout the period. The Government was unwilling to restrict credit as a tool of stabilization, because of the possibility of causing a strong recession, high unemployment and renewed social unrest. Money supply in the narrow sense (M1) increased at roughly the same speed as inflation. Since interest bearing time deposits could, however, be held for as little as one week, an alternative which became attractive after the monetary reform in 1977, M2 rose at a substantially faster rate. 2/ On the supply side private sector credit expansion was a major force in the large increase in money growth (see Table 1). While credit to the public sector decreased in relative terms, the liberalization of the external sector played a role in monetary expansion as discussed below. 32. Rather than restrict credit, the Government attempted in 1977 to reduce the rate of inflation by directly controlling prices, aiming in that way to reverse inflationary expectations. A four-month price "truce" implemented in March 1977 was, however, not successful. It seems that inven- tories were built up in expectation of price and interest rate increases to follow. 3/ The end of the price truce coincided with a financial reform, which included the freeing of interest rates. Although not the intent of the authorities, interest rates rose to exceptionally high levels. After credit had been rationed in the 1973-75 period, with few customers able to get official credit at highly negative interest rates, the return to a free market for credit changed dramatically the demand structure between the formal and informal markets. In addition, speculative credit demand continued strong 1/ The Ministry of Finance currently classifies 92% of interest paid on non-indexed government bonds as amortization, since most of the interest payments are only made to maintain the real value of the bond. These expenditures, as a consequence, are not shown in the deficit calculations but are registered under the financing of the public debt. If all interest payments are included in the calculation of the public deficit, its share of GDP reached nearly 5% in 1977 and is estimated to have been over 7% in 1978. 2/ After falling to 30% in 1975/76, total financial assets which had been close to 40% of GDP in 1970 recuperated to 36% and 40% in 1977 and 1978 respectively. 3/ However, the data on inventories in Argentina are of too poor quality to be used to assay this hypothesis. Table 1: ARGENTINA - QUARTERLY INDICES OF MAJOR MONETARY AND PRICE INDICATORS, 1977-1979 Monetary Base Money Supply Money Supply Credit to (total) (Ml) (M2) L/ Public Sector Private Sector 1977 1 100.0 100.0 100.0 100.0 100.0 II 147.6 137.0 139.1 141.7 167.3 III 192.9 149.8 186.1 172.7 242.6 IV 271.0 201.3 264.0 236.4 320.4 1978 I 329.1 - 340.9 356.3 406.9 II 414.9 319.4 456.3 461.5 520.4 III 522.0 350.1 566.5 525.4 659.4 IV 559.6 543.9 695.9 610.4 894.7 1979 I 641.6 611.1 877.9 835.3 1195.3 II 836.4 796.4 1163.1 992.1 1644.7 III 982.8 886.8 1531.0 1283.0 2275.1 IV 1031.9 1335.0 2074.8 1536.7 3066.5 tz3 Index of Wholesale Monthly Average Interest Rates Monthly Average Increase in Prices Lending Deposits Cost of Living(,)Wholesale Prices 1977 I 100.0 4.5 -- 7.9 8.2 II 119.8 5.5 6.1 6.7 6.2 III 153.0 8.] 7.3 9.0 8.5 IV 195.3 13.1 10.1 9.6 8.5 1978 I 247.2 11.2 8.4 9.7 8.1 II 308.0 8.2 6.9 8.8 7.6 III 374.4 7.7 6.6 6.9 6.7 IV 475.2 7.5 6.7 9.2 8.3 1979 I 609.9 7.2 6.5 9.3 8.7 II 782.1 7.1 6.5 7.9 8.7 III 1014.8 7.5 7.2 8.5 9.1 IV 1086.7 6.9 5.9 4.6 2.3 1/ Currency, demand and time deposits. Source: Central Bank and Bank of Boston. - 13 - in expectation of more rapid inflation by the end of 1977. Thus, even in the face of rapidly expanding credit availability, nominal interest rates rose steeply in the second half of 1977 to 13% monthly, equivalent to real interest rates of 5% monthly (see Table 1). The rise in interest rates apparently reduced inventories toward the end of 1977, and led to the previously cited decline in economic activity which began in the first quarter of 1978. 33. The strength of the i;iflationary process in Argentina had become evident in 1975 and 1976, and the new Administration attempted through wage controls to attenuate one of the key links in the process, the wage-price spiral. Thus, during the first three months of the stabilization program a nominal wage adjustment of only 15% was granted compared to a 54% increase in prices (see Table 10.1). 1/ In 1977 and 1978 the wage limits were not fixed so rigidly. While permitted money wage increases, with few exceptions, did lag substantially behind price increases of the previous period, actual money wages after an initial decline apparently kept up with or even surpassed the price increases of the previous period (Table 10.2). The result was the maintenance of real wages from June 1976 to June 1979 with a substantial improvement in the second semester of 1979, as shown in Table 2. Thus, after the initial success of dampening inflation, the link between wages and prices was maintained. Since unemployment in major cities remained low, averaging roughly 3% in 1977 and 1978, many employers extended wage and other benefits beyond the legal limits, confident that in an inflationary environment they would have no difficulty in passing on cost increases through higher prices. 34. The large reduction in real wages in 1975 and early 1976, combined with the success of the public sector in cutting real current expenditures, led to a very substantial cut--10%--in total consumption and an implied greater decline in private consumption. This was followed in 1977 and 1978 by a further small decline in total consumption, mainly caused by a continuous decline in private consumption. Besides the decrease in current expenditures, the shift of public savings from a negative 7% of GDP in 1975 to a positive 8% in 1977 was also the result of a substantial increase in current revenues. At the same time, the shift from private consumption to savings in 1977 and after seemed to be mainly induced by the rise in interest rates. 2/ 35. These figures suggest that the persistence of high inflation may have been largely structural or expectational rather than demand or cost induced. This appears to have been the case, for example, during the recession in early 1978, when many industrial firms reduced production by half and doubled prices at the same time. Only in a highly protected, oligopolistic market could the increased costs of higher interest rates and low volume production have been so readily passed on to the consumer. 1/ It should be noted that a good part of that decline in real wages had actually occurred in 1974/75, when an increasing number of goods were sold in black markets. 2/ It is doubtful, if the rise in interest rates had such a powerful effect to lower private consumption at a time when real wages were maintained and unemployment was low. The shift to self-employment may have induced individuals to save more than before, in order to make up for lost social security benefits. - 14 - Stabilization Attempts, Economic Growth and Employment 36. The early 1970s witnessed high rates of public investment and a decrease in private capital spending, even though exchange rate and subsidized credit policies encouraged the accumulation of stocks, importation of capital goods and residential construction. It would seem that it was less the adjustment of interest and exchange rates to more realistic levels in 1976/78, than the continuing high and variable rates of inflation which led to rela- tively low private investments during most of the period. Combined with declining demand by consumers, unsatisfactory investment negatively affected the development of GDP, which by the end of 1978 was 1% below the 1974 level and only 15% above 1970 in real terms. 1/ 37. Despite the gradual character of the stabilization program, GDP remained far below its potential; it also fluctuated widely between 1976 and 1978. Following the sharp decline in economic activity during the 1975/76 crisis, output recovered rapidly in the first three quarters of 1977. Originat- ing in the agricultural sector, which benefitted from the virtual elimination of export taxes and favorable world prices, private investment rose strongly in industry and construction, leading to an increase in aggregate economic activity of 9% between September 1976 and September 1977. That expansion came to a sudden halt in late 1977, when interest rates increased dramatically as a result of structural changes in the financial system. Faced with sudden increases in credit demand, the monetary system responded with a steep rise in interest rates. Private investments dropped almost immediately by over 13% during the first semester of 1978, and production dropped by 4% for 1978 as a whole. 38. One of the most surprising facts of this whole period has been the low level of unemployment which averaged 3%, half the rate experienced in earlier years. As mentioned above, the Government had given special emphasis to maintaining employment during the stabilization program in order to avoid social unrest. Moreover, Argentine employers customarily hoard labor during short periods of recession. There are, however, a number of other important factors to explain this phenomenon. On the demand side, both the fall in real wages in 1975 and early 1976 as well as the high mandatory severence payments in case of firing induced firms to keep their work force underemployed rather than letting them go. On the supply side, low wages - particularly in the public sector - motivated workers either to retire from the labor force and receive pensions, which the Government began to index in 1977, or to shift from dependent employment to self-employment. 2/ It is estimated that self- employment rose from 15% of total employment in the early 1970s to 25% in 1976-78. Net emigration is also estimated to have increased, particularly in the case of foreign construction workers, many of whom returned to Uruguay, Paraguay, Bolivia and Chile. This occurred not only because of relatively 1/ In per capita terms, those changes would be -6% for 1974/78 and +4% for 1971/78. 2/ It does not seem that the shift towards self-employment is comparable with such similar movements in other less developed countries. In most cases net earnings were about as high as or even higher than they had been in the factory or office. Table 2: ARGENTINA - WAGES AND UNEMPLOYNENT INDICATORS, 1976-1979 Industrial Wage Index 1/ Unemployment Rate 2/ Nominal Real (in Percent of Labor Force) 1976 II 100.0 100.0 4.8 III 112.8 95.4 4.5 IV 150.9 98.2 4.1 1977 I 186.3 92.7 II 267.0 108.9 3.2 III 297.0 95.3 3.4 IV 440.2 106.0 2.2 1978 I 499.7 91.7 II 700.6 98.9 3.9 III 806.0 92.8 2.6 IV 1216.9 109.6 1.7 1979 I 1433.0 97.7 II 2034.5 111.2 2.1 III 2424.3 104.0 1.5 IV 3704.2 133.0 1/ From a sample of 1,300 firms. Wages include bonuses paid in second and fourth quarters of each year. 2/ Buenos Aires only. Source: Ministry of Economy, INDEC - 16 - better job opportunities in some of those countries but also because of the Argentine authorities' preoccupation with social unrest and international tension. The Role of External Sector Imbalances 39. Rapid export growth together with a substantial decline in imports produced an external current account surplus of US$650 million in 1976, which expanded to over US$2 billion in 1978. Some part of the initial large reduc- tion in real wages and the decline in overall aggregate demand in 1976 would seem to have been necessary to restore equilibrium in the balance of payments. While the phenomenal 1977 growth in exports and the favorable current account balance were a consequence of record crops and conscious external sector policies, the increasing current account surplus in 1978 primarily reflected the unplanned recession. 40. The emergence of a current account surplus in 1976 was followed in 1977 and 1978 by substantial net capital inflows (Table 3.1). The public sector was the major recipient at the beginning. Starting in 1977, particu- larly after domestic interest rates increased to high levels, the private sector, including financial intermediaries serving the private sector, began to borrow abroad on an increasing scale. Although desirable from the viewpoint of lowering domestic interest rates, this recourse to external finance was viewed as undermining internal credit and monetary policies. As a consequence, controls over external capital, including a two-year minimum maturity and a 20% deposit requirements for foreign loans to Argentine residents (later reduced to 15%; 10% applied to trade credits), were established in mid-1978 to increase the cost of foreign borrowings. 1/ 41. At the end of the first quarter of 1978, although not announced as an official policy at that time, the authorities began the practice of lagging exchange rate depreciation behind the increase in domestic prices relative to external prices. This policy, if practiced during times of large current account surpluses, would tend to accelerate the inflow of capital. Instead, the capital controls, a narrowing of international and domestic interest rate differentials, and the increased chance of a border conflict resulted in a net outflow of capital for the account of the private sector in the second half of 1978. It is impossible to quantify the importance of each factor in contribu- ting to the reversal of private capital flows, except that most of the capital outflow did indeed take place during the last quarter when chances of a border conflict became more serious and when interest rate differentials between foreign and domestic credit markets decreased spectacularly from a monthly average of 3% in early 1978 to 0.7% at the end of the same year (see Table 6.1). The authorities did not believe that capital controls had any major impact and were ready to abandon them by late 1978. Capital inflows for the account of the public sector continued to be substantial, leading to another overall capital account surplus. 1/ In April 1978 minimum maturities for the financing of capital goods were also established. - 17 - 42. By the end of 1978, the combined effect of a three-year period of current account surpluses and two years of large capital inflows was to produce gross foreign exchange reserves of US$6 billion, compared with less than US$100 million when the Government came into office in March 1976. While the continluous balance of payments surpluses would lead one to believe that the expansion of money supply, and with it inflation, were fueled by the ex- ternal sector, its contribution was actually falling from 26% of monetary expansion in 1976 to 18% in 1978. In addition, the opening of the economy to international capital markets had led to significantly lower interest rates in 1978. After high domestic interest rates had attracted foreign capital in 1977 and early 1978, the very increase in supply of the external financial resources allowed the authorities to lag the exchange rate in mid-1978. This, in turn, led to lower costs of borrowing abroad and forced domestic interest rates down. 43. Meanwhile, the large foreign exchange reserves and Argentina's ability to tap the high level of liquidity in the world economy set the stage for the new approach to inflation control in the framework of an open economy. The private sector would have every incentive to borrow abroad, if expecta- tions of high domestic credit costs continued in Argentina. At the same time that this approach would greatly reduce the influence of the monetary authori- ties over interest rates and total money supply, it would make such control less important for the achievement of price stabilization. - 18 - CHAPTER III THE 1979 PROGRAM AND ITS IMPACT ON INFLATION 44. In late December 1978 the Government announced its new program consisting of six major components: preannounced adjustments of (i) exchange rates, (ii) prices of public sector services and fuels, (iii) wages, and (iv) the monetary base of internal origin; the other two major components were (v) a five-year tariff reduction program and (vi) the formal reopening of the capital market to international transactions. The scheduled changes in the first four policy variables are summarized in Table 3. As will be seen below, the key element was the exchange rate policy which, combined with tariff reductions, became the major tool of stabilization policy. 45. One intention of the package of measures was to dampen inflationary expectations, but the key to the program was its direct operation on the compe- titive milieu faced by domestic producers, making it unprofitable to raise prices "excessively" regardless of expectations. With prices of tradeable goods subject to competitive forces, so that employers would be forced to bargain more strenuously with the unions, wages and other costs would also be restricted in their movement. 1/ Given the importance of industry in the Argentine economy and its leadership in setting wages in other areas, the authorities expected that other sectors, including those which produced non-tradeable goods and services, would also experience less wage pressure. Commerce was expected to apply fixed percentage margins to wages and other costs, thus contributing to the process of price deceleration. In short, the deceleration of inflation would quickly spread from industry to commerce and other sectors. These forces would soon overwhelm any pre-existing inflationary expectations. While greater inertia might exist in the non-tradeable sectors, these sectors were relatively small and their behaviour would modify only slightly the overall impact. Moreover, many services were provided by public enterprises, whose prices were subject to an overall pricing policy under the program. 1/ Though many unions were intervened, it was expected that during the liberalization of wage controls in 1979 collective bargaining on a local and industry-wide level would prevail. Table 3: ARGENTINA - 1979 POLICY GUIDELINES FOR PUBLIC SECTOR TARIFFS, THE EXCHANGE RATE, WAGES AND MDNEY SUPPLY (NMnthly percentage changes) /1 Public Sector Prices and Tariffs Electricity, Postal and Minimum Telephone, Gas Sanitation Exchange and Monetary Resources O/5 Coal and Crude Oil Transport Works Rate Basic Wages Internal Origin - January 5.9 5.9 /2 5.9 5.2 4.0 February 5.7 - - 4.7 4.0 March 5.5 11.5 11.5 4.7 4.0 15.0 April 5.3 5.3 - 4.6 4.0 03 May 5.1 - 10.7 4.5 19.6 - June 4.9 10.3 - 4.2 102 15.0 July 4.7 4.7 9.8 4.0 10.2 2 August 4.5 - - 3.8 4.0 September 4.3 9.0 /2 9.0 3.6 4.0 15.0 October 4.1 4.1 - - 3.4 4.0 November 3.9 - 8.2 3.2 4.0 December 3.7 7.7 - 3.0 4.0 15.0 /1 Effective the first of the month, unless indicated otherwise. /2 Effective the fifteenth day of the month. /3 The flexibility margin was reduced from 75 per cent to 70 per cent in May; to 65 per cent in June; to 60 per cent in July, and to 55 per cent in August and abolished in September. /4 Tariffs for electricity may be increased by an additional 2 percentage points in September, and gasoline prices may be increased further to reflect higher oil import costs. /5 Monetary resources of internal origin include effects of changes in reserve requirements as well as changes in net domestic assets of the CentraJ¶Bank. Percentage figures for each quarter presents cumulative changes from end of 1978 on. Source: Ministry of Economy - 20 - Stabilization Through Increased External Competition 46. The key policy tool for increasing competitive pressure was the exchange rate. Devaluing at a lower rate than the ratio of domestic to international price increases would result in the gradual elimination of tariff redundancy. Once redundancy was eliminated and foreign competition made effective, the rate of domestic price increase would be limited to (a) the rate of price increases, abroad of those tradeable goods important to the Argentine economy and (b) the rate of depreciation of the peso, a policy variable. 1/ When the rate of inflation reached the level produced by the combined effect of price changes abroad and the exchange rate devaluation, "convergence" would have taken place. It was recognized that convergence would not occur immediately: (i) because there was still some redundancy in the tariff at the end of 1978; and (ii) because the poor organization of import trade would allow importers to acquire short-term monopolistic rents. 47. It should be noted that the above explanation runs in terms of competition with imports. Also important in determining the rate of Argentine inflation, however, is the impact of foreign price increases for primary export products. Even when the Argentine economy was not open, and high export taxes and ad hoc restraints on exports were common, international price fluctuations in meat, grains, and other primary products had a powerful impact on the Argentine inflation rate. The importance of wage goods, particularly meat and grains, in explaining the Argentine inflation rate has long been recognized. 2/ With the liberalization of the export trade regime and an unchanged export tax structure, the impact of international price fluctuations became even more direct. 48. Whereas earlier tariff reductions failed to eliminate redundancy or were applied mostly to goods not produced in Argentina, the new tariff schedule provides for major reductions in tariffs on goods produced in Argentina. The reform program, which excludes imports covered under the vehicle import program, is to be implemented during the 1979-84 period. In 1979, tariffs on goods not produced in Argentina remained at 10%, while tariffs on other goods were reduced by up to five percentage points. This is to be followed by reductions of 8% in 1980 and 1981, and 14% in 1982 and 1983. By the end of 1983 import tariffs will be reduced to a 10% to 40% range, from a 10% to 85% range at the beginning of 1979, with the average rate falling from 45% to 23% of the c.i.f. value of imported goods. Table 4 shows the gradual 1/ It should be noted that although this thesis is part of the monetary approach to the balance of payments, the "law of the single market" is independent of the monetary approach as such. For an explanation see Annex 1 and Swoboda, A.K., "Monetary Approaches to Worldwide Inflation" in Krause, L.B. and Salant, W.S., eds. Worldwide Inflation: Theory and Recent Experience, Brookings Institute, 1977, pp. 9-51. 2/ See for example IBRD, "Current Economic Position and Prospects of Argentina," Report No. WH-2046, 1971. - 21 - Table 4: ARGENTINA - SCHEDULE OF TARIFF REDUCTIONS, 1979-1984 (Levels of nominal tariff rates as of January of each year) Sub-groups /1 1979 1980 1981 1982 1983 1984 Food , beverages, 1 39 35 31 27 20 12 tobacco 2 45 41 37 30 22 14 3 -52 48 40 32 24 16 Other consumer 1 65 61 54 46 38 30 Goods 2 75 70 62 54 46 35 3 85 80 72 64 52 40 Intermediate 1 44 40 36 32 26 18 Products 2 46 42 38 34 29 21 3 48 44 40 36 32 24 Agricultural products 1 21 19 17 15 13 10 of primary origin 2 25 23 21 19 16 12 3 29 27 25 22 18 14 Other primary 1 36 32 28 24 20 15 inputs 2 39 35 31 27 23 17 3 42 38 34 30 26 20 Goods not produced 1 10 10 10 10 10 10 in Argentina 2 10 10 10 10 10 10 3 10 10 10 10 101 10 Capital goods 1 46 42 38 34 28 20 2 48 44 40 36 31 23 3 50 46 42 38 34 27 /1 According to degree of increasing elaboration of inuividual uroducts. Source: Ministry of Economy - 22 - decrease in external tariffs during the six years of the program, with capital goods experiencing the most rapid cuts and durable consumer goods receiving the longest and highest nominal protection. The basic rationale of the program is not so much to lower tariffs rapidly but to promote more equal "effective" protection to all industrial subsectors. 1/ While the tariff schedule reflects the trend towards greater equalization of effective protection by reducing the nominal protection of final consumer and capital goods more rapidly than intermediate products, a wave of ad hoc tariff reductions, introduced in 1978 and reinforced in 1979, led in many cases to new distortions. 2/ 49. The reductions planned for the early part of the reform period were small and were agreed to only after much debate. If the protection provided by tariff redundancy was to be eliminated and price competition brought to bear, other measures would be necessary. Shortly after the announcement of the 1979-84 schedule, the Government started a special program of tariff reductions for goods whose domestic price increases were above international price increases and the rate of devaluation. Although these ad hoc adjustments were initially labeled temporary (three months), most of them were prolonged for a period of six months or a year. In addition, tariffs on capital goods were lowered to zero in March 1979 in order to facilitate the re-equipment and modernization of Argentine industry at the lowest possible cost. This tariff cut was originally to last one year only, but has now been prolonged for a second year. As a consequence of these measures, tariff redundancy has been reduced more rapidly than would have been possible with the regular tariff reform schedule. The Supplementary Role of Aggregate Demand Policies 50. One notable feature of the Government's stabilization policy since 1976, as noted above, has been the hesitation on the part of the Central Bank to restrain money and credit expansion. The monetary system introduced by the 1979 program is the equivalent of the traditional gold exchange standard in an international inflationary framework with a pegged exchange rate, free capital movements, fractional reserve requirements and a central bank. Equilibrium is attained under this system by the following self-regulating mechanism: excess demand for goods (excess supply of money) produces a balance of payments deficit, which in turn gives rise to monetary contraction until a new equili- brium is reached. Movements in domestic prices (including interest rates) are determined by movements in foreign prices. Under this system, the authorities 1/ The basis for the Commission which studied and decided on the tariff reform was provided by a study on effective protection by Berlinski, J., "La Proteccion Efectiva en la Argentina"; for an evaluation of effective protection of Argentina see IBRD, "Argentina, Structural Changes in the Industrial Sector" Report No. 1977a-AR. 2/ For an example of these distortions, see: Cavallo, D.F. and Swoboda, C.J., "Proteccion Efectiva del Servicio de Transporte Internacional de Cargas por Carretera Argentina", Discussion Paper, IERA, Fundacion Mediterranea, 1979. - 23 - believe that government borrowing can be an endogeneous source of inflation, if it were to reach such levels as to overwhelm the self-correcting mechanism of balance of payments deficits, thus exhausting reserves and forcing a devaluation. As a consequence, the 1979 program precluded Central Bank lending to the public sector, except for seasonal requirements. 51. With capital controls eliminated, the pre-fixing of the Argentine peso vis-a-vis the dollar requires the monetary authorities to determine the monetary resources of domestic origin. Quantitative targets for these resources, set for each quarter in 1979, took into account the effects of the money multiplier as influenced by changing reserve requirements of the Central Bank. The idea of establishing these targets for the expansion in the domestic component of monetary resources was to limit the increase in domestic public sector borrowing and to ensure an adequate supply of credit to all borrowers. The publication of the monetary target was also viewed as a tool for influenc- ing inflationary expectations. 52. In the theoretical framework of the new stabilization strategy, fiscal policy takes on a supplementary function in the view of the Argentine authorities, at least insofar as short-term stabilization objectives are concerned. In an open economy, the crowding-out effect of heavy public borrow- ing in credit markets does not appear if the supply of foreign capital is infinitely elastic. 1/ In Argentina, the authorities targetted a further decrease in the Treasury deficit from 2.8% in 1978 to 1.6% in 1979, with higher public revenues being expected because of the recovery. The policy was not only to contribute in lowering inflationary expectations but was also in accordance with the tendency to decrease government involvement in the economy. 53. The overall public sector deficit was expected to decrease from its 1978 level of about 5% of GDP to less than 4% of GDP as part of the general strategy to reduce public sector participation in the economy. In 1979 the Government continued its privatization program by: (i) selling a number of enterprises which had come under public sector control during the early 1970s; (ii) transfering to the private sector some secondary activities such as storage, transport, and maintenance; and (iii) transfering to the private sector some investment activities traditionally undertaken by the public sector, including road construction and a gas pipeline financed by private firms to be recovered by toll charges. In addition, the public sector deficit was reduced by cuts in public sector investment expenditures and by such current expenditure reforms as the rationalization and decentralization of health and education services. 54. No new revenue measures were introduced in 1979, either in the field of tax or public enterprise rates. While the authorities acted to reduce tax evasion by new administrative arrangements and the introduction of severe 1/ This was probably a realistic assumption in Argentina during most of 1979, when a prefixed exchange rate, combined with a high current account surplus and high domestic interest rates, attracted over US$3 billion of external capital. If expectations were of a more flexible exchange rate together with a turn-around of the balance on current account, that assumption could change. - 24 - penalties, which included prison terms for tax evasion, tax collections were adversely affected by the lapsing of some emergency taxes introduced during the 1976-77 period, by further reductions in export taxes and by a new regula- tion allowing enterprises a liberal revaluation of their assets which would reduce their income tax liabilities. Public sector tariffs, in the meantime, were subject to a preannounced schedule of monthly adjustments at declining rates. Impact of the Program in 1979 55. The First Nine Months. Most of the policies outlined above were imple- mented during the course of 1979. The key variable--the exchange rate--was moved according to plan. The tariff reform was applied. Public sector prices and tariffs were adjusted as envisaged. The monetary resources of internal origin expanded only slightly more than projected in the second semester. However, the response to the elimination of capital controls and the mainte- nance of the schedule of declining exchange rate devaluations, in the face of continuing inflationary expectations, was a substantial inflow of foreign capital to the private sector. Net inflows amounted to over US$1.5 billion in the first nine months, contributing to a substantial expansion of money and credit. The wage targets were not fully implemented. As in earlier years, while "decreed" money wages increased less than the price increases of the previous period, actual money wages increased more, reflecting the tight labor market situation, as unemployment declined from 2.8% to 2.0%. In September 1979, the Government gave tacit legal recognition to the situation and eliminated the ceilings on wage increases, retaining only the 4% monthly increases in minimum wages. 1/ Given these stimuli, it is not surprising that aggregate consumption rose 11% in 1979. GDP as a whole grew 8.5%. 56. Despite the new approach, wholesale and retail prices continued to advance at the same rates and even experienced some acceleration through the first nine months of 1979. Another factor accounting for price increases was the unforeseen rise in international inflation, particularly in primary products. External prices important for determining internal prices increased by over 8% in the first quarter of 1979, (about triple the average rate of increase during 1978), by over 6% during the second quarter (double the 1978 rate), and by 5% during the third quarter. Despite internal demand pressures, the acceleration in external prices, combined with the exchange rate policy, should have led to an overall rate of inflation on a quarterly basis of about 20% if the model were fully operative during this period. Wholesale prices actually increased more than this--by 28% in the first two quarters and 30% in 1/ It should be noted that wage increases after September 1977 continued to be granted monthly or bi-monthly, in contrast with the practice dictated under the wage controls in force prior to 1979, when wages were to be adjusted less frequently. Other things being equal, the more frequent the adjustment of wages to the past rate of inflation, the more infla- tionary the likely impact. - 25 - the third quarter. 1/ Table 5 shows that the unexplained inflation during the first three quarters is somewhat lower when the consumer price index is used. 57. The divergence of price behaviour from what may be called "official expectations" is not easy to explain. The Argentine authorities themselves believed that there had been substantial tariff redundancy at the end of 1978 and that it might have taken some time before this was eliminated by the exchange rate policy in 1979. Table 6, however, indicates that redundancy had already been eliminated in most industrial branches by January 1979, following upon the lagging exchange rate policy changes of the previous nine months. 2/ Thus, the failure of foreign competition to produce a quick response in 1979 must be attributed largely to institutional lags which can be expected to follow upon a major change in a trade regime. It takes some time, for example, for new import opportunities to be identified, for confidence in the durability of the trade regime to be established, and for new trading organizations and procedures to be set up. The doubts which the private sector has had concern- ing the durability of the 1979 program inhibited the placing of orders for imports and the creation of a distribution system. In addition, the port authorities were slow to clear the increasing volume of imported goods; estimates of imports backed up at the port of Buenos Aires reached over US$1.5 billion by August of 1979, more than three times the usual accumulation in that port. Import clearances and the development of import trade under the new stimulus started to accelerate by September of 1977. 58. Domestic price increases were also influenced in 1979 by the fact that the domestic prices of some exportable products began the year below international levels. Thus, in the case of several products, beef being the most important, domestic prices rose even more than international prices. 59. The Fourth Quarter Turn Around and early 1980 Developments. Without any apparent reduction in the level of demand, the new approach began to take hold in the fourth quarter of 1979. As shown in the last row of Table 5, both the wholesale and consumer price indices began to decelerate in October, November, and December. The quarterly rate of inflation in Argentina was 7.1%, if measured by the wholesale price index, or 14.7% if measured by the consumer price index in the last quarter of 1979. This should be compared with an average quarterly rate of inflation of 28.3% (WPI) or 28.5% (CPI) in the preceding four quarters. Thus, the annual rate of inflation was reduced from about 170% to 32% (WPI) and from 175% to 73% (CPI). 1/ The rapid price increase during the third quarter of 1979 as well as the sudden deceleration in the following four months have to be considered in the light of the sudden shift in beef prices, which reached record highs between June and August 1979 before they dropped precipitously in September and October of the same year. 2/ Note, however, that food, beverages and tobacco are not included in the analysis. It was in these branches that firms enjoyed a number of non-tariff barriers (i.e. health and other regulations), which prevented effective foreign competition. These barriers have since been eliminated. Table 5 ARGENTINA - THE CONVERGENCE OF THE INFLAHION RATE (Percentages) (1) (2) (3) (4) (5) Residual Inflation with respect to (6) (7) Rate of International Inflationary Change In Exchange Rate Inflation Impact of Wholesale Prices Change In WPI C/ CP1 d/ Year Quarter Devaluation (Pi) a/ (1) and (2) b/ Index Cost-of-Living _ (rl (WPT) (CPI) 1977 Ill 19.0 0.16 19.2 21.6 29.0 2.4 9.8 IV 26.8 1.69 28.9 27.6 32.0 -1.3 3.1 1978 I 21.4 4.70 27.1 26.6 32.0 0.5 4.9 11 12.0 4.15 16.6 24.6 29.0 8.0 12.4 1II 8.2 0.38 8.6 21.6 22.0 13.0 13.4 % IV 15.3 2.41 18.1 27.0 30.0 8.9 11.9 1979 T 15.3 8.80 25.5 28.4 31.0 2.9 5.5 I1 13.8 6.10 20.7 28.3 25.0 7.6 4.3 III 11.8 4.70 17.1 29.6 28.0 12.5 10.9 IV 9.9 3.40 13.6 7.1 14.6 - 6.2 1.1 1980 I 8.0 5.00 e/ 13.4 12.7 19.4 -0.7 6.0 April 2.2 1.6 3 8 3 R 6.2 0.0 24 a/ nternatinnal price chang"e wei hted according to the Argentiae wholesale price index. b/ tl| (r: loo)] x (1 + (i 10 - i31x 100 r/ (olumn 4 minus column 3. Domestic inflation not explained by devaluation and international inflation. d/ Column 5 minus column 3. See ,! above. e/ Approximated by U.S. producer prices. Sources: Central Bank and mis:i4on estimates. - 27 - Table 6: ARGENTINA - CHANGE IN PRICE DIFFERENTIALS BETWEEN FOREIGN AND DOMESTICALLY PRODUCED INDUSTRIAL GOODS, 1977-1979 /1 Weights according to June 1977 January 1979 August 1979 Price Index Value Added (WPI) (V.A.) Textiles 1.69 .92 .68 30.2 11.4 Clothing 1.20 .43 .38 7.2 1.9 Paper 1.59 .89 .70 4.1 3.6 Chemical Substances 1.61 .83 .77 3.5 7.7 Other Chemicals 2.50 .95 .74 4.1 9.9 Rubber 2.00 1.19 1.01 2.2 2.4 Glass & Glassware 2.27 .70 .58 3.2 1.0 Cement and other non- 2.13 .79 .52 3.4 4.4 metallic minerals Iron & Steel 1.45 1.14 1.06 5.9 8.6 Non-ferrous metals 1.72 1.01 .72 3.6 0.9 Metal products 2.44 1.41 1.01 12.9 7.6 Non-electric machinery 1.56 1.30 1.05 5.1 12.5 Electrical machinery 1.69 .97 .72 9.3 6.0 and apparatus Transport equipment and 2.08 1.79 1.52 5.1 21.9 vehicles Scientific apparatus 1.35 .69 .56 .2 .4 TOTAL (WPI weights) /2 1.79 .90 .72 100 TOTAL (VA weights) /2 1.81 1.09 .87 100 /1 Ratio of foreign prices c.i.f. Buenos Aires plus tariffs and fees over domestic prices of selected industrial goods. /2 In order to evaluate the impact of redundancy on both, future inflation as well as output and employment 15 industrial subsectors are weighted, first, according to their importance in the wholesale price index (W.". f1. and secondly, according to their importance in value added of 1978. (V.A.) Source: Computed from table 9.12 - 28 - This reduction in inflation achieved the Argentine authorities' conver- gence target, inasmuch as the objective was to reduce the rate of inflation, as measured by the WPI, to the level produced by the combined effect of price changes abroad and the exchange rate devaluation. This target was surpassed by the performance of the wholesale price index in the last quarter of 1979 and was nearly achieved for the consumer price index in the same quarter. Though somewhat faster than the last three months of 1979, the first three months of 1980 continued the sharp break in the past inflation rates. Whole- sale prices rose by a monthy rate of 4% and the cost-of-living increases averaged 6.5%. 60. For September and October price deceleration was attributable in large part to lower prices of primary products, especially beef. However, the impact of increasing exposure to competitive forces became evident in the case of manufactures in November and December as indicated by the price movements of processed foods and beverages, tobacco, leather, electric machinery, clothing and textiles. Those sectors which have been most clearly exposed to foreign competition, through rapid elimination of tariff redundancy, seem to be those showing the greatest price decelerations. 61. A significant rise in imports was to be expected in 1979 as a result of the renewed growth of GDP, which increased by 8.5%. Total imports increased substantially in excess of what might be expected on the basis of historical relationships between imports and GDP, mainly as a consequence of accelerated growth in imports during the second semester. 1/ Information on the composi- tion of imports shows that the fastest growing consumer and intermediate products are those identified in the study of tariff redundancy as being the first to feel the force of competition. Imports of textiles, clothing and shoes more than quadrupled. Non-metallic mineral imports more than doubled. 2/ 62. The Government's strategy for controlling inflation in 1980 con- tinues along the same path established in 1979, relying primarily on the disciplinary force of foreign competition, maintenance of a free trade and financial regime, and continued tariff reductions. While strong internal opposition to the program developed during 1979 among important interest groups, the Administration persevered, with its main support coming from the political authorities who felt that continuity of policy was perhaps most important in the Argentine context. Objections to the program were presented by industrialists who feared that the lagging exchange rate and ad hoc tariff reductions were undermining all domestic industry, including efficient sectors. Agricultural groups were even more opposed to the lagging exchange rate and 1/ The rapid acceleration of imports is evident from figures of the individual quarters, which were US$1.2, 1.4, 1.85, and 2.23 billion. This compares with US$.86, .87, 1.05, and 1.07 billion for 1978. The 75% increase cannot be explained by the increase in output which rose by 20% in current dollar terms, even though most recent estimates of Argentina's import function have shown that the income-elasticity of imports is slightly above 1.5. See Machinea, J.L. & Rotemberg, J., "The Argentine Import Function: an estimate", Central Bank of Argentina, 1977. 2/ However, imports of electrical and scientific machinery and apparatus grew by 35% only. - 29 - and export incentives. Labor spokesman were critical of the Administration's almost complete reliance on market forces in the setting of prices and wages and were fearful that real wages would again be subjected to strong downward pressures. 63. The Administration proclaimed in October 1979 the continuation, for the time being, of peso devaluations at declining rates according to a pre- announced schedule. The new schedule follows the same form as the one announced at the beginning of 1979. Starting with a devaluation of 2.8% in January of 1980, the rate has been reduced by 0.2% in each of the following months. In contrast with the early 1979 announcement, no termination date has been mentioned. When the success of the program on the anti-inflation front became increasingly evident, there was little disposition within the Administration to alter this exchange rate policy. Moreover, with the recent increase in domestic interest rates and the decrease in foreign interest rates, the present exchange rate policy helps to preserve the incentive to private capital inflows. 64. No inflation targets have been announced for 1980. This is under- standable in view of the uncertain outlook for prices of internationally traded goods and the predominant influence of these prices in an open trade and financial regime. The exchange rate continues to be viewed as the key policy variable. On the other hand, the 1980 program gives monetary and fiscal policy variables a more important role to play in checking unwanted excess demand problems. In contrast with 1979, no formal targets were announced in 1980 for monetary resources of domestic origin. For internal policy purposes the Central Bank has such targets, but they were to be kept flexible in case a sudden shift in certain behavioral variables required a different approach to satisfy domestic demand for money. With the conscious widening of the differential between foreign and domestic interest rates, it is expected that the supply of external credit will become more important in satisfying the demand for money. 65. The 1980 budget proposes a further decline of the Treasury deficit to 1.5% of GDP, and of the overall public sector deficit to 3% of GDP. This is to be achieved through higher tax revenues and lower investment expenditures. Further GDP growth, full indexation of the corporate income tax, and its full application to private and public enterprises as well as better control of tax evasion are expected to produce the desired increases in revenue. With regard to expenditures, the authorities expect to keep public investment below 10% of GDP. 66. The intended reduction of the public sector deficit is in accordance with the Government's general strategy of lowering public sector participation in the economy. The Government already has reduced the rate of public invest- ment, and public expenditures as a whole are not expected to increase signifi- cantly in real terms. From the viewpoint of short-term stabilization the question is whether additional efforts should be made in 1980 to constrain aggregate demand. There is some basis for believing that such action is now unnecessary. With the tariff reduction beginning to bite, industrial output will be slowing down, and the adjustment process would be made more painful if overall demand does not remain at a high level. Whatever excess demand does - 30 - prevail in 1980 would increasingly spill over into the balance of payments, largely in the form of increased imports. Thus, even without new measures to restrain aggregate demand, so long as the authorities permit the balance of payments adjustment mechanism to operate, a limit will be imposed on domestic price increases. 67. As previously noted, the Central Bank did not announce targets for the expansion of domestic monetary resources, mainly because it wanted to keep enough flexibility in case of sudden shifts in the demand for money. Such a shift did occur when the Central Bank began to liquidate one of the largest commercial banks in late March 1980. Depositors lost confidence in a number of other private Argentine banks and shifted the deposits either into public institutions or foreign commercial banks. 1/ The run on the banking system led the Central Bank to act quickly by (a) increasing the minimum deposit guarantee from the equivalent of about US$600 to US$55,000; and by (b) estab- lishing ample rediscounts for commercial banks in need. Although the redis- counts were granted at rates above the prime interest rate, the banking system absorbed the equivalent of US$2.7 billion within one month. At the same time the public bought foreign currencies which led to a loss of inter- national reserves by the Central Bank of US$1.5 billion between April 1, 1980 and June 30, 1980. Prospects for 1980 68. Inflation. By August 1979 negative tariff redundancy was present on a significant scale in 30 out of 40 industrial sectors (see Table 6). With the organizational and institutional barriers to imports having been progres- sively reduced during the last few months, the potential price-decelerating impact of foreign competition is now being realized. The breakdown of the wholesale price index from November 1979 to May 1980 shows that deceleration of inflation has become widespread in industry, with nondurable consumer goods experiencing the lowest rates of price increase. 69. Even so, the domestic price structure does not yet fully reflect international competition. Some further deceleration of domestic relative to foreign price increases should occur in those industries showing negative redundancy. Such industries have a weight of nearly 40% in the wholesale price index. The negative redundancy of 30%, if eliminated during 1980, could translate into lowering Argentina's relative inflation rate by about 10%. This figure assumes, however, that Argentine markets for manufactured goods are very closely integrated with foreign markets, an assumption not entirely consistent with recent studies of world-wide experience. 2/ It would not be 1/ While private banks' share of total deposits fell from 56.8% to 53.2%, Argentine public financial institutions raised their share from 34.5% to 37.2%, and the foreign banks' share rose from 8.7% to 9.6%. In com- parison to 1976, however, when private banks only held one-third of total deposits, this recent change is rather small. 2/ See Kravis, I.B., and Lipsing, R.E., "Price Behaviour in the Light of Balance of Payments Theories," Journal of International Economics, VIII, 2, May 1978, p. 193. - 31 - prudent to count on such a large cut in Argentina's relative inflation rate resulting from this source. Nevertheless, the deceleration of inflation is likely to continue, so long as there is no reintroduction of redundancy in the rate of import protection for industrial goods, either through tariff increases, non-tariff barriers, or exchange devaluation. 70. Output and Employment. At the same time that overall inflation is being dampened and convergence with international prices is being achieved, the liberalization program is affecting relative costs and prices among and within sectors. To the extent that internal price rigidities and other human or institutional sources of friction inhibit factor movements among industries, some unemployment and loss of output could result. Although non-tradeable goods and services are subject to the same cost influences as tradeables-- particularly wage increases--they are not subject to the same discipline on the price side. In a situation of excess demand, therefore, non-tradeable prices are likely to increase at a more rapid rate. This phenomenon is already reflected in the more rapid rise of the CPI compared to the WPI for both the last quarter of 1979 and the first quarter of 1980. 1/ Similarly, within the CPI, the non-tradeable component has begun to rise more rapidly than the tradeable component. 2/ 71. The restructuring and modernization of Argentine industry is an unquestionably desirable outcome of the present trade liberalization policy. The question raised here concerns the speed and short-term costs of the transi- tion. Unless real wages continue to be flexible downwards, the possibility arises of a significant slowdown and loss of job opportunities in the tradeable- goods sectors. Some potentially competitive domestic enterprises may fail. Particularly vulnerable appear to be the clothing industry and some textiles as well as the glass and other non-metallic minerals industries (see Table 6). 72. The probability of serious displacements is reduced to the extent that the prices of the Argentine industries now showing negative redundancy may reflect economic rents derived from the previous lack of effective foreign competition. In that case, price reductions would not necessarily come at the cost of industrial unemployment and bankruptcies but rather reduced profits. Argentine authorities believe that unduly high profits were, in fact, made in many sectors which only now face international competition. This is an empirical question of considerable importance and can be tentatively answered by examin- ing the major factors which brought about negative tariff redundancy in 1979. 1/ The WPI only contains commodities, most of which are now "tradeable" in the sense that there is neither import prohibition nor tariff redundancy. On the other hand, about 25% of the CPI is made up of public and private services. If account is taken of mark-ups in wholesale and retail business, the genuine "non-traded" part of the CPI is close to 35%. 2/ This divergence is not evident in the aggregate price data for the first nine months of 1979 because of the limited tariff adjustments granted the public enterprises (see Table 5.12). With public tariffs excluded, however, an annual divergence of about 15% between price of tradeables and non-tradeables becomes evident in 1978-79. - 32 - When an attempt was made to separate the importance of tariff and exchange rate policies on the one hand and pricing decisions in Argentina and abroad on the other, the relative importance of domestic price changes, even after adjustments for foreign prices and exchange rates, was much higher than that of reductions in tariffs. 1/ This may indicate higher costs resulting from underutilized capacity and the fact that industries were able to take advantage of the profit opportunities made possible by institutional barriers to imports during 1978 and 1979. A more thorough analysis of developments in industrial costs for 1978/79 would be required, however, to test this hypothesis more convincingly. 73. Balance of Payments. Another area of potential concern derives from the instability of expectations in the external sector regarding the ability of the government to sustain its exchange rate policy. The previously large surplus on current account has been shrinking rapidly in recent months, and was estimated to have been turned into a US$460 million deficit by the end of 1979. Preliminary projections indicate a deficit on current account of about US$2.5 billion for 1980. With the emergence of such a deficit, expecta- tions concerning the exchange rate could change, increasing the perceived risk of a large exchange rate devaluation. Although domestic interest rates would rise, reflecting the increasing risk premium in foreign borrowing, expectations of a large devaluation could lead to capital outflow. This possibility is recognized by the authorities, and they stand ready to accept the short-term adjustments in output and employment which would be required were it to occur. 74. Although the danger of unstable expectations should not be under- estimated, it would seem that, given the lags experienced in 1979, the change in the balance of payments as well as in the supply of foreign goods will not be too abrupt in 1980. Although exports of the agricultural sector are being adversely affected by the drought and the flooding of the most fertile areas in early 1980, net capital inflows should continue to be large enough to meet the projected current account deficit for the present year. Moreover, the extraordinarily high level of Argentina's international reserves should easily satisfy any foreseeable short-term uncertainties in the capital market. Balance of payments prospects for the whole decade, however, are less secure. The growth of future exports will be closely related to changes in key para- meters; these issues will be discussed in Chapter IV. I/ These calculations are derived from the results obtained in Table 9.12, which imputes the changes in redundancy from 1977 to 1979 in separate steps. - 33 - CHAPTER IV MEDIUM AND LONG-TERM ISSUES AND PROSPECTS Exchange Rate Policy and Tariff Reform 75. The Argentine authorities are continuing the policy of declining monthly fixed nominal devaluations with the aim of steadily reducing the difference between domestic and international price increases. As noted above, appreciation of the foreign exchange rate in real terms played a crucial part in the 1979 stabilization strategy. Actually, the Central Bank had already started to slow down the rate of devaluation in the second quarter of 1978. Table 7 shows the nominal exchange rate deflated by the ratio of domestic to international price increases, weighted alternatively by Argentine wholesale price weights and the weights of major trading partners. Both cases suggest that, between the 1976/78 average and 1979 the real exchange rate appreciated by 25% to 30%. 76. Any calculation of an equilibrium exchange rate would be tenuous at this point, given the structural changes experienced by the Argentine economy in the last few years, most of which are still in process. The changes relevant for the exchange rate were: (i) the virtual elimination of export taxes; (ii) the liberalization of interest rates; and (iii) the reduc- tion of import tariffs. The first two measures contributed to an outward shift of the supply function of foreign exchange and as a consequence may have justified some revaluation of the peso in real terms. 1/ While recent studies suggest that the actual overvaluation of the peso only amounted to between 10% and 15% in late 1979, concern may be raised that the appreciation that has occurred could create increasing problems over time for the nation's trade balance. 2/ The question, in brief, is whether the shift in relative prices inside Argentina between the export, import-competing and non-tradeables sectors, occasioned by the appreciated exchange rate and tariff changes, provides investment and production incentives consistent with external accounts balance and efficient resource allocation. 77. It seems apparent from trade data that, after rapid expansion in recent years, the growth of exports leveled off in 1978, with an actual decline in industrial products in 1979 (see Table 3.2). After a lag, imports have increased rapidly in late 1979 and early 1980. As a consequence, the large trade surplus of the last few years has been reversed. A negative $50 million trade balance was recorded in the first quarter of 1980, and a deficit 1/ It should be noted that the increase in foreign exchange reserves between 1976 and 1978 was also a function of several other factors, one being the two recessions and the low demand for imports. On the other hand, the effects of the import tariff reductions are only visible since September 1979. 2/ Rodriguez, C.A. and Sjaasstad, L.A., "El Atraso Cambiario en Argentina: Mito o Realidad?", Centro de Estudios Macroeconomicos de Argentina, October 1979. - 34 - Table 7: ARGENTINA - FOREIGN EXCHANGF RATE MOVEMENTS, 1976-1980 Index of Real Exchange Rates (December 1969 = 100) A,djusted by Nominal Exchange Export Import U.S. Wholesale Prices Rate Weighted /1 Weighted /1 with Argentina's Weights /jL 1976 224.3 110.8 107.1 125.2 June 189.3 116.3 108.8 131.5 September 216.2 108.5 102.4 119.7 December 267.6 110.7 114.8 124.5 1977 417.8 106.1 109.4 125.5 March 336.5 108.6 112.6 132.6 June 390.5 108.6 112.1 127.1 September 473.5 103.5 106.1 120.9 December 597.5 110.6 112.6 121.5 1978 795.8 102.8 103.1 105.4 March 721.0 113.4 112.8 121.1 June 788.5 102.9 103.6 110.8 September 849.3 96.8 97.6 98.4 December 978.6 91.3 91.6 91.4 1979 1,317.0 78.6 77.8 83.4 March 1,136.7 84.9 84.5 90.2 June 1,292.0 77.2 76.7 84.7 September 1,449.8 71.0 69.9 76.8 December 1,596.9 75.1 73.5 81.7 1980 March 1,724.7 75.5 73.9 82.4 /1 Nominal exchange rate deflated by the Argentine wholesale price index and adjusted by wholesale prices of trading partners according to their weight in Argentine exports or imports. /2 Deflated exchange adjusted by U.S. wholesale prices weighted according to the Argentine wholesale price index. Source: Central Bank, INDEC, IMF and Mission Estimates - 35 - is expected for the remainder of the year. Because of Argentine tourist expenditures abroad and external borrowing, real and financial service accounts have shown rapidly increasing net outflows, which surpassed the 1979 balance- of-trade surplus by about US$500 million and already reached the same amount in the first quarter of 1980. Since unfavorable climatic conditions will also slow export growth of traditional products in 1980/1981, it is currently estimated that Argentina will face a current account deficit of about US$2.5 to $3.0 billion. Prospects of rapidly growing trade and currenit account deficits may have a negative impact on the public's expectations with respect to the continuation of the exchange rate policy, but the current restrictive domestic credit policies should continue to attract capital inflows. 78. There are basically three alternatives for future exchange rate policy: (a) a one-step devaluation followed by a policy of fixed exchange rate to eliminate the current degree of over-valuation; (b) the maintenance of the current exchange rate program under which the rate of adjustment is to continually decline; and (c) an intermediate position, which would continue the current rate of devaluation in order to alleviate the process of structural changes. Aside from the initial difficulty of determining the appropriate size of a maxi-devaluation, the first alternative faces the additional objec- tion that the empirical evidence in Argentina shows that higher prices for tradeables are rapidly transmitted to the rest of the economy. As a con- sequence, overall inflation would accelerate, rapidly eroding the policy's effectiveness in setting the right signals for production and export incentives. This argument can also be made for alternative (c); while it would reduce the pressure on import-competing production and exportables for a short period, it would allow inflation to continue at the present level. 1/ 79. Considering the prospects of those two alternatives, the autho- rities believe that the current program is the only viable policy. Since it has been successful in bringing down the inflation rate decisively in the last nine months, the reluctance of giving up that tool is apparent. In order to sustain the present progress against inflation, however, without eventually facing a renewed balance of payments constraint, proper production and export incentives must be maintained in the major sectors; the current convergence between international price movements and Argentine wholesale prices must continue; and the prices of non-tradeables will have to follow the decelerating trend of the tradeables. With respect to the maintenance of proper incentives for the productive sector, GDP development of the first quarter was mixed. Sectors with increased import competition experienced some decline in output, but overall industrial production rose by 3%, because of rapid expansion in the auto industry. Expectations of continuous expansion for the rest of the year were strong. On the other hand, agricultural terms of trade have reached the lowest point within the last three years, being about 10% below the 1977-79 average (See Table 9.11). Several provincial agricultural and processed products have recently been receiving increased export reimbursements to cushion the negative impact of falling world prices and/or negative effective protection. To what extent other products might 1/ This assumes that no other anti-inflationary measures are taken. - 36 - extent other products might have to be included in this subsidy in the future is not clear at this moment, but an increasing number of demands for similar reimbursements by producers of other exportables can be expected. 80. As to the convergence of domestic with international price move- ments, the experience of the first five months shows that the real rate of exchange has been maintained. There is some doubt that the domestic wholesale price increases will continue to decelerate pari passu with the rate of devaluation, unless prices of non-tradeables, which have consistently risen more rapidly than tradeables in 1980, are brought into line. 1/ In this context one of the crucial variables to follow is the development of wages. Although industrial wages have been slightly reduced in real terms during the first three months of 1980, wages in the other private sectors have tradi- tionally been adjusted to cost-of-living increases. Public sector wages were boosted by 15% in January and since then have been raised by 4% monthly. Industrial wages and wage levels in other sectors will have to be contained if further price deceleration is to be achieved. Other variables of considerable importance are the costs of credit and construction. Both have been increa- sing more rapidly than the wholesale price index. Cost-of-construction increases have averaged 5.2% in the last 8 months. Interest rates remained at over 6% per month in late 1979. After decreasing to close to 4% at the beginning of 1980, they have recently been increased by about 1 percentage point a month as a consequence of Central Bank efforts to encourage foreign borrowing. 81. The Argentine authorities should weigh carefully the trade-offs which may be involved in maintaining the present exchange rate policy. With inflation now reduced, a policy of holding to the present monthly rate of devaluation may be warranted to give an opportunity to monitor the transition process. Indeed, the twin objectives of price stabilization and allocative efficiency might be better served in the future by continuing the current rate of devaluation of about 2% per month, compensated by accelerated tariff reduction for products still enjoying high effective protection and export subsidies for those where high input costs prevent them from competing suc- cessfully in international markets. 82. A further and more rapid decrease in import barriers as well as a new look at the special regimes may be effective in enforcing more widespread competition in the Argentine economy without lowering export incentives. The problem is one of implementation. With the exception of the general import fees, tariffs and other protectionist means are commodity and interest group 1/ The non-tradeable items in the cost-of-living index increased by a monthly average of 7%, whereas the tradeables rose by 6%. Taking the consumer price index as a whole, it surpassed the monthly average of wholesale prices by about 2% between September 1979 and April 1980. It is interesting to note that in previous stabilization efforts deceler- ation also occurred first in the wholesale price index, with consumer prices following in the third year rather closely in the 1959-61 and the 1967-69 stabilization program (see Table 9.6). - 37 - specific and, as a consequence, are much more difficult for governments to apply than exchange rate policy, which falls more evenly on efficient and inefficient producers in export and import-competing industries. Considering the negative trend in non-traditional exports, which have required increased fiscal support, and the fac- that a number of inefficient import-competing industries are still highly protected, every effort should be made to increasingly use tariff rather than exchange rate policy to both fight inflation and allocate resources more efficiently. Monetary Policy, Interest Rates and Capital Market Development 83. A crucial change in the 1976 program was the freeing of interest rates, which contributed to substantial changes in the saving behavior of the public and required a more careful analysis of investment projects from the investor. As a consequence of the 1977 banking reform and the attempt by the monetary authorities to fight speculative hoarding and inflationary expecta- tions, interest rates rose to extraordinary heights during the last quarter in 1977. The strong external sector position and the reduction of exchange and capital controls provided Argentina's public and private firms with increasing amounts of medium-term financing at decreasing interest rates. Although domestic interest rates also fell, becoming negative in real terms from the last quarter of 1978 to September 1979, they remained high enough to induce businessmen to borrow from abroad and to attract capital from abroad for deposit in Argentina, (mainly repatriation of Argentine assets). As a conse- quence, net capital inflows became extraordinarily high in 1979. In early 1980 domestic interest rates fell to only one percentage point above rapidly rising international rates plus Argentine devaluation (see Table 6.1). However, since April the interest rate differential between Argentine and foreign rates has again opened up, as international rates declined from 20% to 12% p.a., and domestic rates were increased by the Central Bank in response to the banking crisis. This policy has been effective in dampening the sudden capital outflow. 84. While the close integration of the Argentine financial market with the international capital markets made it possible for the government and the larger companies to engage in medium and some long-term borrowing, the high inflation rate kept the majority of the domestic transactions on a 30-day basis. The first signs of the lengthening of the domestic credit terms became evident in early 1980, with increasing amounts being deposited and borrowed for a period of 180 days. The banking crisis has, however, interrupted that development. Since the stock market has not been able yet to attract substan- tial sums to finance new investments, most long-term finance within the country is still handled by the National Development Bank (BANADE). As long as inflation remains substantially above international levels, it will be difficult to build a viable capital market without indexing. More long-term credit and venture capital will, however, be necessary for the re-equipment and modernization of industry. Since the private sector is expected to take on a number of tasks formerly undertaken by the public sector, the flexibility and efficiency of the Argentine financial system will be seriously tested. - 38 - Public Sector Prices and Investment 85. The pricing of public services during the last four years has reflected the Government's desire to reduce distortions in the economy, have public enterprises self-finance an increasing share of their investments and to lower the rate of inflation. Although government-controlled goods and services make up only 9% of the cost-of-living index, the overall impact of increases in public sector tariffs on inflation is larger because of the indirect effects and their presumed importance in forming inflationary expec- tations. It was partly because of the latter problem that public sector tariffs were adjusted at relatively low and decelerating rates announced in advance at the beginning of 1979. 1/ 86. During the year, tariffs were adjusted only slightly more than envisaged in the original schedule, despite a much higher rate of inflation. As a consequence, real public sector tariff rates suffered a decline of about 20%. Cost data are only available until August 1979. At that time, public sector tariffs lagged 16% behind increasing costs (see Table 5.12). 2/ In addition, the mandatory payment of a "contribution" to the Treasury, which is now replaced by regular tax payments, and high interest rates led to finan- cial losses in a number of public enterprises which had generated surpluses in 1977/78. 87. The financial problems of the public enterprises contrast with indicators of improving efficiency. Employment has been reduced by an average of 20.5% since the beginning of 1976 and gross value added has grown by 10% in real terms. Although some caution has to be used in interpreting productivity data because of structural changes in several entities, produc- tivity seems to have advanced substantially in several sectors, as Table 8 shows. The same Table also makes clear that, in 1979, real tariffs deter- iorated significantly from the 1977 and 1978 levels, but recovered by 8% between the third quarter of 1979 and the end of the first quarter of 1980. 88. While continuously pressing public enterprises to lower costs and raise efficiency in 1980, Government policy with respect to public sector tariffs is to increase real rates by about 15% to reach the 1979 average. This policy is expected to improve the financial situation of public enter- prises without endangering the public investment program, which already was reduced somewhat in 1979. The issues can be best illustrated by comparing 1/ The target was to increase public sector tariffs at 75.5% for the whole year. The actual adjustments were equal to 87.4%; at the same time wholesale prices rose by 136%. Thus, public sector pricing policies contributed to holding down the average inflation rate. Its direct impact on overall inflation must have been small, since the 20% to 30% difference between the change in wholesale prices and public sector tariffs translates into a 2% to 3% increase in the cost-of-living. 2/ Tariff adjustments in September 1979 and after were above inflation and should have also slightly reduced the gap between the rise in costs and prices. Table 8: ARGENTINA - CHANGES IN EMPLOYMENT, PRODUCTION AND RELATIVE PRICES IN PUBLIC ENTERPRISES (In Percent) (1) (2) (3) (4) Employment Gross Value Added Productivity Relative Prices 2/ Changes 1/ Sector 1975/79 II 75/79 III 76/79 III 77/79 78/79 79 III/80 I Energy --23.0 13.0 42.5 -28.7 -20.8 -14.4 -17.8 +6.7 Fuels -24.0 5.4 38.4 -34.9 -24.1 -14.5 -18.2 7.6 Electricity -21.8 31.3 48.8 34.1 1.5 - 6.6 -14.6 6.0 Transport -27.0 0.0 27.0 -11.0 -10.2 - 0.6 -14.0 8.8 Communication -13.0 0.5 6.0 0.4 31.2 - 0.6 -23.5 5.2 Health Services -13.0 0.0 n.a. - 9.6 39.8 - 5.4 -10.4 36.3 Total -21.5 9.9 n.a. -22.4 -11.9 -10.2 -18.2 +8.0 Source: Sindicatura General de las Empresas Publica and National Planning Institute (INPE), Ministry of Economy. 1/ Based on a number of physical indicators selected by INPE. 2/ Public Sector Tariffs deflated by non agricultural wholesale prices (first two columns compare year end data with end of 3rd quarter). - 40 - actual 1979 with the budgeted 1980 revenues and expenditures of the electric power sector, contrasting the financial resources generated with funds required for the overall sector expansion program, which will be dominated by initiation of the US$4.6 billion project at the Yacyreta Island in the years to come. 89. In 1979, internally generated savings of the electric power sector reached 10% of total outlays for capital investment (see Table 5.14). Fuel taxes and other contributions by,the central government reduced the net credit requirements to 45% of investment. In 1980, internal savings are expected to increase absolutely and also relatively, amounting to 13% of investment. Because of lower contributions and higher outstanding liabilities, however, net financing as a percent of capital outlays will be close to 60%. It should be noted that the data do not include financing of amortization and that part of the interest payments which can be considered amortization in the light of inflationary accounting. For the five major power companies the 1980 gross borrowing will be equivalent to US$2.3 billion, which constitutes over 95% of total investment in the electric power sector. 90. Besides weighing the public sector tariff policy's contribution to the fight against inflation versus the public enterprises' needs to improve their financial situation, it is also important to consider government pricing policy's consistency with the general strategy of letting world prices determine the allocation of resources in Argentina. Although many public goods and services have substantial external economies and should therefore be supplied at social rather than economic costs, petroleum and its derivatives do not fall into this category. These prices were, however, also lagged in 1979 leading to substantial income losses and some investment reductions. In late 1979, domestic ex-refinery prices of gasoline reached about one-half to two-thirds of world market prices. 1/ The current policy is indeed to raise the prices of petroleum products gradually to world price levels. 91. The choice between raising tariff rates or increasing the public sector deficit through borrowing or direct contributions from the Treasury is not available to all public entities. The most significant of those without option are the railways, whose current account deficit was still equivalent to 0.5% of GDP in 1979 and is expected to be about 0.3% of GDP in 1980, despite substantial tariff adjustments during the first quarter of this year. In this case, the choice is between increasing the Treasury contribution and lowering planned investment. While it is, in general, difficult to make a precise statement about the adequate level of total public investment, the case of the planned and realized investment of the railways in 1979 shows the immediate costs involved in delaying decisions. 2/ In an inflationary environment delays become costly, especially if the initial program was carefully calculated to maintain the minimum standard of a vital public service. 1/ By December 1979, the ex-refinery product price of gasbline was US$.49 in Argentina, while international prices were at US$.71 . If a shadow exchange rate is used, the domestic price would be closer to US$.40. 2/ Current dollar costs of the program rose by 67% in 1979. - 41 - The Public Investment Program 92. Public investment's share of GDP has historically been below 10%, averaging 7.5% in the late 1950s and early 1960s and 9% between 1966 and 1970. In the 1970s, as the authorities pursued a more ambitious course, the public investment - GDP ratio passed the 10% mark in 1970 and reached an unprecedented 13% of GDP in 1976 and 12% in 1977. This was a consequence of a decision taken in late 1976 to complete large unfinished projects rather than having to write off the capital already invested. Although final data are not yet available, the share of public investment declined in 1979 to below 9% of GDP. Part of this decline was caused by delays of some important investment expenditures (mainly railways), and part of it is explained by lower prices quoted by private contractors of public investment projects. 93. In order to control public investment more effectively, a decree issued in 1974 determined that the Ministry of Economy must approve all central government and state enterprise investment projects over US$4 million. The National Institute of Economic Planning (INPE), a planning and investment coordination group of specialists within the Ministry, evaluates the major projects in the light of cost-benefit analysis and sectoral investment priori- ties. INPE has also prepared several medium- and long-term investment plans since 1977. According to the latest 10-year Plan (1980-1989) 1/, the Govern- ment intends to reduce total public sector investment as a percentage of GDP by cutting substantially the investment of the Central Government. These cuts are to be offset only partially by increasing investments of the provinces, as follows: 1980 1985 1989 billion billion billion X of constant % of constant % of constant of GDP pesos of GDP pesos of GDP pesos Central Government 5.9 9.4 4.2 8.8 3.7 9.7 Provinces /1 3.1 5.0 3.0 6.5 3.1 8.3 Total 9.0 14.4 7.2 15.3 6.8 18.0 /1 Includes the City of Buenos Aires. 1/ Gobierno de la Republica Argentina, Ministerio de Economia, Presupuesto Decenal de Inversion Publica 1980-1989, Buenos Aires, 1980. - 42 - The Government expects that reduction in total public investment as a percent- age of GDP will be compensated by increased private sector investment. The Government strongly believes that market forces and greater local government participation will result in a better mix of investments, carried out at lower cost and more expeditiously, and with political factors paying a lesser role in the selection process. 94. It is now expected that the provinces will be responsible for the provision of education and health services. Responsibility for the provision of water supply and sewerage services, now provided by Obras Sanitarias de la Nacion, will be transferred in 1980/81, as will the electric distribution and irrigation services now provided by Agua y Energia, and gas distribution services now provided by Gas del Estado. Provincial participation is also expected to grow in other areas such as port development. The private sector is expected to play a major role in oil development (48% of all investment compared to 30% in 1979) and to construct all new refineries and gas pipelines, expressways under the toll system, and grain silos. In addition, private participation is hoped for in port development, railway maintenance and hospital construction. It is the intention of the Government to continuously explore avenues for and facilitate private investment in other areas. 95. The proposed investment program, including participation of the private sector, raises two general issues: first, whether its composition and level are adequate; and second, whether its execution is feasible. Evaluation is made difficult by: (a) uncertainty about the private sector's interest in areas other than oil and gas exploration, where there is now evidence of actual investment taking place. Private sector response to investments with a relatively long recovery period, such as mining, ports and grain silos, will be related, in part, to the private sector's belief in the continuity of government policies; (b) the fact that provincial investments are not yet broken down by sector, making it impossible to determine the allocation of overall public investment. Since provinces are autonomous and have discretion to determine the mix of their investments, and since such investments amounted to one-third of public investment in 1979 and are expected to be almost half of the total in 1989, it is difficult to assess the adequacy of investment levels in sectors in which there is substantial provincial participation. 96. National public investment in electric power generation and telecom- munications will be of top priority (see Table 5.13). For electric power generation the budgeted amounts correspond closely to the levels of investment proposed in the national electric energy plan. Since the enterprises in charge of electric power generation and telecommunications were able to reorganize at an earlier point than most other public entities, it should be expected that large investments in those areas will be adequately carried out. In the petroleum and gas sectors the crucial variable is the future of private - 43 - sector participation. Based on the assessment of YPF, the Secretariat of Energy and private companies, the private sector seems prepared and able to play the expanded role expected of it by the Central Government, at least for the next two years. 97. In the transportation sector the level of Central Government invest- ment is being kept at a constant real level through the 1979/89 period. This investment excludes expressways, now to be built by the private sector, and assumes private sector participation in the ports sector. The success of the Government's objective in increasing Argentina's export of grain will, inter alia, depend on the ability of Argentine producers to compete success- fully in far away markets. This, in turn, will be a function of transportation costs. They are particularly important because of Argentina's remote location and its shallow ports which impede the entrance of large grain ships. Present railway services and port capacity are inadequate. Railway service cannot be improved without a substantial increase in investment; budgetary restrictions, however, have been delaying such investment. For ports, substantial invest- ments are needed to improve grain handling facilities, primarily in Buenos Aires and Rosario, and to dredge the approach channel in Bahia Blanca. Prima facie, therefore, there is reason to believe that the level of public plus private transport investment will have to be higher than in the past, and the stable level proposed would be adequate only if the Government is successful in attracting private sector investment for expressway and port construction. No clear indication exists as yet as to what the private sector's response will be. 98. Social investment by the Central Government is expected to be reduced by a third in real terms because of the transfer of responsibility for investments to the provinces. Major deficiencies exist in the housing and water supply sectors. For housing - a priority area - financing for credit is made available to the provinces by the Central Government and is not part of the investment plan; the constraint on the sector is not financial, but in execution capability. In the water supply and sewerage sector internal cash generation is expected to finance a larger part of investment than in the past; meanwhile, and until tariffs are substantially raised, there is a severe financial constraint. Because no sectorial breakdown is available, it is not possible to assess the level of expenditures in the social sectors planned by the provinces. 99. Because of the sophistication of the Argentine private sector, and Government encouragement of foreign private participation, there is little doubt that private investment could reach the level the Government intends. Therefore, provided it is prepared to do so, the private sector should be able to expand its investment in several major sectors (petroleum, roads). With regard to the provinces, particularly the poorer ones, the situation would be just the opposite; while eager to take over the additional responsibilities they may not be able to handle them. Clearly, the provinces will require a major effort in institution building and recruitment of per- sonnel to meet a challenge which, in some cases, is beyond their present capacities. Assistance is expected to be provided by national entities. - 44 - Financing Public Investment 100. The financing plan for the 10-year investment program assumes that an increasing part of Argentina's public investment will be financed by public sector savings, which are expected to rise from 5% of GDP in 1979 to 6.2% in 1984 and to declinQslightly to 6% by the end of the decade. Since the public investment's share of GDP is planned to fall at the same time from 9% to 6.8%, net financial requirements as percent of GDP are expected to diminish rapidly during the 1980-1989 period as the following table shows: Public Investment and Its Financing, 1979-1989 (in % of GDP) 1979 1984 1989 Total Investment 9.0 7.2 6.8 Public Sector Savings 5.0 6.2 6.0 Other Capital Revenues - 0.5 0.5 Net Financing Requirements 4.0 1.5 1.3 101. The increased savings are expected to come mainly from higher public revenues, which are to increase from 25.3% to 27.4% of GDP. Whereas the income-elasticity of tax revenues is thought to be slightly above one, major emphasis is put on improvements in the performance of state enterprises, where further potental increases in labor productivity and administration hold promise for larger savings. As discussed above, however, the revenue side of public enterprises have suffered in 1979 from inadequate tariff adjustments. It is clear that even if there is additional potential for cost reduction, future adjustments of about 30% in real terms will have to be made if the Government hopes to fulfill its goal of raising public sector savings. 102. Since 1976, the public sector has received an increasing share of its capital requirements from abroad. The shift towards external borrowing may continue in the future, especially if the internal saving target is not realized. Given Argentina's strong balance of payments and international reserve position, the Government should have no difficulty financing its announced investment program. However, the current demand estimates for public sector funds, which are planned to decrease both in relation to GDP and in absolute real terms, will have to be reexamined in the coming year to adjust the finances to the actual investment requirements. - 45- Balance of Payments Prospects and External Capital Flows 103. Argentina's balance of payments has historically experienced conti- nuous strains as a result of the frequently conflicting domestic policies which hampered exports. The dominant factors in the external accounts during the past decade have been sluggish export growth and the heavy burden of external debt service payments, which led to the periodic need to restrict imports to a level well below the requirements of sustained economic growth. The recent stabilization effort has temporarily reversed the situation, with large current account surpluses and increasing capital inflows leading to a rapid accumulation of international reserves which, at the end of 1979, stood at about US$10 billion. This situation is expected to change as the opening of the economy proceeds over the next five years. 104. A medium- to long-term projection of Argentina's balance-of-payments is made difficult by at least two considerations. First, exports and imports will crucially depend on the future development of inflation and the exchange rate. As the foregoing discussion has shown, unless consumer price increases can be lowered further, there are some doubts as to the long-run viability of a program which aims at fixing the exchange rate by April of 1981. Secondly, if the current monetary approach to the balance of payments is continued by the next Government, it is more important to evaluate the repercussions of international price and employment developments on the domestic economy than to project external sector variables, which are to adjust automatically. The following projections try to take account of international developments; they assume, however, that Argentine policy makers are not willing to have their domestic activities completely adjusted to fluctuations or slow growth of the world economy. The required long-term capital flows, which follow from such a more independent policy, are found to be within a range which a country like Argentina can attract, absorb and service within the years to come. 105. Exports in real terms have increased substantially during recent years over their historical levels, climbing from 9% of GDP in 1960-75 to over 15% in 1979. 1/ The volume of exports is expected to fall in 1980, because recent drought and floods will dramatically lower the output of traditional export products, and because the incentive system is not expected to encourage the growth of non-traditional exports. In the following years, however, real export growth rates will recuperate and should reach a growth rate of between 5-6% by 1984-85, mainly because of the lower costs of manufactured inputs for export products and the restructuring of the industrial sector according to comparative advantage. Since the long-run outlook for world prices of Argentina's export products is favorable, total export earnings are projected to increase by an average of 19% annually through 1985. 1/ Exports include non factor services. Exports of goods amounted to 12.7% of GDP. GDP is estimated to have been US$61.53 billion in 1979, computed according to World Atlas Methdology using average adjusted exchange rates for the last three years. - 46 - 106. The opening and consequent transformation of the Argentine economy is expected to lead to increased demand for imports, especially capital goods, as industry modernizes. Capital goods imports therefore are projected to grow at a rate close to 11% in real terms during the next five years. While this rate will be decreasing thereafter, it should still remain at a level of slightly over 5% during the late 1980s. Consumer goods imports will increase rapidly, as Argentine industry - faced with limited internal markets and increasing external competition - becomes specialized along the lines of comparative advantage based on natural resources and skills. Because of the small initial base, however, these imports will only increase to about 10% of all imported goods in 1985. With the decline of import restrictions and stronger industrial growth, intermediate goods, which constitute the most important group of imported products, are projected to increase at an average annual rate of 7% during the period 1980-1985 in real terms. Net imports of petroleum products, after declining slightly during the early years of the projection period, may fall to zero as early as 1983, when Argentina is expected to become self-sufficient. Finally, non-factor service items are projected to be growing in real terms at an average 4% annual rate during the 1980-85 period. 107. The outlook for Argentina's imports, therefore, calls for vigorous growth in the decade ahead as a result of the opening of the economy, and a process of modernization and specialization in Argentine industry. The year 1979 has already witnessed an increase in the ratio of imports to GDP to over 14% from historical levels of about 9-10%. 1/ With currently predicted growth rates, a new long-run level of about 17% seems feasible. Import prices are expected to grow at the same rate as world inflation. 108. The projected resource balance is highly dependent on the accuracy of the price projections, and results could vary considerably if prices do not evolve as expected. Current expectations are that the resource balance of Argentina, after being highly favorable for the last three years, will turn negative in 1980 and may stay so for three to four years. The current account balance is projected to show a deficit of about US$2.5 billion in 1980. This deficit is projected to increase steadily during the following years reaching US$6.6 billion by 1985. In relative terms the current account deficit as percent of GDP will increase slightly from 4.1% in 1980 to 4.6% in 1985. 109. The current accumulation of reserves, which now exceeds one year's imports is not likely to be sustained. It is projected that the reserve level will gradually decline to about four months of imports by 1982. This would be consistent with increasing import requirements and the decreased need to hedge against instability in short-term capital movements. 1/ Imports include non factor services. Imports of goods amounted to 10.9% of GDP. Table 9 : ARGENTINA - PROJECTED FLOWS AND INDICATORS OF THE EXTERNAL SECTOR 1980-85 (in millions of US$) 1980 1981 1982 1983 1984 1985 Current Account Balance - 2,517 - 2,957 - 3,397 - 4,423 - 5,580 - 6,643 Private Direct Investment 500 550 605 665 732 805 Net Public M & LT Loans 241 280 260 257 270 260 Disbursements 415 504 528 563 594 611 Amortization - 174 - 224 - 268 -306 -324 -351 Net Private M& LT Loans 317 1,008 1,217 4,348 5,506 6,652 Disbursements 2,071 2,546 2,844 6,092 7,576 9,165 Amortization - 1,754 - 1,538 - 1,627 - 1,744 - 1,970 -2,513 Short-term Capital and transactions, n.e.i - _ _ _ _ _ Change in Reserves (- increase) 1,459 1,120 1,315 - 846 -1,027 -1,074 Level of Reserves 8,540 7,420 6,105 6,951 7,978 9,052 Reserves/Imports Ratio 7.5 5.6 4.0 4.0 4.0 4.0 Total Debt Service Ratio (gross) 25.8 22.1 21.3 21.5 23.6 27.6 Source: World Bank Projections - 48 - 110. Amortization of public debt is expected to expand gradually during the 1980-1985 period, averaging US$270 million per year. Facilitated by Argentina's increased access to international capital markets, private sector indebtedness has risen rapidly. As a consequence, amortization of medium-term loans will rise from about US$1.8 billion in 1979 to over US$2.5 billion in 1985. This would mean an annual average of US$1.8 billion for private debt amortization and, together with the repayment of the public debt, lead to a total amortization averaging about US$2.1 billion per annum. 111. The projections of external financial requirements included in the report assume continued increases in net direct foreign investment. Such investment would take place mainly in the mining and petroleum sectors, with some inflow also being expected in manufacturing and services. Exploration and development of Argentina's offshore oil potential will require massive outlays for machinery and equipment, most of which embodies advanced technology, and will have to be imported. Direct foreign investment, which should amount to annual inflows of about US$500 to US$700 million, will be sufficient to cover the foreign exchange costs of importing such equipment. 112. Bilateral and multilateral sources are expected to provide gross capital inflows averaging US$550 million over the 1980-85 period. Private sources are conservatively assumed to provide a US$5.0 billion average capital inflow over the same time period in the form of supplier credits and financial credits. Argentina's access to international capital markets should enable it to attract these fairly large amounts of capital, provided that transition problems are solved and improvement in economic growth and stability is achieved. 113. Argentina's medium- and long-term external public debt amounted to US$8.3 billion at the end of 1979, an increase of US$1.5 billion over its 1978 level. Medium- and long-term private external debt expanded more rapidly from US$2.7 billion to US$6.4 billion. External public and total debt service ratios were 20% and 26%, respectively. Interest on foreign exchange reserves amounted to 7% of exports, reducing the total net debt-service-ratio to 19%. Given the controlled expansion of the public investment program, the public debt service ratio is expected to decline to below 20%. Private indebtedness will probably increase more rapidly, so that the overall debt service ratio can be expected to average between 25% and 30% in the 1980s. The current level of foreign exchange assets of over US$9 billion should provide a comfortable margin to counteract any sudden capital outflows. Trade and capital flows in the medium run will be determined by two major factors: (1) the state of the international economy; and (2) domestic economic policy management. Since international economic development trends should affect Argentina less than most other countries with large fuel import requirements, given prudent management of the major economic policy tools, Argentina should continue to be creditworthy in the years to come. - 49 - ANNEX A THE MONETARY APPROACH TO THE BALANCE OF PAYMENTS AND ITS RELEVANCE FOR CURRENT ARGENTINE ECONOMIC POLICIES 1. The monetary approach to the balance of payments has recently been receiving increasing attention in international economics. At the same time much work has been devoted to the analysis of macro models for the open economy with free capital movements. These theoretical developments have strongly influenced the Chilean stabilization effort since 1977, the IJruguayan effort since 1978, and the Argentinian stabilization plan of December 20, 1978. A brief description of these theoretical trends may be useful for understanding the rationale of present Argentinian economic policies. 2. The point of departure of the monetary approach is the assertion that "the balance of payments is essentially a monetary phenomenon." (Mussa [4] p. 189). This assertion implies the rejection of the Keynesian analytic tradition and reflects the decision to analyze the balance of payments in terms of the demand and the supply of money. The general characteristics of the monetary approach follow then naturally. First, the analysis of the balance of payments should be centered around the notion of disequilibrium and adjustment in the money market, rather than around the notion of disequilibrium and adjustment in the markets for goods. The monetary approach rules out any terms-of-trade or relative price effects. The analysis of the balance of payments in the monetary approach concerns itself only with the explanation of the balance between the total acquisition anid disposal of funds. No consideration is given to the channels through which this takes place; there is no need to distinguish between current and capital account balances, the only meaningful balance is the official settlements balance, i.e., the "money" balance. The Monetary Approach: Key Assumptions 3. A crucial assumption of the monetary approach refers to the nature of the automatic mechanism of payments adjustment. This assumption consists itself of two parts. First, in sharp contrast with the sterilization assump- tion often implicit in the Keynesian view, the monetary approach asserts that, with a pegged exchange rate, the monetary inflows or outflows associated with surpluses or deficits cannot be sterilized. The domestic monetary authority, therefore, cannot determine the total money supply. The monetary approach also stresses that the demand for money is a stock demand and, therefore, the notion of equilibrium must be that of stock equilibrium. Let a variation of the supply of money associated with a payments imbalance disturb an initial equilibrium. A flow demand for money (hoarding) arises that gradually brings the actual stock of money to its desired level. Eventually, a new full-stock equilibrium will be attained; this stock equilibrium will necessarily correspond to a balance-of-payments equilibrium. - 50 - ANNEX A 4. A second assumption of the monetary approach is known under the name of "the law of one price." Interpreted in a simple way, the assumption of the "law of one price" is nothing but the purchasing power parity concept, which asserts that in the long run changes in the exchange rate tend to offset changes in relative price levels between countries or, alternatively, that price levels measured in a common currency will be equal. However, the "law of one price," as customarily interpreted and used in the monetary approach, asserts that high elasticities of substitution prevail among countries for most traded goods and that, because world markets are highly integrated, a single price will have to prevail in all markets. According to this view, competitive forces will quickly eliminate changes in relative prices stemming from exchange rate changes by offsetting changes in domestic prices. By assuming a fixed domestic currency price of exports, the traditional approach was able to establish a relationship between changes in the exchange rate and changes in the terms of trade. In contrast, the "law of one price" implies that relative prices of traded goods stay fixed with exchange rate changes. The monetary approach, therefore, denies that exchange rate changes can adjust the balance of payments through price-induced flows-of-trade changes. The monetary approach thus regards the exchange rate as the relative price of national monies, rather than the relative price of traded goods. 5. A third element of the monetary approach is the assumption that interest rates are pegged to the international level. Such an assumption can be seen as an extension of the "law of one price" applied to money or, alternatively, as a natural consequence of capital mobility in a small, open economy. The View on Monetary Policy 6. A simple model can be designed illustrating the working, or rather the non-working of monetary policy in an open economy with a pegged exchange rate. The model is as follows: (1) M = P . L (y, i) (2) M = a .(R + D) d s (3) Md M 7. In equation (1) the demand for nominal money balances is determined by the price level (P), real income (y) and the interest rate (i), while the supply of money--equation (2)--equals the money multiplier (a) times the supply of high-powered money, that is international reserves (R) plus domestic monetary base (D). Supply of money and demand for money are instantaneously adjusted in equation (3). Thus, we can write - 51 - ANNEX A (4) P . L (y, i) - a (R + D) Differentiating logarithmically equation (4), we obtain (5) R d log R d log a+ e d log y+ e 1 d log i+ d log P R + DY - D d log D. R + D where e = y d L G income-elasticity of demand for money. y L d y and e - i d L = interest rate-elasticity of demand for money. i L d i We can rewrite equation (5) as (6) r = a + a 1& log y + a2A log P + a3. 1log i + a4 d where r = R d log R R +D d = D d log D R + D 8. The monetary approach offers the following interpretation of equation (6). Real income is considered exogenous by a long-run, full- employment assumption. Also, prices and interest rates are exogenous by either the small country assumption or the "law of one price." This implies that the demand for money is exogenous for the small, open economy. The supply of money adjusts to the predetermined demand via the balance of payments. It turns out that the money supply ceases to be a policy instrument and cannot be controlled by the monetary authority, which only controls its domestic component D. An increase in the latter, ceteris paribus, leads to an equivalent decrease in the level of reserves R, which leaves the money supply a (R + D) unchanged. - 52 - ANNEX A 9. Argentina is presently following a plan of preannounced and periodic nominal devaluations of the exchange rate. Although these nominal devaluations were until September 1979 at a rate smaller than the differential in the rate of inflation between Argentina and its major trading partners, the effects of such policies can also be discussed within the monetarist framework. Two models can be presented with and without non-traded goods respectively. We will present the analysis for devaluation, the symmetric result will hold for a revaluation. 10. The model without non-traded goods is a two-country model which embodies the assumptions mentioned earlier. It consists of the following equations: (1) L = kPy L* = k* P* y* (2) P = P*e 0 6 (3) M= B = e M* (4) Z Py -H Z* = P* y* - H* (5) H = k (L-M) = H(P,M) H* = k *(L*-M*) = H*(P*,M*) Equation (1) is a stock demand for money. The stock demand (L) is proportional to nominal income defined as the price level (P) times real income (y) which is considered fixed at full-employment level. Equation (2) embodies the "law of one price." The national price level (P) and international price level (P*) are tied through the exchange rate (e). Equation (3) embodies the non- sterilization assumption. The Balance of Payments surplus (deficit) is equal to the same positive (negative) change in the domestic supply (i) and to the same negative (positive) change is the foreign money supply in national currency terms (-eM*). Equations (4) and (5) embody what we termed earlier the automatic adjustment mechanism. Equation (5) states the flow demand for money (hoarding) as a proportion (k) of the excess demand for money, i.e., the difference between the stock demand (L) and the actual quantity M. Equation (4) makes aggregate expenditures a function of nominal income and the flow demand for money (hoarding). 11. In this model the short-run effects of a one shot devaluation are clear: by raising the domestic price level (2)--pegged to the world price level according to the "law of one price"--and thus the stock demand for money (1), a devaluation stimulates hoarding (5), affects expenditures (4), and brings about an improvement in the balance of payments without--it should be noted--any terms-of-trade or relative price effects. Instead of increasing exports and lowering imports through a shift in relative prices, the overall - 53 - ANNEX A price changes increases the real value of foreign balances and decreases the real value of domestic balances, causing foreigners to dishoard and nationals to save to restore thle real value of their cash-balances. This effect of devaluation is transitional however; over time, as the stock of world money is redistributed in favor of the devaluing country, the demand for money will progressively be satisfied and hoarding will approach zero. In the final equilibrium--a stock equilibrium--hoarding will be zero and the balance of payments will have returned to its initial position. Devaluation, therefore, has no real effects but only increases the price level by the full amount of the exchange rate change. The symmetric statement would apply to a revaluation. 12. What are the policy implications of this analysis? The monetary approach has an equivocal position with respect to devaluation, acknowledging its favorable initial effects while pointing out its long-run neutrality. A characteristic position may be that of Johnson [3]: a devaluation speeds up the adjustment in the balance of payments, an adjustment that would occur anyway through the automatic mechanism embodied in the working of a monetary economy. Finally--it should be noted--the monetary approach has taken a last step in minimizing the role of a devaluation by making it strictly equivalent to a reduction in the money supply. 13. If traded goods and non-traded goods produced and consumed in each country are introduced, the model can be written as follows: (1) X =X (q) i =.1,2 X* X* (q*) i 1, 2 i i i i (2) q =2 q= 2 p (3) Pi e P* (4) C= C (q, Z) C* C* (q*, Z*) i i i (5) Z= Y - H Z* Y* - H* (6) X + q X= Y(q) y* X* + q* X* Y* (q*) (7) H H(q, M ) H* =H* (q*, M*) p1 P (8) E = X -c =0 E* X* -C* = 0 2 2 2 2 2 2 (9) H (q, M) + H* (q*, M*) = 0 p p* 1 1 - 54 - ANNEX A Equation (1) states the production of good i (Xi) as a function of the relative price q. Equation (4) makes the consumption of good i (Ci) a function of relative prices (q) and expenditure (Z). Equation (6) defines national income in real terms (Y). The other equations embody the monetarist elements of the previous model, i.e., the law of one price--equation (3)-and the expenditure and the hoarding functions, equations (5) and (7) respectively. 14. Dornbusch (1] has shown that in this more disaggregated structure the conclusions of the one-commodity model continue to hold for the effects of a devaluation on the balance of payments and the prices of traded goods. The additional element that arises is that the reduction in domestic absorp- tion resulting from the devaluation cause the relative price of non-tradeable goods to decline at home and to rise abroad. This result reinforces the effect of the devaluation on the balance of payments. Within this model the following proposition can be proved: the domestic currency price of traded goods increases less than proportionately to the rate of devaluation; the devaluing country's balance of payments unambiguously improves in the short run; and the relative price of non-traded goods decreases at home and rises abroad. In the long run, the devaluation does not have any permanent effect on the balance of payments; it only raises the price level and lowers the relative price of traded with respect to non-traded goods. 15. In summary, the monetary approach to the balance-of-payments con- cludes that there is an automatic monetary mechanism of balance-of-payments adjustment which renders exchange rate changes unnecessary. Against this, critics of the approach claim that the working of the automatic mechanism has yet to be proven empirically, and that the model fails to recognize the importance of adjustment lags which reduces its relevance to economic policy making. References [1] Dornbusch, Rudiger, Devaluation, Money and Nontraded Goods, American Economic Review, December 1973. [2] Hahn, Frank H., The Monetary Approach to the Balance of Payments, Journal of International Economics, August 1977. [3] Johnson, Harry G., The Monetary Approach to Balance-of-Payments Theory, in Frenkel and Johnson eds: The Monetary Approach to the Balance of Payments, University of Toronto Press, 1976. [4] Mussa, Michael, Tariffs and the Balance of Payments in Frenkel and Johnson eds: The Monetary Approach to the Balance of Payments. University of Toronto Press, 1976. - 55 - ANNEX B INFLATION AND THE DISPERSION OF RELATIVE COMMODITY PRICES IN ARGENTINA 1. The impact of inflation on the structure of relative prices has been recently investigated by a growing number of empirical and theoretical studies. 1/ In a recent contribution, R.W. Parks 2/ has shown that it is not just inflation but mainly the amount of unexpected or unanticipated inflation which affects relative price variability. 3/ Although fully anticipated inflation may also affect the structure of relative prices, it is the unexpected component of inflation which has the stronger disruptive effects on the distri- bution of individual prices. The main reason for this relationship is the existence of differences in supply elasticities across commodities, as well as differences in the income elasticities of demand. The speed at which suppliers adjust to unexpected changes in. demand is different across sectors, depending on the characteristics of the production function, the availability of interme- diate inputs, the magnitude of storage costs, and other commodity-specific attributes. These attributes are certain to play a considerable lesser role when the changes in demand are fully foreseen and changes in production can be planned in advance. 2. Relative prices evolve over time in response to structural changes in the real side of the economy and not only as a consequence of monetary developments. However, since we deal here with very short-run changes (monthly), our main focus will be to isolate the specific effects of inflation on the variability of relative prices. 1/ Among others, see Bordo, M.D. "The Effects of Monetary Change on Relative Commodity Prices", unpublished manuscript, July 1978; Cukierman, Alex, "The Relationship between Relative Prices and the General Price Level: A suggested interpretation", American Economic Review, June 1979; Glejser, H. "Inflation, Productivity, and Relative Prices: A Statistical Study", Review of Economic and Statistics, February 1965; Hercowitz, Z. "Hyperinflation and the Dispersion of Relative Prices", Manuscript, The University of Rochester, December 1978; and Vining, D.R., and Elwertowski, T.C. "The Relationship between Relative Prices and the General Price Level", American Economic Review, September 1976. 2/ Parks, R.W. "Inflation and Relative Price Variability", Journal of Political Economy, February 1978. 3/ Parks model has been extended in order to consider relative-price variability in the context of an open economy by Blejer, M. I. and L. Leiderman, "Relative Price Variability in the Open Economy", Boston University, Center for Latin American Development Studies, Discussion Paper, No. 33, September 1979. - 56 - ANNEX B 3. Relative prices are signals in the process of allocation of resources and, therefore, an increase in their variability, and the consequent reduction in their predictability, can be expected to have significant welfare as well as real effects. 1/ Some of those possible effects are discussed in the concluding part of this Annex. 4. Our purpose here is tQ study briefly the month-to-month evolution of relative price changes in Argentina and to relate those changes to some elements directly connected with the very rapid inflationary process of that country. In order to proceed with the analysis, a measure of relative price variability is required. We use here a measure suggested by Theil 2/ (and used by Parks) which takes the form of variance measure: (Al) n (Al) = fr wi (Dpit t where pit is the logarithm of the price of commodity i, P is the logarithm it ~~~~~~~~~~~~~~~~t of the average price index, and DX Xt - X l ; therefore, (DPit - DPt ) is the rate of change of the relative price of the ith commodity and w i8 the share of i in the Consumer Price Index. VP is, then, a measure of the non-proportionality of the price movements and is larger when the variability of relative prices is higher. If all prices change by the same percentage, VP = 0. 5. To construct VP for Argentina monthly data on prices for 40 sectors ("groups") were used. The period considered is May 1977 to June 1979, since this is the longest period for which comparable sectoral price data is available. The price data is obtained from Indice de Precios al Consumidor y Salarios Industriales Capital Federal, INDEC, Buenos Aires, monthly issues. The CPI weights (w,) are obtained from Indice de Precios al Consumidor - Informe Metodologico, INDEC; Buenos Aires, N.D. 6. VP indices for each of the 26 months in the sample were computed t and are reported in Table Al. The series display large month-to-month fluctuations which indicate ample changes in the magnitude of relative price variability. The question explored here is whether those changes in VP are systematically related to the inflationary process and to some of the elements affecting the aggregate rate of inflation. 1/ On the welfare implications of relative-price variability see Jaffee, D. and E. Kleiman, "The Welfare Implications of Uneven Inflation", in Lundberg, E. (ed.) Inflation Theory and Anti-inflation Policy, Macmillan, London, 1977. 2/ Theil, H. Economics and Information Theory, Rand McNally, Chicago, 1967. - 57 - ANNEX B 7. The existence of such a systematic relationship appears to be confirmed by the results reported in Table A2. Equation (1) presents the results of a regression of the form: (A2) VPt = a + a1 t where VPt is the variable calculated in Table Al, and It is the monthly rate of inflation measures by the CPI. Since the coefficient of It is highly significant, we can conclude that there exists a positive correlation between the aggregate rate of inflation and the variability of relative prices, i.e., the higher the rate of inflation the more uneven is the rate of price changes across sectors. 8. In order to study the possibility that it is mainly unexpected or unanticipated inflation which causes relative price disruptions, we disaggregate It into two components: (A3) I = Elt + UIT (A3) t t t where EIt indicates expected inflation and UIt stands for the unexpected or unanticipated rate of price changes. 1/ 9. Three equations were estimated using the above specifications. Equation (2) in Table A2 indicates that the expected component of the infla- tionary process does not appear to have a significant effect on the variability of relative prices. On the other hand, from equation (3) we observe that the unexpected component has a strong positive effect, increasing the degree of relative-price changes. The same pattern of results emerges from equation (4) where both components are included: only unexpected inflation is significant. 1/ The variable EIt and UIt are calculated by fitting a fifth order autore- gressive process of the form: (A4) I = -b 0 + n b I (A4) t o ffi t-i It-i t With this simple specification the best predictor for I is the fitted value from (A3). Such a predictor is used as an approximation for expected inflation (ERt), and the difference between actual and expected inflation (It = Elt), as a proxy for unanticipated inflation (UIt). - 58 - ANNEX B Table Al: ARGENTINA - THE VARIANCE OF RELATIVE-PRICE CHANGES (VP t) MAY 1977 - JUNE 1979 40 (Al) VPt = i£l w (Dpi-DP) Period VP Period VP t t 1977 May 41.048 1978 May 24.485 June 33.069 June 8.876 July 18.487 July 18.834 August 46,136 August 16.713 September 20.540 September 8.092 October 32.416 October 32.670 November 23.778 November 12.666 December 20.576 December 10.912 1978 January 61.680 1979 January 45.909 February 35.014 February 10,256 March 81.427 March 34.330 April 29.351 April 24.651 May 6.737 June 27.113 The values of VP reported here are the values obtained from equation (Al) multiplied by lO!.00. - 59 - ANNEX B 10. From the above results we can conclude that the relative price effects which are associated with higher inflation are mainly caused by unanticipated changes in the inflation rate, and fully expected changes in prices appear to be free of such effects. 11. An additional aspect which deserves some discussion is related to the causes of inflation, and their relation to the variability of relative prices. In Table 5 we observe that a large part of the variance of the inflation rate can be explained by two variables related to the foreign trade sector, the rate of world inflation relevant to Argentina, and the rate of exchange rate devaluation. Using that result we can disaggregate the rate of inflation into two components: the foreign component (F t) and the domestic component (D ): (A5) I = Ft + D t t t Where Ft can be explained by international inflation and exchange rate devaluation, i.e., (A6) F h + h IPI + h2e + As a consequence the residual (It - Ft) can be used as proxy for the portion of inflation explained by domestic developments, D t. 1/ 12. By relating now VPt to the components of It, we obtain the results reported in Table A3. They indicate that the domestic elements appear to have a much stronger and significant effect in the dispersion of relative prices than the foreign ones. Ft does not have a significant coefficient in the first equation and is significant at the 10 percent level only when both components are included in the regression. The Dt variable is highly signifi- cant in all cases. 1/ This is certainly now totally appropriate since "noise" in the system and all random developments will be captured by Dt and they may not be caused by domestic policy variables. For our purposes, however, this approxima- tion appears to be a sensible one. - 60 - ANNEX B Table A2: ARGENTINA - THE VARIANCE OF RELATIVE-PRICE CHANGES AND THE RATE OF INFLATION. REGRESSION RESULTS FOR ARGENTINA (MAY 1977 - JUNE 1979) DEPENDENT VARIABLE: VPt Actual Expected Unexpected 2 Equation Constant Inflation Inflation Inflation R /D.W. (I t) (El t) (UI t) (1) -10.80* 446.25 0.290 (0.85) (3.13) 1.39 (2) -13.68* 506.75* 0.052 (0.38) (1.18) 1.76 (3) 27.45 516.70 0.249 (9.14) (2.82) 1.65 (4) -11.15 470.56* 509.01 0.297 (0.35) (1.24) (2.81) 1.39 t-values are in perentheses; an asterisk indicates not significant at the 0.05 level. - 61 - ANNEX B Table A3: ARGENTINA - THE VARIANCE OF RELATIVE PRICE CHANGES AND THE COMPONENTS OF THE RATE OF INFLATION. REGRESSION RESULTS FOR ARGENTINA (MAY 1977 - JUNE 1979) DEPENDENT VARIABLE: VPt t~~~~~~~~~~~~~~~~~~~ Constant External Sector Domestic Sector R Variables (F t) a/ Variables (D t) b/ D.W. 1.72 301.85* 0.079 (0.09) (1.43) 1.73 27.90 661.93 0.255 (9.34) (2.87) 1.59 1.72* 301.85 661.93 0.355 (0.10) (1.65) (2.97) 1.44 A ~A a/ Fitted values of the regression It = h + h P' + h e. t/ ot h 1 w 2 bi I - h - h P h e. - t o w 2 - 62 - ANNEX B CONCLUDING REMARKS 13. It has been shown here that the monthly dispersion of relative prices increases with the rate of inflation, particularly if the changes in the rate of inflation are unanticipated by the public. Also it is apparent that the variability of relative prices is less sensitive to price changes caused by foreign-sector variables and more responsive to inflation caused by domestic sources. 14. The study of the sources of relative-price variability is important because such variability is expected to have some negative impact on the real side of the economy. M. Friedman, in his Nobel Lecture, hypothesizes that increased volatility of inflation reduces the efficiency of market prices as coordinators of economic activity, and that therefore "its seems plausible that the average level of unemployment would be raised by the increased amount of noise in market signals, at least during the period when institutional arrangements are not yet adapted to the new situation." 1/ Earlier, J.M. Keynes discussed the possibility that large fluctuations in relative prices would increase the risks of specialization, thus leading to a slackened productive process. 2/ 15. A number of explicit mechanisms have been postulated to account for the effects of relative-price variability on real economic variables. First, it has been emphasized that an increase in relative-price variability reduces the value of market prices as allocative signals, thus leading to an increase in the optimal amount of time and resources devoted to search activities, and to a consequent reduction in measured output and employment. Second, increased volatility is likely to bring about a shortening of optimal contract length, thus implying a higher per period cost of contracting. Furthermore, resource misallocation among industries may be generated,to the extent that costs of price variability are distributed unevenly across sec- tors. All these effects may contribute to an increase in unemployment and to a reduction in output. 3/ 16. Since our results here indicate that variability in relative prices depends on the level of inflation and, particularly, on unanticipated aggre- gate-demand policies, the possibility that real effects of increased varia- bility are also present in Argentina should be considered as an additional cost of the extremely high rate of inflation in that country. 1/ Friedman, M. "Nobel Lecture: Inflation and Unemployment," Journal of Political Economy, June 1977, p. 467. 2/ Keynes, J.M. Tract on Monetary Reform, Harcourt, Brace and Co.,New York, 1942, pp. 35-36. 3/ A negative effect of relative-price volatility on real output, and a positive effect on unemployment, is found, for the U.S. case by Blejer, M. and L. Leiderman, "The Effects of Relative-Price Variability on Output and Unemployment: Some Empirical Evidence," Review of Economics and Statistics, forthcoming. - 63 - STATISTICAL APPENDIX Table of Contents Table 1. POPULATION 1.1 Population, 1950-1979 1.2 Estimated Population Density by Jurisdiction, 1979 1.3 Unemployment Rates, 1974-1979 2. NATIONAL ACCOUNTS 2.1 Gross Domestic Product by Sectorial Origin at Constant Prices, 1971-1979 2.2 Gross Domestic Product by Expenditures at Current Prices, 1971-1978 2.3 Gross Domestic Product by Expenditures at Constant Prices, 1971-1978 2.4 Gross Domestic Investment at Constant Prices, 1971-1979 2.5 Projected National Accounts and other Macro-Indicators, 1980-1985 3. BALANCE OF PAYMENTS 3.1 Balance of Payments, 1974-1979 3.2 Commodity Exports, 1976-1979 3.3 Composition of Exports, 1976-1979 3.4 Imports in Current and Constant Values, 1960-1979 3.5 Structure of Imports in Relation to Consumption, Manufacturing Value-Added, Gross Fixed Investment, and Gross Domestic Product, 1960-1978 3.6 Index of Real Effective Exchange Rate for Commodity Groups, 1974-1979 3.7 Foreign Exchange Rate Movements, 1970-1979 3.8 Direction of Trade, 1970-1979 3.9 Terms of Trade and Capacity to Import, 1965-1978 3.10 Net Capital Flows, 1978-1979 3.11 Export Projections, 1980-1985 3.12 Import Projections, 1980-1985 3.13 Projected Balance of Payments, 1980-1985 3.14 Indices of Export Prices and Volume, 1951-1977 3.15 Balance of Payments, 1948-1978 - 64 - 4. EXTERNAL DEBT 4.1 External Public Debt Outstanding Including Undisbursed as of December 31, 1978 4.2 Service Payments, Commitments, Disbursements and OUtstanding Amounts of External Public Debt, Total 4.3 Service Payments, Commitments, Disbursements and Outstanding Amounts of External Public Debt, Suppliers Credit 4.4 Service Payments, Commitments, Disbursements and Outstanding Amounts of External Public Debt, Financial Institutions 4.5 Service Payments, Commitments, Disbursements and Outstanding Amounts of External Public Debt, Bonds 4.6 Service Payments, Commitments, Disbursements and Outstanding Amounts of External Public Debt, Multilateral Loans 4.7 Service Payments, Commitments, Disbursements and Outstanding Amounts of External Public Debt, Multilateral Loans, IBRD 4.8 Service Payments, Commitments, Disbursements and Outstanding Amounts of External Public Debt, Bilateral Loans 4.9 Service Payments, Commitments, Disbursements and Outstanding Amounts of External Public Debt, Nationalization 5. PUBLIC SECTOR FINANCE 5.1 Public Sector Resources for Investments, 1971-1979 5.2 Public Sector Resources for Investment, 1970-1979 5.3 Public Sector Resources for Investment, 1971-1979 5.4 Public Sector Operations, 1971-1979 5.5 Public Sector Operations, 1971-1979 5.6 National Tax Burden, 1971-1979 5.7(a) Treasury Operations, 1971-1979 5.7(b) Treasury Operations, 1971-1979 5.8(a) Treasury Budgetary Revenue, 1971-1979 5.8(b) Treasury Budgetary Revenue, 1971-1979 5.9(a) Treasury Expenditures, 1971-1979 5.9(b) Treasury Expenditures, 1971-1979 5.10 Index of Public Sector Tariffs, 1968-March 1980 5.11 Value of Production and Employment of State Enterprises, 1975-1979 5.12 Policy Targets and Actual Public Tariff Adjustments, 1979 5.13 National Economic and Social Investment of the Public Sector, 1979-1989 5.14 Consolidated Electric Sector Flow of Funds, 1979-1980 5.15 Loans and Amortization of Major Electric Power Companies (in 1980) 6. MONETARY STATISTICS 6.1 Interest Rates, 1977-1980 6.2 Monetary Expansion of the Financial System, 1975-1979 6.3 Net Foreign Exchange Reserves of the Monetary Authorities, 1971-1979 6.4 Gross Reserves and Imports, 1950-1979 - 65 - 7. AGRICULTURE 7.1 Production of Principal Crops, 1967-1979 7.2 Principal Crops, Area Planted, 1967-1979 7.3 Principal Crops, Area Harvested, 1967-1979 7.4 Yields of Principal Crops, 1967-1979 8. INDUSTRY 8.1 Growth and Structure of Value Added in Manufacture, 1950-1979 9. PRICES 9.1 Principal Price Indicators, 1960-1979 9.2 Changes in Wholesale and Consumer Price Indices, 1960-1979 9.3 Monthly Rates of Price Increases, 1976-1979 9.4 Price Movements of Major Groups Included in the Wholesale Price Index, 1979 9.5 Comparison of Implicit Prices with Wholesale Consumer Prices, 1950-1979 9.6 A Comparison of Historical Periods of Price Deceleration, 1952-1978 9.7 Sources of Domestic Inflation, 1979 9.8(a) Price Movements of Traded, Non-traded, and Government Controlled Goods and Services, 1977-1979 9.8(b) Price Movements of Traded, Non-traded, and Government Controlled Goods and Services, 1977-1979 9.9 Price Movements of Traded, Non-traded, and Government Controlled Goods and Services, 1979 9.10 United States and International Price Movements Weighted by Argentine WPI Weights, 1979 9.11 Internal Terms of Trade (ITT), 1977-1980 9.12 Approximation of Redundancy in External Tariffs 10. WAGES 10.1 Permitted Wage Adjustments and Cost-of-Living Increases, 1975-1979 10 .2 Actual and Potential Wage Increases, 1976-1979 - 66 - Table 1.1: ARGENTINA - POPULATION, 1950-1979 Mid-year Annual population Growth (in thousands) Rate 1950 17,150 -- 1951 17,494 2.0 1952 17,850 2.0 1953 18,211 2.0 1954 18,571 2.0 1955 18,928 1.9 1956 19,277 1.8 1957 19,620 1.8 1958 19,956 1.7 1959 20.286 1.6 1960 20,611 1.6 1961 20,929 1.5 1962 21,244 1.5 1963 21,556 1.5 1964 21,868 1.4 1965 22,179 1.4 1966 22,490 1.4 1967 22,802 1.4 1968 23,115 1.4 1969 23,430 1.4 1970 23,748 1.4 1971 24,068 1.3 1972 24,392 1.3 1973 24,719 1.3 1974 25,050 1.3 1975 25,383 1.3 1976 25,719 1.3 1977 26,056 1.3 1978 26,393 1.3 1979 26,729 1.3 Source: Instituto Nacional de Estadistica y Censos, Ministry of Economy - 67 - Table 1.2 ARGENTINA - ESTIMATED POPULATION DENSITY BY JURISDICTION, 1979 Jurisdiction Mid-Year Population, Area /1 /2 Density (in thousands) (in thousand kr-) Capital Federal 2,983 0.2 14915.0 Buenos Aires 10,695 307.6 34.8 Catamarca 176 101.0 1.7 Cordoba 2,379 168.8 14.1 Corrientes 603 88.2 6.8 Chaco 582 99.6 5.8 Chubut 230 224.7 1.0 Entre Rios 852 78.8 10.8 Formosa 284 72.1 3.9 Jujuy 367 53.2 6.9 La Eampa 185 143.4 1.3 La Rioja 147 89.7 1.6 Mendoza 1,136 150.8 7.5 Misiones 528 29.8 17.7 Neuquen 209 94.1 2.2 Rio Negro 333 203.0 1.6 Salta 598 154.8 3.9 San Juan 425 87.6 4.9 San Luis 191 76.6 2.5 Santa Cruz 116 243.9 0.5 Santa Fe 2,355 133.0 17.7 Santiago del Estero 536 135.3 4.0 Tucuman 801 22.5 35.6 Tierra del Fuego 18 20.9 0.9 Total 26,729 2779.7 9.6 /1 Not including Falkland Islands (Malvinas) and dependencies, South Georgia, South Sandwich Islands, and Antarctic Argentina /2 United Nations Demographic Yearbook estimate of land area is 2,776,889 km2 Source: For land area - Instituto Nacional de Estadistica y Censos, Serie anual de la Poblacion de la Capital Federal y las provicias, Nov. 1975. Instituto Geografico Militar, 1973. For estimated population by jurisdiction - INDEC, Ministry of Economy. T.bte 1.3: Ai3CGYTINA - UNEMPLOYMENT PATES, 1974-1979 (I. percent of con -itely active popu.Ltioc) 1974 1975 1976 1977 1978 1979 April Argurt lloNeber April August October April July oeteber April July Octtber Mey August Octobr April July October Greeter lo.r-. Aires 4.2 3.4/1 2.5 2.4 6.0- 2.8 4.8 4.5/1 4.1 3.2 3.4/ 2.2 3.9 2.6 1.7 2.1 1.5 1.9 RosCrie 4.7 ... 3.8 5.3 ... 5.7 5.3 ... 4.1 3,1 ... 2.6 1.5 ... 2.3 3.5 ... 2.8 C.rd.b. 7.0 ... 5.4 6.1 ... 7.2 6.5 . , 5.4 5.9 ... 4.0 5.1 ... 2.7 2.5 ..8 l.a T-c-.r 10.5 ... 7.5 8.4 ... 6.9 7.4 ... 5.5 7.2 ... 4.3 68.8 ... 4.8 *.8 6.57 Greeter Me-do.. 4.9 ... 4.7 4.0 ... 4.4 5.9 ... 4.8 4.4 .. 4.4 2.9 ... 3.5 2.8 3.3 TOTAL /2 4.7 3.1 3.2 3.5 5.1 4.3 3.6 2.5 4.3 ... 2.0 2.4 2.0 /1 3.1y-Aog.st rse.pleynt corns .,Ailabl. for Greeter lucr- Air., tnly, er.eption being T-rones in July 1979. f2 The irdea wee -ai-olated by weighting ure-pliy-ert rater by the pop,letion of the -orre-pondgrg citie. Source: INDEC, miniStry of Economy Table 2.1: ARGENTINA - GROSS DOMESTIC PRODUCT BY SECTORIAL ORIGIN AT CONSTANT PRICES, 1971-1979 1971 1972 1973 1974 1975 1976 1977 1978 1979 (In millions of 1960 $a) Agrictulture 1717.9 1741.0 1918.9 2003.4 1973.0 2051.9 2077.4 2113.5 2219.8 Mining 257.3 263.2 253.0 260.4 248.5 252.9 276.9 280.5 290.9 Manufacturing 5458.5 5783.9 6151.6 6526.0 6342.9 6058.9 6313.7 5812.0 6451.2 Construction 794.4 783.0 684.1 734.4 772.0 863.8 989.5 993.2 1045.5 Electricity, gas and water 348.6 385.5 413.2 440.0 465.6 481.6 505.4 521.0 572.3 Commerce, restaurants and hotels 2669.9 2768.7 2843.0 3077.1 3045.2 2871.0 3046.6 2869.2 3163.3 Transport and communications 1085.5 1105.5 1169.4 1218.1 1201.5 1163.1 1233.6 1201.6 1303.2 Banking 501.7 496.2 525.6 599.8 543.2 507.5 582.4 634.0 700.5 Government and other serviees 1951.1 2020.8 2111.9 2193.9 2313.2 2365.8 2411.8 2454.0 2516.1 GDP at factor cost 14785.0 15347.8 16070.6 17053.2 16905.2 16616.5 17437.4 16879.0 18263.3 Net indirect taxes 1397.3 1450.5 1518.8 1611.7 1597.7 1570.4 1648.0 1595.2 1711.8 GDP at market prices 16182.3 16798.3 17589.4 18664.9 18502.9 18186.9 19085,4 18474.2 19975.1 Annual Growth Rates Agriculture -0.1 1.3 10.2 4.4 -1.5 4.0 1.2 1.7 5.0 Mining 3.6 2,3 3.9 2.9 -4.6 1.8 9.5 1.3 4.3 Manufacturing 9.7 6.0 6.4 6.1 -2.8 -4.5 4.2 -7.9 11.0 Construction 6.6 -1.4 -12.6 7.4 5. 11.9 14.6 0.4 4.9 Electricitv, gas and water 9.0 10.6 7.2 6.5 5.8 3.4 4.9 3.1 9.9 Commerce, restaurants and hotels 6.6 3.7 2.7 8.2 -1.0 -5.7 6.1 -5.8 11.9 Transports and communications 2.5 1.8 %.8 4.2 -1.4 -3.2 6.1 -2.6 8.5 Banking 2.5 -1.1 5.9 14.1 -9.4 -6.6 14.8 8.9 10.5 Government and other services 2.6 3.6 4.5 3.9 5.4 2.3 1.9 1.7 2.5 GDP at factor cost 5.9 3.8 4.7 6.1 -0.9 -1.7 4.9 -3.2 8.5 Net indirect taxes .. 3.8 4.7 6.1 -0.9 -1.7 4.9 -3.2 7.3 GDP at market prices 5.9 3.8 4.7 6.1 -0.9 -1.7 4.9 -3.2 8.1 As percentage of GDP at factor cost Agriculture 11.6 11.3 11.9 11.7 11.7 12.3 11.9 12.5 12.2 Mining 1.7 1.7 1.6 1.5 1.5 1.5 1.6 1.7 1. 6 Manufacturing 36.9 37.7 38.3 38.3 37.5 36.5 36.2 34.4 35.3 Construction 5.3 5.1 4.3 4.3 4.6 5.2 5.7 5.9 5.7 Electricitv, gas and water 2.4 2.5 2.6 2.6 2.8 2.9 2.9 3.1 3.1 Commerce, restaurants and hotels 18.1 18.0 17.7 18.0 18.0 17.3 17.5 17.0 17.3 Transports and com-nicat,onrs 7 3 7.2 7.3 7.1 7-.1 7.0 7.1 7.t 7.1 Banking 3.4 3.2 3.3 3.5 3.2 3.1 3.3 3.8 3.8 Government and other services 13.2 13.1 13.1 12.9 13.7 14.2 13.8 14.5 13.9 GDP at factor cost 100.0 100.0 100.0 100. 0 tOo. 0 100.0 100.0 l00.u ;00u. Net in direct taxes 9.5 9.5 9.5 9.5 9.5 9.5 9.5 9.5 9.4 GC)P at market prices 109.5 13X.5 109.5 109.5 104.5 109.5 109.5 109.5 109.4 So,r,e C'-ntr r, 1 Table 2.2: ARGENTINA - CROSS DOMEISTTC PRODUCT BY EXPENDITURES AT CURRENT PRICES, 1971-1978 (in millions of $a) 1971 1972 1973 1974 1975 1976 1977 1978 Gross national produLct 132,456.0 235,434.7 385,032.4 451,628.9 1,402,000,4 7,908,508.5 20,987,650.4 51,687,619.4 Net factor payments -1,779.8 -3,506.0 -4,811.2 -4,604.3 -15,527.9 -76,074.0 -258,341.7 -658,129.9 GDP at market prices 134,235.8 238,940.7 389,843.6 456,233.2 1,417,528,3 7,984,582.5 21,245,992.1 52,345,749.3 Imports of goods and NFS 13,566.4 20,268.0 26,336.4 39,190.2 121,986.0 578,281.2 2,011,835.0 4,661,831.2 Exports of goods and NFS 12,808.5 21,279.1 38,219.4 44,286.6 100,088.0 760,557.6 2,783,751.3 7,313,776.8 RFsource balance 757.9 -1,011.1 -11,883.0 -5,096.4 21,978,0 -182,276,4 -771,916 -2,651,945.6 ConSLiniption 100,529.5 178,491.2 290,815.9 338,714.9 1,126,582.8 5,895,178.2 14,750,115.0 36,560,586.1 Public 30,964.8 48,677.6 96,427.3 146,320.4 439,384.0 2,005,887.0 4,980,371.0 15,202,105.0 Private 69,564.7 129,813.0 194,388.6 242,394.5 687,198,8 3,889,291.2 9,769,744.0 21,358,481 1 Gross domestic investment 34,464.2 59,438.4 87,144.7 112,421.9 312,923.5 1,907,127.9 5,723,961.1 13,133,217.6 Gross domestic fixed investments 33,633.6 57,890.6 86,048.7 111,794.9 311,109.8 1,900,208.0 5,753,289.5 13,259,555.0 Public 9,565.0 16,970.0 24,626.0 36,530.0 115,549,0 848,620.0 2,398,785.0 6,047,605.0 Private 24,068.6 40,920.6 61,422.7 75,264.9 195,560.8 1,051,588.0 3,354,504.5 7,211,950.0 Change in stocks 831.6 1,547.8 1,096.0 627.0 1,813,7 6,919.9 -29,328.4 -126,337.4 ';ross domestic savings 33,706.3 60,449.5 99,027.7 117,518.3 290,945.5 2,089,404.3 6,495,877.1 15,785,163.2 Public 4,121.0 5,661,0 -422,0 1,676.0 -96,329.0 93,471.0 1,799,008.0 3,384,978.0 Private 29,585.3 54,788.5 99,449.7 115,842.3 387,374.5 1,995,933.3 4,696,869.1 12,400,185.2 Net Current transfers -15.8 -36.9 104.5 160.7 2,750.2 13,060.3 39,076.5 Cross niational savings 31,910.7 56,906.6 94,321.0 112,914.0 275,578.3 2,016,080.3 6,250,595.4 15,166,109.8 Source: Central Bank, mission estimates. Table 2.3: ARGENTINA - GROSS DOMESTIC PRODUCT BY EXPENDITURE AT CONSTANT PRICES, 1971-1978 (In millions of 1960 $a) 1971 1972 1973 1974 1975 1976 1977 1978 Gross domestic product 16,182.3 16,798.3 17,589.4 18,664.9 18,502.9 18,186.9 19,085.4 18,474.2 Terms of trade effect -103.7 35.7 291.3 95.2 -15.6 -380.4 -463.2 -429.8 Gross domestic income 16,078.6 16,834.0 17,880.7 18,760.1 18,487.3 17,806.5 18,622.2 18,044.4 Imports of goods and NFS 1,581.9 1,439.9 1,328.2 1,525.3 1,601.6 1,223.1 1,529.4 1,330.6 Exports of goods and NFS 1,577.9 1,482.6 1,572.0 1,567.5 1,294.7 1,820.6 2,743.5 2,891.2 Exports - adjusted for terms of trade 1,474.2 1,518.3 1,863.3 1,662.7 1,279.1 1,440.2 2,280.3 2,461.4 Resource balance 107.7 -78.4 -535.1 -137.4 322.5 -217.1 -750.9 -1,130.8 Gross domestic expenditure 16,186.3 16,755.6 17,345.6 18,622.7 18,164.8 17,589.4 17,871.3 16,913.6 Consumption 12,053.9 12,569.8 13,346.3 14,445.0 14,720.8 13,290.0 12,875.0 12,443.7 Public 3,712.8 3,428.0 4,425.3 5,437.4 5,741.3 4,521.8 4,347.4 5,174.1 Private 8,341.1 9,141.8 8,921.0 9,007.6 8,979.5 8,768.2 8,527.6 7,269.6 Gross domestic investment 4,132.4 4,185.8 3,999.3 4,177.7 4,088.9 4,299.4 4,996.3 4,470.0 Gross domestic fixed investment 4,032.8 4,076.8 3,949.0 4,154.4 4,065.2 4,283.8 5,021.9 4,513.0 Public 1,146.9 1,195.1 1.130.2 1,357.5 1,509.9 1,913.0 2,093.9 2,058.3 Private 2,885.9 2,881.7 2,818.8 2,796.9 2,555.3 2,370.8 2,928.0 2,454.7 Change in stock 99.6 109.0 50.3 23.3 23.7 15.6 -25.5 -43.0 Gross domestic savings 4,024.7 4,264.2 4,534.4 4,315.1 3,766.5 4,516.5 5,747.2 5,600.7 Net factor income -213.4 -246.9 -220.8 -171.1 -202.9 -171.5 -225.5 -224.0 Net current transfers -1.9 -2.6 4.8 . 2.1 6.2 11.4 13.3 Gross national savings 3,809.4 4,014.7 4,318.4 4,144.0 3,565.? 4,351.2 5,533.1 5,390,0 Gross national product 15,068.9 16,551.4 17,368.6 18,493.8 18,300.0 18,015.4 18,859.9 18,250.2 Gross national income 15,865.2 16,587.2 17,659.9 18,589.0 18,284.4 17,635.0 18,396.7 17,820.4 Source: Central Bank of Argentina and mission estimates. Table 2.4: ARGENTINA - GROSS DOMESTIC INVESTMENT AT CONSTANT PRTCES, 1971-1979 (In millions 1960 $a) 1971 1972 1973 1974 1975 1976 1977 1978 1979 Gross domestic fixed i-vestment, by assets 4,032.8 4,076.8 3,949.0 4,154.4 4,065.2 4,283.8 5,021.9 4,513,0 5,116.1 Construction 1,897.0 1,833.1 1,634.7 1,762.8 1,876.7 2,043.0 2,232.5 2,289.7 2,385.9 Public 742.2 761.6 624.7 665.5 586.7 787.3 1,074.9 1,034.0 1,051.4 Private 1,154.8 1,071.5 1,010.0 1,097.3 1,290.0 1,255.7 1,157.6 1,255.7 1,334.5 Machinery and equipment 2,135.8 2,243.6 2,314.3 2,391.6 2,188.5 2,240.7 2,789.4 2,223.3 2,730.2 Transport equipment 706.9 747.9 805.5 765.9 652.8 641.7 870.1 7(05.4 948.4 Machinery 1,428.9 1,495.8 1,508.8 1,025.7 1,535.8 1,599.1 1,919.3 1,517.9 1,781.8 Gross domestic fixed investment, by sector 4.03Z.8 4.076.8 3,949.0 4,154.4 4,065.2 4,283.8 5,021.9 4,513.0 5,116.1 Puiblic 1,146.9 1,195.1 1,130.2 1,357.5 1,509.9 1,913.0 2,093.9 2,058.3 1.738.2 Private 2,885. 9 2,881.7 2,818.8 2,796. 9 2,555.3 2,370.8 2,928.0 2,454,7 3,377.9 Change in stocks 99.6 109.0 50.3 23 .3 23.7 15.6 -25.5 -43.0 24.2 Gross domestic investment 4,132.4 4,185.8 3,999.3 4,177.7 4,()88.9 4,299.4 4,996.3 4,470.0 5,140.3 Source: Central Bank of Argentina and Mission Estimates. 1/ Table 2.5: ARGENTINA - PROJECTED NATIONAL ACCOUNTS AND OTHER MACRO-INDICATORS, 1980-1985- (millions of 1978 US$) 1980 1981 1982 1983 1984 1985 Gross Domestic Product 60,907 62,883 65,767 69,226 73,011 77,004 Terms of Trade Adjustment 678 858 1,097 992 919 842 Gross Domestic Income 61,579 63,741 66,864 70,218 73,930 77.846 Imports of Goods and NFS 9,853 10,660 11,327 12,008 12,694 13,212 Exports of Goods and NFS - adjusted for terms of trade - 8,005 - 8,765 _ 9,365 _ 9,667 -10,054 -10,470 Resource Gap 1,848 1,895 1,962 2,341 2,640 2,742 Consumption 49,403 51,143 53,657 56,585 59,721 62,817 Gross Domestic Investment 14,024 14,493 15,170 15,974 16,849 17,771 Gross Domestic Savings 12,176 12,598 13,208 13,633 14,209 15,029 Net Factor Service Income - 347 - 523 _ 678 - 835 - 1,081 - 1,406 Net Transfers 40 37 34 38 39 38 Gross National Savings 11,869 12,112 12,564 12,836 13,167 13,661 Gross National Product 60,560 62,360 65,089 68,391 71,930 75,597 Gross National Income 61,232 63,218 66,186 69,383 72,849 76,439 Source: World Bank Projections. 1/ Sums are not exact because of rounding error. Table 3.1: ARGENTINA - BALANCE OF PAYMENTS, 1974-1979 (In millions of US dollars) 1974 1975 1976 1977 1978 1979 Exports (incl. NFS) 4,762 3,704 4,752 6,769 7,689 9,568 Imports (incl. NFS) 4,214 4,518 3,612 4,892 4,901 9,025 Resource balance 548 -814 1,140 1,877 2,788 543 Net factor service income -421 -475 -508 -618 -815 -1,040 Net interest payments -393 -460 -465 -370 -387 -495 (o.w. interest on public M< loans) (-234) (-251) (-256) (-308) (-37) ... Direct investment income -35 -16 27 -208 -292 -395 Other factor services 7 1 16 -40 -136 -150 Current transfer (net) - 5 18 31 48 35 Balance on current account 127 -1,284 650 1,290 2,021 -462 Public M< loans Disbursements 782 437 1,956 1,064 2,910 1,631 Amortization -548 -520 -605 -708 -1,560 - 568 Net disbursements 234 -83 1,351 356 1,350 1,063 Other M< loans Disbursements 261 581 355 1,059 1,328 2,140 Amortization 324 -510 -476 -540 -1,019 394 Net disbursements -63 71 -121 519 309 1,746 Direct investment 10 - - 146 290 235 Use of ITF resources -116 216 235 -115 -414 _ Short-term capital transactions) -237 226 -923 31 -1,558 1,560 Capital transactions, n.e.i. Change in gross reserves (- increase) - 854 -1,192 -2,227 _1.998 -4,142 Change in net assets of Central Bank -102 289 1,084 -262 -1,367 -432 Exchange adjustments and others -6 -37 -17 10 145 132 Change in net reserves -51 1,107 -125 -2,479 -3,220 -4,442 Source: Central Bank of Argentina and Mission estinates - 75- Table 3.2: ARGENTINA - COMMODITY EXPORTS, 1976-1979 (Millions of US Dollars) 1976 1977 1978 1979 TOTAL 3,916 5,652 6,400 7,811 Major Agricultural Products 2,070 3,082 3,282 4,586 Wheat 431 541 173 614 Corn 362 518 587 613 Sorghum 335 344 358 333 Seeds and oilseeds 23 210 567 759 Vegetable and animal oils 176 370 391 540 Beef 251 331 426 752 Hides & skins 152 210 278 461 Wool 125 217 221 222 Fruit (fresh) 135 180 227 226 Sugar 80 161 54 66 Other Agricultural and Agro-Based Products 900 1,264 1,451 1,581 Mineral Products 28 38 74 70 Fuel and lubricants 19 28 53 50 Other 9 10 21 20 Industrial Products 918 1,268 1,593 1,574 Textiles (excluding wool) 114 170 252 141 Leather manufacturers 49 97 155 210 Chemical products 133 156 200 241 Metal manufacturers 131 129 302 305 Machinery 202 244 286 304 Transport equipment 201 231 218 182 Other 88 241 180 191 Source" Central Bank - 76 - Table 3.3: ARGENTINA - COMPOSITION OF EXPORTS, 1976-1979 1976 1977 1978 1979 Total 100.0 100.0 100.0 100.0 Major Agricultural Products 52.9 54.5 51.3 58.7 Wheat 11.0 9.6 2.7 7.9 Corn 9.2 9.2 9.2 7.8 Sorghum 8.6 6.1 5.6 4.3 Seeds and oilseeds 0.6 3.7 8.8 9.7 Vegetables and animal oils 4.5 6.5 6.1 6.9 Beef 6.4 5.9 6.6 9.6 Hides and skins 3.9 3.7 5.9 5.9 Wool 3.2 3.8 3.4 2.8 Fruit (fresh) 3.4 3.2 3.5 2.9 Sugar 2.0 2.8 0.8 0.8 Other Agricultural 23.0 22.4 22.7 20.2 Agro Based Products Mineral Products 0.7 0.7 1.1 0.9 Fuel and lubricants 0.5 0.5 0.8 0.6 Other 0.2 0.2 0.3 0.3 Industrial Products 23.4 22.4 24.9 20.1 Textiles (excluding wool) 9.9 3.0 3.9 1.8 Leather manufactures 1.3 1.7 2.4 2.7 Chemical products 3.4 2.8 3.1 3.1 Metal manufacturers 3.3 2.2 4.7 3.9 Machinery 5.2 4.3 4.5 3.9 Transport Equipment 5.1 4.1 3.4 2.3 Other 2.2 4.3 2.8 2.4 Source: Table 3.2 Table 3.4: ARGENTINA - IMPORTS IN CURRENT AND CONSTANT VALUE, 1960-1979 (in millions of US$) 1960 1965 1970 1971 1972 1973 1974 1975 1976 1977 1978 19 7 Imports in current dollars Food 13.0 34.0 53.0 44.0 66.0 45.0 88.0 87.0 41.5 60.0 102.8 50o.0 Other consumer goods 10.0 12.0 29.0 26.0 17.0 22.0 46.0 45.0 24.o 75.5 103.5 Fuels and lubricants 156.0 115.0 79.0 122.0 70.0 168.0 526.0 515.0 530.8 685.4 338.9 1,127.0 Intermediate goods 650.0 883.0 1,168.0 1,257.0 1,294.0 1,615.0 2,543.0 2,738.0 1,933.8 2,229.7 2,213.6 4,530.0 Mineral products (11.0) (25.0) (48.0) (45.0) (38.0) (44.0) (81.0) (122.0) (119.8) (124.1) (101.9) (170.0) Metal and metal products (183.0) (254.0) (346.0) (357.0) (389.0) (537.0) (794.0) (984.0) (505.1) (516.3) (380.0) (610.0) Chemical products (115.0) (192.0) (206.0) (242.0) (278.0) (291.0) (633.0) (629.0) (515.6) (589.8) (528.4) (830.0) Paper products (42.0) (75.0) (100.0) (94.0) (85.0) (108.0) (188.0) (183.0) (139.1) (158.7) (180.9) (220.0) Rubber and plastics ( - ) ( - ) (53.0) (56.0) (65.0) (74.0) (166.0) (162.0) (129.4) (144.0) (109.4) (335.0) Lumber (35.0) (58.0) (72.0) (72.0) (51.0) (56.0) (99.0) (101.0) (36.4) (53.0) (53.5) (125.0) Machinery and tqulpment (237.0) (251.0) (120.0) (143.0) (153.0) (175.0) (206.0) (203.0) (125.1) (226.7) (215.3) (380.0) Others (27.0) (28.0) (223.0) (248.0) (235.0) (330.0) (376.0) (354.0) (363.3) (417.1) (584.2) (1,860.0 Capital goods 420.0 155.0 365.0 419.0 458.0 380.0 432.0 562.0 502.9 1,110.9 1,072.9 1,550.0 Total merchandise imports, cif 1,249. 1,199.0 1694,0 1.868.0 1,905.0 2,230.0 3.635.0 3.947.0 3.033.0 4,161.5 3,850.0 6.680.0 Non-factor services .. 186.0 360.0 372.0 317.0 352.0 579.0 571.0 564.0 730.5 815.5 2,344.6 Total imports and n.f.s. .. 1,385.0 2,054.0 2.240.0 2,222,0 2.582.0 4,214.0 4518.0 3.597.0 4.892,0 4,665.4 9.024.6 Factor services .. 59.0 329.0 361.0 403.0 560.0 588.0 570.0 605.0 768.8 1,149.1 1,745.3 Total imports and services .. 1444.0 2,383.0 2,601.0 2.625.0 3.142.0 4,802.0 5.088.0 4,202.0 5.660.8 5,814.5 10j769.9 Imports in constant 1970 Prices Food 14.7 36.7 53.0 40.6 55.1 31.2 48.7 41.8 19.6 25.8 38.4 Other consumer goods 11.3 12.9 29.0 24.0 14.2 15.2 25.5 21.6 11.3 32.5 39.0 Fuels and lubricants 176.7 124.1 79.0 112.7 58.4 116.3 291.3 247.2 250.5 295.0 126.6 Intermediate goods 736.1 952.5 1,168.0 1,160.7 1,080.1 1,118.4 1,408.1 1.314.5 912.6 959.9 827.5 Mineral products (12.5) (27.0) (48.0) (41.6) (31.7) (30.5) (44.9) (58.6) (56.5) (53.4) (38.1) Metal and metal products (130.2) (274.0) (346.0) (329.6) (324.7) (371.9) (439.6) (472.4) (238.4) (222.3) (142.1) Chemical products (47.6) (207.1) (206.0) (223.5) (232.1) (201.5) (350.5) (302.0) (243.3) (253.9) (197.5) iPaper Products ( - ) (80.9) (100.0) (86.8) (71.0) (74.8) (104.1) (87.9) (65.6) (68.3) (67.6) Rubber and plastics (39.6) ( - ) (53.0) (51.7) (54.3) (51.2) (91.9) ;77.8) (61.1) (62.0) (63.3) Lumber (268.4) (62.6) (72.0) (66.5) (42.6) (38.8) (54.8) (48.5) (17.2) (22.8) (20.0) Parts and machinery (30.6) (270.7) (120.0) (132.0) (127,7) (121.2) (114.1) (97.5) (59.0) (97.6) (80.5) Others 474.9 (30.2) (223.0) (229.0) (196.2) (228.5) (208.2) (169.9) (171.4) (179.5) (218.4) Capital goods 167.2 365.0 386.9 382.3 263.2 239.2 269.8 237.3 478.2 401.1 Total merchandine imports, cif 1,414.5 1,293.4 1,694.0 1,724,8 1590.2 1.544.3 2.012.7 1,8949 1,431.3 1.791.4 1,432.6 Non-factor services 200.6 360.0 343.5 264.6 243.8 320.6 274.1 273.3 314.5 399.0 Total imports and n.f.s. 1.494.0 2,054.0 2,068.3 1,854.8 1,788.1 2.333.3 2,169.0 1.704.6 2,105,9 1,831.6 /I Preliminary; only available in current prices. source: Central Bank of Argenrina and -'ssion estimates. Table 3.5 ARGENTINA - STRUCTURE OF IMPOR'S IN RELATION TO CONSUMPTION, MANUFACTURIN( VALUE-ADDED GROSS FIXED INVESTMENT, AND GROSS DOMESTIC PRODUCT, 1960-1978 (In millions of $a, and percentages) Imports Import ratios Consumer Intermediate Fuels and Capital Consumer goods lntermediate goods Fuels & Lubricants Capital goods Import total goods goods lubricanlts goods to to manufacturing to manufacturing to gross fixed to consumption value-added value-added investment GDP 1960 19 540 129 349 0.24 18.76 4.48 16.78 10.24 1965 78 1,492 194 262 0.27 13.20 1.72 4.25 5.58 1970 310 4,424 299 1,383 (0.41 17.29 1.17 7.30 6.77 1971 322 5,773 560 1,924 0.30 15.72 1.53 7.55 8.10 1972 681 10,622 575 3,760 0.39 16.45 0.89 8.56 7.07 1973 627 15,113 1,572 3,556 0.23 14.33 1.49 5.04 5.83 1974 1,192 22,622 4,679 3,843 0.34 17.07 3.53 3.84 7.41 1975 2,817 58,424 10,989 11,992 0.28 13.82 2.60 3.52 7.52 1976 9,803 289,432 79,445 75,269 0.17 10.77 2.96 3,96 6.08 1977 56,616 931,636 286,381 464,167 0.38 12.88 3.96 8.07 8.36 1978 168.184 1,787,283 273,631 866.270 0.46 10,47 1.60 6. 3 3.'7 Source: Central Bank of Argentina and Mission estimates. -79- Table 3.6: ARGENTINA - INDEX OF REAL EFFECTIVE EXCHANGE RATE FOR COMMODITY GROUPS, 1974 - 1979 (1976 I Quarter 5 100) Machinery Beef Processed Basic and Wheat Corn/Sorghum (cooked) Food Metals Transport 1974 I 116.6 112.8 81.3 110.1 112.8 101.2 II 112.7 109.0 91.2 106.5 108.9 97.7 III 107.8 148.6 87.2 101.8 104.1 93.5 IV 96.3 106.8 77.9 93.0 83.5 1975 I 74.4 82.7 90.6 91.0 97.9 80.3 II 121.6 121.6 88.4 84.7 86.8 87.3 III 104.9 104.9 87.2 100.2 87.4 107.9 IV 135.4 135.4 144.1 112.1 169.4 125.6 1976 I 100.0 100.0 100.0 100.0 100.0 100.0 II 115.0 141.0 133.2 141.4 138.8 124.3 III 133.4 133.4 126.0 130.9 133.6 117.2 IV 246.6 218.1 132.6 128.9 131.6 114.6 1977 I 254.8 225.5 132.2 131.5 146.2 135.7 11 265.2 217.8 128.0 127.4 134.3 131.0 III 238.8 211.1 124.0 121.8 121.2 126.8 IV 222.4 199.1 116.8 120.3 122.2 119.5 1978 I 218.6 218.6 114.8 118.2 120.1 117.3 II 196.5 196.6 103.2 106.3 108.0 105.4 III 184.0 184.0 97.9 81.7 101.2 98.8 IV 167.8 167.8 91.5 74.5 92.2 90.1 1979 I 156.3 156.3 85.1 81.3 84.9 82.9 II 144.8 144.8 78.8 73.9 86.3 76.9 III 130.1 130.1 70.9 66.4 77.6 68.6 IV 137.9 137.9 75.2 70.4 82.3 72.7 Note: Effective exchange rate is the nominal exchange rate adjusted by taxes and fiscal subsidies. Real effective exchange rate is the effective exchange rate deflated by the end-of-period relative price index. The relative price index is the Argentine domestic non-agricultural wholesale price index relative to the U.S. producer price index. Source: Central Bank of Argentina, INDEC, Ministry of Economy, and IMF. - 80 - Table 3.7: ARGENTINA - FOREIGN EXCHM-GE RATE MOVEMENTS, 1970-1979 rndex (Dec. 1969 - 100) Nominal Export weighted Import Weighted exchange effective ex- effective ex- rate 1/ change rate 2/ change rate3j 1970 3.8 100.3 100.1 1971 4.6 91.3 90.7 1972 8.2 104.0 95,4 1973 9.4 87.9 76.8 1974 8.9 88.5 76.7 1975 36.6 98.0 91.2 1976 224.3 110.8 107.1 1977 417.8 106.1 109.4 1978 795.8 102.8 103.1 January 641.5 111.5 111.0 February 681.5 115.2 114.3 March 721.0 113.4 112.8 April 761.0 110.8 110.7 May 776.5 104.3 104.7 June 788.5 102.9 103.6 July 805.5 101.9 102.9 Augusr 819.3 98.4 99.5 September 849.3 96.8 97.6 October 885.9 95.5 95.9 November 934.2 91.5 92.0 December 978.6 91.3 91.6 1979 1,317.0 78.6 77.8 January 1,038.1 88.9 88.8 February 1,078.8 86.8 86.6 March 1,136,7 84.9 84.5 April 1,182.8 83.9 83.3 May 1,238.0 80.6 80.2 June 1,292.0 77.2 76.7 July 1,344.8 77:4 76.6 August 1,397.8 70.9 70.0 September 1,449.8 71.0 69.9 October 1,449.2 72.9 71.7 November 1,548.7 73.2 71.8 December 1,596.9 75.1 73.5 1980 Jan. 1,641.6 75.6 74.0 Feb. 1,684.3 76.0 74.4 Mar. 1,724.7 75.5 73.9 1/ IMF International Financial Statistics. 2/ Derived by the following formula: XRa X ai f M ai w _ x WPIix _ or _) WPI a where a ¢ Argentina i - Trading partners of Argentina XR Exchange Rate WPI r Wholesale price index X a (or M a) Total exports (or total imports) of Argentina X ai - Exports of Argentina to countrv i M ai - Tmports of Argentina from country i Source: IMF and INDEC, Ministry of Economy. - 81 - Table 3.8: ARGENTINA - DIRECTION OF TRADE, 1970-1979 /2 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 Exports (In percent of total exports) LAPTA 20.6 21.0 24.9 24.4 23.7 25.5 26.3 24.3 23.6 24.5 EEC 46.7 45.8 48.3 40.2 33.7 28.9 32.4 31.4 33.5 32.8 U.S. 8.7 9.1 9.5 7.8 8.1 6.4 6.9 6.8 8.4 7.4 Japan 6.2 5.1 3.0 4.1 4.5 4.6 5.3 5.4 6.0 5.2 Spain 4.5 7.0 2.7 3.1 3.6 5,2 4.0 5.0 5.2 5.6 Rest of world 13.3 12.0 11.6 20.4 26.4 29.4 25.1 27.1 23.3 24.5 Imports (In percent of total imports) LAPTA 22.0 20.9 19.6 19.5 21.7 22.9 26.8 23.6 21.7 21.6 EEC 30.8 30.6 35.8 30.0 27.3 27.4 27.3 26.3 31.1 20.7 U.S. 24.7 22.2 20.2 21.4 16.8 16.2 17.7 18.5 18.4 19.8 Japan 5.0 8.4 7.5 11.5 10.8 12.5 8.2 8.7 7.0 4.9 Spain 1.9 1.9 1.5 1.0 1.2 1.0 0.9 2.7 3.2 33.0 Rest of world 15.6 16.0 15.4 16.6 22.2 20.0 19.1 20.2 18.6 1 Balance of trade (In millions of US dollars) LAFTA - 6.4 - 24.7 110.9 361.3 139.8 -147.9 218.0 388.2 680.9 47C.8 EEC /1 305.7 226.3 255.3 643.7 334.8 -228.2 439.8 681.8 954.1 1179.2 U.S. -263.3 -256.0 -200.6 -223.8 -291.6 -448.3 -266.7 -388.9 -167.8 744.6 Japan 24.4 - 67.8 - 85.3 -121.6 -213.0 -357.5 - 40.8 -560.2 113.3 7 .9 Spain 46.5 86.0 24.0 80.3 97.1 114.2 130.0 169.7 206.2 14&.7 Rest of world - 27.8 _ 91.5 - 67.9 296.6 228.7 82.5 402.8 695.7 779.1 Total 79.1 -127.7 36.4 1.036.5 295.8 -985.2 883.1 1490.3 2565.8 1131.0 /1 Includes Denmark, Ireland and United Kingdom for all years. 77 Preliminary Source: Central Bank of Argentina Table 3.9: - ARGENTINA - TERMS OF TRADE AND CAPACITY TO IMPORT, 1965-1978 (1970=100) Capacity Export volume Import volume Export price Import price Terms of to index index index index trade import 1965 91.3 78.4 92.2 90.3 102.1 93.2 1966 94.8 73.3 94.8 90.6 104.6 9912 1967 86.9 72.1 95.1 89.7 106.0 92.1, 1968 83.3 76.5 92.6 90.2 102.7 85.5 1969 95.5 101.5 95.2 91.6 103.9 99.3 1970 100.0 100.0 100.0 100.0 100.0 100.0 1971 89.8 104.2 109.4 105.9 103.3 92.7 1 1972 83.4 99.1 131.3 113.5 115.7 96.4 X 1973 102.9 98.9 179.0 133.1 134.5 138.4 1974 99.0 114.9 223.9 186.8 119.9 118.7 1975 75.5 116.6 221.2 199.8 110.7 83.6 1976 102.2 105.5 194.4 221.7 87.7 89.6 1977 158.4 131.0 219.7 236.0 93.1 147.5 1978 155.8 102.6 230.9 266.2 86.7 135.1 Source: Ministry of Economy - INDEC, IMF, and mission estimates. Table 3.10: ARGENTINA - 7'ET CAPITAL FLOWS, 1978-1979 (in illione of U.S.S) 1978 1979 I 11 111 IV Total I IT III IV TOTAL A. A.tonomous Capital Movements _027 7 A -29.-4 -.17, 1060.3 920.1 1747.8 1329.3 4602.3 Public 318.2 134.0 411.2 640.7 1.504.1 172.3 275.2 305.9 437.2 1174.1 (a) Short Term 60.0 -90.0 120.0 251.3 341.3 51.7 84.9 75.0 144.7 186.5 National Governseut Bond. - -60.0 150.0 251.3 341.3 1.7 -66.8 106.8 144.7 186.5 Publir Enterpriees o105 60.0 -30.0 -30.0 - - 50.0 -18.1 -31.8 0.0 0.0 (b) LIg-Tem 285.2 224.0 291.2 389.4 1.152.8 120.6 360.1 230.9 - _292.5 987,6 National Government Bond lIsues 66.9 67.0 -6.1 68.3 196.1 -3.1 201.9 94.1 69.1 362.0 Other National Government External Borrowing -13.4 -6.4 23.5 -14.8 -11.1 -0.7 19.3 0.3 -15.6 3,5 Local Governent Borro'ing. -0.9 0.1 -0.3 -0.2 -1.3 -0.6 -0.2 3.0 -0.2 2.0 Publir Enterprises Loans 125.2 160.4 291.5 286.1 863.2 129.2 134.2 182.4 278.6 724.4 Other Public Borrowing 80.4 2.9 -17.4 50.0 -!15.9 4.2 5.9 -48.9 - 71.0 -104.3 Private 709.7 305.2 -440.6 -905.4 -331.1 888.0 644.9 986.9 892.1 3428.2 (a) Short Term 307.9 -2.3 -458.3 -778.2 -930.9 420.9 381.3 333.8 108.5 _ 1260.1 leports FPisemig -7.2 -135.4 -7.3 -17.9 -177.8 -112.4 -72.5 82.3 -101.5 -204.1 Exports Financing 419.5 214.6 -461.9 -63.6 8.6 339.1 M33.2 -75.4 212.8 839.7 Other. 5.6 81.3 10.9 -698.7 -761.7 194.2 100.6 326.9 -2.8 624.3 (b) Lomg Term 401.8 307.5 17.7 -127,2 599.8 467.1 263.6 653.1 783.6 2168.1 Direct Investment 50.1 131.5 39.0 69.7 290.3 95.5 -42.9 86.5 95.4 234.5 Import Financing 12.4 -82.5 -17.0 -157.3 -244.4 88.9 -13.7 29.8 31.4 136.4 Private Firms Borrowing 342.3 237.8 -15.1 -51.1 513.9 284.4 278.3 490.7 545.3 1598.1 Private Bank Borrosing and Others -3.0 20.7 10.8 11.5 40.0 -1.7 41.9 46.7 111.5 199.1 B. Cooensatorv -206.8 -712.8 -416.5 -31.3 -1367.4 ;-53 -.25.7 -44.6 -20.0 -140.6 Central Bank -191.3 -684.5 -389.0 -6.2 -1271.0 ..L1 -0.1 -O. 2 Cotmercial Banks -61.4 -404.5 -384.5 -6.0 -856.4 - - - - - I.M.PF -129.7 -280.0 -4.5 - -414.2 - - - - - I.D.B. -0.2 - - -0.2 -0.4 -0.1 -0.1 _ -0.2 - Other - - - - - _ _ . _ Treas.ry -15.5 -28.3 -27.5 -25.1 -96.4 -i0.2 -25.6 -44.6 -20.0 -160.4 External Bonds -14.5 -28.3 -26.5 -25.1 -94.4 -48.3 -25.6 -44.6 -20.0 -134.5 I.D.B. -1.0 - -1.0 - -2.0 - - - Other - - _ 0.9 0. C. Adjootments 35.8 29.7 84.9 21.2 171.6 -27.2 65.0 -30.2 -39.4 86.5 S-ourc: Central Bank of Argentlna Table 3.11: ARGENTINA - EXPORT PROJECTIONS, 1980-1985 (millions of US dollars) 1980 1981 1982 1983 1984 1985 Exports - Constant Prices 6,004 6,552 6,872 7,223 7,625 8,043 Meat 713 998 1,068 1,132 1,189 1,249 WHeat 182 177 193 198 214 232 Corn 455 496 533 571 611 653 Sorghum 282 353 385 419 455 491 Vegetable oils 551 579 608 638 670 704 Wool 271 276 282 290 299 308 Hides 336 363 385 408 432 454 Manufactured goods 926 954 992 1,041 1,104 1,170 Other goods 2,284 2,353 2,423 2,520 2,646 2,779 Exports - Current Prices 8,654 In,370 12,222 13,644 15,256 17,041 Meat 1,528 2,223 2,484 2,696 2,899 3,117 Wheat 287 306 384 427 498 581 Corn 777 862 1,154 1,333 1,539 1,777 Sorghum 457 542 784 924 1,084 1,265 Vegetable oils 656 865 1,059 1,152 1,254 1,364 Wool 415 458 560 622 683 751 Hides 515 602 765 875 988 1,108 Manufactured goods 1,158 1,300 1,461 1,641 1,857 2,096 Other goods 2,857 3,208 3,569 3,971 4,451 4,998 Annual Export Growth Rates /1 -2.6 9.1 4.9 9.1 5.6 5.5 Meat -15.0 40.0 7.0 6.0 5.0 5.0 Wheat 1.0 -3.0 9.0 3.0 8.0 8.0 Corn -20.0 9.0 7.5 7.0 7.0 7.0 Sorghum -25.0 25.0 9.0 9.0 8.5 8.0 Vegetable oils 4.0 5.0 5.0 5.0 5.0 5.0 Wool 25.0 2.0 2.0 3.0 3.0 3.0 Hides 10.0 8.0 6.0 6.0 6.0 5.0 Manufactured goods 2.0 3.0 4.0 5.0 6.0 6.0 Other goods 2.0 3.0 3.0 4.0 5.0 5.0 /1 Constant 1978 prices. Source: World Bank Projections. Table 3.12: ARGENTINA - IMPORT PROJECTIONS, 1980-1985 (millions of US$) 1980 1981 1982 1983 1984 1985 Imports of Goods /1 7,086 7,755 8,306 9,488 9,942 Food 35C 382 412 440 467 491 Consumer goods 600 636 674 714 757 794 Petroleum products 400 400 400 400 400 400 Intermediate goods 3,400 3,767 3,993 4,232 4,444 4,666 Capital goods 2,336 2,570 2,827 3,109 3,420 3,591 Imports of Goods /2 9,185 10,852 12,737 14.774 16,942 19,069 Food 351 367 405 464 525 587 Consumer goods 750 867 992 1,124 1,273 1,422 Petroleum products 868 992 1,107 1,215 1,334 1,465 X Intermediate goods 4,292 5,121 6,069 7,069 8,055 9,159 Capital goods 2,922 3,504 4,162 4,899 5,753 6,433 /1 Constant 1979 prices. /2 Current prices Source: World Bank Projections Table 3.13: ARGENTINA - PROJECTED BALANCE OF PAYMENTS, 1980-1985 (In millions of US$) 1980 1981 1982 1983 1984 1985 Exports (Incl. NFS) 10,315 12,217 14,277 15,931 17,795 19,880 Imports (Incl. NFS) -12,449 -14,512 -16,725 -19,099 -21,622 -24,071 Resource Balance -2,134 -2,295 -2,448 -3,827 -3,168 -4,191 Net Factor Service Income -433 -712 -999 -1,315 -1,818 -2,520 Net Interest Payments -203 -467 -739 -1,040 -1,528 -2,215 Direct Investment Income -170 -180 -190 -200 -210 -220 Other Factor Service Income -60 -65 -70 -75 -80 -85 Current Transfers (Net) 50 50 50 60 65 68 Current Account Balance -2,517 -2,957 -3,397 -4,423 -5,580 -6,643 Private Direct Investment 500 550 605 665 732 805 Public M< Loans (net) 241 280 260 257 270 260 X Disbursement 415 504 528 563 594 611 Amortization -174 -224 -268 -306 -324 -351 Other M< Loans (net) 317 1,008 1,217 4,348 5,606 6,652 Disbursement 2,071 2,576 2,844 6,092 7,576 9,165 Amortization -1,754 -1,538 -1,627 -1,744 -1,970 -2,513 Change in Reserves (- = increase) 1,459 1,120 1,315 -846 -1,027 -1,074 Level of Reserves 8,540 7,420 6,105 6,951 7,978 9,052 Source: World Bank Projections. Table 3.14: ARGENTINA - INDICES OF EXPORT PRICES AND VOLUME, 1951-1977 (1975 = 100) U n i t V a 1 u e V o l u m e Total Major Total Major Merchandise Agricultural Industrial Merchandise Agricultural Industrial Year Exports Livestock Crops Products Exports Livestock Crops Products 1951 62 118 59 71 64 185 133 133 1952 55 55 64 70 43 233 40 40 1953 53 64 46 74 72 247 111 111 1954 45 61 33 62 77 206 126 126 1955 47 51 41 69 68 242 168 168 1956 43 46 42 57 74 310 102 102 1957 42 48 40 53 80 308 119 119 1958 39 39 39 49 86 339 119 119 1959 39 39 37 50 88 316 110 110 1960 42 51 40 49 88 276 117 117 1961 41 50 42 44 81 290 91 91 1962 36 43 41 27 114 387 153 153 1963 39 46 42 35 119 397 108 108 1964 43 50 40 45 111 303 157 157 1965 42 53 38 47 121 279 271 271 1966 42 53. 38 47 126 347 200 200 1967 43 50 39 48 115 356 139 139 1968 43 52 38 48 110 314 117 117 1969 44 51 39 49 127 390 120 120 1970 45 55 39 53 133 364 143 143 1971 52 71 44 56 119 230 147 147 1972 62 89 45 61 111 295 87 87 1973 80 140 70 72 136 227 137 137 1974 100 140 103 89 131 110 126 126 1975 100 100 100 100 100 100 100 100 1976 90 94 87 101 151 188 142 142 1977 87 118 84 108 191 205 245 245 Source: IMF/ International Financial Statistics, Yearbooks. IBRD: Economic Reports on Argentina. - 88 - Table 3.15: ARGENTINA - BALANCE OF PAYMENTS, 1948-1978 (in millions of US$) Merchandise Year Exports Imports Services Balance on ¶epital Change in (Net) Current Acct. Acct. Reserves 1948 1,409 1,491 -52 -30 -- -- 1949 934 1,073 33 -126 -44 -150 1950 1,168 1,045 6 129 38 167 1951 1,169 1,480 -13 -324 -10 -334 1952 688 1,179 -46 -445 272 -173 1953 1,125 795 6 336 -143 193 1954 1,027 979 12 60 -54 -6 1955 929 1,173 5 -239 -13 -252 1956 944 1,128 -55 -129 147 18 1957 975 1,310 34 -301 161 -140 1958 994 1,233 -17 -256 42 -214 1959 1,009 993 -2 14 115 119 1960 1,072 1,249 -20 -197 371 174 1961 964 1,460 -76 -572 410 -162 1962 1,216 1,357 -127 -268 -28 -296 1963 1,365 981 -150 234 -116 118 1964 1,411 1,077 -298 36 -59 -23 1965 1X493 1,199 -98 196 -105 91 1966 1,593 1,124 -213 256 -224 32 1967 1,465 1,096 -192 177 261 438 1968 1,368 1,164 -204 -15 155 140 1969 1,612 1,576 -255 -219 138 -81 1970 1,773 1,694 -223 -144 403 259 1971 1,740 1,868 -261 -390 -30 -420 1972 1,941 1,905 -187 -223 113 -110 1973 3,266 2,230 -316 720 -144 864 1974 3,931 3,635 -169 127 -172 -45 1975 2,961 3,947 -298 -1,284 ,31 -854 1976 3,916 3,033 -233 650 542 1,192 1977 5,652 4,162 -200 1,290 937 2,227 1978 6,400 4,082 -297 2,021 -23 1,998 Source: Central Bank of Argentina Table 4.1: ARGENTINA Page 1 of 3 EXTfRNAL. PUBLIC DEBT OUTSTANDING INClUOING UNDISRURSED AS OF DEC. 31, 1978 INCLUDES ONLY DEBT COMMITTED JAN. 1, 1900 - SEP. 30, 1979 DEBI RFPAYABLE iN FOREIGN CURRENCY AND GOODS (IN THOUSANDS OF U.S. DOLLARS) D E B T O U T S T A N D I N G I N A R R E A R S TYPE OF CREDIrOR ------------------------------------------------------ CREOITOR COUNTRY DISBURSED :UNDISBURSED: TOTAL PRINCIPAL INTEREST SUPPLIERS CREDITS AUSTRIA 26.480 136 26.616 - BELGIUM 9,312 77 9,389 - BOLIVIA 176 - 176 - BRA21L 2.126 13,900 16,026 - CANADA 134,388 74,332 208,720 CZECHOSLOVAKIA 3.876, 399 4,275 - FINLAND 39.164 - 39,164 - FRANCE 69,027 9.171 78,198 - GERMANY, FED.REP. OF 390,954 35.144 426.098 - ISRAEL 3.696 3,898 7,594 - ITALY 172,993 141.280 314.273 - tJAPAN 348,450 66.187 414,637 - LUXEMBOSIRPG - 166 166 - MEXICO 35 -35 - NETHERlANDS 19.512 - t9,512 - NORWAM 980 - 980 - PANAMA 31.468 - 31,468 PORTUGAL i - i - SOUTH AFRICA 28 1,084 t.112 - SPAIN 25,010 476 25.486 - SWEDEN t.679 3,822 5.501 - SWITZERLAND 23.274 20.211 43,485 - UNITED KINGDOM 49.656 11.391 61,047 - UNITED SrATES 219.140 19.760 238.900 - YUGOSLAVIA 3,179 2.406 5.585 - TOTAL. SUPPLIERS CREDITS 1,574,604 403,840 1,978,444 - FINANCIAL INSTITUTIONS AUSTRIA 4.413 776 5,189 - BAHAMAS 15.000 - 15,000 - BELGIUM 6.173 24.027 30,200 - CANADA 10.242 - 10,242 - CZECHOSLUVAKIA 13.750 11,221 24,971 - FRANCE 114.376 62.832 177,208 - GERMANY, FED REP. OF 158,159 31.764 189,923 ITALY - 382 382 - - JAPAN 184,591 - 184,591 - - LUXEMBOURG 67,799 474 68.273 - - NETHERLANDS 2.065 - 2,065 - - NORWAY 61 - 61 - - PANAMA 66,192 - 66.192 - - Table 4.1: ARGENTINA Page 2 of 3 EXTERNAL PUBLIC DEBT OUTSTANDING INCLUDING UNDISBURSED AS OF DEC. 31, 1978 INCLUDES ONLY DEBT COMMITTED JAN. 1. 1900 - SEP. 30, 1979 DEBT REPAYABLE IN FOREIGN CURRENCY AND GOODS (IN THOUSANDS OF U.S. DOLLARS) D E B T O U T S T A N D I N G I N A R R E A R S TYPE OF CREDITOR -----------------------------------:----------------------- CREDITOR COUNTRY DISBURSED :UNDISBURSED: TOTAL PRINCIPAL INTEREST SPAIN 24,400 233.359 257,759 - _ SWEDEN 10,505 4,804 15,309 - - SWITZERLAND 86,367 1,152 87,519 - - UNITED KINGDOM 588.768 13.935 602,703 - - UNITED STATES 1,182,458 14,160 1.196,618 - - MULTIPLE LENDERS 83.001 9,600 92,601 - - TOTAL FINANCIAL INSTITUTIONS 2,618,320 408,486 3.026,806 - - BONDS BELGIUM 779 - 779 - GERMANY, FED.REP. OF 231.127 - 231,127 - - JAPAN 77.085 - 77.085 - - SWITZERLAND 157,408 - 157,408 - - UNITED STATES 127,941 - 127,941 - - MULTIPLE LENDERS . 371.341 28,659 400,000 - - TOTAL BONDS 965,681 28,659 994,340 - - '0 NATIONALIZATION 0 UNITED KINGDOM 2,340 - 2,340 - - UNITED STATES 8,242 - 8,242 - - TOTAL NATIONAIIZATION 10,582 - 10,582 - - MULTILATERAL LOANS IBRD 351,725 478,510 830,235 - - IDB 467,135 454,287 921,422 - - IDB REGIONAL 85,556 45.760 131,316 - - TOTAL MULTILATERAL LOANS 904,416 978,557 1,882,973 - - BILATERAL LOANS BRAZIL 1,160 - 1,160 - - BULGARIA 5 - 5- CANADA 100,307 18,555 118,862 - - CZECHOSLOVAKIA 87 3.729 3,816 - - FRANCE 9.811 - 9,811 - - GERMAN OEM. REP. - 12.749 12,749 - - GERMANY. FED.REP. OF 195,135 2.025 197,160 - - HUNGARY 2.059 487 2,546 - - OAPAN 1,274 86,089 87,363 - - POLAND 7,056 10.040 17,096 - - ROMANIA 4,662 9.464 14,126 - - SPAIN 66,102 8,435 74,537 - - URUGUAY 1,565 - 1,565 - - Table 4.1: ARGENTINA Page 3 of 3 EXTERNAL PUBLIC DEBT OUTSTANDING INCLUDING UNDISBURSED AS OF DEC. 31, 1978 INCLUDES ONLY DEBT COMMITTED JAN. 1. 1900 - SEP. 30. 1979 DEBT REPAYABLE IN FOREIGN CURRENCY AND GOODS (IN THOUSANDS OF U.S. DOLLARS) D E B T O U T S T A N D I N G I N A R R E A R S TYPE OF CREDITOR -----------------------------------:----------------------- CREDITOR COUNTRY DISBURSED :UNDISBURSED: TOTAL PRINCIPAL INTEREST UNITED STATES 196.134 25.164 221,298 - - USSR 141,080 92.078 233,158 - - VENEZUELA 1,098 3.902 5,000 - - TOTAL BILATERAL LOANS 727.535 272,717 1,000.252 - - TOTAL EXTERNAL PUBLIC DEBT 6,801.138 2,092.259 8,893,397 - - NOTES: (1) ONLY DEBTS WITH AN ORIGINAL OR EXTENDED MATURITY OF OVER ONE YEAR ARE INCLUDED IN THIS TABLE. (2) DEBT OUTSTANDING INCLUDES PRINCIPAL IN ARREARS BUT EXCLUDES INTEREST IN ARREARS. I- Table 4.2 : ARGENTINA SERVICE PAYMENTS, COMMITMENTS. DISBURSEMENTS AND OUTSTANDING AMOUNTS OF EXTERNAL PUBLIC DEBT PROJECTIONS BASED ON DEBT OUTSTANDING INCLUDING UNDISBURSED AS OF DEC. 31, 1978 INCLUDES ONLY DEBT COMMITTED JAN. 1. 1900 - SEP. 30, 1979 DEBT REPAYABLE IN FOREIGN CURRENCY AND GOODS (IN THOUSANDS OF U.S. DOLLARS) TOTAL YEAR DEBT OUTSTANDING AT T R A N S A C T I 0 N S D U R I N G P E R I 0 D OTHER CHANGES : BEGINNING OF PERIOD …__ _ _ _ .… _- _ _ _ _ _ _- _ _ - _ - _- _ _ _ _ _ _-_-_ __-_ _ _ _ __-_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __-_ _ _ _ _ _ _ _ _ _ __- _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ : DISBURSED INCLUDING COMMIT- DISBURSE- S E R V I C E P A Y M E N T S CANCEL- ADJUST- : ONLY UNDISBULRSED MENTS MENTS ----------------------: ----: LATIONS MENT * PRINCIPAL INTEREST TOTAL (1) (2) (3) (4) (5) (6) (7) (8) (9) 1970 1,731,283 2,312.306 504,509 488,634 341.595 120,758 462,35J 6.370 1,690 1971 1,879.729 2.470,540 715.244 530.403 297,633 134.867 432.500 1.746 82.813 1972 2,161,958 2,969,218 806,206 525,190 318.354 157,224 475.578 6,661 5.942 1973 2,379.016 3,456,351 430,157 840,159 469,732 200,121 669.853 10.514 118,064 1974 2,810,947 3,524.326 1,881,843 811,623 550.130 234.198 784.328 112.935 101.607 1975 3.100,469 4,844,711 970,376 500,497 527,531 253,547 781,078 14,831 -124.393 1976 2,996.468 5.148,332 1.958.026 2,060,673 609.057 262,693 871,750' 19,425 10.423 1977 4.479,919 6,488,299 1,681.468 1.063,283 712,206 319.657 1.031.863 229.087 210.748 1978 5,002.972 7,439,222 2.686,884 3.202,760 1.577.764 513.084 2.090.848 29,044 374.098 1979 6,801,138 8,893,396 * * + * * * THE FOLLOWING FIGURES ARE PROJECTED * ** * * * 0 1979 6,801.138 8,893,396 1,35i.023 1,457.353 972.489 655.858 1.628.347 - -29.903 1980 7.262.595 9.242.027 - 641.770 1.108,299 697,639 1.805,938 - 75 1981 6.796.126 8.133,803 - 481,537 1.127,044 648,983 1,776,027 - 29 1982 6,150.633 7,006.788 - 340.966 983.557 574,071 1.557,628 - 18 1983 5.508.059 6,023.249 - 259,298 924,002 501,543 1,425.545 - 10 1984 4,843,363 5,099,257. - 131,238 952.853 429,314 1,382.167 - 26 1985 4.021,779 4.146.430 - 65,901 857,184 347.197 1.204,381 - -8 1986 3,230,488 3,289,238 - 37,424 722,984 272,120 995,104 - 7 1987 2,544,936 2.566.261 - 16.370 583,687 211,230 794,917 - 7 1988 1,977,626 1,982.581 - 4,349 543.232 157,602 700.834 - -8 1989 1,438.735 1,439,341 - 584 449.217 108.158 557,375 - 10 1990 990.1t2 990.134 - 22 252.832 71,666 324,498 - 10 1991 737,312 737,312 - - 197.411 49,365 246.776 - - 1992 539,901 539,901 - - 143,484 35.203 178,687 - 3 1993 396.420 396,420 - 105,649 25.589 131.238 - 1 1994 290.772 290,772 - - 84.468 18,347 102,815 - -3 1995 206,301 206.301 - - 69.782 12,417 82,199 - 1 1996 136,520 136,520 - 42.057 8,184 50.241 - 1997 94.464 94,464 - - 28.064 5,229 33.293 - -1 1998 66,399 66.399 - - 23,578 3,364 26,942 - 3 * THIS COLUMN SHOWS THE AMOUNT OF ARITFIMETIC IMBALANCE IN THE AMOUNT OUTSTANDING INCLUDING UNDISBURSED FROM ONE YEAR TO THE NEXT. THE MOST COMMON CAUSES OF IMBALANCES ARE CHANGES IN EXCHANGE RATES AND TRANSFER OF DEBTS FROM ONE CATEGORY TO ANOTHER IN THE TABLE. Table 4.3: ARGENTINA SERVICE PAYMENTS, COMMITMENTS, DISBURSEMENTS AND OUTSTANDING AMOUNTS OF EXTERNAL PUBLIC DEBT PROJECTIONS BASED ON DEBT OUTSTANDING INCLUDING UNDISBURSED AS OF DEC. 31, 1978 INCLUDES ONLY DEBT COMMITTED JAN. i. 1900 - SEP. 30, 1979 DEBT REPAYABLE IN FOREIGN CURRENCY AND GOODS (IN THOUSANDS OF U.S. DOLLARS) TYPE OF CREDITOR SUPPLIERS CREDITS TOTAL YEAR DEBT OUTSTANDING AT T R A N S A C T I D N S D U R I N G P E R I 0 D OTHER CHANGES BEGINNING OF PERIOD …-… …_… _ _ _-_ _- - - - - - - - --,- - - - - -_ - -_ _- - - _ _ _ _ _- - - - _ _ _ DISBURSED INCLUDING COMMIT- DISBURSE- S E R V I C-E P A Y M E N T S CANCEL- ADJUST- ONLY :JNDISBURSED MENTS MENTS -----------:-----------:----------- LATIONS MENT * PRINCIPAL : INTEREST TOTAL (1) (2) (3) (4) (5) (6) (7) (8) (9) 1970 639,550 796,590 194,659 151,852 127,121 50.153 177,274 6.273 2.239 1971 666.249 860,094 121,235 79.099 121.704 52,582 174.286 1,455 30,172 1972 635,910 888,342 117,661 119,831 132,660 50,842 183.502 878 5,293 1973 627,044 877,758 121,329 265,981 153,615 54.183 207,798 5,321 52,235 1974 755,884 892,386 589.694 124,553 157,083 55,809 212,892 18.053 38.605 1975 735.066 1,345,549 326,235 220,193 160,548 59,165 219,713 12,470 -59,591 1976 756.673 1.439,175 208,842 182,334 178,897- 64,165 243.062 8,560 -4,027 1977 765,478 1,456,533 363,293 242,798 154,956 58,685 213,641 42.999 101,022 1978 910,495 1,722.893 343,416 782,279 215,763 81,112 296.875 15,802 143,701 1979 1,574.604 1.978.445 t + t t * THE FOLLOWING FIGURES ARE PROJECTED * * * * * * 1979 1.574,604 1.978,445 152,394 231,677 316,397 109,056 425,453 _ 78 1980 1.489,952 1.814,520 - 114,407 299,189 112,808 411.997 44 1981 1.305.210 1.515.375 - 95.053 278,923 103,469 382,392 - 26 1982 1,121,365 1,236.478 - 71,611 254.035 89.180 343,215 - -6 1983 938.936 982,437 - 41.627 225,879 73,410 299.289 - -3 1984 754,681 756;555 - 1,872 175.461 57,570 233.031 - 2 1985 581,096 581.096 - - 142,998 44,527 187,525 - -6 1986 438,092 438,092 - - 108,321 32,985 141.306 - -3 1987 329.768 329,768 - - 98,669 23,877 122,546 - 2 1988 231,101 231,101 - _ 76,246 15,738 91.984 - -10 1989 154,845 154,845 - - 51,640 9,663 61,303 - - 1990 103,205 103,205 - . 22,809 6,758 29,567 - 2 1991 80,398 80,398 - - 18,210 5,238 23,448 - -1 1992 62,187 62,187 - 17,776 3.983 21.759 - -1 1993 44,410 44,410 - - 17,143 2,745 19,888 - -1 1994 27,266 27,266 - - 15,642 1.599 17,241 - - 1995 11,624 11,624 - - 9,409 448 9,857 - -1 1996 2,214 2,214 - - 886 159 1,045 - 1997 1,329 1,329 - - 886 88 974 - -1 1998 442 442 - - 444 18 462 - 2 * THIS COLUMN SHOWS THE AMOUNT OF ARITHMETIC IMBALANCE IN THE AMOlUNT OUTSTANDING INCLUDING UNDISBURSED FROM ONE YEAR TO THE NEXT. THE MOST COMMON CAUSES OF 'IMBALANCES ARE CHANGES IN EXCHANGE RATES AND TRANSFER OF DEBTS FROM ONE CATEGORY TO ANOTHER IN THE TABLE. Table 4.4: ARGENTINA SERVICE PAYMENTS, COMMITMENTS. DISBURSEMENTS AND OUTSTANDING AMOUNTS OF EXTERNAL PUBLIC DEBT PROJECTIONS BASED ON DEBT OUTSTANDTNG INCLUDTNG UNDISBURSED AS OF DEC. 31, 1978 INCLUDES ONLY DEBT COMMITTED JAN. 1. 1900 - SEP. 30. 1979 DEBT REPAYABLE IN FOREIGN CURRENCY AND GOODS (IN THOUSANDS OF U.S. DOLLARS) TYPE OF CREDITOR FINANCIAL INSTITUTIONS TOTAL YEAR DEBT OUTSTANDING AT T R A N S A C T I 0 N S D U R I N G P E P I 0 D OTHER CHANGES BEGINNING OF PERIOD1 DISBURSED INCLUDING COMMII- DISBURSE- S E-R V I C E P A Y M E N T S CANCEL- ADJUST- ONLY UNDISBURSED MENTS MENTS - ---------------------: LATIONS MENT * PRINCIPAL INTEREST TOTAL : (1) : (2) (3) (4) : (5) (6) (7) (8) * 9) 1970 136,989 177,665 76,529 53.644 68,923 8,669 77,592 - -296 1971 121,433 184,975 178,350 127,137 55,585 11,148 66,733 - 12,134 1972 200,317 319,874 393,398 176,160 16,813 16,586 33,399 - -2.186 1973 364.064 694,273 144,808 319,661 59,653 38,850 98,503 1,239 16,162 1974 631,302 794,351 495,345 167.059 171,720 62,608 234,328 57,757 18.091 1975 631,674 1,078,310 197,463 65,212 163,970 58,953 222.923 1,430 -29,380 1976 519,955 1,080,993 1,098,916 1,412,061 186.488 63,477 249,965 7,809 -16.338 1977 1,742.443 1,969,274 754,153 555.557 258,494 114,453 372,947 4,510 52,304 1978 2,090,790 2,512,727 1,520,988 1,641,529 1,095.197 254,674 1.349.871 3,293 91,580 1979 2,618,320 3.026,805 + * * * * + THE FOLIOWING FIGURES ARE PROJECTED * * * * * * 1979 2.618,320 3,026.805 967,782 887.466 319,418 334,215 653,633 - 12 1980 3,186,367 3,675,181 - 212.680 448.889 376.831 825,720 - 15 1981 2,950,168 3,226,307 - 108,263 499,409 344,551 843,960 - 10 1982 2,559,018- 2.726,908 - 62,171 448.135 295,782 743,917 - 12 1983 2,173,067 2,278,785 - 72,522 380,417 247,712 628,129 - 5 1984 1,865,176 1,898,373 - 31,714 433,762 206,148 639,910 - 6 1985 1,463,136 1,464,617 - 1,481 357,264 159,348 516,612 - 7 1986 1,107,360 1,107,360 - - 294.535 118,740 413,275 - 3 1987 812,828 812,828 - - 245,311. 86,156 331,467 - - 1988 567,517 567.517 - - 236.063 57,776 293,839 - 3 1989 331,457 331,457 - - 199,400 31.512 230,912 - 5 1990 132,062 132,062 - - 71,339 13,096 84,435 - 3 1991 60,726 60.726 - - 36,514 4,070 40.584 - 1992 24,213 24,213 - - 3.954 1,601 5,555 - i 1993 20.260 20,260 - - 3,370 1,339 4,709 - - 1994 16,890 16,890 - - 3,366 1,t00 4,466 - - 1995 13,524 13,524 - - 3.362 864 4.226 - -1 1996 10,161 10,161 - - 2.946 626 3,572 - - 1997 7,215 7,215 - - 253 437 690 - - 1998 6.962 6,962 - - 253 422 675 - * THIS COLUMN SHOWS THE AMOUNT OF ARITHMETIC,IMBALANCE IN THE AMOUNT OUTSTANDING INCLUDING UNDISBURSED FROM ONE YEAR TO THE NEXT. THE MOST COMMON CAUSES OF IMBALANCES ARE CHANGES IN EXCHANGE RATES AND TRANSFER OF DEBTS FROM ONE CATEGORY TO ANOTHER IN THE TABLE. Table 4.5: ARGENTINA SERVICE PAYMENTS, COMMITMENTS, OISBURSEMENTS AND OUTSTANDING AMOUNTS OF EXTERNAL PUBLIC DEBT PROJECTIONS BASED ON DEBT OUTSTANDING INCLUDING UNDISBURSED AS OF DEC. 31. 1978 INCLUDES ONLY DEBT COMMITTED JAN. 1, 1900 - SEP. 30, 1979 DEBT RErAYABLE IN FOREIGN CURRENCY AND GOODS (IN THOUSANDS OF U.S. DOLIARS) TYPE OF CREDITOR BONDS TOTAL YEAR DEBT OUTSTANDING AT T R A N S A C T I 0 N S D U R I N G P E R I 0 D OTHER CHANGES : BEGINNING OF PERIOD : DISBURSED INCLUDING COMMIT- DISBURSE- S E R V I C E P A Y M E N T S CANCEL- ADJUST- : ONLY UJNDISBURSED MENTS MENTS :----------- ----------------: LATIONS MENT * PRINCIPAL INTEREST TOTAL : (1) : (2) (3) (4) (5) (6) (7) (8) (9) 1970 283,628 283.628 119,043 119,043 19,763 22.654 42,417 - -408 1971 382,500 382,500 185.000 180,000 28,864 30.319 59.183 - 10.631 1972 544.267 549,267 i20.000 125,000 80.542 45,090 125.632 - 1.184 1973 589,909 589,909 65.000 65,000 183.209 53.520 236,729 - 11,720 1974 483,420 483,420 276,739 270,000 140,993 50,520 191,513 - 12,545 1975 623,837 631.711 200.000 36,793 105.389 6t.675 167.064 - -5,844 1976 549,517 720,478 200,000 308,926 130,202 50,763 180,965 - 6,042 1977 734,283 796,318 93,106 82,554 143,914 51,203 195,117 - 11,894 1978 682,511 757,404 345,555 393,038 154.878 60.439 215.317 - 46.259 1979 965,681 994,340 + * * * + * THE FOLLOWING FIGURES ARE PROJECTED % * * * * * 1979 965,681 994,340 - 28,659 200.831 96,500 297,331 - I 1980 793,510 793.510 - - 181,622 76,695 258,317 - -1 1981 611,887 611,887 - - 121,232 58.163 t79,395 - - 1982 490,655. 490.655 - - 32.041 45,073 77,114 - -1 1983 458,613 458.613 - - 60,479 42.107 102.586 - 1984 398,135 398,135 - - 104,107 36.757 140,864 - -1 1985 294,027 294.027 - - 125,577 24,675 150,252 - - 1986 t68,450 t68.450 - - 86,685 13,878 100.563 - - 1987 81,765 81,765 - - 32.725 8,892 41,617 - -1 1988 49,039 49,039 - - 32.725 5.635 38.360 - - 1989 16,314 1i,314 - - 16,314 2,376 18,690 - - 1990 1- - - 84 184 - 1991 - - - - - 184 184 - - 1992 - - - - 184 184 - - 1993 - - - - 184 184 - - 1994 - - - - 184 184 - - 1995 - - - - - 184 184 - 1996 - - - 184 184 - - 1997 - - 184 184 - 1998 - - - - 184 184 - - * THIS COLUMN SHOWS THE AMOUNT OF ARITHMETIC IMBALANCE IN THE AMOUNT OUTSTANDING INCLUDING UNDISBURSED FROM ONE YEAR TO THE NEXT. THE MOST COMMON CAUSES OF IMBALANCES ARE CHANGES IN EXCHANGE RATES AND TRANSFER OF DEBTS FROM ONE CATEGORY TO ANOTHER IN THIE TABLE. Table 4.6: ARGENTINA SERVICE PAYMENTS, COMMITMENTS, DISBURSEMENTS AND OUTSTANDING AMOUNTS OF EXTERNAL PUBLIC DEST PROJECTIONS BASED ON DEBT OUTSTANDING INCLUDING UNDISBURSED AS OF DEC. 31, 1978 INCLtlDES ONLY DEBT COMMITTED JAN. 1, 1900 - SEP. 30, 1979 DEBT REPAYABLE IN FOREIGN CURRENCY AND GOODS (IN THIOUSANDS OF U.S. DOLLARS) TYPE OF CREDITOR MULIILATERAL LOANS TOTAL YEAR DEBT OUTSTANDING AT T R A N S A C T I 0 N S D U P I N G P E R I 0 0 OTHER CHANGES BEGINNING OF PERIOD DISBURSED INCLUDING COMMIT- DISBURSE- S E R V I C E P A Y M E N T S CANCEL- ADJUST- ONLY UNDISBURSED MENTS MENTS -----------:-----------:----------- LATIONS MENT * PRINCIPAL INTEREST TOTAL (1) (2) (3) (4) (5) (6) (7) (8) (9) 1970 233.782 481,162 70.171 63,566 16,443 17,502 33,945 97 -1 1971 280,905 534.792 165,789 83.428 17,535 21,827 39,362 49 10,226 1972 350,713 693,223 92,121 58,396 21.541 26,982 48.523 4,696 - 1973 387,568 759,107 57,292 105.135 25.291 35,616 60.907 2.287 9,801 1974 478,174 798.622 1,166 127,400 27.239 40,393 67,632 32.070 11,475 1975 558,596 751.954 177,145 87.117 35,878 43,510 79,388 755 -6.020 1976 605.362 886.446 289,905 63.943 41.685 52,341 94,026 3,056 9,659 1977 636,823 1,141,269 353,383 97,292 40.890 64,217 105.107 110 29,089 1978 718,294 1,482,741 395,941 197,203 39.938 86,984 126,922 ISO 44.379 1 1979 904,416 1.882,973 * t * * * * THE FOLLOWING FIGURES ARE PROJECTED * * * * * * 1979 904,416 1,882,973 218,000 180,868 56,483 75,001 131,484 - -29,999 1980 1.005,318 2,014,491 - 234,606 82,137 87,591 169,728 - 6 1981 1,157,795 1,932,360 - 228.672 117,975 99.117 217,092 - -1 1982 1.268,489 1,814,384 - 186,491 140.072 104,972 245,044 - I 1983 1,314,908 1.674,313 - 139.205 149,881 104.811 254,692 - - 1984 1,304.233 1,524,432 97,030 140,485 101,262 241,747 - 3 1985 1.260.780 1,383,950 - 64,420 144,035 96,733 240,768 - -1 1986 1.181,164 1,239,914 - 37,424 159,152 89,687 248,839 - - 1987 1.059.437 1,080.762 - 16,370 145,376 79,431 224,807 - - 1988 930.431 935,386 - 4.349 142,913 68,974 211,887 - -5 1989 791,862 792.468 - 584 14l,912 58,022 199,934 - - 1990 650,534 650.556 - 22 135.974 46.988 182,962 - 2 1991 514,584 514,584 - - 124,587 36,366 160,953 - -1 1992 389,996 389,996 - - 101.670 27,070 128,740 - -i 1993 288,325 288.325 - - 76,134 19,744 95.878 - 2 1994 212,193 212,193 - - 56,475 14,412 70,887 - -5 1995 155,713 155.713 - - 48.026 10,390 58,416 - 2 1996 107,689 107,689 - - 36,517 7.081 43,598 - -3 1997 71,169 71,169 - - 25,217 4,399 29,616 - - 1998 45,952 45,952 - - 21,173 2,634 23,807 - -1 * THIS COLUMN SHOWS THE AMOUNT OF ARITHMETIC IMBALANCE IN THE AMOUNT OUTSTANDING INCLUDING UNDISBURSED FROM ONE YEAR TO IHE NEXT. THE MOST COMMON CAUSES OF IMBALANCES ARE CHANGES IN EXCHANGE RATES AND TRANSFER OF DEBTS FROM ONE CATEGORY TO ANOTHER IN THE TABLE. Table 4.7: ARGENTINA SERVICE PAYMENTS, COMMITMENTS, DISBURSEMENTS AND OUTSTANDING AMOUNTS OF EXTERNAL PUBLIC DEBT PROJECTIONS BASFD ON DEBT OUTSTANDING INCLUDING UNDISBURSED AS OF DEC. 31, 1978 INCLUDES ONLY DEBT COMMITTED JAN. 1, 1900 - SEP. 30, 1979 DEBT REPAYABLE IN FOREIGN CURRENCY AND GOODS (IN THOUSANDS OF U.S. DOLLARS) TYPE OF CREDITOR MULTILATERAL LOANS CREDITOR COUNTRY IBRD YEAR DEBT OUTSTANDING AT T R A N S A C T I 0 N S D U R I N G P E R I 0 D OTHER CHANGES : BEGINNING OF PERUOD : DISBURSED INCLUDING COMMIT- DISBURSE- S E R V I C E P A Y M E N T S CANCEL- ADJUST- * ONLY UNDISBURSED MENTS MENTS :-----------:----------- ---------- LATIONS MENT * * * * * : PRINCIPAL INTEREST TOTAL (1) (2) (3) (4) (5) (6) (7) (8) (9) 1970 154,243 336,026 - 32,217 5.121 11,092 i6,213 - - 1971 181.339 330,905 151.500 44.497 7,155 12,734 19,889 - - 1972 218.681 475,250 - 45.278 7.823 16,442 24,265 - 1973 256,136 467.427 - 55.916 , 9.886 21,138 31,024 - - 1974 302.166 457,541 - 77.063 11,811 23.620 35,431 27,500 - 1975 339.918 418.230 - 18.655 17,354 25,916 43,270 - - 1976 341,219 400.876 115.000 19,759 18,490 25,125 43.615 - - 1977 342,488 497,386 205,000 20.039 19,678 26,174 45,852 - - 1978 342,849 682,708 165,000 26,350 17.473 32,189 49.662 - - 1979 351,725 830,235 * * + * + THE FOLLOWING FIGURES ARE PROJECTED * * * * * * 1979 351,725 830.235 - 63,539 27,465 29,158 56,623 - - 1980 387,799 802,770 - 97.707 37,057 33.394 70.451 - - 1981 448,449 765.713 - 100.013 51.122 37.752 88.874 - - 1982 497,340 714.59t - 77,667 60,209 40,470 100,679 - -1 1983 514,797 654,381 - 53,526 65.030 40,625 105,655 - - 1984 503,293 589.351 - 37,296 66,611 38.969 105,580 - - 1985 473.978 522,740 - 24.382 68,296 36,112 104,408 - 1986 430.065 454,445 - 13.978 70,088 32,271 102,'359 - - 1987 373,955 384,357 - 6,997 64,366 27,803 92.169 - - 1988 316,586 319,991 - 2.799 61.991 23,182 85,173 - - 1989 257,394 258,000 - 584 60,983 18.528 79,511 - - 1990 196,995 197,017 - 22 56,078 13,873 69,951 - - 1991 140,939 140,939 - - 53,804 9,444 63.248 - - 1992 87,135 87.135 - .- 38,370 5.514 43,884 - - 1993 48.765 48.765 - - 22.830 2,966 25,796 - - 1994 25.935 25.935 - - 14,935 1,509 16,444 - - 1q95 11,000 11,000 - - 11,000 602 11,602 - - * IHIS COLUMN SHOWS TIIE AMOUNT OF ARITHMETIC IMBALANCE IN THE AMOUNT OUTSTANDING INCLUDING UNDISBURSED FROM ONE YEAR TO THE NEXT. THE MOST COMMON CAUSES OF IMBALANCES ARE CHANGES IN EXCHANGE RATES AND TRANSFER OF DEBTS FROM ONE CATEGORY TO ANOTHER IN THE TABLE. Table 4.8: ARGENTINA SERVICE PAYMENTS, COMMITMENTS, DISBURSEMENTS AND OUTSTANDING AMOUNTS OF EXTERNAL PUBLIC DEBT PRPOECTIONS BASED ON DEBT OUTSTANDING INCLUDING UNDISBURSED AS OF DEC. 31, 1978 INCLUDES ONLY DEBT COMMITTED JAN. 1, 1900 - SEP. 30, 1979 DEBT REPAYABLE IN FOREIGN CURRENCY AND GOODS (IN THOUSANDS OF U.S. DOLLARS) TYPE OF CREDITOR BILATERAL LOANS TOTAL YEAR DEBT OUTSTANDING AT T R A N S A C T I 0 N S D U R I N G P E R I 0 D OTHER CHANGES BEGINNING OF PERIOD : DISBURSED INCLUDING COMMIT.- DISBURSE- S E R V I C E P A Y M E N T S CANCEL- ADJUST- : ONLY UNDISBURSED MENTS MENTS ----------- ----------------------: LATIONS MENT * PRINCIPAL INTEREST TOTAL * (1) (2) (3) (4) (5) (6) (7) (8) (9) 1910 348,442 484,369 44,107 100.529 93,147 15,780 108.927 - 156 1971 355.948 435,485 64,870 60,739 58,427 14,757 73,184 242 18,615 1972 372,540 460.301 83,026 45,803 51,619 14,514 66,133 1,087 2,713 1973 368,461 493,334 41,728 84,382 37,065 15,752 52,817 1.667 28.129 1974 431,079 524,459 518,899 122,611 45.256 23,268 68,524 5,055 20.800 1975 527,956 1,013,847 69,533 91,182 55.244 29,118 84,362 176 -22,601 1976 549,080 1,005,359 160,363 93,409 70.190 31,060 101,250 - 15,919 1977 587,438 1,111,451 117,533 85,082 112,388 30,309 142,697 181,468 16,060 1978 588,613 951,188 80,984 188,711 70,145 29,160 99,305 9.799 48,023 1979 727,535 1,000,251 * * * * * * THE FOLLOWING FIGURES ARE PROJECTED * * * * * 1979 727.535 1,000.251 12,847 128,683 77,737 40,456 118,193 - 5 1980 778,489 935,366 - 80,077 94,839 43,175 138,014 - 11 1981 763,730' 840,538 - 49,549 108.350 43,236 151,586 - -7 1982 704,924 732,181 - 20,693 108,587 38,673 147,260 - 12 1983 617.040 623,606 - 5,944 106,659 33,157 139,816 - 7 1984 516,330 516.954 - 622 98,351 27,276 125.627 - 16 1985 418,619 418,619 - - 86,623 21,657 108,280 - -8 1986 331,988 331,988 - - 73,604 16,618 90,222 - 7 1987 258,391 258,391 - - 60,919 12,707 73,626 - 5 1988 197,477 197,477 - - 54,598 9,356 63.954 - 4 1989 142,883 142,883 - - 39,264 6,507 45,771 - 5 1990 103,624 103,624 - - 22,023 4.607 26,630 - 3 1991 81.604 81,604 - - 18,100 3.507 21,607 - 1 1992 63,505 63.505 - - 20.084 2,365 22.449 - 4 1993 43,425 43,425 - - 9,002 1,577 10,579 - - 1994 34,423 34,423 - - 8.985 1,052 10.037 - 2 1995 25.440 25,440 - - 8,985 531 9.516 - 1 1996 16,456 16,456 - - 1,708 134 1,842 - 3 1997 14,751 14,751 - - 1,708 121 1.829 - - 1998 13,043 13,043 - - 1.708 106 1,814 - 2 * THIS COLUMN SHOWS THE AMOUNT OF ARITHMETIC IMBALANCE IN THE AMOUNT OUTSTANDING INCLUDING UNDISBURSED FROM ONE YEAR TO THE NEXT. THE MOST COMMON CAUSES OF IMBALANCES ARE CHANGES IN EXCHANGE RATES AND TRANSFER OF DEBTS FROM ONE CATEGORY TO ANOTHER IN THE TABLE. Table 4.9: ARGENTINA SERVICE PAYMENTS, COMMITMENTS. DISBURSEMENTS AND OUTSTANDING AMOUNTS OF EXTERNAL PUBLIC DEBT PROJECTIONS BASED ON DEST OUTSTANDING INCLUDING UNDISBURSED AS OF DEC. 31, 1978 INCLUDES ONLY DEBT COMMITTED JAN. i- 1900 - SEP. 30, 1979 DEBT REPAYABLE IN FOREIGN CURRENCY AND GOODS (IN THOUSANDS OF U.S. DOLLARS) TYPE OF CREDITOR NATIONALIZATION TOTAL YEAR DEBT OUTSTANDING AT T R A N S A C T I 0 N S D U R I N G P E R I 0 D OTHER CHANGES BEGINNING OF PERIOD : DISBURSED INCLUDING COMMIT- DISBURSE- S E R V I C E P A Y M E N T S CANCEL- ADJUST- : ONLY UNDISBURSED MENTS MENTS ----------------------:-----------: LATIONS MENT * PRINCIPAL INTEREST TOTAL : (1) : (2) (3) (4) (5) (6) (7) (8) (9) 1970 88,892 88,892 - - 16,198 6,000 22,198 - - 1971 72,694 72,694 - - 15.518 4,234 19,752 - 1,035 1972 58,211 58,211 - - 15,179 3.210 18.389 - -1,062 1973 41,970 41,970 - - 1-0,899 2,200 i3.099 - i7 1974 31,088 31,088 - - 7,839 1,600 9.439 - 91 1975 23,340 23,340 - - 6,502 1.126 7,628 - -957 1976 15,881 15,881 - - 1,595 887 2,482 - -832 1977 13.454 13,454 - - 1,564 790 2,354 - 379 1978 12,269 12.269 - - 1.843 715 2,558 - 156 1979 10,582 10,582 %a * * * * * * THE FOLLOWING FIGURES ARE PROJECTED * * * * * * 1979 10,582 10,582 - - 1.623 630 2,253 - 1980 8,959 8.959 - - 1,623 539 2,162 - - 1981 7,336 7,336 - - 1.155 447 1,602 - 1982 6,182 6.182 - - 687 391 1,078 - - 1983 5,495 5,495 - - 687 346 1,033 - - 1984 4,808 4,808 - - 687 301 988 - - 1985 4,121 4,121 - - 687 257 944 - - 1986 3,434 3,434 - - 687 212 899 - - 1987 2,747 2,747 - - 687 167 854 - 1988 2,061 2.061 - - 687 123 810 - - 1989 1,374 1,374 - - 687 78 765 - - 1990 687 687 - - 687 33 720 - - * THIS COLUMN SHOWS THE AMOUNT OF ARITHMETIC IMBALANCE IN THE AMOUNT OUTSTANDING INCLUDING UNDISBURSED FROM ONE YEAR TO THE NEXT. THE MOST COMMON CAUSES OF IMBALANCES ARE CHANGES IN EXCHANGE RATES AND TRANSFER OF DEBTS FROM ONE CATEGORY TO ANOTHER IN THE TABLE. Table 5.1: ARGENTINA - PUBLIC SECTOR RESOURCES FOR INVESTMENTS, 1971-1979 (in millions of $a) 1971 1972 1973 1974 1975 1976 1977 1978 - 1979 2 I. Sources A. Current Account Durplus 4.121 5661 2 1.676 -96.328 93.471 1*799.008 3.384 978 7.867.495 1. Central Government 2,975 5,009 2,179 5,961 -20,637 81,577 857,490 1,896,641 3,229,212 Central administration (1,967) (3,385) (-1,626) (-847) (.27,750) (-34,284) (355,921) ( 759,592) ( 517,402) Special accounts /3 (714) (1,485) (3,675) (9,152) (16,063) (71,761) (309,613) (1.332.854) (2,800,392) Decentralized agencies (226) ( 27) (-1,676) (-3,597) (-13,141) (-4,621) (40 630) (-90,339) (-88,582) Social security ( 68) (112) (1.806) (1,251) (4.191) (48,721) (151:317) (-105.466) ( - 2. State enterprises 489 1,261 1,142 912 -12,519 29,447 382,198 663,233 1,796,113 3. Provincial government /4 657 -609 -3,743 -5,197 -63,172 -17,554 559,320 825,104 2,842,170 B. Capital .,ccount revenues 422 654 399 2,083 2.494 9.695 83,414 409,989 455,305 C. Borrowing (gross) 7.347 15.511 35,419 47.449 243.585 1.001.079 1.336,242 5.773,490 10.784.096 1. Internal 5,024 10,830 30,235 39,777 230,567 846,829 932,514 3,702,730 6.936.902 2. External 2,323 4,681 5,184 7,672 13,018 154,250 403,728 2,070,760 3,847,194 TOL 11.890 L35.396 51208 149.75t 1.104245 _.2t8.664 9.568.457 1168 11. Uses A, Gross fixed investment 10,265 17.841 26.624 42,506 126.530 991.051 2,715,467 6,475,069 12.986,444 1. Fixed investment 9.565 16,970 24.626 36.530 115.549 848.620 2,398,785 6,047.605 12.356,491 a) Central Government 2,727 4,987 7,687 10,119 30,240 244,953 718,601 1.838,088 3,794,972 Central administration (883) (1,530) (2,346) (3,742) (12,631) (75,748) (186,844) (477,170) (960,345) Special accounts (254' (468) (823) (1,505) (7,467) (43,501) (184,826) (528.423) (1,273,796) Decentralized agencies (1,590) (2,989) (4,513) (4,873) (10,142) (125,704) (346,931) (832.495) (1,560,831) b) State enterprises and corporations 4,461 8,100 11,295 16,165 53,447 380,241 980,415 2,390,491 4.724,756 c) Provincial government /4 2,377 3,883 5,644 10,246 31,862 223,426 699,769 1,819,026 3,836,763 2. Financial 4nvestment 700 871 1.998 5.976 10,981 142,431 316,682 427,464 629,953 B. Amortization of :ebt 1,625 3,985 8.772 8,702 23,221 113.194 503,197 3,093,388 6,120,452 1. Internal 787 1,468 4,005 5,262 11,743 43,301 396,698 2,175,331 4,231,760 2. External 838 2,517 4,767 3,440 11,478 69,893 106,499 918,057 1,888,692 TOTAL ,21826 35,396 51,208 41104.245 3218664 9,568,457 19.106.896 /1 Definitive Budget /2 Original hudget /3 Includes the Energy Fund /4 Includes the Municipality of Buenos Aires Source: Ministry of Economy Table 5,2: ARGENTINA - PUBLIC SECTOR RESOURCES FOR INVESTMENT, 1970-1979 (As percent of GDP at market prices) 1971 1972 1973 1974 1975 1976 1977 1978 /1 1979 /2 1. Sources A. Current account surplus 3.1 2.3 .0.1 0.4 -6,8 1,2 8.4 6.5 5.6 1. Central Government 2.2 2.1 0.6 1.3 -1.5 1.0 4.0 3.6 2.3 Central administration (1.5) (1.4) (-0.4) (-0.2) (-2.0) (-0.4) (1.7) (1.5) (0.4) Special accounts (0.5) (0.6) (1.0) (2.0) (1.1) (0.9) (1.5) (2.5) (2.0) Decentralized agencies (0.2) ( - ) (-0.5) (-0.8) (-0.9) (-0.1) (0.2) (-0.2) (-O.1) Social security ( - ) (0.1) (0.5) (0.3) (0.3) (0.6) (0.7) (-0.2) 2. State enterprises and corporations (0.4) 0.5 0.3 0.2 -0.9 0.4 1.8 1.3 1.3 3. Provincial government (0.5) -0.3 -1.0 -1.1 -4.5 -0.2 2.6 1.6 2.0 B. Capital Account revenues 0.3 0.3 0.1 0.5 0.2 0.1 0.4 0,8 0.3 C. Borrowing (gross) 5.4 6.5 9.1 10.4 17.2 12.5 6.3 11.0 7.7 1. Internal 3.7 4A 7.8 .87 16.2 10.6 4.4 7.1 5.0 2. External 1.7 2.0 1.3 1.7 1.0 1.9 1.9 3.9 2.7 TOTAL 8.8 9.1 9.1 11.2 10.6 13.8 15.1 18.3 13.6 11. Uses A. Gross public investment 76 7.,5 6.8 9.3 8.9 12.8 12.3 9.2 1. Fixed investment 7,1 7.1 6.3 8.0 8.2 10.6 11.3 11.6 8.8 a) Central Government 2.' I.. ' '. .1 .4 3.- 2.7 Central administration (0.7) (0.6) (0.6) (0.8) (C.l l. (0.9) (0.9) (0.7) Special accounts (0.2) (0.2) (0.2) (0.3) (0.5) (0.6) (0.8) 1.0 (0.9) Decentralized agencies (1.2) (1.3) (1.2) (1.1) (0.7) (1.6) (1.7) (1.6) (1.1) b) State enterprises and corporations 3.3 3,4 2.9 3.5 4.0 4.8 4.6 4.5 3.4 c) Provincial government 1.8 1.6 1.5 2.2 2.2 2.8 3.3 3.5 2.7 2, Financial investment 0.6 0.4 0.5 1.3 0.8 1.8 1.5 0.7 0.5 B. Amortization of debt 1.2 1.7 2.3 1.9 1.6 1,4 2.3 5.9 4.4 1. Internal 0.6 0.6 1.0 1.1 0.8 0.5 1.8 4.2 3.0 2. External 0.6 1.1 1.2 0.8 0.8 0.9 0.5 1.7 1.4 TOTAL 8.8 9.1 9.1 11.2 10.6 13.8 15.1 18.3 13.6 /I Definitive Budget /2 Original Budget Source: Ministry of Economy Table 5.3: ARGENTINA - PUBLIC SECTOR RESOURCES FOR INVESTMENT, 1971-1979 (Percentage Distribution) 1971 1972 1973 1974 1975 1976 1977 1978 / 1979 1. Uses A. Current account surplus 34.7 25.9 -1.2 3,3 -64.3 8.5 56.0 35.4 41.2 1. Central Government 25.0 22.9 6.2 11.6 -13.8 7.4 26.6 19.8 16.9 Central administration (16.5) (15.5) (-4.6) (-1.7) (-18.5) (-3.1) (11.1) (7.9) (2.7) Special accounts (6.0) (6.5) (10.4) (17.9) (10.7) (6.5) (9.6) (13.9) (14.7) Decentralized agencies (1.9) (0.1) (-4.7) (-7.0) (-8.8) (-0.4) (1.3) (-0.9) (-0.5) Social security (0.6) (0.5) (5.1) (2.4% (2.8) (4.4) (4.7) (-1.1) (-) 2. State enterprises and corporations 4.1 5.8 3.2 1.8 -8.3 2.7 11.9 6.9 9.3 3. Provincial government 5.6 -2.8 -10.6 -10.1 -42.2 -1.6 17.4 8.6 14.9 B. Capital account revenues 3.5 3.0 1.1 4.1 1.6 0.9 2.6 4.3 2.4 C. Borrowing (gross) 61.8 71.1 100.1 92.6 162.7 90.6 41.5 60.3 56.4 1. Internal 42.3 49.6 85.4 77.6 154.0 76.6 29.0 38.7 36.3 2. External 19.5 21.5 14.7 15.0 8.7 14.0 12.5 21.6 20.1 TOTAL 12 0 QQA 10.0 I 10005> 100.0 100.0 100.0 100.0 II. Uses 0 A. Gross public investment 86.3 81.7 75.2 83.0 84.5 89.7 84.4 67.7 68.0 1. Fixed investment 80.4 77.7 69.6 71.3 77.2 76.8 74.5 63.2 64.7 a) Central Government 22.9 22.8 21.7 19.7 20.2 22.2 22.3 19.2 19.9 Central administration (7.4) (7.0) (6.6) (7.3) (8.4) (6.9) (5.8) (5.0) (5.0) Special accounts. (2.1) (2.1) (2.3) (2.9) (5.0) (3.9) (5.7) (5.5) (6.7) Decentralized agencies (13.4) (13.7) (12.8) (9.5) (6.8) (11.4) (10.8) (8.7) (8.2) b) State enterprises and corporations 37.5 37.1 31.9 31.6 35.7 34.4 30.5 25.0 24.7 c! Provincial eovernment 20.0 17.8 16.0 20.0 21.3 20.2 21.7 19.0 20.1 2. Financial investment 5.9 4.0 5.6 11.7 7.3 12.9 9.8 4.5 3.2 B. Amortization of debt 13.7 18.3 24.8 17.0 15.5 10.3 15.6 32.3 32.0 1. Internal 6.6 6.7 11.3 10.3 7.8 3.9 12.3 22.7 22.1 2. External 7.1 11.6 13.5 6.7 7.7 6.4 3.3 9.6 9.9 TOITAL 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100,0 100.0 /I Definitive Budget /2 Original Budget Source: Ninistry of Economv - 103 - Table 5.4: ARGENTINA - P1U8LIC SECTOR OPERATIONS, 1971-1979 (in millions of $a) / 1 42 1971 1972 1973 1974 1975 1976 1977 1978 1979 Central Government /3 Current revnue 18.354 28,334 49,210 77,227 171,080 984.649 3,040,860 8,807,999 18,319,084 (of which taxes) (15,486) (23,467) (42,917) (70,372) (151.682) (859.657) (2,482,816) (7,259,674) ([5,260.307) Current expenditure 15,379 23.325 47,031 71,266 191,718 903.071 2,183,370 6,911,358 15,089,872 Current surplus/deficit (-) 2,975 5,009 2,179 5,961 - 20,638 81,978 857,490 1,896,641 3,229,212 Capital revenu 77 220 71 844 307 1,983 2,123 117,254 35,042 Investent expenditure 2,809 5,548 9,113 14,383 37,354 343,744 920,675 2,022,226 3,840,782 Gross fixed investment C 2,727) ( 4,987) ( 7,687) (10,119) ( 30,240) (244,953) (718,601) (1,838,088) (3,794,9721 Surplus/deficit before transfers 243 - 319 - 6,863 - 7,578 - 57,685 -260.183 -61,062 -8,331 -576,628 Transfers (net) -3,347 - 5,814 -13,230 -23,807 -114.799 -483,470 -724,969 1,454,906 -1,641,228 Surpluu/deficit (-) after transfers -3,104 - 6,133 -20,093 -31,385 -172,484 -743,653 -786,031 -1,463,237 -2,217,756 Provincial and municipal government /4 Current revense 7,092 9,523 18,410 29.172 51,715 377,473 1,682,670 4,463,113 10,756,398 (of which taxes) ( 5,810) ( 7,908) (16,200) (25,561) (43,443) (337,815) (1,477,571) (3,865,439) (9,592,316) Ctrrent expenditure 6,435 10,132 22,153 34,369 114,887 395,027 123,350 3,638,009 7,914,228 Current surplus/deficit (-) 657 - 609 _ 3,743 - 5,197 - 63,172 - 17,554 559,320 825,104 2,842,170 Capital rvenue 55 90 115 272 807 2,033 8,372 69,358 67,331 Investment expenditur 2,501 4,030 5,906 10,845 32,814 228,700 759,601 1,890,837 3,955,489 Gross fixed investment ( 2,377) ( 3,883) ( 5,644) (10,246) (31,862) (223,426) (600,769) (1,819,026) (3,836,763: Surplos/doficit before transfers -1,789 -4,549 -9,534 -15,770 - 95,179 -244,221 -191,909 -996,375 -1,045,988 Transfers (net) 1,307 3,158 7,940 14,279 83,271 235,334 327,208 996,375 1,045,988 Surplus/deficit (-) after transfers - 482 -1,391 -1,594 - 1,491 - 11.908 - 8,887 135,209 - - General government Current revenue 25,446 37,857 67,620 106,399 222,795 1,362,122 4,723,530 13,271,11Z 29,075,482 (of which taxes) (21,296) (31,375) (59,117) (95,933) (195,125)(1,197,472) (3,060,387) (11,125,113) (24,853,423: Current expenditure 71,814 33,457 69,184 105,635 306,605 1,298,098 3,306,720 10,547,367 23,004,100 Current surplus/deficit () 3,632 4,400 - 1,564 764 - 83,810 64,024 1,416,810 2,721,745 6,071,382 Capital revenue 132 310 186 1,116 1,114 4,016 10,495 186,612 102,373 Investment expenditure 5,310 9,578 15,019 25,228 70,168 572,444 1,680,276 3,913,063 7,796,271 Gross fixed investment ( 5,104) ( 8,870) (13,331) (20,365) (62,102) (468,379) (1,418,370) (3,657,114) (7,631,735) Surplus/deficit before transfers -1,546 -4,868 -16,397 -23.348 -152,864 -504,404 -252,971 1,004,706 -1,622,516 Transfers (net) -2,040 -2.656 -5,290 - 9,528 - 31,528 -248,136 -397,761 -458,531 -595,240 Surplus/deficit (-) after transfers -3,586 -7,524 -21,687 -32,876 -184,392 -752,540 -650,732 -1,4b3,237 -2,217,756 state enterprises L5 Current revenue 9,640 16,482 28,386 41,597 120,260 737,236 2,055,849 5,315,971 17,166,446 Current expenditure 9,151 15,221 27,244 40,685 132,779 707,789 1,673,651 4,652,738 10,370,333 Current surplus/deficit C-) 489 1,261 1,142 912 - 12,519 29,447 382,198 663,233 1,796,113 Capital revene 290 344 213 967 1,380 5,67q 72,919 223,377 352,932 Investment expenditure 4,955 8,263 11,605 17,278 56,362 418,607 1,035,191 2,562,006 5,190,173 Gross fixed investment ( 4,461) ( 8,100) (11,295) ( 16,165) ( 53,447) (380,241) (980,415) (2,390,491) (4,924,756) Surplus/deficit before transfers -4,176 -6,658 -10,250 -15,399 67,501 -383,481 -580,074 -1,675,396 -3,U41,124 Transfers (net) 2,040 2,655 5,290 9,528 31,528 248,136 397,761 -458,532 -595,240 surplus/deficit (-) after trans fers -2,136 -4,003 - 4,960 - 5,871 - 35,973 -135,345 -182,313 -1,216,864 -2,445,780 Public sector Current rev nu 35,086 54,339 96,006 147,996 343,055 2,099,358 6,779,379 18,587,083 41,241,928 (sf which taxes) (21,296) (31,375) (59,117) (95,933' (195,125)(1,197,472) (3,960,387) (11,125,113) (21,853,023: Current expenditure 30,965 48,678 96,428 146,320 439,384 2,00.S887 4,980,371 15,202,105 33,374,433 Current surplus/deficit (-) 4,121 5,661 - 422 1,676 - 96,329 93,471 1,799,008 3,384,978 7,867,445 Capitel revenue 422 654 399 2,083 2,494 9,695 83,414 409,969 455,305 Investment sopenditure 10,265 17,841 26,624 42.506 126,530 991.051 2,715,467 6,495,069 12,986,444 Gross fixed investment (9,565) (16.970) (24,626) (36,530) (115,549) (848,620) (2,398,785) (6,047,605) (12,356,491) Surplu./doficit (-) -5,722 _11,526 -26,647 -38,747 -220,365 -887,885 -833,045 -2,680,102 -4,b63,644 Financing 5,722 11,526 26,647 38,747 220,365 887,886 833,045 2,680,102 4,663,b44 External financing (net) 1,485 2,164 417 4,232 1.541 84,35; 297,229 1,152,703 1,958,502 Borroning 2,323 4,681 5,184 7,672 13.049 154,250 403,728 2,070,760 3,847,194 Amortization 838 2,517 4,767 3,440 11,478 69,893 106,499 918,057 1,888,692 Internal financing 4,237 9,362 26,230 34,515 218,824 803,524 535,816 1,527,399 2,705,142 Burrowing (net) 909 1,949 3,106 4,838' 23,955 232,570 147,414 1,354,164 2,382,035 Cross 1,696 3,417 7,111 10,100 35.698 27S,871 544,112 3,s22,495 6,613,795 Amortiation 787 1,468 4,005 5,262 11,743 43,301 396,698 2,175,331 4,231,760 Centrel Bank 3,037 3,738 15,617 27,104 140,571 272.309 311,571 - - Other 291 3,675 7,507 2,573 54,298 298,649 76,831 173,235 323,108 /1 Definitive budget. 71 Original budget. /3 Comprises the Treasury, special accounts, decentraliaed agencies, the enrgy funds, and social security. 1- Includes the National Territory of Tierra del Puego 75 Comprises the traditional state enterprisca and the state corporation - In 1978 the Post Office and the Greator Buenos Authority became ate enterprises. Source: National Office of Bodgeting and Programing: Ministry of Economy, - 10' - Table 5.5 ARGENIINA - PUBLIC SECTOR OPERATIONqS, 1971-1979 (As percent of GDP at market prices) 1971 1972 1973 1974 1975 1976 1977 19741 19741 Central Government Current revenue 13.7 11.9 12.6 16.9 12.1 12.3 14.3 16.8 13.1 (of which taxes) (11.5) (9.8) (11. 0) 15.4 (10.7) (10. 8) (11. 7) (13.9) 10.9 Current expenditures 11.5 9.8 12.1 15.6 13.5 II.~ i o.3 13.2 10.8 Current surplus/deficit -) 2.2 2.1 0.6 1.3 -1.5 1.0 4.0 3.6 2.3 Capital revenue 0.1 0.1 - 0.2 Investment expenditures 2.1 2.3 2.3 3.2 2.6 4.3 4.3 3.8 2.7 Cross fixed inivestment (2.0) (?.l) (2.0) (2.2) (2.1) (3.0) (3. 4) (3.5) (2.7) Surplus/deficit before transfers 0.2 -0.1 -1.8 -1.7 -4.1 -3.2 -0.3 - -0.4 Transfers (net) -2.5 -2.4 -3.5 -5.2 -8.1 -6.1 -3.4 -2.8 -1.1 Surplus/deficit after transfers -2.3 -2.6 -5.2 -6.8 -12.2 -9.3 -3.7 -2.8 -1.6 Provincial and municipal governiment L4 Current revenue 5.3 4.0 4.7 6.4 3.7 4.7 7,9 8.5 7.7 (of which fazes) (4.3) (3.3) (4.2) (5.6) (3.1) (4.2) (7.-0) (7.4) (6.9) Current expendituze 4.8 4.2 5.7 7.5 8.1 4.9 0.6 6.9 5.6 Current surplus/deficit () 0.5 -0.3 -1.0 -1.1 -4.5 -0.2 2.6 1.6 2.0 Capital revenue - - - 0.1 0.1 - - 0.1 0.1 Investment expenditure 1.9 1.7 1.5 2.4 2.3 2.8 3.6 3.6 2.8 Gross fixed inrvestment (1.8) (1.6) (1.5) (2.2) (2.3) (2.8) (2. 8) (3.5) (2.7) Surplus/deficit before transfers -1.3 -1.9 -2.5 -3.5 -6.7 -3.0 -0.9 -1.9 0.7 Transfers (net) 1.0 1.3 2.1 3.1 5. 2.9 1.5 1.9 -0.7 Surplus/deficit after transfers -0.4 -0.6 -0.4 -0.3 -0.8 -0.1 0.6 - - General Government Current revenue 19.0 15.8 17.3 23.3 15.7 17.1 22.0 25.4 20.8 (of which taxes) (15.9) (13.1) (15. 2) (21.0) (13.8) (15.0) (14.4) (21.3) (17.8) Current expenditure 16.3 14.0 17.7 23.3 21.7 16.3 15.6 20.1 16.5 Currenit surplus/deficit () 2.7 1.8 -0.4 0.2 -5.9 0.8 6.7 5.2 4.3 Capital revenue 0.1 0.1 0.1 0.2 0.1 0.1 0.1 0.3 0.1 Investment expenditure 3.9 4.0 3.9 5.5 5.0 7.2 7.9 7.5 5.6 Gross fixed investment (3.8) (3.7) (3.5) (4.5) (4.4) (5. 9) (6.7) (7.0) 5.5 Surplus/deficit before transfers -1.1 -2.0 -4. 2 -5.1 -10.8 -6.3 -1.2 1.9 -1.2 Transfers (net) -1.5 -1.1 -1.4 -2.1 -2.2 -3.1 -1.8 0.9 -0.4 Surplus/deficit after transfers -2.7 -3.2 .-5.7 -7.2 -13.0 -9.4 -3.1 -2.8 -1.6 State enterprises /5 Current revenue 7.2 6.9 7.3 9.1 8.5 9.1 - 7 10.2 12.3 Current expenditure 6.8 6.4 7.0 8.9 9.4 8.y 7.9 8.9 7.4 Current surplus/deficit () 0.4 0.6 0.3 0.2 0.9 0.4 1.7 1.3 1.3 Capital revenue 0.2 0.1 0.1 0.2 -0.1 0.1 0.3 0.4 0.2 investment expenditure 3.7 3.5 3.0 3.8 4.0 5.2 4.9 4.9 3.7 Gross fixed investment (3.3) (3.4) (2.9) (3.5) (3.8) (4.7) (4.6) (4.6) 3.5 Surplus/deficit before transfers -3.1 2.8 -2.7 -3.4 -4.8 ..4.8 -2.7 -3.2 -2.2 Tranisfers (net) 1.5 1.1 1.4 2.1 2.2 3.1 1.8 -0.9 -0.4 Surplus/deficit after transfers -1.6 1.7 -1.3 -1.3 -2.5 -1.7 -0.8 -2.3 -1.8 Public sector Cuirrent revenue 26.1 22.7 24.6 32.4 24.2 26.3 31.9 35.5 29.5 (of which taxes) (l5. 9) (13.1) (15. 2) (21.0) (13.8) (15.6) (18.6) (21.3) (15.6) Current expenditure 23.1 20.4 24.7 32.1 31.0 25.1 23.4 29.0 23.9 Current surplus/deficit () 3.1 2.4 -9.1 0.3 -6.8 1.2 8.5 6.5 5.6 Capital revenue 0.3 0.3 0.1 0.4 0.2 0.1 0.4 0.8 0.3 Investment expenditure. 7.6 7.5 6.8 9. 8.9 12.4 12.8 12.4 9.3 Gross fixed investment (7.1) (7.1) (6.3) (s.o) (8.2) (10.6) (11.3) (11.6) (8.8) Surplus/deficit ()-4.2 -4.8 -6.8 -8.5 -15.6 -11.1 -3.9 -5.1 -3.3 Financing 4.2 4.8 6.8 8.5 15.6 11.1 3.9 5.1 3.3 External financing (net) 1.1 0.9 0.1 0.9 0.1 1.0 1.4 2.2 1.4 Borrowing 1.7 2.0 1.4 1.7 0.9 1.9 1.9 4.0 2.8 Amnortization 0.6 1.1 1.2 0.8 0.8 0.9 0.5 1.7 1.4 Internal financing 3.1 3.9 62 7.6 is.4 io.i 2.5 2.9 1.9 Borrowing (net) 0.7 0.8 0.8 1.1 1.7 2.9 0.7 2.6 1.7 Gross 1.2 1.4 1.9 2.2 2.5 3.4 2.6 6.7 4.7 Amortiznation 0.6 0.6 1.0 1.1 0.8 0.5 1.9 4.2 3.0 Central Bank 2.3 1.6 4.0 5.9 9.9 3.4 - 1.5 - - Other 0.2 1.5 2.0 0.6 3.8 3.7 0.4 0.3 0.2 /1 Definite budget. /2 Original budget. /3 Comprises the Treasury, special accounts, decentralized agencies, the energy funds, and social security. /4 Includes the Nationtal Territory of Tierra del Fuego. /5 Comprises the traditional state enterprises and the state corporation - In 1978 the Post Office and the Greater Buenos Aires Authority became state enterprises. Source: National Office of Budgeting and Programing M4inistry of BcoTsomy. Table 5.6: ARGENTINA - NATIONAL TAX BURDEN, 1971-1979 (as a percentage of GDP at market prices) __ =- / 1 /_2 1971 1972 1973 1974 1975 1976 1977 1978 1979 National Taxes 10.76 7.96 8.57 11.47 6.87 8.82 12.00 12.69 13.01 Taxes on wealth and income 2.75 1.81 1.91 2.75 0.85 1.46 3.01 2.60 2.18 Sales tax and value added tax 1.70 1.26 1.09 1.63 1.61 2.17 2.85 3.00 3.63 Fuel tax 1.00 0.79 1.11 2.10 1.23 0.69 1.26 1.68 1.91 Tax on foreign trade l.bO 1.80 1.66 1.68 1.64 1.90 1.15 1.04 0.82 Other 3.70 2.31 2.80 3.30 2.13 2.60 3.72 4.37 4.46 Provincial and Municipal Taxes 2.53 1.65 1.69 2.18 0.89 1.39 2.81 3.09 3.75 Turto-er tax 1.06 0.68 0.69 0.92 0.11 0.76 1.53 1.41 1.64 Real estate tax 0.49 0.31 0.32 0.28 0.20 0.18 0.48 0.86 1.18 Other 0.98 0.67 0.69 0.98 0.58 0.45 0.79 0.82 0.94 Non-tax Revenue 0.45 0.24 0.26 0.30 0.28 0.44 0.65 0.67 0.68 National 0.40 0.22 0.24 0.28 0.26 0.42 0.61 0.64 0.65 Provincial and Municipal 0.05 0.02 0.02 0.02 0.02 0.02 0.04 0.03 0.03 Social Security Svstem /3 7.02 5./7 7.82 9.99 8.42 7.45 7.27 7.00 7.15 Total 20.76 15.64 18.34 23.94 16.46 18.10 22.73 23.45 24.59 Note: sum may not add to total due to rounding, /1 Definitive budget /2 Original budget /3 Includes wage tax to low-coost housisng Source: Ministrv of Economv Table 5.7(a): ARGENTINA - TREASURY OPERATIONS, 1971-1979 (In millions of $a) /1 /2 1971 1972 1973 1974 1975 1976 1977 1978 1979 Revenue 8,262 12,591 18,985 29,411 51,039 385,834 1,281,454 3.365.890 8,950,450 Budgetary /3 8,202 12,432 18,192 28,445 50,234 380,150 1,252,787 3,332,678 8,950,450 Non-budgetary 60 159 793 996 805 5,684 28,667 33,212 - Expenditure 12.027 19,296 42.159 62,846 225,048 973,440 1,994,348 4.660.529 11.028.315 Budgetary 11,587 18,612 40,454 58,463 204,113 882,803 1,855,721 4.567,170 11,028,315 Non-budgetary 440 684 1,705 4,383 20,935 90,637 138,627 93,359 - Deficit -3,765 -6705 -23,175 -33.435 -174.009 -587.606 -712 894 -1.294.639 -j1U7&8 (as percent of expenditure) 5,T73) T34.) j53) -5!7 -T7r) -u:4 T * ) (27.8) (18.8) Financing 3_765 6.705 23,175 33.435 174,009 587.606 712,894 1.294.639 2.077.865 External financing, net 341 165 1 - 1,007 29.886 4.838 436.397 693.331 Credits (573) (1,353) (1,189) (2,074) (2,145) (47,518) (70,345) '559,122) (959,171) Amortization (- 232) 2 - 1,188) (- 2,547) (- 1,766) (- 3,152) (- 17,632) (- 65,507) (-122,815) (-265,840' Internal financing, net 3.424 6.540 24.533 33,127 175.016 557.720 708.056 1.384 53 Bond sales, net 245 415 1,991 2,578 17,001 129,237 - 95,112 2 4,3847,533 Placements (745) (1,071) (3,596) (4,982) (24,983) (245,2971 400,165 (1,112,992) (2,945,518) Amortization /A (-500) (-656) (-1,605) (-2,404) (-7,982) (-116.060) (-495.277) (-881,527) (-1,560,985) Central bank operations 3,035 4,423 15,699 24,542 123,991 253,021 311.571 - Others /5 144 1,702 6,843 6,007 34,024 175,462 491,597 626,866 !1 Definitive Budget /2 Original Budget /3 Excludes Revenues and Expenditures corresponding to Regional Development Fund and exchange rate differences, 1973-78. L4 Includes interest considered as amortization, 1976-78. /5 Includes unified Funds, Treasury bills, changes in floating debt and others. Source: National Office of Fiscal Analysis, Ministry of Economy. Table 5.7(b): ARGENTINA - TREASURY OPERATIONS, 1971-1979 (as percent of (-DP at market prices) /1 /2 1971 1972 1973 1974 1975 1976 1977 1978 1979 Revenue 6.15 5.27 4.87 6.45 3.60 4.83 6.03 6.43 6.41 Budgetary 6.11 5.21 4.67 6.23 3.55 4.76 5.90 6.37 6.41 Non-budgetary 0.04 0.07 0.20 0.22 0.05 0.07 0.13 0.06 - Expenditure 8.05 9.09 10.81 13.77 15.89 12.19 9.39 8.90 7.89 Budgetary 8.63 7.80 10.38 12.81 14.40 11.06 8.73 8.72 7.89 Non-budgetary 0.32 0.29 0.43 0.96 1.47 1.13 0.66 0.18 - Deficit -2.80 -2.81 -5.94 -7.33 -12.27 -7.36 -3.36 -2.47 -1.48 Financing 2.80L 2.81 5.94 7.33 12.27 7.36 3.36 2.47 1.48 External financing, net 0.25 0.0 0.35 0.07 -0.07 0.38 0.02 0.83 0.49 Credits (0.42) (0.56) (0.31) (0,45) (0.15) (0.50) (0.33) (1.07) (0.68) Amortization (-0.17) (-0.49) (-0.66) (-0.38) (-0.22) (-0.22) (-0.31) (-0.24) (-0.19) Internal financing, net 2.55 2.74 6.29 7.26 12.34 6.98 3.34 1.64 0.99 Bond sales, net 0.18 0 17 0.51 0.57 1.20 1.62 -0.44 0.44 0.99 Placements (0.55) (0.45) (0.92) (1.09) (1.76) (3.07) (1.89) (2.13) (2.11) Amortization (-0.37) (-0.28) (-0.41) (-0.52) (-0.56) (-1.45) (-2.33) (-1.69) (-1.12) Central Bank operation 2.26 1.85 4.03 5.38 8.74 3.16 1.47 - - Others 0.11 0.71 1.76 1.31 2.40 2.20 2.31 1.20 _ /1 Definite budget /2 Original budget Source: National Office of Fiscal Aialysis, Ministry of Economy Table 5.8(a): ARGENTINA - TREASURY BUDGETARY REVENUE, 1971-1979 'In millions of $a) /1 /2 1971 1972 1973 1974 1975 1976 1977 1978 1979 Total budgetary revenue 8.202 12,431 18_192 28.44 50.234 380,150 1,252,787 3L332678 8L930L450 Ta v /3 7,532 11,110 16400 26,871 46.18 356,23 1,177,17 2,773.082 6,091,827 Taxes on income /4 1.460 2048 . 3.054 3,974 5,222 40,56 185.622 413601 814.354 Taxes on capital and wealth 805 836 973 3,099 1,198 14,778 124,974 185,512 302.555 Grant/gift tax (227) (279) (443) (522) (108) (113) (93) (-) (-) Tax on wealth /5 - - - (342) (81) (2,691) (7,291) (137,910) (302,055) Automobile tax /6 (244) (299) (176) (318) (53) (7,987) (1,133) (1,624) (-) Tax on revaluation of wealth (162) (11) (12) (1,503) (659) (263) (72,627) (30,705) () land tax (119) (201) (280) (336) (67) (57) (36) (13) (-) Tax on revaluation of real estate - - - (67) (22) (9) ( - ) (-) (-) Others (53) (46) (62) (12) (208) (3,658) (43,794) (6,260) (_) Taxes on production and consumption 3,201 4,203 6,318 11,631 22,762 15743 618.582 1.738.387 4.037.368 Sales tax/value-added tax (1,382) (1,815) (2,025) (3,589) (7,633) (79,972) (278,400) (721,279) (1,886,691) Excise tax (790) (1,078) (1,513) (1,972) (3,990) (24.346) (101,316) (322,462) (702,303) Stamp tax 7/ (541) (774) (1,585) (2,265) (4,561) (24,639) (93,552) (152.582) (346,500) Fuel tax (440) (515) (1,086) (3,703) (6,527) (884) (72,539) (312,703 (715,400) Others 8/ (48) (21) (109) (101) (51) (27,591) (72,775) (229.361) (386,474) Taxes on foreign trane 2.066 4.023 6.055 8.167 16.999 143.459 24799 435.582 93.050 Import taxes (1,216) (1,780) (1,724) (3,894) (7,509) (47,110) (161,244) (393,877) (892,350) Export taxes (824) (2,177) (4,266) (3,940) (8,850) (95,513) (83,406) (31,035) (45,700) Customs charges (26) (66) (65) (333) (640) (836) (3,344) (10,670) Non-tax rFvcnue 671 1.321 1.791 1,574 4.053 23,91 75,615 55959 2.858 623 Post office receipts 285 370 523 71 7 49 204 1,604 Interest 20 54 92 205 1,198 980 824 1,212 Miscellaneous fees 111 207 423 544 1,165 14,246 59,304 137,747 Transfers from rest of public sector - - - - - - - 370,000 2,205.000 Others /9 260 255 690 753 1,683 8,637 15,283 49,033 /I Definitive budget /2 Original budget /3 Excludes receipts from Regional Development Fund in 1973-1978 /4 Includes additional emergency income tax in 1975 /5 Includes taxes on capital of enterprises and equiity of individuals /6 Includes emergency tax on automobile in 1976 /7 Includes tax on foreign exchange transactions /8 Incluides the following taxes in 1976: cred.t on loans (18,832), baniking credit (4,505), transfers on property and/or negotiable papers, stocks and honds (1,850), and agricultural products (1,676) /9 Excludes the exchange variation Source: National Office of Fiscal Analysis, Ministry of Economy. Table 5.8(b): ARGENTINA - TREASURY BUDGETARY REVENUE, 1971-1979. (as percent of GDP at market prices) /1 /2 1971 1972 1973 1974 1975 1976 1977 1978 1979 Total budgetary revenue 6.11 5.20 4.67 6.23 3.54 4.76 5.90 6.37 6.40 Tax reventue 5_6 4.65 4.21 5.89 3.26 4.46 5.53 5.30 4.36 Taxes on income 1.09 0.86 0.78 0.87 0.37 0.51 0.87 0.79 0.58 Taxes on capital and wealth 0.60 0.35 0.25 0.68 0.08 0.19 0.59 0.35 0.22 Grant/gift tax 0.17 0.12 0.12 0.11 0.01 0.03 - _ _ Tax on wealth - - - 0.08 - 0.10 0.03 0.26 0.22 Automobile tax 0.18. 0.13 0.05 0.06 0.05 - 0.01 - - Tax on revaluation of wealth 0.12 0.01 - 0.33 0.01 - 0.34 0.07 - Land tax 0.09 0.08 0.07 0.08 - - - -- Tax on revaluation of real estate - - - 0.01 0.02 - - Others 0.04 0.02 0.02 - - 0.05 0.21 0.01 - Taxes on production and consumption 2.38 1.76 1.62 2.55 1.61 1.97 2.91 3.32 2.89 Sales tax/value-added tax 1.03 0.76 0.52 0.79 0.54 1.00 1.31 1.38 1.35 Excise tax 0.50 0.45 0.39 0.43 0.28 0.30 0.48 0.62 0.50 Stamp tax 0.40 0.32 0.41 0.50 0.32 0.31 0.44 0.29 0.25 . Fuel tax 0.32 0.22 0.28 0.81 0.46 0.01 0.34 0.60 0.51 Others 0.04 0.01 0.03 0.02 - 0.35 0.34 0.44 0.28 Taxes on foreign trade l.S 1_6A 1.55 1.79 1.20 1.80 1.17 0.83 0.67 Import taxes 0.91 0.75 0.44 TM 0.53 0.59 0.76 0.75 0.63 Export taxes 0.61 0.91 1.09 0.86 0.62 1,19 0.39 0.06 0 Custom charges 0.02 0.03 0.02 0.07 0.05 0.01 0.02 0.02 0.03 Non-tax revenue 0.46 0.35 0.28 0.30 0.36 1.07 2.05 Post Office receipts 0.21 0.16 0.13 0.01 0.08 - - - - Interest 0.02 0.02 0.02 0.05 0.08 0.01 - - - Miscellaneous fees 0.00 0.09 0.11 0.12 - 0.18 0.28 0.26 - Transfers from rest of public sector - - - - - 0.7 1. 58 Others 0.19 0.29 0.20 0.17 0.12 0.11 0.07 0.09 - /1 Definite budget /2 Original budget Source: National Office of Fiscal Analysis, Ministry of Economy. Table 5.9(a): ARGENTINA - TREASURY EXPENDITURE, 1971-1979 (in millions of $a) IL /2 1971 1972 1973 1974 1975 1976 1977 1978 1979 Total treasury expenditures 12_027 19.296 42.159 62,846 225,048 973,440 1,994,348 4,660,529 I.1.2 Budgetary expenditure 11,587 18.611 40.454 58.463 204.113 882.803 1.855.721 4,567,170 11,028,315 Current expenditure 6,362 9,725 20.053 30,582 79,493 351.269 930,139 2,789,615 6,058,858 Personnel 4,032 6,079 13,067 18,501 46,645 196,261 489,629 1,530,290 3,506,283 Goods and services 980 1,439 2,479 3,389 7,643 45,802 166,867 472,824 1,526,172 Interest 441 943 1,505 3,522 10,674 36,066 97,143 245,084 340,252 Transfers to private sector 313 418 963 1,729 5,462 25,170 44,590 152,608 305,668 Retirement and pension payments 596 846 2,039 3,441 9,069 47,970 131,910 388,809 1,110,483 Minus=savings - - - - - - - - -730,000 Investment 781 1,511 1,890 2,283 6.694 54,320 184.405 417,500 960,345 Transfers to public sector 4,444 7.374 18,511 25,598 117,926 477.214 783,805 1.360,055 4_00911 2 Special accounts 54 59 225 475 2,323 44,579 83,607 242,724 1,134,136 Decentralized agencies 1,339 2,250 4,678 6,798 15,547 93,240 199,127 570,544 1,362,678 State enterprises 1,665 2,198 4,212 6,173 20,256 142,020 215,920 273,925 599,728 (of which: railways) (1,261) (1,357) (2,915) (3,879) (13,164) (68,822) (134,861) (226,476) (-) Provinces /3 1,090 2,468 6,401 8,691 65,514 154,894 82,455 173,458 473,711 Others /4 296 399 2,995 3,461 14,286 42,481 202,696 99,404 438,859 Non-budgetary expenditure 440 685 1,705 4,383 20,935 90,637 138.627 93,359 - Transfers 246 281 859 2,538 13.253 50.806 87,537 71.762 State enterprises 24 17 74 11 7,552 38,207 69,583 23,693 Provinces 172 183 544 1,097 3,792 7,352 1,502 26,117 Others 50 81 241 1,430 1,909 5,247 16,452 21,952 Others 194 404 846 1,845 782 39831 51,090 21,592 1I Definitive Budget /2 Original Budget /3 Excludes transfers from Regional Development Fund in 1973-78. 14 Includes variation of floating debt. Source: National Office of Fiscal Analysis, Ministrv of Economy Table 5.9(b): ARGENTINA - TREASURY EXPENDITURES, 1971-1979 (as percent of GDP at market prices) 1971 1972 1973 1974 1975 1976 1977 197 d 1979 12 Total treasurv expendicures 8.96 8.08 10.81 13.77 15.88 12.19 9 8.90 7_89 Budgetary expenditures 8.63 7.79 10.38 12.81 14.40 11.06 8.73 8.72 7.89 Current expenditures 4.74 4.07 5.14 6.70 5.61 4.40 4.38 5.33 4.34 Personal 3.00 2.54 3.35 4.06 3.29 2.46 2.30 2.92 2.51 Goods and services 0.73 0.60 0.65 0.74 0.54 0.57 0.79 0.90 1.09 Interest 0.33 0.40 0.39 0.77 0.75 0.45 0.46 0.46 0.24 Transfer to private sector 0.23 0.18 0.25 0.38 0.39 0.31 0.21 0.29 0.22 Retirement and pension payments 0.44 0.35 0.50 0.75 0.64 0.60 0.62 0.74 0.79 Minus=savings - - - - - - - - -0.52 Investment 0.58 0.63 0.49 0.50 0.47 0.68 0.87 0.80 0.68 Transfer to public sector 3.31 3.09 4.75 5.61 8.32 5.98 3.69 2.60 2.86 Special accounts 0.04 0.02 0.06 0.10 0.160.56 0.39 0.46 0.81 Decentralization agencies 1.00 0.94 1.20 1.49 1.10 1.16 0.94 1.09 0.98 State enterprises 1.24 0.92 1.08 1.35 1.43 1.78 1.01 0.52 0.43 (of which railways) (0.93) (0,57) (0.74) (0.85) (0.93) (0.85) (0.64) (0.43) ( - Provinces 0.81 1.03 1.64 1.90 4.62 1.94 0.39 0.33 0.34 Others 0.22 0.17 0.77 0.76 1.01 0.53 0.95 0.19 0.31 Non-budgetary expenditure 0.33 0.29 0.43 0.96 1.48 1.13 0.65 0.18 - Transfers 0.18 0.12 0.22 0.56 0.94 0.63 0.41 0.14 - State enterprises 0.02 .- 0.12 - 0.53 0.47 0.33 0.05 - Provinces 0.13 0.08 0.14 0.24 0.27 0.09 0.01 0.05 - Others 0.04 0.03 0.06 0.31 0.14 0.07 0.08 0.04 - Others 0.1S 0.17 0.21 0.40 0.54 0.50 0.24 0.04 - /1 Definite Budget i2 Original Budget Source: Nattonal Office of Fiscal Analysis, Ministrv of Economy. Table 5.10 ARGENTINA - iNDEX OF PUBLIC SECTOR TARIFFS, 1968 - MARCH 1980 (19615 1 too, End of the Period Average of per' od 1 9 7 1 9 7 9 1980 1968 1970 1974 1975 1976 1971 *978 79 Mar J SD. J Sept =-ee Mar Cenerol level 105.8 97.7 130.9 123.8 98.7 110.3 12.0-Q 97,7 129.9 117.6 j1.J 112.7 105.2 9b.1 87. .5 96.5 Fael a-d Plectricitv 99.1 89.7 133.8 127.0 102.9 108.7 113.2 92.0 122.7 109.5 106.7 105.0 98.8 90.5 81.5 87.1 90.7 Foel 96.9 91.0 146.6 144.3 111.7 115.0 118.4 95.3 129.1 114. i 111.5 109.4 102.9 94.0 84.8 91.3 94.9 Y.P.F. Sales price 97.6 93.1 159.8 159.6 115.4 114.9 115.3 93.8 125.6 111.8 108.6 107.0 . 101.0 92.3 83.6 90.8 93.5 Retention price /2 - - 143.9 - 109.7 91.8 102.4 85.1 110.5 98.6 96.6 98.1 92.6 85.2 . 77.5 80.8 state Gas Company 97.2 81.8 66.7 50.4 87.9 127.4 141.8 108.1 154.9 137.8 132.9 128.0 118.1 108.2 95.7 98.0 104.8 Y.C.F. 46.7 39.3 61.1 59.4 102.0 82,1 87.4 66.8 95.1 84.9 83.9 78.3 73.2 67.2 59. 61.1 72.7 Electricity 108.0 84.2 82.1 56.9 67.3 83.2 91.0 78.9 96.8 88.1 87.6 87.1 81.9 76.3 68.3 20.1 76.0 S.E.G.B.A. 108.1 84.9 94.1 62.9 67.2 78.3 86.3 78.3 91.8 83.6 83.3 83.3 79.7 74.6 66.2 68.1 75 9 Water & Electricity Company 107.7 82.9 58.3 44.9 67.4 93.1 100.1 80.0 106.7 97.0 96.2 96.7 86.3 79.7 72. 5 73,9 78.0 Tran.port and cloosscicotioos 127.1 123.1 129.9 120.5 94.8 119.1 147.4 119.6 154.5 144.0 143.4 137.7 126.3 104.6 104,9 tl5 R 7 Transport 100 2 100.7 L11.2 103.1 92.4 94.3 108.9 94.1 109.6 106.6 105.9 106.6 98.7 91.7 83 0 95,1 99.3 Argentine Railways 110.3 113.9 104.9 84.9 81.2 86.8 107,6 93,1 108.2 105.9 106.1 109.0 102.7 94.0 03.0 87.3 100.3 B-evos Aires S,lbway 104.2 87.7 142.1 136.7 134.2 138.9 159,5 134.0 163.4 159.3 1;0.1 150.8 138.9 12S.1 115.3 166.0 State Mcrchant Marint [09.S 104.0 148.0 185.7 173.4 136.7 147.7 ll8.0 155.9 147.6 145,5 142.4 131.? 118.0 104 1 111.5 133.8 Argentine Airlines 84.9 84.8 76.6 63.9 54.4 58.2 70.6 60.3 70.8 69.3 67.7 67./ 63.3 57.9 98.0 64.8 60.1 General Port Authority 76.9 69.1 243.9 304.7 237.4 230.4 209.2 190.9 205.7 197.3 199.1 189.6 159.. 167.1 171.4 219.8 215.4 Cooensnicatiocs 1~~~~~~~~~~58.6 149.3 151.8 140.8 97.5 148.1 192.4 143.0 207.0 187.7 187.2 173.9 .58Lp I4Aij l._9.. 128.4 134.4 EN Tel. 107.4 110.6 121.5 95.4 72.1 129.0 145.6 105.5 151.8 1 144.8 128.6 115.4 109.5 93.4 95.4 99.7 EN CO Tel. 340,4 286.5 259.5 302.6 187.6 215.7 3S9, 276.0 403.3 384.6 375-7 335.2 312,3 268.b 2SO.' 245.2 258.0 llelth S-rices (OSN) 58.4 47.t 39.3 51.1 30.4 52 1 . 47.7 7 59.5 51.9 56_3 41.9 256.7 /I Pnblic cector tariffs in current prices are deflated by the -onagricultIral wholesale donest ic /2 The retention price indicates the part of the ales price of foil products that the YFF is .1loed to retaie. The difference between sales price and retention price is -ciposed of arions taxes which mrst 6e transferrel to otler ports of the pablie sector. Note: YPF = State Petrnleum Compaay YCF = State Coal Company SEGBA Greater Bo.eno Aires Electric Services ENTeL = National felecomnicationa Company ENCoTel - National Pestal and Telegraph Services OSN = Sanitary Idorks of the Nation Source: National Enterprise Corporation TPbl 5.11: ARGRNTINA - VAlUE PF PROW-T050 AND PM02y0FNr OF IF797 0sN7E6PRI7S. 19i5-10` 1975 1976 17 19,8 1979 IFe- ur ,o 1976/79 1977/76 1979177 19797/u polo6actiof EApllueont So Yroui;ct on_f rnplo.^zzent _Pr.dicrofin- P,.di Valce oP Vs7uel pPcrbploy e6lL Prod- ea,on Rplomet --.cuo.. F plfymep /i DueL aud Elecuricic, 1.1866866 119 U488 1.195.398 115.169 1-244 763 1775,YII 1.263 059 94,513 67, 617 9 10b73 0., y3.3 4.77 -8.1 . -70. 7 11 3 -2.9 27L 38 58723 66 710 82,9821 64 743 85M 076 59 202 838 ,?352 441 909 507716 -1.1 -2.9 3.S -8.9 _ , -12. 5 70 -2.2 YFF 636,189 50,555 619,118 49,283 645. 733 43,486 657,956 37.629 30,610 36.438 -2.7 -3.6 6.3 -119 1.8 -1 3.5 6.0 -3 1 uecat Oar CouponAs 186,612 1U.906 192,912 10,367 193,662 10,735 192,497 6,.37 47,032 In,10' l3 b-4 6 6 4 - 6 2 -.6 -0.3 16 1 1.2 PCF 15,802 5,249 17,791 5,593 19,679 5,679 7.8n2 4.'5 4,119 4,171 11 9 6 6 10 6 1 5 -62.4 -27.6 13.4 Olaoiriuoty 34N,143 52,378 365.577 50.426 385335 7 46 b09 404.807 42.701 2?8,628 47.982 _ 5_0 -8.4 20.7 -4,D SEGBA 223,217 26,334 2022713 26,805 211.439 25,335 221,124 21,205 117,321 20.213 5.2 -92 11.34 Oiler snd Electri 7 Oonpatcv 162,926 26,044 162,862 2 4 60 5,61 17F,228 23,234 183.633 21.496 111,307 27,747 13.9 -I 7 0 9 2 5.4 -76 32 8 3 5 Trus.. oc. sod C-se,ics-uo,s 288.406 274.251 28 750 2'_0463 263,995 235,176 277,665 218.661 164_2 7 8 216,92 -2.0 -1.4 0.4 -92.0 -2.2 -6.9 9.4 -I 8 Tr-unopcl 173.8685 L69,202 171,141 170,469 171,161 140,915 Iny5893 12b,199 87, 328 121,b53 22 00 n_.n -17.3 -3.1 -15 13.7 -2 Aue-ti-e R.il-ac 116.820 153, 366 117.570 154,94Q 100,0~90 126,039 164.138 111.33 51,67-10.62 088 -5.9 -11.7 16.3 2 Aur3snt ARes ysvs4 6,106 4.536 11.033 4,281 9.843 4.023 3ut 3 750 5 1.91 3 700 -3.2 3.1 -5.8 2.0 .2. State M.rchant IMrine 10 673 3,165 16,814 2,967 11,046 8,660 9.310 2,5309 4,61 2,393 -0-3.b .2 _3. -10.3 -1.8 -8. 6 ArIentite Air1i6sa 42.026 0,233 19,724 8,217 45,578 7,9'3 47,884 8,571 28,747 8,9a1 _ 42 17. -3.0 5.1 7.5 26.9 4.4 COsuonaLious 114,521 105,049 111,609 100 023 112,834 94.261 118,777 92,b62 56.920 912 -2 5 84 11 _-5.8 -6.9 -1.7 3.4 1I Eu tel 96,919 56,543 9I,464 40,789 s7,196 45,910. 100,339 06,4154 50.787 45.485 2.1 -3 S 0 C, 22 1.2 2.6 -20 EN CU Tel 1M7,uo 54,53c 10,065 56.237 14,438 48.31 11.413 24 6.33 45791 -22U -6. 4 5 6 -22.0 44 18- 0 -eslb Sr (.cee 76908) b u,01 26 ,296 63.506 26,415 84,905 ?.4,167 65,477 23,289 43 .034 22,891 -30 -9.9 1 7 -8.5 6 7 -3.6 -0.5 -9.7 tl 1 561133 419635 1561,654 412,042 1,61_3,663 355,154 1,6326494 336_682 057 2 329,316 0 -1.8 3.3 -11.4 7.9 -7,8 10.3 -2.1 71 Prodortuc-o 1 ee-se-r.d iu cers, ot -lne added n thoousnds oftcoustt l9600rteoiaca pesos, /2 A the =d f thbelst quartur. / P rF-erutug chauge batoeau the firot ucuca Ir of 1979 sod aqggl peruod ot 1976. /_ rercautoger haga be--ee the ed othe firata _eser of 1979 .ad06randa01978, tote: YfP - Otaoe PetaoIO..u Company YCF - Stale CoFl Co--puyP 18E9A Greeter eucaB. Alert Electric I-rAcoa- ENTel . Ndtiouai ... erI eauicoico, 6omcpocp ENrC-l - N2tioosl P-rrol AcA Telegraph 4o,.poop OSN - Seitsuy Works of lb. Nation Sonnet, C-rputacio- de R,nr-toF N6c0o,ulr, Table 5.12: ARGENTINA - POLICY TARGETS AND ACTUAL PUBLIC TARIFF ADJUSTMENTS, 1979 (Percentages) Actual nominal increase Policy target, General Fuel and Transport & Health Wholesale Public Actual vs. Real nominal level electricity communica- services Price Index, services, target increases increase tions domestic non- indice of tariff in tariffs agriculture costs increases (9) = I+ (2) 1 (1) (2) (3) (4) (5) (6) (7) (8)=(2)-(1) 1 + (6) 1979 75,5 94.2 94.7 90.6 79.4 135.9 18.7 -19.8 I 18.1 23.7 23.4 21.3 25.6 31.5 23.6 5.6 -5.9 II 16.1 15.9 16.4 15.3 9.2 27.0 25.3 -0.2 -8.7 III 14.1 16.5 16.0 17.8 18.8 27.3 . 2.4 -9.2 IV 12.2 16.3 16.9 15.6 10.3 11.0 * 4.1 44.9 Jan. 5.9 10.4 9.7 11.8 15.0 11.3 9.0 4.5 -0.8 Feb. 5.7 5.3 6.4 3.4 0.0 8.4 6.0 -0.4 -2.9 March 5.5 6.4 5.7 7.8 9.2 8.9 7.0 0.9 -2.3 April 5.3 5.2 5.5 4.9 0.0 6.6 5.0 -0.1 -1.3 May 5.1 5.2 5.2 5.3 9.2 8.8 10.7 0.1 -3.3 June 4.9 4.7 4.9 4.4 0.0 9.4 7.8 -0.2 -4.3 July 4.7 5.3 4.6 6.7 9.4 7.0 12.4 0.6 -1.6 Aug. 4.5 3.8 4.5 2.6 0.0 12.6 7.6 -0.7 -7.8 Sept. 4.3 6.6 6.1 7.6 8.6 5.7 . 2.3 0.9 Oct. 4.1 5.8 6.0 5.8 2.4 3.8 1.7 1.9 Nov. 3.9 4.8 5.0 4.3 7.7 3.3 .. 0.7 1.5 Dec. 3.7 4.9 5.0 4.8 0.0 3.5 , 1.2 1.4 Source: National Enterprise Corporation and Fundacion Mediterranea. Table 5.13: ARGENTINA: NATIONAL ECONOMIC AND SOCIAL INVESTMENT OF THE PUBLIC SECTOR 1979-1989 (In billions of 1979 pesos and percentage) (1) (2) (3) (4) (5) (6) . (7) (9)~~~~~~~~~~~~~~~~~~~~~~~~~~. (1) (2) (3) CoEm ii- (5) Economic Soci)al/2 °0h)er Year Energy/' Transport cation Other Sectors Sector Sectors TOTAL (2+34-4+5) 1979 3,910 1,704 639 393 6,646 708 1,894 9,247 % (42.3) (18.4) (6.9) (4.3) (71.9) (7.7) (20.5) (100) 1980 4,617 1,671 L,014 394 7,697 400 1,265 9,412 % (49.1) (17.8) (10.8) (4.2) (81.8) (4.8) (13.4) (100) 1981 4,895 1,570 858 315 7,638 437 1,141 9,216 % (53.1) (17.0) (9.3) (3.4) (82.9) (4.7) (12.4) (100) 1982 4,928 1,482 867 315 7,592 349 1,202 9,143 x (53.9) (16.2) (9.5) (3.5) (83.1) (3.8) (13.1) (100) 1983 4,312 1,493 694 320 6,820 362 1,287 8,469 % (50.9) (17.6) (8.2) (3.8) (80.6) (4.3) (15.2) (100) 1984 4,078 1,590 694 323 6,685 376 1,334 8,395 % (48.6) (18.9) (8.3) (3.9) (79.6) (4.5) (15.9) (100) 1985 4,351 1,703 707 326 7,087 390 1,367 8,843 % (49.2) (19.3) (8.0) (3.7) (80.2) (4.4) (15.5) (100) 1986 5,018 1,575 720 329 7,642 405 1,371 9,418 % (53.3) (16.7) (7.6) (3.5) (81.2) (4. 3) (14.6) (100) 1987 5,583 1,666 733 332 8,314 421 1,346 10,081 % (55.4) (16.5) (7.3) (3.3) (82.5) (4.2) (13.4) (100) 1988 5,695 1,706 746 336 8,482 437 1,335 10,255 % (55.5) (16.6) (7.3) (3.3) (82.7) (4.3) (13.0) (100) 1989 5,082 1,746 760 339 7,927 455 1,353 9,734 % (52.2) (17.9) (7.8) (3.5) (81.4) (4.7) (13.9) (1OO) /1 Includes Binational Enterprises. /2 -Decline in investment reflects transfer of National Waterworks (Ohras sanitarias de Nacion) to provinces. Source: Ministerio de Economia, Presupuesto Decenal de Inversiones Publicos 1980-1989. - 116 - Table 5.14: CONSOLIDATED ELECTRIC SECTOR FLOW OF FUNDS, 1979-1980 (In US$ mill) 1979 1980 Actual Budget A. Current Revenues of the Electric Sector 1. Sales revenues 1593.7 2268.6 2. Electric tariff fund 230.7 321.0 3. Other current resources 31.0 30.0 Subtotal 1855.4 2619.6 B. Current Expenditures of the Electric Sector 1. Salaries and wages 543.5 672.3 2. Goods and services 890.8 1106.6 3. Interest payments (real) 24.1 53.5 4. Taxes, fees and contributions 212.6 491.8 5. Other expenses 12.4 9.7 Subtotal 1683.4 2333.9 C. Savings of the Electric Sector (A-B) 172.0 285.7 II. D. Investment plus other capital expenses 1733.7 2415.8 E. Investment Financing 1733.7 2415.8 1. Saving of the Electric Sector 172.2 285.7 2. Fuel Taxes 328.0 452.0 3. Accounts receivable 183.9 7.3 4. Contribution by national government 194.3 358.3 5. Contribution by provinces and municipalities 6.1 28.7 6. Other capital resources 3.2 4.6 7. Short term liabilities 22.6 -(143.6) 8. Net use of credit 823.4 1422.8 Source: Ministry of Economy, Secretariate of Finance and INPE Table 5.15: ARGENTINA - LOANS AND AMORTIZATION OF MAJOR ELECTRIC POWER COMPANIES (in 1980) (in Sa bill.) SALTO AGUA y ENERGIA SEGBA HIDRONOR GRANDE YACYRETA TOTAL Domestic Gross Borrowing 1225.4 736.4 45.5 364.1 - 2371.4 Amortization - 433.8 - 5.1 - 3.6 -167.5 - - 610.0 Interest Adjustments - 423.6 -331.3 - 9.8 -196.6 - - 961.3 NET BORROWING 368.0 400.0 32.1 800.1 External Gross Borrowing 803.7 331.6 118.1 316.4 314.4 1884.2 Amortization -114.6 -141.8 - 39.7 - 65.2 - - 361.3 Interest Adjustments - 153.2 - 111.5 - 41.9 -146.9 - - 453.5 NET BORROWING 535.9 78.3 36.5 104.3 314.4 1069.4 TOTAL NET BORROWING 903.9 478.3 68.6 104.3 314.4 1869.5 TOTAL GROSS BORROWING 2029.1 1068.0 163.6 680.5 314.4 4255.6 Source: Ministry of Economy, Secretariate of Finance and INPE. Table 6.1: ARGENTINA - INTEREST RATES, 1977-1980 (1) (2) (3) (4) Prime Rate Borrowing Rate Eurodollar Deposit Rates Monthly Rate of Peso (30 days loans for (Major Banks' bidding rates Devaluation Against Buenos Aires) Foreign Loans 1I for 30-day deposits in London US Dollar Year Month Monthly Quarterly Montnly Quarterly 1977 January 4.5 8.8 .99 6.50 February 4.5 4.5 8.5 8.9 .40 6.78 March 4.5 9-3 .41 7.62 April 4.5 6.5 .44 4.72 May 4.5 5.5 7.4 6.8 .46 5.63 June 7.4 6.5 .43 4.80 July 7.2 7.9 .53 6.11 August 8.2 8.2 7.4 8.3 .46 5.52 September 9.2 9.8 .57 7.95 October 12.2 10.3 .59 8.42 November 13.7 13.2 10.4 9,9 .54 8.54 December 13.6 9.0 .57 7.16 1978 January 13.4 9.2 .59 7:35 February 11.1 11.3 9.1 8.7 .55 6.22 March 9.3 7.8 .64 5.26 April 8.3 7.4 .60 5.53 May 8.2 8.2 4.2 5.0 .64 2.23 June 8.3 3.5 .68 1.54 July 8.0 4.1 .67 2.15 August 7.8 7.7 5.1 5.2 .71 3.09 September 7.4 6.4 .77 4.32 October 7.4 6.5 .80 4.71 November 7.6 7.6 7.5 6.9 .97 5.49 December 7.9 6.7 .92 4.79 1979 January 7.6 7.0 .84 5.16 February 7.1 7.2 6.4 6.6 .80 4.63 March 7.0 6.5 .85 4.69 April 7.1 6.4 .87 4.57 May 7.1 7.2 6.3 6.3 .85 4.45 June 7.3 6.1 .90 4.18 July 7.2 6.0 .91 4.08 August 7.9 7.7 5.7 5.8 .98 3.80 September 8.0 5.7 1.09 1.60 October 7.9 5.7 1.26 3.40 November 6.8 7.1 5.3 5.4 1.13 3.20 December 6.7 5.2 1.20 3.00 1980 January 6.7 5.0 1.17 2.80 February 6.0 6.0 5.0 5.0 1.34 2.60 March 5.3 5.0 1.60 2.40 /1 Computed by adding 1.3 percentage points (arbitrage and commission fees) until Sept. 1978, then after 1 percentage point to - urodollar deposit rate plus dievalnation rate (see Columns 3 and 4). Source: Morgan Guaranty Trust Co, :World Financial Market; and First Boston Bank, Buenos Aires. Table 6.2: ARGENTINA - MONETARY EXPANSION OF THE FINANCIAL SYSTEM /1 1975-1979 1975 1976 1977 1978 1979 1975 1976 1977 1978 1979 Total (end of period) Composition (.) (billions of $a) TOTAL BY ORIGIN 526.5 2277.2 7824.6 20924.3 45478.5 100 100 100 100 100 External Sector -2.2 385.0 1271.1 2636.5 5083.0 -0.4 17 16 13 9 Public Sector 240.8 681.6 2219.4 6107.7 15249.2 45.7 30 28 29 27 of which monetary regulation - - (268.1) (1692.5) (3953.5) - - (3) (8) (7) Private Sector 287.9 1210.6 4334.1 12180.1 36146.3 54.7 53 56 58 64 TOTAL BY DISTRIBUTION 526.5 2277.2 7824.6 20924.3 56478.5 100 100 100 100 100 Ml 330.6 1259.9 3080.0 7742.9 18545.0 63 55 39 37 33 Currency (U23.7) (410.6) (1073.2) (3331.7) (7870.0) (23) (18) (14) ((16) (14) Demand Deposits (206.9) (849.3) (2006.8) (4411.2) (10675.0) (40) (37) (25) (21) (19) Quasi Money 79.1 578.5 3174.2 9426.4 31059.0 15 25 41 45 55 Savings Accounts (65.3) (246.1) (373.6) (1042.9) (2981.6) (12) (11) ( 5) ( 5) ( 5) Term Deposits (13.8) (332.4) (2800.6) (8383.5) (28077.4) ( 3) (14) (36) (40) (50) OTHER FINANCIAL INSTRUMENTS 116.8 438.8 1570.4 3755.0 6874.5 22 20 20 18 12 /J Includes Central Bank, conmercial banks, and other financial institutions. Source: Central Bank of Argentina and IFS. Table 6.3: ARGENTINA - NET FOREIGN EXCHANGE RESERVES OF THE MONETARY AUTHORITIES, 1971-1979 (in millions of US dollars) 1971 1972 1973 1974 1975 1976 1977 1978 1979 Total net foreign reserves 71.7 -84.5 536.7 587.2 -520.1 - 395.4 2,083.6 5,303.1 9320.8 Central Bank 194.1 135.6 801.3 858.4 -285.9 74.7 2,558.7 5,681.8 9559.1 Assets 305.2 500.2 1,364.4 1,319.5 464.2 1,784.7 3,848.4 5.7X3.2 9645.6 Gold 89.7 151.7 168.7 168.7 168.7 168.7 176.7 180.6 180.6 SDRs 2.8 19.3 80.7 101.8 40.9 90.7 88.9 209.0 327.0 Reserve position in the IMF 110.0 - - 13.7 - - - 173.0 203.0 Foreign exchange 69.8 293.7 1,068.4 1,027.7 246.8 1,513.2 3,487.6 4,971.1 8,858.0 Bilateral (LAFTA) 32.9 35.5 46.6 7.6 7.8 12.1 95.2 169.5 77.0 LiabiL_ties 111.1 364.6 563.1 461.1 750.1 1,710.0 1,289.7 21.4 86.5 IMF- 188.9 209.9 77.8 293.4 528.7 414.2 - _ US banks _ 62.0 137.3 105.9 69.6 533.3 464.3 _ _ European banks - 80.1 200.0 161.9 104.7 454.8 392.1 - _ Other banks 99.0 25.0 - - 212.7 20.0 - - _ Other 2.3 2.7 3.1 3.6 3.9 1.2 0.6 0.2 Export letters discounted abroad - - - 6.7 5.5 - - - Bilateral (LAFTA) 9.8 5.9 12.8 105.2 60.3 172.0 18.5 21.2 86.5 Treasury liabilities 122.4 220.1 264.6 271.2 234.2 470.1 475.1 378.7 238.3 External bonds 79.8 166.3 244.6 255.1 222.0 461.8 470.5 376.1 236.6 Other 42.6 53.8 20.0 16.1 12.2 8.3 4.6 2.6 1.7 Source: Central Bank of Argentina. - 121 - Tale 6-4 ARGENTINA: GROSS RESERVES AND MERCHANDISE IMPORTS, 1950-1979 Reserves in Total Reserves Imports (c.i.f.) months of (US$ Millions) (US$ Millions) imports (1) (2) (3) (1) x 12 (2) 1950 655 964 8 1951 520 1,480 4 1952 420 1,179 4 1951 520 1,480 8 1952 420 1,179 4 1953 532 795 8 1954 524 979 6 1955 457 1,173 5 1956 382 1,128 4 1957 286 1,310 3 1958 129 1,233 1 1959 993 1960 529 1,249 5 1961 386 1,460 3 1962 114 1,357 1 1963 270 981 3 1964 153 1,077 2 1965 236 1,199 2 1966 216 1,124 2 1967 727 1,096 8 1968 760 1,169 8 1969 538 1,576 4 1970 673 1,694 5 1971 290 1,868 2 1972 465 1,905 3 1973 1,323 2,230 7 1974 1,313 3,635 4 1975 457 3,947 1 1976 1,614 3,033 6 1977 3,331 4,162 10 1978 5,148 4,082 15 1979 9,569 6,680 17 Source: IFS (IMF) Table 7.1: ARGENTINA - PRODUCTION OF PRINCIPAL CROPS, 1967-1979 ('000 M.T.) 1967/68 1968/69 1969/70 1970/71 1971/72 1972/73 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 Principal Cereal Crops Wheat 7,320 5,740 7,000 4,250 5,696 7,894 6,560 5,970 8,570 11,000 5,300 8,100 Corn 6,560 6,860 9,360 9,930 5,853 9,697 9,900 7,700 5,855 8,300 9,700 8,700 Grain Sorghum 1,897 2,484 3,820 4,660 2,056 4,965 5,900 4,830 5,060 6,600 7,200 6,200 Oats 690 490 425 360 475 566 561 327 433 530 570 676 Principal Industrial Crops Cotton 230 366 458 285 291 400 418 541 445 522 714 466 Sugarcane 9,500 10,680 9,700 10,260 12,879 14,729 15,536 15,600 14,310 16,000 13,600 14,100 Tobacco 62 54 66 62 75 74 98 98 101 90 66 70 Principal Oil Crops Sunflower 940 876 1,140 830 828 880 970 732 1,085 900 1,600 1,430 - Lins. ed1 385 510 640 680 316 330 297 381 377 617 810 600 a Peanuts 283 217 234 388 252 440 290 375 388 600 270 470 Soybeans 22 32 27 59 78 272 496 485 695 1,400 2,500 3,700 Vegetahle Cr Potat--s 1,967 2,340 2,336 1,958 1,340 1,535 2,173 1,349 1,528 1,677 1,593 1,753 Sweot Botatoes 379 480 438 454 328 474 295 418 348 330 320 325 Dry beans 23 32 40 59 58 73 115 109 171 165 133 232 Tomatoes 315 352 348 410 487 492 646 610 486 533 574 501 Fruit Crops Peaches 224 248 236 278 265 50 265 252 288 283 254 280 Applen 470 436 447 424 512 233 786 608 577 820 810 972 Ci-c-s 1,079 1,344 1,425 1,597 1,302 1,462 1,546 1,483 1,399 148 134 1,306 -ranos 2,540 2,131 2,462 2,865 2,600 2,610 3,528 3,100 3,590 3,160 - - Note: Crop year, Jully through Junie. Source: Central Bank and Junta Nacional de Granos. Table 7.2: ARGENTINA - PRINCIPAL CROPS, AREA PLANTED, 1967-1979 ('000 of hectares) 1967/68 1968/69 1969/70 1970/71 1971/72 1972/73 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 Principal Cereal Crops Wheat 6,613 6,680 6,239 4,468 4,956 5,627 4,242 5,183 5,753 7,192 4,600 5,230 Corn 4,473 4,595 4,666 4,993 4,459 4,251 4,134 3,871 3,696 2,980 3,100 3,300 Grain Sorghum 1,841 2,151 2,568 3,122 2,759 2,974 3,114 2,602 2,358 2,780 2,650 2,530 Oats 1,193 1,299 1,129 1,026 1,098 1,222 1,154 1,200 1,341 1,471 1,480 1,545 Principal Industrial Crops Cotton 307 436 464 388 135 536 557 513 433 543 621 700 Sugarcane 198 201 203 208 256 319 350 348 351 360 356 350 Tobacco 67 62 78 71 74 78 89 93 85 81 73 76 Principal Oil Crops Sunfluwer 1,194 1,354 1,472 1,614 1,533 1,552 1,342 1,196 1,411 1,460 2,200 1,766 Linseed 711 879 952 972 539 588 415 520 471 722 950 893 Peanuts 294 254 215 314 321 389 350 383 335 368 452 400 Soybeans 23 31 30 38 80 169 377 370 443 710 1,20C 1,640 Vegetable Crops Potatoes 210 209 159 186 155 134 129 113 110 115 119 113 Sweet Potatoes 46 49 48 46 44 44 45 43 40 37 35 - Dry Beans 61 60 46 64 63 83 109 151 151 250 154 235 Tomatoes 21 22 26 28 29 33 37 36 34 32 33 31 Fruit Crops Peaches 31 32 32 33 34 34 34 35 36 - - - Apples 41 42 44 43 42 43 46 48 48 . _ Citrus 115 115 123 127 127 138 142 142 144 - - - Grapes 291 298 295 322 319 313 325 342 343 342 - Note: Crop year, July through June. Source: Central Bank and Junta Nacional de Granos. Table 7.3: ARGENTINA - PRINCIPAL CROPS, AREA HARVESTED, 1967-1979 ('000 of hectares) 1967/68 1968/69 1969/70 1970/71 1971/72 1972/73 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 Principal Cereal Crops Wheat 5,812 5,837 5,191 3,701 4,315 4,965 3,958 4,233 5,271 6,428 3,910 4,685 Corn 3,378 3,556 4,017 4,066 3,147 3,565 3,486 3,020 2,766 2,532 2,660 2,800 Grain Sorghum 1,083 1,302 1,872 2,235 1,419 2,131 2,324 1,937 1,834 2,377 2,542 2,044 Oats 516 443 327 300 357 399 395 282 338 383 430 500 Principal Industrial Crops Cotton 282 406 452 367 398 445 474 505 414 518 607 667 Sugarcane 190 195 192 202 243 286 298 293 339 350 343 339 Tobacco 59 54 69 66 68 74 83 88 82 75 65 73 Principal Oil Crops Sunflower 1,054 1,189 1,347 1,313 1,267 1,338 1,190 1,005 1,258 1,233 2,000 1,557 Linseed 616 810 791 834 451 441 390 501 446 674 884 817 4 Peanuts 287 244 210 310 294 379 345 357 309 368 428 392 Soybeans 20 28 26 36 67 157 344 356 434 660 1,150 1,600 Vegetable Crops Potatoes 200 203 188 179 147 117 127 111 108 102 115 100 Sweet Potatoes 41 45 44 42 35 43 33 41 38 36 - _ Dry Beans 38 57 41 61 62 79 108 137 147 187 136 230 Tomatores 20 20 20 24 26 30 34 33 27 29 30 26 Fruit Crops Peaches 29 29 28 29 ... .. 32 34 35 - - - Apples 36 37 38 34 ... ... 39 42 42 - - _ Citrus 87 91 97 99 ... ... 102 103 103 - - Grapes 287 292 290 299 304 299 310 331 339 - - - Note: Crop year, July through June. Source: Central Bank and Junta Nacional de Granos Table 7.4: ARGENTINA - YIELDS OF PRINCIPAL CROPS, 1967-1979 ('000 MT/Ha. harvested) 1967/68 1968/69 1969/70 1970/71 1971/72 1972/73 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 Principal Cereal Crops Wheat 1.26 .98 1.35 1.15 1.32 1.59 1.66 1.41 1.63 1.71 1,36 1.66 Corn 1.94 1.93 2.33 2.44 1.86 2.72 2.84 2.51 2.12 3.28 3.65 3.11 Grain Sorghum 1.75 1.91 2.04 2.09 1.66 2.33 2.54 2.49 2.76 2.78 2.83 3.03 Oats 1.34 1.11 1.30 1.20 1.33 1.42 1.42 1.16 1.28 1,38 1.32 1.35 Principal Industrial Crops Cotton 0.82 0.90 1.01 0.78 0.73 0.90 0.88 1.07 1.07 .99 1.18 0.70 Sugarcane 50.0 54.8 50.5 50.8 53.0 51.5 52.13 53.24 42.21 45.71 39.07 41.59 Tobacco 1.1 1.0 1.0 0.9 1.1 1.0 1.18 1.11 1.2 1.20 1.02 0.96 Principal Oil Crops Sunflower 0.89 0.74 - 0.63 0.64 0.66 0.82 0.73 0.86 0.73 0.80 0.92 Linseed 0.63 0.63 0.81 0.82 0.70 0.75 0.76 0.76 0.85 0.91 0.92 0.73 Peanuts 0.99 0.89 1.11 1.25 0.86 1.16 0.84 1.05 1.09. 1.63 2.11 1.20 Soybeans 1 .09 1.12 1.03 1.58 1.15 1.73 1.44 1.36 1.60 2.12 2.17 2.31 Vegetable Crops Potatoes 9.8 11.5 12.4 10.9 9.1 13.1 17.2 12.2 14.2 16.43 13.85 17.53 Sweet Potatoes 9.2 10.7 10.0 10.8 9.5 11.3 9.0 10.2 9.21 9.17 Dry Beans 0.8 0.6 1.0 1.0 0.9 0.9 1,1 0.8 1.16 0.96 0.98 1.01 Tomatoes 15.8 17.6 17.9 17.1 18.7 16.6 18.3 18.3 18.27 18.23 19.13 19.27 Fruit Crops Peaches 7.7 8.6 8.4 9.6 ... ... 8.3 7.4 8.23 - - _ Apples 13.1 11.8 11.7 12.5 . .. .. . 20.4 14.4 14.0 - - _ Citrus 12.4 14.8 14.7 16.1 ... 15.2 14.4 13.6 - - _ Grapes 8.9 7.3 8.5 9.6 8.6 8.7 11.4 9.4 11.1 - - _ Note: Crop year, July through June Source: Central Bank and Junta de Granos - 124 - Table 8-1 ARGENTINA-.GR7WTH AND STRUCTURE OF VALUE ADDED IN KA.UFACTURING, 1950-1979 ISIC 31 32 33 34 35 36 37 38 39 Total Million 1960 Pesos 1950 502.9 458.1 48.0 105.2 224.8 104.5 43.8 305.4 131,0 1,923.7 1960 574.7 505.1 56.6 122.8 422.5 121.4 117.2 810.1 147.5 2,878.0 1i5 706.3 554.1 73.6 170.5 662.0 154.6 213.7 1,176.3 171.0 3,882.1 1970 881.0 581.4 83.0 217.1 926.5 238.9 289.8 1,549.0 211.1 4,977.9 1974 1,006.6 770.1 94.3 264.5 1,212.9 252.0 427.3 2,254.7 243.6 6,526.0 1975 996.0 804.8 82.4 262.1 1,212.6 253.6 419.2 2,076.8 235.4 6,342.9 1976 998.6 767.8 59.5 243.0 1,204.3 242.1 318.0 1,998.2 227.4 6,058.9 1977 962.3 721.6 52.7 258.2 1,264.9 241.0 364.6 2,215.6 232.8 6,313.7 1978 901.4 655.6 46.3 269.3 1,219.4 244.4 353.0 1,902.0 220.7 5,812.0 1979 919.3 678.9 49.1 300.0 1,352.6 258.1 411.9 2,236.1 245.2 6,451.2 Structure in 7. 1950 26.1 23.8 2.5 5.5 11.7 5.4 2.3 15.9 6.8 100.0' 1960 20.0 17.6 1.8 4.3 14.7 4.2 4.1 28.2 5.1 100.0 1965 18.2 14.3 1.9 4.4 17.1 4.0 5.4 30.3 4.4 100.0 1970 17.7 11.7 1.6 4.5 18.6 4.8 5.8 31.1 4.2 100.0 1974/5 15.6 12.2 1.4 4.1 18.8 3.9 6.6 33.7 3.7 100.0 1976 16.5 12.7 1.0 4.0 19.9 4.0 5.2 33.0 3.7 100.0 1977 15.3 11.4 0.8 4.1 20.0 3.8 5.8 35.1 3.7 100.0 1978 15.5 11.3 0.8 4.6 21.0 4.2 6.1 32.7 3.8 100.0 1979 14.3 10.5 0.8 4.7 21.0 4.0 6.3 34.6 3.8 100.0 Annual Growth in . 1950-60 1.4 1.0 1.7 1.5 6.5 1.5 10.3 10.2 1.2 4.1 1960-65 4.2 1.9 5.4 6.8 9.4 4.9 12.5 7.7 3.0 6.2 1965-70 4.5 1.0 2.4 5.0 6.9 9.1 6.5 5.6 4.3 5.1 1970-75 2.5 6.7 - 3.8 5.5 1.2 7.7 6.0 2.2 5.0 1950-75 2.8 2.3 2.2 3.7 7.0 3.6 9.5 8.0 2.4 4.9 1976 0.3 -4.6 -27.8 -7.3 -0.7 -4.5 -24.1 -3.8 -3.4 -4.5 1977 -3.6 -6.0 -11.5 6.3 5.0 -0,6 14.6 10.9 2.4 4.2 1978 -6.3 -9.1 -12.0 4.2 -3.6 1.4 -3.2 -14.2 -5.2 -7.9 1979 2.1 3.6 5.9 . 11.4 10.6 5.6 16.7 17.6 11.1 11.0 1/ 31 Yood, beverages and tobacco; 32 textiles snd wearing apparel; 33 wood and wood products; 34 paper, printing and publishing; 35 chemicaln, petrolen., rsubber end plastics; 36 noo-metallic minerals; 37 basic metals; 38 metallic prodoots, machinery and transport equipment; 39 other anufacttred goods. Source: Central Bank of Argentina Table 9.1: ARGENTINA - PRINCIPAL PRICE INDICATORS, 1960-1979 Wholesale price index (1960 . 100) Construction Non-agriculture Cost of living index (1974-100) cost General Domestic Total General index agriculture Total Domestic Imported domestic index Food 1960 - 100 1960 100.0 100.0 100.0 100.0 100.0 100.0 3.3 3.7 100.0 1961 108.3 105.8 109.3 110.1 96.8 108.8 3.7 4.1 122.0 1962 141.4 144.9 139.6 140.4 128.7 141.7 4.7 5.2 158.7 1963 181.7 195.8 176.0 177.3 156.9 182.8 5.9 6.5 197.4 1964 229.2 251.1 220.5 223.3 178.6 231.6 7.2 8.2 238.5 1965 284.0 275.0 287.7 291.5 232.4 286.5 9.3 10.5 339.5 1966 340.8 333.5 343.7 348.2 277.9 343.8 12.3 13.1 437.5 1967 428.0 419.6 431.4 434.0 393.0 429.7 15.9 16.9 563.4 1968 469.2 461.1 472.4 475.7 424.4 471.3 18.4 19.6 606.2 1969 497.6 498.2 497.4 499.2 469.9 498.9 19.8 20.8 664.3 1970 567.7 576.7 564.1 565.2 547.8 568.6 22.5 24.2 743.3 1971 791.9 855.1 766.6 772.9 674.4 797.5 30.3 34.3 972.7 1972 1,401.8 1,665.5 1,296.1 1,292.1 1,353.1 1,403.9 48.1 56.0 1,501.0 1973 2,103.4 2,373.0 1,995.2 1,980.8 2,202.8 2,098.2 77.0 86.9 2,584.7 1974 2,524.5 2,610.4 2,490.0 2,453.7 3,014.6 2,500.5 100.0 100.0 3,551.9 1975 7,384.0 6,393.7 7,780.6 7,573.3 10,776.5 7,219.5 270.6 287.7 12,608.0 1976 44,233.7 40,253.4 45,826.9 43,107.3 85,175.3 42,249.9 1,472.2 1,606.8 58,071.1 1977 110,338.0 106,112.3 112,027.8 106,451.8 192,690.8 106,343.5 4,063.7 4,506.4 114,643.3 1977 January 74,276.7 72,949.4 74,805.5 71,367.2 124,540.5 71,837.4 2,570.7 2,856.0 78,381.0 February 79,484.1 77,098.8 80,436.7 76,810.7 132,885.3 76,892.8 2,782.9 3,147.1 82,003.2 March 82,592.5 79,280.0 83,916.4 78,919.1 156,220.1 79,023.0 2,992.9 3,384.1 92,866.0 April 87,337.3 82,950.3 89,091.7 82,760.6 180,703.3 82,812.9 3,172.8 3,522.3 96,587.5 May 92,845.1 90,978.2 93,589.3 87,132.4 187,018.8 88,279.9 3,378.9 3,752.1 97,913.7 June 99,006.7 98,015.4 99.399.8 93,231.8 a..188,643.6 94,659.8 3,637.3 4,122.6 101,715.8 July 104, 653.7 102,702,7 105,431.1 98,790.7 201,509.7 99,953.5 3,904.7 4,374.4 114,473.3 August 117,813.3 115,782.4 118,622.1 112,829.5 202,417.0 113,708.1 4,347.4 4,807.7 125,391.7 September 126,392.6 121,348.2 128,408.8 122,251.2 217,482.6 121,974.0 4,708.1 5,215.1 131,225.0 October 143,494.6 137,652.4 145,829.8 140,268.9 226,252.0 139,477,4 5,296.3 5,839.2 143,356.2 November 154,836.4 145,607.4 158,528.4 152,760.3 241,941.8 150,609.0 5,775.0 6,368.4 152,247.2 December 161,322.3 148,949.4 166,274.0 160,299.2 252,674.6 156,890.1 6,197.2 6,687.3 159.581.9 1978 January 177,845.6 162,145.3 184,130.0 178,361.3 267,535.4 173,493.3 7,024.9 7,355.6 187,024.4 February 187,243.5 165.539.6 195,933.5 190.038.2 281,163.4 182,688.2 7,460.8 7,797.3 192,261.8 March 264,225.5 186,l0d.5 211,47815 205,391.9 299,469.0 199,602.6 8,169.1 8,540.3 204,286.8 April 222,761.7 -- 229,802.3 224,289.7 310.397.1 218,504.3 9,073.7 9,608.0 231,608.8 May -- -- 249,921.1 245,023.9 320,662.2 238,984.0 9,862.3 10,528.1 247,581.6 June 254,407.6 228,679.4 264,707.5 259,504.2 339,872.9 250,255.0 10,502.5 11,149.3 262,447.0 July 266,911.5 238,495.0 278,288.2 273,671.4 344,952.2 263,117.8 11,195,5 11,602.3 275,306.5 August 289,967.6 274,729.4 296,062.0 292,346.4 349,664.6 287,052.5 12,069.6 12,665.3 290,380,1 September 309,322.3 300,309.0 312,921.3 309,720.1 359,064.8 306,883.7 12,841.7 13,532.0 301,944.8 October 340,049.5 339,253.9 340,353.9 337,714.7 378,340.5 338,157.5 14,093.9 14,997.7 319,693.4 November 360,003.5 370,507.8 368,385.0 366,298.3 398.354.0 367,539.5 15,333.3 16,501.7 344,061.6 December 392,502.0 380,838.6 397,159.5 395,696.3 418,080.2 391,223.4 16,722.8 18,046.1 403,302.4 1979 January 431,893.9 409,178,1 440,979.1 440,669.0 445,174.3 431,210.4 18,858.5 20,837.4 432,152.3 February 466,265.8 439,662.6 476,907.3 477,714.9 464,895.1 466,288.6 20,262.1 22,480.6 459,845.8 March 503,841.6 466,587.5 518,749.4 520,359.1 495,102.4 504,221.0 21,832.4 23,988.4 503,982,1 April 536,350.6 491,940.4 554,125.4 554,890.4 542,676.9 536,000.6 23,361.0 25,186,2 551,619.9 May 584,697.1 540,182.4 602,511.7 603,780.8 583,733.4 584,694.1 24,977.7 26,935.4 630.350.7 June 645,995.3 611,247.8 659,893.1 660.737.9 647,219.0 645,874.9 27,399.4 30,050.9 680,728.9 July 694,568.3 667,172.5 705,517.9 707,088.2 682,308.6 695,091.1 29,358.9 31,902,0 752.045.9 August 796,357.8 807,265.1 791,952.9 796,068.0 731,838.1 799,379.3 32,720.5 37,242.2 803,380.8 September 838,183.4 843,879.1 835,864.9 841,086.7 759,696.5 841,877.8 34,960.4 39,482.1 864,736.1 October 847,025.8 793,503.0 868,439.4 872,790.6 804,854.1 848d928.1 36,478.0 39,841.4 911,674.5 November 876,185.0 822,942.7 897,484.9 901,849.1 833,692.7 878,159.9 38.352.7 41.509.9 947,320.7 December 897,591.5 819,361.1 928,904.5 933,623.2 859,958.4 899,339.9 40,090.5 42,917,1 976,007.8 /1 Buenos Aires only Source: INDEC, Ministry of Economy Table 9.2 ARGENTINA - CHANGES IN WHOLESALE AND CONSUMER PRICE INDICES, 1960-1979 Wholesale prices (1960=100) Consumer prices /1 (1974=100) Index Annual % change Index Annual % change Yeaar ear end /2 Average /3 Year end Average Year end /2 Average T Year end Average 1960 100.4 100.0 - - 3.7 3.3 - - 1961 115.9 108.3 15.4 8.3 4.3 3.7 16.2 13.7 1962 165.0 141.4 42.4 30.6 5.6 4.7 30.2 26.1 1963 204.3 181.7 23.8 28.5 6.9 5.9 23.2 26.0 1964 240.6 229.2 17.8 26.1 8.2 7.2 18.8 22.1 1965 308.6 284.0 28.3 23.9 11.3 9.3 37.8 28.6 1966 378.4 340.8 22.6 20.0 14.7 12.3 30.1 31.9 1967 456.3 428.0 20.6 25.6 18.7 15.9 37.2 29.2 1 1968 474.3 469.2 3.9 9.6 20.5 18.4 9.6 16.2 1969 508.9 497.6 7.3 6.1 21.8 19.8 6.3 7.6 X 1970 645.1 567.7 26.8 14.1 26.6 22.5 22.0 13.6 1971 956.0 791.9 48.2 39.5 37.0 30.3 39.1 34.7 1972 1,682.4 1,401.8 76.0 77.0 60.7 48.1 64.1 58.7 1973 2,199.9 2,103.4 30.8 50.0 87.2 77.0 43.7 60.1 1974 2,994.7 2,524.5 36.1 20.0 122.2 100.0 40.1 29.9 1975 13,436.2 7,384.0 348.7 192.5 531.7 270.6 335.1 170.6 1976 65,254.0 44,233.2 385.7 499.0 2,379.6 1,472.2 347.5 444.1 1977 161,322.3 110,338.0 147.2 149.4 6,197.2 4,063.7 160.4 176.0 1978 392,502.0 271,417.7 143.3 146.0 16,722.8 11,195.8 169.8 175.5 1979 897,591.5 676,579.7 128.7 149.3 40,090.5 29,054.3 139.7 159.5 11 Buenos Aires only. /2 From December of the previous year to December of the given year. E3 Average at twelve monthlv rates. Source: INDEC, Ministry of Economy. - 129 - Table 9.3: ARGENTINA - MDNTHLY RATE OF PRICE INCREASES, 1976 - 1979 (% change during period) Wnholesale prices _ Year Cost of General Year Living index Agriculture Non-agriculture Imported 1976 347.5 386.3 456.1 362.5 390.8 January 8.9 19.5 24.4 17.9 18.4 February 19.0 28.6 34.2 26.7 53.1 Marclh 37.6 54.1 32.7 61.9 88.5 April 33.9 26.3 23.6 27.1 22.3 flay 12.1 4.8 2.1 5.5 -0.5 June 2.7 4.7 11.6 2.8 -2.8 July 4.2 6.1 15.6 3.2 1.7 August 5.5 8.0 14.2 5.9 1.9 September 10.6 8.8 13.3 7.2 2.6 October o.5 4.4 3.8 4.7 2.1 4ovember 8.0 6.8 7.1 6.8 2.2 December 14.3 6.5 7.8 6.0 9.3 1977 160.4 147s2 130.5 153.7 127.5 January 8.0 13.8 12.9 14.1 12.1 February 8.3 7.0 5.7 7.5 6.7 March 7.5 3.9 2.8 4.3 17.6 April 6.0 5.7 4.6 6.2 15.7 May 6.5 6.3 9.7 5.0 3.5 June 7.6 6.6 7.7 6.2 0.9 July 7.4 5.7 4.8 6.1 6.8 August 11.3 12.6 12.7 12.5 0.5 September 8.3 7.3 4.8 °.3 7.4 October 12.5 13.5 13.4 13.6 4.n November 9.0 7.9 5.8 8.7 6.9 December 7.3 4.2 2.3 4.9 4.4 1978 169.8 143.3 141.6 147.6 75.9 January 13.4 10.1 8.3 10. -379 February 6.2 5.3 2.0 6.4 5.1 March 9.5 9.0 12.1 7.9 6.5 April 11.1 9.1 10.2 8.7 3.6 May 8.7 9.0 9.7 8.7 3.3 June 6.5 4.8 1.7 5.9 6.0 July 6.6 4.8 4.0 5.1 1.5 August 7.8 8.6 15.1 6.8 1.4 September 6.4 6.7 9.3 5.7 2.7 October 9.8 10.0 13.0 8.8 5.4 November 8.8 8.5 9.2 8.2 5.3 December 9.1 6.4 2.8 7.8 5.0 1979 159.5 128.7 150.7 148.7 93.0 January 12.8 10.0 7.2 11.0 6.5 February 7.4 8.0 7.4 8.1 4.4 March 7.7 8.1 6.1 8.8 6.5 April 7.0 6.5 5.4 6.8 9.6 May 6.9 9.0 9.8 8.7 7.6 June 9.7 10.5 13.2 9.5 10.9 July 7.2 7.5 9.1 6.9 5.4 August 11.5 14.7 21.0 12.3 7.3 September 6.8 5.2 4.5 5.5 3.8 October 4.3 1.2 -6.0 3.9 5.9 November 5.1 3.4 3.7 3.3 3.6 December 4.5 2.4 -0.4 3.5 3.2 Source: INDEC, Ministry of Economy Table 9.4: ARGENTINA - PRICE MSOVEMENT OF MAJOR GROUPS INCLUDED IN TIlE WHOLESALE PRICE INDEX, 1979 (Percen-age change fran preious period) W7I WeiRht Ja. Feb. Mar. Apr. May June July Aag. Sept. Oct. Nec. Dec, Siple A-er ge Sifple Aver-g. J n.ery.Aueagt Sept. /Dec. G--erel lade- too 10.0 S.O B.1 6.5 9.0 10.5 7.5 14.7 5.3 1.1 3.4 2.4 9.3 3.1 D--eetic GCods 10.2 8.1 8.1 6.3 9.1 10.5 7.6 15.0 5.3 0.8 3.4 2.4 9.4 3.0 Donletic Aartcalt-re 26.5 7.4 7.5 6.1 5.4 9.8 13.2 9.1 21.0 4.5 -6.0 3.7 _0.4 9.9 0.5 Doa8ttic Non-Agriuilt-re 68.7 11.3 8.4 8.9 6.6 8.8 9.4 7.0 12.6 5.7 3.8 3.3 3.5 9.1 4.1 FPod nod Beverages 19.4 14.0 10.8 8.2 5.6 10.9 11.8 6.2 19.4 1.7 -1.0 0.4 2.6 10.9 0.9 Tnbacco 1.6 13.6 3.4 3.9 9.9 37.0 7 1 2.0 4.2 3.2 2.4 1.0 0.9 10.1 1.9 Tetil-e 9.1 8.9 4.5 6.9 8.4 8.2 9.3 8.7 8.3 8.7 6.1 3.6 3.0 7.9 5.4 Clothf.g 5.0 9.5 5.7 12.1 8.9 4,7 7.7 5.8 11.7 5.9 7.9 3.9 4.6 8.3 5.6 WUnd 3.0 7.2 6.9 10.5 9.2 7,2 20.0 18.1 9.4 14.2 11.3 9.1 7.9 10.1 10.6 Paper 1.5 10.9 8.9 8.0 5.9 8.7 7.7 9.9 11.6 13.1 10.0 4.7 3.1 9.0 7.7 Chmicals 4.9 8.1 9.5 5.4 5.7 6,5 7.1 6.2 8.4 10.0 6.2 7.4 5.6 7.1 7.3 Oil Products 2.7 4.9 6.6 5.6 4.6 4.9 4.9 4.0 4.7 6.6 5.6 5.4 4.9 5.0 5.6 Robber .9 4.4 10.2 9.8 4.9 10.9 5.4 7.6 7.3 11.0 8.3 4.8 4.7 7.6 7.2 Leather 2.2 13.4 15.1 22.8 9.9 6.7 2.7 1.9 3.6 8.7 2.1 3.2 2.5 9.5 4.1 on-Mietalic mlinre-ls 2.7 10.7 5.7 7.6 7.1 7.3 n.1 14.1 8.3 9.4 0.7 7.5 5.2 8.6 7.7 Metal, en... MHahi-"ry I 6.2 11.1 4.6 7.1 6.4 7.9 7.3 9.0 7.1 11.5 7.0 S.l 3.9 7.6 6.9 Vehicles and }hchinery, nedc. elect. 5.8 7.9 7.5 9.5 6.1 8.4 8.8 5.6 5.9 8.6 10.8 6.9 2.2 7.4 7.1 Ele-tric Machine-y 2.5 10.5 6.6 7.9 5.6 9,9 6.7 7.5 10.7 7.9 5.1 4.8 6.8 7.7 6.2 Entra-ti-e I.dnetry 1.2 19.8 3.9 7.4 6.1 .6 5.4 17.8 3.9 4.0 11.9 6.1 2.5 8.1 6.1 Itapodtad Goodt. NIo-Aacicaitare 4.8 6.5 4.4 6.5 9.6 7.4 10.9 5.4 7.3 3.8 5.9 3.6 3.2 7.3 4.1 Source: wholes1.e Price Index, INDEC. Xv~~~~~~~~~~~~~~ 3 sea v a Q¢ \gggs NU N= - - - a3 am o _a _o,A_Oa gg g _N g -= 0ot10gg 2 a b- oNNzOi