CURRENT INTELLIGENCE WEEKLY SUMMARY 30 JUNE 1978[SANITIZED] - 1978/06/30

• Document Type: SPECIALCOLLECTION
• Collection: Argentina Declassification Project - The "Dirty War" (1976-83)
• Document Number (FOIA) /ESDN (CREST): 06749091
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 18
• Document Creation Date: April 3, 2019
• Document Release Date: April 12, 2019
• Publication Date: June 30, 1978

3.5(c)
National
Foreign
Assessment
Center
Approved for Release: 2018/09/17 C06749091
5e.tr
Current Intelligence
Weekly Summary
30 June 1978
Approved for Release: 2018/09/17 C06749091
S t
3.5(c)
EO 13526 3.5(c)
NR
CG CIWS 78-026
30 June 1978
Copy N2 68
3.5(c)
Approved for Release: 2018/09/17 C06749091
I
The WEEKLY SUMMARY, issued every Friday morning by the
Current Reporting Group, reports and analyzes significant
developments of the week through noon on Thursday. It ire-
quently includes material coordinated with or prepared by the
Office of Regional and Political Analysis, the Office of F()-
nomic Research, the Office of Strategic Research, the Offic.: .3f
Scientific Intelligence, the Office of Weapons
and the Office of Geographir and Cartographic Resec;!.!-I.
Warning Notice
Sensitive Intelligence Sources and Methods Involved
(WNINTEL)
NATIONAL SECURITY INFORMATION
Unauthorized Disclosure Subject to Criminal Sanctions
3.5(c)
CONTENTS
,-.--':',-,. National
�1.. .
r--- s: Foreign
Assessment
Center
.30 Juni NT8
13 Argentina: Economic Outlook
3.5(c)
Comments aml queries on the contents of
this publication are welcome They may be
directed to the editor of the Weekly. tele-
phone:
Approved for Release: 2018/09/17 C06749091
NR
Approved for Release: 2018/09/17 C06749091
Approved for Release: 2018/09/17 C06749091
NR
Approved for Release: 2018/09/17 C06749091
Approved for Release: 2018/09/17 C06749091
NR
Approved for Release: 2018/09/17 C06749091
Approved for Release: 2018/09/17 C06749091
NR
Approved for Release: 2018/09/17 C06749091
Approved for Release: 2018/09/17 C06749091
NR
Approved for Release: 2018/09/17 C06749091
Approved for Release: 2018/09/17 C06749091
NR
Approved for Release: 2018/09/17 C06749091
Approved for Release: 2018/09/17 C06749091
NR
Approved for Release: 2018/09/17 C06749091
Approved for Release: 2018/09/17 C06749091
NR
Approved for Release: 2018/09/17 C06749091
Approved for Release: 2018/09/17 C06749091
NR
Approved for Release: 2018/09/17 C06749091
Approved for Release: 2018/09/17 C06749091
NR
Approved for Release: 2018/09/17 C06749091
Approved for Release: 2018/09/17 C06749091
NR
Approved for Release: 2018/09/17 C06749091
Approved for Release: 2018/09/17 C06749091
NR
Approved for Release: 2018/09/17 C06749091
Approved for Release: 2018/09/17 C06749091
NR
NR
3.5(c)
Approved for Release: 2018/09/17 C06749091
11/>11111WV-
3.5(c)
The economic strategy of the Argentine
military government is faltering, and the
country may fall back into the pattern of
fluctuating economic policies that has
plagued it since the 1930s. Economic
stagnation and lack of progress in the anti-
inflation drive have weakened the position
of Minister of Economy Martinez de Hoz,
who has been instrumental in implement-
ing the military junta's economic reform
program.
The junta, which overturned the Peron
government in March 1976, faced eco-
nomic and financial problems unparalleled
in Argentina's history. The economy was
Argentina: Economic Outlook
in chaos, with foreign exchange reserves
practically exhausted and the country on
the verge of defaulting on its foreign debt.
Soaring wages and a swollen government
deficit had pushed inflation close to a 750-
percent annual rate. Import restrictions
and sporadic price controls had induced a
steep decline in production.
The junta instituted an economic re-
form program that touched nearly every
aspect of the economy: most price controls
were lifted; wages were controlled and
activities of labor unions sharply curtailed;
the government's involvement in the
economy was reduced; trade restrictions
were cased; and controls over interest rates
were removed. Loans totaling $1 billion
Page 13
WEEKLY SUMMARY
from the International Monetary Fund
and commercial banks helped to restruc-
ture the foreign debt, and good weather
and agricultural incentives yielded a
bumper export crop to make economic
prospects even brighter.
By the end of 1977, 21 months after
assuming power, the junta had:
� Achieved a trade surplus half again
as large as thc $1 billion deficit it
inherited.
� Raised reserves to a level equal to a
year's imports.
� Sharply cut the budget deficit.
� Lowered the 12-month inflation
rate to 175 percent.
30 June 78
Approved for Release: 2018/09/17 C06749091
3.5(c)
Approved for Release: 2018/09/17 C06749091
opecci
� Reversed two years of decline in
gross domestic product�which grew
by 4.4 percent in 1977.
The recovery, however, was fragile
because it was based on a bumper year for
agricultural exports and a spurt in invest-
ment spending. At the end of 1977, real
incomes and purchasing power were still
below the 1975 level.
A Blow to the Recovery Program
The economy performed dismally in the
first quarter of 1978. National output,
registering its first quarterly drop since
mid-1976, declined by 7.2 percent com-
pared with the first quarter in 1977.
Production fell off in all sectors except
construction. Agriculture�plagued by
unfavorable weather and low world wheat
prices�was down 7 percent. Manufactur-
ing�hobbled by the public's continuing
low purchasing power and lower demand
from the farm sector�fell 11.5 percent.
Despite the drop in production, the
government has failed to make headway in
contolling triple-digit inflation�its top
priority in 1978. The consumer price index
increased by a discouraging 46 percent in
the first four months, above last year's 41
percent for the same period. The inflation-
ary spurt was attributable largely to a
rapid rise in the money supply, increased
public utility rates, and inflationary expec-
tations in the private sector that contri-
buted to price rises.
Government Reaction
The government responded quickly once
the first quarter results were in. To
counter inflation, import tariffs on prod-
ucts that have experienced sharp price
rises will be reduced and government
operations in the foreign exchange market
to control "minidevaluations" of the peso
will be halted. In addition, local currency
deposits will be required against foreign
loans to minimize the impact of foreign
capital inflows on the money supply.
To counter the recession, the govern-
ment plans to increase the purchasing
SECRtT
power of farmers, small businessmen, and
households with credit on more favorable
terms, to lower bank reserve requirements,
to facilitate the importation of industrial
materials and equipment, and to keep
tariffs at a minimum. Special legislation is
being prepared to stimulate Argentina's
important automotive industry, which has
been especially hard hit by the recession.
Prospects
The economy probably will begin to
pick up by the end of the second quarter or
early in the third; the new economic
measures should slow the recession and the
inflation rate. An unexpectedly good
harvest of coarse grains will improve
agriculture's performance for the year and
help to sustain farmers' purchasing power.
The recent World Cup soccer matches
attracted many visitors and stimulated
spending, although less than the event's
planners had expected.
Economic growth for the year, however,
will likely be less than I percent and may
even be negative. Moreover, the high
inflation rate of the first four months will
make it difficult for the government to
hold annual inflation below 150 percent,
much less reach the official two-digit goal.
During the past several months, opposi-
tion to Martinez de Hoz and his policies
has been widespread, especially among
workers and small businessmen caught in
the stagflation squeeze. Even highly
placed officials�among them junta mem-
ber Admiral Massera�have openly criti-
cized the Minister. For the time being,
however, he continues to enjoy the support
of President Videla and most of the Army,
the most influential of the armed services.
3.5(c)
Page 14
Happy soccer crowds In Buenos Aires
WEEKLY Sp....gargi- 30 June 78
Approved for Release: 2018/09/17 C06749091
Approved for Release: 2018/09/17 C06749091
Approved for Release: 2018/09/17 C06749091
NR
Approved for Release: 2018/09/17 C06749091
Approved for Release: 2018/09/17 C06749091
NR