ECONOMIC INTELLIGENCE WEEKLY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79B00457A000100090003-1
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 19
• Document Creation Date: December 12, 2016
• Document Release Date: January 8, 2002
• Sequence Number: 3
• Publication Date: August 4, 1977
• Content Type: REPORT

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Secret
Economic Intelligence Weekly
Secret
ER EIW 77-031
4 August 1977
N2 586
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Warning Notice
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(WNINTEL)
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of E.O. 11652, exemption category:
?5B(1), (2), and (3)
Automatically declassified on:
date impossible to determine
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Noforn-Nocon tract
4 August 1977
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Jamaica's Foreign Financial Situation: Touch and Go . . . . . . . . . . . 4
Prime Minister Manley's government can probably cope with the financial
gap through 1977, if it can stick to the austerity conditions imposed under
last month's agreement with the IMF.
World Tin Agreement: A Model of Ineffectiveness . . . . . . . . . . . . . 10
The inability of the International Tin Council to adjust supplies and main-
tain prices within the recently negotiated ceiling highlights the ineffec-
tiveness of this particular agreement.
Cocoa Prices: Easing from Last Month's Peak . . . . . . . . . . . . . . . 12
While down from last month's record high, cocoa prices should remain
strong over the next 12 months because of low stocks and prospects for a
mediocre 1977/78 bean crop.
Notes
USSR: Grain Purchases Mount . . . . . . . . . . . . . . . . . . 16
UNCTAD Sugar Conference To Reconvene . . . . . . . . . . . . . 16
i
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JAMAICA'S FOREIGN FINANCIAL SITUATION:
TOUCH AND GO
Despite a :narrowing of its foreign financial gap* this year, Jamaica faces serious
payments difficulties that are only now beginning to ease. The improvement has
followed the securing of an IMF standby credit in mid-July, conditioned on a
further tightening of an already harsh austerity program. The IMF commitment has
paved the way for the left-leaning government of Prime Minister Michael Manley to
obtain additional foreign funds. Kingston has succeeded in obtaining and/or is
negotiating a patchwork of financing that probably will cover the financial gap and
meet esser;tial short-term foreign obligations this year.
Dom;stic political and economic pressures could still upset this progress. The
new austerity, which comes on top of import cuts and other restrictive measures
slapped on in tie past two years, could cut real GNP another 4 percent in 1977 and
further boost the already high inflation and unemployment rates. The result almost
*This article is the eighth in a series on the foreign financial gap faced by individual LDCs. In these articles,
financial gap is defi ned as the current account deficit plus amortization of medium and long-term debt; shifts in
short-term capital are not included. Previous articles have covered the Philippines, South Korea,
Argentina, B ?azil, T iiwan, and Peru.
4 August 1977
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certainly will be further loss of popularity for Manley, whose own supporters have
begun to criticize his handling of the economy. In these circumstances, Manley may
be strongly tempted to take advantage of the greater availability of foreign financing
to increase imports and otherwise to relax austerity measures-a step that would
jeopardize the IMF agreement and could put Jamaica back on square one.
Good Times Followed by Slump
Spurred by substantial direct foreign investment in bauxite and tourism,
Jamaica enjoyed steady economic growth for the decade before Manley's election in
1972. The economy then began to slip because of the deterioration in investor
confidence, which was later intensified by Manley's accelerated leftward drift.
Investor fears were justified in 1974 when Manley, prompted by higher oil prices,
imposed a 600-percent increase in taxes on bauxite (produced mostly by US
aluminum companies) and demanded a small equity share in their Jamaican
operations. Jamaica is the source of 37 percent of US bauxite/alumina supplies.
Jamaica initially benefited from the $145 million tax hike. Higher bauxite
returns-along with record sugar prices-contributed to a near doubling of export
earnings and partly fi- Jamaica: Economic Indicators
nanced a jump in pub-
Real GDP Growth Foreign Reserves
lic works expenditures.
Million US $, Yearend
Percent
5.6 0.6
240
During 1975-76, how-
ever, Jamaica's foreign 175 115
financial gap trebled to LIJ
a record $351 million. 3
Weak world demand
20
had reduced bauxite
shipments; tourism
earnings had been hit
Unemployment Rate
Infiation Rate
by violent crime; and a
Percent Percent
27
drop in world prices 30 32
had cut sugar export 10 22 22
earnings by nearly 21 21 17 two-thirds. Kingston
was unable to cover
the gap because capital
flight and the loss of 1173 1074 1075 1970' 1977
Government Expenditures and Revenues
Bauxite Production
direct investment part-
Million US $
Thousand Tons
ly offset increased bor- 15.320 15,000 Efipendlture6 1,364
-11 e6 1,26fi
. Al- , 13,600 , n n 11 6nuxne66ere 1n74
abroad.
rowing
the Manley
government dipped
1672
1. Efitinleted
2. Preieoted
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heavily into the short-term money market, it still had to draw against foreign re-
serves; it 'urthc,r weakened its credit rating by delays in servicing private debts.
To limit inflationary pressures resulting from a spurt in government spending,
Kingston in 1975 greatly increased personal income and property taxes and
instituted stringent controls on private credit. Austerity measures were intensified
last year through the imposition of import restrictions and foreign exchange controls
to contain the financial gap. The result was a 6-percent decline in real GNP following
the 2-perc;nt drop in 1975; unemployment climbed to about 30 percent of the
labor force. Costly strikes, rising violent crime, and increasing leftist influence in the
government con :ributed further to the malaise.
Tightened 1'ayrn ants Bind in 1977
The foreign, financial gap has been narrowing in 1977 as a result of a substantial
current ac:ounl improvement. Even so, Jamaica's inability to secure sufficient
financing i o corer the gap and to meet heavy amortization obligations on past
short-term borrowing precipitated a payments crisis by mid-year. Export earnings
will likely increase about $126 million (19 percent) in 1977, mainly because
recovery o "the world aluminum industry will boost demand for Jamaica's bauxite
and alumina. Strict foreign exchange controls on private transfers and reduced
imports will allow a substantial improvement in the services deficit despite higher
interest payments and a probable further decline in tourism. Additional austerity
measures irnposcd in January should slash imports 11 percent below 1976, to $718
million ($325 million on a c.i.f. basis). These measures included strict foreign
exchange controls, direct import curbs, increased personal income taxes, and a
temporary wage, price freeze.
Reduced capital inflows severely strained Jamaica's ability to cover the $108
million financial gap and to meet net short-term debt service obligations of $250
million. The country faced a 50-percent cut in medium- and long-term capital
receipts, lo $121 million in 1977, largely because its extremely weak
creditworthiness had severely limited new commercial borrowing. Most of the credit
promised att that time was from official sources, including $30 million from the US
Government this year. Direct investment inflows remained nil. As matters stood
before the IMF agreement, Jamaica still had to find as much as $237 million to
cover this year's payments needs. Gross foreign exchange holdings were down to
about $20 rnillicn-less than two weeks' import cover-and provided little cushion.
The IMF Agreement and Financial Impact
In try: ng to: cope with the payments difficulties, Manley followed the advice of
political moderates and accepted a $75 million loan from the IMF in mid-July-a
move he had earlier scorned. About $35 million of the loan is scheduled to be
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disbursed this year. The IMF loan is tied to additional belt-tightening, including an
immediate cut in government spending by 8 percent and a more austere wage policy.
The IMF dropped demands for an immediate unification of the present dual foreign
exchange rates. Instead, Jamaica's compliance with IMF performance criteria will be
reviewed in the coming months to decide if the coverage of the recent 38-percent
devaluation for tourist and some commercial transactions needs to be extended to
curb imports. At the same time, the IMF has eased Jamaica's financial squeeze by
postponing repayments due this year on $27 million in compensatory financing and
oil facility loans. The IMF also has allowed Jamaica to delay repayment of $67
million in private debts at least until next year without jeopardizing the standby
agreement.
The IMF agreement has paved the way for a patchwork of additional foreign
financing that we believe probably will cover this year's payments needs if imports
are limited to the present target.
? Jamaica has reached preliminary agreement with the aluminum
companies for immediate prepayment of at least $40 million in first
quarter 1978 bauxite tax liabilities as part of an arrangement covering the
next two years.
? Canada is considering the provision of an additional $20 million in
commodity grants, most of which will be available in 1977.
? Ottawa also is considering the conversion of $25 million in short-term
credits to longer term loans.
? Manley probably can count on as much as $20 million in additional
loans from Venezuela.
? Trinidad has offered $45 million in export financing, although only part
can be drawn in 1977.
? The Netherlands has pledged loans of $10 million.
? Some additional financing from other official sources such as West
Germany may still be worked out.
We expect that this financing will cover Jamaica's financial gap in
1977 as follows:
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Before IMF Loan After IMF Loan
Financial gap -$108 million -$96 million ($12 million in Canadian grants)
Medium- rnd $121 million $159 million ($38 million in official loans)
long-ten n
receipts
Net short term -$250 million -$56 million ($27 million in debt relief and
obligati( ns $35 million in new loans from the
IMF, $67 million in prospective
repayment delays on private loans,
$25 million in Canadian debt roll-
overs, and $40 million in bauxite
tax prepayments)
Deficit or -$237 million $7 million
surplus
Domestic I epercussions
Tightened austerity is having a serious impact on the Jamaican economy this
year. The import reduction now projected probably would cut real GNP another 4
percent, to roughly 88 percent of the 1974 level. Manley will likely suffer a further
erosion in publi,; support as the unemployment rate is pushed above 30 percent of
the labor force, inflation accelerates, and basic goods-including drought-afflicted
domestic food stocks--remain in short supply. Jamaican businessmen are protesting
that inventories are being exhausted under the current import ceiling, resulting in
the closure of retail and manufacturing operations and in black markets for some
import items. Moreover, pressures from militant unions for wage increases are
mounting in th,- wake of a strike in June at Jamaica's only oil refinery. In an
unpreceder ted fiction, the National Workers Union-the trade union based of
Manley's party-has begun to criticize the government for its handling of the
economy.
In these circumstances, Manley will be strongly tempted to take advantage of
the recent improvement in the financial outlook by relaxing import restrictions, thus
risking violatior. of IMF guidelines. Should imports be increased substantially
beyond the present target level, they must be matched by a corresponding rise in
foreign fina ncinl; if IMF conditions are to be honored. Since sufficient new financing
seems unlikely at this point, a loosening in import restrictions could trigger IMF
demands for a full devaluation and/or deeper cuts in major public works programs at
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Jamaica: Foreign Financial Gap
1973
1974
1975
19761
19772
Exports, f.o.b.
393
754
808
672
798
Imports, f.o.b.
-570
-811
-970
-808
-718
Net services and
transfers
-71
-35
-91
-166
-101
Current account balance
-248
-92
-253
-302
-21
Debt amortization3
-17
-23
-32
-49
-75
Financial gap
-265
-115
-285
-351
-96
Medium- and long-term
capital inflows
223
249
206
238
159
Official borrowing
54
122
153
134
149
Direct investment
75
23
0
0
0
Other private inflows
94
104.
53
104
10
Net short-term capital
and errors and ommissions
12
-64
-1
-32
-56
Change in reserves
-30
70
-80
-145
74
External public debt
yearend
306
474
632
649
611
Debt service ratio (public
medium- and long-term)
7
7
9
14
15
4Based on financing now contracted or being negotiated, including small
disbursements on Trinidad's loan and prepayment of the first quarter 1978
bauxite levy.
1 Provisional.
2Projected.
3 Public and publicly guaranteed medium- and long-term debt.
the initial performance review in October. Failure to comply could jeopardize the
standby agreement and, in turn, the financial patchwork so carefully being worked
out.
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Even if Jamaica weathers the present crisis, the economy faces a bleak outlook
over the next few years. Although continuing recovery of the world aluminum
industry sb.oulc allow earnings from bauxite/alumina to increase, imports will have
to be kept under tight control at the cost of continued sluggish economic
performance. Poor prospects for other major exports and tourism as well as higher
debt service p iyments will prolong the financial gap. Substantial new foreign
financing will be needed to cover the gap and permit Jamaica to resume servicing
private debts nc,w in arrears.
Abili ::y to attract new capital will remain limited. Manley almost certainly will
continue io rely on Western industrial nations as the best source of funds. At the
same time, Kinston probably will continue to probe for closer ties with Cuba and
the USSR, despite poor prospects for large-scale financial assistance from these
sources.
Manley's lope that recent contract settlements with the aluminum companies
will lead to renewed investment is ill-founded; the unsettled political situation
almost ceitainlir will keep the investment climate Poor.
The
companies also have balked at Jamaica's request that they resume investment as a
condition for including bauxite transactions under the devaluation. Unless Kingston
over the next few years can sustain foreign borrowing far beyond the meager levels
warranted by its credit rating, pressures for a new bauxite tax hike will mount. The
alternative coul I be increasing violence, strikes, and emigration of Jamaica's middle
class. (Confidential)
Tin ;)rice, are expected to remain well above the ceiling recently established
under the Intcrnational Tin Agreement and could set a new high later this year
because cif lagging production and depleted buffer stocks. The inability of the
International Tin Council (ITC) to adjust supplies and to arrest spiraling prices
highlights the ineffectiveness of the agreement.
Prices Push Upward
Unlike most industrial commodity prices, which have weakened in the face of
sluggish d,mani and large inventories, tin prices have continued on an upward path
in 1977. From 1 January to 8 March, the price on the London Metal Exchange
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(LME) jumped 22 percent to a record $4.99 a pound. A leading factor in the runup
was the January announcement that the Tin Council's buffer stock holdings had
been exhausted.
Subsequent rumors that the US administration might support a bill to
authorize the sale this year of 30,500 tons from US stockpiles temporarily weakened
prices; US disposals last year amounted to 3,600 tons out of an authorization of
6,000 tons. By the end of March, the LME price had fallen to about $4.00 a pound.
The weakness proved short lived as the LME price rebounded to its earlier record
high of $4.99 by the end of July. The Penang price, which governs ITC buffer stock
adjustments, simultaneously reached $4.84 per pound, 30 cents above the ceiling
just set by the ITC.
Supply Prospects Spur Prices
A poor supply outlook is the key factor underpinning high prices this year. We
estimate the 1977 tin supply shortfall at about 26,000 tons, compared with the
23,000-ton deficit in 1976. Although demand for tin is expected to grow only 3
percent this year, production is likely to rise even more slowly.
Unlike 1976-when the deficit was offset by the sale of some 20,000 tons from
the ITC buffer stock and the 3,600 tons from US stockpiles-no large stocks are so
far available to cover the 1977 shortage. ITC buffer stocks are exhausted, and the
US stockpile is currently authorized to sell only about 2,000 tons from its tin stocks
in 1977.
The lag in tin production results not from a lack of smelter capacity but
rather from difficulties in expanding mine output. World tin smelters are currently
operating between 65 percent and 70 percent of capacity, leaving at least 60,000
tons of capacity idle.
Government taxing and licensing practices in major producing countries have
blunted new investment in mining and have discouraged many small mining firms
from reentering the market, despite higher prices. In Malaysia, the world's largest
producer, the number of small firms declined one-fourth between 1974 and
mid-1977. Licensing restrictions by individual Malaysian states have retarded the
number of new large-scale dredging operations. Levies on dredge operations have
tripled since 1972 and now exceed 40 percent of production costs.
In Bolivia, the highest cost tin producer, the burden of taxes and royalties is an
even greater deterrent to investment. Including taxes and royalties, Bolivian
production costs in most cases exceed the floor price set by the ITC.
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ITC Requests Assistance
An ITC of:Icial recently took the unusual step of requesting the release of large
quantities of U3 stockpiled tin directly to the market. Even producer members of
the Counc1 prcbably would welcome substantial direct stockpile releases this year
to assure to continued participation of consumer members in the agreement. They
view the prospe;tive US pledge of 5,000 tons to the ITC buffer stock as insufficient
by itself to dampen prices.
Other actions taken by the ITC are unlikely to have an impact over the short
run. These include the recent admonitions aimed at producing countries to spur
investment in tin mining by revising their burdensome taxes. Both Bolivia and
Malaysia have indicated intentions to move in this direction, but, even if they adopt
such actions, it would be at least early 1978 before output was affected.
Implications for Other Commodity Agreements
The demonstrated inability of the Tin Agreement to protect the interests of
consumer members could have an adverse effect on negotiations underway on other
internatioral cc mmodity arrangements. Sometimes cited as a model commodity
arrangement, the Tin Agreement has helped to shape the format of discussions for
commodity agrc ements such as rubber and copper. The tin format has already been
adopted for the International Cocoa Agreement.
Consultations on the UNCTAD-sponsored commodity agreement in rubber will
be resumed in October, and consuming countries already are voicing concern about
the ability of the proposed rubber buffer stock to control prices. Other agreements
in the offing am likely to face similar questioning by consumers. (Unclassified)
COCOA PRICES: EASING FROM LAST MONTH'S PEAK
World cocoa prices appear to be edging off from last month's record high levels.
Consumption citbacks, already under way as users find substitutes for high-priced
cocoa, wilt exe:?t gradually increasing downward pressure on price. However, low
stocks and prospects for a mediocre 1977/78 crop should keep prices relatively
strong over the next 12 months. Cocoa prices will continue to far exceed the ceiling
negotiated under the International Cocoa Agreement.
Spot price,, for Bahia cocoa reached a record $2.48 per pound on 18 July-an
increase oi' 25 percent since late June and more than double the level of July 1976.
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Although prices have subsequently eased, they are still four times as high as the
55-cent ceiling price of the currently meaningless International Cocoa Agreement.
Consumption Off
Consumption of cocoa
has traditionally been meas-
ured in terms of cocoa grind
actually consumed in the form
of many diverse products man-
ufactured from the three bean
grind derivatives-cocoa pow-
age of consumption since its
uses include confectionary
items, candies, puddings, and
Cocoa: World Stocks and Prices
Thousand Tons C Per Pound
1000
ann
E Through 28 Jul /A
200
180
800
160
700
Ending Stocks
140
600
(1 Oct)
120
500
A
100
200
40
100
20
0
11 Jill
0
beverage flavorings. Due to the 1965 66 67 68 69 70 71 72 73 74 75 76 77
nature of the end products of 573599 8-77
cocoa manufacture, sugar is a
key complementary in-
gredient.
Statistics of cocoa bean grind indicate a substantial reduction in worldwide
consumption during second quarter 1977. The largest cocoa bean importer, the
Importer Cocoa Grindings
World
Total
United
States
West
Germany
USSR
Nether-
lands
United
Kingdom
1970
1,357
266
126
102
115
82
1971
1,438
279
133
110
121
84
1972
1,566
289
139
132
124
98
1973
1,557
278
152
134
123
107
1974
1,477
230
138
143
115
93
1975
1,445
208
139
150
119
73
1976
1,503
230
137
126
127
83
1977'
1,396
205
134
85
120
79
1International Cocoa Organization forecast.
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United Sta~es, showed a 15-percent decline over the comparable 1976 period.
Grindings were also down by more than 5 percent in the United Kingdom, France,
and West C ermany, while grindings in the Netherlands were unchanged. Recent data
on Soviet grindings are unavailable, but USSR imports in 1976 were 16 percent
below 19'5. T:ie Soviet representative to the International Cocoa Organization
forecast a.13-percent reduction in grindings for 1977.
Retail prica,s for cocoa products generally lag six months behind bean prices
due to the additional manufacturing required. Current retail prices, which reflect
bean costs of atout $:1.80 per pound, have also been dampened by the low price for
sugar. Still, a recent European cocoa manufacturing industry study shows a
25-percent decline in cocoa products consumption. This decline will gradually be
reflected jr reduced cocoa grindings and a lower demand for cocoa beans.
Supplies Continue Tight.
World cocc a production for the 1976/77 season (October through September)
is estimated at 1.37 million tons-a decline of 9 percent from last season's crop.
Production in Ghana and Nigeria, traditionally the world's largest producers, is off
18 percent Bra;;ilian production is down 8 percent, a result of cocoa pod rot, while
production has increased only slightly in the Ivory Coast. Current bean stocks are
now equal to three months' consumption, compared with a normal four to five
months' su ply and the record low of 2.6 months' supply hit in 1974.
Although weather problems have affected the crops in Ghana and Nigeria,
the declim is :vainly attributable to the poor incentives provided. Very little
effort has been made to increase yields and acreage or combat disease in these
countries, largely because the price received by producers is far below the world
price. When the world price was $1.85 per pound in early 1977, prices received by
producers were as follows: Ghana, $0.39; Nigeria, $0.43; Brazil, $0.85; and the
Ivory Coas,, $ 1.,)0.
Beyond these basic supply factors, temporary supply difficulties contributed to
last month's price spurt. Available cocoa supplies for importers have been reduced
due to shipment problems from the three African producers. Rumors of poor crop
prospects in coining months due to drought in Africa and pod rot in Brazil have
accentuateil the record price climb.
We esti.mat,, that world production for the 1977/78 season will show no major
improvement: (a) drought in Ghana threatens to add further to the gradual decline
in that country' 3 production; (b) production in Nigeria is not likely to increase even
with favorable weather conditions; and (c) production in Brazil and the Ivory Coast
should imfrove considerably with favorable weather. World production should range
between 1.35 m Ilion and 1.44 million tons.
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Cocoa Production
World
Total
Ghana
Brazil
Ivory
Coast
Nigeria
1969/70
1,435
416
201
181
223
1970/71
1,498
392
182
180
308
1971/72
1,582
464
167
226
255
1972/73
1,398
418
162
181
241
1973/74
1,446
350
246
209
215
1974/75
1,546
377
273
242
214
1975/76
1,510
397
258
231
216
1976/77'
1,370
325
237
235
175
1977/782
1,400
310
250
240
175
2 Forecast.
We believe prices have already peaked unless Africa's main crop continues to
deteriorate this fall. Consumption has dropped and will decline further. Although
cocoa prices should continue at relatively high levels for the next 12 to 18 months,
the decline in consumption ultimately will become the dominant price-determining
factor. The escalation of cocoa prices has encouraged use of substitute products,
many of which will hold their larger market shares after the price of cocoa declines.
Implications for the Cocoa Agreement
The International Cocoa Agreement of 1976, like many existing agricultural
commodity agreements, has resulted in little more than an increased flow of
statistics. It has not fulfilled its intentions of stabilizing cocoa prices, largely because
prices have always been above the negotiated ceiling. The agreement has set up a
substantial fund for the purchase of buffer stocks-useful only if prices ever descend
to the floor level. This does not seem a likely prospect, since cocoa prices are far
above the agreement ceiling of 55 cents per pound. Even though the ceiling price
will probably be negotiated upward in September to a level of approximately 80
cents, cocoa prices are not likely to descend to this range in the next 15 months.
The International Cocoa Agreement-to which the United States is not a party-will
continue to be ineffective in defending consumer interests. (Confidential)
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' Preliminary.
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USSR: Gr iin Pi irchases Mount
Recent purchases of Canadian and Australian wheat and a scheduled repayment
in kind of a wheat loan to India could bring total Soviet grain acquisitions so far this
year to 14 million tons. This is a large amount considering that Soviet grain
prospects appe-,.r to be excellent for the second year in a row. However, with world
grain price s low, the USSR can buy and store extra grain as a hedge against future
crop failures.
During last week's visit to Canada by the Soviet Chairman of Eksportkhleb,
Moscow boughi: 1.7 million tons of spring and durum wheat, reportedly for delivery
in first half 1978. Last Monday, the Australian Wheat Board sold 450,000 tons of
wheat to tie Soviets for delivery during January to November 1978.
Market sources still contend that in June Moscow bought 6 million to 10
million tons of optional origin wheat and corn, most of which will come from the
United States. These amounts have not appeared in USDA's weekly tabulation of
grain export sales. Although US grain companies are required to report by law, their
foreign affiliate; are not obligated to do so if the US companies are not involved.
With negotiations still to be completed, India probably will export 1.6 million
tons of herd ar.d soft wheat to the USSR, beginning this October. The wheat is in
repayment: of Soviet wheat sent to India in 1973. India has had two good harvests
and foodg:?ain stocks are at unprecedented levels.
The JSSP will use most of the imports for producing higher quality bread,
improving livestock herds, and rebuilding depleted grain stocks. Some of the
Canadian grain will go to Cuba in the form of wheat and flour, and perhaps as much
as 1 million tons of the Indian and Australian grain will go to North Korea and
Vietnam. An average of 3 million to 4 million tons of Soviet grain normally is
shipped to Eastern Europe each year. (Confidential)
UNCTAD sugar Conference To Reconvene
The ITN Sugar Conference will be reconvened this September, as the result of
last week';. Lon don meeting of 20 leading sugar importing and exporting countries.
Chances for reaching a new sugar agreement now appear much improved although
several sticky issues :remain to be negotiated.
The London talks led to agreement in principle on stocks and stock financing,
the major stumbling blocks in earlier negotiations. Exporters have agreed to accept
reserve stocks of at least 2.5 million tons with the exact level still to be negotiated.
4 August 1977
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Despite the progress achieved at the meeting, the issues of minimum prices,
special trade arrangements, quota allocation among exporters, and access to
developed country markets remain to be resolved. Minimum prices in a new
agreement will probably fall in the range of 10 to 13 cents per pound, based on last
week's consensus. The current world price for sugar is about eight cents a pound.
The trade arrangement issue may prove to be the most difficult; it centers largely on
Cuba's exports to other Communist countries, an issue on which Havana has
previously been uncooperative. (Cuba exports sugar to the USSR, Eastern Europe,
and China under a mixture of barter and hard-currency arrangements, with the
Communist countries generally free to reexport the sugar on world markets.)
However, the Cuban position on other matters at the London talks was surprisingly
constructive. The position taken by the United States, which imports about
one-fourth of the sugar moving in the, free world market, will be critical to results in
the September conference. (Unclassified)
The Impact of the 200-Mile Boundary Claims
on the Soviet and Japanese Fishing Industries
(ER 77-10437, July 1977, Secret)
This publication analyzes the effect of the spread of 200-mile fishing zones on
the Soviet and Japanese fishing industries. It discusses the impact on domestic
consumption and foreign trade and alternative ways of making up expected losses.
25X1A
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Secret
Secret
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