Economic Intelligence Weekly Review, November 2, 1978

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80T00702A000900050002-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 64
• Document Creation Date: December 15, 2016
• Document Release Date: July 7, 2004
• Sequence Number: 2
• Publication Date: November 8, 1978
• Content Type: CABLE

Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
 Approved F r e 7 fA 80 0702 090)050002-5
TMR4
TO:
Approved For
FROM:
o/~~2
EXTENSION
I l~%e 2004MMIP: CIA-RDP80TO 702A000900 50002-5
REPLACES FORM 36-8 (47)
WHICH MAY BE USED.
FORM NO .241
1 FFR 5S L'r
 25X1 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
Next 12 Page(s) In Document Exempt
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
 ApprovedFFor Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
Economic Intelligence
Weekly Review
'ti EE3W11 78-044
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5~
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
ECONOMIC INTELLIGENCE WEEKLY REVIEW
France and the EMS: Third Time Around ................................................
Paris sees a complementarity between membership in the proposed
European Monetary System and its economic policy goals of reining in
domestic inflation and improving the competitiveness of French exports.
India: Slowdown in Manufactured Exports Boom ....................................
Export growth will proceed at a slower pace because of shortages of
electric power, coal, and steel; growing labor unrest; and the govern-
ment's shift in emphasis toward Internal needs.
ASEAN Stabex Proposal: Complication in Common Fund Dialogue ............. 17
Officials from Japan and the five ASEAN member states have been
holding discussions that could lead to still another international program
for commodity export compensation.
Sudan: Arab Largess Breeds Financial Problems ....................................... 21
Large Arab aid Inflows have required matching local funds, with foreign
exchange shortfalls and domestic Inflation the result.
Cuba: Citrus Development Threatens World Markets ............................... 26
As Cuban shipments gradually gain ground In the CEMA market, Mediter-
ranean suppliers will likely focus on the European Community, increasing
the difficulties for US growers in the latter market.
Cuba: New Africa/Mideast Air Links Planned ......................................... 28
The expansion fits in with the extensive Cuban and Soviet Involvement in
African political and military affairs.
Note ........... ......................................................................................... 31
Vietnam's Military Demands Add to Economic Woes
i
SECRET
25X1
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
FRANCE AND THE EMS: THIRD TIME AROUND *
French President Valery Giscard d'Estaing's decision to enter the European
Monetary System (EMS) appears as firm as any political decision can be. While
political considerations are dominant, the government argues that economic conditions
are more favorable for such a move than at any time in years. France's current
account has just returned to balance, although continuing rapid inflation generates
skepticism about tying the franc to the deutsche mark. The motivations behind
Giscard's EMS decision revolve essentially around the following: (a) the traditional
French desire for fixed exchange rates, (b) the weakness of the US dollar and the
general instability of international currency markets, (c) the desire to enhance French
influence in a more unified European Community, and (d) the complementarity
between EMS membership and domestic economic policy goals, especially slower
inflation and improved competitiveness.
The EMS, currently planned for implementation on 1 January 1979, is shaping up
as an expansion of the present joint float-the so-called snake-with the French franc
and possibly the Italian lira, the British and Irish pounds, and some other European
currencies as additional participating currencies. Although serious differences remain
to be worked out at the negotiating/technical level, Giscard and West German
Chancellor Helmut Schmidt clearly have concluded that Europe must do something,
even if the risk of failure is considerable. The two leaders appear to have the personal
will and political clout to overcome the many technical obstacles to early implementa-
tion of the EMS. If need be, they may go it alone in launching an expanded currency
system.
Whether France will be able to remain in the EMS for long will depend on (a) the
durability and results of Prime Minister Raymond Barre's anti-inflationary policies,
(b) the flexibility of the new currency arrangements, and (c) the course of internation-
al currency speculation. To enhance chances of staying in the EMS, the French
25X1
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
Ratios of Francs to Deutsche Marks and French to
German Consumer Prices
(Index: 1973 1=100)
1. Index of French franc(deutsche mark cross-rates. An increase in the index shows weakening of the franc vis-a-vis the deutsche mark.
2. Ratio of the French consumer price index to that of West Germany. A comparison of the wholesale price index reveals similar trends.
Government probably will engineer a devaluation of the franc prior to initiation of the
EMS. Once the system is operating, Paris would opt for further periodic devaluations
rather than an externally imposed increase in austerity. France would drop out if
remaining meant changes in domestic policy that Giscard perceived as clearly against
the national interest or inconsistent with his political survival. The skepticism of
outside observers for the long-term outlook of the EMS appears justified.
Despite the history of previous European monetary failures and the franc's record
as a two-time snake drop-out (January 1974 and March 1976), Giscard and Schmidt
have concluded that another attempt must be made to link the currencies of EC
members. The two leaders agree on the urgency of forming the EMS. The chicken-egg
question of which should come first, coordination of economic policies or of exchange
rates, has been answered in favor of the latter, at least for now. The French, who
2 SECRET
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
traditionally favor fixed exchange rates, believe they have convinced the West
Germans of the evils of floating. An indication of French opinion on this subject is
contained in the late-September press quotation of an unnamed Finance Ministry
official: ". . . [France's] greatest intellectual victory is that the Germans, previously
unconditional allies of Washington, now agree with the French point of view that the
current situation is intolerable."
Another factor pushing France toward the EMS decision is a conviction that the
weakness and particularly the instability of the US dollar have been the primary cause
of intra-European exchange rate problems. Although Giscard believes a truly durable
international currency system must await some solution to the "dollar problem," he is
firmly convinced that a "European zone of monetary stability" is needed to create a
buffer for the European currencies against dollar fluctations. Furthermore, Giscard
probably hopes that a European demonstration of decisiveness and solidarity will
encourage stronger US action to help stabilize foreign currency markets.
French political ambitions are perhaps an even more important factor underlying
the decision. Giscard wants France to play a greater role in the world and believes that
both politically and economically this can be achieved only through a stronger Europe,
with France as its natural leader. Giscard views 1979 as "the year of Europe," marked
by the first direct election to the European Parliament, progress toward accession to
the Community of three new members, and implementation of an EMS as another
step toward the long-heralded Economic and Monetary Union. For Giscard, the year's
importance is increased further by France's succession to the EC Presidency, replacing
West Germany, on 1 January 1979. In addition to wanting progress toward the EMS
while their respective countries occupy the EC presidency, Giscard and Schmidt may
feel that pushing hard against a short deadline is the only way to obtain a decision
among nine countries with differing political aspirations, economic policies, and
business trends.
Complementarity of Internal Policies and the EMS
The French Government is hoping that efforts to remain a full and strong partner
in the EMS will reinforce domestic anti-inflationary and modernization policies.
Opinion in Paris supports the Barre prescription of giving top priority to checking
inflation, provided that efforts are made simultaneously to limit unemployment.
Many economic advisers doubt the possibility of meeting official inflation targets-a
6-percent annual inflation rate by the end of next year, an average rate for 1979 of 8
percent-under the best of circumstances. Paris hopes that joining the EMS will buoy
up the franc and force the inflation rate lower than it otherwise would be. Prime
Minister Barre, who initially advised against EMS, is now a vocal supporter.
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
Other longstanding French goals have been translated into policy initiatives since
the March 1978 reelection of the center-right parliamentary coalition. To achieve the
dream of matching West German free-market dynamism and international competi-
tiveness, Paris has removed nearly all industrial price controls; plans to progressively
reduce subsidies to public utilities and services as well as state-owned firms, permitting
compensating price hikes; and threatens to cut off financial assistance to noncompeti-
tive private firms. The resulting "bubble" in the inflation rate does not greatly concern
the government, which considers it a necessary short-term result of more realistic
policies.
Rising unemployment continues to pose a threat to the French economic strategy.
Giscard and Barre clung stubbornly to their economic plan through the election
campaign ending last March, ignoring pleas of political advisers who wanted
expansionary policies to improve the governing coalition's chances. With the center-
right comfortably ensconced in the National Assembly and the next important
political test not due until the 1981 presidential election, they now have less reason
than before to veer off from attempts to wring inflation out of the economy and make
France a more modern industrial state.
Negotiating From the Top *
Since the July EC Summit endorsement of the EMS concept, representatives of
member governments have been trying to work out technical details in the EC
Commission's Monetary Committee and in the EC Central Bank Governors Commit-
tee. Discussions stalled in August, primarily over a disagreement between French and
German negotiators concerning the method of defining the exchange rate limits of the
system. The French delegation had been pushing for the currency basket concept,
which in some instances of exchange rate pressure could put the burden of
intervention and policy adjustment on a single strong-currency country (presumably
West Germany).
Giscard and Schmidt appeared to have resolved the issue at one of their regular
25X1
25X1
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
tete-a-tetes in mid-September. Faced with flat West Geman refusal to accept the
basket concept, the French President abandoned his position and agreed to accept the
parity-grid system. Thus, the grid system currently employed in the snake would be
used for determining intervention points; the basket approach would be employed
simply as a warning system to trigger discussions on possible intervention or domestic
policy changes before the grid system's obligatory intervention points were reached.
Despite the Giscard-Schmidt agreement "in principle," EC negotiations continue
to stumble over practically the same differences as those presumably resolved, at least
between the French and Germans. Non-German EC members, including the French,
are pushing for a more definite role for the basket in determining intervention
obligations of a strong-currency country; the West Germans continue to resist. On the
surface, French negotiators seem not to have received word of their President's change
of mind. A more plausible explanation of their persistence is that France intends to
push for concessions-particularly regarding West German intervention obligations in
the event of severe dollar fluctuations-until a complete agreement is worked out. In
any event, negotiators probably recognize that differences will ultimately be resolved
at the highest level.
To the weak-currency countries, the currency basket issue and the disagreement
over the size of EMS support facilities have become symbolic of West German
reluctance to make commitments entailing substantial costs. In fact, the West German
position is regarded as a retreat from the EC's agreed goal of a qualitatively new
currency system. For its part, France clearly wants to avoid having to expend huge
amounts of reserve funds in a fruitless effort to support its currency, as it did when
trying to stay in the snake in early 1976. While West Germany loaned deutsche marks
for intervention in 1976 and presumably would do so again, France would much
prefer to obtain a formal German commitment to act directly in the market against a
rising deutsche mark rather than for a falling franc.
Giscard and Schmidt meet again today in Paris. Another agreement "in
principle" will likely be announced, although basic differences concerning interven-
tion obligations and credit facilities surely will persist. Moreover, other countries may
resent such self-appointed Franco-German leadership even more than in the past.
Thus far, most compromises have reflected concessions by Giscard, and the same
pattern may emerge from the next Franco-German summit. In the meantime,
however, the French President will have his negotiators push for all possible
concessions from the West Germans. While the final outcome at the 4-5 Decmeber EC
Council meeting may differ little from the compromise reached at the mid-September
summit, French negotiating pressure may produce some give in the West German
position.
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
Prospects for France and the EMS-A Mixed Bag
President Giscard now seems determined to take France into a European
Monetary System at the earliest moment. As long as Chancellor Schmidt remains
equally resolute regarding EMS, technical problems and continued opposition from
lower levels of the French and West German Governments could be swept aside.
Nevertheless, economic or political pressures might yet cause either of the two leaders
to shift position, at least enough to delay implementation of EMS beyond the 1
January 1979 target date.
The franc's prospects once in the EMS will depend on the technical specification
of the system and on its functioning. The wider the bands for fluctuation and the
greater the resources for intervention and credit support, the longer the system can
operate without parity changes.
The inflation differential between France and West Germany will be a
benchmark for determining the chances of the EMS, and it likely will remain
relatively wide. French officials argue, however, that France's underlying rate of
inflation is around 8 percent rather than the current observed rate of about 10 percent.
They contend that the observed rate has been ratcheted upward by one-time price
increases resulting from price deregulation and government-administered rate hikes.
The French also assert that West Germany's underlying inflation rate is higher than
the registered 3 percent, as deutsche mark appreciation has produced a drop in import
prices and an artificially low rate of consumer price increases. Given greater stability
in intra-European exchange rates, the West German inflation rate could well rise by
one or two percentage points. The resulting gap of three to five percentage points
between France and West Germany could be taken care of with periodic currency
realignments within the EMS, provided that speculative currency flows did not add
excessively to exchange rate pressures. The outlook for smooth adjustments is
brightened by increasing French and West German willingness to accept timely
devaluations/revaluations. France is particular has indicated that it would devalue its
currency within the EMS in response to divergent economic trends.
Other than speculation, the factor most likely to prevent France from remaining
in the EMS would be domestic pressure to pursue policies not in accordance with EMS
objectives. At the moment, Giscard judges the two complementary; current policy and
expected pressures from EMS membership point in the same direction. He wants a
strong franc (like the deutsche mark) and a strong economy (like Germany's). The key
short-term policy goal of slowing inflation is consistent with EMS membership. France
does not expect the EMS to force more austere policies than those currently employed;
rather, the EMS would be used only as additional justification for such policies. If
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
continued EMS membership should come to depend on more austere policies, the
French would be likely to withdraw.
Giscard may in fact be forced to draw back from current anti-inflationary policy
before its objectives are achieved. Unhappiness with the Barre Plan, particularly as
reflected in record unemployment, is widespread and increasing. The leftist labor
unions and the Socialist and Communist parties are currently dispirited and disorgan-
ized, but strike activity is on the rise. More importantly, Giscard's Gaullist coalition
partners-nationalistic, distrustful of the European Community, and concerned about
unemployment-might choose unfavorable economic trends as the ground for a break
with the majority. Unless Paris can point to a visible slowdown in inflation by the
middle of next year, pressure to stimulate economic activity and reduce unemploy-
ment could become irresistible. A policy reversal would dash Giscard's hope of
bringing France's inflation rate into closer alignment with West Germany's and
ultimately doom the latest attempt at closer monetary coordination in the European
Community.
With manufactured exports expected to reach $3.5 billion this year, India ranks
high among LDC exporters of manufactured goods, but well behind South Korea,
Taiwan, and Hong Kong. Backed with considerable formal and informal encourage-
ment from the government, India's export gains have been based largely on selling
steel and machinery to Middle East OPEC countries and textiles, clothing, and yarn in
developed country markets, Export growth is now being hurt by domestic shortages of
key industrial inputs and growing labor unrest. Moreover, New Delhi's new five-year
plan (1978-83) reduces the priority of heavy industry, which has been the main
underpinning for export growth. These factors almost certainly will retard export
expansion over the next several years even though India should do well in selected
markets-for example, in sales of machinery to LDCs.
Export Record
Between 1970 and 1977, foreign sales of manufactured goods climbed from $1.1
billion to an estimated $3.2 billion, growing at a rate of 17 percent annually or double
the rate of the 1960s. Export growth is slowing this year, however, and sales are
expected to show only a small increase, to $3.5 billion. Despite its success in tapping
foreign markets, India has not matched the pace of other leading LDC exporters. Its
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
share of LDC exports of manufactured goods to the OECD countries, for example,
slipped from almost 9 percent in 1970 to 6 percent in 1977.
India: Destination of Manufactured Exports
-- Average Annual
1970 1977 Percent Growth
World ..... ......................................................................... 1,067 3,200 17
OECD .......... ....................... ...................... _................. . 462 1,525 19
Of which:
United States ......... .................... ................... ...... 169 382 12
France .__ ............................... .......... .................... 13 115 37
West Germany ........................ ............ ............... 25 238 38
Italy ........... .......................................................... 9 113 44
United Kingdom ............ ................................ .... 74 276 21
Japan ......... ...................... ..................... .............. 63 95 6
OPEC .......................................................................... 95 500 27
Of which:
Saudi Arabia ...................................... _............... 11 75 32
Iran.. ................. ............ ....... __ ....................... 28 90 18
Kuwait ................................................_.............. 12 90 33
United Arab Emirates ........................................ 28 110 22
Far East ...................................................................... 125 325 15
Africa ......................... ................... ......:._.................... 36 130 20
USSR ....... .......... ..................................... ..................... 148 280 10
Eastern Europe .......................................................... 81 150 9
Other ................... .............. ............ ...... ....._................ 120 290 13
Export expansion has partly compensated for the slow growth of domestic
demand and resulting underutilization of manufacturing capacity. Exports of steel
products accounted for nearly 20 percent of domestic steel output in 1976 and 1977
compared with an average of 6 percent in the early 1970s. Textile production received
a major boost following the 1973/74 OPEC oil price hikes because the bulk of output
was cotton goods whereas other major LDC exporters had already converted to
petroleum-based synthetic fibers.
The export push has focused on shipping capital goods and intermediate iron and
steel products to the Middle East and Asian LDCs, while exporting textiles and apparel
to OECD countries. Sales of capital goods and intermediate products grew from $330
million in 1970 to $1.1 billion in 1977. Exports in this category cover a broad range of
products including (a) heavy industrial equipment and electrical machinery; (b) a
variety of steel and pig iron products; and (c) nonferrous metal manufactures such as
aluminum ingots and sheets, copper, and copper alloys.
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
India: Leading Manufactured Exports, by Commodity
1970
1977
Average Annual
Percent Growth
Manufactures ....
............................................... 1,067
3,200
17
Textiles ...
............................................... 460
800
8
Clothing; ..................................................................
36
340
38
Leather ....................................................................
95
280
17
Iron and steel ............
131
360
16
Tubes and piping ........................................
15
70
25
Metal manufactures ................................................
33
150
24
Machinery .................................... ...........
38
140
20
Electrical machinery ..............................................
22
100
24
Transport equipment ............
46
120
15
Chemicals .....................................................
47
130
16
Other ........................................................
144
710
26
The OECD countries and the OPEC oil producing nations together absorb nearly
65 percent of India's manufactured exports. Success in these areas has been narrowly
based. In the OECD, export growth has consisted mainly of leather goods and textile
sales to five countries-France, West Germany, Italy, the United Kingdom, and the
United States. In the Middle East, India has effectively cashed in on the economic
development boom in the Persian Gulf states by exporting iron and steel products,
machinery, and construction materials to Saudi Arabia, Iran, Kuwait, and the United
Arab Emirates. Sales to non-OPEC LDCs reached $600 million in 1977, nearly one-
fifth of manufactured exports.
Exports of manufactured goods to the United States, India's major trading
partner, stagnated in 1977 at $382 million, roughly the same level as in 1976. A sharp
drop in apparel sales-to $74 million-because of competition from East Asian
suppliers was primarily responsible and cut the Indian market share to 2 percent.
Textiles make up 65 percent of exports to the US market and are the major dollar
earner; in 1977, textiles held a 10-percent share of the US market. Apart from these
products, India has had little success in penetrating the US market with the
manufactured goods that have been successfully marketed elsewhere. For example,
steel products and heavy machinery sales amounted to only $24 million in 1977 and
accounted for a negligible share of the market.
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
India: Selected Exports by Destination, 1976
Clothing Textiles
US $ 334 Million US $ 743 Million
Iron and Steel
US $ 367 Million
Machinery and Transport Equipment
US $ 315 Million
3% 2%1%
El United States
11 Japan
577681 11-78
10
European
Community
^ USSR and
Eastern Europe
Leather
US $ 272 Million
Africa
Other Non?OPE&Inegl.
Chemicals
US $ 119 Million
N OPEC
U Africa
Other Non-OPEC
LDCs
Other Developed
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
India: Major Commodity Market Penetration, 1977
Share of Import Market (Percent)
United States
Clothing 1.8
F]Metal Manufactures 0.9
0 Footwear 0.4
0 Metal Manufactures 1.3
a Electrical Machinery 03 Footwear 1.3
Textiles 2.1
fj Clothing 1.4
7 Metal Manufactures 1.3
Textiles 1.0
0 Industrial Machinery 0.3 n Electrical Machinery 0.8
-t Clothing 1.5
Textiles 1.5
a Footwear 0.5
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
Western Europe
Sales to Western Europe reached $850 million in 1977 compared with $175
million in 1970; the United Kingdom and West Germany are by far the biggest
customers. Textiles and clothing have been the leading exports, giving India a 9-percent
share of the import market in the United Kingdom, and 3 percent in West Germany
and France. Even these small percentages have generated a strong protectionist
reaction; under the Multi-Fiber Arrangement of December 1977, import quotas on
Indian sales of apparel to EC countries restrict volume increases to only 1 percent over
1976 levels. India has captured only a miniscule 0.3-percent share of the highly
competitive EC heavy machinery market. Overall, India's share of the EC import
market in manufactures has remained small-less than 0.5 percent throughout the
1970s.
Competitive prices and low transport costs helped boost Indian exports to the
OPEC countries by more than $400 million since 1970, to $500 million in 1977. Iron
and steel products, construction materials, pipe, machinery, and transport equipment
have been major foreign exchange earners. Manufactured exports have benefited from
the success of Indian consulting and engineering consortiums in winning several large
contracts, such as a $280 million contract to build 3,300 homes and the supporting
infrastructure in Kuwait and a $100 million contract for a power plant in Saudi
Arabia. Steel exports, $150 million in recent years, account for one-third of manufac-
tured exports in the area.
USSR and Eastern Europe
Exports to the USSR and Eastern Europe absorbed 13 percent of total manufac-
tured exports in 1977. At $430 million last year, sales were nearly twice as large as in
1970. Yarn, fabrics, and clothing make up the bulk of sales to the USSR as well as to
Eastern Europe. Trade with the USSR is conducted under annual bilateral agreements
which call for balancing exports and imports. India's growing trade surplus with the
USSR has recently prompted Moscow to cut back imports.
Competitive Factors
In the 1970s India, as a long-established exporter, was able to increase manufac-
tured sales in absolute terms though it lost ground relative to the vigorous new LDC
exporters. Its failure to do better resulted from its inability to keep up with
developments in technology, packaging, and marketing. At the same time India did
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
well in holding down price increases. The 9-percent average annual increase (1971-77)
in wholesale prices of Indian manufactured products has been considerably lower than
the increase in many other leading LDC exporters. Because of rupee depreciation,
average dollar prices of manufactured goods have risen only 3 percent annually since
1975, less than half the rate for other leading LDC exporters and well below the rates
for most developed country competitors. Since the link with the pound sterling was
severed in 1975, the rupee has been permitted to depreciate on a bilateral price-
adjusted basis 13 percent against the US dollar, 17 percent against the British pound,
and 16 percent against the Hong Kong dollar.
Labor discipline, which had deteriorated in the early 1970s, stiffened under Mrs.
Gandhi's Emergency Rule (June 1975 to March 1977), with a resulting jump in
productivity gains and a dampening of wage increases. Productivity gains in 1976-77
averaged 5 percent.
India: Price-Adjusted Bilateral Exchange Rates
Index 1973 1=100
120
60 1 1 1 ._1 _a_ j
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
In cooperation with private firms, the government has moved to beef up
marketing and related services. An increasing number of trade missions are being sent
overseas to conduct market analysis and acquaint importers with Indian manufac-
tures. This year, for example, the Engineering Export Promotion Council, representing
6,000 firms, is sponsoring 60 trade delegations to various countries. Quality control
inspections have recently been tightened. Several after-sales and service centers are
being established in overseas capitals for government-owned manufacturing firms. As
for financing, the government has approved but not yet established an export-import
bank.
In contrast to the situation in several other LDCs, notably South Korea, Taiwan,
and Brazil, multinational corporations have not played a substantial role in India's
export growth nor are they apt to in the future. New Delhi has maintained tight
controls on foreign investment to keep majority interest and ownership in domestic
hands. Although exceptions may be made in highly export-oriented and sophisticated
technology areas, these restrictions and a host of administrative controls have
discouraged foreign investment.
Indian exporters benefit from a wide array of formal and informal incentives to
support exports of manufactured goods. Cash subsidies alone amounted to an
estimated $330 million in 1977, equal to 10 percent of total manufactured exports.
One of the largest beneficiaries is the capital goods and machinery sector, which
receives cash assistance ranging between 10 and 20 percent of f.o.b. value. Various
categories of cotton textiles are eligible for rates of 10 to 12.5 percent. The rates are
adjusted according to country of destination for cotton textiles and several other
manufactured products.
As a rule, when exporters request assistance, it normally is forthcoming on the
recommendation of the appropriate government department. The Janata government,
which took office in March 1977, has continued this generous policy but plans to
require more justification from exporters requesting increased subsidies and broad-
ened coverage. The Minister of Commerce recently observed "that subsidies while
necessary to maintain India's competitiveness should not be a premium on
inefficiency."
Trade lobbies have been instrumental in obtaining changes in subsidy rates and in
determining the coverage of eligible items. These lobbies operate through a variety of
government-sponsored organizations, such as export promotion councils, development
authorities, and government departments. Uncertainty over the duration of subsidy
rates has caused problems for Indian firms, particularly when negotiating long-term
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
contracts, Exporters have usually asked that the subsidy rates remain unaltered for at
least three years; New Delhi has generally fixed rates for one year, except for cotton
textiles, where rates are reviewed every six months.
Other measures used by the government to promote exports include:
? A deduction from income taxes of expenditures on export promotion,
allowed at the rate of one and one-half times the actual expenditure. Large
exporters, because of their high marginal income tax rates, benefit the most.
? Provision of export insurance and preferential credit rates.
? Giving first call on import licenses to assure a steady supply of raw
materials and components used in the production process. The premium
formerly carried by these licenses in the open market has declined since
early 1978 when the government began liberalizing imports.
? Granting exporters a cash refund on excise and custom duties levied on
imports of raw materials and components used in manufactured exports.
The benefits of the Generalized System of Preference (GSP) to India have been
partially offset by recent rises in nontariff barriers, such as quotas on textiles and
clothing. Even so, India has taken full advantage of GSP and has emerged as one of its
principal beneficiaries, particularly in West Germany and France. New Delhi has
aggressively campaigned for increased GSP coverage of its exports. In 1977, some $550
million worth of its manufactured exports were eligible for GSP treatment, nearly one-
tenth of the total benefit accruing to LDCs.
Slow Growth Ahead
We expect India's manufactured exports to grow at 10 to 15 percent annually in
the next few years, a pace that would raise foreign sales to about $4.5 billion by the
early 1980s. Signs of a slowdown in export growth are already evident, with sales of
key exports such as steel, clothing, and leather goods leveling off. The slow-down
partly reflects aggressive competition from other LDCs, quota restrictions imposed by
developed countries, and a slowing of massive development programs in several
Middle East countries.
Not the least of India's short-run difficulties are serious supply bottlenecks, which
have recently emerged in the industrial sector. Shortages of electric power, coal,
cement, and various steel products, coupled with a resurgence of labor disputes, have
hurt manufacturing output this year and have forced the government to import some
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
India: Commodity Export Trends'
Dollar Value Index: 1973=100
Iron and Steel Textiles
600 -- 400 -
500
I
400
f
300
200
100
01 I I I
Transportation Equipment
400 -
200 -
100
0L I i I I
Leather
115 --
110 -
105
100 r
95 -
90
85
80
75 I y-~- i 1e._.--1
1973 1974 1975 1976 1977
1. Note change in scales.
Electrical Machinery
400
100 '
0 1 1 I L ____
Clothing
01 I i L
1973 1974 1975 1976 1977
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
coal and steel. Delays and late deliveries of steel and other key manufactures to
foreign countries are no doubt tarnishing India's reputation as a reliable exporter and
may cost future sales.
Over the longer term, the Janata government's shift in economic priorities and
development policy would militate against maintaining the export growth pace of the
1970s. During the next few years New Delhi intends to give more emphasis to meeting
domestic needs. For example, in allocating steel between firms producing for domestic
and export markets, both types of manufacturing firms will now be treated equally;
formerly, export-oriented enterprises received priority. More than any previous
government, Janata is also stressing expansion of small-scale industry (and agriculture)
to provide employment and income for the rural poor. This "trickle up" approach
contrasts sharply with government planning in the 1950s and early 1960s which
stressed the expansion of heavy industry and 1 ' oundation for the export growth
of the 1970s.
ASEAN STABEX PROPOSAL: COMPLICATION IN
COMMON FUND DIALOGUE
The countries of the Association of Southeast Asian Nations (Indonesia, Malaysia,
the Philippines, Singapore, and Thailand) are pressing Japan for a new system of
compensation for declines in the value of commodity exports. Officials from Japan
and the five ASEAN member states met in Jakarta last month to discuss creating some
version of the European Community's STABEX system; they-are scheduled to meet
again in December. These talks, which sandwich the November reopening of
Common Fund negotiations, could lead to yet another form of commodity export
compensation in what is rapidly becoming a tangled skein of such programs.
Although the Japanese have made no commitments to date, the pressures on them
to respond cooperatively are increasing. They could choose to announce financial
support for an AESEAN stabex to improve their relations with the Third World before
or during the UNCTAD V sessions (scheduled for Manila in May 1979). Meanwhile,
preparatory talks on this issue will add another complicating factor to the muddled
dialogue on a Common Fund.
Compensation and Stabilization Facilities
Long seized with the notion that shifting terms of trade for commodity exports
are at the heart of their trade, payments, and growth problems, a substantial bloc of
2 November 1978 SECRET
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
SECRET
I DCs has lobbied through their UN caucus-the Group of 77 (G-77)-for a variety of
facilities to offset shortfalls in export earnings. The two basic types of remedies they
have pressed for (or have elicited from the developed countries) have been compensa-
tion for earnings shortfalls and mechanisms to offset price declines.
The best known examples of earnings compensation include the IMF's Compen-
satory Financing Facility (CFF) and the European Community's STABEX system.
The CFF, established in 1963, has loaned more than $4 billion at concessional rates to
LDCs suffering from declines in their overall commodity export earnings. The newer
EC STABEX has provided about $200 million in interest-free loans or grants to certain
African, Caribbean, and Pacific LDCs for shortfalls in about 20 primary commodity
exports; in contrast to CFF loans, these payments occur even if losses on one
commodity are offset by gains on others. Especially in the last few years, LDCs have
increasingly drawn from one or the other facility.
Devices to stabilize prices include international commodity agreements (ICAs)
and the related creation of buffer stocks. The G-77 platform in this area focuses on an
Integrated Program for Commodities (IPC) and the Common Fund. Since discussions
on the IPC began in 1976, little progress has been made toward new ICAs because of a
range of technical and political barriers. The lackluster IPC record repeats the
experience of the IMF's Buffer Stock Financing Facility; indeed, only one ICA has
made use of the funds in this latter facility since its creation in 1969. These difficulties
in creating ICAs and buffer stocks will affect progress toward the Common Fund,
negotiations for which resume on 14 November.
Economists at the international financial institutions in the developed countries
and-in some instances-even in the LDCs agree that price stabilization is a very
blunt instrument for Third World aid. Partly in recognition of this fact, the Germans
have been especially eager to drop the Common Fund concept in favor of a broader
set of stabex schemes. Recently, they have again been lobbying for a global stabex that
they had proposed at earlier stages of the Common Fund dialogue. The other
Europeans are not eager to simultaneously finance the EC STABEX, the Common
Fund, and the proposed West German global scheme. Nevertheless, a convergence of
interests of the Germans and Japanese on stabex proposals could broaden the ongoing
discussions of commodity earnings.
The Japan-ASEAN Talks
An expression of interest by the five ASEAN LDCs in a 25-commodity, $500-
million facility led to serious discussions on a possible stabex at the Japan-ASEAN
summit in August 1977. In the euphoria of that occasion, Prime Minister Fukuda
pledged to move forward on proposals for regional commodity arrangements. The first
18 SECRET
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
such detailed proposal-still the only substantive document to emerge from the
talks-appeared late in fall 1977 and is under scrutiny by the Japanese. Continuing
informal discussions were capped by an "experts" meeting in Jakarta on 29-30
September of this year. At the next formal round, scheduled as part of a Japan-ASEAN
conference in December, Tokyo expects to examine answers to a series of probing
questions it tabled at the September meeting. Progress at this session is likely to be slow
while both sides weigh worldwide developments on the Common Fund and on a
variety of bilateral issues.
Some basic differences persist between Japan and the ASEAN countries on stabex
issues:
Commodity Coverage. The current ASEAN proposal requires compensa-
tion for earnings shortfalls in each of 17 commodity lines (including tin,
already covered by a commodity agreement, and practically all of ASEAN's
major exports except rubber). In this the design differs from the recent West
German proposals for broader systems that would base compensation on
declines in net earnings from a basket of exports. Japan reportedly is still
considering the latter, much less costly basket approach and would, in any
event, probably insist on narrowing the set of commodites covered.
Financial Base. Early in the talks, ASEAN suggested a first round figure of
$400 million to $500 million as the likely cost of its stabex scheme. Although
financial limits apparently have not been formally discussed, Japan could
seek quotas for each country, as in the CFF, or for the entire operation for a
period of years, as in the EC STABEX. Alternatively, the financial base
could be narrowed by limited commodity coverage, stringent threshold
provisions, and hard credit terms. Whatever the arrangement, Japan will
probably not allow the maximum financial requirements of the stabex
scheme to approach the ASEAN figure.
Terms of Compensation. In the ASEAN design, earnings shortfalls for
exports to Japan trigger compensation in the form of interest-free, uncondi-
tional loans. These are to be repaid within five years only if improved export
conditions in the affected commodity permit. Japan will probably insist,
however, on no better than concessional interest rates and a less open-ended
amortization schedule.
Impact and Interests
The stabex talks touch on a variety of economic and political interests. Malaysia,
the Philippines, and Thailand-currently major exporters of such commodities as
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
timber, rice, cassava, coconut and palm oils, tin, and copper-see fairly immediate
gains from the proposed arrangement with Japan. Indonesia, whose export earnings
are now derived 70 percent from petroleum, faces the propsect of a fairly rapid
decline in that share in the 1980s; accordingly, it favors a regional stabex as yet
another means of evening out its revenues for development. Singapore, a net importer
of most of the commodities proposed for the scheme, would gain less but would not
stand in the way of its regional allies. From among this cast, Malaysia and
Indonesia-both aspirants for regional political leadership-have shown the most
interest in a stabex.
Still clouding discussions of the ASEAN stabex is the unresolved status of the
Common Fund. Malaysia, usually the most concerned with commodity exports,
publicly endorses the stabex scheme as complementary to a Common Fund and will
provide the staff support necessary to pursue both proposals over the next several
months. Indonesia, a strong political force in the Common Fund talks, will probably go
on playing second to Malaysia in orchestration of the stabex discussions. The other
ASEAN countries have shown less interest in both institutions; regional solidarity-
such as has moved Thailand to a more aggressive Common Fund stance as this year's
regional spokesman-will probably supplement economic interests in keeping the
individual countries lined up behind group positions on both fronts.
Like West Geman Chancellor Helmut Schmidt, who has pledged to attend a
controversial North-South summit in Jamaica this December, Prime Minister Fukuda
has shown interest in new ways to reaffirm commitment to Third World and regional
goals. Despite the scant achievements of the ASEAN stabex talks so far, Fukuda could
step in at the eleventh hour to resolve interministerial differences that now block
agreement. Pressure to move in this direction will be greatest over the next few
months as both developed and developing countries prepare for UNCTAD V (1979's
most important North-South event) and try to compensate for any LDC disappoint-
ment from the Common fund talks.
Japanese acceptance of the ASEAN stabex scheme would have serious implica-
tions for other facets of the North-South dialogue. Besides giving a new boost to West
German arguments for substitution of a global stabex for a Common Fund, it would
put heat on the United States (as another major ASEAN trading partner) to finance
this additional commodity earnings scheme. Moreover, it would likely stimulate
further demands from other LDCs not presently covered by stabex programs.
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
SUDAN: ARAB LARGESS BREEDS FINANCIAL PROBLEMS
Sudan is facing several years of severe balance-of-payments constraints on
economic growth despite recent IMF help and Arab and Western debt reschedulings.
Ironically, the payments bind stems from problems associated with Arab efforts to
transform Sudan into a major food supplier. Large Arab aid inflows in recent years
have required matching local funds and have often necessitated sizable investment in
roads, railroads, and ports. This investment effort has left Khartoum with serious
foreign exchange shortfalls and high domestic inflation. Under pressure from Arab
creditors, the Numayri government finally has accepted stringent IMF guidelines to
moderate its development effort and get its foreign and domestic finances into better
shape. While economic growth is likely to average no more than 2 to 3 percent in the
next several years, the reform program and increased agricultural yields from new
farming and livestock projects should result in a sounder external financial position in
the early 1980s.
Agricultural Resources and Arab Interest
Arab interest in the Sudan lies primarily in the country's considerable agricultural
potential. Only 8 percent (6.4 million hectares) of the country's 80 million hectares of
cultivable land is farmed. Irrigation from the Nile, which now affects only about one-
fifth of the cultivated areas, could be doubled. Cotton from the irrigated land,
groundnuts, gum arabic, sesame, and food products are the principal crops.
Talk of Western retaliation against Arab food imports during the 1973/74 oil
embargo focused Arab attention on Sudan. In 1976, a plan was formalized by the Arab
Fund for Economic and Social Development (a 12-member Kuwaiti-based organiza-
tion) to combine Arab oil money with Sudanese resources and Western technology to
develop Sudan into the "bread basket" of the Arab world. Although this plan has not
yet gotten off the ground because inter-Arab rivalries have caused administrative tie-
ups, more than $375 million in Arab project aid has been disbursed bilaterally since
1973, helping to support a number of irrigation and other agricultural development
projects. Saudi Arabia has been by far the major Arab donor (70 percent), followed far
behind by the United Arab Emirates. Total Arab aid was about equal to Western aid
in 1974-77.
Balance-of-Payments Problems
The development drive sparked by Arab aid has increasingly strained Sudan's
external financial position. A principal problem has been Arab demands for substantial
matching funds before aid is disbursed. For instance, Sudan is financing 25 percent of
the $270 million cost of the Rahad, one of the country's largest irrigation projects. In
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
addition, before many of the agricultural and food processing projects can be carried
out, Khartoum must develop transportation and communication facilities to overcome
potential bottlenecks. Relying on its access to seemingly inexhaustible oil wealth,
Sudan has gone overboard in foreign borrowing to help pay for the development
program. As a result, foreign debt has risen from $335 million at yearend 1973 to
almost $1.5 billion today,
Funding the domestic cost of development has led to a growing budget deficit,
which has been financed largely through local bank borrowing. The resulting
inflation-25 to 30 percent in fiscal year 1978 (July 1977 - June 1978)-has
undermined Sudan's export competitiveness, while outlays for construction projects
have added to consumer demand for imported manufactures.
The current account deficit began to escalate sharply in FY 1975, ebbed
temporarly in FY 1977, then shot up again in FY 1978. Imports, principally from
Western Europe, the United States, and Japan, which reached $935 million by FY
1978, have been increasing steadily in the past year and a half. At the same time,
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
Sudan: Status of Planned Major Facilities
Infrastructure
Current Status
Foreign
Financing
(percent)
Jonglei Canal ....... ......... ..................
Ongoing
46
Port $vdan-Khartoum road .................. ......
Ongoing
43
Railraod modernization ..... ..................
Planning stage
74
Construction of Port Suakin
Planning stage
NA
Sennar-Damazin road .............................
Ongoing
67
Agriculture
Upper Atbara dam ....................................
Planning stage
68
Rahad irrigation project ............................
Ongoing
75
Damazin agricultural and animal produc-
tion project .........................................
Ongoing
40
Khashm el-Girba irrigation project expan-
sion ... ...............................................
Ongoing
38
Tea and coffee production in south ........
Planning stage
47
Industry
Kenana sugar project...................................
Ongoing
100
Starch and glucose factories ......................
Planning stage
50
Cotton mills ......... ..... ..:...........................
Ongoing
61
Edible oil processing plants..................
Planning stage
75
export earnings have leveled off, partly because of the government's policy-at odds
with the Arab goals of raising Sudan's farm exports-of encouraging import substitu-
tion crops at the expense of export crops. Although the value of cotton exports doubled
between 1975 and 1977, this was due more to higher world cotton prices than to
expanded production; the volume of cotton exports in 1977 was up only 20 percent
over the 1975 figure.
International reserves began falling in 1975 and never recovered. The situation
became acute in 1977 when Arab bilateral aid fell 60 percent from the 1976 peak. By
mid-1978, reserves had dropped by $100 million, to about $22 million, less than half a
month's imports, and arrears on import payments had accumulated to an estimated
$850 million. These factors were reflected in Sudan's near-zero credit rating; most
major international commercial banks were refusing new letters of credit to the Bank
of Sudan.
In July 1978, shortages caused by the severe foreign exchange crunch were
compounded by heavy flooding in the Gezira, the country's principal agricultural
region. Together, these events threatened the inflow of both capital and consumer
goods, while aggravating public unrest. Supplies of petroleum and spare parts, as well
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
Trade Balance ................................................
-246
23
-279
-470
Exports, f.o.b . ............................................
508
665
656
667
Imports, c.i.f ...............................................
754
642
935
1,137
Net services ........ _....................... .... .... _.....
-63
-49
-29
-70
Current account balance ................................
-309
-26
-308
-540
Debt amortization ..........................................
-112
- 65
- 90
-235
Accumulation of arrearsI .... .......... .... ........
-5
-405
-450
0
Financial gap ..................................................
-426
-496
-848
-775
Financing the gap .._........_ ...........................
330
499
776
650
Official nonmonetary capital ..................
369
94
287
650
Other capital ..............................................
-44
0
39
0
Current arrears ...........................................
5
405
450
0
Change in reserves ...... ......... ._....... __..... ......
-96
3
-72
-125
Imports are understated because dataexclude remittancesof consumer goods by Sudanese working
abroad; these are included under "Net services." Data are for fiscal years, July-June.
Estimated.
Projected.
as fertilizers and insecticides essential for the cotton crop, became critically short. Iraq
and Kuwait interrupted shipments of petroleum several times when Sudan was unable
to keep arrearages from rising. Both industry and rail transportation were running at
roughly half capacity for lack of equipment and spare parts.
In mid-1978, Khartoum finally accepted under heavy Arab pressure an IMF
austerity regimen to ease Sudan's financial problems. The program includes:
? A 20-percent devaluation, announced last June.
? A reduced rate of increase in government current expenditures.
? A trimming of development expenditures.
? A reversal of government policy in favor of export crops, particularly
cotton, at the expense of import substitutes such as wheat.
In return, the IMF has approved two loans worth $63 million. Negotiations for a
formal standby agreement are scheduled for later this fall, at which time Sudanese
compliance with the first part of the agreement will be reviewed.
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
The IMF accord has opened the way for massive assistance from other sources.
Saudi Arabia subsequently provided a $300 million loan to purchase crude oil and
another $50 million for balance-of-payments support. Other donors have committed
balance-of-payments support of $238 million. In addition, Saudi Arabia and Kuwait
Total .._ ................................................................. 588
Saudi Arabia .................................................... 350
Arab Monetary Fund ...................................... 16
IBRD ................................................................ 25
Kuwait .............................................................. 19
Abu Dhabi ........................................................ 10
France .............................................................. 22
Japan ................................................................ 15
IMF .................................................................. 63
IMF compensatory financing ........................ 26
have rescheduled their share of Sudan's official debt on highly favorable terms.
European nations have rescheduled $150 million in official obligations, and Western
commercial banks have rescheduled $280 million to $300 million in private loans.
Although the total of new loans and debt relief-more than $1 billion-readily
covers the $540 million current account deficit projected for FY 1979 and eases the
immediate debt amortization squeeze, the need for economic austerity will not
diminish. A time lag of at least two years can be expected before the exchange rate
adjustment and the tightened fiscal policies have positive effects on the balance of
payments. Even the IMF-sponsored incentives to boost exports, which include a
restructuring of costs and prices, will take considerable time to bear fruit.
Last July's floods will further slow recovery of the Sudanese financial position,
helping to keep exports flat. Although 95 percent of the 1978/79 cotton crop
reportedly has been replanted, Khartoum must still find financing, for fertilizers and
insecticides to replace those used on the flooded crop. Despite the receipt of $26
million from the IMF to cover an estimated one-third of the export short-fall resulting
from the flooding, damage to the transportation system will hamper growth through
FY 1979, These problems, together with internal and external financial constraints,
probably will hold GNP growth to 2 to 3 percent for the next couple of years.
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
Cuba is undertaking a massive expansion of its infant citrus industry aimed, at
least initially, at boosting export earnings from CEMA countries. Realization of
production goals would enable Cuba by the mid-1980s to capture at least half of the
rapidly growing CEMA market for fresh citrus. This market, which takes nearly one-
sixth of the $2 billion in world exports, now is supplied mainly by Mediterranean
countries. As Cuban shipments gain ground in CEMA, the Mediterranean suppliers
will likely focus on the EC, increasing the difficulties for US growers in this latter
market.
Citrus Development Goals
Cuba's citrus industry produced only 270,000 tons last year. Trees already
planted, however, should yield crops of 550,000 tons by 1980 and 1.7 million tons by
1985. By 1985, even if Cuban citrus consumption should reach the targeted level of 60
kilograms per person per year-the world's highest-more than 1 million tons would
be available for export. (World exports last year were roughly 7 million tons.)
Realization of its 1985 production and export goals would enable Cuba to compete
with the United States for the rank of second leading exporter of fresh citrus, after
Spain.
basic orchard units
encompass 500 hectares; these are combined into farms of up to 28,000 hectares.
Integrated with the new farms are secondary boarding schools-one 500-student
school for each 500 hectares-whose students devote several hours a day to citrus
cultivation and harvesting. Nearly 118,000 hectares already have been planted at a
rate approaching 10 million trees a year. Most of the land developed for citrus
cultivation is unsuitable for other crops.
Cuban professional staffs appear to be well trained, though lacking experience.
Rapid improvement in disease control and cultivation techniques have been noted,
and the Cubans are believed capable of achieving their ambitious production goals.
I he Cubans have been
obtaining (through third country channels) ample supplies of all varieties of select US
root stock, the world's best, and will therefore be producing a full line. The Cubans are
besieging US growers and universities with requests for technical assistance while
giving assurances that Cuba, with its output earmarked for CEMA nations, will not be
a competitor of the United States.
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
Although the Cubans are aiming primarily at the fresh citrus market, they are
also developing a processing capability. The two existing plants have a current
processing capacity of 450 tons a day. A third plant is to be completed next year, and
12 more plants are planned for the next six years. A complete line of byproducts also is
planned.
The CEMA Market
CEMA countries represent a large and rapidly growing market for fresh citrus.
Their imports have grown an average 7 percent annually since 1970, compared with a
growth rate of 3.4 percent for world citrus trade. At this rate, CEMA's citrus imports
could double to about 2 million tons by 1985. Until the early 1980s, much of the
increased demand will be supplied by the Mediterranean producers.
Cuba sees in citrus a means of diversifying and expanding its limited export
potential. Moreover, shipments to CEMA will help repay long-term industrial
development aid. Although CEMA countries will prefer Cuba as a supplier to save on
hard currency, sales by Mediterranean producers should not decline before 1984. If
Cuba allocated a larger share of output to exports, Mediterranean losses would occur
earlier. Italian citrus growers would be hurt the most; they now count on CEMA for
three-fourths of their foreign citrus sales. Greece also would feel the impact; CEMA
took two-thirds of Greek citrus exports in 1976. Other Mediterranean citrus exporters
for whom CEMA has been a major market include Algeria (100 percent), Morocco (40
percent), Egypt (39 percent), and Turkey (30 percent).
In the longer run, Cuba's citrus export capability will likely outstrip CEMA
demand. By 1985, Havana intends to have 200,000 hectares of citrus groves, the
equivalent of two-thirds of Florida's citrus acreage. These groves should yield an
export volume of 6 million to 8 million tons by the mid-1990s; CEMA demand is
projected to reach less than 4 million tons in 1985.
Impact on US Growers
Cuban citrus development could have a substantial impact on the US citrus
industry. Even if Cuba failed to gain access to the US market, the industry could be
hurt by sales to third country markets. The major threat could come from inroads into
US sales to the EC, now one-fourth of the US total. As Mediterranean countries are
squeezed from the CEMA citrus market in the early 1980s, they can be expected to
push sales to EC nations. Cuba probably would divert sales from CEMA to the EC, as
well as to Japan and Canada, only if hard currency needs became pressing.
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
Cuban citrus has some marked climatic advantages over US citrus. The Cuban
fruit ripens up to three months earlier and is rarely hurt by the frosts that periodically
decimate US citrus crops. Citrus production in the United States has leveled off since
1971 despite growing international demand.
CUBA: NEW AFRICAN/MIDEAST AIR LINKS PLANNED *
Cubana Airlines, Cuba's national air carrier, plans to expand its network of
international services in the near term to several countries on the African con-
tinent-Algeria, Ethiopia, Equatorial Guinea, Libya, and Mozambique-as well as to
Iraq in the Middle East. Other points of service at a future date may include Syria and
South Yemen. Cubana has tentatively scheduled the first phase of new services to
begin in January 1979, about the same time that the airline reportedly will receive
additional Soviet transport aircraft, including two long-range IL-62s. The expansion in
airline service fits in with the extensive Soviet and Cuban involvement in African
political and military affairs.
Havana has not indicated any specific routes for the proposed service. We believe
one possibility for three of the countries to be served would be a Havana-Algiers-
Tripoli-Baghdad flight, which might include a refueling stop in Las Palmas in the
Canaries. As for Equatorial Guinea and Mozambique, the most likely route would be
an intermediate stop at Malabo in Equatorial Guinea on the existing route to Luanda,
with operations beyond to Maputo, Mozambique. Any formal service to Addis Ababa
could either operate as an extension of new service to north Africa or as an extension
of some added service to Luanda.
In addition to the broad Cuban military participation in the Horn and in southern
Africa, political relations between Havana and each of the countries to be served have
warmed perceptibly in the past few years. The increased contacts have led to plans for
expanding technical assistance, particularly to Iraq, Libya, and Mozambique. Because
of these improving ties, the Castro government decided to augment its slender air links
with friendly countries in the area.
Havana probably is optimistic in indicating its intention to inaugurate all these
services by January, especially to those countries where a route requires a time-
This article was produced jointly by the Office of Economic Research and the Office of Regional and Political
Analysis.
25X1
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
consuming request for overflight rights. We do not know of any particular overflight
requests by Cuba at this time.
Factors Behind Expansion
Cuba's economic relations with these countries, while still relatively small, have
increased considerably over the past few years. For example, Cuban sugar exports to
Algeria, Libya, Iraq, and Ethiopia have nearly quadrupled since 1974 to over 250,000
tons-about 15 percent of Cuba's total sugar exports to the world free market in 1978.
These sugar sales have helped offset Cuba's serious shortage of hard currency. These
earnings, coupled with the probable hard currency payments for Cuban technical
assistance from at least some of the more prosperous Arab states, make many of these
countries of increasing importance to Cuba.
In addition to these commercial ties, the Castro government doubtless plans to use
the new airlink to Addis Ababa to rotate troops-many of whom will soon have
completed a year's service in Ethiopia. The new service will also allow the transport of
civilian advisers, as part of Cuba's recently finalized plans to establish a large technical
assistance program in Ethiopia. Similarly Havana is in the process of sending large
numbers of public health and other technical specialists to Iraq and Libya and is
expanding considerably in its development assistance to Mozambique.
Cubana now operates 14 scheduled international flights weekly, to 15 foreign
cities over a route network of 27,500 nautical miles. With Havana as the hub, the
service features routes to Europe and the Caribbean, with additional flights to Canada
and black Africa. In Europe, IL-62 flights operate three times a week to Madrid, one
of the flights going beyond to East Berlin and another to Prague. A Havana-Montreal
flight operates twice weekly, also using IL-62s.
Service to Latin America includes weekly flights between Havana and Mexico
City and between Havana and Lima via Panama City. In the Caribbean, Cubana has
twice weekly turboprop IL-18 flights to Kingston; one of the flights continues on to
Barbados, Port of Spain, and Georgetown.
Scheduled Cubana operations to Africa amount to little at present. In addition to
a twice weekly IL-62 flight between Havana and Luanda (with a stopoff at Cape
Verde), occasional flights have been made to Luanda via either Conakry or Freetown.
These flights have expedited the flow of Cuban military, technical, and general
support personnel into the military confrontation arena.
25X1
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
Cubana Airlines: International Route Network, October 1978*
East Berlin
.1rague
Havana
Luanda
*Cubana flights between Havana and Luanda have used
varying routes and intermediate stops during the past two years.
he announced new
service to Iraq would give recognition to this nation's ties to Soviet and Cuban
aspirations both in the Mideast and on the African continent.
Aircraft Inventory
Cubana's civil air fleet has been expanded and modernized over the past 12
months through the purchase of four Soviet-built IL-62 jets * for longer haul
international services, and more recently, through the purchase of six YAK-40 trijets
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
Cuba's Transport Aircraft Inventory
Jet ..............................................................................
10
IL-62 ........... . ..................... .......... .....................
41
YAK-40 ... ............................................
6
Other ........ . ....................... ................. ............ ......
28
IL-18 ....... ......... ..............
4
Bristol-Britannia ......................................................
4
IL-14 ... ......................................................................
11
AN-24 ..... ............ .....
9
for domestic service. The Cubana inventory of major transport aircraft is shown in the
table.
25X1
Vietnam's Military Demands Add to Economic Woes
Sporadic fighting on the Cambodia border since late last year and recent moves to
improve defensive capabilities along the northern border with China are further
hampering Vietnam's postwar economic recovery. * Since the 1.975 takeover, the
economy has been hobbled by bureaucratic inefficiency, lack of skilled managers,
absence of production incentives, a poorly developed infrastructure, and unusually
bad weather affecting agricultural production.
25X1
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
The situation along both borders has diverted troops from their major postwar
reconstruction and development role. The military was to provide much of the
manpower, security, and equipment to open up Vietnam's agricultural frontier so that
food production could be boosted. Many important-but not crucial-land reclama-
tion, irrigation, and rail and road projects are being delayed.
The military situation is also occupying much of the time and energy of
Vietnam's thinly stretched government leaders, slowing the functioning of the
centrally planned economy. Hanoi officials have been unable to give full attention to
difficult decisions on foreign economic relations and on domestic economic policies.
Consequently, implementation of foreign aid projects is lagging and needed economic
reforms are being delayed.
The heightened readiness along the border so far has required only small
additional budgetary outlays for military pay, food, and equipment. Deliveries of
military aid from the USSR this year are up slightly but are still well below those noted
during the Vietnam war. We have no evidence that priority military shipments are
substantially displacing the transport of civilian goods through Vietnam's already
overtaxed ports. In some cases, however, transport equipment intended for foreign-
financed aid projects has been commandeered by the military.
25X1
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
 Secret
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
 Assessment
Center
Economic Indicators
Weekly Review
ER EI 78-044
2 November 1978
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
This publication is prepared for the use of U.S. Government
officials. The format, coverage and contents of the publication are
designed to meet the specific requirements of those users. U.S.
Government officials may obtain additional copies of this document
directly or through liaison channels from the Central Intelligence
Agency.
Non-U.S. Government users may obtain this along with similar
CIA publications on a subscription basis by addressing inquiries to:
Document Expediting (DOCEX) Project
Exchange and Gift Division
Library of Congress
Washington, D.C. 20540
Non-U.S. Government users not interested in the DOCEX
Project subscription service may purchase reproductions of specific
publications on an individual basis from:
Photoduplication Service
Library of Congress
Washington, D.C. 20540
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
1. The Economic Indicators Weekly Review provides up-to-date information
on changes in the domestic and external economic activities of the major non-
Communist developed countries. To the extent possible, the Economic Indicators
Weekly Review is updated from press ticker and Embassy reporting, so that the
results are made available to the reader weeks-or sometimes months-before receipt
of official statistical publications. US data are provided by US government agencies.
2. Source notes for the Economic Indicators Weekly Review are revised every
few months. The most recent date of publication of source notes is 16 February 1978.
Comments and queries regarding the Economic Indicators Weekly Review are
welcomed.
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
 BIG SIX Fd roved For COMPOSITE INDICATORS
140
130
120.E
INDEX: 1970=100, seasonally adjusted
Semilogarithmic Scale
Percent
JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT
1973 ApprTMIXor Release124.9iN07/28 : CIA--
1976 T7 0T00702A0p09 050002-5 1978
llncluding Japan, West Germany, France, the United Kingdom, Italy, and Canada. A-2
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
Trade Balance
4.0
Industrial
Production
Big Six
United States
Consumer Prices
AVERAGE ANNUAL
Percent Change GROWTH RATE SINCE
LATEST from Previous 1 Year 3 Months
MONTH Month 1970 Earlier Earlier2
Percent, seasonally adjusted, annual rate
Billion US $, f.o.b., seasfially adjusted
Unemployment Rate
Big Five
3 Months
LATEST MONTH 1 Year Earlier Earlier
Big Six
JUL 78
0.9
9.2
6.6
7.9
Trade Balance
United States
JUL 78
0.7
6.8
7.7
1
1.0
Big Six
United States
LATEST
MILLION CUMULATIVE (MILLION US $)
MONTH
US $ 1978
1977
Change
JUL 78
3,146 31,681
16,184
15,497
JUL 78
-2,987 -19,355
-13,623,
-5,732
w ear Re eor previos aseu2004n/07/ so ally ad usteRDP80T00702A000900050002 -5 rate,
2Average for latest 3 mdn~ll? RRdrci08}?ddifh
A-3
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
INDUSTRIAL PRODUCTION INDEX: 1970=100, seasonally adjusted
West Germany
130
120
110 /' 113
JAN APR JUL OCT JA APR JUL CT A APR N P C APR JUL OCT
approved for Release 2~'b4/~`~/2 :Geld-R ~8~0`tOa1 0A 2~ O6Oa02-5
1973 1974 1975 1976 1978
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
United Kingdom
140
Canada
1 140
JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT
United States
Japan
West Germany
France
Percent AVERAGE ANNUAL
Change GROWTH RATE SINCE
from
LATEST Previous 1 Year 3 Months
MONTH Month 1970 Earlier Earlieri
Percent
Change
AVERAGE ANNUAL
GROWTH RATE SINCE
LATEST
Previous '
1 Year 3 Months
MONTH
Month
1970 Earlier Earlieri
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
iAverage for latest 3 months c pared with average for previous 3 months.
JAN APRN 1JUL~ ~~ -OCT
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
UNEMPLOYMENT RATE PERCENT
United States
JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN
1973 1974 1975 1976 1977 1978
Approved For Release 2004/07/2 6 CIA-RDP80T00702A000900050002-5
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
United Kingdom
Italy (quarterly)
3
Canada
JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT
1973 1974 1975 1976 1977 1978
THOUSANDS OF PERSONS UNEMPLOYED
United States
Japan
West Germany
France
1 Year 3 Months
Earlier Earlier
SEP 78 6,002 6,668 5,754
JUL 78 1,260 1,200 1,220
SEP 78 986 1,035 986
SEP 78 1,235 1,132 1,186
3.8
United Kingdom
Italy
Canada
8.5
OCT 78 1,360 1,432 1,371
711 III 1,658 1,692 1,455
SE:P 78 946 887 944
NOTE: Data are seasonally adjusted. Unemployment rates for France are estimated. The rates shown for Japan and Canada are
roughly comparable to US rates. For 1975-78, the rates for France and the United Kingdom should be increased by 5 percent and
15 percent respectively, and those for West Germany decreased by 20 percent to be roughly comparable with US rates. Beginning in
1977, Italian rates should be decreased by 50 percent to be roughly comparable to US rates.
Approved For Release 2004/07/28 : QAI9-RDP80T00702A000900050002-5
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
CONSUMER PRICE INFLATION Percent, seasonally adjusted,
annual rate'
United States
2.9 Ayeracge Annual Rate of Inflation 1961-1972
West Germany
France
._ _...~.___ JAN R-,.,...._....
JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR a JUL OCT 1AN- APR JUL UL OCT OCT JAN APR JUL OCT
1973 1974 1975 1976 1977 1978
'Three-month average compared'' h pprove err+orhF~elease 2004/07/28 : CIA-RDP80T00702A000900050002-5
/ap A-8
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
United Kingdom
4.T
Canada
4.2
JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR
Percent
Change
from
LATEST Previous
MONTH Month
SEP 78
AVERAGE ANNUAL
GROWTH RATE SINCE
1970 1 Year 3 Months
Earlier Earlier2
JUL 78 0.7
AUG 78 0.1
LATEST
MONTH
United Kingdom SEP 78
Italy SEP 78
Canada SEP 78
2Average for latest 3 months compared with average for previous 3 months, seasonally adjusted at annual rate.
Approved For Release 2004/07/28: CIA-RDP80T00702A000900050002-5
JUL
OCT
JAN APR JUL OCT
Percent
AVERAGE ANNUAL
Change
GROWTH RATE SINCE
from
Previous
1970 1 Year 3 Months
Month
Earlier Earlier2
1.0
13.1 12.2 13.5
0.1
7.6 8.6 8.7
 United States
Japan
West Germany
France
United Kingdom
Italy
Canada
' Seasonaly adjusted.
Average
Annual Growth Rate Since
Percent Change -------
Latest from Previous 1 Year Previous
Quarter Quarter 1970 Earlier Quarter
78 II 1.8 3.2 4.0 7.4
78 II 1.1 5.4 5.3I 4.4
78 II
78 I
77 IV
78 I
78 II
Nonresidential; constant prices
Average
Annual Growth Rate Since
United States
Japan
West Germany
France
United Kingdom
Italy
Canada
' Seasonally adjusted.
Percent Change
-.--
Latest from Previous I Year Previous
Quarter Quarter 1970 Earlier Quarter
78 II I 3.6 I 3.0 7.4 1 15.1
78 II
78 II
77 IV
78 I
United States
Japan
West Germany
France
United Kingdom
Canada
Eurodollars
Average
Annual Growth Rate Since
Percent Charge - Latest from Previous 1 Year 3 Months
Month Month 1970 Earlier Earlier
United States Jul 78 -0.3 3.1 3.5 1.9
Japan Apr 78 4.0 9.9 4.3 24.8
West Germany Jun 78 1.6 2.6 3.3 -3.2
France Jan 78 9.9 0 1.0 10.5
United Kingdom Sep 78 -1.2 1.3 6.8 12.8
Italy May 78 12.1 3.5 3.5 12.1
Canada Aug 78 3.7 4.1 1.3 1.1
' Seasonaly adjusted.
'Average for latest 3 months compared with average for previous 3 months.
WAGES IN MANUFACTURING'
United States Jul 78
Japan Apr 78
West Germany 78 I
France 77 IV
United Kingdom Jun 78
Italy Jun 78
Canada Jul 78
1.2
0.3
0.9
'Hourly earnings (seasonally adjusted) for the United States, Japan, and Canada; hourly wage
rates far others. West German and French data refer to the beginning of the quarter.
'Average for latest 3 months compared with that far previous 3 months.
1 Year 3 Months 1 Month
Latest Date Earlier Earlier Earlier
Oct 25
Oct 27
Oct 25
Oct 27
Oct 25
Oct 25
Oct 25
Average
Annual Growth Rate Since
Percent Change --
Latest from Previous 1 Year 3 Months
Period Period 1970 Earlier Earlier '
3.82 4.08
7.00 8.50
10.71 4.93
9.92 7.30
7.75
9.91
8.38
8.41
Approved For Release 2OG4/07128- CIA--R?P8M0702A00090005090 -5
A-10
Commercial paper
Call money
Interbank loans (3 months)
Call money
Sterling interbank loans (3 months)
Finance paper
Three-month deposits
___e-_ -
GNP Approved For Releas2004/07/28 : CIJ~f~ 85A ~0 -
 EXPORT PRIC Iff proved For Release 2004/07/28
IJg$0p2A000900050002-5
us $
National Currency
Average
Average
Annual
Growth Rate Since
Annual Growth Rate Since
Percent Change
Percent Change
Latest from Previous
1 Year
3 Months
Latest from Previous 1 Year
3 Months
Month Month
1970
Earlier
Earlier
Month Month 1970 Earlier
Earlier
United States
Jul 78 - 0.4
9.6
9.5
15.7
United States Jul 78 - 0.4 9.6 9.5
15.7
Japan
Jul 78 1.0
11.7
26.8
37.9
Japan Jul 78 - 5.8 3.8 -4.3
-8.8
West Germany
Jun 78 1.7
11.5
12.9
-4.0
West Germany Jun 78 0.7 3.9 -0.1
4.9
France
Jun 78 2.2
11.5
13.6
7.8
France Jun 78 0.6 8.8 5.3
-2.8
United Kingdom
Sep 78 1.7
12.3
21.8
41.9
United Kingdom Sep 78 0.8 15.1 8.3
9.6
Italy
Jun 78 0.5
10.8
8.1
2.7
Italy Jun 78 -0.8 15.3 4.9
4.6
Canada
Jul 78 0.9
8.3
0.6
10.3
Canada Jul 78 1.5 9.3 6.6
3.8
IMPORT PRICES
OFFICIAL RESERVES
National Currency
Average
Billion US
$
Annual
Growth Rate Since
Latest Month
Percent Change
I Year
3 Months
Latest from Previous
1 Year
3 Months
End of Billion USE Jun 1970 Earlier
Earlier
Month Month
1970
Earlier
Earlier
United States Jun 78 18.9 14.5 19.2
19.2
United States
Jul 78 0.6
12.6
7.3
2.9
Japan Aug 78 29.2 4.1 17.8
27.7
Japan
Jul 78 -6.6
5.8
-20.9
-22.7
West Germany Jul 78 41.1 8.8 35.1
41.3
West Germany
Jun 78 -1.6
3.0
-5.9
-12.5
France Apr 78 10.6 4.4 10.0
10.2
France
Jun 78 -0.6
9.1
0.2
-9.1
United Kingdom Aug 78 17.4 2.8 15.0
17.3
United Kingdom
Sep 78 0.9
17.1
4.3
3.8
Italy Aug 78 14.9 4.7 10.5
12.2
Italy
Jun 78 -0.7
18.7
1.8
2.4
Canada Sep 78 3.7 9.1 4.8
4.7
Canada
Jul 78 2.3
9.7
11.3
17.4
CURRENT ACCOUNT BALANCE '
BASIC BALANCE '
Current and Long-Term Capital Transactions
Cumulative (Million
US E)
Cumulative (Million
US E)
Latest
Latest
Period Million US $
1978
1977
Change
Period Million US $ 1978 1977
Change
United States'
78 I -6,954 -
6,954 -4,158
-2,796
United States No longer published'
Japan
Aug 78 7 1
0,803
5,300
5,503
Japan Aug 78 -1,268 4,867 3,779
1,088
West Germany
Jul 78 -868
2,831
1,406
1,425
West Germany Jul 78 -881 1,915 -2,363
4,278
France
78 I -84
-84 -1,628
1,543
France 78 1 -863 -863 -1,889
1,025
United Kingdom
78 I -803
-803
-896
94
United Kingdom 78 I -326 -326 543
-869
Italy
78 I 288
288 -1,025
1,313
Italy 77 III 2,427 N.A. N.A.
N.A.
Canada
78 II -1,201 -2,381 -2,658
277
Canada 78 II 883 327 -557
884
' Converted to US dollars at the current market rates of exchange.
Converted to US dollars at the current market rates of exchange.
' As recommended by the Advisory Committee on the Presentation of Balance
of Payments
' Seasonally adjusted.
Statistics, the Department of Commerce no longer publishes a basic balance.
TRADE-WEIGHTED EXCHANGE RATES'
EXCHANGE R
ATES
Spot Rate
As of 27 Oct 78
Percent Change from
Percent Change from
As of 27 Oct 78
US $
1 Year
3 Months
1 Year 3 Months
Per Unit 19 Mar 73
Earlier
Earlier
20 Oct 78
19 Mar 73 Earlier Earlier 20
Oct 78
Japan (yen)
0.0056 45.80
41.97
5.06
2.32
United States -6.73 -11.86 -3.88 -1.86
West Germany
0.5682 59.84
28.92
15.30
2.64
Japan 46.60 35.37 2.59
1.48
(Deutsche mark)
West Germany 37.01 7.70 5.46
0.03
France (franc)
0.2466 11.13
19.77
8.17
3.42
France -10.09 -1.83 -2.56
0.91
United Kingdom
2.0630 -16.56
16.59
7.16
3.25
United Kingdom -29.33 -0.37 -0.90
1.09
(pound sterling)
Italy -44.04 -8.66 -3.90 -0.69
Italy (lira)
0.0013 -28.65
10.56
5.72
1.78
Canada - 17.64 -10.94 -4.77
0.28
Canada (dollar)
0.8515 -15.13
-6.56
- 3.14
0.84
Weighting is based on each listed country's trade with 16 other industrialized countries to
Approved For Release 2004/07/28
1a rg the maja `urren`ies.
 Approved For Release 2004/07/28 : CIA-RDP80TOO702AO00900050002-5
Exports to (f.o.b.)
Big Other Com-
World Seven OECD OPEC munist Other
UNITED STATES
1975 ..........................
107.65
46.94
16.25
10.77
3.37
29.82
1976 ..........................
115.01
51.30
17.68
12.57
3.64
29.44
1977 ..........................
120.17
53.92
18.53
14.02
2.72
30.98
1978 ..........................
1st Qtr ................
30.94
13.65
4.60
3.76
1.00
7.93
Apr ......................
12.06
5.40
1.68
1.38
0.42
3.17
JAPAN
1975 ..........................
55.73
16.56
6.07
8.42
5.16
15.87
1976 ..........................
67.32
22.61
8.59
9.27
4.93
17.84
1977 ........... ....... ..._.
81.11
28.02
9.73
12.03
5.32
26.01
1978
1st Qtr ................
22.11
7.83
2.39
3.35
1.32
7.22
Apr ......................
7.89
2.80
0.80
1.19
0.57
2.53
WEST GERMANY
1975 ..........................
91.70
28.33
36.44
6.78
8.81
11.05
1976 ..........................
103.63
33.44
41.86
8.25
8.72
11.04
1977 ..........................
119.28
39.01
48.00
10.78
8.59
12.90
1978
1st Qtr ................
32.45
FRANCE
1975 ..........................
52.87
20.00
15.50
4.90
3.13
8.61
1976 ..........................
57.05
22.49
16.15
5.08
3.23
8.75
1977 ..........................
65.00
25.90
18.19
5.97
3.00
11.94
1978
1st Qtr ................
18.49
7.66
5.07
1.57
0.66
3.53
Apr ......................
6.74
2.82
1.90
0.56
0.28
1.18
UNITED KINGDOM
1975 ..........................
44.03
12.55
16.59
4.55
1.56
8.64
1976 ..........................
46.12
14.03
17.53
5.13
1.39
7.92
1977..........................
57.44
16.99
22.56
6.78
1.63
9.48
1978
1st Qtr ................
16.86
5.09
6.27
2.03
0.55
2.92
Apr ......................
5.75
1.73
2.19
0.74
0.18
0.91
ITALY
1975 ..........................
34.82
15.61
7.86
3.72
2.46
4.67
1976 ..........................
36.96
17.41
8.69
4.23
2.18
3.96
1977 ..........................
45.04
20.92
10.20
5.85
2.45
5.62
1978
1st Qtr ................
10.80
CANADA
1975 ..........................
33.84
26.30
1.73
0.71
1.20
2.00
1976 ..........................
40.18
32.01
2.03
0.81
1.25
2.09
1977 ..........................
42.98
34.77
2.13
0.94
1.06
4.08
1978
1st Qtr ................
10.75
8.78
0.55
0.23
0.22
0.97
Apr ......................
4.20
3.44
0.16
0.08
0.07
0.45
Approved For Release 2004/07/28 : CIA-RDP80TOO702AO00900050002-5
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
UNITED STATES
1975 ..........................
1976 ..........................
1977 ..........................
1978
1st Qtr ................
Apr ......................
JAPAN
1975_ ........................
1976 ..........................
1977 ..........................
1978
1st Qtr ................
Apr ......................
WEST GERMANY
1975 ..........................
1976 ..........................
1977 ..........................
1978
1st Qtr ................
FRANCE
1975 ..........................
1976 ..........................
1977 ..........................
1978
1st Qtr ................
Apr ......................
UNITED KINGDOM
1975 ..........................
1976 ..........................
1977 ..........................
1978
1st Qtr ................
Apr ......................
ITALY
1975 ..........................
1976 ..........................
1977 ..........................
1978
1st Qtr ................
CANADA
1975 ..........................
1976 ..........................
1977 ..........................
1978
1st Qtr ................
Apr ......................
World
Big
Seven
Other
OECD
OPEC
Com-
munist
Other
103.42
49.81
8.83
18.70
0.98
25.08
129.57
60.39
9.75
27.17
1.16
31.09
156.70
70.48
11.08
35.45
1.22
38.47
43.14
20.39
3.51
8.15
0.47
10.62
15.42
7.54
1.27
2.73
0.18
3.70
57.85
16.93
6.08
19.40
3.36
12.05
64.89
17.58
7.78
21.88
2.91
14.72
71.33
18.87
7.93
24.33
3.41
16.79
18.32
5.04
2.06
6.46
0.87
3.89
6.28
1.64
0.74
2.01
0.36
1.53
76.28
27.09
27.78
8.24
4.87
8.21
89.68
31.28
32.64
9.73
5.93
10.01
102.63
36.38
37.37
10.12
6.14
12.62
28.24
10.11
10.88
2.32
1.39
3.54
53.99
23.04
14.33
9.43
1.94
5.21
64.38
27.81
16.93
11.36
2.24
6.01
70.50
30.28
18.24
11.82
2.46
7.70
19.76
8.58
5.40
3.05
0.64
2.09
6.79
3.02
1.84
1.00
0.23
0.70
53.35
18.47
18.52
6.91
1.68
7.67
55.56
19.66
18.81
7.29
2.08
7.65
63.29
24.02
21.34
6.31
2.40
9.22
18.87
7.44
6.68
1.80
0.55
2.40
5.67
2.27
2.04
0.39
0.16
0.81
38.36
17.32
6.75
7.85
2.09
4.34
43.42
19.35
8.04
8.12
2.65
5.24
47.56
20.80
8.67
9.03
2.80
6.26
11.26
5.03
2.10
2.18
0.51
1.44
38.59
29.78
1.70
3.43
0.32
2.02
43.05
33.55
1.82
3.48
0.38
2.56
44.67
35.67
1.77
3.05
0.33
3.85
10.80
8.60
0.44
0.77
0.08
0.91
4.61
3.84
0.18
0.03
0.19
0.37
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
FOREIGN TRADE BILLION US $, f.o.b., seasonally adjusted
6.8
6.6
2.0
JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
A-14
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
United Kingdom
United States
Japan
West Germany
France
AUG 78
Balance
SEP 78
Balance
AUG 78
Balance
JUL 78
Balance
13,429
104,054
91,352
13.9%
15 120
126,721
10Q 105
19 1%
-1,691
22,667
-17,953
-4,714
8,146
62,499
51,820
20.6%
6.023
43.994
41.055
7.2%
2,123
18,505
10,765
7,740
10,890
78,259
66,376
17.9%
.9.,.203
64,60.4_
5 ,039
17-4%
1,687
13,655
11,337
2,318
6,598
50,854
41,993
21.1%
.6,842_
50,7.35_.
44,40.1-
14,3?!
-244
119
-2,409
2,527
6,043
50,004
41,298
21.1%
6,423
51,895
44,234
17.3%
Balance
-380
-1,891
-2,936
1,044
4
480
33
333
29
145
14
4%
AUG 78
,
3,787
,
31,244
,
28,992
.
7.8%
Balance
693
2,089
153
1,936
Canada
AUG 78
3,640
29,739
27,962
6.4%
3,478
28.071
26.672
5.2%
Balance
162
1,668
1,289
379
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
A-15
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
FOREIGN TRADE PRICES IN US $1
United States
West Germany
INDEX: JAN 1975 =100
JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT
19AA3roved For#MM5se 2004/071129761A-RDP80T9ffD7A000900050M%
lExport and import plots are based on five-month weighted moving averages.
A-16
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
APR JUL OCT JAN APR JUL55 OCT JAN APRs JUL OCT JAN APR JUL OCT JAN APR JUL OCT
117 Approved For elease 2004/6S 6CIA-RDP80 (W7 2A0009000 R(T( g 11-78
 ApprovSELECTEDe 2004/ 01AA-6DP?3URfV1Vg00050002-5
MONEY SUPPLY'
INDUSTRIAL PRODUCTION '
Average
Average
Annual
Growth Rate
Since
Annual Growth Rote Sims
Percent Change
-----
Percent Change
-
West
from Previous
1 Year
3 Months
Latest
from Previous
1 Year
3 Months
Month
Month
1970
Earlier
Earner
Period
Period 1970
Earlier
Earner'
Brazil
Mar 78
2.7
36.4
43.3
34.7
India
Jun 78
-2.8 5.2
5.4
21.1
India
Apr 78
2.5
14.0
16.2
13.0
South Korea
Jun 78
-1.2 22.5
20.1
26.5
Iran
May 78
0.4
29.0
21.4
66.2
Mexico
May 78
-2.2 6.3
8.3
14.3
South Korea
Jun 78
4.3
31.6
30.4
20.9
Nigeria
78 1
6.8 11.4
0.5
30.0
Mexico
Jun 78
2.9
20.9
37.7
30.8
Taiwan
Aug 78
2.9 16.3
33.6
40.6
Nigeria
Mar 78
5.6
35.3
18.9
3.3
Taiwan
May 78
0.6
25.1
32.8
40.8
Seasonally adjusted.
Thailand
Apr 78
- 3.2
13.3
12.5
32.3
previous 3 months.
Average for latest 3 months compared with average for
' Seasonally adjusted.
' Average for latest 3 months compared with average for prevIous 3 months.
CONSUMER PRICES
WHOLESALE
PRICES
Average
Anmat Growth
Rote Since
Average
Percent Change
Annual Growth Rate Since
Latest
from Previous
1 Year
Percent Change
Month
Month
1970
Earner
Latest
from Previous
1 Year
Month
Month
1970
Earlier
Brazil
Jun 78
4.1
28.3
38.0
Brazil
May 78
3.4
28.4
34.5
India
May 78
0.3
7.4
1.6
India
May 78
0.6
8.0
-2.8
Iran
Jun 78
-0.1
12.2
10.2
Iran
Jun 78
-1.3
10.7
9.3
South Korea
Aug 78
0.3
14.5
13.5
South Korea
Aug 78
0.1
15.7
10.9
Mexico
Jul 78
1.7
15.2
18 3
Mexico
Jul 78
1.1
16.5
17.3
Nigeria
Dec 77
3.1
16.6
31.3
Taiwan
Aug 78
0.4
8.1
1.6
Taiwan
Aug 78
1.9
9.8
-0.6
Thailand
Mar 78
-0.1
9.4
5.8
Thailand
Jun 78
0.9
8.7
8.4
EXPORT PRICES
OFFICIAL RESERVES
us $
Million US $
Average
Latest Month
Annual Growth Rate Since
1 Year
3 Months
Percent Change
End of
Minion US $ Jun 1970
Earlier
Earlier
Latest
from Previous
1 Yea
Month
Month
1970
Earlier
Brazil
Feb 78
6,733
1,013
5,878
5,994
Brazil
Feb 78
0.4
14.0
1.5
India
Jun 78
6,140
1,006
4,559
5,823
India
Sep 77
-2.7
10.0
18.4
Iran
Aug 78
11,949
208
11,561
12,468
South Korea
78 1
0.7
8.7
7.7
South Korea
Jul 78
4,298
602
3,656
4,138
Taiwan
Jun 78
1.9
11.3
3.3
Mexico
Mar 78
1,766
695
1,422
1,723
Thailand
Dec 77
0.1
10.2
-7.8
Nigeria
Aug 78
1,872
148
4,611
2,609
Taiwan
Jun 78
1,462
531
1,411
1,433
Thailand
Aug 78
2,295
978
1,992
2,129
Approved For Release 2004/07/28\: 16IA-RDP80T00702A000900050002-5
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
Latest 3 Months
Percent Change from
3 Months 1 Y
ear
Latest Period Earlier' Earlier 1978 1977 Change
May 78 Exports
84.8
-3.7
4,743
4,979
-4.7%
May 78 Imports
26.6
1.4
5,110
4,939
3.5%
May 78 Balance
-367
40
-407
Mar 78 Exports
-19.6
-13.5
1,476
1,707
- 13.5%
Mar 78 Imports
-24.1
9.7
1,444
1,316
9.7%
Mar 78 Balance
32
391
-358
Iran
Jul 78 Exports
49.4
14.0
13,913
13,562
2.6%
May 78 Imports
- 1.6
1.6
5,705
5,259
8.5%
May 78 Balance
4,087
4,871
-783
South Korea
Jul 78 Exports
39.3
23.5
6,749
5,351
26.1%
Jul 78 Imports
83.0
29.2
7,284
5,695
27.9%
Jul 78 Balance
-535
-344
-191
Mexico
Jun 78 Exports
- 7.3
8.4
2,412
2,162
11.6%
Jun 78 Imports
91.3
26.8
2,934
2,340
25.4%
Jun 78 Balance
-522
-178
-344
Nigeria
78 II Exports
86.7
-26.0
1,808
2,526
-28.4%
78 I Imports
579.5
115.0
1,808
841
115.0%
78 I Balance
-974
368
-1,342
Taiwan
Aug 78 Exports
84.2
38.7
8,044
5,884
36.7%
Aug 78 Imports
68.9
32.5
6,439
5,119
25.8%
Aug 78 Balance
1,605
765
840
Thailand
May 78 Exports
21.9
4.5
1,609
1,506
6.8%
May 78 Imports
105.7
21.3
1,908
1,624
17.5%
May 78 Balance
-299
-117
-182
Approved For Release 2004/07/28 A d?A-RDP80T00702A000900050002-5
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
AGRICULTURAL PRICES MONTHLY AVERAGE CASH PRICE
WHEAT
S PER BUSHEL
7.5
1-25 OCT 11
RICE
175 S PER HUNDRED WEIGHT
'22.5
No. 2 Medium Grain, 4% Brokens,
f.o.b. mills, Houston, Texas
16 OCT 15.50
10 OCT 15.50
SEP 78 15.50
OCT 77 17.06
t5.0 15.50
7.5
1-16 OCT
1-974 1975 1976 1977 1978
25 OCT 0.6719
18 OCT 0.6567
SEP 78 0.6101
OCT 77 0.5003
1-25 OCT II
1974 1975 1976 1977 1978
SUGAR
$ PER METRIC TON 75 0 PER POUND
800
1-25 OCT (I
CORN
5 $ PER BUSHEL
0 1974
8.97
1-25
COFFEE/TEA
400 C PER POUND
COFFEE
2,000 Other Milds Arabicas, ex-dock New York
350 25 OCT 150.00
18 OCT 154.33
300 SEP 78 155.32
1,500 OCT 77 170.90
1,000
200
TEA
London Auction
JUL 96.2
JUN 98.3
MAY 94.9
OCT 77 101.9
Approved For Release 2004/0742
A:
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
SOYBEANS
$ PER BUSHEL
Crude, Bulk, c.i.f. US Ports
25 OCT 0.3050
18 OCT 0.3050
SEP 78 0.2975
OCT 77 0.2017
500 400
25 OCT
6.91
25 OCT
177.50
18 OCT
6.70
18 OCT
175.20
SEP 78
6.47
SEP 78
164.03
OCT 77
5.05
OCT 77
136.41
SOYBEAN OIL/PALM OIL
$ PER POUND $ PER METRIC TON
0.51
SOYBEAN OIL
Crude, Tank Cars, f.o.b. Decatur
0 PER POUND
120
AUSTRALIA
Boneless Beef,
110 f.o.b., New York
11
1-25 OCT (l
1976 1977 1978
UNITED STATES
Wholesale Steer Beef,
Midwest Markets
} 19 OCT 108.00 21 OCT 81.83
13 OCT 106.00 14 OCT 84.28
$ PER METRIC TON $ F
1-19 OCT
$ PER METRIC TON
108.38 . 2,500
1-19 OCT
500,
1-17 OCT [
NOTE: The food index is compiled by the Economist for 16 food commodities
which enter international trade. Commodities are weighted by
3-year moving averages of imports into industrialized countries.
Approved For Release 2004/07/28 : C-PA-RDP80TOO702AO00900050002-5
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
INDUSTRIAL MATERIALS PRICES MONTHLY AVERAGE CASH PRICE
COPPER WIRE BAR
140 C PER POUND
LME US
25 OCT 69.3 71.6
18 OCT 67.6 71.6
SEP 78 65.4 67.8
OCT 77 54.8 60.6
LEAD
S PER METRIC TON 45 C PER POUND
3,000
ZINC
100 C PER POUND
LME US
25 OCT 33.3 35.0
18 OCT 31.2 35.0
SEP 78 28.8 33.0
OCT 77 23.1 32.3
1-25 OCT 1I 1,000
TIN
S PER METRIC TON 750 C PER POUND
2,000
650
1-25 OCT II ' 6,000
1977 1978
1-25 OCT II
1975 1976 1 977 200
~1978
LME US
25 OCT 731.5 776.9
18 OCT 699.5 755.7
SEP 78 630.4 674.9
OCT 77 549.6 607.9
1-25 OCT II
0
1974 1975 1976 1977 1978 250 1974
O 1-19 OCT II 0
1974 1975 1976 1977 1978
PLATINUM
350 $ PER TROY OUNCE
LME US
25 OCT 39.2 39.0
18 OCT 36.1 39.0 37.4
SEP 78 31.4 :14.4
MP USD
25 OCT 280.0 345.5
18 OCT 255.0 326.0
SEP 78 250.2 258.0
OCT 77 167.0 156.0
PER METRIC TON
1,000
$ PER METRIC TON
16,000
734.7 )
1-25 OCT
1977 1978
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
A-22
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
ALUMINUM
Major US Producer
t per pound
55.25
53.00
53.00
48.00
US STEEL
Composite
$ per long ton
419.31
395.81
359.36
327.00
IRON ORE
Non-Bessemer Old Range
$ per long ton
22.55
21.43
21.43
20.51
CHROME ORE
Russian, Metallurgical Grade
$ p.er metric ton
NA
NA
150.00
150.00
CHROME ORE
S. Africa, Chemical Grade
$ per long ton
56.00
56.00
58.50
42.00
FERROCHROME
US Producer, 66-70 Percent
t per pound
42.00
41.00
41.00
44.00
NICKEL
Composite US Producer
$ per pound
2.02
2.06
2.11
2.41
MANGANESE ORE
48 Percent Mn
$ per long ton
67.20
67.20
72.28
72.00
TUNGSTEN ORE
Contained Metal
$ per metric ton
18,222.00
18,372.00
20,236.00
16,340.00
MERCURY
New York
$ per 76 pound flask
151.00
151.00
141.14
132.45
SILVER
LME Cash
t per troy ounce
594.79
515.88
476.67
421.55
GOLD
London Afternoon Fixing Price $ per troy ounce
226.75
175.28
158.86
116.12
LUMBER INC)EX6
1-17 OCT
1977 1978
1970=100
1-20 OCT `II
1976 1977 1978
lApproximates world market price frequently used by major
world producers and traders, although only small quantities of
these metals are actually traded on the LME.
2Producers' price, covers most primary metals sold in the US.
3As of 1 Dec 75, US tin price quoted is "Tin NY lb composite."
4Quoted on New York market.
5S-type styrene, US export price.
6 This index is compiled by using the average of 13 types of lumber whose
prices are regarded as bellwethers of US lumber construction costs.
7Composite price for Chicago, Philadelphia, and Pittsburgh.
NOTE: The industrial materials index is compiled by the Economist for 19 raw
materials which enter international trade. Commodities are weighted by
3-year moving averages of imports into industrialized countries.
Approved For Release 2004/07/28 : Cql,13RDP80T00702A000900050002-5
 Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5
Approved For Release 2004/07/28 : CIA-RDP80T00702A000900050002-5