ECONOMIC INTELLIGENCE WEEKLY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86T00608R000500140032-8
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 24
• Document Creation Date: December 9, 2016
• Document Release Date: March 19, 1999
• Sequence Number: 32
• Publication Date: August 13, 1975
• Content Type: REPORT

CIA-RDP86700~Q8ROOb50Q140032-$
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Secret
No Foreign Dissem
Economic Intelligence Weekly
Secret
ER EIW 75-32
13 August 1975
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NATIONAL Si:CURITY INFORMATION
Unauthorized Dis~!os(rre Subject t~ Criminal Sanctions
Claaalfi~d by 013314
Exempt from y~nsral d~claasifimtion ach~dul~
of E.O. 11632, ~x~mption mt~poryo
? SE(1), (2), and W)
Automatically d~cloaaifl~d one
Datx Impouybl~ to D~t~rmin~
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StCRET
No Foreign Dsssem
ECONOMIC INTELLIGENCE WEEKLY
13 August 1975
France: Worsening Unemployment 3
. 5
Portugtl: Host of Economic Problems 7
Chile: Tightened FEscy~ anc: iVienetary Restrictions 9
The Two Koreas: An Economic Appraisal 13
Soviet GoIJ to the Rescue? 17
Romania: Trade Agreement signed with US 18
Publication of Interest, Statis~cics
The Number of unemplo~./ed in the Big Seven Is Up 60:o From Mid-1974.
Seasonally adjusted unemployment in Fr~~nce (878,000 or 4.0% of the labor force
in June) and in the United Kingdom (977,000 or 4.2 % in J~~ly) is now certain
to top the politically sensitive 1 million .,park by ~rearend. In West Germany,
unemployment has more than doubled over the year, to F.7% in July; file rates
are still higher in the United S~:ates (8.4%) and in Canada (7.2%!. Even if business
activity picks up in response to anticipated reflationary programs this fail, high
unemployment will persist well into 19~o as firms return to longer workweeks
before hiring new hands.
Foreign workers account Eor 1~% of the unemployed in West Germany and
10% in France. Until domestic unemployment eases, Wes*_ European governments
are likely to retain or evP;?r stiffen restrictions on the employment of foreigners.
Switzerland recently reduced further the number of annual and seasonal work
permits for foreigners and adopted a provision allowing the federal government
to halt the is~~:,:~~,?e of permits if employment continues to fall.
Note: Comments and queries regardi:ig th.e Economic /nrelligence -Neekly arc welcomed. They may be duccted
25X1 A to the Office of Economic Research, Code 143, Extension 7555.
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The Dollar Rebounded Last Week following a slight decline earlier in the
month in the wake of tha announcement of the US wholesale price figures for
July. The dcllar has appreciated nearly 12% against the Deutschema-k and other
joint float currencies since mid-May. Its strength this summer has been due largely
to growing interest rate differentials which have stimulated capital movements into
the United States.
The dcllar is likely to continue strong until economic growth picks up in
Europe, raising interest rates. Some governments are disturbed by the recent
exchange rate movements despite the salutary effect on their competitive posit;on
in world markets. A majcr cause of their concern is the increased cost of crude
oil, the price of which is quoted in dollars. (Conf;~antial)
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SECRET
FRANCE:
WORSENING UfJEMPLOYMENT
Unemployment in Trance, al-
ready at a F ~stwar high, will likely
jump another 40%o by )~carend-a dis-
quieting increase i~1 a country with
vivid memories of the 1968 cr~_s
FRANCE: Unemployment Indicators
(Ssesonelir adjusted)
iio Trends in Industrial Employment
and Production (Index: 1973=150)
n
sparked by students and discont~ ,ted 100
workers. Paris anticipates a much
smaller increase, counting on the
psychological impact of the $3.5 bil-
lion reflationary package scheduled for
95
announcement in September. We judge
that even if busine~smer, raise produc-
tion il, expectation of strengthening
demand, forces already in motion will
drive unemployment up for another
four or five months.
Unemployment Trends
The number of unemployed has 800
jumped 95% lil the past year to
878,000, or 4% of the labor force at
mid-1975. Last fall saw the steepest soo
rises, with the recent monthly increases
at about 40,OOJ. Most of the latest
increments represent young entiants
into the labor force rather than I:lyoffs. 400
People under the age of 25, the same
age group that manned the barricades
in 1968, now account for 36% of the 200
unemployed, up substantially from a
yeal? ago. The percentage of males
amol~g the unemployed has also risen
during this period, from 47% to 53%.
~J F
About one-tenth of the jobless come 699925 9.7b
Tronds in Total Unemployment and
Job Vacant+es (Thousand persons)
JOF3
VACANCIES
M A M J J A S O N D J F Ill A fill J
1974 1975
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:`rom the ranks of the 2 million forri~?r. workers, mostly Algerians and Portuguese,
who constitute a like sha-. of the labor force.
Of those now out of work, only " 0,0~i0 have been laid off and hence qualify
for the new program that guarantee jvbl;ass workers practically 100`,;'0 of take-home
pay.: aced with stroro pressure frcm goivern:n~~nt and unions, French firms have
made great efforts to hold on to their employees. shortened workweeks, advanced
vacatic n schedules, an,i normal attrition have been used to avoid layoffs. As a result,
industrial employment declined only 1.3 ~'0 from July 1974 to April 1975, while
industrial production plummeted by 130. Because hourly wages continued their
rapid rise, we, estimate that unit labor costs rese 21;"0 during this period.
Prospects in the Labor Market
We believe that the n>mber of jobless wiii top 1.2 million by December,
possibly reaching 1.5 million, or almost 7`J0 of the labor force, and that
unemployment will remain well above prerecession levels through :976.
On the labor supply side, a sharp spurt in the labor force is likely before the
end of the year. About 820,000 young people will reach working age this year, of
whom 650,000 are expected to enter the labor force. Traditionally, school graduates
begin their job search after the August vacation period. Retirements and withdrawals
from the labor force should number 300,000 to 350,000 this year, possibly half of
them falling in the second part of 1975.
On the demand side, the near-terns outlook for job opportunities is bleak. The
increase in public spending expected to be announced in early September will not
directly affect production until next year. The gover;imcnt is pinning its hopes on an
improvement in the immediate psychological climate of business. We believe this is
wishful thinking. Because most firms have hung on to excess workers, they can
readily increase production in the initial stages of ecunomic recovery through fuller
use of current short-timer;; and underemployed persons.
Other government efforts to create jobs are not likely to have much effect on
the demand for labor. Extension cf the 1974 ban on the immigration of foreign
labor will curb the growth of the labor supply; it will not release jobs for
Frenchmen. With production sluggish, *.;ie program announced ir. June to subsidize
:he hiring of yon^ng workers will hardly make a dent in the crop of new graduates.
(For Official Use Only)^
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PORTUGAL: HOST OF tC0}~IOMIC PROBLEMS
Portugal 1~ t\Derle,^, 'in3' a pr;~__r'ess,~. e~C.`:Jrriic d'.'teriOrat]On, ~pceue;' ~:~; b`.
ti:is summer's pohiical crisis. Lisbon has }~et to a.;opt or .yen formulate :: pry, ram
that could turn thins aro~rn t.
T}:. r:~lirg Armed Fof:es '~to~ement has '?~recast a 6'- declim in GtiP this
~ ear, a figure likF^i}~ to pro~~e optimistic because of the disastrous effect labor turmoil
is having on industaial production. '~!an~ enterprises, includine some i~orrign~w~ned,
have been seized r~ rad~cai worl'% last year and ar? on t;'e way to a simi'ar
increase in 1975. Redistribution of income in favor of poomr groups. upset' led
political conditions, and declining product:^n have ~,iven impetus to inflation. The
government budget. in near balance in 1974, n~~w is running a substantial deficit.
Lisbon has decreed various price controls ar.d then u-:dermined there with efforts
to raise farm prices and boost minimum wages.
Payments in Deticit
a cording to the International Monetary Fund, foreign reserves fell by S4R5
million last yea- and b}~ an adc'itional 5163 million in Janu;.ry-April 1975. Lisbon
admits to an even greatr. drop in reserves - 5650 million in 1914 and 5440 million
in Janu;try-April 1975. Included in remaining reserves, totaline S'.3 billion, is S 1 .~'
billion in gold valued at 54~ per ounce, which would be worth 54.7 billion at
the market price of 5165.
Since early 1974, h;gh oil prices, sharp wage increases, political unrest at home,
and the internatiural recession have opened a substantial gap between receipts and
outlays. Imports arc up while receipts from tourism, foreign investment. and wo.~ker
remittances have fallen. The trade deficit seems certain to rise from S 1.7 hill^n
in 1974 to at least S2 billion this year; the current account defici[ will jump from
5560 million to more than S 1 billion.
Capital Hight continues apace, despite various controls by the government.
Travelers c_an take only small amounts of cash and other assets cut ~f the ccunt,y.
Remittances by foreign firms operating in Portugal reportedly also have been
.mpcdec'_.
The government has moved to discourage imports, by imposing ad valorurn
surtaxes on a wide range of products. So far, it has refused to devalue the escudo.
Afthougl~ the EC foreign ministers last June agreed in principle to extend
a possible $1.3 billion in aid to help the country "develop along democratic lines,"
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Subslque^t dCt'rio['::t1on !~ il:. i~_t1U~a~ Srtaati~)rl tiaS .sL1S~;l tl:: Cor~~~...,uil~' t0
Lbaci: O?I. CJnI)~ small amo:^tS O. '.~i} rri~tL'all?~ ~:;i~~c hc~^ ~CP.1rn;ti:,j ~)r :\t~,^4~L~
b~ ~l.est ~llr0pean lo!.:ltr::_ ...:d alt l~nitla Mail S.
Lisbon and the Con,muaist govern^.rlnts ha~~? signed several l~or,omic
agreements amid much fanfare: trade has picked up sharpy from ;..~ small hasc.
Portuguese exnortc to 1'1'arsaw Pact countries totaled S1 ~ million in Januar.-April
19?5, double the same perio~J in ':9'4, while imports ~r._,t?ased from 5-'.? miiiion
to Slb million. !Moscow h:s agreed to sup,~ly lquiprnlnt and training to the
Portuguese fishing 1ndUStry :?'.~ r`C:':SiS ~L'lll ng tl) pr0~'.dl t