TRADE AND PAYMENTS TRENDS OF NON-OPEC LDCS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86T00608R000500180007-2
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 13
• Document Creation Date: December 12, 2016
• Document Release Date: March 5, 1999
• Sequence Number: 7
• Publication Date: April 1, 1975
• Content Type: IM

 Approved For Release 2001/08/21 :CIA-RDP86T00608R000500180007-2
F~OA OI`~YC'JAIL USE ONd.Y
Intelligence Memorandum
Trade and Payments Trends of Non-OPEC LI~Cs
ER IM 75.7
April 1976
' Copy No. 1~'y~
Approved For Release 2001/08/21 :CIA-RDP86T00608R000500180007-2
 Approved For Release ~~IO~~~~~~~8~~~08R000500180007-2
Trnde and Payments
Trends of Non-OPEC LUCs
Non-OPEC LDCs incurred a substantial worsening of 2hcir terms of trade in
1974 They suffered not only from sharp increases in the price of petroleum
imported from OPEC countries but also from extraordinary pace increases in
cornmoditi , and manufactures imported from developed countries. Prices of
primary commodities exported by non-OPEC LDCs were mixed. Those of metals
and agricultural raw materials reached a peak around midyear and, with the
worsening economic recession, leave been declining since then. Food prices remained
firm, in .general. These factors caused:
? arr increase in the trade deficit of non-OPEC LDCs to about US
$31 billion, 41 ~% of which was attributable to OF EC trade; and
? a drop in real economic growth rate;, for most of the non-OPEC LDCs.
Althou#h the balance-of-payments deficits of most non-OPEC LDCs were
financed with little apparent difficulty in 1974, problems will grow in 1975. Most
of these countries entered 1975 with a lower level of foreign exchange reserves
and larger potential current account deficits than in 1974. Private capital flows
to these countries will become less available, driving them increasingly to official
bilateral and multilateral capital sources and to 1MF balance-of-payments financing.
OPEC, directly or indirectly, will assume a larger share in financing their
balance-of-payments deficits.
We expect that non-OPEC LDCs will increasingly resort to currency
devaluations to expand exports and curb imports. Increased import restrictions and
falling prices for their primary commodity exports will result in a continued drop
in the real rate of economic growth for most of them.
N01P; Comments and queries regarding this memorandum are welcomed. They may
be directed to of the Office of Economic Research, Code 143,
Extension 5291.
Approved For Release 2001/08/21 :CIA-RDP86T00608R000500180007-2
ADt111976
 Approved For Release 2001/08/21 :CIA-RDP86T00608R000500180007-2
I. -Chis memorandum presents and analyzes recent changes in foreign trade
relationships between non-OPEC less developed countries (non-OPEC LDCs)I and
the OPEC c:ountrics, devclopetl countries, the USSR and Eastern Europe, and China.
Its primary focus is the balance-of-payments implications of these changes and the
economic adjustments that non-OPEC LDCs have made. Complete data on country
foreign trade and payments arc lacking, and gaps had to be filled in with estimates
that should be regarded as approximations.
?. Merchandise trade developments in non-OPEC LDCs for 1974 indicated:
(a) a doubling of the overall trade deficit, (b) widening trade deficits with OPEC
countries, (c) an even larger trade deficit with developed countries, and (d) a
nlativcly small but improved trade balance with the Soviet bloc and China.
3. 1Jon-OPEC developing countries merchandise trade in 1974 showed a
record deficit of some 531 billion (sec Table 1 and Figure 1). Brazil ran a deficit
of about 54.7 billion, South Korea roughly 51.7 billion, South Vietnam
S770 million, Taiwan 5700 million, the Philippines 5680 million, India
5650 million, Pakistan 5640 million, and Kenya 5350 million. The 33 countries
on the UN Most Seriously Affected (MSA)2 list, which includes India and Pakistan,
had a combined trade deficit of about S4 billion.
4. Most of the increase in the trade deficit with developed countries was
generated by an estimated S3.5 billion increase in tltc deficit with Japan. Data
for 1974 show trade deficit Increases of S? billion with West Germany, about
55''5 million with the United States, and more than 5750 million with the United
Kiagdom, relative to 1973.
I. Alltiria, t?:cuadur, Indonesia, Iran, Iraq, Kuvrit, Libya, Nigeria, Qatar, Saudi Arabia, United Arab l:miratcs,
and Venezuela arc full mcmtxrs of OPEC; for the purposes of this memorandum, Gabon, an aswciatc member,
also is included in OPEC. [excluding these countries, nun-OPEC LOCs include all Africa except the Republic
of South Africa; al! Asia except Japan, Australia, and New tealand: as the Near East; and all the Western
Hemisphere except C'anad:r and the United States.
2 UN administrative criteria tlwt identify MSAs include low per capita income tout exceeding 5400), sharp
increases in import costs of essentials relative to export earnings, high ratio of debt service to export crrnings,
and a low Icvcl of forcilm cxrtwnlti reserves to meet requirements. Rwanda was rceently added to the
32 original AISAs.
1
Approved For Release 2001/08/21 :CIA-RDP86T00608R000500180007-2
 Approved For Release 2001/08/21 :CIA-RDP86T00608R000500180007-2
Talrlc 1
Non-OPEC L1DCs: Forci~n Trader
"-"
_
_
A9illion US
~f
_ o.b.~
1971
1972
1973
.
1974
Total net deficit
-15,333
-14,895
-15,530
-30
958
Dcvclorcd countries
L'xports
28,196
33,104
49,017
,
62
741
Imports
40 671
~
45,108
62,153
,
81
42;1
Trade balance
OPEC countries
Exports
-12,475
1234
-12,004
1,644
-13,136
2
219
,
-18,6'19
2 774
Imports
3,95'1
4,587
,
4,914
15
479
Trade balance
Soviet bloc/China
Exports
?2,718
2 086
-2,943
2,433
-2,695
3,214
,
-; 2,705
3
921
Imports
2226
2,381
2,913
,
3
495
Trade balance
140
52
301
,
426
1. Data exclude arms trade.
2. Cstimatcd.
Non-OPEC LDCs: Foreign Tradet
EXPORTS
IMPrOR-TS-
-ib.b 1
EXPORTS
IMPORTS
~,,,,, ba.a
89.9
TRADE DEFICIT
100.4
Approved For Release 2001/08/212 CIA-RDP86T00608R000500180007-2
 Approved For Release 2001/08/21 :CIA-RDP86T00608R000500180007-2
5. Import prices for non-OPEC LUCs rose about 38% in 1974; import
volume was up by 9%. Export prices improved some 25% and export volume rose
about 3%. The 33 It?SAs fared much less well; import prices climbed some 50%
and import volume gowth was virtually unchanged; export prices showed :Ii25%
gain, but export volume declined by "almost 5%. -
Regional and National Impact
6. Changes in export and import prices and volumc:;c had different impacts
on individual nations of the non-OPEC LDCs. For example, Brazil's real economic
growth of 10% in 1974 was about ti.he same as that of Nigeria, ari oil exporter.
South Korea's exports weakened during the year, particularly those of textiles and
plywood, acrd the country's real economic growth rate fell by one-half. But this
was a decline from a phenomenal 16% real economic ge!vth rate in 1973.
7. At the 'other extreme, floods, drought, or other natural calamities
contributed to the economic problems of such countries as India, Pakistan,
Bangladesh, and those of Sahelian Africa.3 They were consequently ill-equipped
to cope with adverse import price developments or to maximize export volume
increases during 1974. In the case of Sahelian Africa, the end of a drought of
several years' duration is not expected to restore normal agricultural activity for
a'.-out two years. The market for Pakistan's raw cotto~r and yarn, major exports,
t~~ok a turn for the worse. Poor monsoon rains reduced India's agricultural output
a-:~l were a major cause of larger gain imports that n: ore than doubled in value,
to about $1 billion. Flood problems and generally chaotic conditions hampered
Bangladesh's export production and brought the economy to t}te brink of collapse.
8. Prices of metals, food, and agricultural raw materials in 1974 remained
above 1972 levels, although Those of most metals and sonte agricultural raw
materials weakened considerably after midyear. Price declines were large for cotton,
hides, rubber, and copper, f'or example. Food prices were buoyant during most
of the year, but by yearend they too were falling -especially for coffee, rice,
and copra (see Table 2).
. 9. The decline in prices of certain primary products wes not sufficiently
long-lived to have a sizable effect in 1974 on major LDC exporters of these
commodities. The consequences will be gayer in 1975.
~. Sahelian Afrlca consists oC Mauritania, Senegal, Mali, Upper 'Volta, Niger, Chad. and The Cambia -all
MSAs, except The Cambia.
Approved For Release 2001/08/21 : C>IA-RDP86T00608R000500180007-2
 Approved For Release 2001/08/21 :CIA-RDP86T00608R000500180007-2
Pro-
jected
X972
1973
9974
19752
I~'ood
Bananas
101
102
123
I25
Bctf~ n
162
:e20
174
150
Cocoa
85
i68
258
185
Coffee
119
148
160
110
Copra
60
157
305
230
Fish meal
144
327
224
175
Groundnut oil
130
166
33U
250
Ricer
114
209
294
215
Sugar
246
316
988
800
Agricultural raw materials
Cotton
132
216
219
140 ~e
1Jides
229
266
l $8
150
Jute
108
104
127
250
Rubber
77
157
174
150
Metals
Aluminum
101
102
130
140
Copper
78
130
150
IOC
Iron ore
103
145
166
180
Tin
110
141
238
250
1. Indexes are expressed in terms of US dollars. Data arc from the IMF except as otcd.
2. CIA estimate.
10. The indications are that the services account of non-OPEC LDCs, which
traditionally shows a negative balance, deteriorated substantially in 1974. Data for
a sample of 39 countries consisting of 29 low-income countries (1972 per capita
GNP of less than $400), and 10 higher income LDCs indicate a deterioration, in
the services account from 1973 to 1974 of 54% for all low-income countries
(including 24% for UN MSAs), 74% for higher income LDCs, and 68% for the
entire sample.4
1:. The services balance for non-OPEC LDCs is largely determined by outlays
for transport and financial services, although there is considerable variation within
4. The sample was compiled from estimates by IMF, IBRD, and US embassies fir individual countries.
Approved For Release 2001/08/21 :CIA-RDP86T00608R000500180007-2
 Approved For Release 2001/08/21 :CIA-RDP86T00608R000500180007-2
the group. Debt service payments arc relatively larger for the higher than fcr the
lower income LDCs because they tend to borrow more and generally have to pay
market rates of interest. For example, Taiwan's 1974 services balance det:eri~~rated
by about 214?l0, Israel's by some 82?Io. and I3razil's by about SSIo. On the other
hand, India's worsened by a mere 3% and Sri Lanka's by 13%.
12. From an extrapolation of both 1972 IMF balance-of-payments data (the
latest available for the non-OPEC group from that source) and the sample
balance-of-payments estimates for the 39 countries, we estimate the 1974 services
deficit for all non-OPEC LDCs to have been on the order of $15 billion.
13. OPEC wants disbursed to non-OPEC LDCs approximated about
$2.0 billion in 1974, mostly to Islamic countries. DAC bilateral official grants have
been of the order of $4.5 billion per year for 1972 and 1973. Assuming a minimum
10% increase,spurred by increased .-eed, DAC grants in 1974 may have totaled
$5 billion.
14. With a 1974 trade deficit of ;>31 billion, an adverse services bdtance of
$15 billion, and unrequited transfers inclusive of private transfer.;s estimated at
$9 billion, the 1974 current account balance for non-OPEC LDCs was about
$37 billion (see Table 3).
Billion US S
Pro-
jetted
1974'
19I52~~
Exports (f.o.b.)
69.4
83.3
Imports (f.o.b.)
-100.3
-118.4
Trade balance
-30.9
-35.1
Net services
-15.0
?19.5
Net transfers
9.0
9.9
Current account balantx
-36.9
-44.7
1. Estimated as ln. Table 1.
2. C1A estimate.
Approved For Release 2001/08/21 :CIA-RDP86T00608R000500180007-2
a
 Approved For Release 2001/08/21 :CIA-RDP86T00608R000500180007-2
Official L'iilatcral Capital flows
15. DAC net official bilateral capital flows6 were about $4.9 billion in 1974,
roughly the same as for 1973. Data on OPEC official capital flows arc not precise.
We estimate 1974 OPEC bilateral commitments to nqn-OPEC LDCs at $8.G billion,
of which some $3 billion, inclusive of the $2 ~ billion in grants referred to in
paragraph 13, was actually transferred.? Net transfers from Communist nations
were about $1.2 billion, inclusive of a negligible grant figure. ,
16. Non-OPEC LDCs acquired some $0.9 billion from the IMF Oil Facility
in 1974 to assist in financing their balance-of-payments deficits (see Table 4). Gross
drawings from the Fand other than from the Oil Facility approximated $1.1 billion.
Parti~~l data on IBRD/1DA disbursements indicate some increase in disbr+tsements
in 1974 over the ~ record level of the previous year.
Private Capital
17. From the limited information on private capital flows, we e:~;timate that
she current account deficits of higher income LDCs such as Brazil, the Dominican
Republic, and Jamaica were financed principally by private capital flows. For lower
income LDCs such as Cameroon, India, Ivory Coast, Kenya, and Tanzania, current
account financing came mainly from official sources (see Table 5).
18. Eurocurrency borrowing by non-OPEC LDCs for 1974 approximated
$G.4 billion, with $4.5 billion of this going to higher income countries (see
Figure 2). These borrowings were 33% above 1973 levels but were lower in the
second half of the year than in the first.
19. At the end of December 1974, the gross international reserves of
non-OPEC LDCs Were about $28 billion, off some $2 billion from the December
6. These arc distinct from grants. They include official development lending and irvcstment as well. as official
export credits.
7. Gross official bilateral disbursements (grant+:, loans, and asset acquisitions) in 197A arc estimated at
S15 billion, of which DAC countries transferred S10 billion, OPEC S3 biWon, and the Comr~~nlst eat+ons
51.7 billion. Net official capital flows are net of interest and lase amortization payments, whl~h a:., about
51.5 billion annually to DAC countries and are presently negligible in the case of OPEC countries. The
corresponding figure for Communist countries is now about SS00 miWon.
Approved For Release 2001/08/21 : CIA-RDP86T00608R000500180007-2
 Approved For Release 2001/08/21 : ~I,~-F24DP86T00608R000500180007-2
a e
Non-0PEC LDCs: borrowing from 1M1: Oil facility
1974
UN Most Seriously Affected
Other countries
263,114
countries
654,187
Clule
49,764
Bangladesh
48,468
Costa Rica
22,604
Cameroon
5,544
Cyprus
7,656
Central African Republic
3,186
Fiji
408
Chad
2,646
Nicaragua
3,9'12
CI Salvador
21,468
Panama
8,844
Guinea
4,212
South Korea
108,000
Haiti
4,590
Uganda
5,975
Honduras
20,142
Uruguay
55,890
India
240,000
Ivory Coast
13,404
Kenya
38,436
Malagasy Republic
4,140
Mali
4,800
North Yemen
11,167
Pakistan
117,528
Sierra Leone
5,184
Sri Lanka
40,800
Sudan
34,452
Tanzania
34,020
Total
917,301
Net Official and Private Capitol Flows to Selected Non-0PEC LDCs
r~ith 'L~rrrent Account Deficits
Official
Capital
Private
Capital
Official
Capital
Private
Capital
Brazil
210.0
3,470.0
280.0
5,320.0
Cameroon
42.4
18.0
44.0
18.0
Dominican Republic
14.0
74.0
23.0
110.0
India
658.0
-210.0
1,141A
-202.0
Ivory Coast
171.9
139.6
199.0
-52.1
Jamaica
42.1
179.5
107.8
233.2
Kenya
53.0
45.0
85.0
45.0
Tanzania
137.0
9.8
120.7
17.4
Approved For Release 2001/08/21 :CIA-RDP86T00608R000500180007-2
 Approved For Release 2001/08/21 :CIA-RDP86T00608R000500180007-2
Mon-Oi'EC LDCs: Eurocurrt;ncy Borrowing
Lower Incomo
LDCs
LDCs
Higher Income
LDCs
1973 total for the group. Gross reserves of industrial countries rose by some
$5 billion over the same period.
20. Cstimates for a sample of 20 of the 33 MSAs indicate an overall deficit
t'or the sample of $1 billion for 1974.8 Drawings on the IMF (including those
from the Oi~ r~acility), less repayments, amounted to $1.1 billion. Of the net
drawings, India received $688 million against an estimated overall deficit of
$518 million, and Pakistan received $132 million against an overall deficit of
Approved For Release 2001/08/21 :CIA-RDP86T00608R000500180007-2
 Approved For Release 2001/08/21 :CIA-RDP86T00608R000500180007-2
$225 million. Between them, these two countries obtained ~3','Jo of the net IMF
drawings of non-OPEC LDCs in 1 X74.
21. Among the MSAs, Guyana, Etluopia, and South Yemer,~ incurred overall
balance-of-payments surpluses in 1974. These developments should be regarded
more as being the net outcome of random c,ir~umstances than as being positive
signs of the economic health of those countries. All are relatively small consumers
of imported petroleum. Guyana benefited from high sugar prices and a good sugar
cane harvest; Yemen profited from Arab official donors and fi-om workers'
mmittances from neighboring oil-producing countries. In the case of Ethiopia,
uncertain political conditions led to inventory drawdowns of imported goods and
restrained imports at the same time that favorable market condition:; for coffee
and pulses were boosting export earnings.
Overall Assessment ~hd Short-Term Prospects
22. The balance-of-payments deficits of non-OPEC LDCs were financed with
little apparent difficulty in 1974. For 1975, the prospects are for mtrre serious
balance-of-payments problems.
23. In industrial countries, little recovery from the economic recession is
likely until late this year. Consequently, demand for the products of developing
countries will continue weak. In the short term, prices of primary products may
fall further as users' inventories continue to be drawn dow,~. Even if a turnaround
in the inventory position should stimulate LDC export volume after mid-1975,
price declines up to that point would probably bring about minimal increases in
export earnings for the year.
24. For 1975 as a whole, although certai-~ prices of items, such as jute and
tin, are expected to be higher than in 1974, commodity prices in general will
be lower. The prices of manufactured goads will continue to increase. All this
points to a continued worsening of the terms of trade of non-OPEC LDCs and
to larger trade and current account deficits. We c,:pect the 1975 trade deficit for
the group ?o be about $35 billion anti the current account deficit to be some
$45 billion (see Table 3).
25. Faced with their poorer balance-of-payments prospects in 1975,
non-OPEC LDCs probably will rely increasingly on import restrictions and currency
devaluations to cope with the situation. Many countries will have to accept lower
rates of economic growth. Brazil's reJ growth rate, for example, is expected to
Approved For Release 2001/08/21 : CIA9RDP86T00608R000500180007-2
 Approved For Release 2001/08/21 :CIA-RDP86T00608R000500180007-2
fall from D a% to 5%-7%, Colom>;=.a's from 6% to 4%, Itenya's from 5?lo to 2?Io,
and Costa Rica's from 4% to about 2%. On the other !rand, Sri Lanka's real growth
rate is expected to rise t'rom 3% to 5-1/2% and Guyana's from 5% to 6% because
of improved export prospects.
26. Non-OPEC L.JCs face mixed balance-of-payments financing prospects for
1975. The level of interest rates in world capital markets, and the uncertainty
prevailing there and in the developing countries themselves all serve to work against
any increase in the rate of private capital flows io these countries. Tlie burden
of balance-of-payments financing in 1975 wily fall increasingly on official. bilateral
and m~~ltilateral capital sources. In these arrangements, OPEC countries are expected
to assume an expanding role
? in the financing of the 1975 IMF Oll Facility,
? in new lending to the IBRD,
o in direct (joint-venture) investment in non-OPEC LDCs,
? in increased activity in their regional official financial institutions, and
? in the transfer of 1974 aid commitments that were delayed in their
disbursement.
Approved For Release 2001/08/2110CIA-RDP86T00608R000500180007-2