CHILE : BALANCE OF PAYMENTS PROSPECTS FOR 1975

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86T00608R000600070004-6
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 6
• Document Creation Date: December 16, 2016
• Document Release Date: December 8, 2004
• Sequence Number: 4
• Publication Date: January 29, 1975
• Content Type: MF

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.Attachment:
As stated
29 January 1975
Distribution: (S-08603)
Orig. & 1 - Addressee
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(.L 1'RAL INTELLIGENCE AGENCY
WASHINGTON, D.C. 20505
DES S~ab8le0'~~'1S
Bureau of rconc:nic and Pusiness Affairs
Office of Development finance
Department of State
141:t10RANDU? FOR: ?fir. Robert Gc1hard '
for 1975
SUBJECT : Chile: valance of Payments Prospects
directed to
In response to your request, we are transmitting
our assezsment of Chile's 1975 balance of payments
prospects. Queries concerning this report should be
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OffIce o Econc is ..esearch
1 - D/OER
OER/D/LA:
(29 Jan 5
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Chile: Balance-of-Payments Outlook for 1975
1. The damage to prospective export earnings caused
by low world market copper prices will cause serious
balance-of-payments difficulties for Chile in 1975. Without
official ecorcmic assistance. beyond levels presently in
sight, compensation payments for L'S companies may be
jeopardized, and Santiago certainly will be forced to
drastically cut back imports, with harsh consequences for
economic growth. We estimate the remaining financing gap
at no less than $258 million.
2. Weak den-and by the industrial nations and large
world stocks overhanging the market almost certainly will
keep copper prices low throughout 1975. We expect 1975
copper prices to average no more than 65 cents a pound
compared with a 1974 average of one dollar. At the same
time, Chile has agreed with the other CIPE'C countries to
reduce copper export volume about 10% from the 1974 level
to 810,000 metric tons. Under these circumstances, Chile's
total export earnings will amount to no more than $1.5
billion, down 25% from last year. If copper prices average
only 60 cents a pound -- as is quite possible -- total 1975
export earnings would amount to only $1.4 billion.
CCgig L'~Tl~t
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3. The estimated financing gap assumes that a 10%
cut in imports from last year to $2 billion will be
effected by the military government. Such a ctit,, probably
the maximum that can be made without serious adverse affect
on economic growth, is now under consideration. Since
sizable inventories were acdumulated under a liberalizes?
import policy, most observers believe imro.rts of raw
materials and intermediate goods probably could be cut
ti
substantially without serious damage. Moreover, Santiago
probably could restrict oil imports to last year's level
by introducing rationing ?or by raising oil prices to consumers.
Such efforts will be further aided by this year's improved
harvest and by continuing US PL-480 assistance, which together
will permit a 13% cut from last year in food imports.
. 4. With an import cut of this magnitude, Chile's
1975 current deficit still is likely to climb to $800-$900
million compared with some $440 million in 1974. A
considerable part of the increase is expected to be offset
by an improvement in the capital account, however. New
suppliers credits this year are expected to push inflows
of private capita]. sharply upward, to about $400 million.
At the same time, presently contemplated official assistance
will total $307 million, as follows (million US $):
C6111it cl* ?.4
-77777 7.
7 C, VIM
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US AID and PL-480
30
IbT
187'
World Bank
80
Finally, Chile has a good chance of obtaining about $200
million in debt relief at the ::arch reeting of the Paris
Club.
5. This leaves a financing gap of $25E-$358
million. Since foreign reserves a.:.eunt t7-only $195 r.illion
Chile will be forced to further curtail z.pcrts unless
additional financing can-be obtained. Because Chile's poor
credit standing precludes bcrrowing fro-: cc:= ercial sources,
such financing will have to core frci official sources. In
view of the milita_-v cover _^ent's blemished international
image, financirc frcn even official sources is far fr=
assured.
CIA/OER
29 January 1975
~~rt~-;,~I?I
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Millions of Dollars
1975
Averace
Ccr:.er Price
1974
E5
60c
Current account (net)
-441
-760
-850
Exports
(fob)
2,037
1,535
1,445
Copper 1/
(1,560)
(1,010)
(920)
Other
(477)
(525)
Imports (cif)
-?,234
-2,01
Foodstuffs
(-472)
(-410)
Petroleum, and products
(-348)
(-350)
Other
(-1,414)
(-1,255)
Services (net)
-248
-300
Transfers (net)
4
20
Capital account (net)
-71
502
Private
-379
410
Amortization (-638) (-415) 2/
Debt relief - 424 200
Overall deficit -88 -258 -348
1. Net copper excorrs ass,=..e an 8.5 cer.:s cer pound disccunt from
the. copper wirebar :rice CIF Europe, to allow for quality deviation,
freight and insurance.
2. Includes ccr.pensation paynents to foreign companies for
properties nationalized in Chile.
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