INTERNATIONAL ECONOMIC & ENERGY WEEKLY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP88-00798R000100090007-7
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 48
• Document Creation Date: December 22, 2016
• Document Release Date: October 14, 2010
• Sequence Number: 7
• Publication Date: May 24, 1985
• Content Type: REPORT

Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
-Seeret
Weekly
International
Economic & Energy
DI IEEW 85-021
24 May 1985
833
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
International
Economic & Energy Weekly
24 May 1985
Synopsis
7 Iraq: Debt Problems
Yugoslavia: Good Performance in 1984, Uncertain Outlook
EURA
15 The Turkish Economy Under Ozal
EURA
19 Thailand: New Push for Export Reform
OEA
25 Briefs Energy
International Finance
Global and Regional Developments
National Developments
25X1
25X1
25X1
25X1
25X1
25X1
25X1
25X1
directed to Directorate of Intelligence
Comments and queries regarding this publication are welcome. They may be
Secret
DI IEEW 85-021
24 May 1985
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
International
Economic & Energy Weekly
Synopsis
Iraq: Debt Problems
Iraq's failure to make some debt payments in early April reflects Baghdad's
increasing difficulties managing its mounting foreign debts. We believe
Baghdad will avoid unpopular cuts in consumer good imports by delaying some
major weapons purchases and stretching out development projects.
11 Yugoslavia: Good Performance in 1984, Uncertain Outlook
Aided by financial support from the IMF, Western governments, and banks,
Yugoslavia's economy made a relatively good showing in 1984. The economy is
off to a poor start in 1985, and the Planinc government is under growing
pressure to deal with rising inflation and falling living standards.
15 The Turkish Economy Under Ozal
Since Prime Minister Ozal took office in late 1983, economic growth and the
foreign payments position have improved. Inflation and unemployment have
worsened, however, and we believe the government will come under increasing
pressure from the military and the public unless there is progress in these two
areas.
19 Thailand: New Push for Export Reform
The Prem government has made an impressive start in implementing measures
to ease the country's foreign payments strains and boost Thai export competi-
tiveness. We expect sufficient progress to ensure at least moderate growth'in
exports through the end of Prem's term in 1987.
iii Secret
DI IEEW 85-021
24 May 1985
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
International
Economic & Energy Weekly
24 May 1985
Perspective
Secret
DI IEEW 85-021
24 May 1985
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
Saudi Arabia: The Struggle
for a Balanced Budget
Budget D
Wheat
Wheat subsidies illustrate the difficult policy deci-
sions Saudi officials will have to make during the
next several years. During the 1970s, Saudi offi-
cials became concerned that they were vulnerable
to Western pressures because of their dependence
on food imports. Self-sufficiency was costly but
affordable as long as oil revenues were continuing
to grow. Now officials must choose between their
deeply felt financial obligation to balance the
budget and the goal-still considered important-
of negating any leverage by wheat exporting coun-
tries
Riyadh's policy of giving free land, concessional
financing for equipment,- and subsidized water and
other inputs has paid off handsomely in terms of
production. This year's wheat harvest of an esti-
mated 2.3 million tons is 10 times the output just
three years ago and far above domestic consump-
tion of 800,000 tons per year. Even storage is a
problem. The Grain Silos and Flour Mills Organi-
zation's (GSFMO) silos can hold only 1 million
tons of wheat, and they still contain 700,000 tons
from last year's crop. The US Embassy estimates
that another 1 million tons of private storage may
exist, but, even if that is empty, almost half of the
wheat harvest will have to be stored in the open.
GSFMO has not been allocated enough money to
pay for the wheat, let alone build new silos.
Although officials have reduced the guaranteed
purchase price for wheat from $972 a ton to $555 a
ton, farmers still receive three and a half times the
world market price. Riyadh will have to cough up
$1.3 billion to pay for the wheat, but only $536
million has been allocated to GSFMO in the
current budget
Secret
DI IEEW 85-021
24 May 1985
25X1
25X1
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
Iq
Next 2 Page(s) In Document Denied
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
Iraq: Debt Problems
Iraq's failure to make some debt payments in early
April reflects Baghdad's increasing difficulties
managing its mounting foreign debts. Although
Iraq probably will secure further debt rescheduling
and additional Arab aid, import cutbacks are like-
ly. We believe Baghdad will avoid unpopular cuts
in consumer good imports by delaying some major
weapons purchases and stretching out development
projects. Iraq's finances will remain fragile, and a
steep drop in oil prices or large battlefield losses
could force politically risky reductions in civilian
imports
Debts and Missed Payments
The cost of the war and loss of oil export facilities
through the Persian Gulf and Syria have wrecked
Iraq's finances. Since 1980 Baghdad has turned to
other Arab states-especially Saudi Arabia and
Kuwait-for $30 billion in aid, drawn down foreign
assets by $29 billion, and run up an $8.5 billion
debt to non-Arab states. Despite this financing,
civilian imports-primarily development projects-
have been slashed.
Iraq's immediate debt troubles reflect a hump in
payments caused by the short-term structure of its
non-Arab debt-we suspect debts to Arab states
will probably never be paid. Most loans have been
undertaken since 1982 and have only two-year
repayment periods. As a result, Baghdad owes an
estimated $3 billion in debt payments this year on
rescheduled 1983 debts and initial payments on
1984 debts.
At the beginning of April, Iraq surprised Japanese,
Yugoslav, and Indian creditors by not making
scheduled debt payments and by asking again for
rescheduling. At the same time, however, Baghdad
made payments to its other major creditors, accord-
ing to the US Embassy in Baghdad. Iraq also is
continuing payments to the US Commodity Credit
Corporation to which it has outstanding debts of
approximately $1 billion.
Iraq's decision not to pay individual creditors rath-
er than bring together all its creditors for resched-
uling talks probably reflects a belief that some
countries can be pressured to provide more relief:
? Baghdad probably opted to not make its first
installment on the approximately $700 million it
owes Japanese firms this year because Tokyo's
offer of only a $200 million credit line for 1985
fell short of Iraqi expectations. Most other West-
ern creditors have offered to maintain or expand
credit in 1985.
? Yugoslavia and India, Baghdad's largest non-
Western non-Soviet creditors, have shown a will-
ingness to reschedule Iraqi debt to maintain
business. Moreover, neither country is likely to
extend additional credit, and thus Baghdad does
not risk losing potential sources of new financing.
Lower than expected oil revenues and somewhat
higher war costs contributed to the early April
payments crunch. Bad weather at the Ceyhan
terminal of the Turkish pipeline in late February 25X1
caused average oil exports for the month to fall by
about 100,000 b/d,
Press reports indicate Iraq was having some i -
culty marketing its oil because it was resisting
making price concessions. In late March, Iraq
probably increased munitions expenditures some-
what to replenish stocks used to repel the latest
Iranian offensive and in preparation for another
major Iranian attack. Ammunition-unlike weap-
ons purchases-usually requires cash payment 25X1
rather than credit terms. 25X1
Muddling Through the Rest of the Year
We believe Baghdad will secure additional Arab
aid as well as debt rescheduling and credits from
most of its major trading partners to minimize
Secret
DI IEEW 85-021
24 May 1985
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
Iraq's 1985 Payments Dilemma
Sources of foreign exchange
15.4
17.3
Export revenues (over 90 percent oil)
11.1
11.1
Arab aid
2.9
3.4
Export credits and rescheduled payments
1.4
2.8
Foreign exchange requirements
18.0
17.3
Civilian imports and invisibles
12.0
11.8
Military imports
3.0
2.5
Debt payments due
3.0
3.0
Shortfall
-2.6
a Case I illustrates the hypothetical shortfall in foreign exchange
given current policies. This case assumes Iraqi exports of 1.1 million
b/d priced at $27.50 per barrel; Arab oil sold to aid Iraq averages
300,000 b/d priced at $26.50 per barrel; credit lines available and
rescheduling agreements as of the end of March 1985; military and
civilian imports equal to 1984 levels; debt payments due at the
beginning of 1985.
b Case II represents our best estimate of how Iraq will deal with the
shortfall. This case assumes Arab oil aid at 1984 average of about
350,000 b/d; exporters extend additional credits, and some debts
are rescheduled; civilian imports are only slightly lower than 1984
as a result of stretching out development spending, and military
spending is cut by about 15 percent by stretching out modernization
of the armed forces.
politically risky cuts in imports of consumer goods.
Based on oil revenues, Arab aid, new credits, and
rescheduling obtained during the. first four months
of the year, potential foreign exchange amounts to
about $15.4 billion this year. In contrast, if military
and civilian imports remain at last year's level, Iraq
will need about $18.0 billion to meet expenses and
debt payments. Lacking substantial foreign ex-
change reserves, Baghdad must cover the
$2.6 billion difference by securing additional re-
scheduling, credits, and Arab aid and by stretching
out the procurement of new weapon systems and
development projects.
Although most countries are uneasy about offering
additional credit to Iraq, all seem resigned that
payment problems are the price of maintaining a
position in Iraq's potentially lucrative market.
Baghdad has reinforced this view by warning that
it will remember its friends when the war is over.
Creditors probably are also concerned that restrict-
ing financing might weaken the Iraqi regime, risk-
ing an Iranian victory or change of government
that would lessen chances for future payments.
Iraq's strategy of playing off its trade partners
against each other also appears to be having some
success at obtaining necessary reschedulings and
debt deferrals:
? France agreed in March to Iraqi requests for a
three-year deferral of $300 million in debts,
.according to press reports. Most creditor coun-
tries have resisted terms longer than two years,
and the French action should increase pressure on
other exporters to offer longer terms.
? The United Kingdom granted a $350 million
credit line in the beginning of May, and Italy has
pledged to maintain its credit line of $500 mil-
lion, according to press reports.
? Although Japanese firms have resisted Iraqi pres-
sure to reschedule, the companies are negotiating,
and we suspect they will come to terms rather
than declare Iraq in default. Such a drastic action
would mean a substantial loss to the firms in-
volved because they are not fully insured against
nonpayment.
Iraq's pipeline through Saudi Arabia will increase
Iraq's capacity to export oil from about 1.1 million
b/d to about 1.6 million b/d, and reassures credi-
tors about Baghdad's ability to eventually pay its
debts. Although scheduled for completion by Octo-
ber, it is two months behind schedule
A planned second pipe-
line through Turkey could raise oil exports another
500,000 b/d by mid-1987. These new pipelines,
however, may not ease Baghdad's debt problems as
much as hoped. OPEC is likely to pressure Iraq to
limit exports, and a likely decline in Arab oil aid
after the lines open will partially offset gains.
25X1
25X1
25X1
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
Secret
Fiscal austerity in Saudi Arabia, Kuwait, and other
Gulf states has made Baghdad's principal donors
less inclined to provide aid for Iraq, but the recent
Iranian offensive and Tehran's preparations for
another will probably generate additional financial
support from Saudi Arabia and other Gulf states.
Riyadh's. support to Iraq in the past has increased
with heightened military activity. The United Arab
Emirates discontinued its limited financial support
to Iraq early this year because of general budget
austerity, but the US Embassy in Abu Dhabi
believes aid would be resumed if Iran launches
losses of military equipment were
another major offensive.
Although Iraq should muddle through its debt
problems, cash flow problems will persist, and
Baghdad probably will miss some more debt pay-
ments over the next several months. Who gets paid
will depend on political considerations, and how
nonpayment would affect future credit. For exam-
ple, the US Commodity Credit Corporation proba-
bly will be spared requests for rescheduling because
Baghdad places high priority on relations with the
United States and is seeking additional credit
through the US Export-Import Bank. France and
the Soviet Union-Iraq's major arms suppliers-
will continue to be paid on time. Third World and
East European countries and suppliers without
government backing, will be the first to go unpaid
during cash-short periods.
Avoiding Major Cuts in Consumer Imports
Even with some relief from foreign creditors and
Arab donors, Iraq's credit problems are such that it
will probably be forced to make small reductions in
imports. So far, Baghdad has generally succeeded
in insulating Iraqi consumers from the effects of
war. Despite deep cuts in civilian imports, the
availability of consumer goods has only declined
slightly since the beginning of the war.
We believe that rather than risk unpopular cuts in
civilian imports Baghdad will defer major weapons
purchases and make small cuts in development
spending by stretching out the few remaining pro-
jects. Although Iraq used large quantities of muni-
tions to repel Iran's March offensive
small and replaceable from existing stocks. Most
military spending is currently used to upgrade
weapon systems, such as replacing old tanks with
newer models, rather than to replace lost materiel.
Given Iraq's vast numerical and technological supe-
riority in armored vehicles, aircraft, and artillery,
Baghdad can afford to delay purchasing new weap-
ons without significantly altering its strategic ad-
vantage
A large fall in oil prices or substantial battlefield
losses of equipment probably would force Baghdad
to make the deep cuts in civilian imports it has
sought to avoid. This could threaten the regime by
antagonizing the war-weary populace:
? A major oil price decline would seriously under-
mine Iraq's finances by lowering export revenues,
discouraging further credit, and reducing the
willingness of its oil-producing Arab benefac-
tors-similarly affected by oil prices-to give still
more aid.
? Although unlikely, large losses of military equip-
ment in the war would leave little choice but to
cut civilian imports.
Cutting imports now would be particularly unpalat-
ing the opening of new export pipelines.
able following Iraq's overblown claims of recent
battlefield victories and official optimism surround-
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
Yugoslavia: Good Performance
in 1984, Uncertain Outlook
Aided by financial support from the IMF, Western. Yugoslavia: Economic Indicators Percent change
d b
k
governments, an
an
s, Yugoslavia s economy
made a relatively good showing in 1984. Growth
reached its highest rate in four years, and strong
export gains improved the country's external finan-
cial position. These results prompted the IMF to
call 1984 a "watershed" year for Yugoslavia, but
the Fund's optimism may be premature. The econo-
my is off to a poor start in 1985, and the Planinc
government is under growing pressure to deal with
rising inflation and falling living standards. West-
ern creditors are looking for evidence of structural
adjustment to ensure long-term growth and exter-
GNP (social production)
0.5
-1.3
1.7
3.0
Industrial output
0.1
1.3
5.5
4.0
Agricultural output
7.5
-1.5
1.3
2.5
Gross fixed investment
-5.5
-10.0
-6.0
2.0
Industrial labor
productivity
-3.1
-1.3
2.8
1.5
nal balance, but prospects for such changes are unemployment 12.4 12.8 13.3 NA
uncertain at best. Yugoslavia probably faces more
years of slow economic growth and difficult negoti-
ations with creditors.
Real incomes
-2.7
-9.1
-6.0
1.1
Retail prices
31.0.
39.0
57.0
.45.0
Personal consumption
-0.1
-1.7
-2.0
2.0
In 1984 Yugoslavia recorded its strongest economic
growth since 1980 as gross social product-roughly
equivalent to GNP-rose 1.7 percent. Aided by
increased imports of materials, industry led the
recovery with a 5.5-percent increase in output
following two years of near stagnation. Much of the
upswing was in export sectors that benefited from
growth in Western demand and enhanced competi-
tiveness resulting from large devaluations of the
dinar. Domestic demand continued to decline in
response to IMF-supported austerity measures in-
tended to ease inflationary pressures, limit import
requirements, and free up production for export.
Investment again shouldered most of the reduction
in domestic use of output, although personal con-
sumption fell for the fourth consecutive year.
Yugoslavia extended the gains in hard currency
trade and payments that began in 1981A 9-
percent increase in exports .enabled Belgrade to
reduce its hard currency trade deficit by $500
million while easing restraints on imports. The hard
currency current account surplus rose by $600
million to $850 million, a sharp turnaround from
the large deficits incurred since the late 1970s.
Foreign exchange reserves grew by $536 million,
exceeding the IMF target of a $500 million in-
crease. Even with these gains, Belgrade had to.
reschedule debts with Western banks and govern-
ments for a second consecutive year and draw on.
IMF standby credits
The pickup in economic growth and improved
external performance have not won praise from the
Yugoslav people burdened with rising inflation and
unemployment., Inflation accelerated to more than
50 percent-partly as a result.of lifting price
controls and the devaluations. The price increases
together with restraints on wage gains have cut real 25X1
personal income by 30 percent since 1979. The
reduction of private consumption has been much
less severe because withdrawals from dinar and
private foreign exchange accounts and widespread
Secret
DI IEEW 85-021
24 May 1985
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
Yugoslavia: Hard Currency Financial Statistics
Trade balance
-6,570
-5,665
-4,880
-3,519
-1,690
-1,171
Exports
4,766
5,656
5,720
5,526
6,047
6,588
Imports
11,336
11,321
10,600
9,045
7,737
7,759
Current account balance
-3,356
-2,204
-1,821
-1,580
246
865
Net debt
13,731
17,608
18,337
18,488
19,002
18,602
moonlighting have helped buoy spending. Even
with this cushion, the domestic adjustment has
taken its toll. Although there has been little overt
unrest, the public has grown increasingly cynical
about the government's ability to manage the econ-
omy. In 1984 the number of economically motivat-
ed strikes rose to its highest level in five years.
Moreover, income disparities between the relatively
prosperous north and underdeveloped south have
widened, compounding Yugoslavia's regional rival-
ries.
be recouped later this year, but Yugoslavia's goal
of recording major gains over 1984 is unlikely to be
met
After a reasonably good start, Yugoslavia's deal-
ings with Western creditors-particularly commer-
cial banks-have also soured. Belgrade initially
opposed negotiation of a new standby agreement
with the IMF, but, at the insistence of private and
official creditors, the Yugoslavs reached agreement
with the Fund in mid-March. In return for a $300
million standby credit, Belgrade will continue
movement toward positive real interest rates, deval-
uation of the dinar to offset inflation, and tighter
control over domestic credit and government expen-
First results for 1985 have all but dashed Belgra-
de's hopes of improving significantly on 1984 per-
formance. Growth of industrial production slumped
sharply in the first months of the year, largely as a
result of exceptionally severe winter weather. Al-
ready high inflation accelerated to an annual rate
of more than 80 percent in April, prompting the
government to reimpose some price controls. Most
important, external payments performance deterio-
rated sharply. The first-quarter hard currency
trade deficit of $215 million was nearly 50 percent
larger than the first-quarter deficit a year ago.
Imports rose 5 percent-largely as a result of
increased oil purchases-while exports declined. By
March, Belgrade had reduced its foreign exchange
reserves by more than the increase recorded in
1984. Some of the economy's losses will probably
ditures.
In late March, Yugoslavia and Western creditor
governments reached agreement on rescheduling
roughly $800 million in debts coming due between
1 January 1985 and 15 May 1986. The agreement
reschedules 90 percent of principal over nine years
with a four-year grace period. Although the credi-
tors promised future support, the rescheduling fell
short of Belgrade's demand for an agreement cov-
ering debts maturing in 1985-88.
s
25X1
25X1
25X1
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
Secret
Yugoslavia: Inflation and Personal Income
Trends, 1976-84
Consumer prices The Problem of Structural Change
Nominal
personal income
Real personal
income
If final results for 1985 fall short of last year's
gains, doubt would be cast on Yugoslav and IMF
claims that Belgrade's adjustment efforts are be-
ginning to produce the changes needed to achieve
both growth and external balance. The IMF
termed last year's performance a "watershed" for
Yugoslav economic policy on grounds that Fund
prescriptions for lifting controls on prices and
interest rates, reducing subsidies to money-losing
enterprises, tying wage increases more closely to
enterprise performance, and devaluation of the
dinar were starting to promote greater efficiency
and shift resources to the export sector. Western
creditors, however, remain skeptical that structural
adjustment is taking place. They are looking for
more than restraints on domestic demand, increases 25X1
in administered prices and interest rates, and main-
tenance of a competitive exchange rate. They are
seeking evidence of systemic changes needed to 25X1
control underlying inflationary forces and to reduce
the economy's dependence on foreign borrowing:
? Reducing the power of regional authorities to
exert controls that prevent goods, capital, labor,
and foreign exchange from flowing to their most
efficient uses.
? Enforcing greater financial discipline on enter-
prises through tougher application of bankruptcy
laws, controls on intraenterprise credits, and re-
duced subsidization of inefficient producers.
? Reducing the influence of political criteria on
investment decisions.
? Changing wage determination to link earnings
more closely to productivity.
Progress has been made in these areas, but the
IMF believes much more needs to be done.
We doubt that Belgrade has the political willpower
or ability to enforce this economic discipline. From
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
Belgrade's perspective, the costs of reform are
high-inflation, sliding living standards, bankrupt-
cies, and rising unemployment-and the payoff is
neither quick nor certain. Many of the measures
challenge the basics of the country's self-manage-
ment system and conflict with ethnic or regional
interests. The extremely heterogenous nature of
Yugoslav society has made implementation of
many changes impossible even under stronger cen-
tral management in the past.
Change so far has been forced on Yugoslavia by
creditors and the IMF, but Belgrade is trying to
avoid further IMF standby programs. Yugoslav
economists are divided over the wisdom and effects
of IMF-sanctioned measures, and some senior lead-
ers fear Yugoslavia is being forced into "neocolon-
ial" status. The advocates of reform, at best, can
hope for tinkering with the system and uneven
implementation of measures by the regions. Mean-
while, the Planinc government will face the threat
of a growing conservative backlash, fueled by pres-
sures to ease the pain of austerity measures
The slow and uncertain pace of change in Yugosla-
via and the likelihood of disappointing economic
results this year may force Belgrade to revise
downward its ambitious goals for growth and exter-
nal payments performance through 1990. Creditors
already unhappy over Yugoslavia's intransigence
and delaying tactics are likely to take a harder view
of the country's creditworthiness and to press for
continuation of strict IMF oversight. Belgrade's
hopes of reflating the economy to halt the erosion
of living standards and to resume faster economic
growth are likely to be dashed. More years of
difficult dealings with creditors and slow economic
growth are probably in the offing as the economy
struggles to service its $18.6 billion foreign debt.
25X1
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
Secret
The Turkish Economy
Under Ozal
Since Prime Minister Ozal took office in late 1983,
economic growth and the foreign payments position
have improved. Inflation and unemployment have
worsened, however, and we believe the government
will come under increasing pressure from the mili-
tary and the public unless there is progress in these
two areas. Ozal should be able to point to some
improvement in inflation by early next year, if he
delivers on his promise to slow monetary growth
and reduce the budget deficit.
The Ozal Approach
Ozal won election on 6 November 1983 in part on
the strength of his promise to revive the Turkish
economy, which had begun to slip after making a
remarkable recovery from the economic crisis of
the late 1970s. Ozal's policy focuses on making the
economy more responsive to market forces-mainly
by reviving the 1980 economic stabilization pro-
gram he developed when he was economic czar
under the conservative government of Prime Minis-
ter Demirel. The Turkish military, which handed
over the reins of government to Ozal, has generally
given him a free hand in the running of the
economy, in contrast to the decisive role it still
plays in security policy.
Real GDP grew by almost 6 percent last year, up
from 3.8 percent in 1983. Industry and commerce
led the way, with growth rates of 8.7 percent and
7.6 percent, respectively, while agricultural output
grew 3.6 percent. Meanwhile, the current account
deficit narrowed from $1.8 billion to $1.4 billion,
despite an increase in interest payments and the
liberalization of imports and foreign travel.
The improved performance was due, in large meas-
ure, to a surge in exports-up 25 percent last year
after near stagnation in 1983. Exports of industrial
Turkey: Balance of Payments,a Million US $
1982-85
Trade balance
-2,660
-2,990
-2,958
-2,668
Exports (f.o.b.)
5,746
5,905
7,389
8,663
Imports (f.o.b.)
8,406
8,895
10,347
11,331
Balance on invisibles
1,799
1,162
1,516
1,658
Tourism (net)
224
292
271
320
Worker remittances
2,189
1,569
1,901
1,900
Interest payments
(before debt relief)
1,465
1,441
1,578
1,550
Other (net)
851
742
922
988
Current account balance
-861
-1,828
-1,442
-1,010
a In consultation with the IMF, Turkey has just revised its balance-
of-payments methodology. All balance-of-payments references in
the text are based on the new figures.
b Estimated.
c Official Turkish Government projection.
goods soared nearly 40 percent and accounted for
almost three-fourths of the total-a dramatic
change for a country that, five years earlier, was
still primarily an agricultural exporter. The net
invisibles balance rose 30 percent because of a
sharp increase in worker remittances, following two
years of substantial declines. Imports rose 16 per-
cent as crude oil costs-benefiting from the moder-
ation in oil prices-grew only 4 percent to $3.4
billion.
25X1
On the negative side, both inflation and unemploy-
ment have risen since Ozal took office:
? Retail prices climbed 52 percent last year-
compared with 31 percent in 1983-and inflation 25X1
accelerated further during first quarter 1985 to
an annual rate of approximately 60 percent.
Secret
DI IEEW 85-021
24 May 1985
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
Ozal's Economic Program
Fiscal and monetary measures:
? Personal and corporate income tax cuts in 1984
to promote saving and investment.
? A value-added tax of 10 percent this past Janu-
ary to increase government revenue.
? Hikes in real interest rates to positive levels and
promises of slower money supply growth.
Measures to reduce the pervasive role of the
government in the economy:
? Sale of revenue shares in the Bosphorus Bridge
and Keban Dam to private investors and plans to
sell shares in the national airline.
? Proposed legislation that would privatize the
largely nationalized mining sector and open it to
foreign investment.
? Reorganization and cutbacks in the public sector
including more efficient management of state
enterprises and reduced subsidies on prices of
public-sector products.
Trade and foreign exchange measures:
? Tariff cuts and removal of many import license
requirements.
? Limitation on the use of export licensing.
? Exporters are now permitted to keep 20 per-
cent-up from 5 percent-of their foreign ex-
change earnings.
? Incentives for companies with over $30 million in
exports in 1983 in the form of special credits,
duty-free imports, and foreign exchange.
? Commercial banks are free to buy and sell
foreign currency within a certain range around
the official rate set by the Central Bank.
? Turkish citizens are free to hold foreign currency
and to travel abroad.
? Daily exchange rate adjustments.
? Elimination of some restrictions on foreign inves-
tors including repatriation of profits.
Infrastructure development:
? The massive Ataturk Dam project in southeast-
ern Turkey and support for the development of
nuclear power.
? Unemployment probably exceeds 20 percent
there are no reliable figures-as growth in the
labor force has outstripped gains in civilian em-
ployment.
Ozal can place some of the blame for higher
inflation on the lagged effect of loose monetary
policies followed by the previous military govern-
ment. Part of the higher inflation rate also reflects
temporary factors-long-overdue price hikes for 25X1
products produced by the State Economic Enter-
prises, and the introduction of a value-added tax
(VAT) in January. Ozal, however, shares the blame
because of his accommodating monetary policies.
The money supply grew by 50 percent in 1984, and
Ankara ran into trouble with the IMF last summer
because it exceeded the Fund's monetary targets.
In response to the IMF's threat to suspend credit,
Ozal raised interest rates and promised to bring
money growth back into line with newly agreed
targets.
Ozal's decision to cut income and corporate taxes,
as well as the continued depreciation of the lira,
have helped to increase the budget deficit, which
reached $2.6 billion-6 percent of GDP-last year.
Lagging revenues are a major problem-tax reve-
nues equaled approximately 14 percent of GDP in
1984, one of the lowest rates in the OECD. The
recently introduced VAT should help close the gap.
Ozal's efforts have the general sup ort of the
international financial community,
(thus enabling Turkey to
tap foreign credit markets. Earlier this year it
obtained a $500 million loan from a consortium of
Western banks. Ankara encountered some difficul-
ty in putting the deal together mainly because of to
its inexperience with the new type of loan facility
being used.
The outlook for 1985 is mixed. Export growth
probably will slow to about 15 percent, but, with
import growth of less than 10 percent, the trade
25X1'
25X1
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
Secret
Turkey: Economic Indicators, 1980-85
6.0
5.0
4.0
3.0
2.0
1.0
0
-i.0
Budget Deficit as a Share of
GDP
a Estimated.
b CIA projection.
c Debt as a share of current account earnings. Excludes military debt. The
US Embassy estimated military debt owed to the United States at about
$2.6 billion at the end of 1983.
deficit will decline again. On the basis of this
favorable trade performance, GDP growth should
remain strong at about 5 percent, and we expect
the current account deficit to narrow to about $1
billion. On the negative side, unemployment is
likely to creep even higher because of strong growth
in the labor pool, while the inflation rate probably
will remain close to 50 percent for the full year. By
early next year, however, inflation should begin to
slow if Ozal delivers on his promise to reduce
monetary growth and the budget deficit. I 25X1
Ankara's grace period on rescheduled foreign debt
essentially ended last year; principal repayments
thus will jump sharply in 1985. Total service costs
on medium- and long-term debt will exceed $3
billion this year Habout 30 25X1
percent of current account earnings-and will re-
main near that level for the remainder of the 1980s.
As a result, Turkey will continue to depend on
Western aid as well as on new borrowing in private
financial markets) 25X1
Ozal's political future is inextricably linked with
Turkey's economic performance. The Prime Minis-
ter is already under strong attack for his failure to
control inflation, reduce unemployment, and relieve
the financial stresses of many private business
firms. The two corruption scandals that rocked his
government within a three-month period this past
winter heightened dissatisfaction with Ozal, as did
the rather chaotic im lementation of the VAT in
January.~
Ozal's dilemma is that his program is aimed at the
long run, although he needs short-term results to
avoid jeopardizing his government and even the
democratic process in Turkey. Although we believe
he is in no immediate danger, the mixed economic
outlook for 1985 means that Ozal's political prob-
lems will not abate in the near future and that he
will need all his tactical skills to fend off critics and
keep his program on track. Should Ozal be forced
from the scene, Turkey would lose its most influen-
tial champion of badly needed economic reforms,
and successor regimes would almost certainly lack 25X1
Ozal's commitment to long-term economic restruc-
turing.
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
Secret
Thailand: New Push
for Export Reform'
The Prem government has made an impressive
start in implementing measures to ease the coun-
try's foreign payments strains and boost Thai ex-
port competitiveness. Bangkok over the past seven
months has sharply devalued the currency, adopted
a variety of measures to promote exports, and
drawn up plans for even more extensive tax and
financial reforms. Domestic opposition to the politi-
cally sensitive reform effort may delay some as-
pects of the program. Nonetheless, we expect suffi-
cient progress to ensure at least moderate growth in
exports through the end of Prem's term in 1987.
Thailand: Growth of Export Earnings, 1970-84
Total
7
Lagging Export Performance
Thailand's once vigorous export growth slowed to
an annual rate of about 5 percent during 1980-
83-compared with a 25-percent annual rise in the
1970s. Major factors in the decline were depressed
world prices for the country's commodity exports,
an overvalued currency, and domestic economic
inefficiencies such as a tariff structure that discour-
aged exports. Manufactured exports, which had
soared from about $40 million in 1970 to more than
$1.5 billion in 1980, also slowed substantially in
this period.
The slowdown in export earnings aggravated the
country's growing financial strains and contributed
to a sharp rise in the debt service ratio from 10
percent in 1980 to 22 percent last year. Moreover,
the poor export performance combined with a
credit-driven import boom to produce a record
1983 current account deficit of $3 billion-which
improved only moderately in 1984. Bangkok's ini-
tial efforts to improve its external finances slowed
economic growth as a tight money policy in late
Manufactures
L 6 1 I I I I I I I I I I
0 1970 75 80 84
1983 generated a wave of small business bankrupt-
cies and a liquidity crisis in the financial sector.
The New Export Strategy
Last fall, the Prem government responded to the
country's growing financial difficulties by quickly
launching a program of economic reforms to reduce
the trade deficit and boost Thai export competitive-
ness-especially for manufactures. In November
the government devalued the baht by about 15
percent against the US dollar and floated it against
a basket of trading partner currencies. To prevent
Secret
DI IEEW 85-021
24 May 1985
25X1
25X1
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798ROO0100090007-7
Rationalization of domestic Reduce level of import protec-
export/import price structure tion to industry, promote do-
mestic efficiency, increase in-
ternational competitiveness of
export sector.
Currency devalued from 23 to Ability of Bank of Thailand to
27 baht per US dollar in No- adjust currency value frequent-
vember. Now pegged to market ly to reflect economic changes
basket of trading partner cur- key to future export
rencies, with US dollar influ- competitiveness.
ence substantially reduced.
Baht continued to depreciate in
March.
Reduction or removal of protec- Overall level of effective protec- Could be reversed if trade defi-
tive tariffs on finished goods; tion lowered to approximately cit does not improve.
increase on intermediate goods 40 percent in 1982. Some tariffs
and quotas eliminated.
Reduction or elimination of
subsidies to exporters
Financial system reform Increase domestic savings,
channel into export-oriented
investment, reduce need for
foreign borrowing.
Eliminated for textile exports to Reduction or elimination of
the United States under agree- other subsidies is likely to pro-
ment with US Department of voke opposition from manufac-
Commerce. Cuts in subsidies to turers and exporters.
other exporters uncertain.
Reduction in size of informal Royal decree bans "chit funds" Involvement of senior military
financial sector as of November 1985. Funds officers makes issue highly
gradually deflating in early sensitive.
April.
Tighter regulation of nonbank Government's "lifeboat Many are still weak and a li-
finance companies scheme" has bailed out ailing quidity crunch could cause ad-
companies with additional ditional failures.
funds and closer regulation.
Increased equity financing for Decrease dominant role of bank Securities Act amended last fall Higher returns available from
investments financing of new firms. to permit listed companies to informal financial sector will
make public offerings of shares retard equity formation.
and debentures.
Export promotion measures Reduce trade deficit, create
jobs, boost labor- and resource-
intensive exports, reduce
foreign borrowing.
Develop an exchange rate sys-
tem that closely reflects re-
source costs of imports and ex-
ports.
Interest rates increased last Private banks still reluctant to
year for some types of deposits. change interest rates to reflect
Lending rates raised for non- credit conditions without pres-
promoted projects. sure from Bank of Thailand.
On paper Bangkok offers a
competitive package of incen- Redtape, bureaucratic delays,
tives and has over the past two fear of Indochina conflict re-
years begun sending missions main barriers.
abroad to recruit foreign invest-
ment.
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798ROO0100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798ROO0100090007-7
Secret
(continued)
Reduce government budget def-
icit and need for foreign bor-
rowing to finance current con-
sumption rather than longer.
term investment.
Restructuring of tax system
Rationalization of state enter- Make public sector a net con-
prise sector tributor to national savings. Re-
duce public-sector foreign
borrowing.
Privatization of unprofitable
state enterprises
Increased fees for public utili-
ties and services
Incentives include export cred-
its, tax holidays, and promo-
tional measures. A national ex-
port plan incorporating produc-
tion, marketing, and financial
incentives is under discussion.
Budget cuts of 5 to 10 percent
for FY 1985 have been imple-
mented and other measures ap-
proved to curtail government
spending. Wage freezes for
many government employees
are likely over the next two
years. "Zero Growth" budget
may be proposed for fiscal
1986.
Indirect taxes increased, per-
sonal income taxes for lower tax
brackets reduced. Major tax in-
creases under consideration.
Government still debating
which firms will be sold off.
Has stated that it will continue
to run those enterprises that are
considered vital to the country,
even if they are operating at a
loss.
Busfare increased by a third in
February. Fees for other ser-
vices and utilities probably will
also be increased.
Attempt in 1980-81 to set up
Japanese-style marketing car-
tels (sogo soshas) failed. Little
progress so far in setting up
export processing zones.
Military is pressing for addi-
tional funds. Labor groups are
likely to add to pressure against
austerity measures.
Despite reform, Thailand is ex-
pected to face a $1.8 billion
revenue shortfall in FY 1985.
Cabinet in early April approved
part of Sommai's tax increase
package.
Employees of enterprises cer-
tain to oppose these measures.
Workers of Communications
Authority of Thailand struck
for two days in February to
protest planned privatization,
other strikes possible. Opposi-
tion from military also is likely
because senior officers often
supplement incomes with direc-
torships of state enterprises.
Issue has been politically sensi-
tive in the past, but public reac-
tion to current increases has
been minimal so far.
Administrative reform Streamline and improve eco-
nomic planning and resource
mobilization.
Centralization of economic de-
cision making
Minister of Finance Sommai,
trusted by Prem, is now most
influential economic. policy
maker. Council of Economic
Ministers is gaining influence.
Not formalized, although tech-
nocrats are gaining power. Too
early to assess role to be played
by government's new economic
think tank, Thailand Develop-
ment Research Institute.
Reduction of redtape, corrup-
tion
Foreign investment, export pro-
cedures being streamlined. The
Board of Investment's One-
Stop Investment Center has
made small but definite im-
provement,
Conflicting signals to investors
are likely to continue as long as
various ministries and agencies
retain a large degree of
autonomy.
25X1
25X1
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798ROO0100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
sharp increases in the government's budget deficit
from undermining the devaluation, the Cabinet late
last year approved deep budget cuts and postponed
"nonessential" development projects. It also re-
duced the 1985 ceiling on government-guaranteed
loans by 30 percent to $1.6 billion. Further budget
cuts and tax increases have been introduced in the
current National Assembly session.
We believe that the Prem government is also
committed to accelerating the implementation of
longer term reforms-including tariff reform and
trade and financial liberalization-begun in 1982
under the auspices of a $350 million loan agree-
ment with the World Bank. Bangkok is counting on
the private sector to respond to the heightened
export incentives. These measures should lead to a
more dynamic domestic economy and make Thai
exporters more competitive.
The government will have to tread carefully if it
hopes to achieve most of these reforms during the
remainder of Prem's term. Influential elements in
the military and the opposition Thai Nation Party
(TNP) have vested interests in the current economic
structure, which favors production of manufactures
for a protected domestic market rather than for the
highly competitive export market. Both groups
have in the past successfully manipulated public
discontent over economic policy to force the govern-
ment to back down on reform.
We believe the most vulnerable area of the govern-
ment's export strategy in the near term is its
economic austerity policy. The TNP is especially
critical of Finance Minister Sommai for the devalu-
ation-induced rise in inflation and for the recent
tax hike. Influential military officers, occasionally
in concert with the TNP, have criticized plans for
budget austerity and complained bitterly about
limits on foreign borrowing that restrict military
purchases abroad. In addition, plans to sell some
state enterprises to the private sector or cut subsi-
dies to some of them are drawing opposition from
public-sector unions-the country's largest-and
senior military officers who frequently sit on the
Much of our optimism about Thailand's export
prospects is based on Prem's public and private
support for the necessary economic reforms. We
know of no other figure capable of generating the
broad, long-term support the export campaign
needs. Prem is likely to remain in office through
the end of his term, but, if for some reason he
leaves office or loses his parliamentary majority,
the outlook for economic reform becomes more
doubtful. If the TNP becomes part of the governing
coalition-and especially if it should gain the
prime-ministership, we believe the export drive will
stall because of the party's strong links to domestic
manufacturing interests. We believe export pros-
pects would also dim if a military-dominated
government headed by Army Commander in Chief
General Arthit-frequently mentioned as a likely
successor to Prem-comes to power. Arthit has
demonstrated little understanding of economic af-
fairs and has been a vocal critic of the govern-
ment's austerity measures. We believe that a TNP
government or one headed by Arthit probably
would pursue economic policies that would lead to
stagnant export earnings and accelerated foreign
borrowing even in a favorable global economic
environment.
Prospects for Reform
Although much of the rhetoric about economic
reform is old hat in Bangkok, we are moderately
optimistic about the outcome of this program. The
influence of well-trained Thai technocrats on eco-
nomic policy-steadily growing for a decade-has
accelerated under Prem, as has the centralization
of economic policy making. In addition, the Prime.
Minister has shown increased willingness to imple-
ment difficult economic decisions, including dou-
bling domestic energy prices in 1981-82, sharply
devaluing the currency last, fall, and sanctioning
large tax hikes. Both Prem and the technocrats,
moreover, seem determined to avoid a debt crisis
such as that in the neighboring Philippines. In our
boards of directors
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
Secret
view, Prem-in his strongest political position since
taking office in 1980-has a good chance over the
next two years of accomplishing substantial reform
and thereby improving export performance.
Outlook for Export Earnings
The continuing world economic recovery combined
with the devaluation probably will ensure at least
modest expansion of export earnings in 1985, even
if the reform package is only partially implemented
by yearend. Most of Thailand's commodities ex-
ports should increase in volume. Moreover, exports
of manufactures and processed food products,
which soared late last year, probably will experi-
ence another year of at least modest growth. As a
result, we expect the current account deficit to
decrease by $500 million this year to about $1.8
billion.
If the reforms are fully implemented, we believe
Thai exports probably will accelerate even more
strongly over the next few years. Barring an eco-
nomic slowdown in the industrial countries, we
expect Bangkok's export earnings to increase by 10
to 15 percent annually through 1990. Although still
below the rate of the 1970s, this would be high
enough to ease Thailand's recent foreign payments
strains and allow it to continue making payments
on its $16 billion foreign debt. Even in a world of
slow economic growth and rising protectionism, we
believe Thailand's market-oriented openness, en-
hanced by the current reforms, will result in a
relatively strong performance compared with other
developing countries.
25X1
25X1
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
Energy
OPEC April OPEC crude oil output in April averaged 17.1 million b/d, over 1 million b/d
Oil Production above the group's October 1984 production ceiling. Despite a drop of 400,000
b/d in Saudi production-due primarily to a late month falloff in liftings by
the four former Aramco partners-the decrease was more than offset by a
jump in Iranian output of approximately 500,000 b/d. The oil shuttle between
Khark and Sirri Islands is apparently over its initial difficulties, and direct
exports from Khark Island continued at a high level. The 11 other OPEC
members were also at or above their quotas.
October
1984
1984
1985
First
Quarter
March
April
Total
16.00
17.7
16.5
17.0
17.1
Algeria
0.66
0.7
0.7
0.7
0.7
Ecuador
0.18
0.3
0.3
0.3
0.3
Gabon
0.14
0.2
0.2
0.2
0.2
Indonesia
1.19
1.4
1.3
1.2
1.3
Iran
2.30
2.4
2.2
2.5
3.0
Iraq
1.20
1.2
1.2
1.3
1.3
Kuwait
0.90
0.9
0.9
0.9
0.9
Libya
0.99
1.1
1.0
1.0
1.0
Neutral Zone
a
0.5
0.5
0.5
0.5
Nigeria
1.30
1.4
1.6
1.7
1.7
Qatar
0.28
0.4
0.3
0.3
0.3
Saudi Arabia
4.35
4.4
3.6
3.8
3.4
UAE
0.95
1.2
1.2
1.2
1.2
Venezuela
1.56
1.7
1.6
1.6
1.6
a Neutral Zone has no production quota; output is divided evenly
between Saudi Arabia and Kuwait and included in their quotas.
25 Secret
DI IEEW 85-021
24 May 1985
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
Nigeria Expanding Nigeria has doubled its September 1984 countertrade deal with Brazil to
Countertrade in Oil 95,000 b/d of crude in return for $950 million of essential goods. Under the
12-month arrangement, Brazil will deposit oil payments into an escrow
account that then will be drawn down as Nigeria imports Brazilian products.
Similar deals with France, Italy, and Austria are in the final stages of
negotiation, totaling about 115,000 b/d in exchange for $1.2 billion in goods.
Nigeria also is exploring countertrade agreements with firms in Canada, West
Germany, and the United States to supplement its austere import budget.
According to press reports, Nigeria does not consider countertrade oil as part
of its OPEC quota, which it has exceeded by about 300,000 b/d since last No-
Argentine Financial The Central Bank, in an effort to stem withdrawals triggered by a recent bank
Crisis Simmers failure, last weekend announced a 120-day freeze on dollars held in local
banks. Some foreign creditors are increasingly concerned about Argentine
economic management and say they will withhold participation in Argentina's
pending $4.2 billion new loan package until the failed bank's foreign debts are
honored, Although Buenos Aires
may have averted a domestic banking crisis, Buenos Aires will need to
complete an accord with the IMF and convince some remaining banks to
participate in the lending package before US bank regulators meet on 10 June
to classify Argentine loans. Without foreign credit, Argentina will soon face
foreign exchange difficulties that could force a complete suspension in interest
payments.
Peru's Debt Finance Minister Garrido-Lecca probably will tout his economic adjustments
Stalemate when he meets with US officials on 20 through 22 May, but patchwork policies
are intensifying financial problems for the next government.
bankers continue to hold trade credit for Peru to a
minimum, despite indications that Lima is making partial payment of interest
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
Secret
probably to avoid a downgrading of its loans. The government is devaluing the
currency and hiking gasoline and some staple prices, according to the US
Embassy, but is still resisting an IMF agreement. It still owes $350 million in
past due payments, which probably will prevent progress in rescheduling debt
with commercial bankers. Inflation in April rose to a record annual rate of 143
percent. This will only strengthen popular resistance to tougher adjustments
and leave the incoming administration with little financial maneuvering room.
Colombia's Informal Colombia's Bank Advisory Committee last month agreed in principle to
IMF Deal informal IMF monitoring of the economy as a condition for new bank loans,
Under this scheme, the government would 25X1
provide both the IMF and the World Bank detailed quarterly reports on
economic adjustments until the change of government in August 1986. Fund
and Bank representatives also will visit every six months to monitor and
approve performance targets. the principal com- 25X1
mercial banks have tentatively agreed to provide a billion loan over two
years: $700 million as a "replacement" of public-sector debt amortization,
$200 million in new money, and $100 million for recapitalization of the
Colombian banking sector. Most of the new money will go to Ecopetrol and
Carbocol, the state oil and coal enterprises. Quarterly disbursements will begin 25X1
this year after the IMF reports on first-quarter economic performance. In
addition, the Bank will lend $300 million during 1985 and 1986 to finance im-
ports needed to produce nontraditional export goods
25X1
The IMF board probably will consider this month a staff recommendation that
commercial bank credits be reopened without a formal Fund arrangement, and
will approve the monitoring plan. 25X1
Nonetheless, the IMF and bank creditors will insist that Bogota implement
tough adjustment measures to reduce inflation to 22 percent and cut the
public-sector deficit from 8 percent of GDP to 5 percent in 1985, 25X1
By emphasizing its independence, Bogota hopes to 25X1
minimize domestic political reaction to this arrangement and still gain access
to major amounts of foreign capital. Planned austerity measures already have
evoked protests from business groups, labor, the left, and liberal politicians. If
opposition grows substantially, we doubt that President Betancur will push
austerity sufficiently to fulfill these conditions. 25X1
Venezuela Gets Venezuela and its bank advisory committee recently agreed on terms for
Debt Terms Agreement restructuring $21 billion of public-sector debt, but final signing-planned for
early fall-may be delayed if private-sector interest payments are not current.
The agreement calls for 12-year repayment at 1.125 percentage points over
LIBOR, no grace period, and a $750 million Venezuelan payment upon
signing. The committee also gave Caracas the go-ahead for June talks with the
450 creditor banks in Japan, Europe, and the United States necessary to
finalize the accord. The US Embassy reports, however, that some bankers may
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
insist that private-sector interest arrearages be paid before the signing. We
believe this agreement will reduce domestic criticism of President Lusinchi's
inability to finalize last September's agreement in principle. With rescheduling
behind him, Lusinchi will be better able to defend his economic adjustment
program and lay the groundwork for recovery.
Moroccan-Libyan Libyan leader Qadhafi recently extended Morocco a $100 million concessional
Financial Dealings loan to help finance crude oil imports from Libya, according to the US
Embassy in Rabat. Although final details are still pending, the funds will be
the first since September, raising to $250 million the level of Libyan financial
assistance over the past year and a half. The new loan will finance imports of
about 10,000 b/d of Libyan crude oil this year-10 percent of Morocco's
needs. Some of the oil, however, may be refined for reexport to Libya or sold
on Libyan account. Qadhafi may attempt to use these loans or promises of low-
cost oil to extract political concessions from financially strapped King Hassan.
Nevertheless, the new money underscores the progress of the Moroccan-
Libyan union and helps support the popular belief in Morocco that large
amounts of Libyan aid will be forthcoming.
Philippine Financial Manila's long-stalled financial rescue agreement with nearly 500 private banks
Rescue Package was finally signed this week in New York. The agreement includes a nine-
year, $925 million loan, rollover of $3 billion in short-term trade credits, and
restructuring of $5.7 billion in principal repayments falling due between 1983
and 1985. Each rescheduled loan must be negotiated individually within the
terms and options of the agreement-a process we expect to take six to 12
months. The first $400 million in disbursements, set for early July, are
contingent on Manila's compliance-which we expect-with the IMF's finan-
cial performance targets for the end of May. This financial relief comes at a
crucial time for the stagnating Philippine economy. In the first quarter of this
year, export earnings fell 9 percent short of last year's already depressed levels
and about 20 percent short of the IMF's target.
Vietnamese Debt A private Japanese banking syndicate has agreed to reschedule a $160 million
Rescheduling loan owed by cash-strapped Vietnam, according to press reports. Vietnam has
been in de facto default on its $1.5 billion hard currency debt since 1982. Japa-
nese bankers believe Hanoi will now attempt to begin negotiations on
rescheduling with other non-Communist creditors. Private bankers and West-
ern governments, however, are unlikely to act before Hanoi settles its $30
million arrears with the IMF. A payment to the Fund in the next few months
would probably indicate that the Vietnamese Government is trying to put its
finances in order so that it can better attract Western investment.
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
Secret
Global and Regional Developments
Canada Relaxes Beef Ottawa has agreed informally to raise its import quota for EC beef, effectively
Quotas Against the EC ending a dispute that began last December. At that time quotas were
implemented to protect Canadian producers from growing imports of subsi-
dized EC beef. The EC claimed the export surge was temporary, as EC
farmers culled dairy herds to meet the lower milk quotas in the latest CAP re-
form. Ottawa, however, feared a longer term problem stemming from EC
dairy policies. In March 1985, the EC threatened to retaliate with tariffs on a
range of Canadian food products, worth $39 million. The new arrangement
calls for Ottawa to increase the Community's beef allotment from 2,700 to
10,668 metric tons; in return, the EC will not raise duties on Canadian goods.
A formal agreement will be completed shortly but probably will not help
improve the generally poor bilateral economic relationship. In fact, a new
dispute may soon erupt over Canadian claims that EC countries are overfish-
ing near the Georges Bank.
Maghreb Concerns The upcoming accession of Spain and Portugal to the EC is heightening fears
About EC Trade among North African states of stricter trade barriers. Several countries have
petitioned the Community to maintain preferential access for their raw
material and agricultural exports-about 60 percent of the region's trade is
with the EC. Morocco even requested full membership status in the EC earlier
this spring and Libya-the only North African state without a cooperation
agreement-recently expressed interest in establishing formal ties. Agricultur-
al exports are at greatest risk, but limited excess capacity in Spain and
Portugal and their 10-year integration into the Community will soften the
impact on sales of North African citrus and vegetables. More problematic is
the negotiation of new agricutural levy rates and transit rights that will be
pegged to Spanish and Portuguese exports to the EC.
British-Bulgarian A British and a Bulgarian firm last month formed a joint company to
Joint Venture manufacture biotechnology products, including pharmaceuticals and hygienic
equipment in Bulgaria. The British, who will supply technology and engineer-
ing, hope the deal will give them access to CEMA markets, as well as Third
World countries such as Syria and Libya. The Thatcher government, which
sent two high-level delegations to Sofia within the past year as part of a
broader initiative to improve relations with Eastern Europe, welcomes the deal.
Bulgaria hopes to acquire biotechnology to upgrade its pharmaceutical
industry and agriculture, as well as increase exports.
Libyan-Sub-Saharan Qadhafi's recent tour of East Africa and provisions of aid underscore the
Ties Improve regime's attempt to buy influence and preempt Israeli efforts to reestablish ties
in the area. Burundi received about $53 million in financial assistance during
Qadhafi's recent visit Tripoli also
started delivery of promised food and medical supplies to Sudan during the
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
Libyan leader's stay in Khartoum, and the US Embassy reports that a 1,000-
truck Libyan aid convoy is en route to western Sudan. Such assistance helps
Qadhafi repair his, poor image as a reliable aid donor and raises the
expectations of other economically strapped Third World countries, such as
Somalia, which have been the target of Libyan attempts to expand relations.
Moreover, it may make these governments less willing to resist Libyan
demands on regional political issues.
Continuing Andean Prospects for revising Andean Pact Decision 24, the code covering foreign
Pact Disunity investment in the five Pact nations, remain uncertain. Although Ecuador and
Colombia wish to modify the code-which they see as outdated-Peru,
Venezuela, and Bolivia seem unwilling or unable to consider new initiatives.
Although some cooperation among the members to attract foreign capital
continues-a special exposition will be held on 28-30 May in Cartegena,
Colombia, to showcase 54 new investment projects-the Pact has not placed
the revision on the agenda of any upcoming ministerial meetings. Lacking a
consensus, the Andean nations will continue to take separate actions to attract
foreign investment.
National Developments
Developed Countries
Japanese Engine Mitsubishi has delayed commercialization of ceramic turbochargers-a major
Ceramics Delayed phase in the development of engine ceramics-until 1986,
claiming that rust particles in engine exhaus are shattering
the ceramic rotors. In fact, Mitsubishi may have other technical problems-
manufacturing technology remains at a stage where most ceramic rotors have
undesirably large defects, which probably have contributed to the breakage
problem. Given the nature of the troubles and the lack of expedient fixes, we
anticipate further delays both in Mitsubishi's development of ceramic turbo-.
chargers-although the firm retains a good chance of being first to commer-
cialize them-and in the Japanese ceramic engine programs.
Israel Adopts New . The Israeli Cabinet last Sunday proposed 20 measures to reduce the govern-
Economic Measures ment's budget deficit and halt foreign exchange losses. The more significant
measures included a doubling of the foreign travel tax, a hike in the value-
added tax, income tax credits for employees and employers in the manufactur-
ing sector, and a ban within three years on deficit financing by the Bank of
Israel. They also included a partial freeze on public-sector wages, employment,
and contracts. The government is hoping to right the economy without a major
devaluation or an increase in unemployment, but it is likely to find that the
quick fixes included in the new program will not be sufl'icient~
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
Secret
Less Developed Countries
Mexican Economic Mexico's economic performance continues to deteriorate,
Performance Weakens In the first quarter the trade surplus dropped 40 25X1
percent to $2.4 billion compared with the same period last year. The weak
world oil market and the increasingly overvalued peso cut export earnings,
while the surge in economic activity boosted imports. Meanwhile, we estimate
capital flight more than tripled to $2 billion, reflecting increasing concern
among private investors over de la Madrid's economic policy, the possibility of
a devaluation, and prospects for midterm-elections violence. Preelection
spending is keeping inflation and the public-sector deficit well above target.
Based on the January-April period., we project inflation to remain at an annual
rate of about 60 percent, well above the government's original projection of 35
percent. The Embassy reports conflicts between senior economic advisers are
intensifying as Finance Minister Silva-Herzog pushes for tighter controls and
Budget Director Salines de Gortari espouses expansionary policies. If Mexico
City does not take quick action after the election to cool the economy, serious
external financial problems will emerge before yearend. 25X1
Brazilian Iron The recent startup of the Carajas mining project will increase Brazil's iron ore
Ore Exports exports in 1985 and significantly boost its foreign exchange position during the
next few years. The US Embassy reports that the first shipment-to Japan-
took place in May. When the $4.9 billion complex is completed in 1987, the
state mining company expects its annual production to reach 35 million metric
tons. This will represent an increase of one-third over present iron ore exports.
Most of the Carajas production is already earmarked for export under long-
term contracts enabling Brazil, already the world's leading exporter of iron
ore, to add $700 million to its foreign exchange earnings. The Carajas mines
25X1
25X1
also contain major reserves of bauxite, copper, zinc, and manganese that will
lessen dependence on imports and may provide future export opportunities.
Improving Government- Leaders of El Salvador's largest business group have told US Embassy officials
Private-Sector they are encouraged by recent government pronouncements to help the private
Relations in sector, particularly the coffeegrowers, who have been among the most vocal
El Salvador critics of the government. President Duarte recently announced new policies to
aid the coffee industry, including a 5-percent increase in the guaranteed price
to producers and increased availability of credit. Duarte's willingness to
address business concerns probably reflects growing pressures to reinvigorate
the economy, rather than a softening of his long-held suspicion of the private
sector. 25X1
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
Bolivia's Tin Tin production in Bolivia fell 25 percent last year to roughly 18,000 metric
Production Declines tons. Moreover, we expect little improvement. in Bolivian tin output over the
Sharply next few years as problems such as poor management, inadequate operating
funds, declining ore grades, and faulty equipment go largely unaddressed.
Bolivia's earnings prospects are further jeopardized by weak tin prices, which
through April are averaging 10 percent below last year's level. Because tin
accounts for one-fourth to one-third of Bolivia's exports, these trends will
severely complicate La Paz's debt difficulties.
Algerian Socialism Algeria's Central Committee has urged a reexamination of the national
Reviewed charter, the ideological basis for the government and the economy. Specifical-
ly, the committee recommended a review of socialist management of state
enterprises and emphasized the need for increased private-sector participation
in the economy. These departures from tradition underscore President Bendje-
did's liberalization efforts over the past five years and the growing belief
among many government officials that Algeria's brand of socialism is
hindering economic progress. While Bendjedid's call for a possible national
referendum on the committee's recommendations sets the stage for a national
consensus on reform, it also puts hardline opponents on alert. Pent-up social
and economic tensions likely will force the regime to move cautiously to avoid
open unrest.
Libyan Rationing Libyan plans to implement rationing of almost all goods, services, and housing
Progressing are moving apace, The regime has
announced a deadline of 30 June for owners of more than one dwelling to relin-
quish their surplus property to the state without compensation. Housing needs
for each family also are being assessed by special committees, and excess space
and luxury items will be taxed. Ration booklets for foodstuffs and consumer
goods have been widely distributed for some time, but so far ration tickets have
only been necessary for consumer items such as automobiles and refrigerators.
These measures are ostensibly part of Qadhafi's long-term plans to revolution-
ize Libyan society, but are more likely the result of sharply lower oil revenues.
Disgruntlement over declining living standards has increased sharply over the
past year, but has yet to threaten the regime.
Singapore Economy Economic growth dropped to 3 percent at an annual rate during the first three
Slows Dramatically. months of this year, compared with 10-percent growth registered for the same
period in 1984. Manufacturing output actually declined, according to press
reports, with the important petroleum refining industry continuing to operate
well below capacity. A surplus of office and hotel space has halted growth in
construction. With some 4,000 workers losing their jobs during the quarter-
nearly equal to the 1984 total-pressure is mounting for government action.
Businessmen have asked for tax breaks, but as yet these have not been
forthcoming. Some parliamentarians have called for increased benefits for the
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
Secret
poor-fewer than 1 percent receive public assistance-but high-ranking
ministers maintain that generous welfare benefits would do more harm than
good.
Questionable Gains Indonesia may become a net rice importer next year despite published figures
in Indonesian that indicate the country has achieved self-sufficiency in rice output over the
Agricultural Output past 10 years. an Indonesian study has 25X1
determined that the 1984 rice crop on Java, which accounts for about two-
thirds of national output, barely exceeded the previous year's harvest and will
not offset increased consumption. In addition, much of the rice stock held by
the government reportedly is unfit for human consumption. The Minister of
Agriculture has not yet informed President Soeharto of the alleged falsifica-
tion of production and stock figures, but he is concerned that local shortages
will appear before September, when Soeharto is scheduled to deliver a speech
in Rome on the success of Indonesian agriculture. 25X1
Romanian and Prolonged bad weather has reduced ros ects for the grain crops in Romania
Bulgarian Grain and Bulgaria. many winter grains, weakene25X1
Crops in Trouble by drought last fall, barely survived the severe winter. The major growing
regions near the Black Sea were especially hard hit and crops were being
plowed under, according to the US Embassies in Bucharest and Sofia. Drought
this spring has delayed recovery of winter grains and now threatens the
recently planted corn crop. This could be the third successive below-average
grain harvest for Romania, which would further strain the nation's already
poor food supplies. In addition, hard currency shortages continue to oblige
Bucharest to restrict food imports and to push grain exports. Altogether, these
problems could increase the potential for unrest. In Bulgaria, food supplies are
better, but a below-average harvest would reduce the exportable surplus-an
important hard currency earner. 25X1
New Chinese Tax on China has announced approval of a new tax on fees and commissions received
Foreign Businesses by permanent representative offices of foreign firms located in China.
Beginning this year, income from such services as consultations, market
surveys, and liaison for foreign firms would be subject to a minimum 20-
percent tax. Income from services conducted for Chinese enterprises or strictly
for the parent firm will be exempt, and offices in special economic zones will
be taxed at a reduced rate. Foreign press reports have interpreted the new tax
as a sudden move designed to bolster China's foreign exchange reserves,
adding to the already high cost of doing business in China. Because the tax is
unlikely to yield significant revenues, it is more likely part of an ongoing effort
to bring China's commercial law in line with international practices. In fact,
those firms subject to the new tax will receive a reduction in the existing
commercial tax rates, which will offset some of the increase in Beijing's
revenues.
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
Iq
Next 1 Page(s) In Document Denied
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
Secret
Secret
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
Directorate of
Intelligence
Economic & Energy
Indicators
DI EEI 85-011
24 May 1985
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798ROO0100090007-7
This publication is prepared for the use of US Government
officials, and the format, coverage, and content are designed to
meet their specific requirements. US Government officials may
obtain additional copies of this document directly or through
liaison channels from the Central Intelligence Agency.
Requesters outside the US Government may obtain subscriptions to
CIA publications similar to this one by addressing inquiries to:
Document Expediting (DOCEX) Project
Exchange and Gift Division
Library of Congress
Washington, D.C. 20540
or: National Technical Information Service
5285 Port Royal Road
Springfield, VA 22161
Requesters outside the US Government not interested in subscription
service may purchase specific publications either in paper copy or
microform from:
Photoduplication Service
Library of Congress
Washington, D.C. 20540
or: National Technical Information Service
5285 Port Royal Road
Springfield, VA 22161
(To expedite service call the
NTIS Order Desk [phone]
Comments and queries on this paper may be directed to the DOCEX
Project at the above address or by phone [phone]), or the
NTIS Office of Customer Services at the above address or by phone
(703-487-4660). Publications are not available to the public from the
Central Intelligence Agency.
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798ROO0100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
Economic & Energy
Indicators
Industrial Production
Gross National Product
Consumer Prices
Money Supply
Unemployment Rate
Foreign Trade
Current Account Balance
Export Prices in US $
Import Prices in US $
Exchange Rate Trends
Money Market Rates
Agricultural Prices
Industrial Materials Prices
Energy
World Crude Oil Production, Excluding Natural Gas Liquids 8
Big Seven: Inland Oil Consumption 9
Big Seven: Crude Oil Imports 9
OPEC: Crude Oil Official Sales Price 10
OPEC: Average Crude Oil Official Sales Price (Chart) 11
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
Industrial Production
Percent chang
seasonally adju
e from previ
sted at an a
ous period
nnual rate
United States
2.6
-8.1
6.4
10.7
0
2.2
1.5
3.7
-2.9
Japan
1.0
0.4
3.5
11.1
-7.7
-2.0
9.4
-21.4
West Germany
-2.3
-3.2
0.3
3.3
-13.5
-1.2
0
France
-2.6
-1.5
1.1
2.6
-24.1
-17.1
74.0
United Kingdom
-3.9
2.1
3.9
0.9
8.5
20.2
-2.3
Italy
-1.6
-3.1
-3.2
3.1
6.5
-37.9
158.1
Canada
0.5
-10.0
5.7
8.7
6.0
-9.5
-4.1
Percent cha
seasonally ad
nge from p
justed at a
revious period
n annual rate
West Germany
6.0
5.3
3.6
2.4
3.8
4.3
5.3
5.8
2.4
France
13.3
12.0
9.5
7.7
5.7
5.3
5.9
6.6
5.6
United Kingdom
11.9
8.6
4.6
5.0
7.0
7.4
8.9
14.0
Italy
19.3
16.4
14.9
10.6
10.2
10.0
10.7
10.9
12.7
Canada
12.5
10.8
5.8
4.3
5.5
6.0
5.3
1.9
Gross National Product a
Percent change from previous period
seasonally adjusted at an annual rate
1981
1982
1983
1984
Japan
4.1
3.4
3.1
5.7
7.6
2.6
9.6
West Germany
-0.2
-1.0
1.3
2.6
-7.4
9.8
5.8
France
0.2
2.0
0.7
1.6
-1.7
4.7
-0.2
United Kingdom
-0.9
1.5
3.4
1.6
-5.6
-1.4
13.2
Italy
0.2
-0.5
-0.4
2.6
2.7
4.4
.-2.3
Canada
3.3
-4.4
3.3
4.7
3.2
6.6
2.3
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
Money Supply, M-1
Percent change from previous period
seasonally adjusted at an annual rate
United States b
7.1
6.6
11.2
6.9
10.9
9.4
15.3
5.8
6.3
Japan
3.7
7.1
3.0
2.9
11.5
-8.1
11.0
64.8
West Germany
1.1
3.6
10.3
3.3
1.4
-20.8
-3.7
13.2
France
12.2
13.9
10.0
7.5
United Kingdom
NA
NA
13.0
14.6
0.7
-22.6
-2.4
27.8
46.1
Italy
11.2
11.6
15.3
-11.0
Canada
3.8
0.6
10.2
2.3
-4.6
-33.1
-29.2
16.8
-3.2
a Based on amounts in national currency units.
b Including M1-A and M1-B.
Unemployment Rate
United States
7.5
9.6
9.5
7.4
7.2
7.3
7.2
7.2
7.2
Japan
2.2
2.4
2.7
2.7
2.5
2.4
2.6
2.6
West Germany
5.6
7.7
9.2
9.1
10.4
10.6
10.5
10.0
9.3
France .
7.6
8.6
8.5
9.6
9.9
9.9
9.9
10.0
10.2
United Kingdom
10.0
11.6
12.4
12.6
13.0
12.9
13.0
13.0
13.1
Italy
8.4
9.1
9.9
10.4
Canada
7.5
11.1
11.8
11.3
11.1
11.2
11.0
11.2
10.9
a Unemployment rates for France are estimated.
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
}
Foreign Trade
1981
1982
1983
1984
1985
1st Qtr
Jan
Feb
Mar
United States b
Exports 233.5
Imports 261.0
Balance -27.5
212.3
244.0
-31.6
200.7
258.2
-57.5
217.6
325.6
-107.9
55.7
84.4
-28.7
19.4
28.3
-8.9
17.9
28.0
-10.1
18.4
28.1
-9.7
Japan
Exports 149.6
Imports 129.5
Balance 20.1
138.3
119.7
18.6
145.5
114.1
31.5
168.2
124.1
44.1
40.1
28.7
11.5
14.1
9.6
4.6
13.2
9.7
3.5
12.8
9.4
3.4
West Germany
Exports 175.4
Imports c 163.4
Balance 11.9
176.4
155.3
21.1
169.4
152.9
16.6
172.0
153.1
18.8
40.7
36.3
4.5
14.2
12.9
1.4
13.6
11.9
1.7
13.0
11.5
1.5
France
Exports 106.3
Imports 115.6
Balance -9.3
96.4
110.5
-14.0
95.1
101.0
-5.9
97.5
100.3
-2.8
22.5
23.6
-1.1
7.1
7.5
-0.4
7.6
8.2
-0.6
7.9
8.0
-0.1
United Kingdom
Exports 102.5
Imports 94.6
Balance 7.9
97.1
93.0
4.1
92.1
93.8
-1.8
93.7
99.2
-5.5
22.6
24.0
-1.4
7.4
7.5
-0.1
7.6
7.9
-0.3
7.7
8.7
-1.0
Italy
Exports 75.4
Imports 91.2
Balance -15.9
74.0
86.7
-12.8
72.8
80.6
-7.8
73.6
84.3
-10.7
5.7
6.9
-1.2
6.1
7.3
-1.1
Canada
Exports 70.5
Imports 64.4
Balance 6.1
68.5
54.1
14.4
73.7
59.3
14.4
86.8
70.8
16.1
21.9
17.9
4.0
7.3
6.2
1.0
7.1
5.8
1.3
7.5
5.9
1.6
a Seasonally adjusted.
b Imports are customs values.
c Imports are c.i.f.
Japan 4.8'
6.9
20.8
35.0
6.8
0.8
2.5
3.5
West Germany -6.8
3.5
4.1
5.9
1.1
-0.3
0.7
0.8
France -4.7
-12.1
-4.6
-0.5
a Seasonally adjusted; converted to US dollars at current market
rates of exchange.
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
Percent change from previous period
at an annual rate
Annual
3d Qtr
4th Qtr
Jan
Feb
Mar
United States
9.2
1.5
1.0
1.4
-2.5
-3.5
-1.3
-5.2
8.0
Japan
5.5
-6.4
-2.4
0.2
-14.9
-4.7
-14.8
-8.2
-11.2
West Germany
-14.9
-2.8
-3.2
-7.1
-22.9
-12.9
-17.8
-33.9
4.1
France
-12.0
-5.5
-5.0
2.7
-21.4
-9.7
United Kingdom
NA
-5.9
-4.8
-17.1
-16.3
-34.0
-11.2
68.6
Italy
-7.8
Percent change from previous period
at an annual rate
Annual
3d Qtr
4th Qtr
Jan Feb Mar
United States
5.3
-2.0
-3.7
1.7
-2.6
-20.0 0.8 -9.9
Japan
3.6
-7.3
-5.0
-2.8
-5.2
-8.4
-28.9 4.9 19.2
West Germany
-8.6
-4.7
-5.2
-4.8
-22.5
-11.3
-11.4 -24.4 19.4
France
-7.8
-7.2
-7.0
-3.8
-22.9
-2.7
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
Exchange Rate Trends
Percent change from previous period
at an annual rate
10.5
10.6
5.8
9.1
34.3
40.0
9.3
-5.7
10.4
6.2
3.1
-3.0
-2.1
7.0
5.8
1.0
-5.1.
5.7
-5.1
-6.1
- 4.7
-2.1
4.2
-3.7
United Kingdom
2.5
-2.1
-5.0
-2.5
-27.3
0.4
Italy
-9.2
-5.1
-1.6
-3.1
9.4
-10.6
Canada
0.3
0.2
2.3
-2.3
8.5
-13.4
Dollar Cost of Foreign Currency
Japan
2.7
-12.8
4.5
-19.6
-315
-32.5
9.6
25.5
West Germany
-24.6
-7.2
-5.2
-11.5
-28.0
-26.3
-58.7
-0.8
54.2
France
-28.7
-20.8
-15.9
-14.7
-26.7
-26.1
-54.7
-1.0
55.4
United Kingdom
-13.2
-13.4
-13.3
-11.9
-28.6
-28.9
-28.9
41.1
212.0
Italy
-32.8
-18.8
-12.3
-15.6
-30.3
-25.0
-66.8
-29.4
46.4
Money Market Rates
United States
90-day certificates of
deposit, secondary market
16.24
12.49
9.23
10.56
8.76
8.30
8.84
9.13
8.61,
Japan
loans and discounts
(2 months)
7.79
7.23
NA
6.66
6.55
6.56
6.55
6.54
NA
West Germany
interbank loans
(3 months)
12.19
8.82
5.78
5.96
6.12
5.84
6.17
6.35
5.98
France
interbank money market
(3 months)
United Kingdom
sterling interbank loans
(3 months)
13.85
12.24
10.12
9.91
12.98
11.74
13.56
13.63
12.67
Italy
Milan interbank loans
(3 months)
Canada
finance paper (3 months)
18.46
14.48
9.53
11.30
10.59
9.83
10.59
11.35
NA
Eurodollars
3-month deposits
16.87
13.25
9.69
10.86
9.04
8.50
9.19
9.43
8.86
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
Agricultural Prices
1980
1981.
11
1982
- 1983
1984 ,
1985
Australia
(Boneless beef,
f.o.b., US Ports)
United States
(Wholesale steer beef,
midwest markets)
1.04.3
100:0
101:4
97.6
100.9
96.6
97.4
92.4
89.2
Cocoa
(? per pound)
113.5
89.8
74.3
92.1
106.2
99.2
100
98.9
101.6
Coffee
($ per pound)
1.54
1.28
1.40
1.32
1.44
1.44
1.45
1.41
1.41
Corn
(US #3 yellow,
c.i.f. Rotterdam
$ per metric ton)
Cotton
(Memphis middling
1 1/ 16 inch, $ per pound)
0.8219
0.7243
0.6073
0.6873
0.6849
0.6062 '
0.5959
0.6154
0.6241
Palm Oil
(United Kingdom 5% bulk,
c.i.f., $ per metric ton)
Us
(No. 2, milled,
4% c.i.f. Rotterdam)
Thai SWR
(100% grade B
c.i.f. Rotterdam)
522
573
362
339
310
254
256
250
241
Soybeans
(US #2 yellow,
c.i.f. Rotterdam
$ per metric ton)
Soybean Oil
(Dutch, f.o.b. ex-mil.
$ per metric ton)
598
507
447
527
727
651
664
667
693
Soybean Meal
(US, c.i.f. Rotterdam
$ per metric ton)
257
252
219
238
197
157
152
152
155
Sugar
(World raw cane, f.o.b.
Caribbean Ports, spot
prices 4/lb.)
29.03 '
16.93
8.42
8.49
5.18
3.69
3.65
3.78
3.37
Tea
Average Auction (London)
(US 4 per pound)
101.4
91.0
89.9
105.2
156.6
126.9
127.3
110.4
98.6
Wheat
(US #2. DNS
Rotterdam c.i.f.
$ per metric ton)
209
210
187
183
182
177
182
168
171
Food Index a
232
203
167
184
194
176
176
176
174
(1975 =100)
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
1983
1984
1985
Major US producer
71.6
77.3
76.0
77.7
81.0
81.0
81.0
81.0
81.0
65.1
56.8
49.2
50.0
49.5
49.8
Chrome Ore
(South Africa chemical
grade, $ per metric ton)
55.0
53.0
50.9
50.0
50.0
49.9
50.0
50.0
50.0
Copper a (bar, ? per pound)
98.7
79.0
67.1
72.0
62.4
62.1
63.5
62.2
66.6
Gold ($ per troy ounce)
612.1
460.0
375.5
424.4
360.0
300.0
302.1
295.3
326.7
Lead a (Q per pound)
41.1
32.9
24.7
19.2 -
20.0
17.2
17.2
15.7
17.3
Manganese Ore
(48% Mn, $ per long ton)
78.5
82.1
79.9
73.3
69.8
69.6
69.8
69.4
68.4
Nickel ($ per pound)
Cathode major producer
3.5
.3.5
3.2
3.2
3.2
3.2
3.2
3.2
3.2
LME.Cash
3.0
2.7
2:2
2.1
2.2
2.2
2.2
2.3
2.4
Platinum ($ per troy ounce)
475.0
475.0
475.0
475:0
475.0
475.0
Metals week,
New York dealers' price
677.0
446.0
326.7
422.6
358.2
269.3
276.4
256.3
286.7
Rubber (? per pound)
Synthetic b
40.6
47.5
45.7
44.0
44.4
46.6
47.7
45.0
NA
Natural c
73.8
56.8
45.4
56.2
49.6
42.0
42.0
42.0
42.0
Silver ($ per troy ounce)
20.7
10.5
7.9
11.4
8.1
5.9
6.1
5.7
6.4
Steel Scrap d ($ per long ton)
91.2
92.0
63.1
73.2 .
86.4
83.7
82.0
86.8
NA
Tin a (4 per pound)
761.3
641.4
581.6
590.9
556.6
501.1
499.0
499.7
533.3
Tungsten Ore
(contained metal,
$ per metric ton)
18,219
18;097
13,426
10,177
10,243
11,515
11,568
12,025
11,792
US Steel
(finished steel, composite,
$ per long ton)
Lumber Index a
(1975=100)
167
159
140
Industrial Materials index r
184
166
142
(1975=100)
a Approximates world market price frequently used, by major world
producers and traders, although only small quantities of these
metals are actually traded on the LIME.
b S-type styrene, US export price.
c Quoted on New York market.
d Average of No. 1 heavy melting steel.scrap and No. 2 bundles
delivered to consumers at Pittsburgh, Philadelphia, and Chicago.
/1t
This index is compiled by using the average of l l .types of lumber
whose prices are regarded as bellwethers of US lumber construction
costs.
f The industrial materials index is compiled. by The Economist for
18 raw materials which enter international trade. Commodities are
weighted by 3-year moving averages of imports into industrialized
countries.
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
World Crude Oil Production
Excluding Natural Gas Liquids
.Thousand b/d
Annual
3d Qtr
4th Qtr
Jan
Feb
World
59,463
55,827
53,014
52,588
-.53,827
;539195
.53,661
Non-Communist countries
45,243
41,602
38,810
.38,228
39,257
. 38,711
38,952
Developed countries
12,859
12,886
13,276
13,864
14,302
..14,216
14,618
United States
8,597
8,572
8,658
8,680
8,735
8,776 .
8,807
8,737
8,911
Canada
1,424
1,285
1,270
1,356
1,411
1,397
1,448
United Kingdom
1,619
1,811
2,094
2,299
2,535
2,451
2,646
2,815
Norway
528
501
518
614
700
681
. 764
- 695
Other
691
717
921
911..
953
1,014
Non-OPEC LDCs
5,443
6,036
6,633
6,823
7,515
7,565
7,704 -
7,179
Mexico
1,936
2,321
2,746
2,666
2,746
2,724
2,723
2,644
Egypt
595
598
665
689
827
833
890
890
Other
2,912
3,117
3,222
3,468
3,942
4,008
4,09.1?
.3,645
OPEC
26,941
22,680
18,901
17,541
17,440
16,930
16,630
14,846
16,391
Algeria
1,020
803
701
699
638
650
633
600
600
Ecuador
204
211
211
236
253
261
253
260
270
Gabon
175
151
154
157
152
157
150
150
150
Indonesia
1,576
1,604
1,324
1,385
1,466
1,400
1,411
1,160
1,190
Iran
1,662 "
-.1,381.
2,282
2,492
2,187
2,002
2,299
1,400
2,100
Iraq
2,514
993
972
'922
1,203
1,249
1,233
1,250
1,250
Kuwait b
1,389
947
663
881
912
933
834
900
900
Libya
1,830
1,137
1,183
1,076
1,073
1,027
1,000
1,000
1,000
Neutral Zone c
544
370
317
390
410
386 .
380
420
450
Nigeria
2,058
1,445
1,298
1,241
1,393
1,232
1,600
1,400
1,700
Qatar
471
405
328
295
399
440
317
345
290
Saudi Arabia b
9,631
9,625
6,327
4,867
4,444 4,338 3,699
3,300
3,800
UAE
1,702
1,500
1,248
1,119,
" .,,1,097. ,,,,.,,1,012?r,_ .1,056
1,106 .
1,106
Venezuela
2,165
2,108
1,893
1,781
1,813
1,843
1,765
1,555
1,585
Communist countries
14,220
14,225
14,204
14,360
14,570
14,484
14,709
14,210
USSR
11,700
11,790
11,750
11,820
11,870
11,864
12,067
11,400
China
2,113
2,024
2,044
2,120
2,280
2,200
2,222
2,390
Other
407
411
410
420
420
420
420
420
a Preliminary.
b Excluding Neutral Zone production, which is shown separately.
c Production is shared equally between Saudi Arabia and Kuwait.
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
Big Seven: Inland Oil Consumption
Thousand b/d
United States a
17,006 16,058 15;296
15,184
15,708
15,631
15,602
15,353
16,142
15,975
15,909
Japan
4,674 4,444 4,204
4,193
4,349
3,880
4,373
5,029
4,683
West Germany
2,356 2,120 2,024
2;009
2,012
1,902
2,076
1,856
2,162
France
1,965 1,744 1,632
1,594
1,531
'1,587
19530
1",577
2,024
1,713
1,503
United Kingdom
1,422 1,325 1,345
1,290
1,624
1,835
1,996
1,870
1,903
Italy b
1,602 1,705 1,618
1,594
1,513
1,502
1,560
1,558
1,763
1,809
1,573
Canada
1,730 1,617 1,454.
1,354
1,348
1,410
1,423.
1,311
1,363
1,374
a Including bunkers, refinery fuel, and losses.
b Principal products only prior to 1981.
Big Seven: Crude Oil Imports Thousand b/d
Annual
Oct
Nov
Dec
Jan
Feb
Mar
United States
5,220
4,406
3,488
3,329
3,402
3,751
3,552
3,126
2,700
2,126
2,670
Japan
4,373
3,919
3,657
3,567
3,664
3,405
3,489
3,722
3,194
4,053
West Germany
1,953
1,591
1,451
1,307
1,335
1,060
1,366
1,328
1,360
France
2,182
1,804
1,596
1,429
1,395
1,346
1,325
1,502
1,494
1,538
United Kingdom
893
736
565
456
482
506
478
486
489
Italy
1,860
1,816
1,710
1,532
1,416
Canada
557
521
334
247
244
187
235
?285
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
US S per barrel
OPEC average b
18.67
30.87
34.50
33.63
29.31
28.70
28.25
28.59
28.09
28.06
Algeria
42? API 0.10% sulfur
19.65
37.59
39.58
35.79
31.30
30.50
30.15
30.50
30.50
29.50
Ecuador
28* API 0.93% sulfur
22.41
34.42
34.50
32.96
27.59
27.50
26.82
27.50
26.50
26.50
Gabon
29? API 1.26 % sulfur
18.20
31.09
34.83
34.00
29.82
29.00
28.35
29.00
28.00
28.00
Indonesia
35 ? API 0.09% sulfur
18.35
30.55
35.00
34.92
`
29.95
29.53
28.88
29.53
28.53
28.53
Light
34? API 1.35% sulfur
19.45
34.54
36.60
31.05
28.61
28.00
28.38
29.11
28.05
28.05
Heavy
31 ? API 1.60% sulfur
18.49
33.60
35.57
29.15
27.44
27.10
27.41
27.55
27.35
27.35
Iraq ?
35 ? API 1.95% sulfur
18.56
30.30
36.66
34.86
30.32
29.43
28.78
29.43
28.43
28.43
Kuwait
310 API 2.50% sulfur
18.48
29.84
35.08
32.30
27.68
27.30
27.30
27.30
27.30
27.30
Libya
40? API 0.22% sulfur
Nigeria
34? API 0.16% sulfur
20.86
35.50
38.48
35:64
30.22
29.12".
28.24!"'
27.90
28.37
28.37
Qatar
40? API 1.17% sulfur
19.72
31.76
37.12
34.56
29.95
29.49
28.48
29.24
28.10
28.10
Berri
39? API 1.16% sulfur
19.33
30.19
34.04
34.68
29.96
29.52
28.48
29.27
28.11
28.11
Light
34? API 1.70% sulfur
17.26
28.67
32.50
34.00
29.46
29.00
28.32
29.00
28.00
28.00
Medium
31 ? API 2.40% sulfur
16.79
28.12
31.84
32.40
27.86
27.40
27.48
27.65
27.40
27.40
Heavy
27* API 2.85% sulfur
.16.41
27.67
31.13
31.00
26.46
26.00
26.50
26.50
26.50
26.50
UAE
39? API 0.75% sulfur
19.81
31.57
36.42
34.74
30.38
29.56
28.52
29.31
28.15
28.15
Venezuela
26? API 1.52% sulfur
17.22
- 28.44
32.88
32.88
28.69
27.88
27.69
27.88
27.60
27.60
a F.o.b. prices set by the government for direct sales and, in most
cases, for the producing company buy-back oil.
b Weighted by the volume of production.
c Beginning in 1981 the price of Kirkuk (Mediterranean) is used in
calculating the OPEC average official sales price.
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
 Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7
OPEC: Average Crude Oil Sales Price
18.67
11.29 11.02 11.77 12.88 12.93
3.39
SU.6I
1 II III IV
1979
Sanitized Copy Approved for Release 2011/03/03: CIA-RDP88-00798R000100090007-7