ARGENTINA: ECONOMIC ACCOMPLISHMENTS OF MILITARY JUNTA - 1977/01/21

• Document Type: SPECIALCOLLECTION
• Collection: Argentina Declassification Project - The "Dirty War" (1976-83)
• Document Number (FOIA) /ESDN (CREST): 06628277
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 2
• Document Creation Date: April 3, 2019
• Document Release Date: April 12, 2019
• Publication Date: January 21, 1977

Approved for Release: 2018/10/02 CO6628277
2 FRIDAY JANUARY 21, 1977
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THE NATIONAL INTELLIGENCE DAILY
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Argentina: Economic Accomplishments of Military Junta
The military junta in Argentina under
President Jorge yidela chalked up im-
pressive accomplishments in restoring
business confidence and international
credit in its first nine months.
Since assuming power on March 24, the
military government as:
� Arran �loans of $1.3 k
billion to mee e rse6ice payments,
and rescheduled foreign debts so that
future repayment problems can be
avoided.
� More thandoubled foreign
reserves.'*'
� Replaced a $ -billion trade deficit
in 1975 with an S/100-million surplus
last year, as increased sales of grains
and meat raised exports while imports
declined with the drop in domestic
economic activity.
� Devalued the peso by almost 50
percent and eliminated the dual-rate
system.
� Lowered the annual rate of infla-
tion from nearly 400 percent in the
first half of 1976 to a little more than
100 percent in the second.
� Stimulated agricultural producers
to increase crop areas, leading to a
record wheat harvest that should boost
export earnings in 1977.
� Reduced the government budget
deficit as a percentage of gross
domestic product in 1976 to about one
half the level in 1975 by raising tax
collections and curtailing spending.
Although real gross domestic product
probably declined about 4 percent for
�
The Argentine junta (L to R): General Agosti,
President Videla, Admiral Ilfassera
A large part of the recent economic
readjustment has come at the expense of
the working class. Real wages slumped in
the second quarter; since then, the govern-
ment has authorized several wage hikes to
hold real wages near the June level.
Holding the line on real wages has
enabled many enterprises to keep workers
on their rolls despite reduced production,
thus keeping unemployment at roughly
5.5 percent.
Plans and Projections
The Argentine economic team expects
the trade balance to remain strongly
positive in 1977 for three reasons: large
_
jected at about 100 percent; private es-
timates are slightly less optimistic.
The government's economic projections
for 1977 call for gross domestic product to
grow by 4 percent, led by reviving invest-
ment. Some 5260 million in development
loans has been obtained from inter-
national agencies for government con-
struction projects.
Buenos Aires hopes to attract private
foreign investment through its recent
revisions of restrictive Peronist laws and
its settlement of most disputes with
foreign enterprises. Industrial output is
projected to grow about 5 percent as idle
period.
Terrorist activities, though reduced,
continue to hamper the economy, par-
ticularly foreign investment. Domestic in-
vestment funds are limited even though
savings have picked up since March and
capital that had moved out of the country
seems to be starting to return. Foreign in-
volvement in the petroleum industry is
needed if the government's goal of energy
self-sufficiency is to be reached.
Buenos Aires will have to reduce
further the budget deficit in order to
reduce the rate of growth in money sup-
ply. The 1977 budget calls for raising
revenues by improving tax collection
procedures and by basic tax reform.
Expenditures are to be held down by a
gradual reduction in government rolls as
private employment opportunities im-
prove�a plan that often has proved in-
effectual in the past. Projected sharp cur-
tailment in transfers to provincial
governments and in subsidies to un-
profitable state enterprises also will be
difficult to achieve.
Prospects
Assuming that the current leadership
remains in power, economic prospects for
1977 are favorable. Private businessmen
foresee a substantial improvement in
economic activity this year. This con-
fidence, however, could be severely under-
mined by a change in leadership or policy.
Labor's willingness to accept continued
austerity and the suspension of its
bargaining rights will be the key factor in
determining the success of the economic
program this Year. Sn far. the onvernrr�ent
Approved for Release: 2018/10/02 C06628277
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and ll rese wlmled friFoign flak& that
future repayment problems can be
avoided.
O More than doubled foreign
reserves.
� Replaced a $1-billion trade deficit
in 1975 with an $800-million surplus
last year, as increased sales of grains
and meat raised exports while imports
declined with the drop in domestic
economic activity.
O Devalued the peso by almost 50
percent and eliminated the dual-rate
system.
O Lowered the annual rate of infla-
tion from nearly 400 percent in the
first half of 1976 to a little more than
100 percent in the second.
� Stimulated agricultural producers
to increase crop areas, leading to a
record wheat harvest that should boost
export earnings in 1977.
� Reduced the government budget
deficit as a percentage of gross
domestic product in 1976 to about one
half the level in 1975 by raising tax
collections and curtailing spending.
Although real gross domestic product
probably declined about 4 percent for
1916 as a whole�following a 1.4-percent
drop in 1975�production began to pick
up in the last quarter. A bumper wheat
crop was harvested, truck and tractor
sales increased, and petroleum produc-
tion rose after several years of steady
decline.
The Argentine junta (L to R): General Ago sti,
President Videla, Admiral Massera
A large part of the recent economic
readjustment has come at the expense of
the working class. Real wages slumped in
the second quarter: since then, the govern-
ment has authorized several wage hikes to
hold real wages near the June level.
Holding the line on real wages has
enabled many enterprises to keep workers
on their rolls despite reduced production,
thus keeping unemployment at roughly
5.5 percent.
Plans and Projections
The Argentine economic team expects
the trade balance to remain strongly
positive in 1977 for three reasons: large
supplies of grain are available for sale,
prospects for meat sales to Western
Europe are improving, and industrial ex-
ports are rising slowly. The export surplus
will be slightly larger than in 1976, even
though imports will rise as industrial out-
put revives. Inflation is officially pro-
jected at about 100 percent; private es-
timates are slightly less optimistic.
The government's economic projections
for 1977 call for gross domestic product to
grow by 4 percent, led by reviving invest-
ment. Some $260 million in development
loans has been obtaimd from inter-
national agencies tot government con-
strurtion projertc.
Buenos Aires hopes to attract private
foreign investment through its recent
revisions of restrictive Peronist laws and
its settlement of most disputes with
foreign enterprises. Industrial output is
projected to grow ant. it ��+ iNT4Cri. . idle
capacity is drawn back ilau produi:tion to
meet rising demand. Assuming normal
weather, agricultural prtaitictioa is likely
to grow 5 percent.
The government plans to permit real
wages to rise only slightly in 1977; un-
employment is projected at or below the
current level. The planners intend to ease
the present rigid wage restrictions to per-
mit employers to raise wages as produc-
tivity climbs.
Problems
Labor so far has accepted the sharp
decline in the standard of living and severe
restrictions on union activities with only
moderate protest. It is now growing more
restive. Demonstrations and work stop-
pages have occurred, even though major
unions have been put under government
control and strikes are illegal. Leaders of
unions not under government control
recently prepared a manifesto protesting
that labor is bearing more than its share
of hardships in the economic recovery
nuirin
eit-stititciency is to Ce ireviched.
Buenos Aires will have to reduce
further the budget deficit in order to
reduce the rate of growth in money sup-
ply. The 1977 budget calls for raising
revenues by improving tax collection
procedures and by basic tax reform.
Expenditures are to be held down by a
gradual reduction in government rolls as
private employment opportunities im-
prove�a plan that often has proved in-
effectual in the past. Projected sharp cur-
tailment in transfers to provincial
governments and in subsidies to un-
profitable state enterprises also will be
difficult to achieve.
Prospects
Assuming that the current leadership
remains in power, economic prospects for
1977 are favorable. Private businessmen
foresee a substantial improvement in
economic activity this year. This t: i�
riden i evere.iy thief -
mined by a change in e.adership or paza::
Labor's willingness to accept continued
austerity and the suspension of itt
bargaining rights will be the key factor I::
determining the success of the ecors-:-
program this year. :41-; l'zr, the gover
has reacted mildly to isolated infraction,
of labor restrictions. If labor starts to
make concerted demands, however, tin
regime will face a dilemma.
lithe government refuses to grant con-
cessions, it risks a confrontation with
labor that could wipe out many of the
economic gains made so far. If it makes
concessions, the workers will almost cer-
tainly increase their demands, and the
economic balance will be jeopardized.
Such a move, moreover, could trigger a
government takeover by military
hard-liners.
Even without such a precipitating
agent, there could be a shakeup within tie
military government and a shift to stricter
policies. Many in the military fear that
the Vidcla government will permit a
revival of labor power such as existed un-
der the Peronist governments. Greater
repression, however, could backfire by
making labor more susceptible to leftist
influence
Approved for Release: 2018/10/02 CO6628277