ECONOMIC INTELLIGENCE WEEKLY REVIEW

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79B00457A000300080001-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 50
• Document Creation Date: December 12, 2016
• Document Release Date: January 9, 2002
• Sequence Number: 1
• Publication Date: December 15, 1977
• Content Type: REPORT

A i
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foreign tr)rr tiu~ r` aG t
Assessment
( enter
Economic Intelligence
'Weekly Review
15 December 1977
ER E1W 77-050
15 December 1977
611
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Warning Notice
Sensitive Intelligence Sources and Methods Involved
(WNINTEL)
NATIONAL SECURITY INFORMATION
Unauthorized Disclosure Subject to Criminal Sanctions
DISSEMINATION CONTROL ABBREVIATIONS
NOFORN- Not Releasable to Foreign Nationals
NOCONTRACT- Not Releasable to Contractors or
Contractor/ Consultants
PROPIN- Caution-Proprietary Information Involved
NFIBONLY- NFIB Departments Only
ORCON- Dissemination and Extraction of Information
Controlled by Originator
REL... - This Information has been Authorized for
Release to ...
Classified by 015319
Exempt from General Declassification Schedule
of E.O. 11652, exemption category:
? 5B(1), (2), and (3)
Automatically declassified on:
date impossible to determine
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SECRET
NOFORN-NOCONTRACT
ECONOMIC INTELLIGENCE WEEKLY REVIEW
Major Recent Developments Affecting the International Economy . . . 1
Italy: Communists Lay Out Economic Objectives . . . . . . . . . . . . . 5
Hoping to improve its credentials as a potential governing party, the
Italian Communist Party (PCI) has issued its medium-term economic plan
after months of intense intraparty debate.
European Joint Float: Further Realignment? . . . . . . . . . . . . . . . 8
The appreciation of the West German mark-sparked in part by the recent
movement of funds out of US dollars-is again putting pressure on the
snake.
Current Survey
Brazil: Mounting Problems for Foreign Investors . . . . . . . . . . . . . 11
The government is now requiring greater domestic equity participation in
new ventures and is channeling foreign funds into specified import
substitution sectors.
25X6
25X6
Poland: Growth and Consumption Policies in Jeopardy . . . . . . . . . . 19
Gierek's twin policies of rapid economic growth and more consumer goods
cannot be pursued much longer without further massive credits from the
West.
Common Fund Talks Shift to UN After Geneva Breakdown . . . . . . 24
Bauxite Producers Get Together on Minimum Price . . . . . . . . . 25
i
SECRET
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SECRET
NOFORN-NOCONTRACT
Current Survey
MAJOR RECENT DEVELOPMENTS AFFECTING
THE INTERNATIONAL ECONOMY
Note: This Survey, the second in a series, reviews the recent foreign
economic developments that have significant implications for the growth
and stability of the international economy. In particular, it summarizes the
likely impact of new macro-economic policy decisions of important
countries and the latest evidence of economic trends. We expect to publish
a similar survey every month.
Economic Indicators in the Big Six
Economic performance in five of the six largest industrial countries outside the
United States has improved in recent months. Japan is the exception; industrial
production is showing signs of stagnation largely because of the more than 20-percent
yen appreciation since the beginning of the year.
? Still, composite production in the Big Six turned up slightly in September
after stagnating in August and deteriorating earlier in the year; France and
Italy showed the most improvement.
? Unemployment in each of the six nations in September-October, although
still high, was back down to the June levels. Joblessness had increased rapidly
earlier in 1977.
? The seasonally adjusted annual rate of increase in Big Six consumer prices
in October was less than 7.5 percent, compared with a 10-percent rate as
recently as May. Italy, Britain, and France have slashed their rates by 6, 7,
and 3 percentage points since May; inflation in West Germany has returned
back down to pre-1973 rates.
Note: Comments and queries regarding the Economic Intelligence Weekly Review are
welcome. For the text, the may be directed to of the Office of
Economic Research, for the Economic In icators, to of OER,
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? Britain, Italy, and France have posted sharp improvements in their trade
balances. Italy now has racked up four consecutive months of surplus,
Britain three, and France two-all after many months of steady deficits.
Japan and West Germany continue to show large-surpluses. (For Official Use
Only)
As a result of the slowdown in growth in the six major foreign industrial states
throughout most of 1977, several US forecasts for these nations in 1977 have been
revised downward. In October, Chase Econometric cut its projection for combined
CPYRGHT real growth in the six nations in 77 to 3.2 percept ent 1977 projection
CPYRGHT that it ma a in Ma . Forecasts by Me OECD, ata Resources, Fin CIA 77777-n
similarly reduced.
The recent Chase projection of 1978 GNP growth for the six-3.7 percent-is
virtually unchanged from its spring estimate, with a more pessimistic outlook for
Japan offset by a sharply higher projection for the United Kingdom; the projection for
Japan does not assume substantial new stimulative measures. Recent Data Resources
and CIA GNP projections for 1978 for the total six are 4.7 percent and 4.5 percent,
respectively.
The growth projections by the six nations themselves, made at an OECD Short-
Term Forecasters Meeting last month, were almost universally more optimistic than
those of the OECD Secretariat. Several of the six countries anticipated that prices
would rise at a slower rate than envisaged by the Secretariat. The country forecasts,
however, were apparently often more influenced by national economic goals than by
fully analyzed expectations. (For Official Use Only)
CPYRGH
T
25X6
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25X6
LDC Trends
Growth
Non-OPEC LDCs should turn in an overall rate of real growth of slightly less
than 5 percent in 1977 compared with 5.1 percent in 1976. The small decline is
heavily weighted by slower growth in Brazil and Mexico, where adjustment to earlier
debt and inflation problems required contractionary policies, and somewhat slower
growth in several of the export-oriented economies of Southeast Asia, which are
closely linked to business trends in the industrial nations. Growth in the OPEC nations
will show a sharp deceleration-from 13 percent in 1976 to 8 percent this year-as
development spending levels off and oil output decreases for some producers.
(Confidential)
International Borrowing
LDC borrowing on Eurocurrency and other private capital markets has risen
substantially in 1977. Publicized gross commitments of funds by private bankers to the
LDCs in January-September had nearly matched the $16 billion total for all of 1976.
(Publicized commitments historically have accounted for at least 40 percent of all
medium- and long-term external funding by the LDCs from private sources.) Mexico
is the largest LDC user of foreign private loans, having obtained $2.7 billion so far this
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year although faced with IMF borrowing restrictions. Other large LDC borrow-
ers-each with more than $800 million in publicized borrowing in 1977-have been
Brazil, Iran, South Korea, the United Arab Emirates, and Venezuela. OPEC borrowers
were responsible for about one-third of the publicized total.
Improved LDC creditworthiness and slack Western demand for international
loans have helped improve the climate for the LDC borrowers. New private
commitments probably will increase again in 1978 although not at the 1977 rate. Some
LDC countries continue to meet lender resistance, however. Private bankers remain
reluctant to lend to Zaire because of its fiscal and political problems. Although banks
seem willing to underwrite new borrowing to Brazil, the interest premiums for such
loans are rising. (Unclassified)
LDC steel producers have sharply cut their expansion plans, but completion of
plants still planned or under construction will accelerate the trend to LDC self-
sufficiency and permit the emergence of several substantial steel exporters among the
LDCs-notably Brazil, Venezuela, Mexico, South Korea, and India. The Latin
American exporters could become important competitors in the US market. By 1985,
LDC steelmaking capacity will be about 100 million tons, about 15 percent of Free
World capacity, up from a share of 7 percent today. With the growth in LDC
capacity, traditional exporters, particularly Japan, which now sells nearly one-half of
its steel exports to LDCs, will be hard pressed to increase their sales to other developed
nations. (Unclassified)
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ITALY: COMMUNISTS LAY OUT ECONOMIC OBJECTIVES
The Italian Communist Party (PCI), hoping to improve its credentials as a
potential governing party, recently issued its medium-term economic plan after
months of intense intraparty debate. A recent decline in the Christian Democrats'
resistence to PCI participation in government gives the document particular
significance.
Secretary General Berlinguer had ordered Communist theoreticians to come up
with a statement of objectives that would pacify party members restless over PCI
support of the current austerity program. The party leaders see no short-run
alternative to austerity and advance the plan as a follow-on program that would bring
about stable economic growth and social progress. The plan offers outsiders the best
opportunity to assess PCI policy positions since the 1976 election campaign. Perhaps
its most striking features are a reemphasis on domestic economic planning and a shift
away from protectionist measures earlier favored by party economists.
The plan sets out PCI "maximum objectives" for a period of about five years. PCI
leaders argue that the medium-term focus is realistic, given Italy's economic situation;
this leaves vague their long-term objectives for the "grand transformation" of Italian
society. They apparently hope this approach will answer critics who demand that the
party disavow allegiance to Soviet style plans for control of the society.
Reaction to the plan has been mixed. The relatively nondoctrinaire tone of the
document probably has contributed to a growing impression in Italy that the
Communists are moving away from the classic Marxist-Leninist model. Still, many
Christian Democrats have been critical. Deputy Secretary Galloni, for example, has
criticized the plan for inherent "duplicity" and has predicted that its implementation
would mean the end of the free market in Italy.
What the Plan Says
A voluminous and turgid document, the medium-term plan is divided into two
parts. The first, shorter section defines the political arrangements and cultural
attitudes the PCI considers prerequisite to extracting Italy from its economic
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difficulties. In particular, the plan urges an end to the longstanding "discrimination
against the left" and admission of all parties to the governing process. The second
section, which contains the core of the program, is a litany of more or less specific
proposals. It advances the party's ideas for economic planning, public finance,
agriculture, labor and industrial policies, and relations with the Third World and the
European Community.
The Communists tout comprehensive economic planning as the fundamental
solution to Italy's economic problems and belittle Rome's past efforts at indicative
planning. Yet their program expresses the objective of "upgrading" and "rechannel-
ing" the activities of the free market rather than supplanting it. The Communists
would substitute their own social priorities for what they regard as the chaotic patterns
of the market. Their proposed system of planning would control large-scale industry
more closely than medium- and small-scale industry or agriculture. The Communists
say they would develop and impose economic plans through the legislative mecha-
nism, with the regional authorities playing a major role. Unlike their French
counterparts, they do not call for outright nationalization of industry. In some
undefined way, the bureaucracy would use "levers of direct and indirect public
intervention" to ensure that economic units follow plan directives. The Communists
foresee worker surveillance playing an important role in policing business behavior.
Labor and industrial policies are intertwined. The PCI favors government
intervention to assure that investment promotes both import substitution and job
growth. Its program recommends that investment be directed into labor-intensive
service activities rather than into the capital-intensive manufacturing sector. To foster
job creation in the backward South, the Communists propose a freeze on job levels in
cities to the north. They recommend a shift in favor of take-home pay at the expense
of fringe benefits and social insurance. The PCI would enhance labor mobility
through special assistance to people between jobs. The program includes closer
supervision of state corporations to promote efficient operation and tight control of
multinationals. More broadly, the Communists advocate government review of pricing
decisions.
The medium-term plan advocates greater investment in agriculture, reactivation
of fallow land, and replacement of small family farming units with "cooperative"
arrangements. Communist economists hope to raise farm production and reduce
Italy's large trade deficits in food, which they regard as a drag on industrial growth.
According to the program, the Common Agricultural Policy of the European
Community has exposed Italian agriculture to damaging competition from other EC
members and is the main obstacle to Italian self-sufficiency in food. The PCI demands
"a profound change in the mechanism on which EC policy rests."
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Regarding foreign economic policy, the PCI plan flatly rules out protectionism.
The Communists express concern that integration of the European Community has
slowed and attribute this to the different balance-of-payments performances of the
member states. As a remedy, they suggest joint management of EC members' foreign
exchange reserves. The PCI proposes that the European Community develop greater
cooperation and exchange with Third World and Communist countries. In North-
South relations, the Communists advocate commodity stabilization pacts, debt relief
for the poorest nations, and trade concessions to LDCs.
In the area of public finance, the medium-term plan strikes a rather conserva-
tive note, stressing measures aimed at reducing budget deficits. It states that deficit
financing should be restricted to capital projects. The PCI recommends greater effort
against tax evasion, higher and more progressive taxes on income and wealth, and
curbs on public spending. To hold down outlays, the Communists would abolish
certain agencies that have been prime patronage vehicles for the Christian Democrats
and put a freeze on the hiring of administrators. The PCI would lower payroll taxes
for social insurance, making up the revenue loss with heavier direct taxation. They
would reduce the present large deficits in the social insurance system by scaling down
health benefits, imposing some charges for medical services, and tightening up the
policing of claims for disability pensions.
The most controversial part of the medium-term plan-and the one that
prompted the attack by the Deputy Secretary of the Christian Democrats-is the
section on economic planning. The call for governmental control of the economy is
broader and more strident in the new plan than in earlier PCI pronouncements. The
Communists would use economic planning to divert resources away from activities
shown by the market to be more efficient and into activities to which the PCI assigns
higher priority. To this end, the Communists seek greater government influence over
pricing, employment decisions, credit allocation, and, most especially, investment.
In treating labor and industrial policy, the plan follows earlier PCI documents in
steering clear of the delicate issue of wage reform, especially modification of the wage
indexation system or any admission that inflation and unemployment might be
exacerbated by rapid wage increases. The plan merely exhorts workers to be more
productive and offers a vague promise of voluntary wage restraint once the grand
transformation has been achieved.
PCI agricultural policy is misguided in its focus on self-sufficiency in food. In a
country with such poor agriculture, self-sufficiency can be achieved only through a
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wasteful propping up of the farm sector. The Communists fail to recognize that one of
the main benefits of Italian membership in the European Community has been the
elimination of small, inefficient farms, which has freed labor for more productive
employment. Basically, the PCI has carried forward its past opposition to the Common
Agricultural Policy.
The medium-term plan seems to ignore potential gains from trade. The
Communists not only urge autarky in agriculture but also press for expansion of
import substitution industries to the exclusion of export industries. Yet they plump for
EC integration, apparently believing that a stronger, more unified Europe would
counterbalance both US and Soviet influence. The suggestion that EC members pool
their foreign exchange reserves is impractical at best, so long as the different countries
show wide variation in their payments balances. PCI rejection of general protectionist
measures is a sharp turnabout; after the lira crisis of early 1976, the Communists
strongly endorsed import quotas and exchange controls. Improvement in Italy's
balance of payments or a more realistic assessment of its vulnerability in any trade war
may have prompted the change.
PCI recommendations for public finance are largely directed towards the central
government, where the Christian Democrats have been dominant. Paradoxically, the
greatest progress toward reduction of deficit spending has been at this level. As in
earlier PCI statements, little is said about the escalating deficit spending of regional
and municipal governments, many of which are Communist controlled. Communist
suggestions for refinancing and tightening up the social security and health systems
would be inadequate to make the systems solvent. (Secret Noforn)
The appreciation of the West German mark-sparked in part by the recent
movement of funds out of US dollars-is again putting pressure on the European joint
float.* Even though only three months have passed since the last exchange rate
realignment and the withdrawal of Sweden from the float, divergent economic trends
among the remaining participants could shortly lead to another realignment. Float
members have spent more than the equivalent of $1.8 billion since 1 November to
support their exchange rates. All non-Deutschemark currencies have fallen to their
*The Joint float, or snake, is a monetary arrangement under which Norway, Denmark, Belgium and Luxembourg,
the Netherlands, and West Germany agree to maintain their exchange rates within a fixed band of 2.25 percent
while floating against other major currencies.
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lower float limits within the last three weeks. There is little economic justification for
their continued appreciation against the dollar if the Deutschemark continues to
strengthen. The float has slowly disintegrated since its inception in 1972, having lost
the United Kingdom, France, and Italy, as well as Sweden. Dissolution may not be far
off.
Economic Performance Out of Step
The failure of the less powerful snake members to match West German economic
performance has repeatedly caused changes in the joint float. In the last five years, 10
European countries have participated in the snake; today six remain. Italy and the
United Kingdom abandoned the float during its first year. France withdrew from the
float, reentered, and withdrew again, Sweden, as associate member, left in August
1977. The remaining members have avoided a similar fate, largely because their
currencies are not widely held and traded. The float is now a de facto Deutschemark
zone.
The low West German inflation rate constitutes the major underlying pressure for
another realignment. The West German consumer price index has been rising at a 3.8-
percent annual rate since the last Deutschemark revaluation in October 1976. By
contrast, the rate for the other members has been averaging 8.3 percent, ranging from
6.2 percent in the Netherlands to 11 percent in Denmark.
Consumer
Price
Changes
Wholesale
Price
Changes'
Share of
Exports Going to
Snake Partners
Share of
Imports Coming
From Snake
Partners
West Germany ..........................
3.8
1.7
22
24
Belgium-Luxembourg ..............
6.7
1.8
42
40
Denmark ....................................
11.0
6.9
27
33
Netherlands ................................
6.2
6.2
48
38
Norway ......................................
9.4
6.1
20
25
The more comprehensive wholesale price indexes are rising more than three and
a half times faster in Denmark, Norway, and the Netherlands than they are in West
Germany. The Belgian index, which has wholesale prices rising only slightly faster
than in West Germany, is suspect. Other Belgian inflation indicators show much
higher price increases. Their faster inflation rates, on top of the Deutschemark
appreciation, are reducing the international competitiveness of the exports of the other
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five countries. Norway and Denmark are particularly hard hit as the currency of their
major Scandinavian competitor, Sweden, continues to depreciate. They will probably
require exchange rate adjustments soon.
Despite strong public pronouncements of support for joint float from all
participants, rumors of its breakup are multiplying. Some commentators expect its
demise before spring.
West Germany is the key to the future of the joint float. In addition to their
public commitment to the float, the Germans philosophically prefer stable exchange
rates and support the concept of a European monetary union under the auspices of the
European Economic Commission. The joint float was originally envisioned as a first
step toward such a union. Since the European Community is again trying to develop a
program of working toward this goal, Bonn probably wishes to preserve the float as
long as possible.
Despite political commitment, economic justification for the snake is questionable
from the German viewpoint. Since the inception of the snake, the Bundesbank has
repeatedly intervened heavily in exchange markets to maintain float parities. This
intervention has often caused the money supply to grow faster than desirable to hold
down domestic inflation. If domestic inflation goals are endangered again or market
intervention becomes too expensive, Bonn would favor realignment. It may also
propose a period of free floating for snake currencies as it reportedly did before the
realignment of October 1976.
Belgium is the most adamant supporter of the current exchange-rate parities in
the joint float. Brussels sees little export advantage to be gained by depreciating its
currency. Its steel industry suffers from slack international demand; steel exports
would not pick up significantly even with a major exchange-rate shift. In addition, the
government believes that an appreciating Belgian franc has been a major factor in
bringing down inflation. Since two-fifths of the Belgians' trade is with snake partners,
their commitment to the float will remain strong.
The Netherlands also has a high economic stake in maintaining the joint float.
Over two-fifths of its trade is with snake partners. While energy exports have kept its
current account in surplus, its manufacturing sector has been losing competitiveness in
nonsnake markets. Some business sector sentiment now leans toward a guilder
depreciation to help compensate for the loss of competitiveness.
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Denmark publicly supports the joint float without any further devaluations.
Concerns about inflation again play a major role. Economic Affairs Minister Per
Haekkerkp said that a devaluation of the krone would shake up the Danish incomes
policy and diminish the credibility of future incomes policies, Copenhagen will have
difficulty maintaining its stand on the joint float, however, since its current account is
$1.5 billion in deficit and its inflation rate is the highest of any float member.
Norway gains the least from the joint float. Since neighboring Sweden dropped
out, less than one-fourth of its trade is with snake members. In contrast to its bright
future based on North Sea oil, Norway will probably suffer a record current account
deficit of nearly $5 billion this year. The nonenergy sectors have had to cut profit
margins in an effort to preserve their competitive advantages as costs, particularly
wages, continue to rise.
Prospects
A realignment of currencies within the European joint float seems a distinct
possibility before spring. A period of free floating, amounting to unofficial dissolution,
or an official breakup of the joint float arrangement cannot be ruled out. Failure to
maintain a strong joint float demonstrates that a European monetary union is still a
long way off. (Secret Noforn)
Brazil is moving away from its previous strong encouragement of practically all
foreign investment.
Although the door remains open to outside business firms, the government has
adopted measures during the past two years to channel foreign funds into specified
import substitution sectors and to limit the import dependence of new ventures.
Brasilia is now pressing for greater domestic equity participation in new projects and
is taking steps to protect the domestic market position of Brazilian-owned firms.
Foreign investors also are being hit by the government's limitations on credit, cutbacks
in public spending, and efforts to trim imports. We have no evidence that implemen-
tation of any of these measures discriminates against US investors. Despite the new
government policies, the pull of Brazil's large domestic market and vast resources will
keep investment inflows high over the next few years. The US share of foreign
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BRAZIL: Foreign Direct Investment Inflows
Million US $
1970
574 814 12-77
investment in Brazil will continue to drift downward relative to the West European
and Japanese shares.
Tightened regulation of new foreign investment is being implemented through
cutbacks of the tax and credit incentives previously granted automatically to most
foreign and domestic investors. These incentives consist of: (a) exemptions from duties
and deposit requirements on imported capital goods, (b) exemptions from value-added
taxes on capital goods wherever obtained, (c) accelerated depreciation on domestically
produced capital goods, and (d) subsidized credit for customers of new firms.
To qualify for those incentives, investment projects must now either expand
Brazil's export potential or contribute directly to import substitution in such areas as
metals, chemicals, fertilizer, and specified machinery and equipment. Moreover, they
must allow substantial Brazilian equity participation and must use domestic capital
goods and materials. Even if these conditions are met, incentives may be withheld
from foreign business that threaten the positions of locally controlled firms.
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Brazil: Cumulative Foreign Direct Investment, by Country of Origin
Million US $
Percent
Million US $
Percent
Million US $
Percent
Total ..............................
1,710
100.0
4,579
100.0
9,824
100.0
United States 8 ............
816
47.7
1,717
37.5
3,125
31.8
West Germany ..........
177
10.4
521
11.4
1,218
12.4
Japan ..........................
55
3.2
318
6.9
1,077
11.0
Switzerland ................
105
6.1
357
7.8
965
9.8
Canada ........................
168
9.8
360
7.9
483
4.9
United Kingdom ........
109
6.4
324
7.1
4131
4.2
France ........................
35
2.0
205
4.5
3121
3.2
Panama ......................
49
2.9
132
2.9
294'
3.0
Luxembourg ..............
17
1.0
108
2.4
2033
2.1
Netherlands ................
8
0.5
96
2.1
2023
2.1
Other ..........................
171
10.0
441
9.5
1,532
15.5
Includes reinvested earnings of $3,033 million.
s Based on Brazilian figures, which are as much as 50 percent less in value than corresponding US Department
of Commerce data.
8 Mid-1976 data.
The rules are being strictly enforced. New investment projects with majority
foreign equity now make up only 5 percent of the total value of the projects receiving
incentives, down from 25 percent in 1975. Moreover, the share of foreign equipment
used in approved projects has dropped from 50 to 35 percent over the same period. In
line with its policy of protecting the market position of local firms, Brasilia recently
turned down a proposed IBM-owned minicomputer plant to avoid undermining a
local operation.
Effects of the Austerity Program
Foreign investors have also been hurt by increasingly severe austerity measures
since 1974. Stiff import deposits required on components and materials have forced a
shift to domestic substitutes, thereby considerably increasing production costs. Credit
restrictions for businesses and consumers have made access to local credit more
difficult and have cut demand for many products-particularly consumer durables
such as automobiles-in which foreign investors have a substantial stake.
Brasilia has also slashed public investment spending this year, curtailing road and
dam projects needed to support major foreign investment ventures slated for the
Amazon and other northern areas. Moreover, the government has substantially
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reduced funds allocated for proposed joint ventures with foreign firms and is
demanding that foreign investors make up the difference.
Impact and Investor Reaction
The new rules are forcing investors initiating new projects or expanding
established operations to choose between making adjustments to qualify for incentives
or sacrificing their benefits. Since tax exemptions alone save more than 40 percent of
the equipment costs of new undertakings, most investors probably will adjust by
shifting into new areas of production and making increased use of joint ventures with
Brazilian nationals.
Even so, several major projects have been stalled or canceled. Implementation of
Japanese agreements to invest at least $700 million of equity capital in joint export-
oriented projects over the next few years has been delayed. For instance, Japan is
reluctant to initiate its share of a $1.4 billion aluminum complex, and Japanese
investors are considering pulling out of the jointly planned Tubarao steel mill. US Steel
recently backed out of the Carajas iron ore project with Brazil, prompting the
government to shelve the $3.5 billion project.
Brazil: Cumulative Foreign Direct Investment, by Sector
Mid-1976
Million
US $
Percent
Total ..................................................................
8,0031
100.0
Manufacturing ..................................................
6,089
76.1
Chemicals and petrochemicals ....................
1,114
13.9
Transportation equipment ............................
1,055
13.2
Communications equipment ........................
691
8.6
Primary and fabricated metals ....................
642
8.0
Machinery ......................................................
605
7.6
Food products ................................................
368
4.6
Pharmaceuticals ............................................
309
3.9
Textiles ............................................................
238
3.0
Rubber .............................................................
176
2.2
Paper ..............................................................
171
2.1
Other ..............................................................
720
9.0
Mining and smelting ........................................
203
2.5
Public utilities ....................................................
226
2.8
Technical services ..............................................
508
6.3
Finance ..............................................................
383
4.8
Trade ..................................................................
224
2.8
Other ..................................................................
370
4.6
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These adjustments have yet to cause a drop in total inflows of foreign direct
investment, mainly because of the continuation of large projects already under way
and the coincidence of investor interests with the new rules in some fields. Foreign
food processing and agricultural equipment firms, for example, are expanding
capacity to supply both domestic and export markets, reflecting the boom in
agriculture as well as Brasilia's investment priorities.
The new situation has at least temporarily dimmed the attractiveness of Brazil as
a location for foreign investment. New investment inflows will remain sluggish in
some fields over the next few years, until austerity is relaxed and investors adjust to the
new rules. Investment in many export-oriented industries will remain slow until
economic recovery strengthens in the industrial nations.
Foreign investment nonetheless should remain at high levels over the next several
years. Investors will continue to be attracted by Brazil's rich mineral and agricultural
resources and its huge domestic market, the largest in the Third World. Most of the
steam behind investment inflows will come from new projects in government-favored
areas such as agricultural processing, chemicals, fertilizer, paper, and industrial
equipment. West European and Japanese investors will likely continue to provide the
bulk of the funds, further whittling away the US share of foreign holdings in Brazil.
(Confidential)
25X6
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 Approved For Release 2002/02/01 : CIA-RDP79B00457A000300080001-2
POLAND: GROWTH AND CONSUMPTION POLICIES IN JEOPARDY
Gierek's twin policies of rapid economic growth and more consumer goods are in
serious trouble and cannot be pursued 'without further massive foreign credits.
Sufficient direct economic aid cannot be arranged. This leaves large-scale reschedul-
ing of Poland's debt to the West as the only way to obtain enough balance-of-
payments relief to avoid unsettling domestic policy adjustments. Without such
assistance, Warsaw almost certainly will have to cut industrial imports and heavy
industrial production to shift resources to agriculture and consumer industries.
Otherwise, the regime risks even more dangerous flareups of popular discontent.
Economic Policy Errors
Since coming to power in 1970, party boss Edward Gierek has sought simulta-
neously to modernize the economy and to raise living standards, a strategy that has
entailed tremendous infusions of Western equipment and technology-largely on
credit. The strategy worked for a time. Real GNP grew 7.3 percent annually in
1971-73; real incomes also grew rapidly, leading to a surge in consumer spending.
The hard currency debt mounted rapidly in these years, but it remained manageable.
By 1974, however, difficulties emerged that still plague the Polish economy. Some
problems were beyond Warsaw's control, particularly (a) unfavorable weather, which
contributed to stagnation in agricultural output, and (b) the Western recession of
1974-75 and the subsequent anemic recovery, which retarded Polish export growth.
The regime compounded its problems with critical policy errors. With the onset
of the Western recession, most other East European countries cut back plans for
imports from the West and even economic growth plans. But the Poles were driven by
their desire to transform Poland rapidly into an industrialized nation and their
perception that domestic political stability was closely linked to improved living
standards. Warsaw therefore continued to pursue its ambitious investment and growth
targets, thus increasing Polish demand for imports of Western industrial goods.
Moreover, the poor harvests forced Poland to boost imports of Western grain and feeds
to support livestock production. In the meantime, Polish exports failed to keep pace
with the soaring imports because of reduced Western demand. Meat exports also had
to be cut to ease consumer unrest over shortfalls in domestic meat supplies. By 1976,
Poland's hard currency trade deficit reached $3.3 billion-as large as its hard
currency exports-and yearend debt to the West exceeded $10 billion.
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The government also blundered in agriculture. As a result of the poor harvest,
many private farmers (who produce about 80 percent of Poland's meat) became
dependent on purchased feeds to sustain their livestock herds. The higher prices of
these feeds, however, were not matched by increases in government livestock
procurement prices. Facing a profit squeeze, many farmers cut back on their herds
beginning in 1975, thus curtailing livestock output in 1975-77 and contributing to
severe meat shortages.
Meanwhile, consumer incomes continued to grow above plan, primarily because
of unplanned increases in worker bonuses. The 11-percent average annual growth in
the real value of personal income during 1971-76 far outstripped the ability of the
economy to provide consumer goods and services. The result was a pileup of zlotys,
longer queues, sporadic disappearance of goods from shelves, more back-door
transactions, and, in general, smoldering consumer grievances, particularly with
respect to meat shortages.
The meat problem could have been largely avoided if the government had let
meat prices, frozen at unrealistically low 1966 levels, rise gradually over the years. But
the regime procrastinated for fear of adverse consumer reaction. When it finally
raised prices in 1976, the government again blundered. The announced average 69-
percent boost in meat prices was too much for the consumer to accept; riots in several
cities forced cancellation of the hikes the next day. With the price option pushed to
the back burner, the regime is now attempting to deal with the consumption problem
by boosting domestic meat production. To encourage the farmer to produce more
meat it has increased prices paid to private farmers for livestock, brought farmers into
the national retirement system, agreed to permit private farmers to purchase more
land from the state, and continued to import large amounts of grain.
Warsaw has made some attempt to bring its hard currency deficit under control.
Imports from the West have been cut slightly, thanks partly to increased Soviet oil
deliveries and last year's 1 billion ruble Soviet credit, which allowed Warsaw to shift
some of its hard currency raw material purchases to the USSR. But efforts to boost
exports continue to be thwarted by sluggish Western economic recovery and soft
world prices for major Polish exports. The trade deficit with the West is expected to
exceed $2.5 billion in 1977, pushing Poland's hard currency debt to $13 billion. Debt
service now takes almost 60 percent of merchandise export earnings from the West.
The Economic Outlook
Current Economic Plans
In December 1976, the Gierek regime announced a revised 1976-80 economic
plan, which calls for high, if slightly reduced, rates of economic growth. National
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income and industrial production are slated to grow at annual rates of 7 percent and
8.5 percent, respectively. Investment growth is to be drastically reduced from the
rapid 18-percent annual pace in 1971-75, to 3 percent per year in 1976-80. Investment
will be used mainly to complete projects already under way rather than to start new
projects.
To ease consumer unrest, the regime elevated consumer targets in the revised
plan. The share of total investment allocated to agriculture, housing and communal
services, and the food industries was raised from 35 percent in the original draft of the
1976-80 plan to 45 percent for the plan period. At the same time the livestock
production targets were lowered to more realistic levels, as were planned goals for
meat consumption.
The Poles now plan for exports to the West to increase by about 15 percent
annually in constant prices. Imports are targeted at roughly 5 percent, down from the
33-percent annual real growth achieved in 1971-75. These goals-based on 1975 trade
results-would have allowed Poland to balance its trade with the West by 1980. The
targets are unattainable in view of the worsening trade problems since 1975, and the
goals probably have been further revised.
Even with zero import growth, Poland might come close to achieving its
economic growth plans. Imports of Western machinery and equipment, almost 40
percent of Poland's hard currency imports, can be curtailed for a time without much
effect on economic growth because of a large supply of equipment in the pipeline and
some excess plant capacity.
Agriculture-A Key Problem Area
Agriculture will be a major problem for the remainder of the decade. Good, or
even normal, weather should enable grain and fodder production to quickly regain
1971-73 growth rates, but sizable imports of animal feeds still will be required.
Without these imports, livestock production cannot reach even the lowered consump-
tion target for 1980. Moreover, meat production is not likely to increase in the next 12
to 18 months, requiring continued meat imports to partially satisfy consumer demand.
Potential For Increasing Exports
Polish planners anticipate that a considerable share of the targeted growth in
exports to the West in 1976-80 will come from a rapid rise in exports of machinery
and equipment. Most of these new exports are expected to come from new plants built
with almost $17 billion of Western equipment acquired in 1971-75.
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Western capital equipment primarily was earmarked for the heavy machinery
and chemical industries-industries that have never been significant in Poland's hard
currency export structure. For example, many investment goods were allocated to the
production of automobiles, construction equipment, and aircraft, especially engines.
In many cases, Poland imported complete plants or licenses to produce highly
sophisticated end products, or both. Poland also has invested heavily in the production
of household appliances and, more recently, electronics. Some of the equipment
purchased is now obsolete. Import substitution industries-such as steel, cement, and
pulp and paper-also were given priority in the allocation of Western investment
goods. The traditional export sectors-elementary machinery and machine tools and
some metal products-were largely neglected.
Some Polish economists now question whether Poland has developed a viable
export structure. They point out that serious difficulties have developed that may
restrict the expansion of exports of machinery and chemicals to the West, including:
? Tariff and nontariff barriers that narrow access to Western markets.
? The inability of Polish production to adjust rapidly to changes in foreign
demand.
? Poor quality of many manufactures.
? A lack of marketing, servicing, and advertizing expertise as well as
problems in supplying replacement parts.
? Rising competition for petrochemical markets from newly developed
industries in East European and OPEC countries.
In short, the Poles seemingly have created an industrial structure that will not
generate large exports to the West and at the same time, will remain highly dependent
on increased inputs of Western industrial materials. Poland would have been better
advised to have used the imported Western equipment to expand and modernize less
prestigious industries producing marketable exports and needed domestic goods.
Growing Financing Problems
Poland cannot expect to receive large untied credits from Western banks on a
continuing basis to finance imports. Some Western banks are now reluctant to provide
even project-related loans, while others are approaching legal or self-imposed limits on
lending to Poland. Potential Western government credits are not likely to fill the gap.
Unconditional assistance from the IMF, should Poland join, probably would total, at
the most, $600 million over the next few years. Any larger amount would require
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abiding by IMF restrictions on the Polish economy-a requirement that Warsaw
almost certainly would not accept.
The Poles could approach the Soviets for additional aid, but Moscow is not in a
position to provide sustained balance-of-payments support. Moreover, the Soviets are
reluctant to continue bailing out an ally whose economic policies it considers dubious
and whose standard of living is substantially higher than the Soviet standard. Moscow
probably would only extend sizable aid if Poland's political stability were threatened.
In return, Moscow would expect the Poles to adopt growth, trade, and consumer
policies that the Soviets consider more realistic.
Consequently, large-scale rescheduling of Western debt is the only option that
could provide sufficient balance-of-payments relief. With no rescheduling, Polish
imports are likely to drop sharply over the next few years even if debt service is held
to the current 60 percent. Historically, few countries have been able to run a 50-
percent debt service ratio for long. A substantial rescheduling-covering about one-
half of repayments and associated interest falling due in 1978-80-would be required
to keep imports through 1980 near the 1977 level.
Impact on the Economy
The cutback in imports from the West eventually would force Poland to reduce
its rate of economic growth. Although the almost inevitable reduction in machinery
and equipment imports may not have much immediate impact on output, the Poles
also would have to reduce imports of industrial materials. With rescheduling, these
reductions could be postponed.
The main impact on the consumer of a cutback in economic growth would be
reduced growth of wages and other worker benefits. The government probably would
try to avoid curbing the growth of consumer goods production. The Poles no doubt
would cut other imports before sacrificing necessary grain purchases. The same holds
true for imports of Western consumer goods, already at minimal levels. The
availability of such items-although mainly for hard currency-is a small safety value
for frustrated shoppers who cannot find attractive goods on the domestic market.
For political reasons, the Polish leadership would move unobtrusively in any
retrenchment in growth policies. Gierek's tenure as party leader has been marked by
rapid economic growth with a concomitant rapid percentage rise in the standard of
living. To abandon this strategy now would mean discrediting his past policies and
would enhance the chances for his ouster. (Secret Noforn)
25X1A
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Common Fund Talks Shift to UN After Geneva Breakdown
LDC suspension of the Geneva negotiations two weeks ago has shifted discussions
of the common fund to the UN in New York. The Group of 77 (the LDC's UN caucus)
blames the breakdown of the Geneva negotiations on the industrial countries' failure
to accede to LDC demands for direct government contributions and inclusion of a
development assistance window; a UN resolution tabled by the Group of 77 restates
this view.
The public display of unity in the Group of 77 shown in suspending the Geneva
talks contrasts sharply with the inability of the caucus to agree on substantive issues,
including whether changes in its position should be made to facilitate industrial
country agreement to a common fund. Radical African representatives, supported by
the South Asians and a few Latin Americans, would not budge on this issue. Their
adamant stand was seemingly rewarded at the end of the talks when (a) the industrial
countries offered a fairly conciliatory statement, and then (b) the Nordics, Dutch, and
Austrians each made separate statements supportive of the Group of 77. These actions
likely will encourage the unrealistic belief of some LDCs that the industrial countries
will eventually accept the Group of 77 formulation of the common fund. UNCTAD
Secretary General Corea and other moderate LDC representatives wishing to
maintain a dialogue with the industrial countries are likely to arrange a reopening of
the common fund negotiations sometime next spring. Unless they are also able to
change the uncompromising positions of intransigent Group of 77 countries, however,
the prospects for an agreement are poor. (Secret Noforn-Nocontract)
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Bauxite Producers Get Together On Minimum Price
The International Bauxite Association (IBA), meeting in Jamaica last week,
adopted a $24-per-ton minimum price for bauxite delivered in the United States and
Canada next year. Minimum delivered prices will vary accordingly in other markets.
The agreement-the first concerted pricing action by IBA, whose members control 75
percent of world bauxite output-will have little or no effect on the going US price,
which now averages $30 per ton for imported bauxite. Rises in non-US markets are
more likely, for example, for Japan, which now pays $12 per ton delivered for
Australian bauxite.
The accord caps a four-year effort, primarily by Caribbean members of IBA, to
induce Australia to go along with a minimum price formula. The Caribbean
producers, through tax levies on bauxite production, have more than doubled their
charges for bauxite and alumina since 1973. Other producers, including Australia (the
world's largest), have increased prices more gradually. IBA control of bauxite supplies
is weakening as production expands in nonmember countries like Brazil. (Unclassified)
China's Economy
(ER 77-10738, November 1977, Unclassified)
This publication focuses on recent developments in both the domestic economy
and the foreign trade sphere.
China's International Trade, 1976-77
(ER 77-10674, November 1977, Unclassified)
This publication provides an overview of PRC foreign trade in 1976 and the
prospects for 1977. A statistical appendix covers the direction and commodity
composition of trade.
25X1A
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Assessment
Center
Economic Indicators
Weekly Review
ER EI 77-050
15 December 1977
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 Approved For Release 2002/02/01 : CIA-RDP79B00457A000300080001-2
This publication is prepared for the use of U.S. Government
officials. The format, coverage and contents of the publication are
designed to meet the specific requirements of those users. U.S.
Government officials may obtain additional copies of this document
directly or through liaison channels from the Central Intelligence
Agency.
Non-U.S. Government users may obtain this along with similar
CIA publications on a subscription basis by addressing inquiries to:
Document Expediting (DOCEX) Project
Exchange and Gifts Division
Library of Congress
Washington, D.C. 20540
Non-U.S. Government users not interested in the DOCEX
Project subscription service may purchase reproductions of specific
publications on an individual basis from:
Photoduplication Service
Library of Congress
Washington, D.C. 20540
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1. The Economic Indicators Weekly Review provides up-to-date information
on changes in the domestic and external economic activities of the major non-
Communist developed countries. To the extent possible, the Economic Indicators
Weekly Review is updated from press ticker and Embassy reporting, so that the
results are made available to the reader weeks-or sometimes months-before receipt
of official statistical publications. US data are provided by US government agencies.
2. Source notes for the Economic Indicators Weekly Review are revised every
few months. The most recent date of publication of source notes is 20 October 1977.
Comments and queries regarding the Economic Indicators Weekly Review are
welcomed.
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 INDUSTRI roil DoeqnIM2/qhp 9 WO7
=9B Q457A0003R008001-2
seasona y as
usted
United States
Japan
West Germany
130
120
France
JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN
APR JUL OCT JAN APR JUL OCT
1975 1976 1977
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1972 1973 1974
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United Kingdom
Italy
131
123
JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR, JUL OCT
1972 1973 1974 1975 1976 1977
Percent , AVERAGE ANNUAL Percent AVERAGE ANNUAL
Change GROWTH RATE SINCE Change GROWTH RATE SINCE
from from
LATEST Previous 1 Year 3 Months LATEST Previous 1 Year 3 Months
MONTH Month 1970 Earlier Earlieri MONTH Month 1970 Earlier Earlieri
United States OCT 77 0.3 3.6 6.7 2.4 United Kingdom SEP 77 -0.6 0.4 -1.7 0.6
Japan OCT 77 -0.4 3.7 3.3 1.9 Italy SEP 77 6.5 2.4 -2.2 -29.1
West Germany SEP 77 -1.7 1.8 -0.9 -2.3 Canada AUG 77 0 3.9 2.7 0.3
France SEP 77 1.6 3.3 -3.1 --4.2
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UNEMPLOYMENT PERCENT OF LABOR FORCE
United States
Japan
1.9-
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United Kingdom
Italy (quarterly)
3.8
3 -
A labor force survey based on new definitions of economic activity sharply raised the official estimate of Italian unemployment in first quarter 1977. Data for earlier periods thus are not comparable.
Italian data are not seasonally adjusted.
JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT
1972 1973 1974 1975
THOUSANDS OF PERSONS UNEMPLOYED
1 Year
Earlier
3 Months
Earlier
1 Year
Earlier
3 Months
Earlier
United States
NOV 77
6,818
7,651
6,926
United Kingdom
NOV 77
1,433
1,317
1,414
Japan
AUG 77
1,130
1,100
1,140
Italy
77 HE
1,692
776
1,432
West Germany
OCT 77
1,041
1,026
1,051
Canada
SEP 77
798
753
847
France
OCT 77
1,100
935
1,180
NOTE: Data are seasonally adjusted. Unemployment rates for France are estimated. The rates shown, for Japan, Italy and Canada are
roughly comparable to US rates. For 1975-77, the rates for France and the United Kingdom should be increased by 5 percent and
15 percent respectively, and those for West Germany decreased by 20 percent to be roughly comparable with US rates.
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DOMESTIC PRICES1 INDEX: 1970=100
United States
Japan
West Germany
150
125
France
225
200
Semilogarithmic Scale
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175
150
JAN APR JUL OCT JAN
1972
APR JUL OCT JAN
1973
1974
Percent
Change
AVERAGE ANNUAL
GROWTH RATE SINCE
Percent
Change
from
AVERAGE ANNUAL
GROWTH RATE SINCE
LATEST
from
Previous
1970
1 Year
3 Months
LATEST
Previous
1970
1 Year
3 Months
MONTH
Month
Earlier
Earlier
MONTH
Month
Earlier
Earlier
United States
OCT 77
0.7
8.5
6.9
6.9
United Kingdom
OCT 77
0.6
14.6
17.8
7.9
OCT 77
0.3
6.5
6.5
4.2
OCT 77
0.4
13.7
14.1
6.0
Japan
OCT 77
-0.3
7.4
0.1
0
Italy
AUG 77
0.5
15.6
14.3
4.6
SEP 77
1.8
10.5
7.6
6.2
OCT 77
1.1
13.2
16.6
11.9
West Germany
SEP 77
-0.1
5.1
1.6
-0.6
Canada
SEP 77
0.1
10.0
9.5
9.3
OCT 77
0.1
5.4
3.8
-0.3
OCT 77
1.0
7.5
8.8
8.1
France
SEP 77
0.6
8.2
6.1
5.4
OCT 77
0.8
9.1
9.5
9.2
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8
-
GNP'
RETAIL SALES '
Constant Market Prices
Constant Prices
Average
Average
Annual Growth Rate Since
Annual
Growth Rate Since
Percent Change
Percent Change
Latest
from Previous 1 Year
Previous
Latest
from Previous
1 Year
3 Months
Quarter
Quarter 1970 Earlier
Quarter
Month
Month
1970
Earlier
Earlier'
United States 77 111
0.9 3.2 4.6
3.8
United States
Oct 77
1.7
3.2
5.3
2.0
Japan 77 III
0.5 5.4 5.1
1.8
Japan
Jun 77
-0.1
9.8
2.6
1.4
West Germany 77 II
-0.2 6.3 2.4
-0.8
West Germany
Sep 77
-0.8
2.3
1.7
9.5
France 76 IV
0 3.9 4.9
0
France
Jun 77
7.7
-0.3
1.0
-8.1
United Kingdom 77 II
0.7 1.6 1.9
2.9
United Kingdom
Oct 77
-0.2
0.9
-1.9
5.4
Italy 77 II
-1.9 2.8 2.8
-7.3
Italy
Jun 77
2.6
3.8
3.4
-6.8
Canada 77 111
1.3 4.9 2.5
5.3
Canada
Aug 77
4.7
4.5
1.3
-0.5
' Seasonally adjusted.
Seasonally adjusted.
S
' Average far latest 3 months compared with average for previous 3 months.
FIXED INVESTMENT'
WAGES IN MANUFACTURING'
Average
Non-residential; constant
prices
Annual Growth Rate Since
Average
Percent Change
Annual Growth Rate Since
Latest
from Previous
I Year
3 Months
Percent Change
Period
Period
1970
Earlier
Earlier'
Latest
from Previous 1 Year
Previous .
United States
Sep 77
0.4
7.5
6.6
6
5
Quarter
Quarter 1970 Earlier
Quarter
.
United States 77 III
1.0 2.1 7.8
4.2
Japan
Aug 77
2.2
17.0
9.8
8.7
Japan 77 II
0.5 1.1 4.5
2.0
West Germany
77 III
1.2
9.3
7.4
5.0
West Germany 77 II
- 1.6 0.4 3.4
-6.4
France
77 I
2.3
14.1
13.9
9.5
France 75 IV
8.8 4.2 2.9
40.1
United Kingdom
Aug 77
0
15.3
3.0
3.5
United Kingdom 77 II
11.2 1.7 8.0
53.2
Italy
Aug 77
3.7
21.0
23.8
23.7
Italy 77 II
-7.8 2.5 10.3
-27.6
Canada
Aug 77
0.2
11.2
9.9
10.2
Canada 77 III
- 1.1 5.8 3.2
-4.2
'Hourly earnings (seasonally adjusted) for the United States, Japan, and Canada; hourly wage
rates for others. West German and French data refer
to the begi
nningof the quarter.
Seasonally adjusted.
' Average for latest 3
months compared with that far previous
3 months.
MONEY MAR
KET RATES
Percent Rate of Interest
1 Year
3 Months
1 Month
Representative ra
tes
Latest Date
Earlier
Earlier
Earlier
United States
Commerical paper
Dec 7 6.54
4.68
6.01
6.57
Japan
Call money
Dec 9 5.00
7.00
4.88
4.63
West Germany
Interbank loans (3 months)
Dec 7 4.21
4.70
4.07
4.09
France
Call money
Dec 9 9.38
10.50
8.50
9.13
United Kingdom
Sterling interbank loans (3
months)
Dec 9 6.96
14.55
6.09
4.83
Canada
Finance paper
Dec 9 7.37
8.65
7.50
7.38
Eurodollars
Three-month deposits
Dec 9 6.99
4.95
6.49
7.23
Approved For Release 2002/02/01 : CIA-RDP79B00457A000300080001-2
 EXPORT PRroved For Release 2002/02/01 : C
US $
Average
Annual Growth Rate Since
Percent Change
Latest from Previous 1 Year 3 Months
Month Month 1970 Earlier Earlier
United States Oct 77 -0.8 9.2 1.9 -1.3
Japan Jul 77 - 1.8 10.4 10.4 -4.4
West Germany Sep 77 - 1.5 11.0 6.2 3.6
France Sep 77 -1.4 11.2 8.3 12.1
United Kingdom Oct 77 1.9 11.1 23.2 26.1
Italy Jul 77 1.7 11.3 13.3 18.9
Canada Aug 77 3.0 9.9 1.5 17.1
IMPORT PRICES
National Currency
A- BJ ?A000300080001-2
National Currency
Average
Annual Growth Rate Since
Percent Change
Latest from Previous 1 Year 3 Months
Month Month 1970 Earlier Earlier
United States Oct 77 0.8 9.2 1.9 -1.3
Japan Jul 77 -1.0 6.3 3.1 -5.3
West Germany Sep 77 -1.2 4.2 -1.2 -2.3
France Sep 77 -0.9 9.4 8.5 10.1
United Kingdom Oct 77 0.4 15.9 14.3 13.6
Italy Jul 77 1.4 16.9 19.4 16.4
Canada Aug 77 3.9 10.2 10.2 27.0
Av
erage
Since
th R
t
l
a
e
Grow
Annua
h
1 Ye
ar 3 Months
Percent
Latest from P
ange
C
revious
1
Year 3
Months
End of Billion
US $ Jun
1970 Earl
ier Earlier
th Mo
M
nth 1
970 E
arlier E
arlier
5
19
0
9
18
on
United States
Oct 77
1
9.0 1
4.
.
.
United States
Oct
77
-
0.3
1
3.0
7.6
3.3
Japan
Oct 77
1
9.6
4.1
16
.6
17.6
Japan
Jul 77
-
1.5
10.5 -
2.3
7.0
West Germany
Oct 77
3
5.7
8.8
35
.8
35.1
West Germany
Sep
77
-
2.3
4.0 -
1.3
-5.5
France
Oct 77
1
0.1
4.4
9
.6
9.9
France
Sep
77
-
1.0
10.1
7.4
0.6
United Kingdom
Oct 77
2
0.2
2.8
4
.8
13.4
United Kingdom
Oct
77
-
0.4
18.7
8.3
-6.3
Italy
Oct 77
1
1.1
4.7
5
.4
10.5
Italy
Jul
77
-
1.6
20.7
15.3
10.4
Canada
Aug 77
4.8
4.3
5
.6
5.2
Canada
Aug
77
3.2
9.3
15.5
31.3
CURRENT ACCOUNT BALANCE'
Latest
Period Million US $ 1977 1976 Change
United States' 77 II -4,605 -8,763 1,070 -9,833
Japan Oct 77 1,356 7,834 2,452 5,382
West Germany Oct 77 1,133 1,252 1,549 -297
France 77 11 -438 -2,101 -2,052 - 50
United Kingdom 77 II -474 -1,490 -1,277 -213
Italy 77 11 161 -768 -2,859 2,091
Canada 77 II - 1,407 - 2,956 -3,088 132
'Converted to US dollars at the current market rates of exchange.
Seasonally adjusted.
EXCHANGE RATES
Spot Rate
As of 9 Dec 77
Japan (yen)
West Germany
(Deutsche mark)
France (franc)
United Kingdom
(pound sterling)
Italy (lira)
Canada (dollar)
US $ 1 Year 3 Months
Per Unit 19 Mar 73 Earlier Earlier 2 Dec 77
0.0041 8.73 22.01 10.35 0.19
0.4566 28.951 9.361 6.21 0.72
0.2067 -6.20 2.881 2.00 I 0.12
1.8310 - 25.60 9.67 5.07 0.60
0.0011 1- 35.71 -1.56 0.53 1-0.26
0.9140 - 8.39 - 6.36 -1.79 1.32
BASIC BALANCE'
Current and Long-Term-Capital Transactions
Cumulative (Million US $)
Latest
Period Million US $ 1977 1976 Change
United States No longer published'
Japan Oct 77 739 5,161 1,895 3,266
West Germany Sep 77 -1,341 -4,642 1,655 -6,297
France 77 I -1,354 -1,354 -2,015 660
United Kingdom 77 II 1,409 2,075 -1,119 3,195
Italy 77 II 97 -395 -2,963 2,568
Canada 77 II -217 -791 1,701 -2,493
'Converted to US dollars at the current market rates of exchange.
' As recommended by the Advisory Committee on the Presentation of Balance of Payments
Statistics, the Department of Commerce no longer publishes a basic balance.
TRADE-WEIGHTED EXCHANGE RATES '
1 Year 3 Months
19 Mar 73 Earlier Earlier 2 Dec 77
United States 3.27 - 3.31 -2.94 -0.70
Japan 14.02 20.04 9.02 -0.07
West Germany 30.01 6.16 3.00 0.39
France -9.71 -1.69 -2.02 -0.32
United Kingdom -27.46 7.54 2.11 0.21
Italy -40.40 -6.15 -3.24 -0.68
Canada -7.38 -8.13 -2.96 1.24
' Weighting is based on each listed country's trade with 16 other industrialized countries to
reflect the competitive impact of exchange rate variations among the major currencies.
Approved For Release 2002/02/01 : CIA-RDP79B00457A000300080001-2
 FOREIGN f WX6I or Release 2002/02/01 : CIA-RDP79B00457A000300080001-2
E BILLION US $, f.o,b., seasonally adjusted
United States
14.0
12.0
10.0
Japan
7.0
West Germany
10.0
8.0
JAN APR JUL OCT JAN
1972
APR JUL OCT JAN APR JUL OCT
1973 1974
JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT
Approved For Release 2002/02/01 : CIA-RDP79B00457
 Approved For Release 2002/02/01 : CIA-RDP79B00457A000300080001-2
3.3%
3.2%
LATEST
MONTH
MILLION
US $ 1977
1976
CHANGE
LATEST
MONTH
MILLION
US $ 1977
1976
CHANGE
United States
OCT 77
9,190
99,774
94,870
5.29
United Kingdom
OCT 77
4,894
46,020
36,432
26.3%
12,288
122,170
98,852
23.6%
4,839
48,927
41,814
17.0%
Balance
-3,098
-22,396
-3,982
18,414
Balance
55
-2,907
-5,383
2,475
Japan
OCT 77
6,580
65,066
54,025
20.4%
Italy
SEP 77
3,608
32,833
26,553
23.7?0
5,168
51,065
45,731
11.7%
3,357
32,430
29,079
11.5%
Balance
1,412
14,001
8,294
5,707
Balance
251
403
-2,526
2,929
West Germany
OCT 77
8,763
94,989
83,081
14.3%
Canada
SEP 77
3,270
31,191
28,891
8.0%
6,798
77,617
68,099
14.0%
3,215
29,858
28,520
4.7%
Balance
1,965
17,372
14,982
2,390
France
OCT 77
5,768
53,474
46,978
13.8%
5,742
55,573
50,154
10.8%
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 Approved For Release 2002/02/01 : CIA-RDP79B00457A000300080001-2
FOREIGN TRADE PRICES IN US $1
West Germany
1Export and import plots are based on five month weighted moving averages.
A-12
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 Approved For Release 2002/02/01 : CIA-RDP79B00457A000300080001-2
United Kingdom
Italy
109
107
JAN APR JUL OCT
1974
1977
574740 12-77
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 Approved For Release 2002/02/01 : CIA-RDP79B00457A000300080001-2
SELECTED DEVELOPING COUNTRIES
INDUSTRIAL PRODUCTION'
MONEY SUPPLY'
Average
Annual Growth Rate Since
Average
Percent Change
Annual Growth Rate Since
Latest
from Previous
1 Year
3 Months
Percent Change
Period
Period
1970 Earlier
Earlier'
Latest
from Previous
1 Year
Month
Month
1970
Earlier
Brazil
76 II
0.1
11.0 10.7
0.4
Brazil
Aug 77
0
36.7
46
2
India
Jul 77
-4.7
4.3 2.0
-7.2
.
India
Jun 77
0.3
12.0
16
9
South Korea
Aug 77
4.7
22.7 13.6
49.3
.
Iran
Aug 77
1.6
28.3
15.6
Mexico
Jul 77
1.0
6.0 4.7
21.6
South Korea
Sep 77
9.5
32.6
56.3
Nigeria
76 IV
0.2
11.3 9.0
0.7
Mexico
Aug 77
0.7
18.7
30.1
Taiwan
Sep 77
7.2
15.0 12.3
-2.0
Nigeria
Apr 77
-2.3
36.9
47.5
1 Seasonally adjusted.
Taiwan
Jul 77
1.4
24.4
27.1
'Average for latest 3 months compared with average for previous 3 months.
Thailand
Jun 77
- 1.8
13.1
12.0
Seasonally adjusted
.
CONSUME
R PRICES
WHOLESALE PRICES
Average
Average
Annual Growth
Rate Since
Annual Growth
Rate Since
Percent Change
Percent Change
Latest
from Previous
1 Year
Latest
from Previous
1 Year
Month
Month
1970
Earlier
Month
Month
1970
Earlier
Brazil
Oct 77
2.7
27.2
42.1
Brazil
Sep 77
1.6
27.1
34.4
India
Sep 77
1.2
8.5
9.6
India
Sep 77
0
9.2
4.8
Iran
Sep 77
0.7
12.3
30.2
Iran
Oct 77
0.5
10.1
13.1
South Korea
Sep 77
0.3
14.5
9.2
South Korea
Sep 77
0.7
16.3
9.4
Mexico
Sep 77
1.8
15.0
32.2
Mexico
Sep 77
0.5
16.5
44.6
Nigera
Apr 77
2.9
15.2
16.0
Taiwan
Sep 77
-0.5
8.9
3.8
Taiwan
Sep 77
-1.9
10.9
10.4
Thailand
Jul 77
1.0
10.1
7.1
Thailand
Aug 77
1.1
8.7
9.9
EXPORT PRICES
OFFICIAL RESERVES
US $
Million US $
Average
Latest
Month
Annual Growth
Rate Since
1 Year
3 Months
Percent Change
End of
Million US $ Jun 1970
Earlier
Earlier
Latest
from Previous
1 Year
Period
Period
1970
Earlier
Brazil
Jun 77
5,707 1,013
3,716
5,863
India
Oct 77
4,886 1,006
2,778
4,395
Brazil
Jul 77
-12.4
16.3
28.4
Iran
Oct 77
11,547 208
8,542
11,592
India
Feb 77
8.0
10.4
8.9
South Korea
Sep 77
4,040 602
2,374
3,502
Iran
Aug 77
0
35.0
18.7
Mexico
Mar 76
1,501 695
1,479
1,533
South Korea
77 II
1.4
8.7
8.5
Nigeria
Aug 77
4,610 148
5,842
4,740
Nigeria
May 76
-0.1
27.3
12.3
Taiwan
Aug 77
1,416 531
1,586
1,331
Taiwan
Aug 77
-0.3
11.8
5.3
Thailand
Oct 77
1,906 978
1,937
2,017
Thailand
Dec 76
2.0
13.3
13.1
Approved For Release 2002/02/01 : CIA-RDR'B'00
 Approved For Release 2002/02/01 : CIA-RDP79B00457A000300080001-2
FOREIGN TRADE, f.o.b.
Latest 3 Months
Percent Change from
3 Months 1 Year
Latest Period
Earlier '
E
arlier 1977
1976
Change
Oct 77 Exports
-47.7
5.0
10,171
8,119
25.3%
Oct 77 Imports
11.4
-4.4
9,989
10,250
-2.5%
Oct 77 Balance
182
-2,131
2,313
Jul 77 Exports
-42.6
1.8
3,165
2,923
8.3%
Jul 77 Imports
10.6
2.7
2,529
2,480
2.0%
Jul 77 Balance
636
443
193
Iran
Sep 77 Exports
0.2
-0.3
17,793
16,865
5.5%
Sep 77 Imports
2.8
3.5
9,479
9,301
1.9%
Sep 77 Balance
8,313
7,564
749
South Korea
Aug 77 Exports
43.9
20.3
6,217
4,838
28.5%
Aug 77 Imports
16.4
18.8
6,265
5,121
22.3%
Aug 77 Balance
- 47
-283
235
Mexico
Aug 77 Exports
-46.9
30.5
2,743
2,125
29.1%
Aug 77 Imports
101.8
-16.5
3,260
4,070
- 19.9%
Aug 77 Balance
-517
- 1,945
1,428
Nigeria
Jul 77 Exports
18.3
22.8
2,853
2,259
26.3%
Dec 76 Imports
86.7
8.4
2,531
1,990
27.2%
Dec 76 Balance
1,502
1,102
399
Taiwan
Sep 77 Exports
28.7
9.0
6,637
5,902
12.5%
Sep 77 Imports
-13.9
6.1
5,722
5,111
11.9%
Sep 77 Balance
915
790
125
Thailand
Aug 77 Exports
-18.7
26.3
2,392
1,911
25.2%
Aug 77 Imports
28.4
40.2
2,716
2,101
29.3%
Aug 77 Balance
-324
-190
-134
Approved For Release 2p02/02/01 : CIA-RDP79B00457A000300080001-2
 AGRiCUL"1 VKAf P0fff L-'-9 MON HI YRAVERAGE CASH PRICERDP79BOO457AO00300080001-2
7.5 $ PER BUSHEL
CORN
$ PER METRIC TON 5 $ PER BUSHEL
250 Chicago No. 2 Yellow
1-7 DEC
7 DEC 2.22
30 NOV 2.22
NOV 77 2.19
DEC 76 2.48
150
100
1-7 DEC
100
TEA COFFEE
London Auction Other Milds Arabicas,
ex-dock New York
1-7 DEC t 1-7 DEC
0 1973 1974 1975 1976 1977 0 0 1973 1974 1975 * 1976 1977
7 DEC 0.4858
30 NOV 0.4901
NOV 77 0.4904
DEC 76 0.7416
0
1973 1974 1975 1976 1977
2,000
350
300
1,500
COFFEE/TEA
$ PER METRIC TON 400 c PER POUND
7 DEC 7.54
30 NOV 6.82
NOV 77 6.66
DEC 76 7.64
10 OCT 96.9 30 NOV 200.83
NOV 77 NA NOV 77 196.44
DEC 76 77.0 DEC 76 207.11
Approved For Release 2002/02/01 : CIA-RDP79B00457A000300080001-2
 Approved For Release 2002/02/01 : CIA-RDP79B00457A000300080001-2
$ PER HUNDRED WEIGHT
No. 2 Medium Grain, 4% Brokens,
f.o.b. mills, Houston, Tex.
SOYBEAN MEAL
$ PER TON
80
1-28 NOVII
0
325
COCOA1
PER POUND
7,000
Bahia, New York price
22 NOV
NA
6,000
16 NOV
NA
,
41 Percent Bulk, f.o.b. Decatur
7 DEC . 153.00
30 NOV 152.50
NOV 77 163.40
DEC 76 196.22
PER, METRIC TONY 400
SOYBEAN OIL
Crude, Tank Cars, f.o.b. Decatur
7 DEC 0.2290
0.4 30 NOV 0.2128
CPYRGHT
1970=100
400
300
222.22'' 0.3
AUGII
1977
NOV I I
7 DEC 0.2300
30 NOV 0.2200
NOV 77 0.1948
DEC 76 0.1960
350
1-7 DEC I
NOTE: The food index is compiled by the Economist for 16 food commodities
which enter international trade. Commodities are weighted by
3-year moving averages of imports into industrialized countries.
Approved For Release 2002/02/01 : CIA-RDP79B00457A000300080001-2
 INDUSTRI EgM$FfgPIlatt 02LQ2Li1cE R MPONTTHLY AVERAGE OCASH PRICE
COPPER WIRE BAR
140 C PER POUND
LEAD
45 C PER POUND
1-7 DECI
,
1973 1974
1975
1976
1977
10 1973 1974
1975
i976
LME
US
$ PER METRIC TON
650 C PER POUND
2,000
LME
US
7 DEC
23.7
31.0
7 DEC
595.4
618.4
30 NOV
23.8
31.0
30 NOV
575
4
616
5
80
550
.
.
NOV 77
23.7
31.2
NOV 77
572.6
621.1
DEC 76
29.1
37.0
DEC 76
380
8
417.0
1,500
.
60
1-7 DECI
0 1973 1974 1975 1976 1977 0 150
STEEL SCRAP
150 $ PER LONG TON
7 DEC 30.6 33.0
30 NOV 29.6 32.0
NOV 77 28.6 32.0
DEC 76 21.6 26.0
800
$ PER METRIC TON
1,000
1-7 DEC 1
1977 200
1-2 DEC 1
1973 1974 1975 1976 1.977 0 100 1973
DEC 76 58.6 65.6 2,500 35
LME US
7 DEC 56.1 60.6
30 NOV 54.9 60.6
NOV 77 53.6 60.6
1
000
MP USD
7 DEC 167.0 174.5
30 NOV 167.0 163.4
NOV 77 167.0 169.4
DEC 76 167.0 153.5
1-7 DECI
1974 1975 1'976 '1977
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 Approved For Release 2002/02/01 : CIA-RDP79B00457A000300080001-2
CPYRGHT
ALUMINUM
Major US Producer
E per pound
53.00
44.00
48.00
41.00
US STEEL
Composite
$ per long ton
359.36
316.36
333.78
306.72
IRON ORE
Non-Bessemer Old Range
$ per long ton
21.43
19.50
20.51
18.75
CHROME ORE
Russian, Metallurgical Grade
$ per metric ton
150.00
150.00
150.00
150.00
CHROME ORE
S. Africa, Chemical Grade
$ per long ton
58.50
39.00
42.00
44.50
FERROCHROME
US Producer, 66-70 Percent
E per pound
41.00
45.00
43.00
52.00
NICKEL
Composite US Producer
$ per pound
2.07
2.20
2.41
2.20
MANGANESE ORE
48 Percent Mn
$ per long ton
72.24
72.00
72.00
67.20
TUNGSTEN ORE
Contained Metal
$ per metric ton
21,500.63
13,954.00
18,352.00
10,960.00
MERCURY
NY
$ per 76 pound flask
123.00
110.00
134.50
120.00
SILVER
LME Cash
it per troy ounce
474.40
478.82
434.62
408.93
GOLD
London Afternoon Fixing Price $ per troy ounce
159.98
125.71
133.79
139.30
RUBBER
? PER POUND
60
LUMBER INDEX6
160
1-Approximates world market price frequently used by major
world producers and traders, although only small quantities of
these metals are actually traded on the LME.
2Producers' price, covers most primary metals sold in the U S.
3As of 1 Dec 75, US tin price quoted is "Tin NY lb composite."
4Quoted on New York market.
5S-type styrene, US export price.
6 This index is compiled by using the average of 13 types of lumber whose
prices are regarded as "bell wethers" of US lumber construction costs.
7Composite price for Chicago, Philadelphia, and Pittsburg h.
NOTE: The industrial materials index is compiled by the Economist for 19 raw
materials which enter international trade. Commodities are weighted by
3-year moving averages of imports into industrialized countries.
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A-19
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