Latin America-Central Government domestic revenues, 1961-66

[Estimates in constant prices, millions of dollars]

Percentages increases

Brazil

ECONOMIC INTEGRATION AND TRADE

The Brazilian Government has developed an effective export promotion program including a realistic exchange rate policy, elimination of exchange restrictions and controls, expansion of export financing, and a sweeping simplification of export procedures. These measures have resulted in a substantial increase in the export of nontraditional commodities. In June 1964, the GOB negotiated the re-scheduling of its large foreign debt and has greatly improved its balance of payments, accumulated foreign exchange reserves of over $450 million, liquidated commercial arrears, and re-established Brazil's international credit standing. On the import side, Brazil has recently taken some important steps that indicate a desire to shift from a very protectionist-oriented economy to a more internationallyoriented one. Recognizing the need to increase competition, increase productivity, and lower costs in Brazilian industry, and expand the flow of resources from abroad, the Government has substantially lowered the cost of importing through a series of changes in tariffs, exchange surcharges, and administrative practices. Laws scheduled for implementation on March 1, 1967 should bring a sharp reduction in tariff levels and provide a broader basis for tariff exemption.

A new agency is being created to foster development of Brazil's great tourist potential, and various financial incentives have been established to promote private investment in hotels and other tourism facilities. Brazil is a member of LAFTA and Brazilian trade with this area has increased both in absolute terms and as a percentage of total Brazilian trade.

Costa Rica

In 1966, the Government of Costa Rica created the Office of Economic Integration within the Ministry of Industry to assist in accelerating economic integration and to resolve any trade conflicts between Costa Rica and the other Common Market countries which might hinder the integration process. Costa Rican exports to the CACM in 1965 reached $18.2 million, an increase of 18 per cent over 1964. In 1965, Costa Rica imported $14.6 million from the CACM, surpassing 1964 imports by 76 per cent. Costa Rica has maintained a favorable balance of trade within the CACM, especially in 1964 and 1965 when exports exceeded imports by 48 and 20 percent respectively. In 1966, exports to the CACM may well top $20 million and imports $15 million.

Nicaragua

Nicaragua's participation in the Central American Common Market has contributed to a sharp increase in its total volume of trade with its neighbors. Exports climbed from $1.8 million in 1961 to $12.4 million in 1965 while imports rose from a level of $2.9 million to $21.4 million.

Mexico

Mexico's trade in 1966 with other LAFTA nations increased 36 per cent over 1965 (January to June data), compared with about a 26 per cent rise in 1965 over 1964. Mexico's over-all trade also has increased. Through September 1966, exports were up 14.7 per cent over the same period in 1965, while imports rose only 1.4 per cent. The respective increases in the full year 1965 over 1964 were 8.6 per cent for exports and 4.5 per cent for imports. Thus, progress is being made in reducing the persistent trade gap.

While the trade gap has been bridged in considerable part by net gains in growing tourism and in border transactions, Mexico has at the same time made special efforts to increase foreign exchange earnings through enlarged and diversified exports. The efforts have included greater emphasis on trade missions and promotional trade conferences, enlargement and strengthening of domestic trade advisory bodies, and expansion of commercial contacts in Central America. Uruguay

In January 1965, the GOU established a Board for the Promotion of NonTraditional Exports to encourage export sales and help offset the over-balance on agriculture for foreign exchange earnings.

Uruguay is a charter member of LAFTA, a major instrument to achieve wider markets and greater trade among member countries. Uruguay exports to the zone had risen from $6 million in 1961 to $15 million in 1965 and early estimates from 1966 are that such exports may approach $25 million.

Venezuela

The protracted domestic debate about Venezuela joining the Latin American Free Trade Association ended on August 31, 1966 when the country formally

deposited instruments of ratification in Montevideo. Venezuela has recently participated in the Sixth Period of Negotiations for the National Lists.

Chile

Chile is a member of LAFTA and has been encouraging more rapid progress toward an eventual common market. Import restrictions have been liberalized through the reduction of the foreign exchange waiting period (from 120 to 70 days legally, and de facto now about 60 days), by not implementing other import restrictions still legally in effect, and through the reduction of prior deposits, additional taxes and surcharges on a wide variety of capital equipment. Export promotion measures have been approved by the Congress including rebates of import duties and other taxes and credits for the production of selected export products.

NATIONAL PLANNING

Argentina

On September 30, the government passed a new development law which instituted the National System of Planning and Action for Development. Under this law the president of the country assumes personal responsibility for development planning as head of the National Development Council (CONADE) which is to be the implementing agency. The law further (1) provides for integration of development planning and security planning; (2) calls for participation by all levels of the public sector, national, state, and municipal, in the planning process; and (3) sets up guidelines to be followed by the private sector.

Chile

Progress on national planning has effected the following: (1) a National Planning Office (ODEPLAN) was established in 1965. During 1966, progress has been made in refining the development planning process. In preparing a national development plan for 1967-1971, separate sectoral planning groups have been established in key sectors, including agriculture, education, industry, housing, health, and others, and a project planning capability is being incorporated into the work of these groups. Preliminary global planning projects have been made, and interagency coordination of economic planning is improving. (2) Technical assistance coordination has improved essentially due to the effects of both the National Planning Office Technical Assistance Coordination Staff and improved communication and coordination between international donors including AID, UN, and private foundations. (3) Improved direction and coordination of national economic policy has been achieved through the creation of a Cabinet-level economic committee chaired by the Finance Minister. This committee is directing the work of the National Planning Office and has decisionmaking authority on broad financial economic planning issues. Honduras

In October 1965, the National Economic Council was reorganized under the Ministry of the Presidency as the Superior Council of Economic Planning and was given new powers for coordination and integration of public sector activities and budget plans, including evaluation of projects of autonomous and semiautonomous organizations. At that time, a Five-Year Plan was presented to the Assembly and to the business community as well as to the CIAP. The Plan inventories public investment projects for 1965 and 1966 and projects basic economic growth requirements and actions the Council feels necessary to achieve development objectives. The Plan calls for an increase in public investments from $16.7 million in 1962 to $40.4 million in 1966, and up to $67.5 million in 1969. The Council, which originally ignored the educational sector in the Five-Year Plan, has recently developed a plan for the expansion and long-term development of the country's primary, secondary, and university level education programs. Mexico

Planning is carried out through an Inter-Secretarial Committee composed of representatives of the Secretariat of Finance and the Secretariat of the Presidency. An over-all economic development plan has been prepared and is now being considered by the various agencies concerned. Meanwhile, regional development programs involving infra-structure investments and crossing federal and state jurisdictions are being carried out in half a dozen regions in Mexico.

Panama

During 1966, the GOP Department of Planning concentrated its efforts on the following activities: preparing the National Economic Development Plan 19681972; preparing development projects and feasibility studies; increasing the amount and improving the quality of economic statistics collected; developing plans for the reorganization and improvement of governmental ministries; and, calling and conducting budget and investment hearings at which GOP ministries and independent agencies presented their operating and investment proposals for 1967. An AID-financed team of planning experts began in February 1966 to assist their counterparts in performing planning tasks and at the same time training Panamanian technicians to strengthen the GOP Department of Planning. Paraguay

The GOP established a Planning Secretariat for Economic and Social Development in 1962, and has received moderate AID assistance since that time. A preliminary development plan for 1965-66 was published in 1965. It was evaluated by an Ad Hoc Committee of CIAP.

In August 1966, a revised two-year plan was published for 1967-68, incorporating many of the CIAP Committee's recommendations. It is felt that, in general, the revised plan is much more realistic in its development targets and more accurate in pinpointing obstacles to development than its predecessor. It is regarded as another important step toward a more rational allocation of resources for Paraguay's development program. A longer-range ten-year development plan is being prepared.

Uruguay

In October 1965, the National Planning Commission CIDE, published a tenyear Development Plan plus an emergency economic stabilization program. The GOU National Council approved the Plan and legislative approval is pending. Certain plan proposals were incorporated in the constitutional reform measures which were voted approval in the recent elections. These include modernization of the social security system, and the creation of a Budget and Planning Office in the Office of the President; (this Office will take over the function and personnel of CIDE and will continue CIDE's planning duties.) The introduction of performance budgeting is also a part of the reform. The reform also calls for realignment of certain ministries' functions proposed in the CIDE plan.

Venezuela

Venezuela has an effective National Plan with a competent planning entity (CORDIPLAN) which enjoys the full confidence and support of the government. Purpose of the Plan is to transform a petroleum economy into a broadly based modern agricultural and industrial economy while improving living conditions for the Venezuelan people; the Plan is revised on a continuing basis with major revisions at two-year intervals. In November of 1962 CORDIPLAN submitted its 1963-1966 "Four Year Plan of the Nation" to the CIAP's Panel of Nine. In November 1963, the Panel of Nine issued its evaluation which recommended higher public expenditures in certain areas. These recommendations were substantially included in the subsequent "Leoni Plan", and later incorporated into the 1965 fiscal budget. The revised Plan for 1965-68 was released in August 1966; it does not vary greatly from the outlines of the 1963-66 plan; annual GNP growth rate continues to be projected at 5.6 per cent in current prices. The new Plan depends heavily on a projected 4 per cent annual increase in petroleum, which may be optimistic; it anticipates a slight decrease in the growth rate of industrial production but includes increases in housing and agriculture.

Argentina

PRIVATE ENTERPRISE

Possibly one of the most important developments during 1966 was the reversal of government policy toward the petroleum industry. The Illia regime had annulled the contracts of the petroleum companies (mostly Americans) and had concluded settlement agreements with all but three of these companies: the new government has re-opened negotiations with the remaining three. All renegotiations center about the companies' continuation of exploration and production. It has become evident that YPF is in no position to make Argentina self-sufficient in petroleum and therefore the government has recognized the

role private enterprise (largely foreign) must play in the development of the industry. The granting of real concessions, which would necessitate an amendment of the "Ley de Hidrocarburos," is being widely urged by the economic press.

Brazil

The Brazilian Government has taken active steps to encourage a resumption of private foreign investment, which virtually ceased from 1962 to 1965, including a liberalization of restrictions on profits remittances, the opening up minerals de velopment to domestic and foreign enterprise, maintenance of realistic foreign exchange rates, and the settlement of the AMFORP (American and Foreign Power Company) case. An Investment Guaranty Agreement was signed in February 1965 and is now being implemented. Further, the government is taking steps to encourage greater private investment in industry through the Capital Market Law of 1965, and the establishment of intermediate credit institutions, and special tax measures. Measures to encourage the purchase of shares by the public in some government-controlled enterprises will take effect in 1967. Chile

Private sector growth figures and measures initiated to stimulate continued progress include: (1) Industrial production for the first nine months of 1966 rose by 6.9 percent over the corresponding period of 1965, and industrial exports for the year as a whole are expected to be up 65 percent over last year. (2) Public sector investment in the more productive sectors in 1966 rose as a percent of total government investment. According to the latest projections for the year as a whole, this included a 31.3 percent real rise in investment in agriculture and a 153.3 percent real increase in investment in industry. (3) Programs are being prepared, including copper, petrochemicals, plastics, beet sugar, fertilizers and other industries, calling for greatly increased investment through 1970 for the expansion of production of basic commodities. (4) Legislation establishing new norms for the production, manufacture and sales of copper was signed into law by President Frei in April 1966 to increase export earnings from copper and gain greater control of the industry. (5) Reform legislation on corporate operations and stock offerings to the public is now in Congress, and legislation designed to strengthen the enforcement machinery of the existing anti-monopoly law is being prepared. (6) Labor reforms include the establishment of an eight hour day for agricultural workers, and other modifications to the labor code which are now under consideration in the Congress. A law permitting the unionization of campesinos has just been passed by Congress and awaits Presidential action. (7) An investment guaranty agreement for convertibility has been signed, ratified and put into force. Although coverages are being issued, the amendment covering expropriation and war risks signed in 1963 has not yet received Congressional approval. As of June 30, 1966 guaranties issued total $221.5 million, including $115.8 million for convertibility, $85.4 million for expropriation, and $10.3 million for war risk. (8) Wage policy data made available unofficially by the GOC indicate that real wages for low income groups have increased significantly in 1966, thereby continuing the Frei Administration policy to raise real incomes of wage earners and redistribute total income in favor of low income groups.

Ecuador

Actions designed to encourage investment and to facilitate more rational business organization and financing have included: a "law of companies" which seeks inter-alia to encourage the development of a private market; decrees to allow the creation of both public and private investment companies; and modifications in Ecuador's Industrial Development Law which have granted industry lower taxes and have established exemptions from certain fees and tariffs.

A Public Financiera and a Private Financiera, using AID loans (of $5 million and $3 million respectively) are making development loans and helping new enterprises. The Public Financiera has loaned money to 32 new businesses in 22 different fields, creating 800 new jobs and saving $10 million in foreign exchange. The private Financiera, in four months, has loaned $1.8 million to 9 enterprises, creating about 500 new jobs.

Both specific risks and extended risk guarantees are available for American investors: through 9/30/66, 42 had been issued for a total coverage of $52.2 million; an additional 53. with a total coverage of $299.7 million were being processed. New investment covered by these guarantees was approximately $100 million.