'ANNUAL FINANCIAL AND ECOMOMIC REVIEW, I, 'THE TIMES (LONDON), 24 SEPTEMBER 1974.

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01194A000100510001-9
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 18
• Document Creation Date: November 11, 2016
• Document Release Date: August 6, 1998
• Sequence Number: 1
• Publication Date: October 4, 1974
• Content Type: REPORT

25X1C10b
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 CPYRGHApproved For Release 1999/09/02: CIA-RDP79-01194AO00100510001-9PYRGHT
Boom reverses into CPYRGHT
world recession
pared with 1973.
by Peter Jay
Economics Editor in 1973 the three strong
A year ago the major prob-l
lent of the world economy
did not even exist. Nor was,
it -foreseen. The increase in,
oil prices, although it may,
,vverl1 have been inherent in,
flit progress of inflation in,
t11'6 industrialized countries,
interacting with their ex-
trame dependence on this
valuable commodity, was not
regarded as imminent by al-'
most everyone generally con-
cerned with the management
of xthe world economy.
this should be a sobering
les6on to pundits, although
it does not quite entail total
agnosticism about world eco-,
nomic prospects. It is not
evory year that an event of
comparable magnitude dis?
tunbs reasonable prognoses of
economic trends ; and there
are not so many groups with
t.114--until last winter-un-
used monopoly power of the
oil'. producing countries to
create such extraordinaryI
ch dnges.
The consequences are by
now well known. The oil-
producing countries have be-
from the beginning of
the year, to move into a mas-
:avg balance of payments sur-
plus with the rest of the
-v.orld. The OECD has esti-
m aied the effect on the bal-
ances of payments of its
members-mainly the indus-
trialized countries of the so-
called West (including Japan,
and Australia) at a deterior-
ation of about $50,000111, in a
full year.
l'his has been. coming
through fast ; and it Ii . by
apt, means been proportion-
.ulely distributed between the
main oil-using countries ac-
cording either to their eco-
nomic size or to their
capacity to handle a balance
of payments deficit. The
Bank of England, in its Sep-
tember Quarters) Bulletin,
4ras provided a convenient.
retries in terms of cur-
ie ties and balance of pay-
m nts were the United
'St tes, Canada and West
G rmany. In addition the
c< egory "all other OECD
co ntries " (excluding North
A erica, Japan and the four
la ger members of the EEC)
w re' in strong surplus in
19 3; but jointly these coun-
tries enjoyed no special cur-
re icy or financial strength.
TI e turn-round in the joint
balance of payments posi-
ti ns of the United States,
C nada and West Germany
b ween 1973 and the second
quarter of 1974 (at an annual
ra e) was from a surplus of
$5 000m to a surplus of
$5 000nt-in other words, no
ch nge at all.
he turn-round of Japan,
th four larger EEC countries
at
tr
the "other OECD coun-
s " was thus equal to the
w ole of the deterioration in
th total OECD balance, from
a urplus of $2,S00m to a
de icit of $40,500in. Of this
to al deterioration of
$4 ,300m the "other OECD
co tntries " suffered
$1 ,SOOm, Italy suffered
$8100111, Japan suffered
$6 900nt (after an even worse
ex )erience in the first quar-
te ),'Britain suffered $6,700m
all i France $5,800in.
File important 'conse-
qt ences were threefold : to
e. ccrbate world inflation,
to trier off a world reces-
si I anti to pose the world
fi ancinl pontlts will go up by 23 per
The Government's policy
a most any cost, and the
c st is already being shown
i forecasts that domestic
r cent this year.
its September review
iblished three, weeks after
tit demand and supply is
time it was served, and
collapse of the West
man mark.
r Willem Duisenberg,
R ister of Finance, was
e ply offended at not
e ng invited to the finan-
i discussions in Paris
a ly in September and,
vi h his Belgian colleague,
r mptly let it be known
t he does not consider
Dutch bound by anv
n ncial decisions taken
h (re, such as the possible
e aluation of. the " green
o n d ".
he Dutch have tackled
~ ation radically this year.
pite a rise in price of
a materials of some 30
)e cent and a forecast rate
eft, the eventual figure
'ill be closer to 9 per cent,
h first five OECD coun-
ri s withi a " low " rate of
ation. Although there
Next to oil, the world's most
wanted commodity is gold.
South Africa, which pro-
duces 70 per cent of the
western world's supply of
the metal, has seldom, if
ever, had it so good.
.It is small wonder that in
August, when the world's
financial leaders were look-
ing gloomily at forecasts of
serious recession and as
stock markets tumbled, Dr
Nico Diederichs, the South
African Finance Minister,
was able to produce a budget
which he modestly described
as " a remarkable fiscal
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J.heres of the economy..
his has become apparent
?oui an excessive pressure
demand for and the high
st of finance, increasing
roduction bottlenecks and
the reduction of spare in-
dustrial capacity, the length-
ening of delivery periods, a
tight labour market, a
strained transport system
nd a worrying deterio-
ation in the country's
alance of trade."
I In its annual economic
eport, also published after
he budget but on which Dr
iederichs apparently based
is own review of the past.
2 months, it suggested that
bile existing credit con-
ols might not be tight-
ned, there was little pros-
ect of any easing of them.
The report said: " The
igh rate of increatsl in ,.ri-
ate consumption expend=
ure during the last two
ears was facilitated to an
portant extent by the
extensive use made of con-
sumer credit."
The Governor of the
04r- q. W. de Jongh,
 CPYRGHTApproved F 6 1999/09/02: ,R- l~-O1194AOOO1(O6g df 9
aid: "We -. ave , now
eached the stage where the
cononly is_ growing at a
cry high rate... while at
he same time demand-pull
nflation has begun to play.
part again. It is there-
ore certainly not necessary
o stimulate further growth
eliberately but rather a
latter of trying to maintain
relatively high rate of
rowth to the extent that
vailable resources permit
nd without feeding infla-
tion.,,
There is no doubt that
the South African economy
is at present growing at an
exceptionally rapid rate in
real terms. The expected
rate of increase of 7 per
cent in real gross domestic
product for 1974 far out-
strips the average annual
rate of 5.75 per cent envi-
saged in the economic deve-
lopment programme.
But most economists feel
that now that tlra cyclical
upswing has brought the
economy to a point where
most of the previously exist-
ing surplus capacity has
been absorbed, it is both
inevitable and desirable that
the rate of real economic
growth should slow down at
some stage to a more main-
se erely affected by the oil
I
l cr
i
B
i
hi
d i
s
s
ut
n t
s an
n
. of er respects there are spe-?
ci l factors in the Finnish'
Si uation.
Most of Finland's energy
i ports are obtained from
t Soviet Union, with
w om trade is on the basis
o regular bilateral agree-
m its. Before the inter-
n tional price of oil was
r sed so dramatically the
m in n limitation on Soviet-
F nnish trade was the inabi-
li y of the Soviet Union to
s 1 Finland enough goods
tl at she really wanted. It
w is political considerations
ich kept this trade as
h li as it was, which was
11 below a fifth of Fin-
] id's total international
t de. Now Finland is hav-
i g to sell more to Russia
t pay for the higher price
o oil and for the natural
g s which began flowing
f oni the Soviet Union to
eland this year.
This has limited Finland's
c pacity to export to the
rest of Europe, so that the
b lateral trade agreement
th the Soviet Union has
o ly partly shielded Finland
f om the full effects of. the
o I crisis. The limiting fac-
t r on the growth of Fin-
sh exports has been the
pacity to produce, not the
capacity to sell. There is a
persistent shortage of
skilled manpower for the
main industries, at any rate
the south of Finland.
In some respects this is a
omforting position as the
nternational economic
rinds blow more harshly.
he combined effects of
uoyant international
eniand for forest products
nd Finland's need to sell
tore to the waiting Soviet
ar-ket should ensure con-
inued high activity in the
innish economy.
Finland will also benefit
rout the continued strength
f both the Swedish and
orwegian. economies. They
rovide the real Scandina-
ian success stories over the
ast year. Both have had a
elatively low rate of infla-
ion by today's extravagant
tandards, though inflation-
ry pressures have been
teadily increasing.
Neither continued to
dvance at the same pace as
n the previous year but
neither could expect. to do
o in the harsher inter
ational economic climate.
oth had enjoyed boon con-
ditions in 1973 and the first
half of this . year, with the
wedes having one of their
best .years on record in
1973.
However, of all the Scan-
dinavian countries Norway
has the most glowing pros-
ects. The 'boom there has
rcen slowing down and-may
n so still more, depending.
n the level (if "Cool-al
?uropean demand. The good
xport performance of the-
ast year has been due lat-
ely, however, to the
?trength of the demand for
Japer, which is unlikely to
`oath-east
Asia CPYRGHT A
uaw?~~
y Petar Hadji-Ristic
Engsand's bewilderment'
over its economic plight is
n marked contrast to the
urrent mood in South-east
sia; every country in that
egion is keen to develop
and the world recession is r
not deflecting them from
their course. Compared to a
year ago short and medium-
term expectations have been
rapidly revised downwards,
but the gloom-and-doom syn-
drome we know in Europe,
is not yet to be found.
The fourfold increase in
crude oil prices has not left
the region unscathed, how-
ever. The additional boost
this gave to already soaring
inflation and cost increases
in 1973 has caused some
development projects to be
emporarily shelved.
The export growth rate
has been temporarily:
educed because of the
adjustment strains in indus-
trial countries created by
the energy crisis and a few
ianufacturing companies
have collapsed. -
The general view is that
this is nothing more than a
temporary setback. Accord-
ing to most government
officials and bankers, South-
east Asian nations are bet-
ter placed than most deve-
loping countries to survive,
and even thrive on, the cur-
rent economic difficulties..
Not least of the reasons for
such optimism is the fact
that the energy price rises'
are bringing big amounts of
new international invest-
ment in the development of
alternative energy sources
in the region.
The best place from
which to take a first look at
the financial prospects of
the region is Singapore, the
tiny republic on the
regional crossroads. - This
city-state is gambling on
becoming the region's finan-
cial . and technical nerve
centre.
That Singapore is moving
fast to do just this can be
seen from the Government's
single-minded efforts to
Scandinavia
by Geoffrey Smith C PYRE
One of the ironies of
this year of economic gloom
is that the one Scandinavian
country to have joined the
EEC is the one with the
worst economic record, fac-
ing the most daunting eco-
nomic perils. This is not
cause and effect; it is
simply a? reminder that
membership of the Corn- .
munity cannot by itself set
all other factors on one
side.
because the fundamental
weakness of its position
over a period of years had
left it in no condition to
face the sudden onset of the
oil crisis. Nor does it have
the compensation enjoyed
by the other Scandinavians
of the forest industries
whose products continue to
sell in a boom European
market.
Unemployment has been
about three times higher
than a year ago, with the
construction industry parti-
cularly badly affected.
Finland's situation is the
next worst. There, too, infla-
tionary pressures have been
.strong and the balance of
payments deficit has in-
creased. Finland was among
those countries most
Approved For elease 1999/09/02: e =; ,[ 07 a 'c af9400. I
Th fast-expanding Asia dol-
lar market base in the
re ublic, now worth some
$9 OOui, has b come a
m 'or source for develop-
m nt finance for _the oil
so rch.
he Governme it's Eco-
no tic Developme it Board
is now concentrating on
acting into the republic
foreign investment in high-
technology industries, par-
ticularly in metal and aero-
space engineering and chemi-
cals. It is not surprising that
against this background of
intense activity, Si gapore is
Ling, perhaps a little
over- ptimistically, a 10 per
cent real growth rate this
year.
Co ernment officials in
Malaysia, just across the
caus gay from Singapore,
are lso predicting a high
rate of growth his year,
prob bly about 7 per cent.
In th industrial sector, into
whit foreign i vestment
conti ues to flow at a high
rate, the growth rate should
ben rly triple this.
Th re is no ev dente to
show so far sat this
healt y growth in he indus-
trial sector will be halted
next year as a res t of the
energy crisis. Rather, this
seem to have been
enco -aging the relocation
of co panies from the high-
cost ndustrialized countries
to de eloping coun ries such
as Malaysia, wh ch have
lowe labour costs and a big
pool of young unemployed
in th urban areas.
Th s process is likely to
be 6',en a co siderable
boos by the massive invest-
ment now going into the
searc for petroleum in the
Malaysian offshore waters-
Nine foreign oil ompanies
are rospecting for oil and
gas id some 120 thers are
comp ting for new prospect-
ing I cences.
Es "mates based on exist-
ing finds suggest that
Mala sia should be produc-
ing million barr is a day,
10 tines its preset domes-
tic eeds, by 1980.
Ap rt from simulating
the development of the
coup ry's energy resources,
the oil price rises have
brow ht about a revival in
the ortunes, of the natural
rubb r industry, for more
than a generation struggling
agai st competition from
the heaper syn retie rub-
ber ubstitute. Th price of
synti etic rubber soared
after the energy crisis and
this has ' stimulated an
expa sion in production of
natu al rubber.
N tural rubber is not the
only commodity that has
ben ited _ from th boom in
corn odity prices Palm oil
005 0001-9 1
 CPYRGHT Approved F&%(d?4 zMiF 1999/09/02: CIA-RDP79-01194A00010O91i OG1-M .
prices have also ro ete , as
well as the price of metals,
such as tin, bauxite and
iron ore, all of which
Malaysia now produces in
reasonably large quantities.
Any discussion of the
region's natural resources
must turn to a discussion of
the fabled wealth of Indone-
sia, the archipelago facing
Singapore and Malaysia. To
a much greater extent than
in Malaysia, the energy
crisis has hastened the deve.
lopment of Indonesia's
petroleum reserves, which
are estimated to equal at
least 2 per cent of the total
world's supply.
Oil production is expected
to rise substantially this
year, from 489 million bar-
rels to 550 million, and will
rise even more spectacularly
in the second half of the
decade as the new finds are
brought into production.
Big earnings will also
accrue to the country from
the development of natural
gas resources.
- Apart from the increase
in petroleum exports, a big
boost in the output of other
primary products can also
be expected later in the
decade. Major mining pro-
jects are now under way or
in the planning stage to
exploit new finds of tin,
bauxite, copper and, the lar-
gest of all, coal.
As for industrial produc-'
tion, this is expected to
expand by at least 15 per'
cent this year as the diffi-
culties due to inadequate
transportation and shipping
begin to ease following big
spending on infrastructure.
Over the long term, the
key to the continuing finan-
cial stability of the region
rests on regional political
stability rather than the suc-
cess of the world economy
in adjusting to the changed
economic circumstances. All
indications are that the
political situation in Singa-
pore, Malaysia and Indone-
sia is stable.
With these conditions in
mind, most economists in
the region maintain a cau-
tious optimism about the
future.
he prices of copper, tin;`
I}vel slightly less than that
effect on industrial and
itf 1974 will be equal to
optained by special agree.
d vote more vigour and
r sources to the exploitation
I dia should now be extract-
g annually 225 million
India CPYRGHT
Oil, food and raging infla-
tion have dominated the
economic scene in India this
year, as also, in varying
degrees, in Bangladesh, Cey-
lon and Pakistan. The huge
rise in oil prices at the end
of last year, which was
'nly part of 'a whole range
*mport cost increases
F val
cep
I
thir
cru
Ass
the
exh
de. This prospect, cou-
pled with the high prices of
imported crude, has im-
parted a new urgency to the
need to increase indigenous
production. The record to
date of the Government-
owned Oil and Natural Gas
Commission (ONGC) has
been highly erratic and in-
efficient. Its performance in
onshore ? development and
exploration.. has shown a
consistent downward trend.
The ONGC's new offshore
drilling programme, how-
ever, presents an altogether
more encouraging picture.
The most promising deve.
lopment was the discovery,
in February, of oil in the
Bombay High structure in
the Arabian Sea.
The oil crisis has also'
severely affected food
production because of the
increased cost and reduced
availability of petroleum-
based fertilizer, of which In-
dia has to import about 50
per cent of her require-
ments. Plans to expand the
indigenous production of
coal-based fertilizer have yet
to bear much fruit.
The huge rise in import
costs has overshadowed the
one apparent success story
of which India's economic
planners can boast, namely
the growth in exports,
which rose by 22 per cent in
1972-73, by 25 per cent in
1973-74 and, reportedly, by
40 per cent in the first
three months (April-June)
of the current financial
year.
These figures, however;
tend to reflect the steep
rise in the unit value of
many of India's traditional
exports (such as coffee,
cashew nuts, cotton textiles,
sugar and jute) rather more
than an increase in their
volume.
At an optimistic estimate,
:he total value of India's
exports in 1974-75 might
amount to Rs 26,000m. The:
total import bill, which is
difficult to calculate
because of the uncertainty
about how much food will
have to be bought abroad,
could be anything from
Rs 37,000m to Rs 40,000m;
leaving an uncovered gap of
between Rs 11,000m and
Rs 14,000m. The next inflow
of foreign aid, after debt
servicing, in 1974-75 is lik-
ely to be about S675nt
(Rs5,400m); which will still
leave a substantial gap to be
filled. But the assumption
of these calculations is that
with the aid of drawings on
the International Monetary
Fund and oil credits India
will scrape through.
An important proviso of
this assessment is not only.
that export' trends continue':
to be favourable but also
that Congress approves the
.crucial American ?contribu-
ion to the International
Development Association,
the World Bank's soft-loan
affiliate, which is scheduled
to provide about $60otu of
the total aid commitment of
$1,400m pledged this year
by the Indian Aid Consor.
tium.
On the domestic front;
the Government has been
struggling, though not so
far effectively, to contain a
highly inflationary situation.
Fuelled by stagnant or
declining industrial and
agricultural production,
deficit budgetary financing
and the existence of a paral-
lel "black" economy
(mainly the product of mas-
sive tax evasion), the gen-
eral price level rose during
the first Six months of this
year at an annual rate of 30
per cent.
An emergency supplemen-
tary budget enacted. in
July-sought to close the
..budgetary gap by._ raising
extra revenue through in-
creases in a wide range of
taxes, levies and excise
Eastern
Europe CPYRGHT
by Kurt Weisskopf
The oil crisis of the West,
rising commodity prices and
inflationary price trends
have affected the economies
of the Comecon countries.
The impact of these trends
may have varied from coun-
try to country. It was less
marked in East Germany,
strongly felt in Hungary and
Yugoslavia, the communist
country outside Comecon,
and less perceptible in Bul-
garia. Yet none of the Euro-
pean Comecon countries es-
caped unscathed. Their plans
to control their economies
during 1976-1980 and to in-
clude an element of supra-
national integration are still
under consideration, Com-
econ sources indicated at the
Leipzig Fair early this
month. Some of them admit.
ted that in view of the upset-
ting effects' of western infla-
tion, these plans are once
again in the melting pot. Up
to a point there has been a
convergence of problems be-
tween East and West.
In terms of overall econo-
mic growth little has
changed. Growth rates still
vary between 6 per cent and
8 per cent. But overall
growth is a general term.
More specifically, the Come-
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 CPYRGHT
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con countries are passing
through a process of plan-
ning readjustment which will
-delay realization of the goal
p1.ncl,1inmed at the Bucharest
meeting of. the council in
July, 1971-full planning in-
tegration, possibly by 1980.
The past 12 months, but
particularly the events after
the Yom Kippur war, as well
as intimations by the Soviet
Union that prices of Russian
crude oil will be raised to
world market levels while
the volume of deliveries to.
the Comecon countries may
be limited to a maximum of
perhaps 50 million tonnes
annually, have forced East
European states to re-
appraise their own oil situa-
All of them are committed
to the expansion of their
petrochemical industries as
one of the main planks of
their economic programmes.
Therefore, all of them have
been searching for new
,sources of oil, generally
Middle Eastern and North
African. This entails not only
,contracts with Middle East
countries but also physical
preparations that have
already started.
East Germany is construct-
ing a major oil port at
.Rostock. Poland is expanding
the oil port and refining capa-
cities at Gdynia. Possibly the
most ambitious and expen-
sive project is the new
Adria oil pipeline from
Omysal in Rijeka bay to the
Hungarian border and
Czechoslovakia, with the pos-
sibility of an eventual exten-
sion to Poland.
Commodities have been
another worry for the
Conrecoil countries. But
prices could now be turning
downwards. This trend,
coupled with a campaign for
economical use of commodi-
ties and fuel saving, seems to
hold a chance of easing the
pressure.
Oil and commodities are
not the only factors of con-
cern to the economic and
planning authorities of the
Comecon countries. Planning
integration as originally en-
visaged under the Bucharest
charter, known as the Com-
plex Programme, entailed
joint development of science-
based industries. It was soon
found that this process could
be profitably accelerated by
the purchase of western
equipment, licences and ex-
perience.
As a result of western in-
flation, however, such pur-
chases have become more ex-
pensive than was originally
calculated. The time sche-
dule has therefore been
revised and the date envi-
saged is 1990. -
This delay is probably wel-
rnme to Comecon planners
who have realized that inte-
gration,-since it involves co-
operation and specialization,
will have to be based on links
between enterprises or in-
dustrial groupings. This in
turn requires the existence
of enterprises with corpora.
tive status in the legal sense.-
It is not just Comecon
internal integration which
requires the establishment
of enterprises with coopera-
tive status in the Comecon
countries. The matter is even
more pressing in view of the
emphasis on cooperation
deals with western firms. }
Such deals are seen as a
means to transact business
outside the monetary sphere
and therefore more or less
unaffected by inflation.
-Generally they will involve
part-production by both the
Comecon and the western
partner, assembly of the,
product by one, and eventual -
delivery of a share of the
assembled product to the
non-assembling partner or'
joint disposal on ? third
markets.
In recent months all Come-
con countries have expressed
themselves in favour of co-
operation deals, which not
so long ago some viewed with
reservation. Yugoslavia, not
a member of Comecon, sees
in cooperation rather than in
conventional deals the best
opportunities for foreign
trade expansion. This view
is shared by Romania. -
Joint ventures, which were
started in Yugoslavia in 1967
and in Romania in 1971, are
only one step forward from
cooperation, but it could be
a long step.
Recently Hungary has
started to take an active
interest in joint ventures on
its territory, having taken
part in them abroad for
some years, and Poland is
cautiously considering the
possibility. .
The rapid advance of the
idea of cooperation deals and
the serious preoccupation:
with joint ventures in recent,
months is part of. the
Comecon reaction to western
inflationary trends. It is this
approach, the economic.
authorities of the Comecon
countries appear to hope,
-that will enable them to mini-.
mize the effects of imported
inflation and to proceed
eventually with their integra
tion plans.
The main feature of the
economic policies of East
European countries in the
past 12 months has been the
definite reappraisal of - the -
time-scale of integration.
They received an object les-
son demonstrating that they
are dependent on coopera-
tion with the western world,
and that one social system's
crisis is by no means:'th'e
other system's boom. .
The lessons, it seems,' have
been learnt and, if political
utterances in the press of the
Comecon countries, with,
high propaganda content for..
home consumption, are dis-
regardgd, the language of
economic policy and action
in the recent past is fairly
clear and points to a long
period of willingness to co-
Latin CPYRGHT
America
by John Rettie
editor, Latin America
Chileans . have been
variously told that their cost
of living went up during the,
past 12 months by 550 per.
cent or, from another
statistical source, nearly 700
per cent. To the average
man in the street, the odd
150 per cent makes little or
no difference.
Although Chile, flounder-
ing in the chaos of- the
Allende and post-Allende
governments, is by far the
worst case in Latin America
this year, not a single
country has escaped the
scourge of inflation. Even
the best managed and
luckiest governments in the
region can expect inflation
of 25-40 per cent in 1974.
Perhaps the most striking
feature is the shift in the
balance of economic power
in the continent. Until this
time last year Brazil, with a
opuration over 100 million,
ias the unquestioned eco-
omic giant, forging ahead
A its Spanish-speaking
ivals Argentina and Mex-
co, as well. as the six-nation
ndean group formed by
olivia, Chile, - Colombia,
cuador, Peru and, -bela-
edly, Venezuela. -
Oil has changed all
hat. Brazil, of, course, is
till a giant; its economy is
oo dynamic to come sud-
only to a halt. But power
. s now in the hands.of Ven--
zuela, with an oil income
hich has suddenly jumped
rom about $3,000m to
- omething like $10,000m a
ear. This is a lot of money
y anybody's standards, and
ertainly far too much for
enezuela to absorb at
once. The Government has
ierefore set up develop.
ent funds under which
bout half this income will
e used at home, and the
est reserved for aid and
vestment in other develop.
g countries. Naturally
rough, priority will be
iven to Latin America and,
i particular, the Andean
gm p G: ;!
11 he effect o this, at a
.time when the i dustrialized
nat ens are drawing in their
ho s as a result of the oil
cri is, may well be to make
Ve ezuela replac the United
Sta es as the major sup-
pli r of capital and credit
. to atin Ameri a, and eer.
tai ly to the Spanish-speak.
innations. This will have
pro ound impli ations for
economic relation s, not only
'within Latin America but,
also between Latin America
and the rest of the world.
It was the of crisis that
brought concern about the
Brazilian miracle to a head;
but nagging doubts had
exts ed for some time.
D spite a massive inflow'
of bout $3,000 the first
half of 1974 saw balance of
payments deficit of $190m.
Inflation, 'artifi iajly held
dow to 151 per cent by the
out Ding Medici Govern.
men last year, is likely to
be 0-40 per cent in 1974.
A I this is clearly serious;
but not yet catastrophic.
Som corrective measures
hay been taken by General
Ern sto Geisel, the newPresi-
dent The state oil concern,
Petr bras is stepping up its
expl ration programme, and
mom- attention is to be paid
to griculture, whose pro-
'duct seem to have the best
exp rt prospects at a time
of imminent wort industrial
rece sion. Clearly, however,
the razilian miracle will be'
pro ematical fo the next
few ears.
w at is renal) worrying..
abo. Mexico is he political
situation. After 0 years of
political 'stabilit and 20
year at low rats of infla-
tion, serious social tensions
have been created by the -
very uneven distribution of
weal h, and exacerbated by
an nprecedented rise in
the ost of livin . The prime.
+vate sector has poor rela.
tion with both the Govern-
men and labour, and in
:.spit of initial good inten-.
;lion President Luis Eche=?
:very has so fa been un-
able to adapt and modernize
eithe the politial system
or t e country's social and
econ mic struct ire. This
will certainly be the main
task [f his successor in two
Po itics, too, a e the big-
gest cloud over Argentina's
econ my. Things have ini-
prov d out of all recogni-
tion since the return of`
Pero 16 mo the ago,
than s to the irp-entinian
 CPYRGHT
Approved For Release 1999/09/02 : CIA-RDP79-01194AO00100510001cYRGHT
version of the "social' con-
tract." he was ahl