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Approved For Release 2002/01/29 :CIA-RDP79B00457A000200~~~gzd C? PY Secret NOFORN-NOCONTRACT Economic Intelligence Weekly Secret ER EIW 77-035 1 September 1977 copy N?_ 407 Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 Warning Notice Sensitive Intelligence Sources and Methods Involved (WNINTEL) NATIONAL SECURITY INFORMATION Unauthorized Disclosure Subject t'o Criminal Sanctions DISSEMINATION CONTROL ABBREVIATIONS NOFORN- Not Releasable to Foreign Nationals NOCONTRACT- Not Releasable to Contractors or Contractor/Consultants PROPIN- Cautian-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 cotepory: ?SB(1), (21, and (3) Automatically declassified on: date impossi6ls fo dsfermins pprove or ea e - - Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 SECRET Noforn-Nocontract ECONOMIC INTELLIGENCE WEEKLY 1 September 1977 25X6 Norway: The Economy in Good Shape on Election Eve 7 Going into the 12 September parliamentary elections, the minority Labor government can point with pride to rising living standards and unemployment of less than 7 percent. Portugal: Another Mild Dose of Austerity 11 Lisbon has announced further belt-tightening measures designed to stem the outflow of foreign exchange reserves and raise the confidence of foreign creditors. Egyptian Financial Gap: Reaching a Peak 14 By reaching an agreement with the IMF that entails a politically acceptable degree of austerity, Cairo stands a good chance of regularizing the inflow of Arab aid. Soviet Merchant Fleet: Limited Response to Price-Cutting Complaints 19 Faced with threats of retaliatory measures by US and other non-Communist governments, the USSR is taking limited steps to reduce rate-cutting by its merchant fleet. Notes Sino-Soviet Trade: No Big Deals 23 Guyana: Economic Problems Mount 24 Publications of Interest, Statistics i SECRET Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 Next 5 Page(s) In Document Exempt Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 25X6 NORWAY: ECONOMY IN GOOD SHAPE ON ELECTION EVE Going into Norway's 12 September parliamentary elections, the minority Labor government of Prime Minister Odvar Nordli can claim credit for managing one of the most buoyant economies in Western Europe. While opposition parties have been pointing a finger at high taxes and 9-percent inflation, the average Norwegian knows his living standard has continued to rise. Registered unemployment is less than 1 percent, a remarkable figure in a Europe frustrated by inadequate economic recovery. The Labor Party, the largest political force in Norway, is running neck-and-neck in the polls with a group of nonsocialist parties. The Conservatives, the second largest party, and two smaller groups, the Christian Democrats and the Center Party, have said they will form a coalition government if they command a majority of seats in the new parliament. A victory for the coalition could mean slower exploitation of North Sea petroleum and reduced influence over wage settlements. Oil Policy Under Labor, Oslo has adopted a fairly cautious approach toward development of the oil and gas riches of the North Sea. This policy responds to the concern of I S~ptemb~r i977 SECRET Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 SECRET many Norwegians about the potentially disruptive economic and social effects of rapid development as well as the environmental impact. Such fears were brought to a head last April when a spectacular blowout occured at the Ekofisk field. The Nordli government has been able to mute Ekofisk as an election issue because major political parties realized that certain risks are inherent in development of oil resources. Moreover, no substantial damage appears to have been done to aquatic life and no oil slicks reached coastal areas. After the disaster, the Prime Minister was quick to announce that exploration north of the 62d parallel, previously expected to start next summer, would be postponed at least until 1979. Environmentalists and local fishermen strenously opposed development in this area, citing potential damage to fish stocks. The Ekofisk blowout has provided the Center Party and the Christian Democrats an opportunity to renew their efforts to slow the. pace of exploration and development even further. The Center Party advocates a ceiling of 1 million bJd on oil production, compared with the generally accepted limit of 1.3 million b/d. Through June, oil production was averaging 270,000 b/d; gas production is expected to start later this year. If the three-party coalition comes to power, the Conservative Party-which generally supports the Labor government's oil policies-presumably will have to accept some slowdown in development in order to keep the new government together. State of the Economy The Norwegian economy weathered the recent global recession better than the almost any other Western economy. Real economic growth slowed to 3.5 percent in 1975 but rebounded to 6 percent last year and is expected to hold that rate in 1977. The Labor government turned to expansionary fiscal and monetary police-s to bolster demand, in effect mortgaging future oil earnings to finance the resulting large current account deficits. Consumer spending is being fed by rising real disposable income; with oil revenues on the increase, the government is gradually reducing tax rates_ Manufacturing output, which declined in 1975 and increased just 2 percent last year, continues sluggish in 1977. Expanded oil and gas production accounted for most of the 7-percent growth in total industrial output achieved in both 197 and 1976. Surveys indicate continued strong investment spending, although last year's 12-percent real increase almost certainly will not be matched in 1977-oil-related investment is tapering off. Norway is one of the few countries in Western Europe to trim its unemployment rate this year. Now that unemployment is down to prerecession levels, the government is easing up on various programs designed to keep people at work-for example, loans, purchases of stock in private companies, and subsidies. Approved For Release - - Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 SECRET NORWAY: Selected Economic Indicators I r I f 1 1 1 1 1 1 1 1 ~ I r I r 1 1 t l r 1 1974 1975 Hourly Earnings in Manufacturing, Males Registered Unemployed 2.0 1 Percent of Labor Force iu mrv iuw iv 1974 1975 1 September 1977 I l l l l l l l l l l 1976 1 1 1 1 1 1 1~ 1 1 1977 1977 est. Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 SECRET Registered unemployment, which had reached a high of 1.6 percent in fourth quarter 1975, was only 0.8 percent by June of this year. With unemployment abating, attention is now focused on inflation, The government has resorted to temporary price freezes-most recently in April-to hold inflation near the promised target rate of 8.5 percent. First half 1977 prices averaged 8.9 percent above first half 1976. Concern over inflation and the competitiveness of Norway's traditional exports has led the Nordli government to assume a more active role in annual wage negotiations. With earnings in manufacturing rising an average 18 percent a year since 1973, Oslo's strategy has involved limiting nominal wage increases and thus cost pressures for producers. At the same time the government is ensuring increases in real disposable incomes through tax cuts. Last spring unions agreed to a 2.9-percent wage increase above cost-of-:living allowances in return for about $200 million in tax concessions and continuation of certain food subsidies. Real disposable income rose 3.5 percent in 1976 and is expected to increase 2.5 percent this year. Government concern about improving Norway's competitive position in world markets is justified by deterioration in the foreign trade account. The trade deficit probably will be at least $3.5 billion this year, up from last year's record $3.2 billion. In first quarter 1977, the volume of exports, excluding ships, was 1.3 percent below the same period last year, while import volume was up 7.3 percent. Brisk domestic demand will boost imports by more than enough to offset a pickup in oil and gas exports later in the year. Little if any reduction is expected from last year's record current account deficit of $3.7 billion. Norway's traditionally large surplus on services disappeared in 1976, and earnings from shipping, normally a key contributor to the surplus, are likely to remain depressed. Oslo is not anticipating a current account surplus based on oil earnings until 1979. Even though net foreign debt is equivalent to an alarming 29 percent of GNP, Norway is having little trouble borrowing against future oil revenues to cover its deficits. Besides a decision to slow North Sea development, victory for the nonsocialist coalition could lead to declining influence over?'wage negotiations. Acenter-right government would have fewer ties with the unions than the present socialist regime. It could hardly replace the influence and prestige of the current finance minister, Per Kleppe, who has masterminded the socialist government's efforts in wage deliberations. As a result, labor-management discord might increase. While a nonsocialist government would not extend state ownership of industry, we doubt it would liquidate current holdings. The coalition would concede that Uslo must continue to play a role in ailing industries, particularly shipbuilding. Changes in the status of Statoil and Noroil, the two state-owned oil companies, are unlikely because all parties favor active state participation in oil activities, (Confidential) 10 SECRET Approved For Release 2002/01/29 :CIA-RD 79B00457A0002 00 - Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 PORTUGAL: ANOTHER MILD DOSE OF AUSTERITY Lisbon last week an- nounced another belt-tighten- ing program aimed mainly at slowing the outflow of for- eign-exchange reserves. While the new program supplements steps taken earlier to limit im- ports and shift resources to ex- ports and investment, it is not bold enough to have much near-term impact. The govern- ment will continue to depend heavily on foreign credits as it gropes along the path of eco- nomic and political recovery. Economic Trends Disappointing Portuguese economic trends are mixed. On the plus side, industrial production re- portedly was 10 percent greater in first half 1977 than in the same 1976 period. We expect real GNP to grow 5.5 percent for the year, following an estimated increase of only 3.3 percent in 1976 and a drop of perhaps 7 percent in 1975. At the same time, about 15 percent of the labor force remains unemployed. Inflation has accelerated and may aver- age 35 percent for 1977, even though Lisbon this year has been generally successful in mP~zrgal: Industrial Production ~-lndex: I$73 _10~, seasonal adjusfed Pgal: Wage and Price Trends ~...,___m~_ __ '~. Industry an transportation only. 3. April- May. 513637 8-77 Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 limiting wage increases to 15 percent. Real wages have been eroded to prerevolutionary levels, fueling worker discon- tent but contributing to hopes for stronger revival of invest- ment. Dwindling foreign ex- change reserves remain Lis- bon's most pressing economic problem. Despite a doubling of emigrant remittances and a jump in tourist earnings, the current account deficit was $ 5 5 0 million in first half 1977, only $100 million less than in first half 1976. The trade deficit-boosted by a 48- percent rise in imports- reached $1,025 million in the first half. A continuing large deficit is assured because of this year's poor harvest-the result of bad weather and un- settled conditions in the farm sector. Reflecting the large payments imbalance and speculation on further devalua- tion of the escudo, foreign exchange reserves dipped to a meager $50 million in mid-July 1977 before being replenished by a $100 million loan from the Bank for International Settlements. Due to seasonally higher receipts from tourism and the renegotiation of several short-term credits, foreign. exchange reserves declined at a slower pace during the first half of August and stood at $120 million on 17 August. While Lisbon continues to hold gold reserves worth about $4 billion at the market price, much of this already has been pledged to secure loans. Early this summer, 11 countries, including the United States, West Germany, and Japan, agreed to provide $750 million in medium-term credits to Portugal aver the next 18 months. In return, Lisbon promised to work out a new economic stabilization program in collaboration with the International Monetary Fund (IMF). Disbursement of these bilateral loans is expected to begin some time in October, following the conclusion of negotiations with the IMF fora $50 million second 12 SECRET pprove or a ease - - Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 SECRET trarache loan. In August, Manufacturers Hanover Trust announced approval of a $30 million loan to Portugal, to be repaid out of the first disbursement of the US portion of the $750 million package. Before the National Assembly adjourned on 10 August, it gave final approval to several new measures aimed at encouraging investment. It allotted $2.6 billion to reimburse persons whose property had been nationalized, hoping to give business- men both the means and the will to invest. However, compensation is to be paid in low-interest government bonds over periods of up to 27 years, and the principal amounts fall far short of investor claims. To attract foreign investors, the National Assembly liberalized the foreign investment code. Other measures to promote investment include laws specifying the areas of economic activity to be left to the private sector and limiting the constitutionally guaranteed worker control over enterprises. The National Assembly also passed a controversial agrarian reform law, which replaces a law enacted by the left-wing provisional government in 1975. The new law is designed to limit Communist Party influence in southern Portugal, where large areas have been turned into collective farms. It gives broad discretionary powers to the Minister of Agriculture in determining the size of farming units and in con- trolling access to official sources of credit. The new law also raises the minimum size of farms subject to expropriation and guarantees that no landowner can be deprived of all his property. On 25 August, Prime Minister Soares announced a new package of austerity measures intended to supplement the devaluation and other steps taken last Febru- ary. The principal elements in the package are: ? A crawling peg regime for the escudo. The Bank of Portugal expects a downward adjustment of 1 percent monthly, beginning this month. ? An average rise in petroleum-based fuel prices of 25 percent. The Prime Minister warned that gasoline rationing will be imposed by yearend unless consumption falls drastically. ? Authorization for banks to open foreign currency accounts for non- residents. ? Credit controls and an average increase in interest rates-for both savings accounts and loans-of four percentage points. Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 SECRET ? A reduction in govermment expenditure o:f 10 to 20 percent. Cuts, to the extent they can be realized, presumably would fall most heavily on subsidy programs. ? Permission for firms threatened with bankruptcy to suspend certain costly provisions in labor contracts and dismiss redundant workers. The contractionary nature of the package is softened by provision for a National Development Fund to finance investment in key sectors. Limited Short-Term Impact The new austerity program is a step in the right direction, but it will have little impact in the short run. Moreover, expectations for the program must be tempered by recognition that Lisbon often does not fully implement unpopular measures. Even so, Portugal's recent success in arranging short-term loans should enable it to avoid a serious liquidity crunch until the big package of bilateral loans becomes available in the fall. By announcing a relatively moderate austerity program, the government un- doubtedly hopes to mute criticism from its vocal leftist opposition while mollifying foreign creditors. Since recent press campaigns had seemed to prepare the public for more severe measures, the government may have lost an excellent psychological opportunity to adopt a tougher, more effective program. Recent measures aimed at investment probably will add little impetus to the sorely needed recovery in this area. Most notably, the compensation law fal-s far short of investor hopes. In the agricultural sector, some provisions of the new agrarian reform law will be difficult to enforce, for instance, the return of some land to former owners. (Confidential Noforn) *~~*~ EGYPTIAN FINANCIAL GAP: REACHING A PEAK Despite a record financial gap* this year, there is cause for guarded optimism about Egypt's international :financial condition during the next few years. In the past, Arab aid to Egypt had been supplied in astop-and-go fashion-partly because of Cairo's resistance to economic and administrative reform. By reaching an agree- ment with the IMF that entails a politically acceptable measure of austerity, Cairo *This article is the eleventh in a series on the foreign financial gap faced by individual LDCs. In these articles, financial gap is defined as the current account deficit plus amortization of medium- and long-term debt. Shifts in short-term capital ordinarily are not included; in the case of Egypt, an exception was made because of their importance in Cairo's debt-service commitments. Previous articles have covered -the Ph>7ippines, South Korea, Argentina, Brazil, Taiwan, Peru, Jamaica, Zaire, and Chile. SECRET 1 September :1977 25X6 Approved For Release 2002/01/29 :CIA-RD~79B00457A001~ Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 SECRET stands a good chance of regularizing the flow of Arab aid. Rapidly increasing earnings from oil, the Suez Canal, and tourism will also help to alleviate foreign exchange contraints over the next several years. In these circumstances the Egyptian economy should be able to attract additional private investment and to maintain real GNP gains on the order of 6 percent annually during 1977-80. Pattern of Deficits, 1970-74 The Sadat government, which came to power in 1970, inherited an economy plagued with inefficient economic institutions, persistent fiscal imbalance, a chronic payments deficit, and a huge external debt. In an effort to court the West and open up new lines of credit, Cairo moved cautiously to modify Egypt's socialist economy by relaxing controls on foreign investment. Attempts to reduce the payments deficit, however, were scuttled because of the government's inability to impose the austerity measures needed to cut imports. As it was, real per capita GNP hardly increased between 1970 and 1973, while the current account deficit hovered at $500 million to $600 million annually. For a brief period following the 1973 war, Egypt was able to largely ignore its external financial problems. Arab affluence, Egypt's pivotal position in the Middle East, and Sadat's efforts to undo the Nasir years brought a record inflow of cash and credit, allowing Egypt to increase its imports sharply for the first time in a decade. Between 1972 and 1974, imports more than doubled and the financial gap swelled to $2 billion. By alleviating shortages of raw materials and intermediate goods, the rise in imports enabled Egyptian industry to substantially increase its capacity utilization rates. Reconstruction of the war-torn Suez Canal area proceeded rapidly, giving a strong push to investment spending, which rose from an average of only 12 percent of GNP in 1967-72 to about 18 percent of GNP in 1975. Real GNP growth increased from a high of 3-4 percent in the interwar period to 6-7 percent in 1975. Prelude to Reform, 1975-76 The honeymoon with Arab donors ended abruptly in 1975 when aid terms were substantially hardened. Although Arab disbursements for the year amounted to $2.5 billion, most of it came in the second half to forestall an impending liquidity crisis. To avoid another payments crunch in 1976, Cairo was forced to defer repayments on $450 million in short-term debt service obligations and draw down inventories of imported goods rather than place new import orders. As a result, the financial gap was held to $2.7 billion, while the current account deficit was kept to about $2.0 billion. Again the gap was filled only with the help of last minute Arab and Western emergency aid. 1 September 1977 SECRET Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 Egypt: Foreign Financial Gap 19761 19772 19782 Exportsa 1,570 1,800 2,400 2,800 Imports4 4,540 4,700 5,700 6;000 Net services 450 900 1,100 1,300 Current account deficit -2,520 -2,000 -2,200 -1,900 Debt amortization, med- ium and long term -570 Change in short-term indebtedness -260 240 -700 -200 Financial gap -3,350 -2,740 -3,700 -2,600 Foreign aid and other capital inflows 3,530 2,24:0 3,700 NA Errors and omissions -240 5456 NA NA Change in reserves 60 -45 NA NA Provisional. 2 Projected. 4Based on partner country trade data. 3Including Egyptian portion of oil export earnings. imports of purchases financed with private funds held abroad. 6Consists preponderantly of deferred payment of obligations. SNet service receipts have been adjusted upward to compensate for inclusion in In exchange for emergency aid to pay off arrears, the Sadat government in late 1976 agreed with Arab donors to more rapid implementation of economic reforms recommended by the IMF. The difficulties in imposing these tough measures were highlighted in January of this year when Cairo's badly bungled attempt to reduce consumer subsidies led to the worst urban riots in two decades. Armed with the threat of further civil disorder, the Sadat government subsequently negotiated a compromise standby IMF load agreement requiring: ? A de facto devaluation to be accomplished by a staged shift from the official rate of 1 Egyptian pound = $2.55 to the substantially lower "tourist rate" of $1.43. ? A modest reduction in existing price subsidies, exempting for the time being the most politically sensitive items such as wheat. ? Reduction in the public sector deficit by increasing revenue collection from higher income groups-through tax reforms, tariffs on luxuries, and a crackdown on tax evasion. Approved For Release 20 / - - Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 ? Decreased use of high-cost, short-term bank loans as a means of financ- ing the government's international obligations. To partially compensate for the decline in real wages inherent in the above terms, the agreement permits substantial pay increases for public sector workers and a rise in private sector wage ceilings. Living up to the agreement is proving difficult. Egyptian authorities, for example, had been counting on increased revenue collection and falling prices of imported wheat to reduce the size of subsidy cuts needed to comply with IMF expenditures guidelines. So far these improvements have not been sufficient to offset above-budget expenditure by some government departments during first half 1977: Other ways of reducing state spending-cutting the public sector labor force or curtailing investment-would be both politically and economically disruptive. Cairo is particularly reluctant to cut government investment spending, which re- mains the driving element in this year's expected 6-percent gain in real GNP. The 1977 Payments Outlook We expect the financial gap to approximate $3.7 billion this year, up $960 million from 1976. Most of the increase reflects higher debt amortization costs, particularly repayment of short-term debt accumulated last year. Under terms of the IMF standby agreement, Cairo is obligated to pay $700 million of this debt by yearend 1977 in addition to repaying $800 million in medium- and long-term obligations. Most of the outside support needed to meet these payments and cover the remainder of the financial gap has already been lined up. About $2.5 billion has been committed by Arab states and small additional Arab funds may be forth- coming. Another $1 billion or so will come from the US government and other sources. We project that Cairo will arrange sufficient financing to essentially cover the $3.7 billion gap. Despite a surge in imports, the 1977 current account deficit will probably be held to $2.2 billion, only slightly above the 19761evel. We expect the import bill to increase $1 billion and reach $5.7 billion, partly reflecting the need to rebuild inventories of industrial raw materials and intermediate goods drawn down during last year's exchange squeeze. Although price hikes associated with devaluation of the Egyptian pound will help contain growth in purchases of foreign goods, pent-up demand for consumer durables remains strong. Altogether, the levels we project of imports for the industrial sector should support real GNP gains of about 6 percent in 1977. Rapidly increasing earnings from oil, tourism, and Suez transit fees will offset most of the rise in import costs this year. Thanks to discovery of a new high-pressure areas in Amoco's July Field in the Gulf of Suez, Egyptian oil output has already risen one-third over the 1976 level of 330,000 b/d and may approach 500,000 b/d by 1 September 1977 SECRET 17 Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 yearend. As a result, net foreign exchange earnings from oil should increase about $300 million this year. Increased receipts from tourism plus another record increase in Suez Canal revenues will boost net service earnings this year to $ l . l billion compared with $900 million in 1976 and $450 million in 1975. The 1978 Outlook and Beyond The financial gap should begin to decline in 1978, dropping to perhaps $2.6 billion. The big change again will be in debt amortization costs, which should be cut roughly in half, to $700 million. A projected $300 million gain in net oil receipts will bring the current account deficit below $2 billion. for the first time since 1974. This assumes (a) Cairo prices the bulk of imports at the depreciated exchange rate, and (b) non-oil exports hold roughly steady. At this time, the major risk is that falling cotton prices will offset the gain in other non-oil exports, which are 17ene- fiting most from the currency change. As for financing we estimate that as much as $1.5 billion in aid commitments have already been lined up for the next year. This pattern of a diminishing external gap should hold through 1980..Aid requirements will tend to shrink faster than the overall gap, especially if foreign investment picks up in response to improvements in the Egyptian investment climate. In any case, foreign investment in oil, tourism, and other sectors that already have a high degree of foreign participation should continue to increase unless political upheaval or war intervenes. Cairo will also be benefiting from increased remittances from Egyptians working in other Arab countries. With foreign exchange constraints thus eased, the economy should be able to grow at about the 6-percent rate of 1975-77. Much of the growth will continue to be concentrated in the Suez area and other "frontier" regions on the Red Sea coast and west of Alexandria. Except in the case of tourism, growth in the interior will lag in view of obsolete infrastructure and limited private investment opportunities. Egypt's ability to sustain growth and payments gains beyond 1980 is question- able. Quite likely the postwar tourist and canal traffic booms will be leveling off by the end of the decade. If major new oil fields are not discovered quickly, growth in oil output also may come to a halt. Tourism, oil, and increased private remittances can help hold down the financial gap for several years. Nonetheless, Egypt over the longer run will have to develop new export markets :in order to achieve sustained growth of 6 percent and reasonable balance-of-payments stability. This in turn would require rapid expansion of export-oriented industries-preferably labol?-in- tensive-and accelerated development of the small :private sector. Although reform measures taken by the Sadat government over the past several years provide some incentives, more basic bureaucratic and institutional reforms are needed to spark development of a broad-based private sector. (Confidential) Approved For Release 2002/01/29 :CIA-RD 79B00457A000200010001-0 Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 SOVIET MERCHANT FLEET: LIMITED RESPONSE TO PRICE-CUTTING COMPLAINTS Faced with threats of retaliatory measures by US and other non-Communist governments, the USSR is taking limited steps to end alleged unfair price cutting by the Soviet merchant fleet. The penetration by cut-rate Soviet liner services of key trade routes linking the United States, Western Europe, and Japan has (a) boosted annual hard-currency earnings of the Soviet fleet to more than $500 million, and (b) taken business away from Western liner operators, who claim that Soviet rates do not cover costs. Complaints by Western owners have led governments in the United States, Western Europe, and Japan to consider legislation that would induce the Soviets to raise rates and to join more conferences.* Some proposed laws would reduce or end Soviet access to profitable routes if differentials between Soviet and conference rates remain substantial. In response, Moscow has narrowed the differentials in certain trades by raising its rates, but it has resisted pressures to join conferences. Most Soviet liner rates are now within 10 to 15 percent of conference rates, a range traditionally acceptable for independent lines. Growing Prominence of Soviet Ships in Liner Trade Soviet cargo liner services are the chief irritant to Western shipowners. The Soviet Union controls the third largest liner fleet in the world, exceeded only by the Greek and Japanese fleets. By mid-1977, the total number of Soviet international lines* * had grown to 72, with 26 involved in the cross trades, that is, moving cargoes between non-Soviet ports in competition with ships of other nations. Soviet ships now carry roughly 2 percent of world liner cargo. In managing its international liner services, the USSR has preferred to operate as an independent outside the conference system. By late 1976, only seven Soviet cargo lines were affiliated with conferences, and only one had joined a conference since 1973. The USSR has avoided conference membership because it lacks ships fast and modern enough to compete in terms of service, the principal form of competition among conference members. As nonmembers, the Soviets are not bound by conference rate structures and are free to compete by cutting rates. The pace and extent of the USSR's penetration of key world liner routes are best illustrated by its movement into US liner trades. Iiy focusing on shippers of *A conference is an association of liner owners operating in a given direction on a given trade route. The conference sets rates charged by its members and allots sailings among them. Other companies operating on the same route are referred to as "outsiders" or "independents." **A line is scheduled common carrier service for. movements of general cazgo on a prescribed trade route. Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 SECRET containerized cargo for whom speed of delivery is not the prime consideration, Soviet lines linking the United States with Western and Mediterranean Europe on the Atlantic and with Japan and other Asian trading partners on the Pacific have taken over almost 3 percent of US liner trade in the past six years. More than 95 percent of Soviet carriage in US trade consists of cross-trade goods between the United States and other trading partners (principally Western Europe, Japan, Hong Fong, and Southeast Asia). Soviet Carriage of Liner Cargo in US Trade 1 Derived from unrounded data. Western Response to Soviet Liner Practices Price-cutting tactics in Soviet liner operations have generated complaints by Western shipowners who have lost business to the Soviets. In response, various Western governments have been studying the problem and some have taken steps to check Soviet inroads. Legislation already passed in the Netherlands and under consideration ir1 the United States, West Germany, and Japan would curb Soviet lines serving those countries if excessively low rates persist. The Kremlin cannot afford to ignore these developments, which might jeopardize Soviet hard-currency earnings of a half billion dollars annually. The USSR has recently reduced its differentials on two of the three major liner routes where hard-currency earnings have been greatest, namely, on the North 20 1 September .1977 In Soviet Ships Total US Liner Trade (Million Tons) Tonnage (Million Tons) Percents 1971 44.2 0.2' 0.4 1972 44.6 0.4 0.8 1973 51..3 O.S' 0.9 1974 51.4 1.1 2.1 1975 44.3 1,0 2.3 1976 50.0 1.4, 2.9 Approved For Release 2002/01/29 :CIA- 4 7A000200010 0 - Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 SECRET Pacific between the United States and Japan and in Japanese/European trade. On the third major route, the North Atlantic, differentials are already within the 10 to 15 percent range traditional for nonconference operators. Efforts to get the Soviets to increase their participation in the conference system have not been as successful as those to narrow the gap between Soviet and conference rates. On the North Pacific In May 1977, the Soviet-owned Far East Steamship Company (FESCO) announced a general rate increase of about 15 percent on the North Pacific. This change brought FESCO's rates to within 10 percent of the higher conference rates. FESCO had previously eliminated some paper rates-charges for commodities not actually moving in the trade-and had altered commodity classifications to make rate increases easier. In July 1976, the Soviets had entered into an understanding with Chairman Bakke of the US Federal Maritime Commission (FMC) eventually to bring into conferences all their lines involved in US trade. Efforts to enroll key Soviet lines on the North Pacific nonetheless have been fruitless. For instance, at a series of four meetings with leading Pacific conference lines between October 1976 and January 1977, FESCO refused to place its Japan - US West Coast lines in conferences. One of the USSR's standard excuses for remaining outside of the North Pacific conferences is the inability of its ships to compete on equal terms. To illustrate, even though FESCO operates three of the USSR's best containerships (units of the Khudozhnik Saryan class), these 14,000-dwt, 21-knot vessels are inferior in both speed and size to the best Western containerships on the route. Furthermore, even these not-up-to-scratch containerships account for less than a third of the capacity assigned to the USSR's container lines on the route. Conventional cargo liners predominate. The North Atlantic is the second major trading area served by Soviet liners. The differential there between Soviet and conference rates has never deviated greatly from the 10 to 15 percent traditional for outsiders. At the same time, at least one other independent on the route is charging even lower rates. As a result, less pressure has been put on the Soviets to narrow the differential. In July of this year, Soviet plans to join seven conferences in the North Atlantic trade between the United States and Western Europe were scuttled. Two of the conferences were seeking FMC approval of a scheme that would have permitted Soviet lines to join the conferences while charging lower rates than other conference members. This two-tier arrangement-to last until Soviet equipment and service were 1 September 1977 SECRET Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 SECRET brought up to conference standards-had been challenged by the US Departments of Justice and Transportation as a deterrent to competition. Faced with drawn-out hearings and negotiations, the two conferences decided that pursuit of special status for the Soviets was no longer worth the time and expense. Because Soviet entry into the additional five conferences-originally agreed to at a meeting in Amsterdam with the major North Atlantic conferences in September 1976-was part of a package deal involving the other two conferences that have been challenged, the USSR will apparently not join them either. The two conferences that offered the Soviets special status control the most important segment of the trade-that between US east coast ports and Continental ports from Antwerp to Hamburg. The other five cover routes to Scandinavia, the United Kingdom, and France where traffic volumes are lower. The USSR was willing to accept regular status (and conference rates) from these five in return for special status in the two key conferences. The Soviets refused to join the Continental conferences without authorization to continue charging lower rates because ships of its Baltic Steamship Company assigned to North Atlantic service cannot compete with the ships of the conference lines. Most liner cargoes crossing the Atlantic are containerized. The conference ships assigned are fast, modern, cellular containerships tailored for the trade. Almost two-thirds of the Soviet tonnage on the route consists of slow, inefficient, conventional cargo liners. The other third consists of advanced roll-on/roll-off ships capable of carrying containers but designed primarily for vehicles and other wheeled cargo. Although transit times of these ro/ro ships are competitive, their growing involvement with vehicular cargoes reduces their ability to compete with containerships. Between Japan and Europe As for trade between Japan and Europe, Soviet rate cutting an the Trans-Siberian Landbridge-a through service for containerized cargo moving between Western Europe and Japan using both Soviet railways and container lines-affects conference lines on the all-sea route. I:n the past, the Landbridge has attracted cargoes with rates as much as 40 percent below those of the all-sea conference lines. Last April, however, its rates were raised to within 10 percent of conference rates. A subsequent rise in conference rates widened the differential again, but it remains smaller than at any time prior to April 1976. Soviet lines will generally remain outside of the conference system, charging rates 10 to 15 percent below conference rates, so long as (a) the Soviet liner fle;ets in the North Atlantic and North Pacific trades remain uncompetitive or (b) the Soviets 22 SECRET Approved For Release 2002/01%29 :CIA-R--D~79B - Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 SECRET cannot arrange for a two-tier pricing system within the conferences. During talks with British officials in London in June, Soviet Minister of the Maritime Fleet Guzhenko told reporters that FESCO container lines on the North Pacific would remain independent until all of their conventional ships have been replaced by modern containerships. With deliveries of such ships running between one and two per year, FESCO may not join the conferences until 1979. Despite plans to put cellular containerships on the North Atlantic routes, membership in those conferences may come no sooner. The USSR will have a strong incentive to keep most of its rates within i 5 percent of conference rates to preserve the vital hard-currency revenues accruing from participation in the key trades that link the United States, Western Europe, and Japan. Rate cutting in excess of this figure would only mean increased retaliatory measures, a development Moscow cannot afford, especially at this time of ahard-currency squeeze. (Confidential) Sino-Soviet Trade: No Big Deals Both the value and the volume of Sino- Soviet trade are likely to fall this year. Soviet statistics for first half 1977 show two-way trade running at about 75 percent of the level for the corresponding period in 1976. With the recent stabilization of economic policy in Peking, both Chinese imports from and ex- ports to the USSR probably will pick up for the remainder of the year. Indeed, Chinese and Soviet diplomats have stated privately that trade will be only slightly lower than in 1976. The Chinese have not received any So- viet aircraft since second half 1976, when the Million US $ Exports To Imports From 1975 1st half 42 39 2d half 108 90 1976 1st half 85 86 2d half 93 152 1977 1st half 66 60 last known contract (for AN-26 and AN-30 transport aircraft) was fulfilled. Last year the Chinese informed the Soviets that they would not buy any aircraft or power-generating equipment from the USSR, items that in the past have comprised about one-third of Soviet exports to China. A recent report suggests that the Chinese may buy three more AN-30s-a very small number compared with previous years. Peking probably cut purchases because the Soviets demanded too high a price. 1 September 1977 SECRET Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 In 1976, the value of trade (measured in current YJS dollars) increased about 50 percent over 1975. A trade imbalance developed with Soviet exports-$238 million- substantially exceeding Chinese exports-$178 million. The real value of trade (measured in 1970 US dollars) increased only about 15 percent over 1975, with the entire increase attributable to higher Soviet exports. The volume of Chinese exports almost certainly declined; transportation tieups in northeast China resulting from the Tangshan earthquake delayed planned deliveries of Chinese goods to the Soviet border in the second half of the year. (Secret Noforn) Guyana: Economic Problems Mount Guyana's economic difficulties, brought on by a foreign exchange shortage, have worsened markedly in recent weeks. Mounting industrial layoffs and labor strife, including a sugar strike called last week by the .Marxist opposition, have boosted the unemployment rate- beyond 20 percent and spell growing political trouble for Prime Minister Burnham. Depressed export earnings have shown little improvement. Continuing low sugar prices are overshadowing the gains from a record spring rice crop and slowly rising bauxite sales. We expect that existing import restrictions will cut imports by 16 percent from last year, reducing the record current account deficit by about two-fifths in 1977, to roughly $105 million. Even though the current account deficit is smaller, Guyana this year faces a foreign payments gap of about $50 million, as yet uncovered by foreign funds. Cross foreign exchange holdings reportedly are down to less than $20 million-only three weeks' import cover-and will provide little help. Hope is rapidly fading for $45 million from Trinidad and Tobago, which recently canceled a similar offer to Jamaica. Unless Guyana can garner additional foreign financing, tougher import controls will be necessary. The result would be a further economic slowdown and more bitter labor strife. (Confidential) * * * ~ Publications of Interest* OPEC Countries: Size and Distribution of Official Foreign Assets on 31 December 1976 (ER 77-10464, August 1976, Secret Noforn) This memorandum examines the pattern of investment by OPEC countries during 1976 and presents detailed estimates of the distribution of official foreign assets by type of investment, location, and currency denomination. 25X'~A Approved For Release 2002/01/29 : CfA-l~`~77 Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 OECD Countries: Medium-Term Economic Prospects and Some Alternative Policy Scenarios (ER 77-1 OS 17, August 1977, Confidential) This report discusses likely trends in GNP, inflation, unemployment, and balance of payments in OECD countries during 1977 and 1978. Emphasis is placed on economic activity and government policy in the major foreign developed countries. 1 September 1977 SECRET 25X6 Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 Secret Secret Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 ECONOMIC INDICATORS Prepared by The Office of Economic Research ER EI 77-035 1 September 1977 Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 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 Gift 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 Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 1. The Economic Indicators 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 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 are revised every few months. The most recent date of publication of source notes is 20 April 1977. Comments and queries regarding the Economic Indicators are welcomed. Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 INDUSTRI~p~I~~~~~g~/01/29 :CIA-RDP79B00457A000200010001-0 INDEX: 1970=100, seasonally adjusted 1974 1975 1976 A-2 Semilogarithmic Scale Approved For Re-lease 2002/ - - Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 United Kingdom Italy Percent AVERAGE ANNUAL Change GROWTH RATE SINCE from LATEST Previous 1 Year 3 Months MONTH Month 1970 Earlier Earlierl JAN APR JUL OCT 1976 Percent AVERAGE ANNUAL _ Change GROWTH RATE SINCE from LATEST Previous 1 Year 3 Mon[hs MONTH Month 1970 Earlier Earlierl ~. United States JUL 77 0.5 3.7 6.4 10.4 United Kingdom JUN 77 -5.1 O.1 O..z - 5.6 ~lapan JUN 77 0.5 3.9 3.4 3.0 ! Italy JUN 77 -7.2 2.7 3.a -16.9 '!; West Germany JUN 77 1.8 2.2 3.6 -6.6 Canada JUN 77 0.3 4.1 4. 1.4 France JUN 77 2.4 3.6 4.1 -6.1 i Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 roved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 U N E M PLO I~A E NT PERCENT OF LABOR FORCE United States JAN APR JUL OCT JAN APR JUL OCT APR JUL OCT 1974 APR JUL OCT JAN ApR JUL OCT JAN APR JUL OCT Approved For Release 2002/ - - I I I Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 United Kingdom Italy (quarterly) JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT lAN APR JUL OCT 1973 1974 THOUSANDS OF PERSONS UNEMPLOYED JAN APR JUL OCT' JAN APR JUL OCT 1976 1977 1 Year 3 Months LATEST MONTH 1 Year Earlier 3 Months Earlier LATEST MON TH Earlier Earlier United Kingdom AUG 77 1,414 1,309 1,316 United States JUL 77 6,744 7,406 6,737 Japan MAY 77 1,140 1,120 1,030 Italy 76 IV 777 699 176 Canada JUN 77 847 722 856 West Germany JUL 77 1,049 1,050 1,009 _ France JUL 77 1,180 950 1,039 'NOTE: Data are seasonally adjusted. Unemployment. rates for France are estimated. The rates shown. for Japan, Italy and Canada are 15 pelrcentnPespect vely endtthose for West Germany dec~eas d by 20percentitodbe roughly comparable witheUS ratesercent and Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 DQMESTI~p~qu~~~A,l-~lease 2002/01/29 :CIA-RDP79B00457A000200010001-0 1-~ t INDEX: 1970=100 Wholesale iWholesale price indexes cover industrial goods. Approved For Release 2002/01/29 :CIA-RD 79B 0 - Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 United Kingdom Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 Approved For Release 2002/0 - GNP ' Constant Market Prices Constant Prices Average Average Annual Growth Rate Since Anr;ual Growth Rate Since Percent Change _ Percent Change -. Latest from Previous 1 Year Previous - Latest from Previous 1 Year 3 Months Quarter C!uarter 1970 Earlier Quarter Month Month 1970 Earlier Earlier' United States 77 II 1.6 3.2 4.7 6.4 United States Jun 77 - 0.2 3.2 4.1 3.3 Japan 77 I 2.5 5.5 4.9 10.2 Japan Apr 77 3.1 10.7 6.4 16.0 West Germany 76 IV 1.8 2.5 4.5 7.3 West Germany Jun 77 0.9 2.4 4.4 -8.7 France 76 IV 0 3.9 4.9 0 France May 77 - 1.1 - 1,4 - 7.1 - 13.2 United Kingdom 76 IV 2.1 2.0 2.6 8.8 United Kingdom 1ul 77 3.6 1.2 - 1.2 4.6 Italy 76 IV 4.8 3,4 9.4 20.6 Italy Mar 77 0.2 2.9 -0.3 16.3 Canada 76 IV -0.6 4.8 3.4 -2.5 Canada May 77 -0.8 4,2 1.8 - 13.6 ' Seasonally adjusted. ' Seasonally adjusted. ' Average _for latest 3 months compared with average for previous 3 mon ths. FIXED INVESTMENT' WAGES: IN MANUFACTURING' Non-residential; constant prices Average Annul Grawrh Rare since Average Percent Change _ Annual Growth Rate Since Latest from Previous 1 Year 3 Months Pertenf Change Period Period 1970 Earlier Earlier' Lofesf from Previous 1 Year Provious Quarter Quarter 1970 Earlier quarter United States Jul 77 0.6 7.5 7.6 8.1 United States 77 II 2.2 2.1 9.6 9.0 Japan May 77 1.4 17.3 10.6 7.3 Japan 77 I 0.2 0.9 3.9 0.8 West Gerrnany 77 I 4.0 9.6 7.7 17.1 West Germany 76 IV 3.3 1.1 5.0 13.8 France 77 I 2.3 14.1 13.9 9.5 France 75 IV 8.8 4.2 2.9 40.1 United Kingdom Jun 77 0.3 15.7 3.4 3.6 United Kingdom 77 I -2.4 -0.2 2.0 -9.2 Italy May 77 5.3 21.1 29.4 33.2 Italy 76 IV 10.6 3.1 15.7 49.6 Canada Apr 77 0.8 11.4 11.6 13.4 Canada 76 IV 8.5 6.8 5.1 38.7 'Hourly earnings (seasonally adjusted) for the United Stat es, Japan, and Canada; hourly wage rates for others. Wesf German and F rench data refer to the beg inning of t he quarter. ' Seasonally adjusted. 'Average for latest 3 months compared with that for previews 3 months. MONEY MARKET RATES Pertenf Rate of Interest 1 Year 3 Months 1 Month Representative rates - Latest date Earlier Earlier Earlier United States Commerical paper Aug 24 5.89 5.35 5.50 5.38 Japan Call money Aug 26 5.75 7.25 5.38 5.75 West Germany Interbank loans (3 months) Aug 24 4.06 4.50 4.33 4.12 y France Call money Aug 26 8.25 9.56 9.00 8.63 United Kingdom Sterling interbank loans (3 months) Aug 24 6.60 11.08 7.83 7.74- f Canada Finance paper Aug 24 7.47 9.40 7.13 7.28 Eurodollars Three-month deposits Aug 24 .6.36 5.63 6.70 5.78 Approved For Release 2002/01/2 I - - EXPORT PR~~roved For Release 2002/01/29: IAESI~IY6?r~[~S7A000200010001-0 US $ National Currency Average Average Annua l Growth Rata Since Annual Growth Rate Since Pe rcent Change Percent Change Latest fr om Previous 7 Year 3 Months Latest fr om Previous 1 Year 3 Months Month Month 1970 Earlier Earlier Month Month 1970 Earlier Earlier United States Jun 77 - 0.4 9.8 5.6 2.5 United States Jun 77 - 0.4 9.8 5.6 2.5 Japan Jun 77 2.0 10.8 14.9 10.1 Japan Jun 77 0.4 6.5 4.7 - 1.0 West Germany Jun 77 -0.5 11.3 11.6 5.4 West Germany Jun 77 -0.5 4.5 2.0 -0.9 France May 77 0.9 11.3 7.1 3.6 France May 77 0.6 9.5 12.8 1.3 United Kingdom Jul 77 0.6 10.6 12.9 11,1 United Kingdom Jul 77 0.4 16.0 17.0 9.7 Italy Mar 77 0.5 11.3 16.9 16.7 Italy Mar 77 - 1.1 16.8 22.9 17.1 Canada Apr 77 2.9 10.1 10.9 24.7 Canada Apr 77 2.9 8.5 7.2 7.1 IMPORT PRICES National Currency OFFICIAL RESERVES Average Annual Growth Rate Since Billion US S Per cent Change Latest Month latest from Previous 1 Year 3 Months 1 Year 3 Months Month Month 1970 Earlier Earlier End of Billion US $ Jun 1970 Earlier Earlier United States Jun 77 - 1.4 13.5 7.9 2.1 United States Jun 77 19.2 14.5 18.5 19.1 Japan Jun 77 -0.8 10.9 0.3 - 14.8 Japan Jun 77 17.4 4.1 15.4 17.0 West Germany Jun 77 -0.1 4.4 1.7 3.0 West Germany May 77 34.3 8.8 33.6 34.5 France May 77 - 0.5 10.5 17.4 2.5 France Mar 77 9.8 4.4 11.1 9.7 United Kingdom Jul 77 0.7 19.7 15.7 6.6 United Kingdom Jun 77 11.6 2.8 5.3 9.7 Italy Mar 77 - 1.9 21.2 24.6 25.8 Italy Sep 76 5.1 4.7 5.8 5.2 Canada Apr 77 1.1 9.3 8.5 10.3 Canada May 77 5.2 4.3 5.8 5.3 CURRENT ACCOUNT BALANCE ' BASIC BALANCE ' Current and Long-Term-Capital Transactions Cumulati ve (Million US $) Latest Cumulat ive (Million US $) Period Mill ion US 8 1977 1976 Change Latest Period Million US $ 1977 1976 Change United States z 77 I -4,317 -4,317 540 -4,857 United States No longer published ~ Japan Jul 77 1,530 4,637 1,242 3,395 Japan Jul 77 1,340 3,493 1,629 1,864 West Germany Jul 77 -566 1 ,618 1,188 429 West Germany Jun 77 -630 - 1,256 1,105 -2,361 France 77 I - 1,660 - 1 ,660 1,316 -345 France 77 I - 1,351 - 1,351 -2,015 663 United Kingdom 77 I -773 -773 -502 -271 United Kingdom 76 IV -277 N.A. N.A. N.A. Italy 76 IV -882 N.A. N.A. N.A. Italy 76 III 779 N.A. N.A. N.A. Canada 77 I - 1,624 - 1 ,624 1,911 287 Canada 77 I -583 -583 882 - 1,465 'Converted to US dollars at the current market rates of exchange. ' Converted to US doll ars at the currant market rates of exch ange. ' As recommended by the Advisory Com mittee on the Presentation of Balance of Payments ' Seasonally adjusted. Statistics, fha Department of Commerce no longer pu blishes a basic balance. EXCHANGE RATES TRADE-WEIGHTED EXCH ANGE RATES ' Spot Rate As of 26 Aug 77 Percent Change from Percent Change from As, of 26 Aug 77 US $ 1 Yeor 3 Months 1 Year 3 Months Par Unit 19 Mar 73 Earlier Earlier 19 Aug 77 19 Mar 73 Earlier Earlier 19 Aug 77 Japan (yen) 0.0037 - 1.53 8.08 3.74 0.03 United States 6.06 1.27 -0.09 -0.19 West Germany 0.4321 22.02 9.03 1.76 0.56 Japan 4.25 10.25 3.74 -0.15 (Deutsche mark) West Germany 25.76 6.83 1.24 0.26 France (franc) 0.2040 - 7.46 0.91 0.89 0.24 France - 7.86 - 2.42 0.35 - 0.12 United Kingdom 1.7418 - 29.22 - 1.59 1.40 0.09 United Kingdom - 29.85 - 3.25 1.17 - 0.19 (pound sterling) Italy - 38.69 - 7.74 - 0.34 - 0.20 Italy (lira) 0.0011 -35.93 -4.55 0.44 0.18 Canada -4.69 -8.87 -2.25 0.04 Canada (dollar) 0.9307 -6.72 -8.44 - 1.95 O.IU ~ Weighting is based on each listed count ry's trade wi th 16 other i ndustrialized countries to reflect the competitive impact of exchang e rate varia tions among the major currencies. Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 Developed Countries: Direction of Trade' (Continued) Exports to (f.o.b.) Imparts from (c.i.f.) Big Other Com- Big Other Com- World Seven OECD OPEC' munist Other World Seven OECD OPEC z munist Other ITALY 1974 ........... . . 30,261 13,796 7,681 2,427 1,721 4,636 40,977 18,003 7,216 9,313 1,944 4,501 1975 ............. 34,230 15,345 7,468 3,710 2,895 4,812 37,793 17,072 6,367 6,993 2,304 5,057 1976 ............. 35,364 16,698 8,276 4,165 2,591 3,634 41,789 18,585 7,759 8,124 3,000 4,321 1st Qtr ........ 7,398 3,513 1,713 811 597 764 9,092 4,063 1,708 1,816 608 897 2d Qtr ........ 8,705 4,157 2,040 958 623 927 10,716 4,786 1,918 2,106 744 1,162 3d Qtr ........ 9,398 4,808 2,191 1,056 656 990 10,335 4,497 1,860 2,029 792 1,157 4th Qtr ........ 9,863 4,523 2,332 1,340 715 953 11,646 5,239 2,273 2,173 856 1,105 1977 1st Qtr ........ 9,668 4,520 2,264 1,236 655 993 11,299 4,964 2,130 2,166 720 1,319 CANADA" 1474 ............. 32,904 27,092 2,004 548 659 2,601 33,309 26,727 1,777 2,698 257 1,850 1975 ............. 32,201 26,582 1,689 700 1,153 2,077 35,435 27,887 1,621 3,174 310 2,443 1976 ............. 36,840 30,783 2,077 928 1,259 1,793 38,705 31,118 2,034 3,154 369 2,030 1st Qtr ........ 8,422 7,103 381 167 328 443 9,404 7,572 473 868 87 404 2d Qtr ........ 9,964 8,408 480 184 346 546 10,244 8,174 683 930 96 361 3d Qtr ........ 9,112 7,465 576 270 349 452 9,378 7,417 473 715 96 677 4th Qtr ........ 9,342 7,807 640 307 236 352 9,679 7,955 405 642 90 587 1977 1st Qtr ........ 9,670 8,201 524 230 231 484 10,025 8,164 406 772 90 593 'Data are unadjusted. Because of rounding, components may not add to the totals shown. z Including Gabon. Import data are f.a.s. Import data are f.o.b. Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 FOREIGN TRADE BILLION us $, f.o.b., seasonally adjusted United States 14.0 12.0 Japan Approved For Release - - Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 United Kingdom Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 FOREIGN TRADE PRICES IN US $1 United States West Germany INDEX: JAN 1975 =100 lExport and import plots are based on five month weighted moving averages. A-14 pproved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 United Kingdom Italy Canada Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 ApproSEIECTEDs DE~L~F'I~RD~7~~o~~~~~g2ooo10001-0 MONEY SUPPLY' INDUSTRIAL PRODUCT ION ' Average Annual Growth Rata Since Average Percent Change Annual Growth Rate Since latest from Previous 1 Year 3 Months Percent Change Month Month 1970 Earlier Earlier' Lofesf from Previous 1 Year 3 Months Period Period 1970 Earlier Earlier ~ Brazil Jan 77 - 3.1 35.5 28.2 49.6 Brazil 76 II 0.1 11.0 10.7 0.4 Egypt Apr 77 1.2 18.4 23.0 45.3 , India Feb 77 3.5 5.5 6.9 18.7 India Mar 77 1.8 12.3 20.5 16.6 South Korea Jun 77 8.3 22.7 14.3 21.6 Iran Mar 77 14.5 30.4 52.2 41.1 Mexico Apr 77 0.6 5.6 0.4 17.5 South Korea May 77 3.4 3'1.3 35.0 59.6 Nigeria 76 IV 0.2 11.3 9.0 0.7 Mexico Jun 76 -0.3 17.0 16.6 19.6 Taiwan Apr 77 1.9 14.9 12.7 -8.4 Nigeria Feb 77 5.9 3.5.9 54.8 65.1 Taiwan Mar 77 -0.2 24.4 21.2 24.0 ' Seasonally adjusted . Thailand Feb 77 4.0 13.6 17.1 12.9 ~ Average for latest 3 months comp ared with average for previous 3 months . Seasonally adjusted . ' Average for latest 3 months comp ared with average for previous 3 months. CONSUMER PRICES ` WHOLESALE PRICES Average Average Annual Growth R ate 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 Apr 77 3.3 26.6 44.4 Brazil Apr 77 4.3 27.3 45.9 India Mar 77 0.6 8.2 9.1 India Mar 77 0.2 9.3 11.9 Iran May 77 2.6 12.4 29.3 Iran May 77 1.8 11.0 22.2 South Korea Jun 77 1.0 14.6 10.1 South Korea Jun 77 0.8 16.6 9.1 Mexico Jun 77 1.2 14.7 32 5 . Mexico Jun 77 1.0 16.5 50.9 Nigera Jan 77 4.5 15.0 13.5 Taiwan May 77 0 9.2 4.4 Taiwan May 77 0.4 10.4 3.0 Thailand Mar 77 0.9 10.0 2.7 Thailand Mar 77 0.6 8.4 3.0 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 3 Months Brazil Feb 77 5,873 1,013 3,667 5,139 Period Period 1970 Earlier Earlier Egypt Apr 77 405 158 375 389 Brazil Oct 76 -0.4 14.5 26.5 77.0 India May 77 4,431 1,006 2,258 3,481 India Sep 76 -3.8 9.2 b.4 -b.b Iran Jun 77 11,025 208 8,621 10,355 Iran May 77 0 36.5 18.6 0 South Korea May 77 3,519 602 1,911 2,872 South Korea 77 I 1.7 8.8 11.9 6.9 Mexico Mar 76 1,501 695 1,479 1,533 Nigeria May 76 -0.1 33.2 8.2 6.6 Nigeria May 77 4,740 148 6,087 4,937 Taiwan May 77 0.4 12.3 9.4 14.7 Taiwan Apr 77 1,289 531 1,146 1,581 Thailand Dec 76 2.0 13.3 13.1 77.7 Thailand Jun 77 2,017 978 1,896 1,981 Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 FOREIGN TRADE, f.o.b. Latest 3 Months Percent Change from Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 A ppr~oved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 AGRICULTURAL PRICES MONTHLY AVERAGE CASH PRICE 24 AUG 2.32 17 AUG 2.28 JUL 77 - 2.35 AUG 76 3.21 5 $ PER BUSHEL Kansas City Na. 2 Hard Winter Chicago No. 2 Yellow '250 1.24 AUG 1.24 AUG -- 1973 1974 1975 1976 19 II 0 0 1973 1974 1975 1975 19 II 24 AUG ~ 5.39 17 AUG ~ 5.36 JUL 77 6.33 AUG 76 6.30 1.O $ PER POUND Memphis Middling 1 1/i6" 24 AUG ' 0.5335 17 AUG :0.5255 JUL 77 ' 0.5938 AUG 76 - 0.7536 24 AUG 7.55 17 AUG 7.50 JUL 77 7.36 AUG 76 9.99 ;;1,000 I I 1-2a AuG 1 1 n n COFFEE/TEA $ PER METRIC.TON 400 q PER POUND TEA COFFEE 2,000 London Auction Milds Washed - "" 25 JUL - 84.7 24 AUG 18 JUL 92.7 Y7 AUG 300 JUN 77 142.00 JUL 77 '.:1,500 JUL 76 80.00 AUG 76 0.5360 250 1,000 24 AUG 1.77 - 17 AUG 1.77 JUL 77 2.07 I AUG 76 2.86 2 1.82 1973 1974 1975 1976 19~I 0 50 205.00 205.00 242.88 153.05 $ PER METRIC TON 6,000 Approved For-Release - Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 37.5 $ PER HUNDRED JVEIGHT. No, 2 Medium Grain, 4% Brokens, f.o.b. mills, Houston, Tex. 22 AUG 14.75 30.0 _i: _ M` 15 AUG 14.75 COCOA 325 ~ PER POUND 80 II 1973 1974 1975 1976 1977 SOYBEAN OIL $ PER METRIC TON $ PER POUND 7,000 0.5 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. JUL 77 15.25 AUG 78 14.50 SOYBEAN MEAL $ PER TON 800 Cr~de, Tank Cars, f.o.b. Decatur 400' 24 AUG - 137.50 17 AUG 133.00 JUL 77 163.35 AUG 76 175.27 $ PER METRIC TON __ __ - .400 139.79 1-24 AUG ?200 160' Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 INDUSTRIAL MATERIALS PRICES M?NTHLY AVERAGE CASH PRICE 40 1973 1974 1975 1-24 AUG + _LI 200 1974 1975 1971!3 1977 1-24 AUG ~ I 11,000 1976 1977 10' 24 AUG 82.2 17 AUG 62.5 JUL 77 62.8 AUG 76 g0.9 PER METRIC TON $ PER TROY OUNCE ...._.,150 250. -=125 225 LEAD 45 ~ PER POUND $ PER METRIC TON 1'000 24 AUG - 25.1 - 31.0 17~AUG 24.6 31.0 JUL 77 25.3 31.0 AUG 76 21.9 - 25.0 -600 gas ' 25 '> 1,500 20 ' 6a.a 52.6 15 Y00 200 -- -- II 19II7 0 100 1973 1974 1975 1976 1977 nnP usD 24 AUG 167.0 145.6 17 AUG 167.0 :146.1 JUL 77 167.0 149.5 AUG 76 .180.0 157.9 pprove-kf~For Release-2002/01/29 :CIA-RDP79B00457A000200010001-0 Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 ALUMINUM Major US Producer E per pound 53.00 48.00 47.09 40.43 US STEEL Composite $ per long tan 357.08 339.27 327.00 289.23 IRON ORE Non-Bessemer Old Range $ per long ton 21.43 20.97 20.05 18.75 CHROME ORE Russian, Metallurgical Grade $ per metric ton 150.00 150.00 150.00 142.50 CHROME ORE S. Africa, Chemical Grade $ per long ton 58.50 42.00 42.00 42.70 FERROCHROME US Producer, 66-70 Percent E per pound 43.00 43.00 44.55 53.50 NICKEL Malor US Producer Cathode $ per pound 2.20 2.41 2.20 2.01 MANGANESE ORE 48 Percent Mn $ per long tan 72.00 72.00 72.00 67.20 TUNGSTEN ORE 65 Percent W03 $ per short ton 9,788.68 10,015.64 7,166.26 5,184.16 MERCURY NY $ per 76 pound flask 115.00 167.55 110.00 140.00 SILVER LME Cash t per troy ounce 440.13 453.72 425.61 493.94 GOLD London Afternoon Fixing Price $ per troy ounce 143.84 136.31 109.65 163.08 LUMBER INDEX6 160 CPYRGHT 10 1973 100 -1973 1974 Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 1Approximates 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 US. 3As of 1 Dec 75, US tin price quoted is "Tin NY Ib composite." 40uoted on New York market. 5S-type styrene, US export price. 6This 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 Pittsburgh 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. 25X1A gpproved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0 Next 48 Page(s) In Document Exempt Approved For Release 2002/01/29 :CIA-RDP79B00457A000200010001-0