ECONOMIC INTELLIGENCE WEEKLY REVIEW

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79B00457A000300070001-3
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 51
• Document Creation Date: December 16, 2016
• Document Release Date: September 20, 2004
• Sequence Number: 1
• Publication Date: December 8, 1977
• Content Type: REPORT

M
AFor Release 2004/10/08: CIA-RDP79B00457A000 -
Assessment 25X1
Center
Economic Intelligence
Weekly Review
ER EIW 77-049
8 December 1977
COPY N?_ 613
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Korea: South Pulling Ahead in Economic Race with North . . . . . . . . .
1
The export-oriented South Korean economy has been outpacing the less
dynamic North Korean economy in raising labor productivity, absorbing
modern technology, and building up international financial strength.
West Germany: Slow Export Growth Casts Shadow on Economy . . . . . .
5
Unexpectedly low growth in exports largely explains the failure to reach
the 1977 GNP growth target.
Peru: Foreign Payments Crunch . . . . . . . . . . . . . . . . . . . .
9
Delays in reaching the recent financial agreement with the IMF and in
arranging international bank credits have caused a drawdown in foreign
reserves to the equivalent of only several days' imports.
China: Snags in Industrial Recovery . . . . . . . . . . . . . . . . . . .
12
The Hua government will need at least another year to untangle the
problems of the industrial sector.
Rhodesia: The Economic Decline and White Morale . . . . . . . . . . . .
14
Three straight years of deepening recession have stifled investor and
consumer confidence and have helped push emigration to a net of 1,000
whites a month.
World Tungsten Market: Prices To Ease As Supply Grows . . . . . . . . .
18
Notes
New mines will boost Free World supplies next year, while demand will
reflect the lethargic pace of global economic growth.
USSR: Interest in Soybean Purchase . . . . . . . . . . . . . . . .
22?
Canton Fall Fair: Moderate US Business Gains . . . . . . . . . . . .
22
Model Finds UNCTAD Copper Stock Too
Costly . . . . . . . . . . .
23
i
SECRET
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KOREA: SOUTH PULLING AHEAD IN ECONOMIC RACE WITH NORTH*
Over the past decade the export-oriented South Korean economy has clearly outpaced the
less dynamic North Korean economy in raising labor productivity, absorbing modern
technology, and building up international financial strength. While North Korea's real GNP
was doubling between 1965 and 1976, real GNP in the South more than tripled. As a result,
South Korea recently surpassed the North in per capita GNP, an advantage P'yongyang had
held since partition in 1945. The North's total GNP of $10 billion is less than half the $22
billion of the South (in 1975 prices). More importantly, the economic gap in South Korea's
favor will widen substantially over the next five years.
Comparative Economic Indicators
Item
Unit
North Korea
South Korea
North Korea'
South Korea
GNP
Billion 1975 US $
6.0
11.8
10.0
21.6
Population
Million persons
(Midyear)
14.2
32.2
17.0
35.9
GNP per capita
1975 US $
425
365
590
600
Industrial output
Production of:
Index: 1970=100
100
100
225
357
electricity
Billion kWh
16.5
9.2
22.0
23.1
coal
Million tons
27.5
12.4
40.0
16.4
crude steel
Million tons
2.2
0.5
2.75
2.7
fertilizer
Million tons (nu-
trient content)
0.3
0.6
0.6
0.8
cement
Million tons
4.0
5.8
5.0
11,9
textiles (ex-
eluding
yarn)
Million square-
meters
418
329
450
936
refined petro-
leum prod-
ucts
Million tons
0
9.0
1.0
17.8
Exports (f.o.b.)
Million US $
315
835
560
7,715
Imports (c.i.f.)
Million US $
395
1,984
820
8,774
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Industry: The South's Biggest Edge
South Korea's economic surge over North Korea has been especially pronounced in the
industrial sector. Industrial production has grown almost 25 percent annually since 1965,
nearly double the rate of the North and perhaps the fastest in the world. Production has been
geared to the export market, with clothing, footwear, and electronics the leading growth
industries.
Heavy industry currently is receiving top priority and is gradually increasing its share of
total output. South Korea has become an important shipbuilding nation and is making
considerable progress in the steel, petrochemical, and fertilizer industries. A major effort to
expand the machine-building sector is under way. This effort is featured by the construction of
a huge 100-plant complex near Pusan, which is to produce $2 billion annually in industrial
machinery, specialty steels, and industrial components. Because of its heavy dependence on
imported petroleum, South Korea has also started an ambitious nuclear energy program.
A reconstruction of official North Korean statistics indicates that industrial production in
the North grew about 13 percent annually between 1965 and 1976. Growth has been erratic,
with zero or negative rates in four of the past 11 years. Heavy industry and mining continue to
dominate the economy. North Korea produces more coal, iron ore, nonferrous metals, machine
tools, and military hardware than does the South. It produces approximately the same amount
of steel but a little less electric power. Other significant industries in the North include cement,
fertilizer, and textiles; production in all these industries is well below output in the South.
Heavy use of coal and hydroelectric resources has minimized the need to develop petroleum
and related industries.
Why the South Has Outperformed the North
Many reasons may be cited for the South's edge in performance over the past decade.
These include faster gains in labor productivity, a smaller defense burden, greater efficiency in
the use of capital, and exposure to the discipline of international markets.
Labor Productivity
Labor productivity has grown much more rapidly in the South than in the North. That is,
South Korea's labor force and bureaucracy now far exceed those of North Korea in technical
competence. The North Korean educational system spends about as much time imparting the
ideology of Kim 11-song as in instilling practical knowledge. In contrast, the economic planners
and top businessmen in South Korea are well educated, many with advanced degrees from US
universities. Moreover, South Korea has extensive training facilities for upgrading technical
skills of a diligent labor force. Firms with more than 200 employees, for example, are required
to have at least 15 percent of their employees in training programs.
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Defense Burden
The North maintains a defense establishment roughly comparable in manpower and
quantitatively superior in equipment to that of the South; yet the North has only half the
population and less than half the GNP. During the past decade, North Korea has allocated an
estimated 15 to 20 percent of its GNP annually to defense. The South has benefited from US
security commitments and has allocated less than 5 percent of its GNP annually to defense
during the past 10 years. Fully 12 percent of North Korea's males of military age (17 to 49) are
in the regular armed service, a level exceeded only by Israel. An added drain on North Korean
resources over the years has been a high-cost underground construction program designed to
protect important industrial and military installations. P'yongyang's defense industry currently
produces all but the most sophisticated weapons. The South is heavily dependent on imports
for most of its military equipment.
Capital Efficiency
A higher return on industrial investment constitutes the third reason why the South has
outdistanced the North in economic development. South Korea has rapidly increased its savings
rate and has marshaled large sums for productive investments in industry. Its incremental
capital-to-output ratio of about 2.2 has been among the lowest in the world. Large investments
have been made in developing the economic infrastructure, particularly the transportation and
electric power sectors. These investments have greatly facilitated the growth of both heavy and
light manufacturing industries, especially those branches that are export oriented. In turn,
rapidly increasing exports have enabled South Korea to import large amounts of modern
machinery from Japan and the West and to maintain a high return on capital.
North Korea, in contrast, has had a much lower return on its capital investment. Although
North Korea has generated high savings and investment rates-restraints on private consump-
tion have enabled investment to equal roughly 30 percent of GNP-P'yongyang has not
allocated these funds efficiently. A considerable portion of North Korean investment resources
has gone into military construction and defense industries, which does not lead to self-
sustaining growth. Equally important is the North Korean perception of foreign trade.
P'yongyang prides itself on the extent of the country's self-sufficiency-from agriculture to
machine tools to weapons. Such a policy can become expensive for a small country, since the
gains from specialization and trade and from foreign technology are not fully realized.
The North Korean leadership has recognized its problems of insufficient return on
investment and growing obsolescence of the industrial plant. In the early 1970s, P'yongyang
contracted with Japan and Western Europe for considerable amounts of modern machinery,
importing $2.5 billion worth of equipment between 1965 and 1976. P'yongyang's suspicious
attitude toward foreign technological advice and its inability to sustain the inflow of
equipment (because of financial difficulties) have greatly reduced the productivity of these
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imports. South Korea, in contrast, imported more than $11 billion in capital equipment during
the same period, along with the skills to operate and manage the equipment.
South Korea's rapid export expansion is another key factor for its growing economic lead
over the North. Through a well-orchestrated export drive, South Korea has boosted its foreign
sales a remarkable 45 percent annually since 1970. This has helped Seoul obtain the foreign
exchange necessary to finance the rising levels of capital imports essential to industrial
development.
Just as important, South Korean businessmen have had to respond nimbly to the demands
of the constantly changing international markets; their achievements have constituted one of
the biggest success stories of the 1970s. The strength of the South's international positon was
underscored last week when imports of 126 commodity sub-items, previously banned or subject
to prior approval, were placed in the automatically approved category. Although South Korea
has in the past run substantial current account deficits to import large amounts of capital
goods, its current account has been in near balance in 1976 and 1977.
North Korea's export earnings, in contrast, have increased only 10 percent annually since
1970, not nearly fast enough to finance its capital goods imports.
North Korea's Debt Problem
North Korea's large foreign debt and continuing default have cut its access to further
imports of advanced Western machinery and equipment. By yearend 1976, P'yongyang's hard
currency debt had reached $1.4 billion, about five times annual hard currency exports of
recent years. At least another $1 billion was owed to Communist creditors.
Largely because of the debt problem, but also because of prolonged drought, North
Korea's economy stumbled badly in 1976. Cutbacks in imports of machinery and equipment, a
shortage of hydroelectric power, and difficulties in reallocating resources caused industrial
production to stagnate. Production of electric power, machine tools, cement, and textiles
declined, while output of lead and zinc remained at 1975 levels.
Because of these setbacks, P'yongyang fell short of many of its Six-Year Plan (1971-76)
industrial targets. Coal production, for example, amounted to only 40 million tons, 10 million
tons below the minimum target. These economic difficulties have continued in 1977-a year in
which Kim II-Song had declared a "year of readjustment" before the launching of a seven-year
plan, to start in 1978.
Outlook: Widening Gap is Likely
A more productive labor force and greater technological sophistication will favor South
Korea in future economic development. Unless a major global recession or increased
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protectionism in the developed world shrinks export markets, real GNP in the South is likely to
grow 9 to 10 percent annually during the next five years. The maximum for the North is
probably 6 percent. Barring large-scale war on the peninsula, South Korea should emerge in
1981 with an economy about three times the size of the North Korean economy and with per
capita GNP of about $900 compared with $650 in the North (in 1975 prices). 25X1
Disappointing export growth largely explains West Germany's failure to reach its 1977
growth target. In early 1977, Bonn expected exports to increase 9 percent in constant prices
and real GNP to rise 5 percent; actual gains will be about 4 percent and under 3 percent,
respectively. In particular, exports to West European and Communist trading partners have
fallen short of projections. Even so, the West Germans have been maintaining their share of
world markets. Exports may increase a bit faster next year, although not enough to give the
economy much of a lift.
West Germany: Share of Partner Country
Merchandise Imports
First Half
First Half
1976
1977
World '
.................................................. 16.3
18.5
EC ......................................................
17.5
17.1
France ..............................................
19.3
18.4
Netherlands ......................................
23.1
23.1
Belgium-Luxembourg ....................
22.8
21.9
Italy ..................................................
17.0
16.5
United Kingdom ..............................
8.7
9.3
Denmark ..........................................
20.7
18.9
EFTA ..................................................
24.1
24.0
Austria ................................................
40.5
40.7
Switzerland ......................................
28.3
27.4
Sweden ..............................................
18.9
18.6
United States ......................................
4.8
4.6
Other developed countries ..............
6.7
6.8
OPEC' ..............................................
14.2
15.3
Iran ....................................................
19.5
21.7
Non-OPEC Oil LDCs' ....................
8.9
8.8
Communist countries' ......................
24.3
25.3
USSR ................................................
19.5
18.8
' For certain areas, import data are not directly available. In these
cases, the percentages presented are derived from data on exports of
20 non-Communist, non-OPEC reporting countries that accounted
for over 70 percent of world exports in 1976; the percentage of West
German exports thus overstates the West German position in the
imports of these particular areas.
8 December 1977 SECRET 5
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We have progressively reduced our 1977 constant-price projection for West German
exports of goods and services from an 8.5-percent increase to one of about 4 percent. Nearly all
the slowdown can be traced to merchandise exports, which have registered quarter-to-quarter
gains thus far this year of 9.1, 4.5, and 4.8 percent (annual rates). Simulations carried out on
our model of the West German economy indicate that the slowdown in export growth accounts
for about half of the drop in our projection of real GNP growth from 4.5 percent to under 3
percent.
The deceleration of West German export growth this year stems from a dramatic
slowdown in the growth of purchases by West European countries and an actual drop in sales
to Communist markets. Slower economic growth in the former countries and continuing hard
West Germany: Merchandise Exports, by Country
Percent
of Total
(Jan-Aug 1977)
Jan-Aug 1976 Over
Jan-Aug 1975
Jan-Aug 1977 Over
Jan-Aug 1976
World ....................................................
100.0
14.6
7.6
EC ......................................................
44.5
218
5.3
France ..............................................
12.2
33.3
-0.6
Netherlands ......................................
10.0
10.5
13.0
Belgium-Luxembourg ....................
7.8
20.9
6.7
Italy ..................................................
7.0
22.2
1.1
United Kingdom ..............................
5.2
17.1
18.3
Denmark ..........................................
2.2
47.7
-9.4
EFTA ..................................................
15.7
13.0
8.9
Austria ................................................
5.1
23.2
16.5
Switzerland ......................................
4.5
17.2
8.9
Sweden ..............................................
3.2
4.8
4.2
United States ......................................
6.3
14.3
22.7
Other developed countries ..............
9.3
3.0
15.0
OPEC ..................................................
9.1
17.9
27.8
Iran ....................................................
2.4
11.5
17.6
Non-OPEC Oil LDCs ......................
7.7
1.2
2.7
Communist countries ........................
7.4
2.5
-8.2
USSR ................................................
2.3
-0.8
-10.4
currency deficits in the latter have been-the main negative factors. The poor showing in
exports to these two markets, which together absorb two-thirds of West German exports,
outweighed faster growth of sales to non-European industrial nations, OPEC countries, and
non-OPEC LDCs.
The slowdown has affected almost all categories of exports. In the first eight months of this
year, foreign sales of raw materials and semifinished goods, which make up 26 percent of
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merchandise exports, grew only about one-third as fast as in the same period a year earlier. The
growth rate for machinery and equipment, the mainstay of West German exports, was less
than half the comparable 1976 rate, largely reflecting the sluggish pace of investment spending
worldwide.
West Germany: Merchandise Exports, by Commodity
Percent
of Total
(Jan-Aug 1977)
Jan-Aug 1976 Over
Jan-Aug 1975
Jan-Aug 1977 Over
Jan-Aug 1976
Total ......................................................
100.0
13.5
5.4
Agriculture, forestry, and fisheries ......
1.1
18.2
1.4
Processed foods and tobacco ................
4.3
10.9
24.4
Mining ....................................................
1.5
-12.8
-3.3
Raw materials and semifinished goods
25.6
14.3
4.8
Chemicals ..........................................
13.2
27.7
4.2
Iron and steel products ....................
6.1
-11.2
1.9
Nonferrous metals, paper, rubber,
and petroleum products ..............
6.3
23.4
10.6
Machinery and equipment ..................
54.2
11.0
4.7
Machine-building ..............................
18.3
2.3
2.0
Road vehicles ....................................
14.9
20.2
5.3
Electronics, business machines, and
data processing equipment ..........
11.4
16.4
6.8
Iron, steel, and metalworking
machines ........................................
5.5
14.4
13.6
Ships, aircraft, precision instruments,
optics, and clocks ..........................
4.1
15.3
-0.2
Consumer goods ....................................
11.2
25.6
4.3
Synthetic fibers, textiles, clothing,
shoes, and leather ..........................
7.1
27.0
2.0
Other ..................................................
4.1
23.1
10.5
Other ......................................................
2.1
19.7
13.6
On the whole, West Germany has been maintaining its share of major markets despite the
export slowdown. Through mid-1977, losses of less than one percentage point in West
European and non-OPEC LDC markets were almost matched by gains in the rest of the world.
West Germany's share of Big Seven exports to the world continues to hover around 21 percent,
as it has since 1970. We had expected that world trade would increase more than it has this
year and that West German exports would grow a bit faster than the world total.
Thanks to relatively slow domestic inflation, West Germany's international competitive-
ness has suffered little. The price-adjusted exchange rate rose only about 5 percent between
first quarter 1976 and third quarter 1977 despite a nearly 20-percent rise in the value of the
Deutschemark vis-a-vis a weighted average of the exchange rates of 22 trading partners. In
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dollar terms, West German export prices have risen roughly in tandem with those of major
competitors and remain close to the Big Seven average.
Based on an examination of current projections of world trade in 1978, real growth of
West German exports of goods and services should accelerate slightly, to about 5 percent. The
increase would result mainly from faster growth of imports elsewhere in the European
Community, particularly France and the United Kingdom. We expect the stimulative
measures recently announced by London to boost British aggregate demand substantially next
year. In France, consumption would be stimulated should the leftist alliance gain power next
March, and investment should pick up if the current government remains in office.
Last week, Bonn conceded that its former 6-percent target for real export growth in 1978
probably would not be realized. The Economics Ministry now has set its sights on 5-percent
real export growth. We see the following trends:
? EFTA import growth is likely to slow again in 1978. In Austria, which accounts for
a third of EFTA purchases from West Germany, the government intends to curtail
import growth sharply to improve the balance of payments. Sweden also will be
trying to hold down imports, and Switzerland will experience another sluggish
economic year.
? West German shipments to non-European industrial countries also will slow,
assuming US economic growth falls off as is widely anticipated.
? Imports next year by Communist and non-OPEC LDC customers are expected to
pick up only moderately. Communist countries still will face hard currency
constraints, and non-OPEC LDCs have persistent balance-of-payments problems.
? Given our projection of slower expansion of import demand in OPEC countries,
West Germany would have to capture a larger share of the OPEC market for the
seventh consecutive year just to keep its exports to the group growing at the present
rate.
If West German export growth acceleratesas little as we expect in 1978, the increase in
real GNP growth will be correspondingly restrained. The economy has become increasingly
dependent on exports; the ratio of exports to GNP has grown from 22 percent in 1970 to 28
percent in mid-1977. Bonn's announcement ofrevised economic forecasts last week included a
drop in the real GNP projection for 1978-from 4'/z percent to 31h percent. The new, more
guarded West German figures agree closely with our own.
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After delaying the implementation of austerity measures, which in turn prolonged the
conclusion of negotiations with the International Monetary Fund (IMF), Peru has finally
obtained a $105 million standby loan. This delay, together with the government's failure to
arrange timely commercial bank credits, has caused a drawdown of foreign reserves to the
equivalent of only several days' imports. In addition to an initial installment of $12 million
from the IMF, the government desperately needs an immediate $100 million to meet foreign
obligations through January. We believe chances are fairly good that Peru can arrange a
financial patchwork to cover immediate needs. For the remainder of 1978, Peru will have to
live up to the stringent IMF loan conditions if it is to obtain the $ 300 million to $400 million
needed from commercial banks.
Origin of the Problems
Peru's payments difficulties began in 1974-75 when rapidly rising imports pushed the
financial gap (current account deficit plus debt amortization) to an average of $1.5 billion
annually, six times the average of the previous five years. Imports soared as the ruling military
junta launched massive economic development programs, foreign arms purchases, and
1973 1974 1975 1976' 19772 1978E
Million US $
Trade balance ............................................ 79 -403 -1,098 -740 -368 50
Exports, f.o.b . .......................................... 1,112 1,506 1,291 1,360 1,782 2,050
Imports, f.o.b ........................................... 1,033 1,909 2,389 2,100 2,150 2,000
Net services and transfers .......................... -253 -323 -442 -422 -489 -533
Current account balance .......................... -174 -726 -1,540 -1,162 -857 -483
Debt amortization ...................................... -339 -395 -339 -451 -391 -686
Financial gap .............................................. -513 -1,121 -1,879 -1,613 -1,248 -1,169
Medium- and long-term
capital inflows ............................................ 690 1,226 1,524 1,446 731 1,269
Direct investment .................................... 65 246 342 196 69 120
Project loans .:.......................................... 625 980 972 670 650 749
Support loans .......................................... 0 0 210 580 12 400
Net short-term capital $ .............................. -121 279 -114 34 317 0
Change in reserves .................................... 56 384 -469 -133 -200 100
Other financial items:
External debt, yearend' ........................ 1,582 2,288 3,050 3,800 4,250 4,700
Percent
Estimated.
Projected.
Included errors and omissions.
Medium- and long-term, public and public-guaranteed.
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subsidized food and fuel programs. Lima had little trouble financing the gap with project loans
and direct investment in 1974, but the deficit grew even more rapidly in 1975. The
government was forced to draw down foreign reserves by almost $470 million in 1975 despite
$200 million in balance-of-payments support from international commercial banks.
Financial difficulties mounted in 1976, as Peru was forced to borrow $580 million in
balance-of-payments support loans to close the $1.6 billion financial gap. Lima belatedly
initiated an austerity program at midyear, including harsh import constraints and a 31-percent
currency devaluation. Peru had substantial difficulty in acquiring part of the needed balance-
of-payments support because of its delay in compensating the US owners of the nationalized
Marcona iron mining properties. Although the IMF supplied $210 million in nonconditional
loans in 1976, commercial banks demurred on commitments of $370 million until after the
Marcona issue was settled in the fall.
Even though the financial gap narrowed by one-fourth in 1977 to $1.2 billion,
international commercial banks wearied of backsliding on austerity and increases in purchases.
The banks demanded that Peru accept the conditions required for a $100 million IMF standby
before they would ante up the additional $300 million needed to close the gap. Cabinet
dissension and civil unrest contributed to a nine-month delay in agreeing to IMF austerity
conditions. Without commercial bank support, Peru has been able to get by this year only by
(a) arranging about $90 million in swaps with Venezuela and Brazil, (b) drawing on suppliers'
credits, and (c) nearly depleting foreign reserves. Peru finally signed the $105 million IMF
standby on 18 November. The standby provides an initial $12 million with remaining
installments to be disbursed quarterly over the next two years.
High Stakes in January
Peru has more than $200 million in net foreign payments-including debt service
obligations-due next month. Assuming that about $100 million in short-term obligations can
be rolled over, Lima needs another $100 million to cover January's payments gap.
A large portion of debt service payments due in January is owed the Soviets for past arms
purchases. Commercial banks and Western official sources will probably resist providing
financial support to cover these obligations, which Peru probably will be able to postpone.
Without immediate financial support or the rescheduling of its Western debts, Peru
conceivably could be forced to mortgage or sell some of its $41 million in gold reserves. We
believe that adoption of this alternative would undercut the political stability gained since July.
Lima is approaching various Western governments for a $100 million stopgap loan. If
these are not forthcoming, we believe chances still are good that international commercial
banks will provide the bridge to protect their exposure.
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Peru needs $300 million to $400 million to close an expected $11.1 billion financial gap in
1978 and to make a start at rebuilding foreign reserves. If Peru complies with the terms of the
IMF standby loan through March, a consortium of US banks may be willing to provide $250
million. Commercial banks in Canada, Western Europe, and Japan probably would follow with
additional funds.
An Immediate Issue
Even more immediately, the 40,000 workers in the mining and metallurgy industries,
which provide more than 50 percent of Peru's export earnings, are planning to strike this week.
These workers are protesting the government's continued refusal to reinstate 400 dismissed
workers and are seeking a substantial wage increase. This action could be the first of a new
round of crippling labor stoppages resulting from economic complaints.
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The new PRC leadership seems increasingly disturbed by the slow pace and the marked
imbalance in industry's recovery from the setbacks of 1976. Despite some bright spots in
particular branches of industry, we see 1978 as still another year of readjustment, further
upsetting the timetable of the Fifth Five-Year Plan (1976-80).
Sober Tone of Official Reporting
At a recent high-level gathering, planning chief Yu Chiu-li offered a remarkably subdued
appraisal of the economic revival process that followed upon the overthrow last fall of Mao's
widow and her leftist cohorts. While he cited a 12-percent increase in industrial output for the
first nine months of this year over the corresponding period of 1976, Yu implicitly
acknowledged that the increase was from a low base. As Yu put it, 1976 had been a year of
"stagnation in industrial production."
Reporting from the provinces and by branch of industry seems to bear out Yu's
assessment. Although several provinces have reported increases in industrial output ranging
from 10 to 40 percent for the first eight months, these areas were mainly those hard hit by the
political turmoil of the previous year. For the most part, reporting has been sparse and
incomplete, with the majority of claims coming from provinces of minor industrial importance.
Official comment on performance in key sectors has been the most sobering of all. Eight-
month statistics for a number of key industries-crude oil, natural gas, electric power,
chemical fertilizer-show considerable increases over 1976. When viewed against increasing
demand and the consequent need for large additions to capacity, however, a less glowing
picture emerges. Mostrevealing is Yu's admission that "the development of the fuel and power
industries and primary goods industries" is below expectations.
Our overall impression is that while considerable progress has been made in some
important industrial branches and in rail transport, recovery has been spotty and slower than
anticipated. We note a continuation of many of the same political problems and raw material
shortages responsible for the "stagnation" of output last year.
The slow recovery in industrial output has complicated the government's task of
improving the financial situation. State revenues, which come mostly from industrial profits
and taxes, apparently have been falling short of plan, forcing Peking to curb spending in order
to avoid a budget deficit-an anathema to the Chinese. Various steps are being taken, ranging
from a crackdown on misuse of funds to restrictions on the flow of currency and credit.
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The severity of financial disarray was driven home in October with the issuance of a
sweeping central directive aimed at warding off a budget deficit and dampening inflationary
pressures. The directive called for tighter currency controls, greater emphasis on consumer
savings, and the disgorging of hoarded supplies of raw materials and finished products. These
actions became all the more necessary with the recent decision to grant long-postponed wage
increases to a large number of urban workers.
Outlook Still Uncertain
Earlier this year, Peking's new leaders frankly admitted that they expected industrial
recovery to be tough and protracted. As the year progressed, official commentary turned
increasingly upbeat; a series of economic conferences were convened in Peking; and it
appeared that a National People's Congress would soon be held to discuss and ratify the
overdue draft of the five-year plan to carry the economy through 1980. Now, with the returns
for the first three quarters in hand, Peking seems again pessimistic.
? The recovery of industry continues to be restrained by lingering confusion and
uncertainty among provincial leaders, enterprise managers, and rank-and-file alike.
? The apparatus for statistical reporting, economic accounting, and planning and
management is more disorganized than had been earlier realized.
? Economic planners seem unconvinced that even by the end of 1978 the economy
will be capable of the kind of sustained growth earlier envisaged for 1978-80.
As a result, convocation of the Congress has been postponed to next spring, and little mention
has been made of the status of the draft economic plan.
Despite the present difficulties, China's pragmatic new leaders still seem confident of
their ability to restore industry to a sound foundation before 1980. Reforms in incentives and
management are beginning to take shape, and Peking has lowered many of the barriers that
had thwarted the acqusition of advanced foreign technology needed to break bottlenecks. To
put this technology to work, China's schools and universities eventually will again begin
graduating qualified technicians and engineers; officials, who speak of half a generation of
wasted educational efforts, are busy restoring academic standards and processing applicants for
undergraduate and graduate training programs.
For the next year or so, the mettle of the new leaders will continue to be tested by
motivational problems, shortages of raw materials, and slipshod economic accounting that at
times has left even Peking's planners in doubt about how well industry is progressing.
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RHODESIA: THE ECONOMIC DECLINE AND WHITE MORALE
Unsettled political conditions continue to exact their toll from Rhodesia's battered
economy. Three straight years of deepening recession have stifled investor and consumer
confidence and have prodded increased emigration-now cutting into key skill groups such as
physicians. These economic factors help spark Prime Minister Ian Smith's repeated attempts to
get a political settlement, even one that would include universal black suffrage. Smith,
however, with the overwhelming support of Rhodesian whites, will not put his desire to get the
economy back on track ahead of the basic economic issue-preserving the white stake in the
country.
The Downturn, 1975-77
The Rhodesian economy has contracted since 1974. Real GNP stagnated in 1975 and fell
by 4 percent in 1976. The decline in 1976 was led by manufacturing and construction, down
about 11 percent and 28 percent, respectively. The falloff in these two sectors, making up
about 30 percent of GNP, far more than offset solid gains in mining. Sectors showing normal
growth were public services, agriculture, transportation, and communications.
GNP is expected to drop by 5
percent or more in 1977. Manu-
facturing production through July
was running 6 percent below last
year; the largest declines have
been in the output of vehicles and
of metal, mineral, and wood prod- 1.8
ucts. Output of principal crops
such as cotton and corn probably
has slipped because of drought 1.6 -
conditions early this year. More-
over, the mining sector for the
Trends in Real Gross National
Billion US$ Product
tirst time is taltering, a reelection
of weak world demand for
chrome, copper, and nickel and of 1.2
the repeal of the Byrd Amend- 1970 71
ment by the United States. 574670 1247
Planned building starts in
1976 stood at only half 1973 starts,
and planned factory construction was down 55 percent in the first seven months of 1977,
compared with the same period in 1976. A number of major firms reportedly have stopped
long-range planning altogether.
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Consumers also are holding back, especially on purchases of durables. Retail trade
turnover in real terms was down 7 percent through first half 1977. A new $800,000 department
store in Salisbury, built only 16 months ago, has announced that it will close after Christmas.
Payments Problems
A decline in exports, coupled with a falloff in foreign capital inflows, has put the balance
of payments in a precarious position. Salisbury ran a rare surplus on the current account last
year only through a drastic tightening of import controls. The volume of imports fell by 27
percent in 1976, even allowing for a pickup in defense-related purchases. The brunt of the
decline fell on consumer goods, fuel, spare parts, and replacement machinery. The volume of
exports rose by 6 percent in 1976 largely because of sales of metals. On the negative side,
capital inflows plunged to a four-year low of $38 million compared with $153 million in 1975.
Rhodesia: Balance of Payments
1973
1974
1975
1976
1977'
Trade balance ..............................................
144
102
71
264
200
Services balance ..........................................
-101
-133
-150
-127
-100
Net investment income and transfers ......
- 68
- 92
- 98
-112
-150
Current account balance ........................
-26
-124
-176
26
-50
Capital account balance # ......................
78
94
153
38
25
Balance ........................................................
52
- 30
- 24
65
- 25
' Estimated.
Including errors and omissions.
Rhodesia is likely to return to a current account deficit this year, with both mining and
agricultural exports declining. We estimate that Rhodesian foreign exchange reserves are
below the $60 million held when independence was declared in 1965, putting holdings at less
than two months' worth of estimated imports. About the only course open to the government is
to maintain its strong import controls and possibly to devalue periodically; the Rhodesian dollar
dropped from $1.60 to $1.50 in October.
Impact on Whites
The depression has not yet struck at the basics of life for the 265,000 whites. Food and
other essentials still are in adequate supply, and white employment and real wages have been
maintained reasonably well. The main inconveniences have been the high price of imported
goods and rationing of fuel for recreational travel.
White civilian employment slipped by only 1 percent in 1976, mostly reflecting
emigration and increased military conscription. Within total white employment, the 5-percent
8 December 1977 SECRET
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SECRET
drop of workers in industry, construction, and retail trade was almost completely offset by the
gain in public sector employment, including security forces.
The labor picture has deteriorated somewhat this year. Mine layoffs reportedly have
occurred since last summer. Moreover, increased guerrilla activity has forced the government
to step up military service requirements. In June 1977 the mandatory tour of duty for all
eligibles under 38 years of age wasraised from four to six months a year, and in September the
tour of prospective college students was boosted from 18 months to two years. Businesses have
been hurt by the requirement that they make up the substantial difference between military
and civilian pay for the six-month leaves of absence.
Average white wages went up by 10 percent last year, compared with a 9-percent rise in
the cost-of-living index. Real wages in 1977 probably have fallen slightly. The government has
temporarily frozen salaries of civil servants and has put a 5-percent limit on increases in other
wages. The cost of living through August was up about 7 percent. Moreover, household
purchasing power has been eroded by higher income and sales taxes imposed in April to help
finance increased military spending. The defense budget is now 27 percent of total
government allocations, compared with 15 percent in 1973.
Impact on Blacks
The recession has been passed on to blacks in the form of decreased government spending
on housing and social services and increases in unemployment. The total number of African
employees fell by 7,000 or 1 percent in 1976, largely the result of a huge drop in black
employment in the construction sector; this drop was only partly offset by increased
employment in the public sector. Less than 1 million Africans of a total work force estimated at
2.5 million are working in the modern sector of the economy, including commercial
agriculture. Few of the black unemployed have been hired to fill in for whites during military
leave periods, both because the blacks lack adequate skills and because demand does not justify
such replacements.
Average wages for blacks--a mere 10 percent of the average white salary even excluding
domestic servants-went up by 11 percent in 1976. The wage ceilings and tax hikes will affect
blacks proportionately about as much as whites,
Emigration
The fragility of white morale is reflected in rising net emigration, now averaging 1,000
whites a month. Net emigration has totaled 16,000, or 6 percent of the white population, since
January 1976. Increasing numbers of doctors, dentists, and teachers, as well as older people
who have lived most of their lives in the country, have been leaving. Businessmen and farmers
with substantial property interests in the country have been slower to emigrate.
Laws limiting the conversion of currency have deterred a larger outflow. No more than
$1,500 can be taken out in foreign exchange by any emigrant, and only $47 a day is permitted
for travel expenses of businessmen. Businessmen who liquidate assets and homeowners who sell
property are not permitted to take the proceeds out of the country. These laws, however, may
only be a temporary deterrent to those determined to leave. Many whites are gradually
converting their assets into gold, diamonds, expensive automobiles, and other easily transport-
able valuables.
At the same time, substantial numbers of white immigrants are entering Rhodesia-5,900
this year. Probably more than half are returning emigrants disillusioned by the contrast
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between the privileged white lifestyle
they had known in Rhodesia and the
lifestyle they had experienced abroad.
The returnees have received wide
publicity in Rhodesia, undoubtedly
raising second thoughts in others who
have been thinking about leaving.
SECRET
White Migrants
No Recovery in Sight
While the recession is putting
pressure on Smith to move as rapidly
as possible toward a political solution,
the state of the economy will not
prompt him to make major concessions
in this effort-especially on the ques-
tion of securing the white economic
stake. The white business community
fully shares in the general mandate
given Smith in last August's election
and is prepared to see the economy
muddle along for as long as it takes to
arrange a suitable settlement.
Moreover, a settlement would be
unlikely to trigger an early economic
recovery. Smith's most recent proposal
for an internal settlement, for exam-
ple, probably would fall short of at-
tracting the international support
needed to get the UN sanctions re-
pealed, Even if sanctions were
dropped, both domestic and foreign
investors would keep their money in
their pockets until the degree of stabil-
ity of the black-run government and
the intentions of the new economic
policymakers were clear. Proposed
white veto power under Smith's
scheme-through more than one-third
of the representatives in Parliament-
supposedly would ease worries about
nationalization. It would not, however,
prevent a sharp swing in government
priorities to black social issues such as
wage equalization and to the poten-
tially explosive question of land
redistribution.
Even good agricultural crops next
year and an unexpected resurgence of
1971
Immigrants
5.1
0
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11.9
1976
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international demand for mineral exports would be unlikely to reverse the economic tide. Most
of the resulting foreign exchange probably would be allocated to military purchases. The
amount left over for private industry would not produce a turnaround in the vital
manufacturing and construction sectors, which will continue to suffer from low investor and
consumer confidence.
Shortages and record high prices now plaguing world tungsten users will ease in 1978.
New mines will boost Free World supplies next year, while demand for tungsten-a vital
ingredient in aerospace applications, mining equipment, armaments, and super-hard steels-
will grow slowly, reflecting lethargic economic growth. For the longer term, tungsten prices
will continue volatile unless current UNCTAD negotiations lead to a market stabilization
agreement.
Annual Average Price of Tungsten Concentrates
0
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Tight Market
The current tightness in the tungsten market results from:
? Failure of Free World producers to meet demand. During 1974-76 non-Commu-
nist tungsten production was 8 percent below Free World consumption. US
production covers less than one-half of US consumption.
? Low volume of Chinese tungsten exports in 1976 and concurrent heavy buying by
Eastern Europe and the USSR, which made drawdowns in world inventories
necessary.
? Lack of adequate substitutes for tungsten.
Falling prices in the early 1970s led to retrenchment of tungsten mining by US and other
Free World producers. In the United States, tungsten production plummeted by nearly one-
third in 1971, reflecting the depletion of high-grade ores and unwillingness to mine low-grade
ores at depressed prices. Recent record high prices have thus far failed to boost production to
former levels, but in 1978 new mines will come on stream in Australia, Brazil, and the United
States, adding about 2,700 tons of contained metal to world supplies. This will bring Free
World production into balance with Free World consumption. The higher production levels
will:
? Eliminate the need of the US Government to cover demand shortfalls from
strategic stockpiles.
? Lead to substantially lower prices.
? Slightly lessen Free World dependence on Chinese sales.
Beyond 1978, tungsten demand will parallel economic recovery. If, as we now believe,
economic growth and steel production will be restrained in the early 1980s by energy
problems, tungsten consumption is expected to grow at about 2 to 2'/z percent annually. Free
World reserves are adequate to meet this level of growth; production will be appropriately
adjusted by price movements.
Communist sales and purchases will affect Free World prices and output strongly.
The Communist countries account for approximately 45 percent of total world production
of tungsten. The USSR is the largest producer in the world, with an estimated output in excess
of 8,000 tons a year. Soviet tungsten production has grown steadily since the late 1950s,
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Consumption
South Korei
Bolivia
United
States
increasing from 4,600 tons of contained metal in 1957 to 8,700 tons in 1977. The long-term
growth rate of 3 percent is expected to continue at least to 1985.
Moscow, nonetheless, has been unable to meet its tungsten needs from domestic
production. We believe Soviet consumption has more than doubled since 1960, led by steady
growth in the Soviet steel and metalworking industries and, more recently, by the expanded
use of tungsten in armor-piercing munitions and in tank armor. In 1977, consumption probably
will exceed 10,000 tons of contained metal, substantially more than domestic production.
Annual deficits have been filled by imports from China and from the West and possibly by
imports of supplies bought by East European countries. The size and timing of Soviet and East
European tungsten purchases have been a major market uncertainty and a destabilizing factor.
World Tungsten Production and Consumption, 1976
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Tungsten Production and Consumption
Tons of Contained Metal
World production ..............
40,230
35,250
38,430
39,120
Free World ......................
22,190
18,450
20,230
21,820
United States ................
3,515
2,490
2,720
3,610
Thailand ......................
2,450
1,640
2,050
2,000
South Korea ................
2,265
2,405
2,425
2,300
Bolivia ..........................
2,315
2,485
2,540
2,500
Portugal ........................
1,590
945
1,450
1,400
Canada ..........................
2,175
1,075
1,155
1,200
Australia ......................
1,450
1,530
1,565
1,500
Brazil ............................
NA
1,130
1,200
1,200
Others ..........................
6,430
4,750
5,125
6,110
Communist ......................
18,040
16,800
16,200
17,300
USSR ............................
7,900
8,200
8,400
8,700
China ............................
8,140
6,500
5,700
6,500
North Korea ................
2,000
2,100
2,100
2,100
World consumption ..........
42,290
36,080
37,850
39,370
Free World ......................
25,990
19,280
20,550
21,570
United States ................
9,980
6,350
6,800
7,140
Japan ............................
2,950
1,680
1,680
1,760
Western Europe ..........
11,880
10,160
10,890
11,430
Other ............................
1,180
1,090
1,180
1,240
Communist ......................
16,300
16,800
17,300
17,800
USSR ............................
9,300
9,800
10,300
10,800
Other ............................
7,000
7,000
7,000
7,000
In recent years, China has fallen to second place among tungsten producers, with
production declining from more than 10,000 tons in the late 1950s to an estimated 5,700 tons in
1976. The decline is ascribed to the moderate level of investment in tungsten mines compared
with investment in higher priority industries. While production is expected to increase
substantially in 1977, an imminent return to the 10,000-ton level of the past is not in the cards.
About half of current Chinese production is exported, making it the dominant factor in
the world market. China demands a high price for its tungsten and withholds supplies in time
of weak demand. Possessing the world's largest ore reserves-probably more than 1 million
tons-the PRC will continue exporting as long as the price remains high.
The paucity of information on the world tungsten market has been a major stumbling
block in UNCTAD negotiations on market stabilization. To close some of the information gaps,
various market studies were tabled at a meeting of experts in Geneva last week. The outcome
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of this meeting was a draft report prepared for the tungsten committee, scheduled to meet in
February.
Because tungsten is produced and used in relatively small quantities, financing and
storage under a common fund arrangement would appear easier than in the case of other
commodities now under consideration. Nonetheless, prospects for a workable tungsten
agreement are not good. Price stability would be difficult to achieve because:
? Chinese sales to the Free World are sporadic and beyond the control of an
UNCTAD agreement.
? Unpredictable large-scale purchases of East European countries and the USSR are
expected to continue.
? Dealer speculation adds to price instability.
USSR: Interest in Soybean Purchase
During the last several weeks, Soviet interest in soybeans has been persistently rumored in
the international market. An authoritative vegetable oil journal reported in late November that
it believed the Soviets had already bought 11/4 million tons for delivery this marketing year. A
mediocre 1977 sunflower harvest probably prompted the Soviet decision to buy beans. The
beans, in addition to yielding oil, provide soybean meal, a high protein livestock feed, which
will help offset the disappointing grain harvest.
Contracts concluded by US businessmen at the recent fall Canton Fair reached a total of
$65 million to $70 million, surpassing the record $60 million to $65 million total set at the 1975
spring fair. After dropping at the spring fair, attendance-some 750 US businessmen-was
back to the level of last fall, although the number of firms represented probably declined. Most
US traders were content with the results of the fair. Chinese officials were more flexible on
matters of labeling, packaging, and compliance with US import regulations.
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US purchases totaled about $50 million. Major items included $15 million in textiles and
clothing; $15 million in carpets, tea, and feathers; $8 million in light industrial products; and $6
million in minerals and metals. Except for feathers, prices were up little from the spring fair.
Shortages were noted largely in foodstuffs and chemicals. The $15 million to $20 million in US
sales were primarily chemicals, nonferrous metals, and textile machinery.
The level of US purchases at the fair points to continued gradual growth in imports from
China. US imports in 1977-$174 million for the first 10 months-will probably increase about
$10 million over last year's $201 million total. Despite Peking's apparent interest in the US
market, supply and marketing problems will still limit the growth of Chinese exports to the
United States in 1978. US exports to the PRC totaled $96 million through October 1977.
Deliveries of US soybeans, soybean oil, and possibly cotton in November and December may
push the total for the year to as much as $150 million, compared with $135 million in 1976.
With Peking's policy of avoiding US purchases when alternative suppliers are available, the
prospects for major increases in US exports to China in 1978 are limited.
Model Finds UNCTAD Copper Stock Too Costly
Prospects for an UNCTAD-sponsored agreement on a copper buffer stock were set back as
the result of the introduction of an econometric model into last month's meeting of copper
experts in Geneva. According to a Charles River Associates model discussed at the 21-25
November meeting, the cost of such a stock would be politically and economically unaccept-
able. The report concluded that while "it is possible to stabilize small short-term fluctuations"
in price, "long cycles of excess supply and demand similar to those characterizing the copper
market from 1953 to 1976 cannot be stabilized using the rules envisioned."
This pessimistic outlook for a successful buffer stock hinges on the model's finding that a
hypothetical stock would have had to sell copper in every year during the 1964-76 period in
order to maintain the ceiling price on a slowly rising trend. (Two trend lines were examined,
one derived from a three-year moving average of market prices, the other from a five-year
average.) During this 13-year period approximately 22 million tons of copper would have had
to be sold. Stocks of this size are impractical.
On the other hand, the model found that a buffer stock with a $2 billion to $2.5 billion
line of credit could have prevented the price from falling more than 10 percent below the
reference (trend) price from 1953 to 1976. Such a stock would have reached its maximum size
at just over 2 million tons in 1963, the equivalent of nearly 50 percent of Free World output in
that year. However, a stock of this size could not have prevented the price from exceeding the
ceiling in 1966, 1967, and 1968.
Representatives of the major developed countries, with the exception of France, were
quick to accept the model's conclusions. LDCs were reluctant to agree but failed to make a
convincing rebuttal. The issue may be reopened at the third preparatory meeting of the
UNCTAD committee on copper in Geneva.
SECRET 23
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 National
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Assessment
Center
Economic Indicators
Weekly Review
ER EI 77-049
8 December 1977
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This publication is prepared for the use of U.S. Government
officials. The format, coverage and contents of the publication are
designed to meet the specific requirements of those users. U.S.
Government officials may obtain additional copies of this document
directly or through liaison channels from the Central Intelligence
Agency.
Non-U.S. Government users may obtain this along with similar
CIA publications on a subscription basis by addressing inquiries to:
Document Expediting (DOCEX) Project
Exchange and Gifts Division
Library of Congress
Washington, D.C. 20540
Non-U.S. Government users not interested in the DOCEX
Project subscription service may purchase reproductions of specific
publications on an individual basis from:
Photoduplication Service
Library of Congress
Washington, D.C. 20540
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1. The Economic Indicators Weekly Review provides up-to-date information
on changes in the domestic and external economic activities of the major non-
Communist developed countries. To the extent possible, the Economic Indicators
Weekly Review is updated from press ticker and Embassy reporting, so that the
results are made available to the reader weeks-or sometimes months-before receipt
of official statistical publications. US data are provided by US government agencies.
2. Source notes for the Economic Indicators Weekly Review are revised every
few months. The most recent date of publication of source notes is 20 October 1977.
Comments and queries regarding the Economic Indicators Weekly Review are
welcomed.
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 IN DUSTRIAtpffKt56XFd7 MV4/ITTo(:Ci "L)R6%B a ~ AQ~~1-3
West Germany
130
120
110
JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT
1972 1973 1974 1975 1976 1977
A-2
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United Kingdom
Italy
JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR, JUL OCT
1972 1973 1974 1975 1976 1977
Percent
Change
from
AVERAGE ANNUAL
GROWTH RATE SINCE
Percent
Change
from
AVERAGE ANNUAL
GROWTH RATE SINCE
LATEST
MONTH
Previous
Month
1970
1 Year
Earlier
3 Months
Earlierl
LATEST
MONTH
Previous
Month
1970
1 Year
Earlier
3 Months
Earlierl
United States
OCT 77
0.3
3.6
6.7
2.4 =
United Kingdom
SEP 77
-0.6
0.4
-1.7
0.6
Japan
SEP 77
-0.1
3.7
3.3
-4.0
Italy
SEP 77
6.5
24
-2.2
-29.1
West Germany
SEP 77
-0.9
1.8
--0.9
3.4
Canada
AUG 77
0
3.9
2.7
0.3
France
SEP 77
1.6
3.3
1.6
- 4.2
Approved For Release 2004/10/08 : CIA-RDP79B00457A000300070001-3
 Approved For Release 2004/10/08 : CIA-RDP79B00457A000300070001-3
UNEMPLOYMENT PERCENT OF LABOR FORCE
United States
1..2
JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT
1975 1976 1977
Approved For Release-2004/10/08 : CIA-RDP79B00457A000300070001-3
 Approved For Release 2004/10/08 : CIA-RDP79B00457A000300070001-3
United Kingdom
Italy (quarterly)
-A labor force survey based on new definitions of economic activity sharply raised the official estimate of Italian unemployment In first quarter 1977. Date for earlier periods thus are not comparable.
Italian data are not seasonally adjusted.
Canada
1 Year
Earlier
3 Months
Earlier
1 Year
Earlier
3 Months
Earlier
United States
OCT 77
6,872
7,564
6,744
United Kingdom
NOV 77
1,433
1,317
1,414
Japan
AUG 77
1,130
1,100
1,140 , -
Italy
77 111
1,692
776
1,432
West Germany
OCT 77
1,041
1,026
1,051
Canada
SEP 77
798
753
847
France
OCT 77
1,100
935
1,180
NOTE: Data are seasonally adjusted. Unemployment rates for France are estimated. The rates shown. for Japan, Italy and Canada are
roughly comparable to US rates. For 1975-77, the rates for France and the United Kingdom should be increased by 5 percent and
15 percent respectively, and those for West Germany decreased by 20 percent to be roughly comparable with US rates.
Approved For Release 2004/10/08 : CIA-RDP79B00457A000300070001-3
 Approved For Release 2004/10/08 : CIA-RDP79B00457A000300070001-3
DOMESTIC PRICES1 INDEX: 1970=100
United States
France
225
200
JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT
r% -7 '
 Approved For Release 2004/10/08 : CIA-RDP79B00457A000300070001-3
United Kingdom
Italy
France
OCT 77
SEP 77
OCT 77
Semilogarithmic Scale
Percent
AVERAGE ANNUAL
Percent
AVERAGE ANNUAL
Change
GROWTH RATE SINCE
Change
f
GROWTH RATE SINCE
LATEST
rom
Previous
1970
1 Year
3 Months
MONTH
Month
Earlier
Earlier
United Kingdom
OCT 77
0.6
14.6
17.8
7.9
OCT 77
0.4
13.7
14.1
6.0
Italy
AUG 77
0.5
15.6
14.3
4.6
OCT 77
1.1
13.2
16.6
11.9
SEP 77
0.1
10.0
9.5
9.3
0.1
5.4
3.8
-0.3
OCT 77
1.0
7.5
8.8
8.1
0.6
8.2
6.1
5.4
0.8
9.1
9.5
9.2
Approved For Release 2004/10/08 : CIA-RDP79B00457A000300070001-3
 Appro ee- For Release 2004/1018 CIA-RDP79BOO457AOOO3OOO7OOO1-3
RETAIL SALES '
United States
Japan
West Germany
France
United Kingdom
Italy
Canada
Seasonally adjusted.
Average
Annual Growth Rate Since
Percent Change
Latest from Previous 1 Year Previous
Quarter Quarter 1970 Earlier Quarter
77 III
77 II
77 II
76 IV
77 II
77 II
77 III
United States
Japan
West Germany
France
United Kingdom
Italy
Canada
Average
Annual Growth Rate Since
Percent Change
Latest from Previous 1 Year 3 Months
Month Month 1970 Earlier Earlier
Sep 77
Jun 77
Sep 77
Jun 77
Oct 77
Apr 77
Aug 77
Seasonally adjusted.
Average for latest 3 months compared with average for previous 3 months.
WAGES IN MANUFACTURING'
Average
Annual Growth Rate Since
Percent Change
Average
Annual Growth Rate Since
Latest from Previous 1 Year 3 Months
Period Period 1970 Earlier Earlier'
Perce
nt Change
Latest from
Previous 1 Year Previous
United States
Sep 77
Quarter Q
uarter 1970 Earlier Quarter
Japan
Aug 77
United States
77 III
West Ge
rmany
77 11
Japan
77 II
France
77 1
West Germany
77 II
United Kingdom
Aug 77
France
75 IV
40.1
Italy
Aug 77
United Kingdom
77 11
53.2
Canada
Aug 77
Italy
77 II
-27.6
Hourly earnings (seasonally adjusted) far the United States, Japan, and Canada; hourly wage
Canada
77 III
-4.2
rates far others. West German and French data refer to the beginning of the quarter.
Seasonally adjusted.
l Average for latest 3 months compared with that for previous 3 months.
I Year 3 Months I Month
Latest
Date
Earlbr
Earlier
Earlier
United States
Commerical paper
Nov 30
Japan
Call money
Dec 2
West Germany
Interbank loans (3 months)
Nov 30
France
Call money
Dec 2
United Kingdom
Sterling interbank loans (3 months)
Dec 2
Canada
Finance paper
Dec 2
Eurodollars
Three-month deposits
Dec 2
Approved For Release 2004/10/08 : CIA-RDP79BOO457AO00300070001-3
 EXPORT pW ved For Release 2004/10/08: Cl?
Us $
-RltJ7990H 000300070001-3
National Currency
Average
A
verage
Perce
nt Change
Annual Growth Rate Since
Perc
Annual Growth Rate Since
ent Change
Latest
Month
fro
m Previous
Month
1970
1 Year
Earlier
3 Months
Earlier
La
M
test
onth
fro
m Previous
Month
1970
1 Year
Earlier
3 Months
Earlier
United States
Japan
West Germany
France
United Kingdom
Italy
Canada
Sep 77
Jul 77
Sep 77
Sep 77
Oct 77
Jul 77
Aug 77
0.6
-1.8
- 1.5
-1.4
1.9
1.7
3.0
9.4
10.4
11.0
11.2
11.1
11.3
9.9
3.0
10.4
6.2
8.3
23.2
13.3
1.5
-0.8
-4.4
3.6
12.1
26.1
18.9
17.1
United States
Japan
West Germany
France
United Kingdom
Italy
Canada
Se
Ju
Se
S
O
Ju
A
p 77
l 77
p 77
ep 77
ct 77
l 77
ug 77
0.6
-1.0
-1.2
-0.9
0.4
1.4
3.9
9.4
6.3
4.2
9.4
15.9
16.9
10.2
3.0
3.1
-1.2
8.5
14.3
19.4
10.2
-0.8
-5.3
-2.3
10.1
13.6
16.4
27.0
IMPORT PRICES
National Currency
Average
Annual Growth Rate Since
Perce
nt Change
Latest from
Month
Previous
Month
1 Year 3 Months
1970 Earlier Earlier
End of
B
illion US $
Jun 1970
1 Year
Earlier
3 Months
Earlier
United States
Sep 77
0
13.2
8.1
7.2
United States
O
ct 77
19.0
14.5
19.0
18.9
Japan
O
ct 77
19.6
4.1
16.6
17.6
Japan
Jul 77
-1.5
10.5
-2.3
7.0
W
G
S
77
34
5
8
8
35
0
34
3
West Germany
Sep 77
-2.3
4.0
-1.3
-5.5
ermany
est
ep
.
.
.
.
France
S
ep 77
10.0
4.4
9.4
10.2
France
Sep 77
- 1.0
10.1
7.4
0.6
United Kingdom
O
ct 77
20.2
2.8
4.8
13.4
United Kingdom
Oct 77
-0.4
18.7
8.3
-6.3
Italy
S
ep 77
10.5
4.7
5.1
9.7
Italy
Jul 77
-1.6
20.7
15.3
10.4
Canada
A
ug 77
4.8
4.3
5.6
5.2
Canada
Aug 77
3.2
9.3
15.5
31.3
Latest
Period Million US $ 1977 1976 Change
United States' 77 II -4,605 -8,763 1,070 -9,833
Japan Sep 77 1,142 6,473 1,815 4,658
West Germany Oct 77 1,133 1,252 1,549 -297
France 77 II -438 -2,101 -2,052 - 50
United Kingdom 77 II -474 -1,490 -1,277 -213
Italy 77 II 161 -768 -2,859 2,091
Canada 77 II -1,407 -2,956 -3,088 132
'Converted to US dollars at the current market rates of exchange.
' Seasonally adjusted.
Spot Rate
As of 25 Nov 77
US $ 1 Year 3 Months
Per Unit 19 Mar 73 Earlier Earlier 18 Nov 77
Japan (yen) 0.0042 9.57 22.56 11.27 1.41
West Germany 0.4511 27.39 9.49 4.41 1.11
(Deutsche mark)
France (franc) 0.2064 -6.35 3.30 1.20 0.13
United Kingdom 1.8175 -26.15 8.31 4.35 -0.36
(pound sterling)
Italy (lira) 0.0011 -35.54 -4.92 0.62 0.18
Canada (dollar) 0.9024 -9.55 -10.99 -3.04 0.09
BASIC BALANCE'
Current and Long-Term-Capital Transactions
Cumulative (Million US $)
Latest
Period Million US $ 1977 1976 Change
United States No longer published'
Japan Sep 77 611 4,398 1,732 2,666
West Germany Sep 77 -1,341 -4,642 1,655 -6,297
France 77 I -1,354 -1,354 -2,015 660
United Kingdom 77 II 1,409 2,075 -1,119 3,195
Italy 77 11 97 -395 -2,963 2,568
Canada 77 II -217 -791 1,701 -2,493
' Converted to US dollars at the current market rates of exchange.
' As recommended by the Advisory Committee on the Presentation of Balance of Payments
Statistics, the Department of Commerce no longer publishes a basic balance.
1 Year 3 Months
19 Mar 73 Earlier Earlier 18 Nov 77
United States 3.89 - 0.94 -2.04 -0.53
Japan 15.28 24.33 10.59 1.20
West Germany 29.12 6.91 2.67 0.58
France -9.18 - 0.61 -1.44 -0.56
United Kingdom -27.59 7.07 3.22 -0.90
Italy -39.83 -9.17 -1.86 -0.44
Canada -8.50 -12.42 -3.99 -0.04
' Weighting is based on each listed country's trade with 16 other industrialized countries to
reflect the competitive impact of exchange rate variations among the major currencies.
Approved For Release 2004/10/08 : CIA-RDP79B00457A000300070001-3
 Approved For Release 2004/10/08 : CIA-RDP79B00457A000300070001-3
FOREIGN TRADE BILLION US $, f.o.b., seasonally adjusted
United States
14.0
12.0
10.0
Japan
West Germany
10.0
8.0
Approved For Release 2004/10/08 : CIA-RDP79B00457A000300070001-3
 Approved For Release 2004/10/08 : CIA-RDP79B00457A000300070001-3
United Kingdom
3.3%
3.2%
LATEST MILLION
MONTH US $ 1977 1976 CHANGE
United States
Japan
West Germany
France
JAN APR JUL OCT JAN APR JUL OCT JAN
OCT 77
Balance
SEP 77
Balance
OCT 77
Balance
OCT 77
Balance
9,190 99,774 94,870 5.2??
12,288 122,170 98,852 23.6%
-3,098 -22,396 -3,982 18,414
6,439 58,430 48,305 21.0?o
5,183 45,838 40,860 12.2%
1,256 12,592 1,445 5,147
8,763 94,989 83,081 14.3?o
6,798 77,617 68,099 14.0%
1,965 17,372 14,982 2,390
5,768 53,474 46,978 13.8?'?
5,742 55,573 50,154 10.8%
26 -2,098 -3,176 1,078
APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT
1975 1976 1977
LATEST MILLION
MONTH US $
United Kingdom OCT 77
Balance
Italy SEP 77
Balance
Canada SEP 77
Balance
CUMULATIVE (MILLION US $)
1977 1976 CHANGE
4,894 46,020
4,839 48,927
3,608 32,833
3,357 32,430
251 403
36,432 26.3?%
41,814 17.0%
-5,383 2,475
26,553 23.7?o
29,079 11.5%
-2,526 2,929
3,270 31,191 28,891 8.0%
3,215 29,858 28,520 4.7%
Approved For Release 2004/10/08 : CIA-RDP79B00457A000300070001-3
 Approved For Release 2004/10/08 : CIA-RDP79B00457A000300070001-3
FOREIGN TRADE PRICES IN US $1
United States
Japan
INDEX: JAN 1975 =100
105
104
West Germany
106
JAN APR JUL OCT JAN APRJULOCT JAN APR JUL OCT JAN APR JUL OCT
1974 1975 1976 1977
lExport and import plots are based on five month weighted moving averages.
A-12
Approved For Release 2004/10/08 CIA-FRDP'79E
 Approved For Release 2004/10/08 : CIA-RDP79B00457A000300070001-3
United Kingdom
109
107
Approved For Release 2004/10/08 : CIA-RDP79B00457A000300070001-3
 Approved QrgZ!i tb 28c QWtbPIA PC4UNTO003 0070001-3
RIES
Brazil
India
South Korea
Mexico
Nigeria
Taiwan
Average
Annual Growth Rote Since
Percent Change
latest from Previous 1 Year 3 Months
Period Period 1970 Earlier Earlier ~
76 11
Jun 77
Aug 77
Jul 77
76 IV
Sep 77
0.1
0.2
4.7
1.0
0.2
7.2
11.0
5.1
22.7
6.0
11.3
15.0
10.7
7.1
13.6
4.7
9.0
12.3
0.4
-0.3
49.3
21.6
0.7
-2.0
Seasonally adjusted.
Average for latest 3 months compared with average for previous 3 months.
-12.4
8.0
0
1.4
-0.1
-0.3
2.0
Brazil
India
Iran
South Korea
Mexico
Nigera
Taiwan
Thailand
Average
Annual Growth Rate Since
Percent Change
latest from Previous I Year
Month Month 1970 Earlier
Oct 77
Jun 77
Aug 77
Sep 77
Sep 77
Apr 77
Sep 77
Aug 77
2.7
0.6
-0.3
0.3
1.8
2.9
-1.9
1.1
42.1
10.0
30.7
9.2
32.2
16.0
10.4
9.9
Brazil
India
Iran
South Korea
Nigeria
Taiwan
Thailand
Average
Annual Growth Rase Since
Percent Change
Latest from Previous 1 Year
Period Period 1970 Earlier
Jul 77
Feb 77
Aug 77
77 II
May 76
Aug 77
Dec 76
27.2
8.3
12.3
14.5
15.0
15.2
10.9
8.7
16.3
10.4
35.0
8.7
27.3
11.8
13.3
Average
Annual Growth Rate Since
Brazil
India
Iron
South Korea
Mexico
Nigeria
Taiwan
Thailand
Brazil
India
Iran
South Korea
Mexico
Taiwan
Thailand
May 77
Jun 77
Jul 77
Aug 77
Aug 77
Apr 77
Jul 77
Jun 77
Latest
Month
36.3
12.0
28.4
31.6
18.7
36.9
24.4
13.1
Average
Annual Growth Rate Since
Percent Change
Latest from Previous 1 Year
Month Month 1970 Earlier
Sep 77
Sep 77
Aug 77
Sep 77
Sep 77
Sep 77
Jul 77
Brazil
India
Iran
South Korea
Mexico
Nigeria
Taiwan
Thailand
May 77
Oct 77
Sep 77
Aug 77
Mar 76
Aug 77
Aug 77
Sep 77
Percent Change
from Previous
Month
1.5
0.3
-0.2
2.2
0.7
-2.3
1.4
-1.8
1.6
0
-0.6
0.7
0.5
-0.5
1.0
5,806
4,886
11,445
3,765
1,501
4,610
1,416
1,925
28.4
8.9
18.7
8.5
12.3
5.3
13.1
Approved For Release 2004/10/08: CIA-RDP79B00457A00030
1,013
1;006
208
602
695
148
531
978
27.1
9.2
10.3
16.3
16.5
8.9
10.1
I Year
Earlier
41.7
16.9
26.6
39.9
30.1
47.5
27.1
12.0
34.4
4.8
17.7
9.4
44.6
3.8
7.1
1 Year 3 Months
Earlier I Earlier
3,401
2,778
9,642
2,263
1,479
5,842
1,586
1,989
5,878
4,395
11;025
3,519
1,533
4,740
1,331
2,017
 Approved For Release 2004/10/08 : CIA-RDP79B00457A000300070001-3
Latest 3 Months
Percent Change from
3 Months 1 Year
Latest Period
Earlier'
E
arlier 1977
1976
Change
Jul 77 Exports
110.6
27.2
7,225
5,312
36.0%
Jul 77 Imports
22.8
-2.0
6,873
6,989
-1.7%
Jul 77 Balance
352
-1,677
2,029
Jun 77 Exports
-46.9
6.3
2,707
2,485
8.9%
Jun 77 Imports
-55.4
-5.8
2,094
2,117
-1.1%
Jun 77 Balance
612
368
244
Iran
Aug 77 Exports
-42.5
-5.7
15,621
14,785
5.7%
Aug 77 Imports
- 18.2
-4.8
8,402
8,351
0.6%
Aug 77 Balance
7,219
6,434
785
South Korea
Aug 77 Exports
43.9
20.3
6,217
4,838
28.5%
Aug 77 Imports
16.4
18.8
6,265
5,121
22.3%
Aug 77 Balance
- 47
-283
235
Mexico
Aug 77 Exports
-46.9
30.5
2,743
2,125
29.1%
Aug 77 Imports
101.8
-16.5
3,260
4,070
- 19.9%
Aug 77 Balance
-517
-1,945
1,428
Nigeria
Jul 77 Exports
18.3
22.8
2,853
2,259
26.3%
Dec 76 Imparts
86.7
8.4
2,531
1,990
27.2%
Dec 76 Balance
1,502
1,102
399
Taiwan
Sep 77 Exports
28.7
9.0
6,637
5,902
12.5%
Sep 77 Imports
-13.9
6.1
5,722
5,111
11.9%
Sep 77 Balance
915
790
125
Thailand
May 77 Exports
39.8
21.1
1,506
1,210
24.5%
May 77 Imports
62.6
21.7
1,624
1,322
22.8%
May 77 Balance
-117
-112
-5
Approved For Release 2004/10/08 : CIA-RDP79B00457A000300070001-3
 Approved For Release 2004/10/08 : CIA-RDP79B00457A000300070001-3
AGRICULTURAL PRICES MONTHLY AVERAGE CASH PRICE
WHEAT
7.5 $ PER BUSHEL
0 1-30 NOV I I 0 0 1-30 NOVII 0
1973 1974 1975 1976 1977 1973 1974 1975 1976 1977f
SOYBEANS
$ PER BUSHEL
0 1-30 NOV I I 0
1973 1974 1975 1976 1977
30 NOV 0.4901
22 NOV 0.4910
OCT 77 0.5003
NOV 76 0.7702
30 NOV 2.22
22 NOV 2.15
OCT 77 1.89
NOV 76 2.35
30 NOV 6.82
22 NOV 6.70
OCT 77 6.31
NOV 76 7.94
COFFEE /TEA
$ PER METRIC TON 400 C PER POUND
TEA
2,000 London Auction
1-30 NOV I I
COFFEE
Other MildsArabicas,
ex-dock New York
350
17 OCT
102.3
30 NOV
200.83
10 OCT
96.9
22 NOV
205.74
300
OCT 77
96.9
OCT 77
170.90
1,500
NOV 76
78.0
NOV 76
182.99
6.66
1-30 NOVA
1976. 1977 l
Approved For Release 2004/10/08 : CIA-RDP79B00457A000300070001-3
 Approved For Release 2004/10/08 : CIA-RDP79B00457A000300070001-3
No. 2 Medium Grain, 4% Brokens,
f.o.b. mills, Houston, Tex.
21 NOV 21.50
14 NOV 21.50
OCT 77 17.06
NOV 76 14.00
SOYBEAN MEAL
$ PER TON
400
A
0 1973 1974 1975
FOOD INDEX
1970=100
1-21NOV11
1976 1977
22 NOV NA
16 NOV NA
OCT 77 NA
NOV 76 150.51
1-22 NOVl1
1976 1977
- $ PER METRIC TON
SOYBEAN OIL
Crude, Tank Cars, f.o.b. Decatur 1,000
30 NOV 0.2128
22 NOV 0.2278
OCT 77 0.1876 800
30 NOV 0.2200
2,000 0 1V 22 NOV 0.2050
OCT 77 0.2017
NOV 76 0.1980
1-30 NOV
1976 1977
NOTE: The food index is compiled by the Economist for 16 food commodities
which enter international trade. Commodities are weighted by
3-year moving averages of imports into industrialized countries.
Approved For Release 2004/10/08 : CIA-RDP79B00457A000300070001-3
4j Percent Bulk, f.o.b. Decatur
30 NOV 152.50
22 NOV 161.00
OCT 77 136.41
NOV 76 180.15
1-30 NOV1I 100
1973 1974 1975 1976 1977
SOYBEAN OIL/PALM OIL
6,000 0.4
 Approved For Release 2004/10/08 : CIA-RDP79B00457A000300070001-3
INDUSTRIAL MATERIALS PRICES MONTHLY AVERAGE CASH PRICE
140 t PER POUND
LEAD
45 c PER POUND
30 NOV
54.9
60.6
30 NOV
29.6
32.0
22 NOV
54.4
60.6
22 NOV
28.3
32.0
OCT 77
54.8
60.6
OCT 77
27.9
31.0
NOV 76
58.2
70.6
2,500
35
NOV 76
20.8
26.0
53.6
1-30 NOV II 1,000
40 1973 1974 1975 1976 1977 10 1973 1974
ZINC
100 t PER POUND
LME US
30 NOV 23.8 31.0
21 NOV 24.3 31.0
OCT 77 23.1 32.3
NOV 76 27.3 37.0
TIN
S PER METRIC TON 650 C PER POUND
2,000
550
`1,500
1-30 NOV I I
1-30 NOV I I
LME US
30 NOV 575.4 616.'.:
22 NOV 586.8 606.3
OCT 77 549.6 607.9
NOV 76 368.6 407 7
MP USo
30 NOV 167.0 163.4
22 NOV 167.0 169.9
OCT 77 167.0 1x6.0
NOV 76 167.0 167.5
1.30 NOV I I 4,000
1977
50 150
Us
23 NOV 49.0
22 NOV 48.3 .125 225
OCT 77 51.0
NOV 76 63.8
1-23 NOV I
1973 1974 1975 1976 1977
100 i'97 ' 1974
150 1973 1974 _.. 1975 1976
1-30 NOV
II
1975 1976 1977
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SELECTED MATERIALS
ALUMINUM
Major US Producer
E per pound
53.00
51.00
48.00
41.00
US STEEL
Composite
$ per long ton
359.36
339.27
327.00
306.72
IRON ORE
Non-Bessemer Old Range
$ per long ton
21.43
21.43
20.51
18.75
CHROME ORE
Russian, Metallurgical Grade
$ per metric ton
150.00
150.00
150.00
150.00
CHROME ORE
S. Africa, Chemical Grade
$ per long ton
58.50
58.50
42.00
44.50
FERROCHROME
US Producer, 66-70 Percent
t per pound
41.00.
43.00
43.00
53.50
NICKEL
Composite US Producer
$ per pound
2.10
2.40
2.41
2.20
MANGANESE ORE
48 Percent Mn
$ per long ton
72.24
72.00
72.00
67.20
TUNGSTEN ORE
Contained Metal
$ per metric ton
22,131.15
23,106.00
18,082.00
10,799.00
MERCURY
NY
$ per 76 pound flask
134.00
141.90
134.50
125.26
SILVER
LME Cash
E per troy ounce
473.86
469.85
436.90
431.93
GOLD
London Afternoon Fixing Price $ per troy ounce
157.72
146.60
130.44
142.42
60 C_ PER POUND
INDUSTRIAL MATERIALS INDEX
300 -
1970=100
LUMBER INDEX6
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 lb 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.
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