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December 19, 2016
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May 23, 2006
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Publication Date: 
February 19, 1974
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PDF icon CIA-RDP85T00875R001900010186-2.pdf739.6 KB
~r.I jIN~ Approved For Release 2006/0i1'26t't1Af. DP85T00875R0019Q01-144a 19 February 1974 MFJ1ORANDUrd FOR: Mr. Charles L. ?. acDonr.ld o \SIA/rD Room 5211 Department of the Treasury SUBJECT impact of Fsirher Oil Prices on South America 25X11 25X1 In response to your request of 14 February 1974, attached is information on the innact of higher oil prices on South America. If you have further questions, you may contact Attachment: As stated Distribution: (S-5942) Orig. & 1 - Addressee 1 - D/OER 1 - SA/ER 1 - D/D ?5X1A 1 - St/P 1 - D/LA 1 I OER/D/LA Approved For Release 2006/09/26 : CIA-RpP85T00875R001900010186-2 ? Approved For Release 2006/0~129 C]At-RDP85T00875R001900010186-2 Prices on South America 1. The impact of higher oil costs on South American countries in 1974 will vary. Growth and price stability will be impeded in some countries. Export earnings will,,rise sharply for others. Brazil, Chile, Paraguay, and Uruguay -- countries largely dependent on foreign oil supplies -- will suffer most. Argentina, Colombia, and Peru, which produce most of their own requirements, will be only moderately affected. Bolivia, Ecuador, and Venezuela, net exporters of oil, will gain substantially from higher foreign exchange earnings and increased royalty and tax payments by oil companies. 2. Except for the petroleum exporting countries, growth rates in 1974 are likely to fall. Even countries which are relatively self-sufficient will suffer some adverse impact of higher oil prices. Many imports, particularly petroleum-based products, will be more expensive. International demand for raw material and manufactured exports will fall $f the sharp rise in oil prices slows growth in developed countries. Inflationary pressures will probably intensify and government measures to counter them will moderate economic growth policies. 3. If higher prices prevent maintenance or expansion of oil imports, economic growth will be further reduced. Petroleum consumption has risen steadily in the region, at Approved For Release 2006/09/26 : CIA-RPP85T00875R001900010186-2 ? Approved For Release 2006/0%1;9.',' _!g} MIDP85T00875R001900010186-2 rates ranging from 8% for Colombia to 12% for Brazil. Because much of the region's electric power ann transport media are fueled by oil, growth in industrial output is likely to slow and transportation may be disrupted. Few readily available substitute energy sources exist. % Countries Largely Dependent :on Foreign Sources 4. The oil import.bill for Brazil, Chile, Paraguay, and Uruguay coulca reach $2.7 billion during 1974,'equal to about 30% of their export receipts. Brazil would account for an estimated $2.2 billion and Chile nearly all the remainder. Imports to Paraguay and Uruguay are small. Brazil's projected oil imports will cost about 30% of projected export earnings and Chile's about 23?. Uruguay's imports will equal about 45% of export earnings. Because Paraguay's requirements are small, oil imports may be less than 10% of projected export earnings. Brazil's strong reserve position and export capability will enable it to absorb the higher oil import costs. In contrast, higher oil prices will have a particularly detrimental effect on the economies of Chile and Uruguay because they must import other critical food and raw materials as well and their export industries will not be able to expand revenues sufficiently to match rising import costs. Balance of P