ARGENTINA: ECONOMIC PROSPECTS OVER THE NEXT SEVERAL MONTHS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R002000010025-8
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 5
• Document Creation Date: December 12, 2016
• Document Release Date: May 15, 2000
• Sequence Number: 25
• Publication Date: November 1, 1974
• Content Type: MF

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 Argentina: Economic Prospects Over the Next
Several Months
.6?4 741
Economic Policy
1. The.ascendency of, Gomez Morales as Minister of
Economy has generated xsnewed hope for improved government
financial management. The government,, however, continues
to rely heavily on the support of organized labor and will
be unable to resist renewed demands for wage increases. At
the same time, Morales will be forced to pay lip service
to the Social Pact until its expiration in mid-1975 and will.
have to hold the line on price hikes generally, limiting
increases to those sectors most pressed by higher costs and
poor profits. -Morales' biggest challenge will be the curtailment
of public sector spending. He recognises that government
deficits are the- major source of Inflationary pressures in
Argentina and has called for a campaign of public and private
austerity. Nevertheless, vested interests in state enterprises
and the bureaucracy will join continuing demands for increased
levels of government services that will frustrate most efforts
at austerity.
2. Apart from relaxation of some price controls, the
most promising change in policy may come in agriculture. The.
agrarian reform bill is being rewritten and could prove to
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be the F.oy-to stimulating increased grain production in
years to come. Such a development would ensure continued
-strength of the external sector and would provide the ncedod
foreign exchange to finance industrial development while
covering the nation's heavy external 'debt burden.
Economic Performance
3. Despite continued financial mismanagement, high
consumer demand will generate economic growth of 5-7b per
annum. The inflation rate will probably accelerate to around
40%, however, as prices are partly adjusted to higher costs.
In the external accounts, continued high grain and sugar
prices should offset exchange losses from lower meat and wool
exports, while reduced oil consumption and renegotiation of
prices for Libyan crude imports should cut the nation's
petroleum import bill by some 15% to around $450 million per
annum.
4. Private investment. will continue to *stagnate in most
sectors as wages outstr_ ire prices. While key sectors. such as
the automotive industry have been given a temporary reprieve
from bankruptcy by authorizations of price hikes, many firms
will continue to face a bleak future. Excess demand and lack
of replacement capital will continue to generate sporadic
shortages of consumer and capital goods but major disruptions
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of industrial production arc unlikely in the near term.
Continued deterioration of the business climate, however,
could result in production falloffs during the latter part
of 1975 as the low level of investment during the past 18
months begins to be felt. The government would then be
forced to choose among (a) complete reversal of economic
policy to stimulate industrial recovery; (b) state takeover
of key private facilities operating at the brink o#
insolvency; and (c) acceptance of slowed growth, rising
unemployment, and a budding recession.
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 Approved For Release 2001/09/28 : CIA-RDP85T00875R002000010025-8
29 November 1974
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