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December 16, 2016
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December 8, 2004
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January 29, 1975
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25X1 Approved For Release 2005/01/10 : CIA-RDP86T00608R000600070004-6 25X1 .Attachment: As stated 29 January 1975 Distribution: (S-08603) Orig. & 1 - Addressee 25X1 (.L 1'RAL INTELLIGENCE AGENCY WASHINGTON, D.C. 20505 DES S~ab8le0'~~'1S Bureau of rconc:nic and Pusiness Affairs Office of Development finance Department of State 141:t10RANDU? FOR: ?fir. Robert Gc1hard ' for 1975 SUBJECT : Chile: valance of Payments Prospects directed to In response to your request, we are transmitting our assezsment of Chile's 1975 balance of payments prospects. Queries concerning this report should be 25X1 OffIce o Econc is ..esearch 1 - D/OER OER/D/LA: (29 Jan 5 Approved For Release 2005/01/10 : CIA-RDP86T00608R000600070004-6 25X1 Approved For Release 2005/01/10 : CIA-RDP86T00608R000600070004-6 Chile: Balance-of-Payments Outlook for 1975 1. The damage to prospective export earnings caused by low world market copper prices will cause serious balance-of-payments difficulties for Chile in 1975. Without official ecorcmic assistance. beyond levels presently in sight, compensation payments for L'S companies may be jeopardized, and Santiago certainly will be forced to drastically cut back imports, with harsh consequences for economic growth. We estimate the remaining financing gap at no less than $258 million. 2. Weak den-and by the industrial nations and large world stocks overhanging the market almost certainly will keep copper prices low throughout 1975. We expect 1975 copper prices to average no more than 65 cents a pound compared with a 1974 average of one dollar. At the same time, Chile has agreed with the other CIPE'C countries to reduce copper export volume about 10% from the 1974 level to 810,000 metric tons. Under these circumstances, Chile's total export earnings will amount to no more than $1.5 billion, down 25% from last year. If copper prices average only 60 cents a pound -- as is quite possible -- total 1975 export earnings would amount to only $1.4 billion. CCgig L'~Tl~t Approved For Release 2005/01/10.: CIA=RDP86T00608R000600070004-6 Approved For Release 2005/01/10 : CIA-RDP86T00608R000600070004-6 3. The estimated financing gap assumes that a 10% cut in imports from last year to $2 billion will be effected by the military government. Such a ctit,, probably the maximum that can be made without serious adverse affect on economic growth, is now under consideration. Since sizable inventories were acdumulated under a liberalizes? import policy, most observers believe imro.rts of raw materials and intermediate goods probably could be cut ti substantially without serious damage. Moreover, Santiago probably could restrict oil imports to last year's level by introducing rationing ?or by raising oil prices to consumers. Such efforts will be further aided by this year's improved harvest and by continuing US PL-480 assistance, which together will permit a 13% cut from last year in food imports. . 4. With an import cut of this magnitude, Chile's 1975 current deficit still is likely to climb to $800-$900 million compared with some $440 million in 1974. A considerable part of the increase is expected to be offset by an improvement in the capital account, however. New suppliers credits this year are expected to push inflows of private capita]. sharply upward, to about $400 million. At the same time, presently contemplated official assistance will total $307 million, as follows (million US $): C6111it cl* ?.4 -77777 7. 7 C, VIM Approved For Release 2005/01/10 : CIA-RDP86T00608R000600070004-6 Approved For Release 20661164 (diA RDP86T00608R000600070004-6 US AID and PL-480 30 IbT 187' World Bank 80 Finally, Chile has a good chance of obtaining about $200 million in debt relief at the ::arch reeting of the Paris Club. 5. This leaves a financing gap of $25E-$358 million. Since foreign reserves a.:.eunt t7-only $195 r.illion Chile will be forced to further curtail z.pcrts unless additional financing can-be obtained. Because Chile's poor credit standing precludes bcrrowing fro-: cc:= ercial sources, such financing will have to core frci official sources. In view of the milita_-v cover _^ent's blemished international image, financirc frcn even official sources is far fr= assured. CIA/OER 29 January 1975 ~~rt~-;,~I?I Approved For Release 2005/01/10 : CIA-RDP86T00608R000600070004-6 Approved For Release 200,NQ1((Qj.CIA=RDP86T00608R000600070004-6 Millions of Dollars 1975 Averace Price 1974 E5 60c Current account (net) -441 -760 -850 Exports (fob) 2,037 1,535 1,445 Copper 1/ (1,560) (1,010) (920) Other (477) (525) Imports (cif) -?,234 -2,01 Foodstuffs (-472) (-410) Petroleum, and products (-348) (-350) Other (-1,414) (-1,255) Services (net) -248 -300 Transfers (net) 4 20 Capital account (net) -71 502 Private -379 410 Amortization (-638) (-415) 2/ Debt relief - 424 200 Overall deficit -88 -258 -348 1. Net copper excorrs ass,=..e an 8.5 cer.:s cer pound disccunt from the. copper wirebar :rice CIF Europe, to allow for quality deviation, freight and insurance. 2. Includes ccr.pensation paynents to foreign companies for properties nationalized in Chile. Approved For Release 2005/01/10 : CIA-RDP86T00608R000600070004-6