BALANCE OF PAYMENTS POSITIONS OF LATIN AMERICAN COUNTRIES FOR 1973 AND 1974

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86T00608R000600070012-7
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 27
• Document Creation Date: December 16, 2016
• Document Release Date: December 8, 2004
• Sequence Number: 12
• Publication Date: April 17, 1974
• Content Type: MFR

 C~%Z"z \Ss.~ - a$cp.k -1- 7s
17 April 197A.r
MEMORANDUM FOR TIIE REC .
SUBJECT: Balance of Payments Positions of
Latin American Countries for 1973 ,,..~
and 1974
Approved For Release 2005/01/10: CIA-RDP86T00608R000600070912-70 ( / ?
STAT
On 14 April 1975,
in a telephone
conversation, gave the attached information to Tim
Attachment:
As stated
Distribution: (S-08617)
1 - D/OER
Oftice of Economic Research
(16 Apr 75)
Ur irC!AL USE U;`;LY
't .
Approved For Release 2005/01/10 : CIA-RDP86T00608R000600070012-7
STAT
STAT
 Appfoved For Release'2005/01/10: CIA-RDP86T00608R000600070012-7
Balance of Payments Position of Latin American OPEC
Members and 19 Other Latin American Countries
Million US
1973
1974
Venezuela
543
4,009
Ecuador
98
109
19 other' countries
3,448
693
1. The strong positive balance of payments position
of most Latin American countries in 1973 reflected particularly
good prices and world markets for most commodity and new
manufactured exports from the region. For example, wheat,
other grains, and such metals as copper were unusually strong.
2. The balance of payments positions of most Latin
American countries deteriorated sharply in 1974 because of
high oil prices and recessions in industrial nations. For
the first half of the year, most countries' balance of
payments were cushioned by continuing strong commodity markets.
In the last half of the year, however, most corm-nodities'
prices and volumes traded in world market began to drop.
Thus, the balance of payments position deteriorated by nearly
$2.8 billion.
3. In contrast, of course, the balance of payments of
the Latin American OPEC members improved sharply in 1974
because of the quadrupling of world oil prices.
^r?.n.1 USE 1 1 :L:nL '' `X,
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 r 1 (J' I t t i
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4. The balance of payments position of most Latin
American countries is likely to deteriorate further in
1975. Commodity prices are expected to remain stagnate
for most of the year. In some cases shipments are being
cutback in an attempt to boost prices or because of
production problems at home. Meanwhile, prices of manufactured
imports are higher this year. The region's oil bill continues
to be a drain.
0FFiC
Approved For Release 2005/01/10 : CIA-RDP86T00608R000600070012-7
 Approved For Relo
Nigeria
With a GDP of more than $20 billion, Nigeria is
the economic giant of Black Africa. in addition to
being the sixth largest petroleum producer in the world,
Nigeria is an imrortant producer of cocoa, rubber,
palm products and peanuts. Despite its potential,
however, Nigeria remains underdeveloped with most areas
of the country deficient in social services even by
LDC standards. Even its burgeoning oil income is not
large when related to the needs of its eighty million
people.
Petroleum production now dominates Nigeria's economy.
In 1974 it provided 92% of exports and was the primary
factor in the 65% rise in GDP to $22.6 billion. Proved
oil reserves amount to about 20 billion barrels, representing
25 years of production at the current rate. Potential
reserves are believed to be much larger. In addition,
long-term prospects are favorable for export of natural
gas, reserves of which are estimated at 40 trillion
cubic feet.
Oil production has removed the financial constraint
on Nigerian development. Nigeria now has $6 billion
in foreign exchange reserves, and will probably continue
to accumulate additional reserves through the end of
the decade. If oil exports grow slowly in volume. and
price, and imports grow at 15%-20% annually, Nigerian
current account surpluses could total $30 to $40 billion
by 1980.
Nigerian oil production and prices increased steadily
until recently. In March Nigeria fell into line with
other OPEC members who have been reducing the price of
their high quality, short haul crudes. Government
take fell from about $11. CO a barrel in December to
$10.56 for the first half of 1975. In addition, Nigerian
crude oil production marked its fifth straight month
of decline in March, averaging only 1.7 million b/d.
This is its lowest level since January 1972. With its
sizable reserves and limited spending, reduced current
income will probably have no impact on Nigerian development
plans for some time.
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 Approved For Rele~
General Gowon formally launched Nigeria's ambitious
new Third National Development Plan (1975-1980) in
March. The plan calls for investments of $48 billion --
$32 billion in the public sector and $16 billion in
the private sector. Almost half of public sector investment
is slated for transport ($12 billion) and industry
($6 billion). Other priority areas are mining and
quarrying, education, agriculture, housing, communications,
power and health care. Private sector investment is
to be concentrated on building and construction, industry,
distribution and agriculture. Major planned industrial
projects include two oil refineries, an LNG plant,
a petro-chemical complex, fertilizer plants, an iron
and steel plant,.cement factories and aW.omobile and
truck assembly plants. Gowon called for active participation
of foreign investors and experts in carrying out the
plan and promised to reduce administrative red tape
and foreign labor quotas in order to encourage it. At
the same time, Gowon called for greater Nigerian participation
on the managerial and policy levels of joint projects
between local and foreign firms. To help realize this
goal he said that Lagos will negotiate with "friendly
countries" for overseas technical training of Nigerian
students at Nigeria's expense.
The agricultural sector is the key to balanced
growth outside the petroleum sector. Although agriculture
takes top priority in the current plan, actual development
activities will be hampered by the difficulty of reaching
millions of small farmers practicing traditional agriculture.
Despite its declining share of GDP and its slow growth
rate, however, agriculture remains the backbone of
the economy. It continues to employ over half of the
labor force and makes the country almost self sufficient
in food. Crop yields remain low, however, because of
the continued use of primitive methods.
The development of agriculture is also necessary
if Nigeria's large domestic market is to be developed
to support indigenous industry. Lagos has already
taken several measures to increase both rural and urban
incomes. A combination of lowered export taxes and
increased producer prices for crops has been instituted
to increase farm incomes. The government also has plans
to establish several development institutions to provide
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 Approved For Release
financing for indigenous businesses and has significantly
increased transfers to the states to enable them to
expand their development activities. Government is
the largest employer of salaried personnel, and in
December 1974 announced new wage structures that more
than doubled the minimum annual wage in the public
sector.
The task of spreading the oil wealth throughout
the economy will be handicapped by a severe shortage
of indigenous administrative and technical skills. As
development emphasis shifts from relatively capital-
intensive infrastructure expansion to the more labor-
intensive sectors of agriculture, health and education,
the shortage of trained manpower will become even more
evident.
U.S. aid to Nigeria has focused on this problem.
Although the volume of U.S. economic assistance in dollar
terms has decreased throughout the 1970's -- down to
only $8 million in FY 1974 --, it has addressed the
critical areas of manpower and rural development.
U.S. assistance in the past has included such projects
as: upgrading planning units of agricultural ministries,
developing research and extension programs at agricultural
colleges, developing a faculty of veterinary medicine,
training in project development and training of educational
leaders and administrators. In view of Nigeria's growing
financial resources, the Third Development Plan notes
that the government plans to review its technical assistance
agreements to ensure that the flow of experts is not
hampered by suppliers' budgetary limitations. Where
necessary Lagos will bear the costs of foreign expertise
or training either in whole or in part.
CIA/OER
30 April 1975
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 Approved For Release 2005/01/10: CIA-RDP86T00608R000600070012-7
V.0. OV(6S(AS LOANS AND GRANTS . C21LIOATI(>1S M3 LOAM AUTIIDt7ZATILm
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Approved For Release 2005/01/10 : CIA-RDP86T00608R000600070012-7
 Approved For Release 2005/01/10 : CIA-RDP86T00608R000600070012-7
U.S. ECONOMLC AND MILITARY LOANS AND GRANTS
TO THE LESS DEVELG?ED COUNTRIES IN FY 1074
(Millions of Dollars)
ECONOMIC LOANS AND GRANTS
MILITARY LOANS AND GR&.TS
ECONOMIC ASSISTANCE (Official Dcwlopmrnt Asilancr)
Apwrcy for International
Food for Pence (Pt,IIic Law 480)
Com.
Dnveloonnt
mndrty
Taral
Ete.
Tilts 11
Cr..t;t
FMS
MAP
Trans-
MASF
REGION AND COUNTRY
nom.c
L
Total
T
l
Dar..tians
Export-
Imtxxt
Corpara
ion
Total
M;tisary
t
M.thary
Eco.
ota
I
I --
Bank
E.M,t
Military
Foreign
Ar..-
'tam
As_t-
Oy~cr
Military
nOmic
Eto?
o.
Of
,
Title I
rp:n.:y
Other
Loans
S.lc
Loa : S
Maiwry
air
#.crns
a,Ke
ti'r tary
?
loans L
Grants
Loans L
Crams
no
Assist-
Which
Loans)
Total
Total
S..ir
.1If-_
Il.au?f,
t
V
Paco
n
;
Pro5r.un
Grants
Sala
rrs
P `
Det me
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Grants
on"
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Food
Pa
C
""-
un-
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cm
C
A
'
& oil-
(Cradilsl
IGontsl
Stocks
F.rnoeJ
for Peace
in U.S.
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. ,miC
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(1c1 n t
ante
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ment
t
A
g"-n.
,
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(1)
(2)
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(4)
(5)
(6)
(7)
(B)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
(161
(17)
I15)
(11)
1201
(21)
Atria-(Cont41 ,
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0.7
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Jf ll<
!jLc cria : Prot ects for oinn 1?xchancje,
t arnincl:v and 1Expcnd1 tures
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Nigeria's proved oil reserves amount to about 20
billion barrels, representing 25 years of production
at the current rate. Potential reserves are believed
to be much larger. In addition, long-term prospects
are favorabl fox export of natural gas, reserves of
which are es'--imated at 40 trillion cubic feet.
Nigerian oil revenues reached $8.6 billion in 1974,
up from $2.4 billion in 1973 (see table). In 1980 oil
revenues could be more than $11 billion assuming exports
grow slowly and prices remain at today's level. In late
1974, however, after years orf steadily increasing oil
production, Lagos did reduce output -- ostensibly for
conservation reasons -- and is now producing at 80% of
capacity.
if imports grow at about 15% a year (Nigeria's
estimated absorptive capacity), Nigerian reserves --
$5.5 billion at the end of 1974 -- would total $20 billion
to $30 billion in 1980. After 1980 financial reserves
will probably begin to drop off as public expenditures
continue to grow and oil revenues level off. Lagos
could reduce its cash reserves prior to 1980 by investing
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large amounts of capital abroad. Nigeria also has an
outlet for its funds in lens fortunate neighbors who
are pressing for financial support.
Nigerian oil income is not large when related to
the needs of its 80 million people. Per capita income.
of only about $250 places Nigeria among the least developed
of countries. Nigeria has the potential over an extended-
period for a large expansion in investment and in imports.
The recently announced Third National Development Plan
(FY 1976-FY 1980) calls for investments pf $48.6 billion
of which $32.4 billion is to come from the public sector.
While well within the projected revenues of the government,
the projected expenditures appear to be well in excess
of the government's implementation capabilities. A
scarcity of managerial and technical manpower and inade
uat
q
e
-ti
institutions to administer `.~ development
projects will
limit th
i
e
ncrease in Nigerian investment for some time.
Public sector investment in FY 1975, for example, will
probably be less than $2.5 billion.
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Nigeria: Estimated Balance of Payments
Billion US $
1973
1974 1980
Exports of goods and services
3.4
9.5 13.5
Of which: oil revenues
(2.4)
(8.6) (11.5)
Imports of goods and services
3.5
4.6 10.5
Current account balance
".l
4.9 3.0
Year end total reserves
.6
5.5 20-30
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Incrcaned Oil Price. A Phr.rnt to Sub-Jnharan
Airic;in IJr_v for i:i. nC
Introduction
Sharply increased petroleum prices have not yet
had as dire an effect on the economies of the non-producing
African countries as was generally anticipated in early
1974. Increases in the prices of many major African
exports and the dependence by most of the African populations
on subsistence agriculture -- which requires no oil
inputs -- have cushioned the immediate impact. The
most damaging effect is against the countries long-term
potential for development. in addition, inflationary
rises in consumer prices, to which the high oil prices
have been a major contributor, have cut into the welfare
of most urban Africans. In the four sub-Saharan countries
with oil production -- Nigeria, Gabon, Angola and Congo --
development prospects have improved dramatically.
The African Gainers
Nigeria dominates sub-Saharan petroleum production
and has reaped by far the largest gains from it. With
production of 2.3 million b/d, it is now the world's
sixth largest oil producer and has followed the lead
of other OPEC countries in raising prices. Its reserves
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totalled more than $4 billion at the end of September
compared to a total of just $592 million at the and
of 1973. Nigerian government revenues from oil are
expected to total $9 billion in 1974 -- almost 4 times
the 1973 figure.
So far effects of the increased oil prices on the
other African producers has been mixed. Gabon's petroleum
production -- 150,000 b/d in 1973 -- has made it a rich
country by African standards. Its per capita income
of $900 is already the largest in black .Africa. Oil
revenues have risen from about $83 million in 1973 to
more than $500 million in 1974. Angola, as a Portuguese
province, has probably not profited domestically from
the oil price increases. Its oil production of about
160,000 b,-` has been subject to Portuguese demand for
domestic use and prices have probably not been allowed
to rise with the OPEC increases. With independence,
however, Angola will be in a better position to maximize
returns from petroleum for domestic development. Although
the Congo is a modest producer of oil -- 39,000 b/d
in 1973 -- it has no refinery and is forced to import
high priced petroleum products.
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gold and foreign exchange to be able to rely for even
moderate periods on increased withdrawals from reserves.
Other imports can't be reduced significantly without
cutting into supplies of essential food commodities
and of transport equipment and other machinery. Increased
indebtedness, thexefr-.n, -the principal means
of financing the higher oil costs.
OPEC Relief
.With their growing oil wealth, the African and
Arab producing countries have been under increasing
pressure from the African oil importers to take steps
to offset the sharply increased energy costs. A number
of African countries have approached Nigeria, hoping
to buy oil at low prices. Nigeria -- with one-fourth
of black Africa's population and a per capita income
of less than $200 -- is reluctant to provide cheap oil
or economic assistance on a significant scale. Nevertheless,
it has recently reiterated its willingness to provide
some of the oil-importers with crude at below market
prices providing they request it and have refineries.
The Arab oil-producing countries have set up an
Arab Fund for Africa with a capital of $200 million
to assist African countries in meeting the higher oil
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Status and Outlook for Producer Country Oil Barter
and Soft Currency Deals with LDC's
6z~;
In general the oil producing countries have adhered
to OPEC policies which avoid price, discounts to consumers.
Based on available information, they have not yet gone
beyond the negotiation stage for: soft currency or oil
barter deals.. There are some indications that
price concessions have been made but any such concessions
fail to reduce the LDC oil burden significantly. We
believe the oil producers would prefer to provide relief
to selected countries through the aid mechanism rather
than through selling oil on soft or barter terms.
The request for relief by the more than 70 oil
importing LDC's certainly will continue but positive
responses by the oil producers are likely to be concentrated
in those countries who can offer the best return.
Brazil which alone accounts for 16% of LDC oil imports
has been most active in attempting to work out deals
with the producers. Brazil can offer agricultural
goods,.industrial raw materials, and some technology,
as well as a good investment climate and the possibility
of participation in joint ventures. LDC's with less
LIT,+c?j ;%^ 'D
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on oil sales reportedly have been turned down by the.
Libyans. No barter or soft-currency sales are known
to have been made to LDC's. In.the past, Libya has
supplied oil gratus as part of a broader aid program,
for example, giving the Arab belligerents oil during
the October 1973 war with Israel. Same oil may have
been shipped under similar circumstances in 1974 and may
be expected to reoccur if it serves Libya's political
interests.
Nigeria .
Nigeria's large population and extensive
development needs keep it among the poorest of the oil
producing countries. While it aspires to leadership
in Black Africa, it is not likely to sacrifice domestic
development by diverting large quantities of either
funds or low-priced oil to its neighbors. Philip Asiodu,
Permanent Secretary of Mines and Power, did announce
in July 1974 that Nigeria would consider selling oil
at concessionary prices to a few neighboring African
countries. To date we have no evidence that this has
been done.
Saudi Arabia
An early 1974 Saudi stand against barter or
soft currency payments for oil by LDC's apparently
4
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