RETURN TO RESTRICTED

REPORTS DESK FIL Report No. WH- 124a

WITHIN ILE 1COPYONE WEEK

This report was prepared for use within the Bank and its affiliated organizations.They do not accept responsibility for its accuracy or completeness. The report maynot be published nor may it be quoted as representing their views.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL DEVELOPMENT ASSOCIATION

CURRENT ECONOMIC POSITION

AND PROSPECTS

OF

ECUADOR

February 26, 1963

Department of OperationsWestern Hemisphere

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CURRENCY EQUIVALENTS

1/US$ 1 = 18 sucres-1 sucre = US$ 0. 0551 million sucres = US$ 55. 500 approx.

1/ Ecuador has two exchange markets; anofficial market in which the buying rateis S/18=US$1, and a free market rate inwhich the rate was about S/22. 80=US$lin September 1962. The free marketnow encompasses some 20 percent ofall exchange transactions.

TABLE: OF CONTENTS

PAGE

BASIC DATA ...................... ....* .. i

SUvMMARY AND CONCLUSIONS . .. iii

INTRODUCTION .. .... .... . ... 1

CHAPTER I - THE ECONOMY

A. Structure, Economic Growth andInvestment ....... ....... a 2

B. Recent Development in MainIndustries ................ 2

C. Growth Potential . ..... . 4D. Policies for Economic Develop-

ment . ... 0. ............. 9

CHAPTER II - FINANCIAL SITUATION

A. Money, Credit and Balance ofPayments , ,,.. 14

B. Public Finances .... , 15C. Financing of Plan Inmediato 17

CHA-PTER III - GRO.WTH ANID BALANCE OF PAYMLENTSPROSPECTS AND CREDITW4ORTHINESS

STATISTICAL APPENDIX

i

BASTC DATA

Area: 102,000 square miles

Population (1961 - estimate): 4.46 million

Annual rate of increase (1950-1961) 3.1%

GNP (1961): 14.6 billion sucres

Annual rate of increase in realterms: 1950-1960 5%

1960-1961 3%

GNP per capita in 1961: 3270 sucres

GNP per capita in U.S. dollarsat the average free marketrate of exchange: $163

Exports in 1961: US$ 132.6 million

Bananas 80.9 tCoffee 14.3 ItCacao 15.6Others 21.8 "

Annual iate of increase in exportvalue 1950-1960: 6.5%

196o- 1961: -11.0%

Prices Annual Average Change1950760 1960/61

Cost of Living 2%" 5%Export Prices -1% -7%Import Prices +1.5% 1%Terms of Trade -2% -8%

Free Market Rate of Exchange Sucres per U.S. dollar

1950 18.31955 17.h1960 17.51961 20e0

1962 (first half) 22.51962 (September) 22.8

Official International Reserves

End of lEay 1960 US$ 36.6 millionEnd of September 1961 US$ 16.2 ItEnd of September 1962 US$ 25.6 it

Public Finances

Central Government revenues, 1961 1.5 billion sucres% of GNP 10.5%

Annual rate of increase:1950 - 1960 11%1960 - 1961 7%

Central Government expenditures1961 2.0 billion sucres

% of GNP 13.5%

Annual rate of increase:

1950 - 1959 13.0%1959 - 1961 9.0(%

Public sector revenues, 1961 3.1 billion sucres

% of GNP 21.0%

Public sector savings, 1961 748 million sucres% of GNP 5.1%

External Public Debt, December 31/61: US$ 111.1 millionof which undisbursed US$ 26.2 "

Service payments as % of expectedexport earnings in: 1962 11%

1967 5%

iii

SUvlRiliY AND COINCLUSIONS

1. The last economic report on Ecuador (WH-104b) was written late

Spring 1961. At that time the country was experiencing political and

economic difficulties stemming mainly from inflationary policies initiated

by the new Government in late 1960. The report pointed out that many of

the structural weaknesses of the economy were still much as they were a

decade earlier. Exports were predominantly agricultural, the extreme

dispersion of authority and financial resources remained the dominantcharacteristic of the public sector and Central Government had increasingdifficulties in finding non-inflationary funds for its investments. On

the other hiand, a vigorous, flexible and responsive private business sectorhad emerged and there was an increasing awareness of national developmentproblems and opportunities of the public sector. The report concluded that

prospects were for an improvement of the financial situation, but for a

slow economic expansion and continued budgetary strain.

2. Developments in the one and a half years which have since

passed confirm these conclusions. 14hereas approximate internal equili-

b.Ltum and part of the heavy losses of foreign exchange reserves have been

regained, there has been virtually no improvement in the financial posi-

tion of the Central Government. Economic growth is estimated at 3% in1961, but about one-third of this can be attributed to an unusually large

potato cropO The growth in 1962 is not likely to surpass the 1961 rate,

which was about equal to the growth in population.

3. The slow growth in recent years can be attributed to the prei-

gressive saturation in the world market for Ecuadorian principal exportproducts, (hananas, coffee and cacao) accompanied by declining confidenceof 'hne privTate sector. Export earnings (in dollars) increased by an annual

rate of l2s in the early 19'OWs but only by 2% in the late 1950's andactually fell by 11% in 1961. As exports represent an important dynamic

factor in Ecuador, this development in the export sector also adversely

affected growth in domestically-oriented industry. Confidence in the

economy began to diminish in the late 1950ts, evidenced by a fall of

private fixed investment relative to GNP. The failure of inflationarypolicies in 1960/61 to stimulate economic growth resulted in a sharp

further drop in confidence. The subsequent stabilization of the monetary

situation has contributed to some improvement, but confidence of the

private sector is still low.

4. The government is faced with a difficult task in trying toachieve a more satisfactory rate of expansion and to improve the lot ofthe poor farmers, mostly Indians, who live in the Sierras. Prospects for

Ecuador's principal exports have not changed appreciably since the lastreport was written. An average rate of increase of 2-3% a year in export

earnings from the 1960 level still seems realistic in the 1960-65 period.

iv

This rate will by itself be highly inadequate to bring about an overallrate of expansion significantly in excess of population growth and thereis therefore a need for providing incentives for intensification ofproduction and for diversification of the economy.

5. Ecuador is in the fortunate position of having excellent naturalconditions for and long experience in growing tropical crops, much readilyaccessible good farm land and a demonstrated willingness of farmers tomove to new areas. There are also large untapped resources of fish inEcuadorian waters. The nature of the economic problems in Ecuador is

progressively being realized by the Government and a public investmentprograr has been prepared (Plan Imnediato) which includes nearly three-fifths of public sector investment. Under the plan, a large part ofinvestment is devoted to transportation. However, much more emphasisthan before is put on direct productive investment, such as the amplifi-cation of agricultural and industrial credit facilities, and projects for

improving livestock, starting new production (African Palms) and intensi-fying old lines of production (cacao). The plan also envisages largeincreases in social investment, particularly housing.

6,, Public investment envisaged in the Plan Inmediato seems on the

whole to point in the right direction and should contribute importantlyto laying the foundation for an accelerated future economic growth. In-adequate project preparation is likely to hamper the implementation of

the Plan, e3pecially in the short run. Lack of domestic funds availablefor invest,:ent Luder the Plan will also be an obstacle. Strong effortswill be necessary both to achieve increasing surpluses on current account

in the Central Government budget and to divert funds from the rest of the

public sector to projects under the Plan. A full implementation of thePlan IDumediato would imply a65%. increase in public investment but in view

of technical and financial difficulties, a 30% increase seems more real-istic. As most of the projects will need several years before they become

fully effective and as business confidence can only be expected to improvegradually, the rate of expansion is likely to be slow in the next two tothree years, probably just keeping ahead of population growth. A resump-tion of a more rapid economic growth should be feasible once the trans-itional period is successfully completed.

7. In view of prospects for small increases in export earnings andin total output, the Central Government will be faced with delicate prob-lems both of restraining imports, without at the same time impeding acti-vities depending on imports, and of withstanding the political and socialpressures for increased transfers to the rest of the public sector and forlarger current and social expenditures. Restraints in both of these fieldswill be necessary to maintain internal and external equilibrium and toregain fully business confidence.

8. External capital is likely to play a more important role than inthe past in Ecuador's economic rehabilitation and in the revival of the

r

economy. Ecuador's external public indebtedness, net of undisbursedamounts, rose from $67 million at the end of 1959 to $85 million at

the end of 1961, and is estimated to amount to $98 million at the endof 1962. The undisbursed part of the loans committed at the end of 1961amounted to some $26 million. Scheduled service pamients on the externaldebt outstanding of $16 million in 1962 falling to <b9 million in 1967represent respectively ll% and 5% of projected export earnings. In 1962,

service payments were equivalent to about one-third of public savings.

9. The Plan Inmediato for the 1962-1965 period envisages external

assistance of about $40 million a year, representing about two-thirds of

total investment included in the Plan. A more realistic figure might be

about $3) million a year on a disbursement basis. About $8D million was

obtained by late 1962 of which about $50 million was undisbursed and loans

of about $46 million for projects in the fields of transportation, develop-

ment credit, agriculture, and water and sewage were under active considera.

tion by various lending agencies.

10. In view of the slow growth in export earnings and public savings

in prospect, the margin for incurring additional external debt on conven-

tional terms is fairly limited. On the assumption that the service burden

of the external debt ought not to rise substantially the present rate ofabout 11% of export earnings and the new debt on conventional terms is ob-tairmed with maturities equivalent to the average of the present debt, ad-ditional ex;ernal debt of about $20 million a year in the next four-yearperiod cou±-d be serviced. This is considerably below the external finan-cing reouired for implementing essential high-priority projects in thenext few years. In the rehabilitation and further economic expansion ofan economy like Ecuador's, with a standard of living among the lowest inLatin America, public investment must play a very important role. In

theie circumstances, part of the further external financial assistance to

Ecuador should be made available on special terms.

INTRODUCTIOIN

1. The last Bank economic report on Ecuador (WH-lQ4b) was preparedin the late spring of 1961. At that time the country was in the midst ofa financial crisis. Very large Central Bank credit expansion, partlynecessitated by deficit spending of the Government, resulted in a loss oftwo-thirds of net foreign reserves, a sharp increase in the free marketrate of exchange and in the first major increase of prices since the Koreanconflict. The crisis was accompanied by a rapid deterioration of confi-dence and by political upheaval under which the President (Dr. Velasco)was forced to resign.

2. In the one and a half years which have since passed, the finan-cial situation has improved appreciably. Prices have risen only moderatelyand part of the loss of foreign reserves has been regained. However,economic expansion has been slow, public finances are under pressure andinvestorst confidence is still low. The new Government which replacedVelasco in 1961 has been unable to arouse much popular support. A generalfeeling of discontent with the Government policy prevails and has beenreflected in a number of changes in the Cabinet. Recently, however, therehave been indications of improvements in the political environment.

3. The last economic report concluded that economic expansion wouldcontinue along traditional lines at a rate that, on the average, keptahead of population growth. The developments of the last eighteen monthssuggest that even to attain this goal will require developing new lines ofproduction. While possibilities for a diversification of production exist,it will at best take some time before the economy can achieve a rate ofexpansion significantly in excess of population growqth. The duration ofthe period of readjustment wTill depend partly on how fast the confidenceof the private sector can be regained and partly on the type and volume ofpublic investment. The prospects for the immediate future seem uncertain.There is, however, a growing realization in many quarters of the need of aconcentrated effort, both for keeping the economy on an even keel and forproviding new stimuli to economic expansion which could have a favorableeffect over a somewhat longer term.

CHAPTER I - THE ECONOMY

OStructure, Economic Growth and Investment

4. With about two-fifths of the GNP originating in agriculture,the Ecuadorian economy is predominantly agricultural. Most of the peopleengaged in agriculture live in the relatively resource-poor Sierra, wherethe cultivated area is still &ly. ab'o=t one hectare per person, despiteconsiderable emigration to the lowlands over the last decade. There isalso a steady movement from farms to cities, but the share of industry,commerce and transport in the total product was unchanged over the lastdecade. The population is growing at a rate of 3% per annum, and nowamounts to 4.5 million.

5. Over the last decade the increase in output has on the averagebeen appreciably greater than population growth. However, the rate ofgrowthl even without taking into account the deteriorating terms of trade,has been declining since the mid-1950's. The declining rate is closelyconnected with the progressive saturation of the world market for Ecuador'sprincipal exports:

Annual rate of increase in:

GNP in Exports1950 prices in dollars

1950 - 1954 6.5% 12%1954 - 1957 5.0 31957 - 1960 4.0 21960 - 1961 3.0 -11

Source: Table 3 and Table 26

6. The substantial expa-nsion of exports in the early 1950's wasan importanlt stimulus for the domestically oriented industries, especiallymanufacturing and construction, which expanded between 40% and 50% from1950 to 1954. The effect of this initial push lasted throughout the 1950's,but the expansion has levelled out in recent years. Investment rose at ahigher rate than total output in the early 1950's and its share of GNPincreased from about ll% to 16%;, which can be considered as a fairly highratio in a country like Ecuador. Because of stagnating private invest-ment, the ratio was reduced to about 15% by 1961 and it is likely to bestill lower in 1962.

B. Recent Development in Main IndustriesGeneral

7. In 1961 the economy of Ecuador was influenced by conflictingfactors. The stimulating effects on the economy of increased publicinvestments and a substantial credit expansion were to a large extent

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offset by declining export prices and by political and economic uncertain-ties, following in the wake of drastic changes in policies initiated by thenew Government. GNP in 1950 prices rose in 1961 by 3%, but about one-thirdof this increase can be attributed to a bumper crop of potatoes (50% largerthan in 1960). IMost of the rest of the increase in GNP is due to continuedexpansion of livestock production, both to replace imports and for exportto neighboring countries. A further substantial increase in public adminis-tration and defense also contributed to the rise in GNP. Fixed private in-vestment in 1950 prices continued to decline while there was some furtherincrease of public investment. The share of public investment has risen from32% of total fixed investment in 1950 to 37% in 1956 to 48% in 1961. Thisis a high proportion in comparison to other Latin American countries.

Agriculture

8. The gross domestic product of agriculture valued in constantprices rose by 6.5% in 1961, as compared with an average rate of increaseof about 4% in the 1950ts. Though primitive subsistance agriculture is stillimportant, commercial farming has expanded substantially over the past de-cade and now probably accounts for more than half of total agricultural rutput.However, incomes earned from producing foodstuffs for commercial sales havelagged behind output in recent years, because of adverse trends in pricesboth for export crops and for products consumed in the domestic market. Thus,from 1956 to 1961 food prices relative to other prices declined by 3-4%.Ave^7age export prices for bananas, cacao and coffee declined by about 10%.This means that the overall growth in real income of the agricultural sectorover the last five years has been only about 3% per year. Real incomes ofthe traditional export agriculture (mainly located in the coast) hardlychanged bet-i-en 1956 and 19618

9. The changes in the composition of agricultural production overthe last eleven years can be summarized as follows:

% of gross value of totalagricultural production

(current prices)

1950 1954 1956 1960 1961

Crops primarily for exports 35 45 42 37 31Other crops 44 36 36 38 43Livestock production 21 19 22 25 26

Total 100 100 100 100 100

Source: Table 5 and Central Bank

10. The high proportion in 1961 represented by crops mainly for in-ternal consumption can partly be attributed to the extraordinarily large

crop of potatoes this year, but partly also to a substantial expansionof some relatively new crops such as sugar (50% increase of productionover six years), vegetable oils, pyrethum and vegetables. Productionof these crops nearly doubled over the past six years, while productionof traditional food crops (rice, corn, potatoes, wheat and barley) roseby 37% in the same period, (one-third of which is due to the large potatocrop in 1961). Livestock production, which jumped by nearly 2C/ in 1961,has been favored by relatively stable internal prices and export possi-

bilities to neighboring countries.

Manufacturing Industries

11. Ecuadorian industry is wholly oriented to the home market butlargely import-oriented for raw materials. The 1961 devaluation of thesucre helped some industries competing with imported goods, particularlythe textile industry. Sugar refining benefitted from rapidly expandingsugar production, which was induced by the expectation that Ecuadorwould get a non-quota allocation in the U.S. market. There was somefurther increase in the beverage and cement industries. A decline inproduction was registered in some other industries, in particular in theshoe and clothing industries. Overall, industrial GNP rose less than 1%in 1961, and industry's share of total GNP remained the same as in 1950.

Extractive Industries and Other Industries

12. The extractive industries which only account for 2`, of total GNPregistered a small increase in 1961, due mainly to a rise in petroleumOUtp.lt. Output of petroleum was, however, still some 20% below the peakin 1955 and Ecuador became in 1960 for the first time since Wiorld WarII an importer of crude oil. Gold, silver, copper and lead are producedin very small amounts and did not change significantly in 1961. Therewere small changes in output in other sectors of the economy; fuLrthersmall increases in production of electricity in coimmerce and serviceswere offset by a decrease in other activities, mainly construction.

C. Growth Potential

13. The progressively diminishing rate of increase of export earningssince 1954 and the absolute decline in 1961 have adversely affectedentrepreneurial expectations of continued rapid growth of the Ecuadorianeconomy. To regain a satisfactory rate of growth there is a need fordiversifying and expanding exports and for giving new direction andstimulus to the home industries. The existing and future possibilitiesfor growth in the principal industries are reviewed in the followingparagraphs.

Production for Export

14. Ecuador's exports are almost exclusively agricultural and consistprimarily of three commodities: bananas, coffee and cacao which have

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been accounting for about 90% of total export values. The changes involume, price and value (in US dollars) of exports since 1950 have beenas follows (1950=100):

Indices of Production, Prices and Value of Export by Category 1950 - 100

1950 1954 1958 1960 19611/

Bananas:volume 100 290 420 525 500price 100 102 100 99 95value 100 295 420 520 470

Cacaovolume 100 111 83 133 133price 100 167 134 87 70value 100 185 111 116 93

Coffeevolume 100 104 149 155 125price 100 14O 94 75 67value 100 1)46 139 116 83

Othersvalue 100 57 75 69 79

Totalvoliume 100 137 180 212 205price 100 118 98 90 83value 100 162 176 191 170

Source: Table 2 8an. 311/ Inclusive of estimated contraband exports of cacao and coffee of

respectively >1.6 and Si-$4 million.

15. The increase in the volume of bananas without offsetting pricedeclines accounted for virtually the entire increase in total exportvalue in the last decade. Bananas represented in 1960 63% of totalexports. In 1961, export of bananas declined by 1(% in value and 5% involume, but part of the loss has been regained in 1962. For some timethere have been excess supplies of bananas for export and for homeconsumption, and about one-third of total output is estimated either togo to waste or is used as cattle feed. Exporters adjust supplies todemand by varying minimum quality standards for accepting fruits atshipside and by regulating purchases of bananas from producers througha quota system rather than through varying prices. This procedure affectsin particular small producers, who are having difficulties in marketingtheir crop in a remunerative fashion. Increased real income from bananaproduction is thus almost entirely dependent upon finding new outlets in

the oDrld market. The situation in this respect has not changedappreciably from the evaluation given in the last Bank report (WH-104b)

and an increase by 3% to 45s per annumi from the current level seemsrealistic. At this rate Ecuador would about maintain its ahare of theworld market and attain an export of bananas worth at present prices

about $98 million by 1965, as compared with $89 million in 1960 and $81

million in 1961. Even this rate of expansion will depend on maintainingEcuador's competitive position in the world market. The recent change

in banana taxes/A and the current shift from the stem method to the boxmethod of shipment could be helpful in this respect. A more general useof boxes could also provide the basis for an important card-box industryin Ecuador partly based on the use of local raw materials (sugar bagasse).

16. The steady weakening of the price for coffee has resulted in avirtual discontinuation of planting new coffee trees in recent years. How-ever, on the basis of the present stock of coffee trees, production forexports could potentially reach a maximum of 40,000 metric tons in 1963,

or 4iO-50% above the 1960 level. WJhether this maximum will be exportedwill depend on quotas and prices. Under the International Coffee ogree-ment for 1963 Ecuador obtained a quota of 33,120 metric tons, or about15-20% below this maximum. Export of coffee has been assumed conserva-tiJvely to increase by about 3-4% per year and might in 1965 approximate36,OO metric tons. On the assumption of coffee prices of 26# per poundas compared with 31.5/ 'in 1960 and 28/ in 1961, the value of coffee ex-ports may in 1965 approximate $20.5 million, as compared with $15.7 mil-lion in 1%,1 and j'5l14 million in 1960.

17. Production of cacao was stimulated by favorable world pricesin the mid-19503s and again In 1958. A fairly extensive replacement ofold trees now coming into production took place in these years. With

favorable climatic conditions for growing high quality cacao and based

on somne nevT varieties with substantially higher yields than the old trees,

the Plannir- Board has prepared plans for further large renewals of cacaoplantations. These plans, which envisage planting of 25,000 hectares overa 5-year period, are estimated to cost some 48 million of which half is

to be financed by external credits. Output from these trees would start

in the late 1960's and reach a maximum of some 12,000 metric tons, equalto about one-third of current output. Prospects are for a depressed market

with export prices from Ecuador around 20¢ per pound, although an inter-

national cacao agreement, which might raise prices, is under discussion.

In view of these uncertain prospects, it is difficult to judge whetherand to what extent the expansion plans for cocoa will be realized. Inany event, output in the next few years would not be appreciably affected

by these plans and exports in 1965 may approximate 38,000 metric tonsworth about $17 million, as compared with $21.4 million in 1960 and $17.2

million in 1961.

1/ See paragraph 50.

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18. Over the past few years exports of petroleum and panama hatshave declined and exports of vegetable oil, sugar and fish products haveincreased. These shifts in the miscellaneous category are likely to con-tinue in the next few years but with the forces making for increasingexports exercising a greater influence. There are also possibilities forsome further diversification. Planting of African palms has been success-ful in Ecuador and plans exist for a further extension of the area plantedwith this crop, which will mean a 30% increase in production of vegetable

oil over 10 years, a large part of which will be for exports. Sugar pro-duction expanded substantially in recent years and Ecuador obtained in1961 for the first time a non-quota sugar allocation in the U.S. marketof 25,000 metric tons. In addition, Ecuador may also be able to sellsugar profitably to the free market at prices around the present level(3.2/ per pound). The fishing industry has expanded substantially inrecent years, encouraged by favorable prices for shrimp and tuna fish inthe U.S. market. The fish resources in the sea around Ecuador are beingstudied by a U.N. sponsored National Fishing Institute, and preliminaryestimates indicate that ample possibilities exist for expanding thecatches of shrimp and tuna fish, as well as for other kinds of fish nothitherto exported. Possibilities also exist for an expansion of such new

products as dried bananas, pyrethrum (an insecticide-producing plantwh-ch is grown successfully at high altitudes), and pharmaceuticals. Onthe whole, prospects are for an appreciable increase in the value of otherexports which by 1965 may approximate $28 million or about 50%o larger thanin 1961.

19. On the basis of the above analysis, the value of total merchan-dise exports may approximate $165 million by 1965 (Table 27), more or lessthe same level as projected in the last economic report. Compared with1960 exports, this would represent an increase equivalent to 2-3/'o per year.In view of export possibilities in Ecuador, especially in the miscellaneouscatr-- i-y, the rate of export expansion could be substantially higher overthe longer term.

Production Principally for the Domestic Market

20. With exports growing more slowly, it would be increasingly im-portant to explore the opportunities in the internal market for producinggoods which are previously imported. Increased internal food production,especially of livestock products, has contributed to a reduction of foodimports from about ;$19 million in 1954/55 to about $9.5 million in 1959/60,despite an appreciable increase in food consumption during this period.The success of the expansion of livestock production and the growing marketfor Ecuadorian meat in neighboring countries (now being supplied on a smallscale by contraband exports) have encouraged further expansion, not onlyin the Sierra but also in the newly opened land in the coastal region. Inorder to improve sheep and cattle breeding, 500 pure-bred cattle were im-ported in 1962 and 20,000 sheep will be imported in 1962/66. Wheat produc-tion was more than doubled from 1957 to 1961 and the share of imports intotal domestic consumption has dropped to about one-third. New varieties

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of wheat have increased the possibilities for grnwing this crop in the

Sierra and under favorable conditions a further expansion of wheat pro-

duction seems probable.

21. With prospects for increasing production of sugar, meat, fish,

edible fats and some other products, there is scope for further expansion

of manufacturing industries processing local raw materials. In fact, plans

have been studied and prepared for freezing plants for shrimps, sugar re-

fineries, canning industries for fish and tropical fruits, plants for hy-

drogenation of fats, etc. Prospects for carrying out these plans are

good. In addition, apart from a continued modernization of the textile

industry in order to meet the competition from widespread contraband im-

ports of textiles, a tire plant and a new cement factory are under con-

struction. Other import substituting industries which might be expected

to continue to expand are the paper industries and the chemical and phar-

maceutical industry.

22. Expansion of the production of other goods and services would on

the whole depend on producers' expectations of further growth of the domes-

tic market, largely reflecting the fortunes of the export and import sub-

stitution sectors and the public investment activity. In view of existing

supuply conditions production of these goods and services could make a sub-

starntial contribution to overall growth. Thus, there is considerable scope

for increased production of traditional food crops, by applying more modern

methods of cultivation and by extending the cultivated area. Fairly sub-

stantial unused capacity exists in some perts of the manufacturing industry

(e,g, textile) and in construction, which should make possible increased

production, without large new investment. The petroleum industry has had

difficulties in keeping production up with internal demand; in fact

Ecuador's position as a net exporter was reversed in 1960. This develop-

ment is partly due to lower profits of the private oil companies following

higher import costs which were not compensated by higher domestic prices

which are subject to Government control. As the major present fields are

old and wi.l require increasing effort to maintain present output, it seems

that the btst which can be hoped for is that domestic production keeps pace

with internal demand, and even this will require changes in Government

pricing policies.

D. Policies for Economic Development

General

23. Favorable world market conditions for bananas in most of the 1950tsand a rapidly grcwing population favored development policies directed to

an extensive production. Main emphasis was put on opening up new land, and

about 40% of public investment was devoted to transportation in 1956-61,

which contributed greatly to the agricultural expansion, especially of

bananas. Banana growing requires little capital, as banana trees can thrive

on roughly cleared land and yield crops after one year. At the same time,

bananas help to clear the land fully by providing shade, which retards under-

growth, thereby preparing the land for other crops. The appearance of ex-

cess supplies of bananas in recent years and prospects of a slow growth in

exports have, however, adversely affected this extensive method of produc-

tion. This change in the situation makes necessary an intensification and

diversification of production. As bananas can be used for cattle feed, an

expansion of livestock production in the coastal region would be particu-

larly helpful in this respect.

24. There is a growing realization in Ecuador of the need for more

directly productive public investment and credit programs. The Planning

Board has prepared a short-term public investment plan (Plan Inmediato)

which in principle has been adopted by the Government, subject to available

external and internal financial resources. The Plan envisages substantial

increases in development credits to ac'riculture and industry and large

credits to special agricultural projects.

25. The Plan Inmediato can be regarded as a first attempt to consoli-

date and coordinate public investment on a somewhat longer term basis. How-

ever, the Plan Inmediato includes less than half of the investment by auto-

nomous entities, and almost none of the investment by municipalities and

provincial consuls, Furthermore, the time period for the investment under

the Plan Inmediato varies somewhat from sector to sector and some of the

sector plans are also likely to be revised in the light of further studies.

According to an unpublished version dated August 1962 (see Table 23) total

publiic investment of the Plan, including government contributions for fi--

nancing private investment, amounts to $262 million, of which about one half

is projected to be executed in 1962 and 1963. There is no indication about

the time phasing of expenditures on the Plan after 1963, nor is it known

whether and to what extent new projects will be added to the Plan in 1964and later years. In view of the nature of the Plan it seems reasonable to

assume that the Government intends the Plan to be almost fully carried out

by the end of 1965e Even if the Government made no substantial additions

to the Plan in 1964 and 1965, annual capital expenditures under central plan-

ning in the period 1962-1965 would average about 65 million. Assuming that

public investments outside the Plan Inmediato will continue at past rates,

total public investment would average some 1600 million soles, which is about

65$O higher than in 1960-61, This notional figure of the investment inten-

tions of tile Ecuadorian Government is used in this analysis, particularly

for appraising the financial implications of the Plan (see paragraph 55).

_k-dnsportation

26. The Plan Inmediato includes the completion of the existing five-

year program for improving and constructing a network of 750 kilometers of

the Sierra and in the coastal area, expected to be finished in 1963. The

Plan also envisages the start of a new road program which includes im-

provements and construction of 500-600 kim, of trunk roads. The technicalstudies of the new program are fairly well advanced and with some further

preparation the implementation could start in 1963. Improvements of sea-

ports and of airports will continue but at a lower level than before. The

Quito - Guayaquil railroad, which is run-down and inefficient, is to be

rehabilitated, although a detailed plan has not been prepared. The costs

of the transport investments envisaged in the Plan Inmediato are estimated

at some $30 million a year in the 1962-65 period, as compared with the

equivalent of some $20 million in the last five-year period. Transport

investment would however continue to be about 40% of total public investment.

- 10 -

27. Further extension and improvements of the transpo-'tation system

as envisaged in the Plan will still account for a large part of public in-

vestment. Although cultivation of bananas is less favroable than in the1950's, continued investment in trunk roads and feeder roads seems to be

justified. One of the main sources for increasing or just maintaining per

capita food supplies for the rapidly increasing population and for contain-

ing the social and political pressure for improving the lot of the gener-

ally poor Indians in the Sierra, lies in opening up new land. The expan-

sion of products for exports will also, to some extent, depend on extend-

ing the cultivated area. Finally, there is a need for further improvement

of existing transport facilities to enable a larger volume of products to

be marketed at a reasonable cost.

28. The relatively large investment envisaged in transportation and

competing claims for investment in various means of transportation in

Ecuador have prompted the Government to request the Bank to organize and

help finance an overall transportation study, which is expected to be

ready in the summer of 1963. It will contain recommendations for invest-

ments in the transportation system during the next decade.

Agriculture and Fisheries

29. Public outlays over a three-to-six year period for investigation,development of exports (cacao), substitution of imports (African palm,sheep_ and cattle-breeding, silos for wheat) are estimated to be aboutj$23 million, of which about $20 million is for capital expenditures.Public investments in irrigation are projected at about .h5.4 million(6 years), in colonization Z5.7 million (3 years) and in fisheries "34million (5 years). Public investment envisaged in these fields will averageabout 1$9 million per year, as compared with less than p2 million per yearin the previous five-year period.

30. Apart from colonization projects, most of the projects in theagricultural sector are in an advanced stage of Vrep a-.dion.- QfV greatimportance to agricultural development is the projected increase ofagricultural credits through the development bank system. Credits toagriculture made available by the banking system Twere almost unchang,edin the second half of the 1950's. Despite a substantial increase duringthe inflationary period of 1960/61, bank credits extended to agriculturein 1961 represented only 5% of the current value of agricultural production,as compared with 10% in 1950. FurtAermore, as most of the bank creditsare on short tern, there has been an increasing shortage of medium- andlong-tern credits. This situation is the result, partly, of mismanagementof the system Of development banks, where loans in arrears as a -,ercentageof loans o.utstanding approximated 40' in 1960, and partly of the lack ofpublic funds for agricultural development credits. The system is nowbeing overhaauled and. there are good prospects that the system could be puton -sounl bhesis end effectively operated in early 1.963. Under the Plan,tVe development banks will be supported by additional resources of about$9 miXiion for extending agricultural credit on medium- and long-term basisfor tne next 2 - 3 years.

Industry and Power

31. Despite the recent slow-dowm in industrial expansion, there is asizeaole demand for lono-term credits, esTecially for new industries.In recognition of this'probler, public capital of .J.3.5 million is to be

allocated to the Development Bank System and to the "Comision de Valores"for channeling credits to industry. These funds, which are planned to bedisbursed over a three-year period, would represent a sizeable increase inloan funds available to industry.

32. The production of electric energy has increased at an average rateof 8% per year over the last five years. About one-third of the totalproduction has been consumed in industry but many firms, especially outsideQuito atid Guayaquil, have had to produce their own power from small thermalunits at a high cost. The Plan Inmediato includes installation of six shipsfitted with power plants (donated by the U.S. Government) for taking careof the urgent needs for electric power in the provinces of the Costa andconstruction and completion ef six power plants in the Sierra.

- 12 -

33. These investments wqhich are likely to be implemented over a periodof 2 - 3 years and are estimated to cost $28 million, would represent powerinstallations of 46,500 kw., equal to about one-third of the present capa-city. Public power installationsin recent years have averaged some $6 - 7

million. A substantial part of these power installations will provideelectric supply in areas which are at present without a central supply sys-tem. In 1961 a National Electrification Institute was established, whichis to harmonize rate structures and assist in the financing and co-ordina-tion of future power installations. A general survey of hydroelectricsources is planned to be implemented in the next few years.

34. A plan which will provide increasing opportunities for primaryeducation in Ecuador is estimated to cost $10 million over a 5-year period,of which 70% wrill be for capital expenditures (building of new schools).Improvements in higher education (technical and university) are estimated

to cost some p7.5 million over two years, of whicn half is for capitalexpenditures. With some further studies of tne projects in the educationalfield, particularly in higher education, the implementation of these shouldnot be seriously hampered by lack of technical preparedness.

35. Social investments included in the Plan Inmediato consist of a

-S, million program of supplying 14 towns in Ecuador with potable water,a housing program of 'p35 million, partly for direct financing of construction

and reccnstruction of 11,000 homes, and partly for credits to housing.For public building, a program of : .2 million is envisaged. Projects for

improving the sewage and water systems in Quito ($4 million) and Guayaquilare not included in the plan. Apart from credits to private housing, theprojects envisaged in the social field are likely to be implemented moreor less in accordance with the plan.

EvaTuation of the Plan

36. Public infrastructure investment and the technical and financialassistance to agriculture, industry and power from the public sector en-visaged in the Plan Inmediato seem on the whole to point in the right

direction although the need for transportation investment might prove to

be somewhat exaggerated. The Plan should provide the foundation for a sub-stantial recovery of the economy, and accelerated growth in the future.However, lack of organizational and technical preparedness may result in

a somewhat slower implementation than envisaged in the Plan. Even thoughthe Planning Board has progressed notably in preparing investment projects,many of the projects included in the Plan Inmediato are in a preliminarystage. Concentrated efforts in the preparation of the most important pro-jects are needed. The findings of the proposed transportation survey willbe particularly helpful in this respect. Another limiting factor in the

implementation of the Plan is likely to arise from the scarcity of domestic,non-inflationary investment resources. This will be discussed in ChapterII (c).

- 13 -

37. Although public investment will play an important role in economicdevelopment in Ecuador, the r-te of growth oJ tie economy will also dependon creating an atmosphere conducive to an expansion of private enterprise.As mentioned, confidence was shaken during the political and financialcrisis in 1961. The stabilization of the monetary situation in 1962has contributed to some improvement, but confidence is generally still ata low level. As long as this situation prevails, specific measures takento promote and encourage industrial expansion such as the financial incen-tives offered in the Industri-I Development Law end technical and explorationassist'nce rendered by the Planning Board and the industrial developmentcenter, would probably have only limited effect. Great emphasis should thusbe put on maintenance of financial stability and further strengthening ofthe balance of payments which are likely to be decisive factors in the fullrecuperation of business confidence. Prospects in these respects arediscussed in the following chapters.

- 14 -

II. FINAiHCIAL SITUATION

A. !Lonev. Credit and Balance of Payments

38. In sharp contrast to the conservative monetary policy of the

1950's, bank credits were allowed to increase rapidly in 1960/61. From

the first nine months of 1960 to the following nine months' period, Central

Bank credits rose by nearly 40%, mainly because of deficit financing of the

Central Government budget. Credits to the private sector from the Develop-

ment Bank System rose by 50% and from the commercial banks by 3,, during the

same period. Uncertainties about fiscal, monetary and exchange rate policy,

which accompanied this sharp reversal of the monetary policy, contributed

to the loss of about two-thirds of official foreign exchange reserves.

Prices which had risen by less than 2% per year in the previous decade, in-

creased by 5, and the free market rate of exchange rose from 17.9 sucres to

the U.S. dollar in September 1960, to 22.7 sucres in May 1961.

39. The heavy loss of foreign exchange reserves was due to both in-

creased deficits on current account and capital flight. Between 1958/59

and 1960/61 the current deficit rose from $S million to j36 million, mainly

as a result of larger imports, but also because of declining export prices.

Exports remained about unchanged over the same period, an increase in 1960

being offset by a drop in 1961. The net outflow of short-term private

capital in 1960 and 1961 is estimated at some ^20 million. The impact on

the balance of payments of the declining trade surplus and capital flight

was alleviated by the increased external borrowing of the Central Government.

40. In mid-1961, Ecuador obtained a standby credit of 9>10 million

from the International ,'bnetary Fund. The standby agreement was renewed in

June 1962 for an amount of 95 million. Under these agreements, the Govern-

ment has committed itself to a strict stabilization program, which, on the

whole, has been successful in restoring internal price stability. Since

mid-1961, prices have increased only 2P. The official exchange rate was

devalued f:-om 15 sucres to 18 sucres to the U.S. dollar in mid-1961.Ecuador still operates with a dual exchange system, although a larger part --

about 80', -- of all transactions now are going through the official exchange

market.

41. As a result of the measures taken in 1961, and of some improve-

ments in the terms of trade, there has probably been an appreciable reduc-

tion in the current deficits in 1962. Contributing to a reduction of

imports is the system of advance import deposits, ranging from 25 - 100% of

the import value, and the prohibition of imports of passenger cars. The

severe limitation on bank credit expansion has virtually stopped furthercapital flight. With continued inflow of external capital to the CentralGovernment, foreign reserves have increased somewhat. However, at the end

of September 1962, reserves were still equivalent to only about two months

of imports. The spread between the official and free market rate of ex-change of between 25% and 305 was still considerably larger than in the

1950's (15%).

- 15 -

42. The credit market has been very tight. In the first half of

1962 bank credit rose by less than 1i; Central Bank credit contracted

slightly while there were small increases of credit fromn commercial banks

and the Development Banking System. The pinch was felt especially in the

private sector, which was able to increase its bank credit (net) by less

than half of one percent in this period. The Central Bank increased itsbank lending to the Central Government by S/47 million in the first half

of 1962, but bank credit to the rest of the public sector declined by S/30

million.

43. Considerable bank credit expansion was in the past based on

mortgage bond sales. These bonds were sold to the Social Security Funds

and to private insurance companies but mainly to the rest of the private

sector. In 1961 sales of bonds decreased sharply and there was a net re-

duction of bonds outstanding in the first half of 1962. This development

is due partly to the general uncertainty of the financial situation, and

partly to the shift of Social Security Funds' purchases from mortgage bonds

to securities of the public sector. The general uncertainty also affected

sales of bonds by institutions other than the banks, further curtailing

availability of loan funds for private investment.

44. Ecuador obtained in 1961 and 1962 $10 million in external loans

for medium- and long-term credits for financing private investment in indus-

try and housing. In addition, the country obtained in October 1962 a ,6

million loa3; for credits, mainly to agriculture. The external loans will

only finance about half of the cost of the individual projects; the rest

will have 'o be financed from local private or public resources. Although

prospects are for a slower economic expansion than before, the need for

econcmic diversification and social investment would imply a need for some

a,plificat±on of domestic resources available for private investment. 'uch

an amplification will depend on the possibilities of correcting imbalances

in the finances cf the public sector, particularly in the Central Government

budgst. In view of the still u1nresolved structural problems of the public

sector, this is likely to be a difficult task.

B. Public Finannes

45. The public sector plays an important part in the Ecuadorian

economy. In 1961, total revenues represented 21% of GMP 1/ and public in-vestment 6.4% of GNP, only slightly less than private fixed investment.

_ T he high proportion of GNP absorbed by public revenues is partly associatedwith a broader definition of public revenues in Ecuador than in most other

countries. Thus, non-tax revenues in Ecuador represent more than one fifth of

total revenues, which is much higher than in other countries (between..5-15to)

These relatively large non-tax revenues are partly a result of the fact that

income from state monopolies is computed on a gross basis (gross sales less

purchases of raw materials). There are also indications that income from state

properties and public enterprises are computed on a gross basis. However, even

if these differences in the method of computation are taken into account, the

revenue/GNP ratio in Ecuador still is among the highest in Latin-America. In

Table 15 a comparison of the public revenue/GON ratio in various Latin-

Imerican countries is given.

- 16 -

As explained in the last Bank report on Ecuador, there is little centralcontrol over the allocation of financial resources of the public sector,and expenditures are, in fact, disbursed through a great number of publicentities. This characteristic of the public sector has become still morepronounced in recent years. The distribution of total revenues among thefour main groups of the public sector, the Central Government, the 15 pro-vincial councils, the about 90 municipalities and the more than 700 sepa-rate autonomous entities and funds had been as follows:

1956 1958 1961

Central Government 38 40 34Provincial councils 2 1 1Municipalities 14 15 17Autonomous entities 4_6 .4 4

Total 100 100 200

Source: Table 16

46. Savings of the public sector reached their maximum in 1959,when they represented 6.1% of GNP but have since declined both relativelyand absolutely. However, public investment continued to increase in 1960and 1961. Thus, whereas up to 1959 public savings were about equal topublic investment, in 1960 and 1961 the public sector showed over-all de-ficits, equal to 13% and 20% respectively of public investment. Publicsavings have progressively been concentrated in autonomous entities, whoseshare of the total increased from 66% in 1956 to 83% in 1961. CentralGovernment; savings were 17% of the total in 1956-57, but actually becamenegative -n 2.960 and 1961. This deterioration in the Central Government'spoition is partly associated with increasing assignment of revenues toautonomous entities (such new entities as the Irrigation Institute, theCo'onization Institute, and the National Electrification Institute whichhave been established in recent years) without propobrtional transfer ofresponsibilities. It is, however, mainly a result bf increasingly largetran.sfers by the Central Government to the rest of the public sector,mainly for investment purposes. In fact, from 1957 to 1961 transfers in-creased by 50?, more than the increase in Central Government revenues.Administrative and service expenditures of the Central Government increasedrather slowly up to 1960, but have risen substantially in recent years(about 10% a year), mainly due to higher wages and salaries.

47[ The Social Security Funds (Caja de Pensiones and Caja del Seguro)account for a sizeable portion (about one third) of the savings generatedin the autonomous entities. In recent years increases in reserves in theseinstitutions have averaged about S/200 million a year and accumulated re-serves and capital amounted to some 3/1,945 million at the end of 1959.Only about one quarter of the reserves at the end of 1959 was invested ingovernment and other public securities while the rest has been used mainlyfor purchases of mortgage bonds and for the financing of construction ofpublic buildings. In recent years the portion going into public securi-ties has increased appreciably; thus in 1960 and 1961 purchases of CentralGovernment securities accounted for about one-third of total savings inthe two institutions. In 1962, the portion will probably be still larger.

48. While the Central Governmentts capacity to finance investment de-clined in 1960 and 1961, investmerts undertaken by the Central Government,particularly in highways and buildings, rose appreciably. The growing dis-parity betbween investment and savings in the main groups of the publicsector is showTn below:

- 17 -

INVEST1YCNT, PUBLIC SAVINGrS W';MD aVLrALL DLFICITSBY AUTHORITY IN 1957, 1959 AMD 1961

(millions of sucres)

_ _ 1957 - __ _ 959 1961In- Over- In- Over- In- Over-

vest- Sav- all vest- Sav- all vest- Sav- all

ment inp_s Balance ment inns Balance ment ings _Balance

Central Government 166 147 -19 225 148 -77 342 -66 -40O5

Provincial Councils 25 25 - 25 28 3 24 27 3

Mliunicipalities 140 132 -8 212 133 -79 250 168 -82

Autonomous Entities 233 286 53 276 460 184 320 618 298

Total 564 590 26 738 769 31 935 748 -187

Source: Table 16

Central Covernment investment in 1960 and 1961 had to be entirely financed

by external and internal borrowings, partly on an emergency basis (drawuings

on Central Bank credits, external budget support loans), making the situation

rather unstable. In 1962 current expenditures and transfers continued to

absorb the entire increase in current revenues. As drawings on Central Bank

credits had to be severely limited under the stand-by agreement with the Inter-

national i4onetary Fund, most of the resources for investment this year were

obtained by borrowings from the rest of the public sector and from abroad.

Despite an emergency decree obliging public entities to convert S/70 million

of their deposits into Central Covernment bonds and a new budget support loan

from the U.S. of 67 million, funds available for Central Government capital

expenditures declined, and the Central Government was compelled to reduce its

investment activity.

C. Financing of the Plan Inmediato

49. Tentatively one-third of the investment included in the Plan

Inmediato is to be financed domestically. 1 However, ways and means to

obtain these resources are not indicated. A. full realization of this plan

and a continuation of investment in other public sectors not included in

the plan at past levels would mean an average annual public investment in

the 1962-1965 period amounting to some S/l6oo million (equivalent to ';85

million). This level is about 65% higher than in 1960/61 and about twice

as high as in 1956-1959, which seems overly ambitious. If one-third of the

1/ Problems and requirements of the economic development policy of Ecuador.

Presentation to the U.S. Government by the Ecuadorian C-overnment. July 1962,

p. 47.

- 18 -

investment in the Plan Inmediato and most of the public investment not in-

cluded in the plan were financed domestically, the following hypothetical

plan for financing public investment in 1962-1965, as compared with the

actual financing of public investment in 1956-1961, can be constructed:

Annual Public Investments and Their Financing(millions of sucres)

HypotheticalActual (by fiscal year) Projection

1956 1957 1956 1959 1960 1961 1962-1965(Annual Aver.

Public Investment 584 564 567 738 882 935 1600

Financed by:Public Savings 567 590 604 769 766 748 875Net Foreign Borrowing 49 -2 -19 94 155 187 725

Net Domestic Finan-cing 1/ -32 -24 -56 -125 -39 - -

1/ The negative figures reflect purchases of mortgage bonds by the Social

Security Funds, see paragraph 43, and indicate that over-all the publicseclor has made net transfers to the private sector.

Source: Table 14 and 16

50. In the next few years the possibilities for an increase in local

funds avail able for public investment seem rather limited. With an un-

changed ta. system and with prospects of slow growth in total output and

exports, the increase of total revenues is likely only to keep up with the

increase in administrative and other current expenditures. Public savings

which represented 5.3% of GNP in 1960/61 are therefore likely to decline

relatively to GNP, unless the tax system is modified.

51i0 Prospects for a substantial increase in taxes seem rather limited,

particularly in the next year or two. The share of GNP absorbed by public

revenues is already fairly high and the present Government appears not to

have the broad political support which would be necessary to impose new taxes

or to raise tax rates on a significart scale. Recent changes in the income

tax!7 and the export tax on bananasV/ are likely adversely to affect tax re-

ceipts, especially in the short run. Charges for public utilities (power

rates, railway and air fares) are generally very low in Ecuador and are in

many instances insufficient to cover even current expenditures. A substan-

tial increase in power rates in Quito is nowv under consideration. These and

other changes could contribute to some increase in public savings. Some

attempts are also being made to improve tax administration and to improve

efficiency in the operation of the Government. Several foreign expert mis-

sions have been and are working on these problems. In September 1962 a

National Commission for Financial and Administrative Reform was created, for

1/ Including lnrger exemption for the lower income brackets and higher tax

rates for the higher income brackets.2/ Exports of bananas over and above the average level of the preceding three

years are exempted from the 5% export tax.

- 19 -

the purpose of simplifying the tax system, exploring possibiLities for tax

measures which could increase public revenues and for bringing about more

efficiency in public agencies. Progress in these fields is, however, likely

to be slow at best, with little immediate effect on over-all public savings.

52. A large part of total public savings will be absorbed by munici-

palities, provincial councils and many small autonomous entities for invest-

meiit in local projects in roads, ports, public buildings, urban affairs and

purchases of machinery and equipment. Investments in projects of these

types not included in the Plan Inmediato, which roughly can be estimated at

some s/450 million per year in recent years, are likely to continue at about

the same level. While no analysis has been made of these projects, which

loom so large in the total, it is reasonable to assume that many of them are

relatively low yielding from both a social and economic point of view. The

Plan Inmediato represents the first attempt to include a larger part of

public investment related to a national program. In a long-term public in-

vestment program now being prepared by the Planning Board, attempts will be

made to include a still larger portion of all public investments.

53. Assuming that total public savings would approximate S/800 million,

of which s/475 million would be absorbed by investment outside the Plan,domestic resources available for financing investment included in the Plan

Inmediato would probably not exceed an average of some S/325 million a year,

eou'valent to about two-thirds of the domestic financing envisaged in the

Pl-n.n Even to direct these resources to investment under the Plan Inmediato

may prove difficult in view of the present dispersion of financial resources

in the public sect'or. A reassessment of the financial policy relating to

Social Security I•unds and a strengthening of the Central Government finances

will be es-ential in this respect. In the proposed 1963 budget reductions

in transfer, to the rest of the public sector are designed to produce a

small current surplus as compared with current deficits of between S/70

and S/90 million a year in the last three years. Continued strong efforts

will be necessary both to increase Central Government current surpluses

and Lo divert non-inflationary domestic resources from the rest of the public

sector to high-priority projects of the Central Government.

54. External credits available for projects in the Plan amounted to

about $25 million at the end of 1961. In the first ten months of 1962 new

credits of $32.2 million have been contracted and a gift of eight ships

with diesel generators (worth $17.2 million) was received. In addition,

external loans of about $46 million have been requested.

55. On the whole the lack of domestic funds is likely to prove to be more

of an immediate limiting factor in realizing the Plan Inmediato than the

lack of both external resources and projects fully studied and prepared for

execution. As noted above, even if public savings can be increased some-

what, the availability of domestic finance to complement the external re-

sources obtained in support of the projects in the Plan Inmediato will be

a problem. Taking all factors into account, average public investment of

about S/1,150 million a year is probably a realistic target for the 1962-65

period, which would mean that about two-thirds of the investment envisaged

-20 -

under the Plan Inmediato could be implemented. This target represents an

increase of 30% from the 1960/61 level. If a yearly average of about S/800

million of total investment is financed by domestic resources, the need for

external financing can be estimated at S/350 million on a net basis, i.e.

after a deduction for service on outstanding external public debt, or S/515

million ($29 million) per annum on a gross basis. This seems feasible in

view of the undisbursed external commitments in support of the Plan Inmediato,

which will amount to some $50 million at the end of 1962. On these assump-

tions, external resources would on a gross basis in the 1962-65 period fi-

nance about 45% of total public investment, compared with 30% in the 1950's

and about two-thirds of the Plan Inmediato. On a net basis about 30% of

total public investment would be financed from abroad, as compared with 9%

in the 1950ts.

III. GROWTH AND BALANICE OF PAYMENTS PROSPECTS AND CREDITWORTHINESS

56. With the end of the fabulous growth in banana exports, which was

the prime mover of the economic expansion in the 1950s, Ecuador now seemsto have reached another crossroad in its economic history. While the re-

adjustment that is required is not as drastic as what was required after

World War I with the breakdown of the market for Ecuadorian cacao, the

present situation wvill require strong and constructive policies in order to

prevent undesirable economic and political repercussions.

57. Po'oibilities exist for expanding output for the internal market,

but the smallness of the market sets rather narrow limits for such an ex-

pansion. Favorable climatic and soil conditions for producing agricultural

goods, especially tropical crops, together with large untapped natural re-

sources seeri to indicate that the growth of the Ecuadorian economy for many

years will depend mainly on expanding exports of products from agriculture

and fishing.

58,, A satisfactory rate of growth of the economy will largely depend

on the implementation of policies designed to provide more capital inten-

sive techniques and to achieve a diversification of exports. In this re-

spect, the implementation of the economic projects envisaged in the Plan

Inmediato will play an important role. As most of these projects will need

several years before they will come into production, and as business confi-

dence can only be expected to improve gradually, the rate of economic growth

in the next few years is likely to be rather slow, probably just keeping

pace with the population growth. A resumption of a more rapid rate of econo-

mic growth should be feasible once the transitional period is successfully

completed.

59. Export earnings can be projected to increase by some 3% per year

in the next few years. Although emphasis will continue to be put on import

substitution, import demand is likely to continue to increase about in pace

with total output, or about 3% per year. Thus, increases in current export

earnings are not likely to permit any substantial increase in foreign ex-

change reserves. In fact, if the present slim margin of reserves is to be

protected and confidence of investors firmly re-established, strict fiscal

and monetary policies will be required.

- 21 -

60. Necessary adjustments to changing economic world conditions arelikely to put great strain on the economy. Ecuadodts creditworthiness willto an important extent depend on the ability to contain this pressure andto maintain financial stability. Ecuador's long tradition of moderationin financial matters and the fact that the community has during the past 18months, in the face of adverse world market conditions for the country's

principal exports, managed to restore financial stability are favorablefactors in this respect. It should also be noted that the public sector in

Ecuador generates a substantial volume of domestic savingsj even though the

Central Government has not been fully successful in assuring their alloca-tion to high priority uses.

61. External public debt, net of undisbursed amounts, rose from about

$67 million at the end of 1959 to $85 million at the end of 196I. The un-disbursed part of loans committed at the end of 1961 amounted to $26 million.Less than 206 of the debt outstanding at the end of 1961 consisted of sup-pliers' credits with from 2 to 7 years repayment period. The rbst consis-ted of long-term loans, mostly from the U.S. Government and IBRD. Debtservice payments, amounting to about $16 million in 1962 and falling to $9million in 1967 represent respectively about 11% and 5% projected exportearnings. In 1962, these service nayrnents were equal to about one-third of

public savings.

62. External credits have played an important strategic role in public

investment; grcs.s drawings on such credits, largely for transportation pro-jects, finanzed some 30% of public investment in the 1950's. With the nota-ble progre s made principally 'by the Planning Board in preparing projectsand in cooxdinating public investment, external resources are likely to beeven more important in the 1960's. About $80 million has already been ob-taired in support of the Plan Inmediato, of which about $39 million are inthe form of grants or loans on special terms. Loans to Ecuador are underactive consideration by various foreign lending agencies for a total of a-bout $46 mil'ion,

63. In view of the slow growth in export earnings and public savingsin prospect, the margin for incurring additional external debt on conven-tional terms is fairly limited. On the assumption that the service burdenof the external debt ought not to rise substantially above the present rate

of about 11% of export earnings and that new debt on conventional terms isobtained with maturities equivalent to the average of the present debt,

additional external debt of about $20 million a year in the next four-yearperiod could be serviced. This is considerably below the external financingrequired for implementing essential high-priority projects in the next few

years. In the rehabilitation and further economic expansion of an economylike Ecuadorts, with a standard of living among the lowest in Latin America,

public investment must play a very important role. In these circumstances,part of the further external financial assistance to Ecuador should be made

available on special terms.

STATISTITCL AP?ENDIX

Table No.

External Public Debt1 Estimated external public debt outstanding December 31, 1961.

2 Estimated contractual interest and amortization payments onexternal public debt outstanding including undisbursed as ofDecembe'r 31, 1961.

National Accounts

3 Expenditures on gross national product, 1955-1961

4 Gross national product, by origin, 1955-1961

Production

5 Structure of agriculture in 1955, 1958 and 1961.

6 Major agricultural products: production, area and yield, 1955-1961.

7 Credit extended to agriculture by the banking system, 1955-1961.

8 Industrial structure and changes in industrial output, 1955-1960.

9 Electric power: capacity, production and consumption, 1955-1961.

10 Mineral production, 1955-1961.

11 Exports and imports of petroleum products, 1955-1961.

Banking

12 Changes in bank credit by origin and destination, 1956-1962.

13 Advanced import deposits, 1960-1962.

Public Finances

14 Consolidated finances of the public sector, 1955-1961.

15 General government revenue as percentage of gross national productin various countries.

16 Finances of the public sector, by authority, 1956-1961.

17 The Central Government budget, 1956-1963.

18 Central Government expenditure, by purpose, 1956-1960.

2-Table No.

Capital Formation

19 Gross fixed capital formation, by sector and purpose, 1956-1961.

20 Gross fixed capital formation of the private sector, 1956-1961.

21 Gross fixed capital formation of the Central Government, 1956-1961.

22 Gross fixed capital formation of the rest of the public sector,1956-1961.

23 Public investment projects in Ecuador (Plan Inmediato).

Capital Market

24 External credits obtained or being sought for, for financingprojects of the Plan Inmediato.

25 Negotiable securities outstanding end of 1959 and end of 1961,by purchasers and by securities.

Balance of Payments

26 Balance of international payments, 1956-1961.

27 Merchandise exports, by value, 1956-1961.

28 Merchandise exports, by volume and value, 1956-1961.

29 Merchandise imports, 1956-1961.

30 International reserves of the Central Bank, 1954-1962.

Pri_es

31 Terms of trade, 1950-1962.

32 Free market rate of exchange, 1950-1962.

33 Cost of living index, 1950-1962.

34 Wholesale price index, 1956-1962.

Table 1: ECUADOR - EXTERNAL PUBLIC DEBT OUTSTANDING INCLUIDING UNDIISBURSED AS OFDECaMBER 31, 1961 -JITH -lrAt,OP. REPORTED ADDITTIO iS TO OCTOBER 11, 1962

Debt Repayable in foreign Currencies

(In thousands of U.S. dollar equivalents)

Debt as of Major additionsDecember 32 1961 Jajo addios

Net of Including October 11, 1962undisbursed undisbursed

TOTAL EXTERNAL PUBLIC DEBT 84298 111,057 14,220

Publicly-issued bonds 6,715 6,715 -

Privately-placed debt 16 19,533 1,720

IBRD loans 31,360 40,561 _

IDB loans 3p715

U.S. olovernment loans 26,634 38,430 12.500Ex.c-rt-Import Bank 17,561 18,307 500Reconstruction Frnance Corp. 3 3 -A ID (formerly ICi.) 2,160 2,160 -AID (formerly DLF) 2,610 9,960 5,000AID 4,000 8000 07000

Colombiaa Government loans 2,103 2,103 -

IBRD - Economic StaffNovember 14, 1962

Table 2: ECUADOR - ESTItiATED CONTIRACTUAL SERVICE PAY1iENTS OH N i .L PUBLIC DEBT 6UTOThNDING 1:.iIIIG UNDISBUi.SEDAS OF DEC!1i7BER 31, 1961 WITH i-AJOR ;.PORT'D ADDITIONS TO OCTOBER 11, 1962 1

Debt Repayable in Foreign Currencies

(In thousands of U.S. dollar equivalents)

Total Debt.Debt out- Total service payments by category of debt

standing Payments during yearYear plus un- h -qorti- In- Publicly Privately IBRD U.S. Colombian IDB

disbursed mon te Total issued placed loans Govt. Govt. loanI

January 1 zation terest bonds 2J debt 1/ oanloans loans

1962 109,482 12,044 3,672 15,716 292 7,940 3,957 3,217 287 231963 111,656 10,968 4,101 15,069 292 6,068 4,914 3,416 279 100

1964 100,686 8,654 3,838 12,/±92 292 4,073 4,154 3,497 270 2C61965 92,030 5,777 3,549 9,326 292 1,642 3,387 3,422 262 321

1966 86,251 5,758 3,329 9,0S7 292 1,285 3,387 3,403 302 413

1967 80,491 5,677 3,107 8,784 292 637 3,384 3,778 196 497

1968 74,812 5,608 2,898 8,506 292 108 3,385 4,106 189 426

1969 69,203 6,047 2,668 8,715 292 3,386 4,461 182 394

1970 63,154 5,375 2,427 7,802 292 3,387 3,653 175 295

1971 57,778 5,174 2,202 7,376 292 3,386 3,039 168 491

1972 52,603 5,267 1,978 7,245 292 3,385 2,934 161 473

1973 47,325 5,165 1,749 6,914 292 3,386 2,/93 154 2891974 42,168 5,019 1,527 6,546 292 3,386 2,444W 146 278

1975 37,148 5,056 1,307 6,363 292 3,384 2,420 - 267

1976 32,091 5,019 1,085 6,104 292 3,367 2,385 - 260

1/ Does not include service on $1,575,000 of privately placed debt 'or which repayrient terms are not available.

2/ It was assumesd that bonds would be retired by the sinking fund through r:urchases in the open market at

prices below par at approxim-ate present yields.IBRD - Ecoromic Staffiqcvember 14, 1962

Table 3: EXPENDITURES ON GROSS NATIONAL PRODUCT, 1955-1961

(millions of sucres at current market prices)

1955 1956 1957 1958 1959 1960 1961

Consumption Exenditures 9,224 9,492 9,944 10,393 10,803 11,925 12,985

Private 7,850 8,125 8,537 8,9°o 9,270 10,112 10,928Public 1,374 1,367 1,407 1,413 1,533 1,813 2,057

Gross Investment Expenditures 1,806 1,780 1,811 1,772 1,921 2,081 2,255

Fixed capital 1,538 1,560 1,561 1,516 1,734 1,856 1,946Private 901 977 997 949 997 974 1,011Public 637 583 564 567 737 882 935

Inventories 268 220 250 256 187 225 309

GROSS AVAILABLE RESOURCES FOR DOMESTIC USE 11,030 11,272 11,755 12,165 12,724 14,006 15,240

Net Exports of Goods and Services - 289 - 375 - 124 - 112 - 100 - 344 - 616

Exports 2,070 2,097 2,377 2,312 2,454 2,530 2,513Imports -2,051 -2,103 -2,125 -2,120 -2,169 -2,476 -2,677Services (net) - 3°3 - 369 - 376 - 304 - 385 - 398 - 452

GROSS MATIONAL PRODUCT 17I 0897 11631 12,053 12,624 13,662 14,624

GNP at 1950 prices 9,165 9,443 9,950 10,249 10,726 11,385 11,690

Gross Investment as % of GNP 1604 15.8 15.4 14.6 15.1 14.9 14.8

Source: Central Bank.

Table 4: GROSS NATIOMTAL PR.ODUCT BY ORIGIN, 1955-196i.

(1950 = 100')

% ofGNP in 1955 1955 1956 1957 1958 1959 1960 1961

Agriculture 36 119.7 126.9 131,3 132.7 140.8 149.4 158.9

Industry 15 121.2 128.4 131.8 140.2 147.4 158.8 160.3

Commerce 13 158.3 162.4 164.7 167.8 170.0 185.5 188.9

Services 8 123.7 114.5 134.5 143.6 149.9 153.9 155.1

Otmership ofbuildings 8 122.7 126.0 129.0 131.5 134.5 134.6 134.6

Public Ad;ninis-tration andDefense 6 135.1 1142.1 141.6 144.8 151.6 166.2 185.9

Transport 5 136.5 133.6 140.2 141.8 145.9 145.6 n.a.

Construction 3 147.2 170.6 180o6 183.3 218.3 243.9 n4 a.

NIining, petrol-eum 2 138.0 132.0 132.0 126.0 132.0 173.3 181.3

Banking, insur-ance 2 157.4 171.3 219.1 258.5 297.9 302.1 307.4

Powjer, wvater,sanitation 1 27365 276.5 302.9 3114.7 344.1 3614.7 n.a.

Total 100 128.7 133.5 139.4 1143.5 151.2 161.0 166.5

Source: Central Bank.

n.a. = not available

Table 5: STRUCTURE OF AGRICULTURE: 1955, 1958, 1961

(value of production as percentage of totalvalue of agricultural production)

Product 1955 1958 1961

Primarily frr-- P=rt 43 38 31

Bananas 28 25 23Coffee 9 7 4Cacao 6 6 4

Primaril,y forinternal consumption 57 62 69

Rice 5 5 6Corn 5 4 3Potatoes 5 4 5WTheat 2 1 2Barley 2 1 1Other crops 18 24 26

Total crop forinternal consumption 37 39 43

Cattle and products 20 23 26

Total agriculturalprcduction 100 100 100

Source: Central Bank.

Table 6: MAJOR AGRICULTURAL PRODUCTS: PRODUCTIONI, AREA HIARVESTED AND YIELDS, 2955-1961

Unit 1955 1956 1957 1958 1959 1960 1961

Crops primarily for exportBanalias: Production 'OOO metric tons 1,873 1,953 1,669 1,755 1,898 2,075 2,050

Area '000 hectares 135 4147 156 164 169 n,a. n.a.Yield ton/hectare 13.9 13.3 10.7 10.7 11.2 n.a. n.a.

Coffee: Production tOOO metric tons 36 30 34 37 30 38 30Area '000 hectares 84 83 105 1114 109 n.a. n.a.Yield ton/hectare 0.4 0.5 0.3 0.3 0.3 n.a. n.a.

Cacao: Production tOOO metric tons 28 33 31 27 33 I41 38Area '000 hectares 205 202 243 230 237 n.a. n,a.Yield ton/hectare 0.1 0.2 0.1 0.1 0.1 n.a. n.a.

Total exportcrops: Production '000 metric tons 100 102 93 103 100 115 108(1955=100) Area '000 hectares 100 102 119 120 121 n.a. n.a,

Yield ton/hectare 100 100 78 86 83 n.a. n.a,

Crops primarily for internalconsumptionRice: Production 1000 metric tons 115 119 144 148 160 175 169

Area '000 hectares 79 93 104 109 116 n.a. n.a.Yield ton/hectare 1.5 1.3 1.4 1.4 1.4 n.a. n.a.

Corn: Production 1000 metric tons 164 164 132 143 166 159 144Area '000 hectares 241 240 218 221 240 n.a. n.a.Yield ton/hectare 0.7 0.7 oO,6 o.6 0.7 n.a. n.a.

Potatoes: Production '000 metric tons 164 177 154 161 183 187 298Area '000 hectares 45 51 56 58 59 n.a. n.a.

Yield ton/hectare 3,6 3.5 2.8 2.8 3.1 n.a. n.a.

.... continued

Page 2

Unit 1955 1956 1957 1958 1959 1960 1961

Wheat: Production '000 metric tons 42 40 35 39 47 58 78Area '000 hectares 70 65 61 56 55 n,a. n.a.Yield ton/hectare O.6 0.6 0.6 0.7 0.9 n.a. n.a.

Barley: Production '000 metric tons 79 77 61 69 76 83 70Area '000 hectares 125 133 129 130 132 n.a. n.a.Yield ton/hectare o.6 0.6 0.5 0.5 o96 n.a. ne.a.

Sugar Cane: Production '000 metric tons 2,135 2,)413 3,343 3,802 4,325 4,951 5,614

Other Crops: Production '000 metric tons 1,032 1,144 1,195 1,497 1,691 1,767 1,917

Total crop Production '000 metric tons 100 102 97 102 115 121 137for interni-Area '000 hectares 100 104 101 103 107 n.a. n,a,consumption:Yield ton/hectare 100 98 96 99 107 n.a. n.a.Rice, corn,potatoes, wheatand barley (1955-100)

Sugar Cane Production '000 metric tons 100 110 121 145 163 180 193& othercrops (1955=100)

All Crops forinternal Production '000 metric tons 100 106 108 122 138 149 163consumption(1955=100)

All Crops Production 100 104 100 108 117 130 133(1955=100)

Animal Products (1955=100) 100 113 125 135 144 155 185

Total Agricultural Production 100 106 105 113 122 135 143

n.a. = not available

Source: Central Bank.

Table 7: CREDIT EXTENDED TO AGRICULTURE BY THEBANKING SYSTEM, 1955-1961

(million of sucres of new loans)

1955 1956 1957 1958 1959 1960 1961

Central Bank 36 44 37 59 40 36 114

Commercial Banks 53 52 68 83 94 109 102

Development Banks 261 254 302 266 189 189 234

All Banks 350 350 407 408 323 334 450

Source: Central Bank.

Table 8: INDUSTRIAL STRUCTURE IN 1958 AND CIHANGES IN INDUSTRIAL OUTPUT, 1955-1960

Percentage in 1958 of: Industrial Production (1955=100)Employment Gross Value Value Added 1955 1956 1957 1955 1959 1960 L

Foods ) 100 115 126 130 135 151

)Beverages) 42 55 54 100 lo4 120 128 138 143

Tobacco ) 100 125 113 111 110 109

Textiles 25 14 18 100 106 135 131 139 148

Petroleum 8 8 10 100 102 102 118 153 217

Shoes, Clothing 3 2 1 100 93 91 83 74 47

Chemicals 4 6 5 100 91 94 100 107 117

Lumber, wood industry 4 2 2 100 122 113 145 168 201

Cement 3 4 3 100 104 106 110 107 137

Others 11 9 7 100 125 125 128 184 200

Total 100 100 100 100 107 116 124 135 156

1/ Provisional

Source: Central Bank.

Table 9: ELECTRIC PCNER: CAPACIY, PRODUCTIONAND CONSUMPTION, 1955-1961

1955 1956 1957 1958 1959 1960 1961R/

Installed capacity./ 66 70 84 101 106 110 131

Hydro 26 29 33 34 35 35 55

Thermal 4h 41 51 67 71 75 76

Production_/ 259 281 299 324 349 389 429

Residential commercial 98 15 113 134 144 162 175

Industrial 84 95 101 107 110 127 146

Strceet lighting 16 19 21 23 27 26 27

Other 61 62 64 60 68 74 81

P/ Provisional.1/ Thousands of kilowatts.2/ Millions of kilowatt-hours.

Source: Central Bank.

Table 10: MINERAL PRODUCTION, 1955-1961

1955 1956 1957 1958 1959 1960 1961

('000 troy ounces)Gold 15 15 17 20 19 15 15Silver 48 52 61 85 163 126 101

(metric tons, metal content)Copper 9 12 16 48 135 221 223Lead 85 116 110 120 107 238 245

(millions of U.S. gallons)Petroleum - crude 148 144 134 131 116 116 123

- gasoline 28 29 27 30 37 63 51- kerosene 8 9 9 10 11 13 14- diesel 11 15 15 19 27 29 31- residual 33 32 34 39 29 52 65

Source: Central Bank.

Table 11: EXPORTS AiND TIMIPORTS OF ?ET?OLEUY PRODUCTS, 1955-1961

(millions of U.S. dollars)

1955 1956 a957 1958 1959 1960 1961

Exports(rude oil 2.1 1.7 1.8 0.8 0.6 -

Imports 3.4 3.1 5.0 3.9 3.0 -

Gasoline 2.1 2.3 3.3 3.0 2.2 -

DLiesel 0.3 0.3 0.7 o.6 0.3 -

Residual o.6 0.5 0.1 0.3 0.5 -

Balance -1.3 -1.4 -3.2 -3.1 -2.4 -

ImportsCrud- jtl - - - - 0.1 1.75Gasoline forAvia tion n.a. n.a. n.a. n.a. n.a. 0.6 0.6

Source: Nsinistry f or Development.

- = zeron.a. = not available.

Table .2: CHANGES IN BANK CREDIT BY ORIGIN ANiD DESTINATION, 1056-1962

(millions of sucres)

First BalanceHalf Jun.3~

1956 1957 1958 1959 1960 1961 19622 1962

ORIGIN:

Central Bank Credit 118.8 1.4 -143.2 1.0 147.7 378.3 - 1.6 1044.6Central Government: 54.2 -16.9 - 66.9 - 12.8 54.1 148.8 50.4 228.3Loans & Investment - _ 7.3 _ 7.1 _ 11.0 229.9 - 21.5 37.1 4.3Less: Deposits - 2.1 - 9.6 - 59.8 - 1,8 -245.8 170.6 13.3 -218.0Rest of Public Sector 16.3 -31.5 - 66.3 35.4 41.7 37.6 -26.4 69.6Loans £L Investment -243 -37.4 4 6*7 42@8 -75* 2.2 .T75 T27*0Less: Deposits - 8.0 5.9 - 19.6 - 7.4 - 33.9 35.4 -31.7 -148.4

Private Sector 2 66.5 55.9 - 30.7 - 6.1 94.1 121.5 -31.9 507.6Commercial Banks 5.4 - 9.4 10.6 1.3 0.1 - o.6 9.8 36.7Development Banks -23.6 3.3 10.1 - 16.8 - 42.3 71.0 - 3.5 202.4

Comrercial.J D3nk Credit 154.0 174.2 144.3 216.4 234.1 77.2 27.3 2135.7Loans a;-d Investments

to Private Sector 159.4 164.8 154.9 217.7 234.2 76.6 37.1 2172.4Les_: Financing through

Central Bank - 5.4 9.4 - 3.0.6 - 1.3 0.1 0.6 - 9.8 - 36.7

Develo12ment sank Credit 33@6 38.4 35.1 - 12.6 22.9 18.5 5.3 602.2

To: Central Government(Deposits) - 1.5 0.7 7.3 0.3 - 2.3 4.8 - 3.1 - 11.2

Rest of Public Sector(Deposits) 2.1 - 6.9 - 9.3 1.2 - 304 1.2 - 4.0 - 34.2

Private Sector 9.4 47.9 47.2 - 30.9 - 13.7 83.5 8.9 850.010.0 41.7 45.2 - 29.4 - 19.4 89.5 T1E 80h.6

Le7s: Financing throughCentral Bank 23.6 - 3.3 -10.1 16.8 42.3 -70.0 3.5 -202.4

Total Banking SystemCredit

Central Government 52.7 -16.2 -59.6 -12.5 51.8 153.6 47.3 217.1Rest of Public Sector 18.4 -38.4 -75.6 36.6 38.3 38.8 -30.4 35.4Private Sector 235.3 268.6 171.4 180.7 314.6 281.6 14.1 3530.0Total 306.4 214.0 36.2 204.5 1 7 474.0 31.0 3782.5

.... Continued

Page 2

One- BalanceHalf ''Jun,32.

1956 1957 1958 1959 1960 1961 196Haf 1 ,962_

3ESTINATION:

?ri ate Holdings of3a4k Debt 284.0 250.5 14.6 298e3 299.2 300.2 - 8.6 3517.5Currency in

circulation 80.4 13.2 - 15.1 42e1 96.4 33.2 - 7.0 853.0Demand deposits 76.8 41.0 1.5 127.4 72.2 26.0 -18.0 916.8Total Money Supply 157.2 54.2 - 13.6 169.5 168.6 59.2 -25.0 1769.8Niortgage Bonds 82.2 142.7 98.9 112.4 86.1 18.6 - 6.o 1033.1Time, Savings and

Foreign ExchangeDeposits - 44.6 53.6 - 70,7 16.4 44.5 222.4 22.4 714.6

Gold and Foz-eign ExchangeHoldings oI Earnk(icrease 6.8 -55.5 - 31.6 - 76.2 55.2 -107.3 81.5 -512.1

capital, Reserves andOther (netY i?.abilities 29.2 19.0 53.2 - 17.3 50.3 281,1 -41.9 777.1

Total 306.4 214,0 36,2 204.8 404.7 474.0 31.0 3782.5

'I Provisional.

2/ Includes advanced import deposits.

Source: Central Bank.

Table 13: ADVAITCE fIPORT DTTPOSITS, 1960-1962

(millions of sucres)

End of Period At rates of Total25% 50% 100%

1960 - December n.a. n.a. - 16.5

1961 - M,-arch 9.8 23.4 _ 33.2June 49.7 5° e 100653eptember 71.0 51.h 26.6 149.0December 70.8 33.2 )42.5 146.6

1962 - March 6h.7 15.1 49.5 129.3

June 72.1 15.4 54.8 142.3

Source: Central Bank.

Table 14: CONSOLIDATED FI1NANCES OF THE PUBLIC SECTOR, 1955-1961

(millions of sucres)

1955 1956 1957 1958 1959 1960 1961

Revenue

Direct taxes 579 613 694 731 803 840 903

on: income 371 393 431 468 524 522 564

inheritance 57 68 73 79 80 81 84

exports 104 110 136 134 144 175 188

other 47 42 54 50 55 62 67

Indir-ct taxes 1,028 965 1,109 1,154 1,187 1,205 1p390

on: imports 484 447 544 571 579 642 682

consumption 372 353 388 392 401 437 461

transactions 22 25 27 36 37 35 39

other 150 140 150 155 170 171 208

Other revenue 548 576 610 689 719 810 851

Total revenue 2,155 2,154 2,413 2,574 2,709 2,935 3,144

Current expenditures 1,635 1,587 1,823 1,970 1,940 2,170 2,396

Saving 520 567 590 604 769 766 748

Investment expenditures 644 584 564 567 738 882 935

Surplus, or deficit (-) -124 -17 26 37 31 -116 -187

Financed by:

External gross borrolwing 140 93 59 85 204 293 349

less amortization 52 44 61 66 110 138 162

External borrowNTing (net) 88 49 -2 19 94 155 187

Domestic borrowing (net)and use of cash balance 36 -32 -24 -56 -12.5 -39 0

Source: Central Barik.

TABLE X - T:KAL GL 7:, L.T FL,BiJE ASPER ENTACGE OF GROSS i7ATIDI+L -tJDUCT ILl VAPIOUS COUNTRIES

Period Revenues as percentage of GNP

Total Indirect Direct Income from propertyCurrent revenues taxes taxes and entrepreneurial

Rctivities

Ecuador 1950 - 59 19.7 10.9 3.7 4.2

Chile 1950 - 59 19.7 8.6 10.2 0.6

Colombia 1950 - 59 12.0 6.9 4.2 0.9

Costa Rica 1950 - 59 18.5 9.6 3.6 1.1

Paname 1950 - 58 16.3 7.7 4.1 1.0

Peru 1953 - 58 12,6 5.8 6.5 0.3

Source. Simon Kuznets "Quantitative aspects of the economic growth of nations;

VII -',he share and structure of consumption." Volume X, No. 2, Part II

of Economic Development and Cultural Changes (January 1962).

__e_i16: FINANCES OF THE PUBLIC SECTOR, BY AUTHORITY, 1956.,1961

1956 1957 1958 1959 1960 1961

Central GovernmentRevenue 820 1,011 1,025 975 860 1,086Noon-investment expenditure 772 864 879 827 970 1,152Saving 4 7 146 vT -110 266Investment expenditure 242 166 147 225 284 342Surplus, or deficit (-) s _-19 -1 -77 -3i -4 05Total expenditure 1,T1O 1,030 1,026 1,052 1,T 1,565

Investment as % of totalexpenditure 24 16 14 21 25 23

Saving as % of revenue 6 15 1]4 15 -13 -6

Provincial CouncilsRevenue 32 37 36 35 39 40Non-investment expenditure 9 12 12 9 12 13Saving 23 -725 -28 27 27Investment expenditure 18 25 22 25 22 24Surplus, or deficit (-) _7 - 2 3 7 73Total expenditure 27 37 34 - m 37

Investmuent as % of totalexpenditure 67 68 65 73 65 65

Saving as % of revenue 72 68 67 25 31 33

iIunicipal CouncilsRevenue 303 352 382 372 511 502Non-investment expenditure 180 220 261 239 289 334Saving 123 132 121 133 222 168Investment expenditure 132 140 134 212 241 250Surplus, or deficit () -9 -8 -13 -79 -19 _82Total expenditir?e 312 360 3 530 584

Investment as % of totalexpenditure 42 39 34 47 43 43

Saving as /Z of revenue 41 38 32 36 43 33

Autonomous EntitiesRevenue 999 1,013 1,131 1,327 1,526 1,516Non-investment expenditure 626 727 818 866 899 898Saving 373 _28 313 461 627 618Investment expenditures 192 233 264 276 335 320Surplus, or deficit (-) 182 3 49 185 292 298Total expenditure 818 9 1,082 1,142 1,234 1,218

Investment as Z of totalexpenditure 23 24 24 24 27 26

Saving as jO of revenue 37 28 28 35 41 41

.e .. *continued

Page 2

1956 1957 1958 1959 1960 1961

Total Public SectorRevenue 2,154 2,413 2,574 2,709 2,936 3,144Non-investment expenditure 1 587 1 823 1 970 1 940 2 170 2 396Saving 6014 48Investment expenditure 584 564 567 738 882 935Surplus, or deficit (-) -17 2 37 31 __116 -187Total expenditure 2,171 2,387 2,537 2,67 3,02 3,331

Investment as % of totalexpenditure 27 24 22 27 29 28

Saving as % of revenue 26 24 23 28 26 27

Central Government as % of TotalPublic SectorRevenue 38 42 40 36 29 34Non-investment expenditure 49 47 45 43 45 48Saving 8 25 24 19 -14 -8Investment expenditure 35 29 26 30 32 37Total expenditwxse 47 43 41 39 41 47

Source: Central Bank.

Note: As these data reflect the public sector finances afterconsolidation, Central Government data shown here do notagree in all respects with Central Government budget datashow-n in Table 17- Revenue for each segment of the publicE ctor is shown here after transfers from the CentralGovernment to the rest of the public sector. Revenue doesnot include proceeds of loans or cash balances, expendituredoes not include amortization of debt.

Table 17: THE CENTRAL GOVF¶1i!NT IS BUDGET. 1956-1963(millions of sucres)

1956 1957 1958 1959 1960 19611/ 1962-/ 19632/

RevenuesIndirect taxes 2773 934 935 958 1,034 1,028 1,100 1,250on: imports 413 545 554 558 639 639 670

consumption 285 293 288 304 299 273 300others 75 95 92 96 96 116 130

Direct taxes 249 280 304 290 280 344 375 440on: income 147 158 183 166 173 207 210

exports 79 98 87 90 84 109 120others 23 24 34 34 23 28 45

Other revenues 113 141 140 90 113 173 192 100

Total 1,135 1,355 1,379 1,338 1,427 1,548 1,667 1,790Current Expenditures and Transfers 1,086 1,173 1,161 1,189 1,519 1,616 1,744 1,770Consumption 675 729 682 696 790 880 999 1,050Transfers 411 444 479 493 729 736 745 720

Savinzs 49 182 218 149 - 92 - 68 - 77 20Investment Expenditures 238 165 147 226 284 350 270 2C0Budget Surplus, or Deficit (-) -189 17 71 -77 -376 -418 -34Y -180Financed ByExternal borrowing (net) .22 -21 -2 13 138 210 170Gross borrowing 47 5 - 91 194 287 240Less-Amortization 14 26 18 78 56 77 70

Domestic borrowing (net) A 4 -69 64 238 208 - 7Central Bank 1*-7-7 7 274 17National Security Commission 3 -23 14 107 92 88) goSocial Security Fund -5 -7 -6 -5 - -29)Borrowing from private sector 46 17 -18 -21 -21 51)Use of cash balances 20 26 -45 -18 -89) 81)Other 3 -1 8 12)

1/ Provisional2/ Estimated partly by Central Bank, partly by IBPD staff (Investrment and Financing of Deficit)3/ Proposed budget; IERD staff estimates of specij'L accc:-;ts

Source: Central Bank - 1956-1962Mlinistry of Treasury - 1963

Table 18: CENTRAL GOVERNrT4ENT LXl - NDIT. U BY PURPOSE, 1956-1960

Purpose 1956 1957 1958 1959 1960

General administration 13 13 14 13 13

National defense 23 22 21 18 18

Police and justice 5 5 5 5 5

Education 11 11 11 12 11

Public health 3 3 3 2 3

Social welfare, labor 4 4 4 6 5

Housing, communal services /1 /1 a 1 1

Agriculture, forestry,fisher-es 1 1 1 2 2

Industry and comnerce /1 /1 /1 L 1

Transportation, communication 20 17 17 23 19

Other/2 19 24 24 18 22

100 100 100 100 100

1/ Less than 0.5

/ Includes customs duties collected by the Central Government on behalfof autonomous entities.Note: These figures do not include repayment of debt.

Source: Central Bank.

Table 19: GROSS FIXED CAPTTAL FORMATTO!, B' SECTOR AND PURPOSE, p956-1961

(millions of 1950 - sucres)

1956 1957 1958 1959 1960 1961

TOTAL: 1.352 1.335 1X289 1.474 1.547 1.556

By Sector:

Private sector 847 853 807 847 812 809

Central Gov. otherPublic sector 505 482 482 627 735 747

By Purpose:

Transportation 247 212 180 221 277 305

roads, bridges 191 178 164 186 190 220

railroads 17 14 6 1 9 8

airports 23 12 1 4 2277

ports 16 8 9 30 56

Electrification 18 40 35 97 104 98

Irrigation 5 4 4 8 14 14

Housing 218 233 223 240 202 202

Non-residential building 132 126 140 131 174 172

Other construction 110 109 103 121 113 93

Vehicles,machinery andequipment 622 611 604 656 663 672

Source: Central Bank.

Table 20: GROSS FIXED CAPITAL FORNATTON OF THE PRIVATE SECTOR, 1956-1961

(millions of 1950 - sucres)

1956 1957 1958 1959 1960 1961

Housing 211 214 208 174 166 162

Other building and construction 70 82 61 84 52 47

Vehicles,machinery and equipment 566 557 538 589 594 600

TOTAL: 847 853 807 847 812 809

So-arce: Central Bank,

Table 21: GROSS FIXED CAPITAL FORJTIiATT.N OF THE CENTRAL GOVERNYiENT, 1956-1961

(millions of 1950 - sucres)

1956 1957 1958 1959 1960 1961

Transportation 180 116 89 154 173 223

roads, bridges 144 101 87 135 150 178

railroads --- -- --- --- -

airports 23 12 -- --- --- 20

ports 13 3 2 19 23 25

Electrification --- ---- -- -_-- --- -

Irrigation --- --- -- --- 2 --

Buildings and otherconstrmction 20 15 23 20 42 37

Water, sewage --- --- -- 3 9 ---

Ccmmunication 1 3 -- 5-- ---

Vehicles, machinery andequipment 9 8 13 10 11 13

TOTAL: 210 142 125 192 237 273

Source: Central Bank.

Table 22: GRO76 TI 3D C.'PlL PI7 O.KTTIO± 07 THE REST

OF TIE PUBLIC 3'ECTOR, 1956-1961

(millions of 1950-sucres)

1956 1957 1958 1959 1960 1961

Transportation 67 96 91 67 104 82

Roads, bridges 47 77 77 51 40 42Railroads 17 14 6 1 9 8Airoorts - - 1 4 224

Ports 3 7 11 33 32

Electrification 18 40 35 97 104 98

Irrigation 5 4 4 8 12 14

Buildings and other constructionsHous i rng 7 19 15 66 36 140

Non-residential buildings 55 67 81 46 100 107.,ater and sewage 66 31t 27 47 46 45Urban affairs 26 25 25 26 37 25Other 1 9 24 16 - 3

Communica tions 3 - 2 5 1 1

Vehicles, Machinery, Equipment 47 416 53 57 58 59

TOTAL 295 340 357 435 498 4714

Source: Central Bank.

Table 23: PUBLIC INVEST371KENIT T'RJECTS/ I1I ECUADOR- _T=R,_ PL%*-,1DIATO)

(millions of U.S. dollars)

Financed by Projected Invest.mentTotal External InternalCost Credit Resources 1962 1963 1964 & later

AgricultureCentral Government(investigation, ex-tension service,projects for specialcrops) 20.0 8.4 11.6 3.0 3.0 14.0

National IrrigationInstitute 5.4 1.0 4.4 1.8 3.0 o.6

Colonization Inst. 15.7 10.3 5.4 0.7 6.8 8.2Fishing Institute 4.0 1.3 2.7 0.3 1.0 2.7Development Banks(credits to agric.) 8.9 6.o 2.9 - 3.0 5.9

Industr-y (credits toIndustry)

Comisicn de Valores 7.5 5.0 2.5 - 4.0 3.5Dovelopment Bank 6,o 4.o 2.0 - 2.0 4.0

RoadsCen-tral Government 47.5 25.0 22.5 13.8 12.3 21.4IMl-unicipalities andprovinces 25.6 12.6 13.0 1.8 2.3 21.5

BridgesCentral Government 0.2 - 0.2 0.2

PortsPort Authority inGuayaquil 7.8 6.2 1.6 7.8 - _

Cenitral Government 8.5 6,o 2.5 0.5 2.5 5.5

RailroadsNational Railroad 19.3 17.2 2.1 - 2.9 16.1

ElectrificationNational Electri-fication Institute 27.7 23.2 4.5 12.0 8.3 10.4

EducationCentral Government 7.2 4.0 3.2 2.5 1.6 3.1ilunicipalities 1.2 0.5 0.7 0o6 0.4 0.2

ConnunicationsCentral Government 3.2 3.2 - 0.2 0.8 2.2

....continued

Page 2

Financed by Projected InvestmentTotal External Internal

Cost Credit Resources 1962 1963 1964 & later

Social WelfarePotable water supply:

20 municipalities 5.0 4.6 0.4 - 2.5 2.5

HousingBanco de la Vivienda 9.2 5.0 4.2 - 3.0 6.2Instituto Nacional

de la Vivienda 25.8 16.3 9.5 2.9 11.5 12.4

Other ServicesGovernment 6.2 3.7 2.5 1.4 0.8 4.0

Total 261.9 164.5 97.4 49.5 68.7 143.7

Central Government 89.6 47.1 42.5 21.4 20.6 47.6Rest of public sector 172.3 117.4 54.9 28.1 48.1 96.1

I/ Including government contributions to the financing of private investment.

Source: Planning Board.

Note: Since this Plan was prepared, some of the cost-estimates of thevarious projects have been revised, resulting in substantialincreases. This applies in particular to investment in roads.

Table 21.: EXTERNAL CREDITS UMDISBURSED AT THE END CF I96'EXTB ASSISTNCEl 7 E-IN =N REQUESTi

(in millio6n-sof U.S. dollars)~

Assistance- -ndisbursed Obtained Loans

Projects Lender end of 1961 in 1962 Requested Total

Agriculture: total -603African Palms IDB ) 5,0Wool ).Cattle Eximbank 0.5 0.5

Colonization IDB 2.9 2.9Rural Development IDB 2.0 2.0Agricultural credit IDB 4.0 2.0 6.0

Industry: total 9.0Industrial credit AID 5.0 5°0Industrial credit IDB 2.0 2.0 .0

Roads: total 33.9

1st 5-year plan IBRD 2.7DLF 2.3 r.0Suppliers'credit 1.4 1.4

2nd 5-year plan IBRD, IDAIDB, AID 25.3/1 25.3

Paute-Mendey highway IDB 2.2 2.2

Ports

New port - Guayaquil IBRD 6.5 6.5

Electrification0 ships with power

plan,t- AID 17.2 17.2

EducationCentral University IDB o.8ivianabi University IDB ? 0.8

Housing: total 15.8

Housing Bank AID 5.0 5,0Housing Institute IDB 10.6 10.6

Water and Sewage 8.5

Quito IDB 3.5 3.514 towns IDB 5.0 5.0

Other Serviceiiiapping AID 1.8 1.8

Budget Support Loan and AID 2 7.0 16r5Ce,7eral Com. 3evelopm_ent- - -De lopment|rv2 o 4;-7 126ok

lJ With the upward revision of cost-estimates for the road projects, therequested external credits for road financing has been increased to $36 millionSource: Table 1 and Planning Boarde

a! Of which `$7e7 million is repayable in lccal currency.

3/ Of which $17.2 million is a grant- (6 ships with poser plants) and $13.6Nflillion is repayable in local currency.

Table 25: NEGOTIABLE SECURITIES OUTST.!t%DIAIG, DECEIKBER 31, 1961

BY PURCHASES AND BY SECURITY

(millions of sucres)

Central Gov't. Total Totialliortgage MIunicipal and other pub- Dec. 31 Dec. 31

Holders Bonds Bonds lic bonds Other 1961 1959

Social insurance funds 194 132 247 161 734 567

Insurance companies 54 2 1 10 67 63

Commercial banks 27 8 - 21 56 42

Development banks 22 - - 5 27 30

National SecurityCommission 20 - 264 3 287 230

The Public 719 - - - 719 550

Total anount outstandingDecember 31, 1961 1,036 142 512 200 1,890 -

Total anount outstandingDecember 31, 1959 930 125 326 100 1-h81

Source: Central Bank

Note: This table does not include private holdings ofprivately-issued securities, for which no dataare available. Amounts of less than 0.5 are notshowin.

Table 26 - BATJ 'NE CF OIFJ?j\j-X?I- CT p f-ThTT, 1956-1961

(millions of dollars)

1956 1957 1958 1959 1960 1961

Merchandise exports 117.8 137.1 136c9 143.4 148.1 132.0Nerchandise imports - 95.9 - 98.5 -102.2 - 96.1 -109.8 -110.7Trade balance 21.9 34c 7 3 33 21.3Transportation - 14.9 - 13.4 - 15.0 - 15.0 - 17.6 - 16.8Investment income - 20.3 - 21.6 - 21.8 - 23.3 - 22.8 - 23.0Other services, net and

transfers - 8.2 - 6.8 - 6.2 - 9.5 - 9.3 - 6.8Balance on goods, service

and transfer payments - 21.5 - 3.2 - 8.3 0.5 - 11.0 - 25.3

Private long-term capital(net) 9.9 9.4 7.8 13.0 11.3 10.4

Private and bankshort-term capital (net) 4.4 - 4.8 - 2.4 4.7 - 12.7 - 7.1

Government capital (net) 13.4 - 1.2 - 2.4 - 10.8 8.0Subscription to DiT - 5e0 - - - 5.0 - -

Change in net foreignexchange reserves ofCentral Bank(increase -) - 0.5 - 2.7 - 2.1 - 5.9 5.2 12.4

Errors and Omissions - 0-7 2.5 7.4 - 7.3 - 3.8 1.6

Source: Central Bank.

Table 27: IMERCHANDISE EXPOPLTS, Bf A ALuE, 1956-1961

1956 1957 1958 1959 1960 1961

(millions of U.S. dollars)

Bananas 59.8 69.0 72.9 89.7 88.9 80.9

Coffee 29.3 29.9 26.3 17.5 21.9 15.7

Cacao 17.4 18.6 20.4 21,8 21.4 17-2L2

Rice 1.6 4.9 3.5 2.3 3.7 3.0

Panama hats 1.5 1.1 0.9 o.8 1.1 0.5

Crude petroleum 1.7 1.8 .8 0.3 -

Pharmaceuticals 0.7 0.4 0.7 0.7 0.9 1.5

Balsa vood 1.0 1.9 1.5 1.5 1.3 1.2

Fish and fish products ) ) 3.7 3.9 3.6 5.45.4) 10.1)

Others ) ) 6.9 5,7 5.0 7.2

Total 113.4 137.7 137.6 144.1 147.8 132.6

(percentages of total exports)

.ananas 51 50 53 62 60 61

Coffee 25 22 19 12 15 12

Cacao 15 14 15 15 15 13

91 86 87 89 90 86

Others 9 14 13 11 9 14

100 100 100 100 100 100

1/ Including contraband exports of $1.4 million2/ Including contraband exports of $1.6 million

Source: Central Bank.

Table 28: MAJOR 7E BCHA"D-SV LORT5, BYVOLUME AND VALUE.

1956-1961 A'D i)JPGT(D FORL IP6;

Projected

Product 1956 1957 1958 1959 1960 1961 1965

Volume (1000 metric tons)

Bananas 579 669 717 885 900 848 1000

(mln. 25.7 kg. stems) 22.6 26.1 27.9 34.0 35.0 33.0 39

Coffee 24.5 29.0 30.2 23.4 31.3 22.9 36

Cacao 29.2 26.9 22.2 28.2 35.6 32.4 38

Unit Value (U.S. cents per pound)

Bananas 4.7 4.7 4.6 4.6 4.5 4.3 4.45

Coffee 55 47 39 34 31 28 26

Cacao 27 31 42 35 27 22 20

Value (millions of U.S. dnllars)

Bananas 59.8 69.0 72.9 89.7 88.9 80.9 98

Coffee 29.3 29.9 26.3 17.5 21.9 15.71/ 21

Cacao 17./i 18.6 20.4 21.8 21.4 17.21/ 17

106.5 117.5 119.6 129.0 132.2 113.8 136

Others 11.3 19.6 17.3 1L.9 15.9 18.2 28

117.8 137.1 136.9 143.9 348.1 132.0 164

1/ Including estimated contraband exports of coffee and cacao; see Table 27

Source: Central Bank

Table 29: C'''r-.CSTITT0 OF IKORTS, 1956-1961

1956 1957 1958 1959 1960 1961

(millions of U.S. dollars)

Total imports 88.8 90.8 94.5 89.2 105 104

(percentages of total imports)

Consumers' goods 20.4 21.9 22.9 22.9 22.0 21.8Direct 12.3 14.2 17.1 14.1 13.1 12.5

of which: antibiotics 1.0 1.4 1o2cigarettes 1.8 2.7 2.8 4.5oats o66 o.6 o.6 o.6

Semi-durable 3.0 2.6 2.7 2.7 3.1 3.1of which: dinnerware 0.2 0.2 0.2 0.2

glassware 0.1 0.2 0.1 0.phono, records 0.1 0.1 01L

Durable 4.6 5.1 6.1 6.1 5.8 6.2of which: radios 0.4 0.5 0.4 0.5

refrigerators 0.4 O06 0.7 o.6sewing machines,manual 0.8 0.4 O.7 0.3

Fuels and lubricants 4.2 6.o 5.1 5.0 4.2 4.4of which: gasoline 2z2 3.1 3,0 2.5

diesel and fueloil 0.1 1.5 O.7 0.8

lubricants 1.1 1,2 1.1 1.3

Raw materials and supplies 29,8 30.2 28.0 30.2 30.0 32.3of which: whaat 5.5 3T 3.3 T1 7

artificial silkthread 1.1 1.3 1.2 1.1newsprint 0.9 1.1 1.0 1.3

Capital goods 45.5 42.0 44.2 42.0 43.8 41.5of which: trucks 1.2 1.3 1.4 1.4

tires 2.3 2.8 2.5 2.8truck chassis 2.4 2.4 2.7 2.3

1/ Less than 0.5Source: Central Bank.

Note: The above import figures are based primarily on customs data, and do notinclude adjustments normally made for balance of payments purposes. There-fore, t>ie totals shown here differ slightly from those showJn in Table 25.The largest differences, which occur in the years 1956-1959, amount to nomore than $7 to $8 million in any year.

The items identified under each category currently represent the threelargest in that category.

Table 30: INTERIHATIONAL RLSERVES OF THE CEINJTRAL BANK, 1954-1962

(millions of U.S. dollars)

ASSETS LIABILITIESPayments To For- Payments Reserves as %

End of Foreign Agreements Gross eign Banks Agreements Net of same yearts

Period Gold Exchange (credit) Reserves and ITIF (debit) Total Reserves Imports c.i.f.

1954 22.9 11.2 4.4 38.5 0.8 1.8 2.6 35.9 32

Kl955 22.9 5.3 5.4 33.7 6.o 2.9 8.9 24.8 23

1956 21.7 4.9 5.0 31.7 4.5 1.9 6.4 25.3 23

1957 21,7 9.5 7.9 39.1 8.1 3.0 10I2 28.0 26

1958 21.7 5.5 8.1 35.3 3.2 2.0 4,3 30.1 27

1959 20.4 12.1 7.4 39.9 1.3 2,6 3.8 36.0 33

1960 20.0 12.3 4.7 37.0 3.0 3.2 4.6 30.8 22

1961 19.2 13.7 5.4 38.3 19.9 - 19.9 18.4 14

Sept. 1?61 19.9 6.5 6.1 32.5 16.2 - 16.3 16.2 12

Sept,1962 19.1 16.2 5.6 40.9 1593 - 15.3 25.6 13

Source: Central Bank.

Table 31: TIEMlI'S OF TmADE, 1950-1962

(1955 = 100)

Unit value of Terms ofYear Exports Imports Trade

1950 100 87 1141951 101 95 1061952 105 99 1061953 102 96 1061954I 118 98 1211955 100 100 1001956 103 102 1011957 101 107 951958 98 106 921959 96 99 971960 90 102 87196) 83 103 801962 (first half) 87 103 84

Source: Central Bank.

Table 32: FREE HARKET RATE OF E:C ANGE, 1950-1962

End of Sucres perU.S. dollar

1950 18.31951 17021952 17)4

1953 17.41954 17.41955 17.41956 18.81957 16.61958 16071959 17.01960 17.51961 20Qt1962 (first half) 22o5

Source: Central Bank.

Table 33: COST OF LIVING INDEX, 1950-1962

(1950 = 100)

Year Index

1950 1001951 1121952 11)41953 1151954 1181955 1211956 1151957 1161958 1171959 1171960 1191961 1241962 (first half) 127

Source: Central Bank.

'able 3,: WHLOIEAL5'i--'E I -iNDEX, 1956-1962

(1956 100)

1956 1957 1958 1959 1960 1961 1962Jan/I9!ar

Beef 100.0 100.2 100.8 101.3 101.5 109.1 109.8iYilk 100.0 100.6 97.0 94.7 94.6 88.1 87.5Corvina 10O.0 107.6 102.1 107.2 112.5 108.3 102.8Tneat flour 100.0 97.2 103.6 103.8 102.8 100.3 101.0Rice 100.0 97.9 94.2 91.1 101.6 106.8 107.0Corn 100.0 121.3 109.7 95.4 106.2 120.1 120.8Vermicelli 100.0 101.1 97.6 96.9 96.8 97.3 96.8Sugar 100.0 07.8 93.7 96.4 95.2 97.2 95.2Oranges 100.0 104.6 115.9 87.5 123.9 90.2 113.6Bananas 100.0 110.4 ]07.] 102.5 105.1 118.2 103.0Pot,-I-Ioes 100.0 15f,6 114.6 84.3 134.3 88.2 82.2Lentils I0(>.0 132.2 121.9 107.8 111.7 121.6 1 3.0Tomatoes 100.0 44.1 36.2 36.2 3l.8 36.3 53.9Butter 12;'0.0 97.9 101.3 99.7 98.8 101.5 101.5

TOTAL 100.0 105.h 101.7 100.7 102.1 105.6 105.8

Source: Central University.