r-I R E TURN -aR E S T R I C T E D|REPORTS DlE__| 1 1 A R ea n r t No. WH-106aI WITHINI ONE WEEK

This report was prepared for use within the Bank. It may not be publishednor may it be quoted as representing the Bank's views. I he Bank accepts noresponsibility for the accuracy or completeness of the contents of the report.

iNTERNATiONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

r¶TjPPl1W'TJTr Trrn TMTAATr~ V)CV%TrTnTC%T

AND PROSPECTS

OF URUGUAY

June 21, 1961

Department of OperationsWestern Hemisphere

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CURRENCY EQUIVALENTS

1US$ = llPesos1 Peso = 9 US cents1 million Pesos = $90; 000

A'R / TD I 'A -ri9.T 2+ + + °19iL1- -/ I Co_/wS~>sE I L/d/ I

+~~~~~~~~| I\_ Rvr

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(I-i ~' s r ' ) c E R R O L A R G II

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5, N' D D FA Z N O

(WfFray 8et0 , TREINTA Y TRES / TC EM /| -tJ,^iUercedes r TrE*-nta J T"

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_| I S ° t N O N, 0Trinidad toe 3el O, d6rez r , -,

JFLOR E F L O R I D A 0 \ 0 Lascao

dt_" >eo TREINTA Y TRES i

I.s- w Carmelo A ,o,d ROCHA

oL O N I 3 AN 5 Floria ,/ t. . I

|olo,,,a JOSE °o f~~/;~- 0 0 f*ochaOAN E LONE O

| . < >. on M,¢)donsdoi_XUNEiJO+ + + _

-A T L-A4 T I C

K_________ + + + t 4URUGUAY

§ P~~FOLITIRCAL MAP- O C -E A 2V~~~I f - i;I Au .l _ IfI S~~~~CALE Of MILES / L L' ZI J

L .E 50i-E 1II ICAPITAL.S OFr DEPARTMENTS ... ............. . . . ........ 0~ + + +

OTHER IMPORTANT CITIES AND TOWNS........L rINERNATIONAL BOUNDARIES ..... u

DEPRARTMENTAL BOUNDARIES ........ 5

U1nited States Trar,ff Commiss&o,s-Lkee /944

TABLE OF CONTENTS

Page No.

BASIC ])ATA .......................

SUMMARY AND CONCLUSIONS. . ................................. i - ii

I. Description of Urugua,y .,,, ... . .1

Population and Resources ................. ....... 1

Economic Structure . , . .. . 1

Social Structure ...... . a .... * ...... 2

Institutional Organization . ....... e 3

Political and Social Conditions . . ....

II. Development of the Urueuavan Economv ................. h

Broad Trends .......... e....,.... ... e e I4

The Financial Framework- -----

Main Ec-onnmic Sect.-ors = 7

TTT- CrrpntE. Rnnnmin .i±nj+.iint-n_ aaaaww6ww

ITT= Gurren~t-1 1 - E c -meSiuto ......................... @w. 1Develo=m.ents Before 19660..10

The 19.9 Economic Refor . . . ... 13

Developments During 1960., ... ........ 1. .

-M T ,conomic Prospects. . . 16

*w T. Credtwo+,'s.1.1. ~............. .......................

VDfl~'T . r -4 -17

APPEN>rv]^DI - Export Projections...............................

3'A'iTLJ, 'iCkL Ai??L3ITX ........................ . ..............

BASIC DATA

Popula-tion (1959): 2.6 million

Area: 72,000 sq. miles

Gross Domestic Product No estimate available.Probably US$ 400 per person

Balance of Payments (million. US$) 1956 1959

Current Account - 1 - 51

Exports 211 98Imports 206 170Services (net) - 6 21

Capital Account (net) 18 2

Errors and Omissions - 1 15

Official Reserves andshort-term caoital movements 16 - 3h

Government Finance (1959) (million pesos)

Central Goverrnent. Revenue 899Central Government Expenditures 842

Siirnlus 58

WIinnv and Prines

Money Supply, October 1960 Ps. 3.028 million up40% since December 1959

Cost of Living: Up 34% during 1960

External Public Debt (June 30, 1960)

Total US$ 134.5 million

Bonds 60.8TThflTh 'I.1 I.IBLnvJ -loans 61L .4US Government loans 12.0

n - r, L_ _ nU IR1 I U..

BASIC DATA

Population (1959): 2.6 million

Area: 72,000 sq. miles

Gross Domestic Product No estimate availab].e.Probably US$ 400 per person

Balance of Payments (million. US$) 1956 1959

Current Account - 1 - 51

Exports 211 98Imports 206 170Services (net) - 6 21

Capital Account (net) 18 2

Errors and Omissions - 1 15

Official Reserves andshort-term caoital movements 16 -

Government Finance (1959) (million pesos)

(G,ntral GovernmPnt Rnvene Rg99Central Government Expenditures 842

Surnlus

Yonne-,, :nn Priee

Money Supply, Octoberr1960 Ps. 3.028 million up40% since December 1959

Cost of Living: Up 34% during 1960

External Public Debt (June 30, 1960)

Total US$ 134.5 million

Bonds 60.8IBn.D loans 61.hUS Government loans 12.0utier 0.3

SUMIMARY AND C01TCLUSIONS

10 Uruguay, the smallest of the South American Republics, is endowed with~~~~~~~~--' _ ~_ n_ __ ~ _~ 1- _: _ @_ : t n _i:___ Z _: I -I: _. _ 1 t_ _l _- _ 1 _anX arm1p'le reso1urce 'Uase in rela'tiond U UU t its pUpulation of 2.6 m,I Ullo n. UOLther QIR-

racteristics of the country include a high level of per capita income, a longtrauition of political stability, and a social structure with a hign degree oIvertical mobility, where there are no extremes of poverty and where social wel-fare has always been an important objective oI government policy.

2. The country is an internationally important exporter of pastoral andagricultural commodities - mainly wool, mutton, beef, hides and skins, as: wTellas grains such as corn, wheat and linseed. For many years Uruguay's per capitaexports have been higher than those of most latin American Republics. Yet thecountry's economy is well diversified and the manufacturing industries enployonly a slightly smaller proportion of the total gainful population than agri-culture. The service industries provide nearly 50?o of the gainful employment.The main industrial activity is the processing of food products, but otherindustries also have attained a comparatively high degree of development. Tex-tile manufacturing ranks second and one of its products (wool tops) is animportant export article. On the basis of emplo-yment, building constructionfollows in importance. But industrial development extends also to rubber,chemicalS3, medicinal products, metals and metal processing, petroleum refiningand many other industries which, together, account for about 52% of total manu-facturing employment.

3. Except for the last few years, the Uruguayan economy has tradition-ally operated within a framework of conservative financial and fiscal manage-mient. As a result the economy has enjoyed considerable internal and externalstability,

4. During the Second World W4ar and the post-war years the Uruguayaaeconomy went through a period of expansion. Increasing external demand andhigher Prices for the country's exoort nroducts 1i fted epnorts from !96l mi;llionyin 1938 to an average of ,2h2 million in 1950-53. During this period industrialdevelopmetnt was also rapid. The post-i-ar prosperity, prolonged by the Ko-reanWar boom, continued until 19%. Since then, with the exception of a briefupsurge in 1956 on the wake of the Suez crisis, the econorm of the ountrrr hasbeen losing ground under a succession of balance of payments deficits and stronginflationarv tendencies.

5. The recent deterioration in enonomi condrition resulted from a :Ormbi.-nation of factors which include lowTer prices for export commodities, governmentpolicies which discouraged agricultural production and exports and, for the pacthree years, unusually severe weather conditions which greatly reduced agricul.-tural output- Inflation -was lnrgely the result of a wage-cost spiral which 1e5to an expansion of credit to the private sector.

6. At the end of 1959 the Uruguayan Government undertook a radical ex-change and monetary reform and adopted a new l--n-e-- -4 I: c Itrecognized the de facto devaluation of the peso, eliminated the complex systemof preferential exchange rates, import controls and ini,ort subsidies and C stab-lished a single exchange market with a fluctuating rate, Credit expansior be,an

to be controlled and, by the end of 1960 a new budget, incorporating aprofound tax reform, had been approved by Congress. Simultaneously ivdhthe adoption of the economic reform program the Government began consid--eration of a list of public investment projects designed to strengthen theproductive capacity of the country and to counteract the possible depres-sive etfects which it was feared the new monetary and credit policies wouldhave.

7. Although the change in government policies occurred at the end of1959, and important measures were adopted only later, developments duririg1960 alroady show the beneficial effects of the newr policies. By th--end of1960 there were indications that inflationary pressuros were slackening-, thatthe international accounts were improving and that the agricultural sector,particular:Ly, was reacting to the more favorable exchange rates broughtabDut by the exchange reform. Still, the process of readjustment has torun its course and the effects of some measures such as the adoption ofthe new budget have not made themselves felt as yet.

8. A prompt return to normal levels of exports, internal stabilityand the consequent disappearance of price distortions and production bottle-necks, and the implementation of a sound program of public investment shouldresult :in an expansion of the productive basis of the country and bring abouta period of renewed economic growth.

9. IJruguav's external public debt (S13h4 million) is Iargelv in theform of long-term publicly-issued bonds (L5%) and IBRD loans (461). Thebalance is in U. S.. Government ereiits=. The total sru-inp on t.hisi ebth.will require approximately t11 million a year until 1970. This amountrepresents 6M of estimated expnorts in 196Q iand on the bsis rf' o rjiec-t.dexports, somewhat less than 5% in 1965.

10. Assuming the continuation of policies conducive to the growth ofthe exp.ort sector, Ug c s e obiJga t gatr tha-nit now has. But to carry out an extensive list of public investment projectswhbich thp Tfriraiunin Governr.ent is presently considering would require "'"ro-

ing on a scale that, barring a radical improvement in export prospects,would heavilir nnmYn.i tIhe ^n-vi+tyrt Adekb rcin- capacQ -. For this reason

and in the light of the observations on the public investment needs andofficia:L plans, contained n Appendix A, until a w-vell-thought out long-termpublic investment program can be prepared, external borrowing should beprojec at a .rodrate scale and le use' only to inIprojects.

T T^T.^. 1^. rnTron T I- 7 TTfTTtTT A V

Population and Resources

lo Uruguay, the smallest of the South American republics (72,000square miles), is only about l/50th the area of Brazil and l/lthl- the areaof Argentina, its closest neighbors. Uruguay's territory is largely agently umdulating natural grassland devoid of pronounced features such asforests or mountains and practically all of it is easily accessible andutilized. Soils are fair to good although some of its mineral nutrients,particularly phosphates, have been depleted during centuries of grazing.The climate, except for irregular periods of drought seldom exceeding twomonths,is little short of ideal. Temperatures are moderate and the normilannual rainfall is about 40 inches (l,000 mm.), distributed fairly evenlythroughout the year. Mineral resources appear to be limited. Hoi,Tever,some iron deposits have been found in the Department of Florida (Valentines)and the Uruguayan Geological Institute is presently making a survey todetermine their extent and quality.

2. The population of Uruguay is estimated at about 2.6 million.Since natural demographic growth has been very low and immigration prac-tically came to a standstill in the 1930's, the population of the countryhas increased at the low rate of only 14% per year over the last thirtyyears.

Economic Structure

3. Uruguayvs standard of living has. for manv years; been compa-ratively high. Per capita income may be estimated to amount currentlyto )tO0 ner year0 The resource hase has made the country rate an -internationally important producer and exporter of agricultural and pas-toral commodi+iesjbut its economy is well-diversified and the rnmnufac-turing and service industries occupy an important place as sources ofPTnl^ n nt md income. Precise informt'ion i but variousestirmates indicate that manufacturing accounts for only a slightlysmaller propn-rtinn of the gainful -mployrment than agricultur"al and cattleraising (25c% as against 28%), while the service industries provide approx-

)M/Kel 1,%f ̂ -pMn1nrTentan_ W.irhi +the pr"imrny" ^n+.tis sheIndctl

raising are more important than agricultural crops. Industrial exportsre.preent nearn^,-l r O f t hd + totall and mntA in4n s -.l 4-oAp^ are tA --:-

-- r- _<. ~,v i..A _ ,Aj ua wo.a al. fl.fl LA5

ULL1I* .J'.J.. L 0..! LJI !vo > c v I0,.L,

item. T:he actual contribution of the various economic activities to thecollntiryls iionnl +'in^ome4 is- not- kno, OJas C CWO the Cew CO-ee UaLJ

that have been prepared do not offer any kind of breakdowtn of the

4. tInd13usr-aal acti viesLu arel-ell"t:-diLUversi-i°'L-;iLeIU and allho u-h.L

food processing, as might be e)pected, is the most important one,other industries hiave also atGa±necd a coIrruaratively high degree ofdevelopment. The manufacture of tetiles ranks second and one of

its products (wool tops) is an important export article. In termsof emp'Loyment, building construction ranks as the third industry.But indlustrial development extends also to industries such as rubber,chemicals, medicinal products, metals and metal processing,petroleum refining and many others which in l958 accounted for 52%of total manufacturing employment 0

5. The economy of Uruguay is greatly influenced by a largeurban niucleus, the capital city of Montevideo, and a heavyconcen-tration of industrial, commercial and administrative servicesaround this nucleus. Montevideo accounts for approximately 35% ofthe total population of the country and for 75% of the manufacturingactivi-ties (as measured by emplovment and value of output).

6. Notwithstandine the diversification of the Uruguayaneconomy, international trade is basic to it. Over the past tenyears commodity exnorts have fluctuated around the A200 million mark.thus giving Uruguay a level of per capita exports of $85, nearlytwice as high as that of Latin Amerina as a whole and exceededonly by Venezuela and Cuba. Uruguay exports are directed mainly toWesterin Euruon ( 6o in 1959> tn tht- ITnitpd States and Canada (12:)and to the United Kingdom (9%0). Exports to other Latin Americancountri;es in recent years have rpresented sannewhat over 10% of thetotal OnI the import side purchases from other Latin Americanorln+-ri es mainl- VrMni7.eiel Brani nrl AtTrgenti na have reent1v

represented over 25% of total imports. During the past three yearsgross r~eceip+s',,~, frr to- ri+,tr~ad have amotdt over 10% of' thevalue conmodity exports.

7. The nature of Uruguay's commodity exports, subject to the±I4 - 1J -- 0±P 0J.±SILd4-± - P- -4L - IIUZ 0U u) I tP 1I-i -± 4.L-1 , UL±±4 4-IrPl LUKence11 of. L;LLCLt,.at.; factors1, _lntrodu1ces ar e-lement- ofL instabiLJLLl->y

in the economy of the country. During the post-war period thisinstability has been accentuated by economic and political developQ-ments in Argentina, an important trading partner, and by internal

~0UL0I~LLL, J0± ies± YLI.L Li J. .V 1.±J1 .L .L u -LuW l 1.11 ld- A1~ 40LIl. U±_H0F d-.1L 0±Le c or,mLc poliie whc avTe ir.terfered wit h o4.ldspslowool cLips and with beef exports. The degree of instability isshown, by the fact that since 9Y1L year--to-year- fluctuations inexport earnings have averaged 20% per year. Thus the 1953 value of

-,LU ~ ~ I -r,Hn nr,1 =_ - r' --- , '- -exports exceedeU thab oft 19 -Uy 3U/A; in 197( anu 199Y, on the

other hand, exchange receipts from exports declined from theirprevious year levels by 4h0o and 3070, respecti-vely.

po I a'i ovrUyucture

8. Perhaps the two most important institutional factorsinfluencing the socio-economic organization of Uruguay are an all-inclusive system of social legisiation, the product of an evolutionwhich Started in the early 1900ts, and the extraordinary extensionof the state services reflected in the unusual size of the publicsector,

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9. Social legislation evolved out of the organized activitiesof labor groups and very often confirmed situations of fact. Acharacteristic of this legislation is its ad hoc nature, shown by thefact that it is embodied in over 160 laws passed between 1896 and1956. Retirement and pension benefits were first provided to publicschool teachers in 1896 and to public employees in 1904. A seriesof laws have since extended retirement benefits to every employedor self-employed person. Other social benefits include old agepensions to all indigent persons over 60 and to all invalids,dismissal pay (equivalent to one month's salary per year of serviceup to a total of six months), accident and health insurance, etc,,

Institutional Organization

10. Although the Uruguayan constitution is centralist,institutional evolution has moved toward decentralization of publicpower and state activities through the creation of state entitieswhich operate with a high degree of autonomy. These entities fallinto three broad categories, viz., "autonomous enterprises"."decentralized public service industries" and "semi-p.public bodies".

11. Autonomous enterprises operate within the industrial domainof the state with a maximum of indenendence from central governmentinfluence. Control is limited to the auditing of accounts by anautonomnous c body -- the Accounts Court (Tribuinal de Cuentas) Theyare administered by bi-partisan boards of directors of which themajorit;y is appointed by memhbrs of the Nationanl roinpil of Gorvernment(Executive) representing the majority party in power and the resthr +the minorit+.r npar+.r nDirc+tnor rscn be remnomv byr t.he Exe .cuti-ve-.7 '-'-'- Jw- - -- -_. _-_ .._._ __, .._ _,. -_ _ , -__

only under exceptional circumstances and then with the approvalnf the Se.nae

'12. Decentra-lized public Jservice - - -gnce -d sm-pul icbodies are restricted by budgetary considerations insofar as part

but otherwise their statutes allow them a high degree of freedom inpolicy matters.

J__J e A'Ls a resudLtU of. this systUem, tble VCr.iLoUs U,LpUIoItsIIU0 U.L ULoIt

public sector operate with very little, if any, coordination inregard to overall public policy- UUjetives, an.d the state, althoughmassive as an aggregate of units, is far from being an all-powerful,centrally--dLrected ent-ity,I To a large extent the s-y-stemI JUstdescribed resulted from the desire to maintain political equilibriumbuy limitirg the discretionary power of the central gover-rment andto attain a measure of operating efficiency by removing politicalinfluences from the state industrial activities.

14. The number of puolic employees (180,000 or 18% of theactive population in 1954) provides a good indication of the scopeof state action in Uruguay. Approximately 64,ooo persons, or 35% of

the total, are occupied in purely commercial activities carried outby official enterprises such as the National Railways Administration,the National Packing House, the National Printing House, the NationalAdministration for Cement, Alcohol and Petroleum and the Telephonesand Electric Power Administration. State industrial enterprisesaccounted for 18% of all industrial employment and 16% of the totalvalue of industrial output in 1958.

Political and Social Conditions

15. AiiAy description of Uruguay's socio-economic structure wouldbe incomplete without reference to the country's traditional politicalstabili.ty and to its relative freedam from grave social problems.Political stability goes back at least 50 years, and, consequently,the tradition of regular constitutional change of goverrment and ofcivilian control of public affairs is well engrained. Social problemsare not pressing and even the active agitation of noliticallv consciouslabor groups Lor a greater share of the national output is conductedwifnthi legal annr rontit,tional chnnPelq .whinh allow freedom ofexpression to all political parties.

16. Although no statistical data can be brought to bear on thequestion of income distribution in Uruguay, it is apparent that thecondition of high average per capita income which the country enjoys

nscomr-nrl _k Aon n-'r c f even dibutin of sch inome, so tha

no extremes of poverty prevail among the lower income groups. Thiscor.dlti .on, -wIh.JcUl has p- fo I l. A 'I ti, is mo.t +lkely linked

to the extensive social legislation referred to above. Theconcentration of pop1 .atiJon in the c.ap.ital. city an..d the 6-owth of I

industry, commerce and service activities around it have alsofacilitated vertical mobility as between various social and economicgroups, and led to the rise of a large and politically important

, -- -- - .. L.L !f miduule c-LaCs. ±: s class includes a substantial n--iuber of retiredpersons and pensioners (260,000 or the equivalent of 25% of the laborfLorce i.n 197f,4)o The existen_e ofL this mid-lUe clJ1ass,Y the reor rr

poverty extremes, the absence of chronic unemployment and aneducati.onal system- wnich, aulto-ugh in need of expwsor. aid impr-ovement,allows free access to primary, secondary and university education,go a long way tc-wvard ex-plaining the high degree of political stabilityand soc:ial peace which has been characteristic of Uruguay.

II. DEUVELOPEvLNT O'F THE UR-UGUAYAN ECONUir1

Broad _rends

17. Uruguay's pattern of economic development has followed thatof most countries dependent on the export of a few basic primarycommodities. For several decades until about 1920 Uruguay's exports,composed mainly of wool, mutton, beef, hides and skins andagricultural products such as corn, wheat and linseed, increased

rapidlv (from $3N million in 1901-05 to 't113 million in 1916-20, i.e.,at a compound rate of over 8% per year) thus providing a drivingforce for econnmic erowth Trade exnansion stonped during the 1920'swhen the value of exports remained below the peak already attained.It averaged 981 million a vyarr IJnder the imnant of the worlddepression the dollar value of trade declined by about 40% in the

which also greatly slowed down during the 1920's and 1930's, Yet4n spite- of - long per4od of relatlve -cnrt stg.ain,scLil piv- V.L L L.uJ41, PJt.± LvJ" L _L %,.LO. UJ V i OQJILi i-~V..Ji LUl~

indicators as per capita imports, per capita number of automobiles,-P _ 41 _ - - …- - - -4-.__. 4.- --

miL.:es cf rIil.±Ls and-U 1odsUC 11 pIropUo.riLVon UU tito11.L UU-y, LtcVe indicate

that at the end of the 1930's Uruguay's per capita income very likelywas still ori of 1 ie LLL t hCu nig lghest Ln Latl urILericaU ULidL ht comparedfavorably with that of many Western European countries.

19. The stagnation in the levels of international trade duringthe 19201s and 1930:s accelerated structural changes already in evidenctin the Uruguayan economy. Industrialization acquired momentum andthe decade of the Twenties was one of rapid industrial growth. By1930 there were 7,400 establishments employing 94,OCO persons, i.e..a,proximately i4% of the labor force; 59% Of them had come into beingafter 1919; another 1h% between 1915 and 1919. Only 10% of them hadbeen in exdstence before 1900.

20. Between 1930 and 1936 industrial development, in spite of theadoption of protective measures in favor of new industries, came to astandstill. The 1936 industrial census showed no further progresssince 1930, either in regard to employment or value of output. Thelack of industrial development during this period is probably linkedto the reduction in the country's external payments capacity whichresulted not only from the lower export levels but also from areduction in the flow of foreign capital investments.

210 During the Second World War and the post-war years theUruguayan economy went through a period of expansion which sharplycontrasts with developments during the previous two decades. Underthe impact of an increasing external demand and higher prices,Uruguay's exports began a rapid rise which carried their dollar valuefrom $61 million a year in 1938 to an average of $242 million for theperiod 1950-53 (an increase of 300%, equivalent to a compound rateof over 11% per year), This increase was somewhat smaller thanthat experienced by all Latin American countries as a group (121z%per year) but exceeded the performances of New Zealand (8% per year),Australia (91o% Der year) and Argentina (7% per year), countrieswith a composition of exports similar to that of Uruguay. About40% of the increase was due to larger volume of exports, theremainder to higher prices. At the same time manufacturingindustries exnerienced an extraordinary development which trebledthe value of output at constant prices and raised industrial

employment from about 90,000 persons in 1936 to 175,000 persons in19v5O These favorab' eeeomnscicded wt a rapdl'A rve

L. LIE,~ ± CVUIdU± U L1'VVLUP11m.1flO k;U_L11.L~U U Wi Ull d. .d u ±U IILl J V~

ment in the terms of trade, so that by 1951 the external purchasingpowver o.f raguaayari export.s -WaCS nearC-ly ULtwic asO high1 asC in 1938.Reflec-ting the effects of this set of favorable circumstances,unofficial estimates available for the period 194L0 to 1948 indicatethat the availability of goods may have increased by 40%, i.e., atthe compoLnd rate of about 4% per year, tnus providing a good marginfor an improvement in standards of living.

22. Uruguay's post-war prosperity, bolstered by the Korea warboom, continued until 1954, Since then, with the exception of abrief upsurge in 1956, the economy of the country has been losingground under a succession of balance of payments deficits and stronginflationary tendencies. The analysis of these more recent develop-ments appearsin Chapter IV.

The Financial Framework

23. Except for the last few years, the Uruguayan economy hastraditionally operated iithin a framework of conservative financialand fiscal manageraent, Price levels, as reflected by the Montevideocost o' living index, increased by only 9'1 over the two decades1920-19340, Even the inflationary pressures of external origin broughtabout by the Second World W,[ar and the post-war years, when officialgold and foreign exchange reserves increased from $76 million in1939 to $312 million in 1950, were successfully controlled. Neasuresadoptecd included higher reserve requirements for commercial banks,credit restrictions, limitations to the entry of foreign flight-capital and absorption of excess liquidity through market operationsand the sale of government bonds in the portfolio of the Bank of theRepublic.

24. Sound financial and monetary policies, pursued for a longtime, was also reflected in the external value of the Uruguayancurrency which until recently maintained remarkable stability. Thusin 19h6 the peso (with a legal gold content of Ps. 1.519 to thedollar) was quoted at Ps. 1.90 per dollar. The de facto devaluationOf the pe.no pin to its nresent value of annroximatelv Psll ner dollarwas gradual after 1945 but accelerated in the course of the past

25. Urug1y'sim nhility to maintain a relatively high degree ofstability in spite of the inherently unstable nature of its inter-

policies which were followed until recently by the Bank of theDosql 4 ,. l 1

-x +t-o a-or4 c+Cv>D Of b Nl-/ 4f i,c+4

T+w+; 4nt , <5r tt W;_ V . L s V&A J V'-v V .J V V_ ' W V _ v VJ* | s w V VSV a bJ V v l a

which give a measure of financial flexibility to the public sector. TheBank of the Republic, a state-o---ed institution, operates as acommercial bark and, through its issue department, as the country'sceent'ra'l b T-4k. Until reety--rnc su -wa l,,ited by law 4o aamount eqcdual.0 t h aIU±aJ. t .ofU± I k theU baLn lusv LdY LgW an d .l

amount equal to the capital of the bank, plus silver holdings and

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rediscounted comruercial paper up to certain specified amounts. Beyondthese limits the note issue required 100 percent metallic cover.

26. Government operatior.s have generally not been a source ofinflationary pressures. The Central Government operates through aGeneral Budget which covers the bulk of current expenditures andthrough two major special budgets, viz., the "Public Works Flmd" andthe "Exchange Profits Fund", The General Budget normally covers onlyctrrent expenditures of the central administration. Central Govern-ment investments, including assistance to Departments and Municipalities,are handled through a special budget (viz.. the Public Works Fund).which is largely supported by shares of taxes allocated to it and bythe sale of government bonds. Public agencies operate within theirown budget which, in addition to revenues from the sale of services,may include central government subsidies and proceeds from the saleof government bonds assigned to them. The Public Works Fund operatesby adjusting the level of public investment to fit available resources,expanding or restricting expenditures according to circumstances.The alLocation of resourees aecung to the Rxnhange Profits Fuindfollows a similar procedure. Public agencies resort to bank crediton the hasi S nf t.heir onm financial standing and although on occasionthey have been able to use as collateral in operations with the BankOf the Republic, bonds given to thepm by the C(¶re.rnmr.nt, the practicehas nol; been widespread, Pension Funds -.also operate within theirt-!r,M n. ~ '.. nrl r-rmqa,,c~n . xr, Zn,c=+Arinac fnlnr11 r +)n e,. -.+ =town~ ~~~~.. -ah eouce id cn -Eetly, sometlmes folwthe patcof restricting or delaying the granting of retirement and pensionbenefi'ts.

27. *Public investm.ent and Genra+l Gover-r-mnt asslstance to stateenterprises and agencies are ccvered throuch the issue of governmentbo.ds . Th.ese bonds are deliiered to the recipi nt en.tities who, inturn, rmust find a marlret for them. As of June 1959 the total internaldb Li UoJ' Urguay amnound4 edU tuo 'Fs. 2 7uU0 mILliIUIon, OLr WhI1cll )?U/0 consistedof national government bonds. Mortgage bonds issued by the StateroII ± BJWarlk accounted Lfor a.r adi tional 3>%. IUl-u,.i. bond issues

accounted for the balance. A very large proportion of the CentralGoverrument debt (about 5Q/o) w-as held by the vario-us retirement andpension funds and an additional 30% by various state enterprises.Only 12% swas in the hanras of private holders. This latter group heid,however, over 80% of the official mortgage bonds.

Main Economic Sectors

28. Agriculture, Although most of Uruguay's land is suitablefor agriculture, only two million nectares are devoted to crops withthe bulk (17 million hectares) used as pasture lands. Pastoraloutput represents about 60% of all agricultural output and about 80%of the value of exports. There is practically no unutilized land inUruguay. The areas around Montevideo and along the coast are primarilyused for crops while the interior of the country concentrates onpastoral production. This geographical distribution emphasizes theneed for a well-functioning transportation system, as most of the

exportable products are produced inland and have to be brought toMontevideo for shipping abroad.

29. Pastoral production has been, and still is, the main economicactivity in Uruguay. Within the livestock industry, wool accountsfor 50% of the vale of exports. During the last few years the woolindustry has been beset with mounting difficulties, caused by adecline in the international price of wool and unfavorable erchanFerates. A recent exchange reform (Cf. par. 52-55) isexpected to provide incentives for increased production of wool andother pastoral products.

30. Cattle production has been more or less stagnant from thebeginning of the century until World War II. There were 8.2 millionhead of cattle in 1908 and about the same number in 1939. In 19L6 thetotal count had droDped to 6,8 million, but it reached a peak with 8.7million head in l9hS9 Since 19h9 meat nroduetion has fluctuatedwidely; but the trend has been downward. Particularly during theyears ]9q7/8/9 meat nrnointinn of bhth eattl e and sheepn drnnpedconsiderably, reflecting the difficulties which confronted the meati ndustry. During this period unfavorable eponnrt rates and sharpcost increases forced United States owned packing houses to close.

31. Livestock production has not only been handicapped bypolicies advrerse to exports, but also by an in4sfficient use ofmodern methods of pasture improvemlent, inadequate technical knowledgearor.gr fn.m.evro a~nd shor+agnes o-f 4 ,r,nr-v+aA ,n,+a,.

41s Gor.side A~rable

increases in production can result from pasture improvement, sub-di;TSio;-^M1 fen;-O "sAch J0 essentia 4. 44 Aj_4_4 4 _4- --- 'I5

V # VLA..*. .S. 4L-|_-l3 \ V /i; | K.1L i o C) JVC; Z L/ L .J U J 1>.L . 111 U I J bU tI U IL c l.rL' U LU IL Ui L'.)il.±

grazing) and also from a better control of animal diseases. TheJanklis recent livestock-'Loa r shoduld bL'UULe an essential e.lement , ing

favorable technical conditions for the expansion of pastoralProduc UU1011

n T :_ :_ TT - -- __ - - __ - -:__ ___ __ )L l'4X1iaA- 9s n U1LUc4Y Lb 9XI-U-.LJ.Y L;QUkt1U1tb-dLUtU tU-UUJJU l'lUiUf,V EUU(_'.

the largest market. The major products are: grains (wheat, corn,rice, oats, barley, rye) industrial crops (iinseed, sunflower, peanuts,sugar beets, sugar cane, grapes) and truck crops (potatoes, vegetables,fruits) 'Wheat aod linseed are exported; together they represent about144% of total exports. All. other agricultural products are fordomestic consumption.

33. Government policy since 1945 has favored production ofwheat. The area under wheat greatly increased (32%) between 1948 and1959, and wheat production rose over the same period by 22%. Mostother crops have also shown a moderate increase in production, exceptfor linseed which has declined continuously since the war. Sinceall land in Uruguay is used either for crops or cattle raising,further expansion of output requires improved techniques ofproduction. Even so, the appearance of substantial crop surplusesfor export is not likely, except in the case of wheat and linseed.

34. Manufacturing. Between 1931 and 1954 manufacturing outputand employment increased at the rate of about 6% per year. Since1954, however, no further expansion apparently occurred even thoughemployment data show gains; as a result productivity per workerdeclined by approximately 24%. Although the basic data, andparticutlarly the estimate of output in real terms, may be subjectto a substantial margin of error, the indications of some degreeof recent stagnation in the manufacturing sector cannot be ignored,A possible cause that may account for this decline is the reductionof fixed capital used in industry. According to a sample surveycovering establishments which account for 70% of total canitalinvested in industry, the value of total fixed assets at constantprices in manufacturing increased ranidly between 19)46-1950o butslowed down between 1951 and 1954. Since then the real value offixed assets in industrv diminished by about 10%

35. Electric Pnwer Elentric nower is generated and distributedby UTE (Usinaa y Telefonos del Estado), which operates one largetherral station near Monteimi cldeo and about fifty small ones in varionuparts of the country. UTE also operates two hydro stations, RinconrdelBe a tBa r Total capaci+y- at presTentis 230 I4.I. Rincon del Bonete was heavily damaped by the floods in 1959,Iti +th fully back in ra- - ion and 11ygrc a a to the capacity,present demand for electricity can be satisfied. Since l9?49 electricityc nsu I- _onr -'rA 4- 4^Vr ,d at the rate of a °,-pe yr; uture

expansion is projected at no less than 8% per year over the next decade.14 __~~~,'n P,n-rA,A+- +,nv.Tn4nAo, t~ r,nv

Uruguay possesses a relatively extensive network of roads andrail-way,s. T- spit e o4f 4its periphei loaton Mo,tvie is the'V4~A -± L/'J.VY .LA C) I. u AJ. L VA,C ~ L LI-.LNL1..Lt, J.UL IJii rLJALUC VJ.L%/LVV LO L/L1-

transport center of the country. It is also the most important port.

37. There are about 7,800 oo ., first class roads and 40,000-50,000 ion, of second and third class roads in Uruguay. Route I,connecting Montevideo with Colonia and Mercedes,and Route VIII,Connuect MJ i±ont-UviUeo wiWI L.EU rtitLa y- Tresi aLiU M1eLo dnU Udle Draziliarborder,are relatively good roads. They represent the Uruguayancontribution to the Pan1 Aumerican highway system. Besides these twosthere are relatively good roads along the coast to Chuy and Rocha.Of the first class roads, about 4,80U Km. are surfaced with asphaltor concrete, while the rest consist of gravel roads. Although novehicle registration data are available, it is clear that roadtraffic, passenger as well as truck, has increased considerablysince the war. Since 1949 the country has imported approximately30,000 passenger cars, 1,800 trucks and 33,000 chassis for trucksand busses. There are numerous small truck enterprises which aresubjected to very little control or taxation by the Government andit is very often argued that because of these reasons they are in anexcellent competitive position vis-a-vis the railroads. In view ofthe increase of traffic, road repair and maintenance has becomevery important. However, because of neglect in this respect, roadshave deteriorated greatly during recent years.

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38. Most of the TIirupuavan railroad svstem was built bv nrivatecompanies between 1866 and 1914. In 1914 the Government began theconstruc+tion and onpration Of s^m. additinal linp.s Privately- andGovernment-owned railroads were operated simultaneously until 1945 whenall private rrilroads were purchasedr h +.hp (vrpvnmpnt. Tn 1952 AFE(Administracion de Ferrocarriles del Estado) a Government entity wasformed to operate the entire system.

3°. Th~~~e geograpia laou of -h ralra -ie emhsze-h

importance of Montevideo as all lines but one converge on the capital.±L. LI I.) I CL-L J, Ir L1 IJ. L L111 .L O._L.L 0,OJ UI3 J. - O CLUIJkA Id L 44. IIL.4d 1.I 44V~

except for a 7.5 mile double track section in Montevideo, of standardsingle _ track There_ are i -- -- -- - -- 4--' (Curem, ivraand-S.1X1g |e U.CUA LJt, dL' lt,f XcU-U Uvl-Ut' QUUls1lPOt::UdU_LWt "_ t V,A1C cui ILL U. vu~ V)

to the E3razilian railroads facilitating trans-shipments but there is noconnectio-n across the Rio Uruguay with the Argentine railroads. W.ith L .9 II.of traclc per km2, Uruguay has the highest track density of all LatinAmerican countries. with 1o9 km. per 1,000 inhabitants, Uruguay ranks secondto Argentina in length of track in proportion to population. Only a sma:llportion of the country is located more than 50 xm. from a railroaa line,and in the southern parts this average is only 25 km.

4o. Since the takeover by the Uruguayan Government very little hasbeen done to maintain or repair the existing system; as a consequence, t.herailroacls are in need of heavy investments. This fact was pointed out in atechnical report prepared by a group of consultants who studied the rail-roads in 1958 and found that a rehabilitation program was urgentlynecessary. This applies particularly to the Chamberlain-Paysandu sectio:nof the former Midland Railway. This section is one of the most heavilytravelled and is used for transporting wheat, cattle and other agriculturalproducts to Montevideo. The consultants' recommendations had not beenimplemented by the end of 1960, although at that time AFE was activelyplanning to undertake a limited re-equipment and rehabilitation program.Preliminary information about this program indicates that it deviates inimportant respects from the program recommended by the consultants.

III. CURRENT ECONOMIC SITUATION

41. At present the Uruguayan Government is carrying out a programdesigned to stabilize the economy and to remove factors which for severalvears have tended to bring about distortions in economic relationshiDs andinterfered with the growth of output and exports. This Chapter analyzeseconomic develooments un to the end of 1959.. when the Government adopted astabilization program and new economic policies which aimed at reducingthe Pxtnnt of state interventi .n in the econoamy and to free the exnortsector of the stifling controls to which it had been subjected. Thesepolicies; and their effects up to the end of 1960 are also reviewed.

Developmennts Before 1960

t4.e Pe Icen'It econorIic pie U%,U.y -policies were

largely based on the use of two major instruments, exchange and importcontUroLi aLnJ.U Lh 6al.iL11, of uc1n1sL-mLtVon subs e.t TLie latUer were

designeQd to offset the efIects of iM1at ioori by maintaiLrng artifuLU±c±a y

low prices for certain commodities and services important in theconsumers, budget. But it became more and more difficult to preventa price-wage spiral fed by bank credit which largely undid theefforts of the monetary authorities to promote, through selectivecredit policies, activities considered of national interest (e.g.,agriculture). No attempt was made to use the budget to pramoteeconomic development or to counteract monetary expansion. Between1950 and 1958, government budgets, except that for 1956, closed withsubstantial deficits; these did not add to inflationary pressures,however, since they were financed to a large degree by the sale ofpublic bonds to social security agencies.

43. Exchange and import controls, which had first been adoptedin 1931, tended to increase in complexity, By 1959 there existed abewildering array of effective rates for both imports and exports.A large number of bilateral trade agreements were also in effect.Although the main objectives of exchange and import control regulationswere the balancing of the external accounts and the promotion ofexports, particularly of manufactured goods, these objectives wereneither consistently followed nor in general attained. Reasons forthis failure included the widening of the margin between the internaland external value of the peso which fostered contraband and falseexchange declarations and required constant tizhtening of thecontrols. To make matters worse, the control authorities werefreauently forced to modify their regulations as internal costsincreased and price relationships changed, thus introducing anelement of uncertainty which discouraged long-term investment andprevented increases in production and exports.

44. The Balance of payments. The expansion of Uruguay's inter-national trade, wrfhitCh started in the early years of the Seond WorldWar, continued until 1950 when exports reached a total of $254illion. nce 10 the trend in dollar export values has been

downward. Underlying this trend in exports was a drastic declinein nagriniiuurn nrl >ndntnrqI prnAiitinn annd lower nrices. Woolexports were influenced by the periodic tendency of producers toWi t.)rIaw -fror t.he *n_qrhket in theic apctinof bhettereterna

prices or higher returns as a result of tax or exchange ratemodific;tin+;-.on 'rho Aal Jnoin 4n mnn+. rlinT^+.a IiT OC:oR onnA 101%0

was due to labor difficulties which led to the closing down of threef-o g-rwin=aed packing pla-s. .- Mr+ res' trption of activitr4 inthese plants in 1960 production and exports increased sharply.

45. As to imports, their level tended to fluctuate violentlyin response to chan.ges in. import regulation.s. But ingnrltheadjustment of imports to changes in export earnings tended to lagby aboUUU Uj.=e yealr -Lwt UiIt sl ULLt substlida uUanI.C.L traLde-U Ud.LfL.Lut

occurred in most years since 1954. The succession of balance ofpayments deficits is reflected in the sharp drop in official goldand foreign exchange reserves from $235 million in 1953 to , 92million at tne end of 1959.

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46.i~. Mnna+er.r.r Develo.mnts.Sine 4r,n cff a ra d rste~ of nin-.,+ne.Dr

expansion brought about a pronounced process of inflation. This process4tended- _ I -tv .4 acelr-t If; 1957.T In en5 4the cost- of 5-Vi- inde rose_l.enULt2U WA akUULt,_L U: cl. Ut.J. L, L* ±7, f dAL1 .J71?7 ULl UVOL, VL U LLV±Llr LIAU~-&

by nearly 50% and wholesale prices increased by about 70%. A specialindUeA r-telectiU n | 1Ig the cuot Uo f"V lilvg f d i u"uu U cumu1 L ; irbUe zllUI,' d llVI-t:

modest rise (14.6%) for the same period. Price data, however, are notvery reliable and must be taken only as a broad indication oI trends.

47. Although Uruguay:s inflationary pressures involved a wage-pricespiral, the initial causes of the spiral can not be precisely determined.Real incomes probably began to decline in 1955 when exports abruptly droppedfrom the level of about A250 million which they had maintained during 1950-5)4to ;1884 mil:iion in l955 and to an average of $1144 million in the followingfour years. In spite of this the economy did not contract, perhaps becausemoney incomes were mamintained by institutional rigidities which preventedmass dismissals and wage cuts ahd possibly by the intense activity in thebuilding construction industry which appears to have occurred during theperiod. The peso cost of imports began to increase in 1956 and did somore rapidly in 1957 and the followTing years, as official import rates wereraised reflecting the internal depreciation of the peso. The pressure oforganized labor and the ability of the private sector, aided by liberalcredit policies, to translate higher money wages into higher prices accolntfor the continuation of the spiral. Wage increases in Uruguay are author-ized by w1age boards composed of two representatives of labor, two of employ-ers and three of the government. The number of wage board decisions andthe magnituie of the wage increases showed a steady rise over the past threeyears. There are indications, however, that real wages which increasedrapidly from 1953 to 1957, declined during 1958 and 1959.

48. The money supply which rose at the average rate of 8.5% per yearbetween 1950 and 1957, increased by 28% in 1958 and 47% in 1959. Total

bank credit, largely to the private sector. increased steadilv since 1956.Credit to the public sector did not contribute to monetary expansion sinceits growth (15% from December 1956 to December 1959) vas more than comperl-sated by increases in official deposits.

49. In recent years, c:.ntral bank operations were an imnortant element intntal crdit expnansion. D-irct cr Hdit of the Bancor Punn1icali to thr) nriTr.tesector increased from Fms. 568 million at the end of 1958 to Pr. 950 million atthe end of 19N9: rediscounts during the same neriod ros^ frnm Ps= 107 1i'llion

to Ps. 3!42 million, thus facilitatting the growtth of comm2rcial bank creditwohich also eyxncrienced a substantial ircrine (Cf_T=abh1 1Vi-10)_ Trqsct onexchange transactions of the Bank of the Republic were an additionalcause of the exnansion. particularly during 1959_ The oss follmowTedfrom modifications in exchange rates as a result of which the Bank of theRenublic paid higher rates for the exchanae hnoiuht from vnn-rtrs tjhnn itcould realize through sales to importers. These losses are to be eventuallyhorn hv th1 rcnvprnmprt-

C0. Fiscal DeTlopments. The operations of the central v--er -ent

official agencies and the Exchange Profit Fund show substantial deficitsbetiveen~ ~ ~~~~~/,J V1953 andL.C:_ 69f,bti 9f h eta oVe,rnment accounts close(.l

with a surplus of Ps. 57 million, equivalent to 6.4% of total revenue. 'hisi-1-n rices-4i A A] 4- - 4. d _o; XV- L ov_7 J.LWI _LLA U_O. s oL vL 1 sIr , L iV_JLU j 11_rU1t:v ucx s an ,X1GL t4GdLULlt. >Ult¢Ed Elra_i :JZU

in nrices.*

51, TyIn 1959 all public sec+orn oeat+.i showed aiii e5' f' Ps. 1AO

million of wjhich Ps. 57 million oorresponded to the central government andP)s. 113 r, " -4i'4on lo e-1-r-bugtr accounts. The4- Ml prw,ent and M--unicA LL.,) 1I.LL.JLI L) A dLJU.i- L,iy A.AULv llu . III'= IJVjJC&I UIIiK UO CLtILI

palities as well as the autonomous enterprises balanced their accounts.D,ub'4- irvs_,_ repreente les7tan7of tova 4-4-1t^. o.wA UU."L.L .LIIVt::O WIJZII UO E-_L -tJ1 Z~ ULA UtU -L.0 UICLI d.L 1 VI L UVUL- E,A1Jt LIUJ. UUIULJ1I~ olto

what over half of these investments were undertaken by autonomous enter-prises and decentrai zed se-vices. Other details about Vhe ptlons ofthe public sector as a whole during 1959 appear in Table 17.

The 1955' Economic Reform

520 At the end of 1959 the Uruguayan Government undertook a radica'lexchange a-nd monetary reform and adopteed a new line of econoumic pollc-y. Alaw of December 15, 1959 recognized the de facto devaluation of the peso,eliminated all preferential exchange rates and established a single exchangemarket with a fluctuating rate. Restrictive import licensing was abandonedand a system of import surcharges and advance deposits was adopted as ameans of controlling the total level of imports and in order to discourageimports of non-essentials. Exports were subject to a system of "iretentionsiiby which certain percentages of the export proceeds of wool and wool prodluctsand of some other major commodities were taxed away. The law also set a newofficial par value for the Uruguayan peso and determined the use to be madeof the revaluation profits of the gold holding of the central bank.

53, During 1960 the exchange reform law was implemented through aseries of decrees which modified some of the original export retentionpercentages and set the level of import surcharges and advance importdeposits. Export retentions were determined on the twofold basis of mak-Lngexport commodities competitive abroad, and still permit the government tocollect a large amount of taxes -- Ps. 300 million in 1960.

54. During the latter part of 1960 -the Uruguavan Government tookfurther steps to pursue its new? economic policy. In July, the Legislatureapproved, a 'bill which increased Uruguay's auota in the El4F from U. S..$15 million to U. S. ''30 million: in September the Executive issued adecree by which the parity of Ps. 7.40 per dollar was adopted for opera-tions with the IMF and a stand-by credit for `30 million was negotiatedwith the Fund.

55. The return to a single fluctuating exchange rate involved theabolition of many subsidies, implicit in the structure of the multiplerate exchangpe system. Tn an effort to sunnress the remaining nricedistortions the government allawed some of the autonomous enterprises (UTE,the water sunnlv comnanv and the Port Authoritv) to charge pricen whichcover the full cost of their services, so that they can operate withoutdefitcits- Prires of gasoline; nnci rici tv ndr L'atfpr were rinlhlepr. A

substantial increase in freight rates was also granted to the NationalRailways. Bu_t the Railways still %Till havne to receive earmarked sharesof taxes (which at the present time amount to nearly 50% of their totalrevenues) to cover operating eenses. Certain direct subsidies, such asthose on wheat, 'which required Ps. 160 million in 1959, were also suppressed- Vc the I tra(q -1-4n -ha was dec're-' free. However, in orler lo ease the

- I 1.

transition some subsidies (e.g., on milk, urban trnsnprtn_ oaclinpe forrural consumers) will be maintained for the time being and financed throughexport retentions-

56= A Tanor step in the financial readPnus.mPnt of the country is afour-year (1960-63) budget, discussion on which began early in 1960 andwthich wsfin-nl 1yt appnyrove hyt Cogrssa +'he yer closd. Th vnew b dget,nwhich according to Uruguayan custom is drawn for periods of four years,implies a dr-astic fiscal reform as new +axes and 4-o iing taxes will raise 1960 revenues by nearly 50% over the 1959 level. Oneof tLhe 4J 4.L1et f' 4te n bd i a pruKres--ve x -

on income from all sources. Expenditures were also substantially increased,mainly for salaries of public emnpluye, whieh had remained uncnanged sinceSeptember 1957. Notwithstanding the higher level of revenues resulting fromthle fiscal reformLi, central government savings, as well as public sectorsavings in general are very small, the latter amounting to perhaps 3% ofGNP (ree Appenudix A). For this reason it is important to undertake a studyof the nature of government exoenditures with a view to determining whethercurrent expenditures can be reduced, thereby releasing resources for thefinancing of investment.

57. Simultaneously with the adoption of the economic reform programthe Uruguayan Government began consideration of a list of public invest-ment projects designed to strengthen the productive capacity of the coumtryand to counteract the possible short-term depressive effects of the newmonetary and credit policies. In line with these plans, an extensive publieworks program and an agricultural improvement program have been started.Similarly,, a pasture improvement program, in large measure financed by a$7 million Bank loan, which became effective last December, is now inoperation. Some of the autonomous state, industrial and commercial enter-prises(e.g., National Railways and ANCAP) have investment plans of theirown. In addition, many other projects, in various stages of studv andpreparation, are now under consideration by the Government. In order toestablish statutory authority for this program Congress passed at the enndof 1960 a law authorizing the issue of Ps. 2,700 million in internal boncls.The law also authorizes the Ececutive to negotiate external loans. Apartfrom the projects for which specific Congressional approval was requestedand obtained, a message to Congress listed other projects under study f'orwhich such approval is not necessary. The economic and financial aspectsof the proposed public investments are reviewed in Annpnaix A nf +his report

DevelopmenIts During 1960

58. Although the change in governmpnt poli ici e nro crred at the enL of1959, and important measures were adopted only later, developments during1960 already show the beneficial effects of the newJ policies. D- the endof 1960 there were indications that inflationary pressures were slackening,that the international accounts were impnroving and that the agricul- turalsector,, particularly, was reacting to the more favorable exchange ratesbrought about hy the foreign exchange reform. But the process uf readjust-ment is not complete as yet and the effects of some measures, such as theadonti on of the new expanded budget, are still to come.

59. The most imme-9;ate effect of the siMplification of tre foreignerchiPnge s-rstem, the suporession of some direct suhsidie5 rnd tfe devaluationo0 tre oes3 was an increase in the prices cT ranyr cornrnodlties kyrlei

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the nrevious system had kept artificially low. The price readjiustmentbrought about demands for massive salary and wage increases. These increaises,wihich in many nases exceeded the rise in the cost of living. were generallygranted. However, the Ministry of lndustry and Labor announced that in thef'nture government renrPsPntatives in waqn hoards will enorHinqte their actionsand will not support wage increases greater than increases shown by the offi-cial cost of living index.

60. Phring; +hem fi-"ot h-nf' ofP +the -ryea mOnetafvrJ ovpansinc- contir.uedrIa

at a rapid pace (5.4% per month as against 4% per month during 1959).Ho'xe-ver, from. July o,n the moneya supply maire practically~ 1 ~ ,,nchnb nnrat

the end of November it was only 1% above the July level (Of. Table 13).fl + +o, +he~. pr---- -a+e sec+o e+xpar.ded4a +abu -oa sm+e -e a ; 1959

(2% per month) but the expansion was in large measure counteracted by thegrowthL' of goverm.en-t- deposit -it th4etr5brl.Tes aane rexpected to decline, however, once the salary increases of the new budgetuecoiie efecti-ve. N r bk uliura± uarn crediU to the guvoi-ivlumlt Ueclj d U uviuefDecember 1959 and November 1960 by Ps. 384 million. Credits of the Bank ofthe Republic to tne banking system aiso remiained unchanged since March l9o0OThe reduction in the pace of monetary expansion began to be reflected inthe price level by the end of 1960. The cost of living index, which duringthe first nine months increased at the average rate of 3.4%, increased only2.3% in October and declined by 506% in November. The special index forbank personnel increased at the rate of 2% per month between January 15 andJuly 15, 1960 as against nearly 4L7 per month during the previous year. Whole-sale prices have shown only slight increases since April 1960. (Cf. Table 12).With the cost of living and prices in general caming under control, the con-tinuation of the present strict credit policies together with some laggingin wage increases should go a long way toward bringing the wage-price spiralto a halt.

61. On the basis of revenue and expenditure figures for the first tenmonths of the year it is estimated that the 1960 central government budgetwill show a surplus of Ps. 128 million. Revenues for 1960 are estimated atPs. 1,475 million as against Ps. 899 million in 1959. The largest revenueincreases came from sales taxes and other business taxes and fromi customsand other import duties (Cf. Table 19). They thus reflect the higher taxbase brought about by inflation and the greater imports which occurred in1960 in comparison with 1959. Government expenditures for 1960 are estimatedat Ps. l1347 million as against Ps. 842 million in 1959 - nearly three-fifthsof the increase being accounted for by higher wage-salary payments.

62. Balance of payments information for 1960 is not yet available butpreliminary information indicates that exports reached a total of $130 million.Wool exports moved slowly and unsold stocks were still substantial at theend of the 1959/60 season. Preliminary data for 1960 place imnorts at 2CI3million (excluding $25 million of P.L.480 imports), leaving a trade deficitof $73 million for the year,r which o_mnqrPas with a deficit. of $79 million in1959. A substantial part of the 1960 trade deficit was apparently financedby supplier credits and movements of private capital. At the end of 1960official gold and foreign exchange reserves were $80 million or only $12milio 4aJe th erbfr.Rcn romton Jndic ate t hat woolL.lIlJ~~~S ~~'JV~~.L u~~~±a~~ a joa~~~. J0.3. 'J~~~~ ~* ~~~~410 L1J.L 1J.i. ~~~~~~IIaU4.1jLL J.L1u~~~~~~L1.a ~-I"Vild. LL _LV-L J1LJJL

exports, after a reduction in the percentage of exchange retention, moved'I I n A.4 .-t 4:_ *nf T...._- Aff- A-4 .- 4-4-1 . .__,.

WLj eAls ALIu E "&LD .l U ± 0 V V | L v.L .± *UC0ULY-.1I'C2 U4.Ud. OLIUW VUCL.± .A4JUJ. VO 1-

$89.4 mil:Lion of which raw wool accounted for $50.9 million and wool tops6 tX.) A1LL .L. ri. Lon 1.

- 1U -

IV. ECOM&ITC PIROSPECTS

63. For many years Uruguay's level of per capita income has beenamong the highest in Latin America and growth was well maintainea betioeen1939 and 1954. It is only since 1954 that the Uruguayan economy has beenconfronted with difficulties Etemming from a combination of such factors aslower prilces for export commodities, government policies discouraging agri-cultural production and exports and, for the past three years, unusuallysevere weather conditions. Over this period inflationary pressures developedand introduced distortions which compounded those resulting from excessivegovernment intervention in the economy.

64. The removal of the obstacles to expanded agricultural productionand exports and a return of more normal climatic conditions, should soon bereflected in substantially higher levels of exports than those of recentyears. It is estimated that 1961 exports may be -at least$175 million, as against 1131 million in 1960e Projections based on iwhatare believed to be reasonable assumptions point to a possible level of.3238 million bv 1965 and ',261 million by 1970. (Cf. ADD endix B).

65- The nuseTs that led to the inflationary pressnres of recent yearsare being removed and the country is moving toward monetary stability, therestorat.ion of normal price relationships and t.he normal use of the nricesystem a; a mechanism for resource allocation. Although considerablepnrogress has hben mand in this dirention And nr.nPotPtq f'nr nrrirno +nthrolg7hthe stabilization program are favorable, success is by no means assured.Th.e crverna. nn1pollc of lirning further IJMCage irigiely r%n6ing credit to the private sector will have to be adhered to strictly. Undlerthese conditions, a gradual return of Uruguay to internal and external eqn-ilibrium a,nd the resumption of income growth may be considered likely, parti-rCUlvli r 1 iTm ar- ^ i. cvvr,rvs+ ,Vn" en

.The loverrtmIent of. IuTu- y feels 4tha stailizatlon slould bIeconsidered only as a step toward economic growth and that to this end thele-el of pu'bli and c -ivat in--ve+mntA T-u b-ard +t the

public secto:r it is evident that years of neglect have produced many gapsin socalJ. U vrhead facilities of -Lh cIy adthat L eIve u tVt.Ly -LLI Vt lILtent u

field is in need of improvement and expansion. A similar situation prevailsin the private secbor, where in-vesument in agriculture as well as 1n maIu--facturing appears to have been inadequate to permit an expansion of output.Aware of these deficncies, the government is already implementing somebasic investment projects in the fields of agriculture and road transportwhich by themselves should materially contribute to the further growth ofthe country. Other projects which require external assistance are alsounder consideration by the government. (See Appendix A). In brief, theprospects of an early return to normal levels of exports, the control ofinflation and consequent disappearance of artif-icial price distortions anclproduction bottlenecks, and the implementation of a sound program of publicinvestment should result in the enlargement of the present productive basisof the country and bring about a period of renewed economic growth.

- 17 -

67. The realization of the long-term grow?th potential of the countrvrequireS that the Government malce a special effort to prepare a publicinvestment Drogram in which priorities for the various nroiects he deter-mined on the basis of sound economic considerations. This program shouldbe adiusted to the financial pnolihi1itJles of the country. TI this respectit may be appropriate to stress that public savings have been extremely lawin the nast And that. +th hiebudetanrv nnrl fiscaQl reform reenotly aAdn+Pte dnozsnot greatly augment the domestic resources which the Government can comnitforr -i vsta purposes.

68. A further prerequisite to ss e orderly econo.c growth is animprovement in the policy-making processes of Government. The public sectorin Uruqa operate not Tr ru-l as+ - -- , ,-44 but rate 4 sa cor:ae-- 1- - O -W O_ Mr4~± O. M. wa.LJ.i U JL4U J.~UL±U± d.O d.LL LUJ -V.J±U.LL1MU UU

complex of autonomous public enterprises and decentralized public services.As a result, policy- deiinsae ---- '----' r and, in the area ofpublic investment, investment plans of individual agencies are drawn withl-out regard to the share of the country1 s resources that should be used bythe public sector as a whole. This situation points to the need to establishsome certural gro-up for the coordination of economic policies and publicinvestment. To operate successfully such a group requires information onwhich to base decisions. This information is now largely lackina or notreadily available. Therefore efforts must be made to centralize and improveune statistical services and the provision of current information on thecountry's output, and on savings and their use.

V. CBEMDIhJORThINESS

69. in appraising Uruguay's creditworthiness it is important to stresssome of the basic characteristics of the country, viz, an ample resourcebase in relation to the country's population, a high level of per car.itaincome, a long tradition of political stability, and lack of serious socialproblems. The deterioration of the country's economy over the past fewyears resulted from policies which discouraged agricultural and pastoralproduction cnd exports, from a wage-price inflation and from a decline inexport prices which, together with unusually unfavorable climatic conditions,reduced export proceeds to extremely low levels.

700 The continuation of the policies already adopted by the Governmentshould result during 1961 in current exchange receipts in the neighborhocdof $175 million. The external public debt of Uruguay (613h.5 million eqAi-valent as of June 30, 1960) is modest and largely in the form of long-termpublicly issued bonds (45%) and IBRD loans (46%). The balance is in UnitedStates Government credits. The total service on this debt will reauireapproximately ')ll million a year until 1970. (Cf. Tables 1 & 2). Thisamount represents approximately 6% of estimated exnorts in 1961, and, onthe basis of projected exports, somewhat less than 5% in 1965.

71. Assuming the continuation of policies conducive to the groTth oftho export sector. Uruguay can service external obligationsq areater thanit now has. It should be strongly stressed, however, that in order to carr,7out all the nubhlic investment prorects which the Urutguayan Goernment is

- 18 -

presently considering, it would have to borrow on a scale that, barringa radical improvement in export prospects, would heavily commit thecountrY's debt servicing capacitv. For this reason and in the lihtof the observations on the public investment needs and official planscontained in Appendix A. until a well-thought out long-term. publi -investm.ent program can be prepared, external borrowing should be ktjptat a modest level and the proceeds used only to finance obvinously highpriority projects.

APPENDIX A

Public Investment Plans

Nature maonitude and financial resources

1. ThiS Appendix suynynarizes information on a series of nublic investt-ment projects which the Uruguayan Government has under consideration and,subjhecrt. to. lntittio.nsn s+temming from lack of adequrapilt+.e infnrma+tinn at.tempT+

a preliminary appraisal of their economic importance and financial possili-lities

2- T. va -ir-niousm irntO.ALrLn prjeT Ldrd consideratlon have no' -4

been officially arranged into an integrated program; some of them are high-ly tentative Llhog no CIJ.al. orde of poi es has bee Ual4.sheU,

some projects are already being carried out, or will soon be undertakenbeca-use thle necessa-y resource's have been earmr,rked. for them. ,hXe tenta--6tive year by year phasing of projects requiring several years to coMpletEis avaiZ..Lta le I f .oroly sUoIme WI UIot jJeJJcLtsULI*. -As a res;OU4L1 Ltte1Lr -La Liu noL Lof.-

cial estimate available of the aggregate annual cost of all projects. Nei-tIltr- h1ave th-e UrugLJ-.yanLI aUWIUr± Lt.Lhg Us 1 di±ar'sedU UU[1omestc .LinaI rucivurutI

to complement the foreign financing which might be secured to assist infinancing sorie projects in the program.

3. In order to appraise the iinanciai implications oI ali the pro-posed projects, they have been brought together and phased rather arbi-trarily over the period 1961-68. The results are presented in Table Aat the end of this Appendix.

4. The total cost of the projects is Ps. 5,289 million; the averageannual cost over the next three years (1961-63) is close to Ps. 1,100million. These figures do not include a group of projects, which are sohighly t-entative that they need not be considered as feasible in the next,few years. The projects under active consideration are in various stagesof preparation but their undertaking is feasible provided funds to financethem can be found. In the following table the cost of the various projectsin the period 1961-63 are shown separated from those in the period 196I4-68,because the recently approved government budget also covers the period1961-63.

Appendix A - Page 2

Proposed Public Investment, 1961-68

Total Period 1961-63 PeriodInj-s+ment Total Annual %196-68

_______ 1961-68 Ayerage

TOTAL 5,289 3,293 i,o68 lOoO1 1,996

Roads 2.224 1.22h [08 38.3 1,000Railways 340 2h0 80 7.5 100Electric Power 1.139 310 103 9.7 829Agriculture 354 35 118 11.1 -Industry 538 538 178 16.7 -Urban Transport 100 100 33 3.1 _Airnort Construntion B1 81- 27 2.5 -

IJaterworks 257 190 63 5.9 67Aerophotogrametric Survey 6 12 loSchools and Housing 220 220 44 .1

5. The proposed annual investment of Ps. 1,100 million a year fort,he nect thtLree years compares with total public investment of Ps. 1h8million undertaken in 1959. Investments of Ps. 1,100 million a year wouldroughly represent i7p of total public sector expenditures, and perhaps 9,of gross nationalproduct in 1961. These percentages are not high ifct_ r ast-d Y!lJitl theU pJULIt1U Linve t. itf otn V. Otllor countribPes, -par:ticular'lyif the large share of the Uruguayan public sector in the

Fublic Investment 1959 and Proposed Investment, 1961-63

(Actual) (Proposed)-7;27 7V 4 .L LU

(in millionw of pesos)Central Government 50 579 589 578Departments and Municipalities 15 83 128 160Autonomous Enterprises and

Decentralized Services 83 104 185 261Other - 173 173 192

Total Public Investment 148 939 1,075 1,191

Total Public Sector Expend- 2,273 5,000?itures

Gross National Product 5,600 10,000?

Total Public Investment as % of:Total Public Sector Exp. 6.5% 17%G. N. P. 2.6% 9%

Appendix A Page 3

national product is taken into account. But the fact that the proposedinvestment would raise public investment from 2.6% of G. N. P. to perhaps9% indicates that so much investment may be excessive relative to what ispossible in Uruguay today. These doubts are confirmed by an analysis ofthe resources available for the financing of the progran'.

6. The following table presents a rough estimate of all resourcesavilahblp to) finanee public investment over the next three years.Central Government Savings. As indicated above the budgets for 1961 to1Q63 show c-urrent account sulrpluses of Ps. 156 mi11lrn, in 1961o P9. 138million in 1962, and Ps. 333 million in 1963. However, these estimatesare Suihbpe+ +to widep mnrginq of errnr. The infIntion nf the nqqt. thrppyears, changes in expenditure patterns associated with it, and expandedgr¶n+e expendi tres ke fores of +.x yl and overmentexpenditures inevitably hazardous. This is equally true for the ExchangeRetentions and Tmport Surcharges Fund wvinhich is to provride resources forthe general budget (100 million a year) over the next three years.

7. An analysis of the official revenue forecasts indicates that,upr from thue yiel of two P e taxe (a -rgesv 4income tax4- and a

comprehensive turnover tax which replaces a more limited sales tax now ineffect) t' ,,oUI st Uof th 11e UexpjeCted incrte:as es in- tCax y--el ds i the nE1ex-t thr1e eyears is to come from higher prices and the normal growth of the economy.TX.n v .e 0 o'L U'-l s.tabi za22- UreEt…~L lU . 1j rLe5LlIn1 -view of ihe stabUl±ization program ani thie recen L b Q fld p-rces, theprojected increases must be considered exaggerated. A more reasonable es-timate is tLat no surplus will arise in 1961 and 1962 and that the 1963surplus will amount to no more than Ps. 100 million. As to the autonomousstate enterprises, some like ANCAP (Cement, Alcohol and Petroleum) andUTE (Telephone and Electric Power) provide savings to finance at leastpart of their own expansion but many others (National Railroads, Monte-video Harbor, the Water and Sewage Agency, the official airlines, etc.)nave operating deficits tnat in the past have been covered by the centralgovernment budget. Not more than Ps. 10 million may be expected assavings originating in these enterprises.

8. The public sector has not been a source of monetary expansionsince the end of 1957. In line with the current economic stabilizationplans, this situation is expected to continue. Bank credit will not,in consequence, be used to any considerable extent as a source offinancing for the proposed investments. Only token amounts of bankcredit ('Ps. 20 to Ps. 30 million a year) have been added in the estimate.As to credit from private non-banking sources, it is also felt that nomore than limited amounts (Ps. 40 million a year) of public bonds can beabsorbed by individual or institutional savers.

Appendix A - Page 4

Proposed Public Investment and Estimated Financial Resources 1961-63

(In millions of pesos)

1961 1962 19?63

A. Toftal Thm-eqtiA GinnnGin 326 331 l_"3

C'e'.nrallGvrae, Savings 256 256 35Surplus on Current Account (adjusted) - (1F0)Special In,vestm.ent Budgets

Exchange Profits Fund(Amgricu-Cult-al Progr&,m) (ki*0) (80) (80)i

Exchange Profits FundkX-Liu±±Lc VEO&) (51%L) () (L

Tax Allocations (Public Works) (125) (125) (125)

Profits of Autonomous Enterprises 10 10 10

Credit 60 65 70Bank credit (20) (25)Net Sales of Government Bonds to

non-bank investors (40) (40) (40)

B. Total Foreign Financing (Available and Possible) 71 81 81= = . ______ __

Proceeds IBRD loan: Pasture ImprovementProgram 20 30 30

Proceeds of possible DLF loan: AgriculturalSchool 7 7 7

J ± V VG PL U..VO'U 04 V%. I.±O,L 1JUvrUd DULIl

loan: School and Housing Program 44 h4 4h

C. TOTAL DOMESTIC AND FOREIGN FINANCING (A+B) 397 412 .,17

D. TOTAL PROPOSED INVESTMENT 939 1,075 1,191

Financing Gap 542 663 o74Gap as 7% of Investment 57% 61*bDomestic Financing as % of investment 35% 31% 36%

Source: Mission estimates

Appendix A - rage 5

9. Foreign financing already available or likl.y to finance pub'lIinvestment, includes the proceeds of the recent pasture improvement Bankloan, a small amount from a possible DIl loan to finance an agriculturalschool and perhaps Ps. 44 million annually for school construction and low-cost housing expected to be available from the Special united States Fundfor social and economic development.

10. To summarize: domestic resources may amount to Ps. 326 million in1961, and Ps. 436 million in 1963, equivalent to approximately one-thirdof the cost of the proposed investments. After including the proceeds ofthe $7 million livestock loan and two possible loans by the DevelopmentLoan Fund and the Bogota Fund, still only 43% of the proposed investmentsis covered, and Ps. 1,900 million, or US$ 175 million, remains to be financed.

11. A preliminary comment suggested by the above figures is that thelevel of public savings is rather small in Uruguay. On the basis of existingrough GNIP data it can be surmised that GNP in 1961 (current prices) may bein the neighborhood of Ps. 10 billion in which case the savings of theCentral Government would represent approximately 3% of GNP and about 12% oftotal government revenues. Both these percentages are low in comparisonwith the saving performance of most countries and even more so if contrastedwith the level of taxation which probably exceeds 20% of GNP. On this basisit seems that a thorough study of the nature of current government expendi-tures with a view to improving the present ratios between current andcapital expenditures would be amply justified.

12. Since many of the specific projects listed under the generalhenalingst in the Tnhle iAhnp nn+. bhen evalunatep it. is not. npossile at. t,h:itime to determine whether the country would be justified in borrowing abroadthe equivlent of US$T 175 million to carr-r ot the program.. Morover, +.tborrow such a sum in the next few years would go a long way towardabsorbing Uuguays e.ern.al debt servicing _apaci+tyr nless export+s expn-rdmore than appears likely at this time.

13. Although the investments under consideration involve expendituresv-wh1ich. exceed thie resouCes tIat c ecasonably be e xpected tobe ava labLe agood case can be made for the economic importance or the social need toundertai:e investments in nil the fields covered or the va u p Asthe repcrt shows, the agricultural sector has lagged behind the rest of theeconr.o,ry The road" andAA rail-wavys sy-tem,s are bady nee' of Aear As 4to~ s ±L~ J..JO.L a.~LJ. J.o..L.Wa.J DVIJ~I10 M.1 u ULOAj.Ly .LLi 1i Ul' .~J L I- PEJ0.J.L 1 L~0 IJ

electric power, the proposed expansion is in line with normal growth ofdem.and. Of cou-se, t,hese broad considerations do not imply that the mag&nit-udeand nature of the specific projects are correct. The so-called "Public lWorksrlogram" (Ps. 200 millionl a year) miAay be too large, for insbance, since theamount of Ps. 200 million must be added to a special investment of approxi-mately P's. 208 million over the next iew years to finance ThGree major na7tionalhighways. Although the need for road construction is great it is possib:Lethat thet proposed rate of investment may be excessive even in terms of thephysical possibilities of the country. Moreover, the re-equipment require-ments of the national railways, the long-term reorganization of the railwaysand their coordination with the road network has not been adequately studiedcThe railroad north of the Rio Negro also still requires basic studies beforea final decision to go ahead with it is made.

14. Because of the financial and technical uncertainties, the practicaLcourse is to begin work only on projects which have obvious priorityand which will be part of any later overall program.

Appendix A - Page 6,TELble A: PROFOSED PUBLIC INVESTIEENTS,, i961-68

(In millions of pesos)

Investment PhaCsing of Annual investmentfor 1961-48 -191 196f7963 : 1 915 196-1 967 19

Description eriod

TOTAL 5,289 939 1L,075 1,191 546 463 372 376 305

Highways 2,224 408 408 408 200 200 200 200 200

Regular Public Works Programv? 1,600 200 200 200 200 200 200 200 200Route 5 - Montevi.deo-Rivera3 228)Route 26 - Pa:ysandu-Rii Blanrco./ 240) 208 2013 208 - - - - -Route Hiontevideo-ChQui. 156)

Rajti2a, 340 60 90 90 50 50

Rc-equipment National Rai.lwaysV 1()0 20 40 40 - -Railroad North of the Rio Negro 240 40 50 50 50 50 - - _

Electric Power/ 1,139 44 95- 171_203 169 172 17lS lo

Fifth Unit "Central Batll.e 125 1L3 30 50 32 - - -Peak LoadL Generating Units ,6 6 23 27 -ExpaniisiorL Collector System 21 5 1S - - - - - -Expansion 30 and 6 KW Network 107 l1 1:L 11 11 11 11 20 21Expansion 220 V Network 65 7 7 6 6 7 6 13, 13Super-Central (Thermic) 261 1 7 51 50 68 42 -Paso del Puerto Hiydrcele ctric PlaLnt 504 1 1 26 104 83 113 - 75

Agriculture 354 1:L5 125? 114

Agricultural Improvement Pr?yramY/ 240 80 80 80 - - - - -

Pasture Improvemrent Frogray.- 94 25 35 34 - - - - -Agricultural School 20 :0 10 -

See footnotes at, endL of table (Continued)

Appendix A - Page 7

(Table A conti:nued)

Investment Phasing of Annual Investmenitfor 1961-6,8 1961 1962 1963 4 7 9 )_T (-LT9 T-19

- Decripion -period -LI-

Indust21 f8/ 538 173 173 192 - -

Petroleum Refining 63 - - - - * _ _ _Cement Plants 114 - - - -Fertilizer Plant 112 - - - -

Re-equipment Industrial Sector 200 - - - -Re-equipment Fishing Industry 49 - - - -

WaterworksJ/ 257 23 68 99 67 - _ _ _

Urban [ransportatiOnlo/ 100 33 33 34 --- - -

iontevideo 100 33 33 34 -

Airport ConstructiDn and TIprovement 81 27 27 27 - - _ _

Carrasco 34 11 11 12 - - - -

Olther Cities 47 1.6 16 15 - . _ _

Aezropha112Lrametric Survey 36 12 12 12

School and Housing Prolgram 220 44 44 44 44 144 _ _ _

1/' All costs expressed i:n millions of Uruguaiyan pesos. Rate of exchange used in all. cases is Ps. 10 per U.S. dollar.

2/ According to bill submitted to Congress, the Ministry of Public Wforks would operate with a special Fund(Tesoro de Obras Publicas) to which specific taxes (gasoline, real estate:, etc.) are to be aLlocated. The FandiE' A-q1iTmn+1-d ton imminti. +rt Pe 9P.0 mnil linn a yenr; TMAin+.pnprrp_ repnairE a,rd new r nnetr+.inr-t-inn q are to 1Le annged

in a flexible way and paid out with resources from t-he common. Fund0

(Continued)

Appendix A, - E'age 8

(Table A corLtimnLed)

3/ Program submitited to Congress. It has been assumed that it will take three years to complete it.

4/ Proposed purchase program submitted to Goverrnent for approval. Plan contemplates implementation over nexttwro or three years by mearns oif supplier credits. Repaaymeint o.f credits to be undertaken by AFE(Administracion de los Ferrocarri:Les dLel Estado) out of current earni:ngs and a bond issue in about equalparts. Allocation of purchases over next three years is arbitrary.

5/ Programn submitted by IJTE (Usinas Telefonicas del ]3stado) to Government.

6/ Program, approved by Congress,, contemplates use ofE Ps. 80 million to promote use of fertilizers, seed,improvement, weed and animal-disease control, etc. Funds to be provided by the Export Retentions Fund.

7/ Program financed in part by IBRD :Loan ($8.0 million) and by i:nternal credits of Ps. 14 million.

8/ Investment program of ANCCAP (Administracion Nacional de Ciemento, Alco:hol y Petroleo). Financing to beundertaken by the state agency itself. The investment hais been arbitrarily spread over next three years.

2/ IncludLes water supply and san.itation works for which OSE (Administracion de las Obras Publicas del Estado)has prepared d.etailed planse

10/ Covers most of ex)anding amd improving the public tranasportation system of the City of Mdontevideo. Thecost has been allocated over next three years.

APPENDIX B

Export Prospects

1. Assuming that government policies conducive to the growth of the exportbictor are-followed, prospects are good that Uruguayan exuorts rTilJ quiclslyriseto the nre-l9q7 level and that they will grow at a moderate rate.The rate of exchange is now favorable to agricultural producers. Thegovernment has talen measures to increase and improve pastoral andagricultural production and favorable results may be expected in afe years0

2. Afte. in" t'he +.ll o of ynvors.q dHAelinci frnm rin ar nrage of about '"10million to ^97 million in 1959, rising to `130 million in 1960.The decline in1959 was caused hy a fall in nxport prices, by weather conditions and bypolicies unfavorable to agricultural exports, Because of theseabnon.al de- tm nt-- r--ent epin a+ be ue to deterr no

future exports. Exports have therefore been projected on the basis,v? t .,; - f.n -lAP +h 1~ a a4, 1, - ar FA - 4-n* ar me - av1 -4-+ nIvrnrnrAAT +-r

3 TIh.e result ofL UtheU P1LJtioLUL1 -e tLIa bU LJ1965 UJ.

exports may be about '$ 240 million, and about : 260 million by 1970.TiLLs means thUat expor't[ s -wi±Ll C. U inc reIUAse at Ua U.an-.ua ri5U.Lil

1965, and at 2% between 1965 and 1970, Should price conditionsiiiipro-ve or sho-uld it be posil io expanId significanltly theist of~ exportable goods, export earnings may be higher.

4. The most important export commodities are wool, meat, hides,wneat and linseed. They account for about 9170 of total exports. Theremaining 9% consist of other agricultural products and minor exportsof products of the mining and manufacturing industries.

5. Wool. Uruguayls major export commodity is wool. Between1951-1956 raw wool represented about 40% and tops about 13% of thevalue of total exports; about 65,000 metric tons of wool were exportedannually. Because of the decline in the price of wool and unfavorableexchange rates, thne value of wool exports fell considerably in 1957and again in 1959. In the latter year unfavorable market conditionsand floods reduced exports. The new exchange rates have made woolexports economically attractive. As a result of the program to improveand increase livestock production considerable increases in woolproduction can be expected in the next few years. In view ofcompetition particularly from Australia, it is doubtful though whetherUruguay wiLl be able to increase its share of world wool exports. Aconservative estimate of Uruguayts wool export prospects musttherefore assume that Uruguay's historical share of 5% of the woolmarket will be maintained, or rather regained, since this share waslower during 1957 and 1959.

6. It is not expected that world per capita wool consumption willbe significantly increased during the 196 0's. Thus, any increase inwool sales must result from population increases, which in the moreimportant countries is estimated at 1.5$ per annum. On this basis, world

Appendix B - Page 2

wool consumption in 1965 will be about 3,300 million pounds and 3,500 to3,600 million pounds in 1970. If Uruguay maintains a share of 5% of thismarket, exports of raw wool valued at ';100 million in 1965 and t107 millionin 1970 wiould result.

7. Exports of wool tops are expected to rise at about the same rateas raw wool. This represents exports of about `30 mnillion by 1965 and perhaps1)33 million, or 10% more, by 1970. These proportions may underestimate futureexports since Uruguay's capacity to produce more and better wool together- withslight changes in demand conditions or prices could easily result in consider-ably larger exports.

8. Ieat. Uruguay's second most important export commodity is meat. Itis estimated that in 1960 Uruguavarn exnorts of meat and meat nroducts earned540 million. Average exports for the period 1951-56 were 130 million pounds,valued at about 3, million, Gommeneing in 1957 and ending in 1959, volumeas well as value of meat exports declined because of unfavorable weatherconditionis and the discouraging effects of exchange rates on producers an!exporters. Now exchange rates are favorable and the meat industry is expe-riencing increased act-ri+vy. A considerable rise in meat produetion isexpected from plans to improve livestock production.

9. Since per capita consumption in Uruguay is among the highest in theworld (over 200 pouds per year), consumption is not lkely- to increasefaster than population. Thus, a very large portion of increased productionwill be available for export. Assum.ing no significant price changes, it can beexpected that the value of meat exports will increase by about 5% per yearfor the next five years and by- about 3-1/2' per year thereafter. Stocks ofbeef-cattle (6.9 million in 1959, or the same as in 1956 i,7hen the volume ofbeef exports was 60% higheer) appear sufficient to sustain tne projectedimmediate increase in exports. This is confirmed by the export level alreadyattairned in 19u60. (Cf. attached Appendix Table). Prospects are good thatincreases in meat production will be easily absorbed in the European mark8twhe-re most of the Uruguayan meat exports are sold.

10. hides and Skins, During the six-year period ending in 19'6 Uruzuayexported on the average 67 million pounds of hides and skins valued at about$J0 m"llion per year. Tis represented 9%" of total exports. Exports ofhides and skins declined between 1957-59, both in terms of price and volune.

11. Because of the expected rise in meat production, a correspondingincrease in hides and skins can be anticipated. By 1965 the volume ofexports of hides and skins probably will have surpassed average annualexports mn 1951-56. For the following five years (1965-70) exports of hidesand skins are projected to increase 4% per year.

12. The increased use of leather substitutes is likely to bring aboutsome decline in prices which will partly offset volume gains. But on balancethe value of exports, although lower than during 1951-56, should be nearlytwice as high as that of the past three years.

Appendix B - Page 3

13. Wheat. Between 1951 and 1956 Uruguay exported on the average260,OOC' tons of wheat, valued at about $23 million. In 1957-59 wheatexports; declined because of unfavorable prices as well as poor weatherconditions. Like Argentina, Uruguay is a low-cost producer; thequality of its wheat is well liked in Europe. However, as long assuch international factors as competition from United States wheatand flcur and price arrangements under the International WheatAgreement remain unchanged, there is little prospect for more thana slight increase in Uruguay's exoorts.

1)h On the smunnlv qi do it seems reasonable to exnect thatr, r r-o -_--- . - -- _ 1 --

because of attractive peso prices the amount of wheat available forexport will increase somPwhht- nperhaps retuarning to the more normallevels of wheat exports of the years 1951-56. With stable prices,whlenat e- vyo,r+.s o%f' t7 mnillIion, or- 92< beplon^ +the 195Iaeae mny-T

UIV -- -- -- _.erage.,~~~--

be expected.

15. Linseed Oil. During the six years 1951-56 Uruguay exportedon th.e average oR.h million worth of linseed oil. In the last thre-years exports averaged 4-.7 million. Total world demand for linseedoil 4is not exp+a +r .o r--se &ndA Ti--,'-I~ share o1-- + wrldr n.mare

is not likely to increase. For this reason, exports of $6 millionhaveU,. -- e 4 -r-

4-A

for 4t1he next I0 -ra-.

16. Other ~~Ex-or 4. Th M e,-ani,g9 of expot con 4s of theJ_%_1 . %JULI± 1.J UC) . i ± LL mIiC.L_"jA..LLi 7/0 VJ.L u_jt~..Jl UD uLAJILa± I UU± VUJ14.Z.

agricultural products and a few minor commodities produced by ther,ir:.4g and manufacturing industries. Because of the recent exchangereform prospects for the increase of these exports are favorable. Iftlhey r.aIirna.tUai their shilare of totaiJ expUorts xrexhge eilu%gz firi-f thlemshould be $20 million by 1965, and about '$22 million by 1970.

Appendix B - Fage 4

EXPORTS PROSPECTS, 1965-1970

Aviprais Prcect;edCommodities 93 1957 1958 1959 19601/ 19 197(T)

hleat and Meat Volumie (miLI1iLons pounds) 129.7 132.3 55.4 76.6 - 200.0 235.)0Products Value (millions IJS$) 34.1 27.5 14.6 18.5 30.9 5o0.0 59.0

Price (cents per pound) 26.0 21.0 26.0 24.0 - 25.0 25.0)

tlides and Skins Volume (millions pounds) 67.3 51.9 41.9 41.2 - 70.0 85.(Value (millions lJS$) 19.9 10.8 8.9 9.8 TL1.0 1l4.0 17.0Price (cents per powud) 30.0 21.0 21.0 24.0 - 20.0 20.0

Wheat VFolumne (thousand metric tons) 260.C4! 147.2 286.3 59.3 2/ 280.0 280.0Value (miLllions lJS$) 22.9 9.4 17.2 3.2 - 17.0 17.0Price (US$ per ton) 88.1 63.9 60.1 54.0 - 60.0 60.o

Linseed Oil VTolurme (thouSand metric tons) 25.5 25.7 17.7 18.1 _.2/ 25.0 25.0Value (millions IJS$) 8.4 5.8 4.3 4.1 - 6.o 6.0Price (US$ per ton) 329.4 225.7 242.9 226.5 230.0 230.0

Raw Wool VTolume (thousand metric tons) 54.2 27.9 58.7 35.1 I72.0 77.0Value (m-illions IJS$) 91.0 44.0 63.4 34.4 50.0 100.0 JL07.(0Price (US$ per ton) 1,679.0 1,577.0 1,080.0 9580.0 - 1,389.0 1, 389.0

Wool Tops Vlolurre (thousand metric tons) 11.0 7.3 10.0 12.3 -3 13.0 14.tValue (miLllions lJS$) 30.2 19.9 17.0 19.51 21,7 :31.0 33.(Price (US$ per ton) 25745.0 2L726.0 1 7CO.0 1, 618.0 - 2,337.0 2,337.0

TOTAL: Value 206.5 117.4 125.4 89.59 li3,6 218.0 2390(

OTHER EKPORTS: Values 19.6 10.7 13.2 8.o 16.14 20.0 22.0

TOTAL EXPORTS: Value 226.1 128.1 138.6 97.95 130.0 238.0 :761.0

_,/ Fr±I uImriary.2 \-ot availlbl. Eeparatcly. Includecl wlit,h other exports.,

Table No .

1 External Public Debt Outstanding, Including Undisbursed asof June 30, 1960

2 External Public Debt, 1959 and Projections 1960-1970

3 Geographical Distribution and Average Yearly Output inStockraising and Agriculture, 1956-58

4 Agricultural Production, 1955-1959

5 Agriculture, Acreages under Cultivation and Volume ofProduction, 1940-1959.

6 Yields of Main Crops, 1933-1959

7 Cattle and Sheep Bought by Packing Houses, 1952-1959

8 Industrial Activity, 1958

9 Industrial Establishments by Size, 1958

10 Capital Invested in Manufacturing, 1946-1957

11 State Industrial Enterprises, 1958

12 Price Indexes, 1950-1960

13 Money Supply, 1956-1960

14 Total Bank Credit, 1956-1960

15 Bank of the Republic Credit, 1956-1960

16 Commercial Banks. Main Assets and Liabilities, 1956-1960

17 P§ublic Sector Finance, 1959

18 Fiscal Position 1952-60 and Projection to 1963

19 Central Goverrment Revenues by Type, 1958-60 and BudgetPro Jecti ons 4 3 to 1963

20 C~~er.t 'r-a ernm..... ,ent Crrent Expendtures ne%95B fr a r d BDu-dgaet

Projections to 1963

21 Balance of Payments, 1953-5922 Imports by Principal Commodities, 1952/55/58/59

23 Ir.pr^-+orsfrom MnaJor Countri es, 19052 le55 /58 le9

24 Exports by Principal Comnodities, 1952-1959

25 Exports to Major Countries, 1952-59

Table 1: EXTERNAL PUBLIC DEBT OUTSTANDING, INCLUDINGUNDISBURSED AS OF JIJNE 30, 1960

(In millions of U.S. dollar equivalents)

Chitstandingincluding Undisbursed.

Unt+i bhrsed

Total Tij .eral Pubi Debt JJ4U0 L4 ±17.

Bonds 60. @ -

IBRD loans 61.4 10.3

U.S. Government loans 12.0 7.3

Bonds, privately placed 0.3

External Debt Repayable in LocalCurrency 23.2 20.3

IC.A Loans 21.7 18.7

DLF Loans 1.5 1.6

NOTE Exchange rates: LB. 1 = $2.80; Sw.Fr. 1 $ .23170

a/ Of this-amount, the equivalent of $11.3 was held internally as ofJune 30, 1960.

Table 2: EXTERNAL PUBLIC DEBT, 1959 AND PROJECTIONS 1960-1970

(In millions of U.S. dollar equivalents)

fnlht Chntstanding, Tncluding UndisbirsedPublicly U.S. TotalIssued IBPTT novit Debt Ane.orti-

Total Bonds loans loans Other Service Interest zation

1959 131.2 66.1 57.2 6.0 1.7 11.4 4.7 6.7

Project.ions

1960 134.5t/ 60.8 61.4 12.0 0.3 11.1 5.1 b6.0

1961 131.3 59.1 6o.h 11.6 0.2 12.0 5.6 6.h

1962 124.o 55.1 58.2 10,7 - 11.7 5.0 6.7

1963 116.2 50.8 55.5 9.8 - 11.8 4.6 7.2

1964 108.0 46.4 52.6 9.0 - 12.2 4.3 "7.9

1965 99.0 41.7 49.2 8.1 - 12.4 3.9 3.5

1970 5h.5 19.1 29.5 5.9 - 10.1 2.2 7.9

The amount outstanding shown for 1960 is as of June 30; paymentsshown are for the full year 1960.

SOURCE: IBRD Economic Staff.

Table 3: GEOGRAFHICAL DISTRIBUTION AND AVERAGE YEARLY OUTPUTIN STOCKRAISING AND AGRICULTURE, 1956-58.

Approximate geographic location

_ (no Tons) of activity

Wo6l 90 Spread over nearly the whole country withthe exception of coastal departments devotedto intensive c-r-on-farming (fnT.fNTA- SAIY JOS7CANEILONES, MALDONADO).

MAutton 80 Same as wool.(1ivpstonk weight.at the mnarket level)

Beef 380 Distributed throughout the country with(livestock weight denser concentration the northernat the market level) departments the remotest ones from the

se~asid (APTTC(A.I ~T1 7TT'7 PATArTTA PTMPflp

CERRO LARGO).

Milk 600 Particularly in the center departments(I T AnRD"c TTTDA N M7 A C TTA T'mDpCr ))

I ., j 700 1I4A.Lli±Ly cUU"eQtLiLUe1dJLLI onithe -seosuern biordelu

line (COLONIA, SORIANO, RIO NEGRO,'DA VC' A ?KMThTTI…AYSAMDU)I

SecondLAMa-ry c.Lrops 600 Lesser- coricentr-ation in 1te Western areas.

large production in the departments nearlffThrflT fnn - . A 1.I T -TTr. f A¶ - Aflr

'UPIf,EVIDRO UCANEJLONESU, SAfiN JuOS).

Sugar 300 Canes in the northern tropical areas,beets in crop-rotation in the westernareas or aIlernaiLng w±bLth -rne-r secondarycrops along the coastal line.

Fruit and vegetables 400 Mainly around MONTEVIDEO (CANELONES,SAN JuoE, and to a lesser extent around.SALTO).

0nTTRrT.! R1pnr+. of the F'rennh Tran.nport, Mission (Sofrerail); 1959. Vol, 1,

Table 4: AGRI CULTURJUL PRODIJCTIOfN, 1955-1959.

Product:ion /1 /2 Acreage

(Thousands of' Metric Tons) (Thousands of' Hectares)

Grains 1,.173 9"1 I.221 u 97

Wheat 832 589 598 360 21,4 788 689 778 65,1 296Corn, 209 168 324 331Rice 66 57 19 19Oats 3 6 52 32 23 50 83 90 38Barley 5 1O 9 8 9 10 11 11 16 13Barley (beer) 22 34 22 16 26j 25 50 28 5'1 40Alpiste and Rye 12 7 1 2 1 5 14 4 5 3

Industrial Crops 55iL3 553 334 383

Linseed 49 72 73 72 48 110 135Sunflower 8t) 79 183 209 167 118 72Pearruts 6 7 8 9Sugar beet 15 2 15,8 7 11Sugar cane 755 10)6 4 4Grapes 1141 130 18 12Other 1 1 3 3

Truck Crops 335' 357 83 93Potatoes 68 73 18 25Sueet Potatoes 44 5i8 10 12Vegetables 10C) 10)1 18 19Fresh fruits 12 3 125 37 37

TOTAL 2,059 1,831 1,638 1,673

/2 F-irst estimat,e.,a3 ]c es not add up duLe to errcr in Source.

S0U:RCL: l_.nist,-y c,f Agriculture.

Table' I5: cf AGC (TnTTT M'ETVT Ar'TCA PTrTQ TI1-.t'r) CrTTTv'MTArmTrT%T

AND VOLUDE OF PRODUCTION, 1940-1959.

Acreage in Use _Volue of' Productic

Total Grains/l Industrial To'tal Per-Capita

1940 1094 794 300 100 100

1941/45 937 713 224 101 96

1946/50 1085 757 328 108 98

1951/55 1399 1025 374 133 116

1956 1555 1221 334 137 116

1957 1581 1197 383 1i0 118

SOURC,E: inistry of Agriculture.

/1 :ncludes wheat, corn, rice, oats, barley, rye and birdseed.

/2 includes linseed, sunflower, peanuts, sugar beet, grapes and tobacco.In rTeGnt years area lindrn- t:riruck crops, not irrncldd ein +t-hi +tb1

has been about 85,000 Hs., or 5% of land used for all crops.

Wheat Linseed Oats Barley Pearl Bird-Barley seed

(kilogram per hectare)

Average

,-1, r) 5iy 4U Jv - L427

19380-42 706 548 4 757 330 408

i943--47 6073 -541 4607 7 53 669 427^

l948--52 001 532 57 77( 4 780U 4951

1953-57 lo16 536 726 923 807 506

1957.-58 768 438 432 835 791 373

1958-59 521 610 366 538 316 388

SOURCE: Ministry of Agriculture.

Tp.11- le 7 PA rTT' AJT) CT'D Dc'HTrc'tP M)V BY P CK.' H S i oc192=I oc9o

Cattle SheepNumber Weight Number Weight(000) (Thousand metric (Thousand me-

,______ tons) tric tons!)

1952 764 289 671 28

1953 880 349 353 16

1954 553 210 254 11

1955 522 210 585 26

1956 628 258 542 22

1957 469 174 26 10

1958 296 119 99 5

1959 352 1h3 6 2

SOURCE: Ministry of Finance.

Table 8: nBUD±ST!L A CTIv±' 1958.

Establish- Employment Outputments Total Employees Workers Value 0

(number) (Thousands) (mill. pesos)

Total 32;h06 2630,1 43,2 219.9 3i906 1:00i 0

Food 4,825 41e8 8.4 33.5 927 23.7Beverages 1,175 lOo0 2.2 708 295 7.6Tobacco 30 1.0 0.2 0,8 16 1.9Textiles 566 25.8 2.9 22.9 460 ll18Clothing 3,987 19.2 2.2 17,0 19L 4o9Forestry products i,667 5.7 0.3 5.4 61 16Furniturea 1,085 4,9 0.3 4.6 44 llPaper and cardboard 88 3.0 0.5 2.5 64 1.7Printing 520 6.3 1.7 4.6 99 2,6Leather 369 2.7 023 2.4 41 1.0Rubber 312 3.5 0.8 2.7 36 2.2Chemicals 601a 8.2 2.8 5.4 217 5.7Petroleuin and Coal 36 4.2 1.2 3.0 145 3.7Construction Materials 1JL33 10.3 1.1 9.2 l12 3.6Foundries and metal plating 91 1.8 0.2 1.6 36 0,9M4etals 2.155 8.6 0.9 7.7 103 206Mechanical industries 466 5.2 0.8 4.4 56 1c4E lec t.-ri -. I iuri 1;116 7-7 1.5 602 117 2^9Transport Equipment 3j434 i4L7 1.6 13.1 109 2A 8Construction 51'7 39.3 2,9 36.1 2 76Electricity, Water, Gas 364 13.3 3.7 9.6 154 3.9Other 3,016 2509 6.7 19Q2 185 h8

SOURCE: M -4 -4- of Tndustry -- A 1,Trs,- nr of t-h P

Table 9- * ThT\TTTmPTAI. mTAPTI.T.C\-TTSrn PV ST7., 1958R

ITotUal ,lz-4e- lin /O 01 to-UdlIndustry number of 1-4 1-19 over 20

establishments workers workers workerS

TOTAL 15,907 19 62 38

Mining 17 - - 100Food products 1,150 37 85 15Beverages 434 72 96 4Tobacco 26 - 64 3LTextiles 516 13 37 63Clothing 2,751 22 70 30Wood products 774 23 68 32Furniture 830 16 76 24Paper 78 - 27 73Printing 342 18 67 33Leather 257 - 53 47Rubber 151 - 17 83Chemicals 497 10 58 )f2Construction matorials 4,42 15 53 147Smelting ii,d lamination 81 22 78 22Metallurg- 1,021 13 62 38Mechanical metal.lurgy 310 12 45 55Electrotechnical 683 - 36 6hTransport 192495 - 29 71Plastics 1,044 12 43 67Construction 2,978 28 76 314

SOURCE: Ministry of Industry and Works, Bank of the Republic.

Table 10: CAPITlAL INVESTED IN 14ILNUFACTURIN&G 1946-1957

Fixed Circl ati ng Total Year to y,,earAssets Capital change

(millions of pesos, 19L8 prices)

2.9!46 218e4 103o3 321 e7.947~ ~~~~~~-U 2<U 30$ 64 -7 11;W3-,

1948 32904 137.8 467.2 12,8

1L950 421.7 166.4 588.1 n.14

2.951 450.8 177.0 627.8 10.7I.952 e492.3 164.4 656,7 1(J5

1-953 511.1 187,9 699>o 10.6i.95L4 54541 134.2 679.3 -3.91.955 521.0 152.8 673z8 -o,8

1956 552.1 139.h4 691.5 10.3:1957 488,8 148.5 637.3 -708

aOURCE: Desarrollo Industrial del Uru-guay. Mario Bucheli. Based ontax declaration by a saTiple of enterprises accounting forabout 70% of the capita. invested in industry in 1955/58.

Table 11: STATE 1NDUISTRIAL Ehl.ERPRISES1 1958.

Capital Value of EmDlavmentinvested Output

(millions of pesos) (in 1000)

Monopolistic enterprises 388.1 436.4 20.3

Food 5.7 78.5 1.1Beverages 39.3 118.0 2.6Electric Power 281.0 100.2 12.6Petroleum 62.1 139.7 4.0

Competition enterprises 203.3 167.6 23.1

Food 81j 4 lOle0 5.8Beverages - - -Clothing 0.l 0.1 -Printing 2.9 3.2 0.3Chemicals 2.3 3,0 0.4Construction materials JJt8 10.0 OJlMetallurgy -dMechanical Mvetall.urgv ___)40 1 .2Transportation 50 5 7.7 4.6Vrarios indrustries n! -o

Construction 48.8 37.4 104

TNrpA T 5901e 603* ir.) A 104

SOURCE: Mario Bucheli, Desarrollo Industrial del Uruguav. Montevideo,.1960.

Table 12: PRICE INDEXES, 1950 - 1960

Cost Co-t of' Whole- Cost Percentage Changesf hole- Cost ofI Cost of' Wihole-

of e Living sale / Living Living salearik /Price5 ~ Bank PricesPersonner Personnel

____ ~~~~~~~~~~~~~~~~~07o

(December 1953 = 100)

December 1950 68 97December 1951 82 111 20.6 12.1December 1952 92 103 12.2 - 7.2December 1953 100 100 100 8.6 6.9December 1954 108 109 1ll 8.0 9.0 11o0December, 1955 119 121 106 10.2 11.0 - 45December 1956 126 130 128 5.8 7.4 20.1December 1957 150 151 134 19.1 16.2 4.7December 1958 179 178 190 19.3 17.9 41.8December 1959 267 259 322 49.2 14.6 69.5

1960

January 274 344 2.6 6.8February 286 388 4.4 12.8March 280 403 -2.1 9April 286 h26 2.1 :5-7May 292 434 2.1 1.9June 305 h3h h.5July 311 291 438 2.0 12,4 .9August 334 438 7.h _September 350 [33 LB -1October 358 2.3November 338 -5.6

/1 Ministrr of Finance. Refers to lower income groups.

/2 Used for salarv adiustments. Figures do not refer to December of eachindicated year but to January 15 of the following.

L Bank of the Republic. Unpublished. Total index is an unweighted geometricmean of comnponents and subgroup indexes-

Table :_: NOWFYNr SUPPLY; 1956 - 1960.

Total Currency Demand DepositsMoney in Bank of the RepublicSupply Circula- Total Treasury State Other Private

tion Enter- Banksprises

(millions of pesos)

December 1956 1,083 514 308 159 27 122 261Decem-b-r 1957 11I2 E52 1 1 ILa 16 1)46 289

December 1958 1,472 709 350 157 21 173 413DecembeIr IL95 9 2,163 897 6A). 3 a 257 G25

±y9 U'J

Janual- 058 8279 1 2 3 5February 29324 885 753 323 82 347 686

I UU 0 )y-I r)) ) UYl~

April 2,622 882 1,023 610 94 320 717'lay 0 012.75 879 1,133 639 111 383 739June 29871 893 1,229 677 110 W1 2 7)48July 2,989 887 l,348 750 i25 )X73 75 4August 3,O15 877 1,388 795 129 i163 750September 3,008 932 1,309 728 143 439 767

October 39028 961 1,288 741 102 44 5 779

SOURCE: Bank of the Republic.

Table 24: TOTAL BANK CREDIT, 1956-1960

Bank CreditTotal To Public Credit to Private SectorBank Sector Total Bank of PrivateCredit (B.of the R,) the Republic Banks

(Millions of pesos)

December 1L956 2_191 368 1,823 568 1,255December 'L957 2. 5)0 399 2;1Jh 688 1 L51December 1958 3,o89 1412 2,677 781 10896tTDecem.hr 1LQ9Q 380. __124 3,379 950 2 142q

January 3,843 391 3,452 974 2,478February 3,860 388 3,472 O5 2,6

March 3,948 401 3,547 1,051 2.,49 6April , 1),R 2299 3,726 1,8 4 9 2,4

Miay 4,202 431 3,771 1,119 2 652" ~~~~*'-' I~~7- I R )I9-( '

July 4,300 472 3,828 1,200 2,62 8August 4,452 520 3,932 1,266 2.666September 4,539 508 4,131 1,329 2 8 02

I.4 PE n1. -L 'I 'a C7 ' Ro-iOcUUt ob e- r4968 490 4y,J 1,3

SOURCE: Bark of the Republic.

Table 15: WMIK OF 1T[E REPUBLIC CREDIT, :L956-1960.

To Public and Private ors To BRanki2ng Systen (Redis counts)Eruu] of PerC±od Qtora- _ublWic SectoP _- v CZ flu km

Net Credit, Credit Deposits Sector Banks Bank

(millions of pesos)

December 1956 769 20]. 368 167 568 197 197 -December 1957 942 254 399 1145 688 214 197 1.7December 1958 1,038 251 41.2 155 781 318 294 2.4Jecember 1959 1.,018 68 423 3'55 950 378 342 24

1960

January 998 214 3S91 367 9'74 398 367 3:1February 1,017 12 388 3'76 1,005 378 359 1.9March 868 -183 401 584 1,051 378 365 13April 827 -2517 42 2 673 1,0B4 397 387 10Tlay 833 -286 431 7L7 1,1:19 392 388 4June 897 -264 488 7!52 1,161 374 374 -Juy 833 -36, 472 8:39 1,200 388 387 1August 898 -368 520 888 1,266 387 383 4September 1P003 -326 5(8 834 1,329 392 384 8October 1;041 -316 490 806 1,3'57 394 382 12

SOURCE: Baak ef the Republic.

Table 16: (D1jRNNERCLIL BA,kNKFS. MAIN 1ASSETS AND LIABILITIES, 1956-1960.

End of' Currency Credit to Deposits Capital CreditPeriod_ and deposits in Private I'ota]i Demand rime and from Central

Central Sector deposits depos its Reserves Bank-- . _ Bank

(In mi:Llions of' pesos)December 1956 1.36 1, c'55 89,5 26:L 634 22.4 197December 1957 159 1,453 I.,OOC 289} 711 24'3 197December 1958 1.93 1,8i96 ]., 258 413 845 286 294December 1959 283 2,4129 1,6)44 625 1, 019 3)48 342

1960

January 338 2,478 1,681 65t3 1,023 359 367February 372 2,,L67 1,704 686 1,018 367 359March 345 2, 496 1,713 6914 1,019 376 365April 338 2,6L42 1,751) 717 1,037 387 387May 384 2,652 1,813 739 1,074 39D 388June 455 2,622 1,852 748 1,104 403 374July 492 2.,628 1,888 7514 1,134 413 387August 473 2,666 1,889 75( 1,139 41B 383September 478 2,802 1,919 767 1,152 429 384October 497 2, 821 1,951) 779 1,175 43P 382

A Totals are not homogeneous sirLce for some series only monthly averages are available.

SOURCE: Ba:nk of the Republic.

Table 1.7: PUBLIC SECTOR FINANCE, 1.959

ExtraCentral Departments Autonomous Etr

Government and Enterpri ses and aryMunicipalities Decentral:ized Services expenses

(Millions of' pesos)Total Revenues 2v4424 85,99 211.0 510.0 822.4

Of iUaich Taxes (a,0.6) (7200.) (11200) (.34.6) (174,0)hImport taxes 60.3 5330 1.6 5.7

Consumption taxes 236.0 156.0 3.4 5.7 70.9.Business taxes 293.6 255.0 ().1 171 21.4Real Estate taxes 173.5 46.0 84.7 5,1 37.7Other taxes 277.2 21.0,0 23.8 5.1 38.3

Sale of Services 559.2 61.0 47.6 45.02 0.4Workers Contribution to

Social Sec. Agencies 293.1 293.1S-tate Contribution to

Social Sec. Agencies 292.2 292.2Refunds from Public Sector/i 99,0 995.0 ._Other Revenue 1.58.3 19e0 51.4 25.2 62.7

Total Expenditures 2 73CC) 842.5 211eO 5Lo.o 709.5

Ourrent 1,148.6 529.4 173, 0 427.0 19.2Transfer Payments 867,3 224.0 2 3.0 _ 620.31Capital Expenditures 1148.3 _5 .0 8B3.0 50.3lUnclassified 10808 89.1 - 19.7

Surplus or Deficit (-3 169.4 56.5 112_ _

/1 Covers daloan+i an2rising f-rom. the rr,,nirr1nrtr' t.hrt. nertain Pnverniment pavments gD to agencies or branchesof the Central Government.

iSOURi6E: Ministry of Finance.

Table 18: FISCAL POSITION 1952-60 AiD PR0JECTION TO 1963.

(Estimate) (Projections)

(Millions of pesos)

Central Government

Revienues 322.9 3)4.9 453.6 477.5 517.z2 664.9 698.5 899,.2 1.,475 2jl63 2,327 2,580Expenditures 355.6 412.8 503.4 505e1 515.4 709..2 7894,2 841,,5Li 1,347 2,007 2,189 2j247

Deficit or Surplus -32.7 -70.9 -49.8 -27.6 1i,8 -44.3 -90,.7 57.-7 128 156 138 333

Exchange Profit andRetention Funds

Revienues 54.9 52.8 57.7 39.0 56.,7 14,.8 94,4 10,0Expenditures 68.7 57.2 70.3 101.8 94.4 49.5 294,4 304,0

Deficit or Surplus -13.8 -4.4 -12'.6 -62.8 -37.,7 -34.,7 -20X0 -20XO

Official Agencies - - - - 337.2 590.3 625.o 641.2

Deficit or Surplus -26.2 -2_1.8 -41.3 -8.8 _5.9 -17 .6 -12.,0

rota:l Deficit or Surplus 72.7 517.1 103.7 99.2 41e,8 96.6 122.7 37e,7

L Covers period Jan-Nov. 1960. Included. Import Surcharges as well als export relent:ions.

SOUJRCE: National Association of Eanksi. Based, on official. data, Data for 1960-6:3 are from Ministry of Finance.

Table lgj: CENTRAL GOVERNMENT REVENUES BY T'PE, 1958-60 A1MD BUDGET ]PROJECTIONS TO 1963.

195 8 1959 1960 1961 1962 1.963( Zs t, -mate )tPoje ton

(Tn millijons of pesos n

Taxes 532 720 11023 1 546 1,858 2098Customs and other import dutoies 36 53 10 ; 174 209 230Consumption and excise. taxes 122 156 1917 331 397 436Sales tax and other business taxes 194 255 3815 551 598 671Real Estate taxes 22 29 32 44 53 58Inheritance and other taxes

on transfers cf property 55 81 112 148 178 196Stam.p taxes 593 79 132 206 247 272Income T'ax - - - 12 80 130Other taxes 44 67 57 80 96 105

Fees 15 16 21 38 45 50

State Dormain 46 45 4.3 79 87 92Contributions State Entities 19 1 110 T 35 35Lottery and Casi-nos )27 ) 30 31 40 48 53OthE~r 2302 4 4 4

Other Revenues 17 18 202 315 147 150Surplus previous bucdget - - 40 100 -

Retention Fund - - 100 100 100 100Gold Revaluation Profit - - 40 - _ _Import Surcharges - - - 72 -

Other 17 18 22 43 47 50

Refunds f'rom Public S;ector 90 99 18,6 186 190 190Budgetary 53 5Public Debt Service 37 42Other - 1

TOTIAL REVEJUES 70:L 899 ,5 2,163 2,328 2,580

SOURCE: iM:nistry of Finince.

Table 20): CENTRAL GOVERNMENT CURRENT EXPENDITURES 1958-60 ANID BUDGET PFROJECTIONS T'O 19?63.

Projections19513 19159 19,60 IQ 1 1962 196

_. _ ( E~~~~~~~~~~~~~~~~~~~~~~_lstimate) 6 _

(14illions of pesos)

Parliament 10.'7 12.2 - -

Execut,ive Branch

Presidency 1.5 1.6 2.5 3.6 I4.0 4.1Deferise 73.3 73.3 117.0 186.4 199.7 202.0Finance 32.7 3203 46.6 65.o 76,8 133.6Industry and Labor 20.:3 19.4 27.4 38.8 -E.411 146.7Education and Social Security 31.5 31.0 40.L, 6L,.3 69.q9 72.9Interior 53.3 52.8 88.7 106.L4 117.7 1:18.7Public Works 9.8E 9.6 13.6 23.7 27.3 28.6Foreign Relations L4.3 L,.3 5.8 hi1. 8 43.14 144.1Public Health 66.3 67.1 89.0 155.7 179.6 l90.2Agriculture 13.3 13.2 18.5 31,2 36.0 38.0

Judiciary 12.6 12.1 16.7 27 .6 33.5 35.1Autonomous AgDncies 200.9 213.2 337.3 590.5; 625%.0 642.1General Services and Misc. 258.7 299.4 54144.0 671.9 732.6 7b21.5

.TOTAL 789.2 841.5 ],347.14 .22006.9 2,189.4 29 247.4

Of w:ich'Wages and salaries 328.3 330C.9 621.8 929.:3 :L,037.9 1,079.2Plurchases of goods 42.9 414.1 118.0 1L92.14 233.8 231.4Public Debt Service and State

Pensions 202.8 223.9 27C).3 294.'7 2914.7 294.7

Support of:Nat. Council of Primary Educ. 69.9 69.6 87.5 2014.,7 2014.7 204.7Nat. Council of Secondary " 33.2 33.2 45 .3 90.6 108.0 :10.5U:niversities 44.1 46.6 60.1 J145.7 157.0 170.7Other 68.o 93.2 1414,4 ]4905 153.3 156.2

SomURQE: Mllinistry of Finan-e.

Table 21: BALAICE OF PAYivIElNTS, 19,53-59

195:3 19R54 195.5 1956 1957 1,958 1959( Millions of U. S. dolla:rs

M. M:ereb.alndi.se LeceoLiLnt 76 -25-43- -98 -72iExportts, f. o. b,. 270 24!9 183 211 1258 139 98lIports, c. iL. f,. 194 274 226 2D6 226 134 170

II. Service and Donations Account -8 *-9 -8 -6 2 5 21Travel 2 1 1 2 10 14 22'Transport, and Insurance - - 1 1 - 1,InvestmerLt Income -5 *-5 -5 --5 -5 -4 -3Donat,ions -2 *-2 -2 *-2 -2 -2 3Government and Miscellaneous -3 -3 -2 .-2 -2 -3 -2

III. Capital Account, Excluding OfficialReserves and. Official,Short-term_Capital, -2 .2 -14 L8 -1 1 2

Private long-term capital - - -10 20 - --Priva.te short,-term capital -9 .9 - - - -

Official long-ter-m caLpitail 7 7 -4 -2 -1 1Loans utili2led (11,) (:L2) (1) (5) (8) (7) (8)Amortizatiorn (-4) (--5) (-5) ('-7) (-6) (-6) (-6)Other - - - (-3) -

IV. Errors and Omissions -2 -6 -13 1- 32 -16 15V. Official, Reserves and Short--terra

Capital Movementis 64 -42 -78 :16 -65 -5 -34Bilat,eral Paymentzs Agreement 29 -'52 -23 ,38 -22 -24 -28Other short-t,erm capital 14 1LO -43 7 -36 20 - 7'M:onet,ary gold 21 .. -12 -29 - 7 - 1 1.

Note. Import figures, for 1955 to 195'8 are subject to change as a result of an adijustment required in the valueof petroleum imports erroneously recorded in those years.

SOURCE: Bank of the Republic.

Table 22: IMPORTS BY PRINCIPAL COUMODITIES; 19.52A5/58/59

GROUP 1952 1955 1958 1959

(In % of total)

Raw materials 27.5 32.14 41.7 38. 2Combustibles and lubricants 13*2 1108 21.5 3600Machine.ry 14.8 16.5 8. 4 7.'1Automotive vehicles 13.5 8.0 5.3B3uilding and construction

materials 8.8 9.4 5.6 3.2

Salt and foodstuffs 4.8 4.6 3.6) 3.0Electrical materials and

accessories 2*2 3.4 3.4 2.0Medicinal and pharmaceutical

preparatioins 1.4 2.1 2.7 1.9Fresh vegetalbles 2.0 1.6 1.6 1.14Seed,, fodder, plants and trees 0.6 1.0 2.8 0.8

Metals and manufactures 2,2 1.7 0.6 0.5Musical instruments, radios,etc. 1*2 1.2 0.5o 0.5Orthopedic, Surgical, etc.

equipment 0.9 o.8 0.5 0.14Haberdashiery 3.2 2.9 0.14 0 .3Newsprint 1.2 1.0 0. 3 0..3

General merchandise 0.1 0.1 0.6 0.2Toys and school supplies 1.6 1.0 0.2 e.lLLive animals 0Ol 0.1 0.2 0.1Jewe:LrLy and lwatches 0.6 0.3 0.1 0.1SaddLery,, shoes, etc. 0.1 0.1 * *

TOTAL (in millions of dollars) 236.2 225.0 134.7 214.0

* Negligible.SOUR(E: Banco Comercial, Informacion Economica del Uruguay, June 15960.

Table 23: IMPORTS FROMK HAJOR COUNTRIES, 1952/55/58/559

Counatry :1952 1955 1958 1959

-In T - -f( T Fo…toa…

Vrenezuela 6.1 5.5 13e3 26..1United States 25.7 19.4 12.2 15. OBrazil 7.8 16.9 18.2 10.9France 4.1 5.0 9,O 5,.7Germany, West 8.0 7.8 4.4 5.6

Ita:ly 2.7 4.1 4.8 3 .6United Kingdom 312.1 10.9 60 3.1Russia - * 1.2 34.0Switzerland 1.3 2.7 3.7 2,.7Netherlands; Antilles 0.2 1.4 3.5 2,.5

Trinidai * * - 2.5Sweden 3.6 4.0 1.4 2,.2Fin:Land 0.6 0.7 1.8 1.7Netherlands 2.6 3.4 1.3 1,.4Czechoslovakia 0.4 0.6 1.0 1,3

Argentina 0.2 0.5 2.0 14.2Chi:le 1,3 1.3 0o,8 1.2British Malaya 0.5 0.9 1.0 1,.1Belgium 3.7 2.7 1.2 1,.0India 1.2 1.7 1.1 0.9

Yugoslavia * * 1.6 0o9Germany, East - 0.1 1.5 0.8Poland * 0. 4 0.6Paraguar 2.8 0.7 1i.0 0.5Other countries :15.1 9.7 7.6 4.5

TOTAL (in millions of dDllars) 236.2 225.1 134.,7 214.0

* Negligible.SOURCE: Banco Comercial, Informacio:n Economica del Uruguay, June 15960.

Table 24: EXPORTS BY PR-INCIPAL COMMODITIES, 1952-1959

GROUP 19>2 % 1956 15957 % s58 % 1959 59

Greasy wooL 56,749 27.2 65,535 31.1 32,316 25.2 53,782 38.2 24, Lo1 24.7Semi-washed wool 155 0.1 78 * 23 * 37 *Washed woo:L 11,370 5.4 22,532 10.7 11,054 8.6 9,j629 6.9 10,253 10.5Hicdes and skins 23,420 11.2 15,915 7.5 11,078 8.6 9,020 6.5 10,044 10,.3Other agricultural

raw material3 12,003 5.8 28,122 13.3 8,452 6.6 16,536 11.9 4,050 4.Process;ed agricultural

products 37.,478 17.9 11,852 5.6 10,961 8.5 11,644 8.4 6'586 6.7Live cattles 1,287 0.6 1,431 0.7 829 0.7 151 O.l 353 0.4Extractive industries 210 0.1 368 0.2 237 0.2 U8 0.1 24 *Chemical and pharmaceu-tical products 59 * 84 * 114 0.1 106 0.1 :123 0.1Other -indus,tries 1,264 0.6 1, 045 0.5 728 o.6 1 444 1.0 531 0.5Textiles 24,276 11.6 41,901 19.9 24 983 19.5 a,544 ]L5.6 23, 224 2:3.8Meat aad meaat products 402S8 19.5 22s,190 10.5 27j473 21. 4 1a611 10.6 18,!09 113.9

TOTAL 208,889 1.00.0 211,054 100.0 128,248 100.0C 138,622 100.0 97,798 100.0

* Negligible.

SOURCE: Baico ComercialL, Informacion Economica del Uruguay, June 1960.

Table 25: EXPDRTS TO MAJO'R COUiKTRIES, 1952-59

Counitry 19152 1953 1954 1955 1956 1957 1-958 1959

(In i of total.)Uniited States 24.1 18.5 12.9 8.9 11.6 9.7 7.7 11.8Netherlands 4.5 7.0 12.7 23.3 24.4 23.4 10.2 9,,7Germany, West 10.2 7.4 6.4 3.9 8.5 7.0 6.4 9.4United Kingdom 15.9 30.9 18.5 13.5 10.0 16.1 15.2 9.3Russia - 0.1 8.0 2.5 0.2 1.4 11.7 8.,6

Hungary * * 0.4 o.6 o.4 0.2 2.1 5..6Yugoslavia 0.1 - - 1.9 1.4 1.0 2.6 5.,2Ita:Ly 5.0 2.9 3.2 3.9 5.8 6,3 3.2 4,.3Czechos:Lovakia 0.5 0,2 0.7 1.3 1.6 2..1 3.1 3.5FinLand 0.1 0,2 0.6 1.2 1.4 o.,6 1.9 3.4

Switzerland 1.3 3.1 2.1 2.7 3.2 3.7 4.3 3.3Bulgaria - - - - * 0.1 o.6 2q,9

Poland 0.1 0.1 0.4 1.2 o.6 1.0 1.0 24.9Franice 8.7 6.5 5.0 5.4 6.3 3.4 7.4 2,9China - - - 0.1 2,0 0.7 2,8

Spa:in o.6 - * 0.2 0.1 1.8 3.9 24,0Belgium 3.0 4.5 1.8 2.3 1.5 2,3 1.0 24,0Brazil 12.0 305 13.8 14.3 11.3 6.9 6.5 1,.4Germany, East - - - - 0.8 1.,3 1.6 1.2Other Countries 13.9 15.1 13.5 12.9 1.0.8 9.7 8.9 7.,8

TOTAL (:in millionsof dollars) 208.9 269.8 2490o 183.7 21J1. 128.2 138.6 97,,8

7 Neg1ibg7l=e .

SOURCE: Banco Comercial, Informacion Economica del Uruguay, June 1960.