ECONOMIC AND SOCIAL COUNCIL

Transcription

1 UNITED NATIONS ECONOMIC AND SOCIAL COUNCIL Distr. GENERAL E/CEPAL/G.1292 E/CEPAL/SES.20/G March 1984 ENGLISH ORIGINAL: SPANISH E C L A Ecnmic Cmmi ssin fr Latin America ECONOMIC SURVEY OF LATIN AMERICA, 1983; ADVANCE SUMMARY* * This dcument is a preliminary and partial versin f the Intrductin f the Ecnmic Survey f Latin America,

2

3 I PRINCIPAL TiffiNDS The ecnmic evlutin f Latin America in I983 was basically characterized by three principal features. The first f these was the exacerbatin f the crisis which began in I98I and which by I982 had already reached dimensins nt wit witnessed since the Great Depressin f the 1930s. The secnd was the ntable adjustment effrt undertaken by many ecnmies f the regin in rder t reduce the prfund desequilibria that had develped in the external sectr ver previus years, Lastly, the third feature was an extrardinary cntractin, fr the secnd cnsecutive year, f net capital inflws, with its accmpanying dimensin f the transfer f resurces abrad by Latin American cuntries. 1 The decline in internal ecnmic activity and the acceleratin f inflatin As in 1982, the crisis affected almst all f the cuntries f the regin and manifested itself in the deteriratin f the principal internal ecnmic indicat rs fr Thus, during the year grss dmestic prduct fell, the emplyment situatin wrsened3 and there was a marked acceleratiôn in the rate f inflatin. Accrding t available preliminary data, it is estimated that the grss dmestic prduct f Latin America declined by 208^ in 1983, after having fallen by in I982 and having risen by nly ^.3% in I98I. Reflecting this new decline in glbal ecnmic activity, and the grwth f ppulatin, the per capita prduct fell by smething mre than and declined in 1? f the 19 cuntries f the regin; fr which cmparable data are available. This decline in ec'nmic activity, cupled with the falls registered in the tw previus years, generated a situatin in which I983 per capita prduct was almst less than that registered in I980 and was equivalent t what the regin has already reached in (See table 1.) Indeed, the setback t the real level f living was even greater, because natinal incme per capita declined during the last three years by almst ^2%, as a cnsequence f the cntinued and marked deteriratin ver the perid f the terms f trade and the cnsiderable rise that tk place in net remittances f interest and prfits. The reductin f ecnmic activity was als accmpanied by rises in the rates f urban unemplyment and falls in real wages in the majrity f the cuntries fr which relatively reliable data are available. In spite f all this, and as ccurred in the three previus years, inflatin accelerated spectacularly and reached unprecedented levels. Thus, fr the regin as a whle the simple average rate f increase f cnsumer prices rse frm in I982 t 66^ in I9835 the rate weighted by ppulatin rse even mre sharply frm 86% in 1982 t 130?i in Althugh these increases reflected relatively generalized trends, they were nevertheless influenced by the particularly high rates f inflatin registered in sme /Table 1

4 Table 1 LATIN AMERICA: MAIN ECONOMIC INDICATORS" ' Grss dmestic prduct at market prices (billins f 1970 dllars) Ppulatin (millins f inhabitants) Per capita grss dmestic prduct (1970 dllars) Per capita grss natinal incme 1970 dllars) Grwth rates Grss dmestic prduct , Per capita grss dmestic prduct Per capita grss natinal incme Cnsumer prices'^ Terms f trade (gds) Curirent value f exprts f gds Current value f' imprts tíf gds ' Billins f dllars Exprts f gds Imprts f gds Trade balance (gds) Net payments fr prfits and interest Balance n current accunt Net capital mvement' Glbal balance^ Glbal grss external debe , Surce: ECLA, n the basis f fficial figures. Prduct, ppulatin and incme figures refer t the grup frmed by the cuntries included in table 3, except Cuba. Cnsumer price figures refer t thse 19 cuntries plus Barbads, Guyana, Jamaica and Trinidad and Tbag, except in the case f 1982, when Guyana is excluded, and in 1983, when Guyana and Haiti are excluded. The figures fr the external sectr relate t thse 19 cuntries plus Barbads, Guyana and Trinidad and Tbag, except fr the figures n the external debt, which relate t the riginal 19 cuntries plus Guyana. Prvisinal estimates subjet t revisin. 'Variatin frm December t December. ^Includes net unrequited private transfer payments. 'Includes lng- and shrt-term capital, unrequited fficial transfer payments, and errrs and missins. ^Vanatin in internatinal reserves plus cunterpart entries. /cuntries. During

5 - 3 - cuntries. During 1983, the level f prices mre than quintupled in Argentina, mre than quadrupled in Blivia, tripled in Brazil, and mre than dubled in Peru«At the same time, in Mexic prices rse by while in bth Ecuadr and Uruguay they increased by mre than 30%a 2 The reductin f the external disequilibrium The deteriratin f the majrity f internal ecnmic indicatrs cincided with a significant reductin, albeit at a very high price, f the external disequilibrium. In effect, due in part t the marked cntractin f internal levels f prductin and expenditure -which reduced the demand fr imprts and liberated gds fr exprt- eind in part due t the adjustment plicies applied by numerus cuntries during 1983» Latin America generated an unprecedented trade surplus. The trade balance which until I981 had been regularly in deficit, but which by 1982 had already clsed with a surplus f mre than 9.7 billin dllars in I983 registered a surplus f almst 33 billin dllars. (See figure 1.) This surplus was due, hwever, exclusively t the new and spectucular fall f imprts, whse value declined by 30%, after having fallen by 20% in This unprecedented decline in the purchases f gds abrad was accmpanied by, as in I982, an almst equally intense fall in imprt vlume, which cnstituted, at the same time, bth an effect and a cause f the reduced internal ecnmic activity in the regin. At the same time, the value f exprts f gds fell by in I983, This light fall ccurred in spite f an increase f almst 7% in exprt vlume, which resulted principally frm the cnsiderable increase in many cuntries f real exchange rates and a significant cntractin f internal demand in many f these same cuntries. On the ther hand, the fall in ecnmic activity and the decline that tk place in nminal interest rates in the principal wrld financial markets cntributed in 1983 t reduced net payments f prfit and interest, thereby interrupting the cntinuus and sharp grwth f these payments f recent years. Indeed, the amunt f these remittances, which between 1977 and 1982 mre than quadrupled, rising frm 8.6 billin dllars t 36.8 billin dllars, declined t a little less than 33 billin dllars in I983. (See again table 1.) As a cnsequence f the large surplus generated in the trade f gds, the fall in remittajices f prfit and interest, and the cnsiderable decline that als was experienced in the net payments f services, the current accunt deficit was sharply reduced, frm 36.3 billin dllars in 1982 t 6.1 billin dllars in I983. This was the lwest deficit registered since 197^» The exceptinal reductin f the current accunt deficit cincided with, and in a large degree, was caused by a n less drastic cntractin f the net flw f capital. The latter, which in 1982 already had fallen by ^6%, after having reached a histrical maximum f almst 38 billin dllars in I981, fell again in I983, barely reaching 3<.2 billin dllars, /Figure 1

6 - ^ - Figure 1 LATIN AMERICA: MAIN ECONOMIC INDICATORS - 40 Net.mvement f capital"^ v/ N. " Trade balancee / / ^ 20 0 Balance n current accunt^ - Net factr payments t ^ T ^ ^ x I Surce: ECLA, n the basis f fficial infrmatia ^Annual grwth rate. bweighted percentage variatin frm December t December. CBillins f dllars. ^Percentage. /In these

7 - 5 - In these circumstances, and ntwithstanding the cnsiderable reductin f the current accunt deficit, the verall balance f payments clsed with a deficit f almst 2.9 billin dllars, which althugh much lwer than the 19.6 billin dllar deficit registered in 1902, still induced a new fall in the level f internatinal reserves f Latin America» Als as a cnsequence f the decline in net flws f capital the rate f grwth f external debt diminished fr the secnd cnsecutive year» In effect, in 1983 the external debt f Latin America rse by that is, as a rate well belw the 13^ crrespnding t I982, and much less than the 23^ registered n average in the perid 1978-I98I0 In any event, due t the stagnatin f the value f the exprts f gds and services and the fall in the level f grss dmestic prduct, bth the cefficients debt/exprts as well as debt/prduct reached unprecedented levels in 1983= While there was a slight fall in I983 in the prprtin f exprt earnings that were absrbed by interest payments, it cntinued t be very high frm a histrical pint f view. (See again figure 1.) 3 The fall-ff f net capital inflws and the transfer f real resurces As already mentined, in 1983 the net flw f capital fell sharply fr the secnd cnsecutive year. Indeed, the fall was s strng that the inflw f capital was inferir t the payments f interest and prfits n freign capital. Therefre, just as in I982, Latin America, instead f receiving a net transfer f resurces frm abrad, actually effected a trainsfer f resurces t the rest f the wrld. This transfer als reached cnsiderable amuntss 20 billin dllars in 1982 and almst 30 billin dllars in 1983; that is, magnitudes equivalent t 19? and 28?^ f the value f exprt f gds and services, respectively. Cnsidered frm anther angle, the inversin f the directin f flws f financial payments that ccurred between I98I and I983 was equivalent in its effect t a fall f apprximately 365^ in the terms f trade. Indeed, as ne can see in table 2, in I981 the psitive difference between the inflw f capital and the payment f prfit and interest increased the capacity t imprt f the regin by the equivalent f almst f the value f exprts f gds and services. In I983, in cntrast, the negative balance between these tw financial flws reduced the capacity t imprt f the regin by the equivalent f 28?^ f the exprts f gds auxd services. 2/ In rder t appreciate adequately what these figures mean it is apprpriate t remember that the effect f the decline f the terms f trade in this perid was arund 139^0 As a cnsequence, with respect t the capacit: t imprt, the negative effect f the fall f net capital inflws and f the increase f the payment f prfits and interest almst tripled the effects generated by the deteriratin f the terms f trade. /Table 1?

8 - 6 - Table 2 LATIN AMERICA: NET CAPITAL INFLOWS AND TRANSFER OF RESOURCES {Billins f dllars and percentages) Net Un- ' Net- Net pay- Transfer f Exprts Variatin effective registered capital ments f resurces f gds in the 7/1 Z/ 1 6/8 7/fi // capital trans- inflw prfits and and terms f inflw" actins (1 + 2) interests (1-5)' (3-5) services trade (1) (2) (3) (4) (5)- (6) (7) (8) : (9) (10) (11), Ü , ' Surce: ; Internatinal Mnetary Fund, Balance f Payments Yearbk, : ECLA, n the basis f fficial figures. "Equals net capital inflws less unregistered transactins. 'Crrespnds t errr and missins f the balance f payments. 'Preliminary estimates. /Thus, the

9 " 7 Thus, the espectacular change in the directin f financial flws was a decisive cause in the generalized cntractin f ecnmic activity in Latin America and in the difficulties that sme cuntries cnfrnted with respect t the service f their external debt. In effect, as can be appreciated by again viewing table 2, until 198I the regin received inflws f capital in amunts that amply exceeded the sum f payments due t amrtizatin, investments made abrad, and remittances f interest and prfits. Indeed, during 1973-I981 this transfer f resurces was equivalent, n average, t 16% f the value f exprts, which at the same time had risen at an average rate f clse t 20% per annum. In these circumstances, Latin America culd pay amrtizatin and interest n the external debt and prfits n freign capital with the new lans eind investments received annually. Hwever, the magnitude f this transfer f resurces began t diminish in 1979, because the increases in net capital flws were mre than ffset by the increases that were taking place in the payments f interest and prfits. This tendency was accentuated in the perid when the sharp fall f net capital inflws aggravated the negative impact f the internatinal recessin; these circumstances frced numerus cuntries f the regin t apply much mre drastic adjustment plicies than wuld have therwise been necessary t cnfrnt the situatin. Thus, due t the prcyclical behavir f capital flws, Latin America had t effect the majr part f its payments f interest and prfits in 1983 with resurces derived frm cmmercial trade surpluses and the drawdwn f previusly accumulated internatinal reserves. As already explained, as a cnsequence f the unfavrable external envirnme envirnment, the cmmercial trade surplus was generated nt by an increase in exprts, which wuld have had an expansive effect n the ecnmies, but by an extremely severe cntractin in the vlume f imprts, which cnstituted the principal cause fr the decline in internal ecnmic activity f the regin. II PRODUCTION AND EMPLOYMENT As already mentined, in 1983 the lss f dynamism that the Latin American ecnmy had been experiencing ver the tw previus years was sharply accentuated. In fact, after having risen by less than in 198I -the lwest rate f grwth registered since 19^0- and having fallen by 1% in I982, the grss dmestic prduct f the regin cntracted by 2.89^ in 1983» (See table 3 and figure 2.) As a. result f this unprecedented reductin f the ecnmic activity and the grwth f ppulatin, per capita prduct fell fr the third year in a rw, but at a much higher rate (-5.19^) than in 198I (-0.9%) and I982 (-3.3^) Cnsequently, the per cepita prduct was lwer in I983 than in /Table 3

10 - 8 - Table 3 LATIN AMERICA: EVOLUTION OF GLOBAL GROSS DOMESTIC PRODUCT {Annual grwth rates). Cuntry " , * Argentina Blivia Êrazil Clmbia Csta Rica 7.1 ' Cuba' 8.7" 6.0' Chile Ecuadr El Salvadr ^ Guatemala Haiti ' Hnduras Mexic Nicaragua Panama Paraguay Peru Ò Dminican Republic Uruguay Venezuela Ttal^ l.o Surce: ECLA, n the basis f fficial figures. "Preliminary estimates subjet t revisin. Cumulative variatin fr the perid. 'Refers t the cncept f glbal scial prduct. ''Relates t the perid These figures are nt cmparable with thse f the fllwing perid because f methdlgical reasns. 'Relates t the perid ^Average excluding Cuba. /Figure 2

11 - 9 - Figure 2 LAHN AMERICA: ANNUAL GROWTH RATE OF THE GROSS DOMESTIC PRODUCT I960 : Surce: ECLA, n the basis f fficial infrmatin. /The exceptinal

12 The exceptinal intensity f the decline in the ecnmic activity ver the last three years was ais reflected in the large falls in the per capita prduct f several Latin American cuntries. During the perid, per capita prduct fell by ver 22.% in Glivia and El Salvadr; by 19% in Csta Eica; by abut 15% in Uruguay, Perú and Chile; by almst 13% in Argentina and Guatemala; 11% in Venezuela, and by apprximately 10% in Brazil, Haiti and Hnduras. (See table 4.) As in 1982, the decline f ecnmic activity was widespread. Indeed, the grss dmestic prduct drpped in 11 f the 19 cuntries fr which cmparable infrmatin is available; remained virtually at a standstill in El Salvadr and Haiti; and rse slightly in Clmbia, Csta Eica and Panama. Only in Argentina, Nicaragua and the Dminican Eepublic did the rate f increase f verall ecnmic activity rise abve that f the grwth rate f ppulatin. Meanwhile, the glbal scial prduct rse by arund 3% in Cuba. ^ (See again table 3.) Nevertheless, in cntrast t what happened in I982, the decline in the prduct f the regin as a whle in I983 was due in particular t the highly unfavrable trends in prductive activity in Brazil and Mexic, which are by far the tw largest ecnmies in Latin America. In Mexic, the grss dmestic prduct, which had fallen slightly in 1982, declined by h.3% in 1983, while the industrial utput fell by %.5% and cnstructin was reduced by almst Ik,Under these circumstances the rate f unemplyment in the principal urban centers rse t 13?^, dubling that registered in 1982 and tripling the figure fr 1981, which was the year that culminated the ecnmic expansin that was initiated in (See tables 3 and 6.) The principal causes f the sharp cntractin f ecnmic activity and f the deteriratin f the labur situatin were the drastic falls in internal demand eind the vlume f imprts which were prvked by the restrictive plicies applied by the gvernment with a view t strengthening the balance f payments and cntrlling the intense inflatinary prcess that had been unleashed the year befre. This plicy, while managing t reduce by half the large deficit f the public sectr registered in 1982, and als cntributing t the generatin f an impressive trade surplus n the balance f payments, induced at the same time sharp reductins in fiscal utlays, private investment and salaries, with the cnsequent negative effects n internal expenditure and the level f ecnmic activity. Meanwhile, in Brazil -a cuntry which by itself generates arund nethird f the grss dmestic prduct f the regin- glbal ecnmic activity fell by mre than 3% after having risen marginally in Alng with Mexic, prductin cutbacks were very severe in manufactiiring i-6%) and, abve all, in the cnstructin (-19^), bth being sectrs which had stagnated ttally in 1982 and had cntracted in In this fall f the level f ecnmic activity -withut precedent in the last half century- several factrs were decisive, amng them being the new and strng reductin which tk place in the vlume f imprts and the severe cutbacks intrduced in /Table 1?

13 Table 9 LATIN AMERICA: EVOLUTION OF PER CAPITA GROSS DOMESTIC PRODUCT" t-untry Dllars at 1970 prices Annua] grwth rates '' '' '" Argentina Blivia Brazil Clmbia Csta Rica Cuba'' Chile Ecuadr El Salvadr Guatemala Haiti Hnduras Mexic Nicaragua Panama Paraguay Peru Dminican Republic Uruguay Venezuela 1 2Ó I Ttal' Surce: ECLA, n the basis f fficial figures. At market prices. 'Preliminary estimates subject t revisin. "Cumulative variatins fr the perid. ''Refers t the cncept f glbal scial prduct. 'Average excluding Cuba. /Table 10

14 Table 5 LATIN AMERICA: EVOLUTION OF THE MAIN SECTORS OF ECONOMIC ACTIVITY (Grwth rates) Agriculture Manufacturing industry Cnstructin '' ^ * Argentina Blivia Brazil Clmbia Csta Rica i.r -14.9' -1.8' -19.5' Cuba-* Chile Ecuadr El Salvadr Guatemala Haiti Hnduras Mexic Nicaragua Panama in Paraguay Peru Dminican Republic Uruguay Venezuela Latin America' Surce: ECLA, n the basis f fficial statistics. "Preliminary figures. Accumulated variatins during the perid. 'Includes mining. It refers t the cncept f scial prduct. 'Average excludes Cuba. /Table 1?

15 Table 6 LATIN AMERICA: EVOLUTION OF URBAN UNEMPLOYMENT (Average annual rates-) Cuntry Argentina" Blivia' Brazif Clmbia'' Csta Rica' Chile'' Mexic' Nicaragua'" , Panama' Paragua/ < Peru* ' Uruguay' Venezuela"" Surce: ECLA and PREALC, n the basis f fficial figures. "Federal Capital and Greater Buens Aires. Average frm April t Octber. ''La Paz and 1978 secnd semester; 1979 annual average; 1980 May-Octber; 1981 nacinal urban; 1982 and 1983 average April-Octber. 'Metrplitan areas f Ri de Janeir, Sã Paul, Bel Hriznte, Prt alegre, Salvadr and Recife. Twelve-mnth average; 1980 average June t December. ''Bgtá, Barranquilla, Medellin and Cali. Average fr March, June, September and December; 1983: average fr March, June and September. 'Natinal Urban. Average fr March, July and Nvember. - ;> '^Greater Santiag. Average fr fur quarters. As f August 1983, the infrmatin refers t the metrplitan area f Santiag. 'Metrplitan areas f Méxic City, Guadalajara and Mnterrey. Average fr fur quarters; 1982 and 1983: estimated annual average fr the cuntry as a whle. ' * nn-agricultural activities, 1983 estimates. 'Natinal nn-agricultural, except fr 1978 and 1979, which refer t the urban sectr. The figure fr 1980 refers t unemplyment in the urban area recrded by the ppulatin census and the figures fr 1981 and 1982, t the metrplitan area estimate f the annual average fr the whle cuntry. ' Asunción, Fernand de la Mra, Lambaré, urban areas f Luque and San Lrenz. 1983: ficial estimatei * Metrplitan Lima. 1978: average July t August; 1979: August t September; 1S>80: April; 1981: June; 1982 and 1983: fficial estimates fr the whle cuntry. 'Mntevide. Average fr tw semesters. "Natinal urban. Average fr tw semesters, 1983 first semester. /the public

16 - 1if - the public sectr investment prgram as well as the grwing uncertainty that was generated by the acceleratin f inflatin and the prlnged and labrius negtiatins began by authrities in rder t restructure the external debt and suscribe t a stand-by agreement with the IMF. The declines in prduct were even mre severe in Blivia (-7.6%) and, abve all, in Peru ( - 1 1, cuntries which suffered in 1983 a cmbinatin f unusual natural disasters, characterized by trrential flds in certain regins eind prlnged and intense drughts in thers. These calamities particularly prejudiced agricultural prductin, which fell by 10% in Peru and 22% in Blivia. T this ne must add in the case f Peru a change f cean currents which caused a sharp fall in the utput f the fishing sectr. Ecnmic activity in bth cuntries was als adversely affected by unusually strng inflatinary pressures and, in Peru, by a dramatic fall in the vlume f imprts. The situatin was simileir, althugh less serius in Ecuadr, where dmestic prduct fell by 3*3% because fishing, agriculture and manufacturing in the castal regin suffered the destructive effects f unusually heavy rains, flding and tidal waves; because inflatin reached an unprecedented level (32%), and because the vlume f imprts drpped dramatically (-35%)' The trends in prductin and unemplyment cntinued t be very unfavrable in Uruguay. After having stagnated in 1981 and fallen by nearly 9% in 1982, grss dmestic prduct declined by k,7% in I983. As in the previus year, this new decline was caused, in particular, by unfavrable trends in industrial prductin and cnstructin -which suffered cntractins f 7% and 27%, respectively, after having registered falls f 1?% and 139^ in and the extremely strng cutback in the vlume f imprts, which fell by 27% after having fallen by 30% in 1982 and lk% in Als, as in 1982, the decline in the ecnmy was accmpanied by a cnsiderable increase in unemplyment. In effect, the rate f unemplyment in Mntevide, which almst dubled between 1981 and 1982, cntinued rising thrugh the middle f In spite f the fact that the rate f unemplyment began t decline in the secnd half f the year, its annual average was 15.5% and exceeded amply all figures registered in previus years. (See tables 6 and 7 and figures 3 and During 1983 there als was a fall in the level f ecnmic activity in Venezuela, whse grss dmestic prduct cntracted by arund 3%* Given that prduct has remained almst ttally stagnant since 1978, incme per capita declined fr the fifth cnsecutive year, while the rate f urban unemplyment rse fr the fifth cnsecutive year and reached the unprecedented level f almst 10%. As in the case f ther cuntries, the tw mst imprtant causes f the fall in the ecnmic activity were the enrmus decline in imprts -whse vlume was reduced by 60% and the greater uncertainties generated by the devaluatin f the blivar and the prfund mdificatins intrduced in the exchange system, after a prlnged perid in which there reigned a fixed exchange rate and virtually n restrictins n freign currency transactins, /Table 7

17 Table 7 LATIN AMERICA: EVOLUTION OF UNEMPLOYMENT RATES IN MAIN CITIES I II III IV I II III IV Argentina" Federal Capital and Greater Buens Aires Córdba Gran Mendza Rsari Brazil' Ri de Janeir Sã Paul Recife Prt Alegre Clmbia' Bgtá Barranquilla Medellin Cali La Paz (Blivia)'' San Jsé (Csta Rica)' Santiag (Chile/ Lima (Peru)' Mntevide (Uruguay)* , V , , , Surce: ECLA, n the basis f fficial figures. "Figures fr April and Octber. 'Trimesters averages nly up t nvember. 'Figures fr March, June, September and December 198} nly up t September. secnd semester; 1979 average f tw semesters; 1980 May-Octber; 1981 Natinal rate; 1982 and 1983 June and September. 'Figures fr March, July and Nvember. ^Trimesters averages. Until August 1983, data refers t Greater Santiag and then t metrplitan area. «1978, average fr July-August; 1979, September; 1980 April; 1981, June; 1982 and 1983 fficial estimates. ^Semesters averages fr 1978, 1979 and Trimesters averages fr 1981 and /Figure 3

18 Figure 3 LATIN AMERICA: EVOLUTION OF URBAN UNEMPLOYMENT KJ Nicaragua I'anam.-i «/ Uruguay J 4 I t I I I 11 t T 0 12 Blivia / - 12 Csta Rica 10 / z 8 Peru J ' \ / Btaiil 4 V 6 2 -! t Surce: ECLÀ, n the basis f fiicial infnnatin. /Figure k

19 Figure 4 LATIN AMERICA: EVOLUTION OF UNEMPLOYMENT IN SOME MAJOR CITIES ARGENTINA MAJOR CITIES Capital and Greater Buens Aires Córdba Gran Mendza Rsari % BRASIL MAJOR CITIES Ri de Janeir Sã Paul Recife Prt Alegre I t I I I» I I I I I.J. I I I. I I I I. I J_ I COLOMBIA MAJOR CITIES Bgtá Barranquilla Medeilin Cali JL. I I... I I A \ / \ A / 14 V V \ / V /» r~ > 12 I ' \ / / ^ I V / i Santiag Mntevide San Jsé Lima La Pat OTHER CITIES JL_L I I I I I 1 I I I I 1 ^ I. I., I I % Surce: ECLA n the basis f ffícial infrmatin. /In Chile

20 - i8 - In Chile, the sharp decline f ecnmic activity, which had began in mid-1981 and which in 1982 had caused the grss dmestic prduct t fall byver and unemplyment t rise just as sharply, was attenuated in (see again table 3 and figure 3.) Althugh ecnmic activity cntinued t fall during the first half f I983, it tended t recver slwly after that, as a result f increased public expenditure, lwer real interest rates, and the increased prtectin f activities cmpeting with imprts that was prvided by the maintenance f a higher real exchange rate, the raising f the general tariff frm ^0% t 20% and the impsitin f higher special tariffs n imprte f certain agricultiiral and industrial gds. Nevertheless, this recvery did nt cmpensate fr the fall f ecnmic activity during the first half f the year and cnsequently, the grss dmestic prduct drpped by almst ver the year as a whle. In additin, althugh pen unemplyment in Greater Santiag fell almst cnstantly, frm the maximum histrical rate f 25 during August-Octber 1982 t 16.5^ in the last quarter f 1983i this was mainly due t the enrmus expansin, during that perid f the emergency emplyment prgrammes carried ut by the gvernment, the prductivity f which is generally lw sind in which wages are als very lw. The recvery f ecnmic activity was much greater in Argentina. In thic cuntry, prduct rse by 2.8^, thanks, in particular, t the fact that industrial prductin rse by arund 10$0. Nevertheless, inasmuch as verall ecnmic activity had drpped by ver the previus tw years, while manufacturing prductin had fallen by almst 23^ between 1979 and 1982, neither sectr came clse, in 1983, t recvering the levels they had reached in The grss dmestic prduct f Clmbia was nly slightly higher in 1983 and that cuntry's rate f ecnmic grwth declined fr the fifth year in a rw. The main cause f the slwdwn f the ecnmy was the decline f industrial prductin, which was affected by the slw grwth f dmestic demand and the reductin f exprts t Venezuela and Ecuadr, where Clmbian manufactures ceased t be cmpetitive after the devaluatin f the blivar and the sucre. As a result f the decline f industrial prductin, and despite the mderate grwth f cnstructin, unemplyment rse fr the secnd year in a rw in the main cities f the cuntry, reaching an average f almst 12^, the highest figure fr the last nine years. (See again table 6 and figure 3.) Trends in ecnmic activity als were unsatisfactry in mst Central American ecnmies, althugh the slwdwn was much less serius than it had been previusly in sme f these cuntries. Thus, grss dmestic prduct rse slightly in Csta Rica, after having fallen cnsiderably in the tw previus years. The fall in ecnmic activity als was detained in El Salvadr, where dmestic prduct, which had declined cntinuusly and markedly since 1979» was cmpletely stabilized in I983. Nr did prduct vary in Hnduras, marking the third cnsecutive yesir f stagnatin f ecnmic activity. Ecnmic trends were mre unfavrable in Guatemala where prduct fell by 2% after having fallen by nearly in I982. In cntrast, prduct rse by arund in Nicaragua -mre than cmpensating the slight fall the year befre- and by in Panama, where glbal utput has expanded persistently, at a smewhat rapid pace, since /Finally, in

21 Finally, in I983, ecnmic activity rse by k% in the Dminican Republic and by in Cuba, the nly tw cuntries f the regin which, alng with Clmbia and Panama, were able t raise their verall levels f prductin steadily ver the last three years» III. INFLATION Despite the decl ine f ecnmic activity and the rise f unemplyment, and despite the weakening f inflatinary pressures abrad, the rate f increase f prices cntinued t rise in mst f the Latin American ecnmies, reaching a new recrd fr the regin as a whle in 1983» Indeed, the simple average rate f increase f cnsumer prices rse frm k8% t 66% in I983, and the rate weighted by the ppulatin rse even mre sharply, frm smewhat under ' in 1982 t 130% in Inflatin rse at a particularly virulent rate in Argentina, Blivia, Brazil, Peru, Ecuadr and Uruguay, while the rate f increase f prices cntinued t be very high in Mexic Inflatin als was n the rise in mst f the Central American ecnmies, especially Nicaragua and Guatemala, and appreciable inflatin was als recrded in Jamaica and Trinidad and Tabag» 'n the ther hand, inflatin drpped dramatically in Csta Rica, fell mderately but steadily, in Clmbia and was very lw in Barbads, the Dminican Republic and Panama, (See table 8.) Cnsumer prices cntinued t rise sheirply in Argentina, reaching ^30%, mre than duble that f the previus year and much higher than the rates recrded between 1975 and As in previus years, this phenmenn was related t the existence f a cnsiderable fiscal deficit and the spreading f increasingly negative expectatins abut future trends in prices. Thus, fr the eighth time in the last nine years, inflatin in Argentina reached a three-digit level. Inflatin als registered unprecedented levels in Blivia, where cnsumer prices rse by almst 330^, after having already tripled in I982. As can be seen in figure 5, the acceleratin f inflatin was especially marked beginning in Nvember, the mnth in which the exchange rate was re-adjusted by 1^0% -after a year f being fixed by authrities- and in v/hich a 709é rise in the minimum salary was decreed. Inflatin als rse sharply in Brazil. As a result f the high public sectr deficit, the maxidevaluatin f the cruzeir in February, the cntinuus subsequent adjustments f the exchange rate, the deteriratin f expectatins and the cmplex and generalized indexing system that was in frce, cnsumer prices, which had risen at a rate f arund 100?á in I98O and 1982, rse by almst 180% in I983, while the general price index mre than t ripled. /Table 1?

22 Table 8 tatln AMERICA: EVOLUTION OF ÇONSU1VIER PRICES (Variatins frm Decembef't December) Cuntry Latin America" Cuntries with traditinally high inflatin : Argentina '334i) ; Blivia : Brazil Clmbia'' , ' Chile , Mexic Peru 24.0? : 44.7., , Uruguay S t , 51.5 Cuntries with traditinally mderate 'inflatin : ^ Barbads ,9.5.0' Csta Rica , Ecuadr'' ^ E) Salvadr -, ; , ,8 '.li Guatemala i , :9.1 ^ ^ 13.7,. : ' -2,0,. Guyana Haiti : : :4 15:3 16,4 8.0'. 7.1 Hnduras , : Jamaica , ? Nicaragua' io.2. /: ^.4,3, '. 24: y Panama , Is^O 10,0., Paraguay , ; l.'^-l Dminican Republic , Trinidad and Tbag ~ ^ Venezuela Surce: Internatinal Mnetary Fund, Internatinal Financial Statistics, and ff;çia( infrmatin supplied by the cuntries. "Ttals fr Latin America and partial figures fr grups f cuntries represéñt average price variatins by cuntries, weighted by the ppulatin in each year. ; '.. : 'up t 1980, figures represent the variatin in the cnsumer price index fr manual wrkers; frm 1981 n, figures represent the variatin in the ttal natinal CPI, including manual wrkers and emplyees... 'Variatin between Octber 1983 and Octber ' ''Up t 1982, figures represent the variatin in the cnsumer price index fr-the city f Quit; in 1983, the natinal ttal, 'Variatin between September 1982 and September ^Variatin between Nvember 1983 and Nvember /figure 5

23 Figure 5 LAUN AMERICA: VARIATIONS IN CONSUMER PRICE INDEX OVER TWELVE MONTHS IN SELECTED COUNTRIES J ASOND JPMAMJ JASONDJI-MAMJ JASONDJFMAMJ JASOND Surce: ECLA, n the basis f fñcial infmiatia /The acceleratin

24 The acceleratin f inflatin was als extrardinarily serius in Peru, where the annual rate f increase f cnsumer prices, after having fluctuated arund the rate f 70% in 198I and I982, rse t almst 1259^ in I983. This ntable increase was the result, in particular, f the much mre rapid devaluatin plicy fllwed by the ecnmic authrities up t August, as well as the strng increase in fd prices which resulted frm bad harvest caused by the drught and flds» Althugh it was much lwer in abslute terms that that in the fur afrementined cuntries, inflatin rse mre sharply in relative terms in Ecuadr: frm 2h% in I982 t 52^ in As in ther cuntries, the acceleratin f the inflatinary prcess was largely due t the devaluatins f the sucre that were enacted beginning in 1982, after a lng perid f stability in the exchange rate. In this case, hwever, the rise f inflatin was als due, t a large extent, t the decrease in the supply f agricultural prducts caused by the flds. Hwever, as supply cnditins tended t nrmalize twards the end f the year, the index f cnsumer prices registered small falls in Nvember and December, and the rising inflatinary tendency was abruptly halted. (See figure 6.) During 1983, inflatinary trends were very similar in Uruguay, where the rate f increase f prices, after having shwn a steady dwnward trend between early 1980 and Nvember 1982, rebunded after the devaluatin f the pes at the end f the latter mnth. Thus, the rate f inflatin rse cntinusly and sharply during the majr part f I983, but slwed dwn markedly in December. Ntwithstanding this, the rise f 51% in cnsumer prices in 1983 mre than dubled that f I982. (See again table 8.) In 1983, inflatin als remained very high in Mexic, althugh it slwed dwn after the middle f the year. As shwn in figure 5t the annual rate f increase f cnsumer prices reached a recrd high f almst 120% in July, but subsequently fell almst steadily, s that it was 8l?á in December. This reversal f the inflatinary trend was mainly due t the cnsiderable reductin f the fiscal deficit and the mre restrictive wage plicy applied by the ecnmic authrities. The reversal f the inflatinary trend was even mre definite and spectacular in Csta Rica where, as in Mexic, the rate f increase f prices had risen with exceptinal frce in 1982» As shwn in figure 6, after having reached an unprecedented level f arund 110^ in September 1982, the rate f increase f cnsumer prices fell drsimatically and steadily ver the fllwing mnths: by the end f 1983 it was belw 11%. In fact, as a result principally f stabilizatin f the exchange rate, a restrictive wage plicy, and an increase in the vlume f imprts, cnsumer prices were almst cmpletely stabilized by mid-year. The trajectry f inflatin was much mre cmplex in Chile in Indeed, between June I982 -the mnth when authrities decided t devalue the pes after almst three years f exchange rate stability- and June 1983, the annual rate f increase f cnsumer prices rse steadily frm k% t smewhat ver 32%, Nevertheless, as the effect n the cst f tradable gds f the shf /Figure 6

25 Figure 6 LATIN AMERICA: VARIATIONS IN CONSUMER PRICE INDEX OVER TWELVE MONTHS IN SELECTED COUNTRIES J A S O N D ^J F M A M J J A S O N D, J F M A M J J A S O N D J F M A M J J A S 0 N D^ Surce: ECLA, n the basis f fficial infrmatin. /rises in

26 - 2íf - rises in the exchange rate which ccurred during the secnd half f I982 began tc wane, and as real wages cntinued t fall, the inflatinary prcess began t Blw dwn gradually after August 1983 and fell t under 239^ by end-year. During 1983, inflatin cntinued t fall gradually, but cntinuusly, in Clmbia, the Latin Americsui cuntry that had had the mst stable price structure ver the last ten years. This reductin in the intensity f the inflatinary prcess ccxirred despite the fact that the authrities had stepped up the rate f increase f the minidevaluatins f the pes in rder t strengthen the balance f payments. The increased inflatinary pressure that this might have brught t bear was neutralized by the slw grwth f dmestic demand. Finally, price trends were quite varied fr the Central American and Caribbean cuntries, which traditinally have had mderate rates f inflatin and which als have tended t fllw the general fluctuatin f the internatinal price level. Thus, in Central America the rate f inflatin rse msirkedly in Nicaragua -frm an average f eirund 23% in I98O-I982 t 37% in and in Guatemala -where cnsumer prices rse 8^, after having fallen 2% in On the ther hand, the rate f inflatin did nt shw majr variatin in El Salvadr and Hnduras; it fell, as already mentined, dramatically in Csta Sica, and was very lw in Panama. At the same time, amng the Caribbean ecnmies, inflatin rebunded with certain frce in Trinidad and Tabag -after 3 straight years in which the rate had been falling- and in Jamaica, where it dubled, frm 7 t In cntrast, the rate f increase f prices fell slightly fr the furth cnsecutive year in Barbads and fr the third successive year in Haiti and the Dminican Republic. (See again table 8.) IV. THE EXTERNAL SECTOR In 1983, Latin America made a tremendus effrt t reduce the disequilibria that had been accumulating in the external sectr since the late 1970s. Thus, t the higher exchange rates adpted by numerus cuntries f the regin in 1982 were added, in 1983, new devaluatins, varius ther measures aimed at cntrlling imprts and encuraging exprts, aind strict fiscal, mnetary and wage plicies aimed at reducing dmestic expenditure. As a result f these adjustment plicies, and despite the unfavrable trends in wrld trade and external financing, in I983 the regin achieved a large surplus in its merchandise trade, ntably reduced its current-accunt deficit and als cnsiderably reduced the negative glbal balance n the balance f payments. /1. Freign

27 Freign cmmerce and the terms f trade As mentined abve, hwever, the I983 cmmercial trade surplus f almst 33 billin dllars was achieved nly thrugh a drastic reductin f imprts, vhse value fell by almst 30%, after having fallen by 20% in I982. Since the unit value f imprts declined slightly in I983, and als in I982, the reductins f the vliune f imprts were almst as drastic as the fall in their value. (See table 9») The extremely sheirp reductin in bth the value and the vlume f external purchases was, mrever, a widespread phenmenn» Indeed, in 1983 the vlume f imprts fell by mre than 10% in 11 cuntries, declined mderately in anther 59 and rse nly in Blivia, Csta Rica, Haiti, Nicaragua, and the Dminicein Republic. But even in these latter cuntries the rise in the vlume f imprts did nt manage t cmpensate the sheirp cntractins experienced in The reduced vlume f imprts was especially intense in the petrleum imprting cuntries. Thus, imprt vlume fell by 60% in Venezuela, by mre than k0% fr the secnd cnsecutive yeeir in Mexic and by arund 33^ in Ecuadr and Peru. The reductin was als enrmus in Uruguay -where the vlume f imprts, which had already plummeted by mre than k0% in the tw previus years, drpped by 27% in and in Guyana, Guatemala and Chile, cuntries in which imprts declined by abut l8% in real terms, after having experienced serius falls in (See again table 9») In cntrast with the unusual reductin in the vlume f imprts, the vlume f exprts rse by nearly 7% in the regin as a whle. As was the 0-''. case with respect t the real decline f imprts, the increases in the vlume f exprts mainly reflected the adjustment effrt made by the Latin American ecnmies thrugh measures riented at mdifying the relative prices f tradable and nn-tradable gds and reducing dmestic expenditure.i Nevertheless, unfavrable trends, fr the furth year in a rw, in wrld trade and the cnsiderable drp in the internatinal prices f ild and ther cmmdities prevented this relatively satisfac ry increase in the vlume f exprts frm bringing abut a similar increase in their value. Indeed, as may be seen in table 10, the value f exprts fell slightly in the regin as a whle and by mre than in the grup f il-exprting cuntries. Althugh the drp in the internatinal price f il had much t d with the drp in the unit value f exprts in 1983, it was als due t the decline in the internatinal prices f the regin's majr exprt cmmdities, such as cffee, meat, wl, irn re, bauxite and ther minerals. Mrever, the substantial increases in the internatinal prices f bananas, cca, maize, fishmeal, sybeans, cttn and cpper did nt in anyway, except in the case f bsmanas, ffset the tremendus reductins in the prices f these cmmdities in previus years. (See table 11,,) /Table 1?

28 Table 9 LATIN AMERICA: IMPORTS OF GOODS (Indexes: 1970 = Í00 and annual grwth rates) Value Unit value Quantum Cuntry Index Grwth rates Index Grwth rates Index Grwth rates " 1983" " Latin America Oil-exprting cuntries Blivia Ecuadr : -1: Mexic Peru ^0 m Trinidad and Tbag Venezuela Nn-il-exprting cuntries Argentina : Barbads Brazil : Clmbia Csta Rica Chile El Salvadr Guatemala Guyana ; Haiti Hnduras Nicaragua Panama Paraguay Dminican Republic Uruguay "Preliminary estimates subject t revisin. /Table 10

29 Table 10 LATIN AMERICA: EXPORTS OF GOODS (Indexes: 1970 = 100 and annual grwth rates) Value Unit value Quantum Cuntry Index Grwth rates Index Grwth rates Index Grwth rates " Latin America Oil-exprting cuntries Blivia Ecuadr Mexic Peru Trinidad and Tbag ,5 3,7 Venezuela ,8-1,7 Nn-il-exprting cuntries Argentina ,0 Barbads Brazil Clmbia Csta Rica Chile El Salvadr , Guatemala Guyana Haiti , Hnduras Nicaragua Panama Paraguay Dminican Republic Uruguay Surce: ECLA, n the basis f fficial figures. "Preliminary estimates subject t revisin. /Table 11

30 Table 11 PRICES OF MAIN EXPORT PRODUCTS Annual averages (dllars at current prices) Grwth rates Unrefined sugar" Cffee (mild)" Cca" Bananas" Wheat' Maize'' Beef" Fishmeal'' Sya' Cttn" Wl" Cpper" Tin' Irn re' Lead" Zinc" Bauxite' '' Crude il' Saudi Arabia Venezuela Surce: UNCTAD, Mnthly Cmmdity Price Bulletin, Supplements and September 1983; Internatinal Mnetary Fund, Internatinal Financial Statistics, Yearbk 1981 and February "Dllar cents per pund. Dllars per metric tn. 'Dllars per pund. ''Average January t September. 'Dllars per barrel. /Since the

31 Since the unit value f exprts fell much mre than that f imprts, Latin America's terms f trade declined by abut after having fallen by 1% in 1982 and in Hwever, in cntrast t what ccurred with the 2 latter years, the decline in the terms f trade had its rigin exclusively in the petrleum exprting cuntries. In the rest f the Latin American ecnmies the terms f trade rse slightly (See table 12.) Nevertheless, since the terms f trade had strngly deterirated fr the nn-il exprting cuntries during the 5 prceeding years, the index in I983 was nt nly less than its level f 1978, but als was at its lwest pint in the last half century» Indeed, its average value in 198O-I983 was cnsiderably less than that registered in » which was the mst critical perid f the Great Depressin In cntrast, fr the petrlevim imprters, the deteriratin f the terms f trade during the last 2 years did nt ffset the gains experienced in Thus, in all these ecnmies, except Peru, the index in 1983 was much higher than that fr any nn-petrleum exprting cuntry, and fr the petrleum exprters as a grup the terms f trade was 17^ better than that recrded in 1978, the year which prceeded the secnd majr hike f internatinal petrleum prices. (See again table 12») The new decline in the terms f trade meant that in I983? the pxirchasing pwer f Latin American exprts declined slightly, even thugh the vlume f exprts had increased by arund As nted abve, in 1983 the vlume f exprts grew even mre than this in the nn-il-exprting cuntries, thus marking the resumptin f the vigrus grwth which had taken place since the beginning f the 1970s and which had been interrupted in (See figure 7») Als as a result f this increase in the vlume f exprts, the purchasing pwer f the exprts f this grup f cuntries rse by in Hwever, this did nt cme near t cmpensating fr the decline f previus years. The vlume f exprts grew much less ik2%) in the il-exprting cuntr cuntries and did nt ffset the impact f the deteriratin f their terms f trade, which fell by almst 7%- Cnsequently, the purchasing pwer f their exprts fell fr the secnd year in a rw, althugh at a rate which was mre mderate than (See table 13») /Table 12

32 Table 12 LATIN AMERICA: TERMS OF TRADE (Indexes: 1970 = 100 and annual grwth rates) Gauntry Indexes Annual grwth rates / 1983 '. Latin America Oil-exprting cuntries Blivia Ecuadr Mexic Peru Trinidad and Tbag Venezuela Nn-il-exprting cuntries Argentina Barbads Brazil Clmbia t30.. : Csta Rica Chile El Salvadr Guatemala Guyana Haiti Hnduras Nicaragua Panama Paraguay Dminican Republic Uruguay Surce: ECLA, n the basis f fficial figures. "Preliminary estimates subject t revisin. 'Cumulative percentage variatins fr the perid. /Figure 7

33 Figure 7 TRENDS OF SOME FOREIGN TEADE (Indexes: 1970'=100j 450 cjansrfes 450 Tenas í t(s3 Purchasing pwer í Quantum íeaprts í gds Latín America ! t J t I 1 t I 8 I I I SS'i ^ I Sj Surce: ECLA, n the basis f fficia! infitnatin. 319 cuniries. bprm 1970 t 1975, includes Blivia, Ecuadr and Venezuela; frm 1976 n, als includes Mexic and Peru. CFrm 1970 t S975, includes 16 cuntries, l-rm 1976 n, Mexic md Peru are n lnger Included. «^Prvisinal estimat. /Table 13

34 Table 13 LATIN AMERICA: PURCHASING POWER OF EXPORTS (Indexes: 1970 = 100 and annual grwth rates) Cuntry Indexes Annual grwth rates " / 1983 * Latin America Oil-exprting cuntries Blivia Ecuadr Mexic Peru Trinidad and Tbag Venezuela Nn-il-exprting cuntries Argentina Barbads Brazil Clmbia Csta Rica Chile El Salvadr Guatemala Guyana Haiti Hnduras Nicaragua ^ Panama Paraguay Dminican Republic Uruguay Surce: ECLA, n the basis f fficial figures. "Preliminary estimates subject t revisin. 'Cumulative percentage variatins fr the perid. /2. The

35 - 33-2, The balance f payments Because the value f imprts fell much mre that that f exprts, the merchandise trade balance underwent anther significant change in I983. After the radical turnabut f 1982, when the US$ I06 billin deficit f I98I had been replaced by a surplus f ver US$ 9«7 billin, I983 brught an extrardinary grwth in the cmmercial trade surplus, which amunted t ver USS 33 billin, mre than three times that f the previus year. This was, in particular, due t the enrmus increase in the trade surpluses f Venezuela, Brazil and Mexic, and f the cnsiderable changes in the merchandise trade f Argentina, Chile, Peru, Ecuadr and Uruguay» (See table l^f). In Venezuela, the trade surplus f abut US$ 9.4 billin was almst triple that f 1982, despite the fact that, as in I982, the value f exprts fell significantly. In Brazil -where there was there was an 8-fld increase in the trade surplus between 1982 and I983, frm US$ 78O millin t US$ 6.5 billin- the imprvement was due bth t an increase in exprts and t a decrease in iraprts Mexic, which in 1982 had already managed t transfrm its US$ billii. deficit f 1981 int a surplus f almst US$ 6.9 billin, the psitive trade balance rse t US$ 12 billin, thanks t the fact that imprts again fell substantially and that exprts rse slightly. The evlutin f the trade balances f Chile and Uruguay was similar t that f Mexic althugh, f curse, the abslute amunts f the changes were much lwer. Thus, after having had an anrmus deficit f nearly US$ 2.7 billin in 198I and having achieved a small surplus in I982, Chile recrded a surplus f arund USS 1 billin in I983, basically due t a new and significant fall in imprts and mderate grwth f the value f exprts. During that same perid, Uruguay transfrmed a deficit f US$ 36O millin int a surplus f USS 310 millin; hwever, in this case, thè cause was exclusively a radical cntractin f exprts f 56^ between 198I and I983. A drastic cntractin f imprts was als the main factr behind the new increase in the trade surplus achieved by Argentina, the dramatic rise in the surplus recrded by Ecuadr and the substitutin by Peru surplus f US$ 300 millin in 1983 fr its deficit f US$ 56O registered the year befre. By cntrast with that happened in 1982, when the impact f the change in the trade balance n the current accunt was neutralized, t a large extent, but the sharp increase in payments fr interest and prfits, in I985 the part played by the increased trade surplus in reducing the disequilibrium n the current accunt was reinfrced by a decline in freign remittances. /Such payments,

36 - - Table 14 LATIN AMERICA: TRADE BALANCE {Millins f dllars) Cuntry Exprts f gds FOB Imprts f gds FOB Balance f gds Latin America : Oil-exprting cuntries Blivia Ecuadr Mexic Peru , Trinidad and Tbag Venezuela Nn-il-exprting cuntries Argentina Barbads Brazil Clmbia Csta Rica Chile El Salvadr Guatemala Guyana Haiti Hnduras Nicaragua Panama Paraguay Dminican Republic Uruguay Surce: 1981, 1982: Internatinal Mnetary Fund:, figures fr Ecuadr (1982), El Salvadr (1982), Guyana (1982), Nicaragua (1981, 1982) and Trinidad and Tbag (1982), are ECLA estimates. Figures fr Chile fr 1981, 1982 and 1983: Central Bank f Chile, 1983: ECLA, preliminary estimates subject t revisin. /such payments

37 Such payments, which had mre than quadrupled ver the previus five years, rising frm US$ 8.6 billin in 1977 t almst TJS$ 36=0 billin in 1982^ fell t a little under USS 33 billin in This was a result f the limitatin n the payment f prfits caused by the sharp cntractin f dm stic ecnmic activity and the slight decline f interest payments brught abut by the reductin f nminal interest rates in internatinal financial markets. Under these circumstances, the deficit n current accunt -which in 1982 had already drpped by lo^j after having reached a recrd high f USS billin in I98I- fell spectacularly t US$ billin in I983. (See table 15») The deficit als was equivalent t a much lwer percentage f exprt earnings. In effect, the cefficient deficit/exprts, which had reached the unprecedente: figure f in I98I-I982, fell t nly S% in I983 and was much less than bhat recrded in any f the preceeding 10 years» (See table 16.) Almst all the cuntries f the regin cntributed t this utcme, either by sharply reducing their current-accunt deficits; r, as in the case f Mexic and Venezuela, by replacing deficits by large surpluses; r as in the case f Trinidad and Tbag, by increasing their surpluses. The nly exceptins t this general trend were Argentina, Blivia, Csta Rica, Haiti, i'icaragua and Paraguay, which shwed greater current-accunt deficits than in the previus year. Nevertheless, the drastic reductin f the deficit n current accunt which tk place in I983 was als due, t a very large extent, t a n less radical reductin, fr the secnd year in a rw, f the net inflw f capital. Between I98I and I982, capital flws had already fallen frm USS 38 billin t US$ 16.1 billin and in 1983 they fell t a little mre than USS 3.2 billin. In 1983 the net flw f capital was thus less than the current accunt deficit, repeating the situatin that presented itself in I98I and 1982, As a cnsequence, in spite f the anrmus reductin f the current accunt deficit, the glbal balance f payments clsed with a deficit fr the third cnsecutive year. Althugh the verall deficit f a little less than USS 2.9 jillin was ne seventh f that recrded in 1982, it exceeded by 20% the deficit f (See again table I5.) 3. The external debt Accrding t very preliminary estimates, by the end f I983 the ttal external debt f Latin America amunted t apprximately US$ 333 billin. It is esti estimated t have grwn by 7% during the year, a rate that was much lwer than the 13% f I982 and far belw the grwth rate f arund 23% which was the average during the perid 1978-I98I. (See table 17.) This sharp drp in the grwth rate f the debt was amainly the result f the restrictive plicy adpted by the internatinal cmmercial banks with respect t Latin America. In 1983, these banks granted virtually n new /Table 15