1995 es Corden, W. Max Corden, W. Max Una zona de libre comercio en el Hemisferio Occidental: posibles implicancias para América Latina En: La liberalización del comercio en el Hemisferio Occidental - Washington, DC : BID/CEPAL, 1995 - p. 13-40 2014-01-02T14:51:16Z hdl:11362/28538 u p^c-je^ C U N I T E D NATIONS ECONOMIC COMMISSION FOR LATIN AMERICA BUENOS AIRES OFFICE A J United Nations Working Paper for comment and observations • Economic Commission for Latin America Export Development Programme Project RIA/73/053 October 1976 lATIN Al®RIGi\N EXPORTS OF MAMXFACIUHSS; EXPERIENCES AND PROBLEMS Angel Monti This document has not yet beon discussed internally and therefore does not represent ECIAs views. CONTENTS page CHAPTER I. Purpose of this study CHAPTER II. The behaviour of Latin American exports of manufactures and overall experiences which it suggests CHAPTER III. o Salient experiences and problems related to the institutions and instruments of exports of manufactures policy CHAPTER IV. Preliminary agenda of topics to be discussed concerning an export policy for manufactures APPENDIX I 54 70 77 CHAPTER I Purpose of this study The purpose of this paper is to gather the experience of the case studies on Argentine, Brazil, Colombia and Mexico, and expand it as far as possible in the light of the experience of Latin America as a whole in the development of exports of manufactured goods, An attempt has been made to present the findings in synthetic form, based on the case studies of the above countries. on the basis of a common agenda. Those studies viere carried out However, the nature of the problems and the information available in each country differed; consecuently, the dif- ferent subjects were not necessarily analysed in the same way in all the studies. When results are expressed in overall terms, they should be taken to reflect the predominant, or most frequent or outstanding features in the comparative experience of Latin America, and in the understanding that they contain the bases common to any generalization. The background studies have constituted open investigations to identify the dependency relationships which explain the course of exports of manufactures in the countries reviewed. The overall experience furthermore makes it possible to state clearly a number of problems for the future. Chapter II deals with the behaviour of Latin American exports of manufactures and the overall experience gained; Chapter III deals with experience con- cerning instruments and institutions. - 2 - Based on both these chapters, and taking into account also the general experience of Latin American development and problems of international trade, Chapter IV contains a Preliminary Agenda of topics for discussion concerning a policy for exports of manufactures. Essentially, this chapter raises some conceptual problems referring not-only to that specific policy, but also to certain factors of a more general nature which affect regional integration and co-operation, as well as international trade and development. - 3 CHAPTER II THE BEHAVIOUR OF LATIN AMERICAN EXPORTS OF MANUFACTURES AND OVERALL EXPERIENCES WHICH IT SUGGESTS 1. The value of Latin American exports of manufactures in 1974- amounted to US$ 7,365 million. In 1965 it V7as US$ 950 million. It therefore grew almost 8 times during that period. This expansion was significant. Its value was equivalent to over 80 per cent of the deficit in current account in the balance of payment of the region. Without it, the use of externalsavings would have been almost double the actual figure, or else the product would not have been able to grow at a rate of almost 6 per cent per year, or both variables would have shown losses. Therefore, Latin America stepped up its exports of manufactures when it became evident that it could no longer rely on traditional exports. But this expansion, although large, was not sufficient. The balance in current account in the balance of payment for the four countries considered as a whole was structural and increasingly negative,A according to the records. Latin American exports of manufactures accounted for 1,3 per cent of the world total in 1971+ and their main industrial buyers were the United States, the EEC and Japan V . y 2] 3/ Appendix I - tables 1 to 3. Appendix I - table 4, In 1960 it was 0.4 per cent. Appendix I - table 5. - 4 2. The cur.iulftive rate of Growtli in p-ysical voluiTie was of tie order cf IG oer cent perflnnuj..iduring ti3 ppst década up to 1974, l i h is considerably ..c. . - g z r tlian the growth of alj;iost 6 par cent of t 3 total G D ? during the bile .: - 1/ period.- This neans that exports of n : ufactures pla-^-ed an active end a. positive role in the e::pansion of the econon^ of :Latin .Anerica as 3. Ijhole . In recent vears, erports of nanufactured and sei-manufactured products re-irssented practic-ll^-- one fourt, of tot-^l e::port3. Of those, e:r?orts of nanufpctures proper ^iiounted, to 50 per c-nt, and this proportion has shown a . , o i p trend. Trrn, The proportion of the raanuf~cturing trade in the sniere of integration syster.is is one third of total e:: jorts of iianufactures frora Latin i^ierica; hut this proportion shows a declining trend as a result of the opening of certain countries to. trade -t countries outside the region. .i-: 1/ In iVss/Vé thegrowth was 5.2 per centj in 1975, 2,5 per cent. Tis raahes an arinual rate of ..rowth of 5.C per cent for the decade (see •^cononic Survo of li^tin America - 1975 and 1575). rif^ures for 1975 are prelirin^-r-. - 5 - • :abl8 II - 1 mnnfeotpxes. aJ Uni-fe- Concept 1. 7alue of er.ports of riTanufnctures unions current U; S; Rate of g o r c of value rvf.: in fiTO-year period 3. Hate of growth of physical volume in five-vepr period 4. :stiriflted sLsre «f five• 3 a increase in Talue , er represented b the effect -of the £,rowth in physical volume 1951 1955 1970 620 950 2175 2. 5. 6. 7. 8. 9. 10. a/ b/ c/ 11 c.a. 10 36 17 18 92 54 15 100 17 f ) p 15 Proportion of manufactures proper in total exports of iianufactured products T - e sane proportion in the i sphere of integration systeras Proportion of trade in manufactures in the sphere of integration s^j-stans in the total -7365 a Proportion of value of exports of iianufactures in value of total excports i^roportion of ph-sical v l i . e of er.p»rts of i.i~nuou-i factures in total 8-:ports ( - t 1970 prices) .^ 1974 / 29 c 45 44 Proportion of trade betX j e . LAPH^ ember countries Aen in total e::ports of manufactures of L ^ T countries i .P.? a , Total b. Of these• - i^rsentina - Brazil - Colombi^ - Pe::ico 25 20 17 32 25 5 • 55 59 37 of 57 39 31 « 31 27 31 46 29 16 33 34 33 16 43 25 25 c/ 12 • ianufactures includes semi-iianufactured and manufactured products, according to UlCSIAj (e::cludin¿, partiall^í- refined petpoleun, petroleura derivatives and non-ferrous raatals). Some items refer to fivo-year periods. I, those cases, tho fi-^ures in this column cover a osriod of 4 -years (1970/1974). 1973 Source; ECIA. - 6 4. Tlie rol© of e:cports of fii^nufactures in t : i process can ba judged from .s several angles. 8. Conceptué 11, th.e ezperioncG in latin Anerica has s]?o\m that in the long teriii the rate of ;^routh of the GD? is basically a variable that depends on the rate of grovrtl- of e::ports, glTen upper bounds for substitution-effect and for e;-ternal indebtedness that can be assumed.-^ i. It is advisable to consider these aspects further. It is necesssrj that the GD? should have not only an ^accelerated but also a -sufficient groxjth. erel accelerated gro^ith errolains one variable b^* another. It should be sufficient to r.ieet econoMc, social, technological and even political reouirenents (eriiplo::aent, distribution, level of power and prestige in tbe international s-^sten, certain technological grovrth, etc.;. Depending on the sufficiency level, p lowor bound is generates, for the required e;:pansion of the GUP, and the .higher the ainbition in the list of requests that the GD? -^ust neet, the higher vjill be the lower bound, usable errbern^l savings -^re obv iously upper bounded, modities also, in the ^-cports of basic com- lig^.rb of vjhat h-.s been happening - wit: the exception cf petroleum and other non-renewable resources; wit]i the reservation that, as regards food, if countries outside the region with food shortages have the capacity to pay, there could be 3 l«rge jm.ip in the demand. T^is point is discussed in .detail in the Study oil Exports of l^nufacturas in Argentina, _ 7 Givsn levels of tiie GD? required as a riiinimuiii, of e::terii3l savings viiicli at riost can be used, pind of basic products v j i l at aost can be ezportsd, tliere .hci re,v¡6in substitution and erports of jiipnufactures as linked variables at tlie gloval level. ff-jTir relaticns.-iip lies in the fact that the upper bound of substitution possible rnarlcs the louer bound of ezpor^ts of .manufactures necessar:-; and, reciprocall^^, the u^per bound of exports of iianufactures possible Piarles the ilininuii bound of substitution necessary. Frora the above, sever.= I conclusions na;- be drawn. 1/ On the one h-nd, since production/substitution/3;rnorts are linked variables , protection/ -roaotion are tS l.inked sets of instruiients, Tiith • . h c the strate^ of e-ports of Ao :i nanufactures fro-n Latin .^nerica bag,an -ipiv drears ago, vihen the active substitution process be^^ari., ~nd rcnained conitioned b-- it further:.ore, for the future, since substitution is not exhausted but has becone . .ore coriple::, it will be necessar- erplicitl to incorporate erports to air- substitution po,a,re . rnriii 3/ ii. Substitution: • has been negative in the seventies in the countries studied, and the iiiported content of e::iorts of r.ianufactured products has been increasing. 1/ 2y ?J This point is discussed in detail in the Stud;- on i^xports of Manufactures in Argentina . At the nacro level in this anal^rsis and, obviously, rIso at the level of activities. the ratio of inports is maintained there xrould be neutral substitution; a drop iiiplies positive substitution, and a rise negative substitution. ~ 8 in the future there vjill be Pii increase in the der.iand for iroorts before substitution and there víill be p. certain aaount of substitution-effect ivhich viill absorb it in part. Both, variables will ds^-^.nd on the s i ^ e of aevelopt^l ; i n in the coujitries. ;et If T^atin ñm:c\cp follows a consu-i-st -odel - ^ih.ich inplies sophisticated consjj.Dtion, • i f intensivo rene-val of c ••oital coods -nd tcchnolog,- in line vjith such sophistication - it riglat incur in an incrsasinl- negatire subs-titution. If, on the, contrar;-, it spends :iore on basic ¿,oods for the lower-incoue population and its nediui:i and Mg.h-incor.ie levels spend on culture rather than on sophistication, nahinc, full use of existing c^:pital ^ n technolog3% i i : i i u .d ¡a:iin use of maintenance and i a r - n g organization technolog:, there would con;po.i. ceivabl- be a possioilitof a positivo substitution --i,. a high substitu.jt: tion-effect. T • first node], ^ . o l de .-.and, as a rainiiiiun, a high level of e::ports of manu-Tud factures; in the second, the louer bound of such e:::ports -lould be raore viable . 5. I a global approrination^^ , for the group of four countries studios, at prices in 19*74 dollars and assuring th-^t the C-D? will ^row at the rata of 1/ : • i . l i g projections for the co.-J.ng dec-=;des v;ith ¿ l r refined r-iodels, . nacn .oe but this --orh has not : e been conpleted. Te iiodel described here is an --t i T e r o t substitute and its results should be ta/en as a first appro:r.i.aa.,O.fc tion, to obt-in standards of v l u e rafi:.r than results of punctual value. - 9 per aiinura, the e-r.pensinn of er.oorts of manuf=ict-:res required ia ISCO was estinated in torns of tle f l o . i L ; Ir-potheaes; olTri, - Th.3 b ^ - i c in current .=ccount in tá b.-lFince of pa^nents as a ineasure of plTie usable errternal savinss, xi.:. lorror bounds equal to zero (in 1S80 e-:tGrnal jc savinf-s a . ; no longer used} and u;;per bounds equal to 3 ; 5,000 riiillion rU. (pa--aent of the foreiyi debt begins). • - T b 3 c^rovrbh rate of the volume of erroorts of basic products growing at alter.. native lex^ois of S, 10 and 20 per cent per annum. The lower bound represents, approrir.iateli/, the historic rate of the volume of total e::ports of -developing rarlcet econor-ilea at the jorld level in recent tirries. Durin-., the period of expansion of 1939/74 alone such economies expanded t-cir total e::ports by sli ; : l ; over 3 per ?iinun. .t- - The substitution-effect •;ith a lovjer bound of 20 per cent ?nd an upper bound of 40 percent of the increase in value of total imports before substitution. 3 t these are conjectural v-lues, since in 1969/74- the import rate o.- was increasing.— 1/ T large rise is influenced b t e price-effect. Tahing o l the volume e .: n;component, part of th rise in the rate is attributable to having changed the structure of imports b^ econo.rác activities ñt destination, and the rest to a negative substitution-effect. - 10 - Table II - 2 ANHTKL CTTXJrr:] T-icn W L D TÍ3 rp B^T -Tü: 1974 R3t3 of grovrth. of ea:ports of basic produc-fcs (fo) OF Í O T OF Kl^OETS OF IñlUFíCTUISilS GÍ-TH AG^ítwe A SROVÍTE OF S S^^R CSIÍD OF 193r, Kir^OTHESHlS II DICCTEID Substitutioneffect (f,) B^lence of pajriBnts in current account (Ua^) 0 V 5V000 20 28 35 4-0 25 31 20 23 29 40 20 27 20 neg. 3 40 neg. 10 20 a. neg. It is éStiiBted. that, in 19S0, if trads in baac co::i,;iodities, i^npro^ring its historic behaviour, wero to ozp-^nd at a rate of I0;i per annura froia 1974, the bil^nco of payments in current account x . o l balance in the ¿roup of four -;ud countries on the basis of a 40 per cent substitution-effect associated vjith a 20 per cent annual e;:pansion of er.ports of r.Bnufactures j and if only a 20 per cent substitution-effect in the phj^sical Toluae uare obtained, an annual grovjth of 23 percent in such eriports vjould berequired durln¿ the period 1974/80. In vieu of the 18 per cent grovjth in physical volurie in recent five- -linear periods, p rise of 20 or 23 per cent doss not appear to ba exeggsrsted., f l l . u l external orospscts su;igest that it . l f - t I g Sifficult to obtain. ^t?ogi •á^. d On tliG contrar7, if the expansion of exports of basic products v-iove to continue at the historic rate of the ord.er of 6 per cent - taking into accoujit the recession in 19?5 and that other recessions in rorld dierj^nd. aight occur in t.. future - t : a e i substitution-effect and it^vthe anbitio.u of p«-lng the ?ror-ign debt at the r te of US 5,000 millions a it vould lead to unusu-ij.l]- hig^ rates of gro-itli in the ph-^sical T l i - e of e:.:ports of ou-i aanuf-ctures, of over 30 per cent per .-.nnum. b. Trurther_;.orG , an e::rplosive increase in e::ports of manuf actures requires •soiiieohe to achieve it. ^his i-jould pose with greater crudoncss than until now the problen of speed in constituting national industrial/eporting firms, as a ; ^ delajr in strengthening such firms would onl7 leave a vacuui.i • . h c n íih would be incrc-^singl-:^ filled by transnational companies The possibilit-r rf substitution and of e::oorts of manufactures - these being linlced variables - therefore depends, to a large oztent, on the st3^1o of de-/elopment in Latin /merica. c. Ihis is an essential conclusion. These results suggest sever- 1 ideas, placed in the frame of reference of the general anal^-sis bei.ng made of Latin hmerica in the past few decades, is stressed that, for the 1/ it time being, the reasoning is based on the ohrsical Or not filled, in Mhich c s e either the necessar;- product would not be ac.ñeved or indebtedness would increase, or both. - 12 - i. It R \p3nrs to be nririPTil necessar- to continuo orroortinc, basic e i u i oTio clitios at f hisi- rpte , eve;-: as r ; . . o l a i : ! for finflncing th.3 substi•lcins. tution process w-.ich, in turn, is rccuired ultira^tel;^ to sr.port nore ra^nufactures, ii. It also appears that co-opora-bion betvjecn the countries to enciage in substitution at the regional level be delajed inuch longer if it is reallj» desired to ;,5ñijit=in a rate of ¿rovíth of the product vji-^ich, even at the 5 per cent level, is not sufficient, at least to generate enploj^iient to the e:;:tent renuired. iii. Substitution at the regional level is, in turn, suppleuented b;- the fact that high expansion rates recuirs a larger proportion of intra-regionsl trade. And this suggests that roads should be developed for industrializa- tion and,trade, plar.j3.0d rrithin the sphere of M;?TA and of the subregional integration sirstcms. I i a ; - event, it *;ill be necessar*^ to co-operate in j n setting up a ST-Sten of ref^onal trade nith certain p].anned conponents, even if integration is not sought as a higher operation. iv. TTurth.ermore, and also related to tro problevi of financing, which r-jill be considered later in gre-ter det -il, t-e results suggest that it is not onljr a ... r-iattor of :-.i3i-:Tizing er.oorts of :•.-•nufactures but also the actual value of the raathoiuatical expectation of foreign e::change incoiae generated b such e:;ports. T is derrnds that teras of pa-.Tient in financing or:ports be upper bounded and risks minirúzed, since an expansion of orports that require financing at a rauch higher rata than that of the GD? will ver- strongl-;- and raoidl:- influence the doneStic monetary balance of the countries. - 13 . T. It is -180 necGSsar- to prepare the economes for oicporting. at sucli a • . g . r.te T^ithout affacting tlie hp.l.-oice of tli8 poxvfér to decide in the;-asternal -ih sector . a r than it is already affected. voc vi. 3uc a level of e:coansion inplies entering into given ec6n»i.iic spheres, the destination of er.ports thereby beconing a variable of the utmost political and social relevance in the process. This leaús to the proposition that the role of I^tin íiaericán integration and cc-opcration should be reappraised from that pe rs pe ct i ve , a nd ulthout de la j. vii. Concurrentl, and related to the foregoing, it also suggests th^^t it Tjould be useful if the countries as a whole were to devise a strateg-- of oternal financing and e::tra-regional trade that would give each of thea greater bargaining po-er, unitin\ t/eir efforts to reach certain basic definitions. viii. J.iinall-^, it all neans that the countries that have not airead-^ done so must decide on the ^st-le of their long-ter:i. developi;ient, and this also TJithout dela-^ and :iininizing vacillation in t: is fiold, othervjise their e-:tern^l co.Tiityie?ets -íill decide for then. The st-.le of developraent is a pattern of ch-uige I-hich, applied to the •initial state • or current state of the countries, leads ther¿ to a certain •ultimate state. ConsoQuently, the countries tjíII of necessity have to decide first on the attributes of the society the • i.e., a raodel, and subsequently, or in an iterative process, decide-«n the st;le Tihich constitutes their strateg-^^ of change, i.e., of integrated social developr.ient. - 14- - The integration of raodul and. • s ^ - e constitutes a projsct, in the tcrriiitl nology currently in aso. It is not unimportant that an G^ctern^I restriction should suggast tho neod for np)tion?5l projocts and, loerhaps, a Latin Anorican V orojGct ; sinc3, in the rocont past, doriiinant oragonous f.=;ctors havo in- fluencGd rrnd, to a cortain extent, set t o s ^ O e of dsvelopraont of many .i t . . countri3s. It is a v.;oll-l:nown fact th^t the st^.lo usually called •consuirdst - becorios inpossible to fin-nca in tho lon-g torn, nd th~t the L-tin :üric-n countries irAOorted tis st--le -vMch is not suited t frnlr possibilities. sufigest that it is i-p^ssible t~ thin.k t The results t i st^le c-nb be financed b:/ .^s e-ports ^ basic oroducts --nd ith additional e:.ports -f i.ianuf^ictures. -f genous liriitations t^orefore raske it necessai-- for them to define their own projects. The fact is that, in the long tern, structurall;-^ indebted under deTelopnent is not the master of its ovm style. It would popear that the group of four countries studied cannot dalai- much longer in attempting their o v i st^-les compatible :;ith their financing capacitir xr. at the level of the economy as a whole., in terms of models of tho ••ultimate 1/ The formulation of an interdisciolinary Latin i^merican Project as a result of the integration of model ^ ^ d st:^la , in various crmbined -Iternatives, -n was pr-^posed in a lecture given at i\CD~, Buenos Aires, in August 1974 (soo Proyoc-Go Facional función del e.irorssario, njioresa, No.35, ACIEWBPftC, Argentina ) . 11 . - 15 - state of society, in xArhich national efforts should be joined to regional V co-operation far more actively than at present. 6. Thus far, certain terms of trade have been considered constant in the reasoning ussdj however, their variation should also be taken into account. With respect to 1974, in 1975 Istin America as a whole lost U ^ 3,000 million due to the effect of the drop in export prices, plus USf 3,800 million due to the effect of the rise in import prices, which makes a total of U ^ 6j800 2/ million.— The increase in exports of manufactures in that year would have offset almost one third of that effect. If the structure of the terms of trade in 1975/76 continues - as can be assumed in view of the prices of petroleum and other non-reproducible resources, and of the fact that industrial countries will continue to export their own inflation - this price-effect would, of itself, push up the lower bound for exports of manufactures mentioned in the previous section, which was calculated at 1974 prices. This is sufficient reason for Latin America to seek its own optima, taking duly into account the future course of the physical volume of the demand and 1/ To work with more exact magnitudes it will be necessary to await completion of the data being processed by ECIA, as mentioned earlier. 2/ This is one method of calculating the effect of the alternative on the traditional terms of trade observed in the national accounts. ~ 16 1/ of the relative prices, of the goods it chooses to export.-•• From a .certain • angle, this also means accommodating its supplies bettor to th© world deiaand and, particularly, to the regional demand. As regards the regional market, all the above suggests that the style of development in each of the countries of the region would not be entirely independent of the style adopted by the rest. 7. There is thus a circular relationship. On the one hand, exports of manufactures become an important • 2 jgenous factor on which depends the rate • of growth of the GDP - once given the export of baslic products; on the other, the magnitude and the nature of such exports depend on the style of development. And, concurrently, the possibilities of such exports depend on the manner in ivhich Latin America becomes inserted in world trade and on the manner in vihich it envisages its own intra-regional trade, T e shall xovsrt to i this later. 8. Furthermore, .insofar as they are a.restriction, exports tend to-bo dominant in the strict sense of the word. In effect, it no longer seems to 1 / T h e trend in export prices had grown and, as a result, in 1970/74 almost 50 per cent of the increment in the value exported with respect to. that of the previous five-year period was accounted for by pricc-effect. This constitutes a warning to the effect that every effort should bo made to increase the physical volume of exports of manufactures, especially if, on the one hand, inflation continues in the industrial coantrles;, and if, on the other, the relative prices of basic coramoditlGS -excluding petroleum^- continued to be low. In the fourth quarter of 1975, average prices of basic products were 20 per cent higher than in 1973, but ?A per cent lower than those of 1974, (SCIA; Internationa3. comrp.fxiity inarkots in 1975, April 1975, Mimeo). -17 - be appropriate or easy for Latin i\merica to continué to increase its indebtedness at the historical rate of recent 3roars, while the sociñ-pplitical requirement of growth is imperative. This singular - and really historical - convergence, which hardens both the upper bound of external savings and the lower bound of the product, and which occurs together with the hardening of the possibilities of exporting basic products, contributes to make exports of manufactures a dominant restriction. It is therefore all the more important that they should be sufficiently flexible to increases, since the minimum achievement requested of them is a goal that must be attained at all events, and all the more strictly when the adverse effect of the terms of trade is greatest. 9. The case studies of the countries covered by this project agree on the fact that they are awaro that the rate of growth of the GDP depends, in a significant measure, on the expansion of exports of manufactures. Con- sequently, all the countries assign importance to such exports in their development strategies. Furthermore, the four countries studied showed that there was instability, and in some cases, a chronic deficit in the balance of payments. caused many adverse consequences. This In Argentina, it was an important factor in causing the pattern of growth: to show a typical stop-go behaviour. Brazil it has already influenced the rate of growth. have been felt, including political effects. In In Colombia, effects In Mexico it has caused a strong need for an inflow of foreign capital, thus aggravating the medium- - 18 - • 1/ term problom. In all casGS this led to the regulation o- imports, which icipairod the internal adjustment process, the rationalization of foreign trade, and the possibility of exporting manufactures. Also, in all oases it was necessary to maintain a protection which implies a cost-effect that is prejudicial to exports •Of- manufactures. In the face of this experience, there is in the national policy of all countries considered a purpose of industrialization which entered in the policy more strongly than a mere preference, and which demands that exports of manufactures be increased, not only owing to the need to generate the capacity to finance the expenditure in foreign currency implied by industrialization, but also to work on an appropriate scale, to maximize the 2/ rationtof utilization:and use— and to achieve a proper adjustment of the physical balance, of goods. It is therefore appropriate for exports to tend more and :.more to be, as already mentioned, a variable considered in the design of new investment projects and in the improvement of existing capacity. ^ These consequences are evaluated in the respective studies. In practice, it may be said that all negative effects are felt in all countries, including a number of effects not mentioned in the text. The concept of ratio of use of installed capacity is used here as, for example, the ratio of plant-hours actually used to the maximum technically possible- use; and of the ratio of utilization as the ratio of real production to the production technically obtainable at the actual level of use. Thus, the ratio of use depends substantially on the number of shifts and on the days worked per year; and the utilization ratio is a function of the efficacy of the organization of production and of its technology. The instruments of conduction are therefore different for both ratios, althou-gh they are related. . - 19 lo. . It is clear, furthormoro, that esports and substitution aro linked variables, not only in a macrocconomic system, in wliich. physical grovJth and the external sector are in harmony, such as tiiat d.osoribed but also linked at the empirical level of each activity. a. Latin America began to export traditional manufactures and only in- corporated exports of metal-mechanical marxufactures and chemical products in a significant mensure once it had substituted thorn. There was a sort of product cycle which increasingly incorporated learning, througt^voho substitution process, and also due to the effect of the local capacity.to introduce adaptive and creative innovations. So far, the experience of the countries studied indicates, coincidontslly, that substitution was the necessary antecedent to the ultimate exportation of non-traditional manufactures; but that the substitution procoss xvas not sufficiently selective or efficient to facilitate exports of the substituted products and, furthermore, as already mentioned, that this led to negative substitution. Thus, fraile the increase of exports of manufactures served to reduce external vulnerability, at the same time it led to a hgrdening in the demand for im- • ports, This hardening became greater as the technology embodied in the goods became more complex, the procoss having taken place parallel.to its level of sojihistication and to the entry of ncv/ goods to the market. experience is very valuable from so---^erol viewpoints. This - 20 - b. The experience leads to disregarding the idea that substitution is ex- hausted, an opinion often voiced during the past few years. Quite the contrary, it is not only evident that the process is not exhausted but has ) become^more complex, and that the countries should continue to substitute, with a high degree of efficiency, not only by the appearance of new products and improvement of the existing ones, but also to maintain at least the historic ratios of imported supplies. Preserving a natural level of substitution at the macro level therefore makes it necessary not only to overcome the effect of the rise resulting, from the larger imported content of substitution, which is technologically more complex and intrinsically more sophisticated and, in any case, new -the weight of which in industry as a whole increases- but also to continue substituting traditional goods, efficiently. All the country studies coincide as regards the existence of the purpose of improving the efficiency of substituion processes. c. This experience also leads to the conclusion that, if production/ substitution/export are integrated in a single context of policy, that con-^ text must be developed activity, by activity, and consequently, it is concluded that this conceptual set 2 / must also constitute a single operative ^ set; i.e., of ex-ante policy which must be developed at the level of each •y The former implies a rise in the overall ratio due to the effect of the increased weight of activities taht have a higher densj.ty of imports, although the unit ratios of imports by activities do not change. The latter is the effect of the increase in such unit ratios due to sophistication-effect, in general economic, and specifically tech The distribution of markets and sales among branches of transnational corporations,, and the integration processéá with .planned substitution also have the effect of a rise in imports due to specialization-effectTJ Production, substitution and export, conceived as fields of policy, within which the protection and promotion of exports are sets of instruments. - 21 activity, although the implementation of the policy may not ox-post have un?;ty. of conduction. And also, that, such unity of conduction in actml practice iñ an inescapable requirement if the process is to bo acceptably efficient. d. It also implies that, strictly speaking, promotion of exports cannot be considered a purpose of policy, but that conduction of a unifocal process should bo considered as such. Erom the studies of the countries it can be inforrod that the ability to export manufactures depends on a certain critical nnss of embodied technology in relation to the world technological frontier of the product, and that this incorporation of techno.logy. in turn, depends on the capability of the industrial process. The instruments of industrial, technological, financial and other policies are decisive, and what is specifically promotion is thus one among the various sets.of instruments required. The problem is, then essentially, • j ; • I • one of conduction and not of promotion. o, Furthermore, to the extent that production/substitution/export require univocal conduction activity by activity, the process must necessarily be selective,. in the countries studied there is a growing avrareness that a certain amount of selectivity is inoscapablealthough the prevailing economic policies in the past feiv years have only woakly responded to this requirement so far. In several cases there is some soloctivityiñ relatively global terms,-but still viithout tying the perfornrance of certain activities to univocal • - 22 - criteria of selectivo conduction. In othors, as in the automotive industry in M3XÍC0, activities are considered more specifically. 11. Theso policy components raise a moro general question of economic policy. a. It. is usual in economic policy to consider fields of policj?- (monetary, .fiscal, and the like). The decisions adopted in the different fields affect individual activities in a maimer that is not necessarily harmonious or directed to precise goalsj and this dispersion of influence goes hand in hand with institutional dispersion- to the extent that different entities are responsible for mmaging different sets of instruments - and with the relative lack of really operative annual plans. T t i c should be the attribute of the first order for the conduction of poItih licy: the field of policy or the activity? From the standpoint of conduc- tion of exports in general, and manufactures in particular, a true and very precise economic engineering approach, by activities, is required. b. The other question raised in this paragraph is that of conduction fdth yearly operation plans. Can the performance - achievements and behaviour - of exports of manufactures required for the future be attained if conduction is not based on really operative yearly plans? cannot} It is believed that it and this is another matter that requires further detailed considera- tion. c. Since operativeness of the plans depends largely on their being for- imilated and implemented with adequate participation, in the case of conduction - 23 - . with planning, what form should such participation take to ensure that ozpprts of iianufoctures -will give the full perfonnance that the countries require d. of them? It is interesting to note how ing in l/atin América. SOITIB of those factors have been develop- Depending on the countries, deliberate promotion policies for exports of mnnufactures began in the fifties or early sixties; but, in general, the systems in their present form matured in the second half of the sixties. The Latin American countries wore then faced with the alternative of.exporting the manufactures luhich the countries had and could oxportj or those, which their dccision-makers wished to .export. they exported ¥Jhnt they had. Obviously, The companies that had most non-traditional • . manufactures and wore more able to export them - because of their information, marketing and financing networks - wore the transnational corpora- tions, which obviously occupied the principal space in trade in products of the industries that were most dynamic duo to both the elasticity of world demand and their technological level. Concurrently, national companies were fast becoming export-minded during the past fiv.v years. This prise de conscience was obviously the beginning of the stable process of exports of manufactures at the company level, over and above exports engaged in as a comraarcial venture or to escape from a domestic recession. The existence of captive markets of transnational corporations obviously sloxrod down the prise de confianco process because it reduced export opportunities and affected the efficiency of tho activities carried out by national companies. - 24 - At the same time, the problem of the structure of ownership of decisions began to arise, either with on ideological content in terms of dependency, or as an objective problem, in terms of potential power of decision. Up to..the present time there has been a problem of relative speed in the action of national and transnational companies. The fomer having become Gxport~minded and gone on to act accordingly and the latter with their long experionco, it is not surprising that in this stage of the,process there has been a greater relative expansión of transnational companies. And this sets a lower bound to the speed with which Latin American companies-must be formed - without any option - m t h a-really transnational • decisional horizon- and ability. e. Latin America also incorporated to its learning process experiences with balance of payments problems, váth imperfect and negative substitution, with protection which affected exports through costs, although such protection is a prerequisite for the industrial production of the goodsj m t h attempts to govern with planning} approximations in economic policy. and xvith the sterility of partial In this framework exports wore promoted,- incurring- in different typos of costs, among them fiscal costs which, as will be seen later, have reached the upper bound in a number of countries. And in this context, also, exports-of manufactures are requested to show greater achievements and better behaviour, and certain export-goals which are inescapably minim.a are evaluated, It is no longer a question of exporting only what they have but also what they want to export. And they want to ex^ port because they need to do so. : , . . - 25 - But, in tho face of such notional demands and of the national basic conditions described, the vjorld recession of 1975 marks an adverse ezpsrience in external demand v:hich, to some extent, had been forgotten after many jrears of sustained expansion. The conditions surrounding the vjorld market also contribute to harden the possibilities, BS - r shall see later., ET the ve ssie time that exports of manufactures are required to give a. setter performance, f. Therefore, oirercoming the problem concerning the role of exports of manufactures to incorporate the characteristics of national lasic conditions and international surrounding conditions, the experience of iche cases studied appears to suggest that promotion policies as such should be abandoned in favour of designing selective conduction policies, vvith planning and participation, by activities, integrating production/substitution/exports in a single context in design and in operation. 12. The foregoing remarks are of a general nature and, as such, are con- cerned with exports of manufactures as a -^rariable of the economic field, furthermore, the field of technological policy is conceived as a separa-.o unit from ecoaor.ic policy-j which makes precise logical ¿oals. RGQUGSBS that, is, as an entity with conceptual autonomy of OCONCITLIC policy ^ IJO TG8C.H. I. B S OWN. HOCJLITLC. • - 26 - Technology is conceivable as a quasi-good^, constituted essentially by a combination of know-how units carried by different elements (embodied in machinery, for example, or carried by other factors). n Exports of manufactures m t h the highest density of kh are those which appear to have the highest income-elasticity of \vorlddemand. The latin American countries will be able to export such goods to countries outside the region provided the distance between their technological level and that of the world frontier does not exceed certain limit. This frontier is mobile, because all activities increasingly incorporate learning; its velocity differs, depending on the activities and the time. poses a problem of relative velocities; but This the lovrer the velocity at which the world technological frontier advances, and the higher the velocity of technological development of the Latin American countries in the same goods, the greater will be their relative capacity of competition due to technologyeffect. There is a critical mass of such capacity of com-potititon below which it is not possible to export, irrespective of the real effective rate of exchange. 1/ ^ More important innovations vjhich constitute milestones, usually J^orge Sábnto proposes in various studies that it is a good. Política de tecnología; ob.jetivos e instrumentos, mime o, OAS, 1971, proposes that it is a quasi-good because, since it is Iramaterinl, it can bo capitalized and because it is not consumed or ^vorn out with use, but enhanced, Sábatos original approach has the great advantage that it permits working with technology in accordance with the usual criteria for conceptualizing the economy of current goods. The problem lies in measuring the units of laiow-how (or, more briefly, Kh units), which demands a system of measurement which, in the present state of knowledge, is conceivably as conventional as that which at the time gave rise to the metre, the litre, or other units now universally accepted. Transactions in technology give rise to measurable benefits and costsj and some approximations have been made of a balance of payments of such technological transactions with firms abroad. - 27 - produced in ipdustrial centres, reduce the export possibilities of the countries of the region; and these must persevere in systematically accumulating Kh, under their own technological optima, to maintain their. critical mass of capacity of competition. Until nov7, the countries studied have exported predominantly to the Latin American region those of their goods which have the highest density of technology. These are exports to countries that have a lower technological level than that of the exporters - the largest countries of.the región The opening of Brazilian trade towards Africa is also of this nature. The outstanding features of technological policy in the countries studied show that this policy has not necessarily been managed in a systematic manner.. This relative weakness in technological management has been an important factor of the negative substitution in the more advanced industries; and this has constituted one of the prices paid for the relatively rapid accumulation of Kh achieved in some countries. The role of exports vis-a-vis the- requirements of technological policy- in the future is manifold. On the one hand, it will be necessary to sell the I i which the virtual supply of technology offerts; but this will only be posC sible within the limits set by a certain capacity of competition due to technology-effect . On the other hand,substitution must be advised conccrning which constelations of Kh are suitable for such exports, so that substitution will also include exporting - basically without.special support - the same products as those being substituted. technological policy, proper. Ultimately, it is one of the instruments of - 28 - • 13. The role of exports of mnnufoctures must also be judged from the stand- point of the capacity of decision and action of the countries, as already, mentioned. Depending on who exports, the structure of that capacity assumes different characteristics. Goncei-rably, there is a lower hound to participation of national decisions in exports of manufactures, and exporta in future must also take this restriction into account. 14. ThG foregoing points propose different angles for judging the role of exports of manufactures; among others, overall developmont; tion with production and substitution; economic policy; their integra- their role as an instrument of overall their connection xvith technological policy, and with the structure of the capacity of decision. This is certainly an incomplete list, but it affords useful criteria for judging the achievements and behaviour of Latin American exports of manufactures. 15. The following additional aspects concerning the behaviour of exports of manufactures in In tin America as a whole are of interest; a. The importance of trade between the different integration systems^ has decreased lately. In 1970 such trade represented 39 per cent of L?tin Aiierican exports of manufactures, and in 1974 it had dropped to only 31 per cent. 17 Of decisive influence in this regard were the events that took place in The systems considered are lAFia, the Andean I^ct, the CACM and CARIFT/V CilRICOM. - 29 - LAFm, in which system only Argentina continued to expand intra-regional trade, ¡since Brazil determinedly opened its doors totrade outside the region, and the Mexican iraquila did the same, Intra-regional exports of non-liberalized goods grew - at least in lAFTA. more than those of liberalized goods; and there is a fairly general opinion that non-liberalized exports are, in part, an indirect consequence of the integration process itself. In fact, many countries have tended not to undertake multilateral corainitments whose consequences they cannot control; but they have worked through bilateral channels and even through informal integration channels, thus generating trade .-i/ b. There has been an interesting pattern of trade by type of industrial goods. In 1974, 42 per cent of Latin American exports to all destinations represented traditional goods and 33 per cent, metal-mechanical products. 1/Inter-Latin American trade networks have expanded, partly as a result of a natural historical process, and partly due to the effect of integration mechanisms J also, due to the effect of the numerous sectoral meetings held within the context of the various integration mechanisms, and partly also to the effect of the action of transnational corporations in the area. It is hoped that Latin American transnational companies will contribute to this same process with increasing vigour. - 30- Table H lATIN AFRICA: - 3 HELEVANT INDICATORS OF EXPORTS 01 MIEIIFAC TURES BY TYRE OF GOODS Concept 1. 2. 3. 4. Unit Traditional INDUSTRIAL PRODUCTS InterI® tal mediate lvS3chanical Others Structure of total exports of manufactures •by type of goods (1974) 42 21 33 The same structure in trade within integration systems (1974) (1961) 22 53 30 23 43 19 ThG same structure in exports from latin America to the rest of the world (1^74) (1961) 51 56 17 31 28 3 35 31 42 24 19 30 35 21 41 33 48 27 Rates of growbh of exports of imnufactures in 1970/74 Total Between integration systems To the rest of the vrorld c .a. 5 6 - 31 - But in exports to countries outside-integration-systems traditional m n u factures predominated (51 per cent), i t a l within such systems the netalffie DBchanical industries prevailed (43 per cent). This is logical. hasprime markets for capital andmetal-mechanical goods; The-aroa and intra^ • regional trade serves to learn, andthereafter go out and faco the stiffer competition outside the area. The opposite occurs in tr3.ditional manufactures, which are traditional precisely because they afford comparative advantages generally derived from the raw materials, from the relatively higher density of labour - including less skilled labour - per unit of production, and the lower relative -/rages in internatbiial currency. Such manufactures are primarily exported tocountries outside the region. The structure described was achieved, approximately, in the past fifteen years, after a change in the structure which consisted in increasing trade betvjeen integration systems in jTietal-irechanical and intermediate industries, reducing the proportion of traditional industries. But at the same tine, in trade with the rest of the wcfLd there was, to a certain extent, a shift from exports of interaiediate industries to those of metal-mechanical products, due to the action of some countries. c. The content of technology embodied in the goods in this trade is measured . conventionally.-^ Assigning arbitrary weights to the different types of y tionally the quantity of know-how contained in no system of accounting for Kh units has yet System is necessary. An arbitrary measurement Although some attempts have been made to measure alternative technologies, been devised. Such a is introduced in the text. - 32 - goods (1 to traditional goods; 2 to intermediate goods, and 3 to metal- mechanical goods), the average value, weighted by the structure of trade in 1961, gave. 1.7, and in 1974, 2.2, for trade between integration systems,, and 1.5 -and 1.8, respectively, for exports to the rest of the world„ This would mean - always estimated on this arbitrary basis - that while the technological content of exports to the rest of the world increased in 1974, this content appeared comparable to the technological content of exports within integration systems in 1961; gical progress of exports and that the main technolo- of manufactures vras made in intra-regional 1/ trade d. HOVJBver, within the sphere of integration systems, the countries with larger markets export relatively m.ore rtBtal-mschanical productsj with inbdium-sized markets, intermediate goods; markets, traditional goods, those and those with smaller in the consolidated trade with the rest of the world, traditional manufactured predominate, in other words, the industrial world is to Latin America as a whole, what the larger countries of the area are to. the countries with smaller markets. In fact, the countries that export more metal-mechanical goods are those with larger economies. For Argentina, Brazil and Mexico together,in 1974, 1 / T h i s does not tike into account the ultimate effects of metal-mechanical exports as regards services required, domestic technological-replication, or the demand arising from similar technologies in the importing country, apart from other effects of inter-connection betwen the. economies, resulting from the process. - 53 - 58 per cent of exports to lAFTA. countries consisted of this type of goods 5 and this, plus other converging indexed, would appear to show the existence of a new process of international distribution of labour, repeated on a regional scale.;. vAiich should be studied in greater detgü. Vis-a-vis this process, which has a significant inertia, the Andean Pact constitutes a conscious, planned attempt to revert it. In 1974, intra- Andean exports consisted of 52 per cent intermediate goods and 22 por cent metal-mechanical goods5 and if the moiTientum of the early years of the Andean Pact v/ere to continue, there should be a change of structure towards trade in metal-raochanical goods, as occurred in IAF1A, but with a different conception. Givsn the basic conditions imposed by the integration machinery and by other governinental and bilateral mechanisms, the prime movers in the lAFTA process were the tariff reductions, the action of transnational corporations, and á growing action on the partof latin American companies through informál integration channels. In the Andean Rict it is basically the substitution industries, planned at the regional level, in lAFTA, with certain political reluctance on the part of the governments; in the Andean Pact - at least during a certain stage - with explicit political support, notwithstanding the difficulties, if both systems persist - and taking into account the difference in the size of the markets - m t h i n a few jrears, experience will make it possible to evaluate the benefits, costs and velocities of báth types of impulses. - 34 e. • Moro recently-^ it has iDeoii foünd tliat the rapid groirth o f the purchasi ing power of exports in the early soventies has given way to the traditional reality of adverse terms of trade, and not only due to the effect of the price of petroleum; that the illusion of a quick virtual self-financing of the current account in the latin American balance of pajmients has passedj that the countries that are not oil producers have fallen into a much deeper external structural problem than was imaginable barely five years ago-^ that, in general, the higher per capita income of the region is increasingly causing it to be excluded from the international financial co-operation mechanisms, and that it is becoming more and more difficult to move from the historical, closely protected stage of national industrialization to the conquest of markets outside the region if the fact that the region is the priiTB market for manufactures is forgotten,. Within the framework of a world market with inflation and recession, the adverse volume-effect on trade with third countries is increased, due to the stmactural external deficit, in addition to which there is a price-effect which also appears to exceed that of the present juncture. latin America*s foreign, debtv, S ^ ^ ^ H y increased • 27 until 1973 to consume investment in a socially xmjust manner and distorting it» ^ See: Gérard Eichet and Norberto González; Cooperación regional y desarrollo; una propuesta de política latinoamericana para la industria y el comercio (April 1976, mimeo). See also a previous study by Gérard Fichet; La exportación dé manufacturas latinoamericanas (Cuadernos del ILEES, Series II, No. 15, 1972). The unequal distribution of income generates a sophisticated demand of the higher income levels which is met with protected substitution, and distprting the structure of industrial production and of the investment to generate it. - 35 - But since 1974 the deficit in current account reached a peak which suggests there is no longer a ceiling for any length of time to persevere in the consumism followed until then. f. All the foregoing also contributes to increase limitations to the viability of autarkic national development, and makes It compulsory to reappraise the need for co-operation, even for the countries of the area that have the largest markets. It has been found at the level of four industries in particular ^¿at, aside from the k n o m scale-effect - which, for small scales, not only makes it impossible to produce at competitive costs but also to generate technologies properly - the goods of larger scale industries with more technological density are those in which the rate of world, .demand grows much faster; balance of trade; that the greater the size of country, the greater is the that the smaller the country, the larger is its relative demand for imports of such goods; that, consequently, the smaller the na- tional market the greater is the need to export; that the smaller the country, the more does it require a certain amount of specialization, and still more if it does not possess petroleum; that the concrete possibility of such specialization largely depends not only on the technology the country possesses, but also on the oxvnership of patents and trade marks and on its capacity to set up its export network for such manufactures; that there is a cycle made up of imports/substitution/production/exports which denands that a high degree of efficiency and a unified treatment of these fields in 1/Chemical products, electrical and non-electrical machinery and transportation equipment. - 36 - the economic policy for each activity converge at all levelsj and that a low export;industrial production ratio is an indication of relative economic backvsardness. Frora the above findings a. number of useful inferences may bo dravm. to judge the behaviour of latin American exports of manufactirres required in the future, and its relationship with regional co-operation and integration-,g. The above q,uestions give rise to further observations. ECIA has insisted on the need to deal with substitution at , the regioml level and in a planned manner in latin America^, and the regioral deinand for imports would be relatively dynamic, due to the fact that its ozpected rate of groivth, according to the projections, will be higher than that of other areas. Consequently, it is advisable to consider Latin America as a priority destination for exports of manufactures of the countries of tho region, aside from the other advantageous factors summarized above. i. i t i t are, then, the alternatives for the future of exports in the area? jta IS it possible to follow pure strategies, such as indiscriminate liberalization, or strong protection of national production and, consequently, strong encouragement of exports, or should a mixed strategy be followed? On what basic values would such a strategy be based? Wiat would have to be optimized at national levels or at the level of the area as a vihole, and with what restrictions? Juan Ayza, Gf^rard Fichet and Norberto González, America latina; Integración Económica y sustitución de importaciones. Fondo de Cultura Económica, 1975. - 37 - ii. In the early sixties a reply had already been given to the effect that, due to the effects of scale, of technological diffusion, of size of markets and capacity of competition, a hypothesis of latin American integration - r s va preferable, reasoning at the level of the region as a vjiole, and in terms of the benefits of integration. The lAFTft. experience showed that such benefits were achieved to a large extent; that the larger economies obtained the most benefits, notwithstanding which they developed a gro?Jing political reluctance to assume multilateral commitments; that optimization continued at the na- tional level rather than at the level of the area, although accepting certain regional restrictions; that in the absence of a system, of minima to regulate the bohavious of the actors, transnational corporations filled the decisional vacuum caused by the -weaker commercial, financial and technological strength of latin American.companies; that; there was more effective progress where, as in the financial field, there was no alternative of competition or where co-operation •;7s the only viable alternative; a and that the Andean countries, convinced of the need for integration, and in the face of the reluctance of the countries with larger markets in matters such as programmed industrialization, chose that road, and established special mechanisms. Subregional systems - including also the CACM and CAKEFIA/GARIGOM - thus appeared in the historical itinerary as a factor of acceleration of regional integration and cooperation mounted on the inertia of regional integration as a whole 17 Conceiving the components of a parabola which expresses latin An^rican integration, the ordinate to origin would be given by history; the inertia, by the overall integration processes, and the acceleration, by the subregional and bilateral agreements. - 38 iii. A number of subsequent studies showed that without integration - or at least -without certain co-operation - there are no alternatives, and the recent recession of the extra-regional market made this fact still more evident, Other studies show that continuance of the historical trend makes it impossible to finance the rate of growth of the (SDP required to put an end to unemployment and raarginality during the next d e c a d e t h a t a vigorous subregional process of industrial and commercial integration is preferable to doing nothing at all in the region, and that integration and co-operation in Latin America as a whole are the best solution, particularly for the smaller countries, not only in term^ of overall external financing but also - at least - of development, technology, costs, quality, distribution of the fruits of effort and employment. Assuming the concerted development of mechanical and chemical industries to take advantage of the size of the regional market, with certain forms of technological speciali2ation and co-operation, with selective national industrial development policies, and installing new plants capable of competing internationally, there would be a vigorous regional trade; there vrould be a; certain specialization, not only of countries but also of the region as a whole vis-a-vis the countries outside the region; external protection could be reduced, and, concurrently, the cost of promotion; and the absolute and relative importance of purchases outside the region would be reduced. ^ T h e ECIA study now in preparation must be aieited. - 39 - As a result, there ITOU1 be, EIS-post, positive net substitution at the regional level, because the region itself would be in a better position to develop creative technology, or at least to adapt extra-regional technoY logy more successfully and at a lower cost. latin American exports of njanufactured products of traditional industries would continue to expand to some extent in extra-regional markets provided the demand, the protection and the discrimination of industrial countries, 2/ or.the development of the countries associated to them permit it. And this váth great vulnerability, at least as regards the cycle of the industrial world. But the demand of these traditional goods has less relative income-elasticity. The goods of dynamic industries, which have a higher income-elasticity, particularly capital goods, have their prime natural market in the region. iv. The experience is therefore instructive. In assuming basically the value competition vjithout introducing sufficient co-operation with planning, jy These are the i-esults of the study by G. Fichet and N. Gonzálos referred to in a previous foot-note. Iti terms of tho hypotheses of behaviour similar tothat of theOECD adopted by that study, in 1985 the ratios of imported supplies of the d c m n d of the four industrial sectors indicated , asa whole, would be SO.7 or 20»9 per cent, depending on whether the historical inertia continues or whether a concerted industrialization programme is adopted. But in the case of inertia. 19.2 per cent would be supplies from outside tho region, vfaexeas with co-operation, such supplies would only amount to 9.1 per cent. Imported supplies from the region xvouldtherefore rise from 1,5 per cent of the demand in the case of inertia, to 11.8 per cent in the case of co-operation. The consolidated trade deficit v;ould drop from US$ 49,000 million in the case of inertia unfinanceablo - to ITSf 4,300 million in the casé of co-operation. Dueto the effeot of factors such as the Lome Agreement, for instance. - 40 - opportixnlties for production and generation of income - with, all their effects were lost; there was only scant substitution at the national and regional level and mostly hy transnational companies, at least in lAFTA; the intra- regional liberalization strategy went as far as permitted by the fact that each country sought their optima at the national level only, and the benefits of integration were obtained in a greater measure by the larger countries. Moreoisrer, each country encouraged exports of manufactures by offering stimuli at the national level; consequently, in the opinion of experts, a certain amount of redundancy was created at consolidated levels, or else an undesired competition between stimili. In the faco of this value competition, the advantage of the value of co-operation has been demonstrated once again. Based on this basic value, the extreme strategy would be to programme all relevant industrialization in the area and the trade arising thoreform. A more accessible and more realistic mixed Strategy would be to develop at the regional level a certain programmed industrialization - substituting and exporting to countries m t h i n and outside the region the same goods that are substituted - in those industrial activities in which the regional optimum with given national restrictions vjould produce an additional consolidated net benefit for the region a s a whole. . Ti.is last solution would, by definition, give a higher cost-benefit ratio, as•It would mean developing with a regional programme precisely those activities which produce largest benefits; and for these the associated costs - at least those of a fiscal and financial nature - would bo lower, since - 4:1 it would be possible to work i d t a lower level of protection with respect .h to countries outside the region; at higher.levels of scale, technology.^ utilization and use, and without competition or redundance of stimuli. V, What should bo optimized at the: consolidated regional level? The re;ply is, what the countries prefer, be it the not balance of foreign currency, income-effect, employraont-effoct, the sot of ¡forward or bactorard effects, or any other functional. vi. What should the restrictions be? There should be certain restrictions as regards external vulnerability and reliability, and additional restrictions imposed by each country. These might, for instance-, take the, form of lower bounds for the net balance in foreign currency, in such a-way as, to ... ensure an equitable basis in participation,. But.there should remain a sufficient ceiling, so that the ambition to distribute everything before producing it does not becoms a game of restrictions which will again eliminate the space of solutioni^ and prevent producing in practice. Thus, competition would be inscribod as an attribute of the second order in a h i ^ o r attribute of active co-operation, and planned at the regional level. This is a.technical account of what has happened in practice.. .The ambition to distribute before producing made each a dominant restrictions and, duo to the action of dominant restrictions, the problem TOS overdetermined and the space of solutions was eliminated. But, after all. they were political solutions and not only economic ones», • - 42 - vii. ffiio region as a whole would boging to fimction as such - i.e,, as a consolidated legion, as a single actor - in the world concert of rationsg but conducting this practical experience in specific industries and in a gradual maimer. The fact that maintaining the historic inertia in the behaviour of foreign trade of these dynamic industries leads to imbalances of unfinaneeable fo-reign currency suggests that adopting the co-operation alternati-ve and, on this basis, • strengthening the planned.industrialization of specific cicti/ities is not a commercial or industrial adventure, but an option that must, be evaluated at the level of concrete projects. h. This outgoing towards Latin Aubrica for a joint production/i^ubstituliion/ export process is also justified by the drop in-the regions oapaoity to penetrate in external DHrkets for manufactures Miiéh has taken place in the past few years .i/ In fact, the expansion of total exports of manufactures from latin America Cían be explained in terms of the algebraic sum of two effects; a ¿eaiand- effect and a pénetration-effect.^ 1 / T h i s drop is a reality for the region as a whole, although, of course, some countries may escape this rule. _2/ World demand-effect is here defined as the result of applying the ratio .of the increase in world demand to exports of the base year, .and penetra-... tion-effectj as the result of applying to exports at the end of the ptfriod under review the difference between the ratio of latin American exports to the world at large for the final year less the initial year of thb • period analysed. This form of calculation would tosome extent •o^-er--value the penetration-effect; which, in principle, would not appear to be too important in view of the definition and, in practice, also .measuiement problems which affect the basic figures used, Thejr are orders of mngnitude of the effects. - 43 - In both exi)orts to the world as a whole and exports to countries outside the region during the periods 1965/69 and 1969/74, approximately 50 per cent of the increase in total exports has been explained by the effect of the increment in the world demand, and the other 50 per cent by the penetration-^ effect in external markets. The ceissea of the greater penetration are many and should be sought in the increased capacity of competition} in the grow- ing complem.entarity of the economies, as latin American exports vjere adapted in a greater measure to the world demand for manufactures; in the action of transnational corporations which, in pursuing their own optima, in practice are increasingly achieving complementarity; and, in part, in the effect of the integration mechanisms.-^ But it is essential to note that the significance of the penetration-effect was greatest in 19V2, as in 1973 and 1974 there began a declining trend in both -total trade and exports of manufactures to countries outside the region, and in 1975 it became negative. Consequently, it is not necessary for a formal recession to occur in the industria 1.world j deceleration of the demand is sufficient for Latin American exports of manufactures to be more deeply affected by penetration-effect than by\th3 effect of the demand itself. And this is so notwithstanding the With respect to 1974, in 1975 the penetration-effect in the markets appears to be negative, even though the value of world trade continued to rise slightly, at a rate under 2 per cent, for all types of goods. According to data cf TJNCTAD IV, the physical volume of total world exports appears to have Iropped 6 per cent, and the unit value to have risen 8 per cent. For developing market economies the drop in volume appears oo have been14 per cert, and the rise in prices 5 per cent. - 44 - small participation of latin America in the ertemal supply of Manufactures of the industrial countries. This would e a reasonably clear indication to exporting countries to have b greater confidence in latin America if it is desired to ensure a lower 1/ bound for penetration-effect, i. Changes in income due to changes in the price structure in world trade have sufficientlyaffected the balance of payments as to give rise to a structural protectionism I n many coiintriesj and there appears to be ho assurance that the-, fluctuation in volume which became evident in 1975 will not be repeated. In other words, reliability of the rate of future demand and cf the fluctuation of the world economy dropped . Itoder piesen-6 conditions, the country studies evalúate as basic factors of access- - 0 irarkets outside the zone, the integrated capacity of coicp^/bition . - i.e., due to price-effect, technolo®-~effect, marketing-effect., informatior.effect, political support-effect, etc,; the need of purchasers for supplies, and the supranational inter-industry relations established to a large extent by the actioi of transnational corporations. in this contesrt the Generalized Systems of Preferences, although increasingly used by latin American exporters, d) not seem to be included In the list of. 2/ sine qua non fsctors or of the causes leading to expoxi^s of manufactures.- Another probler., although relatóc to it, is to ensure a minimum bo^^nd for the denand-effeet. \ 2/ In some countries it is even suspected that applications are over-valuatea. - 45 The country studies show that although the United States system seeks to diffuse, the demand, it is contradictory inasmuch as it encourages efficioncj, but penalizes it when the exporting country achieves it. The EEC syster,! did not succeed in overcoming the effects of the depression of 1S~5? in the care of one country, the exports covered hy the GSP grevr less than thoso of other r industrialized goods, and the EDC suspondod the preferences on soverel occasions.. For the future, theix significance appears to be farther v:ealcenec. by the convergence of the general reduction of protection negotiated in the CATI;, the special preferences of the EEC agreed upon in I,cmd«. the intra-regional operation of the EEC itself, and the addition of political limitations imposed by the 1974 U.S. licade Act. Reliability of bothtbhe rato of expansion and the fluctuation of- the real world market, would therefore have no evident reason, to be high,. ,insofar . as the latin American countries are concernedc And any change in the rate or in the fluctuation vrould proportionately affect medium-sized and sria?.! latin American companies5 i,e„, the balance of the povrer of decision, at least in the external sector. In vievi of the above, in the experience of all the countries studied, acceFS is relatively reliable in regional systems. The imltilateral agreem^snts give the process inertia-, and bilateral or plurilateral agreement.^, as x\rell as crossed,investments, odd acceleration to it o The addition of programming for conducting the process even though it be limited - iTouid contribute powarfully to strengthen the scene and ma:;riraize re liability} and the dp-- - d e liberate training of private and public Latin Jlmorican entrepxoneiirs, vJith. a world-wide decisional horizon, and capablo of optimizing at the regional 1/ level , would accelerate the presence of the actors required to makB the structure of the power of decision compatible. 16. At the level of the four countries studied it has been foimd that; a. The reasonably explicit overall goals of the policy for exports of manu- factures in all countries have consisted in improving the balance of paj^nonts, contributing to industrialization(expressed as higher value added, greater USD of installed capacity, or increased industrialization in general), and ceasing to depend on traditional exports. Some countries lay emphasis on achieving a greater internationalization of the economy and on the construction of networks of common interests (Brazil), or on achieving higher employment (Colombia and Mexico). In some cases, certain instrumental goals are included, such as the diversification of products and markets, increasing the capacity of competition, or rationalizing the use of non-renewable re\ sourcfes. \ \ b. • , • , . • The\physical volume of the purchasing power of exports of manufactures in the four countries is extremely sensitive to world inflation, taking into account that the industrial countries on average export their own inflation y Projects have been made for deliberately up-dating and training decisionmaking entrepreneurs and bankers in the region, it being considered that the speed at which a certain critical mass If latin American entrepreneurial skill should be achieved is sufficiently high to preclude reliance on a spontaneous piocess, such as has been the case up to the present. - 47 - to the under-developed, and only ad just. their,exchange- rates wheü. trade between themselres is Impaired. In fact, purchasing powerj in terms of United States prices, had risen until 1973 and declined thereafter, and, during the five-year period 1970/75 it .grew at the manifestly insufficient rate of 2 per cent.-^ c. Exports of manufactures appear to be more sensitive to the drop in ox- ternal demand than to that of basic products. In 1975-their share in total exports dropped in all the countries studied. d. In the expansion of the value of exports of manufactures in 1970/74, the volume effect explains around 35 to 40 per cent in Argentina and • Brazil, and around 45 to slightly over 50 per cent in Mexico and Colombia. e. Theindustria 1 policy defines the characteristics of expo3?ts. 2/ In 1973, Argentina, Brazil and Colombia exported over 50 per cent of manufactures proper, and Meiico, 80 per cent of semi-manufactures, due to riHquila-effect, f. Exports still represent a small proportion of industrial production, as • a group, and in each country. They still do not have a strong fonmrd and backsrard effect on the industrial structure. 17 Appendix I, table 6. ^ Yolume-effect is def ined, as in the national accounts, as bhe- difference between the volixm.es of the final year and the base year, valued at baseyear prices. This :implies .under-i?aluation.. : - 48 - g. Depending on their industrial origin, Argentina, Brazil and Golombia exported over 50 per cent of traditional mnufactures in the past few years? and I^zico, over 50 per cent offie-tal-prodücts, machinery and equipment, also 1/ to a large extent due to the maq.uila-effGct. h. There is a trend to diversify exports by products, but concentration ia still strong. The country studies have not found that the option between diffusion and concentration of exports of irsnufactures has arisen from an explicit overall strategic decision. stimuli generates diversification; On the one tand, the existence of on the other, the fact that traditional iiBnufactures or those previously substituted are exported - under all the. conditions created by substitution - itaintains a significant concentration, i. Greater diversification by countries of destination is sought in all. cases, but the strategies differ. Argentina exports preferably to LiVFTA-, Brazil diversifies its sales to lAFTñ. and increases the participation of Japan and Africa j Colombia channels more trade tovcards the Andean Rict countries; and Ifexico reduces the proportion of ito trade with the United States and turns more towirds the EEC and lAFia.. j. The number of export flows (number of products by number of irartets of destination) grew significantly in almost all countries. k. The presence of transnational companies is growing and decisive^ parti- cularly in dynamic industries with relatively more sophisticated technology 1/ Qualifying traditionality in terms of the ISIC. See Appendix I, table - 49 - and greater concentration. The concentration of exporting companies tends to increase. 1. Itie positive factors that encourage exports of manufactures e-raluated ty the country studies are in all cases the existence of financial and fiscal stimili-j the action of transnational corporations, external demand, the possibilities afforded by lAPia and the Andean Pact, and a gradual prise do conscience by notional companies, in some cases, stress is laid bn the very dynamic government effort (Brazil), on the signing of agreements granting special financing (Argentina), on the requiremeiit that companies export to obtain entry benefits (s^xico), on the existence of idle capacity or of remnants of domestic recession, and on the national technological capability.^ m. The nain problems affecting exports of manufactures evaluated in the studies are very significant. of national companies} In general, they are: the relative -weakness the difficulties in operation of the smaller companies; the expensive and infrequent jfransportationj and the relative reliance on the access to markets outside the region remaining unchanged. In some cases, stress is laid on the weakness of the public sector due to high rotation of decision-makBrs, the -weak support given to the establishment of large national trading companies and export consortia, and the weak information sjTStem (Argentina); on the scarcity and high cost of raw imterials, partly Methods of verifying the dependency relationship are different depending on the studies, and range from the expert judgn^nts to the use of econometric models. - 50 - as a iresult of the financial TMBalaiess of the public sector which slows down investment in basic industries politically reserved to national decisionmakers (Mexico); on excessive placing of tho responsibility for exporting on the private - particularly the external - sectorj and, in general, on the problems.inherent in the condition that one study defines asperipheric-. dependent, insufficiently selecti-ve, líáiich operates at a high relative pro-^ motion cost. n. The studies in general qualify as positive the effects of exports of manufactures on a number of -variables such as the forrord and baclcward effects on the inter-industrial structurej technological know-how embodied in exports technological know-how; the overall income; on the local replication of on the local creation of new on the productivity of the economy as a whole; on on employment, and on distribution, by the double road of the overall income-effect and employment, although the stimuli increase tho capital-entrepreneur factor rem.uneration which is relatively larger, as well as being external. In sogie cases, and as regards certain goods, some doubts have been expressed concerning the balance of foreign currency, o. In the four countries, the capaóity of competition duo to price-effect, defined as ^the.XKitio of the rate of exchange index to that of domestic pricesi/j dro.pped during the period 1969/V5. The drop was more severe in Argentina (to approximately half) than in the rest of the CQuntrios (one third), The expansion of exports of manufactures was achid^ed by overcoming Appendix I, table 8. - 51 - this basic condition with fiscal and financial instruuBnts which served to correct this trend. These will be analysed later. Naturally, it ^vould be necessary to operate with relative capacity of competition indexes with respect to purchasing and virtually competing countries. HoivoVer, for the time being it does not seem reasonable to say that there has been overlGva.luation in the past few years 5 and far less in pi^vious year3, of V c o u r se p. fhe monetary dosage of the economies in 196^/?g was not associatec. vjith inflation rates. Argentina systemtically and unsuccessfully used monetary 2/ restraint to combat inflation, reducing its liquidity ratiof- below the amount corresponding to its per capita income level and to the development of its financial markets, at least until 1973; and in 1974 it strongly increased its liquidity and at the same time reduced its inter-anmial rato of g o r c h rvfof prices. Brazil gradually increased its liquidity level and its inflation rate in the past few years. Colombia reduced its liquidity trend at the same time that the trend in price grovrth increased. Mexico maintained its monetary liquidity at a stable level but could not prevent acceleration of inflation. 1/ In fact, in recent periods some countries appear to have touched a iriiniraum point in the level of capacity of competition due to price-effect, at least for some exports; but this is not jret certain. It is not knovm either, whether the. national currencies were ovcr-dovaluated beforo - not only in • the sixties but in previous decades - and if this constitued a disg-aisod subsidy to external savings in terms of national assets, with the many consequences derived therefton» 2/ In this text the liquidity ratio is defined as the ratio of prii^ate means of laynBnt plus official current acco-unts to the See Appendix I, table 9. - 52 - q . In 1974, prices in the four countries analysed experienced, rises rang. •1/ ing from 2o to 30 per cent. With or without the contribution of external inflationary factors, in the countries studied inflation appears to be endemic5 and concurrently t«ith the prise de conscience of this fact, a policy of flexible adjustments in the rate of exchango, of the creeping typoj has taken shape. Uiis experience is instructive. Brazil introduced its policy of flexible adjustments in 1958 and obtained more.rapid results in exportp of manufactures, Colombia adopted a similor policy about the same tim.e, and also succeeded in expanding its minor exports.. Argentina made larger adjustments,, until mid-1975, when a soaring inflotl^ called for more frequent adjustments, and at the end of . 1974 aifd beginning of 1975 essayed, cancelling existing export contracts, apparently due l o insufficiency of the real effective í rate. Ti^xico adhered to its traditional fixed rate of exchange until mid- ; 1976, and affected its balance of payments significantly.. Exporience shows that, when there is a single exchange market, excessively generous fiscal stimuli can lead to over-invoicing of exports or to simulated transactions. And when there is an official exchange market and á free market i h v/idely different rates, the difference between the two rates ivt encourages under-invoicing of exports, and export contraband», in which case, the stimulus operates to some extent as a dissuasive of spurious transactions by bringing the real rates closer. The year 1975 is atypical for the analysis. - 53 - It will therefore be observed that stimuli have a space of useful movement which is bounded by the nature of exchange markets and the magnitude of the rates of exchange, apart from other bounds which will be considered later. AS a practical necessity, and independently of previous doctrinal preferences and even policies, all countries have finally come to inescapably realistic and flexible rates of exchange, This is an important experience for extra- polation to other countries - whether they are developing or at an intermediate level of industrialization - that wish to export manufactures. - 54- Chapter III . SALIEKT EXPERIENCES AND PROBIEIB REIATED TO THE INSTITUTIONS AND INSTRÜTÍENTS OF EXPORTS OF MNímCTCTRES POLICY 1. [ l e previous chapter showed the need for certain basic conditions refi quired for exports of manufactures to bo carriod on as a soIf-sustained process. These basic conditions are being built up by the countries of the region, particularly during the past decade, and are gradually incorporating learning to the institutional and instrumental structure. 2. In reference to institutions, the country studies show that there has been a trend to establish promotion agencies; and only in a few cases - in Brazil since 1972, and in Ifexico for certain industries - is there a greater trend towards conduction of exports, staiting from an industrial basis. But there is as yet no system of conduction fully included in the design and implementation of the policy, activity by activity, xvith adequate participation. As a general rule, there is a good deal of institutional dispersion and promotion systems are open to whoever wishes to use them; this weakens the momentum, required to build a system with sound national participation, and favours greater utilization of the advantages by transnational corporations. This type of consequences is er:irtLsaged as possible in the mecha- nisms put into operation by Brazil in 1972 in terms of special sectoral programmes, inc3-uding those that seek the transfer of industries to the country. Hov/ever, the establishment of an important trading company, with State action and participation, and the encouragement given to the establishment of national marketing companies in Brazil recently, seems to show that - 55 - there is a trend to seek a better equilibrium in the structure of the power of decision. 3. - The fundamental question seems to be whether instruments of induction are sufficient to conduct the external sector - and exports in particular or whether a more direcc and catalytic action on the part of the Government is required to obtain a sound selective effect in terms of all the variables that have to be sought, since exports are a multipurpose instrument. This last solution seems to be taking shape, although in some countries institutional solutions for the conduction of the external sector follow after general doctrinal preferences. Depending on the countries, the trend towards State action ranges from stimulating the private sector through public institutions which are administratively too weak to serve as catalysts (Argentina and, apparently, to a lesser extent, Colombia and Mexico) to a more active presence of the Government, including companies T \ i h government participation (Brazil). ,rt Concern and action to reduce bureaucracy have been convergent in the countries; as well as administrative and diplomatic supportj action in the fields of information, inarketing, technical assistance and training, etc. The efficacy of the services has been varied. Particularly in information and direct action, the studies qualify institutional systems from relatively weak (Argentina) to relatively expeditious (Brazil).-^ 17 AS the studies were written by different authors and as there is no single objective pattern to judge all cases, these qualifications contain several biases and should be taken as general appraisals of independent experts. - 56 - Experience suggests that moro governitEnt, with more capacity for action and a sound and efficient direction, has giyen best results, at least in terms of the volume of exports. In the case of one country, the advisa- i/ bility of establishing an External Sector Corporation has been suggested. - 4. Policy trends suggest that the cost of promotion is already felt, at . least in taxes{ that its effects are capitalized by national companies less.than expected;, that the need for more catalytic action - and sometimes more direct action - is recognized, in order to achieve greater national power of decision; and that to mintain realistic and flexible exchange rates and introduce correctors to help lower the price of virtual FOB supply of mnufactures is a necessary though not sufficient basic condition; and that there is no alternative but to tackle the industrial and technological process i^pidly and in depth. The links between export of manufactures, policy and the industrialization and technology policies are. still not strong. This means that the countries studied so far export what they con and what they have, and not necessarily what they would like to export. This explains why at this stage the trend is to diffuse export flows in the form of generalized promotion, although with certain selectivity, depending on the countries. Thus, in jé-gentina, the evaluation of industrial projects to obtain State l^As an agency with banking capacity plus the capacity of participation in - — the capital or of establishing companies, and others related to the direct and catalytic action of private enterprise. - 57 - advímtóges through investment, benefits when such projects include export programmes, to which the company comMts itself by signing contracts; in Brazil, since 1972, new sets of stimuli are granted to export programmes starting from the industrial base; and in ifexico the use of imnufacturing programmes in specific activities which contain mandatory export plans has been increasihg. It will be noted that these are steps in the right direction, but it is considered that they would require a more general decision of economic policy to conduct them by activities, so that the results in term^ of exports may be more quickly achieved and more efficient, instead of overcoming the problem casuistically through the promotion of exports, 5, All the- studies mention the fact that the dangers of indiscriminate promotion are recognized, particularly if it is over-generous, not only because of the possibility of distortion in the allocation of resources and the virtual application of countervailing duties, but also because of the cost in foreign currency it implies, 6. A trend is observed towards greater selectivity by products, using the product as an instrument for obtaining certain goals. Unfeil now the countries have generally tended to lay stress mainly, although not exclusively, on • value added, and in some cases this variable-goal has been quite explicit. • The general components of selectivity have either been contained in explicit regimes (Argentina, Colombiaand Mexico) or the regulations contain few ox- ^ 58 - plicit slbmonts (of soláctivity, although in practice it is applied (Brazil) .•i/ All the studies agree that the »»performance of seloctivity can and should be improYcd. 7. The basic fstiimili arc fiscal and financial. In all studies these ore defined as an essential prerequisite for exporting nenufactures. Furthermore, impo-l-t regulations for inputs and capital goods, export regulations, and information, marketing, diplomatic action andother instaniments are used. a. These last have been mentioned elsewhere in this study. The financial instruments form part of basic world conditions i l i c must fiih be ratified in order to bo able to export. The stimulus proper is contained in differential interest rates with respect to ordinary credit, or in real negative interest rates, or in the automaticity of the procedure for granting them. AS a general rule real interest rates were negative, but not only in exports. Some studies (Argentina) point out that, if the proportion of financed exports in the GI)t%Gro to increase significantly and if at the samo time monbtaryrestraint continued to be used to cómbat inflation, credit to the industrial/export sector would have a very high proportion in the annual inc3?e]TBnt of monetary flow, and suggests that the two policies are not com- patible in the long run, y These are salient characteristics, Natumlly all rGp:i-m®ff contain bSth components in varying proportions, depending on the periods. - 59 - In all countries, credit granted for exports has served to prevent shortages of circulating capital in production for export. New advances include financing of investment, which is indispensable to the extent that it is desired to produce for export in a larger relative dinffinsion. AS a rule, financial systems are managed flexibly, as befits their nature. Appraisal of the risks is performed according to banking standards, taking solvency ns an attribute of the first order. However, it v;ould appear that to the extent that a more unified conduction of the production/substitution/ export process is implemented, rather than the mere promotion of exports, it-will bocome increasingly necessairy to grant credits for the programme. There is already a glimmering of this process, and it appears that it would have to become generalized as an essential condition if the ambition to export is strong and, particularly, if a more efficient selectivity is desired. b. Fiscal instruments have, basically, played the role of correctorsof the rote of exchange and of the cost-effect of protection. In Argentina they have not succeeded in offsetting the adverse cost-effect of virtual supply-, in international currency, which the interplay of .effective protection and exchange rate have introduced in industrial exports. Brazil they appear to have done so. In In the studios on Colombia and Mexico their corrective role is also mentioned. Although the-magnitude of the burden of protection and of the effect of the - 60 - 1/ : : . capacity of competition index- is not sufficiently precise, it -mas possible to establish that, in generalterms, there has been no subsidy of exports, although this may have occurred in the case of some specific product. In general, the use of these correctors has been generous, in view of the systematic reduction in thecapacity of competition indexes, in order to increase diversification of exports of manufactured goods. Recently, in some countries (xVrgentina and Colombia) the importance of such stimuli TOS reduced; and Brazil tends to eliminate them,at least for some activities. Experience showed that excessive generosity affects export prices in international currency and even leads to simulated exports when there is a single exchange market, as mentioned earlier». ror this instrument also there is an upper bound given by the fiscal balance. If the ratio of promoted exports in the GDP were to rise significantly, the efficiency of collections would have to improve (as appears to have occurred in Brazil) or.else the burden of promotion would have, to be borno more by the basic exchange rate - in which case the weiglit.of protection would also fall more heavily on, the exchange rate. 1 / I n the reasoning of this document the index of capacity of competition of the exporting country is used, rather than the relative index obtained by considering also those of other countries that are virtual competitors and importers. This has been done because, for the present purpose, the profit.or loss of third countries in terms of capacity of competition due to price-effect has no bearing on the analysis, ifaturally, when applied to specific cases, the position of third countries as regards prices and exchange rates is important - 61 - c. Imports of inputs embodied in exports of manufactures would appear to have been stimulated by the promotion regines in Brazil (the draw-tack is much used), Colombia (Plan Valle30) and Lfcxico (fixed exchange rate),, until there was a trend to correct this effect. The linlis with c:r.ports through preferential quotas appear to be more functional in l®:rico sinco the exchange adjustment of 1976, but thoy are not moro efficient than total prograraning of the activity. In Argentina the draw-back, an instrument which encourages the use of imported inputs - and is not efficient in.its administration - has lost significance» Thus, it has been observed that the handling not only of the pattern of substitute industrialisation but also of the function of exported industrial production has in most cases over-dimensioned imports of inputs. It is believed that only a policy implem.entod activity by activity; governing production/substitution/export in.a univocal and planned manner, night cover this tjrpe of bias. d. Regulation of exports, depending on the countries, has tended to clarify explicitly that it is possible to export, ensure national supplies, ana particularly ensure that raw material that can be processed in the country will not be exported. o. It therefore appears evident that a strong and successful export policy for mnufactures could not ask financial and fiscal instruments to.bear the-, burden .of the overall correction of the exchange rate and of the effect of protection; and that, on the contrary, its role should basically be limited to two purposes; to confir.m basic conditions and maximize their seloctn-ve -52 efficacy, in terms of sufficiently precise variable-goals acting as correctors. I Efficient selectivity is conceivable, on a first level abstraction, in terras of fixing certain goals end conceiving a sot of products as instruments to attain those goals. The variable-goals m i ^ t be; value addeiii/, omploy- msnt, distribution in general, net balance of foreign currency, technologyeffect, structure of the power of decisiontype of insertion in world trade, structure of trado by destination, induced structure of production by rQgional origin, ctc,, and each goal will have certain lower and upper bounds and certain requirements of stability, reliability, ctc. The problem boing thus stated, a reasonable ambition placed in terms of multiple goals demands exporting mostly what the country m n t s to export and not merely what it has; and imkes it necessary to prepare the indus- trial and technological base, with all the attributes that it wants exports to have. Given the limited frontier of resources, objective analyses^ as well as the experience obtained from the studies, suggest that it is necessary to set up a process of programming at top level, and to identify the optiimim structure of exports by products and destinations to serve the set of goals and restrictions, finally evaluated at the top level of political power. This problem has a known technical solution. ¿7 2/ And to reach that in this case, as in the other variables, of direct and indirect effects, This is a case of dynamic or lineal programming, or of establishing priority relationships, at least. - 173 - level of programming does not imply disregarding pragimtic experience but supplementing and orienting it* On a áeóond level of abstiaction, knowing the optimum structure of ezports by products and destination, there are a set of requests made on the basic conditions and the corrective instruments. The set of instruments is thus, bounded and its features can be seen more precisely. Instead of follomng the historic process of creating the instrument and testing its efficacy and efficiency, the process -would be supplemented with this iiBthod of identifying the characteristics required of the instrument once the minimum bounds of the efficacy and efficiency expected of each instrument are established, as well as a reasonably precise work-load for it. With some differences, depending on the countries, the studies judge that the most efficient sets of instruments are those of a fiscal and financial typo, as well as the agreements and instruments covering regional integration and co-operation areas. The efficacy of the information and marketing instruments is still judged to be poor. Depending on their contribution to certain variables, the forward and backward effects on the industrial structure, the value added and, in certain cases, the destination of exports, would appear to be those obtained most often; and for the time being, achievements in the fields of region of origin of production, type of company, scale, and type of technology ore not considered outftmnfllJip; o ^ sustninAfl. x f o hnTanr-i I i loi.-oif^ ii currency is understood to be positive, although there was negative substitution. - 64 - In some cases the employmexit-effect appears to bo higher than in exports of traditional manufactures, which continue to have a decisive weight in total exports. Distribution-effect in general terms is positive, through.the. higher rate of the GDP which exports made it possible to finance, although; according to the direct recipients of the stimuli, a regressive effect was introduced in the distribution by income levels. In any case, it is t.oubt- ful whether exports of manufactures can be asked, as a priority matter, for a distribution-effect or, more specifically, an employment-effect when the ratio of exports of manufactures is small and the proportion of effi.ployment generated by exports on total employment is also small; the foreign currency-effect has particularly TAihen rather obvious precedence for latin America, which has a huge carry-OTOr debt and a large and increasing deficit in current account in the balance of payments. In terms of power of decision, technology and external insertion, the effects are linked variables;9, and national achievements in this field have differed. The studies ,1udge the efficiency-cost-benefit ratio in non-identical terms and. in general, consider it positive, measured in terms of equivalent foreign currency, although it can be improved, a„ As a general rule, decisive policy criteria were based on iEa.xim-izing the value of exports, but not the afitual value of the m.athemjatical expectation for exports of manufactured goods. Attempts were made to export as much as possib-le. tendingto maximize export flows, althougti with some geographical pPOfGX^UCSS u Iready mentioned. The cost-benefit ratio in te?\mí3 - 65 - of foreign currency,, considered at the product level, seems to have had certain participation as a criterion for the use of instruments, although not necessarily a decisive one. Lower bounds to exports by products and/or markets were not generally used, although in a few cases some commitments were set for companies which are beneficiaries of stimuli. b. Specialization as an instrument for maximizing efficiency outside of traditional manufactures has been sought in cases such as that of the maquila in léxico and the setting up of the network of reciprocal interests with the industrial world by Brazil. Essentially, it seems that the country seeks to export more labour - which is qualified by the industrial activity itself at a higher level than if the activity did not exist - taking advantage of the its lower relative cost in international currency, and as a predominantly external actor and technology.-^ In fact, if a country reduces taxes on this form of work and grants preferential financing for it, it is establishing a sort of spocial tax and credit paradise or, in other words, the country would becomle a sort of free zone of the activity, and even financially privileged. 10. This raises the need to reconceptualize efficiency, according to the level at which one is working. Until now, optimizing at the level of the country and qualifying efficiency at national levels, it would be sufficient for the chosen cost-benefit ratio 1/ The solutions of Taivian, South Korea and Hong Kong - on another scale would appear to be similar. - 66- of on activity to be higher than ons, to ensure positive efficiency and an indication to undertake that activity. But if it were true that the styles of development of Latin American countries are not completely independent each of the other, the efficacy ratios of the different countries would be linked and this also befiause a countrys method of production ^ i n s markets which other countries might take advantage of. If such a policy were ex- , tended to all the countries of the region, latin America would become a unique tax. and credit paradise, set up by activities power of transnational corporations, for using cheap labour. Is this the optimum option for Latin America? Again, prior definition of the basic values that are to prevail in Latin America appears to be essential. So far, the competitive alternative has been adopted. torically; It prevailed his- it was irJierent in the use of, preference margins in lAFHA ¡ it resulted ex-post from the fact that each country continues to optiinize at the national level and admitting.only dominant notional restrictions} it arose as a result of the fact that each country decided on its own to stimulate its exports of manufactures, and also of tho foci. that each country, acting independently, captured the new technology. Although, speeches favoured co-operation, deeds brought about competition between the I^tin American countries. The price of that competitive attitude has been heavy, not only in terms . of power of decision and economic waste, but particularly in haying adopted - 67 - . a sensorial/ccnsumist style-^/ which is not financeable in the long tei^a except with difficulty, and decidedly unfinanceable by most if not all the countries of the region. If the co-operatiYe alternative were adopted, it could be optimized at the level of the area and efficacy would increase for all the countries and for each individual country. Of course, in that case the efficacy functional might be positively different and incorporate the capacity to decide on the variables that express technological development and other socio-cultural variables which are naturally absent from a mere foreign currency ratio. The glimmerings of co-operative alternative were implemented by complementarity agreements - mainly between the LA?TA countries having the largest marketSj - but always optimizing at the national level, largely with the catalytic presence of transnational corporations and rejecting planned industrialization, as a persistent policy. The Andean Pact, in optimizing at the area level, constituted a transofrmation-milestonewhich is certainly encountering great instrumental difficulties, perhaps because national values continue to be fundamentally competitive. It would certainly not be reasonable to expect the area to advance at the speed of the slowest country, nor that the struggle for distribution continues preventing concrete action from getting under way. But neither does it appear reasonable to waste opportunities of common benefit, or to encourage a competitive race between the countries of the region in order to grant more benefits, which would principally be enjoyed by companies from outside the region unless latin American comjHnies are exeptionably dynamic. U Sensorial inasmuch as it evaluates what enters through the senses. Since it is sensorial in the socio-cultural sphere, it is consumist in the economic sphere.; - 68 - This is an important point to be evaluated, and the studies made have contributed useful material to clarify it, 11. Efficiency, whether at the national or regional level, should be reliable. This reliability depends not only on the intrinsic capability of the basic values and of the systems set up on them, but also on the - ^ a ijy in which the rules of the game are respected in the system; i.e., on the disloyalties. Until now, the competitive system ha$ legally defined dumping and subsidies as disloyal pra.ctices. committed. But these are by no means the only disloyalties The sale of outdated technology, the use effector prices, the dilution of investments, monopolio practices, and a number of other actions are also disloj^alties. For instance, when a developing country has pur- chased outdated technology up to a limit which absorbs the difference in labout» costs in international currency, it has no jother recourse but to grant stimuli if it wishes to export. Such stimuli have the outward form of a subsidy, but Intrinsically their economic function is merely that of a corrector, which appears tobe disloyal but is only offsetting a previous external disloyalty. Should disloyalties incurred in international relations - and not only in trade itself - be Incorporated gradually into a code as the-^ are casuistically mapped? Or else, should an inventory be made now of all the disloyal- ties, before establishing rules of conduct that can be generalized, to penalize some of them? Logisrally, it would not be possible to adopt a de- cision concerning one component of a set v;ithout first considering all the -69 othor components and their interactions with the first; as, otherwise, v e ; i should be dealing with consequences or formal appearances rather than with the underlying, substantive causes. The experience of the cases analysed suggests that this type of approxi-mation indicates the advisability of a complete restatement of.the problem of disloyalties. ¿ 70 Chapter rV PRELIMimRY AGENm OF TOPICS TO BE- DISCUSSED CONCERNING AN EXPORT POLICY FOR MANUFACTURES 1. Purpose of this chapter This chapter proposes some topics for discussion which it is belieTed sb.oy.ld be clarified, cither before the policy is designed - because they constitute the fundamental conditions of the problem of exports of manufactures or because thoy form part of the neighbourhood international conditions - or in connection with the policy, because they refer to the instruments it should use. 2. Some topics for discussion a. Exports of manufactures, considered nt a high level of abstraction, are a multipurpose instrument. As regards financing of the economy as a whole, they are, strictly speaking, a dominant restriction. b. The political, technological, socio-cultural, environmental and insti- tutional fields - at least - have their own optima and, consequently, make requests that the economi.c field must satisfy. There are, therefore, spe- cific requests of a non-economic nature m.ado to the behaviour of the external sector, in addition to economic requests proper. c. Exports depend largely on the capacity of integrated comipctition defined as the result of the capacity of competition generated by the effect of prices, information, marketing, financing, capacity of decision and action, technology and political support, at least. ^ 71 - d. The dominance of the technology factor and its high relative interna- tional mobility make the context of the endowment of factors of individual cotintries very sensitive to the coimtrscopacity to capture technology. e. Production/substitution/export constitute linked variables, both in their conceptual aspect asthe macro lovel, and the operational aspect at the level of specific activities. f. The possibilities and forms of substitution depend on the style of development and limit those of the subsequent exports. g. The style of developm.ent is an instrument to obtain a certain model; that is to say, a certain interconnected set of attributes of the society aspired, at the national, regional or world level. h. Foreign trade is one of the basic machanisms of insertion within supTOnatiknal level models and styles. i. The form of insertion in the supranational context forms port of the. national project of each country, since it constitutes at least a basic condition, ond/or a neighbourhood condition,and/or a restriction which in various aspects is coiainant for national integrated social development. j. Every insertion has a certain inertia. The insertions in the technolo- gical and commercial contexts, in a certain style of consumption and in a certain structure of ownership of decisions, have a strong and dominant inertia. - 12. k. Styles and models - projects, in short - are based on basic values - . considered in the oxiological sense. In relations between Latin American countries, the essential choice lies in persevering in the vnluo competition prevalent todajr or in assuming o value cooperation in genuine terms. 1. The value assurned for the intra-Iatin American relationship/must bo consistent with the option chosen for insertion in the context outside the region. m. The action of insertion and the project of each of the countries - particularly the largest of the area - influence the options of the rest as regards model and style; n. in other words, on their national projects, Considering Latin America as a whole, there is a model and stylo re- sulting from its integrated social activity which is influenced by many factors, among them, by the form of external insertion. The fact cf for- mulating a version of a Latin American Project in explicit terms, at worst, would do nothing more.than show one more alternative, which would, be a useful frame of reference for a number of aspects, among others, the behaviour of the external sector of each country. c. As long as the countries .with food shortages,have not the purchasing power to pay for their imports, the most dynamic world demand in the future will be, for non-traditional industrial production, of more sophisticated technology. .. This has the highest relative import ratio in developing countries in general, and Latin American countries in particular. - 73 - p. There are numerous disloyal practices in international relations; dumping and subsidies are not the only disloyalties. q. The world market outside the region, in perspective, has become loss reliable for lAtin America, both as regards its rate of growth and its variability. r. The space of solutions for exports in general, and exports of manufactures in particular, has stricter lower bounds, and less reliable upper bounds outside the region; exports are required by moro exacting and precise se- lective economic and non-economic requests; the cost of leakages of design : and implementation of the policy is very important; and it is essential to incorporate learning into the policy in a systematic manner. In view of this, it is an operational necessity to set up the external sector as a system in the strict sense of the word, free from the influence of preconceived doctrinal preferences. s, A fundamental decision is to establish at what level to optimize, and at what level to accept restrictions (world, regional, sub-regional, or national in each case); and it is advisable that this be done in the most explicit manner possible. t. There are activities for which the optima at supranational level (bi- lateral, subregional or regional) give higher results for each of the actor countries than the optima of purely national levels. - 74 - • u. Latin America must identify its own optima. This constitutes a poli- tical act that cannot be delegated to certain actors, V. Latin America has, in its trade with industrial countries, a structural advantage in the cost of labour in international currency. If it can control the real cost of capital goods, of technology, and of ontropreneurcg)pital factor remuneration; and if it can captura technology suitable for world competition,- it vd.ll have a favourable structural capacity of competition due to price-effbct. w. It is easier and more efficient to captura technology on the basis of regional co-operation. X, HIG expected rate of growth of the GDP during the coming five-year periods is higher for Latin America•than for countries outside the region. y. The building of a network of intra-Lotin American interests is a useful convergent instrument to improve intra-regional distribution in Latin America. z. There is a lower bound to the national capacity of decision in every- thing that is significant and relevant. The external sector in general, foreign trade in particular, more specifically exports, and, concretely, exports of manufactures, insofar as concerns this study, have the attribute of being significant and relevant. aa. ,: There is a lower bound to the speed required to form the critical mass of national and Latin American capacity of decision and action, A deliberate - 75 - impulse to accelelrate the formation of public and private entrepreneurs Latin American optimizers, and with a world horizon of decision - would increase the speed with respect to that resulting from a purely spontaneous formative process such as has been followed until now. bb. ih.e countries need to conduct exports of manufacture. Promotion is only one of the partial instruments of conduction. cc. In extremes, the attribute of the first order of conduction is cons- tituted either by successive approximations or by planning. dd. The use of planning with real operational value benefits the achieve- ments and behaviours in the external sector in general, and in exports of manufactures in particular. ee. In mixed societies, genuine participation is required if planning is to have real operational value. This is specifically applicable to the external sector in general and to exports of manufactures in particular. ff. Exports have a certain optimum diffusion and specialization structure which depends, among other factors, on the ownership of the-.technology and the trade marks, on international behaviour in the use of such legal ownership, on behaviour in respect of disloyalties, and on the relative mobility of the international and national technological frontier. It does not de- pend on preconceived doctrinal preferences. gg. Protection/promotion are linked variables. They are both partial sets of instruments and their characteristics depend to a large extent on the - 76 - optimum structure of trade. hh. The basic exchange context must be realistic and flexible. ii. The use of fiscal and financial promotion instruments is upper bounded; and the more the ratio of exports of manufactures in GDP grows, the sooner will the upper bound be reached. jj. The establishment or adaptation of institutions should be structured once the goals, the instruments, and a certain optimum distribution of responsibilities are given. Appendix 1 LATIN AMERICÜN E3CP0RTS OF iViANUrACTUHES: EXEERIENCES A f i PROBLEMS lf SOI® 0VERALL STATISTICS H t o o E H ISH g E H o o C ! c a M s • r 0 Ü t s i C O u p q • 1 c n c t . rH i N n O w fH C rl t 1 I t o t o t rl t o ri - C O H S C O -t D L O 1 t to O i 1 t o CO i H t o O J tj i Oí t o C O 1 C O H H C O 1 C N 0 . rH 1 1 I C O C2 \ i H i n i n S I 0 H C O H CQ 1 i n C O i n 0 3 c a 0 3 02 1 H r H É (D t 0 0 m ^^ i n t o I o rl I C D ri ñ ii o C Q g r H C O r H (Í — C O o s to . C C O O N 00 t 0 (J C O C O a? H t o m C D CQ CQ C O cr CT H t o t o t o w i n i H C O 03 03 C O C3 \ t o C O C O t o 03 . to C03 t o t o t0 , C! V 02 c n 02 cr C O t N C O 0 3 C D rH to i n t o t o 03 r H 0 DH 0 3 H t o in t o r W O C ^O ri - C O a o ^^ C O t o t o 0 3 i n t o t o C O i n C O t o 0 t o t o 0 3 C O c a t o t o r H r H C O c n t o t H 0 t o i n ij r r H 0 C O H 1 m CC O c r i n W w f H 0 ca 03 r H CJ 0 B t o u 03 0 i H r H 0 i n t H H S O 03 i H i H C O t o 03 0• t n C O c n 0 c n 02 C O 0 t o C O I N C O 0 [ S 0 3 0 3 ci r t o 0 03 . i n J H r H r H i H t o 0 3 c n C O £03 0 a i H o c r C O CTi C P r H t o r H i n 10 . i n 0 1 to I N 03 o • H +5 03 H to r H t o c s C N r H i H H C i H to t o 03 C O r H t o c n C O U 0 ^ H c r to r H 0 Cc n r H iH li e n H 0 3 t o c s D cr C r H H cc n r H rl O O C O O C D o tí • H tD i l O F H ^ O El ra -p o P( K M rl O O m o M f H t n H t o C T L O o o m w O l !- 0 r-t c- C- rJ rl - m o • H -P ra • H C D • P CO •^ r Ü 0 03 i n r H to 03 i n I N cr r H O O o C Q RilDle AI-1 (cont.) crF Imports Year ; Balance of Trade FOB/GIF U^x. Total Arg. 685 2078 6604 36 2849 843 2461 7847 79 - 110 1868 3701 929 2407 8905 1972 1905 4783 859 2935 1973 2255 6999 1062 1974 3635 14162 1975 3656 13558 Arg. Braz. col. 1969 1576 2265 1970 1694 1971 3ource; Braz. Col, lfx ie. Total 46 • ^ - 77 • - 648 - 643 -lóo -1059 -1190 -128 - 797 -S21 - 906 -2052 110482 36 - 792 15 - 974 -1715 4146 14442 1031 - 800 170 -1515 -1114 1602 6504 25903 296 -6211 - 93 -2964 -8972 1289 6580 25083 -1210 -4903 251 -5671 -9555 In-fcernational Financial Statistics Table A I - 2 BALANCE OF GOODS, SERVICES AND TRANSFERS (in millions of US$) Year Argentina Brazil Colombia Mexico Total 1969 -226 -336 -175 -596 -1333 1970 -159 -561 -293 -1076 -2089 1971 -388 -1317 -454- -e^e -3005 1972 -223 -1490 -190 -916 -2819 1973 714 -1757 -55 -1415 -2513 19711 220 -7179 -350 -2876 -10185 1975 -1319 -6751 -178 -4056 -12304 Source: International Financial Statistics Table A I - 3 INTERNATIONAL RESERVES (in millions of US$) Year Argentina Brazil Colombia Mexico Total 1959 222 -481 -49 -5 -313 1970 -134 -552 15 -83 -754 1971 398 -531 4 -177 -306 1972 -175 -2482 -122 -210 -2989 1973 -845 -2341 -172 -144 -3502 1974 57 S84 91 -32 1100 1975 793 951 -125 -151 1468 Source: International Financial Statistics Table A I - 193 LATIN AMERICA AND FOUR COUNTRIES STUDIED PARTICIPATION IN WORLD TRADE IN MANUFACTURES Year ^ a/ exports — Exports from LatinAmerica Value millions of US$ Share 0 , -0 Exports from Argentina Brazil, Coloir.bia g Mexico Value millions of US$ Share •6 1960 70.150 255 0.36 159 0.23 1965 109.730 613 0.56 405 0.37 1969 164.950 1.219 0.74 803 0.49 1970 190.030 1.587 0.84 1.116 0.59 1971 215.940 1.888 0.87 1.425 0.66 1972 258.760 • 2.540 0.98 1.969 0.76 1973 346.660 •3.975 1.15 3.306 0.95 197Í+ 457.670 5.930 1.30 4.465 0.98 Source: a^/ Monthly Bulletin of Statistics: Advance of Special table D, and ECLA. Includes exports of the countries, excluding Cuba and Haiti. TABLE lA - 5 a/ IMPORTS OF MANUFACTURES BY INDUSTRIALIZED COUNTRIESFROM LATIN AMERICA-^ AND FOUR COUNTRIES STUDIED Exports from developing countries in the Americas Year Total indust. countries Of these USA EEC Japan Exports from Argentina, Brazil, Colombia and Mexico Of these Total T T / L. f ^n * inQUo 1 1 O countries USA EEC Japan (in millions of us$) : 1965 7M-7 36 9 261 20 331 241 134 13 - 1970 1.775 937 553 59 1.1^5 690 300 47 1971 2.136 1.110 651 52 1. 359 863 344 41 1972 2.791 1.590 774 89 2.017 1.225 499 67 1973 1+.215 2.280 1.2Í+5 214 3.171 1.848 832 179 Industrialized countries include: United States, Canada, Belgium, Luxembourg, Prance, Western Germany, Italy, Netherlands, United Kingdom, Denmark, Norway, Sweden, Australia, New Zealand, Portugal, Switzerland, Iceland, Ireland, Greece, Spain, Finland, Austrfe, Japan, Yugoslavia and Israel, b/ This refers to developing countries in the Americas and, for practical purposes, covers Latin America, with slight differences from year to year. Source: Supplement to the World Trade Annual. Vol.11, UN Statistical Office, Compiled by the Statistical Division of ECLA. t) Q t ) Ü e • g H M r H o 1 r M () a X O O J E H . n . J O W M Q D H Ui O O W H H « O ü •H X ( U D O O fe O c ^ r o H • ( ( 0 U • 3 H C rt Q -x: ( 0 • H • C M • P •n c,to CD / H D C D « 4 • O 1H 1 O O H X O M w C c • o J H U • fH tri H H O •H ( 0 H 6 t M O C r t t í Ú s s hj o f (U O o B M H , O .c P M O) : H () t •H P s •rt « I H O : CO CD O O O o o CO CD i n CO CO c CD CO CO CD n i C CD CO CD n D • TH H T H CM LO vH CM O TH o i n o C D T H • • 0 » c c CO n n c- r- CM CO CO dT T • T TH H H H H CO CM CO CD H • O cn H tH T O o CD CO O n D n n d- c CO C i c T r T T CM CO CM H H H H o CO CN CO t o J- T H CO CD CD t K ! Ü T) o u ft H ( d • H O CO JT a m C o CD 00 P M • H Ü H « (. §Q 0 ; ) • 3 H C H O O r C •H N n ) m 1 C OV o S C C C O O O •O J- o- l- C O C O M 00-^ rC C L- L O M O O rH c c C rH 00 n n M M m C cn O C O i n CM C C CO M M tH -o •; H t o • H m p CS / tH O J r H . () t. (0 C • H • H 0 ) bc u r-i m0 ) o g •H d C H O , 0 ^ P w •c u r4 — rt O w o P y o OI I ftH o X C N WftC D U m rH rH CO CM i n r H r H C M r H C D r H c J- rH n n o c C1 c J n CO CN CN CO .C C C O O O C- C O — C- C - D r r r H H H C O O t ^ ^ C- C- r r :• r H H H cn cn rH CD n rH i i m n c CD n C- CO C L O O C O n CO c C r M H o m C O •ri C D C D C M C O r H C O c n C M r H C O c n C O M Ü •H • P m •H • p f d • P G O ( 0 •H Ü C t o C • H f n ( C C 0 • H m 1 O Jn n O c c c r n H .r o o r c H . r ^ . • r r. C H H H H- M • p c M c O xH C C n - M O C D ^ n C r . n c cn. c CD cc n . T r; . H rf • H - t o ; i n e e n r H - ¡- i C n M C CD D c O n l C C O O PH ij • C J M w t» K P M a s c •w • D • • . C- O O o o o cn CM tH CM n n t LO i i CO o I CD C c CO D D n O ^ ^ w i ® p • H c D Ih J o n a u •H ft ( U H ( 0 C O 0 ) H o se o Íí H ( 0 X) c 0- o ) -J • P H O C •C O B- •H • H •O o p C s. O H O C^ O 00 o C N C O O doC N o « C O rcn t H « O I C O C N Ü D C N C N C N r- C t O H C C N N C• N o O • • r d- C tH H D LO . C- C - J C D i n r^ L O • • o o t• I Ca 0 D D N 0 • tH co L O co L n I« D C O C O C O 0 L O d- o • • o () £ t o C D 04 C N o C D O C O C1 J C• T • C co 0 C N i D 0 N • m 0 c e O 0 o n O o C C O D o O• c• O o o •H C- C M • m C N C N O• I) T T H L D • C i N n O o o do i n 0 0 C Ñ .N C oC N Oc ^ oC N t H o o ó r^ oC O o C» cn t H C O C N • CO T H 30 o c r O ^ o CO o Ot H O « « • • O• t i n n t»0 0 T - 0 0 H c o CN « • in * C N C) O T C) t O O * o C O d- I D C N C N C O r- ^• d• o o C• C N • O e l r- L n O í, O in. d- c o • H • • m Ti c C c - n N o I i r O C N Cí C^ N. 0 0 O O C N C M n C N r- C tD• ^ • D I ) O L T d- c I i- C n D } D O l •O a CD CO CD CD O J- CN rH CN •H O I• D « O 3 rH CD CD CO CN IT) dCO JC J Cj v t o C O O O r - ü• i C C D • N O n C I C N D O I D I D i n CI S o • o u o c o • • • • o o c o • CN tH i n • H C O C N • C D m • tn O C O C C D C C O D D m (L) B •H O H I H O r d T í bO Tí - .-. -H a P; 13 r P P- P g f X M c C O ( 0 t H d(í) ( o t G t í 0 c 0•H • • ) u ) C P H • x: O ft P I O T3 -H C O B o pO ü -H Ed í P ) , C e - -s b -o i 3 t T 1 O P C O -H 0 C ) P ! r J • 0 H ( ^ 0 3 W G ) O u T í f ,g3x:Ü j • H -O P OH H F ^ O O ft ft T ( í 0 H ° 3 S-S u T í mT J p o C( C O- g O ( H Ü w p 2 i T) O- Q ftn ) í O 0 ( ) t l £ t O J ) O u f b ) W H • -H • r C e o, 3 ÍS H H H 3 O ü o t H H o c r ü H o S P 4 ; m • ) a 0 p Tí -H r r -H ra 0 H ) ) - J o u ,p ® D:o n. m4 T X! 3 t o P n P 3 •H n 3 O is t if O s nU o ,Q S ( O P O H t . • C O m r- 00 ~ C e D ( O C O CO C O O C C C O O O O.C s I •í T T í C bO ta p C m • H t x: o ) c o 0 P 0 c b O ) o O § ) ( f O t H í F U H 1 • 3 () p o • P O 0 J ) i C O I ( p 0 H p 3 I -H fr 3 c 3T P í g C O X (í t o U C. D Ef ( íl M H (• 0H O C J -p E H M o ür C M CD / cC C o O O (tí • * C D oÜ D oI D oC O t H o oC O o l £ O O r •e H n C c D o L O I D O• t • D O co -H • H O• o• O rH. o M • U O C O a • r-\ tH C N C N •t r « » • T) « ( 1 U • íh 1 t o • p B T) o Í H ft T) O ) § • p ü n 3 M h 3 § s C N • M H H § g o CJ1 CD c n o H oí m T í H c + ( d ft Q C ) O • P O B T í T) O § ft C T O í T3 P O i J 0 ) § § • P • H J -P H 3 ( ( C 0 • I p p t 3 o O ) ü 2 c *H Ul I I H ( «H U O T E í ( 0 O ) H P1 0 (í t O ^Tí • H r C H •H r f l () t m • H • Tí P 4 Q ( ) P r O ^ . CI A T) + t - o C O H í (^ í? ü T t 0I )p P 0 ) ( I d E o c o t 3 3 0) H H Í 0 H O OO J x: XI S Oi p t e c o c 3 oc o o C • 0) p H C íi-B .. K f-i m () 1 3 oQ J T J T) X • l ü c w •H • H b O T) P C •H O H • 0 H ) Q ) s C - -H T3 • O § H P 3 0 C ,i Q - t ) D S ^) T ( x: th i« C a • p p O H T) 3 O c C HO O j C O t J p( t e t - 0 i ( c f ) p o T D í • C, P N ! C ft 3 O C t- p _ H - ü ; 0 ( • : 0 T3 c ) Dx ) E v P ftc p H » U •H o tí t H Tí ft t C E H ft r- 1 ( 3 8 0 0 ) H 3O Q 0 • I CD t T i H X / H í H 3 (í O t • -H H ü O + J C O0 ) M ft ( •U p o s M c o •H + J 1 i Table AI - 8 INDEXES OF CAPACITY OF COMPETITION DUE TO PRICE-EFFECT Year Argentina Brazil Colombia Mexico (Base 197^=100) 1969 • 200 155 157 160 1970 189 li+1 155 151 1971 167 139 153 146 1972 167 131 141 142 1973 127 116 120 123 1974 100 100 100 100 1975 106 94 91 91 Source: International Financial Statistics. In view of possible differences between definitions in this publication and those of the national studies, there may be discrepancies in figures but not in trends. This source was adopted to ensure comparability. Prices used are wholesale. Table A I - 9 LIQUIDITY RATIOS AND INCREASE IN IMPLICIT PRICES FROM YEAR TO YEAR IN THE COUNTRIES CONSIDERED Brazil Argentina Year Colombia. Mexico Liqui- Variation Liqui- Variation Liqui- Variation Liqui- Variation dity in implicit dity in implicit dity in implicit dity in implicit ratio prices ratio prices ratio prices ratio prices 1970 17.1+ 10 15.5 16 15.6 10 11.3 5 1971 15.1+ 35 15.2 - 15.2 12 11.2 5 1972 12.2 67 15.6 2 15.2 13 11.3 6 1973 13.8 60 15.7 19 11+.9 22 11.5 12 1974 17.5 22 16.1 30 14.2 27 10.5 2+ 1 1975 17.2 190 16.9 27 13.0 25 11.2 11 Sourcus: International Financial Statistics (IMF) and. Economic Studies of Latin America (ECLA). Definitions: The liquidity ratio is the quotient of means of payment over gross domestic product at current prices. Means of payment figures are averages, at beginning and end of year, of currency in circulation plus private and official current accounts, and therefore exclude quasimoney. The variation in implicit prices is the percentage change in the index from year to year.