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Public Disclosure Authorized This reportwas prepared for use within the Bank and its affiliated organizations. They do not acceptresponsibility for its accuracyor completeness.The report may not be publishednor may it be quotedas representingtheir views.

INTERNATIONALBANK FOR RECONSTRUCTIONAND DEVEI (DX 4 'r INTERNATIONAL DEVELOPMENT ASSOCIATION Public Disclosure Authorized

CURRENT ECONOMIC POSITION

AND PROSPECTS

BRAZIL

(in five volumes) Public Disclosure Authorized

VOLUME IV

Annex 4 - The Federal Sector Investment Program

Annex 5 - List of Projects for External Financing

Annex 6 - Flows of Funds Tables

December 19, 1969 Public Disclosure Authorized

Western Hernsiphere Department CURRENCY EQUIVALENTS

Currency Unit: Novo Cruzeiro (New Cruzeiro)

Average 1968 Exchange Rate:

U.S. $1.00 m NCr 3.396 U.S. $1 million - NCr 3,396,000 NCr 1 million - U.S.$294,464

Unless a specific indication to the contrary is given, all cruzeiro values in the report are expressed in average 1968 prices and conversions betreen dollars and cruzeiros were made at the average 1968 exchange rate.

Exchange Rates Effective October 3, 1969:

Selling Rate: $1.00 = NCr 4.210 Buying Rate: $1.00 = NCr 4.185 .

ANNEX4

FISCAL AND MCNETARYPOLICr

Prepared by Curt Carnmark and Richard Fletcher 'aS

A ANNEX4

THE FEDERALSECTOR INVESTMENT PROGRAM

TABLE OF CONTENTS

Page No.

I. INTRODUCTION ...... 9...... 900 @0S000 0 1

A. ProjectedInvestment Levels ...... 1

B. Financingthe Program ...... , 2

II. THE SECTORAL PROGRAMS ...... 4 A. GeneralComments 4*.e.... 4

B. The Directly ProductiveSectors , , 5

C. Economic Infrastructure ...... 10

D. Social Infrastructure 23

III. CREDIT PROGRAMS ...... 29

A. TheNational Housing Bank 29

B. The National Economic DevelopmentBank.* 31

STATISTICALAPPENDIX 4' -I : ANNEX 4

THE FEDhRAL SECTOR INVESTMENT PROGRAM

I. INTRODUCTION

A. Projected Investment Levels

1. In its review of the Federal Government's investment program the mission has included the programs of federal enterprises as well as investment through ministries and federal autarkies. In this sense our concept of the federal sector is wider than that used in the Brazilian national accounts. In another respect our concept is narrower, the "Federal Sector Investment Program" which we discuss in detail excludes capital expenditures for administration, for defense, and for some other unidentified purposes. 'IThe mission's objective has been to analyze the investment projections for 1969-71 of the individual agencies and to present our own estimates of feasible and desirable programs for the period 1969-74.

2'. A number of difficulties have been encountered. First, data re- lating to the recent past (1966-68) are inadequate. The Ministry of Finance has recently completed a review of Federal Government investment in 1966 (Balanco dos Investimentos Publicos), but no reliable figures are available for 1967 or 1968. Secondly, for Dractical purposes Brazil is without a medium-term program for federal sector investment and its financing. In 1968 the government prepared both a three-year investment budget and a three-year Strategic Development Program (both covering 1968-70). There has been no revision of either of these "plans" nor at the time of the mission could the government say to what extent they were fulfilled in 1968. In the absence of a coordinated plan, the agencies' investment program for 1969-71 consists of a consolidation of the ambitions of individual spending agencies. These individual projections have not been subjected to any review by the government to determine what the relative priorities are and how the program as a whole can be kept to a level consistent with the government's resources and the needs of the economy. 1!

3. In preparing the "Mission Projections" for 1969-74 several constraints were applied. Investments by each agency (or loan disbursements in the cases of the BNDE and BNH credit programs) have been set according to the expected availability of financial resources, the state of preparation of particular projects or Drograms, and the extent to which major programs are already under way as well as the mission's view of the Drior- ity of the activity. In addition the overall size of the investment program has been kept to a level consistent with the general macroeconomic framework which assumes annual growth rates of 6 percent for GDP and of 9.4 percent for fixed investment during 1969-74.

1/ See Table 4-1 under "Agency projections": This shows a projected increase in federal sector investment in 1969 of 60 percent over the 1968 level. Such an expansion would not be possible unless there was a severe contraction in the level of private investment. ANNEX 4 Page 2

B. Financing the Program

4. The macroeconomic framework (which is discussed in detail in "The Main Report") has provided a more stringent limitation on the public sector investment program that has the availability of funds. Detailed projections were made of total capital expenditures of the federal sector and of the available financing for 1969-74. (See "The Main Report", pp. 32 ff.) The estimates indicate that the federal sector as a whole will generate financial resources in excess of its spending needs. Surpluses occur in particular in the Social Security Institute (INPS) and the Coffee Institute (IBC) which taken together will have excess capital resources amounting to over NCr 1.2 billion per year on average throughout 1969-74. The projections provide that these surplus resources will be made available to the private sector as a result of the build-up of cash deposits by the agencies concerned and their use by the monetary authorities to either extend credit to or purchase Treasury Bonds (ORTN's) from the private sector. This process should help to ease the problem of credit in the private sector which is at least partly due to the high tax burden. The situation disclosed by our projections suggests that tax reform aimed at reducing the level of taxation would be desirable in the latter years of the period (see discussion ciffiscal and monetary policies).

Financing of Federal Sector CapitalExpenditures (billions of NCr's at 1968 pricesF

Discre- Earmarked Enter- External tionary Taxes prise Private Other Borrow- Budget and Funds Savings Sector Domestic ing Total

1968 NCr 1.9 4.9 1.2 0.3 0.3 0.7 9.3 % 20% 53% 13% 4% 3% 7% 100%

Total in NCr 11.6 38.0 13.2 7.9 0.9 9.5 81.1 1969-74 % 14% 47% 16% 10% 1% 12%, 100%

Change, 1975 NCr 0.3 2.3 1.8 1.7 -0.2 1.1 7.4 from 1968 % 4'e 33% 26% 24% -9 . 3%e 16,l 100%

Ratio, 1974 to 1968 1.2 1.5 2.5 5.9 0.3 2.7

Source: Mission estimates and projections. See details in Annex 6.

5. The breakdown between the various sources of finance is shown in the accompanying table. As in 1968, the major source will be the variety of budgetary and extrabudgetary taxes which are earmarked for particular agencies or activities. These will account for nearly 50 percent of total resources. Dis- bursements of external loans are expected to rise sharply between 1968 and 1974, due in part to the past build-up of a large pipeline of external project ANNEX 4 Page 3 assistance and supplier credits. (In January 1969 undisbursed amounts of existing loans from AID, IDB, IBRD and Eximbank totalled over US$1 billion; the pipeline of supplier credits was over $600 million.) Other sources include transfers from the private sector (mainly repayments to BNDE and BNH), retained earnings of federal enterprises, and discretionary transfers from the Treasury capital budget. A comparison of 1974 and 1968 shows that of the increase in the level of capital expenditures of NCr 7,020 million, 33 percent is financed by earmarked revenues, 16 percent by external borrowing, and 47 percent by enterprise profits and other extra-budgetary domestic resources. A mere 5 percent of the increase is financed by discretionary Treasury budget capital expenditures.

6. Earmarking has long been a major feature of the Brazilian tax system. While the 1967 tax reforms reduced the earmarking of budgetary revenues, there are a large number of extra-budgetary earmarked taxes. It is argued that agencies receiving earmarked funds have a high degree of financial autonomy which permits them to plan and carry out investment programs with a minimu= of bureaucratic hindrances. The achievements of Embratel and BNH, which rely to a large extent on earmarked taxes, can be offered as evidence. However, in other cases the assurance of revenues from earmarked taxes is accompanied by relatively poor planning. Here the discipline that a budget review could provide would be helpful. In addition, in the absence of a coordinated investment program, the amount and distribution of earmarked finance acts as the main determinant of the sectoral breakdown of federal investment. Too much earmarking can limit the government's flexibility in varying investment to meet changing sectoral priorities and the requirements of overall fiscal policy.

7. It would appear that this point has been reached in Brazil. The result is that attempts by the government to vary the level of public investment in the short run usually entail large variations in the discretionary capital budget, and the effects are therefore concentrated on the programs of those agencies which rely heavily on this source of funds. In Brazil these are largely the agricultural, regional development and social infrastructure programs carried out by various ministries. It is the mission's impression that this volatility of the discretionary capital budget is an important cause of the inadequate quality of investment planning found in most ministries. In turn, lack of planning and project preparation makes it difficult for the investment level to be raised when funds could become available.

8. It would seem advisable, therefore, that the Brazilian Government should take very seriously the task of preparing a medium term investment plan which is consistent with sectoral priorities and with the overall economic strategy, but which will allow enough flexibility for expansion or contraction should the need arise. Very probably this would require a reduction on the level of earmarking and an increase in the size of the discretionary budget. Since the outlook is for further decreases in the role of discretionary capital transfers from the Treasury budget, the problem is likely to become more rather than less important in the future. ANNEX 4 Page 4

II. THE SECTORAL PROGRAMS

A. General Comments

9. The investment programs of the federal ministries, agencies, and enterprises are classified under three categories: Directly Productive Sectors, Economic Infrastructure and Social Infrastructure. Within these groups there is a more detailed breakdown of investment by economic sectors. Our analysis of the Federal Sector Investment Program is confined to these sectors plus the credit programs of the National Housing Bank (BNH) and the National Economic Development Bank (BNDE). Investment spending in "Adminis- tration and Defense" (which also includes unidentified investments by the Federal Government) was calculated as the residual in 1968 and projected for 1969-74 by the application of a growth rate of 6.0 percent. We have not attempted any discussion of investment in these areas. The lending programs of the BNDE and the BNH do not involve fixed capital formation by the federal sector, but are discussed separately under the heading of "Credit Programs".

Federal Sector Investment and Credit Program (billions of NCr's at 1968 prices)

Historical Agency Mission Projections Data Estimates Total for Ratio, 1966-68 1969-70 1969-74 1974 to Sectors NCr % NCr % NCr % 1968

Productive Sectors 3.3 28 4.1 31 11.1 30 2.23

Economic Infra- structure 6.7 56 7.1 53 19.6 53 1.71

Social Infra- structure 1.9 16 2.1 16 6.1 17 1.61

Total Fixed Investment 11.9 100 13.3 100 36.8 100 1.83

Credit Programs 2.6 3.9 13.9 1.69

Total Expenditures 14.5 17.2 50.7 3.52

10. The accompanying summary table compares the breakdown of the programs as implied by the mission's 1969-74 projections with the estimates for 1966-68 and with the agency projections for 1969-70. The comparison shows a very simi- lar allocation of the investment programs in each of the three sets of estimates. ANNEX 4 Page 5

The only change of any significance is that in the future investment in productive activity is expected to increase its share slightly at the expense of investment in economic infrastructure. This is consistent with the need to increase output in the fields of iron ore, petroleum and steel. In the case of the credit programs, rapid expansion is projected during 1969-74.

11. In the following review of the investment and lending projections of the individual agencies the mission has attempted to highlight the objectives in each sector together with the main problems and issues which have to be faced.

B. The Directly Productive Sectors

Agriculture

12. The strategy for agricultural development outlined by the Ministry of Planning in the Strategic Development Program (PED) for 1968-1970 assigns the major responsibility for increasing investment and production to the private sector. The role of the Federal Government is confined to the provision of stimuli through expansion of the agricultural credit programs of the Bank of Brazil, Bank of the Northeast, etc., and through investments in infrastructure. The investments projected in the PED fall into two main classes of programs: (1) those designed to raise agricultural productivity (irrigation, extension services and rural electrification) and (2) the agrarian reform and colonization program which aims primarily at increasing the area under productive use. Both classes of programs are also, of course, aimed partly at improving living conditions for the rural population.

13. The _rri ion program is administered by the Ministry of Interior with the various regional agencies, together with DNOCS and DNOS, as the executing organs. In early 1969, the Grupo Executivo de Irrigacao para o Desen- volvimento da Agricola (GEIDA) was set up for the purpose of developing a national irrigation plan as well as to prepare feasibility studies of high priority projects. A foreign consulting firm is assisting in this task. The expected completion date of the plan and of project identification is 1970. In view of the absence of defined priorities the mission recommends a cutback in the irrigation investment in 1969/70; after 1971 the availability of the consultants' report should allow a rapid increase in investment, provided that good projects exist.

14. The Extension Service is provided through ABCAR (Associacao Brasil- eira de Credito e Assistencia Rural) and related state associations (ACAR's). The system is an important means of introducing modern techniques to rural farmers as well as for providing the foundations for general improvements in rural living standards. The PED's target for 1968/70 is to double the staff engaged in extension work. In terms of fixed investment this involves the building of 90 new regional and 460 local offices. The mission has assumed that the growth of staff will be much slower in 1971/74 due to shortage of skilled personnel, and therefore that investment in construction of new offices will be reduced. ANNEX 4 Page 6

15. Rural Electrification is the main activity of the Instituto Nacional de Desenvolvimento Agrario (INDA). Its present program for 1969-72 (which is likely to be financed partly by IDB) involves the provision of electricity to 28,000 farms. The mission has revised the PED's estimates to take into account delays in the obtaining of finance and has projected a second phase program beginning in 1972.

16. The Government's program for Agrarian Reform is not clear. In May of this year the Grupo Executivo de Reforma Agraria was created to intensify the implementation of land reform, but the approach to be adopted - i.e., whether the emphasis will be on colonization of new territory (with consequently high costs per family) or on settlement of areas with existing infrastructure (which would involve acquisition or expropriation of already owned lands) - is undetermined. Given the lack of definition of objectives, the mission has assumed that investment in agrarian reform will increase only modestly in 1969-1974.

17. The remaining investments forecast consist of the expansion of research facilities, improvement of the distribution system (including the Santos Port storage project) and disease control. Estimates of fixed investment by the IBC in warehouses and other facilities have also been included. The mission has been unable to evaluate the long term investment strategy for agriculture or to recommend an alternative distribution of investments as between the different programs. More detailed information about the structure and prospects of the agricultural sector than is now available would be required for such evaluation.

Mining - Iron Ore

18. Brazil's largest producer and exporter of iron ore is the Companhia Vale do Rio Doce (CVRD), a mixed enterprise with 85 percent of its shares held by the Federal Government. CVRD is now completing the first stage of its expansion program, which was initiated in 1964 with the objective of increasing the volume of its exports from the level of 7 million tons in 1964 to 20 million tons in 1970. In 1968, the actual amount exportedwas 12.8 million tons which CVRD considers to be in line with their projections. Long-term contracts with customershave been secured which should enable the 1970 target to be met and permit further expansion to 23 million tons in 1971.

19. The expansionprogram's second stage, which is to be implementedin the 1969-75 period, consists of the integrated developmentof CVRD's entire processing and exporting operations in order to meet the varied input demands of modern steel producers and cope with the rapid growth in output. This development involves the installationof an ore washing and concentratingplant and an expansion of the pelletizingplant to produce a variety of ore sizes and qualities as well as the opening of new mines. The railroad facilitiesof the EFMW (a CVRD subsidiary) and the port terminal at Tuberao are also to be expanded and modernized. This will permit larger quantities of ore to be marketed and also lower unit transportation costs. The breakdown of the program for 1969-74 shows that 88 percent will be invested in mining and processing, 47 percent in railways and 15 percent in port improvements. AMNEX 4 Page 7

20. In addition to the above program, CVRD is currently studying two projects which it intends to undertake in association with other companies. CVRD and US Steel have agreed to perform a joint research program in the State of Para where evidence of large iron ore reserves was recently found. If the results are good, then an integrated mining complex will be built beginning in 1972 with a target volume of production of 10 million tons in 1975 or 1976. The second project involves the conversion of charcoal using steel plants in the Rio Doce Vale to the use of coke, thereby permitting the use of the existing planted forests for the production of wood and cellulose products. The project will be participated in by CVRDand a number of steel companies operating in the Rio Doce Valley.

21, The mission regards the CVRD program as of high priority in view of the important foreign exchange earnings which are expected to amount to $150 million by 1971. CVRD's projections for 1969-71 appear to be very firmly based, and no slippage is likely. In its projectionsfor 1972-74 the mission has included rough estimates of investmentson the Para iron ore and wood in- dustrializationprojects as well as the continuationof the expansionprogram. The financing of the program has already been arranged by CVRD for 1969-71. Internal generation of funds will cover roughly 72 percent and long term external loans (from KFW, IDB and Eximbank)the remaining 28 percent. In the 1972-74 period the mission has projected a slightly lower volume of external loans (roughly 22 percent) with the balance being met from CVRD's own resources.

Mining - Coal

2?. The Commission for the National Coal Plan (CPCAN) is a federal autarky which coordinatescoal mining and marketing operationsand which pro- motes the production and use of Brazilian coal. CPCAN's existencewill be terminated after 1970, at which time its assets will be transferredto various mining enterprises (probablysome of them mixed enterprises). Its program for 1969 and 1970 consists of investment in the mechanizationof coal mines in Santa Catarina and in the expansion of a number of steel and thermoelectric plants which are important consumers of coal.

Steel Production

23. In 1967, an inter-agencyworking group was set up to work out an expansion program for the steel industry for the next decade. This report, which was endorsed by the government in mid-1968, constitutes the National Steel Plan. Based on an estimated internal market growth of 10 percent per annum, it contemplatesan increase of ingot capacity from 4.6 million tons in 1968 to 8.1 million tons in 1972 and further to 13.4 million tons in 1977. The first stage - up to 1972 - is estimated to cost about NCr 1.9 billion or $163 per ton of installed capacity. Of this amount, about NCr 1.6 billion covers the expansion program of government-ownedenterprises (which presentlyaccount for some 65 percent of total steel production in Brazil). The second stage which is less well defined and studied is estimated to cost about NCr 5.4 billion. The mission suggests that a decision on the second round of steel expansion be postponed until 1971-72, when it will be clearer how much additional capacity will be needed for the late 1970's. ANNEX 4 Page 8

24. The first stage expansion program has taken a much longer time to initiate than projected in the Steel P'lan. This has mainly been due to the difficulty in obtaining financing, especially local funds. As of mid-1969 only Companhia Siderurgica Nacional (CSN) was under way with the first part of its expansion program (200,000 tons) with financing from Eximbank and the Brazilian Government. COSIPA is planning to start its first phase program (400,000 tons) during 1969 with financing from French commercialbanks and BNDE. The initiation of expansion programs for other companies are somewhat uncertain. In its estimates of capital expenditures for the expansion program of government-owned steel companies the mission has taken into account the delays that have taken place and will presumably occur. It estimates capital expenditures at about NCr 0.9 billion for the 1969-71 period and some INCr 2.3 billion for the 1969-74 period.

25. Difficulties in obtaining financing for the program have been the main deterrent to its implementation. The delay has resulted and for several years will continue to result in higher imports of steel. The financing problems of the industry are due in great part to past government policies regarding steel prices. Since 1965 the government has imposed restrictions on steel prices, with the result that there has been seriously inadequate internal generation of funds to finance capital expansion. The present government has, through capital transfers from the Treasury, BNDE and Banco do Brasil, tried to restore the financial position of the federal steel companies. This has been achieved to a certain extent. But, despite improved policies since March 1967, steel prices continue to lag behind cost increases when compared to early 1965. Consequently,the cash generation capacity of the steel industry is almost nonexistent. Borrowing by the steel companieshas resulted in financial chlargeswhich amount to some 15 percent of selling price. Taxes imposed by the government constitute another 17 percent. The proportion of the selling price that goes for taxes and financial charges (32 percent in all) is comparativelyhigh. It can be noted that these two items for steelworks in Europe and the United States total only 9 and 4 percent, respectively.

26. A comparison between steel prices for publicly-ownedcompanies and the industrialwholesale price index shows clearly that between 1965 and 1967 steel prices lagged far behind cost increases. 1/ Since the present government took office in March 1967 the gap has somewhat closed, but as of March 1969 the index of steel prices was still 22 percent below that for industrial products as a whole (when January 1965 is used as the base).

1/ It has been assumed that cost increases in the steel industry have been more or less in line with increases in costs and hence in wholesale prices for industrialproducts in general. ANNEX 4 Page 9

Comparison of Federal Companies' Steel Prices with Wholesale Prices for Industrial Products

__ ___=__ ___ Base January _ _ Base March 1967 Industrial Industrial Date Steel Products Steel Products

January 1965 100 100 - -

March 1967 129 180 100 100

December 1968 215 275 167 153

March 1969 223 286 173 159

27. The mission feels it is important that the steel sector be able to generate enough funds to help finance the planned expansion program. In projecting the financing of the program the mission has therefore assumed a price policy that will keep up with any further inflation plus a real price increase of $18 per ton in late 1969. This corresponds to a 15 percent real increase in the price for flat products but a smaller increase on more expensive products. Part of the resources generated from the real price increase would, during the first years, be used to restore the financial position of the federal steel companies. From 1972 onward, however, it.may be assumed that all additional resources generated by the real price increase would be available for the financing of the steel investment program.

28. The government is planning to create during 1969 a holding-company for the federal steel companies - "Empresas Brasileiras de Siderurgica S.A." (Brassider). This company would coordinate both the execution of the expansion program as well as its financing. For local financing, its financing agent would be BNDE.

Petroleum

29. The projected capital expenditures in the petroleum sector are substantially higher than in the recent past. Petrobras is projecting investments in fixed assets of about NCr 1 billion per annum in the period 1969-71, compared to an average of NCr 622 million in the period 1966-68. More than one- half of the expected expenditures are for crude oil exploration and development, about one-fifth for construction of new refineries and about one-tenth for investments in transport facilities - terminals, pipelines, barges and tankers. The remainder includes investments in petrochemicals, distribution and industrialization of shale. The program will be almost fully financed by Petrobras' own resources (about NCr 750 million a year) and the 12 percent share of the petroleum tax (IUCL) that goes to Petrobras (averaging about NCr 250 million per year during the period). ANNEX 4 Page 10

30. Domestic production of crude oil was about 96,000 barrels per day between 1961 and 1965. Since then a large increase in production has materi- alized. In 1966 production rose to 120,000 barrels per day; in 1967 to 147,000 barrels and finally in 1968 to an average of 179,000 barrels per day. Towards the end of 1968 about 200,000 barrels per day were being produced; this represents close to 50 percent o1' domestic needs. Petrobras is planning to meet about 60 percent of projected crude oil requirements in 1971 from domestic production. About 85 percent of production came from fields in the State of Bahia.

31. During 1968 Petrobras started drilling for oil on the continental shelf off the coast of Sergipe. The prospects are promising and one good well has been found some 15 miles outside a present terminal location. Seismo- graphic studies are presently under way in the Amazon delta and the results of these should be available in mid-1970. The off-shore exploration areas in Brazil are located at the same latitude and are reported to have the same geo- logical structure as the off-shore fields of Nigeria.

32. The Petrobras refineries anclasphalt plants processed a total of 20.7 million cubic meters (130 million barrels) during 1968 which represented an increase of 18 percent over 1967. Total domestic consumption of these products amounted during 1968 to some 25.8 million cubic meters. The completion during 1968 of two new refineries (Gabriel Passos in Minas Gerais and Alberto Pasqualini in Rio Grande do Sul) together with the modernization of other plants increased refinery capacLty by 90,000 barrels to 400,000 barrels per day. Petrobras is continuing its refinery expansion program with the goal of becoming self-sufficient in most products by 1973. This calls for a further increase in refinery capacity to 596,000 barrels per day. The main element in the program is the construction of a new refinery Planalto Paulista in the Sao Paulo region with a capacity of 126,000 barrels per day.

33. The Petrobras expansion program appears generally realistic. The mission has in its estimates for the 1L969-71 period phased out the program somewhat due to delays already occurred in the construction and modernization of refineries. And in order to keep the overall level of federal investment within a feasible limit, taking into consideration new estimates of petroleum tax revenues and external borrowing possibilities, the program will not fully utilize projected available resources. Hence, unless earmarking arrangements are changed, Petrobras should accumulate substantial cash balances in the latter part of the projection period.

C. Economic Infrastructure

Electric Power

34. Eletrobras has undertaken two major studies which when completed in the latter part of 1969 will give a comprehensive picture of projected investments and financial resources in the power sector up to 1973. One study is focussing on the growth of power demand in the South Central region which ANNEX 4 Page 11 covers some 70 percent of the power market. The other consists of a survey of almost all power companies in Brazil in which data are collectedon historical investmentsand their financing for the period 1966-68 and projections made on each company's investmentprogram and its financing for the period 1969-75. On the basis of these two studies and the UNDP-sponsoredpower sur- veys (one for the South Central region completed in 1967 and one for the Southern region to be completedduring 1969), Eletrobrasshould be in a position to work out a complete investmentprogram for the period 1970-73.

35. It is the intention of Eletrobrasthat this program be updated every year in the sense that projectionsfor one more year will be added and data collectedon realized investmentsfor the year just passed. This continuous updating has not been done in the past mainly due to the lack of established informationflowing from the power companies to Eletrobras. The last comprehensive investment program for the power sector was made in 1967 and no substantial revision of that program had been undertakenup to the initiation of present studies.

36. In anticipationof the results of ongoing studies Eletrobras has prepared preliminaryprojections on investmentsand resources in the power sector up to 1975. Based on preliminarydata from the load growth study, Eletrobras is envisaging an 11 percent annual cumulative increase in power demand. This increase would be consistentwith an increase of total installed capacity from at present around 8,800 MW to around 17,600 MW in 1975. The program contemplates,besides the constructionof power plants, construction of the transmission and distribution systems necessary to transfer energy to the consumers. The total cost of the program (including the expansion plans of private power companies and state as well as federal government companies) is estimated at NCr 17 billion. About 45 percent would cover the construction of generating facilities, 20 percent transmission systems and 35 percent distribution facilities have lagged seriouslybehind both requirementsand generating capacity. However, during the last few years as well as in the presently contemplatedprogram, Eletrobrashas aimed at reducing the lag and achieving a balanced investment program.

37. A large part of the proposed investments would be for projects already under construction. The major projects started during the last three years (on which expenditures would reach a peak during the 1969-75 period) include the following hydroplants: Jaguara (425 MW), Jupia (1,200 MW), Ilha Solteira (1,750 MW), Porto Colombia (360 MW), Volta Grande (400 MW), Paulo Afonso III (66o mw), Passo Fundo (220 MW), and Passo Real (125 MW). Major projects on which constructionwould start during the period are Moxoto (400 MW), Marimbondo (1,400 MW), Paulo Afonso IV (600 MW), as well as a 500 MW nuclear plant. It is anticipatedthat some 3,900 MW will come into operation during the period 1969-71, some 3,600 MW during 1972-74 and another 1,300 MW in 1975.

38. If load growth is to grow at 11 percent per year, then the total investment in the power sector during 1969-1975would have to be about NCr 17 billion (NCr 2 billion annually in the early years and close to NCr 3 billion in the later ones). Anticipated financial resourceshave been estimatedat ANNEX 4 Page 12 some NCr 13.5 billion, leaving a gap to be financed of NCr 3.5 billion if this program were to be carried out. Of projected available resources, about 26 percent come from the sole tax on electric energy (IUEE) and the compulsory loan (that are part of the total charge for electric energy) and about 25 percent from the power companies' own resources. In other words, about half of the projected resources available for the power expansion program would be obtained through tariffs and related user charges. This emphasizes the importance to this program of maintaining present tariff policy which is set with the general objective of the power companies realizing a 10 percent return on revalued assets. The Federal Government has cut down its financial contribu- tions to the sector while the private capital market, which in many countries is an important source of funds for the power sector, is highly limited in Brazil.

39. The mission's projections for power investments during the 1969- 1975 period are shown in the table below. Investments are divided between federal, state and private sectors according to the percentages used in the program prepared in 1967. The mission's projections are compatible with an annual load growth of between 9 to 10 percent, slightly less than Eletrobras' estimate (11 percent). The lower figures are believed to be adequate to avoid serious shortages, but this conclusion will have to be reviewed when the results of the demand study for the South Central region are analyzed. Investments for 1969-1975 are projected at NCr 14.3 million compared to the NCr 17 billion Eletrobras estimates.

Power Sector Investments 19_9-75

(millions of NCr's ELt 1968 prices)

1969 1970 1971 1972 1973 1974 1975 Total

Federal Sector 543 603 641 689 734 751 810 4,471

State Sector 923 990 1,032 1,088 1,137 1,156 1,224 7,550

Private Sector 244 261 273 287 300 305 323 1,993

Total 1,710 1,854 1,946 2,o64 2,171 2,212 2,357 14,314

Source: Mission estimates.

40. For estimates on the sole tax and the compulsory loan the mission has used data from the Ministry of Finance and assumed an eleven percent annual ANNEX 4 Page 13 increase 1/. As regards external resources, the projections include disbursements on existing loans as estimated by Eletrobras plus disbursements on major new transmission and hydro projects to be committed during the period (assuming foreign financing equal to the cost of the import components). All external resources have been attributed to the federal sector as no sector breakdown is available. Transfers are then made from the federal sector to cover the financial gap in the state sector. Private sector investments are assumed to be financed by internally generated resources and local borrowing.

Communications

41. Telecommunications - In March 1Q69 Brazil's international telecommunications were considerably improved by the entry into operation of the Itaborai earth station which transmits and receives international calls through the Intelsat Satellite. The resulting quality and speed of the service for international communication is in marked contrast to the domestic long distance and local facilities: the latter are grossly inadequate when compared to the growing needs. The telephone density in Brazil is presently in the neighborhood of 1.7 per hundred population; this is one of the lowest in South America 2/. In the main cities of Rio de Janeiro and Sao Paulo States there are more than half a million applicants on waiting lists for phone service.

42. A main cause of the existing deficiencies was the institution during the 1950's of very rigid rate controls which substantially reduced the earnings of telephone companies and led to neglect both of maintenance and expansion of telephone networks. In the decade prior to 1966, for example, Companhia 'Pelefonica Brazileira (CTB), which operates more than 70 percent of the tele- phones in Brazil, expanded its terminals by an average of only 2.5 percent per year as compared to the rate of growth of population in its service area of nearly 4.3 percent.

43. Since 1966 the government's attitude toward telecommunication has changed. The National Telecommunications Council (CONTEL) makes an annual review of rates with objective of permitting companies to earn rates of return up to 12 percent on their revalued assets. Additional financial resources for investment have been provided by the creation in 1966 of the National Telecom- munications Fund. 3/ The government enterprises operating in the telecommunications have since 1967 embarked on investment programs which should result in substantial expansion and improvement of the system.

1/ A larger growth of tax collections than power demand is anticipated due to the fact that no taxes are paid on electricity in systems entirely supplied by thermal plants. However, as soon as power generated by hydroplants comes into the thermal system, taxes are levied on all electricity used. 2/ The density in the United States is 43 per hundred population. 3/ This Fund receives the revenues from a 20 percent tax on domestic telecommunication messages and a 30 percent tax on international calls. The Fund is earmarked for investment by Embratel. ANNEX 4 Page TW

44. The program being undertaken by Ermbratelconsists of the installation of a high capacity microwave network which in the first phase will link the main industrial centers of Rio de Janeiro, Sao Paulo and Minas Gerais with each other and with Brasilia, Recife, Fortaleza and Porto Alegre. In the second phase connections between the main towns in the Amazon region, the Northeast and Mato Grosso will be added. Embraltel expects that the first phase will be completed in 1970 and the second phase in 1971/72. CONTELis now engaged in a study of the priorities for investment after 1972. At the moment there is no indication as to what Embratel's responsibilities in the future might be.

45. C.T.B.'s program envisages the installation between 1967 and 1971 of nearly 800,000 new terminals in the States of Guanabara, Rio de Janeiro, Sao Paulo, Minas Gerais and Espirito Santo. This would involve an increase of nearly 140 percent compared with the number of terminals in operation in 1966 (575,000). At the same time CTB plans to provide in the five states mentioned secondary interurban microwave networks which will be linked to and complement the national network of Embratel. 146. In its projections the mission has stretched out the completion of the programs of both Embratel and CTB. It was assumed that Embratel will complete its present program during 1973 and will start on new projects. In the case of CTB, increasesof 12 percent ]peryear in its investment on urban expansion and a much reduced interurban program were assumed. In terms of CTB's target of 800,000 terminals, the mission's estimates imply that this would be achieved in 1972. This is consistent with the present slippage of the program which is at present about four months behind schedule.

47. Financing for the programs will be provided through retained profits, the National TelecommunicationsFund, external borrowing and through the sale of CTB shares to prospective subscribers which will cover about 60 percent of the cost of the urban program. 1/ Embratel's resources will be far in excess of its needs if its estimat,es of the growth of receipts of the FNT and its earnings prove to be realistic. CTB, on the other hand, will not be able to meet its commitmentsfrom presently projected sources. The mission has assumed that Embratel will financ,e the CTB deficit and that the remaining surplus receipts will be held on deposit with the banking system (thus allowing greater credit expansion to the private sector). In view of the already -- high level of federal investment it would not be advisable to increase expenditures on the Embratel or CTB programs except in substitutionfor investments in other sectors. The mission is unable to evaluate priorities with sufficientprecision to make any recommendationsin this respect. As alternatives to simply building up bank deposits, the tax intake of the FNT could be reduced or could be applied in other areas. However, decisions on these questionsmust be deferred until better data are availableon the likely growth of Enbratel's tax and operating revenues.

1/ The system known as "self financed expansion" offers applicants the opportunity to purchase non-voting preference shares in CTB. The cost of the share is equal to the cost of installation and the purchaser's reward is that he gets his phone more quickly than nonshareholders. ANNEX 4 Page 15

48. Postal Services in Brazil are operated by the Empresa de Correcs e Telegrafos (ECT) which until April 1969 had been a department under the Min- istry of Communications. ECT's transformationinto a federal enterpriseis intended to give it greater financialresponsibility and to permit more effective planning of its operations. However, as the Treasury will probably still be responsible for financing its operating deficit and its investments, it is unlikely that much change in operatiing methods will in fact occur.

49. ECT's investment program consis-s of the constructionand modernization of postal agencies throughout Brazil. In particular ECT hopes to in- stall a number of automatic letter sorting centers in Sao Paulo and Guanabara. The equipment for the center which was set up in 1968 in Sao Paulo was pur- chans-don credit from the suppliers (AEG Telefunken). In view of the present uiicertaintyabout 14.CT'sfuture operations,the mission has reduced the pro- ,jectedinvestments to levels more consistentwith the past.

Tran_SoRtation

50. The improvementand expansion of tralsportationfacilities are of major importancefor the continued growth of the Brazilian economy. The rapid expansion of production and markets requires large investments in transportation facilities. Currently about one-fourth of the Federal Government'sfixed investmentexpenditure is in the transportationsector: the proportion for the states is almost the same (althoughin the latter case it is confined largely to road construction). Moreover, some of the transportationentities, partic- ularly the railways, incur large deficits financed by the budget and need major organizational and operational changes as well as new investments to approach financialviability.

51. Brazil's transport network has been influencedby geographicaland historical factors. The easily accessible coastline and navigable rivers have been instrumentalin the developmentof populationand economic centers. Rail- ways were developedprimarily to penetrate the interior and to carry natural resources to the ports. In many cases these lines are unconnectedwith each other and often have differentgauges. 52. Road transport (measuredin ton-miles) has doubled in importance over the last eight years. Its share of total freight traffic is now about 70 percent. This rapid growth has been both a consequenceand a cause of difficulties in coastal shipping and railways (which share about equally the remaining 30 percent of total freight traffic). The quality of a large part of the existing road system is poor; there is a great need for road improvement and paving (as well as for new construction)in order to lower transport cost on high density roads.

53. Transport coordination,in the sense of a set of policies to encour- age the movement of traffic by that mode of transport which in the long run can move it at the lowest economic cost, has not existed in Brazil but is now being developed. Many past transport investmentshave been made without ref- erence to prioritiesbased on economic desirabilityand a number of investments have been made where the yield has been low. A major step forward in transport planning and coordinationwas made in 1965 when a general transport survey was ANNEX 4 Page 16 started in cooperation with the IBRI) and with the assistance of foreign consultants. Phase I of the survey involved the preparation of road master plans for four states, country-wide studies of the railways and of coastal shipping, and studies of the three main ports (Rio, Santos and Recife). Phase II, which was initiated in 1967 and is to be completed in 1969, will include road master plans for most of the states not covered by Phase I.

54. Highwspr. The Transport Survey has identified a high priority program of highway investment totalling NCr. 18.6 billion for the period 1969-76 or about NCr 2.3 billion per year. This program includes construction by both federal and state entities, but; does not include investments in urban areas. It is based on the highway planning studies and will yield first year benefits averaging 22 percent for highways completed in the first four years of the program, declining to 11 percent for the remainder of the program.

55. The federal highway department (DNER) is projecting highway construction expenditures of close to NCr 1 billion a year for the next three years. The mission has in its projections modified the DNEh estimates, assuming that federal expenditures for highway construction should be limited mainly to the DNER's quota of the federEl tax on oil and lubricants (IUCL) supple- mented by foreign assistance funds. In projecting available resources the mission has assumed that there will be no Treasury capital transfers after 1969 and has estimated new commitments of external resources at $70-$85 million per year. Roreover, the mission has assumed that the three new taxes recently levied will be earmarked for maintenance rather than investment expenditures. These taxes are an annual road tax of a maximum of 2 percent on the assessed value of vehicles, an annual tax of 10 percent on vehicle insurance and a tax of 5 percent on interurban bus fares. Collections from these new taxes are estimated at NCr 170 mlillion in 1970 with annual increase of 10 percent thereafter.

56. During the next few years the government intends to gradually transfer responsibilities for the construction and maintenance of federal highways to the state highway departments. It also intends to reform the structure of road user charges so that there will be a broad correspondence between the user charges paid by particular classes of vehicles and the economic cost of highways. Presently the main user charge is the IUCL. It was concluded by the Transport Survey that users contributed about 40 percent of the economic cost of highways (although this percentage is probably rising as highway traffic increases) and that the incidence of the existing user charges on different types of vehicles was not linked to their relative use of highways. any'LX4 Page 12

n ests-ent in LAijhways (millions of NCr's at 1968 prices)i

1966 1.967 196' -,969 197-0 1 )7 i972 1973 l 4 7

Federal (DNER) 424 869 523 739 729 815 91C2 1 1 .111.97 5399-5l States (DER's) 7?29 66 n.a. 980 1100 1300 1400 Z_017 '3030 T-80

TOTAL 1153 1536 l6ig A829 2115 2302 2C51 2`697 1331`9'

57. While the mission: estimates that the federal sector w' 1l se=d NCr 5.k billion ia highway investments during the period 1969-,-4, ee..-it expenditures for road transport (excluding urbaa roads) by the nete.Es a-, %ti-.- mated at NCr 7.6 billion, The totacl amount for hight'ajy invest-mnts is NCr 13.2 billiou or about NCr 2.2 billion per year; this expe'.1u.4res level, especially in the earlier years (1970-72), is lower than the Drogram recommend ed by the Transport Survey due to the constraints on total investment. It is important (and is assumed in the mission's projection) that the program to be undertaken will follow the priorities recommended by the Transport Survey. The states' program would be financed by their quota of IUCL as well as state budgetary ap1prcpriations and disbursements of existing foreign loans.

58. Railroads. The Brazilian federal railroad system (RFFSA) has been plagued by large annual cash deficits which by their size (some $1P0-$200 -million per year during the last few years) have made it difficult for the Fed- eral Government to control inflation. The causes of the inefficiency in the railways have included, among others, excess labor, a number of separate and badly coordinated railway systems, high administrative costs, a large number of uneconomic lines, obsolete equipment and the lack of proper cost accounting and tariff policies. These policy issues were identified by the Brazil Trans- port Survey and, on the basis of its recommendations, the Ministry of Trans- portation formulated an Action program for the revitalization of the federal railways. This program has been under way for a few years and progress has been made.

59. The cash deficit, which decreased by ten percent in real terms in 1968 to some $140 million, has been cut by 50 percent in real terms over the last five years. Moreover, these amounts do not represent deficits that are fully attributable to the operations of the federal railways. The reason ia that the railways during the past have provided other government departments with free or subsidized services. During 1968 an accounting system was iAtro- duced that when fully implemented in 1970 will transfer the cost of such services to the government department or agency concerned. It is estimated that when fully implemented the normalization of accounting will further reduce the railway cash deficit by some $50 million. The normalized cash deficit for 1968 amounted to $103 million. ANNEX 4 Page 18

60. During 1969 Rede Ferroviaria Federal S.A. (RFFSA) is setting up a regional organizationwhich by 1970 will have converted its 16 subsidiary railway lines into four regional systems and thus ensure more rational operations. RFFSA has recently retained a foreign consulting firm, Sofrerail,to study and help implement new procedures in the following fields: operational standards and procedures, acquisition and handling of material and equipment, tariff setting and commercial policies, financial and cost accounting, statis- tics and processing of data. This work is expected to be finished by mid-1970.

61. A number or uneconomic lines totalling some 7,300 km. were identified by the Transport Survey. Of these, some 5,000 km. have already been closed down and RFFSA is planning to close some further 204 km. in 1969 and 989 km. in 1970. As regards redundant personnel, RFFSA cut back its staff by some 5,000 employees during 1968 to a total number of about 128,000. This represents a reduction of some 26,000 employees since 1963. The progress in the federal railway system is also documented by studies and plans that are presently drawn up to serve as a basis for investment decisions. A program for the introductionof mechanized maintenance equipment is being implemented and the preparation of a five-yearprogram for the rehabilitation of track is being finalized. Programs are also being drawn up for the replacement of obsolete rolling stock and the need for additional locomotivesand cars.

62. The federal railways are projecting fixed investmentstotalling NCr 590 million for the period 1969-71. However, these estimates are based only on already committed resources plus earmarked funds, and do not take into account external resources even though negotiations have been undertaken with suppliers for the financing of locomotivesand cars. The mission estimates include projections of possible external financing; projected investment expenditure amounts to NCr 791 million for the 1969-71 period and NCr 1.7 billion for the period 1969-74.

63. In order to cope with increasing traffic (in 1968 traffic rose by close to 10 percent) and to replace obsolete equipment, RFFSA needs a substantial number of new locomotivesand freight cars. Some of the latter should be specialized cars for grain shipments. It has been estimated that close to 40 percent of the locomotivesin traffic are obsolete steam engines and that a number of diesel locomotives have too small a capacity to handle the required loads. As regard the freight car stock, it is estimated that some 2,400 new cars are needed just to replace old and worn-out equipment. The Transport Survey emphasized the need for large investmentsin rolling stock. For all railroads in Brazil (includingSao Paulo state railways) its estimates of investmentsin rolling stock amounted to about NCr 300 million per year in the 1967-71 period and about NCr 180 million per year between 1972 and 1976. RFFSA has included in their 1969-71 program only some NCr 123 million (NCr 4i million per year) for the purchase of new rolling stock. The mission has substantially increasedthe RFFSA projectionsto about NCr 134 million per year during the 1969-74 period. 64. RFFSA has identified a large number of line sections that are bottlenecks and limit the amount of traffic to be transported on the line as a whole. These bottlenecks may be due to poor condition of the track or that the particular sections are too hilly or the curves too narrow. For some of ANNEX 4 Page 19

these sections feasibility studies are under way. RFFSA is preparing a five- year nrogram concerning the rehabilitation of these line sections. Annual

investment expenditures would, in the RFFSA estimates,7mount to some NCr 105 million. Due to the greater priority given investments in rolling stock and - the amount of resources available, the mission estimates annual expenditures for investments in track at about NCr 81 million for the 1969-74 period.

65. The Departamento Nacional de Estradas de Ferro (DNEF) has been the government department to direct, guide, control and supervise the policies of railway transport as well as to plan and undertake new line construction. -In doing the latter it has had nractically complete authority to determine what new railroad line construction should be undertaken. Insufficient regard to `izn !conomic justification of new lines has resulted in unsuccessful operations by the RFFSA, the separate agency in charge of the operation of government railway lines. The Transport Survey recommended that DNEF be dissolved as a separate entity and its functions as regards new line construction be taken over by the Engineering Department of RFFSA. The mission understands that this recommended action is being undertaken.

66. The three-year investment program prepared by DNEF for the period 1969-71 estimates capital expenditures for new line construction at NCr 355 million. This amount far exceeds the program of about NCr 50 million which was deemed as economically justified by the Transpolt Survey. A large part of the DINEFprogram presently being carried out was found to have little or no economic justification by the Transport Survey. As DNEF is now being merged with RFFSA, a new analysis should be made of its present construction program. The mission estimates -that this analysis would result in the termi- nation of a large part of the construction program and that the annual capital expenditures needed for new line construction would be of the order of NCr 10- 20 million. This amount is included in the mission projections for RFFSA under the item 'Line Construction".

67. Ports. Investments in ports during the last three years have been of the order of about NCr 85 million per year. The National Port Authority (DNPVN) is projecting an increase in investments for the 1969-7i period to about NCr 285 million per year. The mission believes this rate of investment to be too high from the point of view of what DNPVN can efficiently handle in the nesr future as well as from the availability of economically justified projects. Most of the works programmed by DNPVN are without prior economic feasibility studies and often also without complete detailed engineering. The main works of high priority to be undertaken in the near future are the extension programs in the Ports of Paranagua, Santos, Rio and Recife. The mission estimates that annual investment expenditures during the 1969-71 period would amount to some NCr 170 million. Other major port works should not be undertaken until their economic feasibility has been proved. As part of its overall program DNPVN is projecting a large investment program (some NCr 47 million per year) in inland waterways on the Rivers Tiete, Jacui and Taquari. This program consists mainly of the construction of locks and canals to enable river traffic to pass hydroplants like Jupia, Ilha Solteira, and Boa Esperanca. The mission has in its projections scaled down these investments to some NCr 30 million per year for the first three years and NCr 20 million ANNEX h Page 20 thereafter. Given needs elsewhere in the public sector and in the private sector, and the insufficient economic studies of the inland waterway investments, this seems to be the wiser course.

68. A firm of foreign consultants is presently undertaking a study as to the setting up of adequate cost and financial accounting systems in the major ports. Another important development being prepared by the government is the proposed establishment of autonomous and financially viable administrations in the ports. These changes, once made, should substantially reduce the present red tape and bureaucratic procedures and thus enable larger investments to be undertaken after 1971 (provided viable projects are prepared in the interim).

69. The port tax, which is the! main source of funds for investments in the ports, was increased in February 1969. The new rate is 2 percent on the value of imports charged with port tariffs (previously 1 percent) and 0.2 percent of the value of goods transported by coastal shipping (the same as before). Sixty percent of the proceeds is allocated to the National Port Fund which is administered by DNPVN and is used to finance new investments at all ports. Forty percent of the tax goes to the Port Improvement Fund; this part is retained by the port administrations collecting the tax and is used to finance major renewal and replacement works in the individual port. Ex- penditures are, however, controlled by DNPVN and delays in the release of these funds have resulted in a build-up of cash balances. In mid-1968 a new tax, the so-called Port Utilization Tax, was created. The proceeds of this tax go into the National Port Fund.

70. The introduction of a new tax, together with the increase in the port tax, has resulted in a substantial increase in funds available for investments in the ports. The mission estimates that investment expenditures for the next few years (up to 1974) will be substantially lower than available resources. It is, therefore, recommiended that federal budget transfers be discontinued until needed again and that DNPVN be permitted to use part of the National Port Fund for current expenditures as was the case up to 1967.

71. §h Ra. Since 1967 Brazilian shipping companies, with the assistance of the government, have been engaged in a drive to increase Brazilian participation in ocean cargo trade. So far the results have been favorable. In 1966 Brazilian flag vessels (including ships chartered by Brazilian companies as well as Brazilian owned ships) accounted for 26 percent (i.e. $92 million) of freight earned on cargo shipped to and from Brazil. In 1968 the share was 32 percent ($150 million.) 1/ As a result of the renegotiation during 1968 of the terms of a number of shipping conferences, it is expected to rise further to 40 percent (approximately$240 million) in 1969 and to 50 percent by the early 1970's.

1/ Freight earnings of charteredvessels were 19 percent ($90 million) and nationally owned ships 13 percent ($60 million). ANNEX 4 Page 21

72. The investment program of the Merchant Marine Commission (CMM) is intended to provide a modernized and expanded fleet capable of coping with the increased share of traffic. As the following table shows, 180 new vessels will be acquired between 1968 and 1971 with a total capacity of over 1.5 million DWT. Of these, 20 (0.8 million DWT) will be purchased abroad and 160 (0.7 million DWT) are being built by Brazilian shipyards.

Fleet Ixiansion Program /a

To be Acquired % Age Distribution Operating 1967 1968-71 1967 'Tje of Vessel No. DWT '000 No. DWT '000 10 yrs. 11-20 20

Petroleum Tankers 62 567 9 301 63 36 1

General Cargo/Dr Bulk 45 309 56/b 1102 60 - 40

Coastal Shipping 168 450 24 142 17 22 61

Interior Shipping 113 26 91 20 - - -

TOTAL 388 1352 180 1565 48 22 30

/a Includes vessels being constructed abroad for Petrobras /b Includes 5 ore/oil carriers (513,000 DWT)

73. It is difficult to make an evaluation of the overall benefits or costs of the program. The shipyards are substantial employers of labor. The increase (from 26 to 50 percent) in the share of freight accruing to Brazilian vessels will probably result in a substantial savings of foreign exchange. On the other hand the rapid expansion of the fleet involves large subsidies to the high cost Brazilian shipyards and is resulting in an expansion of output which is unlikeyv to be sustainable in the long run. 1/

74. According to the CMM program Brazilian shipyards will handle on the average about NCr 400 millions (re. between 150,000 and 200,000 DWT) worth of construction per year during 1968-71. This is about twice the level of the previous two years, but would only involve working one full shift per day. As 116 of the 160 vessels to be built were already under construction at the

1/ Estimates made by the Merchant Marine Commission show Brazilian shipbuilding costs in 1964 to be about 60 percent higher than international prices of comparable vessels. A more recent statement by the CMM suggests that the subsidy amounted to 46 percent in 1966. More intensive use of the shipyards would probably lead to significant reductions in the domestic price of ships. ANNEX 4 Page 22 end of 1967 it appears that this figure is fairly realistic and that substantial cutbacks cannot be made at this time. The level of investment after 1972 is likely to be very much lower than in 1968-71. Brazilian shipyards are too high cost to compete in export markets without heavy subsidies, so that demand for new construction should be limited to replacement of obsolete vessels owned by domestic shippers. Some expansion of the Brazilian fleet may also take place but this is likely to be small in view of the spare capacity acquired in the 1968-71 program. At the end of 1967 about 30 percent of the Brazilian fleet was more than 20 years old (i.e. approx. 400,000 DWT) and 25 vessels (205,000 DWT) were between 15 and 20 years. By 1972 the Brazilian fleet will contain roughly 600,000 DWT in vessels more than 20 years old. This stock of old vessels will generate a demand for new construction of, at the most, 100,000 DWT per year, that; is, for about NCr 200-300 million per annum. The mission has assumed that; NCr 200 million per year will be invested in naval construction during 1973 and 1974. This amount of construction will be insufficient to utilize the present capacity of the shipyards and substantial unemployment is likely to occur. Since the alternatives are to increase the Brazilian share of the cargo trade even further (which would be difficult), or to embark on a policy of subsidizing the export of ships (which would be economically wasteful), the government should begin to consider alternative sources of employment for the workers to be displaced. In May 1969 the Finance Ministry raised the allowable annual depreciation on ships made in Brazil from 5 to 20 percent. As the tax savings resulting must be rein- vested in domestic construction of vessels, this amounts to a considerable subsidization of the Brazilian shipbuilding and could result in a higher level of investment during 1972-74 than has been projected. Such a result seems economically questionable.

75. The financing of the program for 1968-71 as projected by CMMshows that external suppliers will provide 20 percent, the Treasury budget appro- priations another 37 percent, the Merchant Marine fund 31 percent, and the banking system and private sector the remainder of the financial resources needed. 1/ The mission's projections assume that the Treasury's contribution will be much lower than estimated by CMI and that the program will be phased out into 1972. After 1972, the reduced level of investments can be financed almost entirely through the Merchan-t Marine fund, with only small budgetary assistance.

76. ALrkorts. The program of investment in civil aviation consists mainly of two projects on which feasibility studies are currently being made. One of these projects will be the expansion of the present Rio international

1/ The Merchant Marine Fund is an investment fund used for financing the construction and purchase of ships by Brazilian shipping companies. The fund's resources consist of taxes applied to freight charges on imports and coastal shipping and also the receipts from amortization of its loans and the sale of ships. Applications of the fund comprise a combination of direct investments by CMM, loans to shipowners and capital subsidies to cover the difference between the domestic and foreign costs of construction. ANNEX 4 Page 23

airport in Rio de Janeiro to enable it to handle jumbo jets and supersonic aircraft. The other involves the installationof a modern air traffic control system throughoutthe country. Both of these projects appear to be of relativelyhigh priority in view of the increasing volume of air traffic within and to Brazil. The airport expansion moreover will be of great importance to the tourist industry,if, as seems likely, the entry into service of the new giant aircraft results in substantialreductions in fares and travel times.

'77. In addition to these projects,which should be completedby 1975 (at which time supersonicaircraft are expected to be in commercialopera- tion), the mission has assumed that the Ministry will continue its program general improvementand constructionof other airDorts through the country. The program is expected to be financedby external loans (26 percent), budgetary donations (32 percent) and earmarkedtaxes (42 percent). In view of the heavy investment level forecast,the mission expects that the portion (2.86 percent) of the IUCL which is now earmarked for this purpose will continue to he available after 1970 (which is the terminal date under present law).

D. Social Infrastructure

Education

78. Brazil has been making considerableefforts to improve and expand its educational system during the last few years. In quantitativeterms con- siderablesuccess has been achieved. Between 1960 and 1966 the total number of students enrolled grew by 43 percent in the primary schools, by 100 percent in secondary schools and by 64 percent at higher levels. Increasesin teaching staff have been more modest; they were 73 percent in the primary and secondary schools and 64 percent at the higher levels. This growth has involved substantialincreases in public expenditureson education. They have risen from a total of NCr 5,430 million (1968 prices) during 1960-63 to AlCr8,200 million between 1964-67. As a percentageof GDP this represents an increase from 2.7 to 3.1 percent (annual average).1/

79. In terms of the quality of education, however, there has been less progress and possibly even a lowering of standards. To some extent this has been due to the policy of increasingenrollment at a faster rate than teaching staff or educationalexpenditures (a policy which is unavoidableif the coverage of the system is to be increasedrapidly). But it is even more the result of some fundamentalweaknesses which continue to characterizeBrazilian education. There is a severe shortage of classroomswhich requires most schools to operate two to four shifts per day. Consequently,the daily school

1/ These data are taken from IPEA's Programa Estrategicodo Desenvolvimento for 1968-70. ANNEX 4 Page 24 time per pupil is well below the normal. Few schools have suitable buildings, apparatus or teaching aids and are, therefore, restricted in the choice of curricula and in the use of new teaching methods. Teacher training programs are inadequate and conditions of service are unattractive; 44 percent of primary school teachers are insufficiently trained while most teachers at the higher levels are part-time only. The objectives of the various types of secondary schools are not clearly defined nor is the educational content always relevant to either the country's manpower needs or the opportunities that will be open to the graduates.

80. While the quality of education thus leaves much to be desired, expenditures are nevertheless high in comparison with the small number of graduates produced. The 1967 economic mission estimated that graduating students as a percent of entrants of' primary and secondary schools were only 18 and 22 percent respectively. Costs could be substantially reduced by the introduction of more modern administrative and organizational methods. A combination of changes in curricula and in promotion procedure would reduce the present high repetition rates. It has been estimated that on the average in the first year of primary education there are 55 repeaters among each 100 pupils. Much of the expenditure is wasted since many students do not get far enough to achieve effective literacy.

81. The government is aware of these problems and has been attempting to deal with them. In 1966 the Ministry of Planning prepared a ten-year plan for education (1967-76) based on projections of manpower needs and has followed this up with the StrategicDevelopment Program for 1968 which defines the short-run targets and projects to be undertaken. both of these plans project substantialincreases in enrollment (see table). In addition,significant qualitative improvements are expected, e.g., repetition rates in primary schools are to be lowered allowing enrollment of new pupils to grow at a much faster rate than the rate of growth of total enrollments (by 26 percent as compared with 18 percent during the 1968-70 period). Excess capacity in universitiesis to be utilized (through "0perationProductivity"), thereby generating 18,000 new places per year between 1969 and 1978. ANNIEX4 Page 25

Actual and PrJected School Enrollment

Educational Primary _ Secondarv Schools Higher Level: School 1st Cycle 2nd Cycle Education

Ae Group: 7-10 11-14 15-17 17+

Enrollment: ('000)

1976 Target 11,500/a 4,890 1,319 375 As % of Age Group 100%/:b 47% 19% n.a.

1970 Target 12,587 3,237 997 333 1967 Actual 10,669 2,226 69o 213 , Increase lP70/1967 18% 45% 44% 46%

1968/70 Requirements

New Classrooms 413,930 7,388 3,585 _ New Teachers 16 2,990/c 68,154 34,330 10,400 ja T2his figure assumes that primary school reforms will have been effectively aDplied by 1973. The joint IBRD/UNESCO/FAO mission estimated that if there is no reduction in repetition rates primary school enrollment in 1976 could be as high as 19.5 million. /b This projection has been revised by the PED. The new target is that 95% of the urban and 80,' of the rural age groups should be enrolled. /c Of which 29,360 would be "leigos" - i.e., untrained teachers, and 133,630 'normalistas' - trained teachers.

82. The "Programa Estrategico' projects public expenditures on education as rising to 4.4 percent of GDP by 1970, a level comparing favorably with that in countries of a much higher GDP per capita. The projected level of investment by the Federal Government (which includes both direct investments by-the Ministry of Education and capital transfers to the states) is of the order recommendedby the IBRD mission in 1967 and is certainlynot excessive given the needs of the sector. 1/

1/ The IBRD/UNESCO/FAOmission of 1968 estimated that annual investment requirementsin secondary education are roughly $70 million per year during the next seven years. This implies (see Economic Growth of Brazil: Problems and Prospects,WH 173 a, 1967) that total investment should be $200 million (NCr 680 million) and federal investments$150 million (NCr 500 million) approximately. ANNEX 4 Page 26

"PED"7 Tar~ets for Public Expenditure in Education (millions of NCr at 1968 prices…

3-year 1968 1969 1970 Total

8 Federal Government 996 1 170 1,3 3 Current 83 959 Capital 331 334 424

States 1,477 1,931 1,043 5,451

Municipalities 185 :250 280 717

TOTAL 2,658 3,351 3,708 9,717

Percent of GDP 3.6% 4.2% 4.4%

83. Hovever, an increase in educational investment would be of little value unless accompanied by the succiessful institution of measures to improve the efficiency and quality of the system. So far this has not taken place. Moreover, the Federal Government has not yet sufficient work on detailed program and project preparation to assure efficient use of all of the funds that may be made available. The mission has estimated that in 1968 only NCr 262 million was invested by the Federal Government, far short of the target of NCR 331 million.

84. The major bottleneck to reform and to the effective execution of education programs is the decentralized administrative structure. At present the national Ministry of Education has neither the power nor the capability to establish and apply national standiards and priorities. This is not likely to change radically in the near future. The best possibility for improving the situation in the short run is through a substantial and coordinated inflow of external assistance on a project 'basis. This would provide needed technical assistance in project preparation and imolementation; it would also ensure that resources are channeled into areas of highest priority and that desirable changes in curricula and administrative practices are made.

85. Whether such assistance will be available is uncertain. The projects loans presently being considered by AID, IDB and IBRD could, if carried out in a coordinated manner and followed by future loans, make a considerable impact. If these projects are implemented according to the present schedule (see Project List), and if the Federal Government can increase its budgetary contribution by 10 percent annually over the 1968 level (of NCr 213 million per year), then federal investment in education would increase by 125 percent between 1968 and 1974. This would imply that investment in externally assisted projects (including local counterpart funds) would increase as a percentage of total federal investment in education from 11 percent in 1968 to 40 percent in 1973 and 1974. If projects are well selected and implemented this would lead to significant qualitative improvements in the eduational ANNEX h4 Page 27 system. Average investment during the neriod 1969-74 would be roughly NCr 440 million per year. This program could be financed entirely by Treasury budget transfers (78 percent) and external loans (22 percent).

Health

36. The Brazilian Government is currently engaged in a reorganization of the structure of health services in Brazil and in preparing a new National Health Plan. Though final decisions have not yet been made, the probable approach will be for the Federal Government to concentrateon public health programs (e.g., control and prevention of endemic and epidemic diseases) and provision of basic health services (e.g., establishmentof a pharmaceutical .:Iustrv, medical research and training)while the private sector will be responsible for the supply of medical attentionto individualsincluding the setting up and operating of hospitals.

87. In accordancewith this breakdown of functions,the Federal Govern- rmient'sinvestments in health will consist mainly of installationof water supply and sanitary facilities (see below), the executionof disease eradi- cation campaigns and the provision of research and training schools. Expend- itures on the latter programs were estimated by the PED for 1969 and 1970 at NCr 117 million and NCr 122 million respectively. The mission's estimates are slightly lower for 1969-70 due to the assumption of slower rates of disbursement on outstandingexternal loans.

Housing

88. Federal Government spending on housing (apart from the BNH lending operation) consists of the constructionof houses for public officials, civil servants and military personnel. The PED estimates that this program will involve investmentsof NCr 127 million in 1Q69 and NCr 146 million in 1970. It is not known what is the size of the housing deficit among the class of people served by the program, and whether it is large enough to merit investment at that level. On account of the need to limit the scope of the total federal investment program, the mission has projected substantially lower investmentsthan the PED.

Social Welfare

89. The National Institute for Social Welfare (INPS) is responsible for the administrationof the national social security system for urban employees in private industry. Public servants are insured under separate schemes. The levels of investmentprojected by INPS for 1969-71 represents an increase of about 200 percent over investmentsin 1968. Roughly 60 percent of the investment projected for 1969 will comprise the building of administrative offices to replace the presently leased facilities,and the remainder consists of the constructionand equipment of rehabilitationcenters and hospitals run by the Institute.

90. The mission has assumed a cut back in the INPS investmentin the belief that a large program for the constructionof administrativeoffices is ANNEX 4 Page 28

of too low a priority to merit the diversion of physical and financial resources away from other sectors offering greater social and economic benefits. Projection of INPS financial resources show that the growth of revenues from payroll taxes are likely to result in resources exceeding expenditures (including investment) by amounts averaging NCr 270 million between 1969 and 1974. The mission has assumed that these surplus resources will be channeled back into the private sector through the banking system. (The mission has projected a much lower level of revenues than did the INPS. If the latter's estimates are correct the financial surplus would be of the order of NCr 1 billion in each year during 1969-74. A study of the financial aspects of the Brazilian social security system is urgently needed to reduce the large margin of error in the present estimates.)

Water SuDply and Sanitation

91. Deficiencies in the existing sanitation services in Brazil are a major cause of the high rates of infant mortality and of deaths due to diar- rheal diseases. The general mortality rate in 1967 was 11 per thousand population of which about 50 percent consisted of children under the age of 5 years. Deaths due to infectious diarrhea in 1964 varied from .04 to 2 per thousand in 6 cities in south-central Brazil and were as high as 7 per thousand in Natal and northeast. Approximately 50 percent of the victims of infectious diarrhea were less than one year old. The size of the problem is apparent from the fact that at present only about one-quarter of the population is supplied with potable water and less than one-fifth have the benefit of sanitary sewers. In the urban areas the estimate ratios are one-half and one-third, respectively.

92. The Federal Government will be undertaking a number of water supply programs during the next few years. One of these is the lending program by the National Housing Bank (see Part III below). The others, carried out by the departments and regional agencies attached to the Ministries of Health, Interior and Finance, take the form of direct investment in or financial grants for municipal water supply systems. Of the latter, the most important programs are those of:

(i) Nationa_ Deparmn_t of Sanitary Works (DNOS).? rhis program involves the construction and financing of a wide variety of projects in water supply, sewerage, irrigation and flood control. The total investment is estimated as NCr 138 million during 1968-1970 to be financed almost entirely by the Ministry of Interior's budget.

(ii) SUDENE. This consists of the financing (by grants) of water sunply facilities for 37 medium sized cities and of sewerage systems for the seven capital cities and thirty medium sized cities all in the Northeast Region. The PED estimates that investments in this program will amount to NCr 115 million during 1968-1970, one-third of which will be financed by external assistance.

(iii) Ministry of Health. Two departments of this ministry are engaged in sanitary programs - the Fundacao Servicio Especial para Saude ANNEX 4 Page 29

Publico (FSESP) and the Departamento Nacional de Endemias Rurais (DNERU). These organizations are primarily concerned with water supply facilities in small communities (less than 5,000 inhabitants) and with the completion of projects left unfinished by other agencies. The 1968-1970 program involves estimated expenditures of NCr 75 million, of which NCr 39 millions consist of disbursements of the existing loan from IDB.

(iv) Ministry of Finance. This ministry is responsible for the establishment of water supply and drainage systems for the Federal Dis- trict. NCr 78 million are to be spent during 1968/70.

0?P In terms of the type of investment, the consolidated programs break down as follows for 1968-1970:

NCr (Millions) Percent

Water Supply 261 57 Sanitary Sewers 96 21 Drought & Flood Controls 89 19 Others 11 3

TOTAL 457 100

The overall size of the program for the three year period and its allocation between the different sorts of investment seems reasonable. Water supply deservedly has the largest role as this is the most economical way of achieving an imnediate improvement in public health. PSESP estimates that the installation of water supply facilities in cities costs on average $33 per in- habitant served. Sanitary drains cost about twice as much and have less impact upon public health. In its own projections the mission has reduced the PED's estimates to take into account the current reorganization of the Ministry of Interior and the fact that the BNH program will also require the services of sanitary engineers and to that extent will reduce the ability of DNOS, SUDENE, etc. to carry out their programs. The investment levels projected imply that FSESP and SUDENE will concentrate their efforts almost exclusively on the execution of current and anticipated projects for which external project assistance is being provided.

III. CREDIT PROGRAMS

A. The National Housing Bank (BNH)

94. The BNH was created in 1964 as an autarky under the Ministry of Interior for the purpose of supervising and promoting the execution of the National Housing Plan. In addition, since 1968 it has taken on the responsibility of a national program of financing water supply installations. ANNEX 4 Page 30

The Housing Program

95. The major portion of BNH's resources (62 percent in the 1969-1971 program) is applied to the financing of home purchases by lower and middle income families. The conditions attached to BNH loans vary with the income levels of the purchasers. At the lowest levels BNH will finance up to 100 percent of the purchase price at an interest rate of 4 percent per annum (with monetary correction) and 20 years amortization; at the highest levels eligible for BNH credits, the bank's participation may be as low as 12 percent with a 100 percent rate of interest and 8 years amortization.

96. Loans are distributed betireen the various categories so that the average terms are 7 percent interest; and 15 years amortization. In all cases BNH requires that the monthly repayments by the purchaser should not exceed 25 percent of the family income. BNH relies on a complex system of agencies and associations to mobilize counterpart funds from private savings and to administer the construction of houses and the collection of monthly payments.

97. As a complement to its financing of home purchases, BNE does a substantial amount of short-term lending to the construction industry for the purchase of building materials, expansion of capacity and increases in working capital (the RECON, REINVEST and REGIR programs). The objective of these loans is a gradual improvement in the efficiency of house construction and consequently lower prices.

98. The program as a whole has been very successful; at the end of 1968 BNH had financed a total of 329,071 (either completed or currently under construction) representing a total investment in 1968 prices of NCr 4,899 million of which NCr 2,250 million were BNH loans. Actual disbursements on housing rose ninefold between 1966 (NCr 128 million) and 1968 (NCr 1,305 million). The housing program is also given credit for a major contribution to the economic recovery in the latter part of 1967 and 1968 due to the resulting demand for labor and construction materials.

99. BNH's investment program for 1969-1971 contemplates the financing of 600,000 units and an average increase in disbursements of about 8 percent per year. It is indicative of the size of the housing deficit in Brazil that this will satisfy a mere 26 percent of the estimated need for housing in the markets concerned; for urban areas, however, the program will cover 33 percent of the deficit. ANNEX 4 Page 31

The BNH Program Compared to the HousinDeficit

(number of dwelling units) Program 1969-1972 Estimated as % of Cateory: Pro am Deficit Deficit

Rural 38,813 595,800 6.5%

Urban-Popular 256,628 541,600 47.4

UJrbanEconomic 193,308 789,200 24.5 (including recon.)

Urban-Middle 120,310 375,700 32.0 (including SBPE) TOTAL 609,059 2,302,300 26.5%

100. In the longer term (after 1971) BNH hopes to achieve a rate of growth of disbursements of at least 6 percent; this would just keep pace with the estimated growth of poDulation in urban areas. Houses constructed are exPected to increase at a slightly faster rate as a result of lower costs.

The Water Sul Proram

101. Traditionally the federal government operations in the field of water supply have consisted of direct investments or grants by the Minis- tries of Health and Interior (see above under social infrastructure). In 1967 the Fundo Financiamento do Saneamento (FISANE) was created to complete the financing of a number of projects started under an agreement between UNOS and USAID in 1965. In 1968 BNH formed the Sistema Financeiro do Saneamento (SFS) to which FISANE's resources and responsibilities have been transferred. The SFS will administer the FISANE program together with a new national program of much wider scope.

102. Under this program (known as REFINAG) BNH makes loans to cities and municipalities for the installation of water supply systems. These loans carry a rate of interest of 8 percent (with monetary correction) and generally amount to 37.5 percent of the total cost of a project. 1/ A condition of these loans is that the municipality maintain rates sufficient to cover the operating costs and the amortization of the BNH and state loans.

1/ State governments and regional agencies loan another 37.5 percent (of which BNH may contribute up to 50 percent in special cases) and the municipalities provide 25 percent as a grant. ANNEX 4 Page 3?

103. The target of the program for 1969-1971 is the provision in 857 municipalities of adequate water supply systems designed for 20 years of service, taking into account the likely population growth. As of March 1969 preliminary agreements had been made with 653 municipalities and contracts for actual construction had been signed with 77. BNH estimates the cost of the program at approximately NCr 1 billion (1968 prices) of which BNH would provide NCr 381 million, external resources would provide NCr 203 million and states and municipalities the balance. Expenditures for the FISANE projects (NCr 25 milLion for 1969-71) will be financed entirely by Treasury budget allocations.

104. After 1971 BNH hopes to start a program for financing sewerage systems (REFINESG program). No estimates of expenditures for this program have been made by BNH, since its inception date and size will depend very much on the experience with the REFINAG. The mission has lowered the projected disbursements by BNH on water supply and sewerage loans to take in- to account more recent information on the availability of external finance during the 1969 and 1970. Disbursements are expected to grow by 20 percent per year between 1971 and 1974.

The Overall Program and its Financing

105. For the 1969-1971 period BNH estimates that about 60 percent of its resource needs will be met by use of deposits of the Fundo de Garanta de Tempo e Servicio (FGTS), 25 percent by repayments on outstanding loans and the remainder through use of operating profits, sale of assets and foreign loans. Between 1971 and 1974 these sources of finance will be insufficient to meet the projected levels of spending. This results from a projected substantial decline in the growth of FGTS deposits as withdrawals by contributors increase. 1/ This financing gap, however, is too small to require any major change in the projected level of expenditures. In the short run additional resources could be provided through the sale of Treas- ury bonds purchases by BNH in 1967; increasing the level of external assistance could help fill the gap and also prove useful from a balance of payments point of view (because of the large element of local cost financing neces- sarily involved). The mission's projections assume these courses of action.

B. National Economic I)evelopment Bank (BNDE)

106. The BNDE was established in 1952. In its early years most of its resources went into financing the transport and electric power sectors. Beginning in 1957 the steel sector became a major client. (Over half of

1/ After 1970 the decline should terminate and deposits should grow at a constant rate. At about this time, however, repayments on previous loans should be sufficient to meet all the financial needs of BNIIand the FGTS could in fact be diverted to other purposes. ANNEX 4 Page 33

BNDE financing in 1960 and in 1Q62-1965 went to this single activity.) With Eletrobras now the main channel for financingthe power sector and with alternativesources opening up for the steel industry,BNDE is now able to increase its financingof other sectors. The change is reflected in the 1968 loan approvals. Less than 15 percent of the cruzeiro financingapproved in 1968 went to the power and steel sectors: over 40 percent went to the other manufacturingactivities. This trend is expected to continue in the future. Thus BNDE will increasinglybecome a developmentbank financinga broad range of activitiesin the private sector and less the banker of public enterprises. In the mission's projections this is reflected in a continuingincrease in the proportion of BNDE loans going to the private sector; the percentage rises from an estimated 54 percent in 1969 to 74 percent in 1974.

Cruzeiro Financing Aaproved by BNDE in 1967 and 1968 (millions of WCr's at 1968 prices)

_ __ __8 = _ __=19 Million NCr's Percent Million NCr's Percent

Public Utilities 230.2 24.7% 409.9 41.5% Power 227.B8 2;1- 88.6 8.9 Transportation 2.4 0.3 265.3 26.8 Telecommunications - - 56.0 5.7

Mining - - 18.8 1.9

Manufacturing(except steel) 287.6 30.8 405.7 40.9

Steel Industry 338.5 36.3 57.0 5.8

Livestock & Food Supply 22.9 2.4 45.1 4.6

Education and Research 54.1 5.8 31.4 3.2

Others - - 22.5 2.2

Total 933.3 100.0% 990.4 1OO.o%

Source: BNDE; 1967 data converted to 1968 prices by General Price Index.

107. Until 1968 the main source of funds for the BNDE had been the federal income tax; it received either a surcharge on the tax or a share of the tax receipts. This came to an end in 1968, but has been replaced in part by the transfer to the BNDE of most of the revenues from the Finan- cial Operations Tax (collectedby the Monetary Authorities). In addition BNDE still receives some financing from the Treasury budget. Loan repayments should become a rapidly increasing source of funds for the BNDE. The adoption in 1969 of a policy of positive real interest rates on all loans over 5 years will end the tendency toward decapitalizationthat accompanied ANNEX 4 Page 34 interest rates below the rate of inflation. Borrowers now must pay full monetary correction plus nominal interest of 4 to 8 percent on such loans. In the past receipts from loan repayments were held down by the practice of financing the steel industry in large part through equity participation; the shift away from financing the steel sector will thus also add to receipts from loan amortization.

108. The mission's projections suggest that even though the BNDE increases total lending at an average annual rate of 12.0 percent and lending to the private sector at a rate 15.6 percent over the 1968 levels, it will become progressively less dependent upon transfers from the Treasury Budget and, after 1971, transfer of the Financial Operations Tax from the Monetary Budget.

109. Given the relative surplus of savings in the public sector and the needs of the private sector, a strong case can be made for even more rapid rates of expansion in BNDE's lending if it demonstrates the administrative capacity to efficiently carry the burden. The changing composi- tion of lending as well as the increasing volume add to its workload; however, administrative reforms are being made which should help it handle the increased responsibilities. As Brazil needs expanded private as well as public development banking, BNDE's lending to the private sector should be on terms which permit effective competition from well managed private investment banks.

110. An increasingly important function of BNDE has been to obtain lines of credit abroad and other forms of foreign financing and then make these available to Brazilian borrowers. At the end of 1968 agreements on lines of credit had been made with banks or major suppliers in France, Germany, the U.S., Poland and Hungary: discussions were under way with poten- tial credit sources in Belgium, South Africa, and Czechoslovakia. The IDB and AID have both made loans to finance lending through the BNDE's special funds. Such types of financing for BNDE are expected to expand rapidly in the coming years. If balance of payments and external debt management problems are to be resolved, it is essential that a larger proportion of the private sector's imports of capital equipment be financed by relatively long term credits. While financing not tied to imports from particular countries is to be preferred, such funds are in short supply. The best alternative seems to be that of obtaining lines of credit in a number of supplier countries and then letting the importer choose on the basis of the best combination of price and credit terms. By obtaining credit on relatively favorable terms and serving as the intermediary, the BNDE greatly enlarges the scope for such operations. ANNEX 4

STATISTICAL APPENDIX

LIST OF TABLES

Table No.

4-1 The Federal Sector Investment Program

Ministry Programs

4-2 Agriculture 4-3 Education h-4 Health 4l-5 Housing 4-6 Water Supply and Sanitation

FederalAutarkies

4-7 Coal Coimnission 4-8 Airport Authority 4-9 DepartamentoNacional de Fstradas de Rodagem 4-10 DepartamentoNacional de Portos e Vias Navegaveis h-11 Merchant Marine Commission 4-12 InstitutoNacional da PrevidenciaSocial 4-13 Coffee Fund (Parts A and B)

Federal Enterprises

4-1h Companhia Vale do Rio Doce (Iron Ore Mining) 4-15 Federal Steel Companies 4-16 Petrobras 4-17 Federal Power Companies 4-18 Embratel 4-19 CompanhiaTelefonica Brasileira 4-20 &npresa de CorreioseTelegrafos 4-21 Rede FerroviariaFederal SA and DNEF

Official Credit Agencies

4-22 Banco Nacional de DesenvolvimentoEconomico 4-23 Banco Nacional de Habitacao. I I a I ANNEX 4

Table 4-1: THE FEDERAL SerTOR TNVESTMENT PROGRAM (millions of NCr's at 1968 prices)

Historical Data Agenc Projections Mission Projctions _9 -9 -961 % o9 90 719 1970 1971 1972

A. FIXSD INVESTMENT

Produrctive Sectors 1,139 1.11 1,0147 1,908 2,193 - 1252 1,653 1725 1970 2209 Z2.3

Agriculture (Includes IBC) 292 332 244 372 4oo n.a. 276 333 325 348 379 400

Mining - Iron Ore 30 47 32 50 97 77 50 97 77 125 194 241 Mining - Coal 10 11 11 14 27 - 14 27 - - - -

Steel Production 144 134 163 575 578 280 125 302 465 550 549 403

Petroleum 663 607 597 897 1,091 1,017 787 894 858 947 1,087 1,286

Economic Infrastructure E 1, 81 2,630 3547 3,573 2,1882,831 3260 3,244 3461 3,724

Electric Power 506 759 582 5431/ 6031! n.a. 543 603 641 689 734 751

Coxwnications 176 277 393 746 0 __ 446 539 523 597 660 7 EHBRLTEL 3 21 100 n.a. 1091341 39 7 3 70 Coup. Tel. Bras. 153 241 275 558 346 170 317 359 434 504 559 640 EXp. Correos e Tel. 18 15 18 34 39 63 20 25 30 33 36 40

Transportation 1,199 1 594 1,213 2,258 2,467 - 19642 o 2096 1,958 H26 2223 Highways - DNgR *'85 ,* 424903 981 1,017 7 Railways ------RFFSA 214 168 106 198 226 166 244 285 262 253 296 334 DNgF 150 94 81 97 140 140 ------CVRD - FMV 78 121 114 126 102 54 126 102 54 54 68 68 Ports - DNPYN 72 79 103 276 282 300 125 165 220 225 230 255 Ports -CVRD (Thbarao) 11 19 16 30 35 53 30 35 53 17 10 _ Shipping 196 178 197 567 634 610 517 534 510 270 220 220 Airports 54 66 67 61 67 n.a. 61 105 182 237 226 149

Social Infrastructure 591 573 736 980 1,139 - 789 860 994 1.085 1,145 1,189

Bducation 225 275 253 332 424 n.a. 287 349 421 489 545 571

Health 150 140 131 117 122 n.a. 106 116 122 129 137 145

Housing - - 121 127 146 n.a. 70 70 70 70 70 70

Social Welfare 66 42 87 256 269 275 200 169 175 184 193 203

Water Supply 150 116 144 148 178 n.a. 126 156 206 213 200 200 Total Fixed Invest nent 3,611 4,33 3,971 6,435 6,905 4,872 5 , 5,9791 6,299 7, T4

contiuued I I ANNEX 4

Table 4-1: THE FEDERAL SECTOR INVBTMENT PROGRAM (millions of NCr's at 1906 prices) Page 2 Historical Data A enc Proetns Mission Pro ections T 192T11 8 T~ 97 1971 T19 1970 1971 -- 9 - 1

B. CREDIT PROGRAMS

BNH - Private Sector 96 490 1,305 1,486 1,558 1,651 1,486 1,558 1,651 1,750 1,855 1,966

BNDE- Private Industry 110 257 299 381A/1 n.a. 381 Ig2 600 623 721 835

Total Credit Programs 206 747 1L04 1,867 2,031 1,d67 ,2131 2,251 6 2,801

C. Total 3,817 5,081 5,575 8,302 8,936 6,739 7,641 8,230 8,672 9,391 10,044

1/ Mission estimates used - agency projections not available. I I I I e I 4 S~~ I ~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Table 4-2: AGRICULTURE ANNE1 4 (millions of NCr's at 1960 prices)

Historical Data Agency Projections mission ZsEimates l9' 19('7 19t'9 1949 1970 1971 1949 1970 1971 1972 1973 1974

A. Current Account Savings n.a. n.a. 67 69 70 n.a. 69 70 71 72 714 75 12. Direct Taxes 62 64 65 614 f;5 6A (7 (9 70 (IBRA - land tax) (32) (34) (35) (34) (35) (35) (36) (37) (38) (INDA - Payroll.tax) (30) (30) (30) (30) (30) (31) (31) (32) (32) 14.Registration fees - IBRA 5 5' 5 5 5 5 5 5 5

B. Capital Receipts n.a. n.a. 217 303 330 181 238 229 251 280 300 1. Treasury Budget Transfers n.a. n.a. 203 225 252 n.a. 154 179 153 1147 221 251 (Min. Interior RegionalAgencies) (76) (102) (113) (143) (159) (114) (116) (184) (195) (Min. Agriculture) (114) (98) (111) (IBRA) (10) (17) ( 20) (11) (16) (22) (27) (33) (o) (INDA) ( 3) ( 8) (8) () (4) (17) ( L) (14) (16)

3. Borrowing fron abroad n.a. n.a. 14 78 78 n.a. 27 59 76 101 59 149 (Min. Interior, Min. Agr., Regional Ag.) (114) (-) - (27) (32) (49) (77) (32) (15) (IB'RA) ( (6)4- (46) (- ) (_ ) (_ ) (_ ) (_ ) (_ ) (INDA) ( -) (32) (32) (- ) (27) (34) (h0) (35) (314)

C. Capital ELcpenditures (= A 4 B) 411 385 284 372 1400 250 308 300 323 3514 375

1. Fixed Capital Investment 2(-o 213 226 372 400 n.a. 250 308 300 323 354 375 IBRA - Agrarian Reform (14) (147) (101) (105) (50) (56) (62) (68) (75) (83) INDA - Rural Electrification ( 5) ( 2) ( 70) ( 70) (30) (61) (82) (75) (71) (82) Colonization/other (16) (31) - - (- ) (- ) (- ) (- ) ( -) (- )

Mins. Irrigation (73) (40) ( 52) ( 58) (26) (29) (140) (50) (60) (70) Agric.& &xtension (38) (68) ( 90) (102) (90) (102) (50) (53) (57) (61) Interior Research ( 9) (14) ( 21) (23) (21) (23) (24) (25) (27) (28) Distribution (27) ( 6) ( 8) ( 9) ( 8) ( 9) (12) (21) (32) (18) Disease Control ( 9) ( 7) ( 114) (17) (14) (17) (18) (19) (20) (21) Other (G9) (11) ( 16) (17) (11) (11) (1?) (12) (12) (12)

2. Stockpiling 151 172 58 Sugar Institute ( 93) (114) (-) COBAL ( 58) ( 58) (58)

Source: Ministries of Agriculture, Interior and Planning and Mission estimates. I I i I I Table 4-3:, ZDUCATION ANNEX 4 (millionsof NCr's at 1968 prices)

HistoricalData Agency Projections Mission Estimates

1966 1967 1968 1969 1970 1971 1969 1970 1971 1972 1973 197b

A. Current Account Savings _- - - - _- - - _ -

B. CapitalReceipts 2_2 _5j2 _gii _J23JA - 287 349 421 489 545 571

1. Treasury Budget Transfe 240 268 376 n.a. 265 291 319 3h9 383 b19 (SalanoEducacao - 40%)- (27) (31) (34) (31) (33) (35) (37) (4O) (b2) (discretionarytransfers) (213) (234) (3h2) (234) (258) (284) (312) (343) (377) 3. Borrowingfrom Abroad (gross) 13 66 48 n.a. 22 58 102 140 162 152 (Existingloans) (22) (22) (22) (22) (-) (-) (New loans) (-) (36) (80) (118) (162) (152)

C. Capital Expenditures(-A+B) 225 275 253 332 42h 287 349 421 h89 545 571

1. Fixed Capital Investment 225 275 253 332 424 n.a. 287 3h9 121 h89 545 571

1/ This tax was extrabudgetaryprior to 1969 but has been included here for convenience.

Source: Ministriesof Educationand Planningand Mission estimates I ANNEX 4 Table 4-4: HEALTH (millions of NCr's at 1968 prices) Ifistorical.Data n Pro~jetons Mission Estimates 16 1 1968 1969 19i7 1971 1969 1970 1971 1972 1973 19TM

A. Current Account Savings - 7 5 6 n.a. 7 8 8 9 10 11

4s. PEFAM - (30% lottery profits) - n.a. 7 5 6 7 8 8 9 10 11

B. Capital Receipts 1214 99 98 114 120 127 131

1. Treasury Budget Transfers (discretionary) 118 n.a. 118 89 98 n.a. 89 98 104 110 117 124

3. Borrowing from Abroad (gross) 32 n.a. 6 23 18 n.a. 10 10 10 10 10 10

C. Capital Expenditures (-A+B) 150 1140 131 117 122 106 116 122 I2 137 1k5

1. Fixed Capital Investment 150 1140 131 117 122 n.a. 106 116 122 129 137 1$5

Source: Ministries of Health and Planning and Mission Estimates. I I I t~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

; b i~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Table 4-5: HOUSING ANNEX 4 (millions of NCr's at 1968 prices) HiLstorical Data Agency Projections Mission EPstimates 1966 1967 1968 1969 1970 1971 1969 1970 1971 1972 1973 1974

A. Current Account Savings _ _ _ _ _------

B. Capital Receipts n.a. n.a. 121 127 146 n.a. 70 70 70 70 70 70

1. Treasury Budget Transfers (discretionary) 93 108 130 51 54 5h 54 54 54 2. Private Sector 28 19 16 19 16 16 16 16 16

C. Capital Expenditures (=A+B) n.a. n.a. 121 127 146 n.a. 70 70 70 70 70 70-

1. Fixed Capital Investment n.a. n.a. 121 127 146 n.a. 70 70 70 70 70 70

Source: Ministry of Planning, BNH and Mission estimates. Il I 1~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Table 4-6: WATER SUPPLY AND SANITATION ANNEX 4 (millionsof NCr's at 1968 prices) HistoricalData Agency Projections Mission Estimates 1966 1967 1968 1969 1970 1971 1969 1970 1971 1972 1973 1y74

A. CurrentAccount Savings n.a. n.a. 18 11 11 16 18 19 19 21 21

2. Water Rates 11 11 12 11 12 13 13 14 14

4. FESFIM - 20% of 7 - - - 5 6 6 6 7 7 Lotteryprofits_

B. CapitalReceipts n.a. n.a. 126 137 166 110 138 187 194 179 179 l.TreasuryBudget Trans- fers 110 102 115 n.a. 83 94 131 134 134 134

(Ministryof Health) (1X) (12) (13) (17) (16) (16) (16) (15) (15) (Ministryof Finance PDF) ( 8) (23) (29) (23) (29) (30) (30) (31) (32) (Ninistryof Interior DNOS,SUDENE,Others) (88) (67) (73) (43) (49) (85) (88) (88) (87)

3. Borrowingfrom Abroad (gross) 16 35 51 n.a. 27 44 56 60 45 45

(Minis.of Health) (8) (16) (11) (8) (8) (8) (8) (8) (8) (DNOS,SUDEN,Others) ( 8) (19) (40) (19) (36) (48) (52) (37) (37) C. CapitalExpenditures (=A+B) 150 116 144 148 178 n.a. 126 156 206 213 200 200 1. Fixed Capital investment 150 116 144 148 178 126 156 206 213 200 200

(Minis.ofHealth) (31) (28) (24) (30) (30) (30) (30) (30) (30) (Minis.ofFinance) (15) (28) (35) (28) (35) (35) (35) (35) (35) (Minis.ofInterior) (100) (92) (119) (68) (101) (141) (148) (135) (135)

1/ Prior to 1969, 30% of the profits were allocatedto FESPI14.

Source: Ministries of Planning,Health and Finance, BNH and Mission estimates. I I i ;I Table 4-7: COALCOMMISSION ANNEX4 (millions of NCr's at 1968 prices)

HistoricalData AgencyProJections M4issionEstimates 1966 1967 1268 1969 1970 1971 1969 1970 1971 1972 1973 1974 Current A/C

A. Current Receipts _ 2 1 1 2 - 1 2 - - - (discretionary transfers)

4. Conmissions on Operations - 2 1 1 2 1 2

B. Current Payments 2 2 1 L 4 - 3 4

2. Administrative Exponses 2 2 1 3 4 3 4

C. Savings (A-B) -2 _ _ -2 -2 -2 -2

Capital A/C

A. Current Account Savings -2 _ -2 - 2 2 -2

B. Capital Receipts (Treasury Transfers) 33 36 29 16 29 16 29

C. Capital Expenditurs 31 36 29 14 27 14 27

1. Fixed Capital Investment 10 U1 U 14 27 14 27

6. Change in Cash Balance 21 25 18 - - - -

Source: Commission for the National Coal Plan and Mission estimates. I I Table 4-8: AIRPORT AUTHORITY ANNEX4 (millions of NCr's at 1968 prices) Historical Data Agenc Projections Mission Estimates 19_6 196T-7 -W 1969 1970 1971 1969 1970 1971 1972 1973 197h

CURRENTACCOUNT

A. Current Receipts n.a. n.a. 7 8 8 8 8 8 8 1. Treasury Budget Transfer 7 n.a. n.a. n.a. (discretionary transfers)

B. Current Payments n.a. n.a. 7 8 8 8 8 8 8 2. Administrative Expenses 7 n.a. n.a. n.a.

C. Savings (A-B)

CAPITALACCOUNT

A. Current Account Savings ------B. CapitalReceipts 54 66 67 61 67 74 92 184 24 242 174 1. TreasuryBudget Transfers 17; -Zr - 70 -7T §: i3i 133 (IUCL Share-2.86%) (45) (36) (44) (43) (-) n.a. (50) (54) (60) (66) (73) (80) (AirportTax) (-) (-) (12) (17) (18) (20) (21) (22) (23) (25) (26) (DiscretionaryTransfer) (9) (30) (9) 1 (49) n.a. (-) (-) (44) (78) (59) (27) 2. Borrowingfrom abroad (gross) - - 2 - - n.a. 4 17 58 78 85 41 (Existingloans) ( 2) (4) (-) (-) (a) (-) (-) (now loans) (17) (58) (78) (85) (41)

C. CapitalExpenditures 54 66 67 61 _ 74 92 184 245 242 174 1 Fixed Capital Investment -n.a. 1-i i0 182 37 226 W9 la. Rio Airport (-) (34) (85) (129) (135) (92) b. TrafficControl Network (6) (27) (57) (68) (51) (17) c. Other projects (54) (66) (67) (55) (44) (40) (40) (40) (40) 4. AmortizingFordign Loans - - - - - n.a. - - 2 8 16 25 6. Change in cash balance 13 -13 - - - -

Source: Ministry of Air and Mission Estimates I I I I Table 4-9: DEPARTAMENTONACIONAL DE ESTRADAS DE RODAGEM ANNEX 4 -(millions of NCr's at 1968 Drices)

Historical Data Agency Projections Mission Estimates 1966 1967 196 1969 1970 1971 1969 1970 1971 1972 1973 1974

CURRENTACCOUNT

A. Current Receipts 27 275 278 316 - 127 47 491 529 556 1. Treasury Budget Transfers 301Uii 377 102 1_5 2 (IUCL) 181 24 151 156 n.a. n.a. (141) (201) (202) (222) (167) (112) (Taxa. Rodoviaria) - - - 25 120 132 (54) (120) (132) (i145) (162) (176) (Discretionary transfers) 56 251 127 133 n.a. n.a. (106) (56) (68) (63) (133) (1914) 4. Insurance/Passenger Taxes - - - 2 50 57 15 50 55 61 67 74 B. Current Payments 237 275 278 316 1 6 427 457 491 529 556 1. Interest Payments (Bond a/c) 3 3 2 7 n.a. n.a. 2 30 30 30 30 30 2. Administration + Other 179 182 214 215 215 227 240 255 270 276 Maintenance 55 90 62 73 170 178 73 170 187 206 229 250 C. Sarings (A-B) CAPITALACCOUNT

A. Current Account Savings -- - - - B. Capital Receipts 1i 919 v 911 1 1071 II E 1.O 1. 1. Treasury budget transfers 3357 7314 I0 800 an70 O 21 592 653 794 946 (IUCL) (307) (508) (444) (555) (582) (621) (516) (521) (592) (653) (794) (9468 (Discretionary transfers -net) (49) (226) (-39) (79) (218) (250) -46 (-)( -) (-) (-) (-) (gross transfers) (155) (322) (61) (232) (440) (496) (107) (Less- repayment of advances) (106) (96) (106) (153) (222) (246) (153) 2. Borrowg from abroad 32 62 25 202 189 262 202 193 214 262 300 350 (Existing loans) (32) (62) (25) (202) (114) (22) (202) (93) (14) (12) (-) () (New loans) W-) (-) (-) C-) (75) (240) (-) (100) (200)(250) (m) (350) 4. Borrowing from BNDE - - 17 19 - - 19 - - 6. Transfers from Coffee Fund 17 31 13 31 - - 31 - - - 7. Transfers from Bond Account 59 92 85 25 60 53 25 40 148 40 - - C. Capital Expenditures (-A+B) 91 91110149l 1186 W7 I4 8514 955 1,094 1,296 1. Fixed Capital Investment 214 569 903 ' 1,042 739 729 i 902 1,07 I17 a. Construction and paving (408) (848) (515) (828) (941)LOj,302) (724) (696) (782) (872) (987XL,167) b, Other (16) (21) (14) (75) (40) (40) (15) (33) (33) (30) (30) (30) 4. Amortizing Foreign Loans 40 50 16 7 65 142 7 23 37 51 75 97 5. Amortizing BNDELoans - - - 1 2 1 2 2 2 2 2

Source: Departamento Nacional de Estradas de Rodagem and Mission Estimates. I I

W X~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ : X I I

AN1ME4

Table 4-10: DEPARTAMENTONACIONAL D! PORTO.S VIAS NAVEOAVEIS (millions of NCr's at 1968 prices) Historical Data Agency Estimatas Mission ProJections 1966 1967 1965 1969 1970 j-ff1_ 196 971-197_2_17 1 CURRENT ACCOUNT

A. Current Receipts 77 80 89 - _2 181 191 200 211 222 1, Treasury Budget Transfers (discretionary) 20 28 17 na, na, n.a. 25 25 25 25 25 25 4. Indirect Taxes 57 52 72 147 174 (19 147 156 166 (Il 186 19 4a, National Port Fund (9) { ) (46) (94) (11) (I) t7 ) (100) (1) (112) (119) S 60% Port Tax (O) (31) (37) (5) 7) (1) (0) t) (90) T9) (101) (107) Port Utilization Tax (-) (-) (8) (14) (15) (20) (14) (15) (16) (17) (18) (19) 4b, Port Improvement Fund (Q) (21) (26) (Q) (64) (S) Ci) (9) (60) (63) .J) 71 40% Port Tax B. Current Payments 20 28 1 n.a. n.a. na. 25 21 2 2 2j 25 Administrative and Operating Expenses C. Savings (A-B) L7 52 72 147 174 1 147 156 166 175 186 197

CAPITAL ACCOUNT A. Current Account Savings 57 52 72 7 15 14 156 166 17 186 19 B. Capital Receipts s 7 4 -47 1. Treasury Budget Transfers (discretionary) 34 20 28 31 35 35 16 - - _ _ _ 3. Borrowing from abroad (gross) - - 1 10 26 28 10 16 27 33 34 20 4. Borrowing from BNDE (gross) - - 9 40 30 20 20 20 25 25 21 - 5. Monetary system credit (net) 3 3 -4 6 -8 -10 6 -8 -10 - - - (gross borrowing) (10) (12) (10) (24) (5) (3) (24) (5) (3) (loan amortization) (7) (9) (14) (18) (13) (13) (18) (13) (13) C. Capital Expenditures (mA+B) 94 Yf l06 320 288 32 199 184 208 233 241 217 1, Fixed Capital Investment 72 79 103 2 300 3 220 2303 - ; Port Improvement Fund (12) (16) (20) ( Included below ) Santos (-) (-) (-) (72) (65) (70) (30) (50) (70) (70) (45) (40) Rio de Janeiro (10) ( 8) (11) (36) (35) (35) (10) (20) (30) (30) (40) (40) Recife (4) (4) (5) (16) (15) (20) (10) (10) (20) (25) (15) (20) Other ports (30) (40) (28) (99) (100) (100) (30) (40) (6C) (70) (100) (125) Waterways (2) (3) (1) (39) (47) (55) (30) (30) (30) (20) (20) (20) Other (14) (8) (38) (14) (20) (20) (15) (15) (10) (10) (10) (10) 4. Amortizing Foreign Loans - - - - 1 4 - 1 2 4 6 8 5. Amortizing BNDE Loans - - - 1 5 8 1 3 5 8 11 13 6. Change in Cash Balances 22 -4 3 43 - - 73 15 -19 -4 -6 -59

Source: Departamento Nacional de Portos e Vias Navegaveis and Mission Estimates. I Table 4-11: MERCHANTMARINE COMMISSION ANNEX4 (millions of NCr ts at 1968 prices)

Historical Data Agency ProJections Mission Estimates 1966 1967 1-966 19-69-19-70-- 7197) 1269- 5017 1972 1973 197h CURRENTACCOUNT

A. Current Receipts 166 1 105 n.a. nea. n.a. 157 165 I 181 190 200 1. Treasury Budget Transfers (discretionary) 97 129 34 30 30 30 30 30 30 4. Taxa Renov. M.M. 69 66 71 127 135 1143 151 160 170

B. Current Payments 103 16 41 n.a. n.a. n.a. 38 38 8 388 1. Subsidies to Shipping Cos. 97 129 3 30 30 30 30 30 30 2. Administrative Expenses 6 7 7 8 8 8 8 8 8

C. Savings (A-B) 6I _q 64 9 RI 135 119 127 13L5 1 152 162

CAPITAL ACCOUNT

A. Current Account Savings 63 59 64 119 127 1i 119 127 135 14s3 162

B. Capital Receipts 135 109 1144 480 490 505 480 357 422 174 115 105 1. Treasury Budget Transfer 117 9 1 3 _ 1-7 2Z28 13 - (Taxa do Despacho Advanceira) (33) (31) (26) (-) (-) (-) (-) (-) (-) (-) (-) (-) (Capital Budget - discretiori (84) (67) (62) (65) (308) (344) (65) (175) (261) (77) (13) (-) 2. Private sector (paymentforships)18 11 6 23 67 94 23 67 94 1041 115 125 3. Borrowing from abroad (gross) - - 25 251 78 - 251 78 - - - - 5. Monetary System Credit (net) - - 25 141 37 67 141 37 67 -7 -13 -20 (gross borrowing) (25) (17) (37) (69) (17) (37) (69) (-) (-) (-) (-loan amortization) (-) (-) ( ) (2) (-) (-) (2) ( 7) (13) (20) (+R;FIlAM Account) - - - (124) - - (124)

C. Capital Expenditures 198 168 208 599 617 640 59 484 57 317 267 267 1. FixedCapital Investinent 19 179 197 63i F 7 1 50 0 F 0 220 (Naval construction) (196) (178) (193) (560) (625) (596) (510) (525) (496) (250) (200) (200) (Civil works) (W) (-) (4) (7) (9) (14) (7) (9) (U1) (20) (20) (20) 4. Amortizing Foreign Loans - - - - 30 30 - 47 47 47 47 47 6. Change in cash balances 2 -10 32 - - Source: Merchant Marine Commission and Mission Estimates. e I I s ~~~~ ~; ~~~~~~~~~~~~~~~~~ Table 4-12: INSTITUTO NACIONALDA PREVIDENCIA SOCIAL ANNEX 4 (millions of NCr's at 1968 prices) HistoricalData Agency Projections Mission Estimates _966 1967 1968 19 9 1970 1971 199 170 1971 _1972 1973 197

CURRENTACCOUNT

A. Current Receipts 3781 3849 4699 5291 6290 7150 5291 5664 6068 6503 6974 7482 1. Treasury Budget Transfers n.a. n.a. 398 398 398 2. Private Sector n.a. n.a. 4301 5291 n.a. n.a. (Payroll and Other Taxes) (3985) (4668) 4668 5041 5445 5880 5351 6859 (Other Current Receipts) (316) (623) 225 225 225 225 225 225

B. Current Paym nts n.a. n.a. 4618 n.a. n.a. n.a. 4812 5196 5613 6061 6$6 7070 1. oci-slecurity Benefit 3083 2777 n.a. n.a. 3165 3 39734 291 763 2. Current Expenses 1535 n.a. n.a. n.a. 1658 1790 1934 2088 2255 2436

C. Savings (A-B) n.a. n.a. 81 n.a. n.a. n.a. 479 468 455 442 428 412

CAPITAL ACCOUNr

A. Current Account Savings n.a. n.a. 81 2113 n.a. n.a. 479 468 455 442 428 412

B. Capital Receipts 9 6 14 61 19 21 61 19 21 - - - 2. Private Sector (Sale of Assets) 6 9 % 19 19 h 21 - - -

C. Capital Expenditures n.a. n.a. 95 n.a. n.a. n.a. 540 487 476 442 428 412 1. Fixed Capital Investmant 5 877 2756 7 9 OO 9 7 1 93 3 3. Financing Private Sector - - 14 ------6. Change in Cash Balances n.a. n.a. -6 n.a. n.a. n.a. 340 318 301 258 235 209

Source: Instituto Nacional da Previdencia Social and Mission estimates. I Table 4-13: COFFEE FUND ANNEX 4 Part A: Historicaland ProjeetedAccounts (millions of NCr's at 1968 prices) Historical Data Kission Estimates 1966 1967 1968 1969 1970 1971 1972 1973 1971

CurrentAccount

A. CurrentReceipts 1,375 1,103 1,097 1,118 1,170 1,197 1,226 l2.5i4 8 2. Transferfrom Private Sector 76 62 1 4. Indirect Taxes 1,412 1,151 1,06h 1,103 1,1 9 1,182 1,211 1,239 1,269 5. Profit on TBC Export Sales -113 -110 32 15 21 15 15 15 15

B. CurrentPayments 697 818 596 669 583 492 393 290 290 1. Tranefers to Private Sector -47 130 62 83 83 83 83 83 83 2. Consumption (adm. expense) 281 175 184 207 207 207 207 207 207 3. Subsidr on Domestic Sales 463 513 350 379 293 202 103 - -

C. Savings (A-B) 678 285 501 449 587 705 833 964 994

CpMitalAccount

A. Current Account Savings 678 285 501 449 587 705 833 964 994

B. Capital Receipts -17 -31 -13 -31 - - - - _ 6. Transfersbetween Ex-Bud. Prog. -17 -31 -13 -31 - - - - -

C. Capital Expenditures(=A+B) 661 254 488 418 587 705 833 964 994 1. Fixed Investment 7 119 ---iU26 25 25 25 25 25 2. InventoryInvestment 171 -188 -h96 -512 -273 -159 -387 -32h -114 3. Capital Transfersto Private Sector 115 134 22 26 25 25 25 25 25 h. Loans made to ROW - 2 42 ------6. Change in Cash Balances 343 187 902 878 810 814 1,170 1,238 1,058

Source: Central Bank and Mission estimates. I ANNEX4 Table 4-13- COFFEE FUND

Part B: Price and Volume Assumptions Actual Mission Estimates 1968-~~F 19~690 19701 1971 1972 1973 19h .96 1796 6

Volume ASSU!Etions(million bags) 30.00 27.8 22.86 A. Production 17.75 19.87 214.35 26.92 214.10 25.90 19.33 ; 7 13.0 13.2 1. Exported Directly l15.27 T;T7 F TgT7 10 .13 14.80 9.66 2. Sold to IBC 3 .10 4.60 8.57 8.614 5.30 6.57 21.147 17.0 17.3 B. Exports 19.04 18.89 19.38 19.88 20.40 20.93 19.W I W7 1. Private Exports 717 f7172 1 7 19.33 (16.89) (16.149) (16.68) (17.08) (17.140) (17.73) (18.07) (15.2) (15.1) (beans) (.2) (.6) (soluble) (.58) (.80) (1.00) (1.20) (140) (1.60) (1.80) 1.60 1.6 1.6 2. Warehouse Sales 1.57 1.60 i.60 1.63 1.60 i.60 11.60 11.90 12.1 12.7 C. IBC Sales 13.144 12 .54 12.80 11.10 11.30 -- _ --. T . 1. To Eporters 3.12 2.02 2.00 - 1.60 1.6 1.6 2. Warehouse Sales 1.57 1.60 1.60 1.60 1.60 1.60 8.1 8.6 3. For Domestic Market 8.75 8.92 9.20 9.50 9.70 10.00 10.30 -1-77 +2.7 -3.04 D. IBC Inventory Change -10.014 -7.914 -14.23 -2.146 -6.oo -5.03

Price Assumptions (1968 NCr per bag)

A. Average Prices for IBC 149.38 64.48 614.8 63j.148 64.48 61418 64.48 39.53 50.04 1. For Purchases - 32.79 30.92 2. On Sales to Exporters 52.69 6L4.48 67.48 - - - 3. On Warehouse Sales 63.44 74.07 714.07 74.07 74.07 74.07 74.07 5.5) 55.50 8 6141.h8 3.72 1.87 4. On Domestic Sales 9.42 21.96 32.59 43.22 53.85; 6t.14

B. Indirect Taxes 61.05 1. Contribution Quota (beans) 70.80 66.88 66.88 66.88 66.88 66.88 66.88 58.25 - 2. Tax on Soluble - - 33.141 33.414 33 blh 33.44 33.4b

Source: Central Bank and Mission estimates. I Table 4-14: COMPANHIAVALE DO RIO DOCE (IRON ORE MINING) ANNLX 4 (millionsof NCr1s at 1968 prices)

HistoricalData Aaencv Projections Mission Estimates 1966 1967 196t 1969 1970 1971 1969 1970 1971 1972 1973 1974

A. CurrentReceipts (net) 134 135 133 174 188 197 174 188 197 216 236 290 1. Retained Profits m3I -135 133 T7I 1T9 197 m174 1 19T7 2 m 290

B. CapitalReceipts 27 58 59 75 100 54 75 100 54 56 125 128 3. Borrowingfrom Abroad (gross) 27 3 30 7 101 3 7 101 3 7 127 130 (existingloans) (17) (58) (30) (3) (2) (3) (3) (2) (3) (3) (-) (-) (new loans) - - - (65) (99) (52) (65) (99) (52) (55) (127) (130) 4. Borrowing from BNDE (gross) - - 14 8 - 8 - - - - - 6. Monetary System Credit (net) 15 -1 -1 -1 -1 -1 -1 -2 -2 -2 (Gross borrowing) - - (i m 71) 1) 1) T) 5) () - - - (Loan amortization) (-2) (-2) (-2) (-2) (-2) (-2) (-2) (-2) (-2)

C. Capital Expenditures(=A+B) 161 193 192 249 288 247 249 288 247 272 361 418 1. Fixed Capital Investment 119 T87 162 206 23T 120 -2T T17 9 272 309 C.l.a.IronOre (30) (47) (32) (50) (97) (77) (50) (97) (77) (1i5) (194) (241) (mining) 7) (l>) *) (2) (7) (5) (2 (7) (5) ) (30) T7) (pelletizing) (24) (37) (24) (21) (29) (27) (21) (29) (27) (17) (34) (34) (Para project) ------(50) (100) (150) (Wood Industrialization) (20) (30) (50) b.Railway - EB1;V (78) (121) (114) (126) (102) (54) (126) (102) (54) (54) 68 (68) c.Port - Tubarao (11) ) ) 0) ) (3) 30) T37) (3) () 1 (7 2. Inventory Investment 27 -12 4 7 1; T 10 12 14 3. Financing Private Sector 5 7 10 17 18 30- 17 18 30 35 40 45 5. Amortizing Foreign Loans 10 11 14 20 28 23 20 28 23 29 35 48 6. Amortizing BNDELoans 2 2 2 2 2 2 2 2 2 2

Source: Companhia Vale do Rio Doce and Mission estimates. I I 0

I Table 4-15: FEDERAL STEEL COMPANIES ANNEX 4

(millions of Ntr's at 1968 prices)

Historical Data Agency Projections Mission Estimates 1966 1967 1968 JY69 1970 171 1969 1970 1971 1972 1973 1974 107 190 246 271 3 A. Current Receipts (net) - - - 66 79 95 - -7 f_ 190 v 271 301 1. Retained Profits - - - 7 155 138 215 301 344 337 184 B. Capital Receipts 150 141 173 575 499 120 59 145 200 229 248 102 3. Borrowing from Abroad (gross) 4o 34 78 276 246 253 49 35 61 105 89 52 4. BNDI Investments 110 107 35 233 35 30 30 30 - - - 5. Financing from Bond Account 60 - 5 10 10 - - b. Banco do BraBil (net) 250 138 322 491 590 608 48! C. Capital Expenditures (=A+B) 150 141 173 575 578 127 302 1T m 9 & 1. Fixed Capital Investment 1 137 13- T X 2m0 (153) (136) (54) (91) (101) (120) (160) (194) (200) a. CSN - (88) (51) (10) (64) (101) (108) (32) (25) b. USIMAS _ (5) (38) (102) (119) (44) (18) (90) (90) (44) (75) (110) c. COSIPA n.a. (38) (33) (85) (61) ( -) (1) (1) (7) (8) (8) (2) d. F.A. Vitoria _ (5) (8) (14) (7) C-) (40) (5) (3) Acesita _ (3) (16) (51) (51) (17) (5) (45) (57) e. ( ) (fr1 '6" f. Semi-finishedSteel Plant - (-) (17) (170) (204) (135) (-) (1) - 13 20 i 5. Amortizing Foreign Loans 6 7 10 - - (

Economico and Mission estimates. Source: Ministry of Industry and Commerce, Banco Nacional de Desenvolvimento I I I I I Table 4-16: PETROBRAS ANNEX 4 (millions of NCr' s at 196d prices)

Historical Data Agency Projectians2 Mission Estimates ______1966 1967 1968 1969 1970 1971 1919 1970 1971 1972 1973 1974

A. Current Receipts (net) 625 357 475 628 756 867 628 756 867 954 1 Q49 1 154 1. Retained Profits 62T 27 F7 ;;i 1 9 154

B. Capital Receipts 171 225 D .0 260 241 321 , 318 327 1. Treasury Budget Transfers 101 I83 201 193 204 213 208 229 25 277 304 335 (I.U.C.L. Share12.0%) 2. Private Sector 41 26 25 36 27 17 36 27 17 20 20 20 3. Borrowing from Abroad (gross) 29 16 106 59 18 11 59 40 50 30 20 20 4. Borrowing from BNI (gross) - - 2 18 U1 - 18 11 - - - -

C. Capital Erpenditures (-A+B)2 796 582 809 989 1,197 1 153 949 1063 1 185 1 281 1 3 1 529 1. Fixed Capital Investmnent 63 3W7 i7 897 1,091 1,017 787 84 47 ,087 Exploration (198) (204) (233) (240) (227) (202) (220) (227) (202) (200) (240) (280) Production (117) (116) (82) (192) (190) (189) (142) (150) (189) (225) (250) (300) Reserve for nea projects (-) (-) (-) (40) (132) (247) (-) (15) (51) (117) (177) (236) Refinery (112) (97) (85) (137) (320) (3.83) (137) (280) (220) (200) (210) (240) Petrochemicals (62) (49) (30) (66) (50) (35) (66) (50) (35) (40) (40) (50) Maritime Transport (80) (16) (9) (101) (55) (15) (101) (55) (15) (20) (20) (20) Terninals and pipelines (52) (84) (105) (54) (43) (68) (54) (43) (68) (70) (75) (80) Distribution (12) (10) (20) (18) (21) (23) (18) (21) (23) (15) (15) (15) Industrialization of Shale (U1) (U) (10) (14) (10) ( 8) (14) (10) (8) (10) (10) (10) Other (19) (20) (23) (35) (43) (47) (35) (43) (47) (50) (50) (50) 2. Inventory Investmt 63 -55 124 65 78 108 65 78 90 104 116 133 3. Financing Private Sector 5 2 25 ------5. Auortizing Foreign Loans 65 28 63 25 25 25 25 27 28 30 30 20 6. Amortizing BNDELoans - - - 2 3 3 2 3 3 3 3 3 7. Change in nash Balances - - - - 70 61 206 197 157 37

I/ PETRO)BRAS'Estimates for 1969-71 show a financing gap in each year. Source: Petrobras and Mission estimates. I i

I ANNEX h Table 4-17: FEDERAL POWER COMPANIES (millions of NCr's at 1968 prices)

Historical Data Agency Estimates mission Estimates 1966 1967 1968 1969 1970 1971 1969 1970 1971 1972 973 197

A. Current Receipts (net) DI 412 416 299 218 27 299 302 317 334 352 373 1. Retained Profits - Electrobras 111 270 277 16 101 8 150 1 l1 Subsidiaries 122 142 139 138 114 125 138 152 167 184 202 223

B. Capital Receipts 771 652 717 732 826 895 672 771 81 893 979 1 069 1. Treasury Budget Transfers 2BT 237 216 196 198 213 9 170 mT Z-7 177 ' (IUEE Share 39%) (96) (91) (60) (87) (105) (120) (69) (77) (83) (92) (102) (113) (discretionary transfers) (185) (146) (156) (109) (93) (93) (109) (93) (75) (75) (75) (75) 2. Private Sector (compulsory loan) 273 180 179 222 269 308 172 192 213 236 262 291 3. Borrowing from Abroad (gross) 196 217 259 267 300 334 275 350 400 450 500 550 4. Borrowing from BNDE (gross) 21 18 63 47 59 40 47 59 40 40 40 4o 12 C. Capital Expenditures (A+B) 1 004 964 1 133 -1h 9 1. Fixed Capital Investment 50 7 9 2 n.a. n.a. n.a. 3 603 i 9 7 71 4. Transfer to State Power Companies 4514 165 529 n.a. n.a. n.a. 383 420 422 448 487 556 5. Amortizing Foreign Loans 4O 36 18 38 43 55 38 43 55 76 94 U15 6. Amortizing BNDE Loans 4 4 4 7 7 10 7 7 10 1!4 16 20

Total Fixed Investment in Electric Power na. n.a. n.a. 1,922 1 9 2,222 1 710 1 854 1 946 2 064 2 171 2 212 1. Federal Companies 3 757 5 n.a. n,a. n.a. 641 R989 751 2. State Companies n.a. n.a. n.a. n.a. n.a. n.a. 923 990 1,032 1,088 1,137 1,156 (Own Resources) 540 570 610 (540) (570) (610) (640) (650) (600) (E:LETROBRASTransfer) n.a. n.a. n.a. (383) (420) (422) (448) (1487) (556) 3. Private Companies 212 198 241 179 179 179 244 261 273 287 300 305

Source: Eletrobras and Mission estimates. i I

I I Table 4-18: dMBRATEL ANNEX 4 (millionsof NCr's at 1968 prices)

A. Current Receipts (net) .5 9 85 163 215 288 331 _ a9

1. Retained Profits 2 2 2 n.a. n.a. n.a. 10 27 52 60 69 80 2. National TelecommunicationsFund 3 47 83 153 188 236 153 188 236 271 312 359

B. Capital Receipts - 2 2 2 7 12 3 19 25 31 32 3. Borrowingfrom Abroad (gross) - 2 2 2 7 12 3 19 31 32 3.a (existing Loans) 3.b (New Loans) (2) (7) (12) (25) (32) (19) (1) (12) (13) (6) - - C. Capital S&penditures (=A+B) 5 49 87 166 234 313 362 413 458 1. Fixed Capital Investment 5 21 100 154 118 n.a. 109 155 59 60 65 70 5. Amortizing Foreign Loans - - - n.a. n.a. n.a. - - 1 3 5 8 7. Change in Cash Balances - 28 -13 n.a. na. n.a. _ _ 109 128 237 249 (balance at end of year) (- startd' year balance) 8. Transfers to CTB Program - - 57 79 144 171 106 131

Source: Embratel I I

I I Table 4-19: COMPANHIATELEFONICA BRASILEIRA ANNEX 4 (millions of NCr's at 1968 prices) -a-soric1lDaa AgecyPojections Miso siaes 196 iY] 16919V191 9(7T7 l16919y T -7t 190 213 A. CurrentReceipts (net) n.a. n.a. &0 121 150 164 121 136 152 170 190 213 1. Retained Profits 80 121 150 164 121 136 152 170 n.a. n.a. 235 302 169 169 257 304 394 443 396 57 B. CapitalReceipts 20 169 179-169 165 18 207 232 2. Private Sector 20~ 169 T~T~ 207 23 -260 291

(InstallationShare Purchases) (109) (165) (167) (167) (165) (185) (207) (232) (260) (291) (other) ( 96) (2) (2) (2) - - - - - 40 30 35 3. Borrowingfrom abroad (gross) 30 135 - - 35 40 43 a. (ExistingLoans) (135) - _ (35) (40) (40) (20) - - b. (New Loans) (3) (20) (30) (35) 131 7. Transferfrom Embratel - - - - 57 79 144 171 106

613 586 670 C. CapitalExpenditures (-A+B)/ 202 286 315 619 427 282 378 440 546 559 640 1. Fixed CapitalInvestment 153 241 275 558 346 170 317 359 434 504 470 a. Urban ExpansionProgram 238 287 229 60 267 299 334 374 419 110 140 b. Interurbannetwork 10 229 68 52 20 30 70 100 30 c. Other 27 42 49 58 30 30 30 30 30 FinancingPrivate Sector 49 45 38 53 47 49 53 47 49 47 25 25 3. (25) (25) a. Amortizationof Br. Tractiondebt (49) (45) (38) (25) (25) (25) (25) (25) (25) (25) - b. Amortizationof Domestic Credits (28) (22) (24) (28) (22) (24) (22) - 62 2 5. AmortizingForeign Loans - - 2 8 34 63 8 34 63 5

1/ CTB's projectionsfor 1969-71 show capital expendituresin excess of identifiedresources.

Source: CompanhiaTelefonica Brasileira and Mission estimates. I I I ANNEX4 Table 4-20: EMPRESADE CORRETOSE TELEGRAFOS (millions of NCr's at 1968 prices)

Historical-Dat Agency Projections Mission Estimates 1972 1973 1974 1966 1967 1969 1969 1970 1971 1969 1970 1971 _ n.a. n.a. n.a. _ _ _ _ _ A. Current Receipts (net) - - - 41 23 rna. n.a. n.a. 22 27 32 36 37 B. CapitalReceipts 18 15 38 15 21 26 30 34 35 1. Treasury Budget Transfers 18 15 (discretionarytransfers) 3 8 1 1 1 1 1 2 2 2 3. Borrowing from Abroad (gross) - - 41 15 23 36 41 65 22 27 32 36 37 C. Capital Expenditures (=A+B) 18 39 63 20 25 30 33 36 40 1. Fixed Capital Investment 18 15 18 34 ------3. Financing Private Sector - - 5 3 1 1 - 2 2 2 2 2 2 5. Amortizing Foreign Loans - -

Estimates. Source: Empresa do CorreioseTelegrafos and Mission I I I Table 4-21: REDE FIEROVIARIA FEM31iRLS.A. AND DNEF ANNEX4 (millionsof NCr's at 1968 prices).

Histnritl DatA AmenCY Prhnwtions MissionEstimates 1966 1967 1968 1969 1970 1971 1969 19(0 TM71 1972 .19731-Y4 3 3 4 4 5 A. CurrentReceipts (net) 2 2 2 3 , 3 3 3 3 4 h 5 2. Pipeline Fund 2 2 2 3 3 3 3 3 312 289 281 327 374 B. CapitalReceipts 407 237 219 310 392 330 247 219 239 261 284 1. TreasuryBudget Transfers 334 228 188 232 307 328 169 201 8.0%) (155)(128)(126) (154) (154) (154) (139) (152) (168) (184) (203) (223) (IUCLShare.- 49) ( 51) ( 55) ( 58) ( 61) (5% ImportTax) - - - - ( 36) ( 36) (30) ( - - - - (discretionarytransfers - DNEF) (179)(100)( 62) ( 78) (U17) (138) -

2. PrivateSector 73 9 31 4 2 2 4 2 2 1 1 - 47 68 65 90 3. Borrowing from Abroad (gross ) ------17 41

62 - - - 4. ENDE (gross) - - - 74 83 - 57 - 292 285 331 379 C. CapitalExpenditures (=A+B) 409 239 221 313 395 333 250 315 262 253 296 334 1. Fixed Capital Investment 364 262 187 295 366 306 244 285 (DNKFprior to 1961(150)( 94) ( 81) ( 97) J40) (140) 29 21 10 8 21 39 a. Line Construction 180 Stock ( 74)( 60) ( 28) ( 53) (47) (23) 70 116 145 130 160 b. Rolling 15 15 15 c. Yards and terminals ( 13)( 12) ( 6) ( 10) (17) (12) 10 17 12 & Electrification ( 10)( 16) ( 13) ( 17) (29 ) (7 ) 17 29 10 10 10 10 d. Communications 75 75 75 e. Track (104)( 66) (42) (104) (L21) (91) 104 90 70 ( 1)( 2) ( 7) ( 5) (2)2 -) 5 2 5 5 5 5 f. Pipelines 10 10 10 g. Other (12)( 12) (10) ( 9) (10) (33) 9 10 10 -8 2. Inventory Investment 43 -35 - -8 - - 4 4 4 4 4 3. Amortizing Private Sector Loans 1 5 11 5 4 4 5 22 23 33 5. Amortizing Foreign Loans - - 20 20 20 20 20 21 21 5 5 6 8 8 6. Amortizing B= Loans - - 6 6 ------7. Change in Cash Balances 1 7 3 1 -1 -3 -11

Source: kede Ferroviaria Federal S.A., DepartamentoNacional de Estradasde Ferro and Mission estimates. i A ANNEX4 Table 4-22: BANCONACIONAL DE DBSENVOLVIMENTOECONOMICO (millionsof NCr's at 1968 prices)

EstimatedIHistorical Agency Projectio-n* ission 'ro,lectioJns 1966 1967 l9? i'' 19C70 1971 l9'9 C1970 1071 1972 3)97 1Q977

A. OperatingProfits n.a. n.a. 39 (includedin line B.7) 5S 73 90 107 12h T13

B. CapitalReceipts n.a. n.a. L91. 890 1018 1-01 A(h 722 791 P49 91t, 1050 1. Treasury Budget Transfers " it 75 30 489 h3h 11/ 32 - -

2. PrivateSector " " l) ------3. Borrowing from Abroad " " 2L 105' 17 7 A 71h 02 90 9 -10Q 6. Monetary System Transfer (FOT) " 320 290 305' 320 34h )403 )i17 1,09 1JnA,oln 7. Receipts from Repay- ments " 135' 207 320 133 213 299 ?70 ltc,o Ol (Federal Enterprises) (O) (11) (17) (20) (2') (29) (,4) (Federal Extra- Budgetary) ( 2) (5') (7) (l0) (l3) (11) (Local Governments) (9) (19) (31) (11l) (. ) (7}1) (99) (PrivateSector) (01') (101) (1Jo) (221) (277) (O3V) (001) C. CapitalExpenditures (-A 4 B) n.a. n.a. 530 890 1018 1091 717 795' RP1 974 1079 ____ 1. Lending Programs 55 0979 1017 1000 7 0o 77 -71. 9?9 103' Ti (Federal Enterprises) 4LIo 542 (114) n.a. n.a. n.a. (179) (lW7) (101) (1)t ') (19Q) (1°.) (Federal Extra-budgetary) ( 26) " " T (39) (20) (P2q) ( 2) (21) ( -) (Local Governments) )llO )257 ( 0I) tt () (11l) (19p) (W1)) (?t) (179- ) (PrivateSector) ) ) (350) II (391) (1t73) (400) (4P3) (721) (Q 5. Amortizing Foreign Loans n.a. n.a. 5 (deductedin line B.7) 12 19 27 37 C7 7. Change in Cash Balances n.a. n.a. -51 -89 1 1 - - - -

Source: Banco Nacional de DesenvolvimentoEconomico and Mission estimates. I ANNEX4 Table 4-23: BANCO NACIONALDE HABITACAO (millions of NCr's at 1968 prices) HistoricalData Agency Projections Mission Estimates _1966-1967 196A3- 19-69- 1-970 _1971 16 1970 1971 1972 1973 1971

CURRENTACCOUNT A. Current Receipts n.a. 763 1 318 4 1600 1 546 1 401 1 500 5461 556 1 586 1 664 2. F.G.T.S. - Liquid Deposits - 715 1, J1 1,133 1,119 X 1,133 1,119 m 921 m 2. Interest and Commissions 48 170 268 381 492 268 381 492 635 820 1,059

B. CurrentPa ents n.a. 33 115 202 242 301 202 242 301 376 472 596 1. in Changesancial 7 13~ 7W 1 190 2 319 -U-b __530 2. Current Expenses 18 40 67 52 55 67 52 55 58 62 66 (Administration) (18) (36) (56) (40) (42) (56) (40) (42) (44) (47) (50) (Urban Planning & Tech. Asst.) (-) ( 4) (1) (1.2) (13) (11) (12) (13) (14) (15) (16)

C. Current Account Savings (=A-B) n.a. 730 1,203 1,199 1,258 1,245 1,199 1,258 1 1,180 1,114 1,068

CAPITAL ACCOUNT

A. Current Account Savings n.a. 730 1,203 1,199 1,258 1,245 1,199 1,258 1,2545 1180 1,114 1,068

B. Capital Receipts 159 138 474 537 692 442 495 643 849 1,0t1 1 88 1. Treasury Budget Transfers - 11 _76 9 10 -6 9 10 10 10 10 2. Private Sector - Net Transfers 155 -21 378 444 566 378 4414 566 724 928 1,191 (Sale of FinancialAssets) (202) (70) (33) (21) (19) (33) (21) (19) (17) (16) (14) (Plus Repaymentsto BNH) (3) (89) (354) (428) (552) (354) (428) (552) (712) (917)(1,182) (Less Repaymentsby BNH) (50) (180) (9) (5) (5) (9) (5) (5) (5) (5) (5) 3. Borrowing from Abroad 4 33 90 84 116 58 42 52 74 75 76 (HousingProgram) (4) (33) (31) - - (31) (-) (10) (30) (30) (30) (Water Supply) (34) (69) (100) (2) (27) (26) (27) (27) (27) Repasse (25) (15) (16) (25) (15) (16) (17) (18) (19) 7. Redemption of TreasuryBonds - - 115 - - - - - 15 41 58 11

C. CapitalExpenditures (=A+B) 128 889 1,341 1 673 1 795 1 937 1 641 1 753 1 888 2 029 2 185 2 356 3. Financing Private Sector 96 i9 1,305 i 1 17m > > 1 1,750 Housing and Reconstruction (96)(490)(1,261) 1,184)(1,2504(1,329) (1,184)(1,254)(1,329)(1,409)(1,493)(1,583) - - (40) (211) (220) (232) (211) (220) (232) (246) (261) (276) REINVEST/REHIR. - - (4) (66) (69) (74) (66) (69) (74) (78) (83) (88) Repasse of Foreign Loans - - - (25) (15) (16) (25) (15) (16) (17) (18) (19) 4. Amortizationof Foreign Loans - - - 2 5 7 2 5 7 1i_ 14 18 7. S.F.S. Loans to Local Govern- ments - 7 18 162 204 243 130 162 194 233 280 336 9. Purchaseof Treasury Bonds 32 392 18 23 28 36 23 28 36 36 36 36

Source: Banco Nacional de Habitacaoand Mission estimates. I I I I ATINE-X 17

LIST OF PROJECTS R EXTEMT-ALFINANCING

Pre-ared by Curt Carnemark- I 0 ANNEX 5

LIST OF PROJECTS FOR EXTERNALFINANCING

TABLE OF CONTENTS

Page No.

INTRODUCTION...... I

I. DIRECTLYPRODUCTIVE SECTORS ...... 3

A. Agriculture ...... 3 B. Industry and Mining ...... 5

C. Petroleum...... 9

II. ECONOMIC INFRASTRUCTURE , ...... 10

D. Electric Energy...... 10

E. Telecommunications...... 12

F. Transportation...... 13

III. SOCIAL INFRASTRUCTURE...... ,.. 17

G. Education...... 17

H. Water Supply and Sewerage ...... 18

IV. CREDIT PROGRAMS ...... 20

Table: List of Projects for External Financing. I ANNEX 5

LIST OF PROJECTS FOR EXTERNAL FINANCING

INTRODUCTION

1. The governmentlacks a long-range investmentprogram which would identify high priority projects suitable for external financing. One of the main problems in this respect seems to be the absence of a central body that could stimulate and coordinate project preparation and evaluate priorities in accordance with the overall development program and expected financial resources. Various studies have, however, helped to define future needs and prioritiesin some of the major sectors. For electric power the U.l. Special oundStudy has defined an investment program for the Center-South which would be consistentwith an economic growth rate of 6-7 percent per annum. A sim- ilar study for the Southern part of the country is now being completed. In the case of transportation,a general transportsurvey has prepared road master plans for most of the states and made studies and recommendations for the railways, coastal shipping and the three main ports (Rio, Saatos and Recife). Finally, in the steel sector the government has drawn up a steel e:pansion program covering the public enterprises as well as a few private ones.

2. In identifying projects suitable for external financing the mission has used these sector studies. In other sectors the mission has obtained data on individualprojects from the government agencies concerned. In compiling the Project List the mission has evaluated each project from the point of view of economic priority,impact of policy and management, and project readi- ness. For a number of projects technical and economic studies were available. In some instances,especially in the education,air transport and agriculture sectors,benefits to be derived from the projects were not readily quantifi- able at this stage. These projects, however,would either remove existing bottlenecks or contributeto meeting future demand for their products and services. Feasibility studies already under way or to be undertaken in the near future should clarify the priority to be given these projects.

3. In many cases arrangements for external financing are already underway. The formula for suggested financing varies from project to project. In cases where a financing institution is considering a project and could indicate the amount, this amount has been shown as the suggested financing. In other cases, where the project has a high import component (such as steel and electric power), the import component has been chosen for external financing. In sectors like transport, education, agriculture and sanitation, where the import component is low, the suggested external financing is 40 percent of total cost. The following table gives a summary by sector of the Project List. ANNIEX5 Page 2

Sectorial Breakdown of Supgested ProjLect Lendig (us$ million)

Foreign Suggested Project Procurement Foreign Sector Coslt Component Financing

Agriculture 3T72 60 132 Industry & Mining 668 304 315 Petroleum 225 46 46

Pover 1,235 556 574 Telecomunications 225 96 93 Transport 1,48i 299 615

Education 22'r 28 109 Water Supply & Sewerage 63:3 61 131 Credit Programs 400 80 105

Total 5,495 1,530 2,121 ANNEX 5 Page 3

PROJECT LIST

I. DIRECTLY PRODUCTIVESECTORS

A. AGRICULTURE

1.1 Petrolina - IrrigationProJect

Irrigationof 7,000 has. in two blocks of land on the Sao FransiscoRiver near the City of Petrolina. Settlementwill be in 5 ha. lots and the farm products would be livestock,cotton, potatoes, onions,tomatoes, melons and grapes. TAHAL, a consulting firm, is presently preparing the project and will submitits report in October 1969. Estimated total cost: US$17 million. Direct foreign procurement component: US$2 million. Probable commitment date: 1970. Estimated disbursementperiod: 1970-73. Executing Agency: Superintendenciado Vale do Fransisco (SUVALE).

1.2 Bahia - Small-Holder Oil Palm

This project consists of the development of 11,000 has. of oil palm by some 1,200 smallholders in areas mainly served by existing processing facilities. Production would be for the home market where, because of import restrictions, prices for palm oil are about US$300/ton, double the world market price. The State Department of Agriculture and OPALMA,a publicly owned subsidiary of the National Steel Company (CSN) with some 2,000 has. of plantation and processing facilities, are presently preparing the project to further determine its economic desirability. They will conclude their studies in mid-1969. Estimated total cost: US$9 million. Direct foreign procurement component: US$1 million. Probable commitment date: 1971. Estimated disbursement period: 1971-74. Executing Agency: To be decided.

1.3 Storae - Port of Santos

The purpose of this project is to provide improved and expanded storage facilities in the Port of Santos, through which most of Brazil's agricultural exports move. Feasibility studies have been prepared by Weitz-liettelsater (U.S.) and Geotecnica (Brazil). As originally envisaged, the storage facilities would be located in the present port area on the right bank of the river. Recently,however, the Governmenthas discussedthe possibilityof building the storage facilities on the left bank of the river. No decision has yet been made on the location. Estimatedtotal cost: US$11 million. Direct foreignprocurement component: US$4 million. Probable commitment date: 1971. Estimated disbursement period: 1972-73. Executing Agency: National Economic Development Bank (BNDE). ANNEX 5 Page 4

1.4 Capibaribe - Multi-purpose Project

The project involves the construction of two dams, dikes and reservoirs in the lower Capibaribe basin (close to Recife), for the purpose of providing additional water supply for Recife and its surroundings; regulation of the Capibaribe River (flood control) and provision of water for the irrigation of some 3,000 has. Feasibility studies have been completed for part of the project. Studies presently under way are scheduled to be concluded in October 1969. Estimated total cost: US$15 million. Direct foreign procurement component: US$2 million. Probable coimnitment date: 1971. Estimated disbursement period: 1971-74. Executing Agency: SUDENE.

1.5 Foot and Mouth Disease Control

This project was originally designedto control foot-and-mouthdisease of livestockin the States of Sao Paulo, Parana, Santa Catarina and Rio Grande do Sul. It is currentlybeing re-designedto include the States of Bahia, Minas Gerais, and Espirito Santo, which states are included under a recent livestock loan from Inter-American Development Bank (IDB). Estimated cost: US$100 million. Direct foreign procurement component: US$8 million. Pro- bable commitment date: 1970. Estimated disbursement period: 1970-73. Executing Agency: Ministry of Agriculture (Escritorio de Producao Animal) in coordination with the Secretaria de Agricultura in the respective states.

1.6 Rural Credit for Agricultural Diversification - Mogiana

Through a combined program of agricultural extension and credit, it is hoped that the land productivity in the Mogiana region in the State of Sao Paulo and also the profitabilityof the operationsof the 21 cooperativesaffili- ated with the CooperativaCentral dos Cafeicultoresda Mogiana (CCCM) will be increased. The credit to the cooperativemembers will financetheir fixed capital requirementsin producing food crops. Estimated total cost: US$25 million. Direct foreign procurement component: US$1 million. Probable commitment date: 1970. Estimateddisbursement period: 1970-72. Executing Agency: CCCM in cooperationwith the Banco Nacional de Credito Cooperativo.

1.7 Integrated Development of the Northeast Region of Minas Gerais

An integrated agricultural and infrastructure plan for the Northeast region of Minas Gerais has been developed and is currently being revieved and ap- praised by IDB/FAO. Estimatedtotal cost: US$55 million. Direct foreign procurementcomponent: US$17.1 million. Probable commitmentdate: 1970. Estimated disbursementperiod: 1970-73. ExecutingAgency: Fundacao Rural Mineira (Ruralminas) in cooperation with the Caixa Economica do Estado de Minas Gerais, Banco do Estado de Minas Gerais, and Banco de Desenvolvimento de Minas Gerais. ANNEX5 Page 5

1.8 Production and Industrialization of Milk Products

This project is aimed at improving the supply and quality of milk and related products in the States of Sao Pa.ulo, Minas Gerais, Espirito Santo, Rio de Janeiro and Guanabara. It may also be expanded to include Parana and Santa Catarina. Feasibility studies financed by BNDE through its Special Fund (FINEP) are presently being undertaken. Estimated total cost: US$18 million. Direct foreign procurement component: US$9 million. Probable commitment date: 1971. Estimated disbursement period: 1971-74. Executing Agency: to be determined.

1.9 Terminal Markets

The construction of nine terminal markets are planned at the following major consumption centers: Rio Niteroi, Salvador, Recife, Belo Horizonte, Porto Alegre, Curitiba,Fortaleza, Belem and Sao Paulo (expansion of existing facilities). These markets are identicalin concept to CEASA (CentroEstadual de Abastecimento S/A) in Sao Paulo and their main purposes will be to provide storage facilities and stabilize stocks of food products at consumption centers; to modernizewholesale marketing as well as to reduce handling costs of agri- culturalproducts. The feasibilitystudies for the proposed markets at Rio Niteroi, Salvador, Recife and Belo Horizontehave alreadybeen completedwhile proposals have been called for the feasibility studies for the remaining terminal markets. Estimated total cost: US$101.5 million. Direct foreign procurement eomponent: US$3 million. Probable commitment date: 1971. Estimated disbursement period: 1971-76.

1.10 Agricultural Research

This project consists of the supply of equipment for agricultural research stations in variousparts of Brazil as well as a five-year program for technical assistance. Studies have been completed. Total cost: US$20 million. Direct foreign procurement component: US$13.4 million. Probable commitment date: 1969. Estimated disbursement period: 1970-74. Executing Agency: Ministry of Agriculture.

B. INDUSTRYAND MINING

Steel

2.1 Comoanhia Siderurgica lacional (CSN) - Stagy 2

On the basis of the National Steel Plan, CSN has a seven-year expansion program presentlyunder way which by 1975 will have increasedits productionof steel ingots to 2.5 million tons. The program is divided into four stages - mainly from the point of view of obtaining external financing. Each stage requires about US$30 million to cover imported components. The first stage, which is presently under construction with the assistance of a US$30 million loan from Eximbank, will raise production by 1971 to 1.5 million tons. The second stage ANNEX 5 Page 6

(which is the project concernedhere) will raise production to 2.1 million tons by 1973. This stage includes essentially the installation of mining and beneficiation facilities, a pellet plant, B.0.F. shop, pickle line No. 3 and a 200 ton oxygen producing unit. Studies have been conducted by Arthur G. McKee, Consulting Engineers (U.S.). Total cost: US$95.8 million. Direct foreign procurement component: US$32.4 million. Probable commitment date: 1971. Estimated disbursement period: 1971-73. Execu- ting Agency: Compamhia Siderurgica Nacional (CSN).

2.2 Usinas Siderurgicasde Minas Gerais (USIMINAS)

The existing facilities at the USIMINASplant are characterized by an imbal- ance between cold rolling and finishing equipment, vis-a-vis steel production and hot rolling. The expansionprogram envisages an increase in ingot capacity from .62 to 1.4 million tons and will result in a more rational use of the equipment. It involves the installation of a sintering machine, third B.O.F. converter, oil and oxygen injectors, cold rolling and finishing equipment. Total cost: US$90 million. Direct foreign procurement component: US$55 million. Probable commitment date: 1970. Estimated disbursement period: 1970-73. Executing Agency: Usinas Siderurgicasde Minas Gerais.

2.3 Cia de Acos Especisis Itabira (ACESITA)

The expansionprogram for ACESITA envisagesan increase in ingot capacity from 120,000 to 150,000 tons per year. It includes the addition of cold rolling and finishing equipment for stainlesssteel. Total cost: US$42 million. Direct foreign procurement component: US$21 million. Probable commitment date: 1970. Estimated disbursementperiod: 1970-72. Executing Agency: Cia de Acos Especisis Itabira.

2.4 Cia SiderurgicaBelgo Mineira (CsBM)

Recent installationsof oil and oxylgeninjectors in the blast furnacehave increasedingot capacity from 450,000 to 540,000tons per year. The expansion program now envisaged includes a new sinteringplant and an enlarged hot rolling mill, which by 1973 would result in an expansionof ingot capacityto 700,000 tons per year. The executionof the program is dependenton the availability of foreign and local financing. Total cost: US$40 million. Direct foreignprocurement component: US$20 million. Probable commitmentdate: 1971. Estimated disbursementperiod: 1971-73. Executing Agency: Cia SiderurgicaBelgo Mineira (Private).

2.5 Semi-finishedSteel Plant - Tubarmo

In order to derive larger benefits from its iron ore deposits,Brazil has attemptedover the past years to supplementthe exportation of ore with the exportationof more refined products. The first step in this direction was the CVRDpelletizing program initiated some years ago. The Federal Govern- ment now envisages the installation of a plant for production of semi-finished steel. This plant would be located at Tubarao (E.S.) and would have an initial ANNEX 5 Page T ingot capacityof 1.5 million tons per year. Its productionwould be directed mainly at exportation but would also be used to feed rolling mils such as Ferro e Aco de Vitoria and U3INOR. An engineering study prepared by German consultants is available. A market survey and economic feasibility studies are being prepared and will be completed in mid-69. Estimated total cost: US$170 million. Direct foreign procurement component: US$70 million. Prob- able cosmitment date: 19T. Estimated disbursement period: 19T1-73. Exe- cuting Agency: to be determined.

Iron Ore

3.1 MBRProject

This project is sponsored by the Hanna Mining Company and the Antunes Group. It will mine and export some 10 million tons of high grade iron ore in the mid-seventies. Adequate deposits exist in the Vale de Rio Paraopeba (Aguas Claras) close to Belo Horizonte. Presently, the company is updating capital and current cost estimates for the project and negotiating with the Federal Railways a long-term freight contract for the shipment of iron ore from Aguas Claras to Sepetiba Bay where the port terminal will be located. The project includesthe constructionof mining and port facilitiesas well as purchase of ore cars. Total cost: US$105.0 million. Direct foreignprocurement component: US$44 million. Probable cormitment date: 1971. Es- timated disbursement period: 1971-74. Executing Agency: Mineracoes Brasileiras Reunidas (MBR) (Private).

3.2 Cia Vale do Rio Doce (CVMD) - Pelletizing Plant - 2nd Stage

Brazil is a major producer and exporter of high quality iron ore and CVRD accounts for the largest part of production as well as exports. During 1968 CVRD mined 12.0 million tons of iron ore and exported together with its asso- ciated companies (SAMITRI and FERTECO) 12.8 million tons. During 1964 CVRD initiated the first phase of its expansionprogram (US$100 million) which is being completed during 1969. The second phase, totaling investments of US$165 million, has recently started and covers the period 1969-71. From an estimated iron ore export of 16 million tons in 1969, CVRD plans to increase its exports to 23 million tons in 19T1. The expansion program covers investments in mining, railwa%y transport, ports and a pelletizing plant. Foreign financing has been secured for all but part of the railway program (see section 9.6) and the second phase of the pelletizing plant. Total cost: US$16.3 million. Direct foreign procurement component: US$11.8 million. Probable coumitment date: 1969. Estimated disbursement period: 1969-71. Executing Agency: Cia Vale do Rio Doce.

Coal

4.1 Mechanization of 10 Coal Mines in Santa Catarina

Many coal mines in Brazil are presently utilizing obsolete methods of extrac- tion. This results in a high cost product which affects the steel industry, ANNEX,5 Page 8 the major user of coal. The Federal Government, through Comissao do Plano do Carvao Nacional, has initiated a program aimed at raising the productivity in the coal mining sector. This project, part of this program, consists of the introduction of mechanized equipment in ten coal mines in the State of Santa Catarina. Total cost: US$17.4 million. Direct foreign procurement component: US$7.7 million. Probable commitmentdate: 1971. Estimated disbursement period: 1971-75. Executing Agency: Comissao do Plano do Carvao Nacional.

Industry

5.1 Maua Cement Project

The project consists of the construCtionand operationof a cement plant with a capacity of 500,000tons per ann=m of common portland cement. The plant would be located adjacent to its raw material reserves in Cantagalo, some 200 km. northwestof Rio de Janeiro. T'otalcost: US$20.6 million. Direct foreignprocurement component: US$8.3 million. Probable commitment date: 1969. Estimated disbursementperiod: 1970-71. Executing Agency; Lonestar Cement Company. (Private).

5.2 Itau Cement and Fertilizer PrcOject

This project to be situated in Campinas, in the State of Sao Paulo will, when completedin 1972, have a daily production capacity of 555 tons of cement, 500 tons of sulphuricacid, 200 tons of P205 for phosphoric acid and 270 tons of P205 for super triple phosphate. Total cost: US$33.0 million. Direct foreign procurementcomponent: US$16 million. Probable commitment date: 1970. Esti- mated disbursementperiod: 1970-72. ExecutingAgency: Companhia Itau de Ciment. (Private).

5.3 PoliolefinasPetrochemical Plant

The project, involves the constructionand operation of a low density poly- ethylene plant with an initial capELcityof 40,000 tons per annum of polyeth- ylene. Its output will be sold to other companiesin Brazil for conversion into a wide variety of plastic prodLucts,primarily films for packaging and polyethylenecontainers. The plant is designed in a way that it could be doubled in capacity at a relatively small amount of added investment. This project is one of the several downstream plants to use ethylene from Petro- quimica Uniao and will be located adjacent to this plant at the Capuava, Sao Paulo site. Total cost: US$26.1 million. Direct foreign procurement component: US$12.0 million. Probable commitmentdate: 1969. Estimated disbursementperiod: 1969-71. Executing Agency: Poliolefinas, S.A. (Private).

5.4 Ethylene Oxide Project

This project, sponsored equally by Grupo Ultra, Petroquisa (a state-owned company) and Montero Aranha, will use ethylene from Petroquimica Uniao for an annual production of 1,500 tons of ethylene oxide, 25,000 tons of glykos and 2,000 tons of etanolaminas, whi.ch products are inputs in the production ANNX ~5 Page 9 of dacron fibers, tergal, etc. Total cost: US$12.0 million. Direct foreign procurement component: US$6 million. Probable commitment date: 1970. Estimated disbursement period: 1970-72. Executing Agency: Company to be formed by Grupo Ultra, Petroquisa and Montero Aranha. (Private).

C. PETROLM

6.1 Cubatao Refinery - Modernization

Cubatao refinery, in the State of Sao Paulo, with a present capacity of 115,000 barrels a day, has a low capacity of extracting light products such as liquid petroleum gas and naptha, for which products there is a great demand in the local market. In order to adjust this structural problem, Petrobras is planning a modernization and expansion of the existing plant which would increase capacity, mainly in light products, by 48,000 barrels a day, starting in 1972. Total cost: US$85 million. Direct foreign procurementcomponent: US$18 million. Probable commitmentdate: 1970. Estimated disbursement period: 1970-72. Executing Agency: Petrobras.

6.2 Duque de Caixas Refinery ExPansion

Brazil is presently importing all its needs for lubricatingoils. During 1968 imports amounted to US$25 million. A new plant in Bahia is starting production during 1969 of basic lubricants. This project will, when completedin 1972, make Brazil self-sufficientin naphthenic lubricants. The plant will produce 4,700 barrels a day. Total cost: US$25 million. Direct foreign procurement component: US$8 million. Probable commitmentdate: 1969. Esti- mated disbursementperiod: 1970-72. ExecutingAgency: Petrobras.

6.3 Planalto Paulista ReLl ery

This refinery,with a planned capacityof 126,000 barrels a day, will have a complete line of petroleum derivateswith a high proportion of light products such as gasoline and liquid petroleum gas. The refinerywill serve the Sao Paulo market area and is planned to come into operation in 1972. Final engineering is presentlybeing undertakenby M.W. Kellogg Co. Total cost: US$115 million. Direct foreign procurementcomponent: US$20 million. Probable commitment date: 1970. Estimated disbursementperiod: 1970-72. Executing Agency: Petrobras. ANNEX5 Page 10

II. ECONOMICINFRASTRUCTURE

D. ELECTRIC ENERGY

Federal Companies

7.1 Furnas Units 7 and 8 (Center South)

Two additional 165 MWgenerators and related facilities will be installed in the Furnas plant. These additional units would raise generating capacity of the plant to 1,200 MW. Total cost: US$8.4 million. Direct foreign procurement component: US$6.1 million. Probable commitment date: 1970. Esti- mated disbursement period: 1970-72. Executing Agency: Central Electrica de Furnas (FURNAS).

7.2 Moxoto Hydro Plant (Northeast)

This new plant will have an initial capacity of 400 MWand will be located upstream from the existing Paulo Afonso plant. It will thus provide better regulation of the stream at Paulo Afonso. In conjunction with the 600 MW expansion of the Paulo Afonso hydro plant, mentionedbelow, the project will be essential to carry the load of Brazil's northeastern system through 1978. Total cost: US$97 million. Direct foreign procurement component: US$39 million. Probable commitment date: 1970. Estimated disbursement period: 1970-74. Executing Agency: Companiaia Hidro Eletrica do Sao Fransisco (CHESF).

7.3 Extension of Paulo Afonso Xydro Plant (Northeast)

This fourth extension of the Paulo Afonso hydro plant consists of an additional 600 MW capacitywhich, when complet,edin 1975, will give the Paulo Afonso plant a total capacity of 1,875 MW. The demand for power in the northeasternpart of Brazil is increasing rapidly and a load growth of some 20 percent per year is expected for the next decade. Total cost: US$40 million. Direct foreign procurement comnonent: US$16 million. Probable commitment date: 1971. Esti- mated disbursement period: 1972-75. Executing Agency: Companhia Hidro Eletrica do Sao Fransisco (CHESF).

7.4 CHESF - Northeastern Transmission System (Northeast)

This high voltage transmission systiem will be necessary for the transmission of power generatedby the Moxoto and Paulo Afonso hydro plants. Its peak load carrying capacitywill be in the order of 800 MW. Total cost: US$45 million. Direct foreignprocurement component: US$12 million. Probable commitment date: 1971. Estimated disbursementperiod: 1972-75. Executing Agency: Companhia Hidro Eletrica do Sao Fransisco (CHESF). AXM 5 Page 11

7.5 Marimboando Hydro Plant (Center South)

This project involves the construction of a nev hydroelectric plant on the Rio Gra.nde River, with a capacity of 1,400 MW. Total cost: US$160.6 ail- lion. Direct foreign procurement component: US$43.7 million. Probable comitment date: 1970. Estimated disbursement period: 1970-75. Execu- ting Agency: Central Eletrica de Furnas S.A. (FPUMAS).

7.6 Maiabiado Transmission System (Center South) The project consists of a 500 KYtransmission system and related substations to connect the Ma;rimbondohydro plant with the Sao Paulo and Rio de Janeiro markets. Total cost: US$83.5 million. Direct foreign procurement component: US$66.9 million. Probable comnitment date: 1971. Estimated disbursementperiod: 1972-77. Executing Agency: Central Electrica de Furnas S.A. (FURNAS).

7.7 Nuclear Power Plant (Center South) Studies undertaken by Eletrobras have indicated that after 1980 close to 1,000 MWper year of thermal capacity, including nuclear, will be required to carry the country's power load. The Government of Brazil has, therefore, decided to build this first nuclear plant of about 500 MWcapacity, located in the south- central region, to provide necessary service and technological experience prior to 1980. Total cost: US$227 million. Direct foreign procurementcomponent: US$150 million. Probable comnitment date: 1971. Estimated disbursement period: 1971-76. Executing Agency: Central Eletrica de Furnas S.A. (FURNAS).

State Companies

7.8 Capim Branco H;dro Plant (Center South)

This project consistsof the constructionof a new 420 MW hydro plant on the Araguari River and related transmissionfacilities. Total cost: US$106.4 million. Direct foreign procurementcomponent: US$43.0 million. Probable commitmentdate: 1971. Estimateddisbursement period: 1971-77. Executing Agency: CentraisEletricas de Minas Gerais S.A. (CEMIG).

7.9 Ilha Solteira - Sao Paulo Transmission(Center South)

This project consistingof a 500 KV transmissionsystem will be needed to transfer energy from the Ilha Solteira hydro plant (presentlyunder construction) to the Sao Paulo market area. Total cost: US$100 million. Direct foreign procurementcomponent: US$40 million. Probable commitment date: 1970. Estimateddisbursement period: 19T1-75. ExecutingAgency: Centrais Eletricasde Sao Paulo (CESP). - ~~~ANNEX5 Page 12

Unallocated and Other

7.10 Sao Paulo Steam Plant

This project of a 400 MWsteam planl; is considered necessary to carry the Sao Paulo area load of the South-Central System due to delays in the completion of the Ilha Solteira hydro plant presently under construction. Total cost: US$84 million. Direct foreign procurement, component: US$42 million. Probable commitment date: 1971. Estimated disbursement period: 1971-74. Executing Agency: Centrais Eletricas de Sao Paulo (CESP).

7.11 Itauba Hydro Plant (South)

This 500 MW hydro plant, to be located on the Jacui River in Rio Grande do Sul, will mainly serve the Porto Alegre market area. The project also includes related transmission facilities. Total cost: US$86 million. Direct foreign procurement component: US$35 million. Probable commitment date: 1971. Esti- mated disbursement period: 1971-77. Executing Agency: To be decided.

7.12 Salto Osorio Hydro Plant (South-

The Salto Osorio project will be located on the Iguacu River in the State of Parana. It will have a capacity of 540 MW. The project also includes related transmission facilities. Total cost: US$132 million. Direct foreign procurement component: US$55 million. Probable commitment date: 1971. Esti- mated disbursementperiod: 1971-76. Executing Agency: To be determined.

7.13 Rural Electrification

In Brazil today only about 10 percent of rural dwellingsare connectedwith the electric pover network comparedwith over 70 percent in urban areas. To alleviatethis situationthe Federal Governmentstarted a program for rural electrificationin 1965. This project, which is a part of the general program, will include the connectionof 28,000 farms in nine states over a 3-year period. Total cost: US$65 million. Direct foreignprocurement component: US$7 million. Probable commitmentdate: 1969. Estimated disbursementperiod: 1970-72. ExecutingAgency: InstituitoNacional de Desenvolvimiento Agrario (INDA).

E. TELECOMMUNICATIONS

8.1 Embratel - ExpansionProgram

Embratel was created in 1965 with the responsibilityof creating a National TelecommunicationsNetwork. The first phase of its expansionprogram, which was initiatedin 1967, consisted of the construction of microwave links between major industrialand population centers on the east coast of Brazil, as well as linking Rio de Janeiro and Sao Paulo with Brasilia. The second stage, which ANNX 5 Page 13

covers the 3-year period 1969-72, has as its purpose to connect the hinterland and distant population centers with the main system constructed during the first stage. The second stage consists of the constructionof microwave links using troposphericdiffusion techniques with repeater stations every 300 km. Total cost: US$39.5 million. Direct foreign procurementcomponent: US$9.6 million. Probable commitmentdate: 1969 (US$7.8million), 1970 (US$1.8mil- lion). Estimated disbursementperiod: 1969-72. ExecutingAgency: Embratel.

8.2 CompanhiaTelefonica Brasiliera (CTB) - ExpansionProgram

CTB with its two subsidiaries,Companhia Telefonica de Minas Gerais and CompanhiaTelefonica do Espirito Santo, provides telephone services in the five states of Guanabara,Rio de Janeiro, Espirito Santo, Minas Gerais and Sao Paulo which together contain 70 percent of Brazil's telephone system. C'B is owned by Embratel,having been purchased from the BrazilianTraction Group in 1966. This project consists of expansionof the inter-urbantelephone systems in the five states covered by CTB and its subsidiariesas well as inte- grationwith the national network being installedby Embratel. It will include the installationof microwaveequipment, cable and open-wire lines and carrier systems, and automatic and manual toll switching centers. Total cost: US$150 million. Direct foreign procurement component: US$50 million. Probable commitment date: 1970. Estimated disbursement period: 19T1-75. Executing Agency: Companhia Telefonica Brasiliera (CTB).

Other

8.3 Tebasa Expansion Program - Bahia

Tebasa (Telefones da Bahia, S.A.) is a privately owned telephone company serving the State of Bahia. Its present capacity of 20,000 lines is becoming fully utilized and the project, which is a 3-year expansion program, will double present line capacity and interconnect, by means of microwave, 50 cities in the State of Bahia. Total cost: US$65 million. Direct foreign procurement component: US$36 million. Probable commitmentdate: 1969. Estimated disbursementperiod: 1969-72. ExecutingAgency: Telefones da Bahia, S.A. (Private).

F. TRANSPORTATION

Railways

9.1 Mechanized Maintenance Equipment

Maintenance of the Brazilian railways is presently mainly undertaken without the use of modern mechanized equipment. RFFSA has studied the possibility of acquiring modern equipment and has formulated a program for the introduction of such equipment in the different railway systems. This project, which is merely a first phase, offers equipment to be used mainly by Central do Brasil ANNX 5 Page 14 and Parana Santa Catarina railroads. Total cost: US$15.0 million. Direct foreign procurementcomponent: US$13.5 million. Probable commitment date: 1970. Estimated disbursementperiod: 1970-73. Executing Agency: Rede Ferroviaria Federal S.A. (RFFSA).

9.2 Locomotives and Cars - I

In order to cope with increasing traffic (in 1968 traffic rose by close to 19 percent) and to replaceold equipment,RFFSA needs a substantialamount of locomotives and freight cars. It was recently estimated that close to 40 percent of the locomotives in traffic were obsolete steam engines and that a large number of diesel locomotives had too small a capacity to handle the load needed. RFFSA has also recently estimated that of its fleet of 33,200 freight cars some 5,200 are obsolete and that some 2,400 new cars would be needed just to replacethe obsolete stock. This project consists of the purchase of 200 diesel locomotivesand 1,000 freight cars. Discussionswith suppliers are underway. Total cost: US$60 million. Direct foreign procurement component: US$30 million. Probable comnitmen,t date: 1969. Estimated disbursement period: 1969-71. ExecutingAgency: Rede Ferroviaria Federal S.A. (RFFSA).

9.3 Locomotives and Cars - II

Further purchasesof locomotivesand railway cars have to be made in 1972-74. Some 3,000 freight cars, some of which will be specializedcars for grain transports,and some 100 locomotiveswill be needed. Total cost: US$90 million. Direct foreignprocurement component: US$30 million. Probable commitment date: 1971. Estimated disbursementperiod: 1972-74. Executing Agency: Rede FerroviariaFederal S.A. (RFFSA).

9.4 Railway Line Improvements- I

RFFSA is presentlyworking out a five-yearprogram for improvementsto be made on existing lines. This program is mainly based on a four-yearprogram previously in existence. The project is merely a first phase of the program and consists of improvementsconsidered of high priority on the followingfive lines. Eng. Bley - Curitiba,Antonio Carlos - Baroso, Pirassirica- Itapessoca, Cantagolo- Melo Branco and Esperanca - Rio Acima. Total cost: US$42 million. Direct foreignprocurement component: US$3 million. Probable commitment date: 1970. Estimateddisbursement period: 1970-72. Executing Agency: Rede Ferroviaria Federal S.A. (RFFSA).

9.5 Railway Line improvements- II

This project is a second phase of the Railway Line ImprovementProgram to be started in 1972. Total cost: US$55.0 million. Direct foreign procurement component: US$4 million. Probable commitmentdate: 1971. Estimated disbursement period: 1972-74. Executing Agency: Rede Ferroviaria Federal S,A. (RFFSA). ANNEX 5 Page 15

9.6 Signalling System - EFMV

This project consists of the implementation of a centralized signalling system (CTC) on the Minas-Vitoria railway. Discussions with suppliers are underway. Total cost: US$21.6 million. Direct foreign procurement component: US$16.6 million. Probable comitaent date: 1969. Estimated disbursement period: 1970-72. Executing Agency: Companhia Vale do Rio Doce. (CVRD).

Highways

9.7 Second IBRD Highway Project

The Project consists of construction and/or improvement and/or pavement of 16 road sections in nine states, totaling 2,259 km. The different road sections have been selected accordingto the Master Plan prepared as a part of the Brazil Transport Survey. Total cost: US$199.6 million. Direct foreign procurement component: US$5 million. Probable commitmentdate: 1970. Estimated disbursement period: 1970-73. Executing Agency: Departamento Nacional de Estradas de Rodagem. (DNER).

9.8 Third IBRD Highway ProJect

Constructionand/or improvementand/or pavement of some 2,300 km. of roads in nine states. Selectionbased on priorities establishedby the Master Plan prepared as a part of the Brazil Transport Survey. Total cost: US$200 million. Direct foreign procurement component: US$5 million. Probable commitment date: 1971. Estimated disbursement period: 1971-75. Executing Agency: Departamento Nacional de Estradas de Rodagem. (DNER).

9.9 Sao Paulo Beltway

The construction of a 68.5 km. long circuiSerential highway around the City of Sao Paulo. The southern loop will have eight lanes and the northern loop four. Total cost: US$17.6 million. Direct foreign procurement component: US$5 million. Probable conmitment date: 1971. Estimated disbursement period: 1971-74. Executing Agency: Sao Paulo State Highway Department.

9.10 Santos - Sao Paulo Toll Road

This project is the first phase of a planned toll road from Sao Paulo to the Port of Santos and to Mongagua on the coast south of Santos (a seaside resort area). Nine years of construction are envisaged to complete the road. The first phase covers the three years 1970-72, during which period the road to Santos would be completed as follows: from Sao Paulo to the mountain ridge, four out of eight lanes; in the mountain ridge, three out of seven lanes; and from the mountain ridge to Santos, three out of six lanes. Total cost: US$98 million. Direct foreign procurement component: US$3 million. Probable commitment date: 1970. Estimated disbursement period: 1970-72. Executing Agency: Sao Paulo State Highway Department. ANNEX 5 Page 16

Ports

9.11 Port of Santos

The existing facilities are to be improved by dredging, construction of new quay walls, storage sheds and purchases of handling equipment. Total cost: US$47.0 million. Direct foreign procurement component: US$10 million. Probable commitment date: 19T0. Estimated disbursement period: 1970-74. Executing Agency: Departamento Nacional de Portos e Vias Navegaveis, (DXPVN), and Santos Port Authority.

9.12 Port of Rio de Janeiro

The existing facilities are to be improved with the modernization of quays, construction of new grain silos, additional bulk handling facilities and purchases of handling equipment. Total cost: US$26.0 million. Direct foreign procurement component: US$5 million. Probable commitment date: 1971. Estimated disbursementperiod: 1971-74. ExecutingAgency: DNPVN and Rio de Janeiro Port Authority.

9.13 Port of Recife

The existing facilities are to be improvedby the enlargementof quays, construction of new sheds and other buildings and purchases of handling equipment. Total cost: US$15 million. Foreign procurementcomponent: US$4 million. Probable commitment date: 1971. Estimated disbursement period: 1971-73. ExecutingAgency: DNPVN and Recife Port Authority.

Air

9.14 Galeao Airport Extension

The Ministry of Air is presently preparing feasibility studies with Canadian financial assistance for the modernization and extension of Galeao Airport (Rio de Janeiro). The plans are to extend runways and enlarge terminals so that the airport will be able to handle Jumbo jets and later on supersonic aircraft. Total cost: US$100 million. Direct foreign procurement component: US$5 million. Probable commitment iate: 1971. Estimated disbursement period: 1971-75. Executing Agency: Ministry of Air.

9.15 Traffic Control System

This project is to provide modern traffic control systems for the main airports of Brazil. Total cost: US$65 million. Direct foreign procurement component: US$52 million. Probable commitmentdate: 1970. Estimated disbursement period: 1970-74. Executing Agency: Ministry of Air. ANNEX 5 Page 17

Other

9.16 Sao Paulo Subway

In order to cope with the increasingproblem of traffic congestionin the City of Sao Paulo, the constructionof a subway system has recently been initiated. The total system as presently envisagedwould encompass66 km. and would require a ten-year constructionperiod. This project covers the first phase which consists of a 21 km. long North-Southline. Total cost: US$270.3 million. Direct foreignprocurement component: US$108 million. Probable commitment date: 1970. Estimated disbursement period: 1970-74. Executing Agency: City of Sao Paulo.

III. SOCIAL INFRASTRUCTURE

G. EDUCATION

10.1 SecondaryEducation - Four States

This project consists of the developmentof over 300 ginasios and related teacher training centers in the States of Rio Grande do Sul, Minas Gerais, Espirito Santo and Bahia. Total cost: us$64.0 million. Direct foreign procurementcomponent: US$4 million. Probable commitmentdate: 1969. Estimated disbursementperiod: 1970-73. ExecutingAgency: Ministry of Education.

10.2 SecondaryEducation - Pernambuco

The develolmentof ginasios and related teacher training facilitiesin the State of Pernambuco. Total cost: US$10 million. Direct foreign procurement component: US$1 million. Probable commitmentdate: 1969. Estimated disbursementperiod: 1970-73. ExecutingAgency: Ministry of Education.

10.3 SecondaryEducation - Other States

The project consists of the constructionof ginasios and teacher training facilitiesin states not yet defined. Total cost: US$20 million. Direct foreignprocurement component: US$2 million. Probable commitmentdate: 1970. Estimated disbursementperiod: 1971-74. ExecutingAgency: Min- istry of Education. ANNX 5 Page 18

10.4 Post-GraduateTraining

This project involves scholarships for post-graduate training abroad, plus research equipment for Brazilian universities. Total cost: US$15 million. Direct foreign procurement component: US$10 million. Probable commitment date: 1970. Estimated disbursementperiod: 1970-73. ExecutingAgency: Ministry of Education and Banco Nacional de Desenvolvimento Econcmico (BNDE).

10.5 Primary Education - Northeast

This project includes curriculumimprovement, equipment and constructionof teacher training colleges in the States of Bahia, Pernambuco, Alagoas and Goias. Total cost: US$20 million. Direct foreignprocurement component: US$4 million. Probable commitmentdate: 1970. Estimated disbursement period: 1970-73.

10.6 IBRD EducationProject

This project includes equipment and constructionof schools for general secondary education, secondary agricultural education, secondary technical education and teacher training centers in respective fields. The project tentatively would include the States of Sergipe, Para, Goias and the Federal District. Total cost: US$30 million. Direct foreignprocurement component: US$3 million. Probable commitment date: 1970. Estimated disbursement period: 1971- 74. ExecutingAgency: Ministry of Education.

10.7 Secondar Education- Sao Paulo

This project includes the construction and equipment of 200 ginasios in the State of Sao Paulo. Total cost: US$67.5 million. Direct foreign procurement component: US$7 million. Probable commitment date: 1970. Estimated disbursementperiod: 1970-75. Executing Agency: Ministry of Education.

HI. WATERSUPPLY AND SEWERAGE

11.1 Water Supply - 3L_Cities

This project covers 37 cities with a population of between 20,000 and 100,000 in the Northeast of Brazil. Total cost: US$50 million. Direct foreign procurement component: US$'3 million. Probable commitment date: 1969. Estimated disbursement period: 1970-73. Executing Agency: SUDENE.

11.2 Water Supply Prog -SF

This program to be carried out by Superintendencia do Sistema Financeiro do Saneamento (SFS) under Banco Nacional de Habitacao (BNH), envisages the provision of adequate water supply systems for 857 cities and municipalities Page 19

during the period 1969-Tl. SFS expects to meet approximately 37.5 percent of the total cost. At present, agreementson the program have been reachedwith 653 cities and municipalitiesand contracts for the execution of works have been signed with 77 cities and municipalities. Total cost: US$300 million. Direct foreign procurementcomponent: US$15 million. Probable commitment date: 1969. Estimated disbursementperiod: 1969-T1. Executing Agency: Superintendenciado Sistema Financeirodo Saneamento;Banco Nacional de Habitacao.

11.3 Sao Paulo Water SupplyProject

Major water supply improvementsare needed in the Sao Paulo metropolitanarea in order to provide safe water to the rapidly growing population. It is estimated that only some 60 percent of the population in the area is served by the public water supply system. COMASP, a new agency, has recentlybeen established to supply water in bulk to the 22 municipalities in the metropolitan area. With the assistance of consultants, COMASPhas prepared a Master Plan for water development, the first phase of which has been initiated with the assistanceof the Inter-AmericanDevelopment Bank and the Swedish International DevelopmentAuthority. The second phase consists mainly of the construction of dams on the Capivari River system. Total cost: US$90 million. Direct foreignprocurement component: US$4 million. Probable commitment date: 1970. Estimated disbursementperiod: 1970-73. ExecutingAgency: CompanhiaMetro- politana de Agua de Sao Paulo (COMASP).

11.4 SaoLPalo S!evBerageProec

Only some 35 percent of the populationof metropolitanSao Paulo is served by a public sewerage system. A program for sewerage in the metropolitanarea through the end of this centuryhas been prepared and the estimated cost is some US$550 million. This project, which concernsthe immediate construction program,would concentrate on the extension of sewerage services to presently unserved areas, improvementof existing installations,and initial steps toward what must be a long-termreduction of the gross contaminationof water sources in the metropolitanarea. Total cost: US$90 million. Direct foreign procurementcomponent: US$4 million. Probable commitmentdate: 1970. Es- timated disbursementperiod: 1970-73. ExecutingAgency: Departamentode Aguas e Esgotos.

11.5 Seven Capital CitiesSew er.ge_Prop t

The seven capital cities in the Northeast, namely, San Luis, Teresina, Fortaleza,Salvador, Joao Pessoa, Recife and Aracaju, are in need of a modernized and expanded sewerage system. It would cover some 3.6 million inhabitants, or 30 percent of the urban populationof the Northeast. Total cost: US$50.9 million. Direct foreign procurementcomponent: US$3 million. Prob- able commitmentdate: 1971. Estimated disbursementperiod: 1971-73. Exe- cuting Agency: SUDENE. ANNEX .5 Page 20

11.6 Northeast Severage Project

The thirty cities included in this sewerage project have newly constructed water supply systems financed under a contract with the Inter-American Devel- opment Bank. The population served by this project would be 1.8 million or 16 percent of the urban population in the Northeast. Total cost: US$52.5 million. Direct foreign procurement component: US$2 million. Probable commitment date: 19T1. Estimated disbursement period: 1971-74. Executing Agency: SUDENE.

IV. CREDIT PROGRAMS

12.1 Industrial Credit - BNB

This project consists of medium and long-term financing for industries in the SUDENE area through Banco de Nordeste (BNB). The project would cover BNB's industrial financing during 1970 and 1971. Estimated total cost: US$100 million. Direct foreign procurement com-ooent: US$25 million. Probable commitment date: 1970. Estimated disbursement period: 1970-71. Executing Agency: Banco de Nordeste (BNB).

12.2 Industrial Credit - Other

This project would provide medium and long-term financing for industrial enterprises in the center-south of Brazil. Total cost: US$200 million. Di- rect foreign procurement component: US$50 million. Probable commitment date: 1971. Estimated disbursement period: 1971-73. Executing Agency: To be determined.

12.3 Agricultural Credit - Northeast

This project would provide medium and long-term financing for agricultural development in the Northeast through Banco de Nordeste (BNB). Total cost: US$100 million. Direct foreign procurement component: US$10 million. Probable commitment date: 1971. Estimated disbursement period: 1971-73. Executing Agency: Banco de Nordeste (BNB). BRAZIL: LIST OF PROJECTSFOR EZTERNALFINANCING ANNEX 5 (In Millions of US$)

Direct Foreign SuggestedPossible Total Procuremerlt Foreign Commitment Cost Componente Financing Date

I. DIRECTLYPRCDUCTIVB S3)TORS

A. AGRICULTURE 371.5 60.5 132.0 -

1.1 Petrolina - Irrigation 17.0 2.0 8.0 1970 1.2 Bahia Oil Palm 9.0 1.0 4.0 1971 1.3 Santos Part Strage 11.0 4.0 4.0 1971

1.4 Capibaribe- Multi Purpose 15.0 2.0 6.o 1971 1.5 Foot and Mouth DiseaseControl 100.0 8.0 20.0 1970 1.6 Mogiana RuralCredit 25.0 1.0 10.0 1970

1.7 Ruralhinas- IntegratedDevelopmnt 55.0 17.1 17.1 1970 1.8 Milk Products- IxdAustrialization 18.0 9.0 9.0 1971 1.9 TerminalMarkets - 9 Major Cities 101.5 3.0 40.5 1971

1.10 AgricultureResearch Stations 20.0 13.4 13.4 1969

B. INDUSTRYAND NINING 668.3 304.2 -

Steel 437.8 198.4 198.4

2.1 CSN, Stage 2 95.8 32.4 32.4 1971 2.2 Usiminas 90.0 55.0 55-o 1970

2.3 AcesLta 42.0 21.0 21.0 1970 2.4 Belgo Mineira (Private) 40.0 20.0 20.0 1971 2.5 Tubarao - Semifinished Steel Plant 170.0 70.0 70.0 1971

Iron Ore 121.4 55.8 61.8 - 3.1 MBR Iron Ore Project (Private) 15.770 440 so.o 1971 3.2 CVRD PelletizingPlant 2nd stage 16.4 11.8 11.8 1969

Coal 17.4 7.7 7.7 - 4.1 Thechanizationof 10 Coalminesin Santa Catarina 17.4 7.7 7.7 1971

Industry (Private) 91.7 42.3 47.5 5.1 Maua Cnernt Project 20.6 T.3 12.0 797 5.2 Itau Cement Project 33.0 16.0 16.0 1970 5,3 PoliolefinasPetrochemical Project 26.1 12.0 13.5 1969 5.4 2thyleneOxide Project 12.0 6.o 6.o 1970

C. PETROLEUM 225.0 46.o 46.0

6.1 Cubatao Refinery - Modernization 85.0 18.0 18.0 1970 6.2 Duque de Caixas Refinery Expansion 25.0 8.0 8.0 1969 6.3 P>mnaltoPaulista Refinery 115.0 20.0 20.0 1970 3RZIL: LIST OF PROJECTS FOPRFTEPt.. 'l FINANCI?e

(In M-illions vTuS$)

.jil•C t

Total Poccuremient ?cro ?-- Cost --- ___-ponentl/ Fin anc' ,S,, II. ECONOMICINlMSTRlTURE

D. ELECTRICENERGY 1,234.9 555-7 573.8 -

Federal Companies 661.5 333.7 316.8

7.1 Furms Units 7 & 8 FURNAS 8.) 6.1 6.1 197 7.2 lMoxoto Hydroplant CHESF 97.0 39.0 39.0 1? 7i

7.3 Paulo Afonso IV CHESF 40.0 16.0 16.0 1971 7.4 Northeast Transmission CHIEF 45.o 12.0 12.0 1971 7.5 Marimbondo Hydmplant MURNAS 160.6 43.7 43.7 1970

7.6 Marimbondo Transmission FURNilS 33.5 66.9 50.0 1971 7.7 Nuclear Power Plant FURNAS 227.0 150.0 150.0 1971

State Companies 290.4 5.O 135.0 - 7.8 Capim Branco Rydmplant CEMG 106.4 43.0 43.0 1971 7.9 Ilha Solteira - Sao Paulo Transmission CESP 100.0 40.0 50.0 1970 7.10 Sao Paulo Steam Plant 84.o 42.0 42.0 1971

Unallocated and Other 283.0 97.0 122.0 -

7.11 Itauba Hydroplant 86.o 35.o 35.0 1971 7.12 Osorio Hydroplant 132.0 55.o 55.0 1971 7.13 Rural Electrification 65.o 7.o 32.0 1969

-e. TELQOMM&JNICATIO0E 254.5 95.6 93.1 _

3.1 Embratel Expansion Program 39.5 9.6 9.6 1969/70 8.2 CTB Interaiuan Expansion Program 2nd phase 150.0 50.0 50.0 1970 8.3 Tebasa Ewansion Program, Bahia 65.o 36.o 33.5 1969 F. TRANSPORTATION 1,481.o 299.1 614.9 _

Railways 283.6 97.1 128.9

9.1 Mechanized Maintenarxze &luipment RFFSA 15.0 13.5 13.5 1970 9.2 Locomotives and Cars I RFFSA 60.0 30.0 30.0 1969 9.3 Locomotives and Cars II RFFSA 90.0 30.0 30.0 1971

9.4 Railway Line Improvementa, I RFFSA 42.0 3.0 16.8 1970 9.5 Railway Line Improvements, II RFFSA 55.0 4.0 22.0 1971 9.6 SigraLing System &Hi 21.6 16.6 16.6 1969

Highways 674.2 18.0 249.5 ANNEX 5 BRAZILtLIST OF PtJBCTS FOR UML FIIIAICINO Page 3 (In Millions of US)

Direct Foreign Suggested Possible Total Procurement Foreign Commitment Cost Componentl/ Financing Date

9.7 Second IBRD Highway ProJect DMEt 199.6 5.0 80.0 1970 9.8 Third IBRD Highway Project DNdR 200.0 5.0 80.0 1971

9.9 Sao Paulo Beltway S.P. 176.6 5.0 50.0 1971 9.10 Santos - Sao Phalo Toll Road 1et PThu. 98.0 3.0 39.5 1970

Ports 88.0 19.0 36.5 _ 9.11 Santos 47.0 10.0 2D.0 1970 9.12 Rio de Jansiro 26.0 5.0 10.5 1971 9.13 Recife 15.0 4.o 6.o 1971

Air 165.0 57.0 92.0 -

9.1EJ Galeao Airport !bxensio 100.0 5.0 Lo.0 1971 9.15 Traffir Control Syste= 65.o 52.0 52.0 1970

Other 270.3 108.0 108.0 -

9.16 Sao Paulo Subway S. P. 270.3 108.0 108.0 1970

III. SOCIAL INFRLST2CTURU

G. EDUCATDDN 226.5 28.0 109.2 -

10.1 Secondary Alucation - Fcur States 64.0 4,o 32.0 1969 10,2 Secondary 3ducation - Pernsabuoo 10.0 1.0 5.0 1970 10.3 Secondary Eduation - Other States 20.0 2.0 10.0 1971 io.L Postgraduate Training 15.0 10.0 10.0 1970 10.5 Primary Education - Northeast 20.0 2.0 10.0 1970 10.6 IBRD - Education Project 30.0 3.0 15.0 1970

10.7 Secondary Education - Sao Paulo 67.5 7.0 27.2 1971

H. WATERSUPPLY AND SEWERAGE 633.4 61.0 131.4 -

11.1 Water Supply - 37 Cities 50.0 3.0 25.0 1969 11.2 Water Supply - SFS BNH 300.0 15.0 15.4 1969 11.3 Sao Paulo Water Supply COMASP 90.0 4.0 25.0 1970

l1.L Sao Paulo Sewerage DAESP 90.0 4.0 25.0 1970 11.5 Sewerage - Seven Capital Cities. SUDENE 50.9 3.0 20.0 1971 11.6 Sewerage - 30 Cities. SUDENZ 52.5 2.0 21.0 1971 BRAZIL: LIST OF PROJECTSFOR EXTRNAL FINANCING A 5

(In Millions of US$) Page 4

Direct Foreign Suggested Possible Total Procurement Foreign Commitment Cost Componentl/Financing Date

IV. CREDIT PROGRAMB 4pO.0 80.0 105.0 -

12.1 IndustrialCredit. BNB 100.0 25.0 25.0 1970 12.2 IndustrialCredit - Other 200.0 5°.0 5).0 1971 12.3 Agric ultural Credit 100.0 5.0 30.0 1971

GRAND TOTLL 5,495.1 1,530.1 2,120.8 -

1/ This is the equipment coyonent which cculd be subject to internationalbidding. To the extent that Braziliansuppliers win bids, the foreign exchange cost would be reduced. ANM 6

FLO1 CP FUNDBTABL

Prepared by John A. Holsen ANNEX6

FLOWSOF FUNDSTABLES

INTRODUCTORYNOTE

1. A flows of funds approach has been used to insure consistency between the national accounts, the budgetary data for the various levels of government, the balance of payments and the monetary accounts. When some reclassificationsand rearrangements of the data are made, these normally separate "accounts"can be consolidatedinto a single "flows of funds" table. Table 7-1, Parts A to G, shows the consolidatedpresentation for each year, 1968 through1974, while tables 7-2 through7-10 show accounts for the individualsectazs which are easily reconciledwith the customarilyused formats for presentingthese data.

2. The model used in this annex contains ten sectors, seven of them being componentsof the public sector. The other three are the private sector, the monetary system and the rest of the world (i.e., the balance of payments). The federal governmentis represented by five sectors -- the Treasury cash budget, the extra-budgetaryaccounts, federal enterprises, the official credit agencies, and the "bond account" (operations with re- adjustable Treasury obligations). A local government sector (including generalgovernment functions of both states and municipalities)and a state enterprisesector complete the componentsof the public sector. The federalsector is presented in relative detail since the focus of attentionis the federalsector invest-mentprogram and its financing. Tle tables in Annex 4 ("The Federal Sector InvestmentProgram") on individual autarkies, mixed enterprises and official credit agencies have been consolidatedinto the sectors shown in the flows of funds tables. The latter contain, in additionto the sector accounts,all of the basic national accountsmagnitude. They thus link the specific federal sector investmentprogram to the generalmacro-economic framework.

3. The structureof this flows of funds presentationscan be most easily understoodby looking at a simple model which uses only a single account for the public sector. The format of and elements in such a simple model are shown on the two pages at the conclusionof this note. The first shows the arrangement of the flows of funds table; the second identifiesthe elements in the table and states the national accounts identitiesthat are representedby the appropriaterows and columns. The table contains sets of rows and columnsfor each sector plus one set for the variables that enter into the differencebetween estimatesof GDP at market prices and at factor costs and another set to show resource avail- abilitiesand uses. The inter-sectoralfinancial flows, by which a sector either borrows to finance any excess of real investmentover real savings or increasesits holdings of financialassets in the opposite case, are shown in the lower (capitaltransactions) part of the table. ANNEX6

Page 2

4. While the conceptualframework of this flows of funds presentation is relativelysimple, its applicationcan be quite difficultdue to in- adequaciesin the data. In the case of Brazil some of the sector accounts which had to be consolidateddid not exist and had to be constructedfrom data in other accounts. The double entry principle in the system is helpful in this case as it permits missing accounts to be built up in part from data in other sectors. (The private sector accountwas derived entirely as a residual.) This flows of funds approach is especially valuable when the basic data are limited because of the check built into the system by having each flow appear in two accounts. By placing emphasisupon the inter- sectoril flows it makes possible an examinationof the adequacyof insti- tutions and policies to bring about these flows. It may be looked upon as a way of making explicit,and thus subject to examination,the inter-sectoral flows that are implicit in the usual kinds of macro-economic projections of national accounts, budgets and the balance of payments.

5. The monetary sector account is presentedin terms of flows at average1968 prices. Many of the elements in this account--e.g.,money supply and private sector credit--wereprojected in the form of end-of-the- year stocks at projected December prices; the nominal flows within the years were then calculated and deflated to constant 1968 prices. The changes shown in money supply are those that would result from a constant income velocity of circulation and a decline in the rate of inflation from 20 to 15 to 10 percent (at the end of, respectively,1969, 1970 and 1971). ANNEX6

A SIMPLE MODELOF THE FLiOWOF FUNDSPRESENTATION Page 3

Resource 4J ~~~~~~Uses: r. ~~~~~~0

E-4!> H $4~ ~~~~2 ci5 I to ;4 S4P0 0)-P4 *4 05- $.4 0 0~ 0$ '*

PAYM4ENT3BY: ~ it -

A. Current

1. lovernxnent - . U og Sg (3)

.. Private Td - F - p Sp (4)

3. Fo-eign T r - - - - D (5)

L4 . MA-Cnetary ------

IDThF~rp/MDfc Ti GDYfc - - - - - (2)

:). Rs. Avail., - (M-E) - GD?mp - - (l.a)

(3) (4) (2~~~~~~C) (1) a)-

- - ,-t ,->~t L

7. Total* ... ~~...... (l b

*Ntinbers in parentheses indicate niational accounts identity correspondingto the row and column.

Financiald flows excluded f rom national accounts but included in flow of funds .presentation. ANNEX6

Page 4

N3tional AccountsVariables:

GDPrnp = gross domesticproduct at market prices (M-E) = importsminus exports(resource gap) GDYfc = gross domestic income at factor cost Td = direct taxes Ti = indirecttaxes Tr = currenttransfers, foreign to privatesector F = net factor payments to abroad D = currentaccount deficit in B/P (+ is deficit) U = subsidies rg governmentconsumption Cp = privateconsumption =g governmentsavings ' = private savings (national; after transfers) Ig = government fixed investment Ip = private fixed investment Vll - inventory investment (private sector)

Fj nandial Flows Variables:

ii = net purchases of government bonds Lfg = loans (gross), foreign to government sector ;~ = loans (gross), foreign to private sector Dr,^ - loans (net), monetary to government Inn = loans (net), monetary to private sector ,,f' = loan amortization, government to foreign Apf = loan amortization, private to foreign R = increase in net internationalreserves j-fr = money, quasi-money and other private sector claims on the monetary system

;2tional Accounts Identities

Er;. (1): Availability and Use of Resources

(1.a) 3DPmp + (M-E) = Cg + Cp + Sg + Sp + D

(L,b) Sg + Sp + D = Ig + Ip + Vp

Eq. (2): GDPmp/GD!fcRelationship

GDPmp+ U = GDYfc + Ti

E.. (3): Government Current Account

Td + Ti = U + Cg + Sg

Eq. (h): Private Sector Current Account

GDYfc + Tr = Td + F + Cp + Sp

Eq.: (5): Balance of Payments (current account)

D + Tr = F + (M-E) ANNEX6

FI0WSOF FUNISTABLES

Table

6-1 Current and Capital Flows by Sector Part A: Summary Flows of Funds for 1968 Part B: n n1969 Part C: " n 1970 Part D: n 1971 Part E: " it 1972 Part F: n n n 1973 Part G: n n 197h 6-2 Federal Treasury Cash Budget

6-3 Extra Budgetary Accounts Part A: SectorTotal Part B: MinistryPrograms Part C: FederalAutarkies Part D: ExchangeOperations Part E: Other Extra-budgetary transactions 6-L Local Governments 6-5 FederalEnterprises

6-6 StateEnterprises 6-7 Balanceof Payments 6-8 MonetarySystem 6-9 OfficialCredit Agencies 6-10 Bond Account ANIINE6 Table 6-1 - Part A

SUNMABFWWi OF PF1DS FOR 1968 (millions of NCr's at 1966 prices)

43 1 (2) (3) (4) (5;) (6) (7) (8) (9) (10) 91) (12) 13_ Paynts by: ' Treasu&r Brtra Federal State Rest Official GDPxp/ Resource Uses 0o Cash Btdgetary Local Private Enter- Enter- of the Monetary Credit Bond tlDYfc a. Con- b. Total A. Current Account ] hlget Accounts Gov'ta. Sector prises prises World System &Lences Accotnt Relation sumption Savings Paynts

1. TveaauiAget - 741 760 -- - - - 79 680 5,009 2,985 10,254 2. ktra_adgetary Fmids - - - 3,603 _ _ 113 _ _ 2 384 2,102 239 6,443 3. Local Qowerunts - - - 2,167 ------117 6,304 2,462 11,050

4. Private Setor 2,308 4,365 235 - _ _ 804 - 1,148 - - 66,744 3,41)4 79,018 5. Federal Eiterprise ------1,191 1,191 6. ftat* S ies ------167 167

7. Bet of tho Wrld - 68 _ 136 - 1,5o4 1,708 8. metyU lt ------370 370 9. Omdal readt A ea ------4 1,242 1,246

10. UbsIAccoeut - - - 367 - - - _- - -286 81 11. MPAV/GDTc Relation 7,946 1,26J 10,055 72,745 1,191 &67 - 370 98 - - 93,841 12. ArailabiIitlea ------791 - - - 92,660 - - 93,451

13. Total Capital R.eceipts 10,254 6,443 11,050 79,018 1,191 167 1,708 )70 1,246 81 93,841 8o,163 13.288 ... SUD-zozal Y_1,4>1

(12) c. Fixed d. Inwen- D. atpital Acomnat (1 (2) (3)_ (4) (5) (6) (7) (8) (9) (o) 11) Invest. tory Ir. (13)

1. TreauryDadgt - 677 1,419 - 558 _ - _ 86 - 1,472 - 4,212 2. Ixtra-adgetary Accounts - - - 2 - _ 351 -- - - 1,204 -438 1,119 3. Lcal Goerments - - - - - 483 20 - 9 29 - 3,267 - 3, 808

4. Private Sector - 67 200 - 421 - - 8,211 65 124 - 3,732 739 13,559 5. Federal Rktuprise - - - 89 - 529 127 -10 4 - - 2,003 130 2,872 6. State Interprise ------1,179 - 1,179

7. Ret of the Wcrld - 458 34 1,342 513 - - - 57 - - - 2,404 8. monetary Syste 1,318 -433 -411 7,108 15 - 397 - 293 284 _ - - 8,571 9. Official Credit Agencies - 26 104 1,604 114 - 5 - - 18 - 1,871

10. Bond Account -91 85 - - 60 - - - 115 - - - - 169 12. Resource Availabilities 2,985 239 2,462 3,414 1,191 167 1,504 370 1,242 -286 - - - 13,288

13. Total Capital Receipts 4,212 1,119 3,808 13,559 2,872 1,179 2,404 8,571 1,871 169 - 12i857 431 Table 6-1 - Part B AwN=X 6 SUM4ARYFLOWS OF FUNDSFOR 1969 (millions of NCr's at 1968 prices)

w(12 (2) (3) (4) (5) (6) (7L (8) (9) (lo) (11) (12) PaywnLa by: $4 Treasury Ectra- Federal State Rest Official GDPmp/ Resource Uses m Cash Budgetary Local Pxivate Bnter- &±ter- of the Monetary Credit Bond GDYfc a. Con- b. Total A. Ourrent Account A Budget Acoounts Gov'ts. Sector prises prises World System Agencies Account Relation saunption Savirgs Payments

1. Treasury Budget - 762 506 ------169 644 5,287 3,690 11,058 2. Extra-Budgetary Accounts - - - 3,476 - - 134 - 28 1409 2,231 909 7,189 3. Local Goverrmsnts - - - 2,254 - - - 131 6,619 2,368 11,372

Private Sector 2,497 4,958 249 - _ _ 936 _ 1,133 - - 69,745 2,743 82,261 F7edwal &iterprise - - - _- - - 1,388 1,368 6. State Enterprise - - - - 177 177

7. Rest of the World - 34 - 102 ------1,664 1,800 8. orstay SBtem ------373 373 9. Official Credit Agencies - - - 1-1 1,255 1,266

10. Boni Acc¢unt - - - 197 ------197 11. 0DF/3DYfc Relation 8,561 1,435 10,617 76,230 1,388 177 - 373 133 _- _ - 98,914 12. Resew. Availabilities ------730 - - - 97,730 - - 98,460

13. Total Current Receipts 11,058 7,189 11,372 82,261 1,388 177 1,800 373 1,266 197 98,914 83,893 14,567 ...

c. Fixed d. Inven- B. Capital Account (1) (2) (3) (4) (5) (6) (7) (8) (9) (l0) (11) Invest. tory _In. (13)

1. Treasury Budget - 637 1,237 164 576 _- 122 - 1,392 - 4,128 2. Axtra-BIgetazy FPnds - - - 893 - - 414 _ 2 _ - 1,879 -512 2,676 3. Local Goverrnnts - - - - 363 20 - 19 - 3,548 - 3,950

4. Private Sector - 103 - - 377 - 143 5,433 479 -60 - 4,009 916 11,400 5 Fedetal Interprises - - 75 - 383 126 59 11 - 2,351 61 3,066 6. State EIterprise------923 - 923

Rest of the World - 825 34 1,249 517 - - - 126 - - - - 2,751 8 onearySystem 43 8 138 75 4,409 -1 - 370 - 344 92 - - - 5,865 9. Official Credit Agencies - 39 236 1,867 179 - 14 - - 23 - - - 2,358

10. Bond Acccrnt -25 - - 30 ------55 12. Resource Availabilities 3,690 909 2,368 2,743 1,388 177 1,664 373 1,255 0 - - - 14,567

13. Total Capital Receipts 4,128 2,676 3,950 11,400 3,066 923 2,751 5,865 2,356 55 - 14,102 465 ... Table 6-1 - Part C Lyon 6

SUMZIRYFLCWS OF FUNDSED t 1970 (millions of NCr's at 197-prices)

Payments by: 4 |Treasury Extra- Federal State Rest Official G5DPmp/ Resource Uses . Cash Budgetary Local Private Sater- Enter- of the Monetary Credit Boin GDTfc a. Con- b. Total A. Current Account ; Budget Accounts Gov' ts. Sector prises prises World System Agencies Account Relation sumption Savings Payments

1. Treasury Budget - 838 535 - _ _ - _ _ 168 630 5,543 4,150 11,864 2. Extra-Budgetary Accounts - - - 3,753 - _ 162 - - 30 323 2,473 1,006 7,747 3. Local Governments - - 2,344 -- - - 147 6,950 2,570 12,011

4. Private Sector 2,716 5,339 264 - - - 1,006 - 1,119 - - 73,860 2,933 87,237 5. Federal Enterprise ------1,707 1,707 6. State Enterprise - - - - 100 180

7. Rest of the Wcrild - 34 - 102 - - 2,007 2,143 8. Mom tary System ------403 403 9. Official Credit Agencies ------12 1,331 1,343

10. Bon Accourt - - - 198 ------198 11. GDPzp/GDYfc Relation 9,148 1,536 11,212 80,o40 1,707 180 - 403 224 _ - _ - 105,250 12. Resource Availabilities ------975 - - - 104,150 - - 105,125

13. Total Current Receipts 11,864 7,747 12,011 87,237 1,707 180 2,143 403 1,343 198 105,250 88,838 16,287 ...

c. ried d. Inroa B. Capital Account (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) Iurest. tory In. L13)

1. Treasury Budget - 800 1,344 46 626 - 41 - 1,512 - 4,369 2. Extra-Budgetary Fu\xis - - - 685 - - 410 - 5 - - 2,037 -273 2,864 3. Local Goverrnts - - _- - 390 21 - 31 - - 3,750 - 4,192

4. Private Sector - 102 - 1406 - 182 4,721 604 -55 4, 72 9 8 11, O 5. Fedeal Elterprises - - 69 - 420 175 1 17 - 2, 3 3 6. State Enterprises ------990 - 990

7. Rest of the World - 577 68 1,627 743 - - - 116 _ - - - 3,131 8. Monetary System 219 319 -68 3,919 4 - 312 403 403 97 - - - 5,205 9. Official Credit Agencies - 20 278 2,031 167 - 24 - - 28 - - - 2,548

10. Bond Account - 40 - - 30 ------70 12. Resource Availabilities 4,150 1,006 2,570 2,933 1,707 180 2,007 403 1,331 0 - - - 16,287

13. Total Capital Receipts 4,369 2,864 4,192 11,310 3,683 990 3,131 5,205 2,548 70 - 15,518 769 Table 6-1 - Part D ANNEX6 SUMMARIFLOWS OF FUNDSFOR 1971 (millions of NCr's at 1968 prices) 33 4 (2QL •.3L (4 (6.)~ £7L QL £ (10) (12) Federal State Rest Official(9(1p/ Resource Uses Payments by:,, Treasury Extra- a. Con- b. Total 0 o Cash Budgetary Local Private Enter- Enter- of the Monetary Credit Bond GDYfc Acccunt Relation sustion Savigs Pgyunts A. Current Account Budget Accounts Gov'ts. Sector prises prises World System Agencies 4,723 12,674 565 - - _ - _ _ 164 616 5,743 1. Treasury Budget _ 863 3D 232 2,643 1,078 8,226 Furis - - - 4,049 - - 194 2. fxtra-Budgetary 165 7,297 2,787 12,687 3. Local Governnents - - - 2,438 - _- _ _

- - 77,899 3,043 92,oo4 Sector 2,893 5,736 280 - - - 1,099 - 1,054 4. Private - - 2,014 2,014 Eiterprises ------5. Fedeal - - 1Q3 193 6. State 8nterprises - - -

- 2,332 2,468 - 34 - 102 - 7. Rest of the World - - - - 435 435 Monetary System ------8. - 13 1,335 1,348 9. Official Credit Agencies - - - 194 Borx Accort - - - 191 - - - 10. _ _ _ - 111,373 11. GDPp/GDIfc Relation 9,781 1,593 11,842 85,221 2,014 193 - 435 294 - - 110,360 - - 111,535 12. Resource Availabilities ------1,175 - 194 111,373 93,595 17,940 ... 13. Total Current Receipts 12,674 8,226 12,687 92,004 2,014 193 2,468 435 1,348 (12 ) c. Fix" d. Inven (10 Invest. tory Iw. 13 B. Capital Account (L (2) (3) (4) (5) (6) (7. 0 (9) (lo)1

- 1,604 - 4,723 - 979 1,461 11 658 - - - 10 1. Treasury Budget _ - 2,285 -159 3,183 2. Funds - - - 685 - - 365 _ 7 kxtra-Budgetary - - 4,176 - 4,661 3. Local Governsrt s - - - - - 417 24 - 44

- 4,965 1,006 11,122 - 131 - - 439 - 254 3,635 787 -95 4. Private Sector 20 - - 2,933 98 4,090 F.Federal Enterprises - - - 83 - 422 219 315 - - 1,032 - 1,032 6. State &nterprises ------3,510 7. Rest of the World - 645 136 1,756 839 - - - 134 - - - - 4,385 8. Monetary Systea - 277 -45 3,293 9 - 282 - 417 152 - 36 - - - 2,769 9. Official Credit Agencies - 25 322 2,251 101 - 34 - - - - 93 10. Borid Account - 48 - - 30 - - - 15 0 - - - 17,940 12. Resource Availabilities 4,723 1,078 2,787 3,043 2,014 193 2,332 435 1,335 - 16,995 945 ... 13. Total Capital Receipts 4,723 3,183 4,661 11,122 4,090 1,032 3,510 4,385 2,769 93 Table 6-1 - Part E ANNEX6 SU4MARY FIOWS OF FUNDSFOR 1972 (millions of NCr's at 1968 prices)

42 (1 (2) (3) (4) 5 (6)j (7j** (8) (9) (10) (1 (2...... (13) Payments by: .1.. Treasury Extra- Wedr-a State Rest Official Resairce Uses ov Cash Budgetary Local Private inter- nter- of the Monetary Credit Bond GD!fc a. Con b. Total A. Current Account A Budget Accounts Oov' ts. Sectcr prises prises World System Agencies Account Relati on sumption Savings Pawyents

1. Treasury Budget _ 891 599 - - - _ _ 143 603 5,964 4,901 13,101 2. ALtra-Budgetary Funds - - - 4,366 _ _ 233 - - 30 133 2,8331 1,150 8,743 3. Local GovernAnrts - - - 2,536 - - - 165 7,662 3,041 13,404

4. Private Sectsw 3,081 6,172 297 - _ 1,204 - 921 - - 82,150 3,719 97,544 5. Federal lkterprises ------2,255 2,255 6. State gaterprises - - - 195 195

7. Rest of the World - 34 - 102 ------2,357 2,493 8. No*9tsry SWOtU ------470 470 9. Official Credit Agencies ------_ _ 14 1,287 1,301

10. Bond Account - - - 173 - - - _ _ _ _ - 173 11. 0DPp/QDffc Rel tion 10,020 1,646 12,508 90,367 2,255 195 - 470 3dO - _ _ - 117,841 12. Resworce Availabilities ------1,056 - - - 116,940 - - 117,996

13. Total Current Receipts 13,101 8,743 13,404 97,544 2,255 195 2,493 470 1,301 173 117,841 9d,621 19,375 (12) B. (2)Capital Accowt,(3) (1) (6) ~~c.F zd d. InrA 31. CapitalAooant (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) Invest. totrZ Inv. 13)

1. TrBmry adget - 897 1,589 - 717 - - 10 - 1,688 - 4,901 2. kttra-Bdetar7y Funds - - - 685 - - 371 _ 10 _ - 2,273 -387 2,952 3. Local overmnts - - - - - 445 34 - 58 - - 4,562 - 5,099

4. Private Sectar - 120 - - 489 339 3,866 1,001 -593 - 5,750 1,055 12,027 5. Fedwal fterprises - - - 86 - 443 265 325 25 - - 3,232 1114 14495 6. State E!nterprises ------1,088 - 1,088

7. Reat of tk. lorld - 789 136 1,640 881 - - 164 - - - - 3,610 o. Ihastary 8aytm - -69 -46 3,524 8 - 137 - 409 63- - - 4,661 9. Official Credit Agencies - 25 379 2,373 145 - 47 - - 36 - - - 3,005

10. Bond Account - 40 ------41 - - *1 12. Resource Availabilities 4,901 1,150 3,041 3,719 a,255 195 2,357 470 1,287 0 - - 19,375

13. TotalCapital Receipts 4,901 2,952 5,099 12,027 4,495 1,088 3,610 4,661 3,005 81 _ 18,593 782 ... Table 6-1 - Part F ANNEX 6 SUNIHA FLOWS OF FUNiJ1DS1R 1973 (miliions of NCr's at 1968 prices)

(1) ()_ _ 3 _4_ 5 () () (8 9 (lo) kl) (2 PaymentBE by: * s rry( c tra- (3) Stat rest-06i iT I 8 DPapl Resource Uses o 0 Cash Budgetary Local Private Enter- Enter- of the Monetary Credit Bord GDYfc A. Con- b. Total A. Current Account BBudget Accounts Gov'ts. Sector prises prises World System Agezcies Accomnt Relation sumption Savings Payments

1. Treasury Ibdgt _ 923 633 - _ _ - _ _ 101 591 6,116 5,336 13,700 2. Extra-Budgetary _- - 4,708 - - 272 - - 30 30 3,036 1,229 9,305 3. Local Governments - - - 2,637 _- - - 165 8,045 3,313 14,160

4. Private Sector 3,284 6,645 315 - _ _ 1,304 - 766 - - 86,477 4,571 103,362 5. Fedwal &iterprises ------2,483 2,483 6. State Ihterprises - - - - - 174 174

7. Rest of t} World - 34 - 102 - - 2,398 2,534 8. Monetary System - - - - - 507 507 9. Official Credit Agencies ------_ - 15 1,238 1,253

10. Bond Aocount - - - 131 ------131 11. ODPp/aDYfc Relation 10,416 1,703 13,212 95,784 2,483 174 - 507 467 _- - 124,766 12. Rescurce Availabilities ------958 - - - 123,980 - - 124,938

13. Total Olrrent Receipts 13,700 9,305 14,160 103,362 2,483 174 2,534 507 1,253 131 124,766 103,689 21,249 ...

(12) _ _ _ _ c. Fixed d. Iiven- B. Capital Account (1) (2) (3) (4) (6) (6) (7) (8) (9) (10) (11) Invest. tor Inv. (13)

1. Tremmury Bdget - 964 1,729 - 777 - - - 10 _ - 1,856 - 5,336 2. ktrra-Budgetary Funds - - - 685 - - 397 - 13 -- 2,308 -324 3,079 3. Local Oover nts - - - - - 476 38 - 74 - - 4,986 - 5,574

4. Private Sector - 131 - - 543 - 420 4,047 1,262 -723 - 6,448 1,112 13,240 5. Pedtral Ihterprises - - - 69 - 487 249 394 29 - - 3,598 126 4,954 6. State Enterprises ------1,137 - 1,137

7 Rest of the World - 797 136 1,557 1,024 - - - 174 _ - - 3,688 Monetary Systea - -63 -46 3,782 -2 - 126 _ 406 745 - - - 4,948 9. Official Credit Agencies - 21 442 2,576 129 - 60 _ - 36 _- - 3,264

10. Bond Account ------58 - _- - 58 12. Resource Availabilities 5,336 1,229 3,313 4,571 2,4d3 174 2,398 507 1,236 0 _- - 21,249

13. Total Capital Receipts 5,336 3,079 5,574 13,240 4,954 1,137 3,688 4,948 3,264 58 - 20,333 916 .. Table 6-1 - Part G Am= 6 SUMMkRYFLOWS OF FUNDSFOR 1974 (millions of NCr's at 1 prices

(1)p (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) Payments by: .v Treasury tra- Sedrale Rest Officia G p Resoirce Uses o o Cash Budgetary Local Prlvate Enter- Enter- of the Monetary Credit Bond GDIIfc a. Con- b. Total A. Current Account Budget Accounts Gor'ts. Sector prises prises World System Ageies Account Relation sumption Savings Payments

1. Treasury Budget - 943 671 ------63 579 6,334 5,802 14,392 2. 2xtra-Budgetary Furis - - - 5,077 _ _ 320 - - 30 30 3,244 1,192 9,893 3. Local Governssnts - - - 2,742 ------165 8,447 3,608 14,962

4. Private Sectcr 3,500 7,154 334 - _ _ 1,405 - 605 - - 91,142 5,482 109,622 5. Federal EIterprises ------2,775 2,775 6. State Zaterprises - - - ______- 90 90

7. Rest of the World - 34 - 102 _ - 2,581 2,717 8. Monetary Systema - - - - 548 548 9. Official Credit Agencies ------16 1,211 1,227

10. Bond Account - - - 93 ------93 11. GDPmip/GDYfc Relation 10,892 1,762 13,957 101,608 2,775 90 - 548 622 - - - - 132,254 12. Resource Availabilities ------992 - - - 131,480 - - 132,472

13. Total Current Receipts 14,392 9,893 14,962 109,622 2,775 90 2,717 548 1,227 93 132,254 109,183 23,289 ..

c . Fixed d. Inen- B. Capital Account (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (1) Invest. tor, Tnv. (13)

1. Treasury Badget - 1,079 1,882 - 845 _ _ _ 10 - - 1,986 - 5,802 2. Ektra-Budgetary Faurs - - - 685 - - 438 _ 15 - 2,428 -114 3,452 3. Local Governments - - - - _ 510 48 - 92 - - 5,513 - 6,163

4. Private Sector - 141 - - 602 - 469 4,373 1,582 -487 - 7,173 1,167 15,020 5. Federal Aterprises _- - 74 _ 556 312 336 33 - - 0,833 147 5,291 6. State Interprises ------i,1o - 1,156

7. Rest of the World - 769 204 1,931 949 - - - 185 - - 4,038 8. Monetary System - 271 -46 4,047 -2 - 115 - 410 462 _ _ - 5,257 9. Official Credit Agencies - - 515 2,801 122 - 75 - -36 - - - 3,549

10. Bond Account ------11 - - - - 11 12. Resource Availabilities 5,802 1,192 3,608 5,482 2,775 90 2,581 548 1,22U 0 - - - 23,289

13. Total Capital Receipts 5,802 3,452 6,163 15,020 5,291 1,156 4,036 5,257 3,549 11 22,089 1,200 Table 6-2 Ann 6 FEDfg?AL TRASURY CASH BUDGET (millions of NCr at 1968 prices)

1974 1968 1969 1970 1971 1972 1973

13,542 14,479 aL485 I. Gurrent Receipts 025L4 11,056 11,d664 -12,674 13,691 14,635 15,650 Reported Total 10,275 11,15 11,998 12,615 - 156 - 165 - Sales of Goods & Services - 100 -127 -134 - 141 - 149 + Airport Fees & Fduc. Salary 79 - - - - 7 946 8,561 9.148 9 781 lo.461 11.195 119 A. Indirect Taxes 7,319 Products (IPI) 5 ?69 lI 4 6,463 bou8 1. Industrial 1,157 1,226 2. I=orts 833 916 971 1,030 1,091 1,574 1,732 1,905 2,095 2,305 2,535 2,789 3. Fm1s & Lubricants (IUCL) 291 Energy (IlUe) 155 172 192 213 236 262 4. Electric 353 360 5. Others 333 325 331 339 346 (114) (44) (44) (44) (44) (44) (44) (a. insrals; IU1M) - - - Karine Ftnd) (26) - - - (b. Yerchant (25) (27) Airport Fees) (12) (20) (21) (23) (24) (c. (278) (284) (289) (d. 78% of unidentified) (251) (261) (266) (272) 2,716 2 893 3,081 3,284 3500 B. Direct Taxes 238 21497 9 2,170 -1 2,430 1. Inco Taxes 105 SaJary 67 78 83 88 93 99 2. Educational 160 176 3. Iltor Vehicles 54 120 132 1.45 78 80 82 4. 22% of Unidentified 71 74 75 77 7269 7 368 7 714 7 951 8,200 8 36 85 II. Current Expraaditures 755 Total 7;l79 7;495o8 og2 0. 49 Reported 149 - 156 -165 - Sales of Goods& Services - 100 - 127 - 134 - 141 ------+ 60% Eiucational Salary 4 - 6,116 6,334 A. Goods and Services 5,009 5,287 5,543 5,743 5,964 2,248 2,256 B. Current Tramfers 2,260 2,081 2,171 2,206 2,236 660 61414 63 616 1. Subsidies 5 a. Railroad Deficit 1-39--IF-- 79 99~ 1914 207 220 b. Post Office Deficit 171 160 171 182 63 6 1 2. To Local Goverrnts 760 506 535 565 599 462 491 555 9 a. Participation Ed 44 b. MInemis Ta (IlM) 414 44 44 44 44144 3. To Extra-Budgetary Accounts 741 762 838 863 891 __92_9_ a. Social Security (INPS) 39 127 106 56 68 63 135 194 b. DNERdiscretionary 112 IUCL 151 141 201 202 222 167 c. DNMEfrom 160 176 d. 2ilNRfrom Vehicle Tax - 54 120 132 145 e. BN F 7 - 17 25 25 25 25 25 25 f. DNPVN 8 8 Airpcrt Authority 7 8 8 8 8 g. 30 30 h. Merchant Marine 34 3D 30 30 30

(cont 'd) Table 6 -2 (page 2) ANNEX6

1968 1969 1970 1971 1972 1973 1974

4. Interest on Bonds 79 169 168 164 143 101 63 1,093 III. Reduction in Indirect Taxes - - - - 441 779

IV. Savir"s on Current Account 2,985 3,690 4,150 4,723 4,901 5,336 5,802

V. Capital Ebperdit rnes 4 212 4,128 4,369 4,723 4,901 5,336 5,802 Reported Total 4,173 - - - - - _ + h0% Ed. Salary; Airport Fees 39 - - - - -

A. Direct Fixed Investment 1,472 1,392 1,512 1,604 1,688 1,856 1,986

1. Witbin Investment Program 764 642 716 61 794 909 982 a. Agriculture 203 154 179 153 147 221 251 b. Education 240 265 291 319 349 383 419 (i. discretionary) (213) (234) (258) (284) (312) (343) (377) (ii. 40% E*d. salary) ( 27) ( 31) (33) (35) (37) (40) (42) c. Health 118 89 98 104 110 117 32 4 d. Housing 93 51 54 54 54 54 54 e. Water Supply 110 83 94 131 134 134 134

2. Adwinistration & Defense 708 750 796 843 894 947 1,004 (includes capital n.e.i.)

B. Capital Transfers 2,734 2,572 2,811 3,108 3,213 3,480 3,816

1. To Local Governnrmts 1,419 1,237 1344 1,461 8 1.729 1882 a. Participation Furai 717 463 491 522 555 590 b. 6o% IuEE 93 103 115 128 1h2 157 175 C. 609 671 738 811 892 982 1,080

2. Extra-Budgetary; Fararked 526 586 596 674 742 892 1,052 a. IUCL far DNgR 444 516 52 b. IUCL for Airport Authority 44 50 54 60 66 73 80 c. Airport Fees for Air. Auth. 12 20 21 22 23 25 26 d. Maritime Authority (MMF) 26 - - - -

3. Extra-Budgetary; Discretionary 151 51 204 305 155 72 27 a. Maritime Authority 7 5 1752 77 13 b. DNUR(rnt of repayments) -39 -46 - _- - c. Ports and Waterways 2d 16 - - - - d. Airport Authority 9 - - 44 78 59 27 e. Coal Comnission 29 16 29 - -

4. Federal &Eterprise; Earmarked 387 416 458 502 53 -609 6 a. IUCL for Petrobras 201 200T9 9 277 3; 3 b. IUCL for Railrvads (RFFSA) 126 139 152 168 184 203 223 c. IUEE for Electrobras 60 69 77 83 92 102 113

5. Federal kterprise; Discretionary 171 160 168 156 164 168 174 a. Electrobra1 109 93 75 75 75 7T b. Rjiiroads (DNEF) (DNEF/RFFSA) 62 30 49 51 55 58 61 c. Post Office (ICT) 15 21 26 30 34 35 38

(cont d) ANNEX6

Table 6 _2 (page 3) 1972 1973 1974 1968 1969 1970 1971

10 10 122 41 10 10 6. Official Credit Agencies 86 32 - - a. D)erelopmenrt Bank (BND1) 11 10 10 10 b. Housing Bank (BNH) 11 6 9 10 164 46 11 - - C. Reduction in Carryover - (Outside investment program) 219 - - - VI. Deficit Financing 1,227 438 - - - 1. By Monetary Authorities 1,318 438 219 219 - a. Treasury Borrowing 1,079 - b. Taxpayer Deposits 239

2. By Bond Accoant -91 - Table6 -3 ANNEX6

EXTRA-BUDGETARYACCOUNTS

Part A: Sector Total (Consolidationof Parts B, C, D. and E)

(millions of NCr's in 1968 prices)

1968 1969 1970 1971 1972 1973 1974

CURRENTACCOUNT A. Current Receipts 6.443 7,189 7.747 8,226 8 743 9.305 9,893 1. Treasury Budget Transfers 741 762 -13 -s3 891 923 943 4. PrivateSector 4,365 4,958 5,339 5,736 6,172 6,645 7,154 (directtaxes) (4,o47) (4,732) (5,106) (5,5I1) (5,947) (6,420) (6,929) (otherreceipts) (318) (226) (233) (225) (225) (225) (225) 7. CurrentTransfers from Abroad 68 34 34 34 34 34 34 11. GDPmp/0NPfc Relation 1,269 1,435 1,536 1,593 1,646 1,703 1,762 (indirecttaxes) (1,226) (1,409) (1,509) (1,565) (1,618) (1,674) (1,733) (retainedearnings) (43) (26) (27) (28) (28) (29) (29) B. CurrentExpenditures 6,204 6,280 6 741 7,148 7,593 8,076 8,701 4. PrivateSector 3,7W 1iE 5,077 (socialsecurity transfers) (3,083) (3,154) (3,406) (3,679) (3,973) (4,291) (4,634) (otherexpenditures) (520) (324) (347) (370) (393) (417) (443) 7. Intereston ExternalDebt 113 134 162 194 233 272 320 10. CurrentPayments to Bond Account 2 28 30 30 30 30 30 U1. Subsidies 384 409 323 232 133 30 30 12.a ConsumptionExpenditures 2,102 2,231 2,473 2,643 2,831 3,036 3,244 C. CurrentAccount Savings (12.b) 239 909 1,006 1,078 1,150 1,229 1,112

CAPITALACCOUNT A. CapitalReceipts 1 119 2,676 2,864 3 183 2 952 3 079 3,452 1. Treasury Budget Transfers 637 oOO 4 1,79 4. Finrhcingfrmx PrivateSector 67 103 102 131 120 131 141 7. ForeignBorrowing 458 825 577 645 789 797 769 8. MonetarySystem (doublenet) -433 138 319 277 -69 -63 271 (a. increasein net credit) (1,449) (1,4487) (1,352) (1,373) (1,355) (1,404) 1,479 (b.less increasein deposits (-1,882) (-1,349) (-1,033) (-1,096) (-1,424) (-1,467) (-1,208) 9. OfficialCredit Agency Loans 26 39 20 25 25 21 - 10. Financingfrcm Bond Account 85 25 40 48 40 - - 12. Savingson CurrentAccount 239 909 1,006 1,078 1,150 1,229 1,192

B. CapitalExpenditures 1,119 2,676 2 86 3 183 2 952 3 079 3.452 4. Financingof PrivateSector 6895685 7. ForeignDebt Amortization 351 414 410 365 371 397 438 9. Amort. Official Credit Agency Loans - 2 5 7 10 13 15 12.a FixedInvestment 1,204 1,879 2,037 2,285 2,273 2,308 2,428 12.b Inventory Investment -438 -512 -273 -159 -387 -324 -114 ANNEB 6

Table 6-3 (p. 2) EXTRA-BUDGETARYACCOUNTS

Part B: Ministry Programs

(mdllions of NCr's in 1968 prices)

1968 1969 1970 1971 1972 1973 1974 CONSOLIDATEDACCOUNT A. Current Receipts = Savings 922? 96 98 100 105 10 4. Private Sector (directtaxes) 26 6X 7D 11. GDP?np/GNPfcRelation 30 28 31 32 33 36 37 a. Indirect Taxes (19) (17) (19) (19) (20) (22) (23) b. Undistributed Profits (11) (11) (12) (13) (13) (14) (14)

B. Capital Receipts 77 125 187 260 330 292 272 4. Private Sector 2 19 16 -in IT -iz -17 7. Foreign Borrowing 49 86 171 244 314 276 256

C. Capital Expenditures 169 197 28133 8 43 379 12.a Fixed Investment 111 197 28 358 43 397 379 12.b Inventory Investment 58 - - - - - ANNEX 6 Table6-3 (p. 3) EXTRA-BUDGETARYACCOUNTS

Part C: Federal Autarkies (millions of NCr's in 1968 prices)

1968 1969 1970 1971 1972 1973 1974 CURRENTACCOUNT A. Current Receipts 6 283 7 063 7,617 8,094 8,609 9166 9752 1. Treasury Budget Transfers -7IiI --- S35 `t3 --it "Z "943 4. Private Sector 4,303 4,894 5,274 5,670 6,105 6,576 7,084 a. Social security taxes (3,985) (4,668) (5,041) (5,445) (5,880) (6,351) (6,859) b. Other (318) (226) (233) (225) (225) (225) (225) 11. Indirect Taxes 1,207 1,392 1,490 1,546 1,598 1,652 1,710 a. Coffeeexport tax (1,064) (1,103) (1,149) (1,182) (1,211) (1,239) (1,269) b. Others (143) (289) (341) (364) (387) (413) (441) 11. Retained Earnings 32 15 15 15 15 15 15

B. Current Expenditures 5,565 5.871 7,617 8094 6609 9166 9 752 4. Private Sector 3,1145 3,2 a. Socialsecurity transfers (3,083) (3,154) (3,406) (3,679) (3,973) (4,291) (4,634) b. Other (62) (83) (83) (83) (83) (83) ( 83) 10. Bond Account (DNERinterest) 2 28 30 30 30 30 30 11. Subsidies 384 409 323 232 133 30 30 12.a Consumption 2,034 2,197 2,439 2,609 2,797 3,002 3,210 C. Current Account Savings 718 1,192 1,336 1,461 1,593 1,730 1,765 CAPITALACCC)UTT A. CapitalReceipts (incl. Savings) 1 619 2 591 2615984 3 236 3.360 1. TreasuryBudget Transfers 677 8263 979 89 1,079 4. PrivateSector 39 84 86 115 104 115 125 7. ForeignBorrowing 53 467 304 299 373 419 411 8. MonetarySystem (net loans) 21 147 29 57 -7 -13 -20 9. Official Credit Agencies 26 39 20 25 25 21 - 10. Bond Account 85 25 40 48 40 _ 12. Current Account Savings 718 1,192 1,336 1,461 1,593 1,730 1,765

Be Capital Expenditures 1,619 2 591 2,615 2.984 3 025 3236 3,360 4. Private Sector '36 26 7. Foreign Debt Amortization 58 7 71 88 110 144 177 8. Monetary System (cash bal.) 928 1,386 1,033 1,096 1,424 1,467 1,208 9. Official Credit Agencies - 2 5 7 10 13 15 12.a Fixed Investment 1,093 1,682 1,754 1,927 1,843 1,911 2,049 12 .b Inventory Investment -496 -512 -273 -159 -387 -324 -114 AMKI 6 Table 6-3 (p. 4)

EXTRA-BUDGEtARYACCOUNTS

Part D: Exchange Operations

(millions of NCr's in 1968 prices)

1968 1969 1970 1971 1972 1973 1974

CURRENTACCOUNT A. Current Receipts (None shown; interest earned on reserve assets is deducted from payments.)

B. Current Paye nts r e19375 42643 606 680 4. Interest an NCr. Debt 192 AT 310 336 4. Exchange losses (1968 only) 266 - - - 7. Interest on External Debt 113 134 162 194 233 272 320 a. Paid on M<Debt (150) (171) (199) (231) (270) (309) (357) b. Less Earned on ST Assets (-37) (-37) (-37) (-37) (-37) (-37) (-37)

C. 12.b Current Account Savings -571 -375 -426 -481 -543 -606 -680

CAPITAL ACCOUNT

A. Capital Receipts 293 407 339 277 261 253 261 8. Fron Monetary Authorities S7 752 S59 I94 (gross amount) (1,261) (1,152) (1,077) (1,040) (1,001) (985) (1,056) (- inc. in int'l. reserves) (-397) (-370) (-312) (-282) (-197) (-126) (-115) 12. Current Account Savings -571 -375 -426 -481 -543 -606 -680

B. Capital Payments 293 407 339 277 261 253 261 7. External Debt Amortization 293 407 339 27761

NOTE: For 1969 and later years interest on NCr. debt was estimated at the previous year's level plus 3% of the previous year's transfer from the Monetary Authorities and 3% of the current year's transfer. The total transfer for the current year is calculated as a residual given the interest and debt amortization items. Exchange losses (a residual in the 1968 accounts) are assumed to terminate with the adoption of the flexible exchange rate policy in August 1968. ANNEX 6 Table 6-3 (p.5) EXTRA-BUDGETARY ACCOUNTS

Part E. Other Extra-budgetary Transactions

(millions of NCr's in 1968 prices)

1968 1969 1970 1971 1972 1973 1974

CURRENT ACCOUNT A.7 Receipts; Current Transfers from ROW 78 34 34 34 34 34 34 B.12.aConsumption Expenditures (=A.7) 78 34 34 34 34 34 34 C. Current Account Savings 0 0 0 0 0 0 0

CAPITAL ACCOUNT A. Capital Receipts 920 830 660 660 660 660 660 7. Foreign Borrowing _756 272 102 102 -- i7 102 102 8. Receipts from Monetary System 56h 558 558 558 558 558 558 a. Loans to Autarkies 286 286 286 286 286 286 286 (reported total) (307) ------(less identified in Part C) (-21) ------b. Other Monetary Sector Credit 278 272 272 272 272 272 272 (special commodity programs) (272) (272) (272) (272) (272) (272) (272) (other M<gov't. paper) (10) ------(other loans to Federal Gov't.) (-4) - - - - -

B. CapitalExpenditures 920 830 660 660 660 66o 660 4. Capital Transfer to Private Sector -34O 8. Increase in Ex-Bud. Sector Deposits 954 -37 - - - - -

a. PL 480& AID Counterpart 110 -37 - - - - - b. Other Deposits n.e.i. 844 (export funds except coffee) ( 5) ------(autarky demand deposits n.e.i.) (905) ------(federal demand deposits) (-43) - - - - (federal time deposits) (-22) ------(autarky time deposits) (-1) - _ _ _ _ _ ANNEX6 Table 6-4 LOCAL (DVERINENTS

(millions of NWr' s at 1968 prices)

1968 1969 1970 1971 1972 1973 1974

CURRENTACCOUNT

A. Current Receipts 11,050 11,372 12,011 12,687 13 404 14 160 14,962 (Reported total) (11,733) (12,075) (12,735) (13,433) (15,777) (Less sales of goods and services) (-663) (-703) (-724) (-746) (-768) (-791) (-815)

1. Current Transfers from Treasury 760 506 535 565 599 633 671 4. Direct Taxes 235 249 264 280 297 315 334 11. Indirect Taxes 10,055 10,617 11,212 11,842 12,508 13,212 13,957

B. Current lbPernditures 8,588 9.004 2a 10,363 10,847 11.354 (Deported total) (9,271) 9,707 10,165 10,646 11,131 11,638 (less sales of good and services) (-683) (-703) (-724) (-746) (-768) (-791) (-815) 4. Transfers to Private Sector 2,167 2,254 2,344 2,438 2,536 2,637 2,742 11. Subsidies 117 131 147 165 165 165 165 12.a Consumption Expenditures 6,304 6,619 6,950 7,297 7,662 8,o45 8,447 C. Current Account Savings (12.b) 2,462 2,368 2,570 2,787 3,041 3,313 3,608

CAPITALACCOUNT

A. Capital Receipts 3, 08 3 950 4 192 4 661 5 099 5,574 6,163 1. Capital Transfers from Treasury 1,419 TO97 9 1,729 1 4. Borrowing from Private Sector (ret) 200 (a) (a) (a) (a) (a) (a) 7. Foreign Borrwing 34 34 68 136 136 136 204 8. Borrowing from MonetarySystem -411 75 -66 -45 -46 -46 -46 (credit net of repayments) (-51) (75) (57) (39) (39) (39) (39) (less increase in cash bal.) (-360) (-) (-125) (-d4) (-85) (-85) (-85) 9. Borrowing from OCA's (BNDE& BNH) 104 236 278 322 379 442 515 12.b Current Account Savings 2,462 2,368 2,570 2,787 3,04. 3,313 3,608

B. Capital Excpenditures 3 808 3 950 4,192 4 661 5,099 5 574 6 163 5. Transfers to State Enterprises 439 440 5L 7 O 7. Amort. of Foreign Loans 20 20 21 24 34 38 48 9. Amort. of OCA (BNDE)Credits 9 19 31 44 58 74 92 10. Amort. to Bond Account 29 - 12. Fixed Inwestment 3,267 3,548 3,750 4,176 4,562 4,986 5,513

(a) In keeping with current goverrment policy on borrowing by local governnents, amortization and new borrowing are assumed to exactly offset each other. ANNEX6 Table 6-5 FEDERALENTERPRISES

(millions of NCr's at 1968 prices)

1968 1969 1970 1971 1972 1973 1974 CON0OLI&TEDACCOUNT

A. Current Account Savings 1,191 1,388 1,707 2,014 2,255 2,483 2,775 (Retained earnings + depreciation) B. Capital Receipts (excl. savings) 1 6d1 1 678 1 976 1. Treasury Budget 2 076 2,240 2,471 2,5i6 Transfers 5!762 `58 a. 717 777 X Farmrked taxes (367) (416) (456) b. Discretionary (502) (553) (609) (671) transfers (171) (160) (168) (156) 4. Private Sector (164) (168) (174) 421 377 406 439 a. Cowpulsory investments 489 543 602 b. Other private capital 7. Foreign Borrowing 513 517 743 839 881 8. Monetary System Credit (net) 1,024 949 15 -1 4 9 8 -2 9. Official Credit Agency Loans 114 -2 179 167 101 145 129 122 10. Bond Account 60 30 30 30 -- - C. Capital Expenditures 2 63o66 68 4. Private Sector 4 4 4,54 5,291 2 757 003 6. State 74 &iterprises 529 383 420 7. Amort. 422 448 487 556 of Foreign Loans 127 126 175 8. Monetary 219 265 249 312 System (cash bal.) -10 59 61 9. Official 315 325 394 336 Credit Agency Amort. 4 11 17 12a Fixed Investment 20 25 29 33 2,003 2,351 2,857 2,933 3,232 3,598 12b Inventory Investment J30 3,833 61 84 98 114 128 147 Table 6-6 ANNEX 6

STATE ENTERPRISES(Power Companies Only) (millions of NCr's at 1968 prices)

1968. 1969 1970 1971 1972 1973 1974

CONOLIDATiDACOWJNT A. Current Account Savingd 167 177 180 193 195 174 90 (Retaired earnings + depreciation)

B. Capital Receipts 1,012 746 810 839 893 963 1,066 3. Transfer from Local Goverrnents 483 363 390 417 45 476 510 a. Local Gow't. Share of IUEE (93) (103) (15) (128) (142) (57) (175) b. Other Transfers (390) (260) (275) (289) (303) (319) (335) 5. Financing by Eletrobras 529 383 420 422 448 487 556 C. Capital Expenditures-l 1,179 923 990 1,032 10 88 1 137 1 156 12.a Fixed Irwestint 1,179 923 990 1,032 T i 1 156

1/ Retained earnings are measured after deducting, and capital expenditures exchude, amortization of credits from Electrobras. The corresponding amount is included in ELetrobras' earnings. Fixed investnent was arrived at indirectly by addition of estimated available finsncing. Other transfers (B.3.b) from local governnmats include only State of Sao Paulo transfers to CFSP. ANA 6 Table 6-7

BALANCEOF PRAMENWSIN FLICWOF FUK)S PRES2TATION

(millions of NCr's at 1968 prices)

1968 1969 1970 1971 1972 1973 1974

CURRENTACCOUNT

Receipts 1,708 1 800 2.143 2LW8 2,493 2,534 2.717 A. Current 1 2. Net Interest frcm E&ch. Oper. Acc't 113 162 3 194 233 272 320 4. Private Sector 804 936 1,006 1,099 1,204 1,304 1,405 (profits on foreign investaents) (306) (319) (333) (346) (360) (374) (387) (interest; total except Rxch. Oper.) (498) (617) (673) (753) (844) (930) (1,018) 12. Resource Gap 791 730 975 1,175 1,056 958 992

B. Current Payments 2L 136 136 136 136 m 136 2. Official Donations 34 - 34 34 33a 4. Private Domrtions 136 102 102 102 102 102 102

C. Current Account Savings (equals B/P's "Balance on Current Account") 1,504 1,664 2,007 2,332 2,357 2,398 2,581

CAPITAL ACCOWNT

A. Capital Receipts 2,404 2,51 11 3.610 3.688 2. kxtra-budgetary Loan Amortization 351 414 410 6 371 397 3. Local Gov't. Loan Amortization 20 20 21 24 34 38 48 4. Private Sector Loan Amortization - 143 182 254 339 420 469 5. Federal Enterprise Loan Amortization 127 126 175 219 265 249 312 8. Momntary System 397 370 312 282 197 126 115 (Amort. of Compensatory Loans) 468 (370) (312) (282) (197) (126) (115) (Decrease in ST Reserves (-)) (-71) ------9. Official Credit Agency Loan Amort. 5 14 24 34 47 60 75 12. Balance on Current Account 1,504 1,664 2,007 2,332 2,357 2,398 2,581

B. Capital Payments 2 404 2 751 3 131 3 510 3 610 3,68d 4,038 2. Extra-Bud. NlLT Loan Disbursemerts `77 825645 7d9 797 769 3. Local Gov't. MkLT Loan Disbursements 34 34 68 136 136 136 204 4. Private Sector 1,342 1,249 1,627 1,756 1,640 1,557 1,931 (Direct Private Investment) (1B3) (319) (333) (346) (360) (374) (387) (N< Loan Aisbursements) (269) (532) (911) (1,112) (1,341) (915) (1,218) (Net Short Tern Credit) (890) (398) (383) (298) (139) (26d) (326) 5. Federal Enterprise Loan Disbursements 513 517 743 839 881 1,024 949 9. Official Credit Agency Loan L'isb. 57 126 116 134 164 174 1d5 6 Table 6-8 AM= KIN rAEY SISTEI (ItF1.H) (nillions of NCr's in 196ti prices)

1968 1969 1970 1971 1972 1973 1974

CUMtETACOCIUN1 37909 373 W 435 470 507 548 Current Account Sayings 507 54t 11. Indirect Taxes (GDP/GNPRel.) 370 370 CAPITkLACC0DUI Capital Receipts Cexcl. Savings) i79 8 201 5 492 4,802 3,950 4,191 4,441 14. Private Sectw 75 a. Private wiey mpply ?I3414 25I el Xl57 442 218 190 156 166 176 187 b. Private quasi-mey 899 954 1,011 1,072 c. Net uiscl. liabllities 2,645 1,250 1,093 205 13L4 1 4,9 48 57 Capital Paymnts 8,571 5 865 5 1. Treasury Budget (net) 1,3l9_ -63 271 (net) -433 138 319 277 -69 2. &tra-Budgetary Acc'ts. -46 -46 -46 Governint (rot) -411 75 -68 -45 3. Local 3,524 3,782 4,047 Credit 7,108 4,409 3,919 3,293 4. Private Sector 9 8 -2 -2 5. Federal Erfterprise 15 -1 4 397 370 312 262 197 126 115 7. Rest of the World 1409 406 410 Official Credit Agencies 293 344 403 1417 9. 152 638 7145 462 10. oind Accordt 284 92 97 Table 6-9 ANNE 6

OFFICIAL CREDIT AGENCIS (BND1 & BNH)

(millions of NCr's at 1968 prices)

1968 1969 1970 1971 1972 1973 1974

CURRENTACCOUNT

A. Current Receipts 1 2 1.266 1.343 1341 i 1 4. Private Sector 1, 1,133 1,119 1,054 921 7 0 11. Operating Profits 98 133 224 294 380 487 622

B. Current Ecperdiibares 4 11 12 13 14 15 16 12.a BNH Urban Planning IT 11 12 13 r 15 1 C. Current Account Savings 1,242 1,255 1,331 1,335 1,287 1,238 1,211

CAPITAL ACOWUNT

A. Capital Receipts 1 671 2,356 2,546 2,769 3,005 3,264 3,549 1. Treasury Budget 122 41 10 10 10 10 2. 5xtra-Budgetary Agencies 2 5 7 10 13 15 3. Local Government 9 19 31 44 58 74 92 4. Private Sector 65 479 604 767 1,001 1,262 1,562 5. Federal Lnterprises 4 11 17 20 25 29 33 7. Foreign Borrowing 57 126 116 134 164 174 165 8. Monetary System (transfer) 293 J44 403 417 409 406 410 10. Bond Account (redenptions) 115 - - 15 41 5d ll 12. Current Account Savings 1,242 1,255 1,331 1,335 1,287 1,238 1,211

B. Capital &cpenditures 1 871 2,358 2,54d 2 769 3264 3,549 2. Extra-Budgetary Agencies 39 20 2 21 3. Local Goverrmnents 102 236 278 322 379 442 515 4. Private Sector 1,604 1,867 2,031 2,251 2,373 2,576 2,801 5. Federal Snterprises 114 179 167 101 145 129 122 7. Amort. Foreign Loans 5 14 24 34 47 60 75 10. Bond Account (purchases) 18 23 28 36 36 36 36 Table 6-9 ANNEX 6

OFFICIAL CRJ&DITAGENCIS (BNDE & BNI)

(millions of NCr's at 1968 prices)

1968 1969 1970 1971 1972 1973 1974 CURRENTACCOUNT

A. Current Receipts 1462 1,266 1,343 1,348 1,301 1,253 1227 4. Private Sector 1,133 1,119 1,054 921 605 11. Operating Profits 98 133 224 294 380 487 622

B. Current Experniitares 4 11 12 13 14 15 16 12.a BNH Urban Plannirg 1E 11 12 13 1 1

C. Current Account Savings 1,242 1,255 1,331 1,335 1,287 1,238 1,211 CAPITAL ACCUJNT

A. Capital Receipts 1 871 2,350 4 2,769 3,005 3,264 3.549 1. Treasury B3udget 122 41 10 10 10 10 2. E:xtra-Budgetary Agencies - 2 5 7 10 13 15 3. Local Goverrmtnt 9 19 31 44 58 74 92 4. Private Sector 65 479 6(4 787 1,001 1,262 1,502 5. Federal Enterprises 4 11 17 20 25 29 33 7. Foreign Borrowing 57 126 116 134 164 174 105 8. Monetary System (transf'er) 293 344 403 417 409 406 410 10. Bond Account (redemptions) 125 - - 15 41 58 11 12. Current Account Savings 1,242 1,255 1,331 1,335 1,287 1,238 1,211

B. Capital &Lpenditures 1 2,758 2,546 2 769 3.264 349 2. Extra-Budgetary Agencies 39 20 2 21 3. Local Governments 102 236 278 322 379 442 515 4. Private Sector 1,604 1,667 2,031 2,251 2,373 2,576 2,801 5. Federal Eiterprises 114 179 167 101 145 129 122 7. Amort. Foreign Loans 5 14 24 34 47 60 75 10. Bond Account (purchases) 18 23 28 36 36 36 36 Table 6 -1 AM=EX6 BONDACCOUNT (ORTN' ) (millions of NCr at 1960 prices)

1968 Ba 1ic Adjusted 1969 1970 1971 1972 1973 197 4 Flgures Figures

CUMDT ACCwJN! -Curr ifrentReceipts 7 di 197 198 1 917 l3i41 1. Treasury Budget (interest) 719 79 169 -- i> 30 30 30 30 2. Extra-Budgetary (INER interest) - 2 28 30 367 197 98 191 173 131 93 B. Current Paymants 93 4. Interest to Private Sector 13 131 Cercisl Bak Adjustnts - 182 - 4. - _ _ (coissiona on own purchases) (6) - - (readJustaent accrued on books) - (176) - - 0 0 0 C. Current Acooant Savings -104 -286 0 0 0

CAPITALAC(NUN2/ A. Capital Recdpts 5 55 0 7 A.1 Fro* Net Bond Sales 3035 Sector (residmsl) 4. To Privats 152 638 745 1,62 8. To Nuatarx Systs n.a. 291 92 97 -5 -22 25 9. To Official Credit Agencies n.a. -97 23 28 Z1 n.a. (18) (23) (28) (36) (36) (36) (36) (Gross sales) (-41) (-58) (-11) (Reurchases) n.a. (-115) - - (-15)

A.2 Otber Capital Receipts (net) -249 -249 - - 3. Local Government Repayments 29 29 - - Resolution 21 Reayments 15 15 - - 4. above) B. Credited to Monetaxy Budget -189 -189 (Included in line A. 1.8 8. ComMnl. Bank Items (B.4 above) - 182 - 0 0 0 12. Current Acccunt Savings -104 -286 0 0 0

70 78 . 0 - B. Capita 1 Payments 54 54 55 1. Treasury Deficit -0 -9 0- 48 40 2. Financing iztra-Budgetary Programs 85 85 25 40 30 - 5. Fimncing Federal Enterprises 60 60 30 30

with total net bond sales. However, in the I/ In this table trsnsactions with Official Credit Agencies a,e shown on a net basis in order to easily reconcile su-arY flows of funds tables and in the Official Credit Agency tables sales and purchases are shown separately.