RETURNTO ~~~~~~~RESTR ICTED RE rURN TO L C ?Report 'No. WH- 18 5a REPORTS DES FILECOPY WlTHIN | ONE WEEK X

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 The report may not be published nor may it be quoted as representing their views.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELQPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Public Disclosure Authorized

CURRENT ECONOMIC POSITION

AND PROSPECTS

OF

COSTA RICA Public Disclosure Authorized

November 8, 1968 Public Disclosure Authorized

Western Hemisphere Department CURRENCY EQUIVALENTS

Cbsta Rica has had a dual exchange market since January 1967. The official rate, at which about half of all exchange transact-ions- are made, is..U. S. $1 =¢6. 6Z (colones); 1 Colon = $0. 151.

The free nmarket rate, which fluctuates, was quoted in June 1968 at U. S. $1 - ¢7. 80 (l(Z = $0. 128). TABLE OF CONTENTS Page No.

BASIC DATA i -ii

MAP

SU>DIARY AND CONCLUSIONS i - iii

I. LITRODUCTION 1

II. RECENT DEVELOPMENTS (1960-1967) 2

A. Economic GrowTth, Savings and Investment 2

Agriculture 3 Industry 5

B. Public Finance and Investment 6

Central Government, Finances 7 Public Investmnt 11

C. MIoney and Credit 13

D. Balance of Payments 13

III. OUTLOOK FOR 1968-1973 16

A. Economic Growqth 16

B. Public Sector Investment and Financing 17

Investment Plans 17 Financing the Program 20 Central Government, Finances 22

C. External Finance 26 D. Conclusion 2B

Statistical Appendix

This report is based on the findings of a mission to Costa Rica during March/April 1968 composed of M4essrs. Klaus Huber and Eugenio Lari, and discussions held subsequently with representatives of the Costa Rican Government in September, 1968. BASIC DATA*

Area: 51,0C0 square kilometers

Population (1967) 1.54 million

Density per sq. km. 30 Rate of growth p.a. (1960-1967) 3.9 percent

1966 1967 1968

GNP, current prices (0 million) 4150.0 4465.0 4800.0 Per capita (US$) 419.0 436.0 450.0

GDP, 1962 constant prices (6 million) 3900.0 4164.0 4442.0

Real growth percent 5.4 6.8 6.7 Percent of Current GNP Gross fixed investment 20.7 21.2 21.9 Consumption 85.1 87.2 86.5 Balance of payments current account 6.0 7.9 6.0 deficit Gross savings 16.1 13.9 15.6 Central Government revenues 12.6 12.1 13.1 Central Government expenditures 16.7 17.0 16.2

GDP, current prices (9 million) 4243.0 4588.0 4964.0

Sectorial Origin (vcent): Agriculture, mining 24.2 23.7 n.a. Manufacturing 18.6 19.2 n.a. Construction 4.8 4.6 n.a. Utilities 1.6 1.5 n.a. Transport and communication 3.8 4.1 n.a. Government services 10.7 10.8 n.a. Other 36.3 36.1 n.a. Money Supply (O million) 592.9 792.3 850 Change in percent 4.4 33.6 7.3

Price Movements (change in percent)

Wholesale prices 0.4 3.1 n.a. Consumer prices 0.2 1.2 n.a. GNP deflator 2.0 1.3 1.5

* 1967 data mostly preliminary; 1968 projected. - ii -

1966 '967 1968 Central Governmnent Finances (% million)

Current revenues ! 023. 541el 63090 Current expenditures 525.7 576.7 609.0 Surplus on current account -2.7 -35.6 233.0 Capital expenditures 166.2 186.1 -233.0 Overall deficit -168.9 -221.7 -202.0

Public Sector Savings ( million) 74.5 49.0 114.0

Percent of GDP 1.8 loO 2.4

Balance of Payments (. million)

Exports of goods and services 164.3 173.2 20353 :Lnports of goods and services -216.5 -232.0 -2.5 Transfers (net) 7.8 8r 2 8.5 Current account balance -44.4 =5o06 -33.7

Concentration of ComruditEports (percent)

Coffee 38.8 37°5 33.9 Bananas 2165 21.2 26.7 Heat 4.0 6.o 6.1

External Public Debt ($ million)

I4ediurx and long-term, total out- - standing as reported by IBRD 140.1 145.3 167.5

of w-;hich undisbursed 39.2 3365 43.0

Annual debt service:

medium. - and long-term 28.4 21.9 22.8

short, medium and !ong-term 56.o 52.7 28.2

Debt service as percentage of exchange earnings on goods and services:

mediun.i and long-term 1765 12.3 11.9

s,mrt, mediun and long-term 34.6 29.6 14.8

Fc,reirn Exchange Reserves ($ million) Dec. bec. Aujg.

Total assets 21.6 28.3 32.9 Net position -14.0 11.0 19.6 L AKIF CAKODUA0 N 'I C A U A

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1. Throughout the 1960's, the Costa Rican economy grew at a rapid pace. Recovering from a major decline in the late 1950's, exports pro- vided the momentum for growth. The recovery of traditional export crops was accompanied by rapidly rising m-anufacturing exports to the rest of the Central American Common IMarket (CACM), which accounted for over half of the increase in exports. However, persistently widening fiscal deficits throughout the period and permissive credit policies exerted mounting pressures on the balanzce of payments and led to rising external debt and declining exchange reserves. A dual market exchange system was introduced early in 1967, which is still in effect; the free market rate covering abGAt one titirdof all exchange transactions has depreciated considerably.

2. The fiscal problem - the overriding factor in Costa Rica's finan- cial difficulties in recent years - was mainly caused by a rapidly deteriora- ting Central Government savings performance in the face of increasing in- v_estment. The deteriorating savings performance reflected: (i) rapid in- creases in current expenditures, partly due to rapidly rising social expen- ditures as a result of a high rate of population growth; (ii) increasing erosion of the tax base due to rising duty-free regional imports and prolif- eration of industrial tax incentives; and (iii) inadeqjuate revenue effort because of the inability of the Government to persuade the majority opposition to pass tax legislation through Congress t.hen needed. Substantial tax measures uere passed, but they were always too late and, therefore, inadequate since in the meantime, expenditures continued to grow rapidly. The deteri- oration of the fiscal situation markedly accelerated in 1966 and 1967, when Central Government deficits were almost three times as high as in the irmmediately preceding years. As balance of payments problems mounted and external credits became more difficult to obtain, these deficits have since 1966 been financed mainly by the banking system, As a result, the public sector absorbed about 50 percent of total credit expansion in 1966 and 1967 agaiznst only 15 percent in the preceding five years. The continuation of such a pattern of credit allocation is not compatible with sustained economic grotAh.

3.. Tax action taken during 1967, together with a reduction in current expenditure growth, are expected to reduce the 1968 fiscal deficit below that of 1967, but not enough to avoid continued Government resort to bank credit. The early implementation of the 30 percent regional surcharge on imports from outside the CACM nowr being considered by the five CACM countries is thus urgently needed to arrest further deterioration in Costa Rica's finances. With present export prospects, this measure, together with appropriate credit policy, should keep the balance of payments situation manageable.

4h. Costa Rica has the potential for continued substantial growth over the next few years. The prospects for a large increase in banana exports, a further although somewhat slowed down expansion of industrial - ii - exports to the regional market and good opportunities of further export diversification into world markets, mainly for processed and unprocessed foocistuffs, are the main elements for continued growth. But the key to the realization of this potential is Costa Rica's ability to respond to the need for a substantial step up in domestic resource mobilization, mairly Central Government savings, to permit planned and much needed public investments to proceed without unduly diverting resources from the private sector.

5. Public investments are now planned to increase from an average annual level of 0180 mrllion in recent years to some 0290 million in 1968-73 In line with the urgent need to link Costa Rica more adequately with its major trading partners within and outside the CACM4, the bulk of this in- vestment will be concentrated on road and port investment. Substantial additional investment is also planned in power and telecommunication. In all the sectors, but particularly in transport, this will require a great effort in project preparation and execution. It will also require a decisive improvement in public savings, which would have to rise from an annual level of 949 million in 1967 to some 0176 millioII in 1968-73, or fran 41 percent to 61 percent of a much larger investment program if there is -to be a viable public sector financing plan. The key to this improve- men-t lies wfith the Central Goverrment, which will have to make great ef- for-ts in reducing the rate of growth of current expenditures and intro- ducing additional tax measures. Although the 30 percent regional import surcharge, combined with restraint on current expenditures, would go far towar; meeting these targets, still further revenue measures will be needed to support the expenditure levels nao in prospect. The additional effort would not be large compared to what has already been achieved, once the import surcharge is ratified. But past difficulties in passing new measures through the legislative process in time do not give ground for expecting easy solutions, especially since 1970 will be an election year.

6. The balance of payment situation is expected to continue to be tight throughout the 1968-70 period because of continuing heavy amorti- zation payments and the possible need to liquidate in 1969 and 1970 the payment arrears which accumulated since the introduction of the dual ex- change market system. Howevrer, mith the import surcharge passed and con- tinued tight credit policies, the improved current account balance due to Costa Rica's favorable export prospects, together with the projected in- flows of private and official capital, should be sufficient to meet the external obligations through 1970. With reduced amortization payments in subsequent years, provided no return to large short-term borrowing takes place and financial policies effectively restrain demand for imported con- sumption goods, the prospects for a considerable replenishment of exchange reserves in the early 19701 s appears fairly good.

7. Costa Rica's creditworthiness as well as growth prospects depend on better financial policies than in the recent past. Given this, the available high priority projects suitable for external financing merit substantial external support. If the investment targets and the supporting financing plarn were to be fully realized, Costa Rica could effectively absorb new official commitments of some U.S.$180 million during 1969-73. If these commitments are obtained on the average terms now obtainable from official agencies, the debt service burden would decline from the - iii -

12 percent of exchange earnings level in 1967 to some 8 percent in 1973. Progress in reaching the indicated public savings target will influence greatly the extent to which Costa Rica's development effort invites ex- ternal support. If some shortfall in these targets turns out to be inevitable, external support of an appropriately reduced. expenditure pro- gram would still be warranted, but at a lower level than indicated above. I. INTRODUCTION

1. Costa Rica's development effort in recent years, which resulted in a very satisfactory rate of growth of the economy, was based on a strcng demand for Costa Rica's exports, especially for industrial exports to the Central American Common Market (CACM). With highly trained man- power and an environment of political stability based on strong democratic traditions, sustained increases in investment, mainly in industry and in- frastructure, was the response to rising export earnings. However, this growth was accompanied by increasing financial difficulties. Although internal savings, mainly in the private sector, grew substantially in recent years, they fell short of the even more rapidly increasing capital formation. Large amounts of external capital were borrowed during this period, much of which was on relatively short terms, provoking serious re- payment problems.

2. The crucial element in Costa Rica's financial difficulties appears to have been the inadequate savings of the public sector. Persistently widening fiscal deficits through the 1960's, given the openness of the economy, have exerted mounting pressures on the balance of payments, resul- ting in mounting external indebtedness and heavy losses of international reserves. The internal price level remained virtually stable throughout the 1960's. The limits of this process of growth with rapidly rising fis- cal deficits financed largely aoroad became increasingly evident when, after 1965, external credits became more difficult to obtain. Credit ex- pansion to the public sector increased sharply, diverting credit from the private sector and aggravating pressures on the balance of payments.

3. Costa Rica has gained materially from the integration process in recent years through an expanded market for its industrial production. But integration has also created problems. The accelerated substitution of duty-free regional imports for dutiable imports from outside the region and the competitive proliferation of fiscal incentives directly contributed to the revenue problem of the Central Government. This, in turn, affected the balance of payments. Yet with the growing interrelationship among the economies of the region, Costa Rica found itself increasingly inhibited in its freedom to initiate corrective measures which affected its partners. Develuation of the Costa Rican Colon was rejected in early 1967 by the CoTmmon Market partners. 1/ W4hile the response of the CACM partners to a devaluation by just one of its members was quite understandable, it aggra- vateid the Costa Rican problem because the executive branch of Government could not get new tax measures passed expeditiously through Congress. The coalition Government had no majority and often could not get the coopera- tion of the opposition. Substantial tax measures have been passed by

1/ This is only one symptom for a much more general problem, which was created by the lack of coordination in fiscal and monetary policies within a group of increasingly interrelated economies. In fact, these policies substantially differed between CACM countries in recent years. There is evidence that there now is growing recognition of these prob- lems. The introduction of a regional import surcharge and the advanced preparations to establish a regional stabilization fund are steps in the right direction. However, much more needs to be done in order io avoid more serious difficultie3, which could arise in the future. Congress in recent years, but they were generally too late, and therefore inadequabtwhen they finally caine into effect since expenditures continued to grow at a very rapid pace. The result is that while Costa Rica's financial problems are not unique in the region, they remain the most serious. The resolution of this fiscal problem continues to be the key development policy issue facing Costa Rica at this time since substantial public investment effort will be required over the conming years if private investment is not to be inhibited by inadequate infrastructure. As Chapter III points out, the realization of these public investment levels will re- quire a very substantially stepped up level of public savings.

II. RECENT DEVELORXTTS (1960-1967)

A. Economic Growth, Savings and Investment

4. Betueen 1960 and 1967 GDP in real terms grew at about 5.7 per- cent annually or roughly 2 percent per capita. WeJith a money GDP reaching about $450 per capita, Costa Rica has not only the highest and most evenly distributed income in the CAQc, but also one of the highest and most equit- ably distributed per capita incomes in Latin America. The determining factor in Costa Rica's growth has been exports, which increased by almost 9 percent per annum on average in this period. There was a drop in the late 1950's in the prices of two of its major exports, coffee and bananas, and total exports fell as a result. But there has since been an impressive recovery, not only in these two products, but, as a result of serious efforts to diversify exports, in other products such as manufactures, meat and sugar. Mlanufactures have accounted for most of the increase in exports after 1962, since agricultural products seriously suffered for about two years from an eruption of the volcano Irazu in 1964.

5. Investment has been increasing more rapidly than GNP. The invest- ment rate rose from a 20 percent level in 1960 to some 23 percent in 1967, but unevenly because of the negative effects of the volcano eruption in 1964 and the concentrated effort of reconstruction in 1965, lwhen the investment rate approached 29 percent. Both private investment (mainly in industry) and public investment (power and transport) increased at about the same rate during the first half of the 1960ts, with public investment continuing to account for between one-fifth and one-fourth of the total. sincts 1965, pubLic investment has not increased at all in absolute terms, mainly because a major power project had been finished and the start of important transport projects was delayed. Private investment did continue to increase. -3-

6. Costa Rican savings increased very rapidly during the first half of the 1960's, in spite of stagnating public sector savings. The marginal savings rate for the period as a whole amounted to about 25 percent. After 1965, the marginal savings rate turned negative and the average savings ratio declined from 18 percent to 15 percent of GDP. This absolute reduc- tioin in gross domestic savings was almost totally accounted for by a sub- stantial drop in Central Government savings, which were negative in both 1966 and 1967.

7. As to the sectorial distribution of growth, secondary production (mainly manufacturing) by far outdistanced any other sector in the economy. Betiween 1960 and 1967, manufacturing increased at an annual rate of 11.0 percent as against 7.5 percent of GIJP, thereby increasing its share in GNP from 16.0 percent to 19.2 percent.

Agriculture

8. The relative importance of agriculture has been declining. Agri- culture now accounts for some 24 percent of GNP. 1/ Agricultural products in exports fell from 83 percent in 1961 to 64 percent in 1967. The percen- tage of active population engaged in agriculture declined from 59 percent in 1950 to 49 percent in 1963. However, continued agricultural growth remains critical for Costa Rica's future.

9. In the field of exports, the momentum gained in banana production in the last few years is likely to accelerate markedly in the near future. Heavy investments have been made in the past year in new banana plantations on the Atlantic coast (some 9,000 ha. by various companies) and additional investment is reportedly planned for the near future. Banana production for export is thus likely to become the backbone of the development of the Atlantic region. The realization of this prospect forms an integral part of the Government's development strategy for the next decade. The Atlantic area appears particularly suited for banana production, mainly because of very favorable weather conditions, the existence of transport facilities (railroad) and the vicinity of the Atlantic port of Limon. Any massive step-up of banana production, however, would call for a substantial increase of capacity in railroads, roads and ports. Present investment plans provide for this increase in transport capacity.

10. In spite of the drop in world prices, coffee is estimated to be still more profitable than any other traditional crop with the present levels of taxation on coffee. Improved agricultural techniques, namely large re- planting and interplanting using better planting material, use of larger quantity and a better quality of inputs, and better pnrning and control of

1/ The mission has obtained two different time series on agricultural pro- duction, one from the Central Bank on which the above national account figures are based, the other from the Planning Office. It was not possible to reconcile the two series. The discussions below are based on Planning Office data (available in much more detail), which show a larger increase of production after 1965 (7 percen-t per annum as against 4 percent per annum by the CentrUl Bank). - 4 -

weeds, have resulted in a marked expansion of coffee production. In 1967-68 a record crop was harvested, which has prompted Costa Rica to ask a waiver for 100,000 bags from the International Coffee Organization. A large part of the recent surpluses have been sold to "new markets" at a 20 percent discount, substantially reducing the average export unit value from $58.00 to $50.00 per bag between 1965 and 1967. Since sales to "new markets" are expected to become more difficult under a better policed new International Coffee Agreement, measures to control output are becoming a matter of in- creasing concern. To reduce the relative profitability of coffee by in- creasing the present low level of coffee taxes - 2.5 percent ad valorem at present prices - would appear to be urgent if unmarketable surpluses are not to be accumulated in the rnear future.

ll. The large 1967-68 surpluses have stimulated interest in coffee diversification. Two research projects concerning diversification of areas now under coffee are currently under active study: they include the culti- vat-ion of macadamia nut and of pines for electric poles. Agricultural di- versification outside the coffee area includes projects for African palms, tea, tobacco, fruits and vegetables, and mushrooms and strawberries for export.

12. The cattle industry, the principal new line of agricultural ac- tivity in this decade, recovered from a temporary decline in 1965. Strong export demand and high prices lhave resulted in record exports in 1967, so much so that shortages appeared in the supply for domestic consumption, leading to the imposition of temporary export ceilings recently. If pro- longed, these restrictions could undermine incentives to further growth in cattle production for export markets and home consumption and undercut the drive to further diversification in agriculture.

13. Costa Rican agricultural objectives in recent years have been to increase and diversify exports, develop new sources of supply of industrial raw materials (mainly meat, wood products, cotton) for home and foreign processing and increase production of basic food products to improve the diet of the population. The Government has been active in trying to in- crease productivity in the traditional crops by encouraging research in quality improvement, pest controls and introduction of new varieties through the Agricultural Extension Service of the Ministry of Agriculture. In this regard, much attention is being given to raising productivity in bananas. Given the need to improve the average diet, which has shown no improvement in the last ten years, particular attention has also been paid to four pro- ducts basic to the Costa Rican diet: beans, corn, milk and rice. Costa Rica has been a substantial importer of these commodities, particularly after the Irazu eruptions. There are reported to be very good possibilities of improving productivity in these and most other crops although there is some risk of bananas so dominating the interests of farmers as to direct energy and resources away from newer crops which also have good potential. Adequate medium and long-term credit programs, which so far have reportedly notc been adequate, complemented by extension activities, irrigation facili- ties, feeder roads, marketing improvements and market yvsearch in the areas outside Central America, are important pre-requisites sor success in these agricultural development efforts. The development program contemplated for the next few years (Chapter III) reflects these needs. -5-

Ind1stry

14. Costa Rican industry has been a major beneficiary of regional integration. Exports of manufactured goods, which accounted for almost half of the increase in total exports between 1960-67, were sold mostly within the Common Market. The structure of industry underwent substan- tial change in the process, away from the more traditional industries (foodstuffs, beverages, textiles, shoes etc.) toward the production of intermediate goods (chemicals, non-metallic minerals, petroleum deriva- tives) and mechanical products. The contribution of traditional indus- tries to the net value of industrial production decreased from 80 percent in 1960 to 67 percent in 1967. The increases in the non-traditional in- dustries were mainly concentrated in petroleum derivatives, electrical equipment, machinery and non-metallic minerals.

15. From an economic point of view, some of the new industrial de- velopments raise serious questions. The establishment of a petroleum re- finery in 1967, to mention one case, appears to be of highly questionable economic merit, Economies of scale are rather important in oil refining. The capacity of the Costa Rican refinery is well below what is considered efficient plant size. The resulting substantial increase in product costs to consumers does not seem to be justified by the small employment and the import substitution effects of this investment. Another economically questionable operation appears to be the production of tires, which was also started during 1967. Here again, the plant size is substantially below what is considered efficient. This operation, whose employment and import substitution benefits are also small, is financially viable only as a re- sult of high tariff protection and the fact that there is only one other competitor within the CACM.

16. In more general terms, questions must be raised about the in- creasing dependence on imported raw materials and semi-processed products which this change in the structure of manufacturing has brought about. In many of the new industries the domestic value added is confined to assembly or mixing operations. Imports of raw material have increased from ¢150 million in 1961 to about h400 million in 1967, or from 12.6 percent to 18 percent of the gross value of production. The increase in the relative share of imported inputs has been particularly rapid since 1964. Even though exports of manufactures have substantially increased, particularly since 1963, imports of raw materials for manufacturing have grown even more rapidly, The net effect on the balance of payments has been increas- ingly negatives, particularly since 1964. The lower effective exchange rate for raw material imports (duty-free import under Incentive Law) has undoubtedly contributed to this process.

17. There is no doubt that the overall industrialization effort has been quite impressive. The new opportunities created by a substantially larger integrated market, the aggressive industrialization policy of the Government (mainly through tax incentives and credit policies) supported by t;he existence of a relatively well-trained labor force, have provoked a striking response by Costa Rican and foreign entrepreneurs. However, in the last few years, it has become increasingly clear that Costa Rica's - 6 - industrialization process was approaching a critical stage. The relatively simple and obvious import substitution opportunities which have been able to be initiated without raising domestic costs undulzr are fairly well ex- hausted. WSith new opportunities in sectors where larger investments are required and economies of scale are more critical, the possibilities of un- economic investment have become more serious and the need for less agress- ive competition among the members of CACM to attract new industries to their territories correspondingly more important.

18. So far, the national fiscal incentive schemes still operate com- petltively rather than in cooperation. A regional protocol to coordinate fiscal incentive policies had been negotiated as early as 1962, but has not yet been ratified. However, the pressures to coordinate fiscal incen- tives have markedly increased recently, partly because of mounting concern about the proliferation of un-economic investments, but principally because of rapidly growing revenue losses from excessively generous tax holidays. These revenue losses have been particularly large in Costa Rica, materially contributing to the erosion of the tax base. A more detailed account of the fiscal implications is given in paragraph 25.

19. While the protocol to coordinate fiscal incentives would define agreed criteria and limits for granting fiscal incentives and thereby con- siderably improve the present situation, its administration would still remain for some years under national authority. To avoid competitive grant- ing of incentives arising from differing national interpretation would thus require, more than the protocol, some coordinated administration by a regional body. In the light of the fiscal problems throughout the region, which were not anticipated when the protocol was originally drafted, the scale of exemptions might also be reduced. Costa Rica has taken the lead in defining such a common tax incentive policy and discussions are presently taking place within SIECA, the regional secretariat.

20. Investment in industry, which continued to increase rapidly throughout 1966, has since shown distinct signs of slowing down. The number of contracts registered in 1967 under the Industrial Incentive Scheme dropped to about half of the 1966 level, representing a total investment of only about one-third of that in the previous year. This drop has most probably boon promptac'. by tluC moving of c:;pital goo&s iriports from the official to the depreciated free market exchange rate, thereby increas- ing their landed cost by over 20 percent, since a large part of these in- vestments are for export production to the CACM and exports still receive the lower official exchange rate. It remains to be seen whether the drop in industrial investment is of temporary nature and investment will pick up again once the exchange rate is reunified.

B. Public Finance and Investment

21. The public sector consists, in addition to the Central Government, of over 70 municipal governments and about 40 autonomous agencies (inclu- ding the banking system). Since only partial updated statistical informa- tion exists for the consolidated public sector, the following analysis will - 7 - concentrate on the fiscal performance of the Central Government and on pubLic investment and its financing by the Central Government and the major autonomous agencies. 1, This coverage is not comprehensive, but it does approximate the public7sector as a whole. The Central Government accounts for about two-thirds of total ptublic sector revenues, 95 percent of total tax revenues, slightly more than half of total public sector ex- penditures and, together with the major autonomous agencies, virtually all public sector investment.

Central Government Finances

22. The financial difficulties that Costa Rica has plagued with throughout the 1960's reflected directly inadequate public sector savings, particularly in the Central Government. The underlying causes of the Central Government's fiscal problems were the excessive growth of current expenditures and inadequate revenue increase because of increasing erosion of the tax base.

23. Population growth explains much of the current expenditure in- crease, Estimated at about 4 percent per annum - although this figure has been challenged in recent studies as being some 0.5 percentage points too high - Costa Rica's population growth is one of the highest in the Hemisphere, if not in the world. Given the declared policy of almost all recent admin- istrations to provide health and education at very low charges to a large segmer.t of the population, this rapid population growth has put a heavy and increasing burden on Government resources. As a result, Central Govern- ment current expenditures have been increasing by over 11 percent per annum, far more rapidly than total output. Most of the increase has been accounted for by education, health and social security expenditures and, more recently, by interest payments as a result of the rapidly growing public indebtedness. Increases in revenue have been inadequate to cope with this pace of in- crease in expenditures. The tax base has been increasingly eroded by the elimination of duties on imports from other Common Market countries and the proliferation of tax exemptions to industry in the attempt to out- compete the Common Market partners for newJ industries. Taxes have been increased, mainly on income and property; but not enough to prevent total revenues from lagging behind GNP, and especially behind total expenditures so that fiscal deficits increased steadily throughout the period. The increase in expenditures and thus the deterioration of Central Government finances accelerated sharply after 1965, largely because of increased debt service on the short-term borrowing to finance the deficits of previous years. Central Government indebtedness, both external and domestic, roughly tripled between 1960 and 1967. This poor and deteriorating fiscal perform- ance contributed heavily to the deterioration of the balance of payments situation during this period.

1/ The major autonomous agencies are - ICE: Instituto Costarricense de Electricidad (power and telecommunica- tions); S1NAA: Servicio Nacional (le Acueductos y Alcantarillado (water supply); INWVU: Instituto Nacional de Vivienda y Urbanismo (housing) and, CCSS: Caja Costarricense de Segura Social (social security agency financing hospital construction). - 8 -

24. The following paragraphs give some detail of this fiscal deter- ioration during the past two years.

25. Substantial tax measures were taken during 1966 and 1967; (a) addi- tions to the list of goods subject to consumption taxes, with an approximate annual yield of '1l million; (b) a temporary 25 percent income and property tax surcharge with an annual yield of t20 million, due to lapse at the end ofT1968; (c) a general 5 percent sales tax with an estimated annual yield, net of the increase in consumption taxes, of 080 million (the 1967 yield was only about 023 million since the tax was introduced in the second half of the year). These measures yielded additional revenues of about 0110 million representing an increase of 23 percent over 1965 revenues. However, while these measures were being taken, revenue from duty-free intra-trade and fiscal incentives continued to decline. Revenue from import duties dropped by over 030 million between 1965 and 1967. As a result, the net increase in current revenues was only equivalent to about 17 percent in these two years, A measure of the fiscal cost to Costa Rica of the inte- gration process is that revenue foregone in 1967 as a result of intra-CACM trade and duty-free imports under the Incentive Law approximated 0213 mill- ion, or about 40 percent of total revenues in that year.

26. This heavy erosion of the tax basis has now been recognized as a major cause of Costa Rica's fiscal problem. The introduction of the general sales tax is an evidence of this awareness. However, still further measures are needed to restore order to Costa Ricats public-finances.

27. Current expnditures increased by 12 percent in 1966 and again in 1967, far more than revenues. While comparable time series on current expenditures go only back to 1965, there is no doubt that this recent grcwth of current expenditures was very substantially higher than in earlier years. The major increases were in education (20.4 percent per annum), current transfer payments (20.2 percent per annum) and interest payments on the rapidly rising public debt (17.8 percent per annum). These three categories accounted for about 60 percent of the total increase in current expenditures in the past two years.

28. The pace at which education expenditures have been rising is a matter of great concern in Costa Rica. Even if one bears in mind when assessing the relative importance of education expenditures that Costa Rica has no army and public security expenditures are very low, the resources devoted to education are very high. Current expenditure of the Ministry of Education accounted for 23.5 percent of total current expenditures in 1965 and 27.3 percent in 1967. There is in addition a substantial amount of current education expenditures which take the form of transfers to the university and to a variety of private and public schools, Adding these educational transfers, the ratio of current education expenditure to total Government current expenditure was 31 percent in 1967. This is a high figure.

29. The main reason for the sharp increase in current education ex- penditures in the last two years was the doubling of teachers' salaries over a three-year period that began in 1966. As a result of this salary increase, current education expenditures since 1965 have grown much faster than enrollments, unlike earlier years when the two increased in line with the rapid population growth. Although this salary increase was the first since 1959, it was three to four times greater than real wage increases in the rest of the economy.

30. Current transfers to local governments, autonomous agencies, cultural, educational, and public health institutions and contributions to the Govermnent employee's pension fund have always accounted for a substan- tia:L fraction of Government expenditures. Local goverments possess a very poor tax base and, by default, depend on the tax collecting function of the Central Government. Some transfers to autonomous agencies, such as the Water Authority (SNAA), are the result of political difficulties these agencies are facing in obtaining the rate increases needed to at least elim- inate their current deficits. Other transfers are fixed by law, either in the form of a fixed amount or as a percentage share of certain taxes. These situations have introduced great rigidity in the budget-making process. The failure to check the growth of current transfers, particularly in 1966 and 1967, was partly a reflection of these "built-in" expenditures. The executive has to some extent tried to avoid the cash impact of these transfer obligations by either not paying or by borrowing in the form of paying in bonds in lieu of cash.

Table A: CENTRAL GOVERWiENT FISCAL PERFORMANCE, 1965-1967 (in millions of Colones)

1965 1966 1967

Current revenues 475.5 523.0 5hl,l Current expenditures 462.9 525.7 576.7 Current savings 12.6 -2.7 -35o6 Amortization 51.5 73.8 68.6 Current savings net of amortization -36.9 _775 -104.2 Investment expenditures 79.1 92.4 117.5 Deficit -118.0 -168.9 -221.7 Financing: Foreign borrowing 5:3,2 35.4 35*9 Domestic borrowing 64.8 133.5 179.1 (Central Bank) (9e4) (57.7) (81.8) (Commercial banks) (18.7) (-5.2) (-28.3) (Other) (36.7) (81.0) (125.6)

Source: Table 10, Appendix

31.. The above table clearly indicates the magnitude of the deteriora- tion in the Central Government finances referred to in the preceding para- graphs. It also shows the change that has taken place in the pattern of financing Central Government deficits. Up to 1965 a large part of the much smaller deficits was financed by external (very often short-term) borrowing. As external credits became increasingly difficult to obtain, - 10 -

and the rising deficits had to be financed more and more domestically, Central Bank credit to the Government rose very sharply, and in 1967 was equivalent to 15 percent of total Government revenue. Borrowing from the private as well as from the rest of the public sector through bonds and floating debt also increased. Part of the bonds sold has at least poten- tially expansionary effects, Some decentralized public agencies have re- portedly been using these bonds increasingly for cash payments to contrac- tors and other Government agencies. In addition, the Government has been issuing bonds with a sight repurchase guarantee increasingly to tap the private market, which before 1965 had only modestly increased its holdings of Government bonds. About V60 million of this type of bonds was issued in 1966 and 1967.

32. Both the magnitudes and the short terms on which the Government has borrowed in recent years have resulted in debt service payments absorb- ing an increasing proportion of Government revenues. During 1966 and 1967 the increase in debt service payments absorbed about half of the increment in revenues and accounted for about one-fifth of incremental expenditures. Debt amortization alone absorbed aver 13 percent of current revenues in 1966 and 1967, compared with 10 percent in 1964-65 and 8 percent in 1961-63. Including interest, debt service absorbed 23 percent of 1967 revenues. Interest payments alone are now accounting for 10 percent of Government current expenditures. None of these figures includes service of the large floating debt.

33. The authorities have persisted in their investment effort through- out this period, even while borrowing heavily to finance current expendi- tures. Since there is clear need for an expanded public investment effort, which the Costa Ricans do not now intend to sacrifice, some combination of still further increase in revenues and much lower increases in current expenditures is urgently called for. The recent rates of increase in current expenditure are clearly not sustainable.

34. The fact that extremely rapid growth of population has been one of the major causes of the Government's rising expenditures in social services and the associated overall financial difficulties has led to a growing awareness of the need to introduce a family planning program. In 1966 a private Demographic Society was founded, the main object of which was to familiarize the general public with the problems of family planning and to make family planning facilities available on as large a scale as possible, The Society started out with a massive information campaign through the mass media and by seeking the cooperation of physicians and mi&dives. Family planning centers were opened throughout the country, mairly in offices of cooperating private physicians. The Society has also been distributing pills supplied below cost by the International Society of Planned Parenthood. The response to these efforts has apparently been good.

35. Stimulated by this initial success, the Government announced in 1967 that it would not only fully support, but also complement, these private efforts. The Government's family planning program mainly consists of a training program for doctors and nurses, who henceforth will have to - 11 -

do part of their inservice training in family planning centers, and the opering of family planning stations in Government hospitals. In addition, training is being given to physicians practising in Government clinics and to rnurses and midwives. In 1967, twelve family planning centers were opened in Government hospitals. In 1968, thirty more will be added and by the end of 1969 fifty-eight Government hospitals or clinics will provide family plarning services.

36. It is too early to determine whether the Costa. Rican efforts to introduce family planning will be fully successful in reducing growth of population. However, given the high education standards and the availability of both personnel and facilities, the present prospects appear good.

Public Investment

37. The year 1965 was the first year of the 1965-68 plan that was to have governed public sector investment in these years. The plan period started well, with a 40 percent increase in investment expenditures over the 1964 level. But the rhythm has not been maintained. Investment ex- penditures fell in absolute terms in each succeeding year, and in 1967 were only 15 percent above the 1964 level. As a proportion of GDP, public in- vestment in 1967 was slightly below 5 percent of GDP, considerably below the 8 percent target of the plan. The 1965-68 plan was clearly overly ambitious, both in terms of available finance and in terms of capacity to plan and execute projects. Its objectives were reasonable in advancing high priority projects designed to open up new agricultural areas, provide badly needed transport infrastructure and add to the capacity of power and telecommunications. However, they also contemplated substantial invest- ments in the social sectors, particularly hospital construction, which wouLd imply still further commitments to increasing current expenditures in future years. In total, it was not realistic.

38. The principal slippages occurred in the transport program. Two major projects, even though 100 percent externally financed, could not get underway because of slow project preparation (Interamerican Highway) and slow legislative approval of external borrowing (San Ramon-El Coco). The execution of other transport projects was slowed down by inadequate domes- tic funds and insufficient local construction capacity (regional roads and feeder rcads). There were also slippages in housing (INVU) and water (SMAA), mainly because of inadequate local finance.

39. The financing problems show up clearly in the change in the pat- tern of financing public investment expenditures in 1966-67 compared to 1962-65. In the earlier period foreign loans contributed about half of total financing, the other half consisting mainly of public savings. In 1966-67 the share of external borrowing dropped to 19 percent and that of public savings to 25 percent. Over half of public investment in 1966-67 was financed by domestic borrowing, and about half of this borrowing was from the banking system. - 12 -

Table B: FINANCING OF PUBLIC INVESIMENT, 1962-1967 (in millions of Colones)

1962 1963 1964 1965 1966 1967

Investment 135.7 161.5 162.2 226.7 205.8 188.5 Financing: Public savings 1/ 101.3 76.1 109.2 80.1 7h.5 -49.0 Central government - - - (12.6) (-2.7)(-35.6) ICE - - - (13.8) (11.4) (17.4) ccss - - - (56.6) (66.5) (68.0) SNAA - - - (-5) (-3.5) (-3°5) INVU - - - (0.6) (2.8) (1.9) Net external borrowing 52.3 70.9 94.7 117.0 44U0 31.2 Net domestic borrowing -21.2 2.7 -2.0 -3.6 71.8 120.5 Other 2/ 3.3 11.8 -39.7 33.2 15.5 -12.2

1/ No comparable breakdown available for 1962-64. 2/ Includes capital revenues of autonomous agencies, change in deposits and discrepancies.

Source: Table 11, Appendix and staff estimates

40. The bulk of the public sector savings that were generated were supplied by one agency - the Social Security Fund (CCSS). The power and telecommunications agency (ICE), the next largest saver in the public sec- tor, improved its financial situation considerably through a series of rate increases, and is expected to contribute substantially to its future investment program without further Government subsidy. But this is not likely to be the case for the housing and water authorities, which will continue to be heavily dependent on Government subsidies. The housing agency (INVU) has regularly generated a small current surplus in recent years, but was still consistently short of funds to complement disburse- ments from external loans because the Central Government paid a large part of the subsidy to INVU in the form of bonds which were negotiable, if at all, only at heavy discount; this accounted for much of the delays in the execution of INVU's investment program. The water agency (SNAA) has been facing great political difficulties in raising presently inadequate water rates and has not even been able to cover its operating expenses. SNAA is now making another attempt to increase water rates; application for a 70 percent increase is being considered by the rate controlling authority. SNAA's investment program is unlikely to be realized without a resolution of the agency's severe financial problems. - 13 -

C. iVnnly and Credit

41. The principal feature of monetary developments during the recent period of increasing fiscal difficulty wias the progressive transfer of bank resources from the private to the public sector. tJhile total banlc credit grew slightly less rapidly during 1966-67 (7.8 percent per year) than in earlier years (9 percent), the rate of increase of credit to the private sector was halved to make wray for the Governmentls claims. In 1960-65 the public sector absorbed about 16 percent of the increment in-- credit; it claimed almost 50 percent in the past twro years, with the re- sult that growth -in private sector credit was curtailed from an earlier average annual 8.5 percent tc) a recent 4.8 percent. Resources were also shifted from the private to the public sector by the Government's step- ping up the issue of treasury bonds. Carrying a sight repurchase clause and yielding 8 percent, these bonds were by far more attractive than, bank deposits yielding at the most 4 percent. About %60 million of f-fts type of bond.s were sold to the private sector in 1966-67, It is surprising to note that there was a sharp increase in private banc deposits in 1967. But there was a special reason for this, namely, an increase in exchange reserves wihich resulted from the accumulation of external payment arrears caused by delays of up to three months in issuing foreign exchange to importers at the official market rate (para. 45)e Despite this excessive liquidity in the banting system, the Central Bank was able to enforce its credit ceilings to the commercial banks during 1967.

D. BRlance of Payments

42. Costa Rica's balance of payments, w-ith the exception of 1962, deteriorated throughout the 1960ts. acternal finances were particularly precarious since 1965 because of the effects in 1965 of the eruption of the Irazu volcano and the burden since 1965 of large repayment of debt superimposed on steadily growirg import demand (11 percent per annum betwreen 1962 and 1967). As a result, net international reserves of the banking system wjhich at the beginning of the decade ;were US$19 million equivalent to almost twJo months of imports, were negative by $14 million at the end of 1966. In early 1967 a dual exchange market system was intro- duced which brought the reserve losses to a halti/.

43. This deterioration of external finances wfas not a result of poor export performance, Since 1962, 2-ot have been increasing by over 9 percent annually on average. About half of the increase wyas accounted

1/ During 1967 the net reserve position of tie banding system (not Including payment arrears of the private sector) improved by US$25 mil lion, Howzever, due to the rationing imposed on the sale of foreign ex- change of the official market, payment arrears were accumulated w,hich about offset thie increase in net reserves (see also page 25 footnote 3). - 14 -

for by boormin manufactured Coods eMorts to th0e Central !tmerican Comn ,Iarket; Most of the reMainder waS increased coffee, banana and meat e::ports to other countries. Thle deteriorating balance of payments situation had its -,,ain roots in a very rapid gro'tIi of imports sustainied by expanding credit to the private sector up to 1965 and to the public sector since. increasin2 interest payments on public debt and heavy araortization of public debt w1hich had doubled in its total amount outstandin- during L964 and 1965e

44. Because of the heavy repayments on shiort-terrm debt since 1965, there has been no increase in total debt since and the naturity structure of oZficial debt has i;proved as a result (Table C). Costa Rica also had the benefit of roll-overs by so.,a en-ternal creditors in these years. HowJever, a heavy buxden of short-tenn official debt still remains. This fact, plus the large private arrears accuwulated-during 196.7, maes Costa Rica's external payments position still delicate.

Table C: OFFICiLL MsTIML DIZT, 1963-1967 (in millions of US; and percent)

- ~~1963 1965 196;7

Short-terr (under 1 yrear) 1:2.9 17 24.2 18 10.2 a .Iedi.um-term (1-5 years) 19.1 26 33.5 29 40.9 30 long-tern (over 5 years) 52.357 72.3 53 83.3 62

Total 74.8 100 135.0 100 134.9 100

Sourec: Central DwIc. of Costa Riica.

45. One of the nmst i,,rportant consequences of these mounting Pay- rments difficulties has been a partial depreciation of thle extfernal value of Costa Rican currency. Under the dual market system introduced as an eiaer.gcncy measure in January 1967, the sale of official exchange is no= liited to goods imported and debt contracted before January 1967, es- sential imports (including all Central Americmn Common ;.arlet imports) and profits or debt service payments on registered canital. Foreign exchange earnings, except for t'iose ori-inating in tourisr1i transactions, - 15 -

have to be surrendered at the official rate. The free market rate de- preciated in steps froml the official /6;65 to %7.80 by the end of 1967 (i.ee, by 17 percent) and to %8.25 (i.ee, by 24 percent by ilarch 1968. Since then the free rate appreciated to -7.30(end of September 1568) mainly due to large private capital inflows to finance banana investment.

46. This depreciation of the rate covering about one-third of all exchange transactions appears to havre markedly influenced the regional pattern of Costa Rica's trade0 Imports from the Central American Common Hlarket, w-hich consistently increased in recent years, jumped from $i24 million to $34 million during 1967, almost double the increase in previous years. lhile a large part of incremental regional imports wrere of regional origin, there is evidence that imports from outside the region wrere channeled through other Central American Common 'Market countries in order to qualify for the more favorable exchange rate, Exports to the Common lArket, on the other hand, increased only slightly in 1967, contrary to -- performance in recent years. Part of this is probably a result of under- invoicing and illegal exporting in order to escape the mandatory surrender of exchange at the official rate.

47. The present dual exchange market is temporary. lbteverj the level at wihich the twJo marktets vrill be unified remains an issue. Since only an appreciable increase in the average price of foreign exchange durimng 1967 was able to stop further revenue losses, an attempt to reuni2y at the old rate *ould a.pear unrealistic. Also, as a result of the partial devaluation internal prices have increased by almost 5 percent between June 1967 and June 1968o Unification at a depreciated rate wrould tend to divert trade within the CAC;I, as appears to have happened to some extent already, and has until recently been regarded by the other CACA cointries as giving Costa Rica unfair advantage over them. Yet counter- vailing tariffs on trade ith Costa Rica w-ould violate the present CAC;I arrang£ement. - 16 -

III, OUTL3OX FOR 1968 - 1973

l. Economic Growrth

48, Costa Rica has the iptential for continued grorth at a sub- stantial rate over the nexft five years. The country will continue to heavily depend directly or indirectly on agricultural'exports and hence fluctuations in wiorld markets and climatic conditions. However, substan- tial expor:t diversification hlas already taken place, so that setbacks in indiVidual e;:port comDodities will have a lesser irmpact than in the past. iloreover, a rmajor effort is being contemplated to further diversify production in regions outside the Central?Plateau., where so far only liaited economic activity has taken place. The Common iTarket is likely to continue to provide a growing market for Costa Rica's industrial products, although the rate of growth is likely to slowr down marlcedly, If reason- -- able industrial policies are pursued and industrial production is increas- ingly geared to using domestic rawi materialsp for wlhich there appears to be substantial scope, rminly in textiles., wooden products, meat and pro- cessed fruits and vegetables, the country should also be able to export outside thie Coiraon ilarket.

49. "hile the underlying forces for Costa Rica's further development tlhus appears strongs the basic precondition for these opportunities to be realized is marked iimprovement in the Costa Rican financesj, whose deterioration was outlined in the preceding chapter. Improvement in public savings performance is required urgently to finance presently plan- ned public investments and to male possible the reallocation of bank credit needed to sup,port the further growth of private economic activity. A suzmary projection of the banking system's financing capacity (Table 17) indicates that if Costa Rica is gradually to improve its international reserve position and still permit credit expansion to the private sector at about the same rate as projected CDP (6 percent per annum), net dcEcstic credit to the public sector -ould h-ave to be gradually reduced over the next 5 years. This wjould mean that any net credit expansion to the public sector uould have to be financed from C ternal sources. These estimates, even though approximate, reveal clearly that the diversion of bank rasources to the public sector wrhich took place in the past few years cannot be continued if the growth targets of the private sector and hence the economy as a w-hole are to be achieved.

50. If these immediate problems can be resolved e:peditiously, the economy sihould be able to continue growJing by bettreen 6 to 7 percent per annum, as in tlhe recent past. Ovorall, agricultural production would have to growT somewhat more ra;idly than in the past if the above overall GDP growth is to be achieved. The reason is that uhile industrial production is e.pected to continue its important role in the overall growth of output, industry wrill probably expand considerably less rapidly than the 11 to 12- percent of recent years because the easier import substitution for the na- tional marlcet ha s probably already been initiated. Future substitution processes are lilcely to be in that category -:here economies of scale - 17 -

becorae increasingly important anci hence production could only be economical on a regional scale. The prospects for accelerating output in agriculture for exports, local processing and local consmption appear fairly 00od. As mentioned earlier, efforts are being made to increase output and produc- tivity in a iLde range of crops. There are prospects for doubling of banana production. Additional investment in banana plantations in the - order of $200-300 million are contemplated in the next two years by U.S. companies, a European consortium and local producers. Banana production will form the backcbone of the development of the Atlantic region around Puerto Lim6n, a potentially very rich agricultural area. It is estimated that by 1971 about 3 0. 0 0 0 new jobs, or about half of the estimated incre- ment in employment, will be created in that area. Livestock production also appears to have substantial potential, particularly with the external credit programs presently being channelled into this sector. Coffee production wzill, of course, be limited by the International Coffee Agreement.

51. There is no reason to expect that to achieve these increases in production would require any less overall investment than in the past, both in the private and publi.c sectors. Given the balance of payments constraint in prospect, at least in the earlier part of the period, this means that domestic savings would have to be improved considerably over recent performance. For the public sector, this would require a complete reversal of past trends, a reversal lXhich is a sine q non for a viable develolinent effort in Costa Rica. Sustained -private sector growth iill also require more vigorous eport incentives. The present dual exchange systeim discriminates against exports with an import content: equiment is no!y imported. t the Ue reciL.ed free ;.iarcet rate, but export recei)ts hzve to be surrendered _t the official rate.

B. Public Sector Investment and Financing

Investment plans

52. A substantial public sector investment effort rill be required over the nezt five-year period if the implementation of Costa Rica's development strategy, wrhich consists in max.ing a major effort of diversify- ing production both into ne, products and into yet little exploited regions, (e.g. on the Atlantic) is not to be hampered by an inadequate infrastruc- ture. The Government's role in achieving the contemplated development - targets will, ho;wever, not be limited to providing infrastructure alone. It wrill also have to perform other iaportant functions: channelling funds through official banks toward agriculture and industry, providing appro- priate incentives for agricultural diversification and supportin- the pri- vate sector in preparing and executinG projects to achieve the above- mentioned develoninent targets.

53. The authiorities are still in the process of -re-aring a public investment program for the 1969-72 period. Hoirever, considerable detail - 18 -

is already available in the form of projects underway, about to be started, or in an advanced stage of preparation. This detail, which appears in a preliminary draft of the 1969-72 investment plan, and in the autonomous agencies' investment programs and the lending programs of the major inter- national lending agencies, provides the basis for the following discussion of Costa Rica's public investment intentions through 1973.

54. The public investment level which the Goveniment considers neces- sary for the 1968-73 period would represent a substantial increase over levels reached in the recent past, although as a proportion to projected GDP public investment would not exceed the 5 percent level reached in recent years. Public investment would increase from an annual average of about 0180 million in 1963-67 to some 0288 million in 1968-73, an increase of 60 percent. In line with the urgent need to more adequately link Costa Rica with its major trading partners in the Common M4arket and out- side the region and to expaid production into yet little exploited areas, the bulk of these expenditures would be concentrated on road and port construction. Substantial additional investment is also contemplated in power to meet the rapidly growing industrial and agricultural demand. Less emphasis than in the recent past would be placed on the social sec- tors, although they would still account for about one-fourth of total public investment. From a technical and administrative point of view, these levels of investrment appear feasible, although a substantial effort in project execution and preparation will be required. Transport is the only sector where a problem might arise since the program would call for a tripling of the investment levels reached in recent years. On the whole, the level and content of the program now taking shape appears reasonable.

55. In transport the major projects consist of (a) the Inter- American Highway, 7b) the San Ramon-El Coco road, (c) the Limon Highway, (d) the Second Stage of the Feeder Road Program, and (e) the neu por-c in Limon/1icin. Both the Inter-American and the El Coco roads are uell under way. Since for both roads 100 percent external financing is secured, the Government is trying to advance the execution of these projects as fast as possible. The Limon road and the new port in Limon/IMoin appear to be of highest priority to provide the necessary infrastructure for the development of the Atlantic region. The expansion of banana production, as well as other agricultural diversification projects located in this area, will require substantiaL additional transport capacity. Since the newJ port construction will only be undertaken in the early 1970's, an ad(litional banana berth is now being added to the existing port in Limon to cope with the rapidly rising demnand. The second sta-ge of the feeder road program (the first stage is presently nearing completion) is also of high priority in order to advance agricultural development, mainly in areas outside the central plateau. Although all the projects appear we:Ll justified, the program is very ambitious and will strain both the capacities of the Road Department to prepare and supervise these projects and the construction capacities of local contractors. Since two new major road projects are scheduledto start in 1969, care will be required - 19 -

in scheduling work to ensure that the pace of construction does not exceed the capacity of the highway authorities and the local conistruction indus- try to carry it out effectively.

56. In power and teleccmmunications ICE plans to add a 68 1Wl hydro- plant (Tapanti) in order to meet the rapidly rising mainly industrial and household demand and to embark on the second stage of its telecommunica- tion expansion plan. Both projects are in an advanced stage of preparation.

Table D: COSTA RICA: PUBLIC INVESITENT PLANS BY SECTORS, 1968-19731/ (in millions of Colones)

1965-67 1968 Annual Av.Budget 1969 1970 1971 1972 1973 Power 50 35 54 47 60 68 62 Telecommunication 25 9 15 15 16 18 9 Education 12 4 26 18 16 17 20 Health 23 26 36 15 19 8 20 W;ater and sewer 11 11 43 21 20 17 17 Housing 14 16 9 21 12 13 15 Other and unidentified 34 31 17 22 20 16 20 Sub-Total 172 132 200 159 :L63 157 163

Transport 34 140 145 152 124 112

Total 206 216 340 304 315 281 275

1/ Assumptions: Transport: based on draft Four Year Plan except for 1972 when National Highways II was added and 1973 which is based on mission estimates. The jump in 1969 is explained by two major projects (Inter-American and San Ramon - El Coco roads, both 100 percent exter- nally financed) having their peak years of execution while two ad- ditional projects (Limon Highway and Feeder R6ad Program II) will be initiated, Power and Telecommunication: Plan and ICE-program. Water and Sewer: SNAA program substantially scaled down because of limited resources. Housing: Plan. Health: Plan and mission estimates. Other and unidentified: mainly agriculture, municipalities and a lump sum for not yet identified projects in 1970-73 period.

Souarce: Draft Four Year Plan prepared by Planning Office, Agency programs and mission estimates. - 20 -

57. In the social sectors CCSS is finishing its hospital construc- tion program, which is -maTha financed from CCSSIs own resources. SIIAA., the water authority, is completing its program of providing the capital lith an adequate water and sewierage system and is embarking on a rural water supply program. The progress of these wJorks iS, however, most likely to be slowed dotrn considerably by lack of local funds to complement avai.lable external disbursements,,-since with the present rate level SYLAA cannot even cover operating costs. For this reason, an additional project to provide water supply systems in five major cities, has been postponed. flWJ's investment plans consist in the continuation of a program to construct soiae 4,000 lowr-cost houses both in the metropolitan and several rural rareas.

58. A substantial backlog of investment exists in education, where most of the expenditures in recent years have been current. There is a serious shortage of classrooms both at the primary and the secondary level. Particularly in primary education, the inadequate classroom situation has led to underutilization of the teaching force which has increased unit - costs substantially. Ifigher level school facilities are also inadequate. The demand for graduates ithi vocational education both on the primary and secondary level is e.pected to increase rapidly over the next five to seven years. The JIinistry is presently formulatin- a project which would include the construction of four technical-secondary colleges plus improv- ing the equipment of existing agricultural colleges, A large part of the required teacher force for these colleges is expected to come from exist- ing schools. In addition to this project, a construction program to reduce the classroom shortage and further investments in University education are also included in the five-year program.

Financing theproGm

59. An investment level of the magnitudes outlined above would call for a substantial improvement of overall public savings performance, and a drastic increase in Gentral Government savings. Total public savings wiould kave to rise from their recent average annual level of about $80 million (%49 million in 1967) or 41 percent of investment,-to some 176 million or 61 percent of a much larger level of investaent. In the light of recent performance, this-is a very ambitious savings target; but so are the public investment plans.

60. The brunt of the additional savings effort would have to be car- ried by the Central-Government, but some increase is also required from the autonomous agencies. Such an effort should be w-rithin the capacities of the public sector. i.t about 3 percent of GDP, such a savings effort should not be excessive, considering the income level of Costa Rica. The crucial elements of this savings effort are that (a) current expenditures, par- ticularly in the Central Government, are brought under much better control than in the recent past and (b) substantial additional revenue measures be taken both by the Central Government and by some of the autonomous - 21 - agencies. Among the autonomous agencies, ICE in the beginning of 1968 inposed a power rate increase averaging some 5 to 6 percent. A further increase is expected to take place in the course of the planning period under consideration, which would allow ICE to contribute some 54 percent to its investment program. SNAA would need to implement the proposed raise in water charges (see para.40) in the very near future if it is to reach the investment level discussed above.

61 Savings at the above scale would still require on average net annual borroaing by the public sector of some 096 million (0110 million in the preceding period), and much higher gross borrowing to offset heavy amnortization payments now falling due. The annual average gross borrowing requirements vould amount to about 0247 million. In vieir of the already heavy domestic public debt, the likely need for a relatively tight credit policy throughout the period and the credit needs of the private sector, an adequate financing plan should contemplate a net reduction of internal public debt in this period. All the increase in net borrowing would thus be external (Table 17).

62. This external borroaing would be consistent with the balance of payments prospect. If at long-term, it would lengthen the average maturity of the debt and thereby substantially reduce the fiscal and balance of pay- ments burden of debt. Out of the required 01040 million external gross disbursements over the 1968-73 period, roughly 0470 million would come from the existing pipeline, which wouLld leave 0570 million of disbursements to be obtained from new commitments. Gross external disbursements wqould be equivalent to 60 percent of investment expenditures, reflecting the fact that a few large projects have already obtained 100 percent external financing and some local expenditure financing will continue to be provided for in lending to the social sectors. However, Costa Rica's present development targets imply an increase of public investment expenditures of such a magni- tude and in such a short period of time (from 0180 million in 1967 to 0320 - 0340 million in 1969-71) that, even with the contemplated material improve- ment of public savings (rising from an equivalent of 1 percent of GDP in 1967 to 3.2 percent in 1969), additional action to further increase public saviLgs (mainly in the Central Government) wzill be required in 1970 and sub- sequent years. It would be unreasonable to expect the new government coming into office in mid-1970 to immediately further increase savings to cover the full amount of the unfinanced gaps now foreseen for the years 1970-71. Any material recourse to the Central Bank would not be prudent, for balance of payments reasons. Hence, external lending agencies should consider extending limited amounts of program assistance and/or financing part of local expendi- tures, to avoid interruptions of the much needed investment effort, until such time as the government can prepare additional measures to increase public savings. - 22 -

Table E: OOSTA. RICA: FINANCING OF PUBLIC INVESzMET, 1968-1973 (in millions of Colones)

1963-67 1968 Average Est. 1969 1970 1971 1972 1973

Public Investment 188.9 216 340 304 315 281 275

Financing: Public Savings 77.8 114 -76 74 -79 81 77 (Central Gov.) (7.7) (21) (-15) (-20) (-17) (-18) (-19) (Rest of pub. sect.) (70.1) (93) (91) (94) (96) (99) (96)

Net domestic borrowing 37.9 - - - - -20 -20 (Gross borrowing) - (70) (75) (75) (75) (75) (75) (Amortization) - (70) (75) (75) (75) (95) (95)

Net external borrowing 71.6 65 160 112 115 104 71 (Gross inflow) - (139) (217) (194) (189) (161) (137) (Amortization) - (74) (57) (82) (74) (57) (66)

Other 1/ 1.6 14 14 14 14 14 14

Uncovered deficit 23 90 104 107 102 133

1/ Including capital receipts of autonomous agencies.

Source: Tables D and F, mission estimates.

Central Government finance

63. Given the crucial importance of improved Central Government finances for the viability of the above-outlined public investment finan- cing plan, the fiscal outlook: is analyzed in more detail belowi.

64. The main objective of Central Government fiscal operations must be an immediate and lasting improvement of savings. To this end, action is required both with regard to current expenditures and additional taxes. - 23 -

Table F: COSTA RICA: CENTRAL GOVERNMENT FISCAL OUTLOOK, 1968-1973 (:in millions of Colones)

1967 1968 Bu ge9t6 1970 1971 1972 1973 Actuals Estimate Estimate

Current revenues 541.1 630 628 665 705 748 793 Current expenditures 576.7 609 643 685 722 766 812

Current savings -35.6 21 -15 -20 -17 -18 -19

Amortization 68.6 86 95 120 1.20 120 120 Current savings net of amortization -104.2 -65 -110 -140 -137 -138 -139 Investment expen- ditures 117.5 137 203 206 206 174 162 Deficit -221.7 -202 -313 -346 -343 -312 -301 Financing:

Foreign borrowing and grants 42.6 87 145 136 135 96 82

Domestic borrowing 179.1 75 72 70 70 70 70 Unfinanced gap - 40 96 140 138 146 149

Expenditure cuts - 19 20 22 24 26

Reveme cie-sures :Import errcharge - - 55 60 65 70 75 Other measures 40 22 60 51 52 48

Assumptions: Current revenues: based on present taxes; Current expenditures: continued reduction in growth rate to 6 percent per annum, as contemplated in 1968/69 budgets; Amortization: external debt according to Central Bank forecast; for internal debt assumiLng a continuation of 1969 repayment level plus consolidation of floating debt and/or repayment of Central Bank credit (Z85 million) mainly in 1972/73, when external amortization will be markedly reduced; Domestic Borrowing: no borrowing from the banking system; no increase in floating debt; private sector borrowing in 1968/69 substantially above recent average levels in view of excess liquidity resulting from external payment arrears and reduced levels thereafter; borrowing from autonomous agencies not to exceed recent average levels until 1969, there- after increase of borrowing from CCSS.

Source: Annex table 10, Ministry of Finance and .lanning Office and staff' estmaates. - 24 -

65. If the increase in current expenditures for the period as a whole is limited to the growth of GDP, which would imply a halving of the average 12 percent annual increase of the recent past, the additional tax re- quirements woLld amount to about ,40 million in 1968, / 77 million in 1969 and about 420 million in 1970-73. The savings targets shown in Table F, at least until 1970, would not be substantially reduced should slippages occur in the execution of the investment program because two large highway projects, which account for 45 percent of total Central Government invest- ment in 1968-69 and 30 percent in 1970, are 100 percent financed from ex- tern.al sources.

66. The implied financing effort does not appear unrealistic. On the current expenditure side it will require that (a) borrowing will be kept within such limits that the rate of increase in interest payments would be substantially reduced, (b) restraint is exercized with regard to current transfers and (c) the Government abstains from new massive salary increases such as those recently granted to the teachers. The Government has already made an important beginning towards a real restraint in current expenditures. In the beginning of 1968 it introduced an auster- ity budget in which expenditures, slightly more than half of which are current, were cut by Wh7 miLlion or 6 percent of the original budget. If successfully implemented, it would reduce the growth rate of current ex- penditures to some 5.5 percent. The 1969 budget contemplates the same 5.5 percent increase.

67. On the revenue side, revenues are expected to increase by some 16 percent during 1968, as a result of tax action taken during 1967 (sales tax plus income/property tax surcharge adding to an amnLal y-ield of some a1l million). The uniform tariff surcharge on imports which was recently approved by the five CACH4 governments and is nowy pending congressional ratification would provide additional needed revenue. This surchlarge, which is limited to a five-year period, consists of (a) a 30 percent surcharge on all imports from outside the region (including those presently exoner- aued under present incentive laws) and (b) the possibility of levying additional consumption taxes of 10 percent and 20 percent ad valorem on a list of specific luxury consumption items. On the basis of 1967 imports the import surtax alone should yield some k55 million annually in 1969 gradlually increasing to about 075 million in 1973, Such a flat across the board import surcharge has several drawibacks. The implied increase in protection acts as a further incentive to (inefficient) import substi- tution and could have a negative effect on exports. Uihile the former is a real danger, the latter effact may not be important, at least in the short-run, since major exports (bananas, coffee) are not likely to be affected. In the longer run, cost increases could have a negative impact on the export diversification effort. However, since several exemptions are being contemplated, it is difficult at this point to evaluate how significant this negative impact will be. Should it, however, materialize, this would add to the pressures to raise the exchange rate to a more realistic level (see paragraph 71). The import surcharge must be con- sidered a stop-gap measure (its duration is limited to a period of five years) the main justification of which is that it seems to be the only politically acceptable alternative available to increase public savings at this time, not only in Costa Rica, but also in the other CACM countries. Additional revenues required would bring total revenues to 13.6 percent of GDP in 1969 and subsequent years, as against 12.9 percent in 1968 and 11.7 percent in 1967. While this would represent a substantial increase in taxes in a relatively short period of time, Costa Ricals tax effort would still remain substantially below that of most other countries of compar- able income.

68. Early introduction of the import surcharge is clearly needed 1/. But it is not the complete answer to Costa Rica's fiscal problem. It will not fill the uncovered 1968 gap, for which there now appears to exist no alternative other than recourse to the Central Bank and/or an increase in the floating debt. Such an amount of Central Bank financing would appear high but not unmanageable from a balance of payments point of view. For 1969 measures yielding about 022 million in addition to the import surcharge will be needed to close the remaining gap. Table F. contains the Government's assessment of the present fiscal situation and prospects. The Government intends to present the following measures to Congress, once the import surcharge is passed: (i) change in the base of the coffee tax 2/ (yielding 915 million) and (ii) administrative improvements in the property tax 3/ (yielding a6 million). While taking all these measures would also markedly reduce the projected fiscal gaps for 1970 and subsequent years, there still would remain uncovered annual deficits of about Yh0 million (Table F.). Hence additional measures to increase savings will be needed to complete the financing plans in these years.

69. Any marked shortfall from the Central Government savings targets spelled out above would have a multiple effect in terms of a reduction in the investment program, given the substantial external contribution in most of the existing and planned projects.

1/ The present status is that, after three countries (Nicaragua, Salvador and Guatemala) have deposited their ratification with the regional secretariat, the import surcharge has become effective in these countries. Honduras has also ratified but not yet deposited the ratification. Ratification by Costa Rica is still being debated.

2/ Calculation of tax base on basis of sales to traditional markets only would increase average price sufficiently to allow collection of the tax on all coffee at the 5 percent level (instead of 2.5 percent).

2/ Reassessment of values on basis of new cadastral survey. - 26 -

C. External Finance

70. The balance of payments situation is expected to continue to be tight throughout the 1968-70 period because of continuing heavy amortiza- tion payments and the possible need to liquidate in 1969 and 1970 the payments arrears which accumulated since the introduction of the dual exchange system l/. Nevertheless, with the import surcharge passed and continued tight credit policies, the improvement of the current account balance tak- ing place during 1968 which is expected to continue in subsequent years, together with the projected inflows of private and official capital should be Sufficient to meet the external obligations through 1970. Ilith lower amortization payments in subsequent years, provided no return to large short-term borrowing takes place, a considerable replenishment of monetary reserves should be possible in the early 1970's.

71. The projected gradual improvement in the current account balance is mainly based on favorable prospects for bananas, a continued although more moderate expansion of industrial exports within the Common IIarket and the development of some new export lines such as processed or unprocessed fruits and vegetables, wood and textile products and meat (see paragraph 50). Total exports are projected to increase by some 9 percent annually over the next five years, or about the same as in 1960-67. Realistic exchange rate policies, i.e. an upward adjustment wihen reunifying the exchange rate once the fiscal problems are brought under control, would appear necessary to realize the export targets for industrial and non-traditional agricultural products. The substantial depreciation of the average exchange rate which

1/ Considerable confusion exists regarding the actual level of payment arrears, i.e. the level of unsatisfied requests for official exchange which would have to be liquidated once the exchange rate is reunified and exchange restrictions eliminated, and hence constitute a potential claim on international reserves. As of October 1968, import trans- actions of some $70 million were recorded with the Central Bank, of which about $37 million represent actual exchange requests. Sixty percent ($22 million) of the exchange requests are on sight, the rest on terms of up to 180 days or more. The Costa Rican authorities ob- ject to the practice of deducting the full amount of exchange re- quests ($37 million) when calculating "real" net reserves. Their main arguments are (a) about $5 million of the $37 million are en- titled to official exchange, but have already satisfied their foreign exchange needs on the free market and should therefore be deducted for the above purpose; (b) the real level of potential reserve claims due to the present exchange system is still lower because (i) im- porters have adapted to the delays and file their request ahead of time, (ii) demand for exchange futures which are regularly sold by the Central Bank is less than what the Bank is prepared to offer, (iii) com- plaintBfrom foreign exporters have practically ceased, A considerable amount of what is now registered as arrears in fact represents a "normal" level of importer indebtedness financed by short-term sup- pliers credits. Wihile nobody would venture on a precise figure on what represented excessive suppliers credits which would disappear if restrictions on foreign exchange sales were to be lifted, there seems to be consensus that such a figure would be somewhere between .5-- 25 million. - 27 -

Table G: COSTA RICA: BALANCE OF PAMYITS PROJECTION, 1968-1973 (In millions of US dollars)

1967 Actuals 1968 1969 1970 1971 1972 1973 1. Curr. acc. balanice -LO,6 -33,7 -36.6 -36.4 -3233 -30.8 -22.7

Exp. (goods and serv.) 173.2 203.3 214.8 229.5 247.6 267.3 292.9 Imp.. (goods and serv.) 232.0 -245.5 -260.4 -275.9 -291.9 -310.1 -328.6 Net transfers 8.2 8.5 9.0 10.0 11.0 12.0 13.0

2. Debt amortization (Piblic sector)l/ 46.6 -21.4 -25.5 -21.0 -13.4 -13.6 -13.0

3. Req0, gross capital - inflow (1+2) -97.2 -55.1 -62.1 -57.4 -h6.7 -44.4 -35.7

4. Existing commit. of long-term off. cap. 24.9 32.1 32.4 22.5 7.3 1.5 -

5. Add,, cap. required 79.0 32,7 29.2 27.1 41.0 38.6 35.2

Direct investnent, net 15.4 10.0 10.0 10.0 10.0 10.0 10.0 Pr:ivate loans, net 63.62/ 13.03/ 0 3/ 0 3/ 10.0 10.0 10.0 New commit. cC long- term official cap. - - 12.5 22.9 30.7 24.2 26., Resiid. gap (minus =-sLrpl.) - - 7.2 2.0 -1.3 -8.7 1.2

Change in reserves (minus 6. = increase) -6.7 - 10.03/ 10.03/ -10.0 -10.0 -10.0

1/ Includes IBF repayments of $5.8 million in 1968, $11.8 million in 1969, $h.0 million in 1970 and $0.3 million in 1971. Assuming continued rollover of short-term Central Government debt of $6.0 million until 1970/71. 2/ Including errors and omissions of $15.9 million. 3/ Assuming that arrears in external payments of $20 million be liquidated in 1969/70. Arrears had been financed mainly by short-term suppliers credits. was necessary to check further reserve losses in 1967-1968, would seem to indicate that reunification at the old parity would be unrealistic.

72. WIith these export prospects, the growth of imports cannot be sustained at the 11 percent anrnual rate of increase experienced in the 1960-67 period. The projected increase of 5 to 6 percent per annum, howi- ever would allowT for imports of raw materials and capital goods sufficient to carry out the planned investment program and the projected industrial production. Raw material imports were projected on the basis of past relationships between imported inputs and industrial output, assuming that this ratio would be slightly reduced as a result of a more intensive use of domestic raw materials. Capital goods import projections were based on past relationships between the former and investment. The critical part of this projection is that it provides for virtually no increase in consumer goods imports. Its realization thus assumes adequate policies to restrain this category of demand: the contemplated import surcharges, consumption taxes and selectively restrictive credit policies.

73. Official debt service will remain heavy in 1968 and 1969 but, with proper debt management, could be substantially reduced in the early 1970's. Together with the expected reduction in the current account deficit, gross external capital requirements would thus decline from US$55 to 60 millioni in 1968-69 to soime US$35-40 million in 1972-73. Out of a total gross capital requirement of some US,300 million for the 1968-73 period, slightly less than one-third or US$96 million would be coming from existing commitments of official capital. The remainder or slightly over US$200 million is nows expected to be mobilized in aboult equal shares from additional official and private capital. This implies a net inflow of private loans and direct investment totalling some US$20 million annually or roughly the same as in the recent past, in which private inves-1'ent activituy was comparable to that projected over the next five to six years.

74. In order to achieve the crucial balance of payments objective of decisively reducing the external debt service burden, Costa Rica should attempt to obtain as much as possible of the required external capital from long-term development loans. Assuming that, based on past lending practices of major lending agencies, all official capital is obtained on average with maturities of 20 years, including three years of grace and a mix of conventional and some subsidized interest rates, debt service which is estimated to absorb some 12 percent of exchange earnings on current account in 1967 would be reduced to some 8 percent in 1973. If one were to include the external debt with maturities of under one year in tlle above ratios, for which there appears to be a justification in the case of Costa Rica since this type of debt materially contributed to the balance of payments difficulties, the projected reduction in the debt service ratio would be more dramatic, dropping from same 30 percent in 1967 to 8 percent in 1973.

D. Conclusion

75, Costa. Rica's development effort has clearly reached a critical point. Given the size and the nature of the recent financial difficulties, the past pattern of growth does not appear to be sustainable. On the other hand, the economy clearly has the potential for continued groawth. Whether and to what extent this potential can be realized now depends cn Costa Rica's ability to respond to the need for a substantial step up i1 domestic rescurce mobilization, particularly to ,aarke6ly increase Central - 29 -

(oveirnment savings. Important steps have already been taken in the course of 1967 which ii bear fruits durin- the current year. IlbiTever, the obli&'ations accumulated froam the past and the needs for tlm future are such thlat still furthLer action is required. T1he additional measures re- quired to achieve a viable fiscal situation .iU not be large compared to vlhat has already been achieved, once tle i.;Vort surcharge is ratified. Cut past difficulties in passing neow imasures through the legislative pro- ccss in time and the fact that Costa Rica is lilcely to be last in ratifying the surchar-e are not grounds for enpecting easy solutions, especially since 1970 vill be an election year.

76. The favorablc development prosnects of Costa Rica and the avail- ability of high priority projects suitable for external financing-clearly mierit substantial e.;ternal support over the ne:t five year period0 If the investment targets and the supportinZ financing plan describoed earlier rere to be fully achieved, Costa Rica could effectively absorb net: official co.=witments of so:ne ta8O million over the 1969-73 period. I'o.rever, in viewr of the paramount *x.ortance of an adequate complenentary domestic savings effort, the emtent to wihich Costa Rica's development effort in- vites external support-wrill reflect proGress made in reacuing these in- ternal savin-s targets. If sone shortfall in these targets turns out to be inevitable, external support of an a^ppropriately reduced expenditur; progran would still be imrranted, but at a lowTer level than indicated above. STATISTICAL APPENDIX

Table No.

National Accounts and Poqlulation ]1...... Gross National Product, National Income, Population 2. Gross Dbmestic Expenditure :3. Gross National Product by Sectors l. National and Domestic Savings 5. Investment and Savings Ratios 6. Agricultural Production 7. Manufacturing Production, Inputs and Sales 3. Net Value of Manufacturing Production by Sectors

Public Finance and Investment 9. Public Investment Expenditure and Financing 10. Central Government Fiscal Performances EL. Central Government Revenues 1:2. Central Government Expenditures 13. Central Government Current and Capital Expenditures 14. Central Government Transfer Payments 15. Distribution of the Domestically Held Debt of the Central Government

Monetary Accounts 16. Summiary Accounts of the Banking System 17. Financing Capacity of the Banking System 18. Sectoral Distribution of Bank Credit to the Private Sector 19. Nlolesale and Retail Prices

Balance of Payments 20. Balance of Payments 21. International Reserves 22. Principal Exports 23. Export Projections 24. Imports by Economic Category 25. Trade With Other Central American Common Market Members 26. Drawings on Foreign Loans

External Public Debt 27. External Medium and Long-Term Public Debt Outstanding Including Undisbursed as of December 31, 1967 28. Estimated Contractual Service Payments Due in Future on External Medium and Long-Term Public Debt Table 1: COSTA RICAt GROSS ;ATIOM41A PRODUCT, I'ATIOML IfCO.E, POPULATION

Real Per Canita Per Cap. Gro s Real Gross 11et '.a- Domestic Gross iiet Domestic tional Product Niational ilational Popu- Pro duct Income (At 1962 Product Income lation (At 1962 (At cur. prices) (At current prices) (mill.) prices) prices)

jln miJlions of colones) (In colones)

1957 2,389 2,320 1,966 1.03 2,152 1,771 1958 2,528 2,1411 2,032 1.08 2,193 1,767 1959 2,689 2,539 2,117 1.13 2,240 1,764 1960 2,908 2,7414 2,299 1.17 2,326 1,339 1961 2,966 2,894 2,467 1.22 2,282 1,898 19)2 3,1714 3,118 2,636 1.27 2,369 1,967 1963 3,345 3,413 2,397 1.34 2,1406 2,o84 1954 3,362 3,533 2,999 1.39 2,335 2,033 1965 3,699 3,667 3,253 1.43 2,483 2,183 1906 3,900 14,150 3,474 1.49 2,532 2,256 1967 Preliminary 4,164 4,465 3,770 1.54 2,619 2,371 (Percentage change in year)

1958 5.8 3.9 3.3 2.1 -0.2 1959 6.3 5.3 4.2 .-9 -0.2 1960 8.1 3.0 8.5 3.( 4.3 1961 2.0 5.5 7.4 -1.9 3.2 1962 7.0 7.7 6.9 , 3.6 1963 5.4 9.5 9.9 l.6 5.9 1964 0.5 3.5 3.5 -3.0 - 1965 10.0 9.5 8.5 6.3 4.8 1966 5.4 7.3 6.8 2.0 3.3 1967 Preliminary 6.8 7.6 8.5 3.4 5.1

1958-67 Avera-e 5.7 6.7 6.7 4.1 2.0 3.0

Source: Central Bank of Costa Ri_a Table 2: COSTA RICA: GEDSS DO2ESTIC MXPaIDITURM

Prol. 1961 1962 1963 1964 1965 1966 1967 (In .illions of colones at current prices) Consiuvftion: Public sector 360 332 ts30 485 531 56h 616 Private sector 2,101 2 205 2367 2,616 2 969 21 Su--TDtc.` 4_622,1 7 2,797 3,101 3,227 T3 3,097 Gross fiixed capital fornation 526 663 725 660 897 863 951 Change in inventories 52 29 11! -16 239 98 95 Gross domestic c;.penditilre 3,QsO5 3,279 3,3 3,745 ,363 4,494 9!3 Exports of goods and scrvices 617 729 755 887 896 1,072 1,163 Imports of goods and services -737 -334 -927 -1 032 -1 309 -1 32lN -1 517' Gross domestic product 20 26 I7fl 1 3,600 itet paynents to foreign factors -26 -5o -51 -G7 -83 -93 -123i/

Gross national product 2,894 3,118 3,413 3,533 3,867 14,150 4,465

(As pcrccntagc of GNTP) Consumption: Public sector 12.4 12.3 12.6 13.7 13.7 13.6 13.8 Private sector 72.6 70.7 69.4 74.0 69.7 71.5 73.5 Sub-Total M 53.0 r2.0 7 3 .T .33.1 Gross fi:xed capital formation 18.2 21.3 21.2 13.7 23.2 20.3 21.3 Change in inventori2s 1.8 0.9 3.3 -0.5 6.2 2.14 2.1 Gross do.nestic expenditure i13 106.0 11.1522 17W 110.T .xports of' ,poods and srviccs 21.4 23.4 22.1 25.1 23.2 25.8 26.0 Lnports of goods and services -25.5 -26.7 -27.2 -29.2 -33.8 -31.9 -34.o Gross doLstic product 10.9 . io 101.9 102.1 102.2 102.3, iTet pym-aents to foreign factors -0.9 -1.8 -1.5 -1.9 -2.1 -2.2 -2.3 Gross national product 100.0 100.0 100.0 100.0 100.0 100.0 100.0

J XIncludes adjustnent for pa,-nents effected at free market exchange rate. Source: Central Ban'r of Costa Rica Table 3: CO)S2TRICA: GROSS NATIONAL PRODUCT BY SECTORS

Prel. -1961 1962 1963 1964 1965 1966- 1967

(In millions of colones at current prices) Agriculture 1/ 764 806 875 879 971 999 1sC53 Mining 3 3 3 3 4 4 -4 Primary production 767 9 80 975 1,003 1,057

Manufacturing 463 530 603 647 696 774 859 Construction 150 172 183 150 186 200 206 Uti lities 37 4o 47 52 59 65 68 Secondary production 5 7 379 1,043 1,137

Transport and communications 111 118 130 144 156 159 185 Conmercial services 487 538 574 604 661 706 789 Financial services 74 73 79 93 103 114 121 Housing 273 294 316 329 341 354 366 Other services 284 308 333 361 392 425 453 Public administration 274 292 320 338 380 443 L8h Gross domestic product 2,920 3,174 3,146 3,600 395 4,Z443 ,588

Net payments to foreign factors -26 -56 -51 -67 -83 -93 -123 Gross national product 2,894 3,118 3,413 3,533 3,867 4,150 4,465 (As percentage of GNP)

Agriculture 1/ 26.5 25.8 25.6 24.9 25.1 24.1 23.6 Mining 0.1 0.1 0.1 0.1 0.1 0.1 0.1 Primary production 26.6 25.9 7 25 o25.2 24 .23.7 Manufacturing 16.0 17.0 17.7 18.3 18.0 18.6 19.2 Construction 5.2 5.5 5.4 4.2 4.8 4.8 4.6 Utilities 1.3 1.3 1.4 1.5 1.5. 1.6 1.5 Secondary production 22.73 238 2. |21.0 24.5 25.0 25.

Transport and communications 3.8 3.8 3.8 4.1 4.0 3.8 4.1 Comiercial services 16.6 17.3 16.8 17.1 17.1 17.0 17.7 Financial services 2.6 2.3 2.3 2.6 2.7 2.7 2.7 Housing 9.5 9.4 9.3 9.3 8.8 8.5 8.2 Other services 9.8 9.9 9.8 10.2 10.1 10.2 10.1 Public administration 9.5 9. 9.14 9.6 9.B 10.7 10.8 Gross domestic product 100.9 101.8 101.5 101.9 102.1 102.2 102.5

Net payments to foreign factors-0.9 -1.8 -1.5 -1.9 -2.1 -2.2 -2.8

Gross national product 100.0 100.0 100.0 100.0 100.0 100.0 100.0

1/ Includes livestock, forestry and fishing.

Source: Central Bank of Costa Rica. Table 4q COSTA RICA: NATIONAL AND DOMESTIC SAVINGS, 1960-1967 -(in millions of Colones'

1960 1961 1962 1963 1964 1965 1966 1967

GDP at market prices 2811 292(2 3174 3464 3600 3950 4243 4588

Total consumption 2464 2461 2587 2797 3101 3227 3533 3897

aross domestic savings 347 459 587 667 499 723 710 691 of which public sector 1 a. n.9a.

Net factor income payments -10 -26 -56 -51 -67 -83 -°3 -123

Current transfers 27 31 31 43 47 39 52 57

Gross national savings 364 464 562 65c> 479 679 669 625

Current account deficit 150 114 130 180 165 457 292 421

Gross investment 514 578 6S2 839 644 1136 961 1046 of which public sector 91 121 138 136 161 216 206 189

Source: Central Bank, except for public savings and investment which is taken from Planning Office data. Table 5: COSTA RICA: I"'VESTIM-4T XJD SAVEIGS RATIOS (in millions of current Colonos)

1960 1961 1962 1963 1964 1965 1966 1967

Investment as , of GDP 18.2 19.7 21.3 24.2 17.8 28.7 22.6 22.7 Domestic Savinr,s as 5/of GDP 12.3 15.7 l1.4 19.2 13.8 18.3 16.7 15.0

Resource Gap ^/ as ,, of Investment 32.7 20.7 20.9 25.9 30.2 42.8 36.1 33.8

Harginal Domestic Savings Ratio neg. 102.7 50.3 27.5 neg. 64.o neg. ne-. 2jational Savings as ,J' of GilP 12.3 16.0 18.0 19.3 13.5 17.5 16.1 14.o

l/ Jiet imports of goods and services.

Source: Table 4. Table 6: COSTA fIICA: AGRICULTURAL PRODUCTION (in thousands of metric tons unless otherwzise stated)

Crop Years l 1962,'63 1963`6)4y 196b/'65 1965/66 1966/67 196_/68

Export crops: Cof'fee (thousands of 60-Kg. bags) 909 1,038 787 973 1,139 1,283 Bananas (mill, of stems) 12 12 13 14 16 16 Sugar cane 1,086 1)l4)4 1,198 1,501 1,567 1,576 Cacao 13 11 10 9 9

Industrial crops: Cotton 1.4 1.7 3.2 4.8 4c0 4.5 Tobacco 1.6 1.5 1.4 1.5 1.6 1.7

Food crops: Rice 40 36 34 48 49 53 Corn 57 59 61 77 77 83 Beams 16 20 17 20 17 15

1/ Production of coffee and sugar is for crop years ending September 30; for other crops, production figtures relate to first calendar year of crop year..

Sources: Central Bank of Costa Rica; Planning Office; Directorate of Statistics and Censuses; and Coffee Office. Table 7: COSTA RICA: ,.ULNUFACTURING PRODUCTION, INPUTS AND SALES

Prel _ _ 71961 1962 1963 1964 1965 1966 1967

(In millions of colones at current prices)

Gross value of manufacturing production: Food processing industries 668 814 865 834 858 1,006 1,058 Other industries 533 594 720 8144 9146 1,026 l15 Total 1,201 1,408 1,585 1,678 1,804 2,032 2,208

Inputs: Agricultural products 516 516 581 549 640 701 753 Imported materials 151 185 211 237 343 324 399

Other goods and services - 71 177 187 245 125 233 197 Sub-Total 738 888 982 1,031 1,lC8 1.258 1,319 Value added in:manufacturing 463 530 603 647 696 774 859 Export sales: Samiprocessed foodstuffs7/ 337 358 367 392 361 443 466 Fully manufactured goods 15 16 38 105 129 182 199 Total exports 352 3714 b0 TO7 1490 Z 2 Domestic sales3/ 849 1,03 1,180 4j11 131 1,407 1,54

Total sales 1,201 1,408 1,585 1,678 1,804 2,032 2,208

(As percentage of gross value of manufacturing production)

Gross value of manufacturing production: Food processing industries 55.6 57.8 54.6 49.7 47.6 49.5 47.9 Other industries 44.4 42.2 45.4 50.3 52.4 50.5 52.1

Inputs: Agricultural products 43.0 36.6 36.8 32.7 35.5 34.5 34.1 Imported materials 12.6 13.1 13.3 14.1 19.0 15.9 18.1 Other goods and services&/ 5.8 12.6 11.8 14.5 6.9 11.5 8.9

Value added in manufacturing 38.6 37.6 38.0 38.6 38.6 38.1 38.9

Export sales: Semiprocessed foodstuffs_/ 28.1 25.4 23.2 23.4 20.0 21.8 21.1 Fully manufactured goods 1.2 1.2 2.4 6.3 7.1 8.9 9.0 Total exports 29.3 2 29.7 27.1 30.7 30*1 Domestic sales_/ 70.7 73.4 74.5 70.3 72.8 69.3 69.9

1/ Risidual; includes changes in inventories of materials. 2/ Coffee, unrefined sugar, and meat. 3J Residual; includes changes in inventories of finished products.

Sources: Centra:l Bank of Costa Rica; and staff estimates. Table 8: COSTA RICA: U,ET VALUE OF -IMUFACTURII3G P330DUCTIOlU BY SECTORS (In :nillions of colones at current prices)

Prel. 1961 1962 1963 1964. 1965 196c 1967 Food nrocessing 173 213 230 219 223 262 275 Peverages and tobacco 91 97 112 121 127 134 142 Terxtile s 19 22 23 26 28 32 35 Shoes and clothinJ 33 33 33 38 38 1.1 43 Fvrniture and l-rood products 58 63 67 72 73 77 82 Paper and printing 1I. 18 23 24 26 29 31 Cheizicals 25 31 Lo 61 66 62 71 Petroleumn oroducts - - - - - 32 i-,cnmetallic mineral Products 12 13 19 20 31 34 37 Iron and steol - - 3 5 11 12 ith Aetal nroducts 7 7 10 15 17 18 19 I±zcilinery 4 5 6 7 8 9 Electrical apparatus 2 2 3 5 6 13 13 Transport equipment 15 1h 13 16 21 25 28 Other 10 12 15 19 22 27 23

Total 463 530 603 647 696 774 859

Source: Central Bank of Costa Rica. lahle.2: COSTA RICA: PUBLIC INVES1IENT EXiENDITURE ANID FIiANCING, 1962-1967 (in millions of Colones)

1962 1963 1964 1965 1966 1967 Actuals

Expenditures Transportation 25.8 40.4 43.7 23.5 29.7 48.9 Communications - 2.0 8.6 24.6 33.1 26.3 Power 54.9 55.6 54.3 92.0 33.4 21.9 Education 7.9 9.2 8.6 9.6 14.0 12.4 Health (15 ( 22( 2415 29.9 23.2 14.7 Sanitation ( ( ( 5 106 15.5 8.8 Public housing 20.5 17.2 9.9 5.4 15.5 22.0 Agriculture 2.6 3.9 2.6 22 *8 23.0 (22.2 Other 7.9 10.6 9.3 ( ( (

Total investment 135.7 161.5 162.2 226.7 205.8 188.5

Financing Public savings: Central Government 62.9 17.9 46.3 12.6 -2.7 -35.6 Autonomous entities 38.4 58.3 62.9 67.5 77.2 84.6

Sub-Total 101.3 76.1 109.2 80.1 74.5 49.0

Net external credit: Gross drawings 75.5 98.0 127.1 138.7 80.1 76.6 Amortization -23.2 -27.1 -32.4 -21.7 -36.1 -45.14

Sub)-Total 52.3 70.9 94.7 117.0 44.0 31.2 Net interna-l credit: Gross borrowing ...... 144.6 138.5 162.7 Amortization ...... -48.2 -66.7 -42.2

Sub-Total -21.2 2.7 -2.0 -3.6 71.8 120.5

Residual (incl. change 3.3 11.8 -39.7 33.2 15.5 -12,2 in deposits)

Total resources 135.7 161.5 162.2 226.7 205.8 188.5

Source: Planning Office and various agencies. Table j0 COSTA RICn: CEMTRAL GuVERIIvENT FISCAL PER.FO3HNCES3, 1ji61-i67 1/ (in millions of Colones)

1961 1962 1963 1964 1965 1966 1967 -- Actuals----

Current Revenues 318.0 386.1 385.7 434.9 475.5 523.0 541.1 Total Expenditures 409.2 U- 7-23 57357 599.5 691.8 762.8 Current Expenditures ...... *...... 462.9 525.7 57u:7 (Current Savings) ..... f ..... (12.6) (-2-7) (-35.6) Capital xcpenditures ...... 130.6 166.2 186.1 Investment ...... 79.1 92.4 117.5 Amortization 22.2 29.1 36.3 43.2 51.5 73.8 68.6

Deficit (-) -91.2 -55.7 -86.6 -loo.8 -118.0 -1658.9 -221.7 Financing: Foreign Borrowing (incl. grants) 2.5 39.1 69.9 83.8 53.2 35.4 42.6 Long Term - .2 . 5 -Z7 f.2 27.3 29.4 31.2 37.4 Short and i4edium Term - 33.1 51.7 56.5 23.8 4.2 -0.8 Grants ------k4.0 Domestic Borrowing 88.7 16.6 16.7 17.0 64.8 133.5 179.1 Central Bank 10.0 . T7 9.4 57.7 81.8 Commercial Banks -6.6 -15.2 4.4 -15.2 18.7 -5.2 -28.3 Bond placement outside barAs 33.7 31.3 22.6 -16.9 1141 70.5 87.6 Floating debt 45.3 4.9 -29.8 6.0 21.4 19.4 39.8 Other (residual) 6.3 -12.6 1.7 -0.5 -4.8 -8.S -1.8

1/ Including expenditures on Inter-American Highway

Source: l4inistry of Finance; Central Bank; Plamiing Office. Table 21: OOSTL RICA: CG1TRkL; GOVZMlET REVM41S (in millions of colones) ~Actual _1961 1.92 19t3 19wi 1h965 1966

Direct tams: Income taw 38.7 68Ah 47;9 77;9 77;0 82;4 96;3 Ta: on banana comranies - 15 2O 1;2 109 4;9 6.5 Property ta: 14;2 17;6 l9e6 26i2 25i3 24i0 32-9 Othler direct tax.es 0.2 0.2 0.2 0.2 005 0.7 0_,

Sub-Total 53.2 87.7 69,7 505 104.7 112.0 136.3 T.xes on foreign trade: Import duties 16 744 191;7 205o9 196.7 210.9 210;4 17h:14 Othler custoins receipts Oil l.0 le5 4k-2 7e2 7;6 5;2 Ex=port taxes . 3d1 2.9 4.24e2 3.9 5.9 5.2

Sub-Total 1.70.6 195.6 211.6 205.1 222.0 223.9 181$,8

Taxes on domestic transact: -- - Cigarettes - 2;5 809 8o9 9;2 10i0 9;8 Liquor and beer 16.3 18.6 38,8 41.9 43.4 47.1 46.2 Gasoline tax c - _ 13;5 Gonsumption tax 3 .7 18.0 25.0 29;4 Sales tx - - 23;,1 Coffee tax 114 16;3 13;4 20i44 22;1 34c2 204 Other 6.3 9.7 12c,0 12,6 13.3 1Lh.3 13 .- - -I - -~ Sub-Total 34.0 47.1 73.1 87.5 1o6.o 130.6 i57.7

To-tal ta revenue 257.8 330o4 354.4 398a1 432.7 466.5 478.8

i!ontax revanue: - - - Public domain, profits 28Ah 32;9 11;9 15;4 188 22;3 284t Fees, licenses, transfers 16.4 22.7 18.5 18.4 20.4 24.3 31.5 interest on Treasury-held - - bonds o.4 1.1 0.9 1.5 1.7 8.6 4?h

Sub-Total 45.2 56.7 31.3 35.3 40.9 55.2 62.3 Total ordinary revenue 302,6 386.1 385.7 433.4 473,6 521.7 541.1

Twa revenue included in - extraordinary budget 5.0 - _ 2.1 19 13 -

Total revenue 318.0 386.1 385.7 43505 475.5 523,o 541.1

Source: Ninistry of Finance. Table 12: COSTA RICA: CENTRAL GOVERNM11T EPNDITURES, 1961-1967 (in millions of Colones)

1961 1962 1963 1964 1965 1966 1967 ------Actuals ------

Le-islature 4.4 4.9 5.3 5.3 6.0 6.8 8.2

Executive Departmnents Presidency 1.1 1.2 6.9 4.6 13.6 10.7 5.9 Agriculture 5.8 6.o 7.7 8.2 9.0 9.4 10.6 Economiy, Industry, Commerce 18.1 19.9 23.8 22.8 27.5 28.2 27.5 Education 83.8 92.7 99.7 109.2 118.4 142.7 170.1 Government & Police 19.1 20.2 20.9 20.3 22.4 24.8 24.8 Transport 48.5 52.7 71.4 81.7 87.2 89.6 93.7 Public Health 10.1 10.4 9.2 11.1 13.0 16.0 14.7 Public Security 13.5 14;1 14.4 13.9 14.8 16.9 18.0 Other 5.6 6.5 8.6 9.8 10.5 17.4 34.0

Judiciary 17.3 18.5 21.9 19.3 18.3 23.6 29.0 Electoral Tribunals 4.7 3.7 3.6 4.2 6.1 5.1 4.1 Current and Capital Transfers 124.6 132.5 130.8 140.5 131.5 172.0 183.7 Debt Service 51.5 57.3 53.2 80.3 91.2 119.3 123.4 Special Extra-budgetary Payments - - - 2.8 1.1 5.5 4.5 Salary Bonus Adjustment 1.1 1.2 -18.4 1.7 23.0 10.6 3.9

TOTAL I:XPENDITURES 409.2 441.8 459.0 535.7 593.6 691.8 756.1

Source: Ministry of Finance Table 13: COSTA RICA: CRTRAL OV'Mrk-% CUFn A':D CAPIT&L ZUPamDITURES, 1965-67 (In millions of eolones)

Actual 1965 1966 1967 1. Total a-penditures 593.6 691.8 762.3

2. Current 3xpenditures 462.9 525.7 575.7 21I Consuwirtion expenditures 3-337B3 39135 212 salaries V(259,3) (282.5) (300.6) 212 goodl; and services (37.9) (4o.1) (35.9) 213 intcrest on debt (39.6) (454.) (55.0) 22 Current transfers 125.0 152.2 180.7 221 private sector (45.9) (62.8) (73.7) 222 public s-ctor (74.8) (82.1) (100.1) 223 international organi',atjons (4.3) (7.3) (6.9) 23 &trabudgetary expenditures 2J 1.1 5.5 44. 3. Zati2 penditures 130.7 166.3 186.1 31 Real investment (direct investment) 2 64.1 72.1 32 Financial investment 3.5 2.6 4.7 33 Capital transfers (indirect invcqt.) (Inves ansnt, direct, indirsct, and financial) (79.1) (92.h) (117.5) 314 ;.Zorti zation 51.5 73.8 68.6 341 internal debt (-) (-) (34.0) 342 external debt ( ) ( - ) (34.6)

1/ Includes "ajuste pa3o sueldo adicional". '/Tostly current exnenditures, but also inwludes some canital expenditures. Source: Planning Office Table 14: COSTA RICA: CWTRAL GOVMLENT TRAWSFER PWAYI-TS, 1965-1967 (ji million of colones)

1965 1966 1967

Dirrent transfers 13h49 i53;5 184;2 -"0I'iv at-e Se c t o r 36;7 -no77j2 (Pensions) (27;3) (30;7 (42.5) (Other) (29.2) (36.1) (34.7)

Public Sector 74i2 75;3 10; (Public ServiceKInst.) (28;4) (30.0) (38.4) (Cult. and 3duc. Inst.) (19;4) (22;8) (2887) (Local. Admin.) (25.2) (2103) (28.3) (Other) (1.2) (5.2) (4b7) afternal Sector 4.3 7.3 6.9 Capital Transfers 23;2 2634 :Ziutional and Social Inst. .9 2;0 local Administrations 8;2 7.6 21;4 Public Entierprises 13;2 16;3 15w6 Other .9 1.0 1.6 Total 158.1 180.4 218.2

Source: Planning Office. Table 15: COSTA RICA: DISTRIBUTIOiU OF THE D0fUlSTICALLY IMID DiT OF TIIl CaiTRAL GOVTMiEMiT (In .iillions of colones)

Md or Period Juna 1901960-11962- 1963- £92 1 1966 1267 196b

Consolidated debt: Central Bank 13z7 1347 13;4 17;8 65*7 52,o 58a9 62*8 51z8 C4nirmercial banks - 62.5 55.7 24o.5 44G9 27.6 246.3 41.1 12e8 8.8 !Lutonomous insti- tutions 54.24 53.7 70.24 1144 117;3 127;8 136.3 178.0 197t-6 uA.BiI - - -- 9e9 7.7 15e6 12;3 12; 8.6 Other holders 112;4 1241i24 154;O 146;4 156i2 151i8 192g5 214.5 248;9 222.9 274.5 278.3 333. 3T3: 4q' 2937480e8 8 __ Treasury bills held by Central Bank - 10e0 18.9 25.o 35.3 5o.o 1O.6 151.o 151.0 Other credit from I Central Bhank 6.5 6.8 6.2 15.9 18.8 20.7 22.7 4.D7 o0.1 Oit'7er credit from - _- commercial banks -- 0;2 -- _- 2;1 2d 2eO 4z0 4e9 Floating debt 32.6 77.9 82.7 52.9 58.9 80.3 99.7 138.5 12L464

Total indebtedness 282.0 359.4 386.1 2427.2 478.5 546.6 666.1 815.0 857,4

Svources: Central Bankc of Costa Rica, Department of Economic R3search; bank balance sheets; and Annual Report of the 1:inistry of Finance, various issues. Table 16: COSTA RICA: SUMMARY ACCOUNTS OF THE BANKING SYSTEM (In millions of colones)

End of Period Jul 1962 1963 1964 1965 - 1966 1967-

I. Central Bank

InternatLional reserves: Exchange holdings 8o.9 104.0 123.3 131.8 113.4 127.8 160o5 Net INF position 2.7 -60.7 -52.3 -99.3 -102.6 -102.6 84.2 Reserve liabilities -35.8 -19.5 -55.6 -39.3 -84.5 -5.4 9.8 Total 47.8 3.57 T17T -6.s 77T 19.5 77766

DJomestic assets: Credit to Central Government 35.5 58.7 108.7 122.6 181.2 249.6 267.6 Credit to rest of public sector 27.1 22.1 8.7 11.2 19.5 20.0 13.5 Credit to commercial banks 235.3 251.1 270.4 306.2 287.0 188.2 169.2 Subscriptions to international organizations 22.7 36.2 40.8 54.8 57.8 61.7 67.6 Unclassified assets 51.5 53.5 56.4 60.9 59.1 60.3 78.2 Total 375.1 I-1.7 W 70 = 57604.7 §77:T96.1

Foreign liabilities (medium- and long-term) 82.7 70.1 101.4 120.1 94.4 77.1 61.5 Domestic liabilities and capital To commercial banks: Cash in vaults 33.1 41.7 41.4 41.2 42.4 49.3 48.4 srve deposits 45.1 51.7 58 69.2 5 108. 172.2 To Pri eseoe tctr: 7 12 Currency in circulation 206.0 223.2 227.7 235.7 252.6 282.7 255.o Monetary depositsa 0.7 0.2 0.3 0.4 - o.5 - sub-total :T7h206.7 23.52. 253.2 255.0 Central Government deposits 10.0 12.4 18.8 23.4 25.2 15.7 8.4 Rest of public sector deposits 0.4 0.5 0.8 1.4 3.3 3.9 1.2 Deposits 'of international organizations 11.2 11.0 14.8 15.8 15.4 17.7 21.9 Unclassified liabiXties 3.4 3.5 4.8 10.4 10.7 13.0 61.6 Oa.pital accounts 30.3 30.9 31.3 30.1 29.4 30.0 30.8 Total 3 0 7 3-757 3 775 04". 477 5n7. 601.1

II. Commercial Banks

International reserves: Exchange holdings 26.5 35.8 19.8 29.8 30.0 59.8 77.0 Reserve liabilities 10.2 14.8 9.8 47.8 48.3 6.6 Total 16.3 21.0 10.0 - -&7-T8J5 537 7-6 Domestic assets: Monetary reserves Cash in vaults 33.1 41.7 41.4 41.2 42.4 49.3 48.2 Reserve deposits 47.2 49.9 58.7 71.9 58.5 107.6 172.0 sub-total 0 9.397.6 10i0. 113.1 100.9 156.9 220.2 Credit to Central Government 40.5 44.9 27.6 46.3 41.1 15.4 10.5 Credit to rest of public sector 0.3 0.5 o.5 1.8 2.3 2.1 9.6 Credit to private sector 850.9 911.41,055.2 1,174.91,192.4 1,290.9 1,247.5 Unclassified assets 95.9 91.3 95.8 101.2 109.8 118.8 1144.6 Interbank float 3.1 5.6 _4.5 10.0 9.0 13.2 Total .1,071.01,l.-31,f3_.71,447.3 1,5.5 1,597.3 1 Table 16: (concluded.). COSTA RICA: SUMMARY ACCOUNTS OF THE BANKING SYSTEM (In millions of colones)

end of Period July 1962 1963 1964 1965 1966 1967 1968

II. Commercial Banks (concluded)

Foreign liabilities (medium- and long-term) 27.8 37.8 57.4 89.7 104.1 138.1 150.7 Domestic liabilities and capital: To Central Bank 235.2 249.4 270.4 306.2 286.9 188.2 169.2 To private sector Monetary deposits 245.9 281.1 3o4.1 331.5 339.9 509.1 529.4 Time deposits 1.2 1.0 1.2 1.3 1.6 1.8 3.4 Savings deposits 93.7 105.5 117.1 124.1 133.0 147.4 160.2 Securities 70.0 77.2 107.7 120.4 109.9 130.9 130.3 Other obligations in colones 9.6 8.0 15.4 20.7 15.4 50.0 50.7 Deposits in foreign exchange 22.8 21.5 17.8 18.6 22.2 33.0 5 sub-total 637.3 6 16. 6622.0 872.2 9 1 3 *75 Central government deposits 0.7 o.6 o.6 0.5 o.5 o.6 1.1 Rest of public sector deposits 38.3 48.5 51.6 46.7 46.3 59.9 62.5 Unclassified liabilities 55.2 44.7 54.2 67.9 71.0 79.3 85.9 Capital accounts 286.9 291.0 296.2 301.7 306.4 312.2 317.3' Total 1, 5 1,1 1,5 11i9.7 1,03j1,

III. Banking System International reserves: Exchange holdings 107.4 139.8 143.1 161.6 143.4 187.6 237.5 Net IMF position 2.7 -60.7 -52.3 -99.3 -102.6 -102.6 84,2 Reserve liabilities 67 5.4 3 --i.17 -12.0 Total 64.1 44.8 25.4 -24.8 -92.0 73.0 135.6 Domestic assets: Credit to Central Government 79.0 103.6 136.3 168.9 222.3 265.0 278.1 Credit to rest of public sector 27.4 22.6 9.2 13.0 21.8 22.1 23.1 Credit to private sector 850.9 911.41,055.2 1,174.91,192.4 1,290.9 1,247.5 Subscriptions to international organizations 22.7 36.2 40.8 54.8 57.8 61.7 67.6 Unclassified asset,s 147.4 144.8 152.2 162.1 168.9 179.1 222.8 Interbank float 5.3 5.3 4.1 11.5 10.1 11.1 - 3.3 Total 1,132.7 12223.91,7Yi; ".15ni771 1o Foreign liabilities (medium- and long-term) 110.5 107.9 158.8 209.8 198.5 215.2 212.2

Domestic liabilities and capital To private sector- Currency in circulation 206.0 223.2 227.7 235.7 252.6 282.7 255.0 Monetary deposits 246.6 281.3 304.4 331.9 339.9 509.6 529.4 Time deposits 1.2 1.0 1.2 1.3 1.6 1.8 3.4 Savings deposits 93.7 105.5 117.1 124.1 133.0 147.4 160.2 Securities 70.0 77.2 107.7 120.4 109.9 130.9 130.3 Other obligations in colones 9.6 8.0 15.4 20.7 15.4 50.0 50.7 Deposits in foreign exchange 22.8 21.5 17.8 18.6 22.2 33.0 5 sub-total 9-.9 7T7 791.3 8 74.6 1,I55.1 14i Central government deposits 10.7 13.0 4 23 9 25. 16. 9.5 Rest of public sector deposits 38.7 49.0 HU 48.1 49:Z 3 63 7 Deposits of international organizations 11.2 11.0 14.8 15.8 15.4 17.7 21.9 Unclassified liabilities 58.6 48.2 59.0 78.3 81.7 92.3 147.5 Capital accounts 317.2 321.9 327.5 338 335.8 342.2 348.1 Total 1,056. 1,61 1,7I61 ,2644 l,T7Z1

Source: Central Bank of Costa Rica. Table 17: COSTA RICA: FINANCING CAPACITY CF THE BANKING SYSTEM (in millions of Colomes)

End of Yhar Balances

1962 1963 199L396-1966 1967 1968 1969 1970 1971 1972 1973T Actuals Projections

Met lt.ruticnial wgerma 64.1 44.8 25.4 -24.8 -92.0 73.0 112 1214 84 iSo 180 210 Dtic meets: Public ector 1/ 106.4 116.2 145.5 181.9 244.1 287.1 300 29o 332 275 275 277 private asctc-2/ 850.9 911.4 1,055.2 1,174.9 1,192.4 1,29Q9 1,367 1,4149 1,536 1,629 1,726 1,830 Unclasified r 152.7 150.1 155.3 173.6 179.0 190.2 199 207 217 227 237 247 sowiptioii t0 tut org. 22.7 36.2 40.8 54.8 57.8 61.7 65 65 65 65 65 65

Asets e uliaulitiAc 1,,243.2 1,268.7 1,423.2 1,560.4 1,581.31,902.9 2,043- 2,135 2,234 2,349 2,9483 2,629 *MneyWy 452.6 504C5 532.1 567.6 592.5 792.3 850 850 850 870 921 976 Quafi moey 5/ 197.3 213.2 259.2 285.1 282.1 363.1 381 892 404 417 442 469 For*iln liablities 6/ 110.5 101.9 158.8 209.8 198.5 215.2 252 309 369 422 450 4183 OthM liabilities 7/ 482.8 443.1 473.1 497.9 508.2 532.3 557 584 611 640 670 701

Underlying Assumptions for Projections: l/ Residual. 2/ Sane rate of growth as GDP (1960-1967: Credit to private sector 8.5 percent per annum; money GDP: 7 percent). 3/ 1960-67 rate of growth extrapolated. I/and5/ Assuming no change in money and quasi money to GDP from the past, in which this ratio was very stable. 6/ On the basis of projected disbursements of foreign loans (Table G) assuming that as in the past about one-third of official loans will be channelled through the banking system. 7/ 1960-1967 rate of growth extrapolated.

Source: Central Bank and staff estimates. Table 18: COSTA RICA: SMCTORAL DIMR3IUTIO:. OF EA:t-K CREDIT TO TH; PRIVATJET SECTOR ('Ouulative balance in nillimns s¢ coloncs)

End of Period 19_64_ 1965 1966 1967

A-rriculture 390.0 427.2 446.2 L,5o.2 Cattle 164 .3 203.0 21S.5 251.6 industry 170.0 199.0 198.4 232.0 sub-total 8939.2 C Electricity 3.5 6.3 6.9 29.2 C2omnerce 61.0 54.3 51.6 40.5 Services 5304 61.4 62.1 66(13 Hbusin- 97.3 1l01. 1o4.l 119.0 Personal credit 55.5 55.2 54.6 58.8 Other 52.0 63.3 45.9 30.7 Total loans 1,052.0 1,171.1 1,188.3 1,27&.8

Othier credit (net) 3.2 3.8 4.1 12.1 Total credit to the private sector 1,o55.2 1,174.9 1,192.4 1,29o,9

Source: Central Bank of Costa Rica Table 19: COSTA RICA: WHOLESALE AND RETAIL PRICES (Index 1964 = 100)

Annual~ ~--- w1olesale errce lndex ConsuDaer General Domstic Imported Price Averages Index Goods1/ Goods Index 2/

196:L 96.3 96.6 95e3 91.6 1962 95.8 95.5 96.8 94.1 1963 98.4 97.9 100l1 96.9 19614 100.0 100.0 100.0 100.0 1967 99.2 98.3 lOOe6 99.3 1966 99.6 99.0 101.4 99.5 1967 102.7 101.6 106e1 100.7

1967 Jan. 103.0 102.5 1o4.7 99;8 1967 f.uLust 103?7 101.3 1968 Jan. ioh;6 10),;O 206/;h 103;8 1968 14uu6st 105.3 104.9 10 6.4 1o5.o

1/ Including export-type goods 2/ Metropolitan area of San Jose

Source: Central Bank of Costa Rica. Table 20: COSTA RICA: BALANCE OF PAYMENTS (in millions of US dollars)

1962 1963 196k 1965 1966 1967 Cred. Deb. Cred. Deb. Cred. Deb. Cred. Deb. Cred. Deb. Cred. Deb.

Goo,ds. services, and transfer payments: Merchandise trade, f.o.b. 92.7 102.4 93.2 113.4 112.9 125.7 111.9 160.5 136.0 162.2 142.9 173.7 Freight and merchandise insurance I.2 13.0 5.2 16.0 5.9 17.3 6.5 21.5 6.2 21.8 1 17.7 Direct :Lnvestnent income payments - 6.0 - 4.2 - 5.9 - 8.7 - 7.6 ID. 17.2 Other services 16.2 13.5 18.1 15.7 19.3 18.5 22.1 23.2 22.1 25.9 203 2,,5 Private transfer payments 2.2 0.2 h.i 0.3 3.1 0.4 2.5 0.1 5.5 1.2 5.0 1.1 C'entral Government transfer payments 3.3 0.7 2.9 0.3 )-9 0.5 5.2 0.7 L.0 0.5 d 0.5

Total goods, services and trans. -- 17.2 - 26.L - 22.2 - 67.4 - LL. - .

Private capital: Direct :nvestment capital 12.0 - 1L.o - 7.9 - D.1 - 15.6 _ 15 ,1 _ Loans 1.3 0.8 8.0 0.5 10.8 .9 22.2 12.3 23.0 8.0 20.3 10.7 Suppliers' credits 3.7 - 5.1 0.6 0.6 5.3 14.2 2.2 5.6 9.3 I 1 Other short-tera private capital -. 0.7 0.6 1.9 0.2 4.1 1.1 2.7 0.1 5.9 0.7 .1

Total private capital 15.5 - 2L.7 9.2 - 20. - 29.1 - Vt. _

Official capital: Subscriptions to international agens. 0.5 0.9 - 2.1 0.6 0.7 D.1 2.1 - 0.5 0.2 i Central Government medium- and long- term 2.3 2.3 9.5 1.7 5.6 2.8 11.3 5.5 11.9 iO.6 0.5 2.> Central Government, shsrt-term 5.7 o.6 3.1 2.5 5.7 2.8 1.8 1.6 1.0 2.3 O.l _ Rest of Public sector, medium- and long term 5.9 0.2 5.8 0.1 3.7 0.3 11.7 0.3 7.C 0.5 9,0 ,.9 Rest of public sector, short-term - - - - 3.6 2.2 4.9 4.8 5.0 14.5 - -

Total official capital 11.8 14.0 - 9.5 - 15.3 - 5.5 - -

Banking system: Medium- and long-term 5.1 3.0 2.9 3.5 9.8 2.1 11.5 3.9 3.0 4.8 rt3%

Errors and omissions (net) 8.1 15.7 - 7.1 16.6 - 1.3 - 15.9 -

Monetary movements: CDrtral Jtnk cs.sts .. 5.9 - 3.5 - 2.9 - 1.3 2.8 - 2., j Col - subscription to DIF ------1.2 - 1.3 iDaw_ng.s on IMF 2., 6.3 10.0 0.5 - 1.3 12.0 3.7 5.j 3.7 Other Central Bank liabilities 5.0 - - 2.j 5o - - 2.5 6.9 - 6.5 19.0 Commercial banks, assets 1.4 - - 1.4 2.5 - - 1.5 - - _ Commercial banks, liabilities - 0.5 0.7 - - 0.7 5.7 - 0.1 - ; 11.6

Total monetary movements - 4.1 2.9 - 3.0 - 7.5 - 10.3 - - 21.0

Sources: International Monetary Fund, Balance of Payments Yearbook; Central Bank of Costa Rica. Table 2: COSTiL RICA: ET1AT7R;I0AL -ES 2;R1S (in m-llions of. U.S. dollars)

Central BainY: Coi.rjiaJ Baen!s 1End Gold and R=scrvc Resorve Banking? of Foreigi. 1et LI' Liabili- Total Forci',n Liabili- Total 2ystc,i Pzriod Z:chan !e Position ties (iha) 2:chnrme ties (CTet) (Icot)

19?3 19.5 1.2 20.72 5.2 -1.2 14 ° 2L.7

1961 6.3 -3.8 .0.3 2.2 5.4 -2.0 3.4 5.6 1962 12.2 0.4h 5.4 7.2 h.0 -i.5 2.5 9.7 1963 15.7 -9.2 -2.9 3.6 5.4 2.2 3.2 6.3 196h4 13.6 -7.9 -8.4 2.3 3.0 -1.5 1.5 3.8 196&•5 19.9 -15.0 -.5.9 -1.0 4.5 -7.2 -2.7 -3.8 129) 17.1 -15.5 -12.8 -11.2 4.5 -7.3 -2.8 -14.0 1967 19.3 -15.5 -0.8 3.0 9.0 -1.0 8.0 11.0

1967 A'i,Cust 31; 2 -12;7 -0;6 0;9 6;7 -07 6;0 6;9 1 9 ust 23,2 -10.7 -1.6 10.9 9.7 -1.0 8.7 19.o

Socrce: Central Ban'. D Costa Riza. Table 22: COSTA RICA: PRINCIPAL EXPORTS (in millions of U.S. Dollars)

1961 1962 1963 1964 1965 1966 1967

Agricultural Products: Bananas 19.0 25.9 24.3 26.7 28.3 29.2 30.9 Cocoa 4.8 4.9 4.3 4.1 2.2 3.1 3.1 Live Cattle 1.9 1.3 0.6 1.7 2.0 1.4 0.9 Coffee 44.9 48.4 45.3 48.0 46.6 52.6 54.8 Meat 2.8 2.8 5.0 6.o 3.2 5.5 8.6 Unrefined sugar 3.1 2.8 5.1 5.1 4.7 8.7 8.4 Other 1.8 1.7 2.1 2.9 3.2 4.9 4.6 Total 73 7778 87. 9. 90.2 105.4 111.3

Fully processed manufactures: Foodstuffs 0.4 0,5 1.0 1.6 2.9 3.7 4.3 Textiles and clothing 0.3 0.1 0.3 1.4 2.4 4.2 4.6 Fertilizers - - o.6 6.8 3.5 2.4 2.8 Plastics 0.2 0.1 0.2 0.5 1.0 1.5 1.6 Other chemical products 0.1 0.1 o.6 1.2 2.0 3.1 3.5 Finished lumber and furniture o.4 1.0 1.0 1.6 2.4 3.1 2.5 Paper products - - 0.1 0.2 0.6 0.8 0.8 14etal products - - - - 0.8 1.4 1.5 Electrical appliances - - - - 0.5 1.4 2.6 Construction materials - - 0.1 0.1 1.0 2.2 2.3 Other manufactures 0.8 0.6 1.3 2.5 2.4 3.6 3.6 Total 2.2 T2a 15.9 1T9.5 F77 30.1

Unclassified exports 1.7 1.8 0.9 1.7 2.3 2.7 2.4 Balance of payments adjustment 1.1 0.7 -0.2 0.8 -0.1 0.2 -0.9 Total exports f.o.b. m 92.7 92.6 112.9 111.9 135.7 T .9

Source: Central Bank of Costa Rica. Table 2': COSTA RICA: EXPORT PROJZCTIONS, 1%68-1973 (Values in millions of U.S. dollars)

1968 1969 1970 1971 1972 1973

Bananas: Value 45i6 48-7 52io 57e4 63-4 73;5 Volume (minl. stems) 16;9 19qi5 22;6 26.1 30;2 35!o Unit Value (UiS$) 2Q70 2.50 2.30 2.20 2.10 c1o0

Cocoa: Value - 3;7 3e6 3,3 3;4 3;5 3z6 Volume (mill. kg.) 8e6 M8 9o1 9c4 9b7 100 Unit Value (US$) 043 0d41 0P36 0.36 0.36 0,$6

Coffee: Valu,o 5709 58.2 6 0.4 61.9 63.4 65.o Volume (000 60 kg. bags)1170 1127 1170 1199 1229 1260 Unit Value (US$) 49.5 51.6 51.6 51.6 51i6 5i6 siat: VaLue o104 l0o2 107 ll;3 12;0 1303 Volume (mill. kg.) 13,0 13;6 14e3 15eO 1601 17.7 Unit Value (US$) 0:80 0.75 0.75 0e75 0.75 0.7:5

live cattle lO 1.0 1;0 1.0 1.0 I.0 C*.her agric, products./ 7G2 846 lo0. 12z4 14.9 17.9 Unrefined sugar 6-6 7;0 7*4 7;8 8e2 8z6 IManufactures 33-0 36c3 39-9 43;9 48-3 53-1 O ier 5,o 5.5 600 6.5 7.0 IZ

Total 170.4 179.1 190.8 205.6 221.7 243.!5

I!/ Cotton, mood products, shrimps, fruits, vegetables. Source: staff estimates. Table 24: COSTA RICA: hOPORTS BY ECONOYIC CATEGOPY

Prel. 1961 1962 1963 1963 1965 1966 1 96 ?J' (In millions of U.S. dollais)

Consumer goods: Dorables 12.0 1102 13.6 17.4 21.2 23.1 20el iNondurables 23.2 21.8 23e7 29.6 34.6 37c3 41;L 35.2; 3300 37.3 7 T0 5 Ra,w -materials: iNanufacturing and mining 22A8 26.0 31.8 35.7 51.o 48.9 57.7 Agriculture M8,8 7c7 5.3 5.8 6,8 6&5 32.1 36.8 39-5 41; 57.b -57~ 6 Capital goods: Nianufacturing and -mining 7.6 9o0 10.2 1102 15.8 14.6 1703 Agriculture 2.6 2.7 2.7 3.1 3.6 3.5 308 Transport 6.8 6:9 8.8 9.2 10.6 12.3 14Z7 Construction 3.3 3.3 4.,2 4.8 4.3 5e5 3g9 Other 3.6 5.5 5.3 5.6 10.8 7.8 921 23.9 277. 31.2 335 7 43-7 48F Fuels and lubricants 6.5 7.0 7.0 7.5 8,2 8.3 6;2 Construction materials 9.3 9.3 8.7 9.3 11.5 0o. 10.0

Total c.i.f. 107.2 113.3 123.8 138.6 178.2 178.5 190,o7

1/ Ratios are computed at official. exchange rates. Sources: Directorate General of Statistics and Censuses; and Central Bank of Costa Rica. Table 25: COSTA RICA: TRADE WTITH OTHER ,E>ITPL Ak'ERICAN C&i4Or! ML.RIcD NMER3

______1962 1963 1964 1965 1966 1967

(In millions cf U.S. dollars)

Ezr.3,rts (f .o .b. ): El Salvador 1.2 2.0 7.3 4.7 6.1 6.1 Guatemala Oel 0.4 3.2 4.3 4.7 5.G Honduras 0.1 0.3 1.5 3.0 4.4 4;4 vicaragua 0.3 13 3.4 6J3 100 11.2

Total 1.7 4Lo 15.4 18.3 25.2 27.3

-o rts (c.i.f. ): El Salvador 2.0 2.3 2.9 4.8 7.7 12;3 Guatemala 0.3 o,6 2.7 5.3 9.1 11;3 Hbnduras 0.2 0.1 0.7 1.4 2.0 3M2 Wicaragua 0.8 Oa8 1.9 3.2 41 4 71-4_

Total 3.3 3.8 8.2 14.7 23.2 3h4.2 (As rcrccrtie-O of total trade) Eaports 1.8 4.3 13.7 16.3 18.6 19;0 Imports 2.9 3.1 5.9 8.2 13.0 17.9

-ourcc: Directorate General of Statistics and Censuses. 0,-loo - - a 13,4133 >3'--aOCCls-- -an-a 1300 -. ---'------V'

- 31-t3lS 000 0 1-233) 3 an cx 3*3 3 *to3 oo-3 -'--c-1- *' .uA .3t 033 33 a x'.ro-,. 033LO 31330. 1) 5. 'C. o 0 '.3'' 01 -no o . - 0 0 a-o.30-- '-I 3 oo-' . U'. 0 o.o - 0 o-o o .241'.-.' 0. .3 - 1- 3 no -0 c-Op3 oaR 30 14 3 C -33'3 3 .333 330133) oo 3;o3g3oooo.o 0 30 -, E oi0 0 so. 0 0 . 133.3.1 1 o '.'.33 3

3 3 3 3

-4 a- ao 3) '.3 '4' 1 ,-a 0 .3 an

c-al--'--,-l-aa,.-. a -11303)13 4, a-a-ac . 03- -t 3)C'-'-ItoC3)00.an.n ax .a (no -a an I- . . . -4 3 - 3 0

* ...... cx at 0 3) '.3 0<) '3 0 ton

3) 3' o a-' I 3)140, - an a-, an iiiii, -00 01- TOICa .3 o * . . . . , . . . . * C' 3) to a 3)1-' '.33' to ".43)3) aa co C"." a, a,

to 130.3) ll-laWJC4CIC'.1.)a 'w in' 00 Ca anna. a a a no CaO-aO-C- 3)tn3 1 3)0. -j.'.

a , 03)3) *'-'l'--Q't,---C-ICC...) lil* 101 CIa lC.CC.S C to -I t.flC (JCa-3-..-a .130 - 0 '.-.' C C'.3 3 3

- 0 I I Ia- III I 1Q0CQal , I 1.000CC' nan 'Ca .03' n a 141a 41-C 0 -a304' attic 03- 0

o I I all a5,.,(3, OICCCC-Cl act- 'ii CIa- ax n 0 nO 13 '3 -<'-a--0 'arC'.- OcI

I I 0 alticl lalOCCt3 Cal CO-totI a 0-C 3). lO '0 a 3) C. to CC-an oC- a-ca.-- . . . * (nO.3.

a a a a a - a I I I IOIJtVCO'3-Oa lIllIlIllIl 3)l-"flto OOto')''4C lIllIlIll 03- OC,-CC3Soa,axl I I 313)14' 0.-C Ill'' 1 - 1 1 1 0 0 - 0 0 OnOnno - Sl> Ia, 3)3t oa- V. '-tIC <)C- ' ax00 at-JO CC

-A3

IC lCIIl CO I3).OCCaIlCllIlIIII2lll.StCCl - Vt ,''.. lTil3) a ,-n nj'.31 a 00 C. C' a- '.11--nC 3) as- -onaz'.t- 0 '01-' . no

3- I I II 113)11 HO 11l10,aw 0, - -Il * * . . Ci OCQa-, Ca ClOl atonalO I a. I 3) a C I u-i a axa- to a C) a3-3) '0 .21 t3-a3)n. 0101.0 '.0.3 11',

3" I I I I Oi-n3)nl 3' IIIIIIICII, COO Ca-a .-. CI$llll COCCI sa-' I ax . . . -. . . 3 - 0 3 ) au--i--c-a -r a- CC--u '0:1-to tS1-Cn 3) 01-aC; .0 aaCC-C C 0

to I I II 0131-Inlo IllIllIlnIll 001-100 IICIIIIIIIIII lllllll 3)3-3)1--I II a oaa 133 a a-s a --ta-n Ca 3'.0011

ax I I II 1101 0allllllllnlll Ill, 'lll-ZIIIIIIIIII II 1111'311 a-Ill I II -cj O 0- 1--a a- a-. C-C 3)

3) I

0'. I I II lll,ll-llll,ll Ill I lII 111111 1 1 1 1 1 1 1 1 1 1 1 1 1 1 II T;,'~lc:271, CffJ'V;I I' ICIA )EY I E11J . :l;lD Ai'vi'IM' '.! , ;l /I 1 5.I.oTHMJ)

DeJ,cbt PolcZI-pb'ALL in ForeignrJ C ul,c'-ncy

(I nousicts cf' U2.S. dbLD2:i-rs;)

])cb Qi.t0"E;(,' " . Tl c -c: 3]. O ItciA) (:'jij 1hC I '.l i

|01) 251 .7.7 28i , (. 7

Jf'i..... ;R . t. I,UD5!: 2 5 1.2,; ,23;S7i9*f.(,i',.;2

0Th-, i.0;!i; 3 5C)-2 V .T_.

IDA,' tl-lUi!d ,.t '.CO. ..

12*\ S.* CflC2i>t 1 s! ,.~______1.('-.' Br rt :z() S w) ~~~~~~~~~~3,.83575X

EXz)Z)~~~~~VJ¾!pC)~~~~~tB~~2ikC

Lf-) oi;foh") 15(}1 223 Ico l Ifs. ;fo,cr2Tl-~ rslt. of' Ot.i:l Ir i_q.- crs /2 3,297 3 ,`9 El3 Sc.l v .c.<4'

Cu-.J.a- f:. .l. 93.8 . 9'3 }Icnd.ucaas 11O6 I-,500

, ]) bt. vltt nn c .i½ c:'.cX1z f 1rtt r^it t Oi , L 0.2'.C. /2 At.,l!.cU,i r,Eprero7it bc.rids hold bythcr Ctom:.l I'-- of thet elp&ct.- cot 'Jnjes

C; t J U , 1 ' S; '' ' !C: ,Tl,c': CC) .oO tvw20: CCO'ST], IOlCA ESTi:ltTED CC)-JACTUAT, SER,VIC PA6EU1T'SPA'J7 J1LlE IN FUTWL:`E cu. Zimmmu.- ANtI Lc3::G--TEAI ruua,1Im±c Ci'STJ,ailD i:oC IICICPJUhCG UlETSJ.KJHS]:2liA)/ OP' DECEI3Y2' 31L, 1.967 /1l

lDebt R?cp,3ryWI)e in iorcij;n Cu:rc.ney

(In thou:;ands of Iu.S. doCI2rs)

DET OtJTST

1EGIN (i PI I O) P1 I UR I E ])T YE AH URI SL"'512SE LT I.oN I NT.1 F_rE.RE ST \O TAL,

GRANDi TOTAL

19 60 1.37,93 4 17,3 0 5,516 22,848 1 9 s9 ; 0, J.12,r2 4838v 10 fl Lt 11,96 9429 16 , 05 I 971 gG}, n01. F8 , 2 9 ;96321/5 5.92 97, 73 5 7 447 3 169 I 616 19 7 80, 26 4 920 2, 11 7s 731 1995,364 t675 2 548 7 2,2 1975I 7";0>&6 %215. 6 ?,155 6,3 5 19796 6671 4542 2,20? 6,69 59-7 62,4 3 3,907 2,07 5,964 19?7.8 5,13'i 6 1;,0? 9 2,096 3.979J 53,942 4,01J4 I ,7 21 5 ?-46 i 980 4I9,928 A, 116 15 i6 5 ,2 i 9 Fl 4 5, 0j12 4 266 1, 314 6 5,6 1 2 1982# 4i;546(",14,8 4,258s 5 ,406

P UFLIC L Y-IsUa),D BON,DS

19605 . 757 1 .57 1969 2,813B 78n 74 855 197t0 j.,948 719 48 767 1971 1;iS5 307 28 3;35 1972 785 435, 4I56 1973 344 19 6 21 1.974 327 15 6 21 1.975 31 0 16 5 21. 1.976 293 1 6 5 21 19?7 276 16 5 1978el2 25 2 2(1

.. r _ t_tr . at.. ud f tn.. Tatl) I. 28: C03TA }'lCL - F^J,S¶flA"LT T - C)i' E J-.CTUScfj.Cfl:A PAYi*:-L fl'S 'U,L Ii ] u O, - ],AS)i.LO~~G--TJ.U~ YUB'lIffC T Oul'S'i'tl;])JI I NC.{?0J)I!t umi)TSTI,i, AS C.' DMv;CI.1"3fl.D 3J.) 196i7 /'L (Oii

Dout I cpayab: i.ll FOi'2,cl-t.n Cur'vrlC;cY

([nrr tVou;ll', s of UI.3. dcllars)

Y'a e 2

DE: 1 rilUTST (EMi GI, i or PFFI O!,> '-X() )) PA Y lE NT S DUF1 I) I NJrPF ' V)DI I "Cl LJ F I 'G AiC) MO 'T I- Y EAK SL1'3!PSoD ) ZAT I 0 NTfRfIST TOTTACl.

PRlI VA tELY - PLACED DE-E)T TOTIJ,

968 2 ?,5 '7 7 7 8B8 , ,11 2 7 1,969 14,3 29 5t570 813 6,3103 J59/0 8 7 59 5,16 3 4, r , 63 5 5. 97 3, 5 96 1 82'1 . 135 2' 0P9 197.2 17772 j,542 68 1,60 5.97S 20l 207 8 21.5 1.9 7 4 2 3 23 1 -

SUPPLIERS CFR[DITS

5 9 6 1 8 9 2' 280 62 3550 1969 1,604 420- 93 553 1970 1. .A4 413 67 4 P 1971 771 274 42 316 1972 497 267 25 292 1973 230 2n7 28 1974 23 23 1 24

S.ct; fc iU.i;r L' at. c,--I of taWlc. ¶jzji.'c' 2iS CU3-9'j; 1(1 C \~\( BiA;A'L)G;t:;!',..'llST *i,CU L PAYV!..'i,1-,i'},., J!J:i'..1; :Al13-)Ui'ilJ ' ]HiJ:t:u; ,'- ia,1) I').O -c *'-J-.L:; dL-J-I::LC )).:;;, (l$%OUoTiS¶l'AUD:,h :c.To',.i.UDi:l.'- U: '!)i}X(O i;i l;4) !:,'-i OX, 111'.i'.,.31, 19cyS7 /, (C'MT'l.)

D1;bt. FRepaY, .lbi c il' Pov c--ij Cui-)vc cyl

(In thcwc-f ,k; of U.S. OtolarS)

Pat 3

T)c.fTT CIjST EG 1, Pff 1OL ) PA YNS 1)D IUFJ G P'[.D I tl) I N'2CL U!l I ,'G AMf1") T I- Y EA U NIND I SM! HJ T/A I 'T ]'I F-i'NT T',TA/L

PRI VATEflY * PLAGEUD DEBTr * T rIL

1.968 19625 6,900 ,f7B 7,978 1969 J12? 725 50150 720 51 87n 1970 7,575 4.7s5 405 5 1 1 97J. 2, E?5 I., 55 1 - 14 6%)9 19 72 .,275 1,275 43 1,318,

I RD LOAN'S

1968 36;775 1,830 2,n29 3,8;59 1969 34 945 .,9 07 1,9373 3, !4 a 1970 33, 038 I.,990 J., P23 3.813 1971 31,n48 2,n73 1.,7(8 3,7n1 1.972 28,975 2,046 is5e'9 3, 65 5.973 261929 2,n43 1,475 3, 51 5.974 246886 1,843 1#36? 3,205 19 75 23, 043 1, 946 1,257 3 X203 1.976 21;097 2,057 1,147 3 204 1977 i91040 1,527 1,039 2,566 1978 17,51.3 1,613 95? 2,565 1979 15,900 10,7n0 861 2,51 1900 14,20o 1,798 765 2,563 1981 1i2402 l,9n2 664 ;,[5(6 1982 10,500 2,nn4 556 2,560 53'Z 913£ TXLIS6 6L 902 66 921 ;T1Z 8L6b 90f,3 uz; 992 9Wz LL61 LZ?IIGI t1 98g 0 6 9 ;Z 9L6S i3f, 5 St9 90£ 9 Lz£iL6 ewPlf;0ZOZ 699 991 L61

1r^£'s~~~~LTLl£ zu' I S[ZI9 ZL6T bZU'T 'T46T OSZ i; 9'rl tV p, zsu 8 OtL6l 6/.6 t9 £0S59 1 696T 0 6 s Zz. OZ6 9 9 6'

961C

'tC ~ ~ ~ ~~~~LIV'6 OZTT 6

8L 7,£ Lf66 S f T L

6/. s'£ ¶3tz 1k UL61

J0d3t' 9 / 6'5 (; '3 WZ Ltw biN~~~~~~~~~~~~1/f bt,6

(;£~ ~~5O ~ ~ t ~~ /Z~~O909 't'1{0'OS - !;~~~~~~~5. !3 ;(9 ,>6 LX-. 0(.;9 1 t 69614jX

S~~~~~~~~ !. I ; 9I]XJ

I O1 IUO'IV 'J I .'IfI1ON l (10t.1I ?J 3 , "tiI?JN il (1 SiNL !3'.4AVd . ( !O IUtd.]sJOj i' 'S1)t3J?

( r::o~~~~)~~I isIno 3:6 -12K2( (V.1K> .X4 >0(Jl°1 i{[ .~To CM O('':Sl\l(l - ,t,)

(~~~~~ I.-7tt) 6 C: '1- Z^.-.--! .f. '([',,)T'[l.[tl ^[ t'sT[2t'l &'.ftli'!r..'t!$V J..!^.;.J 1i''Tt '';'a'11 '!. lrn f! T T,r'{'r<>t.:. .f >,rGt:(r-'Lrerr 0l; !En r:T ;! . . .,*r(ll r -,pJ. 28:a cC S; JfCA - Tl1'J.I ,i, :1D CO 1.it i'iUA S7VT C ); . hi.l iI :L I1 1 . CU. 'll) l"Dii'V'* . IDi3l4mIG,) jD''I OUiJTMiC,j13G)CTj:t; U1 3!5I}S.L. S OY IYSCI:;?JiB?f3 1:L,1I"97 /I (C:01!T )

Debt' RcpLy-|Alc in Yorcdc01n Culicy

(:rn thou ay±c.s cf U.Se dollars)

Pagc 5

D Ef? T n UT ST1 (PEiG ! OF PEfk 10T) ) P\yNFNTS DURI NOG PfER I (D INICLUBINIG AHO)f T 1I YEAR tlNi.J I SIRiO S EDJ z4AT IO(N I \TEdF ST 1 TAL

BCCIE LOANS

9 68 6, 7;30 . 173 138 311. 5.969 / 5757 1.73 216 3hf9 1970 8,384 1.97 272?469 1971 8l 187 197 262 458 1972 9991 17 251. . 4 4 1973 7J 794 229 240 469 1 97i 7, 5 65 ?62 229 1975 7, 302 14I 2i9 3t, 1 976 7/163 278 213 491 1977 6,68o5 278 204 461 1.978 6; 607 254 194 41-S 1979 ti.353 254 186 440 19'80 6 099 254 17B 4C'2 19B13 5) 844 254 169 423 1.962 5, 590 254 161 45.5

Ut S, GOVEFRNIEU'!f LOA!S TnTAL

1963 50,095 3,505 1,637 5,142 1969 46;590 3,t403 i.,159 4'762 1970 43,186 31043 1,1 83 4,226 1971 40Q;143 2.771 1,034 3' 806 1 972 37 371 2,153 892 3,046 1973 35 218 1.354 788n ,142 1974 33i864 11595 714 2Yj 1975 32,269 1,68? 659 2,340 1976 So,5rB 1(,643 663 230-6 1977 28, 945 1 653 647 2. 3no0 J1978 27,292 j.s634 62? 2,256 1979 25?6'8 1#627 564 2,191 19P.o 24.030 J1.631 504 114 1981 22.400 1,631 444 2, o75 1962 20 , 769 1 6(13 3 38 4 7,1 7

Sto foc,i.-oo ;t- c-nd of t:.ble. (1 r : ( ..i . .7.. ! . * )] j TI j j; . I) G,r;! :ji'i ,( 9J SY;1;':iVYC 1 j. I- Th iL 3r _l i% iI jlV >)J o;

ll' ,J-~~~t '-;l, ( cc)R1., <

(3Wi i). ov(-;c lof U.S. cloTh s)

}vo 6

t) L 1 ( UT S'I ( v: VI OF FT P I O!P) r AY IN Yr S LIf l PLF) I O) I ':Cl.t),. I 1'G . kMOIIi 'MI - YFAf LINt1 I SF SSf)\ ET ZA1 I ()'! I NT[fT STTt l .L

U,S GOVT, E X I ULINK LO ANtS

J.1(6t 2 5, 59 5 3 5t05 j. c85 .1 99. 1 9 6 9 22,090 3, ,n3 i. 5 19701 15,686fi6 3 '2i3 7,29 1.9 /i. 15, 6'3 2V /71. 0 23 3, 5 5.9/2 12 87 ?.12. 15 3 68 2, 19 i3 10, 7 1.8 135J i 57 1,9::1. 1.97', 9g 36'i I,309 503 1,12 1975 0,055 J.2522 431 9766, 6,80r3 1,08 365 j 197 / 5, 755 9 el 3 6 1 2 2 1.97/6 4,809 844 255 I1 9 9 1.979 3,965 836 in' i, 06 1, 0 3 129 83\8 J.6 3 1 0n1. 1.90's1 ?/ 291 8AS7 1J.6 953 198? I, 454 838 69 9n1

A I l) LOAilNS

19 6 24',5 0 1 52 152 1969 245100 - 210 2.0 1970 24,50n - 21i 1971. 24,500 211 211 1972 24?5n0 211 21.1 J.97; 24/500 - 211 211 1.974 24,500 286 211 496 1975 24',214 430 228 657 1976, 23, 785 595 290 e93 3.9 7 23,1.0 707 3l. -' 04F 1978 22,4r33 790 367 t,1,7 J 979 21., 6% 7?1S41 , J 9 1 779 90,9 1931. 20n:a, 1 9 79 32- 1 12 1902{ 1.9,315, 795 315, iwo> l'i8:1,- J,1;I A( I '.3i i'}'TL') 0V Ui,'1' S,JiY:.Vi; ; z ivSi; 1 lI.J c.l01 9 31.,/1 1$(c:~~~~~~~~Sy ~i. C. MD'.(;};i?,,i 3i 5 :1.S'7 A/,1 (C;s, )-

DebJJt Rl;cpxy)Lec ri. Fol'cir;ll Clrincxlcy

(1-n thcJu-(aTns 0r' Ir S. dro)'OalS)

P E- COL)TST (t'[:G 1 opF- t i\ I1C) Pi'K,'tZT j DURNI, PNP I ] U C LCLUJ)1I 'IG AI 1,0R)T I 8'LAII UVN ] St,Ii\P ZAT I O>! I NT E.fT:S TrTAl,

IOAW&I l'RO'N G0VF,9Q1ThiEV1'fS OP UJUD1,1TIF3R1) 1,)ElBIS'RS

1,9 6 8 3, 97 3, 297 1 J3' 4:1.2

7i. Y1ic:u1c~~~~5~ , L C :tiU-vcl in- Thb.t p'c~paredi OLmic i.0, :L5Cm6, vri'h ti,m c':cEcp-t:.c':rI. orf t.hr'cc y'ia'dto byit' 1aor's writh an cita;tmst':irl; zxcilailt, o.f `7050,GY £cm l~i,ici( )'cZi y7-:e,'t tomi;s cal'e riot ac-'.\ab1ott.t

Statist-ical 8crv:icv Divisio.n

Jun11e :3C, 1 96s