EXTERNAL CREDIT OF CHILE

Economic Department Prepared by; Jaeques Torfs

Dr. Harold Larsen

CONFIDENTIAL

March 16, 1949 Copy No. 1 n

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CONTENTS

Essential Statistics • • • • • • • • • • • · . . • • • • • • •

Summary and Conclusions • • • • • • • • • • • • • • • • • •

Balance of Payments and Foreign Transactions • • • • • • •••• Balance of Trade • • • • • • • • • • • • • ~ • • • • • • ]!xport s • • • • .. • • • • • • • • . • • • . ~ • • • . • • • Cower ..."....................... ~i trates ....«.......... . . . ... .... Distribution of Exports by Countries ••• • •• • ••• Imports • • ~ • • • • • " • • • • • • • • ~ • •• •••• Origin of Imports • • • • • • • •• ••••••••••• Balance of P~ents • • • • • • • • • • • • • •• •••• Copper in the Balance of P~ents , • • • • • • • • • • • • Gold Movements •••••••• • • • • • • • • " ~ • • • •

Foreign Debt of Chile · . . . . . . . . . . . . . . . . . , . . Foreign Exchange and Gold Reserves Foreign Exchange Rates • • • • •

Trade and Pa;yments Agreement •• • • •

• • • • • • • • ~ " . · . . , • •

• • " . . • • • • • • • • •

• • · , . Argentina-Chile • • • United Kingdo~Chi1e

.............. " ... · . . . . . . . . . . . . . . . ,. , . Public Finance • • • • • • · . . .. . • • • • • • • • • • • • • •

Ordinary Budget • • • • • • • • • • • • • • • • • • • • • • Revenues •••• ~ • • • • • •• ••••••• Expendi tures •••• • • • • • • • • • • • • • • • •

• • • •

Tax Revenues Outside the Budget ...... . • • • · . . . Leyes Alspeciales • • • • • • • • .' • · . · . Government Expenditures for Development , • • • , • • • • •

Fublic Debt • • • • • • • • • • • • • • • • • • • • • · . , . Foreign Debt • • • • • • • · • • • • • • • • • • t • Internal Debt • • • • • • • · • • • • • • • • • • • • • • • Total Debt , • • • • • • • • • • • · , • • • · • • • • •

Money . . .. , . . . . . • • • • • • • • • • • • • • • • • • •

National Income and Cap;i tal Formation · . . . ~ ., . .. . . , . . Statistical Tables

Page

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1

1 1 2 g 7 g

9 10 10

15 15 16

17 19 19 20 22 22 23

25 25 26 26

21

Area:

Population, 1947:

Currency: Unit; ParIty:

Trade:

CHILE

ESSENTIAL STATISTICS

Total Imports, 1947: 'T"otaI EXPorts:

Totar value in foreign exchange, 1947: Total exchange revenue accruing

from exports, 1947: -

Total Gold and Exchange Reserves: December 1947: December 19415:

Ordinary Budget 1948, Estimated: .Revenues: 'EXPenditures: EaIance:

Internal Debt, December 1947:

External Long-Term Debt, December 1948: US$: -ot1ler:

296,717 square miles

5,574,175

Paso 31 pesos = US$ 1

US$ 283.3 million

US$ 306.5 million

US$ 242.2 m:U1ion

US$ 55.8 million US$ 53.1 million

Pesos 12,328 million Pesos 13,328 million Pesos 1,000

Pesos 6,265.4 million

US$ 295.0 million US$ 175.0 million US$ 120.0 million

Cost of Living, September 1948 (base year 1937): 475

Wholesale Prices, All Goods, June 1948 (base year 1937): 347

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SU.M.lvlJL1l.Y AND CONCLUSIONS

Balance of Payments • •• 'T

1. The future pattern of the Chilean Balance of PaJ~ents is

likely to be mainly determined by the following considerations:

(a) Chilets capacity to maintain the volume and value of

her exports of (i) couper and (ii) nitrates, and, to a

smaller extent, her capacity to increase exportable sur­

pluses of locally produced agricultural ~roducts (notably

wine and forest products).

(b) Her need to imnort substantial quantities of agri-

cultural nroducts of heavy consul:lPtion which cannot be

domestically produced.

(c) A probable continuing desire on her part to import,

during a period of expansion of her economy, "develormlentll

goods in the form of capital equipment.

Exports

2. The Chilean copper situation presents the follovdng features:

(a) Copper exports produce (net) about 40% of the total for-

eign exchange accruing to Chile.

(b) Prospects for Chilean copner exports are closely linked

with the level of U. S. production of durable goods; a fall

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3.

of 20% in which would reduce U. S. copper consumption by the

whole amount of present U. S. imports from all countries. In

such an event, continued U. S. purchase of Chilean copper would

depend upon copper price reductions; a fall from 23.5 cents to

16 Gents a pound would carry an annual los s to Chile of about

US$ 33 million (net). This could occur with U. S. prices at

18 cents if U. S. import duties are re-imposed.

:'Tith recard to nitrates -

(a) Nitrate exports produce (net) about 15% of Chile's

foreign exchange accruals.

(b) Long-run prospects for Chilean nitrate exports are not

promising. In the U. S. market, shorter-run :orospects depend

upon U. S. farm income, notably from cotton and tobacco •.

4. Foreign exchange receipts from present export leaders are

likely to decline rather than increase.

Imports

5. Import pressures are likely to be continuing and difficult to

resist for the reasons contained at (b) and (c) in paragraph 1.

6. The volume of some present heavy items of food imports (notably

cattle) could be diminished by more attention to expansion of local pro­

duction.

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Foreign Debt Service

7. The peak load of debt service (on a total foreign c.ebt of approx-

imately US,; 295 million plus USC 59.2 Exim-Bank and TBRD authorized, but

not drrovn) vall be U&,~ 21.7 million annually in 1951 and 1952. This rep­

resents 6.5% of 1947 current balance of payments receipts.

Currency Parity

8. Devaluation of the peso is being effected by progressive move-

ment of categories of transactions from the present official rate of 31

pesos per US:}!; to the new intended parity of 43 pesos.

Internal Finance

9. Total Government expenditures have increased from arrnlnd 16%

of national income in 1942 to 20;~ to 24% in 19h8. Exnendi tures on defense

and development account for 18% and 20% respectively 01' total Govern.lJlent

expenditures.

lO~ Deficit finance has been continued up to 1948, when new incor.:e

taxes may have at l~ast temporarily brought about budget balance. Domes­

tic monetary inflation has, how'ever, resulted largely from commercial bank

lending to the public, vdth little Central Bank intervention.

11; Public debt charges amount to about 11.5% of GoverThuent expendi-

tures (5.5% for external, and 6% for internal debt).

12. Development investment is proceeding. IJ~asurable gross capital

formation .vas some 11% to 13% of national income in 1947, vdth the Govern­

ment undertaking something like 30% of measurable gross capital formation •

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13. For the past eight years, development has brought about an in-

crease in real national income, but not yet an improvement in standards

of consumption. In fact, increase of population has resulted in fal1~of

real income Der capita.

Conclusions

14~ Heavy additional foreign borrowings T'Quld be inadvisable.

15. Having regard to the inflationary effects, e~::pensive Tojects

not providing early additional output of consumer goods should not be

financed by foreign borrmving.

16. Small borro'lJ'lings for projects which v{ould quickly i-ncrease con-

surner goods output could be undertaken, particularly they have a favor ...

able short-term impact on the balance of Dayrnents, or if their service is

small before 1953 or 1954.

17. For projects even' in these categories, bor!'Owing over US~; 10

million would be inadvisable until completion of a part of current develop­

ment projects permits examination of their effects both domestically and

upon the balance of payments, and ~~til more permanent pattern of foreign

trade and of price levels emerges.

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B.ALANCB OF PAYrlJI:NTS AND FOREIGN TRANSACTIOl\fS

Fluctuations of the Chilean balance of payments are largely

determined by the value of (a) copper e~orts, (b) nitrate e~rts. (c)

exporte of agrl<llltural products, (d) transfer of profits of foreign

owned companies engaged in miping. The receipts partly determine imports

of c~ital goods, as well as ability to maintain consumption standards of

the population, as regards foreign textiles, cotton, coffee, sugar, etc.

BalancE; of Trade

Chilean foreign trade has considerably increased in value since

pre-war. Exports in 1937 were valued at $195 million. They reached $329

million in 1948. Imports increased from $88 million to $268 million in

the same period. This apparently spectacular growth of foreign trade did

not increase export values beyond their 1929 level ($276 million) until

1947, while 1946 was the first year that import values recovered to the

1929 level ($195 million).

Exports

As shown in Table 4, copper and nitrates are the export leaders.

Agricultural products are third in the value of exports, but this vol1,lIIle

is influenced by growing domestic demand. In 1929 copper bars accounted

for 45)b of all exports and nitrates for 46%. Since then the importance

of copper has almost constantly grown. As shown in Table 4. it was 53%

of all exports in 1937, 59% in 1943, and 62.4% in 1947. lTitrate has de­

creased in relative importance. In ).947 it azoounted to only ),.2% of total

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exports. Chile produces and exports iron ore in some volume, but this

represents little exports receipts since iron ore is of low value. The

considerable drop in production during the war, owed to a shortage of ship­

ping did not therefore affect materially Chilean trade receipts. Agricul­

tural products (mainly peas, wine, forest products) have accounted for be­

tween 15% and 2Cfp of all exports since 1937 and seems the major line along

which e:&port trade could be expanded.

Ccn;:lper

As seen in Table 6, copper is very sensitive to fluctuation of

the world econondc cycle. For 90 years (1840-1930) the selling price of

copper had been maintained above an average of 12¢ per pound. Neverthe­

less, with the economic crisis of the thirties it fell from 18.1¢ per

pound in 1929 to 12.9¢ in 1930, 8.1¢ in 1931 and reached a low of 5.6¢-­

or less t~~ one-third of the 1929 price--in 1932.

Recovery was extremely slow and, except for a slight boom in

1937, copper prices did not reach 12~ per pound until after the release

of the OPA price ceilings in 1945. These large price falls followed by

only slow recovery €.( :'\.Iunted in great part for the depth end length of

the depression which struc;k Chile in the thirties and for Chile I s de­

fault on its external debt.

The total volume of production of copper, closely related to

the total volume of copper exports, fell from a level of 321,000 metric

tons in 192~ to 103,000 tons in 1932.

As shown in Table 1, sales of copper fell from US$ 123 .1lIil1ion

in 1929 to US$ 15 million in 1932. Recovery in volume was much faster

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than recovery in price. Indeed, average production between 1934 and

1936 Was not far below the average of 1927-29. However, this could not

offset a reduction in price by ~proximately 5010.

After 1937 production stabilized on a new level (above 350,000

tons). This, coupled with considerable increase in prices in 1947-48,

returned Chilean copper to its pre-l930 position in the current balance

of trade and balance of pa¥IIlents of the country.

The prospects for Chilean copper depend overwhelmingly upon

United States i.uports, for which Chile and Canada are competitors. Other

major sources can increasingly meet the bulk of requirements outside the

Western Hemisphere and are likely to do so for their respective mothe+

countries. Canadian copper production is a by-product of nickel and gold

mining and Canada consumes about 401> of her own production. Chilean cop­

per mining has very small by-product values and is almost wholly for

export. Her prospects are thus far more intimately linked wi th the

level of durable goods output in the United States than any other copper

producing country, In the short..,rw1, U.S. stockpiling may add to this

demand, but stockpiling is unlikely to be a continuous long-term factor.

In 1948 the U. S. was a net importer of copper to the extent

of 350,000 tons. Total consumption including old scrap approximated 108

malion tons. A decline in U.S, durable goods activities of around 20%

could be expected to reduce copper consULqption proportionately to levels

which could be supplied com~letely from domestic U.S, sources (including

scrap). The degree to which Chilean copper could then maintain its U.S.

market would depend largely upon pr'!ce falls so severe as to reduce

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domestic U.S. mine production appreciably. Under current cost conditions

(which may well ease under the circumstances visualized) this would in­

volve a reduction to between lS¢ and 2fJ¢ per pound as compared ~lith the

present price of 2~¢. Moreover, at present U.S. copper imports are

temporarily duty free; in fact, renewal of the existing legislation,

\Thich expires March 31, is now under Congressional discussion t ~t must

be assumed that in the event of price decline below sa;y 20t, the previous

2¢ duty will be re-introduced. The incidence of such a duty would, under

recession conditions. be upon Chilean producers, either by way of reduced

realization price or reduced export volumes to the U.S.

Gross copper export real~zations do not. however, accrue

wholly to the Chilean economy; this is discussed further in the section

upon Balance of Payments. It is importfIDt, however, to notice here that

this circurnsta..Tlce in fact reduces the impact of a given fall of copper

prices upon the Chilean economw, which looses receipts to less propor­

tion than the full fall. Under present Chilean taxation laws, under

which an excess profits tax operates above a copper price of 1~¢ per

pound, dividing equally between the Government and the mine operators

all net profits above this base level, a fall of Nevl York copper prices

from 23lif, to 16¢ per pound would involve a loss of about US$ 33 million

to the Chilean economy.

After considerable discussion with tbe Chilean Government. the

Anaconda Copper interests have decided to invest approximately $130

million in their Chuquicamata property (largest mine in the world) for

the conversion of this plant from copper oxide to copper sulphide pro­

cessing"

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About half of this investment would be for local expenditures

and will thus increase the foreign exchange receipts of Chile by more

than US$ 10 million a year for about six years.

Nitrates

Ni trates t unfortunately, did not enjoy the same recovery from

the depression of the thirties as did copper. Although, as shown in

Table 7, prices in 1935 fell only to one-half of their 1927 levels and

to less than one half of their 1929 levels, and although they are now

at the pre-crisis level, the Chilean nitrate industry was seriously and

perhaps permanently damaged by the crisis and by gro~lling com:petition of

synthetics which became serious in the same decade.

In 1929, production of nitrates had reached 3,233,000 tons.

This fell to 437,000 tons in 1933, and the maximum production level

attained before 1946 Was not higher than 1,485,000 tons (1940). The

extent of the blow dealt by the crisis is illustrated in Table 1, which

shows a fall from US~ 127 to $7 million from 1929 to 1932. Recently

pt'ices increased sizeably and production volumes have overtaken the 1927

figures (although still well below 1928-30 levels). This does not indi­

cate the possibility of a new booPl. The condition of the nitrate

industry in Chile has changed considerably since the t11'fenties. Nitrate

has now to meet the co,Jpetl tion of synthet ics. Conseq nently, profi ts

margins in natural nitrate have decreased considerably t and only three

large Chilean producers provided ~i th uP'"'to-dete equipment can compete.

Increased production of synthetic nitrates is being plal1ned

by many countries now irJporting natural nitrates. This shrinkage of

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markets can be expected to exert constant downward pressure upon natural

nitrate prices. In the U.S. market, the future of nitrates is intimately

related to farm incomes in the U.S. t particularly incomes of cotton e..nd

tobacco growers.

New eJ.."Periments have been carried out by the Anglo-Chilean

nitrates which involve the processing of nitrate ore througll solar evapo­

ration. The process, ','!hich has been proven successful, reduces production

costs considerably. If, when applied on a large scale, it lives up to

expectation, this process may permit Chile to ruaintain its share of pre­

sent markets. Total consw]ption in these markets, notably the U.S., is

dependent upon satisfactory farm price levels and avoidance of severe

acreage restrictions.

Distribution of Exports by Countries

As shO\Vll in Table 5, the United States and the United Kingdom

are the major clients of Chile, and the first has gro~ considerably in

importance since 1937. Before the war European (and especially German)

demand for Chilean copper and nitrate was important. It is now in great

part replaced by a demand for copper, nitrates and agricultural products

by countries paying in dollars, such as Argentina, Peru and the rest of

South America; Egypt (for nitrates); and even Asia and Australia. AS a

result, ChUe suffers from no convertibility problem. There is no ex­

pectation of such a problem since Chilean capper is purchased mainly in

the United States, since the major derik'lnd for nitrate emanates from the

United States, and finally, since demand for agricultural products

mainly originates from Latin America. It is likely that if Chile

manages to expa","1d its export trade only throue;h increased sales to

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Europe, its demand for machines and equipment will equal its soft cur­

rency availabilities.

Imports

The distribution of Chilean imports has been characterized

Ul1.til 1947 by the increasing importance taken by purchases of agricul ...

tural products releti ve to textiles, chemicals, machines end metrJ.lurgi­

cal goods. Before the ~ar (from 1937 to 1939) these iraports amounted to

less than one-fUth of the total. In 1945 they were more than one-third.

They declined to one-fifth again in 1948 partly as a result of a con­

siderable effort on the part of the Chilean authorities. It is very

difficult if not impossible for Chile to reduce certain categories of

agricultural imports. The country produces no cotton for its textile

factories and no sugar, coffee, tea and mate 1f.rhich are in he8~VY con­

sumer demand. This creates trade problems with Peru, supplier of cotton

and S'..lgar; and Brazil, which supplies coffee and mate. The problerJ t",ith

Brazil is of minor magnitude and irnpOJI'tance. The trade relationship

with Peru remains difficult. The promoters of the steel plant in

Concepcion hope for an exchange of their surplus steel production

against the Peruvian products. The real problem of ag;I'icultural imports,

however, arose during the war from the necessity to import l"rheat end cat­

tle, notably from Argentina; in tl1.9t period, domestic production fell

behind population increase, and since the vvar has been unable to meet

demands arising from income increase.

As a result, there has been increasing attention paid to agri­

cultural productivity. Following a wheat prodl,lction drive, wheat imports

fell in 1947 and "'Jere avoided in 1~48. Cattle ill!port$ occurred until the

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end of 1948 when the Argentine authorities, resentful of the attitude

taken by Chile in recent political events, declared an embargo upon the

transfer of cattle from Southern Argentina to the gra.zing grounds of

Southern Chile. The resulting meat shortage in Chile may occasion emer­

gency imports from Bolivia. It is the consensus of opinion in {)!IJ.le

that the country should take the long-run measures to attain self­

sufficiency in meats.

Of the other imports, about 287& are capital goods. This ratio

seems relatively small; it is kept down by the need for agricultural

imports mentioned above, and for imports of textiles '7ihich may be re­

duced in value within a few years, by the installation of new plants.

Origin of Imports

As sho\v.n in Table 5, the United States is the major supplier

of imports. Its importance in the total amount of foreign purche.ses

of Chile clilllbed from 297" in 1937 to 44% in 1947. The States, however,

did not succeed in replacing completely Germany which supplied 26;O:J of

the total imports in 1937. Major suppliers after the United States in

1947 were Peru end Argentina. These three major suppliers accounted in

that year for 6810 of all imports. The balance was provided by a

scattering of other countries. It is likely that the importance of the

United States as supplier of Chilean equipment will increase inasmuch as

there is no dollar problem and as Chile ShOVIS a di stinct preference for

United States supplies, since a tm.rq world war could deprive it of

any source of replacements were it equipped by Eu,fope.

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Balance of Payment s

There are good estimates of the balance of payments of Chile,

The official account provided by the Banco Central de Chile since 1942

is very co~lete and has been used in this analysis. .Af3 ShoVlIl in

Tables 2 and 9, receipts are mainlY from cOlllIllodity exports amongst which

mineral exports play a major role. Non-mineral exports have stabilized

at about 2C1jo to 25% of all exports, and no im:mediate improvements is

expected in the future. Inasmuch as both tIle visible and the invisible

trade balance is almost neutral, H is in the capital payments item that

Chile's foreign exchange difficulties arise. Large trensfers are made

to cover the profits, the dividends, the reserves and the administrative

expenses of foreign-ov,1fled mines. The iwpact of these invisible outflows

is such that mineral export figures do not represent the real position

and iwportance o:f these exports for the Chilean economy. Table 11, in

which the value of copper and ni tra.te exports is decreased by the value

of theli?e transfers, shows more accurately the position of various re­

ceipt items in the balance of payments of Chile.

As seen in this table. from 1944 to 1947 copper exports

accounted for 31Yo to 4l.f,k of total foreign exchange receipt s accruing

to Chile. The iIlq;rortance of nitrate was increased relative to copper,

and represented 10';& to 19';0 of all receipts. .Agricultural products

exports ranked equal to or even above nhirate as a source of revenue.

Of all the other items producing receipts, intergovernmental loans

accounting for ?flo to 516 of all receipts between 1944 and 1947 occupieq.

the largest position.

The extreme dependence of Chile on copper and nitrate exports

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is thus reduced when a global view is taken of balance of payments

receipts.

Copper in the Balance of Payments

As shol"lIl in Table 12, the gross traneferred profits after

taxes of the copper mines and supplies are large. They amounted to

. 2J/o of the total value of sales in 1944 and reached about 3c:f/o of the

total value of sales in 1947. In 1944 and 1947 these high gross trans­

ferred profits were approximately equalled by the taxes levied by the

Government t while, in 1945 and 194G the proportions shifted in favor of

the companies, However, the Chilean Government elso secured the equiva­

lent of a tax yielding about $13 million a year by requiring the cO!Jpe~

mines to sell the dollars necessary to cover their local production

expenditures at the rate of 19.37 pesos per US$ instead. of the of:fi cia!

rate of 31 pesos. All in all, over a period of four years, bet'.'!een 1944

and 1947 t the taxes recovered by the Goverrunent amounted to roughly

US$ 175 million while the provision for profi ts, reserves and adminis­

trative expenditures abroad of mines were US$ 145 million.

The nitrate industry which enjoys smaller profits and is much

more closely controlled by the Government accounts for much smaller

capital outflows.

Gold Movements

The production of gold is not an important factor in the

Chilean economy. Gold is mined either as a by-produce of copper by

the large foreign corporation or by a number of Chilean prospectors

who manage to cover their expenses only when gold sales race! va a

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premium exchange rate.

Before the ~ar, annual production of gold reached approxi­

matelyU~ 12 million in 1940. Production dropped drastically during

the war although the Fomento Corporation made some efforts to stimulate

it through the import of modern equipment. It might, however, increase

if the peso price of gold rises.

FOBElON DEBT OF CHILE

The long-term foreign debt of Chile can be estimated as fol­

lows (as of December 31, 1948):

(in thousand US$)

OUtstanding undisbursed

Consolidated Public Debt US$ 125,685 ~ 91,517

Swiss Francs 24,809

Nitrate Debt uS$ 16,936 -t 3,391

IBlID uS$ 16,000

EximBank US$ 32,585 46,243

Total 294,923 62,243

Grand Total 357,166

Debt service estimate has been made in. Table l~o .. 14. A peak service

load is to be anticipated in the years 1949-1951 at which time it will

reach US$ 21.7 million or 6.%. of the current balance of payments re­

ceipts in 1947 t or 6.5;& of exports in 1948. Starting in 1952 the ser­

vice load decreases from uS$ 18.1 milliof ... to US$ 14.5 million in 1958.

From that time on and until 1968 it stabilizes at a level of US$ 14 mil-

lion. Anticipated service payments drop off considerably starting in

1969, and, provided no net'r loans are engaged in by Chile, its total

external debt could be extinguished in 1973. About one-half of the

service of the debt represents amortization and inter6st of the consoli

dated public debt and of non-guaranteed nitrate bonds o This debt has

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been in default, or partial default. since 1931-32, although it has been

serviced up to a maximum amount of usp 7 million a year before the "'ar

and in recent years. The settlement 1.'rith various bondholders councils

in 1948 was favorable to Chile, for the new service is only slightly

higher than prevalent in a period of default,±! The balance of the

external debt is an International Bank loan of US$ 16 million for e1ec...,

tric plants and agriculturo1 machinery t an outstanding RII10unt on Exim

Bank loans totaling US$ 32.5 million. and en undisbursed US$ 46.2 mil-

lion from the Exim Bank~ So far, ~xiIJl Ban.1{ funds have been utilized

for railroad equipment, construction of bydro-electric plants and a

steel rulll, and for purchase of agricultural equipment. The aLl0unts

undisbursed consist mainly of an additional US$ 31 million for the steel

mill and an additional US$ 6.3 million for the Chilepn railroad.

Foreign Exchange and Gold Reserves

Table 8 shows that the foreign exchange reserve of Chile

(Central Bank and Amortization Fund holdings) increased from US$ 43.6

million in 1939 to US$ 115.4 million at the end of 1945. Purchases of

gold account for about US$ 45 million of the increase and US$ trade sur­

plus constitute the 11Irhole of the balance. In 1946 and 1947 Ohi1e

started catching up with the backlog of capital goods imports and agri­

cultural purchases increased. Notwithstanding a considerable increase

in the values of e.xports as a result of a rise in price of copper from

Y The mechanism of settlement is described in a study of the External Iebt of Ohile (Economic Department, lharch l-5). The new service schedule covers arrears owed to bondholders whQ assented to the 1935 debt settlement with delay. Only US$ 3,4 million of the $23.7 million diverted from amortization payIllents betweEn 1939 and 1945 were re­~p11ed in 1946 and 1947 an~ the new settlement does not include any provision for 1;'estitution of the balance,_

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12¢ to 23t~ per pO'Wld, and almost as spectac.u1ar an increase in the price

of nitrate, reserves dropped to about US$ 56.5 million in J'Wle 1947. They

were maintained at approximately that level up to the end of 1948 and to

the present, thanks to a rigid policy of exchange control and the continua~

tion of a favorable market for copper and nitrates. Reserves of US$ 55

million are now virtually a working balance for the banking system. Reserve

requirements, however, do not constitute a restriction to this utilization

inasmuch as the Central Bank is freed of any obligation to carry specific

reserves. The fate of the foreign exchange balance of Chile is thus en­

tirely in the hands of the foreign exchange authorities who have dis..,.

played so far a considerable competence.

Foreign Exchan~ Rates

Par value of the Chilean peso is 31 pesos per US$, A complicated

multiple exchange rate system exists, with buying rates ranging frou 19.37

pesos to 43.0, and selling rates from 19.47 to 43.10. The bulk of trade

transactions, both import and export (except mineral exports), are presently

made at the 31.10 rate. The Fu.nd has, however, consented to a progressive

devaluation to 43 pesos, to be accomplished by increa.sing the categories

of tra.nsactions made at this rate 'Wltil it is carrying the bulk of trans­

fers~ In the transitional period exporters benefit from any rate between

31 and 43 according to their ability to meet foreign markets - while ex~

porters of copper receive 19.37 pesos per uS$ for a part of their exchange.

Some imports of basic raW materials are still carried out at the

rate of 25 pesos. per. US$ while the bulk of imports occurs at the rate of

31 peso~ per US$. A free or curb rate exi~ts 'llhich fluctuates be~ween 60 and 70 pesos per US$. This rate, however, is confined to a smaJ,.l amoUo.'1t . , of transactions only. such as purchaees of travelers check s from tourists

or purchBses of doll::>rs from diplomats, . . Y Executive Board 11.1F: Meeting 265, 1/30/48

TRADE AHD PAYr-1ENTS AGREEMENT

Argentina-Chile

An important project of financial and trade aGreements 1:,l'.ich

"lould he.ve involved a loan of US$ 175 million by Argentina to Chile, and

the creation of a customs union did not materialize. However, the Insti­

tuto Argentino de Promocion del Intercambio made a short-term credit to

Fomento to cover the cost of impcrts of Argentine oils, and to the Insti­

tuto de Economia Agricola for the imports of wheat. The total credit

utilized in 1947 amounted to 73.1 million Argentine pesos, the equivalent

of US$ 17.3 million~ Some small cash payments 1.'Iere applied in March 1948

to the balance of the debt.

An agreement of il-larch 4, 1949 provides for the settlement of

this debt. Chile 1:rill obtain Argentine pesos by the use of cash funds

belonging to its nationals in Argentina, or the sale of their properties.

These pesos will be utilized by Chile to buy U.S, dollars from Argentina

at the IIfree market" rate. an (1 Argentina "Jill immediately re1Jurchase them

at the rate of 4.01 Argentine pes~s per U.S. dollar. The resulting amount

in Argentine pesos ,,,Ul be aDplied to amortization of the Chilean debt.

Payment to Argentina must take place uhen made out of cash funds 90 days,

and ,,,hen made out of the proceeds of sales 180 days after the twenty-third

of March, 1949.

At least 10 million Argentine pesos must be cancelled as above

described "lithin 180 days from Narch 23. 1949. In deflClult of this, the

Chilean debtors will be required to make up the balance by July 31, 1950

-16-

by the payment of pesos accruing from either (a) the negotiation in tl:e

Argentine market of U.S. dollars at the rnte of 4.01 pescs per dollor;

and/or (b) tlSpecial Export Accounts" opened in the name of Ch11e8n be.nks.

The Agreement further provides that, in order to comply ,:ri t}l

Argentine legal monetary requirements, the aggregate Chilean debtor

balance sho1tTn on the accounts shall be considered to be equivalent to the

quantity of gold resulting from applying to that bal::tnce the exc:le.ne;e rp.te

of 401 Argentine pesos per 100 U.S. dollars and the ~rice of gold ruling

in Net" York (at present 35 dollars per fine ounce). In the evel:t of a

change in the price of eold, the balance on each of the accounts shall be

adjusted accordingly.

Interest on the ChileM debtor bS.lances viII be nayable in U.S.

dollars at the rate of exch~.nge ruling in the Argentine market on the date

of payment. Interest accrued up to March 2,3, 1949 ';'fill be ppyable before

A:::;ril 24, 1949, and interest accrued thereafter v!ill be payable before

June ,30, 1950.

United Kingdom~Chile

A payment agreement signed by Chile ~md the United lCine:dom in

June 1948 states that trade and financial payments bet':.reen Chile and the

sterling area ui11 be settled in terms of sterlin:",:. CO",)~1er l1il1, hOi'rever,

be sold on the dollar basis.

The ne'lll system does not alter the situ"tion of Chile, inasmuch

as (1) the trade '.'rith the sterling 9.rea is very small, (2) the trade balance

with the United Kingdom is unfavora.b1e to Chile, (J) Chile has service upon

sterling debt. (4) cOP!ler is the most important ex-port item of Chile sold

in dollars.

All netional, provinciel and m'Ullicipal bu.dgets are handle,l by

centrel government authorities. Ordinary expenditures c1nd receipts, [nd

some "ordinary" borro1.'Jings for investment purposes are clearly accomltE:d.

for in the receipts of the Budget Controller. H01-lever, a large l)Ulk of

government transactions takes place outside of the ordinary budget; te.xes

levied and spent outside of the budget, borro'.-rings umwcounted for in nor-

mal acco'Ullts of the government, expenditures and receipts of entities with

~arious degrees of independence obscure the budgetary situation.

Table 16 consolidates all sources of revenues and items of ex­

l' penditures controlled ~irectlY by the eovernment.-' Deficit financing

has been current practice since 1939 and on a large scale since 1943.

Total annual taxation receipts from 1939 to 1946 (the last date for ilhich

t~ley are available) increased from 2,284.8 million pesos to 7.958.0 mil-

lion pesos. In the me~~time, expenditures increased from 2,322.6 million

pesos to 8,861.3 million pesos. Revenue increases of 248% ,-rere thus

matched by expenditure increases of 281%. Deflation of these fis~res by

the cost of living index, ho\.rever. rev""als a much lO\Jer rate of real grm'rth,

as follows (millions of 1939 pesos):

Receipts Expenditures

1939

2,284.8 2,322.6

1946

2,980 ),318

Index of Increase (1939 :::: 100)

130 143

17 Thls excludes revenues of entities resulting from business trans­actions.

-18-

Such deflation of budgetary figures by the cost of living index may be ~~s­

leading. Hm'1ever, fair na.tiona1 income estimfltes have been made for Chile,

and their matching against government eXl)enditures f:ives similar inc.icHtion.

In 1942 total expenditures controlled b~l the covernment 'lZlounted

to 16% of 1942 national income. They climbed to 18.5% in 1943 8.nd. 1'744,

reached 22.5% of current national income in 1945, Bnd must have remained

at the level above 21% in 1946 and 1947. On the basis of tentative esti­

mates setting the total government expenditures in 1948 at 15,326 million

pesos and the national income at 63,838 million pesos, this ratio may have

attained 24% last year. It is likely, as \'r111 be d.iscussed later, that

this relative gro\l1th arose me.inly from grm·,th of development expenditures,

and the service of internal and external debt.

This level of official revenues to national income may not be

too high for a period of prosperi ty, al tl':ough ::Jany revenue i terns seem

vulnerable to economic recession.

A large part of revenues emanates from the copper industry 1;!hich

currently enjoys very large profit margins, and can at present sup:)ort a

taxation burden of about 2 billion pesos ner year lrithout great difficulty.

Import taxes also play an important role in the balancing of the budget.

::Soth these sources of revenues could be hit by shri:rJcage in

foreign trade. Income tax, which has increased considerably in recent

years, could probably do little to fill a revenue gap at such time, even

though its present levels sUf~gest some margin for increased tax rates.

In general a fairly efficient fiscal administration enables Chile to match

closely expected and actual revenues.

-19-

Ordine_ry Budget

As shown in Table 17, ordinary expenditures of Chile, which

amounted in 1946 to about 75% of tote.l expenditures assumed by the govern-

ment, have increased enormously since the beginning of 1940. llhen deflA-ted

by the increase of the cost of living, however, ordinary expenditures dis-

playa much less serious increase. Ordinary expenditures of the government,

although they were never particularly high, ranging from 125; of the national

income in 1940 to 18% in 1947, '''ere never covered completely by tax. revenues

and revenues from national properties and services.

Revenues

Budgetery figllres for 1948 are estimated, end their detailed

present"..tion '·,ould be misleading, The various interpretations can be S11.'1l-

marized as follows (million pesos):

Revenues Expenditures

(a) "Contraloria" Ordine.ry

Budget

(b) "Alessandri" Ordinary

Budget

12,)28 1),328

(c) :t;;stimated Total

Budgets

15,326 15.326

The first present:,tion takes into consideration on),y revenues

from normal taxes, ex.cluding ex.traordinary income and excess profit taXdS

voted for six months a.t the end of 1947 but maintained ever since, thanks

to the insistence of the Ninister of Pinance. It includes as expenditures

only those of the various Ministries.

The second includes the extre_ordinary taxes, on revenue side, and

underestimates them. It includes among the expenditures provisions for

salary increases, a participation of :Womento, the rai1lll'tys, etc.

-20-

The third includes taxes levied outside of the builget, and t:'.e

participations of Fomento and other entities, both from inside and from

outside the budget. It is estimated that no recourse 1;la8 made to deficit

financing in 1948.

Table ],7 shows that since 1940 the importance of iml10rt taxes

and duties has progressively decreased re1e.tive to llEarmarked funds from

specific la",s" composed mainly of exchange profits on copper and the extra­

ordinary tax on excess profits of cop~er. In 1940 the first category of

revenues accounted for 41% of the total revenues as age.inst 13;; for the

latter. In 1947 the res'Jective ratios '!lere 26;; and 18%. This resulted

in 'oart from the relFtive decrease of value of imports in relation to total

taxable activities, and in 'Dart from the conslderable increase in the sales

of the copper mines, the major contributor to income tax. The nicture for

1948 revenues is not yet clear. Increases in income end excess profit

taxes inaugurated f'.t the end of 1947 as an emergency measure and maintained

in 1948 at the insistence of the Minister of Finance. seem to have increased

tax revenues considerably above the figure anticipated at the end of the

year (12,328 million pesos), The im:,:,ortance of incone tax in total revenues

(12% in 1940 and IJfb in 1947) is likely to have climbed to 187~ to 20;) in

1948.

It is believed that former ordinary budgets were never balanced

for lack of the heavier income taxes '11ic11 have been in operation no\'! for

a year. Henceforth ordinf'.ry revenues are lil<:ely to be adequate and at

least this source of deficit financing might disappear.

Exoenditures

There have been some changes in the structure of ordinary

-21-

expenditures (as presented b::.r the Contraloria).

The main spenders have ahlays been the fiiinistries of National

Defense. of the Interior, of Education, of Public ~';orks, nnd. of :5'in8.11ee.

The share of national defense expenditures in total eXUGnditures h2S never

been as high as in neighboring countries such as Argentina. }'rom 25~Q in

1940 it has been reduced to 22% in 1947. and is anticipated to f82.1 to 21;:'

in 1949. The consensus of opinion in Chile, h01:1eVer, is tha.t this ratio

could still be considerably reduced. The Department of the Interior, 1,'lhich

spent 18% of total ordinary expenditures in 19l10, "!as reduced to 145; in

1947 and 1949.

The share of the Ivlinistry of ;E;duc!ttion is high, fluctuating be­

t\veen 145~ and 1.5~~. The share of Public i1orks. ' .. 'hieh benefited f:::'om n;j

of ordinary expenditures in 1940, has been considerably reduced, but this

is due to the fact that entities have been entrusted '.'lith many of the major

expend! tures in this field, and that public "lorks expendi tuxes finenced

by borrol'lings are not covered in the ordinary budget.

The shR.re of the ~':1n1st:ry of Finance has climbed sts::tdily 2nd

takes no\'! one c:uarte:r of the total expenditures. These funds are used to

supplement other funds of the Caja de Amortization devoted to debt service

(as discussed later) and for contribution to various development agencies.

In 1948 a ne1,T method of :!?resento.tion of the or(Hnary bud{;et, tend­

ing t01.'lard eonso1idetion, l',as introd.uced by the i'lin:i ster of }'111anoe. Enti­

ties in constant need of funds, such as Fonento, the Chilean railroads. etc.,

started competing "/i th regu1E-.r ministries for ordinary budget exnendi ture

-22-

allocations. This \1[111 in the future permDnently modify the relative im­

portance of expenditure items.

Tax Revenues Outside the Budget

Various 1a'''8 allocate the yield of certain taxes directly to de­

velopment institutions and to the Caje. de Amortizacion, entrusted 11i th the

service of the interne,l and external debt.

The total of these taxes, hO"lever, is never received by these

entities inasmuch as the government a;)-;1ropriates and thrO':ls in its ordinary

tax revenues a large segment of their total yield. Line 0, Table 16, rep­

resents an estimate of tax yield actually available to entities', ",hile

Line d indicates estimated dra\dngs from these texes by the same entities.

In 1946 approximately 23% of total tax revenues were thus going directly

to the Amortization Institute, the Reconstruction Cor:?oration, the Develop­

ment Corporation and the Institute of Popular HousinG. These fiscal con­

tributions were amalgamated with other resources such as earnings and

borrm'lings of those entities. The funds dra\ill from these special taxes,

plus the borro\·Tings of the entities, represent their actual l)articipation

in government expenditures.

Leyes 31s-;Jeciales

Most of the government borro'lfings are clEissified under the heading

of "funds dedicated to s~lecinl lavis". Tllese funds, originally borrowed

abroad, are utilized through the Ce" tral ?cu12.:: for .'} nUJ:lber of ~)urposes

which could theoretically fall under the heading of development. This in~

cludes purchases of equipment by the milit8ry, road and railroad construction,

su,bsiliies to,,- th~ .nattonaJ..airline .. S110siri.ias to development enter:?riseS sucp.

as the Institute for Agricultural Credit, and Fomento, etc.

-2:3-

A portion of the Leyes =~speciales. together "ri th other €;overn~

ment borro':rings, is used to cover the c;overnment deficit, and outside of

the Leyes Es:neciales, short-term borrollTines are made from the 'DubHc and

central bank \',hich sometimes 1?re for development projects of i'omento or

Auxilio.

Government Exuenditures for DevelOp~ent

Table 18 attempts to describe the size of goverr;.:nent e:xnendi-

tures for development. As most of these expenditures occur outside the

budget t and the picture is therefox'e necesse,rily clouded, this reTlresents

no more than a tentative estim8te. The method used is to sum (a) expendi-

tures in the ordinary budget for construction and development subsidies

and public \'lorks purposes. (b) taxes outside of the budget dedicated to

development institutions, (c) loans to development institutions made by the

Amortization Institute out of soeoial taxes pnd (d) investments under Leyes

Esneciales minus sums used to cover the ordinary clefici t.

This method suggests that development expenditures \-rere main-

tained around 14;J of total government expenditures in 1942-44. In 1945,

perhaps as a result of the Availability of foreign eCluipmen t t they climbed

to 211" of total expenditures. A reduction to 16.550 \01aS noticeable in 1946.

In the last t\olO years total deve1o:;Jment expenditures htwe prooably exceeded

20;0 of all expenditures controlled b~- the government.

In terms of gross capital form?tion, the ,,;overnment shE're could

be described as follows (millions of pesos):

1942 1943 1944 194~ 1946

(1) Gross capital formation 2080 2566 3284 3714 5450 (2) Government expenditures on development 607 699 8:34 1606 1469 (:3) 2 in % of 1 29~ 275; 25'1 4:3% 27% ,'"

-24-

This is only a very rough yardstick of government partici::;etion

in development of the country, inasmuch as the figures under (2) include

elements ",,,fhich could not be strictly classified und.er the headinr; of invest­

ment in capital goods and does not include investments made by entities out

of their own resources.

PUBLIC DEBT

It is very difficult to ascertain the actual size of Chilean

public debt, and almost impossible to determine with any real accuracy

the peso charges of total lJub1ic debt service. This is due to the fact

that official documents show the peso equivalent of external debt sorvice

at a fictitious rate of exchanl"e. This is because taxes used to service

foreign debt are levied to clollars. Al thour,h the outstandtnr am01mt of

internal debt fuaranteed by the GovernI'1ent is shmm in Government docu-

nents most of the service is as sUlned not by the Goverrl1'nent, but by the

actual borrower, throug:h the channel of the Al]lOrtization Institute.

Finally, the records of t.he Amortization Institute and of the Controller

General of the Republic do not indicate similar aJ:tounts. Hesort to esti-

mates is therefore necessary.

1/ Foreign I:ebt-

Table 13 nresents the total foreign debt outstandinz at the end

of the years 1944 to 19L7. The sum total of the Government external debt

(long-term), of advances and bank credits, port works credits, other short-

term loans, and of loans guaranteed by the Government was US;!!; 323.3 million

in December, 19h4 and was reduced to us;1l; 283.6 million in December,1947.

(US,~ 149.1 million in US Dollar5J US~ 109.5 million in b Sterling; US:";

25.0 million in Swiss Francs). In :peso terms (current De80s) this ren-

resents a decrease from 10,022 billion 'lesos to 8,791 billion Desos.

The total service of the foreign debt, as shown in Table 20, has repre-

y Foreign exchange aspects of the Foreign Debt are discussed section dealing with the Balance of Pa:~1]'nonts.

+' "ne

- 26 -

sented 4.4% of the total Govern.'1lent exnenditure in 1945 and 5.5% in

1946. By 1951-52 total services in nesos may not represent more than

L5% to 5% of the emenditures if they are Flaintained at their current

level.

Internal Debt

AccordinG to the records of the Controller General, internal

debt increased from t~,li63.0 million pesos at the end of 1944 to 6,265.L.

million pesos at the end of 19h1. From these docUlnents it a1')')ec,rs that

net borrowing has been ar:mroximately 833 million 1916 and 789 million

in 19h6, while amortization exceeded borrm'ling in 19h1. About one-half

of the funds borrowed by the GoverTh'1lent and entities originated from the

Central Bank. The Com:aercial Banks financed a third, and the r:aja de

Amortizacion and the public the remainder. As shown in 'Table 19,i';ross

borrovrinr by the Government and entities was rouGhly one bi] lion pesos

in 1945 and in 1946, and dro1')ped to 275 million in 19h1. 20, in-

dicates that service of the internal c~ebt of Chile apparently repre­

sented 67~ of the total Government c:cpendi ture in 19h5 ('.nd in 1946. In

1947 it amounted to 8% of ordinary expendj.tures.

Total Debt

As shown in 'Table 19, total Government c~ebt of Ohile fluctuates

around 15 billion pesos, a figure 1I'rhich is likely to equal the totc:l in­

ternal Government expenditures in 19h9, and "I'Ihich is equivalent to le ss

than 25~ of national income.

- 27 -

The total service of the debt amounting to 10.«% of total E'X­

nenditures in 1945 and to 11.5% in 1946 is not narticu1arly heavy. It

estinated that it became smaller in relative value in 1947, and re­

presented about 8% of total expenditures in 1948. It will, hovr6vor,

incre~se if, as expected, the nesolis devalued to 43 Desos ner US~.

l.;OKEY

Inflation has become a chronic nhenomenon in Chile. Private

and public deve1opr.-lent has been in effect financed by forced savin[;s

broue:ht about by the e:xpCl,nsion of credit and the -;;rintinr of currency.

The last major attem?t to checl: this trend was made in 1946

by the Hinister of Finan~e, "achholz, "\'rho was l:l.nable to uursue his

efforts, as a result of the political pressures brought about by the

commercial banks and Chilean Businessmen.

lJ!ith a cabinet shift and aupointnent of Jorge luessandri as

Hinister of Finance at the end of 1947 it 1'ras expected that nffi'T en­

deavors would be made to stop or rather reduce the rate of inflation.

Alessandri attemnts to fiGht inflation progressively, but continually

meets considerable obstacle s in (1) lar ge blldr,etary needs and (2) the

laissez-faire attitude of the Central B2~k. He is ha~pered the danr-er

of alienat5.nc the entrepreneurial class in Chile and the danger of stOD­

ping industrial development. So far his attempts have only been success­

ful in the budgetary field, '.fhere a balance seems to exist, but in the

credit field expansion aD'JearS to continue.

On the basis of official docu,'1lents of the Su:)srintenclencia de

28 -

BancDS, the money sU1)1')ly in June, 1948 reached 16,287.7 million 1)8808,

or 15% above the level recorded in Pecember, 1947, as shovm in Table

21. Looking further, bank money su})ply ":as in Ju..rw, 19h8, l03::~ hi.0'her,

and cost of living 95% higher than in Jecember, 1944. Analysis of t:le

consolidated balance sheet of the Central Bank, the com:raercial banl:s, and

the major savings bank (Caja de Ahorr~s), summariz,ed in Table 22 'Jrov1.des

some indications as to the mechanism which has maintained inflation during

the period.

Inflation from 1945 to 191..~7 I'ras Drilnarily based on the extension

of loans from the Central Ba..'1k and commercial banks to entities entrusted

wi th development and to the Government. Honey SUDl')ly "eras not sizeably

increased by these operations, but commercial banks were provided with

cash and promissory notes issued by develonment cnti ties, both of ,·Thich

could be utilized as leeal reserves. On this basis the COl11mercial banks

considerably exoanded loans to the public, pri~ari1y for the purnose of

financing commercial trans';:'.ctions. In order to expand further, they ob­

tained rediscounts from the Central Dank, ""hich, acco~'dinr: to the spirit

of the Kemmerer legislation on 1':hich it VIaS founded, vTaS cor:::;frlled to

accept all IIfirst quality papers II • The Central Bank did not, as it '."'as

empowered to do, 'Vdthin limits set by lavr step up the rediscount rate,

nor increase the reserve requirements of the co~mercial banks, nor stop

the issue of notes. The business community, the powerful cOFlf>:ercial oanks,

and (except under Viachholz) the Government practieal1y forced it to acceut

the situation r:assively. Fluctuations in rrold and exchange reserves had

little influence on money sup~ly inasmuch as the Central Bank is free of

any obligation to maintain specific reserves.

-29 -

Changes in public demand deposits, in time deposits and in

deposi ts of official entities indicate that the major beneficiar;'T of the

m:pansion policy has been the general public rather than the Government.

The rate of increase of time deposits has been hirh except in 19h7. In

that year it dropped, nresumably as an effect of a sudden ava.iJ.ahil-t ty of

imported cons~~ers goods.

At the end of 1947, although major efforts had been :"r1ade by the

Goverr'Jnent to balance the budp:et, the I\Iinister of Finance "ras faced 1'.1'i th

a deficit of 1,000 million pesos. Law 8913 ,'[as nassed, 'Jermitting the

Central BanI" to revalue its Hold cold reserve!! fro!'\ a Darity of 1:.85

pesos per dollar to the official parity of 31 !"lesos per (lollar. The

operation yielded 845 million pesos, which, accordinr: to the laYT, ';ere

turned over to the Government in order to finance the deficit. All of

this, however, VIas not inflationary.

Simul taneously, the Government borr01fled from the cOlTlJ'!lercial

banks 400 million pesos against which short-term Government notes bear­

ing an interest of 7 .5~~ were issued. This resulted, in the short-run,

j n a monetary contrartion as the Government oromissory notes issued

against the loan could not be included in commercial ban.~ reserves.

In addition three hundred r:lill~"on nesos of the revaluation nrofi ts v:ere

used to re-purchase short-term oblifations of the Government held by the

Central Bank, a deflationary move. However, cOTIl1'1ercial banks h<:l.ve the

privilece of selling these notes to the Central nan};: ','hich, in the long­

run, may release all or part of the 400 million peso loan. Ferrtunately

few notes were sold to the Central Bank in 1948, but the liquidity of the

money market remained unaffected.

- 30 -

The process of inflation continued in 191+8 mostly as a

secondary effect of the financing of the 19tJ.7 budr;et. The Central Bank,

though encouraged by the Governnent, still hesitated to utilize its limit­

ing powers, and did not stop note issue. The COLTInercial ban):s, althrmgh

repeatedly 'warned by the Goverrunent and the Central Banh:, did much !:;cre

to agpravate the situation by lending for many unproductive nurposGs,

including real estate and speculation.

In March, 19h9 the Central Rank issued strong statements con­

demning these practices and threatened to put them to an end. It is un­

fortunately likely that as Ion'.: as a nB1ff Central Bank lav,j is not passed,

removing it from the influence of the commercial banks, broadening the

margin vfithin which it can modify reserves and rediscount requirerrlents

of commercial banks, and checkinG its issuinr rir,hts, these statel:1ents

cannot be effectively enforced.

- 31 -

NATIONAL INCOi'iE AND CAPITAL FOqr"ATION

An elaborate study of the national income of Chile has been

made by FOU1ento. It provides detailed information for the years 1940-h3.

Fi£:Ures for later years have been estimated by the Bank as shown in ~able

24, and appendices, and, unofficially, by an economist of Foracnto. It

seems, tentatively, that the figures of the International Bank for Re­

construction and Development are over-estimated, and those of the econ­

omist of Fomento under-estimated.

Using the last estimate the national income Chile appears

to have increased from 16.9 billion pesos in 1940 to 54.1 billion nesos

in 1947. This figure, adjusted py the cost-of-living index, indicates the

possibility of national income of 63.8 billion DeBOS in 1948, or a little

!l'ore than the equivalent of US.~ 2 billion.

This spectacular Gro~~h in current peso national income does

not reflect any imprOVement in the IJresent real condition of the Chilean

Deople. Total real national income has nrobably increased somey!hat over

the past eif:ht years, the increase being in capital fornation rather than

consumption. A::E:regate real in':ome avai~.ab1e for consll:r:r:;tion has reJ1ainc'd

v.Lrtually unchanged, w'hile population has increased.

Ls shoV'm in Table 23, although the Der capita. money income has

increased from 3,380 pesos (US~, 109) in 1940 to 9,800 Desos (lISe 368) in

1948, the real income per capita (19ho pesos) has decreased from 3,380 pesos

in 1940 to 3,OL.o Desos in 19[18. This decrease in real term.s may be over­

estimated inasmuch as the cost-of-living index used to denate the current

peso values, the population figures, and the national income fip:ures for

the various -;f8ars must be regarded as estimates and are not quite adequate

- 32 -

for this purpose. At any rate, it can safely be said that per capita

real income in Chile has not increased over the nast eight years~

As shovm in Tables 23 and 25, gross capital formation was lo.8"b

of the national income in 1940~ and Vias still 10.8% in 19h7. Hovrever, 1f

capital fornation statistics are deflated by the cost-of-living index for

locally produced [oods and by the value index of United states e}morts lor

the imported capital equipment, the following fieures result:

(in million 1940 pesos) ------~--------------~----------~~~--~~---------------~----

1/ National Income-Gross Capital Formation

by DTIDorted Goods Gross Capital Formation

by Locally Produced Goods Total

Total in % National Income

19ho

16,963

851

982 1,833

10.8%

19lf7 (in 19ho pesos)

17,500

1,190

1,150 2,340

1).4%

This suggests that gross capital fonnation has in fact increased, both

absolutely and in relation to national income.

Net capital formation, after having been kept at a Imr level

until 1943, increased suddenly in 194h and has remained at a level above

1940. This shift from investments for maintenance to neVi capital invest-

ments is partly due to the fact that maintenance of obsolete equipment had

been extremely costly between 1940 and 1944, and could revert to aSS11.\1;ed

pre-war levels only when new equipment became available again. This analysis

Obtained as follows: Total 1947 minus capital formation in 1947 neaos. Balance deflated by cost of living. New balance increased by deflated Gross ca;:Jital Formation figures.

- 33 -

suggests that in recent years new industries VTere established, represent­

ing (new) net capital formation.

This theoretical conclusion is confirmed by the record of Chile

in recent years. Since 1944 three major hydro-electric nlants, several

textile factories, a conper aDuliance ulant, and a rubber tire factory,

for example, have been built, and some are coming into operation, as

well as a multitude of other smaller industries.

Furthermore, the construction of a steel plant ond ot'1er large

hydro-electric plants been started.

Although imports accounted for al)Y)roxinately )~6:~ of [ross capital

formation in 1940 and only for 38% in 19L7, tJ1e real quantity of machines

and equipment represented by 1947 inports VTas higher than in 19)~0. The

strain on national resources exerted by the real and woney costs of j_n­

stallations of iroportedequinment (which is Edfecti vely related t a real

volume of installations rather than to their monetary value) can thus be

estimated to have been much greater in 19Lt7 than in 1940.

Since 1940 the share of industry in national income has been

greater than either agriculture or mini.ng, accounting for 17'[1, of the

national income in 1940 af,ainst 16. and 10% for the other activities.

ratios are estimated to have bC"'come 22.5~~, 17 .3"~ and lO.3;'~ res­

pecti ve1y in 19h7. The relati vcly small importance of r'lininr; is due to

the fact that the large foreiGn-armed mines export their net T)rofi ts and

make considerable provisions to cover reserves and administrative mmenses

abroad.

- 34-

As seen before, the Government plays an important role in copi­

tal formation in Chile. Between 1942 and 1944 it accounted for 25)0 to

29% of the gross capital formation of the country. This share increased

in 1945 to 43% and returned to average in 1946.. This, however, conceals

the magnitude of the investments of entities such as the Chilean rail­

roads, Fomento, etc., out of their own earnings. It is doubtful, however,

that on the average the Government and entities account for mors than one­

third of the capital formation. Foreign mines may be estimated to account

for another 10f0. Chilean private e~terprise therefore invests yearly

(roughly) more than one ..... half of the capital required for development, and,

according to our information, do so out of profits. As in the case of

the Government, they could by re ..... allocation of expenses, enter into

larger capital investments. but are prevented from doing so by the

shortage of foreign exchange.

CHILE

STATISTICAL T.ABLES

1. Foreign Trade, 1927-1948 2. Exports, 1936-1948 3. Imports, 1936-1948 4. Foreign Trade: Major Commodities 5. Foreign Trade: Direction of Trade 6. Copper Prices, Production and Exports, 1840-1948 7. Nitrate Prices, Product~~on and Exports, 1927-1948 8. Balance of Payments: SUmmary an,d Exchange Reserves 9. Balance of Payments~ Receipts

10. Balance of Payments: Payments 11. Major Net Sources of Exchange 12. Disposition of Proceeds of Copper Exports 13. ioreign Debt 14. Foreign Debt Service 15. Status of U.S. Export Import Bank: Loans to Chile as of

January 31, 1949 16. Total Government Revenues and Expenditures 17. National Ordinary Budgets. Chile, 1940-1949 18. Government Expenditures for Development 19. Government Debt t Internal and External 20. Total Debt Services, Peso Charges 21. Money Supply 22. Banking Changes 23. National Income and Cap! tal Formation 24. Nat ional Income 25. Capital Formation

Table 1

CHILE -Foreign Trade Y

(in mi2J~?s US dollars)

EXPORTS UJPm.TS . Copper et

Excluding Nitrate Year Total Gold Co'?per Nitrates % of Total CIF

1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 19h2 1943 1944 1945 1946 1947 1948

!I Sources:

204 129 239 146 276 123 127 90.6 195 160 169

99 85 35 15 7 62.9 26 42 22 97 38 29 69.1 50 97 37 29 68.0 62

116 107 44 29 62.9 72 192 186 104 34 71.9 89 141 131 68 29 68 .. 8 103 138 128 68 26 68.1 85 143 132 78 26 72.7 104 161 153 97 34 81.4 108 179 174 118 23 78.8 128 181 173 108 23 72.4 131 197 191 116 25 71.6 Ih4 210 202 103 38 67.1 156 230 213 1(,4 37 61.3 197 277 277 173 / 38 76.2 266 32931 324V 171~ 5031 67. 268V

Total !:~:xports and Imports 1927-35 Re~)ort for 1938. Roreign B:mdholclers Protective Council - Exoorts 1935-47 and In:)orts 1935-h7 - I::F Financial Statistics. E:::::-:!ort Co~}per Bars and Export ~\ii trates 1935-45; Chile's Program amI. Progress - Corporacion de Fomento 1946.

Y On basis 9 months statistics.

Ta.ble 2

CHILE ~orts1.1

(Bullion included in totals)

19~6 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948* GRAND TOTAL

Thousand metric tons 3,661 4,273 4,227 4,098 3,988 3.779 2,490 1,860 1,940 3,532.6 4~279.3 )~60).9 Million gold pesos ~~.., 947 682 671 696 781 869 877 959 1.022 I t 11).7 1,356 .. 1 1~112.4 ..,,,,,Iw. Million U.S. dollars 115.8 1.95~2 140.6 138.3 143~5 161.0 179.1 180.8 1.97.5 210.7 229.6 279 .. 6 251.8 VaJ.ue per ton (u~$I";':;;'1 t) )1.6 45.6 33f12 33·7 J2·~~_ 42.6 71.9 96.3 101.8 15.0 6.5.3 102.2

VALUES (OOO,OOO's of US dollars)

Copper 44.0 103.8 67.6 68.2 78 •. 4 97.4 118.2 107.9 116.0 103.1 104.6 173 .. 8 128.4 Nitrate 34.4 29.1 29.4 26.4 23.6 23~0 22C16 24.7 37.6 34.7 34.7 37.3 Iodine 2.3 1.7 2.6 1.8 1.6 3.6 1.8 0.9 2.5 2.9 1.0 Gold & silver & precious metals 6.) 8.8 9.) 6.4 2.8 3.7 2.7 6.4 8.3 6.3 3.7 Iron 2.6 2.7 2.8 3.0 2.8 0 .. 7 0·5 0.4 2.1 1.9 3.4 Sulphur 0.2 0.2 0 .. 8 0.6 0.8 1.3 0·3 0.2 Manganese 0.2 0.1 D.2 0·3 0.1 0.1 1.9 3·3 ·5 .2 Molybdenum 0.6 0.2 0.8 0.9 1.2 1.2 1.1 n.a. n.a. Sodium Salts 0.7 0.1 0.1 0.1 0·3 0.2 Coal 0·3 0.2 0.2 0.6 0.9 0.6 __ 2·3 0.5 .4 .1 .2

TOTAL, J..1ineral 109.4 111.5 121.6 133.8 149.2 140,8 14706 152.2 152417 222.5 182.6

Agricultural products 36.1 27.9 24.3 19.1 22.8 23.6 29.1 32.9 41.5 51.2 41.7 62.1 Textiles 0.2 0.2 0.1 0.1 0·3 0.4 1.2 1.9 1.9 3·2 1.4 .. 6 Chemicals 0.3 0.4 0.4 0.6 1.0 2,0 2.0 3·3 2.8 2.4 2.2 4.5 1.8 Machines & 'lIansp:>rt Equipment 0.1 0.1 0.1 0.1 0.1 0.1 0·3 0·3 0.5 0.9 .6 .9 .6 Metallurgical Industries 0 .. 1 0.1 0.1 0.2 1.5 1418 7.2 7.6 3.0 4.8 1.2 Various manufactures 0.4 0.4 0.4 0.4 0.3 0.-5 0.8 1.4 1--5 1.6 ).5 2.8 1.3

TOTAL, o~ than Mineral 37.3 2809 2505 20.9 25 0 6 28.6 37.1 46.8 55.9 63.7 56.1 67.6

TOTAL 138.3 1~7.0 142 • .5 159.4 177.8 177.9 194.4 208.1 216.4 278.6 250.2

1/ Source: Direccion General de Estadlstica, IfEstadistica Chilena", September 1946, Sinopsis 1947, and September 1948, Santiago, Chile. !I First 9 months: 1948 Total Exports: 328~7 million dollars.

Table 3 CHILE 1/ ~orts -

(Bullion included in totals)

19:;6 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948*

GRAND TOTAL Thousand metric tons 1,002 1.366 1.422 1,2)2 1,652 1~638 1,592 1,615 1,552 1,6)).9 1,827.8 1,954.1 1,462.7 Million gold pesos )46 429 499 410 506 525 621.5 6)7 698 757 953·9 1,307·3 957.0 Million U.S. dollars 71 88 103 85 104 108 128 131 144 156 196.6 269.5 197.3 Value per ton (US$/unit) 70.9 64.4 72.4 69 .. 0 63·0 65.9 80.4 81 .. 1 96.0 95.5 107.6 137.9 1)4.5

VALUES -(OOO,OOOIS of US dollars)

-Pig Iron - Tin - Zinc 0.7 1.0 1 .. 4 1.5 209 1.5 2.6 2.8 .6 .6 .6 Coal 2.4 0.8 0.) 0 .. 4 0·3 .4 .9 1.9 Petroleum 4.9 4.9 3.2 5.9 7.5 9.5 12.6 9.5 7.8 11.0 12.4 11.7 Diesel Oil 0 • .5 0.6 1 .. 0 0.8 0.8 1.1 1.5 0.9 1.5 1.4 1.9 3·2

TOTAL., Mineral 6.2 5.2 10·5 10.6 13.8 15.9 13.3 12.1 15.1 18.5 17.4

Agricultural products 16.3 16.7 15.0 17.9 17.9 30.6 )6.6 4107 54.4 66.5 75.9 50·5 Textiles 15.2 15.1 15.4 1}.6 16.8 16.6 19.9 19.6 21.3 17.7 19.3 )1.6 20.8 Chemicals 9.0 11.0 11.9 11.4 14.4 15.6 . 19.8 17.0 18,,7 19.7 22.9 29., 28.3 Machines & transpcrt ecpipnent 16.4 17.5 30.8 20.0 22.6 24.6 19.9 16.9 20 .. 4 22.9 39!'0 66.6 47.1 Metallurgical industries 9.1 12.7 11.7 10.7 12.6 11.9 11.3 10.5 12.2 1).2 16.) 2).8 19.6 Various manufactures 6.S 8.6 9.6 8.6 9.-2 10.7 12.2 14rl 15.9 15.6 17.6 19.6 11.9

TOTAL, other than Mineral 81.2 96 .. 1 79·3 93·5 97·3 113.7 113.7 130.2 143.5 181.6 247.0 178.2

'rOTAL 102.~ 84!5 104.0 107.9 127.5 139. 6 14).5 '155.6 196.7 265.5 195 __ 6

1:./ Source: Direccion General de EstB.distica, "Estadistica Chilena", Ana XIX - No.9 - September 1946, Sinopsis 1947. and September 1948, Santiago,Chile.

~ First 9 months:: 1948 Total Imports: 267.9 million dollars.

Table 4 CHILE

Foreign Trade 1/

Major commodities: (a) in millions of u..S. dollars (b) in per cent of to ta,l value of trade.

1917 1238 1243 1944 a b a b a b a b -

EXPORTS - TOTAL 19.5.2 100.0 140.6 100.0 180.8 100.0 197.5 100 .. 0

Copper (103.8) 53·2 (67.6) ,48.1 (107.9) 59.7 (116.0) 58.·7 Nitrates (34.4) 17.6 (29.1~ 20.7 (22.6) 12.5 (24.7) 12.5 Precious metal (6.3 4 .. 5 (3.7) 2.0 (2.7) 1.4 Agricultural products (36.1) 18.5 (27.9) 19.8 (29.1) 16.1 (32.9) 16.7

IMPORTS - TOTAL ~8.0 1pO.0 103 .. 0 100.0 131.0 100.0 144.0 100.0

Agricultural products (16.3) 18.5 (16.7) 16 ... 2 (36.6) 27.9 (la.7) 29.0 Textiles (15.1) 17.2 (15.4) 15.0 (19.6) 15.0 (21.3) 14.8 Chemicals (11 .. 0) 12.5 (11.9) 11.6 (17.0 ) 13.0 (18.7) 13·0 Machines & traIl sport equipment (17.5) 19.9 (30.8) 29.9 (15.9) 12.9 (20.4) 14.2 Metallurgical products (lZ.7) 14.4 (:t1.7) 11.4 (10.5) 8.0 (12.2) 8.5

1./ Source: Direccion General de Estadist1ca, "Estadistica. Chilena", September 1946. 5ino1'8is 1947, and September 1948. Santiago, Ohi1e.

!I Bullion and coins not included for first nine months of 1948. Total Trade for 1948, preliminary figures:

(Source: Internatlona1 Fina,ncia1 News Survey, March 3, 1949)

Exports Imports :Balance

million US$ 328.7 267.9

I 60.8

124Z 1248* a b a b

278.7 ,100 .. 0 251.8 100.0

173.·8 62~4 128.4 50.9 34.7 12.5 37·3 14.8 6.3 2·3 3.7 1.5

41.·7 15.0 62.1 24.6

265.5 100.0 196.7 100.0

75·9 28.6 50.5 25.7 31.6 11.9 20.8 10.6 29.5 11.1 28.3 14.4 66.6 25.1 47.1 23·9 23.8 9.0 19.6 1'0 .. 0

Table 5

CHILE

Foreign Trade by Countries Y (in per cent of total value)

1937 1938 1946 1947

Destination of ~orts

United States 23 16 37 44

Un! ted Kingdom 20 22 12 11

Germany 10 10 0 0

Source of Imports

United States 29 38 40 44

Germany 26 26 0 0

Peru 8 6 16 13

Argentina 4 4 15 11

Y Source: IMB' Financial Statistics, Vol. 12"

Table 6

CHILE

Prices, Production ~j E:port of Copper

Frices Foreign EleC::-

Production EX'Jorts trolytic US cents per lb., ( 000 metric ton~ ( 000 metric tons)

_ eIF New York 1L Year Total Bars Bars

1840-49 17.4 1850-59 23.0 21 18Eo-69 29.5 40 1870-79 23.0 46 1880-89 15.2 36 1890-99 12.3 23 1900-09 15.5 1910-19 20.2 1920-26 14.1 1927 12.9 243 226 1928 14.6 287 274 1929 18.1 321 302 1930 12.9 220 207 1931 8.1 223 215 1932 5.6 103 97 1933 6.7 163 157 1934 7.2 257 21+7 1935 7.5 267 259 260 1936 9.2 256 244 239 1937 13.0 !~13 394 383 1938 9.7 351 337 3L..9 1939 10.7 341 326 312 1940 10.8 363 347 357 1941 10.9 469 4S5 440 1942 11.7 484 !~77 494 19h3 11.8 497 l+88 449 1944 11.8 498 490 482 1945 11.8 L~70 462 431 1946 13.8 361 358 373 1947 21.2 427 hOB 357 1948 22.2 438Y !t20Y na 1949 23.,;/

!I 1840-1926, La Econonia de Chile y la Industria del Cobre Ignacio Aliaed Ibar Santiaco 1946, p, 198.

1927 -1932, Boletin l:~ensual P.anco Central de Chile. 1933-1945 Lstadistica Chilena; Chile Program and Progress.

2/ On basis 9 months sta.tistics. 11 March 9th.

Table ?

CHIIE

Prices, Pro~ction and E:rports of Nitrates

PI~ItjIjS IN USA ------------·-~Per-i'OO-~~Per 1~' PRODUCTION EXP011TS

1 bs • ,Con- Ibs., Con- ( 000 ~ letric (000 metric Year ~JPer She Ton tained n tained N tons) tons)

--------~-----------

1927 16.1) 161l~.1 1928 Ih.39 3164.8 1929 13.94 3233.3 1930 13.42 2h45.8 1931 12.77 1125.9 1932 10.26 693.9 1933 8.45 437.6 1934 S.S2 812.3 1935 26.0 8.1 7.97 1217.9 1260 1936 27.1 8.h 1261.6 1286 1937 28.5 8.9 1413.8 1608 1938 29.0 9.05 1398.0 1573 1939 29.0 9.05 1hho.5 1584 1940 29.1 9.1 1!~8S .0 Ih24 1941 30.9 9.65 1416.3 1270 1942 33.0 10.30 1332.7 1270 1943 33.0 10.)0 1171.1 1060 1944 33.0 10.30 990.7 1071 19L+5 33.0 10.30 1383.5 1621 1946 35,332/ 11.0 161~8 .9 1947 43.0 _ 13.4 1631.8 1948 49.1921 15.4 1776.0Y

~....-----.-

Production volume Hitrate 1921-h7 - Estadistica Chilena ~~orts 1937-45 -Anuario Estadisfico de C0l!1ercio~~:t8rior International :r..e,'erence Serv-ice p,34. VallI, Nov. 1945, No. 37. Prices USA 1935-L6 - Price Y!holesale Nitrate of Soda - crude - f .o.b., cars, -port, warehouses - US>'; ~0er short ton -see 19h 7 statistical sW'ToleIaent to the Survey of curr€nt Business US DC. 1927-35 - Prices: C;he111ical Nitrogen - US Tariff Ccnnission ReDort No. lILt - second series Prices in USfi?er 100 Ibs of contained nitrogen in New York - spot 100 Ib bars. 1/ On basis a months statistics. ~/ 2.152 = 1947 average crude i.o.b., cars, 90rt warehouses dollars per 100 lbs. Source: Survey of 0.urrent Business, February, 1948 p, S24. 3/ h9.19 = 19!+8 average, 11 months Sodium Natrate Cru(~e f.o.b., cars, dollars Der short ton port warehouses. Source: Survey Current Business, January, 1949, p,s-24

Table 8

CHILE

l3al.ance of P~ents and Foreign Exchange Beserves

1

(in million US$)

1939 1944 1945 1946 1947 1948

BALAHClil OF PAYIv~S

Receipts n.a. 246.3 263.7 275.8 368.9 n.a.

Payments n.a. 220.6 251.4 321.0 392.1 n,a.

:Balance n.a. f25.7 112.3 -45.2 -23.2 n.a.

FOREIGN EXCRAUGE AND GOLD"

Central Bank 33.3 105.0 110.0 69.1 55.8 53.S

Amortization FUnd 10.3 4.1 5.4 6.5 4.6 6.0

Total 43.6 109.1 115.4 75.6 60.4 59.8 i

FLUCTUATION OF BESERV'J!1 u.a. n.a., /- 6.3 -39.S -15.2 - 0.6

:J As of December for each year.

Table 9

CHILE

Balance of paymeqts

Receipts y

(in million US$)

1944 1945 1~46 1~41

Copper (Gross e~orts) 108.7 107.9 110.6 172.4 Iron (Gross exports) 0.5 0.5 3.1 4.5 Nitrates (Gross e~orts) 26.5 38.5 41.1 58.3 Small mining l6,0 13.2 13.0 10.8 Other exports 52.0 62.6 63.4 60.6

Sub-total exports 203.9 222.7 238.0 306.5 I

Transports 16.5 14.4 14.0 12.5 Insurance 0.7 1.~ 0.4 -Diplomats and others 3.4 3. ~.l 6.9 Private transactions 8.2 8.6 .5 8.7

Sub-total invisible trade 28.8 27.8 28.1 28 .. 2

Loans Long term 5.7 6~1 9.7 10.9 Short term - 2l.~

Other capital 7·9 7·1 1.

Sub-total c~ital receipts 13.6 13.2 9·7 34.2 Grand total receipts 246.3 263.7 275.8 368.9

11 Source: Banco Central de Chile. flBalanza de Pagos", various years.

Table 10

CHILE

Balance of Payments

P~ents jJ

(in mdl1ion US$)

1944 1945 1946 1941 Imports 149.4 174.0 230.2 283.3

Total trade 149.4 174.0 230.2 283.3

Transport s and insurance ~.4 9.3 l·9 10.5 Government .2 3.1 .. 1 6.2 Private s.6 b.l 8.4 7.8 Administrative expenses of mines 2.7 5 .. 2 10.5 11.3

Total invisible trade 24.9 23.7 32.9 35.9

Debt of Fomento/Ra1lroads 3.4 4.7 6.0 (total service) 5.1

Consolidated public debt 6.1 5.4 (Short and long) (total service) 5.2 1l.2

Profits and reserves copper/nitrates 28.3 30.2 31.6 46.7

Various 8.5 13.1 10.4 14.8

Total capi tal 46.3 53.7 57.9 72.9

Grand total 220.6 251,4 321.0 392.1

Y Source: Banco Central de Chile, tJBalanza de Pagostl, various years.

<, -'''\.1

'".: J tJ •.

:.. ... , ~::f.~.

, !:"'

Table 11

CHILE

~...!~9hange Revenues ~Net. Accruals)

of payments:1/(a) in millions of U.S. dollars (b) in percentage

1945 1246 a b a b

79.1 36.0 73.5 31.0

31.8 14.0 44.2 19.0

41·5 19.0 48.0 20.0

28.5 13.0 31 .. 7 13.0

6.1 ].0 9.7 4.0

34.9 16.0 28.1 12.0 ... _---

221.9 100.0 235.2 100.0

:ividends, profits, administrative expenses abroad.

1947 a b --

120.1 44.0

46~3 16.0

41.7 15.0

)4.1 12.0

10.9 4.0

29.6 10.0

282.7 100.0

Table 12

CHILE 1/

Disposition of Proceed.s from ~iZ:ports of Co::rper­__________ .. __ Jin mi11~ons of US dollars)

____________ 1_9_44 ___ 1,745 ___ 1_94_6 ____ 19_4_1 __

____ E:i_CP_O_'R_TS ______ }2_~~l __ ._ _ 107 "2~ __ ~~ llC?. 6 .~_172 .L-a) nLe,~-:al Cost of Pro­

duction"

b) Imports with ovm exchange

c) Taxes and Duties

d) Profits

e) Reserves

f) Expenditures Abroad

g) "Net Exchange Proceeds to Chile" (a I-c)

h) Total Available to Chilean Economy (aj.bj.c)

i) Proceeds Unavailable to Chilean Economy

(df3~f)

15.6

22.8

17.4

7.9

67.5

.1

25.6

43.1

13.2

22.8

11 .. 4

14.9

2.5

65.9

79.1

28.8

12.0

19.1

21.6

10.1

61.5

73.5

37.1

Y Source: Banco Central G.e Chile, tt~a.lanza de PatOS", - 1947

20 .. 4

49.9

36.0

5.6

10.7

99.8

120.1

52.3

December 1944

Changes in 1945

Table 13

CHILE

Foreign Debt 1/

December 1945

Changes in 1946

December 1946

Changes in 1947

December 1947

Currency Units/ millions

In Various In Various In Various In Various In Various In Various In Various Currencies In US$ Currencies Currencies In US$ Currencies CUrrencies In uS$ Currencies Currencies In US$

Government DeDt

Lung Term

US$ I,

Sw.francs

Shcr, Term .Advances and f,

Eank Credit US$

Port Works Loans

Pagares

~

us$ ~

US$ "L

Government Guaranteed Debt Sw.francs

of which Eximbank

Total, converted in US$ of which, US$ debt in US$

91.2 27 .. 2 79·3

2.3 3·4

0.477

2.6 0.11

78.5 0.493

29.3 12.7

il sterling debt in US$ Sw.franc debt in US$

Total in $ converted in

91.2 - 4.65 108.8 - 0.224 18.5

9.2 3·4

1.9

2.6 0.4

78 • .5 2.0 6.8

12.7

323·3 175.7 122·3

25.3

- 0.05 - 0.1

- 0.016

- 0.1 ..... 0.01

..... 2.3 - 0.004

o - 0.4

86.5 27.0 79·3

2.25 3·3

0.461

2·5 {l.1

76.2 0.489

24.3 12.3

86.5 108.0 18.5

9.0 3·3

1.8

2.5 0.4

- 6.7 ... 2.7

- 0.)2 ..... 0.4

- 0.309

- 0.3

79.8 24.3 79-}

1.93 2.9

0.152

2 .. 2 0.1

79.8 97.2 18.5

7.7 2·9

6.0

202 0.4

- 4.26 - 0.817 - 0.808

- 0.07 - 0.1

- 0.00.5

- 0.1

75.5 23·5 78.5

1.86 2.8

0.147

2.1 0.1

75.5 94.0 18.2

7.4 2.8

5.9

2.1 0.4

76.2 - 5.1 71.4 71.4 - 3.1 68.7 68.7 1.9 ~ 0.02 0.467 1.9 ~ 0.003 0.464 1.8 6~8 29.4 6.8 - 0.1 29.2 6.8

12,3 f 0.3 12.6 12.6 I 0.5 13.1 13.1 314.9 294.8 283.6 168.5 156.3 149.1 121.1 113.2 109.5

25 .• 3~ .. ~~.3. 25.0

pesos at current exchange rate 10,022,.1 9,761.9 9.118.8 8.791.6 11 Source: Memoria de la Contraloria General. ~ converted at $4 per~. Sw.franc converted at 4.3 Sw.franc per U5$.

Table JlJ.

CHILE

Se:vvice of the_ Foreign Debt !l

(in millions of US Dollars) ConsoliC1ated Public Debt &:.

non-guaranteed Nitrate EXTI1 BANK Year Bonds Disbursed: UndIsbursed: IBRD Total

~ ~ SWiss Fcs ~> ;p.; .. ', .............. ~ r'r~)

1949 7.0 4.4 1.1 8.1 0.7 21.3 1950 5.0 2.9 0.7 6.) 5.8 0.9 21.1 1951 5.4 3.2 0.8 4.3 6.7 1.2 21.7 1952 5.3 3.2 0.8 2.9 '-t.8 1.2 18.1 1953 5.2 3.1 0.8 1.9 4.6 1.5 17.1 1954 5.3 3.2 0.8 1.5 h.4 1.8 17.1 1955 5.3 3.2 0.8 I.) 3.3 1.5 15.5 1956 5.3 ).2 0.8 1.3 3.2 1.2 15.2 1957 5.3 3.2 0.8 1.3 3.1 1.2 15.0 1958 5.3 3.2 0.8 1.2 2.8 1.2 14.5 1959 5.3 3.2 0.8 1.0 2.7 1.2 1h.) 1960 5.3 3.2 0.8 1.0 2.h 1.2 14.0 1961 5.3 3.2 0.8 1.0 2.3 1.2 13.9 1962 5.3 3.2 0.8 1.0 2.3 1.2 13.8 1963 5.3 3.2 0.8 1.0 2.2 1.2 13.8 1964 5.3 3.2 0.8 1.0 2.1 1.2 13.7 1965 5.3 3.2 0.8 1.0 2.1 1.2 13.6 1966 5.3 3.2 0.8 1.0 2.0 1.2 13.5 1967 5.3 3.2 0,8 1.0 1.9 1.1 13.4 1968 5.3 3.2 0.8 1.0 1.9 1.1 13.4 1969 h.O 2.9 0.8 1.8 9.5 1970 4.0 2.9 0.8 0.9 8.6 1971 4.0 2.9 0.8 7.1 1912 l~.o 2.9 0.8 7.1 1973 0.7 0.5 0.1 1.4 1974 1975

Y Source: External Debt of Chile - Economic Departuent

Table 15

OHILE

Status of U.s. Export-Import Bank Loa,ne to Chile! as of Januarl }11 1242

Gross Net Amount Amount Obligor. Number Purpose Authorized Cancellations Authorized Repaid Outstanding Undisbursed

1/31 / 49 1/31/49

Oorporacion de Fomento 245A Electrical power. agricultural $14,539,260 $14 .. 539,260 $11,050,760 $ 3.488,500 de la Produce ion machinery, copper wire, (Republic of Ohile) petroleum, buses, copper

do. 245A tube, tires, chemicals and 1,212,000 1,212,000 471,000 741,000 do. 2450 various other purposes 6,200,000' 6,200,000 3,900,000 2,300,000 do. 2450 6,800,000 6,800,000 1,100,000 3,700,000 $ 2,000,000

Ohi1ean state Railways 313- Railway eqUipment 5,000,000 5,000,000 2,157,276 2,842~724 Ingenieria Electriea, 3SS Dollar exchange 250,000 250,000 50,000 200,000

S.A.C. (Corp. de Fomento de 1a Produce ion)

Ohilean state Railways 372 Locomotives--Baldwin Locomotive 1,200,000 $ 302,750 897,250 269,190 628,.110 Works

do. 373 Electrical equipment--Electrical 2t800~OOO 2,800,000 181.921 2,618,079 Export Corporation

Oorporacion de Fomento 374 steel mill eqUipment 48,000,000 48,000,000 17,000.000 31,000.000 de la Froduccion (Republic of Chile)

ChUean state Railways 410 Railway eqUipment 5,.000,000 5,000,000 150 ,000 1,.150,000 3,700,000 (Republic of Chile)

Corporacion de Fomento 411 Power program, agricultural ,,350,000 5,350,000 300,000 2,700,000 2,350,000 de la Produceion machinery. copper wire plant, (Republic of Chile) cement plant, etc.

Fabrica Victoria de 449 Construction of rayon staple 1,200,000 1,200,000 1,200,000 Puerto Alto, S.A. fiber and spinning plant

Manufacturera de Metales,. 4,50 Machine tools, cranes and 375,000 375,000 375,000 B.A. foundry eqUipment

Total $97,926 y 260 $ 302,750 $97,623,510 $19,6)0,147 $34,750,334 $4),243,079

Table 16

CHILE

Total Revenues and Expenditures 1/

1939 1942 1943 1944 1945 1946 1947 1948 1949

REVENUES (a) Taxes in Ordinary Budget 1,807 2,954 3.738 4,089 ;,531 6,197 9,578 12,)28 13,207

Revenue from Government Properties and Services

(b) Taxes Outside Budget gJ 477 873 1,013 1,031 1,449 1,760 nea. n.a. n.a. ---

2,284 ),827 4.751 5,120 6,980 7.957

EXPENDITURES

(c) Ordinary Budget 1,777 ),052 3,960 4,472 5,741 6,726 9,979 1),328 12,437

(d) Autonomous Agencies, out 477 3./ 865 9)0 1,128 1,208 1,410 n.a. n.a. n.a. of Taxes Outside Budget

(e) Leyes Especiales 62 17 426 208 772 725 ;02 n.a. n.a.

(f) Special Amortization 6 63

2,322 3,997 ;,)16 ;,808 7,721 8,861

DEJrrCI!r - 38 ~ 170 - 565 - 688 - 741 ...- 904 _ 903 4/ n.a. n.a.

]J Source: Chilea.n Budget Practice in recent years.e Economic Department and subsequent tables.

£! Excluding amount earmarked for ordinary budget.

J./ Actual drawings not available. Assumed to be equal to taxes outside budget. 4/ Ordinary budget and Leyea Especiales qn1y.

Table 17

CHILE

a ~ (I) Ct-t

..p 0

1/ ., Q)

N~tiona1 Ordinary Budgets of Chile, 1940-~ ~ ~ (OOO,OOOfS of pesos) ~ 0 - a

Item 1940 % 1941 1942 1943 1944 1945 1946 1947 " % 1948?J 194931 % ~ 2 '0 41 Q) 14

'rota1 ordinary revenue 2,052 IOC.O 2,496 2,954 3,738 4,089 5,531 6.197 9.57ff-!-' 99 .. 5 9,618 11,257 1j ~ ..., Pt

National properties National services Taxes

Import duties Income taxes Real estate taxes Special import taxes To bacco and liqu-or tax Other tax~s

Earmarked funds_.~ rom specific laws2J

Other revenue

Total ordinary expenditure

National defense Interior Education. Public 'vorks Finances Public health Justice Labor Foreign relations Colonization Agriculture Economy and commerce Other expenditures Surp1us{!) or deficit(-)

29 1.0 28 36 40 51 50 64 71 1.0 60 73 ~ g. 160 8 .. 0 1'19 207 222 276 293 351 389 4.0 489 490 ~ s:l,:!

1,597 I; -:. 1,929 2.GB;' 2 .. J)6 2,872 1,527 4.250 $,471_ 8,,116 9,588 g 0;:::_ 602 30 .0 595 507 448 475 - 631 820 958 10.0 rd '«1 e 245 12.0 300 Q46 619 682 831 927 1,221 13.0 ~ ::; Pi 83 4.0 14S 117 130 170 216 238 252 2.5.. w g ~

226 11.0 317 513 544 824 976 1,213 1,585 16.0 n.a. n.a. ~ t ~ 133 .6.0 196 241 274 332 371 449 721 ?5 .,.. ct-4.C1

308 15.0 376 259 321 ~89 :fj~02::=- .§0~~4",~=~ g ~~ 266 13·0

2,202

196 164

218 410

952 188

518 372

1.192 469

924 608

1,7.52 1,895

18.0 20.0

14 (I) 14 ~ ~C)

..... c:t .J:l rd Jl~

~952 ~1,106 . CD 0" ... 6 rd . Hrd . 2,761 3,052 3,960 4,472 5,741 6, 726 9,6C~i 10,452 11,25 92.0 p J:i1'S::

rl .Q$ . t) •.

5S6 25.0 676 758 1.221 1,308 1,650 1,770 2,200 22.0 2,135 2 t 347 21.0 ~ t~ 398 18.0 457 518 574 703 807 984 I t 382 14.0 1,508 1,539 14.0 ..;PtH 300 14.0 517 511 657 760 969 1,163 1,415 14.0 1,566 1.671 15.0 ~~ 8~ 238 11.0 258 272 281 342 582 576 845 9.0 877 368 3.0 i.s 0

345 16.0 411 473 550 634 841 1~082 2,483 24.0 2,256 2,868 26.0 C4 grd 16,5 7.0 202 257 323 339 406 487 542 6.0 820 393 3 .. 0 p ~ ell ~

76 3.0 84 91 11.6 133 17'7 217 286 3.0 307 305 3·0 §11 !:.S 39 2.0 43 49 61 74 94 90 95 1.0 201 197 2.0 ..... ~ cg1:; 31 1.0 33 36 41 37 45 110 119 1.0 73 69 .5::t ~ ar6 9 2J 16 16 16 19 23 33 34 34 • 5 11 0 0

21 1.0 22 32 33 37 39 74 53 129 186 2.0 0 (.) ~~ 43 41 40 41 59 437 151 1.0 g ~ ~<t-t

24 1.0 35 39 44 48 72 108 96 1.0 108 125 1.0 III c!:: :a 0

-- 150 - 265 - 98 - 222 - 38) - 21C - 528 - ~o - 834?J .f 1 r~ ~ ~~ J ~m~o

40 /4 . . / / . rl 0 14 t) Sources: 19 7 - Memoria de Is Contra.lorlD. General; 1948.- El lfercurlo, Santiago 1 ) 48; 1949 - Economia y Fl.nanzas, No. 143, t) rl ~;: Santiago de Chile, Sept ember 1948. Figures given by source are 1,003 million short of total. ~ ~

]j

y II

Estimated - preliminary. Later figures (without breakdown) are R = 12.328 - Ex: 13,328. Final returns indicate higher revenues. Approved - preliminary. Later figures (without breakdown) are R - 13,207 - Ex: 12,437. ~~

Table 18

CHILE 1/

Government Expenditures for Development-

(in millions pesos)

Total Invest- in % ments total

Loans to under Govern-Fomento & "Layes ment Ex-

Year

From Ordinary Budget: Ordi­nary Expendi­tures & Parti­cipation to Development Agencies 2/

Taxes Outside Budget 3/ Auxi1io 4/ Especiales"5/ Total penditures

1942

1943

1944

1945

1946

376

414

470

702

750

146

197

241

278

180

68

73

62

20

17

15

61

f::fJ6

607

699

834

1,606

1,469

15%

13%

14.5%

21%

16.5%

1/ Y

Source: Table 6: Chilean Budget Prac tice in ::?ecent Years. SumS for minor constructions, development subsidies to shipping -industry - railroads - Public ""'orks - Fiscal contributions to Caja de Habitacion, Caja de Credito i.:inero, Instituto de Fonento Industrial y I\;Iinero - Caj a de Credi to Popular. Amounts dravnl from these taxes by Fomento, Luxilio and Caja de Habitacion. Loans given mainly by the Amortization Institute, from taxes outside budget theoretically dedicated to service of the foreign debt.

21 Amounts drawn dovm for miscellaneous investrnent purposes rninus sums used to cover deficit.

Table 19

OHILE

Government Debt

in million pesos at 31 pesos per US$

Fluctuations Fluctuations Fluctuations End of in 1945 End of in 1246 End of in 1247 End of 1944 7 1945 7. - 1946 7 1947

1) INTERNAL

a) Direct

Long Term 3,091.7 967.8 71.3 3t866 .. o 822.9 92·3 4.476 .. 3 275 ... 4 462.0 4,.284.8 Adjus tmen ts 121.6 120 .. 2 Short Term 45.7 13.4 32·3 32.4 0.7 31.7 Loans to Fomento and Auxi1io 690.7 20.2 710 .. 8 710.8 710.8 Treasury No tea Law 8918 400.0

b) Indirect 634.9 65.1 13.6 686.0 185·7 15.? 856 .. 6 833·1

c) Total 4,463.0 1.053·1 219.9 5,295.1 1 t 008 .. 6 228,,2 6,076.1 275.4 462.7 6,265.4

2) EXTERNAL

Total converted in pesos 10,022·3 n.a. 260.4 9,761.9 n.a. 623.1 9,138:-8 n.a. 347.2 8,791.6

J) GRAND TOTAL 14,485.3 480.3 15,057.0 851 .. 3 . 15,214 .. 9 809.9 15t057.0

1 - AIl10 rt i 'Zat i~n (a) 2 - Interest (b) 3 ..... Sub-Total

EXTERiAL

4 - .Amortization (c) 5 - Interest (0) 6 - Sub-Total

7 - Grand Total

8 - Tbtal Expenditures of Government

9 - 3 in % of 8 10 - 6 in %. of 8 11 - 7 in % of 8

Table 20

CHILE

lli"bi., Serlice _ I

(million pe so s)

. 1946

228 Q5 -,--,"1 a )u )$1

532~

ao3.5 1,028.1 /I'

7,721.0 6 % 4.4%

10.4%

8,861.0 6 % 5.5~

1l.5%

462.7 350.0**· 812.7

1, 1~68.,6

n.a.

Sources: ~a) See Table 19. b) Informe 1945 and 1946. Caja Aut 0 noma de Amorti zacion. c) Bal.anza de Pagos 1947. Banco Oentral de Chile. Figures

converted at 31,,0 pesos per US$.

*.. Assumed figure.

Table 2l.

CHILE

~~Y Supply Y (million pesos)

! j .....

Dec. Dec. Dec. June !::ec. 1944 1945 1947 1948 1948

----------Central Bank Notes 2,597.7 2J~92.3 4,066.6 4,414.2 4,720.1

Demand .!::Spa si t s of the Public 3t884.9 4,508.,6 6,611.8 7,482.8

Government Deposits 557.2 835,,7 1.426.5 1,809.3

Other Deposits gj 797·2 1~044)6 2.099.6 2,58l.4

Total 7.837.0 9~28lo2 14,206 .. 5 16,287c7

Index (~c. 1944 - 100) 100 119 182 206

Y Source: Chile. Estadistica Bancaria. Superintendencia de Bancos. 1:Jioney supply in this table does not incJueB coins, nor deposits of banks.

gj Caja de Ahorros - Caja de .AJ.llOrtizacion - Entities - Letters of credit.

fJ:ab ... c. 22

CHILE

Banking Changes Y

1945 1946 1947 First Half 1948

ASSETS

Gold/Foreign Exchang,e Reserves I: 218.5 - 216.2 - 19-+.gy /:1857. 821 Other Reserves t 4~.0 I: 229.2 /.2095., f 377.0 Loans to Government f. 2 .5 11101.9 f. 34.3 "-t 3.5lj Loans to Public 1-:1477.0 f:2336.2 /:2513.0 1:1873.0 Exchange Account t 279.6 - 341.4 f. 80.3 t 309.4 Other Assets t 173.1 f 171.5 t 308.9 -- 199.5 Central Bank Loans t 189.2 to Other Banks f 8600 f 489.4 - 129.4

Total Assets f2950.7 t3526.5 {-5326.9 .p.tog1.S

LlABlLIT~

Central Bank Notes f. 294,6 f 672.5 I: 50l~8 f. 347.6 Government .Deposits f: 278~5 -.. 249.8 t. 842,,6 f. 380.8 Deposits of the Public f 623J] t.1292.9 t. 810~3 t 871.0 Other Deposits t. 247 .. 4 t 509 .. 2 1:. 545,,5 1:. 481.8

Sub-Total llmeu Supply /1444 ... 2 /-2224.8 1-2700.2 12081.2

Bank ~posi t s ~ ~~:~ - 911.1 f 393.4 f 294.1 Time Deposits I- 334.1 - 22.5 f 311.9 Conversion Account

/:1165.82.1 Central Bank f 25.1 ..... 80.6 - 101.5 Profits - .7 f. 27.2 f: 19.7 t 246.9 Capital and Reserves f. 179.0 t 350.4 t 182.~ f ~2.9 Other f 373.2 f 765 .. 3 '/-2l6o. - 1.0

Total Liabilities 1-295041 7 1-3526 .. 5 15326.9 .p.to91 .. 8

Y Source: Chile. Estadistica Bsncaria. Superintendencia de Bancos.

Y Reason for increase is inclusion of quota to Th.LF and !BED.

jJ Reason for increase is revaluation of gold and foreign exchange reserves.

'!Y Includes short-term loan of 400 million pesos to Government.

Table 23

CHILE

National Income .and CalJitAl Formation

1940 1941 1942 1943 1944 1945 1946 1947 1948

National Income per Capita

(1) in current pesos (rounded figures) 3,380 3,380 ,5,000 5,,500 6,000 6 t 350 7700 9,800 11.400

(2) in 1940 pesos (current deflated by cost of living) 3,380 3,380 3,450 3,250 3,200 3,130 3,240 3.080 3,040

(c) in US$ per current pesos (at 31 pesos per US$) 109 125 162 177 193 205 248 316 368

Gross Capit~l Formation as % of the National Income 10.8 10.2 8.1 9.0 10.4 10.9 13,,0 10.8 n.a.

Net Capital Formation as % of the National Income 6.2 5.9 3·9 4.9 6 .. 6 7,,2 9·5 7·3 n.a.

Sources:. Population figures from Estadistica Chilena National income: Totals under 2, Table 24. G.O.F.: Total under 1 Table 25,. N.C.F.: Total under 4 Table 25.

Table 24

CHILE

National Income in million Chilean pesos

1940 1941 1942 194) 1944 194.5 1946 1947 1948

Agri cul ture 2,878.1 ),232 4,072 4,671 5,150 5,400 6,950 9,350 Fisheries 4.5 67 64 74 83 90 105 140 Mining 1,702 1,927 2,247 2,910 ),174 3,544 3.745 5,582 Industry 2,903 ),706 5,020 5,882 6,880 8,220 9,700 12,2,50 Ocnstruction 332 40.5 440 .584 847 858 1,560 1,272 Transports 890.7 1,284 1,52) 1,692 2,050 2,47.5 2,920 ),880 Public Utilities 16) .. 1 216 )76 408 Commerce 2,524.4 2,419 3,.508 4,034 Finances 788.2 800 1,042 1,175 Services 1,700 2,127 2,467 2,774 Rents 1,818 1,974 2,153 2,442 Government 1,268 1,6)0 1,856 2,684 Various 150 200 270 320

Total National Income ~ 19.963 19.987 25,038 29,650 63,8383.1 National Income 2 16,96) 19,719 25,6)7 28,6)0 31,706 )4,070 41,998 54,100

Sources: 1940/4) breakdown and total 11 ~ Renta Naciona1 - Corporacion de Fomento, Santiago, 194.5_ 1944/47 breakdown = IBRD projection. See footnotes. 1940/47 totals ~ - private revision of Fornento calculations, cited in RD 797, I~~, 1948 total J! ~ 1947 weighted by cost of living.

Table 24

Bases for Oaleulation of National" '- Income "". t.. ", ,"". • • t

A. ~culturet, TQ,tal valu~ of Pl"Qduqtion nP.nus cost of seeds, t:erti;lizers) , " d.i~i~e~tan~s, ~ne:rgy;d.epteciationt interests, 1;,a;){es and insurance. ','", '" ~

~~1;al"Val~~ of agr~qultm:al production 1943 - 6.0ki6 million. ~" S . ' . ~ . ' . . 1:' ..... 8('. .•

Pl'9jeet;QIl:, 1943 prodUQt aul t1plied. by index of "t61ue of agriCb.l'~,9l. prC)du¢t.1()~~'

, " ",' 'c I'.. ~ • • ' - • -. • * ~"

:B t FisherielH 9Cfl, 9~ grQ~~ value, of p;oductlon. ·P.r~jeCtiQn:, " i~.3 net prOduct mltlplied by cost ,of living ~d(li.·'" ,;. " . ,

c. Mining:

I. National,,· Glol;>al. vCllue of production m1~s :fuel, energs. explosives, ,', ~\lb,ric~ts, depI"ec~ationt ~s, patents, insurance, interests

$ild '~ o~ '''gastos. generales~.. . . ' .

1940 ~

Net Product I 426.1 1n mill~O:Q :pe~~.

Pl'9.ject,ion: '. 1943f1e;ures ~tip11ed by index of daily wages in 'selected, ; iIidu.strie&,.. .

:, .:'" • • . t ~ " ,.

1944 ~. ~ 715.0 9.30 ... 0

II. Foreign. To,tal of sslar~~s, wages,. social laws and taxes .•

Net Product -:- Foreign, Mining (million pesos)

Wages' Salaries Social LaVIS TaXes' Total

~ 1420 .. 0

Net Income 1176.9 . 1291Q 5 1613 ... 4 2102.7 2222.0 2402.-5 2432.5 3841 .• 0', AmortiZation'

,', and Rep91rs 204Q5 202.9 201.9 r74q2 Total .. ' .

'Gross Income 1388,,3 1494~4 l8l5.3 2276(>9 Sources: . 1940/43',' nRent'~N.· ac:i;o~"! .· .. trageS s~aries 1944/47 = 1943 :f~~es.

"freighted by increase Inm:uung salanes s ' Social taws ilia offlC.lal figure~. Taxes:- see Table of Taxes on Copper Nitrates and ;ron~ . faxesln 1943 seem· to have been underest;'mated1n "Ranta Naclonal".

... J J ~" .

Table 24

III. Independent Mines. Estimated income. Projection as for I.

Net Pm duct (million pesos)

~ 1941 1942 1943 19li4 1945 1946 1947 100.0 120.0 120.0 150.0 177.0 212.0 243.0 321.0

IV. Total, all mines,

1944 ~ 1946 1947 I. 775 2~ ~ej~ 1420

II. 2222 3841 III. ITT 212 243 321

3174 3544 3745 5582

D. Industries: Global value of production minus raW materials, fuels, energy, depreciation end amortiZation, taxes, insurance, interests for industries reporting to D1rector of Statistics, plus total of salaries t wages, profits and social laws pay­ments for others. Projection: 1943 product weighted by total wage bill index.

E. Construction: Value reported in 13 Chilean municipalities plus 25% - is considered gross value of production. 55% of this total is net product.

Projection: 1943 net product multiplied by value index of construction in 13 most important municipalities,

F. Transport: Total wages, salaries, profits, Projection: 1943 net product weighted by index of total wages and salaries bills in railroads.

The total (A) to (F) represented 53.5% of the national income in 19+2 and 1943. It will be tentatively assumed that this proportion was maintained in the later years. A rough estimate of national income after 1943 could thus be:

1944 1945 -- 1946 1947

(1) Total (A) to (F) 18,164 20.567 24,980 ~2.474 (2) Total National Income :;4,000 .38.480 46,700 0,700

estimated above (3) Compared to Figures

31,706 ,34,070 41,998 54,100 Cited by IMF

Overvaluation of the national income under (2) may have resulted from the unprecedented expanSion of mining income, which may now play a larger role in the national income than in 1943. -

Imports of Mechanical Equipment 11. . . 1/ National Productionof.,aChines and Vehicles -lhlilding Oo:ns!7uction 1 ~:plic \~orks 1 if Ih~estmentB of Railroads - l! Improvements to Agriculture 1

Gross C'apitalFormation--1/

Depreciation of ~riCul1re £I ~l1ning2 y Industry 1/ Ra~lroa~s ...... '. . y Merchant. Marine 2J Publio Utill.-ties 2.

UTllan propertlYS £I Public \vorks

Total Depreciation §? Net Oapital Formation

Table 25

OHILE

Capital Formation

in million Ohilean pesos at 31.00 per US$

1940 - 1941 1942 1943

851 865 739 790 131 188 305 346 448 545 563 863 219 247 248 319 84 ' 33 40 48

100 135 185 200

1',833 2,013 2',080 2',566·

266 276 286 296 .7 1() 10 11 154- 182 ?34 261

75 62 160 160 20 25 45 50 IS :20 35 40

220 240 260 290 20 25 45 50

759 841 1,079 1',167 777 840 1,075 1,1.58

1~O56 1,173 1,005 1.408

1944

939 41.7

1~46~ 366 91

210

),284

141

1~564 l'

2~O89

Sources; 1/ As given by Fomento to members of first IBRD tnissit;m to Chile (December 1947 - January 1948). .?J As given. if? "Renta. l>Taciona.l". Corp,ora-cion de ;Fomento', 1945. iI Re'Vised, t~tals :... priVE,lte source. ~lvi.F.RD 797,~ ~ Equals totals marked 1/ minus totals marked jJ.

1945 1946 1947

1,039 i~629 2.Zl0 496 628 833

1',..268 2~.JO,9 l~.m 582 552 105 10:9 100 100 220 240 25h .......----

},714 5',45'0 :$,870

155

1',272 1,460 1;$94

2.442 3,989 3'~976