Para la publl=aclh d i

iim obm u wni6 con

la ~ o p m t b buo&
mlco d, Al0 ( b y
For Iniirwtloml D i n -
lopnint U.S.A.\

Javier Villanueva The inflationary Process

in Argentina, 1943-60

2nd. Edition, 1966

Working Paper Insl. Torcuato Di TeLla

Centro de
lnvestigacjones Econ6micas

Dislributed by:
Editorial del Instituto
Torcuato D i Tella,
Florida 936,
Buenos Aires - Argentina
T A B L E O F C O N T E N T S P agc

ACKNOWLEDGMENTS . . . . . . . .. . . . O .. .. , . . . .. . . . . . . . . .. , .. . . . ,. , . . . . -..
111

.. .. .. . ., . .. . .. , . . .. , . .. .. . . .
.... .. . . , ... ., ., . . ,

LIST O F ThBLES v

LIST O F FIGURES.. .. . . . .. . .. . .. . . . ... ... .. ... ... .. ... .. . . . .. .., . . viii

FIRST PART

Chapter I T HE JBSTORICAL BACKGROUND . . . .. . . . . . . . . . . . . . . . . . . 1

Chapter ii THE BEHAVIOR O F CONSUMER PRICES . . , . . . . . . . . . . . . . 27

Chapter I I I THE BEIUWOR OF OTHER INOICATORS . . . . , . . . . . . . . . . . 65

Chapter IV PRlCE FORM-4TION 1N THE FOODSTUFFS MARKET:

W HO LESALE AND RETA1 L PROFIT MARGINS .. . . .. . . . .. 95

SECOND PART

Chxptor V I N F L4TION, D E V E W P M E N T AND STAGNATION:

A SIMPLE MODE L . . . . . .. . .. . . . .. . . . . . . .. . . . . .. . . . . .
. , 109

THEORETICAL APPENDIX TO CHAPTER V. . . . . . . . . . . . . . 126:

Chapter VI INFLATION A N D GOVERNMENT POLICY.. . . , . . . . . . . . . . . 132

THEOBETICAL APPENDZX TO CHAPYER VI . . . . . . .. . . . . . 142

Ch,apter Vi1 FINAL COWIDERATIONS . . .. . ,. . .. . . . . . .. ... . .. .., .. . . 151

BIB L I O G R A P I I Y . . . . ... . . ... ... . . . . ... . .. .. .. . . . . .. . . . . . . . . . . . . . 153

 A C K N O W L E D G M E N T

We are indebted to mmy institutions for helpful assistance in the obtention

of the original statistical inaterinl presented in o u r work. W e remember grtttefully:

the Direccibn Nacional de Abastecimiento, the Dircccidn Nacional de Estadrstica y

Censos, Direcciones Provinciales de Estadfsticas , Junta Nacional de Carnes, Se-

c retarla de Agricultura y Ganaderra.

For long conlinued sympiithetic and helpful interese in n u r work, anci v;ilu-

able criticism and orientation we wish to thank Professors C . Goodri ch and A. O.

Hirs chman of Columbia University. We are also grateful of Prof. Alhert G Kirt .
for his many valuable suggestiom mci comments.

For rnaking time available for the studies we wish to thank the Centro clc

Xrivestigaciones E coii6micas de 1 Instituto Torcuato Di Tella.

We are deeply appreciative of the cooperation of: M r . F. Brooman of Bristol

University with whom I have discusscd many points of t h i s wurk m d who has made

mmy v n b a b l c suggcstions. M r s . Cal-irien L1. de Azar who pritientiy and efi'iciently

cooperated with the laborious statistical computatiou nnd R . Reinoso who hravely

typed the English version,

O€ cou r s e , responsability for i h e entirc w o r k rcsts solelg with the aulhvr.

L l S T O F T A B L E S

T able Page

CHAPTER 1

Index of the physical volume of imports and

exports (base 1943=100) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

G N P by economic sectors at factor costs:

Percentage distribution of the G N P by sectors ............
Endicato rs of total food supply . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deficit of the pubiic sector in thousands of

rnillion pesos and relative to G N P .......................
v.
VI. Relative distribution of the value of the loreign
exchange licenses gr,anted fcir the purposes of
import (% of total licenses granted) .....................
Index of agricultura1 and manufacturing pro-
duction (base 1943=100) ...............................
VIII. National Product at constant prices 1 9 6 0 by
s e c t o r s . . . ............................................

CBAPTEH 11

Cost of Living Index (hous ing excluded) snd

relative increases City of Buenos Aires
(base 1943=100) ....................................... 29

Cost of Living Index f o r fourteen countries

(1943=100) ............................................ 32

Ibis Cost of living, farm production and estimated

popu lation (Index base 1ti6 @= L 00) ........................ 34

Cost of Living Index ilistributian of expenditures

per group and number of items included in the
basket -,.....**..m**
. . . , . . , . . . . . . . . m . . . . , . . . . . . . . . 35
 Sectors of the cost of living of Buenos Aires
(1943=100) ...........................,......,......... 37

Selected food commodities: Retail price indices

of fnod products (1943=100)exprcsaed as percent-
zges of C. L.I. food indcx (1943=100) . . . . .. . . . .. . . . . ... .. 39

VI. CLI and refrigerntur prices .. . . . . . . ..... ... ... . . .. ... . . 43

VI1 . of the provincial capital$

Consurner '%b;isketsf' .. . 44

VlIJ, Yearly price indices of provincial capitals

(1903-1 0 6 0 ) @ a ~ 1943=100)
e , . . . .. . .. . ..,.... . . .. , .. , . .
,. 48

Yearly price isidiccs of provincial capitals

(base 1943=100) . . . . . . . . . . . . . .. .. . .. .
. .. . .. . . . .- - .. . . 56

Quarterly indices - Provincial weights

(base: Firsz Quarter 1956=100), , . .. . . . . .. ... .. . .. , . .. . .. 59

CHAPTER III

Iiziplicit prices, 1943-61 (Lndices 1950-100) .. ..........,. 70

Impl icit prices, 1943-61. % change over

previous yenr . .. ... . . .. . . ...... .. ....... .....
.. . . .. . .. 71

Index-Numbcrs o€ money-wages and real wages,

:' 1943-1961 (1950=100) . .. ..........,.,...,.............. 75

Annual pcrcentage changes in index-numhers of

money-wages m d real wages, 1943-1961
(1950=100) ............................................ 76

IV. b i s Wage agreement dates, and price changes of

several consurner goods . . . . .. . ... ... . ... ., . .... . ...,
. . . 75

v. Index of farmwages ................,,...............,, 81

VI. Indices of f a r m wages (Ferrer and Vila) .. . .. . .. . . ,... . .. 82

VI1 . Ratios between indices of implicit prices

(1943=100) ......................,.........,..,..,...... 85
V11. bis f T R c a l fcrup
t prices. Iildex of arpa sown.
Relative yrict.5 . . . . ... . . . . . ...... . , .. . . . . . . .. . . . . .
.. . . , 86

VI¡¡. Distribution of farrn value added . .. .., . . . .. . .. . .. .. . . . . . 88

lndicea (195@=100)of expart and import prices

. . .. . . . . . . . . . ... . . . . .. . . . . . . .. . , . . .
in U. S. dollurs . . , . . H9

X. Terms oi' trade (1950=100). . . . . . . .. . .. . . . . . . , . . . . . . . . . . , 9O

Argentina's pel+centL%eshare in warld cxports

(several product S ) . . . . . . . . . .. . . .. . .. . . .
. . , . . . . , . . . . . .. .

CHAPTER IV

Wholesale mmnrgins un 22 articles . . . .. . . . . . .. . . . . , . . . . . . 97

Retail margins un 36 ürticles . . . . . . . . . . . . . . . . . , . . . . . . . .. 98

l e retail margins . . . . . . . . . . . . . . .. . . .
Averagc ~ i ~ h o l o s l i and 101

Overali averages wholesale and retail margins . . . . . , . . . . . 101

Retaíl nnd wholesnle nzargins; PhysicaJ volume

of retail sales (Buenos A i r e s ) . Index 1958=100
Pcrcent chmge in wholesale price index .. . . . . . . . . . . . .. . , 103

Vi. Pe rccntagc changes in p r o d u c e r t s wholesale

and rclail ~irjcesof commodities . . .. .. . . . .. . . . . . . , . . . .
,. 105

Dist rihution of :iverage percentages of gross

margins .........,................................ 106

CHAPTER V

Agriculture and industrial product (1949=100) . . . . . . ... .. . . 120

Zniporls of caliit:il gntirls n~idr a w materials, as

% of total imports . ... .... . . . .. . .. . .. . . . . . . . . . . . . . . . . . . 123

Foreign private investment as % oof G N P (Yearly

werages) .,,....,...,......,.......,.................. 125
L I S T O F F I G U R E S

C H A P T E R I

l. Physical volurne index of Importc and Expurts (Dase 1943=100)

2. Xndex of agricu ltur al :uirl in ,iiiufscturing production (Base 1943: 100)

J. Nittionül product at cnnstnnt pricea 1960 by sector

C H A Y T E R 11

1. Cust o i Livirig lndcx (housing exaluded) and relative iiicrease - City of

Buenos Aires (Base 1943=100)

-.
9 C o s l of living, agricultural production and esiiiiiated population (index
Base 1960-100)

3. lndex of cost living. Fourteen countriev

4. Qu:trtcrly índew nf C L I : CLI in food sector, value of u$$ in argentine pesos

ünd wages (Base 1943-7106)

4. bis Quarterly increases in C LI; CLI food sc-ctor md v a l u e nf u$s in argentine

pes(

5. 1)1-»vincialpcice indcx of b a s i consumption griode. Main cities (Bme

1943-1 0 0 ) ; hasqiiet rif 13 articles

6. Prr-it.incial price index of basic consurnp~iongouds . Capitnl citieg ((Rase

1943 -101)) Basyuet oP 15 ai3icLes

7. Pro\ inciai price iriciex of bnsic consumption goods. Quarterly (Base: first
quarter of 185G) M a i n cities

8. Cornpari son among provincial p r i ce ind ices with Federal Capital and
provincial weights - Corrientes

9. Comparison arnoiig pravincial pricc indiccs with Federal Capital ,md

provincia1 weights - Santa Cruz
CHAPTER 111

Diagrams 1 t o 8

1. Changes in CLI and relative prices

2. Index of sown area, real crop prices, relative prices

3. Carrelation between index of sown area and "real" crop p r i c e s

-4 Correlation between index of sawn area and real crop prices (+= b+a. Pt- l )

C H A P T E R I V

1. Retail percent ruargins and percent increases in t h e C LI

2. Wholesale marg ins and percent increase in the wholes ale p rice index
 THE INFLATIONARy PROCESS I N ARGENTINA, 1943-60

Introduction

1. The present work is a. study of the behavicir af prices, wages. profit rnasgins
of food distribution industries a ~ i dIhe t e r m s of trade in Argentina durjng the
yearfi 1943 t o 1960, a periud f n which sustained inflation waS accompanisd
by profound changes in the couiiryls economic aiid political structure. The
first part (Chaptcrs I ta IV) pi'esents t h e relevant statistical material, and
it is prcccded by a rshort l~istoricaloutline t o giva the reader the necessarg
background. The second p:wt (Chaptcrs V t o V I I ) attempts to explain why
the price-leve1 has shown such a persistent upward tendency througbout
these years, and the principal lines of policy followed by the different gov-
ernmentS. .

C u h u s l y enough, the study of l-irice behavior is almost a mfssing link in

t h e econoniic d e v e l o p m e ~ tliterature of Latin America. One of the ~ i m of
s
the worlc is to call tlie attention to this important topic. A thorough under-
standing of the operation of tne pricc mechanism in Latin America countries
would be of great assistance to policy-malcers. Whether or not thc price
s ystei~ibríngs about the inost sciciatly desirakle allocation of resources,
tliere is no driubt that it is cxtqeriiely sfficacious in showing uhere ttbottle-
necks" exist in the economy and iu the present state of stíitistical informatifin
i i i Latin Ariierican couiitries, t h i i rnay k the beat iiidication of where suit-
Itkle c o r ~ e c t i v ernerisureu ~ i e e dt o be applied.

Iii the chapters which iolluw, both absolute prices and price-indices are
given. Sonle statistics were already auailable in publisbed form, so that
ixy task was mertily oiie nf assembly and presttntatlon; some of the basic
material was given Surther elaboration, but I have tried throughout to indi-
cate clearly the statistical methods used, both by t h e original sources and
by myself.

In other cases 1 had to construct m y w 3 indices. This was particuIarly

difficult at times, since Iht:basic infarination was either geographically
dispersed o r simply not n v ~ i l n b l e , Onc indexivhich required extensive
original work was that of provincial food ?rices, since there were PiomytualIy
comparable o r ccrmplete indicatora o£ provincial retail prices t o atart with.
 ----
.. . . .-
------A
, _.

My object in producing this index was to discover: ( 1 ) whether thc pace of

inflation in Argentina as a whole could k satisfactorily measured by
changes i n the cost-of-living index i n Buenos Aires only : and (2) whether
the process af industrialization and urbanization has affected the relation-
ship between pr ices i n the provinces and those in Buenos A i r e s . In par-
ticular, 1 wanted t o know whether the provjnces had been less o r more
inflationary than the capital.

Another field i n which special statistical effort was needed was that of
p r o f i t margins in food dislribution. Here my object was to determine the
effects on food p r i c e s of tht! pricing policies followed by wholesale
and retail traders, because it seemed to me that the behavior of d i s t r i b u t o r s
must be of great importante in the explanation of price movements. Usualiy
urbanization processes a f the kind which o c c u r r e d i n Argentina in the years
1943-60 give rise tu tlbottleneckstli n the distrihutive trades, which i n turn
lead to abnorrnal p r o f i t s üiid to the disappearance of price competition.

3. It will be noticed that in the course of thc study food production, food con-
sumption and food priccs are frequently singled out for special. attention.
The emphasis is due to iny belief that t h i s is a field which coritains difficult
and important problems to be solved by Argentine policy-makers if they
w i ~ tho further the i n d u s t r i a l i z a t i o n of the country. Sinse food has a heavy
weight i n the urban workerts budget, and since experts consist mainly of
the kind of food praducts which are also consumed domesticall.~,it follows
that a f a i l u r e of food production to expand must cause rnajor difficulties in an
industrialization process which relics on impolted materials and equipment.

4. In the Last part of the work I offer a n explanation, on the bnsis of the sta-
tistical evidence, of the inflationary mechanisni which drove up the general
price- level by 4.000,0% during the 1943-60 period. The esserice of my
aigument is aa followsl. Suppose a country possesses (a) an important
agricultura1 sector whose productivity i s low and whose long-run elasticity
of supply is small, and @) n rnanufacturing sector with perrnissive wage
policics, rigid or expanding profit margins, and a level of productivity
which though higher than in agriculture is not itself rising; then any excess
demand f o r food (whether for export o r for home consumption) will raise
not only agricultura1 prices but those of manufactured goods as well, c&l
thnugh the general price-ievel will be pushed up, the excess deinand for
food will not be met by an increase i n supply, In this situation thc low
supply-elasticity of the agricultural sector plays a key part. Other factors,
of courso, may be important (for example, fiscal deficits and forcign trade
difficulties}, but in my vie w these are to be segsrded as exogenous influences;
1
This hypothesis, which I shall t r y l o justify as consistent with the evidence, has
a c l o ~ eaffinity with that put farward by Prnfessor A. O . Hirschman in The Strategy
of Economic Development, Yale University Press, 1958.
 in the light of the theory juat put forwards I have chascn to concentrate lin
rigidities in food aiupply and their influence on the upward movernent of the
price- l e v e l .

5. Chapter 1 gives a brief historical survey of the period. C h a p t e r II examines

changas in the Buenos Aires cost-of-lfving index (both in general and by
eommodity-groupa) and In provincial food prices. Chapter 111 daes t h e
a m e f o r national lncome statlstics and traces the changlng relationship
between induetrlal and f a r m price-levels. It also studiss the behavior of
wagss and of the terma of trade; in Chapter IV, an analysis of profit
margina 1s presented. Chapter V attempta a partial explanation of the
Argentino inflation~ryprocoss which wa descrlked in previous chapters.

Flnaliy, in Chapter VI, I atternpt an analysis of the policies undertaken by

the different governments. In Chapter VII, 1 offer a number of policy re-
cammendations on the basis of my conclustons.
F I R S T P A R T
 CHAPTER 1

THE HISTORlCAL BACKGROUND

1, Argentina's econamic and political vicissltudes during the last two decades
h a ~ ebeen the subject of so much controversy that even a skort factual ac-
count of the events of the period may be unconsciously distorted by the
author's p e r s o n a l viewpoint, Nevertheless. some s u c h outline is neces-
sary and must be atternpted; without i t , many of the movements i n the
statistical series presented i n subsequeiit chapters would seem quite in-
explicable,

2. Between 1943 and 1960, Argentina underwent two succesive and contrasting
experiences: fii'st, she \vas transforrned by Per6n into a contralized econ-
omy; then, after the revolutionary overthrorv of his regime in 1955, she
moved away froin state-control t o w a r d s sorne s o r t of economic liberalism.
With the pendulum thus swinging back and forth, almost any generalizati011
about the period as a whole is likely to break down. Nevertheless, lhere
is one theme which can be said t o underlie any of the differing economic
policies of the successive administrations - the theme of industrialization.
Most of the econornic decisions of the pmt two decades have been dictated
by the need, felt by al1 governments, to either preserve o r stimulate thc
industrial sector; and policy had to manouver within a set of very rigid
constraints. These havc remained much the same over the years, what-
ever the regime; this h a s h e e n particularly truc since 1949, a year which
saw the abrupt ending of a short-lived period of wider rnargins of choice.
The four principal constraints have been:

i. a continuing deterioratíon in the terms of trade:

ii. the rigidity of agricultura1 supply;

iii. the competition of interna1 consumption with overseas

demand f o r the available supplies of exportable products;

iv. thc growth of industries requiring large inputs of imported

goods .

3. SVlthin the l i m i t s set by tl-iese constraints, official policies regarding price-

inflation varied very much during the period: From 1943 to 1955 - the
 state-control years - the government became more and m o r e preoccupied
with the problem of iiiflationary pressures; yet with the exception of a
strong and largely successful efforl. to stabilize prices in 1953-54, i t s
policies were by and large permissive. Diiring the years immediately
following P e r 6 n f s overthrow iri 1955, inflatiun wac only one among a large
number of problerns; in this period uf social snd political readjustment,
the provisional government had i t s hands too full to do much about it. It
was only in the last months of 1958, under the first constitutional. presi-
dency since P e r ó n f s fall, that stahilization hecarne the center-picce of
government policy; yet paradoxicallq~,the years after 1958 were to see
the most rapid inflation of the whole period. In 1959, the cost-of-living
index rose by 115,4%, a greater increase than in any other year since
1943.

4. With government attitudes toward inflation thus varying over the years,
the period might h e subdivided according to the nature of the policies ap-
plied at different t i m e s . However, I believe it will be more profitable for
the purposes of this inquiry to define subperiods according to ailnual rates
of increase in the cost-of-living index.

Policy changes will then be seen in the context of the price rnovettients
which in some* cases they brought about and which in other cases they were
attempting to check.

1. 1943-49: this period which may be styled IfPost W a r I", s a w

apersistent rise in the cost-of-living index, up to
a peak in 1949 (Average yearly relative rise in the CLI fro:;,
1943 t o 1948: 1 4 . 3i",. Relative rise from 1948 t o 1949: 3 4 . 6 .
As it may be seen on Table 1 of Chapter 11, the year 1949,
together with 1951, 1952, 1958 and 1959, shows the largest
yearly relative increases i n the CLI).

2. 1950-52: llPost W a r ZITt: further rise in the index to a new

peak (relative rise i n the CLI in the years 1950 and
1951, respectively: 27. 2 and 3 9 . 6 . Relative rise in 1952:
40. 8).

3. 1953-54: lfPost W a r 1111': a slower rate of price-increnses,

(Relative increases i n the CLI in 1953 and 1 9 5 4 ,
respectively, 4 . 1 and 3 . 9 ) .

4. 1955-59: "Post W a r IV": a faster climb in the price-level,

up to a new peak in 1959. (Relative increase in the
CLI in 1955, 1958, 1957, 1958 and 1959, respectively: 12;8;
1 3 . 8 ; 25.4; 32. 2; 116.4).

5, 1960-61: ITPostW v VTt: falling rates of increases (Relative

increases i n t h e CLI: 26.8 in 1960 and 13.6 in 1961).
 A. 1943-49: "Post W a r 1"

3. These years s:iw the establishment of the main institulional

frarnework of the Per6n government, which was to las1 until
1955. In 1943, a rni1it:iry revolt overthruw the constitutional g0ver.g
iiient of D r . Castillo, and Perón (then a colonel) became Argentina's
fiisst M i n i s t e r of Labor and Social Security. In 1944, he was appointed
Wai. Minister. and Vice-President; in 1946, after overcoming
an attempt by the generals to wst him, h e w a s elected to the
P r e s i d e n c y . In 1946-47, a series of new measures laid t h e found-
ations of the "new era1', Among other tkings, the Institute for the
Promotioii of Argentine Forcign T r d e (IAPI) was s e t u p , thc! Centr:tl
Bank and vurious public utilitics were nationalized. and a five-year
plan was introduced.

h. The cost-of-living index ( h e r e a f t e r referred to as the CLI)

rose substantially during these years; the average annual
increase trom 1943 to 1948 was 1 4 . 3 % , with aii above-average r i s e in
I Y46 (21.2';~) and diminishing rates of incrcnsc i n 1947 and 1948 ( 1 5 . 8 3
iind 14. 79h respectively). I Finaliy, in the single year of 1949, t h e C L I
climbed by 3 4 . 7 5 - aii uiiprt.cedented r a t e of increase which carried
thc index up to a first major peak of 2 5 9 . 9 (1943 = 100).

C. The p e r i o d was one of economic expansion: real output, pro-

ductivity m d living standard$ were rising, and the coiintryls
i n t e r n ~ t i o n a ls ituation was very favorable. Export price r o s e contin-
I

uously until 1943, bringing a marked improvement in the t e r m s of

trade, aild - ul nny rate to bcgin with - Argentina f ~ o s s e s s e damplc
forcign-exehnnge rcscrves which had been built up during t h e w a r .
T h i s gavc t h c government great frccdom of choice in econoniic policy:
if, for cxamplt:, it decidcd on :i course of i n d u s t r i a l i ~ a t i o nand foreign
trade c o n t r o l s , it did sn quite frtlely. A s time passed, however, t h c
fiilld rif choice nürrowed. O u t of reserves, 776 millions of p e s o s
weve used t o retire forcign debts, m d 1 , 6 7 9 92 riiillions of pesos
(npproximate.tely)3were spent in buying u p v a r i o u s hreign - owned
public utilities, exclucling railways.
Britis'n cumpanics rece ived in püyment f o r t h e r a i l i ~ a l s. y s t e m 150
rnillion o p:. i s ste rli~ig. Industrialization, calling ior large y u a n -

t. The figures are percentages of t h e prcvious years index.

2. 240.6 million dollars at an nxchange rate of 6 . 9 8pesos per dollar
3 . Accordiiig to tke ECLA rsport on Argentina (ECLA, El d e s a r r o l l ~ e c n 6 m i c ode.
la A r g e n t i . ~ ~30.6.58,
, aiinex, p. 265 ; mimcograph).
The repatriation of Ihe foreign debt, was as follows. .
(in million of d o l l a r s )
1946 1947
in dollars 121,5 49,l
in pounds steriing - 4d,2
in othor foreign exchanges 10,l 2,1
Source: ECLA, Ibid, p . 26'7
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..ropas
u o g 2 n J l s u o J puc Bu!urur ' d ~ ~ s h p un rq J O 3vq7 j ~ c yU E ~ Jaxoru ol71q s E m
airn~lnq;r%t: n'q paJnqT6luoa ianposd ~ i ? u o ! ro ~ ~un!
u l;rodo.rd ay3 ' s n ~ o E y
!
y z a l q r ! ~o q ~~ t 'saoct;t Q.r~?aF I ~ I ! : ~L~lsnpuro ~ p a ~ ~ l a ~ s a r l r n ~ l o r !
u n q m ayl lo puc solaas Ic!;rlsnpur aqq puryaq lTam lTaj Mvrr asii1~nq~3't:
',l'~uouociaS,cu!lua2~v;o J O ~ S SJ ~ ~ L O C [ C UJSUUI I aq? amo . F%gz
lnoq? Lq llaj sry3 ~ c / 0 5 6 ' 1pm f.g/of:r;~ uaa,n?aq :YUT.IEJ U D as11 U! ~ u a w
puv A x a u i q 3 ~ m$0 a n p n ay? u! auyaap ay? sem slrtl jo Uo!JE3rpu!
¿relnay.~rndE fu!a;rayq saa!ju.uaour 01 a3curep iuanbasuo~y ? ! . ~' n o p a s
1~.1n)px!-~=h:aqt ISU!F~C L l p a y ~ s r urCn;~np ~ ~ . i ~qjar nu p o ~ dj v ~ nn~ al r ~ p 8 ~u ~
!e!;rlsnpuy uaa.nJaq ,,apvqjo smaaq 1xriirajul,, s y 6~ ~ 6 puz: 1 g p 6 ~rzaaMlag
a
h u a ~~ n 1cuoy)ru u! l u a ~ ~ n r n bags!le
a air
r! u ~ q sl s q yanw pau!xqqo s x a ~ i o a 23111 'soarnri ~ ~ J O ~Mz plos ! SFM
u!c;r8 ay] rlfanoyl . s n y l :sa$a,r o3ucy3xa 11:~o!jjnM O ~J O slsnq ay1 uo
paxg 3 ~ sdox3 a j
~u!c~8 Jtaur) ~ 0 .pa.i!aaoa sJ3ruxeJ rpTq,ti sa3l;rd osad
aqj. ,sa~!pa3u!uri 1 3 3 ~ ~?!0u!S S ald313 ~ ! 3 y ~$ U C~ a l 3 g 0 d33136 s , ~ u a w
-u~ano% ay4 auxclq o? JIFJ ~ ~ 1 3 11 3 s'SJYJ J ~ I J iCmoun3a a q jo JsaJ ay1
JC'~ r ? pyu~y a q ñ ~ q ~ a ~ r pl oo3u3 q ~ n c l ~ nSI!o pun '~uaura%ñxno3
-u3 a l q ~ ~ c d r u oouo pahraaril 'pmu Jnqici oql tro ' a , r n q n ; 7 ~ ~ 8 y * a
* a r a rxg;ra,í ay1 $o : ~ s dñ ~ n ay] a %E ! ~ n pm!ap uoyczyjR!qsnpy ay3 j o
y $ u a ~ l s 341 o1 h o u i g s a j J U ~ I I ~ O ~- J ~ ; p t ; tpuiut: s t ~ uoamlaq
1 aauaJs!xa
olu! amo3 p q urayl $0 lsour ~ x paMoys q E z 9 ~u! l Jno parir;ri:o surarf
~ c p ~ s i i piu; "i ~ p ' 30
7 l ~ a ~ ~yi i sx p g ~u! ,%tl LZ p u ~'L561 u! % c . ~ z
'9bfil U! ?LJ ' 9 1 01 a S O J ' d ~ JO 3 TIT Z I Sl?M CFC;T U! Y3IY,N 'UO!JEUI.7OJ
~ ~ l r r~ lT~~ Sa ~ U I OS PS O J ~ :sosad u o ! [~u 1 '-[ 3u!1tqo+ su-coi 0 0 ~
%u!ycw 8967 ñq SFM 'sosad uo!l-(rru 261 3 1 1 1 p ~ osmol ~ 0136' 2 apvw
pi?q c p r i ~u! q q q m '~^e!dysiipuya i ! p g ~ 3ap o3uvg ay? Is%z'g9 oso^
u o g 3 n p o ~ dlvrirlsnpu! JO xapu! ay4 'i3f.61 puv u a a q o u .asa3
- o ~ daq3 30 paads ay1 n ~ v x a 1 a r i 3o$
~ pzn: ri'3!10d ~ ~ ~ [ [uzd uxaaj s u ~ d x a
lv!Jlsnpur ayem 01 SBM p!p J U ~ U I U J ~ , \ O %M ~ Uaql J E ~ M , a a ~ ~ n d
01 a u r a ug;rw a q a q uiiaaq X p r s q a p ~ d uogxz;layJpnpuI -p
,
juarrrlsi-ilpa~A s ~ a u nj o ssriaoirti c oqut p a a q aq o$ uaos SEM
~r p u ~' ~ a n n a n u u rJ O J tuoo,r unio Y%! U! U O I l 3 J J 1 E 3 . 1 . a.ranas r: pa3-c~
~ u a u i u . ~ a h os 3r l ~'a;rojarcar[i '6ft;l: 'T1p6'[ PUF 9 5 6 ~ ~~d 1a a x a
paurlaap Allvn3ae suodxa j o aurnlo,\ ay1 3 l q M ' $ 7 6 ~pui: g ~ f uaanll i ~
-aq pIc!llnrq A ~ J K ~as!a U 0~ s~notirrr!,!o aurnlnh arll 3ulsnr:n u1 ~ 0 1 3 1 : ~
~o[rourR SBM 'STI?!.Z=IJEUIIc!.rIsnpul puc ?C~au!qnruruta!n;roj ] o sarlrl
 TABLE T

INDEX O F THE PHYSICAL VOLUME O F IMPORTS AND EXPORTS

(BL2se1943 = 100)

Ye ars lmports E xpo rt s

Source:
a) 1943-5 1: wPrri&cJg-e_Ingreso de la Rcpdrgentina, 1933".
b) 1952-56: i' irzcción Nacional de Estadistica y Censos, Bol. C 48, 1958.
c) 1957-6 0: Direccidn Nacional de Estad-Tsticn r; Ceiisos, .Bolet Tn Mensual.
. -. -....-
 .Llan!13adsa~ 'Lf61: PuE 996T 'cP6'C 'óf6T u1 6 'OT PuE S ' IT
:6 ' 2 ~ d ~ aql
Is . Z T jo s - e ~ 3 salio s o ~ n ~ l p u a c ú $uarrru,ra;zo2
ra 30 a%e:uamad ay;L
'19-8PRZ p o r ~ a day330 aloyh\ Jan0
$uaiiru.q~dj o sueaui ay1 u! saZusy3 s ~ o y 1s 1 3 i y ~'ilalclc;L ay1 u! uaas aq
U F SE ~ 'u0!7filn3~~3 u ~u!n ; h
U! , < ~ U O U Xjo d ~ ~ ~ arIl i a n ~ dyo01 a s ~ a l o u !
a(qx.rap!suon v 6 ~ 6 ' 1u! uanz -paqcq aq o? SEM uo!qEljur ,TI papuwxap
uo.!gcnlrs ay1 ss ;ClZuo~zssr: $31: 03 pal!i?j T! ' ' s s a 1 o q p a ~ a ~.1~pa.roJ O
uoísuedxa ay? payaay3 pul? ' s ~ s B ~ J ~3Cd-e~ u ! . 1 0 ~ 1 ~ 0O$ 3 S ~ C I I I I ~ ~ J Bapxw
'a;lnj!puadxa unlo pampa :snlnscarrr a n r . l 3 ] . r ~ s a-10 ~ Jaqurnu
F <$!M '
papuodsad ~uaurunano%ayL s a s r ~ dnaurnsuoa JO lariat ay1
01 t[snd p~r!n{dri %zro;r~sE- ant.3 ' saa!hJas ogqnd p u pooj ~ uo sa{p!sqns
u;rn?.ía3 $0 uopuyurrla ay$ yl!nl 8uolz: -sry.+ p u ~'sosad jo suma2 u!
saa;r,rd l ~ o d u paslxir
r~ ' 6 j f . 6 ~ nac[ura~dasu! 2ug;ials 30 11?t!y?% U ~ M O ~ I O J
'nsad ay? l o uut$t: tiienap aq,l, .pauTl;Iap pEay m d l n d ~ n opur: ]la$ Jurrarrr
-7sanur !qp1o.r8 IE!,xlsnpu;r j(i al-cn a q paynaqa ~ b l l ~ e s s a o a usvodurr
30 %u!llno ay2 ' S ~ E ~ L ~ J MEJ E W pu-e saJi-i1;icjnueur paystug-!mas 'ha
-uryni:ur yans ,lo u o g e $ ~ o d u raq4 l p e a ~ n i l auo:sucdxa
~ IEIJlsnpur a m r s
iymq ~ 1 x 1aq o? p ~ s+.rodur~
y a
pur ' s % u l u ~ cszaslano S, li~jrrnooay?
u! I~EJ d ~ i i y sr: 1q3no;rq s~.rorlx:,jo arxxnlon ay? u1 airgaap ay1 ' a p . r l
j o srnla? ay1 J O ~uyrrasironiaql ~ T T M.(00'1={:+61) 6 - 6 & J O ysad 't: o$
7 ; t . p ~ 3 ~ 0 2xapu? 3u!~q-jo-?sna aqc~, ' S ~ U K I p~ a~~Pa l s j %11-e a ~ yuaur
-~saAuKa!lsauop puz: sJ~cidxa' s$.~odru~i l l a j qloq p d ~ n ole~nqna!cz%l:
pur: I+cr;rlsnpu! :u.rnl a1qrlrrihvjun ui: yo01 a p c q jo sutilal aql 'poc-rad
uoryqju! pa$walaanl: ay1 jo t s ~ !aq? ~ '~"a.1' 1 ~ qu1 l .n';rcr)sry q u r o
-u033 .ic,~i-~sorl s , n u q u a % ~u[ v aua6 paqsaa,)I:,n E ' 6 ~ 'u~ pua 1
u+e 01 a u r m 8 ~ u! ~p a ~1 c u ~ r r r l n13[ 3 ! q ~u o j s u ~ r i x a30 po1;rad ay^ 'Y
-burouosa ay1 jri iroqnas alen;r.id aqq 60 aloyM ay$ 04 Bu~pualpapaaa
-xa $ua~uuiraho% arl4 01 Su!pua] yucq B - L ~ G T u! 'paapu] :(AI qqe;L aas)
sl!xjap ~ a s p n qa 3 1 q Lq pay3p:ur si:^ uo!su~dxa s ! y ~ 'T8p6T X.[ y > c jo ~
Tanal E 01 aso;r. 3;r ' ~ F G ir!
T 6 ~ 503 tuoaj :s~n$!puadxo~uaux
-uirano%j o qvio;r%ay1 SEM s ; I B ~ ~ C ,,I JCM p n d i i ayq J O a ~ n ~F.~ a j - 3
'111 alq-e& u! sa~i-i%!j ay$ Lq m o y s S! s!y$ :sl;rodxa
j o asuadxa ay1 ~ i Lluo : pags!lcs aq plnoa pooj JOJ prn:urap x l s a u r o p
%u!pu~dxaay1 1EY1 luEaur jncilno l-t:anl!nop%I? $0 u o r ~ e u % ~ay^ s 'pa-iou
: C p ~ a s lsv~ *sl~npo.~ j
p do q ~ o ;Cllnraadso p m spoo%JamnsuoD JOJ
pmurap 2!u1nio;r% put: a % ~z:qD i asr;r anx8 ' Y O ~ E M ~-eI;Ilsnpuj30 puali
p ~ c - a d nay3 Y ~ ~ Ma y $ a 3 o $ y j
'(sairry souang 50 ~ ~Ll[cpadsa) U O ~ E
-1ndod usqm ay$ j o y w o ~ % ayL , ~ 3 6 u!
1 usyq a.tour pp s a M p-eay
dad pnpond TEaJ ' 8 ~ 6 16q 1456 ' g I n q E sehl p a y rrad ~ n d ~ n o
sso~E u1 a s ~ a . r ~ ua r3 e ~ a h
y ~ n u uay$~ ' ~ ~ 6 p1 :u ~ u a a ~ ~ a ~ '3
.uogenT! S
ay1 Taaw 03 uayc? s s unym ~ a ~ g 3 a j j 3r[Snoua loir s ~ e a Ll o laqurnu
e JOJ Jnq :pamx1xqun artroriaq pcy L w o u o ~ aaql )*iy~73123 ay1 lnoqi:
d x ; r o ~03 u ~ % a~qu a u r u ~ s n oay1
3 '.rananioy ' a h o ~ d r uo1 ~ ~ 3 ~ x a3 p3E q 10
s u r ~ a ay? m!
) uayM -apea1yo s w a q s , r u ! ~ a a 3 ~u!v ~ u a u ~ a ~ i o l d iCp-i?a~s
ay? hq alqrssod a p u r s?:m s!yl I S I J O ~ X J O~L q g u ~ n bay? u! suo!$nnp
- 2 ~ ñq jam aJaM uoqelndod u-cq~ 11 B u ~ ~ o i ay? ~
l Y jo q u a u r o ~ r n b apool
 figure 1

Ph/YS/CAL VOL UME IffDEX

mar
-.
144s
- ..-.-- - - .
@ 5 c
,
--
,
e
r.
1
, -- - ,
9 s 1
,
2 3
- ., - - - - - ----
4 ñ C ,- U f
7-
fPCOY P
 G N P A\' ECONOPI'ITC SECTORS AT FACTOn COSTS:
PERCENTAGE DISTRIBUTION OF THE G N P B Y SECTORS

Agricul- Indust. Transp. Housing,

- Govern-
k'e ar Total and Commerce,
ture Mining and ment
Construc. commun. Finance

íThe figurcs m e aiinual avertiges over each of the quinquennial periods)

Source:
Alexander Ganz, cit. G. Di Tella and M . Zymmelman, p. 311, Vol. V .

TABLE 111

TNDICATORS O F TOTAL FOOD SUPPLY

Total Síiod supply 100 97 93

Do. , excluding meat 100 1O 0 101

Real cotisumption per head . 100 135 121

Volume of food exports

1938-1939 = 100
- ---"

(The figures are ani~uülavcrages over the periods indicxted. exprcssed as pcr-
centages of the 1934/48 avcrages).
a. It includes wheat, maize, rice, heans, potatoes, sugar, oils, m e ~ nndt milk.
Even if it is not made clcar in the original source, ure interprct ihese tiguros
t o refer to total production.
Source:
United Nations, Economic Coinmissionhr Latin Amerlca, The Selective Ex-
pansion of Latin American Mriculture (19.561, Chap. IV, an estimate pre-
pared by the author at the Center for Eclinomic Research, Inst. T.Di Tella.
7
 DEFICIT OF THE P U B M C SECTOR ZN TEIOLTSANDS O F MILLION PESOS
AND RELATIVE TO GNP

Deficit
Y e ar De k i t GNP

Source:
Unit ed Nations, Economic Commivsion fui- Latin America, &j-Desarrollo
Económico de la Al-sentina, Anexo V , 1 9 5 8 , p. 145.

Tn 1949, the governmeiit took new steps in ordcr to facilitate its

Cield oi manouver iti rnonctary mntters: the Centrnl Bank w n s re-- .
organized so ,as to make it directly dependcnt on the Finruice Min-
istcr m d io remove al1 possiliility of separation betwcen the fisc:;~1.
financia1 and economic policies oi the goverilrnentl. At the same
time, it was relieved uf the ohligation t u keep gold and forcign
exchange equivalent to 25% oof its currency issuc.

1. Argentina, Presidencia de la Naci6n, Subsecretaria de Informaciones, Reginien

Bancario Nacionalj. 194 9.
 SUPPLY OF MONEY

Quantity of Perccntage Wantity of Percentage G N P at

rnoney in increase rnoney in increase Proport ion
curxent
between
Year circu lation ove r circulation over prices of quantity of
end of year previous average of previous f 950
money and GNP
(mn. pesos) ye ar the year Par (m-Pesos)

26,8
29, O
30,6
27,6
27, 1
30,2
31,6
31,4
30,2
27,5
24,l
19,8
SO, 1
20, O
18,76

vhe'quantity of money is dcfined as the totd of cur-rency bilis, win, 4banks' &mand depsits).
+

brircc:
cc :ri:cntin;il Bmti Central de Id Rcptihlicri Argentina, Boleth Estddistico. A h I M F 1 s , Lnternational Financia1 Statistics
 -

j, Tlie 1949 setback made t h e iiuthorities awxre of the limitdiiins

and rigidities which wcrc Iiainpering t h e indusirializatiriil of
t h e economy. Thc governmentts ecunomjc pub1ic:ltions began to admit
the existencc of the friciious inhereni i n n process of unbalanccd
growih, particular ly ihe problems posed hy the lagging iigricu1tur:il
sector. T ~ 1E9 4 9 report o1 t h e Central Banli, revickving the previoiis
yenr, said:

At the end rif t h e year, with t h e basic objectives of tiie

industrializatioii plan fully attnined, t h e econuniy w m
enteriny a period of adjiistment and consolidation. In
this period, i f grain and mcat producers are t o regain
their position in international markets, their activities
- . - --- with those o f manufacturing
w i l l have to be harmonized
production and a ratiunal balance struckl.

Ofl'icinl economists began to I-ie mueh more sharply aware of the

intercr~nnectionsLietween expci t-ts, interna1 consumption :tnd agri-
c u l t u r a l outpui; the saine Central Bank report is indicative of thc
changc in approaeh:

.
The situntion . . of ngricultural produclion in 1948 indi-
cates the need to promote its exp;tilsion, not only beciiuse
it represcnts an essenlial source of foreign exchange, but
also because of the need l o provide f o r the population's
increasing corisumption2.

To achieve this expansion, Che following program w a s put forward3:

(i)i-ileasures t o promote ttie immigratiuri of suitable agriculturnl
w o r k e r s , who would offset the increasiiig drift to the citics f r o m
r u r a l a r e a s (ii) thc irnporting uf agricu1tur:tl rnachinrrv, {iii) mri re
favorable credit policies towart-l ngricultureL': and (iv) the re:idjust-
ment of interna1 price policy s o a s to stimulate ngricultural incentives.

This program, howevei*, w a s not fu11y p u t into effect uniil some

years later.

1. AuthorTsitalics. Memoria A n l ~ de l 1948, Banco Central de 1aRepQhlica Ar-

gentina, 1949, p . 6
2. Ibid. , p . 15
3 . Ibid., p. 18
4. Between 1948 and 1944, loanx to agriculture incrcnsed by 25. ZC&, whi!e loans Lo
industry rose by 34.6%. Tlie bnlatice scems i-o have becn reversed by 1953;
farm loans rose by 2 8 . 9 % k t w e e n 1952 and 1953, whereas industrial loans went
up by only 1 2 . 6 % "
1o
7.

B. 1950-52: tlPost W a r 11''

a. After its unprccedented rxte of increme in 1949, the price-

level continued to r i s e at a faster rate than i r i the early Per6n
years : having reached 25 9.9 at .te end of 1949 (1943 = 100) , the C LI
climbed to 65 0 by 1952: in that y e a r alone it rose 40, 8Y0 - oone of the
highest annual ii~creasesin the whole 1943-60 period. The devaluation
which occurred in the second q u a r t e r of 1952 undouhtedly contributed
t o tkis acceieration of the rate of increase in the price-level.

b. These years witnessed a process of readjustment after the

expansioi-t of the "Post W a r 1" period. The terina of t r a d e
continued to deteriorate, lncome per capita declined; though it m i d e
a partial recovery l a t e r on, it never regained its previous highest
level. Finally, the crisis i n agriculture bcgan to he recognised by
the autharities: thc droughts oí' 1051 u d 1952, causing further re-
ductions in fa]-m output, madc the need f o r action iiiore obvious.
Since the country w a s nciw experiencing btilmce-of-payments diffi-
culties, the anly coursc warq to improve incciitives for export pro-
ducers; credit facilities were improved (in 1951, 95 niillion pesos
werc lent t o farmers with a gnvernment guarantee of the interest
payments) , agricultura1 equipmcnt was purchüsed a b r o a d (in 1952,
1 7 % of import permits wcre for this purposc, as against less than
12%in previous gcars) , the peso w a s devalued (1952) and more
favorable official exchange rates were used in calculating the peso
yield of overscas sales (1952,/53). In consequence, the "interna1
terrns of trade" bctween industry and ~ r i c u l t u r emoved in the lat-
ter's favor, and tlie agricultural sector's share in G r o s s National
Product rose from 15.5% in 1950 to 1 7 . 3 % iri 1951 - falling back,
however, to 16.4% in 1952.

C. Industrial production continued to expand: in 1951 the index

reached 167 (19.15= 1001, one of the highest points attained
during the whole period from 1943 to 1960. This called f o r a contin-
uing rise i n iniports of industrial materials - indeed, the level of
output (and so of income) essentially depended on thc availability
of such imports. (This suggests an error of strategy in the policy
of industrializatioii, i. e . the error of neglecting the sectors whosc!
output could h w o replaced impoimtedinputsjl. Thc world stock
piling boom, resulting Irom t h e Korctan wtir, d r o v e u p irnporl prices:
morPover, on thc rtssiimption that tht- would be proliinged : ~ n d

1. In this respect D. Felix woulcl argue that tlie e r r o r h:is becn prmeciselythat oi
not concentrating on already well cstüblistii*d industries, in ordei. to reducc
costs t o the point at [~Iiichtheir- goorls could be cxporfed. Sce David Felix,
- ---
"blonetarists, structur;tlists :m(I a i c --i r t subst itiition: A crili cal apprnisnl".
Paper presciited at thc Cunfcr-eiicc on Inflntion iuid Growlh iil Latin Arilcrica,
Rio de Janeiro , Janunrg' l c ) t ; : 3 .
It is necessary to point out Ihni the proccse of import subslitutio~lis likely tri
take time and largc invcstmenis. Thcsr invcstmriits (111 the othei. h m d may rs -.

present inci-cases i n iinports 01 rii~ctiint:~.~' iirid oqiripmrbnl.

11
 y a l q ~' u q d ;r~an'-an;j pt1033s S , ~ U ~ Z U U Ja ~ q
~ O~, ,~, J R . ) ~ s1~1;13,,
6 1
E SE ~ ~ 2u!qr~asap &TE:\\ 1
; l!$un saeod 3 u ~ ~ o l ayz ~ q u!
l pooru S?!
pa8n~<a '8qs ~ a ~ a sanmsad
u? 1j J J ~ Ms l ~ o d i u t' $ulsp amm
pui: 3 ~ 1[E
s$.rridxa asniiaay n a ñ ,,SJ o ? o t - j s ~S,, q ~ n SE 0 g~ 1 n; ~&,%noyq qqy,?.i ' yue
l n q u a 3 ay;L . s a p t i l j p 1F13IJJOJ O a a m y o ay? u1 papalAaJ
ala.ii poiaad ,,TI nvM ]sodi, ay7 jo saIllnDTjj!p aTurouooa aq;L -2
'%8 ' EF: s,ñysnpu! Y~!M paJnduro3 sv
'3tt!puai T E J a j jo 359.~2 L ~ U ZOU I A Z ~ ~SVAI ; a.~nlln3!~8?? ~ 2 u!6 uana ~
y
' ~ o ~ a n z o :a;rnqn3!a% spLeMo2 s u ~ o y i u ~ qalnqyqstpax 01 ' ~ O J T U O ~
ppaao a,igoalas Iiq .ap?m 3aaa.N s j n o j j j . s ~ ~ a 6no~aa;rd rC u? p u a q
ay1 jo rusnalias E - JoJoas aqqnd aql u e q s u ~ o l~ ~ r aJrnrri r ~ q pahTaoa;r
aoJ.>as aj-e.i!;rd arll ' 0 $61 u! u a ~ 3,uoqq.rTsaJ iE~~qarrour jo ñmlod -e
SPJEMOJ JAOUI ,saqIJoq?nl: 3 ~ 1 S J ~ ~ TSJS C~~ J D L I ! JO a l - e ~aql u! %ujua
- q " ~ l ss j y ~ , -%L ~ 2 6 u? :
~ pus '9)g aso^ 1 ! T ~ G u T! !leas sno!n
-a.rd ay? ~ 3 ~ -5s 1 % ~ .
0 asoa ( s p r o ~ a as ~ n a Aay? 3 0 s7!sorlap
d
pmurap s n ~ iI3uas;rn;ri ' 3- E ) n'ouoru jo n'l!lm?nb ay1 '0261: u1 'J
's33j~d
PUE s " ~ T : A ~ JCI urn~;icpl!nha aql n.tnsua senz uog;>un$sir i s a ~ r u n s u u a
EM
Que s ~ a u ~ e a - ~ Y .snakqdura a
,lo s n n i ~ t q u a s a ~ d 33ujpnl3u~ 'dn Las
SCnh s a % pUE )
~ Sa3!J,T .íOJ U O ! S S ~ ~ U l O =lEUOllT:N E '8561 U1 .po!;rad
ir 1 .J .:A\ ? s c ) ~ ~
';iq,~ , ~ si: LIII:I~UUT
, , J;EU!JII~ a . ~ 3 ,Tl'ar{l ,]o pazqsu! ' s l i ? n . ~ a ~ u !
JT:.iA-o,+iq 3c ~ P tu B aq plnoys squaut asd.% o % ~l h~ : qp~a a m a p
9 ;1 ' u paanpo.Iqu! SFM 1 ~ 1 ~ ~ 1 a%hr, ~ 3 . 1JO n ' 3 1 1 0 6 ~ .a
' ~ T ; G Tir! ,,nlol,, pJona¿r w o1 Tlaj ' 0 q ( ; ~u! %lgc 69 uasJJ Yu!~eys.l,rodxg
-s~rir[s II\ a1gt';C sc ' ~ 3 6 u! ~ :~tlaoxasasnoag
podur a S u ~ y 3 x ajo u o ! y n d o ~ c Ir: m as03 iC1~t"nqnespooB payslu!j
- ~ u r a srms SIT?!.I.~IT?UIM I ~ J 'pmq ~ 3 4 1 0 3147 un - $ ~ J T O ~ U ~ I ~pcq F J
A r q l 8 5 6 ~Lg 'spodurr I ~ L J,lo dn a p e u spao%Tuauqsahu! 8741: u!
s r a a a m .%u!i~undiI~$snpu!ay7 daay 04 Jap;ro u! ~ 3 w ~ ay1 t . j asooy3 oq
pa;xrij aJaM '1wauaZ u! ' i n y ~.spao2 ?uaiulsanu! 3uynodurl pue sic!
~ s l ~ h1-e.1 q
r u %u! ~-iudccrki ~ d 3 m ~ aasoriqn 01 p y: s3q;r~oy~no - t :y q~ q q ~
~zrlodL' paq31: 3.1 ~ ~ C I U BII:'~! I ~3~~0.1
X J ~O ;~%I?)JUYS ay? 'sluaurA'~d
$0 3 3 ~ ~ 1 x ay1
4 dl ay 03 alllq op pl non mayl un suorpl!ury-( Jaqpii,j
l i : q ~os ruriury~rwI? 01 pa3npaJ ,Spsa;rlr: spoo3 xaurnsuo3 a~qmnp-uciu
JO s ~ . ~ o d u qjrm
r r pun rlelldw u=lra~oj $0 hio[juy pa?lur!1 L J ~ A
-e d ~ u oqyiii f LlEldtIns ~ l c i y su! s 3 y p o w w o n nlq~q.rodxa~ 1 1 'P~
 TABLE VI

RELATIVE DISTRIBUTION OF TBE VALL'E OF THE FOREIGN EXCHANGE

LICENSES GRANTED FOR THE PURPOSES OF IMPORT
(% of total licenses granted)

R a w materials
and semi-
finishedgoods39.8 47.8 52.1 57.5 62.0 33.9 44.9 46.8

M achine r y (ig
cluding agri-
cultural),
motors, tools,
spare parts 20.3 23.3 15

Transportation 11.3 11.3 7.1 9.1 13.0 6.3 11.5

Fuels and
lubricants 10.8 7.7 14.3 12.8 29.7 22.8 15.3

Consurners goods
& others 9.8 5.6 5.7 4.2 6.3 8.7 9.2

Source :
RepGblica Argentina, Memoria del Banco Central, 1948154.

aimed at rising agricultura1 production and exparts and at reducing

imports , waa an indication of change official views: its emphasis
on "austerityt' in consumption, so a~ to increase the supply of ex-
ports, set before the Argenf.im people a new and rcsisted idea. It
is true that the Central Bank regarded Ifanoccasjon:il exiernal dis-
equilibriumf7as I1preferable t o a contraction of industry Etnd employ-
mentV1, but the phrasing itself shows the anxiety with which the
balance-of-payments was ntiw regarded.
 C. 1953-54: "Post W a r 111"

After the substrtntisl price-increases of t h e previous period,

two exceptional years ensued in which the a v e r g e rise in the CL1
w as no more than 4% ppe r n u m . This comparative stability was
undoubtedly the result of the disinflationary policies adopted in 1932
and continued through 1953 into 1954. Restrictions on credit de-
p r e s s e d industrial nctivity: many firms were operating well bclow
capacity and t h e number of brtnkruptcies i n c r e a s e d noticeably . The
'lindex of profitability"l calculated by t h e Direcci6n Nacional d e Es -
tadfsiica y Censos fe11 from 15.3 in 1952 to 1 1 . 2 in 1953 arid 12. 9
in 1954. A s might have been espected, iiivestment declined consideg
ahly: f rom 2 2 . 2 % oof G N P in 1 9 3 2 , gross domestic capital forniation
fe11 to 1f1?~in 1953.

With thc dcmnnd for industrial inputs thus reducerl: iriiports

dcclined by - 3 1 . 6 % in real ter-ms - this brought t h e physicul vulume
of' imports back tu the 1944-45 lcvel. ElxportB incretised f'rorn 1952
t o 1953 (68.6% in real tcrnis) , though tliey remained w e l l helow the
prc-Per6n level. Thc iinpi-ovement in the balance of prtymcnis,
which aetually showed :I surplus of 1, 771 million pesos in 1953,
was sueh that the rescrves uf gold and foreign exchangc rvse from
the 1952 "lowT1of 772 million pesos l o no lcss t h n n 3 , 0 8 4 . 9 million
pesos i n 1 9 5 3 . M e n s u r e s wcre adupted t u rittr:~ctforeign investment,
nnd in August 1 Y 5 3 negotiations began M-ith C alifn'orniia Argentina {a
branch o f Stanrlacd Oil) for nn agrccmcnl on uil-prospecting. This
w a s tl-ic first stage in a dcvclopmcnt wliich w s s to become v e r y im-
portünt. pulitjcally as well ns economjcnlly, in later ycrirs .

Attempts to encourwc a g r i c u l t u r e continued: the xgricuitui+aI

sector's share of nationril income ihoscf r o m 1 6 . 3 % i n 1 9 5 2 t o 21. 7%
i n 1953, though this wns prirtly n reflection oí' the depression jn in-
dustry (whose shnre dccliilcd lroim 2 2 . 2% to 1 9 . 8 % ovcr tbc same
two yenrs). In 1953, fxrni production did indeed rise by about 74.65b
frorii 1952 t o 1953; but in subscqucnt yeürs i t continued more or less
at this iiew level, instead o I registering furtlier incrcases.

Though prices rose relatively liittle in 1953-54, ~ l i cquantity

of money continued to expand; in fact, its 247; increase in 1 9 5 3 ~was
the largest rise since 1950, and almost twice as great as the 1 3 . 77, in
crease which occurred in 1952, the year in which prices went u p by
40.8%. Out of the 1953 increme i n bank credit, almost a quarzer
was used by I A P l f o r crop financ.ing, w h i l r aiiother fifth went i n loms

1. This index is derived from the formula:

Profit of current year x 1 0 0 ,

Realized Profit
+ + Reserves
Capital from previous year
- which, in effect, gives ,z percentage ratc of return on capital.
2. See Table V, above, p . 9
 CHAPTER II

THE BEHAVIOR OF CONSUMER PRICES

1. in the previoris cliapter, h e rnovemenl cif the oflicial cost-of-living index

(CLI) was takan as a rneasure of thc pace and i n k n s i t y of Argentina's in-
Slation. But t h i s w a s v e r y niuc.!i I'üutt, de miel=, because closer c o n s i d e r -
-.----

ation suggests that the CLI is fur f r o m adequate as a n ecunomic indicator.

Before furtber use i s made of it, it will be advisable to give a detailed
description so as to bring out i t shortcomings
~ a i d justify various modifi-
cations which will be made l ü t c r .

2. The nlost ohvious peculiurity of the C L I i s that it relates only to prices iii
Buenos A i r e s , the Fedei+al Capital; there are no officiülly-publishcd i n -
dexesfor the vitrious provincesl, n o r Ior A r s n t i n a a s a wholct. It is thus
conceivable that s p e c i a l iactors, opera ting i n the Capitül aloile, rnay be r e
flected i n me CLI in such a wüy as to give a false i m p r e s s i o n of price-
moveiriei-its in the country as a ivhole,

3. Secondly, i t is a n index of prices o1 g o d s Iiought by urbm working-class

families, n o t by consumers in gencrttl. Siiice Arganlina as a whole, and
Buenos A i r e s i n p a r t i c u l a r , prissesscs ü large iiiiddlc cluss with a different
pattern o$ expenditures, t h e CLI may fail to a v e a n accurate representatjon
of movements in the general price-level. Even f o r working-class consurners
the index was somewhat out-of-date by t h e late 19401s, since the "basket of
goods" whose prices are included watj derived from a budgat survey rnade in
1943, w e l l before the improvemcnt o1 real wages which took place in the
early post w a r years; new gouds, ~vhichtippcared on the markct after 1943,
are not included, nor have aiiy adjustmcnts been made f o r siihsequent qurility
chmges ir1 the o r i g i n a l set of cummodities, A particular omission is thal
of durable such a s radio and Tlr, which carne to he more widely owned
during the p e r i d : but in addition, i ~ m whicll s may not figure in the budgets
of really poor householde, such as childrent a clothing and bedlines, continued
to be left out @venthough they had become normal abjects of w a r k i n g - c h ~ s
expenditure.
--
1, There exista CLI for some provinces (Jujuy, Salta and h k i ~ d o z a ,f o r example)
although they a r e not comyarablc n o r do they cover the same periods.
2. lt wws necessary, for the purposcs of t h e present work, t o construct special pro
vincial indexes for n-iost of the provinccs: thcse ~ v i l llx prcsented and discucsst~d
later on.
4, X third consjderation is thüt many of thc goods in the 1943 basket were sub-
ject to price control i'or various periods over the years; s o m e were subsi-
d i z e d , w h i l e others were objects of taxation a t riii'fcrent t i m e s and rates.
The leading case was t h a t of housing. 3y a decree of 1943, rents were
frozen at the level they had theil restched, riiid they remained a t that level
for tiie rest of the period; however, the control w a s applied only t o ac-
cornada tion actually exi sting i n 194.7, and subsequentlp-built dwellings have
been l e t at market-value rents -which, of course, i m p a r t s a considerable
bias t o the CLI. For the purposes of the present study it seemed advisable
t o eliminate reiit altogether f r o m thc index rit prices. The aame consider-
ations apply t o elec tr icity, since tarii'l's were kept artificially low during
the p e r i o d . Housing and electricity bet\ceeil them had a weight of 1 6 . 7 % iin
the CLI. Wien they are omitted, so that t h e remaining 8 3 , 3 % i s set equal
t u 100, t h e remaining comrnodity-groups represented in the CLI have the
following weights: Food, 57.14%; Houeehold Goods, 5. 88%; Clothing,
24,25%; General Expendítures, 12.73%- The figures given in Table I and
the movements depicted in Figure 1, thus r e l a t e not t o the official CLI but
t o the CLI m d i f i e d by the omission of rcnt and electricity.

5. Nevertheless, in spite of the s h o r t c o m i n g s noted above, it seems reason-

able t o accept the modified CLT as a fair represeniation of the course of
prices over the years since 1943. The Direccibn Nacional de Estadistica
y Censos (DNEC) made f u r t h e r budgct surveys during the period, as a check
on the consistency a n d accuracy of the 194:I-based index; the last of these
was carried out i n 1 9 6 0 and is t o f u r n i s h the base f o r a new index-number.
The DKEC concluded that in spite of changes in consumption-patterns, an
index which hsd taken due account of them would have shown almost the
s a m e iuovemants, with respect both t o direction and amplitude, as the of-
ficial C L I ~ . An additional considcration i~ that t h e official CLI is t h e object
of close attention on the part of organized labor: though there is no legal
niiilimum wage tied to the CLT (such as exists, for example, i n Australia),
unions are quick t o submit wage-claims based an movements in it. Thua,
whether or not i t reflects price-changes accurately, it has a strategic im-
portance i n the inflationary process. In a wider sense, it may be said to be
of great '' Psychological'l importance, since expectationa regarding the future
course of p r j c e s Eieem t o be strongly influenced by c u r r e n t trenda in the CLI
itself',

-- No.53, June 1962. The following table gives a comparison

1. DNEC, lnformacibn
of the 1943-based CLI values for 1957-60 with those oi the new CLI based on 1960
budget data: for this purpose, both series a r e expressed as percentages of their
1956 values: Year (1956 = 100) 1957 1958 1959 1960
CLT, 1943 budgets 125.4 166. O 357. 3 452.9
CLI, 196 O budgi?ts 124. 6 163.9 350.8 445. 9
 COST OF L N I N G INDEX (HOUSING EXCLUDED)
AXD RELATIVE JNCREASES-CITY OF BUENOS AlRES
(Base: 1943 = 100)

Yearly
Y ear rela tive
increases

i:
S Source:
. ,
Calculated on the basis of data f r o m llBoletlh Mensual de Estadisticav, Di-
!
reccidn Nacional de Estadfstica y Censos,,
i

29
 TABLE V

SELECTED FOOD COMMODITIES:

RETAIL PRlCE lNDICES OF FQOD PRQDUCTS (1943=100)
EXPRESSED AS PERCENTAGES OF C . L.1. b 0
013 ShDEX j1943=100)

% $#::A r r an
iil Food
1946 1919 2952 1955 1958 1960 Expenditure
1943 1960
IRidget Budget

Bread
Meata
Blsarlo
Falda
Carnrt za.
Hueso GOII
carne
Oj1
Mik
Butt e r
Eggs
Potatms
Winc

CLI, Food
(1943=100) 144.1 245.6 622.7 703. 9 1,472.3 4,218.8 1 OO. 0 100,O

C I,T, General
(1943=100) 140, 5 236,5 562. 9 682, 3 1,269.9 3,454.4 - -

SOUTce s:
DNEC, A n u a r i o Estadistico, 1957 ; DNEC, RnletIh Mensual d e Estadfsticii,
1960-61; DNEC, Costo del Nivel de Vida en la Capital Federal, Feb,.196:3
Jos6 Figuerola, Condiciones de Vida d e la Familia Obrera, Bs.As., 1945
R. F o r explana tions d the Spanish teritis, t;ee text.
Note: Columns (1). ( 2 ) , (3), (4), (5 j and ( 6 ) were calcuiated on t h e basi s of
the following fdrmula: index of Retail
,-- - Prices of Food Products 1194:3==1i)01
C o s t of Living Index, Food Sector(1943=101~)
Column (7) corresponds to the percentage ,of expenditure of each rtrticle
over the total s p n t on foods products.
Buenos La Pampa Chubut Santa R lo
Aires Cruz Negro
T ABLE VZlI (Cont. )

La Ricija Tucumh C ataniarca Salta Juj uy

Year

Note: T h e indices a r o bmed on the respective 'fbaskets" of each province.

Buenos L,a Pamp:i Chuhut Santa Rio N e uque n
Aires Cruz Negro
 T A B L E IX

YEARLY PRICE INDICES O F PROVINCIAL CAPITALS

Base: 1943 = 100

Capital Jujuy Salta S . del Tiicu- Mendozn Cata- Misio- Corrien

Year Federal Estero iti5n marca ncs tea

- - -- - --
Neuquen Chuhut C;?;icci E nt rc Butlnos San Snnta Sün For-- La
RIos Aires Juan Cruz Luis 90 S Pampa
 .A6 ' Z 0 5 00 '001 t390PJ93
59 .err 0 9 . ~ 0 ~ 99 ' 2 0 'I 00 '00-r SOJU aqu3
96 '90T ZF'POT FL ' X O T O0 '001 s ~ n 7uns
0%-ZTT tfi' 5 0 1 O& 'EOI 00 'O01 edurv,j E?
: 80'901 5L 'SOt 16 '101 00 '00T o ~ e l s 3la\>o%guns
i
C L '90T 26 ' Z O T 28 '201 O0 '001 esouuog
PS'TIT C L '901: 9P ' E 0 T 0n '00 1 s a ~ r vsouana
1 ZP-60T t L *SOT 9H 'E0 Z: O0 'O01 u ~ n pUFS
ont. y 3
ZZ -90T S6 't!oI O0 '001
OP'LriI P8 ' E O T 00 '001: E ~ A E p t 3 , i lonopouros
~
0 8 '1'11 66 ' C O T O0 '001 salua!~;ro3
L8 ' 2 0 1 BE ' G O T 00 'OOT MajaJS,
PP ' C O I LZ '201 O0 '001 uanbna~
0%' 8 0 1 0 1 '86 O0 'OOT 8 sauo~s!~
28 ' 2 0 1 89 -201 00 '00 '1 E3JEWE$E3
PC ' S T T 78 ' L O 1 O0 '001 ~ zarp a j ~ ~ j ! d3c
ZO '-PO1 ZP'EOI O0 'O0 T ugurn3n~,
PS'SOT PS'ZOT O0 '001 azopualq
56 'COT 82 '101 00 '001 Ln Cnl>
89 '001 8 1 '66 00 '001 XllcS

--
o F: 62 ? I
-

9 5 6 T
-
. --
+

( 0 0 ~= 996 'E ~ a 3 J e m$sJ!ií : a s ~ f f )

SUX313M 1VI3NIAOHd - SBDICINI 6'Iuz~HvnB
X 318VL
TABLE X (Cont.

Salta
Jujuy
Mcadoza
Tucurnan
Capital Federal
Catnmarca
Misiones
NeuquB n
Trelew
Corrientes
Cornodoro Rivadavia
Chaco
San Juan
Buenos A i r e s
Vormosa
Santiago del Estero
La Prunpa
San Luis
Eiitre RXos
CCirdo:ra
TAB LE X (Cont. )

Salta
Jujuy
Mendoza
Tucuman
Capital Federal
Catamar ca
Misiones
Neuqué n
Trelew
Corrientes
Conlodoro Rivadavia
Chaco
San Juan
Buenos Aires
Fornmsa
Santiago del Estero
La P a m p a
San Luis
Entre Rfos
C6rdoba
F60 'O6L 9CO '019 PST 'IZ& GLO 'ZEZ s a o r ~ dq a y m ~jtl
pnpoxd q s a w a a s s a J 3

OPO '96T. ZLP'GST P fi ' ~ 8 9PL '69 suolpqunwuro~pue

l ~ o d m s'uol$nqp$s;ra
~~
 At 195 0 prices: index numbers , 195&-100

Gross Domestic Product at rnarket prices in millione

of 1950 pesos
 Argentine economists as thc "U'hite Book") gave details of the sources and
methodology employed. the Bank has never added t o this information, and
has sirnply contiiiucd thc original scrics, using the samc procedures, Very
litt le detail h a s been niade rivailrible since 1 9 5 5 ~ : indeed, the Boletin Esta-
dfstico
-- gives only threc iables, for National Produci, National Incorne and
National Expencliture rcspcciivcip. T hcse (Sor the years 1957-60) are re-
produced here in Table 1. A riuniber of features deserve mention:

a. The National Product tahle gives figures of rlvalue addedfffor only

a e s e c t o r s of t h c economy - thece are no further subdivisions of
(for example) agriculture o r manufacturing .

b. The National Tncome inhle shows only two subdivisions of income

- remuneration of Isbour, a d al1 othcr incomes (profits, rent,
interest, e@) combined, Thus, it i s nol possihle (for example) to
trace variaiions in farm incomes over the years.

C. The calculation of income inc ludcs an allowmce for cnpitn 1 consum-

tion by means of which gross income is converted into i ~ e income.
t
But the progress of inflation has opcned up a wide chacni between
capital consumption estimates on an "original cost" basis md e s -
timates on a 'lreplacernent costl?basis: f o r example, i i i 1959 the
"original costTTestimate w m 19, 700 million pesos, while t h e "re-
placement cost" figure was 8 4 , 3 0 0 million - a discrepnilcy suf-
ficient to make a difference of over 10% in the estimate 01' Nntioilal
Income itself.

d. In the Natioml Expenditurc table, the itcm 'personal consuinpt ion"

is a residual, obtained by substracting t h e total of othcr items from
the estimate of G N P previously obtained.

e, The Boletfn Estadfstico figure for "change in inventorytTincludes

only variations in inventories of livestock products: however. the
White Book figures include changes in industrial stocks as well.

f. There is no entry for " e r r o r s and omissions", al1 of these heing

included in the t7personalconsurnption" figure (sinee this is a re-
sidual).

3. F r o m this brief description, it i s clear that Argentina's statistics of nation-

al income and product are rudimentary compared with those available in the
United States and elsewhere: caution w i l l he necessary i t i inaking use of them

1. On April of 1964 the National Council for Development (CONADE)h,% issued a

new series of the nationnl accounta (1950-61) which differ in niany aspects of the
commented in this chapter. The new f i g u r e s are s t i l l to be accepted by the
Central Bar& which i s presently reviewing its previous work oti the subjekt.
ti8
 Estimates of Natioiial Product and Expenditure (but iiot National Zncoinc) :ire
given i n t e r n ~ soi 1951) prices a s well as at current p r i c e s , so that by divid-
ing the current-price figures into t h e constant-price figures a set of "implicit
prices '' can be obtained; but these are, of coiirse, subject to the errors rtnd
wealrnesses which are fotind i n the system o£ accounts itself. In principle,
the constant-price estimates of G N P are arrived at by taking direct physical
rneasurements of quantities of output and valuing them at 1950 prices. The
actual methods by which this is donel have been+!uv.cr::llcriticizedz; in
a r has been argued that the use of the official Index of Industrial
p a ~ ~ t i c u l it
Production, in calculating the real output of manufacturing, has caused the
latter to be seriously underestirnated during the 1950's - and this, if done,
would naturally cause t h e index of f l i m p l i c i t f pricea
l to exagerate the actual
r a t e of price-increases, T h i s possibility will hsve to be borne in mind when
the movement o£ implicit prices are compared with those of the C W and other
indices. Howevei., the shor.tcomings af the national accounts do not seem su1
ficient to rule the use of iniplicit prices completely out of court, and they
are given in detail, f o r the years 1943-60, in Table 11.

4. T h e CLI, readjusted so that 1950 = 100, has been inserted in T a b l e 11 alang-

side the other series: #e obvious comparison is between the CLI and linplicit
prices of personal consumption (the index of which may be called, f o r con-
venience, the ICP). On the whole, the two seriee stay fairly well together,
diverging somewhat during the fifties and ending up with a 10% difference be-
tween theni in 1961.

Particular features are:

a. The ICP rises i n 1944, before the CLI has changcd. Since the C L1
refers t o t h e Capital only, while the ICP refers t o the whole countiy,
t h i s is consistent with the lTleadlT
of provincial prices in 1943-45 as
noted at the end of the previous chapter3.
I

1. Described in the "White Booku, pp. 8 2 et seq.

2 Josd Marfa Rivera, *'Fundamentos Estadfsticos de Nuestro Estancamiento Eco-
n6micort, Cronista Comercial, 15 February 1962, is a particularly intelligent and
'
destructive critic; h e goes s o far as t o argue that the official statistics of Nation-
al Product are s o biassed that they make the economy seem tri stagnate when iii
fact output is growing, and that this has had sufficient ly adverse effects on expect-
ations as t o destroy confidence in official policies and to cause flights of capital.
, we have already suggested that, due to the wa&nessea of Ar-
It is possible, m
gentine national income statistics, price deflators are affected by a systcinat ic
bias. The deterinin3iion o£ t h e degrce of accuracy in Argentinc in.f<irm:itionwoiild
demand a study in itself. In thc following pages we have assurned that t h e avnil-
, able information can be uscd to analyzc general trends in thc economy.
3 . See above, p . 7 6 .
 TABLE 11 bis

IMPLICIT PRICES, 1943-61

?& cliange over pirevfous year
-. -- -p.-- .- - --

Government Gross Domestic Capital Formaiion Gross

Personal CIJrrent
Y e ar Expendíture Const ruction Other Fixed n'ational C. L.I.
C~nsu~mptiion on G o o d s and Capital Total
Services Puhlíc Private For mation Product
.-

- Banco
Source: Secretaria de Asuntns Econúrnicos, Producto c Ingreso de ia Reytiblica Arggntina para el periodo 3935-54;
-1.
C. C ~ n t r a lde la Repbblica Argentina. Boletfn Estadfsticro Dirección Nacional de Estadistica y Censos.
 b, in 1946-48 the CLI lies below the ICP, because the price control
and subsidy measures of the early Per6n regime favored the working-
class standard o f living, rather than consciinption in general1.

1
C. in 19% the CLI begins t o "leadIt thc TCP: this was the year in which
food priccs (which are represented m o r e heavily in the CLI) increased-
more t h m in any other year except 1959, and more than any other 1
e lement in the C LI itsc lf .
1
d. in 1956-57. the ICP catches up the CLI; in 1958-55, the CLI takes . ,
the lead again. This is to be explained as the effects of the process
of dismantling the pric.c-control aiid subsidy system: this 15'as not done
by regular "rtcross-the board" cuis, but commcidity by commodity, in
such a way that the working-class conaumer (represented by tht. CLI)
wsls at first sp:ired t h c f u l l rigors of decontrol: afterwards things
w e r e the nther way round -- f n r example. 1950 was the y m r in
which nieat subsidies were removed -- :md the CLI rose correspond-
ingly .

5 N l e n Table I I is considered as a whole, it is noticcable that irnplickt prices

in the various categorics of expenditure did not risc in equal prvportions year
by year. The figures in Tablc II (bis) show. for each series, t h e percentage
by which the index differed f r o m iis vnluc in i h e preccding year: for example,
in 1951 the index for 'lotlier lixed capital forrnation" crrns 4 T L i higher than in
1950, and was Iligher ihün any u i the othcr figures in 1951, since personal
consumption prices rose only 4 O%, governrneilt expendilure prices J 3 % , and
s u on. l l O t l ~ efixed
r capital formatioii" took first place in t h i s way i n sis out
of the eighteen years shown, and second place in five years; personal con-
sumption had five 'Yirats '' nnd foii r "seconds" ; government expendítu re had
four of each. In so far as the magnitude oí' p r i c e - i n c r e a s e s can be supposed
to indicate t h e degree of exccss demand. the figures in Table 11 {b1s) suggest
that demand for fixed investment (other t h a i construction) was the most fre-
quent source of inflationary press ure, with personal consumption a fair Ly closi
second. Furthei'scrutii~yof the tables also suggests adivisioiiinto periods:

a. in 1944-45, "other fixed capital formation" and construction take the

lead - - suggesting that the wartime inflation arose primarily from
'
the effort t o build manufacturing industries whase output would
replace suppliesi which Argentina could no longer import from the
belligerent countries.

b. from 1946 to 1948, construktion prices rise fastest: urbanization,

combined w i t h t h e social Policies of the early ~ e r b regime,
i was
the mafn factor in keeping up inflationary pressure.

1. See below, pp.74

 C. from 1949 t o 1951, fixed investment other than construction shows
a succession of "firsts".

d. in 1953 and 1954, government current expenditure is in the lead.

Probably, as a result of the expenditures connected with the renl-
ization of the Second Five-Year plan.

e. in 1956 and 1957, "other fixed capital formation" shows the highest
price-inc~eases.while in 1958- 60 it comes aecond -- suggesting
that a revival of invcstrnent-demand was now the main saurce of
pressure.

f, in 1959-60, personal consumption prices ros@fastest.

ít iái interesting to observe thnt moet of the periods in which ('other fixsd
capital farmationt' leads in price Increaaes, coincide with declines in the
imports of capital g'oods .

Ta infer too much from price increaees d o n e mny be misleadlng. The laet
'
item (f, ) of the preVious llst ie an exarnple of the oaution needed in the inttlr-
pretatlon of the strttistlos. Tho personal coneumption prlae-index went up
strongly in these laat yeara; the real vulue af personal ooneumption instead
rose anly about 1% whereae real fixed investrnent (other than oan~tructian)
raae a b u t 43%, even thouph the latter'e prjoe level rase los# than that of
personal oonaurnption. It la then diffioult to tell, whother prloe lncreasee
in the coneiurnption eector due to the oliminatlon oP eubsldise and prtce onn-
t r o l s transimited iiiflntionriry proasuraa to the inveatment sector: aE rather
the upeurge of inveetment den-innd wasi the lnitiatlng fautor. tt ia poasible ta
think that prices af capital equipn-ient roae relatjvsly losa nicroly bocauati
resources were diverled away, frtbin other sectors t o supply the extra-deincind
and that rehtlvely higher prioe i n c r e t i e e ~elsewhere were aaused by this
'diveraion of supply .

Thus, the fact that a given eector showed a "Eirst" In my p t i r t l ~ u l a ryear

neod not lmply its primaoy ara a generatar o f inflntianary preePurs, Changos
In import prioes (spe above) In tnxation nnd laubsldles , and in prloa-oonirols,
nsed t o be taken into account; ttis degres of aompatition tn oortnln rnurkotra,
the prlcing procedures nnd policioe of oligopolistlo flrms, ohunges in tho dis-
tribution af income, lags in the rciatianships between the various magnitudes,
import difficulties .-- any iind al1 of these thinge may compliuate the pfcture,
In part iculnr, the approach adaptad in the proviaus pnragraph -- thut prlco-
.Increasee can be taken to indicate tbo preseure af oxcees demand -- lgnareei
ths posaibllity of "cost-pushtqinflattlon whoreby the price level rises bocnuse
business flrms are adjusting their aolling prices ta cost-increaees due t o
higher wage-costs, raw material pricos, nnd ao on. As there is reason t o
think that competition is very irnperf'cci: in much of Argentina's mmufacturing
 industry, and that most firins fix prices by the rule of adding a fixed over-
head-and-profits percentage as average price costs, the possibility of
cost-induced inflation s e e m s worth exploring, particularly with respect to
changes in industrial wages.

7. Officisl statislics give two sets of data on wages: one for "okireros ofjcia-
les", who are skilled manual w o r k e r s , and one for "obreros peones'!. who
are unskillcd and receive les3 than the forrner group; in 1961. f o r example,
the average hourly \wge oí' riobrerosoficiales" was 28?k higher than the
average f o r "peones". The published figures are wage-ratcs. in t e r m s of
pesos per hour, fol. twelve occuputionsl (elcctrjcian, carpenter. etc. );
since such workers are t o be fvund in many dii'ferant industries, the data
give v e q little iniormation as to what i s happening to 1:tbour-costs of pro-
duction in t h c various b r m c h e s of rnanlifacturing. Moreover, the figures
are brisic rates agreed by cnllcciivc bargaining betwecn unions and
eniployers, not the actual r a t e s heing püid a t any given time; they a r e
"basic", also, in the sense ttint they include nonc- of the vnrious supplcments ;
(bonuses2, size-of-family allowanceu, seniority ralcs. etc. ) which in certain
years have been an irnportant pari of the worker's rcmuneration. Colurnns 1 m

and 2 of Tahle 111 give indices oi' thvse basic wages (1950=100) for "obreros
~ f i c i a l e sand
~ ' f'ohreros peonesTfrespcctively, averaged over the eleven
occupriiions in erich case. In addition t u Ihese s e r i e s , howcver. the ofiicial ,

statistics include an index of the total nmount of wages paid iil indiistry:
dividing this "wage-hillft index by (a) an index of industrial eiuployment and ;
(b) ;m index of h o u r s per w o r k e r , it is possible to derive a series showing
changesinthetotalhourlyremunerationpc~workeract.uallyp:iidinindus- i
t r y : tl-iis is shown in Ccilumn 3 of Table 111. This iildex, unlike the f i r s t
two, reflects changes ir1 the various supplements as well as in wages paid;
in as much as the latier havc very often tended to cxcocd the "agrecd bnsic"
ratcs fixed by collective bargaining, a comparisoii hetween Column 3 ~indthe
first tivo columns may be e q ~ e c t e dtu give some indicaiion of the amoutit of
lfwage-driftftYwhich has occurred from time to t i m e . Table 111 also includes
the C1,I (adjusled to 1950 = 100. rind excluding housing ;ind electricity f o r
reasons given in thc previous chapter) ; the indexes oi' t h e f irst three columns
have been divided hy the CLI to give "real wage" v a l u e s , and these are shown
in Columns 5 - 7. lmmediately following Tnble III is Sable IV, exactly the
s a m e as its y i-edecessor except that yeai-by-year percentage changes are
shown instead of the rnovements of the 1950-based indexes.

1. Believed to be the lowest paid.

2 . For example, the "aguinaldo", o r 'Ithirteenth salary": normally paid i n December
this is ane-twelfth of the total salary paid during the year -- so that it is u s u a l l y
less than one monthfs T1take-home'tpay. and may even be much less than December's
basic salary if there have been severa1 wage-adjustments in the course of a p a r in
which prices have been rising sharply .
3 . nr flwage-slideft. Bco. Ctral. de la Rep. Argentina, Memoria A n ~ l 1961.
,
74
:.i
 TABLE TI1

I N D E X - ~ M B E R SO F MONEY- WAGES AM) REA L-WAGES, 1943- 1961 (193 0=100)

-- - - - - -
Money- Wages C.L.I. R c al- Wages
Year "Obreros "Obreros Payments Per "Obreros "Obreros Paymerits Per
Oficiales "a peonesftb Hour in Industry 1950=101i OficialesTqa peones "b H o u r i n Industry
0) --
(2) -
(3) (4) -- . ..
(5)- 16) - (7)

78.5
84.1
78.5
76. O
PO. 5
107.4
102. O
100. o
85. 1
78. O
77.9
87. 8
80. 2
96.5
79. O
87. 7
69. 1
64.3
70.2

-l
Source: Dirección Nacional de Estadfstica y Censos.
c' Notes : a. ?'Obreros oficiales": Skilled Urorkers - b. "Obreros peones": Unskilled Workers.
 TABLE IV
4
m
ANNUAL PERCENTAGE CHANGES IN INDEX-NUhIBERS O F RIONEY-IirAGES AND REAL-IVAGES, 1943-1961 (1950=100}
- - - -- - . - - - - .- --. .- --. -- .- - -- - . -
Money- Wages C.L.1. Real- Wages
Year "Obrems "Obreros Payments Per fObreros "Obreros F aj'ment S Pe r
Oficiales ~ e o n e . ; " ~ Hour in Industry 195 k 1 0 0 0ficiales"a peonesytb Hour in Industry
(1) (2) (3) 14) (5) (6) 17)
.- - - . - -.- --- --

Source: Direcci6n Nacional de Estadística y Censos.

Notes: a. "Obreros oficiales": Skilled Workcrs - b. "Obreros peones": Unskilled Workers.
 Froi-i~these t a b l c s , it is easy tu see that the 'puynients pcr hour" iiidex o f
coliimn 3 rose very much more thnn the two wage-indexcs, especinlly d u r ~ n g
the years aftcr 1950. This is pnrtly duc to the diffcrences in coverage be-
tiveen the indexes: the recipients of l1paymenCs per hour in industry" incIude
many m o r e occupations thnn the twelvr: w h o s e basic w a g e s are avcr:tged to
give tlie indcxes in Coluinns 1 and 2 , end the :'rnixl'of occupations rvithin
industry did not rcmnin constant ove r thc ycars . But most oi the contrast
arises f r o m the fact that Columils 1 and 2 gjve basic: wages. while Colunin 3
m g i v e s hourly c:iriiiws Wages nnd csrnings diverged for two rcasuns: first
bccause of the extensicin of the "fringe" bencfits (ltaguinaldo", vacations ,
ctc. j and ovcrtime w h i c h m u s t be addod t o the basic wcig-es; and sccond,
employers anci unions made pi.ovjsiona1 arrangements at certain times ti)
augment wxges. in face of rapidly rising prices, without simultanct>us!y
changing t h e previously ügreed h a s i c wage-rates .

During nlost of t h e 1'35Zifs, the "basic" wüge indexcs seem t o hnvc mover1
rather j e r k i l y . Thc "pttyments per hour" index rose more smoothly. re-
flecting a f a i r l y regular pressurc on labor's s i d e to keep remuneration in
line with the cost-01-living; whcn payments had got w e l l chead of basic
rilages, the new nis si tion would be recognizcd by a substantial rise in tlitb
latter -- from labor's ~iointof view. this [vas a consolidation of past
gains rather than a 11-esk ndvance. T h u s , bltsic wages rose more than
"payments per huurl' in 1954; in 1955, paymenta went ahcad agnin, but in
1956: basi c wages m:idc a furthe.r eff'ort to catcli up; in 1957, wages "r?stcclU
but payments went oii increasing; i t i 1 9 5 8 , wages made another attempt lo
get back in step. T h i s disparity between the movements of tlie v a r i o u s
jndcxes makes a substmlial clifferencc l o the apparent course of real wuges;
if t h e two llbasic'' indcxcs are deflated by Ihe C L I , as in Columns 5 and 6 , ít
seems as though real w:iges reachad a maximum in 1948 which wns nctrei.
regained. and that by 1959-61 they were only about ~liree-fifthuof the 1948
peak levcl; the deflated payrnents index, however (shown in Column 71,
suggests that r e a l wages in 1 9 6 1 were actually higher than in any previous
year, and that the earlier 1948-49 peak was excecdcd i n 1953-58 as w e l l a s
in the last year of the period. An important implication of t h i s is that the
"basic wage" indexes are bound to be misleading as a guide to the chang'iig
production cost S of Argentinc industry during the 1 9 5 0 ' s .

9. A c o ~ ~ i ~ a r i ofs othe
n indexes of basic wages with tliat of "payilient per hourw
rnny give a >ough indication OS t h e relative strength of wage-pressure and
other causes'of inflation. T h i s is hecause, a s in other countries, collect ive
bargaining betwecn lttbour unions m d emplojTers has been c hiefly concerned
with bdsic wage-rates. Firins are often fciund to pay m o r e (sometimes
l ~ , than the hasic lcvel: but as long a s these paymeids have
~ o n s i ~ e r r i bmore)
a ternpw-ary c h a r a c t e r the iirms may later w i t h d r a w l them on t k e plea oí' hard
t i m e s and revert to the basic wages Only when the lntter has been adjusted
'----
l . Or act as if they could withdraw.

77
 IVAGE XGREEAIENT DATES, AI\íD PRlCE CHXKGES OF SEVER-4L COKStnfER GO0I)S

Date Price of Price of

Article of Previous Month of Following Months
Agreemcnt Month Agreement
- - - -- -- - -- -- -. -- - --
Oil 4- 11-56. Oct Nov Dec Jan Feb Mar Apr May June
6.35 6.35 6.35 6.55 6.74 6.99 7.05 7.43 - 7.55
Oct No v Dec Jan Feb Mar APr May June
8.68 8.18 8.22 8.50 8.75 8. 79 8.96 9.53 9.70
Oct Nov Dec Jm Feb
10.27 10.42 11.13 11.95 17 4 8
Feb M nr AP r M ay June
- 17.48 18.90 21.10 31.37 47.65
1-12-59 Nov Dec Jan Feb Mar A P ~
.. - . . . . 32. 3 1 . 2 5 . - 33.48.
-- 34.41 33.84 32.54 . . .-- .
- - ,.-

i Diy 23- 10-56 5eP Oct Nov Dec .Jan Feb Mar Apr M ~ Y
! Noodles 3.16 3.16 3.17 - 3.20 3.30 3.4 1 3.48 3.72 4.07
j 1-12-58 Nov Dec Jan Feb Mar APr M ay June
6.43 6.54 7 . 05 10.07 11 11 11.36 11.38 11.42
Jun Su 1 Aug S ~ P Oct Nov Dec
- .. . ..
- - 11.42 _ L
. . . l .6 12.31 . 12.43 12-46. 13..38 .

Bread 21-11-56 Oct Nov Dec J an Feb Mar Apr May

1.70 1.70 1.70 1.70 1.70 1.81 2.00 2.40
Feb Mar A P ~ M ay Jun Jul Aug SeP
---- ... . 5.90
- ... ._
. . -. 6189 7- 3 . . .. .. , 7.54 ._ 8.10 . 8.10 8.10- . -

ShoeS 1-1-59 Dec Jzn Feb hi ar A P ~

320.50 341.19 360.65 375.56 403. O S
AQr M ay Jun Jul Aug S ~ P Oct Nov
403.30 4 40.21 298.29 570.43 637.50 686.43 692.14 692.71
Dec Jan Feb Mar APr M ~ Y Jun Jul
7 .3
- 5.43 735.0
-. . 742.43- 775,d6. - -7 9 4 . 2 9 802.71 806.64 810.57

., . .., - . . d-"<h--T".-
 Tailet 1-1 1-58 Oct Nov Dec Jan Feh
S O V 2.45 S . 74 3.28 3.47 3.74
12-2-59 Jan Feb Mar A P ~ May Jun Ju 1 Aug
3.74 3.74 4.25 5.11 3.47 5.91 6.24 6,84
1-1-61 Dec Jan Feb Mar AP r May
6.96 7 - 01-- -- 7. 03 - 7. 09 7.09 7 , 09 --
Laundry 1-11-58 Oct Nov Dec
soa~ 3.97 4.03 5,09
16-2-59 Jan Feb Mar A P ~ May Jun Jul
7.79 9.70 14.51 18.98 18.99 19.10 20.19
1- 1-61 Dec Jan Feb Mar Apr May Jun
1 0 . 8 9 . -11.13
-p. 11.48 11.59 12.41 13.52 13.27
~iour 1-1-59 Dec Jan Feb M ar APr M ~ Y Jun
2.74 2.92 5.09 5.60-- 5 60 5.49 5.52
Shirts 1- 12-58 Nov Dec Jan Feb
129.63 132.97 137.30 143.54
1-4-59 Mar A P ~ M ~ Y Jua Ju t
155.64 171.14 183.23 194.50 207.67
41-8r61 Ju~ Aug SeP Oct NOV
332.70 333.43 334.52 340.73 348.54
--- - _ - - --- .- - -

Sources: Convenios Colect,ivos de Trabajo, Ministerio de Trabajo y Seguridad Social. Direcci6n Nacional de Estadfstica y
Censos.
-4
a -Note: Price per unit.
 to new conditions can unions feel that their memberst position is really
secure. But employers wanting to avoid labor problems may offer above-
basicl wages; actual remuneration will t h e n rise faster than basic wages
for a time, with the latter catching up etrery now and then when new rates
are negoliatedS, This kind of sequence seerns t o have occurred in the
19501s, with tdal remuneration (as measured by llpayments per hourtl in
Tables III and I V ) pushing ahcad in 1953, 1 9 5 5 and 1957, and basic wages
(Columns I and 2 of Tables DI and IV) trying to catch up in 1954, 1956 and
1958. The factthat t h e 1950 basic indexof "payrnentsper h o u r t l finished
up well ahead of i.he two basic-wage indexes suggest that "wage-drift" (the
increase in tbe gap between remuneration and basic rates} continued on
the whoLe strongly during the period.

10. The lack of detailed statistics about labour and material costs in individual
i n d u s t r i e s , also m a k a i t imposaible t o make reliable estimates of the lags
in the wage-price spiral, A study by H. L, ~ r b i s a i a 3found that during the
1943-60 period, "prices anticipated wages in a rninirnum amount of 99 days
plus a variable amount of 16 days per year" -- i . e . that moiemcnts in the
cost of living took about f o u r months, on the average t o be compensated by
wage-increases. The other haLi of the seyuence -- i . e . ttie subsequent
effect of the wage increases on prices -- muy be raughly indicated by
Diagrams 1-3 which show t he course of p r i c e s f o r six commodities over
periods between 1956 and 1961, with thc dates ou whick wage-increases
w e r e agrecd: the general iinpression is that wage-íncreases oftten took
several nionths to make inuch irnpresvion un product-prices, and that the
effects of wage raises as suchr were often swallowed u11 in a general
inflationary surge which occurred subsequently. Bcit the chief conclusion
to be drawn from thc work s o far done on t h i s topic is, unfortunately, that
a great deal more needs t o be done.

- --
l. I t is also possible that the amount of overtjme may have some influence on the'
.leve1 of Itpaid ',\nágesl'.
2 . It may also be argued that "hasic wagesft cover only the lowest paid warkers of
the labqr force, while "paid wages correspond t o a general average of al1
industrial remuneration. In such case, the abolle deacribed process would
represent the race between ttvo levele of remuneration.
3 . H. L. ~ r b i s a i b ,Análisis Estadlstico de la Evolucibii de la Inflacion en la Repii-
blica Argentina en el Perrodo 1943-1960, mimeographed, Faculty of Econornic
Sciencies, Univeraity of Buenos Aires, 1962.
4) SHOES
 11. The foregoing pnragrxphs ;111 relate to industrial wages. For agriculturc,
there are no officisil wagc-statistics: but n study madc by A , J. ViliZ for
t h e years 1943-57 gives tlie indcx shown in Table V .

This series may be compared with i t similar one calculated by Aldo Ferrer
for 1950-602; iii Tntile Iq, it is s c t alongside Vila1s index (which h a s been
, re-wrirked u n a 1950 base Sor t h i s puqmse}.

Indcx of Agricultura1 Wages Percentage Tncrease

Year (1943=100) O v e r Previous Year -
-- --

1943 1O0 -

1944 111.3 11.3

15.15 136.2 22.4
1946 139.7 2.6
1947 148.9 6.6
j 1948 209.9 41.0
310.6 48.0
355.3 14.4
437.6 23.2
572.3 30.8
675.9 18.1
773. 0 14.4
354.6 10.6
936.2 9.5
936. 2 O--
, - -----.---m-.-

There are considerable tliscrepancies betwccn the two serics: this is

probably becausc V i l ? % s;iiiiplc is smaller than Fcrrerls. Mrl-ien the
indexes arc cornpnrrd wilh those given earlici. for industrial w a g e s , the
Cril,Z series al>ljtlrirsto hrlve rntirc o r lcss kept pace with the "obreros
oficialesr1index j i 'L'ahlc ~ 111, h11t t r i hlivc Lccn slightly outdist:tnct:d by Ihe
''ohrei-ns peonesT1series. o i e r t h e 1943-57 pcriori ns :i wholc; in t h e 1!i4fi
47 pítricid, ; ~ g - r i c u l t u r n l\v~ip,csrtisc? little, ;it ti time wlien industri3l w;y,es
wrrc i-isiiig subst:tnti;illy ; nfte r :irccovcry in 19-49, agriculliiral wag'es
went on, during t h e y c ü r s 1952-55, to rise faster than industrial -- a sigii
- - -- -- -,-.-
l . Antonio J . Vi ld, -Precios para
.- Prot.luctos Agricolns en 13- Arg5ntln:i.
- - ... . ,. - .,,dc IJarjd:id
-

Asoc;Arg, de Productores AgrTcolas, Buenos A i r e s , 193 8.

2 . Aldo F e r r c r , L,?_-Et~ducri6nn del-Soqtgr-Agr,gfi&e-~el
In~rgs;(i.y-C~pitaliz~cibn
w&ri!> 1!!,5Q;69, an unpublished report by CAFADE , Buenos A i r e s , 196 l .
I

i4 1
 .sa;rtx8!j u o ! ~ ~ l n d o Ad A ~ J Fpm SS!~SIIZJS 3~103~ [ B1U O ~ E N ~ 1 1 ) ~ 3
palEruqsa uaaq aAEy p m uolq~ur1xo~dd-e y%no6 E L1uo ?uasa.rda.~sa.rnSrj a e a y ~'
-.-+
,196'1 ' s e ~ r y souana '@%?ñaado~By~ o p + e [ e q1ap ~ q sapu
- ~ o pA soplans 'IV];>OS p e p ~ ~ n 8 da so i ~ q - e . apr ~ o!Jalsyur$q ' suor$+eJaunrue.J,,plryy
u! aluoarr!,, S ~ BqseqM ay7 u! apnlaur o? apvw uaaq ssy ~dura$~-e ay? 1s.rauaB u1 T
- --A .-

'~uauranouis!rI$ a ~ n p c i ~o$d ~ J O Mq?? s3snw JayJO Ifu~ruuaaq a n q o;rayq qnq --

h ~ ~ s n p uu~r uoIli:.IarinrrraJ .rayS!y 30 ~3adso~xrI a y Ay
~ ~ ; I ) ~ C ) V J J $ I :a.Iahi SJBYJOM
~ ; I " . I1 ~ s ~~s a12 3 n s' s a ~ r ysouang o2 n'll~!mdscipue 'uMril o$ ñiquno3 m a l
3% B u ~ y x o ~ u o y ~ s ~ n d o50d luarrianorir 3 ~ 0 ~ 1Es SFM
$0 : OJayJ J E ~ 1dEJ J i?Y;L
.ñauoui jri a S u ~ y o x aLUE 2nuyl!.u ~adoldruasyy w u ~ 3Á ~ p a ~ srupl ~ y t oupad
Iz.rnJ ay? q " ! q ~uot~-epouto3nr-:%ursnny puc p n q jo an1r.n ay$ n'l~adoirdtuas:
-a~dap l u &m ' ; r a n a ~ o c : ' o ~ n % .ra$ji:T
g ay& * $ ~aJaM 6 a ~ n q n ~ r rí!~ % e
asoy?
alTqM 'sosad 0 ~ 'E6 arara z ~ a l ~Jad ~ ~s%!u~ca
k k If]t{~riritrr a%v.ran~' ~ 9 u! 8 ~
'atdmxa .mL%.a~n.;lnq.r?ir! pue k q s tiprr! u! uogr?JaunwaJ JO sjonal m o w JO
s u o s ~ . r ~ d r upj8utrnau.r
o~ ayew 01 4'fno;rjjtpL J ~ s~ A $1 ' 6 ~ a ~ ~ u n ~ o .gsuan% ~
u u e j 60 3s-m aq? u! sllnsaJ alqs!Ial ssq sxy3 syq~'111 ~ Q E Ju;r sc s a 3 ~ ~
I-eaJ jci sexapur u!t?.)qoo3 113 ay) bq sa8cm-63unur ie!.rlsnpu! alvljap 01
alq:uoseaJ sr 41 a(Lqni ' o s l y *uo!pJaunwair s - r a y ~ cunqln i~ ,jo J J E ~:ou aa-e
y q y ~ I - ~ a % ~ ay? u! pa13a[jan ñ ~ x a d o ~ do ,,ptry
3!s??q u rr;r auro3rryl, 30 suraoj
sno!as;z n'otao ñnur snayaom w ~ s j:joa m s aq o$ auo qlnxjjrp E s j uos~aeduioo
ay1 .ina alqs;L jo a ~ t i % r,,.Tnorl
j Jad s8u!uxca,, ay1 ,nolaq la^ sr ann%!j
.ra.rJag aql '0961 L a .rEqsnpu! tq a s o q u i i y i trsa] yanw asoJ a~nqlna;ra%a
u! s;lu!una IEnp't: 1 ~ 4 1sqsa23ns xapul ; r a u a d ayL .xo$aas l-ean)1nq;r%z
ay? 10 sa13snbalxu1 aql .rano u ~ a ~ %u:sca;rau! u o ~ B,uaqtqs!ujwp ay1 jo

.- - -- ----
2'01 Z -LL6
F'89 C '988
9-85 6 '929
.-
0'6 8 'TFE
'2.6 S'LT F -+a€
9 'O1 O'S ? -92s
- P'PT 6'6 2 '96.2
Z'BT E '98 I 'PZZ
8 'O€ L 'GF 5 'LLT
T 'LS T <LZI
- O0 1
 s u c h ris the desirc f o r iiccess tci urban ;irnusemeiitsl and young peciple7s
wishes t o emulale e l d c r brothers iuid sistcrs \Vho have precedcd them to
the city. Statistics made nvailable to the a u t h u r suggest2 that farm witges
r e n ~ n i r i e dabout 2 ~ ~of' gross
; ~ nutional inconie over the period 1943-56, at
a tit-tie when t h e industrial scctor was expünding considerably and the
proportion of t h e labor force cngnged iii agriculture w a s f:illing, siiggesls
thüt rcmuneration .wr worker m3y even have r i s e n relatively to earnings in
industry2. The r u r a l / u r b a n wagc comparison is, of course, simply one
aspect of t h e general internction Isetween industry and agriculture during
the period; anothcr :rspect. tri be cxnniined next. is the relationship he-
tween t h c p r i c e s o i industrirtl and larms products -- tbe so-callod
"interna1 t e r m s o f Irade"

12. In tiie officinl sirttistics 01' National Prriduct, outpiit figures are Kivcn at
current prices, whilc rc;il output s (nt 1950 p r i c e s ) are shoivri as l95O-
based indices ( S e r T a h l e I I ) . ' Dividing ihe lntter inlo t h e f'cirmer, :ind
expressing t h c i ~ s i i l t sas indcx-numbcrs, givcs a scl of indexcs OS
"imglicit prices l ' f o r tlw p~+i)clucIs ~f lhe v a r i o u s scctors oí' the econorriy .
and for Gross N;lttioni;L Prciduct ;is ri whole. T h c r e rtrc se~iaratc? series
f o r the trvo majn hrnnchrs oS'xgriculturc: -- crop m d c:tii l e -- Ixit only
one for t h e wholc of mrtnutncturing indtrstl-y. In Tnlile VI], ihese havc? b e m
iiianipulatcd in v:irious u l ; ~ y s . 111 thc f i r s t L h ~ e ecolurnns, ihe i n ~ p l i c i t
p r i c r - indexes for f 3i.m produc:ls in general, for c r o p pi-ciducts , nriri t c i r
c ati le products bnve carh becii di viclcd by thc impl i cil price-inclvs ciE
rnnnufacluriii~)oiitpui. Thc next W~rcc!colilmns sliow t h e r : i l j ~ )betwccn t l i ~
t h r c c f n r m indicc.s ;:nd the irnplicit priccc uf' thc G N P r~ :i wholc, xvhílcb
the sevcnth ~ ( i l u j i l i si h o w s i h c ratio bctween the pricc-levels of tlie t w u
brunches of : g r i c u i t u r e -- i . e . c r o p productjon as ngainst rini m a l prodiicls.
This last relationship is u s e f u l as a reminder t h ü t it is often v e r y m i s -
leading to spclk iil "agriculliirc:' i n a general way, as though it prnduced
a single homogeriec~usprot-liict: in fnct, during the yerirs since 1943 there
have been s o m e quiir: large s h i f t s hetween c r n p and cattle prorluction, anrl
Column 7 of the tahle shows t h a t the crop- c ~ t t l cprice rxtio has v:iried
eonsiderahly frum t i m e to tiinc. Ohviously, this will hatbctci be b n i u g h t
into consider-ation when Ihc overall I : I ,~;!,ir be~wcenf a r n ~and industri:il
m

prices is examined.

.-y ---Y

1. Anci the expectancy of bettei. housing iiiid perhaps a bettcr living.

- Nacional -- Re-
2 . This jrAformritioni s f r v m ü Baiicn Central report, Q g r e s o Neto - u

muneraci6n
--. -.- del Traba& unpuhlis hed bui nlade available privately tu t h c writ cr
The peihcentageIiere includcs "incomc i n kindf'as wcll as cnsh rccciprs. In
1954 and 19.55, it reached t h e record Levcls of 2 3 . 2 % and 24. 7% r c s p e c t i ~ ~ e l y ;
after 1957 it declined to a "lowt' of 14.9%,i n 1960 - but I h i s was nol so much
hecause of a decline in f a r m wages relat ively t o industrial, biit hccause the
skare in national income uf wages i n general w a s heing reduced.
 '(gg-+& -dd '1961 íraqruaaaa 's3~srinjsle!amurg ~ - e u o r $ ~ u ~ a ~ u l )
6 1 'O2 $ 'sc[l 001: ~ n cdg ' p ~$: ruoxj a s o l jaaq uazoJj a u g u a B ~ v' sirsab aur-es
ay? JahO ' O S . 1 $ 03 95'7:$ U0J.J uE!lEJlsny Pm 6 B . T $ o? * Z ' Z $ UoJJ P a y M
's'n '096T ur 9 5 ' 7 $ o) L S G T : ur Iaqgnq -e c g ' r $ 'sanWOJJ 1193 IEayM a u r ~ a 8 s v. z
' ~ J V J - a % u ~ y,,q$srlEaJ,,
oxa airaur E $E paliraoaA
ahvy p1no.N Layq u ~ qnamol l o d osad ay$ ' s n y ~
airanz s J a 3 n p 0 ~ dLq p a u r ~ ~ qsaor
Iqanpo~dU J E 3 30 p o d x a JOJ al-en I E F 3 J J J O Y%FY E YJIM 'a3JoJ U! SEM s a y x oldglnur
50 w a ~ s b es '(1 ~ a l d ~ w
y 3o ~palle3a.x
j aq IlrM J!) s m a d upirad i C l ~ ~ayl a u1 * r
.uo n a p l pauIumxa aq ~ I I M~ 3 1 1 4 ~
aXreo;tj!rx%rs oyurouo~o 3 ~ C q' I. a ~ n 3 j Uj! p a l ~ p a ~ d daqz LELU 3~ sn-pa)*ela:
-aomn d l a s g u a lou a m o!pa 1~ra~snpuy/urirnj ay1 u! pu-e 113 eyj u! sluauxanocu
JFYI 13ej ay$ ' J a n a ~ o y' p o r ~ s dl l m a n o ay? u 0 ' U O I ~ . ~ J Us! s a ~ d d n sOJ l u a u
- U , T a A O g ay? JO S p O J J a $0 a~dw-exa UT 3JE 226T 03 €961. WOJf S X E ~ ay1 , ~
~
p a d s a ~s!r[j u1 *sa!prsqns p u sloirluo3-a3~xd 50 Jaajja ay$ iiq p a u r q d x a oq
LEUI s ! q ~ - 0 g / g 9 6 ~sitnalC ¿rol paurelqo S! u o ! ~ ~ l a i r ~poa3u a m m z? L l ~ n a l 3
'0961 01 1961 p o y ~ a day1 %urirnpuo!lnla.i.roa u!ci.raa E s3t;iIxo &¿ay7 ' 5 5 6 1
01 Fq6 t s,r~aiC10 uo;[~da3xaay$ 201 lnq ' 1 ~ smoy ~ 1 s (1 a l n 8 1 ~ aas) 173 ay$ ut
~
saiaucq~1cnrnr-e p u o~ g ~ ~ - e ~l ~r !. ~~$ls n p u i / u ra~ ~q juaomlaq unsrxndzrroo v .f.-[
.1uaruu~ano3ay$ jo yt.d ay1 uo sar3;rlod a l q w o m j
aiour $0 N n s m aili j.~sd'u!pt~n sao!.id 9 e a q M p p o 4~ 1 1 ~ pa~F<rwo3 SE s o a ~ ~ d
z
jaaq p130M U! ~ U a l ~ l ~ . + » . 7 day?
w [ lo uo!J3alja;r E ?;red u! sr 'pusy iraylo ay$ uo
'sa!Jgj a l q 3q3 u! s a a ! ~ da131i?3 u! ~Unur ano~dw! an!$q a.7 ~ Y ; L . , , L I ~ , I T ? ~ ~ o , ,
s ~ yjo l J ~ M Onql ~ atr!anpa~ +oLEM I? aq n3 pawaas , , s o ~ a ~ o z w ~ s a , , n ' q p a ~ z y 3 ~ a ~
s a q ~ r ay3
i na!ipJLr o j , . s l s j u o J a d ay? Ay JsnJlslp y l l m papacYa.7 aJam puz:
' s ~ u a r u u ~ a naLr!]rr;iS.rl:
o~ qnrirnoxd puryaq dno;r3 U ~ E W oyl uaaq p??i!q- - ,,solar3
,
- u ~ j s a , -ig? - - s~a3tipo.~cI a l ~ l ay$
~ n se y 3 n m SE u! ' p u a ~ ,,$aymur,,
j eu~yj
Jaylc;r Isa!l;lod E s i 3 a 1 j a ~L l q ~ q o ~s!yl d :I-eyqsnprry y l ! ~p a ~ c d u r o aM O ~a;roM
lmaua3 u! saalird U T J P .uayM ~ ' 0 5 6 ~07 5561 WOJJ san1-c.t M O ~JCI saldas 3 ~ 0 1
t p q (E: uwnyoa) o r v x 1zl~~snpu!/s1111:3 s q lnyl
~ A y l ~ o ~ a j osru $1 ' ( ~ 2 6 ' 1 :~ o j
~daaxa)p o r ~ a d8s-CPGT ay4 % ! ~ n p pul: sa!l.~jyi a q %u;r~np ~ (1i?~aua8 uj s a a r ~ d
ur.7-e~ $0 $vq$unyl) alqeJoh-Ej aJ oui - a .!) s a a r ~ d ls1;rjsnpuI o$ oy~vira l q a l o m j
airom E daay o$ pa%-eu~rus a o y d d o m ~ c s ~ q - e~a d d e4; 'E pur: suurnlo3
UOJJ . s a ! $ ~ r yay$ ~ jo lana1 aql PJF?.MO$ yaeq o p x ay7 paAour Lljt?npt?;r%' a l i : ~
-a%uzrpxa ay$ u! suo;rpnpaJ q j r ~pauTqruoo i ' s s ~ g u a o t rt ~u ~ v aar
, ~ A ~ Jo$ 1.r ojj a
aqJ ' s a i ~ aql ! ~ u1 - peo~qcplos a l a M a y 1 qa!qhi $-e Talv.r aaeqoxa panlen
-JaAo aill ñq uaaq aney asTMJaylo ly8tu1 ,<ayj u ~ y ;)r a ~ o 1 lday axaM s a q s d
WJEJ al!qM ' s u o y p l n ~ s apodurr ~ iIq paq3a)o;rd aq 01 p ~ uoy1nnpo~d y ?so3-y%!r[
asoyhl SUIJ!J ,Ilu~ru%raq o ~ u ?l y % n o ~luawdolailapq lcrqsnpu! %ul]t.~nur!ls
J O b~!lod 1~131jjoa q l s a g l o j aql u1 . sl~ociiu! ~q pap!no.iri Illls si:M s x n l i E T
-nunur 30 iClddns ay7 j o p v d ~ a p a ay? ~ %a s n m a q y8ly nq lou pTno3 s g r ~ s ~
~ U E'fauruur%aqlsnr SEM uogEzller;r?snprr! ' saqJ!y$ ay? u! y3na 'sluana 30
esJnaa l e l a u a l a q l u i o q palaadva ancq plnoM auo ) t ? q ~ssal J O aJ om s! s ! q ~
)
* 5 ' 8 2 1 =M :1 ( T ~ - T G ~ T sa!w aql ur pue '.L -1oT J! os-re61 e n a i ( aql ur
'9' ~ F TGEMo y p ~ayq 30 a n l m a % - e ~ aay1 h ~ ' p o l ~ a dO P - ~ ~ G ay1I u! :smolloj SE
paz!nururnseqL~m ' ~ u r u n l o ~ u ~ s a ~ n 2 ~ ~ a y q 'd!ysuo!~z~aasiryJ, ~~qu~oyss~~ ' ~ 1
 TABLE VI1 bis

''REAL'' CROP PRICES, INDEX O F AREA SOWN, RELATIVE PRICES

lndex of Crop Prices lndex of Crop Priceiq

Yvar
.p. - - ..-
G N P Impl. Prices
.. .-. - . .- - - . ..-----.
.- .. ..
Area sown
. . .---.--.- -
Cattle Prices
,. .

Source: Producto e Iwreso de la Rcpdbliaa A r ~ e n t i n apara el perrodo 1935-54;

Banco Central de la Repablica Argentina, Boletfn Estadfstl co.

15. Another relationahip to be.noted is that existing between the crop/GNP

price-ratio (which may he called anr index of "real" crop prices) and an
index of the area sown to crops. The figures are given in Table VIlbis,
and illustrated graphically in Figure.2, Here again, the relationship is .
closer in the later fifties t h m in the earlier years of the period. The
figures suggest that during the fifties the response of crop cultivation to
prlce-changes was not totally lacking.

Neverthe leas, the price elasticity of 'siupply, though greater than zero,
does not seem very large. It mayseem odd that the relationship just
described is closer than that between the index of sown'area and the.ci.op/
cattle price-ratio (also slhown in'Figure 2) ; one might have suppossed that
 the l a t t e r rntjri would be importünt iii dcciding the division of resvurccs
bctween crop lind catl Ir. n c t i v i t i c s , even 11' xgrieulturc a s a whole la un-
1-esponsivc lo "realbT p ~ i c e ch:inges.
- r , reaction of cattle
H o w c ~ ~ ethc
agricultiirc- to pricc- inccnlivt~sis nccessririly more comp1ic;it ed than th:it
syrnbolised by tlic s i m p l e supply ciirve iif busic ihcciimyl, and this affecls
thc :i!locatjon tri esop c u l t i v ; ~ t i o no1 1;mtl which c m equally ivell bc used tor
either oi i h e two hranclies of rtgricu lturc. Even allowing for t h i s , though,
thc indexcs ot "rcal" c r o p priccs and of t h e a r e a sown to crops, wl-ien
platted together in Figiires 3 and -1 bcgin to look iike n supply ciirve: i n
fnct , thc regrcssiuii t i i ' pricc on sown artuaover the w h u l e pcriod (1943- l9CiO)
is

and over thc 1!153-60 pci.ic)d i t js

which st~ggestslhat ;L norrniil mn rbket. suliply relationship wns emergjng

during the pos(-Hevolut irin p e r i o d 2 .

T h i s conc lusion i s nc~lsiikistmti:i 1\y c11:ingcd if the relationship betwcen

arca sown a n d crop " r c : ~ lpric:cs
'~ h a s n onc yc-;ii. lag (See Figurc 4).

Irj, Twoiither:ispcc~sofiht~~':~i.rnscc.~rirdescrvci-iitiiition. Thefirsticithe

slc;ir!y expansion of miiicit. typcv 01' cu l t j vatioii: fruits, mxrkct grirdeniiig:
aild c u l t i v , : s industri:ilc~s, i . c . crcips f o r industrial u s e s u c h as cotton,
ground-riii ts :incl%eiiip CVhi le friod g r a i n s rrkgistered no adv:ince in pro-
duction kctween !hc t h irties ancl fifties, t h c output o f "industrial': crops i i i
1960 was übout d v u h l e what it htid bccn in 1935, xnd about 50% m o r e thaii
its 1943 figure; though cvcn by 1!360. the arca sown to t.hese c r o p s n7:ts
still only atiout ,z t w c Ii'th of I!IC arc;i sown tu fuod grninzi. Siliiilar advrinccs
were recorcicd hy mnny i r u i t :-lnrl vegetable crops: for exrtmple, the output

1. See note 1. to p . 83.

2 . This may be cont rtzstcd with Johr. il . Blacli's conc lusions after ri close study o1
Argentine agricultiire: "Atte~~ipls o: npplyi~igconvcntiunal pricc and aupply anal-
ysis of the p r o b l i m yjeld no usablc rcsu lts F r o m most crops therc are riiore
years in whick the acrcages sown move in the same direction as real p r i c e s in
the preccding year than t h e rcversc, even a f t e r allowing f n r possihle trends.
Stretches of several years can b c iociizd when acreages sown move in the opposite
direction f r o m sevcr;il yveurs o f h i g h f r or* lortTerprices . But therc ctrc more
sequences wlien they du not. Onc has to coriclude that other factors t h a n p r i c c s
have played a larger role Ih:ir: prices in acreage changesT1.("Observations on
tl?e Agriculture of .4i-gentinatt,Jo~r-nal of Farm E coiiomics, May, 1957). In
t3is case, Black was Iooking at the r e c o r d of the pre-Revolution period.
 j
r
4
of grapefrriit approximately trebled between 1943 and 1960. The second $
feature i-s tlle extent of ycar-to-year variations in the division of f a r m .;
income betiveen wnge earneys and propcrty-uwners, as shown in the
i'ollowing tnlilcl.

- --. -- .- ----... . 4

G r o s s Value Aclderl (nt Factor Cost) by Agricultura1

Sector: Perccntages distributed t o -
Year -L.-. p..-.-. ..- ..
:+roí'ita, Rent . Interest
-,
.- - Wages - -
.-

1960 SO. 4

11 ni:ilv be observed that wages reach n peak i n 1854 and then decline,
persistently while tbe tendency of the property -- income shrires in the
t o t ~ ftr.nlue-zddcdtl
l of tbe agricultura1 sector is the opposite.

1. Taken from Aldo Ferrer, Ln Produccibn, Ingreso Y Capitalización del Sector

Agropecuario e n e l p e r r o d o 1950:Q CAFADE, Buenos Aires, op. cit.
 -..- - - - .--
17. The "interna1 t e r m s of trade" between agriculture and industry c m hardly
be discussea without reference t o tbe extemal t e r m s of trade in the case of
a country like Argentina, whose exporta are almost cntirely agricultura1
products and whose imports are industrial manufactures of various kinds.
Exporl. and import price-jndexcs, with an index of the t e r m s of trade, are
givcn in Table IX following:

TABLE IX

TNDEXES (1950=10Ci) O F EXPORT AND IMPORT PRXCES IN U.S . DOLLARS

Terms of Trade
Export Impo rt
(Export prices
Prices Prices ' /. lmgort prices)

1960_.- 82.4 97.2 84.5

--
Source: CEPAL, E l Desarrollo Econbrnico de la Argentina, 1958; International
Financia1 S t a t i s i c .
89
 O '06 O '007 Z 'CL T'(i0T O '001: 8 'LTT 1-euiralx3

:$~~Mo~~oJ
x a1qRA UJ SE ' , , ~ F w ~ ~qu1J: ~p,a ~ x d w o a3~72a p w q jo sutsa?. l-euaawa
uayM pu!w uy 3 u o q 3q l s n u aZuey:, s!q& pspooSpaysgqj 50 asoyl a3~lda.r
cpnpoird lR!qsnpn! payslu!j-!cuas pin: A~;rauyyanrrr30 sa3!;rd ay? ' p o y a d ay$
$0 ptla ay1 6q !s=inn~ozljnu~rn pays!u!j ,jo ~ a a ; t ay?~ d pue sa~!;rd ~ ~ ~ n . ) j n q c r % . i :
~ aai: poi¿rad ay1 3 0 Yrrluur3aq aql $E apm$ J O suclal [auaqxa
uaamiaq 0 1 4 ~ay2
ay$ ' snqg, iuautd~nba11?11d-eop w sp00.3 ~v!qmnpu!,,alsrparuaeluy,, ?~odmr
,

1 . 01 dir~s6a;iau sxm l r asay1 a ~ n p q n u - c w01 lnq ' saln.)gsqns apzu - a u r l u a % ~ v

I
Sq p a o ~ l d auaaq
~ p y E P ~ , Iu! p a ~ ~ o d r uspon% r paqsrug ay4 30 ~ s o u' O 9 6 1
I
: ñg iuaq-e?p-eq u o r - p z l p r q s n p u l s, l C ~ ~ u n oay?
3 q q q UJOJ~ a q j~o aauanb
- a m o 3 t: asdnoo 30 , 5 2 7 ~S!Y;L '%ZP Jan0 &r!aq auo1-e , h a u y y n ~ u' ~ ~ q oaql q
j jo % p g r o j papnoaai: ~ o ñ~aulqaeur
u pue s p n p o ~ dl e p a r mq .sann~aejnuern
$o pasoduro3 L13urur~aq,*.ra~o ~ll?saJam sq~odtu!.I%LP s p n p o ~ da l q m n
PUB ' S ~ J O ~$0 X %8p
~ aJam s ~ o n p o ~ d~ ~ o ~ '0961 i ' g e jn0q-e
s x c u1 ~ cin apwu
! a n li';rarrrymm ' s l a n p o ~ dle~aurq q q h i 30 ' s q a n p o ~ dpasn.i3~jnuaur
sal ~ r i ~ pus
hla,rguzra .~sourlr!anaM Japul-euiaa ay1 puz (11303pm uxna1o.rlad k l u y ~ i u )sl anj
1
k
aJaM 1 Japun $sn[ 'spodury Jaq 30 ! p - e ~ l x ao ~ p ~ x q a nSE
lo pul? auo jn slñrita?zur , C x ~ r u r ~aJam d
h yrins ' x 3 y ~ o u ~
a x 30 jsow p u ~
% p 2~l r r ~ u ~ ~ r uay$
 Comparisun oi' the twu series shours 3 remarkable discrepancy betwcen
the m during the 1950 ' S : while the externa1 t e r m s of t r d c dec lined alriiosl
unintcrruptedly from 195 1 l o 195 7, and even by 1960 had nowhere near
made up the lost ground tri the 1951 lerel, the lTinternnl"terms of tradc
s h o w a rising trend and bl- 1960 :,re wcll ahead of the "externalTT series.
If the "internalTrindex is t aken as showing changes in the amount ot'in-
dustrial g x d e ohtainable in Ilie homc market ín exchange f o r a given
quantuni uf agriciiltur-al products. while the ''externnLrtseries shows
changes i r 1 tlie arnount obtainable by Irading abroad, it wauld appear t h a t
tkese diverse trends rn home and iorcign prices gave the agricultura1 cjeclor
nn incentiv* to scll at home r u t h c r than in ocersees m a r k c l l .

18. Mennwhile. the efftlct of the steady decline in the externa1 t e r m s of trade
w a s t o rediicc Argentina's c n y n c i t y tn import, during u periocl in wliicb h e r
efforts to industrinlize created u deniand f01- capital guods which wcre not
finnnced by :in inflow uT foreign investrnent intn the c o u n t r y -- o r at any
rate, not before 1958. Up to 2949, the improving l e r m s o1 trade had
allowed her to obtain siifficicnt cxgort carnings evcii thriugh t h rluantity
~ ril
exports Icll: by 1949, the lotal tonnage O S exports w:is only about half the
1938-40 average. Since Ihcn, she has increased t h e quantiiy of exmi-ts
agaiii, Liut unly to the point o1 gctting back to the 1938-40 leve1 by 1 9 6 0 .
In the mem:ime, vthcr food and primary-material exporters have come
forwarcl to inci-eme their shar-e of markets in which Argentina was once
predominmt, as rnay be secn in t h e following table2.

Betiveen 1953 and 1960, the volume of Argentina's exports rose 23%, but
export iri ices le11 21% in dollar t e r m s , so that export ear-nings actually
fe11 abvut 4% (in V . S . dollars) over a period when t h c dollar import bill
rose 57% and t h e volume of exports yose by f o u r f i f t h s (as informed in
Internstional Financia1 Statist ics j.

1 . There are some objections to the comparison just made: export pric:es a r e not
quite :he saine as agricultura1 prices, und the raiige of hoinc-produccd indils-
trial goods is different k o n i thc rxnge of manufactures which are imporied:
thcrc a r e ?:?kwürd problems of wcighting (such as that' noled a little carlier),
there is Ihe complicntivns that iimporled industrial goods :xre used as inputs
in b c a l mamifacturing. Tlie approach uscd in this paragi'riph is found in G .
hlaynard, Economic D-opment and tke Price Leve1 (London, 1962). Maynard
puts a. gnnd deal of stress un tl-ie cori1p;trison uf Interna1 and externa1 terins of
trade, nnd applies his theory to Argentina among o'her countries: cf. his Chaptc~r
IX and 11.
2 , La Nación, 4 M s r c h 1963. .4n additional feature of this development has been a
re-orientation of Argentina's exports townrd the rest of Latin America: e . g . in
1951/52 she supplied only 21% of Latin America's whcat imports, but by 1956/57
1
she was supplying over 40%. See R . R.!. Stern "The Regional Pattern of f orld Focid
Welltvirt. sch:iftlichcs _nllqh&., 1959, Zer. Band.
Iinports and Exports'?,--.---.
!3 1
 TABLE Xl[
-- . .. - - . -

-. . - - .- . .- . ..- .- ------ -. ---

Argentina's
- Percent'age -Share
-..-. --. -- -.. .---- . .
i n World Exports of:

Cvrn Ment Wheat Wool

.-- -- .- - .-- -, --- -.
Average
1934/8 69.6 63,4 20. 8 12. O

Under these circurnstances, anci consit1er.ing the existing rigidity of the

supply of exportables, balance-of-payrnents difficulties and repeated de-
valuations could have been prevented in the 1950's only by a reallg massive
inflow of foreign lending; but the Perfiri goveriinient did not attompt to
obtain this.

20. Earlier, d o u h l s h a v e ~ e n e x ~ i r e s ~ e d n h o u t t h e s i g n i f i c a i ~ c e o f v a r i o u s
price- comparisons ; a particular rcnson I V ~ J J p r i c c s should be regarded as
unreliable d u r i n g much cif the 1943-60 pcriod, is tlre existencc uf n ranlified
system of grice-controls during t h e P e r b n years . In fact, price controls
pre-date ~ e r 6 n l ;i-cgulalions werc introduced in September, 1439, on he
outbreak of w a r in Europe, to fix thc prices oT ''Lasic" ~ommciditics,and
they were extended and strenglhened in 1943. A i ' u r t h e r series of meas-
ures w a s enacted in 1946, and (after a pürtial rclaxation in 1945) another
in 1551-52. Aftcr Pcr6nts tal1 i n 11155 thc prucess uf de-cuiitrol bcgan
ancl by the i ' i ~ s mcinths
t of 1939 alinost al1 prices had been freed again: the
only importnnt controls r s m n i n i n g were on rcnts and o1-i interest-rates
charged by banks. Three bLasic methods of control w e r e uued:

a. Under the 1939 regulatiuns, ccrkain prices were frozen: i.e .

sellers weye forbidden to raise them above the leve1 they bappened
to have reached when the regulations carne into force. The same
principie w a s applied in mnny of the 1943 and 1946 rcgulations, suid
in the 1946-47 period most prices were s t i l l bc: ing controlled iii this
way. It gaye rise to rnany complaints and much evasion, since
there was obviously nothing very equitable about the 'Ibasic dateT1
criterion: traders in a particular commodity coiild always argue,
often with xnuch truth, that the 1939 price happened t o b e unduly low
and no longer ccirrespond u ~ i t heconomic reality .

1. Indeed, this was by no means the first Argentine experiment in price-controI:

urban rents had been frozen for a time at the end of World W a r 1, and still earlier
cases can be found; the first recorded attenipt ta control prices was f616!
 b. F r o m 1946 onwurds , howcver, the principie of presc ribing prices
hegan to be adopted. Under many of the 1946 regulsttions, the
authorities were empowered to take notice of productian costs and
other considerations and to fix p r i c e s in the light of them. These
prices might be quite different from any ?'base-date" levels -- indeed,
, they were higher than thc %ozenT71939 prices of the system described
under a . This was a concession t o public discontent, and for a time i t
made the system more realistic . Provision was made for the sub-
sequent adjustment, if thought necessary, of "prescribedn p r i c e s ;
however, once they were fixed it w a s seldom that traders wt3re able
to get them rnised. Some rettdjustments wera made in 1949, m d
again in 1951-52, but the chicf f e a t u r e of the m e a s u r e s of those years
was t o substitute " p r e ~ c r i b e dfor
' ~ ftfrozenlr
prices over an increasing
r q e of commodities.

C. Towürd the end ol' the Parón pcriod, and during 1955-58 (when thc
new regime w ü s s t i l l tidministering the control system i t h:ld iin-
h e r i t e d and was gradually dismsintling) ü t h i r d systcm was intro-
duccd: that of prescribing profit-margins rather than the prices
thcmsclvcs. Mnnufacturcrs , wholesalers, importers nnd r c t a i l e r s
were told what percentagc they rnight add to costs st every stage of
t h e production ;ind distributiun of the controllsd cornmodities. This
w a s generally felt to be more equitable, since it rneünt that tttbc
p r e s s u r e of controls w a s evcnly d i s t r i b u t e d instead of being cnncen-
trated mostly on rctailcrs; it also p a ~ m i t t c dthe üdjustment of
prices t o allow f o r increases i n the costs of imported materinls
-- the omission of which had sometimes crellled intolerable hard-
ships and distortions under the s y s t e m s describcd in a . and b .

It i s impossible (in the w r i t e r l s opinion, anyway), given the existing sta-

t i s t i c a l r c c o r d s , to say whether the controls were really effective in check-
ing the rate of p r i c e - i n c r e a s e s . Obviously, the r e c o r d shows thüt they did
not hold p r i c e s down altogether; but t h e r e is no doubt that the ycars whan
controls were enforced m o s t s t r i c t l y , i, e . 1952-54, saw the lowest rates of
adv,mce i n p r i c e s , kvhile the "freettyears -- 1949, wlien the 1446 controls
had been t e m p o r a r i l y rcduced and relaxed, and 1959 whcn controls had
endcd altogether -- regíster t h e highest jumps in tho pricc-leve1 recorded
during the whole 1943-60 p e r i o d . The fact that prices surged forward so
much duriilg the tffreel t years i s pxrtly to be explained as the effect of
devaluation (as noted earlier on}; but it $vas also due in part to thc unchain-
ing of supply- and-demand Iorccs , as previously-suppressed b:icklogs of
demand attenipted to work tbeniselves out; and this sciggests that price-
conlrols rnust previoiisly hüve heen effective in suppressing sorne of the
inilationary pressiire in the economy. In summary, it is our i m p r e s s i o n
that price controls have been temporarily effective in retarding price rises
at the c o s t of periodic explosions as controls had t o be lifted.

20. Jn addition to price-control rneasiires, subsidies were used to keep certzlin

 p r i c e s lnwer than they would otherwise have bcen. They w e r c almost al1
paid in the f a r m sector, both tri crop and t o c ~ t tle t producers, snd they
iipplied whether the subsidised output was being consumed inte rnally or
cxported. Thcy w e r e the chief instrument in the stabilization campaign of
1952-54; bclween 1952 and 1953 the amoiint paid out i n subsidies rose
five-fold, nnd i t more than doubled ngaiii bctween 1953 a n d 2954. Fsrm
subsidies w e r c reduced 3rd climinated fairly rapidly a f t e r 1955, though tho
on cattle products werc tiipered-off more smoothly than ihose on crop. A
typc o1 concenled subsidy, wbich survived the Per.611regime and indeed
berame larger i n the late fiities, is rcpresented by the lleficits incurred by
i>~.i!>lic-utilitye n t e r p r i s e s owiled by the s t a t e . s u c h as t h t ~riii1w:iys and the
13ucnos A i r e s subway system. These rcsulted from the maiiitcriance of
!I rices at lower-than-econrirnic leve ls, and (:is notcd earlicr) thvy helped to
kcep the CLI f r o m r i s i n g as much as it would otherwise have done. I t
s e e m s probable that af'ter the fTCeing and de-subsidis ing of food prices In
thc late i j f t i ~ s ,the lower-than-cost priccs of transpo rt, clcctricity and so
on cnahled conrjumers t o switbh m o r e expenditure to food than they could
have done without those concealed s u b s i d i e s , thiis hclping to dt-irc up food
prices . This p r n m p t s the reflcction that a aystem of contrnls and subsidiee
inny produce more distortion, the loss cornplcte it is; certainly, it does i
not seern that the authoritiev intended t o produce t h e effcct just descrjbed. !

21. A n y a n a l y s i s o f t h c e f f e c t s o f s u b s i d i e s , controls, a n d o t h e r m c a s u r e s
affcctirg prices, requires prior rtssurnptions regarding the way prjccs
t h c m s e l v e s are determined. A tax, for exnmplt., will produce a different
result if it is imposcd on a perfectly competitive mar.kct wiih elastic supply '
and demand, than if it is laid nn a commodity produced l>y oligopolistic
fii-ms with full-cosi pricing policies . Sími larly, thc whcile pyocess of
itit'1:ttion is likcly to bq affectcd by the naturc of thc ecoilomy 'S rnarkets
snd thc extctit t o which se!lers are "pricc- rnitkersit o r "pricc- lal~ri.sii.
The ncxt chripter is devoted t o m investigation of lhis questiori in the case
of ihe distrihution o€ foodstuffs during thc rcars 1 9 5 7 - 6 2 .
 PRICE F0RMATIC)N Th: THE FOODSTIJFFS MARKET:

WHO LESALE Ah33 R ET A1 L I'RO FIT M hRGINS

What wwe intend to examine in this chapter is thc mechnnisrn of t h e f o r m a ~ i o n

of prices during the period 195 7- 1962 (for which rvc Ii:~i-cohttlinvd st.itistics)
in che foodstuffs distribution industry, both u7holesnle 1 - t l t i ~ i i . O u r object
is to estohlish whcther Toori p r i c ~ch:ingcs duritig t h c pet-iuJ LLII !cr ~ : ) n s i c l ~ r -
ation can principally be attributed to n di rect ;iild p isoportionnl i 1-ansl'erence
of the changes in costs. o r whcther as trzidition.;il ihcory t-vcluirc.~,ir can
be supposed that in thc deterinination oí' the ch:~ngcsin thc ;iric lcvcl
market forces have been allowed tn work.

For the time being, i t will be assumed ihat the distrjbutive ti-ndcs contributcd
to the inflationary process in proportion lo I h c pei-cent;igc mlirgins wkich ihey
added to che product ion costs o£ t h e commo~lit~ G Jsiild: ;i la11 in m:ii gins -vil1
'

he t&en to imply a reduciion, and a risc i i ni:~rgins

~ rin incrc:isc!, iii this
contribut ion.

T h e w is an ahiindant literaturel on the ~ u h j e c of

t "rnrirginf7pricing and no
----
l . E. e;, in Ackley, C : "Administcrcd Prices anrl tht. 1nfl;~lionrtryProccss", ;Irncr- A

ican Ecogomic Review, Ilapcrs md Proccerliiigs, Tlr-cernbcr. 1938. "A Thii-rl

Approacb to the h a l y s i s and Control of Inftülion" in "'~[~rKc~l:itionship -- --
oi' i'rict:s
--
to Economic Stability and Growth", U.S . Congmss. Joint Et~oiiomicCoirirn ii l c r ,
ln thc ,'irnflr-iaxnEcrincimy
Match 37, 1958; Bitrgcr, lX31.01d: " D i ~ t r i b u t i ~ ) n '~'I:LI'~P
s
Since 18C=!Itt,NI3 of ER, Princeton, 1955; Check, :VI. Briicc: "Praiii. M:L~-gins :ind
Wagt! S h ~ r e sin Australian Mmuft~ctures, 1945-55 ", Tke Economir Recora, u..
1957; Heflebower, R . : "Full Costs, cost changas md pricca!', Bysi1:i:ss Con-
Price Palicy, NB u i ER, Princcton, 1555; Rtiggll.~,Hir-h;: r*lt: " 1 . i ~

-
centration
estabilidad de los precios y el crecimiento economico c ?ri los EE LrLrr', &u!~<riifi~
Revista de Ciencias Econ6iiiicas d e la Universidad de CPii le, Pi 74, pagc 23 "Thc
nature o í Price Flexibility and ihe Determinants of Relative Price Chnnges in thc
Eccinamy7t, Business Concerilr&ion and Price Policy, NB ~cif El3 Princclon ¿'niv ,
Press, 1955, page 458; Sho-Chien-Tsisng:'The Variatbys U I Re:il -Kige~..~-
u Trade Cjrc le ", London, ?54$ - to nrime oniy a
Prafit Margins in R e l a t i ~ n - l l :he
few o[ thc possible references.
5. The Ifindustry" o í which everycine spolre did not include the f u l l rn;iiigi-(?l.
manufacturing activities - coa l niid stec. l, heuvy cheinicrils, n1xchii1t.r~: ~ I L ( ?
s o on. The enlerprises which hnd grown up before and during the uriir
were eiigliged i i i producing f'inishcd coiisunier gliods with imported mntclr-
ials and equipment, and it. rv2s :issiimed that this ptlttern wou ld I_ie rclai:lcd.

The 1944 Memoria of the Banco Central contained an intcresting passage

in which it I\,~?s urgued thiii i h e l i o s t - w a r iiidustrinl dcucloprnei~tof Eur-(ipc.
and the U . S. would >e in thc dircction of capital goods production hcc:tusc.
cif the liiies i h e i r w a r producticin hs;d takcn; t h i s v:ould rcdcice cccinipctii i o n
frcim t h c ;tdvmced cricint.ries w i t h r c ~ a r dto finishcd consumcr ri~aiiiifaclcr'ts .
'I'hough thc P c r o i i i ~ ti n c ~ v e i r - e n tsl>rikíi of ''rcvolutiunl', w l i ~ tiit rc:Jly uttcmpi-
ed to do, i n he c:irly yeiirs :ind I'rnni an economic poiizt of view, was to
defcnd the industrial post-&:ir sj:itus-quu. It I i : d i~othingcif tl-ic. S o v i e t
ductrinairrr! insistencc on building he:ivy índustry as the fírst slagc oí' I h e i r
dcvelolment progranunes, T hc gcrieral vieu w as thal. nny ;itlt.mpt to
creatc producer-goods indusl.-r.it?s wriaId rncrely cre:~tc:iflo w of o u t p u f fL> .
ivhich tlicrc coulrl not be n sufficient intt.1-nat dcmrind, i ~ n awliich coilld iio,
~ S ~ costs would rnake thcir pilice,c uncornperitive i n
bc e x ~ ~ c i r ~t ~P dC B L high
wririd markelsl. The m2in :ic:rrnt, in any case, w:w oii thr "dtoficiifir~" ol
t h e industries existing i n 1944-45; t h i s word occur-s agxin anci again bo1.k
iii Pcron's speeches, in the pr,(:ss, :tnd in thc pronounccmentu oí' p r i i - n ~ c
orgnniz:ttinns. ,As :ilinnst al1 thc i n d u s t r i c s bogun in the peiAiod1935-45
were producing finished gonds , t h e principie o1 "dciendi.ngl' i he staLiis- qur>
inrvitably dt?iined the dircction which Argentirin ! S g r o w t h rvns to i;ilcc?.
Later, it is true, thr Perhn govcrnincnt bogan t c j in&e p r o v i s icin i'( i r
clcreloping soine heavy industry, bu[ t h i s devc lopmcnt, they thought, tuas
to be rnodcst. In a n irnportarit speech2 in 1933, Perbn looked back oii thr
1tsrtie.s wheii the ;~cceiitwas on "defcnac", and refcrred tci L I i f 1 stncond
five-yenr plan (begun 1952) rvhich would also be niainly dcfensivc but whic+h
~vouldsiso bcgin to build a snull capital-goods industry; the lt:itiaclru would
be fully develnped later iii a third fivc.year p l a i , whii:li woiild i~spand
jndustry al1 alorq the lirie. l3ut the third plan was never introdticed - Per6n
had fallen before t h e second was completed; and at thc end cif ihr. fiftics,
the indusl t-i al sector (vas s t f l l rnainly concerned with the prurilict ion of
finished consi;mer goods .
l . T h i s approach brings in t h e concept of curnpürative advantage: evcn though
recoinmending tariff protection, t h e industries to be "deie.ndec1" {ve re thcisc
in which Argentina's dis advantage was s m a l les t.
2. R ~ f o r ethe Congreso G c n c r a l de 1;i Iildiistria, RI:iy 1953. Even with ieg:ird
t o the thicd plan, PerFin said: ltWe do nol wani an cncirmous industrial scclor.
but a relütively s m a l l one which w i l l be w e l l integr:ited aiid i-atiiiii;~.l\vpliirirrc~cl'.
It is intcresting to point o u t that iii tilis si~eech,Perdn uses a voc:~bi~l;try which
suggests the possibility that i n the developii~entuT h i s economir, systc-in htl mnv
have used w a r tactics. H e speaks of Itdeiense of the induslry", "caughi, uiltlc~,
crosced f i r e l ' ; the i n v a i o n u l f u r e i g n iiianuf'nctured goiids": ui1d rit ''l,vili-vr>s
of advancc".
6. This general resolution, on t h e part of #e nation in gencral a s welI as af
the grivernment in pakicuiar, to'retairi Ihe industrial development already
achieved and to advanqe further on the same lines, must be counted as the
leading exegenous factor in tho course of econumic events in the post-war.
To trace the consiquences which rnight be expected from the policy
decision of insisting in t.he deveIopmcnt of a cousuin~~r-'Yeconomy firstl,
rather than attempting to integrate the economy with a basic sector, a
simple model will now be sei. i~p,embodying thc spccial cliaracteristics
of the Argentine economy. The uns atisfactory nature of the avai lable
statistics precludes anythi& very advanced in the way of cmpirical testing
of the model, but the principal conclusions may be checked against the
main evidence given in the prcvious chapte rs R I I ~the addi ' ioi?::l i ? ~ f o r m
-
ation given in further paragraphs and in Ch;ip!v r VI.

Tbe characteristics of the model are as follows. Thv ecoliomy has t wo

principal sectors, i . e . agricultura1 (A) and industrial (B). A produces
food, which is partly consumed abroad and partly absorbed by the domesi i c
markct. (Non-food agricultural pmducts are neglected f o r sirnplicity: it is
true that therc are some irnportant ones such as hides a ~ wool,
d h~telre?
wool maüe uy ordy 7 . 3% oI agricultura1 outpul. in 1959). B manufactures
oonsurner goods2, which are entirely absorbed within the country: i' is
unnoccssary for Argentina to import finished rnanufacturcs, but she is
obliged to irnport industrial rnaterials and equíprnent lo be used cxclusively
by the B sector. Thus; the current output and ihe rate of growth of B
jointly determine import reguirements, whíle thc ouiput of A, Iess in!e rral
fond cnnsumption, dctcrmines import capacity. lt is ;issliirisd thrit frireigri
rnarkets for f o d t u f h are m problem, in the sensc that whrttevcr quantitg
the country wishes t o export will be aold at Iht! ruling world pricc. Thus
the balance óf t rade depends on four things:

a. the supply of A: t h i s id aasumed to be very inelastic

b. the interna1 dernand for A: this depends on the leve1 of domestic ,

income, md is large even when incomes nre not vcry high

C. the vaiue of raw and semi-finished m a t ~ r i a l sn e r r l t ~ ~f lo r ihr: current

production of B

d. the value of equipment needed for the c u r r e ~ rntc

t nf cxpansion of B
industry .

1. "Consuniptlon rnust not he submitted to production, rather the capital m d its

advantage must b e subordinated't6 consumption, This is the theory of the
justicialism". J. Perbn, Conducci6n PolItica, Escuela Superior Peronista, &-
Aires, 1951.
2. The part of domestic manufacturing output which consists of "intermediate
products (e-g. petrochemicals) is left out of account.
11 2
 A trade deficit may, of course, be financed by an import of capital, o r by
the use of short-term credit and reserves. Changes in tbe terms of trade
will have important effects on the trade balance, given the physical
quantities involved. In syinbols, the balance of payments T is

ivhere C, is interna1 consiimption o i A, Cb is interna; consumption of f3,

I is investliient ( u s s u m e d to be madc in B - industry entirely), Z is foreign
capital inflow and L is monetai-y adjustment through short-term credit and
the use of reserves, and m is the "in~portcoefficient'' of B-production in
tcrrns of imported rnhteria 1s. Finally, A is assumed to be land-intensive
$nd B capital-intensive; A is less labor-intensive than B.

8. Within this frai-i~c w o r k of assunilitions, t h e expansion of manufactures -

once urbanemployment is fully achicved - will r e q u i r e , if labor costs are
not t u go iip, t h a t \abur is eiicoui'aged to move from other activities into
industry. The transfer may be facilitrtted by riiral/u rban wage differant-
ialsl, and perhaps by the bettcr urban conditions and possibilitics of per-
sonal developmer~t. T h e problem can be resolved either by trnnsferring
labor frrim rural non-productive a r e s into the prodrictive ones o r by
stimulating the foreign immigration of rural labor. The f i r s t possibility,
howcver, is somewtiat: limited hecause labor may be attracted from
productive and non-productive rural areas not only by better wages in the
industrial sector hut also by prcispects -. imaginary o r real - offered by
t h e mctropolis f o r a better. "way of llfeM. Also, the expansion of the
maniifacturing sector will demand that capital. is rcoriented from other
activities. This rnay be done by t h e incentive oi' protection (government
credit policics and tariffs) a ~ i dparticular ly by sufficiently large and
sustained profits. Finally, the growth of the i n d u s t r i a l sector will re-
quire a concornitaut expansion of importa of foreign capital, raw materials
and intermcdiatc goods. Ai~ollieravvurnption that wi ll have to be intro-
duced is that the country may or rnay not accept foreign capital contributions
or foreign loans. If the first hvpothesis is accepted, then it will be required
that the country maintains a suffiuiently Ilexlble Import capacity rnainly on
the basis of its exports once gold a i ~ dexchange reserves are down to
minimum levels, But, since cxports consist máinly of food products which
are also consumcd internrtily, and siiice Tarm output is inelastic, increases
i n imports will require either tbe restriction of interna1 food consumption o r
the running-down oí' stocks of foreign exchange xnd gold2, The elasticity of
supply of rixportablcs w i l l t l i u s depend cin the degree o f consumption s u b -
stitut ability between food and manufactured products. Interna1 dern and
problema may become more diificult to overcorne if, u i t h stagnation in
the agricultura1 scctor and rigid iniport requi rements, populat ion growth
and urbanization add pressures on the food supyily. In the shot-t run,

1. The statistical information correspondirg ta these paragraphs rnay be secn in

Chapter 111.
2, See Chapter I and 11.
11 3
 bowever, with favorable terms of trade and litrge foreign reserves, the
country wiil be able to mnintain high import levels, even if the voIume of
expvrts is allowed to decline.

1
9. The expansion of the industrial sector, under favorable terms of trade ,
will. increase real income snd if real snvings and capital formation are low,
real consumptiuri will expnnd. With incre'lses in real incorne. given suf-
ficiently sensitive money wriges. demand for food will expand. The
rnagnitude of the expansicin will dcpend on the income-elasticity of demand.
On the assurnption thcit thcre is a certain lrg in the conaumptions-patterna .
of rural immig~*nritscoming from low income areas, income-elasticities
will be rclatively h r g e frir certain groups oi the urban population2. Labor
consuniption expenditures are heavily weighted by food oiitlays, On the
other hand, the process of urbani~ationconcomitmt with the growth of
industry will contribute to increase thc preasure on marketed food pro-
ducts, ;ind thus on the rnechanism of distrihution3. It is also necessary
to take into account that thc consurnptiun of rn;inufactured goods is
'
S timulated when certain rninirnum housing and living standards are fulfilIed.
For cxample, if the country docs nol hnvc enough capital to achieve
simiiltrineously (a) grciwth in the industrial sector and (b) expansion of
urhan facilities (housing, roads, transportations , electric power, etc),
f u r t h e r increases in ihe demand for consurncr durable goods will be .1
inhibited: no one will buy (for examplc) a tclevision set if he has no !

electricity supply in his house4. This will be rnanifested in the forrn of :$

1
a low claaticity uf substitution between m c i n u f ü c t u ~ ~andd agricultura1 1

prciducts {cxcept for such gooda as cllithing). Then, unlcss the income- :<
clasticity of demand for food is vcry low, p r e s s u r c will develop on the 1
supply o1 agricu Itural products which (on present ussumptions) is very
inelastic. There will be also a preasure on the manufacturing sector,
bi~fccintrary io tbe case oi' q r i c u l l u r e , the product oI this sector will
grriw. T h e priocs cif :igricultural produt:ls will rise rcliitively t o the
priccs of münuf zturci! goods5, since thc supply oE manufacturcd con-
surner goods, as urr!Ll m their demünd, will be increasing, while the
reverse will be true in the case of the a g r i c u l t u r a l products. It may be
anticipnted then that agricultura1 prices will rise relatively to the
maiiufüctu ring prices .

l . See Chaptcr 111.

2 . Soe Chaptcr TI f o r these paragraphs,
3. St:r Chapcr IV.
4. On ';he other hand the expansion nf investment in construction will create ad-
verse conditions f o r the development of the indusiry, since investment in I

capital goods wi ll be reduced thus ho tding back the process of import substitution
-so iiecessary in the conditiona described in this model- and allowing f o r the
deteriorxtion of the social capital,
'

5. See Chapter 111.

114
 THEORETICAL APPENDIX

to

Chapter V

The simple model previously commented is presented more formally in

the following par= raphs. The simplifying assumptions here introduced though
dr,mtic, are not, it is hoped, cornpletely unrealistic.

1. Basic Assumptionls

a. Only two goods are procluced, an agricultura1 food commodity, Y1

and a rnanufactured conaumer good, Y2. No capital equiprnent is
produced; when this is required, it is imported. -- Good Y2 1s
manufactured partiy from imported rnaterials; Y is not used at 4
al1 in the manufacture of Yz. 1

b. The output of Y1, we assume, does not change overtime; it is quite .

1
inelastic with reapect to price (in the relative sense, i . e . the ratio
of Y1 price to Y Z t s ) ; Y1 1s both consumed -- domestically ami
exported, s o that the amount available for exports is Y1 - C1, when
C1 ia home consumption of YI. O n the other hand, Y2 is consumed
fully domes tically.

C. The world market for Y1 is such that the country can se11 any amount
it wishes at the ruling world price, Pe. It follows that, unles6 over-
seas trade in Y1 is restricted, the domestic price of Y1,P1, must
equsl ~ dwhere, -+ is the exohange-rate (defined as the number of
units of fareign currency).; Pe ia. of course. defined in terrns of
foreign currency. Exports earnings, then, will be Pe(Y1 - C 1 ) in
foreign currency, and PI (Y1- Cl), or Pe 1 (Yl- Cl),in terms of
horne currency.

d, Irnports consiste of the raw material content of manufacturik output

Y 2 ,plus capital equipment. (The agricultura1 good Y1,is assumed
t o require no imported input8 at all. A rigid technical relationship holh
between good Y2 and the materials required in its production; this
relationship Is represented by the coefficient m, so that raw mater-
ial and semi-fabricated goods imports are always equal to mYZ. The
materials imported cannot be atocked. It is also assumed that there
 is no internal. investment in stock piling either Y1 o r Y 2 ,s o that
imports of capital equipment are exactly equal t o the amount of
interna1 investment. Any desired amount of equipment can be
obtained from abroad at the price Pk.

e. Interna1 consumption of Y 1 ,denoted C1, is completely inelastic

with respect t o its price (P1) relatively to the price of Y2(Pz). It
is also very inelastic with respect to real income, to that in t h e
re lationship C = 4. +
I Y, .L is large and is small. With
the consumption of Ys,denoted C2, the contrary is assumed: i n
C2 = 4' + j Y, , is srnall and 5 is large, except that
J' + < 1 . Also, the demmd for Ys has some price-elasticity,
sothat C 2 = 1 Y - 1 ' p2/P;';-since thedemandforY1
has zero pricc-elsticity, this implies that a relative increase in
the price of Y 2 daes not switch demand from Y2 ta Y1 but causes
people to save more.

f. Tn the industrial sector, the price of Y2 is determined by firrns

whose policy is to add a fixed percentage, g, to average prime cost,
which consists of wage-cost plus the cost of the imported raw
material. T h u s :

where:

wZ = monetary salary per unit of L2; and the total value of

Y2 produced is:

g - The industrial wage-rate wg is negotinted between ernployers m d

unions. The unions t r y to see that real wages are not reduced wlien .
the price of food rises, if possible, they t r y to raise real wages ,
though they may also suffer reductions if tlieir bargaiiiing strenglh
is low due to.the existence of unemploymcnt. This is formalised as
~ ~ - 1 =~ z Plt/Plt-l,
# w where
~ z is~ an index of bargaining strength:
if z=1, the unions are merely meeting food price increases. This
relationship may be lagged, e g . wZt/w2t-1 = z P ~ ~ - ~ / P ~ ~ - ~ .

h. The supply of labor is inelas tic with respect to real wage-rates ; a

minimum real wage-rate is set by custom and by previous trade-
union success in getting mininium standards accepted; labor is highly
mobile between agriculture and industry, so that wl must equal w2 if
agriculture is to retain its workforce. Labor productivity is constant
in the short ruii, so that nl ami n2, denoting output per unit of
 employment, i. e . in Y1 = nl N1 and Y2 = nSN2, the coefficieritei nl
and nZ are comtanta. Since Y1 does not change, total emplopent
varies only with Y2,up to a rnaxirnum Nf (i. e . fu ll empiqmedt).

i. In agricu2ture, only labor and land are used; the m o u n t of 1 4 is

fixed. Incomes in agriculture are N1 Wl tR, where R is rent. In
induatry, labor and capital* (K) are used, a n d the income arising
therefrom are N2 W2 t. G , where G denotes profit; as noted earlier,
this is a fixed perccntage of prime costs. The effect of investment
in anyperiod ia to add to the stock of capital in the next, i . e . : Kt =
%-l+ Iidl> and t h i ~causes A. proportlonate increase in the value of
"2.

j. For the time being, it is asaurned that there is no government ex-

pcnditure and no taxation; it is alaa assumed that the monetary
systern is elastic, in the sense that the quantity of money, the level
of interest rates, credit terma, etc. , are always adjusted in such a
way as not b affect t h e working of the model,

2. The model thua apecified contains many very drastic simplifications, but
it also has a few unusual com~licatingfeatures, such m the separatiun of
the industrial and agricu1t;ural sectors, the specification of separate price-
levele for the two aectors and for foreign trade, and the assurnption of an
open e conomy from the very beginning . These special features, however,
are clairned to be essentíal ií the model is t u display the main character-
istics of the Argentine economy. In this econamy, four *es of inflationary
pressure can Lic considered:

a. 'inte rnalt cos t-inflation, ario ing from autonomous increases in

money wage- rates and profit rnargins ;

b. 'externalt cost-inflation, arising from chmges in the prices af

irnports and exports, whether these are due t o changes in world
prices o r to reduction in the exchange-rate;

C. dernand-inflation of the orthodox Keynes ian type, i. e , that which

arises when dernand f o r the economjl~output is greater than can -
b e satisfied from its existing resources;

d. lbudgetarytinffation, i. e . t h d arising from a failure of the govern-

ment to divert resources t o its own activities without causing in-
creases in the price level.
-- - -- . . . . .. . .

( * ) Of couraa, we are here referring exclusively to riational factor of production.

'*
 Before (d) can be dealt with, assumption (j) will have to be relaxed and
f u r t h e r ones must be introduced; but the specifications are complete enough
at the moment to allow the consideration of the other cases, andthfa will be
done in the ensuing sections.

3. In the economy represented by the model, total output is the sum of Y1 and
Y2. But ihddustrial output Y pwas specified abave as being groas of importcd
input; in the 'value added' seme, it is Y2 - mY2. Multiplying by price-
levels to put the quantities intri money terms, we can write the usual identity
of product and income as :

YIPl + Y2P2 - mYZPm = W1 Ni + W2N2 + R + G:

with similar identities f o r each of the two sectors, i. e .

and Y2 P2 - r n Y ~ P r n1 = W2NZ + G
r
where, as already noted,

Substltuting this in the previous equation, and taking N2 as YZnz, a little

manipulation gives the industrial commodityls price as

If x ia used ta denote the share of industrial output in total production, the

general price-leve1 w i l l then be:

Suppose, now, that the industrial wage-rate rises while agricultura1 arid
import prices remain uiichanged, The general price-leve1 will then in-
crease by (1 + g - rng) times the increase in the wage-rate W2.
-rrZ
ns
It could be offset by an equal increase in n2 (output per unit of employ-
ment, in real t e r m s ) ; conversely, a fa11 in n2 could cause the general
price-leve1 to rise without any change in the wage-rate. A rise in the
share of industrial output in total product (i.e. a rise in x) will increase
the effect on P of a rise in the industrial wage-rate; so \vil1 a rise in the
profit marging. A rise ín the import-content of industrialoutput, due
 to some change in the technique of productfan, will somewhat diminiah
those effects.

5. Cbmges in the industrial wage-rate may give rise to a spiral in variova

ways.

a. If the agricultura1 wnge-rate must always bc adjusted to equal W ,

this will raise P1 unless there ia a corresponding fa11 in rents, ;
a rise in Pí will then c m ~ wage-dernands,
e since W Z t N 2 t - l =
H
Plt/Plt-l.

b. Since it is assurned that P1 = Pe ,

a nammary condition f o r the
sale of exparts, the rise in P1 wijl cause a fnll io the exchaage-ratt
r; but this will raise the cost of imported material for the prodiic-
tion of Y2, which in turn wilI raise P2 and the general price leveL

C. If agricultura1 producers (landlords) are able to fix P1 collectively

so as to keep rents R at a given real value, a rise in P2 will cauae
a riae in R and so in P1, thus causing further increases in W2.

6. 'Externall cost-inf lation can be analysed along exactly the same lima as
the foregoing, except that the original "pushttwould take the form of in-
creases in P , and Pe in absolute terms. Changes in the terms of trade
P,/Pm &ay not necessarily shift P, the general price-level, if, e . g. ,
P,/P, falls because oí' a greater reduction in P, than in P,; however,
ihey could have an effect through a worsening of the BaIance of Paymenta
which caused a fa11 in the exchange-rate T.

7. So much (for the moment, anyway) on cost-inflation: the next step is to

consider demand-inflation. The s u m of real demands in the model will be

where E i s exparts and M i a imports.

From the assumptiona given in 2 ,

E = y1 - C1 y1 - ( -t :.; Y ) ; and M = mY2 + K

, Also, incorne Y is equal to Y1 + Y2 - mY2.

Siibsituting al1 these, and valuing at current prices.

The essential feature of demand-inflation is that t h e sum of d e m a n a , at

current prices, excegds t h e current-price valuation of supplies: i. e.

where H is ' e x c e s ~demnndt. Subatituting for DP, in t h i s equation, the

right-hand side of the earlier ane

and the rise in prices can be taken t o be a function of R. This formulation

i s equivalentto H = Cs - Ys, and in the absience of inflation (1. e . , when H =
O ) , would amount t o the simple statement that the demand for the industrial
commodity is equal, in equilibrium to its current output: as it has been
assumed that Y2 cannot be stocked and.is neither exported nor imported,
this must be true in equilibrium, and the degree of disequilibrium in the
ecanomy is defined, it seems, entirely in terms of exceas demand f o r
industrial output.
 CHAPTER VI

INFLATXON A N D GOVERNMENT POLICY

The mode l discussed in the previous chapter was put forward as an ex-
planation of the course of the economy in t h e 1940's and 19501s, and especially
of its inflatinnnry tendenciee. In'.the following pages, attention shifts to the
economic policies by means of which the authorities attempted to solve the
countryts prnblems, with special refcrence to t h e period dter 1949, the year
in which the terrns of trade began their unfavorable t u r n . The official ap-
proach paid mrich -perhaps toa niuch- attention to t h e foreign sector of the
economy. This, of course, is hardly surprising since from t h e early fift~es
up tu the present policy-makers have been struggliig within the constraints
imposed by the balxnce of payments. A good deal of the time, also, the
various governments were reacting to s h o r t - r u n problems with short-run
nleasures, and were unable to produce long-run solutions. It is a basic
hypothesis of t h i s chapter, to be supported with historical evidence, that the
general "appreciat.tíuntT of the aítuation, md t h e strategy devised to meet it,
have remained substantiaily the same under al1 governments regardless of
their political affiliations: tactics may have varied, but the underlying
conception -cine might cal1 it a lfmodel'tof the economy, though the word
w;is not used by the officials themselvea - h a s been prnctically unchanged
al1 along.

The various consirüints m d s t r u c t u r a l rigidities are very similar to those

found in many other countrics of Latin America, and have seriously limited
t h e choice of policies. It is not intended Rere t o criticize t h e policies
actually chosen nor to cxplain why the country has not heen able to free it-
self from the constraints just mentioned. The objeci. is, rather, t o describe
t,hc "policy model", showing its permanente over t h e years and indicating
i h e wa-vs in which it niirrowecl down policy-choices.

3. T h i s ttpolicy inodelw is bmed on the iollowing relationshjp:

B = (A - Ca) +(Mc + M i ' Mk)

Where (A - C,) exports and M, I Mi t Mk = imports.

 M, represents imports of consurner gaods; Mí imports of industrial inputs
- r a w materials, f u e l s , intermediate gmds; nnd Mk, capjtal goods irnports.
To correct balance-of-pnyments difficulties within this cotitext, policy-
makers applied various measures with the object of expanfting exports, re-
d u c i r ~imports, or bothl. The various Iínes of policy rnay be listed as
follows :

4. P o l i c ~1 : Most govi?rniili:nl,; di] ring the period made efforts to expand ex-
ports. The expans ion 01' cxl>i)rLsdepends on t h e availabi lity n i exportable
surpluses and íin tho existcncc of :dequ:~lc foreign demand. T o increwc Ihe
supply of exports, it is iiccess ary c ither ~ Í Iexpün.d t h c ngricultural output
(A)or ta reduce doinestic :~bsorption(C;,} of exportables. The expansion of
ragricultural output h;is hecn a central aim of many governments, but few
have heen a k l e t(.)succeed in implctiienting it efficiently. T h i s rnüy bc due
to the fact that tthe bett.erment o€ t h e conditions of productirin oP t h e agri-
culturiil sector is plainly a long run type oE policy requiring deep changes
in the existing structure. M-ost govcrnnlents tended to focus thcir efforts
o n the solution uf iriimediate problems. It is also possible that the institution-
al resistances met by the authorities i n the xgricultural sector could only be
overcome hy a degrce o f concentration which governments felt they could not
sittcinpt withotit giving tmiset o problems in other sectors of thc economy. The
object ivc of expriiiding (A) wns stated, ;&lbeit-rather vaguely, as early as
1945 in the report nf thc Post W n r Council (referred to in the previous
chapter) . Thc intention was tnore poli lical t h m economic: the Council
spoke of "reducing speculation in land v 3 l u c ~ s "and "increasing thc number
uf o w e r - p r o d u c e r s t ' . In 1949, t h e idea gaihored streigth in vicw oi tlie
decline incxports m d thc lack of oxtrrnal rnkans u i p n y m c n t . At thiit time
me:csures were proposcd2 (a) tci Six niore fuvorsble prjces f o r thc farrncrs:
(b) tci lacilitalc! cnsy c r e d i l l o agricultiirnl producers: ( c ) ~ i iimporl equip-
ment; (d) tci iizcrc:ise t h e immigration of' hrcign agricultura1 w o ~ k e r sas :L
nieaiis 01' solviiig thc r u ~ : Inbor ~l short,age ~ i i ~ i as
a ia ~consequenct. of urban
ex~xiiision. @ 1951, official opiiiion had bcgtin to grasp the fact thxt t h e
solulioli o f t h e ;igricultur:il problcin wns ü nccessary condition for p r o g r e s s
in the iiitlustrinlization of [ h e country . .4n il-idiclttion of t h i s is t u bc found
in "Hechos e Ideas", ü journal which rcflected the goirernmcntls opinion and
ofteii iucluded articles by Pcrhn himself: a
. .. .- - .-. . . . . . . - - .

l. The British econnmy, notes W. A. I k w i s , met foad supply problems head-on as

the economy dcvtbloped in the XIX ccntury. Its tjolution was to increase its
propcilsity to export: Gerninny followed suit, and so did Japm. Othor econ-
omies, faced with tlic s a m c problcm, iiave rcduccd their propeizsity t.o import,
e. g. thc Soviet Unioii, India. aiirf Kgypt. A. S. Lewis, "Closing Rernnrksr', R i o
Conference un Inflatioii iind GrciWh. 1963 (mimen).
2. Banco Central dc la Rcpii blica Argeni inn, Mi:_morW-, 1949.
3 . "La Cuesti6n Agraria Arhgentinrt-3c 19511', H w c e-1dc-w , Oclober 1951, p . 1 3 7.
 --
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 rneasuxe full o£ political ri~lrs,which has only heen tried for short periodv
m d as an emergency; The slogan of ''ni@terity " began t o be Iieard around
the early "fifties. In 1951 it was decided that until jncreases in rgriculturai
pr-uducliun should bc inrthcorning the pcilicy o~rghttri he one of curtailment of
internal consumption nf exportabl.es1. In 1952 the idea waa brought into the
Second F i v e - i ~ a rPlan, xhich iiicnry>rLntedin its prescriptions the rieccs-
sity u f practicing "nustcrjtv"~. In 1955, after the lQevrrilumdnlf,tht? new
provisional gnucrnmeii'L ' . tlccjde whethcr to satisfy internal clemand at
the cost of a shortfail i n -:xL~oi.ts, or. whether to risk lxhor unrest and high
industrial covtv (llii.oug'Ii iiici-t.:iscs i n wagcs) in order to s a t i s f y externa1
. deinand and i-erlucc Ihi? scarcity of foreign cxchange.

In 1959, the gvver-turier~trif Pi-aridizi. fncing tho s a n i e prohlem, tri~rlthe

same s o l i ~ t i o n :

The cunl t a c l i u r i uf thc inte mal conaumption cttused fundamental ly

by tkc climinntjon oi price controls, is evidenlly ü trnnsitory situ-
d i o n neces sürg t ci r n ~ i n i a i nand cxpand o u r rnc a t cxpo r.1 s. . .

Latcr on, Alsogasay (one o€ thc Ministers of Economic of the Frondizils

governincnt) üttempted the ssme policy . Rei'erring to Alsogaray's policies
a commcnt:ittor s ü i ~ l :

Alsogaray developcd . . . a campaign to cor,.vince thc population

that il rriual curisume levs mcüt in order to be able to irnpciri
inxterinl for the i.:rilways.
-. .< ...-. "

1. xemoriw , 1951, R m c o Ce n t i ~ ücle l la nepdblica Argentina. AIso in t h i s

r & r1951, an. official publication;
respect, see the. Re-yis t a de C o g ~ r c i ~ - E 2 ~ t gfor
". . . givcn f he unccrtaiii pcrpseciii~esin 1951, it w.a aittternptcd t o pi-umote ex-
p a r t s . . . f o r this purpose mcasures w c r e taken t o crcatc tho popular aceeptancn

2 . Subsidies, howevor, wcre rriaiiitaiiiecl, thua nei~tralizingihc effact of the

"austerity" mcasures. I t js clc~rr.I I i i ~ t''austerity" mcusuros wero, for Per6r1,
ti.:insitoy nwasures oiily to be applicd fur v e r g short time. II is possilole,
elcn, that a dif€crc%nce ol' vivw may have existcd hetween him and the planners
who thciught iI adr~is;iblt> to i licluclc- rbc uord "austerity" in tho Secund Five-Ycztr
Pim. Xn this connt>ction thr? follon7jrigp~iragriiphis illuminating: "We know very
wcll that if LVC w a ~ l t c dto iiic.rc:lse 4-xports and to accumulate a foreign exchange
surplus, we could do it scl liiig in f o r - c l g ~rn:irkets
i part of whnt is consumed at
prcsent, by thc Argentine peuplc; but t h l s only could be realized, as it is done
in other parts. at thc c o s l cif the slnrvation and thc rnisery of o u r peciple. We
prcfer, instead, to c0lllillllf3 o u r I>i+ilsyslcin, i~ccordingtn somr people, c i f
supplying first tbc Argei~tinesand then sending thc rcmainde r Lo supply t h é
forcigners". J. Pe-i-6n, ttP1an Econbmico 1952 - Ejccuci8n y Contrril", &&aa
e - I d ~ a ~March,
, 1352.
3 . A . Frondizi, Mensaje al Hon.- Coigrcso dc 13 Nacihn, Mny 1, 1960.

4. Cf.thc introduction by d. i3ullrich to A. Frondizi, Política Econ. Nacional, 3 . As. 1963,

6. At times, governments despajred of both policies - they Selt they could
n e i t h e r expand agricultura1 output, nor reduce internal consuniption becau
of the social irnplications of such a pulicyl, ihey turned iheir attention to
~ ; is, they tried
what inay be called the "fish-and-chicken a l t c r n a t i ~ e ~tliat
tci divert mnsumer demand towards non-exportable types of food. This waa.
atte inpted by Perón and by the governments which canie af'ter his fall.

;j
7. The need to increase exports alsi) t~iovedt h e authvrities t u consider the j
possibilities of de veloping tnon-traditionallt exports and new i~isirkets. i
IJntil i h e late 'forties, t h e fltraditiunülllmarkets f o r agricultiiral products :
p r e s e n t e d no problem, i n the sense that dematid wns always sufficient t o
absorb whatever quantities the country cou ld export: and even after 1949,
when the t e r m s of t r a d e begm to worsen, the Pcr6n guvernment continued
t u t ake t h i s for granted. T h e post-1955 governments. h u w c v e r , began tci
be concerned lost those markets should contract, o r ai any rate fail t o
expand sufiiciently to be consistent with thc growth rif the e c o n ~ n i y . Hence
the insistence un developing new lines of exports to new nzarkets. Thus,
Frondizi p r o m i ~ e dthat

W e will not cease in o u r multiple and diversified e f f o r t s to over-

come the resiatance and discriminrit ion in o u r 1raditiciiial rnarkets2.

To seek new rnarkets f o r traditional exports had been an old aspiration of

Argentine policy inake rs . Already in 194 5 the Nrtt ional Pos twar Counc il
indicatcd the necessity of seeking new outlets i u r agricultura1 commudities;
but the idea never went f u r t h e r thun discussion. More recently, twn lines
of policy have been proposcd: first the "semi-hcterodox" under which new
rnarkets are to be sought only in the non-Communist world; secoridly, the

i. I t - i s understandable that governments hesitnte to iake measures t o restrict the

interna1 consumption of exportables, since t h e h r d e n of the reduction falls un
the pvorer sections of the ccimrnunlty. To c o n v e y a rough impression of this,
the writer calculated quaritity indices of food consumption i n t w a d i s t r i c t s uf
Buenos Aires with different average income-levels. The trfciodllsection of the
official Index of Retair Sales in the Federal Capital w a s first deflated by the
"food" s e c t i o n of the C LI, then by a s i m p l e index nf population, obtained f r o m
electoral rolls, fui- each uf two zones - N" 6, Belgrario (high inconie) md No..
10, Nueva Chicagn (one of t h e pourest districts of' the city) whose average in-
coriies had been calculated in a study by Professor Gino Germani. T h i s givev
t w u indexes of "real food sales Iier head"; when their movcments are traced
civer the periods when thc üuthurities were tryjng to cut cciimumption, the fa11
in the index for Nueva Chicago i s considerahly l a r g e r tlian that of t h e Helgrano
index.
'L. lWe will work withoul pause t o . . . open iiew markets f u r o u r primary products
and for o u r industrirtl p r a d u c t s t t . F r o n d i z i l s messaga of danuary, 1962.
 "fully heterodox" which advocates extending foreign trade to rill ne';- countries
md particularly to the Communist ones.

8. The idea of e-uporting manufactures, on t h e other hmd, is a relatively new

one, though it wns proposed as early as 1946 by the "Revista de Economía
Argentina". In 1952 a Con] iiiissioii for the Promotion of Exports was formcd
with ttie object oí' s t i n i u l.,: il
.:1 c!xports of industrial and semi-industrial
product. In 1954, a Corniil iss ion f o r t h e Popularization o£ A r g - n t i n e ~rorliictsl
was created with the rule oi promoting exports o£ manufacturcd commtirlities.
,1n 1955, the Prebisck Plan proposed, as one of its principal recommendations
that encouragement shc3uld k given to the exporting of industrial products.
The diversification oí exports w s s an irnpnrtant line of policy u n d e r t h e
F r o n d j z i administration. T h e Memorias s f tlie Banco Central in 1960 pointed
out v e r y c k a r l y that: "if industry dues not organize itself with the aim O S
ccinquering ex?eriial markeis . . . i n d u s t r i a l expansion r u n s the risk of getting
into difficultiesT'.

9, Anothcr method of irnproving (01. at any rate checking t h c fa11 i n ) export

earnings, is to t r y to obtain better p r i c e s for the country's export com-
modities . After 1949, this idea appears frequently i n official pronounce-
mentsZ. The c r e a t i o n of IAPI (Institutt. f o P the Prornotion of Argentine
Foreign Trade) was justified, at the time of its setting-up, as a means of
obtaining lietter pricesJ. By 1952, prcssures from the foreign t r a d e sector
were so great that a plan for the defense of prices was drawn up. In later
yenrs. the idea recurred continually in the minds of policy-makcrs. he
Banco C e n t r a l Memori:ts of 1 9 5 7 point out that expo1-t prices have gone
down because of the effect r i f US s u r p l u s c s i n foreigti markets. Thc same
publicatitions rcrnarks thal i t is absoliitely necessary for the country to
iniprove thc priccs of its exporis, Frrindizi, in 1958, emphasized the
same idea:
. . . Thjs situation (the decline of agricultura1 prjccs in the interna
tional market) must be corrccted by means of n btitter orientation
of trade, diversificntion of markets, rkr.li .tn energctic defense of
cxport prices4.

1. This is a rather free translation of its Spanish ti'le "Comisión para la DifusiGn
de Productos Nacionales ".
' 2 . Thc "Revista d e Cuincrcío&tcr~ur" jan official publication) point out bargaining
bectiii-ie inuch more energetic aftor 1949.
3 . Particularly by I A P I t s ability to act as a i-iionopolist. As Per6n put it - "lt (IAPI)
. . . bad the opportunity to opposc to the rmly buyer, -- the oAy sellcr, and prices
wetit uptt. B c h o s e I d e ~ ,Decernber l i i 9 .
m 4. Message of May 1st. , 1958.
10. P o l i e ~ 2 : She obvious alternative to i n c r c x i n g export earnings, as ü means
of deal ing with balance-of-payments problems, was t u attcinpt to reduce thc
countryls import bill. Action alnng t h ljne ~ trink three forins - attenlpls t o
cut the demand f o r finished consumer manufactures, s o as to reduce the
derived d e m a n d f o r irnported inputs; dircct restrictions u n the impoi-ts
t the dnmrsti c production of import-
themselves; and e n c o u r ~ e m e n of
substitiites. These threc zliproache~will be coiisidercd jn t u r n Rle*dsures
t o reduce overall demand k x v c been t r i e d by various governments, f r o m
Per6n to Alsogaray, Monetary and credit re~tricticinr, nlong with fiscal
and budgetary mcas~iresl,were employed i n various cornbinatiuns: i n the
later 'fifties, the government even went to the length of pustponing s a l a r y
payments to its own employees and failing to settle accounts witn its siip-
.
pliers Obviorisly, the more successful such policies were in rcducing
aggregate demand, the more discontent and opposition they :troused: labor
unions protested the unemployment which resultcd. \vhilt! husinc.ss fii-nis
were put into serious difficulties by the reduct ion i i ~s a l e s t u r n o v e r . This
could, indeed, l x advanced as a strategic objection io this rnethod of cut-
ting imports: aU the governments which tried it - e v e n YerÓn7s- wcre
eventually forced by general discontent to back dciwn.

11. Direct restrictiun cif imports has k c n practircd sincc the 'thirties. hut
wau much extended under Per6n. Here, tfdircct17 is used i n the sense that
the measures (tariffs, prohibitions, quotas, Liccnses , prior deposits of
h r e i g n exchange, exchange control, etc. )-are applicd dircctly to imports
inatead of attempting to reduce them at onh reniovc through effccts on
general demand. Imports uf consumer gnods have lrmg bet?n rest rirted by
tariffs with t h e abject ot fostering import-suhstitutes: tu the cxtt3nzthat the
lattcr have been forthcoming, t h e scope for f u r t h e r reduction of consumer
goods irnports has been narrowed. Also, certain l i m i t s liitve bken imposed
by tlie existeace u i trade agrecmenls with various countrics uiider which their
' acceptance of Argentine exports was conditional on Argentina's importing
'certaii-i consiimer goods f r o m them; obvjously, there wtiuld have been no
point in stoppirig Uiese impor.ts as long as thc government ihought that thc
export markets invalved werc essential outlets for hrgentine trade. Witli
r a w and intermediate materials, on the other hanti, great efforts t o limit -
importa have becn made. As early 3s 1948, the Cctitrnl Bank was of the
opinion (in its Memorias of tliat year) that 'Yhe large deinand f o r iniports
rnakes it imperative to npply rignrousiy select ive ciiiteria in the granting
o f exchange licenscs ". In 194 9 , tl-ie fall i ~ expurls
i and the running-dowii

1. A particular aspect of this was tlie attempt t o reduce I h e scale of activity of tne
nationnlly-nwned enterprises (rail-rorids, etc. ) so as t r i reduce Ilie inflitticinary
effects of their deficits, and also to cut down o n thcir dernaiids f o r foreign ex-
change with which to buy foreign equiprnent (e. g. rolling-stock Sor the railroads).
Such attempts WPTE! never very siiccessful.
 of the excha.nge reserves induccd a mood of great caution in governmcnt
agencies concerned with imports ; by 1953, at i h e start of the Second Five-
Year Plan, Perljn himself'was adniitting' that "the shortage of foreign
excliange tias f r q u e n t l y mmade it very painful to use this scarce asset frir
the purchase of imports. We have vftcn had l o restrict llie u s e uf irrlported
rnaterials in cei-tain set:tor*sttl. Iii 1958, Frondizi was striking t h e samc!
note: 'ln the s h o r t ruii. :I:( ii:~lycffective solution is that of cutting impnrts
tci Q:r licrine. If w e t ; i ~ l i l cr l i p jub scriously, with a setise of urgenriy, wc
shall be able to e n s u r e a supply of imports indispensable for o u r nntional
developmeiit withvut p r r judicing thc national inte rest by creating sho rtsges
' of foreign exchaiige. We need a rational limitation of importsU2. The
careful attention which w.xs given to possible ways of econornjzing foreign
materials gave ríse to a whoie " l a n g ~ a g eof~ ~iinport-restriction, dcsigned
to separate the "dese rving" i ndustries (to whicli the aiithorit ies wou ld
grant pcrmissinn t.o import inputs j and the "urideserving" (to be dciiied such
pe rmission) . T he for lne r wc re des cribed as "naturaltk, "usefu 1" rtnd "intra-
marginaln:3; the lntter as "artificial" and "marginalt'. Alsogaras. distin-
ghuishcd bctivocti "solid industries and thnsc! which have only a desk and a
telephone" - though this phrtising suggests a distinction between f i r m s
rather than indusirics. 'T2ationül:zation" as 3 s Iogan frequently licard:
in 1952 t h e R l x t e r i o r argued for 'Irationalizing
industrial inputs", while in tlle Secvnd Five-Year Plan of 2953 it was
lagrdown thal the state would promote rationalization of the use of raw
materials; t h e quotation from Frondizits hlessage to Congress. given a
little earlier, also indicales that tht? idca was in the minds of thc authorities
in 1958.

. 12. Among the r a w materials impo rted, oil hnd grcnt impnrtance. Energy
requirements g r e w in s k p with tbe developmeiit of iiidustry, and the country
carne tu dcpend more m d more on impoi-ted fue1 since domcstic oil reserves
w e r e exploited rclatiuc?lg: littlc. beforc 195Y. The inci8easing d i v e r s i o n af
foreign eschange to thc purdiasc of oil memt that it wwas proportionately
more difficu1.t t o find the means of paying for oiher m n t e r i a l s figurirrg in
the import-bill, whicih were : i l w very irnportant for industrial growth. As
early as 1153, the Second Five-Year Plan recognized the necd to develop4
1. Speech tri the Congreso General.-.- -
de Ia - -- ..- 1953.
-. Industria,
,

2. Message t o Congress, Müy 1 9 5 8 .

3 . Editorial in La Prensa. - 12 March 1953
4 . B. de Castro, E l Desarrollo Ecoli6mico--Argentino (Buenos Aires, 1955), argued
t h a t foreign capital woiild he needed to dcvelop Argentina's oil because "exarninatiiin
of t h c nnnual reports of oii undci-takings operüting a1 prescnt in Argentina make it
clear that the chief psoblem lhey encounter in expanding their output is the lnck oi
proper modern cquipment". The counlry cnuld rlot aff'ord the foreign exchange to
ljuy such equipment outright; the only solution, therefore, was to encouragt! direct
foreign physical investment .
 the countryls own oil reariurces. and looked to enljsting the help of privatc
enterprise f o r the purpose . At the beginning of 1955, Per6n hegan nego-
tiations with the U.S. firnl California Argentina, with thc object of bringiq .

foreign capital into the business of oil expluration and extractiun.

d
After Per6nfs fall, Getieral Lonardi (Ihe head of the Provisional Govern-
ment) declared that "witl~ rvspect t o the o i l problcm, thc gcivernment 1

helieves i t to be necessktrk and desirable to obtain t h e cciritributions of

private and public foreign crxpita l <mdinternational technieal knowledg:.e"l.
In 1958, President Frondizi aiiriouiiced the signnture of a large number of
contracts with foreign oil companies which heralcicd a period of iniciisive
exp lorattion and deve lopment2.

Apart from attempting to reduce i m p o r t s of r n ~ t e r i a l srequ i rrd for c u r x l t

industriat production, t h e authorities t r i e d on occasions to eui dowii the
importation r>f capital equiprnent, e v e n tiiough t h i s was likcly to iiihibit the
c o u n t r y t s industrial gmwth. T h i s sumetinies meant thnt, in cei-tai1-i line
of rnanufacturing, it was not evcn prissiblt. t n take cal-e oi' depreciíitiui~:it
nlso conflicted with t h e other policy (to be discussed prcscnzly) of biiilding
up the production rif import-tjubstitutes . The resu 11 t v : ~that capital ,goods
imports became very "humped", wiih peaks in 1945-48, 1951. 1955, and
1958-60, and troughs in ihr! intervening ycars : to sorne extpiit, tliis
instability was imparled to domestic inves tment also.

14. The third line of policy directed toward cconomizing impoi-ts has been the
encoilrGcmcnt of impcirt sutristitution. By t h e e a r l y 'sixties, Argentina has
succecded in replacing almost al1 Eo reign consumer griods by domestically-
produced equivalents . To replace fo re ign rnate.rials snd cquipment, however,
was a diffcrcnt m;ltter: obviously, t h e very progrcss madt. in siibetituting
consumer rnanufrictures left few r c s o u r c e s vvcr fur inves tmerit ir] "b:isictt
industries othc r thari transportation ;uld pub1 ic u t i litics. Yet thc: p ~ s t - 1 9 4 9
conditions, with worsening tertns o f trade and difiiculties i n iiic re:wing'
export supply, made governnieiits feel that import-substitu tion of intc 1.-

1. Radio address t u the nation, 26 October 1955.

2. Aogelio F r i g e r i o (who w a s ri collaborator of Frondizi's at the time) h a s written:
"Wc- had to lighten the import sector. . . so wc decided 10 makc full use of our
.
own oil . . In the oil qucstion, we emph;itically put asjde the idea of cntriisiing
oil exploitation exclusiveIy t o state agencies (i. e . Y P F ) , and wc signcrl ciintrticts
with foreign compaiiies, mostly U, S. I t ( R . F r i g e r i o , Los c u l r c i @n_s, Buctios
Aires, 1 9 6 2 , pp. 6 3 - 6 4 ) .
 mediate prodcicts and even of capital goods was highly desirahlel. The
country hm not vet solved this dilemma, but during the 'fifties - beginning
rather tirnidly i~nderPer6n, then more boidly after 1955 - h a s madc some
ini tia1 attemlits to deve iopec: ''intermediate indiistries b y attracting direct
foreign inves tment. Frondi zi 1s Deve lopment Plan, in particular, was "to
produce an integrated cri-inoni,v, inc luding the hasic industries - a i l , coal,
steel, energy etcM.

15. .P o l i 3--3: If, after doing its utinost to incre,me export earniiigs md reduce
t h e import bill, a country still finds itself in deficit, there remains the
possibility oíi~btainingczpital from abrond eitbor by loan o r through direct
investment. In # e 1940Ts, of course, this was not in question for Argentina:
indeed, .:he w a s repaying foreign debt. But in 1950, a mission h e d e d by
Cereijo, Per6ri1s M i n i ~ t e rof Commerce, obtained cretlits of U . S . $ 150
millicins from a group of U.S. banks ; while t h c Second Fise-Year Plan
envisaged the possibility of attracting foreign iiivestment - as Per6n him-
self put it, "to üchicve the aims of the Plan, we m u ~ accept t the movernent
into our country of thc numerous foreign manufacturers who are willfng to
come and invcst t h e i r capital in our economyl+. Another sign of incrcasing
willingness to uttract foreign inrfestrnentwas a law of 1954 layiiig down
ccinditions f o r i t , R I I ~the negatiittions of the s a m e year with the Ex-Im
Bank to obtain credit for the San Nicolds Steel Millrj, as well as with
privüto concerns s u c h as the California Oil Compaxy. After Per6nts fnT1,
the trend grew: in 1955, Prebisch advised that foreign capital should be
obtajned in larger quantities: m hc put it, "if the present crisis cif develop-
ment is to he overcomc: rapidly, it is nccessary to obtain foreign loans and
invesimenttf. The 1957 Mcm0d.a~oí' ihe Centra1 B m k cnlled for "inter-
national co-opc ration, publjc and private" to promnte the production of oil.
ancl steel. I t W:LS t.hc: Frondizi administration, howevcr, which aitcr 1958
madc the greatest efforts in obtaining invcstment from overeeas3,

16, From this

-- short. aummary
- -..
A - -of government .&titudes and measures in the
.. . -

1. "While we do not produce o u r own r a w materiais, we shall be exposed to the

dawer of a breakdown in the industrial order - a breakdown to which we should
also be exposed if we werc t o destroy oui. consumption capacity through a lack
of purchasing priwer . . . We must struggle t u obtain our own Argentinc r a w
materials for o u r ind~istry". From Per6n's speech to the 1953 Congreso -. -- -Gene-
A --
r a l de laJ,~dustria.
2. R . Frigerio, .o p.-. c i t .
3 . A good summary of thc philosophy underlying t h e governmentrs decision to
attract foreign capital can be found i n Ihe introduction to A. Frondiai, Polfiica
Ecor.6-~ica.Nacional, Buenos Aires, 1963,
 " 9-6 1 ' n t i ~
' p ~ o ~ . i ~Bi -i l o l f B T 3 ',,~u;>uriE-e~
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1. THE FUNDAMENTAL HYPOTRESES

Let us consicler a country w h i c h p r o d u c e s t w o types of goods: Y1 (foodstuffs

of agricultural o r i g i n j and Y 2 (manufactured consurncr goods). Y1 is pro-
duced with the help of labor, capital and land. Y2 is, on the other hand,
produced with the aid, not oril l; of I n b r and capital, but also of goods of
foreigii origin that may, as wc s h n l l sce later, consist of r a w mxterials,
intermediate products and cnpi t nl goods. Thrvughout this analysis, capital
stock as well as availahle fertilc 1:ind m d technology will remain constant.
ttomogeneous 1:ibor is nt thc s ü m e time a fixed quantity that may be trnnsferred
from one sector ti) another. Rural-urhan migration may be facilitated not only
by approprintc! wüge differcnlials, but also by the prospects of better living
conditions and futurc pussibilitjes .

It is to h e presumed that in the beginning of the analysis, al1 the available

labor is fully emploped in the agricultural sector, and that givcn the
corresponding production function and the supply of labor, there w i l l be a
certain quantity o i this factor that is redundani in the sense usually accepted
that marginal productivity is equal to zcro. T h i s condition does not play an
irnportruit role in our work, and we have merely introduced it to show econ-
omic situations in which disguised unemployment exist in the rural sectoi..

On the other hand, we would like to point out that t o be able to shift labor
frorn the agriculiural to the i n d u s t r i a l sector it is necessary to caunt with
agricultural surpluses thrtt may aUow the abso~ptionof the imported goods
needed iil the industrial sector. That is to say, that the industrial production
is connected with agriculture in t ~ v oways: a) the mmufacturing sector
absorbs labor shifted frorn the rural sector; b) the possibility of having
cssential i m p r t e d inputs depends on t h c capacity of exporting agricultural
goods. T h c exportable agriculturül and farming surplus in o u r model is
nothing but the diffcrence betwecn agricultural production and t h e interna1
consumption of exportable goods. The possible forrnation of stocks is
there fore not takcn into consíderation. J t is w o r t h a i l e ppointing out that
the hypothesis of this work is that the exportable surpliis can be wholly
exported.

Rcgarding the form t h a l t h e agricultura1 s u r p l u s will take it can be said

that when al1 the available labor iu fully employcd in agriculture, the pro-
duct is not totnlly absorbed by interna1 demand. That is to say, in i t s
"initial" rnoment ihe net agricultural aurplus ia positive.

3. T h e principal relations c,m be defined as frillows:

(1) Y1 = f (Ko, To, L l ) ; piwduction function in which K = capital

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rro~sundxaaq? aq-elqr3~30 3 OSZE j n q ' u o g c r ~ a ~ d aLp~ u n~ o u. ~ a n o o03 ]7autm,sap
spoci%lelyrlv3 J,O t t o r ~ x ~ ~ o ay1
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uo)-+3npoLid Iv!.rj#nptry jo s ~ m q~ua.r~n;i ay1 u!eluri?iu o? pougsrip rorlncaj e j o
'iSISUti3 LTLU J0333S [ B U Z S n p T ~
ay1 JO S $ J Q ~ WIi:JOl "E:[$ % I ~ . C C S '(6 PUR 8
~ c dA';>yodJ ! U U U U ~ ~
y d ~ ~ % gas) pue
JO s u r a ~ q o ~ p aoqi?
d sura1y:i~d~ ~ r u c r r ñ$0
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spodw: 'S! ~ ~ y l
 It is easy to estimate how important - in rnatters of econoinic policy - will
be t h e choice of the most appropriate R and Km cornbination t o back up the.
long and short t e r m plans of industrial developrnent the government may
have. Practica1 experience s e e m s to indicate that, with the lirnitations in
the availability of fureign exchmge, rnany governments have chosen to
give greater weight tri Km twerg' certain nurnber of years, leaving the
intermediate years to col,t - r. i i;c corresponding debt and to maintnin the
equipment required in activiiy (which implies greater wt:ight for R ) .

(4) CT = h (L17L2); function of consumption of agricultura1

products. L = labor factor employed
1
in the agricu tural sector and Ls = labor
factor employed i n the industrial sector.
-
( 5 ) 1, ;= Ll .+ L2 total supply of fixed labor.

One way of stating the problein would be to maximize Y2:

This formula is, of course, for a determined capital stock,

In the case of there being a maximum:

dY2
O (first order condition)
dL1

11. A GEOMETRJC VERSION

4. Alternatively a gcometric version mrry be chosen based on the following

conditions:

a. W e represent the agricultura1 function in figure 1 on the basis of

the following hypotheses:

f (L1}is increasing íor L1

k '1
 O (L1) is decreasing for L1:
ft
lI
\

-
f t (L1) = O for ll L1 , > L
L,

b. At the beginning of the period we can say that al1 the labor force
is ernployed in sector Y1.

C. Tha production fuilction of the industrial sector which, as we have

already stated, presuposes fixed coefficients in t h e combination of
factors is as follows:

then L2 M , heing the slope of t h e curve which cxpresses «ie

1
differeni lbveles of r~roductionof Y2 for determined coefficients of
industrial production. In future versions it will be our purpose to
eliminate the hypothesis of fixed coefficients which is here adopted
provisionally.

Frorn whal has been stated, it c m be seen that Y 2 depcnds on avxil-

able quantity of limiting factors which may be M (exports} that is to
s a y , t h e importing capacity, or L2, that is to say the labor force in
the industrial sector.

d. The tcital atlotmeni of' agricultura1 goods for consumption m:iy be

expresscd thiis:

where , .1 md are the per capita quantities of agricultura1 goods

alloted f n r consumption to the labrir force engagcd in the scctors Y1
m d Y2 respectively.

By way of h ~ o t h e s i s ,we shall say that: (1) 1 is constant tlirough-

out the process and that - - 2 although equally constant may Iric Ihe
sarne as, or s m a l l e r o r greater than ,. 1 . For t h e purposes o1 t h i s
,

paper we shall only consider t h e case in which :: 1 = ., ; .A

(2) on
beginning thc analysis, that is when al1 labor is assigned to sector
Y1, CT Y1. That is to say that as already stated, the exisience
of a net initial surplus is postulated.
 In figure 1 the total consurnption of agricultural goods at the beginning of
thc period is ¿U and there exists a net surplus of UT. The rural per
capita allotment of goods of the same origin in figure 1 is equal to the -
slope of the line OU, that is to s a y w Bearing in mind that L2 = L - 1.,1
we can re-write o u r f o r m u l a (8) as follows:

5. The function o f thc allotment of agricultura1 goods appears in figure 2, in

which different hypotheses regarding ,,) and can be observed.
(j-'

In this work, l k j rrmains constant and equal to l-11 for the section of
e r i c u l t u r a l production which appears in R T in figure l . Another possible
situation to which we also make reference is the case in which ;t ! 1 .L\ 2. >
That is to say when tbe transference of labor from the rural to the urban
s e c t o r is accompanicd by rcductjon in the amount of foodstuffs placed at
the disposal of the urban scctor. Anothcr possible case is that which
s h a w s the following inequality : 2 ii.. ( 2. With as constant al1 thc
probabilities i n this case are that there may be a tendency to repress the
exportable surplus. Tn figure 2 the following cases are illustrated: the
line (1)represents , , j 1 givcn = O ) ; (2) i l u s t r a t e s t h e case in which
,
(kv

O <.J- VLI 1; ( 3 ) when :.cl = ,'; and ( 4 ) whenk) ) 1 4 1.

6. For the case i n whichfv = i,J which is the one that interests u s most in
1
this paper the exportable surplus may be represented as in figure 3. The
shaded part of figure 3 corrcsponds to t h c equally shaded part of figure 1
f o r certain terms OS exchange. The exportable surplus in this case is
maximum when
ay,

In the case in whichr 1,) jr,., 2, that is to s a y , when the labour factor in the
industrial sector receives less that i i p received by the agricultural sector,
ihe agricultural sector is maximum at the poi~itin which:

2. We will not h a k e reference to the multiple combinations that may be obtaincd

by varying ,,1, 2 ünd the agricultura1 surplus.
,

3. It is interesting to point out that this version of the model can be porfectly wcll
supported, if it is accepted that, in order to compensate for the deficit of
agricultural goods, u r b m labor exchanges manufactured goods with t h e rural
sector.
 in other words, whcn the marginal productivity iif the labor Iactor in
agricultural productii_inis equal to Ihe difference between the allutment
pei- capit:~o £ foodstuffs i n 1)ritIi seciors of thc e c o m m y . According to the
stated hypotheses , the rn:irrirui~,ntion of the exportable agricu1i;ural s u r p l u s
destined to facilitate the attaimeilt of higher levels of u r b m ernployment
will Icad us to üccept a. new form in which the Iabor force in lhe ugricultur-
al seclor may turn out to be redundant.

F'nr the case in which CJJ2there is a m a x i r n i : ~s~u ~r p l u s at the point in

which ,, 0.
c,i

7. On thc basis r>f the aigrieultural-industrial relations stated in the preceeding

paragr:iphs, sevcrnl cases can he1 disiingujshed regarding productioii levels
of Y L arid Y1 atid the employme~itlevels of L l , L., and M. We have tried to
illuslrüte s o m e of Ihe possihlt~cases i n t h e graphs which appear at the end
in which referente is mxdc io a: Qudrant 1: relatcs the agricultural
siirplus ( - cxports) ancl the labor ernployed in r u r a l tiisks: Quadrant 2:
relates agricultura1 and urbari labor; Q u i d r ü n t 3: relates urban labor. mcl
the avtcilability cif irnported iiiputs which cornbinc in tixed proporticins to
produce industrial goods; Quadrant 4: shows t h e relal.ion hetwcen exports
( iigricult ural s u r p l u s ) and imports. T h e 45 0 line illustrrites the irnport-
cxpori. relation fnr ccrtain terms of exch-e. Chmges in these either for
o r agüiiist thc countrg 's interest niay be idcntified in the area under or above
t r d 45 2 curvc rcspcctively .
One case that is w n r t h considering, in the fjrsi place, is thüt in which (see
íig. 4) given a certain cnefficient M one obtain the full utili7,ztion oí' tht!
: ~ g r i c u l t u r asiirplus
l iind the indiis$?ial Lahor foric, with ut the saine lime,
. thc eli rriinatio~iuf disguised unemploymeni in the agricultural sector
p o ~ t u l a t ~ind thc rnodcl.

The pos i:iuns of 'tequilibriurn"4 contrary ta whai :qippears io fig. 4 niiry not .
corrcspoiid to situatirins in whjch thc maximurn importing capücity is utili7,ed
jthat is to sny, more labor factor is shifted frrim the agricultural sector thrm
i h a t which maximii,cs lhe surplus) and in which t h e disguised a g r i c u l t u r a l un-
cmploymcrit is e1iminri:cd.

According tn the industrial tecbnique ernployed ceverai interes ti% cases

may arise. For cx;imple
-- -- .-u -
4 . Ecyuilibriurn in the scnse that h t h the labor factor and the exportable surplus
a r e fully utilized.
 which represents the cases in which production is "imensivetlin L2 in
relation l o M , although not necessarily in relation to K;

which represents the cases in which the industrial production is "intewive ''
in M. As in the previous case, the part played by K is not he re defined.

In fig. 5 we illustrate (TE)#e case in which to alrnost al1 the levels of Y2

there exists urban unernployrnent5. This is the case in which

-
Tn fig. 6 the (AE) case is shown in which there exist levels of Y2 in which
there is incomplete utilization of M and others i n which there is urban un-
.
employment This case being that of

8. There is no douM that the most interesting case is that in which industrial
production is limited by the capacity to irnport, particularly as regards the
countries which t r y to achieve industrial development, but which depend for
this, t o a great extent on the external sector. The solutions that may be
attenipted are thc following: a) incre~qeof agrarian productivity; b) reduction
of the interna1 consumption of agrarian g o d s ; c ) improvements in the terrns
of trade (which mity be expressed by shifting the curve of quadrant IV of Tig .
4 totvards the axis of M); d) the obtaining of lo- or contributiom of
external capital; e ) realization of the necessary investments t o reduce the
dependence of the external sector (shifting the curve of quadrant 111 towards
the axis LZ}.

9. To consider the alternative e ) mentioned a b v e we be1iei.e that it would be

advisable to formulate ü more general model in which the accumulation of
capital rnight be considered. We believe that the model might be formulated
as follows:
, - --

5. It is possible that industrial unemployment might take the ahape of disguised

unemployment in the government sector and in services.
being, M = Kt R2.

where K 2 , Bs correspond respectively to capital goods and to r a w mater-

ials and semi-manufactured goods. k2 is the first derivate of K2 as regards
time.

To complete the model it would be necessary to establish certain hypotheses

related with ~ a v i r g ,to be able to allocate imports between R and E;. At any
given moment, the greater the proportion of the "capacity to importftalloted
to investments, the greater will be the problem of urban unernploymer~t, Only
by means of a short- run austerity program could enough investment be made
s o that one might be able to reduce the long-run externa1 dependence.

Finally an even more extensive model would have to adrnit the possibility
of foreign investment. This model would most certaiiily be much more
complex than t h e one suggested above. At the s a m e time t h i s m o r e
extemive modo1 might be used for the analysis o£ the policies necessary
t o produce the substitution o£ imports without resorting to "msterityrt
programs .
 CRAPTER VI1

FINAL CONSIDERATIONS

T h e foregoing chapters have pwsented a nnrrative, supported by statistical

cvidenca, of Argentina rs inf l.at.ion du ring the years 1943-6 1 ; an expianation
of the causes tias been attempted in terms of a simple model, It must be
adrnitted that hoth narral ive and ana lys is hnve been concerned almost entirely
with "realTt rather than "monetaryHfactors. This has been partly the result
of the way this study developed; from the beginning, fhe interest was con-
centrated on a namber of particular questions, such as the cumparison of
price-incresses as between the capital and the provinces, and the effects
of divergences be t ween agricultura1 and industrial priccs . 11 also arises
from the beiief on t h e part of t b e w r i t e r that, even though monetary factors
played a fundamental role in the described inflationary process , most úf the
time -particuLarly alte r 1950- the authoritics yiolded i n matters of monetary
policies to pressures originated in the different economic sectcirs, Restr'ic-
tions on rnoney and credit, as wall as high interest rates, higher taxes and
attempts to cut govornmeht spending were rneasures tried in severa1 op-
portunities, but they were abandoned due to the strong resistance af the
sectors involved. The most these measures could claim was that the pace
of infl at.ion was reduced for a time.

The essential thread, ruiming through both narrative arid analysis, is the
national resolution to bccome an industrialized country; the Argentine
people visualized this as tbe ro:icl to economic independence and develop-
ment. The unusual aspcct of this effort, however, is that it concentrakd
on "consumer" industries .

The upshnt has been to make Argentina in snme waya more, not Less,
de~ieridentlhan befo re on t h c outs ido world; especially, by promoting
industries requiring imported inputs, it has made t h e countryts growth
depend very rnuch on the state OS its balance of trade and payments, and
either on the wi1lingn~s.snf foreign capital t o move ta Argentina, or on
the possíhility of expanding thc nationaf capital.

The s t o r y told in-previous pages is not yet: over. Idlatiun continuous still.
 Much ot what h a s been said has seemed to suggest that the problem is
almost inipossible of solution without very grcnt c hanges in underlying
conditions - e . g . agreat improvement in thc t e r m s of trade. However,
i t may be worth mentioning a number oí' points on which action might be
taken, some of which seem to emerge f m m the foregoing discussion.
The apparatus of public administration, for example, nceds to be thoroughly
reformed, partly hecausc it h a s heen submitted to intolerable pressures
during the past years, partly h e c w s e it will be required (under the ncxt
point) to rnakc and ndminister a plan. Also, a national economic pl;m
would he desirable, partly fcir reasons of efficiency in that it would co-
ordinate the nctivities of the various sectors of the econorny, and partly
to infuse a sense o € "rntional purpose" into the public rnind.

Other poinis which müy he mentioned are: a) agriculture which mcist he

modernized. The chief necessity is for entrepreneurship with careful
attention to costs. An overhaul of the system of land tenure should be
made in same regions; bj A change in the tariff structure is desirablc, lo
make induatry more competitive; c ) A more active export policy is re-
quired, fiiidiilg now markets for traditional prorlucts a s wcll as devcloping
new Lincs of exports altogether.

4. M o s t of all, pcrhaps, the study mnde in t h e prcceding pages indic;ites t h e

need for more information, and more work t o analyzc that informaiicin.
At various points i n preceding chapters, the w r i t e r has been forced io takc
note of thc Iack of statistical data on particular topics - the allocatioiis o1
the working popuiatiuii between industries, and t h e details of incoine-
distributjon, are but t w o examyles of t h i s lack. It is modestly clnimcd Ihrit,
in ccrt;tin respects, t.hc present work has added to t h e statistical knuwlcdgc
available; biit wii houl :igrcai deal mcire, it will not be posñiblc ti) d r . v t s l l i l _ i
a sufficiently dctailcd understandirg of the working of the econom;; i o i - l h t ~
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 TABLE V

SELECTED FOOD COMMODITIES:

RETAIL PRlCE lNDICES OF FQOD PRQDUCTS (1943=100)
EXPRESSED AS PERCENTAGES OF C . L.1. b 0
013 ShDEX j1943=100)

% $#::A r r an
iil Food
1946 1919 2952 1955 1958 1960 Expenditure
1943 1960
IRidget Budget

Bread
Meata
Blsarlo
Falda
Carnrt za.
Hueso GOII
carne
Oj1
Mik
Butt e r
Eggs
Potatms
Winc

CLI, Food
(1943=100) 144.1 245.6 622.7 703. 9 1,472.3 4,218.8 1 OO. 0 100,O

C I,T, General
(1943=100) 140, 5 236,5 562. 9 682, 3 1,269.9 3,454.4 - -

SOUTce s:
DNEC, A n u a r i o Estadistico, 1957 ; DNEC, RnletIh Mensual d e Estadfsticii,
1960-61; DNEC, Costo del Nivel de Vida en la Capital Federal, Feb,.196:3
Jos6 Figuerola, Condiciones de Vida d e la Familia Obrera, Bs.As., 1945
R. F o r explana tions d the Spanish teritis, t;ee text.
Note: Columns (1). ( 2 ) , (3), (4), (5 j and ( 6 ) were calcuiated on t h e basi s of
the following fdrmula: index of Retail
,-- - Prices of Food Products 1194:3==1i)01
C o s t of Living Index, Food Sector(1943=101~)
Column (7) corresponds to the percentage ,of expenditure of each rtrticle
over the total s p n t on foods products.