CONFIDENTIAL
4
highest level since February Q1) and approximately double the trough levels of
last year.
Spot non-oil commodity prices continued to rise in June and in the
seve weeks to 14 July the Economist Index rose 4 1/2% in SDRS (2 1/4% in $).
Strengthening industrial raw material prices (up 11 1/2% in SDRS) outweighed falls
in foods (down 3%). Among industrial materials, metal prices rose fastest this
month (14 1/2%), with industrial disputes and short-term supply difficulties
affecting several commodities. Copper and aluminium prices have risen particularly
strongly. Agricultural non-food prices were also higher (+7 1/28), with demand
continuing to strengthen from recent low levels. However, news of increased output
for some products (rubber, cotton and wool in particular) could dampen prices in the
second half of the year. For the second quarter as a whole, prices for all non-oil
commodities strengthened, ending 6 1/28 higher in SDR terms, (9% higher in
dollars); however, prices remain below their level of a year ago in SDR terms.
6 July the US presented a radical proposal at the GATT to remove all export subsidies on agriculture within ten years. The initial EC and Japan response was
sceptical.
On
10
The Chancellor's initiative on Sub-Saharan Africa, as well as the IMF MD's
initiative on enlargement of the SAF and an IBRD initiative for increasing
co-financing were discussed in Paris on 10 July at a meeting chaired by Camdessus
and Quereshi. The meeting, however, was poorly scheduled, and failed to generate the commitments of support for which the organisers had hoped. The French
delegation came out against concessional interest rates on official debt, no doubt
providing support to US and Japanese hostility to this proposal. The Sub-Saharan debt proposals were discussed again at the July meeting of the Paris Club on 21 July. Extensive lobbying will be necessary in order to achieve further
progress, especially on concessional interest rates.
Purther details on individual, countries are given below.
Latin America and Caribbean
11 Brazil seems to be edging closer to some form of agreement with the IMF. The Fund Article IV mission returned to Brazil on 22 June to complete its assessment of
the economy, of the austerity measures announced on 12 June and of the authorities'
as-yet unpublished macro-economic plan. While the staff are believed to have
welcomed the austerity measures, their appraisal of the authorities' policy plans is
not yet known. However, growing expectations that the plan will be endorsed in
some way by the Fund have been accompanied by continuing positive public statements
about the Fund by Finance Minister Bresser. Nonetheless, the domestic political
obstacles to an agreement remain serious, and the delay in completing the Article IV
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