Sluggish hydrocarbon revenues limit growth; Algeria - World Trade Outlook

U.S. exports to Algeria in the first half of 1985 increased 15 percent over the corresponding period in 1984 to $255 million. Though still sizable, the U.S. trade deficit with Algeria ($3.25 billion in 1984) has imroved somewhat in 1985 (down to $1.2 billion through June, compared with $1.6 billion for the same period in 1984).

Sluggish hydrocarbon revenues continue to slow Algeria's economic growth. While Algeria's external debt is declining, its balance-of-payments deficit has widened, increasing its debt service ratio from approximately 29 percent in 1982 to over 36 percent in 1983. The World Bank expects that debt service peaked in 1984, however. The Bendjedid government's aversion to excessive external borrowing is an important factor in the positive predictions.

Algeria's large import market (over $10 billion annually) holds great potential for U.S. companies, and President Chadli Bendjedid's highly successful visit to the United States in April 1985--the first visit ever of an Algerian President to this country--increases the prospects for greater U.S. commercial penetration of Algeria.

American firms have found in Algeria a difficult market, largely due to its historical reliance on Western European, especially French, suppliers and its preference for doing business under government auspices. During President Bendjedid's visit, a U.S.-Algerian joint economic commission was created, culminating four years of negotiations. The commission, which will be cochaired by the Department of Commerce, will provide a valuable forum for bilateral government-to-government discussions and initiatives in the areas of trade, investment, and technology transfer.

President Bendjedid, accompanied by the Algerian Ministers of Agriculture and Commerce, also was exposed to U.S. agribusiness, agricultural equipment and water resources technology--areas that are key elements of the new 1985-89 Five-Year Plan. His interest in what the United States has to offer in these areas, as well as U.S. expertise and U.S. suplier interest in Algeria, augur well for increased U.S. exposure in these sectors.

There are also prospects for incremental sales of U.S. telecommunications equipment. In other areas, continued Algerian emphasis on price rather than quality and insistance on the most favorable financing terms may restrict the competitiveness of U.S. firms.

Though skill socialist in outlook, the Algerian government has taken several measures to stimulate private business initiative. For instance, the government is now encouraging private agriculture and permits imports of farm machiner and equipment up to 200,000 dinars (roughly $40,000) outside the usual government channels.

U.S. firms interested in the Algerian market should consider participating in Commerce-sponsored trade missions. Those planned for the near future will feature water resources (November 1985), agriculture equipment (January 1986), petroleum exploration equipment (Febryary 1986), construction machinery (March 1986), and helicopters and aviation equipment (April 1986). The Department of Commerce will also have a booth at the Algiers International Fair in May 1986.

For more information on Algeria, call ITA's Office of the Near East, tel. (202) 377-4652.

COPYRIGHT 1985 U.S. Government Printing Office
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