PORTUGAL and is monitored by regional inspectors of the Employment and Social Security Ministry. As of January 1991 the minimum wage was made uniform for industry, services, and agriculture at approximately $300 per month. f. Rights in Sectors with U.S. Investment U.S. capital investment is significant in the following goods-producing sectors: chemicals and related products; electric and electronic equipment; transportation equipment; and personal care products. The rights afforded workers in firms in these sectors are essentially the same as the rights afforded workers in other firms and/or sectors. (D)-Suppressed to avoid disclosing data of individual companies Source: U.S. Department of Commerce, Survey of Current Business * Section 8 is an abridged version of Section 6 of the Portugal country report included in the Department of State's Country Reports on Human Rights Practices for 1990, submitted to the Congress January 31, 1991. For a comprehensive discussion of worker rights, please refer to that report. ! 1/ To June 30, 1990. All data from Romanian government sources or Embassy estimates based on Romanian sources unless otherwise noted. 2/ IMF. 3/ U.S. Department of Commerce. 4/ Inflation manifests itself in Romania primarily as shortages and product substitution. 5/ Embassy estimate. Unemployment is not measured formally. 1. General Policy Framework ROMANIA Since the revolution of December 1989, Romania has been undergoing a fundamental restructuring of its political and economic systems. The communist system of highly centralized control of the economy has crumbled but has not yet been replaced by a market mechanism. An interim government ruled by decree until elections were held in May 1990. The newly elected government took office in June 1990, and has begun preparing and promulgating laws affecting every aspect of economic life. The parliament has been attempting to cope with the flood of immediately needed legislation and, at the same time, draft a new constitution. As a result, the legal basis for a market economy is far from complete. In addition, implementation of new laws is hampered by old style thinking in the still vast and pervasive government bureaucracy. The government has called for faster movement in reform legislation and is beginning to replace foot-dragging bureaucrats. The pre-revolution government, an autocratic Communist regime, emphasized development of large, state-run industrial and agricultural complexes. In the drive to pay off all foreign debt, it sacrificed living conditions and imports of necessary capital goods. Romania is left with many large, inefficient and outmoded industries. Following the revolution, productivity and output fell sharply. Wage increases and tax rebates contributed to a serious monetary overhang problem. In an effort to meet pent-up demand and absorb excess monetary liquidity, the government allowed the importation of consumer goods. The result was a first half 1990 trade deficit of $650 million to $700 million and a significant drawdown of Romania's foreign exchange reserves. Capital goods, needed in virtually every sector of the economy, must now be financed from external sources. With private capital markets cautious, Romania has turned toward the World Bank and private equity investors to finance economic restructuring and modernization. Lack of a Central Bank and a commercial banking system has left government control of money printing and bank interest rates as the only operable monetary policy tools. The money supply grew by roughly 20 percent in the first quarter of 1990 as a result of expansionist monetary policy. Prior to the revolution, the government ran budget surpluses as a result of forced transfers from public enterprises. Since the revolution, the government has operated without an overall budget. Increases in government salaries and consumer subsidies, though offset by drastically lower spending on prestige capital projects, have resulted in government expenditures exceeding income. 2. Exchange Rate Policies Prior to the 1989 revolution, there were two exchange rates: commercial and tourist. These rates were merged on February 1, 1990, and the national currency, the leu, was devalued from nine to the dollar to about 21 to the dollar. On November 1, 1990, the leu was further devalued to 35 to the ROMANIA dollar. This contrasts with the rate of 100 to 125 lei per dollar offered in the illegal but extensive black market. Rumors of demonetization have been vigorously denied by the government. The government has the long term goal of allowing the leu to float and be freely exchanged. It is likely that the government will implement a hard currency auction sometime in 1991. The mechanism of and criteria for access to this auction have not yet been announced. Due to the lack of internal purchasing power of the leu, the U.S. dollar is coming increasingly into use as an internal medium of exchange. Prior to December 1989, all prices were set by the government. Private enterprise has begun on a small scale, but is finding it difficult to operate in an environment where the government controls sources of credit, foreign exchange and supplies, and regulates wages and most prices. Liberalization has been limited to the private agricultural sector but government-directed price increases have been promised as part of the economic reform program. The government says it will soon allow market pricing for all goods except those it feels it must control to avoid inflation and social unrest. A major overhaul of the tax system is on the government's agenda. Prior to the revolution, government revenue was generated by personal income taxes and confiscatory forced transfers from public and cooperative enterprises. The new tax system will entail a progressive income tax, a value added tax and lower customs duties. The government claims the new tax laws will not discriminate between Romanians and foreigners or between public and private forms of ownership. Tax concessions will be used to stimulate foreign investment and will be calibrated to encourage investment in manufacturing rather than trading operations. Regulations and standards have not been used by Romania to exclude U.S. exports of goods and services. At the end of 1990, Romania's debt is confined to letters of credit and other short-term private commercial credits. Some of Romania's trading partners have begun to offer official credits and credit guarantees. To date, these facilities have not been widely utilized. Romania is a net creditor with outstanding official credits of over $2 billion. The bulk of these credits are to Iraq, and repayment prospects, in light of Romania's strong stand in support of sanctions against Iraq, are dim. Romania is a member of the International Monetary Fund (IMF) and International Bank for Reconstruction and Development (IBRD). Teams from both institutions visited Romania in 1990. There is strong interest in obtaining International Finance Corporation loans to support the ROMANIA privatization and rehabilitation of state enterprises as well as in receiving IBRD-funded technical assistance in devising and implementing reforms. Romania is seeking IMF resources to support its economic reform and liberalization programs. With the economy in transition there are still barriers to imports and foreign investment. Imports still require a government license. Import licenses are the government's most effective tool for controlling the external trade balances. Scarcity of hard currency also limits opportunities for U.S. sales. Because of currency convertibility problems, countertrade still exists but is no longer a governmentimposed requirement. In early 1990 the provisional government issued a decree allowing 100 percent foreign ownership of investments, but the decree is considered inadequate by most foreign investors. The main shortcoming is the limitation of eight percent per year on repatriation of soft currency profits. All hard currency profits may be repatriated. New draft legislation changes this, however, to 8 to 15 percent of initial investment repatriated from soft currency profits, depending on the industry sector. New limitations on hard currency profit transfer have been proposed as well. The service sector is just emerging in Romania. Travel and ticket services are hampered by the national airline's monopoly on selling tickets for local currency. Foreign airlines must charge hard currency. Foreign banks are limited to trade financing activities. A legal basis for foreign involvement in insurance, retail banking and legal services does not yet exist. There is no stock exchange. 6. Export Subsidies Policies The previous regime's emphasis on exports and the strict central control of internal prices and wages created significant distortions in prices. The government is taking steps to eliminate internal subsidies. In preparation for privatization of the bulk of state enterprises, the government is telling managers either to find credit from the banking system or to cut costs. However, the banking system is still tied to the government and managers are limited in their ability to cut labor costs. 1. Protection of U.S. Intellectual Property Romania is a member of the World Intellectual Property Organization, the Paris Convention for the Protection of Industrial Property and the Berne Convention for the Protection of Literary and Artistic Works and the Patent Cooperation Treaty. A series of laws relating to copyright, trademarks and patents have been drafted to place Romania in compliance with international standards and norms. The World Intellectual Property Organization has reviewed the draft laws. Until the |