VZCZCXRO7449
RR RUEHLMC
DE RUEHSN #0844/01 1971510
ZNR UUUUU ZZH
R 151510Z JUL 08
FM AMEMBASSY SAN SALVADOR
TO RUEHC/SECSTATE WASHDC 9787
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUCPDOC/USDOC WASHDC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHINGTON DC
RUMIAAA/CDR USSOUTHCOM MIAMI FL
RUEHRC/USDA FAS WASHDC

UNCLAS SECTION 01 OF 02 SAN SALVADOR 000844 
 
STATE PASS USAID/LAC 
STATE ALSO PASS USTR 
USDOC FOR 4332/ITA/MAC/WH/MSIEGELMAN 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EAGR ECON SOCI ES
SUBJECT: FMLN ANNOUNCES PROPOSALS TO ADDRESS FOOD CRISIS 
 
REF: SAN SALVADOR 530 
 
¶1. (SBU) Summary. The leftist opposition FLMN presented a $450 
million legislative package on July 9 to address the food crisis in 
El Salvador.  Their proposals claim to promote increased 
agricultural production, return unproductive land to use, provide 
subsidies to the poor, redefine social programs, and increase 
coordination with municipalities.  High food prices will be a major 
election issue, and the FMLN wanted to get its proposals out ahead 
of the Government's.  Post will report on upcoming Government 
proposals septel.  End Summary. 
 
¶2. (U) On July 9, FMLN General Coordinator Medardo Gonzalez and Vice 
Presidential Candidate Salvador Sanchez Ceren presented the FMLN's 
policy package to address the "food crisis" in El Salvador. 
Panelists included FMLN deputies Salvador Arias and Blanca Noemi 
Coto, and FMLN alternate deputies Karina Sosa de Lara, Audelia 
Guadalupe Lopez de Kleutgens, and Ana Guadalupe Erazo.  FMLN 
Presidential Candidate Mauricio Funes did not attend. 
The Plan 
-------- 
 
¶3. (U) The FMLN package included four main proposals: increasing 
production and availability of food, improving the ability to afford 
food, confronting the situation of the most poor and vulnerable, and 
enhancing government coordination.  The total package would cost an 
estimated $450 million.  The FMLN deputies stated that they were 
willing to work with the government to finance these proposals. 
(NOTE: El Salvador requires a super-majority vote to take on new 
debt, including loans from international financial institutions. 
The FMLN has for the last two years opposed any new debt. END NOTE.) 
 
 
¶4. (U) Gonzales said the proposal was also presented to the 
government's 29-member multidisciplinary commission on how to face 
the food crisis.  The commission is expected to present its 
recommendations next week.  So far, Gonzalez said, they have not 
received an answer from the commission.  (NOTE.  The FLMN refused 
President Saca's invitation to join the commission in April, stating 
that the government would not take the commission's recommendations 
seriously.  END NOTE.) 
 
¶5. (U) In opening remarks, Gonzalez stated that rising food prices 
were not just a result of a "perfect storm" of higher global demand 
and rising oil prices (a phrase used by President Saca).  Rather, 
the global factors "were exacerbated by 15 years of failed ARENA 
agricultural policies."  Gonzalez stated that consumption of milk 
was down 10% and consumption of eggs, the "fundamental protein" of 
the Salvadoran diet, was down 15%, and poorest communities were 
being hardest hit.  He also attacked production of corn-based 
ethanol for driving up corn prices. (NOTE: El Salvador does produce 
some ethanol, but it is derived from sugar, not corn.  END NOTE.) 
 
¶6. (U) INCREASING PRODUCTION: According to Sanchez Ceren, the FMLN's 
ultimate goal is self-sufficiency in basic agricultural production. 
To achieve this, the FMLN would create or expand programs to provide 
credit, seeds, storage capacity, and technical assistance to 
farmers, including strengthening the National Center of Agricultural 
and Forestry Technology (CENTA).  Additional programs would 
specifically target women working in agriculture.  The FMLN would 
also work to return "400,000-500,000 acres" of unused or underused 
land to full agricultural production.  This land is currently owned 
mostly by various cooperatives that received the land during the 
agrarian reform of the 1980's.  The FMLN, however, opposes an 
ARENA-backed Leasing Law that would promote the use of unproductive 
land by larger producers.  They would rather the land go to small 
agricultural producers. 
 
¶7. (U) AFFORDING FOOD: Under the FMLN proposal, food in the "basic 
basket" (e.g., rice, beans) would be exempt from value-added taxes 
(VAT).  Also, persons making a salary less than twice the urban 
minimum wage (or about $384 per month) would receive a 10% raise. 
The FMLN would strengthen the Consumer Defense Office and 
Superintendent of Competition to go after "speculators."  According 
to their plan, the proposed increase in agricultural production 
would also create more jobs, reducing unemployment and 
"underemployment." 
 
¶8. (U) PROTECTING VULNERABLE POPULATIONS: In the FMLN's proposal, 
Red Solidaria, the current ARENA government's social program, would 
be redefined as part of a broader national development program.  The 
new Red Solidaria would feature more coordination with local 
 
SAN SALVAD 00000844  002 OF 002 
 
 
municipalities and international non-governmental organizations. 
The budget for the Municipalities Social and Economic Development 
Fund (FODES) would also be increased by 2 percentage points, to 9% 
of the state's net current revenues. 
 
¶9. (U) INCREASING COORDINATION: The FMLN proposes creating a "new 
mechanism" for coordination between the national government, the 
municipalities, and non-governmental organizations on food security. 
 They would work closely with the United Nations Development Program 
(UNDP) to implement this new mechanism. 
 
Comment 
------- 
 
¶10.  (SBU) Notwithstanding the worldwide impact of high food prices, 
escalating food prices have the potential to be a winning issue for 
the FMLN in the 2009 election campaigns, especially if the FMLN can 
place the blame on the Saca Administration instead of external 
global factors.  The FMLN package lacks specifics, especially on 
funding allocations.  Some components, such as increased storage 
capacity, are similar to existing government proposals (reftel). 
Other proposals, like eliminating the VAT on food and providing 
subsidies to the poor, are likely to prove popular, even though they 
would actually provide little economic relief since many Salvadorans 
purchase food from informal vendors where VAT is usually not 
collected. 
 
¶11. (SBU) Both the Government and the FMLN have advocated food 
self-sufficiency, albeit through some different methods.  Notably 
absent from the FMLN's proposal is any kind of market incentive.  At 
present, there is certainly room for improvement in both crop 
storage facilities and improving crop yields, which should and are 
getting more attention from the GOES.  The risk in shifting too much 
focus to agriculture is that returning to a commodity-driven 
agricultural-based economy would be a serious step backwards, 
especially given El Salvador's comparative lack of good agricultural 
land and resources.  The future of El Salvador's economy is in the 
services and logistics areas where it has been slowly moving under 
CAFTA-DR and other development policies, not in a return to the 
historically dominant agricultural commodity culture.  END COMMENT. 
 
 
Glazer