VZCZCXYZ0000
RR RUEHWEB

DE RUEHQT #0100/01 0271957
ZNR UUUUU ZZH
R 271956Z JAN 10
FM AMEMBASSY QUITO
TO RUEHC/SECSTATE WASHDC 0698
INFO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHBO/AMEMBASSY BOGOTA
RUEHCV/AMEMBASSY CARACAS
RUEHLP/AMEMBASSY LA PAZ
RUEHPE/AMEMBASSY LIMA
RUEHQT/AMEMBASSY QUITO

UNCLAS QUITO 000100 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: AID EAID ECON EFIN PREL EC
SUBJECT: Fiscal Transparency in Ecuador 
 
REF: STATE 1923 
 
¶1. (U) Post provides the following information on the transparency 
of the government of Ecuador's budget, keyed to questions in 
reftel. 
 
 
 
¶2. (SBU) Is the central government expected to receive funding 
under the FY 2010 SFOAA? 
 
 
 
Yes.  In 2009, overall USG assistance to Ecuador amounted to over 
$40 million.  Approximately half of this assistance went to support 
projects with GoE entities (particularly law enforcement and 
military, and also including support for refugees and economic 
development).  A significant percentage - also roughly 50% -- of 
USG assistance in 2009 supported non-GoE programs (e.g., USAID 
funds support civil society, the private sector and local 
governments). Many if not most of the USG assistance programs in 
Ecuador will continue in 2010. 
 
 
 
¶3. (SBU) Is the host country's annual national budget publicly 
available? 
 
 
 
Ecuador's new Constitution requires that the central government 
submit the budget proposal for the next year to Ecuador's National 
Assembly 60 days before the end of the current calendar year.  The 
National Assembly then has 30 days to review and vote on the budget 
proposal.  The budget enters into force immediately upon approval 
of the National Assembly. 
 
 
 
Ecuador's Constitution provides that the information related to the 
formulation, approval and execution of the Ecuador's annual 
national budget must be public.  The approved budgets are available 
in print and on the Ministry of Finance website: 
http://www.mef.gov.ec/PRESUPUESTO_2010-2013/P RESUPUESTO%202009-2013 
.htm. 
 
 
 
¶4. (SBU) Are incomes and expenditures included in the 
publicly-available budget? 
 
 
 
Yes.  All revenue and expenditure figures are included in the 
publicly available budget.  Revenues and expenditure figures are 
disclosed in detail by sector (e.g., defense, education), entity 
(e.g., Ministries and other public institutions), and state 
function (e.g., executive, judicial, legislative).  The budget also 
provides details on provincial expenditures. 
 
 
 
¶5. (SBU) What is post's assessment of the extent to which the 
publicly-available budget accurately reflects actual government 
incomes and expenditures? 
 
 
 
Local economic analysts have criticized the assumptions used to 
formulate the government's 2010 budget.  Some of these assumptions, 
for example, real GDP growth of almost 7% in 2010, are considered 
overly optimistic.  These assumptions impact the estimates for both 
revenues and expenditures.  If growth levels are more in line with 
private estimates (1.5-2.5%), the probability is that tax 
collection receipts will come in significantly lower than the 
budget estimates, and this will also affect how much the GoE will 
be able to spend in 2010.  Nonetheless, the GoE's assumptions and 
figures are available for public review and discussion. 
 
 
 
In addition, the GoE delayed submitting the 2009 budget to the 
National Assembly for approval, which made it difficult to assess 
 
whether the government budgets for both 2009 and 2010 were credible 
and complete.  No public report about the budget execution in 2009 
has been disclosed yet.  This issue is discussed in greater detail 
in para 6 below. 
 
 
 
¶6. (SBU) Have there been any events since the 2009 review that may 
have affected fiscal transparency (e.g., a coup)? 
 
 
 
Ecuador was not reviewed in 2009.  The GoE delayed submitting the 
budget proposal for 2009 to the National Assembly until November 6, 
¶2009.  The GoE's justification for the delay was that President 
Correa was inaugurated for his second term on August 10, 2009, and 
Ecuador's new Constitution, approved September 2008, established 
that a new administration must submit a new budget to the National 
Assembly (itself inaugurated July 31, 2009) during its first ninety 
days in office. 
 
 
 
The budget proposal for 2010 was submitted almost simultaneously 
with the 2009 budget (in early November 2009), which was well 
within the constitutionally established timeframe. 
 
 
 
¶7. (SBU) Since last year's review, what efforts has the host 
government undertaken to improve fiscal transparency?  What 
progress has been made, pursuant to the 2009 demarches on the 
subject (reftels)? 
 
 
 
Senior Ministry of Finance officials told econoffs in December 2009 
that the Finance Ministry was undertaking several projects aimed at 
improving the formulation, execution, and ex-post evaluation of 
central government budgets.  At the GoE's request, a PEFA (Public 
Expenditure and Financial Accountability) exercise is being 
conducted by a group of foreign consultants.  These consultants are 
applying the PEFA methodology developed by the World Bank, 
International Monetary Fund, and the European Commission.   The 
Ministry of Finance plans to disclose publicly the results of this 
evaluation.  (The PEFA website indicates that an evaluation has 
commenced and a draft report is expected to be available during 
2010.) 
HODGES