VZCZCXYZ0000
RR RUEHWEB

DE RUEHSN #0010/01 0072024
ZNR UUUUU ZZH
R 072023Z JAN 10
FM AMEMBASSY SAN SALVADOR
TO RUEHC/SECSTATE WASHDC 0207
INFO WHA CENTRAL AMERICAN COLLECTIVE
RHMFISS/HQ USSOUTHCOM MIAMI FL
RUCPDOC/USDOC WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS SAN SALVADOR 000010 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EFIN PGOV SOCI ES
SUBJECT: El Salvador's 2010 Budget 
 
¶1. (SBU) Summary: El Salvador's $3.7 billion budget for 2010 
increases spending by only 0.7 percent over 2009 by zeroing-out 
budget increases and cutting spending across a wide range of 
government ministries.  The few ministries granted budget increases 
include Labor (13.3%), Public Security (9.4%), and Foreign Affairs 
(3.3%.)  A widely anticipated USD 407.7 million supplemental budget 
request and the uncertain effect of recently enacted tax reform 
cloud projections concerning the true fiscal effects of the GOES's 
2010 spending plans.  End Summary. 
 
¶2. (U) The 2010 GOES budget assumes economic growth between 0.5 and 
1.0 percent for the year and an inflation rate falling between 2.5 
and 3.5 percent.  In addition to the 2010 budget, the GOES plans to 
present a supplemental budget request to the National Assembly 
totaling $407.7 million, mostly funded through new Eurobond debt, 
for social investment.  The Legislative Assembly also approved the 
reorientation of $300 million in Inter-American Development Bank 
(IDB) loans approved in May 2009, with $150 million for disaster 
recovery and $150 million for the GOES's Anti-Financial Crisis 
Plan, spending (and debt) that is not reflected in the 2010 budget. 
 
 
¶3. (U) Under the 2010 budget, El Salvador's public sector deficit 
will decrease from 5.1 percent of GDP in December 2009 to 4.3 
percent of GDP in December 2010, before the effects of tax reform 
are factored in.  Debt payments will total $769.7 million, up from 
$682 million of 2009.  Close to 95% of the budget will be financed 
with internal revenues, primarily the Value-Added and Income Taxes, 
with the rest from previously negotiated debt and special taxes and 
fees. 
 
¶4. (U) In 2010, the budget for the Office of the Presidency will 
increase by 25.8 percent, or USD $73.6 million.  26 percent of the 
Presidency's budget will be spent on subsidies to national social 
institutions and 19 percent will be allocated to the new Secretary 
of Culture.  The National Assembly's budget was also increased by 
16.9% to $45.9 million, primarily to provide a raise for 
legislative staff. 
 
¶5. (U) The Ministry of Public Security and Justice's budget will 
increase by 9.4 percent to $290.3 million.  Approximately 80.5 
percent of the total, or $233.6 million, is allocated to support 
police actions to fight delinquency.  A total of USD 28.7 million 
will be directed to support the prison system and USD 10.3 million 
to the National Public Security Academy.  The Attorney General's 
office will receive $34.4 million, which includes funding to hire 
95 new prosecutors.  The Ministries of Foreign Affairs and Labor 
will receive increases of 3.3 percent (to $38.4 million) and 13.3 
percent (to $11.7 million) respectively.  The Ministry of Defense's 
budget is unchanged. 
 
¶7. (U) The budget passed with 64 out of 84 votes, with all 20 
members of the (conservative) ARENA party abstaining.  To secure 
the smaller parties' votes, the GOES agreed to redirect $18.9 
million, primarily from the Supreme Court, to the Ministries of 
Health, Education, Public Security, and Defense. 
 
¶8. (SBU) In a presentation to the diplomatic corps, (left-wing) 
FMLN deputies highlighted the importance of the budget increase for 
the Ministry of Public Security, especially the allocation for the 
national training academy, which they asserted would bring 
much-needed change to the National Civil Police (PNC).  The 
deputies also highlighted specific programs under the Ministry of 
Health targeting women and war veterans that were important to 
their party.  They noted the necessity of spending cuts in other 
areas to address El Salvador's growing debt burden. 
 
¶9. (SBU) COMMENT: Constrained by a difficult economic climate, the 
Funes Government's first budget is pragmatic and marks little 
change from the budgets of previous administrations.  The 
supplemental budget, once presented, should provide greater insight 
into the GOES's fiscal priorities.  END COMMENT. 
 
¶10. (U) Table I. Government Budgeted Expenditures (millions of 
dollars) 
 
                                     2009        2010        % 
change 
 
Legislative Branch                   39.3        45.9        16.9 
 
Judicial Branch                      204.3       193.2       -5.4 
 
Executive Branch                     1,934.3     1,919.6     -0.8 
President's Office                   58.5        73.6        25.8 
 
Ministries                           1.875.4     1,846.0     -1.6 
   Finance                           54.9        53.8        -2.1 
   Foreign Affairs                   37.2        38.4        3.3 
   Governance                        15.7        15.9        0.8 
   Public Security and Justice       265.3       290.3       9.4 
   Defense                           132.9       132.9       0.0 
   Education                         702.5       671.5       -4.5 
   Public Health                     393.4       390.7       -0.7 
   Labor                             10.4        11.7        13.3 
   Economy                           43.4        41.8        -3.7 
   Agriculture                       52.1        51.0        -2.1 
   Public Works                      138.3       125.7       -9.1 
   Environment                       11.0        8.5         -22.9 
   Tourism                           18.3        13.9        -24.1 
 
Other Institutions 
  Comptroller                        32.7        33.7        3.1 
  Elections Council                  13.6        13.5        -0.8 
  Civil Service                      0.8         0.8         0.1 
  Ethics Court                       1.4         1.4         0.0 
  National Judicial Council          5.4         5.4         0.1 
  Human Rights Office                6.6         6.5         -1.1 
  Attorney General                   34.1        34.4        0.8 
  Public Defenders Office            18.9        18.1        -4.4 
 
Public Debt                          682.0       769.7       12.9 
 
State General Obligations            113.5       93.8        -17.4 
 
General Transfers                    541.4       518.3       -4.3 
 
Total                                3,627.8     3,654.3     0.7 
 
 
¶11.  (U) Table II.  Government Anticipated Tax Revenue (millions of 
dollars) 
 
                               2009        2010        % change 
 
¶A.  Income tax                 1,084.5     1,150.6     6.1 
¶B.  VAT                        1,783.3     1,564.22    -12.3 
¶C.  Import duties              183.1       161.9       -11.6 
¶D.  Other                      181.5       177.0       -2.5 
 
Total tax revenue              3,232.4     3,053.7     -5.5 
 
Source: Ministry of Finance 
BLAU