From: rich@pencil.cs.missouri.edu (Rich Winkel)
Subject: Proceso 533: Economy
Followup-To: alt.activism.d
Originator: rich@pencil.cs.missouri.edu
Organization: PACH
Date: Thu, 15 Oct 1992 21:10:24 GMT

/** reg.elsalvador: 136.0 **/
** Topic: Proceso 533: Economy **
** Written 12:16 pm  Oct 15, 1992 by cidai@huracan.cr in cdp:reg.elsalvador **
From: cidai@huracan.cr (Centro de Informacion Documentacion y Apoyo a la Invest. - UCAJSC)
Subject: Proceso 533: Economy

Center for Information, Documentation and Research Support (CIDAI)
Central American University (UCA)
San Salvador, El Salvador
 
PROCESO 533
October 7, 1992
 
ECONOMY:
The 1993 budget bill
 
     Last September 30, the executive branch sent down its bill for
the 1993 budget. The most important novelties in this year's bill
are the creation of new budget categories to fulfill peace
commitments, and the separate budget category for the Vice-Ministry
of Housing and Urban Development. Otherwise, the 1993 budget shows
no important changes in amounts and distribution compared with the
previous year.
     Once again, the allocations for social programs have scarcely
increased over 1992 levels, and spending for health and education
are lower than 1990 levels. In contrast, budget allocations for
meeting commitments made to creditors and national institutions
have increased considerably.
     The cost of this choice has been a slowdown in the development
of social services offered by the State, at a time when everyone is
preaching the need to strengthen the development of the poor. The
priorities made at the moment of drawing up the budget are clearly
different from those presented in the current government's
Development Plan, especially in the area of social spending.
 
Structural changes
 
     If the 1993 budget bill is passed, we can expect that the
budgets of health and education will increase their share of
national spending compared to the 1992 budget, by 1.52% and 0.75%
respectively. The Vice-Ministry of Housing and Urban Development
will absorb 0.4% of the total budget.
     However, since ARENA came into power, there has been a notable
increase in the portion of the budget going to service the public
debt. In 1993, this category will take up 20.84% of the budget,
while in 1990 it was 13.49% of the budget. As a result, the
government says it has taken care of the payments in arrears it
owed to international lending organizations.
     The budget of the Defense Ministry dropped by 2.36% from 1992,
while the Vice-Ministry of Public Security, now Police and
Firefighters, dropped by 0.07%. Although we are now in a transition
during which both armies are demobilizing, the structures of the
Armed Forces, Police and Firefighters receive a total of 17.13% in
the 1993 budget, 13.71% for defense and 3.42% for the other two
combined.
     Other agencies whose budgets were reduced include the
Auditor's Office and the Ministries of the Treasury, Foreign
Relations, the Interior, Labor and Agriculture, which were reduced
by a combined total of 3.5% compared to 1992.
     The most important budget increases from 1992 are found in the
Ministries of Public Works (2.46%) and Health (1.72%), and the
Presidency (1.76%). The total combined increase of these three is
5.94% compared with 1992.
     Besides the budget allocations for primary government units,
another area increased is General Obligations (3.32%). At the same
time, payment on the public debt dropped 8.12% compared with last
year, yet still makes up 20.84% of the total 1993 budget. In 1990,
payments on the public debt accounted for 13.49% of the budget.
Adding together general obligations and payment on the public debt,
the two represent 28.1% of the 1993 budget, compared with 32.9% in
1992 and only 18.22% in 1990.
     As a consequence, budget allocations for the specific
ministries and agencies went from 81.78% of the total budget in
1990 to 71.9% in 1993, with a concomitant drop in social spending.
 
Social spending and service on the debt
 
     The national budget for 1993 reflects the government's
unwillingness or inability to adopt a more aggressive social
policy. Over the last several years, the contrary has occurred:
social spending has contracted while payments on the public debt
have increased and, although to a lesser extent, so have the
budgets of the primary government units involved with more
technical-bureaucratic aspects of national management.
     Even if we agree that the resources of the State are limited,
and that it cannot sacrifice ministries necessary for proper
administration, it is contradictory to see speeches preaching a war
on poverty while the majority of new resources are going to service
the public debt, or else to other areas (such as the presidency,
which is slated to receive 1.76% more resources in 1993) which do
nothing to enhance social programs.
     The problem is even greater if we note that no alternative
mechanisms exist to channel social spending in such a way as to
offset the structural deficiencies of the State in this area. The
Social Investment Fund (FIS), which was to be one of the principal
agents of the government's social strategy, has been unable to
carry out its role adequately, and since it began working in April
1991, has only transferred around 124 million colones ($14.4
million) to social assistance projects.
 
Conclusions
 
     Although one of the government's stated priorities is to
reduce poverty, there is still no structural allocation of public
spending to meet that goal. In this context, foreign assistance
remains key to finance the government's sectorial social programs.
     As part of the policies of economic redirection, the
government's Development Plan assumes that foreign aid will be
forthcoming; to this end, one of its policies is to avoid falling
into arrears with creditors and "benefactors." In this context, we
should not be surprised that the General Obligations category
includes contributions of 50 million colones ($5.8 million) to
international lending agencies. In other words, this represents
around 65% more than budget allocations for housing and urban
development.
     This leads us to reflect on how the public debt is
contradictory to social development. The government's development
strategy includes policies which, in the long run, are actually
draining resources from the government's social goals.
     Although the government's current diagnosis of El Salvador's
social situation clearly mentions the prevailing deficiencies in
social conditions, the design of its socio-economic strategy
suffers from inconsistencies which could become great obstacles
along the road to development. For this reason, it is necessary to
re-evaluate the different options of international financing
offered.
 
PROPOSED NATIONAL BUDGET 1993
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                                          Amount     %  Structure
                                                     1993    1992
-----------------------------------------------------------------
a. Primary units
 
Legislative Organ                      33,474,670    0.44    0.36
Judiciary                             241,182,010    3.16    2.67
Auditor's Office                       46,074,720    0.60    0.70
Supreme Electoral Tribunal             28,049,610    0.37    0.16
Civil Service Tribunal                    595,620    0.01    0.01
Attorney General's Office              16,267,430    0.21    0.15
Public Defender's Office               17,775,840    0.23    0.18
Human Rights Public Defender           10,626,830    0.14      --
Presidency                            189,636,640    2.48    0.72
Min. Planning                          13,666,950    0.18    0.18
Min. Treasury                         219,118,470    2.87    2.93
Min. Foreign Relations                107,280,710    1.40    1.52
Min. Interior                         145,742,550    1.91    2.40
Min. Defense                          866,483,700   11.35   13.71
Police and Firefighters               255,960,630    3.35    3.42
Min. Justice                           90,247,890    1.18    1.02
Min. Education                      1,106,305,600   14.49   13.74
Min. Health                           730,000,000    9.56    7.84
Min. Labor                             18,295,830    0.24    0.28
Min. Economy                           95,477,910    1.25    1.24
Min. Agriculture/Livestock            240,127,230    3.14    3.40
Min. Public Works                     987,691,550   12.93   10.47
Vice-Min. Housing/Urban Development    30,694,150    0.40      --
SUBTOTAL                            5,490,776,180   71.90   67.10
 
b. General Obligations                554,508,530    7.26    3.94
 
c. Public Debt                      1,591,141,500   20.84   28.96
 
TOTAL                               7,636,426,210  100.00  100.00
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Source: National Budgets, 1992 and (proposed) 1993.
 

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