WRITTEN QUESTION E-3915/02

by Juan Naranjo Escobar (PPE-DE) to the Commission

(14 January 2003)

Subject: Financial assistance for Latin America

Can the Commission provide an annual breakdown by budget heading of European Union financial assistance to Latin America during the periods 1995-1999 and 2000-2002?

What were the annual payments made during those periods?

How does the Commission justify the traditional underimplementation of these budget headings?

Answer given by Mr Patten on behalf of the Commission

(10 March 2003)

An annual breakdown by budget heading of commitments and payments for cooperation with Latin America for the period 1996-2002 (the figures for 2002 are provisional as commitments have not yet been entered in the computerised system for certain budget headings)(1) is being sent direct to the Honourable Member and Parliament's Secretariat.

During the period in question the total amount of commitments for all headings was EUR 3,12 billion compared with EUR 2,04 billion in payments.

There are a number of explanations for the difference of EUR 1,08 billion between the two amounts.

Firstly, a large proportion of the commitments for 2001 and 2002 have to be deducted from this figure. Although these amounts are entered as commitments in the Community's accounts they have to be covered by contracts in order to generate payments, and this requires financing agreements with beneficiary countries and/or bodies. Financing agreements covering commitments made in 2001 have obviously generated very little expenditure and, consequently, payments. As regards 2002, there are not yet any financing agreements for some commitments.

Secondly, the initial budget has not been used up for some projects as objectives have had to be adapted in the light of the beneficiary area's absorption capacity or projects have had to be suspended or halted as they could not be satisfactorily implemented in a particular local situation. Consequently the level of payments is lower than that of commitments.

An analysis of payments for the main budget heading for the Latin American programme also reveals:

- a net improvement in the rate of payments under heading B7-310 (financial and technical cooperation). In 2002 the global volume of payments was 85 % of commitments for the year whereas it was only 60 % in 1998;

- a reduction in the ratio of payments to commitments under heading B7-311 (economic cooperation). Payments accounted for 58 % of commitments for the year in 1998 compared with only 20 % in 2002. This is due to the large increase in commitments under this heading (which rose from EUR 49 million in 1998 to EUR 125 million in 2002) following approval of major regional programmes (Alfa, Alban, Alis, Al-Invest) in recent years. These take some time to get going before they generate a significant flow of payments;

- a subsequent increase in the rate of payments under heading B7-313 (rehabilitation) covering the programme for the reconstruction of Central America (RPRCA) following hurricane Mitch. The total volume of payments compared with commitments rose from 12,8 % in 1999 to 34,8 % in 2002. It should be noted that the payment schedule for this heading provides for 100 % utilisation of commitments already made over four years.

The Commission does, however, recognise that the problem raised by the Honourable Member, namely the slow rate of implementation of payment appropriations, has been a critical factor in Community cooperation in recent years.

Since management of Community external aid has been reformed this problem is being constantly monitored and an action programme has been drawn up with quantifiable objectives to reduce the volume of payments to be made and to close accounts for projects which still have outstanding commitment appropriations. As a result of the measures taken and efforts by Commission departments the rate of payments is improving and outstanding balances are constantly being reduced.

(1) It is impossible to make the same breakdown for 1995 as changes in the titles of certain budget headings and changes made at the time to the computerised system make it very difficult to compare data. Consequently data has been included solely for budget headings B7-310 (financial and technical cooperation) and B7-311 (economic cooperation).