UNCLAS SAN SALVADOR 001332
E.O. 12958: N/A
TAGS: EFIN PGOV ECON ES
SUBJECT: EL SALVADOR UNSURE HOW TO PAY DECEMBER SHORT-TERM
REF: A. SAN SALVADOR 1238
Â¶B. CHRISTENSEN-SENICH E-MAILS 11/26/08
Â¶1. (SBU) SUMMARY. The Ministry of Finance is unsure how to
pay $80 million in short-term government debt on December 15.
The Ministry had planned on $200 million in funds from the
Central American Bank for Economic Integration (CABEI), but
was informed in late November that CABEI could only provide
$50 million, which the Government of El Salvador (GOES) had
already used. Post has contacted the Department of Treasury
regarding the GOES's request for additional technical
assistance and will report septel on other fiscal/liquidity
issues. END SUMMARY.
Â¶2. (SBU) On November 26, Manuel Rosales, Director of Fiscal
Policy and Public Credit at the Ministry of Finance, called
Econoff to alert him that the Government of El Salvador
(GOES) was unsure how to cover $80 million in short-term debt
in December. According to Rosales, the GOES has $60 million
in Letters of Treasury ("Letes") which it needs to pay or
roll over on December 15. In addition, because of an
economic slowdown, the Ministry of Finance now projected a
$20 million shortfall in tax revenue for December and would
need to issue $20 million in new Letes to cover this budget
deficit. The Ministry of Finance had successfully covered
November's approximately $65 million in Letes, primarily by
using cash deposits from the various "semi-autonomous
institutions" (e.g., the port authority).
Â¶3. (SBU) Rosales noted that local banks continued to refuse
to roll over their Letes. The Ministry of Finance had used
$100 million in funds from the Central American Bank for
Economic Integration (CABEI) to cover its October Letes and
expected to receive an additional $200 million (reftel A).
Rosales reported, however, that CABEI informed the GOES in
late November that they would only receive $50 million more.
This last CABEI loan would cover Letes "up to December 15."
The Ministry of Finance does not currently have a plan to
cover its December debt and requested recommendations and/or
follow-on assistance from U.S. Treasury's Office of Technical
Â¶4. (SBU) COMMENT: The GOES had continued to bank on CABEI
funds even after many non-government analysts had projected
that CABEI did not have the money (reftel A). Post has
already contacted Treasury (reftel B) and will report septel
on additional fiscal/liquidity issues.