EL SALVADOR FINANCE MINISTER RESIGNS

C O N F I D E N T I A L SAN SALVADOR 001027

SIPDIS

E.O. 12958: DECL: 04/20/2026
TAGS: PGOV KCOR ES ECON EFIN
SUBJECT: EL SALVADOR FINANCE MINISTER RESIGNS

Classified By: Amb. H. Douglas Barclay; Reasons 1.4 (b,d).


1. (C) During a long conversation at his residence the
evening of April 19, GOES Finance Minister Guillermo Lopez
Suarez (strictly protect throughout) confirmed to Polcouns
that he had, indeed, resigned his post, effective May 1.
Lopez Suarez recounted how, on April 7, he had gone to see
President Saca at the Presidential Palace, and had told Saca
at the time that he (Lopez Suarez) did not feel he had the
full backing of the President to carry out much-needed fiscal
reforms, and that, in addition, he (Lopez Suarez) was being
undermined by several members of Saca's inner circle,
including Secretary to the Presidency Elmer Charlaix and
Minister of Public Works David Gutierrez. Lopez Suarez told
Saca that rumors were circulating about upcoming cabinet
changes, including Lopez Suarez's own removal, and that he
wanted to make it easier on Saca by offering his resignation.
Lopez Suarez said Saca accepted immediately and asked Lopez
Suarez whether he wanted another position, such as an
ambassadorship. Lopez Suarez told Saca that he did not need
or want another government job, but recommended that his
resignation not be announced until May 1, at which time it
would become effective. Lopez Suarez's rationale was that he
was getting ready to place some USD 400 million in GOES bonds
in the international markets and he did not want his
resignation to negatively impact the demand/price for the
bonds. Saca agreed to keep the resignation under wraps until
May 1.


2. (C) Lopez Suarez said that, despite Saca's assurances,
members of the President's inner circle have begun leaking
news of his resignation, and that several major Salvadoran
newspapers had called him throughout April 19 to confirm the
news. Lopez Suarez said that, true to his commitment, he had
not provided confirmation to the media, and that only a
handful of close friends and associates were aware of his
resignation. Lopez Suarez then recounted how he had fallen
out with Saca over the past few months. According to the
Finance Minister, late last year he received credible
information that Minister of Public Works David Gutierrez, a
long-time ARENA party official, has personally approached two
foreign companies -- one Italian, the other Mexican -- and
had asked for kickbacks in exchange for lucrative
infrastructure projects. When Lopez Suarez went directly to
Saca with this information, the President appeared extremely
concerned and told the Finance Minister to talk to Charlaix
about it and get the issue resolved. According to Lopez
Suarez, Charlaix went directly to Gutierrez and told him
Lopez Suarez had blown the whistle on Gutierrez. Gutierrez
then reportedly confronted Lopez Suarez and subtly declared
him his enemy. When Lopez Suarez continued to receive other
reports of corruption by Gutierrez, he reportedly approached
Saca again, but this time found Saca becoming less accessible.


3. (C) Separately, Lopez Suarez affirmed that the GOES is in
tight fiscal straits and needs to reform its pension system
urgently, and to stop providing unjustified electricity,
water, and gas subsidies. Lopez Suarez said he felt that the
GOES does not have the political will to tackle these
reforms, that he felt increasingly isolated in raising these
issues within the Saca administration, and that, in his view,
El Salvador will face an untenable fiscal situation by 2008
if these reforms are not effected. The Finance Minister
further confided that, had he not been able to place USD 400
million dollars in bonds on April 19, he would not have been
able to meet the public employee payroll this week. Lopez
Suarez also expressed frustration over the fact that the
largest companies in the country, especially the large banks,
continue to evade their full tax payments, and added that
some of the richest Salvadorans -- names like the Simans and
others -- are using loopholes in the tax laws benefiting the
free trade zones to evade tax payments. He concluded that
the GOES is just not willing to take on these powerful
business interests.


4. (C) Comment: Guillermo Lopez Suarez is probably the
star of Saca's cabinet and is highly respected among the
IFI's and the international banking community. He, more than
any other GOES official, is responsible for having reformed
the country's tax laws so that tax collection increased
substantially over time. As a consequence of his efforts to
extract tax payments from the country's powerful business
interests, Lopez Suarez earned their enmity. These interest
will not be saddened by his departure. Post, on the other
hand, will miss someone we trust and respect, and we fear his
departure will hurt the GOES's image before the international
financial community.
Butler