EL SALVADOR'S ANTI-CRISIS PLAN

UNCLAS SECTION 01 OF 02 SAN SALVADOR 000566

SIPDIS
SENSITIVE

E.O. 12958: N/A
TAGS: ECON PGOV EINV KCRN ES
SUBJECT: EL SALVADOR'S ANTI-CRISIS PLAN

REFTEL: A. SAN SALVADOR 494

B. SAN SALVADOR 513


1. (SBU) SUMMARY. On June 18, the Funes Administration announced
its $587.5 million "Anti-Crisis" plan intended to ameliorate the
effects of the international financial crisis on El Salvador. The
plan's economic and social components include creating a "temporary
worker" program, providing fertilizer and seeds to small and medium
farmers, constructing low-income housing, and expanding the former
welfare ("Red Solidaria") anti-poverty program to urban areas. On
the security front, the plan calls for 1,000 new police officers and
expanded police presence in the six highest crime municipalities.
The government claims to have funding for 60 percent of the plan
already secured. On initial review, the economic and social
components are a mix of campaign promises, undefined public works
projects, and increased social spending. Few proposals involve the
private sector, however, and details are too vague to determine how
much of a stimulus effect they may have. While the security
component includes use of military troops, lack of basic police
training and equipment will be limiting factors in the near term.
End Summary.


2. (U) President Mauricio Funes announced on June 18 details of a
$587.5 million "Anti-Crisis" plan that he had promised in his
inaugural address (reftel A). A reprogrammed $253.3 million in
existing World Bank and Inter-American Development Bank loans
(reftel B),$29.6 million in international donations, and $74.8
million in government funds will cover 60 percent of the plan. The
Government of El Salvador (GOES) is still seeking assistance from
international financial institutions and friendly governments to
cover the remaining 40 percent.


3. (U) TEMPORARY EMPLOYMENT: The plan calls for prioritizing labor
intensive public works projects to "create 100,000 temporary jobs."
Technical Secretary to the President Alex Segovia stated that
details on the specific projects would be forthcoming. The
state-owned Multi-Sector Investment Bank (BMI) will be used to
support other state-owned banks and provide guarantees for loans to
productive sectors.


4. (U) AGRICULTURAL SUPPLIES: The GOES will import fertilizers and
seeds to be distributed at cost to small and medium farmers in 160
municipalities. The program will assist 450,000 farmers in 2009 and
600,000 in 2010. Press reports speculate that this is connected to
an offer from Venezuela to provide urea.


5. (U) HOUSING: The GOES will support construction of 25,000
low-income houses and assist poor rural communities through a "floor
and roof" program.


6. (U) SOCIAL PROGRAMS: The plan includes various new and enhanced
social programs including:

- Establishing Comunidades Urbanas Solidarias, an urban program
similar to the cash-transfer anti-poverty program Red Solidaria (now
called Comunidades Rurales Solidarias),and expanding the existing
rural program.

- Creating a universal basic pension for 42,000 people over age 70
who do not have insurance and live in the 100 poorest
municipalities.

- Expanding an existing school food program to 500,000 additional
students and providing free uniforms, shoes, and school supplies to
1.4 million students.

- Providing health and nutrition services in the 131 municipalities
with the highest levels of malnutrition.

- Extend Social Security health service benefits for 6 months for
10,500 unemployed workers.

- Creating a Social Economic Council to establish a permanent
dialogue between business and workers' social movements.


7. (U) SECURITY: The security portion of the plan will focus on
increasing police presence and operations in the six municipalities
with the highest crime rates (San Salvador, Santa Ana, San Miguel,
Colon, Soyapango, and Apopa). Proposals include:

- Using the Salvadoran military to support the police across the
country.

- Hiring and training 1,000 new police officers.

- Implementing a "School Protection Plan" targeting high-crime

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schools and educational institutes.

- Converting municipalities to "gun-free" zones and prohibiting
firearms in the highest crime areas.

- Providing additional resources to specialized units (e.g., the
anti-extortion unit).


8. (SBU) COMMENT/STIMULUS: The plan's economic and social proposals
are a mixture of pre-crisis campaign promises (e.g., providing
fertilizer and seeds to farmers, most of whom are already receiving
fertilizer and seeds),as-yet undefined infrastructure projects, and
increased social spending. Few proposals involve the private
sector, however, and details are too vague to determine how much of
a stimulus effect they may have.


9. (SBU) COMMENT/SECURITY: Funes' proposal to focus existing police
resources on areas most beset by violence is a common sense
approach. Unfortunately, given the PNC's lack of basic equipment,
to include transportation, communications, and even firearms and
ammunition, the Funes administration's "surge" against violent
street crime will likely not accomplish much in the immediate
future. PNC forces sent to the field will likely arrive there
unequipped, and not properly trained to confront organized street
gang violence. Involvement of the armed forces could possibly
address some of the PNC's transportation shortcomings, but will not
address other glaring operational deficiencies. Throwing additional
resources at specialized units, such as the anti-gang,
anti-extortion, and anti-organized crime divisions, is similar to
the Saca administration's long-standing public security strategy,
the alleged inefficiency of which served as a central plank of
Funes' presidential campaign.

Blau