Identifier
Created
Classification
Origin
09SANSALVADOR702
2009-07-28 18:24:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy San Salvador
Cable title:
BUS SUBSIDY EXTENDED FOR ANOTHER 18 MONTHS
how-toVZCZCXYZ0018 PP RUEHWEB DE RUEHSN #0702 2091824 ZNR UUUUU ZZH P 281824Z JUL 09 FM AMEMBASSY SAN SALVADOR TO RUEHC/SECSTATE WASHDC PRIORITY 1434 INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE RULSDMK/DEPT OF TRANSPORTATION WASHINGTON DC RUEATRS/DEPT OF TREASURY WASHINGTON DC
UNCLAS SAN SALVADOR 000702
SIPDIS
SENSITIVE
E.O. 12958: N/A
TAGS: ELTN ECON EFIN PGOV ES
SUBJECT: BUS SUBSIDY EXTENDED FOR ANOTHER 18 MONTHS
REF: 07SANSALVADOR2431
UNCLAS SAN SALVADOR 000702
SIPDIS
SENSITIVE
E.O. 12958: N/A
TAGS: ELTN ECON EFIN PGOV ES
SUBJECT: BUS SUBSIDY EXTENDED FOR ANOTHER 18 MONTHS
REF: 07SANSALVADOR2431
1. (SBU) SUMMARY: The Government of El Salvador (GOES) reached an
agreement with public transportation representatives on a
restructured bus subsidy following two months of negotiations. The
new agreement extends the subsidy program for 18 months, reduces the
monthly payment, and secures a guarantee not to raise fares. While
reducing costs, the new agreement falls far short of expectations
that the Funes administration would eliminate the unpopular subsidy.
Given the political muscle of the bus owners, the transport subsidy
will likely continue for the foreseeable future. END SUMMARY.
2. (U) On July 26, the GOES reached an agreement on subsidies with
public transportation representatives following two months of
negotiations, strikes, and public demonstrations. The public
transportation union had threatened more protests and disruptions in
service if the subsidy was eliminated. The transportation subsidy
is the first of the four major budget-busting subsidies (transport,
water, electricity, and propane gas) to be addressed by the new
government.
3. (U) Under the new agreement, bus owners will receive a subsidy of
$500 per bus per month (down from $800 per bus per month) and
minibus owners will receive $250 per bus per month (instead of $400
per bus per month) starting August 1. According to the GOES, the
new agreement will reduce the subsidy payment to $4 million per
month and save $35 million per year. The subsidy will continue to
be funded through a 10 cent per gallon tax on gasoline and diesel
(REFTEL). As part of the agreement, the GOES secured a guarantee
from public transportation representatives that fares will remain at
current levels over the course of the agreement.
4. (SBU) COMMENT: The continuation of the bus subsidy falls far
short of expectations for the new administration. Before taking
office, the Funes team was outspoken about ending this unpopular
subsidy, and economists across the political spectrum have
repeatedly questioned its value. The subsidy's continuation
demonstrates the political clout of the bus company owners, many of
whom serve in the Legislative Assembly and wield considerable
influence. If the GOES failed to eliminate the subsidy now, in the
early days of the Funes Administration, it is even less likely to do
so in 18 months, when the 2012 Assembly elections are that much
closer. END COMMENT.
BLAU
SIPDIS
SENSITIVE
E.O. 12958: N/A
TAGS: ELTN ECON EFIN PGOV ES
SUBJECT: BUS SUBSIDY EXTENDED FOR ANOTHER 18 MONTHS
REF: 07SANSALVADOR2431
1. (SBU) SUMMARY: The Government of El Salvador (GOES) reached an
agreement with public transportation representatives on a
restructured bus subsidy following two months of negotiations. The
new agreement extends the subsidy program for 18 months, reduces the
monthly payment, and secures a guarantee not to raise fares. While
reducing costs, the new agreement falls far short of expectations
that the Funes administration would eliminate the unpopular subsidy.
Given the political muscle of the bus owners, the transport subsidy
will likely continue for the foreseeable future. END SUMMARY.
2. (U) On July 26, the GOES reached an agreement on subsidies with
public transportation representatives following two months of
negotiations, strikes, and public demonstrations. The public
transportation union had threatened more protests and disruptions in
service if the subsidy was eliminated. The transportation subsidy
is the first of the four major budget-busting subsidies (transport,
water, electricity, and propane gas) to be addressed by the new
government.
3. (U) Under the new agreement, bus owners will receive a subsidy of
$500 per bus per month (down from $800 per bus per month) and
minibus owners will receive $250 per bus per month (instead of $400
per bus per month) starting August 1. According to the GOES, the
new agreement will reduce the subsidy payment to $4 million per
month and save $35 million per year. The subsidy will continue to
be funded through a 10 cent per gallon tax on gasoline and diesel
(REFTEL). As part of the agreement, the GOES secured a guarantee
from public transportation representatives that fares will remain at
current levels over the course of the agreement.
4. (SBU) COMMENT: The continuation of the bus subsidy falls far
short of expectations for the new administration. Before taking
office, the Funes team was outspoken about ending this unpopular
subsidy, and economists across the political spectrum have
repeatedly questioned its value. The subsidy's continuation
demonstrates the political clout of the bus company owners, many of
whom serve in the Legislative Assembly and wield considerable
influence. If the GOES failed to eliminate the subsidy now, in the
early days of the Funes Administration, it is even less likely to do
so in 18 months, when the 2012 Assembly elections are that much
closer. END COMMENT.
BLAU