Requesting more loans or issuing bonds are the options under consideration by the Ministry of Finance in order to raise funds needed to cover the 2018 budget deficit.
On top of the funds that the Sánchez Cerén administration needs to finish 2017, there is also a shortfall to cover the budget for the next year.The funds needed are for the propane gas subsidy and for servicing debt related to the Preliminary Investment Certificate (CIP by its initials in Spanish).It is estimated that the shortfall is at least $925 million, according to explanations given by the Minister of Finance, Carlos Cáceres.
In search of fresh resources, capital shares in sugar factories and plants held by Corporación Salvadoreña de Inversiones will be sold to private companies.
The aim of the Sánchez Cerén administration is to part with its shares and obtain fresh resources to pay off debts amid the liquidity crisis it is facing.The decree approved by the Legislative Assembly"... establishes a deadline up until October 10 for Corsain to be able to gradually sell the shares it owns, which could be worth about $23 million."
The delay in payments to suppliers to the state, corresponding to July, reflects the complicated situation of public finances in El Salvador.
Arguing that"... July was a very bad month fiscally," Finance Minister Carlos Caceres, justified the delay in payment to suppliers of goods and services. According to the minister, in July the government "... had to pay $260million in external debt and Treasury bills."
The 100 largest taxpayers registered with the Ministry of Finance paid tax equivalent to 2% of their annual gross income.
Representatives from the department stated that they will start investigating some companies this year who have reported losses or very low taxation, "...
Representatives from the Chinese conglomerate CITIC Group visiting El Salvador met with the government in order to find out about business opportunities existing in the country.
From a statement issued by the Agency for Export and Investment Promotion of El Salvador (PROESA):
The Government of El Salvador, through a team of heads of various institutions, received today a delegation from CITIC Group, a conglomerate originating in China which has become a transnational, and which does business in 56 categories, both financial and non-financial. With the intention of showcasing the advantages of El Salvador as an investment destination the group's agenda begins with a meeting with William Granadino, president of the Promotion Agency for Export and Investment in El Salvador (PROESA); Luz Estrella Rodríguez, Deputy Minister of Economy (MINEC) and Marta Evelyn de Rivera, vice president of the Central Reserve Bank (BCR).
The opposition in the Assembly is calling for government approval of the bill on fiscal responsibility before approving the issuance of debt of $1.15 billion and a proposed tax package.
The lawmakers argued that there is a need to thoroughly scrutinize the text of the proposed reforms, as there is uncertainty over the destination the government will chose for the proceeds as well as strategies to revive the national economy in order for the state to ensures there is liquidity rather continuing to generate more debt for the country.
The Government is proposing amending the Press Law to tax the income of the companies that own printed newspapers, keeping tax exemptions on paper and ink.
Establishing a concept of fairness and justice between taxing employers and not censorship is, according to Finance Minister Carlos Cáceres, the purpose of the proposed new tax for the companies that own printed newspapers, which until now have been exempt from income tax (ISR).
A bill aims to tax properties of any value that either do or do not have constructions on them, and which do not have a specific use anywhere in the country, declaring them "luxury goods".
The proposed law states that "... property for recreation, leisure or rest, with or without construction or under construction, regardless of its value or location , such as houses, lots, plots, villas located in beaches, lakes, mountains or the city ... "will be taxed at 1% on the assessed value established for the property.
The draft budget for 2014 is 3.9% higher than what that the Salvadoran Congress approved for 2013.
From a press release issued by the Presidency of El Salvador:
The Cabinet today approved the draft 2014 General Budget of the Nation in the amount of $4.679 billion during a meeting at the Presidential House headed by the President, Mauricio Funes.
El Salvador's public debt up to May 2013 totaled $13.429 billion, representing 53.8% of gross domestic product in the country.
Eleconomista.net reports that "As of May this year the public debt of El Salvador, as a proportion of gross domestic product (GDP) amounted to 53.8%, representing a total of $13.4294 billion. That means that for every dollar the Salvadoran economy produces, slightly more than half is debt. "
The third tax bill is now ready; it will tax bank transfers, luxury homes, as well as products used by printing companies.
The Ministry of Finance has not yet said when it will send the plan, which expects to increase revenuea by about $100 million, to the Legislature. According to the chief of Finance, Carlos Caceres, "we are working on the project which will, by 2020, return us to the same pre-crisis debt levels (before 2008).
The Ministry of Finance is reviewing eliminating life annuities, a benefit which affects about 130 thousand people, in place thanks to a decree by the government of Elias Saca.
Elsalvador.com reports that "According to a study on pensions which the Treasury, along with other institutions, is working on, decree number 100 has cost the Government $6 billion, an amount which must be financed by Salvadoran taxpayers."
Textile businessmen say the new free zones law has caught the interest of investors and will strengthen the productive chain.
Elsalvador.com reported that "despite a series of reforms promoted under the table by the Finance Minister Carlos Cáceres, which put companies operating under the Free Zone scheme on alert, the approval of the regulations as they had been agreed between the public and private sector a year ago, "is a tremendous tool (...), a tremendous engine which will make this sector take off," said the president of the Chamber of the Textile, Clothing Companies and Free Zones in El Salvador (Camtex), Jose Antonio Escobar ".
The Chamber of Textile, Clothing Companies and Free Zones states that if the new law on Free Zone included the tax, it would drive away millions of dollars in investments.
Elmundo.com.sv reports that "The Chamber of Textile, Clothing Companies and Free Zones of El Salvador (Camtex) on Wednesday opposed changes made by the Finance Minister Carlos Cáceres to the proposed amendments to the Law on Free Zones, agreed with the sector since October 2011."
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