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Cablegate: Mexico City's Response to Inquiry On Fiscal

VZCZCXRO6792
PP RUEHCD RUEHGD RUEHHO RUEHMC RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM
DE RUEHME #0543/01 0562149
ZNR UUUUU ZZH
P 252149Z FEB 08
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC PRIORITY 0659
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE

UNCLAS SECTION 01 OF 02 MEXICO 000543

SIPDIS

SENSITIVE
SIPDIS

STATE FOR WHA/MEX LIZ WOLFSON
STATE FOR EEB/IFD/OMA ANDREW SNOW AND RICHARD FIGUEROA
STATE FOR PETER MAIER, WHA/EPSC

E.O. 12958: N/A
TAGS: EFIN PGOV MX
SUBJECT: MEXICO CITY'S RESPONSE TO INQUIRY ON FISCAL
TRANSPARENCY

REF: SECSTATE 16737

1. (U) This cable is Mexico City's response to reftel
regarding fiscal tranparency in countries receiving USG
assistance monies.

2. (SBU) Mexico has made strides in improving the
transparency of its federal budget in recent years, but
significant shortcomings remain. Mexico publishes its
federal budget on the internet. The information is useful
and appears to be accurate, but the public would benefit if
it were easier to navigate online and if some sections of the
budget were further disaggregated. Moreover, some items are
excluded from the budget entirely. Off-budget items include
several government-run stabilization funds, public trust
funds, Bank Savings Protection Institute transfers, some
liabilities associated with road concessions, and
infrastructure investment in the petroleum and electricity
sectors (Pidregas). Information on off-budget operations is
reported quarterly and is included in the government,s
macroeconomic framework through the Public Sector Borrowing
Requirements and the Historical Balance of the Public Sector
Borrowing Requirements indicators.

3. (U) The IMF completed a Report on the Observance of
Standards and Codes (ROSC) on fiscal transparency in August
2002. The report can be found on the IMF,s webpage:
http://www.imf.org/external/np/rosc/rosc.asp.

4. (U) The Latin American Budget Transparency Index, 2007,
gave budget transparency in Mexico a 50 -- where 0 is "not
transparent" and 100 is "completely transparent" -- down from
54 in 2005. Mexico fell in 11 of the 14 variables analyzed.
It was dinged for the following reasons: a lack of citizen
participation in the budget process; Congress's inability to
act as a counterweight to the Executive; and the Secretariat
of Public Administration's (SFP) inability to properly
oversee the effective and transparent spending of public
resources and to sanction corrupt government officials. On
the positive side, the evaluation applauded the role of the
National Superior Auditor Office (ASF), how the Federal
Budget and Fiscal Responsibility Law (2006) increased the
legislature's participation in the budget process, and the
Secretariat of Finance and Public Credit's (SHCP) information

SIPDIS
on macroeconomic criteria. In order to improve transparency
and accountability in the budget process, the research center
in charge of the index (Fundar) recommended giving more teeth
and resources to the ASF and the SFP, as well as providing
clear and transparent information on how surplus revenues are
distributed. It also recommended that the government
disclose line-item information so the public can follow every
stage of the budget process.

5. (U) Relevant laws on budget disclosure are as follows:
parts of the constitution, the Federal Budget Income Law
(LIF), the Federal Budget Spending Law (PEF), the Federal Law
for Transparency and Access to Information (LFTAIPG), the
Federal Budget and Fiscal Responsibility Law (LFPRH), and the
National Superior Auditing Law.

6. (U) The Government of Mexico makes every effort to inform
international investors and the general public about its
financial activities. Monthly and quarterly reports are
released in a timely fashion on the SHCP's website, often
accompanied by internal analysis and comments. Whenever
there is a significant fiscal policy shift, fiscal
authorities make themselves available to investors for
questions, usually in the form of a conference call. In
addition, analysts working in the Mexican Government are well
informed and able to clearly explain available data and
provide more detailed data when necessary to meet the
consumer's needs. The U.S. Embassy in Mexico has productive
contact with analysts in the SHCP, Secretariat of the
Economy, Institute of Geography and Statistics (INEGI), and
Bank of Mexico (central bank).

7. (U) Internal comptrollers in federal departments and
agencies have taken on consulting roles, in addition to
auditing, investigating and imposing sanctions. The Mexican
Chamber of Deputies (lower house) selects a professionally
qualified and non-political Auditor General to serve for a
period of eight years.

8. (SBU) USAID does not have any programs to strengthen
Mexico's capacity to develop sound fiscal policies at the
national level. USAID's capital markets development program
targets sub-national entities and promotes sound financial

MEXICO 00000543 002 OF 002


management practices, multi-year debt planning, and ongoing
reporting for transparency in order to improve credit
quality. USAID's governance project works with the national
network of state and municipal information technology and
public administration officials (CIAPEM). This project also
supports inclusive and transparent policy-making at the
federal and state levels, targeting areas that will improve
Mexico's competitiveness. USAID does not have any activities
in Fiscal Year 2008 to promote accurate disclosure of
revenues and expenditures in the national budget of Mexico.

9. (SBU) The Narcotics Affairs Section (NAS) in the U.S.
Embassy provides a wide variety of anti-corruption training
(addressing topics such as ethics, leadership, and
management), as well as limited equipment purchases for
Mexican officials affiliated with the Attorney General's
office (PGR), the SFP, and the Federal Police. NAS also
supports a Culture of Lawfulness program, designed to instill
adherence to public transparency and rule of law, for police
academies in a number of states, and at the federal level.


Visit Mexico City's Classified Web Site at
http://www.state.sgov.gov/p/wha/mexicocity and the North American
Partnership Blog at http://www.intelink.gov/communities/state/nap /
GARZA

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