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Cablegate: Calderon,S Budget Proposal Sparks Debate Over

VZCZCXRO5751
PP RUEHCD RUEHGD RUEHHO RUEHMC RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM
DE RUEHME #6934/01 3490045
ZNR UUUUU ZZH
P 150045Z DEC 06
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC PRIORITY 4590
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE
RHEHNSC/NSC WASHDC
RHMFIUU/CDR USSOUTHCOM MIAMI FL
RHMFIUU/CDR USNORTHCOM
RUEHC/DEPT OF LABOR WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 03 MEXICO 006934

SIPDIS

SENSITIVE
SIPDIS

STATE FOR A/S SHANNON
STATE FOR WHA/MEX, WHA/EPSC, EB/IFD/OMA
STATE FOR EB/ESC MCMANUS AND IZZO
USDOC FOR 4320/ITA/MAC/WH/ONAFTA/ARUDMAN
USDOC FOR ITS/TD/ENERGY DIVISION
TREASURY FOR IA (ALICE FAIBISHENKO)
DOE FOR INTERNATIONAL AFFAIRS KDEUTSCH AND SLADISLAW
STATE PASS TO USTR (EISSENSTAT/MELLE)
STATE PASS TO FEDERAL RESERVE (CARLOS ARTETA)
NSC FOR DAN FISK, CYNTHIA PENDLETON

E.O. 12958: N/A
TAGS: ECON ELAB EFIN PINR PGOV MX
SUBJECT: CALDERON,S BUDGET PROPOSAL SPARKS DEBATE OVER
SPENDING ON EDUCATION IN MEXICO

REF: A. MEXICO 5854
B. MEXICO 6157
C. MEXICO 6823

-------
Summary
-------

1. (SBU) The level of educational spending in Mexican
President Felipe Calderon,s 2007 budget proposal has set off
a firestorm of protest. While the budget proposal increases
real spending on education by 4.2% when compared to the
approved 2006 budget, it decreases real spending by 1.2% when
compared to an estimate of what was actually spent on
education in 2006. The government,s decision to cut real
spending on higher education has been particularly
controversial. Lawmakers from across the political spectrum
have publicly pledged to push for more resources for
education. Not all Mexico experts believe that increasing
funding for education is in the country,s best interest,
arguing that other areas have a greater need for resources
and that Mexico already spends a relatively large percentage
of GDP on education. Some say that funds should be
redirected from universities to lower levels since most of
Mexico,s poor do not attend college. Many commentators have
argued that increasing the educational budget will not
improve the quality of education in Mexico, as the poor
performance of the educational system stems from a lack of
needed reforms. In what some characterize as backtracking,
President Calderon on December 12 told Finance Secretary
Agustin Carstens to work with Congress to find ways to boost
educational spending in 2007. End Summary.

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Educational Budget Spurs Criticism
------------------------------------

2. (SBU) The level of educational spending in the Calderon
administration,s 2007 budget proposal has set off a
firestorm of protest (Ref C). The budget proposal increases
spending on education by 4.2% in real terms when compared to
the approved 2006 budget, but it decreases spending by 1.2%
in real terms when compared to an estimate of what was
actually spent on education in 2006. Criticism against the
government's decision to cut real spending on higher
education by 2.1% (compared to the approved 2006 budget) has
been particularly vocal, as universities in Mexico wield
significant political influence. Under Secretary of
Expenditures Ernesto Cordero this week said publicly that
universities were less in need of funding than junior high
and high schools.

3. (U) Lawmakers from across the political spectrum,
including some from Calderon's National Action Party (PAN),
publicly rejected the 1.2% budget cut and pledged to amend
the preliminary spending plan accordingly. Legislators from
the two major opposition parties, the Democratic
Revolutionary Party (PRD) and the Institutional Revolutionary
Party (PRI), formed a working group to restore the slashed
funds before the Chamber of Deputies approves a final budget
later this month. The Chamber's Policy Coordination Board,
controlled by the PRI, said it would present a resolution
calling for the protection of the universities from any
budget cuts. Even Education Secretary Josefina Vazquez Mota
promised to urge the Finance Secretariat to reconsider the
level of educational funding.

--------------------------------------------- --
Not All Agree That Spending Should Be Increased
--------------------------------------------- --

4. (SBU) A number of Mexico followers and experts on

MEXICO 00006934 002 OF 003


education have responded to calls for increased spending on
education with criticism of their own. These commentators
argue that dedicating more resources to education --
particularly to higher education -- is not the best use of
Mexico's limited public funds. Indeed, many experts have
criticized the government for diverting funding to the
universities at the expense of Mexico's poor, most of who
never attend college or even get a decent education, because
of the lack of educational reform and funding for primary and
secondary education (see Ref A). Many commentators have
argued that increasing the educational budget will not
improve the quality of education in Mexico, as the poor
performance of the educational system does not stem from a
lack of resources, but rather from a lack of needed reforms
(e.g. modifying the way teachers are hired and the way they
are evaluated, making spending more efficient, and making the
teachers' union more democratic).

5. (SBU) Econoff on December 12 asked Dr. Carlos Munoz
Izquierdo (strictly protect), the Director of the Institute
of Research for Educational Development at Universidad
Iberoamericana, what he thought about the proposed spending
on education. Dr. Munoz began his response by noting that
educational spending as a percentage of GDP in Mexico --
which the government estimates will amount to 7.1% this year
if you include private spending -- is actually higher than in
any other OECD country. Dr. Munoz said that this difference
highlights the need to increase tax collection in Mexico.

6. (SBU) Although he did not explicitly say that he favored
redirecting resources from universities to junior high and
high schools, Dr. Munoz highlighted how enrollment at these
levels was growing rapidly and how they face the largest
coverage deficit. He added that there are many ways for
universities to cut costs and improve the efficiency with
which resources are spent, but he lamented that these
institutions do not appear predisposed "to take this path."

7. (SBU) Dr. Munoz told Econoff that universities in Mexico
have become more "democratic" over time but that they
continue to favor more well-to-do students. He said that
many university students can in fact afford to pay some
tuition. To illustrate his point, he noted that students at
some Mexican universities pay around 25% of their tuition,
but that the National Autonomous University of Mexico (UNAM)
in Mexico City has been unable to implement such a policy
because deans who have tried, have been forced by students to
resign.

8. (SBU) Comment: While perhaps more a sign of the
compromises Calderon had to make to win the election than an
indication of prospects for educational reform, it is worth
noting that the son-in-law of national teachers' mega-union
leader Elba Esther Gordillo, Fernando Gonzalez Sanchez, was
appointed Under Secretary of Basic Education. Gonzalez'
appointment has generated considerable criticism in the
press. It remains to be seen whether his appointment will
represent an obstacle to achieving much-needed change in
Mexico's educational system. Post's initial thoughts are
that he will not dampen prospects for reform because such
prospects are already relatively dim. End Comment.

-------------------------
The Government's Response
-------------------------

9. (SBU) In what some characterize as backtracking, President
Felipe Calderon on December 12 told Finance Secretary Agustin
Carstens to work with Congress to find ways to boost
educational spending in 2007, according to local press
reports. Other senior administration officials have said
that they are willing to discuss budget proposals with

MEXICO 00006934 003 OF 003


interested members of Congress, and make moderate changes as
appropriate. (Note: The fiscal responsibility law approved
earlier this year says that if Congress approves more
expenditures than are in the President's budget proposal, it
has to identify a revenue source to offset the extra
spending. End Note.) The Chairman of the Senate Finance
Committee, Gustavo Madero (PAN), said publicly that he is
confident that agreements will be reached and that the 2007
budget will be approved by all political parties. Carstens
(strictly protect) told Econoff this week that these debates
and protests over the budget are "a part of the game" to get
more resources. He said it was possible that Congress would
approve the budget by mid-December, but also possible that
legislators would go home for the Christmas holiday and then
look at the budget again at the end of the month.

-------
Comment
-------

10. (SBU) A political analyst from a leading Mexican think
tank told Poloff this week that it is possible the government
is using the educational budget as a negotiating strategy to
get the PRD to sit down at the negotiation table.
Universities are generally PRD strongholds, and PRD officials
so far have been reluctant to negotiate on many issues.

11. (SBU) This debate highlights the need not only for
educational reform, but also for fiscal and energy reform to
generate more resources for education and social development.
Senior Finance Secretariat officials have frequently
reminded university deans and lawmakers that the 2007 budget
has to be austere due to public pension liabilities, which
each year consume a larger portion of the budget, and
Pidiregas obligations (Note: Pidiregas are long-term
productive infrastructure projects that are supposed to be
ultimately paid for with the revenues generated by the
projects themselves. End Note.)


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BASSETT

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