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Viewing cable 06SANTIAGO2063, NEW GOC BUDGET ORIENTED TOWARDS SOCIAL SECTOR

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Reference ID Created Released Classification Origin
06SANTIAGO2063 2006-10-02 21:42 2011-08-25 00:00 UNCLASSIFIED Embassy Santiago
VZCZCXYZ0000
PP RUEHWEB

DE RUEHSG #2063 2752142
ZNR UUUUU ZZH
P 022142Z OCT 06
FM AMEMBASSY SANTIAGO
TO RUEHC/SECSTATE WASHDC PRIORITY 0085
INFO RUEHBO/AMEMBASSY BOGOTA PRIORITY 1543
RUEHBR/AMEMBASSY BRASILIA PRIORITY 3316
RUEHBU/AMEMBASSY BUENOS AIRES PRIORITY 3220
RUEHCV/AMEMBASSY CARACAS PRIORITY 1103
RUEHLP/AMEMBASSY LA PAZ OCT 4810
UNCLAS SANTIAGO 002063 
 
SIPDIS 
 
UNCLASSIFIED 
 
SIPDIS 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON PREL ELAB CI
SUBJECT: NEW GOC BUDGET ORIENTED TOWARDS SOCIAL SECTOR 
 
 
l. (U) Summary. The GOC budget, the first of President Bachelet's 
government, will be officially released October 3.  The GOC Budget 
Bill shows an 8.9 percent increase in public spending, the largest 
increase in 10 years. Almost 70 percent of the 2007 budget proposal 
goes to social spending.  Labor, education, health and housing are 
the priority sectors for Bachelet's administration, and they will 
receive more than half of the resources assigned for public 
spending.  End Summary. 
 
2. (U) Minister of Finance Andres Velasco sent the 2007 Budget Bill 
to Congress for its discussion and approval on September 30.  MOF 
Velasco will formally present the bill to the Finance Committee of 
the Chamber of Deputies on October 3.  Official announcement is 
expected to immediately follow his presentation.  Meanwhile, Deputy 
Lorenzini, Chairman of the Finance Committee, announced to the local 
press the main aspects of the 2007 Budget Bill. 
 
SIGNIFICANT BUDGET INCREASE 
--------------------------- 
 
3. (U) The political sector, including ruling coalition Concertacion 
members, and even some members of the opposition, had been pushing 
for a 10 percent increase in public spending because of the income 
generated by high copper prices.  While the 8.9 percent increase 
reflected in the 2007 budget is shy of that goal, it is the highest 
increase since 1996 when public spending grew 12.8 percent.  Public 
spending in the 2007 Budget Bill totals USD 34.9 billion.  Per 
capita spending for 2007 increased to a historical record totaling 
CH$783,882, about USD 1,500, a 3.67 percent increased over the 
previous budget. 
 
BENEFITS THE SOCIAL SECTOR 
-------------------------- 
 
4. (U) Headlines in Chile's three main papers observed that the new 
budget presented to Congress is dominated by social spending. 
Almost 68 percent of the 2007 budget goes to social public spending. 
 Labor, education, health and housing are the priority sectors for 
Bachelet's administration and they are receiving more than half of 
the resources assigned for public spending. 
 
5. (U) Labor, Education and Health are the leading sectors in the 
funding plans of the GOC's 2007 budget.  The funds assigned to these 
sectors focus on financing pension reform, improvement of the 
education system, and the 16 new medical pathologies to be included 
within the coverage offered by the public health care program 
(AUGE).  Labor represents 20 percent of the proposed 2007 budget, 
totaling USD 6.9 billions, an increased of 3.2 percent over the 
previous budget.  The education budget increased by 10.6 percent 
and, at USD 5.2 billion, constitutes 15 percent of public spending 
for 2007.  Total spending on health, about 6 percent of the budget, 
would increase 12.4 percent to $2.1 billion. 
 
OTHER SECTORS 
------------- 
 
6. (U) Public spending in defense for 2007 will total USD 1.9 
billion of the GOC budget, but this sector also receives an 
additional USD 833 million in funds from the Copper Reserved Law, 
which assigns 3 percent of copper profits to the armed forces.  The 
Ministry of Public Works will get a 17.1 percent funding increase, 
bringing its total to USD 1.7 billion, or 5 percent of public 
spending.  The Ministry of Housing and Urban Development increased 
its resources by 12.4 percent though its USD 1.1 billion budget only 
represents 3 percent of total appropriations.  About USD 139 million 
will be devoted to the construction of 135 new subsidized houses, an 
18.2 percent increase compared to 2006. 
 
7. (U) The 2007 Budget Bill is predicated on a 2007 GDP growth of 
5.7 percent, an international price of copper at USD 1.21 per pound 
(far below today's price of USD 3.44) and a fiscal surplus of 4.4 
percent of GDP. 
 
COMMENT 
------- 
 
8. (U) The increase in public spending remains lower than what was 
expected by most actors in the political sector.  Expectations 
notwithstanding, President Bachelet's 2007 Budget is the most 
expansive put together by any of the four Concertacion governments 
since 1990.  President Bachelet's budget for 2007 focuses on the 
four main pillars of her administration as stated during her 
campaign and her May 21 State of Union Speech: social protection, 
education, better housing programs, and innovation and 
competitiveness (through labor and public works). 
KELLY