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Sidebar: Austerity hits Coahuila
2011-11-13
Posted by: badanov

For a map, click here. To read the latest full Rantburg report on the growing Moreria debt scandal, click here
As Ruben Moreira Valdes, brother of PRI leader Humberto Moreira, savored his victory as governor elect of Coahuila early in July, negotiations began in Coahuila's Chamber of Deputies to slash much of the state budget.

Much of the coming cuts will likely affect Moreria's income support programs. Those program were central to his drive to put himself forward as a populist.

Among those programs included an elderly meal subsidy program called Comedores de la Gente Mayo which provided meals to 1,500 elderly clients, Tarjeta del Hogar which provided an income supplement of up to MP $200 (USD $16.01) a month and Seguro Escolar which provided free health care to students and employees of Coahuila's educational system.

News of those cuts are rather old now, only three months after they were offered on the chopping block. So is the news that the 14 banks which held Coahuila's long term debt demanded as a condition for financing their bonds collateral in the form of 100 percent of the state's payroll tax revenues.

The agreement was reportedly hammered out towards the end of August. The deal was to have remedied the cut of Coahuila's bond quality which had plummeted five levels. The new deal was supposed to bring Coahuila's credit quality higher, and its interest rates lower.

Now, almost three months later Coahuila's debt load is expected to climb even farther from MP 34 billion (USD $250,394,020.00) to MP $37 billion (USD $272,487,610.00), which is an increase of about eight percent in one quarter, and an annualized rate of increase of close to 32 percent.

A report released by the Coahuila state treasurer's office said the debt increased because, apparently, agreements with three banks, Banobras, HSBC and Banco de Baijo, reportedly were not finalized to give Coahuila favorable terms.

The Coahuila state political class has reacted. A proposal was submitted in the Chamber of Deputies Tuesday which would triple the state's payroll deduction tax from one percent to three percent. The new proposal will likely be a job killer.

The complaint now is that Coahuila's debt load is now 260 percent of the revenue it currently gets.