States drowning in debt for 19S reconstruction loans

The State of Mexico, Morelos, and Oaxaca , three of the 8 states affected by the September 19 earthquakes last year contracted debts for reconstruction with the National Bank for Public Works and Services (BANOBRAS) , which will have to be paid during the next 20 years . Loans for all three entities mounted up to 3,575.5 million pesos , leaving federal participations received by the entities as collateral.

According to a request for transparency sent to BANOBRAS, the State of Mexico became indebted with over 1,300 million pesos ; the state of Oaxaca, with 1,200 million , and the state of Morelos with 75.5 million .

These credits, which will have to be paid off by 2038 , were delivered through the Reconstruction Fund (FONREC) , a trust that was created by the end of 2010 , offering loan schemes for entities affected by natural disasters.

The Chamber of Deputies has approved a 2,500 million pesos budget enlargement for FONREC, to which another 279.3 million were ceded by Mexico’s Institutional Revolutionary Party (PRI), the Green Ecologist Party (PVEM) and Social Encounter (PES) .

One of the so-called benefits of FONREC credits is that the states are only obliged to pay interests while the capital is taken from the fund, which is why said scheme should not compromise a given state’s finances. However, this is often left unfulfilled.

In their yearly report, the Mexican Transparency and FUNDAR organizations warned that the states often ended up paying nearly twice as much in interests for their original loans.

The study shows that the debt of all three states has generated 68.1 million pesos worth of interest and the financial scheme offered by the Reconstruction Fund has been met with widespread condemnation by the National Governors Commission (CONAGO) and the Federal Superior Auditors (ASF) .

In 2011 , shortly after the creation of FONREC, CONAGO stressed that the institution “did not solve needs derived from the urgency of reconstructions following natural disasters in the short and middle term, and it even compromises the states’ future credit capacity.”

The campaign funds donated to the earthquake victims

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