Corruption can be investigated

Privatization, is that the solution?

The Social Security is at the verge of a new labor crisis of considerable proportions. The governmental perspectives that favor the privatization process, the plans of the private business companies, the dismissal of eleven workers, and the threats of the institution's syndicate allow us to predict a new strike that will affect the already deficient service that the ISSS renders.

The national press has added itself (indirectly) to the confrontation, and it has not skimped on paper and ink to present the deplorable state of the institution, the inadequate administration of the resources in which the authorities could be involved because of the syndicate's pressures, and the urgent need to implement deep changes. However, the assertions of the press have taken the same direction that the Executive follows: the reform, a synonym of privatization. This is the magic word that keeps some people awake, and that sounds as an "opportunity" for others.

However, more than a simple labor issue -a situation that would reduce the problem to the relation between the employer and the workers-, the circumstances of the Social Security, given its importance, involve fundamental social implications. Evidently, the access to the health services for a considerable number of Salvadorans is at stake here. A diversity of interests revolves around this kind of benefit, the common and the irreconcilable.

On the one hand, the Flores administration has taken a new privatizing impulse, encouraged by the private business companies. With the third version of the ENADE (2002) -the reform of the ISSS was one of the proposals-, the voices in favor of the privatization have raised their tone in the social and the political Salvadoran horizon.

The businessmen have put in the hands of the Executive the privatization of the services rendered by the ISSS, adding themselves to a larger group that includes the privatization of the Acajutla Seaport. They want to turn it, according to the private business companies’ sector, into a highly competitive territory in the Central American region. The government has gladly accepted the proposals of the business sector and it has showed a clear interest: to open the forces of the market to the health service for the ISSS contributors and, by the way, "award" the faithfulness of the businessmen.

On the other hand, the syndicates of the institution -STISSS and SIMETRISS- demand the restitution of the fired workers and the end of the privatization project. In this case, the interest seems to be a collective one, since they would be demanding to stop a project that has not been able to demonstrate its benefits. On the contrary, the privatization in El Salvador has elevated the costs of the services and it has been profitable for only a few.

In the middle of the confrontation, the population demands the quality services that they do not receive, even if the discount of the Social Security arrives on time. In summary, the context around the ISSS problem has faithfully reproduced the power scheme practiced by the last ARENA governments: a perfect combination between the interests of the private business companies and the Executive, while the presence of the labor and the social organizations has been reduced to their minimum expression. In this perverse game, the citizenry has found just a few -or none- spaces to deal with its demands through the proper channels.

The state of the Social Security
There is almost no information available at all to explain the present situation of the ISSS. However, according to the figures of 1999, the total coverage of the ISSS was 917, 517 people, out of which 602,539 were contributors (536,710 active ones and 65,829 pensioners) and 314,978 were beneficiaries. Until that year, the national net of the Social Security counted with 1,818 doctors (1,101 in the metropolitan area), 698 nurses, 1,498 hospital beds, and 544 clinics. Despite the former amounts, those insured have to overcome the same obstacles to receive an specialized attention. This can be added to the sad chapters of the negligence and the medical incapacity that have demonized the work of the doctors.

The national system of the public health is not away from that reality: it characterizes itself for the little number of doctors available and the lack of hospitals in the rural areas, and their excessive concentration in the urban area, specially in the metropolitan area of San Salvador. The sector begins to recuperate itself from last year's earthquakes. Everything shows alarming signs for the health sector in El Salvador. In this context, the intents to reform it increase -born during the Calderon Sol Administration-, a tendency that has been understood by the following ARENA governments as an access to the privatization process.

What the national press has denounced during the last few months is no secret: things are not going well inside the administration, and how operative the Social Security actually is. Anyone who is a beneficiary of the service is also a witness of the deficient services, the endless obstacles that somebody has to overcome in order to have an average treatment; the surprising, the permanent, and the suspicious lack of medicines, and the never ending circle of bureaucratic procedures. The generalized distrust of the population before the ISSS is the most logical consequence of this vicious circle of social (in) security.

Since March 2000, when an extended strike in the whole national net of the ISSS took place, the relations between the authorities and the syndicates have been calmed but tense, although this situation did not become worse until the former decided to go ahead with the agenda, in order to grant the “private hands” with an authorization to provide the services.

The social impact of the crisis
In economic terms, according to the information of La Prensa Grafica, “only 18 syndicates of the institution would have assaulted the ISSS when they charged from January to June of the present year $92,000 (...) for being away from their jobs to dedicate themselves to the syndicate’s matters". The same article mentions the reluctance of the institution's staff -among which "several high-rank doctors” can be found- to submit themselves to an assistance control. The paper does not mention the authorities' administrative irregularities. Consequentially, the contributors suffer the consequences, because their money is not used to pay their contributions.

El Diario de Hoy adds that, after the crisis of 1999, about 18,000 appointments were lost on a daily basis in the national territory; 48,000 prescriptions were not delivered; and 16,000 laboratory tests were not performed. Who was to blame for this?: the intransigence of the syndicate’s members and the authorities of the institution. Therefore, the social costs could not be hidden. Being an essentially public service and a vital one, the citizenry was exposed to a difficult situation. To this day, no one has taken the responsibility for it.

This situation allows us to conclude -as the private business companies have- that we need radical changes in that institution. The problem is the formula that might be used for the change. What seems interesting to some extent is that the Flores administration is taking too long to respond to this issue, when the tragedy that the earthquakes brought along showed most of the country's institutions were not able to respond -an they have not responded- to the national needs.

The interference of the private business sector
Without a doubt, those who have been able to take advantage of the present situation are the members of the business syndicate who are gathered inside the ANEP. The businessmen’s meeting is a precedent (ENADE 2001) and its agenda took the Executive by surprise and increased the conceit of the national businessmen. Now -as always- they are authorized to define the destiny of the nation. President Flores has been able to do his job: to listen, to study, and to implement the initiatives of the private business companies in El Salvador, a tradition that the ARENA governments have defended.

Therefore, more than an interference, we could be speaking about a real political and economic power that the businessmen have in this country. The businessmen have played their game with no limits, stepping over anybody else's criteria. The syndicates are those who have more to lose in this scenery, that might be why they are now paralyzed, which probably is their only choice to expect some results. However, the critical social consequences are always at sight.




Privatization, is that the solution?
The privatization of the public services has been one of the favorite recipes for the different ARENA governments to take the country out of its structural crisis. Since the early nineties they started with the re-privatization of the banking system, the privatization of the electricity supply, the telecommunications, and the sale of the sugar refineries and the state's assets. A juridical institutional procedure was created to protect the measures they adopted.

The governments assured at the time that the development process would inexorably come attached to this and other measures. However, after more than a decade, the tendency of the events has been very different. Even if the coverage range of certain services has grown, they have also become more expensive (unmentionably expensive), and the companies have been beneficiated with all kinds of incentives to invest. Just like a juridical apparatus was created to protect the privatization process, the Executive "forgot" to support the legal instruments that could stop the enrichment of the large business companies at the expense of the excessive charge for their services.

With this situation, experience indicates that privatization leaves a lot to be desired. And it is almost a fact that the Salvadorans will have a reduced access to the health services if these are privatized. However, no alternative proposals have been articulated yet. There is nothing that can guarantee that the people will have the best possible access to this public right.

The transformation of the social security in El Salvador

Ever since the social security was implemented in El Salvador, this kind of service has played a humanizing role in the relations established between employer and worker, and it has brought along a relative harmony among both groups since it involves a fusion of contributions to finance the social benefits for those who need them more: the workers. Recently, and especially since the mid nineties, the social security issue has generated certain conflicts, this is mostly because of the institutional reform process that has been traditionally implemented. First, we have the privatization of the system of pensions since 1998. And in the second place, the planned concession of activities that are not directly related with the health services.

During the second week of August of this year, a new labor conflict begins to emerge at the Salvadoran Institute of Social Security (ISSS, in Spanish), which was motivated by different reasons, such as the new administrative dispositions, and the progressive concessions of some services inside the Institute. The union of workers of the ISSS has challenged these measures. The directors of the ISSS have accused the union of being involved in corruption cases. However, beyond the important labor activities and the social implications, the social security issue deserves to be examined from a wider perspective.

Actually, the institutional and the juridical reforms go beyond the concessions or the privatization of the health sector. And they are related with the pension's system (that now belongs to private hands), which has a questionable performance. Moreover, this phenomenon is inside a wider process: a misunderstood reform of the state, which indistinctly applies the same recipe to all of the institutions: dismantle them first, to either grant them in a concession later or privatize them.

Considerations about the social security in El Salvador
In El Salvador, the social security system emerges during the fifties, promoted in part by the industrialization process, but also because of the multiplication of the state's functions, as far as the social and the economic fields are concerned. During this period, the people witnessed the birth of the Regulatory Institute of Basic Supplies (IRA, in Spanish) and the Urban Housing Institute (IVU), conceived as the mechanisms to achieve an improved and an equitable distribution of the growing benefits.

In 1954, the coverage of the social security included only a 3.4% of the Economically Active Population (PEA, in Spanish). That percentage eventually grew until it reached a 15.4% in 1979 -25 years after the social security system was created-. One of the characteristics of the system was its exclusive coverage of the urban sectors and, specially, the workers of the formally established business companies. The coverage of the rural population has been, and still is, one of the highest deficits of the social security in El Salvador and Latin America.

Ever since its creation, the administrative problems appear as a constant inside the performance of the ISSS, as in most of the institutions of the state. It is necessary to remember that, during the last 30 years, the social security system has faced different problems that have been practically ignored: bureaucratization, inefficiency, a weak administration of the collected funds, and an administrative disorganization.

During an early stage, the social security expenses were actually modest, compared with the ones recently imposed in the pension's system. During the first two decades, the contribution was a 10% of the salary, which was distributed in the following way: a 5% provided by the employer; another 2.5% as the worker's contribution, and another 2.5% covered by the state. The proportions changed later to 6.25%, 2.5%, and 1.25%, respectively. Before the reform of the pension's system, the contributions of the state had been eliminated, and the employer had to cover a 7%, while the worker covered a 4% (1% was destined to cover cases such as disablement, old age, and death, and the rest was destined to health expenses).

At the beginning of the nineties, and in the context of the initiatives to reform the state, the debate about the social security problem is revived, although it had a clear tendency to believe that the ISSS was irrecoverable, and that the most reasonable thing to do was to reform the social security system, starting with the pensions. With that, the defenders of the reform -who essentially belonged to the government and the business company groups- argued that it was possible to enlarge the coverage of the system, reduce the administrative and the social expenses, as well as to guarantee an improved and a better equity level in the coverage range in order to increase the profitability.

The governmental sources, among others, have recently emphasized on what they consider the deficiencies of the health system -which is still in the hands of the ISSS-. They consider that the public has not received an adequate attention, and that there are not enough medicines available, in addition to the inefficiency and the corruption problems at the syndicates. In fact, some approaches have been made in reference to the concession of the basic services, such as the security and the hygiene at the ISSS facilities. Something similar is expected to accomplish with the nutrition services.

The results of the reform of the pensions' system
Four years after the reform of the pensions' system, there are two aspects that allow us to speak about the first visible results of it:
- An increase on the contribution rates related to disablement, old age, and death (IVM, in Spanish), which are paid by the workers.
- The high (fiscal) cost for the state.

During the first year, the AFP were allowed to charge up to a 3.5% as a commission (obtained from the salary of the workers) for administrating the contributions and for paying the insurances. Most of this fee was used for the administration tasks, but what seemed odd is that the amount was used to administrate a monthly savings account equivalent to a modest 1% over the workers' salary, to which another 5% was added, as a contribution made by the employer. Both amounts added up to a total of 6% of the worker's salary.

The perspectives were to reduce the commissions and increase the contribution rate through the same law that originated the system. That is why the highest amount for both the commission and the insurance services was 3%; the contribution of the worker, 3.25%, and the employer's 6.75%. However, it seems clear that the workers now pay more for the right to their pension, not only because they are charged 2.7% to their salary to administrate a 10% of it (that is, 27% of the administrative expenses), but also because the workers only paid 1% of their salary before to cover the IVM. Now, instead, the workers pay an amount equivalent to a 6.25% between commissions, insurances, and contributions; this means that the monthly contributions increased in a 525%, with the aggravation that a considerable percentage of that amount is the patrimony of the Administrators of the Pensions' Funds (AFP, in Spanish), and their partners (the insurance companies).

About the fiscal cost, it is necessary to remember that the reform proposed a schedule of amortizations that the state was supposed to transfer to the AFP in order to return the funds that the workers had contributed with, and who were (by then) affiliated to the new system. This involves an annual expense, and it is estimated that it could reach 2.2% of the GNP for 2004; the government should be concerned about this aspect, considering that this year the fiscal deficit might reach a 3.6% of the GNP. In other words, the amortizations for the private system of pensions alone could be representing close to 60% of the total fiscal deficit.

The ideologue and the use of the state's reform
Ever since the first ARENA administration, and accordingly to the world's tendencies, the successive governments have considered that the reform of the state must go through the privatization and the liquidation of the institutions that are considered anachronistic. With these perspective, they closed the IRA, the IVU, the National Institute of Coffee, and any institution of the state that was considered unnecessary. In addition, they started a profitable privatization business with the state's companies, beginning with the financial system. The telephone company was next, along with the electric energy distributors, without forgetting the privatization of the pensions' system. The most recent movements include the drastic reduction in the personnel of the Public Works Ministry, and the Agriculture and Cattle-raising Ministry.

During the privatization process, the winners are the private business companies, which now participate in many fields formerly reserved for the state's action: the banking system, the infrastructure work, the system of pensions, the telephone services, and the distribution of electricity. The workers, instead, have to confront higher prices for the basic utilities, higher contribution rates for their pensions, and even higher commissions charged by the banks. Therefore, what was the actual purpose of the privatization process?

There is no doubt that the privatization and the policies to make the concessions have opened different opportunities for the private business companies, and that is not a questionable issue; what is disputable is that they overlook the negative effects of privatization. For example, very few people question if the privatization of the banking system was worthy of note, considering the deficient role that it played promoting the growth of the productive sectors, or the high rates of the financial intermediation; or if the commissions paid to the AFP are not excessive and unnecessarily drain the income of the workers; or even if the health system should be reformed to increase its efficiency and its coverage, instead of thinking about easy and convenient solutions for the private business companies, such as the concessions and the sale of the assets that the state has.

The policies to reform the state seem to be deeply influenced by the visions and the needs of the private business companies. For them, it is more convenient to open the most profitable fields; even if that means to compromise the basic social benefits such as the social security. In fact, one of the most recent proposals of the National Encounter of the Private Business Companies (ENADE-2002) that was presented to the government is the concession of the activities traditionally performed by the ISSS, and even the sale of its assets.

However, apart from the convenience of the private business companies, the implications of the changes in the system of pensions show that the privatization is not a modality that should be applied in the same way to all of the state's institutions, specially when it comes to those that provide the vital services to the workers. In the present moment, the discussion about the reform of the health system should begin to consider that the objective is not to simply improve the benefits and the coverage, even if that represents a higher level of expenses for the state and the private business companies.