The criteria for the health system’s reform

Tactic and strategy

The last events surrounding the strike and the protests that the medical union keeps against the privatization project of the Salvadoran Institute of the Social Security (ISSS, in Spanish) threaten to directly affect the national political life. That sudden “irruption” of the social issues inside the political activities –so far it seemed immune to it- force us to take a closer look at the behavior of the leading social and political actors. The understanding (already aborted) between Hector Silva, the FMLN’s mayor of San Salvador, and President Flores, for Silva to participate in the conflict’s solution, opens the gate for a series of rearrangements inside the leading political parties that will be competing during the next elections.

The FMLN
The left-wing party is, without a doubt, the most affected one by the recent events. Its leaders reacted angrily when they found out about the possible intervention of Hector Silva to mediate in the conflict of the ISSS. They publicly deprived their “star” mayor of his authority without any kind of concessions. Their opponents call them intransigent and stubborn, and the FMLN is responsible for that. Their adversaries also say that the FMLN is interested in keeping alive a medical strike that evidently affects the most vulnerable sectors of the population. The right-wing sectors took advantage of the FMLN’s mistake to intensify their attacks against the so called “orthodox wing”. Independently from the accuracy of such accusations, it is evident that there are many Salvadoran voters who believe in them, and who take the declarations of Schafik Handal and the other leaders in the same terms.

Far from the former considerations, it is interesting to observe the ostensible incapacity of the FMLN’s leaders to understand the most elemental aspects of a political dispute. The most advisable decision would have been to take advantage of the fact that Flores accepted the intervention of Silva. They could have given some credit to the merits of one of the members of their party. At the same time, it would have been convenient to demand some specific signals from the President about his good intentions to resolve the crisis of the health system. There is no doubt that many Salvadorans would have sympathized with this idea. Francisco Flores is well known for being a President who does not always act accordingly to his discourses. In the meantime, the FMLN could have taken a closer look at Silva’s “move”, and reveal his actual intentions in a dialogue with him.

However, the FMLN threw the table away with dinner served on it. Some of them said it was a betrayal, they failed to recognize Silva as their candidate for the San Salvador municipality, and they were about to throw him away from the party. However, now that they know about Silva’s resignation to direct the commission promoted by Flores, they are probably willing to eat the food they threw away before. In any case –if they decide to designate another candidate for the City Hall of San Salvador, or if Silva runs for mayor in the name of the other parties of the coalition, or even if he resigns and does not participate for a possible reelection-, the FMLN will be the most affected one. Its leaders will have to pay for their mistake and for their incapacity to “read” the political events. Before making any considerations about the reasons that might explain such behavior, “incompetence” and “ingenuity” will be the interpretations that will prevail.

ARENA and the other parties
The position of ARENA in this issue has been ambiguous. Surrounded by the strikes and the street protests, the official party has been able to remain calm. Before the possibility of Silva’s intervention, ARENA did know how to take advantage of the mistakes of its main opponent. It not only was about to assure, without any relevant inconveniences, the election of Evelyn Jacir as San Salvador’s new Mayoress, but it also found the time to insist on its opinion about the FMLN’s incapacity to have access to the most important functions of the state. This was a fallacious and an unfounded argument, as many other comments emanated by the right-wing parties, but it did have a considerable effect on the conscience of many Salvadorans. However, now that the door opened by Silva is closing, the members of ARENA have to show a considerable capacity to react. It is not very probable that the threats to repress the strikers (made by the director of the National Civilian Police) are enough to scare the leaders of the social movements against the privatization of the health system. If the ARENA leaders want to arrive to the elections with a certain dose of credibility, they will have to start making certain concessions.

On the other hand, it is not clear under what perspective the ARENA leaders were actually moving their pieces. Even if it is true that the fact of accepting the mediation of Hector Silva would have been an advantage in the short term, there is no doubt that they were contributing to increase the prestige of the city’s mayor. In the mid-term, it could have become a disadvantage for the presidential elections: A Hector Silva acknowledged by his capacity to hold a dialogue, and admired by having sacrificed his personal interests for the country. It would be very difficult to discredit this kind of opponent in the future.

Did ARENA count with the fact that the FMLN was not going to support Silva’s proposal? Was the decision of the President fundamentally aimed to wear down the image of the “conciliatory” mayor of San Salvador? Did ARENA really believed that the solution of the conflict would be reached through a dialogue? Why were they suddenly willing to have a dialogue with a person that a few days earlier they called “corrupt”? These are unanswered questions. In any case, there are plenty of things to clarify about what has been said and done.

The rest of the political parties from the opposition played a better role in this confusion. The Popular Action Party (AP, in Spanish), the Democratic United Center (CDU), and the Civilian Initiative Party (IC) played a key role by supporting Silva. Because of this support, Silva did not resign to his candidacy. These parties acted as a dam before the questionable position of the FMLN. The Mayor of San Salvador is in debt with them, and it would not be absurd to imagine that they will establish a closer relation in the near future –he could even become a member of any of those parties-.

Hector Silva
The present Mayor of San Salvador is, without a doubt, the one has received the benefits of the recent political events. A considerable part of the public opinion perceives him as a moderate man, willing to sacrifice his personal interests in order to reach a concerted approach between the sectors that are involved in the health system’s crisis. This is an advantage for a politician that evidently has great aspirations. It is hard to believe that Silva could have put at risk, unselfishly, his reelection. Why would he jump into a futureless voyage? What did he expect in return of his sacrifice?

In summary, the resignation of Silva to actively participate in the solution to the crisis –at least until the doctors and the government explicitly request his presence- does not clarify the situation. A parenthesis is closed before what looked like the beginning of the solution. Perhaps the curtain will be opened to reveal other surprising proposals and hopefully more solid suggestions. In any case, the social actors better start preparing their tactics and their strategies, because it seems that the conflict of the health system is going to last for a long time.

The limits of the economic policy

After a period of six years of a slow economic growth, accompanied by the usual unsteadiness of both the public finances and the balance of trade, it is important to wonder about the results and the pertinence of the economic policy, not only in regard to the one practiced by the present government, but also with respect to the policy of the two former ARENA administrations.

It is important to analyze these aspects because, despite the intense economic reforms –and despite the governmental propaganda-, the level of sustainable development that has been reached so far is a very small one. The low economic growth rates prevail, the privatization has generated a new process of economic concentration, and the destruction of both the natural resources and the environmental services has been intensified. In addition, the participation levels of most of the population are lower than ever –the conflict in the health system and the imposition of certain measures are an example of this situation-.

Even a superficial review of the reforms that were implemented along the nineties should include those that were connected with the privatization process, the opening of the markets, the fiscal reform, and most recently, the dollarization of the economy. To begin with this, it must be said that the privatization has been the most constant measure ever since ARENA took control of the government. This starts with the re-privatization of the banking system back in 1990; and it goes through the privatization of the pension scheme in 1998; the selling of the national telephone company, the thermal generators, and the electric energy distributors. The recent proposal to hand over to the private business companies the administration of the health services is just another step inside the privatizing chain that does not seem to end, not yet anyway.

The positive effects of the process are questionable, especially because the beneficiaries have been only a few businessmen who have diversified their fields of economic accumulation, and who have been able to concentrate higher amounts of capital. On the other hand, the counterpart is the increase in the costs of the basic services (the telephone and the electric energy, for example), and an increase on the amount of money that people have to pay as contributions for the preventive system. These increases logically affect most of the population.

On the other hand, ever since the early nineties, the first government of ARENA unleashed an unnecessary process to eliminate the tariffs, which has been the reason why many small national business companies stopped operating. The representatives of the business sector have referred to this subject in different occasions. Behind this initiative was an argument which specified that this measure would make the national market more competitive, that it would unleash a modernization process in the national business companies, and that it would support the initiatives that “promote the traditional exportations”. This was one of the objectives of the first ARENA administration. However, technically, it did not bring any important changes in the structure of the exportations, unless we considered that the exportations of the maquila (which do not fundamentally depend on the governmental policies) have been the product of a deliberated governmental policy.

The reform of the taxation structure has also been an important reform implemented during the nineties, and just like other policies, it has not had a positive impact in terms of a sustainable development, it has not even promoted a macroeconomic stability through the control of the fiscal deficit. The taxes were eliminated from the exportations and the patrimony, the tax seals were substituted by the Value Added Tax, the tax chart was reformed for the natural individuals, and the amount of taxes that the business companies usually paid was reduced by 50%. The fiscal deficit and the precariousness of the public finances have been a constant problem, and in the recent years it has taken a turn for the worse.

The situation is of such proportions, that the government insists on drastically reducing the public expense. This measure reduces the capacity of the state to support the process of the economic and the social development. In the mean time, the businessmen pay less taxes than they did during the early nineties, while the wage earning sectors keep paying more.

However, of all the measures that have been implemented, the one that really shows the boundaries of the government’s economic policy is the dollarization. This measure was presented as something that would promote the economic reactivation process through the reduction of the interest rates that it would bring along with it. The reduction of the interest rates did take place, but the investments and the production have not responded in a positive way. The low rates of the economic growth are the evidence. For 2001 the economic growth rate was 1.8%, and the recent reduction of the growth projections issued by the Central Reserve Bank are between 2% and 2.5%.

On the other hand, the dollarization process has left high costs behind, as far as the reduction of the Gross International Reserves (RIN, in Spanish) is concerned. To take the Colones out of circulation (presently, it is estimated that the dollar has already replaced approximately 90% of the cash flow) has its serious effects. The deposits of the RIN in the foreign banks received a smaller amount of interests, a virtual elimination of the monetary policy as the device that supports the economic development. The only effect that gives some sense to a measure of this kind is the elimination of the monetary exchange risk, a matter that benefits the government as well as the private banking system. They are the ones that usually have debts in dollars with foreign creditors, and they would have been in trouble before an eventual –alto improbable- devaluation of the Salvadoran Colón.

In summary, the economic reform process of ARENA has not unleashed an internal development process. The growth of the production is precarious, since the fundamental macroeconomic unsteadiness remains, and there are no important changes at sight in the way that the economic policies are handled.

The only two reasons that explain why there has not been a crisis of higher proportions are, on the one hand, the breath of fresh air that the family remittances bring; and, on the other hand, the employment generated by the maquila. The migration process has turned into an escape route to respond to the domestic economic crisis and into a macroeconomic adjustment mechanism to handle the policies. Under different circumstances, this would be unsustainable.

The false sensation of security and economic progress that the government projects are not enough to hide the fact that the economic reforms have not been effective. The privatization and the tax reform did not resolve the problem of the fiscal deficit, but they did place a heavier load over the wage earning sectors. The opening of the markets did not modernize the domestic productive apparatus, and the national production was displaced by imports. Finally, the dollarization did not increase the investment, although it has allowed the banking system to reduce its financial risks.

To pretend that a model based on unsuccessful reforms, which benefit –almost exclusively- a minority, is a viable procedure in the mid-term, and it will only lead the country to intensify this critical situation. The government is before the challenge to reorient the sense of the economic reform in order to search for a sustainable development, and not before the challenge of adopting questionable economic recipes, such as the privatization and the opening of the markets.