The
economic diagnosis of the country as a weapon to keep the status quo
The first quarterly report of the
Salvadoran Foundation for the Economic and the Social Development (FUSADES,
in Spanish) reflects a stagnated state of the economy, something understood
as “a period during which the growth of the economic activities is always
smaller than its tendency in the long term”. In other words, the Salvadoran
economy is at the previous stage of an “economic coma”, where all of the
economic sectors of the country could go into a period of recession with an
increasing level of both unemployment and poverty.
There are a couple of questions that emerge when the present state of the
economy is analyzed through the 2004 quarterly report prepared by FUSADES:
are they telling the whole truth about the situation? Who is getting the
benefits of the present economic moment? In the diplomatic language of the
report, the word “recession” has not been pronounced yet; however, it has
been mentioned that “the economy is at the low level of the economic cycle”.
A new number of doubts emerge in this case: who has the responsibility to
protect the interests of the Salvadoran population in case of the menace of
an economic depression? The businessmen? The analysis made by FUSADES gives
the reader no reason to celebrate about the state of the economy. The report
avoids to present an integral vision of the economy, not only from the
perspective of the businessmen, but from the perspective of those less
fortunate. The presentation of the report does not mention the lack of
purchasing power of the population or the unemployment level, while the
people, now more than ever, suffer the consequences of the Neoliberal
economic model.
The growth dynamics and the economic conjunction
FUSADES sums up the economic situation of the country in just one phrase: in
the last 50 years, the historic growth rate has been at an annual level of
3.3%, while the productivity rate has been equivalent to 0.0%.
The GNP of El Salvador, which is the total market value of all the goods and
services produced in the end by the production factors located inside the
country’s borders, is inexorably falling since 1996; however, the vicious
circle of the deficient growth level has not been broken in almost 50 years.
FUSADES measured the potential rate of the country’s productivity level, and
it turned out that, excluding the factors that go beyond the economy, such
as the armed conflict of the eighties, the country’s potential growth rate
was 4.5%, and the productivity rate was 0.8%. This means that if we were to
use the productive factors at its mot dynamic level, it would be more
realistic to aspire to reach a growth rate and a productivity level of that
magnitude.
It is no consolation prize to know that according to the report, the economy
keeps a gap under the level of potential growth between 1.3% and 2.5%. How
can we grow more? What are the factors that the country can rely on to grow
more?
As for the external factors, the report explains that the economic activity
of most of the economic regions at a global scale will considerably increase,
according to the information provided by The International Monetary Fund
(FMI, in Spanish) and the Economic Commission for Latin America (CEPAL)
until April of 2004. In this context, an improvement is expected in the
United States (from 2.2% in 2002 to 4.6% in 2004), in China (from 8.0% to
8.5% in the same period), and in general inside the global market the Euro
is the less dynamic area (although it maintains a positive level of growth).
In other words, the expectations connected with the variations in the
percentages of the global economic activity are positive and show a “good
health”. In fact, the production and the world’s commerce have gone from a
growth of 3% (2002) to a perspective of 5.7% for 2004.
When focused on the region, the dynamism projected by the aforementioned
organisms is at a lower level, compared with the emerging economies of China
and the United States. However, there is a positive tendency: the
possibilities indicate that Costa Rica might go from a rate of 2.9% (2002)
to 4.3% by 2004; for the same period, Guatemala would go from 2.2% to 2.6%;
Honduras, from 2.7% to 3.5%, while El Salvador is the only country that,
according to the predictions of the CEPAL, will be stagnated between a rate
of 2.1% and 2.2%.
This information means that, in short, despite the fact that since 2002 both
the global and the regional economies have grown, and therefore, they have
manage to keep the dynamic level of its productive activities, El Salvador
seems to be at a completely opposite direction, that is, El Salvador is not
following the global course. During the last couple of years, the country
has been kept under the plane of the Central American level and under the
world’s level, and even in the positive projections made by the FMI, the
country can only aspire to reach a growth level of 3% for 2004, that is, the
country will remain in the same situation that has been for already 50 years,
and under the level of potential growth that the economy has.
When the structure of the GNP is analyzed, the situation becomes clearer in
order to discuss the present state of the economy. The evolution of the
growth of the GNP by sectors is clear: the agricultural and the cattle-raising
sectors keep creating a considerable percentage of the income of the economy,
since it represents 11.6% of the GNP; however, these are some of the sectors
that have kept a negative growth rate. The quarterly evolution of the
economic sectors, according to FUSADES, has kept its cycle of fragile growth
from a global perspective as well as from the perspective of the industry,
construction, services, and commerce. The curious aspect of all this is that
in spite of this objective climate of the economy, the subjective perception,
according to the last opinion poll conducted by FUSADES, is connected with a
considerable amount of optimism about the short and the medium term
performance of the economy.
The factor of the sudden general optimism of the businessmen about the
possibilities to have an improvement in the economy, according to the
aforementioned opinion poll, has taken a surprising turn from January to
April of 2004. We have gone from the electoral uncertainty, to the
certainties of a stable political climate. That is how 62% of those
interviewed foresees a formidable situation for the economy, according to
the expectations that they had on April, compared with a 24% that thought
the same thing on January. The people that supported the vision about an
economic recuperation for the country, based their opinions on the following
reasons: the result of the elections, 46%; political stability,18%; an
increase on the investments, 16%; commercial openness and the free trade
agreements, 14%; and the economic stability, 11%. Instead, for the
businessmen who do not think that the future economic context is favorable,
the reasons behind their pessimism are the following: the lack of support to
the business companies, 26%; the economic stagnation, 17%; the interest
rates, 12%; the delinquency levels, 11%; and the low purchasing power, 9%.
FUSADES: blame it on the remittances
According to FUSADES, the fragility of the GNP finds year after year its own
explanation on the consumption dynamics, the investment, and the country’s
exportations. For FUSADES, exportation is the key aspect that has an
influence on both investments and consumption, and therefore, on the growth
of the GNP. This means that if the growth of the exportation level were
positive, so would the economic growth. However, what has happened in the
country is a recession in the quarterly amount of exportations since the
last seven years. This forced landing on a ground of poor exportation levels
is connected with the quarterly systematic reduction of the maquila
exportations and not the traditional ones. If on the one hand, the reduction
of the exportation level continues to consolidate itself as a strong
tendency, on the other hand, with the importation level it is a completely
different story. The importation level has increased, and the automatic
result is that now the commercial deficit is even higher.
As the analysis gets more complex, the composition of the exportations
during the first quarter of 2003-2004 shows that the maquila industry is
still considered as one of the most important parts of the exportation
market. For instance, between January and March of 2004, according to the
Central Bank of Reserve (BCR, in Spanish), $442 million came in from the
production at the maquilas, that is, $51 million more than the total of all
of the traditional exportations combined ($60 million), coffee ($39 million),
and the non-traditional exportations ($292 million), which add up to $391
million. The same tendency repeats itself in the first quarter of 2003. An
analysis of the same period (from January through March between 2003-2004)
the importation level also increased. Most of it was destined to the
purchase of goods (it increased form $376 to $406 million) and to the
purchase of intermediate goods (it went from $472 to $492 million), and in a
smaller proportion, another part was destined to the capital and the
maquila.
In the same way, the amount of family remittances continued to grow between
January and March of 2004. The amount added up to $560 million, that is,
$94.8 million more than in the same period for 2003. It was, in addition, a
higher amount reached during the first trimester of each year beginning in
1996.
The answer of FUSADES about this economic behavior (which becomes evident
through the systematic reduction of the GNP, accompanied by the increase on
the importations, the reduction of the amount of exportations and the
increasing number of remittances) is simple. The pressure of the increasing
number of remittances in a small and an open economy such as the one that El
Salvador has, creates a flow of cash that immediately increases the
inflation level as well, and, therefore, currency tends to become and
“expensive” item. In a dollarized economy, all of this goes against the
exporters, since it takes away from them the necessary level of
competitiveness in terms of a higher level of prices when compared with the
situation of other countries and the sales of their products tends to
decrease. However, the automatic mechanism that the economy has in order not
to surrender to the pressure created by inflation, is the growth of the
deficit of the commercial balance. That is why FUSADES states that “the
growth of the commercial deficit can be substantially explained by the
remittances”.
What FUSADES does not explain is that there are many other factors, besides
the remittances, that actually create the problem. For FUSADES, the problem
is not located inside the economic model encouraged by the State. They think
that the trigger of this deplorable economic situation is located inside the
growing flow of remittances, that its economic effect is inside the
commercial balance, and that, therefore, the flaws are of an external nature.
This position is, in the present context, “politically acceptable” in order
not to criticize the State or the status quo of the hegemonic block of the
business companies.
What seems to be ironic about the case is that that, according to this logic,
“the lifesavers” of the economy (that is, the remittances) are also to
“blame” for the recession of the economy. The remittances are, therefore, a
knife that cuts both ways. However, what also seems to be interesting is
that they are used by the government as both an economic and a political
wildcard. After all, according to FUSADES, the State has nothing to do with
this growing flow of remittances, has it ?
The truth is that the little dynamic system of exportations does not only
have to do with the lack of competitiveness because of the prices or because
of the currency value. The government has a considerable share of
responsibility for the systematic abandonment of the productive sectors,
such as the cattle-raising, the agricultural, and the manufacturing sectors.
The same figures presented by FUSADES or the ones presented by the BCR show
this aspect of the problem. The levels of innovation and technology, and the
initiatives of the businessmen not only depend on them, but particularly on
the sectional policies that promote a productive conversion. It would be
enough to see the evolution of the Index of the Industrial Production Volume
(IVOPI, in Spanish) to see the precarious situation of the industry and the
Index of the Economic Activity Volume (IVAE, in Spanish) of the agricultural
and the cattle-raising sectors.
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