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Proceso 1138
March 16, 2005
ISSN 0259-9864
Editorial: Corruption has a fixed fee
Politics: The new reforms in the statutes of the FMLN
Economy: The economy in the beginning of 2005
Corruption has a fixed fee
In El Salvador, the level of corruption is higher than both
the Saca administration and the business elite would like to publicly admit.
This issue was recently studies by the Institute of Public Opinion (IUDOP) of
the Central American University, and they focused on the private sector. This
sectors explains that when it renders its services to the government, it does
get involved in a series of activities that go against both the free competition
and the law. However, all of those involved in it, public officials and
businessmen consider that their actions are part of their regular business
agenda and that they do not find anything odd in this illegal actions anymore.
That is not all. Most of the businessmen interviewed indicated that the ARENA
administration finds itself “kidnapped” by a small number of the members of the
business elite, and that somehow this party administrates the country almost
exclusively for them, something that goes against the beliefs of the free market
and free competition. In a few words, the Saca administration, just like the
three former ones, tolerates corruption, and the discourse of both ARENA and the
private sector about the economic freedoms is false.
Only in several occasions the businessmen know how to use the rules to bid on
projects, to register their products in the sanitation records, or how to obtain
an environmental license, something that leaves an ample margin of discretion
for the public official and creates a feeling of uncertainty. In spite of the
existing legislation, this happens. Generally, the reasons why a certain
proposal is chosen are not revealed for those who participate in it. The
businessmen assure that the public officials modify the technical and the
juridical terms of the bids, as well as the contracts that follow in order to
favor the activities of a certain business company. Once the project is granted
to the bidders, it is almost never possible to verify if the contract has been
strictly followed. Generally, the businessmen interested to provide goods or
services to the government, to obtain a license, or to perform different kinds
of procedures must do illegal expenditures on the official responsible for the
transaction, which is understood as gratitude. That is how some businessmen give
them presents or hand them a piece of the deal, invite them to lunch, pay for
their trips abroad, give them cash, or give them free products or services. The
best way to win a bid for a project is to pay to a public official a percentage
of the contract’s value. The procedures followed by the customs service, and
obtaining a license, permits, the certificate of sanitation, or the
environmental certificate turn faster with diverse expenditures. This sort of
deals is more common in the construction sector –different kinds of permits- ,
in the commercial sector –importation permits-, and in the agricultural industry
–sanitation certificates-. The amounts that are paid, according to the
businessmen, can go from $10 to $1 million dollars, and this is such a common
event that these prices are already included in the fixed rates of the company.
Therefore, if the Saca administration intends to put an end to these actions,
now its members already know where to begin. It is not necessary for the
President to wait for the intervention of the Comptrollers Office, the Public
Ministry, or for the Judicial System, because none of these institutions can
guarantee the transparency of the procedure, since all of them are part of the
structure of corruption.
The National Association of the Private Business Companies (ANEP) frequently
states that it represents the sector, but half of the businessmen interviewed
consider that the actions of this institution (and those of the unions that
represent them inside the governmental branches) have not been of benefit to
everyone concerned. They also believe that the national policies have not been
that positive for them. The small business companies are in the most
disadvantageous position if compared with the rest of the members. The
advantages are for the small sector that controls the national market. Some of
these companies are the ones that have taken advantage of the opportunities
provided by the economic policy of ARENA. In addition, this group has access to
important information, and additional advantage to guide their actions and
obtain more profits. An additional advantage is that the business elite is not
very often affected by corruption, since it does get a preferential treatment,
the rules change in accordance to their interests. They are part of the
corruption cases, and therefore they defend corruption and they cover it up.
These heterodox habits that the believers in the freedom of the market have can
be explained through the relation between the most important public officials
and the formerly mentioned kind of business companies. They are so closely
attached that it is easy for a businessman to become an important public
official and occupy a strategic position that will enable him to organize the
traffic of influences and favor his business groups. He will modify the legal
and the technical terms of biddings and public contracts and will direct the
public institutions to favor his group. He will enjoy of a wide range of
discretion to interpret and to apply the rules. The judicial system, including
the Supreme Court of Justice is one more piece of this complex structure. In
fact, the institutions that are less transparent are those that guarantee
transparency.
Most of the businessmen indicated that the economic policy is chosen by the
business elite, although one third believes that the regular businessmen are
well represented in their cabinet. That is why some of them say that this group
has “kidnapped” the government, because it rules for itself and not actually for
the country as a whole. For example, in the negotiation of the free trade
agreement with the United States, the demands of the private sector were heard
in a manner directly proportional to the size of the business group that
represented it. The result was an hegemonic business group, the same one that in
a study performed by the UCA, published by the ECA 645-646, had identified
itself with another method. Therefore, the possibility of success depends on the
relation with this group and not on the market, or on free competition, and
definitively it does not depend on the rules. The foreign investment, in order
to have a good performance, should penetrate into this exclusive economic and
political circle. Any strategic form of investment should establish a connection
with the administration of ARENA, either in a direct form or through an
hegemonic business group. In any case, it must allow a substantial participation
for both of them in the deals. This is the actual alternative to compensate the
weak features of the Salvadoran institutional scene. Probably that is why the
country is not one of the privileged areas of the region when it comes to the
investments. The one that stays also gets involved in the distortion of the
competition.
There is no doubt that these actions have an influence on the small economic
growth, on the development of the sectors, on the generation of the added value,
on the income of the population, and, definitively, on the intensification of
the social inequality. To eradicate these habits takes more than just open a web
page to report these events. The ARENA administration knows very well where
these actions have more of an intense effect, and, if not, that administration
should ask its allies, the businessmen.
The new reforms in the statutes of the FMLN
The national press has a certain predilection for digging
deep into the internal affairs of the FMLN. And it could not be any different.
In addition to the excessive amount of criticism that the reporters usually
display when they refer to the political battles inside that party, there is no
doubt that what happens inside of it has a considerable influence over the
electoral and the political race in the country. In that context, it is
important to analyze the possible implications of the new reforms announced in
the statutes of the FMLN. It is necessary to examine them specifically in terms
of how helpful will they be to actually strengthen their internal cohesion, at
the same time that they should bet on a higher level of democratization of the
structures in this organization.
According to the promoters of the statutory transformations, these changes
should be understood as an effort to “increase the levels of democracy and
simplify the process, since these actions would also increase the chances of a
participative democracy and it does promote the simplification of the roles,
strengthening the essence of the foundations by promoting the independence of
the committees of the local base”. In fact, throughout the document there can be
found very positive comments about the reasons and the effects that can be
expected from the transformations. It is expected that this can help reduce the
level of political confrontation between the members of the left-wing party, and
clarify several aspects in the daily exercise of the militancy inside the party.
Actually, most of the reforms that have been proposed do not seem to affect the
equilibrium of the power inside the FMLN. With a first glance, it is possible to
say that the objective is to make the legal organization of the party seem more
coherent or to eliminate the inefficient procedures. In fact, many of the
problems of the FMLN in the last years are due to this aspect, because every
electoral process has brought the need to clarify the internal procedures. As a
sample of this, the news media focused on the enormous amount of ballots that
the militants had to trace during the last internal elections.
The document also referred to a series of specific measures to, on the one hand,
assure the control and the quality of the performance of the party’s public
officials, and, on the other hand, to bet on a consensus. The article introduces
the issue of inspecting the process, and it is formulated in the following
terms: “there would be inspections with the mission to watch the performance of
the public officials elected by the party, or those that are named through the
party’s proposals. This feature will be organized by the elected ombudsmen
chosen by the Convention of Proposals from a group integrated by former General
Coordinators of the Party that will remain inside of it”.
After a fist glance, this measure cannot be seen with suspicion. The parties
have the obligation to assure that their public officials will fulfill their
electoral promises. In addition, in the context of a generalized situation of
political discredit the national situation seems to be heading to guarantee a
minimum amount of political coherence, as far as the public officials of the
left wing are concerned.
Then again, if the principle of achieving a certain level of political coherence
inside the circle of the public officials of the left wing does not seem
suspicious, the history of the confrontation between the orthodox and the
renovators in this organization could indicate that this new apparatus can be
used so that the orthodox are able to feel their power. In reference to this
aspect, people are already talking about the actions of a revolutionary source
to control the ombudsmen. Oscar Ortiz, the Mayor of Santa Tecla, indicated that
“if the purpose is to favor someone or some group, when the inspection system is
created it will not be strong enough to fulfill its duties”. In any case, in
order to determine if this new structure will promote a sort of an internal
dictatorship, it is necessary to wait for the elaboration of their internal
regulations.
In any case, an institution that evaluates the performance of the public
officials in a party should not become an organization in charge of punishing or
rewarding its members according to how much these people support the actions of
the inspection system. The militants at the base of the institution are the ones
that have to play this role through free and democratic elections to choose the
people who will occupy a position inside the public administration system.
The present authorities of the left wing party are not totally convinced if a
free and a transparent competition among its members is the best way to
strengthen their organization. This curious conviction can be somehow seen in
the reforms that have been proposed and which intend that an election would be
considered as the last resource, only in the cases where there is no consensus
between the local or the national leaders to designate a candidate that will run
for a public position. That is why the document indicates that “all of the
official affiliates will choose through a direct and a secret vote the following
authorities of the parties and the candidates who will participate in the
popular elections, except in the cases when the political parties are able to
previously reach a consensus with the participation of its militants…”.
This measure, in the opinion of the leaders of the FMLN will help them to avoid
confrontations and the internal deterioration of the party. According to the
present coordinator of the party, “the objective is to win, therefore we have to
look for the most capable individuals, independently from any other
consideration of affinity”. It is expected that the noble objective to win the
political race will prevent them from having negative feelings and isolate the
dissidents.
An internal voice of the party has already pronounced itself against this
curious way to understand democracy. Carlos Rivas Zamora, the Mayor of San
Salvador, does not believe that an internal competition can debilitate the
party: “when there is a competition inside the FMLN, several of the mass media
say that there has been a break-up. I believe that, ultimately, this is the fear
of the FMLN”. And if that were the case, then it would not be necessary to
organize a process of elections in the country, because it can be said that such
process will lead to the end of the social harmony, just like it actually
happens with the violent confrontations, something almost normal during the
elections among the sympathizers of the left and the right wing.
However, nobody has considered that a group of brilliant people have to
designate the public officials that will occupy public positions. On the
contrary, some people talk about the need to assure that the elections will be
free, transparent, and honest, at the same time that the actors are required to
respect the rules of the democratic game. Logically, the same thing would be
expected from the FMLN.
In the first place, its leaders should adopt the pertinent measures to guarantee
the transparency of its internal elections and the reliability of the results.
Until now, none of the internal disputes has been approved by all of the
contenders. Even in the case of those who have been defeated and have admitted
their failure, discretionary actions have been reported by the Electoral
Tribunal of the party. A rumor has been alive for quite a long time: that the
orthodox have somehow “arranged” the electoral process in order that their
candidates manage to win.
When the former problem is resolved, it will be possible to demand a democratic
culture from the militants of the FMLN. That is how they will learn to respect
the internal democratic game, and its legitimacy should rely on the support of
most of its members. In other words, this is not about avoiding the internal
competition among the different perspectives connected with the formula to
handle the party. This is about being sure that the democratic mechanisms
actually work inside the left wing party. Only the naïve can think that what
moves them to win (and defeat ARENA) will be enough to neutralize the
dictatorial tendency inside the FMLN.
The economy in the beginning of 2005
The first trimester of 2005 revealed, thanks to preliminary
numbers, what is the economic situation of this year. The information provided
by the economic indicators, for example, explains what will the production of
this period be like.
On the one hand, the Economic Activity Volume Index (IVAE, in Spanish) and the
Industrial Production Volume Index (IVOPI, in Spanish) remain at a negative
percentage, although with smaller proportions if compared with 2004. According
to the information published by the Central Bank of Reserve (BCR, in Spanish),
the general IVAE dropped by –2.04% during January; this means that out of every
100 goods produced in the country they was a 2% shortage. The IVOPI, for the
month in question was reduced by –1.67%, which means that for every 100 goods, a
couple of products were not actually elaborated. These numbers clearly reflect
how the production level dropped.
By analyzing the IVAE through the different branches of the economic activity,
it can be observed that the sectors that show a higher level of reduction in
production terms are: the construction sector, with –20.7%, and the
manufacturing industry, with –4%. This means that out of every 100 finished
projects, more than 20 of them were postponed, and that from every 100 pieces
manufactured per month, four of them have not actually been produced.
This fall in the construction sector, according to Jorge Arriaza, the executive
director of the Salvadoran Association of Industrialists (ASI, in Spanish) is to
blame for the absence of important projects of infrastructure, such as the ones
that were developed in 2004 with the construction of the new shopping malls.
However, this is not a condition for the growth of a stagnated economy, and it
is not the cause of the low level of economic growth; on the contrary, the
proliferation of shopping malls should encourage the growth of the importation
level and the growth of the consumption level in the Salvadoran society.
What people should be concerned about is the situation inside the manufacturing
industry, which is logically due to the reduction of the textile production
level caused by the deficient level of competitiveness that the Salvadoran
maquila has before the so called Asian menace. A situation that has become more
delicate since China managed to become free from the exportation fees in the
United States.
The level exportations from China to the United States and Europe has increased
during the last months. In February, according to the information of the Chinese
Customs Administration Service, the level of exportation went up to $650
million, which means that it increased by 147%; and, in relation to Europe, the
amount was $783 million (188%) in reference to last year.
The comparative and the competitive advantages that China has before the rest of
the Latin American countries are based in the reduction of its production costs,
that, compared with the ones of Latin America, are much smaller. Such advantages
are unfair for many producers because the labor is extremely inexpensive
(between $50 and $125 per month).
Cambodia, Vietnam, and Sri Lanka have taken advantage of the reduction of the
costs, they have offered to the investors of the maquilas salaries between $0.25
and $0.40 per hour, something that has increased the production of clothes to
astonishing levels of 50% per year, leaving the textile field to China. This
situation has caused a sudden and a drastic loss of jobs, destabilizing both the
national and the Latin American economies.
Francisco Escobar Thompson, the president of the Salvadoran Association of
Tailoring (ASIC, in Spanish), does not believe that they will be capable
recuperate a portion of the market during 2005, while the Free Trade Agreement
that was signed with the United States becomes effective. In spite of an
investigation performed by Fitch Risk Ratings company, which indicates that the
free trade agreements will not help to completely heal the situation of the
market, Escobar insists on the idea that if the country did not have a free
trade agreement, the industry would decrease by 15 or 20%.
On the other hand, several economists consider that the national industry will
be relieved if the United States applies a 27% tax to any additional exportation
of Chinese clothing items, in order to level out the distortion of prices that
the devaluation of currency has caused.
Another advantage that could be applied, according to Escobar, is the geographic
proximity, the capacity that the companies have to deliver the orders on time
and to react with the transformations in the fashion business or the seasons, is
another factor that helps the sector to keep their territory in the American
market.
To reactivate these sectors there are also other proposals, such as the national
purchases, in order to reactivate the internal market, have a higher level of
productivity, and strengthen the food industry. It is necessary to invest more
in the amount of technology used in the productive processes and innovate
products that already exist, or to introduce new ones that could be attractive
to the international markets.
The direct effect of the exportations is noticeable. According to the
preliminary information of the BCR, the exportations grew by 2.8% during
February, a percentage that contrasts with the growth of the importation level,
which reached a 9.5% in the same month, that is, a difference of 6.7%. This
difference goes beyond the 4% that it reached in November of last year. And
although the exportations grew by almost one point, the importations have
increased almost four times in relation to the amount recorded in November of
2004.
It is necessary to analyze inflation. In 2004, inflation reached its maximum
level during October (5.5%). According to the BCR, during January, the inflation
level was higher (5.7%) than the maximum index of 2004 (5.5%). In other words,
inflation increased by 2.7% in reference to last year (for the same month).
This situation could be due to a couple of factors: the increasing prices of
petroleum and the negative impact of the fiscal reform. One of the main
reactions before the increase of the taxes is the increase of the prices, in
order to counteract the loss of many business companies. This indicates that it
is necessary to evaluate all of the effects of the reforms and, most of all, to
verify if in fact they are encouraging the economic growth.
By analyzing the different indicators of production, prices, importations, and
exportations it is possible to see that there is a tendency that will follow the
same line of 2004. The industrial sector is facing a recessive cycle and it is
necessary to neutralize this tendency in order to create more jobs and increase
the economic activity. If these sectors are not activated, it is possible that
the GNP will only grow by 2%, and that is not enough to reach higher levels of
economic development.
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