Vacations: a public health problem

Economic deceleration and the financial system

Changes in the Salvadoran agricultural sector (1970-1990)

The monetary costs of violence

News Briefs

VACATIONS: A PUBLIC HEALTH PROBLEM 

The number of deaths during the Holy Week vacations was slightly less than the number for last year’s vacations, but still continues to be very high. According to official records, the number of deaths was 278 —22 less than last year. The majority are victims of firearms and traffic accidents, although the victims of firearms and drowning are considerable. Statistics for deaths are an accurate reflection of the violence which El Salvador is experiencing. If daily life is laden with acts causing violent deaths, up to a certain point it is normal that the first week of vacations this year should be a reflection of what happens every day. Nevertheless, the impact on the collective conscience is greater because the high level of deaths is concentrated in a single week and because the coverage in the communications media is intense, even overshadowing other kinds of news. All in all, the impact seems not to have diminished in any important degree on the question of violent deaths, during the period following the vacation.

This large number of victims cannot be attributed to a lack of foresight because there has been a great deal of this: for example, the efforts of the National Committee on Emergencies, of Social Security, of the National Civilian Police, of the Vice-Ministry of Transportation and of the aid and rescue institutions are praiseworthy. Their efforts, doubtless, have prevented situations in which the number of victims might have been greater. However, the mortality statistics have not diminished, which means that the problem is beyond the capabilities and praiseworthy work of these organisms.

The solution to the problem cannot be to prevent the population from going to the beaches and tourist centers, so that they stay in their homes during the whole of Holy Week. The alternative is not to go to the religious services in the churches and in the streets instead of visiting the beach, the rivers and recreation centers. Going to religious services ought not to oppose people’s desire to enjoy one of the three vacation periods offered each year in El Salvador. One should not overlook the fact that the only time which the majority of the Salvadoran population has for vacation is Holy Week, the first week of August [the feast day of the Patron Saint of San Salvador] and the year-end Christmas vacation; nor should it be forgotten that very few places for rest and healthy recreation for family and friends exist in El Salvador. As a consequence, the problem is repeated inexorably in each national vacation.

But neither should these things be taken out of context. In most countries, the accident victims increase during national vacation periods, but do not reach overly high figures. The mere fact of the massive mobilization of people to rest and recreation areas seems to be the occasion for situations which cause accidents. But there are differences between countries. The first is that the number of victims is less where there is more education and where the state has firm structures which facilitate the massive mobilization of the population. The second is that where violence is not a national problem, the vacation periods are the occasion for fewer victims. The third is that the greatest number part of the victims documented in El Salvador are caused by firearms and traffic accidents.

The unrestricted circulation, possession and use of firearms is one of the causes of violence in El Salvador. The mortality statistics for Holy Week only confirm this. It is as if those who use firearms do not take vacations. In reality, firearms are ever with us. For this reason it is contradictory that while some state and private organisms and institutions work to diminish the number of victims, many deputies have spoken out publicly in favor of permitting the use of military firearms but have not taken public positions in favor of restricting their circulation, possession and use. Likewise, the penalties should be stiffened for those who kill another person with a firearm. Arms trafficking has become very lucrative in recent years and has, in fact, generated new interest.

Traffic accidents and their resulting deaths are other causes, although always related to violence. A good number of accidents are caused because of the irresponsibility of the public transportation motorists and truck drivers and drivers of other heavy vehicles. One major cause of such irresponsibility is the lack of education. Another portion of fatal accidents is caused by drivers under the influence of alcohol and drugs. This kind of accidents will not diminish until authorities impose order on vehicular traffic; and to do this, they must begin with public transportation, heavyweight and freight vehicles. This is the weakest point and the principal cause of this kind of accidents.

The institutions which make such a great and praiseworthy effort to assure the Salvadoran population that their vacations will be safe confront a challenge that is beyond their capabilities because the problems have much to do with violence. Vacations will not be safe until these organisms and institutions are focussed on the question of public health. The concept of health that the authorities of the ministries use, although it is important, is very limited. They ought not only to dedicate themselves to preventing epidemics such as cholera or polio but should also consider violence as one of the most mortal epidemics from which El Salvador suffers. This presupposes, on the other hand, a change of perspective. One ought not to insist so much on the criminal aspect implicit in these acts of violence, but on considering them as symptoms of a serious public illness. It is not so much a question of drunkards or drug addicts violating the law, but that there were is palpable evidence of something much more complex and profound which may be called the culture of violence, which not only causes victims but those who commit crimes.

This thesis is not new, but the government of Calderón Sol has not taken it up yet. It was difficult for him to accept the fact that El Salvador is one of the most violent countries on the continent because that would cause his idyllic vision of the country to suffer disfigurement, but, finally he gave up when he had to recognize and come to terms with the evidence. Now it is a question of taking the next step: to diagnose violence as a public health problem and deal with it as such. It is a whole society, without distinction of social classes, which is the victim of violence. The remedy not only involves policies on security, criminality and prisons but also a policy on public health understood in the broadest terms.

ECONOMIC DECELERATION AND THE FINANCIAL SYSTEM 

The financial sector is very frequently the source of diverse polemics either because of financial fraud which has been verified in some institutions, or because of its high rates of interest and commissions or because of the limited access to credit granted to productive sectors. Currently, and to judge by the financial statements of the banks, to these problems appear to be added a loss of dynamism in this sector, which is evident in the reduction in the volume of profits received by the principal banks and in a unusual increase in extraordinary activities owing to the implementation of embargoes on goods belonging to clients not up to date on their payments.

These indications are a result of the marked reduction in the rates of economic growth experienced during recent years and, especially, during the recent months of 1999 (see Proceso, 847). Nevertheless, this is also related to the incoherence of economic policies, the strategies for functioning of the private bank and the objective to promote productive investment. Finally, economic deceleration is also a result of the fact that there is no strategic vision of economic sectors which could generate elevated rates of sustainable growth in time and which, therefore, ought to be financially supported.

Economic policy promotes measures affecting competition among businesses. The bank’s criteria for assigning credit have caused a virtual marginalization of agricultural and livestock as well as industrial sectors and a clear inclination to grant credits more favorably to the commercial sector. The policies for diminishing customs tariffs, the liberalization of commerce and the maintenance of the exchange rate which negatively affects sales and competition for national enterprises.

The financial sector has also been affected by the current economic declaration. Although the levels of profits for some banks have increased, what is certain is that the banking system has experienced a fall in its profit levels, an increase in its portfolio of clients not up to date on their payments and the banks have even been obliged to increase their patrimony, in many cases as a result of requirements of the Superintendence of the Financial System (SSF, for its initials in Spanish).

This situation is explained in part by an increase in financial system expired credits for a grand total of 302.4 million colones, which meant an increase of almost 33% for the years 1997 and 1998 alone. The banks most affected are the Proamérica, Salvadoreño and Comercio, although only the increase in the overdue payments of the first of those mentioned explain approximately one third of the increase in the overdue balances of the whole system. It should be mentioned that the majority of the banks experienced significant increases in their total expired credits, except for Banco Cuscatlán which succeeded in maintaining the total of its overdue credits in stable condition, which was increased by only 1 million colones, that is to say, approximately 0.5% between 1997 and 1998. As a result of this, the banks have had to have recourse to the recuperation of credits by means of embargoes on goods and real estate of the clients with overdue accounts to the point that the total of extraordinary profits which is the account where these embargoes are accounted for, reflected an increase in 358 million colones in 1998, which is equivalent to a growth of some 200%.

Along the same lines of the behavior of expired credits, nine banks had to increase their social capital in order to strengthen their patrimonial funds and succeed in complying with the legal requisites in order to function. The increases in social capital varied between 9 and 68 million colones and many were the result of audits practiced by the SSF.

Faced with these financial results, representatives of the bank have expressed their evaluations concerning the causes of the contraction of the bank’s profits. These evaluations share a common factor in that they all identify economic deceleration as a principal cause of the problem, given that this would have affected practically all economic sectors of the country which enter into credit contracts with the banks. In the case of the Banco Salvadoreño, for example, it is to be noted that the reduction in the sales of automobile dealerships have been the causal factor for an increase in expired credits portfolios; in the case of the Cuscatlán and Atlacatl banks, it is argued that the greater part of the increase in expired credits is owing to a reduction in the sales of housing and the stagnation of construction projects. Bancasa, for its part, would have experienced problems in the inability of many clients to pay with consumer credits for housing. Finally, the Multivalores bank would have experienced problems in increasing the expired portfolio owing to the reduction in the capacity for payment of their consumer credit clients.

The panorama presented by the financial system is not very encouraging, especially if we consider that other recent data also demonstrates that the highpoint of this sector seems to be reaching its limit owing to the fact that the investment generated has not been sufficiently productive to produce the necessary added value to cover financial costs. The recent bankruptcy of the CREDISA bank demonstrated that some financial institutions which are apparently solid, in reality turn out to be in a precarious situation owing to the loss of financial firmness. Recent data confirms this perception because practically all banks have had to increase their social capital in order to compensate for the losses provoked by the increase in expired credits, some of them in an obligatory way.

In fact, the Superintendent of the Financial System, Francisco Bertrand Galindo, expressed to the press that "there exists a potential risk of crisis with the extension of related credits of which the Superintendence is not always aware", which implies that, in addition to the reduction of profits and the growth of expired credits, there exists the possibility that the banks might be affected by the presence of an important proportion of related credits—that is to say, credits extended to the bank shareholders themselves. According to data presented by the Superintendence of the Financial System, the greater part of these banks have credits related in very close proportions to the maximum limit established by the Bank Law (15%). So it is that close to half of the 12 banks of the system which present percentages of credits related very close to the limit, although Banco Salvadoreño and Ahorromet are those with the highest percentages (13.63% and 13.46%, respectively).

It is important to mention here that, between 1997 and 1998, some banks were obliged drastically to reduce their related credits given that the legal requirement for percentages of the said credits were reduced from 25% to 15%, in part as a result of the different crises y financial frauds of 1997 in FINSEPRO-INSEPRO and Crediclub. At this point, at least four banks have over 15% in related credits and Unibanco y Desarrollo have related credits in percentages such as 23.5% and 18.23%, respectively. According to their financial statements for 1998 they are within the limits permitted by the law.

The current state of affairs in the financial sector is a reflection of the dynamics of deceleration which had previously been in evidence in the rest of the economy, with symptoms such as the reduction in profits and the increase in overdue credits and the implementation of embargoes. This ought to move us to think again about the need to articulate the financial sector with the productive sector by means of viable projects which promote production, employment and exports. Otherwise the viability of the economy will be more and more committed to orienting savings towards credit subjects which invest in projects not viable in the medium and long range or which consume more than they receive.

Overcoming these bottlenecks to growth necessarily requires the state to adopt a clearer policy on the topics of definition of the central foci of growth, harmonizing the different economic policies and the support of the financial sector for projects which are defined as strategic.

CHANGES IN THE SALVADORAN AGRICULTURAL SECTOR (1970-1990) 

At the close of the decade of the 1970´s, important changes began to take place in the agricultural sector of El Salvador. The first Revolutionary Governmental Junta decreed an agrarian reform, which was continued by the governmental juntas which followed and by the presidential administration of José Napoleón Duarte (1984-1989). Although the agrarian reform had an unforgettable political impact —it became, during the decade of the 1980´s, a component of the counterinsurgency strategy designed by the U.S. government for El Salvador—, its economic impact was significant: (a) it mobilized a large peasant workforce into the cooperative sector to the detriment of traditional export crops; (b) it permitted the state to assume the responsibility in foreign commercialization of coffee, cotton and sugar cane, and take the leadership in this field away from the traditional oligarchy groups.

During the 1980´s, the agrarian reform showed profound weak points: it was pushed forward for political motives and, moreover, did not have the technological or financial base which might permit a thorough modernization of the agricultural sector. Likewise, in the context of the civil war, a migration process affecting the peasant population took place not only towards the principal cities of the country or towards the Central America region, but also towards the U.S., Canada and Australia. The result of this was a "depopulation" of the countryside, with the consequent scarcity of labor.

This state of affairs including the displacement of the population changed the physiognomy of the Salvadoran countryside. The most notable result was the reduction of the percentage of peasants as compared with the whole population, according to official data (taking into consideration only small towns), in 1971 the rural population was 60.4%. According to the Sociologist Segundo Montes, if one considers criteria of dependency on agricultural activities for subsistence and the patterns or models of typically peasant behavior, for that year the rural population was greater than official figures might indicate because many municipalities were not taken into account and in these municipalities lived an important portion of the population with peasant lifestyles.

From 60% or more of the population at the beginning of the decade of the 1970´s, the peasantry became 48% during the decade of the 1990´s. This is only explained by means of the dynamic of the migrations mentioned earlier. Finally, something important happened in Salvadoran agriculture during the last 20 years; the repercussions in terms of the offer of basic grains and the scarcity of agricultural laborers had already been felt in the national economy because what was added to the generalized crisis in agriculture was that this put the authorities of the country in a situation of checkmate.

A process of stripping away the nature of the peasantry was associated with another important phenomenon: the urbanization of peasant life. The Salvadoran countryside was not only significantly depopulated but many families which currently lived in it mixed factors characteristic of peasant lifestyles such as religious customs, lack of electricity and drinking water, adobe homes, with factors characteristic of an urban lifestyles, these last being supported by goods such as stereos, refrigerators, videos and income in dollars coming from the family remittances of family members living in the U.S. (with the modification in the patterns of consumption which this implies) and the values arising from the interaction of peasant families with their relatives living outside the country (this in terms of styles, aspirations to travel, a lack of attachment to the land).

Finally, the decline in the agricultural sector begins to accelerate during the decade of the 1980´s. As O. Melhado indicates: "the decade of the 1980´s is a dark period for production. There was a permanent climate of violence and instability in the whole country, but the sector which carried the greatest burden was, without doubt, agriculture. If at some point one could trace the historic moment when El Salvador stopped being an agricultural country, it would be, precisely, during the years of the conflict. The proportion of the GNP occupied by agriculture was reduced over a period of three decades. The tendency towards the diminishing importance of agriculture as compared with industry, commerce and services in general began to be seen since the 1960´s. The war placed the seal of "goodbye" on the importance of agriculture to the country" (Melhado, O., EL SALVADOR. ECONOMIC CHALLENGES AS THE CENTURY ENDS. (San Salvador, UCA/Ed., 1997) pp. 23-24).

The decline of agriculture as a principal focus of the national economy brought with it, in the same way, the strengthening of commerce and finance to the point that, since the end of the last decade, a process was begun by which the national economy became an economy based on the service sector. This was a process by which the service sector became the major force in the mobilization of capital, with the subsequent development of the infrastructure associated with the sector: powerful financial centers and big commercial complexes.

The growth of the service sector has not been unrelated to the reaccommodations experienced by the Salvadoran state, not only in its internal structure (i.e., the modernization of the state), but in its relationship with the economy —i.e., reprivatization of state-owned goods by the governmental juntas during the decade of the 1980´s and the privatization of services which, since their creation, were serviced by the state, such as electrical energy and pension funds. First the administration of ex president Alfredo Cristiani and, afterwards, the presidency of Armando Calderón Sol have contributed decisively to making firm the movement towards the service-industry overtaking the national economy as it assumed —each one with its matrixes and distinctive emphasis, elements of the program of neoliberal reforms— such as opening towards the foreign market, the reduction of the state and the privatization of public services, orienting the benefits of those reforms towards the financial sector.

In the context of those proposals, both administrations have encouraged a reform of the state with an eye not only to making it more efficient —by means of modernization processes—, but also by reducing its presence in the economy. That second objective has been achieved, first of all, by reprivatizing the resources which were expropriated by the revolutionary junta governments during the 1908´s: the bank and foreign trade. In second place, both administrations have promoted the privatization of services such as telecommunications and pension funds which, since their creation, were in the hands of the state. In this way, from a big, inefficient and "interventionist" state, the proposal is to move towards a strong, efficient state which guarantees the free play of the market. State reform still marches on, for which reason it is impossible to make definitive evaluations concerning its success or failure, or about where it will take us.

THE MONETARY COSTS OF VIOLENCE 

Faced with the growing violence on the whole continent in recent years, new methodological propositions have been developed to calculate, in the most precise possible form, the possible economic costs resulting from this violence. As a result of efforts encouraged by the InterAmerican Development Bank and the OPS, there has been an advance in understanding some of the component costs of violence.

Using the usual definition of direct and indirect costs, at least seven categories could be established in order to classify the information related to the costs of violence. Among the direct costs may be considered: personal costs or costs in the home, institutional attention, rehabilitation, costs associated with the prevention of violence and legal costs. On the other hand, indirect costs include losses in production and/or income and material losses.

The InterAmerican Development bank includes, among direct costs, those referring to the health sector and the security sector. Moreover, these can be divided in accordance with the agents which affect it, which can be persons as well as institutions.

It is to be assumed that the victims of violence must incur costs for recuperation and the state health institutions also dedicate part of their activities and budgets to attention to the victims of violence. This is especially true in the case of the Ministry of Health.

On the other hand, in the field of security it is also to be assumed that the state ought to destine a substantive number of resources for the control of violence, as much in what concerns costs associated with prevention and its treatment as in matters related to judicial, police and prison affairs. On the other hand, private, individual persons incur costs for installing security mechanisms and/or services for security guards.

Among these are costs caused by the interruption of the productive life of the fatal victims of violence as well as the loss of income resulting from disabilities caused to non-fatal victims.

Indirect costs include, as well, costs resulting from a few available resources for investment; low product availability for the assignment of resources for the state as well as private agencies for the control of violence and attention to its effects.

Finally, costs resulting from the loss of goods and values associated with crimes against property must be taken into consideration. So it is that the greater the number of crimes against property the greater will be the material losses and total costs of violence.

Each one of these categories has its own sub-components. In the case of El Salvador, these were quantified in a study sponsored by the InterAmerican Development Bank. In this study an advance in the knowledge of the costs of violence for 1995 was achieved. The categories indicated showed results which we have presented previously in the publication (see Proceso, 820). According to the research data, the total costs of violence in 1995 rose to U.S. $777 million, of which the direct costs were 47.04% and the indirect costs 52.94%.

It should be mentioned that the categories with the greatest incidence among the total costs were legal costs and material losses which represented 36.14% and 29.61%, respectively. In third place were income lost, which represented 21.8% of the total costs of violence. In relation with the GNP, total costs reached 13.46% of the GNP in 1995, sufficient to be considered a serious economic and social problem.

The only category which presents possibilities for permitting an approximate calculation on the basis of available information is that of legal costs. This includes, principally, the legal and police costs which result from violent acts which require police intervention, legal proceedings and even the imprisonment of the aggressor.

It should be mentioned that the calculations which are presented below are based on the premise that the costs for Public Security, the Courts, the Ministry of Justice and the Attorney General’s Office are dedicated, in their totality, to the attention to violence.

According to the National General Budget for 1996, the categories mentioned absorbed 21.3% of the total budget. This figure presents an idea of the costs of the violence, especially if it is considered that we are dealing only with a total of seven components.

The situation does not change much with the recent behavior of the National General Budget. In graphic 2 are presented the percentages assigned to the categories related to violence.

According to the Budget for 1998, the categories which showed an appreciable increase were: education, service to the public foreign debt, judicial entities, justice, the legislative body and, finally, municipal governments.

It is particularly noteworthy that two of the categories related to the control of violence counted among the most favored with increases, while in the social area only education benefited.

Graphic 2 reveals the composition of the social categories and the rest of the categories related to the control and attention to violence. It is notable that these two categories consume similar portions of the budget. For 1999, it is hoped that social spending will reach 26.4% of the budget while the categories related to violence reach 21.7% of the same total. Institutional costs for attention to violence will grow to close to 9% which is far above the 5% growth in the GNP for 1998. The situation gets worse as one considers an important proportion of the budget for the Ministry of Health is dedicated to the attention to victims of violence.

There are no means to measure the total costs of violence for 1997 but the available evidence shows that institutional and legal costs, as well a material costs and the economy have continued to grow at greater rates than the GNP.

It can be affirmed, however, that the total costs of violence are close to 13% of the GNP and therefore affect state finances as well as families through costs for prevention and attention to violence, health, material losses, reduction in future income and reduced investment.

ARENA. The National Executive Council (COENA) will initiate, during the early days of April, meetings in which they will define procedures which will be used to choose candidates for mayors and deputies which will represent the government party in the March 2000 elections, according to reports presented by the president of that political body, Mr. Alfredo Cristiani. "It is the obligation of COENA to submit for consideration to the General Assembly of the party, scheduled for next September, a list of candidates for mayor and deputies"" stated Cristiani. "We will design a whole plan for proceeding with its implementation, that is to say, to define the profile and the manner in which we are going to choose candidates at a national level", Cristiani declared. Another agreement which COENA must reach is that of renewing or relieving of his post, the president of the Supreme Electoral Tribunal, Jorge Diaz, who ends his term of office on the last day of May. By June 1, ARENA should have designated the president of the Tribunal, a post which is the responsibility of the ARENA party as a result of its having obtained the majority in the presidential voting in the recent elections. On the other hand, the president of ARENA does not rule out the possibility of a re-election of the current legislative fraction, but he did not mention what percentage of the bank which would undergo restructuring (La Prensa Gráfica, April 5, p. 22)

CENTRO DEMOCRATICO UNIDO (CDU). The CDU, which is the third most powerful political force in the country after the recent presidential elections, is undergoing a period of internal analysis to determine the direction it will follow for the next year. The election results permitted the CDU to obtain a magistrate in the Supreme Electoral Tribunal and it now aims to obtain a greater presence in the Legislative Assembly and compete for some of the municipalities. Nevertheless, its plan of action is still not defined. For now, the Political Commission has drawn up a poll which, according to Ruben Zamora, the party's coordinator, will serve to arrive at a consensus with regard to positions. The process of affiliation will also be defined. For now, the Political Commission plans to continue gathering up experiences before taking a decision to dissolve the five organizations which make it up in order to form a single party,. The CDU plans to obtain at least ten deputy positions during the upcoming elections. The cake is still not shared out in portions and the commission has not wanted to make known the names of the possible candidates which are disposed to undertake the effort to win the mayor’s offices. However, Dr. Zamora has stated that "before the fits are harvested, more must be invested". For this, they will seek to invest —politically speaking— in efforts to come closer to the voters who do not have confidence in political parties (El Diario de Hoy, April 5, p. 18).

FMLN The revolutionary tendency of the FMLN published, on April 5, a proposal to establish an internal agreement or accord in order to overcome the crisis which came to the fore during the past presidential elections. The proposal is contained in the document entitled "Ideas for the Debate", which details the crisis which wracks that left party. Among other things, it declares that the FMLN lacks a scientific instrument and identity in order to analyze reality, and that, moreover, there is no leadership which could unify the party. According to David Pereira, leader of the revolutionary wing of the party, the internal tendencies of the party must come to an agreement on a minimal political pact which would include formalizing the leaderships of each one of these tendencies and assign them a role in the political life of the FMLN. The proposal for debate presented by the revolutionary tendency will be presented to the political commission of the FMLN in the near future. The goal is that the theoretical and programmatic crises as well a the crises of identity and the organic and ethical crises posed in the document might be resolved in the short and medium-range by means of discussion. In the upcoming convention to be held in May, the leadership bodies of the party have scheduled the election of a new national leadership. Before anything else, Pereira emphasized, the tendencies must be clear in demonstrating that they have some interest in continuing as part of the FMLN (El Diario de Hoy, April 4, p. 6).