ARENA: the difficult reconciliation between the economic and the social

The economic balancesheet for the Calderón Sol government

Salvadorans evaluate the Calderón Sol administration and formulate expectations concerning the new government

News Briefs

ARENA: THE DIFFICULT RECONCILIATION BETWEEN THE ECONOMIC AND THE SOCIAL

A new ARENA administration is preparing to assume the executive office on June 1. The most hopeful auguries indicate that, with the inauguration of Francisco Flores as President of the Republic, a process of change in the relations between the state, private enterprise and the ARENA party will take place. Obviously, no one can guarantee the success of that initiative, but it will open up new perspectives in the social-political dynamic at a national level, concretely in terms of the formulation and implementation of the economic and social policies. For all the rest, an interesting way of initiating the follow-up of the new government is to see it in contrast with the administrations of its two predecessors, Alfredo Cristiani and Armando Calderón Sol, and what they offered when they began their respective mandates.

Before all else, it should be recalled that, during the Cristiani administration, the overall context of the economic policies —as were posed in the Plan for Economic and Social Development for 1989 and 1994— was the effort to reorient the economy with the objective of "establishing a social economic system for the market, given that this would offer the best expectations for achieving the global objectives of the Economic and Social Development Plan: to obtain robust and sustained growth in time and elevate the conditions of life of the whole population, with emphasis on the dispossessed". As it was formulated in the aforementioned document, what was sought was to implement the model for economic development which would contribute to (i) creating the conditions for the gradual eradication of extreme poverty; (ii) achieve economic growth that was sustained in time; (iii) reduce the leadership role of the state; (iv) stimulate the full and efficient use of the country’s resources.

In social policy matters, such as they were formulated in that document, the global proposal was "to elevate the quality of life of the population and initiate a sustained process for the eradication of extreme poverty in El Salvador. The conditions of extreme poverty which already represented a very serious problem during the past decade, have been magnified in recent years to such a point that they currently affect more than a third of all Salvadoran families. The seriousness of these problems demands that Salvadoran society’s every effort be oriented towards overcoming it". In this way, in the Cristiani government program the following social postulates were posed: (i) the state ought to participate in a fundamental way in the eradication of extreme poverty; (ii) the satisfaction of the minimum social needs create the necessary conditions for achieving an effective equality of opportunities; (iii) only with the achievement of social development is it viable to consider in a parallel way sustained economic growth; (iv) the social progress which would result from greater opportunities in integral development leads towards harmony and peace.

For its part, the Calderón Sol Administration entertained a fundamental economic concern, expressed in the Government Plan for the Republic of El Salvador for 1994-1999: "to maintain energetic and sustained growth by means of technological modernization, continuous training of the workers and the insertion of the country into the spheres of world production. This process has as an objective to generate more and better resources, as much for feedback on the economic process and the bettering of the infrastructure as well as financing the investment in the human person and broadening the quality and coverage of social services. Consequently, the generation of financial resources is conceived as a means for the materialization of a solid and dynamic social policy". Precisely, the "Plan for Economic Development has as its objective to facilitate the insertion of the country into the process of modernization and globalization in order to enter decidedly onto the road to integral, sustained and sustainable development (...). This demands the creation of mechanisms and an institutionality in the economic area which would be compatible with the basic fundamentals of a free, democratic and participative society which sustains a system which would provide equality of opportunities in order to compete, which permits equality in the enjoyment of the benefits of progress and offers multiple options so that there might be social mobility".

In the area of social policy, the Calderón Sol administration pointed out, in its governmental plan, a concern for the "magnitude of social problems", which would require attention in terms of "large amounts of resources, many years of socially integrated work. Willingness, dedication and patience in order to persevere and a change as much in the structure of the governmental institutions in the social area as well as a change in the attitude of the private sector, which would contribute in a more solidary way and involve itself in the struggle against poverty which is an imperative of the Christian social conscience and a necessary condition for social peace".

In the discourse of the second ARENA administration, what was presented was the achievement of the following: (a) "to make of El Salvador, a country of proprietors, easing access to property by means of an adequate macroeconomic policy and generating opportunities for benefiting the growth of the economy"; (b) "to achieve a greater degree of possible participation by the population in decision making, empowering the municipal governments and the practice of town hall meetings even more by means of a process which would promote the decentralization of social services provided by the state"; (c) "consequent with the foregoing, to introduce mechanisms which would give life and national autonomy to a new concept of local socio-economic development so that they would be provided throughout the national territory. Also sought would be a basis for fomenting local private investment, with the aim of elevating the levels and quality of life throughout the national territory, providing thereby a harmonious and balanced development at a national level".

As can be seen, neither Cristiani nor Calderón Sol can be accused of not having dealt, in their government programs, with the problems of poverty, social exclusion and marginalization. What can and should be questioned is the fact that they did so little about the problems which they themselves located as socio-economic centers relevant to governmental activity. The bottom line is, neither of the two administrations could reconcile the economic development model encouraged in the light of neoliberal precepts such as the proposals for social equality with what they declared themselves to be committed. Will Francisco Flores attempt this reconciliation? And if he attempts to achieve it, will he succeed?

THE ECONOMIC BALANCESHEET FOR THE CALDERÓN SOL GOVERNMENT

After a decade of government by the Nationalist Republic Alliance (ARENA) party, what can be said to be most outstanding after a detailed examination is the behavior of the economy is that the principal objective of its economic model has not been achieved. The diversification of exports and their conversion into a principal source of income for the country is still absent. Moreover, economic stability and growth are principally owing to the continuing growth in income from abroad (family remittances and loans).

The second ARENA administration, headed by Armando Calderón Sol, although in the beginning it did not present any development plan, proposed concrete propositions in its "Economic Platform for Social Development, its "Social Development Plan" and other plans with which it aimed to reactivate the agricultural and livestock sector. As the Calderón Sol administration draws to a close, it may be an opportune moment to evaluate the results achieved by that administration, for which an examination of the first two plans mentioned and the macroeconomic results obtained during the period might serve as reference points.

The "Economic Platform for Social Development", promulgated at the beginning of 1995, presents as its principal objectives: the establishment of the free exchange rate of the dollar and the fixing of the exchange rate, the reduction of tariffs, the modernization of the public sector and the maintenance of fiscal discipline. In practice, what can be observed as the exchange rate has remained unchanged in spite of the fact that the free exchange rate has not been established and the fiscal deficit increased in spite of a 30% increase in the tax rate corresponding to the value added tax (IVA). The only changes in political economy are the removing of taxes on customs and the privatization of the basic services enterprises and the benefit system.

Lamentably, these measures have not been translated into improvement in the perspectives for the country’s development. The stability of the exchange rate, the reduction of the tariffs and the increase in the IVA, in this case, have not impeded the Salvadoran economy from becoming more and more dependent on foreign income for its functioning, as has been shown in the evolution of the principal macroeconomic variables between 1994 and 1998. On the other hand, privatization of basic services such as the telephone company and the distribution services for electrical energy, have brought with them increases in the service rates without substantially improving the provision of the services themselves.

During the Calderón Sol administration the tendency has been accentuated for economic growth to be concentrated more and more in the service sector with an evident reduction in the participation of the agricultural and livestock sector and an eventual stagnation in the industrial sector. This in the face of governmental offers for sectorial measures for the reactivation of agriculture. It is not odd, then, that during the period 1994-1998 the proportion of investment should pass from 19.8% to 16.6% of the Grows National Product while consumption has stayed at high levels —greater than 95% of the BNP.

Consequently with the limited growth of the exportable production, the external sector has demonstrated a clear dependency on private transferences in order to equilibrate and permit increases in the net international reserves. Proof of this is that the deficit of the commercial balance in 1994 was 1,324 million dollars, but for 1998 it had already increased to 1,506.8 million dollars. The basis of this behavior is to be found, evidently, in an increase in imports superior to that experienced by exports. In fact, exports grew close to 1,220 million dollars between 1994 and 1998, but imports —encouraged by the lifting of taxes on customs tariffs— yielded close to 1,388 million dollars.

In this context, what might be expected is a deterioration in the position of El Salvador internationally, but, much to the contrary, the balance of payments between 1994 and 1998 grew from 143.1 million dollars to 308.5 million dollars. This increase may be explained, fundamentally, by the increase in private transferences, which went from 1,001.1 million dollars to 1,483 million dollars between 1994 and 1998. This is to say that the foreign policy of the government has not contributed to the stabilization of the foreign sector, because it has not been able to combat the growing balance of payment deficits and, on the contrary, seems to have stimulated it.

In the fiscal area, neither did the outgoing government present a successful administration given that it did not foment "fiscal discipline", such as was initially proposed. In fact, between 1994 and 1998, the fiscal deficit grew from representing 0.7% of the GNP to representing 2.1% in spite of the fact that, as was mentioned before, during this period IVA increased by 30%.

Privatization, for its part, overtook telecommunications and the distribution of electrical energy and presupposed increases in the tariffs. To such a degree, in fact, that President Calderón Sol was obliged to continue subsidizing them in order to avoid even greater increases. In a parallel way, telephone tariffs have been increased on a periodic basis in accordance with the increase in the general level of prices. Likewise, privatization of the benefit system has meant the introduction of discounts on commissions to the Administrators of Pension Funds (AFPs) which are greater than the amount which the workers save from these same funds.

On the question of social matters, the offerings by the Calderón Sol government are presented in the "Social Development Plan", in which are proposed measures for the areas of education, health, housing, reform of the benefit system and the promotion of human development. It was affirmed, moreover, that "in order to breathe life into social programs and ratify our commitment, we have decided to duplicate public spending in the social areas during the upcoming four years, until it reaches 50% of the budget by 1999".

In an examination of the evolution of social spending it is noteworthy that these goals were not achieved and, on the contrary, the percentage of the budget assigned to social spending was, in fact, reduced. For 1998, social spending was 24.5% of the budget after representing, in 1995, 25.6%. This, however, is evidently still far below the official proposal.

The Calderón Sol government of, although it could enjoy exchange stability and implement measures such as the change to not taxing the tariff charges and the increase on IVA, it has not succeeded in stimulating productive activity nor has it laid the foundations for diminishing in a sustained way the deficits of the foreign sector and the public sector. In the social area, not all of the programs for compensation which were promised have been implemented because greater financial resources have not been assigned for this. Neither have substantial changes been achieved in the living conditions of the most vulnerable population, especially in rural zones.

The Calderón Sol government is dedicated to administering the bonanza made possible for the increase in profits, and with this lost five years which could have been used to construct a self-sustaining productive apparatus. Together with an increase in social spending, this last item will be among the challenges facing the third ARENA administration.

SALVADORANS EVALUATE THE CALDERÓN SOL ADMINISTRATION AND FORMULATE EXPECTATIONS CONCERNING THE NEW GOVERNMENT 

Salvadorans gave a median grade of 5.89 on a scale of 10 to the Calderón Sol administration according to the most recent poll carried out by the University Institute of Public Opinion (IUDOP) of the José Simeón Cañas Central American University of El Salvador. The poll had as its objective to examine the thinking of Salvadorans concerning the last five years of the second ARENA administration . The poll was conducted between 15 and 18 of May of this year using a sampling of 1,266 adults from the fourteen departments of the country and allowing for a margin of error of 4%. The poll revealed, in general terms, that the government of Calderón Sol was able to better his image in the eyes of the citizenry by the end of his mandate and, in fact, ends his term of office with a higher evaluation than that made of his first 100 days, but did not win the approval of the majority of Salvadorans because of the persistence of fundamental problems in the country: crime and the economy.

As is customary in the IUDOP polls on the evaluation of government, Salvadorans were asked about the positive and negative aspects of the outgoing government. Some 61.1 percent of those polled perceived positive changes in the country since the entry of Calderón Sol into the government, while some 37.5 did not perceive positive changes in Salvadoran society. On the other side of the coin, a little more than half, or 52%, stated that they had perceived negative changes in the country during the last five years of the governmental administration.

In general terms, those polled were asked to compare the situation in the country of five years ago before the current government administration entered into power. Opinions were very divided on this aspect. 36.6% think that the country is worse than it was five years ago and 33.7% consider that the country is the same —that is to say, that there have been no changes; at the same time, 28.1% consider that the country is better now.

The UCA poll revealed that a little more than a third of the population identified the construction of general and highway infrastructure in the country as one of the principal successes of the Calderón Sol government. The rest of the citizens polled are divided in indicating other aspects such as education (9.7%), economic measures (6.2%) and improvement in the public services (3.4%), among other things. Nevertheless, close to 35% either could not or did not wish to identify successes resulting from the current governmental administration.

On the failure side of the balancesheet, the poll suggests that the Salvadoran people are not in agreement on one particular failure, although the tendency is to lean more towards the domestic problems of the country. A little more than a fifth of those consulted, or 22.2%, identified the increase in criminality as the central failure of the second ARENA administration, followed by a series of matters related to the economy: the economic situation of the country (9.4%), unemployment (6.2%), preference for the rich (7.8%), among other responses. Close to 38% did not know how or could not identify the failures.

Together with delinquency, the economy constituted a principle weak point for the Calderón Sol administration as he ended his mandate. Forty percent of those polled think that the economic situation of the country got worse as the government administration drew to a close as opposed to only 19.4% who think that it got better. On the question of the family economy, the majority of opinions were in agreement in stating that their conditions stayed the same.

Asked directly by the group which received the most benefits from the Calderón Sol government, 40.8% stated that this was a concern only of the rich, and 19.5% stated that the government was concerned about all of the people and 18.2% stated that the government was concerned only for itself.

Moreover, those polled were asked how much the government had listened to the demands of the population. Some 10.1% stated that it had listened quite a lot, 23.7% stated that it had listened somewhat and 62.6 stated that it had listened a little or not at all.

The UCA poll included a question that would evaluate the work of some of the ministries and secretariats of the Calderón Sol government using a qualifying scale of 0-10. The governmental dependencies evaluated in the best terms were the National Secretariat of the Family and the Ministry of Education, both of which received grades of 7.38 and 7.27, respectively. The Ministry of Health was given a qualifying grade of 6.89, followed by the Ministry of Public Works with 6.84, the Ministry of Public Security with 6.12 and the Ministry of the Treasury with 6.01. The lowest grades were given to the Ministry of the Interior (5.99), Ministry of Environment (5.91) and the Ministry of the Economy (5.41). The remaining governmental secretariats were not evaluated because their work was considered not to have been visible to the population.

The UCA poll dedicated part of its questions to the gathering of responses indicating the expectation of the citizens towards the new government of Francisco Flores Asked about the principal challenge which the new president would have to confront and resolve, 44.7% stated that it was to fight and root out crime, 17.7% declared that he ought to eliminate poverty and 12.3% mentioned the elimination of unemployment, among other proposals. These responses emphasize the desire of the population concerning the principal problems of the country ought to be finally resolved.

Some 84.1% took a position that the new government ought to change the economic policy implemented by the Calderón Sol Administration and 79% held the same opinion with respect to the policy on public security.

Those consulted asked for a proposal or plan to guide the new government administration so that it could govern the country: 30.3% declared that it ought to follow the New Alliance, that is to say, the ARENA campaign plan; 19.4% mentioned as a guide the Plan for the Nation of the National Development Commission; while 11.9% made reference to "Growth with participation" of FUSADES. The rest did not respond to the question.

Finally, the UCA poll revealed that a good part of the population, or 65.5%, think that Francisco Flores represents a positive change in the policy of the country, as opposed to 24% which affirmed the country and 10.5% did not wish to state an opinion.

The IUDOP poll to evaluate the five years of the Armando Calderón Sol governmental administration demonstrated that he ended his mandate with public opinion divided with respect to his administration, although with an important percentage indicating approval and support. In spite of these levels of approval it does not seem as if it has reached the same level as the first ARENA administration, the tendency of the evaluations throughout his administration indicate that the second ARENA government succeeded in recuperating certain levels of approval by the end of his period in office, the fact that he was very unpopular during a good part of his term in office notwithstanding and the fact that a third of the population accuses him of having left the country in a worse state than when he came to office.

From the point of view of public opinion, what is positive is explained by the implementation of considerable and palpable work on the infrastructure and because of the perceivable and much publicized work of the Secretariat for the Family and the Ministry of Education. Nevertheless, and, according to those polled, the fundamental failures of the government continued building up through the end of his mandate in the lack of capability for solving the problems of crime and the economy both of which cause suffering for the majority of the population. From this perspective a good part of the Salvadoran people felt that the government does not concern itself for them and that on very few occasions were they listened to by the governmental apparatus.

Given this, they expect that the new government should be effectively concerned to change the direction of the country, listen to the citizens, promote public security and improve the conditions of life for the majority of the population.

San Salvador, May 26, 1999

RESIDENCY. Close to 180,000 Salvadorans and some of their family members who qualify under the Nicaraguan Adjustment and Central American Relief Law will opt for permanent residence in the United States. INS commissioner Doris Meissner made public, on May 5, this law applies to Salvadorans, Guatemalans and citizens of the ex-Soviet Block. Salvadoran Foreign Relations Minister, Ramon Gonzales Giner, expressed his satisfaction concerning Meissner’s announcement. "Everything is positive for Salvadorans and we are very happy with President Clinton’s administration. This is the result of a continued effort on the part of the Salvadoran government", stated the minister. Salvadoran citizens who can opt for permanent residence are included in several programs. Extra-officially it was learned that one of the most difficult requirements (demonstration of extreme suffering in the case of deportation) has been made more flexible in order to allow the application of this benefit to be applied to the greatest possible number of persons. At the beginning of the year, Meissner declared that in consideration of extreme suffering "we will have to take into account the capacity of the country to absorb the return of these people, the difficulties that the family might confront as it leaves the U.S. and the environmental conditions of the country of origin (La Prensa Gráfica, May 20, p. 12).

FRANCISCO MERINO. The deputies of the Political Commission, made up of representatives of the PDC, PCN and ARENA, succeeded in issuing a decision to ratify in his post, Francisco Merino, of the PDC, as president of the Comptroller’s Office. The magistrate in second position in the institution will be Adbón Martínez, proposed by ARENA member Walter Araujo. The magistrate in third position will be the magistrate of the Supreme Electoral Tribunal, Arnoldo Marín, proposed by Ronal Umaña Francisco Merino was re-elected and sworn in on May 20 and will continue in the post until 2002. This in spite of the opposition of the FMLN, the Democratic Convergence (CD) and the Social Christian Union which offered their best arguments against the reappointment. Jorge Villacorta of the CD asked for time to discuss the matter before the re-election of the functionary. For his part, Shafick Handal of the FMLN stated that the mechanism being used was incorrect. "There is no file, no decision of the Political Commission, if he now has the votes, so that they can do this legally", stated the FMLN member. Before the end of his statement, Handal offered words of resignation: "we now know that nothing is going to change, but the people have to be made aware that not all of the deputies are the same". The fact that the curricula of those aspiring for the post were not reviewed also argues against his re-election (La Prensa Gráfica, May 20, and El Diario de Hoy, may 21, p. 10).

JOURNALISTS. The Legislative Assembly opened its new building for work commissions during the third week of May and, at the same time, a dynamic polemic on its relationship with the media was begun. The main point of discussion is the design of the new building which places the journalists outside the session chambers of the commission. It even restricts access to the halls of the commission while in the old installations, journalists could enter the areas where the sessions were held at any time. To this was added a sound system which does not comply with the minimal requirements for work needed by news media. However, the problem is not only a technical one. For journalist William Melendez of Channel 12 Television, "there has been an improvisation on the part of the deputies...they moved to this building which does not provide the minimal conditions for work". "This is a slap in the face to public opinion.. if the journalists restrict our right to information, they restrict the right to information which every citizen ought to enjoy", stated Melendez, Journalist Ana Giralt of the DIARIO DE HOY, stated that the deputies are acting in an arrogant manner —putting guards at the doors is arbitrary, these are absurd decisions which only obstruct our work" (La Prensa Gráfica, May 22, p. 17).