Proceso 905
June 7, 2000
ISSN 0259–9864
 
 
 

INDEX

Editorial The first year of Francisco Flores’ administration
Politics Evaluation of the first year of the current ARENA administration
Economy Economic reactivation and investment
 
 
 

EDITORIAL

    Last week was full of news, reflections, evaluations and commentaries concerning the first year of Francisco Flores’ administration. The principal news media —particularly the printed press— were not niggardly in the number of column inches given over to tributes rendered concerning the virtues of the president’s intellectual abilities which —if one takes too seriously what the media says— are far superior in talent and capability than all the rest of ordinary mortals. Some of the young technocrats chosen by Flores to move his government policies forward shared some of his intellectual attributes, by all accounts either by osmosis or contagion, although obviously not at the same level as the president of the republic himself. As things go, what more could be asked for? Shouldn’t Salvadorans be happy enough to have a government team made up of first-rate intellectuals? And isn’t it just this team itself which knows what the country needs most?

    In light of the foregoing, only ungrateful people who wish to “destabilize” the country or those who are not in the know —which is to say, the majority of all Salvadorans— could doubt the positive forward march of El Salvador on all counts economic, social and political. Obviously, from among those who call the administration’s successes into doubt —those who merit the greatest degree of disapproval are those who, in the eyes of the government and its propaganda experts, do so in order to “destabilize the country”. And who are these people? What is it that these people do and say to be included among the ranks of those who wish to cause destabilization? Well, from the point of view of the government and its spokespersons in the arena of the news media They are those persons and institutions which aim to engage in destabilization and who, more than anything else, have detected clear authoritarian lines of action by the government during the Francisco Flores administration as well as those who have made this manifest in a public way. Seen from the point of view of a minimal dosage of objectivity, it is undoubtedly the attitudes, behavior and policies with a clear authoritarian bent which emanate from the Ministries of the Interior, Economy and Public Security. But it is in bad taste to say as much given that the Flores administration is trying so hard to construct a democratic image of itself.

    In second place, those who see in the Flores style of governing a continuation along the lines of political leadership followed by the previous ARENA administrations are also seen as participating in the destabilization under discussion here. Certainly, one of Flores’ major publicity efforts has been that of presenting himself as the model of a “new way of doing politics”; and in order to create for himself that image of his administration and his party, he has invested handfuls of money and resources. The fact of the matter is that for as much effort as has been made and as much good will as there is to had for the asking, the much touted “new way of doing politics” does not succeed in seeing itself anywhere in reality —nor is it possible to reach the point of seeing Flores himself as the one creating such a notion. As a consequence, when some insist upon the small differentiation which might possibly be made between the Flores administration and his predecessors it is natural that some ill feeling and malaise might naturally be generated in governmental spheres. Obviously, the malaise is greater when solid arguments are formulated in order to make the continuity manifestly noticeable during the first year of the Flores administration, of the economic model, the foundations of which were set under the Cristiani administration.

    In third place, and in direct relation with the foregoing, some of those engaged in destabilization are seen as those who are not willing to accept governmental discourse about the presumed good qualities of the economic measures which the government encourages in order to focus upon the neo-liberal model designed for El Salvador. For President Flores and his minister —especially the Ministries of the Treasury and Economy— these measures not only translate into undoubted successes for the economic sphere, but also its benefits come without doubt for the whole sphere of society. The theme has been repeated so much that everything seems to indicate that he sincerely believes what he is saying. From this it follows that it might seem out of place or even shocking that he insists that, in the disarticulation of the economic system on the basis of the predominance and voracity of (1) the financial sector, (2) of the stagnation of the industrial sector and of (3) the crisis in agriculture with no end in sight. In light of the structural disarticulation of the economy, resounding economic successes may be spoken of only with difficulty. From another point of view, there are no proofs that, for example, privatization —of pensions, communication or electricity— have been translated into better living conditions for the greater part of the population. The situation, rather, is all to the contrary. Or, to give another example, it is not altogether clear how requiring payment of the Value Added Tax on basic grains and medicines is a measure which is favorable to the poorest sectors of the country.

    A last point is that those who question the leadership of the president are considered to be among those given to destabilization, above all when he himself, given the breadth and depth of the problems he must confront, is conspicuous by his absence. Those who dare to say that Flores is the “absent” president are not well regarded in official circles, especially if those who offer criticism make comments to the effect that the president is running away from problems —the country’s problems and those of his party—, but when he decides to face them, he does it poorly, speaking with confusion tainted by hackneyed phrases, which can be understood only with difficulty. Even less welcome are those who see in Flores the remedy and replacement for Calderón Sol, when the only difference between them are the intellectual figments of the imagination which characterize Flores —so enamored does he have some of the news media— and his greater experience in the practical work of the political right-wing.

    Those who have called critical attention to the foregoing aspects —i.e., the authoritarianism of the government, the fact that it is a clear continuation of the two previous administrations, those who insist upon the weakness of the economic model being used and those who have the nerve to notice the absence of presidential leadership— not only are out of sync with the pro-governmental consensus prevailing in some media circles, but have been condemned to silence or have been designated as “enemies” of democracy, or marked as participants in destabilization activities. As long as they persist in assuming these postures, the consensus-building of which President Flores speaks of so frequently in his year-end speech cannot become reality, because this would demand that he assume and accept the basic lines of the economic and political project which, not without contradictions, has been the ARENA party line since 1989. President Flores has spoken of seeking bridges to the FMLN. It is clear that he, his party and the project which they defend are on one end of the bridge and the rest —including the FMLN— must move more towards the other side of the bridge —this is to say that they must leave on their side of the bridge that which most distances them from the ARENA project. For Flores, this would be the achievement of consensus-building, yes, but a consensus-building weighted heavily towards the right-wing.

POLITICS

    There are various and divergent opinions with regard to President Francisco Flores’ first year in office as president of the country, although he himself gives himself eight points on a scale of 10 for his performance during this first year. He believes that during this year of government administration he has brought the country out of an economic recession and has laid the foundations for creating “more and better jobs” and he has succeeded in accomplishing the Free Trade Agreement with Mexico and has set himself, as well, the task of reactivating the agricultural sector. The populace, on the other hand looks askant at national reality with a certain level of pessimism. An opinion poll conducted by the University Institute for Public Opinion of the UCA (IUDOP), gives the presidential administration a 5.4 on a scale of 10. The majority of Salvadorans do not feel that any improvement has come to pass in their economic situation. Along this same line, some members of the opposition to the government have called the measures and decisions upon which the president bases his evaluation of himself during his first year “a simple mirage”. So then, an initial evaluation shows a clear difference between the general perceptions of governmental administration and the evaluations presented by the president and his ministers.

    That contradiction between public opinion and official opinion has been a constant during the Flores administration. The official handling of information has always sought to show a reality distinct from that in which the majority of the population lives. The vision of the “new El Salvador” emanating from the presidential palace is far removed from the country in which the Salvadoran people actually live. It is for this reason that it is not by chance that the majority of the population does not perceive any change in the strategy for combating delinquency, nor in the levels of crime which have come to exist—contrary to the allegations of official discourse—, while at the same time they do, however, recognize one outstanding quality in the president: that he is a good speaker. As a result of this divorce between the perception that the government has of itself and the perception that the populace has of him there is sure and steady increase in popular discontent, and no quick solution to the old problem of the lack of representativity of the politicians will not be accomplished and neither will the vicious cycle of electoral abstentionism be broken. The expectations on June 1, 1999 [the date of the presidential inauguration], however, were very different.

    As President Flores assumed office in the inaugural ceremony, he had come directly from a grand tour of the whole country. He aimed at constructing his government program after having “listened to all Salvadorans”. During the electoral campaign he presented himself as a young intellectual—a moderate who had executed his role as President of the Legislative Assembly with consummate skill—, and whose presence in politics would signify a new way of doing things in El Salvador. It was his handling of his work with the press which convinced the majority of Salvadorans who had elected him, in spite of his having refused to debate the other candidates—taking advantage of his comfortable advantage in preferential ratings among the voting populace. The voters, however, did not interpret that attitude as a mark of his arrogance or a lack of capability to enter into debate.

    Arrogance, a refusal to engage in any kind of dialogue and a small capability for listening have not been characteristics absent during Flores’ first year in office. The president’s response to various events which have marked national life during this period are evidence of this. In response, for example, to the strikes, denunciations, demands and social protests, his response has been the same: he waives aside their validity and alleges that they are part of a destabilization plan orchestrated by the opposition. Flores has not been asked to render accounts concerning his way of leading the country during this first year of his administration. He has responded with no other attitude than that of wresting authority from his detractors with statements such as “my critics are mistaken”. In other words, in the president’s judgement, his first year has been a hard year, given the lack of understanding on the part of the opposition and of the Salvadoran people in general.

    In effect, the national and political ambience has not been particularly favorable for Francisco Flores during this period. On the one hand, contrary to what his predecessor took great pains to deny and hide, Flores had to face a not particularly serene and tranquil economic situation. The patent indications of stagnation in economic growth were more than evident. On the other hand, a little after having assumed presidential office, the country celebrated the general elections for deputies and mayors. The pre-electoral period created a particular political situation in which the search for leadership by diverse political actors prevailed over reason and mutual understanding. At the same time, the different public sector strikes did not make for the best work environment. In this way, on the political as well as economic scene, the new ARENA administration had to confront serious problems without enjoying, at points, very much solvency.

    Nevertheless, a correct evaluation of the first year of this administration, if it did not ignore the state of affairs which the president had to deal with, did emphasize the style and efficiency which the most urgent economic, social and political problems would be dealt with. And, in this sense, an evaluation of the labors of the president ought to be compared with his campaign promises. This is to say, that one must ask oneself to what point he has really complied with his proposal to break with the old way of doing politics in this country.

    On this point it might be pertinent to take note of the fact that the enthusiasm which the Francisco Flores campaign awakened went up in smoke the moment he took office. His handling of the health sector strikes, his party-line positions during the deputy and mayor elections, among other examples, fed that lack of enthusiasm. The president has not been able to remove the mask of resemblance to our more remote ancestors which so characterizes his political party. His position as Head of State has not distanced him—as the Constitution of the Republic demands—from his political party interests and biases. During this first year in office he has made no effort whatever at lessening the distance between the executive and legislative powers. Rather, he has established a record number of vetoes of legislative bills and decrees coming from the Legislative Assembly. To this is added a notable lack of leadership together with a minimal capacity for discussion of the bills which, one might suppose, seek the well being of the country.

    Given this disturbing panorama which darkens the democratic horizon and the efforts at empowering national institutions, there will be no lack of questions regarding his successes, as minimal as they may be, as well as questions regarding the perspective for resolving diverse problems affecting El Salvador. Certainly, not all of the problems of the country can be resolved in one year. The foregoing, however, does not impede the initiation of a works progress administration reached through a process of consensus building. On the contrary, this is precisely what is called for. This is to say, then, that instead of a year of confrontation and the propaganda aimed at diminishing the prestige of “the enemy”, the president could focus his efforts towards constructive dialogue with all sectors of the country. In this way, the unpleasant obstacles, bottlenecks and miserly and egotistic interests which obstruct a good governmental administration could be weeded out: so a goodly part of the population thinks and proposes.

    Although one could assume the opinion that all is not lost, given that the president only just finished a year in office. One year is a very short period of time to be able to establish absolute successes and failures in any absolute manner. But the perceptions and evaluations of the citizenry indicate that a change of course and a straightening out of the road might be in order. A real effort at dialogue and consensus building ought to be set in motion. Speech must become act and fact which reflects an inequivocable political willingness to be a prime over in the construction of democracy.

ECONOMY

    One of the principal economic problems of El Salvador is that during recent decades the per capita Gross National Product has not grown sufficiently to be considered as a way to improve the living conditions and quality of life of the population. Fundamentally, this has been the effect of a modest growth rate in production because the demographic growth rates have even been seen to fall during recent decades. The fact that during the last four years the economic growth rates have fallen, in and of itself obliges one to consider the necessity for measures to reactivate the economy which necessarily include a substantial increase in investment.

    During the last eight-year period investment has grown by almost 100%, but even in spite of this growth it continues to represent a proportion (16%-17%) of the GNP insufficient to guarantee vigorous growth in production. Likewise, between 1992 and 1999, investment as a percentage of the GNP fell from 17.2% to 16.3% while total consumption continues to be more than 95% of the GNP.

    Evidently, without a substantial growth rate in the amounts of investment the per capita GNP has not been seen to increase. Even more importantly, neither has the level of jobs and income increased. At the same time, it will not be possible to generate the necessary exports sufficiently to diminish the deficit in the balance of trade (which is close to 10% of the GNP), nor can we create the foundations for reducing dependency on family remittances in order to maintain growth with macroeconomic stability (i.e., stability in the exchange rates, prices, increases in net international reserves and consumption and the GNP).

    In this context, the topic of financing and the orientation of investment acquire special importance, given that they depend, basically, upon the growth rates of the GNP and the sustainability of the economic model. Nevertheless, the economic policies of the last three governmental administrations have not taken up the problem with the seriousness and profundity which the encouragement of investment deserves —nor have these administrations assumed a realistic position vis-a-vis the limitations of investment together with the necessity for stimulating strategic productive activities. The assignment of credit by the financial system and the absence of a new policy for productive diversification reflect this.

    The financial system has been constructed in such a way that one of the principal obstacles to productive investment is the assignment of credits is concentrated upon activities with short cyclical recuperation and having imposed unnecessarily high interest rates. Commerce, construction and services received 38.3%, 13.2% and 6.3%, respectively, of the total credits assigned in 1999, which implies that, taken as a group they used 57.8% of the total mentioned. Meanwhile, credit for the agricultural and livestock sectors as well as the industrial sector represented some 8.1% and 19.2% of that same total, respectively, which implies that both sectors received a sum total of only 27.3%. The situation becomes more serious when we consider that in each sector also exists a concentration of credits: 73.2% of the agricultural and livestock credits went to coffee and sugar and 69% of industrial credit to food, textile and chemical production.

    To the foregoing should be added interest rates which do not reflect single digit inflation rates in place during the last three years. Meanwhile, during 1999, active interest rates of 15% and 16%, inflation were even negative (-1%), for which reason , in practice, interest rates should have been substantially reduced. Nevertheless, interest rates are not adjusted to inflationary rates and this provokes a situation in which, in practice the financial system policies obstruct the transmission of benefits of economic stability towards credit recipients and, with this, towards investors.

    Moreover, the concentration of credits together with elevated interest rates, the encouragement of investment confronts limits related to the absence of new economic growth poles which permit an efficient orientation towards investment. Economic authorities do not appear to be aware of this situation which is a clear-as-day demonstration of that announced by the government administration for the coming implementation of a special credit plan for the coffee-producing sector, even while this sector is plunged into a deep crisis caused by the world-wide overproduction of coffee and the plummeting of international prices. This initiative can translate into a waste of time and resources which could be used to encourage other, non-traditional, activities with better possibilities for the international market.

    On this point, the role of the state is a key one because it ought necessarily to assume a leadership role in defining the new economic growth poles as well as in assuring the financing necessary for encouraging high sustainable growth rates in the medium and long range. For the moment, and to judge by its proposal for the agricultural and livestock sector, it appears as if the current administration is clear about the need to assume a greater leadership role. From this, one must define, as an important priority, what its criteria will be for orienting investment.

    Returning, yet again, to coffee is not an appropriate solution: first of all because of the unfavorable conditions existing in the international market. And secondly because it is the subsector which receives the highest percentage of agricultural and livestock credits. A third point is because, not even in the periods of greatest flourishing has it been able to become the economic activity which contributes towards combating rural poverty. On the contrary, the coffee subsector offers low salaries and seasonal employment which maintains agricultural workers in extreme conditions of poverty.

    There is much, then, to be done in order to induce a process of sustainable growth in investment, production, income and employment. Meanwhile, it becomes clearer by the day that three elements must be taken into account on this score: financing, orientation of investment and —intimately linked to the previous point— the creation of a new strategic vision of development upon which the state must base its public policies.

    Meanwhile, the state does not appear to assume a clear posture as it faces the bottlenecks imposed by the financial sector and it does not, moreover, make any effort to define a strategic plan for encouraging investment and these postures will not in any way, shape or form, turn back the current tide of slow growth which seems to be getting deeper and wider as opposed to waning. The financial sector, and, concretely, the private bank, will not assume in and of itself, a policy to encourage strategic investment given that they are more interested in microeconomic efficiency and not in macroeconomic efficiency. It will have to be the state which will define and negotiate with the bank the creation of special credit lines (with broad repayment schedules and interest rates which are in accordance with the inflationary reality of the counter), as has recently been done in the case of coffee. The greater problem appears to be that there does not exist a strategic plan for the encouragement of investments, nor is there hope that one will be drawn up in the near future.

    The choice of sectors which could become —eventually— poles of economic growth ought to be made taking into account, as a minimum, their potential to multiply themselves and increase more than other economic sectors, their offering to exports and their demand for imports because this will permit one to know the possible effect of investment on the economy in general and upon the balance of trade, which is vital to the current context of slow economic growth and high balance of trade deficit. In the medium and long range, the definition of economic growth poles is also of primordial importance, given that it will permit the articulation of development plans which facilitate a favorable insertion into the international economy and facilitate, as well, a more vigorous and sustained per capita GNP.