Proceso 915
August 23, 2000
ISSN 0259-9864
 
 
 

INDEX

Editorial The El Salvador of the ARENA party
Politics ARENA: approaching disintegration?
Economy Electric energy rates
 
 
 

EDITORIAL

    The following series of events, which occurred recently, offers up an idea or image of the current situation in El Salvador: the Minister of the Economy would like to lower the price of gasoline and diesel, but he does not dare to do so by issuing a decree because this would go against neo-liberal dogma which prohibits the state from intervening in the market, even when it is a question of a public good—except in cases dealing with drugs or other oddities. As it is the case that in El Salvador, the consumers pay the highest prices in all of Central America for fuel, the Minister of the Economy has requested that petroleum companies in and of themselves refuse to pursue such inflated profits for love of country. The petroleum companies have responded by raising the prices even more. In fact, it is the most drastic increase experienced in recent times. The same is happening with the prices for electrical energy, which is one of the highest on the continent, owing to the fact that the enormous, disproportionate profits of private generators and distributors. But in this matter, although the national economy is negatively affected—as in the case of fuel—the Minister of the Economy does not dare to set foot on this terrain because the interests Salvadoran big capital are involved.

    The impulse towards privatization led the ARENA administrations to sell state property without concerning itself with first constructing strong, solid institutions that might guarantee national interests. Capital is not moved by feelings of love for anyone, but rather by greater and greater profits and investment opportunities. Nevertheless, the National Association of Private Enterprise (ANEP) cannot assure the success of its activities if there is no support from the government. And they may be right. The Flores Administration promised to be as dogmatic as its predecessors, but at the end of a year’s work it is discussing how to distribute the subsidies it was going to suppress, as well as how to draw up a sectorial policy which it considered unnecessary and how to make the dreams of a free market come true without affecting capital interests which are growing fat at the cost of the state. From this, while the private enterprise, big business association (ANEP) is demanding leadership, President Flores holds that it is everyone’s responsibility—which is to say that it is no one’s responsibility.

    The last initiative that the National Civilian Police (PNC) has found to use in the fight against crime is its campaign against vehicles with polarized windows. Meanwhile, organized crime continues doing as it likes. Last week there were at least three kidnappings, one of them confirmed. But not only organized crime is a problem for the PNC. There are also cases such as irresponsible young people who use the public thoroughfares to race at high speeds which cause fatal traffic accidents. Just as with the situation of kidnappings, this last is nothing new; but the police are equally impotent to deal with either. Governmental authorities cannot even agree on how many and which and what kind of vehicles should be prohibited from circulating in traffic with polarized windows. This creates confusion. There is a contradiction between the Vice Ministry of Transportation and the PNC. And this so as not to mention the lack of clarity on the question of the extent or limits of the province for dealing with such situations accorded to one body as opposed to that of the municipal mayor’s offices. For its part, the Ministry of Security announces a plan for raising the consciousness of society on the question of violence and the necessity for building peace on a social level. To judge by the announcement, the plan is marked by a great deal of governmental propaganda and little content. A plan presented in such an informal way does not merit much serious consideration. In spite of the promises by President Flores, the cleaning up of the PNC is moving along very slowly and has bumped up against the legal and judicial apparatus. Meanwhile, police continue to be accused of diverse crimes. At any rate, the government wanted to take advantage of the opportunity to leave the decision of who stays and who leaves in the hands of the already powerful director of the PNC. The inclination to resolve problems by promulgating laws notwithstanding, in El Salvador an obsolete police law has been in effect since the end of the nineteenth century, without causing the presidency or the legislature much of a problem.

    In the Legislative Assembly, the board of directors is afraid that the details of its internal administration might come to light publicly. The publication of their expenses for meals, remodeling and advisors were more than could be tolerated. The censorship imposed on the information of an economic and administrative character of the central power of the state by those who promised transparency is complete. Nevertheless, ARENA insists that the information is public but restricted. Some deputies of the right-wing have had recourse to lies and insults, vices which they are accustomed to, when they saw their opposition to complying with the constitutional obligation to audit the Comptrollers’ Office was placed in evidence. The same faithfulness to neo-liberal dogma by the executive power impeded the Legislative Assembly from decreeing the provisional suspension of the embargo in the agricultural sector. Meanwhile, the Minister of Agriculture tried to convince them that mechanisms existed for dealing with the insolvent situation of the farmers, the deputies asked publicly for the banks to find the way for refinancing delinquent loans, forgetting that they have no authority to do so—and neither do they have the prestige to make such a petition.

    The Ministry of Health finally asked for help from international specialists in order to fight the epidemic of haemorrhagic dengue. But when the minister presented them to the press he corrected their declarations, based on his knowledge and their first observations given that, doubtless, they considered them to be politically inappropriate. Declarations by the specialists, having nothing to do with the interests of Salvadoran politics, place in evidence the lack of capacity of this minister to prevent the epidemic. The Salvadoran Institute for Social Security, for its part, was so worried about the rights of those who are insured by the ISSS vis-a-vis the rights of the trade unionists, that it continued in a situation in which there was no medicine because they could not introduce the modifications, at the appropriate time, which the new law of bidding and acquisitions demand.

    Finally, the week ended with one more defeat for the national football team. The Salvadoran team was defeated by the team from a small Caribbean island with an economy much smaller than that of the Salvadoran economy, but much faster with the best strategic ideas and preparations during a five-year period. The lesson is clear. One must recognize, however, that, on this occasion, the sports press was more cautious. National sports cannot go well when the country is going badly.

    The reaction of the Salvadoran population to this El Salvador, which the Flores administration does not tire of calling “new”, is to abandon it. Life continues to be so difficult in El Salvador that a good number of its inhabitants want to emigrate, as approximately three million already have. The transition offers them less than the risks which leaving one’s native land to seek prosperity and well-being involve—such things as are denied to them in their own country. The population has lost confidence in those who ought to help it to live. The population does not believe that El Salvador could be a new country to an extent sufficient for them to remain in the country. In this attitude there is a great deal of disenchantment and skepticism arising from the repeated proof that life is not viable in El Salvador.

POLITICS

    Last May, after public questioning by the founders of the Nationalist Republican Alliance (ARENA) was made public to the leaders of COENA, many things have happened inside that political party. Four months now after these complaints were registered, some changes have taken place in COENA: several ex founders joined the leadership structure of the party, held a National Convention and have begun a process of visits to departmental leaders of that party

    Apparently what began as a call for the restructuring of the ARENA party by a group of founders after the electoral disaster experienced by the party in the elections of last March, has taken on rather larger proportions which appear to threaten the immediate future of that right-wing political party. Recent news suggests that the power that Alfredo Cristiani left when he resigned from the presidency of COENA is the principal apple of discord. Ricardo Valdivieso, Mario Acosta Oertel and Walter Araujo (Araujo being the current interim president of party) are the three gladiators in this fight. In this bare-knuckled brawl, diverse interests arising from unequal groups have blossomed. The struggle for the presidency of COENA allows us to perceive not only the high level of nervousness reigning in the right wing party because of the electoral ascent of the FMLN, but the fragility of the difficult mixture of business sector interests which has been achieved recently among agricultural exporters, industrialists and bankers (groups which make up the ARENA party) is also reflected. Looked at from another angle, the struggle between diverse sectors for the presidency of COENA is at the point of breaking that tacit agreement between party members who are big businessmen who, in spite of their differences, have found in the official party a place which before anything else defends their interests.

    When it began, ARENA structured itself as a party of oligarchs who felt that their wealth was threatened by the blows of the revolutionary movement which covered the country during that period of time. Then, with the end of the civil war, a reconversion took place which consisted in placing the state at the service of the interests of economic groups which, Through ARENA, control the state apparatus. Nevertheless, in this placing of the state at the service of a specific sector, profits have been uneven to such an extent that, during their third period of office in the presidency, ARENA has contributed to making one of the big business groups (the one led by Alfredo Cristiani) wealthy. And this to the detriment of the others.

    But, as a result of the poor showing by ARENA in the recent elections the breaks and splits inside that party have been made public. These surfaced as contradictions between different groups within the party. Currently, discussions concerning who the ideal person for taking up the reins of this right-wing party might have left an imprint on the initiatives which ARENA can call forth from its position at the head of the state.

    The current struggle for control of COENA inside ARENA must be understood in this context. Ricardo Valdivieso who is presented as the ex founders most capable of recuperating the original ideals of this party of the right echoes the disenchantment of the agricultural sector which feels itself to have been marginalized with the arrival of the financial sector group, which provokes jealous reactions among the agricultural sector. On the other hand, Walter Araujo, who enjoys the confidence of Cristiani, is in sympathy with these last and the results of this round of contentions for power will determine, in good measure, the path to be followed in coming years by the ARENA party. For now, all sectors claim to be committed to respecting the party statutes and encouraging healthy competition together with promoting their own respective candidates among the rank and file.

    This last point—the topic of party rank and file—reinforces the hypothesis concerning what is going on inside ARENA. Until now, apart from verbal declarations and lightning-fast visits to departmental leaders, there is no true representation of the rank and file in discussions which take place inside the party in order to proceed with this re-founding of the party which is said to be what is sought; no attempt or intention to involve the rank and file in the process of re-founding the party is known to have been attempted. Along these lines, the problems of verticalism and a lack of connection with leaders of the rank and file is far from being dealt with. But this could not be any other way: ARENA is not a democratic party interested in the problems which the population is complaining about. On the contrary, it is an elitist and hierarchical party the members of which who have the most power can take advantage of the state structures for consolidating their own economic interests. It is precisely this vision of the state at the service of the party which has contributed to the escalation of corruption, favoritism and verticalism in public administration.

    Now, the big question requiring an answer at the present time is up to what point ARENA will continue to be the primary political force in the country without its initiating a process of internal democracy, a greater social sensibility and a firm commitment in favor of the struggle against state corruption. The population—the percentage of which went to the polling booths—seems to be willing to try out other political alternatives. In order to turn back this trend, ARENA must take the necessary steps towards a real internal change which might lead to party democracy and a new party more committed to national problems of greater force and strength.

    But for this change to take place, it is precisely the internal struggle among rival factions of the party for control of party decision making posts which must be resolved and overcome. In the measure in which the diverse sectors reconcile their postures, on the basis of being convinced that the current reality of the country imposes a redefinition of interests which defend the right-wing, they will possess a greater possibility for preserving the sympathy of the Salvadoran people and rebuild possible negative electoral results. Should the contrary occur, they would be condemned to a greater electoral failure, which the left can use for its benefit—if it plays its cards correctly.

    On the other hand, the current internal situation prevailing in the ARENA party points to the fact that it will be difficult to overcome the internal conflict and achieve the granite homogeneity which previously characterized this political party. Everything indicates that Cristiani will not place limits on his interests and will continue manipulating the scene from behind the shadow of the current president of COENA. And this presupposes a situation in which the possibilities for Ricardo Valdivieso, representative of the movement of the founding members of the party, becoming the president of COENA more difficult. Meanwhile, it may not be too far out of line to imagine a scenario in which Cristiani’s influence continues to weigh heavily is most pernicious for ARENA party interests in the measure in which he might wish to reconcile himself with the rank and file by offering to the national electorate new reasons for continuing to believe that the party can resolve its most urgent problems.

    At this point, then, there can no longer be any doubt that the movement of the founders is made up only of an internal phenomenon which seeks to rescue the party statutes and the ideal ARENA party member as was said when this movement began. Now it is more than clear that its leaders seek to use ARENA party power in order to shape things up, according to its point of view. For this reason, if, in 1997, the wave of retreats from ARENA rank and file did not signify any political costs for that right-wing party, in this new state of affairs it would imply a serious undermining of its credibility and image which is already seriously deteriorated in the eyes of the majority of the population. If to this is added the fact that the ex founders might declare that the party of Roberto D’Aubuisson has forgotten its ideals to the point of coming to form a new party structure, the continuity of the government party in power in the upcoming elections could be placed seriously in doubt. Now it remains to be seen how the different groups will deal with the problems posed for the survival of the party and how they will succeed in conciliating their interests with the demands of the population. And, of course, it remains to be seen how the FMLN will respond to the changes which might take place in the ARENA party.

ECONOMY

    Last July and August contradictory news regarding the behavior of electrical rates was published. On the other hand, at the beginning of July, the Minister of the Economy indicated that it would proceed to a gradual process of eliminating the subsidy on the consumption of electrical energy. Meanwhile on August 9, sources close to the electrical energy distributors declared that they would proceed to a reduction by 39% of the rates for service beginning in the month of August. Previously they were already operating on the basis of an increase of large proportions which, for the second trimester of 2000, would raise the rates by more than 50%. To the foregoing may be added the tendencies towards an increase in the prices of petroleum and towards the reduction of the levels of the hydroelectric dams which would increase the costs of electrical energy. In this context, it might be pertinent to review the situation of the electrical sector in El Salvador in order to propose possible contingency measures which might lighten the impact of the cost increases for the generation of electricity on the prices and income of the population.

    At the beginning of the month of July, the Minister of the Economy, Miguel Lacayo, made known the upcoming implementation of a program for reducing subsidies to residential consumers which would imply the elimination of the subsidy for those homes with a consumption of more than 100 kilowatts per month and a reduction of 25% on the subsidy provided to homes with an hourly consumption of less than 100 kilowatts. According to Minister Lacayo, the financial resources which would be freed with the elimination of the subsidy will be used for programs of rural electrification.,

    At this writing, the electrical energy rates have been increased by 52% with relation to the price in effect at the end of 1999, which raised it to the level close to 835 colones per megawatt hour. This increase has been absorbed by the Hydroelectric Executive Commission of the River Lempa (CEL), but, paying attention to the recently cited declarations of the Ministry of the Economy, this situation will change and so provoke heavy increases on the electrical energy rates and upon the amounts which residential consumers must pay for that service.

    It is in this context that, on August 9, representatives of the Electrical Energy Company of San Salvador (CAESS) announced a reduction in the prices of electrical energy to the consumer which would be on the order of 39% and which would enter into effect beginning on August 10. This is owing, at the same time, to the fact that the average prices which distributors pay for energy has diminished quite a lot, going from 835 to 560 colones per megawatt hour, which is a reduction of close to 33%.

    Faced with the already discussed increases in the rates for electrical energy (by more than 52%), the reduction in rates will only be registered at a level close to that existing at the end of 1999, while it might be expected that in practice the general tendency of the rates in the upcoming months will show an increase owing to the projected gradual elimination of the subsidy on consumption in residential homes.

    But if this were not enough, two elements exist which are not linked to political economy which could provoke additional increases in the tariffs: the deficit in the amount of water stored in the hydroelectric dams and the increases in international prices on petroleum. These elements would provoke a reduction in the capacity for generation by hydroelectric plants and, with this, an increase in the generation of electricity by thermal means, which implies greater costs, especially in this situation of rising prices for petroleum.

    According to the general manager of the Transactions Unit of CEL, Roberto González, by the end of the month of July a relative reduction in the levels of the hydroelectric dams was noted, and this was evident principally when the behavior of the Cerrón Grande dam was reviewed—given that it is the biggest dam in the country. This dam operates between a maximum level of 242 meters above sea level and a minimum of 228 meters. For July 26, the level of the dam was just 230 meters, very close to the level defined for its minimum capacity. On the other hand, for the same day in 1999, the level of the Cerrón Grande dam reached 236 meters above sea level.

    This lowering of the levels of the dams is owing to the interruption of the arrival of winter and, according to CEL technical analyses, currently the levels are found to be close to those documented for the year 1991, when it was reported that a serious drought was affecting to agricultural crops and also provoked a rationing of electrical energy of up to eight hours in the provision of electrical energy service (see Proceso 485 and 486). According to Gonzalez, it is expected that during the winter season it will become normal only at the beginning of September, which would commit the level of electrical energy by means of hydroelectric means for the dry season.

    The implications of the foregoing are, on the one hand, greater costs for CEL, which will increase the proportion of energy, which is generated by thermal means, which is to say, by means of combustion of fuel oil. Given the fact that the elimination of the subsidy on the consumption of electrical energy is being projected, a possible generalized increase in the electrical energy rates might be expected and this would affect businesses as much as residences and would be felt especially between the months of December, 2000 and April, 2001. As a consequence, inflationary pressures would be felt which would begin with electricity rates and which, by this means, would also affect costs to businesses and so giving rise to a new increase in the prices of products as occurred in 1991.

    Given this reality, it might become necessary to review the proposal for the reduction of subsidies made by the government and also review the costs for the distributors’ operation in the provision of electrical energy, especially with regard to fixed monthly costs to consumers of electricity. It might be worthwhile to clarify here that, in addition to the cost of energy, the prices to the consumer have two other components: the charge for attention to the client (between 10 and 14 colones depending on the distributor in question) and the charge for the use of the network (between 6 and 9 colones). The foregoing implies that all consumers pay a fixed charge between 16 and 25 colones solely for being connected to the electrical energy network. It is completely reasonable to call for a review of these costs in order to deal with the possible increases in electrical energy that are to be expected in the upcoming months.

    Perhaps the costs of energy which private enterprise generates and which is sold to CEL would also be reviewed, especially the Nejapa Power generator, which has already pointed out that for the General Superintendent of Energy and Telecommunications, Ernesto Lima Mena, as selling energy at excessive prices (Proceso 865). This measure might complement the efforts of the Minister of the Economy to reduce the profit margins of the petroleum companies and, with this, the impact of the international price increases of petroleum on prices. The current economic situation imposes a review of rates for basic services (including the telephone company), owing to the fact that it is more and more evident that the contractual conditions and the fixing of prices which the government agreed upon with the businesses involved which were beneficiaries of privatization, unnecessarily prejudices consumer interests.