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Proceso 923
Octubre 18, 2000
ISSN 0259-9864

INDEX

Editorial El Salvador is a very dangerous place
Politics State versus market
Economy The fiscal deficit and tax problems
Society A conscious option?
 
 
 

EDITORIAL

    The mass poisoning with adulterated alcohol which occurred recently in El Salvador is proof that the Salvadoran state can no longer protect its citizens. The citizen consumer is once again vulnerable and without protection facing a voracious and unscrupulous, and therefore immoral capitalism. This time it concerns those who make and distribute adulterated alcoholic beverages. Their ambition and immorality have caused the deaths by poisoning throughout the national territory in a much greater number than hemorrhagic dengue. Nevertheless, those deaths have not been taken seriously, doubtless, on the one hand, those who died could be called common drunks and on the other, because they were older people who had been marginalized by a society marked by cruel and inhuman inequality.

    The Flores Administration, which is responsible for the public health of the Salvadoran people, seems not to feel any responsibility. The Ministry of Health does not control the making, distribution or consumption of alcoholic beverages and particularly this kind of alcoholic beverage, which is a high-risk product. Nor does the ministry nor the economy exercise any control over the quality of what is distributed and consumed. Once the mass poisoning had taken place, they have not even been able to identify the source of the deadly poison and, consequently, this kind of death spread throughout the country. Neither the police nor the public ministry has been able to identify those responsible for this mass poisoning; they have captured only two shop owners who bought the alcohol without knowing what they were buying, nor what they were selling to their clients. El Salvador is a dangerous country for its own people and for those who come from outside because of its elevated level of violence, epidemics such as hemorrhagic dengue fever, because of kidnappings, poisoning and, in a word, because of the manifest lack of capability of the state to guarantee the health and wellbeing of its citizens.

    One can almost begin to perceive that it will be practically impossible to identify those responsible for the deaths of more than one hundred persons who drank the poisoned alcohol. And this is true additionally because of the lack of security owing to the lack of sufficient control by the government, because impunity exists and is supported not only by the judicial branch of government but by the other two branches of government, which do not dare to investigate, to require accounts to be rendered or to administer justice. One of the sources of judicial insecurity is to be found in the Supreme Court itself and in the judicial structure which depends upon it.

    While the Attorney General’s Office and the legislative deputies found the ideal solution appropriate to those who continue to believe that governing consists in passing legislation and approving a “temperance” law, spokespersons for the police continue putting forth the baseless hypothesis concerning the poisoning, as is their wont; President Flores holds inadequate legislation as the faulty party together with the insuperable vice of the old drunks. In reality, what is urgent is the task of identifying the source of the poisoned alcohol and who distributed it. But this implies investigation and the identification of those responsible, which is precisely what this administration refuses to do, as it also refuses to do in the realm of human rights and other spheres of national life.

    According to the Salvadoran Association of Distillers and Liquor Vendors, since 1996 businesses and people have been selling alcoholic beverages without any control whatsoever by the authorities. It is as if those who produce and distribute ethyl alcohol (for human consumption) as well as other prohibited mixtures, bottled in recipients which are not appropriate for human consumption and touting false information in labels as to content and proportions of ingredients. These uncontrolled products are not sold even with authorization, neither are they sold in places which are not authorized or controlled by health authorities, whose task it is to be responsible for this kind of control. But this is not all. The sale of these products does not involve the payment of taxes, and there is the presumption that the Ministry of the Treasury might easily add up several hundreds of millions of colones for this kind of tax evasion. Methyl alcohol and methanol, apparently the cause of the poisoning, is imported into the Central American region, but neither is this process controlled by the respective authorities. So it is, then, that this disorder and licentiousness, for which the present administration is the final responsible party, are the factors which have opened the door to mass poisoning.

    It is not, then, entirely true that the current laws are inadequate—the argument with which President Flores intends to justify his administration’s irresponsibility. But let us suppose, for a moment, that his were the case: the health authorities who are directly dependent upon the executive office, have had more than enough time to call for a timely reform. However, they waited, instead, for this mass poisoning to take place. It is not the case that the law is insufficient, but that the present administration has not fulfilled its responsibilities, falling, by this negligence, into a condition of illegality on this score. When the law for the control of alcoholic beverages was promulgated in 1996, it gave the administration three months to emit the enabling regulations for it to enter into effect. This, however, it did not do, as it has done with other laws, which are not applicable because they lack the respective enabling regulations. The reasons which President Flores gives for this lacuna in the regulations are unacceptable. If the bill encompassing the enabling regulations had been in contradiction with other secondary laws, what it should have done is to make the legislation harmonious and not simply resign itself not to regulate this activity. The consequences of such sloppiness and irresponsibility are here present. In any case, what is important is the application of the law, state control and the guarantee of public health; this is precisely what the last series of ARENA administrations have not been able to guarantee. Moreover, they have not done so to such an extent that the current crisis is now upon us and they have still not been able to identify the source from which the deadly poison is being distributed.

    To hold the vice of the poisoned persons who are now dead responsible for their own poisoning and death (blaming the victims) is a demonstration of very poor human quality, entirely lacking in Christian sentiment with respect to the life of other persons. Without doubt, those who drank the poisoned alcoholic beverages suffer from a degrading vice. But this in no way justifies a state of affairs in which they can be poisoned with impunity. They drank the adulterated alcohol which had such an effect upon them because society has marginalized them in such a way that they did not have the means to buy good quality alcohol. Rich alcoholics live an equally degraded lifestyle, but they do not run the risk of dying from methanol poisoning. But a state which truly has its focus on the concerns of human beings would concern itself with helping alcoholics leave their habit by means of specialized programs and for those who cannot clean up, minimal guarantees might be offered. This is doubtless too much to ask of a state which only marginalized, impoverishes and casts aside such persons but which does not concern itself overly much with situations in which people are poisoned with impunity. It is not a “temperance” law which El Salvador needs, but a state and administration responsible for the lives of its citizens.

POLITICS

    Up until a short time ago, the dogma of the market as a good and the state as a harmful factor—which was the centerpiece of the discourse of right-wing leaders at a national level—was a topic vetoed for public discussion. Those who looked down on the state as pernicious could not imagine that the state might perform some important role in national life beyond creating propitious conditions for the sale of public assets. After the signing of the Peace Accords, government administrations dedicated themselves, in good measure under the auspices of international organisms such as the IMF and the World Bank, to the privatization of public goods and assets and to a campaign against the prestige of those who still advocated a transformation of the state apparatus which did not lessen its function as guarantor of the wellbeing of the populace. The thesis which argues for the end of history set forth by the triumph of capitalism over communism had held in forced silence those who doubted the omnipotent and omnipresent market.

    This particular period also impeded the possible relevance of a denunciation against some particularly untransparent privatization processes. The transformation of what was known as a public monopoly into a private monopoly to be operated by a small group of persons led by high state functionaries of the time could not be detained. So the country began the process of opening up its markets with private monopoly and poor level of conviction as to the identity of its institutions. In this context, not only could a clear difference between state interests and those of the leaders of groups not be established but the state also could not count on a regulatory context by which effective control of private activity in the market could be maintained. This is one of the reasons which explain the fact that state intervention is conspicuous by its absence when it comes to national tragedies linked to market problems, monopolies or poor quality products. Today the population of El Salvador suffers from the effects of the dogma of the market and from the inefficiency of the functionaries charged with looking out for its welfare.

    With the growing international conviction concerning the limits of the market, however, the social, economic and political results of the privatization processes and their repercussions ought to be analyzed together with the role which the Salvadoran state ought to play in the national market—after the sale of state goods has been almost completely accomplished. The need for this review or examination is owing not only to the continuous increase in the price of energy, telephonic and financial services to the consumer—contrary to the promises of the defenders of privatization—but also because of the current magnitude of deaths from hemorrhagic dengue fever and poisoning from adulterated alcoholic beverages. What the high cost of services (previously offered by autonomous state enterprises) and the deaths during recent months have in common is that they occur in the context of a state which is weak and which, in addition to being led by incompetent functionaries (one should examine, for example, the responsibility of those in charge of public health in the deaths from dengue fever and the consumption of adulterated alcohol) still does not understand its role in the national reality of the country.

    The uncertainty and inconsistency in ideas concerning the role of the state in national life can be seen clearly reflected in the relationship between the executive office and a good portion of society on this topic. It is commonplace to hear businessmen as well as sectors of the populace at large demanding state intervention in the solution of multiple problems. In this way one could continue thinking that the state ought to be the jumping off point for the resolution of the economic problems of the population.

    The responses of the executive office to these demands have not always been coherent. On the one hand, official discourse attempts to separate itself from a conception of the state which intervenes in the economic life of the country. It is this conception which predominates in the speeches of high government functionaries on the topics of free market and free competition. They present it as the best alternative to the activation of economic life and the encouragement of development. However, some governmental decisions contradict the discourse in this framework. In fact, several governmental interventions in benefit of specific businesses have been called into question. Neither, in this sense, can one understand the most recent demands by business in favor of economic reactivation—which are supported by the president. If the desire is to be coherent with the idea according to which the market resolves everything, the present administration ought not to make any intervention for reactivating the economy. These appear to be decisions in favor of certain groups rather than in favor of the country as a whole.

    One should understand, in this way, that state intervention in national life cannot be subjugated to the economic interests of some few sectors. In reality, in flagrant contradiction to the reiterated demands for minimal state intervention, some businessmen continue to make use of friendship and relationships with the sectors in power in order to orient some governmental actions for their own benefit. Practices of this nature not only do violence to the much-touted free market but also undermine the bases of democratic society.

    The role of the state as guarantor of social stability ought not to be understood exclusively as service to a privileged group. Decisions taken ought, moreover, to reflect the interests of the majority of the population and take into consideration the opinion of the citizens. It is to give way to inconsistency when one speaks of “political democracy” without also posing a mechanism by which economic decisions can be democratized.

    In this way, the initiation of a discussion on the role of the state in the concatenation of situations in El Salvador at the present time is an imperative. If the privatization processes and the opening of the markets were not consulted, society cannot continue patiently to suffer the effects of the decisions taken by state functionaries who have already left their posts. The current situation demands a state made up not of technocrats, as President Francisco Flores aims to construct in the make-up of his government cabinet, but one which encourages democratic life, disposed to play an active role in the economic life of the country.

    In order to reach this vision of the state, some of the prevailing dogmas must be laid aside. The prevalent demand for more market and less state ought to be the subject of some review. Neither is it a question of eliminating the market in order to favor the state. Experience shows that both the market and the state have their limits. Upon this combination of harmony and equilibrium depends the advance of society. In El Salvador, a debate is still pending on this important topic. The left as well as the right are heir to visions and tendencies based on trite and hackneyed formulas which it would behoove them to replace with analyses together with more critical and open proposals for change in social and economic thinking.

ECONOMY

    The fiscal deficit and the balance of trade deficit have been the two factors which have been most consistently responsible for the lack of macroeconomic equilibrium throughout the last two decades. While it is evident that prices to the consumer have stabilized and that along with this stabilization inflation rates have been reduced, the same has not come to pass with the fiscal deficit and the balance of trade deficit: for 1999 the fiscal deficit for the pubic non-financial sector reached 2.2% of the GNP while the balance of trade deficit rose to the surprising figure of 12.8% of the GNP.

    Were it not for the family remittances and, in lesser measure, for the international loans in the form of negotiable bonds, there is not the least doubt that the Salvadoran economy could not maintain its viability in a context such as the current one. Family remittances compensate for the balance of trade deficit, reduce the impact of this deficit upon the balance of payments, increase net international reserves, stabilize the exchange rate and prices to the consumer and increase consumption and production. On the other hand, the international loans in the form of negotiable bonds are a source of additional resources for the government which, in a state of affairs in which the fiscal deficit is increasing, it is essential to finance public spending. The explanations of the government entity responsible are to be found, in large measure, in the characteristics of the economic policy implemented by the last two ARENA administrations, of which a brief summary will be presented below.

    On the question of public finances, the tax reform initiated by the Alfredo Cristiani administration (1989-1994) is the most noteworthy. In it the solution to the problem of fiscal deficit is posed in such a way that in the context of stabilization policies, a policy of income would “seek to simplify the tax collecting mechanisms and increase efficiency in monitoring and control”. By the same token, the following measures were proposed: the elimination of taxes with “elevated administrative costs” or those which unnecessarily affect income or “de-incentivize savings and investment” As for public spending, it was proposed that, although the reduction of the fiscal deficit is important, this does not imply that a larger and more efficient category for social services was not being sought, with an emphasis on the satisfaction of the needs of the poorest groups”.

    In practice this discourse translated into the tax reform which has been marked by not having significantly increased the tax burden and, moreover, for having encouraged a reduction in the burden on business owners at the cost of increasing the burden on the consumers. Owing to the fact that there was no significant increase in taxation, neither were conditions created for a sustained reduction in the fiscal deficit—in great measure because, at the same time, new taxes were created, others were either eliminated or substituted. The Value Added Tax (IVA) was introduced as a substitute for stamp taxes and has become a principal source of financing for tax income (representing, as it does, 63% of the total); the tax law on income was reformed, highlighting the fact that the tax on corporations or private enterprise was reduced by half. Taxes on exports of coffee, sugar and shrimp were eliminated as were taxes on inheritances and a process of reducing taxes on imports and customs tariffs was begun.

    The positive effect that the introduction of IVA could have had was lost in the shuffle with the remaining measures which came along with it. The process of lowering customs tariffs has also stimulated the growth of imports and the broadening of the trade deficit, a point to which we will return later. The tendencies in the tax burden have been varied and after the initial increase with the introduction of IVA, it came to represent 12% of the GNP in 1995 and 10.8% in 1999.

    Public spending has also felt the effects of change: it was reduced between 1995 and 1997, but increased between 1997 and 1999. However, as opposed to the tax burden, the most recent tendency in public spending has been the increase, given that it went from 12.8% to 14% of the GNP. This increase in the pressure of spending on the fiscal deficit has been principally owing to an increase in spending on public security, justice administration and spending in education and health.

    The combination of the tendencies exhibited by the tax burden and spending explains why the fiscal deficit has increased because while it reduced the total of tax monies collected, it also increased public spending, which provoked a situation in which the difference between income and costs is increased until to reaches the already mentioned level of 2.2% of the GNP.

    In the balance of trade something similar has occurred: the difference between exports and imports (which are the income and expenses of the case) has increased owing to the second and has grown in greater measure than the first. This is owning to the fact that, on the one hand, traditional exports are sold at low prices (especially in the case of coffee), because there has been no diversification in the production of exports and stability in the exchange rates — which, at the same time, is a key factor in containing inflation—which lessens the competitivity of exports.

    On the other hand, as has been pointed out above, the lowering of customs barriers has been favorable to imports which have increased with greater facility, to the degree that they account for more than 63% of exports. In order to explain this situation, it would suffice to examine the dynamic of the period of 1997 and 1999: while exports grew by 635 million colones (3%), imports grew by almost 3,000 million colones (9.1%). This is added to a pre-existing trade deficit provoking a situation in which the deficit in the trade balance reached 13,886 million colones, or the equivalent of 12.8% of the GNP.

    As might be inferred from this macroeconomic situation, it is not as encouraging as the last two administrations have wished to make us believe. Price stability for the consumer, the exchange rate and economic growth are explained principally as a function of family remittances, which represent close to 11.3% of the GNP and are the principal category which neutralizes the trade deficit, allows cashing liquidity to the receiving families, raises consumption and stimulates economic growth. The loans in the form of negotiable bonds (international as well as national) also play a role, financing the fiscal deficit and providing resources for social programs and infrastructure (Proceso, 923).

    The current administration appears to be failing in its reading of reality when it alleges that its economic policies have eliminated uneven balances in macroeconomics and when it carelessly lays aside the possibility of adopting realistic policies which respond to fiscal and trade problems. Even the dependency upon external cash flows has been fomented by the administration itself, to such an extent that it has not implemented serious programs for industrial reconversion, diversification in agriculture and livestock and, in general, for the productive diversification which would permit the generation of greater taxes and exports.

    These deficits have been pointed out since the beginning of the current decade and, in reality, are nothing new to government. The problem is that, in its dependence upon external cash flows of resources, it has not felt the pressure necessary to force it to adopt policies for the reduction of its dependency on external factors and upon the increase of the tax burden. Nevertheless, external resources will not always be available. It is for this reason that measures are being imposed on both planes: stimulation of production and jobs in sectors which generate exports as well as a “reform of the tax reform” in the sense of increasing the tax burden on the business sector.

SOCIETY

    Two weeks ago, when the news media began to cover the situation of the poisonings from adulterated alcohol in San Vicente, almost no one thought that the deaths documented for this reason were something more than as a consequence of the unfortunate, deliberate and excessive consumption of liquor—something very common in our country. There has always been an automatic rejection, a species of social reaction of condemnation of those who, consciously, have fallen prey to some vice. And in general, that reaction of condemnation is followed by a certain indifference towards medical treatment and rehabilitation of those affected. It is perhaps for this reason that during the early days of this tragedy, the deaths in San Vicente did not worry local authorities, the Ministry of Health or the President of the Republic. The fact is that no one imagined that this carelessness—whether it was justified or not by any kind of social condemnation—was suddenly interrupted by a growing number of deaths that followed from those in San Vicente. Suddenly, the situation began to take on the characteristics of a national emergency and was a fact for which, before condemning those who drank the adulterated liquor, it was important was the assigning of responsibility for the distribution of the product.

    Two weeks have already passed since the production and distribution of the adulterated liquor was discovered—liquor which did not comply with all of the requisites for health and safety imposed by law—the Ministry of Health still has not proceeded to determine clearly who ought to pay for the crime committed. In spite of the fact that the Attorney General proceeded with relative speed in localizing, searching and confiscating the adulterated liquor in the businesses which produced it, Salvadorans still cannot figure out who ought to respond not only for the large number of deaths, but also for placing the population of the country at risk in putting such a product on the market, a product which, in good measure, contained a substance fatal to human beings. It is precisely on this point in which one can locate the real importance of the case of those poisoned by methanol (methyl alcohol, permitted only for industrial use): again, although the paths leading to the application of justice are clearly defined, it would seem that no one has the nerve to set out upon them and go on to the final consequences.

    It would be a mistake to reduce the incidence of this case to the 127 deaths documented up through Monday or the existence of well-organized clandestine networks for the distribution of this product. Logically, this is a case, the sequel of which has gone beyond all rational bounds, but even so it does not cease to be an extreme example of the consequences to which one can arrive in the excessive discretionality with which many businesses operate in our country. El Salvador does not enjoy even the minimal mechanisms for assuring the average consumer of the existence of quality products on the local market. Rather, the few institutions which must lead the fray in this kind of situation—i.e., the Ministry of health and the General Control of Consumer Protection (DPC for its initials in Spanish)—could do nothing more than react with surprise and confusion as they contemplated these facts which, doubtless, have gone beyond all reasonable preventive measures. Above all because these institutions, and especially the DPC, act on the basis of the fact that the population will quickly denounce the violations of its rights as consumers. The problem is that this rarely happens.

    The fragile institutional structure which characterizes the weak democratic structures in formation of our times works both as cause and consequence of the problem posed above. Illicit practices are common in national businesses—and are not limited to the production of poor quality products but also include poor services—and do not tend to be controlled by the authorities and only in very few cases are sanctions imposed upon those which are discovered. The discussion of legal norms which regulate the functioning of national private initiative easily bog down in the clash of interests which, by any stretch of the imagination, are inimical to the wellbeing of the populace. And if this were not enough, big companies have all the resources necessary to rebut any complaints which could directly involve them in the premeditated commission of crimes. In this context such acts as the adulteration of alcoholic beverages and the surprising capacity for distributing them in the smallest bars and stores of the country, and even tolerance towards businesses which monopolize specific services or products and affect the pocketbook of all Salvadorans in their push to make their supremacy prevail in the marketplace.

    On the other side of the coin, this systematic cover-up and deficit feeds into one of the most deeply rooted practices of the average Salvadoran: apathy towards the improvement of his or her own situation within society. In the context of a situation in which the last to receive benefits seems to be the common citizens, the attitude of bringing complaints—that disposition to demand maximum quality from what society provides, finds very little space in which to develop itself. The mechanisms for the resolution of conflicts, above all of those in which the clash of interests of big producers against small buyers or users, almost never encourage solutions in which the error committed takes on its real dimension—i.e., finding a way so that the whole population does not continue to suffer these ills. Moreover, the conditions in which a good part of the population of the country live significantly undermine its capacity for aspiring to the best products and services. Finally, minimal guarantees neither exist for the population, nor does the population feel motivated to make its rights prevail, nor are they offered even the minimal conditions for acquiring products in which any great confidence might be had as to their quality.

    Definitively speaking, in the case of the distribution and sale of adulterated alcoholic beverages throughout the country, the state has once again presented categorical evidence of its incapacity—and even its lack of interest—for taking charge of guaranteeing the wellbeing of the population. It is true that the persons who opt to consume these substances do so with a degree of consciousness that permits them to foresee what could happen to them if they continue with these practices. But it is also so in a country where free enterprise is many times synonymous with deceit and swindle, that degree of consciousness as much necessary for harming one’s own body as for procuring good health is reduced to a minimum. For this reason, ill do those who dedicate themselves to condemning those who decide to drink stronger alcohol than they can find on the market given that, in theory this product should not cause sudden death or, in the best of cases, should snuff out their life and lead to a degree of deterioration of the consumer’s body. Each is free to consume what he or she wishes. This is, in fact, one of the principles upon which the Salvadoran state is build. But this freedom ought to coincide with the overwhelming presence of the capacity of the state to guarantee conscious options to the population which it serves. To the contrary, a priori condemnation will continue to be the excuse of those who can do the least and the effective defense of those who control the market.