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Proceso 955
June 13, 2001
ISSN 0259-9864
 
 
 
 
 

INDEX

Editorial:  One more failure of the Attorney General’s Office
Politics:  Justice's hypocrisy
Economy:  The social security in El Salvador
 
 
 
 
 
 

EDITORIAL

    It is necessary to mention that, immediately after the case was made public, in July of 1997, the  Attorney General’s Office did not hesitate to assert that “according to the audit performed by the Financial System’s Superintendence in the financial organizations FINSEPRO and INSEPRO S.A. de C.V., Republic’s Attorney General Office has given instructions… it is determined that Mr. Roberto Mathies Hill and other members of the Directive Boards of the mentioned organizations have committed the crime of fraud against the public economy”. No other crime was mentioned on this occasion. It was about an accusation that seemed to be firm. The ones who were directly responsible of administrating the millions of colones that were defrauded, were no other than Roberto Mathies Hill and some members from the Directive Board who belonged to the financial organizations audited by the Financial System’s Superintendence.

    The attitude of the most important news media of the country was as firm and as secure as the accusation from the Attorney General’s Office was. The media did not skimp on efforts to establish the guilt of Mathies Hill and his collaborators in the millionaire fraud. El Diario de Hoy established the “route of the fraud”. That is, the most important stages through which not only the deposits from the clients were illegally received in INSEPRO, but also the way this organization —when it faced cash problems— received funds from FINSEPRO, in exchange for payable checks to other banks. During this time, it seemed as if there were no doubts about the responsibility of the administrators and the president of FINSEPRO —the same ones of INSEPRO— for the fraud. This certainty was transmitted to the society, and the most critical sectors witnessed the rebirth of one hope: at last the economic and the political power would be no obstacle for the application of the law.

    Four years later, Roberto Mathies Hill has been declared innocent of committing fraud against the public economy. The other members of the INSEPRO and FINSEPRO Directive Boards —whom the July 1997 Attorney General’s Office report refers to— were never prosecuted; and, even worse, almost nobody knows their names. What could we possibly say about the certainty of the Attorney General’s Office when it started with the investigations in regard to this case?  Did they have strong evidence against Mathies Hill and the others or were they not willing to take the process to the last consequences? Or, on the contrary, such evidence did not exist and an innocent man was put behind bars, where he misspent four years of his life?

    As for now, it could be said that the certainty shown by the Attorney General’s Office was a fraud against society. It is not the first time that the Public Ministry compromises himself to see that the law is obeyed and tumultuously fails. Even worse, its failures are so many and occur so frequently, that it seems as if it was all about premeditated actions to free the accused. Whether if this appreciation is true or not, there can be no doubt that every day there are less reasons to trust in the compromises of the Attorney General. The security that the judicial authorities show, regarding to the solution of crimes, such as kidnapping, rape and murder, is also losing its meaning.

    There are two possible interpretations regarding the Mathies Hill case, and neither one of them is encouraging for the institutions of justice. The first perspective is that they had enough evidence to acquit the main suspect. However, the conditions to exonerate him were deliberately created  —its last ingredient was the selection of the jury. It means that, voluntarily, the public prosecutors did not comply with their technical and juridical obligations. If this is what actually happened, it does not predict a positive situation for the Salvadorans, since there will always be people using their influences to evade justice. The second perspective is that they did not have enough evidence nor the ability to gather others that would prove the responsibility of Mathies Hill. In other words, they had a case that, beforehand, was condemned to failure. Then again, this is serious since not just an innocent person is sent to prison —which is already degrading—, but it also opens the possibility for any citizen to be publicly accused (perhaps unfairly) without enough evidence.

    Both interpretations do not have to be excluding. Incompetence has never been an enemy of the lack of good will, such combination could be explosive. This new failure of the Attorney General's Office makes you doubt even more about the qualification of this institution. They are not sending a positive message to the society when criminals walk away free because of their influences, or because of the judicial authorities’ incompetence. It is not healthy to raise false expectations with cases that —no matter how important they might be for the public opinion— are previously condemn to failure, due to substantial deficiencies throughout the investigation and the gathering evidence process.

    The Attorney General's office is promoting that "everything is valid" and that there is nothing wrong with committing crimes. "If the people responsible for serious crimes walk away free, why would  they make me pay for a less important fault": this is the philosophy that is being promoted through the Attorney General's Office mistakes, even if its authorities pretend not to be aware of such situation.

    The performance of the Salvadoran judicial system leaves a lot to be desired. During the recent trial of the INSEPRO and FINSEPRO case, President Francisco Flores admitted this situation. After declaring that he wanted to express his solidarity with the victims of the millionaire fraud, he accepted that this trial was a test for the judicial system. That is the reason why, if we stay close to the results, we could say that the system has failed the test. The worst financial fraud that this country has known threatens to be forgotten, without determining the culpability of the responsible ones. This leaves the society astonished with a great amount of doubts.

    Regarding this new defeat, there are the ones who blame the conscience jury. The same happened with other cases, where different members of the jury, who belonged to evangelical groups -sheltered under their faith in the divine justice-, have released the delinquents who have made their innocent victims suffer. Based on this reasoning, the Republic's Attorney General, Belisario Artiga, together with the Minister of the Government Francisco Bertrand Galindo, turn into the main symbols of the new crusade against the juries. They think that, generally, the citizens are not prepared to participate in the administration of justice in this country. The practice of the jury members would be a part of what these officials usually call "laws for the Swiss", which should not be in force in El Salvador. For them, it would technically demonstrate that the Salvadorans are not mature enough to deal with such responsibility.

    It is evident that the formerly discussed argument does not resist the least critical analysis. On the contrary, it is a slap on the face for the citizenry. The officials, in order to cover up their poor performance on the preparation of the cases that they bring to court, blame the jury for their own failures. Instead of reading the jury's verdict from the society's rejection perspective to the brief trials that these officials usually prepare, with the help of the sensationalist press, they want to take away from the society one of the few spaces where they can still talk about participation.

    In summary, what these officials do not want to confront is the society's accusing eyes, which claim for what they have done to the application of the national justice. In this sector, the Republic's Attorney General Office has shown shocking inefficiency levels. That is why it is necessary to make the jury responsible for their own failure in the FINSEPRO-INSEPRO case. However, a jury does not have to condemn a person if not even the Attorney General's Office was actually convinced of his guilt.

    In addition, instead of blaming the jury for the verdict in the millionaire fraud case, the people responsible for the judicial apparatus should take it as a lesson —that is if the jury's decision was fair. Because if a neutral jury (randomly elected) is not convinced about the guilt of Roberto Mathies Hill —despite the strong impact that this scandal had in the country and in the citizenry’s opinion—, it means that the Attorney General's Office was incapable of doing its job.

    At this point, we cannot tell if the case's public prosecutors have flawlessly performed their duties. Certain journalistic information about the Attorney General's Office allegations revealed how condescending they seemed during the trial. Certainly, one of the public prosecutors seemed more worried to reveal the professional background and the prestige of Mathies Hill than to convince the jury about the reasons why he should be convicted. In this sense, the obvious happened: the Attorney General's Office did not know how to find substantial reasons that could help to incriminate Mathies Hill for the millionaire fraud: the jury gave him the benefit of the doubt. Maybe even the members of the jury were influenced by the "prestige" of the accused, and they chose to give him one more opportunity.

    Similarly, the officials should not act as if they were appalled by the verdict, because the jury's decision is perfectly synchronized with the treatment that is usually given to the country's  upper class delinquents. Otherwise, the Attorney General's Office should explain why it has not been able to identify the people responsible for the telephone calls, and for the altered alcohol intoxication deaths. It has not been able to find the whereabouts of the people responsible for the fertilizer's robbery either. In this sense, the verdict of the FINSEPRO-INSEPRO case does nothing but perpetuate the old tradition of a justice system that protects the worst criminals.

    However, something very peculiar happens with this case; it reveals that the accused are treated accordingly to their social status. It is interesting how some reporters have handled the information during the trial against Mathies Hill. Differently from what usually happens with other accused, when the press has been the space in which the sentence is dictated; or where, at least, the judicial system is lashed because of presumed senseless decisions that favor the criminals —remember the cases of Parada Grimaldy and Toño Chiches, among others—, in the Mathies Hill case the attitude of some media has been different. Despite the efforts to be objective, generally, they have shown an sudden respect for one of the mainly involved ones in the millionaire fraud. Some journalists have even refered to Mathies Hill as "Mr. Mathies". Obviously, they never said "Mr. Toño Chiches" or "Ms. Grimaldi".

    On the other hand, we also have to think about the silence of the ANEP about the acquittal. Unlikely to what usually happens with the criminals who are not involved with the business elite —when the ANEP usually delivers press releases to condemn the judicial system and demand an agile performance from justice—, in this case we have witnessed an absolute silence. The ANEP has not delivered any press release denouncing the result of the process against Mathies Hill. What probably happens is that the upper class side of the society, in its silence, is celebrating the acquittal of Mathies Hill from one of the most serious frauds committed in El Salvador.

    All of this reminds us of the hypocrisy and the double morale when it comes to the application of justice. Even if a different opinion is promoted publicly, the Salvadoran elite is exempt of being touched by justice. In this sense, more than being surprised by the performance of the public prosecutors, we have to understand that they fit perfectly into the logic of the economic power that justice has not been able to reach yet. The jury’s decision responds to the logic of a judicial system that is very condescending with the crimes of the elite.

    In El Salvador, the social security emerges as the result of the influences of the worker's international movement, and from a national favorable political moment. With the promulgation of law initiatives and the creation of the Salvadoran Social Security Institute (ISSS, in Spanish), in 1949, the incorporation process of the social security in the employer-worker relation starts, even though the social security benefits are limited, in the beginning, to health, to incorporate later the pensions for the handicapped, the elderly and death (IVM, in Spanish).

    Almost fifty years after issuing this law, the Salvadoran social security system has been sensibly reformed. Benefits such as health and pensions were set apart, which also meant a reform to the pensions system that went from a shared system to individual accounts administrated by private companies known as Pension Funds Administrators (AFP, in Spanish). The justifications of the reform were always —and still are— rhetorical: the shared system was going directly to bankruptcy, the contributions to the workers' account did not receive financial profits, and the system’s retirement options generated "pernicious" attitudes, among other excuses.

    We did not count with a complete study of costs and benefits, that would make a comparative analysis between the model of individual accounts adopted before other options, such as: a combination of the shared system with the individual one, or even a shared system with substantially improved administrative-financial measures. It is worthwhile to mention that, in the end, the law that was approved in the Legislative Assembly did not match with the proposal presented for discussion. This proposal was used to make a comparative analysis that, after some changes, it was no longer suitable.

    However it was, in the present the pension system reflects ambiguous situations, since its coverage has spectacularly enlarged (twice). Despite of it, at the same time the costs paid by the worker have also increased, and the high fiscal costs that the reform will bring have been exposed. These elements turn the subject into a matter of discussion —whether if it was suitable or not— at least from both the consumer’s right and the fiscal policy perspectives.

    Three years after the preventive system’s reform, and in a poorly improved context (numerous sectors of the population are traditionally excluded from the social security service, because of certain public policies), it is worth it to reflect about the social security’s situation in El Salvador: its history, the reform, and its perspectives, especially the ones related with the pension system.

The birth of the social security system

    During its first years of existence, the social security coverage reached only 3.4% of the Economically Active Population (PEA, in Spanish). This number was eventually increased until it reached 15.4% by 1979, 25 years after the social security system was created.

    Practically ever since its creation, and with the eventual increase of the social security services, the administrative needs and its logical problems have also increased. In the early seventies, a study performed to the ISSS pointed out the following aspects: bureaucratization in the superior direction, state and employer’s morals, weakness in the planning area, inefficient use of the resources, scarce coordination and administrative deficiency. Curiously enough, definitive measures were never taken to correct that situation, not even during the unavoidable bankruptcy that afflicted the system by the end of the nineties.

    In regard to the social security service, during the two first decades, the social security tax was a 10% from the salary, which was to be distributed between the employer, the worker and the State as follows: 5% the employer, 2.5% the worker and 2.5% the State. By the end of the sixties, these proportions changed to 6.25%, 2.5%, and 1.25%, in the same order. Before the reform, the State's contribution had been eliminated and the employer had to pay 7%, while the worker paid 4% (from which 1% was for the IVM, and 3% for the health sector).

    It is necessary to mention that the beginning of the social security in El Salvador was through the ISSS. Other public employee's, Armed Forces, and housing subsidy initiatives were added later. None of these initiatives, however, has reached the importance of the ISSS in terms of national coverage and services.

The social security in El Salvador after the reform

    During the early nineties, a debate about the need of a reform in the pension system started. The objective was not aiming to improve the coverage and the benefits, but to achieve the State's reorientation programs goals (privatization). This meant to affect one of the main components of the social security, which was until this moment in the hands of the State: the IVM pension. Technically, the reform meant the opening of a new, wide and promising field of private business activities.

    Without the intention to deny that the traditional system was full of deficiencies that would have had to be corrected to guarantee its sustainability, it must be said that these did not necessarily justified such reform, just as it has been implemented. Some of the most notorious problems that the Salvadoran social security faced before the reform were: the system's narrow coverage, high social and administrative costs, inequitable coverage, the funds’ low profitability, and the State's lack of efficiency to provide social security services. Of all these aspects, only the first one has been overcome.

The social security reform

    On December 20th.,1996, the decrees that made possible the pension system’s reform were approved: The Pension Savings System Law, and the Pensions’ Superintendence Organic Law. Since January of 1997, the Pensions’ Superintendence starts its operations, and its duties are to elaborate all the necessary regulations contemplated in the new law, and to supervise the activities of the Pension Funds Administrators (AFP, in Spanish).

    The reform proposal for the pension system intended to attack some of the most urgent problems, personalizing the workers’ accounts, in order that each one of them received only what they contribute with, and establishing mechanisms to place the contributions in profitable financial activities. The product of this operation would be transferred to the individual account of each worker.

    Other problems related with the costs’ socialization and the exclusion of the farming and the informal sector have been ignored by the pension system’s reform. However, the most outstanding aspect of the reform is the implications over the system’s management costs. If before the reform it was estimated that close to 20% of the pension funds were destined for administrative costs, the present situation does not necessarily show an improvement. On the contrary, when a range is fixed between 2.7% and 3.5% for the AFP commissions, the result would be that the private system's managing costs would be higher than those of the public system. Independently if the commission includes an insurance for the handicapped or for death, the truth is that for the worker the commission becomes an additional cost, because before the reform he already counted with an insurance and did not pay an extra amount for it.

    In the new pension system’s first year of operations, from the total amount that the workers would give to the AFP, between 33.8% and 43.8% would be destined for the AFP’s commission, which technically will be a managing cost that will be charged to the worker. Therefore, it should not seem odd if the new pension system’s effect has been very sensible for both employers and employees. In an early stage of this issue, during 1998, the pensions increased in 300% for the workers, when their contributions increased for the prevention system from 1.5% 10 4.5%. Most of the contributions (78%) are destined to the AFP commissions, since the 4.5% mentioned will come from a contribution of 3.5% for commissions, and 1% for the individual savings account. By the year 2002, the laborers’ contributions will represent over 600% of the contributions to the pension funds that were made before the reform (we are going from 1% —1996— to 6.25%). During that same year, close to 46% of the laborer’s contribution will be absorbed by the AFP and the insurance companies.

    The employer's sector will be benefited with an important reduction of its contribution that would go, in the first stage, from 7.0% to 4.5%. It will increase later until it reaches 6.75%, during 2002. In the end, the private sector will pay less than it did before the reform, as far as the pensions issue is concerned.

    In this context, there is no guarantee that the pensions will be substantially increase. For instance, substantial pension increases were not registered —at least not during the first ten years— even in the Chilean case, with over 15 years using the private system

The social security perspectives

    Due to the impact of the AFP, a spectacular increase has been registered in the total of new pension system’s payers and in the coverage range, since only between 1997 and 1999 they went from a coverage range of 10.6% to 31% of the PEA. Instead, the impact over the pensions is still not clear, since there are no expectations to grant any pensions the new social security tax payers of the AFP, except for the ones that stayed in the traditional system of the ISSS and the INPEP.

    Up to this point, there are two aspects of the reform that call our attention: the increase of the pension system payment-commission rates that were imposed to the worker, and its high fiscal costs (5% of the National Gross Product in the next four years). These elements can make anyone doubt of the reform’s adequacy just as it was conceived. In the end, the purpose of social security is not the opening of new business fields or the correction of the fiscal problems, but the protection of the population against the social risks that affect the quality of life. >From this perspective, we would have to infer that the reform to the prevention system still has to demonstrate its suitability to comply with the objectives of social security.