Center for Information, Documentation and Research Support (CIDAI)
E-mail: cidai@cidai.uca.edu.sv

Central American University (UCA)
Apdo. Postal 01-168, Boulevard Los Próceres
San Salvador, El Salvador, Centro América
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     Proceso is published weekly in Spanish by the Center for Information, Documentation and Research Support (CIDAI) of the Central American University (UCA) of El Salvador. Portions are sent in English to the *reg.elsalvador* conference of PeaceNet in the USA and may be forwarded or copied to other networks and electronic mailing lists. Please make sure to mention Proceso when quoting from this publication.

     Subscriptions to Proceso in Spanish can be obtained by sending a check for US$50.00 (Americas) or $75.00 (Europe) made out to 'Universidad Centroamericana' and sent to the above address. Or read it partially on the UCA’s Web Page: http://www.uca.edu.sv
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INDEX

EDITORIAL

    The serious economic and social problems of El Salvador will be resolved promptly to judge by the enthusiasm of the government and the private business elite. They have greeted the wish made public by President Bush about signing a free trade agreement with the region. That is what the government and the owners of most of the country’s economic resources were hoping, considering it a solution for all of their problems. Everything seems to go perfectly with this announcement. However, the reality is very different. It is an important step that President Bush expresses his desire to sign a free trade agreement with the region, but this agreement must be approved by the Congress first, where it could find some obstacles. The presidential wish does not obviate some aspects that must be guaranteed before that signature is even possible. The question is if the government and the business elite are willing to guarantee them, since up until now they have not shown any intention to do so.

    In the first place, the Salvadoran government will have to fight with much more intensity against piracy, which makes a great deal of money with someone else’s intellectual property. This violation does not only happen on the streets, where you can find any kind of “trademark” merchandise, but also inside the high class circles of  the city. This issue has come a long way, but not long enough as to provide with the safety that the United States capital demands. In the second place, El Salvador will have to sign an extradition agreement with the United States, which the defenders of the old concept of sovereignty do not accept. In the third place, El Salvador will have to subscribe all the agreements that until now it has refused to sign with the International Organization of Work, through which the country would compromise itself to respect, promote, and defend with much more seriousness the workers’ rights. That is to say that there will not be massive layoffs such as the ones that took place at the CEPA, and that the country could not be consider as the paradise for the maquila industry any longer because of the weak labor legislation that it applies.

In fact, at the International Organization of Work there is a demand against the dismissal of the CEPA employees. If that organization produces a formal judgment against the Salvadoran government, this one will have to accept the sentence and the sanctions. Finally, it will have to implement quality control systems, technically unknown at the present day, inform the consumer about his purchase and consumption, and, in addition, respect the dispositions made to protect the environment. These dispositions,  internationally accepted, are unknown for the Salvadoran culture, but will have to be acknowledged and respected, precisely, to compete with the North American Companies.

    Therefore, if Central America signs a free trade agreement with the United States, El Salvador will not only fully go into the globalization process, but it will also have to  acknowledge and accept the international legislation. Up until this day, El Salvador has looked with indifference at this legislation, specially in the labor’s rights, the human rights, and the administration of justice areas. This will not be able to go on if El Salvador wants to enjoy the benefits of the agreement. This change will open a new dimension for El Salvador, a dimension that until now it has refused to face. From this perspective, the agreement would bring some advantages for the population, but for this to be true, there still a lot to compromise.

    An additional difficulty that will not be easy to resolve, because of the existence of such diverse interests, is that the agreement is an offer for the region and not only for El Salvador, as the light comments of the national press attempted to make the readers believe, rushed by the governmental enthusiasm. The agreement is being approached in regional terms, and the region is far from a basic understanding that could lead to the necessary integration to arrive to the agreement. In any case, it is a challenge to encourage it in a more decisive way, creating more understanding among very different and even contradictory interests –such as the frontier’s disputes.

    Probably when there is a consciousness about all of these difficulties, the government tends to moderate its enthusiasm about the advantages of the agreement. It does not mention anymore, for instance, the dozens of thousands of jobs that it would create in El Salvador alone. The first pieces of information that the officials gave were overwhelming, but they did not make sense. Everyone said whatever was convenient at the time, according to their own subjective appreciation. When these officials talk about dozens of thousands of new jobs, and about a promising future, they never point out a term. On the one hand, it seems as if all of these wonders could happen immediately, with the simple signature of the agreements. However, on the other hand no one is so naïve as to believe that his or her situation will instantly change from the most despicable poverty into an abundance situation.

    In any case, the government keeps thinking that the agreement is the answer to the country’s needs, and, consequentially, it does not worry much about the low levels of the national production, nor about the fiscal policy, and it always expects that the growth might be higher than in the end it actually turns out to be every year. In other words, the government is assuming that the free trade agreement has magical powers that, evidently, it does not have. For a free trade agreement to have all of the advantages that the government speaks about, El Salvador should have a vigorous and diverse productive activity, part of which should be in a disposition to export.

    That is why the Economy Minister repeats that we have to be competitive, that is, that we have to produce in order to export, and that the production also has to have quality and a low cost. What he does not say is what we have to produce, who will finance that, and what technical assistance we will use. The statistics are clear: El Salvador imports every time more than it exports. The only goods that El Salvador has in abundance to export and that has a positive disposition for working is its population; but this one is evidently not included in the merchandises that could be moving with freedom between the countries that will sign the agreement.

    Ever since the beginning of the ARENA governments, they should have encouraged an industrial conversion plan in order to be prepared for this moment. Instead of doing that, they abandoned any kind of planning and the capital went to the commerce and the services sectors, were the return rates or the profits were much more higher at a short term. In the present,  the national savings are doing the same, but at the neighbor countries. It is more profitable to invest in the commerce and the services in Guatemala, Honduras, and Nicaragua, than in the industrialization of El Salvador. Very little can be obtained from a free trade agreement when one of its parts, in this case El Salvador, has very little to export.
 

    The prestige of the legislative power in El Salvador leaves a lot to be desired. It is well known that the deputies are the worst evaluated public officials, rated by the population. There is information available to testify that. The so called “fathers of the country” contribute every day with their mistakes to the deterioration of their public image. That negative image that the deputies have carved has, undoubtedly, serious consequences over the country’s political life. Some of these consequences will be discussed in this article.

    The first consequence –the most evident one at the public debates- is the large gap between the readers and the elected politicians. It is very common that the citizens show their rejection to the behavior and the political decisions of their representatives, especially when it comes to the congressmen. That is why many people agree that the political representation is living very somber days in El Salvador.

    This situation evidently makes you doubt about the legitimacy of those representatives. When they have no communication with the citizenry, and their actions are permanently questioned, there is a dark environment of  suspected and unsuspected dangers over the country’s democratic horizon and the institutional governmental actions. If  the governmental actions are defined as “the measure of intensity and the sense that produces the relation between the government and the population”, consequentially this means that when the relation screeches, it is prone to suffer serious political problems.

    And some of these problems can presently be witnessed in the relation that the citizenry establishes with the congressmen. They are not only not respected, but there is also a generalized repulsion against the political system as a whole. It is very common to think that any decision that might emanate from the legislative organ will be a mistake that will have to be fixed. In this sense, the Legislative Assembly is made responsible for many of the issues that trouble the country.

    The second consequence that derives from the congressmen’s loss of prestige is the political system’s inclination towards the Executive side. It is the direct consequence in a presidential prone system, which is also supported by a “strong” political party with a deep influence at the most decisive events of the national life. That is why it should not seem odd that in the conflicts between the Legislative Assembly and the Presidency of the Republic the solutions are inclined in favor of the second one. It does not only count with the resources for that, the national political activity also favors the imposition of the presidential figure.

    If the relation between the congressmen and President Flores is observed, it will be noticed that he easily imposes his decisions and projects to them. And this is not only because the Legislative Assembly is an heterogeneous institution, which is dominated by a certain right-wing coalition; it is because of the growing loss of importance of the congressmen’s image. The evident dissociation with the demands of the Salvadorans, the incapability to demonstrate that this is not so, and the Executive’s large press campaigns when it needs the approval of controversial laws put the congressmen in a uncomfortable situation that makes it almost impossible, from the political costs’ point of view, not to endorse the presidential initiatives.

    There is no doubt that the formerly described reality involves a considerable reduction of the Legislative Assembly’s legal attributions. If from the political Constitution’s perspective it is about an institution in which a good amount of the popular sovereignty is deposited, technically is nothing but a puppet that the Executive uses as it pleases. That is why it becomes a sleepwalking power that crashes against the national reality.

    On the other hand, it is important to mention how the Executive uses its advantages when it comes to deal with the Assembly. It has helped the Executive to discredit the opposition, and to administrate the government in a personal and authoritative way.  About the opposition’s discredit, this is not the work of the Executive alone. The official propaganda mechanisms have considerably worked at it, but also the political parties’ injustices and their members’ lack of creativity have contributed to strengthen the Executive’s dominant  position, and the first Organ of the State’s loss of importance in the decisions that are made in the country.

    The “personalized” attitude of the power in El Salvador and in other Latin American countries is definitively something to worry about. Some analysts acknowledge the dysfunctional attitude that the political systems with a presidential tendency usually show. And, among those, authoritarianism occupies a very distinctive place. When, in reality, the political system eliminates the legal mechanisms of reciprocal control from the state’s organs, it is very probable that this will bring terrible consequences for the country’s institutional life.

    This is the logic of the Salvadoran political system. President Flores attempts to administrate the country’s destiny with an iron fist, without listening to the protests nor to the majority’s interests. His decisions are generally controversial, and he privileges the authoritative logic in the relation with his political adversaries and with the society. The political opposition is treated in the most repugnant way: its comments and appreciations about reality are treated as suspicious, and denounced as outdated communist  postures.

    Not only everything that is possible is done to steal some space and importance away from the opposition in the performance of the political system, but the institutions where the opposition has presence are also treated in an authoritative and anti-democratic way. The Legislative Assembly is an example of that. In this context, the opposition loses its reason to exist, and the Legislative Organ does not perform its supervision tasks when it comes to check the state’s performance. In other words, the legislative power is questionable. It is questioned by the society as well as by the Executive.

    In this context, it is evident that something has to be done to establish once again the trust in the First Organ of the State. It should be a national interest that the institutions work and accomplish its constitutional command. That is why the almost authoritative attacks that emanate from the Republic’s presidency have to be faced, but paying close attention to the abuses and the dirty vices of the congressmen.

    Ever since the most recent dispute between the government and the main unions of the public transportation companies, many changes have occurred in this sector. The most noticeable ones are the rearrangement of the routes, and the elimination of the subsidy from the public transportation’s fare. However, the most significant changes are yet to come if by February the government starts with the withdrawal of the bus units with more than 20 years of fabrication, and proceeds, just like he announced in November, to encourage a national renovation plan for the public transportation bus units’ park.

    According to the governmental officials, the plan includes, among other measures: the creation of a special $120 million credit line which will be administrated by the private financial system; a subsidy of three percentage points for the market’s interest rates; the payment of up to 55,000 colones for each bus unit that is put out of circulation; the creation of a guarantee fund for $30 million; and the adoption of a new official dispositions for the authorized transportation business owners’ inscription.

    In the beginning, this seems as an accurate measure as far as the increase of the safety levels and the users’ comfort are concerned, as well as the reduction of the carbon dioxide emanations and other polluting gases excessively expelled by most of the bus units  that circulate throughout the country. However, the governmental approach to a public transportation system’s reform goes beyond the safety, comfort, or the air’s quality issues. Strong economic interests are involved here, the ones of the transportation business’ owners as well as those of the bankers and the bus dealers.

    The aggressiveness of the plan leads to a multiplicity of implicit risks: increases on the bus fares, a reduction of the pubic transportation’s offer, the concentration of the reform’s economic benefits in the financial system as well as in the bus units’ distribution sub-sector, a higher fiscal load for the state, and a high opportunity cost associated to the use of $120 million ($24 million annually for five years) in order to finance this vehicle renovation process. All of these risks will be briefly examined in this article.

    The issue of the public transportation’s bus fares has always been a sensitive point in the negotiations between the government and the transportation units’ owners. The subsidy’s elimination from the bus fares has not caused significant increases, although some rural bus fares have increased (specifically from one department to another). If the system’s reform plan is implemented, a very strong financial responsibility would be placed over the shoulders of the public transportation business’ owners, which, sooner or later, would be transferred to the consumers, as the most basic axioms of the free market’s theory dictate.

    On the other hand, to attempt to retire a 30% of the bus units (1,200) without causing an impact over the public transportation offer during the rush hours is not subject to discussion. With the already mentioned reduction of available units during the rush hours, an even worse overcrowd and long waiting hours should be expected.

    The implicit economic benefits’ issue with the reform is one of the most delicate aspects that can be considered. Without a doubt, the reform leads to economic benefits for all of the sectors involved, especially for the banking system and for the bus units’ dealers. A $120 million credit line distributed in five years means the placement of funds in “safe” activities for the banking system, where the recuperation of the credits is practically guaranteed, since the government would also create a guarantee fund. For the bus dealers, the business here is very clear : five years of juicy and sudden sales will arrive (the government estimates that each bus could have an approximated cost of $60,000 ). Considering that the banking system’s owners and that the bus dealers are key members of the ARENA party, it is not malicious to ask ourselves about the actual motivation of such a drastic reform as the one designed by the Flores administration.

    On the other hand, the state’s finances will also be affected by the reform along its five year implementation period. First, because according to the governmental plan, $5 million might be paid out in order to purchase the buses that are over 20 years old, $30 million for the guarantee fund, and another annual $1.5 million ($7.5 million all together) to subsidize three percentage points of the interest rates to the public transportation business’ owners. These amounts, although they might not seem very important in relation with the total public expense, they lead to the opportunity costs, since there are alternative uses for these resources that are more urgent than the renovation of the public transportation’s bus units.

    The credit line to buy new buses, as well as the resources that the state will assign to buy the old bus units and subsidize the credits’ interest rates, are payment distributions that are made in a moment when the state has put aside the social investment and the housing construction, two transcendental issues (mostly after the earthquakes suffered in 2001). It must be difficult for the victims to understand why a government is more concerned about purchasing buses that will be thrown away, than about building permanent housing for more than 150,000 families who inhabit in temporary “shelters” made out of metal sheets and wood.

    In the same way, it is not easy to understand why they subsidize credits to the public transportation sector while the micro-business and the farm laborers’ sectors grow weaker by the lack of financial resources. In the year 2000, for instance, the financial system only granted $1.1 million for the basic grains’ cultivation, a number that contrasts with the $24 million that will annually be destined for the public transportation owners’ credits.

    Additionally, there is an opportunity cost that should be appropriately dimensioned: to buy new buses and to dispose of the 15-20 year old units, means to renounce to the possibility to encourage the small and micro-business sectors related with the importation and the distribution of spare parts and with the bus reparation workshops. Instead, the option would be to bring the profits to the country’s largest business companies, and to continue with the already eternal tendency of income concentration in the same hands that prevails in El Salvador.

    In this context,  the proposal of the public transportation’s reform still has to face different obstacles before its implementation. First, because of the open opposition of the public transportation’s business unions; and, second, because the reform itself involves risks that could put the government in a difficult situation, specially when it comes to the impact of the bus fares’ increase over the population. It seems as if the Salvadoran population will have to obey –once again- another public policy custom made for the private business elite, who throws away the opportunities to activate the internal market, and drain scarce resources in a context of enormous social investment needs.
 
 
 
 

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