The debate for the presidential candidacies

The crisis of the public health system and the temptations of some politicians

The crisis of the public health system and the temptations of some politicians
The last public opinion polls reveal a generalized discontent about the governmental performance of President Francisco Flores. It seems that the pompous commercial of the “new measures to improve the family economy” did not have an impact on the perception that the citizens have about the governmental team. The 4.2 that the people gave to the Flores administration through the opinion poll was announced by the press on May 27th, and it is the lowest “grade” that Flores has ever received ever since he arrived to the Presidential Residence, four years ago. In addition, as far as the problem of the public health system is concerned, over 70% of those interviewed consider that the President is not confronting the crisis in a competent manner.

This judgment, that clearly disapproves the Flores administration, might complicate the relation of the President with ARENA even more. There is no doubt that this is a very delicate moment for the government. Quite a few members of ARENA think that Flores is mainly responsible for the negative electoral results that the party achieved during the last municipal elections. In this context, the President might not have such a strong influence on the decisions that will be made by ARENA about the next presidential elections. That is why it should not seem odd if the discontent intensifies as the electoral period gets closer. Many leaders from ARENA believe that the polarized posture of the government about the public health issues contributed to the aggravation of the electoral situation of his party.

On the other hand, knowing the stubbornness that has characterized the President in his relation with the social actors, it would not be absurd to image a scenario of confrontation, as a maneuver to destroy the movement of the strikers. However, from now on, Flores will have to show that he has more tact if his goal is to convince the Salvadorans about the need to forget about the doctors and the workers on strike. The pre-electoral context puts more pressure on his administration. The government’s hesitation and its lack of interest in the promotion of a social dialogue are well known facts. The confrontational logic that the governmental team has been promoting seems to be condemned to failure. However, the proposal that the leaders from the PDC and the CDU have made in order to act as negotiators between the parts in conflict look as an unexpected life saver for the government.

From this moment on, the solution of the strike at the Social Security system turns into a political problem, in the worst sense of the word. The politicization of such a transcendental problem should not come as a surprise. By definition, politics is the privileged institution that has to attack a problem of this magnitude. However, the politicization that this article refers to is the kind that intends to obtain all the immediate electoral benefits through a specific problem that the social actors are facing.

When the strike started, the doctors were against the participation of the political leaders in the debates about this issue. First efforts made by Hector Silva in order to become the figure of solution to this problem were rejected by those who claimed that it was a perverse attitude that would undermine the legitimacy of their demands. Nevertheless, a little while after that, because of the governmental attacks that intended to discredit the medical union, and the systematical policy to replace the strikers in their jobs, the workers had to throw themselves into the arms of the left-wing politicians. During the last demonstration of the union, they openly asked for a punishment vote against the right-wing parties, because these political institutions were in favor of the privatization of the national system of public health.

Ever since the results of the last elections were made public, it was evident that several leaders of the CDU and the PDC were trying to take the attention away from the FMLN. The search for glory, useful for the next presidential elections, has leaded the CDU and the PDC to offer the promotion of a dialogue between the parts in conflict, instead of offering support for the neutralization of the presidential veto. Ever since then, the key for the solution of the conflict has been in the hands of these parties, which appear to be willing to save the furniture for the benefit of their next presidential candidate.

In addition, the official announcement made by the PDC and the CDU in favor of the negotiation of the parts represents a breath of fresh air for President Flores. The announcement of his veto against the legislative decree to reinstall the doctors and the workers on strike in their positions was announced as a lost battle due to the correlation of forces at the Legislative Assembly. At first, some people thought that the leaders of the PDC and the CDU were willing to honor their promise to find a quick resolution to the conflict. On the other hand, it is not very probable that the Supreme Court of Justice declares the decree unconstitutional. Not only because there is a record of a reinstallation decree for the health system’s workers during the administration of Calderon Sol, but also because the Legislative Assembly will choose the magistrates very soon.

Many of the present magistrates are more interested in the possibility of their reelection. That is why it is not very probable that they were willing to be responsible for the political cost of opposing to a decision of the Legislative Assembly. This is not about speculating over a judicial decision that should be basically aimed to the strict respect and the fulfillment of the terms of the law. The story of the maximum judicial institution is intimately connected to the most powerful people. The magistrates do their numbers when it comes to make a controversial decision and they always decide for what is “more convenient”, understanding this decision as whatever that does not affect their interests, and those of the part that holds the power in a specific moment.

However, without being able to predict yet the long-term repercussions of the sudden change of the strategies of Zamora and Parker, the representatives of the CDU and the PDC, respectively, there is no doubt that their attitude shows a preoccupation for taking care of their political interests in the conflict. The objective of taking advantage of a critical social scenery is the main concern of the leaders of these parties. At this point, they are no longer interested in the suffering of the ill or in the problems of a considerable number of workers who have not been able to receive their salaries in eight months.

The perspective of being considered in the immediate future as moderate and skillful politicians –who finally made the government and the workers sit down and resolve their conflicts- seems like a precious opportunity that Zamora and Parker are not willing to lose. It is still necessary to see if Flores will allow them to fulfill their aspirations. It is important to remember that any solution that requires the restitution of the workers on strike might be definitively rejected by the President and his ministers. Flores has proved that he is resentful and not willing to abandon his trench. Will the disadvantageous correlation of forces at the Legislative Assembly lead Flores to make the painful concessions that have been requested? That is the bet of the CDU and the PDC.

The results of the dollarization

The dollarization issue is being debated once again. In the political field, the Executive power and the FMLN have been discussing if it is a positive measure for the economy to put the Colón into circulation once again. The Executive power, through the Ministry of Economy and the Internal Revenue Service, explained that a measure such as the one formerly described would have a pernicious effect on the economy. The Executive power considers that a procedure of this kind would increase the interest rates, and that it would become an obstacle for the concession of loans. In addition, the government sustains that the country would be subjected to the risks of the monetary exchange rates, and that the possibility for a devaluation would be definitively open.

On the other hand, the economic advisor of the FMLN, Salvador Arias, explained that it is necessary to put the Colón back into circulation in order to reactivate the economy. He sustains that to allow the Banco Central de Reserva (Central Bank of Reserve) to issue the Colones could give the government an opportunity to improve the growth of the country’s GNP.

The economists Hector Dada and Roberto Rubio declared that the dollarization process has not generated the positive results that the Executive power promised. However, both of them consider that the possibility to return to the Colón should not be rushed; on the contrary, they think that it should be the result of a series of technical conditions. For Hector Dada, an accelerated decision could generate higher social costs.

The FMLN has also said that it will closely follow the Monetary Integration Law (LIM, in Spanish), which stipulates that the parallel circulation of dollars and colones should be allowed. However, the government fears the proposal made by the FMLN, because it could open the doors and let the foreign investments escape and increase the payments of the international debts. In addition, this measure would also generate a complex restructuring of the financial activities performed by the national banking system.

In this context, it is particularly important to observe the behavior of those economic variables that, according to the government, would have a better performance with the implementation of the dollarization process. Through the behavior of those economic variables it can be inferred if the dollarization actually improved the country’s economic activity.

One of the reasons why the government implemented the LIM was because it was looking for a substantial improvement in the growth rate of the GNP. During the last couple of years, the growth rates of the GNP have not improved significantly. Between 2001 and 2002, the GNP increased to an average rate of approximately 2.0%. This rate is 1.0% lower than the average rate achieved between 1998 and 2001. During this time, that is, before the dollarization process was implemented, the country had an average growth rate of 3.1%. In this context, it can be inferred that the dollarization process has not been able to accomplish its main goal. In addition, there are several empirical studies that reveal that there is not a clear relation between the economic growth and dollarization. In other words, the dollarization is not a determinant factor for the growth of the economy. (See ECA No. 651-652, page 49).

Another aspect argued by the Executive power to implement this process was that the dollarization process would reduce the inflation rates, and that it would improve the economic stability. However, before the implementation of the LIM, the statistics revealed that the inflation rate was low and that, therefore, the dollarization process could not be justified. In fact, since 1996 the inflation rate over the General Index of Prices for the Consumer (IPC, in Spanish) has remained at a low level. Even in 1999, the inflation rate was 1.0%. When the dollarization process was implemented, the inflation level increased to 1.4%, and in 2002, it was 2.8%. As it can be observed, the behavior of the prices has not changed in a substantial manner. In other words, before the dollarization of the economy, an effective control of the inflation had been already achieved. In this sense, it is necessary to mention that one of the most important motivations for the governments to implement this kind of process is that their countries experience a severe inflation problem. Generally, these are countries with an unstable monetary policy; and, historically, they have inadequately administrated the monetary variables.

An important element that the government used to promote the dollarization process was connected with the financial market. For the government, dollarization would reduce the interest rates, those in debt would have time to breath, and the interest rates would be reduced for the investors. This –the government promised- would generate the growth of the product in the mid and the long term. During the last couple of years, even if the interest rates have been reduced, the credit has not been significantly reactivated. For 2001 –the year in which the dollarization process was implemented-, the private investment had a negative variation of 4.2%. In 2002, the same variable experimented an equally negative variation of 1.0%.

These figures show that there have not been any considerable improvements to encourage the private investment through the dollarization process. In addition, it is necessary to mention that even if the interest rates have been reduced, the passive interest rates have fallen into lower levels than the active ones, and this basically harms the interests of those people who have their savings in the bank. This has reduced the amount of new deposits that are placed in the financial system. For example, between 2001 and 2002, the variation rate of the regular saving’s deposits was –35.2%.

In this context, it is necessary to consider that the achievements of the dollarization process have not been enough. The lack of success of this measure is due to its influence on the monetary economy of this country. Even if the monetary economy is extremely important to achieve stability and to improve the economic growth, it is not enough to reactivate the economy in general; it is more important to understand that the country is going through a problem of “real economy”. In other words, what is really necessary to reactivate the economy is a set of measures able to have a direct influence over the productive aspects.

The dollarization process implemented by the government is mostly synchronized with the transformation of the national economy, aimed to benefit the growth of the tertiary sectors of the country’s economy. Certainly, there are experiences that teach how the dollarized economies are transformed into service economies, instead of becoming nations able to encourage the productive apparatus.

As it can be noticed, before the dollarization process, the government of ARENA promised a series of benefits that would take place if a measure of this nature were implemented. A couple of years later, it can be understood that the promises were exaggerated. In this sense, it is important to wonder if the benefits that the government promises now with the possibility to establish a Free Trade Agreement between Central America and the United States are actually as significant as the official propaganda describes them.