El Salvador before a possible electoral triumph of the FMLN

The transparency of the elections

For some time now, the news media have been speaking about the transparency of the presidential elections. All kinds of news have been published about the inefficiency of the Supreme Electoral Tribunal (TSE, in Spanish) and the internal confrontations among its members. One of these problems has to do with an alleged fraud. The leading parties, ARENA and the FMLN, are mutually accusing themselves for interrupting the performance of the electoral institution.

The origin of the complains
The leaders of ARENA as well as the ones of the FMLN are publicly talking about a fraud and a boycott allegedly being prepared by each other’s rivals inside the electoral tribunal. The official party saw in the last analysis of Article 80 of the Electoral Code, in the section about the attributions of the electoral institution, an evident proof to sustain its suspicions. The section about the decisions that are made by a qualified majority –four candidates out of the five people who develop this role- has been derogated in a transitory fashion in order to face some of the problems of this electoral conjunction.

For those responsible for the opposition that has sustained the amendment, this is about improving the performance of several magistrates that have been unable to fulfill their duties because of their colleagues, those who represent the official party, too passive and unscrupulous before the demands of the society. The delegates of ARENA in the TSE would have been mainly responsible for the inefficiency of this institution when it comes to sanction the different cases of violation of the electoral code. They would have become a factor of discredit for the institution.

Instead, for the leaders of ARENA, the legal maneuvers have an obscure purpose that they themselves have complained about. They accuse the opposition of changing the rules of the game in an arbitrary fashion. Everything would have to be interpreted –according to the leaders of the official party- in the context of the announced electoral defeat of the opposition. Before the inexorable quality of the adverse results, a fraud mechanism would be emerging, that is why the first step would be to neutralize the capacity of intervention that the delegates of that party have in the decisions of the tribunal. Therefore, it has already been made public that the President will veto the transitory disposition determined by the congressmen.

Most people are aware that during the last test performed by the electoral tribunal, a considerable number of anomalies were detected in the performance of the control mechanism of the scrutiny acts. Several intruders managed to have access to the system of computers of the tribunal, and the official results were changed. The most critical aspect of this situation is that nobody inside the tribunal has been able to give a satisfactory explanation about this problem. That is why this is just one more reason to keep thinking about the possibilities of fraud that might be out there during the elections.

A considerable part of the Salvadoran population, according to the last opinion polls, thinks that the elections will not be transparent enough. Almost half of those interviewed –45.5% of the population, according to the most recent investigation conducted by the Public Opinion Institute of the UCA (IUDOP, in Spanish)- responded in an affirmative manner when asked about the possibility of a fraud in the next elections. All of these events can give us an idea about the dimensions of the transparency issue connected with the elections in the collective mind. Not only the different political parties are mutually accusing themselves of wanting to alter the results of the elections, but also a considerable sector of the population is showing, on the one hand, a lack of trust in the capacity that the tribunal has to do an efficient job; and, on the other hand, some people clearly think that it is highly probable that the results of the elections will not be able to reflect the actual will of the electorate.

An important alert signal
Despite the mutual accusations of fraud that have been made among the political parties, and the doubts that most of the population has, it is highly unlikely that this kind of events might actually take place. The TSE has developed certain mechanisms of internal control that can allow its members to sustain this statement. For instance, during the rehearses organized by the TSE to measure the level of skills of its employees to deal with the different components of the scrutiny, each one of the parties organized a parallel system of supervision and control. That is how they have been able to see for themselves what are the problems and offer solutions. In addition, the tribunal has made contacts with technicians from the OAS, in order to identify the failures of the system.

On the other hand, in the case of the leaders of the official party who do not agree with the resolution made by the opposition to modify the regulations of the decision making process in the tribunal, they also count with enough elements to control the results of the process. It is highly unlikely that the disposition becomes a national law. The elections will take place in just a few days, and there is no doubt that President Flores will use all of the constitutional mechanisms available to put an end to the problems of his party. In this sense, all of the complaints are only rhetorical resources to discredit the adversary. The politicians know very well that their mutual capacity of neutralization makes it almost impossible to organize massive irregularities that might substantially modify the results of the decisions of the electorate.

On the day of the elections, each one of the parties is willing to display an army of observers. They will count with enough resources to update the information about the results. As it has been evident in the past, both of the most important parties usually know the electoral results even before the TSE makes the official announcements.

All of these events invite us to reflect about the formerly described problem. The TSE has definitively had a questionable performance, it has been inefficient, and it has reacted in a passive manner to all of the problems generated among the political institutions. The most important aspect of this whole matter is to see that the political parties have shown us that the rules of the electoral game, just as they are presently conceived, do not offer the necessary guaranties to respect their interests.

It is necessary to pay attention to the events that will follow the development of the elections, and to the measures that will be adopted to correct the performance of the electoral tribunal. The notorious inefficiency portrayed by the tribunal along this electoral process is an invitation to change several mechanisms of the system. The political parties are interested in making changes because their own interests seem to be threatened. In addition, from the perspective of an institutional performance, the only novelty of this electoral process has been the deterioration of the trust in both the transparency and the honesty of the electoral institution. It is necessary to make several changes in order to reestablish the credibility of this process.

What kind of economic condition will inherit the next Salvadoran government?

The macroeconomic perspectives for the 2004-2009 presidential period appear as a prefabricated road. The problem is that the macroeconomic unbalance of these days will become tomorrow’s crisis, because the source of this conflict has to do with a lack of planning and a lack of internal orientation in the economy. The political parties that agree with the performance of the Executive power will not be able to escape from this reality.

Contrary to what has been published by the press, the cause of the economic stagnation does not mainly reside on external factors. If the economic policies adopted by the three ARENA administration remain the same, the economic stagnation, unemployment, the deficit of the commercial balance, the indebtedness, and the economic crisis will be intensified in a short term.

The campaign developed by ARENA to promote fear against the FMLN has insisted on the idea that if the left wing party wins, the people can only expect a future conducted by an authoritarian State, an increasing level of extreme poverty, an exodus of the capitals and the investments, the long lines of rationing, and the loss of an important number of relations with the United States. However, nothing much has been said about the consequences of continuing with the economic model implemented by the right wing throughout the last 15 years.

If ARENA administrates the country in the following period, and the economic policy remains the same, it is necessary not to have too many expectations about the slogan “the best is yet to come”. In fact, not even the FMLN, the PDC, or the CDU could promise a better economic future under the present circumstances in which the public finances of the country are, and because of the economic stagnation. The macroeconomic health of El Salvador is neither healthy nor sustainable.

The Salvadoran economic locomotive has no fuel and no direction
The Salvadoran productive machinery does not have the means to improve the economy, therefore the conditions in which the people live probably will not change either. The productive factors do not contribute to the economic growth as they used to. In order to explain this, the Salvadoran Foundation for the Social and the Economic Development (FUSADES, in Spanish), in its report about the Social and the Economic Development of 2003, called “Competitiveness for Development”, the institution explains that during the last 50 years the GNP has grown by approximately 3.3% (the capital’s contribution was 1.6%, and the work of the nation represented a 1.7%). However, the total productivity of the factors (PTF, in Spanish), that is, everything that includes the technological transformations, the role of the external strategies, the production methods that become more effective with time and that reduce the expenses did not contribute at all to the economic growth.

The formerly described situation is clearly connected to the economic policies. Competitiveness has to be encouraged through a good institutional performance, and this element is nowhere to be found in the present strategies for the national development. It turns out that during the first half of the sixties as well as in the early nineties, there was a policy connected with a higher level of investment for the State, and an injection of resources to increase the level of efficiency, the technological standards, and the dynamism of the productive areas. Only during this time, the total productivity of the factors made a positive contribution to the economic growth. For the period between 1960 and 1964, the GNP grew, represented by approximately 6.3%, and the PTF contributed to that growth with 3.2%, the capital with 1.3%, and the work of the nation with 1.8%. Something similar happened after the Peace Accords were signed; between 1990-1995, the growth was represented by approximately 5.8%; this time the PTF contributed to that growth with 2.5%, the capital with 1.75%, and the work of the nation with 1.6%. The highest growth rates were registered during both of the formerly mentioned periods, although these standards did not keep the same rhythm in the long term.

Who directs, who plans, who guides, and who invests on the strategies?
If the State does not have an active economic policy to affect the economic growth, the freedom of the market does not guarantee the development of the resources of the country. The difference between the period of the first half of the sixties and the early nineties is that the economic models had two different motors. The kind of Neoliberal Capitalism adopted by ARENA during this last decade has had almost no influence at all in the economic growth of the country. The approaches dictated by the Consensus of Washington concerning the economic policies and the Programs of Structural Adjustment have been followed; nevertheless, the gross results in terms of growth have been modest. The Neoliberal model adopted in El Salvador has deteriorated the productive structure, since the economic interests of those who control the financial and the commercial sectors are basically connected with oligopolies, and, therefore, they are obstacles for both a sustainable and an equitable growth.

If the motor of the economy is not well, the economic growth will not be enough to sustain the development strategies. According to the economic performance of 2003, what can be done by an economy that hardly grows by only 2%, while the population increases by 2.2%, the commercial deficit and the external debt increase, and the international reserves and the remittances do exactly the opposite because they have not increased as they used to in the past?

What is the average rate that El Salvador has to reach for the next presidential period? Theoretically, it has to grow three times higher, that is, as far as 6% per year, in order to contribute to a sustainable development. In spite of this analysis, the favorite economic policy has been to keep the macroeconomic stability at all costs, even if this has nothing to do with the growth.

Therefore, for instance, the prices are still the sector that, from a macroeconomic perspective, presents the best relative evolution for El Salvador. Inflation is kept in a relatively acceptable level (for the international standards), among the best of Latin America, and the dollarization process has contributed to this process in a favorable manner. However, a growth at the rhythm of a 6% is still an utopia; the problem is that the alleged macroeconomic stability does not exist either. There are critical mistakes that must be corrected immediately.

The “D” factor: dysfunction, debts, and dependency
The balance of payments is a systematic record of all of the transactions between the residents of a country and the rest of the world. Being a little more descriptive, this means that we are talking about a balance of the income and the outcome of the economic transactions of a country. In the case of El Salvador, when it comes to analyze what are the accounts that create the income and what are the ones that have to do with the outcome, there is a serious sustainability problem and a critical dependency that cannot be resolved in the shot term, and this will be an unavoidable factor for the next administration.

The analysis is simple. To consider the account of the balance of payments, the steady one, that is, does not seem to be a problem. However, the balance of payments is the result of several individual accounts, incomes and outcomes of different kinds, and a deficit in more that one account must be compensated by a surplus in the rest. It would be enough to observe those accounts that have the most negative deficits, and compare them with the ones that have a positive balance in order to have an idea of what kind of steadiness are we talking about when we refer to the balance of payments in El Salvador.

For instance, the balance of the regular account is a sub-account of the balance of payments, and it has a record of the international flow of goods, services, and transactions. For El Salvador, this balance has been in deficit through the entire history of the country. According to the most recent information available, provided by the Central Bank of Reserve (BCR, in Spanish), in the third trimester of 2003 the balance was a negative one with a deficit of $231.5 million. This amount is much higher than the one reached in 2002, when the deficit had to do with $130.2 million. What does this mean? That the global deficit of the regular account keeps growing.

By observing the sub-accounts that form the regular account, the balance with the highest deficit is the one connected with goods and services, with a deficit of $616.7 million. This means that more goods and services tend to be imported, and that less goods and services are actually exported. What account is covered by this enormous balance in deficit?

The answer can be found in another sub-account of the regular account: the one connected with payments and transactions. That is what keeps the record of the income created by the remittances, and for 2003, just inside that account the remittances sent by the workers added up to a total of $529 million. As it is plain to see, this does not cover the deficit of the account of goods and services. That is why it can be inferred that when the importation level is higher than the exportation level, and when monetary transactions are made to momentarily resolve this problem (loans that come from abroad), the country is leaning on sources that it cannot control, just as the remittances, and therefore, it becomes more dependent on loans.

On the other hand, there is another account of the balance of payments that accentuates a different problem: indebtedness. The government has increased its indebtedness and the public treasure that the new president will inherit could not be worse. It turns out that the present public debt is equivalent to a 47% of the GNP. This has already began to affect the country when it comes to examine the scale of risk that is presented to the investors. The external debt is equivalent to 30.3% of the GNP, and it grew until it reached an amount of $775 million, that is by 19.4%. Instead, the internal debt represents 17% of the GNP. At the same time, the evolution of the gross international reserves (RIN, in Spanish) is not a guarantee anymore for the external stability: the months of importation that can be covered with the present level of RIN remained the same for about 4.9 months during 2003, and this is in general a lower coverage than the one registered during 2002, due to the relative stability of the RIN level and to the growing levels of importation.

This means that if the country’s consumption level is higher than the level of production, there is a certain unbalance that has to be compensated; however, this problem has not exploded in the hands of the government thanks to a couple things: family remittances and indebtedness. In the second place, the remittances are a variable that does not offer any guaranties in the long term, since it presently does not cover the gap between production and consumption. The events such as the expansion of the shopping malls are empirical demonstrations of a false economic prosperity that is not directly connected to governmental policies for the creation of a higher purchasing power, but to remittances and a fictitious stability created with indebtedness.