The first one hundred days of Saca

One hundred days of tolerance?

On the day of his inauguration, Saca promised that he would understand the perspective of the opposition. He discerned that the relation with the FMLN could not be worse than it already had been with his predecessor. The left wing party made a demand before the Supreme Court, with the objective to indicate the dangerous silence imposed by the Electoral Supreme Court (TSE, in Spanish) during the presidential campaign. The members of the FMLN did not participate in the official acts of the inauguration and swore that they would not change their minds about the decisions that had to be made regarding the discussion about a budget that had to be approved by the Legislative Assembly six months earlier. In this context, Saca assured, among other promises made during his first speech, that he was willing to talk to all of the political forces. “During the campaign I said that I would work as a negotiator and as an accessible President. I will firmly fulfill that promise from this moment on”, he said.

Said and done: the day after his investiture, Saca named a presidential commissioner of governance, and invited the opposition to become part of a serious discussion about the budgetary negotiations. The President accepted the perspective of the opposition in regard to several of their demands. In response to this action, the FMLN moderated some of their demands and accepted to pose for the historical photo that would inaugurate the era of the negotiations. Since then, Saca has multiplied his public appearances to speak about a government that has a human face. What is behind the so called “government with a human face”? Has Saca inaugurated a new way to do politics in the country? Is there a new conjunction between the interests of the economic elite and those of the less fortunate? In the lines that follow, this article will try to find an answer to these questions.

A governmental image nourished by publicity
It is a well-known fact that, in his first one hundred days, the Saca administration has led a life full of an excessive amount of publicity about the President’s good intentions. Between showy announcements -as the one of the “Super Iron Fist Plan”, just to mention an example- and propagandistic visits (the spectacular parade of some members of the government, after the accident of a bus in San Miguel), the action of the Saca administration has been measured, to this point, by the presence of the press. It is not necessary to say that the media have unrolled red carpets for the ministers that want to reveal their good intentions. With a good dose of what the national press usually delivers, no critical attitudes have been displayed, not even a small amount of capacity to make relevant questions to those that run the propaganda for that “Government with a human face”.

The case of the accident at San Miguel is important because it represents the paradigm of the new advertising storm. This is about taking advantage of the daily facts of the life of the population to make them notice the presence of the President and his team. Saca said it during his inauguration speech: “the Salvadoran population will constantly get to see me face to face, arm in arm, all over the country, and not only on occasional visits, but taking the government to their communities all the time, so that the citizens of every social level are able to feel that the State exists, that it works for them, and that it responds to their most important demands”.

This presence of the government, nevertheless, does not go beyond a propaganda that is purely political. The former example is an excellent proof of all this. The publicity around the accident was not useful to redefine the subject of the country’s public transportation system, nor to review the performance of this area’s Vice-Ministry. The whole matter was just about taking pictures for the newspapers and making declarations of solidarity for the victims. The Vice-President showed the human face of the government –the strategy is to keep promoting the idea that a woman’s face is useful to show to compassion and sensitivity-, and she was in charge to kiss the relatives of the victims.

It is odd to see that this subject was not enough to face a problem as serious as the violence in the country’s highways. It is peculiar and sad, because it is precisely in this kind of issues the Saca administration loses a good opportunity to make an actual statement about his so called “government with human sense”. Someone could easily fool all of the Salvadorans, the victims, and, in many cases, the attackers of the jungle that the highways have become. A good opportunity has been lost, an opportunity to face the situation with a good dose of repression and a little lesson on education for the roads, drivers have a poor culture when it comes to hitting the road and they are irresponsible as well.
The advisers of the Presidential House were not able to give any good suggestions to Saca, not even about an issue like this one. Any observer can ask himself or herself if there is any substance at all in the advertising campaigns of the Saca administration, a team that raves about how close they are to the population. If they had attacked this problem from different angles, they would have gained a considerable amount of credibility, and this would be an obvious sample of their capacity to attack the problems that affect the society as a whole, beyond the preoccupation about wining the next elections. In other words, this means that even without forgetting about the next elections, they would have given an example of how the subjects that involve all Salvadorans, without any distinction of political creeds, can be approached.

The Populist option
The first hundred days of the Saca administration seem to reveal that the Populist option has won the game. The right wing has always accused the opposition, that is, the left wing, of taking advantage of the misery and the needs of the humblest Salvadorans to use it for their political propaganda. Nevertheless, in this occasion, the one that is actually taking advantage of the demands of the population before the ruling insecurity, the one that seems to bet for the elimination of the political benefits that come from the citizenry’s demands, has been the favorite son of the right wing. There is a double advantage for Saca in this case. On the one hand, he undertakes the role of the left wing, the one that creates those discourses about being close to the people and having compassion for the poor. On the other hand, he counts on the loyalty of the most powerful and influential sectors that approve of his social speech.

As for the adhesion of the right to a social speech, many businessmen have indeed touched the subject. Some people speak about the need to respond to the Salvadoran demands, and consider the legislation in reference to the respect for the rights of the Salvadorans. Some have even spoken about the need to improve the remuneration of the tireless Salvadoran worker. In any case, it is a fact that the businessmen have not given any social benefits to the workers. The fact that they like to raise a flag of compassion as a proof of their good will cannot be a sample of their social commitment or the government’s. The underprivileged workers and sectors are those that must hold their destiny in their own hands. And, after one hundred days, everything seems to indicate that the so called “social project” of the government and the one of the business sectors are both aimed to prevent the workers from presenting their own demands and vindications.

On the other hand, Saca’s new political strategy takes away from the opposition its own favorite subjects, and he makes it inaudible in the political context. In this sense, since the day of his arrival to the Presidential House, Saca has dedicated himself to deactivate all the possible subjects of conflict with his adversaries in the FMLN. This way, he was able to occupy the political scene, based on pompous declarations about his negotiation system, and his good disposition to engage himself in a dialogue with the political opponents. After the irritation generated by his predecessor, and all the facts that surrounded the electoral campaign and his later ascent to power, it cannot be denied that it has been an interesting strategy.

Nevertheless, once again, one hundred days after the presidential inauguration, it is still not possible to see any substance at all in Saca’s speech. Far from that, it is not possible to say that the President is willing to break with the national authoritarian political tradition. In any case, the main political decisions of the government do not allow to speak about a spirit of negotiation, or about a will that intends to include all of the actors into the political decisions of the national life.

There is the illegal election of a member of the PCN as a magistrate of the Electoral Supreme Court to corroborate the veracity of the previous reflection. In that subject, the political calculations were the priority for all of the opposite declarations of the President. Saca understood that he needed to relief the discontent of the members of the PCN in order to assure that his party would be able to approve the laws in the Assembly, and that is how he forgot all about his declarations. The same thing can be said about his decision to send the Salvadoran troops to Iraq, or the one about expanding the base of taxation, punishing the small retailers, instead of asking for an intense level of solidarity to the businessmen, which is the best way to finance the social expenses of a country.

In this context, the last one hundred days have not been easy for the opposition. Beyond the considerations about the substance of his speech and his communication games, it is a fact that he has won the first round. In politics, style is not as important as the effective results obtained by the protagonists. In this line, Saca has moved around with freedom and it is very probable that the figures announced by his party –it has been stated that 80% of the Salvadoran population is satisfied with his administration- are close enough to reality.

If this line is being followed, it will be difficult for the opposition to neutralize another overwhelming triumph of ARENA in the next elections. Saca is working on it. At the moment, with the internal lawsuits that the FMLN is experiencing, the fourth presidential administration of ARENA has set the table. All that the members of the FMLN can do now is to cross their fingers, and hope that the political game itself is able to reveal the falseness of the adversary’s image game.

In the meantime, no one can say that, from a political perspective, the country is in the way to legitimately confront its critical problems. History has taught this country that it is a naïve attitude to trust in the sudden kindness of the businessmen or in the political actors who claim to represent the interests of the poor majorities, at the same time that they deny to the people the resources to defend themselves and to incorporate their own agendas to the public discussions. If while they speak about the respect for the opposition they intend to divide the worker’s unions, that means that there are no guarantees about the possibility to represent the interests of the majority in the political debate.

At the moment Saca has managed to shut the mouths of his adversaries. His success, obtained either because of his good strategy or the stupidity of his opponents, cannot be good news for the most underprivileged people. Those who think the opposite should remember that the political decisions are built from a permanent confrontation between the different sectors that fight for the same scarce social resources.

The fiscal Reform, the Free Trade Agreement, and the social welfare

One hundred days after the presidential inauguration, the economic heading begins to be outlined like the angular stone of the challenges that this administration will have to face. It is hardly a little more than three months of work, and certainly, in such a short period of time the results of the implementation of the economic policies cannot be evaluated; however, the guidelines of those policies can be definitively examined. The intention of this commentary is to evaluate the economic performance of the beginnings of the new presidential management, and to examine the feasibility to face, with these strategies, the challenges of the next five years.

In this sense, when evaluating the direction of Saca’s governmental plan through the undertaken actions, it is possible to see three factors that determine the profile of the present administration in the economic field:

1) The government has to fulfill the promises that were made in regard to the social matters. Nevertheless, when carrying out the plans with an inflexible budgetary restriction imposed by the enormous national debt, there is a very small margin to make substantial changes. The answer to the increasing social needs of the population is a fiscal reform, that will be the main challenge for Saca in his first year. The difficulties will become even more critical, if the interests of the business sector are taken into account, because their strategy is to make sure that the tax rates are always on their side.

2) The economic policy of the present government intends to extend the policies of commercial liberalization and the openness of the markets even more than the previous administration did. The last period put all of its efforts on the Free Trade Agreements, which were conceived as lifesavers that would enable the country to grow, create more jobs, improve the competitiveness, increase the investment levels, and introduce new technology.

3) The search for the social welfare is the worse contradiction of the economic policy. In order to achieve a social success, it is necessary to count with economic policies in which the less fortunate ones appear as the main beneficiaries. Nevertheless, the reform that is being outlined does not contemplate the existence of progressive taxes. No agrarian reforms have been outlined, nor any structural plans to create decent sources of employment (different from the ones obtained through the present Free Trade Agreement).

According to the document of the Ministry of Economy, “Productive and Commercial Challenges and Opportunities 2004-2009”, from the beginning, this area of the State has established the following items:
1. The consolidation of the commercial openness.
2. The advantage of the commercial treaties to promote competitiveness.
3. The strengthening of the internal market.
4. The decentralization of the economic activity.
Each one of these sections contains precise economic policies aimed to reach specific goals. The problem is that to carry out those goals, along with the search to strengthen the productive sectors, seems like a contradiction because of the limited resources of the country. Just like the countries of Southeast Asia did it at a certain time, to establish a market platform abroad on the base of a Free Trade Agreement demands a record of excellent productivity levels, state of the art technology, and efficiency, as well as national plans to strengthen the productive sectors. In countries such as Taiwan, South Korea and Japan, it was necessary to establish a consensus between the productive sectors and, mainly, a National Plan designed for the long term. That is why the different business sectors of these countries accepted the fiscal pressure of austerity, the agrarian reform and other necessary structural changes for their development.

This way, when observing our most important productive areas (the land and the industry) it is not necessary to make that many analyses to understand that the country does not count with a suitable preparation to compete abroad, since it is necessary to invest millions in these sectors so that they have “enough quality and creativity” in order that the exports become a successful strategy, and the State is not concentrating much of its attention on that fact. What is important to them is to sign the Free Trade Agreement, and then think how they will be able to take advantage of it. During this period, those that can take advantage of our market turn out to be those that destroy the micro and small business companies of subsistence, those that are not prepared to compete in these circumstances.

If for 2003, according to the information provided by the Central Bank of Reserve (BCR, in Spanish), the growth oscillated between 1.8% and 2% and the GNP per capita remained suspended in time for its fourth consecutive year, in spite of the efforts made by the last administrations to sign more Free Trade Agreements; then, why the productivity of the country has not been reactivated? The growth of the first trimester (2004) reached 1.6%, that is, 2% less than the one it reached the same period for 2002, (1.8%). The farming sector and the sector of services grew by 1.7% and 1.6%, respectively, and these were the only ones that grew if compared with the fourth trimester of 2003. The reduction is much more intense if the first trimester of 2004 is compared with the same period for 2003. After the earthquakes, the construction sector is the one that has been losing more and more in terms of growth, because even if for the first trimester of 2003 it reached 6.7%, for the same period, in 2004, it only grew by 1%.

The heel of Achilles: the fiscal problem
If to reanimate an economy with limited resources is a difficult task, to do it with responsibility, fairness and justice is even more difficult. The 2004 viability is guaranteed with the State’s budget approved on last June, but, what are the intentions of the Saca administration in reference to the 2005 budget? What is the fiscal plan that will be followed to respond to the social problems?

In the first place, it is clear that the budget’s deficit will be financed for 2005 with bonds only. The Ministry of Hacienda (the Internal Revenue Service) has confirmed that they are not allowed to negotiate new credits. Fiscal prudence seems to be the philosophy of the Ministry of Hacienda. They are looking for a policy of austerity and no indebtedness with the international organisms.

How can this be done? The conclusion of the analysts is that the margin for the financial maneuvers is extremely small. For example, between all of the organizations that receive State resources, only four have been chosen to receive a budgetary increase in 2005: Health, Education, Governance and ANDA (The National Administration of Aqueducts and Sewers). Nevertheless, if the increases are compared with “the amount of promises”, this plan does not seem that coherent after all. According to the Minister of Hacienda, Guillermo Lopez Suárez, the 2005 budget will bring more than the $2.793 million approved for this year. Even so, no ministry is authorized to hire new people or to increase the wages, with the exception of the Direction of Penal Centers, which will be able to hire more personnel.

The great bet of the Ministry of Hacienda is that all of these expenses can be financed, almost exclusively, by the taxes that the people pay. The problem is that the amount of collected taxes has decreased in reference to the national goals, especially the value added tax (IVA, in Spanish). The Ministry of Hacienda intends to obtain for 2005 12,6% of the GNP in taxes, that is $15.678,6 million. In other words, in 2005 they expect to collect a little more than $1.958 million in taxes, without applying the fiscal reform.

If the reform planned in the Executive is approved, the predictions are that the State Treasury could modify the budget and would collect approximately $109 million more, which is the goal for the first year that will adopt the reform. However, while that option is created, the alternative is to obtain more income through the bonds’ financing. The Ministry of Hacienda has confirmed that they are planning to issue bonds aimed to make pressure on the country’s national debt to 40% of the GNP. This last action would even exceed the issuing of the approved debt for this year. The Ministry of Hacienda indicates that the debt has reached 37.9% of the GNP, that is, $5,942 million. That, theoretically speaking, leaves a margin to become indebted with an amount of bonds close to $329 million for 2005. With these bonds, they intend to take care of the subject regarding the retirement pensions, which for 2005 has a budget of $370 million, and the regular expenses. The public investment will remain the same for 2005 with an amount similar to the one of the present year ($496 million).

There are some examples about the ministries that will not be able to meet the expectations of income and investments, but the one that has attracted more attention is the new Ministry of Tourism. In the 2005 budget, this institution expects to count with $7,4 million to finance its activities. This amount is usually distributed between the Salvadoran Institute of Tourism (ISTU, in Spanish), and the Salvadoran Corporation of Tourism (CORSATUR, in Spanish) and the new Ministry of Tourism; but according to the Minister of Tourism, Luis Cardinal, the amount is not enough to fulfill the minimum of the agreed projects, such as the restoration and maintenance of the tourists’ centers, which could easily cost twice as much as the pre-established amount.

The government refuses to substantially increase the resources assigned to the farming sector. During the last years, the budgetary ceiling of the Ministry of Agriculture has not exceeded $36 million in average, and 2005, according to what the plan seems to be, will not be the exception. What has been requested for this ministry is to increase the destined amount by $8 million. Nevertheless, the Ministry of Hacienda has allowed them to increase the budget only by $500,000.

President Saca said, when talking about the profile of his administration regarding the tax issues: “we spoke about not increasing the income tax level of contribution, about not increasing the IVA, and to increase the specific taxes such as the FOSALUD and to close the fiscal gaps”. Perhaps in that phrase the present fiscal problem can be summed up: the Minister of Hacienda, Guillermo Lopez Suárez, drafted a document with seventy proposals for several reforms. One of these reforms establishes the obligatory nature of the contributors’ patrimonial declaration, and the establishment of taxes for the interests that the banks from abroad make. These last proposals were rejected since the beginning because they affect the interests of the country’s business elite. Without the State’s support, neither unemployment nor the poverty level will change significantly in the agricultural sector. Unemployment forces more than 70 thousand Salvadorans to leave the country every year to go and look for opportunities abroad, while more than half of the population is poor, and 25% live in misery. That is why, theoretically speaking, the fiscal policy would have to be centered in an expansive foundation in order to reactivate the productive sectors, but through truthful economic and social reforms.