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Proceso 1123
November 24, 2004
ISSN 0259-9864
Editorial: The permanent arrogance
Politics: The reelection of Bush
Economy: Dollars or colones?
The permanent arrogance
It is a display of arrogance when the most important
associations of the private business companies dare to tell the State,
represented by the presidents of the three powers, what it would have to do for
the fifth consecutive year. It is a sign of weakness, before the economic
authorities, when the representatives of those powers faithfully attend to an
appointment and receive instructions of what each one of them should do in the
next year.
The government should establish a dialogue and negotiate with the private
sectors and its associations, but it should also pay the same amount of
attention to the rest of the social sectors; something that is not actually
happening. In addition to having the opportunity to speak about their demands in
an exclusive and privileged manner, these associations eagerly expect more
incentives from the government. President Saca did not disappoint them and he
promised them new incentives. It is time to ask them about all of the incentives
that have been granted to them in the last 15 years. The criterion here should
be the same justification that they used: the investments, the economic growth,
and the national development. Given the new criteria announced by President Saca,
after one year they should present a report about how much technology they have
transferred, what is the new production system that they have developed, and how
many new jobs they have created. And by a certain sense of shame, they should
indicate what is that they offer in return for those privileges which ultimately
come from the effort of the citizenry that pays taxes.
It is also a display of arrogance when the most important associations dare to
complain because the country lacks vision and a strategic plan for the medium
and the long term. They look for them, but they do not find them. They already
forgot that they were the ones that enthusiastically applauded that suppression
during the second administration of ARENA. Back then, they wrongfully decided
that strategic planning was a Communist action, and it was cancelled all of a
sudden. This was an absurd decision because business companies do not plan their
actions. Before the negative result of this mistake, now they demand that the
Saca administration establishes a strategic route and a strategic goal. These
mechanisms are necessary. However, they should be humble about this situation
and admit that they were wrong. Their complaint makes no sense because the lack
of planning is not the exclusive responsibility of the ARENA administration, a
government that, on the other hand, belongs to the most important business
associations.
To correct their lack of strategic vision, now the most important business
associations propose to create a social and an economic council able to plan the
direction that the country should follow in the next 20 years. According to this
idea, all of the sectors should be welcomed in that council, even the unions,
although not the political ones. Their leading mechanism would be a dialogue.
Technically, these associations are the ones that will control the council, just
like they control the increase of the minimum wage. With this, hey intend to
play the role of the negotiators between the government and the social actors, a
role that originally should be played by the State. It is necessary for the
country to have a strategic plan in the medium and the long them. However, the
preparation of this plan is the task of the most important associations of the
private business companies. This is an arrogant attitude, because these
associations intend to make it look like they are responsible for the country’s
growth. They just assume too quickly that the independent social actors will
participate in a council controlled by them. If they are already suspicious
about the discussion groups organized by the Saca Administration, they must
become more suspicious about the other social forces of the country.
The task of this new council will be to make the new dream of the business elite
come true. They dream about a country that, in the next 20 years, will not have
a problem of extreme poverty, the malnutrition level would be reduced as well as
the children’s death rate, their heath system will be universal, their
territorial development level will be balanced, there will be no illiteracy, the
labor will be qualified, the public and the private investment levels would be
duplicated, the government will have internal savings, and the country will have
international solvency. In themselves, these goals are alright. However, while
those who propose them are not willing to finance them with their profits
through a fiscal reform that redistributes the enormous amount of wealth that
they accumulate each year, these wishes are nothing but impossible dreams.
There are no reasons to think that this time the business elite will act
differently. Many of the problems that they intend to overcome exist because; in
the recent past, the business elite itself refused to approve the necessary
policies. Besides complaining about the absence of a governmental plan, they
have also complained about how much the country depends on oil to generate
electric energy, when they are the ones responsible for a burdensome contract of
millions of dollars with one of the new companies that work in this field. They
sold the thermal energy facilities that now they have purchased again, and they
refused to promote the generation of energy with the renewable sources when they
approved the new law in the field.
They have not learned anything from Costa Rica, where almost all of the
electricity is generated with renewable sources. The same can be said about
their almost exclusive dependency from a little qualified labor, which is poorly
remunerated. Ten years ago, they decided to dedicate themselves to work with the
maquilas (sweatshops) because of the conditions of labor. This option is now
trembling and it has no alternative. Before the eminent threat of China, they
find themselves trapped and without much time left. The qualification of the
labor force cannot be improvised, it has to do with education, and with
initiatives for the medium and the long term.
To compete with technology is something they have refused to do for years. They
seem indifferent when it comes to science and research. The same thing has to be
said about their purpose to work with environmentally friendly strategies,
because they have turned their backs to the environment. The construction
companies are the best example of this lack of interest. They have not worked
hard enough either to fulfill their obligations with the consumers. It is enough
to observe the kind of services provided by the privatized companies, in which
they have stocks and shares.
Once again, they intend to participate in the race for development, but in 15
years they have not abandoned the starting point. Before all this, nothing can
be done but to console themselves with President Saca, who reminded them that El
Salvador is worth their while because it is a great nation.
The reelection of Bush
The behavior of the American voters during the presidential
elections has been a source of indignation and surprise for many countries in
the world. The reelection of George W. Bush is seen as an extremely generous
concession for a president who has always been famous for his arrogance and his
mistaken interpretation of reality in the world. For the rest of the people
around the globe, Bush did not actually do much to be rewarded with a
reelection.
The invasion of Iraq during the Spring of 2003 and the growth of the instability
level in the region of the Gulf; the fact that they privilege the war effort
options over the diplomatic actions in Iraq, are decisions that have accelerated
the disintegration of this State, promoting terrorism and contributing to
intensify the hostile situation in the Middle East. In other words, Bush behaved
as an authentic pyromaniac who created more fires than the ones he intended to
extinguish.
How to explain then, the electoral behavior of the American people? Some thy to
find an answer by saying that the fear against new terrorists threats is the
base of the behavior of the American citizens. This kind of answer seems to
indicate that it would have been preferable to choose Bush than to choose a
somewhat weak democrat, who did not know how to show enough firmness to face the
new challenges in the field of international politics.
Many suggest that the White House would have prepared the strategy from the
beginning, trying to influence the decision of the voters. The way the
information on the national security was handled, and the state of constant
anxiety because of the possible attacks, are some of the elements that reveal
this manipulation. Americans have been put under so much contradictory
information on the terrorist risks, that psychologists would have to include
them in their analysis in order to explain their electoral behavior.
Others, however, locate the reasons of the voters’ behavior in a symbiosis found
between the religious values defended by Bush and the offensive actions of some
of the most influential sectors in the society in these terms. Some of the
democratic commentators have reacted to this situation and say that this party
has moved away from the daily preoccupations of the Americans. In fact, during
the electoral campaign both candidates made many declarations about their faith
and their religious beliefs. In short, the voters would have chosen Bush,
apparently because he seemed to be more of a devout person and more apologetic
in reference to the good qualities of the Christian faith.
It is evident that there are many reasons for the electoral behavior of the
Americans. This cannot be explained through just one variable. Usually, there
are many elements that influence the behavior of the citizens, even when a
specific variable plays an outstanding role. For that reason, beyond the
explanations about the re-election of Bush, it would be convenient to wonder how
much this will affect the relation of this country with the world, specially
with Central America.
In this context, the different countries of the world have begun to consider the
way to keep a warm relation with the American President. For that reason, many
leaders from the countries that have criticized the United States seem to wish
to base their relation on new grounds, with new ideas about the international
relations. In other words, some people would prefer to just pass the pages of
the arrogant unilateral behavior that has characterized the Bush administration
during the last four years.
In addition to the difficulties that the Americans find in Iraq, there is their
incapacity to bring peace to a country that bleeds more every day, and this
seems to indicate that some sort of change could take place. As the French
government has constantly repeated, in reference to this subject, the world is
not safer after overthrowing Sadam Hussein. During the electoral debates, Bush
and his team did not want to listen to this argument. One hopes that now, once
the nervousness of the re-election has passed, the American administration will
show a greater disposition to face reality and to listen to the reasons of its
allies in reference to the world’s security problem, and about the best strategy
to face the international terrorism.
However, the first elements of analysis indicate that the American people
responsible for this situation are not willing to make many concessions. In the
meeting of Charm el-Cheikh, Egypt, on the situation in Iraq, they showed a very
little disposition to negotiate on the line defended by some allies, specially
France. The American President does not understand reasons and keeps thinking
that everything will be solved by force, grasping the weapons of his empire.
The resignation of the Secretary of State, Colin Powell, is a clear signal that
the empire is not willing to keep a certain image in its relation with the other
countries. Powell usually is presented as one of less radical members of the
Bush administration. However, the person who will replace him, Condoleeza Rice,
has been presented like an arrogant individual who recommended, because of the
behavior of the European countries in reference to the war in Iraq, to pardon to
Russia, to ignore Germany, and to punish France for not showing much solidarity
with the war against terrorism.
The relation of the American president with the Spanish government is another
example of the resentment that Bush displays to handle his diplomatic affairs.
In spite of the efforts of Jose Luis Rodriguez Zapatero to approach Bush, the
American President does not forget that Rodriguez withdrew the Spanish troops
from Iraq and that he encouraged other governments to make the same decision. He
does not respond to the calls of the Spanish President, and he is far from
agreeing to meet with him in order to speak about the bilateral subjects. In
this sense, it is difficult to expect any changes in the way they handle the
international policy, this administration keeps thinking that a brute force is
enough to solve the problems of the world.
In Latin America, the strategy of Bush is still a strategy of intimidation and
pressure on the bilateral relations to avoid any possibility of approaching the
problems of the region with a multilateral perspective. In this subject, Bush
shows a clear preference for Colombia and for other countries of the region,
like Peru and El Salvador, because their leaders are desperate to show that they
are looking forward to implement the political and the economic recipes that
come from the American orthodox style.
Probably, it is necessary to find in the re-election of Bush one of the
explanations why the former Salvadoran president, Francisco Flores, wanted to
become the Secretary General of the O.A.S. Without a doubt, he counts with the
support of Washington, and many countries of the region would be willing to
surrender before any type of blackmail from the American authorities. The
American authorities keep thinking that they can impose in the continent all of
the wishes of their most conservative sectors. In this sense, there can be
expected four years of a relation that will not be necessarily positive for the
Latin American citizens who live in poverty.
Dollars or colones?
In the last weeks, ARENA and the FMLN have debated on the
convenience of bringing colones back to the economy. For the official party,
this action could create negative effects, because this would go against the
"macroeconomic stability", that, according to the government, the country now
has. From the official position, the introduction of the American dollar has
been one of the most excellent achievements in the search for development. In
this sense, any political measure that intends to create a reversion to this
process would be going against the alleged benefits obtained through the
currency exchange.
The FMLN does not agree with that opinion. According to this party, and under
the Law of Monetary Integration, an equal circulation of both currencies must
exist. In addition, the total dollarization of the economy has not generated the
benefits that the government announced. This measure has seriously damaged
several factors:
1. The government no longer controls the monetary policy, an activity performed
through the Central Bank of Reserve (BCR, in Spanish). This is a problem of
"national sovereignty", because the control of an important instrument of the
local economy has been granted to a foreign institution, in this case, the
Federal Reserve of the U.S.A.
2. The dollarization process has not been able to neutralize, contrary to the
expectations of several people, the increasing level of the prices of the basic
products. The consequence of all this is the continuous increase in the prices
of the goods and products for the family’s economy.
The reality of the dollarization process
After almost four years since the dollarization process was implemented, is
evident that the economy has not yet overcome the critical conditions created
back in1996. In 2001, those who implemented this policy thought that it could
bring a "breath of fresh air" to the Salvadoran economy. According to them, the
dollarization process would generate a new more favorable atmosphere for the
national and the foreign investment. Ultimately, the goal was to increase the
benefits of the financial sectors. For the sake of this objective, some people
assumed that turning dollars into the currency of local circulation could
substantially reduce the exchange risk, that is, that it would reduce the
chances of a devaluation of the national currency. In that context, the
international investors would see more attractive conditions to invest in El
Salvador. The financial amounts that would be introduced in the local market,
would have the lowest level of risk and they would only have to fight with the
problems of inflation.
From January of 2001 to this date, the foreign investment levels are not enough
for an economic development. The BCR, in an article titled “A diagnosis of the
direct foreign Investments in El Salvador: 1998-June 2003”, admits that, in the
last years, the country has not received many investments. The defenders of the
dollarization process indicate, to defend their thesis, that the problem of the
low levels of investment are fundamentally due to the lack of favorable
conditions to compete, specifically as far as security and regulation are
concerned. The truth is that the dollarization has not attracted the levels of
investment that the economy requires.
In the local context, the situation is practically similar. With dollars
circulating, the goal would be to reduce the banks’ type of interest. This could
improve the credit conditions for those local investors who wish to develop
their industries.
Nevertheless, despite the fact that, with time, the interest rates became lower,
the banking credits remained suspended. In fact, after the dollarization, there
were times when negative credit growth rates appeared. It was not until the end
of 2002, after more than a year, that this growth finally seemed to recover. The
expansion rate of credits in the economy is still in recovery, the problem at
the present time is that most of it is destined to solve the difficulties
regarding the expenses in the short term, and not destined to increase the
levels of investment.
The inflation
From a theoretical perspective, inflation is one of the reasons that encourage
the governments to put dollars into circulation. The governments that dollarize
the economy are those who constantly fight against inflation because they do not
have the possibility to control this problem in an efficient manner through
their monetary policy. From this perspective, the economy should have not been
dollarized, because the prices’ increase level was extremely low. In fact,
December of 1999 was closed with negative inflation rates. This indicates that
the problem of the increase on the prices should not have been considered as a
determining factor to implement the dollarization process.
Peculiarly enough, after establishing the Law of Monetary Integration, the
prices have increased and, at times, the markets of nutritional goods and basic
products have reflected exaggerated and volatile prices.
From a macroeconomic perspective, this can be related to the fact that the
dollarization is sort of an institutionalization of the fixed type of exchange.
In this exchange modality, according to the economic theory, the country is more
susceptible to receive the adverse effects that come from the swings of the
international economy. This has been evident in the last years because of a
couple of relevant situations: the instability of the prices of some of the
primary agricultural products, such as coffee, and the increasing prices of
petroleum. Both of these aspects have seriously affected the Salvadoran economy.
A reversion to former policies
Certainly, one of the sectors that has received more benefits from the
dollarization process is the financial sector. In a way, with this measure all
the transaction expenses that the banking organizations had to make when
handling the banking accounts and credit cards (in dollars and colones) have
been reduced. Unfortunately, that reduction was not translated into better
financial conditions for the credits’ applicants. In fact, even several months
after the reduction in the types of interest, the banks automatically did not
restructure the credits of a considerable amount of people and institutions that
had borrowed money from them, because it was necessary to formally request the
new modality of payment in the respective banking centers.
From a wider perspective, this governmental policy restructured the country’s
commercial activities: there were business companies that changed their
accounting process, and many had to go through an arduous process to assimilate
the dollar, among other problems. But what is more important is that some
substantial aspects necessary to introduce a policy of this nature were
overlooked. The absence of those aspects is indeed what now is causing problems
in the country: enough transparency in the development of the activities of the
financial system and healthy public finances. It is evident that the last
administrations have not fulfilled the last condition.
A reversion to colones could again increase the transaction expenses in the
economy and, therefore, it could cause financial problems in the local markets.
At the same time, to return to the national currency will not necessarily reduce
the level of the prices, as many people seem to think. The present situation of
the prices has to do with the variations in the international market. All that
could be possibly expected is a reduction of the speculation level, since when
making transactions in colones and/or in dollars, the people would choose that
currency through which they could pay a less expensive price. In other words,
once again the prices would be negatively “rounded”.
In order to know the state of the economy, it is not enough to observe the
development of the monetary variables. It is also necessary to observe the
performance of the real variables. In this sense, the leading political parties,
instead of being worn away with populists measures in the monetary field -some
say that the dollarization process is effective and others allege that they
defend the colones at any cost-, must develop proposals aimed to develop the
productive apparatus.
The economic problems that the country is going through are not exclusively
connected with the monetary field but with the real economy, with the production
of goods and services. In order to solve this economic problems, it is not
enough to make monetary adjustments, is also necessary to reactivate the economy
through effective policies aimed to the local industry. For those who consider
that the solution is in the monetary measures, it would be necessary to remember
the words of Milton Friedman, who considers that the monetary variations have
neutral effects in the long term. None of the monetary measures is sufficiently
able to remain as a wide range policy. Again, the economic problem has to do
with the real economy and this is directly connected to the low employment level
and the absence of adequate wages to fulfill the needs of the Salvadoran
population.
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