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Proceso 1133
February 16, 2005
ISSN 0259-9864
Editorial: The Salvadoran notion of identity
Politics: The growing concern about governance
Economy: The tax reform: A disappointment for the investors?
The Salvadoran notion of identity
To define the concept of identity is not an easy task. The
first thing that has to be done is to discard those essentialist visions,
according to which the concept of identity is something immutable and something
that can be caught with our own hands. Usually, identity is a dynamic and an
ever changing process through which individuals permanently recreate the
characteristics that identify them as part of a much wider social group. To have
an identity is to feel part of a community, with certain patterns, options, and
particular lifestyles. Each individual builds his identity from certain notions
through which he nourishes his subjectivity. Obviously, Salvadorans are part of
that situation. Their identity has been created and recreated through the
implementation of that national community called El Salvador. Right now, in the
context of an accelerated process of globalization, the identity of the
Salvadorans is being redefined, not only because of the influence of the
external cultural processes, but because of a group of cultural and symbolic
notions that find in the mass media a platform to be publicly broadcasted.
To redefine the identity of the Salvadoran population does not mean that the
traditional signs of the identity have to be eliminated, it means that many of
them will remain as part of the new image that they are building in these times
of political, cultural, and economic globalization. The local symbolic and
cultural notions that the most important media have been working with since the
nineties reveal several aspects that have been traditionally connected with the
Salvadoran identity, along with other aspects that have to do with the new
social and cultural circumstances. Let us see some of those notions.
In the political and the business areas, figures such as Wilfredo Salgado –the
Mayor of San Miguel- and President Antonio Saca are presented as role models. By
the way they have been portrayed by the media, both of them are, in their own
style, successful businessmen and politicians. Both of them had humble
beginnings, but their individual effort and sacrifices allowed them to have
enough money to be respected and to aspire to occupy important public positions,
through which they have been deservedly rewarded. It is true that one of them
expresses himself better than the other one, that he is less rough and more
polite. In one of them, morbidity, and a certain sarcastic air are spontaneous
features; the other one seems to be sympathetic and kind. However –according to
the media-, both of them are Salvadorans; both of them represent the best of
what a Salvadoran citizen can give. Undoubtedly, the people would have to aspire
to be like them, they are a role model.
The complement of both Salgado and Saca, as cultural notions promoted by the
most important media, is Roberto d’Aubuisson, the former major that, alone
–according to the recreation of the events made by the media- took charge of the
titanic task of getting rid of the communists (the real and the alleged ones).
d’Aubuisson was able to do what he did because of his courage and his
bullet-proof manhood, because of his coldness, and his lack of feelings, which,
in any case, an emotional conduct can only be tolerated in a woman..
Undoubtedly, the former major was, without a doubt, a macho, willing to
challenge death, to risk it all, without any fears. He did not have money and he
was not ambitious; however, he was respected by those who had money. How could
not d’Aubuisson be a role model? Was he not a Salvadoran at heart? The attitude
of a macho, virility, strength, the lack of compassion, and the absence of
feelings… Are not all of these elements combined something necessary to get
ahead in life and to create great projects, such as the one that the former
major undertook in order to turn El Salvador into the grave of the communists?
However, the political an the business circles are not the only sources for the
media to build the notion of identity for all Salvadorans. They do the same
thing with religion; where some religious and conservative leaders are turned
into moral and political role models; the business circles; making the public
believe that the success of certain businessmen or companies is what guarantees
the happiness of the population; the sports sector, where the conduct of certain
sports figures is promoted as the ultimate positive behavior; and the circle of
the media as well, where the presenters are portrayed as fashion icons with
specific political preferences.
For instance, the media have always tried to turn Jorge Gonzalez into a role
model for all Salvadorans. In order to do that, they have overestimated his
skills as a soccer player: they have turned him into a genius, if not the
greatest of them all, one that is indeed at the same level of Pele, Di Estefano,
or Diego Maradona. Time and time and again, the media keep talking about how
remarkable he is; the anecdotes of those who knew him in Spain are always about
his extraordinary personality. This is a story about a genius that, in spite of
his humble beginnings, managed to become successful in Spain, where he had it
all –money, luxury, travels, recognition-. However, the media tell us that, in
order to have that world at his feet he had to change, he had to stop being
himself, he had to forget about his lack of discipline, his hectic lifestyle,
his partying… An it is clear that Gonzales did not do that, because in addition
to his genius, he is an authentic person. It was either his authenticity or his
success. He chose to be himself and he had to return to El Salvador in order to
live with his authenticity, without the pressure and the discipline he had to
deal with if he wanted to be part of that false world of first level
international sports.
They encourage the characteristics of role models such as Wilfredo Salgado,
Antonio Saca, Jorge Gonzalez, or d’Aubuisson; and virility, ambition, abuse, and
manipulation as the key factors for success, along with conformism, lack of
effort, and indiscipline. These are contradictory notions that are internally
connected. If there are Salvadorans that aspire to become someone like Wilfredo
Salgado or Antonio Saca, there must be Salvadorans that also aspire to become
someone like Jorge Gonzalez. The ambivalence of the Salvadoran population, the
ambitions, and the contradictory attitudes that characterize them, can be
explained, in part, by the existence of cultural notions like the ones formerly
described.
The growing concern about governance
After the Peace Accords were signed, many thought that the
national politics should flow through completely different streams, different
from the ones that existed during the civil war. However, a while later, it was
sadly concluded that the expected political understanding was not an easy task,
despite the fact that the political actors had showed that they were willing to
respect the agreement of putting an end to the war. Since then, the word
“polarization” has been fashionable, and many fear that the country could go
through a phase of weak governance, due to the considerable distance that
separates the main political forces of the country.
In this context there is also the internal discussion about governance itself.
“The concern about the democratic governance –indicates an expert of the PNUD-
has been present in El Salvador throughout the nineties. After the Peace Accords
were signed, there was the need to come up with new accords. This situation
created initiatives and pacts that, however, were not able to come true”.
This is how it became fashionable to talk about governance in El Salvador.
Almost everyone talks about the need to improve governance. However, there is
still a lot to do in order to reach a satisfactory agreement in the whole sense
of the word, and about the specific recipes that should be applied in order to
achieve a higher level of governance in the political system.
It should not seem completely odd if the dimension of both the “governance” and
the “lack of governance” concepts has not been defined yet. Somehow, El Salvador
is at the level of the rest of the Latin American countries that recently began
to discuss the issue. Rene Antonio Mayorga sustains that “the scientific
treatment of the problem of governance in Latin America is an incipient matter,
and no one has reached an analytical or an operative concept that allows to make
empirical and reliable studies about the different national experiences. The
suppositions and the limitations of a concept about governance are not
sufficiently defined, and its true meaning has not been tested in the empirical
or the comparative field”.
In this context, the author himself sustains that different experts highlight
conflicting aspects of the analysis about governance in the region. Some of them
seem to believe that the most important feature is the administrative and the
technical profile of the subject. For others, instead, it is more important to
discuss the legitimacy, the basic social consensus, and the power of
representation, in order to guarantee the existence of the democratic system.
Others prefer to analyze the institutional designs that favor governance. In the
Salvadoran case, not much has been discussed about it. Those who refer to
governance usually believe in the importance of a consensus between the national
politicians in order to come up with a solution to the most critical problems of
the country.
During 2003 and 2004, several studies have been published about the importance
of governance for the performance of the political system. Among them, there are
the ones of the National Association of the Private Business Companies (ANEP, in
Spanish) and the PNUD. Even if it is true that there are substantial differences
between the way in which this analysis has reviewed the problem and the way that
the ANEP refers to it, both perspectives indicate that the country is in a
crossroad at this historical moment. They propose a sort of dialogue between the
different politicians in order to legitimately confront the problem of
governance.
However, at the same time, there are many things that no one mentions when it
comes to talk about governance here in the country. In the first place, some
people think that this is task exclusively connected with the politicians; or,
in the worst of the cases, the opposition is blamed for the lack of governance.
However, the concept of governance seems to be missing something more profound,
something that involves many other actors. Most of the authors sustain that
governance has to be understood from a multidimensional perspective, an aspect
that includes the politicians and the civil society as well.
The discussion about governance is a new assignment in Political Sciences in
general. This reality explains the fact that there is no unanimity between the
authors about the full meaning of this word, and its theoretical and its
practical dimensions.
The presentation of a group of works about this subject, published in the
Central American Magazine of Culture, included in one of the articles that “just
20 years ago, the term and the notion of governance became part of the language
used by the Political Sciences. Almost five years after –in the wide margin of
its many meanings- the term was launched and popularized by the World’s Bank and
the Inter-American Bank of Development with operative objectives: to use the
financial assistance efficiently in order to reach a sustained growth. In this
lapse, and particularly during the nineties, some have defined, in the frame of
a crucial and a controversial discussion, different theoretical and political
perspectives. Based in many cases in the empirical works about several
subjects”. In this context, Alcantara Saez indicates that governance is “an
elusive concept”.
The relation of the political sciences with the word governance has known
several stages, and has gone through different levels. The first one of these
levels has to do with the different analysis about the crisis of democracy. A
series of neo-conservative authors explained the lack of governance as “the
product of an overwhelming amount of demands to which the State responded with
the expansion of its services and its intervention inevitably causing a fiscal
crisis”. In the context of the crisis of the State of well-being some thought
that the State should not intervene much in order to avoid raising false
expectations.
For these authors, among which it is important to acknowledge the work of
Crozier, Huntington and Watanuki, there are “four tendencies that create a
dysfunction in the democratic system, which are:
1. The loss of legitimacy of the authorities, and the lack of trust in a
leadership as a consequence of the prosecution of the democratic virtues of
equality and individualism.
2. The enormous amount of work that the government has, due to the expansion of
the political participation and the development of the governmental activities.
3. The lack of interest as a consequence of the intensification of the political
race, which has led to the fragmentation of the political parties.
4. The increasing national parochial attitude in the field of international
politics, given the pressure of the society. In the industrialized democratic
countries, their vitality would have produced the same seeds for its own
destruction, which would be “a considerable increase of the governmental
activities, and an eventual reduction of the governmental authority”.
In other words, for these conservative authors, the endless list of demands of
the unions –at this moment they were thinking about the crisis of the European
democracies- promote the lack of governance. That is why Rene Antonio Mayorga
sustains that, by reviewing the thesis of Watanuki and his colleagues, “at the
time the notion of a lack of governance was introduced from a conservative
perspective, in order to question the many functions of the State in the social
and the economic fields, the growing demands of the unions in the context of the
State of well-being and the negative aspects of democracy, which allegedly were
an obstacle for governance in the democratic system”.
The second line of studies that approach governance, was formulated by
conservative economists with the objective to demonstrate that the political
dreams of the followers of Keynes were dangerous for the political democracy.
This source of thought indicates that “democracy is under great pressure, and it
can cause a fast process of inflation when the governments are confronted by the
unions, by the voters that consider the State as a plunder with an everlasting
source of services”.
The third line of analysis, instead, which comes from a neo-Marxist source,
being the leading figures O’Connor and Habermas, studies the crisis that the
Capitalist societies of our days have to face. In other words, the crisis of
governance would be the effect of either the contradictions of an advanced
Capitalism in a democratic system (O’Connor) or the legitimacy crisis (Habermas).
“The liberal democratic State –indicates Alcantara considering both thesis-
adopts several policies and tactics in order to protect its own legitimacy and
the one of the social order developing assistance services for that reason. The
final situation leads this legitimacy system to a process that creates fiscal
crisis, conflicts among different types of workers according to their branch of
production, regional conflicts, and ethnic conflicts as well”.
That is why in spite of the different perspectives about the problems of
governance, it is necessary to find an operative definition that allows to get
closer to the conflict. In order to use a definition prepared by Camou, we could
think about a dynamic state of equilibrium between the social demands and the
capacity that the government has to respond to such demands. This conception of
governance demands the collaboration of all, citizens and responsible public
officials from the governmental institutions in order to promote the good
performance of a political system. An overwhelming amount of demands and the
incapacity to fulfill them become a danger for the stability of a country. That
is why it is necessary to find a dynamic equilibrium between social and
political sectors, speaking about governance. On the other hand, the former
definition has three basic elements connected with the efficiency, the
legitimacy, and the stability of the political systems.
In the first place, governance demands governmental efficiency. In this case it
is important to see the capacity that the political systems have to reach
certain pre-established objectives. In this sense, it is expected that the
decisions of the of the governments find a wide range of social acceptance.
According to the acceptance level, it is possible to speak about of a higher or
a lower degree of governance.
The second element present in this definition is that governance involves the
legitimacy of the governments. In other words, this is where an emphasis is
placed on the quality of the governmental action: for instance, exclusion, and
other social issues that are left behind, among other things, could be a threat
for governance. In the third place, the definition of Camou has as a background
the idea of the stability of the political systems. We are talking about the
capacity of adaptation, the flexibility that the institutions have to face the
different challenges that they have to respond to.
The tax reform: A disappointment for the investors?
The tax reform promoted by the Executive power has
generated different reactions in the world of business. Some sectors of the
private business companies, for instance, have stated that they are unhappy with
this measure. For the most important business associations it is necessary to
raise the revenue level. However, this must be accomplished through efficient
institutional mechanisms, because inefficiency could debilitate the actions of
the business companies.
By the end of last week, several business associations presented a package of
reforms aimed to transform several aspects of the new tax law. The government,
through the Ministry of Hacienda (Internal Revenue Service), admitted that there
are some formalities that have to change in order to make the procedures to fill
and present the tax applications more efficient, and, in addition, not to affect
the operations of the business companies.
One of the regulations that could affect the development of the investments
would be to request a fiscal solvency in order to follow banking procedures,
especially when it comes to request a loan to the government. The business
associations think that such regulation can only be applied to the loans that go
beyond $15,000. They do not agree either with the fact that the DUI and the NIT
are requested for the commercial transactions (an exception when the final
purchase goes beyond $600). One of the most delicate aspects is the presentation
of the income tax application and the rest of the financial states to request a
credit line. To give this information away could be against the privacy of the
business companies’ owners.
For now, everything seems to indicate that some changes will be made indeed.
Just like the Minister of Hacienda stated, Guillermo Lopez Suarez, the
transformations are just cosmetic adjustments, indicating that the nature of the
tax reform will not change at all.
The position of FUSADES
Last week FUSADES presented a report on the economic conjunction, which
evaluated the performance of the economy during the last trimester of 2004. In
this report, a series of problems stand, which affected the performance of last
year’s economic operations. Among them, there was the electoral uncertainty, the
delayed approval of the budget, and the increasing prices of petroleum. For
2005, in general terms, the expectations are positive because everything seems
to indicate that the level of investments will increase. Nevertheless, there
will be certain impediments to reach the goals of the fiscal reform promoted by
the government.
According to FUSADES, one of the most crucial economic problems is the increase
of the public sector’s debt. In a dollarized economy, it is necessary that the
public finances remain "healthy", in order to guarantee the stability of the
foreign investments. In order to attack the problem of the debt, last year the
State promoted the fiscal reform. But the intention to expand the revenue’s base
through that method could somehow restrain the investments and intensify the
economic stagnation.
In that sense, it could be counter-productive for the government to impel a
fiscal reform that can restrain the level of investment. But it is also
necessary to increase the revenue level to resolve the state of the public
finances, since they are constantly reviewed by the international risk-rating
companies at the time of issuing an evaluation on the credibility for the
foreign investment in the country.
The business companies’ associations before the presence of the reform
The National Association of the Private Business Companies (ANEP, in Spanish),
since the beginning, seemed worried about some of the measures contemplated in
this reform, and this happened because several of them were affecting both the
national and the international competitiveness of the companies. For the
business elite, one of the main concerns has to do with the income tax
patrimonial statement. According to the association, the regulation could
stimulate illicit activities. In the declaration of the patrimony, the
contributor would enumerate all the assets, liabilities and properties.
The executive director of the ANEP, Raul Melara, indicated that the figure of
the patrimonial declaration could create problems, mainly security issues,
because that inform would have to go through several filters in the Ministry of
Hacienda, and can urge certain people to commit a criminal action: "for example,
if you declare that you have three houses or three cars, that could increase the
chances of kidnapping, which although it already has been eliminated, it could
have a perverse incentive concerning this measure", he indicated.
According to the association, there already are mechanisms to detect when the
purchases made by a person exceed the amount of assets he is declaring, that is
why this new disposition would create a duplicity of efforts, and would put the
contributor in danger.
Another reform that troubles the businessmen is one that intends to apply the
IVA to the interests of the credits that are not issued by a bank, since that
could have an adverse effect, contrary to what Hacienda actually wants.
According to the government, to charge the IVA is a good option that will allow
to formalize the status of the independent moneylenders. Nevertheless, ANEP
thinks that it will also cause the loss of clients, because the average user,
instead of looking for a credit with a commercial company, will go to another
source that might be inexpensive for him.
The discretionary status that will be given to Hacienda when the resources are
presented before the Main Directorate of Internal Taxes (DGII, in Spanish) is
also an object of preoccupation for the association. The reform indicates that
there will not be terms of resolution for some of the resources that will be
given to the DGII. That, according to the ANEP, gives a discretionary status to
Hacienda. "The reform must also be applied within the Ministry of Hacienda so
that it becomes more effective, because by not establishing a term to solve the
case, the dream of the fair ones will just remain a dream", Melara indicated.
In spite of all those disadvantages, the ANEP assured that it would see the
tributary reform from a positive perspective as long as it works to fight back
against contraband and fiscal evasion. "We are conscious of the need to fulfill
many aspects connected with social matters and with the investments, but we did
not share the idea to increase the Value Added Tax (IVA, in Spanish) nor the
income taxes. We believe that many things can be accomplished by expanding the
dimensions of the foundation of taxes", indicated the director of the
association.
Nevertheless, the information about the Ministry of Hacienda that was presented
to the ANEP indicated that, for several reasons, annually the State’s Treasury
does not receive $660 million because of different reasons; to collect this
amount is equivalent to what would be received if the IVA were increased from
13% to 21%. This would obviously affect the State’s Revenue.
On the other hand, the financial sector also seems unhappy. The Salvadoran
Banking Association (ABANSA, in Spanish), protested about the fact that certain
fiscal reforms were made exclusively for the financial sector. In the opinion of
the institution, with the approved dispositions the banking system would lose
its competitiveness at a regional level and would have to focus its attention
only on the national market.
The most critical reform for the bankers is the one connected to the disposition
to tax the income that comes from the loans granted by the Salvadoran banks
established abroad, since with this measure this system is in a disadvantageous
position before the credit offered by other organizations of the area: "We would
stop being competitive in the region, because while the Salvadoran banking
system pays 25% in income taxes, the banks of each competing nation do not pay
that amount", indicated Claudio de Rosa, the executive director of ABANSA.
Some of the measures that concern the bankers are the following: the taxes on
the income that comes from the credits that were granted abroad; the
presentation of balances, and the declaration of the income taxes to request a
credit; the possibility to give financial information to Hacienda, without
naming a special inspector; the tax on the contingency reserves, even when there
are losses; and the offer of daily information on all the operations made
through credit or debit cards.
It is possible to wonder if what the private business companies and the banking
system are looking for is to protect its interests and influence the decision of
the government. Nevertheless, in order to know the impact of the fiscal reform
it will be necessary to analyze its effects in the short and the long term on
the companies and on the independent professionals.
In this context, it is evident that the government faces "the end of certain
possibilities". An inefficient administration of the public finances during the
Flores administration has taken away a portion of the strength of the present
government to make some public policies. This way, the need to increase the
budget of the State in the social area, the stability of the public finances,
and the search of a higher economic growth seem to be isolated.
It is important to improve the dynamism of the economy by increasing both the
national and foreign investment level. But, how will these variables behave if
they are discouraged by some aspects of the tax reform? How will they approach
the problem of indebtedness in the long term?
The answer to this question will determine in the future the risk-rating level
of the country, something that, after all, is also a fundamental element to
determine the level of foreign investment. It is important to connect the growth
of the public expense level with the increase of the private investment level
and the fiscal stability. How to achieve these goals at the same time? Without a
doubt, with one tax reform that does not stagnate the economy, a reform able to
increase the social investment.
Could it be that the government is paying for the absence of a monetary policy?
According to the traditional economic theory, the search of several objectives
must be connected to the amount of instruments that the State counts with in
order to develop them. The search for an active level of investments to increase
the economic growth could be connected to the movements in the monetary control.
The search for a fiscal equilibrium and a higher level of social investment
would be the responsibility of the fiscal policy. Although, ultimately, in the
wide macroeconomic framework, these variables always would be related to
stimulate the growth of the country’s economy.
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