Center for Information, Documentation and Research Support (CIDAI)
E-mail: cidai@cidai.uca.edu.sv

Central American University (UCA)
Apdo. Postal 01-168, Boulevard Los Próceres
San Salvador, El Salvador, Centro América
Tel: +(503) 210-6600 ext. 407
Fax: +(503) 210-6655
 

     Proceso is published weekly in Spanish by the Center for Information, Documentation and Research Support (CIDAI) of the Central American University (UCA) of El Salvador. Portions are sent in English to the *reg.elsalvador* conference of PeaceNet in the USA and may be forwarded or copied to other networks and electronic mailing lists. Please make sure to mention Proceso when quoting from this publication.
     Subscriptions to Proceso in Spanish can be obtained by sending a check for US$50.00 (Americas) or $75.00 (Europe) made out to 'Universidad Centroamericana' and sent to the above address. Or read it partially on the UCA’s Web Page: http://www.uca.edu.sv
     For the ones who are interested in sending donations, these would be welcome at Proceso. Apdo. Postal 01-168, San Salvador, El Salvador.

Proceso 953
May 30, 2001
ISSN 0259-9864
 
 

INDEX

Editorial:  The changes of Flores
Politics:  The second year of government
Economy:  Economic priorities of the government
 
 
 
 
 
 

EDITORIAL

     Last week, President Francisco Flores made public a series of changes in his government cabinet. Although we could think that it is all about normal changes, demanded by an unavoidable weariness after two years of administration, there are also revealing signs that these changes are something far more serious. We have to consider certain economic and political aspects to understand the actions of the government.

     These changes are announced when the second year of administration is about to be closed; in other words, when a stop is made to evaluate what has been done and make the necessary adjustments for the following step. In this context, nobody should be surprised with the relieve of high rank officials who accomplished their duties or those who did not.

     There have been plenty of discussions about the unqualified way the governmental apparatus faced the disasters caused by the January and February earthquakes. The absence of a disaster prevention and mitigation plan has also been insistently pointed out —and this is one of the weakest aspects of almost every governmental administration of El Salvador. What has not been sufficiently discussed is how hard did the earthquakes hit the economic conduction plan designed, for better or for worst, by the President Francisco Flores´ administration.

     From this perspective, if the managing of the disasters had been a failure, nothing seemed to indicate that the post earthquake managing was improving the situation. The deficiencies shown in the Madrid council soon would find their counterpart in the failures to respond effectively to the demands of the population affected by the earthquakes. The winter arrived, the protection mechanisms against landslides and floods cannot be found anywhere, and the temporary homes not only tend to become permanent, but also condemn their inhabitants to a more precarious situation.

     In other words, the government failed to comply with the double promise he made: on the one hand, to prioritize the aid to the victims´ of both earthquakes; and, on the other hand, to execute a prevention plan before the imminent arrival of winter. Additionally, the economic plan designed before January and February of 2001 must be readjusted and launched once again, otherwise it threatens to turn itself into the worst failure of the Francisco Flores Administration.

     It seems that the president does not care much neither about the victim’s situation nor about the arrival of winter. He seems to be concerned about the threat of not fulfilling his economic compromises, acquired on a national and an international level by his government. That is why Flores trusts that one of his men will resolve —facing the government’s economic objectives- the delicate issue of the fiscal revenue. In his very own way, Juan José Daboub —one of Flores’ “super-ministers”— will know how to face, in a technical manner, the problem of impelling a tax collecting mechanism that (without necessarily collecting those taxes from the richest groups of the country) brings to the government the money that was not collected abroad.

    Applying the IVA to the goods and services offered by the informal sector is already in discussion. Obviously, this kind of products are neither acquired by the bank owners nor by the owners of the industrial enterprises. In other words, with this measure the tax collection would be increased by making that the poorest part of the population —who shops at markets, parks, and food cars— pays taxes for consuming ice cream, refreshments and even second hand clothing.

     When it comes to economic matters, President Flores’ intentions seem to be evident. His objectives are less evident, specially when it is about the changes in the ministries. However, this is no obstacle to make some conjectures about it. At this point, the most noticeable change is the one that took place in the Internal Affairs Ministry, where Mario Acosta Oertel was not only relieved from his position, but a process of ministerial dissolution will also take place —specifically in both the Public Safety and the Internal Affairs ministries— and the person responsible for this will be Francisco Bertrand Galindo, who is in charge of the new governmental branch.

     President Flores killed two birds with one stone. On the one hand, he advances on his ministerial structuring purposes, which goes through the concentration of attributions in the institutions and the people closest to his government management style. Now it is clearer than ever that Daboub and Bertrand Galindo are two of his men of trust. On the other hand, Flores manages to get rid of Acosta Oertel, who was constantly out of tune with the technocratic government style that he wanted to stamp on his administration from the very beginning. The former Minister of the Interior will go his own way, to the ideological and political controversy, but this time without protecting himself in his official rank condition and without blurring the flexibility and openness appearance in which the government’s image consultants have worked so much on.

     Flores and his government have two priorities: the creation of a positive image among the Salvadorans, and to comply with the economic compromises (commercial and financial ones). On the first issue, after many efforts from his advisors, everything seems to indicate that the situation is improving. About the second issue, Flores has no choice but to trust in what his ministers of the Internal Revenue Service (Hacienda, in Spanish) and Economy can do.

     What about the precarious situation in which the earthquake’s victims live? What about the poverty that keeps condemning thousands of Salvadorans to the most suffocating misery? What about the constant price increases the increase on the basic food basket price, the low salaries and unemployment? Until now, nothing seems to indicate that these problems are a priority for the government.
 

    On June 1st, the Flores administration reached its second year. It is still difficult to objectively identify what are the positive aspects that those two years have brought to the life of most Salvadorans. Different opinion polls describe the people’s perception about unemployment, poverty and delinquency, among other issues. The great majority of Salvadorans admits that it does not feel beneficiated by the actions of the Flores government.

    Consequentially, the efforts to promote patriotism and a sense of belonging to the population have not reached the governments’ expectations. A good part of the population keeps thinking that immigration, mainly to the United States, would be the best alternative. The perspective of the country’s economic future is still pessimistic, and the Salvadorans seem every time even more disenchanted with politics.

     About a year ago, the evaluations on the governmental management’s first year, after being terribly graded, let us saw through that the population wanted the president to take a different direction. Similarly to this, the balances emphasized on the idea that if by the end of the government’s first year there were not enough elements to talk about an absolute failure of the third ARENA administration, it was urgent to consider the suggestions of the public opinion, which, then, demanded a new orientation in both the political and the economic field. During that moment, a year ago, there was a need for a true belief in dialogue and agreements, and a need for the materialization of the Executive’s good intentioned speech.

     Today, a year after those wishes were made public, it is time to evaluate what kind of an answer has been given to them. We have to ask ourselves up to what point this year’s president Flores administration has responded to last year’s doubts, and if it has provide some kind of relief to most of the Salvadoran population. Then again, if we consider the results of the different public opinion polls, we could come up with the conclusion that the country’s situation is even worst now. In other words, ARENA’s second year of government did not improve the population’s quality of life.

     However, if you take a look at the speeches of the president and his ministers —from the government’s perspective—, the free trade agreements, dollarization, the IVA for the basic grains and medicines, the motivations to the coffee growing sector, etc. should be enough to resolve the economic crisis this country is going through. Obviously, when it comes to the practical side of it, the decisions of the Presidential House technicians keep crashing against the national reality.

    The January and February earthquakes evidently had a major impact over the poorest sectors of the country. But we also have to admit that even before the earthquakes the poverty situation was already alarming. That is why it is important to insist that problems such as unemployment and poverty are growing worst, and this issues are definitively related to the economic model impelled by the ARENA administrations.

     From this perspective, the explanation of the difference between this year’s and the last year presidential evaluation can only be explained by a change of strategy in the Presidential House’s communication policy. The new crisis situation caused by the earthquakes offered the ideal scenery to change the image of a president who is absent and disconnected from the reality that most Salvadorans referred to in last year’s evaluation. The government’s communication office consultants, in the heat of the earthquakes, have been able to sell the image of a paternal and accessible president who listens and understands the pain of the Salvadoran people. That is the reason why the presidential attitude was positively evaluated, while it failed the test on its economic policies and the country’s management.

     Also about the political conductance, the opinion polls show alarming numbers against the country’s democracy and the governmental management. Once again the Legislative Assembly, together with its political parties, has failed to meet the population’s expectations. Both the infertile confrontation and the use of the government’s resources for the benefit of just a few seem to be the political class’ weak spot.

     In regard to this issue, President Flores’ administration has not necessarily stood out for its virtues. Its repeated accusations —mostly groundless— against the opposition, have not contributed to find the pathway to an agreement. On the contrary, the Flores administration has shown very little respect for the rest of political forces. Its advisors polarized political vision has not allowed the government to get closer to the left wing.

     In fact, in reference to this issue, the population’s opinion was ignored: the people demanded to stop the polarization in the political environment, and asked for an understanding among the different actors, in order to resolve the national problems. Not even the disasters were enough to the governmental team to realize the need to stimulate a national unity, respectful of the divergent opinions and the political opposition.

     On the contrary, the president took advantage of every occasion to discredit the opposition. In some cases, the critics have been accused of betraying the national cause. An old nationalism has fed the governmental answer to the critics against the unqualified administration of the aid for the earthquake victims, and against the excessively bureaucratic aid delivery process. The freedom of the press, so many times mentioned by the official spokespeople as an example of the advanced Salvadoran democracy, was also affected by the right-wing’s fury to control power. The president of the Republic, in a clear manifestation of intolerance, publicly accused an informative media —which happened to criticize his government— of affecting the image of the country, for questioning the administration of the international aid.

     In summary, just like it was evident in the Flores’ first year of administration evaluation, tolerance and openness are not included yet in the official vocabulary. The polarized separation of the political life, which once the former candidate promised to conciliate, remains untouched. In the end, the president has demonstrated that he is just like the rest of the politicians of his party, and that he belongs to the Salvadoran right-wing’s best tradition, which he intended to put aside during his campaign speeches. Contrary to what the people thought in the beginning of the present administration, up to this point, nobody expects a change in the way politics are developed in the country anymore.

     If last year everybody thought that not everything was lost, and that the benefit of a doubt should be given to the new president, today, after he established his government project, there are enough reasons to believe, just like most of the population thinks, that there will be no changes in the government policy during the Flores administration.
 

     After the cabinet changes made by President Francisco Flores, during the third week of May, plenty of doubts about the evaluation, which preceded those changes, come out. Not just because, according to Flores, it was all because of the discovery “of a faster and non-bureaucratic way of working after the earthquakes”, but also because the most compromised ministries have not been included: Economy, Environment and Farming.

     Additionally, it strongly calls our attention when we examine the changes in the cabinet, the assignment of the Technical Secretary of the Presidency, Juan Jose Daboub, to the Internal Revenue Service. Not just because Daboub will have to assume simultaneously two public duties, but also because it is in the public finances area where one of the main weaknesses of the political economy is located: the incapability to eliminate, or at least to reduce, the fiscal deficit. This aspect does not deny the presence of other economic problems, such as the commercial balance’s growing deficit, and the production slow growing rates that, however, have not been considered at the time of making changes in the cabinet.

     The present government inherited an economy with fiscal and commercial problems  —among other   weaknesses—, but at the same time it inherited the advantages that come with the family remittances that immigrant workers keep sending. Like this, even though there are strong tendencies to lose the balance, the government keeps enjoying a certain ease in the management of the political economy, just like the stability of prices and the type of change reflect.

     Public finances, however, present certain problems that cannot be fixed with the flow of remittances, and which require that the government goes into higher levels of debt. As for what is next, the change in the Internal Revenue Service is considered, briefly looking through the public finances path and its situation, and a few considerations are made about the work of other economic areas which suggest that the cabinet changes should have been even more profound and numerous.

     The problem of the public finances actually dates from previous administrations, and practically ever since the Cristiani administration (1989-1994), a large tax reform effort was undertaken. It was intended to correct the repeating tendency to have a deficit in the public finances. Many taxes were eliminated (patrimony, exportations, some tariffs), others were reduced from the companies income, and there was created one that came to substitute the rest, the added Value Tax (IVA, in Spanish). However, by the end of the year 2000 the publics finance deficit increased from 2.5% of the Gross Domestic Product (PIB, in Spanish) in 1999, to 3%.

    This means that the tax reform would not have corrected the fiscal deficit problem, whether it was because of the high levels of evasion, an inadequate design of the reform, a disproportionate fiscal expenses increase or a combination of all the mentioned options. It would be expected that with the arrival of the new minister, a more structural problem could be solved, and that it will require more systematically elaborated measures than the ones presented by the president at the beginning of his administration (see Proceso 952).

     Concerning the performance of the economy, during the year 2000 El Salvador experimented one of the lowest growth rates in the last seven or eight years (2.4%), which should not be a surprise considering that the growth rates have been decreasing practically ever since the last trimester of 1995. What does call our attention is that the Flores government has proposed and executed several measures —tending to reactivate the farming production— which have turned out to be a complete failure: charging the IVA for the basic food basket products and the soft loans for the coffee growing production.

    Paradoxically, in the year 2000 the farming sector decreased in –0.8%, which reflects not only the sector’s long profitability crisis, but also that the measures adopted by president Flores did not have the desired effect, but they did turn into a price increase in the farming products (and also in medicines). It would be fair to accept that, unfortunately, the government has not implemented yet two important measures that might have changed the results: the re-structuring of the Banco de Fomento Agropecuario (Farming Encouragement Bank; BFA, in Spanish), and the reorientation of the farming extension.

     Without a doubt, the behavior of the farming sector during 2000 compromises the Flores government, and specially the agriculture and the cattle raising branches. In case this was not enough, another compromising element emerges from the inadequate dealing with the old commercial conflict with Honduras, due to the commercialization of dairy and poultry products, during which the already mentioned ministry had to accept the presence of the chicken’s influenza in the country and, with that, reveal the existing deplorable sanitary controls. Therefore, an evaluation of the performance in the branches of agriculture and cattle raising would have pointed out more likely to a change in the ministry and to a redefinition of the work plans.

     Additionally, the general performance of the economy shows that we are still far from a successful economic administration, contrary to what over ten years the different ARENA’s administrations have wanted us to believe. Last year cruelly revealed this: the economic growing rates were the lowest in four years (2.4%), the fiscal deficit increased ostentatiously (from 3% to 3.9%) and the commercial gap continued widening. Before this reality, the role of the Economy Ministry has been reduced to an outrageous negotiation of free trade agreements. The advances in this issue would be present in the materialization of the Free Trade Agreement with Mexico, but the truth is that the former has been negotiated for over ten years by now and, therefore, it is not an exaggeration to say that the one which was signed during the current economic administration has been a mere chance.

     The environmental management area is the one that provides the clearest samples of ineffective public administration. The role of the Environmental Ministry during the Flores Administration has fallen into repeated omissions, inertia, and even violations to the Environmental Law. The massive intoxication cases, inadequate storage of toxic substances, and the issuing of environmental permits of uncertain technical criteria have not been strangers to the present environmental management. Construction projects in key areas have been authorized —from a perspective of professional services— for the sustainable management of the Acelhuate’s river basin, where San Salvador is located (the country’s main urban agglomeration).

     The only reason that might explain why the changes in the cabinet were not more drastic is that a governmental crisis could have been created. Apparently, the changes have been put in order of importance according to an elevation of the government’s conciliatory image (which went through the removal of the controversial Minister of Internal Affairs and to continue with governmental reform strategies (previously outlined). The fiscal sector’s reform, and the restructuring of the bureaucratic apparatus are working areas that were defined before the present changes in the cabinet, although that does not necessarily means that they can turn into priority areas.