- The Washington Times - Monday, October 30, 2006

SAN SALVADOR, El Salvador

The bodies soaking the pavement with blood stirred memories of this country’s violent past, still vivid in the minds of many. Minister of Eco-nomy Yolanda May- ora de Gavidia considers the government’s decision to undertake economic reforms after years of military oppression to be the key to ensuring those dark days never return.

However, some in El Salvador are concerned that the seeds of the next wave of national unrest have already been sown by an economic agenda that leaves many Salvadorans behind.

Lawmakers such as Salvador Arias Sanchez, 66 — a former rebel with the leftist Farabundo Marti para la Liberacion Nacional (FMLN), which has become a political opposition party — think the free-market ideas of President Antonio Saca Gonzalez, 41, and his ruling National Republican Alliance (Arena), neglect the needs of the country’s poor majority while courting big business.

“None of this [privatization and free trade] is helping our people or our economy,” said Mr. Arias. “Free-market ideals have benefited only a select few in this country, while the rest are ignored.”

The government disagrees. According to its National Office of Statistics and Census, 57.8 percent of Salvadorans lived on less than a dollar a day in 1991. That number dropped to 38.9 percent in 2002, the statistics office said. El Salvador adopted the U.S. dollar in 2001.

Since Mr. Saca took office in 2004, Mrs. Mayora says, the percentage of those living on less than a dollar a day has gone down further, but some say the figures on poverty in El Salvador are skewed by an increase in remittances from relatives living abroad, which exceeded $3 billion last year.

Backers of the government see remittances as a vital source of income needed to keep the country afloat during its free-market growing pains.

President seeks loans

Mr. Arias’ concerns with Mr. Saca, a close Bush administration ally, include his decision to privatize the country’s pension funds and take on more foreign debt.

El Salvador’s privatized pensions have been coming up short lately, prompting the government to seek overseas loans to cover the balance, a step the FMLN rejects. Though the opposition doesn’t have a majority in Congress, it has enough lawmakers to prevent Mr. Saca from getting the two-thirds vote he needs to pass loan approval in El Salvador’s unicameral Legislative Assembly, which has 84 members.

“This government is willing to take on debt to pay its debt,” complained Mr. Arias. “We’ve told the government to stop, because we need to rethink and restructure this current model.”

El Salvador’s public and private debts total about $13 billion, up $500 million from last year. Hoping to stem national indebtedness, FMLN lawmakers this month voted down a proposal by the Saca government to take on another $376 million in foreign loans, a big defeat for Arena.

The FMLN also takes issue with El Salvador’s decision in 2001 to do away with its own currency in favor of the dollar, which caused rising inflation and left 40 percent of the population unable to afford “basic human needs,” according to Mr. Arias.

The currency change made leading Salvadoran exports like coffee and textiles less competitive globally and unable to compete with developing economic powerhouses, Mr. Arias said. “We don’t have the capacity to compete with China, India and Bangladesh, because we are a dollarized economy,” he said.

But Mrs. Mayora, the economy minister, doesn’t see it that way. She contends that the dollarization of El Salvador and other Arena reforms “strengthened the competitiveness of the economy” on the world stage and created a platform for foreign investment.

According to the central bank, however, foreign investment in El Salvador remains the lowest in Central America at just over $4 billion in 2006.

Corruption cited

Analysts contend that much of the reluctance of foreign companies to invest in El Salvador stems from concern that the country has yet to overcome the atrocities of its violent past and lacks a strong judiciary to protect foreign investors.

“The level of corruption and impunity in doing business here remains high,” noted Alvaro Trigueros Arguello, an economic analyst for Fusades, the leading think tank in El Salvador.

“Legal security” for foreign investment remains a “major concern,” conceded Mrs. Mayora. The continuing inefficacy of the country’s courts to prosecute criminals in a timely manner has soured public opinion at home about the attitude the Arena government has toward the Salvadoran people and frightened foreign firms regarding the judicial bureaucracy of doing day-to-day business in the country.

“It’s best not to deal with the justice system here,” said Tim Bovensiepen, an executive in San Salvador with German printing-press manufacturer Heidelberg, who noted that when debts incurred by domestic clients go unpaid, the legal wrangling and red tape involved make it unprofitable to seek payment by taking a client to court.

El Salvador’s judiciary has also earned a reputation for being soft on organized crime, which is said to traffic billions of dollars worth of cocaine each year from Colombia and elsewhere in South America to the United States and Europe.

Meanwhile, FMLN lawmakers and others such as former San Salvador mayor and 2004 presidential candidate Hector Silva contend that discontent with economic policy is behind recent violence like the July 5 shootout, which started as a student protest against rising public transportation costs.

According to an FMLN study, police repression at anti-government demonstrations has increased noticeably in the last year, causing concern of a relapse into authoritarian rule reminiscent of the military dictatorships that ruled the country for decades.

“Recently, there has been a fundamental change in the way police deal with protesters who are being oppressed for their political opinions,” said Geoffrey Thale, Central America director at the Washington Office on Latin America.

Gang violence rises

Mr. Thale said that many of El Salvador’s poor “haven’t experienced the economic benefits that came with the end of the war” and are increasingly disillusioned. He cited the drop in voter turnout for the last presidential election.

Some say the same discontent is behind the country’s notoriously violent gang culture, which dominates poor neighborhoods in the capital and has spread to cities and towns throughout the country.

“We are the most violent country in the world, even more so than Colombia,” said Mr. Silva.

Last month, a Roman Catholic priest was bludgeoned to death in a neighborhood known for gang activity.

Though far from innocent, gang members who sell drugs on the street and clash with rival gangs say they are being blamed for all the country’s problems.

Over the last few months, police in the capital and elsewhere have cracked down on gangs, patrolling the streets day and night and arresting men with tattoos of MS-13 or 18th Street Gang insignia on their arms or face.

“We’re being hunted down like dogs,” said one gang member.

“Every day [police] are in the neighborhood just looking to pick us up and put us away,” he complained. “They blame us for everything that’s gone wrong in this country.”

Blame is one thing disenchanted Salvadorans concede they have plenty of.

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