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EL SALVADOR: Funes to Take Over Country in Deep Crisis

SAN SALVADOR, May 28 2009 (IPS) - President-elect Mauricio Funes of El Salvador is about to take over a country in recession, with an expanding budget deficit, growing unemployment, and soaring poverty rate.

Social organisations are calling on Funes, of the leftwing Farabundo Marti National Liberation Front (FMLN), to implement a model of sustainable development capable of improving the living standards of the people of this impoverished Central American nation.

Funes, who in the Mar. 15 elections beat the candidate of the rightwing ARENA party that has governed El Salvador since 1989, will become the country’s first leftist president when he is sworn in on Jun. 1.

“There is a 500 million dollar fiscal deficit,” one of Funes’s chief advisers, Alexander Segovia, told IPS, pointing out that the economic situation “will be a huge challenge” for the new government.

Segovia blamed the loss of 40,000 jobs since October – after the international economic crisis broke out – on the 21 percent drop in exports from February 2008 to February this year, mainly to the United States, which absorbs 57 percent of this country’s total sales abroad.

That in turn drove the official unemployment rate – which does not include those working in the informal sector of the economy – up from 6.7 to 8.0 percent between October and April.

And if the current trend continues, by the end of the year, 50,000 more Salvadorans will join the 2.8 million people already living in poverty, the economist predicted.

The authorities estimate that 40 percent of El Salvador’s 5.7 million people are poor, and that 43 percent of the 1.2 million people making up the economically active population are under-employed – working part-time or barely scraping by on casual work – or are active in the informal sector, as street vendors, for example.

The International Labour Organisation (ILO) reported in early May that around one million people could join the ranks of the unemployed in Central America and the Dominican Republic as a result of the global crisis.

The ILO predicts that unemployment in this region will grow from six percent in 2008 to nine percent by the end of the year.

The United Nations Development Programme (UNDP) Human Development Report 2008 indicates that 81 percent of the economically active population of El Salvador does not earn a decent salary.

The budget deficit is a consequence of the drop in exports, tax collection and remittances sent home from Salvadorans abroad over the past eight months, as well as the mismanagement of public finances by the government of outgoing President Antonio Saca, say economists and business leaders.

Tax collection was 12.5 percent down in February with respect to the same month in 2008, and remittances were 7.8 percent down, according to official figures.

President Saca has acknowledged the size of the fiscal deficit, but said public finances are not in “an alarming state.”

UNDP economist Carlos Acevedo predicted that the fiscal deficit will reach 1.2 billion dollars by the end of the year, “which would mean nearly one-third of the national budget” of 3.6 billion dollars for 2009.

“That is huge. It is more than five percent of GDP,” added Acevedo, a member of the committee set up by Funes to design emergency measures to help the country weather the crisis.

The president-elect, a popular veteran TV broadcaster who is not only new to politics but is also a newcomer to the FMLN, recently said he would present “an integral anti-crisis programme that will protect the poorest of the poor” and that “will include policies aimed at removing the structural obstacles standing in the way of human development.”

Ricardo Navarro, director of the Centre for Appropriate Technology (CESTA), a local NGO, said “the current crisis is not only economic and financial, but is also a crisis of energy and food, while a climate change crisis is looming as well.”

That means “an immediate strategy must be established to survive” the recession, while planning for sustainable development policies in the medium-term, he said.

“We must recover the capacity to produce our own food, generate renewable energy and protect the environment,” said Navarro.

These specific problems are added to the structural ones, like poverty and marginalisation, for which “a solution requires national unity,” said Segovia. “No sector, neither private nor public, will be able to fix the crisis on its own. Everyone is needed,” he underlined.

Francisco Segura, a 50-year-old street vendor who sells ice cream, urged Funes “to live up to your election promise” to reduce the value added tax on basic products and medicines from 13 percent to zero.

That would “boost our family budgets,” he told IPS.

Rafael González, 54, who works at a small grocery store, said the new government should “launch a dialogue between business, the government and workers” in order to establish a policy for decent wages.

“Our wages just don’t stretch far enough,” said González. “For example, if they pay me today, tomorrow I don’t have enough money to cover the rest of my needs.”

“How can sustainable development be achieved?” asked Acevedo, who responded to his own question with a metaphor: “Right now we’re trying to reach the beach to keep from drowning in this shipwreck, and later we’ll try to built a hut for temporary shelter, while we plan for the medium term.”