Dollarization, Two Earthquakes and Now War

El Salvador’s economy is more closely linked to the United States than any other in Central America. The war will bring even more problems to the country in a year that has already been tragic for the poor.

Roberto Cañas

The morning of September 11, what should have been an average Tuesday in an average week, many Salvadorans flipped on the TV as they ate breakfast. The emotional impact of seeing those never-forgettable images of destruction transmitted direct on national television was enormous. The terrorist attack that put an end to feelings of security and tranquility in the United States has also aggravated El Salvador’s insecurity and uneasiness.

The crisis in the United States and the world as a whole brought on by the retaliatory war will also have a very deep economic impact here. There are over 20 flights a day between El Salvador and the United States. Our economy is dollarized and is kept afloat largely with the remittances that over two million Salvadorans living in the United States send home to sustain their families. Our production is largely geared to US supply and demand.

Many condolences, little reflection

For several days the national newspapers, which normally dedicate the first ten pages of each issue to reporting and analyzing domestic events, devoted the first twenty to the events in the United States in a new section headed "War Against Terrorism." The section carried many photos, but little text and no reflection on the profound historical causes that might help to explain the attacks.

One by one, organizations ranging from political parties to the masons, business associations and unions expressed their condolences to the US ambassador in El Salvador, Rose Likins. Paid advertisements overflowed with condemnation and condolences, but little thought on the meaning of these tragic events or the possibility of avoiding them in the future.

Very few statements engaged in any serious, objective consideration of what had happened in the United States and what is happening in the world. The Office of Human Rights Ombudsperson was one of the few Salvadoran institutions to express "concern over the dangers of a war that will produce thousands of refugees." It also dared remind the world’s most powerful countries of the need "not only to pursue terrorism, but also to pledge to work first and foremost for progress, peace and democracy for the other poorer and less fortunate nations."

The September 15 demonstration

The Salvadoran government declared three days of mourning and suspended its traditional Independence Day celebrations on September 14 and 15. As it does every year, the FMLN had planned a demonstration, and decided to go ahead with it.

What typically happens in these marches is that people shout slogans and cover the walls of the city with messages that tend not to resonate among most of society. This year, only a few thousand people participated, among them purported university students who burned US and Israeli flags and painted slogans including "Long live bin Laden" and "Osama bin Laden, we’re with you." ARENA politicians and media seized on the participation in the march of a handful of FMLN politicians including the head of the party’s legislative bench, Salvador Sánchez Cerén, to accuse the entire FMLN and Salvadoran Left in general of sympathizing with international terrorism.

US finds FMLN
communiqué "offensive"

Several days later, it was learned that Ambassador Likins had sent a letter of protest to Sánchez Cerén, reportedly not over the slogans or even his participation in the march. It dealt with a communiqué the FMLN issued on September 11, which included statements by him on behalf of the FLMN legislative bench. In its declaration, the FMLN condemned not only terrorist attacks against the United States but also "all forms of terrorism, including that which attacks civilian populations and promotes economic policies that affect humankind and subject it to starvation."
At another point, the statement read, "The FMLN once again exhorts all states, especially the government of the United States of America, to resolve conflicts by political means through dialogue and negotiation, respecting the sovereignty and independence of other nations as a sign of political will that ensures the social, political and economic stability and tranquility of all peoples."
These two paragraphs were the source of her pique, and illustrate the extent to which the United States expects the rest of the world to take sides unequivocally. The US ambassador wrote that "it was particularly lamentable to receive your statement, offensive in substance and tone, at a time when we had not even been able to count all the victims of this crime." She added, "It does not fail to surprise and offend that the bench chose to compare this mass murder to unspecified ‘economic policies.’ I also lament that you have ‘exhorted’ my country to negotiate and respect the sovereignty and independence of other countries in response to these criminal acts."
This series of events and the accusations and counter-accusations that followed, guided by vehemence, opportunism and political manipulation, contributed to the confusion and aggravated tensions within the FMLN, where tensions were already running high over the endless internal battles between the party’s orthodox and conservative sectors.

The new "terrorist hunt"

Several days later, Roberto Murray, who had just been elected the new president of the governing ARENA party, spoke categorically in obvious reference to the FMLN: "We cannot allow people who burn floral wreaths of mourning and the flags of friendly countries to come to power…. We cannot leave the country in the hands of those who think that terrorism is a method that should be applauded and justified." Just as in Nicaragua, the terrorist attack in the United States is being used here to electoral ends.

This was followed by more than a few grotesque, surreal situations. ARENA’s National Assembly representatives began calling call the FMLN bench members "Taliban representatives." In Tecoluca, San Vicente, a teacher came up with the idea of dressing one of her students as Osama bin Laden and another as George Bush during a student march. Although she explained that her intention was to "publicly bring bin Laden to justice as a sign of repudiation," she was accused of trying to exalt bin Laden because she was "a leftist." This new "terrorist hunt" will be a latent danger in a country that has not yet overcome the prejudices, suspicions and fears that all wars leave behind.

There have been other troubling consequences as well. El Salvador’s airports and ports are militarized. Various US agencies are moving freely in the country, including the FBI and the FAA, which has taken direct charge of supervising security in the Comalapa international airport. Even the meeting of Central American police chiefs held in San Salvador on September 23 took place in the presence of US embassy representatives.

"The snake is striking back"

The panorama became more somber when it was learned that a number of Salvadorans had died in the terrorist attack in New York. Alfredo Pocasangre, the father of a Salvadoran woman who was traveling in one of the planes that struck the World Trade Center, had this to say: "My daughter Gloria traveled two or three times a week to the States, carrying packages. Why did she take that job? Because there is no future here in El Salvador. And now she’s a victim of the political problems between the United States and other countries. You have to know that a snake bites the one who touches it, who provokes it, and these cases of terrorism are a response to provocation. I feel that the US government has really provoked countries in the Middle East and this is the result: the snake is striking back."
Then on September 27, it was announced that the FBI had arrested a Salvadoran man, Luis Martínez Flores, accused of helping obtain identification documents for the men who crashed the plane into the Pentagon in Washington. Very little is known about what happened to him, how he was treated during the arrest or what kinds of charges he faces. Though Salvadoran authorities have stated that the Foreign Ministry will ensure that he enjoys all due legal protections, the government has not been actively involved in his case nor is it likely to be involved in his trial.

Remittances, maquilas, tourism

The government has recognized that family remittances will shrink, since many Salvadorans work in the United States in hotels and restaurants and tourism is one of the sectors hit hardest by the terrorist attack. Until the attacks, remittances had been on the rise. A total of US$921 million entered the country between January and June, a 12.7% increase over the same period last year, which can be explained by the solidarity Salvadorans living in the United States felt toward their family back home after the earthquakes in January and February. In 2000, an annual total of some $1.75 billion—13.2% of the Gross Domestic Product—was sent home from the States.

Presumably, Salvadoran exports will also suffer. The United States is El Salvador’s main trading partner and 60% of the country’s exports go north. The contraction of the US economy even before September 11 was already being reflected in Salvador’s economy: US purchase orders from Salvadoran maquilas had fallen in recent months, and these assembly plants for re-export had laid off over 2,000 workers.

Tourist income is also expected to fall an estimated 20%, or $54 million, according to the Salvadoran Tourism Corporation. In 2000, some 800,000 people visited El Salvador and spent $270 million here.

Dollarized and earthquaked

These crises have come on top of what was already an atypical year for El Salvador. Two geological earthquakes and one economic one—the dollarization of the currency—have leveled our country. Dollarization was sold to the population as an almost magical cure that would jumpstart the stagnant economy. What it actually did was decrease the government’s capacity to use economic policy levers, limiting it to fiscal matters and a promised cut in the interest rate. The touted economic benefits turned out to be just pretty words in stale speeches.

Just as the dollarization went into effect, the earthquakes of January 13 and February 13 shook the entire country, causing considerable human and material damage. The official statistics report 1,159 people killed and 8,122 hurt. Over a million and a half people—25% of the total population—lost nearly all their belongings.

El Salvador’s socioeconomic and territorial maps were severely altered by the two devastating quakes. There are over 225,000 more poor people in the country today. Nearly 164,000 houses were destroyed, over 1,000 schools and health centers were destroyed or severely damaged and 41,400 small businesses have gone under. Economic losses are calculated at over $1.6 billion, equivalent to the country’s accumulated economic growth over the past four years.

The situation is even more troubling when we recall that on top of all this destruction, the plunge of international coffee prices—to $46.75 a hundredweight, the lowest level in 26 years—has sharply increased rural unemployment, as plantation owners have laid off many day workers. This has had a huge impact on the income of peasant families, increasing the already high rural poverty rate.

The first half of the year normally shows greater income than the second half due to the spike from coffee exports. This year, the earthquake damage, the fall in internal demand and the decrease in exports meant that by the end of the first half of the year, the Salvadoran economy reportedly grew only 1.5%. In reality, the economy has grown at an average annual rate of under 3% in the last five years, and just 2% in 2000. Given the 2.1% demographic growth rate in the same period, the possibilities of dealing with poverty and making progress towards greater human development were clearly limited even before the effects of September 11 became part of the equation.

Other issues buried

What happened on September 11 has buried—or at least temporarily displaced—this and other important issues on the national and regional agendas. At the time of the attack, for example, some 400,000 people in Central America were suffering from hunger after losing between half and all of their staple food crops of beans and corn to drought. Thanks largely to publicity by the World Food Program, the international community was beginning to show interest. Who will even remember them now?
Also forgotten under the wreckage of the towers is the basic structural problem of the tremendous inequality in income distribution. El Salvador is one of the most inequitable countries in the world. We know, or at least should know, that inequity breeds all forms of violence and despair.

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