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El Salvador seems destined to be a basket-case

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A man reads a newspaper with the elections results as front page news, with a headline that reads in Spanish,

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A man reads a newspaper with the elections results as front page news, with a headline that reads in Spanish, "Second Round", while having his shoes shined in San Salvador, El Salvador, Monday. El Salvador's ruling leftist party appeared to win the presidential vote with nearly all ballots counted, but candidate Salvador Sanchez of the Farabundo Marti National Liberation Front probably faces a runoff against San Salvador Mayor Norman Quijano, of the Nationalist Republican Alliance, known as ARENA, by narrowly failing to win a simple majority of votes.

The battle for El Salvador’s presidency between the leftist FMLN and the right-wing ARENA party remains in suspense after neither candidate won the requisite majority of votes Sunday. That Salvadorans failed to pick a leader between such polar opposites is the latest symptom of political paralysis amid a deficit of ideas.

El Salvador’s political leaders seem incapable of tackling the country’s most enduring problems, from a crime rate that makes it the second most deadly country in the world, to meager economic growth of just 1.9 per cent during the past decade.

In choosing between a former Marxist guerrilla, Salvador Sanchez Ceren, the current vice president, and the right-wing Norman Quijano, a former dentist, voters seemed undecided for a good reason. Neither politician presented a coherent political platform, resorting instead to a game of Cold War-era name-calling.

The right likes to paint the Farabundo Marti National Liberation Front leaders as communists bent on Cuban-style dictatorship, while the left accuses the Nationalist Republican Alliance of widespread corruption and capitalist greed. Both belong to a generation of unimaginative politicians who are more apt to foment division than to foster economic growth.

The last four years of FMLN policies are an apt example. The government increased social spending, but did so by taking on more debt, with little regard for how this will be paid back. Government debt is set to reach 60 per cent of gross domestic product this year, up from 50 per cent four years ago.

Meanwhile, the economy is stuck on a mediocre growth path. The country’s staple exports, such as sugar and coffee, do little for the economy. Same for the textile industry that relies on cheap labour. Hungry, ambitious people have become El Salvador’s largest export to the United States. The money migrants send back home is the country’s single largest source of foreign exchange, now at more than 16 per cent of GDP and rising. No one on the right or left seems to know how to stimulate El Salvador’s economy enough to grow anywhere close to the three per cent rate that Latin America will average this year, according to estimates by the International Monetary Fund.

Rampant violence doesn’t help. The government managed to reduce the homicide rate to 6.8 killings a day — a staggering number in a country of 6.3 million people — but only by brokering a truce between rival gangs, not by tackling organized crime directly. Worse, the state suffers from under-equipped and ill-trained security forces, a judicial system known for letting criminals go free and overcrowded prisons that serve as criminal command centers. El Salvador’s central bank reckons that crime costs the economy as much as 10.8 per cent of GDP.

The country’s business leaders are no visionaries either. Many local entrepreneurs sold out to foreign companies and invest their money in Nicaragua or Costa Rica rather than at home. El Salvador’s investment levels, at 14 per cent of GDP, are low compared with peers. But no one can blame the business community: As economist Ricardo Hausmann has put it, El Salvador is a "low return country" with a lack of productive investments or profitable opportunities.

El Salvador’s future president has his work cut out for him. Any new administration must reform the judicial, police and prison systems, and take on criminal gangs.

The country would do well to model its economy after Costa Rica’s, which specializes in high-end manufacturing. Even Intel Corp. has opened up shop in the Central American neighbour. But to do that political leaders must strike a national agreement with the private sector to prioritize education and train a new generation of engineers and technicians, a long-term investment.

El Salvador’s polarized political class shouldn’t allow Cold-War grudges to get in the way of ideas for El Salvador’s future. Yet, that seems to be a cycle the country’s leaders are unwilling to leave behind.

 

Raul Gallegos is the Latin American correspondent for the World View blog.

 

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