An Analysis of El Salvador’s Political and Economic Realities: Can Funes Succeed?

22 May, 2009 – Council on Hemispheric Affairs

  • The country must overcome partisan differences and deal with a crippled economy
  • Moderate views and a concession-minded president may be the wrong prescription for the troubled nation
  • Will El Salvador finally break its bad luck?

El Salvador’s President-elect Mauricio Funes is scheduled to take office on June 1, and will be confronted with some of the same grievances that have been perpetually plaguing the embattled Central American country. His situation, however, is unique, as he will be the first left-leaning president in El Salvador’s tumultuous post-war history. Even though he represents the leftist party Frente Farabundo Martí para la Liberación Nacional (FMLN), Funes sees himself as a moderate idealist in his political views and has high aims for his moderate administration. However, the opposition party, Alianza Republicana Nacionalista (ARENA) will heavily scrutinize the expected policy changes and is unlikely to meekly succumb to them. His success in actually implementing his policies will depend on the resolve of the opposition (possibly forming a center-right coalition to block the pro-FMLN legislation in the upper house), and his response to the political pressures being registered by radical elements in his own party. During his campaign, Funes vowed to respect ‘all Salvadoran democratic institutions.’ Yet campaign promises can be broken as easily as they are made, and it is not assured that these democratic changes will indeed be allowed to occur if ARENA is unwilling to compromise.

Funes is a moderate politician who will be serving in a country that has become increasingly polarized with every election. This unique situation has distinguished him from any recent Salvadoran politician and may help him to better implement his program, as he will likely win over support from both sides. However, Kevin Casas-Zamora, a senior fellow of The Brookings Institution notes that in cases when the opposition is strongly opposed to FMLN policies, Funes may decide to ‘cater to FMLN hard-liners and pursue his reform agenda with no patience for democratic checks and balances.’ Zamora further adds that pursuing a path similar to such leftist leaders as Hugo Chávez of Venezuela, Evo Morales of Bolivia, and Rafael Correa of Ecuador have done before him, would temporarily be able to ‘undermine the legacy of the armed struggle,’ in order to bring democracy to El Salvador. For the first time in recent memory, Salvadorans will now possess that opportunity. Yet, Funes may not have to choose the radical path, especially as the FMLN has become more moderate soon after the political party took on its present form at the end of the country’s bloody civil war in 1992. The party took their defeat in the 2004 election as a call for political reform, and has since become somewhat less radical. While the party is still far from middle of the road, theoretically it can still be effectively represented by the centrist Funes. He can now demonstrate that the FMLN has ‘evolved’ from the Marxist guerrilla movement it was 17 years ago, to a bona-fide political party that can unite a bitterly divided country.

Funes has compared himself to Brazilian president Lula de Silva, a political pragmatist and latter convert to orthodoxy, and has distanced himself ideologically from the radically liberal Chávez by vehemently denying charges that he will transform El Salvador into a satellite state of Venezuela. According to The Guardian of London, he hopes to distance himself from, ‘old-school leftists by associating himself with the U.S. president Barack Obama.’ Funes accomplished this goal during his campaign by emulating Obama’s slogan of hope and change, but with a slight nuance, ‘safe change.’ Some of his policies that reflect his relatively moderate politics are his repeated disavowal of any intention of joining ALBA, the Latin American trading bloc that is made up of left-leaning countries, and his articulated respect for private property. One can hope, however, that his moderate policies will not severely alienate or polarize his already fractured support base. If so, the average FMLN militant may instead turn to Funes’ more ideological left-leaning Vice-President-elect Salvador Sanchez-Ceren for guidance and direction, who legitimately could be seen as the one who is truly representative of the party.

Although it has the third largest economy in Central America, El Salvador is still mired in deep economic problems due in part to San Salvador’s almost blind espousal of U.S. neo-liberal policies for the past several decades. This habit formed during the civil war in the 1980’s, when U.S. aid to the tune of nearly one million dollars a day caused El Salvador to become heavily dependent on U.S. aid and development strategy. Remittances are coming in decreasing amounts from the 2.3 million Salvadorans living in the United States. Funds from these expatriates represent 18 percent of El Salvador’s Gross Domestic Product (GDP). Therefore, the decline in the U.S. economy has adversely affected the Salvadoran economy.

A significant decrease in American demand for Salvadoran factory output also has directly contributed to the economic disarray in El Salvador. The problem became so pressing that 75 percent of Salvadorans believe that the economy was the primary problem of the country, according to a February survey by Universidad Centro Americana (UCA). It is expected that Funes will directly address these problems before they deepen and further deteriorate his country’s economic standing. He proclaimed during his campaign that he would work to make El Salvador ‘The most dynamic economy in Central America.’ His policies to do so ostensibly would mark a break from those of ARENA, but Funes has said he would not undo any of its policies.

Funes sees the Salvadoran people as the best and most important source for the country to generate wealth and actualize its potential. But many live in such abhorrent conditions that they are prevented from even glimpsing this potential. Some of Funes’ more concrete plans for increasing worker productivity include instituting an immediate food aid program to provide sufficient food to allow every Salvadoran to consume the required caloric intake level. His administration plans to do this by issuing subsidies for the production of food scheduled for domestic consumption. On the other hand, Funes wants to end subsidies that help mainly the rich, such as the $203 million gas and electricity subsidies. He also wants to increase government spending on healthcare, in part to increase publication of material about basic illnesses, and to make health services more accessible and affordable for women and children. Funes’ plan would raise the national expenditure on healthcare from 1.6 percent to 3 percent by the end of his term in 2014. However, funding for these social programs can be expected to be limited due to the severity of the global recession. The IMF has predicted the global economy will shrink 1.3% this year, which, in turn, means less foreign aid, fewer remittances, and a nation-wide budget decrease of about $55 million. The recession is a great impediment to the social programs Funes has in mind, and if it continues for too long, it may thwart the economic success of his presidency.

While recent gains, such as the signing of the Central American-Dominican Republic Free Trade Agreement have increased intra-regional exports, El Salvador still is burdened by extremely high underemployment and a limited purchasing power averaging just over $6,000. Even with hundreds of people leaving El Salvador every day, there still are too few jobs in the country. Currently, 59 percent of Salvadorans have not completed high school, and 63 percent of youths are either unemployed or underemployed, which contributes to the poverty that is currently strangling the economy.

The morning after his election, Funes said during a local television station interview, that he would not jeopardize private property or reverse any privatizations of the prior administration. He also outlined strategies to combat the widespread poverty ubiquitous in Central America, such as warding off tax evasion and other white-collar crimes, and by using public funds to create jobs for returning migrants. He also vowed to reduce dependence on imported food. These initiatives, while leftist in tint, are hardly too radical to drive away middle-of-the-road voters. However, these promises are feeble, because to the poor and destitute, only action matters.

This power shift will be quite difficult for ARENA to swallow, since it will now have to take a backseat approach to active policymaking, after having held uninterrupted power in El Salvador for decades. However, Funes’ immediate attitude towards the right-wing ruling party symbolizes a harbinger of goodwill. Shortly after the Supreme Electoral Tribunal issued its second report, Funes phoned several leading figures of ARENA to emphasize that their voices would still be respected and heard. Indeed, if Funes is to make any progress in his own ambitious agenda, he will need to win over some of the opposition’s cooperation. Although the FMLN won the most legislative seats in the January ballot with 35, it does not have anything close to a majority of the 84 seats, not to mention the two-thirds majority typically needed to pass most important bills. If the conservative parties ARENA and right-leaning Partido de Conciliación Nacional (PCN) vote together, they will control a total of 43 seats, representing a majority in the senate. Thus, when allied together, they could block any legislation perceived as being too liberal. Even with the support of the remaining two tiny parties seated in the senate (Partido Demócrata Cristiano and Cambio Democrático), the FMLN would not be able to overcome a united conservative vote. Therefore, it is imperative that Funes sway at least a few centrist legislators in order to give him a chance to implement his party’s reforms. The differences in Congress will mean that vital legislation will most likely be slowed rather than blocked or defeated.

Throughout most of the Cold War, the United States maintained very close relations with El Salvador. This friendship was born out of the unqualified U.S. support for ARENA during and after the civil war. Interestingly, both El Salvador and the U.S., within 6 months of each other, have held elections that removed the ruling conservative parties and introduced a new, somewhat leftist administration with a message for real change. Both countries’ administrations have now shifted ideologically in the same direction, making discourse and communication more attainable and collegial. Funes desires a strong partnership with the United States, and has pledged to work closely with the Obama administration to help combat domestic problems such as migration, street gangs, and drug smuggling. The exigencies behind his commitment to cooperate with the conservative opposition may even at some point force him to surrender any status he might have as a moderate liberal in order to pursue a more cohesive cooperation with the U.S. If necessary, Funes would likely be prepared to break with the oil discount program granted by Caracas– which has to be seen as a sweet deal with Chávez– rather than abandon trade potential with the U.S., as he cannot afford to lose the inflow of cash from that source. There is no question that Funes would rather sacrifice his ideals than his wallet, since both parties identified the economy as being the area that most directly needs assistance.

Without a doubt, Funes does not plan to be a U.S. puppet. One of his desires is to band together other Central American countries to form a coalition to better lobby for their rights and expectations within the international community. Such an organization, one similar to the Association of Southeast Asian Nations (ASEAN), perhaps, would be better equipped to lobby for benefits such as cheaper prescription medicine prices from the U.S. than as individual nations.

El Salvador is besieged by many other non-political or non-economic issues that nonetheless still adversely affect the country on a daily basis. Migration is one such problem, typically occurring as a result of an economic downturn. A study by economist Alfonso Goitia showed that more Salvadorans have left for the U.S. since the civil war ended than when the war was being fought, with nearly 500 people leaving every day. The mass exodus from El Salvador splinters households by separating children from parents, and makes kids more susceptible to join gangs. Among the many gangs is the notoriously powerful Mara Salvatrucha trece, or MS-13. Gangs such as MS-13 are responsible for a great deal of the street crime in San Salvador, and contribute to the country’s very high murder rate of nearly 50 out of 100,000, the fourth highest in the world. Therefore, outward migration from El Salvador creates the conditions for severe and debilitating social problems. However, Funes is nursing some indirect tactics to help combat the rise in gang membership and the resulting intensification of crime.

Funes’ presidency most likely will be fraught with obstacles laid down by a likely unyielding opposition. ARENA, at some point will most likely attempt to block his progressive agenda, in hopes that any failure on his part will send voters to their side, setting the stage where they can win back the executive office in 5 years time. However, such a strategy comes at a high cost. Any attempt by ARENA to defame the FMLN and its mandate could severely cripple the country in the long run. With the annual growth of remittances sliding from the normal 7-8 percent to 2.5 percent as of recently (with an estimation of zero growth in 2009), El Salvador’s annual budget inevitably will decrease. There is no guarantee that domestic projects will be properly funded.

There exists a myriad of devastating social problems in El Salvador, such as a lack of clean water, heavy deforestation due to human expansion, and one of the highest murder rates in the world. El Salvador cannot continue on the same path without experiencing dire negative repercussions. The changes that Funes promises are indeed a step in the right direction, but he has a long way to make it count. Every aspect of domestic society will be impacted by his political decisions and economic strategies. Not only will he have to persuade the solvency of the opposition to his management style of his position, or prove to his support base that he can indeed be liberal enough to satisfy their modest ideological requirements, but he will need to be lucky in regards to the conditions that are beyond his control.

With the fragile state of the world economy, his success largely will be contingent upon the status of the country’s externalities that exist beyond his control. Funes will not be able to reverse the recession in the United States, which will inevitably affect his own country’s economy, or force migrants to return, but he will have control over his own actions. His policies and decisions could better position the country for success and progress, as long as they are given half a chance. This approaching presidency will be pivotal in determining whether the FMLN can hold on to power. Needless to say, Funes will come into office carrying the new-found weight of his country on his shoulders.

This analysis was prepared by Research Associate James Garman
May 22nd, 2009
Word Count: 2600

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