"One of the most dynamic and stable markets in the hemisphere"

Kristin Rosekrans; Sergio Chávez; Alma Yanira Quezada; Ana Cristina Lemus

At the September 1996 World Bank meeting, the Salvadoran economy was presented as a successful case of structural adjustment with stable macro-economic indicators and a high degree of openness.The government maintains that in El Salvador, "a strong market economy has favoured macro-economic stability, economic growth and competitiveness. We are one of the most dynamic and stable markets in the hemisphere". The Salvadoran economy grew at an average rate of 6.7% until 1995, when growth started to decline. However, this growth has not significantly benefited the population; there has been a steady deterioration of purchasing power, growth of poverty with women especially hard hit, and a concentration of wealth, all of which generate greater inequity.

Civil society organisations in El Salvador have made a public proposal that addresses their concerns about the country’s socio- economic situation. A group of 60 NGOs publicly announced their "Manifesto to the Nation" in July 1997, which is geared to "contributing to the solutions demanded by the nation’s serious problems." Civil society organisations (CSOs) have proposed a National Consensus Agenda that includes legal, political, economic and socio-economic elements. According to the NGOs, the country faces a new, post-electoral scenario that "opens up new possibilities for shaping a particular style of economic and social development and for deepening democracy."

Parliamentary and municipal elections were held in 1997. The new Legislative Assembly (1997-2000) has a pluralistic composition with no dominant political force, which is a novelty in El Salvador’s history. Moreover, approximately 55% of the population is currently living under municipal administrations held by opposition parties. Opposition parties are considered by NGOs to be more inclined toward working with the communities, so the possibilities for effective CSOs are greater than ever.

Since development models applied to the country have not ensured minimal satisfaction of the population’s basic needs, contributions by civil society are necessary to shape new development styles. The effects of the war - poverty, job insecurity and violence - continue to constitute a vicious cycle in which the vast majority of the population is trapped. The situation is made worse by the constant deterioration of the environment: 90% of the rivers are polluted and 77% of the soil is eroded; government actions have not effectively dealt with these problems.

In their Manifesto to the Nation, the NGOs urge the government to promptly call a National Forum that would include CSOs and take their issues and proposals into account, especially with a view to strengthening gender equity. The NGOs call upon civil society to participate more actively and creatively in generating proposals to deal with the country’s problems.

The labyrinths of public information

Public information should be easily accessible to all citizens of a democratic country, and government employees should facilitate access to information. Nevertheless, the editors of Social Watch report that they had trouble finding updated, available information for this paper. Since the Planning Ministry was eliminated (1994), information on social development has been dispersed to different ministries, apparently without effective coordination among them. Moreover, there have been budget cuts and personnel reductions of up to 90%, according to what we learned. We had to resort to letters and calls to high-ranking officials to obtain basic information. Serious contradictions were found among certain official indicators.

Healthy tiger?

In the reports of international finance organisations, including the Economic Commission for Latin America and the Caribbean (ECLAC), the Salvadoran economy is presented as one of the most dynamic and vigourous in the hemisphere, and has even been called one of the "Latin American tigers."

After a decade of war, crisis and stagnation, the Salvadoran economy grew in the 1990-95 period at an average rate of 6.1% annually, with a stable exchange rate, increases in international reserves and controlled inflation levels of less than 10%. In mid-1995, a trend toward recession began (3% growth) and productive sectors were far from dynamic.

However, this macro-economic stability depends on external factors, such as remittances by Salvadorans living in the United States and foreign investment in the maquiladoras, and not on the government’s ability to design and implement stabilisation and economic adjustment policies. Exports have not become a major element in the economy or contributed significantly to macro-economic stabilisation.

The economic dimension of family remittances from abroad is enormous. In 1995 they totaled some $1,195m, representing 12.4% of GDP. Family remittances favour family consumption and improve the income levels and living conditions of broad sectors of society. Approximately 15% of Salvadoran households receive monthly remittances exceeding $100, equivalent to nearly one month’s minimum wage.

El Salvador has not managed to define strategic sectors geared to achieving sustained growth of production, employment and exports, which would provide domestic bases for macro-economic stability and eradication of poverty.

Graph 1

Source: Multi-Purpose Household Survey, 1994-1996.

In fact, more than half the Salvadoran population, 52%, live in poverty. Extreme poverty affects 22% of the population and relative poverty some 30% (Graph 1). This rate increased 4.2% in 1995-1996, with the bulk of the increase among people who live in extreme poverty. According to the World Bank, 65% of rural people live in poverty.

At the national level, unemployment is 8% according to government sources, but non-governmental institutions estimate that "over half the economically active population is struggling with open unemployment or underemployment" . The number of unemployed, or those with precarious employment and earning less than the minimum monthly wage ($132), has grown since 1990 and represents 56% of the "employed" population, reflecting the "trend to replace full employment with under-employment".

The formal sector has also grown poorer, due to families’ increasing difficulty in covering the basic food basket. Although nominal wages rose in recent years, purchasing power fell 18% from 1990 to 1996.

Growth of "maquiladoras"

The largest growth sector in the Salvadoran economy over the past five years has been the "maquiladoras", which have been displacing other areas of production, including agriculture and manufacturing. The sector grew at a rate of 35% to 60% from 1993 to date, except in 1996 when it grew 18.3%. In 1996 the sector represented 42.76% of the country’s total exports (Graph 2).

Graph 2

Participation of Maquiladoras in export flows 1990 - 1996 Maquiladoras Traditional

Source: Prepared by the authors based on information from FUNDE (National Development Foundation).

The maquiladoras are production units established in free zones or "customs areas" that process and assemble products for export or reexport to the country of origin or a specific third country. The government internationally promotes the advantages of investing in the maquiladora sector. The benefits for investors include tax-free exports, unrestricted remittance of net earnings, exemption from local and value-added taxes for ten years, and a minimum weekly wage of $33.

In El Salvador, 34% of companies are financed by Korean capital, 30% by US capital, and 8% by capital from Taiwan and China. Salvadoran capital investment is only 15%. Technology transfer is minimal, since the maquiladora industry in El Salvador mainly involves garment assembly operations based on women’s skills and abilities.

Maquiladoras are concentrated in the textile sector (68%) and the majority of workers are female (78%) with different levels of education. Half of the women have 6 to 9 years of schooling. Working conditions do not correspond to educational levels, since income levels are linked to manual skills and the possibilities for in-company promotion are minimal. Most of the management posts in this industry are held by men, thereby reproducing the situation of discrimination against women.

In this sector there were 50,000 jobs in 1996, of which 39,000 were held by women. In 1996, maquiladora employees represented 9.27% of the population employed in industry. Since women represent 78% of the sector’s labour force, we know that women maquiladora workers generate 31% of the value of El Salvador’s total exports.

El Salvador is the only Central American country that has not ratified ILO Convention 87 (Right to Unionise). This is reflected in the low rate of union membership, especially in the maquiladora sector, where only 1.25% of workers are unionised, ie, 500 people out of a total of 50,000. Nationally, only 4% of the economically active population (EAP) belongs to a union and is thus protected by collective bargaining.

The main attractions for foreign companies who want to set up business in the country are the cheap, abundant labour, the long workdays, and the limited labour rights. In general these companies pay the minimum wage ($132/month), but cases have been discovered where workers must meet production goals set by the company or face proportional deductions from their wages.

Employment in the maquiladoras is characterised by the nonexistence of collective agreements, as well as repression of unions as a mechanism for employer control over the work process.

The government’s intention to attract foreign investment and create jobs has been partially successful, but it has been based on poverty, the low professional qualifications required, the low quality of employment and an abundance of reserve industrial labour.

Development Plans

Before it was dissolved in 1994, the Planning Ministry publicly announced a 1994-1999 Economic and Social Development Plan, which covers the current administration. The fundamental objective is "systematically reducing poverty until it is eliminated, improving the quality of life of Salvadorans, and creating a country of opportunity for all." Curiously, government officials make no reference to this plan and maintain that it is in effect "only in broad terms."

The year is drawing to a close without any development plan in place, much less a national plan for eradication of poverty, as stipulated by the Copenhagen Summit. Salvadoran NGOs have urged the government to establish mechanisms permitting broad, effective and constructive participation of civil.

Landless Or Policy-Less?

Despite efforts to modify land distribution, inequity continues to be a reality: El Salvador has "a Gini coefficient (of 82) among the five highest in the world". Currently there are 230,000 persons who are owners of less than two hectares, 40,000 whose properties range from two to five hectares, and only 4,200 persons with more than 50 hectares. There are still between 250,000 and 300,000 adults who are landless or who own tracts too small for production; they represent 50% of the agricultural labour force and suffer from high levels of unemployment and underemployment.

Government programmes that benefit a minority of the rural population have not basically changed the structure of land ownership; there is a lack of a long-term vision and policies to support small landowners. The 1980 agrarian reform, which redistributed 19.7% of land (reducing the area belonging to large landowners from 38.7% to 14.8%), was implemented for political reasons and was not executed in its entirety. The Land Transfer Programme (PTT), executed at the end of the armed conflict (1992) as part of the Peace Agreements, redistributed an additional 10%.

One of the great weakness of the two programmes was the lack of equity between women and men. Only 9% of beneficiaries of the Agrarian Reform were women, and under the PTT they range from 25% to 35%. Land ownership continues to be dominated by men, thus hindering women’s access to credit and aggravating the dependence of Salvadoran women.

The problem of land ownership for poor people who depend on profitable agricultural production has grown because of policies that are unfavourable to the agriculture sector. Ownership is now less critical in determining whether farmers will make a profit. Agricultural exports, which have been cut to almost half of their level eight years ago, represented only 13.4% of GDP in 1996. This drastic reduction has affected the people whose income derives from the sector, who make up about 30% of the country’s population. Income from agriculture covered only 63% of the Basic Family Food Basket, and 13% of the Basic Market Basket in 1996, indicating a clear need to strengthen this sector as part of a poverty eradication programme.

The government, apparently aware of the problem, has drawn up a "comprehensive agriculture reactivation plan." The plan provides legal security for land ownership, timely and preferential credit for agricultural activities, provision of technology and market information, and preservation of basic grains. Nevertheless, the Ministry of Agriculture and Livestock’s budget was cut this year to only 2.1% of the National Budget (from 3.28% in 1995).

Small producers lack the financial and technical support necessary to be competitive through improved production and diversification. Some 90% do not receive technical assistance, and the lack of legislation on marketing of agricultural products implies further difficulties for them. Lack of access to credit contributes to a vicious circle, which prevents small producers from diversifying and improving production. The financial and commercial sectors show the highest growth and receive the bulk of bank credit, while the agricultural sector receives only a fraction (11% in 1996).

Given this political and economic reality, we can say that land ownership for small owners has gone from being a source of income to a mere survival economy. Given the high density of the country’s population and the population growth rate of 2.2% per year, the 0.85 hectares available per person in 1995 will drop by 60% by the year 2010. The shortage of land, in addition to being a cause of unemployment, will become one of the main causes of malnutrition.

The empowerment of women

In the understanding that gender equity means giving everyone their due, acknowledging the specific conditions or characteristics of each person or human group, recognising diversity, and questioning inequality in power relationships, it can be said that some progress has been made along these lines in El Salvador.

Women’s actions have managed to change the percentage of women parliamentarians, which went from 10.7% in 1994 to 16.6% at present; 8.4% of mayors elected are women (Graph 3). These changes are in part due to campaiging for candidates by various women’s organisations. Female representation is higher among the opposition: of 14 congresswomen currently in office, 9 belong to the Farabundo Martí National Liberation Front (FMLN), one to the Democratic Liberation Party (PLD) and 4 to the ruling party, the Nationalist Republican Alliance (ARENA).

Graph 3

Women elected in 1994 and 1997 elections

Source: Supreme Electoral Court of El Salvador, 1997.

In various municipalities, women’s groups proposed and supported women candidates for municipal councils and undertook promotion and dissemination campaigns based on political platforms tailored to their demands. Nevertheless, the percentages obtained in the last elections are below parity quotas. Despite the fact that women now represent 53.24% of the population, they were only 47% of voters.

Development of an active citizenry that contributes to changing the current way of doing politics and makes the concept of democracy a reality has been posed as a development goal. In this context, women’s organisations are striving to shape autonomous agendas and draw up platforms at the municipal level; they are demanding enjoyment of full citizenship.

Women account for 37% of the economically active population (EAP). Most of the women and men who enter the job market at very young ages come from families with incomes ranging from $1.70 to $2.30 per day. They tend to move into the informal sector, where income is unstable and social security is nil. In the 10-14 age group, girls make up 60.8% of those joining the informal sector and boys form 39.2%. Average monthly income in the informal sector is approximately $172 for women and $244 for men, while in the formal sector, average monthly income is $277 and $356, respectively.

Women’s organisations have made numerous efforts to eradicate violence against women, which they see as a public problem rather than a private concern. Despite this and the enactment of a law against family violence, 84% of the cases of family violence reported during 1996 involve women and girls. In the first quarter of 1997, the number of cases reported increased considerably and, if this trend continues, cases could go up some 460% in 1997. It could be argued that increased awareness around the issue of violence has led to more women filing complaints, and not necessarily that violence against women and girls has increased.

Enforcement of the Law Against Violence is hindered by procedural difficulties and the attitudes of judges towards the victims. An assessment of the enforceability of the law, carried out by the Supreme Court of Justice as a result of pressure from the women’s movement, showed the need for workshops on the subject. For example, since the Legislative Assembly (1994-1997 term) repealed the article of the penal code that included exceptions for abortion in eugenic, therapeutic and rape cases, punishment for rapists is less severe than penalties for women who provoke interruption of pregnancy.

The new penal code, which will take effect in January 1998, punishes all types of abortion with prison sentences of two to eight years, even when the pregnancy would have put the mother’s life at risk. The only exception is when the mother accidentally causes such an action. Women’s organisations presented a penal code reform bill to the Legislative Assembly, but their proposals were not taken into account.

This aggravates conditions for women’s health and encourages clandestine abortion clinics, which in many cases condemn women to premature death. Seen as a public health problem, it is an issue within the competence of the state. The current penal code does not recognise the rights of raped women and further punishes them by forcing them to carry resulting pregnancies to term.

A New Education For A New Economy?

The educational reform process, which began in 1995, seeks to improve the quality of education, increase equity and efficiency, broaden coverage, decentralise services and resource management, and strengthen moral values. Most of the financing for the reform has come from external loans (World Bank and Interamerican Development Bank) and international donations.

EDUCO is the model for decentralisation that is being implemented in the public education system through Executive School Boards. It seeks to involve parents, teachers and students in decision-making, as well as in managing educational center resources. Its purpose is to extend educational coverage and it has provided access to an additional 190,000 children, especially at the youngest levels. The programme is financed by the World Bank, although its expenses are being absorbed little by little by the Ministry of Education. The impact, both in terms of decentralisation and improvement of the quality of education, has not yet been gauged, since it only recently got underway.

Poverty constitutes the biggest stumbling block to education and a cause of desertion (6% at primary level), both of girls who are responsible for domestic chores, and of boys who work in agriculture or perform other economic subsistence activities. According to ILO records, over 311,000 children are currently working. Recognising the problem, this year the government approved a programme to eradicate child labour. Although the records show similar enrollment levels for boys and girls, some studies find that girls are the ones most affected by poverty. Of the population of children who do not attend school, 71% of girls do not attend due to reasons of work, lack of resources and household chores, while the figure is 62% for boys.

Graph 4

Years of schooling completed by the Salvadoran population in 1996

Source: Multi-Purpose Household Survey, 1996.

Poverty and lack of education form a vicious cycle; children who finish basic education have income levels three times higher than the uneducated. People completing three or fewer years of school represent half the population (Graph 4), and the income they obtain does not cover the basic food basket (an average of $130/month). The basic basket for the average family of 4.2 persons (including food, housing, health, education, clothing and transportation) is approximately $520/month, and only a small portion of the population obtains enough income to cover it. According to records, persons who can afford the basic basket are generally men with 13 or more years of schooling. Covering the basic family basket requires two salaries of two persons with more than ten years of schooling. People having less than three years of schooling cover only 27% of this basic basket. The most common employment for the uneducated is farming, a sector forgotten by the government and which is becoming less competitive each year.

El Salvador is among the countries with the lowest per capita investment in education in the world. Five years following the end of armed conflict, investment in education is 2.38%. In 1996, 14.1% of the central government’s budget went to education, while 15% went to defence and public security. In 1996 there was a slight improvement, when education accounted for 16% of the national budget. In part this increase was possible due to external loans, which represent 11% of the total budget for 1997.

It is not only budget increases, but also efficiency in the distribution of available funds that will make the difference in quality. Operations absorb 95%, while the investment reaching students as a direct benefit is less than 1% of the budget. Moreover, budget restrictions do not allow for training and appropriate remuneration of teachers.

Unlike other Central American countries, the bulk of the education budget (63.3% in 1992) is for primary education, permitting higher enrollment at that level; enrollment drastically decreases at secondary level (Graph 5). In 1997, enrollment at primary level was 85%, while enrollment at intermediary level was 34%. At pre-school level, enrollment is low (38%). Although no recent in-depth study exists on access to public schools, according to the Ministry of Education, 20% of districts do not have schools, and the majority do not have pre-school facilities, nor do they have classes beyond sixth grade.

Graph 5

National education rate

Source: Ministry of Education, Statistics Department, 1997.

The illiteracy rate is currently around 23% for the population over 10 years of age. The illiteracy rate has dropped 1% annually, which reflects a failure to meet government expectations. To achieve the literacy level agreed to at the Copenhagen Summit for the year 2000, in addition to assuming the costs of the programme, the government would have to implement mechanisms to ensure process quality and accompany them with programmes for insertion in the job market.

Health vs. Defence

According to the Ministry of Public Health and Social Assistance (MSPYAS), the indicators for the reproductive health programme for 1990 and 1996 reflect the following:


INDICATOR 1990 1993 1996
Prenatal care coverage 27.9% 45.9% 55.0%
Birth assisted by trained personnel 41.1% 53.9% 64.5%
Maternal mortality rate per 100,000 109 115. *300 68
Live births (in hospital) % of cervical-vaginal cytology n/d S/s S/d 13.6%
Family planning coverage S/d S/d 8.5%
Overall fertility rate S/d 4 4

Source: MSPYAS health statistics 1990-1996 (Data adjusted by population and per 1992 census).

Health programmes have limitations in terms of access and coverage; a main area of concern is in reproductive health, where indicators are unsettling. In-hospital maternal mortality is 68 per 100,000 live births, a figure that does not reflect the true problem because it fails to include at-home deaths. If we add unrecorded maternal deaths, we have a true public health problem.

There are major differences between the national statistics and those provided by other organisations, such as the UNDP. According to UNDP, 1993 maternal mortality was 300 per 100,000, whereas MSPYAS indicates 115 per 100,000 for the same year, an index similar to Argentina’s.

Use of modern birth control methods is very limited (8.5%), thus implying a high health risk for women, many of whom do not space their pregnancies and show high fertility rates (4 children per woman).

Information and education on the use of birth control methods is necessary in order to increase their use and not merely the distribution of devices (without ensuring "real" access), as is currently the case. Delivery of family planning services should incorporate active participation of the community, emphasising its role in responsible parenthood.

These programmes do not include specific attention to men, who are likewise responsible for sexual and reproductive behaviour. Current efforts would be better attuned to reality if the relationship between men, health and maternity were defined. Reproductive health cannot be achieved if women are considered to be the only leaders with sole responsibility.

Ensuring health and keeping step with the reform process that is taking place in this sector throughout Latin America is one of the great challenges of the current presidential administration. The Ministry of Health has indicated that before undertaking health sector reforms it will launch a process for modernisation of the sector. Developing health care services, providing access to the entire Salvadoran population, and improving the conditions of life in order to overcome poverty - the true, fundamental cause of unhealthiness in our country - are the wider challenges that must be met by health care reform.

In 1996, 55% of the population had access to drinking water, that is to say, one out of every two families. Because of pollution, it is increasingly difficult to extract clean drinking water, so that access is indeed a privilege. Sewage removal was also low for 1996 (81%), despite a broad range of forms for elimination of excreta. One family in five deposits excreta outdoors. Nevertheless, there are no national or local plans to improve these conditions. Improvement of drinking water and basic sewerage is a political matter and basically depends on "political will."

The discussion on health is necessarily related to the economic sphere. If it involves investment, it ought to be given relatively high priority, whereas if it is a non-productive expense, it drops rapidly on the list of priorities. What investments in health are profitable? And in whose health are investments justified?

The amount of the nation’s total 1997 budget allocated to health is $151,123.8m, or 8.6% of the total budget; this item received the same allocation in 1996, as shown in Graph 10. In comparative terms, the allocation to national defense is 5.8% and the public security budget is 9.1% (as shown in graph 6), which together total 15.1%, so that investing in health apparently is not among the national budget priorities under the current administration.

Graph 6

Public spending on health, public security and national defense in 1997 (in thousands of dollars)

Source: autors' calculations based on information from FUNDE.


*The New Salvador, Ministry of Foreign Affairs, General Economic Relations and Promotion Office.

*La Situación Sociolaboral en las Zonas francas y Empresas Maquiladoras del Istmo centroamericano y República Dominicana; ILO, 1996.

*Impacto Económico de la Industria Maquiladora, "Proceso magazine" No.754, 1997.

*La Actividad de la Maquila en la Economía Salvadoreña, "Boletín Actualidad Económica" FUNDE, 1996.

*Inflación y Capacidad Adquisitiva, "Boletín Actualidad Económica", FUNDE, 1996.

*Manifiesto de las ONG a la Nación (NGO Manifest to the Nation), July 31, 1997.

*Funciones y Composición del Consejo Nacional para el Desarrollo Sostenible, Document July 3, 1997.

*Zonas Francas de El Salvador, article in "La Prensa Gráfica", August 4, 1977.

*President Calderón Sol Announces National Development Commission, speech, April 30, 1997.

*Marco General para una Estrategia de Desarrollo Agropecuario de El Salvador (General Framework for Salvadoran Agricultural Development), March 1997, FUNDE (National Development Foundation), in cooperation with OGEMA.

* El Programa de Transferencia de Tierras, February 1996, FUNDE (National Development Foundation).

* La Importancia Económica del Sector Agropecuario, Reflections on the Agricultural Program 1997.

* ECA, Estudios Centroamericanos. Transición , Hacia Adónde?, January- February 1997.

*Various authors. Las Mujeres y el Poder. 1st. edition. Edit. Mujeres, Costa Rica, 1997.

*La Prensa Gráfica, April 1997, June 4, 1997, July 17, 1997. August 28.

* Ortiz C., Edy. Las mujeres del sector informal urbano en San Salvador. Instituto de Investigación, Capacitación y Desarrollo de la Mujer (IMU), El Salvador. 1994.

* Human Development Report, UNDP, 1994, 1995 and 1996.

* Encuesta de Hogares de Propósitos Múltiples (Multi-Purpose Household Survey) 1994, 1995 and 1996.

*Desafío a la violencia intrafamiliar. La Prensa Gráfica, Agosto 16, 1997. El Salvador.

*El Salvador en cifras y trazos. Research by Francisco Lazo. 1 Edic. Asociación Equipo Maiz,1996. El Salvador.

*Memoria de Labores 1996-1997, Ministerio de Educación

*Existe una Política Social en El Salvador? Dr. Luis Antonio Torres, G. Konrad Adenauer Stiftung, ISED.1995

*La Educación en El Salvador de Cara al Siglo XXI, UCA Editores, 1995.

*Calidad de la Educación en el Istmo Centroamericano, UNESCO - San José, Costa Rica, 1996.

* Distribución del Gasto y Cobertura de PAEBA, 1994-1997, Programa de Alfabetización y Educación Básica de Adultos de El Salvador.

*MEMORIA 89-90, Ministerio de Salud Pública y Asistencia Social.

*ANUARIO No.21 Ministerio de Salud Pública y Asistencia Social.

* Salud Pública en Cifras, 1989, MSPYAS, Unidad de Estadística de Salud.

* Memoria 95-96 " Su salud primero", MSPYAS.

*Evolucion de la esperanza de vida en El Salvador, 1st. report, December 1996, UNDP.

*Politica Nacional De La Mujer , ISDEMU, SAN SALVADOR, December 1996.

Interviews with:

Ministry of Education personnel working in the areas of Research, Evaluation, Statistics, Decentralization and Supervision.

Staff at the Academy for Educational Development, Project SABE.

Co-ordinator of the Literacy and Basic Adult Education Programme (Programa de Alfabetización y Educación Básica de Adultos de El Salvador, PAEBA).

Members of the National Foundation for Development (Fundación Nacional de Desarrollo (FUNDE).

Representative of the women’s movement on the Board of ISDEMU (Instituto Salvadoreño de Desarrollo de la Mujer).

Specialists in Violence, Education and Institutional Projection, Las Dignas.