EL SALVADOR:
Benefits of Free Trade
Deal Still Remote
By Raúl Gutiérrez
SAN SALVADOR, (IPS)
- The Salvadoran
government had
proclaimed that from the
moment of its entry into
force, the free trade
agreement with the
United States would
boost the local economy,
creating thousands of
jobs, so that even
street vendors would be
exporting their typical
snacks. But nearly two
years later, the
economic paradise has
yet to arrive.
The Dominican
Republic-Central America
Free Trade Agreement
(DR-CAFTA) with the
United States was
supposed to enable El
Salvador to increase its
exports to the U.S.
market and attract
foreign investment.
However, economists
consulted by IPS said
that is "unrealistic"
and that ordinary
Salvadorans are still
waiting for the promised
benefits.
René Salazar, head of
the Administration of
Trade Treaties, said DR-CAFTA
was El Salvador’s "most
important trade
agreement" because it
has promoted increased
trade with the United
States.
Non-traditional
Salvadoran exports to
the U.S. of products
such as seafood,
agribusiness goods,
beverages and ethnic
foods grew by 68 percent
in 2006, according to
Salazar. Complete
figures for 2007 are not
yet available, but the
trend has remained
steady, he said.
El Salvador’s total
exports, including
traditional products
like coffee, sugar and
shrimp, amounted to 3.66
billion dollars between
January and November
2007, 4.3 percent more
than in 2006. The U.S.
continues to be the main
destination: in 2006,
exports to the U.S.
alone totalled 2.01
billion dollars.
Salazar told IPS that
direct investment by the
U.S. in this country
grew from 1.049 billion
dollars to 1.059 billion
between March and
December 2006, mainly in
agribusiness, computer
software and call
centres, although he did
not know how many of
these have closed down
since DR-CAFTA came into
force.
Statistics from the
rightwing administration
of President Antonio
Saca indicate that an
estimated 27,000 jobs
were created in 2007,
although not all of
these were necessarily
due to the regional
trade treaty with the
United States.
Herminio Alas, 50, a
former employee of the
privatised National
Telecommunications
Administration (ANTEL)
which is now in the
hands of the Telecom
consortium, told IPS he
is not aware of any
benefits, as "the
economy is not improving
and there are few jobs
to be had."
Alas, a telephone line
technician, has been
unemployed for three
months and has not
managed to find a stable
job since he was laid
off by ANTEL 10 years
ago.
DR-CAFTA, which also
involves Costa Rica,
Guatemala, Honduras and
Nicaragua, was
negotiated in El
Salvador in 2004 in
record time, just 12
months, and was ratified
in December of that year
by the rightwing
parliamentary majority,
with hardly any debate.
Former legislator Ciro
Cruz of the rightwing
National Conciliation
Party (PCN), who was
speaker of the
parliament at the time,
admitted that "he had no
knowledge of the text of
the agreement," but that
it was too late to
debate it, amid protests
by the opposition.
The agreement was
supposed to enter into
force on Jan. 1, 2006,
but the date was
postponed for two
months, until Mar. 1 of
that year, because the
U.S. insisted on legal
reforms to protect
foreign investment, and
changes to the criminal
code to combat pirating
of CDs and DVDs, as well
as brand-name shoes and
clothing.
Paradoxically, street
sales of these knock-off
products have boomed
since then, and even
uniformed police
officers often buy them.
El Salvador has also
signed bilateral trade
treaties with Mexico,
Chile, the Dominican
Republic and Panama, and
will shortly do so with
Taiwan, according to
Salazar.
In spite of the
government’s optimism,
economist Carlos Acevedo
of the United Nations
Development Programme (UNDP)
told IPS that there are
no reliable data on how
many jobs DR-CAFTA has
created.
Acevedo said that 80,000
new jobs a year are
needed to absorb the
growth of the
economically active
population.
"The government’s
expectations were
unrealistic, and
obviously have not been
met," said the expert,
assistant coordinator of
the El Salvador chapter
of the UNDP Human
Development Report.
The Directorate General
for Migration and Alien
Status in El Salvador
recently announced that
60 percent of the 200 to
500 Salvadorans a day
who emigrate have jobs,
Acevedo noted. Some 2.5
million Salvadorans are
currently living in the
United States.
"They decide to leave in
search of higher pay, so
their jobs become
vacant," said Acevedo,
who does not rule out
the possibility that
those jobs are included
in the official figures
on new employment
opportunities.
According to the
government, the
unemployment rate is
about seven percent of
the economically active
population, while 35
percent are
underemployed (working
in the informal economy,
with no social
benefits).
Mateo Rendón, of the
Salvadoran Federation of
Agrarian Reform
Cooperatives (FESACORA),
said DR-CAFTA has
"increased food
dependency" due to the
growth in imports from
the United States.
The country’s dependence
on imported food is
increasing while the
area devoted to the
cultivation of basic
products like maize,
rice, beans and
vegetables, and to
raising livestock, is
shrinking.
Rendón deplored the lack
of "public policies to
support the agricultural
and livestock sectors"
which have become less
profitable because of
the high prices of
agricultural inputs such
as fertilisers, which
rose by up to 30 percent
in 2006. And while
production costs have
gone up, the local
prices for produce have
been declining.
Prior to DR-CAFTA,
FESACORA members,
belonging to 189
agricultural
cooperatives, farmed
12,500 hectares
collectively and
individually, whereas
now they only farm 6,000
hectares, and only for
family subsistence.
DR-CAFTA established
that 50 percent of
imported rice, maize,
pork, powdered milk and
other products were to
enter the country
tariff-free from the
first year of its
implementation, and that
every year the
proportion of
tariff-free imports
would increase by
between two and five
percent, depending on
the product.
The deadlines for
completely eliminating
tariff barriers on
imports were set at
between 10 and 20 years.
Some 65,000 tons of
rice, 35,000 tons of
white maize, 350,000
tons of yellow maize and
10 tons of milk began to
be imported by El
Salvador on Mar. 1,
2006.
In late 2007, the
Salvadoran Central
Reserve Bank (BCR)
announced that the
economy had grown 4.5
percent that year, one
of the lowest rates in
Central America which
had an average growth
rate of 5.2 percent.
Only Nicaragua, with
just over three percent,
had grown less.
The BCR also reported
that between January and
November 2007, El
Salvador built up a
trade deficit of 4.35
billion dollars, larger
than the 2006 deficit of
4.11 billion dollars.
Foreign direct
investment amounted to
5.37 billion dollars
from January to
September 2007,
according to the BCR.
But this figure includes
the sale of banks, which
merely changed hands to
multinational
corporations, for 1.13
billion dollars.
Meanwhile, María
Domínguez, a 42-year-old
street vendor who sells
fruit, continues to wait
for the promises to
change from fantasy to
reality. "Saca’s
government has not
created jobs, and the
ones who suffer are the
poor," she complained. |
