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CENTRAL AMERICA: Protect the Most
Vulnerable, ECLAC Says
By Raúl Gutiérrez
SAN SALVADOR, Apr 23 (IPS) - The global
economic crisis has had a severe impact on
Central America and the Dominican Republic,
and unemployment and poverty will increase
significantly, according to a new study by
the Economic Commission for Latin America
and the Caribbean (ECLAC).
The ECLAC report studies the effects on the
region of the international recession that
began in the United States, identifies the
mechanisms by which it spreads, and
recommends public policies to mitigate the
impact.
Jorge Máttar, head of the ECLAC regional
office in Mexico, told IPS that most of the
Central American economies are highly
vulnerable because of their heavy dependence
on the United States.
In his view, the outlook is uncertain,
because it cannot yet be determined whether
the worst of the crisis is still to come, or
how long it will last. What is sure, he
said, is that this year will be "a very
negative one."
The report titled "Enfrentado la crisis.
Istmo centroamericano y República Dominicana:
Evaluación económica en 2008 y perspectivas
para 2009" (Facing the Crisis; Central
American Isthmus and Dominican Republic:
Economic Evaluation for 2008 and Prospects
for 2009) was presented in San Salvador on
Wednesday.
Some 300 economists, civil servants, and
representatives of civil society attended
the launch, including economic advisers to
leftwing president-elect Mauricio Funes, who
will take over from the rightwing incumbent,
President Antonio Saca, on Jun. 1.
The main routes of "contagion" of the crisis
are the falls in exports, cash remittances
from migrants living abroad, foreign direct
investment and tourism, as well as
restrictions on international financing
which limit the availability of credit
within countries, the study says.
"The countries worst hit by the crisis will
be those that have seen their income reduced
by lower levels of remittances from, and
exports to, the United States," Máttar said.
The president of the Salvadoran Chamber of
Trade and Industry (CCIES), Jorge Daboub,
told IPS in early April that 57 percent of
Salvadoran exports go to the United States.
The Central Reserve Bank (BCR) reported that
remittances declined by an estimated 7.5
percent in the first quarter of 2009,
compared to the same period last year.
BCR figures show that 3.79 billion dollars
entered El Salvador as remittances in 2008,
equivalent to 17.1 percent of GDP that year.
Most of the funds were sent from the United
States, home to 90 percent of the 2.9
million Salvadorans living abroad.
The Salvadoran government estimates that the
economy will grow by one percent this year,
but economists believe there will be zero
growth, or that the economy will even
shrink. In 2008, the authorities reported
GDP growth of 3.2 percent.
Nearly 40 percent of El Salvador’s 5.7
million people live in poverty, according to
official figures, which civil society
organisations regard as underestimates.
Unemployment is officially estimated at
seven percent of the economically active
population, but 43 percent are
underemployed.
As for Honduras, income from remittances
represents 20 percent of its GDP, according
to ECLAC.
Daboub confirmed that 36,000 jobs have been
lost in Honduras since August 2008. Exports
fell by 21.4 percent between February 2008
and February 2009, particularly exports to
the United States.
The crisis could cause the loss of some
120,000 jobs in 2009 in Central America, a
region of 40 million people, "indicating the
magnitude of the crisis," Máttar said.
Igor Paunovic, the head of ECLAC's economic
development unit, said the crisis would add
400,000 people to the number living below
the poverty line in the region, increasing
the overall proportion of poor people from
51 to 52 percent.
The ECLAC economists, who said growth in the
region in 2008 averaged seven percent,
forecast growth of no more than one percent
in 2009. And remittances could decline by
between five and 15 percent this year
compared to last year, they added.
The main impact of the crisis is due to the
fall in exports, since the United States is
the main trading partner of the countries of
Central America, purchasing between 40 and
60 percent of their exports, the economists
said.
This means that the impact has had
"immediate consequences" for the region's
economies, Máttar said.
In March the International Monetary Fund
(IMF) forecast "even deeper and prolonged
recession" on a global scale, and a gradual
"modest recovery" in 2010, with an average
economic growth rate of 1.9 percent.
Alexander Segovia, an economic adviser to
president-elect Funes, said that facing up
to the crisis requires integrated public
policies that combine macroeconomic and
social measures, in order to protect the
most vulnerable.
He criticised the Nationalist Republican
Alliance (ARENA), which has governed El
Salvador since 1989, for repeatedly asking
the poor to "tighten their belts," making
them pay for the impact of crises and
structural readjustments while sparing the
business community.
"It is not fair that the most vulnerable
should pay for this crisis," Segovia said.
More public spending is needed, to provide
"some sort of protection for the most
vulnerable, because they are the people who
suffer most during these crises," Paunovic
said.
Increasing state spending on health,
education and public works, to create jobs
and make these economies more competitive,
is another recommendation of the regional
United Nations agency.
The countries of the region should take
short, medium and long-term measures,
monitor the situation continually, and
prepare for a long, deep crisis, the ECLAC
experts concluded.
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