THE LIMITS OF ECONOMIC REFORM IN EL SALVADOR

Transcription

1 THE LIMITS OF ECONOMIC REFORM IN EL SALVADOR

2 Also by Wim Pelupessy PERSPECTIVES ON THE AGRO-EXPORT ECONOMY IN CENTRAL AMERICA (editor) ECONOMIC MALADJUSTMENT IN CENTRAL AMERICA (co-editor) EL MERCADO MUNDIAL DEL CAFE: El Caso de El Salvador

3 The Limits of Economic Reform in El Salvador Wim Pelupessy Development Research Institute Tilburg University The Netherlands &

4 First published in Great Britain 1997 by MACMILLAN PRESS LTD Houndmills. Basingstoke. Hampshire RG21 6XS and London Companies and representatives throughout the world A catalogue record for this book is available from the British Library. ISBN DOI / ISBN (ebook) First published in the United States of America 1997 by ST. MARTIN'S PRESS, INC., Scholarly and Reference Division, 175 Fifth Avenue, New York, N.Y Library of Congress Cataloging-in-Publication Data Pelupessy, Wim. The limits of economic reform in El Salvador I Wim Pelupessy. p. em. Includes bibliographical references and index. I. Land reform-ei Salvador. 2. Agriculture and state-el Salvador. 3. Agriculture-Economic aspects-ei Salvador. 4. El Salvador-Economic conditions. 5. El Salvador-Politics and government. I. Title. HD 1333.S2P '87284-<lc21 % CIP Wim Pelupessy 1997 Softcover reprint of the hardcover 1st edition All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London WI P 9HE. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The author has asserted his right to be identified as the author of this work in accordance with the Copyright, Designs and Patents Act This book is printed on paper suitable for recycling and made from full y managed and sustained forest sources I ()()

5 Contents Preface 1 Introduction 2 Historical and Political Background: The Stages of Development 3 The Agrarian Structure in the 1960s and 1970s 4 The Agro-export Economy in the 1970s 5 Agrarian Reform in the 1980s 6 Agrarian Policy and Export Producers' Responses in the 1980s 7 Economic Adjustment Policies in El Salvador during the 1980s 8 The Limits of Reform in an Agro-Export Economy Annex Notes Bibliography Index ix V

6 List of Tables 2.1 San Salvador: most important workers' organizations, 1917 and Development in the degree of organization in El Salvador, Trade union federations in El Salvador, Real and potential land use, Distribution of land ownership in El Salvador, Distribution of cultivated land by crop destination, Average growth rate of agricultural production in El Salvador, Changes in distribution of family income in El Salvador, Per capita daily consumption in El Salvador, Importance of agriculture in the economy Most important cultivated areas Distribution of crop land by use of modern technology, Indices of land profitability Stratification in agricultural production, Demand and supply of agricultural labor Evolution of official minimum real wages Composition of the agro-industrial subsector The importance of export crops in the balance of payments, The percentage of the export price (fob) received by the coffee grower, Distribution of income generated by coffee Importance of the principal private processors of coffee in the 1970s Concentration of means of production, Land tenure in vi

7 List of Tables 5.2 Average yields of basic cereals in reformed sectors: phases I and III, Land use by cooperatives, Percentage changes in agricultural crop yields 1980/1-1989/ Land tenure for various crops, Index of the earning capacity of crops, 1980 and Collective land use of agrarian reform cooperatives Distribution of coffee export revenues The banking system, Distribution of credits from commercial and mortgage banks, Credit per dollar value added, Evolution of average production costs and earnings of coffee and cotton growers Evolution of average cost structure of coffee and cotton growers Composition of agricultural value added, Evolution of productive capacity, Regional distribution of coffee areas, Regional distribution of cotton areas, Comparison of two macroeconomic policy models Annual sectoral growth rates, 1960s and 1970s Evolution of principal macroeconomic indicators, 1960s and 1970s Evolution of principal macroeconomic indicators, Annual sectoral and GDP growth rates, Institutional structure of governmental expenses, Macroeconomic policy packages in the 1980s 170 vii

8 List of Figures 3.1 Dynamics of land concentration in El Salvador, Rural class cone of the 1970s Price evolution of export crops, Share of traditional export crops in total exports Volume of agro-export production, Economic policies of the structural reform model 182 vm

9 Preface Modern handbooks of development economics proclaim the importance of the analysis of history, institutions and politics to explain agrarian transformation, which is considered to have a central role in economic development (e.g. Behrman and Srinivasan (eds), 1995). However, not much of this can be traced in the main policy prescriptions for structural adjustment, which seem to bother only with the strictly economic functioning of developing countries. For example, when international institutions or donor country governments call for the elimination of state intervention in labour markets, they refer only to the economic types of intervention. Nothing is specified about the non-economic, coercive or political measures, despite the economic effects these often have. The outcomes of economically free markets in the developing world are often heavily distorted by coercive or repressive structures and policies. The starting point of my interest in El Salvador was precisely this noneconomic side of development. It was at the end of the 1970s when an apparently vicious circle of violation of human rights, repression and people's resistance ended decades of postwar economic growth. My participation in the Dutch and European movements for solidarity with El Salvador gave valuable insights into the mostly undocumented part of the development process. Discussions with members of the organizations that constituted the Liberation Front FMLN brought up the issue of relevance or irrelevance of economic reasoning in an environment of civil war. Was not a military solution the determinant factor, irrespective of what was happening in the economy? Of what use was economic policy while internal war was raging? Both the Front and successive Salvadoran and US governments had to learn that economics also matters under extreme conditions, provided due attention is paid to the handbook statement referred to at the beginning of this preface. It should be borne in mind that war or near-war situations are more the rule than the exception in the developing world. At the beginning of the 1980s we started research into Salvadoran agriculture, under strong restrictions and without adequate financial support. The results of this stop-and-go research could luckily be complemented with published and unpublished results of work done by Salvadoran colleagues, who did not stop their efforts in this area despite the war. The relations between economics and the sociopolitical causes of the civil war should also be considered in policy strategies after the peace ix

10 X Preface agreement of The possibilities for economic reforms will still be limited by these relations and the agrarian transformation process for a long time after the turn of this century. Preliminary outcomes of different parts of this research have been published in various forums. More elaborated results are now presented in this book, to which several persons made valuable contributions. I wish to thank Jeffrey James for his critical comments and continuous support. Cristobal Kay, Mats Lundahl, Karel Veraghtert, John Weeks and Aart de Zeeuw made useful observations. The comments of Ben Evers were also helpful, as was the space provided by the Development Research Institute of Tilburg University to finish this work. Amin Kassam corrected the English with great care. Inti Pelupessy prepared the figures. Last, but not least, I wish to express gratitude to Elisabeth van Tilburg who edited, typed and corrected the different versions of the draft.

11 United States Atlantic Ocean Gun of Mexico Mexico Guatem El Salvador \ Nicaragua Caribbean Sea Pacific Ocean Costa Rica Panam Colornbu Venezuela ^ Sonso Salvador Owartmvnt boundarits Source: Durham 1979:35