The Limits of Economic Reform in El Salvador

231 Pages·1997·16.88 MB·English

by  Wim Pelupessy

THE LIMITS OF ECONOMIC REFORM IN
EL SALVADOR
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
The Limits of Economic
Reform in El Salvador
Wim Pelupessy
Development Research Institute
Tilburg University
The Netherlands
&
m
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 0-333-68373-0
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. 10010
ISBN 0-312-17323-7
Library of Congress Cataloging-in-Publication Data
Pelupessy, Wim.
The limits of economic reform in El Salvador / Wim Pelupessy.
p. cm.
Includes bibliographical references and index.
ISBN 0-312-17323-7 (cloth)
1. Land reform—El Salvador. 2. Agriculture and state—El
Salvador. 3. Agriculture—Economic aspects—El Salvador. 4. El
Salvador—Economic conditions. 5. El Salvador—Politics and
government. I. Title.
HD1333.S2P45 1997
338.1 *87284—dc21 96-49057
CIP
© Wim Pelupessy 1997
All rights reserved. No reproduction, copy or transmission of this publication may be made
without written permission.
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written permission or in accordance with the provisions of the Copyright, Designs and
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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 1988.
This book is printed on paper suitable for recycling and made from fully managed and
sustained forest sources.
10 9 8 7 6 5 4 3 21
06 05 04 03 02 01 00 99 98 97
Printed and bound in Great Britain by
Antony Rowe Ltd, Chippenham, Wiltshire
Contents
Preface ix
1 Introduction 1
2 Historical and Political Background: The Stages of
Development 12
3 The Agrarian Structure in the 1960s and 1970s 34
4 The Agro-export Economy in the 1970s 56
5 Agrarian Reform in the 1980s 85
6 Agrarian Policy and Export Producers' Responses
in the 1980s 110
7 Economic Adjustment Policies in El Salvador
during the 1980s 139
8 The Limits of Reform in an Agro-Export Economy 172
Annex 185
Notes 187
Bibliography 198
Index 210
V
List of Tables
2.1 San Salvador: most important workers' organizations,
1917 and 1929 17
2.2 Development in the degree of organization in El Salvador,
1971-1979 25
2.3 Trade union federations in El Salvador, 1971-1976 26
3.1 Real and potential land use, 1975 37
3.2 Distribution of land ownership in El Salvador, 1961-1975 38
3.3 Distribution of cultivated land by crop destination, 1961 40
3.4 Average growth rate of agricultural production in
El Salvador, 1950-1975 40
3.5 Changes in distribution of family income in El Salvador,
1945-1980 52
3.6 Per capita daily consumption in El Salvador, 1936-1976 53
4.1 Importance of agriculture in the economy 59
4.2 Most important cultivated areas 60
4.3 Distribution of crop land by use of modern technology,
1975 62
4.4 Indices of land profitability 63
4.5 Stratification in agricultural production, 1979 64
4.6 Demand and supply of agricultural labor 68
4.7 Evolution of official minimum real wages 70
4.8 Composition of the agro-industrial subsector 71
4.9 The importance of export crops in the balance of payments,
1972-1982 72
4.10 The percentage of the export price (fob) received by the coffee
grower, 1965-1982 74
4.11 Distribution of income generated by coffee 75
4.12 Importance of the principal private processors of coffee in
the 1970s 78
4.13 Concentration of means of production, 1978-1979 81
5.1 Land tenure in 1987 95
vi
List of Tables vii
5.2 Average yields of basic cereals in reformed sectors:
phases I and III, 1985-1987 97
5.3 Land use by cooperatives, 1980-1987 98
5.4 Percentage changes in agricultural crop yields
1980/1-1989/90 107
6.1 Land tenure for various crops, 1988 112
6.2 Index of the earning capacity of crops, 1980 and 1985 113
6.3 Collective land use of agrarian reform cooperatives 114
6.4 Distribution of coffee export revenues 117
6.5 The banking system, 1979-1989 121
6.6 Distribution of credits from commercial and mortgage
banks, 1980-1988 122
6.7 Credit per dollar value added, 1980-1987 123
6.8 Evolution of average production costs and earnings of
coffee and cotton growers 125
6.9 Evolution of average cost structure of coffee and cotton
growers 126
6.10 Composition of agricultural value added, 1980-88 129
6.11 Evolution of productive capacity, 1980-1992 130
6.12 Regional distribution of coffee areas, 1985 133
6.13 Regional distribution of cotton areas, 1985 133
7.1 Comparison of two macroeconomic policy models 144
7.2 Annual sectoral growth rates, 1960s and 1970s 145
7.3 Evolution of principal macroeconomic indicators, 1960s
and 1970s 146
7.4 Evolution of principal macroeconomic indicators,
1980-1993 149
7.5 Annual sectoral and GDP growth rates, 1980-1993 152
7.6 Institutional structure of governmental expenses,
1977-1992 155
7.7 Macroeconomic policy packages in the 1980s 170
List of Figures
3.1 Dynamics of land concentration in El Salvador, 1524-1971 36
3.2 Rural class cone of the 1970s 43
4.1 Price evolution of export crops, 1970-1984 59
6.1 Share of traditional export crops in total exports 115
6.2 Volume of agro-export production, 1982-1989 131
8.1 Economic policies of the structural reform model 182
vm
Preface
Modern handbooks of development economics proclaim the importance
of the analysis of history, institutions and politics to explain agrarian trans
formation, which is considered to have a central role in economic develop
ment (e.g. Behrman and Srinivasan (eds), 1995). However, not much of
this can be traced in the main policy prescriptions for structural adjust
ment, 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 mea
sures, despite the economic effects these often have. The outcomes of
economically free markets in the developing world are often heavily dis
torted by coercive or repressive structures and policies.
The starting point of my interest in El Salvador was precisely this non-
economic side of development. It was at the end of the 1970s when an ap
parently 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 solu
tion 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 agri
culture, 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 col
leagues, 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