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El Salvador (08/04)


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For the most current version of this Note, see Background Notes A-Z.

Flag of El Salvador is three equal horizontal bands of blue (top), white, and blue with the national coat of arms centered in the white band; the coat of arms features a round emblem encircled by the words REPUBLICA DE EL SALVADOR EN LA AMERICA CENTRAL. 2004.

PROFILE

OFFICIAL NAME:
Republic of El Salvador

Geography
Area: 21,476 sq. km. (8,260 sq. mi.); about the size of Massachusetts.
Cities: Capital--San Salvador (pop. 1.7 million). Other cities--Santa Ana San Miguel, Soyapango, and La Union.
Terrain: Mountains separate country into three distinct regions--southern coastal belt, central valleys and plateaus, and northern mountains.
Climate: Semitropical, distinct wet and dry seasons.

People
Nationality: Noun and adjective--Salvadoran(s).
Population (2003): 6.6 million.
Annual growth rate (2003): 2%.
Ethnic groups: Mestizo 90%, indigenous 1%, Caucasian 9%.
Religion: About 55% Roman Catholic, with significant and growing numbers of Protestant groups.
Language: Spanish.
Education: Free through ninth grade. Attendance (grades 1-9)--85%. Literacy--84.1% nationally; 75.3% in rural areas.
Health: Infant mortality rate (2002)--33/1,000. Life expectancy at birth (2002)—70.4 years.
Work force (about 2.7 million): Agriculture--22%; services--18.7%; commerce--27.2%; manufacturing--17.6%; construction--5.4%; transportation and communication--4.6%; other--4.5%.

Government
Type: Republic.
Constitution: December 20, 1983.
Independence: September 15, 1821.
Branches: Executive--president and vice president. Legislative--84-member Legislative Assembly. Judicial--independent (Supreme Court).
Administrative subdivisions: 14 departments.
Political parties (represented in the legislature): Farabundo Marti National Liberation Front (FMLN), Nationalist Republican Alliance (ARENA), National Conciliation Party (PCN), Christian Democratic Party (PDC), and the United Democratic Center (CDU).
Suffrage: Universal at 18.

Economy (2003)
GDP: $15 billion.
Annual growth rate: 2%.
Per capita income: $2,258.
Agriculture (11% of GDP): Products--coffee, sugar, livestock, corn, poultry, and sorghum. Arable, cultivated, or pasture land--64%.
Industry (24% of GDP): Types—textiles, food and beverage processing, footwear and clothing, chemical products, petroleum products, electronics.
Trade: Exports--$3.1 billion: textiles, diverse manufactures, coffee, sugar, and shrimp. Major markets--U.S. 63%, Central American Common Market (CACM) 25.5%. Imports--$5.8 billion: consumer goods, foodstuffs, capital goods, raw industrial materials, and petroleum. Major suppliers--U.S. 48.6%, CACM 16.1%, Mexico 5.7%.

PEOPLE
El Salvador's population numbers about 6.6 million. Almost 90% is of mixed Indian and Spanish extraction. About 1% is indigenous; very few Indians have retained their customs and traditions. The country's people are largely Roman Catholic and Protestant. Spanish is the language spoken by virtually all inhabitants. The capital city of San Salvador has about 1.7 million people; an estimated 42% of El Salvador's population live in rural areas.

HISTORY
In 1821, El Salvador and the other Central American provinces declared their independence from Spain. When these provinces were joined with Mexico in early 1822, El Salvador resisted, insisting on autonomy for the Central American countries. In 1823, the United Provinces of Central America was formed of the five Central American states under Gen. Manuel Jose Arce. When this federation was dissolved in 1838, El Salvador became an independent republic. El Salvador's early history as an independent state--as with others in Central America--was marked by frequent revolutions; not until the period 1900-30 was relative stability achieved. Following a deterioration in the country's democratic institutions in the 1970s a period of civil war followed from 1980-1992. More than 75,000 people are estimated to have died in the conflict. In January 1992, after prolonged negotiations, the opposing sides signed peace accords which ended the war, brought the military under civilian control, and allowed the former guerillas to form a legitimate political party and participate in elections.

GOVERNMENT AND POLITICAL CONDITIONS  
El Salvador is a democratic republic governed by a president and an 84-member unicameral Legislative Assembly. The president is elected by universal suffrage and serves for a 5-year term by absolute majority vote. A second round runoff is required in the event that no candidate receives more than 50% of the first round vote. Members of the assembly, also elected by universal suffrage, serve for 3-year terms. The country has an independent judiciary and Supreme Court.

Political Landscape
Roberto D'Aubuisson and other hard-line conservatives, including some members of the military, created the Nationalist Republican Alliance party (ARENA) in 1981. D'Aubuisson's electoral fortunes were diminished by credible reports that he was involved in organized political violence. ARENA almost won the election in 1984, with solid private sector and rural farmer support. By 1989, ARENA had attracted the support of business groups. Allegations of corruption by the ruling Christian Democratic party, poor relations with the private sector, and historically low prices for the nation's main agricultural exports also contributed to ARENA victories in the 1988 legislative and 1989 presidential elections.

The successes of Alfredo Cristiani's 1989-94 administration in achieving a peace agreement to end the civil war and in improving the nation's economy helped ARENA--led by former San Salvador mayor Armando Calderon Sol--keep both the presidency and a working majority in the Legislative Assembly in the 1994 elections. ARENA's legislative position was weakened in the 1997 elections, but it recovered its strength, helped by divisions in the opposition, in time for another victory in the 1999 presidential race that brought President Francisco Guillermo Flores Perez to office. A young and serious leader, Flores concentrated on modernizing the economy and strengthening bilateral relations with the U.S. by becoming a committed partner in anti-terror efforts, sending troops to aid in the reconstruction of Iraq, and by playing a key role in negotiations for the Central American Free Trade Agreement (CAFTA).

Taking advantage of both public apprehension of Flores' policies and ARENA infighting, the chief opposition party, the Farabundo Marti Liberation Front (FMLN), was able to score a significant victory against ARENA in the March 2003 legislative and municipal elections. The FMLN won control over 31 seats in the 84-seat Legislative Assembly as well as a number of key mayorships including those in most major population centers. ARENA, with only 29 seats in the 84-seat Legislative Assembly, was forced to court the right-wing National Conciliation Party (PCN), with 14 seats, in order to form a majority voting bloc. However, in 2003 the PCN entered into a loose partnership with the FMLN, further limiting ARENA's ability to maneuver in the legislature.

Despite these constraints, ARENA made a strong showing at the March 2004 presidential election, which was marked by an unprecedented 67% voter turnout. ARENA candidate Elias "Tony" Saca handily defeated the FMLN candidate and party head Schafik Handal, garnering 57.71% of the votes cast. Nevertheless, Saca faces a complex political environment.

The defeat of FMLN's presidential candidate Schafik Handal rekindled an FMLN internal struggle between party hardliners allied with Handal and more moderate party members who see the party's recent defeat as a call for reform. In addition, the PCN and the two parties that comprise the center/center-left coalition, the United Democratic Center (CDU) and the Christian Democratic Party (PDC), face dissolution for failing to each capture at least 3% of the votes. Members of all three parties, whose deputies will continue to hold seats in the legislature, have publicly discussed creating new parties or aligning with existing ones. It remains to be seen how the reorganization of political parties, or the internal disputes of the FMLN, will affect voting blocs in the assembly.

Human Rights and Post-War Reforms
During the 12-year civil war, human rights violations by both the government security forces and left-wing guerillas were rampant. The accords established a Truth Commission under UN auspices to investigate the most serious cases. The commission reported its findings in 1993. It recommended that those identified as human rights violators be removed from all government and military posts, as well as recommending judicial reforms. Thereafter, the Legislative Assembly granted amnesty for political crimes committed during the war. Among those freed as a result were the Salvadoran Armed Forces (ESAF) officers convicted in the November 1989 Jesuit murders and the FMLN ex-combatants held for the 1991 murders of two U.S. servicemen. The peace accords also established the Ad Hoc Commission to evaluate the human rights record of the ESAF officer corps.

In accordance with the peace agreements, the constitution was amended to prohibit the military from playing an internal security role except under extraordinary circumstances. Demobilization of Salvadoran military forces generally proceeded on schedule throughout the process. The Treasury Police, National Guard, and National Police were abolished, and military intelligence functions were transferred to civilian control. By 1993--9 months ahead of schedule--the military had cut personnel from a war-time high of 63,000 to the level of 32,000 required by the peace accords. By 1999, ESAF strength stood at less than 15,000, including uniformed and nonuniformed personnel, consisting of personnel in the army, navy, and air force. A purge of military officers accused of human rights abuses and corruption was completed in 1993 in compliance with the Ad Hoc Commission's recommendations. The military's new doctrine, professionalism, and complete withdrawal from political and economic affairs leave it the most respected institution in El Salvador.

More than 35,000 eligible beneficiaries from among the former guerrillas and soldiers who fought the war received land under the peace accord-mandated land transfer program, which ended in January 1997. The majority of them also have received agricultural credits. The international community, the Salvadoran Government, the former rebels, and the various financial institutions involved in the process continue to work closely together to deal with follow-on issues resulting from the program.

National Civilian Police
The civilian police force, created to replace the discredited public security forces, deployed its first officers in March 1993, and was present throughout the country by the end of 1994. The National Civilian Police (PNC) has about 16,500 officers. The United States, through the International Criminal Investigative Training Assistance Program (ICITAP), led international support for the PNC and the National Public Security Academy (ANSP), providing about $32 million in non-lethal equipment and training since 1992.

Judiciary
Both the Truth Commission and the Joint Group identified weaknesses in the judiciary and recommended solutions, the most dramatic being the replacement of all the magistrates on the Supreme Court. This recommendation was fulfilled in 1994 when an entirely new court was elected, but weaknesses remain. The process of replacing incompetent judges in the lower courts, and of strengthening the attorney generals' and public defender's offices, has moved more slowly. The government continues to work in all of these areas with the help of international donors, including the United States. Action on peace accord-driven constitutional reforms designed to improve the administration of justice was largely completed in 1996 with legislative approval of several amendments and the revision of the Criminal Procedure Code--with broad political consensus.

Principal Government Officials
President—Elias Antonio "Tony" SACA
Vice President—Carlos QUINTANILLA Schmidt
Minister of Foreign Relations—Francisco LAINEZ
Ambassador to the United States--Rene Antonio Rodriguez LEON
Representative to the OAS—Margarita ESCOBAR Lopez
Representative to the UN--Victor Manuel LAGOS Pizzati

El Salvador maintains an embassy in the United States at 2308 California Street NW, Washington, DC, 20008 (tel: 202-265-9671). There are consulates in Chicago, Houston, Los Angeles, Miami, New Orleans, New York, and San Francisco.

ECONOMY
The Salvadoran economy continues to benefit from a commitment to free markets and careful fiscal management. The economy has been growing at a steady and moderate pace since the signing of peace accords in 1992, in an environment of improved investor confidence and increased private investment. Much of the improvement in El Salvador's economy is a result of free market policy initiatives carried out by the ARENA governments, including the privatization of the banking system, telecommunications, public pensions, electrical distribution and some electrical generation, reduction of import duties, elimination of price controls, and enhancing the investment climate through measures such as improved enforcement of intellectual property rights.

One of the biggest challenges in El Salvador has been to manage the decline in the coffee sector, formerly the backbone of the economy, and to develop new growth sectors for a more diversified economy. The collapse of worldwide coffee prices has caused substantial reduction in coffee production and decreased rural employment. While as recently as 1988 coffee exports accounted for more than half of export earnings, in 2003 they were 3.4%. Moderate climate and a hard-working and enterprising labor pool comprise El Salvador's greatest assets. El Salvador has sought to leverage these assets in creating new export industries through fiscal incentives for free trade zones, and currently there are 15 free trade zones in El Salvador. The largest beneficiary has been the maquila industry, which directly provides 88,700 jobs, and primarily consists of cutting and assembling clothes for export to the United States. The apparel industry has greatly benefited from the Caribbean Basin Trade Partnership Act, which allows these goods to enter the United States duty free under certain conditions. Moreover, the U.S.-Central America Free Trade Agreement (CAFTA), negotiated by the five countries of Central America with the United States in 2003, will make these benefits permanent.

Prompt ratification and implementation of CAFTA remains the core of the government's strategy to diversify the economy, make it more competitive, and create conditions for job creation. Now awaiting ratification by the legislatures of the signing countries, CAFTA will benefit several important sectors of the economy, including the textile/apparel industry, by expanding access to the U.S. market. CAFTA also provides mechanisms to develop less competitive areas of the economy, including agriculture, as the agreement is phased in.

Fiscal policy has been the biggest challenge for the Salvadoran Government. The 1992 peace accords committed the government to heavy expenditures for transition programs and social services. Although international aid was generous, the government has focused on improving the collection of its current revenues. A 10% value-added tax (VAT), implemented in September 1992, was raised to 13% in July 1995. The VAT is the biggest source of revenue, accounting for about 57% of total tax revenues in 2003.

Remittances from Salvadorans working in the United States sent to family members are a major source of foreign income and offset the substantial trade deficit. Remittances transferred through the banking system and, therefore, counted by the Central Bank have increased steadily in the last decade and reached an all-time high of $2.1 billion in 2003—approximately 14% of gross domestic product (GDP). As of April 2004 net international reserves equaled $1.9 billion. Beginning January 1, 2001, the Salvadoran Government approved the "Monetary Integration" law that made the U.S. dollar legal tender alongside the col�n. Dollars have gradually replaced col�nes, which are no longer printed. In practice the economy has become dollarized, with the col�n only used in isolated rural areas.

El Salvador obtains concessional loans for development projects from the World Bank, Inter-American Development Bank, the Bank for Central American Integration, and certain other international institutions. Starting in August 1999, El Salvador also has sold bonds in private international financial markets. These sales have been used to fund Salvadoran Government operations. El Salvador's external debt in March 2004 was about $4.8 billion.

Natural Disasters
El Salvador suffered from two earthquakes at the beginning of 2001 and from Hurricane Mitch in 1998. Hurricane Mitch hit El Salvador in late October 1998, generating extreme rainfall of which caused widespread flooding and landslides. Roughly 65,200 hectares were flooded, and 374 people were either killed or remain missing. The areas that suffered the most were the low-lying coastal zones, particularly in the floodplain of the Lempa and San Miguel Grande Rivers.

Reconstruction from Mitch was still underway when in January and February 2001 the country experienced two devastating earthquakes that left nearly 2,000 people dead or missing, 8,000 injured, and caused severe dislocations across all sectors of Salvadoran society. Nearly 25% of all private homes in the country were either destroyed or badly damaged, and 1.5 million persons were left without housing. Hundreds of public buildings were damaged or destroyed, and sanitation and water systems in many communities put out of service. The total cost of the damage was estimated at between $1.5 billion and $2 billion.

Response
The Hurricane Mitch disaster prompted a tremendous response from the international community governments, nongovernmental organizations, and private citizens alike. The U.S. Government has provided $37.7 million in assistance through USAID and the U.S. Departments of Agriculture and Defense.

Following the 2001 earthquakes, the U.S. Government responded immediately to the emergency, with military helicopters active in initial rescue operations, delivering emergency supplies, rescue workers, and damage assessment teams to stricken communities all over the country. USAID's Office of Foreign Disaster Assistance had a team of experts working with Salvadoran relief authorities immediately after both quakes, and provided assistance totaling more than $14 million. In addition, the Department of Defense provided an initial response valued at more than $11 million. For long-term reconstruction, the international community offered a total aid package of $1.3 billion, more than $168 million of it from the United States.

Manufacturing
El Salvador historically has been the most industrialized nation in Central America, though a decade of war eroded this position. The industrial sector has shifted since 1993 from a primarily domestic orientation to include free zone manufacturing for export. Maquila exports have led the growth in the export sector and have made an important contribution to the Salvadoran economy. Currently, manufacture industry accounts for nearly 24% of the GDP.

Trade
Exports in 2003 grew 4.7% while imports grew 11%. As in previous years, the large trade deficit was offset by family remittances. El Salvador is pursuing an aggressive strategy to increase exports, especially manufactured and nontraditional products, and to attract foreign investment. The negotiation of trade agreements such as CAFTA that reduce trade and investment barriers is a central part of this effort.

El Salvador has already signed free trade agreements with Mexico, Chile, the Dominican Republic, and Panama, and increased its exports to those countries. El Salvador, Guatemala, Honduras, and Nicaragua also are negotiating a free trade agreement with Canada. The five Central American countries are working towards a construction of a Customs Union, and they have already harmonized their customs duties and most products.

U.S. support for El Salvador's privatization of the electrical and telecommunications markets markedly expanded opportunities for U.S. investment in the country. More than 300 U.S. companies have established either a permanent commercial presence in El Salvador or work through representative offices in the country. The Department of Commerce maintains a Country Commercial Guide for U.S. businesses seeking detailed information on business opportunities in El Salvador.

FOREIGN RELATIONS
El Salvador is a member of the United Nations and several of its specialized agencies, the Organization of American States (OAS), the Central American Common Market (CACM), the Central American Parliament, and the Central American Integration System. It actively participates in the Central American Security Commission (CASC), which seeks to promote regional arms control. From 2002-03, El Salvador was chair of the OAS anti-terrorism coordinating body, CICTE. El Salvador also is a member of the World Trade Organization and is pursuing regional free trade agreements. An active participant in the Summit of the Americas process, El Salvador chairs a working group on market access under the Free Trade Area of the Americas initiative. El Salvador has joined its six Central American neighbors in signing the Alliance for Sustainable Development, known as the Conjunta Centroamerica-USA or CONCAUSA to promote sustainable economic development in the region.

El Salvador enjoys normal diplomatic and trade relations with all of its neighboring countries including Honduras, with which it has previously had territorial disputes. While the two nations continue to disagree over the status of their maritime borders in the Gulf of Fonseca, they have agreed to settle their land-border disputes with the International Court of Justice (ICJ). In September 1992, the Court awarded most of the territory in question to Honduras. In January 1998, Honduras and El Salvador signed a border demarcation treaty to implement the terms of the ICJ decree although delays continue due to technical difficulties.

U.S.-SALVADORAN RELATIONS
U.S.-Salvadoran relations remain close and strong. U.S. policy toward El Salvador seeks to promote the strengthening of El Salvador's democratic institutions, rule of law, judicial reform, and civilian police and national reconciliation and reconstruction, economic opportunity, and growth. El Salvador has been a committed member of the coalition of nations fighting against terrorism, and has also provided a battalion to the efforts to bring stability to Iraq.

U.S. ties to El Salvador are dynamic and growing. More than 12,000 American citizens live and work full-time in El Salvador. Most are private businesspersons and their families, but a small number of American citizen retirees have been drawn to El Salvador by favorable tax conditions. The Embassy's consular section provides the full range of visa, passport, federal benefit, absentee voting, and related citizenship services to this community. The American Chamber of Commerce in El Salvador is located at World Trade Center, Torre 2, local No. 308, 89 Av. Nte. Col. Escal�n, phone: 264-9393, fax: 263-9393.

Principal U.S. Embassy Officials
Ambassador--H. Douglas Barclay
Deputy Chief of Mission--Philip French
USAID Mission Chief--Mark Silverman
Political Counselor--Annie Pforzheimer
Economic Counselor--Jessica Webster
Public Affairs Officer--Donna Roginski

The U.S. Embassy in El Salvador is located at Final Blvd. Santa Elena, Antiguo Cuscatl�n, La Libertad (phone: 011-503-278-4444; fax: 011-503-278-6011).

Other Contact Information
U.S. Department of Commerce
International Trade Administration
Office of Latin America and the Caribbean
14th and Constitution Avenue, NW
Washington, DC 20230
Tel: 202-482-1658; 1-(800) USA-TRADE
Fax: 202-482-0464

Caribbean/Latin American Action
1818 N Street, NW, Suite 310
Washington, DC 20036
Tel: 202-466-7464
Fax: 202-822-0075

For the most current version of this Note, see Background Notes A-Z.



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