Tuesday, March 15, 2005

Export-focused policies don't improve Salvadoran economy

The Financial Times reports on the potential difficulties in obtaining passage of CAFTA in the US Congress. The article points out that the policies on which CAFTA is based have not promoted economic health for El Salvador:

[The] so-called Washington Consensus policies that advocate export-led growth have largely failed.

El Salvador, which has adopted the most rigidly conservative fiscal policies in the region, last year saw gross domestic product grow by 1.5 per cent, the lowest rate in 15 years and less than the population grew.

In President Tony Saca's first year, interest rates lagged inflation, undercutting plans to increase national savings.

The 2 million of its 8 million citizens already living abroad, mostly in the US, send home remittances equal to 16 per cent of GDP.

William Pleitez, head of the UN Development Programme in El Salvador, said CAFTA would "do nothing to change the competitiveness of the Salvadorean economy". He has recommended that the country "revise the growth strategy to take advantage of the unprecedented resources from migrants' remittances, and the internal market" by investing heavily in education and infrastructure.

Meanwhile, protests erupted across Guatemala in opposition to that country's recent ratification of CAFTA.

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