Fifth Avenue Imports and Cheap Labor Exports, the Challenge of the Millennium

November 14th, 2006
Sister Cities Staff

Last week, the U.S. State Department's Development aid branch, the Millennium Challenge Account (MCA), approved a 461 million dollar grant to the Government of El Salvador. According to Salvadoran President Tony Saca, this aid will be used in large part to revitalize the economies of the northern part of El Salvador, and more than half of the funds will be destined to build transportation infrastructure, primarily in a superhighway to cut through the northern third of the country, a corridor connecting El Salvador with Guatemala in the west and Honduras in the East.

At first glance, anyone would agree that road improvement in that area of the country is a necessity. But who will benefit from the latest US aid and policy implementation? The MCA funds are part of a larger economic plan for Central America, the Inter-American Development Bank's (IDB) Plan Pueblo Panama, a regional free trade industrialization plan which calls for mega highways, new hydroelectric dams, telecommunication privatization, amongst other things. El Salvador and Chalatenango happen to lie right at the heart of this transportation corridor for free market trade, yet for the people of the communities of the CCR, the MCA grant is hardly a jackpot.

Last week's MCA news comes as Mayors in the North-eastern region of Chalatenango received word that the Millennium Challenge Fund does not include direly needed repairs to the road connecting Chalatenango City with Arcatao. For the organized communities of the CCR, this means a continued transportation crisis, one that has worsened daily over the last some years. The Chalatenango-Arcatao road has become nearly impassable, with whole sections eroded away, and cavernous potholes. The damage has reached such an extent that this month the people all the municipalities along the road organized community work days to repair the road, despite the fact that the road's maintenance is under the jurisdiction of the central government.

The Chalatenango-Arcatao road is just one of hundreds in the country, but its fate illustrates well US and Salvadoran government priorities, and perhaps what lies behind the MCA. The department of Chalatenango offers a wealth of natural resources, such as mineral and hydrologic wealth, which will be more easily accessed by an east-west highway that could facilitate the movement of products through the Central American corridor. Yet what sorts of opportunities will bigger, wider, highways offer the greater population of Chalatenango? What sort of economic and social policies lie behind the MCA funds? As one way to think about this question, it is worth looking at where similar social and economic policies driven by the same actors (US Government, IDB, ARENA Governments etc.) have taken El Salvador over the last ten years.

In the repopulated community of Guajoyo, in San Vicente (sister city of Austin, Texas) the community board reports that 78 members of the community have immigrated to the US over the last 15 years since the signing of the Peace Accords. Considering that the community is made up of 146 families, that means for one out of every two families there is a community member in the US, who is maybe sending remittances back to mitigate crop damage, natural disaster, and general unemployment which face the community.

That example is representative of the country as a whole. During the last ten years, under successive right wing ARENA governments and free trade policies, as many people have migrated from El Salvador as left the country during the 50 years prior to 1998, which includes the period of the civil war. What that means, is that more people are leaving the country looking for employment and to feed their families now, than fled the country because of the twelve-year war during the eighties and nineties. Currently, a third of the Salvadoran population lives outside the country, with the vast majority residing in the United States, and most of those living in the state of California and Washington DC (two thirds of the more than 2.5 million Salvadorans in the US).

This population sends an average of 157 dollars per month back to nearly a quarter of the more than 6 million people still residing within the country. According to Salvadoran Government figures, remittances are the single largest contributor to the GDP of the country, at 17 percent and rising yearly. While $157 is nearly twice the monthly rural minimum wage, and about equal to the urban minimum wage in El Salvador, it doesn't stop immigration to the north, and an estimated 500 people per day continue leaving El Salvador for the United States. Those who arrive send nearly three billion dollars in remittances back per year (roughly equal to the annual budget of the Salvadoran Government), while paying an average of fourteen thousand dollars per year per family in US taxes. Studies show that of those three billion dollars in remittances, the large majority (83%) are spent in consumption--food, appliances, clothing, etc.

What this means, is that essentially, El Salvador is exporting cheap unskilled labor to the tune of 500 people per day to the United States to keep its families from starving. With this money, the Salvadoran economy stays afloat and pays for half its imports, and more each year, since the agricultural production sector has fallen on hard times, and maquilas continue to leave for Asia. It goes without saying that if the majority of the remittance money is spent in keeping Salvadorans from going hungry, then little is left over to invest in boosting national production or economic opportunities.

So as the Millennium Challenge funds enter the country, who will they benefit? They won't benefit the 500 economic exiles per day that are exported to the North; the immigrants won't be here to use the new roads. They won't benefit the rural population, who have seen their ranks drop from 60 percent of the Salvadoran population in 1990, to 40 percent of the population today, and find themselves travelling to the urban centers such as San Salvador or to the US in search of work, while cheap corn and beans enter the country from the US. They won't build new roads to geographically isolated communities such as the stretch between Chalatenango and Arcatao. But they will benefit the business import sector that the remittances keep afloat (controlled by the 7 richest families in the country, and foreign investors), which requires north-south corridors to move products between Canada to the Panama Canal.

Free market policies such as those included in the MCA aid will only increase immigration. In turn, immigration will continue to benefit the ARENA Government, who reaps the rewards of immigration as a social release, as the unemployed and marginalized leave the country, easing social pressure on the government and poverty, and sending back remittances to feed others who otherwise would go hungry. For the communities of CRIPDES, immigration is seen as one of the principal obstacles to community organization and empowerment, as people leave or become comfortable on remittances and are no longer interested in shared solutions to their difficulties.

In light of this reality, it is important as CRIPDES´ partners, that Sister Cities continue to define strategies to strengthen contacts with immigrants from their communities in the US, and define strategies together to organize across boarders and resist the forces of economic domination which drive youth out of their homes, and tear families apart.