Salvadoran Workers Reject Predatory Lending Disguised As Aid

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On March 26, the Salvadoran Legislative Assembly unanimously approved President Nayib Bukele’s request to seek $2 billion in external financing to confront the public health and economic impacts of the COVID-19 pandemic in the country. With legislative approval in hand, Bukele secured $389 million by the International Monetary Fund (the first loan to El Salvador in three decades); $20 million from the World Bank, $15.4 million from the Inter-American Development Bank with more financing on the way from the Inter-American Development Bank and the Central American Bank for Economic Integration. However, despite not having secured all the money he had requested, much less spent it, Bukele has already asked the Legislative Assembly to approve an additional $1 billion in international loans. Critics are concerned that Bukele is indebting the country without much transparency about how the money will be spent or much consideration for the future impacts of debt repayment.

Of the $2 billion in loans, $1.4 billion will be used by the Executive and the remaining $600 million will be directed to the Municipal Fund for Economic and Social Development (FODES). In its approval, the Legislative Assembly required that the $1.4 billion be used to “generate liquidity for micro, small and medium-sized companies that are affected by the health emergency, to finance producers of basic grains and coffee and for a subsidy program to pay payroll of employees who are affected by the national emergency declaration and quarantine.”

Before the funds can be allocated, a special commission must design a budget for the $1.4 billion, submit it to the Legislative Assembly for approval and once approved, will oversee the use of the funds. Despite some resistance from the Bukele administration (at first), right-wing legislators were able to come to an agreement with the administration about the composition of a new commision to oversee the funds. This commission will be composed of five government ministers, the private secretary of the president, one representative from the National Association of Private Enterprise (ANEP), one from the Chamber of Commerce, one from the right-wing Salvadoran Foundation for Economic and Social Development (FUSADES) and two from private universities. With the commission being composed of mostly Bukele administrations officials and private sector representatives, and decisions only requiring a simple majority, it seems unlikely that the commission will actually serve as an independent overseeing body.

In addition to these $2 billion, the President has requested another $1 billion be approved to implement five measures “to reactivate the economy.” Of these proposed measures, the most notable is the delivery of 1.7 million food packages to vulnerable families. Treasury Minister Nelson Fuentes described this move as an effort to reduce costs after the government provided a $300 subsidy to informal workers and affected households at the start of the national quarantine.

In a report issued by the International Monetary Fund, the institute recommended a series of measures to increase taxes and reduce spending between 2021 and 2024 to facilitate repayment of El Salvador’s debt. Regarding taxes, the international financial institution urged El Salvador to introduce a property tax and raise the Value Added Tax (VAT), but these taxes would disproportionately affect working class people. It also recommended that El Salvador freeze hiring in the government, implement early retirement of public sector employees and centralize all government purchases to purchase in bulk.

The social movement has been vocal in its opposition to the solicitation of international loans and the proposed recommendations by the IMF. The Salvadoran Popular Movement Coordination, a constellation of progressive grassroots organizations and labor unions, denounced the administration for the decision to address the crisis by taking on massive foreign debt for fear that neoliberal measures will be applied to pay it off. In their statement, they “urge[d] the Assembly to approve only requests for funds that are reasonable and justifiable for the emergency; likewise establish corresponding control, supervision and accountability mechanisms to avoid corruption.”

On May 1, International Workers Day, the Trade Union Confederation of Workers of El Salvador (UNTS) and farmworker organizations demanded an end to predatory lending by international banks who seek to cash in on the crisis created by the pandemic by preying on impoverished countries at the continental level. They also demanded the approval of a General Water Law that guarantees the human right to water and an economic recovery plan that benefits working-class Salvadorans.

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