1

The English and Foreign Languages University

International Training Programme 48

Brief Socio-Political and Economic History

of El Salvador (1990-2013)

Supervisor: Anish Koshy,

Assistant Professor; Department of Linguistics & Phonetics

Name of the participant: Luz Idalia Zelada Snchez

Country

El Salvador, Central America.

Hyderabad, India; 20th November, 2014.

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Contents

Abstract

Introduction ------------------------------------------------------------------------------------- 4

Chapter 1: Statement of Purpose ----------------------------------------------------------- 6

1.1 Objectives of the Research ----------------------------------------------------- 7

1.1 Enquiries in the Research ------------------------------------------------------- 7

1.1 Justification of the Research ---------------------------------------------------- 7

1.1 Background of the Research ----------------------------------------------------- 8

Chapter 2: Socio political aspects of El Salvador --------------------------------------- 9

2.1 General characteristics of El Salvador --------------------------------------------------- 10

2.2 Principle causes of the civil war in El Salvador ---------------------------------------- 11

2.3 Brief abstract of the civil war in El Salvador ------------------------------------------- 14

2.4 The peace agreements and the economic and social reconstruction of the country 17

Chapter 3: Economic aspects of El Salvador (1992-2012) ----------------------------- 19

3.1 Structural changes in the Salvadoran economy since 1990 --------------------------- 20

3.2 Brief analysis of the current state of the Salvadoran economy ---------------------- 22

Conclusions -------------------------------------------------------------------------------------- 25

Appendix ----------------------------------------------------------------------------------------- 26

References --------------------------------------------------------------------------------------- 30

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Abstract

This paper analyzes the evolution and history of the Salvadoran economy

in the period of 1990-2013, emphasizing on the main social and economic

aspects which had most influenced the economy of the country.

And its main purpose is to give to the reader a concrete overview of the

general conditions of life in El Salvador and its main characteristics.

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Introduction

El Salvador, officially know as Republic of El Salvador, is a country Locatedin Central

America, with an estimated population of 6,2 millions of people; a territorial extension of

21,000 Km2

with a tropical weather, and coast on the Pacific ocean; the territory is

organized in 14 deparments and 262 municipalities. The capital city is San Salvador; the

official language is Spanish, in the religious aspect the majority of the population is

catholic, a third part is protestant and the rest practice other religions.

In their economic composition El Salvador is an agricultural country, its four principal

products of exportation are the sugarcane, the coffee, shrimp and cotton, and their economy

is divided in three sectors; Primary sector or Agricultural, Secondary sector or industrial,

tertiary sector or Services. The last one is predominant.

One of the most important recent events in El Salvador was the civil war in the decade of

eighties; one of the main reasons for the war was the economic inequality; many people

thinks the civil war began with the murder of archbishop Oscar Romero; the war was

fought between the Salvadorian army and the Salvadorian rebels known as FMLN. During

the time of the civil war the economy of El Salvador was stagnated, many companies

closed their operations and many people lost their employments, it caused an increase of

the immigration to United States and other countries around the world; the period of civil

war from 1980 to 1992 and it ended with the signature of peace agreements between the

two factions envolved.

After the signing of the peace agreements, the process of economic and social recontruction

began in El Salvador. Some features of this process were guerrilla demobilization,

reintegration into working life of former combatants, abolition and creation of new

institutions to carry out social commitments under the peace agreements.

The plans for economic reconstruction were marked for the introduction of an open

economy system product of the Washington consensus. This economic system still rules the

country today.

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Finally is important mentioned how the salvadoran economy was transformed from an

agricultural economy to an economy based in services, which is knowed like Tertiaritation

Process, after the signing of peace agreements the economic structure of El Salvador

changed. Currently El Salvador is not an agriculture country is a country based on services.

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CHAPTER 1

STATEMENT OF PURPOSE

7

1.1 Objectives of the Research

General objective: To Investigate and describe the main economic and social events that

El Salvador has had in the last 25 years; to give the reader a concrete overview of the

general conditions of life in El Salvador and its main characteristics.

Specific objectives

To investigate the main social factors that have influenced the Salvadoran economy

the most in the last 25 years, like the civil war in the eighties.

To describe the process of economic and political transformation that El Salvador

has followed since the beginning of the nineties to the present.

To describe in general terms the composition of the Salvadoran economy, its main

sectors, main products, and their evolution in the last 25 years.

1.2 Enquiries in the Research:

1) Does neoliberalism exist in El Salvador?

2) Has the Salvadoran economy is entered in the world globalization?

3) To what extent has the phenomena of the civil war in El Salvador influenced the

subsequent economic and social development of the country?

4) What is the main backstay of the Salvadoran economy?

5) Is El Salvador essentially an agricultural country?

6) Is the Salvadoran economy mainly based on services?

7) What is the predominant economic model in El Salvador?

1.3 Justification of the Research

The present investigation is important because it is an effort to get the world to learn about

El Salvador, which is a small country in Central America, but has had a lot of cultural and

historic wealth, for the would important to know about. Also because, the paper wants to

reveal the transformation that El Salvador has lived through the last thirty years, which

alludes to the economic, social and political transformation taking place in the majority of

countries in Latin America.

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1.4 Background of the Research

To understand the Salvadoran economy in the current time, it is necessary to review the

socio political processes in the country during the last twenty years. One of the events,

that set the direction of the country is the civil war in the eighties and the subsequent

economic and political transformation which has happened after the signing of the peace

agreement.

It is important to know what the causes were that drove El Salvador into a civil war. El

Salvador, like the rest of Central America countries, has been characterized as a country

governed by military structures with long periods of military dictatorships, with prolonged

periods of social repression, corruption of the state apparatus and therefore economic

inequality. Those governments have been characterized as being at the service of the

interests of the dominant classes, in particular of the oligarchic groups, and it is here where

we see the origin of the social upheaval, as the larger majorities had been oppressed and

exploited by the oligarchic minorities. In the second half of the XXth

century, the main

exports of El Salvador were coffee, sugar cane, cotton and shrimp and it was here that

the cores of power were concentrated. The second element which stands out in this

process is the problem of the land possessions. The landowners held large land holdings in

El Salvador; and the majoraty of the farmers lived dispossessed of land or had to live

under the colonial mindset that existed in El Salvador in the last XXth

century.

These phenomena ensured that there was a very marked economic inequality in El

Salvador. The rich were very rich and the poor were very poor. This was the cause of the

different war like insurgencies or insurrections (like the farmers insurgence of 1932 and

the others before the eighties), which culminated with the civil war that began in 1980.

Subsequently in 1992, the singing of the peace agreements happened, which ended the

armed conflict; and started the economic, political and social reconstruction of the country.

9

CHAPTER 2

SOCIO-POLITICAL ASPECTS

OF EL SALVADOR

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2.1 General Characteristics of El Salvador

The capital city of El Salvador is San Salvador. It is territorial extension is 21,040.79 km2.

It is considered one of the most densly populated countries of the region because of its

territorial extension. Its population is 5.7 million; men 2.7 millions; women 3.03 millions.

the total number of households is 1.4 million1.

Is it has the Republic of Honduras to the north, Guatemala to the west and to the south the

coasts of the Pacific. According to the Political Constitution, the country is divided into 14

departments2 (See Appendix 1)

The population density of 297 people per square km. In the urban areas the population is

3,910,412, representing the 62.6% of the total. The population into rural areas is 2,388,850,

representing 37.4% of the total population.

According the data of the Ministry of Economy, 63.7% of the population is under 30 years

old and 11% of the population are older than 60. This reveals that the Salvadoran

population is very young, improving generational renewal in productive and social aspects

in general.

The illiteracy rate is 12.4% in people older than 10 years; of these 7.8% are women and

4.6% are men.

In the urban area the illiteracy rate is 8.2%, where 5.7% are women and 2.5% are men. In

the rural areas the illiteracy rate is 19.9%, representing 11.5% woman and 8.4% for men.

The school attendance rate in 2012 was 31.6% of 1,847,763 students that go to a formal

school. The urban school attendance was of 32.1% and the rural was 30.7%.

Employment Situation

In El Salvador the population in age group to work (PET)3 is defined from people in age

group of 16. According to the data of the Ministry of Economics, in 2012 the PET arose to

4,308,637 people representing the 68.9% of the population.

1Data of December 2007, last census of population and housing

2For further information see the Appendix 1, The map of El Salvador

3 PET by the acronym in spanish ( People in the age group to work)

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PET it is necessary to identify the Economically Active population (PEA4) which is defined

as those who engage in economic activity or offer their work force in the labor market;

Which is around 2,724,754 people, where in 59.4% are men and 40.6% are women.

According to geographical area, the PEA in 2014 is 66.4% in the urban area and 33.6% in

the rural area. Into 2,559,315 are employed today which represent 93.9% and 165,439 are

unemployed, where in the unemployed constitute 6.07%

2.2 Principle causes of the Civil War in El Salvador

Military Authoritarianism

In the begining of the eigthies, the country was still agrarian based on coffee, sugar cane,

and cotton with high index of misery and small number of people with big fortunes.

In the seventies, some studies revelead that 50% of all the land wealth was concentrated in

the hands of only 8% of the landholding population and of this, merely 2% hold 56.5% of

the most rich farmers of the country. For that reason, some oraginzations that existed then

like the Alliance for Progress (ALPRO), demanded to make a review of holding in the

country. In this way oligarchich power arose in the country, their own political party; their

state; supported by the church and the army, which generated a violente culture and an

elitist education.

Then the president Coronel Fidel Sanchez Hernandez convened the first national Congress

for agricultural reform, on January 10, 1970, based on the recomendations of the ALPRO.

That congress was atended by labour organizations, syndicates, non goverment

organizations, the UES and profesionals. Not invited the main protagonists of the proces,

the farmers and the rural workers.

The President said that this reform was an inevitable necessity, an right and a task. He

thought to make a massive expropriation for the common, had having compensating to the

owners of the lands.

4PEA by the acronym in spanish

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new law about land was passed; but the members of agrarian elite were very angry and hold

that the system of land-holding was not an obstacle to the development of the country and

that they were the uniques that could understand the landings problems, also they said that

the goverment was falling back and was serving to the communist cause.

Two months later there were, elections for mayors and deputies and it was clearly

demostrated that the efforts of the National Congress for agrarian reforms was destined to

failure. The PCN5 through an electoral fraud could improve their votes and could win

absolute control of the legislative assembly, predominated by anti reform elements.

It was once againg clear that military authoritarianism was in favor of the oligarchic class

and they didnt do anythinlg for the poor of the country.

Electoral Fraud in 1972

In 1972, there were presidential elections in which the candidates were: General Jose

Alberto Medrano from the FUPI (Independent Democratic Front), the Coronel Arturo

Armando Molina from the PCN (National Conciliation Party) and the engineer Jose

Napoleon Duarte from the UNO (National Opposition Union)

After the elections, on the counting of votes; the UNO was seen to be leading. Once it was

known that the UNO was winning, a national meeting at the headquarters of the Third

brigade was held, and in that it was agreed to ballot papers, to ensure that their official

candidates win the election in the official re-count of the votes.

The Central Council of Elections declarated PCN candidate, Cornonel Arturo Armando

Molina winner. It is therefore considerated that the Coronel Molina won through an

electoral fraud.

All these currupt actions damaged the loyalty of the Salvadoran people, causing strong

opposition groups to be created against the government.

5 PCN: National Conciliation Party

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The goverment of Coronel Arturo Armando Molina (1972-1977)

The period of the Molina regime, was characterizaded by a practice on the expansion of

the role of goverment in the economy with special emphasis on the modernization and

establishment of capitalism in El Salvador, promoting industrialization and improvement

of the social conditions of life of the population.

However the President, responded to the growing student organizations, magisterial

organizations and syndicates; with the military intervention of the University of El Salvador

(UES) in 1972, the University was closed, during which great parts of the structure of the

University were damaged.

University officials and Professors were expelled. The majority went to Nicaragua and

Costa Rica. In 1973, the University was reopened by a special committee which was the

Interim Board of the University of El Salvador.

Molina wanted to go slowly, creating the right conditions for their Agrarian Reform

Project. He wanted to buy lands even when people did not want to sell, from large

landowners and sell at good prices to the farmers. For this was conducted in 1973 the first

Seminary of Agrarian Reform, but the National Association of Private Enterprise (ANEP)

responded negatively to this proposal and issued a proposal to increase and standardize the

availability of credit to farmers, which would make it possible to increase the utilization

and productivity of idle land.

All these events made the people very unhappy, leading to protests. For example, in 1975,

the students of the University of El Salvador (UES) marched in protest, which was

suppressed by the FAES (Armed Forces of El Salvador), which ended in a slaughter.

In 1976, there was a second attempt to initiate an agrarian transformation. In June of that

year, the project started with the, identification of around 60,700 hectares of land in the east

of the country, which was to be given to a lot of families to be worked upon.

This implied that the land reform was to be a reality. The oligarchy began to protest

through the ANEP, and held strong campaigns against the government project.

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Molina so withdrew the reform project and proceeded to rule conservatively and

repressively ignoring the demands for reform that the population asked for.

General Carlos Humberto Romero (1977-1979)

His main policy was to stop the protests that almost occurred in a basis. He was only dedicated to the

caring and of preserving private property and economic structures. His goverment has decided to leave

the reforms and his regime was characterized by strong repression toward left wing terrorism. In

November of 1977 Carlos Humbeto Romero passed the "Law for the Defense and Guarantee of

Public Order", with which arose the Death Squads licensed to kill the opponents of the

regime. Finally on October 15, 1979, he was removed from power through a coup led by

junior officers, led by Colonel Arnoldo heap and Abdul Gutierrez.

Social Organization

The emergence of the revolutionary social movements, was initiated by farmers, factory

workers and carriers unions, and also teachers, who belonged to the National Association of

Salvadoran Educators (ANDES). By the beginning of the seventies the national crisis had

deepened. New social opposition forces had arisen; The purpose of these were to begin a

revolution because the military government had virtually no other options left to get

political power, because the pacific options had already been exhausted.

These forces built different organizations, legal, clandestine, political and armed groups.

The population was aware of the gravity of the crisis. The first organization which

appeared after this was the Popular Liberation Forces Farabundo Mart6 (FPL) in 1977.

It was formed by Salvador Cayetano Carpio and a small group of students and workers.

2.3 Brief abstract of the civil war in El Salvador

The civil war in El Salvador was an internal armed conflict between the armed forces of El

Salvador and the insurgent forces of Farabundo Mart National Liberation Front (FMLN).

The conflict was never acknowledged officially, but it is usully accepted that it happened

6 Farabundo Mart was a farmer, who lead in the Farmer Revolution of 1932 in El Salvador, and became

known as a Salvadoran revolutionary and a martyr for the Salvadoran Left

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between 1980 to 1992. Therefore the country went throught a tense political and social

environment since 1970.

It is estimated that the number of victims of these confrontation, was more than 70,000

dead and 8,000 missing (See Appendix 2 and 3).

The period of the civil war (1980-1992), was characterizaded by a conflict that gradually

increased in intensity, going from small isolated to big clashes and military operations that

affected the life of thousands of people in all over the country.

Different groups and personalities of the country; tried to stop the violence and sought a

negotiated end to the conflict. One of the figures was the Archbishop of San Salvador;

Oscar Arnulfo Romero,(See Appendix 2.1), who called for the reconciliation through his

Sunday homilies transmitted by radio to the whole country.

Monseor Romero, in his Sunday homilies became ever more critical of the goverment, of

the board, and of the enforcement, whom he accused of differents massacres and

persecution of defenseless civilians.

In his last homily, he made a call to the army, in the name of God , to cease the repression

of the people. Because Monsignor Romero opposed the repression and pressured the

parties to come to dialogue and peace, he was killed on March 24, 1980, while celebrating

Mass in the Divina Providencia Hospital Chapel in San Salvador.

This was followed by other acts of violence like The Sumpul Slaughter, on 14th May of

1980, when soldiers of the National Guard, killed approximately 300 farmers in the Sumpul

river in Chalatenango7.

During this violent period, popular insurrection were planned. It became necessary to make

an Union of guerrilla organizations, which was the popular army. The FMLN was created

on 10th

October, 1980. It began to prepare a military offensive to establish a revolutionary

government because the purpose of the offensive was to establish a revolutionary

government, before a new US president was to take office.

In the elections of November, 1980 in the United States, Ronal Reagan was elected as the

new President, who took office in January, 1981. He declared as enemies the Soviet Union,

7 Chalatenango is a department of El Salvador located at the north of the country

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Cuba, and Sandinista Nicaragua. He was also alert, about the problems that was gestating in

El Salvador, for the security of his country.

The Offensive of 1981

On January 10, 1981, the FDR FMLN, unveiled a release all over the world;Today at 5

pm the general offensive has begun. The enemy has lost, it is sorrounded, popular justice

has come.

The combats began with an attack on several of the main barracks, like of San Francisco

Gotera in Morazan, of San Miguel, Santa Ana, Zacatecoluca and several in San Salvador.

It was clear then that the FMLN forces were not prepared for frontal combat against the

army and the security forces. And the hope of a quick victory was soon becoming an

impasse against the revolutionary forces, because the Salvadoran government got a quick

military help from the United States government, during the president ship of James Carter.

The FMLN had believed that the attacks against the army would bring up a popular

insurrection all over the country, but these never happened. There were combats on all the

streets in the capital city between citizens and security forces, and general strikes, but the

general population never arose against the army; and on January 20, the day of the took

office Ronal Reagan, the offensive failed.

The Offensive of 1989

The main objective of the offensive of November 1989 was to unchain the popular

insurrection with more than 70000 guerrillas. This offensive had supposed that one part of

the army would convert to FMLN and also that the population would join the offensive, to

establish a national consensus government and establish the base to build the socialism in

the country.

The offfensive began on November 11 with a militia of two thousand members dispersed

in several part of the country: Ayutuxtepeque, Mejicanos, Ciudad Delgado, Soyapango and

Cerro de San Jacinto.

The government ordered a siege and a curfew the next day of the offensive. It implied the

censure of the social media including the satellite television. However the FMLN started to

17

retire and practically leave all their military positions in the capital, thereby they lost all

positions without any arrangements.

2.4 The Peace Agreements and the economic and social reconstruction of the country

The peace agreements were the result of a long negotiation process between the goverment

and the FMLN, that began in the mid eigthies. Since the beginning of the nineties, a

number of contacts on the top level, from United Nation officials, to government

representatives to the diplomatic political commission of FMLN.

The firsts of the meetings was held in La Palma, Chalatenango on October 15, 1984, the

next meeting in Ayagualo, La Libertad November 30,1984, Sesori, San Miguel on

September 19, 1985 and the Apostolic Nunciature on October 4,1987, between Jos

Napoleon Duarte the President, government offcials and delegates from the FMLN

leadership.

Although in the firsts dialogues meetings no concrete agreements were achieved, it made

possible the putting on table, the possibility of a negotiated solution to the conflict.

The conflict concluded after a dialogue process with the signing of peace agreements on

Janury 16th

, 1992. That allowed the demobilization of the guerrillas and their

incorporation into the political life of the country. (See Appendix 4)

Internal Factors that led to the signing of the peace accords

The war progressed, grew the desire for peace in the collective consciousness of the

Salvadoran people grow stronger by the day.

Changes in civil rigth: One stage which opened the way toward the negotiations with the

FMLN was the gradual transformation of the ARENA8 into a civil party, with a wide base,

representing private enterprise, the medium classes and the poor sectors with conservative

ideology.

Delegitimization of the armed forces: One of the principle events that change the

Salvadoran army was the Murder of Jesuitas. It changed the position of the army in the

8 ARENA: Alianza Republicana Nacionalista, main political party of the Salvadoran rigth.

18

negotiations, where by the armed force was obliged to negotiate under internationals

pressure.

Ideological evolution of the FMLN: The FMLN had discovered that it did not have enough

force to topple the government and a general insurrection of the masses was something

far away.

The intermediation of the United Nations achieving sustained development process of

pacification. The new geo political and regional scenario: The crisis in the Soviet Block and

the end of the East - West conflict performed exerted a great influence on El Salvador, and

also helped solve the conflict in El Salvador.

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CHAPTER 3

ECONOMIC ASPECTS OF EL SALVADOR

1992-2012

20

3.1 Structural changes in the Salvadoran Economy since 19909

From 1989 the pace of economic activity began to accelerate. This result is attributed to the

process of economic liberation and implementation of structural reforms initiated by the

first administration of ARENA in a climate of lower socio political tension due to advances

in peace negotiations between the government and the guerrillas.

In the first phase of reforms, ARENA proceeded to the eliminat price controls, reduce

tariffs and barriers to external trade, liberalizate the exchange rate and interest rates and

privatizate of the banking system.

In 1995 El Salvador began to move into a second phase of reforms. Deregulation and

privatization of electricity and telecommunications started. The pension system was

reformed and private managers pension funds were installed (AFPs)10. During the first half

of the nineties the Salvadoran economy experienced a boom. Post conflict the country grew

at a rate of 6.5% on an average each year.

The fundamental impetus for this growth dynamics came from the registered boom in

demand for durables goods and real properties. The same increased access to domestic

bank credit. Also as a result of the repatriation of capital from those who migrated during

the conflict and also the remarkable growth in remittances from Salvadorans living abroad

mainly in US

Also due to the decrease in import costs for commercial release and the relative

appreciation in the currency, due to rising capital in flows which helped to boost

consumption.

9 Data from:Acevedo, Carlos, La Experiencia de Crecimiento Econmico en El Salvador durante el Siglo

XX, BID, Agosto de 2003. 10

AFP: Private Managers of Pensions Funds (acronym in Spanish)

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Figure 1

Structural Change in El Salvador 1990-2010

Sector 1990 2000 Change 2010 Change

Agriculture 17.5 12.7 4.8 13.1 0.4

Industry 25.2 26.6 1.4 25.6 -1.0

Manufacture 21.7 23.0 1.3 22.8 -0.2

Services 57.3 60.7 3.4 61.3 0.6

Total 100.0 100.0 0.0 100.0 0.0

Reference: Cabrera, Oscar; Crecimiento Inclusivo y Transformacin Estructural en El Salvador, BCR,

Agosto de 2012.

It is posible apreciate from figure 1, that has been structural change in the economic

composition of the GDP of El Salvador, from the agricultural sector toward the services.

From 1990 to 2010; In 1990, the importance of the services in the economy was just 42.2%

of the GDP and at the end of the decade of 2000 the rate of participation was 54.6%,

which represent a growth of 12.4% in the importance of the Services sector in the economy.

At the end of the next decade in 2010, the services had had a participation of 58.3% in the

GDP which represented a growth of 3.8% in the Services in the economy. It is also possible

to see the decrease in the importance of agriculture in the GDP from 36% in 1990 to 21.7%

in 2000, which represents a decrease of 14.3% and for the next decade, in 2010, it

continued decreasing until it reached 20.8% of the GDP.

This structural change is characterizaded to be less intensive in capital and more intensive

in employment, with a reduction of the real wages and remarkable consequencies on the

economic growth and development of the country.

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3.2 Brief analysis of the current state of the Salvadoran Economy

Between 2001 and 2013 the economic growth was 1.9%. During this period various events

affected the economy; recorded among the most important are the entry into force of the

law of monetary integration in 2001, the seismic and meteorological phenomena, the rise in

fuel prices, the entry into force of the free trade agreements (the first was in march of 2001

with Mexico), international economic crisis originating in the US in 2008, events in one

way or another influenccing the production of godos and services, affecting the

competitiveness of the domestic economy. The average growth during the international

crisis (2010-2013) was at 1.8%.

The connection of the Salvadoran economy with the rest of the world, specifically with the

US, is established primarily through trade and sending of remittances; These flows are a

function of the performance of the US economy.

In 2013the country had an economic growth of 1.7%, close to the growth in 2012 which

was 1.9%. The country still has the lowest economic growth in all of Central America.

In 2013 major public investment projects like the transport system in the metropolitan area

of San Salvador (SITRAMSS) started. Bridges and roads, a new maternity hospital have

been constructed; which represent an achievement that had not been possible to achieve for

many years.

2013 saw an increase in employment of 6.0%, specially in the areas of financial services,

trade, industry, construction, electricity and water.

23

Figure 2

GDP and Inflation of El Salvador

Reference: Ficha Estadstica de El Salvador, BCIE11

, 2012.

Gross Domestic Product (GDP)

Figure 3, shows the trend that GDP thas followed during 2001-2010. In 2001, the GDP

was 1.7%, experiencing a slight recovery in 2005-2007, when growth rates were around

4%. However in 2009 we can see a significant drop in economic growth, as an effect after

of the impact of the international economic crisis of 2008; Finally in 2010 the growth

ratewas 1.4%, bringing the average economic growth for the whole decade to 1.9%.

In 2013 most of the economic activities that make up the GDP showed positive changes.

Banking, insuranceand other financial institutions grew at 3.8%, Government services by

3.3%, real state and business services by 2.8%, community, social, personal and domestic

services by 2.2%, transport, storage and communications by 2.2%, manufacturing by 2.1%,

commerce, restaurants and hotels by 2.1%, electricity and water by 1%. On the other hand

the growth in constructionwas null, and growth in the agricultural sectorwas negative by (-

0.4%)

11

BCIE: Central American Bank for Economic Integration

24

Figure 3

Problematic factors for doing business in El Salvador

Reference: Ficha Estadstica de El Salvador, BCIE12

, 2012.

El Salvador presents great challenges in terms of competitiveness; the latest Doing Business

report places the country at position 86 on 183 countries. According to the survey

conducted can identify the main constraints in the business environment of the country, are

strong weigh crimeand theft, followed by political instability, access to finance and finally

the need to improve the efficiency of the bureaucracy and the problem of corruption.

12

BCIE: Central American Bank for Economic Integration

25

CONCLUSIONS

The Salvadoran economy has passed through different social and political factors like

social tensions since 1970 and the civil war of the eighties, which has influenced the way

and economic development of the country.

The civil war in El Salvador resulted in more than 70,000 dead and 8000 missing; the

conflict concluded with the signing of peace agreements on January 16th

in 1992. This

allowed the demobilization of the guerrillas and their incorporation into the political life of

the country.

Since the arrival of the ARENA party to power in 1989; begin a series of economic and

social transformations that changed structurally complex and the overall living conditions

in El Salvador: like the privatization of most state enterprises, the liberalization of banking

and commerce; among others.

During the first five years after the war; El Salvador experiences an average growth rate of

7%. Which represent an achievement never reached during the time of the conflict. But this

growth was not sustained, because after that the Salvadoran economy has stagnated.

During the period 2001-2013, the average growth rate of the Salvadoran economy has been

1.9%. The lowest of all Central American isthmus. Which is the result of the combination

of various aspects like meteorological phenomena, stagnation of production, existence of

high volumnes of crime and corruption in the country; among others.

26

APPENDIX

1.0 Map of El Salvador

2.0 The Salvadoran Guerilla during the Civil War (1980-1992)

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2.1 Pictures of Oscar Arnulfo Romero, Archbishop of San Salvador, 1980

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3.0 Pictures of the Salvadoran Army during the Civil War (1980-1992)

29

4.0 The Peace Accords in El Salvador 1992

30

REFERENCES

Banco Central de Reserva de El Salvador

http://www.bcr.gob.sv/bcrsite/?cdr=30&lang=es

Hernandez Melendrez, Edelsys. Metodologa de la Investigacin. Escuela Nacional de

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