The Socioeconomic Implications of Dollarization in El Salvador

Abstract

This study argues that the costs associated with El Salvador's dollarization clearly outweigh the benefits and that the decision to dollarize was prompted not only by the need to promote economic growth, but also by the impluse to serve the interests of the financial sector and the large entrepreneurs who control the ruling ARENA party. Although the policy facilitates investment and international financial transactions, it has a negative effect on the poor by increasing inequality. To develop this argument, the authors discuss the socioeconomic and political situation in El Salvador at the time of dollarization, examine the Law of Monetary Integration, and analyze die effect of the dollarization policy on the poor.

Post-Civil War San Salvador: Social Inequalities of Household and Basic Infrastructure in a Central American City

“…The country's appalling record of labour abuses has endured, as have large-scale urbanisation and emigration. 1 While the official poverty rate has been slashed, income distribution has become more unequal, the percentage of undernourished population has risen, and gang violence has surged (Wood, 2001;Arnson, 2002;Human Rights Watch, 2003;ECLAC, 2004bECLAC, , 2005bRosa, 2004;Towers and Borzutsky, 2004;Amnesty International, 2005;Arana, 2005;World Bank, 2005;Allen, 2006). Urbanisation has boosted San Salvador's share of the national population to nearly one-third and its share of the national economy to roughly two-thirds.…”

“…These revolve around social chasms that, despite progress in areas such as potable water provision, housing and infant mortality, have widened since the early 1990s (Arnson, 2002;ECLAC 2002ECLAC -2005bHuman Rights Watch, 2003;Robinson, 2003;Rosa, 2004;Towers and Borzutsky, 2004;Amnesty International, 2005;World Bank, 2005;Allen, 2006).…”

“…San Salvador's poor -estimated at some 30 per cent of households as the new century began -face acute problems of basic infrastructure: lack of housing finance; settlement in ravines vulnerable to earthquakes, floods and landslides; property tenure insecurity; overcrowded housing; serious air, land and water pollution; absent or woefully deficient utilities and health programmes; and chaotic public transportation (Flores, 2000;SAPRIN/El Salvador, 2003;Wisner, 2001;World Bank, 2001c;Public Citizen, 2003a;Lungo, 2004;Rosa, 2004;Castillo and Escobar, 2006). Service privatisation and rate hikes have worsened social inequalities by unleashing sharp price rises (SAPRIN/El Salvador, 2003;Public Citizen, 2003a, b;Sengupta, 2003;Towers and Borzutsky, 2004;Engel, 2005).…”

“…Neither domestic nor foreign political commitment, though, has approximated the demands of social reconstruction. In the capital city of San Salvador, these demands stand at the crossroads of myriad challenges: intense urbanisation; severe deficiencies of housing and basic infrastructure; environmental destruction and vulnerability to natural hazards; precarious employment; pervasive fear of violence and crime; and elite resistance to inclusionary politics (Wisner, 2001;Lungo, 2004;Rosa, 2004;Rubin, 2004;Towers and Borzutsky, 2004;Amnesty International, 2005;Arana, 2005;Castillo and Escobar, 2006). This paper examines inequalities of household and basic infrastructure in postcivil war San Salvador.…”

И.Н. Руденков Зачем Нужна Долларизация?

“…На неофициальном рынке контроль отсут-ствует; продавцы часто устанавливали цены в долла-рах США намного выше. Неофициальный обменный курс составлял 7 колонов за 1 доллар США [10], сле-довательно, с разницей 1.75 колонов по реальному обменному курсу, что означает 25% инфляции.…”