Name: Republic of El Salvador Population: 6.19 million (2010) Capital: San Salvador Other major cities: Santa Ana, San Miguel, Apopa Area: 8,124 sq miles Currency: US Dollar GNI per capita: $3,360 (2010) Main exports: Textiles, coffee, sugar, tuna, chemicals, paper Language: Spanish Religion: Roman Catholic (52%), large number of Protestants Life expectancy: 76 years (women), 67 years (men) Country Data Profile
This small, densely populated Central American country managed to emerge from a bitter civil war in the 1980s, during which an estimated 75,000 people died, after signing a peace agreement in 1992.
Since the end of the conflict, El Salvador has made significant progress towards consolidating peace and democracy. The country's political transformation led to major structural reforms and stable macroeconomic policies that resulted in strong economic performance in the 1990s.
The peace accord allowed former guerrillas of the Farabundo Marti National Liberation Front (FMLN) to form a legitimate political party and participate in elections. In March 2009, Mauricio Funes was elected president of El Salvador, a first in history for a FMLN candidate.
Funes took office in June 2009 after 20 years of ARENA as the ruling party. Although macroeconomic stability and the promotion of pro-poor social development and inclusion were key elements of Funes' election platform, the global crisis has constrained the Government’s fiscal space and made evident the need to address structural vulnerabilities in order to implement a sustainable social program.
As a result of the mid-term elections carried out in March 2012 in El Salvador, ARENA became the largest legislative block (with 33 seats out of 84) compared to FMLN’s 31 seats. Since neither FMLN nor ARENA will have a legislative majority, both parties are seeking to consolidate their position by forming ad-hoc alliances with smaller parties.
Major economic reforms, such as trade liberalization and privatization of the financial sector, led to significant improvements in social and business conditions in El Salvador. This robust reform program led to high rates of growth (averaging about 6 percent per year) during the 1990s.
Poverty levels in the country declined significantly between 1991 and 2002 (about 27 percentage points), extreme poverty dropped by half over the same period and there were important social advances, including school enrollment, infant and maternal mortality, access to health and water services.
However, growth slowed in the beginning of the new millennium to less than 2 percent, reflecting a series of shocks, including the global slowdown, a devastating earthquake in 2001 in El Salvador and the impacts of the “coffee crisis”.
Growth picked up again in 2005 following an improvement in the external environment and reached 4.7 percent in 2007—its highest level in about a decade. But the 2008/2009 crises severely affected the Salvadoran economy, with a drop in exports and remittances, higher levels of unemployment and rising food and energy prices. Between 2007 and 2008, the percentage of people in poverty increased from 35.5 to 42.3.
In 2009 El Salvador’s real GDP contracted by 3.1 percent, and then registered a modest growth of 1.4 percent in 2010.
In response, the Government formulated the Anti-Crisis Plan with a stimulus package of nearly US$600 million that included measures to create temporary jobs, build basic infrastructure and increase the coverage of social services.
The Salvadoran economy has begun to recover at a slow pace, registering a growth of 1.5 percent in 2011 and a forecasted 2 percent in 2012.
Challenges
High levels of crime and violence continue to threaten social development and economic growth in El Salvador and affect negatively the quality of life of its citizens. Addressing this challenge will need a concerted and multipronged effort on the part of governments, civil society, and the international development partners.
El Salvador's vulnerability to adverse natural events, exacerbated by environmental degradation and extreme climate variability, also compromises the country's sustainable development. In 2011, Tropical Depression 12E hit El Salvador, affecting more than 1.4 million people and causing US$902 million in damages and losses.
Targeting of subsidies also remains a big challenge for the government particularly in the frame of new fiscal targets to be negotiated with the IMF.
The country’s economic recovery could also be affected by rising food prices, such as corn and wheat, of which El Salvador is a net importer. According to the World Bank Food Price Watch prospects for a decline in food prices are favorable in 2012, yet global prices remain volatile, markets tight, and oil prices uncertain.
Currently, the World Bank lending portfolio in El Salvador comprises US$295 million in commitments and includes six projects focused primarily on serving vulnerable groups; enhance government efficiency, protect the environment and expanding opportunities for all.
In 2009 the World Bank Executive Board approved a Country Partnership Strategy (CPS) covering the period from 2010 to 2012 with a lending program, technical assistance and analysis to support Government efforts to reduce poverty. After the 2011 Progress Report, the current CPS period was extended to 2014.
The CPS focuses on three aspects: • Strengthen fundamentals for economic recovery by addressing the macroeconomic and institutional vulnerabilities. • Improving the provision of social services for vulnerable groups. • Expand economic opportunities, particularly for the poor.
Despite a challenging investment climate, IFC continues to explore opportunities to support the Salvadoran private sector. As of March 2012, IFC’s committed investment portfolio totaled US$63 million. IFC opened its first office in San Salvador in 2009, providing both advisory services and investment services to clients.
The current World Bank projects in El Salvador include:
Income Support and Employability Project This US$50 million operation assists the Government’s Temporary Income Support Project (PATI, for its acronym in Spanish), which provides temporary income support, training services and job placement for poor people in urban areas.
Local Government Strengthening Project With US$80 million in financial support from the World Bank, this project aims to improve the administrative, financial and technical processes, systems and capacities of local governments to deliver basic services, as prioritized by local communities.
Fiscal Management and Public Sector Performance Technical Assistance Loan The objective of this US$20 million project is to strengthen the institutional capacity of government processes and agencies to increase the effectiveness and efficiency of revenue and expenditure management, and enhance accountability and transparency in the public sector.
Strengthening the Public Health Care System The objective of this US$80 million project is to strengthen El Salvador’s Public Health Care System, increasing service coverage for the 92 poorest municipalities in the country and providing better access to quality health services for 2.1 million Salvadorans.
Education Quality Improvement Project This US$60 million project will assist public schools in 29 municipalities in adopting the Inclusive Full Time School model, in order to increase access, retention and graduation rates for secondary students. More than 41,000 secondary students in El Salvador will have access to better quality education.
Protected Areas Consolidation and Administration Project The objective of this project, financed by a US$5 million grant from the Global Environment Facility (GEF), is to assist the Ministry of Environment and Natural Resources to develop a strategy to consolidate protected areas and strengthen the national protected areas system.
With support from the World Bank, El Salvador has pioneered the successful implementation of projects in a number of key areas.
Earthquake Emergency Recovery & Health Services Extension Project This project helped built, rehabilitate and improve operations of six hospitals (Cojutepeque, San Rafael, San Vicente, San Miguel, Zacatecoluca and Usulutan). The project also improved the provision of health services for more than 636,000 people, especially in areas affected by earthquakes and in poor areas in the northern region.
Secondary Education Project Launched in 1997, this project sought to improve the quality and efficiency of private and public secondary schools and to upgrade the quality of entrants to the labor market to increase the country’s competitiveness in the global market. Secondary enrollment rose to 46.1 percent between 1998 and 2005, exceeding the planned targets of 40 percent.
Judicial Modernization Project The project helped to strengthen the capacity of the Judicial Branch by modernizing administrative processes and improving oversight of judges and legal professionals. The project focused on strengthening the capacity for monitoring and evaluation of the entire judicial system, including the participation of judges, technical and administrative staff in 160 training activities.
This small, densely populated Central American country managed to emerge from a bitter civil war in the 1980s, during which an estimated 75,000 people died, after signing a peace agreement in 1992.
Major economic reforms, such as trade liberalization and privatization of the financial sector, led to significant improvements in social and business conditions in El Salvador. This robust reform program led to high rates of growth (averaging about 6 percent per year) during the 1990s.
In 2009 El Salvador’s real GDP contracted by 3.1 percent, and then registered a modest growth of 1.4 percent in 2010.
Currently, the World Bank lending portfolio in El Salvador comprises US$295 million in commitments and includes six projects focused primarily on serving vulnerable groups; enhance government efficiency, protect the environment and expanding opportunities for all.
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