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USAID Information:
External Links:
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El Salvador
The Development Challenge: El Salvador has made progress on all fronts--political, economic and
social--despite the problems caused by Hurricane Mitch, the earthquakes of 2001, the U.S. recession and
September 11th. In March 2003, El Salvador held its fifth series of free and fair national elections since
the 1992 Peace Accords, electing 262 municipal mayors and 84 deputies to the National Legislature.
There is every expectation that the upcoming March 2004 Presidential elections will also be free and fair,
firmly consolidating democratic electoral processes in El Salvador. Over the past three years, while much
of Latin America has experienced negative economic growth rates, the Salvadoran economy has
maintained a positive average annual growth rate of 2%. Economic growth projections for 2004 indicate a
more modest 1.5%-1.8% rate of increase due to investor uncertainty over Presidential elections and
possible changes in economic policies, and a 30% increase in prices of imported oil dampening economic
activity. Despite this decade of positive economic growth and a 35% decrease in levels of poverty, the
country continues to be challenged by extreme income inequality. In 1991, the poorest 20% received
only 3% of the nation’s wealth. As of 2002, this percentage has dropped to a mere 2.8%. This declining
share of national income for the poor undercuts the significant progress that El Salvador has made over
this past decade and poses a serious threat to an emerging democracy. Finally, despite significant
reductions in levels of crime and violence over the last five years, they are still at critical levels--a direct
disincentive to direct foreign investment and economic growth.
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El Salvador still suffers from poverty, with approximately 49% of the rural population living below the
poverty line; almost 17% of the population is illiterate; the average educational level among the rural
population is 3.4 years; and 61% of the rural population has no access to water piped into the home.
Security issues in urban and rural areas and low citizen confidence in the justice system compound the
poverty problem and are a strong disincentive to investment and growth. Centralization of power and
decision-making has resulted in the central government being perceived as unresponsive and
unaccountable to citizen concerns.
El Salvador’s unique strategic location and strong historical and cultural ties to the United States make
political and economic stability in El Salvador a vital U.S. interest. El Salvador's adoption of the political
and economic liberalization that the United States has encouraged has made it a model for developing
countries in the region. The United States is El Salvador’s most important trading partner, receiving
67.3% of its exports and providing 50.1% of its imports. There is both hope and expectation that the
recently concluded Central American Free Trade Agreement (CAFTA) between the United States and
four Central American countries will be key to the future economic growth and prosperity for El Salvador
and the region. An estimated 2 million Salvadorans live in the United States, many of them illegally. By
promoting prosperity in El Salvador through USAID programming and mechanisms such as CAFTA, the
United States can strengthen the Salvadoran economy, thereby reducing the flow of economic migrants
to the United States and the country’s vulnerability to narcotics transshipment and trafficking in persons.
The USAID Program: FY 2004 and FY 2005 are transition years as USAID concludes ongoing programs
under its 1997-2004 strategy and begins programs under its new FY 2004-FY 2008 El Salvador Country
Plan under the Central America and Mexico (CAM) Regional Strategy. Accordingly, in FY 2005, USAID
will conclude four objectives that focus on: 1) economic opportunities for rural poor families, 2) promote
democracy and good governance, 3) improve health of rural Salvadorans, and 4) increase rural
household access to clean water. USAID will also finish its high-profile earthquake recovery program,
having contributed to significant reconstruction of rural housing, health and education facilities, water
systems, and reactivation of the most affected sectors of the rural economy. Under the CAM Regional
Strategy, and consistent with the Millennium Challenge Account, USAID will initiate a new objective-Economic
Freedom --in FY 2004, and will begin the new Investing in People and Ruling Justly objectives
in FY 2005. Activities and funding requests under these objectives are described in the Data Sheets.
Other Program Elements: In addition to the bilateral program, the Regional Central American Program
(G-CAP) also manages programs in El Salvador. G-CAP provides training to the electricity regulatory
body to help it comply with the responsibilities, functions, and roles laid out in its mandate. G-CAP will
continue working with HIV/AIDS high-risk populations to control and prevent the spread of HIV/AIDS
through behavioral change interventions at the community level. Another G-CAP program, the
Environmental Program for Central America (PROARCA), will continue supporting environmental
conservation of the Gulf of Fonseca, and will assist El Salvador in the area of clean production related to
the U.S.-Central American Free Trade Agreement (CAFTA). Finally, the regional quality coffee program
will continue to improve production, processing, and marketing of high quality specialty coffees grown by
small and medium-scale coffee producers.
Through the Department of State's International Criminal Investigation Training and Assistance Program
(ICITAP), assistance is provided to continue strengthening community policing. USAID’s Economic
Growth, Agriculture and Trade Bureau (EGAT/NRM), assists projects protecting migratory birds and their
winter habitats in El Salvador’s El Imposible National Park and works with a local NGO to provide rural
water quality testing. USAID’s Democracy, Conflict, and Humanitarian Assistance Bureau funds activities
through the Farmer-to-Farmer program and the Private and Voluntary Cooperation program to promote
economic opportunities for the rural poor.
Other Donors: Donor coordination in El Salvador is dynamic. The United States remains the largest
bilateral donor. Multilateral lending institutions continue to provide the largest share of economic
development assistance to El Salvador (76%) of the total. Major lending institutions in order of
contributions include: the Inter-American Development Bank focusing on earthquake reconstruction,
infrastructure, legislative and judicial strengthening, microfinance, agribusiness, local governance,
education and modernization of the state; the World Bank focusing on earthquake reconstruction,
education, health infrastructure; and the Central American Bank for Economic Integration focusing on
rural development, markets, health, and earthquake-related infrastructure reconstruction. Active
multilateral donors in order of significance include: the European Union (earthquake reconstruction),
World Food Program (health), United Nations Children's Fund (health), United Nations Development
Program (rule of law and local development), and the Pan American Health Organization (health). Among
the bilateral donors, Japan ranks second to the U.S. and works on earthquake reconstruction, education,
and the agriculture sector; Germany ranks third and works on health and local governance; Spain is next
and works on earthquake reconstruction and judicial strengthening.
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