The fiscal pact, the cornerstone for the viability of the Government of Bukele

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  • Sat, 02/09/2019 - 15:49
  • EFE

by Giovanna Ferullo

The success of the Government that will assume in June the elected president of El Salvador, Nayib Bukele, will depend on whether it will soon achieve a fiscal pact that will give it a floor to face a national scenario marked by an elevated indebtedness, a famished productive apparatus and high levels of poverty and violence.

In the fiscal agreement "it is defined which country is wanted, how much it costs and how it is going to be financed", Jonathan Menkos, director of the Central American Institute of Fiscal Studies (Icefi), told to Acan-Efe.

In the opinion of this economist with a master degree in Government and Public Policy in Latin America from the Pompeu Fabra University / IDEC in Barcelona (Spain), the elect president should not wait to take office on June 1, but from now on "with all the legitimacy that counts, to summon the diverse sectors of the society to conclude that fiscal pact".

Bukele, a charismatic 37-year-old businessman, won in the first round with 53.1% of the presidential votes on February 3, ending the two-party system installed since the end of the 1992 civil war that began in 1980 and was represented for the rightwing Nationalist Republican Alliance (Arena) and the ex-guerrilla of the Farabundo Marti National Liberation Front (FMLN).

The elected president will meet a country whose economy has grown barely 2% on average in the last decade, also driven by family remittances, and high levels of informality with only 1 in 4 Salvadorans contributing to social security.

Menkos stressed that "in the next government will be due 2,400 million dollars in bonds", to which we must add that "the Fiscal Responsibility Law established that the tax burden from 2021 must be at least 18.5%, above the 17.9% calculated by the Treasury for this year".

The fiscal deficit for this 2019 has been calculated in the budget at 3.2% and according to the Fiscal Responsibility Law for 2021 it should be 0.7%, which implies that the Bukele government "should make an adjustment of 2,5 points of GDP in just two years".

That is "an abrupt adjustment, taking into account the reality of the country", but "not to make changes in public finances" the outlook for the Government "would be very bleak, as it does not have much room for maneuver, which is why it is so important prioritize the fiscal pact", said Menkos.

Bukele arrives at the presidency with the support of party Gran Alianza por la Unidad Nacional (GANA), minority in Parliament with only 10 seats and product of a split of Arena, after being expelled in 2017 from the FMLN due to the confrontation and public criticism with the directors of the left formation.

Menkos recalled that for the parliamentary approval of matters as debt the new Government "will require a qualified majority, that is, 56 of 84 seats" of the Legislative Assembly.

However, he pointed out that the past parliamentary elections "were a catastrophe for the main political forces (Arena and FMLN), and in fact there were already political parties open to support proposals from the Executive" that Bukele will lead.

Among the campaign proposals to correct the fragility of public finances was the application of the property tax and the cash results of the companies; as well as the electronic invoice for the combat of the evasion.

Also the search for "a fiscal pact with the participation of civil society", highlighted in January an Icefi report.

To operate in that context of parliamentary minority "will force Bukele to foment a citizenship that puts pressure on the opposition", as Menkos highlighted in his conversation with Acan-Efe.

“But that social support will achieve it to the extent of its government plan. The demands of the majority of people. Employment, security, probity, guarantee of social rights, response to democratic institutions, criticism and fiscal agreement. Draft that strengthens the public administration, with more resources, more transparency and better capabilities", he added.

Regarding transparency, Gana's proposal during the campaign was the creation of an International Commission Against Impunity in El Salvador (Cicies), which will be implemented as of the third quarter of 2019, recommended by Icefi.


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