A report from ECLAC describes the financial measures taken by governments and the increased spending.
According to the Economic Commission for Latin America and the Caribbean (ECLAC) Fiscal Panorama report, El Salvador is the Latin American country where central government spending has increased the most in 2020.
The expenditures of the government of Nayib Bukele represent 8.4% of the gross domestic product (GDP) and have focused on subsidies and current transfers as they represent 4.3% of GDP, only among Argentina (5.7%) and Brazil (5.5%) and comparable to Colombia’s spending (4.3%), the report indicates.
At the Central American level, government spending in relation to GDP was: Panama 4.9%, Honduras 1.9%, Guatemala 1.7% and Costa Rica 0.4%.
The ECLAC report also shows that another percentage of El Salvador’s expenditures went to loans, interest payments and salary payments.
In El Salvador, according to the agency, “the increase in central government current transfers is due to the increased resources spent on decentralized institutions (including public hospitals).”
The report also notes that spending has increased as a result of transfers to the Development Bank of El Salvador (Bandesal) to fund the Trust for the Economic Recovery of Companies (Firempresa).
The government directed $ 600 million under the Firempresa program, which sought to reactivate the economy and support the businesses affected by the pandemic.
Likewise, it points out that the increase in money transfers was due to the fact that they were assigned to “municipalities to support them in the provision of public services in a context of increased demand due to the pandemic”.
However, this is in stark contrast to the repeated complaints from the municipal authorities since the Bukele government did not transfer the Fodes (Fund for Economic and Social Development) to them since June last year, as required by law, and that has given them economic difficulties. for the municipalities, to the point where they had to suspend services due to lack of resources.
But Finance Minister Alejandro Zelaya has insisted he has no money to pay the mayors and has even confirmed that they cannot “force” him to pay the Fodes he owes them. Most municipalities to which the money was not transferred will be governed by the ruling party New Ideas from May 1.
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Latin America allocated 4.6% of GDP to combat the crisis
Latin America, the region most affected by the pandemic in the world, spent an average of 4.6% of its GDP in 2020 on social assistance to combat the economic crisis triggered by Covid-19, a fiscal effort launched this year should be continued, the Cepal.
The agency warned that the projected growth for this year (about 3.7%) will not offset the decline in 2020, nor reverse the increase in poverty and inequality, hence the need for fiscal expansion, especially through subsidies and current transfers.
“The persistence of the pandemic and asymmetries in vaccination, along with asynchronous and varying recovery rates, blanketed uncertainty about the speed and sustainability of the recovery,” said the executive secretary of the Santiago-based bureau. Alicia Bárcena.
The Latin American economy shrank by 7.7% in 2020 – the worst recession in the past 120 years – and poverty and extreme poverty soared to 33.7% (209 million people) and 12.5% (78 million) , levels not seen in the last 12 and 20 years, respectively.
Without social transfers, Bárcena told Efe, “poverty in the region would have reached 230 million people and extreme poverty 98 million.”
The massive closure of businesses led to an unemployment rate of 10.7% last year, while the level of regional GDP per capita ended last year at the same level as in 2010, meaning the region is heading for another lost decade , like one lived in the eighties.
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