Victory for farmers and cooperatives! Assembly forgives agrarian debt, but president threatens veto

El Salvador Watch, No.64, November 1997

After a years-long struggle for survival, the agricultural sector is on the verge of freedom from its crushing debt burden.

In a dramatic battle spearheaded by the FMLN, El Salvador's National Assembly approved the "Special Law for the Extinction of Debts and the Reactivation of the Agricultural Sector" on October 30.

The act provides relief to nearly 100,000 campesinos, including those organized in 350 cooperatives, who owed over one billion colones (approx. $120 million). Including family members of direct beneficiaries, it is estimated that the measure will improve the lives of more than half a million people.

It applies to debts from purchases of the land itself (i.e. mortgages), as well as credits for agricultural production.

The final hurdle to be cleared is obtaining President Calderon Sol's signature. Unless he vetoes the bill, it becomes law eight days after he receives the legislation from the Assembly. He is under intense pressure from the banking sector to do so, however.

It is crucial that the opposition maintain its unity. Only ARENA voted against the proposal, but five others did not vote. To attain the 2/3 necessary to override the threatened veto, it will need to count on all 56 votes not held by ARENA. Specifically, the legislation would:

(*) Erase 100% of the first 500,000 colones (approx. $60,000) of all debts and accrued interest - which means total forgiveness for most small farmers and cooperatives;

(*) Require payment of only 7% of amounts owed in excess of 500,000 colones; and

(*) Offer refinancing of the balance over ten years at 6% interest (the prevailing rate today), after an initial two year grace period.

A second law was passed immediately afterward to forgive all debts acquired by ex-combatants from both sides.

The law also instructs the executive branch to contemplate new measures to reactivate the agricultural sector.

A Hostile Policy

Till now, governmental policy toward the agricultural sector has been one not merely of neglect, but of outright hostility. Most farmers are deemed not "worthy" and deprived of necessary credits.

Agriculture is being destroyed by the neoliberal economic model being imposed by ARENA at the behest of Washington, the World Bank and other international power-brokers. [See "Globalization Takes Toll," below.]

Current financial policies have created an economy in which 60% of profits are based on speculation are not real productivity: this does not translate into development.

According to Oscar Ortiz, who represented the FMLN on the Assembly's Subcommission on the Agrarian Debt: "Without a doubt, the current dynamic of [ARENA's] economic model has privileged exclusively the finance sector and big business engaging in speculation, which has debilitated the national productive apparatus."

It has meant abandoning the traditional driving engines of the economy - agriculture and domestic industry - and instead encouraging consumerism and artificial production such as the maquiladoras, which contributes little toward developing the country.

Indeed, ARENA's agricultural policy can be summed up in the words of the Treasury Minister: "the campesinos should just go work in the maquiladoras."

The Legislature Does Battle

With the new balance of power after elections earlier this year, hopes grew for overturning ARENA's hostile policy.

The governing party remained obstinate. It was unwilling to do much better than the decree it passed in 1996, which forgave 70% of the debt, but only for those who could pay off the balance on a very short timeline - a condition that virtually no small farmers or cooperatives could be expected to meet.

The Christian Democrats (PDC) and the National Conciliation Party (PCN), which both have traditional bases of support in the countryside, pronounced themselves in favor of some measure of debt relief for their rural constituents.

The FMLN, meanwhile, was championing a 100% forgiveness of the agrarian debt, a position that began gaining momentum.

Four months ago, the Assembly created a special task force within the Commission on the Economy and Agriculture. It carried out an exhaustive investigation of the extent of the debt crisis and debated different ways of resolving it. In mid- October, it issued its recommendation: full debt relief.

Despite ARENA's best efforts to undermine the opposition's unity with fierce last minute lobbying, all other parties agreed to the slightly watered-down final version that was put forward by the PDC in the full Commission.

Naturally, the Assembly's action is strongly opposed by the finance sector, which continues to issue alarmist predictions of economic collapse unless Calderon vetoes the bill.

Of course, these same financiers were only too happy with their own half billion dollar windfall that resulted from the write-off of the bank debt when the finance system was privatized by ARENA almost a decade ago.

The opposition reaffirmed its belief that erasing the debt would revitalize the agricultural sector, thereby strengthening the economy as a whole.

A disappointed Orlando Arevalo of ARENA bemoaned his party's defeat: "In the end, it is virtually a total cancellation they have done. We are totally in disagreement and we lament the position of the FMLN."

A Legacy of Inequity

Historically, it was the unjust system of land ownership - and the repression the oligarchy unleashed to preserve it - that lay at the root of more than a century of struggle and culminated in twelve years of war.

Measures supposed to address the vastly unequal distribution of land have proven insufficient. The Agrarian Reform of the early 1980's and the Land Transfer Program mandated by the 1992 Peace Accords may have altered the pattern of land ownership, but they did not alter the pattern of rural poverty most suffer.

In exchange for tiny parcels of land, farmers were saddled with mortgages and other loans for production - when they could get them - under extremely unfavorable payment terms.

In a 1996 report, then UN Secretary-General Boutros-Ghali decried "the inadequacy and harshness of the terms of credit" for those allotted land.

Because the accumulated debt burden became essentially unpayable, there were growing fears that large-scale foreclosures would recreate the extreme concentration of land that gave rise to the war.

Agitating for Change

It was persistent agitation and mass action by the agricultural sector that finally succeeded in pushing the land debt to the forefront of the nation's political agenda.

Debt relief has been a rallying cry of a years-long campaign, waged by the National Forum for the Defense and Recuperation of the Agricultural Sector.

Known as the Foro Agropecuario, it focused the anger and frustration of nearly fifty organizations affected by the crisis, enabling it to stage a series of highly visible public demonstrations.

Numerous times in the past couple years, it has mobilized tens of thousands of farmers from across the country to converge upon the capital, on occasion with their tractors or livestock. They demanded again and again that the debt that threatened their very existence be pardoned and a real, sustainable agricultural policy be put into place.

Toward A Sustainable Future?

Still, a comprehensive national policy lies in the future.

"The economic viability of El Salvador depends in great measure," says Oscar Ortiz, "on the possibility of constructing and developing a strong productive base that contributes to improving life for all Salvadorans... The FMLN proposes an economic model that looks upon agriculture as a sector that is vital."

In its view, to revitalize agriculture requires a major investment. Much more must be done: developing accessible credit policies, providing technical assistance and training, upgrading the rural infrastructure and protecting its environment, and using protective tariffs judiciously to regulate competition from multinationals. All of this implies transforming the finance sector to serve agricultural production rather than profit from short term speculative investment.

In short, although important to agri-culture's survival, the debt forgiveness is but a first step in reversing the damage long inflicted upon the economy and the environment in El Salvador's countryside.