Newspaper article The Christian Science Monitor

Debt-Relief Gift from US Marks Salvador's New Peace

Newspaper article The Christian Science Monitor

Debt-Relief Gift from US Marks Salvador's New Peace

Article excerpt

TO give El Salvador a symbolic push down the road of economic reconstruction after 12 bitter years of war, the United States is forgiving 75 percent of the $615 million in debt owed to US aid agencies.

This parting gift - to a nation where the US has spent more than $5 billion on military aid and economic assistance attempting to quash a leftist insurgency - came on Tuesday at a show of pomp and solemnity marking the official end to the civil war.

The debt pardon is consistent with the Bush administration's Enterprise for the Americas Initiative, which advocates debt forgiveness to encourage free-trade and market-oriented reforms in Latin America. One US official boasts that the US is saving El Salvador $19.3 million in debt service payments next year. But the fact is that El Salvador was not paying off these loans.

"The short-term impact is insignificant," says economist Alexander Segovia, director of economic and social research at the Research Center for Science and Technology in San Salvador. "The benefits from this 15 to 20 percent reduction in our external debt are longer term." For example, he says it may be easier to secure future loans for reconstruction.

The peace accords signed in January outline the goal of rebuilding the war-ravaged economy. Foreign donors have pledged $800 million to finance the National Reconstruction Plan, but few are rushing to fulfill their promise. To date, the US is the single biggest donor, promising $250 million over the next five years.

But the US contribution is dogged by controversy.

A report released this week charges the US Agency for International Development (USAID) with acting contrary to the peace pact by continuing to disburse development funds with an ideological bias - favoring conservative groups linked to the government over nongovernmental organizations associated with the left. …

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