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Friday, September 24, 2021
SAN SALVADOR, Jan 5 2007 (IPS) - International financial consortia have already squeezed local shareholders out of banks in El Salvador, and now they are expected to sideline the state, all of which will contribute to widening the gap between rich and poor.
Salvadoran financial groups ended the year with enormous revenues from the sales of most of their bank shares to transnational conglomerates, such as Canada’s Scotiabank, the U.S.’s Citigroup, Bancolombia, and Panama’s Banistmo which was then sold to Hong Kong & Shanghai Banking (HSBC).
The coup de grace was given by Bancolombia, which bought the Banco Agrícola (Agricultural Bank), the last remaining financial group owned by local capital, in December.
While supporters of this sort of transaction argue that they make the banking system more competitive and provide advantages to clients, economists and political scientists consulted by IPS take the view that the Salvadoran state’s weakness and the lack of regulations put the country at risk of “greater dependency and subordination to multinational economic powers.”
Transnational capital “will become a new political class which, although resident abroad, will wield great power, and could turn this Central American country into another banana republic,” said one analyst.
“We are entering a financial scenario with different dynamics, with conglomerates expanding beyond the region,” said Alfonso Goitia, a Bolivian economist living in El Salvador, whose research indicates that the powerful élite, formerly made up of the “agroexport oligarchy,” is now dominated by highly aggressive corporations, while local groups are diversifying.
According to Goitia, this is clear evidence of a decision to prepare themselves to compete in international markets, beyond the borders of Central America.
“Their strategy is to use the free trade agreement with the United States, signed by El Salvador, four other Central American countries and the Dominican Republic (DR-CAFTA), which puts constraints on any action by the state against foreign firms, to make sure that the banking sector cannot be touched by the government,” he said.
Leftwing U.S. intellectual James Petras, in his article on “The Supremacy of Financial Capital” published on rebelion.org, said that the financial sector are able to make unparallelled profits because “banks achieve maximum profitability by enabling the concentration and centralisation of capital, operations they call ‘mergers and acquisitions’.”
This, in effect, will be one of the main topics at the 7th World Social Forum (WSF), which will be held in Nairobi from Jan. 20 to 25.
The WSF is “an open meeting place for groups and movements of civil society that are opposed to neoliberalism and to domination of the world by capital and any form of imperialism, and are committed to building a planetary society directed towards fruitful relationships among Humankind and between it and the Earth,” its Charter of Principles says.
Ángel Ibarra, a member of the “Sinti Techan” Citizen Action Network on Trade and Investment which works to create alternatives to free trade agreements and international investment, told IPS that “this developing world movement combats the concentration of capital and power by transnational corporations, and seeks to give democratic processes an opportunity.”
Sinti Techan proposes a “new architecture” which involves “breaking up the World Bank and the International Monetary Fund (IMF),” as well as other international financial institutions that are “the ideological basis of the whole process of globalisation as it stands today.”
According to Ibarra, who is planning to participate in the forthcoming WSF, subjects for debate in Nairobi will include how to “abolish the World Bank and the IMF, cancel the debt, collect the ecological payments due (arising from the looting of poor countries so that rich nations can live in opulence), and create financial entities with nation-state representation, based on solidarity.”
Salvadoran political scientist Leonel Gómez told IPS that international financial transactions point to the rise of a new political class in El Salvador, whose intended demands on the state are as yet unknown.
However, he was not optimistic about the future because, he emphasised, the profits of these transactions will go abroad, without contributing to local development.
International bankers will “maximise their profits, and it will be worse (for the country) because the new owners have no ties to El Salvador or to the region.” The most worrying thing is that this will lead to “a greater concentration of political power,” added Gómez, who has investigated cases of corruption within the financial system. Goitia, also, said that the farming sector is one of the big losers within the financial system’s new dynamics, since local banks have reduced credits for agriculture and livestock to three percent of the cash available for loans. The vast majority of loans are going to consumption, services and the purchase of homes, that is to say, the most profitable activities.
The expert’s research findings were that “a very small group of the population has practically taken over the assets of the state, because they have such great control over it, while the majority of people have seen their limited incomes progressively reduced.”
The United Nations’ Human Development Report on El Salvador for 2003 provided statistical evidence that the gap between rich and poor had widened in the previous 10 years.
“In 1992, the richest 20 percent of households received 54.5 percent of national income, and the poorest 20 percent received 3.2 percent,” said the report. Ten years later, it added, the wealthiest 20 percent of families “had increased their share of national income to 58.3 percent” and the neediest 20 percent “had their share cut to 2.4 percent.”
Economist Héctor Vidal, a former adviser to the National Association of Private Enterprise, told IPS that at present, “the richest 20 percent of the population amasses 60 percent of the national income, mainly because of the greed of some important players who take a very short term view, without considering the need for equality.”
In the longer term, Goitia claims that El Salvador will become “ungovernable, which will call for a greater degree of authoritarianism unless the powerful realise the need for major changes, which won’t necessarily mean the loss of their huge profits, but rather that some kind of redistribution of their enormous wealth must occur.”
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