A proposal has been made that the municipalities seek financing by securitizing their income, requiring information on their financial capacity.
From a press release issued by the Legislative Assembly of El Salvador:
The Finance Commission today launched the consultation phase for a draft amendment to the Law on Securitization of Assets, to hear the views and comments of the leaders of the Superintendency of the Financial System (SSF), the Central Reserve Bank (BCR), the Stock Exchange of El Salvador (BVES), and institutions specializing in asset securitization HENCORP Valores, S.A. and RICORP Titularizadora S. A.
According to the BCR, 2012 closed with economic growth of between 1.3% and 1.6%, having been affected by the bad international situation and domestic problems.
Carlos Acevedo, president of the Central Reserve Bank of El Salvador, spoke with the newspaper La Prensa Grafica on the prospects for economic growth in the country.
Spain's Royal Academy defines a "White Elephant" as something that is "expensive to maintain and has no useful purpose". Like the Port of La Union.
Without ever taking off to become the port that was promised, La Union can now add to its dismal history the increased cost of funding due to the differential between the dollar – the currency in which the meager income of the port is received - and the Japanese yen, the currency in which the loan was negotiated with the Japanese Bank for International Cooperation (JBIC) to build it.
An Argentine expert predicts that if the Salvadoran economy abandons the dollar it would trigger serious social upheaval ... and Argentines know all about that...
An article in Elsalvador.com by Eduardo Levy Yeyati, former official of the International Monetary Fund (IMF) and the World Bank, and "who has conducted research on the causes and consequences of dollarization, the behavior of markets in times of crisis and of monetary and exchange rate regimes, said a freeze on bank withdrawals in the country would be accompanied by a pronounced economic downturn, which would be associated with an imbalance in the payment system, ie, lack of liquidity. "
The IMF has temporarily suspended the availability of emergency funds for El Salvador because it has not met agreed targets, having exceeded government spending.
The IMF reported that the Salvadoran government may not use a precautionary loan (SBA) of $750 million, said Carlos Acevedo, president of Banco Central de Reserva (BCR).
The Fund based its decision on the breach of public spending targets, since the balance of public finances was one of the requirements for keeping the SBA for three years.
In June, the national debt reached $11,900 million and although it remains stable, it might become unsustainable.
Several private sector analysts believe that the current level of debt, equivalent to half the Gross Domestic Product (GDP) could become unmanageable if fiscal measures are not taken to control its growth.
To cope with the debt, the country needs to strengthen its economic activity and implement fiscal reforms to realign the distribution of spending and taxes.
This was stated by Carlos Acevedo, president of the Central Bank, in response to a proposal to return to the Salvadoran colón.
Acevedo added that President Mauricio Funes committed to keeping the country dollarized in his presidential campaign, reaffirming it many times afterwards.
His statements were in response to an essay by economist Carlos Glower, who presented his arguments in favor of returning to the colón.
In the next $800 million Eurobond issue, domestic investors will be able to participate in the primary market.
The public offering will be carried out in the Luxembourg Exchange, detailed Carlos Cácers, Treasury Minister.
"In previous offerings, 100% of the issue was immediately bought by investment banks and sold 24 to 48 hours later to individual investors, most of them Salvadorans, with 1%-2% surcharge", explained Cáceres to newspaper Elsalvador.com.
Approved loans fell 6.5% in the past 12 months (August 08 - August 09); loans for the productive sector where the most affected.
Experts agree in blaming the global economic crisis for this reduction in credit.
The President of the Central Bank explained that "...banks just reflects 'the economic deceleration' ... It is a lack of confidence in an economic recovery capable of reactivating demand, and payment capacity", published local newspaper Elsalvador.com.
Seven investment banks are competing to underwrite next month's issue.
BCR, the central bank of El Salvador, will announce the underwriter next month, while the bonds sale will begin in the second half of October.
Carlos Acevedo, president of BCR, commented: "There is high demand for Salvadoran debt. Investors are eager to purchase bonds from El Salvador; this is good news and a positive signal".
The Eurobond issue in international markets will be executed no later than October 2009.
With this issue, the first since April 2006, the government intends to finance the Global Anti Crisis Plan and finance the State's budget.
Carlos Acevedo, president of the Central Bank, gave details about the issue to newspaper La Prensa Gráfica: "... the 7-year securities will pay an interest rate between 7% and 8%.
Federico Colorado, president of the National Association of Private Enterprise, welcomed the appointments announced by the president-elect.
Economist Alexander Segovia will be technical secretary to the presidency, legislator Héctor Dada Hirezi will be Minister of the Economy, economist Carlos Cáceres will be Finance Minister and economist Carlos Acevedo will be president of the Central Bank.
The government of El Salvador is proposing to increase the level of public investment.
The nation's fiscal situation is one of the biggest problems the new governemt will face, according to an economic analysis done by Carlos Acevedo, an economist from the United Nations Development Program (UNDP); Roberto Rubio, executive director of the National Foundation for Development; and economist Alex Segovia.