Despite the rising fiscal deficit, the Legislature has approved a new debt issue of $152 million to finance the construction of prisons and strengthen the fight against crime.
From a statement issued by the Legislative Assembly of El Salvador:
After continuous meetings and bilateral approaches, the Legislature unanimously authorized the Executive Body to issue Credit Securities, worth up to $152 million, which will be used to meet the full funding that is required for the timely implementation of extraordinary measures for public safety, -the same execution which began just over a month ago and whose results are palpable in terms of reducing homicide and extortion -, and other activities related thereto.
The loan proceeds signed with the CABEI will go towards the construction of police stations, purchase of safety equipment and vehicles and improving the capacity of criminal investigation.
From a statement issued by the Presidency of El Salvador:
San Salvador May 24, 2016.- The Central American Bank for Economic Integration (CABEI) and the Government of El Salvador today signed a loan amounting to US $100 million that will facilitate priority investments in infrastructure, basic and specialized police equipment which will increase the coverage of public safety services, reducing crime rates and violence by improving operational capacity and responsiveness.
Despite the increase in extortion payments, 33 drivers died at the hands of criminals in 2013.
Catalino Miranda, representing the Federation of Transport Unions (FECOATRANS) said "this amount of money was paid by the employers of the 10,500 units that exist at the national level." In 2012 it reported $18 million in extortion payments.
Miranda said that for 4 years the rate of transport has not increased despite the raise in fuel, spare parts and the complications of traffic.
The phenomenon affects much of Latin America, whose countries spend on average 8% of their GDP on security costs.
That was the conclusion reached during the forum "Connecting businesses as partners for prosperity with security in the Americas", organized by the Organization of American States (OAS) and the private sector, under the framework of the Guatemala Investment Summit.
A survey of Salvadoran entrepreneurs reveals that during 2012, 66% of their companies or their staff were affected up to twice by extortion, kidnapping and murder.
The Survey ENADE 2013 assesses businesses' perception of the performance of government officials, in public safety, fiscal policy and democratic institutions.
• Type of research: a quantitative descriptive research using the technique of self-administered questionnaire.
The Government will be seeking support from the private sector in order to create an antiextorsion model in order to initiate an attack against those who commit this crime.
"We will have a meeting with them in order to examine the possibility of forming an antiextorsion board. We are looking not only for economic contributions, but collaboration for us to pave the way and create more confidence with entrepreneurs who experience extortion so that they will denounce it" said David Munguia, Minister of Justice and Security.
In El Salvador, the state budget allocated to security is $500 million a year, while the total amount invested by private enterprises for self-protection is $600 million.
"The combined budgets (National Civil Police, the Attorney General's Office and the Armed Forces of El Salvador) total about $500 million and the private sector invests over $600 million annually on security issues," said Jorge Daboub, president of the National Association of Private Enterprise (ANEP).
In the U.S. the number of people over 12 years old who use drugs increased from 5.8% in 1991-93 to 8.9% in 2008. In Mexico the war on drugs has killed over 50,000 people over the past 5 years.
Juan Carlos Hidalgo wrote an article for Nacion.com in February 2012. His approach, denouncing the harmful effects of drug prohibition, was based on a proposal by the President of Guatemala, Otto Perez Molina, to legalize drugs as a means to combat drug trafficking.
Role model: In the Brazilian state of Pernambuco the "Pact for Life" has, in five years, lowered the homicide rate by 42%.
In 2007 Pernambuco had the tragic privilege of being at the top of the list for crime among the Brazil’s states. Due to the ‘Pact for Life’, a safety plan established by Governor Eduardo Henrique Campos at the beginning of his term in that year, the murder rate (59 violent deaths per 100,000 people) fell by 42%.
Mexico is currently making headlines worldwide for its drug violence, but the homicide rate in Central America is now higher than that of the Aztec nation.
Like other analysts, Andres Oppenheimer attributes the drama unfolding in Central America to drug trafficking: "Even in Costa Rica, a country that is often called the Switzerland of Latin America because it is an island of peace and prosperity in the region, there is growing anxiety about the rising tide of drug-related violence."
In El Salvador, where the cost of insecurity is equivalent to 12% of GDP, extortion is the main obstacle to economic development.
Crime affecting the country stops economic development and investment, according to the technical secretary of the Presidency, Alex Segovia.
La Prensa Grafica reported statements by the secretary "In terms of growth, the main obstacle is, in terms of costs to businesses, especially micro, small and medium enterprises, the issue of extortion. In fact extortion is another tax. "
While other Central American countries are preparing taxes to combat insecurity, Nicaragua declares that it is not an appropriate option.
The president of Guatemala, Alvaro Colom, proposed to his peers in the isthmus region the creation of specific tax to combat organized crime and the violence it generates.
Although the proposal didn’t prosper at the meeting of the Council of Finance Ministers and Central Finance, both Costa Rica, El Salvador and Honduras are working on the implementation of a national tax for their own security plans.
The Salvadoran government has proposed a tax to finance public safety, which will be temporary and extraordinary, to be applied during the years 2011, 2012, 2013 and 2014.
According to the mentioned project, taxpayers would include individuals, legal entities, trusts, estates, facto corporations and joint ventures who own property, with or with out domicile in El Salvador- for tax purposes (this includes foreign companies that invest in El Salvador). The individuals include those who are required by law to have formal accounting as well as those who are not required.
Private companies will participate in monitoring the results of the plan.
Following Colombia’s example, where monitoring by the private business sector was instrumental in implementing the security measures proposed by the government, businessmen from El Salvador will monitor the security plan and the tax on large amounts of capital.
The methods used to finance the government's ambitious plan to combat insecurity is the private sector’s main concern, because to apply the tax on large capital (assets over $500 thousand) a significant portion of the country’s business could be affected .