STATE DRAFT REPORT ON H.CON.RES. 277, REGARDING SHIFTING ASSISTANCE TO EL SALVADOR FROM SUPPORTING THE WAR EFFORT TO PROMOTING ECONOMIC DEVELOPMENT AND REDUCING HUMAN SUFFERING.

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90M00005R001400010025-4
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 11
• Document Creation Date: December 27, 2016
• Document Release Date: October 17, 2012
• Sequence Number: 25
• Publication Date: August 16, 1988
• Content Type: LETTER

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OFFICE OF CONGRESSIONAL AFFAIRS
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OFFICE OF CONGRESSIONAL AFFAIRS
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Name/Date
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EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
wwsNiNCrow. o.c. soeo~
August 16, 1988
LEGISLATIVE REFERRAL MEMORANDUM
TO: Legislative Lfaison Officer -
National Security Council
Department of Defense
~Cen~r-a3~In~el=~ig_enc~e-~,gency~
Agency for International Development
OCA c758-8f5
SUBJECT: State draft report on H.Con.Res. 277, regarding
shifting assistance to E1 Salvador from supporting the
war effort to promoting economic development and
reducing human suffering.
The Office of Management and Budget requests .the views of your
agency on the above subject before advising on its relationship
to the program of the President, in accordance with OMB Circular
A-19.
A response to this request for your views i"s needed no later than
WEDNESDAY, SEPTEMBER 7, 1988.
Questions should be referred to BIIE TBAII/ANNETTE RO~ONEY
(395-7300), the legislative analyst in this office.
RONALD K. PETERSON FOR
Assistant Director for
Legislative Reference
Enclosures
Cc: J. Eisenhour
B. Sasser
SPECIAL
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? ~ ::~:~- -- unitea Mates Lepartment of Mate
Washington, D. C. 20520
I am pleased to reply to your letter of July 11 to the
Secretary requesting the Department's views on House Concurrent
Resolution 277, titled "Salvadoran Foreign Assistance Reform
Resolution."
The Department strongly objects to this resolution because
it contains serious factual errors and it distorts the true
nature and impact of United States assistance to E1 Salvador.
We believe that implementation of the resolution would not only
diminish the Salvadoran government's ability to defend itself
and its economy from attack, but it would also worsen the very
socio-economic conditions the resolution purportedly seeks to
improve and would encourage efforts of the guerrillas to
overthrow the elected government.
In E1 Salvador we are trying to nurture the establishment of
a democratic system. It is a challenge fraught with obstacles,
but we have witnessed considerable progress:
Five free and fair elections since 1982.
The first democratically-elected president in 50 years.
A new constitution (1983) drafted by an elected
constituent assembly.
Restoration of full political and civil rights.
Full freedom of expression.
The honorable
Dante B. Fascell, Chairman,
Committee on Foreign Affairs,
House of Representatives
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A resurgence of free labor union activity.
Growing civilian control of the military.
-- A dramatic decline in human rights abuses by government
forces (but not by the insurgents).
-- An economic turnaround from an 8.7 percent drop in GDP
in 1980 to an increase of 2.6 percent i.n 1987.
E1 Salvador's economy was one of the strongest in the region
prior to the late 1970's. A variety of factors, not the least
of which was the beginning of a concerted attack on the economy
by E1 Salvador's communist guerrilla groups, conspired to plunge
the country into severe economic decline. According to the
World Bank's 1986 Country Economic Memorandum, E1 Salvador had
made "considerable improvements in social services" during the
two decades prior to 1979. Its economic growth rate during the
1970's, according to the Congressional Research Service (Report
No. 86-88F) averaged five percent a year. Despite these trends,
the country faced considerable problems: limited agricultural
land; severe overpopulation; heavy reliance on a few primary
agricultural exports; and concentration of land and productive
capacity in t-he hands of a few elite families (although the
expansion of the previous two decades had created a thriving
middle class).
Terrorist attacks on the foreign diplomatic and business
communities in the late 1970's and forcible occupations of
plants and businesses by radicalized, insurgent-controlled labor
organizations, served to drive many foreign businesses out of
the country and presaged the heavy capital flight characteristic
of the late 1970's and early 1980's.
The issue of income disparity and control of the country's
economy and government by a privileged few served as the impetus
for the -1979 overthrow of General Humberto Romero and the
civilian-military junta's decree of an extensive land reform
program, nationalization of the domestic banks, and government
control of the marketing of the nation's primary export crops.
These reforms were designed to address the underlying problems
which led some Salvadorans to support the communist insurgency.
However, they were seen as serious threats by both the wealthy
land-owning class and the insurgents themselves, who feared loss
of their raison d'etre. Rather than supporting the junta and
the reforms, the guerrillas joined the oligarchs in violently
attacking both the junta government and the land reform program.
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- 3 -
-Today the insurgents continue their policy of attacking the
government, the economy, and reforms. Their espoused strategy
is to block the establishment of free, democratic institutions
and the functioning of the economy. It is a key part of the
guerrillas' strategy~to prevent the government from meeting the
basic human needs of the people. Municipal officials are
targetted for assassination and murder. The guerrillas destroy
the coffee, cotton, and sugar production, the electrical,
communications and transportation systems, thus interrupting
commercial activities and denying thousands of Salvadorans their
livelihood. We estimate, for example, that since 1980, guerrilla
sabotage of economic infrastructure exceeds $1.5 billion. A
portion -- roughly ten percent -- of United States economic
assistance is used for restoration and repair of power grids,
roads, and. bridges destroyed by the guerrillas, without which
delivery of basic social services and economic activity would be
impossible. United States support for Salvadoran Government
efforts to repair vital economic infrastructure does not prolong
the war as some believe. The guerrillas prolong the war by
refusing to enter into good faith peace negotiations with the
elected government.
The imperative need to defend the country against guerrilla
sabotage and military attacks severely strains the Salvadoran
national budget and drains resources from the provision of
social services to national defense. In response, and with
proper safeguards, United States economic assistance has
stabilized a faltering economy by providing foreign exchange for
critical import requirements and enabled the Salvadoran
government to maintain a safety net of social services for the
country's needy. Competing foreign assistance priorities
worldwide, and the limits of Salvadoran absorptive capacity
prevent us from doing more.
If implemented, the proposed resolution would limit our
flexibility and reduce severely the amount of funding the
government itself could provide for social services and
infrastructure. It would negate the progress made under the
administration of President Jose Napolean Duarte, rather than
enhance prospects for long-term economic growth and
development. I have no doubt-that if the proposed resolution is
passed, the insurgents would applaud this indictment of our
assistance program in E1 Salvador. I believe, however, that the
resolution reflects a fundamental misunderstanding of the
progress made in E1 Salvador and the positive contribution of
United States aid.
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U.S. economic assistance to E1 Salvador is helping to
stabilize an economy drained by the costs of an eight year war
and repeated guerrilla sabotage. Of direct, cash transfer
assistance, approximately two-thirds of the dollar resources has
helped finance imports to maintain production levels, employment
and income opportunities. Related local currencies are
financing social programs and other important goods that
directly benefit the Salvadoran people. A.I.D. programs also
fund economic and social development of the type that the U.S.
Congress expects such as: agrarian reform, health, child
survival, potable water and environmental sanitation, education
and training, as well as improving the administration of
justice, nurturing the democratic labor movement and encouraging
investment and export promotion.
It should be noted that the United States is also helping E1
Salvador rebuild after the devastating October 1986 earthquake
which rocked San Salvador causing more than $1 billion in
damages and claiming 1,000 lives. A.I.D. assistance, approved
overwhelmingly by the United States Congress in the immediate
aftermath, furnished over 40,000 families with loans or building
materials to repair their homes. It provided loans to 2,500
small businessmen to reestablish their firms, and financed the
construction of 700 classrooms, and scores of hospital, health
clinic, market and utility repairs. We are now involved in the
longer-term earthquake reconstruction program, in concert with
several other donors.
In great part owing to U.S. economic assistance, the
Salvadoran people increasingly reject the appeal of the
insurgents, whose numbers have been reduced from 12-13,000
full-time combatants in the early 1980's to 6-7,000 today. The
guerrillas no longer control ~ territory and avoid direct
confrontations with the vastly improved Salvadoran security
forces.
The internally displaced population has been reduced to
about 300,000, and they are supported by the Salvadoran
government and A.I.D. with employment, health, education and
credit programs. As security continues to improve in many
areas, thousands of displaced have been able to return to their
homes with our help.. More than 8,000 former refugees have also
returned from U.N. refugee camps to E1 Salvador since 1985. The
United States will continue to ensure a safety net of social and
employment services for the eligible displaced who cannot return
to their homes.
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In regard to the proposed resolution's many inaccuracies, we
would like to point out the following:
In fiscal year 1987, although still lower than the
government of E1 Salvador's own contribution, the U.S.
contribution was unusually high because of two factors.
First, the level was skewed by a one-time donation of $128
million for earthquake recovery and reconstruction. Second,
and more importantly, the devaluation of the Salvadoran
currency by half in 1986. effectively reduced E1 Salvador's
contribution to the national budget when expressed in
dollars. After taking into account these extraordinary
circumstances, our assistance in FY 1987 was roughly
equivalent to that of previous years: between 54 and 58
percent of E1 Salvador s own budget. This is also the
approximate percentage in FY 1988.
The statement that three times as much U.S. assistance is
used to support the internal war effort and address its
effects as is used to attack the "underlying economic and
social problems that led to the war" is a gross distortion
of reality. Military assistance to the Government of E1
Salvador has consistently represented only 20 to 25 percent
of our total assistance to E1 Salvador. In FY 1987, it was
only 16 percent of the total grants and credits provided by
the U.S. Thus, more than three-fourths of all United States
aid to E1 Salvador is humanitarian or economic. That money
has gone to fund such programs as a human rights training
course for soldiers and policemen, a project to improve the
Salvadoran justice system, agricultural development, and the
safety net of health, education, and employment services
described earlier.
We provide significant resources to the Salvadoran effort to
relieve human suffering, including large contributions to
the United Nations High Commission on Refugees and the
International Committee of the Red Cross. We use
non-governmental and international organizations to the
maximum to distribute such humanitarian assistance.
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The statement that "there are continuing reports of
political imprisonment, killings, disappearances, and
torture in E1 Salvador" appears to be irrelevant to the
resolution. Most killings and disappearances unrelated to
combat are attributable to the guerrillas and criminal
elements, not to government forces. There are very few
credible reports of torture by government authorities in.
recent years. E1 Salvador has not provided for
incarceration under exceptional decrees since early 1987,
and we have seen no evidence of anything which could be
construed as "political" imprisonment since the expiration
of that law. Imprisonments may only be ordered by civilian
judicial authorities in accordance with full due process
guarantees. We can provide more detail to the Committee, if
necessary..
The statement that "executive branch auditors" have found
that (U.S-financed) development projects in E1 Salvador...
are used to "require and reward support for the political
party in power" has no basis in fact. We have seen no audit
to support such a charge. A.I.D. and the Salvadoran
government abide by strict guidelines prohibiting the
distribution of United States-financed economic assistance
by the Salvadoran military. United States economic
assistance is distributed on an apolitical basis.
As for the allegation of corruption, repeated audits by the
Agency for International Development's Office of Inspector
General and by the General Accounting Office reveal no
widespread mismanagement, corruption, or diversion of U.S.
assistance. There have been isolated instances of diversion
or misuse of food aid and local currency resources (owned by
the Government of E1 Salvador) involving relatively small
amounts of money. But these minor diversions have been
detected by our own financial monitoring systems. In each
,case, the Salvadoran government has taken immediate remedial
action.
Ten percent of the people of E1 Salvador do not live in
refugee camps as the resolution alleges. In~ct, the
Archbishopric of San Salvador has been steadily closing its
displaced persons camps because of a lack of need. The only
Catholic Church-run camp still in operation has a population
of only several hundred. Most of the displaced persons
population (estimated at about 300,000 of a total estimated
population of 5.2 million) do not live in camps but are
dispersed, and many have integrated into new communities.
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As mentioned, there is a growing, spontaneous and voluntary
movement of displaced back to their home towns in former
conflict zones. We encourage the displaced to return when
security permits, and we are helping the Salvadoran
government provide them with basic health and education
services, agricultural starter kits and community
restoration activities. Unfortunately, many displaced are
targetted by the guerrillas when they return home.?
There is no evidence that unemployment is even close to 50
percent, as the resolution claims. In 1987, open
unemployment was about 10 percent. One of the primary
causes of unemployment in E1 Salvador is overpopulation. E1?
Salvador is one of the most densely populated countries in
the Hemisphere, but with A.I.D.-financed population
assistance, nearly fifty percent of eligible couples now
practice some form of voluntary contraception.
The statement on inflation and purchasing power is
misleading. After reaching a high~of 32 percent in 1986,
inflation fell to 25 percent in 1987, largely as a result of
monetary and fiscal reforms undertaken by the Salvadoran
government and encouraged by the United States. We project
inflation to drop as low as 18 percent in 1988. Average
real wages in the private sector fell by 11 percent in .1985,
according to the IMF.
Social sector statistics quoted in the resolution distort
the actual situation. We believe for example, that
malnutrition is less then 27 percent as alleged in the
resolution. A nutrition survey is being carried out by the
Pan American Health Organization, and, preliminary results
indicate that the nutritional status of Salvadoran children
is average for Central America, which is remarkable given
the conflict situation.
Infant mortality is only 50 deaths/1,000 live births, not 91
deaths as alleged. The ratio of physicians is very low in
E1 Salvador, but this statistic masks the large number of
trained para-professionals and primary health care workers
providing preventive and curative health care services. The
leading cause of death is intestinal infection, and
A.I.D.-financed projects in rural potable water and
environmental sanitation are focused on this problem.
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., ,
The fact that "little progress has been made in achieving a
political solution to-the conflict" is completely unrelated to
U.S. economic assistance and should not be linked to such
assistance. Rather, the lack of progress is related -- as was
described in extensive detail In our April 1, 1988 Report to the
Congress on the Situation in E1 Salvador -- directly to the
communist guerrillas' intransigence and refusal to incorporate
themselves into the democratic process under the framework of
the Central American Peace Agreement.
I hope your Committee will give full consideration to this
report when evaluating H. Con. Res. 277. We would be happy to
provide briefers from the Department and the Agency for
International Development to discuss this resolution and our
programs with you and your staff, at your convenience.
The Office of Management and Budget advises that from the
standpoint of the Administration's program there is no
objection to the"submission of this report.
Sincerely,
J. Edward Fox,
Assistant Secretary
Legislative Affairs
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