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El Salvador Economic Reform and Civil Society

Latin America and the Caribbean USAID 1997 2002

For five years, DevTech worked closely with USAID to assist the Salvadoran public and private sectors to design, discuss, and analyze economic policy reform proposals in three areas:

  • Decentralization and Local Governance;
  • Public Financial Management; and
  • Trade and Competitiveness.

Work orders were issued under the contract to perform economic studies, prepare and/or arrange for the preparation of seminars on economic topics, conduct in-country training, and provide related technical assistance to private- and public-sector entities. DevTech completed 31 work orders and prepared several significant technical publications, highlighted below.

Decentralization and Local Governance

Fiscal Reform: Reviewed the overall public finances of El Salvador. DevTech assistance focused on how the transfer system (FODES – Fondo de Desarrollo Económico Social) addressed horizontal inequality, its impact on local revenue effort, and the slow implementation/usage rate by local governments. Recommendations were made to improve the incentive aspects to encourage local revenue effort and to improve the programming of transfers to better meet implementation cycles.

Municipal Tax Reform: Provided technical assistance and advisory services to the Municipal Affairs Committee of the Legislative Assembly and worked closely with the Mayors’ organization, COMURES, in conducting a dialogue with the private sector.

Municipal Finance and Asset Tax:

  • Assisted the municipalities of San Salvador and Sonsonate in the analysis of options for private sector participation in municipal infrastructure investment.
  • Assisted the municipal government of San Salvador in the proposal and defense of an important reform of its asset tax.
  • Assisted the municipalities of San Salvador with analytical and legal issues related to the first bond issuance.

Public Financial Management:

  • Established the Office of Budget Analysis and Oversight in the Legislative Assembly and trained the staff.
  • Provided advisory assistance to the Ministry of Hacienda on tax administration.
  • Reported on use of computerized data systems, tax administration, tax personnel, tax code, and other non-policy aspects of the tax system.

Trade and Competitiveness/Trade

Capacity Building:

  • Strengthened the institutional capacity of the Ministry of Economy Office of Export Market Promotion to assist local El Salvador clients in expanding their sales into international markets. * Technical advisory assistance such as gathering market and product intelligence, assessments of how to better support the national competitive program.

Competition:

  • In the aftermath of the earthquakes of early 2001, a DevTech team conducted an assessment of how to reactivate the economy, including examining the expansion of credit for housing, enterprises, and other financing instruments; evaluating priority actions to stimulate the growth of enterprises, particularly micro, small, and medium sized enterprises using non-credit instruments
  • Assisted the Mission’s efforts to clarify performance indicators in education, micro-finance, and policy.
  • Supported the USAID Mission in El Salvador in crafting an updated agriculture and rural development assistance strategy for the country.

Related Publications: