El Salvador: good money, bad money

WHAT President Mauricio Funes wants to reduce the national deficit of nearly $200 million, mainly by raising personal and corporate taxes, with the legislative support of ex President Antonio Saca and his GANA party.

WHY A socialist, Funes believes in strengthening the public sector, while Saca, formerly the leader of the right-leaning ARENA party, wants to please the ruling Farabundo Martí National Liberation Front (FMLN in Spanish), so that it doesn’t investigate alleged corruption during his administration.

WHAT’S NEXT A coalition of the FMLN and GANA ensures that El Salvador's Legislative Assembly approves Funes' proposal, Unless the Salvadoran public sector becomes more productive, however, a heavier tax burden could cause a downward spiral in the economy, weakening the private sector, which as a result pays fewer taxes.

For more information, please contact Esteban Alvarez at [email protected]