The reformer.

Juan Josh Daboub, El Salvador's Finance Minister, is not one to take a perceived insult lightly. A New York risk-ratings service had graded El Salvador lower in rule of law than Cuba--so he went to their offices to demand a change. He got it. Risk ratings matter. El Salvador is campaigning to convince the investment world that its years of war chaos are well behind it and that the country not only needs jobs but is a good place to put them. Daboub talks with LATIN TRADE Editor-in-Chief Greg Brown about turning it all around.

How have things changed in your country?

El Salvador, as you know, ended its armed conflicts and began a new history in which a completely new institutionality has been created. Markets are opening. Sectors are being privatized. New mechanisms are being created to assure us that markets work and there has been a tremendous social investment.... In fact, in 10 years, we have reduced poverty by 22%. While Argentina and Venezuela are headed in a different direction for various reasons, El Salvador is heading in the right direction. We have reduced unemployment from 13.5% to 6.5%, one of the lowest levels in Latin America, and that hasn't happened by chance. Nothing happens by luck. It happens because of conviction.

Reforming an entire country takes some convincing.

I'll give you a very simple example. The Ministry of Public Works at one point had 14,000 employees. For every dollar it spent, 83 cents was spent on personnel costs and 17 cents on public works. That was in '98 or '99, only a few years ago. In 2001, we transformed the Ministry of Public Works into a private administrator. Now, it has only 500 people ... And with S00 people we have invested US$1 billion in three years. And of that $1 billion, of each dollar, 93 cents was spent on highways and just 7 cents was spent on administrative costs.

It's always fascinating to watch countries try to replicate the Chilean model.

Since you know Chile well, I'll mention two things: One, Chile made its reforms under a dictatorship. We are making our reforms as a democracy. It's much harder to transform a democratic country, but it's much more sustainable over time. El Salvador, according to the World Economic Forum, is No. 3 [among Latin American countries] on the global competitiveness index, following only Chile, which is No. 28, Mexico, which is No.47 and then El Salvador, at No.48. The Wall Street Journal put El Salvador at second in freedom after Chile [among Latin American countries] and last year we were first. What I mean to say is, El Salvador is in the same neighborhood as Chile.

What is the source of El Salvador's recent crime problems?

During the war, a lot of fathers left the country. The father went to Los Angeles. The mother stayed in El Salvador and the son went to Los Angeles or stayed in El Salvador. This destruction of homes, as well as influences from outside [El Salvador], created an ideal environment for the growth of criminal gangs. Today, according to some studies, there are 30,000 or 40,000 gang members in El Salvador ... In order to understand the size of it, these 30,000 or 40,000 gang members together are more than the armed forces and police combined. So, it's a national problem that has repercussions and influences things at the international level. Honduras has 75,000 gang members. Guatemala has a similar problem. Southern Mexico has a similar problem, as do Washington, D.C. and Los Angeles, California.

How do you balance public interest and the civil rights of gang members?

There are two universes. There are gangs that form in schools and, at the most, get involved in fights or rock throwing. This is very different from the gangs we're talking about. For the first group, we have a complete program to create values on the sports field, with soccer and basketball matches between neighborhoods, artistic and cultural events that we hope will fill the free time young people have, now occupied by gangs. But for those that break the law, that murder, these people, sadly, have only the choice of ending up in jail for longest period of time possible. Our obligation, if we have only so much in resources to invest in rehabilitation, is to rehabilitate the families and victims and not to rehabilitate gang members.