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REFORMS IN EL SALVADOR ARE WORKING.

El Salvador occupies a unique position in Central America in spite of its geographic size slightly less than the State of Massachusetts says the CIA's World Factbook and small population 6.7-million (about the size of metro Bogota). It's a small population when compared with the whole of Latin America. But even though El Salvador is the smallest, geographically, of the 7 Central American countries, it has the third biggest population. And it's a close third to Honduras with 7.0-million. (Guatemala is number one with 12.7-million.) More important for this discussion, though, is the fact that it the most industrialized of the Central American countries, according to the British Broadcasting Corporation (BBC). And it is recovering rapidly from the ill effects of its bitter civil war (1980-1992) and natural disasters including Hurricane Mitch (1998) and a series of earthquakes (2001) that left more than a million people homeless, (also from the BBC), nearly 17 percent of the population. At the end of January, 2005, the International Monetary Fund (IMF) concluded a series of meetings between the IMF's Executive Board and the Government of El Salvador. Significantly for El Salvador's consumers, the IMF concluded that dollarization, instituted in 2001, has been a success for the economy. Dollarization has imposed stability, reduced interest rates and dampened inflation, which is expected to end the year having grown only 2.8 percent. (The U. S. dollar is used in transactions along with the local currency, the colon.)

The IMF also noted that during the past decade the Government instituted several reforms: The opening of Salvadorian markets; privatization; changes in tax policy; civil service reform, and pension reform. The Government that came to power in 2004 has reinvigorated the reform effort and included a broad social agenda as well.

Nonetheless, GDP has been anemic, and is likely to end the year having grown 2.5 percent. High oil prices and ongoing costs from the recent natural disasters are to blame. In spite of some limitations, signs point to growth in consumer markets.
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Publication:Market Latin America
Geographic Code:1U1MA
Date:Mar 1, 2005
Words:339
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