Press Release: Statement by IMF Deputy Managing Director Agustín Carstens at the Conclusion of a Visit to El Salvador
July 8, 2005
International Monetary Fund (IMF) Deputy Managing Director Agustín Carstens made the following statement in San Salvador on July 7, 2005:
"This is my first visit to El Salvador as Deputy Managing Director of the Fund, and it is a great pleasure for me to be here. Today, I had the privilege of meeting with President Elías Antonio Saca and his economic team, including the Technical Secretary to the Presidency Eduardo Zablah and Finance Minister Guillermo López Suárez. I also had very productive meetings with key representatives of Congress, political parties, bankers, entrepreneurs, and civil society. This visit has provided a valuable opportunity for us at the Fund to deepen the dialogue with the Salvadorian authorities.
"El Salvador's strong record of economic reforms since the early 1990s has brought major benefits in terms of macroeconomic stability, improved social conditions, and access to financial markets. The country's commitment to an outward-oriented, market-based development strategy was reaffirmed by its early ratification of the Central America Free Trade Agreement (CAFTA) with the United States, as the first country to have done so. Nevertheless, the economy continues to face important challenges: Growth has lagged relative to other, more dynamic emerging market economies, and activity has been recently further dampened by the recent sharp increase in world oil prices and strong competition from Asia. And, although official dollarization has brought important benefits, it is also a very demanding policy framework that requires very sound supporting macro and structural policies.
"I was reassured by the clear recognition among everybody I met that El Salvador needs to grow faster, reduce poverty further, and lower vulnerabilities against shocks. In particular, there was broad agreement on the need for fiscal consolidation to set to public debt/GDP ratio on a firm downward path while strengthening key social and infrastructure programs. In this regard, I welcomed and encouraged the authorities' efforts to build a broad national consensus on needed reforms to strengthen the revenue effort and contain non-priority spending.
"The government's structural reform agenda to strengthen productivity and competitiveness should help raise El Salvador's growth potential in the context of the official dollarization regime. In particular, I welcomed plans to further strengthen the banking system, broaden the role of the private sector in infrastructure, and introduce reforms to improve the business climate, enhance human capital, and strengthen institutions. Implementation of this agenda will support and complement further trade and financial integration, including under CAFTA."
"Overall, El Salvador has a clear potential to achieve sustained rapid growth and social progress in the years ahead. It is now important that all segments of society work together to implement the reforms needed to realize this potential. I assured the President that the IMF looks forward to continuing its close relationship with El Salvador, and we stand ready to support the country's efforts to meet the challenges ahead."