In El Salvador there is an urgent need for a Fiscal Pact. It
is great news that the government, opposition parties and civil
society have entered into dialogue to achieve this pact, which
could solve the current and delicate fiscal situation of the public
treasury; so that in the future it provides an adequate and
sustainable management of public finances.
Due to the difficult fiscal situation that El Salvador is
facing, with high public debt, low economic growth and an
unfavorable perspective if the present conditions continue, the
government and political opposition parties are currently
negotiating a fiscal pact aimed at finding a solution to the fiscal
problem that for several years has afflicted the country and has
now reached a level of significant difficulty to the extent that,
in recent past, at least two of the major risk rating agencies
downgraded the country asserting among other reasons, lack of
understanding between political forces in the country, high level
of public debt and low economic growth.
In the current negotiations, the government has requested the
Legislative Assembly to approve US $ 1,200 million to issue bonds
in the international market, in order to pay the internal debt of
treasury bills adding up to US$900 million and the rest for other
needs. Also, they are requesting a pension reform to adopt a
"mixed" pension system and the increase of the tax
burden. Meanwhile, to vote in favor of this new debt, the
opposition parties have required from the government the issuance
of a Fiscal Responsibility Act that would set certain bounds on
public spending and indebtedness, the adoption of a series of
austerity measures which aim to decrease the level of government
spending, to continue with a privatized pensions management system
and to not increase the tax burden. The Legislative Assembly
approved the issuance of bonds for an amount of US$ 550 million and
simultaneously enacted the Fiscal Responsibility Act; pending of
negotiation is the approval for the issuance of balance of the
requested bonds, for an amount of US$ 650 million.
The International Monetary Fund, to which El Salvador is a
member, has been monitoring the fiscal behavior of the country and
in its report published on July 1st, 2016, states that:
"El Salvador continues to have a significantly lower
growth than neighboring countries within a context of low
investment, high levels of emigration, low competitiveness and
political impasse. Growth in GDP averaged 2% over the period
2000-14, below the regional average rating of Central America,
which is 4½%." This statement is still applicable
to the current situation.
In fact, for many years El Salvador has had a low economic
growth and an increased public spending. This situation has
attempted to be reverted by imposing new taxes, increasing existing
taxes and acquiring a new public debt. That is why in the last
seven years there have been at least 5 tax reforms that have
increased existing taxes or created new ones. Also, there has been
a rise in public, domestic and foreign debt, which has reached
amounts never seen before. In terms of tax income, public revenues
have increased by approximately US$ 1.3 billion from the 2009
collection and the 2016 collection, growing at an average rate of
7% per year, while the economy has grown at an average of 2% per
It is expected that the negotiations between the government and
the opposition have positive results in the near future and
agreements are reached that allow solving the current fiscal crisis
and establishing rules of fiscal discipline to guarantee stability
and sustainability in the administration of the public finances;
all of the above, accompanied by measures that promote economic
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Dicho mecanismo consiste en que el Estado, por medio de una entidad delegante, encomienda a un gestor privado la provisión de bienes, obras y servicios a cambio de una contraprestación por su inversión y trabajo, según las condiciones previstas en el denominado ‘contrato de gestión delegada.
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The PPP Law entered into force in Honduras in September 2010 and its Regulation in February 2011.
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