Friday, September 12, 2014

The Debate over Tax Reform in El Salvador

Street vendor in El Salvador (Wikimedia Commons)O
Economists, opposition lawmakers and San Salvador's conservative conservative daily El Diario de Hoy have expressed strong objections to the new tax reform approved in El Salvador this summer.

A central goal of the the reform promoted by Salvadoran President Salvador Sánchez Cerén is to increase taxes on the wealthier contributors to provide the government with new revenues to boost expenditures on social services, education and community facilities. Th reform is is projected to raise the government an additional US$160 million annually. Read more from Benjamin Witte-Lebhar in this week's issue of NotiCen. (This move to boost taxes on wealthier contributors to allow the government to boost spending on social programs is strikingly similar to the argument that Mexican President Enrique Pena Nieto made when pushing his tax-reform plan in Mexico at the end of 2013).

Critics contend the tax hike will not only affect the wealthier taxpayers and the larger businesses, but small and medium-sized ones as well, and will effectually diminish their ability to grow and hire more workers. This, in turn, would create a negative ‘trickle-down’ effect that will hit even the poorest sectors of the economy. El Diario de Hoy, for example, argues in an editorial that that the pupuseras who sell stuffed tortillas on street corners and the minuteros (who peddle cell phone minutes) on the streets as well as the small store owners would be the ones paying for the nation’s new tax plan. The bottom line, says the editorial, is that  that, despite the popular belief that this tax reform was created so “those who earn the most will pay the most," the new system will have an effect on everyone, not just the wealthy elite.

Palacio Nacional, San Salvador
This argument is a classic and well-worn debate over the benefits of supply-side economics, and has served as a fundamental roadblock to socialist reform throughout Latin America, and elsewhere, for decades. President Sánchez Cerén, in contrast, refers to these opposing opinions as untruthful tactics to rally the public against the reform. 

There is also a debate about managing the economy in Panama, where conservative president Juan Carlos Varela is facing criticism from other conservative politicians for pushing through a measure to control food prices. Despite an inflation crisis that has driven the price of basic foodstuffs up more than 30%, members of the Cambio Democrático (former President Ricardo Martinelli's party) have hesitated to support the measure, citing possible side effects that include food shortages, black markets and even rioting and destruction of property. Read more from Louisa Reynolds in this week's edition of NotiCen.

  -Jake Sandler 

Also in LADB this week....
A New Airport for Mexico City :President Enrique Peña Nieto has resurrected a proposal to build a new airport for Mexico City, offering a much larger project than the plan that ex-President Vicente Fox proposed in 2001. In announcing plans for the new airport, Peña Nieto said the existing facility had reached its operating capacity, resulting in bottlenecks in Mexico’s air traffic. The AICM, the second-busiest airport in Latin America, recorded more than 389,000 takeoffs and landings in 2013, surpassing its stated capacity of 340,000.  Read more from Carlos Navarro in this week's issue of SourceMex.

Changes to Ecuador's Constitution: The administration of President Rafael Correa is calling for a series of constitutional reforms based on the argument that the Ecuadoran Constitution—which has been hailed by many for its strong emphasis on human rights and was developed in a constituent assembly and approved by a large majority in a national referendum—is preventing the government from ruling and thus jeopardizes the welfare of the people. Part of the problem, according to the administration, is that constitutional guarantees designed to protect citizens' rights are being used abusively to boycott government plans.  Luis Ángel Saavedra tells us more in this week's edition of NotiSur

A Third Term for President Evo Morales in Bolivia?: For the first time in more than a century, Bolivians are expected to elect a president for the third-consecutive time; indications are that Evo Morales will be re-elected for a term that would keep him in office until 2019 Morales takes credit for important achievements during his eight years as the country’s leader, and his achievements have been recognized by international organizations and even some of his domestic enemies. Meanwhile, his opposition—mainly right-wing and ultraright groups—has failed to build either strong leaders or a united program.  Read more from Andrés Gaudín in this week's edition of NotiSur.

Mexican Union Leader Wins Court Victory:Less than a month after Interpol issued an order for his arrest, exiled Mexican labor leader Napoleón Gómez Urrutia won a victory in the Mexican courts that effectively negates the directive of the international law-enforcement agency .This week's edition of SourceMex expands on this development.

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