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 

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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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Argentina Pushes Back

As Argentina’s President Cristina Fernández de Kirchner battles against a recent court decision in New York that ruled in favor of Argentine bond owners, called ‘vulture funds’, the populist South American leader is also filing suit against RR Donnelley, a printing company that recently closed up shop in Buenos Aires and laid off hundreds. The large printing company cited struggles amidst the difficult national economic situation, due in large part to Argentina’s defaulting on its debt for the second time since the new millennium. President Fernández de Kirchner is utilizing an anti-terrorism law to threaten RR Donnelley with criminal charges for attempting to further derail the national economy and incite fear in international markets.

Fernández de Kirchner’s threat against the printing company could appear as desperate, backing the position of those who favor the New York decision and view Fernández de Kirchner’s anger as nothing more than a mechanism to draw popularity by standing against the unpopular US government.

Despite favorable responses from the IMF and international media that criticized the heavy-handed New York court decision, which set Argentina’s default in motion by affirming the claims of vulture funds that held-out during a debt restructuring plan under the presidency of Nestor Kirchner (Fernández de Kirchner’s husband) almost a decade ago, the US Supreme Court upheld the New York decision, thus calling into question the economic spending policies of Kirchner’s administration. Andrés Gaudín addresses the controversy in Argentina in this week's issue of NotiSur. 

High public spending has been known to cause problems for the national economies of countries ruled by populist leaders, often more concerned with pleasing the masses and maintaining their power than financial minutia such as inflation rates. In fact, the populist president of Ecuador, Rafael Correa, has set in motion a group of laws that not only allow him to stay in power indefinitely, but also begin a move away from Ecuadoran dollarization. President Correa has framed this strategy as a way to protect the Ecuadoran people from the control of banks and bankers. Luis Ángel Saavedra discusses the Correa government's new currency policy in this week's issue of NotiSur. However, the new financial code is set up in a way that will allow Correa to more readily increase spending and ‘print’ electronic money. This would create a system of parallel currencies, similar to the convertibility plan under which Argentina has operated since its first default in 2002.

Between Kirchner and Correa, two leaders heavily influenced by South American populists during the second half of the twentieth century, there is a grand attempt evident to stand up against the US and other global powers. Whether or not these positions are motivated by populism, the ‘vulture funds’, in Argentina’s case, and the dependence on the US dollar in Ecuador’s, underline the legitimate struggle of Latin American nations (and other post-colonial, periphery economies for that matter) to overcome what economist Ellen Brown calls “colonization by bankruptcy”.

-Jake Sandler

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A New Corruption-Free Police Unit in Mexico? On Aug. 22, President Enrique Peña Nieto swore in a 5,000-member gendarmerie, an elite federal police force that the administration is touting as a "new model" of corruption-free law enforcement. The new unit, known as the Gendarmería Nacional, will function as a type of SWAT team that will be deployed to specific areas of conflict. Security analysts are skeptical that the new unit will make much of a difference. "The gendarmerie is an aspirin to fight a cancer," Ernesto López Portillo, founder of the Instituto para la Seguridad y la Democracia (Insyde). Read More from Carlos Navarro

Too Many Deputies and Senators in Mexico?  The governing Partido Revolucionario Institucional (PRI) has proposed a public referendum on a proposal to reduce the size of the Chamber of Deputies and Senate in Mexico. Supporters of this plan agree that Congress has become too big and costly to operate, so a reduction in the number of members of the Chamber of Deputies and Senate is warranted. Critics suggest, however, that the PRI’s proposal to reduce the number of at-large seats in each chamber is undemocratic because it would make it difficult for small parties to gain representation in Congress and perhaps give too much power to the party with the majority of seats.  Carlos Navarro tells us whether this initiative will prosper.

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Excuse Me, Dear Sinaloa Congress...You are Suppressing Freedom of the Press

"After weighing the arguments against the new law, we determined that a change was needed.,"said  state legislative leader Jesús Enrique Hernández Chávez. 'We saw the real possibility that the work of the professional news media could be negatively affected." Hernández Chávez acknowledged that the legislature did not look at the Ley Mordaza closely on the day it was approved because it was one of many pieces of legislation that came before the legislature before recess, and legislators did not have time to "notice those kinds of details."

Did Gov. Mario López Valdez manage to slip a piece of legislation by the Sinaloa Congress that would  prohibit  news organizations from recording videos or taking photographs at the scene of a crime or interviewing anyone directly associated with an incident? The legislature claims it was too busy passing several bills before recess to notice that the restrictive measure had been slipped into the legislative agenda. Did Gov. López Valdez and the legislators think that the media in Sinaloa would not react to the directive? There was a loud outcry from a coalition led by the Asociación de Periodistas de Sinaloa, A.C. and other organizations that promote freedom of expression, including the Mexican affiliate of Article 19. The controversy  forced the legislature to review its actions and then promise to rescind the measure during an upcoming special session.

And Gov. López Valdez? He claimed he made a mistake in pushing the initiative, and that it was not his intention to suppress free speech.  Read more about this issue in this week's edition of SourceMex.

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Energy Policy
Energy Policy was very much in the minds of  decision-makers in Mexico and Costa Rica. A key consideration in both countries was how to reduce the cost of electrical power, which could help promote economic growth. In Mexico, the Congress approved the secondary laws to implement energy reforms, which could bring greater investment into development of gas extraction and transportation.  A greater domestic supply of natural gas could reduce the cost of operation for power plants.  The Secretaría de Energía created a handy section on its Web site with specifics of the Energy Reform.

In Costa Rica, a member of the center-left  Frente Amplio (FA) is proposing that the Costa Rican government renew efforts to join the Petrocaribe initiative, which could provide the Central American country with lower-cost fuels via Venezuela.  Read more from George Rodríguez in NotiCen.  Here is the official Petrocaribe Web site..

Illegal Trafficking of Weapons
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Many leaders come to office with high expectations, but at some point during their tenure in office their popularity is eroded because they have failed to meet expectations and/or/campaign promises. Sometimes the problem is that the unity that brought them to office has given way to inflighting within their coalitions. This is what is happening in Chile to President Michelle Bachelet, who took office in March 2014.  Read more from Benjamin Witte-Lebhar in NotiSur.

In Guatemala, President Otto Pérez Molina would like to extend his mandate beyond the end of his term in 2016.  The Guatemalan president has called for a constitutional reform that would allow him to stay in office an additional two years until 2018. The problem is that the the Guatemalan Constitution contains a number of articles that cannot be changed, known as artículos pétreos,which include those establishing a four-year period in office.  Read more from Louisa Reynolds in NotiCen.


-Carlos Navarro

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New Law Sets Specific Rules for Citizen Consultations

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Article from SourceMex, March 20

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On, Feb. 19, President Enrique Peña Nieto hosted his counterparts from the US and Canada for a summit in Toluca, the capital of his native México state. And, as expected, Peña Nieto’s meeting with US President Barack Obama and Canadian Prime Minister Stephen Harper was an uneventful gathering that resulted in no new agreements, at least none that were made public. This has been the case each year since the annual summit was begun under ex-President George W. Bush in 2005 to promote greater economic partnerships and cross-border initiatives. The three North American leaders reportedly did not spend much time on issues that have been a source of friction, including the lack of immigration reform in the US and alleged US spying on Peña Nieto, and Canada’s insistence that visas be required for Mexicans visiting that country. Carlos Navarro Read More

Latest Brazilian Response to U.S. Spying; Mexico Approves New Electoral Reforms; Racial Discrimination in Panama

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Articles in SourceMex, NotiCen and NotiSur for December 11-13

Brazil Responds to U.S. Spying with International Diplomacy and Domestic Lawmaking

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Uruguayan Politics Heats Up 11 Months Before Election

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