The United States Agency for International Development is one of the most powerful institutions in this small Central American country. AID administrator M. Peter McPherson says the agency provides ''humanitarian assistance'' to El Salvador. But in fact its role here is far greater.
Without AID's money and technical assistance, the Salvadorean economy would almost certainly collapse.
This week President Reagan's special commission on Central America is expected to recommend a quadrupling of US economic aid in the region, with a sizable chunk of the projected $8 billion outlay going to El Salvador.
Some here suggest that AID's ''humanitarian'' funds for El Salvador are part of this country's war effort - that they are as crucial to the battle against leftist guerrillas as the shiploads of US armaments that keep the nation's military going.
Besides propping up the private business sector and engaging in such clear humanitarian work as feeding people displaced by war, AID is also involved in programs such as population control - including the sterilization of thousands of women - programs that critics say alter this nation's social priorities.
Among those who question the use of at least some of the funds are the Roman Catholic Church and several private relief organizations. Some of these groups refuse to have anything to do with AID.
A series of articles beginning today in the Monitor will attempt to assess just how great is the political and social impact of AID's programs in El Salvador.
In fiscal year 1983 El Salvador received $244 million in economic support and recipient of AID funds. Only Israel and Egypt get more US AID money.
With these funds, which account for 25 to 30 percent of the Salvadorean government budget, the US is promoting four main objectives here:
1. Economic stabilization, including reduction of El Salvador's 40 to 50 percent unemployment rate.
2. Humanitarian assistance for persons displaced by the four-year-old war between the Army and leftist guerrillas.
3. Expansion of population and family planning services.
4. An agrarian reform program to give peasants a stake in the land they have worked for oligarchic landowners.
AID officials claim the US has achieved a measure of success on the economic front here. The Salvadorean gross national product, which fell 25 percent over the past two years, is expected to drop only 3 or 4 percent in 1983 and to stabilize at zero in 1984, says AID administrator McPherson.
AID poured 70 percent of its Economic Support Fund money into that economic objective. And most of those funds ($120 million of the ESF total of $140 million) were funneled into El Salvador's private sector to keep it alive. The Salvadorean economy has experienced a capital flight of $800 million to billion since the conflict began. Well over 200 businesses have shut their doors. Export earnings dropped $94 million in 1982, and AID officials expect a similar drop will be recorded for 1983. The AID funds, given to hundreds of businesses, allow the enterprises to make commercial purchases from the US.
Another effort in the economic sphere is an extensive AID plan to rebuild El Salvador's war-ravaged infrastructure. The country has suffered heavy guerrilla sabotage of its industry, agricultural production, and transport systems. As much as $1 billion worth of damage has been done since the war broke out. AID has supplied $14.6 million in equipment and funds to replace blown bridges, destroyed electrical towers, damaged water purification systems, and downed telephone lines.
US President Ronald Reagan told a joint session of Congress last April that ''by a margin of 2 to 1,'' aid to Central America is ''economic now, not military.'' He said that 77 cents of every dollar spent in the region in the past year purchased ''food, fertilizer, and other essentials for economic growth and development.''
But he did not say that a large amount of this aid that the administration classifies as purely economic comes from the ESF, a fund that Congress has classified as security assistance.
The ESF is widely credited with keeping the private sector alive, but it is highly controversial. The fund cost the Reagan administration $3 billion this year worldwide. According to an AID publication, it is used to promote economic and political stability in areas where the United States has ''special security or foreign policy objectives.'' But critics say the ESF has not been used in El Salvador for what is traditionally considered as development since it helps prop up an economic sector that would have collapsed because of the war.
ESF money is also being used in the Salvadorean electoral process. Some of it has gone toward the purchase of a special tamper-proof computer to tabulate votes.
The AID funds to support agrarian reform consist of a $2 million grant to the American Institute for Federated Labor Development to help unionize the members of the government cooperatives, more than $24 million in credit to farm cooperatives, and $9 million in training, management, and research on 276 farms.
About $27 million, or 11 percent of the 1983 budget, is used to provide assistance to the 267,025 displaced persons in El Salvador and what AID terms a ''a revitalization of the health sector.''
Next: Is El Salvador using US economic aid in the war?