US-Funded Think Tank Sways New Government

US AID backing leads to Chicago-style economic policies. EL SALVADOR

IF you ask Salvadoran businessmen to name the group that wields the most influence over their new right-wing government, they may offer a startling response: ``Los Chee-cago Boys.'' The sinister-sounding name does not refer to shadowy Chicago gangsters like Al Capone or machine politicians like former Mayor Richard Daley, though Salvadorans will assure you that both types exist here. Rather, it refers to a cadre of conservative economists and businessmen who adhere to the free-market philosophy espoused at the University of Chicago.

With lavish financing from the United States Agency for International Development (AID), this elite group has turned a young private-sector think tank into perhaps the most powerful organization in the country, thus creating a new avenue of US influence over the Salvadoran government.

Not that the US doesn't already play an enormous role in this tiny, war-ravaged nation. Only Israel and Egypt have received more than the $3.5 billion the US has poured into El Salvador over the past nine years. The AID program here is so huge that the AID mission director is considered nearly as influential as the US ambassador.

Even as AID paid lip service to the populist economic program of former President Jos'e Napole'on Duarte, it poured an estimated $100 million over four years beginning in 1984 into the right-wing think tank, known as the Salvadoran Foundation for Social and Economic Development, or FUSADES (foo-sah-des). One of the ``Chicago Boys''' goals: to formulate a market-oriented economic program to remedy the ills they say Duarte's policies caused.

They've made their mark.

Soon after taking office on June 1, President Alfredo Cristiani - himself one of the group's founding members - adopted an economic austerity program lifted straight from FUSADES studies. It cuts government spending, frees price controls, lowers trade barriers, stimulates nontraditional exports, and envisions the privatization of the banks and agrarian reform.

But beyond implementing its ideas, Mr. Cristiani also named four FUSADES members to serve on his Cabinet, one as central bank president, another as head of the rural development commission, and scores of others as undersecretaries or advisers.

``FUSADES has become the breeding ground for technocrats in the Cristiani administration,'' says one Latin American development worker here. ``It's played a very important role. The US is probably as surprised as anybody by the way [FUSADES] has developed.''

Few US policymakers were optimistic when Cristiani took office.

The resurgence of his right-wing party, the Nationalist Republican Alliance (ARENA), stirred fears of death squads, greater social polarization, and an intensified civil war. Even supporters felt that the US would be unable to control the fiercely nationalistic right.

BUT in the seven-story tower that houses AID here, US officials were ecstatic at Cristiani's rise. After funneling in more than $2 billion to hold together the crumbling economy over nine years, they finally had a government eager to implement their policies. Says FUSADES economist Miguel Araujo: ``AID put its eggs in the right basket for once.''

Lots of eggs. According to one estimate, AID pumped about $67 million into FUSADES between 1985 and 1987, two-thirds of all the money it gives to nongovernmental organizations - while just 9 percent went to private groups assisting land reform or rural development. That's not counting more than $1 billion from AID in Economic Support Funds since 1980, which enables the private sector to finance purchases of production-related imports.

AID supplies about 90 percent of the entire FUSADES budget, funding such things as an export-promotion program, an industrial stabilization project, its own lending institution, even a Miami branch office. To top it off, the US is footing most of the bill to construct a new FUSADES headquarters - just one block from the site of the future US Embassy.

Such a close alliance bewilders some observers, who say it undermined Duarte, the US's strongest Central American ally, whose party lost the March presidential elections.

One former Salvadoran official asks, ``How come the US government, which supposedly was cooperating with Duarte, gave money to an organization ideologically opposed to the Salvadoran government line?''

The support for FUSADES was due to more than frustration with what AID saw as Duarte's bull-headed policies. It also reflected a desire to moderate the far right, known as much for its rapacious capitalism as its reputed death squads.

``The US thought that if they developed this thing, they might be able to pull ARENA away from the extreme right,'' says one Western diplomat. ``But they were also looking for a way to influence any future government.''

FUSADES did not begin as an unabashed bastion of ARENA sympathy. The 240 members who founded the institution in 1983 include several prominent Christian Democrats. But as AID officials became more exasperated each time Duarte ignored their advice and imposed his own populist policies, they saw a need to develop a clear-cut alternative.

Through FUSADES, the US two years ago hired prominent University of Chicago economist Arnold Harberger as a consultant. Hoping to replicate Chile's remarkable economic turnaround, Mr. Harberger and his team of Chilean and Argentinian advisers have visited El Salvador often.

``The decision to bring Harberger in marks the point when FUSADES, which was critical but cooperative with the government, became a think tank with a new agenda for the next government,'' a European diplomat says. ``By financing FUSADES, the US was trying to maintain the fiction of neutrality while reaching out to the right.''

In some ways, FUSADES has served as buffer to the radical right. Mr. Araujo, the economist, points out that FUSADES has developed social programs that were once anathema to Salvadoran businessmen. He says ``a national conscience has been generated.''

Nevertheless, FUSADES has also generated controversy. Some critics, dubbing it the ``Billionaire Boys' Club,'' say that the US is merely financing rich Salvadoran businessmen who are unwilling to risk their own fortunes.

``If we take a strict view of the people who receive money from AID, then yes, this is true,'' says Araujo. ``But if you take a broader view, isn't it helpful for the entire nation to generate jobs and a new economic program?''

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