Debt-Relief Gift From US Marks Salvador's New Peace

TO give El Salvador a symbolic push down the road of economic reconstruction after 12 bitter years of war, the United States is forgiving 75 percent of the $615 million in debt owed to US aid agencies.

This parting gift - to a nation where the US has spent more than $5 billion on military aid and economic assistance attempting to quash a leftist insurgency - came on Tuesday at a show of pomp and solemnity marking the official end to the civil war.

The debt pardon is consistent with the Bush administration's Enterprise for the Americas Initiative, which advocates debt forgiveness to encourage free-trade and market-oriented reforms in Latin America. One US official boasts that the US is saving El Salvador $19.3 million in debt service payments next year. But the fact is that El Salvador was not paying off these loans.

"The short-term impact is insignificant," says economist Alexander Segovia, director of economic and social research at the Research Center for Science and Technology in San Salvador. "The benefits from this 15 to 20 percent reduction in our external debt are longer term." For example, he says it may be easier to secure future loans for reconstruction.

The peace accords signed in January outline the goal of rebuilding the war-ravaged economy. Foreign donors have pledged $800 million to finance the National Reconstruction Plan, but few are rushing to fulfill their promise. To date, the US is the single biggest donor, promising $250 million over the next five years.

But the US contribution is dogged by controversy.

A report released this week charges the US Agency for International Development (USAID) with acting contrary to the peace pact by continuing to disburse development funds with an ideological bias - favoring conservative groups linked to the government over nongovernmental organizations associated with the left.

USAID "must carry out the most difficult about-face, from an agency that conducted counterinsurgency programs during the war to the agency charged with directing the US reconstruction effort," says the report by the Foreign Aid Monitoring Project, a Washington-based group funded by private foundations.

Several relief and development agencies that have operated independently of the Salvadoran government confirmed receiving only a token amount of funds or attention from USAID.

"Its a serious problem that is an obstacle to reconciliation," Mr. Segovia agrees. "More and more complaints are being lodged."

USAID spokesman Kelly Presta says the complaints are merely cases of sour grapes from groups that do not meet the technical administrative requirements to receive large sums of money. "We have bent over backwards to include a broad spectrum of interests," he says.

The claims of the Foreign Aid Monitoring Project are "patently absurd" Mr. Presta says. He notes a recent US Government Accounting Office (GAO) report on aid to El Salvador gives a "positive and very different assessment" of the situation.

Danielle Yariv, one of the authors of the critical report, says the GAO report went through several revisions and was "narrowly focused" at the request of Republican congressmen. Congressional Democrats are requesting another GAO study.

While Tuesday's ceremony marked the end of the completion of the bulk of the accords - including the complete disarmament of the Farabundo Marti National Liberation Front - much remains to be done. A long list of ex-combatants (including former Salvadoran Army soldiers) are waiting for promised land. Further political reforms and military cuts are required. The Truth Commission formed in the peace pact continues its investigation into human rights violations.