El Salvador: Job Opportunities, Recovery Get Boost from World Bank

July 19, 2010

SAN SALVADOR, July 19, 2010 - The World Bank Group renewed its commitment to help put people first in El Salvador’s economic recovery following a signing ceremony for three loans worth $230 million that will promote job opportunities and provide basic services for thousands of Salvadorians.

Approved last year as part of the $650 million Country Partnership Strategy 2010-12, the financing package will generally support El Salvador as it leaves the effects of the global crisis behind and resumes its path of sustained growth with a social emphasis, said World Bank president Robert B. Zoellick after the ceremony at President Mauricio Funes’ office Casa Presidencial.

“I know that the President and the Minister have worked hard with a fiscal reform to the legislature, and these loans will try to help provide financing for some of those that are poorest and most in need in El Salvador, but also to help build some institutions that will be important for El Salvador's development," said Zoellick. Final approval of the loans by Congress –as mandated by law- is expected soon, added the Bank’s top executive.

El Salvador’s economy has been hard hit by the global financial crisis and it’s slowly getting back on track. Economic activity increased by 1 percent in the first quarter of 2010 and consensus forecasts estimate a 1.2 percent growth for 2010, on account of a significant fall in foreign workers’ remittances and exports to the United States, El Salvador’s main trading partner.

Prior to the crisis, El Salvador had made significant advances on the social and economic fronts. In 2007 it posted a GDP increase of 4.7 percent -the highest in a decade- while managing to reduce poverty levels by almost one third between1991-2002. Extreme poverty was halved in the same period, and impressive progress was also made in social areas—including basic education enrolment, infant and maternal mortality, access to reproductive health services and access to safe water.

The loan package has been designed to prop up key areas of El Salvador’s economic and social tissue as the economy shifts gears to resume growth and continues to spur opportunities for all its citizens. Specifically, the financing deal breaks down as follows:

$100 million ‘Sustaining Social Gains for Economic Recovery Development Policy Loan’, to support the country’s recovery through sound economic and social policies that address the needs of Salvadorians, particularly the most vulnerable, by protecting its income and consumption, and ensuring its access to health services.

$50 million ‘Income Support and Employability Project’ to provide temporary income support to the urban poor under the ‘Programa de Apoyo Temporal al Ingreso’ (PATI) which provides a monthly income transfer to targeted individuals in exchange for their participation in community activities and in training programs.

$80 million ‘Strengthening Local Governments Project’ to buttress local governments, considered critical to provide essential basic services for the people (water and sanitation, electricity, street lightning, public infrastructure) and at the same time create new jobs in all 230 municipalities.

The World Bank has been supporting President Funes’ administration through a combination of instruments, including lending (both budget support and investment), analytical work, and policy dialogue and advice.

Zoellick has arrived in San Salvador to participate in a regional integration summit with Central American heads of state July 19-20 before visiting Mexico July 21-23 for talks with President Felipe Calderon and Mexican officials on a range of topics including the Bank's support for Mexico's growing leadership in the climate change debate.