Private Sector, Infrastructure and Continued Reforms Key to Jumpstarting Growth

Private sector leadership, infrastructure development and productivity-enhancing reforms are essential to kick-start growth in El Salvador, participants of the forum “Building Opportunities for Employment, Investment, and Growth” in San Salvador said today at its conclusion. The forum, which brought together El Salvador’s top policymakers, parliamentarians across the political spectrum, private sector representatives, academics, and officials from international financial institutions, was organized by the government of El Salvador in collaboration with the International Monetary Fund (IMF), the Inter-American Development Bank (IDB), and the World Bank.

“The Forum offered a great opportunity for a broad range of Salvadoran public and private sector representatives and key international financial institutions (IFIs) to discuss ways to overcome growth bottlenecks, lower social inequality, and achieve stable public finances” said Oscar Ortiz, Vice-President of El Salvador.

Alejandro Werner, Director of the Western Hemisphere Department at the IMF noted that “El Salvador should take advantage of the current external conditions, with the solid recovery in the United States, low oil prices, and favorable interest rates, to advance structural reforms to stimulate inclusive growth”.  

World Bank Vice President for Latin America and the Caribbean, Jorge Familiar declared being “optimistic that the dialogue that began today will help generate the necessary consensus to jump-start economic growth for the benefit of all Salvadoran citizens”.

As expressed by Santiago Levy, Vice-President for Sectors and Knowledge of the IDB, “a sustainable pensions system fosters growth and employment, and at the same time it contributes to lowering inequality and reducing informality. There is consensus about the need to correct the imbalances which affect the pensions system, while promoting an open dialogue about the necessary reforms and formulating a balanced, quick, equitable, and sustainable solution”.

The IMF, the World Bank, and the IDB reiterated their commitment to working together with El Salvador in many of the initiatives highlighted during the forum.

The summary conclusions from the Forum included:

• The private sector must take a lead role in investment, employment, and growth while the government should do its part by improving the ease of doing business and upgrading infrastructure.

• A vibrant export sector is key to sustainable growth. El Salvador should rely on its comparative advantages to reach its full potential. The participants highlighted the importance of an education system that promotes skill-based products and services.

• Forum participants noted that in order to achieve private sector-led growth, it is necessary to cut red-tape and improve the business climate and access to financing, especially for small and medium-sized businesses.

• Reducing crime and violence would help create a virtuous cycle of lower costs of doing business and higher investment and employment. This also requires allocation of proper budget resources. Participants also noted that a comprehensive strategy that combines effective sanctions with educational and employment opportunities for the young would lower crime and violence.

• Infrastructure upgrades can also anchor an increase in the growth potential, promote competitiveness, lower the costs of transportation and energy, and increase the supply of productive services. Additionally, well-designed Public-Private Partnerships can expand investment opportunities and reduce potential risks.    

•In this context, participants also highlighted that regaining fiscal sustainability would support long-term growth and noted that, for this effort to be successful, it will be critical to maintain a continuous and open dialogue between the government and the Salvadoran society.