El Salvador's current constitution came into force in December 1983. The constitution describes the country as a representative democracy with a president and vice-president, who are elected for a single 5-year term. The executive branch is responsible for the budget, ministries, security apparatus and foreign affairs. The legislature, consisting of 84 seats, is elected every three years (most recently in March 2003). The National Congress controls taxation and ratifies treaties signed by the executive. The highest judicial body is the Supreme Court, whose members are selected by the legislature for a fixed term. Elections are organised by the independent Tribunal Supremo Electoral.
Two parties dominate the political scene in El Salvador: the ARENA (Alianza Republicana Nacionalista) and the FMLN (Frente Farabundo Martí para la Liberación Nacional). ARENA and PCN (Partido de Conciliación Nacional) represent the right, the FMLN the left. The centre is formed by the CDU (Centro Democrático Unido)-PDC (Partido Demócrata Cristiano) coalition.
The presidential and parliamentary elections are separate in El Salvador. The last parliamentary elections took place in 2003, the last presidential elections in March 2004. A political party has to reach an electoral threshold of 3% of the votes in the presidential elections in order not to lose its registration as a political party. The PDC, CDU and PCN parties failed to reach this threshold on 21 March. The Constitutional Court declared an appeal on this issue admissible last June, so the dissolution of these three parties has been postponed for the time being.
ARENA has consistently been the largest party in El Salvador in presidential elections over the past decades. In recent years the FMLN has been growing. In the 2003 parliamentary elections the FMLN won 31 seats, making it the largest party in parliament, as ARENA won 29 seats at the time. Causes for the FMLN's growth are persistent poverty and the various corruption scandals in which ARENA politicians have been involved. The former guerrilla organisation has also gained importance in most major cities. The capital San Salvador, for example, has an FMLN mayor. However, ARENA won the presidential elections again in March 2004.
Although the FMLN party is the largest in parliament, with 31 seats, it only has a blocking minority in case a qualified majority is needed. ARENA and the 15 remaining PCN members together have a simple majority, necessary to pass bills. (One PCN member switched to ARENA after the March 2004 presidential election in which the PCN was in danger of disappearing, so that ARENA now has 30 seats). In the case of qualified majority voting (international loans, appointments, constitutional amendments), ARENA and FMLN need each other.
In the presidential elections of 21 March 2004, ARENA won with almost 58% of the votes. It entered its fourth consecutive term as ruling party. Because they did not reach the 3% electoral threshold in the 2004 presidential elections, the CDU-PDC and PCN parties lose their official registration as political parties. However, according to the Elections Act, the MPs belonging to these parties may still serve out their period in parliament. In any case, they will stay on as independent members, as long as they do not join one of the two remaining officially registered parties, but for the time being they will continue to function de facto as parliamentary parties.
Public criticism of the government's performance in general and after the 2001 earthquakes in particular has forced the ARENA government to undertake reforms. Former President Flores announced an "economic reactivation package". New jobs, housing and reconstruction were key elements of the plan. A greater role was also given to decentralisation. The new President, Antonio Saca, is expected to follow the same line as his predecessor, but with a different style. Saca has sought rapprochement with the opposition and is open to dialogue.
The current political situation is described in the history section.
Fiscal policy was difficult to implement due to the earthquakes and problems in collecting taxes. In early 2003, the government increased its revenues by increasing the VAT, the import tax and the income tax.
Economically speaking, El Salvador is the most open country in Central America. Its monetary and macro-economic situation is considered one of the most stable in the region. Economic reforms have been carried out very actively in El Salvador and many sectors have been privatised. However, the security situation and the large income differences in the country remain an impediment to future economic growth.
Due to the global recession, real GDP declined in 2009 and economic growth has remained low since, averaging less than 2% from 2010 to 2014, but recovered somewhat in 2015-17 with average annual growth above 2%.
Economic growth for 2017 was 2.4%. El Salvador has a relatively strong financial position.
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