Salvador Rightists Attack Duarte Over Taxes for War

Businessmen on the extreme right have launched an aggressive radio and newspaper campaign calling for the resignation of President Jose Napoleon Duarte over a new tax package put into effect this month to pay for the country’s continuing civil war.

Duarte also is facing a showdown with members of the rightist political opposition who announced that they will refuse to debate or vote in the Legislative Assembly until the taxes passed by Duarte’s Christian Democratic Party majority are overturned and other changes are implemented.

The businessmen and politicians are trying to organize a business strike and a boycott of the new taxes, which are aimed at the wealthy. They may be rallying the support they need.

“The strategy of acting as the loyal opposition in the country has not shown any success,” said Juan Maldonado, spokesman for the National Assn. of Private Enterprise, which is debating possible actions. “Talk--enough is enough. Now let’s try pressure.”

The government has countered with threats of jail for tax evaders.

“Remember, Al Capone was jailed for tax evasion but not for all the other crimes he committed,” Minister of Communications Julio Rey Prendes warned on television in a clear message to the far-right elements that allegedly once financed clandestine death squads.

Duarte’s confrontation with the powerful business community comes after a terrible year for El Salvador’s economy, with inflation officially put at 33%, nearly half the work force unemployed or underemployed and a near-zero growth rate.

From 40% to 50% of the government’s budget goes to the military and fighting a war against Marxist-led insurgents for whom economic sabotage is a major weapon.

On top of the ailing economy, El Salvador suffered a devastating earthquake last Oct. 10 that caused more than $1 billion in damage and left about 50,000 families homeless--about a quarter of the residents of the San Salvador metropolitan area. About 1,500 people died in the earthquake.

‘Situation Is Exploitable’

Political observers say the government must pick up the pace of reconstruction from the earthquake to get the homeless into adequate shelter before the rainy season begins in May, or their discontent likely will evolve into an added political problem.

“The guerrillas could take advantage of the rain and the people out in the streets. The situation is very exploitable,” a U.S. diplomat said.

Already, the public’s faith in the government’s ability to handle the economy is shaky. In a government-contracted poll last October, 49% of the people interviewed said they were not sure if any political party in El Salvador was capable of resolving the country’s economic crisis, and 55% said their family’s economic situation was worse than in 1985.

Seventy percent of the 1,280 people interviewed believed that the economy would continue to worsen this year.

According to the government poll, however, the public’s support for the opposition political parties and the guerrillas is even weaker than for the ruling Christian Democratic Party.

Bleak Economic Outlook

Diplomats and political analysts support the popular perception that the economic picture for 1987 is bleak. They point first to the fact that prices are falling on the international market for coffee, cotton and sugar, El Salvador’s principal exports, and then to Duarte’s developing battle with the far right.

“The first quarter of this year is going to be one hell of a rodeo,” a non-government political analyst said. “The right has smelled blood, and they are biting.”

In the most extreme cases, rightists have been pushing the military to launch a coup against Duarte, who has been in office for 2 1/2 years. In one instance, re-establishing paramilitary death squads was called for.

“The extreme right doesn’t want social change,” Duarte said in a recent press conference. “What they want is a coup or destabilization.”

The president accused the rightists, led by cashiered Maj. Roberto d’Aubuisson, who lost the 1984 presidential election to Duarte, of going from “barracks to barracks” seeking military support for a coup.

‘Not the First Time’

“It’s not the first time the extreme right tried to organize a coup,” Duarte said. “But the armed forces know this isn’t right.”

“The pressure for a coup has been very clear,” Gen. Adolfo Blandon, head of the joint chiefs of staff, said in an interview. “Anonymous letters have been circulating clearly inviting a coup, and some officials have received visits in their homes from people interested in destabilizing the government.”

One military source said some on the far right hope to incite members of the military academy’s largest class--known for its size as the “Symphonic”--of which 29 graduates were promoted to full colonel this month.

However, military officials and diplomats rule out a coup.

Blandon said the army has “matured” as an institution.

“I personally don’t think a military coup could happen in this country today,” he said.

A U.S. diplomat who asked not to be identified by name said the military knows that a coup would trigger a suspension of vital U.S. aid.

“We make that point all the time,” the diplomat said.

$420 Million in U.S. Aid

U.S. economic and military aid totaled about $420 million in 1986 and is expected to exceed $500 million by the end of this fiscal year.

Duarte’s controversial tax package is an effort to raise an extra $30 million to help ease the government’s growing budget deficit, due in large part to the war.

The package includes a one-time “war tax” on net worth, an extension of last year’s emergency tax on coffee exports, plus increases in taxes on high-level income, cigarettes, alcohol, real estate transfers, inheritances and vehicle registration.

Duarte had tried to pass the war tax last year, but he dropped it from an economic package that included a currency devaluation, a new tax on coffee, import restrictions and price increases for gasoline and transportation. The devaluation and import restrictions also led to price hikes on other goods widely used by the poor, including medicines and farm insecticides.

This year, Blandon said, it has been made clear to the businessmen and politicians that more money is needed to fight the war.

“Those who criticize the war tax should propose a viable solution,” Blandon said, adding that he believes those publicly calling for Duarte’s resignation and pushing for a coup “are taking advantage of democracy.”

Military Draft Urged

Duarte also has pushed for military conscription, arguing that the children of the wealthy should be forced to fight the war as well as the poor and the peasants. However, political observers said he probably will not have the political strength to fight for both conscription and taxes. Some doubt his seriousness on the draft issue.

“He carts that out for moral authority,” a Western diplomat said.

Leftist and centrist labor unions also oppose the new tax package, since they believe the war must be ended by negotiation. They add that the cost of the new taxes will be passed on to the lower classes through price increases, a point that the businessmen also make.

Rightist politicians and businessmen have been traveling throughout the provinces to drum up support for a business strike and tax boycott.

A newly formed group of the far right called the National Action Movement has bought frequent radio and newspaper advertisements against Duarte’s “oppressive regime” and his party’s legislative majority.

Maldonado, of the private enterprise association, said Action Movement members have met with the association’s board and are urging them to take action.

Possible Actions Studied

“We are looking into the feasibility, effectiveness and ultimate goal of such actions,” Maldonado said. “We don’t just want to jump on the bandwagon . . . because if there is not a public feeling to participate, the actions will be a failure like the (guerrillas’) final offensive and general strike in 1981.”

Maldonado said that different sectors of the business community have different goals for a strike: “Some want to destabilize the government, some want to create a crisis and some want to pressure the government, to show their displeasure and pressure for negotiations for a new (tax) package and electoral law.”

The political opposition wants to overturn a new electoral law giving broad powers to the president of the Central Elections Council, who was named by the Christian Democratic Party majority in the assembly.

Political analysts say a strike, boycott or similar action is possible. Duarte’s minister of communications, Rey Prendes, has gone on television nightly to try to explain the taxes from the government’s point of view.

‘Duarte Will Flood Streets’

“If it gets into a real confrontation,” said a Western observer, “Duarte will flood the streets with a couple hundred thousand people. What are people going to do after the stores are closed for five days? Who are they going to sympathize with after that?”

U.S. Embassy officials say Duarte may have to be “more flexible” on the taxes. They would like to see the package accompanied by broader fiscal and monetary measures, including another devaluation, a cut in subsidies to indebted state companies such as water and electricity (which would mean further price increases), a tightening of credit and the printing of less money.

Businessmen claim that the tax package will discourage investment. They charge that the government is trying to pay for its deficit but is not addressing problems of inefficiency and corruption. Maldonado said that businessmen also would like state agencies to subcontract some of their work to the private sector.

Political analysts say Duarte will have to take some action to appease the right.

“The question is, what is the price to calm them down?” one analyst said.

Some suggest that the price may be more private control over the National Coffee Institute, the government agency that buys coffee from the powerful planters and sells it abroad. The rightist coffee growers abhor the institute, which they consider communist because it not only establishes the price to be paid for coffee but receives the dollar payments from abroad and pays growers in local currency.

Going for Dollars

The growers want an end to what they regard as government interference in the marketplace, and they want the dollars that their coffee brings in to come directly to them, for the dollar is much more stable than the local currency.

Duarte has long insisted that coffee profits must be shared by the entire country, but the U.S. Embassy, which has considerable influence in Salvadoran affairs, also appears to be amenable to changes in the coffee institute system.

Analysts say Duarte feels that limiting subsidies to utilities or altering the coffee system would cost him too much political support among the peasants and working class. Jamaica and Ecuador have been cited as countries where U.S.-backed economic programs are eroding support for local governments.

Guerrillas of the Farabundo Marti National Liberation Front, meanwhile, believe Duarte’s political and economic problems will foster discontent that ultimately will favor them. They have increased their military activity and sabotage in recent weeks and announced their first transportation stoppage of the year, part of their effort to disrupt the country’s economy.

In a recent interview in Nicaragua, Shafik Handal, one of the five guerrilla commanders, said the guerrilla war and the economic problems are inseparable.

“There is no economic solution without a political solution,” Handal said.