U.S. Dollars Sent South Now Fuel Salvador Economy

After scores of anonymous towns on a pockmarked coastal highway, the entrance to this spot is unmistakable: Cars turn off the pitted federal road and glide over a patterned brick avenue that could be a country club drive, past a high red-white-and-blue sign that reads--in English--”Welcome to Intipuca City.”

The street, with curbs and gutters, leads to a community of freshly painted concrete-block houses, many two stories high. They offer a sharp contrast to the precarious wooden huts more common in this steamy area.

The reason Intipuca is so different is clear from its nickname: “El Pueblo de los Dolares,” The Dollar Town.

Homes here are built with dollars that the migrants of Intipuca earn in the United States. Streets named George Washington and William Walker--for a former U.S. ambassador--are paved and maintained with a sort of voluntary tax, self-imposed dues from villagers living outside their hometown.

Intipuca, population 16,000, is so closely identified with migration--and prosperity--that TACA, the national airline, sponsors a float in the town’s annual parade.

Indeed, Intipuca has become a symbol of a national phenomenon: El Salvador’s growing dependence on money sent home by migrants, sums known here as “remissions.”

Salvadorans such as Blanca Neris de Hernandez, 40, whose family owns a general store at a choice location on the corner of Intipuca’s plaza, left home simply because, she says, “I wanted to get ahead economically.”

That decision, multiplied by hundreds of thousands of Salvadorans, has had an important effect on the national economy.

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Workers have become this country’s major export, especially in the wake of a 12-year civil war in which the United States played a critical role.

Remissions bring in more than $1 billion a year to El Salvador, three times more than coffee and far more than assembly plant work or any other product. Money from migrants rivals government spending in economic importance, equaling half the federal budget.

“Remissions have become the foundation of the country’s economic stability,” economist Alfonso Goitia said.

The money that migrants send home pays for Salvadorans’ imports. Remissions offset a burgeoning trade deficit, allowing the government to keep the colon, the national currency, steady at 8.7 to the U.S. dollar. That helps keep inflation hovering around 10%, low by Latin American standards.

But far from being delighted by this bonanza, many Salvadorans worry about it. Economists fear that remissions offer an unstable foundation--dependent on U.S. tolerance of Salvadoran migration--and undermine productive sectors of the nation’s economy.

Local politicians see their tiny municipal treasuries--and thus their influence and authority--dwarfed by budgets that migrant committees control.

Priests and nuns are appalled at the inherent unfairness of an economy that is based on separating families and placing the heaviest burden on the poorest.

The level of El Salvador’s dependence on remissions makes this nation unusual even among Central American and Caribbean countries that have developed a tradition of migration to help alleviate their crushing poverty.

Haitians call their diaspora in Montreal and New York “the 10th department”--an annex to their nine departments, or states. Haitian President-elect Rene Preval is relying heavily on Haitians living overseas to provide future private investment. Guatemalans cross the border every year to pick coffee in Mexico, and many Mexican villages have a tradition of sending workers to the United States.

Still, none of these countries has become so dependent so quickly on dollars sent home by immigrants as El Salvador.

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Immigration by Salvadorans to the United States was barely a trickle two decades ago when Hernandez, one of eight children, headed for Laredo, Texas, with seven friends. Two of her brothers and her then-fiance were already in Washington, D.C.

“People had just started to migrate from here,” she recalled, sipping lemonade on the shaded balcony of her house above the store, one of three buildings that she and her husband own. “I saw that people who emigrated could build their own houses.”

She married in the United States, and after their first child was born the young couple decided to come home for Christmas and stay. They had their house by then. That was in 1982, the year the guerrillas entered the town looking for soldiers who had rented rooms from her father-in-law.

“They forced us out of the house with threats, me carrying my son in my arms,” she said. “It was the worst scare of my life.”

The soldiers escaped through a window in the back of the house. The Hernandez family returned to the United States. They did not resettle in Intipuca until two children and nine years later, when peace negotiations were well advanced.

During the war, an estimated 1 million Salvadorans fled to the United States. Most came from towns in the war zone, such as Intipuca. They went mainly to Los Angeles, Washington, New York and Texas. Most of the refugees have returned or become legal U.S. residents.

But about 80,000 people remain in limbo, constantly applying for extensions that will allow them to legally stay in the United States--and send dollars home--a few months longer.

Their government’s effort to keep them in the United States is one of the ironies created by El Salvador’s dependence on migrants’ dollars.

The Salvadoran Embassy in Washington does not just take out ads in Spanish-language media to inform compatriots of deadlines in the United States to apply for extensions of their stay. The government has set up legal aid offices in the United States to help Salvadorans apply for refugee status. In effect, the government offers to help citizens prove that they are not safe in their homeland.

Government officials have also repeatedly requested special treatment for Salvadorans who fled to the United States during the civil war and remain there, even though a peace treaty was signed four years ago. El Salvador’s fragile economy cannot absorb them into its work force, the government argues.

For U.S. policymakers dealing with Salvadoran migrants, that argument shows how blurred the distinction between political and economic refugees has become.

Many, like Hernandez, who originally headed north for the dollars opted to stay because of the civil war. Others who left this country because of war and repression have stayed in the United States because it offers them more economic opportunity.

Now, independent economists such as Goitia contend that, rather than trying to draw migrants home by solving El Salvador’s unemployment problems, “the government is following a policy that stimulates emigration. We can only hope that is not a conscious decision.”

Economists argue that the government has used remissions to finance a policy that results in fewer jobs, which forces Salvadorans in the United States to stay there and pushes others to join them.

Finance Ministry officials did not respond to repeated requests for comment.

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As economist Mauricio Gonzalez explains the problem, the government has overvalued the colon by 28%, making Salvadoran goods too expensive to export.

An overvalued currency also makes imported goods cheaper, driving domestic companies out of business and eliminating jobs.

“The government has been able to sustain both an overvalued currency and a trade deficit equal to 16% of the gross domestic product only because of remissions,” Gonzalez said.

Francisco Javier Ibisate, who is a priest and dean of the Economics School at the University of Central America in San Salvador, calls the remissions pobredolares, or dollars of the poor.

“Since the mid-1980s,” he said, “it has been the poor masses who have nourished the national economy with dollars.

“A productive economy has been transformed into an economy of importation and speculation,” he said. “So that 10% of the population--the rich--can import luxury goods, we are wasting the opportunity that the pobredolares offer to create sustainable growth.”

Even in cases of migrants like Hernandez, who have invested their earnings in stores, the potential for real growth is limited, Gonzalez said.

“What you have is remissions earners who have opened stores where other remissions earners can buy,” he said.

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Many economists here want the government to create incentives for migrants to put their money into productive investments, such as modern farming, that will create jobs and allow Salvadorans to stay home. Instead, they say, the government has used pobredolares to shirk responsibilities, such as alleviating poverty.

“The fact that a good part of the poorest population has access to remissions has reduced pressure on the government,” Gonzalez said.

But at the local level, remissions have also reduced the government’s importance.

Intipuquenos in the United States pay monthly dues of $5 to $20 a month to a fund called “United for Intipuca,” which covers community improvements such as a new floor for the church, better telephone service and a soccer stadium, now under construction.

“There always are people who, even though they are far away, worry about their hometown,” said Maximiliano Arias, the fund president and one of the migrant pioneers who came home to retire.

But not everyone sees the fund so benevolently.

“People get mad at me because I cannot maintain the fancy streets they build with dollars,” said Mayor Leonidas Caballeros, who migrated to Los Angeles for two years at the height of the war. “My budget is nothing compared to the money migrants send home. They are building a soccer stadium when we do not have enough police protection.”

More lasting than the political squabbles that migrant dollars create are the long-term effects that migration has on communities and values, observers say.

“People get ahead economically, but families are impoverished,” said Bernadina Gonzalez, a member of the Sisters of Charity of the Word Incarnate who works here. “The children lack love when their parents leave them. They are always in the street. You can just feel the difference.”

Father Joe Callahan, a priest from the Cleveland mission who has served Intipuca for four years, agreed, saying, “There are kids who hardly know their parents. They grow up with their grandparents or aunts. The effect on the family is devastating.”

He also wonders at what point the benefits that migrant dollars bring family budgets are transformed into outright greed.

Just the week before, an altar boy at one of the 45 villages Callahan visits left El Salvador to join his three brothers in the United States, who all send money home to their mother.

“She has a nice house and a small business,” the priest said. “How much is enough?”

Despite the problems, the lure of pobredolares remains strong. Even Hernandez--with her legal U.S. residency status and store, rental property and comfortable lifestyle in El Salvador--goes back to work in the United States a few months a year for the little extras, such as a new dining room set.

“If I had not gone to the United States,” she said, “I would not have this house or the business. We would be much poorer.”