Issue of December, 05, 2005
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Credit: : Hugo Guerra
Report
Stan Was a Blow to the Poor, but Not the GDP
By Diego Cevallos

Experts are taking stock a month after Hurricane Stan blew through Central America: although thousands of people lost everything they had, the larger economy is set to come out just fine.

MEXICO CITY, (Tierramérica).- Although the thrashing that Stan dealt the poor in El Salvador and Guatemala was brutal, the main macroeconomic indicators in the two countries are hardly showing a bruise.

A month after the hurricane, the governments can breathe a sigh of relief. Their economic growth, annual inflation, fiscal balances and foreign debt totals are relatively untouched.

But it is another story for the people hit by the storm, whose immediate future bodes for even deeper poverty. And the local ecosystems, which suffered enormous damages, could take decades to heal, according to the assessments of some 30 experts coordinated by the United Nations.

The impacts of Stan, which hit the Central American isthmus and southern Mexico in the first days of October, were scrutinized by a team headed by the Economic Commission for Latin America and the Caribbean, ECLAC, a UN regional agency, in the cases of Guatemala and El Salvador, from Oct. 26 to Nov. 8.

One of the main conclusions of their study was that Stan's effects will be relatively small for the macroeconomic sphere, but will vary from severe to grave for the communities hit, Ricardo Zapata, one of the lead investigators, told Tierramérica.

"Why this difference? It's that the affected people, who are among the poorest, contribute very little to the economies of their countries," explained Zapata.

Gross domestic product (GDP) growth in Guatemala, where Stan's torrential rains, floods and mudslides killed nearly 700 people in rural areas, will hardly see a decline this year, from 3.2 percent to 3.0 or 3.1 percent.

In the case of El Salvador, where 69 people died, the GDP will fall from around 2.5 percent to 2.2 percent.

For the two Central American countries, the direct economic losses caused by the storm were valued at 1.33 billion dollars, with Guatemala carrying the larger share, with 976 million dollars.

Non-governmental groups that came out to help the communities hit by Stan, maintain that what happened in El Salvador and Guatemala reached catastrophic dimensions for the poor, who will need several years to achieve their already low levels of economic development.

"The danger of famine persists, and the situation remains grave, but the macroeconomy doesn't have any problems, which confirms that in our countries there is a style of development that is unjust and unequal," Eduardo de León, director of the Rigoberta Menchú Foundation in Guatemala, told Tierramérica.

ECLAC reports, in the Guatemalan case, that "beyond the economic sums for damages and losses, the effect of Stan is mostly in the social sphere, with difficult to quantify consequences for the social fabric, community networks, and differentiated effects for men and women, and for different ethnic and cultural groups."

A similar assessment is made for El Salvador: "The social impact, the greatest in quantitative terms, also has a qualitative impact on the different population groups, particularly the most vulnerable: the rural population, women peasants, and small entrepreneurs, whose 'patio' economy suffered damages and losses that are not highly visible."

ECLAC addes that the storm will put the brakes on improvements to the human development index and drive up dependence on remittances that emigrants, especially to the United States, send back to their families in Central America.

As for the environment, the UN regional agency warns that severe damage occurred, with losses of farmland. And it sounds the alarm that Stan and other similar natural disasters would have been less harmful if forests and other vegetation were better protected and managed.

But for the Guatemalan and Salvadoran governments' financial situations, an issue of keen interest to creditors and multilateral financial institutions, the situation is one of relative tranquility.

Zapata indicated that the authorities of the affected countries would rather avoid contracting new loans or changing their fiscal balances to attend to the social development blow inflicted by Stan.

He predicts that the existing social programs would be diverted to focus on the communities hit the storm. "What happens is that they will stop helping some in order to help others," he said.

Central America is home to 43.2 million people, and more than half live in poverty. The lowest degrees of social development are found in El Salvador, Guatemala, Honduras and Nicaragua, countries where the population living below the poverty line -- measured by their inability to meet basic needs -- is 30 to 60 percent.

Even before assessing Stan's impacts, ECLAC had warned it is unlikely that several of the Central American countries would achieve the reduction of extreme poverty in the timeline laid out in the Millennium Development Goals, agreed in September 2000 by the United Nations.

The first goal, focused on eradicating extreme poverty and hunger, is, based on 1990 levels, to halve the number of people suffering hunger and who lived on less than a dollar a day by 2015.

Although Central America's overall GDP has grown since the late 1990s at rates that fluctuated between 4.5 percent in 1999 to 3.8 percent last year, the pace did not translate into a significant reduction in poverty or major improvements in employment and education.

"In our countries, what matters is the macroecnomy, and not the microeconomy, the latter of which being what could truly pull us out of poverty," commented the Menchú Foundation director.

* Diego Cevallos is an IPS correspondent.

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