U.S. and El Salvador Ready to Sign Second MCC Compact

Beach in Corral de Mulas on the San Juan del Gozo Peninsula. Behind the fence is an incubator for critically endangered sea turtles. The land is owned by a wealthy investor who is allowing locals to incubate the sea turtle eggs until he is ready to break ground on a tourism project.

After more than a year of delays, the governments of El Salvador and the United States seem ready to sign a second Millennium Challenge Corporation (MCC) compact. Last weekend, Salvadoran President Salvador Sanchez Cerén said they would close the deal on September 30th.

The U.S. Embassy says the second MCC compact, which includes $277 million from the U.S. and $88.2 million from El Salvador, will “spur investment through public private partnerships and better regulations, improve the quality of education, and strengthen key logistical infrastructure.”

After the agreement is signed, the U.S. will disburse $10 million to FOMELINIO (the Salvadoran organization managing the grant) to lay the groundwork for MCC projects. From then it will take six to nine months before other funds will be released and projects can begin.

While the $277 grant from the U.S. is popular among Salvadorans and politicians, communities in the Jiquilisco Bay of Usulután remain strongly opposed to the aid package. They believe the MCC grant will help finance the destruction of the region’s fragile natural resources and agrarian culture.

As Voices has discussed elsewhere on this blog, developers want to use MCC funds to promote tourism along the coast. They are particularly interested in the Jiquilisco Bay, which they have proposed turning into the “Cancun of Central America.” The communities targeted for development argue that large-scale tourism projects will cause irreversible harm to the mangrove forests they rely on for their survival and beaches that critically endangered sea turtles use for a nesting ground.

A community leader speaking to a group about how land speculation and tourism projects are already affecting the health of the mangrove forests and destabilizing the community.

Hundreds of families in the Bay region make their living by fishing and harvesting crab. For generations they have cared for the mangroves and beaches, protecting them and taking only what they need to survive. In theory the Ministry of the Environment is supposed to enforce laws that protect the forests and the right for local communities to harvest what they need to survive. But residents say the State does not get down there much, and few have faith in the Ministry’s ability or willingness to enforce laws.

Community leaders emphasize that they are not against tourism; they welcome visitors who want to tour the mangrove forests, bird watch, and even surf. They are opposed only to the kind of large-scale, unregulated development that investors are planning for the region.

Most of the opposition to MCC is due to the complete lack of public consultation. Community leaders are quick to point out that MCC and FOMELINIO officials have never been to the region to discuss development priorities or what is at stake when investors talk about turning the Jiquilisco Bay into the Cancun of Central America.

Manuel Cruz, a representative of El Chile, says his community is united in their opposition to the MCC grant. He says MCC or FOMELINIO representatives have never come to the region to discuss the grant, much less ask how it might benefit (or harm) the region. All they have heard is that investors want to use funds to develop tourism and that land speculators have been acquiring land all around them, denying access to mangrove forests and beaches that are supposed to be public land.

Another community leader who wishes to remain anonymous says that the closest thing to consultation he knows of was an informal conversation he had in March 2013 with a supporter of the MCC grant. The supporter, who works for an international NGO, said his community had to support the MCC because opposing it would be going against the FMLN party, for which there would be consequences. The community leader ignored the threat and his community remains united in its opposition.

Jose “Mario” Santos Guevarra, representative of the United Communities of the Bajo Lempa and the President of MOVIAC, has voiced opposition against MCC and FOMELINIO on several occasions. His concerns also focus on the lack of consultation from MCC and FOMELINIO. He argues that if MCC and FOMELINIO were really interested in building infrastructure and had consulted with the people, they would know that one of the biggest barriers to economic growth along the coast is the poor condition of the levees along the Lempa and other rivers.

Mario and many others see the lack of consultation as an indication that the MCC grant is meant to benefit rich investors – creating conditions for them to extract value out of the coastal region. He says that if the MCC was to benefit the people, it would not require a $100,000 counterpart to access grant funds. In theory, communities like El Chile, La Tirana, and others could apply for MCC funds to finally install potable water systems or connect to the electrical grid, which they need. But they are unable to front the $100,000 needed to receive MCC funds.

Residents of Chile during a recent meeting to discuss tourism and the impact of land speculation on their ability to access mangrove forests.

Over the past year and a half, Voices staff has shared these concerns over the lack of consultation with policymakers at the U.S. Embassy in San Salvador. We have extended at least three invitations to host meetings between Embassy staff, who have a role in the MCC grant, and coastal communities. The Embassy has declined each of these invitations.

According to newspaper articles, $110 million of the MCC grant will be used to expand a section of the Litoral Highway between the airport and Zacatecaluca. Another $100 million will be for education. That leaves another $155.2 million to cover administrative costs and support tourism and other development. Communities in the Jiquilisco Bay have not had a voice in the MCC planning or approval process, and it is unlikely that that they will have a voice in deciding which proposals for MCC projects get approved. That does not mean, however, communities are going to allow developers to destroy their mangrove forests, beaches and agrarian way of life. They will be paying close attention to how MCC and FOMELINIO use the funds and ensure none will be used to harm their fragile ecosystems.

The Debate Over Public-Private Partnership Law and MCC Funding in El Salvador

Last week Pacific Rim Mining Company announced it is seeking $315 million dollars in damages from El Salvador. It was a stark reminder that the 8-year old mining debate, which included several years of threats and violence between mining supporters and opponents, has yet to been resolved and could still result in a devastating economic blow to El Salvador.

As the mining issue continues, another debate with the potential to become just as volatile is brewing. In March the Funes Administration provided some details about its proposal for a second round of funding from the Millennium Challenge Corporation (MCC), a US aid program started by President Bush in 2004. The proposal is worth $413 million dollars, half of which will likely go towards an infrastructure project like improving the Litoral Highway that runs along El Salvador’s southern coast. The other half is likely to help finance public-private partnerships and improve human capital, which seems to mean education.

As details of the proposal emerge, opposition to a second round of MCC funding is growing. So far, opposition has opened on two fronts. The Salvadoran labor movement has been the most outspoken opponent, denouncing the proposed Law on Public Private Partnerships (P3 Law) since last year. Environmentalists and communities in the Lower Lempa region of Usulután have been less outspoken, but oppose the MCC proposal because the public-private partnerships will support tourism, which they strongly oppose. In 2011, members of the anti-mining movement also spoke out against the P3 Law fearing it would result in mining activities.

Mangrove Forests near La Tirana, a community targeted for a large tourism project

Because politicians within the FMLN are supporting the MCC, the politics of opposing the P3 Law and tourism are a little more complicated than opposition to mining was. Other than a protest outside the US Embassy in March and other small activities organized by the labor movement, opposition has remained largely behind closed doors, which may change soon.

            The Public Private Partnership Law

US Ambassador Maria Carmen Aponte said in October 2012 that approval of a second round of MCC funds relies on the passage of the P3 Law. The labor movement and their international supporters, argue that the P3 Law will privatize government operations including the airport, seaports, health care facilities, and other important services. They fear it will result in the loss of thousands of jobs, increasing the country’s already high rates of unemployment and driving wages down even further.

The labor movement and other opponents also do not want the private sector to control important resources and services like water, education, and health controlled. For example, Salvadoran civil society has fought against privatization of water for many years, making it such a toxic issue that politicians are unable to advocate for it publicly. Just like the government has not been able to privatize water, civil society organizations have not been able to pass a water law they have been promoting for over 8 years. Among other things, the law would protect water resources from privatization. Similarly, in 2002 then President Francisco Flores tried to privatize part of the health care system, but health care workers and many others took to the streets and forced the government to back off. Opponents of the P3 law fear it will make it easier for the government to accomplish what it has failed to do in the past – privatizing water and health care.

Supporters of the P3 Law, including President Funes, counter that public-private partnerships are not privatization, and the government will not privatize any important services, like health and education. They argue, instead, that public-private partnerships will result in more foreign direct investments, injecting capital into services and industries that are lagging behind.

The labor movement and other activists fear, however, that while not called privatization, the P3s are a way to accomplish the same goals. Concessions could last as long as 40 years, which means the state is essentially relinquishing control of an asset. Similarly, while capital investments are needed, the P3 Law will allow private, international investors to generate profits from basic services in El Salvador and take the profits overseas instead of re-investing in El Salvador.

Public-private partnerships are not new in El Salvador – they government has contracted out many operations to private companies over the years. One regular criticism is that these relationships prioritize profits over the well being of Salvadorans. For example, in the aftermath of the October 2011 floods, communities and organizations in the Lower Lempa blamed the CEL for washing them out. The CEL is the state-owned agency that manages the dam, generating electricity that private power companies sell for profit. The more electricity produced, the more money the companies make. In the months after the 2011 floods CEL representatives responded frankly, stating they operate the dams to make electricity and generate profits, not protect the people downstream.

FESPAD and Voices on the Borders 2012 legal interns recently published a full analysis of the P3 Law.

Tourism and other Investments

One of the public-private partnerships being proposed in the second MCC compact is tourism – hotels and resorts being built along El Salvador’s Pacific coast. In December the government solicited proposals from the private sector and received 49 responses, 27 of which are tourism projects in Usulután, La Paz, and La Libertad.

Tourism is not inherently bad, but communities in the Lower Lempa of Usulután fear that building hotels and resorts in and around their important and fragile ecosystems will cause irreparable harm. One Lower Lempa community targeted for a tourism project is La Tirana, an isolated and economically poor community located at the edge of one of the most pristine mangrove forest in Central America. In addition to its immense natural beauty, the forest supports thousands of species of flora and fauna. The nearby beaches are protected as a nesting ground for several species of endangered sea turtles. Residents of La Tirana fear tourists would damage the fragile mangroves with construction of houses and resorts, jet skis and motorboats, and solid waste and sewage, while displacing local residents and their farms.

Proponents of tourism argue that resorts and hotels in places like Tirana would provide jobs and spur the local economy. They believe this to be especially important in communities, such as those in the Lower Lempa, that have had their agricultural economy diminished by free trade. But locals doubt resorts will help the local economy. They know that hotels are much more likely to hire bilingual youth from San Salvador who have degrees in hotel management than poor campesinos who barely have a sixth grade education.

Voices staff recently met with community members in La Tirana, and they are very much against outside investors building resorts in their region. Recognizing that they live in a special place, the community board is proposing that the community build a series of small, humble cabanas that would have a small ecological footprint, but provide comfortable housing for a small number of guests. They are also proposing that the community build a small community kitchen that could feed guests. The community wants to develop its own small eco-tourism industry that it can regulate and ensure does not harm the forest or turtle nesting ground. It would also mean that the money from tourism would benefit the community, and not just make wealthy investors in San Salvador or abroad even richer.

Other communities in the region are even more vulnerable than La Tirana. In El Chile and other small communities, many residents still do not have title to their land. They fear that if a private investor wants to build a hotel or resort the State could take their land and they would have no legal recourse.

Our staff also met with other communities in the Lower Lempa – Comunidad Octavio Ortiz, Amando Lopez, Nueva Esperanza – and several local organizations. They are also completely opposed to tourism projects in the region. They fear that hotels and resorts will further destroy agricultural land, use up limited water resources, and destroy local culture. The community of Octavio Ortiz even wrote in their strategic plan that they see tourism as a large threat to farming and their peaceful way of life.

While most of the public-private partnership proposals involve tourism, there are quite a few agricultural projects. According to PRESA, the government agency managing the project proposals, they received 14 requests to support production of exports in dairy, mangoes, limes, and honey. In order to be considered for a public-private partnership, investors have to have $100,000 in capital and be producing export crops. The capital requirement means local farmers will not be able to participate. And the requirement that products be grown for export means even more land will be dedicated to products that do not contribute to food sovereignty, which is a top priority for the region.

There are also civil society leaders and academics in El Salvador who oppose the MCC because they see it as the latest phase in implementing a neoliberal economic agenda in their country. They hold it in the same regard as the privatization of state assets (1990s), dollarization (1995-2001), Central American Free Trade Agreement (2006), the first MCC compact (2007-2012), and Partnership for Growth (2011). Similarly, Gilberto Garcia from Center for Labor Studies (CEAL, in Spanish) believes the

highway projects, including the northern highway funded by the first MCC compact and the Litoral Highway project planned for the second compact, are part of an effort to build a land bridge in Guatemala. The “Inter-Oceanic Corridor” will connect ports on the Pacific coasts of Guatemala and El Salvador with Caribbean or Atlantic ports in Guatemala. ODEPAL is managing the project in what they call a public-private partnership. The land bridge is located in Guatemala, but it is right on the borders with El Salvador and Honduras, giving both countries easy access.

Politics of Opposing the MCC and P3 Law

Building a strong national movement around opposition to the second MCC compact and the P3 Law may be more difficult than organizing Salvadorans against mining. While the anti-mining movement was able to reduce the debate to a single issue that all Salvadorans could understand – i.e. gold mining will destroy water resources for 60% of the country – most people believe that tourism, better highways, and other capital investments are always good. Similarly, the P3 Law is fairly abstract and difficult to reduce into a simple message that the majority of Salvadorans can relate to their everyday lives.

The politics around the MCC and P3 Law will make it more difficult to achieve the kind of nation-wide opposition that the anti-mining movement was able to garner. During the mining debate, the FMLN (leftist political party) was the opposition party and had the political freedom to take an anti-mining position. The FMLN is now in power and has to consider the economic and political interests that helped them get there. President Funes and FMLN presidential candidate Sanchez Cerén support the P3 Law and MCC compact, arguing the investments will be good for the economy. According to anonymous sources, many of the same business interests that helped Mauricio Funes with the 2009 presidential elections will benefit from the P3 Law and MCC funds. FMLN legislators have been a slower to sign on to the P3 Law. At times FMLN legislators have said it was not their top priority, and more recently they have tried to negotiate amendments to exclude certain sectors such as health and education from public-private partnerships. Officials from the conservative ARENA party have accused the FMLN legislators of not supporting the law because they want to implement a socialist economy agenda.

But the civil society organizations, communities, and labor unions that are opposed to the P3 Law and the MCC funding generally make up much of the FMLN’s base. If Sanchez Cerén and his supporters continue to embrace the P3 law and the MCC funding, while many in their base protest against it, it could exacerbate an existing split within the party in the months leading up to the February 2014 presidential elections. Many former FMLN militants and supporters, especially in the Lower Lempa, already believe the movement they once fought for no longer represents their interests and values.

Though the US and Salvadoran governments want to pass the P3 Law and sign the MCC compact before the elections, many opponents are gearing up for a long struggle. Even if the P3 Law passes, when the government wants to enter into a public-private partnership the Legislative Assembly will have to approve it. They are likely to face great scrutiny and opposition. Similarly, developers wanting to break ground on tourism projects in La Tirana and other communities are likely to face some rather significant legal and social barriers – much like Pacific Rim faced in Cabañas.

Royal Decameron Announces Plans to Build Resort in the Lower Lempa

Last week the Royal Decameron Hotel Group announced plans to invest $60 million in three El Salvador projects – an expansion of their high-end beach resort in Sonsonate, construction of a four-star hotel in San Salvador, and a beachfront resort in Usulután. The new Usulután facility, which will cost $12 million, will be modeled after their Sonsonate resort with 300 individual cabins, an office center, spas, and a conference room.

Royal Decameron’s announcement wasn’t completely unexpected. Investors have been working to develop tourism in the Lower Lempa for many years, and there are likely several other projects being planned. Though tourism may seem like a great boost for the local economy, it’s a complicated issue and Royal Decameron is likely to face some stiff opposition from Lower Lempa residents.

Usulután is centrally located along El Salvador’s coast. One of the local treasures is the Bay of Jiquilisco, a large inlet known for its fishing, mangrove forests, and beautiful beaches. The stretch of land between the bay and the ocean is the San Juan del Gozo Peninsula. The only things out on the peninsula right now are mangrove forests, a few fishing and crabbing villages, and a nesting ground for endangered sea turtles… and a very fancy highway.

In 2004, the Ministry of Tourism hosted an event for potential investors at the Intercontinental Hotel in San Salvador. An Argentinean architect presented plans for the Espino Resort, as well as other infrastructure development plans. His presentation included draft plans for “El Pueblo,” a high-end shopping center on the San Juan del Gozo Peninsula for tourists that included grocery stores, ATMs, and other amenities. It was all part of a 25-year plan that outlined specific stages of development – land acquisition, construction of a highway to the end of the peninsula, and a dyke that would supply water. Eight years into the plan, investors have acquired land, the highway through the peninsula is complete, and the government announced plans last year to install a water system.

Three people are reported own much of the real estate between La Tirana and Isla de Mendez. Angel Velasquez owns two sections of land totaling 2.5 miles of waterfront property. Eduard Quiroz owns 1 mile of beachfront property, and the Tesak family owns another 3 miles along the coast. CESTA, a Salvadoran nonprofit environmental organization, owns 872 feet of beachfront that they preserve. Sources also claim that ex-president Alfredo Cristiani owns property in the region, as does FMLN politician Facundo Guardado, who has a consortium of investors that includes possible FMLN VP candidate Oscar Ortiz. Royal Decameron is rumored to own 103 acres in the region though it is unclear whether this is the property they plan to develop.

Land acquisition on the peninsula has been quiet, but not free of controversy. Locals report that Quiroz and Velazquez regularly violate land-use and easement requirements. For example, environmental regulations allow landowners to own property up to 50 meters above the highest tide. Quiroz and Velazquez, however, fenced their property at the high-tide point, ignoring the 50-meter boundary. Similarly, in 2006 ISTA (the Salvadoran Land Reform Institute) distributed plots of land to landless families in La Tirana. The families moved in, but lacking roads and utilities, seven of them sold their plots to Velazquez. Ignoring ISTA regulations that require passage between the plots and access to the mangroves, Velazquez fenced off the plots and blocked access to the forests. The president of La Tirana, Nahum Diaz, has spoken out about the violations but to no end. The 23 families in La Tirana have to survive on crabbing and shellfish, while Velazquez controls access to all of the farmland, which he uses to graze his several hundred head of cattle. Residents are also upset because in addition to blocking access to agricultural fields, Velazquez cleared large areas of forest to expand his cattle operation.

As investors were starting to buy up land along the Peninsula, Gustavo Guerrero arrived in the Lower Lempa. He introduced himself as the charity manager for the Tesak family, which owns Bocadeli, a Salvadoran food company. In 2007, Guerrero created the San Juan del Gozo and Jiquilisco Bay Integral Development Association and illegally listed local community leaders as members of the board without their knowledge. The new organization published a full-page add in a Salvadoran paper listing its priorities – building a levee for irrigation, constructing a National University campus in the Lower Lempa, and other investments to build the tourism infrastructure. He is still handing out checks and has financed several projects in the region including hiring the Linares Company to repave of the road in La Canoa. In 2009, one of our local partners said “Gustavo Guerrero is the person that made it possible for the rich to buy land,” which they often did at prices far below-market value.

But land acquisition also included making room for the new highway through the Peninsula, primarily convincing landowners to allow builders to cut across their property. Linares, the company that repaved the road in La Canoa won the contract to build the road. If you’ve been in the Lower Lempa at all over the past few years you’ve seen large dump trucks tearing up and down the main road – that was Linares hauling sand and backfill for the highway.

Few people or groups are currently protesting tourism in the Lower Lempa. Many locals, however, oppose development projects that threaten their fragile environment. The community of Amando López, for example, released a statement in May 2012 stating: “This land is our life and our life is this land, we will never stop resisting any project that threatens our natural resources and our organized communities.” They also said, “we know that so-called development means more problems for poor communities, and we are not interested in the development they are offering, because in the end the only thing they develop are transnational businesses. We care about our livelihoods and our children’s lives, and we want proposals to come from our communities, that respond to our interests, to our livelihoods, our needs, and our own worldview.

While Amando López residents were specifically referring to the Millennium Challenge Corporation in their address, they assure us that these sentiments apply to a wide array of initiatives being imposed on the region, including tourism. Amando López was the only community in the region to reject funding offered by Gustavo Guerrero.

The Jiquilisco Bay is one of El Salvador’s few remaining treasures, and residents know that once it’s gone – it’s gone. The mangrove forests protect the region from flooding, which is happening with greater frequency, and the Bay provides residents with food and a livlihood. Communities are very aware of how fragile their ecosystem is and are unlikely to let outsiders exploit it.

The argument for allowing tourism is that it will provide jobs and economic growth, but local residents understand that most jobs will go to people with degrees in tourism and hotel management. They also know that profits will be distributed to investors in San Salvador and beyond and not stay local. Residents of the Lower Lempa also know better than to count on the government to enforce the environmental laws that are supposed to protect their natural resources.

But as pointed out by our friends in Amando López, there is a bigger issue at play. Many in the Lower Lempa are not interested in the kinds of development that wealthy investors from San Salvador are selling. Communities prioritize food security over tourism, and a healthy environment for their kids over a larger income for themselves. Amando López residents said “this land is ours and we will defend it with the same courage with which we won it.”

Royal Decameron says that they still have to work out some land acquisition issues, so this is a story that will likely play out over the next several years. Along the way they will likely face a healthy opposition to their ideas of development.