Friday, February 15, 2008

The unknown and real power of the immigrants (from El Salvador)

A paper from 2003 titled “Discovering El Salvador’s Production Potential” written by two very renowned development economists, Dany Rodrik and Ricardo Hausmann, concludes that notwithstanding “an extraordinary amount of reform since the early 1990s… The impressive growth of the Salvadoran economy in the first half of the 1990s has petered out.” The paper contains an analysis of some reasons why the above; and presents an interesting discussion over “self discovery” in order to achieve the development of new opportunities.

That said the most interesting part of the paper is to observe how the two experts, even though they very clearly see the trees in this case represented by the remittances from the emigrant workers, they can not see the real forest that all those emigrant workers constitute. ¿How could there have been an economic growth within El Salvador if the Salvadorians went somewhere else to grow?

The World Bank estimates that in 2007 the remittances from the emigrants of El Salvador to their homeland were about 3.7 billion dollars. If these remittances represent 15 per cent of the gross earnings of their emigrants (mostly salaries), then a Gross Emigrant Product (GEP) of El Salvador would be around 24.7 billion dollars.

World Bank also reports that the GDP of El Salvador is around 18.5 billion dollars. If we assume the 3.7 billion of remittances is reflected directly in that figure, El Salvador’s real domestic GDP, adjusted downward for what their emigrants send home, is then about 14.8 billion dollars.

So the Salvadorian emigrants produce 67 percent more than what’s produced by the Salvadorians that remained in El Salvador.

And China has managed to grow because of their horizontal migration of an immense number of workers from their poor rural areas into the richer industrial and exporting areas, where they earn more. El Salvador has done the same, only that in their case their emigration has been vertical, from south to north and crossing borders, but with that they have achieved much larger salary increases.

If we add the GDP of El Salvador net of the effect of the remittances with the GEP of the Salvadorians we could conclude that El Salvador has been growing faster than China. And why should we not? Are the Salvadorians less Salvadorians just because they work outside their homeland?

If we are more sincere in the process of “self-discovery” we could also conclude in that given so many of the Salvadorians with initiative have decided to look for development outside their borders, that it might not be even recommendable to try to develop new opportunities in El Salvador. From a global perspective the government of El Salvador might be relegated to fulfill just the functions of a caretaker of the farm, while the workers are away working.

The best way how these immigrants could assert their influence in their new host-land begins with them ascertaining powers in their homeland. In this respect the emigrant workers of El Salvador should have the right to appoint half of the members in their Legislative Assembly.

Having been an Executive Director at the World Bank, 2002-2004, where among other I had the privilege to represent El Salvador, I have always said that when looking for a better governance of the World Bank, more adjusted to current realities, before reshuffling the votes among geographical areas, all of a my-own-back-yard nature, that a chair at the Executive Board should be assigned to a representative of the large community of emigrant/immigrant foreign workers.

Published in El Tiempo Latino, Washington

And of course all this applies to Honduras too