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Central American University - UCA  
  Number 358 | Mayo 2011
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El Salvador

The lights of ALBA on El Salvador’s horizon

The introduction of ALBA Petróleos into the Salvadoran market could be a step towards de-privatizing fuel imports, until recently monopolized by the multinational oil companies. Another positive development is Venezuela’s regional integration initiative. In the May First celebrations, one banner that stood out said, “Only the people united will never be defeated! Long live ALBA…with or without Funes!”

Elaine Freedman

In the first discussions in 1993-1994 to organize an alternative integration project for Latin America—originally called the Bolivarian Alternative for the Americas (ALBA) in opposition to the Free Trade Areas of the Americas (FTAA) promoted first by the George Bush Sr. administration and then by Bill Clinton’s, the voice of the Salvadoran Left was present through two of its historic leaders: Shafick Handal and Nidia Díaz.

From the beginning, their Farabundo Marti National Liberation Front (FMLN) supported building a common project that would foster the development of socialism on the continent not only through political alliances but also economically, culturally and socially.

Nidia Díaz, a member of the FMLN’s Political Commission and its representative to the Central American Parliament, explains that “it was important for us to be a unified Left at the level of parties and social forces through the Sao Paulo Forum and governments. As several leftist governments were winning in Latin America, we were gambling on a new alliance based on the principles of solidarity, complementarity, sovereignty, development based on our countries’ own resources and their preservation and on a type of trade that would seek to surmount the asymmetries. We had to build the basis for socialism and defend the sovereignty of each country. For the FMLN, ALBA, now called the Bolivarian Alliance for the Peoples of Our America, is the most adequate form of integration and union of peoples for building revolutions and developing socialism.”

The start: Scholarships,
culture, literacy....

In the first stage, El Salvador received solidarity from Cuba and Venezuela under this initiative. Through the FMLM, at first with the participation of the University of El Salvador and San Salvador’s mayor, El Salvador began to participate in the scholarship program for Salvadoran youth to study at the Latin American School of Medicine (ELAM) in Cuba and later in Venezuela in 1998. This happened despite Salvadoran President Calderon’s rejection of Cuban doctors’ offer to care for victims of Hurricane Mitch that same year.

Then in 2004 Salvadorans began to travel to Venezuela and Cuba for eye operations under the Miracle Mission program. That same year radio stations belonging to the Participatory Radio Association of El Salvador (ARPAS) broadcast the Cuban literacy program “Yes I Can” in El Salvador.

In 2007 El Salvador received support from the “Allí Primera” Cultural Mission in which El Salvador sent a large delegation of cultural and historical workers to Venezuela to learn more about its work on these topics. They produced two books about the history of Santa Tecla and Suchitoto. Venezuelan cultural advisers also came to El Salvador to teach the municipalities about “municipal culture.”

ARENA turned Petrocaribe down

After the 2004 elections, an FMLN delegation made up of Handal, Díaz and Sigfrido Reyes, now president of the Legislative Assembly, met with President Hugo Chávez in Venezuela. Out of that meeting came the proposal to look into the possibility of El Salvador joining the newly formed Petrocaribe.

Nidia Díaz recalls that “we went twice with this proposal to Economy Minister Yolanda Gaviria and to Francisco Láinez, secretary of state under President Antonio Saca, but they weren’t interested.” Carlos Ruiz, then mayor of Soyapango and now vice president of ALBA Petróleos, adds, “They even said they would agree to join Petrocaribe if the transnational corporations managed it,” which was a mockery of the plan to provide cheaper fuel to the Salvadoran people. The following year, Venezuelan parliamentarians took advantage of the meeting of the Network of Parliamentarians for ALBA in El Salvador to present the same proposal to the Legislative Assembly. Again it was rejected. The leading opponent that time was Milena Calderón, an ARENA legislator, who stated that “one’s ideology is not sold for oil.”

The green light to ENEPASA

Following that NO from the Right, several FMLN mayors and one from the Democratic Change Party (the Mayor of Acajutla, department of Sonsonate) proposed to the Venezuelan government that, since the national government didn’t want this proposal, their local governments would like to manage the Petrocaribe project jointly by forming an inter-municipal public company.

“We sent a delegation to Venezuela and they advised us to study our laws,” Ruiz remembers. “For their part, they would study Venezuelan laws to see if the case was legally feasible. They came back with the assurance that there was no legal problem in their country and we concluded that the Salvadoran legislature allowed us to take on a project of this kind.” It was a novel case for Venezuela since all its other agreements for energy cooperation were with central governments. That association was formed during the year and later a letter of intent was signed with President Chávez that gave the green light to the formation of the Inter-municipal Energy Association for El Salvador (ENEPASA).

The associated mayors

The 22 participating municipalities created the seed capital with differing amounts of contributions based on the principle of fairness in the distribution of contributions among mayor’s offices of different sizes and with dissimilar municipal budgets. Roger Blandino Nerio, the mayor of Mejicanos and a representative of his government on the Assembly of ENEPASA’S Partners, says, “The coffers of San Salvador, the capital, and those of San Sebastian Potrillo, a small municipality in the department of Santa Ana, aren’t the same. The municipalities couldn’t all be asked to contribute equally.”

On April 5, 2006, ENEPASA signed an agreement with PDV Caribe, a subsidiary of Venezuela’s state oil company, PDVSA, to set up ALBA Petróleos as a joint venture with payment facilities to Petrocaribe: 51% of the seed capital funds were contributed by PDV Caribe and 49% by the municipal government partners in ENEPASA. According to that agreement, 60% of the oil bill is paid within 90 days at 2% interest and the remaining 40% in 23 years at 1% interest.

Where to store the Venezuelan oil?

That same month the process to get the necessary permits was started. “At first they gave us the permits, thinking we wouldn’t be able to develop the company,” recalls Ruiz.” Bit by bit we arranged for import, storage, distribution and marketing permits with the Economy Ministry, the Corporation of Municipalities of El Salvador (COMURES) and the Ministry of Finance.

At the same time, they had to resolve the problem of where to store the Venezuelan oil in El Salvador. The transnational companies began a battle to prevent the rental of any storage tanks in the country. They threatened to break off ties with their national clients of those companies made any agreement with ALBA Petróleos.

When the ENEPASA participants realized it would be impossible to find any appropriate place on national territory, they tried to buy or rent tanks in neighboring countries. The Guatemalan and Honduran companies were quickly alerted that they had better not do business with ALBA Petróleos if they wanted to maintain good relationships with their suppliers. “Obviously,” explains Ruiz, “no business was going to risk its relationship with the transnationals. We had theoretical permits in hand but couldn’t find anyplace to store the fuel. We were just about to buy a company in Honduras with a majority of Honduran stockholders, but they had a connection with Exxon and at the last minute it prohibited them from making the deal. While all this was going on, there was a media campaign in El Salvador saying we already had the permits but weren’t capable of developing the project.”

The problem was finally solved when the Sandinista National Liberation Front (FSLN) won the elections in Nicaragua in November of that same year. They signed an agreement with Nicaragua to rent storage tanks there and transport the fuel to El Salvador.

“I didn’t think they’d make it”

The first major change in El Salvador’s fuel market had occurred in the early nineties with the structural adjustment measures put in place by the ARENA government. The privatization of PETROCEL, the state-run oil import company, gave rise to an oil oligopoly in El Salvador under the control of the multinational corporations. PETROCEL was sold to the Acajutla Refinery Company S.A. de C.V. (RASA), owned by Exxon and Shell.

In the last few years, El Salvador’s fuel market began to feel new changes, in which ALBA Petróleos played an important role, that have affected the transnationals. These changes have led Julio Villagrán, executive director of the Salvadoran Association of Petroleum Product Distributors of (ASDPP), who initially opposed ALBA Petróleos, to change his position. “ALBA Petróleos is having a major influence. I thought they weren’t going to make it, but the gas station owners’ associations in both Honduras and Guatemala have asked for contacts because they want to do business with the ALBA Petróleos people.”

ALBA Petróleos’ market influence

ALBA Petróleos currently manages 13% of the country’s total fuel market and between 17% and 20% of its diesel market. In 2009, it began by selling regular and super gasoline and engine oil. A year later it started importing and selling bunker, a grade of fuel used to generate electrical energy. Up to that point, Esso had held an almost complete monopoly over the sale of bunker. Although the ALBA’s inroad into that market has been minimal, it does mean a crack in Esso’s monopoly in the country.

Villagrán explains that the lower prices for the gas ALBA Petróleos imports and sells has affected the national market. At first the gas stations that bought ALBA Petróleos products sold it at $.30 on the dollar less than other gas stations.

Carlos Ruiz explains that two factors determine the rise in prices: speculation on the international market and speculation on the country’s local market. ALBA Petróleos has been functioning as a counterweight to national speculation, forcing the other companies to lower their prices. Villagrán recognizes that “in the country today there’s a $.10 difference [between ALBA Petróleos and other suppliers] and while that’s not much, the market responds to ALBA’s prices, going down $.10.”

They win the bids

It’s shouldn’t be seen as strange that ALBA Petróleos has been very successful in the governmental bidding process in El Salvador. It’s the only provider to governmental bodies such as the Supreme Court, the National Assembly, the Fund for the Disabled and even the mayor’s office of San Salvador, which were administered by ARENA since 2009. Because ALBA Petróleos can offer the best proposals due to its terms of exchange with Petrocaribe and its commitment not to participate in internal speculation, it’s usually the only participant in these bidding processes.

Calling the kettle black, the transnational corporations complain that ALBA Petróleos “is becoming a “public monopoly.” They, however, are the ones who are forfeiting their own chances because they refuse to lower their profit margins.

Crisis in the multinationals

The phenomenon is having regional consequences; it led to Shell Oil Company to leave in 2009. At the end of 2010 Villagrán revealed that Esso and Texaco are also on their way out. “Texaco has sold all its service stations in El Salvador,” he explained. “Only the station at Acajutla will remain. In the case of Esso, its new partner is the Terra group, in El Salvador’s refinery. And if it goes on like that, even the refinery will soon be up for sale. Name brand gas stations are tending to disappear in Central America, shrinking the big oil companies’ market.”

More than 35% of the gas stations in El Salvador are independent. According to ASDPP, 51% of them are supplied by ALBA Petróleos.

Storing in El Salvador

In February 2008, ALBA Petróleos broke ground on a modern system of storage tanks in the port city of Acajutla in the Department of Sonsonate. In response to accusations that they were channeling funds from Venezuela for Mauricio Funes’ presidential campaign, Carlos Ruiz clarified that the funds were to finance the storage project, not the campaign. “The money is coming from the Petrocaribe project. It’s no secret; you can go to Scotiabank and see, because that’s where the transactions are taking place.” This installation—involving seven tanks with a storage capacity of 370,000 barrels of diesel, gasoline, airplane fuel and liquid gas—is being inaugurated on May 19 of this year.

The prospect of being able to import propane from Ecuador at more accessible rates is encouraging to people right now, when the government is implementing a subsidies targeting system for this liquid cooking gas in an effort to stop the loss of 13,000 drums of it that are being sold on the black market in Guatemala and Honduras. These drums are imported by subsidiaries of French and Mexican transnationals and until March the subsidy was applied across the board. The new system has brought both setbacks and successes and the issue of access to propane gas in El Salvador is very relevant.

According to ALBA Petróleos’ adviser and FMLN legislative representative Orestes Ortez, this company could gain control of 30% of the fuel market with the opening of the new storage installations. In addition, since they’ll no longer be paying rent for storage in Nicaragua or transportation through Central America, they’ll be able to lower the cost of their products even more.

A de-privatizing step and other benefits of ALBA Petróleos

Politically, the entrance of ALBA Petróleos’ into the market can be interpreted as a very first step towards “de-privatizing” oil imports. Obviously, a joint venture among municipal governments isn’t the same as a public company of national scope, but the trend of the transnational corporations to pull out of what they view as an unfavorable market after being accustomed for 20 years to a free field for rampant speculating and evading their fiscal responsibilities in El Salvador opens the way for the national government to take on the challenge of assuming control of importing and distributing fuel.

According to Mayor Blandino Nerio, being a member of ALBA Petróleos has also brought other types of benefits to Mejicanos, his municipality. First, they’ve received a donation to implement a socially beneficial project that is three times more than they contributed to be associated with ENEPASA.

Second, all the municipal Mejicanos buses use fuel from ALBA Petróleos. Several have direct agreements with the company, which allows them to save even more money. The majority of the city bus company owners live in the municipality, so the municipal government also receives retribution in the form of local taxes.

Carlos Ruiz explains that “the earnings from ALBA Petróleos are not for social projects but to give impetus to other sectors of the economy in the hope that the country’s economy will take off.” As one example, earnings go towards exporting efforts and fertilizer imports.

Since 2009 ALBA Petróleos has exported 30,000 quintals of coffee in a debt/equity swap and an items diversification pilot project. Ruiz explains that this “is one way to open new markets and we’d like it to be understood that the exchange is so we can compensate, restoring more equal conditions and equilibrium in the trade balance. This is what we’re looking for.”

In the same way, importing and selling urea at low prices is included. In 2007 a sack of urea imported from Venezuela sold through the cooperative movement for $25 when the market price was $40. The expectation of Via Campesina in El Salvador is that the opening of the new storage installation can regain the initiative. “It’s important for us to break the fertilizer importers’ monopoly.” says Oscar Reinos, president of the Federation of Central Region Agrarian Reform Cooperatives and assistant coordinator of Via Campesina in El Salvador.

An opportunity for the excluded

For the social movement, El Salvador’s membership in ALBA is a demand that has been around for several years. The demand grew after Mauricio Funes took office, as many expected his government to take steps the ARENA governments obviously weren’t going to take.

Recinos argues that “the focus on complementarity and solidarity is different from traditional aid because it supports the common people. It lets one think about those who are always excluded from agreements between governments and commercial ventures. You can see it in the case of scholarships. When they are given based only on the criterion of academic excellence, private school students who’ve had access to a better education will generally get the scholarships. With the ALBA scholarships there are academic requirements but they also weigh other criteria so that young people from the poorest communities can have access.”

Funes: “We’re not even
considering joining ALBA”

In May 2009 then President-elect Mauricio Funes stated that “circumstances will define whether or not the country joins the Bolivarian Alternative for the Americas or the Petrocaribe agreement Venezuela is promoting.” He made this statement in the context of the only meeting he has had with President Chávez since Funes declared himself a candidate in 2007.

Apparently the “circumstances” have been overwhelmingly negative. Although a presidential spokesperson announced in August 2009 that the government was considering joining Petrocaribe as an observer so it could later evaluate its membership, there has been no follow-up to this declaration either in speeches or in practical actions.

In fact, in December of that year Funes essentially closed the issue in his inaugural speech to the Seventh International Convention of Salvadorans in the World by stating that “our government is not going to join ALBA and we are not even considering it.” A little later in his speech he added, “We have a strategic alliance with the United States of North America, not only because the great majority of our compatriots abroad live and work there, but also because it’s a large market and we should expand our exchanges more and more and make it more beneficial for our country.” He later confirmed that “I have relationships of mutual respect with the United States. I have no reason to endorse a document that could put that relationship in jeopardy.”

“Funes has too many commitments”

Another weighty “circumstance” at the regional level was the coup d’état against Manuel Zelaya’s government only one year after Honduras joined ALBA. The many threats of the Salvadoran Right that Funes ought to “see himself in that mirror” if he were to make the same decisions very likely affected his decision not to join. Finally, there are other less weighty but always present “circumstances” that contribute to making it very improbable that El Salvador will join ALBA during Funes’ administration.

The campaign to discredit and sabotage ALBA Petróleos includes the majority of the media; specific politicians of the ARENA and Christian Democratic parties; the Court of Accounts, which is managed by the National Party of Reconciliation; and obviously the transnational oil corporations. A web site dedicated to promoting this campaign that calls iself “Albaladrones” (Albathieves), synthasizes the main tactics and arguments that have been used at various times; it accuses ALBA Petróleos of corruption, money laundering and even being part of a Venezuelan interventionist plan against El Salvador.

According to Representative Diaz, “Funes agrees with some of the programs that are part of ALBA: Miracle Mission and the literacy program. And he hasn’t totally closed the door on Petrocaribe. But he has too many commitments that keep him from joining the Bolivarian Alliance for the Peoples of Our America.”

“Chávez will be welcomed”

Oscar Recinos emphasizes that “ALBA is a kind of national and international support that many peoples long for.” As the long-awaited visit by President Chávez at the inauguration of the Alba Petróleos installation approached, expectations arose again about concrete agreements with Venezuela. In the words of peasant leader Recinos, “The presence of President Chávez is welcomed by the majority of Salvadorans. It will be an honor to have him here. When one realizes the changes that are happening in Venezuela, those of us who have been excluded from this society are cheered and encouraged. We hope he comes to give a message to the Salvadoran people, because he has made resources available to the Venezuelan people, not the transnationals. We want this for our country too.”

Sowing the path

Nidia Díaz clarifies what one can expect from the remainder of Funes’ term. “The majority of projects promoted through ALBA can be implemented through bilateral cooperation agreements with the government, but not as part of ALBA. For example, the Secretariat of Culture is currently continuing the Mission Culture project. And programs such as Miracle Mission, Yes I Can, the higher education scholarships and even some points relating to oil can also be formalized.”

The recently signed cooperation agreement between El Salvador and Cuba has terms very similar to those governing cooperation under ALBA. A Framework Convention and an Agreement of Understanding between El Salvador and Venezuela has been drawn up but not signed.

There’s work to be done to open up and strengthen the relationships with other ALBA member governments in the political, economic, social and cultural arenas. A path can be sown through ALBA Petróleos. In Nidia Díaz’s opinion, “ALBA moves forward more by practical paths than formal ones.”

ALBA goes further

The philosophy that unites ALBA is more ambitious. It’s a strategic alliance to design an alternative society in which the member States pledge to foster a modification of the predominant mode of production in their country and to defend a revolutionary transformation. ALBA goes far beyond the principles that can be seen in the framework of a simple bilateral cooperation agreement.

A colorful placard that stood out among the many banners in the International Workers’ Day march on May 1 said it all. At the top is the slogan “Only the people united will never be defeated. Long live ALBA!” At the bottom, the letters shout “Out with US bases!” accompanied by a map in red of Latin America with the flags of all the ALBA member countries: Venezuela, Bolivia, Ecuador, Nicaragua, San Vicente and the Grenadines, Cuba, Antigua and Barbuda. El Salvador’s flag is included and in the center is the phrase “with or without Funes.”

Elaine Freedman is a grassroots educator and the envío correspondent in El Salvador.

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