Pardee-CFLP-Remittances-TF-Report

annually during the 1990s to less than $30 million per year in 2011 and 2012(USAID 2013; Seelke 2012). Fortunately, the huge and unanticipated boom inremittances has helped the Salvadoran economy and society to largely survive,albeit through an unsustainable mechanism. Remittance flows have grown tounprecedented and dominant proportions; in 2010, these flows representednearly 15 percent of national GDP, more than six times foreign direct investment(FDI), and more than 12 times all foreign aid combined. 4The experience of El Salvador teaches us a great deal about 21st century developmentpolicy challenges both in a post-conflict society as well as in transnationaleconomies in general. Since the civil war, El Salvador came to be seen asa “Star Reformer,” but interestingly, not a “Star Performer” (Hausmann et al. 2005;Summers 2003). No country in the Western Hemisphere or anywhere around theworld had so closely followed the prescriptions of think tanks associated withthe University of Chicago and the “Washington Consensus” (Seelke 2012; Madrid2009). Following the war, El Salvador became a prime test case of the WashingtonConsensus and indeed El Salvador not only carried out structural adjustmentpolicies, implemented free trade agreements, and fiscal reforms, it even adoptedthe U.S. dollar in 2001 (Edwards 2008; Edwards and Magendzo 2003; Towers andBorzutzky 2004; Segovia 2002). Yet despite its “Star Reformer” status, El Salvadorhas actually continued to be a “Poor Performer” (Edwards 2003; Acevedo 2003). Itcontinues to experience significantly low rates of growth and increasing dependenceon remittances as the primary mechanism for growth, with very perverseeffects nationally and internationally.The Resulting Human Development Crisis Across Borders:A Vicious CycleIn 2005, the UNDP El Salvador Human Development Report (HDR) focused onmigration for the first time as a critical component of understanding humandevelopment challenges; this approach was echoed in 2009 in the World HDR(Programa de las Naciones Unidas 2005; UNDP 2009). Our research at the Uni-4 In 2010, El Salvador’s GDP was $23,062,800,000, according to World Bank database, and remittances wereestimated by the Central Bank of El Salvador (BCR) to be $3,430,900,000, representing nearly 15% of GDP. Thesame year the World Bank estimated foreign aid to El Salvador to be $283,450,000, or less than 1/12 of remittances.In 2004, the UNDP El Salvador using data from BCR estimated that remittances equaled 655% of FDI, and thistrend has generally maintained itself in recent years (Programa de las Naciones Unidas 2005). There has, however,been growing cooperation and development investment from the South in recent years, particularly from Brazil(Xalma 2012). Venezuela has also initiated large-scale investments through a series of Alba companies in the areasof petroleum distribution and other energy sectors, as well as basic food production and supply chains. The UCLANAID Center intends to evaluate the impact of the socio-productive investments made in El Salvador by Alba.Remittance Flows to Post-Conflict States: Perspectives on Human Security and Development 99