MAY 1981 - VOLUME 2 - NUMBER 5

E L S A L V A D O R

The Army Takes Over from the Oligarchy - To the Discomfort of the Multinationals

An interview with Leonel Gomez
El Salvador is a nation the size of Massachusetts where 4.67 million people live, and where less than two percent of the population own more than half of the arable land. The average campesino (peasant) earns less than $650 a year.
El Salvador's bloody political upheaval is affecting the nation's economy in many ways, from capital flight (several multinational corporations have closed their Salvadoran subsidiaries since 1978), to reduced agricultural production levels.
Multinational corporations have never played a major role in El Salvador, simply because there was little opportunity-the so-called "fourteen families" of the nation's oligarchy traditionally controlled everything of value. Although some international textile, electronics and manufacturing firms entered the country in response to investment-incentive programs and the establishment of a free trade zone at San Bartolo in 1974, industry contributes only two percent of Gross National Product and eight percent of all exports. Texas Instruments, Maidenform, ITT, Dataram, Dow, Kimberly-Clark and the Manhattan Shirt Co. all have subsidiaries in El Salvador. Most industrial raw materials, with the exception of cotton, must be imported.
The only two foreign banks with local deposits, Citibank and the Bank of London, were nationalized along with all Salvadoran banks last year, although they have been granted extensions of the government's deadline for liquidation of their local assets. Two firms insured by the U.S. government's Overseas Private Investment Corporation (OPIC) have recently filed claims for damages to their investments in El Salvador.
A U.S. embassy report on the nation's economy in late 1979 noted: "With respect to prospects for U.S. direct investment in El Salvador, the rising incidence of assassinations, kidnappings, politically motivated strikes and disruptions in mass transit ... have created a climate that is not conducive to foreign investment over the short term." U.S. direct investment has fallen from $150 million in 1979 to less than $100 million at present.
Coffee is the mainstay Of El Salvador's economy, contributing 70 percent of the nation's exports and, along with cotton and other agricultural products, employing 60 percent of Salvadoran workers. international trading companies and agribusiness firms such as Nestle, Folger's (Procter and Gamble), and General Foods purchase most of El Salvador's coffee, and the United States is by far its largest consumer.
In March of 1980, El Salvador's government initiated a three-phase agrarian reform program designed to ease social unrest by giving rural Salvadorans more control over their lives, and to impress the U.S. and other international observers with the regime's commitment to gradual reform. The first phase of the program affected all large farms of more than 500 square hectares; 238 such properties totaling 15 percent of the nation's farmland have been purchased by the government. They are paid for with 30-year bonds, and turned over to campesino cooperatives which are expected to repay the government for the land.
The second phase of the agrarian reform-which has not yet been implemented and may never be, in light of the vehement opposition of many wealthy Salvadorans-would, in the same way, nationalize farms of between 100 and 150 hectares (depending on the quality of the soil) and 500 hectares. This would affect 1,739 properties covering 23 percent of the nation's arable land, on which 70 percent of Salvadoran coffee is grown.
The third phase, the "Land to the Tiller" program, allows tenant farmers to become owners of small farms (less than 2 hectares) which they rent or lease. Up to 200,000 Salvadorans are estimated to be eligible for ownership of such farms. This phase of the program has not yet been fully implemented.
The agrarian reform was administered by the Salvadoran Agrarian Transformation Institute (ISTA), of which Leonel Gomez was deputy director until last December. Gomez left El Salvador after ISTA's director, Rudolfo Viera, was murdered in a San Salvador restaurant along with two American agrarian reform advisers. Gomez himself had received several death threats and an attempt was made on his life just before he took up exile in the U.S.

Patricia Perkins and Matthew Rothschild of the Multinational Monitor staff conducted this interview with Gomez in late April.

MONITOR: To what extent are El Salvador's so-called fourteen families supported by multinationals:' To what extent are there linkages internationally between those elites?

GOMEZ:In developing countries like El Salvador, the elite has traditionally been the managing partner in business. It's very hard for a multinational to go in and invest without a strong managing elite.

MONITOR: People who know the ropes, who know the government officials and the laws, who know the labor force?

GOMEZ: Yes. People who can become government officials themselves. You see, this is something that the multinationals employees can't do-they can never become Minister of Labor.

MONITOR: How large is the Salvadoran oligarchy? How many people are we talking about when we speak of the elite?

GOMEZ: Well, I'd say about two hundred names. Family names.

MONITOR: What are the sectors that they have invested in?

GOMEZ: Before the agrarian reform, they had everything under their control. They had agriculture, they had the banks, they had industry and transport. They formerly had the army too, but over the past fifteen years, slowly, the army began to gain independence from the oligarchy. At the beginning of the Alliance for Progress, when the U.S. began to give a lot of 'foreign aid, to fight against that great monster, Communism, the Salvadoran army realized that the profitable thing to do was to be in complete control of the government, to control all the key positions. They needed to control the Central Bank, they needed to control certain ministries, and of course the presidency. They also, with the loans, started getting a lot of technical aid; technicians could be had as easily as loans. So they became independent from the oligarchy-which traditionally, had been the provider of these two things.

MONITOR: Because there was another source of capital?

GOMEZ: Yes, and a much greater source of capital. And it was independent, it wasn't linked to customs.

MONITOR: So it was not by the elite's choice that this estrangement took place?

GOMEZ: No, it was not by their choice, it just happened. Now, this made the army more independent of the oligarchy. It took time, for this to sort of sink in. And one of the symptoms of what I'm saying is the fact that in, let's say, the past ten years, most of the rich families in El Salvador have had family members kidnapped. And I don't know of any case that has ever been solved.

MONITOR: By the military, by the police?

GOMEZ: You have, in a rather small country, in the past ten years, maybe 37 or 40 kidnappings. I think it's been said in the U.S. press, that the amount of ransom money paid in those ten years is between 40 and 70 million dollars. And you have to include not just oligarchs, but members of the managing class - Japanese technicians, multinationals' employees. Now, the fact that not a single case has ever been broken makes me think that the army was also involved.

MONITOR: In other words, the army has resorted to using kidnappings as a means of making money for itself?

GOMEZ: True. You know, the way it got started could have been that they cracked a couple of cases in the beginning; they probably killed the guerrillas, and then they had this man; maybe they knew that the ransom money was going to be paid, so they probably just replaced the guerrilleros, took the money, and released the guy, or took the money and killed the guy.

MONITOR: How does a relationship between the oligarchy and the multinationals fit into this increasing independence between the military and the oligarchy?

GOMEZ: Multinationals will never trust the army, because of its nature-these armies are not sophisticated, they don't understand about management, they're not viewed by the multinationals as private enterprise, as their own kind of people. It's very hard to talk to the -military. The oligarchs are the ones who know about the banking community. They're the ones who control all _the banks, the coffee, cotton, sugar, import-export businesses, and these are the guys that the multinationals have been dealing with for years.

Salvadorans by law, have to own 51 percent of all businesses in Salvador. That means, the multinationals are going in with 49 percent. Now, 'he oligarch you see in London, in Miami, he plays golf with your cousin in Palm Beach, he has a daughter at Vassar, he has a Playboy subscription, he's one of the boys. He speaks English. It's culture.

MONITOR: On the coffee industry: To what extent do U.S. coffee companies have investments in El Salvador?

GOMEZ: Almost none. What happens is that, in Salvador, coffee is-was-mostly in the hands of Salvadorans. Members of these families.

MONITOR: It was-and still is-the biggest foreign exchange earner.

GOMEZ: Some coffee lands have been taken away, but most of the coffee farms fall under Phase II of the agrarian reform, which has now been postponed. But I think the oligarchy was hit pretty hard by the agrarian reform and the export difficulties that followed. Now, I don't think the Salvadoran people are going to get much out of these reforms, because the profits just go into the hands of the army.

MONITOR: Could you go through what happened to coffee from one square acre of land in El Salvador before the land reform, and then after the land reform? What happened to it before anything was nationalized, say, five years ago? That coffee would be grown on land that belonged to a member of the elite and harvested by a worker who didn't own any land....

GOMEZ: Didn't own any land; who had no choice about it whatsoever, and no right to leave.

MONITOR: And earned how much an hour?

GOMEZ: An hour! Are you kidding me? A day. In harvest time, I'd say, two dollars a day.

MONITOR: OK. The coffee goes into the landowner's storage shed ...

GOMEZ: It has to be processed. Weighed, dried ...

MONITOR: And who owns the machinery in the place where that is done?

GOMEZ: The landowner.

MONITOR: And then, who does he sell the coffee to?

GOMEZ: To an American company, or Japanese, or German, or whatever.

MONITOR: Where is that coffee likely to end up?

GOMEZ: Probably the United States, because it's the closest market. But let me tell you what the problem really was, before the agrarian, reform. You have this land belonging to this man, he gets the coffee, the coffee leaves the country, he pays very little taxes ... he's not taxed by the government. Not really. Now, what the oligarch will do is, he's not going to bring all his money back into the country.

MONITOR: He gets paid in dollars, which he deposits ....

GOMEZ: Outside. In the United States, usually in Miami. When he controlled the banks, he was using credit, but the savings accounts, his profit, went to Miami and stayed in Miami. In order to work his farm the next year, he got a loan from his own bank. OK, that dramatically diminished the ability of that bank to give credit to others. So credit was very limited in El Salvador, because all of the profits stayed abroad. Now, the oligarchs always did this because they said they did not trust the army, or that their money would be safer in the States.

MONITOR: Since the land reform, what's the difference? That coffee is still harvested on that same acre of land, which belongs to ... '

GOMEZ: If it's been taken away by the agrarian reform, it doesn't belong to anyone, yet. It belongs to the government.

MONITOR: And who pays the guy who harvests the coffee?

GOMEZ: OK, this is what happens. The farms were taken over in March, a year ago (1980). At that time, that farm had zero capital.

MONITOR: Because it was all in Miami?

GOMEZ: Right. That farm had no money in the bank. All the campesinos had was the farm, and the coffee bushes that were going to produce in November. The value of the land, which established the debt they had to pay back, was what the owner of that farm said the land was worth in his 1976 tax program in this country have said about it was that it was land at much less than it was really worth. But that's what the campesinos would have to pay the government, in order to take legal possession of the land, and become the owners of it. The original plan said that, by way of payment, the ex-owner was going to be paid by the government 25 percent of the land's value in cash, and 75 percent in bonds, in thirty years. That meant that the co-op which was receiving the land would pay the government the debt, the value of the land, in thirty years too. Now, during those thirty years, the government was going to be the co-administrator of the farm, but with the understanding that the campesinos were going to be the ones in charge of the operation. The government was going to provide technicians, social workers ...

MONITOR: In other words, the government was going to provide the technical expertise to do the things that the oligarchs had done before?

GOMEZ: Right. But it was up to the campesinos to decide what they were going to do with the surplus money that they were going to earn. Now, the government 'also, through some ways that haven't been devised yet, had to arrive at the just number of people that re going to live on any given farm.

MONITOR: But wasn't that always pre-determined by the number of campesinos that were living on that land?

GOMEZ: Nope. If you go into taking these farms in March, that's the slow part of the year, because it's the dry season. The crops have already been picked. You're leaving only the key year-round people-perhaps 10 percent of the campesinos.

MONITOR: So you're saying that most of the people were not there when the land reform was instituted?

GOMEZ: Right. They weren't there. It was part of the planning to incorporate the temporary workers gradually, but it was not implemented.

MONITOR: Let's return to that acre of coffee. Since the land reform, the guy that harvests it has a share in the cooperative which owns the land that the coffee's grown on. So the coffee's harvested, and it needs to be processed. Who owns the processing equipment?

GOMEZ: Now? The government.

MONITOR: And who sells the coffee at the port?

GOMEZ: The government.

MONITOR: And it's sold to the same multinational coffee companies, and it goes in the same ships to the same places as before?

GOMEZ: Yes. Except now, the money comes back to the bank.

MONITOR: To what bank?

GOMEZ: To the bank that the government controls, since it was nationalized last year. Now, who controls all this? The army. But this wasn't the only reason for the military's support of the agrarian reform. The army thought that by making the agrarian reform, people were going to love them to pieces, that they were going to achieve a sort of hypnotic state.

MONITOR: What do you mean?

GOMEZ: The expectations of the army with the agrarian reform were that campesinos, first, wanted a strong leader in the army. They thought that this sort of reform was going to give them the authority, was going to give them the security they needed to stay in power, the backing. But then they found out that when people become organized, it didn't work. For the first time campesinos were able to see somebody that they wanted to be president of the co-op take office, through a free election. Not only that, for the first time, they were able to see that they were going to decide what the priorities of the farm were to be. Now, the military commander would come by and maybe ask for a donation for gasoline, to patrol the area better, that sort of thing, and they would tell him to forget it.

MONITOR: 1 n other words, the army was shocked when the people didn't fall at their feet because they were going to get land?

GOMEZ: Right. Because it's not just the land, and the ability to be in charge of some of the priorities, but the roles of those people that changed. I mean, they became the leaders of the community. So if somebody got killed, let's say, in the street-you know, if you look at the National Guard the wrong way, they think you're a communist and they kill you-the people came to the leader of the co-op, the guy they had elected, because he was the new leader. And now he went to the village and complained about what the National Guard had done to this man, and he vouched for this man-he probably knew him-he would say, "That's wrong." And then the military commander got angry, and killed the campesino [the co-op leader] who was giving him a hard time. And this wasn't done because the army needed an excuse to go in and kill people. No-it was a question of asserting their authority.

MONITOR: Do you see the land reform program, at least in its beginning stages, with its effects on the campesinos, as a politicizing thing? As a positive step?,

GOMEZ: You know, that's where I think some of the people on the left in the States are making a mistake. They see the campesino as a man without soul, as a man waiting for the leader to tell him what to do-and that's not true. These are very strong people. Just the ability to survive in the conditions that they live in gives you an idea of the strength that these people have.

MONITOR: Do you think that the land reform was perceived as a real threat by the right?

GOMEZ: There were elements that were developing, within the reform sector, that sent a red light to the army, because people were not being as docile as they thought they were going to be. The signal was out that this was getting out of hand.

MONITOR: Another thing that critics of the land reform program in this count- have said about it was that it was largely a smokescreen or the military to go in and massacre peasants.

GOMEZ: The military has never needed an excuse to massacre peasants.

MONITOR: Do you expect that there will be more flight of multinational capital, not only because of fear of the guerrillas but also because of distrust of the army?

GOMEZ: I don't think the multinationals are going to want to deal directly with the Salvadoran army. Look at all the bombings, the kidnappings, and the killing of the nuns last December. I think anybody would be afraid. And, I think, from the political aspect of it, they will go to the State Department first. .. if any of these multinationals go back to invest in El Salvador, the way it will be handled will be: multinational-State Department. State Department-Salvador.

MONITOR: Many observers have said that oil is the key to understanding current events in Central America-the oil of Guatemala and Mexico- I'm curious about what you think of the domino theory, since that's what the State Department often comes out with: If the U.S. wasn't in Salvador, Salvador would be more nationalistic, then Guatemala would be more nationalistic...

GOMEZ: Well, there's a different kind of domino-it's not losing countries to communism. it's having to pay their price for what you're going to get out of there. With a change of management, I mean, these guys are going to sell the merchandise for more money, that's all.

MONITOR: So it's not like a leftist government in El Salvador would jeopardize U.S. security. The oil would still come, the U.S. could get the oil ...

GOMEZ: I can assure you that the Salvadorans are not going to invade Texas.

MONITOR: And even if the left were to come to power in Guatemala, that would jeopardize the U.S. security position less than it would the profits of the oil companies?

GOMEZ: Yes. And the worst part of it is, I don't think Salvador will go communist. It's not an ideological thing, in Salvador. People are not fighting because they want the Marxist side to win. They want to get rid of the military government. Period.

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