Economic Growth and Education

Program Overview

El Salvador's ambitious economic policies have succeeded in reducing urban poverty from 53.7 percent in 1991 to 31.3 percent in 2001. While rural poverty declined from 66.1 percent to 51.6 percent in this time, rural economic growth still lags behind urban growth. The UNDP Human Development Report 2002 places El Salvador at 104 out of 173 countries in terms of overall socio-economic development.

The rural poor have limited access to services, infrastructure, and economic opportunities. For example, 2 out of 5 rural households do not have electricity; more than 40 percent of agricultural workers are landless, and almost 80 percent of the rural don’t have access to credit. The average person receives a 4^th grade education, 17 percent of 7 to 10 year old rural children do not attend school and 42.5 percent of the heads of rural families can't read or write. Poor roads and infrastructure isolate most rural areas, making it difficult to improve employment opportunities, create growth, or increase educational levels.

On top of these problems, the devastating earthquakes in early 2001 had severe socio-economic effects. After the earthquakes, almost 146,000 additional families were thrown into poverty. 55,000 jobs were lost and the gradual return of business activity is only expected to generate 40,000 short-term jobs. Experts indicate that it is likely to take 5 years to recover from the earthquakes.

USAID's primary program objective in El Salvador is to reduce the rural poverty and expand participation in the country's economic growth. The opportunity for near term recovery and growth lies in reconstruction, increased job creation from reconstruction projects, economic reactivation, expanded remittances received from Salvadorans living in the United States (currently $1.9 billion per year), continued fiscal discipline and revenue collection, expanded trade and greater competitiveness, diversification of the agriculture sector, and positive trends in US economic growth. Education is the critical factor for medium- to long-term growth.

USAID’s program to expand access and economic opportunities for rural poor families includes activities in the following areas:

Economic Policy: To address policy issues that will lead to rural development and reduce rural poverty.

Rural Financial Markets: Working with rural financial institutions to expand equitable access to financial, technological, and marketing services for the rural poor.

Agriculture Technology and Marketing: To increase the availability of environmentally sound agricultural technologies and marketing services to cooperatives, producer groups, and low-income small- and medium-sized farmers.

Small Infrastructure Activity: A quick-response mechanism to improve rural productivity and/or access to marketing and social services by financing small-scale community-based infrastructure projects.

Education: Improving the quality of education for El Salvador’s poor families.