EL SALVADOR: Multinational Capital on the Offensive

International financial consortia have already squeezed local shareholders out of banks in El Salvador, and now they are expected to sideline the state, all of which will contribute to widening the gap between rich and poor.

Salvadoran financial groups ended the year with enormous revenues from the sales of most of their bank shares to transnational conglomerates, such as Canada's Scotiabank, the U.S.'s Citigroup, Bancolombia, and Panama's Banistmo which was then sold to Hong Kong & Shanghai Banking (HSBC).

The coup de grace was given by Bancolombia, which bought the Banco Agrícola (Agricultural Bank), the last remaining financial group owned by local capital, in December.

While supporters of this sort of transaction argue that they make the banking system more competitive and provide advantages to clients, economists and political scientists consulted by IPS take the view that the Salvadoran state's weakness and the lack of regulations put the country at risk of "greater dependency and subordination to multinational economic powers."

Transnational capital "will become a new political class which, although resident abroad, will wield great power, and could turn this Central American country into another banana republic," said one analyst.

"We are entering a financial scenario with different dynamics, with conglomerates expanding beyond the region," said Alfonso Goitia, a Bolivian economist living in El Salvador, whose research indicates that the powerful élite, formerly made up of the "agroexport oligarchy," is now dominated by highly aggressive corporations, while local groups are diversifying.

In fact these local groups not only sold the majority of their bank shares, but also those of their insurance companies, credit card operations and pension fund administration companies, in exchange for gaining international partners and reinvesting their capital in more profitable sectors, such as trade, car imports, and the construction of shopping malls.

According to Goitia, this is clear evidence of a decision to prepare themselves to compete in international markets, beyond the borders of Central America.

"Their strategy is to use the free trade agreement with the United States, signed by El Salvador, four other Central American countries and the Dominican Republic (DR-CAFTA), which puts constraints on any action by the state against foreign firms, to make sure that the banking sector cannot be touched by the government," he said.

Leftwing U.S. intellectual James Petras, in his article on "The Supremacy of Financial Capital" published on rebelion.org, said that the financial sector are able to make unparallelled profits because "banks achieve maximum profitability by enabling the concentration and centralisation of capital, operations they call 'mergers and acquisitions'."

This, in effect, will be one of the main topics at the 7th World Social Forum (WSF), which will be held in Nairobi from Jan. 20 to 25.

• 104 Globalization
• 110 Trade Justice
• 187 Privatization