The Multinational Monitor

JUNE 1991 - VOLUME 12 - NUMBER 6


The IMF & Labor Repression in Central America

by Robert Weissman

When members of the Salvadoran telecommunications workers' and Treasury Department workers' unions went on strike in March 1991 to demand a wage increase and better medical benefits, the government's response was to "militarize the workplace" and attack workers, says William Hernandez, U.S. representative of FEASIES, a federation of public sector unions. Several Treasury Department worksites were surrounded by "soldiers in light tanks and trucks with water cannons," he states.

Three days into the strike, on March 14, three treasury workers and one supporter were arrested. The next day, "riot police attacked workers, arrested 17 more and shot someone in the head," according to Hernandez. He adds that a grenade was thrown into a crowd of workers but did not explode.

Workers ended the strike on March 22, with the government agreeing to enter into serious negotiations. All of the arrested workers were released by March 25.

This strike was not an isolated one. It took place against a backdrop of ongoing disputes between public sector workers (organized into "associations" rather than unions, since public sector unions are not permitted in El Salvador) and the government over economic policy. And similar conflicts are taking place all over Central America as the newest set of government leaders, in conjunction with the International Monetary Fund (IMF), is attempting to implement a wide range of austerity measures in their respective countries.

A deadly mix

The combination of repressive governments and austerity measures is proving to be a deadly mix for many Central American workers. Trade union leaders and activists in the region have long been harassed, tortured, kidnapped and killed, but a new trend of repression is now emerging, directed against public sector employees who protest policies implemented by the government with the encouragement of the IMF and the World Bank.

With each country in the region mired in debt, Central American governments are seeking loans from the IMF and the World Bank to help meet interest payments and to open the door to additional financing from private and governmental lenders. But loans from the multilateral banks come with conditions attached; these lenders require governments to undertake "structural adjustment," a wide range of free market policies designed to shrink the public sector, encourage private investment and orient the national economy toward exports. Included in the policy prescriptions are: privatizing state-held enterprises, cutting the public payroll, devaluing the national currency, slashing tariffs, removing barriers to foreign investment and maintaining a tight monetary policy.

While the ultimate goal of these policies is to spark growth and limit inflation, the immediate result is normally the opposite. By making the currency less valuable, devaluation causes inflation by definition, and conservative fiscal and monetary policies worsen unemployment problems. Understandably, these policies usually meet with popular outrage in Central America and throughout the world.

But the most direct suffering is inflicted on public sector workers, who face mass firings, pay cuts and privatization of their workplaces--which itself usually leads to an additional round of firings and pay cuts. Catha Worthman, coordinator of the Oakland-based Central American Labor Defense Network (CALDN), argues that "the layoffs themselves are a form of repression in a context in which people are starving."

In Central America, a second round of more direct repression usually follows the layoffs, when public sector unions protest the governments' actions. "When unions organize in response [to the firings]," says Worthman, "the governments crack down, either through death squads or direct repression in the case of El Salvador."

In 1991 alone, CALDN has sent out numerous "urgent action bulletins," highlighting repressive actions directed against public sector unionists in Guatemala and El Salvador:

  • After a leader of the Guatemalan Union of Social Security Workers, Lilian Elizabeth Juarez Escobar, was killed on April 11, 1991, six leaders of the union fled to Canada to avoid meeting the same fate.
  • In May 1991, dozens of leaders of Guatemalan public sector unions including, the entire leadership of the National Federation of Guatemalan Government Workers, received death threats.
  • In April 1991, a former secretary general of the Guatemalan electrical workers union (STINDE), Otto Ivan Rodriguez, was imprisoned, tortured and blinded.
  • Salvadoran security forces attacked a February 27 labor march, using tear gas and clubs to prevent members of the Federation of Independent Union Associations of El Salvador, the Teachers' Union, the Association of Salvadoran Workers of the Institute of Basic Goods and their supporters from marching to the presidential palace.
  • Sixty workers from the Guatemalan Institute of Social Security were arrested on February 26 for participating in an "illegal strike" four weeks earlier.
  • On February 4, Ramon Arnoldo Jacome Pinto, secretary general of the Guatemalan Institute of Social Security union, was attacked and robbed by assailants who told him to call off the strike which the social security workers had begun on January 31.
  • In February 1991, members of the Salvadoran telecommunication workers' union received death threats, warning them not to participate in an upcoming one-day work stoppage.

The situation is similar in Honduras, where the leader of the Central Bank Labor Union, Ramon Briceno, and the former president of the Union of Workers of the Honduran Social Security Institute, Francisco Javier Bonilla, were killed within four days of each other at the end of May and the beginning of June 1990.

The human rights group, Americas Watch, described what passed for an investigation of Bonilla's murder in a recent report. After President Rafael Callejas refused a proposal to include church, business and union leaders on the commission created to investigate the murder of Bonilla, "according to one version, the investigation was assigned to the Armed Forces' Special Counterintelligence Command, formerly known as battalion 3-16, which operated as a clandestine death squad." The results of the investigation were predictable. The armed forces announced at a press conference that a leftist student activist had hired two people to kill Bonilla. "An official at the press conference read the extrajudicial confessions of the prisoners and declared the case solved," Americas Watch reports.

Unions are also struggling against austerity measures in Nicaragua and Panama, but workers there do not face comparable threats from the military or death squads.

The New World Order comes to Central America

The most recently elected presidents in Central America are different from their predecessors in that they have been willing and eager to implement austerity measures which earlier leaders were reluctant to put in place. Taking office with their countries in massive debt and economic chaos, Alfredo Cristiani of El Salvador (elected in 1989), Rafael Callejas of Honduras (1990) and Jorge Serrano of Guatemala (1991) have all jumped on the IMF-World Bank neo-liberal bandwagon. Both Callejas and Serrano took power with their countries in arrears to the IMF and World Bank, making them ineligible for further loans.

Though poverty and militarization remained constant as the new regimes took power, there were significant changes in economic policy. In El Salvador, says FEASIES's Hernandez, the "new Cristiani government made concessions to the IMF and started to implement neo-liberal policies." In Honduras, where former President Azcona had refused to "agree to [IMF-supported austerity] measures that will harm the people, particularly the poor," Callejas announced that repairing relations with the IMF would be one of his first goals upon taking office. The story is the same in Guatemala, where Axel van Trotsenburg, chief economist at the World Bank for Guatemala, says the Serrano government "is far more committed" to implementing policies in accord with the World Bank's view than was its predecessor.

Implementing the policies favored by the IMF and World Bank, Cristiani has been able to attract loans to El Salvador from the two institutions. In February 1990, the World Bank made a $75 million structural adjustment loan to El Salvador; the IMF approved a $50 million stand-by arrangement for the government, its first credit approval in eight years. In addition to money, the Cristiani government has earned accolades from the international donor community for its implementation of austerity measures. A May 1991 "Consultative Group" meeting of leading donor countries and institutions, organized by the World Bank, voiced "satisfaction" at the "very encouraging" results of the Salvadoran government's economic policies.

Salvadoran workers have viewed the policies less favorably. Hernandez says Cristiani's economic policies "helped the rich, not the poor." Unions in his federation have focused their opposition on privatization, which, he says, leads to price increases and massive layoffs. He notes the irony of a government that receives such enormous amounts of military aid from the U.S. government trying to cut its expenses by economic privatization and layoffs rather than shrinking the military.

Honduras fits the same mold as El Salvador, with the Callejas administration implementing Honduras' first ever austerity program in 1990. It includes a government budget cut of approximately 8 percent, tax increases and a devaluation of the lempira, which had been pegged to the dollar at a ratio of two to one since 1918.

With austerity measures in place and having cleared its arrears with the IMF and World Bank, Honduras has again started receiving loans from the international lending institutions. In July 1990, it received a $41 million credit from the IMF, its first since the Fund cut it off in late 1989. The World Bank has also turned its funding spigot on, making several loans to Honduras since Callejas took office.

Labor unions have responded with predictable outrage to the government's policies. Government health workers struck in July 1990; unions and other popular organizations held a 10,000 person march in Tegucigalpa on March 12, 1991 to protest the government's economic adjustment package; and workers at the national electric company staged a walkout in late April 1991 to protest an electricity rate increase which the electrical workers' union said was demanded by the IMF.

The Honduran unions have had some success at blocking the government from carrying out its economic plan, creating concern at the international lending institutions. Herru Aragon, chief economist for Honduras at the World Bank, explains that although the government says it plans to trim the workforce by an additional 7,000, he expects to see only 2,500 let go. He worries that the government is not "serious" about its commitment to privatization, noting that a government plan to privatize grain storage facilities is "not satisfactory." He is especially concerned about the national electric company, since the government signed an agreement with the electrical workers' union stating that it would not privatize the company. Aragon says the government tells the Bank that it should not be worried about the agreement, but he adds that "the agreement says one thing, and the government is telling [the Bank] another thing." When asked if he is concerned that the government is too influenced by labor unions, he says, "Of course."

Guatemala is still in arrears to the World Bank, to which it owes $92.4 million, and the IMF, to which it owes $35 million, but the government is committed to clearing its arrears and implementing austerity measures. The World Bank's van Trotsenburg says the Guatemalan government is "serious" about paying off its debt to the Bank. And the government is clearly eager to return to the good graces of the multilateral lending community, with Federico Linares, the president of the country's central bank, telling United Press International, "The IMF is the passport to solve our problems."

Comprising approximately 15 percent of the country's gross domestic product, Guatemala's public sector is among the world's smallest. The two largest non-financial state enterprises are the national electric company and the telephone company, both likely targets for eventual privatization.

Workers in the electric company and other public sector unions, especially the social security workers' union, have resisted the Guatemalan government's austerity plans and its call for unions to enter into a "social pact" to help implement them. The electrical workers have aggressively protested government plans for electricity rate increases which their union says could reach 300 percent.

What is remarkable about the Guatemalan electrical workers, says CALDN's Worthman, is that, as in Honduras, they "are protesting not just layoffs, pay cuts and repression, but price hikes" which do not directly affect them as workers but rather, are the concern of all the country's consumers. Central American public sector organizing efforts are important not only on their own, she says, but also because "in challenging their own layoffs and firing, they are challenging the policies of the World Bank and the IMF."

Table of Contents