World Notes El Salvador

In a move considered crucial to the future of his government, President Jose Napoleon Duarte last week announced a long-awaited plan to strengthen El Salvador's economy. He told the country, in a televised speech and press conference, that the program creates a "war economy" designed to halt the "gangrene" that has afflicted El Salvador, which now has 45% unemployment and 40% annual inflation.

The heart of the plan is a devaluation of El Salvador's currency, a measure recommended by U.S. officials but resisted by Duarte because it would raise & prices of essential imported goods. The government had kept down the price of such imports, including chemical and petroleum products, by maintaining an artificially high exchange rate for its currency. Duarte sought to blunt the immediate effects of devaluation by freezing prices on medicines and basic foods. He also increased salaries for government workers 17%, hiked the minimum daily wage for peasants and industrial workers from $1 to $1.60, and froze rents on low-income housing. But these measures are not likely to stave off labor unrest if the country's downward economic spiral continues.