Weekly Report - 07 July 2011 (WR-11-27)

EL SALVADOR | Trade setback. The trade deficit increased 19% to US$1.86bn in the first five months of 2011 compared with the same period last year. This is deeply concerning for the government, which is reliant on remittances from Salvadoreans living abroad to cover the trade deficit, although these have fallen short in the last few years as a result of the economic slowdown. Exports totalled US$2.31bn, up 27% on the same period in 2010, while imports soared 24% to US$4.17bn, the central bank announced. The biggest increase was the oil bill, which climbed 31% over the period to US$728m. Balancing the books is a perennial problem for the government and President Mauricio Funes complained this week that El Salvador had been hit harder than any country in Central America because of dollarisation. He did insist, however, that he would maintain dollarisation during his government, claiming that "the cost of de-dollarising is greater". Last November the president of the central bank claimed dollarisation had failed and compared the country's economy to the Titanic [WR-10-47].

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