Money Earned in U.S. Pushes Up Prices in El Salvador

Workers from Nicaraguan build houses in El Salvador which are marketed mostly to U.S.-based Salvadorans.
Workers from Nicaraguan build houses in El Salvador which are marketed mostly to U.S.-based Salvadorans. (Photos By N.c. Aizenman -- The Washington Post)
By N.C. Aizenman
Washington Post Foreign Service
Sunday, May 14, 2006

LA UNION, El Salvador -- It is hard to overstate how much this tiny Central American nation has benefited from the estimated $2.8 billion that Salvadoran immigrants in the United States send back to their relatives each year.

Without it, the portion of families who live in extreme poverty would jump from 6 percent to 37 percent, according to a recent study by the United Nations Development Program.

Yet economists have become increasingly concerned that the flood of U.S. dollars may also be driving up the cost of living in El Salvador, forcing ever-larger numbers of Salvadorans to leave for the United States -- where their presence, along with that of other illegal immigrants, has already triggered a fierce debate.

"You've basically got this vicious circle going on, and it's only going to get worse," said Katharine Andrade-Eekhoff, one of the El Salvador-based authors of the U.N. study.

Estimates of the overall Salvadoran population in the United States, including legal immigrants, vary from 1 million to more than double that. Salvadorans are the largest immigrant group in the Washington area.

Part of the problem driving the migration wave, noted Andrade-Eekhoff, is the fact that most families need the money they get from their relatives in the United States for necessities such as food, clothing and housing. That leaves little for long-term investments that could improve El Salvador's economy.

With more dollars chasing limited commodities such as land and housing, prices are rising. And because El Salvador imports most of its goods from nations that can make them less expensively, the consumption boom isn't creating an increase in jobs. Meanwhile, the ready supply of desperate workers from the even poorer Central American countries of Nicaragua and Honduras keeps down wages for existing low-skill jobs -- making it difficult for the Salvadorans who hold them to make ends meet.

The impact of this dynamic is visible across this eastern stretch of the country, from which much of the Salvadoran migration to the United States has originated.

On small, family-run dairy farms that have dotted the area for generations, most ranch hands tending the cows these days are Hondurans and Nicaraguans.

So are the laborers who scrape salt crystals from the bottom of pools hugging the Pacific coastline, and the construction workers building pricey housing developments on the reddish earth a few miles inland.

"You can't find Salvadorans to do this kind of work anymore," said Jose Acosta, the supervisor at a construction site where almost all of the 35 men toiling under a harsh sun on a recent morning were from Nicaragua.

At best, the workers earn $250 a month, often far less, he said. "And these days, you need at least $300 to $400 just to survive."

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