While Army troops continue to fight leftist guerrillas in the Salvadoran countryside, a long-smoldering second front in El Salvador civil war appears about to break into a battle with more immediate consequences for the beleaguered government's chances of survival.
The weapons are not guns and grenades, but dollars, in the hands of members of the Salvadoran private business sector. Their ongoing rejection of government reforms has now broken into open rebellion that threatens to disrupt the tenuous balance of power in the governing coalition between the military and the Christian Democratic Party.
The reforms, backed by the Christian Democrats, whose civilian presence has provided the principal rationale for U.S. support of the government, include not only a large-scale land reform, but government control over banking and exports. A large segment of the military, and most of the business and industrial sector, have always been against them, but now have been reluctant to act in outright opposition.
Last week, however, business, backed by the military leadership, waged open battle against government civilians, and the government civilians appear to have lost badly.
It started when the minister of the economy and foreign trade, Guillermo Diaz, an "independent" civilian within the Cabinet, publicly sugested that the current wage freeze might be lifted at the end of the month.
That proposal caused an uproar in the private sector. Three days later, the military member of the governing coalition junta, Col. Jaime Gutierrez, responded by repudiating Diaz's statement, calling it a "grave threat" to the nation. Diaz left for Miami on the next plane and has not been heard from since.
The civilians in the junta have refused to comment on the situation, even to the extent of saying whether Diaz resigned or was dismissed.
By contrast, the minister of defense, Col. Jose Guillermo Garcia, has been outspoken. "The people cannot be offered something they won't get," he said. "Lies last until the truth shines out."
The Diaz incident, which may well lead to the resignation of the entire economic team, has put in sharp relief the dilemma faced here by the United States, who efforts to prop up the junta have included $126.5 million in economic aid in the 1981 fiscal year. The question is how far outside funds can go in saving the repidly collapsing economy when the private sector and the powerful military leaders are unwilling to support the economic and social programs of the government.
A drastic realignment of power two years ago, encouraged by the United States, broke the alliance the wealthy landowners and financiers had forged with the colonels who had comfortably ruled the country for 50 years. The move was seen as the only way to avoid violent revolution in the strife-torn country, but one of its secondary effects was to bring an already faltering economy to the ground.
Throughout the previous decade, El Salvador's gross national product has grown at a tolerable average rate of more than 4 percent. The country's low foreign debt, relatively developed assembly industries and plentiful supply of cheap labor made it a good investment risk for foreign and domestic capital. Coffee, cotton and sugar were sound sources of profit. The wealthy prospered and the Army kept an impoverished, malnourished and largely illiterate population quiet.
Then came the Sandinista victory in neighboring Nicaragua, and terror engulfed Central America's businessmen. The exodus of cash from El Salvador -- estimated at $1 billion to $2 billion -- sent foreign reserves plunging. Large numbers of peasants, civil servants and urban workers felt encouraged to attempt the same sort of violent overthrow of a detested regime.
The Carter administration believed that a change of government in El Salvador and the adoption of radical reforms were the only hope of preventing a second Central American revolution. By some accounts it welcomed, and by other accounts it actively encouraged, a coup led by a group of young officers on Oct. 15, 1979.
The coup went forward in defiance of the country's rich, and the new government, led by the conservative Col. Guiterrez and a progressive colonel who has since been custed, incorporated the Christian Democratic Party into the junta in the person of Jose Napoleon Duarte. President Duarte was, by all accounts, included under strong pressure from the United States and against the will of the conservative colonels and businessmen. The Christian Democrats were the traditional opposition, and their ideas were seen as dangerously leftist.
As the Christian Democrats set about implementing an ambitious of land reform and nationalization of banks and foreign trade, two things happened: the private sector brought investment to an almost complete stop, and the land reform program was hamstrung by the violent attacks of members of the security forces on peasants taking over the wealthy plantations. mThe popular rebellion and the increasing activity of the guerrillas, beginning in 1979, were the primary reasons for capital's flight from El Salvador. Strikes and sabotage permanently closed down 26 companies in 1979. In 1980 the figure soared to 113.
Agricultural production is down 7 percent. Construction is down 17.5 percent. Trade is down 12.1 percent. But the economic damage that has sent the gross national product from a 4-percent growth rate in 1978 to a 9.5 percent decline in 1980 is not, the businessmen say, primarily the result of the guerrillas' handwork, or the catastrophic rise in oil prices, or even of the collapse of the world coffee market. What has brought the economy to a standstill, they say, is business' reluctance to invest in a country run by left-leaning Christian Democrats.
The private sector's rebellion is extending beyond a national economic boycott to an aggressive political campaign. A former minister for the junta, Manuel Hinds, spoke at a luncheon last week for 600 businessmen. To enthusiastic applause he attacked a book by Duarte that outlines Latin American Christian Democratic principles.
"We are faced with only two choices, communitarianism [Duarte's doctrine] and communism," Hinds said. "A steely dictatorship only comparable to Marxist tyranny lies behind communitarianism."
He was seconded this week by the powerful Salvadoran Industrialists' Association.
"The present government is based on participative democracy, which at bottom is a socialistic, coercive and collectivist system," the industrialists' position statement reads.
Juan Sandoval, executive director of the National Association of Private Enterprise, agrees with Hinds, and adds, "There is no support on the part of the private sector for what the Christian Democrats are doing in El Salvador."
U.S. military aid of $58.8 million in fiscal 1980 went primarily to the support of government programs, but the 126.5 million approved for fiscal 1981 includes $44.9 earmarked for assistance to private business and industry.
This change in emphasis raises the question of whether the United States has changed its policy and is now willing to support the private sector in order to get the economy back to normal, even if that course of action risks destroying the chance of reform and even the overthrow of the government.