El Salvador's current economic and political situation is a result of positive efforts following years of civil unrest. A 12-year civil war, from 1980 to 1992, ruined the Salvadoran economy by raising inflation and unemployment, and lowering the GNP.
After the civil war ended, the government - eager to improve the economy - introduced reform through infrastructure reconstruction programs and land redistribution, and by encouraging international investment and making local companies more competitive. Billion-dollar debts owed to the United States were forgiven and the International Monetary Fund and the World Bank offered large loans for aid.
The economy grew for four years, but later slowed due to lower prices of major exports - such as coffee - an increase in VAT, and damage from Hurricane Mitch in 1998.
El Salvador now has the strongest economy in Central America and is one of the least indebted Latin American countries. Although there are still infrequent disappearances of Salvadorans, an end to the 1980s death squads - who suppressed government opposition - has allowed organized labor to strengthen. In contrast, the endless battle against disparity between the rich and poor continues. The country's current challenge is the issue of rural poverty, which remains near 30 percent. Stumbling blocks to resolve this issue are high lending rates, low land-ownership among rural farmers, and insufficient high wage jobs in rural areas.
Fifty percent of the employed work in the agricultural sector as either farmers or ranchers. Besides the many coffee plantations that line mountain slopes, other major Salvadoran crops include sugar, corn, rice, and beans. El Salvador is also an industrial nation with manufacturing industries that include beverages, chemicals, food processing, and textiles. However, the economy is still relatively dependent on agriculture and remains vulnerable to price fluctuations of agricultural products - coffee, for example - and to natural disasters like earthquakes and flooding.
Efforts to ease foreign trade and foreign exchange, by adopting the U.S. dollar as the official currency in 2001, have successfully led to new export markets and foreign investment.
El Salvador is a republic, consisting of 14 departments, made up of 262 municipalities. The government's executive branch is run by the President, who serves one five-year term without the opportunity for re-election. Departments are run by governors, chosen by the President. Municipalities are headed by mayors, elected by popular vote. The legislative branch is unicameral and its members are elected every three years. Unlike the President, members are allowed to be re-elected. The judicial branch is run by a 15-member Supreme Court.
The two better known political parties of El Salvador are the right-wing Nationalist Republican Alliance (ARENA) and the leftist FMLN (Farabundo Martí National Liberation Front). The FMLN is now the legal opposition party to the ARENA party. However, FMLN initially formed as an opposition group - to fight for change from the oligarchic, suppressive government - and instigated the civil war (1980-1992). ARENA has traditionally won executive powers during presidential elections, but FMLN is gaining strength, as the 2003 parliamentary elections proved when they became the majority party in parliament.