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Latin America Investment News on Viva Tropical

Subsidized Mortgages Build Hope for Economic Recovery in El Salvador

Article Summary:

Citing Panama as its example, Salvadoran government officials want to implement a preferential interest act geared to providing low interest rate loans and streamlining construction procedures. If approved, the law would allow many Salvadoran families to obtain a government subsidized mortgage.

Photo Credit: gbgm

Original Article Text From El Salvador via Google Translate :

Interest Act Would Encourage the Construction of 6.861 Dwellings

If the government passed a law and implement preferential interest Act streamlining of procedures of construction, construction companies in the country could build more than six thousand new homes in at least four departments and thus, could generate 20,000 direct jobs and 40,000 indirect over the next three years. Economic growth would afloat.

So found the Salvadoran Chamber of Construction (Casalco) through a study conducted among its members.

That, besides other residential projects that other non-union builders could develop this legal tool.

Preferential interest law would allow all Salvadoran families choose a mortgage at a very low interest rate. If out of 7 or 8%, the buyer would pay a rate of only 3 or 4% and the state would pay the rest.

The proposal is not new. In fact, the union has been pushing for this law since 2008, but to date has been echoed by the Government and even though it was a campaign promise of President Mauricio Funes.

But this time, the union’s executive director, Ismael Nolasco, expected to be different, not only because he had the diagnosis to the Technical Secretariat of the Presidency, but also because it is precisely this dependence that is pushing a law streamlining procedures for construction, which this week hit the Assembly.

“If the Government implement these two laws, the construction would be reactivated and with it the economy,” said Nolasco.

“We have agreed with the Secretariat that for there to be private investment we need to play the tape and mortgage credit for families to buy homes,” he added.

To Nolasco, not just enough to build more houses in the country, but also create the conditions for families to have access to one. “What good is building thousands of homes if at the end, the families would not be able to buy them?” Said the director.

What has happened
The Technical Secretariat of the Presidency had promised last week to present to the Legislature a package of laws that would include a to expedite the process of construction. The process did not happen.

According to the Government with such laws, investors will be reduced to 120 days the maximum time to obtain building permits required by law.

But building more agility does not mean that reactivated the economy alone. Two years ago the Government announced its program Home for All, a project intended to build 25,000 social housing.

For Nolasco, the program has not been successful because, although some of these houses built, the financing problem persists. “The Government will bet too statism: I rule, I will resolve, and put aside the role of the private sector,” he said.

“They have to be both (laws). I can put all these housing arrangements, and I approve them, but if you are a housing developer, is going to be to build a thousand homes without knowing if you are able to sell ? ”

Panama Case
In Panama, the preferential interest law has been a success. No wonder its economy is growing at a rate of 7 to 8% of GDP, and is having a soaring construction.

Since the law was passed in 1985, their governments, regardless of what party they are, have continued to extend it due to the large impact on the economy.

The law has also been applied in Mexico and Colombia.

Nolasco said that this law has brought the Panamanian government over compensation “without investing a five.”

All the money the government spends on housing subsidy will return in taxes. “The return to the state tax is high concept. In Panama, it is considered that what is invested in housing allowance, the State returns tributariamente. Ultimately, the state spends nothing,” said Nolasco.

Just the opposite happens with almost $ 400 million that the Salvadoran government disburses propane gas, electricity and public transport, which does not return.

Link to Original Article:

From El Salvador

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