El Salvador is a small developing country that has undergone important processes of agrarian change and suffered the consequences of a 12-year civil war which ended with a peace agreement in the 1990s. Economic reforms have given insufficient weight to history, institutions and politics. This book will show that to improve their efficiency, there is a need to consider how both economic and political variables have affected social structures and institutions. To be sustainable reforms should aim at an appropriate balance between growth and distribution. The outcomes of this research question some commonly accepted theses on agrarian transformation, state autonomy and the role of economic policy and foreign intervention in El Salvador and Central America in general.

State Building in Latin America diverges from existing scholarship in developing explanations both for why state-building efforts in the region emerged and for their success or failure. First, Latin American state leaders chose to attempt concerted state-building only where they saw it as the means to political order and economic development. Fragmented regionalism led to the adoption of more laissez-faire ideas and the rejection of state-building. With dominant urban centers, developmentalist ideas and state-building efforts took hold, but not all state-building projects succeeded. The second plank of the book's argument centers on strategies of bureaucratic appointment to explain this variation. Filling administrative ranks with local elites caused even concerted state-building efforts to flounder, while appointing outsiders to serve as administrators underpinned success. Relying on extensive archival evidence, the book traces how these factors shaped the differential development of education, taxation, and conscription in Chile, Colombia, Mexico, and Peru.

Since the first edition of this book appeared in 1982, El Salvador has experienced the most radical social change in its history. Ten years of civil war, in which a tenacious and creative revolutionary movement battled a larger, better-equipped, US-supported army to a standstill, have ended with 20 months of negotiations and a peace accord that promises to change the course of Salvadorean society and politics. This book traces the history of El Salvador, focusing on the oligarchy and the armed forces, that shaped the Salvadorean army and political system. Concentrating on the period since 1960, the author sheds new light on the US role in the increasing militarization of the country and the origins of the oligarchy-army rupture in 1979. Separate chapters deal with the Catholic church and the revolutionary organizations, which challenged the status quo after 1968. In the new edition, Dr Montgomery continues the story from 1982 to the present, offering a detailed account of the evolution of the war. She examines why Duarte's two inaugural promises, peace and economic prosperity could not be fulfilled and analyzes the electoral victory of the oligarchy in 1989. The final chapters closely follow the peace negotiations, ending with an assessment of the peace accords, and evaluate the future prospects for El Salvador and for the 1994 elections.

El Salvador has made major strides on several fronts since the peace accords of 1992. The near-term outlook has strengthened, although challenges remain. The authorities are intended to limit tax exemptions and subsidies, and raise priority of banking reforms this year. Discussions focused on policies to enhance growth and social progress within the framework of formal dollarization. IMF staff supported plans to consolidate financial stability through steps to strengthen the prudential and supervisory framework, deepen intermediation, and improve the safety net.