The Inter-American Coffee Agreement signed in 1940 went into effect in April, following the adoption of a special protocol by the ratifying countries (see BRAZIL for El Salvador's quota). The effectiveness of the quota system provided, which prevents overshipments that force the price down, is seen in the substantial rise in coffee prices in 1941. The importance of this to El Salvador, which is fourth among the world's coffee producers, is clear from the fact that normally coffee constitutes about 90 per cent of its total annual export values. The failure of the 1940-41 coffee crop, which is barely more than the nation's quota of 600,000 bags, is offset by the recovery in price; as a consequence, the short crop will produce more income than the much larger 1939 yield. The initial reaction of coffee prices generally to the entry of the United States into the War was a sharp advance, but the OPA promptly put a price ceiling at prevailing levels.
Surplus sugar presents no market problem since it is shipped across to Honduras, with which country El Salvador has a treaty of free commercial interchange. However, two unusually large cotton crops make the lack of outlet for the Republic's cotton surplus serious.
El Salvador is in the market for a $1,250,000 Export-Import Bank loan, to complete the Salvadorean section of the Pan American highway. At present the Republic has had no Export-Import Bank credits.
Military training for all men from 15 to 50 was ordered in December. The Salvadorean Military Academy is to be directed for the next two years by a North American, Col. Robert L. Christian. During the year the Minister of Education instructed all schools and colleges to exclude any discussion of anti-democratic doctrines. In June, the government confiscated a secret Nazi radio station, which was linked directly to Germany and to other Nazi stations in Latin America. Like all the Central American republics, El Salvador has declared war on the Axis powers. See also PAN-AMERICAN AFFAIRS.
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