Elections in El Salvador: the economy, the next challenge for Nayib Bukele after the “war” on the mafias

Salvadorans have renewed their trust in Nayib Bukele, who proclaimed his re-election in Sunday’s elections, boosted by the success of his “war” against gangs. But analysts believe so Economic difficulties predict the end of the honeymoon.

“His second government will be problematic because People’s expectations will not be met either economically or socially.. The (economic) trends are not good for him,” independent Salvadoran economist César Villalona told AFP.

Bukele is, according to polls, the most popular president in Latin America, largely thanks to the crackdown on gangs that transformed what was one of the most violent countries in the world. into a much safer one.

Even if he manages to keep the criminal gangs at bay, it may not be enough for Salvadorans to continue giving Bukele carte blanche in economic matters.

“The security situation is better, but the economy is still bad”Analyst Michael Shifter of the Inter-American Dialogue think tank in Washington told AFP.

Bukele promised on Sunday “a period of prosperity” because “there are no longer any brakes on the creation of a business”, on study, on work, on the development of tourism.

But complaints are starting to be heard on the street.

As for “Health, education, we have to change a lot”Blanca Noemí, a 52-year-old street vendor from San Salvador, explains to AFP.

“Everything is more expensive. The cost of basic products has increased,” said taxi driver Miguel Juárez, 37.

This is stated by Elizet García, a 35-year-old housewife “greater job opportunities for young people.”

According to Villalona, slow economic growth and the decline in agricultural and industrial production They don’t promise anything good.

The cost of the basic food basket – which includes bread, beans, meat, eggs and fruit – increased by almost 30% in the last three yearswhile the minimum wage is only 20%.

Nearly 30% of Salvadorans live in poverty and nearly one in ten are in extreme poverty, according to 2022 data from the Economic Commission for Latin America (ECLAC).

This is stated in a 2023 State Department report About 70% of Salvadoran workers worked in the informal sector without access to social benefits.

“The country’s problems are much broader than the issue of security,” said Ana María Méndez-Dardón, director for Central America of the Washington Office on Latin America (WOLA).

“In terms of employment, education” and other social issues “there are no improvements,” he told AFP.

Since then, fiscal health has been another major concern Public debt is equal to approximately 80% of GDP and the country is unable to sell bonds abroad to raise cash or attract large investments, Villalona said.

Loans

Instead, the government had to borrow from international organizations, as well as its own central bank and national pension fund. which further increased the deficit.

With less money in circulation“Consumption capacity is decreasing. And this doesn’t seem to have a short-term solution,” Villalona said.

The country is negotiating a loan of around $1.3 billion with the International Monetary Fund (IMF). But Villalona said Bukele is trying to avoid the conditions that include cut public spending, subsidies and increase taxes on consumption “because it has a political cost.”

The State Department says the emergency regime effective March 2022 is “helping to improve consumer confidence and economic optimism.”

However, this “has not translated” into significant foreign direct investment, partly because There is not much trust in the government and corruption remains “a challenge”.

GDP in the third quarter of 2023 was 2.8% and the IMF expects a figure of 1.9% for 2024.

“The challenge is to grow at a faster pace” reaching at least the Central American average of between 2.6% and 3.5%, former Central Bank governor Carlos Acevedo told AFP.

In an effort to revitalize thedollarized, remittance-dependent economy, Bukele converted bitcoin into fiat currency alongside the dollar in 2021, even as studies show Salvadorans almost don’t use it and the IMF calls on him to back off on that decision.

According to Acevedo, Only sustained economic growth can “decisively attack poverty”. Without social investment, she warned, “the issue of gangs or an equivalent phenomenon will re-emerge in the medium term,” she warned.

AFP agency