Salvadorans renewed their confidence in Nayib Bukele, who announced his re-election in Sunday’s election based on the success of his “war” against gangs. But analysts say economic difficulties predict the end of the honeymoon.
His second government will be problematic because people’s expectations will not be met economically or socially. “The (economic) trends are not good for him,” independent Salvadoran economist César Villalona told AFP.
According to polls, Bukele is the most popular president of Latin Americaespecially thanks to the suppression of gangs that have made one of the most violent countries in the world a much safer one.
Even if he manages to keep the gangs at bay, it may not be enough for Salvadorans to continue to give Bukele carte blanche on economic matters.
“The security situation is better but the economy is still bad,” the analyst told AFP. Michael Shifterfrom the think tank Inter-American Dialogue in Washington.
“Everything is more expensive”
Bukele He promised on Sunday “a period of prosperity” because “there is no longer any inhibition to start a business, study, work and develop tourism.”
But there are increasing complaints on the street.
Regarding “Health, education, we have to change a lotBlanca Noemí, a 52-year-old street vendor in San Salvador, tells AFP.
Everything is more expensive. “The cost of basic goods has increased,” said taxi driver Miguel Juárez, 37.
Elizet GarciaThe 35-year-old housewife calls for “more job opportunities for young people”.
According to Villalona, that is slow economic growth and the decline in agricultural and industrial production does not bode well.
The cost of the basic food basket, which includes bread, beans, meat, eggs and fruit, has increased by about 30% in the last three years, while the minimum wage has increased by only 20%.
Nearly 30% of Salvadorans live in poverty and nearly one in 10 live in extreme poverty, according to 2022 figures Economic Commission for Latin America (ECLAC).
A 2023 State Department report said nearly 70% of Salvadoran workers worked in the informal sector and lacked access to social benefits.
The country’s problems go far beyond security,” said Ana María Méndez-Dardón, director for Central America at the Washington Office on Latin America (WOLA).
On employment, education and other social issues, “there is no improvement,” he told AFP.
The challenge of growth
Financial health is another key concern as national debt is high 80% of GDP and the country is unable to sell bonds abroad to raise cash or attract large investments, Villalona said.
Instead, the government had to borrow from international organizations as well as its own central bank and national pension fund, which increased the deficit even further.
Since there is less money in circulation, “the consumption capacity decreases. And that doesn’t seem to be a solution in the short term,” Villalona said.
The country is negotiating IMF (IMF) a loan of around 1.3 billion dollars. However, Villalona said Bukele was trying to avoid conditions that include cutting public spending, subsidies and increasing consumption taxes “because this has political costs.”
The Ministry of Foreign Affairs reiterates that the emergency regulation, in force since March 2022, “contributes to improving consumer confidence and economic optimism”.
However, this “has not been reflected in significant foreign direct investment”, among other things because trust in the government is not high and corruption remains “a challenge”.
GDP was 2.8% in the third quarter of 2023 and the IMF forecasts a figure of 1.9% for 2024.
The challenge is to grow at higher rates, reaching at least the Central American average of 2.6 to 3.5 percent, former central bank governor Carlos Acevedo told AFP.
In an attempt to revive the remittance-dependent dollar economy, Bukele converted Bitcoin into legal tender alongside the dollar in 2021, although studies show Salvadorans have almost no use of it and the IMF is urging him to back down from that decision.
According to Acevedo, only sustainable economic growth canFight poverty decisivelyWithout social investment, he warned, “the problem of gangs or an equivalent (phenomenon) will re-emerge in the medium term,” he warned.
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