El Salvador Perspectives

The US State Department recently issued its 2023 report on the investment climate in El Salvador .  The opening paragraphs of the executive summary of this report offer a pretty good summary of the forces impacting the economy of the country: El Salvador’s location, preferential trade terms under the Central American Dominican Republic Free Trade Agreement (CAFTA-DR), use of the U.S. dollar as legal tender, and recent improvements in the business environment are strengths as an investment destination. Significant levels of sovereign debt, the legacy of decades of gang violence and a lack of transparency in rulemaking are weaknesses. GDP rebounded strongly from the pandemic to 11.2 percent growth in 2021. The economy grew 2.6 percent in 2022. The IMF forecasts real GDP will grow 2.4 percent in 2023. Public debt is on an unsustainable path and creates uncertainty about El Salvador’s ability to honor its future commitments. El Salvador has engaged in negotiations with the Internationa...

A new poll released by Francisco Gavidia University (UFG) shows the possibility, that after national elections in February 2024, Nayib Bukele and his Nuevas Ideas party will have firmly consolidated one party rule over all of the Salvadoran government. There is no surprise that Nayib Bukele has an overwhelming lead in his campaign to be re-elected president for a second five year term. The highly popular Bukele is preferred by more than 68% of respondents, while no other party's candidate reaches even 5%.   These results appear despite the fact that El Salvador's constitution states multiple times that a president may not be re-elected for successive terms. (See those provisions at the bottom of this post).  However, a panel of Bukele allied judges, installed in the Constitutional Chamber of El Salvador's Supreme Judicial Court by Nuevas Ideas in 2021, decided those provisions should be ignored and issued a ruling that Bukele should be permitted to run again.  ...

Here are a collection of bits and pieces from the news in El Salvador during the past month when we were on break.  1.  Cargo ferry service begins. Commercial cargo ferry service arrived between Costa Rica and El Salvador on Thursday, August 10.  The Blue Wave Harmony ferry is able to carry 100 tractor trailer trucks for the 430 mile voyage through the Pacific from one country to the other in less than 24 hours.  There will be two trips per week.   The first trip was not without problems, needing almost 28 hours to complete the journey and being unable to unload trucks on arrival in Costa Rica when it was low tide. The business case for the ferry rests in being able to ship good between the two countries while bypassing border crossings with Honduras and Nicaragua.  Commerce with Nicaragua under the dictatorial Ortega government has become increasingly subject to uncertainty. 2.   A crypto safe haven. El Salvador is becoming a haven for cry...