How to fix a struggling economy: Bukele’s new challenge in El Salvador

On some occasions Nayib Bukele can only be understood like the kings or popes of Rome: not through his words, but through signs, insinuations, material posted on social networks, and sporadic words from the people around him. He did not outline an electoral program for the recent presidential elections nor did he campaign in the country’s cities, which would have helped Salvadorans understand what his objectives are for the next five years. He considers them outdated methods, the old way of doing politics.

Instead, he uses his phone and a clique of Latin American and Spanish YouTubers to launch his messages. It is evident that the security policy that has made him immensely popular inside and outside El Salvador will continue to be at the forefront, but the country also demands new policies that will help reduce poverty and raise workers’ incomes. Having overcome the serious problem of gang violence, the time seems to have come to use all of the immense power he has to become the only leader of El Salvador to solve the country’s structural problems.

“When one reviews all the economic statistics from four years ago, they are the same or worse: low foreign investment, low economic growth, and a trade balance deficit. We depend more on purchases from abroad than on what is produced here. The challenge now is to focus on that area. This requires a refinement in terms of knowledge of public and economic policies that this government has not shown so far,” explains independent Salvadoran economist Tatiana Marroquín.

The country’s external debt has reached its historical maximum of 80.9%, according to the government itself. And a figure that is even more revealing is that about 25% of the budget has to be allocated to pay for it. The World Bank considers that there are still problems, such as the need to institute reforms to achieve fiscal sustainability. The government faces liquidity pressures, the agency says, but agrees that the country can continue to prioritize increasing investments in human capital and strengthening the social protection system. It concludes that the conditions do exist that can encourage dynamic and inclusive growth.

Bukele used to have Alejandro Zelaya in charge of the country’s finances, but in July of last year, he left the government to take up a directorship at the Central American Bank for Economic Integration (CABEI). In his place, María Luisa Hayem has taken the reins as Minister of the Economy. There is very little public information about the new minister, and her public appearances have been very sporadic.

The inner core of the government’s decision-making is not easy to unravel. It is known that the president is accompanied by his brothers Karim, Ibrahim, and Yusef, all sons of the late Armando Bukele. The president’s father was an extremely charismatic Palestinian businessman who left a very deep mark on all his children. Bukele has said that his father was nominated for the Nobel Prize — which is not true — but that only demonstrates the high regard he held for his deceased father. Ernesto Sanabria, the Secretary of the Presidency, is another close official.

However, as published by the digital newspaper El Faro, the most important media outlet in El Salvador, it is his Venezuelan advisors who have been in charge of “the economic interventions,” such as the distribution of food boxes among the population. These very discreet Venezuelan advisors operate almost in the shadows and come with ties to the Venezuelan opposition leaders Leopoldo López and Juan Guaidó.

There are those who believe that these advisors make up a kind of parallel government that has even more influence over Bukele than some of his ministers. It is a similar story to that of the Cuban agents who were in charge of structuring the governments of Hugo Chávez and later Nicolás Maduro. In any case, the internal mechanisms have not been made transparent and it is difficult to accurately evaluate the balance of power.

However, it is known for sure that Bukele has tried to promote tourism to the country. El Salvador has stunning beaches that are less crowded than those in other countries such as Colombia or Mexico, and new developments are planned for on El Salvador’s coast. In El Zonte, just half an hour from San Salvador, dozens of surfers take to the sea every day in search of waves. The majority are Canadian and American tourists who stay in boutique hotels at the resort.

The UNWTO World Tourism Barometer estimated that the number of foreign visitors grew by 32% last year. The fierce promotion of the country through these foreign influencers and through the president himself on the most active social media platforms has had a clear impact. El Salvador is sold as the country that it is today. On some of these beaches, tourists can make purchases with bitcoin, the virtual currency that Bukele made legal tender in the country, but which has not fully caught on.

Government investigators and auditors complain that they have had problems auditing state accounts. The Bukele government has encouraged opacity. “I’m waiting,” agrees Marroquín, and adds: “I wonder if the president would be willing to give up transparency and oversight in exchange for a financial lifeline for the next four years, such as an agreement with the International Monetary Fund (IMF).” The question remains in the air.

In two years, Bukele has solved the problems the country had with violence through a state of emergency that has violated human rights, according to research by international organizations. This situation will continue, there is no doubt about that, but Bukele is expected to fully immerse himself into the nation’s underlying problems, such as the economy. The president, who has just been re-elected for another five years, faces new problems on the horizon.

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