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Setting aside the debate surrounding the legitimacy and popularity of President Nayib Bukele, he has a number of challenges ahead of him in the social, political, and economic spheres.

In large part, these challenges are his legacy as they result from the decisions implemented in his first presidential term.

Paradoxically, when it comes to overcoming the country’s main problems, President Bukele is his own worst enemy.

President Bukele’s mandate should consist of modernizing the country, making it economically dynamic, socially cohesive, and democratic once again. To this end, it is important for the president to promote both dialogue and agreement on a social contract for El Salvador based on the premise of social inclusion and a democratic, equitable, and the free participation of society.

This commitment would mitigate fears of authoritarian radicalization and would resolve some of the challenges Bukele faces as El Salvador’s head of state.

The Great Economic Challenge – More than a Task, it is an Outstanding Debt

President Bukele opted to increase spending through public investment while also increasing the security budget. This public expenditure has been especially financed with external funds, including borrowing from international financial institutions and bond sales to the banking system and foreign investors. He invested in roads, not human capital, especially during election year.

The president has indebted the country by at least US$7,767 million during his first term for an accumulated debt of nearly 90 percent of national income. Even after his fiscal plan to reduce spending, which fundamentally sacrificed the pension fund, the deficit hovers around 4.5 percent of gross domestic product (GDP).

In fact, the increase in public expenditure has visibly risen from 15 to 20 percent of GDP between 2019 and 2023.

Unfortunately, this indebtedness and public works-directed spending did not produce increases in growth, productivity, or formal employment.

The problem is that contractual and financial obligations are vast and translate into a debt service that is three percent of GDP and growing.

Bukele’s second term begins with an indebtedness that weighs on the people. This is a delicate situation because the two most important sources of economic growth, remittances and exports, are not growing.

The country’s economy is 78 percent sustained by three activities: remittances (26 percent), public expenditure (20 percent), and exports (31 percent). The rest takes place within the informal economy and a business sector that is reluctant or insecure about investment.

Public expenditure is at risk of decreasing due to the debt the government has already acquired, and its accompanying external and internal payment obligations. In other words, to maintain a 20 percent level of public expenditure, the government must either borrow more, raise taxes, make other deals with the banking sector, or continue its indebtedness to the pension fund. The impact of borrowing on the pension fund cannot be ignored. By April 2024, the government borrowed more than US$1,500 million from the pension fund and the mechanism used for this is not transparent. More importantly, it has been used to finance government spending without a clear plan for future repayment. Given the current economic challenges, the impossibility of paying this fund will have consequences for retirees in the future. Not only is this spending unsustainable, but a healthy recovery of the pension fund debt is not anticipated.

Figure 1: The Salvadoran Economy: Exports, Remittances, and Public Expenditure

Source: Banco Central de la Reserva, El Salvador

Things are not looking well for exports and remittances either. According to data from the Central Bank of El Salvador, during the first six months of 2024, exports fell five percent and imports grew only one percent. Meanwhile, remittances grew two percent (highly underutilized Bitcoin and Chivo Wallet transfers have also dropped from 39 to 29 million).

The role of remittances is vital for the country as they fuel private domestic consumption. Between 2017 and 2023, in the face of poor economic performance from both the public and private sector, remittances grew from 20 to 30 percent of private domestic consumption. Even with increased public expenditure and consumption growth from remittances at 30%, the economy still slowed down.

The issue of remittances is critical for two reasons: first, because they grow fundamentally as a function of migration; and second because their impact on economic growth depends on how they are (or are not) leveraged. In the first case, Salvadoran migration will decelerate, not because the country is safer, but because many people have already left. The ability to leave the country is also decreasing as the economic and social burden of the labor force increases; the labor force is smaller than the elderly and minor populations. Declining migration will mean that the volume of remittances will not grow by more than 30,000 new households receiving money. Second, El Salvador does not have a financial inclusion strategy that focuses on formalizing the savings and investments of remittance-receiving households. This situation reduces the capitalization of savings capacity and the amount of savings within the financial market.

In terms of exports, El Salvador lacks economic complexity. Of its exports under the CAFTA and Trade Partnership with the European Union, 90 percent are concentrated to 10 commodities, of which textile exports account for more than 70 percent and coffee and sugar, 15 percent. Changes in global competition and in the investment climate towards this country have reduced export performance.

Macroeconomically, El Salvador is not in a good position.

In order to stabilize the economy with greater income that reflects improvements in macroeconomic indicators and social welfare, it is important that the country takes advantage of the next few years to invest in human capital, financial inclusion, and a transparent fiscal plan that resolves its debt on workers’ pensions. It must be kept in mind that, although the country may have less than 900,000 pension contributors, in a labor force of 3.5 million workers, these future pension beneficiaries are a source of employment and consumption, and current interference will have major long-term consequences.

Reconstituting a Fragmented Society is Imperative

There are many questions about the promises made by the president in his first electoral campaign. He has managed to neutralize the threat of the maras and Salvadorans do certainly feel safer.

Now, however, El Salvador enters a new period in which its society has become substantially fragmented – an everyday reality experienced by its people. Fragmentation is found in at least three major segments: prevailing social inequality, migration, and incarceration.

Social inequality in El Salvador has increased in recent years. According to data from the World Bank, the Gini index shows that the gradual decrease in inequality remained stagnant during Bukele’s five years at 39/100. This statistic had been declining from 51/100 in 2001 and has remained at 39 since 2019.

An example of this inequality is unimproved performance among public schools. Illiteracy remains prevalent and stagnant, with at least one in 10 Salvadorans unable to read or write. Additionally, as of 2022, the country experienced one of the lowest school performance rates in the world. As of 2024, enrollment has not grown during his government and has maintained a matriculation of 1.1 million students – down from 1.4 million in 2018 even though the number of school-age children has grown. One of the factors associated with this decline may include dropout rates which could be related to migration.

With these and other educational challenges, it does not make sense that the state reduced its education spending from 18.5 percent of its total budget spending in 2018 to 18 percent in 2023. Regrettably, the country is paying as much for its debt service as it is on education.

Another challenge facing the president is to bring together a transnational family by building institutional ties that strengthen the material and emotional ties between the diaspora and El Salvador. Although the president claims otherwise, more Salvadorans have left the country recently than in previous years or decades. Departures are not disparate; both regular and irregular migratory growth has been high under Bukele. Outreach to the diaspora must be sincere. El Salvadorans abroad may be prepared to stand up for the president, but they have yet to go to El Salvador and see him or their relatives.  The growth of the diaspora’s tourism in 2018 increased one percent year-over-year, from 282,164 to 303,195 in 2023.  This type of tourist makes greater contributions to the economy than other tourists.

Table 1: Migration to the United States: Migratory Detention Data

Source: DHS, US Department of State, Immigrant visas issued by the issuing office. *Number decreases due to appointment closures in 2020 due to the pandemic period.

The reasons behind migration can be complex, and include the country’s poor economic performance, fear of the current government’s concentration of power, and the urgency of family reunification. But in practical terms, El Salvador is a country where more than 80 percent of households have a family member abroad. Among the less than 1.5 million households, one million receive remittances.

This migration reflects important dynamics, one of which is of a demographic nature. Annually, since 2019, at least one percent of the population has left for the United States alone, an amount that is almost double that of previous periods.

Figure 2: Arrival of Salvadorans as a Percentage of El Salvador’s Population

Source: DHS, World Bank

While school dropouts continue, the number of unaccompanied children migrating is at least 13 percent of all Salvadoran migration to the United States. It is no accident that more children are migrating than the increase in annual high school enrollment. Overall, the demographic effect is large because the size of the labor force is declining as economic obligations continue and even grow.

This government has the challenge of designing social inclusion policies and engaging with the diaspora at many levels beyond the sending of remittances. Such issues include advocating for the regularization of Salvadorans abroad, formalizing development alliances to invest in education and human capital – which is especially important for a country whose natural resources are scarce and modernization requires competitiveness in the knowledge economy and promoting financial inclusion among remittance recipients.

Another vital challenge to social cohesion is related to reintegrating prisoners who have served their sentences and learning what extent the policies of the territorial plan of Reconstrucción del Tejido Social y los Centros Urbanos de Bienestar y Oportunidades (CUBO) have been successful versus its role as an instrumental component of political marketing that has added to the president’s popularity. For example, the number of school dropouts during the same period of CUBO is not consistent with its success.

It is also important to keep in mind that many of the inmates sentenced to 20-years of incarceration at the end of 2000 will be released during this second term. This is a situation that highlights the need to consider how to care for thousands of released persons who must seek employment or reunite with families. Of 105,000 prisoners or more, practically one out of twenty households have a family member in prison. There are also children with parents in prison whose school performance, low results, and/or desertion are associated with this deprivation of liberty. In addition, one percent of those in prison are minors.

Many of these challenges relate to the fact that the president did not meet the goals of his own Plan Cuscatlán, in which the president promised to carry out aspects of education.

Figure 3: El Salvador’s Prison Population

Source: Insight Crime

Politics in the Face of the Concentration of Power and Authoritarianism

A democratically ruled society is one that provides accountability through institutional checks and balances, is inclusive, plural, equitable, and free, and guarantees a better quality of life for its society as its not exposed to abuses of authority, excesses of political control, or restrictions on freedom of expression. The numbers don’t lie; a country’s quality of life is higher with a democracy than without it.

Whether by design or by inertia, the first five years of government show a gradual concentration of political power by the president. This concentration seems to follow a pattern, since the consolidation of control in both the legislative and judicial branches have occurred one after another. Meanwhile, and in parallel, the government attacks the media and civil society organizations as its only means to communicate to them.

In 2024, El Salvador faces several major democratic challenges, of which the absence of checks and balances within the branches of government is one. These checks and balances have effectively disappeared with the replacement of magistrates with those who have a pro-government bias.

However, there are also other risks related to democratic backsliding such as: the presidency’s lack of transparency and communication with society; the labeling of pluralism and expressions of civil society organization as threats; situations that have given rise to a level of persecution; and procedures such as those of the Instructivo de la Unidad de Investigación Financiera de la Fiscalía General de la República (FGR) that requires NGOs to re-register – a requirement that exposes them to closure.

The completely questionable and arbitrary way the president is reelected that uses legalistic but imprecise or incorrect interpretations of Article 152 of the Constitution by his collaborationist magistrates is another action that has weakened the democratic structure. Gradually, Nayib Bukele has facilitated the concentration of political power in all areas of the state and political institutions – including the police and the army.

In fact, the interpretation of the Constitution on reelection alongside the reform to the Penal Code on electoral fraud, which penalizes a person who ‘obstructs a candidacy’ (for example the protest and questioning of Bukele’s reelection this past electoral campaign), are expressions that, when combined, become antidemocratic practices. The reform to the Penal Code, attacks on the media, trials on persons of interest, and the regulation of NGOs constitute practices that criminalize democracy.

The reduction of municipalities from 262 to 44 as a measure transferring control from these local governments to the state is part of this concentration of power. Other aspects of power concentration include the clear absence of accountability and transparency – such as the fiscal reform plans, or the legal reform to the pension fund, or the declaration of certain important information as ‘reserved information,’ and the participation of relatives of the president in the exercise of governance in the country.

Civil society organizations note that it is paradoxical that the president criticizes NGOs given that they are key actors in building a more inclusive society. Rather than including them, his attacks have left them vulnerable before the law.

The absence of checks and balances is a huge risk because El Salvador has been democratically weakened alongside its crumbling party system. Nuevas Ideas operates as the dominant and almost only political party. In the face of this, the people are left at the mercy of a single party.

Thus, political challenges go beyond the suspension of the state of exception because they include the reality of a neo-populist, self-referential, unidirectional, and vertically-driven leadership that has maintained popularity based on the management of crime reduction in the country and through the president’s political marketing.

The president’s challenge lies in maintaining his leadership and charisma while restoring checks and balances as a democratic guarantee. What remains now is the trust placed by the people in the president that he will do a good job within the framework of the democratic rule of law. However, the risks of a deepening concentration of power that has a restrictive effect on freedoms, excludes social and political sectors, and evades accountability are very high. Put differently, there is a high risk that Bukele will transfer mano dura policies to the general population.

One need not look further than Nicaragua and how Ortega gradually dismantled democratic scaffolding. He started by eliminating political checks and balances (the executive co-opting of the legislature and the judiciary), followed this by eliminating civil society organizations and political parties, and then paired these actions with attacks on the media and continued with religious persecution.

No. Bukele is not Ortega. For now. However, it is important that the president is presented with limits that prevent him from radicalizing, especially given the fact that he enjoys the support of both the police and the army.

Introducing a law controlling non-governmental organizations and increased sales taxes without a legislative and civil society counterweight exposes El Salvador to a life in authoritarian conditions.

Towards a Social and Democratic Plan to Dismantle Authoritarianism in the Making

Moisés Naim recently wrote that in these times we are witnessing a revenge of autocrats, of leaders who bet on the autocratic exercise of power, without checks and balances, accountability, and who repress with the calculation that they will not be challenged. This revenge consists of vindicating their way of governing, supported by the polarization of the population, and espousing a populist and propagandist discourse.

This polarization is evident in the region and has been growing in El Salvador with the two administrations of the Frente Farabundo Martí para la Liberación Nacional (FMLN) since the post-2009 period. The is the result of the lack of solutions by leaders to address the impact of the global recession – reaching extremes in terms of not knowing what to do. Some have bet on a combative approach while others have sought to negotiate and reconcile solutions.

The most politically attractive leaders – the populists – are those who have sold cosmetic solutions instead of actionable proposals within the legal framework: I will lead you to change, but in return, you serve me. These populists have used post-truth and propaganda to unscrupulously sell political solutions. It is a systemic political marketing campaign that, when accompanied by a developed clientelist network, gives populists an advantage over other opponents within the polarized rhetoric.

For Bukele, resuscitating mano dura while the maras were already in decline was his solution.

Figure 4: El Salvador: Homicides, Migration, and per capita Income

Source: DHS, Nationwide Encounters. Police reports and World Bank Development Indicators.

This situation does not occur within a void but occurs in moments when society feels greater discretion and control to deposit a little more of its sovereignty in others (the state and the market). The enjoyment of liberties is elastic, and, in some cases, society tolerates greater controls in exchange for answers, solutions, or expectations. Thus, the Salvadoran people have surrendered their sovereignty to populists in a polarized environment that demands solutions.

So far, however, no such leader has offered the right solution, neither Andrés Manuel López Obrador, Gustavo Petro, Nayib Bukele, nor Manuel Zelaya. However, in the process these leaders have been gaining more power and using it to their advantage, weakening the opposition, and changing the political balance of power. They become stronger through rhetoric and laws and achieve continuity in power through lies or half-truths.

With Bukele, once the excuses are exhausted, the absence of economic and social solutions will bring to light his true inability to govern. Therefore, the president will have to seriously undertake actions that include democratic restitution, social inclusion, and economic modernization.

In 2024, Bukele won with the same low voter turnout as before – 57 percent of registered voters. After years of shock therapy against the gangs, it is no longer an excuse to say that the economy is not growing because of the gangs (putting aside the fact that he gave the coup de grâce to the already declining gangs).

In this sense, there is an opportunity for the president to anticipate a political backlash and prevent an economic debacle. Salvadorans, just like they bestowed their trust, can withdraw it.

It is more viable for the president to commit his work to a strategy that is accompanied by a social contract that includes all sectors of the country rather than alienating them. However, the risk of facing a repressive regime in the face of the strong concentration of power may be high in a scenario in which the economic deterioration is unmanageable, social protest grows, and the government responds aggressively. The political crisis in neighboring Nicaragua began with protests resulting from Daniel Ortega’s manipulation of the social security system.

This strategy must have at least three axes: social, political and economic. Agreements must revolve around investing in human capital (education, technology, health) and financial inclusion (increasing the formalization of savings, mobilizing them into credit, expanding payment technologies to the base of the pyramid). On the economic front, this includes a fiscal plan, reviewing the state of pensions, building a better alliance with the diaspora to co-invest in order to reduce the size of the informal economy, modernizing micro-enterprises through technology, and directing incentives towards the knowledge economy. On the political side, incentives must be created to increase organized social pluralism, encourage public debate, and stop the persecution of the media, as well as enter into a political dialogue to revitalize the party system and restore the system of checks and balances.

In the hands of President Bukele, the future of El Salvador depends on whether he holds himself accountable and delivers positive results or if he expects that the people serve him.