El Salvador's President Nayib Bukele Begins Second Term Amid Economic and Security Challenges

On June 1, 2024, Nayib Bukele, 42, begins his second term as President of El Salvador, following a landslide victory in February with 85% of the vote. Bukele's New Ideas party holds 54 out of 60 seats in the legislative assembly, granting him near-total control over parliament and other state institutions.

Why this matters: Nayib Bukele's second term as President of El Salvador has significant implications for the country's economic stability and its relationships with the global financial community. If Bukele's economic policies, including the adoption of Bitcoin, are unsuccessful, it could lead to further economic instability and potentially affect the region's economic growth.

Bukele's popularity stems from his aggressive crackdown on criminal gangs, which has significantly reduced violence in the country. His administration has arrested over 80,000 presumed gangsters under a state of emergency in place since March 2022, allowing for arrests without warrants. This campaign has drawn criticism from rights groups, including Human Rights Watch and Amnesty International, for alleged human rights abuses.

Despite his high approval ratings, Bukele faces significant economic challenges. El Salvador's public debt has surged to over $30 billion, or 84% of its GDP. Food inflation has outpaced salary increases, and more than a quarter of the six million population lives in poverty. Economic growth is projected to slow to 3% this year from 3.5% in 2023.

Bukele's controversial decision to make Bitcoin legal tender in 2021 aimed to attract foreign investment and reduce reliance on the US dollar. However, the uptake of Bitcoin has been slow, and international financial institutions have warned about its volatility. Critics argue that Bitcoin's price fluctuations could further destabilize El Salvador's economy.

Bukele's second term also begins amidst security concerns. On the eve of his inauguration, police thwarted a bomb plot allegedly involving veterans of the 1980-1992 civil war. Authorities arrested eight suspects and seized explosives, including small cylinders with fuses and sacks of ammonium nitrate. The suspects were part of the 'Salvadoran Insurrection Brigade,' and their targets included gasoline stations and government buildings.

Critics warn that Bukele's extended honeymoon with voters may be nearing its end as economic worries overtake safety concerns. Public policy expert Carlos Carcach describes Bukele as an 'all-powerful' president, stating, 'What he has demonstrated is that the law is irrelevant and that he can do whatever he wants, how he wants.'

Bukele's inauguration ceremony was attended by dignitaries including Spanish King Felipe VI and Argentine President Javier Milei. The presence of these high-profile figures highlights Bukele's growing stature on the international stage.

As Bukele embarks on his second term, the focus will be on how he addresses the economic challenges and criticisms of his governance style. His promise of a 'period of prosperity' hinges on the successful integration of Bitcoin into the economy and broader acceptance by the global financial community.

Key Takeaways

• Nayib Bukele begins 2nd term as El Salvador's President with 85% of the vote.
• Bukele's New Ideas party holds 54/60 seats in the legislative assembly.
• El Salvador's public debt surges to $30 billion, or 84% of its GDP.
• Bukele's Bitcoin adoption plan aims to attract foreign investment and reduce US dollar reliance.
• Critics warn of economic instability and human rights abuses under Bukele's rule.