Bukele powers ahead

CENTRAL AMERICA - Report 29 Nov 2023 by Fernando Naranjo and Felix Delgado

El Salvador is preparing for the February 2024 presidential elections, with President Nayib Bukele already registered to run. His notice revived discussions about the supposed unconstitutionality of his running for a successive term, and several annulment petitions were presented before the Supreme Electoral Tribunal. Our conjecture is that they won’t succeed. Congress will have to name before December 1st substitutes for Bukele and Vice President Felix Ulloa for the remaining six months of their terms. No matter who is named, we expect Bukele to continue running Salvadoran affairs in the background. Economic conditions appear to be improving, although this has not yet been reflected in growth. External perceptions of El Salvador are much better than during the previous two years. The probability of an agreement with the IMF is now higher, and may perhaps materialize after the February elections. Most economic indicators continue evolving along the lines of our September revised short-term outlook. We therefore don’t see significant deviations of indicators to December 2023.

Costa Rica has received good news in recent weeks. In February, the country was included in the EU blacklist of non-cooperative jurisdictions for tax purposes, but in October was removed from the list. The second piece of good news was the positive review of the Extended Facility Fund (EFF) by the IMF staff. The staff recommended to the IMF executive board a new disbursement of $756 million in December 2023 that will help support government maturities. Despite the strong increase in interest rates, relatively high prices and the robust appreciation of the colon, the economy performed better than forecast in 2023. Nevertheless, several unresolved challenges for the country remain. Over the past decade the economy has shown a strong duality. Rising crime has become a serious problem. Costa Rica´s reputation as an ideal destination for tourism has been threatened by the surge in violent crime and drug trafficking. According to the latest poll by the University of Costa Rica’s Center of Political Studies (CIEP), the Rodrigo Chaves administration’s approval rating has dropped significantly during the last year, from 79% to 51%.

New concerns have appeared in Guatemala´s political scenario in November, just two months from the scheduled presidential inauguration. The Public Prosecutor's office announced, during a press conference, that it would file a request to the Supreme Court to eliminate immunity for President-elect Bernardo Arevalo and Vice President-elect Karin Herrera. Arevalo has claimed that a slow-motion coup is being enforced to block him from taking office on January 14th, 2024. During a press conference, he insisted that the legal action against his party is unacceptable, and not real. The political situation remains tense. The political turmoil has generated negative effects in some macroeconomic indicators. For instance, the Monthly Index of Economic Activity (IMEA) has accumulated three months with a downward trend. Another consequence of the political crisis is reflected in consumer prices: the gap between the Consumer Price Index and core inflation has again started to increase.

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