Gang Truce Debate Boosts Opposition in El Salvador Vote

Jan. 31 (Bloomberg) -- El Salvadorans angered by one of the world’s highest homicide rates are giving the opposition a boost ahead of elections this weekend that may end a two-year truce with violent street gangs.

Vice President Salvador Sanchez Ceren trails ex-San Salvador Mayor Norman Quijano in the Feb. 2 election, according to a Jan. 3-5 poll of 1,000 people by Consulta Mitofsky. Quijano had 35.3 percent support compared with 31.8 percent for Sanchez Ceren and 16 percent for former President Antonio Saca, with a margin of error of 3.1 percentage points. A candidate needs 50 percent to avoid a March 9 runoff.

A 2012 truce backed by President Mauricio Funes, the Catholic Church and the Organization of American States that initially cut the murder rate by 70 percent and buoyed investor sentiment has failed to assuage voters worried about crime. Quijano has vowed to scrap the accord as 60 percent of Salvadorans say security remains their top concern.

“There are a lot of victims, a lot of people who have been hurt by this,” said Adam Blackwell, a former Canadian ambassador who is mediating gang talks for the Washington-based OAS. “We’re at a challenging period now with the presidential elections.”

The United Nations says the Central American country has the highest homicide rate in the world after Honduras.

The Arena party’s Quijano, 67, has vowed to reverse “a legal trend toward protecting and tolerating criminals” and criticized negotiations with Barrio 18 and Mara Salvatrucha, which the U.S. calls a “transnational criminal association.”

Sanchez Ceren said in a Jan. 12 debate that he would “promote prevention and education” in the fight against crime, without addressing the truce directly.

Murder Rate

According to the government, El Salvador averaged 6.6 murders a day last year after falling to 4 a day during the first months of the truce, in which the gangs agreed to lower the homicide rate in exchange for better prison conditions for their jailed leaders. The rate was as high as 14 per day before the truce.

The country’s dollar bonds rallied after the truce was put in place, with yields on the 2023 notes falling to a record 4.9 percent in May 2013. Yields have since climbed to about 6.8 percent as economic growth remains flat, reserves decline and the current account deficit widened to about $450 million in the third quarter, the most since at least 1999.

Attracting FDI

While the Mitofsky poll shows Quijano with a narrow lead, older surveys have suggested Sanchez Ceren could get the most votes in the first round, with Quijano finishing second and forcing a runoff.

A Quijano victory may fuel a rally in El Salvador’s bonds as he is viewed as the best candidate for attracting foreign investment, said Franco Uccelli, a Latin America and Caribbean analyst at JPMorgan Chase & Co. in Miami.

Officials with Quijano’s and Sanchez Ceren’s campaigns didn’t respond to phone calls and e-mails from Bloomberg News seeking comments on the truce and the country’s economic outlook.

In his closing campaign speech on Jan. 25, Sanchez Ceren said his administration would welcome investors “with open arms” to help drive economic growth.

Sanchez Ceren’s Farabundo Marti National Liberation Front is seeking to extend its rule after winning the presidency for the first time under Funes, who isn’t eligible for re-election. A former rebel leader who is also the education minister, Sanchez Ceren has called for deeper ties with Venezuela to fund social programs, including giving milk to school children.

El Salvador’s reliance on remittances and trade with the U.S., along with legislative elections next year, will limit the ability of any candidate to radically change policy, said Jefferson Finch, an analyst at the Eurasia Group, in a Jan. 27 report.

“A Sanchez Ceren win may rattle investors, but market concerns of a radical shift in policy will likely be overblown,” Finch wrote. “Similarly, if Quijano won, the perceived upside from the more business-friendly candidate coming to power could also be exaggerated immediately after the election.”

To contact the reporter on this story: Eric Sabo in Panama City at esabo1@bloomberg.net

To contact the editor responsible for this story: Bill Faries at wfaries@bloomberg.net