Salvador Sanchez Ceren was sworn in as president of El Salvador vowing to fight organized crime and boost the economy in a country with one of the world’s highest homicide rates.
“Development is not possible if citizens’ security is not guaranteed first and to achieve this we need to unite as a country,” Sanchez Ceren, 69, said yesterday after donning the white and blue presidential sash in the capital, San Salvador. “We need to fight against organized crime, drug trafficking, extortions and all expressions of violence and we’re going to do so using all legal instruments of the state.”
A former rebel commander during El Salvador’s civil war in the 1980s, Sanchez Ceren was vice president under outgoing President Mauricio Funes. He has said he’ll strengthen ties with Venezuela to get access to cheaper oil. Annual growth in the $24 billion economy has averaged about 1.8 percent the last three years. The economy will expand 2.1 percent this year, according to government data and the World Bank.
Wedged between Guatemala and Honduras, El Salvador has struggled to contain a homicide rate estimated at 41 per 100,000 inhabitants in 2012, the fourth-highest in the world after Honduras, Venezuela and Belize, according to the United Nations. While that figure is down from 71 per 100,000 in 2009, a recent spike prompted the government to announce that a truce with street gangs to reduce violent crime has failed.
“The truce lost political support because, while it stopped homicides and violence, it did not at all stop extortion,” said Adam Isacson, a Latin America analyst at the Washington Office on Latin America. “So everybody in El Salvador who is hit up by the gangs, every small businessman, was still feeling the gangs’ pressure.”
The country has also suffered from an outbreak of coffee rust disease, which has crimped exports. Output in the 12 months through Oct. 1 will fall to 507,000 bags from 1.25 million a year earlier before rebounding next year, the U.S. Department of Agriculture forecast last month.
The yield on the country’s dollar bonds due in 2025 fell five basis points, or 0.05 percentage point, to 5.96 percent at 10:44 a.m. EST. El Salvador’s dollar bonds have returned 9 percent this year, more than the 8.5 percent return for emerging markets, according to JPMorgan Chase & Co.’s EMBIG index.
Sanchez Ceren may seek to strike an agreement with opposition lawmakers over plans to sell $1.15 billion in local and global bonds after Congress rejected a similar proposal last month. He focused his inaugural speech on the economic benefits of fighting crime and on plans to improve infrastructure to boost trade, saying he’ll modernize airports, seaports and roads. More than 34 percent of the country’s population lives in poverty, according to the World Bank.
Vision for the Future
“For this administration to secure that level of investment there might be some kind of conversation with the private sector in order for them to have a clear perspective on where this administration wants to take El Salvador,” Santiago Mosquera, Director for Latin America at Fitch Ratings, said in an interview.
Fitch cut El Salvador’s credit rating to BB-, three steps below investment grade, in July last year, putting the country in the same category as Kenya and Armenia.
“The next administration is most likely going to get into some kind of discussion with the opposition in order to secure the authorization to issue more debt,” Mosquera said. “I don’t think it’s feasible without that.”