El Salvador made great economic progress after its brutal civil war ended in 1992. From 1992 to 2009, the ARENA party ran El Salvador and made marked economic improvements under three successive ARENA governments. Poverty decreased and competitiveness and investment increased between 1992 and 2004. El Salvador even reached the coveted “investment grade”credit rating per some financial evaluations, a status signaling minimal risk to investors. El Salvador also signed a free trade agreement with the United States and dollarized its economy to remove the temptation of “printing money” in the early 2000s, moves which should have helped fuel a new economic vibrancy.
If El Salvador had experienced another ten years of ARENA-led governments, it may have transformed into the Singapore of Latin America. Sadly, a series of corruption scandals in the last ARENA government under former President Tony Saca— who is now in jail for corruption and was kicked out of the ARENA party— led to their ejection from power in 2009. Following the scandal, the candidate from former left wing guerrilla party, the Farabundo Marti National Liberation Front (FMLN), Mauricio Funes won the election. A second FMLN presidential candidate, Salvador Sánchez Cerén, won the election in 2014. With the political rise of FMLN, the country has made a turn for the worse.
Under FMLN leadership, foreign direct investment has decreased by 71% and unemployment has hit highs in the 7% range. Sadly, drug financed criminal gangs have also exploded in the last ten years. Some of this gang activity can be blamed on US policies including the extradition of Salvadoran gang members back to El Salvador where there are limited courts, jails, and police to absorb such gang activity. To make matters worse, the FMLN has authoritarian tendencies and seems to be working from the Chavez/Maduro play book. A few more bad steps and El Salvador could regress to the status of Venezuela, a failed state.
The courts, especially the Salvadoran Supreme Court, are the thin line between El Salvador “going Venezuela” or remaining a country under the (tenuous) rule of law. The independence of the courts has been put at risk because of the thuggish behavior of FMLN elected officials and party activists. Supreme Court terms are nine years in length, and four of the Supreme Court justices’ terms end next year. In the interim, the Salvadoran Congress has elections and chooses the judges. To pressure the courts, the FMLN is intimidating justices and even making death threats.
A weakening of the rule of law one of the key issues that keep investors away and local entrepreneurs from starting businesses. A weakening of the rule of law creates personal security risks and encourages gang activity. A weakening of the rule of law is a major but unseen factor in the large migration of people that have arrived at the US border in the last couple of years from El Salvador. In 2016, CSIS put out a report on the “push factors” of migration coming out of the Northern Triangle of Central America including El Salvador. We found that large amounts of immigration occurred due to the lack of stability. Strengthening the rule of law is hard to do, but it is made even harder if the executive branch is sending thugs to the courthouse or making direct threats against judges.
In Guatemala and Honduras, various attempts to increase the rule of law have been made with promising results. In Guatemala, the UN has partnered with the government to create the International Commission against Impunity in Guatemala (CICIG), which supports and strengthens the judiciary system and rule of law by providing a UN-sponsored prosecutorial function. In Honduras, the Organization of American States (OAS) has created a similar version of CICIG for Honduras called the Mission to Support the Fight against Corruption and Impunity in Honduras (MACCIH), which supports the justice system to combat corruption and impunity. El Salvador needs its own version of CICIG but the FMLN government does not want one for fear of members of their own party being prosecuted.
Justice Bonilla supports the formation of a “CICIG for El Salvador” but believes that it would be politically difficult to achieve. Justice Bonilla remarked that his judicial colleagues are grateful for the assistance from the US but he expressed concern about the seriousness of the current FMLN government. Specifically, he questioned if the government was really tackling corruption in its ranks or confronting its citizen security problems.
The US has a stake in El Salvador as a friend and a top aid donor. Additionally, many migrants from El Salvador come to the US, in large part due to the lack of stability in their home country. President Obama and the Republican Congress rightfully agreed to increase our foreign aid to the Northern Triangle by $750 million with the express purpose of strengthening rule of law, among other things, in the Northern Triangle (El Salvador, Guatemala, and Honduras). The US government and the American tax payer have agreed to this big increase in return for a good faith effort from the Salvadoran government to support the plan. Vice President Pence has agreed to oversee this work and he, along with other US officials, should be asking some very direct questions of their Salvadoran interlocutors because the situation in El Salvador is totally unacceptable.
 According to IADB, Moody’s has given El Salvador an investment-grade rating (Baa3) from July 1997 through 2004; however, Fitch and S&P put it a step below investment grade (BB+).
Article Published in Forbes.com on July 17, 2017.