The Enigma of El Salvador
A Mercurial President Rumbles Onward
I. The Evening Redness in the West
In April 2018, as the sun was setting behind the Boquerón volcano, I took a cab through the traffic-choked streets of El Salvador’s capital, San Salvador, to a nondescript building in Colonia Campestre. I stepped inside and was greeted by a tall, lanky man in jeans and a baseball cap. It was the city’s mayor, Nayib Bukele.
We sat in his office and spoke for over an hour. Though I speak Spanish, Bukele, in his last days as mayor of San Salvador, which he had governed since 2015, expressed himself in fluent English as he talked about the country’s security struggles and his remedies for how to address them.
“I don’t like gangs at all,” said Bukele, the grandson of Palestinian immigrants who had come to office as a candidate for the left-wing Frente Farabundo Martí para la Liberación Nacional (FMLN), but who had been expelled from the party the previous year. “But you have to remember something. If you see, out of 70,000 or so gang members, there’s not one that comes from a high-income family, why? If it’s a crime problem, wouldn’t all members of society be involved? You can find drug dealers in low, middle and high-income families, the same with murderers. It’s not whether you have money or not that defines you as a criminal. So why does being a gang member involve being poor? It’s obviously a social problem. So you have to fix that in order to fix the problem.”
During his tenure as the capital’s mayor (he had also previously served as mayor of the nearby city of Nuevo Cuscatlán), Bukele had reached out to heretofore marginalized young Salvadorans - graffiti artists, hiphop emcees, skateboarders and others - as a way, he said, to lure them away from the call of the gangs. Among other initiatives, he invited them to participate in painting enormous murals on the side of the Mercado Cuscatlán, then a recently-opened market in the city’s urban core, and in a special football programme with La Liga, the top professional association men’s division of the Spanish football system.
“Do you think those kids are going to join a gang?” Bukele asked. “Or these kids who paint graffiti murals and now have thousands of followers on Instagram? If you open the world to them, they wouldn’t join a gang. Infrastructure is important, but we try to include all of these people. You should have opportunities in life without joining a gang. Here, the only way for a lot of kids to be someone - in a bad way - is to join a gang.”
Speaking of the country’s economy, Bukele told me that “We’re producing 5,000 jobs a year. We need 100,000 just to keep things are like they are right now. One software engineer could produce the GDP of El Salvador. Of course we should focus on things such as agriculture and agro-industry because we have to feed ourselves, but why are we not focusing on the jobs of the future, the things that will make us as individuals grow and our society grow?”
At the time, it seemed like Bukele’s career might have reached an impasse. Ousted from the FMLN, it seemed unlikely that he would be able to contest the presidential elections the following year. El Salvador’s two main political parties, the FMLN (formed by former guerrillas and their supporters at the conclusion of El Salvador’s long civil war) and the right-wing Alianza Republicana Nacionalista (ARENA, founded by former death squad leader Roberto D'Aubuisson) may have fought bitterly among one another, but they were seemingly united in their indifference to the suffering of the people they governed and their insatiable appetite for corruption, leading them to be described by the Salvadoran author Horacio Castellanos Moya in his 1997 novel, El asco: Thomas Bernhard en San Salvador, thusly:
These politicians reeking of the blood of the hundred thousand people they sent to their deaths thanks to their big ideas…It doesn’t matter if they’re right-wing or left-wing, they’re equally vomitous, equally corrupt, equally thieving, you can see in their faces how anxious they are to rob what they can…You only have to turn on the television to see in their ugly mugs how anxious they to plunder whatever they can from everyone, these crooks in suits and ties that once had their feast of blood, their orgy of crimes, now they dedicate themselves to a feast, an orgy, of plundering .
Bukele, however, proved more wilier than El Salvador’s political establishment gave him credit for. He formed a new political party, Nuevas Ideas (New Ideas), and, when unable to compete for the presidency under their banner, piggybacked on a nearly-moribund centre-right party, the Gran Alianza por la Unidad Nacional (GANA) to demolish his opponents in February 2019 elections. He was inaugurated as El Salvador’s president in June 2019, seemingly promising a breath of fresh air for an ossifying political system that had long been dominated by its stagnant two-party duopoly.
El Salvador was clearly desperate for change. Before Bukele’s election, rule of the country had alternated between ARENA and FMLN since 1989, and it had not been an inspiring performance. At the time of his death in 2016, Francisco Flores Pérez, who had served as president from 1999 until 2004, was set to stand trial for corruption. His successor, Antonio “Tony” Saca, like Flores an ARENA member, was convicted of illicit enrichment and jailed. When the FMLN came to power, its first member to serve as president, former journalist Mauricio Funes, was also found guilty of illicit enrichment and fled to Nicaragua. The president who followed him, the FMLN’s Salvador Sánchez Cerén (a former guerilla leader), also fled to Nicaragua to escape arrest on corruption charges.
Beyond dolorous politics, the country also dealt with raging insecurity. For three decades, the state had fought a roiling war against two gangs, MS-13 (also known as Mara Salvatrucha) and Barrio 18 (now divided into two factions, Barrio 18 Revolucionarios and Barrio 18 Sureños), both with their rough-hewn roots on the streets of Los Angeles, California, where thousands of Salvadorans sought refuge during the country’s 1980 to 1992 civil war. Having reported myself in gang hotspots such as Panchimalco and Soyapango, and on the herculean efforts of some in El Salvador such as Pastor Nelson Moz to bring gang members to a more humane way of life, I can confirm the terror the gangs subjected the population to was not even slightly overstated.
II. Power
Early on, however, Bukele showed a troubling authoritarian streak when confronting his political opponents. In February 2020, he briefly occupied the nation’s Congress while backed by gun-toting soldiers when the body balked at endorsing a loan for his crime-fighting plan, in a moment the newspaper El Faro called “the lowest moment that Salvadoran democracy has lived in three decades” as it denounced what it called the president's “messianic populism.”
The following year, Nuevas Ideas trounced ARENA and FMLN in legislative and municipal elections. The party’s new mayor in the city of Ciudad Arce, where it won an astonishing 78% of the vote, seemed to sum up the popular mood, saying “In 30 years, people haven't seen those changes that the community needed…We wanted real changes. In my case, I had never even voted.”
Bukele then announced that El Salvador would begin to accept the cryptocurrency bitcoin as legal tender alongside the U.S. dollar (El Salvador had dollarized its economy in 2001). In August 2021, El Salvador’s legislative assembly, packed with Bukele allies, authorized the use of $225.3 million to assist the realization of bitcoin in El Salvador. To date, there has been no public data from the government on how much of those resources have been used or how they have been used. When the government launched its Chivo Wallet (“chivo” being slang for “cool”) app to facilitate commission-free crypto transactions in September 2021, it was beset by technical glitches to the point where many who downloaded it could not even use it. Much of the process had been overseen not by Salvadorans but by a cadre of Venezuelans, including Lorenzo Rey Camejo, who runs a company named Ulter incorporated in Weston, Florida, and Sarah Hanna, when had previously worked with Venezuela opposition leader Leopoldo López. In October 2021, thousands protested against the bitcoin plan in San Salvador.
Nevertheless, Bukele appeared triumphant addressing a “Bitcoin Week” gathering of crypto investors in November 2021, trailing in his wake a garish cast of crypto-evangelists, many of whom can now be found on El Salvador’s Pacific Coast beach of El Zonte, now dubbed Bitcoin Beach, telling anyone who will listen how they are “refugees” from the United States and Canada and New Zealand.
Among their number are the Americans Max Keiser and Stacy Herbert, who for years hosted a programme on the Russian state-funded RT propaganda channel and have come to be seen as gatekeepers of those who want to get involved in the crypto industry in El Salvador. A March 2023 article in El Faro described how, after Bukele created the National Bitcoin Office in November 2022, Keiser and Herbert were tasked with “controlling the entry of crypto investors into the country…[and to] recommend or not the type of flow of cryptocurrencies.” Keiser is also an investor in Bitfinex, a cryptocurrency exchange registered in the British Virgin Islands and closely associated with the cryptocurrency Tether, with which it collectively agreed to pay $18.5 million to settle an investigation by the New York attorney general’s office into the apparent loss of $850 million of commingled corporate and client funds in 2021. Tether subsequently also agreed to pay $41 million to settle allegations leveled against it by the U.S. Commodity Futures Trading Commission that it made untrue or misleading statements by claiming that its stablecoins (a type of cryptocurrency whose value is ostensibly tied to assets such as the dollar or gold to maintain a stable price) were fully backed by “fiat” currencies (i.e. cash).
At the time of writing, the Salvadoran government has not published the National Bitcoin Office’s budget. Last September, the government also dissolved the country’s Dirección General de Estadísticas y Censos (General Directorate of Statistics and Censuses or DIGESTYC), perhaps the nation’s key institution in collection economic data as it relates to government policies, transferring its functions to El Salvador’s Central Bank.
The lack of transparency has not gone unnoticed.
“It is unacceptable that in a democratic government, the population does not have knowledge about how the resources they pay through taxes are used,” says Ricardo Castaneda, senior economist with the Instituto Centroamericano de Estudios Fiscales (ICEFI). “It represents a quarter of the health budget, three times the budget of the only public university and four times the budget of the Ministry of Agriculture in a country where almost half the population suffers from food insecurity.”
Though it may be popular with outsiders, crypto has shown very little traction with the average Salvadoran. In a pair of surveys carried out last year by San Salvador’s Universidad Centroamericana José Simeón Cañas, only 2.7% of those surveyed said they used bitcoin on more than 10 occasions throughout the year sand some 65% considered that the implementation of bitcoin in the country to have been a failure. In March 2023, the number of remittances made via electronic wallets accounted for only 1.2% of the total remittances sent to the country.
“For the most part, crypto is fairly clearly being ignored by the general public,” says Ben McKenzie, co-author along with Jacob Silverman of the new book Easy Money: Cryptocurrency, Casino Capitalism, and the Golden Age of Fraud. “Salvadorans don't have a lot of money and the economy is conducted in cash. It’s highly unlikely they’re going to suddenly convert to this supposed currency that’s so volatile and has big problems with fraud and theft. These people do not have enough money to lose or to play with.”
III. State of Emergency
As El Salvador’s crypto experience wavered, however, Bukele was presented with an unexpected political opportunity.
After an explosion of violence by the country’s gangs erupted in March 2022 when a clandestine peace pact they had struck with Bukele’s government collapsed, Bukele ushered in a state of emergency and launched a wide-ranging crackdown on the country’s street hoodlums, which local and international human rights groups have charged has been marked by widespread human rights abuses. The results were undeniable, however, with government security forces reclaiming wide swathes of formerly gang-controlled territory and residents, who had for years lived under the thumb of the gangs through extortion and worse, breathing a sigh of relief. In 2017, El Salvador, a country of around 6.5 million people, saw 3,947 homicides, a shocking number that averages out to about 60 murders per 100,000 inhabitants. In 2022, including the deaths of gang members killed in confrontations with security forces, the total was 600, a drop of 56.8% from the 1,147 killed the year before.
Like everything else in Bukele’s tenure, though, this too, has been tainted by controversy. Some, including those in law enforcement, accused the government of juking its homicide figures and underplaying the existence of disappearances and clandestine mass graves. It was revealed that Helmer Canales Rivera aka El Crook, a major MS-13 leader, was released from prison and taken by Carlos Marroquín, the head of the Directorate of Social Fabric, outside Salvadoran borders. It was also recently revealed that police intelligence had previously investigated Vice Minister of Security and General Director of Prisons Osiris Luna Meza for possibly being involved with some of the country’s criminal structures and that El Salvador’s Attorney General, Rodolfo Delgado, had served as the defense attorney for an alleged MS-13 collaborator.
Those who fell afoul of the government and its supporters - from the president’s own former lawyer Bertha Deleón to some members of the newspaper El Faro to ordinary citizens like 24 year-old Josselyn Palacios, who denounced what she charged was the arbitrary detention of her brother - have found themselves having to flee the country. Deleón subsequently denounced her former boss as “a liar and a manipulator” and “a teenager with power, incapable of having a conversation about the most important issues without constantly looking at his phone."
Some have also sought to link the gang crackdown with the government’s embrace of crypto.
“I believe crypto can only survive through weak states, especially ones that avoid democratic deliberation,” says Ricardo J. Valencia, a professor in the Department of Communications at California State University, Fullerton who was born in El Salvador. “In El Salvador, crypto survives only because it is subsidized by the state and Bukele protects it through brutal repression.”
Bukele’s autocratic instincts, coupled with his erratic approach to the country’s economy, have unnerved some abroad.
In 2022, foreign direct investment in El Salvador fell for the first time in a decade, with many experts citing the legal and institutional uncertainty caused by Bukele’s increasingly autocratic methods. In March 2023, El Salvador was expelled from the Open Government Partnership (OGP), a multilateral initiative founded in 2011 to promote open government and fight corruption, with the OGP saying in a statement that “the termination of El Salvador's membership is a symptom of the deterioration of democratic conditions in the country, from the erosion of counterweights to the limitations of basic civil liberties.”
In January, with customary braggadocio, Bukele announced via Twitter (his preferred mode of communication) that El Salvador had succeeded in making an $800 million repayment of Eurobond loans and thus avoiding a default that many had been predicting for months. The same month, legislators passed what they called a digital asset issuance law, which Bukele says will regulate the issuance of digital assets beyond bitcoin by both the state and private entities.
The next month, however, the International Monetary Fund (IMF) issued a statement following its January 30-February 8 visit to El Salvador that, while praising the government’s “effective government response to the [Covid-19] health crisis” as well as its “unprecedented reduction in crime,” noted with concern the fact that the country’s current account deficit was estimated to have risen to about 8 % of GDP and the fact that its Treasury still lacked access to international capital markets.
More pointedly, however, the statement said that, while some feared risks had not materialized “due to the limited Bitcoin use so far…[the] underlying risks to financial integrity and stability, fiscal sustainability, and consumer protection persist…[and] remain valid. Greater transparency over the government's transactions in Bitcoin and the financial situation of the state-owned Bitcoin-wallet (Chivo) remains essential, especially to assess the underlying fiscal contingencies and counterparty risks.”
Finally, the report cited what it called “the legal risks, fiscal fragility and largely speculative nature of crypto markets” and advised El Salvador’s authorities to “reconsider their plans to expand government exposures to Bitcoin, including by issuing tokenized bonds. The use of proceeds by the new Bitcoin Fund Management should follow regular expenditure controls and good governance practices. The guarantees given by the new Digital Asset Law should be equivalent to those from traditional securities regulations.”
In March, the IMF issued a terse release that, in a highly unusual move, El Salvador’s government had “not consented to publication of the staff report and the related press release” of the body’s survey of the country’s economy and public finances.
IV. Future Past
In January 2019, before he became president, Bukele tweeted that “Dictators like Maduro in Venezuela, Ortega in Nicaragua & Juan Orlando in Honduras will never have any legitimacy because they are kept in power by force & do not respect the will of the people. A dictator is a dictator, right or left.”
Unlike Maduro, Ortega and Juan Orlando Hernández, all of whom corrupted elections to illegally cling to power, so far Bukele has run right up to the guardrails of democracy and bent them but not completely broken them. Yet. Ironically, though, for a man whose political career began as a member of a political party founded by the merger of five leftist guerrilla organizations, Bukele is now is the darling of the far-right in the United States, chatting at length with the white supremacist conspiracy theorist Tucker Carlson and hosting Florida senator Marco Rubio, who has slavishly defended former president Donald Trump as being somehow above the law (as has Bukele). This metamorphosis has dovetailed adroitly with the snarling right-wing libertarianism at the heart of crypto.
In May 2021, the Nuevas Ideas-controlled legislative assembly voted to remove all five judges from the constitutional chamber of El Salvador’s Supreme Court and well as the Attorney General, replacing them with figures widely viewed as more malleable to the president’s will. In September 2021, that same court dropped a long-standing ban on presidential reelection to clear the way for Bukele to run for the presidency again in 2024. Bukele confirmed his candidacy for the office last September.
The FMLN and ARENA still seem punch-drunk by the assault on their dominance and grasping to cobble together a response to contest elections next year, defined by infighting, unable to come up with a coherent strategy of opposition and seeking to align with smaller parties. The near-eclipse of the gangs that once so dominated almost every aspect of life in El Salvador appears to have led many Salvadorans - por ahora - to still be willing to give Bukele the benefit of the doubt. But there are signs the president who once promised such revolutionary modernity might be transforming into the type of leader the citizens of Latin America have known very well in their past, indeed.