Latin America Advisor
Latin America Advisor
A Daily Publication of The Dialogue
Will El Salvador Be Able to Stay Out of Default This Year?
Salvadoran President Nayib Bukele’s government last month repaid an $800 million bond. // File Photo: Salvadoran Government.
El Salvador’s government repaid an $800 million bond, the country’s treasury minister announced Jan. 24. The payment allayed concerns about the country potentially defaulting, and came ahead of an annual visit, starting Jan. 30, by the International Monetary Fund. How likely is El Salvador to continue paying its debt obligations, and what sacrifices does it have to make to do so? What will result from the IMF visit, and how important is the lender to the country’s economy? What effects are President Nayib Bukele’s economic policies having on El Salvador’s ability to access financing and spur growth?
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CarlosPatrice Flynn, professor of global business and economics at Mount St. Mary’s University: “News of El Salvador avoiding default on an $800 million sovereign bond is notable following months of speculation. The payment is nontrivial for a nation that owes some $21 billion to global creditors. The IMF and other lenders are following developments closely, factoring in risks associated with El Salvador’s macroeconomic fragilities before considering new loans. El Salvador may opt for an easier way forward by taking advantage of being a partner on China’s new Silk Road. In 2019, President Xi invited President Bukele to Beijing for a state visit during which Xi lavished gifts, promises of infrastructure loans and an offer to join China’s One Belt One Road. El Salvador accepted and is in dialogue on next steps. We can envision China’s way forward based on…”
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