1. NS4540 Winter Term 2019 El Salvador: Outlook 2019
Oxford Analytica,Cuba: Economic Woes to Mark Succession Preparation December 13, 2017

2. Overview
New president, Nayib Bukele, 37 not of the two parties that have dominated El Salvador’s politics for the past 30 years.
Faces many problems. While end of the civil war in 1992 cleared way for
National reconsolidation
Economic opening and
Robust growth
Familiar miseries remain
Chronic public overspending blights economy
Fiscal responsibility law still not in place
One former president in jail for embezzlement
Another former president avoiding arrest
Sophisticated criminal gangs flourish in the state security apparatus’s blind spots
Mac Margolis, El Salvador’s New President Is Sitting on a Pot of Gold, Bloomberg February 11, 2019

3. Challenges
One of the biggest challenges how to make the most of the country’s demographics
Like Guatemala and Honduras, El Salvador is an exporter of people – has advantages as well as disadvantages
One in five Salvadorians live outside the country
Problem, drains the country of
Youth and
Energy
On the other hand
22% of Salvadorian GDP due to emigrant remittances
Cash inflow growth at around 10% per year

4. Better use of Remittances I
New president’s idea is to look at emigration from a positive point of view
Idea is to find ways of putting remittances to positive use
This could
Help address country’s short-run fiscal emergency and
Tap a large pool for development
Previously an assumption that lack of growth was related to insecurity
However Salvador has had chronic slow growth throughout the postwar period

5. Better Use of Remittances II
One in three households receive remittances of $1,000 a year on average
Although some cash goes straight to consumption most is squirreled away inefficiently due to large number of unbanked Salvadorans in the informal economy
At the same time country’s banking sector favors lending to bigger companies
While ¾ of businesses are in the informal sector paying no taxes
Need to restructure financial system to mobilize remittances and direct them to smaller businesses
Research shows Central American nations that formalize savings are only half as likely to see their populations migrate

6. El Salvador: FDI

7. El Salvador: Finances

8. El Salvador: Growth Forecast

9. Forecast Risks