President Nayib Bukele is not on the ballot for El Salvador’s midterm legislative elections on Sunday, but what matters most to outside observers is how much power the strikingly popular 39-year-old gains. Currently with few allies in the 84-seat legislative assembly, a strong showing for Bukele’s party could pave the way for an International Monetary Fund program for the country’s reeling economy. A big victory could also set the stage for constitutional changes -- a worrisome development for critics who see Bukele as already sliding toward authoritarianism. Bukele’s strong-arm tactics had won applause when Donald Trump was the U.S. president, but Joe Biden’s administration seems less impressed.

1. What’s at stake in this election?

Since his election in 2019, Bukele has lambasted the opposition-controlled legislature for obstructing his agenda. He even sent soldiers into a congressional session in 2020, threatening to oust lawmakers who voted against a $109 million loan. Polls suggest Bukele’s Nuevas Ideas party will win a majority of seats and may come close to the 56-seat qualified majority required to approve borrowing authorization and constitutional changes. Vice-President Felix Ulloa has said he hopes to present constitutional reforms to congress later this year, which may include changes to presidential term limits. Under current law, changes would require approval by two consecutive legislatures, meaning not until 2024.

2. What’s made Bukele so popular?

Politics in El Salvador had been dominated for decades by two parties, the conservative Arena party and the leftist FMLN, who fought a bloody civil war from 1979 to 1992. A former mayor and FMLN member, Bukele broke with his party in 2018 to form Nuevas Ideas and rallied voters against politicians he called “the usual old suspects.” He promised jobs and sought investment, pledged to weed out the corruption that plagued traditional parties and cracked down on homicides, which had until recently earned El Salvador the title of the world’s deadliest nation. His approval rating has remained around 90% since taking office.

3. What’s he done that’s been alarming?

In addition to threatening congress, Bukele has banned reporters from press conferences and audited newspapers, disobeyed orders from the country’s Supreme Court and stripped prisoners to their underwear, forcing them embrace each other on a cement floor during the pandemic. His antics have earned him rebukes from both Democrat and Republican lawmakers in Washington.

4. Why is the IMF involved?

El Salvador’s economy shrank 9% last year while its fiscal deficit widened to around 8.2% of GDP, as the pandemic cut government revenues while emergency spending increased. Investors expect Bukele’s government to seek an IMF assistance program following Sunday’s election, which would include fiscal austerity. It is unclear how much funding his government would seek. An IMF program would require approval from two-thirds of congress.

5. What’s changed since Biden became president?

El Salvador’s relationship with the U.S. has soured since Biden took over in January. The White House turned down a meeting request from Bukele while he was on a trip to Washington in February, the Associated Press reported. The snub seemed designed to send a signal that relations are under review as Biden’s team steps up scrutiny of Bukele’s attacks on the press, courts and legislators, along with corruption in the country. Bukele denied he attempted to meet Biden during the trip and said he would have called first. Still, Biden has pitched a $4 billion aid package for Central America’s northern triangle, which includes El Salvador, to help address the root causes of migration to the U.S.

6. What does this election mean for markets?

Investors will be watching the number of seats Bukele’s party wins on Sunday. A qualified majority will mean improved governability and a clear pathway for IMF program approval. A simple majority may mean that Bukele would need to ally with a smaller political party, GANA, to pass external borrowing authorization. On Feb. 24, Salvadoran bonds due in 2052 climbed the most since they were issued in July of last year, offering the highest coupon in emerging markets during the coronavirus era. The country’s dollar-denominated bonds have returned 6.5% over the past month, the most of any developing nation, according to data compiled by Bloomberg.

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