El Salvador bonds fall after judges, attorney general ousted
El Salvador’s bonds fell the most on Monday since the start of the Covid-19 pandemic after the ruling party took control of the highest court and replaced the attorney general, fueling speculation that President Nayib Bukele prioritizes the consolidation of power over consolidation efforts. the economy.
El Salvador dollar bonds maturing in 2025 fell 5.9% to 97.81 cents on the dollar, the largest one-day drop since March 18, 2020. That pushed yields up more than two percentage points to 7.01%.
Bukele, a 39-year-old social media buff who came to power in 2019, consolidated his control of the Central American country after his New Ideas party and allies took control of the legislature after a landslide election victory Of March. The latest moves have sparked widespread condemnation abroad just as El Salvador negotiates with the International Monetary Fund to secure a line of credit needed to help cover its budget deficits.
“Instead of sending signals of an agreement with the IMF, the government is prioritizing its political program”, Barclays Capital Inc. analyst Alejandro Arreaza and Nestor Rodriguez wrote in a note. “If investors lose confidence in El Salvador, the government may have to start a process of debt restructuring.”
Finance Minister Alejandro Zelaya said In an interview with state television on Monday morning, tax levies this year through April 30 have exceeded expectations by $ 37 million. He said the Constitutional Court had banned the government from prosecuting tax cheats and urged the new attorney general to investigate 87 evasion cases that the finance ministry identified for a total amount of $ 71 million.
“We are not going to allow tax evasion in El Salvador,” Zelaya said. “We are going to prosecute bad business owners who leave the state without funds.”
Bukele’s party used Saturday’s first meeting of a new legislative session to replace five magistrates in the court’s constitutional chamber and fire the attorney general. The new judges immediately took up their duties. Rodolfo Delgado has been appointed Attorney General, replacing Raul Melara.
“The Salvadoran people, through their representatives, said FIRED,” Bukele wrote on Twitter. He later wrote that he was “extremely satisfied” with the legislative session.
Business groups, international organizations – including the Organization of American States and Human Rights Watch – and members of President Joe Biden’s administration were quick to criticize the layoffs, which took place on Saturday night.
“It’s certainly a much faster institutional deterioration than the markets expected,” said Carlos de Sousa, an investor at Vontobel Asset Management in Zurich, which oversees $ 4.1 billion in emerging market debt. “It is clearly not welcome that Bukele prioritizes the concentration of power over economic stability.”
US Secretary of State Antony Blinken spoke to Bukele by telephone on Sunday, spokesman Ned Price said, to express “the serious concern of the US government” over the dismissal of the magistrates.
Blinken also voiced US concern for Bukele over the dismissal of Melara, “who fights corruption and impunity, and is an effective partner in efforts to fight crime in communities. two countries. United States and El Salvador, ”Price said.
– With the help of Maria Elena Vizcaino and Sydney Maki