El Salvador Vice President Salvador Sanchez Ceren is favored to win the presidency this weekend amid a spike in gang violence and investor concerns about the government’s embrace of Venezuela’s socialist government.
Sanchez Ceren, a 69-year-old former rebel commander with the Farabundo Marti National Liberation Front, narrowly missed a first-round victory in El Salvador’s Feb. 2 election, winning 49 percent of the vote. He leads Norman Quijano of the Arena party by a 55 percent to 45 percent margin ahead of the March 9 runoff, according to a Feb. 5-9 survey of 1,400 voters by CID-Gallup. The poll had a margin of error of 2.7 percentage points.
The yield on El Salvador’s dollar bonds rose the most in emerging markets after Sanchez Ceren led the first round vote. The notes have returned 0.2 percent since then, compared with a return of 2.4 percent for Central American and Caribbean debt, according to JPMorgan Chase & Co. indexes.
“Once you get closer to Venezuela, you may be required to adopt policies that are market unfriendly, adopt a populist rhetoric and follow through,” said Franco Uccelli, a Latin America and Caribbean analyst at JPMorgan Chase & Co. in Miami. “That’s a concern that a lot of people have.”
Press officials with Sanchez Ceren’s and Quijano’s campaigns didn’t respond to phone calls and e-mails from Bloomberg News seeking comment. In campaign speeches, Sanchez Ceren said his administration would welcome investors “with open arms” to help drive economic growth.
The next president will also have to confront a failing 2012 truce with street gangs that have made the country of 6.1 million one of the most violent in the world, according to the United Nations. President Mauricio Funes this week announced that the government would deploy an additional 5,000 troops to augment 6,500 already on the streets to counter crime.
“Whoever wins the election will have to sit down and negotiate with the gangs,” Jose Miguel Cruz, a professor at Florida International University who studies El Salvador’s criminal violence, said in a phone interview. “The gangs are going to test them by pushing violence up and then see how the government reacts.”
Quijano, the former mayor of San Salvador, has vowed to scrap the government-backed truce, in which gangs agreed to reduce killings in exchange for better prison conditions for their jailed leaders. Sanchez Ceren has avoided comment, saying in a Jan. 12 presidential debate that he would “promote prevention and education” in the fight against crime, without addressing the truce directly.
The winner of the Sunday election takes power on June 1 with a public debt estimated to reach 65 percent of gross domestic product by 2015, according to a Jan. 29 report by Barclays Plc. The IMF projects El Salvador’s economy will grow 1.6 percent this year, compared to the 3.2 percent average for Central America. About 17 percent of the country’s GDP is based on workers sending money home from abroad.
“Remittances have been an essential lifeline to the poor and working people in El Salvador, but it’s not by any means a sound basis for economic growth,” said Cynthia Arnson, director of the Latin American program at the Woodrow Wilson International Center for Scholars in Washington.
Sanchez Ceren is seeking to extend the FMLN’s rule after the party won the presidency for the first time under Funes, who isn’t eligible for re-election. As education minister, Sanchez Ceren instituted free school lunches that included daily glasses of milk for children. About 43 percent of El Salvador’s population lives in poverty, according to the International Monetary Fund.
Sanchez Ceren has also promised deeper ties with Venezuela to fund social programs, though it’s unclear how much aid might flow as the South American country struggles to contain four weeks of street protests, said Eric Farnsworth, head of the Washington office of the Council of the Americas.
“El Salvador has this way of drawing out extremes and everyone’s viewing Sanchez Ceren through their own lens,” Farnsworth said in a phone interview. “The truth is no one know really knows how he will govern.”
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