El Salvador approves indefinite presidential reelection, extends presidential terms to 6 years

El Salvador's National Assembly, controlled by President Nayib Bukele's New Ideas party, approved significant constitutional amendments allowing indefinite presidential reelection and extending terms to six years, effectively consolidating power and eliminating the second election round. This move, following Bukele's previous re-election despite constitutional bans, signals a further erosion of democratic checks and balances, raising governance risk concerns for investors while ensuring continuity of Bukele's policies, which could inspire similar political trends across the region.

Analysis

El Salvador's National Assembly has approved constitutional amendments allowing indefinite presidential reelection and extending presidential terms from five to six years, a move passed with a 57-3 supermajority held by President Nayib Bukele's New Ideas party. This legislative action codifies a trend of power consolidation, following Bukele's 2023 reelection which occurred despite a constitutional ban, enabled by a 2021 Supreme Court ruling from justices aligned with his party. The changes, which also eliminate the second-round electoral runoff, are framed by proponents as aligning presidential election rules with those for other offices. However, opposition lawmakers have decried the move as the death of democracy, warning it could lead to an accumulation of power, corruption, and nepotism. While these developments significantly elevate governance risk, Bukele remains highly popular due to his aggressive and successful crackdown on street gangs, a key factor that appears to grant him the political capital for such fundamental institutional changes. The regional influence of his model suggests a potential for similar political shifts in neighboring countries.

Key Decisions for Investors

• Investors with exposure to El Salvador should re-price assets to reflect significantly higher long-term political and governance risk due to the erosion of democratic checks and balances.
• While the move signals policy continuity, particularly in security, the concentration of power also heightens the risk of abrupt, unilateral policy changes, warranting close monitoring of the legal and regulatory environment.
• Consider the potential for regional contagion, as the article notes Bukele's political style is inspiring imitators, which could affect stability and investment climates in other Latin American markets.