El Salvador scraps presidential term limits, opening door for another Bukele term

El Salvador's ruling New Ideas party has passed a constitutional amendment allowing indefinite presidential re-election for Nayib Bukele, extending terms to six years, and eliminating run-offs. This legislative overhaul, which passed Congress 57-3 and also synchronizes election cycles, significantly solidifies President Bukele's power following his controversial re-election last year despite previous constitutional term limits. While opposition and human rights groups warn of entrenched one-party rule, the changes reflect Bukele's continued high approval, largely attributed to his successful crackdown on gangs.

Analysis

El Salvador's ruling New Ideas party has passed a constitutional amendment that formalizes and extends President Nayib Bukele's consolidation of power. The legislation, which passed with a dominant 57-3 vote in Congress, permits indefinite presidential re-election, extends terms from five to six years, and eliminates electoral run-offs. This move follows President Bukele's controversial re-election last year, which occurred despite a constitutional prohibition but was sanctioned by a Supreme Court stacked with his appointees. While the government frames this as empowering voters, it is viewed by opposition parties and human rights groups as the end of democracy and a shift towards autocracy. For investors, this development centralizes political risk significantly around a single leader, creating a dichotomy between the perceived short-term stability derived from Bukele's high popularity and successful anti-gang crackdowns, and the long-term institutional risk stemming from the erosion of democratic checks and balances.

Key Decisions for Investors

• Investors with exposure to El Salvador should re-evaluate sovereign risk premiums, as the move toward indefinite rule and the dismantling of term limits increases long-term political and institutional uncertainty.
• Monitor reactions from international financial institutions, credit rating agencies, and the U.S. government, as any negative response could impact El Salvador's access to capital and its economic outlook.
• While the current administration's success in improving public security may support near-term stability, the concentration of power creates significant tail risk for long-duration assets and contracts dependent on institutional predictability.
• Consider the consolidation of election schedules for 2027 as a factor that will likely entrench the ruling party's power, reducing the potential for political change and policy shifts in the medium term.