Removal of Salvadoran judges and prosecutors casts IMF agreement in doubt, bonds fall By Reuters

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2/2 © Reuters. Protest against the dismissal of judges of the Supreme Court of Justice in San Salvador 2/2

By Rodrigo Campos and Nelson Renteria SAN SALVADOR (Reuters) – The removal of El Salvador’s president, Nayib Bukele, the country’s attorney general and top judges, fueled calls on Monday for a reassessment of an expected deal with the Monetary Fund International (IMF), which caused a fall in sovereign debt. . El Salvador is in the midst of negotiations with the IMF for a $ 1 billion program to repair budget gaps through 2023, following $ 389 million approved last month to help the government deal with the COVID-19 pandemic, Reuters reported exclusively. But political pressure is now mounting in Washington for negotiations to be reconsidered in light of moves against the judiciary and the prosecutor. Senate Foreign Relations Committee Chairman Bob Menéndez and Senate Appropriations Committee Chairman Patrick Leahy said President Joe Biden‘s administration should tell the IMF that US support for financing in El Salvador ” it depends on respect for democracy, judicial independence and the rule of law. “The United States is the member with the highest voting power in the IMF. The IMF had no comment late Monday. A vote on Sunday by a newly formed Congress where Bukele’s allies have a two-thirds majority removed Attorney General Raúl Melara, whose work had included an investigation of secret negotiations between the Bukele government and street gangs. Hours earlier, the new Congress overthrew the five justices who sit in the constitutional chamber of the nation’s Supreme Court. Nathalie Marshik, Director of Sovereign Emerging Markets Research at Stifel, said she hoped the IMF program was now on hold and that she saw no “catalyst for a positive outcome other than the reinstatement of the Court” and a moderate rhetoric from Bukele. The country’s foreign bonds fell between 7 and 11 cents, with issues in 2029 and 2032 falling nearly 10 cents each and yielding more than 8% for the first time in more than two months. The issue due 2052 lost almost 11 cents to trade at 102.5, with a yield of 9.251%. El Salvador has $ 7.7 billion in outstanding negotiable debt, according to Refinitiv data. “DEEP CONCERNS” US Vice President Kamala Harris said the measures unleashed “deep concerns” about El Salvador’s democracy. A senior administration official said Washington will engage with Bukele to encourage “more constructive behavior.” The EU said in a statement that the measures “violate” the rule of law and the separation of powers and that it hopes that the legal rights and safety of magistrates will be guaranteed. In contrast, China, which was only recognized by El Salvador in 2018, said through its embassy that it believed the Central American nation could handle its own internal affairs, citing the principle of non-interference. Without IMF financing, El Salvador would likely need financing from elsewhere to fill budget gaps in the coming years. “China would come to mind first, but we doubt that the country is ready to extend the financing that El Salvador needs,” said EM’s Marshik. The Biden administration has cited corruption in El Salvador, Guatemala and Honduras as one of the root causes of the increased flow of migrants to the US-Mexico border, along with gang violence and poverty. His administration is pressuring those governments to do more to fight crime. The five ousted judges, the most powerful jurists in the 15-member court, were among the few remaining checks on Bukele’s power. Legislators from the ruling party accused Melara, whose office has significant investigative power, of lacking independence and hampering the government’s health strategy amid the COVID-19 pandemic.