El Salvador risks breaching a US$365mn infra agreement with the US

El Salvador could breach a US$365mn agreement with the US, potentially leaving several infrastructure projects unfinished. 

To avoid such an outcome, the country’s legislative assembly must approve by early January a US$250mn loan from the Inter-American Development Bank (IDB) that will serve, in part, to pay the remaining US$50mn the government vowed in 2015 to allocate to the Fomilenio II infrastructure fund, a joint initiative with US foreign aid agency Millennium Challenge Corporation (MCC). 

The deadline to pay for its part of the agreement expired on December 7, but disagreements between the opposition and President Nayib Bukele have prevented approval, even though the legislative assembly’s finance committee approved the bill on November 27. Lawmakers now only have to ratify it.  

Members of the infrastructure fund told a press conference on Tuesday that the deadline for receiving the resources was extended to January 7, when the fund is set to end operations. 

The president has urged lawmakers to approve the loan and leave politics aside. 

News about the possible breach of the agreement emerged on December 1, when the fund said the finance ministry had notified it about the lack of funds to cover the country’s part. Fomilenio II then said it would suspend works on five ongoing infrastructure projects due to the lack of uncertainty. 

Under the five-year deal, the US government committed to donating US$277mn to the fund to improve investments in the country. El Salvador pledged US$88.2mn. 

THE PROJECTS

The government said on Tuesday that 36 infrastructure projects were at risk while Fomilenio II mentioned only five suspended works in its statement. 

Among the suspended projects is a US$30mn, 10km bypass to connect Sonsonate and Santa Ana departments via La Libertad department. Works on the project known as Periférico Claudia Lars started in December 2019. 

Construction of two border projects is also in limbo. One is the US$16.2mn Anguiatú border complex in Santa Ana on the border with Guatemala. The other is the US$7.1mn El Amatillo border complex in La Unión department on the border with Honduras. Other projects include an US$11.6mn, 1,300ha irrigation system in El Paisnal municipality in San Salvador and improvement of the San Antonio school complex in Usulután department.