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Finance Chief Says El Salvador Eyes Deal to End Political Crisis

Finance Chief Says El Salvador Eyes Deal to End Political Crisis

(Bloomberg) -- Nine days after El Salvador President Nayib Bukele sent troops into congress, his finance minister says they are seeking a deal with opposition lawmakers to end the political crisis in the Central American nation.

Finance Minister Nelson Fuentes said the government expects lawmakers to approve the $109 million loan at the center of the dispute, within two weeks.

Finance Chief Says El Salvador Eyes Deal to End Political Crisis

Opposition parties, which hold the majority of seats in congress, have been demanding more details about the funds before approving the deal. Bukele, 38, sparked a constitutional crisis on Feb. 9 when he sent soldiers into the legislature and threatened to oust the legislators over the delay.

The government wants the funds, from the Central American Bank for Economic Integration, to upgrade military hospitals and buy new equipment for police officers. El Salvador suffers from one of the world’s highest murder rates and Bukele took office in June vowing to crack down on crime.

“It was an isolated incident. I don’t think it will escalate,” Fuentes told Bloomberg News during an interview in San Salvador, toning down the circumstances of the event. “We are going to reach a political agreement.”

Bukele’s intervention drew international criticism, but Fuentes said it hasn’t hurt the economy.

“There was no capital flight and no negative repercussions for the economy,” Fuentes said. “People are still at the mall.”

The nation’s dollar bonds due 2025 fell to 107.15 cents on Tuesday, from 108.5 cents before the showdown between Bukele and legislators. El Salvador’s bonds are the fourth-worst performers in emerging markets over the period.

During the interview at the finance ministry, Fuentes said the government has been able to reduce violence by boosting security spending. The government is seeking to crack down on gangs and drug traffickers with a new “territorial control” plan.

The economy will expand 2.5% this year lead by construction, telecommunication and energy, Fuentes said. The fiscal deficit will narrow from 3% of GDP this year from 3.1% last year, he added.

--With assistance from Sydney Maki.

To contact the reporters on this story: Michael McDonald in San Jose, Costa Rica at mmcdonald87@bloomberg.net;Ethan Bronner in New York at ebronner@bloomberg.net

To contact the editors responsible for this story: Juan Pablo Spinetto at jspinetto@bloomberg.net, Matthew Bristow

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