Foreign Direct Investment in El Salvador Under Bukele, Trends, Drivers, and Constraints
El Salvador 2026 Economic Assessment
Introduction
Foreign direct investment, FDI, is a central indicator of a country’s integration into the global economy, particularly for small, open economies such as El Salvador. In principle, FDI facilitates capital formation, technology transfer, employment generation, and participation in international production networks. These channels are commonly associated with long term productivity growth and export diversification. Since assuming office in 2019, President Nayib Bukele has pursued a high profile agenda focused on public security reform, state capacity expansion, and international visibility. The Salvadoran experience under Bukele illustrates both the potential and the constraints of attracting foreign capital in a context shaped by security improvements alongside institutional and legal uncertainty.
Historical and Regional Context
El Salvador has historically underperformed regional peers in attracting foreign investment. Prior to 2019, the country received comparatively low levels of FDI relative to Costa Rica, Panama, and the Dominican Republic, reflecting persistent challenges related to violence, extortion, and limited investor confidence. The United States Department of State notes that crime and weak institutional capacity were central deterrents to foreign investors throughout the 2000s and 2010s (U.S. Department of State, 2025).
Regional data compiled by the Economic Commission for Latin America and the Caribbean indicate that El Salvador continues to attract lower absolute volumes of FDI than its neighbors. In 2024, net FDI inflows to El Salvador declined by approximately 11 percent relative to the previous year, while other Central American economies experienced more stable or rising inflows (El Salvador Now, 2025). This divergence underscores the extent to which structural factors, beyond cyclical conditions, shape investor decisions in the Salvadoran context.
FDI Trends Since 2019
FDI inflows under Bukele have displayed volatility rather than a sustained upward trend. According to reporting based on Central Reserve Bank data, El Salvador received approximately 387 million US dollars in FDI during the first three quarters of 2024, representing a year on year decline of roughly 27 percent (El Salvador Now, 2025). Over a longer horizon, cumulative FDI inflows during the first seventeen quarters of the Bukele administration were substantially lower than those recorded during the equivalent period under the previous administration, suggesting that aggregate performance has not markedly improved.
More recent quarterly data indicate episodic rebounds. In the first quarter of 2025, El Salvador attracted approximately 322 million US dollars in FDI, a substantial increase compared with the same period in 2024 (El Salvador EN, 2025). These inflows were concentrated in real estate, logistics, and selected service sectors. While such short term increases may reflect improved investor sentiment tied to specific projects, they have not yet translated into a durable shift in El Salvador’s regional FDI position.
Source: International Monetary Fund; World Bank World Development Indicators.
Drivers of Investment Dynamics
The most frequently cited positive driver of recent investment interest is the marked improvement in public security. The sharp decline in homicide rates and extortion has reduced operational risks for firms and improved perceptions of the business environment. Public safety improvements have likely contributed to renewed activity in tourism, hospitality, and commercial real estate, sectors that are particularly sensitive to security conditions.
Government investment promotion efforts have emphasized El Salvador’s strategic geographic location, trade integration with the United States, labor force characteristics, and tax incentives. Official investment promotion materials highlight regulatory simplification and infrastructure modernization as components of a more favorable investment climate (Invest in El Salvador, 2023). These narratives align with standard investment climate frameworks that emphasize transparency, legal predictability, and ease of market entry as key determinants of FDI attraction.
Global conditions also shape national outcomes. According to the United Nations Conference on Trade and Development, global FDI flows have remained volatile in the post pandemic period, with developing economies facing heightened competition for mobile capital amid geopolitical uncertainty and tightening financial conditions (UNCTAD, 2023). El Salvador’s performance must therefore be interpreted within a broader context of uneven global investment dynamics.
Institutional and Legal Constraints
Despite improvements in security and targeted promotion efforts, institutional factors continue to constrain El Salvador’s FDI performance. Comparative regional data show that El Salvador attracts substantially lower investment volumes than Costa Rica and Panama, both of which benefit from reputations for stronger legal institutions and policy continuity (El SalvadorNow, 2025).
The United States Department of State emphasizes that concerns regarding judicial independence, regulatory predictability, and contract enforcement persist, limiting the translation of security gains into sustained foreign investment (U.S. Department of State, 2025). Empirical research consistently links FDI inflows to institutional quality, rule of law, and economic freedom. Cross national analyses indicate that countries with stronger institutional frameworks attract higher and more stable levels of foreign investment, particularly in manufacturing and high value services (Sovbetov and Moussa, 2025).
Debates surrounding governance reforms under Bukele, including changes to institutional checks and balances and legal interpretations related to executive authority, have contributed to perceptions of policy risk among multinational firms. While such concerns may not deter all categories of investors, particularly in short horizon or speculative sectors, they weigh more heavily on firms considering long term, capital intensive projects that depend on stable legal protections.
Emerging Opportunities
FDI inflows into El Salvador are unevenly distributed across sectors. Recent years have seen interest in energy, telecommunications, infrastructure, and selected manufacturing activities, alongside continued investment in real estate and services (The Business Year, 2024). Renewable energy and logistics infrastructure represent potential growth areas, particularly in the context of regional nearshoring trends and evolving supply chain strategies.
In early 2026, El Salvador signed a reciprocal trade agreement with the United States focused on cooperation in critical minerals and related infrastructure development. While the long term implications remain uncertain, such agreements may create new channels for investment in extractive industries, logistics, and supporting services (Reuters, 2026). The extent to which these opportunities translate into durable FDI inflows will depend on regulatory clarity, environmental governance, and the credibility of long term policy commitments.
Conclusion
FDI trends in El Salvador under President Bukele reflect a complex interaction between improved security conditions and persistent institutional constraints. While episodic increases in investment inflows suggest that investor sentiment can respond to targeted policy signals and sector specific opportunities, aggregate performance remains modest relative to regional peers. Structural factors related to legal predictability, institutional credibility, and governance continuity will continue to shape the country’s investment profile. As competition for global capital intensifies, El Salvador’s capacity to convert short term confidence gains into sustained foreign investment will depend on the consolidation of institutional frameworks that reduce long term policy risk and strengthen investor protections.
See Central America Economic Review´s El Salvador 2026 Economic Assessment for general country analysis.
See Central America Economic Review’s “All Country” Data Report for general regional data.
References
El Salvador EN. 2025. “El Salvador Attracted 322 Million US Dollars in FDI in the First Quarter of 2025.” https://elsalvadoren.com/el-salvador-attracted-322m-fdi-in-q1-2025-top-5-investing-nations/
El Salvador Now. 2025. “Foreign Investment Grew in Central America, but Shrunk in El Salvador.” https://www.elsalvadornow.org/2025/07/18/foreign-investment-grew-in-central-america-but-shrunk-in-el-salvador
El Salvador Now. 2025. “El Salvador Attracted the Least Investment in Central America During the First Nine Months of 2024.” https://www.elsalvadornow.org/2025/02/25/el-salvador-attracted-the-least-investment-in-central-america-during-the-first-nine-months-of-2024
Invest in El Salvador. 2023. “Foreign Investment in El Salvador Reaches 262 Million Dollars During the First Half of the Year.” https://investinelsalvador.gob.sv/inversion-extranjera-en-el-salvador-llega-a-262-mdd-durante-primer-semestre/
Reuters. 2026. “United States and El Salvador Sign Trade Agreement to Boost Critical Minerals Investment.” https://www.reuters.com/world/americas/el-salvador-signs-reciprocal-trade-agreement-with-us-2026-01-29/
Sovbetov, Yhlas, and Mohamed Moussa. 2025. “Interaction of Economic Freedom and Foreign Direct Investment Globally, Evidence from Neglected Regions.” https://arxiv.org/abs/2512.01695
The Business Year. 2024. “El Salvador Economic Overview.” https://thebusinessyear.com/article/el-salvador-2024-economic-overview
United Nations Conference on Trade and Development. 2023. World Investment Report 2023. https://unctad.org/publication/world-investment-report-2023
United States Department of State. 2025. “Investment Climate Statements, El Salvador.” https://www.state.gov/reports/2025-investment-climate-statements/el-salvador
