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El Salvador: peace dividend

Monday, July 30, 2012

A four-month old truce in gang warfare is helping to attract new business to El Salvador, a country which for several years has had a poorly-performing economy.

One of the worst indicators has been a level of foreign investment per person, which is the lowest by far in the region, due in large part to insecurity.

By contrast, violent crime dropped by close to two thirds, according to a CID Gallup poll done last May, three months after the start of the truce between El Salvador's two big gangs, Mara Salvatrucha 13 and Calle 18.

"The truce is very positive for El Salvador, and necessary for economic growth," said Morten Groth, of Denmark’s Jyske Bank. "A decline in violence is a good sign for the economy," said Carl Ross, director of Oppenheimer & Co.

For their part, yields on El Salvador sovereign dollar bonds have reached their lowest level in nearly a year.