Caribbean & Central America - January 2025

On 23 December El Salvador’s legislature, which is controlled by President Nayib Bukele’s Nuevas Ideas (NI) party, voted to lift a ban on metals mining imposed in 2017 amid concerns over impacts on the environment and public health.

President Bukele said on 5 December that he would ask lawmakers to lift the ban, after also attacking it on social media platform X on 27 November. “We are the ONLY country in the world with a total ban on metal mining, something that no other country applies. Absurd!” he wrote, arguing that exploiting an estimated US$3trn in gold reserves would “transform” the country through the creation of thousands of jobs and the financing of infrastructure projects. Of the 60 members of El Salvador’s national assembly, 57 voted to overturn the ban. 

A key reason for the ban is the impact of gold mining on water supplies. Extraction is highly water intensive, and toxic chemicals used in the process contaminate remaining water sources, restricting access to clean water for local communities and causing health problems as they enter the food chain. Despite these well-documented issues, President Bukele claims that future mining projects can be managed sustainably, with revenue from them used to repair the damage from past projects and boost economic and social development.

Environmental groups have reacted strongly to Bukele’s claims about the industry, warning that mining is unviable in El Salvador for myriad reasons. In a joint statement published on 2 December, various campaign groups, including Mesa Nacional Frente a la Minería Metálica, underlined issues around water availability and contamination, particularly as mining areas are the source of rivers that flow into the Rio Lempa river, which supplies the San Salvador metropolitan area. 

The statement also underlined the fact that El Salvador is a small, densely populated country, and open pit gold mining requires extensive amounts of territory. Other issues highlighted by the groups include the fact that El Salvador already suffers the second-highest environmental degradation of any country in Latin America, and that mines would be susceptible to dangerous landslides given the country’s high seismic activity. “Mining companies take away the gold and the people have to deal with the damage caused by the pollution of the water, air, soil, biodiversity and health,” it said, calling on Bukele to uphold the ban.

Amalia López of local campaign group Alianza Nacional Contra la Privatización del Agua told news agency Associated Press that “it is not true that there is green mining – it is paid for with lives, kidneys, respiratory problems and leukaemia”.

Church leaders, who were a key part of the coalition which pushed for the ban, have also called on Bukele to uphold it. For example, the archbishop of San Salvador, José Luis Escobar, urged authorities not to roll back the ban because it would damage the environment and would also be detrimental for “the health and well-being of the people”. And on 29 November, regional Catholic organisation the Episcopal Secretariat of Central America and Panama (Sedac) published a statement asking for mining bans to be upheld. 

Following the 23 December vote by the NI-controlled legislature to lift the ban, the situation could evolve quickly as Bukele has been preparing the ground for a while. In October 2021 lawmakers approved a law to create the General Directorate of Energy, Hydrocarbons and Mines; joined the Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development (IGF), a voluntary partnership which supports the development of good mining governance, in May 2021; and allocated funds to “review and update” the mining law in the 2023 budget.

Bukele maintains strong support in the country due to the popularity of his efforts to crack down on gangs, and this could enable him to face down protests from environmental groups. In addition, the state of exception introduced in 2022 provides him with the legal means to target protesters as it suspends normal civil liberties. And there are already signs that Bukele is moving to tamp down opposition, such as reopening a murder case, widely considered trumped up, which involves environmental campaigners known as the Santa Marta Five [SSR-24-05]. Although these groups remain well-organised and are likely to protest the change to the mining law, Bukele has the tools to dissuade them and has proven his willingness to engage in authoritarian behaviour in pursuit of his goals.

And he is not the only regional leader keen to develop mining. His desire is part of a regional trend spurred by soaring global gold prices. Nicaragua has significantly expanded mining in recent years, granting massive concessions to Chinese firms following the normalisation of diplomatic relations with Beijing in 2021, and on 25 November Costa Rica’s President Rodrigo Chaves presented a legislative bill to restart operations at the Crucitas open-pit gold mine in San Carlos canton, Alajuela province, near the border with Nicaragua. 

In fact, China could be a potential source of investment for El Salvador which established relations with Beijing in 2018. Its firms are rapidly building experience operating in Nicaragua, and they are known for upholding looser environmental standards than Western counterparts, which could be put off by protests and scrutiny of future operations. If Bukele does succeed in attracting miners to the country, it would take some time for their operations to get up and running and start contributing to the public purse. His hunger for new sources of revenue means that he is unlikely to impose strict regulations in order to expedite the process, increasing the risk of environmental damage. 

Mining extraction potential?

According to a 23 December legislative assembly statement, which cites studies by foreign companies, in just 4% of the area with mining extraction potential, 50m ounces of gold have been identified, valued at US$131.57bn, equivalent to 380% of El Salvador’s GDP.

Public opinion

A survey by Universidad Centroamericana’s Instituto Universitario de Opinión Pública (Iudop) published in December showed 59.2% of respondents thought that El Salvador was not suitable for metallic mining.

IMF announces staff-level agreement worth US$1.4bn 

On 18 December the International Monetary Fund (IMF) announced it had reached a staff-level agreement on a new arrangement with El Salvador worth around US$1.4bn. The deal was reached after Bukele agreed to concessions on the use of cryptocurrency bitcoin, which he made legal tender in September 2021. This had proven a major drag on negotiations with the IMF, which cited concerns around volatility as one reason for the failure to agree a deal with El Salvador during four years of negotiations. Bukele has now agreed to make bitcoin acceptance by the private sector voluntary, while “the public sector’s participation in bitcoin-related activities will be confined,” said the IMF in a statement. Other efforts to mitigate bitcoin risks include the fact that “taxes would only be paid in US dollars and the government’s participation in the crypto e-wallet (Chivo) will be gradually unwound”, among other things.

The IMF highlights as other key elements of the programme, efforts to improve the primary balance by around 3.5% of GDP over three years to “put the ratio of public debt to GDP on a firm downward path after peaking at 85% of GDP in 2024”.  It notes that measures, worth 1.5% of GDP in 2025, already included in the approved budget, will “reduce the wage bill, spending on goods and services, and transfers to municipalities”. The deal also includes provisions on fiscal transparency and calls for the establishment of “a strong anti-corruption framework” and the improvements of anti-money laundering and counter-financial terrorism (AML/CFT) arrangements.

While the agreement awaits approval by the IMF board, it would be a major boost for Bukele, whose promises to kickstart the Salvadorean economy have been hamstrung by the dire state of public finances and a lack of access to external sources of funding.