Caribbean & Central America - April 2026

In late February, lawmakers approved a bill that aims to improve the sustainability of public finances, handing the executive branch more power to cut government spending.

This is one of the first major legislative developments vis-à-vis the economy since President Nasry Asfura took office at the end of January, when he vowed to introduce wide-ranging austerity measures in a bid to get the economy moving. The new law, which was approved on 25 February, will allow the president to combine state entities, or make staffing cuts, in order to cut costs. It also introduces new rules on payments mandated by court judgments against the state, making them conditional on whether the government has enough money available to pay without affecting debt servicing, salary payments, or the public budget. In another change, the legal institution representing the interests of the state, the Procuraduría General de la República (PGR), will now be able to participate in national and international arbitration cases.

Lissi Cano, vice-president of congress and a member of the ruling Partido Nacional (PN), said that the law aims to “make the state smaller and more efficient,” improve legal certainty to attract investment and generate jobs, thereby facilitating Asfura’s aims of improving infrastructure. However, lawmaker Carlos Umaña of the traditional opposition Partido Liberal (PL) said he had voted against the bill because of the level of “discretion” it grants to the executive branch. Other critics have pointed to the level of influence the executive will now have over legal processes involving the state, which were previously the responsibility of the judicial branch. Javier Acevedo, a lawyer and executive director of the Centro de Investigación y Promoción de los Derechos Humanos (Ciprodeh), a local human rights NGO, told media outlet Criterio that the law “crashes into the idea of the separation of the powers of the state”.

There are also concerns that the law violates the constitution, and Roberto Ramírez Alvarenga, a former deputy economy minister who served under the previous leftist Partido Libertad y Refundación (Libre) government of Xiomara Castro (2022-2026) has warned that it could be used to renegotiate the state’s financial agreements, such as infrastructure concessions.

The law can thus be read as an attempt to rebalance the powers of the state, handing more power to the president at the expense of the judicial branch. Asfura may have had his honeymoon period ruined by an energy price shock caused by the conflict in the Middle East, but he has moved swiftly to concentrate more political power. There is a chance that the law could be struck down by the supreme court (CSJ) if it is found to violate the constitution, but this seems unlikely after Asfura moved to strengthen his grip on the court and other key institutions in March. For example, on 26 March the CSJ elected Wagner Vallecillo as president after Rebeca Ráquel Obando, who was aligned with Libre, resigned the CSJ presidency in order to avoid impeachment (though at the time of writing, she remained on the top court). Attorney General Johel Zelaya, who was also aligned with Libre, was dismissed on 25 March by the 128-member unicameral legislature, in which the PN now has a strong presence (see our sister publication, the Latin American Weekly Report, for more detail on this). 

Both the new law and these moves to replace the heads of strategic institutions will make it easier for Asfura to rule the country as he sees fit, but his time in office will likely be defined by factors outside of his control, such as the duration of the conflict in the Middle East and the magnitude of its negative effects on the global economy.

Labour laws?

Javier Acevedo, the executive director of the Centro de Investigación y Promoción de los Derechos Humanos (Ciprodeh), also noted that the new law on public spending could violate labour laws and mean that public servants who are laid off as a result of cost-cutting measures may find themselves unable to appeal in court.