Does Mano Dura Pay?
Part I: The Singapore of Central America
"Sometimes they say that we imprisoned thousands. I like to say we actually liberated millions." This line, deftly delivered by president Nayib Bukele of El Salvador during his visit to the White House in April, underscores a common sentiment among defenders of hardline, or “mano dura” security policy the world over. As much as critics may dispute the means or methods of tough-on-crime interventions, they cannot the effectiveness of such policy in places like El Salvador where many inhabitants now feel safe for perhaps the first time.
In a general sense, I agree with this argument. El Salvador enacted its current state of exception in March 2022. Now, in August 2025, we should have enough evidence to say that the decline in violence is real and remarkably durable. Homicide rates have precipitously declined each year since the state of exception, and it seems they are on track to stabilize a little under 2 murders per 100,000 inhabitants. This puts El Salvador in contention with Canada for the safest country in the Western Hemisphere, more than three times as safe as the United States, and an order of magnitude more secure than neighboring Honduras and Guatemala.
But successfully improving security is just one part of what effective governance looks like. Physical safety may lie at the base of Maslow’s hierarchy of needs, but eventually as a society you want to move up the pyramid. Accordingly, I think it’s worth evaluating how effective mano dura has been as an economic and developmental strategy. Bukele’s scorecard here is far more mixed, and, even if you think he deserves the benefit of the doubt for his success on security, the more he struggles to translate this success into economic growth, the weaker his claim to “philosopher king” status becomes.
This will be a two-part post, this week I’ll be laying out the theory of why mano dura might deliver economic benefits, and seeing how it stacks up with the reality on the ground in El Salvador. Next week’s post will look at Ecuador and Honduras, which also experimented with mano dura recently with far less success.
I will also caveat this by saying that this article is going to gloss over much of the human rights and civil liberties concerns that have come to light about El Salvador’s state of exception. I remain deeply disturbed by these issues, and have written on them elsewhere. However, the goal of this article is to evaluate hardline security policy on its economic merits.
Why mano dura should pay
The link between violence and poverty is well-documented globally. Insecurity strangles economic activity, destroys value, and is often closely correlated with predatory state and non-state dynamics where armed actors are more interested in plundering a shrinking pool of resources than growing the pie.
The reverse, however, that safe societies are also prosperous, seems to be more complicated. The United States is vastly more homicidal than Japan, but its economy has continued to grow and innovate while the latter has struggled with decades of stagnation. Conversely, Cuba has one of the lowest murder rates in the Western Hemisphere, but its economy is trapped in a catastrophic downward spiral. While most prosperous societies aren’t particularly violent, past a certain point, gains in stability don’t seem to translate linearly to improvements in GDP. Accordingly, it seems like some level of security is a necessary, but not sufficient condition for economic growth.
Even so, we should expect that a country like El Salvador, which has gone from the most violent country in the hemisphere to one of the safest, it should be positioned to reap some economic windfall.
In Latin America especially, the means through which mano dura policies should be expected to deliver economic gains comes primarily from reducing extortion. Central American gangs like MS-13 and Barrio 18 derive most of their revenue from charging protection fees to local businesses and shaking down individuals for cash. According to a 2022 report by the Center for Global Financial Integrity, the estimated value of extortion payments in El Salvador was between $1 and $1.1 billion, or about 3% of the country’s GDP.
As far as tough on crime policies are concerned, getting the military and police on the streets should, in theory, stop gangs from being able to shake down businesses and in turn open up more space for economic activity. Business owners who might be dissuaded from opening a second location due to extortion threats might decide to do so now, neighborhoods that were once no-go zones now receive increased foot traffic, and restaurants and cafes can stay open later at night taking in more profits.
If sustained for long enough, the gains can trickle up into a more promising climate for foreign investment. Indeed, one of the greatest impediments to Mexico’s emergence as a nearshoring destination has been its worsening criminal landscape. Multinationals looking to get out of Asia would likely view Mexico much more favorably if they had better assurances their trucks and rail cars wouldn’t be hijacked and employees wouldn’t be taken for ransom.
The El Salvador story
At a basic level, the logic outlined above seems to be working in El Salvador. Foreign direct investment and exports are up, and credit rating agencies like Moody’s cite improved security as a factor in making El Salvador a more appealing investment destination. Anecdotal reports from street vendors and retailers suggests they are indeed staying open later and making more efficient decisions now that the specter of gangs has been removed. Importantly, the real estate market seems to be booming (though verging on bubble territory), and construction activity has grown 28% between 2024 and 2025, suggesting the country has become a more desirable location for individuals and businesses alike.
However, these positive signs do not in and of themselves point towards a major economic transformation taking place in El Salvador. The country’s economy grew by 2.6% last year, only slightly better than 2015 when the country’s homicide rate topped 107 murders per 100,000 inhabitants. 70 percent of employment is informal, while remittances from Salvadorans living abroad (usually the United States) make up nearly a quarter of GDP. Finally, poverty has actually increased since Bukele took office and according to a 2024 report by El Faro rising food prices have led more than 70 percent of the population to make cuts to their monthly budgets.
The broader however issue isn’t so much that El Salvador is performing poorly, it’s that it doesn’t seem to be doing much better than either Honduras or Guatemala. In fact, the IMF projects El Salvador to grow slower than both neighboring countries in 2025. Meanwhile, on the Heritage Institute’s 2025 index of economic freedom, El Salvador scored 106 out of 184 countries finding that “Despite some notable progress, institutional weaknesses continue to slow the transition to a more dynamic economy.” Once again, El Salvador performs worse than its more crime-ridden neighbors Honduras and Guatemala, who rank 90th and 71st respectively. Both of these countries continue to sport much higher levels of violence and insecurity, as well as far weaker executives. If Bukele-style benevolent autocracy truly were the silver bullet for the region’s ills, we should hope to see El Salvador pulling ahead by now.
Some of the reasons for this lackluster performance, El Salvador’s failure to bring corruption to heel, and the fact that the country lacks the kind of resource or geographic endowments to bring rapid development.
On corruption, Bukele’s efforts on this front have been more performative than practical. In 2024 he announced a surprise probe into the finances of every cabinet minister, but perceptions of corruption in El Salvador have worsened every year since 2020. Bukele and his family members stand accused of lining their own pockets through real estate investments in the now-revitalized civic center of San Salvador. And this is to say nothing of the increasingly strong case that Bukele pacted with El Salvador’s gangs before he was the tough on crime strongman he is today.
Some analysts have argued certain types of corruption may not be inherently bad. If a comparatively small bribe can speed up the construction of major public works, for instance, it might be better than letting the project go unfinished. But it should come as no surprise that most highly developed countries, even ones with relatively autocratic government structures like Singapore, boast strong and empowered judicial systems to ensure businesses feel they have access to swift and adequate redress. El Salvador’s institutions struggle for the time being at least appear to be with a more generalized form of predatory state institutions, seeking to skim rents from any and all economic activity they can get their hands on. This is worsened by reports that in some cases Salvadoran security forces have replaced the gangs in extorting local communities. Corruption is therefore not just a matter of civic trust, if it permeates the business sector or undermines rule of law it risks scuttling El Salvador’s investment potential.
The second challenge confronting Bukele is much harder to solve. El Salvador is a small country with a population of about 6 million. It does not have major mineral or energy resources to provide a steady revenue stream, nor is it geographically well-positioned to become a regional trade power. With access to just the Pacific coast, companies looking to set up shop in a relatively safe, FDI-friendly logistics hub are probably still better served going to Panama. Further complicating matters, El Salvador’s total fertility rate has been below replacement since 2015 and more than 100,000 of its citizens are in prison, the majority of whom are working-age men.
I remain cautious of dismissing El Salvador completely. Bukele’s popularity and the de facto absence of checks on executive power means he has considerable leeway to make big economic bets with high payoffs. So far, the country’s biggest play, cryptocurrency adoption, has been more trouble than it is worth, but future moves might succeed. In particular, there are two areas where the country seems to be making high-variance plays: mining and mass incarceration.
Buried treasure
In 2017 El Salvador made history by banning all forms of metal mining in its territory, a triumph touted by environmental activists and communities which had faced violence and pollution from the mining industry. Today, however, the global race for critical minerals has left governments around the world seeing new financial opportunities beneath their feet. El Salvador’s mineral resources are of the traditional sort, gold and silver, though modern exploration and separation techniques could reveal other reserves. According to Bukele, the country could boast some of the densest gold reserves per square kilometer in the world, a details which, if true, could be music to the ears of international mining companies as the price of gold continues to surge to new heights.
In late 2024, El Salvador’s National Assembly overturned the ban on metals mining, proposing a new framework wherein the Salvadoran government would have a majority stake in any future mining project. The move comes at a time when other Central American governments are struggling with a rising tide of anti-mining activism. In Panama, one of the world’s largest copper mines, accounting for 2% of the country’s GDP, lies inactive in the wake of a 2023 Supreme Court ruling. There are no currently producing mines in Guatemala. Given Bukele’s popularity and his party’s supermajority in the legislature, he could offer mining companies the political stability needed to stand up major investments in El Salvador.
Of course, there are reasons why mining is deeply unpopular in Central America. Gold mining in particular often involves the use of toxic substances like mercury and cyanide as part of the extraction process. In a small country like El Salvador, environmental mismanagement at a mine site could have public health and safety consequences that impact a large segment of the populace. A poorly-executed rollout of mining might therefore be the first issue to crack Bukele’s seemingly ironclad popular support.
Prison as a service
The second, and more disturbing initiative Bukele has undertaken is his efforts to not just make El Salvador’s prison system self-sufficient, but profitable. Part of this initiative is the so-called Zero Leisure Plan, where prisoners can sign up to take on manufacturing, construction, or sanitation jobs in exchange for a commuted sentence. According to Bukele, as of January 2025, 40% of the country’s prison population was involved in the program, which if accurate would represent nearly 50,000 people. Bukele has also stated the program is not available for the worst offenders.
The most recent phase of this project is the opening of El Salvador’s prisons to like-minded governments to ship undesirables there in exchange for a fee. The United States reportedly paid $6 million for El Salvador in March of this year to take in 238 alleged Tren de Aragua members for one year, translating to roughly $25,210 per prisoner. At this rate, El Salvador’s prison system, with an annual budget of $200 million, could theoretically become profitable from hosting just 8,000 foreign prisoners for a modest 6.6% increase in the country’s total prison population. Add to it the rents extracted from desperate families and the revenues from cheap Zero Idleness labor and the dream of growing El Salvador’s economy on the back of mass incarceration must seem tantalizingly close for Bukele.
The opening gambit seems to have been a miscalculation. The U.S. public was enraged by the detention without due process of individuals like Kilmar Abrego Garcia. Ultimately, El Salvador agreed to send the remainder of its prisoners Venezuela, though this only worsened Bukele’s PR as released inmates shared harrowing stories of torture and abuse in CECOT. But there are other countries in the Western Hemisphere for whom the prospect of prison as a service may be tantalizing.
Some of the most notorious criminal gangs in the Western Hemisphere like Brazil’s First Capital Command or Ecuador’s Choneros operate from within prisons. Unable to achieve control over their own prison systems, countries may elect to pay El Salvador to take the problem off their hands. According to Bukele’s Vice President Félix Ulloa, Ecuador has been in discussions along these lines already. However, the reputational risk of such a move, especially following the United States’ experiment, could mean it will be some time before another government is willing to avail themselves of El Salvador’s prisons.
Quo vadis El Salvador?
I see three broad scenarios for El Salvador over the next decade. First, Bukele muddles through on the economic front, growth remains broadly in line with the rest of the region, but the security situation continues to improve, locking in a solid constituency that serves as Bukele’s power base and ensures the millennial president continues to rule with a popular mandate. Second, some global or local economic shock throws El Salvador into crisis, swinging public opinion against Bukele and triggering protests against the regime. To maintain his hold on office, Bukele is forced to use the very security apparatus employed against gangs in a more barefaced manner to suppress popular unrest, firmly ensconcing him in the company of Latin America’s other autocrats. Finally, in defiance of the trends described here, Bukele ends up being wildly successful on the economic front, El Salvador begins posting high single-digit or even double-digit growth rates year over year, fueling a virtuous cycle of greater economic opportunity and improving security. El Salvador completes its transition into the Singapore of Central America.
I think that the first scenario is most probable, but I should say that it is my hope that third outcome is in the cards. Absent the possibility of a more democratic change of heart on Bukele’s end, I would much rather El Salvador be both safe and economically prosperous than neither. Still, I remain doubtful. It seems that breaking the strength of violent crime alone is not enough to catapult Central America out of the lower-middle income status. Much as Bukele might style himself an enlightened autocrat, his policy track record outside of security issues belies a leader more preoccupied with staying trendy rather than setting a strategic vision for the country.