A market miscellany
OWAIN TSANG-WETHERALD
Senior Associate – Private Wealth
MAHIKA GUPTA
Associate – Private Wealth
THE CHART BELOW TELLS THE STORY: OVER A DECADE, EL SALVADOR’S HOMICIDE RATE HAS FALLEN DRAMATICALLY.
Back in 2015, the country faced a massive problem. Its homicide rate, driven by gang violence, was a staggering 106 per 100,000 people – by far the highest in the world. In response, then President Salvador Sánchez Cerén implemented his ‘Plan El Salvador Seguro’ in 2015. The plan led to a steady fall in murders over the next few years. By 2018, the rate was 51 per 100,000, significantly lower but still atop the global podium, according to the World Bank.
Then on 1 June 2019, Nayib Bukele was elected president. He had campaigned on an anti-establishment agenda, but with barely a mention of cracking down on the gangs. Initially, his government conducted secret negotiations, urging the gangs to order fewer killings. With some success: the country lost its unenviable homicide title. But, as the marathon runner knows, the final mile is the hardest, and the political will was lacking to bring the violence down to internationally acceptable levels.
The mood changed one weekend in March 2022, when 87 people were murdered.
Bukele came out swinging his mano dura, or iron fist. He declared a state of emergency, and thousands of suspected gang members were detained without formal charges or the right to legal representation.
The impact was dramatic. The number of homicides halved in 2022 and has kept plummeting since. In fact, it is now below the rate in the US and many other Western countries.
Whilst El Salvador no longer possesses the highest homicide rate in the world, it has traded the title for the highest incarceration rate. Prisons are severely overcrowded, spending on security has spiralled and it remains to be seen what will happen when – if – the prisoners are released. Critics also allege that changes to the way homicides are calculated twist the data in the government’s favour.
“We’re trying to challenge the gangs, not by repression, but by competing to get the young people to our side.” NAYIB BUKELE
HOMICIDES PER 100,000
Source: Latinometrics, Homicide Monitor, Axios, seguridad.gob.sv, January 2024
For now, though, most Salvadorans don’t mind. In a country long plagued by violence, the public welcomes its newfound sense of freedom and security. Bukele has enjoyed a consistently high approval rating and was re-elected in 2024 with nearly 85% of the vote.
Whilst many Western governments share the problem of prison overcrowding, their politicians can only dream of Bukele’s popularity.
INCARCERATION RATE PER 100,000
Source: Latinometrics (Statista, Bloomberg), January 2024
In the new global regime, big government is back. But only in El Salvador has big government translated into big support.
So far. Those stratospheric approval ratings are tempting politicians elsewhere to jump on the Bukele bandwagon. But, if the short-term fix is throwing 2% of the adult population in prison, would the wiser course be waiting to see how the journey ends? ⬤
OWAIN TSANG-WETHERALD
Senior Associate – Private Wealth
Source: US Bureau of Labor Statistics Consumer Expenditure Surveys. Gen Z spending on education is omitted, as no comparable data is available
“We don’t want to stir up any bad blood between generations. The truth is, every cohort adapts to the unique challenges of its time.”
GENERATION Z, BORN BETWEEN 1997 AND 2012, HAS ENTERED THE WORKFORCE. MANY GEN Z-ERS HAVE COME TO ADULTHOOD AMIDST VARIOUS CHALLENGES, including high inflation and the utopian unrealities of the covid lockdowns. They are also the first generation to have grown up in the social media age.
This has fuelled a perception that Gen Z are impulsive, frivolous spenders – and they just can’t shake it off. Look at the absurdly high resale prices for tickets to see artists such as Taylor Swift. Critics would say the only possible reason is a combination of social media fuelled hype and FOMO (fear of missing out).
One thing is immediately clear: the narrative of Gen Z’s impulsivity doesn’t stand up. The average individual spends slightly less of their income on entertainment, alcohol and even food than did Millennials (born 1981 to 1996) and far less than Gen X (1965 to 1980). Notably, whilst Gen X were net borrowers at that age, Gen Z is not only saving, but spending more on pension contributions and personal insurance. So, rather than reckless, Gen Z actually seems to be more sober and prudent than previous generations. Their spending reflects their style: prioritising experiences that bring joy and meaning over material possessions.
We don’t want to stir up any bad blood between generations. The truth is, every cohort adapts to the unique challenges of its time. Whilst Gen Z-ers have benefited from a solid employment market and higher wage growth than their elders – what The Economist calls a ‘young person premium’ – they’ve also faced higher inflation, rising interest rates and the lingering effects of the pandemic.
So perhaps, with goals such as homeownership often beyond their wildest dreams, Gen Z-ers are more frugal and deliberate with their spending. The data reveals not impulsivity, but financial habits defined by caution, pragmatism and a focus on what truly matters to them. ⬤
MAHIKA GUPTA
Senior Associate – Private Wealth
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