Credit Rating Improvements Could Boost Salvadoran FDI 

El Salvador has entered a new phase of economic development that could boost foreign direct investment (FDI). In a recent report, Santander Corporate & Investment Banking highlighted the possible effects of El Salvador’s positive steps with the International Monetary Fund (IMF) on its credit ratings.

Credit ratings could have several positive implications for Salvadoran FDI. Not only do they measure government default risk, but they also impact perceptions of country risk and access to capital. Improvements could create a virtuous cycle of increased investment.

After uncertain times for El Salvador’s cooperation with the IMF, multinational companies should monitor potential credit rating improvements as part of their ongoing analysis of the country risk and investment conditions.

Recent IMF Agreement Points to Continued Support 

Earlier in August 2026, the IMF announced that representatives from El Salvador and the IMF had reached an agreement on the next phase of its Extended Fund Facility program.

“This IMF-supported program aims to restore macroeconomic stability and lay the groundwork for sustained growth and social progress,” said Jaime Morales, director of the IMF mission.

With successful completion of both reviews, the IMF would release another installment of credit, worth approximately $140 million, to El Salvador. While relatively modest, these disbursements help facilitate El Salvador’s fiscal obligations.

Having the support of the IMF matters from an investment standpoint because it validates government policies externally. Simply announcing reforms does not guarantee that they will be implemented or that they will succeed. An active IMF agreement helps ensure that reforms stay on track.

If current trends continue, Santander suggested that rating agencies could view El Salvador more favorably in the future.

“Continued technical cooperation between El Salvador and the IMF, which would allow the release of new funds, may create conditions for an upgrade of the country’s credit rating in the medium term,” says the bank.

Implications for Credit Ratings and FDI 

More specifically, Santander suggested two ways that agencies could improve El Salvador’s sovereign credit ratings. Either by upgrading the rating outlook to positive or directly improving the credit rating itself at some point in the future.

One historical example used by Santander compared the experience of Argentina with potential implications for Salvadoran FDI. While a multi-step approach to improving credit ratings would be conventional, certain circumstances could allow an upgrade to occur without positive outlook revisions.

Although changes to investment-grade status may seem like they are only beneficial to governments, stronger credit ratings can benefit multinational corporations (MNCs) as well. Companies looking to invest in countries like El Salvador care about sovereign credit ratings because they can affect perceptions of risk.

The easier it is to obtain financing, the more attractive a country could be to foreign investors. For long-term investments like manufacturing facilities, smaller improvements in creditworthiness could contribute to greater corporate confidence when conducting future site-selection analyses.

As fiscal year 2027 has already started, El Salvador’s non-financial public sector (NFPS) balance reached a surplus of 2.3% of GDP.

Measured year-over-year, NFPS debt decreased by 0.4 percentage points to reach 66.7% of GDP. While Salvadoran authorities should continue working to consolidate fiscal policy, observable progress has already been made.

Political Capital is Another Factor to Consider 

The Santander report noted that President Bukele and his party had large majorities within El Salvador’s legislative branches. That level of political support could prove valuable as additional reforms are rolled out.

Implementing certain fiscal reforms can be politically difficult, even when the government has a majority. Taxes, pensions, labor laws, and other fiscal measures can be divisive. Political capital can help lead to continuity as reforms are implemented over time.

Execution of reform matters because perception of risk depends heavily on what governments do, not just what they say they will do. If policies are enacted but poorly executed, multinational corporations could become more hesitant to invest in countries like El Salvador.

MNCs Follow Upcoming Fiscal Reforms with Interest 

Another important reform on the Salvadoran government’s agenda is pension reform. Plans to implement parametric pension reform in 2027 could help solidify economic reforms moving forward.

As a mandatory spending item, pensions can have a significant impact on fiscal consolidation efforts. Plans to reduce the pension burden on El Salvador’s fiscal accounts could strengthen confidence that President Bukele will follow through on important reforms.

To that point, Santander highlighted the example of The Bahamas when discussing the potential implications of El Salvador’s improving relationship with the IMF.

Over about four to five years, The Bahamas was able to improve from the B rating category to the BB rating category. While that does not mean that El Salvador will be able to match that pace, it does show one example of credit improvement occurring over time.

Comparisons to Other Countries Help Highlight Potential 

Any comparison between countries must account for meaningful differences in economic structure, politics, fiscal policy, and more. Credit ratings change for a wide variety of reasons.

That said, the example of The Bahamas serves as a useful illustration of one possible path forward for El Salvador.

Credit ratings are not the only factor that impacts Salvadoran FDI. Education, healthcare, economic competitiveness, and infrastructure are also important considerations for multinational corporations looking to invest in Central America.

Depending on the specifics of corporate investment, ratings improvements could gradually open the door for more FDI into El Salvador over time. As other countries in the region continue to attract investment, improving fundamentals could help make El Salvador more attractive from a sovereign risk perspective.

Santander Cites Healthcare and Education Reforms 

Santander highlighted the healthcare and education reforms that could play a role in improving El Salvador’s economy.

Education and healthcare are notable because they can play important roles in the investment decision-making process.

For instance, multinational companies looking to open new facilities often look beyond tax incentives and labor costs. Education can determine the quality of a country’s workforce. Likewise, strong healthcare systems can improve quality of life and increase productivity.

As companies continue their due diligence around operating in Central America, positive reforms like those seen in healthcare and education could help El Salvador strengthen its position. For multinationals, operating costs are only one part of the equation.

Investors should continue following news about El Salvador and its relationship with the IMF. If current trends continue and the government can enact meaningful reforms, El Salvador could experience improvements to its sovereign credit ratings in the future.