Geopolitical Tensions and Human Rights: A Double-Edged Sword for U.S.-El Salvador Relations and Investment

The case of Kilmar Abrego García, a Salvadoran man legally residing in the U.S., has become a stark symbol of the systemic flaws in immigration policies and human rights abuses that are straining U.S.-El Salvador relations. Abrego's mistaken deportation in March 2025, despite a 2019 court order prohibiting removal, exposed vulnerabilities in U.S. enforcement mechanisms and El Salvador's prison system. This case, alongside the mass deportation of 300 individuals under the Alien Enemies Act—a 1798 law—has ignited international scrutiny, raising questions about the stability of Central American markets and the risks for foreign investors.

The Abrego Case: A Microcosm of Systemic Failures

Abrego's ordeal—subjected to physical abuse in El Salvador's Terrorism Confinement Center (CECOT) and denied due process—highlights two critical issues:
1. Flawed U.S. Immigration Enforcement: The Trump administration's reliance on the Alien Enemies Act, a wartime statute, to justify mass deportations has been criticized as a constitutional overreach. The law's application to non-state actors like gangs lacks legal precedent, creating a pathway for arbitrary detentions and refoulement.
2. El Salvador's Human Rights Crisis: CECOT's inhumane conditions—overcrowding, lack of sanitation, and psychological torture—have drawn comparisons to modern-day internment camps. UN experts have labeled these practices “enforced disappearances,” underscoring risks to bilateral trust and investor confidence.

The legal battle over Abrego's return to the U.S. has further exposed a constitutional crisis, with the Trump administration defying court orders. Such defiance signals a broader disregard for judicial authority, potentially deterring investors who rely on stable governance frameworks.

Geopolitical Tensions and Investor Confidence

The fallout from these incidents reverberates across Central America's economic landscape. Foreign direct investment (FDI) in El Salvador has surged in recent years—reaching $759.7 million in 2023—driven by reforms in logistics, renewable energy, and nearshoring opportunities. However, geopolitical risks threaten to undermine this progress.

Key Risks to Consider:

1. Democratic Backsliding: President Nayib Bukele's consolidation of power—through constitutional amendments and legislative supermajority—has eroded judicial independence. The 2025 “Foreign Agents Law,” requiring NGOs to register as foreign entities, risks stifling civil society and attracting sanctions.
2. Security vs. Human Rights: While El Salvador's “State of Emergency” has reduced homicides, its reliance on mass detentions and opaque policies has drawn criticism from the OAS and UN. Investors in tourism and infrastructure may face reputational risks tied to prison labor or projects in high-risk zones.
3. U.S.-China Diplomacy: El Salvador's 2023 reversal of diplomatic ties with Taiwan and overtures to China add geopolitical complexity. U.S. investors may face pressure to divest if relations sour, while Chinese firms could fill the gap, altering regional economic dynamics.

Investment Implications: Navigating the Risks

For investors, El Salvador presents a paradox of opportunity and risk. Sectors like renewable energy (wind, geothermal), logistics, and nearshoring remain attractive due to low labor costs and CAFTA-DR trade benefits. However, the following sectors warrant caution:
- Tourism: While tourism grew 47.8% in 2023, persistent human rights concerns and geopolitical instability could deter travelers.
- Real Estate and Infrastructure: Projects tied to government contracts may face delays or scandals, given corruption perceptions (Transparency International ranks El Salvador 126th/180).

Strategic Recommendations:

1. Diversify Exposure: Allocate capital across Central America, leveraging regional trade integration. Guatemala and Honduras offer similar opportunities with less geopolitical friction.
2. Monitor Judicial Reforms: Track the Abrego case's resolution and any legislative changes to immigration policies. A U.S.-El Salvador bilateral agreement on deportation standards could stabilize investor sentiment.
3. Engage with Compliance-Driven Firms: Prioritize companies with robust ESG (Environmental, Social, Governance) frameworks. For instance, Google's partnership to establish a tech hub in El Salvador emphasizes digital transformation—a low-risk, high-growth sector.

Conclusion: A Delicate Balance

El Salvador's economic potential is undeniable, but its trajectory hinges on resolving the Abrego case, reforming detention practices, and curbing democratic backsliding. Investors must weigh the upside of low-cost labor and CAFTA-DR benefits against the risks of geopolitical volatility and human rights liabilities. For now, a cautious, diversified approach—favoring sectors with clear regulatory frameworks and avoiding those tied to government overreach—is the prudent path. The road to stability will be long, but the first step lies in ensuring that cases like Abrego García's become a catalyst for accountability, not a harbinger of systemic decay.