2 Businesses Per Week Shut Down by Extortion in El Salvador

Extortion of small businesses in El Salvador is getting worse despite the country’s gang truce, according to business groups, and is the main factor behind an average of two businesses a week closing down.

Around 70 percent of the 11,730 businesses registered with the National Council for Small Businesses (Conapes) reported being extorted by gangs, according to the group’s director Ernesto Vilanova.

The head of El Salvador’s Chamber of Commerce, Federico Hernandez, confirmed the practice is widespread and said extortion, along with the government failing to pay contractors on time, is the main factor behind an increase in closures of small and micro-businesses — classified as businesses employing between one and 50 people.

Hernandez said the Chamber had registered a rapid acceleration in the number of businesses forced to close over the last five months and that the situation was worse now than at any point in his four-year stint at the head of the organization.

According to Vilanova, despite the truce between the two street gangs behind most of the extortion, the Mara Salvatrucha (MS-13) and Barrio 18, there is little optimism in the business community that the situation will improve. “This is never going to end,” he said. “They arrest three, but there are thousands more out there.”

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The comments made by the two Salvadoran business organizations highlight the crippling economic impact of extortion, especially in developing economies where most opportunities for employment are with small and micro-businesses.

Worryingly, they also add weight to reports that the since the gang truce, far from leading to a reduction has actually seen an increase in extortion.

Although it will of no consolation to Salvadoran businesses forced to close down, the situation could be far worse. In neighboring Honduras, an estimated 17,500 small businesses were forced to close because of extortion in the last year. In 2012, it was reported approximately 30 percent of small businesses in capital city Tegucigalpa were forced to close because of extortion.