(Bloomberg) -- For some it’s a worrying combination: Donald Trump back in the White House and a brash Central American president who declares himself the world’s coolest dictator.

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But as bond investors see it, a Trump election could prove a winning trade for El Salvador’s Nayib Bukele. The thinking, they say, is that Trump could help unlock billions of dollars in funding for El Salvador from multilateral institutions such as the International Monetary Fund that, until now, have been loathe to lend to a country that uses Bitcoin as an official currency.

“El Salvador is a clear trade” under that scenario, said Chris Preece, a portfolio manager at Pictet Asset Management. “If Trump gets in, the impediment that Bitcoin has been for El Salvador’s relationship with the IMF becomes less of an issue.”

Dollar bonds from the Central American nation have outperformed, handing investors returns of 2.8% since June 27, when President Joe Biden’s lackluster debate performance sent money managers scurrying to adjust for higher chances of a Trump win. The notes edged higher across the curve on Tuesday, with securities maturing in 2035 up 0.2 cent on the dollar, according to indicative pricing data collected by Bloomberg.

In addition to the El Salvador trade, emerging-market investors broadly expect the dollar will jump as Asian currencies and the Mexican peso take a beating on Trump’s immigration and trade rhetoric.

The 42-year-old Central American president, who was reelected this year with nearly 85% of the vote, has had a rocky relationship with the US government ever since Biden refused to host him in the White House in 2021 due to mounting criticism of Bukele among Democrats.

Bukele has repeatedly defended Trump on X, including slamming the indictment of the former president in 2023 and suggesting that it would be hypocritical for the US to promote democracy with its foreign policy. After the attempt to assassinate Trump, Bukele took to social media, posting on X, “Democracy?” His office then joined other governments condemning the attack.

He has also tied himself to Trump’s reelection campaign by inviting several high-profile conservative political figures to his inauguration — including Trump’s son — and speaking at a conservative gathering outside Washington earlier this year.

For months now, investors have assumed Bukele is stalling, awaiting Trump’s return to Washington. While the Republican’s fiscal plans have spooked some investors, a friendlier face in the White House could tip the balance for El Salvador and unlock a deal with the IMF after three years of talks. The US is the largest shareholder of the International Monetary Fund and must vote in favor of loans before money is disbursed.

“I am much more sympathetic to the El Salvador view than any of the other trades because there’s actually a path to get” an IMF deal, said Arif Joshi, a fund manager at Lazard Asset Management. “The real hurdle in getting that program across the finish line is really the Bitcoin problem.”

Fund officials have warned over and over again about the risks of having Bitcoin as legal tender, asking the country to abandon it if it wants IMF dollars. Bukele, for his side, has refused to scrap his cryptocurrency experiment.

The IMF said in an email that ongoing talks with officials from El Salvador are aimed at reaching a new agreement that would strengthen public finances, improve reserve buffers and boost productivity.

“Addressing risks arising from the Bitcoin project is a key element of our discussions,” a representative for the fund wrote.

While the IMF’s mission is to encourage global growth and financial cooperation among countries, it often caters to US political interests. Take Argentina’s record $57 billion bailout from the fund in 2018, under business-friendly President Mauricio Macri.

“The US has a lot of influence in terms of the IMF,” said Anthony Kettle, senior portfolio manager at RBC Bluebay. “I see people want to latch on to some sort of positive reform story now and generally when you get the IMF involved, it’s quite a positive sign.”

The Trump campaign didn’t reply to requests for comment. Representatives from Bukele’s administration and the finance ministry declined to comment.

El Salvador has a debt burden of around 70% of GDP, including what it owes to pension funds, and its public finances remain fragile, reflecting long-term structural vulnerabilities, according to S&P Global Ratings. A deal with the IMF would unlock further funding tied to economic reforms, giving investors confidence the country’s debt is manageable in the medium term.

The fiscal deficit will decline to 3.9% of GDP this year from 4.7% in 2023 amid increasing spending on wages and capital investments, according to Fitch Ratings. Moody’s Ratings said in May the country lacks a strategy to address high funding costs and to identify financing to meet debt obligations in the medium term.

“They have shown a very high willingness to pay, but where they have underwhelmed has been on their willingness to go and get an IMF deal,” Kettle said. “That’s the next piece that people wanna see.”

--With assistance from Eric Martin and Stephanie Lai.

(Updates with bond move in fourth paragraph. A previous version corrected the amount of Argentina’s IMF program.)

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