In recent decades, local communities across North America and Latin America have mobilized at all levels of politics to demand state recognition of their collective rights to territory and self-determination as Indigenous peoples different from the modern nation. This has not happened in El Salvador. Following the end of the colonial period, national governments divided and governed the local population throughout the national territory as separate Indian and Ladino settlements. Since the late 19th century, historical processes of settler colonialism, agrarian capitalism, and mestizo nation-building have re-organized the countryside into racially stratified municipal communities where the Ladino elite dominate and exploit the marginalized Indians as individual Salvadoran citizens. Beginning in the 1980s, the Salvadoran Indigenous movement has positioned the Indians as Indigenous peoples whose Indigenous identity and collective rights within the national community have been neglected by the state. In response, postwar governments have established a post-neoliberal multicultural regime with an Indigenous slot for the Indians to develop their Indigenous cultural heritage and receive social welfare and development aid. Most Indians in the neighboring municipalities of Izalco and Nahuizalco in the Occidente region have refused these emerging activist and state Indigenous political subjectivities. Indian resistance to becoming Indigenous within local and national politics reveals how the politics of Indigeneity paradoxically challenge and reinforce racial inequality between the Indian and Ladino members of Salvadoran communities. It also foregrounds the limits of Indigeneity for analyzing similar dynamics of colonial domination and capitalist exploitation within the White-Indian racial hierarchy at the center of other Latin American and Latinx communities throughout the Americas.