Yes, it's custodial since they could reject your transaction and no private key will be given, just like ordinary exchange you access with email password pin code etc.
I can understand why El Salvador government did not create a non custodial wallet for their citizens. They want to control citizen transactions if necessary.
I can't speak for El Salvador government but it seems to me that they don't want people to just receive the $30 and go away to forget about bitcoin altogether. They are trying to build the bitcoin economy and encourage people and merchants to start using bitcoin and the $30 acts as the free money to "try things out" instead of just being $30 free money.
In that spirit the 5 transaction would mean the user has at least tried the wallet out and experienced what it means to use bitcoin.
The government did a good thing, bring exposure of Bitcoin and cryptocurrency to their citizens and this effect expands to the world. It is only the good thing I see from El Salvador legal tender.
I hope their citizens will soon realize the importance of non custodial wallet and will choose one to use. Chivo wallet is for their first experience with Bitcoin, first 5 transactions maybe. Later they should use another wallet.
Not your keys, not your coins.
https://notyourkeys.org/