Issue: Jan 2006


El Salvador - new manufacturing hub



by Michael Stewart

Located in Central America, El Salvador has the advantage of being well-positioned to both the North and Central American markets. Its close proximity to the United States provides a competitive edge over China, as goods can be produced and transported at a faster rate. Apart from that, the country is also situated close to capital cities from which 70 per cent of regional commerce takes place.
El Salvador is one of Latin Americas country that is able to boast an established democracy and open trade system that enables more foreign trade and greater global competitiveness for the region.

The 2005 Index of Economic Freedom ranked El Salvador as the second freest economy in Latin America and in the 2004-2005 Global Competitiveness Report by the World Economic Forum, the country was listed as the fourth most competitive country in Latin America and 53rd out of 104 economies in the world.

The El Salvadorian economy focuses on advancing the countrys macroeconomic fundamentals so as to promote competition and international integration into the economy. This is partially enabled by the government-offered incentives which includes incentives that support and encourage investor operations in the free zones. El Salvadors national investment promotion agency PROESA provides a specialized office that helps advise investors and provides technical support while the National Investors Office sees to the legal processes that are essential for investments in the country.

Having a centralized distribution centre, El Salvador is on its way to becoming the Distribution Hub of Central America. This means having world-class infrastructure and technology to allow the frequent storage and transport of large quantities of goods.

El Salvador also has a modern international airport as well as paved high ways that connect airports and ports. Investments are being vested in the maintenance of rural roads, highways, bridges, urban streets and overpasses.
The country is constructing a deep-sea port in La Union. This will be the second largest port in Panama and a fast overland route will connect it to the Atlantic.

El Salvador house several Free Trade Zones (FTZ) and Depots for Active Improvements (DAI), which are both responsible for fostering trade and investment in the country. At FTZ locations, firms can import or re-export goods with low or no duties, taxes, or other fees associated with importing. DAIs, previously known as Bonded Areas, contain special customs treatment where merchandise bought for re-export purposes, is received without payment of duties and taxes.

Electricity is one of the is the leading most developed sector in the countrys infrastructural system. Private companies in from North and South America have stakes in their electricity companies.

Telecommunications in the country is also growing, with the availability of direct dialing, cellular service, high-speed Internet, fax and telex services. Access to international phone services are also possible.
Apart from the its location, potential investment areas and infrastructure, El Salvador also has a committed workforce.

"The human quality of our people makes our work force a very special one, so special that the Salvadoran labor force is recognized throughout the region and the world," says Patricia Figueroa, Executive Director of PROESA. El Salvadorian workers are known worldwide for their productivity, loyalty and their strong work ethic.

The countrys education focus can be observed in the number of students and graduates that the country generates. About 110 000 students enroll at universities each year. With 5000 students graduating with technical degrees per year, it has a strong technical base.

Salvadorans in 2004 elected businessmen Elias Antonio Saca, 40, as president and economist Ana Vilma de Escobar as vice president.

The country is still regaining its footing after a 12-year civil war that claimed 75,000 lives before its end in 1992.
They won 58 percent of the vote representing the ARENA party. The party was founded in 1981 by the late Roberto D'Aubuisson, whom a truth commission blamed for the 1980 assassination of Roman Catholic Archbishop Oscar Romero.

Escobar and other government officials traveled to South Carolina this week to seek investments, while S.C. officials sought chances for exporting products to the country. She was in Columbia on Tuesday.

AI: What are the greatest growth opportunities for El Salvador?

Patricia Figueroa: The biggest challenge we have in El Salvador now is economic growth. We have succeeded in stabilizing the country politically.

AI: What areas of the economy do you expect to expand, and what are you hoping to find in your visits here?

Patricia Figueroa: We have identified strategic sectors. The first one is logistics and distribution. ... Textiles is also one of the most important sectors. We presently have 90,000 jobs in that. We're seeking investments in textile mills to produce the fabric that we're currently importing. We're importing about 90 percent of the fabric we use in the region, so there's a big opportunity there.

AI: This is 25 years since the death of Archbishop Oscar Romero and more than a decade since the civil war ended. How has the country changed in terms of the social inequalities that existed 25 years ago?

Patricia Figueroa: We are convinced that in order to maintain political and economic stability, the social stability is at the base. ... President Saca has launched an important educational program and health program which is being funded with a tax based on liquor, cigarettes and beer. ... In the last 15 years, GDP (gross domestic product) has doubled, and we have succeeded in lowering poverty levels 30 points.


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