El Salvador 2020

El Salvador 2020 1 Table of Contents Doing Business in El Salvador ___________________________________________ 4 Market Overview _____________________________________________________________ 4 Market Challenges ___________________________________________________________ 5 Market Opportunities _________________________________________________________ 6 Market Entry Strategy _________________________________________________________ 6 Leading Sectors for U.S. Exports and Investment ___________________________ 8 Agricultural Sector ___________________________________________________________ 8 Automotive Parts and Service Equipment (APS) __________________________________ 12 Design and Construction _____________________________________________________ 16 Energy ____________________________________________________________________ 19 Information and Communication Technology (ICT) _______________________________ 22 Medical Equipment __________________________________________________________ 25 Plastics ___________________________________________________________________ 28 Safety and Security Equipment ________________________________________________ 30 Customs, Regulations and Standards ____________________________________ 32 Trade Barriers ______________________________________________________________ 32 Import Tariffs _______________________________________________________________ 33 Import Requirements and Documentation _______________________________________ 34 Labeling and Marking Requirements ___________________________________________ 35 U.S. Export Controls _________________________________________________________ 36 Temporary Entry ____________________________________________________________ 37 Prohibited and Restricted Imports _____________________________________________ 37 Customs Regulations ________________________________________________________ 38 Standards for Trade _________________________________________________________ 40 Trade Agreements __________________________________________________________ 42 Licensing Requirements for Professional Services _______________________________ 44 Selling US Products and Services _______________________________________ 45 Distribution & Sales Channels _________________________________________________ 45 eCommerce ________________________________________________________________ 48 Selling Factors & Techniques _________________________________________________ 48 Trade Financing ____________________________________________________________ 52 Protecting Intellectual Property ________________________________________________ 55 Selling to the Public Sector ___________________________________________________ 57 2 Business Travel ______________________________________________________ 60 Investment Climate Statement (ICS) _____________________________________ 67 Political Environment _________________________________________________ 68 INTERNATIONAL COPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE AND U.S. DEPARTMENT OF STATE, 2020. ALL RIGHTS RESERVED OUTSIDE OF THE UNITED STATES. Legal Disclaimer: The US&FCS makes every reasonable effort to ensure the accuracy and completeness of the information in this Guide, a resource for U.S. businesses to use in the exercise of their business judgment. U.S. businesses should conduct their own due diligence before relying on this information. When utilizing the information provided, the U.S. business is responsible for complying with all applicable laws and regulations of the United States, including the U.S. Foreign Corrupt Practices Act (FCPA). References and links to third parties and their content are provided for the convenience of readers, and are not exhaustive lists of such resources. The US&FCS is not responsible for the availability of any third-party or its content whether found on an external site or otherwise; nor does US&FCS endorse the third-parties or endorse, warrant, or guarantee the products, services, or information described or offered in any third-party content. Please be aware that when following a link to an external site, you are then subject to the privacy and security policies and protections of the new site. 3 Doing Business in El Salvador Market Overview The United States is El Salvador’s main trading partner. In 2019, U.S. exports to El Salvador totaled about USD $3.4 billion, similar to 2018. El Salvador’s exports to the United States were USD $2.5 billion in 2019, registering only a slight dip since 2018. Services trade with El Salvador in 2019 was USD $1.5 billion with a services trade surplus of USD $724 million. GDP in 2019 was USD $27 billion. A partial list of U.S. companies with market presence includes: Abbott Laboratories, AES Corp, American Airlines, AT&T Inc., Caterpillar, Citibank, Hanesbrands, Cisco, Delta, FedEx, General Electric, General Motors, John Deere, Kimberly-Clark, Microsoft, PriceSmart, SBA Communications, United, Walmart, Xerox, 3M, and many others, as well as dozens of U.S franchises. There are more than 345 U.S. companies with a presence in El Salvador, most as subsidiaries of U.S.-based companies. U.S. companies exporting to El Salvador benefit from the Central America-Dominican Republic Free Trade Agreement (CAFTA-DR) with zero percent duties on U.S. consumer and industrial goods. CAFTA-DR entered into force on March 1, 2006, and has contributed to dramatic increases in the United States’ bilateral trade with El Salvador and trade throughout the region. Also, El Salvador has a dollarized economy, which eliminates foreign exchange risk and lowers transaction and financial costs. El Salvador’s proximity to the United States give it a strategic location and elevates its position as a regional hub for Central America. El Salvador is a highly receptive market for U.S. products and services. El Salvador's economy is predominantly services-based. GDP From Agriculture in El Salvador in 2019 was USD $348 in the fourth quarter of 2019. Agriculture accounts for about 5% of GDP and employs 15.4% of the population. Manufacturing and industry accounts for 15% of GDP and employs 20% of the population. Prior to the onset of COVID-19 in March 2020, the service sector in El Salvador accounted for almost 65% of the GDP and employed 58% of the population. On June 1, 2020, President Nayib Bukele’s administration celebrated one year in office after winning nationwide elections under the Grand Alliance for National Unity (GANA) banner on February 3, 2018. President Bukele has remained very popular with approval rates in some polls in the 90’s. His party does not enjoy a majority in the Legislative Assembly which is still largely controlled by the two major political parties whom he beat out in February. The rightist opposition National Republican Alliance (ARENA) party holds a majority in the Assembly and the leftist party, Farabundo Marti National Liberation Front (FMLN), holds a lesser number of seats. President Bukele’s GANA party holds only a small minority. El Salvador will hold new Legislative Assembly elections in February 2021. Although President Bukele has actively courted U.S. favor in the months following his election, he also maintains active relationships with other nations. Overall, the U.S. relationship with the Bukele Administration is productive and the U.S. Embassy continues to actively support President Bukele and the people of El Salvador on three main pillars of U.S. policy towards El Salvador which are: security, institutions, and prosperity. Business Environment El Salvador’s economy remains heavily dependent on the United States. On the prosperity front, the United States supports several whole-of-government lines of effort to help increase trade and bolster Salvadoran economic development, thereby mitigating the negative effects of high unemployment and lack of employment opportunity, especially for new entrants to the workforce. One of these ongoing programs is Deal Team, an interagency effort led by the U.S. Department of Commerce to bring forward all of the U.S. tools and sources of funding to assist U.S. companies remain competitive in the region, level the playing field against other nations’ companies which are often overtly supported by their governments, and ensure adequate support in areas including development of feasibility studies, export credit assistance, Government-to-Government Advocacy support, and funding. A second initiative is América Crece, another whole-of-government approach including U.S. funding agencies, especially the Development Finance Corporation (DFC formerly OPIC). The initiative is intended to 4 increase investment in U.S. partner countries including those in Latin America and the Caribbean. Investment projects focus mainly on energy and infrastructure. Market Challenges El Salvador continues to struggle to attract foreign direct investment (FDI) in comparison to the rest of Central America. El Salvador ranked 91st in 2019 for ease of doing business among the 190 economies measured. Initial optimism at the inauguration of President Nayib Bukele in June 2019 has since been tempered since a confrontation with the Legislative Assembly in February 2020 and then policies enacted unilaterally in response to COVID-19 in March 2020 which severely undercut the productive sector of the country for several months. Nevertheless, the private sector continues to work with the Bukele administration on a variety of policy and regulatory issues with some successes. The Bukele administration and El Salvador still considers the United States as its closest partner. The

Load more