El Salvador - Market Overview El Salvador - Market Overview
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 12 years ago, on March 1, 2006, and has contributed to the 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 decreased to 314.17 USD Million in the fourth quarter of 2018. Agriculture accounts for about 5% of GDP and employs 16% of the population. Manufacturing and industry accounts for 17% of GDP and employs 20% of the population. The service sector accounts for almost 65% of the GDP and employs 58% of the population.
On February 3, 2019, newcomer, candidate Nayib Bukele beat out in an uncontested single election against both major political parties that have controlled politics in the country for the last several decades. President Bukele and his Grand Alliance for National Unity (GANA) took office June 1, 2019. President Bukele is very popular but 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 that will create challenges to passing needed legislation on several issues, at least until new Legislative Assembly elections are held in 2021.
President Bukele has actively courted U.S. favor in the months since his election and since taking office on June 1, 2019. He has repeatedly stated that El Salvador is “open for business” and made two preinauguration trips to the U.S. to meet with members of the U.S. Government, Congress, and Multilateral institutions.
El Salvador’s economy his heavily dependent on the United States. In 2018, President Trump tweeted his intention to withdraw $450 million in aid. Much of those funds have already been reallocated for other uses. Nevertheless, El Salvador continues to receive strong support from the United States Government and international organizations. The Alliance for Prosperity (A4P) is a joint effort of the Governments of El Salvador, Guatemala, and Honduras to promote prosperity, security, and good governance. Each country provides funding and in-kind contributions towards this initiative. The Government of the United States’ U.S. Strategy for Central America, which also focuses on citizen security, developing economic opportunities, and strengthening institutions supports the Alliance for Prosperity with its development assistance.
With the election of President Bukele in February 2019, discussions started to take place about the possibility of an initiative that would create a campaign specifically focused on promoting tourism in El Salvador. There are is a broad range of industry sectors and needs that could potentially be filled by U.S. companies as plans for this initiative, led by the Ministry of Tourism, take shape.
Opportunities related to the initiative with a broad reach across destinations in El Salvador are many. The initiative and intergovernmental team led the Minister of Tourism will start with the development of several surfing destinations along El Salvador’s coastline. As plans move forward and the government defines its plans and determines funding sources, there will be opportunities not just in the traditional tourism participants including hotels, restaurants, travel agencies, etc., but also a range of infrastructure and large project opportunities. There will be the demand for inputs for security needs, transportation.
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