Doing Business in
El Salvador is a Central American manufacturing hub.
Investing in El Salvador?
Doing business in El Salvador means initiating operations in a free market, export-oriented economy that is strategically located between North and South America. The country has a population of approximately 6.5 million inhabitants and has an economy with a GDP of US $25.8 billion. The per capita income of the country is US $4,273 annually.
Doing business in El Salvador has become easier given the fact that the country has one of the freest economies in Latin America. It offers macro-economic stability due to its use of the US dollar as its national currency and offers openness to both foreign trade and investment. In El Salvador there is no restriction on foreign ownership and merges, as well as on acquisitions and joint-ventures. The country has duty-free access to 1.2 billion consumers due to the free trade agreements that it is a party to.
Companies doing business in El Salvador that are geared toward manufacturing and exporting goods can set up operations in one of the country’s free trade zones (FTZs). There are seventeen areas countrywide that carry this designation. They offer a number of fiscal benefits that are available to companies that locate in one of El Salvador’s FTZs. Among them are:
- a full exemption from income taxes;
- a full municipal tax exemption;
- duty-free import of machinery, equipment, intermediary goods and raw materials that are used in the manufacturing process;
- a VAT exemption;
- an exemption from real-estate transfer taxes when land is intended to be used for productive activities.
The Central American Group services companies that are doing business in El Salvador by offering them a choice of two free trade zones in which to locate their operations: the Zona Franca International and the San Marcos Free Zone. Activities that are present in this FTZ include:
- textiles manufacturing;
- label manufacturing
- warehousing and distribution;
- third-party logistics.
Infrastructure that is available for use by companies doing business in El Salvador in the Zona Franca International includes:
- a 15 KVA power substation;
- an autonomous water supply and wastewater treatment plant;
- fiber-optic telecommunications;
- offices for customs operations and human resources administration.
The number of individuals employed at the Central American Group’s San Marcos Free Trade Zone is approximately 8,500 individuals. Companies currently doing business in El Salvador’s free trade zones point to its labor force as a major competitive advantage. The minimum wage for a direct labor worker in manufacturing is US $300 per month, while benefits represent a maximum of 30% of the minimum wage. Employee turnover reported by those companies doing business in El Salvador is below an annual rate of 10%.
The FTZ is just over 1 million square feet in area and has 11 buildings within its boundaries. These buildings have a total of 485,000 square feet. Of the thirteen companies that are located in the San Marcos Free Trade Zone, 8 are in the textile and clothing manufacturing industries.
Companies that are contemplating doing business in El Salvador should contact the Central American Group by filling out the form that is below.
Interested in El Salvador?
Included among the topics addressed in this document are:
- starting a business;
- dealing with construction permits;
- registering property;
- paying applicable taxes.
You can download the material here.