PROESA in El Salvador Works to Attract Foreign Investment
Under the recently installed government of President Nayib Bukele, Proesa in El Salvador seeks to serve foreign investors
Contact the Central American Group with Your Questions on Investing in El Salvador.
The Central American Group: Hello and welcome to another installation of the Central American Group’s series of podcasts. In these conversations we speak to people that are internal and external to the organization. Today, we’re pleased to welcome somebody that is outside of the organization from a group called PROESA. PROESA is the foreign investment promotion arm of the government of El Salvador. Joining us today is Javier Galdamez. He is the investment director of PROESA in El Salvador. How are you today, Javier?
Javier Galdamez: Hello, I’m fine. Thank you.
The Central American Group: Could you please tell us a bit about yourself and PROESA in El Salvador?
Javier Galdamez: Yes, my name is Javier Galdamez. I am the Investment Director for PROESA in El Salvador. I have been hired by the country’s new government. I have been working in investment promotion for the past six years in the Salvadoran Ministry of Foreign Affairs, which had a different twist. This is because it was mainly focused on investment from our diaspora, but now I received the opportunity to bring all the good work that was being done in the area of Salvadorans living abroad as well as to look at things from a broader perspective. Now we are working with PROESA, the investment agency in El Salvador, in three main areas: One is export promotion. Another area is foreign investments, and the third is PPP or public-private partnerships.
The Central American Group: That’s interesting. There’s one thing that we would like you to comment on. It is how the recent election of your country’s new young president (37 years old) has affected El Salvador’s business promotion, and how he proposes to make the country more business friendly?
Javier Galdamez: President Bukele is 37 years old, as you said. He is impregnating the whole government structure with a new dynamic. It’s being done mainly by using social media to move beyond campaign promises and in order to produce results. His main focus is what you find in the private sector. It’s based on results. If you don’t have results, you’re lost.
Just as is with the case with the US, Twitter is becoming a relevant platform. In this case, we are continually being informed and generating regular content so that the population gets to know more up front. They are being informed as to what is going on and as to know what the aims of this new government are. Within these aims there are two main issues that are being considered. The first one has to do with crime rates. The new government has implemented a territorial program that has been going on since day one of the new administration. We have been receiving very positive feedback regarding numbers. We are seeing an overall decrease in the crime rate. This is why we have received an improved rating for travelers from the US from the US embassy in El Salvador. We have moved from a Category 3 to a Category 2. People from the US can come and do business, can come and do tourism, because the numbers are speaking for themselves. Actually, yesterday was one of the days that have recorded the least crinminality. What is going on in this important area is very positive.
The second issue has to do with the president, himself, being a businessman. The government structure has been reviewed in order to make it very pro-business. We are reviewing each institution in order to determine what each one can build upon to facilitate doing business in the country. This has to do with the new philosophy that is being implemented by the government and PROESA in El Salvador.
The Central American Group: That’s interesting. I had the pleasure of traveling down to El Salvador and had an opportunity to go a little bit around the country. At least from my perspective, things were tranquil, and it looked like a good place to go.
As far as the new government and PROESA in El Salvador are concerned, what are the sectors that you are seeking to lure investment from?
Javier Galdamez: Exactly. As you may know, we are a part of the whole hemispheric network of free trade agreements. We have a lot of free trade agreements. The most important one is CAFTA-DR, which is the one that Central America and the Dominican Republic negotiated with the US. All of the investor protections that you find under Chapter 10 of the agreement pertain to foreigners, as well as to Salvadorans in the exterior that live abroad and come home to make investments. They are already considered foreign investors, as well.
As PROESA in El Salvador, we are trying to become more efficient. The instruments that we already have in place will be optimized in their use. The government and PROESA in El Salvador are focusing on agroindustry, aeronautics, energy, light manufacturing, offshore business services, textiles and apparel, tourism, and public private partnerships is another component.
PROESA in El Salvador has conducted many different studies through various consulting services in order to identify what are the are the investment opportunities that are available within each of these sectors. For example, in aeronautics, we find that we are well-suited to do commercial aircraft maintenance, and helicopter and corporate aircraft maintenance. These are specific opportunities to pursue. There is legislation in this area that creates incentive for companies to engage in these activities in El Salvador.
In addition to aircraft maintenance, there are incentives to distribute and service aircraft parts, maintain components, provide aeronautics ground services, manufacture aircraft harnessing systems, etc. This is just an example in one sector of what PROESA in El Salvador can help foreign investors to do. Another example is agroindustry. In this sector we have cocoa. The genetics of the cocoa that is found in El Salvador makes us one of the 18 top members in the Chocolate Hall of Fame. What is the significance of this for PROESA in El Salvador? This just example of one of the products that we have to offer that have significant potential. Additionally, there are other sectors that fall within the category of agroindustry that we feel that we can participate in.
The Central American Group: We see a lot of industry in the area of textiles. Can you tell us how the textile industry in El Salvador is vertically integrated?
Javier Galdamez: That has a lot to do with a strategy which was built upon by PROESA in El Salvador many years ago. We are rethinking the strategy of having a vertically integrated industry to be able to access markets.
In this case, we did a study and found the main anchors in the industry in order to bring in that specific investment. Doing this we then brought in more investors to complete the textile industry value chain in El Salvador. We are the only country that has been able to form a complete synthetic cluster in Central America. This was done as a vice presidential effort many years ago that represents a “best practice” of the past that we might be able to upgrade and modernize. For El Salvador the textile is important and quite vital. It represents 46% of our country’s total exports. Textiles is very relevant to our economy and we have learned a lot of lessons in this sector. There are many opportunities for investment in the textile industry in El Salvador. These include things like the manufacturing of yarn and fabric, and knitted garments and accessories, for example. We can also do athletics wear, sportswear, performance wear, and swim wear. Textiles and apparel has its own logic, and that brings us to a discussion of strategy. It is important for the government and PROESA in Mexico to establish priorities for the types of investments that it is seeking to attract. We need to knock on potential investors door and explain to them what we are able to do for them. They can tell us what they need to come to El Salvador. That discussion is an ongoing discussion.
In addition to PROESA in El Salvador working to attract industry to the country, other entities such as the Secretariat of Commerce and Investment may be involved. This is a newly created secretariat that has been established by the new president, Nayib Bukele. The Ministry of Economics and the Ministry of Agriculture can be involved in investments that have to do with agroindustry.
The Central American Group: What kind of approach will you have from the perspective of digital marketing? I know that is one of the tactical areas that you are looking into at this time.
Javier Galdamez: There is a lot of logic for PROESA in El Salvador to enter a 2020 approach to promoting the country. We know that if you are not online, you might as well not exist. The whole government, which is something that I am pretty proud of, has dedicated to it a specific secretariat that is going to define a digital promotion strategy.
When we are talking about digital platforms that we are looking to create, we are talking about data, users, competition, and network effects. We are talking about two different types of users. On one side you find the common aggregate user. This could be a citizen or a foreign investor. On the other side you find a governmental actor. This is the one that provides a service and solves problems. This side produces content and creates the link point for users to act as citizens or investors. The strategy is including a digital view of how doing business with PROESA in El Salvador should be a streamlined process. We are looking at the proposition of cutting the red tape with technology. We are looking to make the experience of investing in El Salvador an easy one. Technology is the way to go to achieve this objective.
To summarize, our digital approach will take into account a pro-business point of view. This is the view that we wish to impregnate in every single aspect of doing business in El Salvador. We have a way to go to achieving this, but this is what is going on in El Salvador right now.
The Central American Group: Given what PROESA in El Salvador is doing and what your government is doing to make doing business in El Salvador easier through digital means, it seems that you have good prospects for the future.
Javier Galdamez: I think so. We will try to make a very impactful effort related to where we are going to “hunt” for investment.
The US is such an important business partner for us. We see this in every aspect of our data. The second most important market for us is the Central American region. This is especially the case with Northern Triangle countries which would include Honduras and Guatemala. In terms of importance, the European Union would be in third place. As you can see, we are already speaking in terms of free trade agreements with each of these states. Our idea is not to discriminate among investors and to treat them as we would domestic investors. We want to give them as good treatment as possible. Protections are already in place to make transactions as far and as equitable as can be. We have an investment law and other things that are in place. For example, El Salvador has its International Services Law, a Renewable Energy Law, as well as legislation that addresses tourism that grants investors additional incentives. PROESA in El Salvador is here to act as your liaison and to prepare you with information. PROESA is your partner form the pre-establishment phase up to the post-establishment phase. We also provide aftercare for our clients. Investors can begin, however, by looking for PROESA online. PROESA in El Salvador can prepare a specific agenda that addresses investors interests and needs.
The Central American Group: You have made it very clear that PROESA is equipped and ready to give foreign investors help in terms of navigating what needs to be done in El Salvador. Many times, we generate questions from listeners to these podcasts. We like to make it possible for them to communicate directly with people like you.
If people that have listened to this recording have questions how can they get in contact with you directly?
Javier Galdamez: People with questions can send them to my personal institutional email. I will then redirect the question to the appropriate investment specialist. My email at PROESA in El Salvador is email@example.com.
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