Today’s guest is Patricia Figueroa. She is the executive director of an organization called CAMTEX in El Salvador. It is the Chamber of Commerce for the nation for the textile industry in El Salvador.
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The Central American Group: Hello. Welcome to another edition of the Central American Group’s podcasts. The subject of these programs is doing business in El Salvador, Costa Rica, and the rest of the Central American region. Today, we have with us, Patricia Figueroa. She is the executive director of an organization called CAMTEX in El Salvador. It is the Chamber of Commerce for the nation for the textile industry in El Salvador. How are you doing this morning, Patricia?
Patricia Figueroa: Hello. How are you?
The Central American Group: I am doing well. We have a few questions that we would like to ask today to learn about the textile industry in El Salvador.
Patricia Figueroa: Great.
The Central American Group: Can you please tell us about your organization and your membership?
Patricia Figueroa: Yes. CAMTEX is the association that represents the textile industry in El Salvador. Textiles is one of the leading sectors of our economy. It accounts for more than forty-five percent of the total exports of El Salvador. We have 110 members in our association. Most of the companies that are doing business in El Salvador, particularly related to the export sector in textile and apparel, are member associates.
The Central American Group: We would like to know where the textile manufacturers are located in El Salvador. Could you tell us where they are in the country?
Patricia Figueroa: Yes. They are grouped in a very synergistic way. Most of them are in the central and the western part of the country. The reason for this is that most of the country’s free zones are located in these areas. That’s where most of our manufacturers are located. Also, these areas are on the major commercial routes. Most of our members export their goods through Honduras or Guatemala.
The Central American Group: I have read that the textile industry in El Salvador is vertically integrated. Can you tell us a little bit about that?
Patricia Figueroa: Yes, that’s one of the key elements and, perhaps, one of the most competitive advantages that the textile industry in El Salvador. Our industry has been evolving over the years from being a provider of what is called “maquila services,” which are very simple services, to becoming one of the leading industries in El Salvador. It is now vertically integrated and has two very distinct clusters. These are cotton and synthetic manufacturing. These have positioned us in the making of synthetic fabrics and, also, sportswear. The textile industry in El Salvador is very relevant for our economy. It accounts, as I have said, for over forty-five percent of total exports. Additionally, it employs over 80,000 workers in El Salvador. So, the textile industry in El Salvador is a very prominent one. El Salvador is the ninth largest provider of apparel goods to the United States. We are located among the ten most important suppliers.
The Central American Group: Why should textile manufacturers choose El Salvador when seeking a location at which to do business and manufacture their goods? What are the advantages of being there?
Patricia Figueroa: Yes. Definitely. I think that there are several factors. One of them is geographical proximity if you look at it as a comparative advantage. Because it allows the companies in the textile industry in El Salvador to manufacture goods in the country and bring them with what is called “speed to market” advantage and bring products to consumers in the US at a very fast pace. When looking at the distance in comparison to our Asian competitors this is one of our key advantages. The other one is the free trade agreement that we have with the United States (CAFTA-DR). Other than that, we have agreements with several other countries, which manufacturers can take advantage of. However, the CAFTA-DR free trade agreement is one of the most important and advantageous ones in that it allows companies to benefit from the tariff preferences. Let’s say if you would pay thirty-five percent tariff on a good made in other countries in Asia, and if you combine it with the speed-to-market facility, you have a very good competitive advantage.
I would also like to highlight that because of the tradition of the textile industry in El Salvador, it has evolved into being a very sophisticated sector. The professionalism of our workforce is well-recognized. The country itself has a dollarized economy. I think that this has a very positive impact on investors in the textile industry in El Salvador. Also, the legal framework that rules the operations of this type of companies is one of the important factors to promote El Salvador.
The Central American Group: One of the things that I have read a lot about is the free trade zone regime in El Salvador. Are many companies that are producers in the textile industry in El Salvador located in free zones? Also, can you tell us about some of the benefits that exist when a company is in a free zone in El Salvador?
Patricia Figueroa: Yes, most definitely. The legal framework is one of the key elements. This is an industrial policy that is geared to attract investment and also to promote employment. It has been in place for many years. For over forty years, we have had an export policy that has been adapting to the needs of the market. There are about 220 companies that are operating under this model. It is also a great model for our country because it attracts new investment and gives a great degree of certainty to investors in the textile industry in El Salvador. Among many of the benefits that we can mention, are the tax exemptions that are given to the companies that operate in free zones in El Salvador. These types of exemptions are bound to certain investment and employment requirements. To mention some of the benefits, let’s say that for the first fifteen years, companies operating in the textile industry in El Salvador would be one hundred percent tax exempt. Particularly, if they are located in the metropolitan area. Then the exemption goes down to sixty-percent and forty-five percent. Then you also have municipal tax exemptions, and in addition to that definitely, companies are allowed to import materials and equipment, and anything that is needed to make their product duty-free. The ecosystem that is around the country to make sure that companies in the textile industry in El Salvador is very favorable. Another thing to highlight, also, that there are seventeen free zones in the country, and also the free zone owners assist their companies to ensure that doing business in El Salvador is easy. Overall, these are some of the key benefits of this important legal framework.
We also have the investment law that guarantees equal rights for both foreign and national investors. It is really great protection for investors that are coming to the country. El Salvador has been making great strides in trying to provide a pro-business environment so that companies can establish their operations in the fastest fashion and in the best way.
The Central American Group: Thank you for that explanation regarding the benefits of being in El Salvador and one free trade zones located in the country. Is there anything that I haven’t ask you that would be of interest to our listeners?
Patricia Figueroa: I think that it is relevant and very important to say that the companies in the textile industry in El Salvador always praise the work ethic of our labor force. There is a very, very small rate of turnover. Actually, I think that the quality of the production and the sophistication of what is being made in El Salvador can make it very attractive. There are a lot of opportunities here, and there is a lot in terms of what we are doing in the Association to help companies in training their workers and guiding them in all of there needs. This is particularly true in the start-up phase of their operations. We would definitely be happy to see more companies come into our country.
The Central American Group: With that, the companies that are listening to this podcast might have a desire to get in touch with you. Could you please tell us how we can help companies to do that?
The Central American Group: Thank you very much for being with us today, Patricia. Learning about the textile industry in El Salvador was very interesting, and we wish you the best of luck.
Patricia Figueroa: Thank you.