El Salvador
June 9, 2009El Salvador at a glance
Capital: San Salvador
Population: 7,185,218 (July 2009 est.)
Government Type: Republic
GDP: $20.4 billion
Imports: $9.75 billion f.o.b.
Exports: $4.55 billion f.o.b.
Although the smallest country in Central America, El Salvador has the third largest economy. Modest growth is expected to slow even further in 2009 due to the global slowdown and to El Salvador’s dependence on exports to the US and remittances from the US. El Salvador leads the region in remittances per capita with inflows equivalent to nearly all export income.
The country is a democratic republic governed by a president and an 84-member unicameral Legislative Assembly. The president is elected by absolute majority vote and serves for a 5-year term. Members of the assembly are elected based on the number of votes that their parties obtain in each department and serve for 3-year terms. The country has an independent judiciary and Supreme Court.
Almost 90% of El Salvador’s population is of mixed Indian and Spanish extraction. About 1% is indigenous; very few Indians have retained their customs and traditions. The country’s people are largely Roman Catholic and Protestant. Spanish is the language spoken by virtually all inhabitants. The capital city of San Salvador has about 1.6 million people. An estimated 37.3% of El Salvador’s population lives in rural areas.
El Salvador is located on the Pacific’s earthquake-prone Ring of Fire and at latitudes plagued by hurricanes. An October 1986 earthquake killed 1,400 and seriously damaged the nation’s infrastructure. In 1998, Hurricane Mitch killed 10,000 in the region. Major earthquakes in January and February of 2001 took another 1,000 lives and left thousands more homeless and jobless. El Salvador’s largest volcano, Santa Ana, erupted in October 2005, spewing sulfuric gas, ash, and rock on surrounding communities and coffee plantations, killing two people and permanently displacing 5,000. Also in October 2005, Hurricane Stan unleashed heavy rains that caused flooding throughout El Salvador. In all, the flooding caused 67 deaths and more than 50,000 people were evacuated at some point during the crisis.
U.S.-El Salvador Relations
U.S.-Salvadoran relations remain close and strong. U.S. policy toward El Salvador promotes the strengthening of El Salvador’s democratic
institutions, rule of law, judicial reform, national reconciliation and reconstruction, and economic opportunity and growth. El Salvador was a committed member of the coalition of nations fighting against terrorism and sent eleven rotations of troops to Iraq to support Operation Iraqi Freedom from 2003 through 2008.
The U.S. and Salvadoran governments cooperate closely to combat narcotics trafficking and organized crime. El Salvador hosts the International Law Enforcement Academy, which provides training to police, prosecutors, and other officials from throughout Latin America. El Salvador’s air force installation near Comalapa Airport houses a monitoring facility that surveils narco-trafficking routes in the eastern Pacific. The U.S. Federal Bureau of Investigation (FBI) and El Salvador’s National Civilian Police jointly operate the Transnational Anti-Gang unit, which addresses the growing problem of street gangs in both countries. In January 2009, the United States and El Salvador signed letters of agreement committing both countries to work jointly under the Merida Initiative to fight crime and drug trafficking.
U.S. ties to El Salvador are dynamic and growing. More than 19,000 American citizens live and work full-time in El Salvador. Most are private businesspersons and their families, but a small number of American citizen retirees have been drawn to El Salvador by favorable tax conditions. The U.S. Embassy’s consular section provides a full range of citizenship services to this community.
Foreign Relations
El Salvador is a member of the United Nations and several of its specialized agencies, the Organization of American States (OAS), the Central
American Common Market (CACM), the Central American Parliament, and the Central American Integration System (SICA). It actively participates in the Central American Security Commission (CASC), which seeks to promote regional arms control. From 2002 to 2003, El Salvador was chair of the OAS anti-terrorism coordinating body, CICTE. El Salvador also is a member of the World Trade Organization and is pursuing regional free trade agreements. An active participant in the Summit of the Americas process, El Salvador chairs a working group on market access under the Free Trade Area of the Americas initiative. El Salvador has joined its six Central American neighbors in signing the Alliance for Sustainable Development, known as the Conjunta Centroamerica-USA or CONCAUSA, to promote sustainable economic development in the region.
El Salvador enjoys normal diplomatic and trade relations with all of its neighboring countries including Honduras, with which it has previously had territorial disputes. While the two nations continue to disagree over the status of their maritime borders in the Gulf of Fonseca, they have agreed to settle their land-border disputes with the International Court of Justice (ICJ). In September 1992, the court awarded most of the territory in question to Honduras. In January 1998, Honduras and El Salvador signed a border demarcation treaty to implement the terms of the ICJ decree, although delays continue due to technical difficulties.
Economy
The Salvadoran economy continues to benefit from a commitment to free markets and careful fiscal management. The economy has been growing at a steady and moderate pace since the signing of peace accords that ended its civil war in 1992, and poverty was cut from 66% in 1991 to 34.6% in 2007. Much of the improvement in El Salvador’s economy is a result of the privatization of the banking system, telecommunications, public pensions, electrical distribution, and some electrical generation; reduction of import duties; elimination of price controls; and improved enforcement of intellectual property rights. Capping those reforms, on January 1, 2001, the U.S. dollar became legal tender in El Salvador. The economy is now fully dollarized.
The Salvadoran Government has maintained fiscal discipline during post-war reconstruction and reconstruction following earthquakes in 2001 and hurricanes in 1998 and 2005. Taxes levied by the government include a value-added tax (VAT) of 13%, income tax of 20%, excise taxes on alcohol and cigarettes, and import duties. The VAT accounted for about 52.2% of total tax revenues in 2007. El Salvador’s public external debt in November 2008 was about $5.6 billion, 27.4% of GDP.
Years of civil war, fought largely in the rural areas, had a devastating impact on agricultural production in El Salvador, but the sector has experienced significant recovery, buoyed in part by higher world prices for coffee and sugarcane and increased diversification into horticultural crops. Seeking to develop new growth sectors and employment opportunities, El Salvador created new export industries through fiscal incentives for free trade zones. The largest beneficiary has been the textile and apparel (maquila) sector, which directly provides approximately 70,000 jobs. Services, including retail and financial, have also shown strong employment growth, with about 48.7% of the total labor force now employed in the sector.
Remittances from Salvadorans working in the United States are an important source of income for many families in El Salvador. In 2008, the Central Bank estimated that remittances totaled $3.8 billion. UNDP surveys show that an estimated 22.3% of families receive remittances.
Under its export-led growth strategy, El Salvador has pursued economic integration with its Central American neighbors and negotiated trade agreements with the Dominican Republic, Chile, Mexico, Panama, Taiwan, Colombia, and the United States. Central American countries began negotiating an Association Agreement with the European Union in 2007. Trade agreements with CARICOM and Canada are also under negotiation, and agreements with Israel and Peru are being considered. Exports in 2008 grew 14.2%, while imports grew 12%. As in previous years, the large trade deficit was offset by family remittances.
The U.S.-Central America-Dominican Republic Free Trade Agreement (CAFTA-DR), implemented between El Salvador and the United States on March 1, 2006, provides El Salvador preferential access to U.S. markets. Textiles and apparel, shoes, and processed foods are among the sectors that benefit. In addition to trade benefits, CAFTA-DR also provides trade capacity building, particularly in the environment and labor areas, and a framework for additional reforms on issues such as intellectual property rights, dispute resolution, and customs that will improve El Salvador’s investment climate. For sensitive sectors such as agriculture, the agreement includes generous phase-in periods to allow Salvadoran producers an opportunity to become more competitive.
U.S. support for privatization of the electrical and telecommunications markets markedly expanded opportunities for U.S. investment in the country. More than 300 U.S. companies have established a permanent commercial presence in El Salvador or work through representative offices in the country. On November 29, 2006, the Government of El Salvador and the Millennium Challenge Corporation (MCC) signed a 5-year, $461 million anti-poverty Compact to stimulate economic growth and reduce poverty in the country’s northern region. The grant seeks to improve the lives of approximately 850,000 Salvadorans through investments in education, public services, enterprise development, and transportation infrastructure. The Compact entered into force in September 2007, and it is expected that incomes in the region will increase by 20% over the 5-year term of the Compact, and by 30% within 10 years of the start of the Compact.
Best Export Opportunities
El Salvador offers a strong market for U.S. products by promoting an open trade and investment environment. Tariffs are relatively low because of CAFTA-DR, and there are very few import restrictions. Consumer goods are always in demand, and the people of El Salvador appreciate the high quality of U.S. products. Among the products from the United States that will find a market in El Salvador are automotive parts and security equipment.
For further information on export opportunities in El Salvador, visit the Best Export Opportunities section of the Official Export Guide’s El Salvadore Country Profile.

Intellectual Property Protection
An overall strategy to protect intellectual property rights (IPR) is very important when doing business in El Salvador. Intellectual property is primarily a private right, and the U.S. government generally cannot enforce rights for private individuals. It is the responsibility of the rights holders to register, protect, and enforce their rights where relevant, retaining their own counsel and advisors. In 2005, El Salvador revised several laws to comply with CAFTA-DR’s provisions on intellectual property rights (IPR). The Intellectual Property Promotion and Protection Law (1993, revised in 2005), the Law of Trademarks and Other Distinctive Signs (2002, revised in 2005), and the Penal Code establish the legal framework to protect IPR.
It is also recommended that small and medium-size companies understand the importance of working together with trade associations and organizations to support efforts to protect IPR and stop counterfeiting.
More detailed information on intellectual property rights can be found in the Trade Data section of the Official Export Guide’s El Salvador country profile.
Transportation
U.S. airlines with international flights to El Salvador include American Airlines, Continental, and Delta. United operates through a code-share with TACA. The Central American airline TACA has direct flights to and from the main cities in the United States. Most hotels offer airport shuttle services for their guests, at rates ranging between $15-$20 per one-way trip. Visitors commonly drive rental cars, and a U.S. driver’s license is valid for 60 days. Taxicab services normally provided within the perimeter of deluxe hotels are reliable. Public transit bus service is not recommended.
Major highways and thoroughfares are among the best in Central America, but road conditions throughout El Salvador are not up to U.S. standards. Mini-buses, buses, and taxis are often poorly maintained. Drivers are often not trained and generally do not adhere to traffic rules and regulations. The U.S. Embassy recommends that its personnel avoid using mini-buses and buses and use only taxis that are radio-dispatched or those stationed in front of major hotels. Robberies and violent crimes on buses are commonplace.











Spain at a glance
Spain has maintained its special identification with Latin America. Its policy emphasizes the concept of Hispanidad, a mixture of linguistic, religious, ethnic, cultural, and historical ties binding Spanish-speaking America to Spain. Spain has been an effective example of transition from authoritarianism to democracy, and visits by Spain’s king and prime ministers to the region highlight that success. Spain maintains economic and technical cooperation programs and cultural exchanges with Latin America, both bilaterally and within the EU.
Frequent direct air service is available to major U.S. cities from Madrid and Barcelona. Airports in both Madrid and Barcelona have good public transportation service to downtown. All major cities have metered taxis, and extra charges must be posted in the vehicle. Travelers are advised to use only clearly identified cabs and to ensure that taxi drivers always switch on the meter. A green light on the roof indicates that the taxi is available. Public transportation in large cities is generally excellent. Rail service is comfortable and reliable, but it varies in quality and speed. Intercity buses are usually comfortable and inexpensive. U.S. citizens are encouraged to obtain International Driving Permits if they plan to drive in Spain.
Panama was part of the Spanish empire for 300 years (1538-1821). From the outset, Panamanian identity was based on a sense of “geographic destiny,” and Panamanian fortunes fluctuated with the geopolitical importance of the Isthmus. The colonial experience also spawned Panamanian nationalism as well as a complex and highly stratified society, the source of internal conflicts that ran counter to the unifying force of nationalism.
Panama continues to fight against the illegal narcotics and arms trade. The country’s proximity to major cocaine-producing nations and its role as a commercial and financial crossroads make it a country of special importance in this regard. The Panamanian Government has concluded agreements with the U.S. on maritime law enforcement, counter-terrorism, counter-narcotics, and stolen vehicles. In March 2007 the U.S. Coast Guard in cooperation with the Government of Panama seized over 38,000 lbs. of cocaine off the coast of Panama, the largest drug seizure in the eastern Pacific.
Panama’s economy is based primarily on a well-developed services sector that accounts for nearly 80% of GDP. Services include the Panama Canal, banking, the Colon Free Zone, insurance, container ports, flagship registry, tourism, and medical and healthcare.
Panama has excellent transportation facilities. Three major U.S. airlines serve the country, as do airlines from other countries. COPA, the Panamanian airline, has a regional hub at the Tocumen International Airport, connecting Panama with major cities in the United States and Latin America.


almost 40% of Morocco’s population depends directly on agriculture, droughts have a severe negative effect on the economy.














United States imposed numerous sanctions on Nigeria. After a period of increasingly strained relations, the death of General Abacha in June 1998 and his replacement by General Abubakar opened a new phase of improved relations. The bilateral relationship has continued to improve, and cooperation on many important foreign policy goals, such as regional peacekeeping, has been excellent. An estimated one million Nigerians and Nigerian Americans live, study, and work in the United States, while over 25,000 Americans live and work in Nigeria.
Agreement (TIFA) to advance the ongoing work program and to discuss improvements in Nigerian trade policies and market access. Among the topics discussed were cooperation in the World Trade Organization (WTO), market access, export diversification, commercial issues, trade capacity building and technical assistance, infrastructure, and investment issues.
over 41% of GDP and two-thirds of employment. Agriculture provides a big chunk of non-oil growth, which in 2006 reached 9%. Nigeria is no longer a major exporter of cocoa, groundnuts (peanuts), rubber, or palm oil. Cocoa production, mostly from obsolete varieties and overage trees, is stagnant at around 180,000 tons annually; 25 years ago it was 300,000 tons. An even more dramatic decline in groundnut and palm oil production also has taken place. Although Nigeria was once the biggest poultry producer in Africa, corporate poultry output has been slashed from 40 million birds annually to about 18 million. Import constraints limit the availability of many agricultural and food processing inputs for poultry and other sectors. Fisheries are poorly managed. Most critical for the country’s future, Nigeria’s land tenure system does not encourage long-term investment in technology or modern production methods and does not inspire the availability of rural credit.
widespread poverty, especially in rural areas. A collapse of basic infrastructure and social services since the early 1980s accompanied this trend. By 2002 Nigeria’s per capita income had plunged to about one-quarter of its mid-1970s high, below the level at independence. Along with the endemic malaise of Nigeria’s non-oil sectors, the economy continues to witness massive growth of “informal sector” economic activities, estimated by some to be as high as 75% of the total economy.
Although Nigeria must grapple with its decaying infrastructure and a poor regulatory environment, the country possesses many positive attributes for carefully targeted investment and will likely expand as both a regional and international market player. Profitable niche markets outside the energy sector, such as specialized telecommunication providers, have developed under the government’s reform program. There is a growing consensus that foreign investment is essential to realizing Nigeria’s vast potential. Companies interested in long-term investment and joint ventures, especially those that use locally available raw materials, will find opportunities in the large national market. However, to improve prospects for success, potential investors must educate themselves extensively on local conditions and business practices, establish a local presence, and choose their partners carefully.