As El Salvador launches its COVID-19 vaccination campaign, the country’s growing technology sector promises to play an important role in recovery. While many businesses in the country were severely affected by the restrictions imposed to avoid the spread of the virus, others managed to quickly adapt to the ‘new normal’ in doing business. Here, three El Salvador tech companies are highlighted that have seen business increase during the pandemic and will likely continue to grow in its aftermath.
El Salvador has experienced consistent and exponential growth over the past thirty years, both in terms of gross domestic product (GDP) and gross national income (GNI) — the latter being a good indicator of general prosperity among the population — according to figures published by the World Bank. The Central American nation of 6.45 million people moved into ‘upper-middle income’ nation status in 2019, when its GNI reached $4,000 per capita (all figures in USD).
El Salvador has a range of free trade agreements (FTAs) in place, largely based on its membership of a number of associations. As one of three ‘Northern Triangle’ countries, along with neighbors Guatemala and Honduras, it maintains an FTA with Colombia. The Northern Triangle are joined by Costa Rica and Nicaragua in the Central American Common Market (CACM), which has agreements with the likes of Chile, Mexico, Panama, and the United Kingdom. All five CACM members are linked to the United States and the Dominican Republic via the Dominican Republic-Central America FTA (CAFTA-DR). Meanwhile, El Salvador and Honduras also have an FTA in place with Taiwan.
While El Salvador is not often recognized as a popular destination for foreign direct investment (FDI), the country saw FDI inflows increase 50% between 2016 and 2019, to reach $720 million. The country has a dollarized economy that welcomes foreign investment through multiple tax benefits, while it also maintains seventeen free zones (FTZ) throughout the country.
Some of El Salvador’s prime exports include garments, electrical devices, sugar, and plastic products. While the country exports mainly to the United States, other export destinations include Costa Rica, Guatemala, Honduras, and Nicaragua.
If you are considering doing business in El Salvador, learning about the three El Salvador tech companies that fared well during the pandemic might provide you with valuable insights for your own commercial venture. Or go ahead and contact us now to discuss your business options in El Salvador, or any of the other 15 markets in Latin America and the Caribbean where we are present.
The impact of the pandemic on Salvadorian business
According to figures published by the World Bank, the COVID-19 pandemic had a negative impact on the efforts of the Salvadorian government to reduce poverty rates in the country. The international entity projected an 8.7% contraction of the country’s GDP, largely due to the decrease in local economic activities and the reduction in remittances sent mainly from the United States. As claimed by Mauricio Choussy, former president of the Central Reserve Bank (BCR), due to the economic crisis generated by COVID-19, nearly 200.000 formal jobs were lost in the country.
Furthermore, according to a survey conducted by the Chamber of Commerce and Industry of El Salvador, about 40% of the country’s small and micro enterprises reported a considerable decrease in their sales during the toughest months of the pandemic. The tourism sector, which in 2019 reported $1.8 billion in profits, was the most affected by the restrictions to stop the spread of the virus. Other economic sectors seriously affected by the pandemic include the hospitality, commerce, and transportation sectors. Nevertheless, El Salvador’s economy is expected to recover by 4.9% in 2021.
On the other hand, the sector least affected by the pandemic in El Salvador was the agricultural sector, as it was able to continue operating normally throughout 2020.
3 El Salvador tech companies to watch after the pandemic
The following El Salvador tech companies have grown during the pandemic and should be expected to continue on their upward trajectories in the future:
Hugo — On-demand delivery and logistics
Hugo began operating in El Salvador in April 2017, and currently offers home delivery and logistics services, which includes the transport of food, medicines, pharmaceutical products, and pet food. In just three years, Hugo has managed to expand to other Central American countries, such as El Salvador, Guatemala, Honduras, Nicaragua, Costa Rica, and the Dominican Republic. In addition, the company is expected to offer transportation services for people and financial services in the future.
“Since we started in this project we had the vision of expanding into Central America and the rest of Latin America. It should be mentioned that the team that is supporting this expansion is made of young people with an average age of 28 years. We want to show the world that the youth of Central America can do great things” explained Alejandro Argumedo, Hugo’s co-founder.
With the massive growth of e-commerce and delivery service usage during the pandemic only likely to continue growing, Hugo can be expected to continue to expand.
IKÉ — Virtual platform focused on construction services
IKÉ is a company that offers services related to the construction sector through suppliers and independent professionals registered on its virtual platform. Among the services offered in El Salvador are property maintenance, remodeling, plumbing, appliance installation, shelf installation, painting, and cleaning. The Salvadoran company launched its mobile application in 2020.
According to Eduardo Montes, founder of ‘IKÉ APP’ “The app allows its users to access a wide range of services. Our app makes life easier for people and avoids the problem of not knowing who to hire“
In 2020, IKÉ was handed the ‘best company’ award at the ‘El Salvador Colabora’ contest, which judges companies according to their impact on the country and their business potential.
SPOT — Company focused on artificial intelligence and machine learning
SPOT is a company specialized in creating corporate solutions with artificial Intelligence (AI) and machine learning (ML), facilitating the incorporation of intelligent analysis of images and videos for different companies and industries across Latin America. Essentially it allows companies to quickly and easily analyse large documents and other sources of information.
SPOT was placed as one of the most innovative startups in El Salvador during the International Entrepreneur Congress (CIES) held in 2017, where it ranked third. Likewise, in 2018, the company participated in the startup Chile contest, where it was classified as the disruptive startup of Latin America at demand solutions.
With AI and ML only likely to increase in importance in many aspects of commercial life, and with SPOT offering an innovative solution that saves time, it can be expected to continue to grow.
El Salvador tech: govt promotes digital transformation
In order to promote the digital transformation of the Central American country, in 2020 the government launched the ‘Digital Agenda 2020-2030‘, an ambitious project that seeks to implement the digitization of government processes, improve access to public services, and facilitate easier business creation. This project seeks to attract foreign investment to the country and will focus on four pillars, which include digital identity; innovation, education and competitiveness; modernization of the state; and digital governance.
Biz Latin Hub can assist you in doing business in El Salvador
At Biz Latin Hub, our team of experienced company formation agents is equipped to help you enter the Salvadoran market and take advantage of the country’s growing tech scene. With our full suite of corporate legal, accounting, and commercial representation services, our multilingual teams are equipped to deliver excellence and ensure the success of your commercial expansion in El Salvador, or elsewhere in Latin America and the Caribbean.
Reach out to us now to discuss your commercial plans.
Learn more about our team and expert authors.