El Salvador may be the smallest country in Central America, but it consists of many great commercial characteristics.
In addition to the many tourist attractions and the various activities that can be undertaken in the tropical country, the government has also invested immensely into luring Foreign Direct Investment (FDI) into the country by providing companies with incentives to incorporate their businesses in El Salvador.
In this article, we will present the main reasons why you should invest in and establish your business operations in El Salvador.
1. Strategic Location
El Salvador is located in the middle of the Central American region, which is optimal for connections into South and North America via the air, ocean or road. Flights usually have a duration of between 2 and 5 hours into some of the biggest cities in North and South America.
2. Preferential Access to International Markets
El Salvador has entered several free trade agreements (FTA) with many American, European and Asian countries. These FTAs provide rules which the foreign investor needs to comply with in order to benefit from those benefits stated in the agreement. Consequently, companies are able to profit from many fiscal incentives in relation to importation and exportation.
3. Attractive Fiscal Incentives
To attract more FDI into the country, El Salvador has reformed and created several laws, which have had a great impact on investment by providing a large number of fiscal benefits not only to local but also to foreign investors doing business in the region. Some of these reforms include the following: exemption of importation tariff duties, income and municipal taxes and improved laws for investors focusing on the following activities:
- Companies that execute international services, concentrating on the provision of services for foreign clients.
- Focus on the free zones that are dedicated to the production, manufacturing or commercialization of industrial goods.
- Tourism projects which have a value of approx. US$25,000 and that are of national interest can obtain legal and fiscal benefits.
- Those projects that are fomenting renewable energies in the field of electricity generation, hydraulic geothermal, wind and solar resources.
4. Competitive Infrastructure
El Salvador is characterized by high connectivity through government dedication to constant infrastructural development. This is complemented by the big telecommunications and electricity markets that allow access to those services in an efficient way.
Given the well-developed infrastructure, the main cities, as well as the rest of the region can be reached rapidly. This facilitates the logistics of goods.
Furthermore, even though El Salvador has only one main airport (the International airport of El Salvador), the country has become an important regional junction and maintenance center for commercial and international airplanes.
Lastly, the Central American Country has developed its port infrastructure in order to attend the maritime cargo disembarking in El Salvador. Even though El Salvador is home to only a few harbors, it has enough capacity to cope with the necessities of the international maritime traffic and keeps investing in infrastructural projects to advance their capacities.
5. Competitive Prices
El Salvador has a competitive advantage in relation to the cost of goods, services, and human labor, which is important during and after the establishment and operation of a company. Among the most attractive competitive costs is the local workforce. If you are planning to hire employees, you will have to know in detail the local Salvadorian labor law in order to provide staff with all the necessary labor benefits, and in order to stay in good standing with local authorities.
6. Productive Labor Force
The workforce in El Salvador is young and productive, with a good percentage of the population being professionals and technicians in different areas. Consequently, these individuals are able to develop new abilities by working with international companies in a variety of areas such as manufacturing, agriculture and the service sector. The local Salvadoran workforce is renowned for its efficiency and hard-working mentality.
As mentioned before, thanks to a great base of technicians and professionals that are able to incorporate themselves into different sectors of the country, foreign investors have access to a qualified workforce. In addition, the government provides incentives for businessmen/women to train their employees that can be executed in the Salvadorian Institute of Professional Formation (INSAFORP); allowing for increased professional development – benefiting both the employer and the employee.
7. Monetary Stability
One of the most important policies in El Salvador has been the adoption of the US Dollar as the national currency, which has further opened up the economy to FDI, especially from the US.
One of the main results is that El Salvador, different from all the other countries in the region, maintains a low inflation rate. Moreover, it has eliminated almost all the exchange risks, which is one of the main concerns of foreign investors doing business in Latin America.
El Salvador provides a lot of good reasons for investors to establish their business in the Central American nation. If you are interested in entering the Salvadorian market, we at Biz Latin Hub have a team of local experts that can give you the support and help you to successfully operate in El Salvador. Reach out to our bi-lingual Country Coordinator, Diego, here for personalized support.