Improved business environment opens El Salvador up for investment

El Salvador may be not directly linked to your list of expansion destinations, however, in addition to great tourist attractions it offers a favorable business climate with great commercial opportunities. El Salvador’s investment potential is not strictly married to tourism, agriculture and the industry sector.

The territory is ready to attract more foreign investors. This is due to a labor force with a relatively high level of English proficiency, accompanied by notable reforms to speed up the company incorporation process and improve its business climate.

El Salvador Open for Investment – Business Reforms and Ease of Doing Business

In the past years, countries peaked in the total number of business reform activities worldwide. The World Bank Doing Business Report showed that between June 2017 and May 2018, 128 economies implemented 314 regulatory reforms to improve business climates. Reforms made by El Salvador are no exception. The ease of doing business in its outstanding sectors is attracting foreign investors that seek to diversify investment portfolios. The government’s business reforms include the following:

• Law on Movable Property: improved access to credit. It allows a general description of a single category of assets granted as collateral.
• Paying taxes is easier due to encouraging the use of the electronic system and online platform for filing taxes.
• Exporting and importing is easier due to increasing the number of customs officers at the Anguiatú land border and the port of Acajutla.
• Reliability of electricity is improved by introducing new software programs allowing better outage management and maintenance planning.
• Construction permits are less time-consuming, thanks to the elimination of specific requirements (feasibility studies i.e.).

El Salvador also offers minimal wait times to obtain permits for commercial operations. Complying with regulations can discourage private investment activity and foreign direct investments. In 2016, The World Bank concluded from its Enterprise Surveys that businesses can obtain an import license and operating license in El Salvador almost two times faster than Latin America’s average number.

New Inter-Institutional Cooperation Agreement

The Ministry of Labor and Social Welfare (MTPS) and the National Center of Records (CNR) agreed on an inter-institutional cooperation agreement that will facilitate easier exchange of corporate information amongst themselves.

Previously, incorporating a company was a time-consuming business since registration matters took time and required registration at several institutions. Further to this, the Ministry of Labor and Social Welfare and the National Center of Records often saved records with inconsistent information. Considerable improvements to the incorporation process have therefore been high on the political agenda.

With this agreement, both organizations will increase communications and will share and save information regarding company registrations and labor matters. In the same vein, it will minimize time in the search for addresses and names of companies in various areas and will resolve labor disputes among the users of the MTPS and CNR.

For privacy matters, it will trade information through a virtual private network (VPN). It asks entrepreneurs and companies of all sizes to register at just one of the two institutions. The registration information will then be shared across the two institutions, thus the MTPS and CNR save the same information. This gives businesses increased confidence in the administration of El Salvador’s institutions, and reduces undesirable bureaucratic misunderstandings.

The agreement has a term of two years, which will be automatically renewed unless either party decides to terminate it.

Doing Business – ‘’Catalog of Benefits’’ Tool

MiEmpresa is the government’s electronic platform that supports all registrations procedures through an online platform.  MiEmpresa also provides a catalog of benefits, a tool designed by the Ministry of Economy to support business in El Salvador., Through this catalog, the Ministry of Economy provides information on training, advice, and health and financial services.

With this tool, people and businesses can easily gauge their eligibility to apply for a specific service or benefit by filtering on specific needs. For example, entrepreneurs can apply for specific training days that give guidance on how to start or manage a company. Additionally, it lists institutions that offer particular benefits for financing and encouraging startups.

In Summary, El Salvador is focused on improving its business climate by speeding up requirement procedures.  Likewise, they support various government institutions to support the business through a catalog of numerous benefits. El Salvador is fast developing a reputation as a destination perfect for domestic and international trade.

Trade Overview for El Salvador

Thanks to a number of Free Trade Agreements and low import and export tariffs, El Salvador shows enough reason to consider a trade business. Despite trade is primarily powered by the agriculture sector, it started to diversify imports and exports thanks to agreements that make importing and exporting duty-free for a wide set of products.

Export environment

In 2017, El Salvador exported a total amount of US$ 5.89 billion, making it the 102nd largest exporter in the world. Exports are especially supported by sales of Knit T-Shirts, Knit Sweaters, raw sugars, plastics and coffee.

Top export destinations of El Salvador are the United States (US$ 2.48 billion), Guatemala (US$ 791 million), Honduras (US$ 778 million), Nicaragua (US$ 431 million) and Costa Rica (US$ 261 million).

Import environment

In 2017, El Salvador imported a total amount of US$ 10.5 billion, making It the 86th largest importer in the world. Most recent imports are led by Refined Petroleum, Packaged Medicaments, cars and broadcasting equipment.

Top import destinations of El Salvador are the United States (US$ 3.26 billion), China (US$ 1.43 billion), Guatemala (US$ 1.03 billion), Mexico (US$ 900 million) and Honduras (US$ 578 million).

Need Local Support? Talk to us about doing business in El Salvador

The New Inter-Institutional Cooperation Agreement in El Salvador is without any doubt a prime improvement for doing business and with its economical geographical location, El Salvador has become even more lucrative for international investors. With a good understanding of doing business in Latin American countries your expansion will very likely be a successful one.

However, dealing with all legal and accounting purposes can be difficult without comprehensive knowledge of the local system of El Salvador.

At Biz Latin Hub El Salvador, we have a team of professionals can support you with new activities or related questions. If you are in need of any of our customized services get in contact with us today.