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Despite being the smallest country in Central America, El Salvador has ample opportunities for companies looking to incorporate a company in El Salvador. With its strategic location and thriving economy, The country offers a favorable environment for foreign investors and entrepreneurs looking to access new markets and take advantage of growth opportunities. Whether in the tourism sector or exploring other industries, it can be a strategic move towards diversification and expansion in the global market to expand your business to El Salvador.
The appeal of El Salvador’s prominent coastline, especially among surfers, underscores the breathtaking beauty of this Central American nation. The influx of tourists not only adds to the country’s charm, but also plays a crucial role in creating more than 80,000 jobs in the region and contributing to the national GDP. In 2023, tourism accounted for about 10 percent of GDP. You can expand your business to El Salvador and take advantage of this.
However, it would be short-sighted to perceive El Salvador solely as a tourist hotspot. Read on to learn about why it might be a good idea to expand your business to El Salvador. Biz Latin Hub can help you both with initial start up and throughout your business life cycle with our array of back office services. As specialists in Latin America and the Caribbean, no one knows the region better than we do.
Why invest in El Salvador?
El Salvador is well-located in the Central American region, with Guatemala, Honduras, and Nicaragua as neighboring countries. Its strategic location makes it a gateway, and provides trading companies in El Salvador easy access to the large economies in North and South America, such as the US, Canada, Mexico, Colombia, Peru, and Brazil.
This Central American country has a location that benefits manufacturing companies seeking short response times to meet customer demands in North and South America. This has been encouraged by recently developed infrastructure that is significantly improving logistic operations.
Seven reasons you should expand your business to El Salvador
You should expand your business to El Salvador for the following seven reasons:
- access to international markets.
- attractive fiscal incentives.
- competitive infrastructure.
- straightforward company incorporation process.
- competitive pricing.
- access to a low cost and productive labor force.
- monetary stability.
1. Access to international markets
El Salvador is a signatory to numerous free trade agreements through which businesses receive great market access and fiscal benefits. Its ‘open economy’ mindset has led to trade agreements with 43 countries in the Americas, Europe, and Asia. This makes El Salvador a leader in Central America. New businesses can also take advantage of various governmental initiatives and fiscal incentives which promote trade and business, especially relating to imports and exports.
2. Attractive fiscal incentives
To attract foreign direct investment (FDI), El Salvador has reformed and created several laws providing fiscal benefits to foreign investors who commercially operate in the region. One key example of this is a reform that allows for the exemption of importation tariff duties, income and/or municipal taxes for certain companies.
In addition, El Salvador passed a free trade zones law applying to export-oriented manufacturing companies that are located in specific zones. These zones are positioned in industrial parks outside the national territory. Companies operating in these territories get attractive fiscal incentives. Additionally, if a company has to import raw materials or merchandise required for manufacturing, then they will be free of taxes and tariffs.
3. Competitive infrastructure
The government is continuously providing support for infrastructural development; this is particularly true in the telecommunication and energy supply sectors. The country’s well-developed infrastructure facilitates logistics between the outgoing ports and the production centers. This is a key benefit for foreigners looking to establish a trading company in the region. Even though El Salvador has only one main airport, the nation has become an important regional junction and maintenance hub for commercial and global aircraft.
El Salvador’s major cargo seaport is located in Acajutla. The second cargo port is located in the eastern part of the country at Cutuco. These ports, the major cities, and airports are all linked by developed motorways. Additionally, the level of access to water supply has been increasing significantly over the past years. This achievement has increased access to water supply and reduced inequality between rural and urban areas.
4. Straightforward company incorporation process
The Salvadorian government has launched a virtual channel for company formation, allowing companies to obtain commercial registration through the electronic platform MiEmpresa. This makes it easier for companies to begin commercial operations in El Salvador by reducing the costs and response time. Through MiEmpresa companies may acquire articles of incorporation, the Tax Identification Number (NIT), and the Taxpayer Registration Number (NCR/ VAT).
5. Competitive pricing
El Salvador has a strong competitive advantage regarding the cost of input goods, support services, electricity, and human capital. Leveraging these competitive advantages can significantly improve the profitability of new enterprises.
6. Access to a low cost and productive labor force
The workforce in El Salvador is young, productive, and enthusiastic. Over 56% of the population are 40 years or younger. The country’s labor force is ideal for manufacturing, agro-industrial, and service activities. There is also a growing population with higher education qualifications that can face the challenges of a modern and globalized economy. The Salvadoran labor force is world-famous for its industriousness, efficiency, and work ethic.
7. Monetary stability
Limited restrictions are imposed on foreign trade operations or foreign currency transactions, and the US dollar is used as the local currency. The introduction of the dollar has further opened up the economy to foreign direct investment (FDI), especially from North America. As a result, El Salvador maintains a low inflation rate and limited exchange risks for foreign investment.
FAQs on expanding your business to El Salvador
Why should I expand my business to El Salvador?
El Salvador could be an attractive destination for your business expansion for a few reasons: tax incentives, strategic location, favorable input and labor costs.
What are the key industries in El Salvador?
El Salvador’s economy is driven by services, followed by industry and agriculture. Some of the key industries include textiles and apparel manufacturing, food processing, call centers, and tourism.
Are there any incentives or benefits for foreign businesses in El Salvador?
Yes, El Salvador offers several incentives for foreign businesses, including:
– Tax exemptions on income and import duties.
– Simplified business registration processes.
– Special benefits within Free Trade Zones.
Biz Latin Hub can help you expand your business to El Salvador
For these and many other reasons, El Salvador is considered a great place to start a company. To be able to leverage El Salvador’s potential, it is recommended to work with a local partner. Here at Biz Latin Hub, we understand the local Salvadorian business environment and we can help you to navigate its complexities.
We pride ourselves on providing our clients with a comprehensive suite of commercial representation and back-office services that allow our client to establish themselves and to prosper. Now is the perfect time to consider your business expansion to El Salvador.
To get started, please contact the Biz Latin Hub team today. We are ready to support you and your business in El Salvador.
The information provided here within should not be construed as formal guidance or advice. Please consult a professional for your specific situation. Information provided is for informative purposes only and may not capture all pertinent laws, standards, and best practices. The regulatory landscape is continually evolving; information mentioned may be outdated and/or could undergo changes. The interpretations presented are not official. Some sections are based on the interpretations or views of relevant authorities, but we cannot ensure that these perspectives will be supported in all professional settings.
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