Its popularity among surfers sells the beauty of the prominent coastlines of El Salvador. The tremendous amount of tourists directly supports more than 80,000 jobs in the region and represents 3.5% of nations GDP. However, it would be a mistake to view El Salvador strictly as a tourism destination. El Salvador may be the smallest country in Central America, but it has a lot to offer businesses looking for expansion opportunities abroad.
Excellent Geographic Location
El Salvador is well-located in the Central American region with Guatemala, Honduras, and Nicaragua as neighbor countries. The nations strategic location acts as a great gateway and provides trading companies easy access to the large economies in North and South America, namely the US, Canada, Mexico, Colombia, Peru, and Brazil.
The Latin American nation has a beneficial location for manufacturing companies that seek short response times to meet customer demands in North and South America. This has been encouraged by modern and developed infrastructure that significantly improves logistic operations.
Access to International Markets
El Salvador is a signatory to numerous free trade agreements through which businesses receive great market access and fiscal benefits. It’s ‘open economy’ mindset has led to trade agreements with 43 countries in the Americas, Europe, and Asia. This makes El Salvador one of the Central American trade leaders. New businesses can also take advantage of various governmental initiatives and fiscal incentives which promote trade and business, especially relating to imports and exports.
Attractive Fiscal Incentives
To attract Foreign Direct Investment (FDI) into the country, 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 to the above points, El Salvador has created a Free Trade Zones Law that applies to export-orientated manufacturing companies that are located in specific zones. These zones are positioned in industrial parks outside the national territory and bring companies operating under the laws 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 – having a positive impact on a company’s bottom line.
El Salvador is characterized by high connectivity through government support and dedication to constant infrastructural development; this is particularly true in the telecommunication and energy supply sectors. The nations well-developed infrastructure facilitates and logistics of goods between the outgoing ports and the production centers 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 increased significantly over the past years in El Salvador. More specifically, this achievement is marked as one of the greatest progress in the world in terms of increased access to water supply and the reduction of inequality in access between rural and urban areas.
Straightforward Company Incorporation Process
The Salvadorian government has launched a virtual channel for the creation of new companies and to obtain commercial registration through the electronic platform MiEmpresa. The simplification of the registration process has the objective to promote companies do begin commercial operations in El Salvador. It includes reducing the costs associated with incorporation a company and response time. This digital infrastructure improvement includes registration of articles of incorporation and registration of the company, obtaining the Tax Identification Number (NIT) and the Taxpayer Registration Number (NCR/ VAT), amongst others company incorporation processes.
El Salvador has a strong competitive advantage with the cost of input goods, support services, electricity, and human capital. Leveraging these competitive advantages can significantly improve the profitability of new enterprises.
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’s 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.
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 USD 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 limits the exchange risks for foreign investment.
Local Salvadoran Support?
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 the 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.