Political Information

Source: DFATD Foreign Relations

Political and Economic Stability

Since the end of the civil war in 1992, El Salvador has made significant progress towards consolidating peace and democracy. There was democratic transition from the dominant political party, the Nationalist Republican Alliance (ARENA) to the Farabundo Martí National Liberation Front (FMLN) in the 2009 general elections. Although the FMLN maintained power in the 2014 elections, the ARENA won the majority seat in the National Assembly elections in 2015. The country’s political transformation has led to major structural reforms and macroeconomic policies that have resulted in strong economic performance.

El Salvador may be the smallest country in Central America by geographic area, but it boasts the third largest economy in the region. The country’s economic growth rate reached 2.4% in 2015. El Salvador was successful in cutting the rate of extreme poverty by half during the 1990s, but hard hit by the 2008 financial crisis, which resulted in higher levels of unemployment and rising food and energy prices. Following a USD $600 million Anti-Crisis Plan introduced by the government in 2009, El Salvador’s economy has begun to recover at a slow but steady pace. The economic growth rate in 2015 stood at 2.5%. Major social protection investments have helped to reduce poverty rates in recent years, which fell from 38.8 % in 2000 to 31.8 % in 2014, according to official statistics. El Salvador’s unemployment and debt projections for 2012-2017 fall below the Latin American average and its inflation rate is the lowest in Central America.

The Salvadorian government continues to promote an open environment for international trade and investment, with significant shifts towards privatization in sectors including telecommunications, electricity distribution, banking, and pension funds. With an export-led growth strategy, El Salvador has negotiated trade agreements with the Dominican Republic, Chile, Mexico, Panama, Taiwan, Colombia and the United States. It is also a member of the Central American Free Trade Agreement (CAFTA). The country’s exports grew 5% between 2014 and 2015 with coffee production and maquila industries experiencing a strong recovery. However, key risks to El Salvador’s economy include its heavy dependence on the United States and fluctuations in commodity prices for the country’s two primary exports of sugar and coffee.

The government has invested hundreds of millions of dollars in education, public services, enterprise development, and transportation infrastructure to stimulate economic growth and reduce poverty, particularly in northern areas that were most affected by the civil war (1979-1992).

Business Climate

The World Bank’s annual Doing Business report ranks 189 economies from 1 to 189 (with 1 being the best) on their ease of doing business. In the 2016 report, El Salvador ranked 86, moving up from 97 in 2015. However, the country ranked 46 in 2016 from 38 in 2015 for Trading Across Borders, which measure the ease with which a standardized shipment of goods can be imported or exported across its borders. The average time to ship goods out of El Salvador is approximately 38 days with an average estimated cost of CAD$ 209.46 per 20-foot container, both figures are below the regional average for Latin America & the Caribbean. To complete the export process, nine forms of documentation are required: Bill of lading, Certificate of origin, Commercial invoice, Customs export declaration, Non-intrusive scanner payment receipt, Packing list, Road transport document, Terminal handling, and Transit document. Although El Salvador moved up by 11 on the ease of doing business, it dropped by 8 on trading across its borders.

Although there are many reputable exporters in El Salvador, Canadian importers should be aware that corruption could be an issue when doing business in the country. El Salvador ranked 72^nd out of 168 in Transparency International’s 2015 Corruption Perceptions Index where 1^st place indicates least corrupt. Canadian companies are advised to exercise strict due diligence before working with a company from El Salvador to ensure that it is a bona fide and reputable entity. It is suggested that Canadian importers commission a report by a credit information provider to verify the financial strength of the partner.

TFO Canada Export Offers

TFO Canada provides an information service for Canadian importers interested in sourcing products from developing and emerging economies such as El Salvador. This includes practical advice on sourcing from developing country exporters, a customized news bulletin including new leads from the El Salvador as they come in, and a searchable database for sourcing new products and suppliers. The chart below provides an approximate idea of the number of El Salvador supplier profiles, available online with contact information through TFO Canada’s searchable Supplier Database.