El Salvador (Complete) - Banking with Citi | Citi.com employment stability among the Hispanic...

E L S A L V A D O R

Citi S

and

Ser

Co Over

Ba Sy

stemCle

arin

g

Sys

tem

For

Ex Con

trol

s

Inv

Oppo

Trade Regulations

COUNTRYPROFILE

L SALVADORE

BASIC DATA

Capital City: San Salvador

Land Area: 20,720 sq km

Population: 27.6 M

Main Towns:

Climate: Tropical on coast, sub-tropical on uplands

Language: Spanish

Measures: Mixed: metric system and English measures; also old Spanish units

Currency:

Time: 6 hours behind GMT

Government:

1E L S A L V A D O R

San Salvador (capital)

Santa Ana San Miguel

President Carlos Mauricio Funes Cartagena Vice-president Salvador Sánchez Ceren

Agriculture Guillermo López Suárez

Defense Atilio Benítez Economy Hector Dada Hirezi Education Salvador Sánchez Ceren

Environment Hernan Rosa Chávez

Finance Carlos Cáceres Foreign Relations

Hugo Martínez Bonilla

Health María Isabel Rodríguez

Interior Ernesto Zelayandía Labor & Social Security

Humberto Centeno

Public Security & Justice David Munguía PayésPublic Works Gerson MartínezTourism Jose Napoleón DuarteCentral Bank President Carlos Gerardo Acevedo Flores

COUNTRY OVERVIEW

Source: The Economist Intelligence Unit as of February 2012

1 colón (c) = 100 centavos. On January 1st 2001 a fixed exchange rate of c8.75:US$1 was introduced by law and the US dollar became legal tender. The Monetary Integration Law provides for a dual currency system; in practice, the US dollar is used almost exclusively, except in some small, rural areas

A. POLITICAL STRUCTURE


Official Name Republic of El Salvador

Form of State Unitary republic

National Legislature Unicameral Legislative Assembly, comprising 64 locally and 20 nationally elected deputies, elected every three years Legal System US-style Supreme Court system

Electoral System Universal adult suffrage

National Elections January 2009 (legislative and municipal), March 2009 (presidential); next elections due in 2012 (legislative and municipal) and 2014 (presidential)Head of State President elected for a single term of five yearsNational Government The president, Mauricio Funes, governs with the support of the FMLN, which holds 35 of 84 seats in the legislature; he appoints and presides over a Council of Ministers

Main Political Organizations Government: left-wing Frente Farabundo Martí para la Liberación Nacional (FMLN) governs in alliance with the Gran Alianza de Unidad Nacional (GANA) and the Partido de Conciliación Nacional (PCN)Opposition: right-wing Alianza Republicana Nacionalista (Arena); Partido Demócrata Cris-tiano (PDC); Cambio Democrático (CD)

Citi Transaction Services Latin America & Mexico

COUNTRY OVERVIEW

Source: The Economist Intelligence Unit as of February 2012

The political scene will remain broadly stable in 2012-16, supported by the moderate stance of the president, Mauricio Funes, and cross-party dialogue and consensus-building. Stability will be underpinned by Mr. Funes’s broad popular support, his approval rating stood at 72% in late 2011, as his government increases social spending, particu-larly on healthcare, education and rural programmes. Although tension between Mr. Funes and some radical leaders of the ruling left-wing party, the Frente Farabundo Martí para la Liberación Nacional (FMLN), will persist as he refrains from pursuing a more left-wing agenda, the Economist Intelligence Unit expects that his pragmatic approach and popularity will avoid major frictions within the party. Mr. Funes’s centrist stance will also prevent any drastic policy shifts or constitutional changes, reassuring voters and external donors. Nevertheless, there will be some degree of social tension, reflecting the economy’s continuous weak performance since the 2009 recession. Disruptive protests or strikes remain likely, reflecting slow progress on Mr. Funes’s economic agenda (including measures to reduce poverty and unemployment), persistent corruption and political interference in the judicial system.

El Salvador’s precarious security situation will also remain a major concern for individu-als and businesses, and a threat to institutional stability. To avoid losing popular support, the Funes administration will increasingly take a hard line stance on crime, including using the military for crime-fighting alongside the police and appointing former military officers to head key security posts traditionally held by civilians. This strategy, however, will continue to strain the president’s relation with the FMLN. Although there are grow-ing demands to deal with cases of human rights violations that took place during the country’s civil war (1980-92), as well as allegations of corruption in previous administra-tions, these are likely to be opposed by political parties and the powerful military estab-lishment, and risk increasing social polarization.

Mr. Funes’s foreign policy will prioritize maintaining close relations with the US, El Salvador’s most important trade and investment partner and home to over 2.3m Salva-dorans. In addition to trade and immigration, bilateral relations with the US will focus on increased co-operation on security matters and on greater support for the Funes administration’s development programmes. Although the FMLN maintains historical links with radical leftist regimes in the region (including with Venezuela’s president, Hugo Chávez, and with the Castro brothers in Cuba), the government and the ruling party will avoid taking a marked anti-US stance. Instead, Mr. Funes will seek to develop closer political and economic ties with moderate governments in Latin America and increase trade links with Asia. The "trade pillar" of the EU-Central America Association Agreement (EU-CAAA), signed in 2010, is likely to come into force in 2012, boosting trade and investment ties with Europe.

B. POLITICAL OUTLOOK 2012 - 2016


COUNTRY OVERVIEW

Increased employment stability among the Hispanic population in the US has meant that the yearly rate of increase in family remittances from the estimated 2.3m Salvador-ans residing there is slowly returning to pre-2009 levels. According to the BCR, in 2011 remittances inflows increased by 6.4% year on year, to a total of US$3.7bn, equivalent to around 16.2% of GDP and slightly more than the country’s total tax intake. In 2010 the total was US$3.4bn, a yearly rise of just 1.3%. The fourth quarter of 2011 saw a particu-larly strong surge in remittances, with growth of 9.6%, partly owing to seasonal adjust-ments, but also reflecting sustained economic growth in the US. With unemployment among Hispanics in the US now estimated to be around 11%, the lowest since February 2009, other Latin American nations have also reported solid growth in remittance flows. In 2011 Guatemala saw a rise of 6% to US$4.4bn, while Mexico reported a 7.4% increase in remittances.

C. ECONOMIC PERFORMANCE


For El Salvador, the recent approval of another extension of the Temporary Protection Scheme (TPS) will underpin stability in its large immigrant community in the US. The TPS was originally put in place to help Salvadoran illegal migrants gain temporary legal status if they could prove they had come to the US in the wake of the earthquakes that afflicted the country in 2001. Some 220,000 Salvadorans have gained TPS status, which means that they are protected from deportation and can even apply for permission to visit El Salvador and return to the US. The latest change extends the scheme to Septem-ber 2013. Successive Salvadoran governments have put securing TPS protection as a top policy priority, although there has rarely been any indication from the authorities in the US that the programme would be terminated.

COUNTRY OVERVIEW


D. ECONOMIC FORECAST


Economic Growth

El Salvador’s GDP growth in 2012-16 will be very modest (at the slowest pace in Central America), reflecting a very weak domestic production base, which limits investment and leads to a persistently negative foreign balance. In 2012 GDP growth will reach only 2.2% (following 1.4% growth in 2011), as the one-off effects of reconstruction spending and continued export growth, in line with a more positive outlook in the US, are offset by weak investor confidence. We expect a stronger release of pent-up domestic demand in 2013-16, although at an annual average rate of 3%, growth will be insufficient to address the country’s development needs.

Private consumption will remain subdued in 2012-13, in line with weak job creation, but it will improve in 2014-16 on the back of a faster rise in remittances and better credit conditions. Despite fiscal commitments under the IMF’s standby arrangement, Mr. Funes’s 2010-14 social development plans and high layouts for subsidies will help to keep government consumption growth high by historical standards, at an annual average of 5.1% in 2012-16. A precarious security situation will affect private investment, but spending on public reconstruction proj-ects and some foreign direct investment (FDI) will support a tepid recovery in investment growth in 2012-13. This will accelerate slightly in 2014-16, as global conditions improve and companies increasingly take advantage of the Dominican Republic-Central America Free-Trade Agreement (DR-CAFTA) with the US. Real export growth will gain some momentum over the forecast period as exporters develop stronger ties with the EU and South American markets, but the prospect of a renewed global recession continues to pose downside risks to our short-term forecasts. Import growth will also accelerate as private consumption strength-ens gradually; rising at a faster pace than exports in 2012-16, so that the external balance will act as a drag on GDP.

COUNTRY OVERVIEW

COUNTRY OVERVIEW

On the supply side, output from the agricultural sector is expected to fall in the short term, as the sector suffered heavy losses during the recent flooding. In contrast, services growth will continue to gather pace, led by commerce, transport and communications. The manu-facturing sector, which is dominated by maquila (offshore assembly for re-export), will also expand, but high input costs will limit growth. After recovering robustly in 2011, construc-tion will post moderate growth in 2012 owing to public infrastructure projects, including an ambitious social housing programme for low-income families. In 2013-16 we expect the agri-cultural sector to recover and the performance of most other sectors to improve, in line with more robust private sector growth and stable international conditions.

Inflation

The dollarization framework will keep inflation lower than in most of the region, but above-average international food and oil prices and a gradual pickup in domestic demand will keep moderate upward pressure on the consumer price index (CPI) in 2012-16. After reach-ing 5% in end-2011, we forecast the rate of inflation to fall in 2012, to an average of 3.3%, reflecting falling international commodity prices and a high base of comparison. There are moderate risks that the recent floods, which will result in sharp falls in domestic output of basic grains in the early 2012 harvest, lead to higher than forecast food price inflation and overall inflation in 2012. We expect inflation to average an annual rate of 3.5% in 2013-16, although the release of pent-up demand could exert stronger upward pressures.

Exchange Rates

The dollarization policy adopted in 2001 will not come under threat in 2012-16, reflecting its broad acceptance across the political spectrum. After weakening by 0.4% in 2011, we expect the real effective exchange rate (REER) to strengthen by 6.7% in 2012-16, partly owing to inflation differentials with the US and as other currencies in Central America (those of both El Salvador’s key export customers and its international competitors) depre-ciate vis-à-vis the US dollar. Although this will affect the competitiveness of Salvadoran exporters, we do not expect any serious strains on dollarization during the forecast period, unless there is a massive deterioration in the public finances (which is not our baseline scenario).

6E L S A L V A D O RCiti Transaction Services Latin America & Mexico

External Sector

A structural trade deficit will produce persistent current-account deficits in the outlook period, averaging 4.2% of GDP annually in 2012-16. El Salvador’s trade balance is heavily exposed to changes in international commodity prices, with our forecasts of slightly lower oil and food prices in 2012-13 helping to narrow the trade deficit, from an esti-mated 20.7% of GDP in 2011 to 18.4% of GDP in 2013. In 2014-16 the trade deficit will increase gradually again, to 19.7% of GDP in 2016, as modest export growth in non-traditional and maquila goods (which have benefited from high levels of investment in recent years) are offset by rising imports, driven by stronger economic growth and higher oil prices. The services and income balances will remain broadly stable in 2012-16 (posting average deficits of 0.1% and 1.9% of GDP, respectively), while the transfers surplus will rise slowly in real terms in the forecast period, boosted by a gradual recov-ery in remittance inflows. However, still-weak job creation in the US will prevent a return to 2006-08 levels, when remittances averaged 17.9% of GDP (compared with 16.2% of GDP in 2012-16). Continued access to multilateral support in 2012-13 and a recovery in FDI in 2014-16 will maintain a steady level of foreign reserves and adequate coverage to avoid a balance-of payments crisis.


COUNTRY OVERVIEW


COUNTRY OVERVIEW

A. GENERAL BUSINESS TERMS AND CONDITIONS

B. CITIBANK’S ACCOUNT SERVICES SOLUTIONS IN EL SALVADOR

CITI SOLUTIONS & SERVICES

Companies operating in El Salvador are moving toward concentrating their cash man-agement needs through one full service bank as a means of optimizing treasury flows. Technology customization is becoming a driving force in the banking sector. Clients have more sophisticated demands, and are therefore requiring efficient, state-of-the-art products to meet their goals. Competition among financial service providers continues to increase with new entrants in the financial market.

Account Services

El Salvador has a dollarized economy and therefore all local accounts are opened in USD. Demand Deposit Accounts (or checking accounts) are usually non-interest bearing although we can offer interest bearing accounts as requested by the customer. Deposits can be made at any of the branches. There are no baking laws or regulations restricting automatic funds concentration, funding of accounts balances or intra-day overdrafts.

Payments

Electronic payments are becoming more popular however, a large number of payments in El Salvador are still being made via check or cash. There has been no ACH in the coun-try, but one is going live this year.

Collections

• Direct deposit to the account using a reference for identification at any of the branches.• Credit to the account via funds transfer.• For large sums of cash, the cash is usually picked up by an armoured car service (hired either by the bank or the client) that deposits the money in the bank.• Direct Debit to a third party´s account who has previously authorized this recurrent transaction.

Types of accounts permitted in USD

• Demand deposit accounts (Interest and Non Interest Bearing Sight Deposits)• Savings accounts• Time deposits• Smart Account Structures



C. CITIBANK’S PAYMENT SOLUTIONS IN EL SALVADOR


Citibank offers payment solutions designed for both local and overseas payments. Com-panies may select the combination of services needed to meet both their domestic and international payment requirements.

Due to Banco Cuscatlan´s acquisition, we have two electronic platforms available:1. Citidirect (Global platform-mostly for corporate ICG customers) and 2. Netbanking Java (Regional platform for companies).

Paylink

It allows the initiation and approval of payments through the electronic banking platform.Citi, following the client’s instructions, issues and delivers management checks to the client’s suppliers. Other forms of payment are book to book, interbank transfers and cross-border trans-fers from local accounts using CitiDirect®.

Tax Payments

Internet-based tax payments through Citidirect and Netbanking Java .

Payroll

Automatic credits to accounts of employees via CitiDirect® and Netbanking Java.

Cross Border Transfers

Issuance of cross borders transfers from its local account through CitiDirect® or Net-banking Java.


Resident & Non-Resident USD

• Minimum Balance Requirement DDA: $300.00 USD• Minimum Balance Requirement Savings: $300.00 USD• Overdraft Facility: Available subject to approval.• Interest Rate: varies with balance

Documentation to open accounts with Citibank El Salvador will be requested according to local regulations.

D. CITIBANK’S COLLECTIONS SOLUTIONS IN EL SALVADOR


Citibank El Salvador currently offers SpeedCollect, which allows customers to deposit through approximately 200 points of the network extension with Banco Citibank de El Salvador and Banco Agricola. Other services offered are Pick Up Services, Collections and Account Deposits.

Colecturía

Passive collection system based on the usage of local network. The Citi client issues a bar-coded bill with information about the payment and the collection invoices. The client’s customer presents the bill at the agency of his choice and makes the payment which is immediately registered in the electronic network.

Checks

Citi’s clients can use the branch network for check deposits although there is a compensa-tion time when funds will become available, usually t+2 for local checks and t+21 for inter-national checks

Incoming Funds Transfers

Local accounts can be credited through the receipt of transfer payments from abroad. A special form must be filled out by the customer as per local regulation, previous to credit-ing the account.

Direct Debit

Citi El Salvador allows direct debit of preauthorized transactions through Netbanking Java.

Pick-up Service

Pick-up service of Corporate customers funds, transported directly from the client’s prem-ises on to its bank account in Banco Citi. Banco Citi has a third party agreement signed the pick up service company in order to deliver the service.


WorldLink® Multicurrency Payment Services

Issuance from DDA NY of cross-border electronic and check payments without the need to maintain foreign currency accounts.

Citibank Mass Payments

Using CitiDirect® the client can set up mass payments solutions.

E. DELIVERY SYSTEMS

F. TRADE PRODUCTS AND SERVICES


• CitiDirect On Line Banking• Net Banking Regional

Cross-Border Delivery Systems

SWIFTLocal Address: CITISVS1

CitiDirect® Online BankingCitiDirect Online Banking is the primary platform utilized by Global clients to manage both local and global cash management products and services, providing a direct window into Citi’s global platform for cross-border payments.

Netbanking JavaNetbanking Java is the primary platform utilized by Local clients to manage both local and regional cash management products and services.

Trade Services

In an international trade transaction involving goods or services, the buyer and the seller negotiate details about the method and timing of both payments and delivery. These negotiations require attention to complex details concerning credit arrange-ments, transaction structuring, legal issues, and political and cross-border risks. Citibank customers, whether buyers and/or sellers, involved in an international trade transaction rely on the expertise of a global bank like Citibank for advice and assistance regarding these complex details.

• Commercial Letters of Credit

A commercial letter of credit is an instrument that states the bank’s obligation to pay the beneficiary upon presentation of conforming documents evidencing that goods have been shipped. Citibank only pays the beneficiary if the required documents presented are in accordance with the terms and conditions of the letter of credit.



• Standby Letters of Credit

Standby Letter of Credit is an instrument that secures the beneficiary against loss resulting from the failure of the bank’s customer to perform a contractual obligation, financial or nonfinancial, that the customer has with the beneficiary.

• Documentary Collections (Import and Export)

Documentary collections is a method by which a seller is able to collect payment from an overseas buyer through an intermediary bank. Banks act as intermedi-aries in facilitating the flow of the title documents and in the payment of the transaction.

• Bank Guarantees (Bonds)

A bond is a commitment made by one party (the bank) to another party (the obligee) pledging to cover for financial loss caused by the act of default of a third party (the obligor – the bank’s customer). A bond is normally issued to assure performance of a nonfinancial contractual obligation, e.g. an obligation to provide goods or services under a contract with another party. Some of the common types of bonds are:

- Bid bond – an instrument designed to ensure that the tenderer (e.g., sup-plier) will honor its commitment to a buyer when bidding for a construction or supply contract. The tenderer submitting a bid requests its bank to issue a bid bond in favor of the buyer as beneficiary. In the event the tenderer’s bid is accepted and the tenderer fails to sign the contract, the bid bond is normally payable against the buyer’s statement that the bank’s customer, the tenderer, failed to sign the contract.

- Performance bond – issued when the contract has been awarded. It is an instrument designed to ensure that the contractor (e.g. supplier) will per-form and execute the contract in accordance with all its terms and condi-tions. A performance bond gives the buyer an indication of the contractor’s creditworthiness and, in the case of default, is payable on demand.


The same letter of credit can be viewed as either an import or an export letter of credit, depending on the customer’s role in the trade transaction. For the applicant (importer or buyer), it is an import letter of credit; for the beneficiary (exporter or seller), it is an export letter of credit.


Trade Finance

All trade transactions require some form of financing. If the seller allows the buyer time to pay for purchased goods, the seller must borrow money or finance that period through available cash. Conversely, if the seller requires cash on delivery, the buyer must cover the period between payment for the goods and the conversion of the goods into cash through a subsequent sale.

Trade financing is the process of making available extensions of credit or other financing to meet the needs of both the importer (buyer) and the exporter (seller).

Trade finance serves a variety of purposes such as:• Pre-export financing• Export financing• Import financing• Inventory financing

Supply Chain Finance

Buyers and suppliers often have conflicting objectives during commercial terms negotia-tion, with a common goal being to strengthen their relationship. A suite of products focused on Working Capital optimization can achieve these objectives

• Citi Supplier Finance

Citi Supplier Finance (CSF) is a transaction structure consisting of:

I. An electronic disbursement service in which Citi acts as a Buyer’s paying agent. II. A separate receivables purchase service that enables the early financing of the payment beneficiaries.

Process: I. Buyers inform Citi of approved Payments, via a manual file upload or electronic straight through processing. CSF presents these Payments (and underlying remittance information such as Invoices or Purchase Orders) to the Suppliers, who now have visibility to future Payments II. Suppliers may choose to elect early payment on all or some of these Payments, or simply be paid at normal maturity – always into their existing bank account. Citi will typically purchase the receivable from the supplier in return for the early payment. III. Buyers fund a Citi account at the normal maturity of the underlying Invoices



Citi Transaction Services Latin America & Mexico18

E L S A L V A D O R

• Receivables Finance Citi has got the primary relationship with the Seller whose Accounts Receivable (AR) will be the underlying instrument for a entering into an agreement where the Seller either assigns the instruments to the Bank or seeks AR financing on a individual or programmatic basis.

The main benefits for Sponsor through a Seller Centric Solution are:

- Accelerate the conversion cycle of its outstanding AR- Could offer its buyers the ability to sell more and/or increase their payment terms- Seeks to bundle AR financing and collections

Export and Credit Agency Finance

Agency Financing can be used to satisfy a multitude of client financing needs through a variety of structures. EAF transactors can help identify which Agency and structure is most relevant for our client.

Relationships with Agencies and clients are managed through our regional offices to deliver our global capabilities to Agencies and clients.

Citi’s “value added” includes coordinating the deal due diligence, facilitating documen-tation and acting as a lender, global coordinator, facility agent, security trustee, etc.

CONTACT INFORMATION

Sales Heads

Industry Sector Heads

Carolina JuanTreasury and Trade Solutions Client Sales ManagementLatin America & Mexico HeadCiti Transaction ServicesEmail: [email protected]: + 57 (316) 743 - 9347Of. Phone: +57 (1) 639 - 4026

Industrials SectorInes Vargas BarreraEmail: [email protected]: +52 (181) 8366 - 5190Of. Phone: +52 (81) 1226 - 8525

Branding, Consumer and Healthcare SectorOscar MazzaEmail: [email protected]: +1 (305) 588 - 9396Of. Phone: +1 (305) 347 - 1336

Technology, Media and Telecom SectorGabriel KirestianEmail: [email protected]: +54 (911) 3301 - 4826Of. Phone: +54 (11) 4329 - 1516

Energy, Power and Chemicals SectorPeter LangshawEmail: [email protected]: +55 (11) 6183 - 6958Of. Phone: +55 (11) 6183 - 6958

Public SectorJorg PaascheEmail: [email protected]: +52 (1) 55 5453 - 0103Of. Phone: +52 (55) 2226 - 6020Based: Mexico DF, Mexico

Non Bank FI Sector (NFBI)Ricardo DessyEmail: [email protected]: +54 (911) 6641 - 9752Of. Phone: +54 (11) 4329 - 1471Based: Buenos Aires, Argentina

BrazilAdoniro CestariEmail: [email protected]: +55 (11) 7130 - 9447Of. Phone: +55 (11) 4009 - 7838Based: Sao Paulo, Brazil

Central AmericaEvelin MadridEmail: [email protected]: + 506 8701 - 4529Of. Phone: +506 2588 - 7541Based: San Jose, Costa Rica

MexicoMiguel YtuarteEmail: [email protected]: +52 (1) 55 4088 - 2284Of. Phone: +5255 (1226) 8895Based: Mexico DF, Mexico

Andean RegionCarolina JuanEmail: [email protected]: + 57 (316) 743 - 9347Of. Phone: +57 (1) 639 - 4026Based: Bogota, Colombia

ArgentinaAdrian ScosceiraEmail: [email protected]: +54 (911) 5674 - 6966Of. Phone: +54 (11) 4329 - 1194Based: Buenos Aires, Argentina


Citi Transaction Serviceswww.transactionservices.citi.com

© 2012 Citibank, N.A. All rights reserved. Citi and Arc Design is a trademark and service mark of Citigroup Inc., used and registered throughout the world. All other trademarks are the property of their respective owners.

El Salvador (Complete) - Banking with Citi | Citi.com employment stability among the Hispanic...

Documents

Transcript of El Salvador (Complete) - Banking with Citi | Citi.com employment stability among the Hispanic...