Investor Guide El Salvador 2013

2013

Why El Salvador? Strategic Location

Preferential Access to International Markets

Attractive Tax Incentives

Competitive Costs

Monetary Stability

Productive Labor Force

Competitive Infrastructure

EL SALVADORInvestors Guide

EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR

E L S A LVA D O R I N V E S T O R S G U I D E 2 0 13

E L S A LVA D O R , C E N T R A L A M E R I C A

Investors Guide 2013Government of El Salvador, Central America

WWW . P R O E S A . G O B . S V

P R O E S A E X P O R T A N D I N V E S T M E N T P R O M O T I O N A G E N C Y O F E L S A LVA D O R

Export and Investment Promotion Agency of El Salvador(PROESA)

Board of Directors

Alexander Ernesto Segovia CceresTechnical Secretary of the Presidency and President of PROESA

Jaime Miranda FlamencoMinister of Foreign Affairs

Carlos CceresMinister of Finance

Jos Armando Flores Alemn Minister of Economy

Pablo Alcides OchoaMinister of Agriculture and Livestock

Gerson MartnezMinister of Public Works

Jos Napolen DuarteMinister of Tourism

Giovanni BertiExecutive Director

Content:Policy Analysis and Market Intelligence Department

Investment Promotion Department

Design and Layout:Communications Department

Printed in El Salvador by Imprenta La Tarjeta, S.A. de C.V.El Salvador 2013

For a digital copy of this document, visit:www.proesa.gob.sv

The material in this work is subject to copyright. Because PROESA encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to the work is given.

Content

WhY EL SALVADOR?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

FOREWORD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

I. EL SALVADOR AT A GLANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

1. A Stable Free Market Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132. Monetary Stability: The advantages of a dollarized economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153. Attractive Investment Climate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164. Stable Political Climate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

II. EL SALVADOR: EXPORT PLATFORM TO MAjOR MARkETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

1. Preferential Access to International Markets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202. Strategic Location. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213. Availability of Industrial Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224. Modern Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

III. LEGAL FRAMEWORk AND INCENTIVES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

1. Investment Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 342. Free Zones Law and International Services Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 343. Tourism Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 374. Renewable Energy Incentives Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

IV. hUMAN CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

1. Labor Climate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 412. higher Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 413. Technical Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 424. On-the-job Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

V. INVESTMENT OPPORTUNITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

1. Logistics & Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 462. Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 493. Manufacturing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 564. Agro-Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

VI. SETTING UP AND OPERATING A BUSINESS IN EL SALVADOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

1. Operational Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 642. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 713. Establishing a Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 734. Costs of Establishing a Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 745. Requirements to Enter El Salvador . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

SERVICES PROVIDED TO INVESTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77


6 W WW . P R O E S A . G O B . S V


7E L S A LVA D O R , C E N T R A L A M E R I C A

Why El Salvador?

1. Strategic LocationEl Salvadors geographic location enables a short access time to major cities in North and South America. The country is on the same time zone as U.S. Central Standard Time (CST). It offers a natural two oceans logistics corridor, proximity to the Transpacific maritime route and to the Panama Canal.

2. Preferential Access to International MarketsMultiple trade agreements provide preferential access to more than 1.2 billion consumers in 44 countries around the world. El Salvador has trade agreements with Central America, Chile, Colombia, Cuba, Dominican Republic, European Union, Mexico, Panama, Taiwan, United States and Venezuela. Likewise, El Salvador is in negotiations to sign trade agreements with Belize, Canada, Ecuador and Peru.

3. Attractive Tax IncentivesThe countrys legal framework provides full exemption from income tax, municipal taxes, taxes on transfers of real-estate property as well as customs duties and taxes on the import of machinery, equipment, raw materials and other articles used in the production of goods and services.

4. Competitive CostsEl Salvador is the most cost-competitive country to set up and operate a business. In 2011, the Financial Times investment journal fDi Intelligence classified El Salvador as the most cost effective country in Central America and the Caribbean.

5. Monetary StabilityEl Salvador dollarized its economy in 2001, therefore offering greater certainty to investors as a result of the elimination of foreign exchange risk and lower transaction and financial costs as compared to non-dollarized countries.

6. Productive Labor ForceInvestors certify that Salvadoran labor force is world-famous for its industriousness, efficiency and work ethic. Approximately 60% of the labor force is 39 years or younger, making it a predominantly young and highly productive country.

7. Competitive InfrastructureThe World Economic Forum (WEF) places El Salvadors infrastructure among the most competitive in Latin America and the best in the Central American region. Modern port, airport and road infrastructure enable efficient logistical operations, while solid and advanced telecommunications and electricity markets guarantees access to high quality and cost-competitive services.


8 W WW . P R O E S A . G O B . S V



Foreword

Dear Investor:

The Government of El Salvador, through its Export and Investment Promotion Agency (PROESA), is pleased to present the 2013 edition of El Salvador Investors Guide. In this document you will find valuable information to help you choose our country as your next investment destination: competitive advantages of El Salvador, business opportunities in FDI growth sectors, how to set up and operate a business, and information about main operating costs.

By the end of 2012, El Salvador records a total stock of USD 8.6 billion in foreign direct investment. Many foreign companies have set up operations in the country and have achieved high returns on their investments. These positive results confirm that El Salvador is an ideal cost-effective location to export goods and services to international markets.

In El Salvador we are committed to promoting investment and developing long-term relationships with investors. Our Investment Law offers equal treatment for local and foreign investors, as well as freedom to transfer funds abroad. Additionally, we provide significant tax incentives for manufacturing, tourism and service companies. The government will continue endeavoring to facilitate business and updating our legal framework and investor-support system to meet current trends on trade and investment.

PROESA offers a full range of services to investors seeking investment opportunities in El Salvador. We provide tailor-made information packages, organize customized site visits, assist investors to apply for tax incentives and identify local business contacts.

We invite you to contact us. We can help you take advantage of all El Salvador has to offer to make your business thrive!

Giovanni BertiExecutive Director

PROESA


10 WWW . P R O E S A . G O B . S V

I. El Salvador at a Glance

Ahuachapn

Santa Ana

Sonsonate La Libertad

Ocano Pacco

San SalvadorCuscatln

Cabaas

San Vicente

La PazUsulutn

San Miguel

Morazn

La Unin

Chalatenango

6.2 millionPopulation

USD 23 billionGDP

USD 3,700GDP per capita

El Salvador


I . E L S A LVA D O R A T A G L A N C E


I. El Salvador at a GlanceEl Salvador, located in the heart of the Americas between North and South America, is an export-oriented free-market economy. The country extends from a coastal plain to a volcanic upland in the interior.

With a population of 6.2 million, El Salvador has a gross domestic product (GDP) of USD 23 billion, and a GDP per capita of USD 3,700.

El Salvador has evolved over the last two decades. Today, it offers its business partners:

A free economy, among the freest in Latin America

Proven macroeconomic stability, with the U.S. dollar as legal tender

Openness to global trade and investment

Democracy and political stability




Key Economic Indicators, 2007-2011

INDICATORS 2007 2008 2009 2010 2011Population (millions) 5.74 6.12 6.15 6.18 6.21

Labor force (millions) 2.32 2.50 2.55 2.58 2.64

GDP, current prices (millions of USD) 20,105 21,431 20,661 21,428 23,095

Per Capita (USD) 3,500 3,500 3,359 3,467 3,717

GDP, PPP (millions of USD) 41,401 42,858 41,877 43,042 44,575

Per Capita PPP (USD) 7,208 7,410 7,191 7,340 7,550

Real GDP growth (%) 3.8 1.3 -3.1 1.4 2.0

GDP by sector (%):

Agriculture 11.4 12.1 11.9 12.1 12.2

Industry 27.3 26.9 26.2 25.9 26.0

Services 61.3 61.0 61.9 62.0 61.8

Inflation (%) 4.9 5.5 -0.2 2.1 5.1

Remittances (millions of USD) 3,695 3,742 3,387 3,431 3,649

Trade and investment (millions of USD):

Net FDI flows 1,551 903 366 117 385

Investment Stock 5,958 6,862 7,696 7,731 8,267

Exports (goods & services) 5,149 5,699 4,729 5,475 6,382

Imports (goods & services) 10,096 11,089 8,279 9,486 11,071Source: PROESA based on data from the Central Reserve Bank of El Salvador (BCR), Directorate-General for Statistics and Census (DIGESTYC) and International Monetary Fund

1. A Stable Free Market EconomyOver the last 25 years, El Salvador has implemented reforms to modernize and open its economy to global trade and investment; these include the signing of free trade agreements with major markets, regional economic and trade integration, and the adoption of the U.S. dollar as legal tender.

The results are conclusive. According to the Index of Economic Freedom published by the Wall Street journal and the heritage Foundation in 2013, El Salvadors economy is among the freest in Latin America. It is ranked 7th in the region and 53rd worldwide of a total of 185 countries. This index highlights El Salvadors strength in maintaining free market policies that promote trade and investment.




GDP Structure, 2011 GDP composition, 2011

Private Con

sumption

Government Co

nsum

ption

Gross Fix

ed Capital Formation

Expo

rts

Impo

rts

94.0%

11.0%14.2%

28.1%

47.3%GD

P 100.0%Source: Central Reserve Bank of El Salvador

12%

19%

0%

2% 4%

21%

8%

5%

5%

7%

8%

9%

Agriculture, Hunting, Forestry and Fishing

Mining and Quarry Exploitation

Manufacturing

Electrcity, Gas and Water

Construction

Trade, Restaurants and Hotels

Transportation, Warehousing and Communications

Financial and Insurance Establishments

Real Estate and Business Services

Housing Rental

Community, Social, Personal and Domestic Services

Government ServicesValue added by economic activity

12.2% 26.0% 61.8% AgricultureServices

Industry

GDP, current prices (2011)USD 23,095 million

Value added by economic activity

Source: Central Reserve Bank of El Salvador (BCR)

The services sector is responsible for most of the value-added in the economy. It contributes with 61% of the gross domestic product.




Average inflation rate of selected countries (%), 2007-2011

2. Monetary Stability:

The Advantages of a Dollarized Economy

One of the most important policies implemented to open the countrys economy to world trade and investment is the adoption of the U.S. dollar as legal tender in 2001 through the Monetary Integration Act.

As a result, El Salvador has achieved single-digit inflation rates for over a decade, remaining below the average of the rest of the Latin American countries. Likewise, the elimination of foreign exchange risk has lowered real interest rates and provided greater certainty for investors. Companies that have invested in El Salvador benefit from lower financial and transaction costs.

Benefits of a dollarized economy

BENEFITS1. Reduces the gap between domestic and international interest rates

2. Reduces transaction costs

3. Greater certainty for investors

4. Favors financial integration

5. helps keep inflation low

6. Generates fiscal discipline

7. TransparencySource: PROESA

Source: IMF




Local currency per U.S. dollar exchange rates variations, 2000-2012Percentage change versus 12 months before (%)

Source: PROESA based on data from IMF and Central Banks of Costa Rica, Guatemala, Honduras, Mexico and Nicaragua

-20 %

-10 %

0 %

10 %

20 %

30 %

40 %

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

El Salvador Costa Rica Guatemala NicaraguaMexicoHonduras

3. Attractive Investment Climate

As of December 2012, the country has attracted USD 8.6 billion of cumulative FDI inflows, equivalent to 36% of the gross domestic product.

El Salvador enjoys wide-spread international support with solid international partnerships. It is the only country in the Western hemisphere, and one of four nations in the world, to be selected by the United States Government to work jointly under a new initiative called Partnership for Growth, which seeks to reduce barriers to economic growth. Likewise, it is the only country in Central America that has qualified as eligible on two occasions to receive funds from the Millennium Challenge Corporation. This represents an important recognition, as only those countries that meet strict requirements of good governability, investment in human resources and economic freedom qualify.




Numerous multinational companies have chosen El Salvador as an investment destination:

Foreign direct investment (FDI) stock 2012USD 8,634.9 million (36.3% of GDP)




4. Stable Political ClimateEl Salvador boasts 30 years of democratic elections. Alternation in power, with peaceful transfers of power between parties, is evidence of political maturity. Presidents are elected to five-year terms without the possibility of consecutive reelection. Likewise, political stability is reflected through balance of power in the legislative branch, which is made up of one chamber with 84 legislators, elected for three-year terms.

Presidential election results, 1984-2009(Name of winning parties and percentage of votes won)

Source: Supreme Electoral Tribunal (TSE)

Distribution of deputies in Legislative Assembly, 2012(Number and percentage of representatives per political party)

Source: Supreme Electoral Tribunal (TSE)

0

10

20

30

40

50

60

70

1984 1989 1994 1999 2004 2009

51 %58 %

52 %

68 %

54 %54 %

PDCARENAFMLN

Otherpolitical parties

11%9 deputies

GANA13%

11 deputies FMLN37%

31 deputies

ARENA39%

33 deputies

II. El Salvador: Export Platform to Major Markets


I I . E L S A LVA D O R : E X P O R T P L AT F O R M T O M A j O R M A R k E T S


II. El Salvador: Export Platform to Major Markets

1. Preferential Access to International Markets

El Salvador has trade agreements with 44 countries in the Americas, Europe and Asia. Together they represent a potential market of 1.2 billion consumers. These agreements provide a competitive advantage for investors interested in establishing production centers in the country and take advantage of duty-free benefits to export their products to major markets. El Salvadors free trade agreements provide flexible rules of origin and significant tariff reductions.

El Salvador has been a leader in negotiating trade agreements with strategic partners:

Source: PROESA

Cuba

Belize

Central America

Mexico

ChilePeru

Colombia

Ecuador

El Salvador

DominicanRepublic

Taiwan

Panama

Venezuela

European Union CanadaUSAFTA: Free Trade AgreementPSA: Partial Scope Agreement

CACM: Central American Common Market

FTA/PSA: in negotiation

Countries of interest for future trade agreements: Japan Mercosur South Korea Trinidad & Tobago

MEXICO

USA

P a c i c O c e a n

A t l a n t i c O c e a n

COLOMBIA

BRAZIL

PERU

VENEZUELA

ECUADOR




2. Strategic Location

It takes a short flight (2-5 hours) from El Salvador International Airport (AIES) to reach major cities in North and South America. El Salvador International Airport serves as the regional hub of Avianca airline. Cargo transportation is also favored by the countrys proximity to main maritime trade routes.

5.5 days

Miami, FL

Port La Unin

Balboa1.7 days

Port Acajutla

2 hours

Los Angeles, CA

Manzanillo2.4 days

5 hours

Callao3.5 days

*Sailing days and flight hours Source: PROESA

The countrys modern port and airport infrastructure allows manufacturing companies to carry out their logistical operations efficiently. Likewise, in the context of international services (offshoring and outsourcing), El Salvador is on U.S. Central Standard Time (CST, GMT -6). This makes El Salvadors location ideal for business processing outsourcing.




3. Availability of Industrial Land

El Salvador has free zones and service parks designed for companies engaged in the production and export of goods or services. These industrial parks provide companies with the services necessary to operate efficiently, including customs office, assistance in personnel recruitment, perimeter security, fire-protection systems, residual water treatment, telecommunications infrastructure, exterior lighting, cafeteria, training center, and medical clinic, among other services.

The free zones and service parks regime provide attractive tax incentives to investors: full exemption from income tax, municipal taxes, taxes on transfers of real-state property as well as customs duties and taxes on the import of machinery, equipment, raw materials and other articles used in the production of goods and services.

Additionally, depending on their activity, companies established outside a free zone or service park can enjoy of the same benefits regardless of their location[1].

There are 17 free zones in El Salvador, five of which also operate as service parks. These industrial parks stand out for their strategic location and easy access to competitive infrastructure: they are near the capital and other major cities and close to world-class highways, airports and ports.

[1] To this end, companies must request their facilities be declared Warehouse for Inward Processing (DPA, for its acronym in Spanish) or service centers. Many service-exporting companies, such as call centers, as well as aircraft repair and maintenance companies have taken advantage of this option.

La HachaduraBorder

Las ChinamasBorder

AnguiatBorder

ReservoirCerrn Grande

CoatepequeLake

Lake Gija

IlopangoLake

OlomegaLake of

Reservoir Septiembre 15

Port Acajutla

IlopangoAirport

El Salvador International Airport

P a c i c O c e a n

Port La UninZacatillo Island

Conchaguita Island

Gulf Meanguera

Martn Prez Island

Coastal Highw ay

LA LIBERTAD

SAN SALVADOR

CHALATENANGOSANTA ANA

CUSCATLN

SONSONATESan Francisco

(Gotera)

San Miguel

Usulutn

Nueva San Salvador

Cojutepeque

Santa Ana

Ahuachapn

G U A T E M A L A

H O N D U R A S

Sonsonate

Zacatecoluca

LA UNINLA PAZ

AHUACHAPN

USULUTN

CABAAS

SAN VICENTE

MORAZN

SAN MIGUEL

San Luis La Herradura

Ilobasco

C-A1

C-A2

Suchitoto

San VicenteTo TegucigalpaPanamericana Highway

Panam

ericana Highway

L ito ral (Coastal) Highway

0 10 20 30 40km

Litoral (Coastal) Highway

PanamericanaHighway

Ports AirportsMajorCities

Capital

C-A2

C-A1

Longitudinal del Norte Highway

Symbols

Borders

Free Zones and Service Parks1. Santa Ana Free Zone2. Las Mercedes Free Zone3. Free Zone 104. EXPORTSALVA Free Zone(2)

5. PIPIL Free Zone6. SAM-LI Free Zone7. American Park Free Zone(2)

8. Santa Tecla Free Zone(1)(2)

9. San Jos Free Zone10. San Marcos Free Zone(1)

11. San Bartolo Free Zone(1)

12. Santo Toms Free Zone13. Internacional Free Zone14. MIRAMAR Free Zone(2)

15. El Pedregal Free Zone16. Concordia Industrial Park Free Zone17. Calvo Free Zone

15

13

10

16

11

3

17

2

56

1

12

9

4

7

8

14

(1)Located in San Salvador Metropolitan Area(2)Also operates as Service Park

Chalatenango

Metapn

Sensuntepeque




4. Modern InfrastructureThe World Economic Forums (WEF) Global Competitiveness Report 2012-2013 places El Salvador among the 66 nations with best infrastructure in the world and the best in the Central American region. El Salvador stands out for the quality of its highways and airport, as well as for a port infrastructure capable of serving large vessels.

The high-connectivity offered by the countrys infrastructure is complemented by modern and advanced telecommunications and electricity markets. Multiple suppliers offer high-quality services at competitive prices.

a) Highway NetworkThe country enjoys a modern and efficient road network that connects its main cities and offers a rapid and easy access to the rest of the region. Due to this, the WEF has ranked El Salvador as the country with the best road infrastructure in the region.

Quality of highways

Source: World Economic Forum, Global Competitiveness Index 2012-2013 *Values are on a scale of 1-7, 7 as the most desirable outcome.

0

1

2

3

4

5

El Salvador Nicaragua Guatemala Honduras Costa Rica

2.5

3.33.33.8

4.5

C-A2

C-A2

C-A2

C-A1

Tegucigalpa

N I C A R AG U A

Choluteca

Francisco Morazn

H O N D U R A S

Guatemala City

G U AT E MA L A

Nueva Ocotepeque

Santa Rosade Copn

San Pedro Sula

SantaBarbara

To Tegucigalpa

Santa Ana

Ahuachapn

Jutiapa

Chalatenango

Sonsonate

La Libertad

San SalvadorCuscatln

La Paz

San Vicente

La Unin

Cabaas

Morazn

Usulutn

San Miguel

ACAJUTLA - PORT CORTS527 KM - 17 hrs.

Fonseca Gulfs Island

Port La Unin

El SalvadorInternational Airport

Port Acajutla

A t l a n t i c O c e a n

La Aurora Airport

B E L I Z E

Port CortsPort Barrios

Port Quetzal

P a c i c O c e a n

ACAJUTLA - STO. TOMAS354 KM - 14 hrs.

LA UNIN - PORT CORTS371 KM - 8 hrs.

Panamericana Highway

Longitudinal del Norte (Northern Longitudinal) Highway

Ports

Airports

Main cities

Capital City

Interconnection Route El Salvador - Honduras

Interconnection RouteEl Salvador - Guatemala

Symbols

Litoral (Coastal) Highway C-A2

C-A1




The good state of the road infrastructure has been achieved through continuous investment by the Road Conservation Fund (FOVIAL). This institution provides maintenance to the countrys priority road network, a total of 6,544 kilometers throughout El Salvador.

El Salvadors main highways:

Panamericana (Pan-American) Highway: connects the capital and main Salvadoran cities with Guatemala and honduras.

Litoral (Coastal) Highway: route parallel to the Pacific coast that crosses the entire territory.

Longitudinal del Norte (Northern Longitudinal) Highway: recently constructed road that has increased connectivity in the northern part of the country.

The quality of the road infrastructure facilitates the movement of goods between the production centers and ports.




b) AirportsEl Salvador International Airport (AIES) stands out as an important regional hub and top class maintenance center for commercial aircrafts. According to the WEF, El Salvador has the best airport infrastructure in the Central American region.

Source: World Economic Forum, Global Competitiveness Index 2012-2013*Values are on a scale of 1-7, 7 as the most desirable outcome.

0

1

2

3

4

5

6

El Salvador NicaraguaGuatemala HondurasCosta Rica

4.24.54.94.9

5.9 Quality of air transport infrastructure




International airlines operating in El Salvador[2]

*Correspond to flights whose final destination is that presented in the table; in addition, they offer flights to such destinations that serve as a connection to other places.Source: Autonomous Executive Port Commission (CEPA)

[2] Some of these airlines, in addition to passenger transport, offer cargo services.

Airline Direct flightsFrequency of direct flights per week*

Belize 15Bogota 15Cali 3

Cancun 14Chicago 4Dallas 10

Guatemala 24Guayaquil 6houston 15havana 3Liberia 8Lima 14

Los Angeles 41Managua 10Medellin 4Mexico 24Miami 19

New York 23Orlando 6Panama 15Quito 3Roatan 14

San Francisco 24

San jose 45San Pedro

Sula 23

Tegucigalpa 14Toronto 6

Washington 32

Madrid 8

Miami 17

Dallas 10

Los Angeles 9

houston 30

Newark 2

Washington 7

Panama 28

Managua 7

Atlanta 14

Mexico 7

Fort Lauderdale 4

Both El Salvador International Airport and Ilopango International Airport[3] are managed by the Autonomous Executive Port Commission (CEPA), an independent public-service institution responsible for the development of the countrys port and airport infrastructure.

El Salvador International Airport

El Salvador International Airport (AIES) is one of the largest and most modern in the region. It operates as Aviancas hub for Central America. Other airlines from Panama, North America and Europe also operate in this airport:

Classified as Category 1 by the Federal Aviation Association (FAA) and certified by the Salvadoran Civil Aviation Authority (AAC, for its acronym in Spanish). Furthermore, audits carried out by the International Civil Aviation Organization (ICAO) show that El Salvador has effectively implemented operational security norms above the world average.

Its strategic location allows year-round operations in optimal conditions. Additionally, its near sea level altitude facilitates the safe take-off and landing of aircraft at 100% capacity.

Nearly 2 million passengers and 25,000 tons of cargo moved on average per year.

Direct access to 33 routes of origin and destination as well as excellent air traffic connections.

[3] Smaller scale air terminal located in the east of San Salvador




c) PortsEl Salvador has a versatile port infrastructure able to respond to the needs of freight services in an effective manner. The two main ports are Acajutla, located in the western side of the country, and La Unin, located in the east. Acajutla specializes in bulk cargo and La Unin is designed specifically for container cargo.

Port Acajutla

The port has a total land area of 110 hectares, with three modern berths equipped for the arrival of all types of vessels, storage areas and specialized cargo handling equipment.

Port Acajutla Berths

Berth ABerth B

Berth CSouth side North side

Vessel type Multipurpose General cargo and bulk-carrier Container ship and general cargo Multipurpose

Quay length 321 m 318 m 348 m 280 m

Depth -10.3 m -10.7 m -9.0 m -12.5 m

Source: Autonomous Executive Port Commission (CEPA)




Port La Unin

Port La Unin is the largest port in El Salvador and is expected to become one of the most important and modern port infrastructures in Central America:

Designed to receive Post Panamax vessels

Located between the hub ports of Mexico (Manzanillo) and Panama (Balboa)

The first phase is the newest container terminal in the region

Once its three phases are completed, it will have a total berthing front of almost 2 km

Contributes to the Government of El Salvadors objective of becoming a regional distribution and logistics center

At the moment, the first phase of Port La Unin is in the process of being awarded to an international operator. It includes berths for container ships, multipurpose vessels and cruisers.[4]

Port La Unin Phase I Berths

Berth A Berth B Berth C

Vessel type Container ships Containerships and multi-purpose Cruisers and ro-ro ships

Quay length 360 m 220 m 240 m

Depth -15 m -14 m -9.5 m

Source: Autonomous Executive Port Commission (CEPA)

Shipping Companies

Several freight companies provide full container load, consolidated and refrigerated cargo services to various export destinations.

Sample of shipping companies operating in El Salvador

Nippon Yusen kaisha (NYk) Great White Fleet Mediterranean Shipping Company hamburg Sd - Costamar El Salvador Crowley Liner Services Inc. ZIM Container CMA CGM American Preside Line (APL) Maersk hapag-Lloyd Container Liner DOLE - Dole Ocean Cargo Express hellmann Worldwide Logistics Compaa Sudamericana de Vapores (CSAV) (South American Vapors Company) China Shipping Containers Line EvergreenSource: Customs

[4] Concession awarding is planned for 2013, for full operation at the start of 2014. The port is currently operated by CEPA.




d) Electricity El Salvadors electric grid is characterized by the participation of companies with ample experience in the electrical industry and a regulatory framework that favors efficient operation of the system.

The Salvadoran electricity market is the most open in the region.[5] This openness began in 1996 with the enactment of the General Electricity Law[6], which promoted a competitive market and private participation in the generation, distribution and sale of electricity.

El Salvador has an institutional structure suitable for the development, regulation and operation of the electricity market:

[5] Central American Economic Integration Bank (BCIE), ARECA Project.

[6] Legislative Decree No. 843

ELECTRICITY SECTOR

REGULATION AND LAW ENFORCEMENT

DEVELOPMENT AND COORDINATION OF NATIONAL ENERGY POLICY

MANAGEMENT OF ThE ELECTRICITY WhOLESALE MARkET

OPERATION OF ThE TRANSMISSION SYSTEM

010

20

30




El Salvadors energy matrix combines different power sources: hydroelectric, geothermal, cogeneration and thermal plants. Approximately 63% of energy generation is currently derived from renewable sources.

Distribution losses (%)*

Costa Rica

REnEWABLES nOn - REnEWABLES

El Salvador Guatemala Honduras nicaragua

10.80 %

63 % 37 %

12.30 % 12.30 %

23.90 % 25.40 %

El Salvador is a leader in the use of geothermal energy (25% of total power generation) and is positioned among the top 10 most productive geothermal energy locations in the world. The availability of substantial geothermal resources, ample experience in this type of generation and the existence of policies that favor its expansion, mean the country has great potential to further exploit this resource.

The countrys legal framework allows compa-nies to generate their own energy and sell their surplus in the electricity market.

El Salvador has one of the most competitive electricity rates in the region. For more infor-mation, see Section VI of this guide, Setting Up and Operating Business in El Salvador.

Source: CEPAL (2010). *As a percentage of available energy

Source: UT (2011)

Energy matrix




e) Telecommunications El Salvador has become one of the most dynamic and connected countries in the region: it went from having slightly more than 850,000 cellular phones at the beginning of the decade to having over 8 million mobile lines and more than 1 million landlines at the end of 2011.

The average growth rate of landlines between 2001 and 2011 has been close to 5%. On the other hand, mobile lines have grown at an average rate of 26%.

Source: General Superintendence for Energy and Telecommunications (SIGET)

The countrys modern Telecommunications Law has driven market liberalization and industry expansion. This has favored the establishment of various multinational companies. As of today, there are 11 international long-distance operators, 11 internet service providers, 9 landline operators and 5 mobile telephone operators. Consequently, users benefit from a large number of service providers and extensive coverage across the country.

0

200

400

600

1,200

1,000

800

Thousands

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

0

2

4

8

6

10

Millions

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Landlines Mobile lines




Main telecommunications operators

Operator Basic services*

Amrica Mvil (Telecom/Claro) Landline, mobile phone, cable TV, internet (fixed and mobile)

Millicom (Telemvil/Tigo) Landline, mobile phone, cable TV, internet (fixed and mobile)

Telefnica Landline, mobile phone, internet (mobile)

Digicel Mobile phone, internet (mobile)

Intelfon (RED) Mobile phone, radio communication

IBW Internet

Salnet Landline, internet

*Companies offer a variety of additional high value added services and products for the corporate sector. Other firms present in the market are: GIGA-OPTICS, GCA Telecom, Telecam Group, Newcom, and Platinum Enterprises, among others. Source: General Superintendence of Energy and Telecommunications (SIGET)

The telecommunications market in El Salvador ensures high quality services at competitive prices. Some of the available services include high-speed data transfers, metropolitan fiber optic networks, international private lines, VoIP, broadband internet (including cable and fiber optic access), wireless internet and 800 numbers, among others.

El Salvador has one highest ICT penetration rates in Latin America: 17% of Salvadorans are internet users[7] and 98% of network subscriptions are broadband.[8] There are 134 mobile phones and 17 landline subscriptions registered for every 100 inhabitants.

Source: ITU and SIGET (2011) Source: ITU and SIGET (2011)

El Salvador is directly interconnected to the United States, Latin America and the rest of the world by four of the most advanced telecommunications networks in the region: EMERGIA, ARCOS, MAYA1 and RED1.

This connectivity guarantees a redundancy of 99.9%, positioning El Salvador at the forefront in terms of efficiency, speed and continued availability of telecommunications. In practical terms, it provides the carrying capacity for much increased level of telecommunications traffic, needed for high volumes of data transfer with more competitive costs.

With multiple telecommunications operators in El Salvador, there is a highly competitive environment of services and prices. For more information about costs of telecom services, see Section VI of this guide, Setting Up and Operating a Business in El Salvador.

[7] Source: Multi-Purpose Household Survey 2011 (EHPM, for its acronym in Spanish), population older than 10 years of age.

[8] General Superintendence for Energy and Telecommunications (SIGET), 2011.

0

10

20

30

40

Costa Rica El Salvador Guatemala Honduras Nicaragua

8111517

32

0

35

70

105

140

Guatemala El Salvador Honduras Costa Rica Nicaragua

8292104

134140

Landline penetrationSubscriptions per 100 inhabitants

Mobile line penetrationSubscriptions per 100 inhabitants

III. Legal Framework and Incentives


I I I . L E G A L F R A M E WO R k A N D I N C E N T I V E S


III. Legal Framework and IncentivesEl Salvador is committed to promoting investment and developing long-term relationships with investors. The countrys legal framework provides attractive tax incentives and gives equal treatment to local and foreign investors.

1. Investment LawThis law seeks to encourage investment and FDI in particular in order to contribute to socio-economic development through increased productivity, job creation, exports and diversification.

Benefits

Procedure streamlining

Equal treatment to all investors (Foreign and local investors will have the same rights and obligations. Discriminatory measures that hinder the establishment, administration, use, extension, sale and liquidation of investments may not be used against them.)

Freedom to invest (Any natural or legal person, national or foreign, can invest in El Salvador, except for those investments limited by law, without discrimination on the grounds of nationality, place of residence, race, gender or religion.)

Transfer of funds abroad (Foreign investors are guaranteed the right to transfer funds abroad, without delay and with the freedom to convert currency through the banking system.)

Protection of property and security (In accordance with the Constitution, foreign and national investors are guaranteed protection of their property and the right to the free disposition of their assets.)

2. Free Zones Law and International Services Law

El Salvador offers attractive tax incentives for both exporters of goods and services according to the following scheme:

Type of company Legal framework Can be established in:

Exporters of goods(production, manufacturing, assembly factory,

processing, transformation or commercialization)

Industrial and Commercial Free Zones Law

Free Zones Warehouse for Inward Processing

(DPA, for its acronym in Spanish)

Exporters of services International Services Law Service Parks Service Centers

a) Industrial and Commercial Free Zones Law

Offers generous tax incentives to export-oriented manufacturing companies located in Free Zones or Warehouses for Inward Processing (DPA).

Free Zones are industrial parks considered outside the national territory for fiscal purposes, and thus raw material or merchandise required by companies are imported free of taxes and tariffs. If a company for technical reasons is unable to operate inside a free zone, it can be authorized to operate outside as a Warehouse for Inward Processing (DPA) and enjoy all the benefits of this law.




Eligible activities:

The production, assembly, manufacture, processing, transformation or commercialization of industrial goods included in Chapter 3 and Chapters 25 and onwards of the harmonized System;[9]

Fishing of maritime species to undergo industrial transformation, including preparation, canning, derivatives or sub products, as well as their respective processing and commercialization;

Cultivation, processing and commercialization of flora species grown in protected structures in greenhouses and laboratories;

Breeding and commercialization of amphibian and reptile species in captivity;

Dehydration of ethyl alcohol.

Benefits:

Full exemption from customs duties and other taxes on the import of machinery and equipment used for production.

Full exemption from customs duties and other taxes on the import of raw materials and other goods used for production.

Full exemption from customs duties and other taxes on lubricants, fuel and other substances used for production.

Full exemption from taxes on the transfer of real-estate property, for the acquisition of real estate that will be used in the incentivized activity.

Income tax exemption according to the following table:

Percentage of Exemption Period

Metropolitan Area

100 % For 15 years

60 % For the following 10 years


Outside the metropolitan area

100 % For 20 years



Shareholders also benefit with full exemption from income tax on the distribution of profits and dividends originating from the incentivized activity during the first 12 years.

Exemption from municipal taxes, according to the following table:

Percentage of Exemption Period

Metropolitan Area

100 % For 15 years


75 % From then on

Outside the metropolitan area

100 % For 20 years


75 % From then on

[9] With the exception of activities related to the production, processing or commercialization of natural gas, oil and derivatives; cement; mineral metallic and non-metallic products mined from Salvadoran subsoil; sugar and its substitutes, sugar products and by-products; alcohol; sacks of synthetic fibers; goods classified as polluting or harmful; commercialization of metal waste and scraps; import of machinery with leasing purposes and supply of food intended for employees or companies benefitted by this Law.




Municipal councils, with the purpose of promoting the development of their municipalities, have the legal power of granting additional benefits to investors.

Upon the expiration of the full exemptions period, investors can benefit of an additional five years of total exemptions if they have increased their investment (in relation to their initial investment) by 100% in the last five years.[10]

b) International Services Law

Offers generous tax incentives to exporters of services located in Service Parks or Service Centers.

Service Parks: Limited areas considered to be outside of the national customs territory, where exporters of services are installed and operate under the benefits of this law.

Service Centers: When a company in an eligible activity specified in this law for physical or technical reasons, is unable to operate inside a service park, it can be authorized to operate outside as a Service Center and enjoy all the benefits of this law.

Eligible activities:[11]

Activities to operate only within Service Parks

Activities to operate in Service Parks or Service Centers

Activities to operate in ports, airports or in national customs

territory

International DistributionStorage, gathering, consolidation

and de-consolidation of third parties merchandise with the purpose of being

exported or re-exported

International call centers or contact centers Maintenance and repair of airplanes

International logistics operationsPlanning, control and handling of

inventories, selection, packing, crating, dividing, classification, ticketing, labeling, signaling, invoicing, inspection of cargo

and others

Business Processing Outsourcing (BPO) Maintenance and repair of maritime vessels

Information technologiesDesign and development of software,

systems and IT applicationsMedical and hospital services Maintenance and repair of containers

Research and development Elderly and convalescent care

International financial servicesSub-contracts for administration processes for financial entities

Tele-medicinePost-checkup medical advice and specialized consultation, laboratory tests, pathological and image-based studies, clinical history management

and treatment support

Technological equipment repair

CinematographyPost-production services carried out on

recorded material

[10] The increase in investment has to be done in the purchase of land, in the construction of buildings and in the purchase of machinery and equipment linked to the incentivized activity.

[11] The following incentivized activities can allot part of their services to the national market: international distribution (50%), international logistics opera-tions (50%), international call center (40%), information technologies (30%), research and development (30%), international financial services (40%).




Benefits:

Full exemption from customs duties and other taxes on the import of machinery, equipment, tools, replacement parts, accessories, furniture and office equipment, and other goods required for the execution of the incentivized activity.

Full and indefinite exemption from income tax, exclusively for income deriving from the incentivized activity.

Full and indefinite exemption from municipal taxes on company assets during the period of operation in the country.

3. Tourism Law Tourism projects with a minimum investment of USD 25,000 are eligible to be declared of national touristic interest and opt for the following benefits:

Full exemption from taxes on the transfer of real-estate property, for the acquisition of real estate intended for the project.

Full exemption from customs duties and other taxes on the import of goods, equipment and accessories, machinery, vehicles, airplanes or maritime vessels and construction materials, used for construction until the completion of the project.[12]

Full exemption from income tax for a period of 10 years.

Partial exemption from municipal taxes (up to 50%) for a period of 5 years, beginning in the fiscal year in which the business begins operations.

4. Renewable Energy Incentives LawThis law aims to promote investment in renewable energy sources (hydraulic, geothermal, wind, solar and biomass) to generate electricity; fostering research, exploration and project development activities.

Benefits:

Full exemption (during the first 10 years) from customs duties[13] on imports of machinery, equipment, materials and supplies intended exclusively for pre-investment and investment activities in the construction of the electrical power generation centrals. [14]

Full exemption from income tax for a period of five years, for projects between 10 and 20 megawatts (MW), and for ten years, for projects under 10 megawatts (MW).[15]

Total exemption from taxes on revenues originated from the sale of Certified Emissions Reductions (CER) in the framework of the Clean Development Mechanism (CDM) or similar carbon markets.

In addition, projects in excess of 20 megawatts (MW) of capacity may deduct from income tax (for a maximum period of 10 years), all expenses or costs on research, exploration and preparation of projects to generate electricity based on renewable energy sources, as well as geothermal reinjection projects.[16]

[12] The exempted amount cannot be greater than the total capital invested in the project.

[13] Customs duties exemptions will be applied to projects of up to 20 megawatts (MW).

[14] It includes the construction of sub-transmission lines required to transport energy from the plant to the transmission and/or distribution grids.

[15] Income tax exemptions will begin - in both cases - with the start of operations of the project, corresponding to the fiscal year in which revenues are obtained.

[16] The deduction may not be greater than 20% of the previous years gross income, and will be carried out via annual quotas that will not exceed 25% of the income obtained in each fiscal year up to its total amortization.

IV. Human Capital


I V . h U M A N C A P I TA L


IV. Human CapitalEl Salvadors labor force is composed of 2.6 million people,[17] 60% of whom are 39 years or younger. Thus, it offers a highly productive labor force capable of developing new skills in short time. The countrys labor force is ideally qualified for manufacturing, agro-industrial and service activities. Furthermore, there is a growing population with higher education 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. Established investors describe the countrys labor force as one of the most outstanding in the world:

[17] Economically active population: Defined as the population over 16 years of age that is occupied or seeking employment.

Our experience has been very positive because, despite the fact that we are in a highly specialized segment of the textile industry, people have a desire to learn, to excel and to be part of a company that offers them stability, which in turn drives social development in surrounding communities.

Thanks to the technification of our recruiting and training processes, we have found women and men with multi-functional abilities who strengthen UNIFIs sophisticated industrial processes.

Carlo Mariano Melara Plant ManagerUNIFI Central America

Salvadoran labor force has been one of the success factors in the development of our manufacturing operations. Our headquarters consider it a blessing to have employees so avid to learn new things and take very seriously their roles in the company.

jaime CamposCountry Manager Darlington Fabrics & George C. Moore

After rigorous study, we were convinced that El Salvador was the adequate place for economic reasons and because of the people, who have an unparalleled energy and work ethic.

Sagar Rajgopal Vice-president of Global Operations Ubiquity Global Services Offshore business services sector




Engineeringand Technology

Managementand Economics

EducationHealthLawSocialSciences

Art andArchitecture

HumanitiesAgroindustry andEnvironment

Sciences

0

5

10

15

20

25

1%1% 2%3% 4%

19%

22%22%

17%

9%

1. Labor Climate

El Salvadors Labor Code balances workers rights protection with the flexibility that employers require to manage their businesses and create jobs.

El Salvador is characterized as having good employer-worker relationships and has not been affected by significant disputes or strikes. The level of unionization is low, as is the incidence of strikes. According to the World Economic Forums Global Competitiveness Report 2012-2013, El Salvador ranks 48 out of 144 countries in cooperation in worker-employer relations. Furthermore, the country ranks 23rd in flexibility of wage determination and first in the Central American region.

2. Higher EducationEl Salvador has a good base of technicians and professionals ready to join the countrys productive sectors. Currently there are more than 160,000 students enrolled in technical and university careers. Likewise, more than 20,000 technicians and professionals join the countrys labor force every year.

There are 38 technical and higher education institutions: 24 universities, 8 specialized institutes and 6 technical institutes throughout the country.

Graduates by educational area, 2011(As percentage over 20,284 graduates in 2011)

Source: Ministry of Education (MINED)




Enrolled students by educational area, 2011(Number of students and percentage)

Educational area No. of students ( %)

Management and Economics 41,195 25.69

Engineering and Technology 33,289 20.76

health 27,994 17.46

Law 15,620 9.74

Education 15,235 9.50

humanities 7,876 4.91

Social Sciences 7,376 4.60

Art and Architecture 6,410 4.00

Sciences 2,824 1.76

Agroindustry and Environment 2,543 1.59

TOTAL 160,362 100

Source: Ministry of Education (MINED)

3. Technical Education Investors can satisfy their demand for technicians through a pool of institutes specialized in technical education, such as

MEGATEC (Gradual Learning Model of Technical and Technological Education), with locations in La Unin, Chalatenango, Ilobasco, Sonsonate and Zacatecoluca

Escuela Superior Franciscana Especializada / AGAPE (Specialized Superior Franciscan School)

Escuela Especializada en Ingeniera / ITCA-FEPADE (Specialized Engineering School), with regional centers in Santa Ana and San Miguel

Universidad Don Bosco / UDB (Don Bosco University)

Escuela Nacional de Agricultura / ENA (National School for Agriculture)

Examples of technical careers available linked to FDI growth sectors: Aeronautical Maintenance, Agroindustry with Specialization in Fruits, Vegetables and Grains, Agronomy, Aquaculture, Biomedical, Civil Engineering, Customs and Logistics, Dental Surgery, Electronics, Food Processing and Preparation, Gastronomy, Global Logistics, Industrial Engineering, Mechanical Engineering, Medicine, Nursing, Orthoses and Prostheses, Port Management and Operation, Software Development, Tourism and Tourism Development and Management, among others.




4. On-the-Job Training Companies that need to train their active workers can do so with the aid of the Salvadoran Institute for Professional Formation (INSAFORP, for its acronym in Spanish), an autonomous governmental agency that aims to satisfy the needs for qualified human resources required by the countrys private sector. Multiple investors have found in INSAFORP an important tool for cofinancing, partially or totally, their employees professional development.

Collaboration between industry and academia

Success Story: AEROMAN Don Bosco University

El Salvadors higher and technical education institutions work to build a qualified labor force capable of fulfilling industry needs. An example of this effort is the work carried out between Don Bosco University (UDB) and AEROMAN, a maintenance and repair company for commercial aircraft.

As a result of the strong growth experienced by the aeronautical sector, Don Bosco University launched - in 2005 - an aeronautical maintenance degree in coordination with AEROMAN. In two years, students can obtain a mechanics license to provide maintenance to cargo and commercial aircraft, as well as to general civil aviation. Since its creation, the universitys aeronautical department has worked closely with the industry to continue fostering El Salvadors aeronautical sector.

V. Investment Opportunities


V . I N V E S T M E N T O P P O R T U N I T I E S


V. Investment Opportunities1. Logistics & Infrastructure

Perspective: With a convenient location on the Western hemisphere, El Salvador is looking forward to fully capitalize on its potential as a regional logistics hub, based on its commercial openness, excellent sea, air and land connectivity, and attractive tax incentives. The country offers port facilities able to serve large vessels thanks to the development of the newest container terminal in the pacific coast of Central America (Port of La Union) with large areas available for value-added services.

Due to its proximity to the United States and to the emergent market of Mesoamerica, El Salvador stands out as a key player in freight distribution on the region. One of its strategic objectives is To become a major regional logistics hub and services provider (El Salvadors Five Year Development Plan, 2009-2014). As a result, the country is developing its logistics capabilities and seeking to attract foreign investment to improve the efficiency of current infrastructure (container terminals, airports modernization) and operations (transport modes and equipment), in order to take advantage of its convenient geographic location and to increase global trade integration and employment opportunities.

El Salvador seeks to become a strategic partner for terminal operators, shipping lines, logistic operators and manufacturing companies, by offering them the advantages of a convenient business platform to key markets.

El Salvador is also promoting the nautical tourism based on: a)The development of the nautical tourism in Salvadoran waters, especially around the quiet navigation and landscaping of the Gulf of Fonseca; b) Existing technical knowledge and skills; and c) A cero hurricane risk condition.




Our value propositions:

For container terminal operators, there are opportunities to: a) operate a container terminal with proper depths to serve large vessels, with room for expansion and surge free waters; b) carry out immediate operations at the newest container terminal in the region, which is close to the Panama Canal; and c) capture cargo from different origins and destinations: regional (import/export), transshipment, transit and the cargo generated by offshore manufacturers and logistic operators.

For shipping lines: a) call at Port of La Unin with large container vessels via Transpacific route; b) handle considerable volumes of cargo for transshipments to North and South America with small feeder vessels and to the Caribbean, via the Panama Canal; and c) transport import and export cargo from and to the mid Central American region.

For manufacturers: a) set up their facilities under free trade zones benefits; b) set up plants as off shore facilities for the U.S. market; and c) access different markets through El Salvadors free trade and association agreements.

For logistics operators: a) set up operations in El Salvador under the countrys International Services Law; b) provide high value-added logistic services to the cargo moving in El Salvador, through different transportation modes; c)offer storage and distribution services to the region, taking advantage of the characteristics and connectivity of the Central American bi-oceanic logistics corridor.

Opportunities for logistics investments: Ports / Airports / hinterland supply

chains Logistics zones Bulk terminal operation Container terminal operation Industrial parks Airport logistics center Railway transportation Short Sea shipping Port trucking




Value adding services / logistics Bulk storage Tank storage Warehousing Distribution centers Integration services Assembling

Miguel Angel Meja LinaresLogistics & Infrastructure Investment AdvisorPBX: +503 2241-6400Phone: +503 2241-6447Mobile: +503 7802-6583Fax: +503 2241-6497Email: [email protected]

For more information about business opportunities,contact our specialist:

Value adding services / facilities Parking Truck maintenance Container maintenance Safety/Security

Opportunities for investments in nautical tourism: Marine infrastructure

Marina Dry storage Sail boats maintenance Motor boats maintenance Repair shipyards




2. Services

Strategic location for high-quality services at low cost

El Salvador offers ideal conditions as a destination for international services companies. It is strategically located in the heart of America and provides attractive tax incentives. Besides that, El Salvadors young and vibrant workforce offers effective and friendly services at a competitive cost.

The Government of El Salvador has placed a strategic commitment in the services sector and, through PROESA, has identified investment opportunities in the following areas:

Aeronautics

Offshore Business Services

Tourism

health Services

a) Aeronautics Successful world-class operations with strong continuous expansion

Perspective: El Salvador has more than 28 years of successful experience operating an aircraft maintenance, repair and overhaul (MRO) industry, placing the country on the global aeronautics map.

El Salvador provides maintenance to aircraft of major commercial airlines such as Southwest Airlines, U.S. Airways, jetBlue, Avianca and Volaris. Maintenance services are provided with focus on Airbus A320 family and Boeing B737 type aircrafts.

The country has an aeronautics cluster which incorporates private actors, government institutions, universities and international cooperation. Some of its members are:

www.aeroman.com.sv www.airsupport.com.sv

MRO Station MRO Station

www.aviotradegroup.com www.helica.com.svInput provider for the industry helicopter maintenance

www.udb.edu.sv www.pulsaraircrafts.com Aeronautic technicians training Airplane parts manufacturer

They are the best of the best. They

do excellent work and are hardly to

equal in price.

Dave RamageVP Technical Operations

jet Blue AirwaysOverhaul &

Maintenance Magazine




Opportunities in the sector

Commercial aircraft maintenance

R44 helicopter and corporate airplane maintenance

Distribution and warehousing services for aircraft parts

Component maintenance shops

Ground services for aeronautics

Light Sport Aircraft (LSA) airframe manufacturing and parts for wing tips, engines and others, in composite materials

Aircraft harness system assembly

Reconditioning on previous LSA models

Advantages of investing in El Salvador

Aeronautics Cluster

Labor costs up to 40% more competitive than United States/Mexico border operations

High productivity:

On Time Aircraft in the last five years of 96% Low employee turnover: less than 2% per year, a key factor for training and performance Fast learning curves, which ensures the learning of technical knowledge required to carry out world-class

operations Technical degree in aeronautics

Success Story

AEROMAN is an MRO (Maintenance, Repair and Overhauling) center that provides maintenance to major commercial airlines. With an investment of USD 110 million, the company is developing an aggressive expansion plan to reach 16 hangars by 2019.

The company belongs to a network of global maintenance centers authorized by the European consortium Airbus and its operations have been evaluated as one of the best worldwide.

The facilities that El Salvador offers to foreign investors have been a determining factor for entrepreneurs in the aeronautical sector to show interest in the country as a destination. In addition, the high quality of Salvadoran labor force is positioning the country on investors map.


Ricardo ArtigaAeronautics Investment Advisor PBX: +503 2241-6400Phone: +503 2241-6448Mobile: +503 7802-6597Fax: +503 2241-6497Email: [email protected]




b) Offshore Business ServicesPerspective: The Salvadoran Offshore Business Services Industry has experienced an unprecedented growth over the last years. Today it generates 13,500 direct jobs, 9,400 work stations and represents over 45 local and foreign companies. The list of internationally recognized companies that have found a strategic partner in El Salvador includes:

Opportunities in the sector:

Contact centers:

Product sales Order taking Cross sales & Up sales Customer relationship management Technical support Customer service Customer prospecting Technical support/warranty Customer acquisition and retention Inbound and outbound calling Appointment scheduling

Business processing services:

Data capturing General ledger accounting Order processing Bank reconciliations Transaction processing Fixed asset accounting Payroll processing Inventory accounting

The sector continues advancing and currently, the country also hosts business process outsourcing (non-voice BPO) centers which have taken advantage of the high skilled Salvadoran professionals.




Information technology services:

Software development, testing, business process management (BPM) and application management.

Advantages of Investing in El Salvador

Outstanding human talent

Neutral English and Spanish accents

Exceptional performance in key industry performance indicators, such as:

Sales (differentiating ability of Salvadorans) Customer satisfaction (C-SAT) First call resolution (FCR)

Cultural affinity with major markets such as the United States and Latin America

Outstanding work ethic compared to other countries in the region: El Salvador enjoys a dynamic workforce, characterized by its honesty, loyalty, warm service and low turnover.

150,000 students registered in higher education programs. In addition, an estimated 3% of the population speaks English (from basic to advanced level).

Excellent telecommunications platform

Open and competitive telecommunications market

Guaranteed telecommunications redundancy

Local and international telecommunication companies provide a broad spectrum of services at competitive costs.

The efficiency of the competitive market and the direct interconnection with the United States through the most advanced networks of the region (EMERGIA, ARCOS, MAYA 1 and RED1), make El Salvador the most competitive country in quality and cost of telecommunication services in the region.

Time zone

For the American market, El Salvador is on U.S. Central Standard Time (CST), which is six hours behind Greenwich Mean Time (GMT).

The International Services Law provides attractive tax incentives


Yolanda MartnezOffshore Business Services Investment AdvisorPBX: +503 2241-6400Phone: +503 2241-6450Mobile: +503 7802-6598Fax: +503 2241-6497Email: [email protected]




c) Tourism

El Salvador: The destination of choice for Tourism and Business

Perspective: El Salvador offers a wide range of hotel accommodations, excellent gastronomy and shopping, an outstanding road connectivity and proximity between multiple touristic attractions: all within an area of less than 22,000 km2.

In recent years, the tourism sector in El Salvador has undergone a significant expansion, creating lots of investment opportunities. The natural wealth of the country, world-class beach destinations and adventure tourism, as well as the determined support from the government of El Salvador, have made Tourism one of the most booming sectors of the country.

Investment opportunities

Because of its privileged geographical location, its consolidated and growing touristic demand, and its political and economic stability, El Salvador offers great investment opportunities in:

hotels Boutique hotels Convention Centers Marinas Spas and wellness centers Mixed use development

Touristic niches

Due to its beauty and natural wealth, as well as to its invaluable cultural heritage, El Salvador caters to tourists in the following niches:

Sun, beaches and surf Business Congresses and conventions Mayan world Colonial heritage Ecotourism

One of the many things that we liked about El Salvador is its combination of diversity

and size. It has beaches, cities, volcanoes, thermal

springs, archeological sites and coffee plantations; and

its such a small country, that you can enjoy a bit of

everything in one day if you want. This is why it is possible to free turtles in the Barra de Santiago beach in the mor-ning; and hike the paths of

the National Park El Imposible in the afternoon.

Karen Catchpole & Eric MohlTrans-Americas journey

www.trans-americas.com





Solid and growing tourism demand Political stability healthy and completely dollarized economy Privileged geographical location Short flights from North and South America

Success Story Royal Decameron Salinitas

The Royal Decameron Salinitas hotel is a beach resort that belongs to the Decameron All-Inclusive hotels & Resorts chain and is located on the Salvadoran Pacific Coast. It began operations in El Salvador in November 2005 with 258 rooms and immediately achieved an occupancy rate of 85%. Due to the success of the initial investment, expansions of USD 24 million followed; nowadays, the resort has 552 rooms and a convention center with capacity for 2,000 people.

For 2013, the Decameron group plans to increase its investment in the country. This business group has found an excellent business partner in El Salvador, even financing part of their new investment through local market securitization.


Beatriz Imendia SilvaTourism Investment AdvisorPBX: +503 2241-6400Phone: +503 2241-6446Mobile: +503 7802-6596Fax: +503 2241-6497Email: [email protected]

Air traffic hub with over 470 weekly arrivals and departures

hard-working and service-oriented work force

Pleasant climate throughout the year The Tourism Law provides attractive fiscal

incentives




d) Health ServicesClose geographic location for high-quality health services at competitive costs

Perspective: El Salvador offers geographical proximity for high-quality health services at competitive costs, making it an ideal destination for the establishment of hospitals, clinics medical centers and resort hospitals, to serve medical tourism.

Photo co

urtesy Diagn

ostic

Hospital


Hospitals: Investors can establish the first internationally accredited hospital for medical tourism. There is the opportunity to co-invest with local business groups.

Specialized clinics: El Salvador has the appropriate human capital and infrastructure to establish specialized medical centers in ophthalmology, dental care, orthopedics, rehabilitation, cosmetic surgery, oncology and apheresis.

Medical spas: The country offers the perfect setting to establish a relaxation center combined with medical therapy, as it has unexplored tourist places of an exotic beauty.

Resort hospitals for chronic diseases: El Salvador has land available near volcanoes and beaches, ideal locations to establish a health center for chronic diseases, with the amenities of a resort hotel. The proximity of these places allows relying on the support of the medical centers of nearby cities.

Advantages of Investing in El Salvador

The existence of qualified medical professionals with postgraduate degrees from abroad, mainly in Mexico, the United States and Europe that offer services at very competitive costs

The Salvadoran community abroad, approximately three million people, is a natural market that constantly visits the country and undergoes its health treatments locally

There is an International Services Law, which provides attractive tax incentives

Availability of human resources, with approximately 12,000 physicians. The national education system offers 20 health sector related careers, and graduates more than 3,200 new healthcare professionals every year

health services provided at costs significantly lower than in the United States and Canada. The savings for a patient may be up to 80%

For more information about business opportunities, contact our specialist:

Carolina Vides de PalomoMedical Devices and Healthcare Investment Advisor PBX: +503 2241-6400Phone: +503 2241-6443Mobile: +503 7802-6593Fax: +503 2241-6497Email: [email protected]




3. ManufacturingEl Salvador is an attractive destination for offshore manufacturing. Investors can take advantage of the export platform offered by the country with preferential access to major markets, competitive costs, generous tax incentives and a strategic location in the heart of the Americas. Significant business opportunities can be found in the following industries:

a) Specialized Textiles and Apparel Manufacturing Vertically integrated industry with easy access to major markets

Perspective: El Salvador exports textiles and apparel to more than 50 countries and is one of the main textile and clothing suppliers to the United States.

El Salvador is the only country in Central America with a synthetic fiber cluster: nylon, polyester and microfibers, among others.

Currently, more than 260 textile and apparel manufacturers operate in El Salvador, including world-renowned companies such as:

Packaging and distribution

Full Package

Threads and Synthetic Fibers

Product Design

Fabric Manufacture

Vertical integration of the production chain

El Salvador offers a vertically integrated supply chain. It consists of five basic links:

Product design Yarn and synthetic fiber Fabrics manufacturing Full package (garment manufacturing) Packaging and distribution


The sector offers attractive opportunities for companies venturing in international markets on favorable conditions and in an expedite manner.




Yarns and Fabrics Manufacturing The fabric deficit in Central America makes textile investment appealing; especially for fabrics produced with synthetic fibers (nylon, polyester, microfibers and others), as these are given preferential access to the United States. On the other hand, fabrics from other regions such as Asia pay a 32 % rate.

Manufacture of knitted garments with accessories and embellishmentsThe global industry is continually demanding shorter product-delivery times. El Salvador has the advantage of having a vertically integrated supply chain and an ideal geographical location close to target markets. This allows providing, within deadlines, high value added niches and high turnover. Some of these niche markets are sportswear, womens apparel (blouses, skirts, bathing suits / swimwear, dresses), mens shirts and socks, among others.

Garment manufacturing under the single transformation categoryApparel articles under single transformation rule enter duty-free into the United States. This rule allows the flexibility to use fabric from any origin in the manufacturing of garments. Eligible apparel articles include bras, girl dresses, boxers, pajamas and suitcases, among others.


Vertically integrated production chain

Favorable tariff conditions provided by free trade agreements signed with countries like the United States (DR-CAFTA) and the European Union (Association Agreement). The rule of origin granted by CAFTA allows free access to fabrics manufactured with yarn produced in any of the Central American countries.

Proximity to major markets like the United States, which allows shorter delivery times, within the deadlines contracted, high value added niches and high turnover.


Celia HernndezSpecialized Textiles and Apparel

Investor Guide El Salvador 2013

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Transcript of Investor Guide El Salvador 2013