Investor Guide El Salvador 2013

EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR

Why El Salvador? ❏❏ Strategic Location ❏❏ Preferential Access to International Markets ❏❏ Attractive Tax Incentives ❏❏ Competitive Costs ❏❏ Monetary Stability ❏❏ Productive Labor Force ❏❏ Competitive Infrastructure

EL SALVADOR Investor’s Guide

2013

E L S A LVA D O R I N V E S T O R ’ S G U I D E 2 013

Investor’s Guide 2013 Government of El Salvador, Central America

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

PROESA

E X P O R T A N D I N V E S T M E N T PR O M O T I O N AG 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 Cáceres Technical Secretary of the Presidency and President of PROESA

Jaime Miranda Flamenco Minister of Foreign Affairs

Carlos Cáceres Minister of Finance

José Armando Flores Alemán Minister of Economy

Pablo Alcides Ochoa Minister of Agriculture and Livestock

Gerson Martínez Minister of Public Works

José Napoleón Duarte Minister of Tourism

Giovanni Berti Executive 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.

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Content

Why El Salvador? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 I. El Salvador at a Glance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 1.

2.

3.

4.

A Stable Free Market Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Monetary Stability: The advantages of a dollarized economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Attractive Investment Climate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Stable Political Climate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

II. El Salvador: Export Platform to Major Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 1.

2.

3.

4.

Preferential Access to International Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Strategic Location . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Availability of Industrial Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Modern Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

III. Legal Framework and Incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 1. Investment Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 2. Free Zones Law and International Services Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 3. Tourism Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 4. Renewable Energy Incentives Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 IV. Human Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 1. Labor Climate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 2. Higher Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 3. Technical Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 4. On-the-Job Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 V. Investment Opportunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 1. Logistics & Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 2. Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 3. Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 4. Agro-Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 VI. Setting up and Operating a Business in El Salvador . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 1.

2.

3.

4.

5.

Operational Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 Establishing a Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 Costs of Establishing a Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 Requirements to Enter El Salvador . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

Services Provided to Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

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E L S A LVA D O R I N V E S T O R ’ S G U I D E 2 013

Why El Salvador?

1. Strategic Location El Salvador’s 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 Markets Multiple 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 Incentives The country’s 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 Costs El 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 Stability El 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 Force Investors 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 Infrastructure The World Economic Forum (WEF) places El Salvador’s 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.

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E L S A LVA D O R I N V E S T O R ’ S G U I D E 2 013

Giovanni Berti Executive Director PROESA

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 Investor’s 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!

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I. El Salvador at a Glance

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

I . E l S alvador at a G lance

El Salvador 6.2 million Population

USD 23 billion GDP

USD 3,700

GDP per capita

Chalatenango Santa Ana

Ahuachapán

Cuscatlán San Salvador Sonsonate

Cabañas Morazán San Vicente

La Libertad

San Miguel

La Paz Usulután Océano Pacífico

I. El Salvador at a Glance El 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

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La Unión

E L S A LVA D O R I N V E S T O R ’ S G U I D E 2 013 I . E l S alvador at a G lance

Key Economic Indicators, 2007-2011

Indicators

2007

2008

2009

2010

2011

Population (millions)

5.74

6.12

6.15

6.18

6.21

Labor force (millions)

2.32

2.50

2.55

2.58

2.64

20,105

21,431

20,661

21,428

23,095

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

3.8

1.3

-3.1

1.4

2.0

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

4.9

5.5

-0.2

2.1

5.1

3,695

3,742

3,387

3,431

3,649

GDP, current prices (millions of USD) Per Capita (USD)

Real GDP growth (%) GDP by sector (%):

Inflation (%) Remittances (millions of USD) 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

11,071

Source: 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 Economy Over 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 Salvador’s 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 Salvador’s strength in maintaining free market policies that promote trade and investment.

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I . E l S alvador at a G lance

GDP composition, 2011

GDP Structure, 2011

47.3%

.1%

14.

2% 11.0 %

28

94.0% Private Consumption

Government Consumption

Gross Fixed Capital Formation

Exports

Imports

GDP

Source: Central Reserve Bank of El Salvador

100.0%

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

21%

Trade, Restaurants and Hotels

19%

Manufacturing

12%

Agriculture, Hunting, Forestry and Fishing

9%

Value added by economic activity Government Services

8%

Community, Social, Personal and Domestic Services

8%

Transportation, Warehousing and Communications

7%

Housing Rental

5%

Real Estate and Business Services

5%

Financial and Insurance Establishments

4% 2%

Construction

0%

Mining and Quarry Exploitation

Electrcity, Gas and Water

Source: Central Reserve Bank of El Salvador (BCR)

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

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Agriculture

12.2%

Industry

26.0%

Services

61.8%

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2. Monetary Stability: The Advantages of a Dollarized Economy One of the most important policies implemented to open the country’s 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

Benefits 1. 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. Transparency Source: PROESA

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

Source: IMF

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I . E l S alvador at a G lance

Local currency per U.S. dollar exchange rates variations, 2000-2012 Percentage change versus 12 months before (%) 40 %

El Salvador

Costa Rica

Guatemala

Honduras

Mexico

Nicaragua

30 %

20 %

10 %

0%

-10 %

-20 %

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

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

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.

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E L S A LVA D O R I N V E S T O R ’ S G U I D E 2 013 I . E l S alvador at a G lance

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

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

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I . E l S alvador at a G lance

4. Stable Political Climate El 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)

68 %

70 60 50

54 %

54 %

1984

1989

52 %

58 % 51 %

PDC ARENA FMLN

40 30 20 10 0

1994

1999

2004

2009

Source: Supreme Electoral Tribunal (TSE)

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

ARENA

39% 33 deputies Other political parties

11% 9 deputies GANA 13% 11 deputies

FMLN

37% 31 deputies

Source: Supreme Electoral Tribunal (TSE)

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II. El Salvador: Export Platform to Major Markets

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I I . E l S alvador : E xport P latform to M a j or M ar k ets

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 Salvador’s 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:

Canada

USA

European Union

FTA: Free Trade Agreement PSA: Partial Scope Agreement FTA/PSA: in negotiation CACM: Central American Common Market

Mexico

Belize El Salvador Cuba

Central America

Colombia

Ecuador

Panama

Chile

Peru

Source: PROESA

20

Taiwan

Dominican Republic

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Venezuela

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

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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 country’s proximity to main maritime trade routes.

Los Angeles, CA 5.5 days

5 hours

USA

Miami, FL 2 hours

Manzanillo 2.4 days

MEXICO

Atlantic Ocean

Port Acajutla

Port La Unión

P a c i fi c O c e a n

VENEZUELA

Balboa 1.7 days

COLOMBIA

ECUADOR

The country’s 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 Salvador’s location ideal for business processing outsourcing.

BRAZIL

PERU

Callao 3.5 days

*Sailing days and flight hours Source: PROESA

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I I . E l S alvador : E xport P latform to M a j or M ar k ets

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].

Free Zones and Service Parks 1.

2.

3.

4.

5.

6.

7.

8.

Anguiatú Border

Metapán Lake Güija

GUAT EMALA

Santa Ana Free Zone Las Mercedes Free Zone Free Zone 10 EXPORTSALVA Free Zone(2) PIPIL Free Zone SAM-LI Free Zone American Park Free Zone(2) Santa Tecla Free Zone(1)(2)

1

Located in San Salvador Metropolitan Area

(1)

CHALATENANGO

SANTA ANA

9. San José Free Zone 10. San Marcos Free Zone(1) 11. San Bartolo Free Zone(1) 12. Santo Tomás Free Zone 13. Internacional Free Zone 14. MIRAMAR Free Zone(2) 15. El Pedregal Free Zone 16. Concordia Industrial Park Free Zone 17. Calvo Free Zone (2)Also operates as Service Park

C-A 1

Las Chinamas Border

3

m an a

AHUACHAPÁN

2 Coatepeque Lake

er

ic a

wa y gh

Sonsonate

Port Acajutla

Li

a l (C o a s

Sensuntepeque

SAN SALVADOR

11

8 Nueva San Salvador

10

9

to r

CABAÑAS Ilobasco

CUSCATLÁN

7

SONSONATE

Suchitoto

LA LIBERTAD

5 na Hi 6

4

C-A 2

H O N D U R A S

Reservoir Cerrón Grande

P

Ahuachapán

La Hachadura Border

Chalatenango

Santa Ana

t a l ) Hi ghw a y Ilopango Airport

12

Ilopango Lake

13 14

El Salvador International Airport

MORAZÁN

San Vicente

LA PAZ

15

Reservoir Septiembre 15

Cojutepeque

Pa n

SAN VICENTE

Co as ta

High wa y

San Francisco (Gotera)

To Tegucigalpa LA UNIÓN

San Miguel

USULUTÁN

Zacatecoluca

San Luis La Herradura

americana

SAN MIGUEL

l Hi gh w ay 16

Usulután

Olomega Lake of

Port La Unión Zacatillo Island 17

Martín Pérez Island

P a c i fi c O c e a n

Conchaguita Island Gulf Meanguera 0

10

20

30

40km

Symbols Longitudinal del Norte Highway

C-A 1

C-A 2

Panamericana Highway

Litoral (Coastal) Highway

Borders

Capital

Major Cities

Ports

Airports

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.

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4. Modern Infrastructure The World Economic Forum’s (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 country’s infrastructure is complemented by modern and advanced telecommunications and electricity markets. Multiple suppliers offer high-quality services at competitive prices.

a) Highway Network The 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 5

4.5 3.8

4 3

3.3

3.3 2.5

2 1 0 El Salvador

Nicaragua

Source: World Economic Forum, Global Competitiveness Index 2012-2013

Guatemala

Honduras

Costa Rica

*Values are on a scale of 1-7, 7 as the most desirable outcome.

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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 country’s priority road network, a total of 6,544 kilometers throughout El Salvador.

El Salvador’s 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.

Symbols Interconnection Route El Salvador - Honduras Interconnection Route El Salvador - Guatemala C-A 1

C-A 2

Panamericana Highway Litoral (Coastal) Highway Longitudinal del Norte (Northern Longitudinal) Highway Capital City

BELIZE

Main cities Ports Airports

Atlantic Ocean Port Cortés

Port Barrios

G UAT E MA L A

San Pedro Sula

Guatemala City

ACAJUTLA - STO. TOMAS 354 KM - 14 hrs.

LA UNIÓN - PORT CORTÉS 371 KM - 8 hrs.

La Aurora Airport

Santa Rosa de Copán

Santa Barbara

Francisco Morazán

ACAJUTLA - PORT CORTÉS 527 KM - 17 hrs.

Nueva Ocotepeque

Tegucigalpa

Jutiapa Chalatenango

Santa Ana

Port Quetzal

Ahuachapán

C-A 1

Sonsonate

C-A 2

C-A 2

HONDURAS

San Salvador

Cuscatlán

La Libertad

P a c i fi c O c e a n

Cabañas Morazán

La Paz San Miguel

C-A 2

Port Acajutla

Usulután

El Salvador International Airport

To Tegucigalpa

San Vicente La Unión

Port La Unión

Choluteca

Fonseca Gulfs Island

NICARAGUA

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b) Airports El 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.

6

5.9

5

Quality of air transport infrastructure

4.9

4.9

Costa Rica

Guatemala

4.5

4

4.2

3 2 1 0

El Salvador

Honduras

Nicaragua

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

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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 country’s 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 Avianca’s 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.

International airlines operating in El Salvador [2]

Airline

Direct flights

Frequency of direct flights per week*

Belize Bogota Cali Cancun Chicago Dallas Guatemala Guayaquil Houston Havana Liberia Lima Los Angeles Managua Medellin Mexico Miami New York Orlando Panama Quito Roatan

15 15 3 14 4 10 24 6 15 3 8 14 41 10 4 24 19 23 6 15 3 14

San Francisco

24

San Jose San Pedro Sula Tegucigalpa Toronto Washington

45

14 6 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

23

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

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

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c) Ports El 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 Unión, located in the east. Acajutla specializes in bulk cargo and La Unión 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 A

Vessel type

Multipurpose

Berth B South side

North side

General cargo and bulk-carrier

Container ship and general cargo

Berth C

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)

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Port La Unión Port La Unión 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 Salvador’s objective of becoming a regional distribution and logistics center At the moment, the first phase of Port La Unión is in the process of being awarded to an international operator. It includes berths for container ships, multipurpose vessels and cruisers.[4]

Port La Unión 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 Süd - 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 · Compañía Sudamericana de Vapores (CSAV) (South American Vapors Company) · China Shipping Containers Line · Evergreen Source: Customs

[4]

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

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d) Electricity El Salvador’s 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:

Development and coordination of national energy policy Management of the electricity wholesale market

Operation of the transmission system

Regulation and law enforcement Electricity Sector [5] Central American Economic Integration Bank (BCIE), ARECA Project.

[6] Legislative Decree No. 843

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El Salvador’s 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 (%)*

30

23.90 %

25.40 %

20

10

10.80 %

12.30 % 12.30 %

0

Costa Rica

El Salvador

Guatemala

Honduras

Nicaragua

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

Energy matrix

63 %

RenEWables

37 % NON RenEWables

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 country’s legal framework allows companies 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 information, see Section VI of this guide, “Setting Up and Operating Business in El Salvador”.

Source: UT (2011)

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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%.

Landlines

Thousands 1,200

Mobile lines Millions 10

1,000

8

800

6

600

4

400

2

200 0

0 2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Source: General Superintendence for Energy and Telecommunications (SIGET)

The country’s 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.

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Main telecommunications operators Operator

Basic services*

América Móvil (Telecom/Claro)

Landline, mobile phone, cable TV, internet (fixed and mobile)

Millicom (Telemóvil/Tigo)

Landline, mobile phone, cable TV, internet (fixed and mobile)

Telefónica

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.

Landline penetration

Mobile line penetration

Subscriptions per 100 inhabitants

Subscriptions per 100 inhabitants

40 30 20

140

32

134 104

105

17

15

10 0

140

92

82

70

11

8

Costa Rica El Salvador Guatemala Honduras Nicaragua

Source: ITU and SIGET (2011)

35 0

Guatemala El Salvador Honduras Costa Rica Nicaragua

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.

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III. Legal Framework and Incentives

PROESA III.

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

L egal F ramewor k and I ncentives

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

1. Investment Law This 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

Exporters of goods (production, manufacturing, assembly factory, processing, transformation or commercialization)

Industrial and Commercial Free Zones Law

Exporters of services

International Services Law

Can be established in: • •

Free Zones Warehouse for Inward Processing (DPA, for its acronym in Spanish)

• •

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.

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L egal F ramewor k and I ncentives

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:

Period

Percentage of Exemption Metropolitan Area 100 %

For 15 years

60 %

For the following 10 years

40 %

For the following 10 years Outside the metropolitan area

100 %

For 20 years

60 %

For the following 15 years

40 %

For the following 10 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:

Period

Percentage of Exemption Metropolitan Area 100 %

For 15 years

90 %

For the following 10 years

75 %

From then on Outside the metropolitan area

100 %

For 20 years

90 %

For the following 15 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.

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L egal F ramewor k and I ncentives

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 Distribution Storage, 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 operations Planning, 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 technologies Design and development of software, systems and IT applications

Medical and hospital services

Maintenance and repair of containers

Research and development

Elderly and convalescent care

International financial services Sub-contracts for administration processes for financial entities

Tele-medicine Post-checkup medical advice and specialized consultation, laboratory tests, pathological and image-based studies, clinical history management and treatment support

Technological equipment repair

Cinematography Post-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 operations (50%), international call center (40%), information technologies (30%), research and development (30%), international financial services (40%).

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L egal F ramewor k and I ncentives

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 Law This 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 year’s 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.

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IV. Human Capital

PROESA I V.

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

Human C apital

IV. Human Capital El Salvador’s 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 country’s 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 country’s labor force as one of the most outstanding in the world:

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 Campos Country 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

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 UNIFI’s sophisticated industrial processes.

Carlo Mariano Melara Plant Manager UNIFI Central America [17] Economically active population: Defined as the population over 16 years of age that is occupied or seeking employment.

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E L S A LVA D O R I N V E S T O R ’ S G U I D E 2 013 I V.

Human C apital

1. Labor Climate El Salvador’s 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 Forum’s 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 Education El Salvador has a good base of technicians and professionals ready to join the country’s 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 country’s labor force every year.

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

25

20

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

17% 15

22%

Management and Economics

Engineering and Technology

19%

Source: Ministry of Education (MINED)

9%

10

5

0

22%

1%

1%

4% 2% 3%

Sciences Agroindustry and Humanities Art and Social Environment Architecture Sciences

Law

Health

Education

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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

160,362

100

TOTAL

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 Unión, Chalatenango, Ilobasco, Sonsonate and Zacatecoluca ✔✔ Escuela Superior Franciscana Especializada / AGAPE (Specialized Superior Franciscan School) ✔✔ Escuela Especializada en Ingeniería / 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.

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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 country’s 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 Salvador’s 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 university’s aeronautical department has worked closely with the industry to continue fostering El Salvador’s aeronautical sector.

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V. Investment Opportunities 1. 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 Salvador’s 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.

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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 Unión 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 Salvador´s free trade and association agreements.

✔✔

For logistics operators: a) set up operations in El Salvador under the country´s 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

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

✔✔ 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

Miguel Angel Mejía Linares For more information about business opportunities, contact our specialist:

Logistics & Infrastructure Investment Advisor PBX: Phone: Mobile: Fax:

+503 2241-6400 +503 2241-6447 +503 7802-6583 +503 2241-6497

Email: mmejia@proesa.gob.sv

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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 Salvador’s 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.

They are the best of the best. They do excellent work and are hardly to equal in price.”

Dave Ramage

VP Technical Operations Jet Blue Airways Overhaul & Maintenance Magazine

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.sv

Input provider for the industry

Helicopter maintenance

www.udb.edu.sv

www.pulsaraircrafts.com

Aeronautic technicians training

Airplane parts manufacturer

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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 Artiga For more information about business opportunities, contact our specialist:

Aeronautics Investment Advisor PBX: Phone: Mobile: Fax:

+503 2241-6400 +503 2241-6448 +503 7802-6597 +503 2241-6497

Email: rartiga@proesa.gob.sv

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b) Offshore Business Services Perspective: 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:

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.

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

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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 Martínez For more information about business opportunities, contact our specialist:

Offshore Business Services Investment Advisor PBX: Phone: Mobile: Fax:

+503 2241-6400 +503 2241-6450 +503 7802-6598 +503 2241-6497

Email: ymartinez@proesa.gob.sv

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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.

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 it´s 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 morning; and hike the paths of the National Park El Imposible in the afternoon.”

Karen Catchpole & Eric Mohl Trans-Americas Journey www.trans-americas.com

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

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Advantages of investing in El Salvador ✔✔ ✔✔ ✔✔ ✔✔ ✔✔

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

✔✔ 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

Success Story – Royal Decameron Salinitas The Royal Decameron Salinitas Hotel is a beach resort that belongs to the Decameron AllInclusive 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 Silva Tourism Investment Advisor For more information about business opportunities, contact our specialist:

PBX: Phone: Mobile: Fax:

+503 2241-6400 +503 2241-6446 +503 7802-6596 +503 2241-6497

Email: bimendia@proesa.gob.sv

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d) Health Services Close 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.

Investment opportunities ✔✔ 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.

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%

Photo courtesy Diagnostic Hospital

✔✔ 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.

Carolina Vides de Palomo Medical Devices and Healthcare Investment Advisor PBX: Phone: Mobile: Fax:

+503 2241-6400 +503 2241-6443 +503 7802-6593 +503 2241-6497

For more information about business opportunities, contact our specialist:

Email: cvides@proesa.gob.sv

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3. Manufacturing El 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:

Vertical integration of the production chain El Salvador offers a vertically integrated supply chain. It consists of five basic links: ✔✔ ✔✔ ✔✔ ✔✔ ✔✔

Packaging and distribution

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

Full Package

Fabric Manufacture

Threads and Synthetic Fibers

Product Design

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

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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 embellishments The 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, women’s apparel (blouses, skirts, bathing suits / swimwear, dresses), men’s shirts and socks, among others.

Garment manufacturing under the “single transformation” category Apparel 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.

Advantages of investing in El Salvador ✔✔ Vertically integrated production chain ✔✔ Favorable tariff conditions provided by free trade agreements signed with countries like the United States (DRCAFTA) 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 Hernández Specialized Textiles and Apparel Investment Advisor PBX: Phone: Mobile: Fax:

+503 2241-6400 +503 2241-6444 +503 7802-6594 +503 2241-6497

For more information about business opportunities, contact our specialist:

Email: chernandez@proesa.gob.sv

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b) Light Manufacturing El Salvador is an outstanding export platform for light manufacturing operations. It offers investors a strategic location in the heart of the Americas, preferential access to key markets through a network of free trade agreements and a highly productive workforce, among others. PROESA actively promotes investment in light manufacturing and has identified or developed business in the following sectors:

Footwear manufacturing Investment opportunities: El Salvador offers great advantages to footwear manufacturing companies wishing to establish an assembly and export platform to reach major markets like the U.S., Europe, Central America and the Caribbean, and thus benefit from free trade agreements.

DR-CAFTA The DR-CAFTA rule of origin granted by the United States for footwear is more flexible than rules established in any other free trade agreement: ✔✔ Simple assembly in the country confers origin, which allows most footwear categories to enter the U.S. market tariff-free and quota-free, regardless the incorporation of prefabricated components from third countries, as long as the products are assembled in El Salvador. ✔✔ It does not establish a minimum value-added requirement. ✔✔ Only 17 tariff lines have a tariff reduction program (all other footwear are duty free) and must contain 55% regional value content.

SGP PLUS / EU-CA Association Agreement The current preferential system granted by the European Union to El Salvador does not establish minimum value-added requirement to export footwear products to this destination duty-free. The rule of origin requires that the footwear parts and components should be made and assembled in El Salvador or in countries benefited by such scheme.

Tariff preferences in this sector will be maintained under the new Association Agreement between the European Union and Central America, expected to enter into force in 2013.

FTA Mexico The Free Trade Agreement with Mexico allows the aggregation principle to meet the minimum 50 % value added requirement.

Vanessa Bandak Footwear Investment Advisor For more information about business opportunities, contact our specialist:

PBX: Phone: Mobile: Fax:

+503 2241-6400 +503 2241-6449 +503 7802-6599 +503 2241-6497

Email: vbandak@proesa.gob.sv

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Medical Device Manufacturing PROESA has identified investment opportunities for medical device manufacturing companies that wish to establish distribution centers or set up manufacturing or assembly plants for hospital-use medical materials that range from low and medium technological complexity, either disposable or reusable. The greatest opportunities are for those medical companies that target markets in the United States, Canada, Mexico, Central America and the Caribbean.

Investment opportunities Manufacturing plants for: ✔✔ Medical supplies ❏❏ Lab disposables and diagnostic equipment ❏❏ Hospital linen and surgical gowns ❏❏ Wound care supplies ✔✔ Orthopedic products ❏❏ Prosthesis and orthosis ✔✔ Hospital furniture

Logistics hub for the Central American region: ✔✔ El Salvador provides a natural location for companies that want to service the 40 million people regional market.

Moreover, it is a few hours from major cities in the United States.

Advantages of investing in El Salvador: ✔✔ Strategic location in the center of the Americas ✔✔ Free trade agreements with major American markets ✔✔ Installed capacity in key complementary industries The textile and apparel sector is one of the most important in the country and includes yarn and fabric manufacturers, as well as apparel companies. El Salvador has a mature plastics industry. Currently, many of the plastic companies have installed capacity to offer outsourcing or even make joint ventures with international companies. In the metal mechanics sector, there are companies with CNC workshops, capable of sourcing precision parts. ✔✔ Highly-qualified human capital El Salvador has the first research center in Latin America accredited by the International Society for Prosthetics and Orthotics (ISPO). It is located at the Don Bosco University where for almost 20 years has provided education in biomedical engineering, orthotics and prosthetics to national and international students.

Carolina Vides de Palomo Medical Devices and Health Services Investment Advisor PBX: Phone: Mobile: Fax:

+503 2241-6400 +503 2241-6443 +503 7802-6593 +503 2241-6497

For more information about business opportunities, contact our specialist:

Email: cvides@proesa.gob.sv

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4. Agro-Industry El Salvador offers and ideal location for the production and processing of food, and to address specific market niches beyond traditional agricultural industries.

Investment opportunities Processed Foods El Salvador is a regional leader in the production and export of juices and snacks. It has a proven track record in attracting investment in this area and offers opportunities for the establishment of food production, processing and distribution centers for exportation. In addition, the country has strong complementary industries in areas such as bottling, packaging and processing technology, among others.

Specific niches PROESA has identified the following niche markets that offer excellent investment opportunities in agribusiness: Cultivation of ornamental plants: El Salvador offers opportunities for the establishment of indoor or shade crops, especially for the propagation and production of cuttings or stakes for the export market. The elevations of 700-900 meters in the western region of the country and the annual average temperature of 22-24째 C (72-75째 F), in addition to sufficient irrigation water and a topography from flat to semi flat, are ideal for these crops.

Aquaculture sector: The warm tropical climate enjoyed by the country and its strategic location are ideal for year-round aquaculture production and for the commercialization of fresh fish fillets to markets in developed countries.

Fruit Sector: Five species of fresh fruit have access to the U.S. market: hybrid coconut, Persian lime, improved cashew, papaya and pineapple MD-2 variety.

In addition, the country has many areas suitable for the cultivation of these and other crops, such as fine aroma cacao, ranging from sea level to 600 meters high. These crops offer favorable conditions for exporting to the United States and the Central American region, as well as for supplying the local market.

There are also opportunities to meet the demand of pulp and fruit concentrate in these markets.

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Advantages of investing in El Salvador ✔✔ Suitable climatic conditions (temperature and altitude) and soils suitable for growing fruits and ornamental plants. ✔✔ Excellent road and port infrastructure ✔✔ Proximity to high-consumption markets, facilitating the export of fresh products ✔✔ Free trade agreements that provide favorable conditions to access major markets in America and Europe ✔✔ Abundant supply of sugar for high-consumption industries (beverages, candies, etc.). It is possible to negotiate fixed price contracts for up to five years ✔✔ Availability of water resources for sustainable aquaculture development

Success stories Grupo Calvo Spanish company engaged in the fishing, processing and commercialization of high-quality canned fish. Its largest tuna processing plant is located in El Salvador (16,000 m² with a total investment of USD 90 million). It is currently one of the largest exporters in the country.

Red Fox Las Mercedes German company that has operated in the country since 2009 with a 20-hectare greenhouse specialized in the production and commercialization of poinsettias, geraniums, petunias and begonias cuttings. The sunny climate and moderate temperatures have allowed them to obtain the high quality products demanded by their customers in the United States and Europe.

Jumex Centroamericana Jumex Central America exports to 20 countries, including Mexico, Central America and the Caribbean. Its infrastructure in El Salvador is used as a production center and platform to export and distribute in the region and the Caribbean. According to Rafael Domínguez, Jumex Financial Manager, the tariff preferences offered by FTAs, El Salvador’s strategic location, and the Salvadoran work ethic have been key factors for successful operation. The company has currently invested more than USD 40 million in its plant and distribution center.

Gerardo Sol Agro-Industry Investment Advisor PBX: Phone: Mobile: Fax:

+503 2241-6400 +503 2241-6445 +503 7802-6595 +503 2241-6497

For more information about business opportunities, contact our specialist:

Email: gsol@proesa.gob.sv

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VI. Setting up and Operating a Business in El Salvador

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VI. Setting up and Operating a Business in El Salvador El Salvador is one of the most attractive countries to set up and operate a business. The Financial Times journal fDi Intelligence ranked El Salvador as the most cost-effective [18] country in Central America and the Caribbean.

1. Operational Costs

a) Labor Costs El Salvador’s Labor Code regulates employer-worker relations. Salvadoran legislation states that wages are determined freely, but cannot be lower than the minimum wage established by the National Wage Council, revised at least every three years.

Minimum wage per sector (In USD)

[19]

Wages per:

Agriculture

Industry

Commerce and Services

Textile and Apparel Maquila

Hour

0.44

0.91

0.93

0.78

Day

3.50

7.31

7.47

6.25

Month

105.00

219.30

224.10

187.50

Source: PROESA based on data from the Ministry of Labor (MTPS)

[18] Cost effectiveness judging criteria: cost of registering property; cost of dealing with construction permits; total tax rate, percentage

of profit; office costs; minimum wage; room rate for four-star hotel and cost to export.

[19] Rates in force since May 16, 2011

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As the following figure shows, El Salvador is one of the most competitive countries in Central America in terms of labor costs:

Comparative minimum wages for companies located in free zones (%)

72 % Nicaragua

100 %

124 %

149 %

El Salvador

Honduras

Guatemala

250 % Costa Rica

Source: PROESA based on data from the Central American Ministries of Labor

Legal working schedules Work days are classified in day and night shifts: ✔✔ Day shift (between 6:00am and 7:00pm): Maximum of 8 hours per day for a 44-hour work week. ✔✔ Night shift (between 7:00pm and 6:00am): Maximum of 7 hours per day for a 39-hour work week. For night shifts, a 25% surcharge is applied on the salary of a similar work in day hours.

Fringe benefits Salvadoran legislation provides the following benefits: Employer Obligations

Description

Monthly Percentage

Annual paid vacations

Vacations are paid once per year and correspond to 30% of a 15-day salary.

1.25 %

Social Security (ISSS)

The employer pays an amount equivalent to 7.5% of the base salary. For the calculation of this contribution, a maximum of USD 685.71 will be considered as base salary.

7.50 %

Training Fund (INSAFORP)

Applicable only to companies with 10 or more employees. The employer pays an amount equivalent to 1% of the base salary.

1.00 %

Christmas Bonus

Paid annually in December (it is not necessary to make a monthly provision). The amount is calculated according to the number of years served: 1-2 years (10 days salary), 3-9 years (15 days salary), 10 years or more (18 days salary).

2.78 %

Retirement Fund (AFP)

The employer contributes with 6.75% of the base salary.

6.75 %

Total benefits paid by employer:

Compensation for unjustified dismissal

19.28 %

This provision is used in case of an unjustified dismissal. Thirty days will be paid for each year of service provided, and proportionally for fractions of a working year. To calculate compensation, no salary will be greater than four times the current minimum wage (Art. 58, Labor Code). The law does not require companies to maintain this provision, but obliges payment in case of unjustified dismissals.

Total benefits paid by employer + compensation for unjustified dismissal:

8.33 %

27.61 %

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Benefits paid by the employer

(19.28% of the nominal wage)

Annual paid vacations

Social Security (ISSS)

Retirement Fund (AFP)

Christmas Bonus

7.50%

6.75%

2.78%

Training Fund (INSAFORP)

1.25% 1.00%

Compensation for unjustified dismissal

8.33%

Total benefits payable by the employer including compensation 27.61%

Comparative fringe benefits in Central America (as % of base salary)

27.61 %

34.68 %

36.40 %

43.49 %

46.00 %

El Salvador

Honduras

Costa Rica

Guatemala

Nicaragua

Foreign workers According to El Salvador’s Labor Code, companies are required to form their staff with at least 90% of Salvadorans; however, in special circumstances, companies may be authorized by the Ministry of Labor to employ more than 10% of foreign workers.

For this calculation, the Law considers Central Americans as Salvadorans, and additionally establishes that up to four foreign workers in management positions (directors, managers, administrators and other managerial positions) will not count as part of the 10% calculation.

Likewise, foreign workers with regional management responsibilities at international companies will not be counted as part of the 10% limit.

National holidays El Salvador has the following national holidays with full salary benefits: ASUETOS REMUNERADOS

National holidays

January 1st (New Year’s Day) Thursday, Friday and Saturday of Holy Week May 1st (Labor Day) June 17th (Father’s Day) August 6th (San Salvador city celebrations)[20] September 15th (Independence Day) November 2nd (All Saints Day) December 25th (Christmas Day) Source: Labor Code of El Salvador

[20] August 3rd and 5th are also considered national holidays in the city of San Salvador. Meanwhile - for the rest of the country - it’ll be the main day of the most important local festivity (of each area).

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b) Free Zones and Service Parks El Salvador offers investors industrial land in free zones and service parks where companies can benefit from generous tax incentives and can access quality services to operate and export their products and services to foreign markets. There are 17 free zones in the country, five of which also serve as service parks.

Monthly rental costs:

Average monthly cost (in USD per square meter) Industrial space

3.80

Office space

4.10 - 10.00

Basic services

0.53

New constructions

Varies according to client’s technical specifications Source: Free zones administrators

c) Real Estate Leasing and construction costs vary according to the type of property. Below are reference costs for leasing, purchasing and construction in El Salvador.

Leasing

Leasing

Monthly average cost (in USD per square meter)

Land in urban area

1.40 - 2.80

Office or premises in urban area

10.00 - 23.00

Purchase of Land Location

Average cost (in USD per square meter)

Urban area

41.93 - 139.76

Rural area

6.99 - 20.96

Puerto de La Libertad

55.90 - 62.89

San Miguel

59.40 - 66.39

La Unión

17.47 - 24.46

Santa Ana

24.46 - 31.45

Sonsonate

17.47 - 24.46

Construction

[21]

Type Industrial zone areas

Average Cost (USD per square meter)

Basic requirements

250.00 - 300.00

Complex requirements

301.00 - 500.00

Building Urban area Básic Standard Luxury

from 501.00 upward

120.00 - 240.00 241.00 - 400.00 from 401.00 upward

[21] Basic: At the basic level, walls may be made of un-plastered concrete block or bricks, tin roof, textured drop ceiling tiles, standard plumbing fixtures, electrical switches and outlets.

Standard: Plastered and painted walls, ceramic floor, tin roof, drop ceiling of sheetrock or similar material, and standard plumbing, electrical switches and outlets.

Luxury: Premium quality sanitary ware, taps and fittings; plastered walls with niches and archways, premium quality ceramic floor, shingled roof, drop ceiling made of sheetrock or wood and premium electrical switches and outlets.

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d) Electricity costs Electricity distribution in El Salvador is performed by solid companies with ample experience in the electrical industry. The main distribution companies are: 1) AES Group, with four electricity distribution firms, reaching the central-northern area of El Salvador (CAESS), the western area (CLESA), and the eastern area (EEO and DEUSEM); and 2) Distribuidora de Electricidad del Sur (DELSUR), which supplies energy to the central-southern part of the country.

El Salvador has one the most competitive industrial electricity rates in the region.

Electricity rates for industrial users Costa Rica

94 %

El Salvador

100 %

Honduras

107 %

Nicaragua

123 %

Guatemala 0

30

60

Source: ICE (2012) Note: Rates for final consumers with 100,000 kWh of consumption and power demand of 274kW, 50% load factor.

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120

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Electricity rates are composed of a fixed monthly charge for commercialization (customer service) and variable charges for distribution and energy. The rates vary according to the voltage category (low or medium) required by the client.

Average electricity rates MEDIUM DEMAND (10 < kW < 50)

CAESS

DEL SUR

CLESA

EEO

DEUSEM

0.91

1.07

Commercialization charge: Customer service (USD/User-month) Fixed charge

0.85

1.01

0.92

12.55

20.44

20.52

25.82

26.37

3.46

5.27

9.18

13.78

14.24

0.20

0.20

0.20

0.20

0.20

Distribution fee: Power (USD/kW-month) Low voltage Medium voltage

Energy charge (USD/kWh) Low voltage With power metering Time-differentiated metering

Peak Hours

0.20

0.20

0.20

0.20

0.20

Mid-peak Hours

0.20

0.21

0.20

0.21

0.20

Off-peak hours

0.18

0.19

0.18

0.19

0.18

0.18

0.19

0.18

0.19

0.18

Medium voltage With power metering Time-differentiated metering

Peak Hours

0.19

0.19

0.19

0.19

0.18

Mid-peak Hours

0.19

0.19

0.19

0.19

0.19

Off-peak Hours

0.17

0.18

0.17

0.17

0.17

CLESA

EEO

DEUSEM

7.93

8.53

LARGE DEMAND ( >50 kW )

CAESS

DEL SUR

Commercialization charge: Customer service (USD/User-month) Fixed Charge

10.89

10.03

10.32

12.55

20.44

20.52

25.82

26.37

3.46

5.27

9.18

13.78

14.24

Distribution fee: Power (USD/kW-month) Low voltage Medium voltage

Energy charge (USD/kWh) Low voltage with time-differentiated metering Peak Hours

0.20

0.20

0.20

0.20

0.20

Mid-peak Hours

0.20

0.21

0.20

0.21

0.20

Off-peak Hours

0.18

0.19

0.18

0.19

0.18

0.19

0.19

0.19

0.18

Medium voltage with time-differentiated metering Peak Hours

0.19

Mid-peak Hours

0.19

0.19

0.19

0.19

0.19

Off-peak Hours

0.17

0.18

0.17

0.17

0.17

Note: Average rates are presented (not including 13% of value added tax) for the last four quarters available (October 2011 and January, April and July 2012). SIGET adjusts rates on a quarterly basis. To consult current rates visit: http://www.siget.gob.sv.

Medium demand rates are usually applied to clients in the commercial sector and large demand rates to industrial users.

For time-differentiated metering, time categories are defined as follows: Peak: from 06:00 pm to 10:59 pm Mid-Peak: from 05:00 am to 05:59 pm Off-peak: from 11:00 pm to 04:59 am

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e) Telecommunications El Salvador’s telecommunications market has multiple service providers offering a variety of voice and data services, as well as value-added solutions that meet the needs of their clients.

The following table presents average costs of land and mobile telephone lines. Corporate clients can get reduced preferential rates.

Average landline and mobile phone rates (in USD) Landlines

14.17

Commercial operation fixed rate (monthly payment) Local rate per minute

0.03

National rate per minute

0.05 0.11 - 0.21

Calls to mobile phones, rate per minute

0.05 - 0.418

Calls to United States, rate per minute

Mobile phones*

Minute rate to same provider, landline

0.05 - 0.17

Minute rate to other provider, landline

0.065 - 0.17

Minute rate to same provider, mobile phone

0.05 - 0.09

Minute rate to other provider, mobile phone

0.05 - 0.17

*Rates for postpaid plans.

Source: General Superintendence for Energy and Telecommunications (SIGET)

Internet services are stable and have extensive coverage across the country. Internet connections can be contracted at different bandwidths.

Dedicated internet rates (in USD) [22]

Dedicated internet with HDSL technology Monthly dedicated internet link rate, bandwidth from 2 Mbps to 10 Mbps* Installation charges

299 - 1,100 150 - 300

*Other bandwidth options are available according to the client’s needs.

Source: SIGET (2011) and quotes with service providers

Available services include E1 links, Virtual Private Network (VPN) services, Universal Access Number (UAN), Direct Inward Dialing (DID), 800-numbers, multi-conference, multi-service portals, mobile office, ISDN links, frame relay, dedicated lines, and a variety of other services.

International circuits pricing generally vary according to the levels of service guarantied, destination country, “last mile” connection and length of service commitment.

[22] Costs vary according the operator and technical specifications of the service.

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f) Water rates The National Administration for Sewers and Aqueducts (ANDA, for its acronym in Spanish) is the government entity in charge of water distribution and sewage management services.

The following table shows the current rate structure for potable water supply in El Salvador and other related services.

Water rates by range of consumption - Commercial sector Cubic meters (m3)

Cost range per m3 + sewage cost (USD)

1 a 30

3.86 – 23.66

31 a 50

32.93 – 51.40

51 a 60

65.32 – 76.32

61 a 90

96.14 – 140.28

91 a 100

160.30 – 175.80

101 a 150

188.02 – 277.30

151 a 200

279.12 – 368.4

201 a 300

370.22 – 550.6

301 a 400

552.42 – 732.8

401 a 500

734.62 – 915.00

For complete rate list, visit http://www.anda.gob.sv/ Other charges (tax included):

Connection fee

167.68

Meter replacement

51.65

Cover replacement

25.83

Control valve installation

13.56

Leak detection service

25.83

In force since October 26, 2009 / Last updated: September 26, 2012 Source: ANDA

2. Taxes Information about the Salvadoran tax system relevant to setting up and operating a business in El Salvador is shown below.

Additional information regarding tax payments is available on the e-Regulations website, http://elsalvador.eregulations.org/ Note: El Salvador’s legal framework provides generous tax incentives, including 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. For more information about tax incentives, see section III of this guide, “Legal Framework and Incentives”.

Income tax For legal entities – residents or not – with taxable income less than or equal to USD 150,000, a 25% tax rate is applied on their net income. Otherwise, a 30% withholding tax is applied.

Branch profits tax: The same withholding rates established for Salvadoran companies apply to foreign branches registered in the country.

Dividend Tax: In the case of dividends paid or credited to shareholders (individuals or legal entities), companies in El Salvador must apply the 5% income tax withholding both to the company as well as to shareholders (in fulfillment of the Income Tax Law, articles 72 and 73).

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Tax on Transfers of Real Estate Property Those that acquire real estate are subject to payment of a 3% tax on transfer of real estate property. The 3% calculation is on the excess of USD 28,571.43. All real estate whose acquisition price is equal to or less than USD 28,571.43 is exempt from the payment of such tax.

Value Added Tax (IVA) The transfer (property transfer of a good or service from one person to another) and import of goods and services are subject to a 13% value added tax (IVA, for its acronym in Spanish). Exports of goods and services are zero-rated, while a number of services are exempt: public health, lease for residential purposes, education, public water service, public transportation, retirement funds and the national lottery.

Other Taxes ❏❏ Municipal taxes: Taxes are paid according to municipal rates and based on total assets. Rates vary across the country according to each municipality; in San Salvador, for example, rates are based on the company´s activity, be it industrial, commercial or other. ❏❏ Company and Establishment License: All industrial and commercial companies must obtain an annual operating license. This rate is paid based on the company’s assets according to the following table: ✔✔ From USD 2,000.00 to USD 57,150.00, the company must pay USD 91.43 ✔✔ From USD 57,151.00 to USD 114,286.00, the company must pay USD 137.14 ✔✔ From USD 114,287.00 to USD 228,572.00, the company must pay USD 228.57 If assets exceed USD 228,572.00, an additional USD 11.43 will be paid for each USD 100,000.00, but in no case duties will exceed USD 11,428.57.

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3. Establishing a Company Procedures to formalize an investment in El Salvador as a Legal Entity Step by step description of basic mandatory procedures:

1. Prepare Articles of Incorporation Length: 2 days

2. Registration of Articles of Incorporation Length: 3 days

Opening Balance Sheet Registration

Length: 2 days

Company and Establishment License Length: 10 days

1. Grant Deed of Articles of Incorporation before a Salvadoran public notary 2. Two shareholders minimum, individuals or legal entities, national or foreign 3. Minimum capital stock USD 2,000, 5% paid 1. Original Deed of Articles of Incorporation 2. Registration fee: USD 0.57 for each USD 100.00 of capital stock 3. Legal size photocopy, reduced to 74%, of Deed of Incorporation, or USD 0.23 for each sheet 1. Externally audited opening balance sheet 2. Registration fee receipt (USD 17.14) 3. Photocopy of the company’s Tax Identification Number (NIT) 1. Application form 2. Externally audited opening balance sheet 3. Photocopy of legal representative’s identification document and Tax Identification Number (NIT) 4. Registration fee payment receipt Tax Identification Number (NIT)

3. Tax Identification Number Registration (NIT) and/or Taxpayer Registration Number – Value Added Tax (NRC) / (IVA) Length: 15 minutes

1. Complete form F-210 2. Original and photocopy of Deed of Articles of Incorporation registered at the Registry of Commerce 3. Original and photocopy of legal representative and shareholders´ Tax Identification Number (NIT) 4. Original and photocopy of legal representative´s identification document 5. Payment receipt (USD 1.15)

For Taxpayer Registration Number – Value Added Tax (IVA), additionally: 6. Original and photocopy of company´s NIT 7. In the case the legal representative cannot request them personally, notarized authorization is required.

4. Employer Identification Number (NIP) Registration

1. Application form 2. All documents in original and photocopy or notary-certified photocopies 3. Registered Deed of Articles of Incorporation 4. Registered power of attorney, if it applies 5. Company´s NIT 6. Legal representative´s identification document and NIT 7. Workers payroll 8. Workplace location map

5. Workplace Registration

1. Original and photocopy of application form 2. Original and photocopy of registered of Deed of Articles of Incorporation 3. Original and photocopy of opening balance sheet, registered at the Registry of Commerce 4. Original and photocopy of company´s NIT 5. Original and photocopy of legal representative’s NIT 6. Photocopy of legal representative’s credential certificate 7. Photocopy of identification document of person designated to represent the company before the Ministry of Labor (other than the legal representative)

NOTE: According to Article 36, that substitutes Article 86 of the Registry of Commerce Law, of Decree 642, published in the Official Journal 120, Volume 379, June 27, 2008, individual or legal entities that, due to the nature of their commercial activities, require special authorization to operate in the public sphere, such as those issued by the Superior Council on Public Health, the Public Accounting Surveillance Council, and any other authority established by law, should present such documents at the time of applying for registration. Likewise, legal entities that due to the nature of their commercial activities are subject to special surveillance or regulatory and supervisory laws, or authorization to operate, by the Superintendence of the Financial System, Superintendence for the Stock Exchange, Superintendence of Pension Funds, General Superintendence for Energy and Telecommunications, or Central Reserve Bank of El Salvador, for the effects of obtaining their respective company registration, must accompany their respective application with a certification that states the authorization to start operations and a certificate issued by such authorities which states the exact address of their headquarters, as well as of all branches, agencies or business premises in which their activities are carried out.

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4. Costs of Establishing a Company No.

PROCESS

WHERE IS IT DONE?

1

Articles of Incorporation before a public notary

At the location agreed by the signatories

2

Registration of Articles of Incorporation

1. At the One-Stop Office (Ventanilla Integral de Servicios) of the National Registry Center (Centro Nacional de Registros -CNR) or, 2. Online through www.miempresa.gob.sv

DESCRIPTION

COST (USD) Initial Capital Stock of USD 2,000 (1 establishment)

Minimum capital stock to establish a company: USD 2,000.00

Professional fees according to notary rates

USD 0.57 for every USD 100.00 or fraction of subscribed capital stock

11.40

Company Assets (USD)

Cost (USD)

From 2,000 to 57,150

91.43

From 57,151 to 114,286

137.14

From 114,287 to 228,572

228.57

3

Company and establishment license

1. At the One-Stop Office (Ventanilla Integral de Servicios) of the National Registry Center (Centro Nacional de Registros –CNR) or, 2. Online through www.miempresa.gob.sv

4

Tax Identification Number (NIT) registration

1. At the One-Stop Office (Ventanilla Integral de Servicios) of the National Registry Center (Centro Nacional de Registros -CNR) or, 2. Online through www.miempresa.gob.sv

$1.25

1.25

5

Registration of company´s Taxpayer Registration Number – Value Added Tax (NRC / IVA)

1. At the One-Stop Office (Ventanilla Integral de Servicios) of the National Registry Center (Centro Nacional de Registros -CNR) or, 2. Online through www.miempresa.gob.sv

Free

Free

6

Opening balance sheet registration

1. At the One-Stop Office (Ventanilla Integral de Servicios) of the National Registry Center (Centro Nacional de Registros -CNR) or, 2. Online through www.miempresa.gob.sv

$17.14

17.14

7

Employer Identification Number (NIP) registration

1. At the One-Stop Office (Ventanilla Integral de Servicios) of the National Registry Center (Centro Nacional de Registros -CNR) or, 2. Online through www.miempresa.gob.sv

Free

Free

8

Workplace registration

1. At the One-Stop Office (Ventanilla Integral de Servicios) of the National Registry Center (Centro Nacional de Registros -CNR) or, 2. Online through www.miempresa.gob.sv

Free

Free

9

Employer registration at the pension fund administrators (AFP)

1. Online through www.miempresa.gob.sv or, 2. At the pension fund administration companies’ offices

Free

Free

10

Registration of company´s Internal Work Rules

1. At the One-Stop Office (Ventanilla Integral de Servicios) of the National Registry Center (Centro Nacional de Registros -CNR) or, 2. At the Ministry of Labor

Free

Free

11

Foreign capital registration

At the Ministry of Economy´s National Investments Office (ONI)

Free

Free

12

13

Company registration solvency at the Directorate-General for Statistics and Census (DIGESTYC)

Company registration at the corresponding Mayor’s Office (according to the company´s domicile and location of additional establishments)

At the Directorate-General for Statistics and Census (DIGESTYC)

At the corresponding municipal Mayor’s Office TOTAL

If assets are greater than USD 228,572.00, an additional USD 11.43 will be paid for every USD 100,000.00 or fraction thereof, but in no case duties will exceed USD 11,428.57 A registration fee of USD 34.29 will be paid for every establishment, branch or agency

Company Assets (USD)

Cost (USD)

Less than 11,428.57

5.00

From 11,428.58 to 57,142.86

8.00

From 57,142.87 to 114,285.71

10.00

From 114,285.72 to 228,571.43

15.00

From 228,571.44 upwards

20.00

For every additional establishment

1.00

Cost varies according to municipal fees

125.72

5.00

Cost varies according to municipal fees 160.51

Source: PROESA These procedures can be carried out simultaneously through the National Registry Center´s (CNR) One-Stop Office (Ventanilla Integral de Servicios) or online through www.miempresa.gob.sv. Similarly, in the e-regulations webpage (http://elsalvador.eregulations.org) you’ll find more information about forms, required documentation and processing times.

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5. Requirements to Enter El Salvador El Salvador is part of the Agreement for the Creation of a Single Central American Visa for Free Mobility of Foreigners among the Republics of El Salvador, Honduras, Guatemala and Nicaragua. The agreement defines, according to the country of origin of the visitor, the type of visa (or exemption) required to enter any of the Central American signatory countries.

Category A: Visa exempt.

Argentina, Austria, Belgium, Chile, Colombia, Costa Rica, Cypress, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Liechtenstein, Lithuania, Luxemburg, Malta, Monaco, Netherlands (Holland), New Zealand, Norway, Panama, Paraguay, Poland, Portugal, Saint Kitts and Nevis, Saint Vincent and the Grenadines, San Marino, São Tomé and Príncipe, Slovakia, Slovenia, South Africa, South Korea (Republic of Korea), Spain, Sweden, Switzerland, Trinidad and Tobago, Turkey, United Kingdom of Great Britain and Northern Ireland and Special Administrative Regions of the Popular Republic of China, Vatican City (Holy See).

Category A: Visa-exempt with payment of tourist card. Some visa-exempt countries may require a tourist card, which can be obtained at the border points of entrance to the country, and has a cost of USD 10.00.

Andorra, Antigua and Barbuda, Australia, the Bahamas, Bahrain, Barbados, Belize, Brazil, Brunei, Bulgaria, Canada, Croatia, Fiji, India, Kuwait, Lithonia, Macedonia, Madagascar, Malaysia, Marshall Islands, Mexico, Qatar, Romania, Russia, Saint Lucia, Salomon Islands, Saudi Arabia, Singapore, Taiwan, Tuvalu, Ukraine, United Arab Emirates, United States, Vanuatu.

Category B: Requires consular visa. The consular visa is issued at the diplomatic or consular representations of El Salvador. [23] The cost for one entrance is USD 30.00 and the cost of a multiple entrance visa is USD 60.00.

Azerbaijan, Belarus, Benin, Bhutan, Bolivia, Burkina Faso, Burundi, Cambodia, Cape Verde, Central African Republic, Chad, Comoros, Cuba, Djibouti, Dominica, Dominican Republic, Ecuador, Egypt, Equatorial Guinea, Gabon, Gambia, Georgia, Granada, Guinea, Guinea-Bissau, Guyana, Ivory Coast (Côte d’Ivoire), Jamaica, Kazakhstan, Kiribati, Kyrgyzstan, Lesotho, Malawi, Maldives, Mauricio, Mauritania, Micronesia, Moldavia, Montenegro, Morocco, Myanmar (previously Burma), Namibia, Nauru, Niger, Palau, Papua New Guinea, Peru, Philippines, Rwanda, Samoa, Senegal, Serbia (previously Yugoslav Federal Republic), Seychelles, Surinam, Swaziland, Tajikistan, Tanzania, Thailand, Togo, Tonga, Tunisia, Tunisia, Turkmenistan, Uganda, Uzbekistan, Venezuela, Zambia, Zimbabwe.

Category C: Requires a consulted visa. It is awarded upon prior authorization by the Directorate-General for Migration and Foreign Nationals and is issued at the diplomatic or consular representations of El Salvador. [24] It has a cost of USD 25.00.

Afghanistan, Albania, Algeria, Angola, Armenia, Bangladesh, Bosnia and Herzegovina, Botswana, Cameroon, China, Congo, East Timor (Timor-Leste), Eritrea, Ethiopia, Ghana, Haiti, Indonesia, Iran, Iraq, Jordan, Kenya, Laos, Lebanon, Liberia, Libya (Libyan Arab Jamahiriya), Mali, Mongolia, Mozambique, Nepal, Nigeria, North Korea (Popular Democratic Republic of Korea), Oman, Pakistan, Sierra Leone, Somalia, Sri Lanka, Sudan, Syria, Vietnam, Yemen.

[23] Requirements for a consular visa: 1) Original and copy of valid passport, 2) Completed visa application form, 3) Recent color photograph, 4) Copy of air ticket or flight itinerary, 5) Copy of the used passport pages and the information page of the passport, 6) Evidence of employment, income and studies, 7) Agenda to be carried out in the country, 8) Letter of support duly authenticated.

In the case that the supporter is an individual, attach: 1) Legible photocopy of government-issued identification, 2) Copy of Tax Identification Number (NIT).

In the case that the supporter is a legal entity, attach: 1) Deed of Articles of Incorporation of the company, duly registered with the Registry of Commerce, 2) Current credential registered at the Registry of Commerce, 3) Tax identification number (NIT), 4) Taxpayer Registration Number - Value Added Tax (NRC / IVA) of the company, 5) Invitation letter on letterhead of the company, with the firm’s seal.

The form can be downloaded from the Ministry of Foreign Affairs’ website: www.rree.gob.sv

[24] Requirements for a consulted visa: 1) Color photocopy of the personal information page and all used pages of current passport, 2) Completed visa application form, 3) Copy of airplane ticket or round-trip flight itinerary, 4) Authenticated support letter, 5) Itinerary while in country, 6) Curriculum vitae.

In the case that the supporter is an individual, attach: 1) Legible copy of identity document of residency card.

In the case that the supporter is a legal entity, attach: 1) Letter of support signed by the legal representative, 2) Deed of Articles of Incorporation of the company, duly registered with the Registry of Commerce, 3) Current credential registered at the Registry of Commerce, 4) Tax Identification Number (NIT), 5) Company’s Taxpayer Registration Number – Value Added Tax (NRC / IVA), 6) Certified copy of authorization to act as legal representative.

Note: Copies of required supporter documents must be certified.

The form can be downloaded from the Ministry of Foreign Affairs’ website: www.rree.gob.sv

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Additionally, for any of the visa categories: ✔✔ The maximum length of stay that can be given to a tourist is 90 days. If an extension is required, one can be requested per year. ✔✔ People arriving from or that have stayed more than 10 days in Brazil, Bolivia, Colombia, Ecuador, Guyana, Peru, Venezuela, Paraguay or the African continent must have received the yellow fever vaccine at least 10 days before their trip to El Salvador.

Source: Directorate-General for Migration and Foreign Nationals and the Ministry of Foreign Affairs of El Salvador

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Services Provided to Investors PROESA[25] is El Salvador’s Export and Investment Promotion Agency. It is a government institution responsible for export promotion, investments and public-private partnerships. PROESA’s mission is to generate economic growth and create jobs by attracting foreign direct investment and aiding the expansion of Salvadoran firms abroad.

Business opportunities: ✔✔ Information on investment opportunities, incentives and advantages of investing in FDI growth sectors. ✔✔ Statistics and customized industry information.

Strategic information: ✔✔ Information on set-up and operational costs, regulations, availability of human capital, business climate and any other information required in the country evaluation process. ✔✔ Personalized attention to specific enquiries.

Advisory and technical assistance: ✔✔ Organization, logistics and coordination of tailored agendas for visits to El Salvador. Specialized support before, during and after the investment. ✔✔ Assistance to potential investors in the generation of local business contacts. ✔✔ Comprehensive support in procedures required to establish or expand business operations in the country.

[25] Member of WAIPA, World Association of Investment Promotion Agencies

EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR

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Investor’s Guide 2013 Government of El Salvador, Central America

W W W. PROESA .GOB. SV

EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR

This publication is supported by

www.proesa.gob.sv Bulevar Orden de Malta, Urb. Santa Elena, Antiguo Cuscatlรกn, La Libertad, El Salvador PBX: +503 2241-6400 / +503 2241-6497