El salvador country presentation april 2014

EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR
Acountryofopportunities
April 2014
1

ELSALVADOR
Ahuachapán
Santa
Ana
Chalatenango
Sonsonate San
Vicente
Cabañas
La Paz
La
Libertad
San
Salvador
Usulután
San
Miguel
Morazán
La
Unión
Gulf of
Fonseca
islands
Capital San Salvador
Official Language Spanish
Area 21,041 Km2 / 8,124 sq mi
Population 6.2 million (2012)
GDP Nominal 24.2 billion USD (2013)
Currency $USD
Time Zone UTC -6
ElSalvador
2

• Solid economic environment
• International view of El Salvador
• Commercial openness & strategic location
• Investment Opportunities in El Salvador
ElSalvador
3

CentralAmericanMarket
Country
EL SALVADOR GUATEMALA HONDURAS NICARAGUA COSTA RICA PANAMA
Central
America
Capital San Salvador Guatemala City Tegucigalpa Managua San Jose Panama City
Official Language Spanish Spanish Spanish Spanish Spanish Spanish
Area (‘000 Km2) 21.0 108.9 112.1 130.4 51.1 75.4 498.9
Population (‘000,000) 6.2 15.5 8.1 6.1 4.8 3.7 44.4
GDP PPP 2013
(Bn USD)
47.5 81.5 39.2 27.9 61.4 61.5 319.0
GDP per capita PPP (USD) 7,505 5,265 4,844 4,548 12,874 16,540 7,185
Average inflation rate
2009-2013
1.9% 3.9% 5.2% 6.4% 4.8% 4.4%
Currency
Dollar
USD
Quetzal
GTQ
Lempira
HNL
Cordoba
NIO
Colon
SJC
Dollar
USD
Time Zone UTC -6 UTC -6 UTC -6 UTC -6 UTC -6 UTC -5
Source: Multi –Purpose Household Survey,
Central Reserve Banks, and IMF.
70% of the population and commerce
concentrates in ES, GT, and HN.
4

Fringebenefits
represent 20.67% of nominal wage
* Effective since January 2014
** Provision in case of termination of contract
*** Applies to companies with more than 10 employees
Source: Ministry of Labor El Salvador
Sector
Monthly
Minimum Wage*
Daily Wage
Agriculture $ 113.70 $ 3.79
Maquila $ 202.80 $ 6.76
Industry $ 237.00 $ 7.90
Commerce & Services $ 242.40 $ 8.08
0%
20%
40%
60%
80%
100%
120%
140%
1
Nominal
Wage
100%
Fringe Benefits + Annual
SeveranceProvision
29%
Social Security (ISSS)
7.50%
Retirement Fund
(AFP)
6.75%
4.17%
Annual Severance
Provision**
8.33%
Fringe benefits paid by the employer (20.67% of nominal wage)
Christmas
Bonus
Vacations paid yearly
1.25%
Training Fund
(INSAFORP)***
1.00%
5

29.6
28.0
25.1
23.7
21.6
20.7
0 10 20 30
Costa Rica
Panama
El Salvador
Nicaragua
Honduras
Guatemala
M 23.7
F 26.6
EAP: 2,724,754
years
YoungPopulation
Average Age
(Estimates)
Source: Multi-Purpose Household Survey 2012, CIA World Factbook 6
0.0% 5.0% 10.0% 15.0%
0 - 4
5 - 9
10 - 14
15 - 19
20 - 24
25 - 29
30 - 34
35 - 39
40 - 44
45 - 49
50 - 54
55 - 59
60 - 64
65 - 69
>= 70
Female
52.8%
0.0%5.0%10.0%15.0%
Male
47.2%

ElSalvador
• Solid political & economic environment
7

InternationalviewofElSalvador
Index
El Salvador Guatemala Honduras Nicaragua Costa Rica Panama
Human Development
Index (2012)
107 133 120 129 62 59
Index of Economic
Freedom (2014)
59 83 112 102 53 71
Ease of Doing Business
(2014)
118 79 127 124 102 55
Freedom in the World
(2013)
Free Partially Free Partially Free Partially Free Free Free
Global Competitiveness
Report (2013-2014)
• Global Competitiveness
• Procedures to start a
business
• Infrastructure
• Roads
• Airports
• Mobile Telephones
• Taxes
97
88
72
58
56
31
61
86
129
78
90
71
32
85
111
135
115
114
97
102
80
99
88
105
79
99
107
132
54
129
76
125
57
42
125
40
47
37
48
5
4
89
8

ElSalvador
9

LegalFramework
Investment Law
International
Services Law
Tourism Law
Free Zones Law
• Equal treatment to national & international investors
• Liberty to transfer funds and profits abroad
• Access to local financing
• Incentives to strategic sectors (contact centers, BPO’s, maintenance and repair
of airplanes, logistics, etc.)
• Total permanent tax exemptions (income and municipal taxes) and import
duties.
• Incentives to industrial activities
• Tax exemptions (income, municipal taxes and real estate transfers) and
import duties.
• Requires minimum of USD 25,000 investment
• Corporate tax exemption (income and municipal)
• Real estate transfer and import tax exemptions
Renewable Energy
Incentives Law
• Customs duties exemption on imports of machinery, equipment and materials
• Income tax exemption for a period of 5 to 10 years
• Total tax exemption on revenues from the sale of Certified Emission Reductions
10
Construction
Projects Procedure
Streamlining Law
• Creation of a One-Stop-Office for the reception and processing of construction and
land fragmentation project applications.
• Development of a centralized computer system to track applications.
• Publication of updated information about requirements, administrative
procedures, criteria and environmental and cultural zoning.
• Procedure streamlining (if a public authority does not resolve within the
established deadlines, it shall be understood that the resolution has been issued in
favor of the applicant).

CommercialOpenness Access to a potential market of
1.2 billion people
11

Main Trade Partners*
Main Export Products*
Source: Central Reserve Bank
MainTrade Partnersand Export Products
El Salvador Exports 2013
USD 7.6 billion
Goods: USD 5.5 billion
Services: USD 2.1 billion
12*The trade partners and export products´ share are calculated as a percentage of
total goods exports .
United States
45%
Central America
38%
Panama
2%
México
2%
Spain
1%
Canada
1%Dominican
Republic
1%
Germany
1%
Taiwan
1%
Indonesia
1%
Japan
1%
Other
6%
Apparel
40%
Agroindustry
15%
Food and
beverages
8%
Plastics and rubber
6%
Paper products 5%Metal-mechanic
Industry
5%
Machinery and
mechanical
products
5%
Textiles
5%
Chemical
products
5%
Mineral
products
3%
Others
3%

Main airlines serving
El Salvador
Strategic
Location
Main Freight Companies
Air Cargo
• DHL
• UPS
• Arrow
Regular charter
flights
Maritime
• MAERSK
• CROWLEY
• MSC
• SEABOARD
• NIPPON
• CSAV
• APL
• Hamburg Süd
Close to key markets
• Closeness to the vital maritime
routes.
• A natural bi-oceanic logistics
corridor.
• Container terminal ready for
post panamax ships.
• A dominant airport certified A1
by the FAA linking important
cities.
• Direct flights to 32 different
destinations and excellent air
traffic connections.
(Montreal, Toronto)
13

StrategicLocation

ElSalvador
16

ForeignDirectInvestment
Stock 2013 USD 8,224.9 million (34% of GDP)
17

Specialized Textiles and
Apparel
Aeronautics
Light ManufacturingEnergy Offshore Business Services
Tourism
Agro-industry
Medical Tourism
Footwear
InvestmentOpportunities
18 18

El Salvador offers an aircraft
maintenance, repair and overhaul
(MRO) industry for commercial aircraft,
which has successfully placed the
country on the global aviation map.
The successful operations of Aeroman,
a member of Canadian MRO group
Aveos, are widely recognized within the
emerging Latin American aeronautical
clusters.
Aeronautics
Compliance with international certifications ensuring the
highest quality required in aircraft maintenance services.
19

El Salvador:
Quality in aircraft maintenance services
 Technical Universities and Institutes have specialized curricula
developed in conjunction with the private enterprise to ensure the
availability of skilled labor.
 In addition to maintenance services for commercial aircraft, a
variety of other companies in the emerging aerospace clusters
offer the following services:
• R44 helicopter and corporate airplane maintenance.
• Distribution and warehousing services for aircraft parts.
• Component maintenance shops.
• Ground Services.
• Light sports aircraft (LSA) airframe, wing tip, and engine
part manufacturing in composite materials, etc.
• Aircraft harness system assembly.
• Refurbishment on older Light Sports Aircraft (LSA) models.
 A Free Trade Zone Law and an International Services Law which
provides tax incentives to these types of industries
 Available land for the development of industrial operations next
door to the International Airport of El Salvador, under Public
Private Partnership (PPP) mode.
Investment Opportunities in Aeronautics:
• Commercial aircraft maintenance service operations.
• R44 helicopter maintenance operations.
• Light Sports Aircraft (LSA) airframe part manufacturing.
• Painting and maintenance of commercial aircraft interiors. 20

For investors in agro industry and
entrepreneurs who seek a platform to
produce and export, El Salvador offers
attractive opportunities in the following
sectors:
• Fruit Farming
• Aquaculture
• Ornamental plant farming
• Food & Beverages
These sectors are highly favored by
good weather and easy access to
regional and international markets.
Agroindustry
Climate, tax incentives and a platform connected
to additional markets.
21

El Salvador:
A production and export platform
• El Salvador possesses suitable climatic and soil conditions for
fruit and ornamental plant farming.
• Suitable soil and climatic conditions for the production of a
wide variety of tropical fruits.
• The country has optimal interconnections for the trade and
transport of agro industrial products.
• Availability of water resources for the sustainable development
of aquaculture.
• Negotiated trade agreements open the possibility for the sector
to expand to regional and international markets.
• Competitive labor costs.
Investment Opportunities in Agro Industry:
• Aquaculture Sector: Development of the production chain through the supply of young fingerlings, feed and other inputs to attain
productivity and quality of aqua cultured products.
• Fruit Farming Sector: Development of supporting industries for the provision of supplies, equipment, quality vegetative materials and
processing technology for the expansion of crops of avocado, Persian lime, coconut and organic products.
• Processed Foods Sector: Opportunities in the development of complementary industries in a sector in continuous growth in areas
such as: packaging, process technology, machinery and equipment. 22

El Salvador is an ideal destination for
companies wishing to do footwear
manufacturing operations at competitive
costs, and offers:
FTAs with flexible rules of origin and
preferential access conditions
Attractive tax incentives, and
A productive and young labor force
El Salvador's commitment is to develop a
vertically integrated production chain,
ranging from the manufacture of
components to the production of
finished footwear.
Logistics
Easy and timely access to large markets.
Footwear
A platform to export to large markets.

El Salvador:
An ideal platform for assembly and export of footwear
24
Sector opportunities
• Manufacturing and production of footwear.
• Assembling components of footwear.
• Manufacturing of components and supplies footwear industry.
Advantages:
• The Free Zones Law offers attractive tax incentives to this type of
manufacturing.
• Availability of a competitive, productive and committed
workforce.
• There is a developed industry with over 50 years of experience
and with the participation of foreign investors such as Nanyang
Footwear, that already has assembly operations in the country.
• The FTAs signed by El Salvador provide flexible rules of origin to
facilitate the entry of this product in important markets:
• The rule of origin issued by the United States allows the manufacturer
to incorporate prefabricated components in third countries and access
the market without tariffs. This rule of origin does not set a minimum
requirement of value added.
• The Association Agreement with the European Union gives free and
immediate access to this market for footwear products manufactured
in El Salvador. The rules of origin allow use of third-country raw
materials and parts, and export the final product duty free.
• The FTA with Mexico allows the aggregation principle to meet the
requirement of 50% of nationalvalue added.

El Salvador
Hub Energético y de Gas Natural
para la región CentroAmericana
25
El Salvador offers an attractive platform of
investment in the energy sector:
• Market based on production costs
• Bids based on long-term contracts
• Investment opportunities in renewable energy
• Clear rules under a legal framework that
promotes the diversification of our energy
matrix, at small and large scale
• Attractive tax incentives for renewable energy
investments
• First country in Central America!
That will include LNG as fuel resource in its
energy matrix.
Success story: First power plant of 355 MW of
Natural Gas-based power generation.
Energy
El Salvador
Energy and LNG Hub for the
Central America Region

El Salvador:
Energy and Natural Gas hub for the CentralAmerican region
Installed capacity 1,547 MVA
Hydro: 31 % / Geo: 13 % / Thermal (oil-based): 49 %
Biomass: 7%
Annual projected growth demand: 3.6 %
National Energy policy:
Oriented to diversify our current energy matrix, by developing
and promoting renewable energies, and thus eliminate the
dependence on petroleum-based thermal generation and
strengthen the Central American energy integration.
Available renewable resources:
Wind, PV Solar and Thermal Solar, Geothermal, small
hydroelectric power plants, Biogas, Biomass.
Diversification oriented to:
Natural gas, coal, and new technologies.
Existence of a tax incentives law for the promotion of renewable
energy
Technical team of governmental inter-agency work in support of
renewable energy investment.
Electrical system network with installed capacity for strong
expansions, SIEPAC Central American Electrical interconnection
Grid with a transmission capacity of 300 MW.
Available land available at Puerto La Unión.
Master Plan for the development of renewable energy
Investment opportunities in energy:
• Bids based on long term contracts of up to 20 years
• High potential for distributed generation projects
• Potential in renewable natural resources:
Hydroelectric: Projects less than 20 MW: 157 MW; Projects greater than 20 MW: 2,000 MW
Biomass: 50 MW; Wind power: 72 MW; Geothermal : 330 - 400 MW;
Solar photovoltaic : 5 Kwh/m2 or 6 hours sun

International light
manufacturing companies will
find in El Salvador a strategic
partner to be used as a
platform for export to markets
in North America, Central
America and the Caribbean.
Light Manufacturing
Strategic location, high productivity and quality at competitive costs
27

El Salvador:
A strategic partner in light manufacturing
• Strategic location in the center of the Americas to be used as
a logistics platform
• Free trade agreements with major markets
• Free Zone Law offers tax incentives to this type of
manufacturing.
• Wide local supply chain in place in the areas of metalworking,
plastics, support systems, automation systems, engineering,
chemicals, among others.
• Low operating costs
• Highly-qualified human capital
Investment Opportunities in light manufacturing:
• Auto parts (harnesses, safety belts, inflators and modulators for airbags, shock absorbers, brake drums & rotors, etc.)
• Medical devices (medical supplies, orthopedic products, hospital furniture, etc.)
• Passive electronic components
• El Salvador offers a successful platform for electronic component manufacturing, with over 30 years of proven
credibility. The country has experience in the manufacture of ceramic and tantalum capacitors in compliance with
required international standards.
28

For offshore business service firms seeking
to enter markets in the U.S. and Spanish-
speaking countries, El Salvador is a strategic
partner for providing quality multi-region
business services.
Our dynamic business environment,
strategic location for near-shoring, time-
zone complementarity and the outstanding
performance of our bilingual human
resources (English/Spanish), makes us a
strategic platform for companies offering
global services.
The modern and advanced local
telecommunications infrastructure ensures
the delivery of quality services and cost-
effective location for this industry.
Offshore Business Services
Cost effective near-shore location, based on a state of the art
telecommunications platform which guarantees your global offer.
29

El Salvador:
Complementary strategic partner for multi-region operations
• Strategic location in relation to English- and Spanish-speaking
customers (shorter flight times from North and South America).
• Same time zone for primary customers (U.S. and Canada) and
Spanish-speaking markets (91% of the global Spanish-speaking
population).
• Time-zone complementarity for customers in Europe and Asia
(24/7 possibility).
• Friendly, hardworking and service-oriented people with neutral
English and Spanish accents.
• Exceptional performance against key indicators (KPIs) such as
Sales, C-Sat, FCR, etc.
• Complementary service to other geographical areas and high-
end front-office services.
• Young and committed workforce (60% of the population under
35 years).
• Cultural affinity of the workforce with priority markets.
Investment Opportunities in Offshore Business Services:
• Voice Business Process Outsourcing (Call Centers)
• Non-voice Business Processes Outsourcing (BPOs)
• Shared Service Centers (KPOs)
30

El Salvador offers attractive
investment opportunities to
specialized textile and clothing
companies wishing to enter the
regional Central and North American
markets based on the favorable tariff
conditions of FTAs with the U.S.
(CAFTA) and the European Union.
El Salvador offers a vertically
integrated industry, which promotes a
competitive high-fashion, high-
turnover garment manufacturing
industry.
Specialized Textiles and Apparel
Vertically integrated industry with easy access to markets
31

El Salvador:
Specialized textile and apparel sector environment
• More than 260 textile and apparel companies have established
themselves in the country, including internationally recognized
companies such as Pettenati, George C. Moore, UNIFI, Swisstex, CS
America and APS.
• The rule of origin granted by the CAFTA-DR Free Trade Agreement
allows free access for textiles manufactured in the region with yarn
produced in Central America.
• A cluster of companies that use synthetic fibers (nylon, polyester,
micro fiber, among others –products paying a 32% tariff when
imported from Asia through the U.S.) is in the process of
consolidation.
• The country offers a wide variety of services, including embroidery,
industrial laundry, dyeing and finishing, cutting and packing, which
have been a great support to the manufacturing operations of
companies such as HBI, Fruit of the Loom, Adidas and Lacoste,
among others.
• The evolution of the manufacturing scheme from "maquila" to "full
package" has developed the supply chain through materials
distribution centers, required for vertical integration and
sustainability of the industry.
Investment Opportunities in Specialized Textiles and Apparel:
• Manufacture of yarn and fabrics.
• Manufacture of knitted garments with accessories and embellishments (embroidery, screen printing, heat transfers, etc.).
• Manufacture of garments included in the “Single Transformation” category: bras, girl dresses, boxer shorts, sleepwear and luggage.
32

El Salvador offers attractive tourism projects
in various stages of development that take
advantage of a wide array of attractions
located close to each other (surf spots,
beaches, mountains, lakes, volcanoes).
The country has a historical past inherited
from the Maya, a pleasant climate all year
round, competitive pricing of land, low
construction costs and proximity to
important markets of origin of international
tourism.
Tourism
Surf, fishing, adventure tourism and the
Maya world ... all in one place.
33

El Salvador:
Variety of close-by touristic attractions
• Tax incentives regulated by a Law on Tourism.
• Foreign investors have the opportunity of acquiring property
in their own name.
• Competitively priced land and low construction costs.
• Rapid access to a variety of tourist attractions.
• Short flight times from North and South America.
• The International Airport of El Salvador handles more than
470 arrivals and departures every week.
• Pleasant climate all year round.
• Warmth and friendliness in tourist service.
Investment Opportunities in Tourism:
• Mixed-use developments .
• Hotels: Urban, Resort, Boutique, Bed & Breakfast, Eco-lodge, Hostels.
• Vacation homes.
• Properties with tourism potential
• Marinas
34

El Salvador offers the opportunity to
invest in health establishments
catering to patients living in the U.S.
and Canada, taking advantage of the
geographical proximity to those
markets, the low costs of health
professionals and the fast connections
between medical facilities and
enviable landscape sites..
Medical Tourism
Geographical proximity to the main countries of origin of medical
tourism, offering quality services at low costs
35

El Salvador:
Strategic location and excellent connectivity between touristic sites
• The strategiclocation of El Salvador and the presence of TACA
airline's hub in the countryprovide excellent air connectivityto the
U.S. and Canada(2 hours from Miamiand 5 hours from Los
Angelesby direct flight).
• The best road infrastructurein the region allows visitingthe wide
varietyof tourist attractionsthe country offersin a short time
(beaches,lakes,volcanoes,colonial cities,etc.) .
• The communityof Salvadoransabroad, about 2 million people, is
A naturalmarket who constantlyvisitsthe countryand buys
health treatmentslocally.
• The existence of qualified medical professionalswho have earned
postgraduatedegreesabroad offer their services at very
competitivecosts.
• There is a Law on InternationalServices thatencouragesthe
establishmentof health centers.
Investment Opportunities in Health Services:
• Hospitals
• Specialized clinics
• Rehabilitation centers
• Medical spas
• Hospitals Resorts for treatment of chronic diseases.
36

 Information on investment opportunities in strategic industries, as well as of
the incentives and investment advantages of those industries.
 Statistics and customized industry information.
Business
opportunities
 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.
Advisoryand
technical
assistance
Servicesprovidedtoinvestors
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.
37

Edificio D'Cora Primer Nivel, Urb. Santa Elena, Antiguo Cuscatlán, La Libertad, El Salvador, C.A.
www.proesa.gob.sv
38
@Proesa_sv
inversiones@proesa.gob.sv
+503 2241 6456

PROESA El Salvador

El salvador country presentation april 2014

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