El Salvador Country Presentation - September 2013

EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR
Acountryofopportunities
September 2013
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 (2012) 23,865 million USD (2012)
Currency $USD
Time Zone UTC -6
ElSalvador
2

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

PoliticalStability
More than 25 years of free and democratic elections
ARENA
39%
33 seats
FMLN
37%
31 seats
GANA
13%
11 seats
Other
Parties
11%
9 seats
• Balance of power in congress
Legislative
Assembly
• Alternating governance
54%
68%
52%
58%
51%
54%
0%
20%
40%
60%
80%
1984 1989 1994 1999 2004 2009
PDC
ARENA
FMLN
Presidential election: % of votes for Presidential Candidate of winning party
Source: Supreme Electoral Court of El Salvador (TSE ).
President for 5 year term with no possible
consecutive reelection
1 chamber with 84 seats for
3 year terms
March 2012 Congress election results, seats
won by each party
4

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 15.1 8.2 6.0 4.7 3.7 43.8
GDP PPP 2012
(Bn USD)
46.3 78.7 37.8 26.7 58.8 57.1 305.4
GDP per capita PPP (USD) 7,438 5,209 4,610 4,458 12,606 15,617 6,966.2
Average inflation rate
2008-2012
2.7% 4.8% 6.3% 8.8% 6.6% 4.9%
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.
5

Fringebenefits
represent 19.28% of nominal wage
* Effective since July 2013
** 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 $ 109.20 $ 3.64
Maquila $ 195.00 $ 6.50
Industry $ 228.00 $ 7.60
Commerce & Services $ 233.10 $ 7.77
0%
20%
40%
60%
80%
100%
120%
140%
1
Nominal
Wage
100%
Fringe Benefits + Annual
SeveranceProvision
27.61%
Social Security (ISSS)
7.50%
Retirement Fund
(AFP)
6.75%
2.78%
Annual Severance
Provision**
8.33%
Fringe benefits paid by the employer (19.28% of nominal wage)
Christmas
Bonus
Vacations paid yearly
1.25%
Training Fund
(INSAFORP)***
1.00%
6

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 7
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
8

InternationalviewofElSalvador
Index
El Salvador Guatemala Honduras Nicaragua Costa Rica Panama
Human
Development Index
(2012)
107 133 120 129 62 59
Index of Economic
Freedom (2013)
53 85 96 110 49 71
Ease of Doing
Business (2013)
113 93 125 119 110 61
Freedom in the
World
(2013)
Free
Partially
Free
Partially
Free
Partially
Free
Free Free
Global
Competitiveness
Index (2012 – 2013)
Infrastructure
Roads
Airports
Energy
Mobile Telephones
Taxes
101
66
52
42
70
37
56
83
67
91
58
67
23
79
90
97
92
71
106
79
92
108
106
75
90
100
108
130
57
95
131
60
42
94
119
40
44
49
6
43
2
96
9

ElSalvador
10

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.
• Incentives to industrial activities
• Total permanent taxes exemption (income and municipal
taxes) and import duties.
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
11

CommercialOpenness Access to a potential market of
1,200 million people
12

Apparel
37%
Agroindustry
16%
Food and
beverages
8%
Plastics and rubber
6%Paper products
5%Metal-mechanic
industry
5%
Machinery and
mechanical
products
5%
Chemical products
5%
Textiles
4%
Mineral
products
4%
Others
5%
United States
46%
Central America
38%
Panama
2%
Mexico
2%
Dominican
Republic
2%
Spain
1%
Germany
1%
Canada
1%
Chile
1%
Japan
1%
Others
5%
Main Trade Partners*
Main Export Products*
Source: Central Reserve Bank
MainTrade Partnersand Export Products
El Salvador Exports 2012
USD 6,659 million
Goods: USD 5,339 million
Services: USD 1,320 million
13*The trade partners and export products´ share are calculated as a percentage of
total goods exports for 2012.

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 33 different
destinations and excellent air
traffic connections.
(Montreal, Toronto)
14

StrategicLocation

ElSalvador
17

ForeignDirectInvestment
Stock 2012 USD 8,634.9 million (36.2 % of GDP)
18

Specialized Textiles Aeronautics Electronics
Medical Devices Offshore Business Services Health Services
Tourism Agro-industry Logistics and Infrastructure Footwear
InvestmentOpportunities
19 19

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.
20

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 manufacturing.
 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. 21

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.
22

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. 23

International medical device
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.
Medical Devices
Rapid access to markets
24

El Salvador:
A strategic partner in medical devices
• El Salvador has tax incentives that encourage the
establishment of foreign companies within a regulatory
framework.
• Investors enjoy rapid access to markets with a potential of
1,200 million people through the existing FTAs and thanks to
its strategic location.
• The country has focused on developing industrial and service
parks boosting industrial growth, especially in the textile and
plastics sectors.
• El Salvador is a pioneer in Latin America in the training of
professionals in prosthetics and orthotics, putting a highly
skilled workforce at the disposal of businesses.
Investment Opportunities in Medical Devices:
• Disposable laboratory and diagnostic equipment.
• Hospital linen and disposable clothing.
• Hospital furniture.
• Orthopedic products.
• Packing and packaging of disposable medical devices.
25

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.
This has enabled the country to acquire and
implement state-of-the-art technology and
know-how.
The high quality, efficiency and productivity
of operations in El Salvador have ensured the
transfer of manufacturing plants from
England, the Czech Republic, Mexico, China
and the U.S., achieving continued expansion
in all processes.
Electronics
High productivity and quality manufacturing at competitive costs.
26

El Salvador:
A platform for electronic components manufacturing
• Setting of strategic alliances with academia to ensure availability
of skilled workforce.
• E-cluster in formation around the AVX Kyocera Company in El
Salvador.
• Wide local supply chain in place in the areas of metalworking,
plastics, support systems, automation systems, engineering,
transport and chemicals, among others.
• Existence of a Law on Free Zones offering tax incentives to this
type of manufacturing.
• The best international airport in the region just 35 minutes from
San Salvador, and 2.5 hours from Miami.
• Available land for the development of industrial operations next
door to the International Airport of El Salvador under Public
Private Partnership (PPP) mode.
• Electrical network system with strong capacity for expansion.
Investment Opportunities in Electronics:
• Electronic component manufacturing and production.
• Electronic equipment and parts assembly.
• Cell phone electronic component repair.
27

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.
28

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)
29

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..
Health Services
Geographical proximity to the main countries of origin of medical
tourism, offering quality services at low costs
30

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.
31

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
32

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.
33

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.
34

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
35

For companies producing consumer
goods seeking to sell to larger markets,
El Salvador, the ‘logistics hub of Central
America,’ provides air and seaport zones
with tax incentives for manufacturing,
logistics and distribution, becoming a
gateway to U.S., Asian and European
markets.
El Salvador has the infrastructure,
geographical proximity and free trade
agreements to ensure easy and timely
access to large markets.
Logistics
Easy and timely access to large markets.
36

El Salvador:
Strategically located and available infrastructure
• Convenientlocation: Proximity to the trans-Pacificroute
(connectingAsia and the Americas); proximity to the Panama
Canal(1. 5 daysby sea); rapid maritime access to U.S. marketson
the East and West coasts; and rapid road access to the Southern
and Eastern U.S. markets.
• Maritime infrastructureavailable to receive large ships: La Union
CentroamericanaPort with the potentialto become the leading
container port on the Pacific coast of CentralAmerica.
• Land connectivity:The port is located 371 km. away from Puerto
Cortes (Honduras AtlanticCoast); 8 hours from the border with
Mexico; and 34 hours from the U.S. border (Texas).
• Air connectivitywith rapid access to U.S.markets from the
InternationalAirport of El Salvador. Approximate flight durations:
Miami: 2:30 hours; Los Angeles:4:00 hours; Houston: 4:00 hours;
New York: 5:00 hours; Panama: 1:30 hours.
Investment Opportunities in Logistics:
• Logistics activity zones in the proximity of seaports.
• Airport logistics center
• Distribution centers
Puerto de Acajutla, located in Sonsonate Puerto La Unión, located in La Unión
37

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
39
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 Generalized System of Preferences (GSP PLUS) that El Salvador
has signed with Europe does not require a minimum of added value
to export tariff free.
• The FTA with Mexico allows the aggregation principle to meet the
requirement of 50% of nationalvalue added.

 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 commercial and
recognition visits.
 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
ServicesprovidedbyPROESA
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.
40

Edificio D'Cora Primer Nivel, Urb. Santa Elena, Antiguo Cuscatlán, La Libertad, El Salvador, C.A.
www.proesa.gob.sv
41
@Proesa_sv
info@proesa.gob.sv
+503 2241 6400

PROESA El Salvador

El Salvador Country Presentation - September 2013

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