Country presentation - February 2014


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Country presentation - February 2014

  1. 1. A countryof opportunities February 2014 1 EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR
  2. 2. El Salvador 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 Chalatenango Santa Ana Cabañas Ahuachapán EL SALVADOR San Salvador Sonsonate La Libertad La Paz Morazán San Vicente Usulután San Miguel La Unión Gulf of Fonseca islands 2 EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR
  3. 3. El Salvador • Solid economic environment • International view of El Salvador • Commercial openness & strategic location • Investment Opportunities in El Salvador 3 EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR
  4. 4. Central American Market Central America Country EL SALVADOR GUATEMALA HONDURAS NICARAGUA COSTA RICA PANAMA 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 43.9 GDP PPP 2013 (Bn USD) 47.5 81.5 39.2 27.9 61.4 61.5 GDP per capita PPP (USD) 7,505 5,265 4,844 4,548 12,874 16,540 Average inflation rate 2009-2013 1.9% 4.5% 5.4% 7.7% 4.7% 4.2% 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 Capital 70% of the population and commerce concentrates in ES, GT, and HN. 7,184.6 Source: Multi –Purpose Household Survey, Central Reserve Banks, and IMF. 4 EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR
  5. 5. Fringe benefits represent 20.67% of nominal wage 140% Fringe Benefits + Annual Severance Provision 29% 120% Sector Monthly Minimum Wage* Daily Wage 100% Agriculture $ 113.70 $ 3.79 80% Maquila $ 202.80 $ 6.76 Industry $ 237.00 $ 7.90 Commerce & Services $ 242.40 $ 8.08 60% Nominal Wage 100% 40% 20% 0% 1 Fringe benefits paid by the employer (20.67% of nominal wage) Social Security (ISSS) 7.50% Retirement Fund (AFP) 6.75% Christmas Bonus * 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 Annual Severance Provision** 8.33% 4.17% Training Fund (INSAFORP)*** 1.00% Vacations paid yearly 1.25% EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR 5
  6. 6. Young Population Female 52.8% Male 47.2% Average Age (Estimates) Guatemala >= 70 20.7 years 65 - 69 60 - 64 Honduras 50 - 54 45 - 49 21.6 Nicaragua 55 - 59 23.7 40 - 44 M 23.7 El Salvador 35 - 39 30 - 34 25.1 F 26.6 25 - 29 Panama 28.0 Costa Rica 29.6 20 - 24 15 - 19 10 - 14 5-9 0-4 15.0% 10.0% 5.0% 0.0% 0 0.0% 5.0% 10.0% 10 20 15.0% EAP: 2,724,754 Source: Multi-Purpose Household Survey 2012, CIA World Factbook EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR 6 30
  7. 7. El Salvador • Solid political & economic environment • International view of El Salvador • Commercial openness & strategic location • Investment Opportunities in El Salvador 7 EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR
  8. 8. International view of El Salvador 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 97 86 111 99 54 40 88 72 58 56 31 61 129 78 90 71 32 85 135 115 114 97 102 80 88 105 79 99 107 132 129 76 125 57 42 125 47 37 48 5 4 89 Global Competitiveness Report (2013-2014) • Global Competitiveness • Procedures to start a business • Infrastructure • Roads • Airports • Mobile Telephones • Taxes 8 EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR
  9. 9. El Salvador • Solid political & economic environment • International view of El Salvador • Commercial openness & strategic location • Investment Opportunities in El Salvador 9 EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR
  10. 10. Legal Framework • Equal treatment to national & international investors Investment Law • Liberty to transfer funds and profits abroad • Access to local financing International Services Law • 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 Free Zones Law • Tax exemptions (income, municipal taxes and real estate transfers) and import duties. Tourism Law • Incentives to industrial activities • Total permanent taxes exemption (income and municipal taxes) and import duties. Renewable Energy Incentives Law Construction Projects Procedure Streamlining 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 • 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). 10 EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR
  11. 11. Commercial Openness Access to a potential market of 1,200 million people 11 EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR
  12. 12. Main Trade Partners and Export Products Main Trade Partners* United States 45% El Salvador Exports Other 6% Goods 2013: USD 5,491 million Services 2012: USD 1,320 million Central America 38% Japan 1% Indonesia 1% Taiwan Germany 1% Canada 1% 1% Dominican México Panama Republic Spain 2% 1% 2% 1% Main Export Products* Apparel 40% Agroindustry 15% Others 3% Food and beverages 8% Mineral products 3% Chemical products 5% Source: Central Reserve Bank Textiles 5% Machinery and mechanical products 5% Metal-mechanic Industry 5% *The trade partners and export products ´ share are calculated as a percentage of total goods exports . EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR Plastics and rubber 6% Paper products 5% 12
  13. 13. Strategic Location • • • • • Main airlines serving El Salvador Main Freight Companies Air Cargo Maritime • DHL • UPS • Arrow • • • • MAERSK CROWLEY MSC SEABOARD • • • • NIPPON CSAV APL Hamburg Süd Regular charter flights (Montreal, Toronto) 13 EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR
  16. 16. El Salvador • Solid political & economic environment • International view of El Salvador • Commercial openness & strategic location • Investment Opportunities in El Salvador 16 EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR
  17. 17. Foreign Direct Investment Stock 2012 USD 8,634.9 million (36.2 % of GDP) 17 EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR
  18. 18. Investment Opportunities Aeronautics Footwear Agro-industry Energy Light Manufacturing Specialized Textiles and Apparel Offshore Business Services Tourism Medical Tourism 18 EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR 18
  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. 19 EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR
  20. 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. EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR 20
  21. 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. 21 EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR
  22. 22. El Salvador: A production and export platform • El Salvador possesses suitable climatic and soil conditions for fruit and ornamental plant farming. • Availability of water resources for the sustainable development of aquaculture. • Suitable soil and climatic conditions for the production of a wide variety of tropical fruits. • Negotiated trade agreements open the possibility for the sector to expand to regional and international markets. • The country has optimal interconnections for the trade and • Competitive labor costs. transport of agro industrial products. 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 mate rials 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 area s 22 such as: packaging, process technology, machinery and equipment. EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR
  23. 23. 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 Footwear Easy and timely access to large markets. A platform to export to large markets. EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR
  24. 24. El Salvador: An ideal platform for assembly and export of footwear • The FTAs signed by El Salvador provide flexible rules of origin to facilitate the entry of this product in important markets: 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 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 national value added. Sector opportunities • Manufacturing and production of footwear. • • Assembling components of footwear. Manufacturing of components and supplies footwear industry. EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR 24
  25. 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 El Salvador Hub Energético Hub for the Energy and LNG y de Gas Natural para la región CentroAmericana Central America Region EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR 25
  26. 26. 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. 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 Diversification oriented to: Natural gas, coal, and new technologies. 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 EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR
  27. 27. 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 EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR
  28. 28. El Salvador: A strategic partner in medical devices • 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 Medical Devices: • Auto parts (harnesses, seat belts, components, 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 28 in compliance with required international standards. EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR
  29. 29. For offshore business service firms seeking to enter markets in the U.S. and Spanishspeaking countries, El Salvador is a strategic partner for providing quality multi-region business services. Our dynamic business environment, strategic location for near-shoring, timezone 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 costeffective 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 EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR
  30. 30. 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). • Exceptional performance against key indicators (KPIs) such as Sales, C-Sat, FCR, etc. • Same time zone for primary customers (U.S. and Canada) and Spanish-speaking markets (91% of the global Spanish-speaking population). • Complementary service to other geographical areas and highend front-office services. • Time-zone complementarity for customers in Europe and Asia (24/7 possibility). • Young and committed workforce (60% of the population under 35 years). • Cultural affinity of the workforce with priority markets. • Friendly, hardworking and service-oriented people with neutral English and Spanish accents. Investment Opportunities in Offshore Business Services: • Voice Business Process Outsourcing (Call Centers) • Non-voice Business Processes Outsourcing (BPOs) 30 • Shared Service Centers (KPOs) EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR
  31. 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, highturnover garment manufacturing industry. Specialized Textiles and Apparel Vertically integrated industry with easy access to markets 31 EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR
  32. 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. 32 EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR
  33. 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. 33 EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR
  34. 34. El Salvador: Variety of close-by touristic attractions • Tax incentives regulated by a Law on Tourism. • Short flight times from North and South America. • Foreign investors have the opportunity of acquiring property in their own name. • The International Airport of El Salvador handles more than 470 arrivals and departures every week. • Competitively priced land and low construction costs. • Pleasant climate all year round. • Rapid access to a variety of tourist attractions. • 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 34 • Marinas EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR
  35. 35. 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 EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR
  36. 36. El Salvador: Strategic location and excellent connectivity between touristic sites • The strategic location of El Salvador and the presence of TACA airline's hub in the country provide excellent air connectivity to the U.S. and Canada (2 hours from Miami and 5 hours from Los Angeles by direct flight). • The best road infrastructure in the region allows visiting the wide variety of tourist attractions the country offers in a short time (beaches, lakes, volcanoes, colonial cities, etc.) . • The community of Salvadorans abroad, about 2 million people, is A natural market who constantly visits the country and buys health treatments locally. • The existence of qualified medical professionals who have earned postgraduate degrees abroad offer their services at very competitive costs. • There is a Law on International Services that encourages the establishment of health centers. Investment Opportunities in Health Services: • Hospitals • Specialized clinics • Rehabilitation centers • Medical spas • Hospitals Resorts for treatment of chronic diseases. EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR 36
  37. 37. Services provided to investors Business opportunities  Information on investment opportunities in strategic industries, as well as of the incentives and investment advantages of those industries.  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 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. 37 EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR
  38. 38. EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR Edificio D'Cora Primer Nivel, Urb. Santa Elena, Antiguo Cuscatlán, La Libertad, El Salvador, C.A. +503 2241 6456  @Proesa_sv PROESA El Salvador 38 EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR