Looking for potential business opportunities in El Salvador? Biz Latin Hub CEO Craig Dempsey explains why this Central American country could be a pioneering place to invest.
El Salvador is a supervised and forgotten country when it comes to market opportunities. Nevertheless, it is a nation that offers many investment opportunities for international trade. With favorable foreign investment, social capital, and business formation policies, prospective business owners in Central America should look for opportunities to incorporate a company in El Salvador.
With its most significant exports and expertise being textiles, rubber, and plastics, there is no doubt that El Salvador offers plenty of manufacturing opportunities. Increasing trade agreements and an open economy provide plenty of market space for your business to invest here.
Given the resources of El Salvador and the fact that it is a beautiful and undervalued country, your business could become the market leader in your industry. This article gives you some critical points to consider about the Salvadoran market and its investment opportunities.
— Living in Central America (@VidaAmerica) August 24, 2021
Four critical points in the Salvadoran market
- El Salvador scores high on market organization due to its dollarized economy, which allows for a higher level of financial flexibility. Market organization is the relationship and exchange within the market determined by events and behavioral adaptations. This high score is also due to El Salvador’s constitutional restriction against monopolies that prohibit price fixing. This improves competition within the country.
- El Salvador scores low on sustainability, due to a need for more consistency with legislation and the policy framework. Their policies focus on restoration using a net zero strategy with various stakeholders. Before setting up a business in El Salvador, it is essential to take into account the skewed levels of education. This could affect your recruitment process in El Salvador.
- Recent studies have shown that many Salvadorans favor an accessible and socially responsible market economy. It is important to note, however, that El Salvador is still a country with relatively high political instability. Structures may change here. Additionally, the market lacks foreign direct investment (FDI) and the government has limited monetary and fiscal policies.
- In terms of international relations, El Salvador scores well. The United States and the European Union have invested in education, research and development, and local businesses. The government is also reliable in respecting the agreements made. This means that international resources are available and the market tends to respect the agreements made. In particular the agreements concluded with foreign institutions and companies.
Key investment aspects to consider when looking for business opportunities in El Salvador
- El Salvador has no policies against foreign investors. It has a decent and pre-developed FDI policy framework. That said, El Salvador does not have much experience with FDI. This could affect the ease of your investments in the country. When entering the Salvadoran market, this is a key consideration.
- El Salvador has many bilateral investment treaties with different countries around the world. This includes most of the European Union and Latin America, which could help you grow your business. Some critical aspects of these treaties include intellectual property rights, contracts, investments and companies.
- The legal regime and governance are quite transparent compared to other countries in the region. But as already mentioned, the Salvadoran market still needs to gain more experience with FDI. Complex applications and regulatory actions still take time here. That said, simplified procedures for FDI exist. Policies in El Salvador favor FinTech and online businesses, as the government sees them as vital aspects of the future economy. It aims to proliferate the economy, integrate many national companies and allow a high volume of FDI. Similarly, public finances are also quite transparent compared to other countries in the region. Therefore, your company can analyze, evaluate and review the executive’s budget proposals for the country. You can also access strategic government documents that may affect business predictability.
- It is essential to know the commercial areas in which you operate. In El Salvador, 17 free trade zones cover a wide range of industries, such as textiles and agriculture. This offers many opportunities for your business and can even make entering the market or investing more comfortable.
— Biz Latin Hub (@BizLatinHub) August 22, 2022
What does this mean for your business?
El Salvador’s current goal is to restore the agricultural sector while achieving net zero.
It is undoubtedly an advantageous market for international companies with experience in agriculture, technology and manufacturing. Companies with advanced agricultural technology that could be sustainable to a higher degree would benefit from the current market situation.
With the majority of the population living in rural areas, it offers many opportunities to improve the agricultural sector and local living conditions. It would most likely benefit your business to be part of this transition. As El Salvador is affected by the pandemic and several consequences of climate change, there is a strong demand for sustainable technologies and knowledge sharing within the agricultural and manufacturing industries.
Due to its preliminary FDI policies, the future of El Salvador’s international market entries remains uncertain. Signs show, however, that the government will continue to favor FDI and an open economy.
International companies might overlook El Salvador because of its “bad reputation”. But the country displays real sectoral development and political stability that do not raise any significant concerns when entering the market.
Biz Latin Hub can provide hiring and PEO services in El Salvador
Whatever business opportunities you are looking for in El Salvador, Biz Latin Hub is ready to help you find and hire the required personnel. With our comprehensive portfolio of back-office support, including high-quality corporate legal and accounting services, we can be your single point of contact to support your market entry and ongoing operations in El Salvador.
Contact us for more advice.
Craig Dempsey is the co-founder and managing director of the Biz Latin Hub Group, an organization dedicated to assisting investors in Latin America and the Caribbean.