El Salvador’s government procurement and contracting system law are based primarily on international standards, which cover contracts for works, supplies, consulting, and leasing of real estate conducted by any government agency. Though a World Trade Organization member, El Salvador has not signed the Government Procurement Agreement. El Salvador contracts the United Nations Office for Project Services (UNOPS) to administer the bidding processes for specific projects. UNOPS is the leading procurement resource agency for the United Nations.
U.S. companies can participate in government procurement processes; however, it is recommended to work with a local representative. The CAFTA-DR Government Procurement Chapter provides U.S. suppliers transparency, competitiveness, and market access.
On March 10, 2023, a new Public Procurement Law (LCP- Ley de Compras Publicas) entered into force, which regulates the procurement processes of government, autonomous, and municipal entities using public funds. This law replaced the Procurement and Contracting of the Public Administration Law; known as LACAP.
The Public Procurement Law created the new autonomous regulatory entity, the National Directorate of Public Procurement (DINAC – Direccion Nacional de Compras Públicas), which is responsible for developing all government procurement policies and regulations, including the administration of the Electronic System of Public Procurements (COMPRASAL). Under the new LCP, all national and foreign companies interested in selling to the government must be registered in the Unique Registry of Providers of the State (RUPES). U.S. companies interested in registering in RUPES should follow the instructions described at: https://dinac.gob.sv/procesos/como-vender-al-estado/. U.S. companies can register and receive notices, regardless of whether the company has a local representative. Public announcements are made through print media and posted on the government procurement website.
The new Public Procurement Law incorporates new government procurement methods such as (a) Competitive Bidding, (b) Price Comparison, (c) Direct Purchasing, and (d) Low Amount. It also stipulates that high technology should be used, and that criterion of sustainability and innovation should be taken into consideration. Strategic Projects developed by the Government of El Salvador are excluded from the Public Procurement Law.
Under Salvadoran law, local companies are preferred for civil engineering and construction projects that the Government of El Salvador finances. However, this is not a significant barrier since most large projects receive funds or loans from international financial institutions and are therefore open to international competition.
U.S. companies bidding on Government tenders may also qualify for U.S. Government advocacy. A unit of the U.S. Commerce Department’s International Trade Administration, the Advocacy Center coordinates U.S. Government interagency advocacy efforts on behalf of U.S. exporters bidding on public sector contracts with international governments and government agencies. The Advocacy Center works closely with our network of the U.S. Commercial Service worldwide and inter-agency partners to ensure that exporters of U.S. products and services have the best chance of winning government contracts. Advocacy assistance can take many forms but often involves the U.S. Embassy or other U.S. Government agencies expressing support for the U.S. bidders directly to the foreign government. Consult Advocacy for Foreign Government Contracts for additional information.
Financing of Projects
Bank financing is readily available in El Salvador. Since the dollarization of the economy in 2001, interest rates for deposits and loans have dropped sharply but are still several percentage points above U.S. levels. Banks offer 30-year mortgage loans. U.S. exports to El Salvador are usually financed by loans made by local banks to importers.
The Foreign Agricultural Service (FAS) of the U.S. Department of Agriculture (USDA) administers the Commodity Credit Corporation (CCC) Export Credit Guarantee Programs (GSM-102/103) for commercial financing of U.S. agricultural exports. Under these programs, the CCC does not provide financing but guarantees payments due from foreign banks. Typically, 98% of the principal and a portion of the interest at an adjustable rate are covered. Two programs underwrite credit extended by the private banking sector in the U.S. or by the U.S. exporter to approved foreign banks using dollar-denominated, irrevocable letters of credit to pay for food and agricultural products sold to foreign buyers. The first, the Export Credit Guarantee Program (GSM-102), covers credit terms of up to three years. The second, the Intermediate Export Credit Guarantee Program (GSM-103), covers credit terms of up to 10 years. However, because payment is guaranteed, financial institutions in the United States can offer competitive credit terms to foreign banks, usually with interest rates based on the London Inter-Bank Offered Rate (LIBOR).
The USDA also offers the Commodity Credit Corporation (CCC) Supplier Credit Guarantee Program (SCGP) for the Central American region. It covers short-term financing (up to 180 days) extended directly by U.S. exporters to foreign buyers and requires that the importers sign a promissory note in case of default on the CCC-backed payment guarantee. The terms are specific: credit may be covered by the CCC only when payment is financed under a dollar-denominated irrevocable letter of credit issued in favor of an exporter by a foreign bank that has CCC approval to participate under the program. The SCGP emphasizes high-value and value-added products but may include commodities or products that also have been programmed under the GSM-102 program. Another program available is the Facility Guarantee Program (FGP), which aims to improve the facilities in emerging overseas markets that process, handle, store, or transport agricultural products imported from the U.S. The FGP provides credit guarantees and financial devices that eliminate most of the risk of non-payment by foreign banks to facilitate the sales of manufactured goods and services.
Created through the Better Utilization of Investment Leading to Development (BUILD) Act Law signed by President Trump in 2018, the U.S. International Development Finance Corporation (DFC), formerly the U.S. Overseas Private Investment Corporation (OPIC), provides medium to long-term financing in the form of investment guarantees, direct loans, and loan guarantees, and now equity financing and technical development assistance. Its total investment limit of USD 60 billion is double OPIC’s USD 29 billion investment cap. In addition, it offers political risk insurance that protects against expropriation, political violence, and inconvertibility. DFC can provide direct loans and guarantees of up to USD 1 billion for tenures as long as 25 years targeting small and medium-sized U.S. businesses. It also includes coverage of up to USD 1 billion against losses due to currency inconvertibility, government interference, and political violence, including terrorism. Its new equity financing capabilities offer direct equity and support for investment funds. Its Technical Development support includes feasibility studies and technical assistance to accelerate project identification and preparation to better attract and support investment in development outcomes.
The Export-Import Bank of the United States (Ex-Im Bank) offers a wide range of guarantees, insurance, and financing to U.S. exporters. Ex-Im Bank has established the Credit Guarantee Facility (CGF) Program, which sets up lines of credit between a bank in the U.S. and a foreign bank (or occasionally a large foreign buyer). Ex-Im guarantees the repayment of the foreign bank’s obligations. The foreign bank then makes credit available to the end user (of the U.S. exports) and assumes the repayment risk from that local company. Financing is restricted to repayment terms of two to five years. For exporting to El Salvador, Ex-Im offers loan insurance for transactions with much less paperwork required than for other programs. The U.S.-based bank will disburse to the U.S. exporter. Since the lines are pre-approved and individual transactions do not require Ex-Im Bank’s review, the process can move quickly. Ex-Im Bank’s standard guarantee coverage is available: 100% of principal and interest for up to 85% of the U.S. export value, plus Ex-Im Bank’s exposure fee if financed. The buyer must make a 15% cash payment to the exporter outside the CGF Program.
The U.S. Trade and Development Agency (USTDA) facilitates partnerships between U.S. companies and infrastructure and industrial project sponsors in Latin America by funding project planning assistance. The agency funds various forms of technical assistance, early investment analysis, training, orientation visits, and business workshops that support the development of modern infrastructure and a fair and open trading environment. These activities involve U.S. companies on the “ground floor” of projects.
The U.S. Small Business Administration (SBA) helps Americans start, build, and grow businesses through an extensive network of field offices and partnerships with public and private organizations. SBA’s Export Working Capital Program (EWCP) loans are targeted at companies that can generate export sales and need additional working capital to support these sales. The SBA Export Express program provides exporters and lenders a streamlined method to obtain SBA-backed financing for loans and lines of credit up to USD 250,000. Lenders use their own credit decision process and loan documentation; exporters get access to their funds faster. The SBA provides an expedited eligibility review and responds in less than 24 hours.
Multilateral Development Banks and Financing Government Sales
U.S. Commercial Service Liaison Offices at the Multilateral Development Banks (Inter-American Development Bank, World Bank)
The Commercial Service maintains Commercial Liaison Offices in the main Multilateral Development Banks, including the Inter-American Development Bank and the World Bank. These institutions lend billions of dollars to developing countries on projects aimed at accelerating economic growth and social development by reducing poverty and inequality, improving health and education, and advancing infrastructure development. The Commercial Liaison Offices help American businesses learn how to get involved in bank-funded projects and advocate on behalf of American bidders. Learn more by contacting the Commercial Liaison Offices of the Inter-American Development Bank and the World Bank