El Salvador - Country Commercial Guide
Market Challenges

Learn about barriers to market entry and local requirements, i.e., things to be aware of when entering the market for this country.

Last published date: 2021-11-04

According to the 2020 World Bank Ease of Doing Business Survey, El Salvador ranked 91st among the 190 economies measured. The World Bank reported net foreign direct investment (FDI) inflows Balance of Payments (BoP) in El Salvador was USD $696.2 million in 2019. U.S. textile companies are the largest private employers in the country.

 

​​El Salvador Ranking on Doing Business
​​El Salvador Ranking on Doing Business

 

Leading contributors to low FDI include a quickly changing regulatory environment with little private sector consultation and rapidly imposed regulations, inconsistency in enforcing commercial law, high levels of corruption, and security concerns. Although the latter has improved, particularly under the Bukele administration.  Bukele administration policies that complicate FDI attraction include a lack of transparency in policy making, poor coordination among government agencies on issues that affect the investment environment, and an unclear investment strategy.  The International Monetary Fund (IMF) reported a GDP decline of 8.6% in 2020.  For 2021, the forecast is a 4.2% growth in GDP. The business sector remains worried about the country’s low growth rate, corruption, and security situation. Additional concerns relate to the deterioration of El Salvador’s fiscal situation, with increases in public spending and borrowing precipitated by the Covid-19 pandemic and its economic and human impacts.

Corruption remains a problem in El Salvador, which scored 36 points out of 100 and ranked 104/180 on the 2020 Corruption Perceptions Index reported by Transparency International, which scores countries on their perceived levels of corruption. Soliciting, offering, or accepting a bribe are considered criminal acts and U.S. companies doing business in El Salvador are subject to the United States Foreign Corrupt Practices Act (FCPA).

In terms of U.S. exports to El Salvador, market entry requirements for importing goods and services are often related to environmental controls, consumer protection, and controlled products.  U.S. and local companies have raised concerns about customs and non-tariff barriers, including customs valuation, tariff code reclassification, labeling requirements, and the inconsistent application of customs regulations. Despite this, the National Trade Facilitation Committee, reactivated under the Bukele Administration and in conjunction with the private sector, has identified a series of measures that are intended to simplify customs procedures, reduce costs, and improve the process for moving products through some border crossings.

El Salvador’s procurement law calls for competitive contracts and applies to all Salvadoran public institutions. The procurement process is decentralized; each government agency is responsible for promoting and awarding contracts.  There is no electronic contracting platform, only an electronic notification system for companies registered online as providers at Comprasal, which is open to U.S. companies.  Procurements are sometimes posted without sufficient advance notice, as well as with short timelines to submit tenders, and the results are not always transparent. Technical specifications are occasionally tailored in a way that favors one supplier over another.