Appointing an agent or distributor is recommended for U.S. companies exporting to El Salvador. One agent is usually sufficient since the commercial activity is concentrated in the capital, and the country’s size does not justify regional agents. Depending on the nature of the products/services, some companies use a regional distributor/agent for the Central American region. In El Salvador, an agent generally acts as a sales representative and is paid a commission, whereas a distributor commonly purchases and resells. Once an agreement has been signed, U.S. companies should support their distributors and jointly develop strategic marketing campaigns that help establish and increase market share. Also, training the partner on the delivery of after-market service is critical for succeeding in El Salvador.
Licensing and franchises are common business agreements used in El Salvador. Licensing is used for clothing brands, food and beverages, car rentals, marketing, and communication. U.S. franchise concepts are common in many segments, including fitness, mailing and shipping, real estate, training, and travel. U.S. franchises for fast food and casual dining restaurants have been very successful.
An international or foreign legal entity is recommended to U.S. companies ready to expand globally or seeking to participate in infrastructure projects funded with international financing. The structure can be through a representative office, a branch office, or a subsidiary. U.S. companies should seek legal guidance from a local attorney, preferably with in-depth knowledge of CAFTA-DR, to fully understand and take advantage of the Free Trade Agreement benefits, local laws and regulations related to taxation, customs and import procedures, local labor laws, and residence permits.
The El Salvador Investment Law grants equal treatment to foreign and domestic investors. The National Investment Office, Direccion Nacional de Inversiones (DNI), provides business and investment advice, administers incentives, and facilitates business registration.
Personal relationships are critical to a successful business partnership. U.S. companies should visit potential partners and demonstrate a long-term commitment to the market. Before signing any contracts, U.S. firms are recommended to check the bona fides of potential partners.