Generalizes on the best strategy to enter the market, e.g., visiting the country; importance of relationships to finding a good partner; use of agents.
Agent or Distributor
Appointing an agent or distributor is recommended for U.S. companies exporting to El Salvador. One agent is usually sufficient, since 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. 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 most commonly 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.
Opening an Office
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. According to the World Bank’s Doing Business Report, El Salvador ranks 148 out of 190 in the starting a business category and it took an average of 16.5 days in 2020.
The 1999 Investment Law grants equal treatment to foreign and domestic investors. The National Investment Office, Direccion Nacional de Inversiones (DNI), provides business and investment advice. The DNI administers incentives and facilitates business registration.
Personal relationships are key to a successful business partnership. U.S. companies must visit their potential partners and demonstrate long term commitment to the market. Before signing any contracts, U.S. firms are recommended to check the bona fides of potential partners.