Discusses key economic indicators and trade statistics, which countries are dominant in the market, the U.S. market share, the political situation if relevant, the top reasons why U.S. companies should consider exporting to this country, and other issues that affect trade, e.g., terrorism, currency devaluations, trade agreements.
The United States is El Salvador’s main trading partner. In 2019, U.S. exports to El Salvador totaled about USD $3.4 billion, similar to 2018. El Salvador’s exports to the United States were USD $2.5 billion in 2019, registering only a slight dip since 2018. Services trade with El Salvador in 2019 was USD $1.5 billion with a services trade surplus of USD $724 million. GDP in 2019 was USD $27 billion. A partial list of U.S. companies with market presence includes: Abbott Laboratories, AES Corp, American Airlines, AT&T Inc., Caterpillar, Citibank, Hanesbrands, Cisco, Delta, FedEx, General Electric, General Motors, John Deere, Kimberly-Clark, Microsoft, PriceSmart, SBA Communications, United, Walmart, Xerox, 3M, and many others, as well as dozens of U.S franchises. There are more than 345 U.S. companies with a presence in El Salvador, most as subsidiaries of U.S.-based companies.
U.S. companies exporting to El Salvador benefit from the Central America-Dominican Republic Free Trade Agreement (CAFTA-DR) with zero percent duties on U.S. consumer and industrial goods. CAFTA-DR entered into force on March 1, 2006, and has contributed to dramatic increases in the United States’ bilateral trade with El Salvador and trade throughout the region. Also, El Salvador has a dollarized economy, which eliminates foreign exchange risk and lowers transaction and financial costs. El Salvador’s proximity to the United States give it a strategic location and elevates its position as a regional hub for Central America. El Salvador is a highly receptive market for U.S. products and services. El Salvador’s economy is predominantly services-based. GDP From Agriculture in El Salvador in 2019 was USD $348 in the fourth quarter of 2019. Agriculture accounts for about 5% of GDP and employs 15.4% of the population. Manufacturing and industry accounts for 15% of GDP and employs 20% of the population. Prior to the onset of COVID-19 in March 2020, the service sector in El Salvador accounted for almost 65% of the GDP and employed 58% of the population.
On June 1, 2020, President Nayib Bukele’s administration celebrated one year in office after winning nationwide elections under the Grand Alliance for National Unity (GANA) banner on February 3, 2018. President Bukele has remained very popular with approval rates in some polls in the 90’s. His party does not enjoy a majority in the Legislative Assembly which is still largely controlled by the two major political parties whom he beat out in February. The rightist opposition National Republican Alliance (ARENA) party holds a majority in the Assembly and the leftist party, Farabundo Marti National Liberation Front (FMLN), holds a lesser number of seats. President Bukele’s GANA party holds only a small minority. El Salvador will hold new Legislative Assembly elections in February 2021.
Although President Bukele has actively courted U.S. favor in the months following his election, he also maintains active relationships with other nations. Overall, the U.S. relationship with the Bukele Administration is productive and the U.S. Embassy continues to actively support President Bukele and the people of El Salvador on three main pillars of U.S. policy towards El Salvador which are: security, institutions, and prosperity.
El Salvador’s economy remains heavily dependent on the United States.
On the prosperity front, the United States supports several whole-of-government lines of effort to help increase trade and bolster Salvadoran economic development, thereby mitigating the negative effects of high unemployment and lack of employment opportunity, especially for new entrants to the workforce. One of these ongoing programs is Deal Team, an interagency effort led by the U.S. Department of Commerce to bring forward all of the U.S. tools and sources of funding to assist U.S. companies remain competitive in the region, level the playing field against other nations’ companies which are often overtly supported by their governments, and ensure adequate support in areas including development of feasibility studies, export credit assistance, Government-to-Government Advocacy support, and funding. A second initiative is América Crece, another whole-of-government approach including U.S. funding agencies, especially the Development Finance Corporation (DFC formerly OPIC). The initiative is intended to increase investment in U.S. partner countries including those in Latin America and the Caribbean. Investment projects focus mainly on energy and infrastructure.