About the size of Massachusetts, El Salvador is the smallest country in Central America and most densely populated of the Central American countries. Now, only four years after a U.N. sponsored peace treaty ended the country's eleven year bloody war, El Salvador is considered to have the most dynamic economy in the region.

Thought to be the most industrialized nation in Central America, the country's hard working people, and improving economic indicators provide the investor with some of the building blocks for a successful venture.

Most expatriates live in San Salvador, where you can find shopping malls stocked with the latest of U.S. goods, movie theaters that show first run movies in english, and many good restaurants with reasonable prices.

By North American standards, real estate prices are low but are considered high for Central America. This is mainly due to the small size of the country, where more than five million people compete with industry and many natural obstacles, such as volcanoes, for the limited space. Middle class homes cost around $50,000, compared to $25,000 in other Central America.

If the peace holds, and the economic reform of the current president succeed in jump-starting the economy, El Salvador will offer new and interesting possibilities for the visitors, as well as opportunities for the business sector.

El Salvador's rugged, striking beauty is epitomized by a string of volcanoes that have formed a series of high lush green valleys and crater made lakes down to the sparsely populated beaches on the Pacific Coast. This tiny country has the largest surfing waves in Central America.

Official name .............................................................................. El Salvador
Capital City ................................................................................ San Salvador
Population .................................................................................. 5.3 million
Government ..................................................................... Democratically elected republican
Living Environment: Pros ....................... decent standard of living, shopping, theaters, etc.
Cons .............. After years of war peace is still fragile, gang violence
Business Environment:
Pros ................... Aggressive economy reform, hard working people
Cons..................... Business infrastructure needs vast improvement
Official language ........................................................................ Spanish
Local Currency ........................................................................... Colon
Inflation ...................................................................................... 10 percent
Devaluation ................................................................................ 0 percent
Unemployment rate .................................................................... 10 percent
Country code .............................................................................. (503)
Tourist visits .............................................................................. 314,000
Literacy rate .............................................................................. 74.6 percent
Time Zone ................................................................................. U.S. Central Standard
Major exports ............................................................................ Coffee, textiles, and sugar
Leading generator of foreign revenue ................. Salvador labor force working in the U.S.

A high volcanic mountain range serves as El Salvador's rugged backbone, along which many of the most important urban centers are located. The slopes of the country's many volcanoes became the first agricultural centers due to their rich, volcanic soils. These agricultural centers, Santa Ana, San Salvador, San Vicente, etc. have become the country's major cities and towns today, which share the names of their corresponding volcanoes.

While the country coastal areas and lowlands are typically hot, San Salvador enjoys an average, almost unvarying, temperature of 82 degrees ferenheit, 28 degrees Celsius. The rainy season last from May to October. The best months for traveling are usually November through January.

El Salvador, the smallest Central American nation, is bordered to the west by Guatemala, to the north and east by Honduras and to the south by the Pacific ocean. Its Pacific coastline is 320 km long. Aside from Belize, El Salvador is the only Central American nation that does not have both Pacific and Caribbean ports.

El Salvador's rich, volcanic soils have been the home to the indigenous people since the prehistoric times. At the time of the Spanish conquest, the heavily Mayan and Aztec influenced Pipil indians were predominant.

When Spanish conquistador Pedro de Alvarado arrived in El Salvador in 1524, the Pipil's put up a fierce resistance that lasted more than 15 years, but by 1540 the region was brought under Spanish control and incorporated into the "Captaincy of Guatemala."

In September 1821, El Salvador declared independence from Spain and joined Central American Federation along with Costa Rica, Nicaragua, Honduras and Guatemala, but the Federation dissolved by 1840 embroiled in ideological differences among the various regions. In 1841, El Salvador became a sovereign nation.

The majority of the land was divided among the now infamous "14 families", who subjugated the indians, forcing them to work for little or no wages on the large Spanish plantations. Under the motto, "Land for those who work it", Anastasio Aquino staged an unsuccessful indian rebellion in 1833. Today, he is still considered a national hero.

The unfair distribution of the land triggered a pleasant uprising in 1932 that was brutally crushed by then dictator General Maximiliano Hernandez. A series of military coups ensued the coming years, and each new dictator staunchly protected the monopoly of the ruling land oligarchy.

Following the country's most recent military coup in 1979, a newly appointed military/civilian junta promised far-reaching reforms. But when these long awaited reforms went unfulfilled, a broad based opposing coalition was formed, and named the Farabundo Marti National Liberation Front (FMLN) as its armed fraction.

When Jose Napoleon Duarte was named as the head of the junta in 1980, the conflict had reached the proportions of a full blown war.

The bloody civil war raged to a stalemate in 1989, claiming an estimated 70,000 victims, with many atrocities committed by both sides. The governing junta was unable to end the war in spite of massive U.S. military aid and attempts at free elections, in which the FMLN rebels were not allowed to participate.

Finally, after considerable assistance from the United Nations, a peace accord was signed in 1992 with provision of the demobilization on the FMLN and the division of land to the former combatants. With the peace, came the U.S. decision to forgive a large portion of the country's $2 billion debt.

The peace talks lasted two years and were designed to allow the FMLN to disarm and become a legitimate political party. The accord also called for a reduction in the size of the military and an effective procedure for verifying and prosecuting human rights abuses.

Although the "14 families" have now grown to around 250, unequal distribution of the land and the enormous social lower class have remained unchanged. An estimated 2 percent of the population controls around 60 percent of the land, while around 90 percent of the Salvadorians can barely make a living. Only about 8 percent of the country'speople are considered middle class.

More equitable land distribution and strong economic reforms will be crucial to the maintenance of the country's newly acquired peace.

The government of El Salvador is divided into Executive, Legislative branches and the Supreme Court. The president is freely elected to a five year term. The Legislative branch, called the "National Assembly", is comprised of 60 members who serve three year terms, and the 13 member Supreme Court is appointed by the National Assembly.

The country is divided into 14 districts, called "departments". Major political parties include the right-wing ARENA party, the left-wing Farabundo Marti National Liberation Front (FMLN), the Christian Democratic Convergence Party and the National Conciliation Party.

Agriculture accounts for 75 percent of El Salvador's exports and 25 percent of the GNP. It employs around 40 percent of the workforce. The country's principal export crops of coffee, cotton, corn, and sugar cane thrive in the nutrient rich volcanic soils.

Manufacturing ranks as the second most important economic sector, employing 22 percent of the workforce and accounting for 22 percent of the GNP.

The majority of export generated wealth remains in the hands of the country's few land owning and manufacturing families. The gap is large between the rich and the poor and a struggling middle class accounts for only around 8 percent of the population.

El Salvador receives one third of its imports from the U.S., and the country is very receptive to U.S. goods. Around 1 million Salvadorans live in the U.S., so news of the latest business news arrives quickly. No expropriation cases are pending. An estimated $40 million dollars in new foreign investments entered the country in 1993 alone.

With the signing of the U.N. sponsored peace pact in 1992 have come some positive economic indicators. The country's GNP has grown an average of 5 percent over the last three years, international commerce has grown at least 20 percent, and inflation is expected to drop to around 6 percent.

Thanks, in part, to the U.S. "forgiveness" of a large part of El Salvador's external debt, the nation now owes a relatively low $100 million to international financial institutions. The figure is expected to drop to $50 million in the coming years.

Coffee, textiles, and contributions of the Salvadoran labor force working in the U.S. are the country's major generator of foreign revenue.

El Salvador's per capita income is actually higher than Nicaragua, but while an estimated 8 percent of the population enjoys the fruits of the expanding economy, the majority of Salvadorans still live in poverty.

Salvadorans have been hardened by years of violence, but their hard working nature and inherent helpfulness has endured and prospered. In spite of the noise, crowding and traffic that make up the daily urban way of life, Salvadorans will offer advice and assistance to the newcomer, and often demonstrate a healthy curiosity in the outside world. One message is clear: El Salvador is anxious to put the years of violence, death squads, corruption and military rule behind it.

Because the country lacked gold and other precious minerals in sufficient quantities to attract greedy Spanish conquerors, El Salvador remained largely unsettled throughout the colonial period. The few Spanish settlers that stayed there, became farmers and married the natives. Even today, the country remains largely homogenous, with approximately 5 percent of the population represented by indigenous people and an additional five percent of unmixed Spanish decent. All the rest are of mixed origins.

When coffee was introduced, the population quickly outgrew the capacity of the limited land. Widespread immigration to the U.S. and neighboring countries has been a result of limited land ownership possibilities and in the 1980's, because of the war.

Unfortunately, this small country's most serious problems didn't end with the war. An estimated 90 percent of the nations population is considered poor and clamoring for land. Only 2 percent of the country's population can be considered wealthy, while an additional 8 percent from a struggling middle class.

The government's planned aggressive economic reforms should help cut an already low import tariff that will result in lower retail prices for the consumer on a variety of items from candy bars to expensive televisions.

San Salvador's three modern shopping malls are well stocked with almost all merchandise found back home. Exclusive boutiques in the more affluent Zona Rosa and Colonia Escalon cater to the more discriminating taste.

If your looking for the latest entertainment, San Salvador's theaters show first run movies for around $2.50.

Prices vary at supermarkets and local farmers' markets, but like in all Central American countries, consuming local produce and meat could cut your grocery bill in half.

Many small restaurants specialize in "pupusas, a traditional Salvadoran fast food made of a folded soft corn tortilla filled with cheese, sausage or beans, for around $.030 each. A tamale or steak with rice, beans and a beer, sells for around $3.00 Most foreigners frequent the city's more sophisticated western suburbs, where you can find well known franchises like McDonalds and Pizza Hut, as well as a variety of other restaurants ranging in price from $3.00 to $20.00.

Real estate is considered reasonable to rent or buy. Middle class homes range from $40,000 to $250,000 for homes in exclusive areas. Rentals go between $200 and $1,500 for a larger house. Most middle to upper class families have maids who are paid around $140 per month.

Many of the country's foreigners report that a couple can live comfortably on $1,000 to $1,200 per month , if they own their home.

Salvadorans, in general, can be some of the least punctual people in Central America. The business community however, does tend to be somewhat more conscious of the clock.

A handshake is always offered as a greeting. Man and women who already know each other or who would like to become aquatinted will usually greet each other with a kiss on the cheek.

Winter, or the wet season, runsfrom May to October, while summer, or the dry season, runs between November to April. Refreshing, wet season rains usually fall hard for about an hour after sundown, but may last all night. The rest of the year is generally dry and dusty.

El Salvador, at an altitude of 680 m. (2,230 ft.), has a moderate, year round climate. Maximum daytime temperatures in the capital hover around 30 degrees Celsius (86 degrees ferenheit) in November to 34 degrees Celsius (93 degrees ferenheit) in March and April. Nighttime temperatures range between 16 degrees Celsius (61 degrees ferenheit) and 19 degrees Celsius (66 degrees ferenheit) all year round. Coastal lowlands are much hotter.

Commercial hours usually run from 8:00 A.M. to noon and from 2:00 P.M. to 4:00 P.M. or 5:00 P.M.. The traditional siesta, from around noon to 2:00 P.M., is still popular here. Breakfast meetings are common and usually begin as early as 7 - 7:30 A.M.. Dinner meetings could begin around 9 - 9:30 P.M.. Lunch meetings are also frequently scheduled.

Mail in El Salvador is totally unpredictable. Air mail letters usually take about two weeks to reach the U.S. or Europe. Packages take about the same time, but stand a good chance of being lost.

Post office hours are from 8:30 A.M. to 4:00 P.M., Mon. through Fri. The main branch is in the Centro de Gobierno. You can also receive mail there, addressed to the poste restante or Lista de Correos.

Offices of the country's state owned telephone service, ANTEL, offer long distance telephone service, telegraph, telex, and fax services. The main office is in downtown San Salvador is located on the corner of calle Ruben Dario and 5a avenida sur. It is open from 6:00 A.M. to 10:00 P.M., Mon. through Sat.

The prolonged civil war has taken its toll on public telephone poles and equipment, but the service remains amazingly efficient. Direct long distance dialing is available to almost anywhere in the world.

As in most of the Central American countries, acquiring a private telephone line can be a hectic process that could easily take months. It is more expensive, but much faster to buy one from a private seller at around $300 each. Pay phones cost 10 centavos.

The currency in El Salvador is called the colon, which is expressed by a cent sign. before the amount. There are 100 centavos to one colon. Coins are minted in 5, 10 25, 50, and 100.

Money can be changed at all banks and Casas de Cambio in downtown San Salvador's. It is also possible to change money at the airport, although better rates are available downtown. U.S. dollars are the most accepted currency, but banks will also exchange the currency of Guatemala, Honduras, Mexico, and some other Central American currencies.

Black market money changers operate outside the post office and sometimes the international bus terminals, at the same rate, or sometimes less than the banks.

The Banco Salvadoreno, a block from the tourist office, and the Banco Hipotecario on Plaza Barrios will both accept travelers checks. The latter will also give Visa and Master card advances at no additional fee.

Spanish is the official language of El Salvador, and the language of all business correspondence. English is widely understood in business, academic, and political circles only. Nahua, the native indian language of the Pipil tribe is only spoken in a few indian villages.

El Salvador is gradually easing up on its Visa requirements, so its a good idea to check ahead to see if you need one. Visas are currently required from citizens of the U.S., Canada, Australia, and New Zealand. Most citizens from western Europe do not need one. Visas cost between $10 and $30 depending upon your nationality, and are valid for 90 days. No vaccinations are currently needed to enter the country, however it is advisable to check with your doctor before traveling to El Salvador for possibilities of Cholera.

Salvadoran labor is abundant and highly trainable. Current average monthly salaries are as follows:

Maids ..................................................................................................... $125.00 per month
Secretaries ............................................................................................. $300.00 per month
Bus Drivers ........................................................................................... $225.00 per month
Architects .............................................................................................. $650.00 per month
Teachers ................................................................................................ $350.00 per month
Engineers .............................................................................................. $625.00 per month
Professionals ........................................................................................ $600.00 per month

These wages are considerable higher than its neighbor Honduras. To compare salaries click here on Honduras

Electric current is 110 volt, 60 cycle, but is far from stable. Power outages are common Receptacles are of the two flat pin type as found in the U.S.. Electric alarm clocks should not be relied upon, and surge suppressers should be used with all important electrical appliances or electronics.

The dress code in El Salvador is casual. Professionals usually wear light cotton suits. The popular "guayabera" or embroidered cotton shirt, is preferred casual wear for men, particularly in the warmer areas. As a courtesy, those visiting on business should wear a light weight suits.

A 10 percent tip should be left in restaurants and hotels or 15 percent if the bill is small. Airport porters are usually tipped $1 per bag, and an additional 20 colons should be given to barbers. Taxi drivers are not tipped.

Salvadorans eat a lot of rice, beans, salads, meats, and seafood's. Soft, white corn tortillas are served as bread. Local specialties include iguana and armadillo. Lunch is usually extended and dinner is served late. Most U.S. style cuisine's are available at many fast food franchises

A typical and tasty fast food is a type of fried sandwich called a pupusa made of white corn tortillas and filled with pork, cheese and sausage. A few pupusas, at around 30 cents each, with a bottle of water or soda make an excellent meal. Small restaurants that specialize in pupusas are called pupuserias. They are located all over the country. Pupusas are also sold on the street, but because hygiene standards are lower, it is advisable to stick to restaurants when you have a craving for this Salvadoran treat.

Surprisingly, coffee is weak and unflavorful in El Salvador because all the finest coffee is exported. Natural fruit drinks called frescos are popular. Pop and bottled water are also widely consumed.

Salvadorans love their beer and the country brews two brands. Pilsner is the most popular beer, followed by the slightly more expensive Suprema. Two potent liquors, Tic Tac and Torito, are distilled from sugar cane and uphold their reputation as white lightning.

Cheap restaurants and pupuserias abound in El Salvador but avoid food sold in street stands. Many restaurants offer daily specials that include rice, beans, salad, and your choice of meat, chicken or fish for around U.S. $1.00.

As many Salvadorans fled during the civil war return to the country, El Salvador is facing a crime problem, including gangs. The civilian police is working hard to clamp down on pickpockets and car thieves.

Disgruntled former soldiers from the Salvadorans military also cause occasional violent disruptions in the streets and in the capital. It is best to ask advise before traveling into certain areas of San Salvador at night. Some rural areas likewise are not safe for the average visitor.

The country's yearly big bash is thrown in honor of El Salvador del mundo, the patron saint of El Salvador. This day, Aug. 6, and the entire week preceding it, are celebrated with fairs, music, and parades. Other major holidays include holy week, and Dec. 12, the day of the virgin of Guadelupe. Literally all small towns render a yearly celebration to their respective patron saint.

El salvador's legal holidays include...

Jan. 1 ............................................................................................. New Years Day
March or April .............................................................................. Holy Week
May 1 ............................................................................................. Labor Day
June .............................................................................................. Corpus Cristi
Sept. 15 ......................................................................................... Independence Day
Oct. 20 .......................................................................................... Revolution Day
Nov. 2 ........................................................................................... All Soul's Day
Nov. 5 ........................................................................................... Cry of Independence Day
Dec. 24 & 25 ................................................................................ Christmas

San Salvador's hottest night spots are located in the spendy Zona Rosa, the more moderate priced Boulevard de Los Heroes and Colonia Escalon on Paseo General Escalon. Are all safe to walk through at night.

The Teatro Cafe, in the National Theater building, features a guitarist during the week and a variety of cultural events such as poetry and literature readings.

If you like the traditional Mexican style Mariachi music, head for the Boulevard de Los Heroes. Mariachi groups gather there nightly awaiting for hired parties or other special occasions. Inexpensive restaurants fill this area, and several groups of Mariachis work the streets, strolling up and down while singing and playing.

An estimated 86 percent of Salvadorans are Roman Catholic, while most of the remaining 14 percent comprising Protestant faiths, such as Lutheran, Baptist, Methodist, and many fundamental sects.

Situated in the highland valley and surrounded by magnificent volcanic peaks and green hillsides, San Salvador is beautiful and intensely over-populated.

One of the most overwhelming capitols in Central America, the city is packed with rich and poor alike, who rarely mix, living their lives from within their own, economically defined boundaries.

Sprawling outdoor markets that sell everything from produce to baby shoes typify the city. Street commerce is competitive and intense. San Salvador isn't a beautiful city, and their are no major tourist attractions to speak of, but newcomers are overwhelmed and fascinated by its industry and energy.

Wealthier neighborhoods are located in the northern and western hills above the downtown area. These barrios offer elegant tree lined streets, peace and quiet, but residences are walled and have many guards.

Few foreigners live outside San Salvador or on of its surrounding districts, such as Santa Ana, San Miguel, or Sonsonante. Most of the foreign population own or rent homes or apartments in Colonia Escalon, Colonia San Benito, Colonia San Francisco, or Colonia Altamira.

In these areas, the price for an average mansion fluctuates from U.S. $120,000 to the high end of $700,000. Rent generally runs from $1,000 to $4,000 per month. These homes are located on half acre lots and have at least four bedrooms, swimming pool and maids quarters.

Outside the stereotypical expatriate areas, nice, very secure homes with back yards can be purchased between $50,000 and $90,000. Condos sell from $30,000 and rent from $250 per month. Most of these moderate priced neighborhoods are located on the outskirts of the older, wealthier areas.

Foreigners can own private land in El Salvador, including beach front, without restrictions.

All property is registered in the Instituto Libertad y Progreso, a state owned registry that clearly identifies the owner of the property. The accuracy of this registry, which is currently being computerized, makes the need for property insurance obsolete. This type of registry system is common in Central America and is considered a safe way to guarantee ownership.

Real estate can be purchased in U.S. dollars. The country is currently establishing a permanent exchange rate of 8.74 (colones) to U.S. $1.00.

Home financing is common in El Salvador and is usually structured from 10 to 15 years. Interest rates hover between 19 and 21 percent, charged monthly on the unpaid credit balance. Down payments range from 15 to 20 percent of the purchase price. All banks lend to construction companies for the construction of housing developments that range in size to 5 to 500 houses.

El Salvador uses the metric system of measurement. Land is generally measured in manzanas (1.73 acres) or varas (.70 sq. meter). Construction values are quoted in square meters.

The Salvadoran socialized medicine system (Instituto Salvadoreno de Social Seguro, ISSS), was established in 1952 to provide hospitals, medicine, and benefits for industrial injury, sickness, accidents, disability, maternity, old age, and death. Good english speaking doctors and dentist work in the country's medical facilities. Many have been educated and trained in the U.S. and Europe.

Education is free in state schools, and is officially compulsory from the ages of seven to sixteen years. Secondary education begins at the age of sixteen and is not compulsory. There is an estimated 3,700 public and private schools in the country. There is one national university and 33 private universities. Official statistics show a 65 percent literacy rate overall, but this figure falls to 40 percent in the rural areas.

El Salvador appears to be headed for real economic growth. The key event was the elections in 1994, which included for the first time the former rebels as a political party, and subsequent peaceful transition into a new government. In spite of El Salvador's war torn past, increased international financing and foreign investment indicate the country is back in business.

With the signing of the Chapultepec Peace Accords in January, 1992, international investors have begun to take another look at this bustling economy.

The economy grew 6 percent in 1994, with solid gains in manufacturing, transport and construction sectors. The trend is expected to continue in the coming years.

Over the past years a market based exchange rate was adopted, coffee, sugar, and cotton marketing monopolies abolished. Most of the banking system has been privatized. The president has also pledged to implement a study by the Salvadoran Foundation for Economic and Social Development (FUSADES) on how to improve economic growth over the next five years.

Inflation has been reduced to around 12 percent, and the International Monetary Fund (IMF) provided the country with a structural adjustment loan of U.S. $25 million. Further IMF financing is being negotiated, and the Inter-American Development Bank recently approved a $225 million loan for the period of 1993-1995.

Made painfully aware by the war of the importance of social programs, the country is rebuilding the country's damaged infrastructure an re-establishing critical social services. In Feb. 1994, there was an important economic seminar in San Salvador that discussed future options for the government.. The guest speakers all agreed on the need for increased government. spending in education and health. Business leaders also confirmed that low education levels must be improved.
 

Generally about one third of all Salvadoran imports come from the U.S.. The Salvadoran market is very receptive to U.S. products.

Important U.S. exports to El Salvador include grain, animal and vegetable oil, processed agricultural products, chemicals, electric machinery, and construction equipment. Excellent opportunities exist for power generation and distribution equipment, machine tools, telecommunications equipment, computers and software, and transportation equipment including buses. One fast growing but very fragmented sector is that of automobile parts and accessories. In 1993, U.S. imports from El Salvador included coffee, shrimp, sugar, melons, and apparel produced in free zones.

A key factor in the Salvadoran market is the direct and indirect influence of the one million or more Salvadorans who live in the U.S.. Word of new products or new U.S. fashion arrives there quickly.

The Salvadoran Foundation for Economic and Social Development (FUSADES) is a private, non-profit, non-partisan foundation created to improve the quality of the Salvadoran life. The foundations Trade and Investment Center (PRIDEX) explains nine reasons why foreign investors should consider El Salvador.

1. The Foreign Investment Promotion and Guarantee Law provides the following benefits...

A. Free remittance of net profits generated by the investment.
B. Free remittance of funds generated by liquidation of firms.
C. Free management of foreign investment in the country.
D. Possibility of 100 percent foreign ownership.
E. Free repatriation of net capital profits from the transfer of a registered investment.

2. The country's minimum monthly wage for a factory worker is around $0.70, including benefits.

3. Companies operating inside a free trade zone are entitled to a 100 percent exemption for 10 years (renewable for another 10) on income tax, equity tax, and import duties on machinery, spare parts, and intermediate goods, etc. 100 percent of production must be exported outside the Central American region for these benefits to apply.

4. El Salvador is trying to attract industry that requires an abundant amount of manual labor, preferably with a high value added. The apparel industry currently accounts for much of the country's investment, but the government is also actively seeking electronic assembly firms and metal mechanics.

5. Foreigners can own 100 percent of any given investment without government interference or mandatory joint-venture agreements.

6. With an unemployment rate at around 10 percent, there is an abundant force of highly trainable labor.

7. El Salvador's airport is modern and the country's infrastructure is being refurbished through international financing. Electricity cost run a reasonable eight cents per kilowatt hour.

8. Future legislation could lead to the privatization of currently government owned monopolies, such as the telephone and electric companies, opening the door to foreign investors.

9. Foreign investors who wish to reside in the country must apply for residency. To qualify, investors must have a profession or sufficient resources to devote themselves to financial, industrial, or commercial activities. This permit may easily be requested of the Ministry of the Interior by indicating the reason for residing in El Salvador.

PRIDEX can help facilitate the process of foreign investment  in El Salvador. Contact them at: Edificio FUSADES;
Boulevard y Urbanization Santa Elena
Antiguo Cuscatlan, La Libertad
San Salvador, El Salvador
telephone (503)278-3366
Fax (503)278-3354

The majority of banking institutions have been privatized as a result of the banking system's need to support a free market economy. The market sets the rates for literally all banking operations and services, including interest rates on loans and deposits. All legally established banks and finance companies are supervised by the Superintendecia del sistema Financiero, which enacts banking laws, and the Central Reserve, which dictates monetary policy. Funds in El Salvador banks are insured by the government.

Foreigners can open savings and checking accounts in dollars or colones without restrictions. Banks offer the same services as any local or international U.S. bank in four different types of currency Salvadoran: Colones, Guatemala: Quetzals, Honduras: Lempiras and U.S.: Dollars

Financial system reforms have resulted in increased efficiency and have led to the return of the financial system's traditional role of promoting the economic development of El Salvador as a solid and solvent country.

Foreigners can own 100 percent of any legal business without any government intervention. El Salvador's economy, on hold during the civil war, has begun to expand, driven by aggressive economic and social reforms.

Many well established business opportunities in other developing countries still have not reached this small nation. Opportunity abounds in every field from computers to food franchising to manufacturing for export.

11 Steps to establishing a business...

1. 1. Find a legal representative or a reputable lawyer.
2. 2. Request a permit to operate in El Salvador at the Superintendency of Businesses and Mercantile Corporations; 1a. Calle Poniete y 45 Avenida Norte; San Salvador, El Salvador; Tel (503)279-2152
3. 3. The Superintendency of Business and Mercantile Corporations authorizes all types of commercial activities and establishes the minimum starting capital required for start-up operations.
4. 4. Obtain an income and property clearance from the Direccion General de Impuestos Internos at the Ministry of Finance; Ministerio de Hacienda; Avenida Alvarado y Diagonal Centroamericana; Condominio Las Tres Torres #2; San Salvador, El Salvador; Tel (503)225-1022; Fax (503)226-7170
5. 5. Request a license at the Commerce Registry (Registro de Comercio), in the Commerce and Industry License Registry Department. The industrial and/or commercial patent registry is also requested in this office.
6. 6. Register the firms board of directors and administrative personnel at the Commerce Registry.
7. 7. Obtain a municipal services clearance from the city hall, under whose jurisdiction the commercial or industrial establishment falls.
8. 8. Obtain certification that the firm is properly registered in the Industrial and Commercial National Establishments Directory at: Direccion General de Estadistica y Censos; 1a Calle Poniete y 43 Avenida Norte; San Salvador, El Salvador; Tel (503)224-1603.
9. 9. In the case of a drug store or a pharmaceutical firm, obtain a permit from the Public Health Council: Dr Mauricio Mossi Calvo, President, Consejo Superior de Salud Publica; Avenida Espana #736; San Salvador, El Salvador; Tel (503)221-0497 or 221-0151
10. 10. Register the investment at the Foreign Capital and Technology Transfer Department of the Ministry of Economy, and publish the firms license in a local newspaper.
11. 11. Hire both an accountant and an external auditor that has been certified by the Republic of El Salvador.

For additional specific questions or comments you may also send us a form request.

Hire a lawyer to help you with residency procedures. All the necessary documents can be obtained at the Ministry of the Interior. There are four types of residency in El Salvador...

1. Temporary residency, granted to foreigners as a work permit.

2. Permanent residency, granted to foreigners who can prove they have lived in El Salvador for at least five years.

3. Residency as a Financier, (Rentista) granted to retired foreigners with outside income.

4. Investor's residency, granted to foreigners who come to the country to establish a business or factory.

The following documentation is required for residency...

• Residency request form
• Original birth certificate
• Good conduct certificate given by the Salvadoran consulate in the foreigner's country of origin, and from the Ministry of Foreign Relations.
• Two recent photographs
• HIV test
• Health certificate
• Work contract
• A letter requesting residency
• Fill out the personal data form
• Photocopies of all the above

For enterprising investors, aware of possible risk in a developing nation recovering from a civil conflict, El Salvador presents a promising investment opportunity. The country invites foreign investment. Its free market economic reforms have considerably enhanced prospective returns for foreign investors,. No expropriation cases are pending.

Foreign investors, in El Salvador are not required by law to operate through a joint venture. Similarly, local management and control are not required by law, but in the country's small and highly concentrated economic environment, local participation is generally desirable for all but major companies with significant overseas experience. Many foreign maquila investments do not have local participation. Promising investment opportunities include; apparel assembly, fruit and vegetable processing, fast food franchises, supermarkets, hardware and building supplies, and auto parts and accessories.

The embassy estimates that in 1993 there was about $40 million of new direct foreign investment. This investment includes equipment for maquila plants, gasoline stations, and terminal expansion for one or more major oil company.

Factors that favor El Salvador for foreign investment include the modern airport with many direct flights to the U.S. daily; A new intellectual property rights law that was enacted in 1993; Reasonable industrial electricity cost of about eight cents per kilowatt hour; and a highway system that is being rehabilitated with the support of loans from the Central American Development Bank.

The tax system is being overhauled to strengthen administration and enforcement, and in Sept. 1992 a new 10 percent value added tax was established, which has been a major source for government revenue.

Also, four additional free zones are being constructed to bolster the country's current four, to ease the import of raw materials needed in the manufacturing process.

Foreigners pay taxes on income earned inside El Salvador, and not from any foreign source.

Income tax for corporations owned by foreigners, either domiciled or not, is 25 percent of the taxable income, with a deduction of approximately $8,600. Natives not residing will pay on the income earned in El Salvador, a rate of 25 percent as income tax.

Trust and successions not domiciled will also pay a tax of 25 percent on the income obtained in El Salvador. Both foreign and domestic corporations also pay a rate of 25 percent.

El Salvador is not a tax haven like Panama, or other countries, nor does the government plan for the country to become a tax haven.

That's all folks ....

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Last modified: 01/19/08