El Salvador: Investing

FDI in Figures

Foreign investment into El Salvador had been steadily increasing during the last few years. Since 2008, due to the crisis which affected the main investing countries, the inflows have slowed down. In 2010, the FDI flux should be driven by the economic recovery of the USA. The country's open and flexible economy should further boost its attractivity.

The country's main asset is its geographical location, situated halfway between the northern and southern hemisphere of the American continent. Nevertheless, inefficient and inconsistent commercial law enforcement create a black spot on El Salvador’s otherwise positive record for encouraging investment. It is recommended to new foreign investors to review very carefully the regulatory framework before entering into the country.

The textile and clothing sectors attract most of FDI in the country, followed by electric generation and telecommunications. The main investing countries are the USA, Mexico and Guatemala. The country is rather dangerous, mainly due to the activity of maras gangs, which could discourage the arrival of new businesses.

	El Salvador	Latin America & Caribbean	الولايات المتحدة	Germany
Index of Investor Protection	4.3	5.1	8.3	5.0

Source: Doing Business

Note: The Greater the Index, the Higher the Level of Investor Protection.

Foreign Direct Investment	2008	2009	2010
FDI Inward Flow (million USD)	784	366	78
FDI Stock (million USD)	6,701.4	7,682.0	7,760.0
Performance Index*, Ranking on 141 Economies	76	75	-
Potential Index**, Ranking on 141 Economies	99	-	-
Number of Greenfield Investments***	9.0	19.0	-
FDI Inwards (in % of GFCF****)	23.8	120.4	-
FDI Stock (in % of GDP)	30.3	33.8	-

Source: UNCTAD - Last Available Data

Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country's Share in Global FDI Inflows and its Share in Global GDP. ** The UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use, R&D, Education, Country Risk. *** Green Field Investments Are a Form of Foreign Direct Investment Where a Parent Company Starts a New Venture in a Foreign Country By Constructing New Operational Facilities From the Ground Up. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.

Tax Rates

VAT (IVA): 13%
Company Tax: From 0% to 25%
Withholding Taxes: Dividends: 0%, Interests: 20%, Royalties: 20%.
Bilateral Agreement: El Salvador and Egypt are not bound by a Double Taxation Agreement.
Social Security Contributions Paid By Employers: 6.8%

Investment Opportunities

Tenders, Projects and Public Procurement: Inter-American Development Bank, Tenders in South America
DgMarket, Tenders Worldwide
Setting Up a Company: Consult Doing Business Website, to know about procedures to start a Business in El Salvador.
Useful Resources: Promoting Investment in El Salvador (PROESA) (in Spanish)

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