El Salvador: Investing

FDI in Figures

According to the UNCTAD's 2022 World Investment Report, FDI flows to El Salvador accounted for USD 314 million in 2021, an increase from 2020, when that rate was USD 280 million. The stock of FDI in the country was estimated at USD 10.3 billion in 2021. There have been some significant investments made in the country in recent years. In December 2019, it was announced that China would help build several major infrastructure projects in El Salvador in the following years, including a large sports stadium, a multi-story library and a water treatment plant. Although they didn't disclose the amount that was being invested in the country, the Chinese government called the investment “gigantic". Futhermore, in 2021, a USD 450-million, 555-km mass transit system under a PPP scheme, sponsored by Comisión Ejecutiva Portuaria Autonoma and the Central American Bank for Economic Integratio was signed. On the other hand, Mexican company América Móvil was negotiating the acquisition of Telefonica Móviles from El Salvador throughout 2020, but the deal was cancelled due to the conditions imposed to obtain the regulatory authorisation required in the country, which is issued by the El Salvador Competition Superintendence. Overall, the main investing countries are the United States (one-third of the total volume of FDI), Mexico and Guatemala. The textile sector receives the highest amount of FDI into the country. Other key sectors are electricity production, tourism and telecommunications. The country has nine free-trade zones and seeks to attract textile companies (FDI Intelligence). El Salvador also uses export processing zones (EPZs) to receive preferential access to the U.S. market (UNCTAD).

According to the Economist Business Environment, El Salvador ranks 67 out of the 82 countries reviewed for their investment climate. In the past few years, El Salvador made getting electricity easier by accepting electrical plans at the same time as connection requests. However, weak household purchasing power, scarcity of natural resources, limited size of the domestic market, insufficient infrastructure, vulnerable institutions - and above all high level of criminality - are real obstacles to investors. Still, El Salvador offers 'business friendly' taxation, a young and skilled labour force and a strategic geographical position. The government aims to promote FDI, as they have implemented a series of incentives to do so. This includes the nation’s Investment Law (which grants equal treatment to foreign and domestic investors), Free Trade Zone Law, and the Law of International Services. The country's membership in the DR-CAFTA (Dominican Republic-Central America Free Trade Agreement) as well as its reinforced integration into the C4 countries (Central America-4 Border Control Agreement between El Salvador, Guatemala, Nicaragua and Honduras) promote FDI.

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Latest Update: September 2023