El Salvador

Economic Overview of El Salvador

GDP and Economic Growth
• GDP (2024 estimate): $32 billion USD.
• Growth Rate: El Salvador’s economy is projected to grow by 2.4% in 2024. While modest compared to regional peers, growth is supported by remittances, tourism, and private consumption. Economic reforms and infrastructure projects are gradually enhancing the investment climate.

Key Economic Features
• Heavy reliance on remittances, which account for nearly 24% of GDP.
• The U.S. dollar is the official currency, providing stability and facilitating trade.
• Increased focus on modernizing the financial sector, particularly through cryptocurrency adoption and digital payments.

Key Sectors of the Salvadoran Economy

1. Financial Technology and Cryptocurrency
• El Salvador was the first country in the world to adopt Bitcoin as legal tender in 2021.
• Opportunities exist for UK fintech companies offering expertise in digital payments, blockchain technology, and financial services innovation.

2. Tourism
• The “Surf City” initiative and investments in eco-tourism are revitalizing the tourism industry.
• UK businesses can invest in high-end hospitality, eco-friendly accommodations, and tour operations.

3. Manufacturing and Textiles
• The maquila (assembly) industry remains significant, focusing on apparel and light manufacturing.
• Opportunities exist for UK exporters of industrial machinery, textiles, and logistics solutions.

4. Renewable Energy
• Investments in geothermal, solar, and wind energy are gaining momentum as El Salvador reduces reliance on imported fossil fuels.
• UK companies specializing in renewable energy technology and project management are well-positioned to contribute.

5. Agriculture and Agro-Industry
• Coffee, sugar, and tropical fruits are key exports. Modern farming equipment, irrigation solutions, and sustainable farming practices are in demand.

6. Infrastructure Development
• El Salvador’s government is focusing on improving transport, water, and energy infrastructure.
• UK companies specializing in construction, engineering, and project financing have opportunities to engage in these projects.

Trade Environment

Main Export Partners
• United States, Guatemala, Honduras, Nicaragua, and Costa Rica.

Main Import Partners
• United States, China, Guatemala, Mexico, and Costa Rica.

Trade Policies
• El Salvador is part of the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR), promoting trade with the United States.
• The UK-Central America Association Agreement provides preferential access for goods and services, supporting trade between the UK and El Salvador.

Opportunities for UK Exporters to El Salvador

1. Financial Technology and Services
• As a pioneer in cryptocurrency, El Salvador offers opportunities for UK firms with expertise in digital wallets, blockchain development, and cybersecurity.

2. Infrastructure and Construction
• Projects in transportation, urban planning, and energy infrastructure create demand for UK firms specializing in engineering, architecture, and smart city solutions.

3. Renewable Energy
• The government’s commitment to green energy makes this sector ripe for investment. UK expertise in solar, wind, and geothermal energy is particularly relevant.

4. Tourism and Hospitality
• British businesses can tap into eco-tourism and luxury tourism opportunities as El Salvador attracts international visitors.

5. Education and Training
• Demand for English language training, vocational education, and partnerships with UK universities is growing, particularly in sectors like IT, engineering, and tourism management.

6. Healthcare and Pharmaceuticals
• Modernization of healthcare facilities creates opportunities for UK exporters of medical equipment, pharmaceuticals, and telemedicine services.

UK-El Salvador Trade Relations

1. Trade Agreement
• The UK-Central America Association Agreement ensures continued preferential access to Salvadoran markets for British exporters.

2. UK Exports to El Salvador (2023)
• Machinery and mechanical appliances: £15 million.
• Pharmaceuticals: £10 million.
• Automobiles: £8 million.
• Alcoholic beverages (e.g., whisky): £5 million.

3. Investment Climate
• The Salvadoran government is actively courting foreign investment, especially in technology, renewable energy, and tourism.
• Political stability and dollarization enhance the business climate, though challenges like bureaucracy and security concerns persist.

Market Entry Considerations

Challenges to Entry
1. Regulatory Environment: Complex bureaucracy can delay business operations.
2. Security Concerns: Crime remains a challenge, requiring careful risk assessment and mitigation.
3. Small Market Size: El Salvador’s population of 6.5 million limits the scale of potential demand compared to larger regional markets.

Recommendations for UK Exporters
• Collaborate with local partners to navigate the regulatory environment.
• Leverage government resources like the UK Department for Business and Trade (DBT).
• Highlight the quality and sustainability of British goods and services.

Recent Political Developments

Economic Policy
• The Salvadoran government has focused on promoting economic stability through dollarization, reducing public debt, and investing in tourism and infrastructure.
• Cryptocurrency adoption has drawn global attention, positioning El Salvador as a financial innovation hub.

Political Climate
• President Nayib Bukele’s administration remains popular domestically but faces international scrutiny over concerns about democratic norms and press freedom.
• Security reforms have significantly reduced crime rates, boosting investor confidence.

International Relations
• Relations with the United States remain strong, particularly in trade and migration.
• El Salvador continues to deepen ties with China, securing infrastructure investments and trade agreements.

Contact Information

British Embassy in San Salvador
• Address: Edificio Torre Futura, Nivel 8, Calle El Mirador y 87 Avenida Norte, Colonia Escalón, San Salvador, El Salvador.
• Phone: +503 2511 5757.
• Email: britishembassy.sansalvador@fcdo.gov.uk.

British Chamber of Commerce for Central America (Guatemala-based)
• Address: Avenida Las Americas 20-32, Zona 13, Ciudad de Guatemala, Guatemala.
• Phone: +502 2331 0867.
• Email: info@britchamca.com.

Proesa – Salvadoran Investment and Export Promotion Agency
• Address: Edificio Avante, Blvd. Orden de Malta, Santa Elena, Antiguo Cuscatlán, La Libertad, El Salvador.
• Phone: +503 2592 7000.

Conclusion

El Salvador offers diverse opportunities for UK exporters in sectors such as fintech, renewable energy, and tourism. While challenges like regulatory complexity and security concerns exist, the country’s dollarized economy, strategic location, and government efforts to attract foreign investment make it an attractive market.

By forming local partnerships, leveraging trade agreements, and focusing on high-potential sectors, UK businesses can successfully navigate the Salvadoran market and capitalize on its growing economy.