El Salvador a Country of Opportunities- Country Presentation - December 2013

EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR

A country of opportunities

December 2013

1


EL SALVADOR Ahuachapán

Santa

Ana

Chalatenango

Sonsonate San

Vicente

Cabañas

La Paz

La

Libertad

San

Salvador

Usulután San

Miguel

Morazán

La

Unión

Gulf of

Fonseca

islands

Capital San Salvador

Official Language Spanish

Area 21,041 Km2 / 8,124 sq mi

Population 6.2 million (2012)

GDP Nominal (2012) 23,865 million USD (2012)

Currency $USD

Time Zone UTC -6

El Salvador

2


• Solid economic environment

• International view of El Salvador

• Commercial openness & strategic location

• Investment Opportunities in El Salvador

El Salvador

3


Central American Market

Country

EL SALVADOR GUATEMALA HONDURAS NICARAGUA COSTA RICA PANAMA

Central America

Capital San Salvador Guatemala City Tegucigalpa Managua San Jose Panama City

Official Language Spanish Spanish Spanish Spanish Spanish Spanish

Area (‘000 Km2) 21.0 108.9 112.1 130.4 51.1 75.4 498.9

Population (‘000,000) 6.2 15.1 8.2 6.0 4.7 3.7 43.8

GDP PPP 2012 (Bn USD)

46.3 78.7 37.8 26.7 58.8 57.1 305.4

GDP per capita PPP (USD) 7,438 5,209 4,610 4,458 12,606 15,617 6,966.2

Average inflation rate 2008-2012

2.7% 4.8% 6.3% 8.8% 6.6% 4.9%

Currency Dollar USD

Quetzal GTQ

Lempira HNL

Cordoba NIO

Colon SJC

Dollar USD

Time Zone UTC -6 UTC -6 UTC -6 UTC -6 UTC -6 UTC -5

Source: Multi –Purpose Household Survey, Central Reserve Banks, and IMF.

70% of the population and commerce concentrates in ES, GT, and HN.

4


Fringe benefits represent 19.28% of nominal wage

* Effective since July 2013 ** Provision in case of termination of contract *** Applies to companies with more than 10 employees Source: Ministry of Labor El Salvador

Sector Monthly

Minimum Wage* Daily Wage

Agriculture $ 109.20 $ 3.64

Maquila $ 195.00 $ 6.50

Industry $ 228.00 $ 7.60

Commerce & Services $ 233.10 $ 7.77

0%

20%

40%

60%

80%

100%

120%

140%

1

Nominal Wage 100%

Fringe Benefits + Annual Severance Provision

27.61%

Social Security (ISSS) 7.50%

Retirement Fund (AFP) 6.75%

2.78% Annual Severance

Provision** 8.33%

Fringe benefits paid by the employer (19.28% of nominal wage)

Christmas

Bonus

Vacations paid yearly

1.25%

Training Fund

(INSAFORP)***

1.00%

5


29.6

28.0

25.1

23.7

21.6

20.7

0 10 20 30

Costa Rica

Panama

El Salvador

Nicaragua

Honduras

Guatemala

M 23.7

F 26.6

EAP: 2,724,754

years

Young Population

Average Age (Estimates)

Source: Multi-Purpose Household Survey 2012, CIA World Factbook 6

0.0% 5.0% 10.0% 15.0%

0 - 4

5 - 9

10 - 14

15 - 19

20 - 24

25 - 29

30 - 34

35 - 39

40 - 44

45 - 49

50 - 54

55 - 59

60 - 64

65 - 69

>= 70

Female 52.8%

0.0%5.0%10.0%15.0%

Male 47.2%


El Salvador

• Solid political & economic environment




7


International view of El Salvador

Index El Salvador Guatemala Honduras Nicaragua Costa Rica Panama

Human Development Index (2012)

107 133 120 129 62 59

Index of Economic Freedom (2013)

53 85 96 110 49 71

Ease of Doing Business (2014)

118 79 129 124 102 55

Freedom in the World (2013)

Free Partially

Free Partially Free

Partially Free

Free Free

Rankings (2013-2014) • Global

Competitiveness • Procedures to start

a business • Infrastructure • Roads • Airports • Mobile Telephones • Taxes

97

88 72 58 56 31 61

86

129 78 90 71 32 85

111

135 115 114 97

102 80

99

88 105 79 99

107 132

54

129 76

125 57 42

125

40

47 37 48 5 4

89 8


El Salvador





9


Legal Framework

Investment Law

International Services Law

Tourism Law

Free Zones Law

• Equal treatment to national & international investors

• Liberty to transfer funds and profits abroad

• Access to local financing

• Incentives to strategic sectors (contact centers, BPO’s, maintenance and repair of airplanes, logistics, etc.)

• Total permanent tax exemptions (income and municipal taxes) and import duties.

• Incentives to industrial activities

• Tax exemptions (income, municipal taxes and real estate transfers) and import duties.

• Incentives to industrial activities

• Total permanent taxes exemption (income and municipal taxes) and import duties.

Renewable Energy Incentives Law

• Customs duties exemption on imports of machinery, equipment and materials

• Income tax exemption for a period of 5 to 10 years

• Total tax exemption on revenues from the sale of Certified Emission Reductions

10


Commercial Openness Access to a potential market of 1,200 million people

11


Apparel 37%

Agroindustry 16%

Food and beverages

8%

Plastics and rubber 6% Paper products

5% Metal-mechanic industry

5%

Machinery and mechanical

products 5%

Chemical products 5%

Textiles 4%

Mineral products

4%

Others 5%

United States 46%

Central America 38%

Panama 2%

Mexico 2%

Dominican Republic

2%

Spain 1%

Germany 1%

Canada 1%

Chile 1%

Japan 1%

Others 5%

Main Trade Partners*

Main Export Products*

Source: Central Reserve Bank

Main Trade Partners and Export Products

El Salvador Exports 2012 USD 6,659 million

Goods: USD 5,339 million Services: USD 1,320 million

12 *The trade partners and export products´ share are calculated as a percentage of total goods exports for 2012.


Main airlines serving El Salvador

Strategic Location

Main Freight Companies

Air Cargo • DHL • UPS • Arrow

Regular charter flights

Maritime • MAERSK • CROWLEY • MSC • SEABOARD

• NIPPON • CSAV • APL • Hamburg Süd

Close to key markets • Closeness to the vital maritime

routes.

• A natural bi-oceanic logistics

corridor.

• Container terminal ready for

post panamax ships.

• A dominant airport certified A1

by the FAA linking important

cities.

• Direct flights to 33 different

destinations and excellent air

traffic connections.

(Montreal, Toronto)

13


Strategic Location


Strategic Location


El Salvador





16


Foreign Direct Investment Stock 2012 USD 8,634.9 million (36.2 % of GDP)

17

http://www.theofficegurus.com/

http://www.theofficegurus.com/

http://www.transactel.net/


Specialized Textiles Aeronautics Electronics

Medical Devices Offshore Business Services Health Services

Tourism Agro-industry Logistics and Infrastructure Footwear

Investment Opportunities

18 18


El Salvador offers an aircraft

maintenance, repair and overhaul

(MRO) industry for commercial aircraft,

which has successfully placed the

country on the global aviation map.

The successful operations of Aeroman,

a member of Canadian MRO group

Aveos, are widely recognized within the

emerging Latin American aeronautical

clusters.

Aeronautics Compliance with international certifications ensuring the highest quality required in aircraft maintenance services.

19


El Salvador: Quality in aircraft maintenance services Technical Universities and Institutes have specialized curricula

developed in conjunction with the private enterprise to ensure the availability of skilled labor.

In addition to maintenance services for commercial aircraft, a variety of other companies in the emerging aerospace clusters offer the following services:

• R44 helicopter and corporate airplane maintenance.

• Distribution and warehousing services for aircraft parts.

• Component maintenance shops.

• Ground Services.

• Light sports aircraft (LSA) airframe, wing tip, and engine part manufacturing in composite materials, etc.

• Aircraft harness system assembly.

• Refurbishment on older Light Sports Aircraft (LSA) models.

A Free Trade Zone Law and an International Services Law which provides tax incentives to these types of manufacturing.

Available land for the development of industrial operations next door to the International Airport of El Salvador, under Public Private Partnership (PPP) mode.

Investment Opportunities in Aeronautics:

• Commercial aircraft maintenance service operations.

• R44 helicopter maintenance operations.

• Light Sports Aircraft (LSA) airframe part manufacturing.

• Painting and maintenance of commercial aircraft interiors. 20


For investors in agro industry and

entrepreneurs who seek a platform to produce and export, El Salvador offers

attractive opportunities in the following sectors:

• Fruit Farming

• Aquaculture

• Ornamental plant farming

• Food & Beverages

These sectors are highly favored by

good weather and easy access to regional and international markets.

Agroindustry Climate, tax incentives and a platform connected

to additional markets.

21


El Salvador: A production and export platform

• El Salvador possesses suitable climatic and soil conditions for fruit and ornamental plant farming.

• Suitable soil and climatic conditions for the production of a wide variety of tropical fruits.

• The country has optimal interconnections for the trade and transport of agro industrial products.

• Availability of water resources for the sustainable development of aquaculture.

• Negotiated trade agreements open the possibility for the sector to expand to regional and international markets.

• Competitive labor costs.

Investment Opportunities in Agro Industry:

• Aquaculture Sector: Development of the production chain through the supply of young fingerlings, feed and other inputs to attain productivity and quality of aqua cultured products.

• Fruit Farming Sector: Development of supporting industries for the provision of supplies, equipment, quality vegetative materials and processing technology for the expansion of crops of avocado, Persian lime, coconut and organic products.

• Processed Foods Sector: Opportunities in the development of complementary industries in a sector in continuous growth in areas such as: packaging, process technology, machinery and equipment. 22


International medical device

manufacturing companies will

find in El Salvador a strategic

partner to be used as a

platform for export to markets

in North America, Central

America and the Caribbean.

Medical Devices Rapid access to markets

23


El Salvador: A strategic partner in medical devices • El Salvador has tax incentives that encourage the

establishment of foreign companies within a regulatory framework.

• Investors enjoy rapid access to markets with a potential of 1,200 million people through the existing FTAs and thanks to its strategic location.

• The country has focused on developing industrial and service parks boosting industrial growth, especially in the textile and plastics sectors.

• El Salvador is a pioneer in Latin America in the training of professionals in prosthetics and orthotics, putting a highly skilled workforce at the disposal of businesses.

Investment Opportunities in Medical Devices: • Disposable laboratory and diagnostic equipment.

• Hospital linen and disposable clothing.

• Hospital furniture.

• Orthopedic products.

• Packing and packaging of disposable medical devices. 24


El Salvador offers a successful platform for

electronic component manufacturing, with

over 30 years of proven credibility. The

country has experience in the manufacture of

ceramic and tantalum capacitors in

compliance with required international

standards.

This has enabled the country to acquire and

implement state-of-the-art technology and

know-how.

The high quality, efficiency and productivity

of operations in El Salvador have ensured the

transfer of manufacturing plants from

England, the Czech Republic, Mexico, China

and the U.S., achieving continued expansion

in all processes.

Electronics High productivity and quality manufacturing at competitive costs.

25


El Salvador: A platform for electronic components manufacturing

• Setting of strategic alliances with academia to ensure availability of skilled workforce.

• E-cluster in formation around the AVX Kyocera Company in El Salvador.

• Wide local supply chain in place in the areas of metalworking, plastics, support systems, automation systems, engineering, transport and chemicals, among others.

• Existence of a Law on Free Zones offering tax incentives to this type of manufacturing.

• The best international airport in the region just 35 minutes from San Salvador, and 2.5 hours from Miami.

• Available land for the development of industrial operations next door to the International Airport of El Salvador under Public Private Partnership (PPP) mode.

• Electrical network system with strong capacity for expansion.

Investment Opportunities in Electronics: • Electronic component manufacturing and production.

• Electronic equipment and parts assembly.

• Cell phone electronic component repair. 26


For offshore business service firms seeking

to enter markets in the U.S. and Spanish-

speaking countries, El Salvador is a strategic

partner for providing quality multi-region

business services.

Our dynamic business environment,

strategic location for near-shoring, time-

zone complementarity and the outstanding

performance of our bilingual human

resources (English/Spanish), makes us a

strategic platform for companies offering

global services.

The modern and advanced local

telecommunications infrastructure ensures

the delivery of quality services and cost-

effective location for this industry.

Offshore Business Services Cost effective near-shore location, based on a state of the art

telecommunications platform which guarantees your global offer.

27


El Salvador: Complementary strategic partner for multi-region operations • Strategic location in relation to English- and Spanish-speaking

customers (shorter flight times from North and South America).

• Same time zone for primary customers (U.S. and Canada) and Spanish-speaking markets (91% of the global Spanish-speaking population).

• Time-zone complementarity for customers in Europe and Asia (24/7 possibility).

• Friendly, hardworking and service-oriented people with neutral English and Spanish accents.

• Exceptional performance against key indicators (KPIs) such as Sales, C-Sat, FCR, etc.

• Complementary service to other geographical areas and high-end front-office services.

• Young and committed workforce (60% of the population under 35 years).

• Cultural affinity of the workforce with priority markets.

Investment Opportunities in Offshore Business Services: • Voice Business Process Outsourcing (Call Centers)

• Non-voice Business Processes Outsourcing (BPOs)

• Shared Service Centers (KPOs) 28


El Salvador offers the opportunity to

invest in health establishments

catering to patients living in the U.S.

and Canada, taking advantage of the

geographical proximity to those

markets, the low costs of health

professionals and the fast connections

between medical facilities and

enviable landscape sites..

Health Services Geographical proximity to the main countries of origin of medical

tourism, offering quality services at low costs

29


El Salvador: Strategic location and excellent connectivity between touristic sites • The strategic location of El Salvador and the presence of TACA

airline's hub in the country provide excellent air connectivity to the U.S. and Canada (2 hours from Miami and 5 hours from Los Angeles by direct flight).

• The best road infrastructure in the region allows visiting the wide variety of tourist attractions the country offers in a short time (beaches, lakes, volcanoes, colonial cities, etc.) .

• The community of Salvadorans abroad, about 2 million people, is A natural market who constantly visits the country and buys health treatments locally.

• The existence of qualified medical professionals who have earned postgraduate degrees abroad offer their services at very competitive costs.

• There is a Law on International Services that encourages the establishment of health centers.

Investment Opportunities in Health Services: • Hospitals

• Specialized clinics

• Rehabilitation centers

• Medical spas

• Hospitals Resorts for treatment of chronic diseases. 30


El Salvador offers attractive

investment opportunities to

specialized textile and clothing

companies wishing to enter the

regional Central and North American

markets based on the favorable tariff

conditions of FTAs with the U.S.

(CAFTA) and the European Union.

El Salvador offers a vertically

integrated industry, which promotes a

competitive high-fashion, high-

turnover garment manufacturing

industry.

Specialized Textiles and Apparel Vertically integrated industry with easy access to markets

31


El Salvador: Specialized textile and apparel sector environment

• More than 260 textile and apparel companies have established themselves in the country, including internationally recognized companies such as Pettenati, George C. Moore, UNIFI, Swisstex, CS America and APS.

• The rule of origin granted by the CAFTA-DR Free Trade Agreement allows free access for textiles manufactured in the region with yarn produced in Central America.

• A cluster of companies that use synthetic fibers (nylon, polyester, micro fiber, among others –products paying a 32% tariff when imported from Asia through the U.S.) is in the process of consolidation.

• The country offers a wide variety of services, including embroidery, industrial laundry, dyeing and finishing, cutting and packing, which have been a great support to the manufacturing operations of companies such as HBI, Fruit of the Loom, Adidas and Lacoste, among others.

• The evolution of the manufacturing scheme from "maquila" to "full package" has developed the supply chain through materials distribution centers, required for vertical integration and sustainability of the industry.

Investment Opportunities in Specialized Textiles and Apparel: • Manufacture of yarn and fabrics.

• Manufacture of knitted garments with accessories and embellishments (embroidery, screen printing, heat transfers, etc.).

• Manufacture of garments included in the “Single Transformation” category: bras, girl dresses, boxer shorts, sleepwear and luggage. 32


El Salvador offers attractive tourism projects

in various stages of development that take

advantage of a wide array of attractions

located close to each other (surf spots,

beaches, mountains, lakes, volcanoes).

The country has a historical past inherited

from the Maya, a pleasant climate all year

round, competitive pricing of land, low

construction costs and proximity to

important markets of origin of international

tourism.

Tourism Surf, fishing, adventure tourism and the

Maya world ... all in one place.

33


El Salvador: Variety of close-by touristic attractions

• Tax incentives regulated by a Law on Tourism.

• Foreign investors have the opportunity of acquiring property in their own name.

• Competitively priced land and low construction costs.

• Rapid access to a variety of tourist attractions.

• Short flight times from North and South America.

• The International Airport of El Salvador handles more than 470 arrivals and departures every week.

• Pleasant climate all year round.

• Warmth and friendliness in tourist service.

Investment Opportunities in Tourism: • Mixed-use developments .

• Hotels: Urban, Resort, Boutique, Bed & Breakfast, Eco-lodge, Hostels.

• Vacation homes.

• Properties with tourism potential

• Marinas 34


For companies producing consumer

goods seeking to sell to larger markets,

El Salvador, the ‘logistics hub of Central

America,’ provides air and seaport zones

with tax incentives for manufacturing,

logistics and distribution, becoming a

gateway to U.S., Asian and European

markets.

El Salvador has the infrastructure,

geographical proximity and free trade

agreements to ensure easy and timely

access to large markets.

Logistics Easy and timely access to large markets.

35


El Salvador: Strategically located and available infrastructure

• Convenient location: Proximity to the trans-Pacific route (connecting Asia and the Americas); proximity to the Panama Canal (1. 5 days by sea); rapid maritime access to U.S. markets on the East and West coasts; and rapid road access to the Southern and Eastern U.S. markets.

• Maritime infrastructure available to receive large ships: La Union Centroamericana Port with the potential to become the leading container port on the Pacific coast of Central America.

• Land connectivity: The port is located 371 km. away from Puerto Cortes (Honduras Atlantic Coast); 8 hours from the border with Mexico; and 34 hours from the U.S. border (Texas).

• Air connectivity with rapid access to U.S. markets from the International Airport of El Salvador. Approximate flight durations: Miami: 2:30 hours; Los Angeles: 4:00 hours; Houston: 4:00 hours; New York: 5:00 hours; Panama: 1:30 hours.

Investment Opportunities in Logistics: • Logistics activity zones in the proximity of seaports.

• Airport logistics center

• Distribution centers

Puerto de Acajutla, located in Sonsonate Puerto La Unión, located in La Unión

36


El Salvador is an ideal destination for

companies wishing to do footwear

manufacturing operations at competitive

costs, and offers:

FTAs with flexible rules of origin and

preferential access conditions

Attractive tax incentives, and

A productive and young labor force

El Salvador's commitment is to develop a

vertically integrated production chain,

ranging from the manufacture of

components to the production of

finished footwear.

Logistics Easy and timely access to large markets.

Footwear A platform to export to large markets.


El Salvador: An ideal platform for assembly and export of footwear

38

Sector opportunities

• Manufacturing and production of footwear.

• Assembling components of footwear.

• Manufacturing of components and supplies footwear industry.

Advantages: • The Free Zones Law offers attractive tax incentives to this type of

manufacturing.

• Availability of a competitive, productive and committed workforce.

• There is a developed industry with over 50 years of experience and with the participation of foreign investors such as Nanyang Footwear, that already has assembly operations in the country.

• The FTAs signed by El Salvador provide flexible rules of origin to facilitate the entry of this product in important markets:

• The rule of origin issued by the United States allows the manufacturer to incorporate prefabricated components in third countries and access the market without tariffs. This rule of origin does not set a minimum requirement of value added.

• The Association Agreement with the European Union gives free and immediate access to this market for footwear products manufactured in El Salvador. The rules of origin allow use of third-country raw materials and parts, and export the final product duty free.

• The FTA with Mexico allows the aggregation principle to meet the requirement of 50% of national value added.


Information on investment opportunities in strategic industries, as well as of the incentives and investment advantages of those industries.

Statistics and customized industry information.

Business opportunities

Organization, logistics and coordination of tailored agendas for visits to El Salvador. Specialized support before, during and after commercial and recognition visits.

Assistance to potential investors in the generation of local business contacts.

Comprehensive support in procedures required to establish or expand business operations in the country.

Advisory and technical assistance

Services provided by PROESA

Strategic information

Information on set-up and operational costs, regulations, availability of human capital, business climate and any other information required in the country evaluation process.

Personalized attention to specific enquiries.

39


EXPORT AND INVESTMENT PROMOTION AGENCY OF EL SALVADOR Edificio D'Cora Primer Nivel, Urb. Santa Elena, Antiguo Cuscatlán, La Libertad, El Salvador, C.A.

www.proesa.gob.sv

40

@Proesa_sv

[email protected]

+503 2241 6400

PROESA El Salvador

https://twitter.com/Proesa_sv

https://www.youtube.com/user/comunicacionesproesa/

Investor Relations

El Salvador a Country of Opportunities- Country Presentation - December 2013