Looking for potential business opportunities in El Salvador? Biz Latin Hub CEO Craig Dempsey discusses why this Central American country could be a pioneering place to invest in.
El Salvador is an overseen and forgotten-about country when it comes to market opportunities. Even so, it’s a nation with plenty of investment opportunities for international business. With favorable policies on foreign investment, share capital, and company formation, potential business owners in Central America should look at opportunities to incorporate a company in El Salvador.
With its most significant exports and expertise being textile, rubber, and plastic, there is no doubt El Salvador has many manufacturing opportunities. Increasing trade deals and an open economy give plenty of market space for your business to invest here.
Considering El Salvador’s resources, and the fact that it’s an undervalued and beautiful country, your business could become market-leading within your sector. This article gives you some critical points to consider about the Salvadoran market and its investment opportunities.
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Four critical points about the Salvadoran market
- El Salvador scores high in market organization due to its dollarized economy, which allows a higher level of financial flexibility. Market organization is the relation and exchange within the market determined by events and behavioral adaptations. This high score is also due to El Salvador’s constitutional restriction against monopolies that prohibit price-fixing. This improves competition within the country.
- El Salvador scores low in the sustainability aspect, due to a need for more consistency with legislation and the political framework. Their policies focus on restoration using a net-zero strategy with various stakeholders. Before incorporating a company in El Salvador, it is vital to consider skewed educational levels. This might affect your recruitment process in El Salvador.
- Recent studies have shown that many Salvadorans favor an accessible, socially responsible market economy. It’s important to note, though, that El Salvador is still a country with relatively high political instability. Structures can change here. Moreover, the market lacks Foreign Direct Investment (FDI), and the government has limited monetary and fiscal policies.
- When it comes to international relations, El Salvador scores quite well. Both the United States and the European Union have invested in education, research and development, and local companies. The government is also reliable in complying with the agreements made. That means international resources are available, and the market tends to abide by the agreements made. Especially agreements made with foreign institutions and companies.
Top investment aspects to consider when pursuing business opportunities in El Salvador
- El Salvador has no policies that go against foreign investors. It boasts a decent, pre-developed policy framework when it comes to FDI. That said, El Salvador doesn’t have a lot of experience with FDI. This could affect the ease of your investments in the country. When entering the Salvadoran market, this is an essential consideration.
- El Salvador has many bilateral investment treaties with different countries around the world. This includes the majority of the European Union and Latin America, which could allow you to expand your business. Some critical aspects of these treaties include intellectual property rights, contracts, investments, and companies.
- The legal regime and governance are quite transparent compared to other countries in the region. But as already mentioned, the Salvadoran market still needs to gain more experience in FDI. Complex applications and regulatory actions are still time-consuming here. That said, simplified procedures for FDI do exist. Policies in El Salvador favor FinTech and online businesses, as the government sees these as vital aspects of the future economy. It aims to make the economy proliferate, as well as incorporating lots of national companies and allow a high amount of FDI. Likewise, government finances are also quite transparent compared to other countries in the region. Hence, your company can analyze, evaluate, and consider the executive budget proposals for the country. You can also access strategic governmental documents that might affect business predictability.
- It is vital to know about the trade zones in which you operate. In El Salvador, 17 free trade zones cover a wide span of industries, such as textile and agriculture. This gives plenty of opportunities for your business and can even make the market entry or investment more comfortable.
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What does it mean for your business?
El Salvador’s current goal is to restore the agricultural sector whilst reaching net-zero.
It is, without a doubt, a beneficial market for international businesses experienced in agriculture, technology, and manufacturing. Companies with advanced agricultural technology that might be sustainable to a higher degree would enjoy the current market situation.
With most of the population living in rural areas, it gives plenty of opportunities to improve the agricultural sector and local living conditions. It would most likely be beneficial for your company to be part of this transition. With El Salvador affected by the pandemic and several consequences of climate change, there is a high demand for sustainable technology and knowledge sharing within the agricultural and manufacturing industries.
Due to its preliminary FDI policies, the future of international market entries in El Salvador remains unclear. The signs are, though, that the government will continue favoring FDI and an open economy.
International businesses might overlook El Salvador because of its “bad reputation”. But the country shows a real sectoral development and political stability that does not lead to any significant concerns when entering the market.
Biz Latin Hub can provide hiring & PEO services in El Salvador
Whatever business opportunities in El Salvador you’re pursuing, Biz Latin Hub is ready to help you find and hire the required staff. With our complete portfolio of back-office support, including high-quality corporate legal and accounting services, we can be your single point of contact to support your market entry and ongoing operations in El Salvador.
Reach out to us for further advice.
Craig Dempsey is the co-founder and chief executive officer of the Biz Latin Hub Group, an organization dedicated to assisting investors in Latin America and the Caribbean.