Identifier
Created
Classification
Origin
05SANSALVADOR2951
2005-10-31 17:06:00
UNCLASSIFIED
Embassy San Salvador
Cable title:  

2005 El Salvador CBI Report for USTR

Tags:  ECON ETRD ES 
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UNCLAS SECTION 01 OF 05 SAN SALVADOR 002951 

SIPDIS

STATE PASS USTR FOR RUSSEL SMITH
USDOC FOR 3134/USFCS/OIO/WH/MKESHISHIAN/BARTHUR
USDOC ALSO FOR 4332/ITA/MAC/MSIEGELMAN

E.O. 12958: N/A
TAGS: ECON ETRD ES
SUBJECT: 2005 El Salvador CBI Report for USTR

REF: SECSTATE 188288

UNCLAS SECTION 01 OF 05 SAN SALVADOR 002951

SIPDIS

STATE PASS USTR FOR RUSSEL SMITH
USDOC FOR 3134/USFCS/OIO/WH/MKESHISHIAN/BARTHUR
USDOC ALSO FOR 4332/ITA/MAC/MSIEGELMAN

E.O. 12958: N/A
TAGS: ECON ETRD ES
SUBJECT: 2005 El Salvador CBI Report for USTR

REF: SECSTATE 188288


1. In response to reftel, please see the following Embassy
El Salvador report for USTR on El Salvador's compliance with
requirements under the Caribbean Basin Initiative.

--------------
Commitment to WTO Obligations
--------------

2. El Salvador has committed to undertake its obligations
under the World Trade Organization (WTO) and plays an
important role as a regional leader on trade issues. The
Government of El Salvador (GOES) understands that trade is a
key to economic development and aggressively pursues
policies that will enhance trade. El Salvador was the first
country to ratify the Central American Free Trade Agreement
(CAFTA-DR) in December 2004. It has also signed free trade
agreements with Mexico, Chile, the Dominican Republic, and
Panama and is negotiating a free trade agreement with
Canada.

--------------
Intellectual Property Rights
--------------

3. El Salvador has continued to make progress in
protecting intellectual property rights and has taken steps
for further implementation of its obligations under the WTO
Agreement on Trade-Related Aspects of Intellectual Property
Rights (TRIPS). The 1993 Intellectual Property Promotion
and Protection Law and the Salvadoran penal code protect
intellectual property rights. Criminal enforcement of
intellectual property protection laws has greatly improved
in recent years, although in practice there continues to be
a very high rate of piracy especially for items such as
software. Acting on the basis of complaints, the Attorney
General's office conducts raids against distributors and
manufacturers of pirated CDs, cassettes, clothes, and
computer software. However, using the criminal and
mercantile courts to seek redress of a violation of
intellectual property can be a slow and frustrating process.
Pharmaceutical companies should be aware that acceptable
standards for test data exclusivity are not observed in El
Salvador. When CAFTA-DR is implemented, test data
exclusivity will be protected for a period of at least five
years.


4. The Law of Trademarks and Other Distinctive Signs,
approved in 2002, brings El Salvador closer to compliance
with TRIPS. The law reinforces established regulations for

the acquisition, registration, and protection of trademarks,
logos, statements, distinctive advertising signs, and
geographical indicators. The law also makes it much more
difficult to register a trademark already in use outside El
Salvador--particularly well-known marks--by requiring the
person attempting to register the mark to show that he is
authorized to do so.


5. El Salvador is a signatory of the Bern Convention for
the Protection of Literary and Artistic Works, the Paris
Convention for the Protection of Industrial Property, the
Geneva Convention for the Protection of Producers of
Phonograms Against Unauthorized Duplication, the World
Intellectual Property Organization (WIPO) Copyright Treaty,
the WIPO Performance and Phonograms Treaty, and the Rome
Convention for the Protection of Performers, Phonogram
Producers, and Broadcasting Organizations.


6. CAFTA-DR provisions will strengthen El Salvador's IPR
protection regime to conform with, and in many areas exceed,
WTO norms and will criminalize end-user piracy, providing a
strong deterrence against piracy and counterfeiting. CAFTA-
DR will require El Salvador to authorize the seizure,
forfeiture, and destruction of counterfeit and pirated goods
and the equipment used to produce them. It will also
mandate both statutory and actual damages for copyright
infringement and trademark piracy.

--------------
Workers Rights
--------------

7. The Constitution provides for the rights of workers and
employers to form unions or associations, and workers and
employers exercise these rights in practice; however, there
have been some problems. There have been repeated
complaints by workers, in some cases supported by the
International Labor Organization (ILO) Committee on Freedom
of Association (CFA),that the Government impeded workers
from exercising their right of association. Union leaders
asserted that the Government and judges used excessive
formalities as a justification to deny applications for
legal standing to unions and federations. Among the
requirements to obtain legal standing, unions must have a
minimum of 35 members in the workplace, hold a convention,
and elect officers. According to the Ministry of Labor
(MOL),30 percent of the country's workforce is unionized.


8. The Constitution and the Labor Code provide for
collective bargaining rights for employees in the private
sector and for certain categories of workers in autonomous
government agencies, such as utilities and the port
authority. The Ministry of Labor (MOL) oversees
implementation of collective bargaining agreements and acts
as a conciliator in labor disputes in the private sector and
in autonomous government institutions. In practice,
ministers and the heads of autonomous government
institutions often negotiate directly with labor
organizations, relying on the MOL only for such functions as
officially certifying unions. The Ministry has often sought
to conciliate labor disputes through informal channels
rather than attempt to enforce regulations strictly, which
has led to charges that the Ministry was biased against
labor. Labor leaders asserted that the Government had an
unfair advantage in arbitration of public sector labor
disputes because the Government holds two of three seats on
arbitration panels. (The employer, the workers, and the
Labor Ministry each name one representative to a panel.)


9. The law provides for the right to strike, and workers
have exercised this right. Fifty-one percent of all workers
in an enterprise must support a strike, including workers
not represented by the Union. Unions may strike only after
the expiration of a collective bargaining agreement or to
protect professional rights. Unions first must also seek to
resolve differences through direct negotiation, mediation,
and arbitration before striking. Union members must approve
a decision to strike through secret ballot. The Union must
name a strike committee to serve as a negotiator and send
the list of names to the MOL, which notifies the employer.
The Union must wait four days from the time the Ministry
notifies the employer before beginning the strike.


10. Public workers who provide vital community services are
not allowed to strike legally; however, the Government has
generally treated strikes called by public employee
associations as legitimate.


11. The Constitution prohibits forced or compulsory labor,
including by children, except in the case of natural
catastrophe and other instances specified by law, and the
Government has generally enforced this provision.


12. The constitution prohibits the employment of children
under the age of 14, although children 12 to 14 can be
authorized to do light work as long as it does not harm
their health and development or interfere with their
education. The law prohibits those under the age of 18 from
working in occupations considered hazardous. The Ministry
of Labor is responsible for enforcing child labor laws; in
practice, labor inspectors focused almost exclusively on the
formal sector, where child labor was rare, and in the past
few labor inspectors have dealt with child labor cases. The
MOL received few complaints of violations of child labor
laws, because many citizens perceived child labor as an
essential component of family income rather than a human
rights violation. The large informal sector often makes it
difficult to monitor practices or enforce labor laws.
Orphans and children from poor families frequently work in
the informal sector for their own or family survival as
street vendors and general laborers in small businesses.
Children in these circumstances often do not complete
schooling.


13. The law sets a maximum normal workweek of 44 hours. It
limits the workweek to no more than 6 days for all workers
and requires bonus pay for overtime. By law, a full-time
employee is paid for an 8-hour day of rest in addition to
the 44-hour normal workweek and receives an average of 1
month's wage a year in required bonuses plus 2 weeks of paid
vacation. Many workers worked more hours than the legal
maximum; some were paid overtime but others were not. The
law limits the workday to 6 hours (plus a maximum of 2 hours
of overtime) for youths between 14 and 16 years of age and
sets a maximum normal workweek for youths at 34 hours.
Wages paid depend on the sector, with agricultural workers
generally receiving lower wages than those in commercial
sectors. Within the agricultural sector those hired for
harvests earn a higher wage than general agricultural
workers.

-------------- --------------
Commitment to Eliminate the Worst Forms of Child Labor
-------------- --------------

14. El Salvador ratified ILO Convention 182, Worst Forms of
Child Labor, in 2000. According to the ILO, from October
2003 to March 2005 47,719 children have received medical,
psychological, recreational, vocational, nutritional, and
educational attention under ILO/IPEC programs; these
activities have helped keep children out of labor
activities. The ILO/IPEC in cooperation with the Ministry
of Labor has also provided 4,028 parents with training in
occupational skills, literacy, productivity, and medical
attention, among other areas.


15. For the period of 1999 through August 2005, the ILO
reported that 6,271 children have been withdrawn from child
labor. A total of 3,032 have been withdrawn from sugar cane
plantations, 1295 from fishing activity, 1156 from working
in coffee plantations, 394 from producing fireworks, 200
from scavenging in garbage dumps, and 194 from urban market
areas. During the same period, the ILO reported that they
in cooperation with the Ministry of Labor, have prevented
14,134 at-risk children from entering labor activities,
including 9,324 on sugarcane plantations, 2,801 in fishing
activities; 1209 on coffee plantations, 525 from garbage-
dump scavenging, 175 from fireworks production, 175 in urban
market areas, and 15 in domestic work.

--------------
Counter Narcotics Cooperation
--------------

16. El Salvador is not a drug-producing nation and
therefore does not require U.S. Government certification.
The Government of El Salvador does everything within its
power to meet the objectives of the 1988 UN Drug Convention
and interdict narcotics entering its territory. Details of
such activities are included in State Department's
International Narcotics and Law Enforcement annual
International Narcotics Control Strategy Report (INCSR).

--------------
Corruption
--------------

17. El Salvador tied Costa Rica as the Central American
region's least-corrupt nation in Transparency
International's 2005 Corruptions Perceptions Index (51 of
159 countries surveyed). Soliciting, offering, or accepting
a bribe is a criminal act in El Salvador. The Attorney
General has a special office, the Anticorruption and Complex
Crimes Unit, which handles cases involving corruption by
public officials and administrators. The Constitution also
established the Court of Accounts that is charged with
investigating public officials and entities and, when
necessary, passing such cases to the Attorney General for
prosecution. The government, with assistance from the U.S.
Agency for International Development (USAID),is developing
a government code of ethics and plans to open an ethics
office for government employees. Long-standing legislation
to establish this office in the Court of Accounts has failed
to gain sufficient support for passage.


18. When it occurs, corruption is usually at lower
governmental levels. However, a recent corruption scandal
involved senior officials of the Salvadoran water authority,
including its former president. There have been credible
complaints about judicial corruption. There is also an
active, free press that reports on corruption issues. El
Salvador ratified the Inter-American Convention Against
Corruption in 1998.

--------------
Transparent Governance
--------------

19. The laws and regulations of El Salvador are relatively
transparent and generally foster competition. Bureaucratic
procedures have improved in recent years and are streamlined
for foreign investors. In late 2004, the government passed
a Competition Law. Overall the Government of El Salvador
applies transparent, nondiscriminatory practices in
government procurement. Bids for large projects are listed
in newspapers or distributed to the international community.
However, short tender deadlines prevent meaningful
international competition in many cases. Smaller tenders
are listed on individual Ministry websites or are available
from ministry procurement offices.

--------------
Country Conditions
--------------

20. After more than a decade of systematic economic
reforms, crowned in January 2001 with the introduction of
the U.S. dollar as full legal tender, El Salvador has the
most open trade and investment environment in Central
America; in Latin America only Chile and Mexico are more
open. The country enjoys low inflation, low interest rates,
and an investment grade country risk rating. Nonetheless,
growth has been slowing since 1997 and has not been high
enough to raise per capita incomes. The Salvadoran
government views the expansion of trade and investment as
essential to the recovery of private sector led growth.


21. Since defeating the communist-dominated FMLN at the
polls in March 2004, President Saca's ARENA government has
continued to chart an economic course fundamentally based on
free markets and fiscal responsibility. However, Saca has
broken from previous administrations by proposing government
programs to address poverty and income inequality that would
in some cases include direct subsidies to the poorest
Salvadorans. Saca has also publicly discussed plans to
provide sectoral investment incentives-unthinkable for
previous administrations implementing strict laissez-faire
economic policy. The country is looking forward to CAFTA-DR
coming into force on January 1, 2006, and hopes it will
provide trade and investment that will spur increased growth
in the economy.


22. According to El Salvador's 1983 constitution, the
government may expropriate private property for reasons of
public utility or social interest, and indemnification can
take place either before or after the fact. There are no
recent cases of expropriation. In 1980, the banks were
nationalized, but beginning in 1990 they were returned to
private ownership. Business interests in general are
protected, and the government is working to privatize rather
than nationalize key sectors of the economy such as ports.
There are several disputes involving U.S. companies that
have reached the court system and are pending resolution.


23. The government of El Salvador is committed to free
trade and is party to a number of free trade agreements; the
most notable is CAFTA-DR, which is scheduled to enter into
force on January 1, 2006. USAID has committed to provide
trade capacity building assistance to the government to
facilitate trade through customs reform and modernization
and to help address some barriers to trade and investment.
El Salvador has lowered or eliminated tariff barriers on
many commodities, and CAFTA-DR will make permanent many of
the duty free provisions that were set to expire under the
Caribbean Basin Initiative (CBI). United States companies
have as much if not more access to markets in El Salvador
than other nations due to geographical proximity, and there
is no preferential treatment of products of any other
developed country to the detriment of U.S. commerce. CAFTA-
DR assures that the United States has equitable and
reasonable access to the Salvadoran market for goods and
services.


24. El Salvador's Investment Law does not require investors
to export specific amounts, transfer technology, incorporate
set levels of local content, or fulfill other performance
criteria. Foreign investors and domestic firms are eligible
for the same export incentives. Exports of goods and
services pay zero value added tax. Some government
contracting for large civil engineering projects requires
local content; however, the funds for many of these projects
are provided by multilateral development banks whose
procurement practices allow U.S. companies to participate.


25. The Government of El Salvador understands the need for
trade to improve the economic conditions of its people. It
recently sent a trade mission to the United States on a
"CAFTA-DR Tour" to create business contacts in appropriate
industries and to attract business and investment to El
Salvador. PROESA, the National Investment Promotion Agency
of El Salvador, has planned a further series of seminars in
the United State featuring Vice President Escobar in order
to attract additional foreign direct investment. Several
trade delegations of business leaders have recently traveled
to El Salvador researching business opportunities, including
19 companies that accompanied Secretary of Commerce
Gutierrez on his October visit.


26. The open trade policies of El Salvador benefit the
revitalization of the CBI region as a whole by providing an
open market for imported products. The earthquakes of 2001
caused a slowdown in growth within El Salvador, but the
country continues to be an active partner in trade with the
region. It cooperates with the United States in
administration of the Caribbean Basin Economic Recovery Act
(CBERA),as well as with other countries in the trade pact.


27. The government of El Salvador signed an agreement with
the United States in 1911 allowing for extradition of each
other's citizens; this treaty is still in force and in use.


28. Geoffrey Schadrack is the officer responsible for this
report, tel: 503-2501-2052, fax: 503-2228-1857, email:
schadrackgf@state.gov. However, follow-up questions should
be directed to David Krzywda, tel: 503-2501-2053, fax: 503-
2228-1857, email: krzywdada@state.gov.
Barclay