Identifier
Created
Classification
Origin
06SANSALVADOR197
2006-01-25 21:11:00
UNCLASSIFIED
Embassy San Salvador
Cable title:  

EL SALVADOR: 2006 INVESTMENT CLIMATE STATEMENT

Tags:  EINV ECON ETRD EFIN KTDB ES OPIC USTR 
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UNCLAS SECTION 01 OF 09 SAN SALVADOR 000197 

SIPDIS

STATE FOR EB/IFD/OIA
STATE PASS USTR
USDOC FOR 4332/ITA/MAC/MSIEGELMAN
USDOC FOR 3134/ITA/USFCS/OIO/MKESHISHIAN/BARTHUR

E.O. 12958: N/A
TAGS: EINV ECON ETRD EFIN KTDB ES OPIC USTR
SUBJECT: EL SALVADOR: 2006 INVESTMENT CLIMATE STATEMENT

REF: STATE 250356

UNCLAS SECTION 01 OF 09 SAN SALVADOR 000197

SIPDIS

STATE FOR EB/IFD/OIA
STATE PASS USTR
USDOC FOR 4332/ITA/MAC/MSIEGELMAN
USDOC FOR 3134/ITA/USFCS/OIO/MKESHISHIAN/BARTHUR

E.O. 12958: N/A
TAGS: EINV ECON ETRD EFIN KTDB ES OPIC USTR
SUBJECT: EL SALVADOR: 2006 INVESTMENT CLIMATE STATEMENT

REF: STATE 250356


1. Per reftel, following is Embassy San Salvador's 2006
Investment Climate Statement.

OPENNESS TO FOREIGN INVESTMENT
--------------

2. The Government of El Salvador views foreign investment
as crucial for economic growth and development and has taken
numerous steps in recent years to improve the investment
climate. However, the legal system's failure to enforce
commercial law consistently or promptly is a black mark on
El Salvador's otherwise positive record for encouraging
investment. A free trade agreement among Central American
countries, the Dominican Republic, and the United States
(CAFTA-DR) includes an investment chapter and other chapters
that, when implemented, will strengthen investment dispute
resolution in El Salvador.


3. In 2005, the Ministry of Economy estimated that
foreigners invested $602 million in El Salvador in sectors
such as hotels, apparel assembly, telecommunications, and
beverages. The government has announced a medium-term
objective to become a logistics/shipping hub for Central
America, and construction of a deep-water port in the Gulf
of Fonseca is underway. Salvadoran Central Reserve Bank
statistics show that foreign investment stock has steadily
increased, reaching $3.2 billion by June 2005, up from $1.97
billion in 2000. Companies from many countries--including
the United States, France, Spain, Canada, Germany,
Luxembourg, the United Kingdom, Korea, Taiwan, Chile,
Guatemala, Venezuela, and Mexico--have invested in El
Salvador.


4. The principal laws governing foreign investment in El
Salvador are the Investment Law (para. 5),Export
Reactivation Law (para. 24),and Free Trade Zones Law (para.
20). Other laws complementing the basic legal framework for
investment include the Monetary Integration Law (para. 12),
Banking Law (para. 39),Insurance Companies Law (para. 40),
Securities Market Law (para. 41),intellectual property laws

(paras. 30-32),and special legislation governing
privatizations (paras. 7-10). A 2004 Competition Law
establishes a Superintendency for Competition to investigate
and discipline anticompetitive practices (para 36). In
December 2005 the government enacted a tourism law providing
specific incentives for investment in that sector (para.
25).


5. The 1999 Investment Law grants equal treatment to
foreign and domestic investors. With the exception of small
businesses (10 or fewer employees and sales of less than
$68,571/year),foreign investors may freely establish
businesses in El Salvador; investors who begin operations
with 10 or fewer employees must present plans to increase
employment. The Investment Law created the National
Investment Office (ONI) at the Ministry of Economy that
serves as a one-stop shop to facilitate the registration of
new investments in the country, a process that the World
Bank estimates takes 40 days. The law establishes
procedures to resolve disputes between foreign investors and
the government and eases residence requirements for foreign
investors who make significant investments. It also
provides that underground resources (minerals) belong to the
state, which may grant concessions for their exploitation.


6. In 2004, the government reorganized its trade and
investment promotion agencies under the Investment and
Exports Promotion National Commission (CONADEI),headed by
the Vice President. The National Investment Promotion
Agency (PROESA) organizes investment promotion tours
overseas and provides information and facilitation services
in El Salvador. The National Agency for Export Promotion
(EXPORTA) focuses on identifying niche markets for
Salvadoran exports, especially nontraditional goods, and
providing trade capacity building to new exporters.


7. The government launched its privatization process in
1990 with the privatization of most of the banking system.
Privatization has played an important role in attracting
foreign investment, especially in electricity generation and
distribution, telecommunications, and pension funds.


8. The Salvadoran electricity sector is divided into
generation, transmission, and distribution subsectors. The
electricity generation market includes CEL, the state-owned
energy company; two U.S. investors, one of which bought
three thermal generation plants from CEL in 1999; and La
Geo, a private-public geothermal power generation company,
and other minor generators. The state-owned ETESAL provides
transmission services. Investors from the United States,
Chile, and Venezuela bought controlling shares in four
electricity distribution companies when the government
privatized the sector in 1998; two U.S. investors now
provide distribution services for the country. The
Transaction Unit (UT),owned by market participants,
operates the wholesale energy market.


9. Privatization and foreign investment have modernized
Salvadoran telecommunications. The only remaining
restrictions for foreign investors are on free reception
television and AM/FM radio broadcasting, where foreign
ownership cannot exceed 49 percent of equity. In 1998,
France Telecom purchased 51 percent of CTE, the state-owned
fixed-line telephone firm, for $275 million, and Telefonica
of Spain paid $41 million for 51 percent of the state-owned
wireless firm. The government sold additional shares of the
state telephone companies on the Salvadoran securities
exchange in 1999. In 2003, America Movil, the Mexican
telecommunications giant, bought France Telecom's shares in
CTE and other shares owned by the Salvadoran Government;
including a December 2004 purchase of additional shares, it
now owns 94 percent of CTE. A U.S. long distance telephone
service provider has complained that CTE refuses to sign an
interconnection agreement with it on terms already extended
to another market entrant, as required by Salvadoran law.


10. The government created five privatized pension funds in
1998 with the participation of Citibank, Spanish banks Banco
Bilbao Vizcaya and Argentaria, and two local investors.
After considerable consolidation in the sector, two funds
remain, both owned by local investors.

CONVERSION AND TRANSFER POLICIES
--------------

11. There are no restrictions on transferring funds
associated with investment out of the country. Foreign
businesses can freely remit or reinvest profits, repatriate
capital, and bring in capital for additional investment.
The 1999 Investment Law also allows unrestricted remittance
of royalties and fees from the use of foreign patents,
trademarks, technical assistance, and other services.


12. The Monetary Integration Law "dollarized" El Salvador
in 2001, and the U.S. dollar now freely circulates and can
be used in all transactions; one objective of dollarization
was to make El Salvador more attractive to foreign
investors. El Salvador has long had a freely convertible
currency and since 1994 the colon traded at 8.75 per dollar.
The Monetary Integration law fixed the colon at that rate.
While prices are often listed in both currencies, the colon
is seldom used. U.S. dollars account for nearly all
currency in circulation. Salvadoran banks, in accordance
with the law, must keep all accounts in dollars.
Dollarization is supported by family remittances--almost all
from the United States--that were $2.8 billion in 2005, up
from $2.4 billion the year before. As of the end of
November 2005, the Central Reserve Bank reported
international reserves of $1.83 billion.

EXPROPRIATION AND COMPENSATION
--------------

13. El Salvador's 1983 constitution allows the government
to 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, a rural/agricultural land
reform established that no single natural or legal person
could own more than 245 hectares (605 acres) of land. In
1980, the banks were nationalized, but beginning in 1990
they were returned to private ownership.


14. A 2003 amendment to the 1996 Electricity Law contains a
provision that, while not authorizing expropriation,
requires energy generating companies to obtain government
approval before removing energy generating assets from the
country. According to the government, this provision of the
law is intended to prevent energy supply disruptions.

DISPUTE SETTLEMENT
--------------

15. While foreign investors can seek redress of commercial
disputes with Salvadoran companies through El Salvador's
courts, investors have found that seeking resolution of
problems through the slow-moving domestic legal system can
be costly and unproductive. The course of some cases has
shown that the legal system is subject to manipulation by
private interests, and final rulings are sometimes not
enforced. Where possible, arbitration clauses, preferably
with a foreign venue, should be included in commercial
contracts as a means to resolve business disputes.
Investors should make sure that all contracts are carefully
drafted and that the relationships with local firms are
specifically defined. Some U.S. firms have been embroiled
in major legal disputes in recent years, in cases where they
asserted that a contract with a Salvadoran firm either had
formally ended or never existed, but Salvadoran courts have
ruled that the contract remained in force.


16. El Salvador's commercial law is based on the Commercial
Code and the Code for Mercantile Processes. There is a
mercantile court system for resolving commercial disputes,
although there have been complaints about its slow processes
and erratic rulings, particularly at the Supreme Court
level. The Commercial Code, Code of Mercantile Processes,
and Banking Law contain sections that deal with bankruptcy;
there is no separate bankruptcy law or bankruptcy court.


17. Article 15 of the 1999 Investment Law states that
disputes between foreign investors and the government will
be submitted for arbitration to the International Center for
Settlement of Investment Disputes (ICSID),a World Bank
affiliated organization. In 2002, the government approved a
law to allow private sector organizations to establish
arbitration centers for the resolution of commercial
disputes, including those involving foreign investors. The
first case of commercial arbitration in El Salvador involved
a U.S.-owned firm and the parastatal water company. The
arbitration panel ruled in favor of the U.S-owned firm, but
a legal challenge by the water company relating to the
bidding process led the Supreme Court to suspend the
proceedings in August 2004 pending a review of the case.
Judicial delays are common in El Salvador, and the Supreme
Court has yet to review the case.


18. Under CAFTA-DR, investor rights will be protected by an
effective, impartial procedure for dispute settlement that
is fully transparent, as described in chapter 20 of the
agreement. Submissions to dispute panels and panel hearings
will be open to the public, and interested parties will have
the opportunity to submit their views.

PERFORMANCE REQUIREMENTS AND INCENTIVES
--------------

19. 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.


20. The 1998 Free Trade Zones Law is designed to attract
investment in a wide range of activities, although at
present more than 90 percent of the businesses in export
processing zones are "maquila" clothing assembly plants. A
Salvadoran partner is not needed to operate in a free zone,
and some maquila operations are completely foreign-owned.


21. The law established rules for export processing zones
(free zones) and bonded areas. The free zones are outside
the nation's customs jurisdiction, while the bonded areas
are within its jurisdiction but subject to special
treatment. Local and foreign companies can establish
themselves in a free zone to produce goods or services for
export or to provide services linked to international trade.
The regulations for the bonded areas are very similar.


22. Firms located in the free zones and the bonded areas
enjoy the following benefits:
-- Exemption from all duties and taxes on imports of raw
materials and the machinery and equipment needed to produce
for export.
-- Exemptions from taxes for fuels and lubricants used for
producing exports, if these are not domestically produced;
--Exemption from income tax, municipal taxes on company
assets and property; and
--Exemption from taxes on real estate transferences that are
related to export activity.


23. Companies in the free zones are also allowed to sell
goods or services in the Salvadoran market if they pay
applicable taxes for the proportion sold locally.
Additional rules apply to textile and apparel products.


24. Under the 1990 Export Reactivation Law firms may apply
for tax rebates of 6 percent of the FOB value of
manufactured or processed exports shipped outside the
Central American Common Market area. These firms need not
be located in the free zones or be exporting 100 percent of
their output. Exports of coffee, sugar, and cotton can
qualify for this rebate if they have undergone a
transformation that adds at least 30 percent to their
original value. Firms that qualify for these tax rebates
are also eligible for duty exemptions for imported raw
materials and intermediate goods used in the assembly of the
products to be exported. El Salvador extended the period to
eliminate this WTO-inconsistent measure until the end of

2009.


25. In December 2005, the government approved a new tourism
law to spur investment in the sector. The law establishes
fiscal incentives for those who invest a minimum of
$50,000.00 in tourism related projects in El Salvador.
Incentives include an income tax break of 100 percent for 10
years and no duties on imports of capital and other goods,
subject to limitations. The investor also benefits from a 5-
year exemption from land acquisition taxes, as well as a 50
percent cut in municipal taxes over that period. To take
advantage of these incentives, the enterprise must
contribute 5 percent of profits during the exemption period
to a government-administered Tourism Promotion Fund.


26. Those who plan to live and work in El Salvador for an
extended period will need to obtain temporary residency,
which may be renewed periodically. Under Article 11 of the
Investment Law, foreign investors with investments equal to
or more than 4,000 minimum monthly wages ($570,000),have
the right to receive "Investor's Residence," permitting them
to work and stay in the country. Such residency can be
requested within 30 days after the investment has been
registered. The residency permit covers the investor and
his family and is issued for one year, subject to extension
on a yearly basis.


27. Most companies employ a local lawyer to manage the
process of obtaining residency. The American Chamber of
Commerce in El Salvador can also help its members with the
process. Labor law requires that 90 percent of the labor
force at plants and in clerical jobs be Salvadoran. There
are fewer restrictions on the professional and technical
jobs that can be held by foreigners.

RIGHT TO PRIVATE OWNERSHIP AND ESTABLISHMENT
--------------

28. There are restrictions on land ownership. No single
natural or legal person--Salvadoran or foreign--can own more
than 245 hectares (605 acres). Rural lands cannot be
acquired by foreigners from countries where Salvadorans do
not enjoy the same right. Foreign citizens and private
companies can freely establish businesses in El Salvador.
The only exception for this is in some cases involving small
business. A 2001 fishing law allows foreigners to engage in
commercial fishing anywhere in Salvadoran waters providing
they obtain a license from CENDEPESCA, a government entity.

PROTECTION OF PROPERTY RIGHTS
--------------

29. Private property, both movable and real estate, is
recognized and protected in El Salvador. Companies that
plan to buy land or other real estate are advised to conduct
a thorough search of the property's title prior to purchase.


30. In December 2005, El Salvador revised several laws to
comply with CAFTA-DR's provisions on intellectual property
rights (IPR). The Intellectual Property Promotion and
Protection Law (1993, revised in 2005),Law of Trademarks
and Other Distinctive Signs (2002, revised in 2005),and
Penal Code establish the legal framework to protect IPR.
Investors must register trademarks, patents, copyrights, and
other forms of intellectual property at the National
Registry Center's Intellectual Property Office to protect
their investments. Reforms passed in 2005 extended the
copyright term from 50 to 70 years. New measures extend
protection to satellite signals, and for pharmaceuticals and
agrochemicals, test data exclusivity will be protected for 5
and 10 years respectively.


31. The Attorney General's office and the National Civilian
Police enforce these rights by conducting raids against
distributors and manufactures of pirated CDs, cassettes,
clothes, and computer software. The 2005 reforms authorize
the seizure, forfeiture, and destruction of counterfeit and
pirated goods and the equipment used to produce them. They
also allow authorities to initiate these raids ex-oficio,
and piracy is now punishable by jail sentences of two to six
years. Investors, however, should know that using the
criminal and mercantile courts to seek redress of a
violation of intellectual property is often a slow and
frustrating process.


32. 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.

TRANSPARENCY OF THE REGULATORY SYSTEM
--------------

33. The laws and regulations of El Salvador are relatively
transparent and generally foster competition. Bureaucratic
procedures have improved in recent years and are relatively
streamlined for foreign investors. However, new foreign
investors should review the regulatory environment
carefully.


34. The Superintendency of Electricity and
Telecommunications (SIGET),a regulatory agency modeled
after a public utilities commission, regulates electricity
and telecommunications. SIGET oversees electricity tariffs,
telecommunications, and distribution of electromagnetic
frequencies. SIGET's processes and procedures have been in
general transparent.


35. In April 2003, the government amended the 1996
Electricity Law with the intention of reducing volatility in
the wholesale market and thereby stabilizing the level of
retail electricity prices. The new law expanded SIGET
authority and gave the government the discretion to change
the way electricity prices are determined; the government
appears to be moving away from the market-based system put
in place at the time of privatization to a cost-based
dispatch system.


36. The 2004 Competition Law defines a series of
anticompetitive practices such as collusion to fix prices,
limit production, or rig bids. Vertical arrangements, tying
(conditioning the sale of one product on the sale of
another),and exclusive dealing are also outlawed. Certain
abuses of dominant market position are also illegal, for
example, creating barriers to entry by other firms,
predatory pricing to drive out competitors, price
discrimination and similar actions when intended to limit
competition will be illegal. The law creates an autonomous
Superintendency for Competition that would be responsible
for enforcing the law, which took effect January 1, 2006.

EFFICIENT CAPITAL MARKETS AND PORTFOLIO INVESTMENT
-------------- --------------

37. The Superintendent of the Financial System supervises
the banks and other businesses in the financial system.
Interest rates are determined by market forces and have
decreased significantly since dollarization was implemented.
Foreign investors may obtain credit in the local financial
market under the same conditions as local investors.
Accounting systems are generally consistent with
international norms. December 2004 fiscal reforms require
that applicants for credit at Salvadoran financial
institutions show that they are current in their tax
obligations with Salvadoran Government.


38. El Salvador's banks are among the largest in Central
America. The banking system is sound and in general well
managed and supervised. The banking system's total assets
as of October 2005 were $11 billion.


39. Under the 1999 Banking Law and amendments made in 2002,
foreign banks are afforded national treatment and can offer
the same services as Salvadoran banks; they can open
branches and buy or invest in Salvadoran financial
institutions. The law raised the local financial sector
standards to international standards, strengthened
supervisory authorities, and provided more transparent and
secure operations for customers and banks. The law also
established an FDIC-like autonomous institution to insure
deposits, increased the minimum capital reserve requirement
for a bank to 100 million colones ($11.4 million),and
sharply limited bank lending to shareholders and directors.
The Non-Bank Financial Intermediaries Law regulates the
organization, operation, and activities of financial
institutions such as cooperative savings associations,
nongovernmental organizations, and other microfinance
institutions. The Money Laundering Law requires financial
institutions to report suspicious transactions to the
Attorney General and the Superintendency of the Financial
System.


40. The 1996 Insurance Companies Law regulates the
operation of local insurance firms and accords national
treatment to foreign insurance firms. Foreign firms,
including U.S., Panamanian and Spanish companies, have
invested in Salvadoran insurers.


41. The 1994 Securities Market Law established the present
form for the Salvadoran securities exchange, which opened in
1992, and has played an important role in the privatization
of state enterprises and facilitating foreign portfolio
investment. Stocks, government and private bonds, and other
financial instruments are traded on the exchange, which is
regulated by the Superintendency of Securities. Foreigners
can buy stocks, bonds and other instruments sold on the
exchange and can have their own securities listed, once
approved by the Superintendent. Companies interested in
listing must first register with the National Registry
Center's Registry of Commerce. Then they must submit the
required documentation to the Superintendent, who will
decide whether the security can be traded. The exchange has
averaged daily volumes of about $30 million. Government
regulated private pension funds and Salvadoran insurance
companies are the largest buyers on the Salvadoran
securities exchange.

POLITICAL VIOLENCE
--------------

42. El Salvador's 12-year civil war ended in 1992 with a
peace agreement. The former guerrilla organization, the
FMLN, became a political party and has participated in
elections since 1994. There has been no political violence
aimed at foreign investors, their businesses, or their
property. However, general levels of crime are high and a
major concern to the business community.

CORRUPTION
--------------

43. 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. In 2005, the
government issued a code of ethics for the executive-branch
employees, including administrative enforcement mechanisms.
El Salvador ratified the Inter-American Convention Against
Corruption in 1998.


44. 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.
Another ongoing corruption scandal involves municipal
governments and waste disposal contracting.

BILATERAL INVESTMENT AGREEMENTS AND FREE TRADE AGREEMENTS
-------------- --------------

45. The United States and El Salvador signed a bilateral
investment treaty (BIT) in March 1999, which addresses
issues such as national treatment for foreign investors,
transfers, expropriation, investment disputes, and tax
policies. The United States has ratified the treaty but El
Salvador has not. The United States concluded free trade
agreement negotiations with El Salvador, Guatemala,
Honduras, and Nicaragua in December 2003 and with Costa Rica
in January 2004. In May 2004, the six countries signed the
United States - Central America Free Trade Agreement.
During 2004, the United States and the Central American
countries negotiated with the Dominican Republic to
integrate that country into the free trade agreement. On
August 5, 2004, the seven countries signed the - Central
America - Dominican Republic - United States Free Trade
Agreement. El Salvador (December 2004),Honduras (March
2005),Guatemala (March 2005),the United States (July
2005),the Dominican Republic (September 2005),and
Nicaragua (October 2005) have ratified the agreement. The
investment chapter included in the agreement will offer many
of the same measures to protect investors as included in the
BIT. The two countries also have a trade and investment
council (TIC) framework agreement.


46. El Salvador is also negotiating a free trade agreement
with Canada, which will contain investment provisions. The
five Central American Common Market countries, which include
El Salvador, have an investment treaty among themselves. In
addition, the free trade agreements that El Salvador has
with Mexico, the Dominican Republic, Chile, and Panama
contain sections that promote investment.

OPIC AND OTHER INVESTMENT INSURANCE PROGRAMS
--------------

47. The Overseas Private Investment Corporation (OPIC) has
a bilateral agreement with El Salvador. The agreement
requires the Government of El Salvador to approve all
insurance applications. A new agreement is being negotiated
that will eliminate this requirement. OPIC insures against
currency inconvertibility, expropriation and civil strife,
and can also provide corporate project financing and special
financing oriented to small business. Because of El
Salvador's use of the U.S. dollar, full inconvertibility
insurance is not needed, although investors do insure
against inability to transfer funds. El Salvador is a
member of the Multilateral Investment Guarantee Agency
(MIGA).

LABOR
--------------

48. El Salvador has a labor force of approximately 2.7
million. Salvadoran labor is perceived as hard working and
receptive to training and advanced study. The general
educational level is low, and the skilled labor pool is
shallow, which may pose problems for investors needing
skilled, educated labor. There is a lack of middle
management-level talent, which sometimes results in
foreigners being brought in to perform such tasks.
Employers do not report labor-related difficulties in
incorporating technology into their workplaces.


49. The Constitution guarantees the right of employees in
the private sector to organize into associations and unions.
Employers are free to hire union or non-union labor. Closed
shops are illegal. Labor law is generally in accordance
with internationally recognized standards, but is not
enforced consistently by government authorities. The
International Labor Organization's Committee on Freedom of
Association has expressed concern in a number of cases about
the government's failure to apply the protections of workers
rights to organize and bargain collectively, as required by
International Labor Organization conventions.

FOREIGN TRADE ZONES/FREE TRADE ZONES
--------------

50. As of December 2005, there were 13 free zones operating
in the country. Maquila textile operations constitute the
businesses of 12 of the free zones. These firms, mostly
owned by Salvadoran, U.S., Taiwanese, and Korean investors,
employ approximately 70,000 people. See para. 20 for a
discussion of benefits available to investors in these
zones.

FOREIGN DIRECT INVESTMENT STATISTICS
--------------

51. Accumulated Foreign Investment by Country of Origin
(Millions of Dollars)
Country 2002 2003 2004
-------------- -------------- -------------- --------------
United States 880.1 950.1 1,015.5
Mexico 72.7 84.7 616.3
Venezuela 309.5 309.5 309.5
Spain 159.0 161.4 194.9
Panama 100.7 102.3 105.1
Chile 91.5 91.7 92.2
Germany 78.7 84.8 84.9
Bahamas 71.4 72.8 74.2
Costa Rica 69.6 70.3 70.4
Taiwan 42.1 56.9 57.5
Canada 45.8 46.6 56.6
BVI 23.1 29.2 56.2
Guatemala 38.7 48.2 52.1
Netherlands 34.8 39.1 39.1
Nicaragua 32.9 33.2 33.2
Singapore 32.1 32.2 32.5
Italy 26.6 26.6 26.6
Korea, South 14.9 22.9 23.8
Israel 8.5 10.4 22.9
Peru 22.3 22.3 22.3
Honduras 9.3 19.4 21.0
Switzerland 11.7 11.7 15.6
Aruba 15.0 15.0 15.0
Japan 14.2 14.2 14.2
Bermuda 10.6 11.2 12.4
Ecuador 9.0 9.0 9.0
England 6.4 6.4 7.4
France 214.7 214.7 5.8
Other 14.0 19.9 27.2
Total: 2,460.0 2,616.5 3,113.1
Source: Central Reserve Bank of El Salvador


52. Annual Foreign Investment Flows in Selected Sectors
(Millions of Dollars)
Sector 2002 2003 2004
-------------- -------------- -------------- --------------
Communications 48.6 10.1 337.1
Industry 46.7 30.7 42.4
Maquila 10.1 70.6 38.3
Retail 35.7 25.2 39.0
Agriculture
and fishing 8.5 3.0 25.1
Services 19.4 1.5 11.2
Finance 12.1 15.6 3.1
Construction 0.0 0.0 0.0
Electricity 26.7 0.0 0.0
Mining 0.0 0.0 0.0
Total: 207.9 156.6 496.6
Source: Central Reserve Bank of El Salvador


53. Foreign Direct Investment as a Percentage of GDP
(Millions of Dollars)
2002 2003 2004
-------------- -------------- --------------
GDP 14,311.9 14,940.3 15,823.9
FDI stock 2,460.0 2,616.5 3,113.1
FDI flows 207.9 156.5 496.6
FDI stock as
a percentage
of GDP 17.2 17.5 19.7
FDI flows as
a percentage
of GDP 1.5 1.0 3.1
Source: Central Reserve Bank of El Salvador


54. Partial List of Major Foreign Investors
AES Corporation (USA) -- Electricity distribution
AIG (USA) -- Insurance
AMNET - Cable television and internet
Avery Dennison (USA) -- Labels for clothing
Bayer de El Salvador (German) -- Pharmaceutical processing
plant, fertilizer plant
Decameron International (Colombia) - Tourism/hotels
Citigroup (USA) -- Banking
Digicel (USA) -- Cellular telephone service
Dell Computer (USA) -- Customer service/sales call center
Duke Energy (USA) -- Thermal electricity generation plants
Elf (France) -- Propane gas
El Paso Corporation (USA) -- Owner/operator of the Nejapa
power/generating plant
EMEL S.A. (Chilean/USA) -- Electricity distribution
Esso Standard Oil (USA) -- Gas stations/small refinery at
Acajutla
America Movil (Mexico) -- Fixed and wireless telephone,
retail
Fruit of the Loom (USA) - Apparel assembly
Grupo Calvo (Spain) -- Tuna fishing/processing
Holcim (Swiss) - Cement
Intelfon (Panama/El Salvador) - Telecommunications
International Paper (USA) -- Packaging
Lacoste (France) -- Textiles/apparel
Liquidos de Centro America (ELCA) -- liquid packaging
company
Kimberly Clark de C.A. (USA) -- Distribution facility
Maseca (Mexico) -- Corn Milling
Max (Guatemala) -- Appliance retailing
Price Smart (USA) -- Member discount store and supermarket
SABMiller (South Africa) -- Beer, sodas, and other
beverages
Sara Lee Knit Products (USA) -- Apparel assembly
Shell El Salvador (Netherlands/U.K.) -- Oil
refinery (with Esso); Service stations/grocery marts
throughout the country.
Telefonica de Espana (Spain) -- Cellular telephones
Telemovil (USA/Luxembourg) -- Cellular telephones
Texaco Caribbean (USA) -- Fuel storage and lubricant
blending plant in Acajutla, and service station/grocery
markets.
Unisola-Unilever (UK) -- Food products
WalMart (United States) -- Supermarkets