Investment Opportunities in El Salvador

Transcription

1 Investment Opportunities in El Salvador August 2018

2 El Salvador, located in the heart of the Americas, is an export-oriented free-market economy Capital: Official Language: Area: Population (million): GDP (billion USD): GDP per capita (USD): Time Zone: Currency: San Salvador Spanish 21,041 Km 2 /8,124 mi ,769 UTC 6 USD

3 One of the best countries for doing business in the region 6 th Easiest country to do business in Latin America 2 nd In Central America 22 positions improved El Salvador in the 2018 ranking El Salvador has been ranked among the 10 economies worldwide showing the most notable improvement in doing business indicators Ranking Doing Business 2018 Mexico 49 Chile 55 Peru 58 Colombia 59 Costa Rica 61 El Salvador 73 Panama Uruguay Guatemala Paraguay Source: World Bank. Ranking out of 190 countries areas with reforms: 1. Dealing with Construction Permits 2. Getting Electricity 3. Paying Taxes 4. Trading across Borders

4 With the U.S. dollar as legal tender, our inflation rates have remained below the average of the rest of the Latin American countries Average inflation rate (%) El Salvador Panama Ecuador Costa Rica Dominican Rep. Peru Chile Paraguay Guatemala Mexico Honduras Bolivia Colombia Nicaragua Brazil Source: IMF The lowest inflation rate in Latin America

5 3.0 million Labor force 56 % of the labor force is under 40 years One of our main advantages is our labor force, world famous for its industriousness, efficiency and work ethic 22,400 Technicians and professionals join the country s labor force every year 21 % Engineering and technology graduates

6 El Salvador is a cost-competitive country to set up and operate a business in the region The Financial Time s investment journal fdi Intelligence has classified El Salvador as one of the most cost effective country in America

7 Here you will have access to an outstanding labor force at a competitive cost 250% 200% 150% 100% 50% Minimum Monthly Wage per Sector (in USD) Agriculture Industry Commerce and services Comparative minimum wages for companies located in free zones 56% Minimum wage (nominal) 94% 100% 126% 198% 250% 200% 150% 100% 50% 59% Minimum wage with benefits 100% 100% Textile and apparel maquila 133% 218% 0% Nicaragua Honduras El Salvador Guatemala Costa Rica 0% Nicaragua El Salvador Honduras Guatemala Costa Rica

8 El Salvador is the most competitive country in Central America in terms of benefits paid by employer

9 And offers competitive electricity rates for commercial and industrial users Comparative Electricity Rates (%) Medium demand Electricity rates (USD/kwh)* With power metering* Low voltage $0.16 Medium voltage $0.15 Time - differentiated metering Low voltage Peak hours Mid-peak hours $0.16 $0.15 SV GT CR HN NI Commercial users Medium and large demand Off-peak hours Medium voltage $0.15- $0.16 Industrial users Peak hours $0.15 Mid-peak hours $0.14 Source: ICE, Costa Rica. Rates are for commercial users with 15,000 kwh of consumption and power demand of 41 kw, and industrial users with 50,000 kwh of consumption and power demand of 137 kw. December Off-peak hours $0.14 *Rates in force since July Besides energy charges, electricity rates are composed of a fixed monthly charge for commercialization (customer service) and variable charges for distribution power (US$/kW month).

10 El Salvador has also been placed among the countries with the lowest total tax rate in the region Income tax 30% over taxable income 25% (reduced rate for taxable income US$150,000) Special contribution for major tax payers for security 5% special contribution over net profits US$500,000. Value Added Tax (IVA for its acronym in Spanish) 13% value added tax for goods and services. Dividend Tax 5% tax retention over dividends paid or credited to shareholders (individuals or legal entities) Tax on Transfers of Real Estate Property 3% applicable on amounts exceeding USD 28, Municipal taxes Municipal taxes Taxes are paid according to each municipality based on the company s total assets.

11 Besides our recognition as a cost-effective location, our infrastructure is among the most competitive in Latin America 2nd In overall infrastructure 2nd In quality of roads Infrastructure Ranking: 65 Costa Rica 77 El Salvador 84 Guatemala 92 Nicaragua 104 Honduras Global Competitiveness Report rankings* *Ranking out of 137 countries. Source: World Economic Forum Quality of roads Ranking: 54 Nicaragua 72 El Salvador 81 Honduras 106 Guatemala 123 Costa Rica

12 El Salvador s modern infrastructure interconnects the main cities in the region and enables efficient logistical operations

13 El Salvador has free zones and service parks that stand out for their strategic location and easy access to competitive infrastructure Free Zones: 1. Free Zone Santa Ana 2. Free Zone Las Mercedes 3. Free Zone Free Zone EXPORTSALVA 5. Free Zone PIPIL 6. Free Zone SAM-LI 7. Free Zone American Park 8. Free Zone Santa Tecla 9. Free Zone San José 10. Free Zone San Marcos 11. Free Zone San Bartolo 12. Free Zone Santo Tomás 13. Free Zone Internacional 14. Free Zone MIRAMAR 15. Free Zone El Pedregal 16. Free Zone Concordia Industrial Park 17. Free Zone Calvo *Also operate as service parks

14 As part of our commitment to attract investment, we have implemented attractive tax incentives Free zones: Incentives to industrial activities International Services Law Incentives to strategic sectors (contact centers, BPO s, maintenance and repair of airplanes, logistics, etc.) Tax exemptions (income, municipal taxes and real estate transfers) and import duties Total permanent tax exemptions (income and municipal taxes) and import duties

15 Renewable Energy Incentives Law Customs duties exemption on imports of machinery, equipment and materials for 10 years Income tax exemption for a period of 5 to 10 years Total tax exemption on revenues from the sale of Certified Emission Reductions Tourism Law Requires minimum of USD 25,000 investment Corporate tax exemption (income and municipal) Real estate transfer and import tariff exemptions

16 We have developed a legal framework that facilitates and guarantees the protection of investments because we are interested in developing a long-term relationship with investors Investment Law Equal treatment to national & international investors Liberty to transfer funds and profits abroad Access to local financing Law of Legal Stability for Investments Guarantees legal certainty to investors on taxes, customs and immigration issues, for a period of up to 20 years depending on the amount of the investment. Applies for an amount greater than or equal to USD1,283,597.4 in new investment projects or the expansion of existing investments. Public Private Partnership Law (PPP) Establishes a legal framework for the development of PPP projects regarding public infrastructure and services. The minimum investment to qualify for a PPP project is USD 13,687,650 million

17 In terms of trade openness, we offer preferential access to a potential market of 1.2 billion consumers in 43 countries around the world

18 And our strategic geographic location enables a short access time to major cities in America Main Freight Companies Air Cargo DHL UPS Arrow Maritime MAERSK CROWLEY MSC SEABOARD NIPPON Main airlines serving El Salvador CSAV APL Hamburg Süd Regular charter flights (Montreal, Toronto)

19 Customs Union between El Salvador, Guatemala and Honduras The customs union between El Salvador, Guatemala and Honduras converts the border customs into fast border posts that allow companies to move goods and carry out procedures in a free, agile and efficient way. Benefits: 1. Reduction of logistics time. 2. Decrease in operating costs. 3. Integration of productive chains. 4. Unification of joint production.

20 For all these reasons, many prestigious multinational companies have chosen El Salvador as an investment destination

21 As a result, El Salvador continues to attract foreign direct investment in both manufacturing and services Foreign Direct Investment Main FDI sectors (I-trimester 2018) FDI net inflows (million USD) FDI Stock I-trimester 2018 USD 9.6 billion 39% of GDP Finance and Insurance US$ 3.1 billion Manufacturing US$ 2.7 billion FDI I-trimester 2018: US$ million Source: BCR

22 Agroindustry Aeronautics We invite you to explore El Salvador s attractive investment opportunities in strategic sectors: Offshore Business Services Energy Textiles and apparel Light Manufacturing Tourism Public-Private Partnerships

23 Aeronautics Succesful World-Class Operations with Strong Continuous Expansions Investment Opportunities: Commercial aircrafts maintenance Helicopter and corporate aircrafts maintenance Distribution and warehousing services for aircraft parts Component maintenance shops Aeronautics ground services Light Sport Aircraft (LSA) airframe manufacturing and parts for wing tips, engines and others, in composite materials Aircraft harness system assembly Reconditioning on previous LSA models

24 Experience of more than 30 years 40% More Aeronáutica competitive labor costs than U.S. and Mexico Less than 2% employee turnover

25 Agroindustry Investment Opportunities: Fishing and aquaculture: Extraction and processing of nontraditional fishing products and large pelagic species Marine aquaculture of tropical species Continental aquaculture, fresh water El Salvador offers good conditions to develop agro-industry businesses due to its location in the tropics and diversity of micro-climates Sugar byproducts: Confectionery Production of rum, coinvestment with local mills Bagasse chipboard for construction, fibreboard Ornamental plants: Rooted cuttings High value tropical flowers Vegetables: High unit value vegetables (including organic production), in greenhouse Prepared food: Frozen prepared foods based on maize Savory and sweet snacks

26 Geographic closeness and preferential access to important markets such as the United States, Canada and Central America Significant savings in production costs such as wages, fuel, electricity, among other inputs Availability of specialised labor recognised for its high productivity

27 Energy Energy and LNG Hub for the Central America Region Investment Opportunities Processes of international bidding and long term contracts of up to 20 years, based on implemented market costs Diversification of the energy matrix, developing the potential of: wind, geothermal, small hydroelectric power plants, biomass, biogas, solar photovoltaic, concentrated solar thermal, coal and natural gas sources Distributed generation projects at industrial level Large hydraulic, geothermal and solar projects in national public generation Categorization of activities or projects for the better use of renewable energy sources in conjunction with the Ministry of Environment and Natural Resources SIEPAC Central American interconnection line

28 1,852.8 MW Installed capacity Available Renewable Resources Wind, PV Solar and Thermal Solar, Geothermal, small hydroelectric power plants, Biogas, Biomass Bids based on long term contracts of up to 20 years

29 Light Manufacturing Successful export platform with strategic location, high productivity and competitive costs Investment Opportunities: Manufacturing plants for: Auto parts (automotive harnesses, car seats, airbags, seat belts, automotive sensors) Medical devices (medical supplies, orthopedic products, hospital furniture, etc.) Passive electronic components (tantalum and ceramic capacitors, transistors, resistors, etc.) Footwear (assembly of components and parts, manufacturing of inputs, components and accessories and footwear manufacturing) Chemicalpharmaceutical and cosmetics (generic medication, vitamins, phyto pharmaceuticals, sun screens, hair products, natural cosmetics)

30 The Light Manufacturing sector has turnover rates lower than 10% El Salvador has production efficiency rates higher than 90% in the Light Manufacturing sector The Light Manufacturing exports represent about 8.2% of total exports in 2017.

31 Offshore Business Services Cost effective near-shore location with exceptional performance Investment Opportunities: Contact centers: Product sales, Order taking, Cross sale & Up sale, Customer Relationship Management, Technical support, Customer service, Customer Surveys, Technical support for guarantees, Incoming and outgoing call service, others Business processing services: Transaction Management, General Accounting, Data and Order Processing, Bank Reconciliations, Procurement, Fixed Asset Accounting, Human Resources Management, Inventory Accounting, Financial Reporting, Performance Management IT services: Software development, Help Desk, testing, business process management (BPM) and applications management

32 30% historic growth rate ( ) 9% growth rate 2016 El Salvador has been rated by The Economist as: "The country for outsourcing" 27,000 jobs and more than 11,000 workstations

33 Textiles and Apparel Weaving a bright and responsible future with a vertically integrated industry and easy access to market Investment Opportunities: Manufacture of yarn and fabrics Manufacture of knitted garments with accessories and embellishments (embroidery, screen printing, heat transfers, etc.), athletic wear, sportswear, performance wear and swimwear manufacturing Garments manufacturing included in the "Cut and Assemble" Rule of Origin category: bras, girl dresses, boxer shorts, sleepwear, luggage, among others

34 It is the only country that has been able to develop a full synthetic cluster in Central America. The sector is vital for the economy of El Salvador, making up 45% of the country s total exports. In 2017, El Salvador exported US$2,617 million of textile and apparel products

35 Tourism The destination of choice for tourism, medical tourism and business Investment Opportunities in Tourism: Hotels Boutique hotels Convention Centers Marinas Spas and wellness centers Mixed use development Investment Opportunities in Health Services Hospitals Specialized clinics Medical spas Resort hospitals

36 8.5% Increase in visitors for the first half of % Increase in income from tourist activities for the first half of % of the GDP represents the tourism sector

37 We are promoting the first Investment Portfolio USD 12 million Total investment 600 Direct jobs The Investment Projects Portfolio includes private project profiles that will allow you to identify new investment opportunities in El Salvador 15 private projects in sectors such as: Energy Real Estate Manufacturing Services Tourism

38 PROESA is your strategic partner for investment Business opportunities Information on investment opportunities, incentives and advantages of investing in FDI growth sectors. Strategic information Information on costs, regulations, availability of human capital, business climate and any other customized information required in the country evaluation process Advisory and technical assistance Tailored agendas for visits to El Salvador Specialized support before, during and after the investment Generation of local business contacts Comprehensive support in procedures required to establish or expand business operations in the country

39 PBX: (503) PBX: (503) FAX: (503) Download our free app for Smartphones and tablets: INVEST IN EL SALVADOR Download our free App for Smartphones and tablets: PROESA EL