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Economy of El Salvador
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==Trade== {| class="wikitable" style = class="bonita" style="float:left; margin:0.5em 0.5em 0.5em 1em; padding:0.5em; font-size:95 " |- ! colspan="2" | Exports to ! colspan="2" | Imports from |- ! Country ! % ! Country ! % |- | United States | 66% | United States | 43.4% |- | Caribbean region | 26% | [[Guatemala]] | 8.2% |- | Mexico | 1% | Mexico | 7.8% |- | Spain | 1% | European Union | 7.0% |- | Others | 6% | Others | 33.6% |} [[File:Torre futura.jpg|thumb|[[Torre Futura]] at [[World Trade Center San Salvador]]]] A challenge in El Salvador has been developing new growth sectors for a more diversified economy. As many other former colonies, for many years El Salvador was considered a mono exporter economy. This means, an economy that depended heavily on one type of export. During colonial times, the Spanish decided that El Salvador would produce and export [[indigo]], but after the invention of synthetic dyes in the 19th century, Salvadoran authorities and the newly created modern state turned to coffee as the main export of the economy. Since the cultivation of coffee required the highest lands in the country, many of these lands were expropriated from indigenous reserves and given or sold cheaply to those that could cultivate coffee. The government provided little or no compensation to the indigenous peoples. On occasions this compensation implied merely the right to work for seasons in the newly created coffee farms and to be allowed to grow their own food. Such policies provided the basis of conflicts that would shape the political situation of El Salvador in the years to come. ARENA governments have followed policies that intend to develop other exporting industries in the country as textiles and sea products. Tourism is another industry Salvadoran authorities regard as a possibility for the country. But rampant crime rates, lack of infrastructure and inadequate social capital have prevented these possibilities from being properly exploited. The government is also developing ports and infrastructure in [[La Unión, El Salvador|La Unión]] in the east of the country, in order to use the area as a "dry canal" for transporting goods from [[Gulf of Fonseca]] in the Pacific Ocean to [[Honduras]] and the Atlantic Ocean in the north. Currently there are fifteen [[free trade zone]]s in El Salvador. The largest beneficiary has been the [[maquila]] industry, which provides 88,700 jobs directly, and consists primarily of cutting and assembling clothes for export to the United States. El Salvador signed the [[Central American Free Trade Agreement]] (CAFTA), negotiated by the five countries of Central America and the Dominican Republic, with the United States in 2004. In order to take advantage of CAFTA-DR, the Salvadoran government is challenged to conduct policies that guarantee better conditions for entrepreneurs and workers to transfer from declining to growing sectors in the economy. El Salvador has already signed free trade agreements with Mexico, Chile, the Dominican Republic, and Panama, and increased its exports to those countries. El Salvador, Guatemala, Honduras, and Nicaragua also are negotiating a free trade agreement with Canada, and negotiations started on 2006 for a free trade agreement with Colombia. El Salvador's [[balance of payments]] continued to show a net surplus. Exports in 1999 grew 1.9% while imports grew 3%, narrowing El Salvador's trade deficit. As in the previous year, the large trade deficit was offset by foreign aid and [[family remittance]]s. Remittances are increasing at an annual rate of 6.5%, and an estimated $1.35 billion will enter the national economy during 1999. Private foreign capital continued to flow in, though mostly as short-term import financing and not at the levels of previous years. The Central American Common Market continued its dynamic reactivation process, now with most regional commerce duty-free. In September 1996, El Salvador, Guatemala, and Honduras opened free trade talks with Mexico. This trade alliance is also known as the Northern Triangle in relation to the Central American economies that are grouped together by proximity and location.[http://www.sice.oas.org/ctyindex/SLV/SLVagreements_e.asp] Although tariff cuts that were expected in July 1996 were delayed until 1997, the government of El Salvador is committed to a free and open economy. Total U.S. exports to El Salvador reached $2.1 billion in 1999, while El Salvador exported $1.6 billion to the United States. U.S. support for El Salvador's privatization of the electrical and telecommunications markets has markedly expanded opportunities for U.S. investment in the country. More than 300 U.S. companies have established either a permanent commercial presence in El Salvador or work through representative offices in the country. The Department of State maintains a country commercial guide for U.S. businesses seeking detailed information on business opportunities in El Salvador. ===Official corruption and foreign investment=== {{further|Corruption in El Salvador}} In an analysis of ARENA's electoral defeat in 2009, the U.S. Embassy in San Salvador pointed to [[Corruption in El Salvador|official corruption]] under the Saca administration as a significant reason for public rejection of continued ARENA government. Subsequent policies under Funes administrations improved El Salvador to foreign investment, and the World Bank in 2014 rated El Salvador 109, a little better than Belize (118) and Nicaragua (119) in the World Bank's annual "[[Ease of doing business index|Ease of doing business]]" index.<ref>{{cite web|url=http://www.doingbusiness.org/rankings |title=Economy Rankings |access-date=1 October 2014 |archive-url=https://web.archive.org/web/20150206025936/http://www.doingbusiness.org/rankings |archive-date=6 February 2015 }} Annual index, Doing Business 2014, World Bank.</ref> As per Santander Trade, a Spanish think tank in foreign investment, "Foreign investment into El Salvador has been steadily growing during the last few years. In 2013, the influx of FDI increased. Nevertheless, El Salvador receives less FDI than other countries of Central America. The government has made little progress in terms of improving the business climate. In addition to this, the limited size of its domestic market, weak infrastructures and institutions, as well as the high level of criminality have been real obstacles to investors. However, El Salvador is the second most 'business friendly' country in South America in terms of business taxation. It also has a young and skilled labour force and a strategic geographical position. The country's membership in the DR-CAFTA, as well as its reinforced integration to the C4 countries (producers of cotton) should lead to an increase of FDI."<ref>{{cite web|url=https://en.santandertrade.com/establish-overseas/el-salvador/investing-3|title=Foreign investment in El Salvador - Santandertrade.com|website=en.santandertrade.com|access-date=13 April 2015|archive-date=14 April 2015|archive-url=https://web.archive.org/web/20150414013243/https://en.santandertrade.com/establish-overseas/el-salvador/investing-3}}</ref> Foreign companies have lately resorted to arbitration in international trade tribunals in total disagreement with Salvadoran government policies. In 2008, El Salvador sought international arbitration against Italy's Enel Green Power, on behalf of Salvadoran state-owned electric companies for a geothermal project Enel had invested in. Four years later, Enel indicated it would seek arbitration against El Salvador, blaming the government for technical problems that prevent it from completing its investment.<ref>{{cite news |title=CEL a punto de ir a otro arbitraje |url=http://www.elsalvador.com/mwedh/nota/nota_completa.asp?idCat=47861&idArt=6919711 |access-date=17 March 2020 |work=elsalvador.com |date=21 May 2012 |archive-url=https://web.archive.org/web/20141129045947/http://www.elsalvador.com/mwedh/nota/nota_completa.asp?idCat=47861&idArt=6919711 |archive-date=29 November 2014}}</ref> The government came to its defence claiming that Art 109 of the constitution does not allow any government (regardless of the party they belong), to privatize the resources of the national soil (in this case geothermic energy). The dispute came to an end in December 2014 when both parties came to a settlement, from which no details have been released. The small country had yielded to pressure from the Washington-based powerful [[International Centre for Settlement of Investment Disputes|ICSID]].<ref>{{cite news |title=El Salvador y Enel ponen fin a litigio por acciones de la CEL |url=http://www.lapagina.com.sv/nacionales/101837/2014/12/07/El-Salvador-y-Enel-ponen-fin-a-litigio-por-acciones-de-La-Geo |access-date=17 March 2020 |work=La Página |date=7 December 2014 |archive-url=https://web.archive.org/web/20161107110631/http://www.lapagina.com.sv/nacionales/101837/2014/12/07/El-Salvador-y-Enel-ponen-fin-a-litigio-por-acciones-de-La-Geo |archive-date=7 November 2016}}</ref> A 2008 report by the [[United Nations Conference on Trade and Development]]<ref>{{Cite web|url=http://unctad.org/en/docs/diaepcb200920_en.pdf|title=UNCTD Report}}</ref> indicates that one third of the generation of electricity in El Salvador was publicly owned while two thirds was in American hands and other foreign ownership. In terms of how people perceived the levels of public corruption in 2014, El Salvador ranks 80 out of 175 countries as per the Corruption Perception Index.<ref>{{cite web|url=http://www.transparency.org/cpi2014/results,|title=How corrupt is your country?|first=Transparency International|last=e.V.|website=transparency.org|access-date=13 April 2015|archive-date=16 June 2016|archive-url=https://web.archive.org/web/20160616202240/http://www.transparency.org/cpi2014/results,}}</ref> El Salvador's rating compares relatively well with Panama (94 of 175) and Costa Rica (47 of 175).
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