Guidance

Overseas business risk: El Salvador

Updated 15 June 2023

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This publication is available at https://www.gov.uk/government/publications/overseas-business-risk-el-salvador/overseas-business-risk-el-salvador

1. Political and economic overview

El Salvador is the smallest, most densely populated country in Central America with 6.4 million Salvadorans living within the territory and about 1.4 million abroad. Its strategic location within Central America allows it to trade with different partners around the world.

The country’s economy grew by 10.3 per cent in 2021, following an 8.2 per cent drop in 2020 due to the COVID-19 pandemic, while growth moderated to 2.8 per cent in 2022 and is expected to average 2.3 per cent in 2023 [footnote 1]. The country has a market-based economy with a liberalised foreign trade policy. Government policy has been to encourage expansion of the economy, both through welcoming foreign domestic investment and encouraging exports. Private consumption, public investment and tourism along with the current government’s ambitious infrastructure projects should help stimulate economic growth.

The government is investing heavily on a number of infrastructure projects to improve the road network, expand the existing airport and build a second airport, tourist sites, docks and transport. There has been a serious commitment to improve the infrastructure of the country by the use of different legal instruments such as public private partnerships.

In 2022, 8.6 % of Salvadoran households lived in extreme poverty. This means that their income was not enough to cover the cost of a basic basket of goods. Compared to 2021, the extreme poverty rate increased by 0.8 percentage points to the same level as in 2020, the first year of the COVID-19 pandemic, which caused economic and social damage worldwide [footnote 2]. According to data, 56.7% of the population work in commerce and services, compared to the agriculture sector, which only accounts for 16.7%.

As of March 2023, the public debt from El Salvador reached $25,709.1 million, representing 79.2 % of GDP, while in terms of credit rating, Standard & Poor’s credit rating for El Salvador stands at CCC+ with stable outlook. Moody’s credit rating for El Salvador was last set at Caa3 with a stable outlook. Fitch’s credit rating for El Salvador was last reported at CC [footnote 3].

The country is a member of some international organisations, including the World Trade Organisation, the International Labour Organisation, and the World Intellectual Property Organisation.

Political tensions in El Salvador remain and can be expected to increase due to upcoming elections due to be held in early 2024. The Presidential and Legislative Assembly elections are scheduled to be held on 4 February, while the Central American Parliamentary Deputies and Mayoral elections will be held on 3 March.

Public protests and strikes against the government, generally by government employees, are common. Most demonstrations concentrate in/around city centres or public buildings and other public areas. Although these are usually non-violent, these public displays sometimes create security problems and impede traffic.

For more information on potential risk, including political demonstrations, read FCDO El Salvador travel advice

2. Visa requirement

Since May 2022, citizens of El Salvador require a visa to visit the UK. The decision to introduce a visa regime was taken due to the sustained and significant increase, over the previous 5 years, in the number of Salvadorans who did not intend to make a short visit, but instead make asylum claims on arrival in the UK.

A UK Temporary Visa Application Centre operates regularly in El Salvador. Travellers can submit their passport and provide their biometric data. Applicants can apply for a visa up to 3 months in advance of their travel date.

3. Commerce with the UK

According to data, there has been a constant trade relationship between El Salvador and the United Kingdom. As of 2022, bilateral trade between El Salvador and the UK is estimated to be worth GBP 19 million [footnote 4]. Both countries share a history of friendship and collaboration in different areas such as education, media freedom, human rights, trade and investment.

British businesses in El Salvador are spread across multiple sectors such as pharmaceuticals, food and beverage, education, infrastructure and equipment, automotive and retail, and there is a potential for UK companies in other sectors like agri-tech, clean energy, financial services and more; these businesses directly or indirectly contribute to the wider value chain of the local economy.

The top 5 goods exported from the UK to El Salvador are:

  • machinery equipment
  • alcoholic beverages and Tobacco
  • pharmaceuticals
  • automobiles
  • chemicals

The top 5 goods exported from El Salvador to UK are:

  • coffee
  • sugar
  • molasses
  • clothes
  • canned food (tuna)

The UK and six Central American countries (Costa Rica, Guatemala, Honduras, Nicaragua, Panama and El Salvador) signed the UK-Central America Association Agreement in 2019. This association agreement includes provisions on:

  • trade in goods, including provisions on preferential tariffs, tariff rate quotas, rules of origin and sanitary and phytosanitary measures
  • trade in services
  • intellectual property, including geographical indications
  • government procurement

It replicates wider elements of the EU-Central America agreement such as provisions on political dialogue and other forms of cooperation, including human rights.

4. Bitcoin

In September 2021, El Salvador became the first country to make Bitcoin legal tender, alongside the US dollar. The “Bitcoin Law” mandated that every business must accept Bitcoin in payment for goods or services, unless it is unable to provide the technology needed to make the transaction, however it is not clear that this is being enforced.

5. Renewable energy uptake

Another changing aspect seen in El Salvador is the focus on the importance and usage of renewable energy. There has been steady progress towards expanding the range of renewable energy sources. According to data provided by the Superintendence of Energy and Telecommunications (SIGET), 80% of El Salvador’s energy comes from renewable sources:

  • 6.7% solar energy
  • 7.2% biomass
  • 32.8% geothermic
  • 32.8% hydroelectric
  • 0.5% imported

This can potentially open a new market to UK companies, which could eventually help to expand this industry as well as assist with the production and development.

6. Bribery and corruption

Bribery and different forms of corruption (including money laundering and illicit enrichment) are classified as criminal offences in El Salvador. One of the main issues impeding El Salvador from reaching its potential is corruption. El Salvador scores a 33/100 in terms of corruption (where 100 is very clean and 0 is highly corrupt) and ranks 116 out of the 180 countries for the Corruption Perception Index [footnote 5].

While the government has made repeated allegations of corruption against members of previous regimes, the US has sanctioned a number of figures in or close to the current Government through the List of Corrupt and Undemocratic Actors for Guatemala, Honduras, El Salvador, and Nicaragua (the “Engel List”).

On June 2023, President Nayib Bukele delivered a speech to mark his fourth year in office and announced that the government will launch a “war against corruption”. He also announced that he plans to build a prison for “white-collar criminals”, and to search and seize several properties belonging to former president Alfredo Félix Cristiani, who governed the country from 1989 to 1994.

7. Terrorism and violence

Although there is no recent history of terrorism in El Salvador, attacks can’t be ruled out.

One of the major social issues that El Salvador encounters is violence and crime. The implementation of government measures such as the Territorial Control Plan and investment in education and health seek to decrease crime rates.

A State of Exception (Emergency) was introduced by the government in March 2022 in response to a sharp rise in the number of murders. It has been repeatedly extended on a monthly basis and remains in force. Whilst the murder rate has fallen significantly, concerns remain that gangs could regroup and violent crime remains a concern throughout significant portions of the country. The state of exception gives police additional powers. This has resulted in a much higher number of arrests and there are reports of mistreatment and human rights violations.

8. Contact

Contact the British embassy in El Salvador for further information.

  1. World Bank, 2023, The World Bank in El Salvador https://www.worldbank.org/en/country/elsalvador/overview ↩

  2. Oficina Nacional de Estadísticas y Censos El Salvador, 2022, Encuesta de Hogar de Propósitos Múltiples ↩

  3. Trading Economics, 2023, El Salvador-Credit Rating https://tradingeconomics.com/el-salvador/rating#:~:text=Standard%20%26%20Poor’s%20credit%20rating%20for,CC%20with%20n%2Fa%20outlook. ↩

  4. Office for National statistics, 2023, UK Trade: march 2023, https://www.ons.gov.uk/economy/nationalaccounts/balanceofpayments/bulletins/uktrade/march2023 ↩

  5. Transparency International, 2022, Corruption Perception Index, https://www.transparency.org/en/cpi/2022/index/slv ↩

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