With a combined population of approximately 40 million people and an area of 52200sq.km, Central America represents a significant and growing market for importers and exporters alike. This potential market consists of seven nations located on the strip of land connecting North and South America, namely Guatemala, Costa Rica, Panama, El Salvador, Nicaragua, Honduras and Belize. With their strategic locations at the heart of Americas, these countries represent an important crossroads between North and South America and encompass many important trade routes and ports. In addition to its access to North and Central American markets, El Salvador enjoys a vast logistics network that links San Salvador International Airport to La Unión Port. These infrastructures make it easy to move merchandise around the region. The Inter –American Highway crosses El Salvador and forms the heart of an excellent transportation system that links San Salvador with the ports of LaUni n, Acajutla, and La Libertad, as well as the inland cities of San Miguel and SantaAna. Although the smallest country in Central America , geographically, El Salvador boasts the third largest economy in the region and the second most open economy in all of Latin America. El Salvador’s economy has traditionally been agricultural, but services and industry now employ a significant percentage of the workforce and account for a much higher percentage of GDP. El Salvador’s economy was adversely affected by its 1980-1992 civil war. At the beginning of early 1990’s, however, the economy has, through a commitment to free market and careful fiscal management, been growing at a steady pace. The improvement of El Salvador’s economic fortunes are largely due to the privatization of the banking system (nowadays well capitalized and liquid),  telecommunications, public pensions, electrical distribution, and generation, reduction of import duties , elimination of price controls and an improved  enforcement of intellectual property rights. Capping those reforms, the economy has been officially dollarized since January 2001 and the US dollar became legal tender. After the backlash from the global economic crisis, the Salvadoran administration has managed to get the economy moving forward again since the start of 2011 with economic growth picking back up to 2.5%. Trade in goods and services plays an important part in El Salvador’s economy with more than 70% of GDP. Agriculture and related sectors represent more than 10% of GDP. Annual remittances, mostly from Salvadorans living in the U.S, amount to 18% of GDP.

The importance of trade and investment is undeniable in El Salvador’s economy, reflecting in part the openness of its trade and investment regime. The trade policy regime of El Salvador has been further liberalized in recent years. Progress has been made in modernizing customs, eliminating unnecessary licensing requirements, enhancing the transparency of technical regulations, and strengthening the institutional framework on competition policy and government procurement.  Regarding intellectual property rights, El Salvador has made significant changes in its patent, trademark and copyright laws, some of which exceed the protections required in its TRIPS Agreement obligations.

As part of its liberalization efforts, El Salvador has entered in 2006 into the US –Central America – Dominican Republic Free Trade Agreement (CAFTA-DR) and several Free Trade Agreements with Chile, Mexico, Panama, Dominican Republic, Colombia and Taiwan. In 2012, the UE and El Salvador signed a comprehensive Association Agreement which includes an ambitious trade component. El Salvador continues to assign high priority to deepening Central American integration. El Salvador is also part of the Tratado General de Integraci n Centroamericana (Central American General Treaty).The country has also maintained its long-standing strategy of granting exporters refunds as well as fiscal privileges through free-trade zones (FTZs), which result in subsidies and tax breaks. Strong industrial capacity in the FTZs, coupled with a skilled labor force trained in technology sectors are increasingly prompting a variety of companies to set up operations in the country.

El Salvador has been a member of the WTO since1995 and takes an active part in its negotiations and its regular work. In addition, El Salvador has accepted the Fourth and FifthProtocols of the GATS.

It is worth underscoring the fact that the current government has set itself two key objectives that drive its economic policy: first, fostering the country’s development and second, addressing social issues.

The trade policy of El Salvador’s current administration are to: reduce the trade gap by supporting foreign investment in export –generating production; contribute to export market diversification; improve domestic production capacity by making it more competitive via-à-vis imports , in order to lessen El Salvador’s vulnerability to changes in the world economy; and to promote job-creating and productivity- improving external trade.

El Salvador’s foreign investment legislation guarantees freedom to invest and equal treatment for foreign investors, except in those areas where other laws impose restrictions. This includes the supply of “small-scale” services, which are the prerogative of Salvadoran citizens by birth or nationals of other Central American countries, and the ownership of rural real estate, which may not be brought by foreigners from countries that do not give Salvadoran citizens equal rights.