iii cafta anniversary un el salvador
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En la siguiente presentación encontrarán información del III Aniversario CAFTA en inglésTRANSCRIPT
Ministry of Economy, El Salvador
March, 2009
III Aniversary Results
CAFTA in El Salvador
During the third anniversary of the entry into force of CAFTA – DR, the Ministry of Economy of El Salvador
is pleased to present this document with the results from said Free Trade Agreement in the country until
2008.
Ministry of Economy
Alameda Juan Pablo II y Calle Guadalupe Centro de Gobierno, San Salvador, El Salvador, Central America
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INDEX
Theme Page
I. Introduction 3
II. Trade Analysis 5
A. Destiny and Origin of El Salvador’s Trade 6
B. Bilateral trade flows, El Salvador - United States of America 7
C. Trade Balance El Salvador with the United States of America 8
D. Composition of Salvadoran exports to the United States of
America
9
E. Main products exported from El Salvador to the United States of
America, new exports, and exports with the greatest growth
10
F. Classification of exports according to their technological level 16
G. Imports of El Salvador from the United States of America 17
H. Supports to exports in El Salvador 19
III. Sectors Analysis 22
A. Textile and Apparel 23
B. Dairy Products 25
C. Pickled Vegetables 27
D. Organic Products 31
E. Plastics 34
IV. Foreign Direct Investment 37
A. General Results 38
B. Who invests in El Salvador? 39
C. Trend from foreign reference companies to direct foreign
investment during 2000-2008
41
D. Sectors with the greatest development in the last years 42
E. Strategies for Investment Attraction 43
V. Achievements and Advances in CAFTA – DR issued during the III anniversary of the entry into force of the Treaty
46
A. Launching the initiative ―Pathways to Prosperity in the Americas‖
47
B. Textile Issues 48
C. Labor Issues 50
D. Environmental Issues 54
E. Institutionalism of CAFTA – DR 57
F. Customs and Trade Facilitation 57
G. Strengthening of private sector and cooperation within the
framework of CAFTA – DR
58
H. Spreading the benefits and opportunities of CAFTA - DR 60
I. Enforcement of CAFTA – DR for Costa Rica 63
VI. General Conclusions 64
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I. Introduction
It is a pleasure to present you this document, which attempts to make an evaluation of the impact the United States - Central America - Dominican Republic Free Trade Agreement has had during its third year of
enforcement in El Salvador. It is important to start this research saying that we cannot close our eyes to the complex reality of the international economy. Certainly we are living difficult times, although we are convinced
that our trade agreements will allow us to continue taking advantage of the opportunities that trade openness offers.
Our productive sectors deserve special congratulations for its activities during 2008; our exports towards the United States grew approximately
7.7% while our imports also grew 6.04%, representing a total increase of trade, of approximately 6.7%.
It is easy to evidence also the creativity, dynamism and shrewdness of our entrepreneurs, allowing them to effectively insert themselves in the United
States market with a wide range of products. Among our exports in 2008, we see all types of products being exported by our entrepreneurs especially in the area of non-traditional products, stressing those commonly called
―nostalgic‖ such as vegetables, chesses, prepared beans, frozen fruits, ethnic drinks, baked products, kitchen aluminum products, plastic
products, and ethylic alcohol. But CAFTA-DR has not only potentiated our exports towards the United
States, but has also allowed us to increase and strengthen our exports towards Central America and the Dominican Republic. Our exports
towards the member countries of the CAFTA-DR region in 2008 experienced an increase of 12.8%, proving that we are taking advantage of the opportunities and integrating our economies through the accumulation
of processes and inputs, leaving quite clear that our private sector is taking better advantage of the regimes of origin from the trade agreements.
On foreign direct investment in El Salvador, we must also point out the advances reported by the National Investment Promotion Agency (PROESA)
which has registered an important increase in terms of investment amounts, confirming that foreign direct investment has had a clear upward trend since 2006, with a growth of 7.02% to September 2008,
related to the closing December 2007. This year has also been positive for the working agencies in our Labor and
Social Prevision Ministry and the Environment and Natural Resources Ministry. Both Ministries have continued promoting important projects
that allow the strengthening of institutionalization and their work agendas;
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we must especially mention the support received from the different
cooperating agencies working hand in hand with both ministries, to comply with their obligations within the framework of Chapters 16 (Labor)
& 17 (Environment). The environmental cooperation results are important in Cleaner Production, for example.
For the tools such as trading agreements to be more productive, we must perform our role responsibly. As a government, we are working towards supporting our citizens to take advantage of trade opportunities, as well as
facing future challenges, especially in the rest of the year, vis-à-vis the international financial crisis.
Ricardo Esmahan Minister of Economy
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Trade Analysis
Picture - www.alcol.es
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II. Trade Analysis
A. Destination & Origin of Trade in El Salvador As part of its trade policy and strategy of openness to the world, El
Salvador has been constantly targeting, not only the consolidation of its trade relationships with historically traditional partners, but also to diversify the target markets and origin of its exports and imports,
respectively.
In such a way, throughout the last few years, El Salvador has signed several free trade agreements with its main trade partners in order to strengthen the trade exchange with those countries. When comparing
trade flows of El Salvador to the year 2008 with those of 1997, when we did not have an important base of trade agreements, we can see how
national exports have constantly grown, at the same time that they have diversified their destination markets (graph 1). On the other hand, imported inputs for production, as well as final goods imported by
consumers also reflect a greater diversification compared to previous years (graph 2).
The United States keeps a predominant role as trading partner in Central America in general, and El Salvador in particular, as a destination market
of our exports, as well as origin of our imports.
Graph 1
Source: Own preparation with Central Reserve Bank information
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Graph 2
Source: Own preparation with Central Reserve Bank information
Graph 1 shows how during the assessed period exports to other countries members of CAFTA – DR have increased in a sustained manner because,
today, the Central American market (36%) together with the United States (48%) represent the destination of 84% of our exports. Meanwhile in 1997 our exports to Central America (24%) and the United States (54%)
represented 78% of our exports total. It is evident then not only the importance of these markets for our exporters, but also the dynamism and
skills of our exporting sector, which has successfully penetrated these markets.
In the case of imports, a similar phenomena can be observed when by 2008, 34% of our total imports come from the United States, and 17% from Central America, while imports from the rest of the countries, reaches
49%. This is a clear example of an important diversification of our country’s suppliers and a greater integration of the productive chains in El
Salvador with its trade partners, especially Central America and the United States.
B. Bilateral trade flows El Salvador - United States
Trade flows (imports and exports) between El Salvador and the United States have been increasing throughout the years, exactly like graph 3
shows, where the evolution of trade flows of El Salvador with the United States can be seen for the period presented. In this graph we can also see
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the weight of bilateral trade with the United States, as a percentage of GDP
year after year.
During the 1997 to 2005 period, average trade flows between El Salvador and the United States was US$ 4,230 millions; nevertheless, starting 2006 when CAFTA – DR was enforced in our country, from 2006 to 2008 we can
see a yearly average trade of US$ 5,219 millions. In graph 3 we can more clearly see the growing trend of trading exchanges reaching a total of US$
5,520 millions in 2008. Graph 3
Source: Own preparation with Central Reserve Bank’s data, values in dollars at
current prices.
C. Trade Balance El Salvador-United States When analyzing the trade balance El Salvador-United States in greater
detail, we can see a constant trade increase starting the enforcement of CAFTA – DR. In the case of exports, during 2008 they reached a total of
US$2,184 million, representing a growth of 7.6% related to 2007 exports, and 10.3% related to 2006.
We can underline the following points from the trade balance with the United States:
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Salvadoran exports to the United States grew 7.7% in 2008; imports
from said country grew 6.04%. Non-traditional exports to the United States have shown an
important growth, when increasing 19.6% related to the previous year. Among these products we find absolute ethyl alcohol, electric
condensators, and plastic products, among others.
Exports in the area of maquila grew 4% during 2008.
Exports of traditional products (coffee, shrimp and sugar) grew 34% related to performance in this item during 2007.
Graph 4
Source: Own preparation with Central Reserve Bank information
D. Composition of Salvadoran exports to the United States
Salvadoran exports to the United States for 2008 increased to $2,184 million and represent 48% of our total exports to the world. Graph 5
shows exports composition towards said country in three classifications: traditional, non-traditional and maquila since 1997 until 2008, according
to items detailed by the Salvadoran Central Reserve Bank. By the year 2008, the composition of our exports is structured a bit
differently, with an increase in the participation of non-traditional products, thus 17.15% (US$374 million) On the other hand, exports of
traditional products (coffee, sugar and shrimp) correspond to 7% (US$153
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million) of total exports and maquila reached levels close to 75.8%
(US$1,655 million) of Salvadoran exports to the United States. Graph 5
Source: Own preparation with Central Reserve Bank information
E. Main products exported from El Salvador to the United States,
new exports, and exports with greatest growth
As it can be seen in the previous section, non-traditional exports to the United States have had a constant growth since the enforcement of CAFTA
– DR. Additionally, this item shows an ever more important participation in total exports in the country, as one of the consequences of the
diversification of national exports. A good portion of these results are due to the incentive represented by the
immediate and gradual elimination of the tariff and non-tariff barriers to enter the United States market, as well as the legal security generated by
the agreement in our exporters and investors. Previously, El Salvador enjoyed temporary trade concessions unilaterally
granted by the United States through the Caribbean Basin Initiative (CBI) and the Generalized System of Preferences (GSP), thanks to which lesser
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tariffs were paid than in the other countries, to enter the United States.
Nevertheless, in order to enjoy these unilateral preferences, the country must comply with a series of conditions.
CAFTA – DR transformed the trade relationship between El Salvador and the United States to a reality which offers a secure legal framework,
besides the consolidation and widening of benefits to the sectors with exporting potential in the country, complementing it with a set of rules of origin which are adequate with and strengthen the productive reality of
our country.
1. Main exports from El Salvador to the United States in 2008 Analyzing the ten main exports from El Salvador to the United States, we
can see there is an important diversification in the composition of the same, because in this sample we find apparel, agricultural products, agro-
industrial and industrial products. The main export product to the Unites Sates is ―knit cotton women and girls pajamas" of which in 2008 US$626 million were exported with a growth of 43.4% related to 2005. The tariff paid in 2005 was eliminated at
the time of enforcement of the agreement, making the Salvadoran product more competitive in the United States market.
Another article which deserves special attention are the ―women or girl pajamas made of other textile materials different from knit cotton" located in
the 6th position among the main Salvadoran exports, reaching US$81 million in 2008, representing a growth of 195% related to 2005 (previously
these products paid differentiated tariffs of 32%, 16% and 5.6% to enter the United States).
In the second position of the main products exported by El Salvador to the United States, we have absolute ethyl alcohol. In 2008, exports of this
product reached US$171 million, representing a considerable increase comparing it with US$39 million exported in 2005. This product was benefited with the tariff reduction to 0% since the enforcement of the
treaty, when it is completely produced from originating goods (corn, sorghum or molasses).
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Green coffee has the fourth
position among the main Salvadoran exports to the
United States with US$97 million, representing a growth related to 2005 of 91.3%. The
above, together with a better positioning of the Salvadoran
product among United States consumers, jointly with an increase in the coffee price at
international level, has promoted the increases in Salvadoran exports to the
United States.
Raw sugar is another traditionally strong export from
El Salvador, placed in the eighth position of exports to the United States, with US$54.7 million and a growth of 86.4% related to year 2005. This product paid a specific tariff at the level of Most Favored Nation (MFN) of
33.87 cents of a dollar per Kilogram. In the Treaty, the United States granted El Salvador a quota with a compound growth which allows the export of said amount free of tariffs. By 2008, this quota was 24,960 MT
and will continue growing yearly.
Main Exports from El Salvador to the United States, 2008
Source: Central Reserve Bank, value in millions US$
Code Product Tariff before
CAFTA Tariff by
2008* 2005
Value 2008
Value
61091000 Women or girls sleepwear, cotton, knit 16.5% 0%
436.2 625.7
22071010 Absolute ethyl alcohol 2.5% & 1.9% 0% & quota 39.0 170.9
61102000 Cotton knit sweaters and jackets 16.5% & 5% 0% 195.6 113.4
09011130 Green coffee 0% 0% 50.5 96.6
85322100 Tantalum fixed electric condensators 0% 0% 66.0 85.7
61099000 Women or girls sleepwear, knit, other textile materials 32%, 16% &
5.6% 0% 27.5 81.0
61071100 Men or children cotton underpants 7.4% 0% 39.4 61.9
17011100 Raw cane sugar 33.87cts/kg 0% (quota) 29.4 54.7
61152100 Synthetic fiber hosiery and leotards 14.6% & 2.7% 0% 111.4 53.8
85322900 Fixed or variable electric condensators 0% 0% 40.7 51.9
Total ten main exports from El Salvador to the United States 1035.6 1395.6
Total Exports from El Salvador to USA 2,055 2184
* Tariffs to enter United States market
Coffee – picture, embassy of El Salvador in Ireland
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The list of main exports is completed by apparel exports such as knit sweaters and jackets (US$114 million), men underpants (US$62 million), and synthetic fiber hosiery and leotards (US$54 million); these products
were subject to tariffs from 5% to 16.5% at the level of MFN before CAFTA – DR and after the enforcement of the agreement the tariff preference is guaranteed at 0%.
Furthermore, it is important to remark the tantalum fixed electrical
condensators and other variable electric condensators which also appear as new exports after CAFTA-DR.
2. New exports from El Salvador to the United States during 2008
After having analyzed a sample of the ten main new exports from El Salvador to the United States, we see a great variety of new exported
products, compared to 2004. Special mention deserve the tantalum electric condensators, one of the main exports from El Salvador in 2008, that are also among the main 10 exports from El Salvador to the United States in
that same year. Among the other new exports we find ―cables for spark plugs‖ that used to
pay 5% tariff to enter the United States, and after the enforcement of the Treaty, this tariff was eliminated. By the year 2008, these exports reached
approximately US$17 million. Other new industrial exports are ―electrical condensators with ceramic dielectric‖ (US$10.8 million), ―plastic school
items‖ (US$3.1 million), ―raw or powder gold‖ (US$1.7 million). These products used to pay between 4.1% and 5.3%, but after the FTA these
were eliminated for originating goods.
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Main new exports from El Salvador to the United States, period 2004 - 2008
Source: Central Reserve Bank, value in millions dollars
Code Product Tariff before
CAFTA* Tariff by
2008* 2004 2008
85322100 Tantalum electric condensators 0% 0% $0.00 $85.68
85443000
Spark plugs cable sets and other sets of cables used in
transportation mediums 5% 0% $0.00 $16.98
85322400
Fixed or variable electric condensators, with ceramic
dielectric, multilayer 0% 0% $0.00 $10.75
21069099 Aromatic syrups or with colors added 6.4% 0% $0.00 $6.88
38085030
Insecticides, rat poisons, herbicides, fungicides,
germination inhibitors 6.5% & 5% 0% $0.00 $3.61
39261090 Office articles and plastic school items 5.3% 0% $0.00 $3.09
07096010 Capsicum (sweet peppers) 4.4 cents/kg 0% $0.00 $2.73
17019900 Chemically pure sucrose, solid
3.14 to 3.66
cts./Kg 0% $0.00 $2.29
71081200 Raw gold, semi-elaborated, or in powder 4.1% 0% $0.00 $1.89
39235090 Plastic lids and stoppers 5.3% 0% $0.00 $1.70
* Tariffs to enter United States market
Among the new agricultural exports we have ―aromatic syrups or with added coloring‖, which reached close to US$6.9 million and before the FTA
paid a tariff of 6.4%. Other agricultural products such as sweet peppers are consolidated as one of the main new exports from El Salvador to the
United States with close to US$2.8 million. They used to pay a specific tariff of 4.4 cents per kilogram.
Finally, the list of the ten main new Salvadoran exports to the United States is completed with ―insecticides and herbicides‖, which reached
exports around US$3.6 million after the MFN tariff elimination of 6.5% and 5%; and ―chemically pure solid sucrose‖, a product with exports close to
US$2.3 million, and a specific tariff that was eliminated of up to 3.66 cents of a dollar per Kilogram with the enforcement of CAFTA – DR.
3. Salvadoran exports to the United States showing a greater growth
Another classification of exports that is important to mention, are those which after the enforcement of CAFTA—DR have shown important growth rates, and represent a high exporting potential and an opportunity niche
for our entrepreneurs.
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For the year 2008, the following table collects a sample of the 10
Salvadoran products with a greater increase in exports towards the United States:
Main Salvadoran products with greater growth in exports towards the United States
Source: Central Reserve Bank, value in US$
Code Product Tariff before
CAFTA* Tariff by
2008* 2004 2008
74199990 Copper manufacture 3% 0% $15 $637,169
33053000 Hair sprays 0% 0% $1 $15,573
90178000
Drawing, tracing, calculation instruments (pantograph,
protractors, etc.) 5.30% 0% $50 $356,033
39249090 Plastic dinner services 3.40% 0% $3 $8,048
42029200 Chests, luggage, briefcases, and attaché cases 17.6% & 7% 0% $1,619 $4,106,019
85182100 Laudspeakers, even mounted in their boxes 4.90% A $87 $78,079
54023300
Synthetic filament threads (except sewing thread)
without conditioning for retail sale 8.8% & 8% 0% $575 $455,550
85322900 Fixed, variable or adjustable electric condensators 0% 0% $113,745 $51,891,968
84440000
Extruding, stretching, texturizing or cutting machines
for synthetic or artificial textile material 0% 0% $200 $72,439
76169990 Aluminum manufactures 2.50% 0% $527 $152,394
52103900
Cotton fabric with a cotton content under 85% in
weight 12.4% & 10% 0% $346 $84,714
* Tariffs to enter United States market
Of these products, copper manufactures are noticeable, which exports in 2004 amounted only for US$15, and by the year 2008 the exports reached
US$637,169. These manufactures paid before the FTA a 3% tariff, and today they are not subject to any import taxes when entering the United
States. Similar growth is noticed for products such as hair sprays, drawing and tracing instruments, just to mention a few.
The performance of products such as chests and luggage is also remarkable, having a significative growth, reaching values of US$4.1
million in 2008. The same in the case of variable or adjustable electric condensators, which show an important growth reaching exports of US$51.8 million, and being positioned among the ten main exports of El
Salvador to the United States. The above shows that these products, which are not a part of our
traditional exports, are efficiently penetrating the United States market and positioning themselves in the minds of consumers.
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F. Exports classification according to technological level
Exports classification in terms of technological content has important
implications to determine the level of development in a country. Countries that look for an export specialization in greater technological development products, or with greater value added, obtain as a consequence greater
income from their exports, and greater economic growth. In order to analyze Salvadoran exports to the United States, a
classification proposed by ECLAC has been used, dividing products in four categories: natural resources intensive products, low technology products,
medium technology products, and high technology products. The first category has primary goods, agricultural and agro-industrial
products, food and drinks, paper, cardboard and wood products, etc. In the case of El Salvador, here will appear the coffee, sugar, fruits and
vegetables exports, paper and cardboard, etc. In the second category, low technology or labor intensive goods, we find
textile, apparel, shoes, toys, and similar manufacture. These products use natural resources and incorporate subsequent processes for their manufactures, and are also labor intensive.
The third category, goods of medium technology, includes mainly products
such as machines for shoe repair, magnetic tapes, electric conductors, semiconductors, cables, etc. In this category we find tantalum conductors, cables to start vehicles, loudspeakers, among others mentioned in previous
sections.
Finally, the fourth category of high technology goods includes products offering a higher value added. Within this category, El Salvador is exporting: optical, photography, and clockmakers instruments,
transportation material (radiators, shock absorbers, etc.) and Metal-mechanics products (piping accessories, cisterns, etc.).
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Graph 6
Source: Own preparation with Central Reserve Bank information, year 2008 By 2008, 22% of our exports to the United States (US$478 million) were
natural resources intensive products; 69% of our exports (US$ 1,519 million) were low technology products, 8% of the exports (US$ 174 million) were medium technology products, and 1% (US$ 13.4 million) were high
technology products.
For the above information, it can be inferred that El Salvador is in an evolution process of technology composition of its exports, and every time a greater proportion of exported products are classified in medium
technology and even high technology products. As we saw in the previous sections, non-traditional products that participate every time more in total exports of the country are constantly growing.
G. Salvadoran imports from the United States
Imports from the United States have also been growing continuously (graph 4) in a similar proportion to that of the total trade growth between
El Salvador and the United States. This reflects the close relationship existing among the productive chains of our two countries, especially
considering that many of the merchandises imported are inputs to develop productive processes in the country.
Regarding the import composition, for 2008, the sectors showing a greater participation in imports coming from the United States, it can be seen a
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small increase in the imports of agricultural products and industrial
machinery. Furthermore, it can be seen an increase in the participation of oil imports and its derivatives, possibly due to the high prices seen during
2008. The main imports are in the oil sector and its sub-products (15%), textiles (19%), industrial machinery and automobiles (21%), among others.
Graph 7
Source: Own preparation with Central Reserve Bank information, year 2008
Breaking down per product the United States imports, we can see how oil
sub-products increased in value between 2005 and 2008. Of the ten main products that El Salvador imported from the United States in 2008, four were oil sub-products (diesel oil, fuel oil No 6, kerosene, and lubricant oils
and greases) that have also shown an increase starting 2005. Only these four products showed an increase which reached a total of US$447
million. Of these four products, the one that showed a greater growth during said period was Kerosene, followed by fuel oil. These increases are mainly due to oil prices fluctuation, which reached historic records in its
price during the last years.
Among the main imports from the United States we can also mention yellow corn, liberalized to enter El Salvador through a compound growth quota and a non-lineal tariff reduction schedule; in 2008 the quota
allowing tariff free entrance increased to 402,500 MT. By 2008 imports totaled US$ 110.74 million. Another of the main imports from the United
States is hard wheat that already had a 0% MFN when the agreement was signed, and of which US$95.5 million were imported in 2008.
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Table 1: Main Imports to El Salvador from the United States, 2008
Source: Central Reserve Bank, value in millions US$
Code Product
Tariff
before
CAFTA* Tariff by
2008* 2005 2008
27101921 Diesel oil (Gas oil) 1% 0% 46.84 257.44
10059020 Yellow corn 15% Quota 50.16 110.74
60062200 Knit fabrics, colored cottons 20% 0% 172.81 104.82
10011000 Hard wheat 0% 0% 46.17 95.5
85171200
Mobile telephones (cellular) and from other wireless
networks** 0% 0%
5.51
93.68
60062100 Knit fabrics, cottons, raw or bleached 20% 0% 112.33 86.98
23040010 Soy flour 0% 0% 35.08 72.6
27101922 Fuel oil No. 6 (Bunker C) 1% 0% 5.88 70.13
27101911 Avjet turbo fuel 1% 0% 0.64 60.03
27101991 Oils and lubing greases 1% 0% 16.18 59.52
Total ten main imports from the United States 491.60 1011.42
Total imports to El Salvador from the United States 2930 3336
* Tariffs to enter El Salvador’s market ** In the third amendment of the harmonized system, no specific openness existed for mobile phones, and its equivalent had
0% tariff.
The remaining products comprising our 10 main imports from the United
States are knit colored cotton fabrics, US$ 104 million, bleached cotton fabrics, US$87 million, and mobile cellular phones, US$94 million.
H. Support to exports from El Salvador
Aware of the relevance international trade has as a direct agent for the economic and social development, the government of El Salvador has
created several support programs for the private sector, and the exports, in order to provide them with the necessary tools to potentiate their exports,
and allow them to insert adequately in the international market. Among these programs we underline the one offered by the National Exports Agency (EXPORTA) and the Ministry of Economy through its
FOEX/FONDEPRO program.
Salvadoran exports promotion through EXPORTA
EXPORTA facilitates, expeditiously, timely and efficiently, access to service companies and support mechanisms, public and private, which will allow them to successfully and in a sustained manner insert themselves in the
international markets, contributing to the increase of exports from the country.
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The objectives of this agency are:
i. Systematic identification of trade opportunities in the prioritized markets.
ii. Application of the internationalization strategies oriented to the adaptation of supply to demand.
iii. Focalized promotion of the export offer oriented to the demand of identified markets.
iv. Facilitate the articulation of demand and supply of the
necessary services for the insertion of companies in the
international markets.
v. Develop and permanently use external and internal networks of strategic allies.
vi. Potentiate the interactive use of technological platforms of information.
Taking in consideration that the United States is the main trade partner of El Salvador, EXPORTA opened this year an office at the Salvadoran
Embassy in Washington, D.C. The objective of this office is to tend to the needs of Salvadorans abroad in the best way possible, and help towards the creation of business opportunities, for Salvadorans in the country, for
those who wish to send their products to the Unites States, as well as for Salvadorans residing in the United States interested in offering their
products. Another important achievement of EXPORTA during 2008 is the launching
of the brand ―Authentic Salvadoran Flavor‖ foods to be included in all Salvadoran food products. The objective of the country brand is to identify all Salvadoran manufactured foods and drinks, communicate their
benefits, and generate trust among consumers. Through this brand we can merge the communication needs of Salvadoran exporters, preparing a
visual unit that transmit the origin and benefits to the products that carry it. As a one first phase, this brand is being promoted in the Eastern coast of the United States (New York, New Jersey, Washington D.C., Virginia)
with the campaign phrase ―Feel the flavor of your land.‖ To find out more information, you can visit the official EXPORTA web page:
www.exporta.gob.sv
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Exports promotion (FOEX/FONDEPRO)
FOEX/FONDEPRO is the result of a Salvadoran Government initiative
through the Ministry of Economy, to promote export development, quality, association, productivity, innovation, including the adoption and
incorporation of technological improvements and other support lines that might be necessary in the future, as long as they are supported by the competitive strengthening of the Micro, Small and Medium Enterprises
(MSME’s) through the non-reimbursable co-financing of up to 70 % of the total cost of a Project or specific initiative.
The main objective is to promote MSME’s competitiveness in El Salvador. Its specific objectives include:
i. Favor the optimal assignment of resources towards new
activities with greater value added, generating positive
externalities with the economy and society.
ii. Promote technological innovation of products and processes.
iii. Incorporate in enterprises, quality systems for products,
processes and operational management, according to international standards.
iv. Incorporate new technologies in productive processes for enterprises; through the adoption, innovation or technological
transfer.
v. Promote association through the development of suppliers,
productive chains and other mechanisms which imply the support of coordination activities among enterprises and at the
same time, are consistent with competitive markets.
vi. Develop and maintain international markets which allow a
constant growth of the enterprises in the country. If you require more information about this program, you can check the
official web page www.foex.gob.sv or call (503)2231-5871.
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Sectors Analysis
Picture: craft museum of textiles
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III. Sectors Analysis
A. Increase in the market participation of El Salvador in the textile and apparel sector of the United States
According to data from the Trade Department of the United States, El Salvador registered a yearly increase in exporting value of its textile offer to
the United States of 4.24% and a recovery of its market participation (1.69%) at the closing of 20081; becoming the member country of CAFTA-DR that registered the largest growth in this highly competitive sector.
Graph 8 Market Participation – El Salvador
In textile and apparel imports – United States
Source: Prepared by IC/MINEC with USITC numbers
Said increase in market participation is an indicator of competitiveness, because it suggests that El Salvador has achieved an important positioning vis-à-vis other countries in a specific target market; a relevant
factor when demand contracts, and as is the current case in the United States, with purchases of textiles abroad that have been reduced in -3.34% in value at 2008 closing, related to 2007. (see date from official sources:
http://otexa.ita.doc.gov/msrcty/v2110.htm)
Regardless of the present economic crisis and the post quota period2, there are several factors that have contributed to the country generating these results to date: (1) The strategic vision of sector enterprises in the
development of a productive integration between the textile and apparel industry; as well as the timely conversion to offer Full Package, receiving
incentives partially by the conditions granted by the FTA with the United
1Fuente http://otexa.ita.doc.gov/msrcty/v2110.htm«Source http://otexa.ita.doc.gov/msrcty/v2110.htm 2 In 1994, the Agreement on Textiles and Apparel (ATC) is implemented, looking for the progressive
integration of textiles and apparel to GATT standards through: The elimination of textile quotas in 4 stages,
according to the list of products of countries, for each of the stages.
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States. (2) The enforcement of the FTA with the United States. On the
other hand, there are some apparel industries that are bidding to the focus or specialization strategy, developing products with ever more value added,
or reorienting it to market niches that require speed of response to the target markets (supply). Additionally, there are other exogenous factors, such as increase in production costs in China (main supplier country) and
the appreciation of its currency vis-à-vis dollar, among others. In the following table, we can see a trend towards decrease in Salvadoran
sales or exports at the beginning and end of the year, and the peak months of provisioning are June and July.
Graph 9
Enero Febrero Marzo Abril Mayo Junio Julio Agosto Septiembre Octubre Noviembre Diciembre
2006 104,187 116,309 67,979 85,886 125,599 148,391 149,252 143,599 152,138 135,750 117,325 124,117
2007 97,306 111,883 131,106 111,945 126,677 137,065 147,625 144,248 138,112 147,606 124,835 127,192
2008 104,567 130,877 124,136 129,945 129,393 162,614 157,953 133,043 147,497 150,803 118,469 123,690
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
En m
iles
de
US$
Importaciones mensuales provenientes de El Salvador hacia EUATextil y Confección- En miles US$
Source: Prepared by IC/MINEC with USITC numbers
Before the world economic crisis, Salvadoran industry perspectives are highly challenging. Nevertheless, it is important to observe the global trends and indicators, where there are indications of opportunities for the
entrepreneur to be capable of approaching due to his/her capacity of response, flexibility towards change, and innovating vision.
For example, the United States companies are looking to balance costs, flexibility, speed and risk in their ―sourcing‖ strategies. They will probably
turn to secondary suppliers for the needs not characterized as primary suppliers. For example, the production of certain goods will keep Mexico and the CAFTA region in products considered fashion, supply, under
volume and fast turn-around.3
3 Source: Competitivity Analysis of the Apparel Industry in El Salvador, MINEC, 2004.
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The above are strategic subjects that transcend the economic situation
and should be approached for the industry’s sustainability.
B. Salvadoran exports of dairy products towards the United States
have been positively promoted by CAFTA – DR after three years
of enforcement Exports of dairy products towards the United States have increased during
the last few years, mainly at the beginning of the year of CAFTA’s entry into force, exceeding the total exported in 2005 in 200%, and with a
upward trend that was maintained in 2008 according to preliminary numbers of the Central Bank, as we can see in the next graph. Graph 10
Main exported products
The main market for dairy products in the United States continues to be specialty cheeses, according to export registries, together with melted
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cheese, reported as a new export product during 2008, according to
authorized export registries by CENTREX-BCR.
El Salvador: Dairy Products exports towards the United States
Product
Accumulated
growth rate
(2006/2008)
Participatio
n % %
2008
0402-MILK & CREAM, CONCENTRATED OR WITH SUGAR
ADDED OR ANY OTHER SWEETENING 1%
0405-BUTTER AND OTHER FATS FROM MILK, DAIRY
PASTES TO SPREAD 109% 1%
0406-CHEESES & CURD CHEESES 28% 98%
Total values USD 100%
Source: IC/MINEC with BCR data
Position of El Salvador in the CAFTA-DR ranking of supplying countries
The United States imports cheeses from a total of 56 countries, where El Salvador holds the 35th position. From the CAFTA-DR member countries,
El Salvador is currently the second cheese exporter to the United States, after Nicaragua, and is closely followed by the Dominican Republic and the other Central American countries. In 2008 according to the International
Trade Commission of the United States, there is a decrease of 6.8% in imports coming from El Salvador.
CAFTA-DR supplying countries: Cheeses and curd cheeses (HS 0406) to the United States
Position
in the
world
Position vs
CAFTA-
DR
countries Country
2005 2006 2007 2008 Variat %
In thousand US$ 2007 - 2008
21 1 Nicaragua 3,423 4,854 6,864 8,826 28.60%
35 2 El Salvador 298 597 1,023 953 -6.80%
39 3 Dominican Rep. 259 340 415 622 50.10%
46 4 Honduras 10 218 123 127 3.20%
47 6 Costa Rica 848 402 224 112 -49.90%
68 7 Guatemala: 4 0 0 0 N/A
Total in the world 1,048,5
50
1,071,532 1,152,680 1,209,620 4.90%
Source: IC/MINEC with United States International Trade Commission data
Treaty Benefits
Besides having access to a 300 million people market, the Free Trade Agreement CAFTA-DR gives El Salvador the opportunity to satisfy the
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segment of close to 2 million Salvadorans presently residing in the
country.
With 0% tariff, Salvadoran and Central American enterprises may export typical cheeses to the United States. As the Hispanic market increases, the opportunity to export products considered ―ethnic‖ increases due to its
cultural connotation, without sacrificing quality. It is important to mention that other countries outside of the Treaty, such
as Mexico, have an important position in the cheese market of the United States, directly competing with our Salvadoran exporters. During 2008,
Mexico held the 16th position within the ranking of cheese supplying countries towards this important market, which can grow and be even more significant in economic terms for Salvadoran enterprises complying
with all the quality and hygiene levels, labeling and standards required to compete in the North American market; besides, this turns it into an
incentive for SME's who want to participate competitively in the large processed cheeses market.
It is important to point out also that, in order to keep exports of this type of products, it has been very important to make an effort in the private sector to comply with the labeling standards necessary to introduce these
products in the market. The Ministry of Economy has a guide for food labeling available to the exporter, which has general information on each of
the labeling requirements, and eases access to official information generated by the USA government. This practical guide tries to make known, in a concise, fast and comprehensive way, the main requirements
imposed by the United States on food labeling, in order to ease its compliance by the small and medium entrepreneurs. This guide is
available in www.minec.gob.sv .
C. Pickled vegetables, Salvadoran style towards the United States, show an important impulse
Pickled food products exports towards the United States show a growth among products such as: Pickled mangos with a growth of 68% moving
from 70 thousand 400 dollars exported in 2007, to 118 thousand five hundred dollars in 2008; Yucca flower (Flor de Izote) in acetic acid with 52% growth, baby corn with a growth of 75% in 2008, and Vegetable Salad
and pickled vegetables with 16%. Each day these products are achieving a greater acceptance in the North
American market, thanks also to the distribution and promotion work in fairs where the local enterprises have carried out jointly with distributors.
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Currently, there is a better positioning for Salvadoran pickled products, as
well as the preparation by enterprises, with governmental support, taking advantage of tariff benefits with CAFTA. In the same manner, the visit of
fairs, market research and compliance of labeling standards that the enterprises have adopted, surely has been an important factor for this growth.
2005 2006 2007 2008
Particip.
2008
Variac.
2008/2007
20019090-01005-MANGOS ENCURTIDOS 33,653 15,820 70,464 118,574 30% 68%
20019090-01004-SEMILLA DE PATERNA ENCURTIDA 552 82,389 99,486 81,990 21% -18%
20019090-01006-PACAYA ENCURTIDA 128,139 52,192 150,581 69,354 17% -54%
20019090-00003-FLOR DE IZOTE EN ACIDO ACETICO 35,406 10,918 27,636 42,033 11% 52%
20019090-01003-ENSALADA DE LEGUMBRES Y HORT. ENCURTIDAS 17,987 23,560 22,112 25,687 6% 16%
20089900-01001-SEMILLA DE PATERNA 33,977 7,915 66,934 13,616 3% -80%
20059900-00006-FLOR DE IZOTE EN SALMUERA 11,716 3%
20019090-00009-MOTATE EN SALMUERA 12,425 9,342 2% -25%
20019010-01001-ELOTITOS 3,980 6,984 2% 75%
20019090-00001-REPOLLO ENCURTIDO 9,635 4,999 7,055 4,443 1% -37%
20019090-01008-LOROCO ENCURTIDO 48,790 7,200 5,930 4,188 1% -29%
20055900-01001-FRIJOL MOLIDO ENLATADO 52,490 30,906 20,425 3,169 1% -84%
20089900-00009-MANGO EN SALSA DE CHILE 3,000 1%
20089900-00008-MANGO EN SALMUERA 2,952 1%
20019090-00002-ARRAYAN ENCURTIDO 20,510 4,560 2,354
20059900-00001-LOROCO EN SALMUERA, SIN CONGELAR 2,736
20060000-00002-COYOL EN ALMIBAR 2,982
20089900-00005-SEMILLAS DE PATERNA ENLATADAS 3,666
TOTALES 381,138.9 243,441.5 495,785.4 397,048.4 100%
Valor FOB en US$
Exportaciones Encurtidos hacia Estados Unidos
PRODUCTO
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Graph 11 Main pickled products exported to the United States
Particip.% por producto "vegetales encurtidos"
Exportaciones USD 2008
20019090-
ENSALADA DE
LEGUMBRES Y
HORT.
ENCURTIDAS
7%
20019090-MANGOS
ENCURTIDOS
34%
20089900 -SEMILLA
DE PATERNA
4%
20019090-SEMILLA
DE PATERNA
ENCURTIDA
23%
20019090-PACAYA
ENCURTIDA
20%
20019090-FLOR DE
IZOTE EN ACIDO
ACETICO
12%
Source: Own preparation with CENTREX-BCR data
Pickled vegetables (vegetable salad, cabbage, peppers, pacaya, green papaya, among others), are considered ―incipient stars or winners,‖
because these are products in growing demand in the target market (United States) and, Salvadoran exports have also reflected a growth towards this market.
The target market of Salvadoran exports of pickled vegetables is the Salvadoran resident community in the United States. It is important to
mention that fruits and vegetables are among the products with the greatest trend to be consumed within that group.
Consumer habits
Consumption habits become progressively more demanding and practical. Demanding on the quality of the product, especially due to health reasons,
as well as less time is invested in the preparation of the food eaten. In the case of Salvadorans who have been less than three years abroad, as
well as the elderly, they keep many of the original habits and like to prepare their own food.
At the general level of the United States, 53.4% of per capita consumption of vegetables corresponds to processed foods. Nevertheless, it is important
to mention that in order to enter this market, it is necessary to add value to the processing of food, and packaging of the product.
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A market niche with great opportunities for the industry of pickles is the
United States market for natural and organic products.
In the United States there are exporting opportunities to the ethnic Salvadoran market, as well as a market for organic products.
Challenges and recommendations:
Among the main challenges faced by El Salvador for the Salvadoran SME’s
to position in the United States market, we find: 1. Strengthening of the primary productive base (vegetables and legumes),
to increase the production levels through the increase of new products and development of new technologies.
Increase national production of vegetables, using state of the art technology (controlled agriculture: green houses, technological
innovation to eradicate plagues and plant diseases).
Widen and potentiate programs along this line, such as the
FRUTALES program promoted by the Ministry of Agriculture and Husbandry since 2000. This program looks at increasing the
capacity of the agricultural sector to contribute to diversification, the economic growth of the country, currency generation, the creation of employment sources, and the improvement of the
environment. FRUTALES offers specialized technical services for fruit groves in each of the productive chain links, from greenhouses, farms and parcels of fruit producers, small and medium agro-
industries, post-harvest management and commercialization, and promotes the association of producers.
Develop the production of organic vegetables.
2. Use the Brand and Seal of Origin for Salvadoran foods and drinks being exported, recently launched by the EXPORTA, Exports Promotion Agency in El Salvador.
3. Strengthen agro-industry through the establishment of alliances with
the national and international academic sector, government and private
With DR-CAFTA, fruits and pickled vegetables exported from El Salvador to the United States are granted free tariff access to that market.
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sector, to incentivize technological innovation in the processing and
conservation of foods.
4. Look for innovation and use of new packages, such as flexible packages, stand-up pouches, bringing innovations such as zippers or special closings that ease packaging, which are also recyclables and environmentally
friendly. 5. Implement new financing schemes for the achievement of the vegetable
development, as well as the industry of processed products with value added.
For more information on labeling of these products, you may visit: http://www.minec.gob.sv/ and download the “Practical Guide for
exporting food”, prepared by the Entrepreneurial Competitiveness Office of this Ministry, for entrepreneurs.
D. Salvadoran organic products exports show a positive performance
The organic production is by definition the ―agricultural production
method based on health, nutrition, conservation and soil improvement; the adequate use of power, water, vegetable and animal diversity, and the application of techniques and ingredients which benefit the environment
and contribute to sustainable development, dispensing from the use of artificial chemical synthesis inputs. It is also known as ―biological or ecological agriculture.‖ In this definition are included the four Organic
Agriculture principles according to the International Federation of Organic Agriculture Movements, IFOAM (www.ifoam.org), HEALTH, ECOLOGY,
FAIRNESS and CARE. The concern about health is a subject of worldwide relevance, mainly in
developed countries where consumers are ready to pay an over price for those products that offer a better health, or avoid health problems in the
future. The same thing happens with the ecology principle, when the deterioration of our environment makes imminent the appearance of ecological movements towards the preservation of natural resources.
Organic agriculture contributes to this cause. The appearance of human rights defense promotes the principle of fairness, characterized by respect and justice, another factor that, equally to health and ecology, justifies the
increase in demand of organic products throughout the world.
Along this same line, the Ministry of Agriculture and Livestock, has developed an Organic Agriculture Policy in El Salvador through which a regulatory framework is establish, allowing organic agriculture to develop
all its potentialities in the trade, social, economic, and environmental
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environments; and searches the development of the national organic sub-
sector, having as a basis the focus of sustainable agriculture.
Organic products Salvadoran exports to the United States Years 2004 – 2008 (US$ values)
Tariff Code Product name 2004 2005 2006 2007 2008
08013200 ORGANIC CASHEWS $ 30,297.20 $ 26,750.00 $ 3,900.00 $ - $ -
09011130 WASHED ORGANIC COFFEE $ 683,803.12 $ 795,541.50 $ 1,482,000.00 $ 1,918,141.63 $ 3,452,764.38
09012100 ROASTED ORGANIC COFFEE $ 906.00 $ 2,140.00 $ 958.00 $ 400.00 $ -
12074010 ORGANIC SESAME SEEDS IN THEIR SHELL $ 36,600.00 $ 290,400.00 $ 156,000.00 $ 405,107.12 $ 350,000.00
12074020 SHELLED ORGANIC SESAME $ 282,120.00 $ 61,200.00 $ 482.00 $ - $ -
TOTAL $ 1,033,726.32 $ 1,176,031.50 $ 1,643,340.00 $ 2,323,648.75 $ 3,802,764.38
Source: CENTREX: Central Reserve Bank of El Salvador (estimated values according to
authorized exports)
Data compiled by CENTREX shows that the main organic product for export is washed organic coffee (SAC 0901.11.30). This represents 91% of
all organic exports from El Salvador to the United States during 2008. Organic coffee participation in exports of this item to the USA has been
increasing in the last five years, since it had a participation of 66% in 2004.
The Average Yearly Growth Rate (TCMA) of washed organic coffee to the USA is 50%. Graph 1 shows this trend. After the enforcement of the free
trade agreement CAFTA-DR, exports growth has increased. During 2008, growth was 80% related to 2007 exports.
Graph 12: Organic products exported to the United States Years 2004 – 2008 (million US$ values)
Source: Prepared by IC with CENTREX-BCR data 2008 including January – September
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Organic products exports from El Salvador include a limited selection of
products such as sesame, cashew nuts, and other nuts. Currently only washed organic coffee and organic sesame in its shell, are exported to the
USA. Salvadoran Organic Coffee wins World Wide Recognition
The main market for washed organic coffee is the European Union, specifically Germany, Italy, Belgium, France and Sweden. Germany, the
United States and Japan have been constant buyers since 2004 of Salvadoran washed organic coffee. In 2008, the United States bought 37%
of the washed organic coffee from El Salvador, while Germany bought 18% and Japan 17%. In 2008 two more countries were added to the list of buyers of Salvadoran organic coffee. Sweden with the participation of
22%, a country that did not buy washed organic coffee from El Salvador since 2004; and Egypt with a participation of 1.3%.
Germany, the second largest buyer of Salvadoran washed organic coffee, although increased the FOB value imported in over US$100 thousand,
their participation fell from 30% to 18% because Sweden imported 22% of the total, equivalent to US$2.1 million.
By 2008, only two organic products were being exported to the USA. The second product, with a participation of 9.2%, is Organic Sesame in its shell (SAC 1207.40.10). In Graph 13 we show exports of that product
since 2004. The general trend is positive, although it experimented a considerable decrease during 2006. The United States is the main buyer of organic sesame in its shell, with 70% participation in 2008. The United
Kingdom bought the remaining 30%.
Organic sesame demand in its shell in the European Union and the whole world is increasing, because it is being used for the manufacture of oil. Therefore, at the short term it could represent a larger market for said
product, as well as an opportunity to locally manufacture organic sesame oil for export.
Graph 13: Organic sesame in its shell exports (SAC 1207.40.10)
Years 2004 – -2008 (Thousand US$ values)
Source: CENTREX –BCR data 2008 including January - September
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E. El Salvador: Central American country with greatest growth in exports to the United States in the plastic products industry
The plastics industry and its manufactures are included in chapter 39 of the Harmonized System. According to official data from the Central
Reserve Bank of El Salvador, total exports to the world from that chapter have increased to US$208 million, of which 86% (US$179.3 million) are commercialized in the region part of the free trade agreement CAFTA-DR.
The trade exchange generated by CAFTA-DR has resulted in a sustained
increase of exports in the plastic industry towards the United States since March 1, 2006. During 2008, 5.5% of total exports of plastics to El Salvador and their manufactures were commercialized towards that
country, with an increase related to 2007, where USA had a 3% participation.
Since the entry into force of CAFTA-DR three years ago, El Salvador has exported over US$18 million in plastic products. In 2008 El Salvador
exported seven times more to the United States than what used to be exported in 2005. In Graph 14 we see the dynamic positive trend of growth of exports of this industry towards the United States. Prior to CAFTA - DR,
export growth of the plastic industry in the country, could already be seen. Nevertheless, it has been evidently potentiated by the benefits granted by the free trade agreement.
Graph 14: Plastics: El Salvador exports to the United States (years 2004 – 2008)
$0.4
$1.6 $1.7
$5.1
$11.4
$-
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
2004 2005 2006 2007 2008
Millo
nes
AÑOS
$US
DÓ
LARE
S
Source: Own preparation with Central Reserve Bank of El Salvador’s data
Envases de plástico. Fuente: www.occiplastic.com
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Plastic manufactures in general
experienced an increase during 2008. The greatest demand for
Salvadoran products came from the USA, with value added manufacture such as
separators, hooks, bags, and flowerpots, among others. Besides, plastics used as input
for production in the USA were also exported, as well as plastic
and polystyrene waste used in recycling as inputs for other productive processes.
In 2008 seven new products were exported for the first time, adding to over
US$820 thousand. Among these new products, the most important are the flowerpots (SAC 3926.90.99). In the same manner, the main export product for 2007, as well as for 2008 was the Plastic Separators (SAC
3926.10.90), an export product that started their sale to USA in 2007. Table 1 details the main exports made in 2008 to USA.
Main plastic products and manufactures exported to the United States in 2008
TARIFF CODE PRODUCT DESCRIPTION EXPORTS VALUE
2008 $US
1 39261090 PLASTICS SEPARATORS $ 3,359,670.20
2 39269099 PLASTIC HOOKS/HANGERS $ 1,905,868.54
3 39235090 PLASTIC LIDS $ 1,855,315.58
4 39269099 PLASTIC VASES $ 1,446,060.00
5 39159000 PLASTIC WASTES $ 800,790.75
6 39232190 PLASTIC BAGS $ 444,388.72
7 39269099 FLOWERPOTS $ 441,138.84
8 39234090 PLASTIC CONES $ 322,264.08
9 39269099 SIZER IDENTIFIERS FOR HANGERS $ 300,447.64
10 39100000 PRIMARY SHAPES SILICONES $ 202,172.33
11 39029000 OTHER PROPYLENE POLYMERS $ 190,478.50
12 39119000 RESINS $ 169,470.57
13 39233099 PLASTIC CONTAINERS $ 150,835.74
14 39152000 POLYSTYRENE WASTES $ 65,409.80
15 39199000 SELF-ADHESIVE TAPES $ 26,640.85
16 39232990 PLASTIC BAGS $ 22,448.99
17 39233099 PLASTIC CONTAINERS $ 14,692.14
18 39262000 PLASTIC WHITE COATS $ 13,678.54
19 39269099 PACKAGING MATERIAL $ 13,504.14
20 39249090 HOME USE PLASTIC ITEMS $ 8,048.04
Source: CENTREX: Central Reserve Bank of El Salvador (estimated values according to authorized exports) Highlights products are new export products
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Drive of the Plastic Industry
Among the main export plastic products of 2008 we find finished products. Contrary to this, in 2005, before the enforcement of the CAFTA-DR treaty,
the main export product in chapter 39 of the SAC to USA was code 3915.90.00 ―Plastic wastes.‖
Besides, in 2004 the main plastic products exported to the USA were: Plastic White Coats (SAC 3926.20.00), Plastic Containers (SAC
3923.30.99), Advertising Material (SAC 39.26.9099), and Plastic Boxes (SAC 3923.31.00). The present combination of products with the highest participation in exports to USA is completely different.
The next table shows the ten main exports of 2008, showing the significant growth observed in the last two periods, achieving important growth in
exports to USA, as well as to the rest of the world, and growth of the general industry. These ten main products generated 93% of plastic
products sales to USA with important percentage increases. In cases when exports decreased, for example Plastic Wastes and Plastic Cones, changes are few.
Plastic Wastes (SAC 3915.90.00), that in 2005 represented 27% of exports in this item of the USA market, in 2008 only represented 7% of sales.
10 MAIN PLASTIC EXPORTS AND THEIR MANUFACTURE TO USA YEAR 2007 - 2008
Code Description
Exports 2007
(US$)
Participation
2007
Exports 2008
(US$)
Participation
2008
39261090
PLASTICS
SEPARATORS $ 1,170,661 25% $ 3,359,670 29%
39269099
PLASTIC
HOOKS/HANGERS $ 988 0.02% $ 1,905,868 16%
39235090 PLASTIC LIDS $ 699,916 15% $ 1,855,315 16%
39269099 PLASTIC VASES $ 650,104 14% $ 1,446,060 12%
39159000 PLASTIC WASTES $ 862,975 19% $ 800,790 7%
39232190 PLASTIC BAGS $ 227,120 5% $ 444,388 4%
39269099 FLOWERPOTS - 0% $ 441,138 4%
39234090 PLASTIC CONES $ 328,114 7% $ 322,264 3%
39269099
SIZER IDENTIFIERS
FOR HANGERS - 0% $ 300,447 3%
39100000
PRIMARY SHAPES
SILICONES - 0% $ 202,172 2%
OTHERS $ 673,894 15% $ 700,559 6%
TOTAL $ 4,613,776 100% $ 11,778,676 100%
Source: CENTREX - Central Reserve Bank of El Salvador (estimated values according to authorized exports)
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Foreign Direct Investment
New Investment of Aeroman - Picture: El Economista
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IV. Foreign Direct Investment
A. General Results
Foreign Direct investment has had a clear growing trend since the entry into force of CAFTA-DR, with the opportunity to trade in a stable, safe and
favorable manner that has incentivized the establishment of new companies in the country, as well as more favorable conditions and clearer rules of the game coming about with the Treaty.
Starting 2006, we can see a clear growth in Foreign Direct Investment
(FDI) in El Salvador. Opportunities created by CAFTA-DR have been complemented with a favorable business climate, offering security and stability to investors, as well as brought incentives to the creation of more
employment. Thus, foreign direct investment has grown 7.02% to September 2008, related to 2007 closing, according to data reported by the
Central Reserve Bank reaching up to this month, 6,325.80 million US$.
Graph 15
Source: Own preparation with Central Reserve Bank information
Another important result to be mentioned is the diversification of sectors
where most foreign investments have been made, and the growth and good performance of several of them. Commercial openness of the country, its strategy to attract investment and amicable policies, has allowed a fast
growth in several sectors of the economy. The sector with the greatest growth has been the financial sector. Other sectors such as communications, industry, services and construction have also had a great
growth in investment.
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Graph 16
Source: Own preparation with Central Reserve Bank information
B. Who invest in El Salvador?
Within these results, it is important to point out that investment coming
from the United States is still the most important one for El Salvador, becoming thus not only the most important trading partner for the country, but also its main source of investment. By September 2008 the
same level of direct investment was registered, as during all 2007, showing a positive performance in this item, waiting for the final numbers in 2008. Graph 17
Source: Own preparation with Central Reserve Bank information
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CAFTA-DR is also a tool that projects us to the world as a country of great
opportunities, and which allows us to be more competitive when attracting new investment. Proof to this is that as we have growth in investment
coming from the United States, we also have new investments from the other Central American countries and different countries in the rest of the world, that see the opportunity to invest in the country as a strategic
decision of the greatest value, allowing access to new markets to offer their products and services, mainly to the United States, Central America and the Dominican Republic. Without a doubt, CAFTA-DR offers great
opportunities for El Salvador, and foreign investors established in the country.
Direct Foreign Investment coming from all Central America has grown in a stable manner in the last few years, being Guatemala and Costa Rica the
main sources. Graph 18
Source: Own preparation with Central Reserve Bank information
Similarly, for many years, we can see how foreign direct investment coming
from other countries increases. In order to take advantage of the favorable conditions created with the different Free Trade Agreements in force, and mainly with CAFTA-DR, countries such as the European Union, Asia and
South America have increased their investment level. In the following graph you see a detail of the FDI composition during 2008, showing a
diversification of investments in the country, and showing the main participation of partners with whom there is a current free trade agreement, or one in process.
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Graph 19
Source: Own preparation with Central Reserve Bank information
C. Foreign companies trend referred to direct foreign investment of years 2000--2008
According to the Heritage Foundation, an institution dedicated to measure the economic indexes of freedom of the countries, El Salvador is positioned
as 33 related to the property rights of the individual and enterprises to be able to consume, produce and invest, in the manner desired. Currently, the global evaluation is 69.8, and is the fourth country positioned among
29 of the Caribbean, South and Central America. The above has great influence in giving a greater receptivity to investors in our country, and
becoming more attractive and competitive vis-à-vis other countries in the region.
According to PROESA, the national agency for investment promotion, the strategy for investment attraction, favorable conditions offered by tools
such as the free trade agreement treaties, and a greater competitiveness of the country, have all contributed to make 2008, the year when 62 projects were possible; among them, 32 new companies, 15 sub-contracts, and 15
expansions. In the following graph we have a comprehensive data of the projects registered by PROESA from 2000 to 2008.
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Graph 20
19
30 27 26 3025
4047
62
0
20
40
60
80
2000 2002 2004 2006 2008
Proyectos registrados por PROESA*
Source: Own preparation with PROESA’s data * During data compilation, the date when these projects were carried out are taken
into consideration, and not the investment commitment of companies.
Said projects have contributed to the generation of 26,993 direct and indirect jobs. At the same time, the total investment amount is US$189.97 million dollars. BCR data on enterprise investment is shown up to
September, 2008.
According to PROESA’s data, by the year 2008 enterprises started their operation in the following sectors: BPO's and Contact Centers, Electronics and Light Manufacture, Aeronautics, Clearinghouses, Textile and Apparel,
Tourism and Agro-Industry: Aquaculture and Ornamental Plants. In the next chart we show data referring to the number of companies in each item in that year:
Category No projects
Agro-Industry 5
Shoes 0
Call Centers and BPO’s 21
Clearinghouses 2
Medical Devices 3 Electronics and light manufacture 8
Textile and Apparel 20
Tourism 3
TOTAL 62
D. Sectors with the greatest development in the last years
The present market trend on direct foreign investment is focused on specific and specialized niches using advance technology. Therefore, one
of the sectors benefited, is services. This sector has kept an increase in
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investment since 2006, according to PROESA’s data. For this growth, the
Law of International Services bringing incentives to this type of centers has played an important role.
The agro-industry sector has diversified thanks to the focus on new crops, which have generated a specialized labor group and an automatic
technology transfer.
On the other hand, Textile and Apparel in the last few years has focused on the re-conversion of the industry, emphasizing in vertical integration, leaving aside all traditional schemes. Thanks to these strategies,
investments in enterprises dedicated to spinning, nylon and polyester; synthetic fabrics factories; dyeing and finishing companies, among other.
It is worth mentioning also, that this sector has seen its opportunities multiplied with the consolidation of tariff benefits to access the United States market thanks to CAFTA-DR, as well as the most adequate rules of
origin. At the same time it is interesting to underline that an aeronautics sector
company has also been attracted; lastly, it is worth mentioning that the distribution and logistics centers have maintained growth, becoming an integral part of the value chain.
E. Investment Attraction Strategies
To awaken interest for foreign direct investment and foster capital flow between El Salvador and its commercial partners, different strategies have
been developed to attract investment. The promotion of the country has been proactive, as an attractive destination, facilitating sustainable
investments. These strategies are coordinated among different bodies to attract the investor, from the establishment of the first contact, all the way to offer an attractive social and economic environment. The main
strategies developed, have been:
Promotion Campaigns
The main strategy to attract investment has been direct promotion
campaigns addressed to large investors, developed by different government organizations, mainly the official investment promotion agency, PROESA.
According to the PROESA in 2008, a total of 20 promotion campaigns have been developed, and there has been participation in 58 fairs, missions and events in different states in the United States and other countries. Among
the main destinations for United States promotion, we have: El Paso, Texas; Los Angeles; San Francisco & Fresno, California; North Carolina;
Las Vegas, Nevada; Atlanta, Georgia; New York; New Jersey; Orlando; Ft. Lauderdale & Miami, Florida; Virginia; Washington DC; Rhode Island; Chicago, Illinois.
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Local training, learning programs, and work fairs
It is important to mention the trend seen on FDI, attracting specific companies from specific and specialized niches, using advanced technology. These investments generate greater value added jobs, and in
some cases require greater technical capacity, English language proficiency, higher studies, and information technology knowledge, among
others. Therefore, the implementation and support to information technology programs from technical jobs, is a basic investment promotion strategy. Among the different initiatives, we have:
a) Foster a professional development triade among Private,
Governments and Educational Institutions. This has brought about
agreements with educational institutions, such as the Don Bosco University and ITCA, for the development of technical careers to
satisfy the needs of different investors. b) Several job fairs have been organized to create data bases of people
who can participate in the recruitment of investment enterprises.
These fairs are focused in technical profiles and English proficiency.
i. Infrastructure promotion During 2008, special emphasis has been given to the promotion of public
infrastructure investment. With concessions and complementary development plans with the main mega-projects, among which we have:
The Port of Acajutla and Port of La Unión (PLU) concession process.
Power projects such us:
o AES Fonseca, with a 550MW generating plant based on coal and an investment of US$550 million;
o Cutuco Energy of Central America – CECA, with a 500 MW generating plant based on Natural Liquid Gas (NLG), and an
investment of US$500 million.
Other Infrastructure projects through public-private associations
(PPA), such as highways and airports
ii. Aftercare Service
It is necessary to keep in mind that in order to reach an attractive climate
for future investment, such as the present, it is necessary to have a continuous monitoring of the needs and requirements of the enterprises. Therefore, the Established Investor Service is offered. This program,
developed by PROESA, gives full assistance to the investor, from
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processing paper work before the government, to support in the expansion
of operations. Among the main achievements, we have:
a) As a support to sectors and industries benefited by the International
Services Law, a strategic table has been formed for the bilingual human resource, for contact centers
b) Together with the Technical Presidential Secretariat of the Republic
and UNCTAD, follow up has been given to the e-regulations project
(portal for the investors on legal processes for the establishment of a businesses in our country) in its phase of spreading it
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Other Achievements and
Advances in CAFTA - DR
during the III Anniversary of
the Treaty’s Enforcement
Fotografía: CAFTA Intelligence Center
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V. Achievements and Advances in CAFTA - DR during the III
Anniversary of the Treaty’s Enforcement
A. Launching of the initiative “Pathways to Prosperity in the
Americas”
Last September 24, 2008, the Heads of Government and representatives of Canada, Chile, Colombia, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Mexico, Panama, Peru and the United States
launched in New York the initiative ―Pathways to Prosperity in the Americas,‖ in order to reach development and prosperity for the members of the initiative through a common commitment with the trade
liberalization and investment, the social, development, law and democracy inclusion.
In the follow up of the initiative’s launching, the first ministerial summit was carried out on December 10, 2008 with the Ministers of Economy or
Commerce, and Foreign Relations of the countries, in order to establish the working axis for the following technical meetings, and reach the objective established for the government heads in New York.
For future work, it was established that the countries needed to work in
four great areas, sharing experiences, cooperating among themselves, and establishing concrete action plans to reach the goals of the initiative. These areas are the following:
Increase opportunities for our citizens, especially small
entrepreneurs and farmers, benefiting them with trade, promotion of trade capacity, among other initiatives
Foster and deepen an open structure for regional trade, compatible with the multilateral trade system
Expand the regional cooperation related to economic development and competitiveness
Improve cooperation and exchange on the best practices on aspects of labor and environmental standards and their compliance
Within the initiative, the participation of the private sector and civil society will also be fostered in order to support its promotion. El Salvador will
host the next follow-up meeting, to be carried out on the first semester of 2009.
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B. Textiles and Apparel Issues
2008 was filled with important activities for the textile and apparel sector within the CAFTA-DR framework. The same as in the training section for
the better taking advantage of opportunities offered by the Free Trade Agreement, better detailed further in this document, and several initiatives
and negotiations carried out to implement and increase the benefits offered by the agreement to this sector to all the Part countries. Among the most noticeable activities, we find the following:
a) Enforcement of the accumulation mechanism
On August 16, 2008 a mechanism was enforced allowing the accumulation of textile inputs for the manufacture of apparel with woven fabrics
classified in chapter 62 of the Tariff System (woven fabric apparel). This mechanism allows the use of Mexican textile inputs to manufacture apparel in Central America and export them to the United States under
CAFTA-DR. The same operation is possible to export apparel manufactured in Mexico, using United States inputs.
Appendix 4.1 B of CAFTA-DR establishes
that the United States allows the use of Mexican inputs for the manufacture of apparel under Chapter 62 (woven fabrics
apparel) up to a certain point, subject to sub-limits according to different apparel
categories. Additionally, reciprocally to the concession made by the USA, it was agreed that Mexico would grant a
proportional quota for Central America, in such a manner that could use textiles from the United States, manufacture in
Central American territory, and export these products to Mexico.
Benefits obtained thanks to this mechanism include the fact that materials and processes may be accumulated to manufacture more elaborated
products, and export them to the United States or Mexico.
On the provisions for the enforcement of the mechanism, the United States required to have an agreement of a quota increase agreed at its inferior limit, due to the entrance of the Dominican Republic. This agreement was
achieved in October, 2007, and the initial quota of 100 million of MCE was increased to 125 million MCE.
Materials and
processes may be
accumulated to
manufacture
more elaborated
products, and
export them to
the United States
or Mexico
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With Mexico, it was necessary to carry out amendments to the corresponding treatments this country has with the Northern Triangle, Nicaragua and Costa Rica. Thus, the protocols for each agreement were
prepared in February 2007, and the amendments were ratified in the Central American congresses between August and November that year. In
the case of El Salvador, the FTA between the Northern Triangle and Mexico amendment was ratified by the Legislative Assembly on November, 2007.
Additionally, an operations regulation was prepared for the accumulation mechanism with Mexico, which was adopted on February 28, 2008, complying thus with the legal processes and requirements to enforce this
mechanism, that assumes an enormous opportunity for the textile and apparel sector in Central America and the Dominican Republic.
The quota distribution, per sub-limits and textile category, based on the quotas granted by Mexico and the United States, is done in the following
manner:
Code or Category Product (%) Initial Amount
(MCE) USA Initial Amount
(MCE) Mexico
Category 342, 347, 348,
642, 647 ó 648 Cotton, synthetic or artificial fibers
trousers and skirts 45% 56.25 million 31.5 million
Fraction 6203.42.aa,
6204.62.aa ó
6204.52.aa
Blue cotton denim trousers and skirts 20% 25 million 14 million
Category 433, 435, 442,
443, 444, 447, ó 448,
& included in entry
62.03 ó 62.04
(suit style jackets only: sub-entry
6204.31, or tariff fractions 6204.33.aa,
6204.39.aa, or 6204.39.dd) & other wool
apparel
1% 1.25 million 0.7 million
The remaining chapter 62 pieces 34% 42.5 million 23.8 million
Totals 100% 125 million 70 million
Minimum Quota Level 125 million 70 million
Maximum Quota Level 250 million 200 million
b) Amendments on matters of origin for the textile sector and
apparel within the framework of CAFTA – DR
On October 14, 2008 the technical negotiations for the incorporation of some amendments to the treatment related to rules of origin for some textile and apparel within the framework of CAFTA – DR. These
amendments are in the process of being reviewed and approved by the
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pertaining legislative mechanisms of each
of the Parties of CAFTA – DR, waiting to be enforced during the first semester of 2009.
The enforcement of these amendments assumes an enormous opportunity for the
Salvadoran textile and apparel sector, opening one more door of opportunities which allow us as a country, to continue
potentiating the CAFTA – DR benefits. Among the amendments expected to be
enforced are those referring to the treatment of the rules of origin for women
and girl’s pajamas, and adequate rules of origin, as well as chapter notes to allow the use of materials found in the scarce
supply mechanism provided by the agreement, among others.
C. Labor Issues
In the same manner as with the implementation of the environmental theme, Chapter 16 (Labor) of CAFTA-DR, a lot of activity has been seen during the third year of implementation, in the cooperation project
development, as well as the strengthening of the institutionalization established in the agreement for this theme.
Referring to the latter, it is important to mention that the Labor Affairs Council met on November 21, 2008 in San Salvador for the first meeting of
the Labor Affairs council within the framework of CAFTA-DR. The Labor Ministers of El Salvador, José Roberto Espinal; from Nicaragua, Napoleón Ríos Miranda; from Guatemala, Edgar Rodríguez; and from Costa Rica,
Francisco Morales; as well as the Vice Minister of Labor from Honduras, Darío Roberto Cardona; the Secretary of State for Labor from the
Dominican Republic, Max Puig; and the Under-Secretary of the Labor Department from the United States, Howard Radzely, participated in said meeting.
The Labor Affairs Council met to supervise the implementation and review
the advance of the agreement with the labor chapter of CAFTA-DR, including activities of the Labor Cooperation Mechanisms and Capacity Development, and to follow up the labor objectives of the agreement.
Documents related to the White Paper can
be found at www.mtps.gob.sv and
www.cafta.gob.sv
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On the other hand, this year we must refer to the Implementation
Verification Report of the White Paper Recommendations for the February 2008 – July 2008 period, stressing that the support from different government agencies in the United States and other cooperators, have
represented an important support to comply with the goals contemplated in the White Book.
It is important to acknowledge that the work of the Labor Ministers of the region, together with the Government Agencies of the United States, the
International Labor Organization (ILO) and members of civil society such as NGO’s, entrepreneurs and other interested actors, have allowed the advance towards the compliance of commitments acquired by the
countries within the framework of CAFTA-DR and other instruments contemplated, such as the ―White Paper.‖
Some important results reflected in the most recent Verification Report for the Implementation of the White Paper Recommendations according to the
last report, are: 1. Freedom of association, unions and labor relations:
Development of five public for the communication on the subject
of union discrimination; the process of the 27 complaints due to illegal firings continued, concluding in financial sanctions processed in the Courts; 163 cases were resolved, and 125
advisories were given on union incidents from the Ministry of Labor and Social Prevision; and the work of the Special
Commission of the Ministry of Labor was created and developed, created to analyze the reforms to Arts. 211 and 248 of the Labor Code that met twice during the period to verify results and
evaluate the steps to be followed on these subjects.
2. Strengthening of the Ministry of Labor and Social Prevision
The Ministry of Labor and Social Prevision budget was
strengthened; investments in the remodeling of the infrastructure were made, computers and furniture were bought; the Technical Norms Regulation for Internal Control, Specific for the Ministry of
Labor, was approved; handbooks for the implementation process of the ISO 9001:2000 Quality Management System, were drafted,
as well as a diagnosis on the situation of the labor inspection, that included an analysis of the administrative career for inspectors; besides, 16 training activities with 592 officers were
carried out, and the Delegate Handbook and Good Practices Protocol from the General Labor Directorate were carried out; and
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the number of yearly inspections increased, from 25,505 (June
2006 – May 2007) to 28,046 (June 2007 – May 2008).
3. Labor Courts
8 training events were carried out on the international labor
standards, and free legal assistance systems, benefiting 219 magistrates and judges, and other labor justice operators; a study of labor jurisprudence was carried out, and during the first
quarter of 2008, 6,358 active files were registered in the labor courts, compared to 5,975 files in 2006 and 6,241 in 2007.
4. Gender and Discrimination
The subject of no-labor discrimination was approached in five public forums carried out by the Ministry of Labor; the Special Gender Unit and Prevention of other Discrimination Acts is
actively working in said ministry, and has 16 officers.
5. Worst Child Labor Methods
The National Action Plan for the Eradication of the Worst Child
Labor Methods is current and being implemented in El Salvador in the period 2007—2010; there are three national committees on the matter; public resources were mobilized to open the leveling
rooms of the Ministry of Education, the application of a child labor work in the Homes Survey for Multiple Purposes, and the
execution of several productive projects with the Ministry of Agriculture and Livestock; prevention actions were developed, as well as the withdrawal of minors from child labor in the sugar
sector; and the commitment from governments to eradicate child labor was reiterated when undersigning the San Salvador Declaration of June 19, 2008 within the framework of the X Ibero
American Conference of Ministers and High Officials for Childhood and Adolescence.
6. Promotion of a culture of compliance
The Ministry of Labor carried out 20 information and training actions in the maquila sector with 57 people, as well as several
meetings from the Higher Labor Council and a forum on the compliance of fundamental labor standards, with 109 participants.
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In the same manner, the development of a project that looks to
promote the Business Social Responsibility, promoted within the framework of the White Paper for the organization of "Business for Social Responsibility" (BSR), and whose main objective is to show
that labor rights are important, and that they can help the enterprise to improve productivity and competitiveness. This
project will start in El Salvador with the support of the Labor Ministry and Social Prevision and the Ministry of Economy.
What is expressed in the preceding lines is a brief executive summary of the most recent Verification Report of the Implementation of the White
Paper Recommendations. The dynamic with which the different representatives of the countries
deserve special mention for their work to give compliance not only to the White Paper of CAFTA-DR, but also assure that the Labor provisions are
duly complied with. Under this same spirit, some of the contact points of the different Parties of CAFTA-DR have met at least four times during 2008 to assess the implementation advances of the Chapter, as well as to verify
advances in the cooperation on matters of the white paper. As it has been shown throughout this comprehensive analysis of the
impact that it has had in these 3 years of the free trade agreement implementation, there are several subjects we still have to work on, there
are many efforts to be carried out, and the importance of everyone's work, essential for the trade agreements to give results, but also for the same to be sustainable throughout time.
Because of the above, we must assess what aspects we must continue
working and supporting to achieve compliance of the whole content of the White Paper. Some of the suggestions made by ILO in the verification report are the strengthening of the Higher Labor Council, achieve a greater
coordination with the technical cooperation projects to orient investment towards strategic themes , continue carrying out periodic meetings of the Follow-Up Committee of the White Paper Implementation Plan; support
measures such as judges training to support the sentences based on the ILO Agreements and a greater spreading of the notices issued by the
Ministry of Labor; continue and increase lobbying activities to increase the Ministry of Labor budget, design and execute a training plan in the area of labor security and hygiene address to labor inspectors; continue with the
efforts to train the Judicial Power to guarantee the affectivity in the application of the international and national labor standard and promote the analysis and discussion of the legal proposal on a unified mechanism
of alternate resolution of conflicts presented before the Legislative Assembly, among other recommendations.
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At the end of February, 2009, a new meeting was carried out in Washington D.C. of the CAFTA-DR region ministers of labor, to approach the labor cooperation agenda within the framework of the Agreement.
During said meeting, it was discussed with the cooperators, the project implementation and development of new cooperation activities.
D. Environmental Issues
2008 was without a doubt a year of a lot of work for the implementation of the environmental subject within the CAFTA-DR framework. Among the several meetings to verify and conclude some of the pending themes, and
assure the due implementation of the environmental Chapter, as well as work performed among cooperators and implementing agencies, a
substantial amount of advances in the implementation were achieved. Institutional work on the environment was also given much importance.
The environmental contact points met at least four times in 2008, to evaluate the implementation of the Environment Chapter, as well as to define the action plans to potentiate its implementation.
This year was also characterized by the culmination of a series of
complementary work and tools within the framework of Chapter 17 of the Treaty. The Secretariat on Environmental Affairs (SEA) is one of the newest mechanisms promoting general citizens participation in aspects
related with the compliance of the environmental legislation in the countries of the region. In this sense, this year work on the procedures to
receive communications from the general public were concluded, criteria for the selection of the new General SEA Coordinator were drafted, to be elected in March this year.
Additionally, a series of workshops for civil society, the media and other public institutions were developed in order to support the knowledge of
Chapter 17, as well as CAFTA-DR in general.
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Besides, the Ministry of the Environment and Natural Resources (MARN),
together with his counterparts from the region and with the support of the Central American Commission for the Environment and Development (CCAD), also worked on the negotiations around the environmental
cooperation aspects of the Free Trade Agreement on the following issue components:
I. Environmental management systems in the CAFTA-DR countries II. Strengthening of capacities from all parties, to comply with CAFTA-
DR environmental obligations. III. Compliance with environmental multilateral agreements IV. Use of cleaner production technologies
V. Inter-ministerial coordination, capacity building, and communication
Through the efforts made by the different actors involved in the implementation of the cooperation achieved through Chapter 17
(Environmental), MARN capacities have been strengthened, such as: Ministry of Agriculture and Livestock,
, Corporation of Municipalities of El Salvador, National Civil Police –
Environmental Division, General Attorney’s Office of the Republic, Firefighters Corp, National Council of
the Judicature, and the Zoological Foundation of El Salvador.
Some of the specific results derived from the implementation of CAFTA-
DR and the cooperation received from the United States underline the following:
Support to the Environmental
Inspectorates to spread the use of the environmental reports to the center of attention, the green line
919, for national coverage.
The drafting of the voluntary technical standard for the preparing of
the Cleaner Production Agreement per sector. The establishment of the enterprise acknowledgement mechanism that apply processes of
Cleaner Production. The development of the information platform (environment and web) in order to systematize the results obtained in the application of the agreements on Cleaner Production. Work
The Secretariat on
Environmental Affairs
(SEA) is one of the
newest mechanisms
promoting general
citizens participation
in aspects related
with the compliance
of the environmental
legislation in the
countries of the
region
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was done in the drafting of a Sectorial Diagnosis with their
corresponding formats of Cleaner Production Agreements in sectors such as poultry and dairy.
The ―Fourth Regional Prize to Cleaner Production‖ was launched, looking to offer incentives to the companies that implement and
maintain monitoring systems and continuous improvement of the adequate cleaner production practices, applied to their processes,
products or services.
Strengthening the capacities of MARN, the Supreme Court of
Justice, the National Council of the Judicature, the Environmental Division of the Police, training in the administrative procedures for
sanctions, characterization of crime and preventive measures, besides the equipment to support these procedures.
Police personnel (Environmental Division) trained in the protection and conservation of natural resources with an emphasis on water,
soil and biodiversity. The environmental crimes manual was prepared.
Training and spreading of the First Response Manual on Hazardous Materials (PRIMAT). Also the environmental audit procedure manual
was drafted. Besides the preparation of a software for data base on the strengthened Environmental Complaints Attention system.
Formulation of the technical criteria Manual for the environmental evaluation of activities, work or projects related to the management of substances, residues, and dangerous wastes. The Environmental
Impact Evaluation Manual was prepared. Spreading of the activity, work or projects categorization were carried out. Protocols, manuals
and procedures for the implementation of the registration system of environmental services offers were designed.
15 Municipal Environmental Units were strengthened with information technology equipment and with tools (policies, strategies
and action plans, as well as environmental legislation) that will allow the identification of high social and environmental impact projects.
The National Framework for the implementation of CITES was
prepared (Diagnosis of the application state of CITES and the Wildlife Conservation Law in El Salvador and the juridical-technical analysis of complementarities of CITES with the Wildlife
Conservation Law). Spreading activities on the provisions of CITES
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and the Wildlife Conservation Law were carried out through
brochures, posters, and teaching material.
E. CAFTA-DR Institutionalism
During this period, two meetings have been carried out by the CAFTA-DR
Coordinators, meeting at Washington, D.C., the first during November, 2007, and the second in October, 2008.
During both meetings, a review of the commitments assumed was made in the Treaty, on matters of market access, rules of origin, custom procedures, and dispute settlement; as well as promoting work of
Technical Committees of the Agreement. In the same manner, in June 2008 took place the first meeting of Central American and Dominican
Republic Vice-Ministers to assess the performance of the Commercial Agreement and some recommendations oriented towards taking a greater advantage of the Agreement.
The Environmental Affairs Council, the Labor Affairs Council and the contact points assigned in the agreement had meetings as detailed in the
labor and environmental section of this document.
F. Customs and Trade Facilitation Starting with the enforcement of CAFTA-DR, Ministers of Finances through
the Customs General Directorate have attempted to modernize its operation system in order to ease trade, and thus improve communication
among immediate users of the entrepreneurial sector, customs agents, and administrative authorities, in order to have more expeditious and efficient processes.
Thus, several projects have been developed for the modernization of the customs system, and improve services offered to users. During 2008,
through the United States Agency for International Development (USAID) Project for Customs and Business Climate Promoting Trade and Investment, developed jointly with the El Salvador Customs General Directorate, three initiatives were presented in order to increase efficiency and transparency
of customs. These initiatives include:
Customs Program for Entrepreneurial Compliance (PACE): referring
to a new management of risks focus in Customs Administration, based on trust from customs in importers with high level of compliance of the customs standard. Only those companies with
modern departments and a philosophy of high compliance on customs matters may enter the program.
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Practical Customs Guide: It refers to a concise and easy to use instrument to
describe services rendered by the Salvadoran
Customs to users. The purpose of this guide is to ease the knowledge on
technical subjects, as well as the customs legislation within the framework of
development and trade facilitation.
Anticipated resolutions: As established in Article 5.1 of CAFTA-DR, these instruments have been developed referring to official decisions
of customs issued at the request of a user before performing an import or export operation related to classification, value and origin. These resolutions are binding and obligatory for the Parties.
Another more recent program launched in order to ease exports, is the ―EXPORTA FACIL‖ (EASY EXPORT) program, with the support from the
Ministry for Governance through the Post Office of El Salvador and the Ministry of Finances, through the General Directorate for Customs. This
project, as part of the ―El Salvador Eficiente‖ (Efficient El Salvador) program, is oriented towards artisans and small and medium entrepreneurs who export up to 30 kilograms directly, in a simplified
manner, economically and safely from the Post Office, creating a simplified system of textile, handcrafts and manufacture exports.
During 2008 the term for trade facilitation and customs modernization in El Salvador, has been positive, and most of these achievements are due to
cooperation projects and own activities carried out by the General Customs Directorate, and give compliance to the provisions included in CAFTA-DR.
G. Strengthening of the private sector and cooperation within the
framework of CAFTA - DR
The creation of trade capacities is a key element to take advantage of
opportunities and free trade transition under a commercial agreement of magnitude and economic transcendence of CAFTA-DR. On the third year
of implementation of CAFTA-DR, our productive sectors have been benefited with a wide range of activities derived from the cooperation for the creation of trade capacities under CAFTA-DR.
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As part of the commitment of strengthening and supporting the public,
productive, academic and civil society sectors in general, with timely information on the different commercial disciplines, during these 3 years of enforcement of CAFTA-DR, the Ministry of Economy through the
Directorate of Administration of the Trade Agreements (DATCO), has promoted the carrying out of over 50 training conferences on subjects such
as access to agricultural and industrial markets, Origin of merchandise, Intellectual Property, Dispute Settlement, Labor, Environment, Sanitary and Phytosanitary Measures, Services and Investment, Government
Procurement, among others; obtaining around 4,800 beneficiaries.
During the same period, we must point out the Advisory Program
consolidation for the Textile and Apparel Sector, in order to assure compliance from this Sector, of obligations derived from CAFTA, carrying
so far a total of 325 visits to the companies in the Sector, giving them training and personalized assistance on the requirements to be fulfilled, in order to export to the United States market.
On the creation of trade capacities derived from cooperation, Section B of
Chapter 19 (administration) is called ―Trade Capacity Building Committee.‖
CAFTA-DR is a pioneer agreement on matters of cooperation; in fact, no previous background can be found
before CAFTA-DR, where aid for trade is incorporated as a substantial part of
the trading agreement, a specific standard on matters of trade capacity building. Here is where the
importance of this component falls, within the context of the Agreement.
The Trade Capacity Building Committee met last November 2008 in
the Dominican Republic to evaluate advances on the subject of cooperation. In the case of El
Salvador, we can point out a few diverse projects that have been implemented by the United States
government, having as beneficiaries, the public sector as well as the private sector.
One of the main programs of cooperation working in the country, is the Regional Trade Program CAFTA-DR financed by the United States Agency
This type of
project tries to
support and ease
the interpretation
of complex
procedures,
improve the
infrastructure, and
foster human
capacity for such
an important
agreement.
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for International Development (USAID), that in order to take advantage of
the whole potential of the treaty, promotes the private sector to change its focus and practices, and that together with the governments, duly implements the requirements of the Agreement.
This type of project tries to support and ease the interpretation of complex
procedures, improve the infrastructure, and foster human capacity for such an important agreement. The main objectives are to support the implementation of Chapter 4 (Rules of Origin and Origin Procedures),
Chapter 5 (Customs Administration and Trade Facilitation); besides, it looks to give technical assistance, among others. Some of the specific results
given by this cooperation project are: a seminar on rules of origin for Textiles, a seminar on Textile Accumulations, Analysis of CAFTA provisions compliance related to the shipments of fast delivery, degree of
compliance Analysis for Chapters 4 and 5 of CAFTA-DR, Drafting of the Rules of Origin Fiscalization Manual, Work with Customs to strengthen
the Units of Risk Management, Communications and Electronic Signature Law Bill, Implementation of PAGOES in 3 Governmental institutions, besides the process of finalization of a determination of origin system
through electronic means. Many more events and seminars having as a goal to improve the
performance of the private sector, have been and are being implemented. We hope to continue supporting the private sector and promoting the
institutional strengthening of the State to insert in a better way, in an international economic environment, every time more complex.
H. Spreading of CAFTA-DR benefits and opportunities
One of the commitments from the Ministry of Economy is to provide the private sector and civil society with the necessary tools to take advantage of the CAFTA-DR opportunities, as well as supporting the many different
sectors in their transition to free trade. With this objective in mind, several projects have been developed that make known the provisions contained in the Agreement, and offer the private sector and civil society,
an easy way to know the benefits and opportunities of the Treaty.
a. Update and re-launching of the official web site of CAFTA-DR in El Salvador
In March 2008 and when celebrating the II Anniversary of the enforcement of CAFTA-DR, a novelty institutional informational portal was redesigned and launched for CAFTA-DR, with a colorful and user-friendly access
design. The web site can be visited through the link: www.cafta.gob.sv or
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with a link through the main page of the Ministry of Economy
www.minec.gob.sv . This web site is periodically updated in order for all visitors who want to
look up information relevant to the Free Trade Agreement of Central America, the Dominican Republic and the United States, can find the
newest information and any document of interest to carry out the corresponding research.
www.cafta.gob.sv
At this site you can find information interesting for users, such as official documents of the Agreement, amendments and agreements of the Parties, commercial analysis, among others. Concretely, the sections included in
the web site are the following:
Free Trade Agreement Official Texts
Treaty Amendments and Agreements of the Parties
Explanatory documents on CAFTA-DR that include a general
document of the provisions of the Agreement and a document on agricultural provisions.
Publications of the ―CAFTA Opportunities‖ magazine with the
monthly publications done by this informational bulletin.
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Legislation related to the Free Trade Agreement, with links to
national legislation on environmental topics, labor and customs legislation.
History of citizen participation activities developed during the negotiation process and enforcement of CAFTA-DR.
A section of ―Documents of Interest‖ where documents can be
found with a detailed guide to export food, a model of the certificate of origin for exporting, research on trading opportunities, among others.
A special section for the textile and apparel industry, with specialized documents on matters such as how a scarce supply
list works, among others.
A section with the interesting news related to CAFTA-DR.
An access to evaluation documents coming from CAFTA-DR results in El Salvador; where there is an analysis performed as a result of the enforcement anniversaries of the Free Trade Agreement in El Salvador.
b. Creation of the ―CAFTA Opportunities‖ magazine
Last June, the Ministry of Economy started the publication of the electronic magazine ―CAFTA Opportunities‖, with the objective of turning it
into a monthly informational tool that provides a summary on commercial subjects related to the Free Trade Agreement with Central America, the United States and the Dominican Republic, and the news that will be
developed day after day, associated to this subject.
The magazine includes sections to underline a sectorial focus where the commercial performance under the Free Trade Agreement is stressed about specific sectors, and also a normative focus that will give an
opportunity to review the legal framework under which the Treaty is ruled, and the legal implications that the same has on legislation and national
standards.
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The magazine is published monthly, and to date, nine issues have been published. In all editions, interesting subjects are approached, focusing on some specific CAFTA-DR issues. Thus, issues have been published on
agriculture, textile and apparel, labor subjects, environment, among others. As it is mentioned in the previous section, all editions of this
magazine can be found at the CAFTA-DR web site, in the section "CAFTA Opportunities.‖
If you are interested in receiving this bulletin, we invite you to send us your information to the [email protected] and we will gladly include you in the distribution list.
I. Entry into force of CAFTA-DR for Costa Rica
At the end of 2008, Costa Rica complied with all requirements and processes necessary to enforce CAFTA-DR; therefore, and as had been
agreed through the term extension to enforce the FTA granted to that country, on January 1, 2009, Costa Rica became the most recent country to be Part of the trade agreement that includes the Central American
countries, Dominican Republic, and the United States.
With the entrance of Costa Rica to CAFTA-DR, it is expected that there will be more opportunities opened, considering that there will be a greater degree of integration of the productive chains. Now, raw materials that
other Parties of the Agreement use that come from Costa Rica will also be considered originating and will comply with the rules of origin takeoff the
FTA and enjoy the tariff preferences. The entrance of Costa Rica to CAFTA-DR will allow enhance the economic links and cooperation that join the region, while helping towards
strengthening the competitiveness of enterprises trading with the United States.
On behalf of El Salvador, we congratulate our Costa Rican brothers and sisters for the enforcement of CAFTA-DR and we hope that the FTA will
bring excellent results, such as those already enjoyed by the rest of the Member countries.
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General Conclusions
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VI. Conclusions
The results seen three years after the enforcement of CAFTA-DR are positive, considering the advances achieved in the increase of trade flows,
as well as in the diversification of the exporting matrix and the strengthening of institutions that encompasses all the other subjects
included in the Agreement. Some important points to mention are:
Within the trading area, the increase of Salvadoran exports is
especially noticed in the United States market, that by the year 2008 reached a total of US$ 2,184 million, and among them, are included a wide variety of products towards the United States, thanks to the
conditions generated by the Free Trade Agreement.
Every year, non-traditional exports have a greater weight on products going to the United States, and greatly due to the
liberalization of tariffs and a more favorable origin regime for national producers, as well as major access to high quality raw materials and efficient processes within the Member countries of the
Agreement.
Along the same idea, El Salvador has become ever more efficient in trade facilitation, modernizing its customs system and favoring the
creation of an adequate environment for the promotion of trade flows and the development of businesses by the private sector.
The opportunities offered by CAFTA-DR have turned El Salvador into a more attractive country for foreign investors that see in the
country a favorable business climate to carry out their investments and take advantage of circumstances to enter markets of great interest such as Central America and the United States. Proof of it
is the constant increase of foreign direct investment (FDI) in the last three years.
CAFTA-DR is a comprehensive agreement, covering several
disciplines related to trade in goods and services. In El Salvador, we
see the result of environmental and labor topics, and the institutional strengthening that guarantees the development of trade
respecting these principles and offering the opportunity to grow respecting labor rights, and preserving natural resources.
Although it is true that results are promising, it is important to be aware that the current international circumstances present an enormous
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challenge for El Salvador, and now it is even more important that
everyone, private sector and government, work hand in hand to overcome difficulties and optimize benefits offered by the Free Trade Agreement, to efficiently compete in the international market an promote the country’s
development.
Facing the complex reality of the international economy, we are certainly living difficult times, but tools such as CAFTA-DR and other trade agreements will allow the country to continue taking advantage of the
opportunities of trade openness offered, and help the private sector to have a legal security and consequently tranquility to continue making business.