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El Salvador

The republic of El Salvador is both the smallest and most densely populated country in the Central American region. The country's economy has the distinction of being the fourth largest in the region. El Salvador has a medium Gini-coefficient of 38.0 as per the latest figures released by the World Bank. As compared to other developing countries, the GDP growth rate has been relatively low. Remittances received from Salvadorans working in the United States form a major part of foreign income. In order to improve revenue collection, focus has been on indirect taxes. In the early 2000s, the country's government introduced a monetary integration plan making the U.S. dollar a legal tender alongside the Salvadoran Colón and by 2004 the circulation of the Colón was stopped and since then it has not been used in the country for any kind of transaction. The country was the first to ratify the Central America-Dominican Republic Free Trade Agreement (CAFTA) which has not only boosted exports but has also supported investment in the apparel sector which was suffering tough competition from the Asian countries. The country has signed free trade agreements with Mexico, Chile, Dominican Republic and Panama and has also increased its exports to these countries. In 2015, the country signed a five year $277 million second compact with the US government agency Millennium Challenge Corporation in order to improve the nation's competitiveness and output in the international markets. Natural disasters such as earthquakes and hurricanes, economic subsidies, and corruption have impeded the country's economy. The IMF in 2012 suspended a $750 million loan to the central government due to governmental policy of mandating large economic subsidies. Following the earthquake in 2001, the government maintained fiscal discipline but the nation's public debt has been increasing (59.3% of GDP IN 2017) over the past several years. Developing new growth sectors for a more diversified economy has been a challenge for the country.

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What free trade areas or economic unions is it a member of?

Member of the Central America Integration System (SICA) since 13/12/1991

Other members:

Belize, Costa Rica, Dominican Republic, Guatemala, Honduras, Nicaragua, Panama

What trade deals are there between Central America Integration System and other countries and economic unions?

EU - Central America Association Agreement (from 01/08/2013)

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What trade deals are there with other countries and economic unions?

Chile - El Salvador free trade agreement (from 01/06/2002)

El Salvador - Honduras - Chinese Taipei free trade agreement (from 01/03/2008)

Colombia - Northern Triangle free trade agreement (from 12/11/2009)

El Salvador - Cuba partial scope agreement (from 01/08/2012)

Mexico - Central America free trade agreement (from 01/09/2012)

El Salvador - Ecuador partial scope agreement (from 16/11/2017)

Korea, Republic of - Central America free trade agreement (from 01/10/2019)

UK - Central America association agreement (from 01/01/2021)

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