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Investment & Legal Framework
LEGISLATION
National Legislation
One of the government objectives is to attract
foreign investment. The country has a liberal norm.
The 1999 National Foreign Investments Law offers
non discriminatory treatment. There is no limit on
capital cash flow or foreign capital participation, in
general, there is free repatriation of funds and capital
transfers. There are certain restrictions about foreign
capital obtained from TV, radio or purchases of land.
The dollarization in 2001 was expected to attract
more foreign investment than previous years
according to IDE (Direct Foreign Investment).
Important dates were 1998 because it marks the
beginning of the privatizations and 2007 because
of the purchases made by international bank and
insurance financers. Another important foreign
investment is in the textile area through “maquilas”
(apparel) and call-centers, thanks to the Free Zone
Law and International Service Law.
Source: Central Reserve Bank based on Private Sector
and Bank Balance surveys.
Direct Foreing Investment by Country of Origen
Figures in Million of $US and their percentages
The Direct Foreign Investment (IDE) figure for 2007
was USD$6,879 million according to Banco Central
de Reserva (Central Reserve Bank).
As a developing country, El Salvador benefits from
the advantages applicable to the Free Zones and the
6% drawback on exports, an extension granted until
2015 by the World Trade Organization. However, it
is seriously considering exchanging the drawback
and other similar advantages for another series of
benefits recognized by the WTO.
The International Service Law approved in 2007,
expanded the applicable benefits to industrial
companies established in the Free Zones and
considers income tax exemption for 15 years and
municipal tax exemption for 10 years to all investment
projects in the Free Zones and Service centers that
have investments higher then USD$150,000
Also in 2007, a new incentive law was issued for
renewable energy projects offering income tax
exemptions for Power Plant projects generating less
than 20MW.
The main investor in the country is the United
States with 29% of the total. Spain has also strongly
increased its investments with the arrival of reference
companies, together with Mexico and Panama. It
is also important to mention that Italy is a strong
investor in stock shares of ENEL in the geothermic
energy plant LaGeo.