El Salvador Economy, GDP, Budget, Industry and Agriculture

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El Salvador Economy


View the information below regarding the economy of El Salvador. The summary and statistics contains gdp, industry, agriculture and more for El Salvador. If you need other information please visit the El Salvador Country Page.

  • El Salvador Government
  • El Salvador People
  • El Salvador Geography
  • El Salvador History

    Economy (2002)
    GDP: $14.3 billion.
    Annual growth rate: 2.1%.
    Per capita income: $2,189.
    Agriculture (12% of GDP): Products--coffee, sugar, livestock, corn, poultry, and sorghum. Arable, cultivated, or pasture land--64%.
    Industry (22% of GDP): Types--food and beverage processing, textiles, footwear and clothing, chemical products, petroleum products, electronics.
    Trade: Exports--$2.9 billion: textiles, diverse manufactures, coffee, sugar, and shrimp. Major markets--U.S. 67%, Central American Common Market (CACM) 24.7%, Panama and Mexico 2.7, Germany 1.2%. Imports--$5.19 billion: consumer goods, foodstuffs, capital goods, raw industrial materials, and petroleum. Major suppliers--U.S. 49.6%, CACM 15.8%, Mexico 5.6%, Panama 3%, Japan 2.6%.

    El Salvador Economy
    The Salvadoran economy continues to benefit from a commitment to free markets and careful fiscal management. The impact of the civil war on El Salvador's economy was devastating. From 1979-90, losses from damage to infrastructure and means of production due to guerrilla sabotage as well as from reduced export earnings totaled about $2.2 billion. But since attacks on economic targets ended in 1992, improved investor confidence has led to increased private investment.

    Moderate climate and a hard-working and enterprising labor pool comprise El Salvador's greatest assets. Much of the improvement in El Salvador's economy is a result of free market policy initiatives carried out by the ARENA governments, including the privatization of the banking system, telecommunications, public pensions, electrical distribution and some electrical generation, reduction of import duties, elimination of price controls, and enhancing the investment climate through measures such as improved enforcement of intellectual property rights.

    One of the biggest challenges in El Salvador has been to manage the decline in the coffee sector, formerly the backbone of the economy, and to develop new growth sectors for a more diversified economy. The collapse of worldwide coffee prices has caused substantial reduction in coffee production and decreased rural employment. While as recently as 1988, coffee exports accounted for more than half of export earnings; in 2002 they were 3.5%. El Salvador has sought to create new export industries through fiscal incentives for Free Trade Zones, and currently there are 15 Free Trade Zones in El Salvador. The largest beneficiary has been the maquila industry, which directly provides 90,000 jobs, and primarily consists of cutting and assembling clothes for export to the United States. The apparel industry has greatly benefited from the Caribbean Basin Trade Partnership Act, which allows these goods to enter the United States duty free under certain conditions.

    Fiscal policy has been the biggest challenge for the Salvadoran Government. The 1992 peace accords committed the government to heavy expenditures for transition programs and social services. Although international aid was generous, the government has focused on improving the collection of its current revenues. A 10% value-added tax, implemented in September 1992, was raised to 13% in July 1995. The VAT is the biggest source of revenue, accounting for about 58% of total tax revenues in 2002.

    Remittances from Salvadorans working in the United States sent to family members are the biggest-single source of foreign income and offset the substantial trade deficit. Remittances transferred through the banking system and, therefore, counted by the Central Bank, have increased steadily in the last decade and reached an all time high of $1.93 billion in 2002--13.6% of GDP. As of February 2003 net international reserves equaled $1.6 billion. Beginning January 1, 2001, the Salvadoran Government approved the “Monetary Integration” law that made the U.S. dollar legal tender alongside the colón. Dollars have gradually replaced colóns, which are no longer printed. In practice the economy has become dollarized, with the colon only used in isolated rural areas.

    El Salvador obtains concessional loans for development projects from the World Bank, Inter-American Development Bank, the Bank for Central American Integration, and certain other international institutions. Starting in August 1999, El Salvador also has sold bonds in private international financial markets. These sales have been used to fund Salvadoran Government operations. As of February 2003, the Salvadoran Government has sold $2.15 billion in bonds. El Salvador’s external debt in early 2003 was about $5.07 billion.

    source: http://www.state.gov

  • El Salvador Government
  • El Salvador People
  • El Salvador Geography
  • El Salvador History