Latin America and the Caribbean: Opening Up for Business

The commercial relationship between the United States, Canada, and Latin America has progressed substantially in recent years. The flow of trade and investment throughout the hemisphere has never been greater. The day is not far distant when the United States will trade more with our neighbors here in the Western Hemisphere than with Asia and Europe—combined.

FREE TRADE AREA OF THE AMERICAS

By accelerating this boom in trade, the proposed Free Trade Area of the Americas (FTAA) will boost economic growth and reduce poverty throughout the hemisphere. The FTAA will also provide an opportunity to re-energize economic reform throughout the Americas. It will confirm a shared commitment to the market-opening policies that create the conditions for growth.

The FTAA will encompass 34 nations with over 800 million citizens. Its collective GDP will exceed $13 trillion. The FTAA will:

Eliminate existing tariff and non-tariff barriers and bar the creation of new ones;
Harmonize technical and government rule-making standards;
Remove other restrictions on trade in goods and services as well as investment unless specifically exempted;
Exceed World Trade Organization disciplines, where possible;
Provide national treatment and investor safeguards against expropriation;
Establish a viable dispute settlement mechanism; and
Improve intellectual property rights protection.

GLOBAL TRADE AND INVESTMENT IS GROWING

Today, over 130 regional trade agreements are currently in force worldwide. The European Union has signed 27 free trade agreements, and Mexico alone has signed over 30. However, the United States is a party to just five free trade agreements: the North American Free Trade Agreement (NAFTA), the U.S.-Jordan free Trade Agreement, the U.S.-Israel free trade agreement and recently, the U.S.- Singapore free trade agreement and the U.S.- Chile free trade agreement.

This pattern of diminished U.S. participation in trade liberalization must not continue. The spider web of free trade agreements emerging in the Americas threatens to put U.S. companies at a competitive disadvantage. Basically, other nations are negotiating trade agreements that provide preferences for their firms over our own.

The NAFTA offers an excellent preview of the benefits promised by the FTAA. In the nine years since the NAFTA came into force, trade between the United States and Mexico has nearly tripled, with bilateral commerce reaching nearly a quarter of a trillion dollars. At the same time, trade with Canada has doubled, reaching nearly $400 billion. Together, the total represents close to 40% of all U.S. international trade.

THE NEW EL SALVADOR

The Peace Treaty of 1992 has entailed a drastic political change in El Salvador. Today there is an equalized Congress, the two most predominant parties, Alianza Repúblicana Nacionalista (ARENA), which currently governs the country, and Frente Farabundo Martí para la Liberación Nacional (FMLN), are both represented.

In the past 10 years, El Salvador has transformed itself into one of the most stable economies and plural democracies in the Americas. El Salvador has achieved a macroeconomic stability underscored by the world’s most respected credit rating agencies.

Sustained GDP growth
2.2 percent average inflation in the last five years
US dollar as legal tender
Lowest interest rates in Central America (Central Banks of Central America, Sept. 2002)
Regional banking leadership and free movement of capital
Recipient of the coveted “Investment Grade” rating by Moody’s Investor Services (July 2002)

LOCATION

El Salvador is strategically located in the middle of the Americas, facilitating access to North, South and Central America. Proximity to the US gives your electronics business convenient access to the country’s west and east coasts by air, land and sea. In addition, El Salvador’s ports allow for transportation of industrial goods to the US in five days or less.

LABOR FORCE

El Salvador’s people are its most valuable resource. With low attrition rates, a fast learning curve and low absenteeism, the Salvadoran workforce is recognized as one of the most capable in Central America.

Population: 6.2 million (2000 official census)
Population under 34 years: 70 percent
Labor force: nearly 3 million people
Unemployment: 7 percent
Underemployment: 30 percent
Less than 10 percent employee attrition rate per year

OPERATIONAL COSTS

Wages and benefits: $0.60 per hour (minimum wage)
Communications: $0.17–$0.40 per minute on international calls
Energy: $0.07 per Kw/h (over 500 kW/month)
Water: $0.21 per m3
Industrial rent space: $2.50–$4.00 m2 per month Investment Incentives

Whether located inside a free zone or as a stand-alone operation, electronic related companies may apply for incentives under the Industrial and Commercial Free Zone Law.

100 percent income tax exemption
100 percent value added tax exemption
100 percent municipal tax exemption
No taxes on capital gains
Duty free import of machinery and equipment, raw material and intermediate goods
Minimal registration procedures
No limits on foreign capital
Full currency convertibility
No double taxation

TELECOMMUNICATIONS& TECHNOLOGY INFRASTRUCTURE

Electronics operations seeking to establish themselves in El Salvador can take advantage of the country’s fully privatized telecommunications sector. International telecommunication corporations already operating in El Salvador include Sprint, AT&T, France Telecom, Telefonica of Spain and Sweden’s Millicom

El Salvador Free Trade Zones

AMERICAN PARK FREE ZONE

American Park Free Zone is located between San Salvador and Santa Ana, along the Pan- American Highway and its location is strategic due to the modern network of infrastructure, which has been developed in this area.

Its location makes it the closest free zone to the Atlantic Ocean through Puerto Santo Tomas de Castilla in Guatemala, 8 hours away; likewise, it is 45 minutes away from the Pacific Ocean through Puerto de Acajutla.

The Aeropuerto Internacional de El Salvador is located at 55 minutes and the capital city of San Salvador at 30 minutes distance time.

EL SALVADOR INTERNATIONAL FREE ZONE

El Salvador International Free Zone is located at 18 miles, in other words at 45 minutes from the capital city of San Salvador, in Olocuilta, La Paz, over the main highway that connects San Salvador with the Aeropuerto Internacional de El Salvador. Its proximity with the capital and other small nearby towns guarantees this park workforce offers and access to the main ports in the Pacific and Atlantic coasts.

INTERCOMPLEX

INTERCOMPLEX has been planned as a real industrial city with all related services, it is fully supported by the “National Zoning Initiative for the San Andres Valley” that guarantees this territorial area as the center of greatest growth in the country.

Located on the main highway that connects El Salvador with the sea ports of Guatemala, offers the following advantages :

15 minutes from the capital city, San Salvador (2.50 miles from the metropolitan area)
34 miles from the international airport
37 miles from the main Pacific Ocean sea-port Acajutla
Access to the main ports in the Pacific and Atlantic coasts.

MEXICO

When Mexico became member of the World Trade Organization (WTO) in 1986, the first step to actively integrate it into the world economy was made. A more open trade was initiated and allowed Mexico to be recognized in the global economy to such a degree that the country is currently the second most important partner of the United States.

Given the 11 free trade agreements Mexico has signed with 32 countries of different regions worldwide, the country has direct access to 860 million potential consumers. This allows Mexico to play a key role in the global economy strategy, converting it into an attractive country for the export sector and for the national and foreign investors.

The main objectives in the world’s dynamic trade include fostering the exchange with their trade partners, to eliminate the trade barriers for services and goods and to lay the foundation for fair competition. For example, The North American Free Trade Agreement (NAFTA) has permitted Mexico to capture Foreign Direct Investment (FDI) at record levels (110 billion USD).

The U.S. is the destination of approximately 88% of Mexico’s exports. International trade between the U.S. and Mexico grew approximately 260% between 1994 and 2000. Mexico international trade with the European Union also is growing: it increased from 11.8 billion USD in 1994 to 20.3 billion USD in 2000.

Mexico has turned into the economic potential of Latin America. According to the figures of the WTO, Mexico is ranked as the seventh largest exporter worldwide, first in Latin America (2001) and regarding production ranked as number ten worldwide (2000). Forming part of the world’s largest market, exports represent the main source for Mexican employment and are the country’s principal growth engine.

Mexico also has vaccinated its economy against global volatility, due to the fact that in February 2002, Standard & Poors, Fitch Ratings and Moody’s Investor’s Services, leaders in credit analysis, upgraded their ratings for Mexico to “investment grade” and proclaimed their outlooks for the general condition of the country as “stable”. S&P forecasted that the efforts of the Fox administration will result in lower inflation, lower interest rates, increased productivity and medium-term growth.

Mexico’s strategic location, the economic development and its forecasted growth offer a great opportunity for investment.