Local Subsidiary or branch of a Foreign Company
Foreign companies may conduct their operations in El Salvador
through local subsidiaries or branches. Companies need to present
a deed authorised by a notary public detailing proof of legal
incorporation of the parent firm, proof of ability to locate
in a foreign country and proof of sufficient assets to cover
establishment and operating costs. Approval must then be granted
by the Ministry of Economy. That will in turn issue an operating
Setting up a local base
The steps necessary for establishing a business office in El
a legal representative or lawyer and appoint an auditor. A
lawyer is necessary since there are a variety of legal requirements,
documents and steps to complete at the Registro de Comercio
and the Superintendencia de Empresas Mercantiles to obtain
an authorisation to operate in El Salvador. The auditor registers
the company with all the governmental agencies and creates
and legalizes the accounting system and books. An example
of a local auditing firm is Grant
Thornton Castellanos Campos.
a permit to operate in El Salvador from the
Superintendencia de Empresas y Sociedades Mercantiles,
Ministerio de Economia
Complejo Maestro, Centro de Gobierno
San Salvador, El Salvador, C.A.
Tel (503) 281-11-22
- The Superintendencia
de Empresas y Sociedades Mercantiles authorises all types
of commercial activities that take place in El Salvador and
establishes the minimum starting capital required for businesses
to begin operations. These start at approximately US$25,000.
an income and property clearance (this includes an income
tax contributor number, as well as a Value Added Tax -VAT-
collector number) from the Direccion General de Impuestos
Ministerio de Hacienda
Avenida Alvarado y Diagonal Centroamerica
Condominio Las Tres Torres Nº2
San Salvador, El Salvador
Tel. (503) 225-1022
Fax: (503) 225-8175
- Request a License at the Commerce Registry (Registro de
Comercio), in the Commerce and Industry License Registry Department.
Industrial and/or commercial patent registry is also requested
in this office. For the issuance of the license, the Registry
must approve a Spanish version of the accounting system, and
must also approve the accounting books. Your auditor must
approve this system and books prior to registering at the
Commerce. Once the Registry sees it is "legalized" and approved
by and auditor they register it.
the firm's board of directors and administrative personnel
at the Commerce Registry.
Municipal services clearance from the appropriate township
certification that the firm is properly registered in the
Industrial and Commercial National Establishments Directory
Direccion General de Estadistica y Censos
Avenida Juan Bertis Nº 79, Ex-Instituto Geografico Nacional
Tel. (503) 276-5900
Fax: (503) 276-5900
- If the
firm sells of manufactures pharmaceuticals, obtain a permit
Consejo Superior de Salud Publica
Paseo General Escalon Nº3551
San Salvador, El Salvador
Tel: (503) 245-3885, (503) 245-3886
Fax: (503) 245-3886
the firm's license in a local newspaper.
the investment at the Foreign Capital and Technology Transfer
Department of the Ministry of Economy.H
both an accountant and an external auditor that has been certified
by the Government of El Salvador.
El Salvador has a labour force of approximately 1.5 million
workers, of which 34 percent work in the agricultural sector,
followed by services (21 percent), Commerce (18 percent) and
Manufacturing (15 percent). The minimum wage in the industrial
and commercial sectors is 1,260 colones, or US$144 a month.
Urban Employees with minimal skills generally earn at least
twenty percent more that the minimum wage. Although the minimum
wage is less for agricultural workers, coffee plantation owners
report that they pay above the minimum wage to attract workers
during the harvest.
Official Unemployment was 7.8 percent in 1997. Underemployment
is much higher, although there are no reliable estimates. However,
some construction contractors cannot find sufficient skilled
workers, due to the number of projects now underway in El Salvador.
Salvadoran labour is perceived as hard working and trainable.
The general educational level is low, which may inhibit the
development of industries needing skilled, educated labour.
The current administration has made education one of its highest
priorities. There is a lack of middle management-level talent,
which sometimes results in foreigners being brought in to perform
(6:00 am to 7:00 pm) 44 hours
(not to exceed 8 hours per day)
(7:00PM TO 6:00AM) 39 hours
(not to exceed seven hours per day)
Overtime is remunerated with a 100% surcharge over the basic
salary. The night shift is remunerated with a 25% surcharge
over the basic salary
The Salvadoran Legislative Assembly approved October 1999,
a new, clearer and more comprehensive investment law, which
supersedes the former 1988 Foreign Investment Promotion and
Guarantee Law. The objective of the law is to promote investment
in general, and especially foreign investment, as means to support
economic and social development, employment generation, production
diversification, and the export of goods and services. The law
clearly defines and protects tangible and non-tangible resources
invested for the production of goods and services. It defines
domestic as well as foreign investment, and provides for equal
treatment for both. Among other features, it creates a new,
unified office (the National Investment Office, or ONI) in the
Ministry of Economy, to reduce and facilitate the steps to establish
and register new investments in the country. It also sets forth
clear procedures to resolve disputes between the government
- or national partners- and foreign investors, and facilitates
legal residence requirements for duty registered foreign investors.
The law contains limitations on foreign investors, who may
neither engage in small business nor fishing activities within
8 miles offshore. Underground resources, i.e., minerals, belong
to state, which may grant concessions for their exploitation.
Rustic lands cannot be acquired by foreigners from countries
where Salvadorans do not enjoy the same right. No single natural
or legal person may own more than 600 acres of land. The state
is empowered to regulate and monitor public services provided
by private companies, including the tariffs charged to the public,
except for what is provided under international treaties. The
state may grant concessions to operate ports and railroads.
Investment in banks and financial institutions is subject to
the provisions contained in Salvadoran banking law.
Some of the most important treaties made by the Salvadoran Government
Free trade and economic integration agreement between the republics
of El Salvador and Guatemala.
Nueva Ocotepeque agreement on trade and Investment
Free trade agreement and preferential exchange El Salvador-
Foreign investors are guaranteed quick repatriation of their
funds and free convertibility at local banks (article 9) Such
transferences include : Net profits and dividends; funds from
total or partial liquidation of the investment; royalties; payments
from indemnisations, and proceeds from dispute settlements establishes
in the law. Foreign investors are obliged to comply with labour,
tax and other requirements established in El Salvador's laws.
Foreign investors with investments over 4,000 minimum wages
(currently US$570,00) have the right to receive "investors
residence" permitting them to work and stay in the country
(article 11). Such residence can be request within 30 days after
the investment has been registered. Residence status can be
acquire financing from local banks and institutions, in accordance
with those institutions' internal regulations and polices.
Reflecting the government's economically liberal p0hilosophy,
the banking system is largely privately owned and the market
sets interest rates and fees for services. Regulation of the
financial sector is performed by the Superintendencia del Sistema
Financiero, an autonomous agency that performs auditing, supervision
and authorisation functions. Monetary credit and foreign exchange
policy is determined by the Central Bank, the Banco Central
de Reseva de El Salvador. Despite interest rates of approximately
20%, short-term credit supplied by local commercial banks is
In general, financing for business is available, but expensive
in El Salvador. Currently, local currency interest rates range
from 16 to 22 percent, and terms from one to ten years.
(Local Representation/ agents and distributors agency legislation)
Retaining a local agent or distributor is strongly recommended
in El Salvador, as business methods and legal requirements differ
from those in the UK. As with all countries, care should be
taken when appointing an agent as it can be costly to terminate
the relationship prematurely and difficult to establish definitive
reasons for doing so. It should be noted that redress for commercial
disputes can prove difficult as a result of the damage suffered
by the Salvadoran legal institutions during the war.
It may be prudent to hire a local attorney when preparing contracts
or when considering opening a business in El Salvador.
British firms seeking an agent are advised to consult the nearest
Business Link international Trade Team.
Protection of the agent/principal relationship is enshrined
in the Salvadoran Commercial Code (Sections B and C of chapters
III, Title III). The code stipulates conditions under which
an agency agreement can be terminated by the principal and also
the terms of compensation that an agent can claim if the principal
ends a relationship contrary to the provisions in the Code.
State Trading organisations / privatisation role and contacts
/ trade promotion organisations
State trading organisations:
Ministry of Agriculture and livestock
Calle y Col. Las Mercedes, San Salvador
Tel: (503) 245-2436/ 279-1949
Fax: (503) 279-1941
Ministry of economy
Calle Guadalupe y Alameda Juan Pablo II, Centro de Gobierno,
Tel: (503) 281-0531
Fax: (503) 221-2797
Ministry of Finance
Edificio Las tres Torres, Avenida Alvarado y Diagonal Centroamerica,
Urbanizacion Buenos Aires, San Salvador.
Tel: (503) 225-10-22
Ministry of Interior
Centro de Gobierno, San Salovador
Tel: (503) 222-5000
Fax: (503) 2712484
Ministry of Public Works
15 Calle Poniente, Edificios Centros Profesionales, Local 7-8,
Centro de Gobierno, San Salvador.
Tel: (503) 222-9227
Fax: (503) 222-5810
Trade Promotion Organisations
Salvadoran Chamber of Commerce and Industry
9ª Avenida Norte y 5ª Calle Poniente, San Salvador
Tel: (503) 271-2055
Fax: (503) 271-4461
Fundacion Salvadoreña para el
Desarrollo Economico y Social (FUSADES)
(Salvadorean Foundation for economic and Social Development)
Edificio FUSADES Boulevard y Urbanizacion Santa Elena, Antiguo
Tel: (503) 224-1236
Fax: (503) 223-8932
National Association of Private Enterprise
1ª Calle Poniente y 71 Avenida Norte Nº 204, Colonia
Escalon, San Salvador.
Tel: (503) 224-1236
Fax: (503) 223-8932
Local Business Services
Global Reach, Personal Touch
Grant Thornton is the leading global accounting, tax and business
advisory firm dedicated to serving the needs of middle-market
companies. Founded in 1924, Grant Thornton serves public and
private middle-market clients through 50 offices in the United
States, and in more than 600 offices in 110 countries through
Grant Thornton International. Your contact in El Salvador is
Grant Thornton Castellanos Campos and their web address is www.castellanoscampos.com.