El Salvador’s location and natural attributes make it an attractive investment destination. The macroeconomic context and declining rule of law present some challenges. El Salvador’s economy has registered the lowest levels of growth in the region for many years, with average annual GDP growth of 2.5 percent from 2016 to 2019. After a deep pandemic-related contraction (7.9 percent) in 2020, the Central Bank estimates GDP rebounded to 10.3 percent growth in 2021. The IMF expects the economy to grow 3.2 percent in 2022, with growth rates declining to 2 percent in the medium-term. Economic underperformance is mainly driven by fiscal constraints. Persistent budget deficits and increased government spending – exacerbated by the pandemic – have contributed to a heavy debt burden. With public debt at an estimated 88.5 percent of GDP in 2021, the Government of El Salvador (GOES) has limited capacity for public investment and job creation initiatives. Large financing needs are projected for 2022.
The Bukele administration continues to make efforts to attract foreign investment and has taken measures to reduce cumbersome bureaucracy and improve security conditions. However, the implementation of the reforms has been slow, and laws and regulations are occasionally passed and implemented quickly without consulting with the private sector or assessing the impact on the business climate.
After being announced in June 2021, Bitcoin became a legal tender in El Salvador on September 7, 2021, alongside the U.S. dollar. The Bitcoin Law mandates that all businesses must accept Bitcoin, with limited exceptions for those who do not have the technology to carry out transactions. Prices do not need to be expressed in Bitcoin and the U.S. dollar is the reference currency for accounting purposes. The GOES created a $150 million trust fund managed by El Salvador’s Development Bank to guarantee automatic convertibility and subsidize exchange fees. The rapid implementation caused uncertainty in the investment climate and added costs to businesses.
Government of El Salvador actions have eroded separation of powers and independence of the judiciary over the past year. In May 2021, the Legislative Assembly dismissed the Attorney General and all five justices of the Supreme Court’s Constitutional Chamber and immediately replaced them with officials loyal to President Bukele. Furthermore, in August 2021, the legislature amended the Judicial Career Organic Law to force into retirement judges ages 60 or above and those with at least 30 years of service. The move was justified by the ruling party as an effort to root out corruption in the judiciary from past administrations. A September 2021 ruling from the newly appointed Constitutional Chamber allows for immediate presidential re-election, despite the Constitution prohibiting presidential incumbents from re-election to a consecutive term. Legal analysts believe these measures were unconstitutional and have enabled the Legislative Assembly and the Bukele administration to exert control over the judiciary.
The Legislative Assembly is not required to publish draft legislation and opportunities for public engagement are limited. With the Nuevas Ideas ruling party holding a supermajority, legislation is often passed quickly with minimal analysis and debate in parliamentary committees and plenary sessions, contributing to an overall climate of regulatory uncertainty.
Commonly cited challenges to doing business in El Salvador include the discretionary application of laws and regulations, lengthy and unpredictable permitting procedures, as well as customs delays. El Salvador has lagged its regional peers in attracting foreign direct investment (FDI). The sectors with the largest investment have historically been textiles and retail establishments, though investment in energy has increased in recent years.
The Bukele administration has proposed several large infrastructure projects which could provide opportunities for U.S. investment. Project proposals include enhancing road connectivity and logistics, expanding airport capacity and improving access to water and energy, as well as sanitation. Given limited fiscal capacity for public investment, the Bukele administration has begun pursuing Public-Private Partnerships (PPPs) to execute infrastructure projects. In August 2021, El Salvador’s Legislative Assembly approved the contract award of the first PPP project to expand the cargo terminal at the international airport.
As a small energy-dependent country with no Atlantic coast, El Salvador heavily relies on trade. It is a member of the Central American Dominican Republic Free Trade Agreement (CAFTA-DR); the United States is El Salvador’s top trading partner. Proximity to the U.S. market is a competitive advantage for El Salvador. As most Salvadoran exports travel by land to Guatemalan and Honduran ports, regional integration is crucial for competitiveness. Although El Salvador officially joined the Customs Union established by Guatemala and Honduras in 2018, implementation stalled following the Bukele administration’s decision to prioritize bilateral trade facilitation with Guatemala. In October 2021, however, the GOES announced it would proceed with Customs Union implementation. El Salvador rejoined technical level working group discussions and resumed testing of system interconnectivity.
The Bukele administration has taken initial steps to facilitate trade. In 2019, the government of El Salvador (GOES) relaunched the National Trade Facilitation Committee (NTFC), which produced the first jointly developed private-public action plan to reduce trade barriers. The plan contained 60 strategic measures focused on simplifying procedures, reducing trade costs, and improving connectivity and border infrastructure. Measures were not fully implemented in 2020 due to the coronavirus pandemic. In 2021, the NTFC revised the action plan to adjust measures under implementation and finalized drafting the national trade facilitation strategy, which will be launched in March 2022. In January 2022, the NFTC met to evaluate progress on the action plan. The NFTC released the action plan for 2022 on February 17th. The 2022 action plan has 29 measures to facilitate cross-border trade and improve road and border infrastructure.
|TI Corruption Perceptions Index||2021||115 of 180|
|Global Innovation Index||2021||96 of 132|
|U.S. FDI in partner country ($M USD, stock positions)||2020||3,4133|
|World Bank GNI per capita||2020||3,630|
1. Openness To, and Restrictions Upon, Foreign Investment
2. Bilateral Investment Agreements and Taxation Treaties
El Salvador has bilateral investment treaties in force with Argentina, Belize, BLEU (Belgium-Luxembourg Economic Union), Chile, the Czech Republic, Finland, France, Germany, Israel, Republic of Korea, Morocco, the Netherlands, Paraguay, Peru, Spain, Switzerland, the United Kingdom, and Uruguay. El Salvador is one of the five Central American Common Market countries that have an investment treaty among themselves.
The CAFTA-DR entered into force in 2006 between the United States and El Salvador. CAFTA-DR’s investment chapter provides protection to most categories of investment, including enterprises, debt, concessions, contract, and intellectual property. Under this agreement, U.S. investors enjoy the right to establish, acquire, and operate investments in El Salvador on an equal footing with local investors. Among the rights afforded to U.S. investors are due process protections and the right to receive a fair market value for property in the event of expropriation. Investor rights are protected under CAFTA-DR by an effective, impartial procedure for dispute settlement that is transparent and open to the public.
El Salvador also has free trade agreements (FTAs) with Mexico, Chile, Panama, Colombia, and Taiwan. Although the GOES announced the cancellation of the Taiwan FTA in February 2019, the Supreme Court halted the cancellation in March 2019. The FTA remains in force pending a Supreme Court ruling.
In January 2020, the South Korea-Central America FTA became effective. This FTA includes investment provisions. El Salvador’s FTAs with Mexico, Chile, Dominican Republic, and Panama also include investment provisions. El Salvador continues trade agreement negotiations with Canada, which will likely include investment provisions. The Salvadoran government signed a Partial Scope Agreement (PSA) with Cuba in 2011 and an additional Protocol to the PSA in October 2018. El Salvador and Bolivia signed a PSA in November 2018 that is pending ratification in the Legislative Assembly. A PSA with Ecuador entered into force in 2017.
El Salvador, along with Costa Rica, Guatemala, Honduras, Nicaragua, and Panama, signed an Association Agreement with the European Union that establishes a Free Trade Area. The agreement entered into force with El Salvador in 2013. On March 1, 2022, El Salvador ratified the Protocol to the Association Agreement to take account of the accession of the Republic of Croatia to the European Union. The United Kingdom-Central America Association Agreement entered into force in January 2021. The agreement ensures continuity of commercial ties following Brexit and provides a framework for cooperation and investment.
El Salvador does not have a bilateral taxation treaty with the United States. El Salvador has one tax agreement with Spain, in effect since 2008.
El Salvador is a signatory of the Central American Mutual Assistance and Technical Cooperation Agreement in Tax and Customs Matters in force since 2012. On October 2018, El Salvador’s Legislative Assembly ratified the OECD . The jurisdictions participating in the Convention can be found at:
El Salvador became a member of the Global Forum on Transparency and Exchange of Information for Tax Purposes in 2011. The OECD published El Salvador’s Phase 1 peer review report, which demonstrates its commitment to international standards for tax transparency and exchange of information, in 2015. The Phase 2 peer review on implementation of the standards, published in 2016, concluded that El Salvador is “largely compliant.”
El Salvador is not a member of the OECD Inclusive Framework on Base Erosion and Profit Shifting.
In November 2020, El Salvador eliminated the Security Special Contribution on Large Taxpayers (CESC). Enacted in 2015, the CESC levied a five-percent tax on companies whose net income exceeded $500,000 to finance security measures, including the GOES’ Plan Control Territorial (Territorial Control Plan).
In May 2019, the legislature also approved an Authentic Interpretation of the Income Tax Law to clarify that energy distributors may deduct energy losses from the income tax, as energy losses are an unavoidable cost of distribution. Prior to the authentic interpretation, tax authorities repeatedly imposed back taxes, interest, and penalties for improper deductions. Companies successfully challenged most of the tax assessments but had incurred legal costs and increased financial exposure.
3. Legal Regime
4. Industrial Policies
5. Protection of Property Rights
6. Financial Sector
7. State-Owned Enterprises
El Salvador has successfully liberalized many sectors, though it maintains state-owned enterprises (SOEs) in energy generation and transmission, water supply and sanitation, ports and airports, and the national lottery (see chart below).
|SOE||2022 Budgeted Revenue||Number of Employees|
|State-run Electricity Company (CEL)||$403,309,045||795|
|Water Authority (ANDA)||$255,939,465||4,281|
|Port Authority (CEPA)||$186,895,990||2,551|
Although the GOES privatized energy distribution in 1999, it maintains significant energy production facilities through state-owned Rio Lempa Executive Hydroelectric Commission (CEL), a significant producer of hydroelectric and geothermal energy.
In October 2021, El Salvador’s legislature enacted the Creation Law of the Power, Hydrocarbons, and Mines General Directorate. The new General Directorate will be responsible for dictating the national energy policy and proposing amendments to energy legislation and by-laws, as well as implementing the energy policy. The law allows the President of the state-owned power company (CEL) to serve as the Director General of the new entity. The law will enter into force in November 2022. Industry stakeholders are concerned about the potential conflict of interest that would result from CEL making energy policy and participating in the sector as SOE.
The primary water service provider is the National Water and Sewer Administration (ANDA), which provides services to 96.6 percent of urban areas and 77 percent of rural areas in El Salvador.
The Autonomous Executive Port Commission (CEPA) operates both the seaports and the airports. CEL, ANDA, and CEPA Board Chairs hold Minister-level rank and report directly to the President.
The Law on Public Administration Procurement and Contracting (LACAP) covers all procurement of goods and services by all Salvadoran public institutions, including the municipalities. Exceptions to LACAP include: procurement and contracting financed with funds coming from other countries (bilateral agreements) or international bodies; agreements between state institutions; and the contracting of personal services by public institutions under the provisions of the Law on Salaries, Contracts and Day Work. Additionally, LACAP allows government agencies to use the auction system of the Salvadoran Goods and Services Market (BOLPROS) for procurement. Although BOLPROS is intended for use in purchasing standardized goods (e.g., office supplies, cleaning products, and basic grains), the GOES uses BOLPROS to procure a variety of goods and services, including high-value technology equipment and sensitive security equipment. As of October 2021, public procurement using BOLPROS totaled $157.1 million. The United Nations Office for Project Services (UNOPS) and United Nations Development Program (UNDP) also support government agencies in the procurement of a wide range of infrastructure projects. Procurement for municipal infrastructure works is governed by the Simplified Procurement Law for Municipal Works in force since November 2021 and centralized in the National Directorate of Municipal works created by the Bukele administration to oversee investment in infrastructure and social projects in municipalities. The GOES has created a dedicated procurement website to publish tenders by government institutions. ).
In August 2020, President Bukele signed an executive order allowing the submission of bids for contractual services via email and eliminating bidders’ obligation to register online with the public procurement system (Comprasal), as well as lifting the responsibility of procurement officers to keep a record of companies and individuals who receive tender documents. Transparency advocates and legal experts have noted that the order would decrease potential bidders’ ability to access and compete fairly for government tenders. The order is pending review in the Supreme Court of Justice, but without injunctive effect.
Alba Petroleos is a joint venture between a consortium of mayors from the FMLN party and a subsidiary of Venezuela’s state-owned oil company PDVSA. As majority PDVSA owned, Alba Petroleos has been subject to Office of Foreign Assets Control (OFAC) sanctions since January 2019. Alba Petroleos operates a reduced number of gasoline service stations and businesses in other industries, including energy production, food production, convenience stores, and bus transportation. Alba Petroleos has been surrounded by allegations of mismanagement, corruption, and money laundering. Critics charged that the conglomerate received preferential treatment during FMLN governments and that its commercial practices, including financial reporting, are non-transparent. In May 2019, the Attorney General’s Office initiated an investigation against Alba Petroleos and its affiliates for money laundering. Alba Petroleos’ assets are frozen by court order and some of its gasoline service stations are being managed by the National Council for Asset Administration (CONAB).
8. Responsible Business Conduct
The private sector in El Salvador, including several prominent U.S. companies, has embraced the concept of responsible business conduct (RBC). Many companies donated to COVID-19 relief efforts in 2020. Several local foundations promote RBC practices, entrepreneurial values, and philanthropic initiatives. El Salvador is also a member of international institutions such as Forum Empresa (an alliance of RBC institutions in the Western Hemisphere), AccountAbility (UK), and the InterAmerican Corporate Social Responsibility Network. Businesses have created RBC programs to provide education and training, transportation, lunch programs, and childcare. In addition, RBC programs have included inclusive hiring practices and assistance to communities in areas such as health, education, senior housing, and HIV/AIDS awareness. Organizations monitoring RBC are able to work freely.
Following a reorganization under the Bukele administration, the Legal Secretariat is responsible for developing strategies and actions to promote transparency and accountability of government agencies, as well as fostering citizen participation in government. The watchdog organization Transparency International is represented in-country by the Salvadoran Foundation for Development (FUNDE).
El Salvador does not waive or weaken labor laws, consumer protection, or environmental regulations to attract foreign investment. El Salvador’s ability to enforce domestic laws effectively and fairly is limited by a lack of resources. El Salvador does not allow metal mining activity.
U.S. companies operating in El Salvador are subject to the U.S. Foreign Corrupt Practices Act (FCPA).
Corruption can be a challenge to investment in El Salvador. El Salvador ranks 115 out of 180 countries in Transparency International’s 2021 Corruption Perceptions Index. While El Salvador has laws, regulations, and penalties to combat corruption, their effectiveness is at times questionable. Soliciting, offering, or accepting a bribe is a criminal act in El Salvador. The Attorney General’s Anticorruption and Anti-Impunity Unit handles allegations of public corruption. The Constitution establishes a Court of Accounts that is charged with investigating public officials and entities and, when necessary, passing such cases to the Attorney General for prosecution. Executive-branch employees are subject to a code of ethics, including administrative enforcement mechanisms, and the government established an Ethics Tribunal in 2006.
In June 2021, El Salvador terminated its 2019 agreement with the organization of American States (OAS) to back the International Commission Against Impunity and Corruption (CICIES). CICIES audited pandemic spending in 2020. After receiving CICIES preliminary findings in November 2021, the Attorney General’s Office began criminal investigations in 17 government agencies for alleged procurement fraud and misuse of public funds. In May 2021, the Legislative Assembly passed the “Law for the Use of Products for Medical Treatments in Exceptional Public Health Situations Caused by the COVID-19 Pandemic” to protect vaccine manufacturers from liability, a precondition for Pfizer to sell vaccines to El Salvador. However, the law’s broad liability shield provisions, including civil and criminal immunity for a wide range of medical product manufacturers and healthcare providers, raised concerns about the future of investigations into fraudulent purchases of medical supplies and PPE. The law was subsequently amended in October 2021 to clarify there is no immunity for acts of corruption, fraud, bribery, theft, counterfeiting or piracy and trafficking of stolen goods. Even though the reforms removed some of the most controversial aspects of the bill, investigations stalled after the Attorney General appointed by the Bukele Administration removed prosecutors working on pandemic-related probe against GOES officials.
Corruption scandals at the federal, legislative, and municipal levels are commonplace and there have been credible allegations of judicial corruption. Three of the past four presidents have been indicted for corruption, a former Attorney General is in prison on corruption-related charges, and a former president of the Legislative Assembly, who also served as president of the investment promotion agency during the prior administration, faces charges for embezzlement, fraud, and money laundering. The former Minister of Defense during two FMLN governments is being prosecuted for providing illicit benefits to gangs in exchange for reducing homicides (an agreement known as the 2012-2014 Truce). In February 2020, the Attorney General’s Office indicted high-ranking members of the ARENA and FMLN parties under charges of conspiracy and electoral fraud for negotiating with gangs for political benefit during the run up to the 2014 presidential elections. In September 2020, the Attorney General’s Office launched a probe against the Director of Penal Centers, the Vice Minister of Justice, and the Chief of the Social Fabric Reconstruction Unit for covert dealings with gangs on a homicide reduction in exchange for better prison conditions. Since the appointment of the current Attorney General, the investigation into Bukele administration’s gang pacts has not progressed. U.S Treasury designated the two officials and Bukele’s Chief of Cabinet for financial sanctions in December 2021. The law provides criminal penalties for corruption, but implementation is generally perceived as ineffective. Former President Funes faces criminal charges for embezzlement, money laundering, and misappropriation of public funds. Although there are several pending arrest warrants against Funes, he has fled to Nicaragua and cannot be extradited because he was granted Nicaraguan citizenship. In 2018, former president Elias Antonio (Tony) Saca pleaded guilty to embezzling more than $300 million in public funds. The court sentenced him to 10 years in prison and ordered him to repay $260 million.
The NGO Social Initiative for Democracy stated that officials, particularly in the judicial system, often engaged in corrupt practices with impunity. Long-standing government practices in El Salvador, including cash payments to officials, shielded budgetary accounts, and diversion of government funds, facilitate corruption and impede accountability. For example, the accepted practice of ensuring party loyalty through off-the-books cash payments to public officials (i.e., sobresueldos) persisted across five presidential administrations. President Bukele eliminated these cash payments to public officials and the “reserved spending account,” nominally for state intelligence funding. At his direction, in July 2019, the Court of Accounts began auditing reserve spending of the Sanchez Ceren administration. In July 2021, the Attorney General’s Office accused ten former FMLN legislators and former cabinet members who served in the Funes administration (2009-2014), including former President Salvador Sanchez, of money laundering, embezzlement, and illicit enrichment for allegedly receiving sobresueldos from the President’s Office reserved spending account.
El Salvador has an active, free press that reports on corruption. The Illicit Enrichment Law requires appointed and elected officials to declare their assets to the Probity Section. The declarations are not available to the public, and the law only sanctions noncompliance with fines of up to $500. In 2015, the Probity Section of the Supreme Court began investigating allegations of illicit enrichment of public officials. In 2017, Supreme Court Justices ordered its Probity Section to audit legislators and their alternates. In 2019, in observance of the Constitution, the Supreme Court instructed the Probity Section to focus its investigations only on public officials who left office within ten years. In 2020, the Supreme Court issued regulations to standardize the procedures to examine asset declarations of public officials and carry out illicit enrichment investigations, as well as to set clear rules for decision-making. At the end of 2021, the Probity Section had a total of 452 active investigations on illicit enrichment. Between 2015 and 2021, the office completed economic examinations in 58 cases, but the Supreme of Court recommended civil prosecution for illicit enrichment in only 21 of those cases. In an October 2021 interview, the President of the Criminal Chamber of the Supreme Court indicated that 127 illicit enrichment cases were nearing the end of the 10-year constitutional statute of limitations.
In 2011, El Salvador approved the Law on Access to Public Information. The law provides for the right of access to government information, but authorities have not always effectively implemented the law. The law gives a narrow list of exceptions that outline the grounds for nondisclosure and provide for a reasonably short timeline for the relevant authority to respond, no processing fees, and administrative sanctions for non-compliance. The Bukele administration has weakened the autonomy of the Access to Public Information Agency (IAIP) – charged with ensuring compliance with the law – by reforming IAIP’s regulations to increase the President’s Office control over the appointment of its commissioners. Enacted amendments also add requirements for accessing information, including for the release of restricted information. Civil society organizations claim it is common practice of the Bukele administration to declare information to be reserved (confidential) or deny information without justification and in violation of the law to avoid citizen oversight and accountability.
In 2011, El Salvador joined the Open Government Partnership. The Open Government Partnership promotes government commitments made jointly with civil society on transparency, accountability, citizen participation and use of new technologies ( ).
10. Political and Security Environment
El Salvador’s 12-year civil war ended in 1992. Since then, there has been no political violence aimed at foreign investors.
The crime threat level in El Salvador is critical, with high rates of crime and violence. Most serious crimes in El Salvador are never solved. El Salvador lacks sufficient resources to properly investigate and prosecute cases and to deter crime. For more information, visit:
El Salvador has thousands of known gang members from several gangs including Mara Salvatrucha (MS-13) and 18th Street (M18). Gang members engage in violence or use deadly force if resisted. These “maras” concentrate on extortion, violent street crime, carjacking, narcotics and arms trafficking, and murder for hire. Extortion is a common crime in El Salvador. U.S. citizens who visit El Salvador for extended periods are at higher risk for extortion demands. Bus companies and distributors often must pay extortion fees to operate within gang territories, and these costs are passed on to customers. The World Economic Forum’s 2019 Global Competitiveness Index reported that costs due to organized crime for businesses in El Salvador are the highest among 141 countries.
11. Labor Policies and Practices
According to the National Directorate of Statistics and Censuses (DIGESTYC), in 2021 El Salvador had a labor force of about 2.9 million people. Female labor force participation remained low at 41.2 percent. Around 70 percent of the workers were employed in the informal sector. The number of people working in the informal sector increased during the pandemic due to high unemployment rates. These workers do not have access to government health and pension benefits, and according to the 2020-2021 Salvadoran Foundation for Economic and Social Development report, 63.9 percent of workers the informal sector belong to vulnerable groups, such as women, children, and the rural poor.
Labor laws require 90 percent of the workforce in plants and in clerical positions be Salvadoran citizens. While Salvadoran labor is regarded as hard-working, general education and professional skill levels are low. According to many large employers, there is a lack of middle management-level talent, which sometimes results in the need to bring in managers from abroad. Employers do not report labor-related difficulties in incorporating technology into their workplaces.
The law provides for the right of most workers to form and join independent unions, to strike, and to bargain collectively. The law also prohibits anti-union discrimination, although it does not require reinstatement of workers fired for union activity. Military personnel, national police, judges, and high-level public officers may not form or join unions. Workers who are representatives of the employer or in “positions of trust” also may not serve on a union’s board of directors. Only Salvadoran citizens may serve on unions’ executive committees. The labor code also bars individuals from holding membership in more than one trade union.
Unions must meet complex requirements to register, including having a minimum membership of 35 individuals. If the Ministry of Labor (MOL) denies registration, the law prohibits any attempt to organize for up to six months following the denial. Collective bargaining is obligatory only if the union represents most workers.
In 2021, some unions were concerned about the MOL’s delay in approving their organization’s credentials, required to continue operating as a union and to participate in various tripartite consultative committees between government, the private sector, and the unions. Without credentials, unions cannot participate in decision-making within tripartite committees on subjects such as worker social security benefits, minimum wage, housing, and other worker benefits. The members of the unions also lose their immunity from termination by their employers if their unions do not have credentials. As of January 2022, the MOL failed to grant credentials to more than 250 unions before their certifications expired. These unions represent workers in municipal, healthcare, education, and judicial trades, leaving these workers vulnerable to termination by their employers. The unions receiving their credentials quickly were those aligned with the political party of the Nuevas Ideas dominated government.
The law contains cumbersome and complex procedures for conducting a legal strike. The law does not recognize the right to strike for public and municipal employees or for workers in essential services. The law does not specify which services meet this definition, and courts therefore interpret this provision on a case-by-case basis. The law requires that 30 percent of all workers in an enterprise must support a strike for it to be legal and that 51 percent must support the strike before all workers are bound by the decision to strike. Unions may strike only to obtain or modify a collective bargaining agreement or to protect the common professional interests of the workers. They must also engage in negotiation, mediation, and arbitration processes before striking, although many unions often skip or expedite these steps. The law prohibits workers from appealing a government decision declaring a strike illegal.
The government did not effectively enforce the laws on freedom of association and the right to collective bargaining. Penalties remained insufficient to deter violations. Judicial procedures were subject to lengthy delays and appeals. According to union representatives, the government inconsistently enforced labor rights for public workers, maquiladora/textile workers, food manufacturing workers, subcontracted workers in the construction industry, security guards, informal-sector workers, and migrant workers.
Unions functioned independently from the government and political parties, although many generally were aligned with the traditional political parties of ARENA and the FMLN. Workers at times engaged in strikes regardless of whether the strikes met legal requirements.
Employers are free to hire union or non-union labor. Closed shops are illegal. Labor laws are generally in accordance with internationally recognized standards but are not enforced consistently by government authorities. Although El Salvador has improved labor rights since the CAFTA-DR entered into force and the law prohibits all forms of forced or compulsory labor, there remains room for better implementation and enforcement.
The MOL is responsible for enforcing the law. The government proved more effective in enforcing the minimum wage law in the formal sector than in the informal sector. Unions reported the ministry failed to enforce the law for subcontracted workers hired for public reconstruction contracts. The government provided its inspectors updated training in both occupational safety and labor standards and conducted thousands of inspections in 2019.
The law sets a maximum normal workweek of 44 hours, limited to no more than six days and to no more than eight hours per day, but allows overtime, which is to be paid at a rate of double the usual hourly wage. The law mandates that full-time employees receive pay for an eight-hour day of rest in addition to the 44-hour normal workweek. The law provides that employers must pay double time for work on designated annual holidays, a Christmas bonus based on the time of service of the employee, and 15 days of paid annual leave. The law prohibits compulsory overtime. The law states that domestic employees are obligated to work on holidays if their employer makes this request, but they are entitled to double pay in these instances. The government does not adequately enforce these laws.
There is no national minimum wage; the minimum wage is determined by sector. On July 1, 2021, the government announced an increase in the minimum wage by about 20 percent for all industries in the formal sector. This was implemented on August 1, 2021, resulting in a one-month implementation period for industry. The increase had no impact on the majority of workers because most are employed in the informal sector.
El Salvador adopted the Telework Regulation Law in March 2020. The law is applicable in both private and public sectors and requires a written agreement between employer and employee outlining the terms and conditions of the arrangement, including working hours, responsibilities, workload, performance evaluations, reporting and monitoring, and duration of the arrangement, among others. Legislation prescribes employers as responsible for providing the equipment, tools, and programs necessary to perform duties remotely. Employers are subject to the obligations contained in labor laws, while workers are entitled to the same rights as staff working at the employer’s premises, including benefits and freedom of association.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
|Host Country Statistical source*||USG or international statistical source||USG or International Source of Data: BEA; IMF; Eurostat; UNCTAD, Other|
|Host Country Gross Domestic Product (GDP) ($M USD)||2019||$27,022.64||2019||$27,023||https://data.worldank.org/country/el-salvador|
|Foreign Direct Investment||Host Country Statistical source*||USG or international statistical source||USG or international Source of data: BEA; IMF; Eurostat; UNCTAD, Other|
|U.S. FDI in partner country ($M USD, stock positions)||2020||$2,104.22||2019||$3,413||BEA data available at
|Host country’s FDI in the United States ($M USD, stock positions)||2019||N.A.||2019||N.A.||BEA data available at
|Total inbound stock of FDI as % host GDP||2020||40.9%||2020||N.A,|
* Central Bank, El Salvador. In 2018, the Central Bank released GDP estimates using the new national accounts system from 2008 and using 2005 as the base year.
|Direct Investment from/in Counterpart Economy Data (2020)*|
|From Top Five Sources/To Top Five Destinations (US Dollars, Millions)|
|Inward Direct Investment||Outward Direct Investment|
|Total Inward||10,075||100%||Total Outward||3.1||100%|
|“0” reflects amounts rounded to +/- USD 500,000.|
14. Contact for More Information
Deputy Economic Counselor
U.S. Embassy San Salvador
Address: Final Blvd. Santa Elena, Antiguo Cuscatlán, La Libertad, El Salvador
Phone: +503 2501-2999