WORLD TRADE  
ORGANIZATION   
G/SCM/N/220/SLV 
G/SCM/N/226/SLV 6 July 2011 
 
(11-3307) 
Committee on Subsidies and 
Countervailing Measures Original:   Spanish 
 
 
 
SUBSIDIES 
 
New and Full Notification Pursuant to Article XVI:1 of the 
GATT 1994 and Article 25 of the Agreement on 
Subsidies and Countervailing Measures 
 
Continuation of Extension under SCM Article 27.4 of the Transition Period for the 
Elimination of Export Subsidies Pursuant to the Procedures Contained in the 
General Council Decision in Document WT/L/691 
 
EL SALVADOR 
   The following notification, dated 30 June 2011, is being circulated at the request of the delegation of El Salvador. 
 
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I. FREE ZONE AND INWARD-PROCESSING WAREHOUSE PROGRAMME 
 Pursuant to paragraph 10.6 of the Decision on Implementation-Related Issues and Concerns 
set forth in document WT/MIN(01)/17, the request fo r an extension of the transition period under the 
procedures laid down in document G/SCM/39 and the WTO General Council Decision in 
document WT/L/691, and the SCM Committee D ecisions contained in documents G/SCM/65, 
G/SCM/65/Add.1, G/SCM/65/Add.2, G/SCM/65/ Add.3, G/SCM/65/Add.4, G/SCM/65/Add.5, 
G/SCM/65/Add.6, G/SCM/65/Add.7 and G/SCM/ 65/Add.8 concerning the Free Zone and 
Inward-Processing Warehouse Programme, El Salvador is pleased to submit this notification relating 
to the programme, in accordance with paragraph 2(a) of document WT/L/691.
1 
  El Salvador hereby wishes to confir m that, pursuant to paragraph 3(a) of 
document WT/L/691, the Free Zone and Inward -Processing Warehouse Programme satisfies the 
standstill requirements established therein. 
    
                                                      
1 El Salvador's notifications pursuant to Article 27.4 of the Agreement on Subsidies and Countervailing 
Measures were circulated as documents G/SCM/N/38/SLV/Suppl.1, G/SCM/N/48/SLV/Suppl.1, 
G/SCM/N/60/SLV/Suppl.1 and G/SCM/N/71/SLV/Supp l.1;  G/SCM/N/95/SLV and G/SCM/N/99/SLV;  
G/SCM/N/114/SLV and G/SCM/N/11 4/SLV/Corr.1;  G/SCM/N/123/ SLV and G/SCM/N/128/SLV;  
G/SCM/N/146/SLV;  G/SCM/N/ 155/SLV and G/SCM/N/160/SLV;  G/SCM/N/177/SLV;  and 
G/SCM/N/186/SLV, G/SCM/N/ 192/SLV and G/SCM/N/192/SLV ;  and G/SCM/N/211/SLV. G/SCM/N/220/SLV 
G/SCM/N/226/SLV Page 2 
 
 
  1. Title of the subsidy programme, if relevant, or brief description or identification of the 
subsidy 
 Incentives for firms operating in free trad e zones or in inward-processing warehouses. 
 2. Period covered by the notification 
 2010 
 
3. Policy objective and/or purpose of the subsidy 
 No changes have been made to the programme since the last updating notification. 
 
4. Background and authority for the subsidy (including identification of the legislation 
under which it is granted) 
A. B
ACKGROUND  
 For the reasons explained in previous notifica tions, El Salvador needs to improve the welfare 
of its people.  The benefits deriving from the pr ogramme, by creating opportunities to maintain and 
raise employment levels and, by extension, to improve the welfare of the Salvadoran people, are 
therefore essential for the country's economic and social development.   In this context, with a view to creating fa vourable conditions for su stained economic growth, 
El Salvador is developi ng and implementing mechanisms to st imulate aggregate demand, enhancing 
its exportable supply and creating a macroeconomi c environment conducive to the establishment of 
investment in the country.  The programme of  incentives to firms operating in free zones or 
inward-processing warehouses is part of a strategy  that seeks to create more and better jobs for 
Salvadorans, while reducing the country's reliance, in terms of its balance of payments, on family 
remittances from the United States. 
 
 By the end of 2010, the programme in ques tion benefited 243 exporting companies, 62.2 per 
cent of which were foreign while the rest were dome stic.  The number of people directly employed by 
these companies rose to 70,321, which made it possibl e for the same number of households to enjoy a 
secure income and access to social security, education,  healthcare, a pension pl an and other benefits.  
Another 140,642 jobs were created indirectly, thus making a total of  around 210,963 new jobs overall, 
equivalent to 9.08 per cent of the Salvadoran labour  force.  It should be noted that around 80 per cent 
of the jobs created through this programme are held  by women, a large percentage of whom are heads 
of household and the main income providers in their respective families.  The programme thus 
ensures better living conditions for one of the mo st vulnerable sectors of Salvadoran society. 
 
 It should also be noted that 68.4 per cent of all companies operating in free trade zones or 
inward-processing warehouses form part of the in-bond assembly ( maquila ) industry, which has 
become the country's leading export sector, bringing in US$1,134.4 million in foreign currency in 2010, i.e. 25.2 per cent of the total value of El Sa lvador's exports to the world.  This sector also 
accounted for 9.85 per cent of El Salvador's 2010 Indu strial GDP, reflecting its importance in terms of 
the country's trade balance performance and economic activity. 
 Companies in the above-mentioned sector which operate under this programme have 
production chains that promote greater value a dded production, for instance through the "full 
package" concept.  It should be emphasized that this  industry is considered the most fully integrated 
in the Central American region.  Technological  progress has also been made in this sector.  G/SCM/N/220/SLV 
 G/SCM/N/226/SLV 
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  Lastly, the programme is of particular inte rest to El Salvador since the effects of the 
2008-2009 recession have not yet been overcome.  It s hould be noted that the impact of the financial 
crisis and the contraction in inte rnational demand have resulted not onl y in a reduction in credit to the 
private sector, which in turn discouraged supp ly in strategic sectors such as construction, 
manufacturing and tourism, but also in a significant fall in unilateral current account transfers and international trade flows.  In point of fact, although in 2010 manufacturing increased 2.1 per cent over 
2009, it remained below 2008 levels.  Also of note is the fact that, in this same period, the country 
saw a reduction in both its exports and imports.  Likewise, family remittances amounted to 
US$3,431 million in December 2010, US$311 million less than 2008, which had a negative impact on 
end consumption of goods and services.  Gross Dom estic Product (GDP) saw a slight recovery of 
1.4 per cent in real terms over its 2009 year-end value,  but fell short of the 2008 rate of 2.4 per cent.  
The rise in prices of oil derivatives and other co mmodities hampered attempts to achieve economic 
growth levels in line with the needs of the popul ation.  Although the Salvadoran economy has begun 
to show signs of gradual recovery, it has not yet seen  a return to the conditions which prevailed before 
the effects of the international crisis become a pparent, given that, according to the Central Reserve 
Bank, the country's production industry responds to  US market stimuli with a delay of three to 
four quarters, taking into account the fact that appr oximately 50 per cent of El Salvador's exports are 
destined for the US market and that remittances  from the US represent 16 per cent of Salvadoran 
GDP.  In the context of a slow economic recove ry and an uncertain outlook for strategic input 
markets, the programme in question remains a key f actor for our country's sustained development in 
the face of the economic challenges facing us in the short and medium term.  B. A
UTHORITY  
 No changes have been made to the programme since the last updating notification. 
 
5. Form of the subsidy (i.e. gran t, loan, tax concession, etc.) 
 No changes have been made to the programme since the last updating notification. 
 
6. To whom and how the subsidy is provided (whether to producers, to exporters, or 
others;  through what mechanism;  whether a fixed or fluctuating amount per unit;  if 
the latter, how determined) 
 No changes have been made to the programme since the last updating notification. 
 
7. Subsidy per unit, or in cases where this is not possible, the total amount or the annual 
amount budgeted for that subsidy (indicating, if possible, the average subsidy per unit in 
the previous year).  Where provision of per-unit subsidy information (for the year 
covered by the notification, for the previo us year, or both) is not possible, a full 
explanation 
 Given the nature and scope of the programme , no statistical data reflecting the amount of 
incentives per unit are available.  8. Duration of the subsidy and/or any other time-limits attached to it, including date of 
inception/commencement 
 This will be in line with the international oblig ations undertaken by El Salvador, in particular 
under the SCM Agreement.  G/SCM/N/220/SLV 
G/SCM/N/226/SLV Page 4 
 
 
  9. Statistical data permitting an assessment of th e trade effects of the subsidy.  The specific 
nature and scope of such statistics is left to the judgement of the notifying Member.  To 
the extent possible, relevant and/or determinable, however, it is desirable that such information include statistics on the produc tion, consumption, imports and exports of 
the subsidized product(s) or sector(s) 
 (See Annex 1) 
 
10. Information concerning the steps taken pursuant to paragraphs 1(e) and 1(f) of the 
Procedures for Continuation of Extensions Pursuant to Article 27.4 of the 
SCM Agreement of the Transition Period under Article 27.2(b) of the SCM Agreement 
for Certain Developing Country Members cont ained in the General Council Decision in 
document WT/L/691 (the "Procedures") 
 The Institutional Committee for the Analys is of the Free Zone and Inward-Processing 
Warehouse Regime, in conjunction with the corr esponding private sector, held around 15 working 
sessions between the third quarter of 2010 and the second quarter of 2011. 
  The two groups have discussed relevant re forms to the Free Zone and Inward-Processing 
Warehouse Regime, following the notification sent to beneficiary enterprises in 2009. 
  As a result, the Committee c ontinues working towards a law that addresses the country's 
development needs and is consistent  with the international commitments  undertaken by El Salvador in 
this area.    
   G/SCM/N/220/SLV
 G/SCM/N/226/SLV
 Page 5Annex 1 
COMPARATIVE TABLE 
(in US$ million) 
  
 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 
(a) World exports 7,782,600.0 7,510,600.0  7,837,800.0 8,937,700.0 11,196,100.0 12, 640,600.0 14,716,900.0 17,019,465.0 19,693,89 00.0 20,854,876.0 18,713,353.0 
(b) Salvadoran 
exports 2,950.5 2,864.0 2,995.0 3,128. 0 3,305.0 3,418.0 3,707.0 3, 979.9 4,549.2 3,797.3 4,499.2 
(c) (b)/(a) 0.0379% 0.0381% 0.0382% 0.0350% 0.0295%  0.0270% 0.0251% 0.0234% 0.0231% 0.0240% 0.0240% 
(d) Salvadoran 
net maquila  
exports 456.00 489.00 474.00 494 465 616 620 564 647 648 666.4 
(e) (d)/(a) 0.0059% 0.0065% 0.0060% 0.0055% 0.0042%  0.0049% 0.0042% 0.0033% 0.0033% 0.0041% 0.0035% 
 
Source :  International Monetary Fund, Central Reserve Bank, Ministry of the Economy. 
 
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