WORLD  TRADE  
ORGANIZATION  WT/TPR/S/226/Rev.1 
16 March 2010  
 
(10-1370) 
Trade Policy Review Body  
   
 
  
 
TRADE POLICY REVIEW 
 
Report by the Secretariat 
 
EL SALV ADOR 
 
Revision 
 
 
 
 
This report, prepared for the third Trade Policy Review of El Salvador, has been 
drawn up by the WTO Secretariat on its own responsibility.  The Secretariat has, 
as required by the Agreement establishing the Trade Policy Review Mechanism 
(Annex 3 of the Marrakesh Agreement Establishing the World Trade 
Organization), sought clarification from El Salvador on its trade policies and 
practices. 
 
Any technical questions arising from this  report may be addressed to Mr Angelo 
Silvy (tel. 022 739 5249), Mr Karsten Steinfatt (tel. 022 739 6759), and 
Mr Raymundo Valdés (tel. 022 739 5346). 
 
Document WT/TPR/G/226 contains the policy statement submitted by 
El Salvador. 
 
 
 El Salvador WT/TPR/S/226/Rev.1 
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 CONTENTS 
 
  Page  
SUMMARY OBSERVATIONS vii 
 (1) E CONOMIC ENVIRONMENT  vii 
 (2) T RADE AND INVESTMENT POLICY FRAMEWORK  vii 
 (3) M EASURES AFFECTING IMPORTS  viii 
 (4) O THER MEASURES AFFECTING TRADE  ix 
 (5) S ECTORAL POLICIES  ix 
I. ECONOMIC ENVIRONMENT 1 
 (1) O VERVIEW  1 
 (2) M ACROECONOMIC TRENDS  1 
 (i) Structure and development of the economy 1  (ii) Fiscal policy 3 
 (iii) Monetary and exchange-rate policies 5 
 (iv) Balance of payments 7 
 (3) M
ERCHANDISE TRADE AND INVESTMENT FLOWS  8 
 (i) Composition of trade 8 
 (ii) Geographic distribution of trade 9 
 (iii) Trade in services 9 
 (iv) Foreign direct investment 10 
 (4) O UTLOOK  11 
II. TRADE AND INVESTMENT REGIME 12 
 (1) O VERVIEW  12 
 (2) T RADE AND INVESTMENT POLICY FRAMEWORK  12 
 (i) General legal and institutional framework 12 
 (ii) Trade policy formulation and objectives 13 
 (3) F OREIGN INVESTMENT REGIME  14 
 (4) I NTERNATIONAL RELATIONS  16 
 (i) World Trade Organization 16  (ii) Preferentia l agreements 17 
 (5) A
ID FOR TRADE AND TECHNICAL ASSISTANCE  21 
 WT/TPR/S/226/Rev.1 Trade Policy Review 
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   Page  
III. TRADE POLICIES, BY MEASURE 22 
 (1) M EASURES AFFECTING IMPORTS  22 
 (i) Customs procedures 22  (ii) Customs valuation 24 
 (iii) Rules of origin 25 
 (iv) Tariffs 25  (v) Other charges affecting imports 29 
 (vi) Prohibitions, restrictions and licensing 31 
 (vii) Contingency measures 33  (viii) Technical regulations and standards 35 
 (ix) Sanitary and phytosanitary measures 37 
 (2) M
EASURES AFFECTING EXPORTS  40 
 (i) Customs procedures 40 
 (ii) Taxes and other charges 40 
 (iii) Prohibitions, restrictions  and licensing procedures 40 
 (iv) Tariff and tax concessions 41 
 (v) Promotion, financing, insurance and guarantees 44 
 (3) O THER MEASURES AFFECTING PRODUCTION AND TRADE  45 
 (i) Creation and taxation of businesses 45 
 (ii) Competition policy and price controls 46  (iii) Incentives 49 
 (iv) State-owned enterprises and privatization 52 
 (v) Government procurement 52  (vi) Protection of intellectual property 56 
IV. TRADE POLICIES, BY SECTOR 62 
 (1) A
GRICULTURE  62 
 (i) Overview 62 
 (ii) Support policy and indicators 62 
 (iii) Policy instruments 63 
 (2) M ANUFACTURING  67 
 (i) Sector outside the free-zone regime 67 
 (ii) Free zones 68 
 (3) ENERGY 69 
 (i) Electricity 69 
 (ii) Other energy 71 
 (4) S ERVICES  72 
 (i) Multilateral and preferential commitments 72 
 (ii) Financial services 73 
 (iii) Telecommunications 78 
 (iv) Maritime transport and ports 81  (v) Air transport 83 
 (vi) Professional services 85 
 REFERENCES   87 
 
APPENDIX TABLES  91 
 El Salvador WT/TPR/S/226/Rev.1 
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 TABLES 
 
  Page 
 I. ECONOMIC ENVIRONMENT 
 
I.1 Basic economic indicators, 2003-2009 2 I.2 Central government finances, 2003-2009 4 
I.3 Monetary and price indicators, 2003-2009 6 
I.4 Balance of payments, 2003-2009 7 I.5 Trade in services, 2003-2009 9 
I.6 Balance of foreign direct investment by receiving economic sector, 2003-2009 10 
I.7 Balance of foreign direct investment by country of origin, 2003-2009 10  
II. TRADE AND INVESTMENT REGIME 
 II.1 Bilateral reciprocal investment promotion and protection agreements signed by El Salvador, 
 October 2009 16 
 
III. TRADE POLICIES, BY MEASURE 
 III.1 MFN tariff structure, 2009 26 
III.2 Breakdown of the MFN tariff, 2009 27 
III.3 Tax on alcoholic beverages, 2009 29 III.4 Other taxes on specific products, 2009 30 
III.5 Import prohibitions, 2009 31 
III.6 Goods subject to import permits, 2009 32 III.7 Financing programmes for technological development, productivity and competitiveness 51 
III.8 Intellectual property treaties in force in El Salvador, 2009 56 
III.9 Summary of protection of IPRs in El Salvador, 2009 57  
IV. TRADE POLICIES, BY SECTOR 
 IV.1 Agricultural sector GDP, 2002-2008 62 
IV.2 Budget implemented in the agricultural sector, 2001-2008 63 
IV.3 Value added in the manufacturing sector (free zones excluded), 2002-2008 67 IV.4 Main free-zone indicators, 2002-2008 68 
 WT/TPR/S/226/Rev.1 Trade Policy Review 
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 APPENDIX TABLES 
 
  Page 
 I. ECONOMIC ENVIRONMENT 
 
AI.1 Merchandise exports (f.o.b.) by product, excluding the maquila industry, 2005-2008 93 AI.2 Merchandise exports (f.o.b.) by product, including the maquila industry, 2005-2008 94 
AI.3 Merchandise imports (c.i.f.) by product, excluding the maquila industry, 2005-2008 95 
AI.4 Merchandise imports (c.i.f.) by product, including the maquila industry, 2005-2008 96 AI.5 Merchandise exports (f.o.b.) by trading partner, including the maquila industry, 2005-2008 97 
AI.6 Merchandise imports (c.i.f.) by trading partner, 2005-2008 98 
 II. TRADE AND INVESTMENT REGIME 
 
AII.1 Notifications to the WTO, January 2003 to October 2009 99 AII.2 Description of preferential trade agreements involving El Salvador, October 2009 101 
 
III. TRADE POLICIES, BY MEASURE 
 
AIII.1 General overview of preferential rules of origin, 2009 103 AIII.2 Analysis of El Salvador's preferential tariff, 2009 104 
 
IV. TRADE POLICIES, BY SECTOR  
AIV.1 Summary of El Salvador's commitments under the GATS 105 
 
 El Salvador WT/TPR/S/226/Rev.1 
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 SUMMARY OBSERVATIONS 
 
1. Trade and Investment play an 
important role in El Salvador's economy, 
reflecting in part the openness of its trade and 
investment regime.  The trade policy regime of 
El Salvador has been further liberalized since El Salvador's previous Trade Policy Review in 2003.  Progress has been made in modernizing 
customs, eliminating unnecessary licensing 
requirements, enhancing the transparency of technical regulations and SPS measures, and strengthening the institutional framework on competition policy and government procurement.  As part of its liberalization 
efforts, El Salvador has entered as well into 
three new preferential trade agreements (with Chinese Taipei, Panama, and the United States), and continued to assign high priority to deepening Central American 
integration.  El Salvador has also maintained 
its long-standing strategy of granting exporters refunds as well as fiscal privileges through free-trade zones (FTZs), which result in subsidies and tax breaks that distort economic incentives. 
(1) E
CONOMIC ENVIRONMENT  
2. Over the period 2003-2008, 
El Salvador's real GDP rose at an average rate of 3.1 per cent per year, supported mainly by strong domestic demand underpinned to a 
large extent by remittances.  From the second 
half of 2008 onwards, there was a marked slowdown in growth because of the international economic crisis, which resulted 
in a decrease in investment, exports, and 
remittances from Salvadoran workers abroad.  
In 2009, GDP is estimated to have contracted by 2.5 per cent.  El Salvador is a dollarized economy, having introduced the US dollar as legal tender in 2001. 
3. The balance-of-payments current 
account was in deficit between 2003 and 2008, 
reaching 7.6 per cent of GDP in 2008.  This reflects traditional deficits in both the balance of trade in goods and in services, which have more than offset high current transfers, mostly in the form of remittances from Salvadorans 
living abroad (representing 17.1 per cent of GDP in 2008).  The current account deficit has been financed by capital inflows, principally in 
the form of foreign direct investment and 
official debt.  El Salvador has also obtained the support of international financial organizations. 
4. Trade in goods and services plays an 
important role in El Salvador's economy, 
representing some 73.6 per cent of GDP in 2008.  For trade in goods (imports and exports including maquila), El Salvador's leading trading partners are the United States and the other Central American Common Market 
(CACM) countries.  Manufactures are still the 
major export category but their share in total trade has contracted due mostly to lower exports of textiles and clothing.  In contrast, exports of agricultural and other primary 
products have increased considerably.  
Manufactures still account for the largest share of imports, although the value of imports of primary products increased substantially reflecting higher fuel prices. 
(2) T
RADE AND INVESTMENT POLICY 
FRAMEWORK  
5. The trade policy objectives of 
El Salvador's new administration are to:  reduce the trade gap by supporting foreign investment in export-generating production;  
contribute to export market diversification;  
improve domestic production capacity by making it more competitive vis-à-vis  imports, 
in order to lessen El Salvador's vulnerability to changes in the world economy;  and to 
promote job-creating and productivity-
improving external trade. 
6. El Salvador has been a Member of the 
WTO since May 1995 and takes an active part in negotiations and in the regular work of the WTO.  It has made a large number of 
notifications, but at end 2009 some were 
pending, including those concerning State-trading enterprises, import licensing and WT/TPR/S/226/Rev.1 Trade Policy Review 
Page viii 
 
 
 customs valuation.  El Salvador has accepted 
the Fourth and Fifth Protocols to the GATS. 
7. El Salvador does most of its trade with 
trading partners with which it has preferential 
agreements.  In 2008, such partners accounted 
for almost 90 per cent of total exports, and some two thirds of impor ts.  El Salvador is a 
member of the CACM, and has free trade agreements with Chile, the United States 
(CAFTA-DR), Mexico, Panama, Chinese 
Taipei and the Dominican Republic.  Of the three agreements that entered into force since the last Review of El Salvador, CAFTA-DR is of particular significance given the close economic links between El Salvador and the 
United States.  Together with the other 
members of the CACM, El Salvador is negotiating association agreements with the European Union and free trade agreements with Canada and CARICOM. 
8. El Salvador's foreign investment 
legislation guarantees freedom to invest and national treatment for foreign investors, except in those areas where other laws impose restrictions.  This includes the supply of "small-scale" services, which are the 
prerogative of Salvadoran citizens by birth or 
nationals of other Central American countries, and the ownership of rural real estate, which may not be bought by foreigners from countries that do not give Salvadoran citizens 
equal rights. 
(3) M
EASURES AFFECTING IMPORTS  
9. Since its last Review, El Salvador has 
continued to adopt measures to modernize customs by implementing risk management 
techniques, broadening the use of information 
technology, and creating a single window for importers.  As a result, customs clearance times have fallen below the OECD average.  El Salvador applied minimum values on imports of certain categories of used goods 
until the expiration of WTO waivers in 2003 
and 2005. 10. The average applied MFN tariff rate 
has fallen slightly since the last Review of El Salvador, to 6.3 per cent in 2009.  This reflects the reduction to 5.2 per cent of the 
average applied MFN rate on non-agricultural 
goods, in turn the result of tariff decreases for textiles and clothing.  At the same time, the average applied MFN rate on agricultural goods (WTO definition) has risen by 
approximately one percentage point, to 
12.9 per cent, reflecting higher tariffs on certain chicken products.  In 2007, El Salvador renegotiated the bindings applicable to some of these products in accordance with Article XXVIII of GATT 1994.  The tariff 
comprises 11 rates of between 0 and 164 per 
cent.  All tariffs are bound, at an average rate of 37 per cent, thus affording certainty to MFN traders.  In spite of this, and the stability of the tariff regime in practice, certainty could 
be enhanced by reducing bound rates. 
11. El Salvador imposes prohibitions and 
licensing requirements on certain imports to safeguard national security, public morals, health, and the environment.  In mid-2008, El Salvador abolished the only licensing 
requirement (on imports of coarse fibre sacks) 
explicitly maintained to protect domestic producers.  However, prior authorization from the Economics Ministry is still required to import sugar.  El Salvador has reduced the 
number of goods subject to import visas, 
which are applied on some 1,000 tariff lines;  eliminating this requirement for additional categories of goods whenever possible would further facilitate trade. 
12. El Salvador has not applied any 
contingency measures during the period under review.  CACM members and, under certain conditions, other preferential trading partners are exempt from the application of safeguards. 
13. Since its last Review, El Salvador has 
pursued efforts to ensure  greater transparency 
in the formulation and implementation of technical regulations and sanitary and phytosanitary measures.  With few exceptions, its WTO notifications on both types of El Salvador WT/TPR/S/226/Rev.1 
 Page ix 
 
 
 measures provide for multilaterally 
recommended comment periods. 
(4) OTHER MEASURES AFFECTING 
TRADE  
14. El Salvador restricts exports of certain 
goods, including liquefied petroleum gas and sugar, to ensure domestic availability.  Remaining export restrictions generally reflect international commitments. 
15. Exporters continue to be entitled to a 
refund amounting to 6 per cent of the f.o.b. value of their exports.  The law that authorizes this measure was not modified during the period under review.  In addition, El Salvador grants tariff and tax concessions, including an 
income tax exemption, under its free trade 
zone (FTZ) scheme.  El Salvador notified both the 6 per cent refund and the FTZ schemes as providing export subsidies.  During the period under review, El Salvador introduced domestic 
content requirements for FTZ exports of 
textiles and clothing to the domestic market.  El Salvador also introduced tariff and tax concessions for firms exporting services and for tourism projects. 
16. Since its last Review, El Salvador has 
established export credit and guarantee 
programmes through its national development bank.  El Salvador has also reorganized the institutional structure underpinning its official export promotion activities.  In addition to 
export promotion incentives, El Salvador has 
programmes to grant support to micro and small enterprises, transfer of technology, and programmes to attract investment. 
17. Since the previous Review, 
El Salvador has strengthened the legislative 
and the institutional framework governing competition policy.  This is important because the Salvadoran market, like other small markets, tends to be concentrated and competition to be limited.  El Salvador has 
also made considerable progress in 
modernizing the legislative and institutional frameworks for government procurement.  Its legislation does not contain provisions giving 
preferences for Salvadoran or foreign goods, services or public works, unless bids are for an equal amount. 
18. All the aspects covered by the 
TRIPS Agreement are regulated in El Salvador.  During the period under review, El Salvador extended the term of copyright protection from 50 to 70 years, as well as the 
term of patent protection for pharmaceuticals, 
and amended its legislation to bring it into line with its international commitments. 
(5) S
ECTORAL POLICIES  
19. The agricultural sector has performed 
strongly since El Salvador's last review, 
increasing its share in GDP and exports.  The 
sector is supported by above-average tariffs 
and marketing and guarantee programmes.  El Salvador applies tariff quotas on imports of cheddar cheese, maize, sorghum, rice, and pig 
meat, pursuant to its WTO commitments or 
marketing arrangements between agricultural producers and processors.  Access to in-quota volumes under these tariff quotas is limited to processors who have purchased certain domestic inputs.  El Salvador maintains a 
system of production quotas for sugar, and 
sugar imports are subject to prior authorization.  Marketing arrangements for rice and productions quotas for sugar have been found to limit competition and increase 
domestic prices. 
20. Manufacturing largely takes place in 
FTZs.  Despite the fiscal privileges offered by this scheme, the performance of FTZ firms has been below expectations and, compared with 
the principal manufacturing sectors outside 
FTZs, their linkages to the rest of the domestic economy remain weak.  Moreover, FTZ tax breaks place producers outside these zones at a comparative disadvantage.  These shortcomings raise doubts about the 
effectiveness and ove rall benefits of 
El Salvador's export strategy, highlighting the need for the gradual introduction of a more neutral trade regime. WT/TPR/S/226/Rev.1 Trade Policy Review 
Page x 
 
 
 21. The electricity sector is open to 
private, including foreign, participation.  Private operators are responsible for most generation and all distribution, while a 
State-owned enterprise is in charge of 
transmission.  Competition has been hindered by the dominant position of some distribution companies.  During the period under review, El Salvador strengthened its legal framework 
governing the electricity sector and introduced 
tax incentives to promote investment in renewable energy.  El Salvador also subsidized the consumption of electricity and liquefied petroleum gas. 
22. The financial services sector in 
El Salvador is relatively open.  For both banks 
and insurance companies, national treatment is guaranteed by law and there are no barriers to establishment other than prudential ones.  However, foreign insurance companies and 
banks from countries outside Central America 
must be classified as first-line corporations by internationally recognized risk-rating agencies and recognized as such by the Superintendence of the Financial System.  During the review period legal reforms were 
introduced to modify the rules on bank secrecy 
and the form and content of insurance policies. 
23. The regulatory framework for 
telecommunications was reformed during the period under review to consolidate the 
liberalization initiated in previous years.  In order to enhance competition, it has been recommended that regulations on 
interconnection be adopted and rates for calls 
from fixed to mobile networks be controlled.  The legislation does not lay down any requirements regarding the origin of operators' capital, except for free-to-air or subscription 
broadcasting services, which must be provided 
by Salvadoran citizens.  A special tax applies to telephone calls from abroad. 
24. There are no restrictions to foreign 
investment in Salvadoran airlines, nor on market access through co mmercial presence.  
El Salvador's single international airport and 
its maritime port are both managed by a State entity.  The building of a second commercial port was completed in December 2008, but it is not expected to start operating 
until mid-2010.  El Salvador does not have its 
own merchant fleet.  The law allows foreign vessels to provide national cabotage services. 
25. Membership of an association is not 
compulsory to exercise a profession.  However, it is necessary to be a Salvadoran 
national in order to act as a lawyer or chartered 
accountant.