WORLD TRADE  
ORGANIZATION   
G/SCM/N/243/SLV 
4 July 2012 
 (12-3563) 
Committee on Subsidies and 
Countervailing Measures Original: Spanish 
 
 
 
SUBSIDIES 
 
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 
 
Updating Notification 
 
EL SALVADOR 
 
  The following notification, dated 29 June 2012, is being circulated at the request of the delegation of El Salvador.  
_______________ 
 
 
I. "EXPORT PROCESSING ZONES AND MARKETING ACT, AS AMENDED" 
(REFERRED TO HEREINAFTER AS "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, G/SC M/65/Add.8 and G/SCM/65/Add.9 and 
G/SCM/65/Add.9/Corr.1 concerning the Free Z one and Inward-Processing Warehouse Programme, 
El Salvador is pleased to submit this notifica tion 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-G/S CM/N/71/SLV/Suppl.1;  
G/SCM/N/95/SLV-G/SCM/N/99/SLV;  G/SCM/ N/114/SLV and G/SCM/ N/114/SLV/Corr.1;  
G/SCM/N/123/SLV-G/SCM/N/ 128/SLV;  G/SCM/N/146/ SLV;  G/SCM/N/155/SL V-G/SCM/N/160/SLV;  
G/SCM/N/177/SLV;  G/SCM/ N/186/SLV-G/SCM/N/192/SLV;   G/SCM/N/211/SLV and 
G/SCM/N/211/SLV/Add.1;  G/ SCM/N/220/SLV-G/SCM/N/226/SLV and G/SCM/N/220/SLV/Corr.1-
G/SCM/N/226/SLV/Corr.1. G/SCM/N/243/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 
 2011. 
 
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 set out in previous notifications , El Salvador needs to improve the welfare of 
its people.  The benefits deriving from the programme , by creating opportunities to maintain and raise 
employment levels and, by extens ion, 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 2011, the programme in question benefited 251 exporting companies, 
63 per cent of which were foreign while the rest were domestic.  The number of people directly 
employed under the Export Processing Zones and Marketing Act rose to 70,915, which made it possible for the same number of households to enjoy a secure income and access to social security, 
education, healthcare, a pension plan and othe r benefits.  Another 141 ,830 jobs were created 
indirectly, thus making a total of around 212,745 ne w jobs overall, equivalent to 8.2 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 most vulnerable sectors of Salvadoran society.  
 It should be noted that 66.2 per cent of all companies operating in free-trade zones or 
inward-processing warehouses belong to the apparel manufacturing industry offering "full package" 
services and to the in-bond assembly ( maquila ) industry, which represents the country's leading 
export sector, bringing in US$1,201 mi llion in foreign currenc y in 2011, i.e. 22.6 per cent of the total 
value of El Salvador's exports to the world.  This sector also accounted for 13.04 per cent of El Salvador's 2011 Industrial GDP, reflecting its im portance 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 valu e-added production, for instance through the 
"full package" concept, thereby encompassing te xtile and logistics enterprises and small-scale  G/SCM/N/243/SLV 
 Page 3 
 
 
  suppliers of inputs.  It should be emphasized that this industry is considered the most fully integrated 
in the Central American region.  Technological prog ress has also been made in this sector, especially 
with regard to yarn and fabric production processes.   Lastly, the programme is of particular interest to El Salvador since the effects of 
the 2008-2009 recession have not yet been overcome.   It should be noted that the impact of the 
financial crisis and the contraction in internationa l demand have resulted not only in a reduction in 
credit to the private sector, which in turn discourag ed supply in strategic sect ors such as construction, 
manufacturing and tourism, but also in a significant fall in unilateral current account transfers and international trade flows.  Gross Domestic Product ( GDP) saw a slight recovery of 1.5 per cent in real 
terms over its 2010 year-end value, but fell short of th e 2008 rate of 2.4 per cent.  Attempts to achieve 
economic growth levels in line with the needs of the population were hampered by the rise in prices of oil derivatives and other commodities and by Tropical Depression Twelve-E, which caused damage of around US$1,300 million, adversely affecting sector s such as infrastructur e and agriculture and 
destroying entire hectares of staple grain, fruit and vegetable crops. 
 
 At year-end 2011 manufacturing had increased 2.2 per cent over 2010 to reach 2008 levels.  
Also of note is the fact that, in this same period, the country saw a recovery in both export and import 
volumes.  Likewise, family remittances amount ed to US$3,648.8 million in December 2011, 
US$93.3 million less than 2008, which had a negativ e impact on end consumption of goods and 
services. 
 
 Although the Salvadoran economy has begun to s how signs of gradual recovery, it has not yet 
seen a return to the conditions which prevailed before  the effects of the international crisis become 
apparent, given that, according to the Centra l 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 
approximately 50 per cent of El Salvador's expor ts are destined for the US market and that 
remittances from the US (which totalled US$3,648 .8 million in December 2011, 93.3 million down on 
2008 levels) represent 16 per cent of Salvadoran GDP.  In the context of a slow economic recovery 
and an uncertain outlook for strategic input market s, the programme in question remains a key factor 
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. 
 G/SCM/N/243/SLV 
Page 4  
 
  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.  
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 determ inable, 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") 
 As indicated in previous notifications, in 20 11 and the first half of 2012 the Interinstitutional 
Committee continued working on the preliminary draft Export Processing Zones and Marketing Act 
with a view to furthering the country's developmen t and fulfilling its interna tional commitments.  This 
process has benefited from private-sector participati on and a working group was set up to this end in 
conjunction with trade associations linked to the fr ee-zone regime.  This preliminary draft Act is 
presently in the final stages of preparation and pe nding submission to the legislative assembly for 
ratification. 
 
  
   G/SCM/N/243/SLV
 Page 5ANNEX 1 
 
COMPARATIVE TABLE 
(in US$ million) 
  
 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 
(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 19,693,890.0 20,854,876.0 18,713,3 53 21,876,684 
(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 5,308.8 
(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% 0.0242% 
(d) Salvadoran net maquila  
exports 456.00 489.00 474.00 494 465 616 620 564 647 648 666.4 1,201 
(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% 0.0054% 
Source :  International Monetary Fund, Central Reserve Bank, Ministry of the Economy. 
 
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