Business Blog

Why Now Is the Time to Start a Company in El Salvador

As a business owner in the United Kingdom, the United States or any other Western country, there is a distinct possibility that international expansion will be part of your long-term growth strategy. Indeed, businesses of all shapes and sizes are today realising the benefits of doing so and bringing their products and services to new markets through company formations and localised marketing strategies. And it’s a technique that works particularly well, with brands including McDonald’s, Apple and Uber entering markets they once thought they could not.

One country that is proving a particularly popular choice for entrepreneurs looking to expand is El Salvador. The country is the most densely populated state on mainland America and is a small but highly-industrialised land. After a civil war in the 1980s, the country is now home to more than 6 million people, mostly speaking Spanish, with Christianity as their religion. They use both the US dollar and the Salvadoran colon as currencies, and have a life expectancy of 68-years-old for men, and 77-years-old for women. With a GDP of $52.666 billion US dollars and a GDP per capita of just $8,668 US dollars, the country allows for cheap labour and access to a growing pool of talent in the tech sector, making it perfect for new international businesses.

In this article, we’ve put together some of the reasons why El Salvador is a top choice for those who wish to expand overseas, and we share tips on how you can crack the El Salvador market.

The country is growing

GDP growth in El Salvador reached 2.1 per cent in 2017, thanks in part to industries such as livestock, agriculture, forestry, fisheries, mining, manufacturing and commerce. This contrasts the GDP growth between 2010 and 2016, which averaged 1.9%, making it the slowest-growing region in Central America. Thanks to investments and more entrepreneurs setting up shop in the country, things are beginning to change and allowing both locals and investors to benefit.

The country has an attractive and growing economy in Central America, and despite being the smallest country within the region, it’s home to the fourth-largest economy. Indeed, its steadily growing economy and unexploited markets allow for a unique and exciting atmosphere for new businesses and established businesses looking to expand into the territory – simply put, very few people have touched the country, and so getting in early ahead of the competition makes sense.

It’s easy to find talent

With a 7 per cent unemployment rate, however, you’ll be able to find top talent overnight, whether you’re looking for ground staff to work in a brick and mortar stores or experienced, university-educated employees, to take hold of your business development, marketing and product expansions. And despite the country recently increasing the minimum wage, it’s still an attractive option for businesses that operate in the manufacturing sector. Indeed, maquila workers have seen their salaries increase from US$211 to US$295 per month whilst coffee and cotton workers have had their pay packets doubled from US$98 to US$200 per month. Despite the hefty increase, wages remain relatively low and mean that you can operate with minimum overheads during your expansion, capitalising on cheap costs and allowing your business to go from strength to strength in the country. It’s a win-win for locals and for businesses like yours.

US businesses will benefit the most

As a US company exporting to El Salvador, you can benefit from the Central America Dominican Republic Free Trade Agreement (CAFTA-DR), meaning there will be no duties to pay on US consumer and industrial goods. Since the CAFTA-DR was introduced eleven years ago, it has contributed to a huge increase in the trade between El Salvador and the United States, with the US now the country’s top trading partner. And because the country has a dollarized economy, you don’t have to worry about foreign exchange rates and transaction costs, as everything that you ship to and from the country will be done so in your existing currency.

Another reason why so many US businesses are beginning to see the benefits of an expansion into El Salvador is proximity. Many consider El Salvador to be the perfect ‘hub’ for US brands that want to expand across Central America, as the country offers easy access and is slap bang in the middle of the territory. So, if you wanted to expand across Costa Rica, Nicaragua, Honduras, Guatemala, Belize and more, you could use the country as a local distribution hub, which would save thousands of dollars in shipping and trucking costs, and help you expand your brand and make a name for yourself throughout the Central America regions.

Assistance is affordable

We all know that expanding a business internationally can be hard work, what with the costs of temporarily relocating your team to a new country and then recruiting for new staff to join the fold and take your international business to the next level. But the good news is that there are companies in Latin America and El Salvador who can assist in your growth and development, offering company formation El Salvador-based as well as other back-office solutions, like help with recruitment, marketing and product expansion. Indeed, these services are affordable and mean that you can work with local experts who speak the language and understand the culture and nuances within El Salvador, offering a unique insight into the market that you would not be able to get otherwise. Of course, shopping around to find the right company first is important.

Whether you’re an entrepreneur in the United States thinking about making the jump into El Salvador, or you’re a Salvadoran and want to expand your business and make more money, we hope that this article has helped. Not only is the country packed with natural beauty and home to a whole host of resources, but it offers a unique market opportunity for businesses of all shapes and sizes, across virtually every niche. Don’t hesitate to make the investment – with the right push, you could be on to the Next Big Thing and take El Salvador by storm. Best of luck!