El Salvador Market Entry

El Salvador Market Entry

Subchapters:

  • Market entry
  • Forms and conditions of operation on the market
  • Marketing and Communications
  • Issues of intellectual property protection
  • Public procurement market
  • Payment terms, payment ethics and resolution of commercial disputes
  • Visas, fees, specific conditions of travel to the territory
  • Employment of citizens from the Czech Republic
  • Fairs and events

Market entry

According to cheeroutdoor.com, entry into the Salvadoran market should be supported, as in the case of other remote territories, by a detailed study. Preparation for entering the local market should therefore be thorough and well thought out. The most effective form of distribution used in the country by most foreign companies is sales through local sales representatives. At the level of selling through a local representative, there are basically two variants, selling through a dealer specialized in a particular commodity. As in many other countries, it is not possible to expect to establish business contacts or implement business cases simply by sending an offer and company presentation to selected companies from the field. If you are interested in the Salvadoran market, you must expect a certain initial investment, long-term efforts and the need to be physically present on the market often.
Among the most suitable ways to establish the first contacts with local partners are international fairs, or through chambers of commerce or with the help of PaulTrade. This enables not only the acquisition of basic information about the market and possible competition, but also very beneficial contact with the local business mentality and customs. Given that the costs of Czech companies to enter the Salvadoran market are not negligible, companies have the opportunity to use a number of tools provided by state authorities in support of economic diplomacy in the organization of joint Czech official participation in industry-specific international fairs, etc.
Czech entrepreneurs can contact the economic section of the Embassy of the Czech Republic in Mexico or the foreign office of the PaulTrade agency in Mexico, under which Salvador falls. It is also possible to request assistance directly at the Honorary Consulate of the Czech Republic in El Salvador.

Import conditions:
The import of goods and services into El Salvador is not subject to any major restrictions. Most imported goods do not require an import license and the goods only need to meet current Salvadoran standards. However, stricter import rules are applied to selected categories of goods, such as chemical, pharmaceutical and food products. The importation of drugs and barbiturates and large-caliber firearms is prohibited. The import of the following items is subject to strict restrictions and permits: publications and films of an obscene nature, slot machines, cigarette paper, coin-making machines, banknotes, seedlings and seeds of the coffee plant. Imported soil must comply with phytosanitary regulations. and consumer products.

Import documents:
For most goods, only common documents (bill of lading, airway bill, commercial invoice) are required. An import license is required for the import of certain agricultural and food products (e.g. fresh food and live animals) and weapons, which are issued by the Ministry of Agriculture and the Ministry of Defence, respectively. All goods sold in El Salvador must bear a visible indication of price, weight or volume, composition and, in the case of pharmaceutical products, a description of health risks.

Customs system:
El Salvador is a member of the Central American Common Market. The basis of the Salvadoran customs tariff is the so-called Central American Customs System and the Common Central American Customs Tariff (SAC). There are common duties on more than 90% of all import items. The maximum tariff rates applied by El Salvador to goods originating from non-integrated countries are 10% on semi-finished products and a maximum of 15% on finished products. However, there is a range of goods on which higher duties are applied (15-40%), these are mainly some agricultural products, cars, alcoholic beverages and textile products. On August 20, 2018, El Salvador entered the Duty-Free Zone between Guatemala and Honduras, which, according to the official statements of the representatives of the states, has increased trade between the two members by 9% in just one year of its existence. it also enables duty-free transit of up to 80% of mutual trade and lowers logistics costs by up to 20%. If the zone expanded to include all the states of Central America, it would have a potential of 47 million people and a combined GDP of $250 billion. This is an opportunity both for Czech exporters who could benefit from duty-free trade with member countries of the zone, and for importers looking for cheap labor and duty-free access to the markets of North and South America, the EU and South Korea.

Export control: The
valid export regime allows export to any country in the world, except for countries on which the UN has imposed trade sanctions. All exporters must be registered with the so-called Centro de Trámites de Exportación at the Central Bank, exporters of agricultural products in addition with specialized institutions (e.g. Consejo Salvadoreňo del Cafe for coffee, Centro de Desarrollo Pesquero for marine products, Dirección de Defensa Agropecuaria for live animals ). Only the export of rare animal and plant species and archaeological objects is regulated. The following documents are required for export:

  • proof of registration in the register of exporters (so-called export license)
  • commercial invoice and, in special cases, a permit min. of finance and labor (for industrial machinery and equipment) or min. agriculture.

The domestic market is basically protected only by customs tariffs. El Salvador has made significant progress in removing non-tariff trade barriers in recent years.

Forms and conditions of operation on the market

The first step to establishing an office or representation in El Salvador should be establishing cooperation with an experienced local attorney. It is also necessary to obtain an activity permit from the Supervisory Office for Enterprises and Commercial Companies (Superintendencia de Empresas y Sociedades Mercantiles) at the Ministry of Economy.
The minimum capital required to establish a company is approx. 25,000. USD. Furthermore, the company must be registered with the Ministry of Finance for tax purposes (Dirección General de Impuestos Internos). This is followed by the registration of the company in the Commercial Register (Registro del Comercio) through a notary, where industrial patents and trademarks can also be registered. For this purpose, it is required to submit a power of attorney for the company representative, an extract from the Commercial Register of the relevant state (verified by the relevant Salvadoran embassy or consulate), the name and personal data of the administrator, the form and purpose of business, the address of the company’s headquarters. The company must also prove that it has sufficient funds to pay the registration fees. The next step is to register the company with the relevant local authority and with the General Directorate of Statistics (Dirección General de Estadística y Censos). The final step may be publication in the local press. The foreign company’s office is subject to Salvadoran laws, including withholding taxes on profits from activities in the Salvadoran jurisdiction.
In the case of a joint venture, the registration procedure is similar, in addition, the joint venture must be registered with the Ministry of Foreign Trade, similarly to foreign investments. Foreign private entities can establish unlimited joint-venture companies and joint-ventures in El Salvador and carry out any business activity in El Salvador. The most common legal form for a joint venture is a joint-stock company (Sociedad Anónima, SA). The share of foreign capital in a joint venture can range from 0-100%. There is no mandatory condition for the presence of Salvadoran citizens in the management of the company – foreigners can occupy any leadership positions without restrictions. There is also no restriction on the nationality of the shareholders.

Marketing and communication

Promotional materials in Spanish, preferably printed and delivered in person, are an essential part of communication. Cooperation with Salvadoran chambers of commerce or advertising agencies is also appropriate, taking into account their knowledge of the local mentality and the ability to choose the most appropriate strategy for a given type of goods or services. Advertising on the Internet and social networks is increasingly being used, or communication channels. (Facebook, Instagram, Whatsapp). In the initial phase of penetrating the Salvadoran market, Czech companies can be recommended to participate in mass events such as fairs, or promotional events organized by the embassy, ​​PaulTrade or one of the chambers of commerce.

Issues of intellectual property protection

El Salvador has acceded to the Paris Convention, which protects industrial property, as well as the World Intellectual Property Organization convention. The protection of intellectual property is enshrined in Article 103 of the Constitution of El Salvador, while this provision is implemented by the Law on the Protection of Intellectual Property (Decree No. 604) of August 1993. This law comprehensively regulates the issue of intellectual property, including copyright, patents, industrial designs, trade names etc. The issue of trademarks is dealt with by a special law on trademarks and other distinctive signs (Decree 868). The office competent in matters of intellectual property is the Register of Intellectual Property.
The ZÚ has not yet encountered a specific violation of the rights arising from the protection of intellectual property of Czech manufacturers in this territory.

Public procurement market

All public contracts and purchases by state institutions above USD 10,000-20,000 (depending on the type of tender) must be implemented through public tenders. Ministries can make smaller purchases directly through their supply departments. Announcements of public tenders are published on the websites of individual ministries or in the local daily press, including the basic specifications of the tender and the relevant deadlines for submitting bids. More detailed information and detailed conditions of the public tender will then be provided to interested parties by the relevant state institution. There are no restrictions on the participation of foreign companies in government tenders, with the exception of some construction works, which are awarded preferentially to Salvadoran companies.
All public contracts are published on the website https://www.comprasal.gob.sv/comprasalweb/.

Payment terms, payment ethics and resolution of commercial disputes

Commercial disputes are primarily resolved based on the provisions of the agreement of both parties. Therefore, it is generally recommended to enshrine in the relevant commercial contract a clause on the jurisdiction of the arbitration court of the exporting country, for the resolution of any disputes arising from the given transaction. In all circumstances, it is recommended to work with an experienced Salvadoran law firm that can help resolve business disputes and prevent many. Resolving commercial disputes in local courts is time-consuming and expensive – so it is recommended to consider the route of out-of-court settlement. Regarding investment disputes, El Salvador is a member of the  International Center for Settlement of InvestmentDisputes (ICSID).
The most common payment term in foreign trade is a documentary letter of credit. In some cases, especially when establishing new business contacts, it is appropriate to request an advance payment from Czech entities. Satisfactory payment discipline prevails in the country, trade debts tend to be the exception rather than the rule.

Visas, fees, specific conditions for traveling to the territory

Visa
On August 1, 2004, a bilateral agreement on the abolition of the visa requirement entered into force, but the total duration of the tourist stay may not exceed 90 days.

Vaccination
Travelers arriving from a yellow fever endemic country or transit country should be prepared to present an international yellow fever vaccination certificate. Recommended vaccinations include hepatitis (A/B), rabies, typhoid, diphtheria, tetanus and measles.

Another caveat
: El Salvador is one of the countries with a relatively high crime rate, often associated with the drug trade or fighting between rival criminal gangs. It is therefore recommended to follow some basic principles:

  • keep valuables in the hotel safe and travel with only a minimum of cash
  • always park in a guarded parking lot, never leave any valuables in the car
  • travel only on main roads and in daylight
  • travel with travel insurance with sufficient coverage
  • be careful of luggage and bags with documents in the city center, at hotel receptions, at bus stops and also directly on buses

It is recommended to drink only bottled water. Protect yourself from mosquitoes, especially near the coast. Recently, epidemics of Zika, malaria, chikungunya and dengue have appeared in Central American countries.

Movement within the country
Hotel: The offer in larger cities and tourist locations is wide. It is highly recommended to stay in a category of at least 3*, not only with regard to hygiene, but also safety.
Car: Renting is a good choice in terms of comfort, speed and, above all, safety, as the distances within the country are short.
Taxi:In El Salvador, taxis do not use a taximeter, so you must negotiate the price with the taxi driver in advance. Make sure that the taxi driver knows where to go, as they often do not have GPS navigation (it is ideal to choose a waypoint such as hotels, offices, squares, etc.). As a safe option for movement in San Salvador, San Miguel and Santa Ana, it is possible to choose Uber.
Buses: It is not recommended to use public transport, especially if you are traveling with valuables. Otherwise, buses are the most common form of public transportation for ordinary Salvadorans. Bus lines also operate throughout El Salvador. Tickets even outside the city are cheap, but you have to take into account that the buses are often overcrowded.

Employment of citizens from the Czech Republic

Conditions for employment of citizens from the Czech Republic
The use of local representatives is the most common way for foreign companies to penetrate the local competitive environment. The issue of representatives of foreign companies in El Salvador is governed by the Commercial Code, according to which an agent, distributor or representative of a foreign company is any legal or natural person with permanent residence in the territory of El Salvador who has been entrusted with representing a certain company or product in the country based on a contract with the parent company. The Commercial Code also specifies the conditions under which one party is entitled to cancel the agency contract and also defines the compensation to the Salvadoran distributor if the contract is terminated by the foreign firm without meeting these conditions.

A foreign company is authorized to employ local or foreign workers in El Salvador. The employment of foreigners in the country is not a problem, but compared to the employment of local forces, this mechanism is more complicated due to the protection of the national labor market. Both are governed by applicable labor law and migration regulations, which are continuously updated. Current information regarding work permits can be consulted on the website of the Migration Office (Dirección General de Migración y Extranjería). For this reason, we recommend that you consult on a case-by-case basis with a legal advisor in a place that can be recommended by the Embassy of the Czech Republic in Mexico or the Honorary Consul in El Salvador. All relations between employers and employees are governed by the Labor Code, which sets out in detail the rights and obligations of both parties, which are the same for Salvadoran and foreign entities. The employer is obliged to pay social and health insurance for employees and to provide employees with several legal components of salary beyond the basic wage. The law also establishes a basic minimum wage (which varies according to the type of work performed and ranges from USD 243.46-365/month).

The employment of foreigners in the country is not a problem, but compared to the employment of local forces, this mechanism is more complicated due to the protection of the national labor market. Both are governed by applicable labor law and migration regulations, which are continuously updated. Current information regarding work permits can be consulted on the website of the Migration Office ( Dirección General de Migración y Extranjería ). For this reason, we recommend consulting with local legal counsel on a case-by-case basis.

Conditions for the use of local health care by Czech and EU citizens
The Czech Republic has no bilateral agreement with El Salvador on the mutual provision of health services. Local medical care (especially in the capital) is at a good level, but the prices are very high for the average tourist from the Czech Republic. It is therefore a good idea to get travel health insurance before traveling to El Salvador.

Fairs and events

Construexpo (Construction Fair) – Annually in spring, San Salvador, http://feriaconstruexpo.com

The premises of the International Exhibition Center of Salvador were closed during the Covid-19 pandemic and the center is to move to new premises. The operation of large fairs after the pandemic in El Salvador has not yet been fully restored.

El Salvador Market Entry