4.2.2.- El Salvador

El Salvador’s economy is prosperous but migration to the cities is still substantial. Development of rural areas is not just required to attract more foreign investment in the agricultural sector or to stimulate exports, but most of all it is a way to create social stability in the country and to stop rural to urban migration.

The agricultural sector in El Salvador is small and mainly dedicated to coffee and sugar. The recent development in the production of ornamental plants and cuttings as well as vegetables for export, is illustrative for the possible future of El Salvador. Products which require knowledge, labour, investments and good infrastructure show better perspectives than commodities.

El Salvador will most likely not develop towards the production of products like melon, watermelon, leatherleaf, pineapple or mango. First of all, the infrastructure for exports is not favourable for ‘low’ value crops to be transported with sea freight.  Secondly, the business mentality in El Salvador is much more aimed at adding value to products and services than to the production of commodities. And finally, competition from neighbouring countries is too big to succeed with such crops.

El Salvador is known as a trade country although the trade balance is still rather negative. Nevertheless, the country is considered to be capable of attracting foreign capital and knowledge to produce high value agricultural products for niche markets. Although knowledge and foreign interest is still limited for such kind of development, it is likely that El Salvador will at least start appearing on the short list of multinational horticultural companies which are considering to initiate or expand production in Latin (Central) America.

Besides this opportunity, the development of an agricultural supply sector, focussing on Central America as its home market, is a second realistic opportunity. Although exports to Costa Rica and Panama might be more difficult in terms of trade restrictions and transport, El Salvador has a favourable logistic position towards markets like Honduras, Guatemala and even Nicaragua. In case these markets are considered to be the home market, future exports will also be possible to horticultural countries like Colombia, Ecuador and Mexico. Even the United States could be an opportunity for products to be mentioned in this chapter. 

It is quite clear in El Salvador that production for niche markets and more focus on (the production of) supply products show best perspectives. It is also quite remarkable in that most companies and organizations seem to agree on the strategy to be followed. This last issue can be regarded as a sign of increased stability and confidence in the (agricultural) future of the country.

El Salvador’s attractiveness as an investment location is underpinned by its favourable access to the US market via DR-CAFTA and a more secure framework for foreign investors. However, the small domestic market, large income inequalities, deficient infrastructure and high crime rate will remain drawbacks.

Figure 4.4 Business Ideavelopment Chart El Salvador
*Tomato, cucumber, pepper and eggplant

4.2.2.1.- Foliage, melon, watermelon, mango, banana and pineapple

For all above mentioned products, little opportunities can be found in El Salvador. There is no business climate for commodities nor attention from private or public entities to stimulate exports of above mentioned crops. All above mentioned crops are being produced in El Salvador but primarily for the national market. Most of these companies are not capable of meeting international demands.
For foliage, there are some opportunities for specialties (specialties in foliage are almost all types of leaves except for leather leaf). Pineapple is not likely to become an important crop due to climatologic aspects. Melon and watermelon can not be considered to be competitive to countries like Costa Rica, Guatemala, and Panama and to a lesser extent, Honduras. Banana and mango can be considered to be in a similar situation.   

4.2.2.2.- Young plants

El Salvador still has a small sector producing young plants but it has good potential. The companies active in this sector are serious and progressive, putting emphasis on certification, quality and traceability. There is a lack of market knowledge and contacts as well as technical (cultivation) advice creating opportunities for Dutch companies. The business climate is good for young plant companies and besides the ‘regular’ companies producing plant material for green plants, even international companies producing cuttings for flowering plants are considering to invest in El Salvador. Such developments create numerous opportunities for Dutch suppliers as summarized underneath. It needs to be said that El Salvador is on the edge of becoming a more important player in this sector. This final comment indicates that the market as such is still small and opportunities for suppliers are therefore limited.

Opportunities

4.2.2.3.- Pre-finished pot plans

Like in Costa Rica, Guatemala and Honduras, the production of pre-finished pot plants is still limited but shows clear perspectives. El Salvador scores high in this category because of the mentality in the sector. Collaboration exists amongst the companies active in this sector which is surprising compared to other Central American countries. There is also a strong need and preparedness to collaborate with Dutch companies. Nevertheless, the sector is small and opportunities will remain to be limited for supply companies as long as El Salvador is not able to reach a certain critical volume. Infrastructure is not as much of a problem as it seems to be (lack of access to the Caribbean Sea). Transfer times to ports are rather short and comparable to those in Guatemala and Costa Rica.

Opportunities can be found in various (supply) sectors but it will all depend on the preparedness of foreign companies to invest and / or collaborate with local companies. Knowledge needs to be transferred and management needs to be trained abroad. If investments will increase and strategic alliances will be set up, all kind of technical equipment, greenhouses and other supply materials will be required.

Opportunities

4.2.2.4.- Cut flowers

There is hardly any production of cut flowers for export in El Salvador but for investors or companies seeking production for the North American market, El Salvador is a country to be considered. Although air transport is still a limiting factor and hardly any other producers are present, opportunities can be detected for producers of flowers like Callas and maybe Lilies. Further research is required to determine all pros and cons of El Salvador for such products compared to other Latin American countries.  

Opportunities

4.2.2.5.- Vegetables

Vegetable production to be exported is, besides some open field crops, limited to one company which exports mainly pepper varieties. This company has faced severe problems with the set up of its facilities and its exports and still has a large part of its installations without produce. Nevertheless, there is a tendency amongst various interviewed persons which tells that exports of vegetables to North America can be profitable and would fit within the product range as discussed earlier in this chapter. High value produce for niche markets. 

It is likely that El Salvador will be one of the Central American countries with opportunities to become a vegetable producer for North America, focusing on crops like peppers, (cherry) tomatoes and cucumbers. Foreign knowledge has mainly been limited to Israeli knowledge so far. Dutch knowledge and products could create an important contribution to the development of this sector. Environmental issues (products, services) can strongly contribute to this development.

Opportunities

4.2.2.6.- Processed fruits and potencial crops

Due to the character of El Salvador as an adding value industry processed fruits and vegetables can be an opportunity and can be expanded next to the already existing industry. The limitation will be that the production of the products for processing will have to be set up or products will have to be imported from other Central American countries. Niche products (mainly within the group of fruits) can show interesting perspectives for El Salvador as well.

Opportunities

4.2.2.7.- Sumary