5.2.2.- El Salvador
El Salvador is ‘on the move’ and taking advantage of recently signed trade agreements (amongst others DR-CAFTA) and secondly the changing attitude / perception of the outside world towards this country. The image of El Salvador can still be considered as negative due to the internal problems the country had to overcome and the history which is still present in the minds of many. Nevertheless, the government makes big efforts to change this image by all kinds of campaigns to promote El Salvador from a touristic point of view but also as a potential supplier of non traditional agricultural goods. But not only campaigns contribute to the ‘new image’ of El Salvador. The actual deeds of the country itself such as its investment climate, its infrastructure and its communication systems are not to be forgotten. Besides all these positive developments, crime is still not under control and putting pressure on Foreign Direct Investments.
Opportunities for El Salvador in agriculture can be found in production for niche markets. El Salvador is (after Belize) the smallest country in Central America which makes production of specialties more appropriate than production of commodities. The actions to be taken by the Ministry of Agriculture to improve competitiveness of the sector by enforcing the competitive strengths of the Ministry of Agriculture itself, a project to be sponsored by the Inter American Development Bank, can contribute to this and shows self-reflection.
Other initiatives like the increased collaboration between organizations like Proesa and Agexport is can be seen as signs of more competitive strength. El Salvador is a strong supporter of more intense Central American collaboration and integration and this position can be beneficial for (future) foreign investors. Niche markets can be developed but only with help from primarily private companies from countries like Holland. Programs like PSOM and PESP, available for El Salvador, can be interesting tools to define and realise commercial activities. Not only because a lack of technical knowledge on a production level, but also due to the limited knowledge on markets and their requirements. However, Salvadorian companies are in general business minded and interesting potential partners for Dutch counterparts.
5.2.2.1.- Production of plastic pot and trays for Central American horticulture
Actual situation
Although El Salvador’s local market is very limited, there are interesting opportunities to be detected for production of various types of supply products for the horticultural sector as a result of reasons mentioned before. Supply products to be mentioned are:
Above mentioned issues are examples of products which show potential to be produced in El Salvador having Central America as its domestic market and besides that, creating opportunities in other markets as a result of affordable and quick access to horticultural counties like Mexico, Colombia / Ecuador (ornamentals) and even North America.
The need for pots in the (pre-finished) pot plant sector is rapidly increasing. To export plants, high quality supply materials are required. Besides peat moss, the right pot is where it all starts. Pots can be imported from the United States but quality and sizes frequently differ from European standards. Imports from Europe are expensive due to the rate of the Euro as well as to the costs of transport.
Local production within Central America, together with a strong partner, seems like an obvious choice. El Salvador is still a small player in the market for pot plants but is increasing its supply. But most of all, the business climate in El Salvador to produce technical products like plastic pot (and trays), is rather attractive.
Future scenario
A Dutch supplier of pots, exporting to Central America, might consider setting up his own production in El Salvador. The home market can be described as not just El Salvador but also Guatemala and Honduras and to a lesser extent Costa Rica. Besides this ‘home’ market, pots can be exported to Mexico or, more likely, the USA. Costs are low, exchange rates are favourable, transport costs are very low and the market is increasing.
On top of all this, the PSOM program is available for El Salvador. Assuming that, together with a local partner, all requirements from PSOM can be met, investment costs and most of all, risks, can be reduced.
Assuming that collaboration between a Dutch producer of pots and a local company active in a similar market is the most logical way to fill in this opportunity, the first step will be to find each other. The EVD has a new program aimed at local companies looking for a Dutch counterpart called the Match Making Facility. This program might lead to a promising contact. After that, a market study will have to define what exactly the market looks like and what products should be produced.
