According to businesscarriers, the small size of the territory with a high population density and asymmetry in land ownership contributed to the more rapid industrial development of El Salvador. The 12-year civil war and the transition to the neo-liberal model had a big impact on the economy. During the war years, significant damage was caused to the environment and basic infrastructure, enterprises for the processing of agricultural raw materials and agriculture. The rate of economic growth dropped sharply, and the levels of poverty and unemployment increased markedly. After the end of the war in El Salvador, the transition to the neoliberal model began.
The most important elements of the new economic policy were: macroeconomic stabilization and liberalization of trade and financial activities; implementation of tax reform; modernization of the public administration system; wide-scale privatization in the sphere of finance and services, in the industrial infrastructure. The reform of the financial system included control over the budget deficit, the rehabilitation and privatization of financial institutions, the stabilization of the national currency, the rejection of price regulation in the markets for goods and services, and the legalization of the activities of foreign banks. Since January 1, 2001, according to the law “On Monetary Integration”, the US dollar and colón have been accepted as monetary units at a rate of 1:8.75.
Changes in the tax system were aimed at expanding the taxable base while reducing the number of tax categories, creating a single income tax rate and introducing VAT at a rate of 13%. A fixed exchange rate and tight control over the money supply have provided El Salvador with one of the lowest inflation rates in the region (3.8% in 2001). The improvement of the investment climate was facilitated by legislative acts of 1988 and 1998, which provided for 100% repatriation of profits from industrial activities and 50% from trade and services, 100% repatriation of income from the sale of investments. The procedure for placing a business was simplified and the rights of national and foreign investors were equalized. In El Salvador, there are 6 and 3 more free trade zones are being created. In 2001, direct private investment amounted to 674 million US dollars, of which foreign – 268 million.
The privatization affected industries such as sugar and cement, telecommunications, water and sewer companies, 4 distribution power plants, seaports and Ilopango International Airport. In 1996, a law was passed under which the state pension system should be replaced by private pension funds. Before the adoption of the law, women received state pensions from the age of 50, men from the age of 60 (by the beginning of the reform, 18% of people of the corresponding ages received pensions).
In 2001 the GDP was $13 billion, $2040 per capita. The structure of GDP (2001, %, in brackets – 1990, %): services – 61 (57), industry 30 (26), incl. manufacturing 23 (22), agriculture 9 (17). The average annual GDP growth rate in 1990-2001 was 4.5% (in 1980-90 0.2%) (in agriculture 1.1%, in the manufacturing industry 5.2%, in the service sector 5.1%).
The structure of employment is changing: in 1970–90, the share of those employed in the agricultural sector decreased from 56 to 36%, but it increased markedly in industry (from 14.4 to 20.5%) and in the service sector (from 29.6 to 41.4%). ). Unemployment for 1993-2000 decreased from 9.9 to 6.7%.
The agricultural sector ranks 3rd in terms of contribution to GDP and remains the most important sector of the economy, providing more than 40% of export earnings and 70% of national food demand. El Salvador has a high degree of land development, but there are large disparities in land distribution. The agrarian reform law of 1980 provoked strong opposition from the latifundists. As a result of the reform, St. 300 thousand hectares; farms with the area of St. 245 hectares, but the reform did not eliminate land shortages. In 1999, cultivated land occupied 810 thousand hectares (560 thousand hectares were under arable land and 250 thousand hectares under plantations of perennial crops), 0.1 hectares accounted for 1 person. Production is poorly diversified 97% of the harvested area is under 11 crops: 78% of arable land is occupied by leguminous crops (corn, sorghum, rice, beans); 96% of the area under permanent crops is occupied by coffee and sugar cane. Fruits, vegetables, cocoa, tobacco, indigo and henequen are also grown. Coffee remains the most important crop: it accounts for 20% of the value of agricultural production. Animal husbandry is developed, mainly meat. In 2000, the number of cattle amounted to 1212 thousand, pigs – 300 thousand.
Forestry and fisheries are poorly developed. The production of forest products in 1999 amounted to 5.2 million m3, of which only 12.6% is industrial wood. Most of the catch of fish products are sea fish and shrimp. In recent years, attention has been paid to the development of aquaculture, mainly the production of shrimp.
The relatively high level of industrial development, the availability of cheap labor, developed infrastructure and a favorable investment climate made El Salvador the first country in Central America to develop assembly plants (“maquilas”) with a focus on the re-export of finished products. Between 1992 and 1997 their share in GDP tripled. The development of “makilas” is facilitated by the creation of free trade zones. The first such zone is located near the Ilopango airport. Makilas employs approx. 50 thousand people, of which 80% are women. Of the 3 billion added value of the manufacturing industry, 45% was accounted for by the food industry, 34% by clothing, 1% by mechanical engineering, and 7% by chemical industry.
The main energy resources are hydro and geothermal sources, 1/3 of the final electricity consumption is based on imported oil. In 1998, the installed capacity of power plants was 996 MW, the production of electricity was 3821 million kWh, of which 1508 million kWh (39%) were produced by hydroelectric power plants. St. 1/2 of generating capacity falls on 4 hydroelectric power stations, 84% of electricity production was provided by the state energy company. In 1998, its 4 distribution companies were privatized.
Highways form the backbone of El Salvador’s transport network. Their length is approx. 10 thousand km, 1/5 with a hard surface. The main transport arteries are the Pan-American Highway (307.3 km), crossing the country from west to east, and the Coastal Highway, linking agricultural areas with ports. The length of railways is 1,202 km (in 1980, 602 km), of which 503 km are electrified. El Salvador does not have a navy, transportation is carried out by ships of foreign companies. There are several small seaports and Ilopango International Airport.
In 2002, foreign trade turnover amounted to 5342 million US dollars with a deficit of 2664 million (in 2000 – 7898 and 1998 million, respectively). In exports, 51.6% is accounted for by raw materials and 48.4% by finished products (in 1990, 64.5 and 35.5%). Coffee provides 1/5 of all export earnings. Almost 1/4 of the income from exports and approx. 1/5 of import costs are accounted for by the service sector. In imports in 2000, 46% of costs were for semi-finished products, 23% for consumer goods, 17% for capital goods, and 1.7% for fuel. The USA is the main foreign trade partner (61% of exports and 41% of imports).