El Salvador
In-depth country-focused analysis on El Salvador's economic, political and operational risk environment, complemented by detailed sector insight

Our comprehensive assessment of El Salvador's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect El Salvador, as well as the latest industry developments that could impact El Salvador's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in El Salvador before your competitors.

Country Risk

El Salvador Country Risk

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External Tailwinds Supporting Regional Underperformers

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Central American outperformers Costa Rica and Panama are facing a more challenging road ahead in the coming years. As real GDP growth slows in Panama on the back of the end of canal construction, establishing fiscal discipline will be crucial. Should the country fail to rein in spending in an environment of lower growth, this would likely cool investor enthusiasm toward the country. Similarly, Costa Rica is also facing a challenging fiscal outlook, though we believe the country is more likely to embrace fiscal consolidation after a recent sovereign credit rating downgrade by Moody's.  

In contrast, our outlook for most of Central America's underperformers is brightening. Guatemala, Honduras and El Salvador will benefit from stronger US demand for their...

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El Salvador Industry Coverage (7)


El Salvador Agribusiness

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BMI View:   The region is still struggling with disease outbreaks in the coffee sector in 2013/14. We believe the region will continue to suffer as low global coffee prices limit investment potential. Even if prices have rebounded recently, we believe they are overstretched and see them going back towards the USc140-150/lb level in the near term. Central America is generally dependent on imports for corn, and we expect the production deficit to widen over our forecast period. That said, Central America is expected to remain self-sufficient in sugar and even increase its potential for sugar exports. The sugar industry has the potential to attract investment over the medium term.

Coffee & Sugar Ahead Of The Rest
Central America - BMI Market Value By Commodity (% of total)...

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El Salvador Autos

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BMI View:   The outlook for the autos industry in the Central Americas region in 2014 is modest, with tepid sales growth expected in some markets, but contractions likely in others. This is broadly in line with our outlook for the Latin America region, although many markets in Central America are very small in volumes terms, and modest changes in sales figures could have a relatively large impact on the year-on-year (y-o-y) growth rate. 

Income distribution across much of the region is highly unequal, and the majority of headline spending growth comes from the relatively wealthy sections of the population. This income structure is likely to continue to restrict growth in the regional autos sector.

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Food & Drink

El Salvador Food & Drink

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BMI View: The economic trajectory for the region remains divergent. Despite our expectations for slower real GDP growth in Panama in the next several years, it will remain the regional outperformer. On the other hand, we have a more mixed outlook for growth in the 'northern triangle' countries. While they will likely benefit from improved agricultural yields and stronger US demand for manufactured goods, Guatemala, Honduras and El Salvador are still vulnerable to significant structural macroeconomic weaknesses.

Headline Industry Data (regional averages)

  • 2014 per capita food consumption (USD) = +4.82%; forecast compound annual growth rate (CAGR) 2013 to 2018 = +4.18%.

  • 2014 alcoholic drink sales (litres) = +4.41%; forecast CAGR 2013 to 2018 = +2.30%.


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El Salvador Infrastructure

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BMI View: We currently forecast an average of 3.43.3% real growth in Central America's construction industry value for 20145 (excluding Panama) which is considerably higher than our regional average estimate for 2014 at 0.2% (excluding Panama). We expect Nicaragua's construction industry to return to positive in 2015 while Panama's will contract, as the completion of the Canal expansion nears its end.

We see high risks, small scale and limited growth opportunities across the region as a whole. A crucial factor underpinning our forecasts for infrastructure investments in future years is political and security risk. This is a particular concern in El Salvador, Honduras, and Guatemala where high levels of crime, homicide, violence, and insecurity exacerbate operational risks for companies willing to invest in those countries. As such, we believe that local and regional...

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El Salvador Insurance

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BMI View: Collectively, the six insurance markets of Central America represent a medium-sized, and quite rapidly growing, market opportunity. The insurers themselves, and their corporate clients, have proven themselves to be resilient in the face of challenging business environments. Many companies are innovating in both distribution and products to increase insurance penetration in their markets .

BMI expect Central American insurance markets to continue to grow rapidly in the coming years. The annual average growth is forecast to be between 7.8% - 11.3% (Guatemala is the lowest and Nicaragua the highest).  We would highlight Panama and Costa Rica as markets which will outperform in absolute terms. Consumers in these insurance markets have the greatest ability to afford insurance and the insurance companies that operate are established and able...

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Pharmaceuticals & Healthcare

El Salvador Pharmaceuticals & Healthcare

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BMI View: Costa Rica and Panama will continue to outperfor m other Central American countries, namely El Salvador, Guatemala, Honduras, Nicaragua and Belize . The business-friendly environment, high per-capita medicine spending and strong consumer demand still present strong revenue-generating opportunities for multimodal pharmaceutical companies.

Headline Expenditure Projections

  • Pharmaceuticals: USD3.5bn in 2013 to USD3.7bn in 2014; +4.1%. Our forecast has been revised slightly down since Q314 due to less promising industry data.

  • Healthcare:...

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El Salvador Telecommunications

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BMI View: Rise of number porting services and high penetration rates across Central America show that the local population is embracing the competition and keen to switch for a better deal. BMI believes that due to the strong competition it will be more difficult for new entrants, such as Xinewei , to penetrate the market as they would have to undercut the local providers. Mobile forecasts show much slower growth across the board, with only Nicaragua offering any real growth potential. Thus companies are investing heavily into 3G and 4G networks to boost mobile data use. The future for telecoms operators lies in the expansion of content and encouraging consumers to use their mobile connections for a growing range of lifestyle needs. Regional market leader Tigo has been most...

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