VZCZCXYZ0009
RR RUEHWEB

DE RUEHSN #2240/01 3101735
ZNR UUUUU ZZH
R 061735Z NOV 07
FM AMEMBASSY SAN SALVADOR
TO RUEHC/SECSTATE WASHDC 8532
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUCPDOC/USDOC WASHDC

UNCLAS SAN SALVADOR 002240 
 
SIPDIS 
 
STATE PLEASE PASS USTR KSIGETOMI 
STATE FOR WHA/CEN, WHA/EPSC, EEB 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ETRD AMGT ES
SUBJECT: EL SALVADOR: CBERA REPORT INPUT 
 
 
¶1.  Economic Review: After more than a decade of systematic economic 
reforms, crowned in January 2001 with the introduction of the U.S. 
dollar as full legal tender, EL Salvador has been described as 
having the most open trade and investment environment in Central 
America; in Latin America, only Chile is more open. The country 
enjoys low inflation, low interest rates, and an investment grade 
country risk rating. After experiencing low rates of economic growth 
during the period 1997-2004, the economy has begun to recover, 
experiencing economic growth of 3.1 percent in 2005 and 4.2 percent 
in 2006. As a result, per capita income increased by 2.5 percent in 
¶2006. The Salvadoran government views the expansion of trade and 
investment as essential to the recovery of private sector led 
growth. 
 
¶2. Since taking office in March 2004, President Elias Antonio Saca 
Gonzalez's government has continued an economic reform strategy 
fundamentally based on free market principles and fiscal 
responsibility. In a break from previous administrations, President 
Saca has also proposed government programs to address poverty and 
income inequality and has implemented sectoral investment incentives 
such as a Tourism Law and a Services Law. The Services law will 
provide fiscal incentives for the export of services that are not 
banned by the WTO and that are similar to the Free Trade Zones Law. 
President Saca has also implemented several programs to support the 
development of small and medium business. 
 
¶3. El Salvador's Investment Law does not require investors to export 
specific amounts, transfer technology, incorporate set levels of 
local content, or fulfill other performance criteria. 
 
¶4. Foreign investors and domestic firms are eligible for the same 
export incentives. Exports of goods and services pay zero value 
added tax. Some government contracting for large civil engineering 
projects requires local content; however, the funds for many of 
these projects are provided by multilateral development banks whose 
procurement practices allow U.S. companies to participate. 
 
¶5. The Government of El Salvador also understands the role of trade 
and investment in improving the economic conditions of its people. 
PROESA, the National Investment Promotion Agency of El Salvador has 
been sending trade missions to the United States on "CAFTA-DR Tours" 
to create business contacts and to attract business and investment 
to El Salvador.  The recently established Ministry of Tourism is 
doing similar tours to promote tourism in El Salvador., Salvadoran 
Vice President Ana Vilma de Escobar has been particularly active in 
promoting foreign direct investment as part of her official 
functions. 
 
¶6. Commitment to WTO and FTAA: The government of El Salvador is 
committed to free trade and is party to a number of free trade 
agreements including CAFTA-DR, and agreements with Mexico, Chile, 
the Dominican Republic, Panama, Colombia, and Taiwan. In October 
2007, El Salvador and its Central American counterparts started 
negotiating an Association Agreement with the European Union, which 
will include a political dialogue and cooperation in numerous areas 
including trade and investment. El Salvador has demonstrated a 
commitment to fulfill its obligations as a WTO member and plays an 
important role as a regional leader on trade issues. El Salvador had 
also been a strong supporter of the FTAA. 
 
¶7. Protection of Intellectual Property: El Salvador has continued to 
make progress in protecting intellectual property rights and has 
taken steps to further implement its obligations under the TRIPS 
Agreement. The 1993 Intellectual Property Promotion and Protection 
Law and the Salvadoran penal code protect intellectual property 
rights. Criminal enforcement of intellectual property protection 
laws has greatly improved in recent years, although there continues 
to be a very high rate of piracy especially for items such as 
software. Acting on the basis of complaints, the Attorney General's 
office conducts raids against distributors and manufacturers of 
pirated CDs, cassettes, clothes, and computer software. The Attorney 
General's office can also take enforcement action at the border 
against pirated or counterfeit goods without waiting for a formal 
complaint. However, using the criminal and mercantile courts to seek 
redress of a violation of intellectual property can be a slow and 
frustrating process. In compliance with CAFTA-DR, El Salvador is in 
the process of implementing acceptable standards for test data 
exclusivity, which will be protected for a period of at least five 
years for pharmaceutical product test data and at least ten years 
for agricultural chemical product test data. 
 
¶8. El Salvador has signed and implemented a number of international 
treaties protecting intellectual property rights. CAFTA-DR 
strengthened EL Salvador's IPR protection regime to conform with, 
and in many areas exceed, WTO norms and has criminalize end-user 
piracy, providing a strong deterrence against piracy and 
counterfeiting. 
 
¶9. In CAFTA-DR, EL Salvador also agreed to authorize the seizure, 
forfeiture, and destruction of counterfeit and pirated goods and the 
equipment used to produce them. In addition, under CAFTA-DR, EL 
Salvador has agreed to mandate both statutory and actual damages for 
copyright infringement and trademark piracy. 
 
¶10. Provision of Internationally Recognized Worker Rights: The 
Constitution provides for the rights of workers and employers to 
form unions or associations, and workers and employers exercise 
these rights in practice; however, there have been some problems. 
There have been repeated complaints by workers, in some cases 
supported by the ILO Committee on Freedom of Association (CFA), that 
the Government impeded workers from exercising their right of 
association. In connection with the implementation of CAFTA-DR, El 
Salvador is working to address these concerns. 
 
¶11. The Constitution and the Labor Code provide for collective 
bargaining rights for employees in the private sector and for 
certain categories of workers in autonomous government agencies, 
such as utilities and the port authority. 
 
¶12. Salvadoran law also provides for the right to strike, and 
workers exercise this right. Public workers who provide vital 
community services are not allowed to strike legally, although the 
Government has generally treated strikes called by public employee 
associations as legitimate. 
 
¶13. The Constitution prohibits forced or compulsory labor, including 
by children, except in the case of natural catastrophe and other 
instances specified by law, and the Government has generally 
enforced this provision. The Constitution also prohibits the 
employment of children under the age of 14, although children 12 to 
14 can be authorized to do light work as long as it does not harm 
their health and development or interfere with their education. In 
addition, the law prohibits those under the age of 18 from working 
in occupations considered hazardous. 
 
¶14. The Ministry of Labor is responsible for enforcing child labor 
laws. In general, labor enforcement is weak due to lack of 
resources. As a result, it is difficult for inspectors to monitor 
practices in the large informal sector. Labor inspectors are 
generally focused on the formal sector, where child labor is rare. 
The MOL received few complaints of violations of child labor laws, 
because many citizens perceived child labor as an essential 
component of family income rather than a human rights violation. 
Orphans and children from poor families frequently work in the 
informal sector for their own or family survival as street vendors 
and general laborers in small businesses. Children in these 
circumstances often do not complete schooling. The Government has 
instituted incentive programs, such as Red Solidaria, for low income 
families to keep their children in school. 
 
¶15. The law sets a maximum normal workweek of 44 hours, limits the 
workweek to six days and requires bonus pay for overtime (although 
this requirement is frequently not met). Full-time employees are to 
be paid for an eight-hour day of rest in addition to the 44-hour 
normal workweek and receive an average of one month's wage a year in 
required bonuses plus two weeks of paid vacation. For youths between 
14 and 16 years of age, the law limits the workday to six hours 
(plus a maximum of two hours of overtime) and sets a maximum normal 
workweek for youths at 34 hours. 
 
¶16. Commitments to Eliminate the Worst Forms of Child Labor: EL 
Salvador ratified ILO Convention 138 on the minimum age for 
employment in 1996, and Convention 182 on the Worst Forms of Child 
Labor, in 2000. According to the ILO, from October 2003 to March 
2005, 47,719 children received medical, psychological, recreational, 
vocational, nutritional, and educational attention under ILO-IPEC 
programs. These activities have helped keep children out of the 
labor force. The ILO-IPEC, in cooperation with the Ministry of 
Labor, has also provided 4,028 parents with training in occupational 
skills, literacy, productivity, and medical attention, among other 
areas. 
 
¶17. For the period of 1999 through August 2005, the ILO reported 
that 6,271 children have been withdrawn from child labor. During the 
same period, the ILO reported that they, in cooperation with the 
Ministry of Labor, have prevented 14,134 at-risk children from 
performing labor activities. 
 
¶18. Counter-Narcotics Cooperation: The President has not identified 
El Salvador as a major drug transit or major illicit drug producing 
country under the provision of the FRAA. In addition, the Government 
of El Salvador has acted to meet the objectives of the 1988 UN Drug 
Convention and interdict narcotics entering its territory.  El 
Salvador also hosts a Cooperative Security Location, used for 
counter-narcotics surveillance flight operations. 
 
¶19. Implementation of the Inter-American Convention against 
Corruption: El Salvador, which ratified the IACAC in 1998, followed 
Costa Rica as the Central American region's least-corrupt nation in 
Transparency International's 2007 Corruption Perceptions Index, 
ranking 67th of the 180 countries surveyed. Soliciting, offering, or 
accepting a bribe is a criminal act in El Salvador. A Court of 
Accounts, established by the Constitution, investigates allegations 
against public officials and entities and, when necessary, passes 
such cases to the Attorney General for prosecution. The 
Anticorruption and Complex Crimes Unit of the Attorney General's 
Office handles cases involving corruption by public officials and 
administrators. 
 
¶20. The Legislative Assembly approved a Government Ethics Law in 
¶2006. The law establishes an Office of Government Ethics that 
handles complains from any citizen against corrupt civil servants. 
Once a complaint has been filed, an Ethics Court follows its 
administrative procedures to investigate the complaint and imposes 
sanctions for the violations against the law. The Ethics Court 
includes representatives of the Legislative Assembly, the President 
of the Republic, the Supreme Court of Justice, the Comptroller, and 
one member elected by the heads of the Public Ministry. Sanctions 
include written reprimands, fines no lower than ten percent and no 
higher than ten times the offender's monthly salary, and dismissal 
after a third infraction to the law. If the infraction deserves a 
penal sanction, the civil servant will be suspended and the case 
will pass to the General Attorney's Office. 
 
¶21. When it occurs, corruption is usually confined to lower levels 
of government. However, a recent corruption scandal involved senior 
officials of the Salvadoran water authority, including its former 
president. There also have been credible complaints about judicial 
corruption. An active free press reports on corruption issues. 
 
¶22. Transparency in Government Procurement: The laws and regulations 
of El Salvador are relatively transparent and generally foster 
competition. Bureaucratic procedures have improved in recent years 
and are streamlined for foreign investors. In late 2004, the 
government passed a Competition Law. Overall, the Government of El 
Salvador's government procurement practices are transparent and 
nondiscriminatory. Bids for large projects are listed in newspapers 
or distributed to the international community. However, short tender 
deadlines prevent meaningful international competition in many 
cases. Smaller tenders are listed on individual Ministry websites or 
are available from ministry procurement offices. 
 
¶23. Nationalization/Expropriation: Pursuant to El Salvador's 1983 
Constitution, the government may expropriate private property for 
reasons of public utility or social interest, and indemnification 
can take place either before or after the fact. There are no recent 
cases of expropriation. However, several longstanding commercial 
disputes involving U.S. companies are pending resolution in the 
court system. 
 
¶24. Reverse Preferences: El Salvador has lowered or eliminated 
tariff barriers on many commodities, and U.S. companies have as much 
if not more access to markets in El Salvador than other nations due 
to geographical proximity. El Salvador does not provide preferential 
treatment to products of any other developed country to the 
detriment of U.S. commerce. 
 
¶25. Contribution to Regional Revitalization: The open trade policies 
of El Salvador benefit the revitalization of the CBI region as a 
whole by providing an open market for imported products. The 
earthquakes of 2001 caused a slowdown in growth within El Salvador, 
but the country continues to be an active partner in trade with the 
region.  El Salvador's increased regional trade is also reflected in 
its recent accelerated economic growth. 
 
¶26. Extradition: The government of El Salvador signed an agreement 
with the United States in 1911 allowing for extradition of each 
other's citizens; this treaty is still in force and is regularly 
used. 
 
¶27. Cooperation in Administration of the CBERA: El Salvador 
cooperates with the United States in administration of the CBERA, as 
well as with other CBERA countries. 
 
¶28. Population: 6,980,279 (2006) 
 
¶29. Per Capita GDP: $2,668.4 
 
¶30. Point of Contact for Report: Economic Officer Brent T. 
Christensen, ChristensenBT@state.gov, (503)-2501-2105, fax 
(503)-2501-2775. 
 
¶31. A copy of this report has been sent via e-mail to WHA and USTR.