An Expert's View about Agriculture and Animal Husbandry in El Salvador

Posted on: 21 Dec 2012

Trade is highly important to El Salvador, demonstrated by its free trade agreements with Dominican Republic, Chile, Mexico, Panama, Taiwan and Colombia, as well as its membership in the Central Americ

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Required Report - public distribution Date: 12/4/2012 GAIN Report Number: ES1206 El Salvador EXPORTER GUIDE ANNUAL 2012 Approved By: Henry Schmick, Agricultural Counselor Prepared By: Ana Elizabeth de Iglesias, Marketing Assistant Report Highlights: Although El Salvador is the smallest country in Central America, it is the third largest economy with a nominal gross domestic product (GDP) of US$22.6 billion in 2011. The economy took a hit from the global recession and real GDP contracted by 3.5% in 2009. The economy began a slow recovery in 2010 on the back of improved export and remittances figures. Post: San Salvador Author Defined: I. MARKET OVERVIEW A. Current Economic Situation Although El Salvador is the smallest country in Central America, it is the third largest economy with a nominal gross domestic product (GDP) of US$22.6 billion in 2011. The economy took a hit from the global recession and real GDP contracted by 3.5% in 2009. The economy began a slow recovery in 2010 on the back of improved export and remittances figures. The Government of El Salvador (GOES) is committed to an open-market economy and has recently led economic diversification initiatives in new sectors such as non-traditional agricultural products (tuna, bakery, snacks, beverages, and dairy products, among others), processed food, distribution, telecomm services, and tourism. Development in these areas follows a 30 year evolution in the economy from being agricultural-based to one of commercial, retail and financial services. A glance into sector distribution in recent years confirms the importance of services in the overall economy: Sector Breakdown: % share of Real GDP 2007 2008 2009 2010 2011 Agriculture 10.8 11.2 10.8 11.0 10.6 Industry 30.8 24.7 29.1 29.1 29.1 Services 58.5 64.1 60.1 59.3 59.3 CIA-The World Fact Book/Economist Intelligence Unit It is important to note that an element which has allowed for growth in services has been internal demand, something which has been positively affected by the remittances of more than 2.5 million Salvadorans living in the United States. Data from the Central Bank for 2011 show an estimated remittance level of US$3.6 billion, an increase of 6.4% compared to 2010; presenting approximately 16% of the country’s GDP. UN Development Program (UNDP) surveys show that a 20-25 percent of Salvadoran families receive remittances from the United States. As for telecommunications, following the 1998 privatization of the sector, market dynamics have provided for interesting statistics. In December 2008, for example, 100 percent penetration of mobile telephones was achieved. Internet and fixed telephone line penetration still lag behind, however. Tourism has been on the upswing since the creation of the Ministry of Tourism in 2004. According to this Ministry, in the last ten years, tourism has increased over 180 percent. Nonetheless, trade is highly important to El Salvador, demonstrated by its free trade agreements with Dominican Republic, Chile, Mexico, Panama, Taiwan and Colombia, as well as its membership in the Central American Dominican Republic Free Trade Agreement with the United States (CAFTA-DR) which went into effect in 2006. In 2010 Central America signed an association agreement with the European Union that includes the establishment of a free trade area. In the fourth quarter of 2012 El Salvador is expected to negotiate an FTA with South Korea, and together with Central America, negotiate and FTA with the Caribbean Community. With the reduction of import tariffs and removal of almost all non-tariff trade barriers, El Salvador’s trade has expanded significantly over the last few years. The privatization of the banking system in the early 1990’s resulted in a financial sector that is recognized as one of the most efficient in Latin America, and which has created an array of financing options for local importers. In addition, a good credit standing with foreign suppliers complements the availability of funds to carry out business transactions. In 2001, El Salvador adopted the U.S. dollar as its currency, eliminating foreign exchange risks for investors. B. Current Political Situation Five parties participate in the political arena, although the top two are the most dominant: the National Republican Alliance (ARENA) which is a conservative party; the Farabundo Marti Liberation Front (FMLN), which is a leftist political grouping; the National Coalition Party (CN); the Party of Hope (PES) which is centrist; National Unity Alliance (GANA), the newest political party and one which embraces centrist principles. ARENA was created in the early eighties has a pro-business platform. The FMLN is composed of former guerrilla organizations and was formed after the country’s peace accords were signed in 1992. On March 15, 2009, El Salvador held presidential elections within a framework of democracy, transparency and full respect for the Constitution and the rule of law. The winning candidate was former journalist and CNN correspondent Mauricio Funes of the FMLN (52%). His opponent was former Police Chief Rodrigo Avila of ARENA (49%). For the last four terms, ARENA had held the presidency, so the FMLN win marks the first time the opposition was able to secure the central government in the post war period. President Funes has expressed that free markets dynamics, past trade policies and amicable relations with the U.S. will continue. Additionally, he has stated there will be an emphasis on social programs and economic stimulus policies. The major challenges facing President Funes are: Moving past lingering public perceptions of FMLN radicalism, as well as party divisiveness; Private sector misgivings about the FMLN’s intentions; And the weak international economy. C. Market Size El Salvador is densely populated, with population growth averaging 1.69 percent during the last seven years. Of its 6.1 million people, nearly 61 percent are estimated to live in urban areas and the average growth of the urban population has been 3 percent in the last 30 years. According to the 2007 census, the capital city of San Salvador accounts for approximately one- third of the country’s population. This figure is understandable when one considers that migration to this city accelerated during the 1980’s as a result of civil conflict, and continued thereafter due to natural disasters and the shrinking of the agricultural sector. Other than San Salvador, there are three other major cities: San Miguel, in the eastern part of the country, and Santa Ana and Sonsonate, in the west. Recent government economic development programs have targeted the impoverished eastern and northern regions, both of which were damaged significantly by the civil conflict. The government’s focus in the eastern region has been the building of the aforementioned seaport in the province of La Unión. In November 29, 2006, The Government of El Salvador and the Millennium Challenge Corporation (MCC) signed a five-year, $461 million compact focused on economic development in the Northern Zone, where MCC financing has enabled Salvadorans to realize a long-held aspiration of opening up the Northern Zone to markets in neighboring countries and better integrating it with the rest of the country. Projects were divided into three main areas: Human Development, Productive Development and Road Connectivity El Salvador in Facts and Figures: Area: 20,742 sq. km. (8,008 sq. miles) Time Zone: UTC - 6 Population: 6.1 million Population under 19 years of age: 2.6 million Population under 5 years of age: 523,400 Unemployment/Underemployment: 7.1 percent / 28.9 percent (2011) Inflation: 2.1 percent Nominal GDP: US$21.2 billion Distribution of Income or Consumption Gini Index 45.4 Percentage Share of Income or Consumption Lowest 10% 1.6 Lowest 20% 4.6 Second 20% 9.2 Third 20% 14.0 Fourth 20% 21.6 Highest 20% 60.6 Highest 10% 34.2 R/P 10%: Richest 10% to poorest 10%; R/P 20%: Richest 20% to poorest 20% Source: CEPAL - Economic Commision for Latin America and the Caribbean: Social Statistics Unit Major Agricultural Products: Coffee, sugar, corn, rice, beans, oilseed, cotton, sorghum; tuna; dairy products. Leading Agricultural Exports: Coffee, sugar, tuna, frozen tropical fruit and processed ethnic foods such as corn tamales. Leading Agricultural Imports: Wheat, yellow corn, rice, soybean meal, cotton, dairy products, and consumer-ready products. U.S. exports of consumer-oriented products reached a record US$105,743 million in 2011. U.S. Agricultural, Fish and Forestry Exports: $ 606 million (2011) U.S. Agricultural, Fish and Forestry Imports: $ 380 million (2011) Source: Salvadoran Central Bank (BCR), CIA World Fact book on-line, USDA-FAS, BICO Reports, World Bank. Salvadorans spend over 65 percent of their income on food. Households earning US$400 to US$1,500 per month and above are considered to be in the middle to middle-upper income classes. There are approximately 460,000 households in this category and 60 percent reside in urban areas. It is estimated that about 1.2 million people or 20 percent of the population is middle class. The Salvadoran market may be significantly larger than portrayed by U.S. export data. A high percentage of El Salvador’s imports of consumer-oriented products are actually registered as imported by Guatemala. The main reason is that many containers come through Guatemala’s Santo Tomas port and even though they are in-transit to El Salvador, local customs officials tally them as Guatemalan imports. Particularly close links with the United States are evident by the strong commercial relationship between both countries. D. Advantages and Challenges in the Market Advantages Challenges U.S. agricultural and food products are sought U.S. agricultural and food products are after by Salvadoran’s HRI sector, as they enjoy more expensive than some regionally an excellent reputation among Salvadoran available food products. Guatemala, consumers and are renowned for their high Canada, Mexico, Chile, and Mexico are quality and high food safety standards. strong competitors. In general, El Salvador in its implementation and Problems obtaining a Certificate of Free application of regulations is transparent and open, Sale make it difficult to register U.S. as it follows and adopts WTO and Codex food products. guidelines for food safety. Exposure to U.S. media as well as language, High marketing costs (advertising, cultural, and commercial ties with the United discounts, sampling, etc) are necessary States all contribute to positive attitudes toward to promote new market products. U.S. products The tourism and restaurant sectors are growing International economic slowdown and and are a dynamic sector for U.S. exports. higher commodity prices could affect employment, income and economic growth in El Salvador. The major retailers are developing increasingly Security is a major concern in El sophisticated distribution systems, which will Salvador and the local authorities still provide more space and better cold chain need to improve their security technology for high value imports conditions. The implementation of CAFTA-DR has lowered or Tariff rate quotas of sensitive products eliminated duties for most U.S. food products continue to protect local producers of products such as poultry, and dairy. Most of the products stocked on the shelves of Low per capita incomes limit the Salvadoran retail stores are imported. importation of gourmet products. Most large importers/distributors are members of the Salvadoran Distributors Association (ADES; http://www.ades.org.sv). This association manages the relationship of its members with local retailers, wholesalers, and supermarkets and can provide good information on how to enter the Salvadoran market. II. EXPORTER BUSINESS TIPS A. Business Customs The successful introduction of products into the Salvadoran market depends on acquiring local representation and making personal contacts. The advantages of local representation include market knowledge, up-to-date information, and guidance on business practices and trade laws, sales contacts, and market development expertise. Salvadoran business relationships and meetings are, at first, formal. One is expected to use proper titles, shake hands before and after you meeting, and not use a person’s first name until a relationship has been solidified. Salvadorans commonly use titles such as Licenciado(a) (title acquired after completing a BA or law degree), Ingeniero (title acquired after completing an engineering degree or BS ), or Doctor(a) (title acquired after completing a medical degree or a PhD). These are followed by the person’s last name (i.e. Licenciado Gómez). El Salvador tends to be very much a business card society and it is important upon first meeting someone to exchange business cards with him or her. It is an excellent practice to have a ready supply of business cards in Spanish. Breakfast meetings are common and begin about 7:30 a.m. Lunches and dinners can be lengthy affairs (2-3 hours), so it is advisable to not plan a tight schedule around them. Dinners start late by U.S. standards, frequently at 8:00 or 9:00 p.m. Lunch is usually at 12:30 p.m. and is the largest meal of the day. B. Customer Taste The four basic foods for the vast majority of the population in order of importance are: tortillas made from white corn, beans, eggs, and rice. Bread, meat, fruit, vegetables (fresh, canned and frozen), snacks and juices are readily consumed in varying quantities depending upon income level. Generally, people living in the city consume more bread and meat and fewer tortillas and beans. Salvadoran consumers are very familiar with U.S. style food. Most U.S. fast food franchises have outlets in El Salvador. Food courts located in shopping malls are popular and viewed as a perfect place to socialize. Delivery service has caught on quickly in this market as well. As more women join the labor force, there is less time for meal preparation at home. In addition, domestic servants are finding better-paying jobs in the growing Maquila (cut and sew) industry. As a result, the average housewife is changing her preference towards ready-to-eat or easy preparation meals, much as what occurred within the United States during the latter half of the last century. U.S. foods such as hot dogs and hamburgers are preferred by the younger generation. Ramen- style soups have fulfilled a niche in the construction and apparel Maquila sector. These soups are a quick and inexpensive lunch for thousands of laborers who cannot afford to pay for a regular cafeteria meal. Culturally speaking, Salvadorans have adopted much of the U.S. culture such as music, sports, fashion, and fast foods. C. Food Standards and Regulations El Salvador does not have a specific Food Law that applies to imported foodstuffs. Instead, the health code is the most widely used instrument to enforce local food safety. The Ministry of Public Health and Social Assistance (MPHSA) is in charge of all registrations and authorizations to import, manufacture, and sell foodstuffs and beverages, as well as any raw materials used in the production process. The most pertinent regulation used to enforce proper health safety when importing foodstuffs is Section 12/Article 88 of the Salvadoran Health Code. This particular article states that in order to import any food or beverages its use must be authorized by a Certificate of Free Sale which is certified by the Environment Safety Department (DSA) of the MPHSA. Each respective certificate must include the name of the product and its components. Other products such as fresh produce and products of animal origin are regulated by the Plant and Animal Health Division (DGSVA) of the Ministry of Agriculture (MAG). For U.S. products the MPHSA will accept the Certificate of Free Sale issued by a competent U.S. sanitary authority. The certificate is valid for one year, and it can cover a list of products that can be annexed to the certificate when requesting the import permit from the MPHSA. For animal origin products, MAG will accept a simple copy of the original Certificate of Free Sale which will be compared to the original by the Ministry of Agriculture officials to verify the expiration date and will be handed back to the importer so that he/she can proceed to the MPHSA to complete the import requirements. The GOES has not yet taken the initiative to design a program geared towards the implementation of food safety laws and their proper enforcement. The main problem has been attributed to limited resources due to other important needs such as public infrastructure and social programs. However, local policy makers are beginning to react to criticism by unsatisfied consumers regarding food safety and quality control. A Consumer Protection Law was ratified by the National Assembly and has been in effect since April 1996. According to the law, the Ministry of Economy through the Consumer Protection Agency (DGPC) is the entity in charge of enforcing all the dispositions stated in this law. The National Assembly has recently ratified an updated Consumer Protection Law. Under the revised law, the (DGPC) has been designated as the sole entity in charge of safeguarding consumers from unsafe products. Most food products are inspected for safety at the port of entry. However, the MPHSA carries out random testing at the retail and wholesale level to make sure that foodstuffs comply with all the required health and quality standards. Nevertheless, many unchecked products manage to reach their final destinations due to lack of human resources and appropriate infrastructure to control illegal distribution channels. The trend in food safety in El Salvador is for tighter control and more efficient regulations. The tendency is towards the use of Codex Alimentarius norms. Meanwhile, Central American norms, and in some instances FDA norms, are being used until Codex norms are revised and adopted. 1. Labeling Requirements The MPHSA requires the following labeling information for all products sold in El Salvador: 1. The label should state the nature of the product, composition, quality, origin and general processing method. 2. Name of the product: There must be a specific name. 3. Net Content: It must be expressed in decimal metric system units. 4. Ingredients: They should be listed with their proper names, in decreasing order, according to their importance in the composition of the product. It is not necessary to identify the percentage of each ingredient. 5. Additives: Must be mentioned by the group it belongs to (for example: antioxidant), followed by its specific name and its concentration in the final product. 6. Lot identification and manufacturing date: in order to identify the lot, a code can be used, which must be provided and clarified to the MPHSA. To identify the manufacturing date, 6 digits must be used (year, month, and day). 7. Expiration date: When a product has limited shelf life, it must be declared on the label. Labels for food products whose shelf life is between 3 and 18 months must include the statement “PREFERABLY CONSUME BEFORE”, followed by the day and month. Labels for food products that expire in shorter periods should state “Expiration Date”, with the day and month. 8. Storage instructions. 9. Manufacturer’s name: The label must include the manufacturer, importer, dealer, distributor or legal representative of the product, and their respective addresses. 10. Sanitary Registry: The label must declare the number of Sanitary Registry (Reg. No. D.G.S. El Salvador), issued by the Environmental Health Department, Section of Food Safety of the MPHSA. 11. Country of Origin. 12. The product must contain the name and address of the supplier in El Salvador in the form of a sticker, which is usually provided by the supplier or distributor. El Salvador’s labeling law requires that the product description be in Spanish. There is no enforcement at this time. However, major retail outlets are requiring stickers with product description in Spanish to comply with the law. GOES is working on a new regulation that will begin enforcement of labels only in Spanish for all food products. In order to determine if a product can be imported with only the standard U.S. label, it is necessary to examine U.S. labeling norms and compare them to the general norms of the Codex Alimentarius for labeling of foodstuffs. The Salvadoran Body for Technical Regulations (OSARTEC) is currently working on labeling regulations based on the Codex. Due to lack of resources the GOES has not enforced this policy and food products with U.S. labels can be seen throughout the distribution chain. However, the GOES is currently requiring that a sticker in Spanish that includes a list of ingredients, manufacturing method, and expiration date be used until the requirement of Spanish-English labels can be fully implemented. The MPHSA/DSA and the Ministry of Economy/DGCP enforce local labeling regulations. All products should be properly labeled prior to distribution for human consumption. Sample-size product labeling requirements are identical to those listed above. However, local authorities are a bit lenient with this type of product due to the small quantities that are imported. Bulk packed or institutional size products are required to visibly display the contents and ingredients either in the container or package. Nutritional labeling is not required by the MPHSA. The U.S. nutrition label needs to be analyzed by the Nutrition Department of the MPHSA in order to be accepted. Some locally produced products at the retail level have nutrition facts in English to comply with U.S. regulations due to expectations of exporting to the U.S. market under the Central America – U.S. – Dominican Republic (CAFTA-DR) Free Trade Agreement. According to local health officials, the possibility of consumers being misled by U.S. labels exists. Since most Salvadorans do not speak English, local health officials fear they could be basing their opinion on the picture that is used in the label by U.S. manufacturing companies. The only requirement for shelf life of a product is the expiration and manufacturing date. The DGSVA requires a country of origin certificate for all products that are imported to El Salvador. The GOES does not grant any exceptions under the labeling law. However, in extreme cases, the MPHSA can analyze a product in order to guarantee consumer health and decide whether that particular product can be imported for human consumption. Both Universal Product Code (UPC) and EAN bar codes are acceptable in El Salvador. Bar coding is rapidly becoming an important instrument in the food business. Currently all local supermarket chains require that products sold throughout their stores are coded. When alcoholic beverages are being imported, the label must read: "The excessive consumption of this product is harmful and creates addiction. Sales to consumers under the age of 18 are prohibited". This is based upon Article 26 of the Regulatory Law for the Provision and Commercialization of Alcohol and Beverages. In the case of tequila, the following is also required: area of production, alcohol grade and manufacturing process. 2. Product Registration According to the Health Authorities in El Salvador, the following information is required for an exporter to register a product. An application must be filed at the Environmental Health Department of the MPHSA, which shall include the following information: Petitioner’s name and address. Description of the product. Name, address and telephone number of the establishment or factory where the product is manufactured. Product use. Name, address and telephone of the supplier in El Salvador. Type of packaging material. Net content. Commercial brand name. This application must be filed with the following documents: 1. Power of attorney granted in favor of the Salvadoran attorneys or the company representative in the country, duly notarized at the nearest Salvadoran Consulate in the U.S. or by notary public. 2. An original Certificate of free sale of the product, issued by the Health Authorities of the country of origin, and Apostille. If the Certificate is in English it must be translated to Spanish duly notarized by a Salvadoran lawyer. In case the Certificate is used for a list of various products, the original will be attached to one of the product files and the others will use a photocopy. 3. Functioning license of the local warehouse where the product will be stored. Usually the local distributor obtains this license. 4. Label of the product, which shall specify the name of the product, list of ingredients, name of manufacturer, importer and/or distributor and the expiration date. In case it is necessary usage instructions are required. If the same product is commercialized in various sizes, a label for each presentation is required. 5. Product samples: the Environmental Health Department requires for solid products 3 samples of the product weighing 200 grams each. For liquid products, 3 samples of the product weighing 200 milliliters. For alcoholic beverages, 2 samples of 200 milliliters each must be presented. For bottled water, 3.785 liters (one gallon) for the physical- chemical analysis and 1 sample of 500 milliliters for the microbiological analysis. 3. Import and Inspection Procedure Usually when clearing a product through customs, a Customs inspector, a Customs police officer, and a MPHSA inspector are involved in the process. English is the commercial language used for import documents. On average, it takes approximately three to five days to clear a product through customs. Most importers use a Customs agent to expedite the clearing procedures. At this time, there is no appeals system in place for disputed product rejections. The steps in custom clearance for a prepackaged foodstuff are: 1. Request Import Permit from DGSVA. 2. Once the import permit has been granted by DGSVA, the importer must take the sanitary registration, packing list, bill of lading, insurance policy, airway bill, shipping information and product invoices to the Revenue Department at the Ministry of Finance to get the policy for payment of import tariff. 3. 3. The import permit has to be cleared by Customs, Customs Police and the Regional Organization for Agricultural Sanitation (OIRSA). 4 4. Customs Police conducts a product inspection. 5. 5. Once product has been cleared by the Customs Police, it can be withdrawn by the importer. The Ministry of Hacienda has implemented a system called “Teledespacho” designed to expedite customs procedures. This system uses satellite technology to allow importers and exporters to send their commercial invoices, bills of lading, and airway bills through an electronic link or web to the Salvadoran Customs office to be processed. All Customs agents have access to this satellite system through an individual personal identification number (PIN) that enables them to get in contact with Customs. This system is also available to import/export companies that have offices outside El Salvador. These companies can purchase the software to hook up with the Customs satellite system to send their product invoices. The Teledespacho system makes it possible for merchandise to clear customs 24 hours a day, seven days a week. In addition to Teledespacho, the GOES uses a "self liquidation" process that allows the presentation, assessment, calculation and payment of duties directly by the importer, without physical inspection of the merchandise in 85 percent of the cases. Local businesses, importers and shippers have noticed a big improvement in the operation of Salvadoran Customs since the initiation of the above mentioned reforms. MAG recently created an online system to process import permits for dairy, meat and fresh produce called the Agricultural Food Safety Information System (SISA). Importers have access to this system with an authorized PIN and no longer have to visit MAG offices to request import permits. According to MAG, this new procedure is part of a GOES process to expedite import, as well as export procedures. These procedures are due to increased trade. This system can be accessed at MAG’s website www.mag.gob.sv. The Ministry of Health also has an online system to request import permits for food products. This system can be accessed at the following website: www.gaisa-mspas.gob.sv. Information of costs for different services such as import permits and product registrations can also be found at this website. For additional information please refer to the FAIRS Report 2012 ES1206 at www.fas.usda.gov/scriptsw/attacherep/default-asp D. Opportunities and Challenges after the Implementation of CAFTA-DR PRODUCT OPPORTUNITY WHEAT - Bulk Most of the wheat processed by Bakery consumption has Wheat – DNS, SRW Salvadoran mills comes from the increased tremendously, mainly and HRW varieties United States, although some due to the availability of fresh Canadian wheat is imported. bakery centers in all major Annual imports of U.S. wheat supermarket chains. Growth in range from 207,000 to 240,000 convention tourism is also helping metric tons. In January-October boost consumption of bakery 2011, U.S. wheat imports products at hotels; due to the reached a record US$59 million. increase of business events. Bakery manufacturers are very optimistic about free trade and believe CAFTA-DR is providing growth opportunity. Ethnic bakery products exported to the U.S. are growing due to the high demand of these products by the Salvadoran community residing in the U.S. RICE - Rough rice El Salvador is not self sufficient in Rice production is decreasing at a - Milled parboiled rice production and needs to fast pace, not only in El Salvador rice import from other countries, but also in the rest of the region. especially the United States, to Under CAFTA-DR, tariffs will be meet demand. Actual local eliminated and TRQs established demand is estimated at as follows: 18-year duty phase- approximately 105,000 metric out, initial TRQ of 61,000 metric tons of rough rice, of which 30 tons (MT) for rough rice, growing percent is covered by local by 2% per year and an initial TRQ production. Typically, El Salvador of 5,250 MT for milled rice, imports rough rice to keep rice growing by 375 MT per year for mills the first five years, 1,000 MT Operating throughout the year. increase in year 6, and an annual However, small quantities of 325 MT Increase thereafter. imported milled rice have recently reached local supermarket chains to meet upscale consumer demand. El Salvador has officially abolished the use of a price-band mechanism to assess import duties for basic grains. CAFTA-DR established Tariff Rate Quotas (TRQs) for rice. CORN - Yellow Since the 1960's, El Salvador has The food-processing sector in El corn - #2 for been an important market for Salvador is not as developed as it animal feed and U.S. yellow corn, for its poultry is in Guatemala or Costa Rica. hard endosperm and animal feed industries. The However, snack food production corn for snack snack processing industry is also is at the top of the list in this manufacturing a major importer of hard sector. Yellow corn is a main endosperm corn. Imports of ingredient in the snack yellow corn from the United manufacturing process. The States cover almost all local DIANA and Bocadeli snack brands demand. produced in El Salvador offer respectable quality for the price, and have roughly 75 percent of the market. In addition, DIANA is the largest snack producer in Central America and is already exporting certain products to ethnic markets in the United States. The poultry and dairy sectors are also major users of yellow corn for feed mix. CAFTA-DR provides for a yellow corn Tariff Rate Quota (TRQ) of 350,000 metric tons (MT) with a 5 % growth per year with a 15- year duty phase-out. A fixed part of the TRQ will be subject to a performance requirement, which will be eliminated in 15 years. White corn was also granted a TRQ of 35,000 MT under CAFTA- DR. There is a growing market for white corn flour to make tortillas. SOYBEANS - El Salvador does not produce any Dairy production is increasing due Soybean meal soybean meal, thus, all demand to government incentives and must be met with imports. The sanitary regulations that provide poultry and livestock sectors use protection against contraband the product as feed. Commercial cheese from Nicaragua and trade is growing quickly due to Honduras. the high demand for poultry Soybean meal is an important products. In January-October ingredient used in cattle feed 2011, soybean meal imports mix. CAFTA-DR provides reached US$50.3 million. El immediate access for soybean Salvador's poultry industry is the meal. most developed in the region and is quickly increasing production to supply demand by other Central American neighbors, particularly Honduras. III. MARKET SECTORS A. Retail The market expectations for retailing remain positive as it continues to be a key area of the Salvadoran economy, supported by employment, financial stability and expansion of consumer credit. Hypermarkets/supermarkets and, convenience stores, coexist with the traditional corner grocery stores and open-air markets. There are three dominant supermarket chains in El Salvador: Supermercado Selectos, Walmart El Salvador and Europa. Selectos Supermarket is owned by the Calleja Group. This local supermarket chain is made up of 88 stores. In February 2008, Calleja, together with 9 Central American and Panama companies joined in a strategic alliance funding Supermercados de Centroamerica y Panama - SUCAP (Panama and Central American Supermarkets) SUCAP groups 16 different supermarket chains that combined add up 281 stores in the region whose annual sales reach US$2.2 billion. SUCAP plans to buy bulk all those product that the companies have in common as a way to get better prices and benefit the consumer. The members of SUCAP are: Panama: El Rey, El Machetazo, Super 99; Guatemala: Unisuper/La Torre; Costa Rica: Perimercados, Automercados; Nicaragua: La Colonia; Honduras: La Colonia; and El Salvador: Selectos Wal-Mart Central America is the largest retailer in the region with more of 450 stores. In El Salvador there are 80 stores in three different formats: Despensa de Don Juan, Maxi Despensa, Despensa Familiar and Hiper Paiz. In September 2005, Wal-Mart Stores Inc, acquired 33.3 percent interests in Central American Retail Holding Company (CARHCO) from the Dutch retailer Royal Ahold NV. In March 2006, Wal-Mart increased its interests to 51 percent, and CARHCO was changed to Wal-Mart Central America. Supermercados Europa, the smallest supermarket chain is also designing strategies to compete with the retail giants. They procure most of their products directly from suppliers in the U.S. and South America to avoid local importers, assuring lower prices and gaining a competitive edge over large supermarkets. They have 5 stores and are planning to open 2 more stores in 2013. PriceSmart El Salvador, S. A. de C. V. Is based in San Diego, California and has two sites in El Salvador - both of which are located in the capital city of San Salvador. Similar to membership warehouse clubs in the United States, it carries a mixture of groceries, apparel, electronics, household goods, and automotive parts. PriceSmart's first chosen location (1999) was in the upscale Santa Elena area, and it initially focused on two market segments: the growing upper middle class seeking imported goods, and restaurants looking for a source of premium ingredients/products alongside known staples and local brands. As PriceSmart's presence became stronger, its offerings appealed to the larger middle class and the second store opened in the Tutunichapa area. Just a few blocks away from the popular Metrocentro shopping mall, it was more accessible than the Santa Elena location and it made American imports available to consumers that were familiar with them via firsthand migration or by proxy through family members in the United States. Supermarkets, Hypermarkets Owner Group and Club Outlets Current New Stores Stores 2012-2013 (Estimate) Calleja, S.A. Selectos 73 5 De Todo 1/ 2 0 Selectos Market 2/ 13 4 Wal-Mart Stores Walmart Supercenter 2 2 Despensa de Don Juan 25 0 Despensa Familiar 1/ 51 2 Maxi Despensa 2 1 Saca Group Supermercados Europa 5 2 Joint Venture Price Smart 2 0 U.S./Salvadoran business TOTAL 175 16 1/ Smaller popular area stores 2/located in gas station store B. HRI Food Service The GOES views foreign investment as crucial for economic growth and development and has taken numerous steps in recent years to improve the investment climate. U.S. food franchises have increased their presence in El Salvador rapidly during the last eight years, including McDonalds, Burger King, Wendy’s, Pizza Hut, Kentucky Fried Chicken, Bennigan’s, Tony Roma’s, Chili’s, Asia Grill, China Wok, T.G.I. Fridays, Starbucks, Papa John’s and Taco Bell. Grupo Piramide is a Salvadoran franchising operator that also manages U.S. franchises in Guatemala and Panama. In 2012 they are opening the first outlets of Ruth Chris Steakhouse and Ruby Tuesday’s casual dining. There has also been a boom in coffee shops/restaurants over the last five years. With some capital injection, small, independent, family-owned coffee shops are being converted into nice little restaurants. Salvadorans usually get together at these restaurants for breakfast in the morning and/or for informal meetings and socializing after work. The boom in this sector brings more demand for bakery products, dairy products, and more sophisticated drinks such as cocktails, smoothies, milk shakes, fresh fruits and fruit juices. Starbucks is a major player in this sector. The hotel sector has also increased the number of four and five-star hotels enjoying a high occupancy rate. Also there has been a significant increase in small hotels nationwide. Given a 10 percent average growth rate in tourism, the demand for food products, especially high quality of U.S. foods should continue to grow. C. Food Processing The food processing industry is relatively small compared to Guatemala and Costa Rica. Snack food production is at the top of the list in this sector. The DIANA brand produced offers respectable quality for the price, and has roughly 80 percent of the local market and 40 percent of the regional market. In addition, this company is the largest snack producer in Central America and is already exporting its products to ethnic markets in the United States. Other local snack producers are Bocadeli and Ideal. These companies are working hard to increase market share and offer a wide variety of snacks. U.S. suppliers can take advantage of the need for ingredients from these snacks producers. There are also some joint venture investments in food processing by U.S. companies such as Del Monte, Clamato and Badia Spices who produce locally for the Central America region. CAFTA-DR has also attracted foreign investment to El Salvador including companies such as Calvo tuna processor from Spain. On February 2009, with an investment of US$20 million the Mexican juice group Jumex inaugurated a beverage plant in Nejapa. Jumex expects that 50 percent of the production will be exported to Panama and the Dominican Republic. Sigma Alimentos, a large Mexican meat and deli company, has invested in a pork processing plant to cover local demand and export to other Central American countries. Another important industry in this sector is meat processing. There are approximately 10 companies which are members of the Salvadoran Meat Processors Association (ASICARNE). Imports of U.S. pork meat by this sector have grown tremendously over the last five years, due to the fact that the Salvadoran population is a large consumer of sausage products. On October 2008, the new meat processing plant of Wal-Mart Centro America was inaugurated. Another significant sector is the dairy industry. Dairy processors in the market offer a wide variety of products which include cheese, yogurt, and sweet cream. The dairy industry also has an association called APPLE (Salvadoran Association of Milk Processing Plants). This sector is already exporting fresh cheeses to the United States. The bakery industry is the last component of the food processing sector. Bakery consumption has increased tremendously, mainly due to the availability of fresh bakery centers in all major supermarket chains and coffee shops demand. IV. BEST PRODUCT PROSPECTS Top 10 best product prospects imports from the United States (Thousands of U.S. Dollars) % Change 2010/2011 Product Description 2010 2011 Snack foods 8,380 11,987 43 Breakfast Cereals 3,179 4,384 37.9 Poultry Meat 4,971 7,838 57.7 Fresh Fruit 15,572 14,909 -4.26 Soybean meal 57,300 58,184 1.54 Processed Fruit and Vegetables 14,454 14,772 2.2 cotton 59,934 89,336 49.1 Coarse Grains 82,755 169,139 104.4 Rice 28,832 34,642 20.2 Dairy Products 7,718 10,465 35.6 Source: USDA/FAS BICO REPORT V. Key Contacts Agency: Ministerio de Salud Pública y Asistencia Social (Ministry of Health) Departamento de Saneamiento Ambiental (DSA – Food Safety Division) Contact: Mr. Arnoldo Rafael Cruz López Address: Alameda Roosevelt, Edificio Laboratorio Central Dr. Max Bloch, San Salvador. Phone: (503) 2210-1615; 2210-1614 Fax: (503) 2271-0363 e-mail: arnoldo.cruz@gaisa-mspas.gob.sv Web: www.gaisa-mspas.gob.sv Agency: Ministerio de Agricultura y Ganadería. Dirección General de Sanidad Vegetal y Animal Contact: Mr. Helmer Esquivel Address: Cantón El Matazano, Soyapango, San Salvador, El Salvador. Phone: (503) 2202- 0835 ; (503) 2202-0823 Fax: (503) 2534-9911 e-mail: helmer.esquivel@mag.gov.sv; ana.lopez@mag.gob.sv Web: www.mag.gob.sv Agency: Ministerio de Economía (Ministry of Economy) Dirección General de Protección al Consumidor (DGPC-Consumer Protection Agency) Contact: Ms. Yanci Guadalupe Urbina González Address: Calle Circunvalación #20, Edificio Defensoría del Consumidor Plan de la Laguna, Antiguo Cuscatlán, La Libertad Phone: (503) 2526-9004 Fax: (503) 2526-9005 e-mail: atencionalconsumidor@defensoria.gob.sv Agency: Centro para la Defensa del Consumidor (Consumer Protection Center) Contact: Ms. Naida Medrano, Executive Director Address: 11 Avenida Norte BIS #525, Centro de Gobierno, Codigo Postal 1767, San Salvador, ElSalvador Phone: (503) 2222-1122 Fax: (503) 2222-2852 e-mail: direccion@cdc.org.sv Agency: Dirección General de Sanidad Vegetal y Animal (Animal and Plant Health Division) División de Certificación Fitozoosanitaria para el Comercio (Sanitary Trade Cartification Division) Contact: Mr. Douglas Ernesto Escobar Address: Final 1 Avenida Norte, Santa Tecla, La Libertad, El Salvador. Phone: (503) 2210-1773 Fax: (503) 2534-9841 e-mail: Douglas.escobar@mag.gob.sv Agency: Dirección General de Sanidad Animal y Vegetal (Animal and Plant Health Division) Division de Inocuidad de Alimentos (Food Safety Division) Contact: Ms. Guadalupe Diaz Nuila Address: Final 1a. Avenida Norte y Avenida Manuel Gallardo, Santa Tecla, La Libertad, El Salvador. Phone: (503) 2202-0832 Fax: (503) 2202-0832 e-mail: Guadalupe.diaznuila@mag.gob.sv Agency: OIRSA – Organización Regional para Sanidad Agropecuaria) (Regional Organization for Agricultural Sanitation) Contact: Mr. Edwin Aragón – OIRSA representative Address: Final 1a. Avenida Norte y Avenida Manuel Gallardo, Santa Tecla, La Libertad, El Salvador. Phone: (503) 2228-7841/2228-7899 Fax: (503) 2228-7823 e-mail: earagon@oirsa.org.sv Web: www.oirsa.gov.sv Agency: Salvadoran Body for Technical Regulations – OSARTEC Contact: Mariana Gómez Address: 1a. Calle Poniente, Final 41 Avenida Norte #18, Colonia Flor Blanca, San Salvador, El Salvador. Phone: (503) 2247-5313 e-mail: mgomez@osartec.gob.sv web: www.osartec.gob.sv Please do not hesitate to contact the office below for questions or comments regarding this report or require assistance to export processed food products into El Salvador: Office of Agricultural Affairs USDA/FAS U.S. Embassy El Salvador Boulevard Santa Elena Sur y Calle Conchagua Antiguo Cuscatlán, La Libertad, El Salvador Phones: (503) 2501-2999 exts. 3414/3412 Fax: (503) 2278-3351 E-mail: agsansalvador@fas.usda.gov Website: www.fas.usda.gov
Posted: 21 December 2012

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