El Salvador

C

Forestry and Fishing

Because of early deforestation and high population density, the forest resources of El Salvador occupy only 14 percent of the area and offer little actual or potential lumber production. Most lumber is imported. El Salvador, however, is the world’s leading producer of balsam, a resin from the balsam tree that is used in making medicines and cosmetics.

Commercial fishing along El Salvador’s Pacific shore has become a growing industry. Frozen shrimp is a leading export, and some tuna, mullet, mackerel, and swordfish are also marketed domestically and for export.

D

Manufacturing and Mining

Since the 1940s, El Salvador has been the most industrialized nation in Central America. The country’s first steel-rolling mill opened in 1966. Although the civil war of the 1980s damaged its industries, by 2005 manufacturing accounted for 23 percent of the GDP. El Salvador’s factories supply mostly domestic and Central American markets, although new assembly plants (maquiladoras) have begun to export beyond the region. Textiles, leather goods, clothing, processed food, tobacco, furniture, wood and metal products, and chemicals are the principal manufactures.

The civil war disrupted the small gold and silver mining operations in the country. Mineral extraction is limited to limestone, gypsum, sea salt, and other construction materials.

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E

Energy

El Salvador depends heavily on electric energy, which it produces with four hydroelectric plants and with one of the world’s first geothermal plants. Petroleum imports, however, still provide half of El Salvador’s energy requirements. Electrical service began in El Salvador in November 1890.

F

Foreign Trade

El Salvador has been working to diversify its economy, which depends heavily on exports, and to increase nontraditional agricultural exports, but it still imports goods worth more than twice what it exports. This serious trade deficit remains a weak point in its economy.

Salvadoran exports totaled $1,255 million in 2003, while imports totaled $4.4 billion. These figures were up from 1993 exports of $731.7 million and imports of $1.9 billion. Principal exports were coffee, sugar, and frozen shrimp, sold primarily in the United States, Guatemala, Costa Rica, Honduras, and Germany. Nearly half of El Salvador’s exports now go to the nations of the Central American Common Market (CACM). El Salvador’s imports consist mainly of petroleum and other raw materials, consumer goods, and capital goods from the United States, Guatemala, Mexico, Japan, Venezuela, and Germany.

El Salvador’s trade deficit was partially offset by substantial amounts of economic assistance and credit from the United States and other Western countries and by about $800 million in payments sent from Salvadorans living abroad to their families. El Salvador had an external debt of $2.2 billion at the end of 1994, equal to about one-fifth of its GDP.

El Salvador is a member of the World Trade Organization (WTO) and is participating in talks with the United States, Canada, and Mexico on creating a free-trade association in the Western Hemisphere. El Salvador was a founding member of the Central American Common Market in 1960 and in the 1990s has been a leader in rebuilding the Central American Economic Integration Movement (SIECA). In 1995 El Salvador joined in the formation of the Association of Caribbean States (ACS), which works to create a free-trade zone among member countries in the region.

G

Currency and Banking

El Salvador adopted the United States dollar as its official currency in January 2001.

In the early 1990s, El Salvador had one of the higher inflation rates in Central America; it reached nearly 20 percent in 1992. But the rate dropped to 12 percent in 1993 and 10 percent in 1994. The Central Reserve Bank has been effective in regulating interest rates, and the downward trend continued through 1996.

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