Investment Policy Review - El Salvador

El Salvador made a firm strategic choice to develop as an open market economy decades ago, and it has long adopted an open attitude towards FDI. A large number of reforms have been implemented in the past decades that reflect this choice: regional economic integration has been fostered and crucial free trade agreements have been concluded, the US dollar was adopted as legal tender, competition rules have been enforced and key segments of the economy have been privatized. This strategy has allowed El Salvador to gain macro-economic stability and attract beneficial FDI inflows. Much progress remains to be achieved, however, to eradicate poverty and reduce income inequality. In addition, El Salvador needs to improve the general level of competitiveness of its domestic firms in order to reap the full benefits of openness to global trade and investment flows. The Review offers concrete recommendations to allow El Salvador to generate higher levels of beneficial FDI.