In recent years, Salvadoran business relationships with the U.S. have been strengthened, thanks largely to the U.S.-Central America-Dominican Republic Free Trade Agreement (CAFTA-DR), implemented between El Salvador and the United States in 2006. The Salvadoran economy continues to benefit from a commitment to free markets and careful fiscal management and has been growing at a steady pace since the signing of peace accords in 1992.
Much of the improvement in El Salvador's economy is a result of the privatization of the banking system, telecommunications, public pensions, electrical distribution and some electrical generation; reduction of import duties; elimination of price controls; and improved enforcement of intellectual property rights. Capping those reforms, in 2001, the U.S. dollar became legal tender in El Salvador. The economy is now fully dollarized.
Under its export-led growth strategy, El Salvador has pursued economic integration with the United States and Canada as well as other Latin American countries.
The U.S. is home to well over two million Salvadorans, and remittances from Salvadorans working in the States are a major source of income for both individual families in El Salvador, and the country as a whole. In 2010, the Central Bank estimated that remittances totaled $3.5 billion.
But in addition to sending money back home, this expatriate population has another vital role for the Salvadoran economy. Many yearn for (and are willing and able to pay for) a ‘taste of home,’ and so constitute what is known among Salvadoran business as ‘the nostalgia market.’
Joshua Alvarado, owner of the Rio Grande Foods Products
, has been manufacturing and distributing ethnic foods products in the United States and Canada for 20 years.
“Our main objective is to always select the highest quality products by hand that preserve authentic Latin flavors,” said Alvarado. “Right now because of the Free Trade Agreement there is an opportunity to be seized – in our case it's a market with an ethnic background. What we're doing is promoting our culture through our products.”
“BECAUSE OF THE FREE TRADE AGREEMENT THERE IS AN OPPORTUNITY TO BE SEIZED... WHAT WE'RE DOING IS PROMOTING OUR CULTURE THROUGH OUR PRODUCTS.”
Owner of Rio Grande Food Products
“THROUGH OUR ALLIANCE WITH PEPSICO IN THE STATES WE HAVE A TREMENDOUS OPPORTUNITY, AS WE GO HAND IN HAND WITH A PERFECT STRATEGIC PARTNER.”
D. CARLOS SLUMAN,
Chief Executive of Livsmart
“WE HAVE FOCUSED ON THE UNITED STATES FOR THE NEXT DECADE, ITS MARKET IS SO LARGE WE CAN NOT PUT LIMITS ON IT”
ING. D. ALFONSO MOLINA PORTILLO,
Executive Director of Embotelladora La Cascada
Despite competition from other importers in the U.S., the brand Rio Grande has spread to 22 states.
“We've worked hard to get the most out of the free trade agreement. We had no stability in the brand price competition, and that forced us to create a brand. The competitive advantage of our products is quality,” said Alvarado.
“Our brand has evolved into a symbol of reliability, flavor and nostalgia for the foods from our lands. Our slogan “Lo Nuestro” (“Our Own”) reflects the conviction to serve the Latin/Caribbean community not only in the United States but also in other international markets to achieve our mission of “Bringing the best of Latin America to you.”
Another company synonymous with the taste and flavour of El Salvador for the last 60 years is soft drinks manufacturing company Embotelladora La Cascada, SA. A leader in the soft drinks market, its best known products are Salva Cola, Kolashanpan
juices in different variations. Their products are 100 per cent Salvadoran and are identified as the taste of El Salvador in both national and international markets. The Cascade products not only stand out because they is 100 per cent Salvadoran but because they have the lowest price in the market – this is one of the company´s man advantage. Embotelladora La Cascada, SA faces tough competition and presently has seven competitors imitating the Kolashanpan brand, hence the company slogan “Kolashanpan, la original”.
“Since the Free Trade Agreement was signed there have been many more opportunities. The exchange of goods and services has been more flexible and there has also been an exchange of technological knowledge. Also, being a dollarized economy helps us analyse costs better as there is no currency fluctuation,” said Ing. D. Alfonso Molina Portillo, executive director of Embotelladora La Cascada.
“The U.S. market is very important to us. America is for us the biggest gamble for the next decade. The market is so large we can not put limits on it; our growth is continuous and we know that at some point will grow exponentially. We are interested in partnerships with supermarkets and convenience stores…. to distribute our products. And we don´t want to limit ourselves to just the nostalgia market, we are also interested in the Afro-American market.”
Health drink company LivSmart
, which was founded under the name of Bon Appetit in 1981, is another company capitalising on the Free Trade Agreements and business with the U.S.
LivSmart was the first health and wellness company of the Americas, and is dedicated to improving the life of consumers with balanced and healthy beverages. LivSmart makes more than 130 million in annual revenue from drinks made without preservatives.
Today, Livsmart serves as a business unit of the group Cabcorp (The Central America Beverage Corporation), which is the anchor bottler of PepsiCo for Central America and part of the Caribbean.
Chief executive Sr. D. Carlos Sluman, explains how important the North American market is for the future of Livsmart.
“The first step is to gain market share. We had to adapt the ‘marketing mix’, as the Petit juice we consume in El Salvador is not the same as is consumed in the United States. We believe that through our alliance with PepsiCo in the States that we have a tremendous opportunity, as we go hand in hand with a perfect strategic partner. We are proud to say we're a success. We consider ourselves capable, we have investment capacity, suitable partners, knowledge, processes and brands, and a willingness to go beyond the dream,” said Mr Sluman.