According to exporting unions, the still high inflation and other economic risks in that country have caused a drop in demand for the products that El Salvador sells abroad.

The number of products that the country sells abroad has fallen in the first five months of the year compared to the same period in 2022, according to the most recent data released by the Central Reserve Bank (BCR).

Specifically, this reduction is equivalent to 7.9% less than total exports last year, when up to $3,081.1 million were registered, while for 2023 the figure stands at $2,850.4 million, that is, $230.7 million less.

The reasons behind this are diverse, but the economic situation and uncertainty in the United States could be the main cause, according to some unions that export in the country.

Specifically, the high inflation in the United States, added to the constant increases in interest rates that the Federal Reserve (FED, central bank) has implemented to curb precisely that inflation, have caused the economy in that country to slow down. and, with it, that the consumption of goods and products that the countries sell to the United States falls.

According to Patricia Figueroa, executive director of the Chamber of the Textile, Clothing and Free Trade Zones of El Salvador (Camtex), "these external problems (situation in the US) are the cause of low demand in the international market and therefore a decrease in orders from our customers”.

The foregoing means that, in a timely manner, the purchasing power of Americans has been reduced, which is why consumption has also decreased, thus causing orders for products abroad to fall.

This situation had already been noticed even since last year by another union such as the El Salador Exporters Corporation (Coexport), which through its president Silvia Cuéllar pointed out that exports in 2023 would be less than those of 2022.

On that occasion, Cuéllar explained that when there was an economic slowdown and a rise in prices, Americans would choose to prioritize their expenses, that is, the products that would experience the most demand would be food, and not any other type.

But why does this situation affect El Salvador? The shortest answer is because that country is the main commercial partner and client of Salvadoran companies that export, since only in the first five months of the year it bought up to $1,041.3 million in Salvadoran products, surpassing neighboring countries such as Guatemala and Honduras combined, the which bought up to $503.4 million and $434.2 million, respectively.

Even so, and despite the fact that between January and May the United States continued to be the largest customer, the registered figure is lower than that of 2022, when that country bought, in the same period, up to $1,190.2 million, that is, that exports to that country has fallen by as much as $148.9 million.

At this point, not only the issue of inflation or the decrease in the purchasing power of Americans has caused this drop in demand, because according to Figueroa, other situations such as the disruption in the supply chain, which still persists, has been affecting since last year, which adds to an excess in the inventories of the distribution companies in the United States, which could be selling less and, therefore, needing less product to supply themselves.

The textile industry continues to keep exports afloat
In the first five months of the year, and despite the fact that the total number of exports has fallen compared to the same period in 2022, some products such as T-shirts, sweaters or socks stand out as representatives of the textile sector, which continues to be driven this indicator of the Salvadoran economy.

The textile industry continues to keep exports afloat

The textile sector
One factor influencing the decline in exports is that, because consumption in the United States is prioritizing more urgent goods such as food, the textile sector has also decreased the amount of products it sends to that country.

This item, in fact, is the one that, despite this drop in exports, continues to maintain this indicator, since it continues to be the economic sector with the greatest projection abroad, and only between January and May of this year it sold up to $757.4 million, equivalent to more than 26.5%, of the total exports that the country made in that course of the year.

In this sense, the products that stood out the most were t-shirts or cotton t-shirts, with $312 million; pullovers or sweaters, with up to $206.7 million; and socks and stockings, with up to $83.4 million.

Other products that stand out, although they do not appear in the top 10 of the most exported by the country, are underpants, tailor suits, or jackets.

One noteworthy piece of information is that, compared to the period January-May 2022, the textile sector has exported up to $70.9 million less just in products such as T-shirts, socks, sweaters or underpants, since last year the exports of these products, only, reached $705.6 million versus $634.7 this year.

On the other hand, and at the level of export volume, the figures have also decreased, although insignificantly, since between January and May 2022, the country sold up to 1,576.2 million kilograms of merchandise abroad, while in the same period this year, the volume amounts to 1,567.7 million kilograms

The United States remains the country's main buyer
The economic situation in the US is closely related to the indicator of Salvadoran exports because it is the country's main trading partner. The North American economy exceeds the purchases made by Guatemala and Honduras combined.

The United States remains the country's main buyer

 

Source:
https://www.elsalvador.com/noticias/negocios/exportaciones-caen-incertidumbre-economica-eeuu/1071988/2023/