POSITIVE IMPACT OF FREE ZONES

The companies covered by the regime of Free Zones, Service Parks and DPA's (Inactive Improvement Warehouses) mean for the country: Generation of productive employment, promotion of exports, technology transfer and, in general, socio-economic development in El Salvador.

According to a technical study prepared by CAMTEX in 2017, one of the most important findings was:

For every US$1.00 of incentive granted to the free zone regime, El Salvador receives US$6.00 in economic and social return

And how do the companies covered by the Free Trade Zones, Service Parks and DPA's (Active Processing Warehouses) regime return that incentive dollar to the country?

  • Through the purchase of goods and services from local companies, mostly SMEs.
  • In the payment of salaries to more than 70 thousand workers, to whom their ISSS and AFP contributions are paid.
  • Generation of income payment for wages.
  • Tax on income generated by employment generated.
  • In the development of additional projects that benefit the communities surrounding the Free Zones, where the greatest beneficiary is the collaborator and their families, in projects focused on education, training, health services and environmental improvements, among others.

PRODUCTIVE LINK

The regime of Free Zones, Service Parks and DPA's (Active Processing Warehouses) improve the quality of life of many Salvadoran families directly and indirectly throughout the production chain, and impacts at the national level through the consumption they make working families in the acquisition of food, transportation, education, health, among others.

Contribution of Free Zones

JOB CREATION

DIRECT JOBS

The Free Zone regime is the most inclusive economic activity, by contracting 76,000 formal workers who contribute to the Salvadoran Social Security Institute (ISSS) in 2022.

For almost 50 years, the Free Zone scheme has been a real employment opportunity for Salvadorans and economic growth for the country.

  • More than 60% of formal employment are women heads of household.
  • The Textile and Clothing sector is the largest employer of the rest of the economic activities within the Free Zone regime.
  • The regime is vital to maintain first place in the generation of formal employment in terms of productive sectors.
  • The companies located within the regime of Free Zones, Service Parks and DPA's (Active Processing Warehouses) comply with national labor regulations, and most grant additional benefits to the law, and other multinational companies comply with the demanding standards of the houses arrays. Free Zone companies pay legal benefits to all formal personnel, which are made up of: social security, savings for pensions, vacations, Christmas bonus, annual settlement, INSAFORP, etc. These contributions can represent up to 30% additional to the salary.

INDIRECT JOBS

Indirect jobs are generated through all subcontracting activities, and supply of inputs carried out by the companies that work in the Free Trade Zones.

Some economists mention that for each formal job, 2 indirect jobs are generated, therefore, taking this theory into account, it can be estimated that by the year 2022, the Free Zones regime generated approximately 152,000 indirect jobs.

 

TERRITORIAL DEVELOPMENT

The Free Zones are large centers of commercial and urban development, thus revitalizing the municipalities where the activity of the Free Zones, Service Parks and DPA's (Inactive Processing Warehouses) are concentrated, in addition to undergoing a positive transformation, since there is a strong urbanization trend – urban housing projects proliferate, construction of large shopping centers and development of the road network.

PRODUCT DIVERSIFICATION

  • Free Trade Zones and DPA's have allowed productive diversification with new exporting productive sectors.
  • The new productive activities developed are in the agro-industrial sector with export of tuna, export of cuttings and vegetables, vehicle harnesses, plastic products, paper and cardboard products, etc. This area continues to have great potential, and progress can be made in pharmaceuticals and technology.
  • In this diversification, the weight of the Textile and Clothing sector has prevailed, where it underwent a reconversion from maquila to a complete package. With this new modality, contracts based on competitive capacities were obtained, derived from a greater integration of the textile industry, which allowed competitive costs and delivery of orders under the “just in time” modality.
  • It also diversified into a new value chain. The synthetic textiles chain was created, which consisted of importing the raw material (PET) to make yarn, then manufacture the fabric, and finally make garments for higher-value international brands.
    New activities with higher added value in the textile chain arose, where textile industries began to offer logistics services, and other specialized logistics companies also offer raw material handling and finished product logistics services.

CORPORATE SOCIAL RESPONSIBILITY

  • The Free Trade Zones, as well as the companies located within them, implement Corporate Social Responsibility projects that not only benefit the collaborators, but also their families and the communities surrounding the zone.
  • The companies are highly committed to reducing the environmental impacts associated with the activities of the companies that host the free zones, developing actions such as the integral management of sewage, waste treatment, residues and others.
  • The companies covered by the Free Zones scheme are committed to areas such as: The environment, training, entrepreneurship, prevention against violence, health, social reintegration, sports and development.
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