War and civil unrest in El Salvador during the 1980s disrupted production, undermined the export sector, and raised the demand for imported goods. As import levels
|Trade (expressed in billions of US$): El Salvador|
|SOURCE: International Monetary Fund. International Financial Statistics Yearbook 1999.|
began to surge in the early 1990s, the trade deficit grew, reaching US$1.7 billion in 1995, about 15.4 percent of the GDP. By 1999, the deficit had narrowed slightly to US$1.6 billion, accounting for 13.3 percent of the GDP.
Total exports in 1999 amounted to around US$2.5 billion, and imports were about US$4.1 billion. These amounts rose to US$2.8 billion for exports and US$4.6 billion for imports by 2000, according to the World Fact-book. Over the years, El Salvador's trade imbalance has been partially offset by family remittances. However, continuing deficits have forced the country to rely on foreign aid to pay for consumption.
El Salvador is dependent on the United States for a majority of its trade. Exports to the United States grew steadily over the latter part of the 1990s, climbing from US$844 million in 1995 to US$1.5 billion in 1999. By the end of the decade exports to the United States accounted for 63 percent of the total. Imports of U.S. goods grew as well during this period, though not as dramatically, rising from US$1.7 billion in 1995 to about US$2.1 billion in 1999. As of 1999, about 52 percent of Salvadoran imports came from the United States.
El Salvador's largest trading partner behind the United States is Guatemala, which accounts for about 11 percent of its exports and 9 percent of its imports. The remaining trade is conducted primarily with Germany, Japan, Costa Rica, Honduras, the Netherlands, Mexico, and Panama. El Salvador's main exports include coffee, sugar, and shrimp, as well as textiles and products derived from offshore assembly.
The Triangulo del Norto (Northern Triangle, or NT, consisting of El Salvador, Guatemala, and Honduras) has negotiated a free trade agreement with Mexico pending approval from the United States. Talks with Mexico stalled in 1998 when NT countries demanded they be given up to 15 years of preferential access to Mexican markets to allow local industries time to retool and to mitigate near-term trade imbalances which might arise from an influx of Mexican goods. Disputes blocking the deal were resolved in the latter part of 2000, and an agreement was signed. Mexican industries have become increasingly interested in Central American markets, primarily for the distribution of household appliances, processed foods, clothing, and footwear. Under the terms of NAFTA, trade agreements between Mexico and her neighbors must gain U.S. approval.
El Salvador, at least in the near term, will probably not succeed in its bid to gain NAFTA parity for its exports. NAFTA parity would benefit El Salvador by making merchandise shipped to the United States more competitive. Rising levels of drug trafficking and organized crime in El Salvador could complicate future bids for export parity.