El Salvador’s focus today is firmly on the future of technology, which will form the backbone of the next generation of devices and applications. As the industry makes the transition from the PC-centric to a digitally driven world, El Salvador is opening up new frontiers of opportunity.
In El Salvador, we understand the importance of manufacturing quality products that are highly valued by quality-oriented consumer. For more than 20 years, the country has successfully manufactured electrical components and refrigerators sold in the United States, Europe, Asia and the Caribbean.
Multinational electronic corporations like AVX, (Kyocera), have already set up successful assembly operations in El Salvador, learning first-hand the value of El Salvador’s modern technology and automation systems, and its skilled technical labor force.
Due to many of the advantages mentioned above, PROESA is also promoting the sectors of auto parts and electronic components.
The training cost of human resources weighs down on the cost structure of auto parts and electronic industries, making low turn over rates a most relevant advantage of Salvadoran labor.
It is important to stress the recognized productivity of the Salvadoran resource, its fast learning capacity, and special creativity for problem solving. Aware of the need to offer an adequate training for the success of these sectors, the Salvadoran Government has promoted educational programs with Institutions such as San José University, and world renowned companies such as CISCO, Texas Instruments, and Motorola, to catch up on the latest technological advances in education and adequate their programs to the same.
When considering labor and other factors such as electricity, El Salvador is a highly attractive option. Compared to Northern Mexico; Salvadoran labor costs are lower. When compared to other Central American countries, it may not be the lowest, but this is compensated by its high labor productivity and economic stability.
Its proximity to Mexico and the United States makes it possible for labor intensive processes to be done in El Salvador, so that they may be sent “just in time” to be incorporated into the production chains of these countries.
With the free trade agreement with the United States, most of the auto parts and electronic components enjoy free access with 0% tariff, making their incorporation to production lines in that country, even more viable.
Although an evaluation of opportunities requires a specific analysis for treating the process and production at hand, in general terms the Rule of Origin for auto parts and electronic components is quite flexible, only requires a “change of entry” to grant origin, and in most cases it allows to import, from any country, the necessary materials to manufacture and assemble auto parts and electronic components in El Salvador, thus entering the United States free of all tariffs.
Electronics
Based on the openness of the Free Trade Agreement with the United States, human resource availability and prior experience, four niches where El Salvador is especially competitive, have been identified: Electronic Components, Home appliances and computer peripherals, Cable and harnesses assemble and Medical apparatus.
As far a electronic components are concerned, we can easily insert ourselves from LOW END to FINISH LINE. We have the experience necessary to carry out from chemical processes and manufacturing, where engineering, statistics and mathematics, are essential, all the way to assembly processes, such as Molding or Packaging and Testing, which require direct labor. For the manufacturing and assembly of the other electronic products mentioned, we should point out that the plastics industry in El Salvador is quite competitive, and can carry out molding, injection or extrusion processes, as well as manufacture whatever plastic parts are necessary.
Auto Parts
Taking advantage of the opportunity provided by the Free Trade Agreement with the US, and the availability and previous experience of human resource, four niches have been identified in the Auto Parts industry, where El Salvador is highly competitive: Bumpers (fenders), brakes, transmission gear boxes, differential axis, suspension shock absorbers, radiators, mufflers, exhausts, steering wheels, harness, safety belts, air bags Although there is no established auto parts industry, there is experience as far as the reconstruction of the same, which would facilitate the hiring of experienced labor.
KEY SUCCESS STORIES
It is important to mention two success stories within the Salvadoran industry that have helped us greatly to define sectors, processes and products that can be manufactured or assembled in El Salvador.
CASE 1. AVX.
AVX is a Kyocera division established in the country in 1977 before the Salvadoran conflict, and kept production up throughout those years.
At the end of the conflict, when the country takes on the necessary measures and policies to contribute to economic development and foreign investment attraction, AVX starts to grow, not only in production, but also industrial space. Plants that close around the world: Mexico, Czechoslovakia, among others integrate themselves to the productive chains of AVX El Salvador.
At the beginning, they were dedicated solely to assembly, importing the Tantalus chip, but now they are vertically integrated from Front End to Finish Line, carrying out even the chemical processes necessary for the manufacturing of capacitors. These processes, which require knowledge of engineering, chemistry, statistics and mathematics, are carried out successfully at AVX. Presently they are directly competing against China, and continue earning contracts. So much so, that they will soon expand their industrial space, updating processes and incorporating state of the art technological advances.
CASE 2. AEROMAN
AEROMAN is considered the Intel of El Salvador. In 1992, after the FAA came to evaluate the enterprise for certification, they sent a plane with twenty people, who, it was believed at first, came to train Salvadoran workers. However, it turned out to be a group of employees who came to learn from Salvadoran workers. AEROMAN was created to provide maintenance for TACA’s air fleet. Nevertheless, the capacity of the workers and the investment made drove the company to look for other fleets. Their current customers are Jet Blue and America West. Maintenance at AEROMAN includes from the simplest of repairs, such as upholstery, all the way to the most difficult maintenance, such as mechanic and electronic.
For further information on the sector please contact:
Ricardo Artiga / rartiga@proesa.com.sv