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Sewing success in El Salvador.

Out on the horizon of a shallow pond less than a mile from the Pacific Ocean, dozens of women and girls - their arms and legs covered in black mud - slosh around, filling crates with huge, succulent shrimp. When the yellow crates come back full, young men hoist the valuable catch onto an embankment for a thorough washing. From there, the shrimp will be trucked in ice-filled barrels to a processing plant, where the day's harvest will be cleaned once again, weighed, packaged and shipped to Miami, and ultimately, the best seafood restaurants in the southeastern United States. "We have the right species of shrimp, the right climate and the right water quality," said Jorge Ramos, chief of aquaculture projects at Fusades, a major export promotion agency in El Salvador. The $500,000 project near Acajutla, located 99 kilometers west of San Salvador, is one of four large-scale shrimping enterprises in the country, which last year exported 1,972 metric tons of frozen shrimp to the United States.

In fact, aquaculture - along with a mushrooming garment industry, nontraditional fruit and vegetable exports, and tourism - is viewed by the government of President Alfredo Cristiani as crucial in the country's efforts to diversify its fragile economy away from traditional products such as coffee and sugar. With El Salvador finally at peace after a 12 year civil war that claimed 75,000 lives and wrecked the nation's infrastructure, those efforts seem to be paying off.

Since the signing of the Chapultepec peace accords earlier this year between Cristiani's administration and the Farabundo Marti National Liberation Front (FMLN), overseas interest in El Salvador's garment industry has skyrocketed, Even during the war-torn times between 1986 and 1991, El Salvador's clothing exports increased 54 percent per year. Francisco Escobar, president of the Salvadoran Apparel Manufacturers Association, says that in the last year alone garment exports from his country to the United States have shot up from $70 million in 1990 to $106.8 million in 1991 and could reach $500 million by 1996. "With the end of the war, we've seen an increase in companies coming in," said the businessman, whose organization represents 90 apparel makers. "Most of the plants that are installed are full and are now buying equipment and increasing capacity. All of a sudden, we're very palatable to large companies. People realize that El Salvador has one of the best work forces in Central America."

William Sandoval, general manager of Primo S.A., a subsidiary of the North Carolina-based Perry Manufacturing Incorporated, points out that before the war El Salvador was considered the Taiwan of Central America for its proliferation of electronic and apparel assembly industries. Many large manufacturers, including Texas Instruments, had plants here. "Not many companies like Perry decided to establish in El Salvador at the time we did," said Sandoval, whose firm employs 900 people at the San Bartolo Free Zone near the old Ilopango airport. "In the 1970s, El Salvador was way ahead of Costa Rica, Haiti and the Dominican Republic put together. Those countries weren't even on the map for apparel exports." Since its establishment here in 1989, Perry has become one of El Salvador's biggest manufacturers, supplying JC Penney, K Mart, Liz Claiborne and other well-known U.S. lines with women's sportswear.

Escobar believes that when it comes to apparel exports, El Salvador enjoys several advantages over its Far East competitors. Soon, he says, the country will be competing head-on with much larger apparel producers in China, Taiwan, Hong Kong, Bangladesh and other Asian nations. "The Orient is good for low-cost labor, but not for quick response time [for changing fashion]. They take up to six months," he said. "Because of Central America's proximity to the main market - the United States - we can compete with cheap imports by using U.S. fabrics and can close the manufacturing cycle in six weeks."

In addition, El Salvador's Export Reactivation Law of 1990 offers a 10-year tax holiday to businesses that ship 100% of their products outside Central America. That law allows for the creation of export processing zones (EPZs) for individual factories anywhere in the country. Producers in these unfenced, unmarked EPZs enjoy duty-free importation of machinery and spare parts and relatively liberal conversion of foreign exchange, in addition to the tax incentives.

As a beneficiary of both the Caribbean Basin Initiative and the U.S. Commerce Department's 807 program, El Salvador has another big advantage: it can export garments to the U.S. duty-free and quota-free using U.S. made fabrics. Proponents say the arrangement guarantees jobs not only in the United States but in El Salvador as well. For example, a local cotton industry, damaged by the war but still viable, can supplement U.S.-sourced fabrics when the need arises. In addition to being the only Central American nation without U.S. apparel quotas, El Salvador has traditionally low wages - 65 cents per hour including benefits - making it even more attractive as a manufacturing site.

The export of fruits and vegetables, both fresh and frozen, is also crucial to the country's recovering economy. Pedro A. Urquilla, executive director of Del Tropic Foods S.A. in the town of Zapotitan, says his company employs more than 150 people in the processing of frozen broccoli, black-eyed peas and okra for U.S. supermarket chains. The sparkling modern plant, which was previously used for drying coffee, contributes to a $3.5 million vegetable export industry that did not exist 10 years ago. Urquilla says that last year El Salvador exported six million pounds of okra, one million pounds of black-eyed peas and two million pounds of broccoli.

The fact that El Salvador is the only Central American nation without a port on the Atlantic Ocean has hurt exports in the past. But an agreement recently reached with Dole Pineapple allows Salvadoran melon growers to truck their produce to Puerto Cortes, Honduras, and ship the melons in Dole's refrigerated containers to the U.S. Gulf Coast at a fraction of conventional shipping costs. Last year, El Salvador exported 900,000 boxes of cantaloupes to the United States and elsewhere, earning an average of $14 a box. If the agreement succeeds, El Salvador will use the containers to export papayas, pineapples and even ornamental plants such as crotons to the United States and Western Europe.

The Dole refrigerated containers may also aid in stimulating the export of a yet untapped commodity, bananas, currently fetching high prices around the world. "The growing conditions appear to be ideal," explained Mauro Suazo, transportation chief at the Fusades office in Miami. "We have approached several banana companies about investing in El Salvador but the fact that we don't have an Atlantic port makes it difficult."

El Salvador depends more on coffee exports (35 percent of its revenues) than any other country in Latin America. Unfortunately, coffee prices have dropped by half since the 1989 collapse of the International Coffee Organization. "This is a disaster for El Salvador and for all of Central America," said Ruben Ernesto Pineda, executive director of the Salvadoran Coffee Council, an agency headed by the Ministry of Economy. "Coffee growers are in a panic. They're not working, and they're in danger of losing their property. Right now, we're looking at every measure possible to help the farmers." Last year, El Salvador earned only $219 million in coffee exports, down from $260 million during 1990. Volume dropped as well, from 148 million kilograms in 1990 to 127 million kilograms in 1991.

The country's economic problems are compounded by a severe energy crisis. Like other Central American nations dependent on hydroelectric power, El Salvador is struggling with one of the worst droughts in 50 years. The drought has led to power blackouts which can last eight hours a day in the capital and has disrupted phone service in many areas. In addition, much of the damage inflicted by the war has yet to be repaired. "Out of 308 central offices, 42 were destroyed during the fighting," said Carlos Armando Aviles, general manager of Antel, El Salvador's state-owned telephone monopoly. "In this phase of national reconstruction, the government is giving priority to restoring public services such as water, electricity and telephones. Antel, at this moment, is working in Chalaltenango, Morazan and other zones most affected by the conflict."

Currently, some 125,000 lines serve El Salvador's five million people, giving the country a telephone density of only 2.5 lines per 100 inhabitants, one of the lowest in the Western Hemisphere. "We calculate that we need 300,000 lines to satisfy 80 percent of current demand," said Aviles. In fact, the U.S. Commerce Department puts telecommunications equipment at the top of a list of products viewed as particularly promising exports to El Salvador. The report notes that the business outlook for El Salvador, which bought $534 million worth of U.S. goods in 1991, is very favorable.

Last year, Antel's revenues came to 952.9 million colones ($118 million), making it one of the country's most profitable companies. More than 75 percent of that income was derived from long-distance calls between El Salvador and the United States, home to an estimated one million Salvadoran refugees. For this reason, says Aviles, he worries about U.S. immigration laws. "If those refugees lose their temporary status and are deported back to El Salvador, it would cause an economic and social crisis." Adds Jose Antonio Quiros, president of the Salvadoran Exporters Association: "If these people all come back, we'd be broke. We don't produce anything. We live off $1 billion in remittances coming from Salvadorans in the United States. It's a very weak economy. We must increase exports, and we have to transform El Salvador from a consumption economy to a production economy."

One way of doing this, government officials say, is by cementing the country's political and economic ties with its Central American neighbors. In May, El Salvador's Cristiani, Guatemalan President Jorge Serrano and Honduran President Rafael Leonardo Callejas signed a trilateral accord calling for the elimination of trade barriers between the three countries. Jose H. Erquicia, chief spokesman for El Salvador's Comision Ejecutiva Portuaria Autonoma, said one of the possibilities the agreement opens up is a long discussed scheme known as the "canal seco" project. "The canal seco is an attempt to unite the Atlantic and Pacific Oceans using trains," said Erquicia. "We would be able to export to the Atlantic directly, and not have to truck everything to Santo Tomas de Castilla, Guatemala, or Puerto Cortes, Honduras, as we do now. With trains, you can move much more than with trucks. What we're trying to do with this project is move products of the three countries at a lower cost and higher volume." In the meantime, El Salvador is spending $10.5 million to upgrade and modernize the Pacific port of Acajutla. Erquicia said that last year, the port handled more than 238,000 metric tons of exports, mainly coffee, and nearly one million tons of imports, mainly grain.

With the peace process firmly in place, tourism - virtually nonexistent during the war - is now expected to increase as well. Carlos Hirlemann, general manager of the Hotel Siesta and president of the government-run Instituto Salvadoreno de Turismo, says the country currently has 1,200 hotel rooms and seven tourist-class hotels, including the four-star Carmino Real in downtown San Salvador. Last year, some 200,000 people - including Salvadorans living in the United States - visited El Salvador, up from 130,000 people in 1989. "We think that before President Cristiani's term is over, we'll get more than half a million tourists a year," Hirlemann said. "El Salvador has an important characteristic as a tourist destination. With a geographical perspective towards North and South America, we're exactly in the middle. We enjoy an almost perfect climate and have every variety of topography. In a country of only 8,000 square kilometers, all our attractions are an hour's drive of each other."

Among El Salvador's prime attractions are black sand Pacific beaches, towering volcanoes such as Cerro Verde and an abundance of flora and fauna. As Hirlemann says," for a country as over-populated as ours, it's surprisingly green." Within the next few months, he added, the government will probably drop the visa requirement for U.S. tourists, who make up more than 60 percent of foreign visitors to El Salvador.

But some business leaders believe a complete recovery of the Salvadoran economy is unlikely unless the country can patch up the political and social differences which led to the civil war in the first place. Luis Cardenal is a member of the board of directors of the El Salvador Chamber of Commerce and Industry. The owner of a company that manufactures wood products and construction materials, Cardenal is also president of the Center for Democratic Studies, a conservative think tank established in 1987. "Our goal is to change things in such a manner that violence will never happen again," he said. "For instance, we're bringing 15 of the most important business executives to meet with 15 or 20 high-ranking officers of the FMLN, to discuss the implementation of a market economy within a social context." Cardenal sums up, "We have come to one conclusion. In order to have economic development, we have to have trust and confidence, which in turn leads to stability."

Larry Luxner is a freelance journalist based in San Juan, Puerto Rico.
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Title Annotation:garments export industry
Author:Luxner, Larry
Publication:Americas (English Edition)
Date:Jul 1, 1992
Previous Article:The silver years.
Next Article:Competing for the encounter.

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