Obbligazione Salvadoria 7.65% ( US283875AN23 ) in USD

Emittente Salvadoria
Prezzo di mercato refresh price now   100 USD  ⇌ 
Paese  El Salvador
Codice isin  US283875AN23 ( in USD )
Tasso d'interesse 7.65% per anno ( pagato 2 volte l'anno)
Scadenza 14/06/2035



Prospetto opuscolo dell'obbligazione El Salvador US283875AN23 en USD 7.65%, scadenza 14/06/2035


Importo minimo 10 000 USD
Importo totale 1 000 000 000 USD
Cusip 283875AN2
Coupon successivo 15/12/2025 ( In 166 giorni )
Descrizione dettagliata El Salvador è una repubblica presidenziale dell'America Centrale, caratterizzata da una storia complessa, un'economia in via di sviluppo e una significativa presenza di gang criminali.

Il bond El Salvador con codice ISIN US283875AN23, codice CUSIP 283875AN2, quota al 100%, denominato in USD, offre un tasso di interesse del 7.65%, ha una scadenza il 14/06/2035, pagamenti semestrali, un ammontare complessivo di 1.000.000.000 USD ed un taglio minimo di 10.000 USD.







Interest will be payable semi-annually in arrears on June 15 and December 15 of each year commencing on December
15, 2005. The Notes will mature on June 15, 2035.
The Notes will contain provisions, commonly known as "collective action clauses," regarding acceleration and voting
on future amendments, modifications and waivers that differ from those applicable to certain of the Republic of El
Salvador's outstanding public external indebtedness. Under these provisions, which are described in the sections
entitled "Terms and Conditions of the Notes -- Events of Default" and "-- Modifications, Amendments and
Waivers," the Republic of El Salvador may amend the payment provisions of the Notes and certain other terms with
the consent of the holders of 75% of the aggregate amount of the outstanding Notes.
Except as described herein, payments on the Notes will be made without deduction for or on account of withholding
taxes imposed by the Republic of El Salvador. Application has been made to list the Notes on the Luxembourg Stock
Exchange and will be made to list the Notes on the El Salvador Stock Exchange.
________________
Price: 99.474%
plus accrued interest, if any, from June 10, 2005.
Delivery of the Notes will be made on or about June 10, 2005.
The Notes have not been and will not be registered under the Securities Act. The Notes may not be offered or sold
within the United States or to U.S. persons except to qualified institutional buyers in reliance on the exemption from
registration provided by Rule 144A and to certain persons in offshore transactions in reliance on Regulation S. You
are hereby notified that sellers of the Notes may be relying on the exemption from the provisions of Section 5 of the
Securities Act provided by Rule 144A.
The date of this Offering Circular is June 1, 2005.


EL SALVADOR




IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF
THE REPUBLIC AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS OR THE RISKS INVOLVED.
You should rely only on the information contained in this document or to which we have referred you. We have not
authorized anyone to provide you with information that is different. This document may only be used where it is legal to
sell these securities. The information in this document may only be accurate on the date of this document.
This Offering Circular may only be used for the purposes for which it has been published.
________________
TABLE OF CONTENTS
Presentation of Information ............................................................................................................................................... iii
Forward-Looking Statements............................................................................................................................................. iii
Enforcement of Civil Liabilities ........................................................................................................................................ iv
Exchange Rate Information ............................................................................................................................................... v
Offering Circular Summary ............................................................................................................................................... 1
The Offering ...................................................................................................................................................................... 4
Use of Proceeds ................................................................................................................................................................. 6
The Republic of El Salvador.............................................................................................................................................. 7
The Salvadoran Economy .................................................................................................................................................. 12
Foreign Trade and Balance of Payments ........................................................................................................................... 25
Monetary System ............................................................................................................................................................... 36
Public Sector Finances....................................................................................................................................................... 40
Public Debt ........................................................................................................................................................................ 47
Terms and Conditions of the Notes.................................................................................................................................... 51
Subscription and Sale......................................................................................................................................................... 59
Book-Entry Settlement and Clearance ............................................................................................................................... 61
Transfer Restrictions.......................................................................................................................................................... 64
Taxation ............................................................................................................................................................................. 66
Validity of the Notes.......................................................................................................................................................... 68
General Information........................................................................................................................................................... 69
Because the Republic or its affiliates may purchase and resell the Notes in certain transactions exempt from registration under
the U.S. Securities Act of 1933, as amended (the "Securities Act"), the ability of any subsequent holder of Notes to reoffer, resell,
pledge or otherwise transfer the Notes pursuant to the exemption provided by Rule 144 under the Securities Act may be limited.
_______________
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN
FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES WITH THE STATE OF NEW
HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN
THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY
DOCUMENT FILED UNDER RA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT
NOR THE FACT THAT THE EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION
MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS
OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS
UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT,
ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
The Notes will be direct, general and unconditional obligations of the Republic. The Notes will, at all times, rank equally
without any preference among themselves and at least pari passu with all other present and future unsecured and unsubordinated
Public External Indebtedness (as defined herein) of the Republic.
The Notes will be issued in registered form only. Notes sold in offshore transactions in reliance on Regulation S under the
Securities Act ("Regulation S") will be represented by a permanent global Note (which may be subdivided) in fully registered
i


form without interest coupons (the "Regulation S Global Note") deposited with a custodian for, and registered in the name of a
nominee of, The Depository Trust Company ("DTC") for the respective accounts at DTC as such subscribers may direct. Notes
sold in the United States to qualified institutional buyers (each a "qualified institutional buyer") as defined in, and in reliance on,
Rule 144A under the Securities Act ("Rule 144A") will be represented by a permanent global Note (which may be subdivided) in
fully registered form without interest coupons (the "Restricted Global Note" and, together with the Regulation S Global Note, the
"Global Notes") deposited with a custodian for, and registered in the name of a nominee of, DTC. Beneficial interests of DTC
Participants (as defined under "Book-Entry Settlement and Clearance") in the Global Notes will be shown on, and transfers thereof
between DTC Participants will be effected only through, records maintained by DTC and its direct and indirect participants,
including Euroclear Bank S.A./N.V., as operator of the Euroclear System ("Euroclear") and Clearstream Banking, société
anonyme ("Clearstream, Luxembourg"), if applicable. See "Book-Entry Settlement and Clearance." Except as described herein,
definitive Notes will not be issued in exchange for beneficial interests in the Global Notes. See "Terms and Conditions of the
Notes -- Form, Denomination and Title." For restrictions on transfer applicable to the Notes, see "Transfer Restrictions" and
"Subscription and Sale."
The Republic has taken reasonable care to ensure that the information contained in this Offering Circular is true and correct in
all material respects and not misleading as of the date hereof, and that, to the best of the knowledge and belief of the Republic,
there has been no omission of information which, in the context of the issue of the Notes, would make this document as a whole or
any such information misleading in any material respect. The Republic accepts responsibility accordingly.
This Offering Circular does not constitute an offer by, or an invitation by or on behalf of, the Republic or the Manager to
subscribe to or purchase any of the Notes. Each recipient shall be deemed to have made its own investigation and appraisal of the
financial condition of the Republic. The distribution of this Offering Circular or any part of it and the offering, possession, sale and
delivery of the Notes in certain jurisdictions may be restricted by law. Persons into whose possession this Offering Circular comes
are required by the Republic and the Manager to inform themselves about and to observe any such restrictions. See "Subscription
and Sale" and "Transfer Restrictions" for a description of further restrictions on the offer, sale and delivery of Notes and on
distribution of this Offering Circular and other offering material relating to the Notes.
Each person purchasing Notes pursuant to Rule 144A will be deemed to:
·
represent that it is purchasing the Notes for its own account or an account with respect to which it exercises sole
investment discretion and that it or such account is a qualified institutional buyer (as defined in Rule 144A); and
·
acknowledge that the Notes have not been and will not be registered under the Securities Act or any State securities laws
and may not be reofferred, resold, pledged or otherwise transferred except as described under "Transfer Restrictions."
Each purchaser of Notes sold outside the United States in reliance on Regulation S will be deemed to have represented that it is
not purchasing Notes with a view to distribution thereof in the United States. Each person purchasing Notes pursuant to Rule 144A
also acknowledges that:
·
it has been afforded an opportunity to request from the Republic and to review, and it has received, all additional
information considered by it to be necessary to verify the accuracy of the information herein;
·
it has not relied on the Manager or any person affiliated with the Manager in connection with its investigation of the
accuracy of the information contained in this Offering Circular or its investment decision; and
·
no person has been authorized to give any information or to make any representation concerning the Republic or the Notes
other than those contained in this Offering Circular and, if given or made, such information or representation should not be
relied upon as having been authorized by the Republic or the Manager.
IN CONNECTION WITH THIS ISSUE OF NOTES, DEUTSCHE BANK SECURITIES INC. MAY, ITSELF OR
THROUGH ITS AFFILIATES, OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN
THE MARKET PRICE OF THE NOTES AT A LEVEL WHICH MIGHT NOT OTHERWISE PREVAIL IN THE OPEN
MARKET, TO THE EXTENT PERMITTED BY APPLICABLE LAWS. SUCH STABILIZING, IF COMMENCED,
MAY BE DISCONTINUED AT ANY TIME.
ii


PRESENTATION OF INFORMATION
Unless otherwise specified or the context requires, references to "US dollars" and "US$" are to United States dollars and
references to the "colón" and "colones" and "¢" are to Salvadoran colones.
References to the "Republic" and "El Salvador" are to the Republic of El Salvador.
References to "FOB" are to exports free on board and to "CIF" are to imports including cost, insurance and freight charges.
Data identified as "preliminary data" reflects an interim calculation and is subject to change.
References to maquila are to the assembly of imported goods for re-export.
References to "Central America" and "Central American countries" are to El Salvador, Costa Rica, Guatemala, Honduras and
Nicaragua.
Certain economic and financial data in this Offering Circular is derived from information previously published by the Banco
Central de Reserva de El Salvador (the "Central Bank") and other governmental entities of El Salvador. This data is subject to
correction and change in subsequent publications.
Certain other information in this Offering Circular is derived from information made publicly available by the United Nations.
References to "net international reserves" are to foreign currency reserves. The term current account surplus (deficit) as applied
to the balance of payments includes foreign aid, unless otherwise specified.
Certain amounts included in this Offering Circular have been subject to rounding adjustments; accordingly, figures shown as
totals in certain tables may not be an arithmetic aggregation of the figures which precede them.
FORWARD-LOOKING STATEMENTS
This Offering Circular contains certain forward-looking statements (as such term is defined in the Securities Act) concerning
the Republic. These statements are based upon beliefs of certain government officials and others as well as a number of
assumptions and estimates which are inherently subject to significant uncertainties, many of which are beyond the control of the
Republic. Future events may differ materially from those expressed or implied by such forward-looking statements. Such forward-
looking statements are principally contained in the sections "Offering Circular Summary," "The Republic of El Salvador," "The
Salvadoran Economy," "Foreign Trade and Balance of Payments," "Monetary System," "Public Sector Finances" and "Public
Debt." In addition, in those and other portions of this Offering Circular, the words "anticipates," "believes," "estimates,"
"expects," "plans," "intends," "projections" and similar expressions, as they relate to the Republic, are intended to identify
forward-looking statements. Such statements reflect the current views of the Republic with respect to future events and are subject
to certain risks, uncertainties and assumptions. The Republic undertakes no obligation publicly to update or revise any forward-
looking statements, whether as a result of new information, future events or otherwise. In light of these risks and uncertainties,
there can be no assurances that the events described or implied in the forward-looking statements contained in this Offering
Circular will in fact occur.
iii


ENFORCEMENT OF CIVIL LIABILITIES
The Republic is a foreign sovereign state. Consequently, it may be difficult for investors to obtain or realize upon judgments in
the courts of the United States. Under its Constitution, the Republic is not permitted to consent to jurisdiction of the courts of any
foreign jurisdiction. The Republic has not consented to the jurisdiction of any court outside El Salvador in connection with actions
arising out of or based on the Notes or in connection with the enforcement of any judgment arising out of such actions, nor has the
Republic appointed an agent for service of process outside El Salvador. The Republic has agreed to the following arbitration
provisions as part of the Terms and Conditions of the Notes:
Any dispute, controversy or claim arising out of or relating to the Notes (other than any action arising out of or based on the
United States federal or state securities laws), including the performance, interpretation, construction, breach, termination or
invalidity thereof shall be finally settled by arbitration in accordance with the Arbitration Rules of the United Nations
Commission on International Trade Law (excluding Article 26 thereof) as in effect on the date of the Fiscal Agency Agreement
(the "UNCITRAL Arbitration Rules"). The number of arbitrators shall be three, to be appointed in accordance with Section II
of the UNCITRAL Arbitration Rules. The appointing authority shall be the Chairman of the International Court of Arbitration
of the International Chamber of Commerce. The third arbitrator may be (but need not be) of the same nationality as any of the
parties to the arbitration. The place of arbitration shall be New York, New York. The language to be used in the arbitration
proceedings shall be English. Any arbitral tribunal constituted under this paragraph shall make its decisions entirely on the
basis of the substantive law of the State of New York.
The decision of any arbitral tribunal shall be final to the fullest extent permitted by law, and a court judgment may be
entered thereon by any Salvadoran court lawfully entitled to enter such judgment. In any arbitration or related legal
proceedings for the conversion of an arbitral award into a judgment, the Republic will not raise any defense that it could not
raise but for the fact that it is a sovereign state. The Republic has not consented to the jurisdiction of any court outside El
Salvador, in connection with actions arising out of or based on the Notes or in connection with the enforcement of any
judgment arising out of such actions, nor has the Republic appointed an agent for service of process outside El Salvador. The
Republic waives any forum non conveniens defense in any proceeding in El Salvador.
No arbitration proceedings hereunder shall be binding upon or in any way affect the right or interest of any person other
than the claimant or respondent with respect to such arbitration.
The Republic's consent to arbitration shall not preclude a holder of any Note from instituting legal proceedings against the
Republic in the courts of El Salvador.
The Republic has represented that it has no right to immunity on the grounds of sovereignty or otherwise, from the execution of
any judgment in El Salvador, or from the execution or enforcement in El Salvador of any arbitral award (except, in each case, for
the limitation on alienation of public property) in respect of any proceeding or any other matter arising out of or relating to its
obligations contained in the Notes. The enforcement by a Salvadoran court of a foreign arbitral award is subject to recognition by
the Corte Suprema de Justicia (the "Supreme Court") of the Republic, which will recognize such award if all the required
formalities are observed and the award does not contravene Salvadoran national sovereignty, public policy and "good morals."
Under the laws of the Republic, public property (bienes de uso público) of the Republic located in El Salvador is not subject to
execution or attachment, either prior to or after judgment. The execution of a judgment against the Republic in El Salvador is only
available in accordance with the procedures set forth in Articles 450 et seq. of the Salvadoran Civil Procedure Code, which
envisions registration of the judgment for inclusion in the budget for payment in a subsequent fiscal year of the Republic.
iv


EXCHANGE RATE INFORMATION
From 1989 to December 31, 2000, although El Salvador set no official exchange controls on the colón and the exchange rate
was permitted to float freely based on market forces, the Central Bank had a policy of purchasing and selling US dollars
periodically for the purpose of limiting movement in the colón/US dollar exchange rate. No official fluctuation range was
established.
On November 30, 2000, the Legislative Assembly approved the Ley de Integración Monetaria (the "Monetary Integration
Act"), which fixed the colón to the US dollar at ¢8.75 to US$1.00, effective January 1, 2001. The Monetary Integration Act allows
free circulation of the US dollar in the Salvadoran economy and makes the US dollar the unit of account for the financial system in
El Salvador. See "Foreign Trade and Balance of Payments -- Exchange Rate Policy and Foreign Exchange Rates."
The following table sets forth the high, low, average and period-end market exchange rates for the periods presented, expressed
in colones per US dollar and not adjusted for inflation, as published by the Central Bank. The Federal Reserve Bank of New York
does not report a noon buying rate for colones.
Exchange Rates
Year
High(1)
Low(2)
Average(3)
Period-End(4)
2000 ....................................................................................................................................
8.79
8.71
8.75
8.79
2001(5)................................................................................................................................
8.75
8.75
8.75
8.75
2002(5)................................................................................................................................
8.75
8.75
8.75
8.75
2003(5)................................................................................................................................
8.75
8.75
8.75
8.75
2004(5)................................................................................................................................
8.75
8.75
8.75
8.75
____________
(1) High of monthly average prices for the sale of US dollars stated in colones.
(2) Low of monthly average prices for the purchase of US dollars stated in colones.
(3) The average exchange rate is the average of the purchase and sale prices of US dollars stated in colones.
(4) Average price for the sale of US dollars stated in colones in the last month of the period presented.
(5) Since January 1, 2001, the colón/US dollar exchange rate is fixed at ¢8.75/US$1.00 pursuant to the Monetary Integration Act.
As a result, there is no differentiation between the high, low, average and period-end exchange rates.
Source: Banco Central de Reserva de El Salvador.
Currency conversions contained in this Offering Circular should not be construed as representations that colones have been,
could have been or could be converted into US dollars at the indicated or any other rate of exchange.
v


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OFFERING CIRCULAR SUMMARY
The following summary does not purport to be complete and is qualified in its entirety by, and is subject to, the detailed
information appearing elsewhere in this Offering Circular.
The Republic of El Salvador
General
El Salvador is a republic and its form of government is a representative democracy. In March 2004, Elias Antonio Saca
González was elected President of the Republic. He took office on June 1, 2004, succeeding Francisco Flores, who was elected in
1999. El Salvador is geographically the smallest and also the most densely populated of the five Central American countries. It is
bounded on the south by the Pacific Ocean, on the northwest by Guatemala and on the northeast and east by Honduras. El Salvador
had a nominal gross domestic product ("GDP") of approximately US$15.8 billion in 2004, an increase of 20.5% from the 2000
nominal GDP of approximately US$13.1 billion. In 2004, real GDP grew at a rate of 1.5%, compared to 1.8% during 2003.
Economy
Beginning in late 1989, the government began to implement a number of measures designed to strengthen the private sector
and to minimize the government's role in the economy. In the early 1990s, the government implemented reforms such as the
privatization of the banking system and reorganization of the Central Bank as an independent institution, the introduction of a
value added tax in 1992, the elimination of price controls, the simplification of the tax system and the liberalization of foreign
trade policy through the reduction of tariffs and the establishment of free trade zones. Benefiting from these measures as well as
the signing of the Peace Accord (the "Peace Accord") in 1992 which ended 12 years of guerrilla war in the Republic, El Salvador's
real GDP grew at an annual rate of 5.1% from 1992 to 1999.
More recent steps taken by the government to stimulate the economy and strengthen macroeconomic stability include the
following:
·
Adopting the Monetary Integration Act, which went into effect on January 1, 2001 and fixes the colón to the US dollar at
¢8.75 to US$1.00, allows free circulation of the US dollar in the Salvadoran economy and makes the US dollar the unit of
account for El Salvador's financial sector. The power of the Central Bank to issue new colones or coins ceased as of
January 1, 2001. All deposits, credits, pensions and other operations of the financial system were redenominated to US
dollars on that date. Non-financial firms may use either colones or US dollars to express their financial records and
accounting. Salaries and wages may be denominated in either colones or US dollars and prices can be specified in colones
or US dollars. See "Foreign Trade and Balance of Payments -- Exchange Rate Policy and Foreign Exchange Rates."
·
Reducing the role of government in many sectors of the economy through a series of privatizations designed to encourage
private investment and foster competition. Since commencement of its privatization program in 1998, the government has
received net privatization revenues of approximately US$1,419.5 million, through the privatization of the country's
electricity distribution companies and telecommunications providers. The government also granted private concessions for
certain services and facilities at the international airport and plans to grant additional concessions at a future date. In
addition, the government sold an alcohol factory and six state-owned sugar mills to private investors. The Republic also
announced that it may grant concessions at its port facilities at Acajutla. See "The Salvadoran Economy -- Privatizations."
·
Promoting trade and foreign investment through the implementation of the initiatives of the Mercado Común
Centroamericano (the "Central American Common Market" or "CACM"), reaching free trade agreements with Mexico,
Chile, the Dominican Republic and Panama and qualifying for enhanced, preferential access to the United States market
under the Caribbean Basin Initiative (the "CBI"). See "Foreign Trade and Balance of Payments -- Regional Integration
and Free Trade." On May 28, 2004, the United States signed the U.S. -- Central America Free Trade Agreement
("CAFTA") with the five member countries of the Central America Economic Integration System. On August 5, 2004, the
Dominican Republic was added to CAFTA. The treaty will become effective between the United States and one or more
other signatories upon approval by their respective legislatures. The legislatures of Honduras, Guatemala and El Salvador
have approved the agreement. Approval of the trade agreement by the United States Congress remains pending.
·
Further reforming the tax system through the simplification and the reduction and elimination of some taxes and tax
credits. Recent reforms to the tax system increased the value added tax rate from 10.0% to 13.0%, imposed a tax on
tobacco products and alcoholic beverages, implemented measures to reduce tax evasion, eliminated exemptions, closed
loopholes, provided the tax administration with the tools to enforce tax compliance and to accelerate the imposition of
1


fines and sanctions, introduced a levy on gasoline, diesel fuel, guns, ammunition and fireworks and created stricter
customs enforcement measures. See "Public Sector Finances -- Taxation."
·
Decentralizing the government and modernizing, downsizing and closing public sector institutions. The Republic
increased by law municipal allocations in the general budget to 7.0% of current revenues, reduced the size of government
by decreasing the number of employees and combining ministries and reduced or eliminated subsidies for electricity, water
consumption and public transportation. See "The Salvadoran Economy -- Principal Reforms from 1979 to Present."
·
Reforming the pay-as-you-go pension system commencing in 1996 by creating a private pension system modeled on the
then-existing Chilean system. The prior public pension system remains in place for certain older workers and others who
elected to remain in the public system. See "The Salvadoran Economy -- Employment and Wages -- Pension Reform."
Although the growth rate of El Salvador's real GDP has slowed since 2000 due to the rise in international oil prices, the fall in
international coffee prices, the effects of natural disasters in El Salvador and the slow-down in the U.S. economy from 2000 to
2003, El Salvador's real GDP nevertheless increased at an average annual rate of 1.9% from 2000 to 2004. El Salvador's rate of
inflation, which was 12.1% in 1993, averaged 3.3% for the period from 2000 to 2004. Primarily as a result of the Monetary
Integration Act, the average interest rate on short- and long-term loans fell to 6.5% and 8.2% for the month of April 2005,
compared to 12.2% and 13.7%, respectively, for the month of December 2000.
Worker remittances from Salvadorans abroad and a strong capital account resulted in the steady growth of foreign currency
reserves from 1992 through 1999. Foreign currency reserves declined by approximately 19.3% from December 31, 1999 to
December 31, 2002, as the Central Bank provided commercial banks with US dollars in connection with the implementation of the
Monetary Integration Act. By year end 2004, however, foreign currency reserves increased by approximately 18.9% from
US$1,588.8 million at December 31, 2002 to US$1,888.4 million. The Republic's ratio of public external debt to GDP, which was
39.3% in 1992, increased from 22.0% in 2000 to 36.6% in 2004 primarily as a result of the financing requirements to pay the
reconstruction costs incurred by El Salvador due to the earthquakes that struck the country in 2001. However, the ratio of total
public sector debt declined from 47.6% of GDP at December 31, 2003 to 46.0% of GDP at December 31, 2004.
In recent years, maquila (assembly for re-export) has been the most dynamic activity within the economy, with maquila
production contributing an average of 13.2% of total production in the manufacturing sector in real terms from 2000 to 2004.
According to the Ministerio de Economía (the "Ministry of Economy"), as of December 31, 2004 there were 294 maquila plants,
139 of which are located in free-trade zones, with the remaining 155 operating outside the free-trade zones. Over half of the
maquila plants established in the free-trade zones produce apparel and linens, mainly for export to the United States. In 2004,
maquila exports represented 55.2% of total exports of goods.
Traditionally, coffee has been the main agricultural product of the Republic and an important sector of the overall Salvadoran
economy. As the economy has increasingly come to rely on industrial production, particularly maquila, the importance of coffee to
the economy has lessened. Coffee accounted for 1.4% of real GDP and 11.9% of agricultural production in 2004 compared to
3.8% and 25.5%, respectively, in 1993. Coffee is nevertheless an important source of employment in El Salvador, generating
approximately 65,355 jobs in the 2003/2004 harvest, which accounted for 2.6% of employment nationwide. Coffee is also an
important source of foreign currency. In 2004, it accounted for 3.7% of total Salvadoran exports of goods.
The Peace Accord
In addition to the economic, monetary and fiscal reforms, the government has implemented a series of initiatives designed to
promote social and democratic reforms. These social and democratic reforms flowed from the Peace Accord signed by the
government and the Frente Farabundo Martí para la Liberación Nacional (the "FMLN") ending 12 years of guerrilla war in the
Republic. The three main objectives established by the Peace Accord were:
·
the reintegration of former participants in the guerrilla war into the Salvadoran economy and society;
·
the implementation of democratic reforms; and
·
assistance to rural communities.
The development of programs to achieve these objectives was assisted and monitored by the United Nations. In December
1996, as a result of the implementation of many of these programs, the General Assembly of the United Nations adopted a
resolution to withdraw its on-site observers and continue the United Nations verification responsibilities through periodic visits.
2


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