Obligation Salvadoria 6.375% ( US283875AS10 ) en USD

Salvadoria

100 % ⇌

Pays-bas

US283875AS10 ( en USD )

6.375% par an ( paiement semestriel )

18/01/2027

Prospectus brochure de l'obligation El Salvador US283875AS10 en USD 6.375%, échéance 18/01/2027

18/01/2026 ( Dans 170 jours )

El Salvador, le plus petit pays d'Amérique centrale, est une république dotée d'une histoire riche marquée par la colonisation espagnole, des conflits civils et des efforts récents de développement économique et touristique.

L'obligation souveraine, identifiée par le code ISIN US283875AS10, est émise par El Salvador, une nation d'Amérique Centrale active sur les marchés de capitaux internationaux, bien que le pays d'émission formel pour cette souche soit les Pays-Bas; cette dette à coupon fixe est libellée en dollars américains (USD), affiche un taux d'intérêt annuel de 6,375% payable semestriellement (fréquence de paiement de 2), arrive à maturité le 18 janvier 2027 et se négocie actuellement à 100% de sa valeur nominale sur le marché.

OFFERING CIRCULAR

The Republic of El Salvador

US$800,000,000
6.375% Notes due 2027

The Republic of El Salvador (the "Republic" or "El Salvador") is offering US$800,000,000 aggregate
principal amount of its 6.375% Notes due January 18, 2027 (the "Notes"). Interest on the Notes will be
payable semi-annually in arrears on January 18 and July 18 of each year commencing on January 18, 2015.
The Notes will mature on January 18, 2027. This Offering Circular constitutes a prospectus for the purpose
of the Luxembourg Law dated July 10, 2005 on prospectuses for securities, as amended.
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's outstanding Public External Indebtedness (as defined herein). 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 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. Application has been made to list the Notes on the Official List of
the Luxembourg Stock Exchange and to have the Notes admitted to trading on the Euro MTF Market.
Application will also be made to list the Notes on the El Salvador Stock Exchange.
See "Risk Factors" beginning on page 9 regarding certain risk factors you should consider before
investing in the Notes.
Price: 100.000%
plus accrued interest, if any, from September 18, 2014
Delivery of the Notes will be made on or about September 18, 2014.
The Notes have not been and will not be registered under the Securities Act of 1933, as amended (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 under the
Securities Act and to certain persons in offshore transactions in reliance on Regulation S under the Securities
Act. 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 under the Securities Act.
Joint Lead Managers and Joint Bookrunners
Citigroup
Deutsche Bank Securities
The date of this Offering Circular is September 11, 2014

El Salvador

SantaTecla

IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF
THE REPUBLIC AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND THE RISKS INVOLVED.
You should rely only on the information contained in this Offering Circular or to which we have referred you. We have
not, and the Joint Lead Managers and Joint Bookrunners have not, authorized anyone to provide you with information
that is different from the information contained in this Offering Circular. This Offering Circular may only be used where
it is legal to sell these securities. The information in this Offering Circular may only be accurate on the date of this
Offering Circular.
This Offering Circular may only be used for the purposes for which it has been published.

________________

TABLE OF CONTENTS
Page

PRESENTATION OF INFORMATION ....................................................................................................................................... iii
FORWARD-LOOKING STATEMENTS ..................................................................................................................................... iii
ARBITRATION AND ENFORCEABILITY ................................................................................................................................ iv
EXCHANGE RATE INFORMATION .......................................................................................................................................... v
OFFERING CIRCULAR SUMMARY .......................................................................................................................................... 1
THE OFFERING ............................................................................................................................................................................ 6
RISK FACTORS ............................................................................................................................................................................ 9
USE OF PROCEEDS .................................................................................................................................................................... 11
THE REPUBLIC OF EL SALVADOR ........................................................................................................................................ 12
THE SALVADORAN ECONOMY ............................................................................................................................................. 17
FOREIGN TRADE AND BALANCE OF PAYMENTS ............................................................................................................. 37
MONETARY SYSTEM ............................................................................................................................................................... 47
PUBLIC SECTOR FINANCES .................................................................................................................................................... 53
PUBLIC DEBT ............................................................................................................................................................................. 62
TERMS AND CONDITIONS OF THE NOTES .......................................................................................................................... 66
SUBSCRIPTION AND SALE ...................................................................................................................................................... 74
BOOK-ENTRY SETTLEMENT AND CLEARANCE ................................................................................................................ 77
TRANSFER RESTRICTIONS ..................................................................................................................................................... 80
TAXATION .................................................................................................................................................................................. 82
VALIDITY OF THE NOTES ....................................................................................................................................................... 85
GENERAL INFORMATION ....................................................................................................................................................... 86
_______________

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 RSA 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
i

Public External Indebtedness (as defined herein) of the Republic; provided, however, that the Republic shall have no obligation to
effect equal or ratable payment(s) at any time with respect to any such other Public External Indebtedness and, in particular, shall
have no obligation to pay other Public External Indebtedness at the same time or as a condition of paying sums due on the Notes
and vice versa.
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 one or more permanent global notes in fully registered 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 one or more permanent global notes 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 for the respective accounts at DTC as such subscribers may
direct. 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 Offering Circular 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 Joint Lead
Managers and Joint Bookrunners to subscribe for 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 Joint Lead Managers and Joint Bookrunners to
inform themselves about and to observe any such restrictions. See "Transfer Restrictions" and "Subscription and Sale" 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 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 Joint Lead Managers and Joint Bookrunners or any person affiliated with the Joint Lead Managers
and Joint Bookrunners 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 Joint Lead Managers and Joint Bookrunners.

IN CONNECTION WITH THIS ISSUANCE OF NOTES, EACH JOINT LEAD MANAGER AND JOINT
BOOKRUNNER 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.
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" in the tables included in this Offering Circular reflects an interim calculation and are 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 are derived from information previously published by Banco
Central de Reserva de El Salvador (the "Central Bank") and other governmental entities of El Salvador. These data are subject to
updates and change in subsequent publications. The Central Bank is currently in the process of implementing a new statistical
methodology following the 1993 United Nations System of National Accounts recommendations. Some information in this
Offering Circular is preliminary and in the process of updating.
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", "contemplates",
"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 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.

ARBITRATION AND ENFORCEABILITY
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 of the required
formalities are observed and the award does not contravene Salvadoran national sovereignty, constitutional rights or public policy
and compliance with the obligations stated in the award is lawful in El Salvador. 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 Article 182
ordinal 4 of the Constitution of the Republic of El Salvador and the procedures set forth in and Articles 555 to 558 and 590 et seq.
of the Salvadoran Civil and Business Procedure Code; pursuant to Article 590, if the budget of the fiscal year in which a final
judgment is issued is not adjusted to provide for payment of the judgment, registration of the judgment for inclusion in the budget
of a subsequent fiscal year of the Republic is required for payment.

EXCHANGE RATE INFORMATION
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. Since January 1, 2001, the colón/US
dollar exchange rate has been fixed at ¢8.75/US$1.00 pursuant to the Monetary Integration Act. 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.
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.

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 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 is a republic and its form of government is a representative democracy. On March 9, 2014, Salvador Sánchez
Cerén of the Frente Farabundo Martí para la Liberación Nacional ("FMLN") party was elected president of the Republic. He
took office on June 1, 2014, succeeding Carlos Mauricio Funes Cartagena, who was elected in 2009.
In 2012, El Salvador had nominal gross domestic product ("GDP") of approximately US$23.8 billion and real GDP grew by
1.9%. The highest growth rates by economic sector for the year were 3.5% in agriculture, livestock and fishing, 2.8% in mining,
2.8% in real estate and business services, 2.6% in trade, restaurant and hotels and 2.6% in government services. The only sector to
register a contraction was finance and insurance (2.8%), caused by lower short-term and long-term interest rates, which reduced
bank profits. In 2013, nominal GDP was approximately US$24.3 billion and real GDP grew by 1.7%. The highest growth rates by
economic sector were 3.8% in finance and insurance, 3.3% in government services, 2.8% in real estate and business services and
2.2% in transportation, storage and communications. The only sector to register a contraction in 2013 was agriculture, livestock
and fishing (0.4%), caused by reduced coffee production and lower international coffee prices. Preliminary real GDP figures
reflect growth of 2.0% for the three-month period ended March 31, 2014, as compared to 1.3% for the same period in 2013.
According to the United Nations Human Development Report 2014, El Salvador's per capita gross national income ("GNI")
based on 2013 figures and adjusted for purchasing power parity was US$7,240.
Recent Political and Economic Developments
In his inaugural speech, President Sánchez Cerén announced the priorities of his administration. The administration's policies
will address three main priorities: security, employment and education. The government's initiatives will promote greater
international integration, for example, by building on the Managua Declaration, in which the presidents of El Salvador, Honduras
and Nicaragua declared their intention to improve economic and social cooperation among the three countries. President Sánchez
Cerén also discussed entering the Petrocaribe alliance as a full member state and his desire to develop deeper economic ties with
the United States, including through a continuation of the Partnership for Growth. His administration also will undertake initiatives
to combat corruption and tax evasion. Additionally, President Sánchez Cerén reaffirmed the government's commitment to achieve
final approval for a second grant program from the United States Millennium Challenge Corporation ("MCC") to fund Proyeto
Fomilenio II, which would include investments in improving El Salvador's business climate, infrastructure and human capital.
Separately, the president has reaffirmed his commitment to the El Salvador Adelante ("Forward El Salvador") plan comprising 33
strategies and 85 commitments for increasing employment opportunities, reducing the cost of living, increasing the well-being of
Salvadorans, improving education and security, protecting the environment and launching further initiatives to improve
governance.
Fiscal Sustainability Agreement
In October 2012, the government entered into the Acuerdo para la Sostenibilidad Fiscal, (the "Fiscal Sustainability
Agreement") with support from all the political parties represented in the Legislative Assembly. The Fiscal Sustainability
Agreement aims to achieve fiscal sustainability without compromising social development.
Within the framework of the Fiscal Sustainability Agreement, the government has taken the following measures:
repayment of US$600 million of internal short term notes ("LETES") and use of US$200 million to finance necessary
current expenditures, such as the 2014 elections, purchases of medications, and certain subsidies (e.g., for electricity,
liquid petroleum gas and public transportation).
implementation of a third phase of fiscal reforms, including new measures to improve income and reduce expenditures.
This third phase included the Fiscal and Social Responsibility Act, which sets limits on the fiscal deficit and on the level

1

of public indebtedness. Additional expenditure measures include voluntary retirement of public sector employees; a 2013
savings and austerity policy that restricted increase in wages and the creation of new public sector jobs and reduced public
procurement by 10%; a new payment mechanism for the liquid petroleum gas subsidy; a 50% reduction of the public
transportation subsidy; and a restriction on the authorization of current expenditures.
implementation of reforms to the Income Tax Law to incorporate a minimum payment of income tax of 1% of net assets.
The reforms also eliminated a tax exemption under the Printing Law that exempted publishers and printers from taxes in
connection with activities related to the production, distribution and sale of newspapers, magazines, other printed media
(other than books, for which the tax exemption remains in effect). The reforms also adopted guidelines from the
Organization for Economic Cooperation and Development ("OECD") on transfer pricing and provide for the development
of control mechanisms for equipment used in processing credit and debit card payments. The reforms include
amendments to the Tax Code designed to reduce tax evasion. Finally, a financial transactions tax law introduces a 0.25%
tax on amounts over US$1,000 paid by check or by electronic transfer within the country and a tax of 0.25% on deposit
operations, payments and cash withdrawals that, individually or in the aggregate, exceed US$5,000. The government has
included provisions that seek to prevent the financial transactions tax from imposing an undue burden on the lower
income segment of the population. See "Public Sector Finances -- Tax Reforms."
In May 2010, the government published its Plan Quinquenal de Desarrollo 2010-2014 ("Five-Year Development Plan").
The Five-Year Development Plan contains the vision, priorities, objectives and goals of the government for the medium- and long-
term periods and includes an outlook through 2024. Its main purpose is to help ensure consistency and coordination of
government action and to provide a strategic framework for productive socio-economic development. The strategy for achieving
the objectives of the Five-Year Plan is based on implementing the following: (i) a universal social protection system and other
social policies related to health, education and housing; (ii) the development of a financial system that extends credit to the various
productive sectors of the economy, particularly the micro, small- and medium-sized businesses and entrepreneurs and farmers and
producers in the agricultural sector; (iii) policies directed at a sustainable macroeconomic environment and inclusive of various
sectors of society; (iv) a productive development strategy that reorients government resources and services to promote innovation
and entrepreneurial initiatives and creates new ways of enabling access to financial resources and quality management; (v) policies
on internal security, democratic coexistence and international relations; and (vi) public investments in strategic programs that
address (a) equity, social inclusion and poverty reduction, (b) economic recovery, (c) sustainable development and (d) internal
security. The plan was further revised in 2011, altering certain financial targets and the priority of certain government programs.
The Technical and Planning Secretariat of the Presidency is currently drafting the Five-Year Development Plan for the period
2014-2019 and plans to finish and publish the document by the end of 2014. This plan will continue to build on the work of the
previous administration and will focus on creating employment with sustained growth, providing education with greater social
integration and providing Salvadorans with effective security from violence and crime.
El Salvador implemented a set of actions aimed at strengthening security, increasing productivity and investments and
sustaining growth and employment. These include the Partnership for Growth Agreement (the "Partnership for Growth") entered
into with the United States. The Partnership for Growth is a joint economic development program announced in March 2011
during U.S. President Obama's visit to El Salvador and was signed in November 2011. The program's goal is to identify key
issues and barriers to economic growth and to unify efforts of both governments to remove such barriers. The agreement is
expected to cover five years. During the first year, an interagency commission identified two binding constraints to economic
growth in El Salvador, namely (i) crime and security and (ii) low productivity in tradable goods. A joint action plan was prepared
to address these constraints, including 20 strategic goals, each of which has its own specific actions to be implemented by the
governments of El Salvador and the United States. As of May 2014, the Fifth Semiannual Report discloses that 17 of the 20 goals
are on target and the remaining three goals are behind target.
Proyecto Fomilenio II
In December 2011, the MCC selected El Salvador as eligible to develop proposals for a second funding program with the
United States Millennium Challenge Account. This second funding program, which the MCC calls a "compact," is contingent on
continued good policy performance and proposals that have significant potential to promote economic growth and reduce poverty.
The first funding program of US$461.0 million supported Proyecto Fomilenio, which was completed in 2012 and included
investments in infrastructure and work-force training.
In 2013, El Salvador prepared concept papers for proposed investments of a second compact. During 2013 and 2014, the
MCC financed activities to assess the expected impact of the proposed investments, to further design activities and to develop
implementation strategies. In September 2013, the MCC's Board approved the second compact for El Salvador in the amount of
US$277 million, which is pending final signature upon confirmation by the MCC that all conditions have been fulfilled.

2

Preliminary plans for the second MCC compact, which in El Salvador is referred to as Proyecto Fomilenio II, include an
investment climate project, a human capital project and a logistical infrastructure project, with each project having two
components. The investment climate project has one component to prioritize and promote regulatory reforms that will increase El
Salvador's competiveness in international markets and to change the perception of the business climate in El Salvador. The
second component is to encourage the government to develop partnerships with private enterprises for critical public services. The
human capital project's first component is to improve education quality by reforming the laws, policies and operations of the
education system, including promotion of the full-time student model, curriculum improvements and teacher training in subject
matter topics and in pedagogy. The second component is to reform the technical and vocational education and training system
("TVET"), which includes the establishment of an institution to provide the legal and institutional framework and to establish
curriculum development, career counseling and standards for accreditation and certification. The logistical infrastructure project's
first component is to relieve congestion on the most transited segment of El Salvador's coastal highway, which is one of the
country's most important logistical corridors, by expanding the road to four lanes. The second component is aimed at reducing
freight and passenger traffic congestion at the border with Honduras by constructing a new road to the border and by modernizing
the border-crossing facilities.
2014 Budget
The 2014 budget was approved by the Legislative Assembly on October 31, 2013. The 2014 budget contemplates a non-
financial public sector deficit of 1.8% of GDP, excluding obligations related to the pension system. Among the main assumptions
considered for its formulation were a 3.2% inflation rate, real GDP growth of 2.6%, international oil barrel price of US$105.3,
international coffee prices at US$170.1 per quintal and a 2.6% growth rate for the U.S. economy.
Economic Performance
El Salvador's real GDP increased at an average annual rate of 0.8% from 2009 to 2013. Real GDP contracted 3.1% in 2009
due to the Global Economic Crisis. In the past four years, El Salvador has experienced a slow recovery from the Global Economic
Crisis, achieving real GDP growth of 1.4%, 2.2%, 1.9% and 1.7% for 2010, 2011, 2012 and 2013, respectively. Estimated GDP
growth for the three-month period ended March 31, 2014 was 2.0%, compared to 1.3% for the same period in 2013.
Inflation was (0.2)% in 2009 as a result of decreased internal and external demand. In 2010, inflation increased to 2.1%
primarily due to price increases in food, beverages and transportation. In 2011, inflation was 5.1%, concentrated in the first half of
the year, mainly due to increased food and oil prices resulting from volatility of international oil prices related to political unrest in
certain Arab countries and increased utilities prices resulting from adjustments in government subsidies. In both 2012 and 2013,
inflation was 0.8% as the prices of food, clothes, footwear and oil-derived products declined. As of July 31, 2014, 12-month
inflation was 1.8%, primarily driven by increased food and beverage prices and restaurants and hotel prices, compared to a year-
on-year inflation of 1.1% as of July 31, 2013.
Remittances from Salvadoran workers abroad are an important source of income for the Salvadoran economy, representing
US$4.0 billion, or 16.3% of GDP in 2013. For the seven months ended July 31, 2014, remittances increased by approximately
8.1% as compared to the same period in 2013. See "Foreign Trade and Balance of Payments -- Current Account."
Manufacturing is a key sector of the Salvadoran economy. Since 2009, manufacturing has generated an annual average of
18.6% of El Salvador's nominal GDP. Manufacturing activity contracted by 3.0% in 2009, due to the effect of the Global
Economic Crisis, which generated weak external demand, leading to decreased exports, and reduced remittances that consequently
reduced internal income and demand. During 2010, 2011, 2012 and 2013, manufacturing activity experienced a gradual recovery,
with annual growth rates of 1.9%, 2.7%, 1.3% and 2.1%, respectively. During the three-month period ended March 31, 2014, the
manufacturing sector increased 2.1%, compared to growth of 1.9% for the same period in 2013.
In recent years, maquila (assembly for re-export) has been one of the most important areas in the manufacturing sector,
contributing an average of 9.2% of total production in the manufacturing sector in real terms from 2009 to 2013. According to the
Ministry of Economy, as of July 31, 2014, there were 240 companies that benefitted from the free trade zones law, of which 136
were located in free trade zones, with the remaining 104 operating outside the free trade zones boundaries. Over half of the 240
beneficiaries produce apparel and linens; 92 of them are maquila plants.
Coffee is the Republic's principal agricultural export and is an important source of employment in El Salvador. The coffee
industry generated approximately 86,000 jobs during the 2012/2013 harvest. During the 2013/2014 harvest, the coffee industry
generated approximately 35,000 jobs, with coffee rust (a coffee plant disease) and drought among the factors responsible for the
decline from 2012/2013. In 2010, 2011, 2012 and 2013, coffee accounted for 74.5%, 79.9%, 71.5% and 66.7% of agricultural
exports and 4.7%, 8.7%, 5.6% and 4.3% of total exports of goods, respectively. The decline in coffee production and exports in

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