Obligation Salvadoria 5.875% ( USP01012AS54 ) en USD

Salvadoria

99.41 % ▲

Salvador

USP01012AS54 ( en USD )

5.875% par an ( paiement semestriel )

29/01/2025 - Obligation échue

Prospectus brochure de l'obligation El Salvador USP01012AS54 en USD 5.875%, échue

P01012AS5

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 émise par Salvadoria ( Salvador ) , en USD, avec le code ISIN USP01012AS54, paye un coupon de 5.875% par an.
Le paiement des coupons est semestriel et la maturité de l'Obligation est le 29/01/2025

OFFERING CIRCULAR
The Republic of El Salvador
US$800,000,000
5.875% Notes due 2025
The Republic of El Salvador (the "Republic") is offering US$800,000,000 aggregate principal amount of its
5.875% Notes due 2025 (the "Notes"). Interest on the Notes will be payable semi-annually in arrears on
January 30 and July 30 of each year commencing on July 30, 2013. The Notes will mature on January 30,
2025. 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: 99.984%
plus accrued interest, if any, from December 5, 2012
Delivery of the Notes will be made on or about December 5, 2012.
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 Bookrunners
Citigroup
Deutsche Bank Securities
The date of this Offering Circular is November 28, 2012

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 AND THE RISKS INVOLVED.
You should rely only on the information contained in this document or to which we have referred you. We have not,
and the Joint Lead Managers and Bookrunners have not, authorized anyone to provide you with information that is
different from the information contained in this document. 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
ARBITRATION AND ENFORCEABILITY................................................................................................................................ iv
EXCHANGE RATE INFORMATION .......................................................................................................................................... v
OFFERING CIRCULAR SUMMARY .......................................................................................................................................... 1
THE OFFERING ............................................................................................................................................................................ 7
RISK FACTORS ............................................................................................................................................................................ 9
USE OF PROCEEDS.................................................................................................................................................................... 11
THE REPUBLIC OF EL SALVADOR ........................................................................................................................................ 12
THE SALVADORAN ECONOMY ............................................................................................................................................. 16
FOREIGN TRADE AND BALANCE OF PAYMENTS ............................................................................................................. 33
MONETARY SYSTEM ............................................................................................................................................................... 43
PUBLIC SECTOR FINANCES.................................................................................................................................................... 49
PUBLIC DEBT............................................................................................................................................................................. 58
TERMS AND CONDITIONS OF THE NOTES.......................................................................................................................... 62
SUBSCRIPTION AND SALE...................................................................................................................................................... 70
BOOK-ENTRY SETTLEMENT AND CLEARANCE................................................................................................................ 73
TRANSFER RESTRICTIONS ..................................................................................................................................................... 76
TAXATION.................................................................................................................................................................................. 78
VALIDITY OF THE NOTES....................................................................................................................................................... 81
GENERAL INFORMATION ....................................................................................................................................................... 82
_______________
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
Public External Indebtedness (as defined herein) of the Republic.
i

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 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 Joint Lead
Managers 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 Joint Lead Managers 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 Joint Lead Managers or any person affiliated with the Joint Lead Managers 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.
IN CONNECTION WITH THIS ISSUANCE OF NOTES, EACH LEAD MANAGER 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" 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
correction and change in subsequent publications. The Central Bank is currently in the process of implementing new statistical
methodology following the 1993 United Nations System of National Accounts recommendations. In addition, in the first half of
2011, certain information for years 2007 to 2010 was updated, in particular to reflect new survey information and methodological
improvements in the external sector information, and the resulting updates in the national accounts. The Central Bank expects to
continue the updating process of these data and no relevant updates are expected to be included in the information related to years
2007 to 2009. This information is identified in this Offering Circular as preliminary.
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 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

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, which require registration of the judgment for inclusion in the budget for
payment in a subsequent fiscal year of the Republic.
iv

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 and to the
date of this Offering Circular, 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.
v

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. In March 2009, Carlos Mauricio Funes
Cartagena of the Frente Farabundo Martí para la Liberación Nacional (the "FMLN") party was elected president of the Republic.
His election marked the first time that a representative of the FMLN was elected president after four consecutive terms in which
the representatives of the Alianza Republicana Nacionalista ("ARENA") party had been elected to serve as president. He took
office on June 1, 2009, succeeding Elias Antonio Saca González, who had been elected in 2004.
In 2010, El Salvador had a nominal gross domestic product ("GDP") of approximately US$21.4 billion and real GDP grew by
1.4%, reflecting positive contributions from the agriculture, livestock and fishing, government services, manufacturing, trade,
restaurants and hotels, finance and insurance and residential leasing sectors, as the country began the emerge from the effects of
the global economic crisis that commenced in 2008 (the "Global Economic Crisis"). In 2011, nominal GDP totaled US$23.1
billion and real GDP grew by 1.5%, driven mainly by increases of 8.7% in the construction sector, 2.0% in the manufacturing
sector, 4.5% in the transportation, storage and communications sector and 5.1% in the government services sector, partially offset
by a 3.8% contraction in the agriculture sector caused by tropical depression 12E. Preliminary GDP figures reflect growth for the
six months ended June 30, 2012 of 1.4%, as compared to 1.6% for the same period in 2011.
According to the United Nations Human Development Report 2011, El Salvador's per capita gross national income ("GNI")
based on 2011 figures and adjusted for purchasing power parity was US$5,925.
Recent Political and Economic Developments
Fiscal Sustainability Agreement
In October 2012, the government entered into the Acuerdo para la Sostenibilidad Fiscal, (the "Fiscal Sustainability
Agreement") with all the political parties represented in the Legislative Assembly. The Fiscal Sustainability Agreement aims at
fiscal sustainability and social development without compromising funding for social programs. The Fiscal Sustainability
Agreement was reached in connection with approval of the issuance of up to US$800 million in external debt to finance the
potential early redemption of El Salvador's US$800 million 7.75% Notes due 2023 (the "Notes due 2023"). The Fiscal
Sustainability Agreement provides, in part, that if the amount to be paid by the government for early redemption of the Notes due
2023 is less than US$400 million, the difference between the amount redeemed and US$400 million may be used by the Republic
to refinance internal short-term notes ("LETES"). In addition, the Fiscal Sustainability Agreement provides that any remaining
funds will be used for general budgetary purposes, as determined by the Legislative Assembly in accordance with Article 148 of
the Constitution of the Republic of El Salvador by an affirmative vote of two thirds of its members. See "Use of Proceeds."
Other actions to be implemented pursuant to the Fiscal Sustainability Agreement include the following:

establishing a legal environment conducive to fiscal responsibility for sustainability and social development, including
rules that limit the public sector deficit and debt levels, as well as qualitative measures of social responsibility, in line
with the government's priority projects;

targeting a non-financial public sector fiscal deficit of 2.7% GDP by 2013, aimed at establishing medium-term
sustainability in public finances. The Ministry of Finance expects to submit bills in the first three months of 2013 that
establish additional revenues for the government and additional expenditure control measures that will strengthen the
Fiscal Adjustment and Sustainability Program;
1

reducing expenditures in the 2013 budget by 10%, freezing new hiring and eliminating vacant positions, except those
essential and related to social development and security; and

incorporating all revenues and expenditures into the country's general budget and reducing the current authorized amount
of LETES from 40% to 20% of current revenues.
Since taking office in June 2009, the Funes administration has implemented a series of measures to continue strengthening the
Salvadoran economy in light of the Global Economic Crisis. In an effort to counteract its effects, President Funes and his
administration developed the Plan Global Anti-Crisis ("Global Anti-Crisis Plan"), a program that sought to invigorate the
economy by: (1) stimulating the national economy with special focus on strategic sectors such as construction and agriculture,
livestock and fishing; (2) providing unemployment compensation to citizens who have lost their jobs while at the same time
reducing the level of unemployment by creating new positions in key economic sectors to compensate for job losses in the maquila
sector; (3) assisting in the budgetary needs of low income families or who have lost their primary source of income as a result of
the crisis by establishing a universal social protection system, including providing free health coverage for six months under the
social security system and free uniforms and other materials for students in grades 1 through 9 of the public school system; and (4)
establishing national policies for economic and social development and maintaining macroeconomic stability, including fiscal
reforms to strengthen public finances. On November 12, 2009, the Legislative Assembly approved a US$300 million bond
issuance and reallocated US$150 million of funds that were originally allocated to fund the Global Anti-Crisis Plan to begin the
rebuilding of basic infrastructure in areas damaged by Hurricane Ida. To date, US$142.6 million of the remaining US$150 million
has been used to finance the projects of the Global Anti-Crisis Plan.
As a result of the execution of the Global Anti-Crisis Plan, President Funes succeeded in enacting the following reforms: (i)
7,000 senior citizens over 70 years of age living in poor municipalities now receive a basic pension of US$50 a month and regular
medical care; (ii) the unemployed have been given three additional months of social insurance coverage; (iii) new jobs have been
generated as a result of the enactment of sectoral policies and the investment in economic and social infrastructure; (iv) creation of
new institutions that promote the participation of organized groups in the formulation of public policy; (v) elimination of fees in
public hospitals; (vi) 1,386,767 students in 4,968 schools have received free school supplies; (vii) implementation of a substantial
housing program for low income families; and (viii) extension of approximately 4,000 land titles to an equal number of families.
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
would extend 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 both innovation and entrepreneurial initiatives of women and men involved in production and
business activities and creating 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 and projects
that address (a) equity, social inclusion and poverty reduction, (b) economic recovery, (c) sustainable development and (d) internal
security.
In addition, recognizing that macroeconomic development is contingent on reversing environmental degradation and
addressing the country's vulnerability to catastrophes, the government has introduced specific goals related to the effects of natural
disasters in the Five-Year Development Plan. All environmental programs now include climate change adaptation measures. In
addition, Unidades de Adaptación al Cambio Climático ("Climate Change Adaptation Units") have been created as key agencies
of the central government. In August 2012, the Ministry of Finance created the Unidad de Riesgos Fiscales ("Fiscal Risks Unit"),
which is responsible for quantifying the short- and mid-term economic impact on public finances and planning contingencies
related to natural disasters.
See "The Salvadoran Economy Economic and Social Policies" for a description of the
government's Five-Year Development Plan.
Based on the economic environment and the progress of programs and projects since the implementation of the Five-Year
Development Plan, the government considered new economic scenarios that led it to review and update the original 2010-2014
Five-Year Development Plan. In May 2010, the government presented a revised version of the Five-Year Development Plan,
based mainly on: (i) the impact caused by natural events (Ida, Agatha and Tropical Depression 12E); (ii) the strategic goals
2

included in the "Partnership for Growth" agreement between El Salvador and the United States entered into in November 2011
(see "The Salvadoran Economy Economic and Social Policies"); and (iii) new financial and strategic governmental priorities
aimed at redirecting resources in favor of social programs.
The revised Five-Year Development Plan did not modify the goals and strategies included in the original plan, but updated
certain financial targets and the priority of certain government programs. One of the revisions was introducing risk management
into government planning. The introduction of risk management was one of the factors that allowed El Salvador to receive a
World Bank loan for US$50.0 million and its early disbursement, to provide funds for disaster relief related to natural events. See
"Public Sector Debt External Debt."
The Funes administration has 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 unify efforts of both governments to remove such barriers. The agreement
is expected to cover five years. During the first year, an interagency commission was established that 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 as a management tool 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.
Proyecto Fomilenio
With a US$461.0 million grant from the United States Millennium Challenge Corporation's ("MCC") Millennium Challenge
Account approved in 2006, the government developed Proyecto Fomilenio. In September 2012, Proyecto Fomilenio ended, with
investments in electrification, roads, bridges, water and sanitation, and work force training that are expected to benefit more than
700,000 people over the next 20 years. Projects competed under Proyecto Fomilenio include a 223 kilometer (140 miles) highway
in the northern part of the country, connecting eastern and western El Salvador, that transformed the productivity and
competitiveness of 94 municipalities, providing easier access to some of the poorest municipalities in the country. This east-west
highway in the north stretches close to the borders with Guatemala and Honduras, and the improvements are expected to reduce
travel time by 50%, from 12 to six hours. Other projects include electricity provision to rural parts of El Salvador, potable water
plants, educational and community facilities and other social programs designed to develop El Salvador.
In December 2011, the MCC selected El Salvador as eligible to develop proposals for a second funding tranche through the
United States Millennium Challenge Account. This second funding tranche, called a "compact" by the MCC, is contingent on
completion of the first compact, continued good policy performance, and the presentation of proposals that have significant
potential to promote economic growth and reduce poverty.
Currently El Salvador is preparing concept papers for the proposed investment and expects to continue the feasibility and
design studies. Funds from the second tranche are expected to aid poverty reduction programs by generating inclusive and
sustainable economic growth in the coastal areas, through projects aimed at productivity, logistics, human capital, infrastructure
and better business climate. See "The Salvadoran Economy Infrastructure Investment Proyecto Fomilenio."
2012 Budget
The 2012 budget was submitted to the Legislative Assembly in September 2011 and approved in November 2011. The
current budget contemplates a deficit of 2.5% of GDP for the non-financial public sector, excluding obligations related to the
pension system estimated at 1.8% of GDP. The main assumptions underlying the 2012 budget include inflation of 3.0%, real GDP
growth of 2.5%, a price of US$100 per barrel of oil, stable coffee prices (US$250 per quintal) and a rate of growth for the U.S.
economy of 1.8%.
2013 Budget
The 2013 budget was submitted to the Legislative Assembly in September 2012 and approved on November 8, 2012. The
2013 budget contemplates a deficit of 1.4% of GDP for the non-financial public sector, excluding obligations related to the
pension system estimated at 1.9% of GDP. The main assumptions underlying the 2013 budget include inflation of 2.9%, real GDP
growth of 2.3%, remittances from abroad growing at 7.9% relative to the prior year, a price of US$115.5 per barrel of oil, stable
coffee prices (US$186 per quintal) and a rate of growth for the U.S. economy of 2.3%.
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