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Miami-El Salvador Annual Report: No. 10 trade partner- Trade holds steady

July 27th, 2006

El Salvador’s commerce with South Florida its most important gateway stayed nearly flat in 2005.

For El Salvadoran products, Miami isn’t the only doorway into the United States but it certainly the widest one.

Trade between the Miami Customs District and Central America’s smallest country held nearly steady in 2005 as they exchanged $1.86 billion worth of goods. In 2004, the figure was 1 percent higher at $1.88 billion. By comparison, the second most important Customs District for El Salvador is Mobile, Ala., and bilateral trade with that area was $520 million in 2005, followed by New Orleans at $409 million.

Miami’s trade with the Central American country was nearly evenly divided between imports and exports. Exports neared $933 million, an increase of just less than 1 percent, while imports reached $935 million, a drop of 2.7 percent compared with a year earlier.

El Salvador is a small nation, but it is not insignificant on trade front. It was the first country to ratify the Central American Free Trade Agreement, CAFTA, and it is the Miami Customs District’s tenth most important trade partner although that is one-spot slip from 2004, when it held the No. 9 spot. Since 2001, El Salvador has had a dollarized economy, using the U.S. dollar as its official currency.

According to the International Monetary Fund, El Salvador’s economy has been growing at a steady pace averaging 3 percent a year, although GDP growth could reach 3.5 percent in 2006. Much of the economic improvement is due to free-market initiatives embraced in the 1990s, including privatizations in the banking, telecommunications and electrical energy sectors.

In 2005, South Florida’s top exported nearly $56 million in regional jet parts to El Salvador, the home country of Central American airline Taca. In 2004, jet part shipments totaled nearly $64 million.

Apparel remained an important export commodity, with several categories of clothing appearing at the top of Miami’s export roster. Exports of women’s socks and pantyhose fell 14 percent to $53 million, while shipments of knit and crocheted apparel also fell, by nearly 20 percent, to just under $47 million. Women’s undergarments including slips, bras, girdles and garters rose significantly, but T-shirt shipments were off by nearly 44 percent.

That said, supplies for the textile industry were up, led by nearly $51 million in knit and crocheted fabrics twice as much as in 2004. The United States ships textile-industry supplies to El Salvador, where clothing is assembled at maquiladoras and returned to the United States, principally through South Florida. One commodity category of synthetic fabrics rose in value by nearly 584 percent compared with 2004 and pile fabric exports jumped 41 percent.

Computer parts and computers were also important exports, both growing double-digit percentages when it came to their value compared with 2004. South Florida shipped nearly $35 million in computer parts, a jump of 17 percent, and some $35 million in computers, an increase of 21 percent, to the Central American country.

El Salvador has sought to leverage its economy by providing fiscal incentives for new industries and by the creation of free trade zones. Currently, there are 15 trade zones. In addition, while implementation of CAFTA is still pending, El Salvador and its neighbors enjoy preferential trade treatment under the Caribbean Basin Trade Partnership Act, which allows most Central American goods to enter the United States duty free.

For the most part, the apparel industry which employs an estimated 80,000 workers and is focused in the cities of San Salvador and San Miguel has taken the greatest advantage of that landscape, and clothing-related commodities dominated South Florida’s imports from El Salvador.

In 2005, South Florida imports of sweaters reached nearly $234 million, up from $214 million a year earlier. T-shirts followed at $193 million, a jump of 36.5 percent from 2004. Imports of women’s socks and pantyhose, meanwhile, hit $108 million but that was down 11 percent when compared with 2004 trade data.

One of the biggest challenges for the Salvadoran government has been boost its coffee sector, a traditional source of foreign income. However, there was no evidence of any growth in Miami imports of Salvadoran coffee. In fact, based on value, coffee imports fell 30 percent in 2005 to close the year at $5.5 million.