Proposal for Opening a Manufacturing Facility in El SalvadorProposal for Opening a Manufacturing Facility in El SalvadorPROPOSAL FOR OPENING AMANUFACTURING FACILITY INEL SALVADORINTRODUCTIONAqua-Tech’s mission is to provide high quality SCUBA equipment to the rapidly growing international, recreational, commercial and technical dive community. SCUBA divers know no boundaries. They can be found in every corner of the world, from beneath the polar ice caps to nuclear containment systems.
Aqua- Tech currently has a small facility in its base state of North Carolina, manufacturing high-end, specialized diving equipment. Aqua-Tech has been very successful in meeting the needs of its customers; however because of high fixed and variable costs they have been unable to be competitive with larger, more established equipment manufacturers. It has been determined that setting up a manufacturing facility in El Salvador would decrease a number of costs, increasing the profitability of the company, while putting Aqua-Tech closer to the huge Caribbean dive equipment market.
ENVIRONMENTAL SCANGeographyEl Salvador has an excellent geographic location for SCUBA equipment production. El Salvador is a small country, about the size of Massachusetts, found in Central America. It is bordered by the Pacific Ocean, Honduras and Guatemala. Though there is limited diving currently in El Salvador, it shares a border with Honduras. Honduras contains some of the top rated dive locals in the world, having access to the second largest barrier reef. Honduras is El Salvador’s third largest export partner. By manufacturing in El Salvador, Aqua-Tech gains access to Honduran and other Caribbean dive markets. Having access to the Pacific Ocean also sets up Aqua-Tech for easy importing of materials and then the exporting of the final manufactured products (Background . . .). With the increased availability of SCUBA equipment in the region and access to the Pacific, there could be an increased interest in local diving.
Political/LegalThe history of El Salvador is a violent one. It gained its independence from Spain in 1821, and then gained its independence from the Central American Federation in 1839. During this period as an independent nation there were frequent revolutions. From 1980 to 1992, El Salvador was enveloped in civil war. More than 75,000 people were killed during this time period and the military had complete control of the country. Corruption and human rights violations were common. When a peace treaty was signed in 1992 by conflicting members the government greatly increased its stability. Civilians gained control of the military, the number of active duty soldiers was decreased and human rights violations were dealt with. Law enforcement was also handed over to a national civilian police force. The guerillas were allowed to form political parties and legally participate in government, having a voice through nonviolent means.
Since 1992 the government has steadily gained in stability. It is a democratic republic with an executive, legislative and executive branch. The president and the 84 members of the unicameral Legislative Assembly are elected by universal suffrage at the age of 18. Salvadoran law is based on civil and Roman law, with some common law.
EconomicWith the increase in governmental stability that came in 1992 there has been a strengthening in El Salvador’s economy. El Salvador has shown a very strong commitment to a free market and encouragement towards international trade. El Salvador was the first of the Central American nations to ratify the Central American Free Trade Agreement (CAFTA-DR). CAFTA-DR is a trade negotiation between the United States, El Salvador, Guatemala, Honduras, Costa Rica, Nicaragua and the Dominican Republic that is working towards the elimination of tariffs and trade barriers between member nations. El Salvador is also a member of the Central American Common Market (CACM), the Organization of American States (OAS), the United Nations (UN) and the World Trade Organization (WTO). Within El Salvador there are 15 free trade zones, encouraging foreign investment and resulting in offshore manufacturing being the largest export.
The Economic With the boost in governmental stability that came in 1992 there has been a strengthening in El Salvador’s economy.El Salvador has shown a very strong commitment to a free market and encouragement towards international trade. El Salvador was the first of the Central American nations to ratify the Central American Free Trade Agreement (CAFTA-DR). CAFTA-DR is a trade negotiation between the United States, El Salvador, Guatemala, Honduras, Costa Rica, Nicaragua and the Dominican Republic that is working towards the elimination of tariffs and trade barriers between member nations. El Salvador is also a member of the Central American Common Market (CACM), the Organization of American States (OAS), the United Nations (UN) and the World Trade Organization (WTO). Within El Salvador there are 15 free trade zones, encouraging foreign investment and resulting in offshore manufacturing being the largest export.
The Economic With the boost in governmental stability that came in 1992 there has been a strengthening in El Salvador’s economy. El Salvador has shown a very strong commitment to a free market and encouragement towards international trade. El Salvador was the first of the Central American nations to ratify the Central American Free Trade Agreement (CAFTA-DR). CAFTA-DR is a trade negotiation between the United States, El Salvador, Guatemala, Honduras, Costa Rica, Nicaragua and the Dominican Republic that is working towards the elimination of tariffs and trade barriers between member nations. El Salvador is also a member of the Central American Common Market (CACM), the Organization of America (OAS), the United Nations (UN) and the World Trade Organization (WTO). Within El Salvador there are 15 free trade zones, encouraging foreign investment and resulting in offshore manufacturing being the largest export.
Socialist With the strengthening of social security, there has been a reduction of violence and the rise in crime in the country, while maintaining that traditional public services are in high demand. There is also increased support from women, children and women from religious or ethnic minority backgrounds. Social activists are also concerned about poverty, poor infrastructure and other problems. While most have not experienced any problems, this could bring a problem of poverty that is now the main reason for discontent with the government.
Industrial With increased economic activity, there had been a significant increase in real wages and incomes and a small increase in unemployment within El Salvador. These increases were made possible through an increase in the minimum wage but in many sectors there was no increase in unemployment.
The minimum wage grew from $15.10 to $16.10 in 2010 and the unemployment rate for those not in the labor force increased from 3.1% in 2010 to 10% in 2011. Moreover, in 2006 the unemployment rate in many sectors increased from 7.2% to 7.9%. The increase was due to increasing business investment, particularly in factories. In 2010 real wages were $29.20. In terms of industrial output, we expect that the decrease in unemployment in 2010 was very large and almost all of the factory employment was in the agriculture sector. The decrease in unemployment was a result of growing industrialization while the unemployment rate was lower among non-manufacturing workers in El Salvador.
Recent economic developments in El Salvador are good news for the country as there is more economic activity on the ground. In El Salvador business activity decreased. In 2011 the overall economic activity in the country and the amount of business activity also decreased through the increase in productivity or with the increase in export opportunities. In 2012 the economy activity was almost 3 times as high as in 2011. The rate of growth in productivity was higher with the amount
El Salvador is required to import most of its necessities such as raw material, consumer goods, fuels and food. Its exportable resources are limited to coffee, sugar, shrimp, textiles and chemicals. Though, El Salvador is limited in respect to its natural and local exports, as a result of its economic policy, it is very strong in offshore manufacturing and working with foreign investment.
The Salvadoran workforce is 2.75 million