How Much Do You Know About El Salvador, an Agricultural Nation in Central America?

El Salvador is a small agricultural country in Central America. China and El Salvador officially established diplomatic relations in 2018, and in April this year, the two nations formally launched free trade agreement (FTA) negotiations. As this new FTA partner emerges, what is the status of its agricultural industry? How does its agricultural trade look? And how has it approached free trade zone development in the past?

El Salvador is the smallest and most densely populated country in Central America, serving as a natural logistics hub linking North and South America. Located in northern Central America, it borders Honduras to the northeast, Guatemala to the northwest, the Pacific Ocean to the west, and the Gulf of Fonseca to the southeast. With an area of 21,000 square kilometers and a population of 6.36 million, it leverages its strategic location and key ports to facilitate trade. In 2023, its GDP per capita reached $5,344, classifying it as an upper-middle-income country according to the World Bank.

El Salvador's economy is rooted in agriculture, with one-quarter of its population living in rural areas, primarily as subsistence farmers. Tropical crops dominate production, with key staples including corn, sorghum, and beans, alongside sugarcane and coffee as its main cash crops. It is the third-largest sugar producer and raw sugar exporter in Central America, with annual raw sugar production reaching approximately 800,000 tons and exports totaling 500,000 tons. Coffee bean production ranges from 30,000 to 50,000 tons annually, with exports accounting for 30,000 tons.

El Salvador is a net importer of agricultural products, with exports primarily consisting of sugar and coffee. Its trade partners are mainly concentrated in North and Central America. In 2023, the nation's agricultural trade reached $4.71 billion, with imports totaling $3.27 billion and exports $1.43 billion. Key imports included corn, beef, cheese, palm oil, and wheat, while major exports consisted of 499,000 tons of sugar, 30,000 tons of coffee, and 105,000 tons of grains such as corn flour and rice. The United States is its largest trade partner, accounting for one-quarter of its trade, followed by neighbors like Guatemala and Nicaragua.

China's agricultural trade with El Salvador focuses on importing sugar, albeit with significant fluctuations. Bilateral agricultural trade usually ranges between $50 million and $100 million annually. China first allowed sugar imports from El Salvador in 2015, with 98,000 tons imported that year. After diplomatic relations were established in 2018, imports peaked at 213,000 tons but have since stabilized between 100,000 and 180,000 tons, with no imports recorded in 2023.

China's agricultural exports to El Salvador have grown steadily, driven by demand for essential goods such as vegetables and grains to alleviate living costs. Since establishing diplomatic relations, China's agricultural exports rose from $13 million to $20.03 million in 2023. Key exports include garlic, canned mushrooms, and frozen tilapia fillets, with China being El Salvador's primary source for these products. In 2023, zero-tariff policies on grains and vegetables in El Salvador boosted Chinese exports of rice (3,790 tons), wheat (3,780 tons), and onions (1,745.7 tons, a 12.4-fold increase).

El Salvador is an active participant in regional economic integration and was the first to sign the Central American Free Trade Agreement (CAFTA). It maintains bilateral or multilateral trade agreements with over 40 countries and regions, including the United States and South Korea.

The FTA with the U.S. features the highest degree of agricultural openness, with 98% of agricultural tariff lines liberalized by the U.S. and 99.9% by El Salvador. In contrast, the FTA with South Korea reflects asymmetrical openness, with El Salvador liberalizing 91% of agricultural tariff lines compared to South Korea's 76%. Across FTAs, El Salvador generally implements lengthy tariff reduction periods, with some agricultural products requiring 15 to 20 years to achieve zero tariffs.