Profits of Good Credit.

• Author: Luxner, Larry
• Position: El Salvador - Brief Article

EL SALVADOR HAS surprised investors by showing the biggest improvement in credit-worthiness of any of the 136 countries recently surveyed by Institutional Investor.

According to the prestigious magazine, El Salvador's credit rating rose 4.1 points in the six-month period ending September 1999, and 7.1 points in the one-year period ending September 1999--outperforming other strong contenders, including Slovenia, the Dominican Republic, and Greece. Yet compared to Costa Rica, Honduras, and other nearby countries, El Salvador "hasn't gotten the investment, it deserves," says Anne Patterson, the U.S. ambassador to El Salvador.

"El Salvador has the third best credit rating in the Hemisphere. But still they've had difficulty attracting investment," Patterson says. "I see this changing. It's an image issue. People still think this is a country of war, and it's not. Peace broke out a long time ago."

Last January El Salvador celebrated the eighth anniversary of the Chapultepec peace accord, which ended a civil war between government forces and Faribundo Marti National Liberation (FMLN) rebels that had taken the lives of seventy-five thousand people and destroyed the country's economy.

Vice President Carlos Quintanilla Schmidt, who's been put in charge of attracting foreign investment by President Francisco Flores, says his country has undergone a complete transformation. "In the last eight years, people from the FMLN became a political party by law, and now in our National Assembly we have legislators from across the political spectrum," Quintanilla says. "When we talk about El Salvador, investors ask about social stability. That is now the most important question." At present, El Salvador has a per capita income of $2,400, and a gross domestic product (GDP) of around $12 billion. GDP grew around 2.2 percent in 1999 and is expected to grow even more this year. Yet the largest single source of foreign exchange--well ahead of garment manufacturing and coffee exports--is remittances from an estimated 1.3 million Salvadorans living legally and illegally in the United States.

In fact, the proportion of Salvadorans living in the United States (mainly in Los Angeles, Washington, Houston, Miami, and New York) relative to the country's population is higher than that of any...