Insurance in El Salvador

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Economy In El Salvador

Compared to other developing countries, El Salvador has experienced relatively low rates of GDP growth. Rates have not risen above the low single digits in nearly two decades – part of a broader environment of macroeconomic instability which the integration of the US dollar has done little to improve. One problem that the Salvadoran economy faces is the inequality in the distribution of income. In 2011, El Salvador had a Gini Coefficient of .485, which, although similar to that

of the United States, leaves 37.8% of the population below the poverty line,[8] due to lower aggregate income. The richest 10% of the population receives approximately 15 times the income of the poorest 40%.

As of 3 November 2014, the IMF reports, official reserve assets to be $3.192B. Foreign currency reserves (in convertible foreign currencies) are $2.675B. Securities are $2.577B with total currency and deposits at $94.9M. Securities with other national central banks (BIS and IMF) are $81.10M. Securities with banks headquartered outside the reporting country $13.80M. SDRs are at $245.5M. Gold reserves (including gold deposits and, if appropriate, gold swapped) reported at $271.4M with volume in millions of fine Troy ounces at $200k. Other reserve assets are financial derivatives valued at $2.7M.

Having this hard currency buffer to work with, the Salvadoran Government undertook a monetary integration plan beginning 1 January 2001, by which the U.S. The dollar became legal tender alongside the colón, and all formal accounting was undertaken in U.S. Dollars. This way, the government has formally limited its possibility of implementing open market monetary policies to influence short term variables in the economy. Since 2004, the colón stopped circulating and is now never used in the country for any type of transaction; however, some stores still have prices in both colons and U.S., dollars. In general, people were unhappy with the shift from the colón to the U.S. Dollar, because wages are still the same, but the price of everything increased. Some economists claim this rise in prices would have been caused by inflation regardless even had the shift not been made. Some economists also contend that now, according to Gresham’s Law, a reversion to the colón would be disastrous to the economy.

Some banks, however, claim that they still do some transactions en colonies, keeping this change from being unconstitutional.

The change to the dollar also precipitated a trend toward lower interest rates in El Salvador, helping many to secure credit in order to buy a house or a car; over time, displeasure with the change has largely disappeared, though the issue resurfaces as a political tool when elections are on the horizon.
From Wikipedia.

 El Salvador, Central America – World Insurance Companies Logos.