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Amendments to the law of international services

The necessity to attract foreign investment to El Salvador is clear; in this regard the public sector must reverse the low rates of economic development seen in past years, encouraging amendments to the Law of International Services.

Gustavo Vega Arrazola

The necessity to attract foreign investment to El Salvador is clear; in this regard the public sector must reverse the low rates of economic development seen in past years, encouraging amendments to the Law of International Services. The Law came into force in 2008, and since then has been the legal framework through which many foreign companies that provide services dedicated to export activities established operations in the country at the legally denominated Parks or Precinct of Services, receiving substantial tax benefits and incentives.

The purpose of the Law is to regulate the establishment and operation of the Parks or Precinct of Services, as well as the benefits and responsibilities of the holder of companies that develop or manage the Precincts. There is a need, however, to incorporate in this Law other types of services that are not specifically covered by this regulation. In this respect the public and the private sector have considered it viable to include medical services intended for the exterior, and logistics services.

On the other hand, it should also be taken into account that the Law does not regulate knowledge process outsourcing (KPO) or business process outsourcing (BPO). These are two important types of services that involve the outsourcing of core business activities that require higher values of knowledge and advanced analytical and technical skills in addition to expertise. The importance of the incorporation of these type of services in the text of the Law is that it will stimulate the recruitment and employment of services related to intellectual property, business research and analysis, legal research, clinical and pharmaceutical research, publications, market research, investment research, engineering and design services, investigation and development, and so on. In general, these are areas of employment in which specialist knowledge will be required.

In conclusion, the amendment should have as its primary objective the adequacy of the law to the economic reality of the country and the great need to attract higher levels of foreign investment. This amendment does not only involve the modernisation of its content, but also the mechanisms to guarantee greater legal security and fiscal stability for those companies willing to benefit from the law.

For El Salvador, this is an opportunity to become a more competitive region in the services sector and to take advantage of the country's greatest asset: its workforce and human talent. In addition, the recruitment and specialisation of the Salvadoran workforce, particularly in the areas of international call centres, business processes and international financial services, will benefit from the amendment.

Gustavo Vega Arrazola

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