From a business standpoint, changes can come at great speed and organizations should be aware of their environmental trends in order to adapt. The business environment is more complex, competitive and accelerated than ever before. Also, from a legal standpoint, regulations are always fluctuating and they become more cumbersome, a situation that many times has negative repercussions on investments, producing insecurity and substantial risks to the investors.
Because of all of the above, there is a tool in El Salvador´s legal system that allows investors to mitigate one of the principal risks associated with investment. This tool is the “Ley de Estabilidad Jurídica para las Inversiones” [Legal Stability for Investments Law]. It is important to point out that this tool is available to all investors, local and foreign, who are starting new investment projects, or expanding existing ones within El Salvador, that contribute to the strengthening of the productive forces in the country and generate added value to the following industry sectors, considered to be strategic and necessary to the economic growth of the country: aeronautics, logistics, health services, remote business services, tourism, telecommunications, various manufactures, science and technology.
This statute seeks to consolidate safe and stable investments in El Salvador, in order for the investors to identify which regulations are fundamental to their investment, and thus, guarantee that, if said norms and regulations were to be modified in a harmful manner, the original stabilized norm would be the one applicable for the duration of the contract, which can have a 5 to 20 years´ term.
It is under this legal protection that LEXINCORP EL SALVADOR actively participated in drafting, negotiating and executing the first “Contrato de Estabilidad Jurídica para Inversiones” [Legal Stability for Investments Agreement] between the Ministry of Economy of El Salvador and our client, Ventus, S. A. de C. V., making a major contribution to the economic and social development of the country, to the growth of strategic sector, to the efficient integration of national and international economy, and to employment generation.
Investors who participate in similar agreements can benefit from the following guarantees:
a) National and municipal tax stability, because they would do business under the existing taxation laws at the moment of signing;
b) Tax exemption stability granted by Special Legislation, for the duration of said exemptions;
c) Estabilidad de los regímenes aduaneros, que se derivan de las Leyes Especiales relacionadas con devolución de aranceles, suspensivos y liberatorios;
d) Estabilidad de libre transferencia al exterior de los fondos provenientes de inversiones extranjeras, conforme a la Ley de Inversiones; Costums legistlation stability, as specified in Special Legislations related to tariff returns, and such other; and,
e) Migration regime stability, related to the investor´s residence statute, as specified in the Investments Law and other legislation.
For more information on this and other tools that can mitigate risks associated with investments in El Salvador, you can reach out to Enrique Escobar () and Antonio Guirola (), and contact us at our offices in El Salvador +503 2250 7800.