Economic Development Report: El Salvador’s Alignment with Sustainable Development Goals

This report analyzes the economic trajectory of El Salvador, evaluating its historical development, key sectors, and persistent challenges through the framework of the United Nations Sustainable Development Goals (SDGs).

Historical Context: Conflict, Recovery, and Economic Transformation

El Salvador’s economic evolution from a primarily agrarian society to an industrialized nation in the 1960s and 1970s was severely disrupted by civil war (1980s-1992). The conflict decimated national infrastructure and stalled economic progress, undermining efforts related to SDG 9 (Industry, Innovation, and Infrastructure) and SDG 16 (Peace, Justice and Strong Institutions). The post-1992 peace accords initiated a period of recovery, focusing on rebuilding the economy and expanding the service and export sectors. This recovery phase represents a renewed commitment to achieving SDG 8 (Decent Work and Economic Growth).

Sectoral Analysis and SDG Contributions

Primary Sector: Agriculture, Forestry, and Fishing

The agricultural sector remains a cornerstone of the economy but faces significant challenges that impede progress on key SDGs. The disproportionate land distribution favoring commercial crops over subsistence farming directly impacts food security, a core target of SDG 2 (Zero Hunger), and exacerbates rural poverty and inequality, working against SDG 1 (No Poverty) and SDG 10 (Reduced Inequalities).

• Key Agricultural Products: Coffee, cotton, corn, and sugarcane are the primary outputs. Coffee, in particular, constitutes a substantial portion of agricultural value.
• Nontraditional Growth: Products like jalapeño peppers and pineapples show potential for economic diversification.
• Forestry Resources: Sustainable management of timber from cedar, mahogany, and balsa trees is critical for supporting furniture manufacturing and local energy needs, aligning with the principles of SDG 15 (Life on Land).
• Fisheries: Government-regulated commercial fishing of crustaceans, mullet, and snapper contributes to export earnings. Sustainable management of these marine resources is essential for advancing SDG 14 (Life Below Water).

Secondary Sector: Manufacturing and Industrialization

Industrial development, initially spurred by the Central American Common Market, is a key driver for economic growth and employment, contributing to SDG 9. After a significant decline during the civil war, the manufacturing sector recovered to account for over one-fifth of GDP. Production includes a diverse range of goods from beverages and pharmaceuticals to electronics. The role of maquiladoras (assembly plants) highlights the need to ensure that industrial growth aligns with SDG 8 by providing decent work and fair wages.

Tertiary Sector: Services, Finance, and Tourism

The service sector is the largest contributor to El Salvador’s GDP, accounting for approximately three-fifths of the total.

1. Financial System: Following nationalization in the 1980s, the financial system underwent comprehensive privatization. In 2001, the country adopted the U.S. dollar as its national currency to stabilize the economy.
2. Tourism: The tourism industry has become an increasing source of income, leveraging the country’s rich cultural heritage. The preservation and promotion of UNESCO World Heritage sites like the Joya de Cerén Archaeological Site contribute to SDG 11 (Sustainable Cities and Communities) by protecting cultural assets while fostering sustainable economic opportunities under SDG 8.

Energy and Infrastructure

Resources and Power

El Salvador has made significant strides in renewable energy, a key component of SDG 7 (Affordable and Clean Energy). The country’s primary power source is hydroelectric projects on the Lempa River, which meet the majority of its energy needs. The absence of significant mineral exploitation further emphasizes the country’s reliance on clean energy and imported resources.

International Trade and Partnerships

El Salvador’s economy is deeply integrated with global markets, reflecting the importance of SDG 17 (Partnerships for the Goals).

• Trade Agreements: The country is a member of the Central America-Dominican Republic Free Trade Agreement (CAFTA-DR) with the United States, its main trading partner. Key trade partners also include Guatemala, Honduras, and China.
• Imports and Exports: Major imports include machinery, petroleum, and foodstuffs. A significant portion of imports supports the reexport of apparel from maquiladoras.
• Remittances and Foreign Aid: The economy is heavily reliant on remittances from over one million Salvadorans abroad, which play a crucial role in poverty reduction (SDG 1) and reducing inequality (SDG 10). However, continued dependence on foreign aid and a substantial external debt present ongoing challenges to achieving long-term economic self-sufficiency.

Analysis of Sustainable Development Goals in the Article

1. Which SDGs are addressed or connected to the issues highlighted in the article?

1. SDG 2: Zero Hunger
   • The article highlights that El Salvador is not self-sufficient in food production and must import it. It also points to the “disproportionate distribution of land” that leaves small farmers unable to grow subsistence crops, which directly relates to food security and sustainable agriculture.
2. SDG 7: Affordable and Clean Energy
   • The text mentions that the country’s main power sources are hydroelectric projects on the Lempa River, indicating a reliance on a form of renewable energy to meet its needs.
3. SDG 8: Decent Work and Economic Growth
   • The entire article focuses on El Salvador’s economic trajectory, including the expansion of industry, the growth of the service sector, manufacturing’s contribution to GDP, and the importance of exports and trade agreements for economic growth.
4. SDG 9: Industry, Innovation and Infrastructure
   • The article explicitly states that the civil war “destroyed the country’s economy and infrastructure.” It then discusses the post-war recovery, including “reconstruction projects” and the expansion of industrial plants and manufacturing, which are central to this goal.
5. SDG 16: Peace, Justice and Strong Institutions
   • A core theme is the devastating impact of the civil war on the economy and infrastructure and the subsequent recovery that began only “after the signing of the peace accords in 1992.” This underscores the foundational role of peace and stable institutions for sustainable development.
6. SDG 17: Partnerships for the Goals
   • The article discusses multiple forms of international partnership, including reliance on foreign aid, the economic impact of remittances from Salvadorans abroad, and the signing of free-trade agreements like CAFTA-DR with the United States.

2. What specific targets under those SDGs can be identified based on the article’s content?

1. Under SDG 2 (Zero Hunger):
   • Target 2.1: End hunger and ensure access to sufficient food. The article’s statement that the country “is not self-sufficient and must import food” directly relates to this target.
   • Target 2.3: Double the agricultural productivity and incomes of small-scale food producers, including through secure and equal access to land. The mention of “disproportionate distribution of land” and “landless” small farmers highlights the challenges related to this target.
2. Under SDG 7 (Affordable and Clean Energy):
   • Target 7.2: Increase substantially the share of renewable energy in the global energy mix. The article points to progress in this area by stating that hydroelectric projects are the “main power sources, meeting most of the country’s needs.”
3. Under SDG 8 (Decent Work and Economic Growth):
   • Target 8.1: Sustain per capita economic growth. The article describes the post-war economic recovery, the expansion of the service industry, and increased exports as efforts toward this goal.
   • Target 8.2: Achieve higher levels of economic productivity through diversification and technological upgrading. The text mentions the expansion of manufacturing and the growth of nontraditional agricultural products as examples of diversification.
4. Under SDG 9 (Industry, Innovation and Infrastructure):
   • Target 9.1: Develop quality, reliable, sustainable and resilient infrastructure. The article’s reference to the war destroying the country’s infrastructure and the subsequent “reconstruction projects” directly addresses this target.
   • Target 9.2: Promote inclusive and sustainable industrialization. The discussion of industrial expansion since the 1960s and its recovery post-war, with manufacturing accounting for over a fifth of GDP, connects to this target.
5. Under SDG 16 (Peace, Justice and Strong Institutions):
   • Target 16.1: Significantly reduce all forms of violence and related death rates everywhere. The “signing of the peace accords in 1992” is a direct measure to end the civil war and reduce violence, forming the basis for economic recovery.
   • Target 16.a: Strengthen relevant national institutions… to prevent violence. The peace accords represent a fundamental step in building institutions capable of resolving conflict peacefully.
6. Under SDG 17 (Partnerships for the Goals):
   • Target 17.2: Developed countries to implement fully their official development assistance commitments. The article notes that El Salvador “continues to rely partly on foreign aid.”
   • Target 17.3: Mobilize additional financial resources for developing countries from multiple sources. The text highlights that “remittances from an estimated more than one million Salvadorans… have played an increasingly important role in the Salvadoran economy.”
   • Target 17.10: Promote a universal, rules-based, open, non-discriminatory and equitable multilateral trading system. The signing of the “Central America-Dominican Republic Free Trade Agreement (CAFTA-DR)” is a direct example of engaging in international trade systems.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

1. For SDG 2:
   • Indicator for Target 2.1: The country’s status as a net food importer (“must import food”) serves as an indicator of its lack of self-sufficiency.
   • Indicator for Target 2.3: The “disproportionate distribution of land” is a qualitative indicator measuring the challenge of providing secure and equal access to land for small farmers.
2. For SDG 7:
   • Indicator for Target 7.2: The share of renewable energy in the total energy consumption is indicated by the statement that “hydroelectric projects on the Lempa River” are the “main power sources.”
3. For SDG 8:
   • Indicator for Target 8.1/8.2: The contribution of manufacturing to the national economy (“more than one-fifth of the country’s gross domestic product (GDP)”) and the growth of the service sector (“services have accounted for about three-fifths of GDP”) are key economic indicators.
4. For SDG 9:
   • Indicator for Target 9.1: The implementation of “reconstruction projects” following the destruction of infrastructure during the war serves as a direct indicator of efforts to rebuild.
5. For SDG 16:
   • Indicator for Target 16.1: The “signing of the peace accords in 1992” is a definitive event-based indicator marking the cessation of widespread, organized violence.
6. For SDG 17:
   • Indicator for Target 17.2: The country’s continued reliance on “foreign aid” is an indicator of the role of official development assistance.
   • Indicator for Target 17.3: The volume and economic importance of “remittances from an estimated more than one million Salvadorans” is a specific financial flow indicator.
   • Indicator for Target 17.10: Participation in free-trade agreements, such as the “Central America-Dominican Republic Free Trade Agreement (CAFTA-DR).”

4. Summary Table of SDGs, Targets, and Indicators

Source: britannica.com