The Legislative Assembly is currently reviewing the “Special Regime to Incentivize and Facilitate High-Value Investments in El Salvador,” a legislative framework that would grant tax incentives, administrative and legal advantages to multibillion-dollar investments.
Presented by the Ministry of Finance on July 22, 2025, the proposed special regime is part of the Government of El Salvador’s (GSE) strategy to attract and compete for foreign direct investment (FDI). The country has been a competitive player for a number of high-impact investment projects, and this framework is expected to help facilitate and advance negotiations with prospective investors.
A Vision to Grow the Economy
While growth in international investment has not met expectations during President Nayib Bukele’s term, economic diversification, modernization, and productivity have remained top priorities. Bukele’s government was proactive about passing legislative frameworks to improve the ease of doing business and push macroeconomic reforms that would make El Salvador more competitive and resilient.
The Special Regime to Incentivize and Facilitate High-Value Investments in El Salvador (hereinafter the “Special Regime”) is a natural progression of that approach. It is a proposal that incentivizes foreign investment in large-scale projects that can change El Salvador’s productive model and bring it to a new level of capital intensity and sophistication.
For the purpose of the Special Regime, high-value investments are defined as those with a commitment to invest directly in El Salvador or transfer capital or assets worth $2 billion or more. Presented by Finance Minister Jerson Rogelio Posada Molina, the Special Regime opens a window for foreign capital to access El Salvador on a preferential basis and receive financial and administrative incentives to pursue large-scale business.
Incentives Package for Large-Scale Investors
The Special Regime offers a package of targeted benefits for large-scale investors. The most notable of these are:
- Tax Incentives: Corporate income tax , import duties, and value-added tax (VAT) exemptions or discounts.
- Administrative Privileges: Expedited processing and approval of business permits, registrations, and other administrative requirements.
- Legal Certainty: Stability and predictability in terms of adherence to the law.
El Salvador is currently among the top recipients of FDI in Central America, which has helped make up for low national savings, domestic investment levels, and productivity rates in the economy. The Central America Free Trade Agreement (CAFTA-DR) is also advantageous for investors as it gives El Salvador preferential access to the US market.
However, neighboring countries are competing for the same slice of international capital, which has become highly price sensitive due to factors like geopolitical risks, higher interest rates, and the global economic slowdown.
By offering financial and administrative incentives, as well as legal certainty for foreign investments, the Special Regime aims to position El Salvador as an attractive and reliable destination for FDI for projects of a particular size and nature. In addition to the traditional financial sector, this initiative will likely focus on a select number of strategic sectors, including:
- Technology & Innovation: Data centers, R&D centers, software development companies
- Infrastructure: Public or private infrastructure projects, such as highways, ports, airports, water or power plants, etc.
- Energy: Solar power, geothermal, wind energy, hydrogen, etc.
- Manufacturing: High-tech or precision manufacturing companies to set up operations in the industrial parks.
- Logistics and Supply Chains: Given its geographic position, El Salvador could become a logistics hub in the region, offering services to landlocked countries.
- Services: Business process outsourcing (BPO), financial services, call centers, etc.
It should be noted that, regardless of whether the Special Regime becomes law, none of these sectors would be “off-limits” for foreign capital or large-scale domestic investment.
Towards a Comprehensive Legal Framework
El Salvador has made significant strides in recent years in reforming its economy and polity. Dollarization, a stable macroeconomic framework, and improvements in physical and digital infrastructure have all been positive developments.
With its Special Regime, the Government of El Salvador is seeking to push these reforms further by creating a highly predictable environment for very large-scale investments. Legislative support for the Special Regime seems high as President Bukele’s Nuevas Ideas party holds a majority in the Legislative Assembly. The Special Regime is likely to be approved and passed into law relatively soon after its approval by the Assembly.
If so, it will help change the investment narrative for El Salvador, which has traditionally been focused on apparel and other low-value and low-productivity sectors. A focus on high-value investments in El Salvador should serve to direct more capital into the economy and spur economic growth and development.
Transformative Investments with Large Impact
Projects of this magnitude do not come by very often, but when they do, the local economic impacts can be significant. Infrastructure projects, advanced manufacturing facilities, or high-tech platforms for technology development and innovation are long-term investments. They can have an extensive and long-lasting impact on the country’s economic activity. Attracting one of these projects is therefore always a game-changer.
According to a study by a regional economic development agency, each new job created by a high-value FDI project can have a multiplier effect and generate additional employment both directly (through demand for additional capital and labor) and indirectly (demand for goods and services).
A $2 billion+ investment project would almost by definition require thousands of direct jobs, as well as several multiples of indirect jobs. The latter would depend on the nature of the investment (energy, manufacturing, etc.) but could reach or exceed tens of thousands, especially in the construction and infrastructure phase.
By extension, these new jobs will boost domestic demand and fuel growth in consumption, gross domestic product (GDP), and output. The more an FDI project requires local capital and labor, the higher its positive contribution to the economy.
No to Regulatory Arbitrage
Administrative bottlenecks and unpredictable business regulation are common obstacles to investment in developing markets. In this way, the Special Regime also serves as a signal to high-value investors that they can expect a very stable legal and business climate to develop their businesses.
The Special Regime offers legal stability clauses that protect investors from retroactive changes to tax and financial conditions, for example. They can also expect to work with a “one-stop shop” of government agencies to receive administrative support and guidance. Any disputes will be resolved in accordance with international best practices.
Predictable Regulatory Environment
Boosting El Salvador’s business climate ranking is yet another potential effect of this initiative. By eliminating what high-value investors see as impediments to business, El Salvador could receive a better rating in global ease-of-doing-business reports, as well as in investment climate surveys. This should also make it easier for the country to attract FDI in the long run, as El Salvador will no longer be seen as an outlier in terms of business regulation and related requirements.
In the medium term, one would also expect positive effects from large-scale, high-value investments on domestic education, vocational training, and human capital development. High-impact investments require a skilled workforce to carry out capital-intensive and high-value-added activities. In this way, these investments can benefit the country’s broader human development objectives.
El Salvador as an Investment Destination
While security, infrastructure, and institutional capacity have been long-standing issues for El Salvador, the Special Regime is an attempt to close the investment climate gap with its neighbors. El Salvador has other notable advantages, including preferential access to the US market, owing to CAFTA-DR. In that way, the Special Regime is both a necessary and complementary component of a comprehensive effort to draw large-scale FDI into the country.
To address and overcome existing barriers to foreign investment in El Salvador, the Special Regime is a crucial piece of that puzzle. It may well represent the difference between winning or losing the bid for foreign capital and therefore FDI for some of these large-scale projects.
Success for El Salvador
The proposal for a Special Regime to Incentivize and Facilitate High-Value Investments in El Salvador is a noteworthy development in the country’s efforts to attract foreign investment. It reflects the government’s proactive approach in creating an enabling environment for large-scale investments that can drive economic growth and diversification.
Although the Special Regime has the potential to increase FDI in El Salvador, its long-term success will likely depend on broader developments in the national economy and polity. Issues like security, crime, public administration capacity, and infrastructure may also have to be addressed to truly reap the full benefits of this framework.
In that way, the Special Regime can become a powerful instrument that will not only help El Salvador close the investment climate gap with its regional neighbors, but it can also become a tool to help overcome security, crime, and other structural barriers to investment and economic development.
Attracting a high-value investment in El Salvador has significant benefits for the country, from GDP growth to employment and exports. In this way, the Special Regime could become a key factor in opening El Salvador to transformative FDI and the transformative investments it brings with it.