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Flows of Money
Cross-border goods and services transactions reflect a relatively small, yet significant, amount of monetary exchange that pays for those goods and services traded—approximately $8.9 billion in goods and $1.7 billion in services traded annually in 2003. In 2003, an estimated $2.1 billion dollars poured into El Salvador through remittances of El Salvadoran workers and families abroad or roughly 14 percent of gross domestic product. El Salvador is the second-most remittance-dependent country in Latin America on a per capita basis.
Overall, Salvadoran laws and public and private institutions support these trade-related money flows. Trade finance products are available to all traders. The economy is fully dollarized and other foreign currency exchange is widely available and easily exchanged for all traders. Credits for export are very difficult to gain because of serious structural issues, such as high collateral requirements and a poorly functioning judicial system. As with other CAFTA members, El Salvador is challenged by illegal money flows.
In this section, we analyze legal, institutional, and operational constraints that impede trade-related money flows. First, our analysis focuses on the legal framework for the primary transactions—trade finance and currency exchange. Second, we consider the institutional issues regarding trade finance, currency exchange, and illicit money flows. Third, we review other key institutions involved in trade facilitation, such as development funds. Last, we identify major recommendations to facilitate trade-related financial flows in El Salvador.
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