Tourism in El Salvador: the competitiveness challenge

This paper analyses the current condition of the tourism sector in El Salvador, its competitiveness and its strengths and weaknesses. It examines how the El Salvador tourism sector can be improved to become an engine for development in the region.

The paper notes that income from tourism represented 2% of GNP in 2000. The tourism sector has also been rising in relative importance to the Salvadoran economy since the end of the armed conflict.

But, how competitive is the tourism sector? Can it face the challenges of international and regional competition? The paper presents a conceptual framework of competitiveness, identifying the following key determinants: factor conditions, demand conditions, related and support industries, business strategy, structure and competition and government. The paper then evaluates the competitiveness of the El Salvador tourism sector using these factors as a frame of reference, and finds that:

• El Salvador benefits from being geographically close to the US market, having a history as a former Spanish colony, and possessing cultural wealth and biodiversity
• low levels of basic infrastructure (electricity, water, health services system) pose a problem for developing the potential for tourism
• the low number of tourism providers means that there has been limited competition in the sector; consequently, the process of improving tourism services has progressed very slowly
• natural disasters and civil war have negatively affected the industry but recent democratic elections and the renewed interest in destinations with natural resources and unique culture are favorable developments for future tourism

The paper identifies several issues that need to be improved for increasing tourist levels in El Salvador including security for the tourist, roads, hygiene and better infrastructure.

The paper concludes that the Salvador tourism industry has the potential for becoming a world class competitor. However, the paper states that the public and private sector must resolve the different problems that threaten the evolution of the tourism industry, such as poor infrastructure. It recommends that all participants in the tourism industry need to develop a common view to be discussed at the next National Congress on Tourism. An action plan is required that defines the actions and responsibilities of each entrepreneur in the sector and the industry as a group.