El Salvador’s manufacturing industry continues slide 

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By LatAm Reports Staff Writers

The manufacturing industry, the engine of the Salvadoran economy, accumulates eight consecutive quarters in contraction, confirms the Central Reserve Bank (BCR).

According to the institution, the industry began contracting in the second quarter of 2022 and, since then, it has not been possible to recover until closing in the first quarter of 2024 with a decrease of 3.94 %.

Manufacturing brings together 26 production chains, such as textiles and clothing, plastic, food, paper and cardboard, metal mechanics, pharmaceuticals, beverages, footwear and furniture. These activities represent 96 per cent of Salvadoran exports.

Douglas Rodriguez, president of the BCR, attributed the industrial decline to a lower external demand for changes in consumer patterns. Among the activities that registered the lowest export demand was the textile production chain, from yarns to the end of the garment, including the maquilado service, the official said.

It also influenced less dynamism in production chains, such as a slowdown in the construction sector in the first quarter, which was reflected in low demand for iron and cement.

Rodriguez said the impact was less, because there was a rebound in the performance of food and beverage processing activities.

What is expected is that the last half of this year will return to the demand that we had normal and that we will recover the industry again by the end of this year.

Douglas Rodriguez
Chair of the BCR
Fall in demand continues

After closing 2023 with a contraction of 8.7%, exports continue this year on negative ground and as of May they accumulate a reduction of 5.3%. According to the BCR, in the first five months of the year goods valued at $2,699.1 million have been shipped, at least$151.3 million less than a year ago.

The El Salvador Exporters Corporation (Coexport) has explained that the drop in shipments is due to the cancellation of orders for an excess of inventories purchased in 2022. Inflation, which limits household purchasing capacity, also influenced.

This low demand mainly affected the textile sector, which even had to close some production lines due to low demand. One of the most felt blows was the closure of one of the five factories of the clothing giant HanesBrands, the company with the largest volume of exports in El Salvador for a decade.

Between January and May, the maquila and clothing sector exported $373.3 million, equivalent to $76.7 million (17 per cent) less than the same period in 2023.

This article has been translated after first appearing in Diario El Mundo