Inflation hit Salvadoran companies in 2023

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By LatAm Reports Staff Writers

The situation led entrepreneurs to make changes in the costs and prices of their products and, at the same time, to seek new suppliers for the rise of raw materials. Others also adjusted the roster with new hires or dismissals.

The high cost of inputs was one of the main problems facing the country’s entrepreneurs. A study by the Department of Research of the Central American University José Simeón Cañas (UCA) found that 74% (of 200 companies consulted) indicated that inflation was the main challenge it faced in the first half of 2023.

A total of 142 companies replied that they have made one or more changes in their business strategy, 69.7% have made adjustments to the cost and price; 25.4% made adjustments to the planilla (new contracts or dismissals); 25.4% adjusted the logistics and distribution of the product; 13.4% made adjustments in the raw material, among other changes.

With regard to the fulfilment of corresponding economic and administrative obligations over the past year, 14 per cent stated that they had difficulties in achieving this. “45 per cent mentioned that their main difficulty was the payment of credits and this often leads to new loans being requested. Another point is that while companies say they have had support, not only do they want credits, they not only want better interest rates, but they also want technical support, to grow,” said UCA researcher Mauricio Morales, in a radio interview.

Are there people who are running out of pay at the end of the month. That’s where we see the unemployment issue that is also part of the reality of our country.
Mauricio Morales, UCA researcher

According to the document, access to credit is a major challenge for companies as existing mechanisms and requirements are not affordable for some, especially when they are not formally registered.

Deepening companies that have experienced defaults, 29 per cent said they have suffered delays in the payment of basic services, while to a lesser extent they have faced problems with tax and plant payments with 13 per cent for each category.

“These data reflect and confirm that companies are having major challenges in their structure. It strikes us that there are people who are running out of pay at the end of the month and what is it? It is a scenario that companies question whether I can continue to pay this collaborator or not? And that’s where we see the issue of unemployment that is also part of the reality of our country,” said the researcher.

Morales said inflation is an issue that is definitely still a challenge for companies and it is important that something be done so that this can be changed. In December, inflation in the price of goods and services moderated to 1.23%, according to the latest data from the Central Reserve Bank (BCR). In the same month of 2022, the rate was 7.32%, according to the data of the financial institution.

This article has been translated from the original which first appeared in La Prensa Grafica