El Salvador Investment Compact

MCC and the Government of El Salvador entered into force a compact agreement on September 9, 2015, to invest up to $277 million in regulatory reforms, education, and logistical infrastructure, with the goal of promoting economic growth and private investment in the country.

Over five years, the project trained over 4,500 teachers, school directors, and education specialists; constructed 32 schools; and launched El Salvador’s first two Public-Private Partnerships (PPPs).

Compact implementation was heavily impacted by the COVID-19 pandemic, however, in a testament to El Salvador’s commitment to country ownership, the government has agreed to continue the funding and implementation of the compact’s projects.

Read the press release about the El Salvador Investment Compact closeout.

  • Original Amount at Compact Signing:
    $277,000,000
  • Amount spent:
    $261,865,337
  • Signed:
     September 30, 2014
  • Entry Into Force:
     September 9, 2015
  • Closed:
     September 9, 2020

Project Results

Human Capital Project

  • $105,117,807Original Compact Project Amount

Estimated Benefits

Estimated Benefits for the Human Capital Project
Time Estimated Economic Rate of Return (ERR) over 20 years Estimated beneficiaries over 20 years Estimated net benefits over 20 years
Not specified 11.56 percent

Rates of return range between 8 and 13%.

 176,000 Not yet available

Project Description

The Human Capital Project focuses on preparing the people of El Salvador to better meet the demands of a global economy by improving the quality of education and by better matching the supply of skills to the labor market.

The project is composed of two activities:

  • The Education Quality Activity will support complementary interventions in competency-based education, increased classroom time, teacher training, and improvements to the institutional environment that are conducive to learning. It will also include investments in approximately 350 schools in the coastal zone of El Salvador where dropout rates are the highest, with a focus on grades 7-12.
  • The TVET System Reform Activity will improve the harmonization between the skills demanded by the labor market with those supplied by private and public education and training providers. Through improving the quality of education in El Salvador, students will graduate with skills that better meet the needs the job market. This will reduce poverty and encourage economic growth across the country.

Investment Climate Project

  • $43,674,818Original Compact Project Amount

Estimated Benefits

Estimated Benefits for the Investment Climate Project
Time Estimated Economic Rate of Return (ERR) over 20 years Estimated beneficiaries over 20 years Estimated net benefits over 20 years
Not specified 18.56 percent 2,483 Not yet available

Project Description

The Investment Climate Project is composed of two activities:

  • The Regulatory Improvement Activity aims to prioritize and promote investment climate reforms resulting in more efficient and profitable business operations for firms doing business in El Salvador relating to tradable sectors.
  • The Partnership Development Activity is designed to enable the Government of El Salvador (GoES) to more effectively partner with the private sector to provide key public services needed to increase productivity and investment in the country. These partnerships include (i) public-private partnerships (PPPs) to enable the GoES to tap private capital to finance, develop, and manage key infrastructure needed to increase productivity and private investment, and (ii) the El Salvador Investment Challenge (ESIC) to demonstrate how the GoES can more efficiently allocate its limited government resources to public goods needed to support private investment in the tradables sector and create a signal that the GoES supports private investment to help develop the country.

Logistical Infrastructure Project

  • $96,796,225Original Compact Project Amount

Estimated Benefits

Estimated Benefits for the Logistical Infrastructure Project
Time Estimated Economic Rate of Return (ERR) over 20 years Estimated beneficiaries over 20 years Estimated net benefits over 20 years
Not specified 13.5 percent 171,159

Estimated beneficiaries encompass the road users on the improved roads.

 $18,770,000

Project Description

The Logistical Infrastructure Project will address two transportation bottlenecks that have led to high transportation and logistics costs for regional trade.

The project is composed of two activities:

  • The Highway Expansion Activity will help relieve congestion at the most trafficked segment of  El Salvador’s key coastal corridor, including key hubs such as its main airport and two main seaports.
  • The Border Crossing Infrastructure Activity will improve a major border crossing with Honduras, reducing wait times at the border by relieving freight and passenger traffic congestion.

As of September 9, 2020