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Private investment in 2021 was the highest in 61 years

Private investment in 2021 was the highest in the last 61 years, according to the Salvadoran Foundation for Economic and Social Development (Fusades).

With data from the Central Reserve Bank (BCR), the institution pointed out that private investment broke records last year by exceeding $5,291 million, which meant an increase of $1,441 million with respect to 2020.

The amount reached last year is equivalent to 18.4% of the Gross Domestic Product (GDP, production of goods and services of an economy), the highest percentage since 1961.

Fusades explained, in an institutional position published yesterday, that the 2021 private investment expansion was driven by the execution of projects that were paralyzed in 2020 due to confinement schemes by covid-19.

It also included the recovery of exports, imports and remittances that exceeded 25% of GDP, as well as by the lag in the approval of construction permits from five years ago.

In 2016, the country faced a “long period” in which no water permits were granted for construction investments, resulting in a backlog of 140 frozen projects amounting to $1.2 billion.

In 2017 there was an agreement to expedite the paperwork and it was expected that they would be completed in three years (by 2020), but due to the pandemic some work was delayed and completed in 2021.

What is expected for 2022?

In March, the president of the Central Bank, Douglas Rodríguez, pointed out that investment projections for 2022 exceed $2.2 billion, including projects in construction processes such as the Energía del Pacífico liquefied natural gas (LNG) mega-plant, the Valle El Ángel urban development complex and Ciudad Marsella.

However, Fusades highlighted that in 2022 the “panorama has changed” in the world economy that faces geopolitical risks due to the invasion of Ukraine, lower growth and the inflationary crisis that raises food prices, as well as the tightening of US monetary policies.

These factors “will reduce corporate and household investment,” plus the influence of emerging market debt risk drives away sources of financing because capital flows “seek securities in developed countries with less” uncertainty.

After the momentum of 2021, and to maintain the pace this year, Fusades recommends facilitating the procedures, in addition to giving flexibility to the labor market according to the new opportunities of the productive sectors, and to develop a strategy of attraction.