 | 2007 | 2006 |
Overall Score: | 41 | 41 |
Regional Ranking: | 10th (tied) | 8th (tied) |
Tied with Peru for 2nd to last place in the 2007 Scorecard, El Salvador has much room for improvement in creating a suitable environment for VC/PE investing. Positive momentum in fund tax treatment must be coupled with laws allowing for local fund formation and operation. Macro-environment improvements to perceived corruption and a weak judicial system are also key.
Strengths: Improvements have been made to El Salvador’s tax treatment of VC/PE funds & investments, with a reduced tax regime for capital gains and no taxation of dividends if the remitting firm has met tax obligations. Pass through is not automatic, but must be structured carefully. International norms are used in El Salvador's fully dollarized economy, and international accounting firms are present and competent.
Challenges: El Salvador earned the lowest possible score for laws on VC/PE fund formation and operation, as no specific regulations exist allowing funds to form and operate. El Salvador also scored zeros for strength of judicial system and perceived corruption. El Salvador’s score in restrictions on institutional investors was revised downwards by two points from the 2006 score, protection of intellectual property rights remains poor, and only minimal requirements for corporate governance are in place.
| Score | Change |
| Overall score | 41 | |
| Laws on VC/PE fund formation and operation | 0 | |
| Tax treatment of VC/PE funds & investments | 3 | ▲ 1 |
| Protection of minority shareholder rights | 2 | ▲ 1 |
| Restrictions on institutional investors investing in VC/PE | 1 | ▼ 2 |
| Protection of intellectual property rights | 1 | |
| Bankruptcy procedures/creditors' rights/partner liability | 2 | |
| Capital markets development and feasibility of exits | 2 | |
| Registration/reserve requirements on inward investments | 3 | |
| Corporate governance requirements | 1 | |
| Strength of the judicial system | 0 | |
| Perceived corruption | 0 | |
| Quality of local accounting/use of international standards | 4 | |
Indicators are scored from 0-4 where 4=best score.
Overall score ranges from 0-100 where 100=best score. |
