Law Firm Directory

Browse all firms with extended profiles for El Salvador

Overview

Despite a widely questioned record on human rights and the ongoing authoritarian political activity of the country’s millennial President (and former publicist and Bitcoin proponent) Nayib Bukele, as well as the still-low adoption rate of Bitcoin by citizens and businesses, the July 2021 downgrading by Moody’s of the nation’s credit rating (around the time the value of Bitcoin had dropped by 23% to $37k) and the November 2022 collapse of the FTX cryptocurrency exchange, the Salvadoran market is currently in a state of modest growth and is an emerging destination of interest for (some) overseas investors.

In the same month that FTX declared insolvency, Bukele announced a free trade deal with China, with Vice President Félix Ulloa stating that as part of the deal China had offered to purchase the country’s $21bn in foreign debt. Such economic manoeuvres, coupled with aggressive tax revenue collection, have led to a more positive forecast than previously projected. According to the February 2023 conclusion of an IMF mission, the Salvadoran economy was estimated to have expanded by 2.8% in 2022 as a result of domestic demand and the government’s effective response to the Covid-19 pandemic.

While noting that facilitating international capital market access is a priority, the IMF projected that El Salvador’s GDP would grow by 2.4% in 2023, above the historical average, driven by private consumption, public investment and tourism. This growth was also attributed to a post-March 2023 reduction in crime.

It is the government’s anti-crime initiatives under Bukele (who, infamously, after addressing the UN assembly changed his Twitter bio to read ‘world’s coolest dictator’) that have received condemnation from human rights organisations.

After blaming several days of violence and 87 killings on the gang known as MS-13, on 27 March 2022 Bukele’s government declared a state of emergency, suspending constitutional rights (foremost of which was the presumption of innocence). This led to the reportedly arbitrary arrests of 6,000 citizens accused of being gang members and the passing of a congressional measure authorising ten to 15-year prison sentences for members of the media who transmit to the public ‘messages or statements originating or presumably originating from said criminal groups, that could generate anxiety and panic in the population’ – an act which has led to allegations of a crackdown on freedom of the press.

By May 2023, the number of arrests reached 67,000. The same month, human rights organisation Cristosal released a report, according to which prisoners arrested during the crackdown had been tortured, with 153 dying in custody, showing signs of ‘asphyxiation, fractures, significant bruising, lacerations and even perforations’.

While at the same time criticising the Bukele regime’s human rights record, news outlet El Faro conceded in February 2023 that ‘the dismantling of gangs has enormous life-changing potential for the country’ – but was still forced to move its operations to Costa Rica in April 2023 to avoid ‘fabricated accusations’. Editor Óscar Martínez, referring to prior threats the news outlet faced (including from drug cartels), stated: ‘This time we have no choice but to leave because it’s not one group that is after us. It is the entire state.’

The growing stability of the market, the downturn in crime and the human rights situation has had a pronounced impact on El Salvador’s legal markets.

In the banking and finance sphere, respondent firms indicated actions by the government and its legislative allies against the rule of law – such as the May 2021 removal and replacement of Supreme Court judges with Bukele regime sympathisers – has led to hesitancy from some international investors and less activity involving major financial institutions. However, firms did note a continued uptick of overseas interest in the crypto space, and some predicted more investment in the country following the downturn in crime.

In relation to dispute resolution, some respondent firms indicated no key changes and a continual flow of administrative tax litigation stemming from the government’s aggressive approach to collections. Other teams, however, described challenges with litigation as a result of the changes to the Supreme Court. Also in the tax area, firms interviewed predicted the president’s May 2023 approval of a law which will eliminate income, property and capital gains taxes on technological innovations (including software programming, coding, apps and AI development) would create a lot of new opportunities in the near future. In addition, firms described a rise in work related to an increasing number of tax audits by internal tax agencies.

In the corporate and M&A field, respondent firms described the challenges of dealing with a rebounding economy, predicting the declining crime rate would have a positive impact on investments in the country, while also pointing to the potential fallout from Bukele’s decision to run for immediate re-election in 2024 (an action prohibited by El Salvador’s constitution). Firms also described growth in such sectors as construction and food and beverages.

Finally, turning to intellectual property, firms reported the rising interest in Bitcoin from overseas corporates has led to a rise in trade mark registrations for digital assets. Respondent firms also highlighted growth in the tourism and gastronomy sectors, leading to increased trade mark work in both areas, and a surge in interest in matters related to NFTs and the metaverse.

In terms of the Salvadoran legal landscape, regional firms such as Arias, Consortium Legal and BLP continue to be leaders across most practice areas, while other notable Central American outfits include García & Bodán, Aguilar Castillo Love, LatamLex | Guandique Segovia Quintanilla (GSQ), LatinAlliance El Salvador, Lexincorp, Mayora & Mayora, S.C. and CENTRAL LAW El Salvador. A growing number of global firms also have a presence in the Salvadoran market, including ECIJA, EY Law Central America (a leader in the tax space) and, most recently, Dentons (the regional arm of Dentons). Full-service domestic firm Romero Pineda also remains a standout (particularly for intellectual property matters), while Torres Legal is an up-and-coming Salvadoran practice.


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