fbpx
Connect with us

Finance

El Salvador: Keys to Understanding Wealth Management

Published

on

white and black abstract illustration

Understanding the local rules

El Salvador is not considered an ‘investment grade’ market, which means that it may be more difficult to conduct investment business in El Salvador, due to issues such as political instability, corruption, crime or inconsistent application of the rule of law. If you intend to manage your wealth in El Salvador, it is recommended that you seek the advice of a finance professional or wealth manager.

These are general risks that may be present to a greater extent in economies that do not have ‘frontier’, ‘emerging’, or ‘developed’ status. Therefore, a finance professional or wealth manager who has a deep understanding of the risks and opportunities in the local market is invaluable. Not only can they help you navigate red tape and length procedures, but they can provide helpful warnings and help to safeguard your assets from risk. 

If you’re an ex-pat who has recently moved to a new country then it can take a great deal of time to learn the ‘way things work’ and understand how the local culture permeates the different facets of personal finance. With a professional team on your side, you can get up to speed in a jiffy without fear of making a ‘newcomer’ mistake. 

Exploring equity markets

Domestic investors tend to prefer their local equity market, usually represented by the stock exchanges domiciled in the same country. 

For El Salvador, this is the Salvadoran Stock Exchange (BVES), which was founded in 1992. Its market cap is rather limited compared to international peers, with fewer than 50 companies listed, with a trading volume of roughly $1 billion annually. BVES does not have an internationally recognised index that we can use to monitor the performance of this market historically. 

For the purposes of additional diversification, investors will build a portfolio of companies based locally but also international firms to bring greater stability to the portfolio. Although foreign companies will be priced or denominated in a foreign currency – this is less of an issue for locals because the El Salvador economy uses the US dollar, so no foreign exchange gains or losses will be experienced if local investors allocate their wealth to US stocks. 

Choosing a local banking partner

Statista.com reports that the three largest banks by assets in the country are Banco Agricola, Banco Davivenda Salvadoreno and Banco de America Central. You’ll note the absence of the largest global banks such as HSBC, Barclays, Santander or Wells Fargo in this shortlist. This shows how it’s the local service providers which have the strongest hold within this sector. 

Western banks haven’t felt like they have been treated fairly in this market recently, with HSBC going as far as to bring legal action directly against the government of El Salvador for what court documents call a breach of the “El Salvador-United Kingdom Bilateral Investment Treaty.”

In such an environment, your advisers may suggest that you use institutions that are in favour of the authorities to try and avoid becoming wrapped up in disputes of this nature. 

Stanley Gatero is a writer at Disrupt Magazine. He covers topics concerning technology, entrepreneurship, news, and sports. He is an avid traveler.

Become A Crypto Expert

Categories

Recent Stories

Trending


Copyright © 2022 Disrupt ™ Magazine is a Minority Owned Privately Held Company - Disrupt ™ was founder by Puerto Rican serial entrepreneur and philanthropist Tony Delgado who is on a mission to transform Latin America using the power of education and entrepreneurship.

Disrupt ™ Magazine
151 Calle San Francisco
Suite 200
San Juan, Puerto Rico, 00901

Opinions expressed by Disrupt Contributors are their own. Disrupt Magazine invites voices from many diverse walks of life to share their perspectives on our contributor platform. We are big believers in freedom of speech and while we do enforce our community guidelines, we do not actively censor stories on our platform because we want to give our contributors the freedom to express their opinions. Articles are not commissioned by our editorial team, and opinions expressed by our community contributors do not reflect the opinions of Disrupt or its employees.
We are committed to fighting the spread of misinformation online so if you feel an article on our platform goes against our community guidelines or contains false information, we do encourage you to report it. We need your help to fight the spread of misinformation. For more information please visit our Contributor Guidelines available here.


Disrupt ™ is the voice of latino entrepreneurs around the world. We are part of a movement to increase diversity in the technology industry and we are focused on using entrepreneurship to grow new economies in underserved communities both here in Puerto Rico and throughout Latin America. We enable millennials to become what they want to become in life by learning new skills and leveraging the power of the digital economy. We are living proof that all you need to succeed in this new economy is a landing page and a dream. Disrupt tells the stories of the world top entrepreneurs, developers, creators, and digital marketers and help empower them to teach others the skills they used to grow their careers, chase their passions and create financial freedom for themselves, their families, and their lives, all while living out their true purpose. We recognize the fact that most young people are opting to skip college in exchange for entrepreneurship and real-life experience. Disrupt Magazine was designed to give the world a taste of that.