By Gaby Chávez | 2025-05-08

SAN SALVADOR -- Negotiations over a Free Trade Agreement (FTA) between China and El Salvador are progressing behind closed doors, with no public disclosure of the terms under discussion, an opacity that economists warn could carry serious consequences for the Salvadoran economy.

Analysts consulted by Entorno describe the country's deepening ties with China as a high-stakes gamble, one that could reshape El Salvador's economic and social landscape.

Chief among their concerns is the potential flood of Chinese imports, products often noted for their low cost and questionable quality, which could threaten local industries ill prepared to compete.

The trade agreement could "displace local producers" unless the government takes concrete steps to protect the country's industrial sector, Otto Rodríguez, a financial adviser and former vice president of El Salvador's Central Reserve Bank, cautioned.

"Local manufacturers lack the technology, workforce and capital to compete," Rodríguez told Entorno.

For example, if El Salvador had a domestic shoe industry, it would struggle to survive a surge of Chinese imports, often subsidized by Beijing and entering the market duty free, he said.

The result, Rodríguez said, could be widespread factory closures and job losses.

Daniel Serrano, a professor and researcher at José Simeón Cañas Central American University (UCA), echoed concerns about El Salvador's vulnerability in a potential trade deal with China.

"The risk is a rapid deindustrialization and the erosion of formal employment in a country where the productive base is already fragile," Serrano told Entorno.

While proponents of FTAs often cite the prospect of cheaper consumer goods, damage to local industries and the loss of jobs outweigh that benefit, he said.

El Salvador lacks the institutional readiness and industrial strategy to responsibly undertake a trade pact of this scale, say knowledgeable watchers.

High-stakes alignment

The proposed FTA between El Salvador and China carries not only economic implications but also significant geopolitical risks, particularly regarding the United States, the country's top trading partner and the source of the majority of its remittances, analysts warn.

"Washington could see this move as a provocation," said Serrano. "The United States could react negatively if the treaty is finalized."

Deepening ties with Beijing could trigger Salvadoran-US tensions that put vital Salvadoran industries at risk -- especially the textile and apparel sector, a major source of export revenue and formal employment, particularly for women, he said.

A US response could include tariffs on Salvadoran goods, potentially leading to a drop in exports, rising unemployment and broader economic instability.

Negotiations between El Salvador and China formally began on April 16, 2024. They have completed two rounds, but neither government has released details of what they have agreed upon.

Opaque trade talks

Rodríguez underscored the risks of secrecy surrounding the agreement.

"We don't know whether China is being offered more favorable terms than the US is," he told Entorno. "If that's the case, Washington would have grounds to impose trade sanctions."

"The lack of transparency, a weak institutional framework and limited investment in workforce development leave us at a clear disadvantage against a global power like China," Rodríguez said.

Government officials highlight the prospect of greater trade and investment, but economists caution that without clear rules, public consultation and support for domestic industry, the agreement could come at a steep national cost.

Concerns over transparency have deepened following the revelation that the Salvadoran government has classified all information related to the FTA negotiations for seven years, as indicated by the Ministry of Economy's public information access index.

The decision stems from legal provisions related to El Salvador's diplomatic affairs, the ministry said. "The information in question contains data on the negotiations and commercial interests of both countries."

"Its release could harm diplomatic relations and jeopardize the agreement's signing," the ministry said.