Obligation El Salvador 8.625% ( USP01012BX31 ) en USD

El Salvador

88.75 % ▼

Salvador

USP01012BX31 ( en USD )

8.625% par an ( paiement semestriel )

27/02/2029

Prospectus brochure de l'obligation El Salvador USP01012BX31 en USD 8.625%, échéance 27/02/2029

5 000 USD

601 085 000 USD

P01012BX3

28/08/2024 ( Dans 130 jours )

L'Obligation émise par El Salvador ( Salvador ) , en USD, avec le code ISIN USP01012BX31, paye un coupon de 8.625% par an.
Le paiement des coupons est semestriel et la maturité de l'Obligation est le 27/02/2029

OFFERING CIRCULAR

The Republic of El Salvador

US$601,085,000
8.625% Notes due 2029
The Republic of El Salvador (the "Republic" or "El Salvador") is offering US$601,085,000 aggregate principal
amount of its 8.625% Notes due 2029 (the "Notes"). Interest on the Notes will be payable semi-annually in arrears on February
28 and August 28 of each year commencing on August 28, 2017. The Notes will mature on February 28, 2029. This Offering
Circular constitutes a prospectus for the purpose of the Luxembourg Law dated July 10, 2005 on prospectuses for securities, as
amended.
The Notes will contain "collective action clauses". Under these provisions, which differ from the terms of the Republic's
Public External Indebtedness issued prior to the date hereof, the Republic may amend the payment provisions of the Notes and other
reserved matters listed in the indenture with the consent of the holders of: (1) with respect to a single series of notes, more than 75%
of the aggregate principal amount of the outstanding notes of such series; (2) with respect to two or more series of notes, if certain
"uniformly applicable" requirements are met, more than 75% of the aggregate principal amount of the outstanding notes of all series
affected by the proposed modification, taken in the aggregate; or (3) with respect to two or more series of notes, more than 66 2/3%
of the aggregate principal amount of the outstanding notes of all series affected by the proposed modification, taken in the
aggregate, and more than 50% of the aggregate principal amount of the notes of each series affected by the proposed modification,
taken individually.
Except as described herein, payments on the Notes has been made without deduction for or on account of withholding
taxes imposed by the Republic. Application has been made to list the Notes on the Official List of the Luxembourg Stock Exchange
and to have the Notes admitted to trading on the Euro MTF Market. Application will also be made to list the Notes on the El
Salvador Stock Exchange.
See "Risk Factors" beginning on page 9 regarding certain risk factors you should consider before investing in the Notes.
Price: 100.000%
plus accrued interest, if any, from February 28, 2017
Delivery of the Notes will be made on or about February 28, 2017.
The Notes have not been and will not be registered under the Securities Act of 1933, as amended (the "Securities
Act"). The Notes may not be offered or sold within the United States or to U.S. persons except to qualified institutional buyers
in reliance on the exemption from registration provided by Rule 144A under the Securities Act and to certain persons in offshore
transactions in reliance on Regulation S under the Securities Act. You are hereby notified that sellers of the Notes may be
relying on the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A under the Securities Act.
Joint Lead Managers and Joint Bookrunners
Credit Suisse
Deutsche Bank Securities

The date of this Offering Circular is February 21, 2017

ANY OFFER OR SALE OF NOTES IN ANY MEMBER STATE OF THE EUROPEAN ECONOMIC AREA WHICH
HAS IMPLEMENTED DIRECTIVE 2003/71/EC AND AMENDMENT THERETO INCLUDING DIRECTIVE
2010/73/EU (THE "PROSPECTUS DIRECTIVE") MUST BE ADDRESSED TO QUALIFIED INVESTORS (AS
DFINED IN THE PROSPECTUS DIRECTIVE).

IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF
THE REPUBLIC AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND THE RISKS INVOLVED.

You should rely only on the information contained in this Offering Circular or to which we have referred you. We
have not, and the Joint Lead Managers and Joint Bookrunners have not, authorized anyone to provide you with
information that is different from the information contained in this Offering Circular. This Offering Circular may only be
used where it is legal to sell these securities. The information in this Offering Circular may only be accurate on the
date of this Offering Circular.

This Offering Circular may only be used for the purposes for which it has been published.

TABLE OF CONTENTS

Page

PRESENTATION OF INFORMATION ...................................................................................................................................... ii
FORWARD-LOOKING STATEMENTS ..................................................................................................................................... ii
ARBITRATION AND ENFORCEABILITY ............................................................................................................................... iii
EXCHANGE RATE INFORMATION ......................................................................................................................................... iii
OFFERING CIRCULAR SUMMARY ......................................................................................................................................... 1
THE OFFERING .......................................................................................................................................................................... 6
RISK FACTORS ........................................................................................................................................................................... 9
USE OF PROCEEDS .................................................................................................................................................................... 13
THE REPUBLIC OF EL SALVADOR ........................................................................................................................................ 14
THE SALVADORAN ECONOMY.............................................................................................................................................. 19
FOREIGN TRADE AND BALANCE OF PAYMENTS ............................................................................................................. 39
MONETARY SYSTEM ............................................................................................................................................................... 49
PUBLIC SECTOR FINANCES .................................................................................................................................................... 55
PUBLIC DEBT ............................................................................................................................................................................. 64
DESCRIPTION OF THE NOTES ................................................................................................................................................ 68
PLAN OF DISTRIBUTION ......................................................................................................................................................... 78
BOOK-ENTRY SETTLEMENT AND CLEARANCE ................................................................................................................ 81
TRANSFER RESTRICTIONS ..................................................................................................................................................... 84
TAXATION .................................................................................................................................................................................. 86
VALIDITY OF THE NOTES ....................................................................................................................................................... 89
GENERAL INFORMATION ....................................................................................................................................................... 90

The Notes will be direct, general and unconditional, unsubordinated and unsecured obligations of the Republic. The
Notes rank and will rank without any preference among themselves and equally with all other unsecured and unsubordinated Public
External Indebtedness (as defined under "Description of the Notes--Definitions") of the Republic. It is understood that this
provision shall not be construed so as to require the Republic to make payments under the Notes ratably with payments being made
under any other Public External Indebtedness. The Republic has pledged its full faith and credit for the due and punctual payment of
all amounts due in respect of the Notes.

The Notes will be issued in registered form only. Notes sold in offshore transactions in reliance on Regulation S under
the Securities Act ("Regulation S") will be represented by one or more permanent global notes in fully registered form without
interest coupons (the "Regulation S Global Note") deposited with a custodian for, and registered in the name of a nominee of, The
Depository Trust Company ("DTC") for the respective accounts at DTC as such subscribers may direct. Notes sold in the United
States to qualified institutional buyers (each a "qualified institutional buyer") as defined in, and in reliance on, Rule 144A under
the Securities Act ("Rule 144A") will be represented by one or more permanent global notes in fully registered form without interest
coupons (the "Restricted Global Note" and, together with the Regulation S Global Note, the "Global Notes") deposited with a
custodian for, and registered in the name of a nominee of, DTC for the respective accounts at DTC as such subscribers may direct.
Beneficial interests of DTC participants (as defined under "Book-Entry Settlement and Clearance") in the Global Notes will be
shown on, and transfers thereof between DTC participants will be effected only through, records maintained by DTC and its direct
and indirect participants, including Euroclear Bank S.A./N.V., as operator of the Euroclear System ("Euroclear") and
Clearstream Banking, société anonyme ("Clearstream, Luxembourg"), if applicable. See "Book-Entry Settlement and Clearance".
Except as described herein, definitive Notes will not be issued in exchange for beneficial interests in the Global Notes. See
"Description of the Notes -- Form, Denomination and Title". For restrictions on transfer applicable to the Notes, see "Transfer
Restrictions" and "Subscription and Sale".

The Republic has taken reasonable care to ensure that the information contained in this Offering Circular is true and correct
in all material respects and not misleading as of the date hereof, and that, to the best of the knowledge and belief of the
Republic, there has been no omission of information which, in the context of the issue of the Notes, would make this Offering
Circular as a whole or any such information misleading in any material respect. The Republic accepts responsibility accordingly.

This Offering Circular does not constitute an offer by, or an invitation by or on behalf of, the Republic or the Joint
Lead Managers and Joint Bookrunners to subscribe for or purchase any of the Notes. Each recipient shall be deemed to have made
its own investigation and appraisal of the financial condition of the Republic. The distribution of this Offering Circular or any part
of it and the offering, possession, sale and delivery of the Notes in certain jurisdictions may be restricted by law. Persons into whose
possession this Offering Circular comes are required by the Republic and the Joint Lead Managers and Joint Bookrunners to
inform themselves about and to observe any such restrictions. See "Transfer Restrictions" and "Subscription and Sale" for a
description of further restrictions on the offer, sale and delivery of Notes and on distribution of this Offering Circular and other
offering material relating to the Notes.

Each person purchasing Notes pursuant to Rule 144A will be deemed to:

represent that it is purchasing the Notes for its own account or an account with respect to which it exercises sole
investment discretion and that it or such account is a qualified institutional buyer (as defined in Rule 144A); and

acknowledge that the Notes have not been and will not be registered under the Securities Act or any State securities laws
and may not be reofferred, resold, pledged or otherwise transferred except as described under "Transfer Restrictions".

Each purchaser of Notes sold outside the United States in reliance on Regulation S will be deemed to have represented that it
is not purchasing Notes with a view to distribution thereof in the United States. Each person purchasing Notes also acknowledges
that:

it has been afforded an opportunity to request from the Republic and to review, and it has received, all additional
information considered by it to be necessary to verify the accuracy of the information herein;

it has not relied on the Joint Lead Managers and Joint Bookrunners or any person affiliated with the Joint Lead
Managers and Joint Bookrunners in connection with its investigation of the accuracy of the information contained in
this Offering Circular or its investment decision; and

no person has been authorized to give any information or to make any representation concerning the Republic or
the Notes other than those contained in this Offering Circular and, if given or made, such information or
representation should not be relied upon as having been authorized by the Republic or the Joint Lead Managers and
Joint Bookrunners.
i

IN CONNECTION WITH THIS ISSUANCE OF NOTES, EACH JOINT LEAD MANAGER AND JOINT
BOOKRUNNER MAY, ITSELF OR THROUGH ITS AFFILIATES, OVERALLOT OR EFFECT TRANSACTIONS
WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES AT A LEVEL WHICH MIGHT NOT
OTHERWISE PREVAIL IN THE OPEN MARKET, TO THE EXTENT PERMITTED BY APPLICABLE LAWS. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

PRESENTATION OF INFORMATION

Unless otherwise specified or the context requires, references to "US dollars", "$" and "US$" are to United States dollars
and references to the "colón" and "colones" and "¢" are to Salvadoran colones.

References to the "Republic" and "El Salvador" are to the Republic of El Salvador.
References to "FOB" are to exports free on board and to "CIF" are to imports including cost, insurance and freight charges.
Data identified as "preliminary" in the tables included in this Offering Circular reflects an interim calculation and are
subject to change.

References to "maquila" are to the assembly of imported goods for re-export.

References to "Central America" and "Central American countries" are to El Salvador, Costa Rica, Guatemala, Honduras
and Nicaragua.

Certain economic and financial data in this Offering Circular are derived from information previously published by Banco
Central de Reserva de El Salvador (the "Central Bank") and other Governmental entities of El Salvador. These data are subject to
updates and change in subsequent publications. The Central Bank is currently in the process of changing the base year of the
National Account Statistics from 1990 to 2005 and in the process of adopting the main recommendations of the United Nations
System of National Accounts ("SNA2008"). The information as a result of the change in base year is preliminary and not yet public.
The disclosure of the SNA2008 figures for El Salvador will be made public subject to the dissemination process of the Government.

Certain other information in this Offering Circular is derived from information made publicly available by the United
Nations.

References to "net international reserves" are to foreign currency reserves. The term "current account surplus (deficit)"
as applied to the balance of payments includes foreign aid, unless otherwise specified.

Certain amounts included in this Offering Circular have been subject to rounding adjustments; accordingly, figures shown
as totals in certain tables may not be an arithmetic aggregation of the figures which precede them.

FORWARD-LOOKING STATEMENTS

This Offering Circular contains certain forward-looking statements (as such term is defined in the Securities Act)
concerning the Republic. These statements are based upon beliefs of certain Government officials and others as well as a number
of assumptions and estimates which are inherently subject to significant uncertainties, many of which are beyond the control of the
Republic. Future events may differ materially from those expressed or implied by such forward-looking statements. Such forward-
looking statements are principally contained in the sections "Offering Circular Summary", "The Republic of El Salvador", "The
Salvadoran Economy", "Foreign Trade and Balance of Payments", "Monetary System", "Public Sector Finances" and "Public Debt".
In addition, in those and other portions of this Offering Circular, the words "anticipates", "believes", "contemplates", "estimates",
"expects", "plans", "intends", "projections" and similar expressions, as they relate to the Republic, are intended to identify forward-
looking statements. Such statements reflect the current views of the Republic with respect to future events and are subject to
certain risks, uncertainties and assumptions. The Republic undertakes no obligation to update or revise any forward- looking
statements, whether as a result of new information, future events or otherwise. In light of these risks and uncertainties, there can
be no assurances that the events described or implied in the forward-looking statements contained in this Offering Circular
will in fact occur.
ii

ARBITRATION AND ENFORCEABILITY

The Republic is a foreign sovereign state. Consequently, it may be difficult for investors to obtain or realize upon
judgments in the courts of the United States. Under its Constitution, the Republic is not permitted to consent to jurisdiction of the
courts of any foreign jurisdiction. The Republic has not consented to the jurisdiction of any court outside El Salvador in
connection with actions arising out of or based on the Notes or in connection with the enforcement of any judgment arising out of
such actions, nor has the Republic appointed an agent for service of process outside El Salvador. The Republic has agreed to the
following arbitration provisions as part of the terms and conditions of the Notes:

Any dispute, controversy or claim arising out of or relating to the Notes (other than any action arising out of or
based on the United States federal or state securities laws), including the performance, interpretation,
construction, breach, termination or invalidity thereof, shall be finally settled by arbitration in accordance with
the Arbitration Rules of the United Nations Commission on International Trade Law (excluding Article 26
thereof) as in effect on the date of the Indenture (the "UNCITRAL Arbitration Rules"). The number of
arbitrators shall be three, to be appointed in accordance with Section II of the UNCITRAL Arbitration
Rules. The appointing authority shall be the Chairman of the International Court of Arbitration of the
International Chamber of Commerce. The third arbitrator may be (but need not be) of the same nationality as
any of the parties to the arbitration. The place of arbitration shall be New York, New York. The language to be
used in the arbitration proceedings shall be English. Any arbitral tribunal constituted under this paragraph
shall make its decisions entirely on the basis of the substantive law of the State of New York.

The decision of any arbitral tribunal shall be final to the fullest extent permitted by law, and a court judgment
may be entered thereon by any Salvadoran court lawfully entitled to enter such judgment. In any arbitration or
related legal proceedings for the conversion of an arbitral award into a judgment, the Republic will not raise any
defense that it could not raise but for the fact that it is a sovereign state. The Republic has not consented to the
jurisdiction of any court outside El Salvador in connection with actions arising out of or based on the Notes or
in connection with the enforcement of any judgment arising out of such actions, nor has the Republic appointed
an agent for service of process outside El Salvador. The Republic waives any forum non conveniens defense in
any proceeding in El Salvador.

No arbitration proceedings hereunder shall be binding upon or in any way affect the right or interest of any
person other than the claimant or respondent with respect to such arbitration.

The Republic's consent to arbitration shall not preclude a holder of any Note from instituting legal proceedings
against the Republic in the courts of El Salvador.

The Republic has represented that it has no right to immunity on the grounds of sovereignty or otherwise, from the
execution of any judgment in El Salvador, or from the execution or enforcement in El Salvador of any arbitral award (except, in
each case, for the limitation on alienation of public property) in respect of any proceeding or any other matter arising out of or
relating to its obligations contained in the Notes. The enforcement by a Salvadoran court of a foreign arbitral award is subject to
recognition by the Corte Suprema de Justicia (the "Supreme Court") of the Republic, which will recognize such award if all of the
required formalities are observed and the award does not contravene Salvadoran national sovereignty, constitutional rights or public
policy and compliance with the obligations stated in the award is lawful in El Salvador. Under the laws of the Republic, public
property (bienes de uso público) of the Republic located in El Salvador is not subject to execution or attachment, either prior to or
after judgment. The execution of a judgment against the Republic in El Salvador is only available in accordance with Article
182 ordinal 4 of the Constitution of the Republic of El Salvador and the procedures set forth in and Articles 555 to 558 and 590 et
seq. of the Salvadoran Civil and Business Procedure Code; pursuant to Article 590, if the budget of the fiscal year in which a final
judgment is issued is not adjusted to provide for payment of the judgment, registration of the judgment for inclusion in the budget of
a subsequent fiscal year of the Republic is required for payment.

EXCHANGE RATE INFORMATION

On November 30, 2000, the Legislative Assembly approved the Ley de Integración Monetaria (the "Monetary
Integration Act"), which fixed the colón to the US dollar at ¢8.75 to US$1.00, effective January 1, 2001. Since January 1, 2001, the
colón/US dollar exchange rate has been fixed at ¢8.75/US$1.00 pursuant to the Monetary Integration Act. The Monetary
Integration Act allows free circulation of the US dollar in the Salvadoran economy and makes the US dollar the unit of account for
the financial system in El Salvador.

Currency conversions contained in this Offering Circular should not be construed as representations that colones have been,
could have been or could be converted into US dollars at the indicated or any other rate of exchange.
iii

OFFERING CIRCULAR SUMMARY

The following summary does not purport to be complete and is qualified in its entirety by, and is subject to, the detailed
information appearing elsewhere in this Offering Circular.

The Republic of El Salvador

General

El Salvador is geographically the smallest and also the most densely populated of the five Central American countries. It is
bounded on the south by the Pacific Ocean, on the northwest by Guatemala and on the northeast and east by Honduras.

El Salvador is a republic and its form of Government is a representative democracy. On March 9, 2014, Salvador Sánchez
Cerén of the Frente Farabundo Martí para la Liberación Nacional ("FMLN") party was elected president of the Republic. He took
office on June 1, 2014, succeeding Carlos Mauricio Funes Cartagena, who was elected in March 2009.

In 2013, nominal GDP was approximately US$24.4 billion and real GDP grew by 1.9%. The highest growth rates by
economic sector were 4.5% in finance and insurance, 3.3% in Government services, 3.3% in real estate and business services and
3.1% in manufacturing. The only sectors to register contraction in 2013 were agriculture, livestock and fishing (0.5)% caused by
reduced coffee production and lower international coffee prices, and construction (0.1%). In 2014, nominal GDP was approximately
US$25.1 billion and real GDP grew by 1.4%.The highest growth rates by economic sector were 3.7% in community, social, personal
and domestic services, 3.4% in finance and insurance, 3.5% real estate and business and 2.4% in trade, restaurants and hotels. The only
sectors to register contraction were construction (10.7%) and mining (1.6%). In 2015, nominal GDP was approximately US$25.9 billion
and real GDP grew by 2.5%.The highest growth rates by economic sector were 3.7% in real estate and business, 3.4% in manufacturing
and 3.3% in transportation, storage and communication. The electricity, gas and water sector registered the lowest growth rate by
economic sector increasing by 0.3%.

Preliminary real GDP figures reflect growth of 2.5% for the three-month period ended September 30, 2016, compared to
2.7% for the same period in 2015. During the first nine months of 2016 real GDP grew 2.4% compared to the same period in 2015.

According to the United Nations Human Development Report 2015, El Salvador's per capita gross national income ("GNI")
based on 2015 figures and adjusted for purchasing power parity was US$7,349.

Recent Political and Economic Developments

In the presidential elections that took place in March 2014, Salvador Sánchez Cerén was elected as President of El Salvador. The
next presidential election is scheduled for February 2019.

Five Year Development Plan 2014-2019
The five year development plan 2014-2019 sets forth the objectives and strategies of the Government around three main
priorities: (i) sustained economic growth, (ii) inclusive education, (iii) citizen safety and security.

In order to achieve its goals, the Government has proposed a fiscal policy that would provide for: (i) financing for an increased
supply of adequate basic public services, (ii) improving efficiency in public expenditures, and (iii) increasing public spending in
competitive markets in order to promote job creation. These policies aim to improve the public finances of the Republic and promote a
sustainable and stable economy for the medium and long term.

Fiscal Agreement

A Framework Agreement for Fiscal Sustainability, Economic Development and Bolstering Financial Liquidity for El Salvador
("the Framework") was signed on November 10, 2016 by the Government, FMLN and the Alianza Republicana Nacionalista
("ARENA"), the main opposition party, and in consultation with the minority parties, in order to set an agenda to guarantee fiscal
sustainability and inclusive growth, increase economic and social development and offer financial stability in the short, medium and
long terms. The following actions are part of the Framework:

1. Authorization to issue debt securities of US$550.0 million in the local and/or international markets, with proceeds being used to
refinance US$307.0 million of short term debt and US$243.0 million to cover Government expenses carried over from fiscal
year 2016. The expenses include transfer payments made by FODES, outstanding payments to suppliers and payment of
subsidies. The Notes are being offered hereby in furtherance of this element of the Framework.

2. The enactment on November 10, 2016 of the Fiscal Responsibility Law. The purpose of the law is to promote policies that will
guarantee fiscal sustainability of the public finances in the medium and long term which will contribute to the macroeconomic
1

stability of the country through the enactment of regulations that: (i) establish limits on the deficit and public indebtedness, (ii)
for consistency of the budget with the goals established by the Fiscal Responsibility Law, (iii) guarantee budget allocation for
social programs, and (iv) promote greater transparency and accountability. The law also provides for public finance
consolidation measures to be implemented over the three years after its enactment requiring an adjustment of 3.0% of GDP
through spending cuts and increased revenues.

3. Continuation of the Fiscal Work Group, a group composed of government officials from multiple agencies (the "Fiscal Work
Group") that is among other things, responsible for guaranteeing fiscal sustainability and for the implementation of the second
installment of issuance and placement of US$650.0 million of debt securities in order to refinance short term debt. The Fiscal
Work Group is responsible for several initiatives related to fiscal sustainability including: review of budgetary support loans,
review of the law providing pensions for the armed forces, review of the wage mechanism that provides for public service
payroll increases, consideration of reforms to the law regulating the Fideicomiso de Obligaciones Previsionales ("FOP") for
purposes of financing of the private pension system, review of the special budget for the Tribunal Supremo Electoral ("TSE")
and compliance with the Fuerza Armada de El Salvador ("FAES") and FMLN Veterans Law.

4. The Government is committed to formalizing an agreement with the International Monetary Fund to improve fiscal
sustainability, compatible with the provisions of the Fiscal Responsibility Law and the Framework.

5. Incorporate into the 2017 budget any modifications due to the agreements adopted as a result of the work of the Fiscal Work
Group.

Fomilenio II

El Salvador and the United States signed the Fomilenio II project on September 30, 2014. The objective of the program is to
implement projects and public policies that increase productivity by attracting investment, strengthening human capital and reducing
transportation and logistics costs. The project is funded with US$277.0 million donated by the United States through the Millennium
Challenge Corporation ("MCC") and US$88.2 million provided by the Government.

As of December 2016, there has been a total disbursement of Fomilenio II of US$10.8 million, and in 2017 the Government
plans to disburse another US$54.7 million aimed at attracting investment by reducing and eliminating regulations and reducing logistics
and transportation costs.

2017 Budget

The 2017 budget for the Central Government was presented to the Legislative Assembly on September 30, 2016 and enacted
on January 19, 2017 for a total amount of US$4,958 million in expenditures, an increase of US$621.9 million or a 14.3% increase
compared to the 2016 results.

The principal assumptions on which the 2017 budget is based are real GDP growth of 2.3%, an inflation rate of 2.0% and
nominal GDP of US$27,826.1 million. The budget contemplates total revenues of US$4,958 million and total expenditures of US$4,958
million. The budget allocates, among other expenditures, US$3,619.0 million (72.99% of total expenditures) to current costs, which
include salaries and compensation, goods and services, certain financial costs and current transfers, US$752.9 million to capital costs
(15.19% of total expenditures), which include public investment programs and other capital costs and US$309.6 million to financial
expenditures (6.25% of total expenditures), which include amortization payments on internal and external debt.

The 2017 budget contemplates revenues of US$4,958 million, with US$4,458.1 million (89.92% of total revenues) from
current revenues, which include revenues from tax and non-tax sources, US$17.4 million from capital revenues (0.35% of total
revenues), which include donations and US$245.0 million from financing (4.94% of total revenues) and US$237.3 million (4.79% of
total revenues) from revenues from special contributions.

Economic Performance

In 2015, the real GDP growth rate increased to 2.5% as public consumption and investment recovered, increasing by 4.7% and
7.6%, respectively, and private investment and exports of goods and services increased by 8.1% and 2.4%, respectively. In the three-
month period ended September 30, 2016, real GDP registered a growth rate of 2.5%, as a result of higher growth rates in the agriculture,
livestock and fishing, trade, restaurant and hotels, community, social, personal and domestic services, construction and manufacturing
sectors.

In 2012, inflation was 0.8%, concentrated in the first half of the year, mainly due to increased food and oil prices resulting
from volatility of international oil prices related to political unrest in certain Arab countries and increased utility prices as a consequence
2

of adjustments in Government subsidies. In 2013 and 2014, the inflation rate decreased to 0.8% and then 0.5% as food, clothes and
footwear and oil-derived products prices registered a decline in their rate of growth. In 2015, the inflation rate increased to 1.0% as the
prices of housing, water, electricity and oil-derived products increased by 11.7%. In 2016, the economy experienced a deflation of
(0.9)% driven primarily by decreasing prices of food and beverages, housing, water, electricity and oil-derived products and clothes and
footwear.

Remittances grew on average 4.2% from 2012 to 2016 and totaled US$3,879.7 million in 2012, US$3,937.4 million in 2013,
US$4,133.0 million in 2014 and US$4,270.0 million in 2015, representing 16.3%, 16.2%, 16.5% and 16.5% of GDP, respectively. In
2016, remittances increased to US$4,576.0 million, representing an increase of 7.2% compared to 2015. See "Foreign Trade and
Balance of Payments -- Current Account."

Manufacturing is a key sector of the Salvadoran economy. From 2011 to 2015, the manufacturing sector has generated an
annual average of 18.8% of El Salvador's nominal GDP. During 2012 and 2013, manufacturing activity experienced annual growth
rates of 1.3% and 3.1%, respectively, driven mainly by growth in activities related to food, minerals and chemical products. In 2014
and 2015, this sector grew at annual rates of 1.6% and 3.4%, respectively. During the three- month period ended September 30,
2016, the manufacturing sector grew at a rate of 2.3% compared to 3.7% for the same period in 2015, mainly due to a decrease of
non-traditional exports.

According to the Ministry of Economy, as of September 2016, there were a total of 220 companies that benefitted from the free
trade zones law, of which 120 were located in free trade zones, with the remaining 100 operating outside the free trade zones
boundaries. Out of the 220 beneficiaries, 161 produce apparel and linens, 77 of them are maquila plants.

Coffee is the Republic's principal agricultural export and is an important source of employment in El Salvador. The coffee
industry generated approximately 81,210 jobs during the 2011/2012 harvest, 86,500 jobs during the 2012/2013 harvest, 35,001 jobs
during the 2013/2014 harvest, 46,258 jobs during the 2014/2015 harvest and 39,237 jobs during the 2015/2016 harvest The most recent
decrease in jobs was due to decreased production caused by drought and rust disease.. Coffee production decreased 12.3% in 2012,
37.7% in 2013, 18.2% in 2014 and 3.5% in 2015. For the same years, coffee exports accounted for 64.2%, 55.0%, 38.3% and 45.4% of
agricultural exports and 5.6%, 4.3%, 2.1% and 2.7% of total exports, respectively. As of January 2017, there are approximately 135,138
hectares devoted to the cultivation of coffee, representing approximately 6.4% of the country's land.

As of December 31, 2016, net international reserves totaled US$2,923.0 million, representing an increase of 9.5% compared to
the same period level in 2015.

Non-Financial Public Sector Deficit
In 2015 the non-financial public sector deficit decreased by US$74.0 million to US$366.0 million compared to 2014, not
including pensions, equivalent to 1.4% of GDP. This was mainly due to an increase in inflows of US$166.0 million compared to an
increase in outflows of US$92.0 million.

In 2016, the non-financial public sector deficit decreased by US$228.6 million to US$137.4 million.

The Government currently projects that the consolidated non-financial sector deficit for 2017 without pension obligations will
be US$311.6 million, or 1.1% of GDP. Including pension obligations, the 2017 consolidated non-financial sector deficit is projected to
be US$925.3 million, or 3.3% of GDP.

The Debt Ratio of the Public Sector

The Republic's ratio of public external debt to GDP was 39.6% in 2012 and decreased to 39.1% in 2015.

Public sector debt, including internal and external debt of the financial and non-financial public sector and the net external
Central Bank debt, was US$17,192.1 million as of December 31, 2016, compared to US$16,323.4 million at December 31 2015,
US$15,466.1 million at December 31 2014, US$14,691.6 million at December 31, 2013 and US$14,296.2 million at December 31,
2012. The increase in public sector debt in 2016 was mainly due to the increase in stock of LETES issued by the Government and the
issuance of "Certificados de Inversión Previsional" (Pension Investment Certificates, or "CIPs").

Rating Agencies

On August 11, 2016, Moody's Investors Service downgraded El Salvador's ratings to B1 from Ba3 and placed the ratings on
review for further downgrade. Later, on November 7, 2016, Moody's Investors Service changed El Salvador's issuer and long-term debt
ratings to B3 from B1 and assigned a negative outlook to the ratings, concluding the previously initiated review for possible downgrade.
Moody's Investors Service stated that the downgrade to B3 was based on a significant increase in liquidity risks and a political impasse
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in the Legislative Assembly.

On October 13, 2016, Standard & Poor's Global Ratings lowered its long-term sovereign credit ratings on the Republic of El
Salvador to 'B' from 'B+'. The ratings on El Salvador remained on CreditWatch with negative implications.

On December 8, 2016, Standard & Poor's Global Ratings issued a Ratings Direct research update indicating it lowered its long-
term foreign and local currency sovereign credit ratings on El Salvador to 'B-' from 'B'. At the same time, Standard & Poor's removed
the ratings from CreditWatch with negative implications. The outlook is negative.

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