. Public companies or companies holding special or exclusive rights,
including designated monopolies (Article 280 EUCAAA).
Article 110 of the Constitution of El Salvador determines that no monopoly may be authorized
except in favor of the State or Municipalities when the social interest makes it indispensable. At
the same time, it establishes in its second paragraph that monopolistic practices are
prohibited. Therefore, the State is prohibited from authorizing the existence of monopolies
except for those in favor of the State directly aimed at protecting the social interest only when
it is indispensable. The Salvadorian State has not authorized or endorsed the existence of state
monopolies to date in application of the exceptions under article 110 of the Constitution.
However, there is a decentralized entity, the National Administration of Aqueducts and
Sewerage (ANDA), which enjoys subsidies from the State for its operation. At the time of its
creation, the aqueducts and sewage systems that were owned by the State were transferred to
ANDA. However, there are other potable water distributors that operate in the country in a
smaller percentage,
such as the Water Boards (community systems) and distribution through
the Municipal Mayors' Offices. 20
Article 2 paragraph 2 of the Competition Law determines that the only activities excluded from
the application of the Competition Law are those economic activities that the Constitution and
the laws reserve exclusively to the State and the Municipalities. In this sense, the Municipal Tax
Law establishes in article 130 that certain services are reserved to be rendered directly by the
municipalities, such as public streets cleaning and ornamental services.
In El Salvador, there is no regulatory discrimination against foreigners in the energy market. At
the same time, in practice, activities whose objective has been to restrict market access to
other energy distribution companies have been sanctioned, as in the case of Distribuidora de
Electricidad del Sur, S.A. de C.V., Compañía de Alumbrado Eléctrico de San Salvador, S.A. de
C.V., and AES CLESA y compañía, S. en C. de C.V., were sanctioned in 2007 for practices aimed
at denying entry to the energy distribution market to Empresa Distribuidora Eléctrica
Salvadoreña (EDESAL) for a fine of $17,040.00. This allowed EDESAL to become part of the
20 Instituto Universitario de Opinión Pública (s/f). La Población salvadoreña opina sobre el derecho humano al agua.
Available at https://www.uca.edu.sv/iudop/wp-content/uploads/Bolet%c3%adn-de-Agua.pdf
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Legal review of the Central American Competition framework
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electricity distribution companies in the country,
which by 2016 occupied 0.8% of the
distribution market in the municipality of Santa Ana.
In the agricultural sector, the law does not expressly discriminate against foreign companies
however, it imposes various requirements with which its products must comply that make it
difficult for foreign suppliers to enter the country. However, in the market of wheat flour import
and production, actions have been taken against entry barriers generated by economic actors
such as the case of MOLSA and HARISA in the flour production and distribution market, which
in 2008 were fined $1,971,015.16 and $2,061,406.20 US dollars, respectively, for having
adopted a market division agreement. Such anticompetitive practice was reaffirmed in court
on May 23, 2017 by the Contentious Administrative Court.
The Public Administration Procurement and Contracting Law (LACAP) determines a regulatory
discrimination in certain cases, since it establishes that at the request of the contracting
institution and according to the bidding conditions, priority may be given to contracting with
domestic micro, small and medium-sized companies. This, subject to the comparison of goods
manufactured and/or produced in the country with foreign ones. The latter relates to the
provisions of Articles 30 and 31 of the Law for the Promotion, Protection and Development of
Micro and Small Enterprises, which establishes that the State shall encourage the participation
of MSEs under equal conditions in government procurement, as well as that the offers of MSEs
shall be taken into consideration in contracting and acquisitions. However, the award must be
based on the decision to hire the MSE, demonstrating the adherence of the offer to the
contracting conditions issued by the institution, i.e., it cannot be an arbitrary decision.
5. Public Procurement and Distribution of Pharmaceutical Products
Public Purchases: Article 26 of the Public Administration Procurement and Contracting
Law (hereinafter LACAP) regulates that bidders, awardees, or contractors are banned from
entering into agreements that restrict free trade among themselves or with third parties, in case
such situation arises they must inform the Superintendence of Competition. Furthermore, as
per article 1 of LACAP,
regulates the need for procurement and contracting to be governed
by principles of free competition. In El Salvador in the past four years the Superintendence of
Competition has sanctioned only one case related to public procurement, in which it was
declared that the companies Constructora Gaitan and Perforaciones Vivas, S.A. de C.V.
committed the anticompetitive practice of price fixing in public procurement processes in a
bidding procedure carried out by the Ministry of Justice and Public Security. In 2020 a series
of investigations were initiated by the Attorney General's Office to the Minister of Finance,
Minister of Health and Minister of Agriculture and Livestock. This was due to questioned
purchases for more than 4 million dollars, including the awarding of a contract to one of the
relatives of the Minister of Health21. Nevertheless, there are no records that inform that the
Superintendency has initiated parallel investigations.
Distribution of pharmaceutical products: In El Salvador, the distribution and sale of
medicines can be carried out through laboratories, drugstores, pharmacies and natural or
legal persons duly registered in the specific registry (Art. 27 of the Drugs Act). The law does
not include express restrictions to competition; however, it establishes the existence of
maximum prices for sales to the public. Sellers need an authorization for the importation of
21 Meléndez, S. (November 15, 2020). Revista Factum. Attorney General's Office investigates more than $155 million
in government purchases during quarantine. Retrieved from https://www.revistafactum.com/fgr-compras-covid/v
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Legal review of the Central American Competition framework
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drugs. An important characteristic of the market identified in 2003 and 2008 was the existence
of drugstore chains owned by the same owners of laboratories and drugstores, with vertical
integration in many participant markets. Therefore, in 2008, 42 chains with a total of 669
pharmacies commercialized 80% of the drugs in the country. In 2019, the Superintendence of
Competition sanctioned the companies Droguería Americana, S.A. de C.V. and C. Imberton
S.A. de C.V., for fixing the gross wholesale distribution prices of 3 medicines. Although article
26 literal b) of the Law of Competition sanctions exclusivity agreements, the Study on the
Characterization of the Drug Sector and its Conditions of Competition in El Salvador of the
United Nations determined in its study, that one of the entry barriers in the Salvadoran market
was constituted by the relations between the international laboratories, Salvadoran drugstores
and laboratories and the different modalities of use of the patents of invention. It was also
observed that international laboratories associate with Salvadoran companies for the
manufacture of several lines of products of their property, to be manufactured and
commercialized through the channel of the Salvadoran company. With respect to the
distribution of pharmaceutical products from international companies, there are agreements
with companies that sell pharmaceutical products to wholesalers, pharmacies, supermarkets,
and convenience stores, mostly without a prescription. To date, there is no record of a sanction
from the Superintendence of Competition regarding these practices in the pharmaceutical
industry.
