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The Revitalizing Power of La Constancia Industries in El Salvador's Economy

25 April 2012

San Salvador, April 2012. A study conducted by the Centre of Public Policies of the Escuela Superior de Economía y Negocios, ESEN (School of Economy and Business of El Salvador), per request of Industrias La Constancia (ILC), Salvadoran subsidiary of SABMiller plc, allows one to establish and approximate what the company´s true impact in the Salvadoran economy is. In this scenario, it was determined that each dollar sold by ILC generates a multiplying effect of up to 4.8 times.

Taking as reference the existing conditions of both the international and local economic environments, ESEN managed to develop a model which adapts ILC´s financial data and sales records with the Salvadoran economy´s input-output matrix.

According to the leader of the investigation, Carlos Carcach, PhD, in order to conduct this study, a scenario was created where all ILC sales were increased by 1 million dollars, and as a consequence, an expansion in the company´s production numbers could be recorded.

The impact, a variation in the production numbers that ILC sales could have on El Salvador´s economy, was then studied, taking into account direct, indirect and induced effects.

This impact could then be quantified directly through elements like the creation of new jobs, wage variations, and tax payments conducted directly by ILC.

Additionally, when ILC purchases supplies and services from their providers, or sells products to their wholesale distributors, an amount of income is generated through which the company pays its employees and can increase their installed capacity, resulting in the purchase of more supplies and services from other industries, revitalizing the economy, and creating a multiplying effect for every dollar in sales.

Only during the year 2010, ILC managed the direct and indirect employment of over 62,900 people, playing a major role in the stimulation of the development of countless micro and small businesses. These job statistics are very similar to PEA´s 2.5%.

According to Carcach, ILC´s economy can be quantified through the estimation of its impact in three different categories: direct, indirect and induced, which show that each dollar sold by ILC has a multiplying impact of up to 4.8 times. This is equal to saying that per each dollar increased by ILC sales, El Salvador´s economy would perceive a cash flow of almost $5.00 as a result of the value chain. 

A $1 million increase in ILC sales would generate approximately 955 new positions per year in El Salvador´s economy and 51 new positions throughout the value chain itself, meaning that ILC´s  multiplying effect over labour is 18.7.

But the main issue comes in the regards of tax contributions: 50 companies the size of ILC would be able to generate by themselves what the country is making as a whole in tax revenues today.

Forty companies the size of ILC would be able to create enough jobs by themselves to employ all of the economically active population.

Also, 150 companies the size of ILC would be able to equal the country´s Gross Domestic Product by themselves.
 
ILC investments in El Salvador have a large number of very positive impacts within the national economy, directly benefiting workers and their families, members of the value chain, clients, consumers, and communities.

Within this context, the study clearly indicates that ILC is a key agent for the country´s economy; their main importance lies in the generation of employment, the execution of projects which greatly benefit small and micro entrepreneurs, they way its business improves quality of life in the lesser income communities, and last but not least, the generation of State revenues, starting with their value chain.

Aldo Vallejo, Corporate Affairs Vice President of ILC, assured that this study´s results are in fact a very big responsibility, which puts a task on the company to keep up its good work to continuously improve itself and keep on doing its job under circumstances which promote harmony with El Salvador´s social, economic and environmental development.

Notes to the editor: Industrias La Constancia (ILC) is a subsidiary of SABMiller in El Salvador, which has three bottling plants, one for beer and two for soft drinks.

ILC was founded in 1906 in the western department of Santa Ana, and moved to its present location in San Salvador, capital of El Salvador, in 1928.

For more information, contact Mauricio Chavarria, Director of Corporate Relations, at mauricio.chavarria@ca.sabmiller.com, on Facebook at https://www.facebook.com/IndustriasLaConstancia, or the Web site www.laconstancia.com.

This is a SABMiller subsidiary news release, it was first published in its local market on [25/04/2012].

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