ABSTRACT
I. INTRODUCTION The advent of the Central American Common Market (CACM) in 1961 saw the beginning of a new economic era for EI Salvador. This era was hoped to be the one of industrialisation and rapid economic growth based on the investment opportunities and economies of scale that the larger market would offer. EI Salvador had been one of the most ardent supporters of the formation of the Common Market and had even established bilateral free trade agreements with Guatemala and Honduras in the 1950s. This interest was due to the economic authorities' realisation that, given EI Salvador's lack of natural resources, small territory and large population, an increase in trade appeared to be a promising path toward economic development. In retrospect, two periods can be distinguished: one of impressive growth between 1960 and 1966, during which its Gross Domestic Product (GOP) grew at one of the highest rates in the developing world; and one of relative stagnation from 1966 to 1971, during which annual GOP growth rate was barely higher than the 3-65 per cent rate of population growth (see Table 1).
