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Supporting a Salvadoran family-owned hydraulic supply and manufacturing company

Story by USAID Development Credit Authority September 30th, 2011

The birth of an entrepreneur

When José Hernan Galdamez, Sr. resigned from his job in the late 1990s to start his own company, little did he know that his business idea would grow to become a regional solution for clients in Central America and the Caribbean.

Initially, Mr. Galdamez dedicated his talents and scarce resources to maintaining hydraulic equipment, working on metal mechanics products, and manufacturing hydraulic seals under the Sellos Hidraulicos Galdamez (SEHGA) brand. Twenty years later, and along with his adult children, Mr. Galdamez now runs a dynamic, medium-sized company called Central Hidraulica that transforms raw materials into hydraulic seals, manufactures cylinders, and represents prestigious brands of hydraulic components, while distributing products at the national and regional levels.

Salvadoran entrepreneur Jose Hernan Galdamez kisses his wife at the entrance of their family business.  USAID/Karen Azucena.

Achieving success

His company’s growth has not come easily.

“I wanted to fight for a goal that would bring about personal and collective benefits,” Mr. Galdamez says. “At that time, the hydraulics industry sector was uncommon in El Salvador.”

A key ingredient for his success has been the timely loans received from local banks, particularly Banco de America Central (BAC). USAID/El Salvador established a loan guarantee partnership with BAC under USAID’s Development Credit Authority (DCA) in 2011. Loan guarantees lower the financial institution’s collateral requirements for small and medium-sized enterprises (SMEs), thereby incentivizing the bank partner to make additional loans to this cohort of businesses and projects. This increases the capacity and willingness of financial institutions to provide credit to SMEs and targeted underserved sectors long after the guarantee ends. Loan guarantees are also part of a broader strategy to address the drivers of migration from Central America by expanding economic opportunity and helping improve conditions so that families can envision their futures in El Salvador. To date, BAC has provided a total of 158 loans to SMEs, including Central Hidraulica, covered by the DCA loan guarantee.

“Obtaining loans has been beneficial to us. Our company has received oxygen through loans that have allowed us to invest in machinery, equipment, infrastructure, and IT systems to best satisfy our clients’ needs,” says Mr. Galdamez.

The Galdamez brothers show their seals in front of the computer numerical controlled (CNC) lathe.  USAID/Karen Azucena.

Central Hidraulica has become a solution for SMEs that buy all sorts of hydraulic components.

Erick Galdamez, the youngest son of Mr. Galdamez, lists the practical applications of his products.

“Hydraulic seals and cylinders are found in a dentist’s chair, mining machinery, garbage trucks, excavating equipment, injection machines, car trunks, cappuccino machines, and much more! The idea is to avoid fluid loss at a high pressure,” he says.

A hydraulic seal is a relatively soft, non-metallic ring, captured in a groove or fixed in a combination of rings, forming a seal assembly, to block or separate fluid in reciprocating motion applications. Hydraulic seals are vital in machinery. Their use is critical in allowing fluid power to be converted to linear motion.

Central Hidraulica is also able to produce polyurethane, a raw material to manufacture hydraulic seals, under a license issued by an American company.

A customer inspects a seal produced at the Central Hidraulica plant. USAID/Karen Azucena.

investing in the future

Given its growth, Central Hidraulica now has 65 employees in El Salvador and 4 in Honduras. Their goal is to become a stronger regional provider with improved inventory and logistics systems. The Galdamez family trains new employees coming from technical institutes from around the country. Newcomers spend a month in technical training followed by a probationary month at the plant.

In addition to the credit guarantee, Central Hidraulica has benefitted from Confia Pension Fund Administrator’s social responsibility program, Sabios y Expertos. The initiative supports SMEs by linking them with international and local expert retirees who volunteer their time. Sabios y Expertos provides technical assistance to SMEs in diverse economic sectors.

First, SME representatives express their needs and the project for which they would like to obtain support. Then, international and local experts from the database of volunteers of Sabios y Expertos are identified according to their field of expertise and matched with the companies so that they can provide assistance and recommendations. Finally, international experts come to the country and work together with the company and local experts to provide follow-up technical assistance.

A Central Hidraulica employee manufactures a cylinder for industrial use. USAID/Karen Azucena.
“Our fight has been well waged,” says Mr. Galdamez. “The best of all experiences is to do whatever you like to do, whatever you are good at it, and to do it right. That’s our satisfaction.”