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San Salvador was founded in 1525, by the Spanish conqueror Pedro de Alvarado, about 30km to the northeast of where it now stands, near Suchitoto. It was moved to its present site three years later, and declared a city in 1546. It was in San Salvador in 1811 that Father José Matías Delgado first called for Central American independence; once achieved, San Salvador was the capital of the united Provinces of Central America from 1834 until El Salvador's own independence in 1839. It has been the capital of El Salvador since then.

Natural disasters have plagued the city, including more than a dozen major earthquakes (and hundreds of smaller ones). San Salvador was destroyed by tremors in 1854 and 1873, by the eruption of Volcán San Salvador in 1917, and by floods in 1934. The earthquake of October 10, 1986 caused considerable damage, and the most recent on January 13, 2001, contributed its share too.

From assassinations to student protests, San Salvador was also a flashpoint in El Salvador's long civil war. In November 1989 the Farabundo Martí National Liberation Front's (FMLN) 'final offensive' brought some of the war's bitterest fighting into the city streets. To quell the attack, government forces bombed neighborhoods thought to harbor guerrillas and their supporters; hundreds of civilians and soldiers on both sides died. The attack and counterattack left parts of the city in shambles, and proved that neither the government nor the guerrillas would win the war militarily. The stalemate lasted another 26 months before the peace accords were negotiated and signed in Mexico City in January 1992.

The declining economy during the war sparked internal migration from the countryside to the city, mostly by poor families and laborers; today over a quarter of the population of El Salvador inhabits the metropolitan area of the capital (whose residents are called capitalinos). Though San Salvador produces nearly 65% of the national GDP, unemployment is high and people do whatever they can to get by - vendors of all ages ply the streets and major intersections, selling everything from candy to cell-phone chargers. On buses, vitamins and other supplements are sold with special vigor and creativity.