B. Data on Best Prospects for Agriculture and Industry Sector Exports A. Major Agriculture Trends and Outlook Guatemalan agriculture is in the process of diversification; production of premium-grade coffee no longer predominates the agricultural economy as in years past, even though it is still the single largest export. In recent years there has been significant development of small-to-medium size fruit and vegetable production for export to the United States, Europe, and the rest of Central America. Guatemala also produces a variety of other commodities, it is the third largest exporter of sugar in the Western Hemisphere, it is the world's largest exporter of the spice cardamom; a major producer and exporter of bananas; and a developing producer and exporter of shrimp, lobster, seafood, cut flowers, ornamental plants, fruits, and vegetables. Overall growth in the agricultural sector should be moderate but steady over the next three to five years. Coffee prices have recovered, sugar demand should remain strong and exports of non-traditional products should continue to grow, albeit at a slower rate. While Guatemala has significantly liberalized its trade policy, it continues to impose trade-restrictive policies on some products. Guatemala uses a price bands mechanism on basic grain imports and an arbitrary product-valuation system on poultry. Guatemala successfully renegotiated upward tariff binding levels for many agricultural products under the Uruguay Trade Agreement. Depending on market conditions, tariffs for products competing with local production could increase when GATT is implemented. B. Principal Agricultural Growth Sectors Over the past 5 years the non-traditional products sector has accounted for Guatemala's greatest agricultural growth. This trend is expected to continue in the short-run, although, at a slower rate. The fruit and vegetable industries in Guatemala have continued expanding and have become far more organized and accustomed to U.S. regulations and market requirements. Vegetable and fruit exporters in Guatemala can now virtually sell all they produce. During the past five years the production of baby (small, immature) vegetables, sugar snap peas, and haricot verts has increased in response to a growing demand in the United States. Macadamia nut production is another sector showing impressive growth potential. Future export growth will depend on increased production and maintenance of U.S. GSP and CBI benefits. Guatemala's sugar production and exports should continue to rise in the short-run as the industry continues to reduce costs through greater efficiencies. Area planted to sugar continues to expand from lands traditionally used for cotton and cattle production. The coffee industry, due to expected strong world prices in the medium-term and normal growing conditions, is expected to increase production by increasing yields, but is not expected to begin expanding production areas for another few years. A key factor for all long-run capital investment in agriculture will be interest rates. Guatemalan interests rates are in the high twenty percent range which makes it difficult for agro-businesses to borrow money. C. Major Third Country Competition The United States is Guatemala's most important agricultural trading partner supplying approximately 50 percent of total Guatemalan agricultural imports. With the liberalization of trade policies and the signing of the Central American Common Market (CACM-4) Free-Trade Agreement, Central American agricultural exports to Guatemala have steadily increased. El Salvador is the second most important exporter of agricultural products to Guatemala, capturing 11 percent of the total import market in 1993. El Salvador was the leading exporter of consumer-ready products to Guatemala in 1993 - capturing 24 percent. The EU captured approximately 11 percent of Guatemala's total agricultural consumer ready products import market and led all exporters in milk and milk-product sales to Guatemala in 1993. Puerto Rico's importance as a consumer-ready products exporter to Guatemala has increased. In 1993, Puerto Rico captured approximately 19 percent of Guatemala's consumer-ready import market, matching the U.S. market share. Generally, U.S. agricultural exports do not compete directly with Guatemalan local production. Although Guatemala has an agrarian- based economy, it is not self-sufficient in the production of many commodities and food products. Guatemala imports significant quantities of bulk grains such as wheat, corn and rice for milling in Guatemala. It also imports vegetable oil and tallow for further processing. Guatemalan production of consumer-ready products is growing, but is not expected to displace U.S. exports in the short-to-medium term. There are exceptions to the general rule, however. For example; a non-tariff trade barrier, in the form of an arbitrary price valuation system, has made it difficult for U.S. poultry-parts exports to compete locally. Pressure from local apple cooperatives could result in higher tariffs on apples once GATT is implemented. D. Infrastructure Situation Guatemala has 5 ports of which only three are important to agricultural imports. On the southern, Pacific coast, is Puerto Quetzal which handles virtually all bulk grains and a significant amount of container imports. Puerto Quetzal is the largest and newest port in the country and is located 110 kilometers south of Guatemala City. It is connected both by railway and by roads to the city of Escuintla and Guatemala City. Warehouses are available within the port area, but total warehouse infrastructure is limited. Therefore importers/distributors move their cargo to storage facilities in Guatemala City or in the case of raw materials directly to processing plants. Virtually all agricultural imports are moved by truck. On the northeastern coast, the Caribbean, the ports of Santo Tomas de Castilla and Puerto Barrios have container and very limited bulk unloading capacity. Puerto Barrios is owned by a banana export company and is used mainly for banana exports. It is privately owned and therefore charges higher prices for rendering its services. These ports are connected with Guatemala City by railway and road facilities, but most containers are transported by truck. They are located 300 kilometers north, north east of Guatemala City. It is ideal for exports from the eastern coast of the United States. The vast majority of container imports from Miami, New Orleans, and Texas, enter Guatemala through these ports. Guatemala has one international airport equipped with freight, legal and warehousing infrastructure facilities (refrigerated warehousing is available). The Panamerican Highway runs through Guatemala connecting Guatemala with Mexico, Honduras and El Salvador. Customs procedures have improved significantly at the borders in recent years and no longer represent considerable bottlenecks as in years past. The import/export traffic between Guatemala and El Salvador is the heaviest. Road maintenance is a problem in Guatemala, especially during the May - October rainy season. At any given time portions of the highway can be in such disrepair that travel times are increased significantly. E. Major Infrastructure Projects Underway The sugar industry recently completed a new shipping terminal at Puerto Quetzal that will significantly increase the efficiency of handling and exporting sugar. The terminal has 44,000 MT bulk- storage capacity and 22,000 MT bag-storage capacity. The terminal is expected to decrease the industry's transportation costs by 10 percent. A major wheat milling company that also has a large feed company in Guatemala is constructing the first grain silos at Puerto Quetzal. The facilities will initially have a capacity of 20,000 MT and are expected to be ready by August 1994. An additional 6,000 MT of storage capacity will be constructed later. While the silos are intended for the owner's own use, it is possible that space will be rented to other mills. 3.(a) Guatemalan Imports of Agricultural Goods Revised Estimate Forecast 1993 1994 1995 ($Mil) Total Ag. Imports 1/: $307 $320 $335 Total Ag. Imports From the U.S. 2/: $180 $185 $198 (Percent) U.S. Share of Total Ag. Imports: 59 58 59 ($Mil) GT/U.S. Ag. Trade Balance: $315 $266 $272 __________________________________________________________ 1/ Source: Bank of Guatemala 2/ Source: U.S. Bureau of the Census, Trade Data 3.(b) Principal U.S. Imports and Exports by Tariff Code Principal Guatemalan Agricultural Products Trade with the United States by Harmonized Customs Code and 1993 Trade Value _______________________________________________________________ Tariff Value Commodity/Description Code $Mil. _______________________________________________________________ Exports Coffee: whether or not roasted or 0901 153.0 decaffeinated Bananas: bananas or plantains, 0803 118.0 fresh or dried Sugar: cane or beet sugar and 1701 81.0 chemically pure sucrose Tobacco: unmanufactured tobacco 2401 33.0 including tobacco refuse Vegetables: frozen, cooked or uncooked 0710 25.0 Imports Wheat: wheat and meslin 1001 41.0 Corn: corn (maize) 1005 21.0 Cotton: cotton not carded or combed 5201 14.0 Soy Meal: oilcake & other solid 2304 13.0 residues resulting from the extraction of soy oil Tallow: fats of bovine animals, 1502 13.0 sheep or goats _______________________________________________________________ Source: Bureau of the Census, U.S. Trade data F. BEST PROSPECTS FOR U.S. EXPORTERS TO GUATEMALA The following best prospects list is ranked according to the anticipated two year growth between 1993 and 1995. The only exception is U.S. beef exports which was ranked #8 because the market is so small. A. #1 B. Snack Foods C. N/A 1993 1994 1995 ($ 1,000) D. Total Market Size Information not available E. Total Local Production Information not available F. Total Exports Information not available G. Total Imports Information not available H. Total Imports from U.S. 3,357 4,200 4,700 Comments: U.S. exports of snack foods to Guatemala have increased dramatically over the past several years and while the rate of growth in exports is likely to decline some over the next few years, strong continued growth is forecast. Potato chips, popcorn, nacho chips, nuts and other salted snack products are the leading sellers from the United States. Competition from Central American countries, especially El Salvador, is fairly strong. The other CACM-4 countries have duty-free access to the Guatemalan market. Central American snack producers also have the infrastructure to manufacture and market product sold in small package sizes. This allows them to dominate the low-end, high- volume portion of the market. A. #2 B. Beer & Wine C. N/A 1993 1994 1995 ($ 1,000) D. Total Market Size Information not available E. Total Local Production Information not available F. Total Exports Information not available G. Total Imports Information not available H. Total Imports from U.S. 684 780 915 Comments: There is tremendous opportunity for increased U.S. beer and wine sales to Guatemala, but the key to success is establishing a solid exporter-distributor relationship. One major U.S. beer company has recently signed an agreement with the Guatemalan beer monopoly which should significantly expand its presence in Guatemala. The locally produced brands cover 85 percent of the market. Other than U.S. beer, German, Dutch, and Mexican beers have had limited success in Guatemala. Exports of U.S. wines to Guatemala have also been limited in the past. Guatemalans have perceived U.S. wines to be of inferior quality. This resulted in Chile, France, Spain, and Italy becoming the main wine suppliers to Guatemala. This trend should change as local distributors make more concerted efforts to promote U.S. wines. A. #3 B. Breakfast Cereals & Pancake mixes C. N/A 1993 1994 1995 ($ 1,000) D. Total Market Size Information not available E. Total Local Production Information not available F. Total Exports Information not available G. Total Imports Information not available H. Total Imports from U.S. 1,672 2,000 2,200 Comments: Guatemalan trade statistics are not available for breakfast cereals. U.S. trade data show significant growth in U.S. exports of breakfast cereals to Guatemala in the past two years which is expected to continue over the next few years as Guatemalan disposable incomes rise. Breakfast cereal targeted at children is expected to be the fastest growing sub-sector. Retailers of U.S. breakfast cereals enjoy free television advertising through cable channels from the United States. There are no import restrictions and domestic production has not been able to keep up with total demand. U.S. cereal exports are forecast to grow approximately 25 percent over the next two years. A. #4 B. Fresh Fruit C. ? 1993 1994 1995 D. Total Market Size Information not available E. Total Local Production Information not available F. Total Exports Information not available G. Total Imports Information not availalbe H. Total Imports from U.S. 4,457 5,200 5,570 Comments: U.S. fresh exports to Guatemala have risen significantly over the past several years. This trend is expected to continue as Guatemalan consumers are expected to increase their demand for imported deciduous fruits. U.S. grape exports are the fastest growing sub-sector with apples second. The majority of Guatemalan grape consumption comes during the Christmas holidays. This coincides with U.S. supply availability and has enabled the U.S. to capture the largest share of the Guatemalan grape market. Chilean grapes are priced very competitively but usually do not enter the market until January. Future apple exports will depend on Guatemalan trade policy which must become GATT consistent by July 1994. Apple imports are restricted to the first six months of the year and are controlled with import licenses. Restrictions which Guatemala is obligated to remain by July 1994 under GATT accession agreement. A. #5 B. Cotton C. 2631000 1993 1994 1995 (1,000 MT) D. Total Market Size 35 40 45 E. Total Local Production 14 10 8 F. Total Exports 2 1 1 G. Total Imports 22 24 26 H. Total Imports from U.S. 19 21 23 Comments: Guatemalan cotton production continues to fall as land historically dedicated to cotton continues to find more profitable alternatives. Guatemalan textile production for exports remains strong and is expected to increase once the proposed NAFTA parity is implemented. There is virtually no competition from other cotton producing countries although Paraguay and Nicaragua have made sales in Guatemala. Under Guatemalan regulations, cotton produced west of the Mississippi must be fumigated at the point of origin. Upon arrival in Guatemala, Guatemalan inspectors could order a second fumigation if it is deemed necessary. A. #6 B. Wheat C. 0410000 1993 1994 1995 (1,000 MT) D. Total Market Size 304 325 347 E. Total Local Production 20 20 20 F. Total Exports 0 0 0 G. Total Imports 295 305 327 H. Total Imports from U.S. 265 270 280 Comments: U.S. wheat historically has been the single most important U.S. agricultural export to Guatemala. Over the next two-three years U.S. exports of wheat should remain strong with possible fluctuations due to market conditions. European milling wheat entered the Guatemalan market in 1993/1994 because of relatively lower prices, but this is expected to be a short-term phenomenon. Guatemalan wheat millers prefer U.S. hard (high protein) wheats. There is virtually no local production of wheat, but what is grown must be purchased by wheat millers by Guatemalan law. A. #7 B. Tallow C. 4113200 1993 1994 1995 (1,000 MT) D. Total Market Size 38 39 40 E. Total Local Production 3 3 3 F. Total Exports 0 0 0 G. Total Imports 35 36 37 H. Total Imports from U.S. 35 36 37 Comments: U.S. tallow exports to Guatemala have been very steady and are expected to grow moderately over the next few years. Guatemala produces a small quantity of low quality tallow. Soap manufactures have become accustomed to the high quality U.S. tallow and are expected to increase imports moderately over the next several years. There is no third-country competition and there are no restrictions on inedible tallow imports. A. #8 B. Fresh Beef C. ? 1993 1994 1995 (1,000 MT) D. Total Market Size 42 43 44 E. Total Local Production 52 54 55 F. Total Exports 9.4 10.3 10 G. Total Imports .6 .7 1 H. Total Imports from U.S. .5 .6 .8 Comments: Guatemala is a net exporter of beef, but there is a growing market for quality beef imports, particularly from the United States. As Guatemala's per capita income increases, more and more consumers are expected to demand higher-quality meat products. The most popular U.S. beef export is frozen carcasses and half carcasses. However, in 1993, boneless beef exports to Guatemala rose significantly as well. Guatemala also imports small quantities of beef from Nicaragua, Honduras and Mexico if prices are low enough. This beef, however, does not compete directly with U.S. beef exports. Consumers perceive U.S. meats to be of higher quality and are willing to pay more. G. SCHEDULED USDA/FAS COMMODITY AND SPECIAL REPORTS Commodity Due Date 1. Macadamia Nuts February 1 2. Oilseeds March 1 3. Sugar April 18 4. Tobacco May 1 5. Coffee May 15 6. Poultry June 20 7. Annual Marketing Plan July 15 8. Livestock August 1 9. Agricultural Situation & September 30 Outlook 10. Sugar (Semi-Annual) October 1 11. Coffee (Semi-Annual) November 15