2 Belgrave Square
London SW1X 8PJ
Tel: +44 (20) 7235 9484
Fax: +44 (20) 7823 1370
E mail: Chris.bennett@caribbean-council.org
Website: www.caribbean-council.org
Scoping Study for UK Business Opportunities in Guatemala and El Salvador
Introduction
In March 2012, the Caribbean Council undertook a scoping study of UK business opportunities in
Guatemala and El Salvador on behalf of the British Embassy in Guatemala.
The scoping study was funded by the FCO Commercial Diplomacy Fund and seeks to raise awareness
among British companies about the opportunities which exist and provide them with key contacts in
a variety of public and private sector organisations which can help them to take new business
initiatives forward.
Terms of Reference:
The scoping mission sought to achieve the following objectives:
 Identify clearly the key opportunities for UK firms in the following defined sectors:
a) Construction/infrastructure
b) Renewable energy
c) Mining
d) Agribusiness
e) Retail fashion
 Identify partners in Guatemala and El Salvador which are potential investors in the UK or
partners for UK investors in-country
 Explore with Government and the private sector where they see opportunity for both sides from
the EU-Central American Association Agreement
 Answer concerns about general security/ juridical security /investment etc.
 Explore ways to create a private sector mechanism for supporting UK-Central American trade
and investment
Methodology:
The Caribbean Council held a programme of meetings over three full working days in Guatemala and
two full working days in El Salvador. The meetings were with key figures in the private sector and
Government.
These meetings are written up in a confidential report (below) for use by the embassy. A separate
abridged version of the report is attached which includes all relevant information and contact details
from the meetings. This can be circulated to interested UK companies and posted on the
Embassy’s/UKTI’s websites relating to Guatemala and El Salvador.
Following the visit and in coordination with the Embassies of El Salvador and Guatemala in London, a
debriefing seminar in London is planned for UK companies interested in Guatemala and El Salvador
from the sectors covered in the terms of reference.
Summary of Key Findings
This report finds that there is enormous potential for UK companies to sell products and services,
and to invest in Guatemala and El Salvador.
In common with much of Latin America, Guatemala and El Salvador are enjoying a period of steady
growth and stability. Neither country is a commodity producer and so growth has not been sky-high
like Brazil or Peru but their highly diversified economies are still growing at rates exceeding 3% per
annum and this growth will not be affected significantly by sharp changes in commodities prices.
Both countries are outward-looking and wish to diversify away from their import and exports being
overly dominated by trade with the United States. They are increasingly looking towards integrating
economically with each other, with partners in the region (SIECA), and with other Latin American
countries. They are also interested in building new business links with Europe and they see the new
EU-Central America free trade agreement (Association Agreement) as an important ingredient to
achieving this.
The Governments of both countries are prioritising the upgrade and extension of their transport and
energy infrastructure to enable them to be competitive internationally. Both countries have
extensive lists of infrastructure projects which they wish implement via a mixture of private
concessions, public works projects and Public Private Partnerships. These include motorways, ports,
airport, railways, hydroelectric and other types of energy production.
Growth is not only however visible in terms of potential infrastructure projects. There is a growing
middle-class which has the financial wherewithal to purchase products and services from the UK.
This is evident in the brand new shopping centres which are being built, the new cars which are on
the road, and the success which companies from other European countries have experienced in the
market.
Both countries currently suffer from a serious lack of visibility in the UK business community which
needs to be addressed. The UK is the sixth largest economy in the world and the second largest
international investor globally, yet trade flows and investment between the UK and Central
American region are minimal, with British exports to Central America in 2011 only £273m (of which
£169m is destined for Panama) representing a minimal percentage of all the goods which Central
American countries import each year. Central American exports to Europe, and the UK in particular,
are also very small, with just £356m exported to the UK in 2011.
Security – Personal and Corporate
At present, UK awareness of Guatemala and El Salvador tends to be the result of negative media
reports about gang violence, corruption, drug-trafficking and high homicide rates. This image is
enormously misleading.
Both Guatemala City and San Salvador are modern and attractive capital cities which are instantly
familiar to any traveller who has been to other parts of Latin America. The business districts are
large and modern and one needs to travel from one meeting to another by car because of the
distances. The buildings, as elsewhere, all have security guards. Like most Latin American cities, the
two capitals are divided into recognisable zones which tend to have particular characteristics eg.
Business district/ government district/ wealthy suburb / old city centre etc. Within this mix, there
are certain zones which have a reputation for being dangerous, particularly after nightfall, and which
the business traveller can easily avoid straying into. The straightforward truth is that the high crime
rates in both Guatemala and El Salvador are confined to some very tightly defined geographical
areas which not just the international visitor, but the local business community, simply avoid.
Rule of Law
Like other parts of Latin America, Guatemala and El Salvador also are perceived by UK companies to
be “difficult” places to do business. There is concern about corruption and unfair practices, about
whether Governments will honour their contracts; and what remedy foreign companies will have if
things go wrong. These generalised, and quite legitimate concerns, however tend to drown out the
fact that while there may be examples of malfeasance in either country, this is by no means the
general rule and that on the whole it is perfectly possible to operate as a foreign company in either
country without facing demands for any illegal payments or similar. Local contacts can quickly
provide guidance as to which parts of Government have a reputation for being problematic in this
way so that they can be avoided. In terms of ensuring that Governments honour their contracts,
both countries do have a track record of working with international investors and honouring their
commitments however it is important to note that the EU-Central America Association Agreement
offers new levels of legal protection for UK companies doing business in the region which can be
enforced via a panel procedure. The UK separately has an Investment Protection and Promotion
Agreement with El Salvador which offers additional protection for investors and an option to resort
to arbitration at the International Centre for the Settlement of Investment Disputes. A similar
Investment Agreement is close to conclusion with Guatemala.
Opportunities for UK firms to do business:
Guatemala
Construction/infrastructure
UK firms are able to provide construction services in Guatemala and other European construction
firms are already active in the country. Provision of engineering, architectural and urban planning
services needs to be undertaken in partnership with a local firm.
The Guatemalan Government has a multi-billion dollar programme of infrastructure construction
which it has identified in the following areas;
a) Roads (inter-urban highways / inter-regional highways / a ring-road for Guatemala City)
b) Airport (upgrading six airports in the country)
c) Ports (port infrastructure, dredging, widening of docks at Puerto Santo Tomas and Puerto
Quetzal).
d) Electricity distribution (upgrade and expansion of existing electricity grid and creation of
interconnector with Mexico)
A full list of the infrastructure projects can be downloaded from the Invest Guatemala website at:
http://www.investinguatemala.org/proyectosdeinversion.pdf
More detailed information about transport projects is available on request from the Caribbean
Council.
The opportunities in the infrastructure sector in Guatemala extend beyond provision of construction
related services. Companies are already importing construction materials from Europe (eg. steel
products from Germany) and there are needs for heavy machinery, excavators and other
construction vehicles.
There is new legislation in place for Public Private Partnerships to be permitted for large-scale
construction projects. The legislation does not allow for private companies however to initiate
projects – they are designed and proposed by the Government and then private companies can
decide to subscribe. The institutional framework to manage the PPP legislation in the Guatemalan
Government is still not in place and it will be likely two years or more before they bring construction
projects of an international scale to tender. UK companies interested in participating in such
projects would be well advised to partner with local banks and construction firms.
Renewable energy
As part of the wider infrastructure development programme, the Guatemalan Government has
identified over 27 viable renewable energy projects it wishes to take forward. These are composed
of:
Type of generation
Hydroelectric
Geothermal
Biomass (steam turbine)
Number of projects
25
1
1
Total MW
2,448
40
50
Total Investment Value
US$6.3bn
US$75m
US$60m
Guatemala has a Renewable Energy Law of 1986 which was modified in 2003 (no.52-2003). This sets
out the incentives for investment in the sector. The Guatemalan Government is keen to attract
investment for geothermal, biomass, wind and hydroelectric. Incentives include exemption for 10
years from income tax and zero duty on the importation of machinery.
A full list of the renewable energy projects (principally in the hydroelectric sector) can be
downloaded from the Invest Guatemala website at:
http://www.investinguatemala.org/proyectosdeinversion.pdf
Mining
There are major opportunities for mining companies in Guatemala. The country has large reserves
of gold, nickel, zinc, iron and copper. Invest Guatemala is promoting foreign participation in the
following private sector projects:
Project
Location
Description
San José Mincesa
San Juan Sacatepéquez, Guatemala Limestone and other minerals for cement
Estimated
investment
Not known
production. Property of Cementos
Progreso.
Fenix
El Estor, Izabal
Under management of the Guatemalan
US$754 m
nickel company. The aim is to extract 590 m
tonnes of nickel over 30 years
El Pato
Chiquimula
Gold exploration under management of El
Condor company
Not known
El Sastre
San Antonio La Paz. El Progreso
Under management of Aurogín Resources
Ltd. They plan to extract 20,000 oz of gold
per annum.
Not known
Cerro Blanco
Asunción Mita, Jutiapa
Ya terminaron fase exploración y está en
trámite licencia de explotación. A cargo de
Entre Mares de Guatemala
Not known
There have been difficulties in the sector in the past because of poor public relations and community
engagement. As in any other country, a UK company entering the mining sector in Guatemala will
need to ensure proper consultation with local community interests.
Agribusiness
With ports on both the Pacific and Atlantic coasts and a varied climate as a result of its mountainous
terrain, Guatemala is able to produce a huge variety of different agricultural products throughout
the year. Guatemala is the fifth largest sugar exporter in world level is currently one of the most
competitively priced producers in the world. It has worked hard in recent years to diversify its
exports into new non-traditional products which are now widely available in UK supermarkets (eg.
sugar-snap peas).
Products which Guatemala produces /exports include:







Fresh fruit and vegetables; including bananas and non-traditional exports like courgettes,
sugar-snap peas, blackberries, etc.
Confectionary
Juices and beverages
Bakery
Preserves (fruits and vegetables)
Sugar
Coffee
At present, the biggest difficulty facing exporters to the UK in the sector is the lack of direct sea
freight routes and the expense of air-freight via Miami. Transit time by sea from Santo Tomas port
to Rotterdam is 22 days.
Retail fashion
A growing middle-class is resulting in new demand for European fashion and consumer goods.
Typically the demand is for mid-range brands which are at a price range which is accessible to
growing number of Guatemalans.
Spanish and French brands have been successful entering in the market and the rapid development
of new shopping centres in Guatemala is presenting new opportunities for companies to set up
franchise agreements for their stores.
There is also interest from Guatemalan importers and supermarkets in other consumer products
from the UK including:
 High-quality food products/ beverages & snacks
 Soaps and toiletries
 Shoes
There is also more limited opportunity for luxury fashion labels to set up high-end stores in
Guatemala City where there is likely to be sufficient demand.
Imported clothing has in the past been subject to high tariffs of around 15% but these will be
eliminated by the new EU-Central American Association Agreement over a period of either 5 or 10
years depending on the product line.
Potential investors in the UK or partners for UK investors’ in-country
As in much of Central and South America, the Guatemalan private sector is dominated by a number
of industrial corporations which are multi-sectoral and typically already have overseas interests.
Some of the key corporations in Guatemala are as follows:
-
Grupo La Fragua: retail, supermarkets; (part of regional Central American Retail Holding
Company with Royal Ahold from the Netherlands and Corporacion de Mercados Unidos
(CSU).
-
Grupo Pantaleón: sugar cane processing for sugar, honey, alcohol and bioenergy. Largest
producer in Central America.
-
Grupo Gutierrez-Bosch (also known as Corporacion Multi Inversiones); CMI is organized into
six well-diversified divisions. Through these divisions, CMI produces and distributes flour,
pasta, cookies, packaging materials, poultry, pork products, and animal foods. CMI also owns
and operates several fast food restaurants, most notably Pollo Campero, the popular fried
chicken fast food chain which, in addition to its well-established presence in Central America
and growing presence in the United States, recently started franchise operations in Spain
and Indonesia, and will soon open restaurants in China, as well. In addition, CMI develops
and builds housing projects, office buildings and shopping malls, operates hydro power
generation plants, and engages in the banking and finance business.
-
Corporación Castillo Hermanos: A holding company with up to 82 companies including most
importantly, Cervecería Centroamericana (brewery), Inversiones Centroamericanas(financial
services), Grupo Financiero Industrial and G&T Continental. The group has diversified into
foods, snacks, packaging, shopping centres, and has significant interests in Nicaragua and
Honduras.
1. Guatemala:
Country
Guatemala
Popl.
14.4m
Capital (popl.)
Guatemala (2.9m)
GDP US$ (Official exchange
rate)2010
GDP per capita US$ (PPP) 2010
41.47bn
GDP growth (2010)
2.60%
Inflation (2010)
3.90%
Foreign Exchange and Gold Reserves
5.71bn
External Debt
17.47bn
Exports FoB(2010)
8.5bn
Imports CIF(2010)
13.8bn
Est. Popl below poverty line(figures
from 2005-06)
56.20%
5,200
Introduction:
Guatemala is the most populous country in Central America with a GDP per capita roughly one-half
that of the average for Latin America and the Caribbean. The agricultural sector accounts for nearly
15% of GDP and half of the labour force; key agricultural exports include coffee, sugar, and bananas.
In 1996 peace accords were signed which ended 36 years of civil war, removing a major obstacle to
foreign investment. Since then Guatemala has pursued important reforms and macroeconomic
stabilization. In 2006, Guatemala joined the DR CAFTA agreement.
The distribution of income remains highly unequal with the richest 10% of the population accounting
for more than 40% of Guatemala's overall consumption. More than half of the population is below
the national poverty line and 15% lives in extreme poverty.
Guatemala has a large expatriate community in the United States and is the top remittance recipient
in Central America, with inflows serving as a primary source of foreign income equivalent to nearly
two-thirds of exports or one-tenth of GDP.
Economic growth fell in 2009 as export demand from US and other Central American markets fell
and foreign investment slowed amid the global recession, but the economy recovered gradually in
2010 and will likely return to more normal growth rates by 2012.
In 2010, Guatemala exported around US$8.5bn of goods. These were predominantly clothing 13,4%;
chemical products 8,8%; sugar 8,6%; coffee 8,3%; food products 7,0%; minerals 6,2%. Guatemala is
the seventh biggest exporter of coffee in the world and the third biggest exporter of sugar in the
world (after Brazil and India). Sugar employs directly around 45,000 people. Guatemala is also the
world’s leading exporter of cardamon.
Bananas represented in 2010 around 4.1% of exports – banana production is controlled by US firms
Chiquita, Del Monte and Fyffes.
The country’s main trade partners were the US (38,5%); El Salvador (11,7%);Honduras (8,3%);
México 5,3% and Nicaragua 4,2%.
More than 1.8 million tourists visited Guatemala in 2010 (5.5% increase on p/y) earning around
US$1.2bn in foreign exchange.
Opportunity for both sides from the EU-Central American Association Agreement
- Opportunity for UK companies to source product from Guatemala and El Salvador:
o clothing industry (maquila)
o ornamental plants
o expand the range of agribusiness products imported
- Greater certainty for investors and service providers operating in Guatemala
El Salvador
Country
El Salvador
Popl.
6.1m
Capital (popl.)
San
Salvador
(1.5m)
GDP US$ (Official exchange
rate)2010
21.7bn
GDP per capita US$ (PPP)
2010
GDP growth (2010)
7,200
Inflation (2010)
0.80%
Foreign Exchange and Gold
Reserves
2.88bn
External Debt
11.45bn
Exports FoB(2010)
4.37bn
Imports CIF(2010)
7.98bn
Est. Popl below poverty
line(figures from 2005-06)
37.80%
Murder rate (per 100,000)
70
0.70%
2 Belgrave Square
London SW1X 8PJ
Tel: +44 (20) 7235 9484
Fax: +44 (20) 7823 1370
E mail: Chris.bennett@caribbean-council.org
Website: www.caribbean-council.org
Confidential
Full Note of Meetings held in Guatemala and El Salvador
as part of Caribbean Council Scoping Mission
Week of 5th-9th March 2012
Meeting with UK Ambassador, HE Julie Chappell
And Guatemalan Ambassador to the UK, HE Acicslo Valladares Molina
A number of major UK companies have presence in Guatemala including: Diageo, GlaxcoSmithkline,
BT Global, Globaleq, Actis, BUPA.
What are the keys for success for UK companies in Guatemala?
-
Route to market – the key differentiator for British companies is “quality”.
Key for success is having a UK face in Guatemala for people to refer to. It is advisable to
have a UK expat presence initially for selling, managing local staff and for vetting of staff.
Local contacts are very important and it is key to have a local representative who is able to
guide you.
British companies succeed by playing a very straight game – being open, honest and
straightforward
There is no need to enter into a Joint Venture company locally.
People can be quite suspicious of foreign investors suspecting that there is an agenda of
“exploitation”. It is therefore important to reinforce the positive aspects of inward foreign
investment.
Other comments –
There is discussion of a possible new security law to licences private security firms. On the security
side, British companies are well respected from the Colombian experience where British firms were
important in helping to turn around the security situation there.
There is concern about corruption in the judiciary. A UN body financed by the Canadian
Development finance called SISIG has been put in place to try to strengthen the judiciary and the
capacity of the Ministry of the Interior.
Part of the tax reform process which is underway will be to authorise the confiscation of assets from
organised crime to be reinvested into fighting crime.
Spanish speaking is much appreciated and will help get results. Whilst all of the senior level business
people and Government people speak English, Spanish will be necessary for training and dealing
with other staff.
Special tax incentives were announced by the Patriota Party before the elections on tourism, clean
energy.
The EU is negotiating an Investment Protection Agreement with Guatemala.
The Guatemalan Ambassador also commented that the Government honours its commitments to
foreign investors. For example, there has been recently a lot of local controversy about a contract
agreed with Canadian mining company, Barrick Gold, where the royalties negotiated with the
Government were only 1%. Despite the national controversy, the Government held to its
commitment but finally the company agreed to renegotiate to 5% but voluntarily.
Vice-Minister of Foreign Affairs Fenosa attended but did not finally make any substantive remarks
due to the time-table.
Meeting with Juan Carlos Paiz, Presidential Commission for Competitiveness and Investment
Jaime Roberto Diaz Palacios, Executive Director of the Programme (attended LSE)
National Competitiveness Programme (PRONACOM)
Invest in Guatemala
10a. Calle 3-17 Zona 10
Edif. Aseguradora General, 4to Nivel
Guatemala City
Tel. 502 2421 2464
jdiaz@pronacom.org
Mr Paiz runs the Invest Guatemala agency and also runs the Competitiveness programme which is
charged with delivering the Guatemalan Government’s newly published 10 year competitiveness
strategy.
Mr Paiz said that the EU-Central American Association Agreement was a priority. Guatemala’s
exports to the world have tripled over the last 10 years and doubled to Europe. They see
opportunity in Europe where they believe growth should have been higher.
Guatemala does not have exceptionally high GDP growth but this because growth is not dependent
on the commodities boom. Guatemala’s growth at 3.3% is constant and diversified.
Guatemala has low levels of foreign debt – at around 28% of GDP. International ratings agency
Moodys rates the country as Ba1 (non-investment grade speculative).
On foreign direct investment, they have seven pieces of legislation which govern FDI:
1)
2)
3)
4)
5)
6)
7)
1998 Investment Law
Law for the free negotiation of foreign exchange 94-2000
Law for the Free Trade Zone (Decree 65-89)
ZOLIC (Decree 22-73) Maquila (clothing industry)
Law for development and promotion of export activities drawback (Decree 29-89)
Public Private Partnerships law (decree 16-2010)
There are large number of foreign investors already present in Guatemala and doing profitable
business. It is rare to see foreign companies leave once they have set up in Guatemala.
The latest new piece of legislation on PPPs will allow the Government to contract private sector
firms for infrastructure projects/energy/ports etc.
Guatemala has extensive Free Trade Agreement coverage with trade agreements in place with:
US, Central América, DR, Colombia, Chile, México, Panamá, Taiwán. The trade agreement with the
EU is expected to come into force later this year.
They are also negotiating new agreements with Peru/Canada and Trinidad and Tobago.
Guatemala City is the largest city in the Caribbean and Central America, South of Mexico. The size of
the market, if one defines it by the distance a truck can travel within 8 hours is 24m people (15m in
Guatemala, plus 6 million in El Salvador plus 3m in Honduras). With new and improved
infrastructure, this market reach will stretch to Southern Mexico and cover all Honduras and
Nicaragua, enlarging the total potential market size to 70m persons.
As part of their competitiveness analysis, they have looked at development gaps, identified actions
and set forward their agenda. They aim to among the top 10 reformer countries in 2012 in terms of
the World Bank’s Doing Business Study.
They cite success stories showing the growth of the telecoms industry – up from 0.5m lines in 1995
to 18.7m lines in 2011. Cellular phone growth has been annual 65% compared to 45% in Latin
America.
Their agribusiness sector has experienced strong growth – particularly in the juices and
confectionary sectors.
Electricity costs are forecast to go down with substantial investment in the energy sector. Costs are
currently 19c-20c p/kwh. They are expected to go down to 12-13c p/kwh over the next ten years.
They are developing a new “investors helpdesk” (ventanilla unica) – to enable investors to more
easily understand how to do business in Guatemala and to obtain the various licences for
construction and environmental permissions which they will need to take projects forward.
On PFI, they are developing projects slowly to build a track record which can give confidence to the
private sector and potential foreign partners. They are hopeful to bring on stream a project worth
around $100m in 2012 and they plan to expand the portfolio up to $500m in 2013.
Drugs/corruption was a problem where criminals had infiltrated into police and the mayors offices in
the Border States with Mexico. However, he acknowledged that private business carried a burden
for the overall security situation which was estimated as around 12% of GDP for the security costs by
private firms each year.
Meeting with Luis David, Director of Invest Guatemala
Brenda Castaneda and Vicky Obregon, Invest Guatemala
Invest Guatemala
10a Calle 3-17 Zona 10
Edificio Aseguradora General 4o. Nivel
Guatemala City
Tel. 502 2421 2490
ldavid@investinguatemala.org
The Guatemalan Government has a very low debt to GDP ratio and has a history of being very
economically conservative. The country has high reserves and a solid owned local banking sector
which is dominated by the Banco Industrial.
Domestic banks are not allowed to buy foreign debt so they tend to hold most of the domestic
Government debt. They offer interest rates at around 5-6%.
The inflation rate in Guatemala is around 5% and has been steady for some time.
The new government has introduced a range of fiscal reforms which will introduce important
changes to the tax regime. The key elements to the legislative package are:
a) An Anti-tax evasion law which changes the tax code and the powers of the tax collection
authority (with no changes to the actually rates or values) (approved)
b) A tax system update (actualizacion tributaria) which includes changes in rates and rules as
well as including a complete new income tax law and customs law. The law lifts slightly
corporation tax on revenues (from 5% to 7%) and tax on dividends (from 3% to 5%). There
remains the option however to pay tax on net profits which is incentivised by reducing the
tax payable from 31% to 25%. Income tax rates are between 5 and 7%. There is rate of
12%VAT payable which is unchanged. (approved)
c) Banking secrecy reform. This will allow greater access to bank account information for the
tax authorities. This aims to 1) fight corruption 2) reduce tax evasion 3) allow for signing of
tax information exchange agreements under OECD. (Legislation is still in congress)
The Free Trade Zone Law which governs the operation of foreign companies which process materials
for export allows companies to either be based in a special free trade zone area or to apply the law
to a facility which is in a location of choice.
On Public Private Partnerships; The Guatemalan Government has a good history of honouring debt.
The ratings agencies demonstrate confidence in Guatemalan debt.
Foreign companies have entered into longer term contracts in the energy sector and the telecoms
sector without any problems.
On the question of citizen security, they acknowledge that potential investors cite this as an area of
concern but that disproportionate attention should not be paid to it. On the whole the problem
facing Guatemala is a challenge which is being faced by most Latin American countries and is the
result of a mix of a) drugs b) gangs c) inequality and d) general crime. The chance of a foreigner
becoming caught up in a violent confrontation is very small unless they actively go looking for
problems.
On the question of corruption, they state that there are many multinational corporations operating
in Guatemala with strict international standards on corruption and operate successfully. They state
that corruption is not an issue in the larger companies and at a high level; there may be occasional
problems at a lower level in smaller companies.
Meeting with Carolina Castellanos, Executive Director
American Chamber of Commerce in Guatemala
5ta Avenida 5-55 Zona 14
Europlaza, Torre 1, Nivel 5
Tel. 00502 2417 0800
director@amchamguate.com
www.amchamguate.com
The newly elected Patriota administration has been a very positive development which has ushered
in a dramatic change in the mood of the country. Over the last 5-6 months, things have changed
significantly. The opposition party candidate, Manuel Baldizon, would have been a disaster,
particularly for business, and there is widespread relief that he was not voted in.
The new government have been quick to assert their determination to ensure rule of law with rapid
reactions to demonstration, petty crime and a reinforced police presence on the streets.
On Foreign Direct Investment, there are dozens, if not over a hundred, US corporations operating in
Guatemala and AMCHAM have no knowledge of any of them pulling out. Procter and Gamble
moved their headquarters elsewhere but this was for unrelated reasons –and they maintain a
sizeable manufacturing facility there.
In terms of juridical security, the Guatemala Government is respecting the arbitration tools which
were put in place by the DR-CAFTA agreement. There are two arbitration processes which are
ongoing:
a) RDC – railway company (via DR-CAFTA)
b) Iberdrola – electricity distribution (using IPPA procedure agreed with Spain)
On Government procurement, the law has been reformed and the legislation is now being
implemented. The former Government did find ways to bypass things but this Government is
introducing new legislation to force transparency in all Government procurement practices.
On Mining – there are been many false accusations and no contaminations (unless one looks 50
years ago EXIM). Her view was that the mining companies which responsible should come to
Guatemala but they will need to work hard to make sure the project is understood and that they are
engaged with local community. Mining brings real value in terms of bringing electricity, roads, and
other infrastructure to rural areas. With the current high price of gold, it also brings valuable income
and tax revenue.
On retail fashion, in Guatemala, SIMAN (group from El Salvador) has franchises for Bershka, Massimo
Dutti, Mango, Zara etc. Other important groups include Spectrum (Pantaleon)/Multinversiones
(Gutierrez Bosch)
It is worth noting that AMCHAM services are open to non-American companies. They have
members from Germany, Spain, Mexico, India, Brazil, Colombia, Italy etc. Members include
Unilever, BAT, Diageo, ACTIS, BUPA.
The UK should also consider looking at ASCABI –an association of Binational Chambers of Commerce
in Guatemala.
Meeting with Sonia Lainfiesta Ramirez, General Coordinator for Foreign Trade Policy
Economy Ministry
8th Avenida 10-43 Zona 1, 4to Nivel.
Guatemala 01001
Tel. 502 2412 0328
Slainfiesta@mineco.gob.gt
www.mineco.gob.gt
The EU-Central American Association Agreement grants EU companies the right of establishment in
Central American countries. Access to Central American market in services is now Bound in the new
Association Agreement treaty, which gives further security to investors. EU companies can now go
to arbitration facility if a Central American Government reneges on these commitments (either IDB
or CITRAL (UN)).
There is no specific Investment chapter under the Association Agreement because many EU
countries have bilateral Investment Protection Agreements in place. The UK’s agreement with
Guatemala is very advanced in negotiations but was put on hold during the EU negotiations.
On Government procurement, the EU now has the same level of access as US. Guatemalan
legislation relating to Government procurement was extensively upgraded and modernised as a
result of DR-CAFTA agreement with the US. On Intellectual Property, they have a high standard of
probity.
Areas of particular interest for Central American exports for EU are as follows:
-textiles (uniforms/maquila). There are important derogations from the Rules of Origin for textiles.
-agribusiness (tropical products)
-fisheries (tuna/shrimps/tilapia)
-Industrial products
-services (eg. nurses / old-age attendants / infirmary /call-centres and back office processing)
They are now working on implementation of their commitments under the Association Agreement.
Region-wide commitments have been part of the working agenda for SIECA for 18 months. They
have been working on: customs provisions; sanitary and phyto-sanitary provisions; other technical
barriers to trade.
At a national level they are working on introducing new legislation in Guatemala to recognise
Geographical Indicators. The project is expected to be ready by the end of March. They are getting
help from the Commission to put on a series of seminars about GIs and their advantages.
On the national front, they are also working on a new competition law. This will consolidate existing
legislation relating to competition which is currently spread across a range of different legislative
instruments. They are receiving UN assistance with this programme which is now undergoing a
public consultation process.
The Guatemalan Government is working on bilateral trade related assistance cooperation
programmes with Spain and Germany, mainly to assist SMEs.
Sofia Velasquez, responsible for Foreign Trade
Guatemalan Chamber of Commerce
10 Calle 3-80, Zona 1.
Guatemala City
Tel. 502 2417 2700
dvelasquez@camaradecomercio.org.gt
www.negociosenguatemala.com
The Chamber of Commerce’s members are focussed on supporting inward trade and investment to
Guatemala. Their membership is composed of distributors, importers, lawyers, agents etc.
They do run trade missions abroad for their members and have recently been to Equador looking at
construction and agri-business opportunities. They would be a natural partner for a mission of
Guatemalan companies to London.
There are good opportunities in the infrastructure sector in Guatemala. Companies are already
importing construction materials from Europe (eg. steel products from Germany). There are needs
for heavy machinery, excavators and other construction vehicles.
Companies would be well-advised to partner with local firms and a full list of construction firms can
be obtained from the Camara de Construccion de Guatemala website;
http://www.construguate.com/index.php/directorio
Guatemalan banks could be useful local partners for PPP contracts where a foreign investor wanted
to become involved in a major PPP infrastructure project. The Chamber of Commerce has a Banking
Division of its membership which can be found at:
http://www.negociosenguatemala.com/index.php?option=com_content&view=article&id=161&Ite
mid=212
On Renewable energy, they believe that companies are currently reluctant to invest in renewable
energy systems because of the high upfront costs. Banks are not lending to SMEs to support micro-
projects of this kind. There is no law in Guatemala at present to incentivise installation of renewable
energy systems.
On retail franchise opportunities, she believes there is significant purchasing power; but duties are
high on clothing imports (around 10-15%).
Meeting with Javier Zepeda, President
And Claudia Barrios
Chamber of Industry for Guatemala
Ruta 6, 9-21 Zona 4, Nivel 13
Tel. 502 2201 00000
jzepeda@industriaguate.com / cbarrios@industriaguate.com
www.industriaguate.com
There is still lots of ignorance about the opportunities in Europe but there is industrial interest in the
Association Agreement.
Examples of industrial goods and processed foods include fridges, biscuits, beer, sweets. Another
area of opportunity is ornamental plants.
Meeting with Cesar Zamora, Executive Director
CACIF (Business Committee for Negotiations and International Trade)
Ruta 6, 9-21 Zona 4, Nivel 12
Tel. 502 2201 00000
Guatemala is the only country in Central America not to have concluded an IPPA with the UK.
It is not necessary however to have an IPPA in place to operate mines in Guatemala. Goldcorp (the
Canadian mining firm currently active in Guatemala) is there operating under the basis of the 1998
investment law.
The 1998 investment law is quite liberal and offers companies the opportunity to incorporate in
Guatemala with no requirement for a Guatemalan national to be on the board of directors. There
are however requirements regarding employment of nationals.
On Mining – this is an extremely important sector with lots of opportunity. Mining companies in the
past started off badly by not consulting properly with the local community. Obviously all proper
environmental and labour law standards need to be addressed.
In the area of Infrastructure – there has been lots of damage because of natural disasters (tropical
storms etc). Bridges, roads and energy infrastructure has proved very vulnerable and there are
opportunities to strengthen and repair these against future damage.
International contracts with Government in Guatemala are honoured and where there is a dispute
they are sent to arbitration. Examples of successful PPP type operations include Canada post
operating the postal service and a toll-road to Port Quetzal being operated by a Mexican company.
They are emphasising the following sectors for EU export: cardamom, sugar, coffee and call centre
services.
The Netherlands sends a trade and investment mission to Guatemala every year.
On the question of security/violence, he acknowledged that Guatemala has a problem with gangs
and narco-traffickers. This partly relates to the very large number (>1m) of undocumented migrants
who are in Guatemala from other parts of Central America.
Meeting with Edwin Rodas Solares, Vice-Minister for Energy
Ministry for Energy and Mining
Diagonal 17, 29-78 Zona 11
Las Charcas, Guatemala
Tel. 502 2419 6464
erodes@mem.gob.gt
The renewable energy law of 1986 was modified in 2003 (no.52-2003). This sets out the incentives
for investment in the sector. They are keen to attract investment for geothermal, biomass, wind and
hydroelectric.
Incentives include exemption for 10 years from income tax and zero duty on the importation of
machinery.
Investment in the sector has been largely domestic up until now apart from a project by Italian firm
ENEL in the hydro and geothermal sector.
They have two geothermal plants operating producing 40MW. They are 15 years old and were
funded by Israeli and domestic investors.
CABEI is also involved in various projects.
UK firm, ACTIS is now operating the contract to distribute electricity and they are interested in
developing two hydroelectric plants.
Instituto Nacional de Electrificación –INDE is looking at PPP as a possible mechanism for two
renewable energy sector at present. www.inde.gob.gt
Guatemala has an excess of renewable energy resource which gives it the potential to export
electricity. They still need the regional regulations to be set in place to make this possible as well as
a reliable interconnector.
They will continue to maintain a strategic reserve of oil in case of emergency. LNG is not a priority
for investment –the main priority is hydrocarbon.
A copy of the projects which have been prioritised for development can be found on the following
website: http://www.investinguatemala.org/proyectosdeinversion.pdf
Julio Hector Estrada, Technical Coordinator for Improving Guatemala programme
FUNDESA
10 Calle 3-17, Zona 10
Edificio Aseguradora General Nivel 5
Guatemala City
Tel. 502 23315133
jestrada@fundesa.org.gt
www.fundesa.org.gt
Mr Estrada was responsible for designing the new PPP legislation in Guatmala. It is intended for
three sectors primarily – telecoms, transport and energy. Telecoms and energy have attracted
investment but transport has been slow to attract investment. The energy sector has two major
foreign investments (ACTIS in the interior of the country and Colombian investment in the City and
coastal area).
The 2010 Law for Public Private Alliances for Development adopts the Mexican experience of PPP
legislation.
The law allows for contracts of up to 30 years. Contracts are to be proposed and negotiated by a
specialised office for PPP (known as ANADIN) which will take the project from the Ministry and adapt
a PPP approach which is suitable for it.
The law has specific provisions for procurement, environment, arbitration, conflict resolution,
supervision of construction etc.
Once the agreement is concluded it is then signed by Ministers and needs to be ratified by Congress
within 60 days. Administrative silence will be taken to be assent.
The law introduces new and very effective provisions relating to land acquisition and compulsory
purchase orders to allow for strategic projects to avoid massive delay.
The new PPP Office is expected to be up and running later this year.
It is expected that the first transport project to be designed by the PPP team will be a relatively small
Build Operate Transfer road scheme in 2013 of between US$10 and US$30 million. They would then
plan to develop two projects in 2014 and 3 projects in 2015, each time getting slightly more
ambitious.
The legislation does not allow for a right of proposal/initiative by non-government organisations.
Only the Government can decide the structure which a PPP project will take.
There are some good opportunities in port developments with port authorities procuring
construction services worth US$200-400m. They are developing some projects with CABEI.
Meeting with Estuardo Castillo, Export Development and Trade
Cerveceria Centro Americana SA
3° Avenida Norte Final
Finca El Zapote Zona 2
Guatemala 01002
Tel. 305 4159944
estuardoc@lcasa.com.gt
www.edtexport.com
The company does not just produce Gallo beer. They are also involved in the production,
distribution and export of fruit juices, malt, nectars, cereals, snacks, soya and mineral water.
They are interested in EU as a market and have capacity to be able to increase production. They
would welcome discussion with European firms perhaps to supply beer on a “own-brand” basis.
Freight costs are however prohibitively expensive.
They are more focussed on trying to break into the CARICOM market. They are particularly
interested in Trinidad and Tobago but the freight routes are difficult and import duties are extremely
high.
They already supply GraceFoods with some of their nectars (using Crawley freight to Jamaica).
Meeting with Luis Godoy, Director General
AG EXPORT
15 Avenida 14-72, Zona 13
Guatemala
Tel. 502 24223400
Luis.godoy@agexport.org.gt
Agexport is a private sector organisation which promotes the exports of Guatemala. It participates
regularly in trade fairs, assists members with standards and certification enquiries and providing
training on a wide range of areas.
They have a detailed on-line database of suppliers which can be found at:
http://www.export.com.gt/index.php?sector=1&subsector=101&nombre=&producto=&template=di
rectorio&option=com_content&view=article&id=140&sect=AGRICOLA&subs=FLORES+DE+CORTE&It
emid=93
Guatemalan agribusiness exporters participate in the following trade fairs:



Alimentaria, Barcelona, Spain (March)
BioFach, Nuremberg, Germany, (February)
Anuga, Cologne, Germany (October)
Agexport is taking Agribusiness trade missions in October and November to Holland, Germany and
Poland. They are also taking a handicrafts mission to Italy.
They work with the following development organisations to support their export activities:
DANIDA (Denmark); AL-Invest (EC); FIDA (UN based in Italy); CBI (Netherlands); Hivos (Netherlands)
Guatemalan exporters have been successful in diversifying the range of products they export to
Europe and in identifying niche markets. They are now for example also exporting rubber (latex) and
palm oil. The problem for many exporters is the cost of air-freight.
Maquila is seen is a major possible opportunity following the Central American Association
Agreement and they are looking for investment in this sector.
Agexport is a member of regional federations for export promotion organisations: FECAEXCA and
ACAPEX.
Astrid Ibarra Bucaro – Portfolio Executive
Central American Bank for Economic Integration (CABEI)
16 Calle 7-44, Zona 9
Guatemala City
Tel. 502 2410 5361
aibarra@bcie.org
Headquartered in Honduras, and founded 50 years ago, BCIE has 13 members, 5 SICA members plus
Taiwan, Mexico, Colombia, Argentina, Spain. Panama, Dominican Republic and Belize are also
members.
Its objectives are a) development b) regional integration and c) environmental sustainability
The key facets which they are looking for in any project are that it a) creates employment and b)
improves the gender balance. 70% of its portfolio is public and 30% is private.
They also have interest in private projects within the scope of their objectives – eg. Renewable
energy, human resource development (university /hospitals etc); also infrastructure (roads, PPP),
agroindustry; services; call-centres; light manufacturing; energy/renewable energy;
Projects which they see has “high impact” will get preferential rates of interest etc.
The size of projects which they work on range from US$20m upwards. Where a project is over
US$50m, they would need to be co-financed (eg. Renewable energy). For projects greater than this,
for a major project, they could form part of a syndicate of banks.
They have 3 ways of operating:
a) they provide up to 60% of the investment and work directly with the client
b) Cofinanced
c) As part of a banking syndicate.
Some funds are available which are grants for feasibility studies.
CABEI’s project portfolio to date for Central America is looking at a number of renewable energy
projects.
- Guatemala – mostly focused on hydropower
- Honduras – US$200m project with wind energy (Zero de Yula)
- Costa Rica
They are also open to projects in the following sectors:
- Recycling and treatment of waste
- Tourism
Both the Camino Real Hotel and Clarion Suites tourism projects were financed by BCIE.
They do not cover mining
Meeting with Mario Yarzebski, Director
AZAZGUA (Guatemalan Sugar Association)
myarzebski@azucar.com.gt
And
Luis Mejia, Industry Division Manager
MERESA – sugar empowering industry
Av. Reforma 6-64 Zona 9
Edificio Plaza Corporativa
Torre 3, 7º. Nivel
Guatemala City
Tel. 502 2379 1509
Lmejia@meresa.com.gt
www.azucarmeresa.com
The Guatemalan sugar industry has a good relationship with British sugar refiners and customers
and traders based in London including Tate and Lyle, British Sugar, Czarnikow and EDF Man.
They are regularly in London for the meeting of the International Sugar Organisation.
The Association Agreement grants Central America 150,000 metric tonnes of market access to EU
annually (with a 2,500 increase annually). It is expected that Guatemala will become the top raw
sugar supplier to Europe following the entry into force of the agreement.
Guatemala has 13 sugar mills and is the 5 biggest exporter in the world. 2nd largest exporter in the
region after Brazil. Four of the mills have refining capacity. Production is approximately split 50/50
between refined and raw sugar. The industry is 100% private sector.
They send industrial alcohol to Europe under GSP they have full market access. 70% of the
production goes to France, Netherlands and Germany. There are very tough EU regulations on
sustainability which can be challenging for them to comply with.
Sugar industry is key to energy production in the country. At harvest time, bagasse biomass
provides up to 22% of energy capacity. (over last 12 years). They import their turbines from the US,
Brazil and India. During the rest of the year, they are using woodchips to continue electricity
production.
They are not concerned about the impact of EU-Mercosur Agreement on them. Brazil will be subject
to a quota of 200,000 metric tonnes not more – this is not a problem to them.
Guatemala is able to provide a better quality of raw sugar than Brazil. Guatemalan sugar companies
are invested abroad in Honduras, Mexico, Nicaragua, DR and Brazil.
They get advice on managing sugar yields etc from Brazil.
Their biggest importer is now South Korea which refines sugar for re-export to South East Asia.
The Puerto Quetzal is operated by the sugar industry in a 10 year concession. It is one of the most
efficient ports in the year handling up to 3000 metric tonnes per hour.
They are very interested in the Dry Canal Railroad project which would connect up to the Caribbean
coast. There is also Korean investment in this.
Luis Mejia is seeking to attract inward investment for production of products with high sugar content
in Guatemala. Foreign companies are attracted by the competitive sugar price, the low labour costs
and the strategic geographic market. They have access into Mexico with zero rate for food products.
They attend the ISM trade fair(January) in Cologne, Germany for sweets and confectionary
producers.
Meeting with Edwin Hernandez, Commercialisation
Grupo Pantaleon
Diagonal 6, 10-31, Zona 10
01010 Guatemala
Tel. 502 2277 5100
Ehernandez@pantaleon.com
www.pantaleon.com
Pantaleon is a 160 year old group with 6 sugar factories (2 in Guatemala plus in Honduras,
Nicaragua, Mexico and Brazil).
The company has diversified into other areas such as real estate, housing, commercial centres,
sweets manufacture and production of rubber/latex.
In addition to producing some 1.1m metric tonnes of sugar each year they also produce 290,000
volumetric metres of ethanol.
They are looking to expand their shopping mall activity into Nicaragua and Colombia. Normally
franchises are granted for the whole of the SICA area. There is a Franchise Association for people
who own franchises. Their website is: http://franquicias.com/acaf/
Guatemalan sugar producers are increasingly looking at selling their sugar directly to major food
processing firms (such as soft drink producers).
He explained that sugar quotas in Europe are unlikely to be eliminated because if they did it would
be difficult to justify not eliminating parallel limits on corn-syrup. Soft drinks would then switch to
cornsyrup use instead – which has significant concerns relating to causing obesity.
On sugar side, Pantaleon group are unlikely to see an immediate interest in the Central American
Business Council concept as it is a sellers market at the moment – the refiners are desperate to
identify sources of sugar as there is a 3m tonne deficit on the Asian sugar market.
They also work with British companies on ethanol – BP, Sucden, Man and Czarnikow.
Sugar produced for EU needs to be ISCC certificated – there are controls on labour, environmental,
SPS, health and safety to allow entry to European market.
BONSUCRO – a new sugar standard is likely to be the standard for the future and it has been
recognised by the EU.
Meeting with Silvia Lucrecia Rivas Amaya, General Coordinator for Concessions and Nonincorporated projects (Check presentation on memory stick)
Ministry for Communications, Infrastructure and Housing
8 Avenida y 15 Calle ZOna 13
Tel. 502 2223 4000
srivas@comunicaciones.gob.gt
www.civ.gob.gt
PPP project will be put up for international tender unless they are too small.
PPP will be used for a) Road infrastructure b) Airport c) Maritime and port infrastructure.
Separately the Ministry of Transport’s, Director General of Roads and other infrastructure will
manage projects with public funding and development funding.
They will be upgrading the Pacific Road through Central America with Brazilian BANDES investment
to bring the entire road up to dual-carriage way standard.
Possible new road concession to Puerto Quetzal – already a road under concession with Mexican
firm Marhnos.
New road in the North of Guatemala is underway with IDB funding.
A new light rail line of around 13km is also being planned which would carry around 2.8m users and
would link the west and east of Guatemala city. The cost would approximately US$500m.
They have completed a feasibility study (by French firms Systra and Cooteban). The Government
needs to identify funding sources.
Insights from off the record private discussions in Guatemala:
- Government debt is nearly all held by domestic banks (controlled by the major families). This is a
shame because it is a poor use of finance which could otherwise be extended to microfinance/SMEs etc. Domestic banks are being lazy just using Government bonds
- The tax-take is so low partly because so many Guatemalans feel that the Government is corrupt
so why should they pay tax to fill politicians’ pockets. The new Government appears to be noncorrupt (or at least trying) and the challenge is to change citizen behaviour to pay tax in response.
- Corporate tax avoidance is also rife with up to 70% of companies not declaring their profits. A
new law is now to enter into force which will introduce a PAYE type system.
- The risks relating to the security situation are overblown. Problems are geographically defined
on the whole. Security guards/4 wheel drives/armoured plating etc is partly a status symbol in
Guatemala for wealthy Guatemalans and expats.
- The previously Government was horrendously corrupt and in particular misuse of the social
programme funds by Colom’s wife’s have made Guatemalans very angry.
- Unemployment is a major issue. There are around 200,000 young Guatemalans joining the
workforce every year but only jobs for about 10% of these with under-employment for another
10%. The remaining 80% are left unemployed.
Meetings in El Salvador
Meeting with Maria Eugenia Pacas, Director General
FECAMCO (Federation of Central American Chambers of Commerce)
Cámara de Comercio e Industria de El Salvador
9 avenida norte y 5 calle poniente #333
San Salvador, El Salvador
direccionejecutiva@fecamco.com
Members of FECAMCO are interested in working with European companies and have been
frustrated at the delays to the signature of the Association Agreement.
Their members include lawyers, consultants, distributors, importers, agents etc.
FECAMCO is now working to a biannual basis and will have the next meeting of the Executive
Directors on 20th April. It would helpful to have a Spanish version of the Central American Business
Council ahead of that meeting.
Meeting with Arnoldo Jimenez, Executive Director
ANEP (Association for National Private Enterprise)
1a Calle Poniente y 71 Avenida Norte No. 204
Colonia Escalon, San Salvador
Tel. 503 2209 8300
ajimenez@anep.org.sv
www.anep.org.sv
Guatemala and El Salvador represent some 40% of total Central American trade.
Companies from El Salvador have been expanding into the rest of the region. This is partly because
of the civil war when companies remained headquartered in El Salvador but looked for opportunities
abroad.
Examples of foreign inward investment include; HSBC, France Telecom (recently sold to Carlos Slim),
Energia Electrica.
There is a big need for development of transport and energy infrastructure but little public funds
available.
El Salvador has a high debt to GDP ratio of 56% and a low growth rate (1.4%). This makes taking on
extra borrowing difficult.
New legislation for Public Private Partnerships is coming in. The plan is to use this to widen the
existing highways to four lanes and to upgrade inter-urban key routes (eg to Managua and
Tegucigalpa). There are also plans to invest in port infrastructure with possible port privatised under
concession.
The Government is also looking at rail for movement of people and the possible introduction of a
new public transport system for San Salvador along the lines of the system in Bogota.
Foreign Direct Investment is currently standing at a low level (around 11% of GDP), perhaps related
to political uncertainty about the future policies of the FMLN (incumbent Government). El Salvador
capital is currently investing elsewhere in Central America.
Italian firm ENEL had problem with the Government and is currently going through an arbitration
process with them.
The retail sector is growing and there are new commercial centres with domestic (Almacenes SIman)
and international (Sears, Zara) brands operating successfully. Domestic consumption accounts for
around 20% of GDP (US$4bn).
On agribusiness, there are major opportunities for technological innovation and to win market share
in new markets. They have significant production of tropical fruits (maranon, lemons, fruit juices),
ornamental plants, cut flowers, dairy products, coffee, sugar.
On the downside, agriculture is generally inefficient because it was parcelled up under agrarian
reforms and is therefore divided up amongst smallholders operating in cooperatives. He saw a need
for legislative reform.
On risks of corruption/security issues, sadly the people who tend to suffer the most from these
issues are the poorest where they suffer from extortion from gangs. Issues which can be a problem
are the theft of lorries or cars.
Meeting with Silvia Cuellar, Executive Director
COEXPORT
Avenida La Capilla no. 359-A,
Colonia San Benito, San Salvador
Tel. 503 2212 0200
Direccionejecutiva@coexport.com.sv
She confirmed that El Salvador suffers from a negative image and that this presents a problem for
exporters in the country. They are known for the civil war and the media tends to focus on violence.
There is a project underway by the Ministry of Tourism and the Foreign Ministry which will produce
a campaign to help with productivity and tourism. Part of this will aim to project a good positive
message about El Salvador.
Marketing a country and redressing these myths however is an expensive business. They did have a
campaign under the last Government which ran a campaign under the slogan “El Salvador –
Impressive.”
Under the EU AL-Invest programme, COEXPORT financed a market study for 35 sectors to identify
where there were market opportunities. They looked at Spain, Sweden, Germany and Italy. They
were very surprised to find how negative the image of El Salvadorean products was and the survey
recommended they needed to differentiate their product by using different imagery/colours, for
instance calling on the Mayan heritage.
She mentioned a €50,000 marketing campaign which appeared to be funded by Spanish
development agency AECID.
COEXPORT sees the EU market as a major opportunity given the tiny current balance of trade
between El Salvador and the EU. They are helping around 190 companies to get into Europe and
have attended a number of key trade shows in Europe:
a) Biofach – Germany
b) Alimentaria – Barceleona
They would be interested in participating in a UK trade fair – particularly in the agribusiness side. In
the UK, the focus has been until now on coffee but they would welcome other help.
She is trying to do an event at the end of the year for El Salvadorean exporters and she is hoping to
attract to San Salvador some EU importers.
It may be that AL-Invest have funds to bring over EU importers to the region. She mentioned two
trade fairs which are already taking this approach – EXPOAPEN (Nicaragua) and Agritrade
(Guatemala).
Meeting with Claudia Umaña and Johanna Hill
CA Trade Consulting Group
Calle del Mirador NO 5546
Colonia Escalon, San Salvador
Tel. 503 2250 0400
cumanaa@catradeconsulting.com
jhill@catradeconsulting.com
www.catradeconsulting.com
Claudia Umaña, a lawyer by profession, used to work for prominent FUSADES foundation. Johanna
Hill used to be the Vice Minister responsible for El Salvador negotiating the Association Agreement
with the EU. They are both now working for a private consultancy firm which assists foreign
companies wishing to invest in /trade in El Salvador and provide advice on rules of origin, market
access, studies etc.
One third of El Salvador’s population lives in the US. They are used to travelling and speaking
English. This gives El Salvador a particular attractiveness vis a vis foreign investors. This contrasts
with other, less “international” countries like Nicaragua.
El Salvador is a manufacturing country which produces clothes, plastics, paper, food products,
cleaning products, steel products, speciality products as well as coffee and sugar to other markets,
primarily the US. El Salvadoreans are aggressive exporters and are used to going out to the region –
Mexico/Colombia.
FUSADES have prepared a detailed market sector report about El Salvador which we can obtain.
In terms of corruption, Transparency International rates El Salvador as being better than Guatemala
and about average for Central America. Their view was that corruption can happen but it is not
generalised. There are specific areas like public bidding for bid Government contract where it may
happen on occasion. There are also examples of more petty forms of corruption in the day to day
eg. customs clearance.
In terms of security of contract, they indicated that it was vital to ensure that your contract was
extremely clear from the outset and that any technical issues need to be clear and practical to apply.
Service commitments on construction in the EPA offer some new guarantees to EU firms in this
sector, as does the Investment Promotion and Protection Agreement (IPPA) between the UK and El
Salvador.
The judiciary in El Salvador is very slow and they would recommend therefore in any contract
including a clause which demands use of international arbitration procedures to ensure international
standards are adhered to.
An area of real opportunity exists in the maquila sector where El Salvadorean companies now are
vertically integrated and are able to produce clothing from raw inputs ready to market giving them a
very fast turnaround. They have specialised clusters relating to synthetic clothing and cotton
clothing. They are producing a wide range of clothing including sportswear, swimsuits, tshirts,
underwear, girls dresses etc. There are already Korean and Brazilian firms invested in the sector
some of which are exporting to the EU (to France, Spain, Belgium and Greece).
They are considering organising an event in November with CAMTEX (El Salvadorean textile
association) and they are interested in focusing on Europe.
Mario Roger Hernandez, Vice Minister for Economy
Ministry for the Economy
Alameda Juan Pablo II y Calle Guadalupe, Edif. C-1, 3er Nivel
Centro De Gobierno, San Salvador.
Tel. 503 2247 5600
mroger@minec.gob.sv
They see lots of opportunities coming from the Central American EU Association Agreement and see
it as their job to promote this. They like the concept of the Central American Business Council
They have worked with German Development Agency on the identification of products which have
potential for export to EU. The Agency produced a report “doing business with 27 Countries”.
There are perceptual issues to address on both sides. On the El Salvadorean side, they see the EU as
being very far away. There is a lack of information about the opportunities. They need conferences,
seminars and practical information about the UK to attract their interest.
UK companies should not be put off by the security issue. 45 international companies are operating
in El Salvador already. He agreed that the travel advisories from other foreign ministries can be offputting and agreed that they needed to encourage careful advice which was nuanced and did not
over-dramatise the situation.
In terms of security of investment, he said that El Salvador takes seriously its responsibilities in this
sphere and honours the guarantees it makes to investors. Calvo, a Spanish fish processing firm has
3,500 employees in El Salvador.
A new legislative package is being put in place this year (first six months) which will offer new fiscal
incentives and further protection to investors. It will cover textiles, clothing industry. It comes as a
result of the expiry of a WTO waiver which the El Salvadorean Free Trade Zones had until 2015
(against charges of export subsidy). El Salvador is therefore reforming its FTZ legislation to make it
WTO compatible.
El Salvador has been a victim of its own success in terms of financial services. Dollarising its
economy ensured a vibrant financial services industry – but it has also become a centre for moneylaundering from the drug trade. There is also not enough production in the rest of the economy to
cover the levels of domestic consumption (which are also boosted by remittances from the US).
Remittances from the US constitute some 25% of GDP and the US consumes some 80% of El
Salvadors’ exports. When the US enters recession, the effect on El Salvador is therefore devastating.
“When the US catches a cold, we get pneumonia”.
They are taking seriously the security issues relating to gangs via social programmes to help youths
vulnerable to joining gangs, to improving the laws relating to violent crime by minors; for example at
present a 17 year old convicted of murder would only serve a very short (6 month) sentence. An
increasing problem is also conflict between the domestic gangs and foreign drug traffickers over
territory.
In terms of construction opportunities, the country is very vulnerable to damage from
environmental causes (eg. tropical storms, earthquakes etc). Construction firms with expertise to
plan for such eventualities will be particularly welcome.
Meeting with Ricardo Flores, Director General for Trade Relations
Ministry of Foreign Affairs
Edificio 2, Calle El Pedregal, Blvd. Cancilleria
Ciudad Merliot, Antiguo Cuscatlan, El Salvador
Tel. 503 2231 1090
rflores@rree.gob.sv
El Salvador’s Government policy is to diversify away from dependence on the US for both exports
and imports to avoid the very heavy impact which US economic difficulties have on them.
At present El Salvador’s exports to the UK are very limited – coffee, sugar and some honey.
Examples of UK companies present in El Salvador are as follows:
o
o
o
Unilever
SAB Miller (La Constancia)
Diageo (imported products through Grupo Liza)
They are also interested in exporting more into the Caribbean and to this end, have opened a new
embassy in Port of Spain, Trinidad and Tobago (Amb. Carlos Pineda – Oxford educated).
Meeting with Giovanni Berti, Export Director
PROESA (El Salvador Trade Promotion Agency)
Edificio d’CORA, Blvd Orden de Malta
Urb. Sta Elena, Antiguo Cuscatlan.
Tel. 503 2246 6400
gberti@proesa.gob.sv
www.proesa.gob.sv
In general there are weak trade links with Europe and with the UK, they are weaker than most.
There are links with Germany and Spain and a little with France.
There has not been much interest in the UK demonstrated by their private sector – mostly a result of
ignorance about the UK market.
They are waiting for the EU-Association Agreement to come into force and they need to develop
information and knowledge of the market to help build capacity.
Exports include coffee/honey/cashew nuts(maranon)/sugar/handicrafts/indigo dye. There is a big
opportunity for agribusiness development especially in the area of production and export of
ornamental plants.
Their efforts to break into the EU market have been dominated by attending Biofach in Germany. A
German company (Estilo) is working in partnership with 20 El Salvadorean SME exporters to export
/distribute their products to Germany.
I mentioned the concept of organising a virtual trade mission which he agreed could be an
interesting concept.
Their priority has been Ecuador, Peru and some areas of the Caribbean. They are very interested in
Trinidad and Tobago, Panama and Guatemala which they see as being economically complementary.
They also are experiencing growth in their exports to DR and Cuba with whom they have FTAs.
They tend to import/export product to Atlantic via Guatemala and Honduras rather than Panama
Canal as the canal is very expensive.
He advised that construction projects in El Salvador were typically too small to be of interest to
international construction companies and that space for private contractors was limited. He
indicated that public works projects were done by state companies rather than private concessions.
He mentioned that there was new PPP legislation coming through Congress which is still awaiting
approval and that this might open up new opportunity.
Meeting with Patricia Guirola, Brand Manager
Grupo Liza
Calle la Mascota no.7
Col. Maquilishuat, San Salvador
Tel. 503 2298 7646
Email. Patricia.guirola@distribuidorasalvadorena.com
Grupo Liza is a major distributor and retailer in El Salvador. They own a number of high end stored
for food and drink and they also distribute to supermarkets across the country (Pricesmart,
Superselectos, Walmart).
They are interested in any proposals for British products – particularly high end British snacks,
cordials, ginger beer etc.
A problem they commonly face is getting EU products certified in El Salvador for sale to the public.
There are big barriers in terms of sanitary and phytosanitary standards to certify origin and obtaining
a health ministry certificate for sale. This involved for example covering the cost of El Salvadorean
officials to travel to Europe to inspect the production facilities.
They import product through Santo Tomas de Castilla (Guatemala port on Caribbean coast) in
containers from Spain, Italy, France and Rotterdam.
Meeting with Mario Ernesto Salaverria Nolasco, President
Sugar Association of El Salvador
103 Av. Norte y Calle Arturo Amrogi
No.145 Col Escalon San Salvador
Tel. 503 2264 1226
Mario.salaverria@asociacionazucarera.com
www.ascociacionazucarera.com
El Salvador’s export interests include cucumber, green peppers, palm-trees, tuna, and ornamental
plants.
El Salvadorean maquila (clothing production) is also very successful. An El Salvadorean company
ADOC (contact Roberto Palomo) is producing shoes for Prada for example.
A German company, Red Fox, an exporter of ornamental plants, has doubled its production area and
quadrupled its exports in the last two years.
Sigma Q has been successful in manufacturing boxes and packaging (contact Carmen de Memeida)
Good contact is Rigoberto Monje (advisor on EU/US trade issues)
Francisco Callejas (Super Selectos) are also very interested in importing British products.
Meeting with Mauricio Chavarria Osorio, Director for Corporate Relations
Industrias La Constancia (SAB Miller)
Avenida Independencia No. 526
San Salvador
Tel. 503 2209 7555
Mauricio.chavarria@ca.sabmiller.com
www.laconstancia.com
El Salvador is investing to maintain its energy security and there are good business opportunities for
the private sector. ENEL are doing good business with their electricity geo-thermal production.
There are some issues which are under arbitration in the Netherlands however.
There are two big hydroelectric cam projects – one has been cancelled for environmental reasons.
El Chaparral is now proceeding but will be another year or two before completion.
The Executive Commission for the Lempa river supervises the energy sector for the Government
(CEL) through provision of hydroelectric power. They are not involved in corruption and foreign
investors should feel comfortable about working with them. The same advice does not go for the
Ministries of Public Works and Health.
A new port project opened three years ago – the Government has been slow to develop the new
port concession.
ALL AM CHAM EL Salvador
CALL IADB@ WORLD BANK Etc. –look at website;
Useful contacts:
Brenda Castaneda /Virginia Obregon
Invest in Guatemala
Edificio Aseguradora General 4° Nivel
10° Calle 3-17 Zona 10
Guatemala City
Tel. 502 2421 2464
vobregon@investinguatemala.org /brendac@investinguatemala.org
www.investinguatemala.org
David McNaught
Deputy Head of Mission
British Embassy in Guatemala
Tel. + (502) 2380-7300
David.mcnaught@fco.gov.uk
Zoe Smith
Deputy Head of Mission
British Embassy San Salvador
Tel. +(503) 7861 9968
Zoe.smith@fco.gov.uk
Rosella Badia
Minister Counselor
Embassy of El Salvador
8 Dorset Square
London, NW1 6PU
Tel. 020 7224 9800
rbadia@rree.gob.sv
Henning Andres Droege
Head of Cooperation, Trade and investment Section
Guatemalan Embassy
13 Fawcett Street
London, SW10 9HN
Tel. 020 7351 3042
hdroege@minex.gob.gt
Tony Lamb
Central America
UKTI
Nicola Ware
FCO – Desk Officer