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Guatemala: Nation plans to diversify
The Packer / December 23, 1996

By Larry Luxner

GUATEMALA CITY -- Central America's longest-running civil war is about to come to a grinding halt, with the Dec. 29 signing of a peace treaty between Guatemalan President Alvaro Arzú and left-leaning rebel groups that have been trying to topple the Guatemalan government for 36 years.

The positive development not only ends fighting that has claimed an estimated 140,000 lives since 1960, but also opens the way for massive development aid and renewed investor confidence in Guatemala, whose 10.3 million inhabitants make it the most populous nation in Central America.

"Once they sign the peace treaty, we'll see lots of economic help, but it won't last long -- maybe one or two years," says Ricardo Santacruz. "What the country has to do is make intelligent investments so later on, it can live off its own resources. We've learned that value-added agricultural activities can offer benefits that coffee can't. Our goal is to diversify agricultural production."

Santacruz is director of the agribusiness subcommittee at Gexpront, Guatemala's association of non-traditional exporters. That organization -- which receives funding from the U.S. Agency for International Development -- aims to steer Guatemala away from its traditional dependence on coffee, bananas and cattle, and towards high-value exports such as pineapples, melons, baby vegetables and raspberries.

At the moment, Guatemala's most important non-traditional agribusiness export sectors are fresh vegetables, melons, mangoes and berries. Santacruz, interviewed at his Guatemala City office, says 2.8 million hectares -- or about 25% of the country's total land area -- is suitable for intensive agriculture.

"We want to improve productivity and yields in areas we're already cultivating," he said. "In a territory so small, we have relatively small areas where you can cultivate various crops. We want to provide small markets with specialty, value-added crops such as baby vegetables that command high prices."

One company that has invested heavily in Guatemala -- despite the ongoing civil war, political violence and frequent kidnappings -- is Del Monte Fresh Produce. With 7,300 employees in bananas, melons and other export crops, Del Monte's Bandegua subsidiary ranks as the country's largest private employer, according to general manager Gerry K. Brunelle.

"We've been in agriculture here since 1970, and started melons in 1991," says Brunelle, a former Puerto Rico shipping executive. "It started out being 150 hectares, and the following year we tripled it, and today we're above 540 hectares. Our plans are to continue to expand."

At Del Monte's melon operation in Zacapa, a half-hour's flight east of Guatemala City, cantaloupes are hand-picked, palletized in rooms cooled by forced air, and shipped in refrigerated vessels to five distribution centers around the country: January through May to Camden, N.J.; Savannah, Ga., and Port Hueneme, Calif., and November through May to Galveston, Tex., and Miami, Fla.

Brunelle says the Zacapa operation employs 1,700 workers from October through May, and 400 the rest of the year. The United States buys 96% of Del Monte's Guatemalan cantaloupe operation, at an average of $15-16 per 40-pound box -- though prices can go as high as $23 and as low as $5.

"In Guatemala, we've been able to produce a better cantaloupe and sustain a better volume," he said, adding that Del Monte exports only cantaloupes, not honeydews, since "honeydews handle more roughly but they're more volatile pricewise."

In fact, melons, pineapples and winter vegetables are the new stars in Guatemala's non-traditional export sector, as prices for coffee, bananas and cardamom spice either plummet or remain stagnant.

In 1995, according to the Bank of Guatemala, the country exported $138.6 million worth of bananas, $12.4 million in melons, $10.4 million in broccoli and cauliflower, $9.0 million in snow peas and lesser quantities of mangoes, berries, plantains, okra, celery, onions and watermelons. The United States continues to be Guatemala's most important customer for fresh produce, buying 88.4% of the country's 635,500 metric tons of bananas, 98.1% of its 45,600 tons of melons, 61.5% of its 24,100 tons in broccoli and cauliflower, and 95.4% of its 13,700 tons of snow peas.

"Coffee, sugar and bananas are the largest exports from Guatemala. Broccoli is still mostly fresh, but the trend is toward frozen," said Todd Drennan, assistant agricultural attaché at the U.S. Embassy in Guatemala City. According to an October 1996 Agricultural Situation Report supplied by the embassy, Guatemala is in the process of installing another hot-water treatment plant in anticipation of increasing mango shipments overseas.

Yet even non-traditional exports have their own set of problems. In late 1992, Guatemalan snow peas were blocked from entering the U.S. market when it was discovered that pesticides not approved by the FDA were being sprayed on the crop. Exports resumed, but shipments are now being scrutinized at the port of entry for FDA violations. Likewise, Guatemalan raspberries were suspected as the source of a recent outbreak of cyclospora.

Despite the setbacks, few doubt Guatemala's ability to attract investment once peace prevails and an estimated $1.5 billion in development aid begins pouring in from such institutions as the World Bank and the Inter-American Development Bank. The question is how long the aid will last, and whether the presence of thousands of unemployed soldiers and guerrillas will turn out to be more destabilizing than the war itself.

"For years, Guatemala has had a reputation for violence," said Drennan. "The peace accords talk about finding land for refugees coming back. But unlike in El Salvador, the guerrillas didn't win. That's why it's been a lot harder here."

Adds Santacruz of Gexpront: "After the euphoria passes, jobs will have to be generated. I'm sure the agribusiness sector can contribute to the creation of jobs, but we can't solve everything. What this government must do is invest in infrastructure. If there are roads, telephones and electricity, investment opportunities will come."

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