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Guatemala maintains tax exemptions which are provided to investors in free trade zone. According to CAFTA, Guatemala cannot adopt new duty waivers or increase the existing duty waivers. Export taxes are only applied to Coffee. The products which are eligible for export are Poultry and poultry products, red meat, beef, beef trim and tallow (USDA, 2009).
As a member of CACM they were working on full implementation of common external tariff (CET), there are no tariffs on goods traded among the members of CACM, but goods traded outside CACM has zero to 19% tariffs. The new poultry import policy was announced on October 1996, which increased the annual tariff rate quota from 3600 MT to 7000 MT for 1997. It also reduced the in-quota tariffs from 20% to 15% (SICE Foreign trade information system, 2007).
Price bands for the grains like corn and rice were eliminated in 1995. In 1997 price band on sorghum was also removed during the reduction in tariffs on most of the agricultural products. After signing the CAFTA - DR agreement, the parties in 2008 implemented some changes to the textiles related provisions and about 80% of U.S industrial and consumer goods enter Guatemala duty - free. Guatemala liberalizes import trade in white corn through increasing TRQ. Guatemala also committed to improve transparency and efficiency in administering customs procedures for the imported transhipment of goods. Guatemala restricted the import of U.S live cattle (SICE Foreign trade information system, 2007).
Guatemala's President Berger have promoted the foreign investment and implemented series of policies to improve the transparency and stimulate economic growth. The flow of FDI in 2005 was $ 226.8 million and it increased by 56% in 2006 to $ 353.8 million. The indication of data shows that it will reach up to $ 535 million in 2007. Many of the U.S and other foreign firms have invested in Guatemala. According to CAFTA trade bloc, they have established a more secure and conventional legal frame for U.S investors who are operating in Guatemala. All forms of investment are protected which include enterprise, debt, concession, contracts etc. U.S investors enjoy all circumstances, the right to establish, acquire and work on equal footing with local investors. There are no impediments to the formation of joint ventures or purchase of local company any foreign investor. There are no restrictions on FDI in Telecommunication, airline, ground transportation and electrical power generation. Foreign banks can open their branches in Guatemala with subject to the financial control and regulation. To incorporate in Guatemala foreign firms mush publish their intent to conduct business by the Legal Jurisdiction and the Ministry of Economy (U.S Department of State, 2008).
FDI from U.S in Guatemala
As from my previous country research 1 I got to know that U.S is the major trading partner of Guatemala, which means many of the U.s companies are trading in Guatemala.
U.S Commercial service
U.S Commercial service in Guatemala provides help to the U.S companies who are wishing to trade in Guatemala markets. They have their office in Guatemala City and their philosophy is to provide timely and relevant business solutions. They have formulated various programs to help U.S companies and find business partner in Guatemala (BuyUSA.Gov, 2001-2010).
Corporation Multi Inversions (CMI)
It is multinational agro based corporation which is based in Guatemala. It is the most well-known corporations of Latin America. This company has spread its business in three continents which includes United States. It comprises of 300 companies in 14 countries. They deal in milling, dining restaurants, livestock, renewable energy, real estate, construction, financial services etc (Anonymous, 2010).
Malher S.A. Company
The headquarters of the company is in Guatemala, and if formed in 1957. It deals with food products and beverages, canned food, seasoning etc. This is multinational company which has its offices operating in United States too. The founder of the company is Miguel Angel Maldonado (Anonymous1, 2007).
Pollo Campero is a fried chicken restaurant chain. The company was first started by in 1971 by the Guatemalan entrepreneurs. It started spreading its chain in 1994 to countries in North America, Central America, Asia and Europe. It has its restaurants over 200 locations, where 50 are in U.S. According to the data given the average sale of the restaurant is $ 1.9 million per location (Pllo Campero, 2010).
U.S FDI in Guatemala
There are many companies of USA near around 19 which do business in Guatemala. These all companies are the member of an IMEX Exchange Group. Some of the companies are discussed below:
Arrow Fastener Company
This is an American hand tool manufacturer company. It has a popular brand name in almost every continent. The company manufacture full range of fastening tools like: staplers for wires and cables, brad nail guns, rivet tool, hot melt glue guns. The company is situated in New Jersey, USA and the President of the company is Gary Duboff (IMEX Exchange1, 2009).
The company is situated in California, USA; it is a worldwide leader in toilet repair category which has a holding in the minds of retailers, consumers, plumbers. It distributes its product in 87 countries. It deals in water supply connectors, access panels, toilet repairs etc (IMEX Exchange2, 2009).
Great American Marketing
This company is situated in California, USA and the President of the company is Sherman L. Weiss. GAM manufactures all tools used for prepping, painting and protecting surfaces. It deals various types of products like paint brush and rollers, scrapers and putty knives, power mixers, wallpapers tools, caulking guns, safety products, flat pad applicator and many more. GAM is known for its outstanding quality, modern designs, value pricing and vibrant packaging (IMEX Exchange3, 2009).
This company is situated in Pennsylvania, USA. It produces high performance, innovative, home comfort and convenient products such as heaters, portable electric fans, humidifiers and tool boxes, tree stands. Using American ingenuity and domestic manufacturing facility, Lasko is quite bendable and approachable to consumer needs (IMEX Exchange4, 2009).
Spectrum Diversified Designs
The President of the company is Sheldon Goodman and is situated in Ohio, USA. It manufactures well designed products which are used in everyday life; it gives satisfaction and pride to the owner, they keep fashion and quality in mind while manufacturing. It deals in the products like bath hardware and accessories, housewares, storage and organization (IMEX Exchange5, 2009).
New York Wire Company
The office of New York Wire is located in Pennsylvania, USA; it is the oldest manufacturer of screening in the world. It deals with various products like Opal branding, Opalite branding aluminium screening, Goldstrand and stiff fibreglass screening, Solar screening, Steel and Aluminium meshes, drawn wires and coated yarn. The Export Executive of the company is Mike Campbell (IMEX Exchange6, 2009).
Major Trading Partners
Major Trading Partners of Guatemala are United Sates, El Salvador, Honduras, Mexico, China, South Korea and Panama (CIA World fact Book, 2010).
Products and Trading Partners
Guatemala mainly Export in the following products Coffee, Sugar, Petroleum, Apparel, Bananas, Fruits and Vegetables and Cardamom. The Export trading partners of Guatemala is United States and the Central American countries particularly El Salvador, Mexico and Germany. 2009 estimate of exports was $6.768 billion (CIA world fact book, 2010).
"Guatemala was 42nd largest goods export market in U.S. In 2008, U.S goods export to Guatemala was $4.7 billion, which was 16.1% more than in 2007" (USTR, 2010). The major categories of U.S export products were: Mineral Fuel, Machinery and Cereals (USTR, 2010). "U.S exports of agricultural products to Guatemala totaled $835 million, which included wheat ($158 billion), coarse grains ($155 billion), Poultry meat ($99 million), Cotton ($44 million)" (USTR, 2010).
Products and Trading Partners
Guatemala mainly Import in the following products Fuels, Machinery and Transport equipment, Construction material, Grain, Fertilizers and Electricity. The major import partners of Guatemala are United States, Mexico, El Salvador, Venezuela and Japan. $10.91 billion was the 2009 estimate of the imports. Guatemala was U.S 56th major trader of goods import. It was totalled to $3.5 billion, which was 14.4% increase from the previous year (USTR, 2010).
Central American Common Market
The Central American Common Market (CACM) was established on December 13, 1960. It is an economic trade organization and the members of this organization are Guatemala, El Salvador, Honduras and Nicaragua. In 1963, Costa Rica also joined CACM. Due to a Football War between Honduras and El Salvador this organization collapsed in 1969, but in 1991 it again reinstated (Encyclopedia1, 2003-05).
This organization unified the external tariffs and increased trade between the member countries. It removed the duties on the products which were moving among the member nations. But this organization failed to achieve its goals which were set during the foundation of the organization i.e. greater economic and political unification and this happened due to their incapability and lack of reliable means to resolve trade disputes. There is a threat to CACM organization from the Free Trade Area of the Americas proposal; it might replace CACM (Encyclopedia1, 2003-05).
The CAIRNS group was formed in 1986 with all the agricultural exporting nations. Their aim was to free up trade in agricultural products. The members of this group are Argentina, Australia, Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica, Guatemala, Indonesia, Malaysia, New Zealand, Paraguay, Philippines, South Africa, Thailand and Uruguay. Extremely proficient agricultural producers in both developing and developed countries wants to make sure that their products are not barred from European and Asian markets. After some years the developing nations of this group formed their own group called G20 (BBC1, 2003).
G20 was another trading bloc of developing nations and was established in August 20, 2003 at Cancun, Mexico in a WTO conference. There are 20 members of the organization Argentina, Brazil, Bolivia, China, Chile, Cuba, Egypt, India, Guatemala, Indonesia, Nigeria, Mexico, Philippines, Pakistan, Paraguay, Tanzania, Venezuela, Thailand, South Africa and Zimbabwe. The main goal of the organization is to develop the policies that support the high and sustainable growth of the global economy (BBC 2, 2005).
This organization was prevailing enough to challenge the EU and US trade negotiations. It made very clear on the day of formation that it will not accept the EU plans to include investment and competition in the trading business. Now it is insisting rich countries to make concession on agriculture before any final agreement (BBC2, 2005, Encyclopaedia2, 2010)
Dominican Republic - Central America Free Trade Agreement (DR- CAFTA)
CAFTA was a free trade agreement between the United States and Central American countries Honduras, El Salvador, Guatemala, Nicaragua and Costa Rica. The Dominican Republic joined the CAFTA in 2004 and the agreement was renamed as DR - CAFTA. This agreement has created new opportunities for the economy by eliminating tariffs, reducing barriers to services, promoting transparency and opening markets. The goals of DR - CAFTA were similar to NAFTA, creating completely globalized free trade agreement. It facilitates trade and investment between the parties and regional integration. It represents the future of free trade and its goal is to include almost every nation (USTR1, 2009).