The sector consists of both large commercial and subsistence farming. Commercial production and related industries are located primarily on the low-lying southern coastal plain and around Guatemala City.
Agricultural policy. Government policy is focused on supporting development projects to help small farmers. In 1993, the Ministry of Agriculture announced a comprehensive agricultural policy program called the Agenda for the Reactivation and Modernization of Agriculture. The plan included projects and programs to increase the transfer of technologies to producers, provide economic stimulation through affordable credit and protect the environment.
At the same time, the government has continued efforts to reduce government involvement in markets. Production or export subsidies are not provided, and the government has significantly reduced its role in setting prices for most basic food products; one notable exception is bread.
Flour milling. In general, Guatemalan use of wheat for human consumption has increased as bread and pastry have become popular, fueled by economic growth and relatively lower prices. Government officials work closely with the flour milling industry to establish flour prices and keep bread prices as low as possible.
In May, millers, bakers and officials, faced with sharply higher world wheat prices and fears of rising inflation, met to determine the seriousness of the wheat price situation. At the meeting, the group agreed to a 12% increase in bread prices, and the wholesale price of wheat flour to bakers also was raised by about 11% to U.S.$563 a tonne for hard red winter wheat flour and U.S.$553 for soft wheat flour.
The meeting also resulted in some significant policy changes affecting the milling industry. The changes had been eagerly awaited for many years and marked an important step toward deregulation of the wheat, flour and baking industries.
A key change was the removal of the long-standing requirement that millers purchase all of the domestic wheat crop to obtain import permits under tariff rate quotas. The requirement, known as Decree 1490, was established in the early 1960s to encourage domestic wheat production by providing a guaranteed market among millers at a preset price.
In 1995, the government set a wheat tariff rate quota of 280,000 tonnes (equivalent to use less domestic production) requiring a duty of 1%. In addition, payments of U.S.$4.03 per-tonne to the Guatemalan Wheat Growers Association were required. At the same time, wheat flour quotas were set at 11,000 tonnes, with the duty cut to 10% from 15% to help hold down prices.
By 1996, with global wheat and flour prices skyrocketing, the government and millers reached a new agreement that marginally raised the wheat import duty to 1.2% but eliminated payments to wheat growers — and importantly, did away with domestic-crop purchase requirements. The agreement also cut the import duty on wheat flour to 8.28%.
Flour imports are not expected to increase because the baking industry is not positioned to import efficiently. Among Guatemala's thousands of bakeries, only two or three of the largest may be able to import flour profitably.
Although Decree 1490 remained on the books earlier this year, the Minister of Economy planned to ask the Guatemalan Congress to eliminate it to avoid any confusion over the two conflicting sets of government regulations.
Feed and livestock. The Guatemalan government provides virtually no support to the livestock sector and no longer controls prices of any livestock products. Government involvement generally is confined to setting tariff rate quotas for imported maize.
The poultry sector is the predominant user of coarse grains for feed. The sector continues to grow, although at a slower rate than in previous years. In 1996, poultry production is estimated at 107,000 tonnes, compared with 101,000 a year earlier.
According to the Guatemalan National Poultry Producers Association (ANAVI), industry expansion over the next three to five years is expected to be slower because of continued illegal imports of poultry parts. Although illegal poultry imports do exist, a reduction in the rate of increase in consumer demand and uncertain government trade policy also have added uncertainty and have constricted industry expansion.
Guatemala's poultry industry consists of three distinct groups: Campero, PAF and small producers. The Campero group is a large, vertically integrated corporation that owns and operates poultry farms, feed mills, processing plants and Pollo Campero, the largest restaurant chain in Central America.
The Campero group produces approximately 50% of Guatemala's total poultry, while the PAF group, which also is vertically integrated, accounts for about 30% of total production. Small producers, who have developed new markets in outlying towns around Guatemala City and rural areas, have captured most of the increased expansion in the broiler sector over the past two years.
Campero and PAF use the latest technologies and vertical integration to increase production yields and improve feed quality, and their average variable costs are low. Smaller producers that cannot afford better technologies receive direct and indirect benefits from ANAVI, which organizes seminars, provides technical assistance and represents the industry in government lobbying efforts.
Most of the poultry industry's feed is manufactured domestically from imported yellow maize and soybean meal. While domestically produced white maize is used in feed, imported yellow maize is preferred. The level of yellow maize and soybean meal imported is directly related to domestic coarse grain supplies and relative world prices. Guatemala has imported feed wheat when prices are low relative to yellow maize, but feed wheat has not been imported since mid-1994.
In February 1996, the government announced a 1996 tariff rate quota of 306,200 tonnes for yellow maize imports; a tariff rate of 5% was set for imports within the quota and 55% for imports above the quota level.
This system is being administered by commission representing the Ministry of Economy, Ministry of Agriculture, Ministry of Finance and maize producers.
The commission will coordinate its efforts with the commission responsible for issues related to the World Trade Organization. Under the new policy, the tariff rate quota could periodically change depending on conditions in the local maize market.