Discussion Brief for the Export Strategy-Maker

Is AGEXPRONT’s Trade Support Network Working?

Prepared for ITC by Giovanni Passarelli, Head of the Trade Promotion Department of AGEXPRONT, Guatemala City, Guatemala.

Until the early 1980s, Guatemala had been an exporter of basically seven commodities: coffee, sugar, bananas, beef, cardamom, cotton and petroleum. The constant volatility of international market prices for those products had a direct impact on the country’s economy, since they accounted more than the 90% of the country’s total exports. 

The export process was complicated. An average transaction required authorizations from 14 different institutions, each of them located in different areas of the Capital City. Obtaining an export authorization could even take weeks. This bureaucracy was a major hindering factor for Guatemalan companies willing to expand their sales out of the Central American Common Market (CACM), which back then was the only market for any product other than the traditional group. 

However, the process that started the development of new exports can be traced to some years before. In the early 1970s, the Government had started looking for ways to maintain the important economic growth rates achieved during the late 1960s, identifying the development of new export sectors out of the CACM as an obvious strategic move. This determined the creation of the Guatemalan Export Promotion Agency–GUATEXPRO. This agency started to identify products and services that had any potential in foreign markets, as well as trying to stimulate the surge of new exporters. Therefore, technical assistance and training programmes were established for new and existing companies, resulting in the first exports of non-traditional products, which included mostly shoes, fresh fruit and vegetables, shrimp, wood and wood products. 

Governmental policy towards export development, however, was not as stable as would have been desirable. In 1983, after a time of cutting the organization's budget and plans, the Government decided to suppress GUATEXPRO, thus eliminating the only existing State efforts to develop exports. Ever since, there has been a lack of a continuous, long-term export development strategy at a governmental level. 

The process that led to the disappearance of GUATEXPRO was one of the main factors that spurred the private sector into developing its own organization, culminating in the constitution of AGEXPRONT in 1982. AGEXPRONT is a private, non-profit association aiming to develop and diversify Guatemalan exports and markets in order to strengthen national economic development. Membership is not compulsory. In October 2000 it had around 800 members, representing around 30% from a total of approximately 2,500 non-traditional products exporters in Guatemala. 

Since there is no governmental organization dedicated to fostering exports, AGEXPRONT has taken the leading role in Guatemala in that area. AGEXPRONT works closely with the Government. Nevertheless, the latter does not offer any direct financial support. The organization also maintains close partnerships with other local private institutions, international cooperation agencies and international organizations such as the World Bank, the Inter-American Development Bank and UNIDO. 

Because of the diverse activities required to continue the development of Guatemalan exports, AGEXPRONT has evolved gradually, leading to the establishment of four divisions: 

The efforts of this division are centred on activities that encourage the growth of an ambience of competitiveness in national production and services, thereby stimulating the investment and development necessary to introduce Guatemalan products and services successfully into world markets. 

Among the main activities carried out by this division, are: 

• direct participation in national forums to establish guidelines and strategies to develop foreign trade 
• involvement in programmes that foster competitiveness at national and company levels 
• negotiations with the Government to create a stable macro-economic environment that provides confidence to export companies 
• support to improve production chains 
• direct participation in Guatemala's foreign trade 
• design, elaboration, and execution of strategies and guidelines to defend national producers against protectionism 
• formulation of strategies and guidelines related to labour and environmental concerns 
• maintaining close relations with public and private entities that are directly or indirectly concerned with national and foreign trade. 

The main objective of this area is to attend the needs of export firms. Services are provided through the following departments: 

• Training and Consultancy organizes seminars, conferences and workshops at distinct organizational levels. This department runs long-term training programmes and arranges scholarships abroad. It has developed the School of Foreign Trade, which offers specialized programmes throughout the year. 
• Trade Promotion organizes participation in foreign trade fairs and organizes international trade fairs in Guatemala. Importers that visit Guatemala are also served by the organization of matchmaking meeting agendas with local exporters. This department also produces promotional materials. 
• Information and Research provides all information necessary to initiate projects, or to expand current operations. The Information and Research Centre supplies all the information tools required to take decisions, and it counts on a specialized foreign trade library. On request, studies and marketing profiles can be elaborated. 
• Institutional Marketing strengthens the growth of the Association through incorporation of new members, providing them with advance information on export processes. It also co-ordinates activities specifically designed to maintain close communication between the Association and its members, such as: General Meetings, Best Exporter Award, Data-Export magazine, and others. 

The aim of this division is to promote increasing participation of AGEXPRONT in the country's integral development activities, involving small and medium producers in export processes. AGEXPRONT proposes and executes development projects with the support of the Government and foreign cooperation agencies, with the ultimate purpose of developing new exporters and new export opportunities in all the areas of the country. 

This division administers public services delegated to AGEXPRONT by the Guatemalan Government, as well as other autonomous services. Its Offices are the following: 

• Electronic Export Licensing Service: This service electronically provides authorization for export licences, which allows exporters to work on procedures from their own premises and obtain immediate authorization. 
• Integral Programme to Protect Agriculture and the Environment – PIPA/A: This ensures that all agricultural products meet the phytosanitary regulations required by importing countries, and at the same time it monitors the rational use of natural resources in order to protect the environment. 
• Applied Agricultural Research Fund – ARF: This helps farmers and exporters carry out immediately applicable research to improve the quality of non-traditional agricultural export products. It provides partial, non-refundable financing to carry out research and field tests, identification of new products with an export potential, and transfer of technology within Guatemala. 
• International Freight Advisory Council – CUTRIGUA: safeguards the interests of five productive sectors in Guatemala (industry, trade, sugar, coffee, and exporters) in foreign transport firm. It keeps the export sector informed on the main freight services, best rates for distinct market destinations, and the way to negotiate optimum transport conditions. 
• Commercial Attaché, Investment, and Tourism Programmes – PACIT: This is an efficient tool to help the productive sector abroad penetrate international markets. Its aim is to have permanent representation that encourages trade, investment, and tourism in outlets strategic for Guatemala. At present the programme has offices in Washington, Los Angeles, New York, Miami, and Hamburg. 

First of all, as a reminder, the trade promotion services offered by the association to exporters can be classified into five areas: participation in international trade fairs, organization of international trade fairs in Guatemala, organization of trade missions to selected markets, production of promotional materials, and reception of importers visiting the country. 

In contrast to governmental trade promotion organizations, AGEXPRONT’s budget does not allow it to finance, partially or totally, the participation of companies in international trade fairs and missions on a regular basis. This has become a limitation for smaller businesses that cannot afford the costs, leaving them out of the process. Even though there is occasionally some funding available to help them, that occurs rarely. This is probably the most serious barrier to development of new exporters, one of the main objectives of AGEXPRONT. 

As a non-profit private organization in an emerging economy, the most important restriction on its activities is financial. This affects not only the quality of services but also hinders the expansion of trade promotion activities. The exporters themselves have had to cover most of the costs, excluding those companies that cannot afford to invest in trade promotion, which sometimes requires large sums at one time. Thus they miss opportunities to make new contacts and to obtain new clients abroad. SMEs are particularly affected. 

AGEXPRONT is constantly searching for alternative financing for small and medium companies, but a permanent solution will not be possible so long as AGEXPRONT does not have a stable and permanent income. 

That drawback could possibly be overcome soon. AGEXPRONT has been designated by the government as the sole operator of the Export Authorization System, which might generate the resources. An alternative solution would be to continue previous years’ efforts to obtain funding or a grant from the Government, something that has not been achieved yet. 

Another limitation is that there is no generalized awareness of the importance of participating in trade promotion events. Many companies are still not eager to get involved in such activities, seeing them as a cost rather than an investment. Currently, AGEXPRONT is distributing some publications that present the advantages of international trade promotion activities and tips for obtaining the best possible results from them. 

It is also a disadvantage that the private sector has no direct influence on governmental policy regarding exports. Business has to negotiate with the Government every time it needs a change in national policy or needs any kind of support. These sometimes time-consuming processes can take months to obtain any result. 

On the other hand, working in the private sector gives AGEXPRONT flexibility to continually adapt to the needs of exporters. This often means changes of plans and budget that in the government sector would be far more difficult. 

Another advantage is the constant interaction with business people, since they ultimately are the ones that define the plans and strategies of the organization, allowing the secretariat to be in contact with their current and future needs and to respond in a faster way. 

Lastly, working with trade promotion from a private sector spectrum enables the organization to avoid making the political compromises common in government that might result in ineffective trade missions or divert action off course. 

To support a long-term trade development strategy, AGEXPRONT has promoted the constitution of a network of private and public institutions. Together, these have assembled two councils, called CONAPEX (National Council for the Promotion of Exports) and CONACOEX (National External Trade Council), founded in 1986 and presided by the Ministry of Economy, with a permanent secretariat in AGEXPRONT. Among the results obtained by these councils, the most important one has been the constitution of the PACIT (Commercial Attaché, Investment and Tourism Programme). 

PACIT was created as a joint programme, combining the efforts of the Ministry of Foreign Affairs, Ministry of Economy and the Bank of Guatemala on the public side, and the Chamber of Industry and AGEXPRONT on the private side. Currently, the programme has five working offices in the United States and Germany. It is in the process of opening five new ones, in Mexico, Canada, Chile, Dominican Republic and the United Kingdom. PACIT has constituted a very valuable tool for exporters, since it has assisted many Guatemalan companies to contact potential clients in their areas of influence, as well as the other way round. 

Locally, AGEXPRONT has also established a cooperation network specifically for trade promotion. The Chamber of Industry of Guatemala and AGEXPRONT are already combining their efforts to organize joint participation in a number of trade fairs and joint trade missions abroad. The institution works very closely with the Guatemalan-American Chamber of Commerce – AMCHAM, the Guatemalan-Mexican Chamber of Commerce and the Guatemalan-German Chamber of Commerce, among others, to prepare for the participation of exporters in international trade fairs or as counterparts in trade missions. 

The Ministry of Agriculture of Guatemala has co-operated with AGEXPRONT to fund projects related to the development of the agricultural sector, projects that have include some budgetary resources for trade promotion. These have been basically used to strengthen participation by small and medium agricultural organized groups in trade fairs abroad, quite successfully so far. 

With regard to foreign international cooperation, AGEXPRONT is currently working on several projects with the German Technical Cooperation–GTZ, USAID and the Inter-American Development Bank. Those projects have some Trade Promotion components. 

Finally, AGEXPRONT is creating a link with the tourism institutions, since tourism is one of the fastest growing activities in the country nowadays. The Chamber of Tourism–CAMTUR and the Guatemala Tourist Commission have supported participation in several trade fairs abroad and a new agreement between CAMTUR and AGEXPRONT is being drafted. Other institutions being involved in the trade promotion network are the universities that offer business-related careers. 

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