LatinFinance - March/April 2014 - 71

Dominican Republic and Haiti at the ifc,
says that even though the Dominican
Republic has fallen a few notches in both
the World Bank's Doing Business 2014 report
(down from 112th to 117th) and the World
economic forum's Global competitiveness
index (dropping from 103 to 105), there are
some positive developments.
"the Dominican Republic is relatively
stable politically, and it's eager to engage in
a number of endeavors that will improve
competitiveness in the coming five years,
such as reforming its environment for
doing business, investing in education, and
lowering the cost of the energy sector. With
these three actions, the next two years look
hopeful for the Dominican Republic, if its
execution is done properly."
it's not exactly been smooth sailing in
the Dominican Republic, however. for
example, in 2011, the country's largest
resort, cap cana, defaulted on some $215
million in debt. "the banking sector is one
of the strongest in the region, but access
to credit is very low for the private sector,

ari naim, ifc

"the local
capital market
is completely
untapped. there's a
lot of liquidity in
the pension funds
that's not invested
locally for lack of
an efficient capital
market"

particularly for small firms," says naim. He
says that the ratio of private-sector credit
to GDP is 25%, while the latin american
average is 45%.
local capital, he says, must be mobilized.
"all the large companies here borrow from
their banks, while in other countries they
borrow from the local [bond] market," says
naim. He points out that in the Dominican
Republic bond issues by the private sector
amount to only 2% of GDP, while the comparable figure is 25% in thailand, and 50%
in malaysia.
"Basically, the local capital market is
completely untapped. there's a lot of
liquidity in the pension funds that's not
invested locally for that lack of an efficient
capital market," he says. the best way to
develop that market, he recommends, is "to
provide incentives for large local companies
to issue bonds, provide investment
opportunities for the pension funds, and
create competition in the banking sector.
that would force banks to provide more
financing to smaller firms." LF

Guatemala

Sugar high
Guatemala, central america's largest country in size and population, is also its breadbasket - or rather, its fruit, coffee, sugar, and
spice basket, given its exports of soft commodities.
its GDP expanded 3.5% in 2013, up from 3.0% in 2012, according to the central bank. this year, the nation expects to see GDP
growth of 3.3% to 3.9%, with exports, including soft commodities
- now benefiting from its 2013 trade agreement with the eU - playing an important role, alongside domestic demand.
"everybody is optimistic about foreign investment," said luis
Velásquez, president of Guatemala city-based consultoría internacional and the country's former minister of economy. "the business environment in Guatemala is improving, and the government
has called 2014 the year of investment and employment."
Velásquez says optimism is shared by the banking sector, which
has grown to nearly $9 billion in assets - despite the country's
violent crime wave and the fact that most of Guatemala's 15 million
inhabitants are poor, and the fact that Guatemala's distribution of
wealth ranks among the most unequal in latin america.
Velásquez's outlook is based on a number of factors. "first, we
now have a commercial accord in place between central america
and the eU," he says. "Second, we see that the US and european
economies are recovering, so that means our exports to those
markets will grow."
"this eU trade accord is one of the best pieces of news Guatemala can receive," says eduardo castillo, president of the Guatemalan association of exporters (agexport). He predicts that

Guatemala's annual exports to europe will double over the next
five years as a result.
the agreement, which took effect on December 1, 2013, allows
products such as oranges, shrimps, honey, fruits, ornamental
plants, handicrafts, wood products, textiles, footwear and glass to
enter duty-free into the eU's 28 member nations.
While the country will also be hoping for manufacturing
growth, one of Guatemala's most profitable commodities is sugar
and it is now the top sugar exporter in central america, and the
third most productive producer in the world in terms of yields per
hectare. in the 2011-2012 harvest, Guatemala exported 1.65 million
tonnes - more than the sugar exports of el Salvador, nicaragua,
Honduras, costa Rica and Panama combined.
that year Guatemala's sugar exports to north america, South Korea, chile, china, taiwan and Bangladesh generated $843.7 million
in foreign exchange for the country and employed 350,000 people,
73,000 of them directly. that ranked just behind coffee ($955.9
million), but well ahead of Guatemala's two other key agricultural
exports: bananas ($469.9 million) and cardamom ($250.3 million).
armando Boesche, general manager of the local sugar trade
association, aSaZGUa, says that in the 28 years he's headed the organization, Guatemala's area under cultivation has tripled, while
yield has jumped from 66.3 tons per hectare in 1984 to 1985 to 95.4
tons per hectare today.
"Guatemala is a small country, not like Brazil or colombia, so
productivity for us is very important," Boesche says. LF

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