This record is a partial extract of the original cable. The full text of the original cable is not available.

081533Z Feb 06

UNCLAS SECTION 01 OF 02 GUATEMALA 000253 
 
SIPDIS 
 
DEPT PASS USTR 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ECON EIND EWWT TBIO SOCI GT
SUBJECT:  Economic update - Guatemala:  January 25- February 
8, 2006 
 
 
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Summary 
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¶1. US Company to lose Venezuelan Oil Source 
¶2. Business Climate Indicator Puts Guatemala on Top 
¶3. Financial Crimes Conference to Prevent Money Laundering 
¶4. Airport Renovations Stalled by Political Fighting 
¶5. Investigating Investment Opportunities in Renewable Energy 
¶6. Agriculture Market Surges 
 
 
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¶1.  US Company to lose Venezuelan Oil Source 
-------------------------------------------- 
 
(SUB) The Minister of Energy and Mines, Luis Ortiz, requested 
a meeting with EmbOff the cut-off by Venezuela of Orimulsion 
to Duke Energy.  Venezuela is the sole producer of this fuel, 
and Duke's generators are calibrated to use it.  The Minister 
had traveled to Venezuela to request that supplies continue. 
He told his Venezuelan counterpart that this request was not 
to help Duke Energy, but to benefit Guatemala.  (Note: Duke 
Energy is the largest private supplier of electricity in 
Guatemala.)  He stressed that the loss of this fuel source 
would cause hardship not only for the company, but also the 
people of Guatemala, and place more political pressure on the 
government to lower energy prices.  Minister Ortiz said that 
his request was denied.  He emphasized that he does not want 
to see Duke Energy fail, and will do what he can to waive any 
fines Duke Energy might incur from their failure to comply 
with GOG contractual agreements.  However, he also said that 
he hopes that Duke realizes that they were in a precarious 
situation depending on only one fuel source, and unfortunately 
lost in the wager between cheap fuel and higher profits. 
 
 
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¶2.  Business Climate Indicator Puts Guatemala on Top 
--------------------------------------------- ------- 
 
(SBU) In a January 30 report by the Latin American Couriers 
Association (CLADEC) on regional customs clearing times for 
express shipments Guatemala came out on top.  Clearing times 
at Guatemala City's international airport average about 90 
minutes, far less than the 600-minute regional average and 
below levels required for CAFTA compliance.  CLADEC President 
Karla Mata (FedEx) has been working with the Guatemalan 
Competitiveness Commission on improvements in Customs service 
and turnaround times.  Privately, Mata, who also represents 
ocean shipping, praises the Tax Director, Carolina Roca, and 
the current government's work on customs in Guatemala City. 
However, she laments that corruption and incompetence continue 
to plague seaport and land border customs operations, where 
clearance times can still take several days. 
 
 
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¶3.  Financial Crimes Conference to Prevent Money Laundering 
--------------------------------------------- -------------- 
 
On January 23, Office of Foreign Assets Control Attach John 
Baxter and IRS-CI Attach Angel Arroyo participated in a 
financial crimes conference hosted by the Guatemalan Banker's 
Association and the Superintendent of Banks.  The conference 
was roughly timed to coincide with the announcement of new 
terrorism finance regulations, including improved Know Your 
Customer policies for international transfers (including 
remittances).  Attendance was strong with over 250 people, 
including financial sector compliance agents and approximately 
40 representatives from the Public Ministry.  Baxter and 
Arroyo were able to answer many questions and network with the 
attendees.  They also held meetings with the Financial 
Intelligence Unit (IVE) and the new NAS and DEA supported 
d 
Financial Analyses Unit (UAF) in the Public Ministry. 
 
 
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¶4.  Airport Renovations Stalled by Political Fighting 
--------------------------------------------- -------- 
 
(SBU) The GOG recently announced initiation of a $40 million 
renovation of Guatemala's international airport.  The plan is 
the first part of a $65 million civil aviation overhaul that 
includes the creation of new international airports and 
upgrades to existing facilities.  Work was set to commence the 
second week of January, but Guatemala City's mayor and former 
President, Alvaro Arzu, began a court battle over construction 
licenses and other renovation technicalities.  His publicly 
stated opposition comes from his desire to use disputed land 
for a city park, and his contention that civil aviation 
authorities have ignored city-licensing processes.  However, 
he has long been at odds with Infrastructure Minister Castillo 
and President Berger over the lack of central government 
resources spent on city infrastructure.  Arzu complains that 
Berger ignores the capital city, in contrast to the mid-90s, 
when he was President and Berger was Mayor and far more 
resources were spent on capital city improvements.  Airport 
renovations will likely move ahead over the Mayor's 
objections; however he has already succeeded in embarrassing 
the administration and stealing any glory from the 
commencement of one of its most ambitious infrastructure 
projects. 
 
 
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¶5.  Investigating Investment Opportunities in Renewable Energy 
--------------------------------------------- ----------------- 
 
(SBU) The week of January 31, the US Hydropower Council for 
International Development led a team of private investors to 
Guatemala to seek opportunities.  The executives, who 
represented various US companies, saw tremendous potential in 
the Guatemalan market.  However, an ongoing case involving one 
US hydropower project (Rio Hondo) that got entangled in legal 
and constitutional issues, and municipal politics concerned 
the investors.  It is hoped that the Constitutional Court will 
soon decide on this issue, which has dragged on for several 
months, clearing the way for more investment in renewable 
energy.  Some experts predict that if there are no new 
investments in the energy sector soon, Guatemala will face a 
major energy crisis in the next 12 to 18 months. 
 
 
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¶6.  Agriculture Market Surges 
----------------------------- 
 
(U) Guatemala suffered a major hit to its agriculture market 
by tropical storm Stan in late 2005.  However, market data for 
agricultural exports improved over the last three years. 
Revenue from agricultural sales increased by US$ 18.9 million 
to a total of US$ 68.3 million last year.  Already for the 
first two weeks of this year revenue is reported at US$ 7.6 
million, which puts the industry on track to surpass the all 
time high of last year. 
 
 
DERHAM