Agro-Foods in Guatemala: Demand Exceeds Supply

Urban growth has increased demand for agricultural products, and the limited local supply is insufficient to meet the needs of the market.

Friday, January 29, 2016

Guatemala has experienced higher than world average urbanization and the sector can no longer meet its cities growing demand for agricultural products. According to Central American Business Intelligence (CABI), the growth in the urban population means higher incomes, and therefore more demand for agricultural products. "But if the supply is static, this inevitably leads to higher prices," he explained.

Added to this is the fact that urban consumption is more diverse than rural consumption, as there is demand is for a greater variety of products. Therefore, it is a fortuitous time for farmers, since supply is not catching up with demand.

In order to overcome this dilemma which has caused price increases of at least 25 agricultural products due to lack of supply - Cabi proposes raising efforts in modernization and production volume in order to bring down prices and level the balance between supply and demand.

Read full report by CABI.

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While declining international prices and smuggling are threatening factors for agricultural production in Guatemala, planned investments in infrastructure would help reduce the costs of the sector.

Estimates by the Bank of Guatemala (Banguat) detail that the agricultural Gross Domestic Product increased 2.6% in 2018, and by 2019 a 2.8% increase is expected.

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The growth of family remittances, the recovery of credit to the private sector and the upturn in investment in capital goods would determine a better economic performance this year.

In a forum organized by the Chamber of Industry of Guatemala, representatives of the Bank of Guatemala (Banguat) and Central American Business Intelligence (CABI), agreed that this year the country's economy could register a better performance than in 2018.

Guatemala Has Been Losing Out On Investments

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The value of the investments that the country has lost in the last five years, has been estimated at $1 billion, due to factors such as high production costs and poor infrastructure, which is having a deteriorating effect on competitiveness.

A study prepared by the CABI at the request of the union of exporting companies concludes that both Guatemalan and foreign companies have opted for neighboring markets such as Nicaragua, Honduras and Mexico in which to make their investments, instead of Guatemala. Production costs, the minimum wage, higher than in other countries of the region, and the deteriorated road infrastructure are some of the factors that have impacted the loss of the country's competitiveness with respect to similar markets in the region.

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Analysts at Central America Business Intelligence (CABI) noted that there are steps which the government could implement in order to improve the picture.

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