Salvadoran carriers estimate that between January and May 2021, the cost of freight between El Salvador and Guatemala has increased from $500 to $548, a rise that is largely explained by the increase in the price of diesel.
Representatives of the Asociacion Salvadorena de Transportistas Internacionales de Carga (ASTIC) state that in recent months the price of a gallon of diesel has increased by $0.63 in the central zone.
Following the reactivation of China's economy in mid-2020, the Asian giant has monopolized a good part of the raw materials demanded by industry, a situation that is pushing up costs and generating uncertainty among Central American businessmen.
Due to the pandemic generated by the covid-19 outbreak, production in China was considerably interrupted during the first semester of 2020.
In order to reduce travel costs, the Guatemalan Airline Association asked Ministry of Health authorities to no longer require passengers to take a negative covid-19 test to enter the country.
According to the Ministry of Health document called "National Guidelines for the Prevention of COVID-19 for International Travel to and from Guatemala" prepared on September 15, 2020, all travelers arriving in the country must present a negative test for covid-19.
Discounts and offers, increase in the price level generally and the rise in operating costs due to new health and safety protocols are the main threats to the profitability of companies in this new commercial reality.
Given this context of economic and health crisis, which derives from the outbreak of covid-19 at the global level, Ariel Baños, a specialist in price management and founder of Fijaciondeprecios.com, explains what are the main threats that could affect the profitability levels of companies, and details some strategies that could be applied to mitigate the adverse effects.
To effectively apply data analysis tools on a large scale, the proper structuring of the information is essential, otherwise the cost that the company will have to incur to reverse the errors will be very high.
Data governance, which encompasses the set of processes, functions, policies, standards and measurements that ensure the effective and efficient use of information, becomes relevant to enterprises, which increasingly benefit from the use of machine learning tools and statistical analysis.
Because of factors such as business closures and lack of opportunities, it is estimated that criminal activity costs Honduras and El Salvador 16% of GDP, and in the case of Guatemala, its losses could amount to 7% of its production.
In Central America, the human costs of crime remain one of the highest in the world. El Salvador, Guatemala, and Honduras—referred to as the Northern Triangle— account for about four-and-a-half percent of homicides worldwide despite only having about one-half-percent of the world's population.
The Panama Chamber of Commerce requested the Panama Canal Authority to postpone the start of collection of the fee for the use of fresh water in the Canal, which would begin to be paid on February 15, 2020.
On January 13, the Panama Canal Authority announced that this year "... the value of water will be incorporated into the line of other maritime services through a charge for fresh water, which will depend on the availability of the resource at the time of the vessel's transit. The freshwater charge is applicable to all vessels over 125 feet in length that transit the Canal:
Convincing the sales team that the increase in the price of the product is necessary, and that they are able to convey the message to customers correctly, is essential when it comes to increasing prices when production costs rise.
Ariel Banos, specialist in price management and founder of Fijaciondeprecios.com, explains five strategies to increase product prices successfully, maintaining profitability and ensuring the viability of the company in the face of rising costs.
From 2020 onwards, the fuel used by ships worldwide should not exceed 0.5% sulphur concentration, forcing transporters to consume higher priced fuels, which could become even more expensive because of increased demand.
From January 1, 2020, the concentration of sulphur in the fuel consumed by maritime transport vessels must not exceed 0.5%, a limit that until now was at 3.5%.
Since mid-July, the main companies transporting maritime cargo from the Port of Santa Tomas in Guatemala stopped operating the direct route to Europe, which will raise between 20% and 25% the costs of imports and exports.
After six decades of keeping the direct route to European ports in operation, the main shipping companies departing from Puerto Santo Tomás de Castilla in Izabal such as Maersk, Hamburg Sud, MSC, CMA-CGM, Hapas Lloyd and Sea Trade, decided not to re-operate the route concerned, leaving only one company with a multipurpose transport ship as an option to move cargo to Europe.
Changes in legislation restricting the use of disposable plastic containers and packaging force companies to look for other options, some of which could be up to five times more expensive.
In a competitive scenario for lower costs and higher productivity, devaluation against the Lempira Dollar in Honduras and the Cordoba Dollar in Nicaragua is a factor that could help these economies stay competitive.
In the last five years, the exchange rate in Honduras increased by 17%, from 21.06 Lempiras per U.S. dollar in June 2014 to 24.67 in the same month in 2019.
The costs incurred by businessmen in Nicaragua, because of excessive procedures and low efficiency of foreign trade systems is 25% additional to the value of the goods, while in El Salvador and Costa Rica, amounts to 18% and 16%, respectively.
A study by the Economic Commission for Latin America and the Caribbean (ECLAC) specifies that the costs paid by businessmen in Nicaragua, because of excessive procedures and low efficiency of foreign trade systems is 25.3% additional to the value of the goods, followed by El Salvador with 18.3%, Costa Rica with 16.3%, Honduras with 15.8%, Guatemala with 14% and Panama with 9%.
Transporting one metric ton of goods in Central America is estimated to cost $0.17 per kilometer, while in developed countries the cost is around $0.10 per kilometer.
Transporting cargo more efficiently remains the greatest challenge that the countries of the region face to improve their competitiveness. According to data estimated by the United Nations and validated by the Economic Commission for Latin America and the Caribbean, currently the costs that companies incur to transport cargo in Central America are up to 40% higher than the costs assumed in some developed markets.
Charges, taxes, high fuel prices and other costs at airport terminals can represent close to 30% of the value of air tickets in countries in the region.
Airlines that operate in the Latin American region face an uncompetitive market, since in 2018 these companies are projected to earn $2.95 per passenger, a figure much lower than the $15.67 estimated in North America or $7.58 in Europe, according to representatives of the International Air Transport Association (IATA).
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