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6/01 chlRCJDatoDuopfis-p. 1 5

 

A SUB SECTOR OVERVIEW OF THE GUATEMALAN BEAN INDUSTRY:
CONSTRAINTS AND OPPORTUNITIES FOR VERTICAL COORDINATION AND
SUSTAINABLE GROWTH

By

Juan Manuel Estrada-Valle

A THESIS
Submitted to
Michigan State University
In partial fulfillment of the requirements
For the degree of
MASTER OF SCIENCE
Department of Agricultural Economics

2001

Dr. Richard Bernsten

ABSTRACT
A SUB SECTOR OVERVIEW OF THE GUATEMALAN BEAN INDUSTRY:
CONSTRAINTS AND OPPORTUNITIES FOR VERTICAL COORDINATION
AND SUSTAINABLE GROWTH
By

Juan Manuel Estrada-Valle

Conventional wisdom highlights the inherent benefits to farmers, derived from the
growth of the food industry, by providing. a new outlet for their crop. However,
Guatemala’s success in expanding bean processing, it has not benefited bean producers.
Production, and per capita consumption of beans have declined by 30% in the last fifteen
years, while the bean canning industry import most of its bean supply. Several possible
reasons have been offered to explain this phenomenon. First, absence of coordination,
opportunism, and high transaction costs. Second, generalized distrust against
intermediaries. Third, inexistence of long-term relationships between producers and
intermediaries. Finally, high quality standards set by the bean canning industry. By
applying the subsector approach, as presented by Staatz in 1997, as a framework for
analysis, this study found that poor adoption of improved varieties, reduced the access to
credit, weak institutional framework and non-competitive markets have constrained the
profitability of bean production. Thus, the apparent decrease in bean production is the
result of a reduction in commercial bean farming, which has been offset by production at
household level, not detectable through the govemment’s conventional data collection
techniques. In addition, this study concludes that given the price advantages of the
international bean markets, coordination among producers and the canning industry is not

a yet a viable alternative.

DEDICATION

To the three most influential persons in my life:
My parents, Rodolfo and Ligia Estrada, and
My grandfather, Gregorio Estrada
Thanks for introducing me to the love of God, to honesty and integrity,
and the satisfaction that only results from hard work.
Thanks for making me sensitive to the pain of others and intolerant to injustice, for
fostering in me a solid social consciousness and a strong desire to comply with the moral

obligation to promote change.

Most important of all, thanks for your unconditional love.

iii

ACKNOWLEDGMENTS

The endeavor of returning to graduate school would never have been possible
without the unconditional support of my wife Milvia, and our children who agreed from
the beginning to sacrifice privileges back home to achieve our life project. I thank my
wife for her love, endurance and patience. For encouraging me even when she was
feeling down, for the good times, and for making the difficult times easier to cope with.

Special thanks to my major professor and thesis advisor, Dr. Richard Bernsten,
for believing in me and supporting my research. His words of encouragement and the
time and effort devoted to revise my uncountable drafts do not go unappreciated. The
support of my committee members, Drs. Kellie Curie-Raper and Dave Weatherspoon is
greatly appreciated, not only for advising me academically, but also for taking the time to
listen to my personal concerns and supporting me through difficult times.

Thanks to faculty and fellow students in the Department of Agricultural
Economics, for their support, their strong sense of fiiendship, solidarity and their high
level of scholarship. It was an outstanding experience to be part of a selected group of
professionals sharing the same objective in life: preparing ourselves to work for a better
and fairer world. Thanks to everyone, especially to Dr. Eric Crawford and Mrs. Sherry
Rich for making me feel at home, to Dr. Thomas Reardon for believing in me, and
making my struggle his, and being my friend.

To my colleagues and friends Monika Tothéva and Meeta Punjabi for their
unconditional fi'iendship and moral support, and for helping me “keep breathing”

throughout graduate school, as our fiiend Brady Deaton would say.

iv

The Comum'dad Latinoamericana made the difference between thinking of our
time in Michigan as a difficult-to-adjust experience and a WOl‘ldCl’fill time. Their support
and sense of brotherhood from the first day we were on campus was a spontaneous
deployment of sincere friendship. Thanks to all, especially to the Andersons, the
Narvaez, the Widders, the Castafiedas and the Whites, especially to Alejandra for taking
the time to help me survive my academic woes during my first semester in grad school.

Finally, I wish to take the time to thank the Bean-Cowpea Collaborative Research
Support Program (CRSP), which under USAID’S grant DAN-G-SS-86-00008-OO fimded
my graduate studies and my thesis research. It was a great privilege to be a part of a

professional team with such level of professionalism and excellence.

TABLE OF CONTENTS

 

 

 

 

 

LISTOFTABLES ...................... viii
LIST OF HGURES .............................................................. ix
Chapter 1
INTRODUCTION
1.1 Background ............................................................... l
1.2 Problem Statement ....................................................... 3
1.3 Justification of the Study ................................................ 5
1.4 Research Objectives ...................................................... 7
1.4.1 Specific Objectives .............................................. 7
1.5 Organization of the Thesis ............................................. 8
Chapter 2
RESEARCH DESIGN AND METHODOLOGY
2.1 Analytical Approach .................................................... 11
2.2 Conceptual Framework ................................................. 12
2.2.1 Industrialization of Agriculture ............................... 12
2.2.2 Subsector Approach ............................................. 13
2.2.3 Transaction Costs ............................................... 16
2.2.4 Coordination ..................................................... 19
2.3 SubseCtor Overview ..................................................... 20
2.3.1 Research Methodology ........................................ 20
2.3.1.1 Farmers’ associations ........................................ 21
2.3.1.2 Assemblers and traders ...................................... 21
2.3.1.3 Wholesalers in Guatemala City ............................ 22
2.3.1.4 Packaging firms .............................................. 22
2.3.1.5 Processing firms .............................................. 22
2.3.1.6 Retailers ...................................... ' ................. 22
2.4 Research Instruments .............. . ..................................... 23
Chapter 3
- THE NA TTONAL CONTEXT .
3.1 Guatemala ................................................................ 27
3.2 The Economy ............................................................ 28
3.3 The Social Context ...................................................... 29
3.4 The Agricultural Sector ................................................. 30
3.5 Crop Production ......................................................... 32
3.5.1 Bean Harvested Area and Production ........................ 33
3.5.2 Bean Growing Seasons ........................................ 35
3.6 Beans in the Guatemalan Diet .......................................... 36
3.6.1 Consumer Preferences .......................................... 36
3.6.2 Home Preparation ............................................... 37
3.7 Demand Analysis ........................................................ 38
vi

 

Chapter 4
OVERVIEW OF THE BEAN SUBSECTOR

 

 

4.1 Structure ................................................................... 43
4.2 Level I, Support Services ................................................ 45
4.2.1 Agricultural Research and Technical Assistance ......... 45
4.2.2 Transportation .................................................... 48
4.2.3 Market Information ........................................... 49
4.2.4 Financing ....................................................... 51
4.2.5 Agricultural Inputs ............................................. 53
4.3 Level II, Agricultural production ....................................... 54
4.3.1 Production Patterns .............................................. 54
Land holdings .................................................... 55
The bean enterprise ............................................. 55
Bean surplus ...................................................... 56
4.4 Level III, Wholesaling and Processing ................................ 57
4.4.1 Bean Wholesaling ................................................ 57
Assemblers and traders ....................................... 58
Farmer cooperatives .......................................... 60
Farmer associations ............................................. 62
4.4.2 Bean Distribution ................................................ 63
Wholesalers in Guatemala City ............................ 63
4.4.3 Bean Processing ................................................ 68
4.4.3.1 Bean Packing Firms .......................................... 68
4.4.3.2 The Bean Canning Industry ................................. 72
Chapter 5
S (MIAR YAND CONCLUSIONS
5.1 Beans in Guatemala ....................................................... 82
5.2 Policy Recommendations to Support the Phase of Agricultural
Production .................................................................. 88
5.2.1 Low Rates of Adoption of Improved Varieties .............. 88

5.2.2 Absence of Financial Support for Bean Production. . . . . . 90
5.3 Policy Recommendations to Support the Phase of Marketing and

Distribution ................................................................. 91
5.3.1 Market Failure and Adverse Selection ........................ 91
5.4 Policy Recommendations to Support the Phase of Industrial
processing .................................................................. 92
5.4.1 The bean Processing Industry ................................... 92
5.5 Limitations of the Study and Future Research ........................ 94
APPENDR A
Main Characteristics of Improved Bean Varieties Developed and
Distributed by ICTA 1997-1998 ........................................ 95
APPENDIXB
Statistical Summary of the Guatemalan Bean Subsector ............ 98
REFERENCES 105

 

vii

LIST OF TABLES

 

Table 3.1

Table 3.2

Table 3.3

Table 4.1

Table 4.2

Table 4.3

Table 4.4

Table 4.5

Table 4.6

Comparative Analyses Among the Main Staple Crops.
Guatemala, 2,000 .........................................................

Geographic Distribution of bean production. Area Harvested and
Production by Department, Guatemala (1999) .......................

Total and Per Capita Bean Availability (domestic disappearance)
Guatemala, 1990-1999 ...................................................

Improved Varieties Developed by ICTA Between 1970 and
1999, Guatemala ..........................................................

Improved Bean Sees Distributed by ICTA During the Period
1997-1999 (Lbs). Guatemala ...........................................

Transportation and Communications Infrastructure in Eastern
Guatemala (1998) .........................................................

Financing of Bean production 1985-1996, Guatemala ..............
Membership, Harvested Area, Production, Average
Landholdings, Production and Yields of the Three Bean Farmer
Cooperatives Surveyed in the Study Area. Guatemala, 2000 ......
Membership, Harvested Area, Production, Average

Landholdings, Production and Yields of the Seven Bean Farmer
Associations Surveyed in the Study Area. Guatemala, 2000 ......

viii

32

34

'39

45

47

49

52

61

'63

LIST OF FIGURES

 

Figure 2.1
Figure 3.1
Figure 3.2
Figure 3.3

Figure 3.4
Figure 3.5
Figure 3.6
Figure 3.7

Figure 4.1

Figure 4.2

Figure 4.3

Figure 4.4
Figure 4.5

Figure 4.6
Figure 4.7

Figure 4.8

Nodes in a PCDS ......................................................... 16

Political Map of the Republic of Guatemala and the Study Area . 27

Intersectoral Distribution of GDP (BAN GUAT, 1999) ............ 28
Rate of Growth of GDP. Guatemala, 1980-1999 ................... 29
Current Distributions of Land and Forestry Resources (MAGA,

1996) .............................. ‘ ......................................... 3 1
Beans, Yearly Fluctuations in Harvested Area 1980-1999 ......... 33

Harvesting Seasons (“Primera” and “Segunda”), as

Percentages of Total Production, Guatemala 2000 .................. 35
Per Capita Consumption of Beans. Guatemala, 1980-2000 ....... 40
Subsector Map and Levels of Analysis ............................... 44

Size of the Bean Enterprise, Among Members of Ten Farmers
Organizations in Jutiapa, Jalapa and Chiquimula, Guatemala. . . ...‘ 56

Distribution of Bean Output Corresponding to Members of Ten
Farmer Associations in the Departments of Jalapa, Jutiapa and

Chiquimula (Jun 2,000), Guatemala ................................... 57
Geographic Origin of Wholesaler’s Bean Supply by Department. '
Guatemala City, 2000 ................................................... 65
Main Sources of Wholesalers’ Bean Supply. Guatemala City,
2000 ........................................................................ 66
Distribution of Wholesalers’ Output. Guatemala City, 1999 ...... 67
Distribution of Wholesalers’ Output. Guatemala City, 1999 ...... 69

Geographical Distribution of Packers’ Bean Supply by
Department. Guatemala City, 1999 ................................... 70

ix

 

Figure 4.9

Figure 4.10

Figure 4.11

Distribution of Packers’ Output, Based on Distribution Channel.
Guatemala, 1999 .......................................................... 71

Domestic Market Share of the Four Bean Canning Firms in
Guatemala City, 2000 .................................................... 76

Domestic Market Share of the Four Bean Canning Firms in
Guatemala City, 1999 .................................................... 77

 

CHAPTER ONE
INTRODUCTION
1.1 Background

As in most low-income countries, Guatemala’s agricultural sector is a major
contributor to the economy, accounting for 24% of GDP, 55.9% of total exports and 58%
of the total labor force (Bank of Guatemala, 2000).

. For several decades, most initiatives to promote agriculture have focused on
staple crop production, in response to governmental incentives to guarantee food security.
However, since the early 19803, Guatemala has significantly increased-its exports of non-
traditional agricultural products (NTAP), including specialty fruits and vegetables, as
well as spices, live plants and cut flowers’. This phenomena has contributed to
increasing export earnings from S US. 1,200 million in 1980 to S US. 2,560 million in
1998 (AGEXPRONT, 1999), which has compensated for export earning losses caused by
significant decreases in the international price of traditional crops such as coffee, cotton
and bananas.

Despite the growing importance of NTAPs, beans (Phaseolus vulgaris L.)
continue to play an important role in Guatemala’s socioeconomic dynamics. First, beans
-the second most important staple after com—are grown predominantly by small farmers
who cultivate less than 7 hectares. Specifically, 43.4% of the national bean supply is
produced on farms of less than 7 hectares, 18.8% on farms from 7 to 45 hectares and
27.8% on farms greater than 45 hectares. Second, bean production generates an
estimated 33,000 full time jobs, valued in more than S US. 23 million. I Third, bean

production contributes to insuring the food security of low-income households in the

rural areas, who produce their beans to supply their consumption requirements. Finally,
beans are the main source of protein for the poor, who do not have access to substantial
amounts of animal protein, and are a traditional food for the rest of the population
(PRONACOM, 1999).

Guatemala has a long history of conducting bean production research. Since the
early 1970s, the Institute for Agricultural Science and Technology (ICTA) has developed
28 new varieties of beans, many of which not only incorporated new traits (i.e. disease
and drought resistance), but also produce higher yields than traditional varieties.
Nonetheless, only 15 of these varieties have been multiplied and distributed to farmers.
Furthermore, farmer adoption of these varieties has been low (49%, 1995). Thus
national yields average only 531 Kg/ha (1999).

Guatemala’s agricultural sector is extremely bimodal. About 82% of all arable
land is concentrated in the hands of 0.05% of the population (MAGA, 1996), which
indicated that there exists a high level of inequality among social classes. Therefore,
small farmers, who represent a large percentage of the total population, farm on marginal
land, characterized by acute slopes, thin topsoil and limited access to water resources.

Among bean producers, farm size has ofien found to be inversely correlated with
‘ levels of technology used in the production process. According to MAGA (1996), farms
smaller than 7 hectares account for 66.3% of the total bean producing area. In contrast, 7
to 45 hectare farms account for 15.6% of the area, and farms greater than 45 hectares
account for only 18.2% of the total bean producing area. For the same period, bean
yields on farms above 45 hectares were 48% above those of farms below 7 hectares

(USPADAMAGA, 1997).

 

nor

Until the early 19703, beans were treated as a commodity, with no priority given
to value added transformation. Bean processing was first undertaken in 1974, when the
canning industry incorporated beans into its line of products. Since then, the bean
canning industry has grown rapidly, due to both increasing demand by higher income
consumers who value the convenience associated with processed products and a strong
export demand for Guatemalan canned beans in the US.

Currently, four firms can beans, in addition to several other product lines. While
the production of canned beans has grown considerably during the 1990s (i.e. 12% per
year), this expansion has not benefited Guatemalan bean farmers. FAO data indicate that
dry bean imports have also followed an upward trend during the same period, which
suggests that the bean processing industry has been increasingly relying on imported dry

beans, rather than procuring beans from domestic sources.

1.2 Problem Statement

Agricultural economists argue that the development of agro-industry benefits
farmers by creating a new market for their output. However, despite Guatemala’s
success in expanding bean processing, this phenomena has notbenefited bean farmers. A
recent competitiveness study (PRONACOM, 1999) reported that while total sales of
canned beans grown rapidly, imports are believed to account for nearly 80% of the
industry’s dry bean supply.

Several possible reasons have been offered to explain the bean canning industry’s
high dependence on imported supplies. First, Ministry of Agriculture (MAGA) officials

noted that an absence of coordination and opportunism are common characteristics of the

bean market in Guatemala, due in part to individualistic behavior of most agricultural
producers, dispersion of production, lack of adequate means of communication and
absence of reliable market information.

Second, bean producers often view intermediaries as a threat to their economic
survival, since in the past middlemen have used private information to the detriment of
producers and consumers. On the other hand, small farmers have a tendency to not value .
space, form-and time utility provided by these economic agents.

Third, in the majority of cases, there exist no long-term relationships between
producers and intermediaries or assemblers. The occasional character of these
relationships reduces the opportunities for coordination and, as a result, opens the door to
oppOrtunistic behavior and high transaction costs that reduce the profitability of bean
production (i.e. most producers deal with different traders every year). Since traders are
not interested in developing a relationship over time, they generally extract the highest
possible rents from the negotiation, in the form of excessive discounts for quality failures
(1'. e. percentage of brokens, high moisture content and weight), and use private
information on prices and market trends to the detriment of producers.

Finally, processing firms require bean producers to meet high quality standards
for dry beans (i.e. a maximum of 2% of broken beans, 15% moisture content, and zero
impurities) that can only be achieved by producers who are organized in farmers’
associations and cooperatives, since only these producers have access to drying, cleaning
and storage facilities. This condition effectively excludes small and dispersed farmers

fi'om negotiating supply contracts with bean processors. On the other hand, as argued by

 

DC

 

ins

 

domestic producers, processing firms purchase low-quality dry beans in international
spot markets, which is inconsistent with their requirements for domestic procurement.

These characteristics of the bean subsector--which tend to reduce farmers’
profitability and. increase uncertainty—reduce the incentives for farmers to expand
production and invest in new technology. According to MAGA, it also encourages
households to produce beans to meet their own requirements (food security), rather than
relying on the market.

During the past three years, the Government of Guatemala (GOG) has attempted
to promote growth in the bean subsector by encouraging greater coordination between
organized domestic producers and the processing industry. However, these efforts to
promote vertical coordination and reduce transaction costs have been seriously
constrained by strict quality standards imposed by processors, lack of coordination
among producers, and high production costsuwhich makes it more attractive for

processors to import beans rather then to procure them locally.

1.3 Justification of the Study

Since the 1960s, several governmental and non-governmental organizations have
conducted extensive research on beans within the Guatemalan context, including
Universidad de San Carlos de Guatemala (U SAC)-the country’s leading agricultural
university-and the Institute for Agricultural Science and Technology (ICTA), the
national agricultural research institute. However, most research has focused on farm
level techniques, developing new varieties, and enhancing nutritional value, while
neglecting the themes of marketing, the processing industry, and its links with the

institutional framework and public policies, on which this study focuses.

Since the late 19808, total bean production has followed a decreasing trend due
to a decline in cultivated area and yields (MAGA, 1998; PRONACOM, 1999). Since
1986, domestic production has decreased by 4.9% annually (MAGA, 1998), while
population has been growing at a rate of 2.7% per year (F A0, 1999). While this implies
a 30% reduction in domestic per capita availability over the 1986—1998 period, a recent
study (INCAP, 1999) shows that despite moderate reductions in per capita consumption
of beans, it has not decreased to such an extent. This finding indicates that the deficit in
national bean supply has been supplemented by non-commercial household production
which is ofien not included in official data. For example, Guatemala has not conducted
an Agricultural Census since 1979, and official data do not report bean production by
producers with plots less than 0.5 hectares.

Nevertheless, the low level of productivity in national bean production is
becoming an increasingly important issue for agricultural authorities. In 2001, when the
Trade Agreement of the Northern Triangle (Guatemala, El Salvador and Honduras) and
Mexico goes into effect, Guatemala and other Central American countries will be
required to progressively eliminate tariff barriers. In addition, within the Free Trade
Agreement of the Americas (FT AA), whose negotiations must also be completed by
2005, Guatemala will be required to further reduce its tariffs. Once this point is reached,
agricultural competitiveness will play an increasingly important role in determining the
survival of several productive sectors, included the bean subsector.

Finally, the Central American Alliance for Sustainable Development, which has

been endorsed by the chiefs of state of the region, gives special attention to establishing a

favorable business environment in order to attract foreign investments to support the
growth of industrial sectors linked to agriculture, as engines of development.

In order for the Guatemalan bean subsector to remain competitive in the future,
new strategies will be required to increase the subsector’s productivity. Thus, an analysis
of the factors constraining productivity grth in the bean subsector-including the
institutional and regulatory framework of the bean processing industryéconstitutes a key

point of departure for identifying policies that are needed to stimulate the bean subsector.

1.4 Research objectives

The purpose of this study is to gain a better understanding of the current structure,
coordination mechanisms and institutional framework of the bean subsector, with special
focus on the bean processing industry, in order to determine its potential, constraints for

future growth, and policies required to relax these constraints.

1.4.1 Specific objectives
The specific objectives of this study focus on the key dimensions of the bean
subsector, which ultimately will determine the potentials. and limitations for its
sustainable growth. They are:
1. To provide an overview of the historical evolution of the bean subsector.
2. To determine the current structure of the industry, as well as the mechanisms and
levels of coordination among the actors within the production, processing and

distribution chains.

3. To document the current ‘state‘ of the bean processing industry, its potential and
constraints that limit its future growth, including the policies and institutional
factors.

4. To analyze the existing problems of coordination between producers and
processing firms, including a) the relative advantages of international spot
markets in bean procurement for Guatemalan processors, compared to domestic
contracting; b) the degrees of coordination between processing firms and small,
large, organized and individual farmers; and c) the possibility of inducing tighter
coordination between producers and processors.

5. To propose public policy recommendations that need to be implemented at the
micro, sectoral and macro levels, in order to promote sustainable growth in the

bean subsector.

1.5 Organization of the Thesis

The thesis is organized into five chapters. Chapter Two introduces the Research
Design and Methodology, including description of research methods, list of interviews,
description of research instruments used and the analytical approach that guided the
study.

Chapter Three provides a general overview of the national context, including a
general description of the country, its economy, the agricultural sector and the importance
of beans within the national context.

Chapter Four provides an overview of the bean subsector, including a description

of the actors involved in value adding activities (i.e. farmers, assemblers and traders;

wholesalers and the processing industry). It also describes the market structure in terms
of levels of coordination among actors and sources of transaction costs, and analyzes the
institutional constraints that limit the growth of the subsector. I
Chapter Five presents a summary of the study, highlights policy recommendations
derived from the analysis, as well as limitations of the study, and proposes priorities for

future research.

Summary

Beans are the second most important food crop in Guatemala. In addition to
being an important source of protein—especially for low income householdsubean
production accounts for more than 33,000 full-time jobs, valued in more than S. US. 23
million. Beans are widely grown by small farmers-43.4% of the national bean supply is
grown on farms with less than 7 hectares, 18.8% on farms fi'om 7 to 45 hectares and
27 .8% on farms greater than 45 hectares.

Because of the strategic importance of beans, since the 1970s the Guatemalan
government has sought to increase productivity by providing firnds to support bean
research at both the governmental agricultural research institute (ICTA) and the
agricultural university. However, although ICTA has released several improved varieties,
bean production has declined since 1986. Farm size has been found to be inversely
correlated with the levels of technology used in bean production. In 1996, 66.3% of the
total area planted to beans was grown on farms below 7 hectares, while 15.6% was grown

on farms from 7 to 45 hectares, and 18.2% on farms greater than 45 hectares. For the

same period, bean yields of farms above 45 hectares were 48% above yields of farms
below 7 hectares.

To date, bean research has focused on increasing production, including the
evaluation of cropping patterns, crop associations, rates of fertilization, chemical control
of pests and diseases, and varietal improvement. As a result, socioeconomic research has
been neglected excluding consumer preferences, the requirements of the industry,
marketing institutions, the impact of policy, and the economics of bean trade in general.

Therefore, this study uses a subsector approach to better understand the
underlying economic relationships of bean production, marketing and processing, the role
of government policies in promoting growth of the bean subsector; and the prospects for
increasing the competitiveness of bean production, as will be required, given the
challenges that will be introduced through new trade agreements which will come in

force in the following five years.

'10

CHAPTER TWO
RESEARCH DESIGN AND METHODOLOGY
2.1 Analytical approach

This study was designed to provide insight needed by decision-makers to
introduce improvements in the institutional and regulatory frameworks, in order to
facilitate the sustainable growth of the bean processing industry. It also analyzes the
current structure and performance of the Guatemalan bean subsector, with special
emphasis on issues related to coordination and sources of transaction costs. Therefore,
this thesis employs the subsector approach, as presented by Staatz in 1997, as a
framework for analysis.

The subsector approach has been used extensively as a tool to conduct subject
matter research. Shaffer proposed the original Subsector Paradigm (1973), as “the
vertical set of economic activities in the production and distribution of a closely related
set of commodities.” The' vertical set of activities under which a commodity gains value
added includes input provision (including research), extension, farm level production,
processing, storage, assembly, transportation, wholesaling, retailing, financing and
consumption (Martel-Lagos, 1995).

Another reason for using the subsector approach is because it takes into account
the relevance of the vertical and horizontal relationships within the system, including
farm-level production activities and linkages to other economic activities (i. e. research,
extensiOn, trading, processing, etc.)

Although, the subsector methodology was originally considered to be lengthy,

intensive and time consuming (Holtzman, 1986), in recent years economists have

11

developed a modified subsector approach which utilizes rapid appraisal techniques to
generate an overview of the subsector. Although less comprehensive, this approach
provides researchers with sufficient insights to a) identify key constraints in the
subsector, b) prioritize research, and c) identify policy changes that are needed to

facilitate sustainable growth.

2.2 Conceptual Framework
This Study is guided by several interdependent economic concepts. This section
introduces the concepts that will enable the reader to link economic theory to the issues

addressed in the study.

2.2.1 Industrialization of agriculture.
Staatz (1997) notes three premises that are critical to understanding the
process of structural change in the agricultural sector.

1. In order to be successful, future industrialization must be built firmly upon
the links between agriculture and industry, exploit comparative
advantages, and be conceived of in a systems context to take advantage of
the synergies between agricultural and industrial development.

2. As the economy begins to exploit the gains from specialization and trade,
more of the activities shift outside the household. Thus, separation

between agriculture and industry begins.

12

3. Increasing productivity (and hence incomes) in the economy occurs either
by rising the productivity of individual physical transformations (e.g. the
introduction of new technologies), or by improving the coordination
among the various productive activities.

2.2.2 Subsector approach

According to Staatz (1997), the subsector approach is simply a way of viewing a
‘vertical slice’ within the food systems matrix. It examines how production and
distribution activities for a commodity are organized within the economy and asks how
the productivity of those activities can be increased, either through improved
technologies or better institutions and policies to coordinate various stages of production
and distribution.

The subsector has been defined alternatively as “the vertical set of activities in the
production and distribution of a closely related set of commodities” (Shaffer, 1973), or as
“An interdependent array of organizations, resources, laws and institutions involved in
producing, processing and distributing an agricultural commodity” (Marion, et al, 1986).

Therefore, a subsector can be viewed as both a) a set of activities and actors, and

b) the rules governing those activities, giving the subsector approach a behavioral
context.

Based on the above, descriptive and analytic tasks involved in carrying out a

SUbsector analysis include:

1. Describing the current structure of the subsector, in terms of activities,

actors and rules involved;

2. Explaining why and how this structure arose;

l3

Analyzing the implications of the existing structure on the economic
performance of the subsector; and

Analyzing possible forces of change affecting the subsector and their
implications for subsector performance-forces that will influence the
supply and demand conditions, including changes in government policies,
institutions, technologies, shifts in the sources of supply of competing.

products, and the evolution of demand, both nationally and internationally.

Subsector analysis is guided by five key concepts (Staatz, 1997):

1.

Verticality. A basic systems notion which means that the conditions at
one stage in the subsector are likely to be strongly influenced by
conditions in other stages of the vertical chain, often in indirect and

unexpected ways. 1

Effective demand. Subsector analysis views effective demand as the

pump that pulls goods and services through the vertical system. Therefore,

the approach emphasizes:

a. Understanding the dynamics of how demand is changing at both
the domestic and international level (including the evolution of
different niche markets), and the implications of that evolution for
subsector organization and performance; and

b. Examining possible barriers to the transmission of information on
the changing nature of demand back to actors at each level of the

subsector.

14

3. Coordination within channels. Much of the subsector analysis involves
analyzing how well current market, contract, vertical integration, or other
types of arrangements harmonize and coordinate the activities of different
actors within the subsector. Among other things, this analysis involves
examining the implications for how these arrangements affect who bears
the risk in the system and what incentives exists for the different actors in
the subsector to invest in improving the productivity of the system.

4. Competition between channels. A given subsectOr may often involve
more than one marketing channel. Subsector analysis attempts to
understand competition and examine how it may be modified to achieve
better economic performance.

5. Leverage. Particularly where a large number of small firms (or interest
groups) are involved, it may be very costly to develop public actions that
seek to help each firm individually. Therefore, subsector analysis seeks to
identify key nodes in the production-marketing sequence where actions

can help a large number of firms at once.

In order to gain better insight of the implications of subsector analysis, we
should, at this point introduce the concept of Production-Distribution-Consumption
sequence (PDCS), which has two basic dimensions: a) physical transformations and
b) transactions. Physical transformations are the result of combining two or more

inputs to make and output. Transformations are linked to transactions. For each

15

technologically separable transformation in a PDCS, potential transactions exist for
passing outputs fi'om one activity to another.

With each separable transformation, specialization is possible. In theory,
each separate transformation can be handled by a separate individual or group of
individuals. These various groups are linked by transactions, which can take place
within fu'ms or across markets, as specialization can take place within firms of
between them (Figure 1).

Figure 2. 1 Nodes in a PCDSl

 

 

 

 

 

 

Physical transformation Physical transformation
Process (1) process (2)
[Fertilizer manufacture] [Seed production]

 

 

Transaction

  

Physical transformation
Process (3)
[On-farm bean production]

     

 

 

 

 

Physical transformation Physical transformation
process (4) process (5)

[Bean canning] [Bean bagging]

/\

r Differentiated distribution chains 1

 

 

 

 

 

 

 

 

 

16

2.2.3 Transaction Costs
Transaction costs are the costs associated with carrying out a transaction. They
are usually regarded as “friction” in an economic system, which tend to reduce exchange.
In this sense, “market failure” is Simply a case of prohibitively high transaction costs.
Based on the part of the production process where they arise, transaction costs can be
classified as ex ante transaction costs (i. e. cost of gathering information for a potential
transaction, costs of processing information, costs of coming to a decision); or ex post
transaction costs (i. e. cost of monitoring performance, and costs of enforcing agreements
and contracts). Note that the origin of all transaction costs is human interdependence, in
the sense that they arise only when people have to work together to benefit fi'om
specialization of trade, in order to capture economies of Size in new technologies.
However, it is often difficult to clearly separate transaction costs from other production
costs.
Three major factors that affect transaction costs are:
l. Uncertainty. The greater the level of uncertainty surrounding a transaction, ceteris
paribus:
a. The less efficient and the more costly it is to rely on spot markets to mediate the
transaction.
b. The greater the incentive to move to some form of contracting or integration.
De Janvry and Sadoulet (1995) argue that markets for inputs and outputs
(including food) in developing countries are highly risky due to the thinness of the

market and fluctuating supply and demand. Also, transaction costs associated with

X

' Adapted from Boughton, et al, 1937

17

 

 

Oil

 

using markets in developing countries are high, since in most cases they lack grades
and standards and there is poor enforceability of contracts. As these conditions
combine to discourage specialization and its gains, households remain integrated in a
very diverse set of activities.

This, in turn, increases transaction costs by encouraging small lots of highly
dispersed production and small lots of individual products. This results in high per-
unit assembly costs and local markets that support only a few traders, which can lead
to monopsony and, hence, high transaction costs. Because a lack of specialization
often leads to poverty, these conditions both show potential gains to market reforms,
if markets can be made more reliable in these countries, and the limits to such
reforms, unless one focuses on the basic sources of uncertainty in these markets.
Externality principle The greater one party to a transaction can impose intended or
unintended external ities on another party, the greater the incentive to move from spot
markets to some other structure, such as contracting or vertical integration
(Williamston, 1985).

Asset specificity The greater the transaction involves assets that are specific to a
particular transaction, the less likely the transaction-specific use is greater than its use
in alternative activities (Klein, Crawford and Alchian, 1978). Asset specificity can
arise fi'om specialized use, Site-Specific use, or temporal factors (e.g., due to
perishability of the product produced by the asset).

Incentive for non-spot market transactions arises from the tendency of at least

one party to a transaction to act opportunistically to try to appropriate the quasi-rent

18

 

2.2.4

PFOCe
marks
Comte.
Wei
mbsec

I SW1)
We;

 

generated by his partner’s specialized assets (Klein, Crawford and Alchian, 1978).
This expropriation can result in the hold up problem2 and moral hazard.

The transaction cost approach has four main applications . in agricultural
economics (Williamson and Masten, 1995):

a. Explaining types of governance structures that are likely to arise in
situations involving certain types of transactions.

b. By focusing on asset specificity, this approach helps to explain the rigidity
of certain institutions and the unwillingness of some to adapt to changes in
the market.

c. Helping to guide the design or redesign of food system institutions, by
looking at the nature of the transactions and the types and degree of mutual
dependence that arise in different types of transactions and their
implications for appropriate institutions to mediate transactions, and

d. Analyzing how changes in technology may affect transaction costs and,
hence, the most appropriate governance structure.

2.2.4 Coordination

Mighell and Jones (1963) introduced the concept of vertical coordination as a
process, defining it as “the ways of harmonizing the vertical stages of production and
marketing”. Marion, et al. (1986) describe vertical coordination as a state,
conceptualizing it as “The sufficiency of the system of prices and other mechanisms as
carriers of information and incentives and directors of the allocation of resources in a

SUb sector” .

k

2 Simation in which producers loose bargaining power due to asset specificity (i.e. specialized use, site
Specificity, perishability, etc.)

19

 

 

 

 

5U.

dis:

 

 

wit}

inst

2.3

Jul)

PCT.

Per:
bet:

£50

Vertical coordination is part of the marketing systems continuum, which goes
from spot markets to vertical integration (factors of production under the same property
scheme). In the case of agricultural products, it includes several different levels (i.e.
marketing agreements, marketing contracts, production contracts, etc). Based on
economic theory, tighter forms of coordination are expected to result in lower transaction
costs and, hence, higher efficiency. For this reason, vertical coordination is a key
strategy for improving market efficiency in low-income countries.

Thus, the marketing system is a primary mechanism for coordinating production,
distribution, and consumption activities. It will include the exchange activities associated
with the transfer of property rights to commodities, physical handling of products and the

institutional arrangements for facilitating these activities (Harrison et al, 1987).

2.3 Subsector overview

A subsector overview of the bean industry in Guatemala was conducted during
July 2000. As previously mentioned, it focused on determining the structure and
performance of the bean subsector, with special emphasis on the institutional and
regulatory framework, as well as issues related to coordination and transaction costs. To
achieve these objectives, existing secondary data were compiled and analyzed, and
personal interviews were conducted with several actors within the system in order to
better understand the dynamics of the subsector, including government officials, farmers’
associations, bean farmer cooperatives, assemblers and traders, wholesalers, packing

finns, bean processing firm managers, and retailers.

20

2.3.1 Research methodology

As a first step towards the identification of key informants, a list of actors within the
system was prioritized, guided by the objectives of the study. The geographic area to be
sampled was also detemiin'ed, based on the regional distribution of bean production._

As a result of the above, the area of study, population and sampling methods were.
determined. The geographic area for the study was delimitated as the departments of
Jutiapa, Jalapa and Chiquimula (out of 22), Since according to the Ministry of Agriculture
(MAGA), these three departments account for 43.3% of national production and 36.9%
of the land area devoted to beans. In addition to government officials, the key

informants were fiom among members of the following groups:

2.3.1.1 Farmers’ associations
’ The population of farmers’ associations within the study area was defined
as groups for whom more than 50% of their total production was beans. The
sample size for this group was set at ten associations (Jalapa 3, Jutiapa 4, and
Chiquimula 3). These 10 associations constituted 75% of the total number of
bean-producing farmers’ associations that met the above defined criteria within
the study area. The leaders of all ten associations were invited to participate two
one-day workshops, in order to exchange impressions around the issues that are
the focus of the study.

While the sample of associations was not selected at random (i.e. it

included associations that were willing to provide the requested information), the

21

participants were representative of the populations of farmers’ associations within
the target area.
2.3.1.2 Assemblers and traders

As there existed no list of commercial traders, the total population was
estimated through interviews with leaders of farmer organizations. Of the 24
traders identified, a total of six were selected for interviews, which corresponds to
25% of the population of large-scale assemblers and traders (i. e. business
purchasing more than 40MT/week during the harvest season) in the departments
OfJutiapa, Jalapa and Chiquimula. Given the difficulty of locating these traders,
the first six (2 per department) traders who were contacted were interviewed,
either in their hometowns or in their unloading points in the capital city. All the

traders who were contacted agreed to be interviewed.

2.3.1.3 Wholesalers in Guatemala City.

Guatemala City’ s 16 large-scale bean wholesalers are clustered around two
areas within the city. Because these wholesalers are highly secretive about their
trading activities and potentially hostile towards strangers, the sample size was
limited to the first 6 who were contacted (37.5 of the total population of
wholesalers). All wholesalers contacted agreed to provide the requested
information.
2.3.1.4 Packaging firms.

Packaging firms, commonly known as bagers, place beans in plastic bags

for retail in supermarkets and small stores. Five firms include beans among their

22

products, all of which are located in the capital city. Three of these firms agreed
to be interviewed, corresponding to 60% of the bean baggers’. None of them
declined to be interviewed.
2.3.1.5 Processing firms.

The bean processing industry in Guatemala produces canned refiied beans,
usually as one of a long list of canned products (i. e. fiuit cOcktail, jalapeno
peppers, tomato paste, and others). Four firms include beans within their line of
products, and all four were contacted and interviewed.
2.3.1.6 Retailers

A survey of retailers (supermarkets, grocery stores and “corner stores”) was
also conducted in order to determine the approximate market share held by each
of the four firms’ brands of canned beans. A set of retailers (composed of a
supermarket, a grocery store and a corner store) was selected in each of three
neighborhoods of Guatemala City (i. e. low-income, medium-income and high-
income). In addition to assessing the shelf-space provided for each brand of
canned beans, interviews were conducted with the manager of each retail stores.

2.4 Research instruments

Since the study involved the collection of primary data from the above-
described actors within the bean subsector, five interview guides were designed prior
to initiating the study. These instruments were revised in the field, based on

suggestions from local professionals and government authorities.

\

3 Patticipatory methodology to analyze the Strengths, Opportunities, Weaknesses and Threats to a
Marla activity.

In the case of bean processing firms, an interview guide plus a set of open ended
questions were used to provide an opportunity to obtain better insights regarding
issues of interest to the researcher, rather than a standardized questionnaire. In
addition, each firm was asked to provide a common set of statistical data about their
operation.

The set of research instruments encompassed the following five guides:

1. Interview guide for farmers’ associations

2. Interview guide for bean traders

3. Interview guide for bean wholesalers and baggers

4. Statistical questionnaire for bean processing firms

5. Interview guide plus open ended questions for bean processing
firms

After all suggestions were considered and incorporated into the original
interview guides and all five instruments were pre-tested, the workshops for
representatives of farmers’ associations were scheduled, as well as the meetings with
representatives of the bean processing firms. In the case ofprocessing firms a copy of
both, the statistical questionnaire and the interview guide were sent via e-mail. These
forms were provided in advance in order to allow the key informants sufficient time to
compile the Statistical information and to provide them with a rough idea of the
subjects to be addressed during the personal interview.

A total of 47 representatives of farmers’ organizations attended the workshops,

Which were held in Jutiapa on July 14, and in Chiquimula on July 20‘”, both from

II

 

It

 

aSficr

09:00 to 16:00. Initially, the researcher made a presentation introducing the objectives

of the study. Afterwards, representatives of farmers were asked to comment about
their own experiences with respect to the issues noted in the interview guide.

In order to provide a systematic framework for data collection and joint analysis
with the participants, a modified SWOPF3 approach was implemented, yielding an “x-
ray” of the limitations and potentials of the agricultural phase of bean production.
This approach allowed the researcher to discuss with all representatives issues related
to the structure of the bean subsector, its strengths and limitations, as well as their
valuable opinion regarding policy alternatives. It also provided a unique opportunity
to gain better insights related to the farmers’ year-to-year struggle in an activity that
encompasses a great deal of uncertainty. The researcher’s concerns about the presence
of a high degree of opportunism, adverse selection and moral hazard in the side of
assemblers and traders were also confirmed.

The personal interviews with managers and CEOs of the processing firms, as
well as with traders and wholesalers, took place during the first and last weeks of July.
Traders were interviewed as they were visited, since the researcher felt that making a
previous contact by any means would have reduced the likelihOod that they would

agree to be interviewed.

Summary
Based on our primary interest of analyzing the structure and performance of the
bean industry (including the actors that participate in the value-adding processes, fi'om

aSlicultural production to sales and distribution of final products) and the scarcity of

25

time, a modified subsector approach, was used to collect data required to describe the
subsector and the underlying economic relationships among actors. This'overview also
provided information required for economic and policy analysis.

The research was guided by economic theory associated with marketing
institutions, transaction costs, competition and vertical coordination. This theoretical
background both served to structure the research framework and subsequent analysis.

The field study was carried out in the departments of Jutiapa, Jalapa and
Chiquimula (out of 22) Since, according to the Ministry of Agriculture, these three
departments account for 43.3% of national production, and 36.9% of the area devoted to
bean production. As such, these departments include most of the surplus bean producers
in the country.

Field research activities included conducting personal interviews and surveys of
government ofiicials, farmers’ associations, bean farmer cooperatives, regional
assemblers and traders, wholesalers in Guatemala City, bean processing firms (packing
and canning industries), grocery stores and supermarkets. The sample size varied by
type of respondent, including 47 leaders of 10 farmers’ organizations, six assemblers-and
traders, six wholesalers in Guatemala City, three packing firms, and four canning firms.
In addition informal interviews were carried out with managers of three supermarkets,
three grocery stores and three “comer stores” in the capital city, in order to update

Previous data on market shares and relative competitiveness of canned beans.

26

Fig

 

 

 

 

 

 

CHAPTER THREE
THE NATIONAL CONTEXT
3.1 Guatemala
Guatemala is located in the northern section of Central America. It borders North
and West with Mexico, east with Belize, the Atlantic Ocean and Honduras, and South
with the Pacific Ocean. It has an area of 108,889 square kilometers (approximately

42,000 sq. miles, and slightly smaller than Tennessee) (INE, 1961).

Figure 3.1 Political Map of the Republic of Guatemala and the Study Area (shaded).

 

27

 

 

 

CUFF

grou

PTOdL

3.2 Economy

Guatemala’s gross domestic product (GDP) reached S US. 4.9 billion in 1999.
Commerce accounts for 24.7% of GDP, followed by agriculture with 21.3%, and industry
and manufacturing with 13.6%, as shown in Figure 3.1 (BANGUAT, 2000).
Guatemala’s GDP per capita is estimated at $441 (1999).

Figure 3.2 Intersectoral Distribution of GDP (BANGUAT, 1999)

 

DISTRIBUTION OF GDP
Publicadmlnlstration I’m-I'm
o H w anddelenae 6% WW
mm
51.
BanIdnanaumnca
androal
5%

 

 

 

 

Grth of GDP has followed an erratic trend characterized by high volatility,
which experts attribute to continuous changes in macroeconomic policy (Figure 3 .2).
The national currency (Quetzal), which until 1982 was pegged at a one-to-one
relationship with the US. Dollar, suffered it most recent depreciation in 1999, losing
13% of it value (Edwards, 2000). Thus, at the time of the study the exchange rate was
Q7.70=$U.S. 1.00. According to key informants in the Guatemalan private sector, the
current exchange rate reflects the real value of the national currency and promotes the
growth of the export industry, although it also increases the cost of production of

products which use imported inputs.

 

lix

651

of

 

 

Figure 3.3 Rate of Growth of GDP. Guatemala, 1980-1999

 

 

 

 

 

 

Rate of Growth of GDP
6
4 ,
i 2 \ f' "7‘ ' ‘7 c
o ,, \V/
4 . . .

 

 

 

 

 

 

Source: BANGUAT
3.3. The Social Context

The Guatemalan population is estimated at 11.09 million. Approximately 60%
live in the rural areas, while the remaining 40% reside in urban centers, including
Guatemala City, with an estimated population of 2.5 million. The labor force is
estimated at 4.0 million (36% of the population), out of which 71% is male.

An estimated 61% of Guatemalans live under the poverty line, mainly due to lack
of equity in the distribution of wealth, which is particularly evident in the rural areas
(ECLAC‘,1999).

Not only has the lower strata of the population lacked access to factors of
production, but a large percentage of farmers do not posses land titles, which
automatically disqualifies them for credit from financial institutions, thereby constraining
economic development. According to conservative estimates, 61% of farms lack titles

(PAFG/FAO, 1997). According to a recent study, these were some of the factors that led

 

' Economic Commission for Latin America/United Nations Organization

29

to the civil war that took place fiom 1960 to 1996 (CEH, 1999), in which civil casualties
exceeded 150,000. However, to address this problem, in 1996, the GOG began to
implement a long-term program to provide land titles, with the aid of geographic
information systems, which is scheduled to be completed in 2008.

In addition, in an effort to better address the needs of the poor, the GOG has
implemented several economic, educational, public health and social development

initiatives, investing more than $200 million/year (FONAPAZ, 1999).

3.4 The Agricultural Sector

Historically, Guatemala's agricultural sector has produced staple crops such as
maize, beans and rice for domestic consumption; and export products such as coffee,
bananas, sugar, cotton, cardamom and lately fi'esh fiuits and vegetables for the US. and
European markets, to generate foreign exchange.

Seen solely from the economic point of view, the agriculture is the second most
important sector in terms of its share of GDP. However, when analyzed from the social
and economic standpoints, it acquires singular relevance. The agricultural sector
accounts for not only 24% of GDP, but also for 58% of the labor force and 55.9% of
export earnings. However, the agricultural sector is characterized by large inequities.
According to the “Agricultural Policy fiamework” (MAGA, 1996), a large percentage of
land is in possession of a reduced percentage of the population, which has contributed to
the expansion of small-scale agriculture on marginal lands and an important factor in

depletion of forestry and soil resources (PAFG/FAO, r 992).

According to resource experts (PAFG/FAO, 1996), the negative correlation
between farm Size and the allotment of forestry resources (Figure 3.2) has promoted the
use of forest as an economic refuge for the rural poor.

Figure 3.4 Current Distributions of Land and Forestry Resources (MAGA, 1996)

CHARACTERIZATION OF AGRICULTURAL

 

 

 

 

PRODUCERS
...... 5......
Subsistence producers
~62 96 of all -33 % of all 04.95 % of all 00.05% of all
farmers. farmers. farmers. farmers.
-2 ‘16 of all -5 % of all -11 % of all -82 % of all
arable land. arable land. arable land. arable land.
40% of all -38% of all -1 5% of all -7% of all
forestry forestry forestry forestry
resources. resources. resources. resources.

 

 

 

 

 

 

 

 

 

 

 

 

Source: Framework for Agricultural Policy, Ministry of Agriculture, 1996.

The agricultural sector accounts for 55.9% of all exports. Traditional exports
include coffee, bananas, cane sugar, and cardamom. According to key informants at the
Non Traditional Products Exporters Association (AGEXPRONT), the country’s deficit in
foreign currency has resulted from a downward trend experienced by traditional
agricultural products. However, in recent years grow in non-traditional exports
(including high value fruits and vegetables, cut flowers, handcrafis and wood furniture,
with a high proportion of value added) have generated an increasing share of agricultural-

based foreign exchange. The main markets for such products are the US. England,

31

as.

Holland, France, Germany and Japan. According to AGEXPRONT, in 1999 non-
traditional exports accounted for more than S. US. 1,215 million, equivalent to 47% of
export-based earnings, compared to S. US. 629 million (31%) in 1990.
3.5 Crop production

Staple crops include maize (Zea mays), beans (Phaseolus vulgaris), and rice .
(Oryza sativa), Table 3.1. Most farmers grow maize and black beans, as part of their
strategy to guarantee food security. Nevertheless, there are certain regions in the country
with favorable agro-climatic conditions for the commercial production of both crops.
Thus, maize is grown in commercially in the southern part of the country, and beans are
grown commercially in the eastern part of Guatemala (i. e. departments of Jutiapa, Jalapa
and Chiquimula), which account for 43.25% of the national bean production (Table 3.2).

In contrast, rice is mainly grown as a commercial crop in the northern part of the country.

Table 3.1 Comparative Analyses Among the Main Staple Crops. Guatemala, 2000.

 

Year Beans Maize

AreaProductlon Are. Production

    
 
  
  
 

(‘ (0001B) (‘000MT)

  

.....................

........................... 634.48 1,272.24
1991 14413 1321312 292-255;;533 668.71 1,233.25

1992 £4900 £31456 725-62 136638
1993 12089 " 699-65 1,294.78

~ " 606.92 1487-69
546.20 1,061.58
575.13 1,045-79
1997 12278 576-17 860-94

628.91 1,068.78

 

 

 

1999 .Q.§Qi§§.2]2§. ..............................................

Source: FAO, 2000

 

626.62 1,109.12

'32

3.5.

Fig

 

3.5.1 Bean Harvested Area and Production
From 1980 to 1986, the bean area increased fi'om 60,000 to 160,000 has.
However, the bean area fell sharply from 1986 to 1998 (100,000 has), and has
fluctuated from 135,000 to 150,000 since 1990 (Figure 3.4). In 1999, the
harvested area in beans stood at an estimated 135,220 has (MAGA-FAQ), with
43.3% of beans grown in the departments within the study area. About 17% of

farmers in this region grow beans as a commercial crop (MAGA, 1996).

Figure 3.5 Beans, Yearly Fluctuations in Harvested Area 1980-1999.

 

 

 

 

 

 

 

 

 

 

 

BIackBeans
Harvested Area
200
,,, m
2100 r
.5 0/3—0/
50
Orrrrrrrrrrrrrtrrtr.
"e "e "s "is “s ”is “e "9, ’is ’is
Source: Ministry of Agriculture

33

'ib

 

Table 3.2 Geographic Distribution of Bean Production. Area Harvested and
Production by Department, Guatemala (1999).

 

Department Area Production Percentage of
(‘000 Has) (‘000 MT) National Production
J237514331536
Quiche 16.44 2.78 2.98
Pctén 16.05 14.80 15.86

Huehuetenango 15,39 3_71 3.98

    

 

 

 

........................................................................

 

 

 

Santa Rosa 4.17 4.97 5.33
El Progreso 2.90 1.73 1.86
Chirnaltenango 2.69 o_ 54 0.58
Alta Verapaz 2.50 2.76 2.96
Baja Verapaz 1.82 1.44 1.55
Inbal 1.59 2.79 2.99
801914 1.39 0.11 0.12
Totonicapén 1.26 0.18 0.19
Quemltenanso 1.08 0.30 032
San Marcos 0,53 0,35 0.37
Escuintla 0.12 0.11 0.12
Retalhuleu 0.01 0.00 0

Suchitepe'quez 0.00 0.00 0
TOTALS 135.22 9330 100-00

Source: Ministry of Agriculture, 1999.

 

 

 

 

 

 

 

 

 

 

 

 

 

gur

 

3.5.2 Bean Growing Seasons

In the eastern region of the country (the study area) and in the northern
department of Petén, where bean production also has a commercial focus, there
are two well-differenced growing seasons (i.e. primera and Segunda). In contrast,
in the rest of the country--particularly in the central and western highlands-there
is only one growing season, due in part to the ’the marginality of lands’ and
unfavorable environmental conditions (i. e. at high altitudes the biological cycle of
beans can extend beyond 5 months).

In the study area, the harvest seasons follow the standard pattern, with about
60% of yearly output coming from the first crop (primera), and the remaining

40% from the second crop (Segundo) (Figure 3.4).

Figure 3.6 Harvesting Seasons ( “Primera” and “Segunda”), as Percentages of Total
Production, Guatemala 2000.

 

Harvesting Seasons

12
10

one-arcs

 

 

 

 

Source: UHF/Ministry of Agriculture

35

3.6 Beans in the Guatemalan Diet

Beans are consumed throughout Guatemala, with no substantial regional
variation with respect to their relative importance in the diet. A large percentage
of rural households (79%) grow their own beans (MAGA, 1987), while the supply
of beans for urban households comes from surplus production in the rural areas.
Empirical data Show that the market shares of canned beans, as well as influence.
of packaged beans (i.e. 1, 2 & 5 lb. bags) are increasing? Estimated market
shares (2000) of bagged beans and canned beans were 17% and 1.38%
respectively. The estimate of canned beans was made based on dry weight (total
domestic supply divided by the average industrial conversion rate of 3.5 lb of
refiied beans per pound of dry beans).

Beans are the second most important food staple in Guatemala and the rest
of Central America. In terms of nutrient value, beans contribute 92
calories/person/day and 6g/person/day of protein, which makes them the second
most important source of protein after corn (Martel, 1995).
3.6.1 Consumer preferences

Consumer preferences for beans in the Guatemalan market are mainly
driven by color and cooking time. Guatemalan consumers eat black beans on
regular basis, and red and white beans only when preparing certain regional

recipes. Thus, black beans account for more than 97% of total bean production

(MAGA, 1995).

\

2 .
KeyInformantsamongbanpackingfirmsprovideddatatowhichindieatesthatsalesofeannedbeanshas
beenSl’uwingatanaverageof4.5%perannumsince1996.

36

Cooking time varies according to variety and storage time, which most
influences cooking time. Thus, in order to obtain a premium price for their new
crop, farmers tend to leave it mixed with leaves and dirt as an indication that it
has not been stored, since in order to store beans in a silo or in sacks, they need to
be fiee of impurities.

Key informants reported that a positive characteristic of some varieties is
their ability to produce a “thicker” soup, which—according to plant breeders at
ICTA-is due to a higher content of solids. However, fOr consumers that purchase
their beans at local markets and corner stores, it is a matter of “luck” to obtain
beans with these preferred characteristics, given that it is virtually impossible to
trace the source of beans or to discriminate among varieties. '

3.6.2 Home Preparation

Beans are primarily consumed in three different forms: bean soup, refiied
beans, and blended beans. Despite their final form, all recipes include preparing
bean soup as a first step. In general, beans are eaten as a separate dish, without
mixing them with rice or meat, as is done in other Central American countries.

Complements for beans include corn tortillas, rice and bread; as well as
cilantro, garlic and onion, which are added in the cooking process. Once cooked

in a soup, they are mashed and then fried in vegetable oil or lard to make refiied
I beans, or blended and seasoned to make a thick soup. In all cases, the main
companion of beans are corn tortillas, followed by white bread in the capital city.
As a timesaving strategy, it is a common custom to cook large amounts of beans

and using them throughout the week.

37

3.7 I
Dom

fOrm

L I

 

 

Green beans (fresh immature pods) are consumed as a side dish. However,
their consumption is highest in urban centers, since they tend to be associated
with Spanish and international cooking.

Most consumers in rural areas and urban centers purchase unpacked
beans. However, according to key informants in the bean packing industry, in the
capital city the market for packed beans is increasing rapidly. According to the
same source, the growing demand for packaged beans is due in part the greater
female participation in the labor force. In the past, a large percentage of women
did not work outside the household and the task of cleaning beans prior to
cooking them (on a daily basis) was a social ritual. While women used to clean
beans while listening to a radio show or watching a soap opera, now, with a larger
percentage of women employed outside the household, the opportunity cost of
their time is higher. Thus, since they have less time available to cook, packaged
beans are becoming a convenient product for households who cannot afford to
purchase canned beans. Further analysis of the bean packing and bean processing
industries is provided in Chapter Four.

3.7 Demand Analysis
Domestic supply (domestic disappearance) of beans is calculated by the following

formula:

Sb = (P b + lb)- (Exb +Sb+Stb)

 

_a-— -r

Domestic availability (calculated in basis of domestic disappearance) has
followed a downward trend over the last 10 years. This trend was particularly pronounced
in the periods from 1992 to 1994, and from 1995 to 1996, when the rates of change in
domestic availabilities and consequently per capita consumption were -27.69% and
-7.61%, respectively (Table 3.2). Per capita consumption has declined steadily since
1985, at an average rate average -4.08% per year (Figure 3.6). These data are consistent
with a priori knowledge regarding the substitution of commercial bean production by
production at household level in order to offset the potential threats to food security

derived from price fluctuation.

Table 3.3 Total and Per Capita Bean Availability (domestic disappearance) Guatemala

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1990-1999.

Product»! Imports IETTIfiSfi Seed Sfafiaéwbommc supply
Yw' (“MD (MD (‘000 MT)
1990 ”313 2039 107.6
199111229 4050 104.0
199211455 5345 108.3
1993 9969 1700 90.1
1994 9139 2,613 83.5
1995 9012 1,347 80.9
1996 7955 2,201 71.1
1997 7263 2,193 63.5
1998 3359 2 293 73.7
1999 933 4,300 ““8700 """ 6256:zszsazszzsarsszszzzzz: 85.2
Source: FAO/MAGA

39

 

3.8

I“)

mil
lei]

(3311'

{at}:

Figure 3.7 Per Capita Consumption of Beans. Guatemala, 1980-2000

 

Per capita consumption of beans

16.0
14.0 -
12.0 -
10.0
8.0
6.0
4.0
2.0

 

 

 

 

 

 

 

 

Kilograms per capit

 

 

 

 

0.0 r l T I f I T I l l T T

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997

 

 

 

Source: FAQ/MAGA

3.8 Summary

The Guatemalan economy is highly dependent on agriculture, as it accounts for
21.3% of GDP (estimated in S. US. 4.9billion for 1999), which makes of agriculture the
second most important sector after commerce (24.7%). Population is estimated in 11.09
million. Approximately 60% of the population lives in the rural areas, while the
remaining 40% reside in the urban centers, including Guatemala City. The labor force is
estimated in 4.0 million, or 36% of the total population.

An estimated 61% of Guatemalans live under the poverty line, mainly due to a

lack of equity in the distribution of wealth, which is particularly evident in the rural areas.

40

expats

titles. ‘

directr
raise '.
Alfitr

titles :

banan
increa

in l9€

 

 

as th
CrOp

prod

s”PP
depe
Vend

have

 

Access to credit for agricultural purposes is an important constraint for the
expansion of agricultural production. An estimated 61% of farmers do not posses land
titles, which automatically disqualifies them for credit from financial institutions.

As part of the Peace Accords, (December, 1996), the Guatemalan government
directed more than S US. 200 million per year to social investments, in an attempt to
raise thestandards of living of rural communities. In a parallel fashion, the Ministry of
Agriculture is implementing a land-titling program, which is expected to provide legal
titles for most farms by year 2,008.

The agricultural sector is oriented towards the production of three types of crops:
a) staple crops (maize, beans and rice), b) traditional agricultural exports such as coffee,
bananas, sugar and rubber, and c) non-traditional exports. The latter have become
increasingly important over the last 15 years, accounting for 47% of agricultural exports
in 1999.

From the food security standpoint, maize and beans are the most important crops,
as they are the main sources of calories and protein for low-income households. Both
crops are grown mainly by small farmers throughout the country. However, surplus bean
production is concentrated in the departments of Jutiapa, Jalapa, Chiquimula, which
account for more than 43% of total production.

According to MAGA, 79% of rural households grow at least part of their bean
supply, while partially relying on local purchases. In contrast, urban household fully
depend on dry and canned beans purchased from supermarkets, stores and market
vendors. Sales of beans sold in 1, 2, and 5 pound packages, as well as canned beans

have followed an upward trend over the last decade, presumably due to an increasing

'41

I!!!

 

number of women in the labor market, which has constrained their time available to
prepare food.

Nevertheless, according to official data, bean availability has steadily declined at
a rate of—4.08 per year since 1985, which at first sight appears to indicate a considerable
decrease of per capita consumption. However, as we will see in following chapters,

changes in production patterns could offer an explanation to this phenomenon.

42

CHAPTER FOUR

OVERVIEW OF THE BEAN SUBSECT OR

4.1 Structure

For the purpose of this study, the bean subsector will be divided into four major levels:
1) support services, 2) agricultural production, 3) wholesaling and processing, and 4)
Retailing. The first level (support services), involves several actors, including
agricultural research organizations, agrochemical and seed distributors, suppliers of
irrigation equipment and materials; transporters, and banks and private lenders. The
second level (agricultural production) consists of rural households, cooperatives,
farmers’ associations and assemblers or traders who transfer beans from producers to the
industry and to retailers in the urban centers. The third level (wholesaling and
processing), includes wholesalers in the capital city, and bean packing and canning firms,
whose outputs are dry beans packed in one hundred-pound-sacks, in polyethylene bags
and canned (refried) beans, respectively. Finally, the fourth level (retailing) includes
actors involved in retail sales, like supermarkets, market vendors and small retail stores,

also known as ‘Comer stores’.

43

 

 

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4.2 Level I, Support Services
4.2.1 Agricultural Research and Technical Assistance
Since the 1970s, agricultural research has been, conducted mainly by
Instituto de Ciencia y T ecnologt'a Agricolas (ICTA), a semi-autonomous central
governmental financed agency, with close links with USAID’, CIMMYTZ,

CIAT’, and PROFRIJOL4 and other research and development organizations.

Table 4.1 Improved Varieties Developed by ICTA Between 1970 and 1999,
Guatemala.

 

Eastern Cultivar (lowlands)

 

 

 

 

 

 

 

 

 

 

 

 

 

Variety
Porrillo 70
San Pedro Pinula 72
Cuilapa 72
Jamapa
ICTA Quetml . I979 ICTA Imazulapa * I979
ICTA Chapma‘ ‘212522522128225532: ICTA Monjefia ‘ I989
ICTA Sm 6...an * I991 ;:ICI‘A Macro * I998
Western Cultivar (H'L ands)
IAN 5091 1970 Guate 10261

 

Chile 23 (red)

 

jig} ICTA Quinack Che I
Altense ‘

 

 

   

 

Source: ICTA. August, 2000
* Varieties released, multiplied and sold to farmers.

 

‘ United States Agency for International Development

2 Internatioml Center for the Improvement of Maize and Wheat
3 International Center for Tropical Agriculture

‘ Aregiomlbeanresearch supportfundedby Swiss Aid

45

According to data provided by ICTA, from 1970 to 1999 the institution
developed 28 improved bean varieties (see Appendix A for a detailed
description). However, only 14 have been multiplied and sold to farmers during
the same period (Table 4.1). According to PROFRIJOL (1996), 49% of
Guatemala’s total bean-growing is planted to improved seeds. However, one of
the insights gained from the workshops with bean farmers in eastern Guatemala
was that only 32% of the total area in the region is planted to improved seeds.
Considering that bean farmers in this region are among the highest adopters of
technology, this suggests that the real rate of adoption (i.e. national average) is
significantly lower that the rate reported by PROFRUOL.

Scientists and agronomists interviewed at ICTA, MAGA, and local NGOs
agreed that the main factor responsible for a low rate of adoption fiom 1970 to
1995 was weak linkage between research and extension. Until the early 19908,
the agricultural extension system employed more than 3,000 agricultural
technicians. However, coordination between ICTA and the extension service was
almost nonexistent. Since most farmers were not aware of the availability of
improved varieties develOped by government scientists, there was little effective
demand for these varieties.

In the early 1990s, as result of reorganization, the Ministry of Agriculture
was downsized from more than 19,000 to only 2,500 employees and agricultural
extension was reorganized. To this end, the government encouraged small,
medium and large agricultural producers to organize themselves into

departmental-level producers’ groups. Under the new organizational structure, a

delegate fi'om every farmers’ association is selected to represent his/her group at
the departmental level, and these representatives constitute the Networks for
Sustainable Agricultural Development (RADEAS). Thus, at the departmental
level, the specific needs of farmers are centralized, prioritized and channeled to
the Ministry of Agriculture for the allocation of funds. To support this initiative,
MAGA provides funding to RADEAS, which distribute these resources among its
member organizations who contract with local firms for technical assistance.

According to representatives of farmers’ organizations, this new structure
has allowed for direct exchange of information among governmental agencies and
farmers, which has served to promote the introduction and adoption of improved
varieties of beans and other crops (Table 4.2). In addition, alliances between
ICTA and farmers’ associations have facilitated the production and distribution of
improved seed varieties.

Table 4.2 Improved Bean Seeds Distributed by ICTA During the Period 1997-
1999 (lbs). Guatemala.

 

 

 

seems. 19934 39,452

 

ICTALisero 0 154.049

mm 2m ens

 

Hunapi 960 10.563

Altense 0 5,225

 

 

mm. mm mm

 

‘AccordingmkeyinfomantsatMAGA,theobseweddecreaseinseedpmducfionfor1,999was
duetodamagecausedtotheseedcropbyofHurrieaneWI‘CH.

47

4.2.2

Currently, the government is considering providing government funding to
universities in order to help them develop crop improvement programs. This
approach is modeled on the successful experiences with the Non-Traditional
Products Exporters Association, which has conducted applied agricultural
research with government firnds and charges its clients a fraction of the cost,
according to a sliding scale (based on size of farm, income and payment
capacity). However, internal contradictions and lack of political consistency’ in
MAGA are likely to prevent such initiative from becoming operational.
Transportation

The departments within the study area have a relative advantage in terms
of transportation and communication infrastructure, compared with those in the
northern part of the country (average road densities of 23.2 in the study area, vs.
3.5 kilometers of road per square kilometer in the north), as Shown in Table 4.3.

However, according to key informants, high transportation costs have direct

’ effects on prices paid by traders. According to representatives of farmers’

associations, producers in remote areas within the department of Jutiapa are paid
discounted prices, based on the accessibility and quality of roads. Discounts vary

fi'om 5 to 10%, compared to prices paid to farmers who live close to a paved road.

 

’Duringthefirstyearofthecunentpresidential period, theMinisterongriculmrehasbeenchangedthree

tunes

Table 4.3 Transportation and Communications Infi'astructure in Eastern Guatemala

 

 

 

 

 

(1998)
Department Pepulatron Area sz R, .. , _, .. Telephonesb Electricity
Jalapa 53248872 248,900 271 ''''''''''' 0.43
Jutiapa 555369.691221 369, 700 192 0.55
Chiquimula 290746 290, 750 """"""" 232‘111'32 0.83

 

 

 

a. Kilometers of roads per 100 Knr2

11. Telephone lines per 100 inhabitants

c. Percentage of households with residential service
Source: PRONACOM, 1999

4.2.3

Interviewed farmers also reported that when they have tried to rent tnrcks
to transport their crop to urban markets, they have been charged considerably
higher rental fees, when the quality of the roads was poor. Thus, transportation

remains an important source of transaction costs to bean producers.

Market Information

Access to market information is essential to all firms. In the case of
agricultural production, access to accurate and timely information is more Of a
constraint to small farmers than to large agricultural firms. Typically, larger firms
have greater access to information resources and innovative means of
communication, which gives them a market advantage.

In the case of Guatemala, this is a key issue since large firms are linked to
their headquarters in the city via portable VHF radios, and cellular networks. In
contrast, small farmers usually travel to the departmental offices of the Ministry

of Agriculture (MAGA), where they obtain market (wholesale and retail) prices

49

with a one-day lag. While this is usually a one to three hour trip, considering the
erratic schedule of rural transportation services, it typically takes a whole day for
farmers to travel to the department office and return home. Thus, only farmers’
associations and cooperatives can bear the cost of obtaining up-to-date market
information.

Before 1996, the only governmental office collecting market information
was the National Institute for Agricultural Marketing (INDECA), a parastatal
established in the mid-19605 with the main objective of stabilizing the prices of
cash crops (corn and beans). While INDECA provided wholesale and retail
price information during the period 1966-1996, it disregarded quality standards.
As a result, most of these data were unreliable. According to MAGA officials,
another important issue is the fact that until its termination, INDECA centralized
all commercial information in their headquarters in Guatemala City, where
bureaucracy was a serious problem. Thus, price data were not distributed in a
8 timely manner.

In 1996, the MAGA adopted a new structure, and created eight operative
units, inclUding the Agricultural Policy and Strategic Information Unit (UPIE).
The UPIE is divided into three strategic areas: a) a Policy Area, in charge of
designing and conducting agricultural policy; b) a Strategic Information Area, in
charge of keeping records of prices, estimating food balances, and as crop
forecasting, and c) a Planning Area. Currently, price information is gathered
three times per week, at both the wholesale and retail level, in all departments in

the country. The data are transmitted daily via e-mail to UPIE headquarters,

where it is compiled, analyzed and distributed to departmental MAGA offices via
a'listserv.

Thus, all farmers and the general public can obtain market information
with only a one-day lag. However, during the field research, most farmers’
organizations expressed a concern that they had to travel to MAGA’S
departmental headquarters to obtain these data, which increased transaction costs.
Therefore, they suggested that price information should be transmitted via AM
radio on a daily basis. When asked about this issue, MAGA officials responded
that this initiative is in their operative plan for FY 2001.

4.2.4 Financing

According to key informants in the Ministry of Agriculture, credit services
for agricultural production are highly restricted by private banks, due to the high
degree of uncertainty that surrounds agricultural activities, especially food crops,
and the lack of certainty regarding property rights over agricultural land.
Conservative estimates indicate that 61% of farms do not have land titles
(PAFG/FAO, 1996). A few private banks, inclrlding the former Agricultural
Development Bank (BANDESA) which was privatized in 1997 and renamed
BANRURAL, provide financing to only a small share of bean producers (Table
4.4).

The lack of financial support not only for the production of beans, but for
most cash crops, is a significant constraint to the grth of the subsector and
makes small landholders dependent on traditional traders or assemblers, who in a

large percentage of cases provide financial support in the form of cash advances.

51

Table 4.4 Financing of Bean Production 1985-1996, Guatemala.

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Harvested Cost of Financed" % of production

area production“ cost
19851986 $§m170240fi§§i 83,358,938 """ 342135 ‘‘‘‘‘‘ 0.41
1986-1987 ggé;;::21.73 390-135;; 84,901,353 ;Ii;.fj;818,662;§§2§§g. 0.96
1987-1988 523%;172, 060513;; 84,250,111 971600 1.15
19881989 §:;.~2222140420§;53§éé 68,757,414 757452 1.1
1989-1990 2:26:21970902252 47,540,644 """‘1393'286*’* 2.93
1990-1991 :'§_;;:::i129,990’i1i§?? 63,650,308 886 27052;; 1.39
1991-1992 $221344,"130.332 70,574,035 ;::::.::i431,335.1:3111. 0.61
1992-1993 ------ 140,000 68,551,758 2,165006 3.16
1993-1994 2.120 890 ----- 59,194,443 i:'=i‘??-~676‘8185?~i9‘§§%§* 1.14
1994-1995 93 828 45,943,574 2103675112353: 2.26
1995-1996 134343 65,732,722 2215:1309 9j;i;,iiiff.iif 1.99

 

 

a. The total cost of production was calculated from the cost of production per hectare (reported
by BANRURAL) minus financial costs, multiplied by harvested area
b. Deflated according to the CPI reported by the National Institute of Statistics (INE)

For example, 47% of interviewed farmers reported that they usually sell their
production to local traders who provide advances in cash and in-kind. However, the
prices they charged farmers for fertilizers usually exceed the market price by 10-15%. In
addition, farmers who received cash advances implicitly accept the fact that they will
receive a discounted price for the beans they sell to these traders. According to
interviewed farmers in Jutiapa, Jalapa and Chiquimula, local (private) lenders play a less
important role nowadays, especially considering the fact that social capital links have
weakened overtime with the grth of urban centers, reducing the opportunities for
contract enforcement. As a result, 88% of informants had never used the services of
private lenders, and none were currently using these services.

MAGA officials reported that in order to reduce uncertainty and expand access to

financial services for producers of cash crops, the government is encouraging the creation

52

of agricultural insurance firms. To this end, a Mexican insurance firm is currently
conducting a feasibility study. In addition, a land registry program in currently being
implemented with the aid of geographic information systems, with the goal of providing
land titles to all farms within eight years.

4.2.5 Agricultural Inputs

Agricultural inputs include seeds, insecticides, fungicides, herbicides, fertilizers,
spraying equipment, irrigation materials and veterinary products. Within the study area,
these products are generally sold by small private agricultural input stores called
‘agroservicios ’; which are typically owned by graduates of vocational agricultural
schools (high school level) or community leaders. In either case, in addition to selling
agrochemical products, salespersons also provide fi'ee technical advise when asked. For
these reasons, agroservicios have become a popular source of agricultural knowledge. An
outstanding point is that despite the significant amount of social capital built over time
between producers and salespersons at agroservicios, purchases are generally paid in
cash (i. e. 90-95% of cases).

During the field research, eight agroservicios in the study area were visited.
Although the selection of products was similar (i.e. 8-10 insecticides, 6-8 fungicides, 3-4
herbicides, 4-5 granulated fertilizers, and 5-8 foliar fertilizers), only three firms sold bean
seeds, while six sold main seeds. According to the store managers, they did not sell
bean seed mainly because they have to travel to the capital city in order to purchase it. In
addition, they reported that the demand was not significant (especially because farmers
exchange improved seeds among themselves) and that marketing margins were not

attractive.

Stores that sold bean seed sold it by the pound, although they bought seeds fiom
ICTA in 50 pound-bags. Thus, package size was not a constraint. The seed price ranged
from Q 4.25 to Q 4.75 / lb (S.56-$.62/lb)6, and yearly sales per store ranged between
600-850 lbs. One store manager believed that the low level of effective demand for
newly released varieties and consequently low levels of adoption was largely due to lack
of information. In his own words: “farmers cannot demand something that. they do not

know exists”.

4.3 Level II, Agricultural Production

4.3.1 Production Patterns
Bean production is carried out at two levels: a) production for houSehold
consumption, and b) commercial production. Within the study area, all
interviewed farmers (47) were members of 10 farmer associations and all of them
had surplus production of beans, a pattern that is consistent with a priori
information regarding the geographic concentration of surplus producers. These
farmers utilized modern technologies, including improved varieties (32%),
mechanized plowing (36%), and chemical fertilizers and pesticides (100%).

Farmer associations surveyed in the study area had 7,815 farrner-members.

Members of the surveyed farmer organizations grow 9,009 hectares of
beans per year, and produced 40,350MT, equivalent to 6.7% of the total bean-

growing area in the country and 13.02% of the national bean supply (1999). .

 

‘ Price ofbeans at the time ofthe study were Q2.75/Lb, equivalent to S US. 0.36

E

Farmers’ yields ranged from 726 to 1,063 Kg/ha7. However, this figure should no
be taken as representative of the national yields, as the study area has a superior
potential for commercial bean production, as indicated by the difference between
the region’s share of the country’s bean growing land and its production share.
Cost of production are relatively consistent among these groups of farmers,
averaging SU.S. 0.29/Kg (Std. Deviation = 2.85)“.

Farmers in these three departments are familiar with the different types of
agrochemicals and their specific uses and dosage, as well with the main pests and
diseases of crops in the region. According to regional MAGA officials, this is
the result of more than 30 years of intensive agricultural extension in the area.

Land Holdings

About 84% of association farmers owned from 1 to 5 hectares; 8.6%
owned 5.1 to 8 hectares; 4% owned 8.1 to 15 hectares, and 3.4% owned more that
15 hectares. With respect to land titles, 70.2% had valid land titles; 17% had
land titles in the name of an ancestor (which had not been validated), and the
remaining 12.8% were defacto proprietors.

The bean enterprise

In the study area, beans are one of several farm enterprises. Farmers
have two objectives: to produce beans both for household consumption and to
obtain a marketable surplus of this highly demanded crop. In Jutiapa, Jalapa, and

Chiquimula, most farmers also planted maize, onions, tomato, coffee, and raised

:Record keeping data from farmers’ organimtions.
Calculated based on the associations’ record keeping and validated through random sampling

livestock. Among these farmers, their bean enterprise averaged 1.15 hectares,
while 94% of these farms planted from 0.5 to 2.5 hectares of beans, 3.8% planted

from 2.51 to 5 hectares, and 2.3% planted more than 5 hectares.

Figure 4.2 Size of the Bean Enterprise, Among Members of Ten Famers
Organizations in Jutiapa, Jalapa and Chiquimula, Guatemala.

 

Size of the Bean Enterpise
(hectares)

 

94%

 

 

 

I 0.5.25 1: 2.51-5 I more than sj

 

Source: Field Survey of 10 Farmers’ Organizations. July, 2000

Bean Surplus

Because a large percentage of farmers in the region have a commercial
focus (Figure 4.4) on average, these farmers marketed 77.5% of their bean
harvest, selling their surplus to traditional traders, cooperatives, farmers
associations and via sales individual to consumers in their communities.
However, among these farmers, their marketable surplus ranged widely. About
57.4% sold 80-100% of their crop, 38.3% sold 60-79%, and only 4.3% sold less

than 60% of their harvest.

4.4 Level III Wholesaling and Processing
4.4.1 Bean Wholesaling

Following harvest, marketed beans flow from the farrn-gate through middlemen,
who sell to wholesalers for resale at the retail level, or to processing firms. Farmers in
the interviewed associations utilized several different marketing channels. Over one half
(55%) of the association farmers marketed their crop through traders and assemblers,
8.5% through cooperatives, 12% through farmer associations, and 2% via individual Sales

to institutional consumers. (See Figure 4.2)

Figure 4.3 Distribution of Bean Output Corresponding to Members of Ten Farmer
Associations in the Departments of Jalapa, Jutiapa and Chiquimula (Jun 2,000),
Guatemala.

 

 

 

I Bean I-— 22.5% ——)I Household consumption I
7 I

l I I |

 

 

 

 

 

55% 12% 8.5% 2%
I Assemblers and traders I I Farmers’ I I Cooperative I I Individual sales I

 

 

 

Source: Farmers’ Associations Interviews, July 2000

Although some key informants reported that the share of total production that they
retain to meet household demand was insufficient to meet their annual consumption
requirements, some farmers (i. e. 17%) sold part of their consumption share in order to

overcome cash constraints.

57

Assemblers and Traders

Local businesspersons (traders), who assemble beans within a specific
area, are in reality informal economic agents. Since most of their transactions are
not reported to fiscal authorities, there exists no record of their total number,
name, or location.

Thus, in the departments of Jalapa, Jutiapa and Chiquimula where the
study was conducted, it was necessary to interview leaders of farmer associations
and cooperatives, as well as individual farmers, to determine the approximate
population of traders. According to these sources, there were 24 traders who
operated in the area and typically purchased at least 40MT per week during the
harvest season. Six of these traders were interviewed, two from each of the three
departments in which the study was conducted.

Traders in the region work exclusively with beans during the period from
June to January, buying and delivering beans to the capital city and other
departments in the western highlands from two to three times per week per truck.
Five of the six traders who were interviewed had at least two trucks, with an
average capacity of IOMT. In some cases, especially during the rainy season
(May to October), traders used 4x4 pickup trucks to collect beans from
surrounding villages, until they gather a full truckload.

All interviewed traders had rudimentary storage facilities, consisting of
wood, adobe (clay blocks), or concrete rooms, which most .of the times were
adjacent to their homes. The capacity of these facilities ranged from 4 to 90 MT

(avg. 43MT), which seems to be sufficient --especially considering that due to

constraints in cash flow, traders seldom store beans for long periods of time
(mode of 6 days).

In most cases (93%), traders sold to wholesalers in the capital city and
other cities in the western region of the country, fi'om whom they often (3 0% of
the times) received cash advances prior to every delivery.

On average, the six traders traders bought and sold 43.5 MT per week,
during the harvest season (Jun-Jan). According to calculations made, based on
statistical data provided by MAGA, profit per MT averaged 12%, which at current
prices in July 2000 represented $100/MT. However, according to the
interviewed traders, their profits were considerably lower. While, none of them
showed accounting records, a key informant reported that traders generally
incurred significant expenses that are seldom accounted for in official estimates
(i. e. donations to village fairs and other leisure activities).

Social capital plays an important and often unvalued role in the rural
marketing systems. In the case of the bean market, assemblers reported
purchasing a significant share of beans fiom their home villages (avg. 76%).
Approximately 12% of the traders’ transactions with independent farmers
involved cash advances and 10% of purchases were made (at least partially) on
credit. Thus, in the absence of appropriate contract enforcement mechanisms,

social capital is the primary source of leverage for contract enforcement.

59

Farmer Cooperatives

Although farmer cooperatives were introduced into the country several
decades ago, beginning in the early 1970s the number of cooperatives grew
rapidly. Initially, the grth in cooperatives was directly supported by the GOG
through the Ministry of Agriculture. Since the General Law of Cooperatives was
enacted (1978), the National Institute of Cooperatives (INACOP) has been the
governmental organization in charge of promoting, registering and auditing
cooperatives. Nevertheless, according to data fiom INACOP, since the late 1980s
there has been a decrease in the rate of formation of new agricultural
cooperatives, due to their presumed association with guerrillas in the late 19708
and early 1980s, as well as widely known cases of corruption.

Out of the 10 farmer organizations interviewed during the field research,
only three were farmer cooperatives: Ipalja, Agrtjal, and Atescatel. As shown in
Table 4.5, in 1999 these three cooperatives accounted for 1,897 MT of beans,
equivalent to 4. 7% of regional production.

All of the cooperatives had storage facilities with a capacity ranging from
400 to 1,500 MT, and provided their members with marketing services. In the

case of Atescatel, the cooperative also provided cleaning and polishing 9

 

9 Polishing removes dirt and starch residue from grains, giving them a characteristic shiny
appearance. Beans undergo this process prior to being put in storage.

60

Table 4.5 Membership, Harvested Area, Production, Average Landholdings, Production

and Yields of the Three Bean Farmer Cooperatives Surveyed in the Study
Area. Guatemala 2,000.

 

 

 

 

 

 

Ipalja 152 526 664
AGRUAL 825 771 926
Atescatel 60 280 307
Totals 3:33:11 037523;; 1,577 1,897

   

 

Source: Field Interviews with three been farmer cooperatives and their record keeping data.

June, 2000

According to key informants at MAGA, cooperatives lack a defined
marketing strategy, which constrains their economic takeoff. Despite having
modern infrastructure and equipment, bean farmer cooperatives have relied on
sales to wholesalers, incorporating very little value added to dry beans.

In most cases, cooperatives assemble beans from their members, clean,
polish and store them, but are able to store them only for a short time (1-2
months) due to liquidity constraints. Thus, in most cases, cooperatives are unable
to store beans sufficiently long to take advantage of the post-harvest price rise and
thereby optimize farmers’ profits.

In addition, as part of the Governmental Strategy for Agricultural
Competitiveness, the GOG has encouraged transactions among cooperatives and
bean processing firms by providing firnding and leased storage facilities to
cooperatives Agrijal and Ipalja. Nevertheless, processing firms have been
hesitant to purchase beans from these cooperatives, presumably due to the

availability of lower-price imported beans.

61

Farmer Associations

After the decline in the popularity of cooperatives in the late 1980s,
MAGA, as well as international development NGOS, encouraged farmers to
organize themselves into associations to facilitate agricultural marketing.

Of the ten organizations surveyed, seven represented some form of farmer
association. Adecicetrepsa, Asociacidn de Productores de Quezada, Asociacidn
de Productores de San Juan Emita and Adisque are grassroots farmer
organizations whose formation was supported by the GOG. Sindicato Agricola is
a farmer’ union, initially organized to protect the interests of farm workers, and
Pastoral Social de Comapa and Fuentes de Vida Adissa are farmers’
organizations formed with the support of religious organizations.

As shown in Table 4.6, in 1999 these seven farmer associations accounted
for 10,200 MT, equivalent to 6.9% of regional production. The primary activity
of farmer organizations is to search for reliable markets for their members’ food
commodities. However, since most farmer organizations do not have employees
(only a board of directors who have no salary), the people in charge of identifying

marketing outlets are farmers that volunteer their time.

62

Table 4.6 Membership, Harvested Area, Production, Average Landholdings, Production

and Yields of the Seven Bean Farmers’ Associations Surveyed in the Study
Area. Guatemala, 2,000.

 

Associations figgfizgafgfg'{ffj:§§?;i'§?§.f (ha)1999 i ..... srze(ha)

Farmers' ....Members Harvested area Average farm Production? , Avg-Yield

 

Adecicetrepsa 5000 2,454 .........0.49;;.t;;;;;;;2é 2,543 726
SindieatoAgricola ééiiii3:?{iéjf6723gtfiéi3j 34 "1;':.:::t0.50‘:::::::.;:.. 38 781

Quezada :tz:sséii'ii?887£4323? 75 085 75 697

 

San Juan Ermita 82 360 439 546 1,064

 

Pastoral Social de

Comapa 97 90 093 116 908

 

Fuentes dc Vida

Adissa 2231:1268??? 1,775 1.40 1,864 gsszsszs5210502333:

 

Adisque isi.%;};?ii.51.‘76:.§%%iElsi-f 2,636 ............ 1498 """" 3,074 §§%I3:I::I::817:113.:

Totals

6778 7.422 336 10.254 863

.............................

Source: Field Interviews with seven farmers’ associations, and their recOrd keeping data. June,

4.4.2

2000

Thus, these farmers’ associations have primarily focused on contracting
bulk transportations services, in order to increase their bargaining power and
lower transactions costs.

Bean Distribution

Participants in the bean marketing channels were identified by reviewing

the literature, direct observation and discussions with individual farmers, traders,

cooperatives and leaders of farmer associations.

Wholesalers in Guatemala City

Bean wholesalers are the agents who transfer sacked beans fi'om traders,
farmer associations, cooperatives and small groups of farmers to market vendors,
grocery stores, comer stores and, in some cases, to supermarkets. Most

wholesalers act as intermediaries (purchase, store, and then sell).

Wholesalers are clustered in two areas of Guatemala City, the Terminal
Market and fiom the 21" to the 23"' streets of Zone 1. There exists no official
data as to the number of bean wholesalers in Guatemala City. Based on
information provided by traders, farmer associations, and cooperatives, the
population of large wholesalers (business greater than 100 MT/year) was
estimated to be sixteen, out of which six were surveyed.

These wholesalers procured their beans mainly from the departments of
Petén (27%), Jutiapa (21%), Jalapa (19%), and Chiquimula (33%) as shown in
Figure 4.4. These proportions are consistent with the geographic distribution of
bean production and support the thesis that the majority of surplus bean producers
farm in departments within the study area.

The six firms that were surveyed purchased 2,300 MT (1999). Assuming
that they are representative of the total population of wholesalers, we can infer
that approximately 13,000 MT of beans (10% of the national production) pass

through the larger wholesalers in Guatemala City”.

 

'° Estimated by multiplying the average annual purchase of the 6 firms by 16.

Figure 4.4 Geographic Origin of Wholesaler’s Bean Supply by Department.
Guatemala City, 1999.

 

Wholesalers' Bean Supply
Geographic Origin

33%

 

27%

 

 

tn Paton DJutiapa I Jalapa I ChlquimulaI

 

 

Source: Field Survey of six wholesalers in Guatemala City. July, 2000

As shown by Figure 4.5, the wholesalers obtained most of their

supply from intermediaries (49%), but also from farmers’ associations

(30%), cooperatives (12%), individual producers (6%), as well as from

their own production (3%).

Based on direct observation and survey data, farmers, traders and

consumers believe that wholesalers have an important influence on price

determination and exercise considerable market power. Several factors

suggest the existence of imperfect competition in bean marketing. First,

barriers to entry are high. Key informants reported that to become a

wholesaler, a person needs to have access to S US. 100,000 in capital in

order to purchase storage facilities and a building near the ‘bean cluster’ of

65

Figure 4.5 Main Sources of Wholesalers’ Bean Supply. Guatemala City, 1999.

 

Distribution of Wholesalers' Supply

 

 

 

 

Indlvldual producers l Frmra‘ associations I Cooperatives
El Intermediaries E1 other

Source: Field Survey of six wholesalers in Guatemala City. July, 2000

 

of wholesalers and to provide their suppliers with cash advances in order
to purchase beans from producers.

Second, social capital plays an important role in transactions
between traders and wholesalers. In most cases, wholesalers provide
traders with cash advances to purchase beans from farmers. However, in
the absence of mechanisms to enforce contracts, social capital becomes
the only way to ensure compliance. Social capital is build over a long
period of time, as indicated by the length of time that the largest
wholesalers have been in the market (i.e. 4 to 24 years).

Third, access to timely price information is very limited.
Government oflicials collect price data mainly from wholesalers, which
reduces their reliability and provides wholesalers an opportunity to follow
a price-setting strategy (speculation). Key informants reported that

wholesalers accumulate large stocks of not only beans, but also maize and

rice, in order to increase the price, which has given them a negative image
in the eyes of the general public. Nevertheless, based on their critical role
within the subsector (i.e. transmitting demand and supply information
through prices, influencing price determination and establishing minimum
standards), wholesalers can be considered channel captains. Thus, any
attempt to intervene in the market to induce greater competition should be
targeted to these actors.

While the surveyed wholesalers distributed beans to retailers at all
levels, the main outlets for their product were supermarkets, grocery
stores, and market vendors, which purchased beans in lOOlb sacks, to be

resold by the pound (Figure 4.6).

Figure 4.6 Distribution of Wholesalers’ Output. Guatemala City, 1999.

 

Distribution of Wholesalers' Output

 

78%

 

 

 

[I Packers D Supermarkets I Processors I Retailers 3 Other]

 

Source: Field Survey of six wholesalers in Guatemala City. July, 2000

67

The main constraints reported by wholesalers during interviews
were a lack of funds to expand their activities, lack of quality standards for
beans, lack of coordination with bean canning firms, and absence of a
secure environment (against burglaries and violent crimes) for carrying
out their daily business activities.

4.4.3 Beau Processing
4.4.3.1 Bean Packing Firms

Commonly known as baggers, packing firms purchase beans and
rice from cooperatives, farmer organizations, and traders, and package
them in plastic bags for distribution among retailers. While the process is
labor intensive, it does not require technical skills or machinery.

Almost all of the country’s packing firms are located in Guatemala
City. Although over 30 packing firms operate in the capital, most of these
firms are informal household industries. Of the five registered firms, four
were surveyed during the field research. In 1999, these four firms handled
14,300 MT, which represented over 13% of total bean production for that
year. According to key informants in the Ministry of Economy, the
remaining informal firms could account for an additional 4,000MT. Thus,
about 17% of Guatemala’s total production of beans passes through these
packaging firms.

In terms of procurement, 87% of these packers’ input were
purchased from assemblers and traders, 7% from farmer associations, 4%

fi'om cooperatives, and 2% from other suppliers (1'. e. small groups of

 

farmers and small traders), as shown in Figure 4.7. According to key
informants among bean packers, they purchased from wholesalers only on
rare occasions, since wholesalers sell their output at substantial markups,

which would limit the competitiveness of their product.

Figure 4.7 Distribution of Packers’ Bean Input, by Supplier. Guatemala City,
1999.

 

Distribution of Packers' Supply

87%

    

2% /

4% 7%

 

[El Intermediaries I Farmers' associations E Cooperatives I Other]

 

 

 

Source: Field Survey of four registered packers in Guatemala City. July, 2000

As was the case for wholesalers, these packing firms procured their
bean supply primarily from the departments of Jalapa (35%), Chiquimula
(30%), Jutiapa ( 19%), and Petén (16%), which is consistent with national
statistics and a priori information on the geographical distribution of
commercial bean production (Figure 4.8).

Packing firms purchase most of their bean supply from July to

early February. Thus, they must have capacity to store at least a four-

69

Figure 4.8 Geographical Distribution of Packers’ Bean Supply by Department.
Guatemala City, 1999.

 

Origin of Packers' Bean Supply

16%

19%

 

30%

 

 

 

E Petén I Chiquimula E Jutiapa I Jalapa]

Source: Field Survey of four registered packers in Guatemala City. July, 2000

 

 

month-supply, in order to satisfy their demand, which is uniform
across the year. Packing firms’ storage facilities consist of silos and
warehouses for sacked beans, which among the surveyed firms, ranged
from 140 to 2,200 MT, with an average of 1,150 MT.

The four packing firms that were survey reported that the outlets
for their production were mainly supermarkets (44%), but also grocery
stores (36%), and other retailers (20%). Sales to other retailers included
wholesalers, who purchase large volumes and distributed to small ‘corner
stores”.

The target market for packers consisted of medium and upper level
consumers, who purchase food in supermarkets and grocery stores. In
contrast, most low-income households purchase unpacked beans, which
they buy by the pound in markets and corner stores from a sack (Figure

4.9).

‘70

Figure 4.9 Distribution of Packers’ Output, Based on Distribution Channel. Guatemala,

 

Distribution of Packers' Output

20%

\\\\\\\

\
\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\

    

44%

 

 

 

I Supermarkets l Grocery stores E3 Other retailerfl

 

Source: Field Survey of four registered packers in Guatemala City. July,
2000

A common complaint against packing firms is that, although the
metric system is not used to weight food products in Guatemala, bean
packers label their products in metric units and disregard round numbers
(i.e. consumers are used to purchase by the pound and packages are
labeled 400g, 600g, 900g, 2,000g). Thus, in most cases consumers buy a
400g bag, assuming that it weights one pound (450g). However, in reality,
the price is actually higher that the price of one pound of beans.

Furthermore, informal packing firms label their products as “350g
exact weight”, but actually sell them as one pound. In these cases, profit
margins account for a significant share of sale price. While these firms’
packing practices are interpreted by some consumers as opportunism-
given the fact that most people in lower income layers are not able to

discriminate between the metric and English systems--they argue that they

71

are actually complying with government regulations by stating the exact
weight.

Packers’ marketing margins were calculated, based on the
difference between prices paid to traders and the wholesale price paid by
supermarkets. In July 2000, this difference was 18.2%. According to key
informants (traders and supermarkets), price margins can reach 26%
during the off-season period. However, according to packers, the higher
margins during the off-season period is due to the cost of storage, in
addition to financial costs, since packers usually sell to supermarkets on 2-
week credit.

Finally, packing firms complained about the inability of the
government to provide financial assistance for their expansion and to
guarantee security for them and their assets, as robberies of distribution

trucks are very frequent (1-2 times per truck per year).

4.4.3.2 The Bean Canning Industry

There are four bean-canning firms in Guatemala. Three of these
firms produce other lines of canned products, including fruit cocktail
tomato paste, hot peppers and link juices, while the other one produces
only of canned beans and fruit juices.

The oldest canning firm, Kem/Ducal, which was established in
1958, originally produced fruit juices for the local market. However, in

the late 1970s, Kem/Ducal began to produce canned beans, as they noticed

72

a growing demand for imported refi‘ied beans. Currently, this firm
produces canned firms and vegetables, tomato paste, vegetable juice,
ketchup, a large selection of hit drinks, and refried beans. Kern/Ducal is
a subsidiary of Rivicma Foods, based in Houston, Texas. However,
according to its investor reports", Riviana has been experiencing losses in
their Central American operations, including Kern/Ducal, due to difficult
economic conditions and high costs associated with product distribution.
In 2,000 Kern/Ducal reported a 7% increase in unit volumes and Pozuelo
(their Costa Rican subsidiary), reported a 2% increase in unit volume, but
their operating profit declined by 6% and sales revenues also declined by
1% in (Riviana Foods, 2000).

Mather, an independent firm that was founded. in the 1970s,
produces powdered chicken broth, chicken, beef, and seafood bouillon.
However, powdered chicken broth is its most popular product, for which
their market share is about 50%. -

Lozano, another independent firm, was established in the late
19603. Its main product lines are apple and grape juices, but it added
refi'ied beans to their product line in the late 1970s. However, canned
beans account for only a small share of their total sales.

Alimentos Maravilla, S.A, is a division of Cerveceria
Centroamericana, SA, a major Guatemalan corporation that produces

beer, purified water, soft drinks, snacks, fruit juices, and several dozens of

 

" Riviana’s Investor Reports http'J/www.rivianaoomlannual.hun

73

other products. Alimentos Maravilla started producing canned beans in
1998, which are marketed through a joint venture with Del Monte Foods.

According to key informants in the food industry, the conversion
ratio from dry beans to canned (refi'ied beans) is 3.5, which means that
every pound of dry beans will yield on average, (depending on the
technology used), 3.5 pounds of refried beans.

For the domestic market, processing firms sell refi'ied beans in
cans with 5.5, 10.5, 16, and 29 ounces. In contrast, canned beans for
export usually contain 16 or 29 oz of refiied beans.

According to customs information, all four firms export canned
beans to Central America. However, only Kern/Ducal and Alimentos
MaraviIIa/Del Monte export to the U. S. and Europe. When asked about
their target consumers in the US, one of the canning firm’s marketing
executives said: “There is one and a half million Guatemalans living in the
US. and most of them are willing to pay a premium for canned beans
coming from their home country, it is just part of nationalism”. Further
research showed that Del Monte’s and Kem/Ducal’s labels are sold in
cities with a large population of Guatemalans, such as Los Angeles,
Chicago, Washington, DC, Newark, Houston, Dallas, and Miami. A
rapid survey of prices in Chicago and Washington showed that refiied
beans imported from Guatemala are sold at prices 15 to 26% above similar

products produced in the US.

‘74

In addition to exporting to the US, Del Monte and Kern/Ducal
also export to Mexico, South America, and Europe. In order to develop a
market, they have implemented advertising campaigns via the press, radio
and television, which are targeted at clusters of Guatemalans and Central
Americans.

Currently, 30% of the beans canned by the Guatemalan industry
are exported, while the remaining 70% are for domestic consumption
(PRONACOM, 1999). Until the early 1990s, families mainly consumed
canned beans during vacation trips or by high-income households.
However, more recently as women have increasingly begun to participate
in the labor force and the opportunity cost of their time has increased,
medium-income families have adopted the product—even though refi‘ied
beans cost four times more per ounce than dry beans.

Regarding the domestic market, a rapid survey in Guatemala
City’sl2 supermarkets, grocery stores, and comer stores (based on shelf
space assigned to each brand and comments from store managers) was
undertaken to estimate the approximate market share of each canning

company’s product. Results are presented in Figure 4.9

 

"Three supermarketsthreegrocerystoreandthreecomerstoreswere selected, onecechinalow, medium
and high-income neighborhood. '

75

Figure 4.10 Domestic Market Share of the Four Bean Canning Firms in Guatemala City,

’

 

Market Share

    

76%

 

 

I Ducal 121 Del Monte I Lozano I Malher

 

 

Source:Survey of four bean-canning firms. Guatemala city, 2000

The shelf space-based estimate of market shares is consistent with
those reported by PRONACOM in 1999 (Figure 4.10). However, our data
show a redistribution of market shares due to the growth on the newest
firm’s brand, (Del Monte), which began operations in 1998. These figures
suggest that Del Monte’s grth in market share (+13%) reduced the

market shares of Kern/Ducal (-2%), and Malher (-1 1%).

76

Figure 4.11 Domestic Market share of the Four Bean Canning Firms in Guatemala City,
1999

 

Market Share

. . xiv/7;
.///,/////////
/////////////////////

 

78%

 

 

I Ducal El Del Monte I Lozano I Malher
Source: PRONACOM, 1999

 

 

In response, Kern/Ducal has recently introduced new products,
including canned black beans with cheese and with chorizo (spicy
sausage), as well as red beans in the same preparations. Although red
beans have been traditionally consumed in a lesser volume, this product is
becoming quite popular.

Total production of canned beans (1999) is estimated at 7,400
MT”, equal to 1.38% of the domestic dry bean supply (total domestic
supply of canned beans divided by the average industrial conversion rate

of 3.5 lb of refl’ied beans per pound of dry beans).

 

'3 Calculated based on estimates provided by PRONACOM (1999), and managers of the canning firms.

77

Although the canning firms did not provide precise information
regarding their procurement for dry beans, analysis of data from
Guatemalan Customs, key informants at the processing plants, bean
wholesalers, US. Customs and the Michigan Bean Association suggests
that at least two of the firms (Kern/Ducal and Del Monte) import nearly
92% of the dry beans used for canning, mainly from the US, Canada,

_ Chile and Argentina".

According to the same sources, these firms import mostly “splits”
(i.e. broken grains) to produce canned refried beans. These firms prefer to
purchase splits because they can be purchased at a discounted price of
over 50%. At the time of the study (Oct. 2,000), the Ex-elevator price
(Michigan) for whole beans was $. US. 0.15/lb, while splits were being
sold for $ US. 0.08/lburepresenting a significant saving. By contrast,
during the same period, Guatemalan beans were being sold for S US.
0.23/lb.

Hence, the reluctance of canning firms to participate in the GOG’s
initiative to encourage transactions among these firms and organized
producers is clearly due to the availability of cheaper sources of beans in
the international market. Key informants reported that the only time that
the canning industry procures domestic beans is during the first and
second months after harvest, when stocks are high and market prices are

low--making domestically grown beans competitive with imported beans.

 

" In these countries, beans are mechanically harvested. During the grading process, splits are separated
from whole beans and sold at a discounted price.

78

Consequently, there is a continued antagonism between the canning
industry and domestic suppliers (1'. e. producers, traders and wholesalers).
Furthermore, bean-processing firms follow a double standard with
respect to quality. While they are exceptionally strict on quality standards
for domestically grown beans (e.g. allowing a maximum of 2% of broken

grains, etc). Domestic suppliers interpret this as a barrier to trade.

Summary

Among the distinct phases of bean production and processing, agricultural
research and extension, financing and marketing are the main constraints limiting the
sustainable growth of the bean subsector. Links between research and extension have
been weak overtime. However, the restructure of the national extension service
introduces new opportunities, especially related to the establishment of strategic alliances
between the GOG and private firms to promote the adoption of improved varieties.

Financing is another aspect that constrains the growth of the subsector. Farmers’
access to credit is limited due to the uncertainty regarding property rights over land,
which automatically disqualifies farmers from accessing to. credit, as well as to the
reluctance of financial institutions to provide loans for agricultural production, due to the
high degree of uncertainty. The gap left by financial institutions has been filled by local
traders who provide farmers with advances in cash and in-kind, thereby reducing the
bargaining power of bean producers and allowing for opportunistic behavior on the side

of these commercial agents.

79

Bean wholesalers in the Guatemala City play an important role in the marketing
chain, as in the majority of cases, they provide time utility to the product, through
storage. Nevertheless, they often exercise speculative behavior in detriment to
consumers, playing a determinant role in price determination.

Bean packing firms also play an important role within the bean subsector, since an
estimated 17% of the national bean supply passes trough packing firms located in.
Guatemala City. While these firms add very little value to dry beans, their profits
average 20%. In addition, consumers often complaint about the opportunistic behavior of
packing firms. Their use the metric system, which is not commonly used in Guatemala to
measure food products, is perceived as opportunistic behavior.

There are four bean canning firms in Guatemala, whose output is mainly refried
canned beans for the domestic and international markets Two of the firms have direct
linkages to international corporations, import their supply of beans and coincidently are
the ones with the most up-to-date processing technology. The other two firms, which are
locally owned, procure most of their bean supply from domestic sources and use older
technologies in their production process. Nevertheless, refried beans account for only for
a small portion of their total output (15 and 18%). In addition, economies of scale in
product distribution ofi‘set their productive deficiencies, allowing them to stay in the
market, although with shrinking market shares.

One of the objectives of this study was to determine the reasons that constrain
vertical coordination among bean producers and the canning industry, in search of
remedial measures that could encourage direct marketing, thereby adding a component of

certainty to bean production. However, this study found that canning firms are

purchasing ‘splits’ (broken beans) in the international markets. Because splits, which are
a byproduct of mechanized harvesting, are graded as low quality for canning, they are
sold at discounted prices of over 45%. This finding discards defacto the possibilities for
inducing vertical coordination, especially considering the significance of the economic

incentives involved.

81

CHAPTER FIVE
SUMMARY AND CONCLUSIONS
5 Summary
5.1 Beans in Guatemala

Beans, are the second most important food crop in Guatemala. In 1,999 the bean
producing area was estimated at 135,200 hectares, following maize (1 .1 million hectares).
Beans are grown predominantly by small farmers since 43.3% of the national bean supply
is grown in farms with less than 7 hectares, 18.8% in farms from 7 to 45 hectares and
27.8% in farms greater that 45 hectares. A recent study (1996) found that the level of
technology is inversely correlated with farm size. As indicated by that finding, bean
yields on farms above 45 hectares were 48% above farms below 7 hectares.

Beans are consumed throughout Guatemala, with no substantial regional variation
with respect to their relative importance in the diet. A large percentage of rural
households (79%) grow their own beans, while the supply of beans for urban households
comes from surplus production in the nrral areas. Empirical data show that the market
shares of canned beans, as well as influence of packaged beans are increasing. Estimated
market shares (2000) of bagged beans and canned beans were 17% and 1.38%1
respectively, the latter with an annual growth rate of 12%.

Since the late 19805, total bean production has followed a decreasing trend due to
a decline in cultivated area and yields. Since 1986, domestic production has decreased
by 4.9% annually (MAGA, 1998), while population has been growing at a rate of 2.7%

per year (FAO, 1999). While this implies a 30% reduction in domestic per capita

 

1 The estimate of canned beans was made based on dry weight. Dividing the total domestic
supply by the industry’s average conversion rate of 3.5 lb of refried beans per pound of dry beans.

82

availability over the 1986-1998 period, a recent study (INCAP, 1999) shows that despite
moderate reductions in per capita consumption of beans, it has not decreased to such an
extent. This finding indicates that the deficit in national bean supply has been
supplemented by non-commercial household production which is often not included in
official data. In addition, Guatemala has not conducted an Agricultural Census since
1979, and official data seldom report bean production by producers with plots less than
0.5 hectares.

Farmers’ bean enterprises are typically quite small. About 94% of farmers plant
only 0.5 to 2.5 hectares, while 3.75% plant 2.51 to 5 hectares, and only 2.25% grow
more than 5.1 hectares of beans.

National bean yields average 532 Kg/ha. Despite several decades of agricultural
research that has been carried out by ICTA and before by the National Agricultural
Institute (IAN), weak links between generation and technology transfer partly explain
the low rates of adoption of improved technologies. In an effort to strengthen research-
extension linkages, in 1996 a new agricultural extension system was introduced, based
upon contracts between farmers’ organizations and private consulting firms, and
supporting through government funding. This approach has proven to be a more
promising way to transfer technology, providing farmers greater opportunity to identify
their problems and seek solutions to relax their constraints.

To gain a better understanding of the constraints to expanding commercial bean
production, ten farmers’ organizations were surveyed in the study area. These

organizations had 7,821 members who accounted for 16.4% of total farmers in the

region. Of these farmers 84% owned from I to 5 hectares; 8.6% owned from 5.01 to 8
hectares; 4% owned from 8 to 15 hectares , and 3.4% owned more than 15.01 hectares.

Yields in the region ranged from 697 to 1,063 Kg/ha, with an average of 847
Kg/ha. These data confirm that in the study area agro-ecological conditions and higher
adoption of improved varieties have a determining influence in yields. In the study area,
characterized by high-technology production, compared to the rest of the country, the rate
of adoption averaged 32%, including farmers who bought improved seeds as far a 5
years ago and are still using the same line.

Farmers in the study area sold most of their bean crop at harvest. Afier retaining
22.5% of their production for household consumption these farmers sold their remaining
harvest to assemblers (55%), farmers’ associations (11.9%), cooperatives (8.6%), and
individual. (direct) sales (2%). The key role that assemblers and traders play in the small
farmer marketing system can be partially explained by the failure of the financial system
to provide assistance to small producers.

Available data indicate that less than 2% of bean farmers receive production loans
fiom financial institutions. Banks are reluctant to support farming activities, since
according to conservative estimates, over 66% of all farms in the country are not
properly titled, which prevents farmers fi'om qualifying for credit. Thus traders have
filled this gap by providing advances in cash and kind (agrochemicals). However,
traders require that farmers sell their harvest to them at discounted prices. Another
factor that explains the structure of the marketing channels is the dispersion of
production. Traders are the only agents willing to bear the cost of assembling the

commodity. However, some producers transport their beans to farmer organizations or

cooperatives for delivery to Guatemala City, or to local markets where they sell to
market vendors. While farmers’ organizations and cooperatives neither store nor add
value to their product in any other way, marketing large quantities of beans enables
them to reduce transportation costs and at the same time increase their bargaining power
with traders and wholesalers.

Typically, farmers view traders as a threat to their economic well-being, since
in the past, traders have used private information and exercised opportunism to increase
their gains fi'om trade. However, several market failures favor such behavior, including
the lack of effective channels for the dissemination of market information and the
absence of a clearly defined system of grades and standards for beans for domestic (non-
industrial) use. Nevertheless, traders do play an important role in the bean marketing
system by bearing the transaction costs associated with assembling dispersed production,
providing financial assistance and communicating market information through prices.

All of Guatemala’s sixteen major bean wholesalers are located in Guatemala City.
The Ten of them that were interviewed purchased 1.8% of the bean crop.

Wholesalers in Guatemala City, play an intermediating role by buying, storing
and selling sacked beans, without adding value other than through storage during the off
season periods. However, the wholesaler survey confirmed a priori information
provided by key informants regarding their role as channel captains, given that they
play an important function in determining market prices, minimum quality
requirements, frequency of deliveries and form of payment (credit or cash). In addition,

because barriers to entry are high, wholesalers are in an ideal position to exercise market

85

power. In fact, it is a common belief that wholesalers set prices below the equilibrium
during the peak season.

Bean packers include five large registered firms and 25 small non-registered
businesses. Bean packing firms also appear to exercise market power and some degree
of opportunism. While these firms add some value through cleaning and bagging, they
sell their products at significant markups. In addition, bagging firms use a system of
measures with which the majority of consumers'are not familiar-especially informal
packing firms , which are not audited by government agencies-and exercise
opportunistic behavior to a greater extent than do formal sector bagging firms (i.e.
selling bags with 350grams of beans as a substitute for 11b bags, while charging the same
price).

The processing industry is made up of four firms that currently produce refi'ied
canned beans. Total output of canned beans was 7,400 MT in 1999. Two of these firms
(Kern/Ducal and Alimentos Maravilla, S.A) have direct relationships with transnational
corporations. In year 2000, Kern/Ducal reported decreasing revenue due to high
transaction costs in their Guatemalan operations. The sources of these costs are the
high costs of transportation and security services, which have become indispensable
due to the social instability prevalent in the country.

Currently, only 1.38% of annual bean consumption is in the form of canned
beans. However, there appears to be a growing demand for canned beans, as indicated
by the emergence of a new canning firm, as a subsidiary of Alimentos Toledo in the
second quarter of 2,000. This firm is associated with a large corporation that also

produces poultry, pork, and other products, and subcontracts canning to one of the four

existing firms. Additionally, the emergence of this new division of Toledo suggests that
there exists a favorable institutional and regulatory framework for bean processors in
Guatemala.

Conventional wisdom highlights the inherent benefits to farmers, derived from the
grth of the food industry, by providing a new outlet for their crop. In the case of
Guatemala, the expansion of the processing industry has had negative effects on bean,
producers. The two main processing firms import nearly 92% of their bean supply fi'om
the US, Canada and South American countries. These firms import mainly ‘splits’,
which are the broken grains sold at discounted prices equivalent to 45% of the whole
bean price. Thus, since brokens are substituted for whole beans in processing refi'ied
beans, Guatemalan bean farmers have not benefited from the expansion of the processing
industry. Interestingly, Del Monte and Kern/Ducal sell canned beans in the US, as if
they were Guatemalan beans, and are being paid a premium of over 26% by Guatemalan
consumers, based on the utility derived from consuming food from their home country.

Clearly, the Guatemalan bean canning industry is dualistic —consisting of two
highly competitive firms with international linkages, up—to—date machinery, standardized
production protocols, and imported supplies, and two locally-owned, less competitive
firms, with older machinery, and domestic bean supply. These local firms are able to stay
in the market due to their low dependence in beans, as their main products are fi'uit juices

and powdered chicken broth.

87

5.2 Policy Recommendations to Support the Phase of Agricultural Production

This study documented the strategic importance of the bean subsector, from the
standpoint of food security.

Disregarding the limited prospects of industrial transformation, and despite their
inability to compete with imported beans, farmers will likely continue to grow beans due
to their importance in meeting their food needs.

Provided that policy regarding bean imports remains stable, processing firms will
likely continue to import most of their bean supply, with eventual purchase of domestic
beans whenever the price falls below the international market for brokens. Nevertheless,
at least until 2,005, when tariffs will be eliminated due to free trade agreements, imports
of whole dry beans for household consumption will remain limited. While dry beans are
cheaper in the international market, the existing 20% import tariff makes it prohibitively
expensive to import them. However, the import tariff makes does not affect imports for
the processing industry, as the low market price for splits offsets the negative effects of
the tariff.

The main constraints to the subsector’s growth are:

5.2.1 Low Rate of Adoption of Improved Varieties

Farmers in the study area are skilled agricultural producers, and have in-
depth knowledge of agricultural practices and the use of agrochemicals.
However, the low rate of adoption of improved varieties is a pervasive
constraint to increased production, since most commonly planted varieties
,are neither resistant to plant diseases nor to adverse climatic conditions,

and are low yielding. Hence, the low rate of adoption contributed to high

, l A

per-unit cost of production for non-adopters, consequently reducing their
competitiveness. In domestic markets low profitability has resulted in a

reduction of commercial bean production.

Needed Actions:

In order to overcome these constraints, agricultural research must
be re-oriented in order to focus on increasing yields and reducing
production costs, and promoting large-scale multiplication of improved
seeds, while facilitating distribution to private outlets of agricultural
inputs, through and agreement with MAGA offices.

ICTA must establish links with private providers of technical
assistance in order to develop strategic alliances tending to promote
dissemination of information about improved varieties to promote their
adoption. Considering the commercial focus of such firms, the strategic
alliances much involve economic incentives proportional to the rate of
adoption at regional level (i.e. commissions based on regional adoption
rates, similar to the reward system utilized by pharmaceutical firms).

To facilitate adoption by producers, new strategies are also
needed. A good example of such an innovative strategies is the ‘kilo por
kilo’ program in Mexico, which allows farmers to exchange a kilogram of
improved seed for a kilogram of common grain, in order to facilitate

adoption of improved varieties.

89

5.2.2 Absence of Financial Support for Bean Production

Due to the high degree of uncertainty associated to the production
and marketing of staple crops, banks are hesitant to approve such loans
because the probability of non-repayment is considerably low. As a result,
farmers must rely on traders and assemblers, who in some cases provide
advances in cash and in kind, help farmers to solve their immediate cash
constraints.

Thus, the absence of financial support for bean production
constitutes a major determinant for the subsector’s structure and
performance. While traders fill this existing gap, they exhibit
opportunistic behavior to the detriment of producers, who experience a
reduction of their bargaining power (1'. e. must sell their crop to the trader

at a discounted price).

Needed Actions:

In principle, increasing the certainty of property rights over land
must continue to be a priority in the governmental agenda, since in the
long run it is the only measure that will democratize access to credit.

Provided that the land titling process will take and additional seven
years to be concluded, two contingent measures should be put in practice:
a) establishment of an association-based credit system to provide loans to

farmers despite the availability of land titles (i.e. though RADEAS and

5.3

farmer associations), and relying on social capital; b) the initiatives to
introduce agricultural insurance must be encouraged and facilitated by
MAGA, especially considering the potential benefits of a program of this

sort in supporting the access of small landholders to agricultural credit.

Policy Recommendations to Support the Phase of Marketing and
Distribution

5.3.1

Market Failure and Adverse Selection

Market failure has created uncertainty throughout the bean
subsector and thereby further reduced incentives for commercial bean
production. Key examples of market failure includes a weak system for
the dissemination of market information, a ‘non-transparent’ system of
grades and standards for beans for domestic (non-industrial) consumption,
and barriers to entry and exit at the trading level, which encourages

opportunistic behavior by traders and wholesalers.

Needed Actions:

MAGA must ensure the effectiveness in the timely dissemination
of market information, preferably by using commercial AM radio stations,
which are the most popular media in the rural communities of Guatemala.
Reliable market information will improve the bargaining power of been
producers, reduce the possibilities for opportunistic behavior on the side
of traders and wholesalers, increasing market transparency and improve

competition.

91

A system of grades and standards for agricultural grains should be
adopted and enforced, allowing for the reduction of transaction costs and
evolution of market futures and options. I

In order to increase competition among wholesalers, grain storage
facilities in possession of the GOG must be sold or leased to farmer

organizations, in order to allow for the establishment of new trading

agents.

5.4 Phase of industrial Transformation
5.4.1 The Bean Processing Industry
Since the mid 1990s, the processing industry has expanded rapidly
in response to increasing domestic demand, following increases in the
income of young households in which both, man and woman work outside
the home. Hence, due to an increase in the opportunity cost of their time,
these households prefer to consume processed products. Also, the
population of Guatemalans in the US. is growing in number and income,
which has contributed to a growth in export demand for canned beans.
Thus, as a result of demand, a fifth canning firm has been recently
established.
Despite the poor performance of the bean subsector, stagnating
local production has had little impact on the canning industry because
bean producers have a guaranteed supply of imported dry beans at prices

that are below the price of domestically grown beans. Despite a 20%

92

import tariff on beans, their final cost (CIF Guatemala City) was below
$.U.S. 0.20/lb, while the price for domestic beans averaged $.U.S.
0.36/lb (July, 2,000).

A determining factor in the economic success of the two leading
firms has been the fact that they are able to take advantage of economies
of scale, using the same plant facilities to produce a large array of
products, which results in higher efficiency. In addition, these firms are
planning to further diversify their bean products, developing new recipes
including beans with hot pepper, lard, pork meat, and eventually (refried)
beans and rice.

Based on the current price structure of canned beans, the two firms
with lesser percentage of market share are likely to survive for a few more
years without major technological improvements, although the market

share of the largest firms is most likely to increase.

Policy Recomendations:

At this point, no firrther resources . should be dedicated to
encourage coordination among bean producers and processors, since in the
absence of economic incentives such coordination is not viable. In
addition, the proportion of brokens among domestically-grown beans is
not significant, considering that the majority of broken beans are a

byproduct of mechanized harvesting, which is not used in Guatemala.

93

5.5 Limitations of the Study and Future Research
This study has uncovered important threats and opportunities for the
Guatemalan bean subsector, most of which will necessarily be addressed by
further research. The following are some of the most relevant questions that

remain to be answered:

0 To what extent do the bean canning industry contribute to national income
and social welfare?
0 What are the implications in terms of producer and consumer surplus, and
social welfare, derived from the bean imports?
o What is the volume of non-declared bean exports to El Salvador?
0 What are its implications in terms of price change?
0 What are the reasons behind the limited multiplication of been seed?
0 How can the competitiveness of bean producers beimproved?
0 Can Guatemalan producers take advantage of “Cause Marketing”
and “Ethical Purchasing” in order to promote black beans with

special attributes in developed countries?

94

APPENDIX A

Main Characteristics ofImproved Seeds Developed and D'Btributed
by ICI‘A During 1997-1999.

ICTA OSTUA. DOR42/ICTAN 78-12 (Lowlands)

Developed by ICTA between 1981 and 1985. Highly resistant to bean
golden mosaic virus (BGMV), rust, common mosaic and drought tolerant.
Blooming starts 72 days after planting, producing beige pods afterwards.
Plant height ranges between 35 and 45 cm. Growth habit II, indeterminate

bush. Yield: 2,590 Kg/ha.

SANTA GERTRUDIS. DOR364/Gl8521/DOR365/IM30630 (Lowlands)

Variety of opaque black beans developed by ICTA and CIAT between
1988 and 1992. Recommended for its resistance to bean golden mosaic
virus (BGMV), rust and common mosaic. It is the variety with the highest
yield potential that has been developed by ICTA. Blooming starts 37
days after planting. Plant height ranges between 50 and 60 cm. Santa
Gertrudis reaches physiologic maturity 75 days after planting. Yield:

3,180 Kg/ha.

ICTA LIGERO. DOR385/JU 90-4 (Lowlands)
Developed between 1993 and 1998. It is highly recommended for its
precocity, blooming takes place 30 days after planting, reaching

physiological maturity at 65 days. It is the variety with the highest level

95

of resistance to bean golden mosaic virus in the world, in addition it is
resistant to rust and common mosaic. Plant height ranges between 25 and
35 cm. Yield: 1,800 Kg/ha And additional characteristic for the
Guatemalan market is the fact that ICTA Ligero provides a high

percentage of solids, resulting in thicker soup.

ICTA ALTENSE. A230/GUATE192/A175 (Highlands)

Opaque black bean developed specifically for the central highlands of
Guatemala. It is resistant to diseases such as anthracnose, rust, Ascochita
and pests such as pod weevil. Ideal for altitudes between 1,800 and 2,300
masl‘. This variety reaches physiological maturity 125 to 130 days after
planting . Its growth habit is type II, undetermined bush, and plant height

ranges between 35 and 45 cm. Yield: 1,800 Kg/ha.

ICTA TEXEL. Line 86-30. (Highland?)

An improved variety developed between 1987 and 1991. Notable for its
resistance to angular spot and its precocity. In addition, it is resistant to
nrst, common mosaic and Ascochita. Its growth habit is type II,
undetermined and erect. It reaches physiological between 105 and 110

days after planting, plant height is between 35 and 40cm. Yield: 1,300

Kg/ha.

 

1 meters above sea level.

ICTA HUNAPU. A216 = Cl32-4CM-4CM. (Highlands)
Alias: Negro Pacoc

Developed between 1980 and 1990. This black bean variety is notable for
its precocity, and reaches physiological maturity 125 days after planting.
Hunapt'r is one of the varieties with the world’s highest resistance to
Ascochr'ta and anthracnose. In addition, it is resistant to rust and
common mosaic. Its growth habit is type II, undetermined and erect.
Plant height ranges between 25 and 35 cm. ICTA Hunapi'r provides a high

percentage of solids, resulting in thicker soup. Yield: 1,800 Kg/ha.

97

APPENDIX B

STATISTICAL SUMMARY OF THE GUATEMALAN BEAN SUBSECT OR

Table B-1

Area, Production and National Yields. Guatemala, 1985-1998

 

Year Production """"""" Yields
si;;;:€:iié%iHa.ias2::2:;:::;;;.:«IMéiéiiéiéé qq Kfla.
1985 """" 170240?:‘étéiiii5117.56953? 2,586,320 691
1986 ..:,-:.:;:.1_‘l3.3.905:>i::~:;i;;.1.;.lfiO.6;lfOiiéiii-§ 2,433,420 638
1987 17206086140 1.895.080 501
1988 ““840420:rigéiggsgggi93-690*“? 2,061,180 667

1989 -------- 97 0901r?‘3}:§;ij§:§90,6105*5*99 1,993,420 933

1990 32%:i232129.990?v5:22;;;;1,39.66_00;:;:i%z 2,631,200 920
1991 144130113640 2,500,080 788
1992 ....... r40000;;;.;.;:;;g:.;:;1fi§1i5,940}§€§;; 2,550,680 828
1993 35,120890:,ggjgg~;§;;;100.890;?3;é:; 2,219,580 835
1994 2;;32134755?2;;z:;;:;:;;;290,:106;;:32;;; 1,982,332 669
1995 33331512125921313353579553:if:i::; 1,750,166 656
1996 .....1226541:5222251981938 ------ 1,802,636 668
1997 :::..:::124476..........._83 5762:: 1,838,672 671

1998 ------ 122 780 ------------- 8! 592 1,795,024 665

 

 

 

 

 

 

 

 

 

 

 

1985-I998 ............._.s::2;:;;..g; '277 -0.29
Source: Economic Statistics Banco de Guatemala

Table 82
Participation of the bean sub sector in the Gross Domestic Product
(Millions of Quetzales)

 

......................................

 

Year GDP GDP GDP
Nation" 9‘55“”? A 3w“

1985 2936 836.20 22.99
1986 2940 829.28 21.63
1987 3944 861.63 16.85
1988 3163 900-40 1832
17.72

1989 3288 928-04

1990 3390 966.10 952125596 20:23:? 23.39
1991 3514 996.02 :::i:.i::618 16 22.23
1992 3684 1,026.08 639 04 .; _, 22.68

 

 

 

1993 3828 1.94867 64273 19.73
1994 3983 1974-33 64577 17.62
1995 4,179 1,112.00 67210 15.56

1996 4303 1,140.41 335:2;269412:2:32;; 16.03

1997 4487 1.16892 7162287 1535

Growth Rate
_l985-l997 3.59 2.83 2.82 -2.81 -6.17 -5.49

Source. Annual reports, Banco de Guatemala 1985 to 1997.

:.GDP Agricultural Sector (Agricultural and livestock production)
.GDP from agricultural production (Excluding livestock)-

 

 

Table B-3
Guatemalan Bean Production vs. World Production
(1985-1997)

 

Year Wodd Production 1! National Production_ 2/ 313111796 Partitiipatron‘of??3595*:

"""" thousands ofTM Thousands of TM iiiiliiiNatronaI Productrort........
1985 £54359???5:55:355'14482332;?!ft-‘Evjfl 117.6 0 81
1986 I4 482 110.6 " '
1987 225355131}???914 3153E?§§ii5§:§.:9:-33i 86.1
1988 Si};51553-3315, 533,553.12"? 93.7
1989 ;fif‘friiffif‘"55.14, 523]}?ij f 90.6

 

 

 

 

 

 

1990 §§é§f:,-.;j.:§;;'g._i:16266§§;;;233;,,;g;, 119.6

 

1991 17525 113.6

 

1992 15958 115.9

 

1993 i233IE52235333316316323:'i5ii"i§.f:;‘;255 100.9

 

1994 17 938 90.1

 

1995 if?{21:52:38061332293i=;€~:ei'ii 79.6

 

1996 €222.23:ii;.;5‘75533il8,95.9_35?f%E’%?§?-;:-§.::s; 81.9

 

1997 18957 83-6
Growth rate

 

 

 

1985-1997 2.27 -2.8 -4.96

1/Source: FAO Annual Reports on World Production 1985-1997.
2/ Source: Production Statistics, Banco de Guatemala

100

Table B-4
Number of bean farms, per size range.
Harvest 1,995/96

 

REGION AND
DEPARTMENT

Country total
Guatemala.

Alta Verapaz
Baja Verapaz.
El Progreso.
Imbal.

Zacapa.
Chiquimula.
Santa Rosa
Jalapa.

Jutiapa.
Sacatepéquez.
Chimaltenango.
Escuintla.
Solola.
Totonicapan.
Quetzaltenango.
Suchitepéquez.
Retalhulcu.

San Marcos.
Huehuetenango.
Quiche'.

Petén.

TOTAL Effif;;Lessthan7Hii-;ESEE:E 7<45Ha. LargerthanilSHa.”
#FARMS% #FARMS #FFT‘"*“” ,

163,073 --------- 1412018659 14,627

 

700069259393 0

 

10,770 ----------------- 9533258831? 469 4. 35 siréér‘éééééérééééir68:2:227:13
4, 907 4 ,426:390.20 337 9‘*~':s-::::::144 ....... 2 93
2 558...... ..2 9225317995: 290 w _ ii‘f'ii;246 9 623
1.578iiiéééééeaéixlé:aiég-i62032-233929- 451 gliii...;‘;$07 3215‘
3.627%}ia;::éisé=iéi%::;52;.845%i£7834? 542 240662

l6.326éséfifésii%é%§%%15;262§3$2933.13 603
3,0683%2533i‘3:i§:.%§§i-'2,i8?1?lii1:59-31:62; 99 . - .22.-. ..

18,297:::éé2:3?as351763271129025333; 1,129 . 641350

12,9749???£23931312541.53£3,885.95? 1,185 “*3 3
5 694**~%***°*3'639‘1263391: 2,055
7, 3443:. ------------- 72882:;29924

346 ..................... 346 300 00
5 780;,Iigfjfi.ji'.;5” 3993199 ;00
3 232323210000
1 V554? ................ 1554 1'00 00

02.33: ................... 0., . 0 00,
94;}, ................. 94 100 ()0
29 218 ::::::::::::::: 2 2‘8 10:0. 00 - Ifii‘lf.'.‘lf;iii".'iil.1».... ...

25 494iii:i§:;.:§i§i20.228ezgfl9..34 5,043 19.78 223087

22 007“1:;.:::.:L2'1,521' 97 '79 486 2.21--i:§’i?§%é:i§-i5‘3E3?Piiil-éiiii'fliiféi50300.?
8 205 ............... 2 784 """ 3 3f. 93 1,938 23. 62 ............... 3 48333542345

..............................................

 
 
  
  

 

0
0

o

o

0 0000 rrrr 000
0

o

o

 

SOURCE: National agricultural statistics, 1 ,995- l 996, USPADA, MAGA.

101

Table B-5

BEAN YIELDS, PER DEPARTMENT AND SIZE OF FARM: 1,995/96 (Kg/Ha.)

 

TOTAL <7Hl. :f:::f::‘::'71<4511845253125443: >45Ha.

 

 

Country total.

 

Guatemala.
Alta Verapaz.
Baja Verapaz.
El Program,
Izabalf

Zacapa.
Chiquimula.
Santa Rosa
Jalapa.

Jutiapa.
Sacatepéquez.
Chimaltcnango.
Escuintla.
Solola.
Totonicapan.
Quctzaltcnango.
Suchitcpéqucz.
Retalhulcu.

San Marcos.
Huchuetcnango.
Quiché.

Petén ~ , . .
SOURCE National asnmltural surveys, 1, 995-1, 996, USPADA, MAGA

 

102

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