Friday, December 09, 2022

American company will invest US$ 160 million in the Northern Triangle of Central America, in Guatemala it is interested in a certain productive area

The president of Cargill Protein Latin America, Xavier Vargas, visited the country last week and met with officials, diplomats and businessmen to refine details of the investment in Guatemala.

The company already has companies in the country and is now going to venture into the poultry sector.

How did the interest in making this investment in the region arise?

A few months ago, we received a call from the White House, precisely from Vice President Kamala Harris, inviting us to participate in the Call to Action initiative, to help improve the living conditions of the population. We went as an American company and after understanding the scope of the project, which we found very interesting, we made a commitment to invest US$ 160 million in the region over the next 3 to 5 years.

What fate will these resources have?

US$10 million is for corporate social responsibility (CSR) in our different works and US$150 million for expanding capacity and entering new markets.

The most recent investments we have are in Honduras, where we are expanding a new distribution center with US$ 20 million. In Guatemala, I was visiting our Perry sausage factory and a water treatment plant that cost over $1 million has just been completed.

In Guatemala we generate just over 800 direct jobs, and this is regularly multiplied by four with indirect jobs. In Honduras we are a little bigger, with more than 2,000 workers.

What do these investment plans consist of?

We believe that Guatemala is a country with great potential and we believe that we are underinvested, so we want to increase investment in our typical business model, which is animal nutrition and protein. In the latter, the biggest is the chicken and sausages.

Here we are already in the sausage business, but not in the chicken business, so we are exploring opportunities to enter that area. Investment in the country would increase considerably and, consequently, the number of jobs generated.

What kind of chicken presentations do you do and what are you going to offer in Guatemala?

Chicken is a very long production chain and we have the advantage of touching different parts of the food chain. We also participate by purchasing local raw materials or importing them, depending on availability in the country.

Also Read: Are Guatemalan Companies Prepared for a Possible US Recession?

The final products in Guatemala can be live chicken, processed or raw, yellow or white, depending on the consumer’s preference, continuing with what we call added value, which are ready-to-eat and practical products for the home, such as nuggets or the breaded ones.

How much will they invest in this segment?

In Honduras, Nicaragua and Costa Rica, we are leaders in the poultry industry and the sausage industry. Recently, in 2017 and 2018, we expanded our business model to South America and invested US$500 million in Colombia. There we bought two chicken companies, El Bucanero and Campollo, and we are very happy with this investment. However, we see the unique opportunity to invest in northern Central America, such as Guatemala and El Salvador.

Our main market now is Guatemala and in addition to these two countries, there is the other half of Central America in terms of population, so we have the availability of that US$ 160 million to invest in the Northern Triangle.

How much of this US$ 160 million will be invested in each country?

Most are for Guatemala. El Salvador is in a second phase. On this visit we met with the US Ambassador, William Pop, and the Minister of Economy. We also visited some other companies to define soon what we will invest in and start executing.

Xavier Vargas Cargill 1
The president of Cargill Protein Latin America, Xavier Vargas, visited the country last week to ascertain details of the investments. (Photo, Free Press: courtesy of Cargill).

In what timeframe could the first investment begin to be seen?

The goal is to start investing a good amount of money this calendar year. It will be in the entire poultry chain, from farms, hatcheries, matrices, processing plant, distribution and others.

In the country the presence of national chicken is very strong. Have you analyzed the competition?

Yup. We always do. And not only that, we recognize and compete with it in other countries, such as Honduras and Costa Rica, and I think both CMI and Vitali Alimentos are excellent local companies. We are ready to compete, because competition makes us better. At Cargill, we believe that competitors help us improve.

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Regarding the business climate in Guatemala for investing, how do you rate it, what do you see as positive and what is missing?

We see it as an extremely positive place to invest. Among the things we really like about the country, first of all is the size of the population, which is the largest in Central America. Second, economic growth is important, as protein consumption is directly proportional to the country’s Gross Domestic Product (GDP).

So, the more money is available in the consumer’s pocket, the more chicken will be consumed. If the GDP grows 3% or 4%, technically chicken consumption grows 3% or 4%. Chicken is the cheapest protein available in our markets, the healthiest and the most preferred by consumers. Chicken consumption far exceeds that of other proteins.

We see many new areas to discover in Guatemala, where we want to reach and give access to proteins to different populations, both urban and rural.

We look for the same in Guatemala as in all countries and there are clear investment rules. That’s why we’re meeting with government officials, and in this case I’ve also mentioned the US embassy, ​​to be able to better understand the country and ensure that we clearly understand the investment rules and that there are strong institutions.

Inflation is being reported in Guatemala and around the world. In the sector you manage, what was the behavior and how do you see the rest of the year?

The world is experiencing a breakdown in production chains and this is causing less supply, more demand and, therefore, inflation. This, unfortunately, happens in all foods in general.

Also read: Gasoline: This is how the increase in fuel changed the buying and transport habits of Guatemalans, according to Kantar

What we try to do is guarantee supply. Like Cargill, we participate in 70 countries around the world, we’ve been around for over 155 years, we’re one of the largest private companies in the United States, and it helps us understand these economic cycles, in our country and in the food cycles.

We know that first of all, the key is accessibility, that is, food security and that there will be no shortage of food: And secondly, to seek the efficiencies necessary to maintain an affordable cost for the population, who need it so much.

So I would say that those are the two main characteristics of Cargill, accessibility and low cost, and we just want to get into the country to help it develop and prosper.

Other sectors mentioned increases in production costs and had to transfer them to price. What has been the behavior in your sector?

Inflation is affecting everyone, but what we must do as responsible companies is to ensure affordability and, secondly, efficiency so that we do not have to pass on, or pass on to the minimum, this cost to the consumer.

And we also believe a lot in the CSR part. As I mentioned, out of the $160 million, there’s $10 million that are earmarked for that. In this sense, we managed to get 80% of the 800 employees we have in Guatemala to participate in our CSR work, focused mainly on the schools around our factories (Perry Empacadora, in zone 3), where we bring snacks to the children. We also have many strategic allies.

How many jobs could it generate in Guatemala and in what timeframe?

One piece of information I would like to share is that for every 1% growth in chicken consumption, around 1,000 jobs are created. We replicate this factor in all countries and we will certainly do so in Guatemala.

Also read: How much does a hybrid or electric vehicle (in quetzales) cost in Guatemala?

So, the advantage of poultry farming is that it participates from agriculture, because the grains are consumed, to distribution and retail sale. Along the entire production chain, value and jobs are generated.

This factor of 1,000 jobs for every 1% growth in chicken consumption, if multiplied by 3% or 4% that chicken consumption grows annually, and also multiplied by the possibility of buying grains, or in the future exporting chicken, as we are working with Colombia and Honduras, could be an important generator of employment for Guatemala.

We don’t just want to generate jobs, but for them to be worthy. Our people in Central America do not leave the country because they want to; he leaves because there aren’t enough decent jobs to stay.

Presence in Guatemala

  • Cargill is involved in different parts of the raw material import or export production chain, as it imports corn, soybeans, wheat and others. It also exports palm oil.
  • In addition, it participates in the manufacture of animal nutrition, as is the case of Purina, a company it bought and has been developing.
  • In protein manufacturing, you have Perry Packer.
  • Now it is expanding its presence in the country, in the chicken chain.
  • It is present in 70 countries. In Latin America, Cargill generates more than 15,000 jobs, 800 of them in Guatemala, where it operates in 10 cities: Guatemala, Chimaltenango, Quetzaltenango, Mazatenango, Escuintla, Jutiapa, Zacapa, Puerto Barrios, Petén and Cobán.

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