Business Development Mission to Central America

Ambassador David Aaron's

Business Development Mission to Central America

March 21-28, 1999

MISSION STATEMENT

Description of the Mission

Under Secretary of International Trade, Ambassador David Aaron will lead a business development mission of 15 U.S. companies to Central America. The mission will visit Honduras, Nicaragua, Guatemala, and El Salvador. In the wake of Hurricane Mitch, significant portions of regional infrastructure, as well as major sources of foreign exchange and economic growth, have been damaged. Reconstruction needs are estimated at over $8 billion for the region.

Focusing on reconstruction, the mission will strive to expand opportunities for U.S. companies in the following sectors: general infrastructure (roads and bridges; power generation/distribution; urban construction; environment; water; tourism; telecommunications; port expansion/management; emergency preparedness equipment), finance, light manufacturing, and agribusiness. Additionally, the growing interest in the regional integration of energy, transport and telecommunication will be explored. In each country, meetings will be held with senior government officials, leaders of the local business communities and members of the American Chambers of Commerce.

Commercial Setting

Financial Assistance

Immediate efforts after Hurricane Mitch focused on recovery, but efforts are now turning to reconstruction. The U.S. Agency for International Development's Office of Foreign Disaster Assistance (USAID/OFDA) has provided $5 million to the Department of Defense (DOD) for reconstruction activities in Honduras, Nicaragua, El Salvador and Guatemala. These funds will support the purchase of reconstruction and engineering materials and supplies, including gravel for road repair. USAID/OFDA has provided an additional $4 million to DOD for continued aircraft support in Honduras, Nicaragua, Guatemala and El Salvador, which contributes to the positioning of more than 40 DOD helicopters in Central America. To date, USAID/OFDA has provided nearly $29 million in assistance to the region.

The primary agencies dealing with reconstruction are the multilateral development banks, with the Inter-American Development Bank (IDB) taking the lead assistance role. The IDB expects to provide Honduras, Nicaragua, Guatemala and El Salvador nearly $800 million in soft loans by the end of 1999. Of that total, $370 million would consist of fresh financing. The IDB is already redirecting $430 million in previously approved loans to emergency programs to rebuild roads, bridges, power, water and telecommunications systems, hospitals, schools and low-income housing.

The IDB will establish a $12 million fund to support Central American micro lending institutions that stand to suffer financial losses due to the hurricane's devastating effects on micro-enterprises in the region; the U.S. Agency for International Development (USAID) will contribute an additional $5 million, bringing the total to $17 M. The IDB will grant Honduras $1 million to prepare its national reconstruction plan.

The World Bank has pledged $115 million to an Emergency Trust Fund for Honduras, Nicaragua, and El Salvador to cover multilateral debt service payments. An additional $200 million has been made available from existing projects to assist reconstruction efforts.

Reconstruction Efforts

Although the region is facing significant long-term economic and social challenges, its economies are functioning, the nations are working hard to rebuild, and the regional governments are taking steps to make the commercial environment attractive. U.S. businesses can play a significant role in the reconstruction and transformation of Central America.

Hurricane Mitch is the largest disaster to strike Central America, with over 9,000 killed, over 9,000 missing and over 3 million people homeless. Much of the primary road network is functional (farm to market less so), the telecommunication and power services are functional, and the big-city water services are largely restored with upgrades badly needed. The agriculture sector was particularly hard hit with the banana crop needing at least two years to recover, other crops such as coffee, shrimp farming and fruits and vegetables needing less time, and the recovery of smaller farms dependent on access to capital and credit.

Guatemala

Guatemala suffered loss of life and property, significant damage to export crops particularly to bananas, and the water system sustained serious damage. Reconstruction efforts are three-fold: focusing on the tourism, agribusiness, light manufacturing, and hydrocarbons and mining sectors; pursuing the privatization of airports and port facilities; and government hiring of independent auditors, private sector project managers, strengthening intellectual property rights protection, and encouraging new flows of capital. Incentives and opportunities include the proximity to U.S. & Mexican markets, its status as the largest single market in Central America, reasonable labor costs, various tax incentives, national treatment for investors, and political stability due to 1996 peace accords.

Honduras

Honduras was the hardest hit country with severe damage to the agricultural sector, which makes up 24% of the GNP and 37% of the workforce. Eighty percent of the banana crop and 50% of the coffee crop was destroyed. The damage resulted in a doubling of the trade deficit, a 14% decrease in exports and homelessness for 37% of the population.. Honduras' main priority is providing low cost housing before the rainy season, expanding light manufacturing, restoring the banana crop, ensuring transparency in all dealings, providing long-term debt relief, disaster prevention and reforestation, and financing for housing and micro-enterprises.

The Honduran government has created a reconstruction cabinet that is developing a master plan to be ready for the World Bank's Donor's Meeting in May. The government also plans to contract an auditor to ensure transparency and sound project management, and to recruit actively foreign firm involvement in implementing reconstruction.

Nicaragua

Nicaragua suffered losses of $1.5 billion or 75% of their 1997 GDP. Their growth rate has fallen 40%.

Nicaragua's reconstruction efforts include establishing cross-cutting commissions coordinated by the vice-president. They are in the process of setting national priorities and developing a master plan focusing on rebuilding roads, building 700,000 low cost housing units, providing potable water, improving ports and airports, expanding and modernizing the telecommunication network and expanding power generation and distribution facilities.

El Salvador

Damage to infrastructure in El Salvador was relatively slight compared to what was experienced in Honduras, Nicaragua and Guatemala with damage to over 10,000 homes, 10 bridges, 1,308 km of paved road and 2,665 km of unpaved road. Agriculture was among the most severely affected sectors in El Salvador. Losses in food crops vary from 20 percent of the corn crop to 100 percent of the bean crop in some areas. Additionally, some 23,000 domestic farm animals were killed, primarily poultry. The most significant losses were suffered by small landholders.

Water service was also interrupted in many areas, as water systems suffered damage to their pumping stations and spring intakes and water wells were contaminated. Thus, the lack of potable water and sanitation are major concerns.

Goals of the Mission

The mission goals are 1) to demonstrate high-visibility U.S. support for Central America economies seeking to recover from the destruction of Hurricane Mitch; 2) to enhance the exposure of small and medium-sized U.S. firms to importers and distributors in the target countries, through one-on-one meetings with representatives of potential business associates; 3) to provide U.S. firms a high-profile opportunity to achieve further penetration of this market by meeting with host-country decision-makers in the government and private sectors; and 4) to provide U.S. Government support of Central America's efforts to achieve greater transparency and even-handedness in procurement.

Scenario for the Mission

Ambassador Aaron's business development mission will visit Honduras, Nicaragua, Guatemala, and El Salvador. This mission will promote the use of U.S. equipment, and engineering and consulting capabilities to facilitate reconstruction efforts while ensuring transparency in the bidding and procurement process.

Mission recruitment of about 15 U.S. commercial enterprises will focus on the sectors identified above.

In his meetings with Central American government officials, Ambassador Aaron will work to advance U.S. commercial objectives for these companies and the sectors they represent.

The mission program will include:

Embassy/consulate briefings on the current economic and commercial environment in Central America; official meetings with relevant representatives of the government of these countries; meetings with public and private sector institutions, chambers of commerce, and industry groups; and meetings with regional and local municipal and provincial authorities to discuss opportunities for infrastructure development for U.S. companies.

The Mission itinerary will be as follows:

(Schedule might change slightly)

March 21, 1999 (Sunday) Mission arrival in Guatemala

March 23, 1999 (Tuesday) Arrive in Honduras

March 25, 1999 (Friday) Arrive in El Salvador

March 26, 1999 (Friday) Arrive in Nicaragua

March 28, 1999 (Sunday) Mission concludes Sunday

Criteria for Company Participation

Mission recruitment will be conducted in an open and public manner, including publication in the Federal Register, posting on the Internet, press releases to the general and trade media, direct mail and broadcast fax, e-mail, notices by industry trade associations and other multiplier groups, and at industry meetings, symposia, conferences, trade shows, etc.

Company participation will be determined on the basis of:

Status as an U.S.-owned or U.S.-based company with the capacity to deliver relevant equipment or services to Central America.

Participating companies must be incorporated in the United States. A company is eligible to participate only if the products and/or services that it will promote on the relevant mission either (a) are manufactured or produced in the United States; or (b) if manufactured or produced outside the United States, are marketed under the name of a U.S. firm and have U.S. content representing at least 51 percent of the value of the finished good or service. (At the discretion of the Department, which will generally be exercised on a mission-specific and sector-by-sector basis, the 51 percent U.S. content requirement may be modified or waived.)

In addition, the Department may consider whether the companies' overall business objectives, including those of any U.S. or overseas affiliates, are fully consistent with the mission's foreign and commercial policy objectives.

Consistency of the company's goals with the scope and desired outcome of the mission as described.

Past, present, or prospective business in Central America.

Diversity of company size, type, location, demographics, and traditional under-representation in business.

Timely receipt of the mission application, and of the participation fee of $3,800.

Initial decisions on private sector participants will be made by a group comprised of a minimum of three Commerce Department officials drawn from the following pool: the project officer or mission team leader, Department experts from the relevant industry and country sectors, the career Commercial Service Senior Officer based in the countries to be visited for market relevance, and the Office of Business Liaison.

The recommendations of this group will be reviewed and adopted/disapproved by a five person review board consisting of the Chief Financial Officer and Assistant Secretary for Administration, the Assistant Secretary for Trade Development, a senior career lawyer in the Office of General Counsel, a senior ITA career official and the Director of the Office of Business Liaison.

Any partisan political activities of an applicant, including political contributions, will be entirely irrelevant to the selection process.

Time Frame for Applications

Applications may be submitted after February 17, 1999 to the Director of the Infrastructure Division, Department of Commerce, 14^th and Pennsylvania Avenue, NW, Room 4056, Washington, D.C. 20230; telephone: (202) 482-2374; facsimile: (202) 482- 3352.

Internet address: "jay_smith@ita.doc.gov"

All applications must be received by March 3, 1999. Applications received after that date will be considered on a space available basis.