US embassy cable - 05YEREVAN859

UNCLAS SECTION 01 OF 03 YEREVAN 000859 
 
SIPDIS 
 
COMMERCE FOR 3150/PBRADLEY/BSMITH 
COMMERCE FOR 4201/ITA/IEP/OEERIS/BISNIS/EHOUSE 
EMBASSIES PLEASE PASS FCS 
DEPT FOR EUR/CACEN, EB/CBA 
ANKARA ALSO FOR CFC/ SNYDER/BALLINGER 
PASS TDA-STEIN, OPIC, EXIM-TUMMINIA/PANARO 
 
E.O. 12958: N/A 
TAGS: KTDB, BBSR, BEXP, BTIO, AM 
SUBJECT: (IMI) REPORT ON VAYOTS DZOR PROVINCE 
 
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SUMMARY 
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1.  On April 14-15, 2005, Embassy's BISNIS 
representative visited the Vayots Dzor region of 
Armenia to explore investment and trade opportunities 
for U.S. companies and to expand U.S.-Armenian 
commercial ties.  He met with the province's business 
leaders and government officials.  This is the latest 
in a series of regional trips to reach out to local 
companies throughout Armenia to promote the BISNIS 
"Search for Partners" and "Trades and Tenders" 
programs and collect information on investment and 
commercial opportunities for U.S. companies.  End 
Summary. 
 
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VAYOTS DZOR: GENERAL BACKGROUND 
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2.  Vayots Dzor is located in the Southern part of 
Armenia.  According to the Vayots Dzor governor's 
office, the province has 62,000 inhabitants:  20,000 
urban residents and 42,000 rural residents.  The 
province borders Azerbaijan to the East and 
Nakhchivan, an Azerbaijani enclave territory, to the 
West.  With an altitude ranging from 3,000 feet to 
6,500 feet, Vayots Dzor is located on the upper and 
middle reaches of the Arpa River, the largest arm of 
Arax River, which ultimately runs along the Armenia- 
Turkey and Armenia-Iran borders.  There are many 
historical landmarks in the province, as well as 
gorges and deep canyons, karsts and caves, forests, 
and rich agricultural lands. 
 
3.  Vayots Dzor's mineral resources include basalt, 
felsite, perlite, and quartzite.  The province also 
has mineral water springs located near the resort town 
of Jermuk.  Vayots Dzor has significant water 
resources for hydro power generation. 
 
4.  More than 40 percent of Vayots Dzor's population 
inhabits the three major towns - Yeghegnadzor, the 
region's capital (8,200 inhabitants), Vaik (5,400 
inhabitants), and Jermuk (5,800 inhabitants). 
 
5.  The province's industrial sector comprises 70 
small and medium-sized private enterprises engaged in 
food processing (wine production, cheese making, 
bottling of mineral water), stone mining, jewelry 
production, and electronic industry.  In 2004 the 
region's aggregate industrial output totaled USD 9.5 
million.  The wineries located near Yeghegnadzor and 
mineral water bottling companies in Jermuk generate 
the greatest share of the province's industrial volume 
and sales. 
 
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SECTORS 
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6.  There are 10 major mineral water bottlers that 
produce about 30 million bottles annually and account 
for 80 percent of the mineral water bottling in 
Armenia.  Among the largest bottlers are the 
(unrelated) Jermuk Group and Jermuk Joint-Stock 
Company.  The Jermuk Joint-Stock Company privatized 
their plant in 1995 and installed plastic production 
lines the same year.  Both companies dominate 
Armenia's market and also export to CIS countries, the 
Middle East, Europe, and the United States. 
 
7.  Vayots Dzor is Armenia's largest grape growing and 
winemaking region.  It is famous for its Black Areni 
varietal, which is good for red table wine and semi- 
dry wines.  As winemaking becomes a profitable 
business in Armenia, local farmers are steadily 
increasing grapes production in the province.  There 
are now several private wineries in Vayots Dzor that 
export their product to the CIS, EU countries, and the 
United States.  Currently a Vayots Dzor winery seeks 
suppliers of used oak barrels for aging (see below). 
 
8.  In 2000, the USDA Marketing Assistance Project 
initiated a dairy goat breeding project in Vayots Dzor 
to increase the production and consumption of goat 
milk and cheese.  A number of private goat breeding 
enterprises, including Golden Goat Plus, Selim, Spitak 
Aghpyur, Vayots Dzor, Vernashen Kat, and Jermuk Blue 
are now successfully operating in the province.  Some 
of them produce a high-quality packaged cheese that is 
exported to the United States and European countries. 
 
9.  Jermuk is a resort town and a popular tourist 
destination during Soviet times.  Local spas provide 
mineral water treatments.  One of the major investors 
in Jermuk's infrastructure, the Jermuk Group, has 
recently privatized a large resort hotel and converted 
it into a high-quality facility.  Local and foreign 
investors are currently renovating many of the town's 
other hotels and spas.  They plan to import furniture 
and spa equipment from Europe and the United States. 
The Jermuk mayor's office recently established a 
tourism information center where potential investors, 
suppliers, and foreign tour operators may obtain 
information on business opportunities in Jermuk. 
 
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INVESTMENT OPPORTUNITIES 
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10.  Most enterprises operating in Vayots Dzor have 
potential and need to establish long-term cooperation 
or a partnership with foreign investors.  Some offer 
interesting commercial and investment opportunities. 
The Embassy encourages interested U.S. firms to 
contact the Political-Economic Section of the Embassy 
or the BISNIS Trade Specialist for Armenia Ellen House 
by phone at (202) 482-2284 or email at 
Ellen_House@ita.doc.gov 
 
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FOOD PROCESSING 
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11.  Company:  Vayots Dzor LLC 
 
Vayots Dzor is a private company established in 1998 
in Yeghegnadzor that bottles mineral water and 
produces goat cheese for export to the Unites States. 
The company also owns 20 hectares of orchards and 
produces high quality fruits and vegetables, including 
apricots, peaches, pears, and apples.  The company 
seeks a U.S. partner to establish joint production of 
canned fruits and vegetables.  It also wishes to set 
up natural juice production.  Vayots Dzor LLC is able 
to invest some USD 500,000 into the cannery project. 
A business plan in English is available and can be 
mailed upon request. 
 
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STONE CUTTING 
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12. Company:  Vazo LLC 
 
Vazo was established in 1985 and privatized in 1994. 
It specializes in stone processing, manufacturing 
slabs from tuff, basalt, and granite.  The company 
also owns a quarry of basalt and granite.  The company 
markets its products in Armenia and exports them to 
CIS countries.  The company wishes to upgrade its 
stone cutting and polishing machinery.  It seeks a 
U.S. partner to provide a modern stone processing 
line.  Vazo would invest its inexpensive, qualified 
labor, well-established distribution channels, as well 
as some financial resources.  A business plan is 
available and can be mailed upon request. 
 
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SMALL HYDRO-ELECTRIC PLANTS 
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13.  Vayots Dzor has significant water resources for 
hydro-electric generation.  The province has six 
privately owned small hydro power plants (HPP) located 
on the Arpa and Yeghegis rivers.  Their total 
installed capacity is 6 Megawatts.  According to local 
experts, there is potential for profitable development 
of new small hydroelectric plants since the Government 
of Armenia recently set higher tariffs for electricity 
from small HPPs than from large HPPs. 
 
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TRADE OPPORTUNITIES 
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14.  Company:  Ginetas LLC 
 
Ginetas was established in 1998 in Vayots Dzor 
province by a professional wine engineer technologist. 
Using the Vayots Dzor variety of grapes, Areni, the 
company produces several new brands of wine.  USDA 
Marketing Assistance Project in Armenia has 
financially and technically supported the firm since 
1998.  Ginetas intends to purchase up to USD 100,000 
of used wine oak barrels for aging.  It seeks a U.S. 
supplier of barrels under flexible financial terms. 
 
15.  For more information on business opportunities in 
Vayots Dzor, please contact: 
 
Mr. Alexan Avagyan, Director of Vayots Dzor Regional 
Business Center, Head of Regional Chamber of Commerce 
Tel: (374-281) 22-113 
Fax: (374-281) 20-553 
E-mail: vaykcci@arminco.com 
Website: www.vaykcci.am 
 
 
Mr. Vanik Khudaverdyan, 
Vayots Dzor Governor's office 
Tel: (374-281) 22-690 
 
Mr. Vanik Zohrabyan, 
Jermuk Tourism and Business 
Information Agency 
Tel: (374-248) 22-488 
 
George Isayan, 
BISNIS (Business Information Service for the Newly 
Independent States, U.S. Department of Commerce) 
Representative in Armenia 
American Embassy, Yerevan 
1 American Avenue 
Yerevan 375082  Armenia 
Tel: (374-10) 464-700 
Fax: (374-10) 464-742 
E-mail: isayangx@state.gov 
www.bisnis.doc.gov 
EVANS