US embassy cable - 05GUATEMALA2050

S E C R E T SECTION 01 OF 03 GUATEMALA 002050 
 
SIPDIS 
 
EAP KAYE LEE, WHA/PPC JEFF BISCHOFF AND WHA/EPSC LAWRENCE 
GUMBINER 
 
E.O. 12958: DECL: 08/25/2015 
TAGS: ECON, PREL, ETRD, ETTC, EINV, ENRG, EAGR, EFIN, EMIN, PINS, PGOV, KCOR, CH, TW, GT, ESENV 
SUBJECT: CHINESE ACTIVITIES IN GUATEMALA 
 
REF: A. SECSTATE 138041 
     B. GUATEMALA 01959 
 
Classified By: EconOff Tom Palaia for reasons 1.5 (d). 
 
1.  (S) Summary: Guatemala does not maintain substantial 
public or private sector ties with PRC China.  Taiwanese 
influence in political and military affairs effectively 
blocks Chinese access.  That influence has been maintained 
through direct assistance and bribes to government officials 
and is supported by a general ideological affinity.  China 
has recently renewed offers of expanded assistance and trade 
opportunities in exchange for political recognition. 
However, as with past attempts, Taiwan has bettered these 
offers and again closed the door on China.  China is not a 
major trading partner and its influence on the Guatemalan 
economy is limited to secondary effects stemming from 
international market phenomena.  Any future attempts to 
expand Chinese influence would likely be driven by Chinese 
international political considerations rather than economic 
interests.  End summary. 
 
Trade and Investment 
-------------------- 
 
2.  (C) Talk of opening a Guatemalan trade office in China 
comes and goes.  Rumors flared up again over the last few 
months culminating in a June 2005 trade mission to China, led 
by Minister of Economy Marcio Cuevas.  During the visit, 
Chinese officials offered to increase purchases of Guatemalan 
sugar and coffee, provide assistance with building roads, and 
invest in Guatemala's energy sector, in exchange for 
Guatemalan recognition of China and an abandonment of formal 
ties with Taiwan.  Press reports of Taiwanese concerns 
following this trip led to GOG clarifications that their 
interest was limited to opening an office in China to 
facilitate trade, with no consideration of formal diplomatic 
relations.  GOG interest and press attention to a potential 
Chinese trade deal have since withered following President 
Berger's successful August 2005 trip to Taiwan, where he 
secured commitments to increase assistance on key 
infrastructure projects and initialed a quickly negotiated 
free trade agreement.  There has been private speculation 
that the recent trade mission and talk of increasing economic 
ties with China were construed to strengthen Guatemala's hand 
in requesting increased trade and official assistance from 
the Taiwanese as well as cooperation in a bribery case 
involving the Taiwanese and former President Portillo (Para 
7). 
 
3.  (SBU) Trade with mainland China represents less than 4 
percent of overall Guatemalan trade and is not substantially 
influenced by preferential trade schemes or Chinese 
investments.  Exports to China are almost exclusively sugar 
while imports consist of a range of manufactured goods, 
almost two-thirds of which are actually purchased from third 
country suppliers.  Hong Kong trade is measured separately 
from mainland China in Guatemalan statistics and makes up 
significantly less than 1 percent of total trade, about half 
of which involved Hong Kong only as intermediary for third 
country suppliers.  There has been no substantial direct 
investment by private or public Chinese interests.  Directors 
of the Guatemalan family-owned Multi Inversiones "Pollo 
Campero" company have told EconOff that they are in 
preliminary stages of exploring potential expansion of their 
restaurant chain and chicken distribution into China. 
However, the conservative family admits their discomfort with 
mainland China politics and complains of how complicated the 
Chinese market is to enter. 
 
4.  (U) Central Bank Trade Statistics 
 
Exports from Guatemala to mainland China (USD): 
19.3 million representing 0.7 percent of total exports 
Composition: 94 percent sugar 
 
Total Imports originating in mainland China (USD): 
345 million representing 4.8 percent of total imports (of 
which approximately 124 million or 36 percent is bought 
directly from China with the remaining 64 percent purchased 
from third country suppliers) 
 
Composition of principal imports of Chinese made goods: 
Mechanical machines and appliances - 10 percent 
Vehicles - 9.6 percent 
Apparel - 8.7 percent 
Footwear - 8.2 percent 
Games - 7.2 percent 
Various manufactured goods - 5.7 percent 
 
Hong Kong activity is separately measured by the Central Bank: 
Exports from Guatemala to Hong Kong (USD): 
0.8 million representing 0.03 percent of total exports 
Composition: 94 percent fruit 
 
Imports from Hong Kong (USD): 
53.3 million representing 0.7 percent of total imports (of 
which approximately 50 percent are produced in Hong Kong, the 
remaining half is produced elsewhere and purchased from Hong 
Kong suppliers) 
 
Composition of principal imports: 
Games - 18 percent 
Mechanical machines and appliances - 9.4 percent 
Plastic materials - 7.4 percent 
Various manufactured goods - 6.6 percent 
 
5.  (C) Chinese economic activity is not sufficiently 
important, nor in such sensitive areas as to have a major 
impact on domestic cultural, economic, environmental or 
political conditions.  Press coverage and general talk of the 
impact of Chinese growth on the Guatemalan economy, following 
the lead of international news coverage, has mainly focused 
on the effects of growing Chinese competition in the textile 
and apparel markets and inflationary pressures on raw 
materials thanks to China's booming demand.  CAFTA has been 
seen as the counterweight to Chinese competition in the 
textile and apparel sectors.  As for Chinese resource demand 
driving up local prices, coverage is sporadic and some 
officials privately acknowledge this is just a foreign 
boogeyman on which to blame domestic economic problems. 
 
Political Overtures - Taiwanese Exclude Chinese Access 
--------------------------------------------- --------- 
 
6.  (S) Taiwan has successfully restricted Chinese political 
access and influence in Guatemala (REF B).  Taiwanese 
officials are active and enjoy broad access to the GOG, while 
Chinese activity is extremely limited.  Legitimate assistance 
programs and alleged bribes to Guatemalan officials ensure 
continued diplomatic recognition of Taiwan.  The Berger 
government is committed to a strong relationship with Taiwan, 
a commitment generally shared by segments of the population 
interested enough to have an opinion on an otherwise 
uninteresting topic here.  Guatemalan elite are also 
notoriously conservative and suspicious of overactive 
governments.  In particular, the business community admires 
Taiwan's development path and is suspicious of China's 
controlling government.  A limited free trade agreement was 
recently signed with Taiwan while on-again-off-again public 
speculation about increasing economic ties with China have 
again fallen from view. 
 
7.  (C) Copies of several checks publicly resurfaced recently 
causing a wrinkle in the otherwise cozy relationship with 
Taiwan.  Former President Alfonso Portillo received at least 
three checks from the Taiwanese Embassy for USD 500 thousand 
each, while his notoriously corrupt Private Secretary may 
have received others.  Copies of several of these checks, 
including one cashed in the US several weeks before Portillo 
assumed the Presidency have been available to authorities for 
several years.  Recent press coverage reflected negatively on 
Taiwan for its role in the scandal but has since died down. 
For a variety of reasons (Ref B), it is unlikely that this 
scandal will have any long-term implications on the 
GOG-Taiwan relationship.  The government of Taiwan, which 
insists the checks were "donations" for a book program, has 
dodged requests from Guatemalan prosecutors for cooperation 
to pursue corruption charges against Portillo. 
 
Cultural/Educational Activities 
------------------------------- 
 
8.  (C) The Chinese government is not involved in any visible 
cultural or educational activities.  Their lack of access 
within the GOG and the Guatemalan cultural elite would make 
any such overtures difficult, particularly in light of 
continuing Taiwanese assistance in these areas. 
 
Military Activity and Weapons Sales 
----------------------------------- 
 
9.  (C) Neither the Chinese government nor military have been 
involved in direct weapons sales to any GOG security forces. 
However, private gun dealers acknowledge occasionally looking 
to China for supplies, in light of difficult US licensing 
processes and competitive Chinese pricing.  However, they 
complain of quality, consistency and speed to market 
difficulties in buying from Chinese suppliers. 
10.  (C) Post is not aware of any military to military 
contact with Chinese officials.  The Taiwanese attache 
maintains excellent contacts within the Guatemalan military 
community and actively fosters that relationship to the 
exclusion of contact with Chinese counterparts (REF B). 
 
Unofficial Chinese Activity - People Smuggling 
--------------------------------------------- - 
 
11.  (C) Chinese alien smugglers use Guatemala as a transit 
point en route to the US.  Post's best intelligence suggests 
that Chinese organized crime uses intermediaries from 
Guatemala or elsewhere in Latin America and is not locally 
established.  However, higher-end smuggling via air has 
implicated Guatemalan immigration and foreign affairs 
personnel in Guatemalan visa fraud.  Evidence also suggests 
that money is occasionally laundered directly from China into 
Guatemala to support smuggling activity and pay these 
intermediaries.  Guatemalan law enforcement lacks the tools 
to adequately track this smuggling to determine the extent of 
involvement of Chinese organized crime in alien smuggling. 
Officials are reluctant to attempt investigative coordination 
with their Chinese counterparts due to a lack of trust and 
understanding in addition to their lack of capacity for 
large-scale international investigations.  There are no 
formal or informal mechanisms for sharing information with 
Chinese law enforcement. 
 
Comment 
------- 
 
12.  (C) The Chinese government, as evidenced by the July 
trade mission, makes occasional attempts to establish itself 
in Guatemala and steal formal recognition away from the 
Taiwanese.  So long as Taiwan maintains its aggressive 
courtship of Guatemala and Central America, it is unlikely 
the Chinese will be successful.  Guatemala has not been an 
attractive place for foreign direct investment from anywhere 
and China is certainly no exception.  Guatemala is not a 
major commodity producer and is unlikely to attract serious 
Chinese attention as an economic partner.  China's future 
influence here depends more on the value it places on 
Guatemalan political recognition and its level of 
aggressiveness in challenging the Taiwanese for influence in 
Central America. 
WHARTON