Document ot )1 , :) " The World Bank ,,"rt- )"

FOR OFFICIAL USE ONLY ')~'-0 DRAFT CONFII>E~lL-\L Public Disclosure Authorized -_Report ~o. ..182J-GU - i

GUATDf.ALA Public Disclosure Authorized TOURISM SECTOR REVIZW ~~ PROJECT IDENTIFICATION

December 7, 1977 Public Disclosure Authorized Public Disclosure Authorized Tourism Projects Department

This document h:J..S a restricted distribution "lnd may be used by reCIpients only in the performance of their official duties. Its ~Qntents may not otherwise b~ disclosed without World Bank authorization. -"-. - 1\.'R QFf1CIAI.: D5~ ONLY CONFIDENTIAL

GUATEMALA

TOURISM SECTOR REVIEW AND PROJECT IDENTIFICATION

TABLE OF CONTENTS

Page No.

s~~~Y ------i-iii :Ct:RISM ASSETS 1

~EVELOPMENT OF DEKA.J.'ID

~::';ELOPMENT OF SUPPLY 3

~CO~OMIC AND SOCIAL ASPECTS OF TOURISM ------8

SECTOR ORG&~IZATION AND POLICY ------10

:~O~!H PROSPECTS ------12

?~.OJECT IDENTIFICATION ------14

Lake Atitlan ------.----- 14 Antigua ------14 Tikal ------15 Hotel Credit ------16 Hotel Training ------16 Handicrafts ------17

,·';-:'r.'S ~

I - Tables 1 - Climatic Data ------18 2 - Foreign Visitor Arrivals ------~---- 19 3 - Foreign Visitor Arrivals by Nationality ------20 4 - ~oreign Arrivals by Means of Transport ------21 5 - Foreign Arrivals by Month ------22 6 - Regional Distribution of Accommodation Capacity 23 7 - Mission Estimates of Operating Results for Selected Types of Hotels ------..---- 26 8 - Comparative Hotel Rates ------27 9 - Tour Prices in Guatemala ------28 10 - Comparison of Tourist Expenditure and Other Exports of Guatemala ------29 11 - Annual Investments in the Tourism Sector (Pre-earthquake) ------30 -.------

-.•• \\~on consisted of Messrs. lain T. Christie (Financial ..!..Iialysi:) I 'l'~~akopoulos (Engineer/Planner) I Sisinio Flores (Tourism Specialist), ,. ~~~rard (consultant)~ and Sheldon Annis (consultant). ~------•• • "'.'Jment has a restricted distribution and may be u.5~ by recipients only in the performance ... ~ Official duties. Its contents may not otherwl~ be di.sclosed without World B.lnk luthorizstKlO. --.------~ TABLE OE CONTENTS - Page 2

Page No.

ANNEXES

II - Table' 1 - Tourist Typology ------31

III - The Const~uction Industry ------34

IV - Handicrafts ------~------37 Chart 1 - Distributional Flow of Handwoven Indian Textiles 46 Chart 2 - (Added Value, Expressed as % of Input) ------47

V - Assessment of Existing Infrastructure ------48

Tables 1 - Principal Airports ------53 2 - Water Supply Systems on Selected Locations ---- 54 3 - Sewerage Systems on Selected Locations ------55

VI - Organization for Project Planning, Implementation and Land Control ------56 VII - Table 1 - Tourist/Host Interaction ------59 VIII - Instituto Guatemalteco de Turismo (INGUAT) Corporacion Financiera Nacional (CORFINA) ------60

Table 1 - CORFINA Hotel Credit Terms (1976) ------63

Chart 1 - INGUAT - Organization Chart ------64 Chart 2 - CORFINA - Organization Chart ------65

IX - The Market ------66

Tables 1 - Total Number of Visitors to Ce~~~?~_~erica According to Region of Origin - 1974 ,------73 2 - Comparative Growth Rate and Market Share Data - 74 3 - American Travel Abroad: 1960-1975 -----~------75 4 - Visitor Arrivals. Actual & Projected (1965-1985) ------76 5 - Breakdown by Nationality and Type of Tourists (1975-1985) ------77 6 - Additional Rooms Required for 1977-1985 ------78 GUATEMA.LA

TOURISt·! SECTOR REVIEW Al.'1D PROJECT IDENTIFICATION

A C RON Y M S

CABEI Central American Bank for Economic Integration (Banco Centroamericano de Integracion Economica)

CACM C~ntral American Common Ma~ket (Mercado Comun - Centroarn-eric-ano)

CORFINA Nutional Financial Corporation (Corporacion Financiera Nacional)

IFES Women's Institute for HIgher Studies (Instituto Feminino de Estudios Superiores)

IRA Institute of History and Anthropology (Instituto de Histori~_y_.Antropologia)

INAFOR Forestry Commission (Instituto Nacional Forestal)

L.'WUAT Guatemalan Tourism Commission (Instituto- - -._- - -- Guat.emalteco_de....-TurismO-f--- INFOM Institute for Municipal Development (Instituto de Fomento Municipal)

INTECAP Technical Training Institute (Instituto de Educacion y Capacitacion) GUATEMALA

TOURISM SECTOR REVIEW &~ PROJECT IDENTIFICATION

SUMMARY

i. Guatemala has remarkable touristic assets. The most noteworthy are its archaeological and cultural attractions including the pre-Columbian civilizations, best represented by the Mayan city of Tika1, and the Spanish colonial period, preserved intact in Antigua. The Indian culture, though in many ways modernized, has retained much of its tradition including methods of agriculture, bright handwoven clothing, colorful markets, and re~igious fiestas. Mountains, volcanoes and lakes provide a varied and dramatic land­ scape for the tourist; the climate, especially in the highlands where the temperatures average 20 0 C year round, is well suited for tourism. The Five­ Year Plan (1975-1979) accords high priority to tourism as a sector with great potential for diversifying the economy, inducing regional development, increasing foreign exchange earnings, and generating employment.

ii. In 1965, gross foreign exchange receipts from tourism totaled U5$18.5 million; in 1975, the figure had risen to US$85.9 million, and tourism ranked second only to coffee as a foreign exchange earner. It is estimated that tourism generates at least 25,000 jobs, about 1.3% of the labor force.

iii. Foreign visitor arrivals increased from 174,000 in 1970 to 454,000 in 1975, or about 56,000 per year on average (21% growth rate) excluding regional travelers using a pase local. In 1975, over half were from Mexico and other Central American countries (predominantly El Salvador), 25% from North America, and the balance mainly from Europe and Latin America. As a result of the earthquake early in the year, arrivals dropped to 403,000 in 1976. Hotels have expanded from less than 2,000 rooms in 1969 to just over 4,000 in 1976. They operate at occupancies of over 70% in Guatemala City and _.5~~6~~__ i~_o~~~r p1c:.c.es; a~ c~rtain_perio.~s .of the year, it is n.ear~'y imposs ibl~ _t.o . _ find_accommodat~on. The ayerage length of stay of visitors is estimated at 4.5 days, iv. The long run growth prospects for the sector appear to be good. Tourism in Central America overall has shown strong gro\vth (17% annually in the period 1971 to 1975). Guatemala has the assets, a developed structure of wholesale and retail travel service outlets, a relatively low cost structure and is in an excellent position as a gateway to Central America,· quite close to major generating markets. Within Central America, Salvadorian traffic should continue to be the major market (for trade and shopping). North Amer~can travel should continue to be a leading market with growth in business travel following the growth of the economy. The pleasure market estimated by the mission at 150,000 visitors is expected to expand by about 7-8% annually, particularly (small) group travelers from North America and Europe. Corporate business traffic, which now accounts for about 90,000 visitors, is estimated to grow at a much slower pace, 5.2% per annum in line with the histoFic growth rate in GDP of 5.7%. The mission believes that an annual increase in - ii -

total arrivals by 40,000 is a realistic assessment of the potential growth of demand for Guatemalan tourism.

v. ' Whether-this denand can be realized will depend primarily on the development of suitable' acc~~odation capacity and promotional activities. The 1975-1979 Plan envisag~5 the construction of 5,700 additional rooms. Of these, 1,100 are already u~:er construction, mostly in the first-class category. The mission estimates that :~ly another 1,000 rooms will be completed before 1980. Consequently, this lack of accommodation capacity will most likely constrain visitor arrivals (especially group travelers) in Guatemala. It is unlikely therefore that the number of total arrivals will exceed 600,000 by 1980. (The Plan's target is 750,000 arrivals by 1979.) Over the longer term, -Guatemala can achieve highe= gro~th rates if adequate supply is developed.

vi. The Instituto G~atemalteco de Turismo (INGUAT) and Corporacion Financiera Nacional (CORFI~A) are responsible for formulating and carrying out tourism policy and promoti~; travel to Guatemala. INGUAT also is responsible for carrying out physical p:anni~g, project preparation and execution functions but cannot do so as it has 0nly cne professional assigned to planning. The Instituto de Fomento Munici;al (I~FOM), the Instituto Nacional Forestal (INAFOR), and the Instituto de Histor~a y ~~tropologia (IRA) have planning responsibilities which overlap with those of INGUAT and should be clarified. vii. The Government ~as icentified a number of tourism development priority zones: Guatemala City and Antigua, Lake Atitlan, the highlands around Quezaltenango and H~=huete~ango, Tikal, and the Caribbean coast at Lake Izabal. Incentives of:ered under the Tourism Development Act (as well as CORFINA financing) encou=age investments in these zones. The mission believes that Lake Atitlan, Antigua and Tikal offer excellent opportunities for development. viii. Public intervention in tourism should focus on developing and strengthening tourism circuits within Guatemala, promoting decentralization of facilities away from Gua:emala City and interpreting Guatemalan culture for tourists. Several projects fulfill these criteria and have been discussed with the Government. No pr~ority was set pending reevaluation -of the Plan after the earthquake. The =issicn recommends returning to Guatemala to discuss the following proposals further with the Government.

ix. Lake Atitlan is a grcwing tourist area faced with uncontrolled growth of housing and hotels. A possible project would be preparation of a master plan which would p=ovide guidelines for controlled resort development plus the financing of infrastruc~ure to upgrade services in selected lake villages (e.g., Panajachel) whi~~ would become tourist service centers on the Inter-American Highway. x. Antigua is one of the finest examples of a Spanish colonial town in the Americas and has long been a tourist destination. A possible project which could be based on ~he existing master plan could include basic infrastructure for the developme~t of a tourism service center, improving infrastructure in Antigua i:sel£~ and an archaeological component tQ inventory Antigua's cultural assets ~~d train stonemasons as well as fund monunent restoration. - iii ...

Tikal is the mid-point of the Mayan circuit which includes ~ ~~xico and Copan in Honduras. Tikal is particularly well known and the .:.: =~-!::"_1 designated _ as a national park. There are plans to finance _e!l~ ~~t Tikal but. _for various reasons, work has not yet begun and there - --::,-n c~~_ortunity for: Bank intervention. A possible proj ect would include - ~i~-~~orks at the archaeological site itself and infrastructure and, _-, ~~~erstructure for a tourism service center together with a visitor ~t~~n center.

If planned expansion of acco~odation capacity is to materialize, 3Si --·illion in hotel credit is needed annually over the next few years. -:!i= -:!lave been identified thus far a=e insufficient and a line of credit _~l ~!lance would fulfill a real need. Possible institutions would be _ _ c:=-..,zfINA.

Service in Guatemalan hotels is adequate and several organizations _ ~~-_:ning. As hotel capacity incre:::..~es, however, there will be increased fer -::--..t9tel school graduates. Pres en ~ training programs will only partially ~U~~~ needs and the system could be ~x?anded considerably. A training . - cc-- .;.9 provide this expansion and a=_ <;he same time help rationalize ~_i::-'~:-;; system. It might include edt:..:....::=.~ional facilities and technical O-:l-:.e:_ .if not available from other scc=ces. GUATEMALA

TOURISM SECTOR REVIEW AND PROJECT IDENTIFICATION

1. TOURISM ASSETS

1.01 Situated ~n the Central American isthmus, Guatemala, with a lar.d area of 108,889 km-, shares common borders with four countries: Mexico, 3elize, Honduras and El Salvador. To the east, it has a 110-km Caribbean coastline and to the south a 350-km Pacific coastline. The Sierra Madre ar.d Cuchumatanes mountain ranges traverse the country, dividing it into ::ur distinct regions: the mountainous western highlands (Altiplano), the 1~5S mountainous eastern highlands, the warm and humid Pacific coastal plain, a~d the densely forested, sparsely populated northern lowlands (Peten).

:.02 Guatemala's tourist assets include its favorable climate, archaeological remains, longstanding cultural traditions, and geographical ~ariety. 1/ The climate is well-suited for tourism especially i~ the high­ :3~ds (including the capital, Guatemala City) where the year-round temperature ~s about 20 0 C (~~nex I, Table 1). Pre-Columbian and Hispanic archaeological ~e~cers are found throughout the country. The most famous pre-Columbian ~e~ains are at Tikal, the largest known Mayan city, which has been partially ~xcavated and is protected as a national park. The Spanish tow~ of Antigua ~~atemala, inhabited since colonial times is noted for its churches, classic ~xa~ples of colonial architecture, and its famous Holy Week celebrations. ~~: Indian culture retains many unique traditions including agricultural :e:~niques, bright handwoven clothing, colorful markets, as well as its ~~::5ious fiestas. Indian-woven fabrics have become particularly sought .::e= by collectors and tourists alike. Guatemala's mountains, volcanoes, 1~: lakes provide a varied and dramatic landscape for the visitor. A major I.~ ::rminal for airlines serving Central and South America, Guatemala City's 1.~:O=t provides easy air access to the country whereas road access is . :'r:'~ed by the Pan American Highway.

2. DEVELOPMENT OF DE.!.'1A..'ID

Foreign visitor arrivals 2/ in Guatemala reached 454,000 in 'j'.lt ,dropp~~ ,_to 402,900 in 1976 as a _r_~sult of the eat:thqua~e. Central

------.. ------_.------_.. _- --.- -- - ~ .. ,\::'es are, however, poor both on the Pacific and the Caribbean compaT.ed ~::~ those in other countries. "~~~~n visitor arrivals include visitors who stay in Guatemala for more "t~ 24 hours but exclude travelers from neighboring El Salvador, Honduras, "! '~<:!i':ico who come to the country either using a nase local and are given .:·7~~3ion to stay for three days, or ~ho come as romeristas tu celeD~ate :~~~~us festivals. It is estimated that there are about 300,000 such •. ', ":'3 annually. - 2 -

-...... :..;;_ '~.'Il\ t!lH.lntries and Mexico contribute over half of all arrivals with .~ ,\ 'ltfllr predominating (35%); the US accounts for' about a quarter of the "'I~ 0 ..... ' I \vElstern Eur:ope and South America are the other maj or markets . .,-'~'\ \'Yo,S and 1970',' arrivals grew by only about 4,000 per annum because -... ,:. '1I\!hHtled internal political situation; between 1970 and 1975, arrivals '" ~. ~r\ l'apidly by more than 56, 000 per annUI:! because of the return to ,.:'1\ p~ace and the doubling of accommodation capacity (para. 3.01) . . _ .• \lI7~ surge in Salvadorian traffic (80,000) arrivals brought about by -. . ~ 1 I\)r\ of the Honduras border is excluded, the overall and Central ,.-'~~'\' 1\1~t'kets are found to have grown by 40,000 and 15,000 per annum . '" ,.~ 1y. 'Arrivals from NorcO. America, Western Europe and South America " ,·~:':"~":\lly by 14,000, 5,000 and 3,000 ne~Y arrivals respectively during the -..... 'p~r10d. About 65% of arrivals are by road and 35% by air. The '". .. . ", .\'t\\$ al."e July, August, December and January. The Government est~mates ":'~~ length of stay at 4.5 days (Annex I, Tables 2-5).

-. There are neither bednight statistics nor reliable information --~':'-'\'~e of visit" (most businessmen, for example, travel on a tourist . .0...... , .. " , .... -."It a business visa as required by law). Moreover, the pases ~~~ not included in the statistics. The mission recommends that a

--...... -... t~urism statistics be tLT1dertaken to find where collection and ~f data can be improved.

'~. On the basis of interviews with Guatemalan authorities and ~',,'~ involved in tourism, the mission prepared a tourism typology " . ~~ , ~dentifying five tourist types: professional and corporate . ~~~velers; group travelers; independent leisure travelers; special­ .. ""·:'..::ral American travelers; and resident travelers. The first group '. ,...... '·,000 travelers in 1975), comprising a large proportion of US ". ~isits Guatemala on short-term independently arranged business ·~.~s type of visitor has high daily expenditure, and has substantial ". -"~!i the Guatemalan business community but little with other -~S. Group vacationers (55,000-65,000 travelers), mostly North ~7 European, stay in first-class hotels on establis~~d circuits ~~~h daily expenditures. These travelers conform to the Guatemalan's ":,:,urist" and utilize tourist services heavily - their main , :~ Guatemala are with travel agents, tour guides, ticket agents, '. ~s ::larket has grown in recent years due among other 'thin'gs to" ,- , ""'~sionalization" of the tourism industry in Guatemala. Independent : :'&~elers (80,000-100,000 travelers) are-heterogeneous ranging from '~~~es" to well-heeled retired couples, and partronize, all categories :~ey show special interest in the highlands, Guatemala City, .~ !~e .special-purpose Central American group is very large .~ ~~out 200,000 visitors traveling on tourist cards and an ;; '~00 ,000 traveling on a ~ local. This group stays with friends­ . \'~s and in lower priced accommodations for the mas t part. Some ~"el is for pleasure but much is for trading and shopping. . the Central American Common Harket (CACM) encouraged more travel , 't). :,ut it was the rift between Honduras and E1 Salvador which l'~t .... ~ to growth in travel to Guatemala, as Salvadorians- sought " b~ Caribbean. - 3 -

2.04 There are no statistics on the magnitude of domestic travel in Guatemala. Interviews with hotel managers suggest that only about 10-12% -of annual bednights in registered hotels 1/ are accounted for by domestic tourists, who often f~vor the cheaper unregistered hotels, pensions or 'private accommodations. Travel is usually undertaken on weekends with one or two families traveling together. Most domestic tourists tend to go to Lake Amatitlan, Antigua and the Pacifi'c beaches, \vhile the more affluent go to Lake Atitlan. Many domestic tourists travel to the archaeological sites of Tikal, Quirigua, and Uaxactun though the greater distance and expense involved make these destinations less popular than the weekend excursion spots. Even rural Indians do not find the notion of tourism alien, and regularly travel to nearby markets, fairs, fiestas, and religious shrines themselves. Guatemalans often travel to E1 Salvador and Mexico and many upper-income Guatemalans travel to the United States and Europe on vacation but also' for business and to shop. INGUAT estimates that Guatemalans made 132,000 trips abroad in 1974, spending U5$5l.8 million (most recent available data).

2.05 According to INGUAT's estimates, daily tourist expenditures in Guatemala averaged U5$39.00 in 1975, up from U5$2l.00 in 1971. These expenditures are distributed 27% for lodging (U5$10.00); 23% for food and beverages (U5$9.00); 12% for local transport (U5$5.00); 25% for souvenirs and purchases (U5$9.75); and 13% miscellaneous (U5$5.25). No recent survey has been completed and so it is difficult to comment on these figures. 11

3. DEVELOPMENT OF 5UPPLY

3.01 The number of hotel rooms more than doubled from 1,971 in 1969 to 4,146 in 1976. The breakdown of registered hotels by category (Annex I, Table 6) is summarized below:

Registered Accommodation by Category in May 1976

Class Number of hotels Number of rooms Number of beds

First 34 1,492 2,839 Second 61 1,119 2,335 Others 82 1,535 3,047

Total 177 4,146 8,221

1/ Hotels registered in the Government's hotel directory. No statistics are available on unregistered accommodations. l/ U5$39.00 seems a high average given the high proportion of Central American visitors, many of whom may stay with friend~ ?nd relative~ or in modest hotels and pensions. At the same time, the average daily expenditure in neighboring Mexico was estimated at about U5$39.00 in 1975 and_in E1 5alvador about US$44.00, suggesting that Guatemalan expenditure estimates are in a reasonable regional range. - 4 -

~ccocmodations are concentrated in urban areas with Guatemala City accounting ior oVer 40%. About 1,100 rooms (mostly first class) are presently under ~onstruction with another 800 due to be started in 1977/1978.

~.02 The classification of hotels in Guatemala used above is an inforfll8.1 one and does not conform to accepted "international" standards. ~part from the two or three luxury hotels in Guatemala City, many hotels clas9ified as "first-class" especially outside Guatemala City, can be considered barely suitable for international tourists in that they lack some facilities and amenities (e.g., air-conditioning, hot running water, ~ and/or radio, swimming pool). The mission suggested that a formal system Qf classification by category would be useful in that it would establish standards and service levels; INGUAT is planning to institute such a system.

3.03 Room occupancy in first-class hotels in Guatemala City was in ey'cess of 70% in 1975. In fact, many hotels keep a register of pensions, guesthouses and even private homes, to which they refer visitors they cannot accommodate. Hotels outside Guatemala City have lower occupancy rates (55-65%) with pronounced seasonality (October-January; July-August) and heavy local business on public holidays and weekends, especially in Antigua dnd Chichicastenango.

3.04 Few operating or financial data were made available to the OIl$sion and estimates of profitability are tentative. Gross operating profits 1" first-class hotels ar~_.of the_order of 3_0:-35~ _of gross sa.1es although in ~t'ln,r categories they may be lower (Annex I, Table 7). Hotel tariffs. \~h t.:h are controlled by INGUAT have been allowed to 'rise gradually in' the r~~t five years (7.5% annually) to cover increases in operating costs. Ih\\,'t'!ver, hoteliers feel that they will shortly face much higher operating ~\\:H,S (particularly i~· wages, with moves to unionize in at leas t one hotel) ~"J that they will therefore need considerable boosts in tariff levels . .\ \ I ~\ough the Government is unlikely to remove price control in the near future, p\'~ff reviews should be conducted more frequently and in more detail than i~ the present practice (every two years). ) .1" The hotel industry in Guatemala is owned almost: entirely by t:h~ private sector. The bigger hotels are owned by established Guatemalan ~~~~lies or businesses (often in partnership) which have diversified into ::\\\\~ i.sm. 1/ Smaller- and medium-sized hotels are owned and managed by ~t"\,,viduals and, as noted above, there exists a large number of householders ~ .. h,' ~ent rooms in periods of high demand (e. g., Easter in Antigua). !"(::nationa1 hotels are well managed, usually by experienced expatriates iiI';! on an individual basis. .

3.~~ Whereas management is good, there is a need for skilled employees .it \~i'art:::Jental, supervisory, and skilled staff levels. Three institutions :-:(,< trai.ning to meet these needs but no coordinated system exists (para. 5.05).

'-=..l !'here is one case of a modest investment in tourism which has - grown to Jrovide the base for expansion both within the sector (hotels, travel 1gencies) and outside. - 5 -

" '0 de Educacion Y Capacitacion (INTECAP) has been offering courses since ~',:~ 1 ;:':Llnagement and operation in its Commerce and Services Division. '. "~r four monthS and cover restaurant service, housekeeping, , t ~ .. v ,: .l~'! ad::linistration. Students (278 in 1975) have been well received j';~' and several new hotels have sent their staffs during the preopening . trl~~tng. The program was to be replaced in 1976 with a hotel : hI! A::.1titlan constructed by INTECAP with Spanish technical • S!nce the hotel to be used as a practice hotel was severely :'~Cl earthquake, these plans have been shelved. No information , : ~ ,~:1 I.'hen the program would be reviewed; in the meantime, the old , : ~~cn introduced again. Another program was established at Landivar :~ 1175. It is a two-year program training guides/interpreters " ~lassroom studies and a period spent working in industry ~or .,,~~~cnce. INGUAT is the third institution involved in hotel ',L::-i:ig training seminars and planning an apprenticeship program. ~:~ese, Opus Dei, a religious organization, has a program to , .. ,,'~..1 ~..!s and the Instituto Feminino de Estudios Superiores (IFES) , " .... n ..:ourses.

::yestment costs vary widely depending on location, type, and I~! :~e availability of utilities and other infrastructure. ':~ years, construction costs have risen mostly because of ',:,~s. The mission estimates per room costs to be between .. : ·.. ithout" iarld for -- first-=-class "hoters---in--Guatemala,--Ci ty; - -~ for resort hotels; and US$8,000-US$14,000 for second­ :~taf- cos'is-;' -civil works -and--heaVY-eql:iipmenr-accQuiif- f or-- : ~~uipment for 25%, and professional fees and preopening :~e foreign exchange cost is in the range of 40-55%. , '~ages and could be reduced by limiting public space, ~~tion facilities and the use of more local equipment and 'I LII discusses the construction industry.

~~er projects, equity capital has been supplied by local ~ J~ten generated from other businesses; for ~maller ~:es are personal savings with expansion coming from :·~::ds. Debt capital has been supplied by' the commercial ~~ system, mostly medium-term for up to 7 years at -::~. Outside the city, commercial banks have shown :t: ?rojects. If tourism is to continue to develop, ::~ :onger term hotel credit to finance the expansion. ':~J to fill this gap but is new and is still building .,- ~ ::'::r.

-":-l.: l City, investment in proj ects such as international l;:-food restaurants has taken place spontaneously . • ~. investment has been slower. To encourage , t \ I.. . ~'Ie Government promotes tourism investment ~:~~~~9. Although there is little difference between ,:q schemes in force in Guatemala, those available ''''/elopment Law (Decree 25-74) for priority areas • -, le under the INGUAT Organic Law (Decree 17-01). ~." ~ : - 6 -

Decree 25-74 Decree 17-01 (tourism priority zones) (country-wide) " : lmport duties exemption exemption (nverage 20% of cost)

I.lInd tax exemption exemption \0.8% of property tax)

\.~0rporate tax exemption for first 50% exemption for 5 yrs. \30% of taxable income) 12 yrs. of operation

'"corporation fees 50% exemption \n/ a)

~" 10 In addition to these incentives: (a) land can be rented to \\\vestors in areas of national tourism interest at nominal rates determined by th~ General Direction of Internal Rents, plus 5% for expenses incurred; \:') CORFINA can 'guarantee and/ or mak~ lo~ns for to~ri~sm pro'; ect~ (Annex VIII. ~';\ble 1).

~,ll The growth of tourism has stimulated sightseeing and restaurant ~~rvices as well as handicraft production. There is a broad range of excursions "~hi tours available ranging from a half-day to three days with most originating \n Guatemala City and going to major resort areas. These tours' are well conducted ~\th well-informed guides and are reasonably priced (Annex I, Table 9). Although ~:~ere are few nightclubs in Guatemala, there is a fine variety of restaurants "~fering a broad range of cuisines.

~,12 Inexpensive and attractive handicrafts are a major tourism asset . .\;~ Guatemala. Textiles are best known (clothing and napery) but many other .~ ·;:-.dicrafts are manufactured including rugs, baskets and other g'oods made from ~~~3W, silver and ceramic jewelry, painted and carved wood chests, pottery, ";'.,: dolls. Almost no data are available on tourist receipts from handicraft c·;:es (one leading retailer in Guatemala indicated that his average sale per ~\·~tomer was about US$14.00 - this, however, was an expensive store and catered I,' local residents as much as to tourists). Annex IV summarizes the evolution "- ..... andicrafts in general and gives a case study of handwoven textiles, which , ~etter documented than most small-scale or cottage industries. Although .'~~woven textiles are still woven as they have been for hundreds of years • ~~~strap weaVing), new methods have been introduced (foot;treadle looma and; , ":\ POio'er looms more recently). Since demand by residents' and tourists for - . ~.!tticnal textiles has risen, competition from new techniques which reduce ~ \aurs of painstaking manual work to produce textiles has led to a ., l'~~cn in the quality of handwoven products. With the expansion of the .,:~~. production, distribution, and sales outlets have all developed t\ \ ••• .... ~' •. Jble 1). For every dollar spent by a tourist, spinners and thread .e:&, r~celve IS cents, the weaver 24 cents; the balance goes to finished • • ~·.r9Jlers and retail~rs. - 7 -

3.13 A full analysis of infrastructure is included as Annex V. Rail- roads and seaports are used almost exclusively for cargo, and, from a transporta­ tion point of view~ airports and the road system are the critical elements for tourism. The only int~rnational airport is in Guatemala City. It is well equipped to handle prese'nt and anticipated traffic flows in the near future. The seven satellite airports, however, have limited landing and terminal facilities and require improvement, particularly at Tikal. In general, main roads serving tourist centers are good except perhaps those providing access to the Pacific Coast from the Western highlands, where it is necessary to double back to Guatemala City. Secondary roads become impassable during the rainy season and require upgrading (notably the Guatemala City!Tikal road~)_. ,_ As Jar __ _ as public utilities are concer~ed, electrical power supply is adequate and water supply and sewerage treatment are satisfactory in urban centers. In smaller communities, water supply is not chemically treated, hotels often have 'their own wells and there is no public sewage collection and treatment. Telecommunications are satisfactory in Guatemala City but very poor in the interior of the country. The main infrastructure deficiencies for the development of tourism are secondary roads, water supply and sewage treatment in smaller communities, and telecom­ munications.

3.14 Physical planning and development controls are normally the responsibility of municipal, provincial and/or local authorities (Annex VI) , and at present four areas (Guatemala City, Quezaltenango, Esquintla, and Antigua) have them. Under the Tourism Development Law (1974), INGUAT is responsible for creating tourism priority zones and executing master plans, Duilding control and zoning regulations within them. Under the same law, it is also empowered to acquire land within these areas although it has not yet done so. 1/ So far, INGUAT has created five priority areas but has done little in the way of plan­ ning partially because the law is so recent but also because of staffing and jurisdictional problems (para. 5.02). The first three priority areas are Guatemala City and its environs (including Lake Amatitlan and Antigua), Lake Atitlan and towns surrounding it (including Chichicastenango), and the zone around Quezaltenango and Huehuetenango. The fourth area is Flores/Tikal where the program calls for upgrading the archaeological site (and national park) of Tikal and providing a service center at Flores connected to Tikal by an 80-krn road. The fifth area includes Lake lzabal, the Bay of Amatique, and the Rio Dulce which is to be developed for beach-based tourism. With the exception of Guatemala City and Antigua, little development has taken place in the priority areas. The Tikal project, to be financed in part by CABEl, has been postponed several times; plans, financed by IDB, are being prepared for the Izabal project. The mission believes that the zones around Guatemala City, Lake Atitlan, and Tikal have excellent development potential. Because of its poor resource base, Izabal does not appear to be competitive with other Caribbean destinations while Quezaltenango is no more than an extension of 'the Lake Atitlan region.

1/ It could also conceivably acquire land under Decrees 277 and 529-for reasons of "public good. I, - 8 -

4. ECONOMIC AND SOCIAL ASPECTS OF TOURISM

4.01 According to INGUAT, "tourism receipts rose from US$18.5 million in 1965 to US$85.9 million in 1975 and now rank second only to coffee as a source of foreign exchange (Annex I, Table 10). The mission estimates net earnings to be 75-80% of gross receipts. These figures must be taken with caution, however; they are "based on estimates of expenditures subject to a large margin of error (para. 2.02). In order to firm up estimates of tourism receipts and improve their knowledge of the sector, the Guatemalans should be encouraged to carry out proper expenditure surveys.

4.02 The hotel industry generates an estimated 1.4 jobs per room in registered hotels giving a total of 5,800 full-time jobs; in addition, non­ registered hotels generate full- and part-time jobs and seasonal accommodations generate part-time employment. Data are not available for these latter categories nor for other types of establishments (restaurants, etc.). They probably generate about 2,000 jobs. The weaving industry creates the equivalent of 18,500 full-time jobs for weavers engaged in production of tourist articles according to Government estimates. Overall, tourism generates a minimum of 25,000 jobs, or 1.3% of an estimated labor force of 1.9 million people.

4.03 A continuing problem of the Guatemala economy is that the benefits of growth have been highly concentrated in Guatemala City, and the standard of living of the rural poor who make up nearly 50% of the 5.6 million population has stagnated for decades. Unemployment and underemployment are widespread, especially among Indians who subsist by tending their minifarms or by working for the coffee and cotton producers at harvest time. The growth in population together with fragmentation of land ownership (in the highlands) is making such farming uneconomic. The impact of tourism has not been great so far in diffusing the concentration of growth - in fact 40% of all hotel rooms and nearly all international standard hotels are located in the capital. This in part reflects the lack of facilities outside the capital and also that the rest of the country is not well known. Some regional development has, however. taken place. One striking example is Panajachel on Lake Atitlan, a small village which has developed as a tourism service town with significant tourism investments realized by local residents. Another example is Chichicastenango. This trend is expected to continue and tourism is seen as one of the few possibilities for spreading growth from Guatemala City to the rural poverty areas.

4.04 To examine Guatemalan attitudes to tourism, a limited, informal survey was conducted with about 50 respondents. Although "results may not be statistically valid, several interesting trends were identified. On the positive side, Guatemalans understand tourism as one element of their econom~c development and may welcome the relationships with foreigners which have evolved. The only tourists who cause any resentment are the relatively few . hippies. Tourism (as distinct from tourists), however, has a pejorative connotation, some people thinking that the industry is all owned by foreigners and that profits accrue to a few. However, tourism is popular with the Government and the business community and is seen as an investment 9Pportunity to be considered seriously. - 9 -

4.05 Annex VII gives a breakdown of interaction between four types of tourists and five types of Guatemalan (but principally non-Indian and Indian). Non-Indians are the group with which tourists com~ into contact most, both in Guatemala City and throughout the country. The impact is extremelv complex and difficult to separate from the many other cultural influences at . work. It is' this group which is most open to the so-called "demonstration effect" - the adopting of new behavior in response to behavior learned from visitors. In fact, it is very difficult to pin changes in local styles on demonstration effects from tourists. Probably, the biggest demonstration effect is absorbed through radio and TV both of which have heavy US programming content. At most, tourist behavior is seen as a confirmation of that already learned from the mass media.

4.06 The impact on Indian culture is perhaps easier to ascertain, although still a very complex issue. In Chichicastenango, the Indian population has retained its traditional form in the face of tourism; the famous market, however, has ad~pted considerably to tourists' needs with tourist booths having prime location and Indian household goods filling less choice sites. In Momostenango, the community remains traditional and unvisited by many tourists; but the carpet weavers have reached out successfully to tourists (and Guatemalan consumers) by means of itinerant salesmen who travel annually from Momostenango to sell carpets. San Antonio Aguas Calientes, by contrast, only 15 minutes from Antigua, receives busloads of tourists who come to buy the famous carpets and tapestries. Here, the weaving industry has developed considerably: production has been coordinated, distribution systems set up and commercial relationships are entered into easily. What was once cheap homemade traditional clothing is now beyond the means of most villagers who wear cheaper western clothing. Panajachel has responded to tourism by dividing into two - the traditional Indian village still existing intact beside the "tourist" town which has seen an influx of non-Indian residents.

4.07 In short, tourism is not monolithic and has evinced a variety of responses in Indian culture. Culture itself is never static and the Indian responses in Guatemala are a reflection of the ability to adapt and change in the face of new technology and economic impacts. It is probably a mistake to view this Indian culture as many do, as an archaic vestige of a.bygone era. Instead, it is a modern peasantry which is constantly reconciling its present economic opportunities with its past traditions in order to produce an integrated lifestyle.

4.08 Although tourism is not likely to generate jobs (in hotels, etc.) suitable for Indians who have shown little interest in such work until now, Indians have accepted tourism and molded it to their ways - principally through handicraft production. Moreover, the Indian culture remains a strong tourist asset and, demonstrably, the two co-exist. This suggests that the solution to both preserving the culture and giving tourists some access to it is to provide well-equipped tourist centers in carefully selected villages leaving tourists­ to fan out from these centers to other villages. This process has in fact started with the creation of the five tourist zones, Guatemala City, Lake Atitlan, Flores/Tikal, Quezaltenango, and Izabal. - 10 -

5. SECTOR ORGANIZATION AND POLICY

5.01 Tourism developed slowly with sporadic public investment in infrastructure and facilities until the 1975-1979 Development Plan. l/ Under this Plan, tourism takes on increased importance as a means of increasing foreign exchange, generating employment and diversifying the economy. The Plan accords high priority to tourism infrastructure, private investment in superstructure, improvement of generic marketing, and the development of tours within Guatemala. Investment envisaged totals US$178 million, comprising US$64 million for infrastructure projects (two-thirds identified), US$10.6 million for hotel finance, and an additional US$98 million for 5,700 new hotel rooms and other tourist facilities (Annex I, Table 11), particularly in priority zones where new projects can avail themselves of infrastructure provided by the' Government.

5.02 The Ministry of Economy is responsible for overall tourism policy which it administers chiefly through the Instituto Guatemalteco de Turismo (INGUAT) and the Corporacion Financiera Nacional (CORFINA). INGUAT, created by Decree 17.01 in September 1967 (Annex VIII), is a "decentralized state entity" with legal status. It is charged with implementing the objectives of the Plan and has a broad mandate covering several areas of tourism such as policy formulation, identification and planning of tourism priority zones, regulation of the hotel industry, administration of incentives, promotional activities, sponsoring hotel training programs, and stimulation of handicraft production. In fact, however, INGUAT has limited itself to promotional activities which it has done competently. With a staff,of about 60 profes­ sionals, most of whom are not qualified because of inexperience, little more can be accomplished. Recently, one professional has been assigned for planning in the sector and this has resulted in the identification of tourism priority zones. INGUAT operates on an annual budget of US$2.0 million, generated mainly from a tax on hotel room sales (10%), tourist card fees (1 quetzal), and departure taxes (3 quetzals at airports, 1 quetzal at other frontiers).

5.03 Given its insufficient staffing, INGUAT has thus far been unable to fulfill its physical planning and project implementation responsibilities. These have been carried out by various other agencies, at times with some confusion and overlapping. The Institute of History and Anthropology has thus been in charge of planning the Tikal National Park and has taken the lead in forming the Consejo Nacional para la Preservacion de Antigua Guatemala. Also active in tourism are the Municipal Development Institute (INFOM) and the Forestry Commission (INAFOR), which have undertaken planning exercises in the Panajachel and Lake Atitlan areas respectively. Centralization of the tourism planning function in a reorganized and strengthened INGUAT would be the best way to overcome current fragmentation of responsibilities in tourism-related projects.

1/ The tourism section of the Plan is being revised (after the earthquake) but the .revised version is not yet available. - 11 -

5.04 CORFINA (Annex VIII) was established as a development bank in 1972 to promote mining, industry, and tourism. Its operations include investment pro~otion and technical assistance, investing directly, providing medium- and long-term credit, and guaranteeing loans. Approximately 18% of CORFINA's portfolio is in tourism projects, but in 1976 the percentage of tourism loans was about 35% of commitments. For priority areas, terms are liberal, with financing up to 80% of cost over 12 years at 10% interest and even better financing terms are available for investments in Peten and Izabal (Annex VIII, Table 1). For nonpriority projects CORFINA lends 70% of cost for up to 9 years at 9-11% interest; Guatemala City has similar terms. Interest rates are marginally lower than medium-term commercial finance (13-15%) and appear reasonable. However, financing 70-80% or more of project cost seems -t'obe---a 'very -high ratio, not permitting CORFINA to cover its commercial risk, -'even--ircollciterai -security (us-ually fixed -assets) is offered in addition to a mortgage. The maturities (except in Peten and the Caribbean coasts) are quite short for hotels, considering the long-term nature of the assets and the high debt service burden on hotels in the initial years of operation. It would appear that longer repayment schedules and financing lower percentages of project costs at prevailing interest rates would be conservative from CORFINA's point of view and still provide hotel credit on terms attractive to investors.

5.05 There are at present three proposals for meeting hotel training needs. The first, favored by the hotel industry, calls for an apprenticeship program which would not require heavy overhead in the form of physical facilities (hotel, school, etc.) but would depend entirely on on-the-job training. However, under this kind of program, apprenticeships are long (3 to 5 years) deperiding on the quality of existing management and staff, are open to abuse, and would turn out qualified personnel only slowly. A second possibility proposed by INTECAP was to convert a Government-owned hotel into a hotel school by adding scholastic and housing facilities. Unfortunately, the hotel in question was damaged in the earthquake and plans for its conversion have been shelved. The Government operates several hotels and vacation villages for civil servants' vacations (financed out of small salary and tax deductions), anyone of which could conceivably double as a training center. For example, the Casa Contenta in Panajachel would be well suited for this purpose. Invest­ ment in physical facilities would be higher than for an apprenticeship program, but the quality of instruction could be better controlled. A third proposal is for hotel training to be implemented on a regional basis, that is, with the participation of all Central American countries. Under this approach, a training center would be set up (possibly in Honduras) to serve Central America. The regional approach assumes that no one country in Central America has the demand itself for a full complement of training facilities. This is probably true in other Central American countries, but is not evident in Guatemala which has the largest tourist trade in Central America. Each of these approaches has its merits and demerits, but not enough is knmm about the relative costs_ and benefits of each. It is, however, a policy area which demands early decision, for sound training is a cornerstone for a healthy tourist trade. The mission recommends that INGUAT, the Hotel Association and INTECAP review training policy to define roles and responsibility for implementation of a comprehensive training policy, including the possibility of a Central American, regional approach. - 12 -

6. GROWTH PROSPECTS

6.01 ~Jatemala nas outstanding tourism assets and many of the elements necessary for s~ccessful:tourism development already exist: attractive resort and dramatic ar~~aeolog~~al sites, relative proximity to major tourism­ generating mark:~3, a de.eloped structure of wholesale and retail travel sales channels; fine ~·..:ality 1: !:':1dicrafts, a relatively low cost structure, an excellent posit::n both ~ a gateway to Central America and as an important stopoff on reg::~al circ~its. In terms of tourism growth, Guatemala is at a crossroads. Ur.:il now, ~ourism has grown, rather haphazardly, because of the country's outsta~ding assets. It could continue in this fashion, or growth could be accele:ated by =~cusing attention on the sector and making the _ resources (huma:l and fi~~cial) necessary for stimulating growth available.

6.02 Over the ~ext three-four years, the major determinant of sectoral growth ~ill be ~~e availability of internationally acceptable accom­ modation capacity. At =~e present time, about 1,100 rooms are under constructior~ most of which are class~=ied as first-class. In view of the time necessary to complete hotel ?rojects (about two years) and the demands on the construction industry followi:lg the earthquake, the mission estimates that an additional 2,000 hotel roo~s could ~e added, many outside Guatemala City, between now and 1979. This available ca?acity will constrain the number of arrivals to no more than 600,000 in 1980, c~=responding to an annual increase of about 30,000 visitors per annum between 1975 and 1980 (Annex IX).

6.03 In the l'=:lger term, continued traffic growth will be largely determined by the incre~se in the propensity to travel abroad in Guatemala's major markets, the cour..~=y' s -ability to attract visitors by developing its assets and remaining pr~=e competitive with other destinations (e.g., Mexico). While it is difficult t= evaluate the prospects for Guatemalan tourism beyond 1980, the following fac=~rs will be of importance:

(a) Cen=ral American and Mexican demand will depend to a large extent on the political/social situation in =~e region, in particular, on the evolution of HonO::'.lran/Salvadorian relations. An improvement in =~ese relations would lessen Salvadorian depe~dence on Guatemala and result in a leveling off or even a drop in Salvadorian arrivals. On the' other hand, Mexican traffic to Guatemala has been increasing steadily sinc~ the 1970s. This traffic wou:d compensate for any drop in Salvadorian tra=fic. There is no data at hand which would jus=ify a significant departure from the trends of the early 1970s, II indicating that total arrivals fro~ Mexico and Central American countries would increase by about 15,000-17,000 per annum.

11 The past trend sho~ld discount the jump in Salvadorian arrivals in 1972. - 13 -

(b) US travel to Central America has held up well and even grown rapidly in recent years. While US travel to Mexico, the Caribbean and Europe has not yet fully recovered from the 1973 crisis, travel to Central America rebounded within six months. l/ This is attributed to the extensive business connections of US citizens in the region. Guatemala, which has traditionally secured the lion's share of both business and leisure traffic, should remain the favorite Central American destination for US travelers and is expected to attract about 12,000- 15,000 additional US travelers each year.

(c) European and South American demand will continue to cover two distinct but related markets: group travelers (charters) and independent leisure travelers. Both markets are linked to development of long-haul vacation travel in the generating markets and evolution of suitable accommodation capacity in Guatemala. Neither market is expected to grow particularly strongly and the trend of the early 1970s provides a useful guide to what can be expected. On this basis, total arrivals from these markets would be increasing by about 7,000-10,000 annually.

Assuming that accommodation capacity increases by 400 rooms a year,the overall annual growth of traffic between 1980 and 1985 can be expected to attain the same levels (i.e., 40,000 additional arrivals per year) as in the 1970-1975 period.

6.04 By 1985, it is estimated that business traffic will account for about 20%' of total traffic, leisure travelers, including both groups and independents, 42% and special-purpose regional visitors, 38%. As Guatemala becomes established as a tourist destination, it is expected that leisure travelers, specifically group travelers, would garner a greater share of the market.

6.05 These targets are not likely to be achieved if the tourism sector is left to develop haphazardly. It will need a larger share of the country's financial and human resources. Estimated financing requirements annually for hotel construction alone would exceed US$9 million. 2/ Additional outlays will be necessary in infrastructure, internal transport, ancillary and supporting tourism services, training, and promotion. INGUAT's capabilities will need strengthening if it is to fulfill its responsibilities in the field of physical planning, project preparation and implementation tasks and its responsibilities should be broadened to explicitly include economic analysis of projects.

1/ On the basis of statistics of US citizens' air departures to Central America. 2/ Assuming a weighted construction cost per room of US$26,000 for 350 rooms. - 14 -

7. PROJECT IDENTIFICATION

Based on 'the foregoing analysis, the mission beli~ves P~bliC ~ to~rism should be supported to (a) develop and s~rengt e~ ._~S w~thin and through Guatema~a; (b) promo:e decet!~rali~at~ond ~ ::.:.litl..es away from Guatemala C~ty; and (c) ~nterpr", t, Indl.an a~ .",'." - ./ ,,;~.' '._;-::s for touris ts. Several proj ects fulfill these r:: /.'i te:-ia an ~~ssed with the Government but no priority was set rend~ng re­

r : ~he Plan after the· earthquake.

.r The Atitlan area is now a growing attraction for cour1sts on ,'_ -:: ..dng the Pan American HighTN'ay (Inter-American Hig~ lay in _~ and connects _~! extends from Mexico to Panama and South Americ~ ::.5 of Guatemala. It is popular with Guatemalans au J foreigners . excursion . :.;-;er for viewing the surrounding highlands and as =:.1 /~?m Guatemala City.

The Government has declared the Atitlan area a pri.ority tourism .. 1/(\ ~s a good deal of private home construction in the .irea; a , _-;;oplex and a large hotel are being built in Panaj a";: el; and o~ner ~~ored to be in preparation. The lake and surrourrJing ~rea a~e ~~ from heavy construction activities and now face lhe treat 0 . ;~~Jnental deterioration . • \ • ( , ~1;1

, \ f' ,\'; , A possible project would be the development of a areal I j • t~ (, ~esoGrt .' d . . l&:' ,. (k d . . j. 0 m ua t e!!la a ,_me prl.marl. y at .1.orel.gn Vl.Sl.tors wee en trl.ps r 1 \ ' -\ '. the provision of infrastructure, including wat~r - JPP_y, sewe~age ,', .,.aste disposal, telecommunications, internal road .. etTN'ork~ a .,-:reational facilities, plus infrastructure to impr" Ie. servl.ces in) .' villages (e.g., Panajachel) and nearby cities (C11 1 ..:hl.cas~enango . , ;,'ould become poles of tourism development on the F ,.• : p.Jne~l.~an carries substantial local and regional traffic. ,'U wor as financial, . ... -: preparatory studies covering planning, technical . .... \ .~ '" \ .... ~rket aspects would be necessary, , .:", ,~ ,', , .. \ , A key issue would be selection of the agency to . {epare and .,\,'" cssible ~coject and INGUAT, INFOM, and INAFOR appear to be > ._-._- - ---_.- -.-- - .. - .. -.- -- \ ------_._-

,.:, ~ ~ . The project would be justified on several ground-: (a) touristic .. ' \ . ~ . - strained' ! ;:,2.sed greatly recently and infrastructure capacity ,~ 1, \I .; ~rea:e a complementary pole of development to Guat ~ala Cit~, th~s ' .."

, l r::he p:'ohlerns associate-i ','ith the caoital's gr~.;th: nd (c) 1... i '.y infra- ~'" : f-e i t 1 an are included, the project could replace agio 0 I (An a::ea needing special examination T..;ould be the ,r'" =ket prospects.) .' ! , ...... , I l\ . . An c and one of • ; "I .:lgua is a prioritv zone for tourism developrrr' 1 ; -, • 'lationa - !fl~ in Guatemala to have a mas ter plan in force. Th,., - , ~he ?::~servation of Antigua Guatemala is responsibl . for enforcing t .' 1 -:-..: I' "~ i I - 15 -

the Plan and preserving Antigua as a-national monument, and the council has been very effective despite its limited budget. Some of the important works started include preservation of churches and strengthening them against earthquakes; restoring paintings of the colonial period; training Guatemalans in the art of stonemasonry, an art which has practically died out in Europe and North America; and researching the history of the city.

7.08 A possible project would consist of basic infrastructure for the development of a tourism service center (as proposed by the master plan) and upgrading of infrastructure in Antigua itself. In addition, the project would have an archaeological component with funds for (a) preparation of an inventory of Antigua's cultural assets II and establishment of a permanent microfilm record; (b) a school to train-stonemasons; and (c) restoration works. Such a project would probably be best prepared wi~hin the National Council for the Preservation of Antigua Guatemala.

7.09 On the assumption that the master plan is acceptable, a project could be identified and prepared fairly quickly since the bulk of the work remaining to be done would be design work for infrastructure. The institutional framework is established and could be strengthened conSiderably under a Bank project. Antigua has a sound tourist market which could be further expanded with an upgrading of its infrastructure. Lastly, the tourism project would enable preservation of an important part of Guatemala's cultural patrimony.

Tikal

7.10 Another tourism priority development area, Tikal is the mid- point of the Mayan circuit that includes Yucatan in Mexico and Copan in Honduras. Being a particularly well-known archaeological site, Tikal has been attracting a substantial number of international tourists. It is a national park and animal sanctuary and a master plan has been prepared by the US National Park Service. One problem which should be examined in detail before proceeding is the availability of ground water in the Tikal area.

7.11 Despite the growing number of tourists, Tikal's 'accow~odation and visitor facilities are totally inadequate. CABEI is to partially finance an infrastructure project consisting of infrastructure facilities at Flores (on Lake Peten Itza, some 60 km from Tika1), a connecting highway from Flores to Tikal, and park facilities at Tikal itself. The project, however, would cover a very limited amount of excavation and restoration works. Possible agencies for carrying out such a project would be INAFOR, the Institute of History and Anthropology or INGUAT, or possibly a new council along the lines of the one for Antigua could be created.

7.12 Two possible project components would be technical assistance for (i) archaeological works and site protection, basic infrastructure and

- II Unesco is also interested in executing this task, but lacks the funds. Unesco officials are anxious to work closely with the Bank on this project. --16 -

facilities including a site interpretation center and upgrading of the airport (similar to the approach being considered by the Bank in Honduras); and (ii) a small agricu1tur'al program.

Hotel Credit

7.13 The only Guatemalan institution offering hotel credit as distinct from industrial finance is CORFINA. It has lent a total of US$1.8 million for hotels and currently has a line of credit from IDB for industry and tourism With about US$3 million allocated to tourism, but in general, their terms are not responsive to the needs of hotels which require long-term financing similar to other real estate projects.

7.14 If the proj ections of demand after 1980 are to be me't (para. 6.04), about US$7 million will be needed annually for hotel credit. This would assume a debt equity ratio of 60:40 with US$4 million being raised by private investors. More analysis needs to be done on where such accommodations are needed (Guatemal~ City versus other tourist areas) and for what category of hotel (ranging from pensions and guesthouses up to luxury city hotels) and a study would be necessa~y to examine alternatives.

7.15 Selection and appraisal of the institution for channeling the funds is a critical issue. IDF's assistance would be necessary for this analysis, but it appears that the choice would be between CORFINA in Guatemala or CABEl on a regional basis. The Bank has not appraised CORFINA and plans for a regional loan to CABEl are making only slow progress.

7.16 The advantages of a hotel credit project aside from the IDF aspects of institution building (portfolio management, appraisal, follow-up, etc.), would be its flexibility to invest and lend only in priority areas - the institution's promotional ability would thus have to be strong. Such a project would also provide a good basis for periodic analysis of the incentives offered to investors.

Hotel Traini:1g

7.17 INTECAP is currently providing hotel training in Guatemala City; Landivar University trains students i:1 tourism and INGUAT is planning an apprenticeship~r~~ram.

7.18 Although service in Guatemalan hotels is adequate~, expansion of training facilities will be necessary particularly for personnel needed in new hotels and other tourist-related jobs. It is estimated that about 2,000 new, _ entry level jobs in hotels will b~ cr~ate~ ov~r the next five years. ~uatema~a currently does not have the capacity :0 train these people with existing programs and some expansion is necessary. A study is needed to determine (a) directions that training should tske (considering all three approaches proposed); and (b) manpower requireme~ts.

7.19 As an essential elemenc of any developing tourism sectur, training has possibilities as a project in ics own right or as part of an infrastructure or education project, Jr, in this case, as part of a Central - 17 -

American, regional program. A possible project in Guatemala might include the educational facilities and financing of technical assistance if it is not available from other sources. A project preparation study would be necessary and it is likely that e.ither INTECAP or INGUAT would execute such a project.

Handicrafts

7.20 A possible project, or project component, in handicrafts would be a line of credit for small-scale enterprises. Several Government agencies are already active in the field as well as several international financing agencies, and Bank participation should be viewed with caution.

7.21 The above analysis indicates that there are several potential projects in Guatemala. Although the Government has identified priority zones for tourism development, it has not established priorities amongst the sites. The mission suggested that, after the Government has established such priorities, a joint Bank/Government mission visit sites and review in detail possible projects. Subsequently, the same team would prepare the terms of reference for studies necessary for preparation of the project. - 18 - ANNEX 1 Table 1

GUATEMALA

TOURISM S~CTOR REVIEW AND PROJECT IDENTIFICATION Climatic Data Mon~-ly Average Temperature (in 0c)

Month City Gua.::_~-:nala Cit~ Chichicastenango Solola Tikal Izabal January 19 19 20 20 20 February 19 17 18 20 20 March 20 20 19 25 25 April 20 25 22 25 25 May 20 22 20 28 25 June 20 20 19 25 25' July 20 25 20 25 20 August 20 26 18 25 25 September 20 20 20 25 25 October 20 20 18 25 25 November 20 16 18 24 22 December 15 15 18 23 22

Annual average 19 18.5 18 25 24 Precipitation in nnn

January 10 10 10 40 200 February 10 10 25 60 100 }1arch 10 10 100 50 80 April 25 25 200 50 ·100 May 100 100 400 200 200 June 200 200 500 200 300 July 200 100 400 200 400 August 150 125 400 200 400 September 225 250 700 300 400 October 140 100 600 200 300 November 25 25 200 -. 75 200 December 10 10 50 75 200 Total :,105 965 3,585 1,450 2,880 No. rainy days per year 105 100 115 120 155

Source! INGUAT - 19 - ANNEX I Table 2

GUATEMALA

TOURISM SECTOR REVIB-l AND PROJECT IDENTIFICATION

Foreign Visitor Arrivals

% Increase Year No. oi' Visi tors (decrease) 1965 153,453

1966 139,307 (9. ~)

1967 171,631 23.2

1968 174,638 1.8

1969 178,331 2.1

1970 173,652 (2.6 )

1971 238,797 37.5

1972 348,138 45.8

1973 403,625 15.9

1974 412,342 2.2

1975 454,436 10.2

1976 402,900 (8.9)

Note: Foreign visitor arrivals constitute only tourists who stay in Guatemala for more than 24 hours.

Sources:INGUAT Statistical Bulletins,l971-l975 and statistical records I \ ~ • , .... ' ...... - ".., , , , . \ \ I , , ""1-' , , .... ; :- ", \" , 1,'Jl\ ...... I I • ... -. ~ • f •• ' ,t, I. ,t.U 4,Ot..8

, J .,. j I , ,,1 t.OI,

\ ) "\ b,~~S !. • . '''';.'~ _.&.-----.. ~l():. H,:l62 8,1143 11,419 13,531 15,693 16,207 23,279 !1.:..l 3,539 4,886

..)_ ...... : L L 1,330 2,405 Cololllbia 3,681 4,959 Venezuela 1,732 3,198 7,831 Other 5,925 i I Caribbean: 1,024 898 810 1,189 1,430 564 1,452 1,613 1,713 1,450 2,441 ~ 1. 9 Dominican Rep. 588 1,349 i Other 862 1,092 ! I , to.> 0 ~U\ ope: 8,626 10,858 13,174 15,573 16,977 16,469 27,087 31,897 35,058 37,143 42,782 .lU Ct!nUllny 2,988 2,570 3,355 4,027 1,,386 3,805 6,279 8;013 8,630 9,040 10,210 Udgium 1,186 1,385 Spain 2,037 1,657 2,278 2,251 2,387 2,425 4,753 4,428 4,931 4,467 4,976 France 1,427 1,489 1,710 2,141 2,346 2,571 4,316 5,571 6,299 6,617 8,634 Nt!tht!rlands 1,737 1,867 Great Uritain 4,061 4,333 Italy 1,364 1,008 1,453 1,499 1,797- 1,650 2,404 2,992 3,224 3,782 3,839 Swit;:erland 810 828 834 1,117 1,437 1,152 1,642 2,375 2,416 2,897 3,231 Otlter 3,306 3, ~)l14 4,538 4,624 4,866 7,693 8,518 9,558 3,356 4,307

Asia; 1,155 914 ,980 1,206 1,005 669 3,127 3,025 4,179 4,1,53 4,880 4.6 Japan - 2,902 3,116 -- Other - 1,551 1,764

.Other Countries: 4,972 502 1,205 1,478 1,951 1,984 810 1,110 1,935 863 1,479 1.3

Crllnd Total 153.453 139,307 171,631 174,638 178,331 173,652 238.797 348,138 403.625 412,342 454.436 402.9 .~

o-i Sources: INCUAT II> tT ~ Statistical Bulletins, 1971-1 ->- r

TOURISM SECTOR REVIEW AND PROJECT IDENTIFICATION

Foreign Arrivals by Means of Transport (70)

Total Year (000) Air Land Sea

1965 153 33.6 65.4 1.0 1966 139 39.8 59.3 0.9 1967 172 35.8 63.6 0.6 1968 175 37.5 62.1 0.4 1969 178 44.1 55.2 0.7 1970 174 37.8 61.4 0.8 1971 239 38.2 61.2 0.6 1972 348 30.1 69.5 0.4 1973 404 31.1 68.4 0.5 1974 412 34.4 65.0 0.6 1975 454 35.1 64.1 0.8 1976~./ 110 29.7 69.4 0.9

Air

Total Connnercial Charter

1973 125,559 123,477 2,082 1974 141,884 138,298 3,586 1975 159,668 156,578 3,090 1976~./ 32,806 31,594 1,212

~January-March

Source: INGUAT -.22 - ANNEX I Table 5

GUATEMALA

TOURISM SECTOR REVIEW AND PROJECT IDENTIFICATION

Foreign Arrivals by Month (%) . Month 1981 1972 1973 1974 1975

January 8.7 7.5 10.3 11.0 10.1

February 7.4 6.9 7.3 8.6 7.1

March 7.2 6.6 7.1 7.9 9.1

April 9.0 6.5 9.3 . 8.9 6.7

May 6.2 6.0 7.2 7.1 7.0

June 7.1 6.9 7.3 7.8 7.5

July 8.9 8.6 9.6 9.3 9.5

August 11.1 13.5 10.2 9.4 10.1

September 7.5 6.5 7.0 6.1 6.9

October 7.3 8.9 7.4 6.7 7.5

November 7.8 9.4 9.0 7.5 8.1

December 11. 8 12.8 8.3 ...2:.§. 10.4 Total 238,797 348,138 403,625 412,342 454,,436

Source: INGUAT - 23 - ANNEX I Table 6 Page 1

GUATD!ALA TOURISM SECTOR REVIEH AND PROJECT IDENTIFICATION

Regional Distribution of Accommodation Canacitv As of May 31, 1976 !/ Region Category No. of Hotels No. of Rooms No. of Beds , Guatemala City Total , 46 1,685 3~178 First ,10 813 1,476 I Second i13 ' 320 605 Third 22 '534 1,061 Fourth 1 18 36

Verapaz Total 9 94 181 First 1 11 22 Second 2 24 48 Third 2 20 40 Fourth 4 39 71

Baja Verapaz Total 1 16 32 First Second 1 16, 32 Third Fourth . -

Chiquimu1a Total 13 343 756 First 1 28 56 Second 5 129 316 Third 7 186 384 Fourth EsCuintla Total 12 m 428 First 6 148 288 Second 2 17 30 Third 2 25 38 Fourth 2 35 72

Huehuetenango Total 4 105 219 First Second 2 67 143 Third 1 24 48 Fourth 1 14 28

Izabal Total 10 176 390 First 2 48 96 ~ Second 7 lOS 248 Third 1 23 46 Fourth - 24 - ANNEX I Table 6 Page 2 ,!./ Region Category No. of Hotels No. of Rooms No. of Beds

Jalapa Total 1 10 40 F~irs t Second Third 1 10 40 -Four th Jutiapa Total 2 34 64 . First Second 2 34 64 Third Fourth

Peten Total .8 113 249 First' 1 12 30 Second 2 31 68 Third 5 70 151 Fourth

Quezaltenango Total 13 262 582 First 1 50 112 Second 7 145 339 Third 2 18 38 Fourth 2 41 82 Fifth 1 8 11

E1 Quiche Total 3 58 119 First 1 30 60 Second 1 8 15 Third 1 20 44 Fourth

Retalhuleu Total 6 81 161 First 1 30 60 Second 1 13 26 Third 4 38 75 Fourth

Sacatepequez Total 10 220 438 First 3 117 242 Second 3 39 78 Third 4 64 118 Fourth San Marcos Total 2.. 157 316 First Second 1 23 43 Third 8 134, 273 Fourth - 25 - ANNEX I Table 6 Page 3

!,/ Region Category No. of Hotels No. of Rooms No. of Beds

5o101a Total l.~ 359 "699 First 5 162 306 Second 9 .109 217" Third 5 88 176- Fourth

Suchitepequez Total 1 :134 221 First 1 15 35 Second 3 "39 .?3 Third 2 [ 28 52 Fourth 1 52 71

7'3.capa Total 4 74 148 I First 1 28 56 Second Third 3 46 92 Fourth

Total Guatemala Total 177 4,146 8,221 First 34 1,492 2,839 Second 61 1,119 2,335 Third 70 1,328 2,676 Fourth 11 199 360 Fifth 1 8 11

~I The breakdown by category is a preliminary one. There is no official classification of hotels by category at the present time.

Source: Instituto Guatemalteco de Turismo (INGUAT) - 26 - ANNEX I Table 7

GUATEMALA

TOURISM SECTOR REVIEW AND PROJECT IDENTIFICATION

Mission Estimates of Operating Results for Selected Types of Hotels

Hotels in Guatemala City Hotel in Antigua --First Class First Class

No. of Rooms 200 60 Average Annual Room Occupancy (%) 70 55 Average Double Occupancy ___ J.5_ 1.3 Averaga Room Rate US$15 - US$20 % of Total Sales % of Total Sales Sales Room 766 55.0 240 33.0 Food 438 31.5 365 50.0 Beverage 160 11.5 110 15.0 Other 28 2.0 15 2.0 Total Sales 1,392 100.0 730 100.0

Cost of Sales Food- (35% of food) 153 135 18.5 Beverage (24% of beverage) 38 29 4.0 Other 3 1 Total Cost of Sales 194 13.9 165 22.5

Payroll: Related Expenses 278 20.0 66 9.0 Other Department Expenses 125 9.0 37 5.0 Gross Income 795 57.1 462 63.3

Undistributed Expenses Administrative & General 125 9.0 110 15.0 Advertising & Promotion 28 2.0 15 2.0 Heat, Light, Power 56 4.0 15 2.0 --Repairs & Maintenance 42 3.0 37 5.0 Total Undistributed 251 18.0 177 24.0 Expenses

Taxes INGUAT (10% of Room Sales) 77 24 Stamp Tax (2% of Revenues) 28 15 Property Tax (8%/$1,000 of Land Value) 24 9 Total Taxes 129 48

GOP 415 237

GOP as % of Total Sales 30 32.5

Source: Guatemala hotels; mission estimates GUATI-l-IALA

l~URISH SECTOR REVIEW AND PROJECT IDENTIFICATION

Comparative Hotel Rates (All EP Unless Indicated)

1976 Pt'ices

C LAS S GUATrnALA EL SALVADOR 1I0NouM~ MEXICO

Guatemala City San Salvador Te8ucisa1~a Mexico City Single Double Single Double Single Double Single, Double

Ue1uxe 30-42 36-48 First class 19-28 24-l,O 18-23 24-29 24-26 29-31 19-34 22-44 Second class 14-23 18-28 10-16 14-20 8-14 11-18 15-30 17-36 Third class 5-15 9-20 6-15 10-20 4-8 5-10 8-18 10-22 Pension 4-12 8-18 6-7 12-14 3-5 5-7 5-8 6-10

ANTIGUA I..A LIBERTAD ROATAN Wl ACAPULCO

N Deluxe + 30-51 34-80 .... First clasa 15-19 22-26 16-20 20-25 45-55 70-80 23-34 26-38 Secolld class 9-18 14-22 20-25 40-45 18-30 20-32 1101 rd class 6-8 9-12 8-12 14-22 Pension 3-6 5-8 2-4 3-6

SOLOLA/CIIICHlCAS'1'ENANGO SAN MIGUEl.. LA CEII1A CANCUN{IXTAPA

Deluxe 15-17 19-22 43-46 48-53 First class 15-25 19-35 8-13 15-17 23-36 25-42 Second class 8-14 10-20 4-5 8-10 3-7 5-12 15-18 18-72 Third class 5-7 8-14 3-4 4-5 8 10 Pellsion 3-6 5-9

~ > QUEZALTENANCO SAN PEDRO SULA ~~ :;-~

First class 10-16 15-25 19-25 32-36 Q) H Second clsss 5-12 " 9-18 10-12 16-19 11,lrd cla88 2-16 4-10 4-8 8-12 Pension 1-2 2-l,

PE'J'EN (TIKAL) TAZUMAL COPAN

Second/'n,ird cla8s 2-8 4-15 2-4 3-6 3-5 6-8

~~:,' ltlGUAT and other National Tourist Organization - 28 - ANNEX I Table 9

GUATEMALA

TOURISM SECTOR REVIEH AND PROJECT IDENTIFICATION

Tour Prices in Guatemala Domestic Tours 1976

Duration Price per Person in US$

1. Guatemala City (sightseeing) 3 hours 3 2. Antigua (sightseeing) lj day 5

3. Antigua Full (sightseeing) day 10

4. Chichicastenango & Full Lake Atitlan day 15

5. Tikal (all inclusive) Full day 75

6. Rio Dulce (jungle tour) Full day 60

7. Las Hamacas (sulfur baths) lj day 14

8. Pacaya Volcano tour lj day 10

9. Pacific Coast Full day 15 10. Lake Amatitlan, Palin and La Democracia 7 hours 15

Note: Lunch is incl. uded in full-day excursions. GUATEMALA

TOURISM SECTOR REVIt~ AND PROJECT IDENTIFICATION

Comparison of Tourist Expenditure and Other Exports of Guatemala

(US$ million)

Rank Exports 1970 Exports 1971 Exports 1972 ~~(lQI!B 1973 Exports 1974

1 Coffee 100.6 Coffee 96.3 Coffee 105.3 Coffee 145.6 Cofiee 172.9

2 Cotton 27.2 Tourism 30.9 Tourism [.7.3 Tourism 60.5 Tourism 71.1

3 Tourism 21. 7 Cotton 26.0 Cotton [.0.9 Cotton 47.9 Cotton 66.7

4 Bananas 20.5 Bananas 18.2 Bananas 25.6 Meat 25.1 Sugar 63.4

5 Meat 12.7 Meat 17 .4 Meat 18.0 Bananas 24.7 Bananas 28.8

6 Sugar 9.2 Sugar 9.9 Sugar 16.1 Sugar 21.9 Meat 22.8

N \0

SOURCE: All tourism figures INGUAT 1974 figures for other exports: INGUAT 1970-1973 figures for other exports: Bank Economic Report

toil>~~ :;~ ..... IH o ill!.ll1:l1Al.A

TOURISM SECTOR REVIl~ ANO PROJECT IDENTIFICATION

Devel0l!ment Plan 1975U9

Annual Investments in the TuurlBm Sector {Pre-earthguake) (US$ OOOa)

Total Coat ~ 1974 1975 1916 !ill !ill. ill! Poat 1979

Public Sector: 400 ProlDOtlon l,nO 300 320 3~0 380 280 Develop ..ent 1,200 200 220 240 260 680 Subtotal 2,950 - 500 540 590 640

Studle .. : ,~

!'IaHer Plan for Aurura Park 25 15 10 Hasrer I'lall for I zabal Tourlem Development 146 146 Natlollal 1'1an fur Tourh.. Development 150 1~0 SuLLO tal 321 15 306

PCOtSl"AlDi!II £0 rr'o)eCltl

Restoration of Anthropological 6. Ethnological HU8.,um 160 112 48 500 An ( t ~lI. -Cua t cilIA I a 5,432 350 1,360 1,610 1,612 Natloll.1 l'81k - Tlkal I 7,126 3,850 3,276 National Park - Tlkal'lI 6,081 2,100 3,387 LA Aurora Pilar\(. 5,000 1,000 1,250 l,7~0 1,000 12,000 500 3,000 3,000 3,000 2,500 I z.aLa 1 Tour I 9w Beve lopt:Qent .... Arcloaevlol$lcal Sites: 0 Hlxco VI_II. 10 10 15 15 1~ 15 Qulrll$u" 341 62 56 72 72 59 20 "und. tor -roods", Road .. 30 19 11 INCUAT Bulldlllil 2,000 ~46 500 954 UtileI'" Pt'l.,Ijec La 22,100 1,800 ..L.!.Q.Q. 10,100 3,100 Sut.LoLal 60.346 739 4,825 9,871 " 11,134 13,536 14,635 5,600

Pt1IILlC St;tTOR TO CAL 6),617 154 S,631 10.411 11.724 14.176 15.315 5,600

Prtvltte Sector-

o..v.,lol'lAe,\[ Loan a - CORFlNA/CABEl 600 600 CORfINA/l1l8 1 5.000 2,000 2,000 1,000 COKt'1 NAIl DB II 5,000 1,000 2,000 2,000 SubLate 1 10,600 2,600 2,000 2,000 2,000 2,000

11(') tel Illve3 tnlent 78,400 20,800 22,400 17 ,600 17,600 Other luve.8CwC'Hta 19.600 5,200 5,600 4,400 4,400 Sublotal 98,000 26,000 28.000 22,000 22.000

'RI VA n SE(;TOR 'rot'''l 1011,600 26,600 2,000 30,000 24,000 24,000 ~~ Hr~~ TOTAl. I tlV~~ Itlt:NT: I' .. lollc and Private 172,217 154 34,231 12.411 41,124 38,176 39,:n5 5,600 ......

~: S~Lr.LArla Celleral del COIl • .,jo Naclond de Plal\lficaclon EconOllllcB GUATE>1ALA

TOURISH SECTOR K~;Yll::\1 ANO PItOJI::Cl' lIIENTlHCA'I'ION

Touri.t 'I'ypolOKY

Prof.ulond and Corporate Independent Special-Purpo.e 8u.'.'~11 Trav~1~r8 ~e.ident Traveler. Group '·ravelen. Leisure Travelers Central American Traveler.

• flnltlon (by purpoae, Short-ter", trip. tor bus In ..., Vume.tlc travel by residents Leisure travel for Mi~ht­ Leisure travel for Special purpose travel. Include • e:ao. of CJAvel. .ctentlflc, or aCAd~wlc pur­ for recreational, religious, Heeillg. educdtlonal. or slghtseeln&, educational, religious pilgrims, visiting otlonallty) pose.. (Include. corporate and educ8 t 10n8 I purpos ea. recreatiollal purposes. or recreational purpose •. frtenda. visLtlng relatives. but not 8tu.tl.ll-tlcale ctl8h (Includ.s school group. to (Included rnany people. work S~ck~CB. vaca~iontng bua lnestiult:u. llic ludt:& govern­ cu llut"al t1~tH ination8, travel l're-acronged group travel. e.g., arlt~td. writers. Central Amt:rlclin unlv~r8ity au:ul And lechnical advlaera.) to vl11u~c ftcutas. travel to Use ot charter flights, ' tUlIull-sc.alt: crafts 8cud~nts. swall-scale cash lcllg,iou8 tthrint:tI. we:~kcnd slghtac~ing s~rY'cc~, travel expOrLeCf'. "'ho generate bU91ntd8Ulen. travel co buy lndependently .rraut!,ed. often bt:.uch. ILlkc. Slid 8c(.onJ-howe asendes. Often pre-paid. Income. ",hf Ie traveling. COUBIJUlt:l" gouJd. locally aosloted travel, ltipu. excursions to urbs" Arrival by air. Includes "hippie.".) usually to a familiur envlron­ educational and recreational Independently arranged travel, c.ellt. ArrIvAl lJy air. ftlclllLlt:!t. 0ut:9 not include lIeavlly North /uner!can ludt:pcndent tnavel, u.ually In·. familiar envlron­ \Jo.-k. [(lPH. tnu.-ket1ng trips, and European. udlJ"lly 111 an unfamiliar melle. Arrival by land. HUl'"lh American, I::tuopean, 01 travel abru~d.) t:llvlronweut. ArriVAl Hexjcan, Souch Anu:llca,n. by air und IBlld. often CI:Htral Amertcana, h~avl1y from and Central Auu:ric81l. Indcvt:udenL domctttic travel. in privaLe vehicles. 1:.'1 ~alvador.

GusCemalulis. (Includes tleHvily Iloreh American forcllto-born residents.) and f:.uropc.an.

ItJ ..c~d nuaabec 75,000. - 100,000 55,000 - 65,000 80,000 - 100,000 200,O()() - on tourlat card 91S 300,000 - on pase locale (leu than 72 houre) 500,O()() at ( .... led .. ver_se \ - 2 days 4-5 days 5-10 days or 1 - 4 days engeh of stoy aeveral weeks several montha ...... • cldl4led oUlDber f occupancy nigh[s rovth (reuda Steady srovth Over Slow 8rowth over several years. Rapid acceleration, especially Rapid acceleration, Level until about 1970. Extreme !leveral years. in US and European marketa, especially In US and acceleration in 1972. Growth Growth expected, especlally in the o1nce 1970, European roackets •• lDce overwhelmingly In arrival. fro. Steady lon~-terg ~rowth G"at",,,.la Clty-...... tigua-E.cuintla 1970. EI Salvador. proJ_ct.d. Triangle, Pacific Coast, and Continued acceleration expected. Izub .. 1. Likely to occupy an Incre •• lng Continued growlh, with Dependent on CA01 trade agre_enu, lh:pcudent Oil nat tonal ecqn()mlc proportion of lcluure travcl leveling. Likely to IncreaSing regional econOmic glO\llh. price of interno.'tlonal Ut:penJcnt on ea~e of internal nw.rket. occupy a decrt:~81nl Integration; atimulaced by tl.ClVcl~ level of .-eglonal travel. dlspodabLe income of p,oportlon of lei.ure Sal vadorean-Uonduran Ian hos tllitlea • ..:conut .. lc tnt egret 100. trade clHcrltlng widdle c18t18. supply Depwdbl\[ on alr tare uLructure. lltlvel warket. ugrc:eluent9, tncrea:.ing demand of lo\l-c~t dCdtlo4tlons. prlct! of alternative DUlrket8. Continued growth ia likely. tot IlIlport guod~ and tet;hnlcal ltlGlJAT PWIUOt lOll, ~rowlng famil­ lCdd HCJlattive [0 al~ :tc.-viccet. iarIty of GU4t~wala in North fare structure, prowotloR. Auu:r1c8n end t:uropt!4n mal ket4, .upply of 1st class il\Cr~adlllg uupply of lat cldd8 ac couwlOJa tiona. travel occouilloddtlond, regIonal tOlJr'~tlc Krowtl,. :1~li:~ ~ ...... GUA l·tl'fAI.A

roUKI~ St-:cTOR RICVIt."Y AND PROJECT IDEN1'YFH:ATJON

,'ourtac Typology (Conc'd.)

ProfeIBlunal alld Corporate Independent Special-PurpOse Buafnedd TrAveler. Resident Tcavel ~rll Croups 1.'ra'it!:lers Leisure Trav~l~r. Centrul American Traveler.

U.ual accommod.tions lat a"d 2nd cl ... hotet •• D8y~tlme e.,uralons. lot cIa •• ~otel •• Uoteh In all r .. /lgee. lrd .....I 4th cia •• hotel ••

2nd "nd lrd cia •• hotels. C.... pen. private Iwmes. unregistered hotel rooaa. hOlu~d:l. unrt:sitltered St::cond-howes on lakes. hot~l&. With friend •• relatives.

Lon~ .. term houa~ rental_.

[altmalrd av~£.~e IIllIh (North Awerlcan or $10-40 Il1gh: ~10-20 ·-$4-10 de I' Y e.prnd alu ... ~. ICurop~a .. ): ~lS-50 low: $4-1 Low (C~n

Uaual tra"'el Guat".... la CI ty_ Antigua, eepeclally on Tourlst circuits: :;ho<[ .tay. in Guatemala CIty, Eaculntla dCli[llldtions Su ..day •• AntiKua. Cl~lchlea8tananKo. Guat""",l .. City. ..nd frontier town •• 1I.1t and fuJI-day ellcuuione LKke Atitlan, Tlkal. to Antjgua.~ ChJt:hic4atenango. Keoort and beaches on the Guided excursions. Free-ranging. _stl,. Esqulpul •• and 1I ...... nO Pedro lake Acltl,,"_ PacHlc Coasl. throughout lndbn area. (In Antigua), eaped .. ll,. in of the lIillhland •• J .. n ...... y and Aprll. '!'Ikal. Vole"'lo ellwblng, especi .. lly u... ~ac"'Yd. NodKl point.: Antillua Pacific LOvllln.J for .. grlcultur.. l (.1Ianc:red flllliit. to other .and fanaJachel. work (many tntries on tourJat }'t:(~n an;:hat:oluKlcal sites. Chlchleastenango and San card .. ) . •·r .. nc loco el Alto, especially Lake town. other than on lR6lkel d,ays. fanoj8chd. Volcanoes, P.. clfic beache ••

E"qull)ulaa and Chlantla, Indian to\l1lS on C/.lqlJlwula and t;astern c:.p~cJally In January. ~arket and fiesta IIlghland. for bu.ln .... da, •• Tlk.l and Quirtgua. occaalonally. l·ikal-Flore., oLcaslonally other Aurora !'ark, the zoo, and ~et,," arch"e

I.~~. Mltl,,"n.

lh:ache.s. (test8a. Antigua dud"K lIoly lIeek. -f;;f;I Zl~~...... GIIA'I'tl1ALA

TOURISM SEL'TOR Rt:Vn:W AND PROJECT IDENTH'JCATJOII

Tourlot Typology (Cont'd.)

Profe8l10nal .nd Corporate Independent Spec lal-Purpooe 8uslness Travelers Resident Travelers Groups l'ntovcler& Leisure Travelers Central American Traveler.

Travel charactct£ ist lca Independent travel. Frequent \ and I day 1I111h profi .... lI11Sh proflle. Low profile. Not vilible Pre-arranged social contact •• excursions, Beldom overnight. on "tourist clrcutt". ResponSive to media. Usually have stated ~·a .. ll1ar1ly with Spanish. VOICCliloes, museums, Antigua. .",rkoLlng forces, prIce p~efe['ence for "non­ Low per dleaa expenditures. urban r~crtiatlo"al alteB. structure. touristy" Hpots 10" nwober of daya, large lltllize i •• fradtfuctuce and QuldKua an~ intensiVely - and seck out such nuwher of tourists. shit tar to upVer t::lasB us"d by 8choul children and IItKh dally expendlture, spota. In Guott:lula. GUlatt:ll1alantj. unlvl::lBlly SCt)uvti. but SU1J111 nUlUber of ttu:tf~ ar~ ludtan "Uece.ntral1z.ed expenditure". tnulbaccionu. vtll*'Kt::~. Peten Kolatlvely 10" prattle. W,;ckencJ lake outlliiSU cODlu.on ar,llaeulogical sites. Utilize Infrastructure for upper cl.a.sd Cuatemalan .... Non-Spant.h .peaklng. and Izobal. ~'re'luelltly Hlmilar lo working cla._. tllnl.",1 ntllhtll f" 10 t~Hd to "colunlzf;:" u~lJan. 14Jlno GuatclWl1ans. Guatemala Clt-y. Sunday afternool' n:BtaurBnt U"uvlly utilize the pct:vlou!tly "uHdls­ outlUKu and Y161l1n~ Antigua serviced of a By6cem of covt:red," e.g .• Sa.n Du not travel in Indian areas COlUlUOn for mlJ,tle cltltl8 i.,CermediMries. e.g_. Pod ro de 14 \.a suna 88 a lel.ure activIty. gruuptl. Guided, Blghc.eeing (l..,ke Atithu) B .. d uperatora, bl~pkeeper8. Sduta. 1::1 ella (n&:ar .... Ule rural p~pll1atlon, CouUu.C ""ith native Floref:ll. Petell). .... C:!ipt:,-lally Ind181\~, are an populotion largely exceplionally mobile peasAnt il\direct. Often have priVAte populatiol1. 'l'rl1vel by p'tm CtiI"S. Use bUHt:ts. and \JOfllt:O 1s trcqu~lIt. HOllY CU8Ltww.lan tourin! "n~quent trlp~ to neighboring groupH hev.:. CummOn to'requeut: 10'"" per villug~~, tuirH. fle~tas. th.:U1~: blnJ"'atchlns. diem expenditure, and n:l t~loutl tihrlnes. tlpclul,klng. clafts hlKh nuu,ber of daya.

study I archaeology t Houl GuatelUdlunB \JAnt to adult t:ducatlon travel FrcqoCflt int~ntle travel. 'rll~Y du I'~t feel grouva . contact with local I todd lhut lorelKnHo population. \IOU 1d '""tint to come! to Guatemala 18 nodal Guule,... "la.. - point fur regional Central Uuually learn rudl­ ku~~lcan group tlAvel. wenlary SpAoidh. Lo"" Cll~t d~titl"BLioIl8 are in hIgh d.:ul.B.nJ. Frequently ~rk or find supplemental No torelgn exchange sourCeS of incowe • l!dl-11111~9...... ll-scale crafts expo£"t i& CO~ltoOn.

NoJal 1'0 tutti art: ~I~I~... AJ~ti&ua, Y~n8Juchel. "'lures - ratlu:.r thdll GU8tethald Cily. - 34 - ANNEX III Page 1

GUATEMALA

TOURISM SECTOR REVIEW AND PROJECT IDENTIFICATION

The Construction Industry

1. In the Republic, the vast majority of workers in the construction industry are Guatemalans. Despite the outstanding ability of the local worker to adopt the skills required in the construction industry, employees from the level of foreman upwards are frequently imported for major contr~cts.

2. There is at present no shortage of unskilled or semi- skilled labor in the construction industry. Some firms experience, however, shortages in the availability of workers at and above the level of skilled craftsmen and technicians such as electricians, plumbers, pipe fitters, mechanics and equipment operators. There appear to be no labor problems and labor-management relations are good, with disputes resulting in strikes being rare.

3. In the absence of any data or formal trade classification, it is difficult to assess exactly the content of the labor force in terms of skilled, semi-skilled and unskilled workers. Very roughly, the breakdown appears to be in the order of 15% skilled workers, 25% semi-skilled (including helpers to skilled workers), and 60% unskilled labor.

4. Labor costs account for approximately 25 to 30% of total construction costs. Daily rates range from US$1.50 per hour for an unskilled laborer to US$4.50 for a skilled and specialized worker. There are two methods of employment and payment of labor commonly used in the construction industry in the Republic: (a) direct employment with payment methods under hourly, daily, weekly, or in some cases by work done; and (b) subcontract, either labor only or labor and material with payments made according to a schedule of rates. j. Between 1974 and 1975, the costs of labor increased on an average by 40% - compared to an increase of 12% in the previous Jo::ars.

~. Both because of the increase in labor costs and the ~rtces of materials, construction costs in general have increased lr'llrp1y between 1974 and 1975, have stabilized somewhat during 1975 -"~ appear to have increased again since the February 4, 1976 '~rthquake (unskilled labor cost increased by 30% whereas the cost -, ~ skilled labor almost doubl ed). The government is making every .' ;')rt to control escalations in costs and already a number of - 35 - ANNEX III Page 2

legislative measures have been taken to curb abnormal price increases. Construction costs now average US~135-l50 per m2 for 5-6 story apart­ ments and around US$200-250 per m for high-rise buildings.

7. Guatemala 'produces a wide range of materials required in the local construction industry. Production of these materials (prior to the February 4, 1976 earthquake), satisfied almost the total national demand, with a small percentage imported from other countries in Latin and Central America, the United States, Japan and Europe.

8. Materials produced in the Republic include cement, some reinforcement bars milled from imported steel and local scrap, nails," concrete and clay blocks, floor tiles, aluminum Windows, sand, gravel, paint, electrical wiring, plastic pipes, galvanized pipes, casings for electric fittings, doors and other types of woodwork from local timber, asbestos cement products and clay roofing tiles. Items such as air-conditioning units, large transformers, elevators and the like are imported.

9. All construction equipment is imported from overseas, primarily from the United States, Japan and Europe. Construction equipment is used quite commonly on civil engineering works, including the use of some rather sophisticated machinery. Very little equipment works, however, appeared to be used on general construction work.

10. The government does not maintain a central government procurement office and tenders are invited by individual ministries or agencies. There appears to be healthy competitior. among firms in tendering for work. All contracts made by government agencies for construction and procurement by law must be awarded after competitive bidding. Decree No. 11 of 1971 regulates all procedures related to contracts of the national government and of all agencies owned and controlled by it.

11. The Ministry of Public Works, for example, awards contracts on the basis of a selected tender method, where companies are nominated to participate in contract competition based on their qualifications and a rating list prepared by the department. Public utility companies use the open competitive tender method, and depending On the type and magnitude of the contract, they occasionally may require international competition.

12. There are about 100 Guatemalan design and construction firms who are registered with the "Camara Guatemalteca de la Construccion" and among them they have the capability to handle civil engineering and building projects of all types of about US$1.0-2.0 million. Xore substantial projects (above US$5.0 million) are handled by six major contracting companies established in Guatemala City. Between them, they have the ability, as well as the equipment, to execute most- civil engineering works, such as steel and concrete structures and - 36 - ANNEX III Page 3

bridges, water works, roads, hotels, residential and industrial develop­ ments, etc •• However, foreign expertise is needed for highly specialized projects such as dams, power, tunnels and industrial plants, telecom­ munication systems and airport projects.

13. The Ministry of Public Works employes technical staff and a labor force which is used almost entirely on construction and maintenance works. Public utility companies also employ technical staff and labor but the degree of use made of them varies depending on the type and complexity of the work.

14. The construction costs of hotels' vary substantially depending upon the location, type and size of hotel. Costs of recently built first­ class hotels outside Guatemala City range from US$20,000 to US$22,000 a room (excluding land and central air-conditioning), of which 55-60% would be for construction l/and the rest for mechanical equipment and furniture. The relatively high proportion for the latter is probably due to the low cost of labor and local material versus the cost of imported equipment.

15. The total foreign exchange component in construction of hotels is roughly calculated to be between 45 and 55% of the total construction costs. For infrastructure, the foreign exchange costs are estimated to be lower, about 25% to 40%.

11 Includes civil works, electrical installations, plumbing, elevators, woodwork, Windows, floor finishing, plastering and painting, land­ scaping, one swimming pool, utility connection charges, licenses, permits and insurance. - 37 - ANNEX IV Page 1

GUATEMALA

TOURISM SECTOR REVIEW AND PROJECT IDENTIFICATION

Handicrafts

1. Inexpensive and attractive handicrafts are a major tourism asset of Guatemala. This annex reviews several aspects of the tourism­ related handicraft industry since handicrafts are an important expendi­ ture item for tourists and they are intimately tied up with the cultural aspects of tourism. A brief case study is made of handloomed textiles.

2. Indians usually specialize in hand processes, very often of the sort that were common before the conquest - handweaving, handspinning, hand constructed pottery making, beeswax and candlemaking. Ladinos very often specialize in preindustrial crafts processes which were introduced from 16th century Europe - metallurgy, footloo~ing, wool spinning, pottery by wheel, tanning. Ladino craftsmen often work in small talleres, usually in towns. Crafts are normally passed on through an apprentice­ ship system. Traditionally, most Indian villages have had one or two craft specialties for which the village is known. Indian craftsmen generally wo_rk in their own homes. Crafts are usually taught within the family.

3. The techniques and materials of modern technology have been incorporated into both Indian and Ladino crafts processes. Huaraches (sandals) are made from discarded tires; candleholders and small lanterns are made from tin cans; the art of jade cutting has been recreated with the help of diamond-tipped power tools. A new market has often given new form to old products. Bulky items, like woodcarvings, have often been miniaturized. Colonial style furniture has been redesigned from materials which are mindful of 44-pound weight limitations or manu­ factured in suitcase-size components. Dozens of new handicraft items, which have no use or meaning except for tourists,have been invented or copied. One story, apocryphal perhaps, is that a passing "hippiell taught an Indian family in Solola how to make delicate knotted ornaments, about the size of Christmas tree bulbs, out of dried wheat straws. Today, about three years later, these ornaments are made in endless variations by Indians throughout Solola and neighboring Quiche. Older children or adults construct them while tending sheep or walking to or from the fields. Small children sell them for ten cents by the side of the road. Middlemen bring them to the cities, and they are now sold at the best shops and at the airport.

4. Tourists have created a cash market for virtually every object that is handmade, portable, and identifiably part of the -Indian household. These include: metates (grinding stones), whorls and - 38 - ANNEX IV Page 2

spindles, old machetes, religious paraphernalia, candle holders, slingshots, drinking gourds, digging sticks, used hoes, walking sticks, storage boxes, ceremonial hats, kerosene lanterns, grain and ,flour sacks, and cooking utensils. Any item of clothing is saleable. Recently the used underwear of the men of Nahaula - which is handwoven of coarse cotton and brocaded with finely executed silk animals and geometric design on the leg edges - has made an appearance in some­ markets. There has long been a market for any object, Indian or Hispanic, with possible antique or aesthetic value - polychrome pre­ hispanic pottery, old jade, Olmec figurines, colonial statuary, paintings, mayolica pottery, carved door panels, old furniture, ceremonial masks.

5. Despite this array, textiles still comprise the main market for handicraft souvenirs. These textiles are produced in three distinct subsectors: footloom, industrial loom, and handloom.

6. Foot-operated treadle looms were introduced by the Spaniards in the 16th century. Footlooms are usually operated by Ladino men. There are many exceptions, however. They have been opera­ ted by both Indian men and women in San Pedro Sacatepequez (San Marcos) for many years. Such looms cost about US$80.00. To operate a footloom requires an annual investment of about US$380.00. Operation requires a permanent space in a household, or more. often, a taller. The National Council for Economic Planning estimates that there are about 2,500 small firms operating footlooms in Guatemala. A weaver earns about 50¢ to US$1.25 a day. The highest wage reported during the period of field investigation was US$1.50, clearly an unusually high rate.

7. Industrial looms and electrically powered knitting machines are coming into increasing use in moderate and large business firms and, in some cases, in homes. Data was not obtained for this subsector during the mission.

Handweaving

8. A case study of han,dloomed textiles is made in sections which follow. This emphasis is not intended to imply that production or tourist expenditure in the other two textile subsectors - much less in nontextile crafts - is inconsequential. Rather, ~andloomed textiles are singled out because previous familiarity made data collecting reasonably efficient within a limited amount of time.

9. Hand100med textiles are produced today, as they were a thousand years ago, on primitive looms made of a few round and flat­ tened sticks. The process is known as backs trap weaving. Backstrap weaving is done entirely by women (granting the exception previously noted in San Antonio Aguas Calientes). - 39 - ANNEX IV Page 3

10. There are no fittings, harnesses, or other mechanical parts to a backs trap loom. The sticks are held together by tension created along th~ warp. One end of the loom is fastened to a housebeam or tree and the other to a leather strap which is wrapped around the weaver's hips. The weaver kneels on a straw petate, leaning backward and forward to create or release tension along the warp. She weaves by throwing a shuttle back and forth through the warp, picking in extra threads of changing colors to create a design.

11. Young girls learn to weave from older members of their households. To become an accomplished weaver, a young girl will memorize thousands of combinations of color, threads, and knots, which allow her to flawlessly repeat and artistically vary the patterns of her village. The range of styles and repertoire of techniques within any village is relatively small and is shared by all the weavers.

12. Despite its technological simplicity, nearly all types of weaves can be done on a backs trap loom. Indian weavers produce textiles of great intricacy and are considered among the best primitive weavers in the world.

13. From the point of view of traditional Indian culture, there is little new in the selling of textiles" Commerce in textiles is probably as old as the craft itself, stretching back to the dimmest moments of Mesoamerican prehistory. Columbus enco~tered Chontal Maya traders on his fourth New World voyage in 1502, their canoes filled with richly dyed cotton textiles woven on backs trap looms. Within this century, many anthropological investigators have noted trade in textiles - within villages, within Indian marketing networks, and to outsiders, including foreign tourists.

14. Since the early 19705, the demand for handwoven textiles has increased sharply, so that if sales are not new, the volume of sales is. This reflects both the tourist and the related export-market. The initial thrust was for older textiles or for modern ethnographic souvenirs. Recently, however, the market has increased for wearable items or for Indian fabric which can be manufactured into stylish clothing or household goods (curtains, tablecloths). There are, in any event, more women weaving today than at any time in Mayan history, though the range of styles and probably the quality o( their weaving has markedly decreased. -

15. Despite the expanded market, there have not necessarily been increases in off-the-loom prices or real wages for backs trap producers. At least four factors work against such increases: a reduction in quality, the large supply of weavers, footloom or machine competition, and the marketing system. These factors are discussed below.

16. Qua1itv. The most serious limitation on the outpu~ of a handweav-er is the costl InesS--ofth~--backstra~~avi-ng--process :--i..- skilled weaver, -·intent on producing a huipile (blouse) of good -workmanship ~ - 40 - ANNE..,{ IV Page 4

cannot produce more than a .few inches of finished fabric in a day. Since she cannot normally hope to sell a finished huipile for more than US$6-7 (to a middleman), she can expect to earn no more than 30-40¢ a day for her labor.

17. She can increase her daily output in only three ways: (a) by using bulky wool or synthetic threads rather than finely spun cotton or silk threads, (b) by banging down on the weft less sharply as she weaves, (c) by devoting proportionately less time to household or other economic activities. The first two of these result in a decrease in quality, which must then be weighed against a decrease in value. The third is not necessarily an attractive alternative, given. the low rate of return which she can expect for her work.

18. Labor supply. In an earlier era, most Indian women learned how to weave well. Although there has been a substantial reduction in the proportion of women who know how to weave today, there has also been a doubling of the Indian population in the last 25 years. As a result, there is still a very large number of potential weavers.

19. It is difficult to accurately estimate the number of weavers employed in tourism-related weaving. The mission calculates that there may be about 18,500 full-time weaving jobs accounted for by the tourist expenditure - or supplemental income for about 45,000 part-time weavers. This conforms roughly to the government estimate of 35,577 (including hand and footloom weavers).

20. There is a large and elastic labor supply which can respond to an increase in demand for handweaving. More women weave, and more women spend more of their time weaving. The household frequently adjusts itself so that the marginally productive members, older women and young unmarried girls, spend a large portion of their time at the 100m.

21. Machine competition. In the past, there was little overlap in kinds of textiles made within the three textile subsectors. Hand­ weavers experienced little direct competition in their own sphere. The tourist market, however, has raised the value of certain products, and has thus encouraged competition by footlooms and industrial weavers. Ironically, a large part of this increased demand is generated by Indian handweavers who cannot now afford to wear their own clothing and must therefore settle for cheaper machine-made imitations. In such cases, machine-made goods often stylize or generalize traditional Indian design, and thus make it a shorthand but culturally acceptable dress alternative.

22. Another disadvantage for handweavers is that a dispro- portionate share of the increased demand has recently been for ~ndian style textiles which can be remanufactured for clothing or household - 41 - ANNEX IV Page 5

use. Such goods usually have a simple repetit~ve design and their value is largely a function of yardage. A footloom produces these goods at four or five times the rate of a handloom. If a handloom weaver i's to compete at all, she must do so at a depressed wage and a breakneck rate of speed.

23. Handweavers can successfully compete with machine goods only on those textiles which receive their value as ethnographi~ ______--- objects or on which value is added by the intricate nonrepetttiv~_. ____ quality of the design. With such goods, the unifonn'high--quality of hand workmanship often works to the disadvantage of the Indian producer. In most cases, only a trained eye can distinguish between a handmade 'and ~c~ine-~ade~obJec~. In such cases the consumer cannot readily be certain that the object is made by hand, thus the object loses the additional value which might otherwise be gained. One way of circumventing this difficulty is by the production of telares, small rectangular weaving specimens which incorporate three or four of the loom sticks.

24. Handweaving is an exceedingly labor intensive activity; and a shift in demand from handlooming to foot or machine weaving has a strong negative effect on the number of people employed. It is estimated that a given increase in output of handlooms would generate about 15 times more employment than a s~~i~ar increase in output of machines and about 2.5 times more than t.!Lthe_-f-;;o~fo9!ll s'ector-.----

25. Marketing structure. The most effective means for a household to increase its income through participation in tourist­ related handweaving is to utilize the labor of those household members who might otherwise be marginally productive, that is, young girls and older women who do not have primary childrearing or household respon­ sibilities. Certain entrepreneurial families extend this principal by acting as bulkers or middlemen, employing several women and then buying from several weaving households.

26. In general, bulking or full-time middleman activity is a more profitable enterprise' than primary production. While both the bulker and primary producer are constrained by relatively fixed prices on what they must pay and what they can charge, the bulker, unlike the primary producer, can increase profitability by expanding his volume.

27. Chart I illustrates the flow of handwoven textiles from raw material to tourist suitcase. It will be observed that the hand­ weaver receives her thread from one of three sources: (a) by handsuin­ ning and home dying-- (now increasingly rare); (b) from a local co~op, which may purchase quantities of thread at wholesale prices; and (c) by direct purchase of small lots of thread from tradesmen or the village market. Only rarely does a weaver have sufficient capital to purchase a large lot of thread at a wholesale price. She may dispose of her finished product in one of six ways: (a) personal use; (-b) sale for consumption to a local I;ndian- family; (c) sale to an . - 42 - ANNEX IV Page 6

artisan co-op for tourist sale or export; (d) sale to local (usually Indian) middlemen; (e) direct sale to a tourist shop or exporter; and (f) - dfrect -safe -to a -t;~~ist-:- I~- pract-ice, it appears that --~et r-e-t,;rn­ is probablyabout- thes-ame regardless-oft"h-e- sale-s outle~ Althoug-fl­ purchase prices differ, so do costs in obtaining the higher purchase price. Obviously, there is a higher sales price in direct sales to a tourist, however, such sales are erratic or require a high investment in time and transportation.

28. The mission estimates that inputs, as a percentage of total sales, are 24.4% of the selling price of handloomed textiles. The value added by the weaver's labor accounts for another 24% of the final selling price. Middlemen account for the additional 46.6%. Input-output values from spun thread to purchased text-{les, -are-­ illustrated in Chart 2. Added value (in parentheses~is--~~presse-d as a percent of the input.

29. From the primary producers' point of view, the artisan co-op may offer the best marketing alternative. Nevertheless, co-ops are still relatively undeveloped and are not yet fully able to accomplish satisfactory marketing for their members. Host co-ops are embroiled in political factionalism at the ground level. Very-few co-ops, if any, have most weavers in a village as members. San Juan Sacatepequez, for-example, one of the oldest and most successful co-ops, has a few hundred members - in a community of about 40,000. Field inquiry located only one co-op, in Zunil, which was able to (a) buy thread in wholesale lots, (b) standardize and uphold quality in production, and (c) guarantee members a better wage than they could earn by indepa~dent .m~rketing __o~..l>Y work in al terna tive oc·cupa_tions.

30. It is worth noting that the growth of the cooperative movement in Guatemala is a much broader and significant phe~omenon than as a simple means of marketing artisan products. Cooperativism, as a strategy for strengtha~ing local government_and organization of low-income groups, has widely been promoted by public and private agencies - and more recently., by the government. Development of co-ops, mostly for agricultural production, is a keystone of the present administration's rural development policy. As such, coopera­ tivism is a complex and highly politicized issue.

31. Presently, artisan co-ops are organized in two umbrella co-ops, Artexco (strictly artisan) and Fenacoac. ~lembership is growing and is actively being promoted. In 1973, AID appropriated US$600,OOO for a credit extension program, which includes artisan co-ops. This is administered through the Department of Community Development and BANDESA. IDB has recently completed the first phase of a co-op assistance program in Quezaltenango (working with Artexco), part of a three-country project, including 30livia and Ecuador. - - 43 - ANNEX IV Page 7

Quality and Commercialization

32. One o'f, the most intriguing and perplexing problems in analysis of handweaving is the relationship between quality, commer­ cialization, and tourism influence. Is tourism a force for preserving the craft - or for destroying it? Does tourism bring a cheapened imitation and hastened demise, or to the contrary, does it invigorate and renew a declining art by providing it with a new footing? .

33. In considering these problems it is useful to distinguish for a moment the cultural and economic bases for handweaving. These are distinct, yet interdependent. If either is severely altered, the craft alters accordingly.

34. Cultural basis. In the early 1930s, fundamentalist Protestant missionaries began an intense conversion program in the town of Barillas, in the remote Mam-speaking Department of Huehuetenango. Over a period of a few years, most members of the community converted from the traditional Catholicized Mayan religion to the Protestant sect; and near concurrently, there was abandonment of backs trap weaving. In its economic base, its technology, and its accessibility to the outside world, nothing had changed. The town was (and is) no different from neighboring communities. What then explains the disappearance of weaving?

35. Skill at weaving - the hundreds of thousands of remembered combinations of knots, colors, threads, numbers, and hand movements - is part of a larger system of beliefs, customs, and day-to-day activity. Weaving, a kind of language of the hand and eye, evolved as slowly and as particularistically as the village itself. It thrived on and was dependent upon a relatively stable pattern of communal organization: the domestic household, shared knowledge within the network of weavers, membership in the cofradia, belief in shamans, and a life regulated by the ancient Mayan calendar. The missionaries had no interest in destroying weaving - in fact, efforts were made to "save it" - yet a change in one crucial part of the cultural system was felt in all parts. As it turned out, fundamentalist Protestant Mayan Indians simply did not make good backs trap weavers.

36. Economic basis. Similarly, no matter how strong traditions may be, weaving will not persist in a situation where it is economically inefficient. Setting aside whatever other reasons there may be, Guatemalan women also weave because it is a cheap and appropriate way to cover themselves with clothing. Unless weaving for sale becomes an economically productive activity, women stop and will continue to stop weaving when, (a) machine-made clothing is less expensive than handwoven clothing, or (b) their time is more valuable to them in other occupations. - 44 - ANNEX IV Page 8

37. In short, any situation which directly or indirectly causes these conditions to, be met - a road bringing new commerce, work ina-- --- factory, increases in the prices of raw thread, free used clothing distributed by CARE, or increased value of textiles from tourism - will undermine the economic basis of handweaving and thus hasten its demise.

38. To survive, handweaving will have to find a new balance in its cultural and economic bases. The configuration of circumstances that gave handweaving its form and viability a generation ago is rapidly disappearing. Upon seeing the intricate huipiles of past generations, tourists often complain that such pieces are no longer available in the market today - or that prices are too high. Until recently, such ' huipiles - which require three or four months of steady work - could be purchased for under US$lO.OO. They were,a reflection of an era in which a woman's labor had virtually no per hour economic value. A huipile for her OTNn consumption was an investment in which she transformed t~ree months of her own valueless labor into a tangible possession with considerable social and prestige value. If worse came to worse, she could and did convert it into US$lO.OO cash.

39. Presently backs trap weaving can only be an occupation of the very rich or the very poor - young Americans and the poorest Indians. Whether the tourism market will create some cultural/economic middle ground r~~ains to be sea~.

40. It is probable that in the future three trends will continue: (a) The proportion of skilled weavers will continue to decline and weaving will be abandoned or generalized in a growing number of villages. (b) The tourist and export market will continue to expand, with increased commercialization. In other words, weavers will continue to experiment with ways to produce textiles that will command the highest prices and demand the lowest investment in labor and materials. Footloom weavers will be at an advantage. (c) It is likely that a few people and a few towns will professionalize backs trap weaving. They will eventually be able to command higher prices on the basis of their name. Presa~tly, this is beginning in San Antonio Aguas Calientes altho~gh------no cases are known of "signed" textiles which obtain additional value from a particular maker's reputation. Perhaps a situation of enforced rarity will eventually be applied. It is interesting_to ~ote) for ~~ample, that a certifiably antique (50 years) San Antonio nuipile of good quality probably has a value of 1,000 times that of a contemporary huioile of similar quality, though close analysis will generally reveal _ cnly minor differences in technique. That contemporary San Antonio ~eavers are now making this bid for professionalism is apparent in ?~ices being asked in the village. The opening price for a well-made ~onan'9 tzute (a rectangular cloth) is now as high as US$80.00, about ~~i?le the opening price three years ago. Tourists are cost conscious ~~d rapldly learn prices. They attribute these high prices to ~varice, - 45 - ANNEX IV Page 9

and quite naturally, feel exploited. On the other hand, producers have become surpris~ngly stubborn and are turning down offers which would have readily been accepted three years ago. In the event that they can force prices upward, high quality backs trap weaving is likely to continue. - 46 - ANNEX IV Chart 1 GUATEMALA

TOURISM SECTOR REVIEW k~ PROJECT IDENTIFICATION

Distributional Flow of Handwoven Indian Textiles

imported aterials and r:lw local raw loca I nthetics cotton wool

spinning hand-sp i nne rs factories and d ers

in

retai lers: local sell thread by co-op ~----t the

co-op local sales an fede rat i on HANDWEAVERS I----..;;~ au to­ consut:1ption

local mi dd lernen

export tou r is t

heavy line indicates (Freely adopted from Hagan, 1910) 1:, - 47 - ANNEX IV Chart 2

GUATEMALA

TOURISM SECTOR REVIEW ~~ PROJECT IDENTIFICATION

(Added Value, Expressed as % of Input)

INPUTS .OUTPUTS $1,00 ) spinning factories

S 1,20 Wholesalers: sell $1.00 , th read in bulk lots /' (20%)

$1.68 Retailers: se 11 $1.20 ...... thread by the ouace / (40%)

$3.67

51.68 HANDWEAVER "'-".. ( 1 18%) "

54.59 $3.67 "- local rni dd 1erren / (25%)

56 88 rna rke t se 11 e r or $4.59 tourist shop ",/ (50% )

$6.88 , tourist / - 48 - ANNEX V Page 1

GUATEMALA

TOURISM SECTOR REVIEW AND PROJECT IDENTIFICATION

Assessment of Existing Infrastructure

1. A review of each of public works and related facilities that Guatemala needs to develop in order to assist its hotel industry, tourism resorts and historic and archaeological attractions is given' below by major infrastructure category.

Airports

2. The major international airport in Guatemala City is modern and well equipped to handle all types of aircraft. It functions as the only gateway to Guatemala and has adequate landing, take-off and terminal facilities to handle the present and anticipated traffic in the near future.

3. Seven satellite airports, however (see Table 1), outside the capital city should receive major attention in the Five-Year Plan during which Guatemala expects to accelerate the development of its tourism industry. These satellite airports have limited landing and terminal facilities. Tikal, with its archaeological ruins, suffers for not having an all-weather airport and good terminal facilities. The Lake Izabal and Puerto Barrios areas could very well use an airport to handle through-service from the US and Canada. Automobiles could be shj:l~.l~ed~y car ferry from Miami, and passe~ger:~~ou~d f1~_~~, pi_c_k__ !;p__ th_~i_r_y:ehJcle_s _i3:~~ _~r:9_c;.~ed_Q...ll. "!-_ tri.E. J:h:r_~ugh Guatemala and other ______Central American countries. ------

4. There are, of course, numerous areas in the country that could benefit from improved air service. In some of these areas new hotel facilities are under construction.

5. The gPvernment has recognized the necessity for timely development of such facilities. They consider these an integral part of the overall tourism development plan.

Highways

6. Planning has gone ahead for a basic highway system throughout most of Guatemala. A large part of this system will be completed within the next Five-Year Plan. Most of the basic roads correspond to the areas selected for tourism development, and wherever possible, the two appear to have been coordinated. Areas selec~ed for major hotel developments are close to main highways and do not require excessive access roads. - 49 - ANNEX V Page 2

7. ==-~,,_!he)~e~:~eri~~~~~~g~wil,-~~~:~~,~_~'laS ~m?le,~~~'in r_~~en_t years through Guatemala, is an extremely valuable asset to the country's tourism because of t'he relatively short distances between the major tourist centers. Guatemala is ideally situated for highway travel by vacationing tourists. Travel by either automobile or motor coach would prove rewarding to even the most demanding tourists.

8. An excellent network of paved and all-weather road branches of-Elle-inter-=-ATIlei-1can- -Highwa-y -l.s-growi""ng- stead:ny--:-- 'Most:' maj'o-r- sfghtseeiilg­ d-estinations in the highIands- -0 "f--Cua temaIa are--'on paved roacls'-:-and --d-le----­ Atlantic Highway now connects Guatemala City with the Caribbean Coast" Lake Izabal and Rio Dulce area. A new road is planned from th~Atl~~~~~___ Highway through the Castillo ,-de San-Felipean-d-afl-o-ther -P-et-eri areas. ___ B.e~_ roads - currently in the planning stag-e----:-WOuldaiso connec-tthe-p~in­ cipal ports of Guatemala on the Caribbean with those of Honduras.

9. There is a general highway plan for completion of inter- connecting roads_t~r~ugh~~~Guatemala. Much engineering work has been completed and ;there is construction a~~'y~,ty o'n1:1Il'-fronts-=-___"I:h:e .. r~_',~~~~,--:FoweveI"., a number of sho!,,~"-sec'ondary roaci"s--which require surfacing to facilitate tourists-reaching_sites of historic and archaeologic interest. Improve- ments or additions to this secondary roads system,leading into archaeo- logical sites should be constructed or at least the planning should begin within the Five-Year plan period. The Bank has in ~the-p.is-t-partic'ip-at~' in the development of highways through LN-124. ------,------

Railroads

10. The system of National Railways (FEGUA) connects the capital city with the port of San Jose on the Pacific and the ports of Puerto Barrios and Santo Tomas de Castilla on the Caribbean. Both railroad corridors are primarily used for freight transport and' their facilities do not contribute to the tourism infrastructure of the country. seaports

------~ ...... - 11. There are three ports on the Caribbean Coast of Guatemala ____ Puerto Barrios, Santo Tomas de Castilla and Livingston, and two'-~o!l~the_ Pacific Coast, Champerico and San Jose, which offer access to Guatemala from the sea. Historically, there have been numerous 'arrivals of cruise ships at Puerto Barrios in Guatemala, Puerto Cortes and La Ceiba in Honduras and Colon in Panama. In recent years, only Colon served large cruise vessels and few cruise ships from Miami rnaere calls at Puerto Barrios. On the Pacific side, several cruise ships call at Acajutla in EI Salvador and the passengers travel by road into Guatemala.

12. The majority of ports in Guatemala are equipped to handle cruise ships without too much difficulty, but require further improve­ ments to handle ships of large size and capacity and to eliminate pr-~bie~s-~'~iat{~-gjo ~-ran's'f~r-o~fpas'sen~ge~s'}io~-_'s~{p--to-- sho-re'and--- vice versa. - 50 - ANNEX V Page 3

13. Passengers arr1v1ng at the Caribbean ports of Guatemala have a selection of outstanding tourist attractions -to v{s·it·-d·ependi~g on the length of stay of a given ves§~~ .. _ A .l?-igh~ai.pro_~:Cde~a:c·cess- - to the interior of Guatemala within.~--.few. ho~~~_._From G~a~~~_~la C!.~y__ _ excursions into the highlands and the lakes could easily be arranged. From the ports, special cruises should be organized to Rio Dulce, the old Castillo de San Felipe and Lake Izabal. From the airport, at Puerto Barrio, special flights could be arranged to the jungle air­ strip at Tikal for tourists wishing to visit the archaeological sites.

14. At the present time, there is no port on the Pacific Coast of Guatemala suitable to handle passenger vessel operat{ons. Th~ ... p~rt_(Jf_~~_n_.:r_,?~~.,_~!t~c~_~s_"'pS~~~~_~y~~e_~_~~.!=._O~~.L_~~ __~ .~p_~n ______unE..rotect~~_~rt wh~~~argC? .il:nd __ pas~.~~g.~!.~~~~!=.. be -.J:E~~~f~r:.r:.~~LEY'~ ___ boats to the pier. There is little protection from the open seC! WJ1iCJ:l __ renders the port very dangerous for cruise ship operation. The_g~v~_rE::- __ _ ment has plans to improve this port and provide port protection suitable for large vessel operation.

Water Supply and Sewerage System

15. Most of the hotels being built, even in the provincial capitals, incorporate their own water supply into their basic plans. These hotels drill their own wells, treat the water, and store suf­ ficient quantities to operate round the clock. This is due to unfore­ seen water shortages during certain seasons but primarily because local water supplies often lack complete treatment. In remote areas, a separate water supply system for hotels is absolutely essential. Some of the newly installed systems are given sufficient capacity to serve also part of surrounding communities.

16. There seems to be no shortage of water at the potential tourist areas visited by the mission, although difficulties are being encountered in the Peten area. Surface water in this part.is scarce and water is being hauled by tank trucks to a number of villages . around Tikal.

17. Of the 325 municipal seats about 40% are considered to have adequate water systems, 55% need to be rehabilitated and/or improved, and the balance of 5% mostly in one northeastern part of the· Peten completely lack water. In total, about 90% of the population living in urban centers outside the metropolitan area of Guatemala City is estimated to have easy access to water. Almost all the urban population in the highlands has easy access to water sources. An inventory of the water supply systems at major localities within the potential tourism development areas is given in Table 2. All water systems are administered, operated and maintained by local municipalities. Outside the metropolitan area of Guatemala City, preparation and execution of water supply systems rests with the Insti tute for Hunicipal Development (INFOr!) and t~·e~-D~·par·t~e~! ~~f-=_ Water and Sewerage (DAYA) of the Ministry of Public Works. - 51 - ANNEX V Page 4

18. Sanitary sewerage systems in the major urban areas are adequate to handle the hotels. In remote areas, however, hotels must plan their own sewerage treatment facilities. In these areas, sewage collection and treatment is almost ~~~_~~{~~-~-~~-.-'~-j~~J:~i-;is-_-a~-~'~~~~qi~~e~_ to have septic tar:.:,.s with leading fields or drainage pits. They are reported to work well in less densely populated areas where sandy sub­ soils prevail. But, as areas become more and more developed, the.danger of underground water supply contamination could arise {f properi~wai~ collection and treatment is not introduced.

19. There are about 100 sewerage systems in the country, all in municipal seats and operated by the municipalities. About 40% of these are combined sewerage and drainage systems. Only three area systems are equipped with treatment plants of' one kind or another including stabilization ponds. It is estimated that about 15% of the urban population outside the metropolitan area of Guatemala City is served by c9~J?_h~te sewerage systems. Rural areas utilize public or private latrine systems controlled by the Department of General Sanitatio-n':Li1 '-th-e Ministry of Health. Table 3 below shows a brief inventory of the ,sewage-c-oflectTon--incCtreatment-rac1.1itIesats-efectej____ _ localities. Under--the-BanKTWHO~coo-p'eraETve program, a-study '0 {-t'he--water and sewerage sector was made in 1975. Currently, the Bank is participa­ ting in the earthquake reconstruction program for urban sites and services through Loan LN-13l5.

Electric Energy and Telecommunications

20. The National Institute for Electrification (INDE) is in charge of the electrification of the country. It anticipated that "wfien the -hydroelectric projec't of -Rio Chixoy is completed~--{t-wo-ura-----­ -douoIe-Ehe- g-enerat:lon capacity-in--tl1e- couritr~heBank-'h8.s been-irl----' volved in the development of the power sector through Loans LN-487 and LN-545. Currently, as far as tourism development is concerned, there are no difficulties in supplying power to any of the potential locations and mainly to those within the altiplano. Electricity generation and supply may become a problem in the Tikal area where currently electricity is available through local generating facilities.

21. Most of the hotels incorporate their own diesel generation system into their basic plans. Hotels generate their own power firstly to co~ wi ~~-e.e!ik de.!ll~.?~~~!:io~~'!.~~~~g ___~~e,x~~~_and ~~s:on_

does not seem to be forthcoming. If Guatemala is to enjoy the benefit of international tourism, it would have to place high priority in adequate communications so that efficient reservation services are provided. GUATEl-1ALA

TOURISM SECTOR REVIEW AND PROJECT IDENTIFICATION

Principal Airports

'Hours of Daily Airport Name Location Classification Service Type of Aircraft Handled Type of Runway

Aeropuerto La Aurora Guatemala City International A 24 All types Asphalt 3,896 m.

Retalhuleu Reta1hu1eu International 12 Piston engine and/or Asphalt 2,800 m. Turbo-prop

San Jose Esquint1a International 12 Piston engine Asphalt 1,574 m.

Puerto Barrios Lake Izaba1 International 12 Piston engine Asphalt 1,815 m.

Tika1 Tika1 National 10 DC 3 or equivalent Compacted 1,100 m.

Sta. Elena Peteis National 10 Piston engine Compacted 1,100 m.

Pop tun Peteis National 10 DC 3 or equivalent Compacted 1,500 m.

.~~ :;~ ...... <: GUA'l'tMAI.A

TOURISM SEC10R REVIl~ AND PROJECT IDENTIFICATION

Water Supply Systems on Selected J.ocations

Capacity of Source of Type of Trest- Conditiona Operated 6- Storage 3 S~8tem ~ ~ taent Used of S},steUls COllg!"\J~~~Y fin"n"'"L by Maintained by Capacity m CD /day_ ~

,aJachel

[igua .tconala Springe 01 sin fectlall Adequate !'WD Gov C coulen t Municlpallty 950 2,620

Ichi- S"dng_ Sed Imentation Adequate !'WD Government Municipal1ty 300 1,)00 Itenango IUver Flltration INFOH lOB INI'OH Chlorination

erto Bar-rio. IIlDRASA ial S"c illgD Uh 111 fec tlon Adequate Private Private (private) NA NA vingdtol\ iol Springs None lnad_quate PIlI) Govecl\1llent Municipal1ty 300 520 Sea80nal inadequ,cy '"... I to be completed by new vella ocea 6. Lake Uidnfection Marginal I Nf'OH INl'OH MunlcipaUty 500 900 To be increaaed by o. [lena Municipality longer pWllping lull ezal teRenKo Springe Oiainfection Adequate NO Government Municipal1 ty NA NA Welle MuniclpaUty Municipality

~~. J~ G\JA TI:MAI.A

TOURISM SECTOR REVU." AND PROJEC'f IDENTIFICATION

Sewerage SystellIu On Selected LocaUona

~ TYye Collection of System Tyee of Treatment Condition of System Constructed by Financed by ~

u~ •.'.4.:he:l Partial "ewcrage system None Inadequate Municipality IN.·OH All village8 Ike Atl tlan .. Ith .epUc tanka around the lalta .. requi re sewerage syst_

aIS"· ~owplete 8eWera~c 8y~te. None Adequate IN~'OH Government .Jet elDOI. lOB

1,IchlcGatcnango C".. blned Bewerage 6. drainage Hone Adequate NO Govermnent Requlree tr.ao-ent facilities

uer[o barrio. Not ed st Ing None lnadequata Private Private

Ivlng.ton Latrines None Inadequate HI. Privata eke hobal

lorn 6. Sep [\ c tanll. Nune Inadequate Privata Private Requires a complete ta. n ena ayatcm 6. treatment 'Ikal '"....

!uczallen."go Co,.blned sewerage/drainaga Hone Inadequate ND/INt'oH Government rartlal .yOlelli lOB

~I~ ... ~ - 56 - ANNEX VI Page 1

GUATEMALA

TOURISM SECTOR REVIB-l AND PROJECT IDENTIFICATION

Organization for Project Planning, Implementation and Land Control

A. Project Planning - Implementation

1. Planning and Implementation of tourism projects is one of the responsibilities of INGUAT which, at present, has a limited in-house staff and certainly not the capability of implementing sizeable and complex projects. Responsibilities moreover are not very clear. Sometimes, other communities or public "agencies are involved in the preparation and execution of projects. Active participation of government institutions such as the Office of Economic Planning, the Public Works Department, the Institute of Municipal Development (INFOM) , the Institute of History and Anthropology, Ministry of Agriculture, the Directorate of Forests and Local Municipalities in the planning and implementations of projects creates a dispersion of responsibilities.

2. Public investment planning is the responsibility of the Office of Economic Planning in the Ministry of Economy. Physical planning and area planning generally are the responsibility of municipal and/or pro­ vincial authorities. At present only four urban centers (Guatemala City, Quezaltenango, Esquintla and Antigua Guatemala) are expanding with over­ all physical plans and development controls. The planning departments in these cities are responsible for (a) preparing the physical and infra­ structure plans for the cities and their metropolitan areas; (b) pre­ paring or approving the plans for special projects requested by other government agencies; (c) approving, following-up and monitoring the implementation of private or public projects. Planning in areas outside the major urban centers is the responsibility of local authorities who also are called upon to (a) execute master plans and enforce building controls and zoning regulations and (b) construct and maintain various types of public works. The municipalities and other local authorities also receive financial and technical assistance from INFOM and the Public Works Department toward the coordination, planning and imple­ mentation of projects.

3. INFOM is an autonomous agency under the presidency, with the broad purpose of giving financial and technical assistance to municipalities outside Guatemala City. During its 18 years of existence, INFOM has financed water supply and sewerage systems, public markets, health centers, slaughter houses, electrification schemes, public buildings and road works, as well as other municipal projects. It has also given technical assistance in several areas, mostly for projects which it finances. - 57 - ANNEX VI Page 2

4. ·INFOM's Director has broad authority to determine investment priorities and areas ,of technical assistance. A separate division, "The External Credit 'Office", prepares and executes projects financed by international loans. Projects are generated through requests by the municipalities; most projects are prepared for INFOM either by their staff or specialized agencies in other government institutions or by consultants. Construction is done by public works on force account or by contractors hired by INFOM through competitive bidding. INFOM's financial power is enhanced by the fact that it controls municipal trust funds constituted by earmarked municipal taxes.

5. The Public Works Department is responsible for (a) providing engineering and architectural services; (b) upon request, acting as an engineering consultant for all government departments or agencies; (c) granting construction permits for specialized types of construction; l/ (d) providing technical assistance to provincial agencies and organizations on matters concerning public utilities; and (e) designing and building water supply, sewerage and road networks. Projects are generated through municipal requests and priorities are determined by the ministry. Projects are executed by the execution and supervision sector of each department of the ministry utilizing staff and equipment from local and regional offices for construction purposes. Construction is almost always done on force account. The local and regional offices are relatively expe­ rienced in carrying out construction programs but are ill-equipped for operation and maintenance activities.

B. Land-Use/Land Controls

6. Much of the land in Guatemala is privately-owned and it is generally evident in areas outside the metropolitan centers that this land is not governed by zoning regulations and development controls and that land-use principles are consistently ignored. Although there is a lack of national planning laws and controls, the laws of the country do provide government institutions with enough powers to monito-r private development schemes and to carry out tourism development projects expeditiously.

7. In this respect some of the legal instruments are: (a) the Constitution which (i) in its Articles 107, 108, 109, and 130 foresees the preservation of natural resources, archaeologic and historic sites and the national folklore; and (ii) in its Articles 69, 70, 71, defines private property and together with Decrees 277 and 529 establishes

!! Building structures and special civil engineering works are designed to sustain seismic loads. Throughout Guatemala, for anti-seismic design, the "Structural Engineers Association of California" (SEAOC) and the "American Concrete Institute" CACI) earthquake codes -are being used. - 58 - ANNEX VI Page 3

procedures 'for the acquisition and use of land and defines the government's rights to expropriate, allocate and/or administer land; (b) the Municipal Code which requires the preparation and implementation of physical plans and land-use controls, (c) the new law of the National Development of Tourism, Decree No. 25-74 which provides for territorial controls through conservation and planning; and (d) National Park Legislation which identifies areas of national interest to be preserved and/or developed as national parks.

8. Permission to trade or lease land is granted by the mun~c~- pa1ities or the Ministry of Agriculture on a parcel to parcel basis. Land in areas which are declared of national interest can remain in the hands of the owner as long as the owner can produce titles of ownership dating back to 1898 (when land registration was put into effect). Any deviation from the accepted use of the land has to be cleared with the public offices concerned. Land which cannot enter private ownership can be leased for a period of 15 years from the municipality or the Ministry of Agriculture.

9. The Government has the right of eminent domain on privately- owned land, which can be expropriated whenever "a public benefit" can be derived by the use of such land. The abovementioned decrees and articles of the Constitution for the Expropriation of Immovable Properties clearly provide for this right. The compensation to the landowner is based upon the assessment value of the expropriated land. However, the expropriation is not completed and the title is not transferred to the government unless the amount of compensation has been determined either by agreement or judicially. In some cases, once the expropriation process starts, the title to the land is transferred ~ facto to the government. The landowner has however the right to complete all legal procedures if he so wishes and contest even the amount of compensation. Landowners who do not agree with the final amount of compensation may resort to arbitration. They also have the right of appeal against th~ decision of the arbitrators according to special procedures provided by the Guatemalan legal system. Making full use of such, complexities in the expropriation process may delay the title transfer to the government for many years. It is for this reason therefore that the government seldom applies the right to expropriate private land. ~

'ItlUkISH Sr,:cTOM K~VIt'\l ANIl rKOJ~CT IIl~NTIlICATIOII

loud.r/Hollt Int er.ction

T .... dlt.w'.t Jndt... H&)denl Iud"" rea.Aot lad lito Modenl (111 "p.n Ie:) t.dtnu Modern (non-Ul.~.n'c) LadlRO

(l) Intrequent 4i ... ect lutee.c[lon (1) Infrequent dlrect lnte .... cllon (I) lnhellucnt dl ... cct interActlo.. (1) Intruduce new techno1o!y (1) Provide cruct.l aocl.l .nd bualnc.a but Indirect Cont.c[ through but lltdire.:.t contAct throu~h but indirect 1..0,Hact 'Inough • nd COlHit.... r Houd. Into connect")n. to '''le ... na,lopal d~ln •• 'rol •••• on.1 de..,e lopuroeut. lie I ellt t He ••nd devalupluent. aclenttflc. and dev.loluuC'nt. aeienttfic, .nd tho \lrkAn cnvi(oluuent. [hult • aource of pover. tntlueuce, IU[fu­ .ud IItandlcag. .ud 1I1ve.tlllC'lIt pruK ... aUlIl. Ihl"O~ In"U[lllel~t pru!Sra.... In'ro~ I"ve.tlilent prolScatIIa. (2) lnve»t ."d participate lochl Curpo.ata dUI,.'e new CUIIIIUCII." ,ouda which dUl.e lIew conoulJle'" a:c,uoda ",hlch du'-e new eoncu"Der Koodu which In PUU\.lJl)CllIent ur DlAJur (2) .'requen..l buall1e.WolI , ... naaclton •• auoln" •• I.a..,c ehallked lhe ec.unulAlc .nd have dla"Kad the econo.. lc and hAve chau~cd the econoculc and bUlllueatl.c. and a8enct.e. ()) .'ecqucnt lIuclal Interaction. Trav"lcr tHhuolugh.al L.a.l. of ,,11l.S. tel;hllologlcal b.st. of v, I hSc tec1uloloKlcAI ba.l. ot vHlaKe (1) t'cequeu[ 10c'01 Inter- (4) Client II {or hulel •• rellteu ... nt •• and 11 t c. II f •. 11 fe. actiun. .'sht.cctug .t\cm.. lc .....".gcd or owned (2) L"llumcr. toe h.n.JIt,;,-.h •• (2) Cu.tuwe"'l1 tu .. h.lldic .... tt. (2) CU'lOUl~fll fOf ha .. dlc;raClll. (4) Cllenl. lur rellta",anta. bl uon-lIhpantc l.d'noa. u.ualty ,u((:II •••d lu the city. ullu.. l1 pu .. ch.ded Itl the city ullu.l1y pucchodltd In the city. botel fa, ,0 .. 1a, etc ••

Teadltlo"al ludl.nl tlKur. HodClIl India .. e frequently (1) Cllcllle tur reatau["anta, p,,-_Incllrly In the ,uurl ... plU~ .bandun outward •• _Jian cultur.l hotela, [4 .. 1 •• etC •• ..ullu ... l Illera,u.e .,lIe4 10 atLc.ct t .. appinglJ, e.s .• dre. •• and a["e (2) CUlllUlncra fur aOU/.c _'ll­ H"'ouP lour'.l •• thercture ut Ie •• Iliterellt to aun handicraft product_. toeet,,, [uurlltll. e.il ••• Uvce wurker •• (I) C.oup tou .... tb",uuaI,h lowe colonial {uruitu["o vlll.Kctll. c.pc"l.lly S.'l (I) buaJueslII O&IIJu"'llmhiod for ",urkcl •• etC .• MaJor' U.nt. fur tl .... t-ct ••• An'uldo AKuII. Caliente. and hand',-,-.I [ mlddlcmen and Vlrt ... lly no contact. 0) III~hly vl.ILI ...d....,n­ hot.It., rr.t.urant., I'aht ••• lna elll, hi 4..a.1 e .. IIIIK'" .cller •• .traltoll effect" (paea. agenct ....oaHo4 or uvncd by CfOUp (2~ lnfceque"t ""I""Cl..l 1 .. [e,."tlol1 (2) SOUIO ClhpluylJt.ellt In tuur's. 8.H). non-tUlipanlc t.dlous. Teay.lee hUl Illd II e"l cuut." t thr()u~h .endce aector. Inlc, .. cJJ.IY ."c,-'.I .el""vlce l"lulitrul,.(uCe (parall, c..IS ."d b. 2~). (J) (.uIIllJll.e". tor ".noJ'cr."',. U."lItt)" purch ••• J III ..:it1 lUlU' III IIItU". 0'" Ct.lchlc •• t.· n.ngu. ...

r ... oJillo"al Indla.. e .... e • Modccn Indl.n. {,equontl), (1) Clleut. for- relltaur-antl. (1) Client. for hotel., r •• ,aUrADtl. p .....u.lp.l urc.ctfl.H\ for ludopcn­ abandon iJu,,,,ard Indl.n cultural hot.l~, ta.l., etc., .lshe.edng agenc t.a. dent I r.llel to Gu.te&aAI •. trllpplnts •••. 8 .• dre ••• and .[". (2) Cuatocaer. tor .ome al'tl­ (2) 'c.quent loct.l Int ..... ctlou. ther.fore of l ••• lntarelt to •• n handicraft p ... oducta, e.pectally 1n younKer _,. (I) t'ref.... eflt direcl conr.et Oil to .. elgn tou ... lou. a.ts., .llv.r wolker., Irou" •• .110..... ' e.c ...... lulu to vlllaH.'. c:ulunlal furniture (l) SUUlC bullln ••• cunt..acl. Ind.,CIl4cnt ".pal,.lally '\ole fI.at •• alld (I) Bualnea. oppoetunltle. for Hln1.. 1 contact. woe"-c .... elC •• L.t." ...... ,-kct d.y •. hllndlcraft middlemen .nd (3) Hi ~lll "I v t.l b 1 c "dcmon­ Tr.",c'.r (2) O... t.. •• to".l "colout .. atluu" ln ..ll.elt. <rlUlon • (fec.t'· (para. 2-) lallc luwna .nd In lIuehu.~ (2) Soaae ePl.,loyuaent In touel •• a.sl) . tellalilLo • .ervlce '&C.(.uc. (4) he~uel\t lIoet"l Inter­ (l) H.l..Jc '"u.(u.e .... for hllnJl­ ectlon. c!:&IlJccL.lly in cratta, 1" l"dl.1I u.arkel. yuulIHer IKe , ... oup'. alld ollcn d1rect fron PIU­ du..:.r, H.ny collector. 0 .nt Ique. and uld textile ••

Spac 1.1 (1) IUllequent dlrecl conlact.. (1) Sub.t.nttd .mall-Icale (1) Competition for a"lcultural (I) H.Jor .... II-«.Ic f'urpou (2) S...-e compet I t I..JII fOI" •• allona1 cOlUlliceci.1 IntCf.ctlon. Job •• budn ••• counterpar-t •• CCIII r.l ~ 'aHe hultu •• t lob. un rtlc .Ipcelally bu)"luK c ... ft (2) vt,tt fr-Iend ••nd r.latlvl'. 1'h" 'nter.ctlon .... y J.jcrlcan to.e 1 t h; Cu •• t. 'tCIIIII {or Celllr.l berh;.n (l) Sub.t.ntlal .... 11-.c.l. <:0.­ be .n i.iou,atant hc tor Tc.", .. l cr (ll t\I.(U"'CI. lu •• VUlt: &I.IIJI­ rc •• le. lJIerclal lnter.ellon, e.pact.tty In ce"lulI.I *eoHoatic LI.lt It .... (2) SOllie compctltllln {or .e.~ buying and ... llln& agriculturAl lntegratLun .t Dlld cUllal aklleutl"'I" luLII 01\ GouJ. lind tlade tn COfl,"C'11.el tlood ltuclOcCunoUlotc level •• Hint ... Contact~ the PC4..lth. Cu .. [. (4) \Jork. 'Iadc. and 'i'liitiok tn (2) Couljlctl LJun tor Job.·, ~ the ulHcrn Ulgl.laolh. £up':l.hl1.)' '" D>.Clny eratlO "lid Itkillcd tradel. Vlaic hicliJ ••nd rclatlye. III f"c~ucllt .0cl.1 tntecactlon - 60 - ANNEX VIII Page 1

GUATEMALA

lQ,tJRISM SECTOR REVIEW AL'ID PROJECT IDENTIFICATION

Instituto Guatemalteco de Turismo (INGUAT) ~orporacion Financiera Nacional (CORFINA)

1. !~GR~T was created in September 1967 as a successor to a series 0 f for-er tourism agencies responsible for tourism. Its major functioc.s at :~e present time are:

(a) setting up and shaping tourism policies and guidelines;

identifying and planning tourism priority zones;

(c) administering tourism incentives;

marketing and promoting Guatemala's image both in the international and domestic tourism markets;

~) sponsoring hotel training programs and seminars;

:) coordinating policies and planning activities with other government agencies and private intl2rests; and

'-;) stir.\ulating handicrafts production.

".d Staeing

"... '~UAT is divided into six major departments (Chart 1) . offic~s around the country and abroad. The s~x

Ope~ations and Development Department which is ~esponsible for tourism development plans, statistics, hotel inspection and the develop­ men: of the handicrafts market;

Pn..... :·.:vtion and Public Rela tians Department, whi~h takes care of disseminating tourism int~rmatian both locally and abroad; - 61 - ANNEX VIII Page 2

(c) Finance and Administration Department, which covers collection of taxes and fees and mai~~aining the INGUAT offices;

(d) Internal Consulting Department, which lends assistance to other departments in planning and implementing tourism projects;

(e) Planning Office, which concerns itself with the identification and planning of tourism priority zones and liaises with other governmental planning agencies; and

(f) Project Review Department, which is responsible for tourism studies and appraisal of proposed tourism projects.

3. These departments report to a Board that is composed of the Director of INGUAT (Chairman), the Sub-Director, representatives of six government ministries and seven representatives from the private sector (including hoteliers, travel agents and airline representatives). It operates on an annual bu4.set of about US$2.0 million, generated mostly from tourist card fees (US$l.OO), hotel taxes (10% of gross room sales) and departure fees (US$3. 00) at ai"rports-,and -US$r:U-Oat-oilierfronti-erS:--

Policies and Practices

4. Although INGUAT has been empowered to cover several facets of tourism administration, its operations have been rather limited in the past. Emphasis has been on generic promotion of Guatemala abroad, notably in North America, on dissemination of information locally (including general tourist information) on particulars for foreign retirees wishing to domicile in Guatemala and recently in identifying zones for priority development of tourism.

CO RF INA

5. CORFINA was established by Decree 46-72 ~~ _M~i _1-9Z~,_ a_~_ ~ __ _ development bank. It has an authorized capital of US$lO.O million (60% public, 40% private) of which US$6.0 million has been. paid in. The Bank's objective is to promote mining, industrial and tourism 'develop­ mente Accordingly, its operations (Chart 2) mostly include promotion and technical assistance, investing directly, providing medium- and long-term credit, and guaranteeing loans in these sectors. CORFINA also implicitly acts as a catalyst for tourism development in areas where the government feels that pilot projects are necessary to stimulate further investment in tourism.

6. CORFINA is an "autonomous decentralized state entity.'~ Its Board of Directors is composed of the Ministers of Economy and Finance, the President of the Bank of Guatemala, the Secretary General of National - 62 - ANNEX VIII Page 3

Economic Planning and three representatives of the shareholders.

7. Its credit policy for tourism is flexible with varying terms for hotel credit depending on the location of the proposed project (Table 1). Overall, lending for hotels currently covers about 75% of project cost for 10 years plus 2 years of grace at 10-11% interest p.a •• Both interest rates and percentage of costs financed appear to be somewhat concessionary. It would appear that longer repayment schedules and financing of lower percentage of project cost at prevalent interest rates (currently about 11%) would be conservative from CORFINA's point of view and still provide hotel credit on terms acceptable to investor~.

8. In the period 1972-1975, CORFINA granted 16 credits for hotel construction and equipment (Table 2). The average credit has been about US$1l0,OOO, although three are about US$350,000 each. Tourism represents 18% of CORFINA's portfolio (74% in industry, the balance in mining). In 1976, about 35% of commitments are expected to be for tourism. - 63 - ANNEX VIII Table 1

GUATEMALA

TOURISM SECTOR REVIEW AND PROJECT IDENTIFICATION

CORFINA Hotel Credit Terms (1976)

% Grace Interest Financed Term Period Rate' (%)

Guatemala City 75 8 2 11

Antigua, Atitlan, Chichicastenango

Hotels 80 8 2 10 Tourism centers 80 10 2 9-10

Santa Cruz de Quiche, Quezaltenango, San Francisco del Alto, San Cristobal, Momostenango 80 8 2 9

Peten area 100 15 3 8

Costa del Caribe 100 15 3 8

70 8 1 9-11

SOURCE: CORFlNA TOURISM SECTOR REVIEt-J AND PROJECT IDENTIFICATION

INGUAT - Organization Chart

BOARD OF DIRECTORS

DIRECTOR

PROJECT INTERNAL REVIl!.'W CONSULTING SUB-DIRECTOR ~

PLANNING I I OFFICE I LEGAL I IECONOMIC I INTERNAL J . AUDIT

f l I FINANCE & OPERATION & PROMOTION & AIl-llNISTRATION DEVELOPMENT PUBLIC RELATIONS J I t /BUDGET I I HOTEL INSPECTION I I PUBLIC RELATIONS I I I I l CASmER I I STATI STICS 1 PRODUCTION OF MATERIALS I I I I PUI{CILASING I HANDICI{AF'J'S MARKET I I RADIO TV, FILNS I I I I gl~ I LIBI{A.I{Y & FILING I I DEVELOPI'IENT I I PIIOTOGI{Al'IIY J :<: nf~ 1 I • J I I SUl'POKJ' SEI{~ICES I FOLKLORE & HANDICRAFTS I ART & DES [CN I ~m SOURCEGINCUAT ~ GUATEMAl .. A

TOURISM SECTOR REVIEW AND PROJECT IDENTIFICATION

CORFINA - Organization Chart

I BOARD OF DIRECTORS

, I LEGAL OPINION GENERAL MANAGER INTERNAL -AUDIT J I I I

PROGMl-l111NG & PROJECTS CREDIT OPERATIONS ADNINISTRATIVE

EVALUATION DEPA-RTMENT DEPAR'lMENT DEPAR1MENT DEPARTMENT (J\ VI

RESOURCES PROJECT GUARANTEE & 1-_ PORTFOLIO PERSONNEL I f PREPARATION INSPECTION I I I

APPRAISAL CREDIT ANALYSIS I ACCOUNTING I I SECRETARIAT I

I _ !OREIG~_ 1 ~~ ~~ SOURCE: CORl'~INA N

GUATEMALA

TOURISM SECTOR REVIEW AND PROJECT IDENTIFICATION

The Market

Central American Tourism

1. The following paragraphs summarize Central American tourism as an introduction to the market for Guatemala. The number of visitor arrivals to Central America has grown as follows:

Visitor Arrivals

(OOOs) Total Year Guatemala Honduras El Salvador Nicaragua Costa Rica Panama Central Americ

1968 175 134 142 120 119 121 811 1969 178 184 134 115 122 139 872

1970 174 89 138 132 155 156 844 1 1971 239 131 167 145 170 189 1,041 1972 348 146 174 148 202 206 1,224 1973 404 166 236 153 247 245 1,451 1974 412 151 285 164 281 275 1,568 1975 454 118 266 168 , 299 301 1,606

Average Annual Growth (%) 14.6 (1. 8) 9.6 5.0 13.8 13.9 10.3

Sources: SITCA, Turismo y Desarrollo Economico Individual Country Statistics

2. Relative to world totals, the number of visitor arrivals in the Central American region is small. The 1975 figure of 1.6 million is less than 1% of the world total.

3. As is evident from the table above, visitor growth in Central America has been somewhat uneven, both with regard to time and distribution of visitors within the six countries. The drop in total visitor a~rivals - 67 - ANNEX IX Page 2

in 1970 is due in part to the political troubles between Honduras and El Salvador, in part to natural disasters that hit the region. Strong growth rates occurred in 191~, but the fuel crisis and depressed economic conditions in major industrial nations during 1973 and 1974 tempered the growth rates in recent years. ~he drop in visitors to Honduras in 1975 was due to typhoon "Fifi. "

4. Over half of the visitors to Central America are citizens of other Central American countries (Table 1).1/ About 30% are from North America, 9% from South America, and 7% from Europe. The rest are from other regions of the world.

5. Travelers to Central America can be divided into three main categories: business travelers, leisure travelers, and intra-regional_special purpose travelers. ~/ Business travelers, made up mostly of North Americans, constitute more than half of total international visitors, and about 25-30% of total arrivals. They stay in first-class hotels and have a very high expenditure per day. The average business trip is about four to six days with many confining themselves to one country at a time. Leisure travelers, either traveling on prearranged charter groups or independently, comprise about 20-25% of total arrivals. Charter groups stay in first-class hotels, have high expenditure patterns and visit several places during their 7-day or 10-day trips. Independent leisure travelers are a heterogeneous group, ranging from "hippies" to archaeologically-inclined students as well as wealthy retired couples. In general they patronize all types of accom­ modation including private ones, and stay in the region for relatively long periods of time (more than two weeks). T~e_special purpose intra-regional visitors are very large group accounting for more than half of total arrivals. Some of this travel is for pleasure but most is for visits with family and friends, trading and shopping. Staying with friends or relatives or lower-type accommodation, this group usually travel by road on weekends and stay for a period of two-three days. While the creation of the CACM and expansion of regional businesses helped greatly in encouraging more travel within the region, certainly the fairly sizeable amount of family ties is responsible for sustaining its growth. 6. There are two main travel seasons in Central America, a winter season from December to January and a summer season, July to August. (There is in fact a third season, Holy Week, which generates much intra-regional

1/ It is interesting to note that in Honduras, El Salvador and Nicaragua . nearly two-thirds of the visitors are from other Central American nations. ~/ There is, in fact, a fourth group, those who live in border towns and travel with a pase local. This group, although very large, has been omitted since they commute between borders frequently and can hardly be called visitors. Furthermore, data collected about them has been dis­ continued recently. - 68 - ANNEX IX Page 3 travel.) With high numbers of businessmen traveling to the region, the flow of traffic ,is becomini'more even throughout the year. In addition, charter operations in the US and Western Europe are now beginning to accelerate and visitors are encouraged to stay longer and visit several places.

7. Central America has remained an inexpensive destination. Average daily expenditure of all non-Central American visitors is estimated at about U5$35.00. This is low when compared with Caribbean destinations (Bahamas­ U5$50.00, US Virgin Islands - U5$70.00), but high when compared with the daily expenditure of Americans in Europe (U5$25.00). The reasons for the high expenditures in Central America are the low incidence of mass travel and, shopping,-wh-ich-accounts for 25% of the total "expenditure::l. There are no-' figures or approximations of Central Americans' "intra-regional travel expenditures but a range of U5$10-16.00 is probably a close estimate.

Guatemalan Tourism 8. Guatemala has traditionally secured the lion's share of visitor traffic in Central America because of its outstanding assets and geographical location. Its two main sources of visitors are Central America and the US. In 1975, they generated 50% and 30% respectively of the total visitor traffic:

9. The Central American market is large, comprising over 200,000 visitors traveling on tourist cards, and an estimated 300,000 traveling on a pase local. Central American arrivals in Guatemala grew at an annual rate of 12.3% over the 10-year period between 1965 and 1974; in the 5-year period 1971-i~ 1975, - the rate increased to 17% (Table 2). Traffic from El Salvador, which has traditionally been Guatemala's major traffic generator, accounts for most of the 17% growth recorded. Much of this traffic was diverted from Honduras, following the hostilities in 1972 as Salvadorians sought a port outlet in the Caribbean which Honduras formerly provided. An easing of tension between these ~NO countries will surely affect traffic,to Guatemala. On the basis of past trends, it is reasonable to expect that traffic from Central American countries will continue to increase by about 15,000-17,000 visitors annually.

10. The US has always been the second largest market in number of tourists and certainly the first if expenditures and length of stay are considered. US travel to Guatemala increased from 30,039 in 1965 to 119,847 in 1975, growing at an annual rate of 12.3%. Thi~ ,represents only a small part of overall US foreign travel (Table 3). One of the most dynamic travel-generating markets in the world, the US generated 660 million personal trips in 1975 up from 361 million in 1967. According to t~e GS Travel Data', Center, total domestic travel for all purposes increased by 12% be~Neen 197" and 1975 - business travel increased by 28%, vacation travel by 7%. Vacation travel accounted for 43% of all personal trips. The average vacation trip involved 2.26 persons, 6.1 nights away from home and 1,115 round-trip miles. Of significance for Central .~erica is that 25% of the total vacation travel was towards the south - Florida. The increase was largely the proa~ct of active and sustained promotional efforts by airlines and travel agents. - 69 - ANNEX IX Page 4

11. With regard to foreign travel, US citizens traveling overseas (excluding Canada and Mexico) increased from 1.8 million in 1960 to about 7.0 million in 1975, ,an average annual growth rate of about 9.5%. US visitor expenditures for travel abroad increased from US$2.6 billion in 1960 to US$10.2 billion in 1975.

12. US travel to Central America for the period 1970-75 grew at a rapid pace, 11.6% per annum, compared to only 3.7% p.a. growth of total US travel overseas (Table 3). US travel to the Caribbean, a major competing destination, grew only 3.2% for the same period with a drop experienced between 1974-75. Although business travel still accounts for two-thirds of all US travel to Guatemala, developments in the group travel market in the US have steadily increased its market share to 20% (independent leisure travelers making up the difference) from only 10-12% in the late 60s. Since the US represents the largest potential tourist market for Central America in general and Guatemala in particular, a brief appraisal of those factors which have influenced the growth in US travel is necessary to formulate accurate projection figures.

13. Increases in population and improved means of transportation have been the main factors for this growth; in addition other factors that have influenced the growth in US travel are:

(a) Growth in family income. In current terms, median family income has more than doubled from about US$6,000 to US$13,000 for the period 1960 to 1974 (increasing at a rate of about 6% annually). More significant, disposable family income increased by 8% annually between 1960 and 1974, from US$350 billion to US$980 billion. The percentage of families with incomes of US$15,000 (1971 prices) and over went up from 4% of the total population in 1960 to 40% in 1974, and is expected to exceed 45% by 1980. The reasons for this significant change in family disposable income are more working women in the labor force and an increase in families with two wage earners.

14. Foreign travel is sensitive to changes in income. Using US Department of Commerce data for 1955-1970, the Conference Board found foreign travel to be income elastic; in the study, it was found that foreign travel increased at a rate of 6.7% for every 4.2% increase in disposable income (elasticity of 1.6).

(b) Number of single persons. The Census Bureau has estab­ lished that in recent years-Americans 'have been slower to marry and quicker to divorce than at any time in US history. In the 5-year period 1970-1975, the number of adults aged 25 to 34 who had never married increased by 50%. Nearly 10% of the adults between - 70 - ANNEX IX Page 5

25 and 54 were separated or divorced and not rema!ried in 1975, as against 7% in 1970. Single people have always represented an important market for the travel trade.

(c) More leisure time. Another important factor influencing travel is total leisure time available. During the past decade, the requirements for earning four-week vacations have eased dramatically. In 1964, only 5% of major companies granted a four-week vacation to employees with less than 20 years of service. Today 44% get this benefit (mostly after 15 years of service). There is also an increase in the number of companies that have lowered the service requirement for a three-week vacation. The average company has added two more paid holidays during the past ten years, now granting nine holidays. The percent of companies reporting ten holidays or more has increased from 19% to 34%. This trend is likely to continue. The labor unions' reactions to the millions of temporary lay-offs during the recent recession has been to try to negotiate contracts that will spread the work among more employees by reducing the time worked by each. The new direction is to bargain for more holidays and longer vacations. As contracts come up for renewal, the amount of time off with pay will undoubtedly be increased in many industries.

(d) Age distribution. The Bureau of Census projects that in the 80s there will be a number of changes in the population's age mix that will significantly alter the travel market. In 1985, there will be fewer teenagers, many more young adults, fewer middle-aged citizens and a large increase in the over-60 group. The largest segment of the population will be in the 25 to 45 category (there will be about 17 million more in 1985 than in 1975).

15. Therefore, considering the factors discussed above and paying particular attention to increasing per capita income, economic stability, developments in charter flights and rising air fares for long-haul destinations, it is reasonable to 'assume that the growth of the US market will at least continue at the same absolute number, some 15,000 a year over the next few years, although the mix may slowly differ with leisure travelers gaining a bigger market share. - 71 - ANNEX IX Page 6

16. The majority of European visitors to Guatemala are leisure travelers, divided evenly between groups and independents. Many of these travelers are in the country as part of a bigger tour which includes several places in South America. Any expansion of this market will depend on favorable developments in long-haul travel arrangements, i.e., lower air fares and additions to Guatemala's accommodation capacity. Based on trends of previous years and the desire of European tourists for new and exotic places, it is reasonable to expect this market to grow by about 7,000 visitors annually.

17. Growth in visitors for South America has averaged 18% over the past 10 years, with a remarkable jump of 43% between 1974 and 1975. However, due to the economic and political situation in many of these countries, a conservative growth o~ about 3,000 new visitors is used for projections.

18. The Asian market, dominated by Japan, increased by 15% over the past 10 years, due largely to the mushrooming of Japanese business in cars, motorcycles, electronics, and heavy equipment. Considering the Japanese recent and increasing propensity to travel, Japan may become a strong generating country for Central America in the next decade.

Projections

19. Central America and the US will remain the primary sources of visitors to Guatemala. Europe could become an important market if the spiraling costs--of long-haul travel can be controlled. The- mission prepared some projections of traffic for the 1977-1985 period and the mix of foreign visitors according to the classification given above (Tables 4 and 5):

1975 actual 454 1976 actual 403 1977 443 1978 484 1979 527 1980 569 1981 609 1982 651 1983 694 1984 736 1985 778

Annual Growth Rates

1975-1980 4.6% 1975-1985 5.5%

20. The drop in traffic bet~veen 1975 and 1976 was caused by the earthquake that hit Guatemala in February 1976. Many of the hote1s in Gautemala City, as well as in the neighboring towns of Antigua ana Chichicastenango were severely damaged and forced to shut down for several months for repairs. (Hotel Biltmore in Guatemala City, for example, was closed for more than six months.) Work on hotels under construction was also halted as construction crews were diverted to repair damaged buildings and other infrastructure. Consequently, accommodation contracts for the summer season had to be cancelled and tour operators were forced to send - 72 - ANNEX IX __E&e_ Z____ _

their clients to other places. As repairs were completed, new rooms opened and the earthquake scares subsided; arrivals started to pick up in the last quarter but not enough to surpass the previous year's total. For 1977, tourism authorities expect that traffic will climb back to pre-earthquake levels. Assuming general economic stability and availability of suitable accommodati.on capacity, it is conceivable that traffic growth would surpass the projections above.

21. The mission also estimated the growth in traffic of the different categories of visitors (Table 5) up to 1985:

Annual Growth Absolute %

Professional & corporate 6,000 5.2 business travelers

Group travelers 9,600 10.0

Independent leisure travelers 8,000 6.4

Special-purpose central American travelers 9,000 3.5

32,600 5.5

22. Beyond 1985, faster growth in traffic can be expected if the constraints discussed earlier are eliminated. Business travel is estimated to grow by about 5% annually, in line with the growth of the country's economy (5.7%). Independent leisure travel will continue to grow at 6%, while group travelers will grow at a faster rate, about 11-12% as charters and group travel arrangements become more popular in the US. Growth of the special-purpose Central American travelers will remain the same or even decline slightly if the political and social environment in other Central American countries becomes more stable. - 73 - ANNEX IX Table 1

GUATEMALA

TOURISM SECTOR REVIEW AND PROJECT IDENTIFICATION

Total Number of Visitors to Central America According to Region of Origin - 1974

Dispatching Region Number of Visitors % of Total

Central America 819,927 51.4

North America 485,357 30.4

South America 141,273 8.9

Europe 110,792 6.9

Caribbean 14,836 0.9

Asia, Africa, Oceania 23,240 1.5

Total 1,595,425 100.0

SOURCE: Stanford Research Institute Report for SlTCO, 1976 - 74 - ANNEX IX Table 2

GUATEMALA

TOURISM SECTOR REVIEW AND PROJECT IDENTIFICATION

Comparative Growth Rate and Market Share Data

Growth Rate ~%2 Market Share ~%) 10 yr. (1966/75) 5 yr. (1971/75) 1966 1971 1975

North America 12.5 11.5 35.5 37.9 34.9

Central America 12.3 17.0 52.3 43.7 49.0

South America 15.5 15.3 . 4.1 4.7 5.3

Caribbean 10.5 11.0 0.07 1.0 0.05

Europe 14.5 31.5 7.9 11.4 9.6

Asia 18.2 9.2 0.08 1.0 1.1

Other 11.5 13.0 0.05 0.3 0.05.

TOTAL 12.9 13.8 100.00 100.00 100.00

SOURCE: INGUAT (based on Annex I, Table 3) - 75 - ANNEX IX Table 3

GUATEMALA

TOURISM SECTOR REVIEW AND PROJECT IDENTIFICATION

American Travel Abroad: 1960-1975

Year Central America Caribbean Total Overseas

1960 38,165 523,333 1,838,027

1965 85,122 786,257 3,029,273

1970 123,779 1,532,722 5,854,574

1971 127,756 1,588,601 6,294,502

1972 164,265 1,775,301 7,358,876

1973 180,772 1,842,321 7,632,087

1974 207,179 1,878,129 7,101,387

1975 214,100 1,793,107 7,017,953

Annual GroYlth Rate: .

1960-1975 12.2% 9.3% 9.5%.

1970-1975 11.6% 3.2% 3.7% - 76 - ANNEX IX Table 4

GUATEMALA

TOURISH SECTOR REVIEW A:.'l'D PROJECT IDENTIFICATION

.. - -.------. ~~ ------_#------.- - - Visitor Arrivals Actual & Projected (1965-1985) -_. -.- - -- -.- -" ------"'------. ------. ------+-- (000)

USAf Central America/ So. America/ Asia Year Canada Mexico Europe Caribbean Others Total

1965 38 95 9 6 6 153 1966 40 81 11 7 2 139 1967 50 100 13 7 2 172 196a 51 97 16 8 2 174 1969 53 96 17 9 3 178 1970 51 94 16 9 3 174 1971 70 125 27 12 4 239 1972 81 216 32 16 4 348 1973 105 240 35 18 6 404 1974 120 232 37 17 5 412 1975 128 252 43 25 6 454 1976 105 235 38 19 6 403~

1977 118 250 45 22 8 443 1978 134 265 51 25 9 484 1979 150 281 57 28 10 527 1980 165 297 64 31 12 569 1981 179 313 71 34 12 609 1982 194 330 77 37 13 651 .; 1983 209 347 84 40 14 694 -- 1984 224 364 90 43 15 736 1985 239 381 96 46 16 778 Growth Rates -- 1965-75 12.9 10.4 16.8 15.2 11.5J 1975-85 6.5 4.2 8.4 6.5 10.0 5.~ - 77 - ANNEX IX Table 5

GUATEHALA

TOURISM SECTOR REVIEl-l AND PROJECT IDE~TIFICATION

Breakdown by Nat'1bna1ity and Type of Tourists (1975 & 1985)

1975

Professional Independent Special & Corporate Group Leisure Purpose C.A. Business Travelers Travelers Travelers Travelers Total

USA/Canada 75,000 24,000 29,000 128,000 Central America/ Mexico 8,000 6,000 28,000 210,000 252,000 South America 3,000 7,000 13,000 23,000 Europe 2,000 20,000 21,000 43,000 Asia 1,500 2,000 1,500 5,000_ Others 500 1,000 1,500 3,000

Total 90,000 60,000 94,000 210,000 454,000

1985 - . -~------.------. ------_. USA/Canada 120,000 62,000 57,000 239,000 Central America/ Mexico 16,000 18,500 49,500 297,000 381,000 ----- South America 4,000 18,000 24,000 46,000 Europe - -5-,-500- - -SCJ,-SOo-- ---40;000------96-; 000 -- Asia 3,000 5,000 2,000 10,000 Others 1,500 2,000 2,500 6,000

Total 150,000 156,000 175,000__ _?97,000 778,000

Percentage Growth 5.2 10.0 6.4 3.5 '; 5.5

Source: Mission estimates WA'I'~

lQlJltlSH SJo:CTOR REVH:W AND PROJJo:CT IOEH1'U'lCATlOH

Addlelonal Rooms Required for 1977-1985

F"re'lJn Average Foreign DOuble itouu, I><)".~.tlc AVt!rage DOmestic Double Room Total Actual Visitor Lengch of Vldtor Occupancy OCcupa.ncy lIucel Length yt lIote! Occupane~1 Occup8ncy ROODlS ROOms AIInual yt:.'J! Arrlv8h S["~ ~/ ~ghts "ll Factor cl R.ut~ ~,!18M ~~ ~~shta Faclor - Rate Reguired Available Construcrlon (000) (days) (000) ---ci)- (000) (days) (000) (1) fl 197~ 455 4,5 1.535 1.4 70 80 2.3 184 1.9 75 4.710 - 4,146

1~7(' '.0) 4.5 1.359 1.4 65 118 2.3 202 1.9 75 4. ~42 4,200

J~J] 447 4.5 1,508 1.4 65 97 2.3 223 1.9 15 5.038 5,000 (esc.)

1'178 4811 4.5 1,647 1.4 65 107 2,5 268 1.9 75 5.549 549

1'1'/9 516 4,6 1,I1l7 1.4 67 H6 2.5 290 1.9 75 6,no 561

1980 %9 4.6 2,094 1.5 67 128 2.5 320 1.9 15 6,412 302 I 353/year .... 1'J1!~ 718 5.0 J,110 1.7 70 200 2.S 500 1.9 80 8,174 CD (1762 tor U"e-year purtod)

~I 11,e a"trage l~ogtl. of Dtay for foreign vlaitor~ 18 noy 4.5 day.. AB group tourB become pupu1ar, it ia expected that viaitors uould 8tay longer. reaching S days 1n 1985. 1>1 lip [0 1979. 4\'oul 7~1. of oil fordg" vlDltora are "xpected to dtay 1n hotels; beyond Chat, this percentage h ""peeted to tllereas" to 1101. ~I lite J).."t..1" OCCU'''''''Y !,,,ctor , ...... ,""wed to be 1.4, due LO ,.tx of vlsitora (bu.tfie ..,""" usually ot .. y (one to Il room, leisure travelers share rooms) ood al:s80oa111;y. - I.'t' I. a,o,,",ed [v II,e rUde lo 1. 5 In 19110 aod 1. 7 1n 1911~ a. churt"" tour. become more popular. dl 1',,,.,,,,,ly, One percellt of tOlal pOllulatlon cravd and BU.y i" hotels. l111s 10 exp"cted to increase domewhat 1n the future. ;, Hu~t Jow~~ll, tlllv~l 1~ (IOlle by t~I"11ic8 on we~kendH. 1/ lxvlalnd by cotlo",[I,," HrOu alld by the fact Chill In period. of htgh " .....