EU-CELAC Innovact Platform: Innovation to Promote Territorial

30 September 2017

EU-CELAC Innovact Platform: Innovation to promote Territorial

Cohesion

Task 2 : Value chain mapping in the México - Guatemala cross-border region

EU-CELAC Innovact Platform: Innovation to promote Territorial Cohesion Task 2: Value chain mapping in the México-Guatemala cross-border region

30 September 2017

For any information regarding this document please contact:

Saskia Bonnefoi, Competitiveness [email protected] +52 1 55 4133 7086

Inés Sagrario, Task Leader for Task 2, Competitiveness [email protected] +34 626163032

Table of Contents

1 Summary in EN ...... 4 2 Resumen en ES ...... 5 3 The Context of the Border Area ...... 6 3.1 Mexico – Guatemala ...... 6 4 National Level Priorities on each side of the Border...... 7 4.1 Mexico ...... 7 4.2 Guatemala ...... 9 5 Value Chain Mapping in the Border Area ...... 11 5.1 Value Chain A: Energy Industry ...... 11 5.1.1 Key Industry Characteristics and Economic Indicators ...... 11 5.1.2 Mapping of Key Players in the Value Chain ...... 13 5.1.3 Key Challenges and Barriers to Development ...... 14 5.1.4 Opportunities for Cross-Border Collaboration ...... 14 5.2 Value Chain B: Information Technology (focus on agriculture) ...... 15 5.2.1 Key Industry Characteristics and Economic Indicators ...... 15 5.2.2 Mapping of Key Players in the Value Chain ...... 17 5.2.3 Key Challenges and Barriers to Development ...... 18 5.2.4 Opportunities for Cross-Border Collaboration ...... 18 6 Prioritization of Value Chains ...... 19 7 Recommendations for Next Tasks ...... 20 : Contact Details of Interviewees ...... 21 : Bibliography ...... 23 : European Commission programs relevant to INNOVACT in this region ...... 24 : Additional information on Industries and Value Chains ...... 25 : Mexico – Guatemala Binational Commission ...... 28

Tables

Table 1 Preliminary stakeholder mapping ...... Fehler! Textmarke nicht definiert.

Figures

Figure 1 Overview of team structure and organisation of work ...... Fehler! Textmarke nicht definiert.

1 Summary in EN

Mexico and Guatemala share a long border (over 900 km) and is characterized by a strong economic and social interdependence. This border runs between the Guatemalan departments of San Marcos, Huehuetenango, El Quiché and El Petén; and the Mexican states of Campeche, Tabasco and Chiapas.

Bilateral relations between both countries have been historically profound and diverse since 1848. They have particularly strengthened during the last decade. For instance, between 2013 and 2016, more than 40 bilateral agreements were signed. México and Guatemala have today different mechanisms of cooperation such as the Mexico-Guatemala Binational Commission that brings together government institutions from both countries, related to issues on the bilateral agenda (Technical and Scientific Cooperation, Economic and Political Affairs, Social Development, and Energy, among others). The Tuxtla Mechanism is another initiative, created in 1991, which aims to promote political dialogue, consolidate peace, democracy and foster regional cooperation among Central American countries. This mechanism also encourages joint economic projects and the creation of regional cooperation actions.

Also, in 1998, Mexico and Guatemala signed a Basic Agreement on Technical and Scientific Cooperation, which includes the following topics: Exchanges of specialists, researchers and university professors; Joint or coordinated implementation of programs, research projects and technological development linking research and industry centers; Exchange of information on scientific and technological research; Organization of seminars, workshops and conferences.

With respect to specific efforts related to economic development, in 2011, Mexico signed a Free Trade Agreement with Central America (Costa Rica, El Salvador, Guatemala, Honduras y Nicaragua), and one of its objectives is to strengthen the competitiveness of its companies and to encourage the dynamic participation of the different economic agents through impulse to innovation and creativity.

Recently, in June 2017, during the visit of the Mexican president to Guatemala, bi-national efforts were updated, focusing on trade and investment through technical assistance in export promotion models, attraction of investments and exchange of business intelligence methodologies.

Given the complexity of economic and social activities in both countries, and the binational strategy for regional integration, the focus of the national priorities in the following pages will consider a wide scope of the border area , including the group of Mexican states in the Southern region (mainly Campeche, Chiapas, Yucatan and Tabasco) and almost the entire country on the side of Guatemala. It is also important to note that both countries have a very active policy for value chain development, focusing on strategic sectors (both at national and regional level), particularly in high value added activities such as ICT and energy, in order to stimulate the diversification of their economies.

Existing value chains in the area were analysed under various criteria through direct interviews with stakeholders, concluding that the rest of the project will be centered in Energy and ICTs . As both industries have a cross-sector impact, it is important to consider their links to the other value chains in the region, such as ICT and agriculture , or energy and environmental preservation and the indirect effect on tourism.

2 Resumen en ES

México y Guatemala comparten una larga frontera (más de 900 km) y se caracterizan por una fuerte interdependencia económica y social. Esta frontera corre entre los departamentos guatemaltecos de San Marcos, Huehuetenango, El Quiché y El Petén; y los estados mexicanos de Campeche, Tabasco y Chiapas.

Las relaciones bilaterales entre ambos países han sido históricamente profundas y diversas desde 1848 y se han fortalecido especialmente durante la última década. Por ejemplo, entre 2013 y 2016, se firmaron más de 40 acuerdos bilaterales. México y Guatemala tienen hoy diferentes mecanismos de cooperación como la Comisión Binacional México-Guatemala que reúne a instituciones gubernamentales de ambos países, relacionadas con temas de la agenda bilateral (Cooperación Técnica y Científica, Asuntos Económicos y Políticos, Desarrollo Social y Energía, entre otros). El Mecanismo de Tuxtla es otra iniciativa, creada en 1991, cuyo objetivo es promover el diálogo político, consolidar la paz, la democracia y fomentar la cooperación regional entre los países centroamericanos. Este mecanismo también fomenta proyectos económicos conjuntos y la creación de acciones de cooperación regional.

Además, en 1998, México y Guatemala firmaron un Acuerdo Básico de Cooperación Técnica y Científica, que incluye los siguientes temas: Intercambio de especialistas, investigadores y profesores universitarios; Ejecución conjunta o coordinada de programas, proyectos de investigación y desarrollo tecnológico que vinculen centros de investigación y de industrias; Intercambio de información sobre investigación científica y tecnológica; Organización de seminarios, talleres y conferencias.

Con respecto a los esfuerzos específicos relacionados con el desarrollo económico, en 2011 México firmó un Tratado de Libre Comercio con Centroamérica (Costa Rica, El Salvador, Guatemala, Honduras y Nicaragua) y uno de sus objetivos es fortalecer la competitividad de sus empresas y fomentar la dinámica participación de los diferentes agentes económicos a través del impulso a la innovación y la creatividad.

Recientemente, en junio de 2017, durante la visita del presidente mexicano a Guatemala, se actualizaron los esfuerzos binacionales centrados en el comercio y la inversión mediante asistencia técnica en modelos de promoción de exportaciones, atracción de inversiones e intercambio de metodologías de inteligencia empresarial.

Dada la complejidad de las actividades económicas y sociales en ambos países y la estrategia binacional para la integración regional, el enfoque de las prioridades nacionales considerará un alcance amplio de la zona fronteriza , incluyendo el grupo de estados del Sur-Sureste mexicano (principalmente Campeche, Chiapas, Yucatán y Tabasco) y casi todo el país del lado de Guatemala. También es importante señalar que ambos países tienen una política muy activa para el desarrollo de cadenas de valor con un enfoque en sectores estratégicos (tanto a nivel nacional como regional), particularmente en actividades de alto valor añadido como las TIC y la energía, con el fin de estimular la diversificación de sus economías.

Las cadenas de valor existentes en el área fueron analizadas bajo diversos criterios a través de entrevistas directas con los actores interesados, concluyendo que el resto del proyecto se centrará en Energía y TIC . Como ambas industrias tienen un impacto intersectorial, es importante considerar sus vínculos con otras cadenas de valor de la región, como las TIC aplicadas a la agricultura , o la preservación de la energía y el medio ambiente y el efecto indirecto en el turismo .

3 The Context of the Border Area

3.1 Mexico – Guatemala Mexico and Guatemala share a long border (over 900 km) and is characterized by a strong economic and social interdependence. This border runs between the Guatemalan departments of San Marcos, Huehuetenango, El Quiché and El Petén; and the Mexican states of Campeche, Tabasco and Chiapas. There are four river basins on Mexico - Guatemala border (Suchiate, Coatan, Grijalva and Candelaria).

Figure 1: The Mexico-Guatemala cross-border region

Traditionally, the main focus of the border area has been related to the containment of illegal migration and the diversity of issues related to it. Both sides of the border suffer from similar negative social dynamics such as the increase of organised crime and the appearance of new criminal forms. One of the main challenges in the Mexico-Guatemala border area is the control of illicit trafficking of people, goods and drugs, most of them aiming to arrive to the United States. In 2008, the Mexican National Institute of Migration estimated that 400,235 people crossed the border illegally every year and that around 150,000 of them intended to enter the United States. 1 This is partly due to the fact that it is a very large border area which is difficult to control.

Nevertheless, bilateral relations between both countries have been historically profound and diverse since 1848. They have particularly strengthened during the last decade. For instance, between 2013 and 2016, more than 40 bilateral agreements were signed. México and Guatemala have today different mechanisms of cooperation such as the Mexico-Guatemala Binational Commission that brings together government institutions from both countries, related to issues on the bilateral agenda (Technical and Scientific Cooperation, Economic and Political Affairs, Social Development, and Energy, among others). These institutions have periodic meetings through groups, commissions, subgroups and subcommittees, which make up the Binational Commission. The last meeting of the Binational Commission was held in June 2017. The Tuxtla Mechanism is another initiative, created in 1991, which aims to promote political dialogue, consolidate peace, promote democracy and foster regional cooperation among Central American countries. This mechanism also encourages joint economic projects and the creation of regional cooperation actions.

1 Gorney, Cynthia (February 2008), , National Geographic, 213 (2), pp. 60–79

Mexico and Guatemala have dynamic trade relations that cover agri-food, energy and tourism, among others. Guatemala is Mexico’s first trading partner in Central America and the 4th most important export destination. For Guatemala, Mexico is the 5th export destination accounting for 4% of total exports. Moreover, 11.5% of total imports in Guatemala come from Mexico. Imported products are medicines, electric energy, electronics, and iron products, among others.

Finally, in June 2017, during the visit of the Mexican president to Guatemala, bi-national efforts were updated, focusing on trade and investment through technical assistance in export promotion models, attraction of investments and exchange of business intelligence methodologies. The president of Mexico considered that the bi-national relationship was at a decisive moment to create a safer, more prosperous and competitive area, through the creation of energy integration, electric interconnection and environmental sanitation projects. There is a common understanding that the use of the productive potential of the south of Mexico, which is closely linked with Guatemala, can stimulate the integration of the region, attracting more investment and facilitating trade in both directions. These declarations made clear that bilateral relations are going beyond containment mechanisms, exploring a multiplicity of paths for a regional economic integration.

4 National Level Priorities on each side of the Border

Given the complexity of economic and social activities in both countries, and the binational strategy for regional integration, the focus of the national priorities in the following pages will consider a wide scope of the border area , including the group of Mexican states in the Southern region (mainly Campeche, Chiapas, Yucatan and Tabasco) and almost the entire country on the side of Guatemala. It is also important to note that both countries have a very active policy for value chain and cluster development, at a national and regional level, particularly in high value added activities such as ICT and energy, in order to stimulate the diversification of their economies.

4.1 Mexico

High productivity sectors as top priorities of the national development Policy

The National Development Plan 2013 – 2018 has aimed to fundamentally change the framework of the country in order to tackle structural issues, particularly the “democratization of productivity”. One of the instruments created to achieve this ambitious goal has been the National Productivity Committee (CNP) which develops a sectoral perspective in order to raise the productivity of the economy and help close production gaps between sectors, based on three strategies:

1. Increase productivity in high-employment sectors (low-productivity sectors were selected with the aim of promoting inclusive growth: Retail trade, Gastronomy, and Tourism). 2. Promote the expansion of high productivity sectors through increased employment and investment (particularly in Electrical / Electronic, Auto Parts, Aerospace supplies and Agroindustry).

3. Take advantage of the growth opportunities in high productivity sectors that emerge from the recently approved reforms (due to the relevance of the Energy Reform, the Energy sector was selected).

The National Digital Strategy which promotes competition and investment in ICTs, is another strategy of the current administration that seek to increase the democratization of productivity. This strategy establishes a Universal Digital Inclusion Policy and a National Digital Agenda and aims to encourage the adoption of ICTs and insert Mexico into the Information and Knowledge Society.

Also, the Secretariat of Economy (SE), through the National Institute of the Entrepreneur (INADEM) has identified those strategic sectors that are currently the engine of development in each state, and also a set of future strategic sectors, such as Energy and ITCs, as potential detonators for development.

An inclusive vision of the Southern region

The southern region of Mexico depends mainly on primary activities and services, it has been characterized by the development of agribusiness sector, due to a great agricultural diversity and large areas of land sown and harvested. Tourism is also one of the important economic sectors of this area, due to its cultural richness and variety of ecosystems. However, this region presents a structural backwardness and a series of deficiencies, since it has low integration into the global economy, absence of a critical mass of companies in highly productive sectors, lack of qualified human capital, high levels of informality, low levels of innovation and an unattractive business environment compared to the rest of country. In order to reduce the inequality gap between the southern states and the northern states, the National Development Plan promotes the reactivation of a policy of economic development focused on increasing the productivity of dynamic and traditional sectors 2 particularly in the southern states of the country. The objective of these efforts and priorities is that, in the medium term, local populations are engaged in activities of greater productivity, adopting a culture of innovation, especially in processes, and providing companies with the necessary skills to adopt technology. In this regard, the Mexican government has had the will to encourage innovation and entrepreneurship in the southern region of the country through a variety of programs. For instance, the establishment of Special Economic Zones, which are defined as a geographically delimited area, located in places with natural and logistic advantages to become a highly productive region, mostly in the South of the country.

Figure 2: Special Economic Zones in Mexico

2 Metal mechanic; Textile- apparel; Leather – footwear; Wood and furniture; Steelmaking; Food and Beverages; textile automotive, aerospace, electric, electronic and Chemical; Biotechnology; Pharmaceutical industry; IT; Creative Industries; and Medical equipment.

4.2 Guatemala

Guatemala has been a dynamic economic actor in Latin America in recent years, with a GDP growth rate of 3% since 2012 and 4.1% in 2015. In 2016, the country’s economy grew by 2.9%, according to the latest estimates, and it is expected to grow by 3.2% in 2017 3. This positive economic trend happens in the middle of an important demographic transition: since 2012 urban population is higher than rural population. Also, by 2032, the population will still be predominantly young, ranging from 15 to 34 years old. 4

Figure 3: Urban transition of Guatemalan population

In order to take advantage of this demographic bonus and modernization, the current Government of Guatemala (2016-2020) through the Ministry of Economy, set as main strategic objectives the improvement of the business climate and the development of conditions boosting the country's competitiveness. It has placed at the center of its policy the competitive development of micro, small and medium-sized enterprises to favor the generation of employment. 5

A long term plan to increase the country’s productivity

The National Competitiveness Agenda 2016-2032 arises from the government's effort to create an agenda directly related to the major factors that determine the country's productivity. Its main drivers are to generate development, quality of life and to promote sustainable and inclusive economic growth. This plan envisions the country as an energy center, a logistics center, an export platform and a top tourism destination, under 5 prioritized sectors: tourism, forestry, light manufacturing, ICT and agribusiness . The Agenda also identified 25 productive sectors that include 75% of the creation of employment associated with high productivity and exports growth. The priority sectors identified were: fruits and vegetables; forestry, furniture; paper and rubber; processed food; beverages; textile- apparel and footwear; metal-mechanical; light manufacturing; tourism and health services; ICTs, software and contact centers; transport and logistics; and construction. 6 These sectors, located in different cities around the country, are conceptualized as the articulation centers of the entire economic activity. In this regard, a Multimodal Infrastructure Network, composed of roads, trains, ports and airports, will allow the mobilization of people and goods in order to enhance the development of those value chains.

3 http://www.worldbank.org/en/country/guatemala/overview 4 https://www.pronacom.gt/website/biblioteca/documentos_de_encargados_anc_web.pdf 5 http://www.mineco.gob.gt/objetivos-estrat%C3%A9gicos-y-espec%C3%ADficos 6 https://www.pronacom.gt/proyectos/agenda_nacional_de_competitividad

Figure 4: Guatemala’s Development Nodes and National Logistics Plan

As it appears in the map above, 9 strategic points were identified as the nodes of productive areas:

• Regional Node of Los Altos: Quetzaltenango, Salcajá, Olintepeque, La Esperanza, San Cristóbal Totonicapán. • Regional Node of Huehuetenango: Huehuetenango, Chiantla. • Regional Node of Guatemágica: Retalhuleu, Santa Cruz Muluá, San Martín Zapotitlán, Champerico, El Asintal, Mazatenango, Coatepeque. • Regional node of Cobán: Cobán, Santa Cruz Verapaz, San Cristóbal Verapaz, Tactic, San Pedro Carchá, San Juan Chamerlco. • Regional node of Metrópoli de Oriente: Zacapa, Estanzuela, Río Hondo, Teculután, Chiquimula. • Port City of San José: Escuintla 7, Santa Lucía Cotzumalguapa, Masagua, La Gomera, San José, Iztapa. • Tourist City of Antigua Guatemala: Antigua, Jocotenango, Pastores, S. María De J., Ciudad Vieja, S. Antonio A.C., S. Catarina Barahona. • Tourist City of Petén: Flores and San Benito. • Port City of Puerto Barrios: Puerto Barrios-Santo Tomás de Castilla, Livingston.

With an investment of US$ 2.8 billion in urban infrastructure, US$ 1.5 billion in health, education and safety, US$ 1.5 billion in road connectivity and US$ 200 million in air connectivity, this 15-year plan aims to boost the country's economic productivity through the promotion of intermediate cities and their main value chains. Decentralization, on this scale, will stimulate the development of higher value activities in the poorest areas of the country, including the border area with Mexico where 3 nodes are identified (Los Altos, Huehuetenango and Guatemágica).

7 Financed by the Rural Development Bank (Banrural), an industrial park in this area is currently being developed, aiming to attract investment from high value industries, especially related to technology.

5 Value Chain Mapping in the Border Area

5.1 Value Chain A: Energy Industry

5.1.1 Key Industry Characteristics and Economic Indicators

The energy industry supplies the power derived from the use of physical or chemical resources, especially to provide light and heat or to work in machines. The different forms of energy production are through renewable resources and nonrenewable resources. 8

Figure 5: Breakdown by energy use in the world (2016) 9

The Energy Development Index is a multi-dimensional indicator that measures countries’ energy production and consumption. The index shows that 17% of global population lacks access to electricity and 38% of global population lacks clean cooking facilities. 10 Increasing access to basic energy in the world is the main purpose for the project “Sustainable Energy for all in 2030”. 11 The initiative’s three objectives are universal access to electricity and safe household fuels, double the share of renewable energy in the global energy mix, and double the rate of improvement of energy efficiency. 12

The strong linkage between energy and development

Over the last century, the energy industry has become a crucial part of the infrastructure and maintenance of modern society. According to the World Energy Outlook, ‘ energy is a prerequisite to economic development. The prosperity that economic development brings, in turn, stimulates demand for more and better-quality energy services. Many countries have established a virtuous circle of improvements in energy infrastructure and economic growth. Energy services enable basic human needs, such as food and shelter, to be met. They also contribute to social development by improving education and public health. During the early stages of development, the absolute amount of energy used per capita and the share of modern energy services – especially electricity – are key contributors to human development .’ 13

8 Renewable resources may be defined as resources that have the potential to be replaced over time by natural processes. Nonrenewable resources may be defined as resources whose stock or reserves is limited or fixed Oregon State University, http://forages.oregonstate.edu/nfgc/eo/onlineforagecurriculum/instructormaterials/availabletopics/environmentalissues/resource 9 https://yearbook.enerdata.net/total-energy/world-energy-production.html 10 http://www.iea.org/topics/energypoverty/ 11 http://www.un.org/millenniumgoals/pdf/SEFA.pdf 12 http://www.worldbank.org/en/news/feature/2013/04/22/energy-for-all-by-2030-time-to-act 13 http://www.worldenergyoutlook.org/media/weowebsite/energydevelopment/WEO2004Chapter10.pdf

In that sense, most of the economic development literature establishes a strong correlation between energy and development, as it strengthens the creation and upgrading of other value chains, and facilitates the diversification of economic structures. This assumption has placed energy policy as one of the top priorities both in Mexico and Guatemala over the last years. Mexican and Guatemalan Governments seek to develop strategies and technologies that can achieve reliable energy and move the poorest communities towards prosperity. As a general perspective, it is important not only to support and develop energy production, but also to reduce the reliance on any single energy resource and increase sustainability. For instance, the Government of Guatemala in its General Government Policy 2016-2020 incorporates as a priority the increase of renewable energy. Its energy policy has the objective to contribute to the country's sustainable energy development with social equity and respect for the environment. 14 Also, as part of the agreements of the recent Bilateral Commission, the Energy Group was commissioned to deepen the energy integration of the region (especially in electric power and natural gas) and to reinforce the exchange of technical information related to common oil deposits.

Characteristics and indicators of main energy sources for productive use in Mexico and Guatemala

The Oil and Gas Energy has become the most globally traded product, it is the resource that feeds the largest percentage of the world’s energy consumption, hence its fundamental importance for industrial development and transportation. 15 Mexico produces about 2.85 million barrels a year and according to forecasts the experts have great prospects in their crude production, especially with the recent implementation of the Energy Reform. Guatemala's 526 million barrels of proven oil reserves are located primarily in the country's northern jungles of the Peten basin, and are most likely associated with those in Mexico's Tabasco formation (currently being discussed by the bilateral Energy Group).

Renewable energy is energy generated by resources such as geothermal heat, sunlight, water and wind, which can be naturally replenished. According to the International Energy Agency, “renewable energy is at the center of the transition to a less carbon-intensive and more sustainable energy system. Renewables have grown rapidly in recent years, accompanied by large cost reductions for solar photovoltaics and wind power in particular.” 16

Geothermal energy According to the Geothermal Energy Association's annual report for 2016, Mexico's geothermal power operation capacity is 1,069 Megawatts (MW), only below the United States, the Philippines and Indonesia that generate 3,567 MW, 1,930MW and 1,375 MW MW, respectively. 17 In Guatemala, this sector is also growing rapidly. The Instituto Nacional de Electrificación (INDE) has five geothermal areas for development, all five (Zunil, Amatitlán, Tecuamburro, San Marcos and Moyuta) lie in the active volcanic chain in southern Guatemala. INDE has conducted both investigative work and development of geothermal power since 1972.

Wind Power In Mexico there are nine states producing wind energy, with Oaxaca being the main generator. In 2015 it registered 7,072,479 Gigawatts (GW), equivalent to 92.14% of the country's total production. To a lesser extent, the states of Tamaulipas, Jalisco, Nuevo Leon, Chiapas, Baja California, San Luis Potosí, Sonora and Quintana Roo also have wind power plants. 18 In the state of Chiapas, the municipalities of Tonalá, Cintalapa, Chilón, Las Margaritas, La Trinitaria, Comitán, Villaflores and Ocozocoutla are classified as feasible zones for the generation of wind energy, according to the map of the National Atlas of High Potential Clean Energy Areas.

14 http://www.mem.gob.gt/wp-content/uploads/2013/02/PE2013-2027.pdf 15 There are around 161 oil areas in the world, each with oil of various characteristics. By the end of 2016, world oil production was around 33.9 MBD, of which 41% came from OPEC countries, where Saudi Arabia, with about 10.5 MBD, contributed 31% of the group's. The regions of the Middle East and North America generate more than half of that of global oil production. (EIA-US, 2016). 16 https://www.iea.org/topics/renewables/ 17 http://www.oise.mx/geotermica 18 http://www.oise.mx/eolica

In recent years Guatemala has been an attractive country to develop wind projects. According to the Ministry of Energy and Mines, there are 10 areas with probable wind potential, Villa Canales (Guatemala), Estanzuela (Zacapa), El Rodeo (San Marcos), Santa Catarina Ixtahuacán (Sololá), San Juan Alotenango (Sacatepéquez), Mataquescuintla, Jutiapa and Nentón (Huehuetenango).

Photovoltaic Energy Experts rank the quality of Mexico's photovoltaic among the world's best. The country has significant advantages: average Global Horizontal Irradiation (GHI) is approximately 5 kWh/m2/day, the energy equivalent of 50 times Mexico's annual national electricity generation, 70% of the territory has GHI values greater than 4.5kWh/m2, just 0.06% of the Mexican national territory would be sufficient to generate the overall electricity consumption of Mexico.19 On the other hand, Guatemala has the largest solar power plant in Central America and the Caribbean with 50 MW of installed capacity beginning to operate. In its second phase it reached 85 MW, approaching the 2 largest projects in Latin America located in Chile and Honduras (100 MW each). 20

5.1.2 Mapping of Key Players in the Value Chain

Given the difference and complexity that exists in the different sources of energy production , two distinct simplified value chains can be identified on the production side, one for non-renewable energy (oil and gas) and another one for renewable energy:

• The oil and gas value chain includes all processes of exploration, extraction, refining, transport and marketing of petroleum products. The process is classified in three major stages: "upstream" (Exploration and production), "Midstream" (Transport, processes and storage), and “downstream” (Refining, sales and distribution).

• The typical process for the production of renewable energy begins by project planning, and then following steps are manufacturing, installation, grid connection, operation and maintenance.

These two value chains share supporting processes such as policy-making, financial services, education, research and development and consulting. They also share the very end of the value chain, which is energy consumption (for domestic use and productive use).

Figure 6: Renewable and non-renewable energy value chains21

19 https://www.greentechmedia.com/articles/read/sunny-mexico-an-energy-opportunity 20 http://www.energiasolar.lat/en/tag/solar-photovoltaic-energy-in-guatemala/ 21 https://hub.globalccsinstitute.com/publications/socio-economic-benefits-solar-and-wind-energy/summary-policy-makers

As we can see in the figure above, the complexity of the energy industry resides mainly in the coexistence of different sources of energy production and the tradeoffs made by the consumption side for renewable or non-renewable energy.

5.1.3 Key Challenges and Barriers to Development

A changing industry

Besides the growth in renewable energy generation, the energy industry is evolving towards a deep transformation of its business models. Global market trends are establishing a different approach and new variables that were not present two or three decades ago are now a permanent concern for public and private actors:

• New entrants due to disruptive technologies • Increased pressure on operational efficiency and workforce productivity • Increasing desire by consumers for a role in energy management and conservation • Climate change and environmental concerns 22 • Creation of local energy systems

These challenges are placing innovation at the center of the value chain and referring to the latest best practices becomes particularly important to overcome them.

A complex relationship between rising energy use and environment

Rising energy use can worsen pollution, and mismanagement of energy resources can harm ecosystems. However, modern energy production can also improve the environment, for example by reducing the pollution caused by inefficient equipment and processes, and by slowing deforestation. 23 In that sense, the sustainability and development of the energy industry are carefully measured in terms of maintaining an economic, environmental and social balance. Many countries have defined low emission development strategies (LEDS) as a guiding framework for development, Mexico and Guatemala are also starting to participate in this effort. 24

Significant gaps on the demand side of local value chains

There is growing consensus among energy practitioners that active support is needed for productive use of energy to ensure that providing access to energy produces significant results in development.25 Despite the current efforts, with regard to energy demand, Guatemala and Mexico face several challenges in defining a long-term and integral strategy that facilitates the process towards a productive use of energy. These challenges include high energy prices and volatility, limited access to investment resources and technology, and low economic diversity.

5.1.4 Opportunities for Cross-Border Collaboration

Given that both countries have placed the energy industry as one of the highest priorities for development, opportunities for collaboration may be pursued in several fields along the value chain, such as:

• Electric regional interconnection 26

22 http://www.oecd.org/internet/ieconomy/46137126.pdf Smarter Utilities: Transforming the Industry, Antonio Pires Santos 23 http://www.worldenergyoutlook.org/media/weowebsite/energydevelopment/WEO2004Chapter10.pdf 24 https://openei.org/wiki/LEDSGP/DIA-Toolkit/Factors 25 https://www.giz.de/fachexpertise/downloads/giz-eueipdf-en-productive-use-manual.pdf 26 This topic is already part of the Energy Group agenda within the Bilateral Commission

• Cooperation in specialized technologies, human resources and services • Logistics infrastructure (pipelines, terminals, land and marine transport) • Energy efficiency and local energy systems • Financing and investment • Construction and Maintenance 27

5.2 Value Chain B: Information Technology (focus on agriculture)

5.2.1 Key Industry Characteristics and Economic Indicators

ICTs: the mainstream for development

Information and Communication Technologies (ICTs) industry refers to equipment and services related to broadcasting, computing and telecommunications, all of which capture and display information electronically. 28 ICTs industry is linked to the productivity of a multiplicity of value chains such as agribusiness , tourism , machinery and equipment, electronic, electrical, energy, mobility, and health, among others. Its great power to transform and innovate is precisely what allows to streamline processes in the value chain and make companies more productive. 29 For instance, the global software market is expected to reach $ 899.5 billion by 2019, representing growth of 45.7% since 2014. 30 ICTs are reshaping many aspects of the world’s economies, governments, and societies, in a so-called Fourth Industrial Revolution. Today, ICTs (and universal internet access) are considered so central to development that almost every government has included them in its national economic strategies. 31 Currently, the ICT sector is reaching population with low levels of income and literacy. According to the World Bank, 95% of the global population now live in an area that is covered by a mobile-cellular network. 32 However, the digital revolution is not homogenous around the world, and there are many differences when it comes to performance, affordability and penetration of services.

The ICT sector in Mexico has made significant progress in the last decade. Market value had an average annual rate of growth of 14% in the last decade, while exports and employment increased at rates of 12.2% and 11%, respectively in the same period. In Mexico, there are currently 30 ICT “cluster organizations” in 23 federal entities, which group more than 1,500 companies and have a total turnover of US$ 2.1 billion. 33 In terms of human capital, Mexico has almost 625,000 ICT professionals, of whom 400,000 are software specialists. Most professionals and technicians in Mexico speak English as a second language and an estimated 110,000 ICT professionals graduate each year.

Guatemala is moving forward in the development of content and software (videogames, apps, software and technical solutions), entering markets in North America, Central America and Latin America. 34 Since 2005, ICTs exports have grown by 10% CAGR, much faster than the 4% GDP growth. Also, Guatemala has excellent connectivity: it is well positioned for Internet services, international long distance services, and mobile telephone services. More than 17 million mobile phone lines and its cellular rates are the lowest in Latin America. There are also some of the lowest long distance rates in Latin America. There are three mobile operators, 19 operators of local network, and 20 international port operators, with a density of 34 lines per 100 inhabitants. 35

27 http://www.energymexico.mx/2016/sector-energetico-mex/?lang=en 28 UN Social Economic Council’s Report of the International Telecommunication Union on information and communication technologies statistics, 2004 29 http://www.promexico.gob.mx/documentos/revista-negocios/html/2015-03/english/03-2015/art02.html 30 PROMEXICO report, Diagnostico sectorial ICTs, 2015 31 http://www.worldbank.org/en/topic/ict/overview 32 http://live.worldbank.org/information-communications-technology-development 33 PROMEXICO Report, Diagnostico sectorial ICTs, 2015 34 http://staffingamericalatina.com/en/guatemala-mas-competitiva-y-desarrollando-talento-para-el-sector-de-la-tic/

35 http://www.ictguatemala.com/?page_id=392&lang=en

The growth of ICTs both in Guatemala and Mexico has started to have a positive impact in diverse value chains of the economy, but one of the main expansion areas is agriculture. ITCs for agriculture has become a development opportunity in rural areas around the world, and it also applies for the border region between Mexico and Guatemala. Given the relevance of the agricultural activities in the area and the growing importance of ICT, the following pages will focus on understanding the role of ICT in the agriculture value chain.

The era of Digital Agriculture

Digital agriculture is the use of new and advanced technologies, integrated into one or more systems, to enable farmers and other stakeholders within the agriculture value chain to improve food production. These advanced devices, precision agriculture and robotic systems allow farmers to be more profitable, efficient, safer, and more environmentally friendly. More than just one technology in particular, it is be the confluence of a diversity of technologies that is bringing a real revolution to the value chain, and it is growing fast: AgriTech's annual investment has increased from $ 900 million in 2013 to $ 3,200 million in 2016.

Figure 7: Digital agriculture

Some of the latest features in the industry are: • Combination of remote intelligence with local assistance • Client-focused solutions with technologies and systems integrated in an open platform: one stop shop (design, usability, management, risk reduction) • Non-stop new product development and improvement in diverse technologies and partnership development (“Permanent Beta”) • Scale required for data collection, modeling, simulation (collaborative economy)

This transformation is obviously happening at a very large scale in big corporate farms. However, Digital Agriculture is also enhancing the ability of smallholders in developing countries to innovate connecting with knowledge, networks, and institutions necessary to improve their productivity, food security, and employment opportunities. Where once rural areas were largely disconnected from the greater world, today, networks of information and communication technologies represent a transformational opportunity for rural populations, both as producers and consumers. 36 For instance, the Bill Gates Foundation and the Carlos Slim Foundation, in cooperation with the Mexican Government, are financing since 2013, a new infrastructure to carry out cutting-edge agricultural science using the latest digital innovations, and to accelerate the use of mobile technology to provide farmers everywhere in Mexico with vital information about weather, prices, and new techniques to improve their productivity. According to Bill Gates, “combining the latest breakthroughs in agricultural science and farming practices with digital technology, Mexico’s innovative efforts will enable even the poorest farmers to grow and sell more crops.” 37

36 http://documents.worldbank.org/curated/en/455701468340165132/pdf/646050ESW0P1180lture0e0Sourcebook12.pdf 37 https://www.gatesnotes.com/Development/Mexico-Will-Lead-Innovation-in-Agricultural-Development-for-the-World

5.2.2 Mapping of Key Players in the Value Chain

Digital Agriculture brings together new key players who actively participate along the traditional value chain. Agritech startups, ICT developers, investors, innovation brokers, market intelligence experts, are all actors specialized in providing ICT services and solutions in every step from “farm to fork”. Also, Competence Centers such as research centers, universities and incubators may improve and create competences in digital technology: access to infrastructure and technology platforms in rural areas, support fabrication of new products, demonstrate best practices, showcase application expertise, mentoring services and training for farmers, etc. The integration of technology in each of the processes of the value chain of agriculture helps to more equitably distribute profits between sales, marketing and consumption.

Figure 8: Digital Agriculture Value chain

An illustrative example of this technological integration into the agricultural value chain is this whole digital network created by SAP:38

Figure 9: Example of Digital Agriculture Value chain

38 https://www.linkedin.com/pulse/digital-transformation-really-relevant-africa-simon-carpenter

5.2.3 Key Challenges and Barriers to Development

Understanding new business models and innovation in a traditional sector

The entrance of digital technology into the agricultural world is creating new business models which are disrupting the usual way of doing things across the value chain. Big players are moving fast, but there is room for smaller players with unique skill sets, that can be developed at a local level. There must be a sustained effort to attract local ICT talent and resources into this field as the approach is still very new.

Cultural, educational and technological gap

There is also a need to raise awareness of the importance of ICTs among farmers, combating the myth that ICTs are relevant in other urban sectors but not so much in agriculture (or rural tourism). Difficulties to make a link between local rural actors and the global value chain, as well as the insufficient technological knowledge and access in the regions, are still significant barriers to be considered.

Where is the real added-value of technology?

Technology is expensive and its impact may be unresearched or easily exaggerated 39 , so it is important to identify the main areas of improvement in local agricultural value chains: when to invest, up to which level and in which technologies according to local contexts. Securing the full potential of Digital Agriculture requires collaboration and consensus across the value chain.

5.2.4 Opportunities for Cross-Border Collaboration

According to the priorities for promoting ICTs in Guatemala and Mexico, and given the importance of the agriculture value chain in both countries, especially in the border region, the focus on Digital Agriculture could provide relevant opportunities for collaboration. The following specific actions could be targeted:

• Workshops between government agencies in order to share best practices • Provide trainings to farmers to incorporate technology into their processes • Processes for technological literacy targeting indigenous population • Strengthen strategic alliances with universities and other local educational institutions to improve student and professional ICT supply in rural areas • Promote professional ICT internships in rural areas between both countries • Achieving greater critical mass on both sides of the border for application of beta versions of ICT solutions for small-scale agriculture.

39 http://unpan1.un.org/intradoc/groups/public/documents/apcity/unpan022641.pdf

6 Prioritization of Value Chains

Based on field interviews and secondary sources, there are two possible approaches for the INNOVACT project in this region: there could be a focus on traditional value chains which constitute the basis of the economy, such as Tourism or Agriculture, or there could be a cross-sectoral approach, considering other high value-added industries, such as Energy and ICTs.

The following prioritization table brings together different criteria discussed with national authorities and regional stakeholders. Results are based both on desk and field research, according to socioeconomic and political priorities. Further information and data about these industries are included in the following pages and in Appendix C.

Cross-border Value Chains mapped HIGH VALUE-ADDED Prioritization criteria Weight TRADITIONAL ACTIVITIES ACTIVITIES Tourism Agriculture Energy ICT Impact of the value chain on the border area’s economy 10 5 4 3 3 Critical Mass 10 5 5 2 2 Existence of other projects and programs 5 3 3 4 4 Support development priorities of governments 10 2 2 5 3 Reinforce regional integration 10 3 3 4 4 Diversification of the economy and cross-sector impact 10 3 2 5 5 Prepare the bases for industrial development in the area 10 1 1 5 5 Facilitate the exchange of information and lessons learned on the promotion of cross-border cooperation and innovation systems, 15 3 3 5 5 clusters and competitiveness Stimulate and contribute to a learning process based on concrete 10 3 3 4 4 examples and best practices Identify and develop strategies, action plans and concrete projects 10 4 3 4 3 or programs for the development of cross-border value chains TOTAL SCORE 100 285 290 415 385

Table 1. Prioritization of value chains in border region Mexico-Guatemala

Main conclusions

• Value chains related to high-value added activities scored higher than traditional value chains, mostly because criteria such as diversification of the economy, cross-sector impact and preparation of industrial basis are relevant to current national and regional development plans. High value added-activities, which are promoted in industrial parks, special economic zones and binational agreements, are perceived as an opportunity for growth and innovation in the region. • Tourism and agriculture have today a greater impact on the border area’s economy and a higher critical mass, however they are less significant in terms of reinforcing regional integration, supporting development priorities and complementing other regional projects and programs. • Criteria related to INNOVACT’s core objectives (innovation, cross-border cooperation, learning from best-practices, developing the best strategies for concrete projects) were greatly considered, and were scored higher while considering energy and ICTs. It is perceived that European expertise in those fields will have a significant impact.

Considering the results of this prioritization process, the value chains selected for the rest of the project will be centered in Energy and ICTs . However, as both industries have a cross-sector impact, it is important to consider their links to the other value chains in the region, such as ICT and agriculture , or energy and environmental preservation and the indirect effect on tourism.

7 Recommendations for Next Tasks

The following recommendations have been made with the aim of providing relevant information for the successful development of the project during the following tasks.

Key actors identified during the initial stages of the project

• At the national level: in Guatemala, Hugo Gómez Cabrera from PRONACOM, who was part of the SEGEPLAN team during the initial negotiations for INNOVACT, has become the de facto counterpart and a key stakeholder. In Mexico, the project has been actively supported by David Vergara Santillán from SEDATU; contacts from INADEM, SAGARPA and AMEXCID are also other Mexican stakeholders that could bring high value to the project.

• At the regional level: on the academic side, FLACSO University in Guatemala and Ecosur in Mexico have expressed interest in the project, given their expertise on regional and border development. In Mexico other players such as FIDESUR (Fideicomiso para el Desarrollo Regional del Sursureste) and the Secretaría para el Desarrollo Sustentable de los Pueblos could also be dynamic.

• Other nongovernmental actors: the Bill Gates Foundation and the Carlos Slim Foundation should be contacted, due to their interest in development and Digital Agriculture.

• Unenthusiastic actors: during the interviews, the Vice Ministry of MSMEs in Guatemala was not positive towards INNOVACT, mainly due to recent unproductive experiences with similar donor projects. Likewise, the Secretariat of Economic Development of the Chiapas government has been evasive.

Current country or border area issues relevant to the project

• 2018 is an election year in Mexico: the level of involvement of Mexican actors may decrease, especially towards the end of the project, as key national stakeholders will be focused on electoral issues.

• Poor security conditions and low connectivity in the border area (particularly in the Guatemalan side): these factors should be highly considered while organizing events and seminars. It may even be necessary to organize the events in the capitals of the regions or countries.

• In order to organize the next task, it is important to consider the natural disasters in southern Mexico and Guatemala occurred in September, the key national and regional stakeholders are focused on the reconstruction of the area.

• The political and social unrest that currently exists in Guatemala also may affect the process of the project.

Thoughts on Task 3

It is important to be very precise with the type of thinking that we want to achieve during the next task, so that the action plan to be reached at the end of the project is an action plan derived from a solid analysis. We need to prevent the next task from ending up in a long working session with few results.

: Contact Details of Interviewees

Telephone Name Organization Position Email number

Secretaría de David Director of Promotion Desarrollo Agrario 68 2097 00 ext. Vergara of Regional [email protected] Territorial y 54408 Santillán Development Urbano

Mario Instituto Nacional Director of Sectorial 52296100 Sergio [email protected] del Emprendedor Competitiveness López ext. 32303

Moira Consejo Nacional Deputy Director of (55) 5322-7700 Karosuo de Ciencia y Mexico-European [email protected] Ext. 1763 Argüelles Tecnología Union Cooperation

Unidad de Vicente Productividad vicente_garcia@hacienda.gob.mx (55) 36881375 García General Director Económica de Moreno SHCP

Directorate of Manuel Secretaria de Entrepreneurship and Gallegos Economía del [email protected] (961) 69 14718 Promotion of Cancino Estado de Chiapas Competitiveness

Roberto Secretaría para el Aquiles Desarrollo General Secretary [email protected]. .mx (961) 1243535 Aguilar Sustentable de los Hernández Pueblos Indígenas

01 (981) Jorge El Colegio de la Senior Researcher of 1273720 Ext. Mendoza [email protected] Frontera Sur Agroecology 2404 Vega

Guillermo Executive (55) 5543 6581 FIDESUR [email protected] Woo Coordination

Agencia Mexicana Edna de Cooperación Directorate of Mercado Internacional para Mexico-European [email protected] 55 36865100 Ortiz el Desarrollo Union Cooperation (AMEXCID)

Hugo Programa Adviser on Strategic Fernando Nacional de Investments and [email protected] +502 2421 2464 Gómez Competitividad Productive Cabrera Guatemala Transformation

Alejandro Red Nacional de 502 + National Manager [email protected] Arango Grupos Gestores 77.65.30.50

+502 Manolo Cámara de PROMIPYME [email protected] 55.58.30.93, Díaz Comercio Director 57.76.72.12

Sofía Cámara de Coordinator of [email protected] 502 + 2417-2700 Velásquez Comercio PROMIPYME Centers

Instituto Técnico Gonzalo de Capacitación y Regional Manager [email protected] +502 59668385 Pérez Productividad West Ixchop

Telephone Name Organization Position Email number

Alberto Axt Universidad Deputy director [email protected] +502 77229900 Rodríguez Rafael Landívar

Ministerio de +(502) 2412- Ezrra Economía, Vice Minister of the [email protected] 0200 Orozco Industria y MSME Competitividad

Ministerio de Director of Danilo Relaciones 2410-0000 International [email protected] Marcucci Exteriores de Economic Policy ext. 3162 Guatemala

Consejo Nacional Director of Hugo de Ciencia y +502 2317 2600 Technological [email protected] Figueroa Tecnología Innovation Guatemala

FLACSO, Researcher Flacso Oscar López [email protected] + 52 77368755 Quetzaltenango Quetzaltenango.

Juan José FLACSO, Researcher Flacso [email protected] + 52 77368755 Méndez Quetzaltenango Quetzaltenango.

Cesar FLACSO, Researcher Flacso [email protected] + 52 77368755 Ordoñez Quetzaltenango Quetzaltenango.

: Bibliography

• https://www.recap-h2020.eu/eip-agri-seminar-digital-innovation-hubsiculture/ • https://www.mhe.es/universidad/economia/8448148878/archivos/general_colaboracion2.pdf • https://www.inadem.gob.mx/sectores-estrategicos/ • http://www.segeplan.gob.gt/downloads/2016/PGG2016-2020.pdf • https://www.worldenergy.org/data/resources/country/mexico/wind/ • https://www.pronacom.gt/website/biblioteca/Agenda%20Nacional%20de%20Competitividad.pdf • http://books.openedition.org/cemca/711?lang=es • Gorney, Cynthia (February 2008), "Mexico's Other Border", National Geographic, 213 (2), pp. 60–79 • http://www.worldbank.org/en/country/guatemala/overview • https://www.pronacom.gt/website/biblioteca/documentos_de_encargados_anc_web.pdf • http://www.mineco.gob.gt/objetivos-estrat%C3%A9gicos-y-espec%C3%ADficos • https://www.pronacom.gt/proyectos/agenda_nacional_de_competitividad • http://forages.oregonstate.edu/nfgc/eo/onlineforagecurriculum/instructormaterials/availabletopics/en vironmentalissues/resource • https://yearbook.enerdata.net/total-energy/world-energy-production.html • http://www.iea.org/topics/energypoverty/ • http://www.un.org/millenniumgoals/pdf/SEFA.pdf • http://www.worldbank.org/en/news/feature/2013/04/22/energy-for-all-by-2030-time-to-act • http://www.worldenergyoutlook.org/media/weowebsite/energydevelopment/WEO2004Chapter10.pdf • http://www.mem.gob.gt/wp-content/uploads/2013/02/PE2013-2027.pdf • https://www.iea.org/topics/renewables/ • http://www.oise.mx/geotermica • http://www.oise.mx/eolica • https://www.greentechmedia.com/articles/read/sunny-mexico-an-energy-opportunity • http://www.energiasolar.lat/en/tag/solar-photovoltaic-energy-in-guatemala/ • http://unpan1.un.org/intradoc/groups/public/documents/apcity/unpan022641.pdf • https://hub.globalccsinstitute.com/publications/socio-economic-benefits-solar-and-wind- energy/summary-policy-makers • http://www.oecd.org/internet/ieconomy/46137126.pdf Smarter Utilities: Transforming the Industry, Antonio Pires Santos • http://www.worldenergyoutlook.org/media/weowebsite/energydevelopment/WEO2004Chapter10.pdf • https://www.giz.de/fachexpertise/downloads/giz-eueipdf-en-productive-use-manual.pdf • http://www.energymexico.mx/2016/sector-energetico-mex/?lang=en • UN Social Economic Council’s Report of the International Telecommunication Union on information and communication technologies statistics, 2004 • http://www.promexico.gob.mx/documentos/revista-negocios/html/2015-03/english/03- 2015/art02.html • PROMEXICO report, Diagnostico sectorial ICTs, 2015 • http://www.worldbank.org/en/topic/ict/overview • http://live.worldbank.org/information-communications-technology-development • http://staffingamericalatina.com/en/guatemala-mas-competitiva-y-desarrollando-talento-para-el- sector-de-la-tic/ • http://www.ictguatemala.com/?page_id=392&lang=en • http://documents.worldbank.org/curated/en/455701468340165132/pdf/646050ESW0P1180lture0e0S ourcebook12.pdf • https://www.gatesnotes.com/Development/Mexico-Will-Lead-Innovation-in-Agricultural- Development-for-the-World • https://www.linkedin.com/pulse/digital-transformation-really-relevant-africa-simon-carpenter

: European Commission programs relevant to INNOVACT in this region

EU-CELAC migration project In order to bring its support on this matter, the European Commission and IOM / FIIAPP (International Organization for Migration / International and Ibero-American Foundation for Administration and Public Policies) launched the "EU-CELAC migration project”, as such, it aims at strengthening the dialogue and cooperation between the EU and Latin America and the Caribbean, and at establishing management models on migration and development policies.40 In Guatemala, Mexico, Peru, Dominican Republic and Uruguay, institutional mechanisms were developed to facilitate (re)integration to the labour market of migrants.

EUROsociAL programme The European Commision also has supported México and Guatemala through EUROsociAL programme , its objective is to contribute to changes in public policies that improve social cohesion through peer-to-peer learning and experience exchanges. Specifically, Eurosocial supported SEDATU in the creation and implementation of national regional development strategies and also supported the Planning and Programming Secretariat of the Office of the President (SEGEPLAN) in the implementation of the Territorial Economic Development Strategy approved by the Guatemalan government, and in the design of an urban development policy within the framework of establishment of a network of sustainable cities.

Sustainable and innovative cities and regions – 2016/2019 Cities are growing and changing so fast that many authorities are struggling to cope. More people can mean more economic activity and wealth, but it can also mean added strain on energy, water, health, transport and housing facilities. All this, in turn, puts pressure on the environment, and more widely on climate change. This is why the European Union is launching a three-year programme to promote international urban cooperation. Europe’s cities want to link up, build and share knowledge and solutions with other cities and regions. In this first phase of a long-term strategy of fostering urban diplomacy – a vehicle of EU external relations – the IUC boosts sectoral, transversal and international urban cooperation and exchange with key city partners (public and private) in Asia and the Americas (box). With a budget of over EUR 20 million, IUC activities support Habitat III goals as well as the Paris COP 21 declaration and the Sustainable Development Goals. The IUC will build on existing cooperation through: • City-to-city cooperation on sustainable urban development • Sub-national action under the Global Covenant of Mayors initiative • Inter-regional cooperation on innovation for local and regional development Support will focus on ways to improve and internationalise regional innovation and cooperation in and between the EU, Latin America and the Caribbean. The programme will stimulate the development or strengthening of regional strategies involving SMEs in the innovation sector, and it will promote international value chains. It will collect and share experience, good practice and lessons learnt to enable knowledge management and development. The Smart Specialisation (S3) platform established by the European Commission will act as a multiplier to further promote knowledge sharing inside the EU as well.

40 https://ec.europa.eu/europeaid/regions/latin-america/eu-celac_en

: Additional information on Industries and Value Chains

Tourism Industry

Tourism is one of the most important and dynamic economic sectors in the world today for its level of investment, participation in employment, contribution of foreign exchange, and contribution to regional development. It contributes directly to 10% of world GDP and generates one in ten jobs. The largest outbound markets for tourism are China, the United States, Russia, Great Britain, France, Canada and Australia, Italy and Brazil.

Tourism has been a very important sector on the border between Mexico and Guatemala, there have been a number of important collaborations to date, which can be further developed. In 2014, the Mexican municipality of Palenque, in the state of Chiapas, and the Guatemalan municipality of La Libertad, in Peten department, signed a Twinning Agreement to reinforce their common border in matters related to trade and tourism. This agreement involved, among other things, setting up a customs office on the Guatemalan side in order to facilitate border crossing of tourists and goods. Furthermore, in 2015 Mexico and Guatemala subscribed a specific program to promote the exchange of knowledge and best practices regarding bi-national tourism. In parallel, the air connectivity has doubled with 88 direct flights in place between both countries. This has resulted, among other things, in a 27% increase of tourism from Guatemala to Mexico.

Tourism in Mexico

Mexico is one of the most important tourist destinations worldwide and during the last 2 decades has been within the top 10 places on several occasions. It is the second source of foreign exchange for the country. Mexico is ranked 5th in tourism competitiveness in the Americas region, ranking 8th in terms of natural resources and 21st place for its cultural resources, according to the study of The Travel & Tourism Competitiveness Index 2013: The Americas. It also has tourist development zones throughout the territory; more than 80 tourist destinations, 7 fully planned tourist centers and 45 magic villages. It has records of 18 thousand 199 establishments for accommodation with 672 thousand 296 rooms in different categories; 27,283 restaurants; 6,367 Travel Agencies and 1,056 Car Rental Companies.

Tourism in Guatemala

With regard to the tourism sector, Guatemala has grown at a moderate pace in recent years. In 2000 the number of tourists who arrived in the country amounted to 826,240 and in 2015 exceeded 2,250,000 non-resident tourists. This represents an increase of 270% since the beginning of the 21st century. Foreign currency inflows by tourism in 2014 amounted to nearly US $ 1.6 billion, 3.1% more than in 2014. Of note are El Salvador, United States, Honduras, Mexico, Canada, Nicaragua, Costa Rica, United Kingdom, Colombia and Spain as the ten main international tourist markets to Guatemala, occupying around 85% (January-December 2015). 41

Tourism in Guatemala has grown considerably in the last ten years and is presumed to continue to do so in the following years. In 2002, 884,190 tourists entered Guatemala a year, and this number has grown to reach 2.15 million tourists in 2014. In 2015, preliminary figures already published show an increase over previous quarters. In fact, tourism is the sector that contributes most to the economy, after the remittances of emigrants. Currencies in 2015 remained at 2014 levels above 992 M $. Also estimates of visitor numbers in 2015 grew above 3% over last year. This places it as the country's main export product or service, above traditional goods. El Salvador (38%), the United States (24%), Honduras (9%) and Mexico (7%) remain the main emitters of international tourists to Guatemala. The European countries as a whole represent 8% of the tourists arriving in Guatemala, most notably the United Kingdom, Spain, France, Germany, Italy and Holland.42

41 http://www.icex.es/icex/wcm/idc/groups/public/documents/documento/mde2/njqz/~edisp/doc2016643457.pdf 42 http://www.comercio.gob.es/tmpDocsCanalPais/6C3A1661456F80C8723C6246AE11C7FE.pdf

Agriculture Industry

The diversity of climates that exist in the border between Mexico and Guatemala favor the prosperity of businesses in different agricultural activities. With regards to agriculture cooperation between Mexico and Guatemala, in 2015 the Mexican agricultural and fishing authority – SAGARPA – and its Guatemalan equivalent – MAGA – signed a Cooperation agreement covering fishing and aquiculture. Cross sector focus. Exchange of tropical fruits from Guatemala, from Mexico meat, berries

Agriculture in Mexico

Mexico in the last century went from being an economy based on the production of the field to one that is distinguished by an accelerated growth of the industrial and services sectors. According to the SAGARPA in its statistical system SIAP 2013, only 10.5% of the national territory is destined to the agricultural crop. That is, the area devoted to cultivation in Mexico is approximately 21 million hectares. of the 21 million hectares cultivated, only 6.5 million are irrigated, while more than double, that is, 14.5 million hectares are seasonal (Fertiquim Aug-2012).

Agriculture in Guatemala

The Central Bank of Guatemala establishes that the primary sector, in agriculture, livestock, hunting, forestry and fisheries, represented 13.6% of the country's total GDP in 2015. This sector is expected to grow by 3.5% in 2016, coupled with the anticipated recovery in coffee production. Likewise, a positive performance is expected in banana cultivation, due to the expansion of producing areas, resulting from better external demand prospects. On the other hand, non-traditional crops estimate higher levels of vegetable and fruit production, associated with greater domestic demand and climatic conditions beneficial to their cultivation.

More information about the Energy Industry

Geothermal energy Geothermal energy, which is the energy from the Earth's core in the form of heat, extracted through the fissures of rock layers of the Earth's crust, according to data from the International Energy Agency (IEA) this energy has a growth projection of 27.9 percent by 2035 globally.

Wind Power Wind Energy generates electricity using the kinetic energy produced by the effect of air currents. It is a source of clean and renewable energy, which reduces the emission of greenhouse effect gases and preserves the environment.43 China, the United States, and the collective member states of the European Union are the top 3 countries/regions with the highest wind power capacities. The reason why they have such high wind power capacities is simply because they have the resources. 44

Photovoltaic Energy It is a term which covers the conversion of light into electricity using semiconducting materials that exhibit the photovoltaic effect. Photovoltaics is a fast-growing market: The Compound Annual Growth Rate (CAGR) of PV installations was 40% from 2010 to 2016. Concerning PV module production in 2016, China & Taiwan hold the lead with a share of 68%, followed by Rest of Asia-Pacific & Central Asia (ROAP/CA) with 14%. Europe contributed with a share of 4% (was 5% in 2015); USA/CAN contributed 6%. ν. In 2016, Europe’s contribution to the total cumulative PV installations amounted to 33% (compared to 40% in 2015). In contrast, installations in China accounted for 26% (compared to

43 https://www.evwind.es/about-wind-energy/what-is-wind-energy 44 http://www.worldatlas.com/articles/countries-with-the-highest-installed-wind-power-capacity.html

21% in 2015). 45 The 50 MW Horus I plant is located in Santa Rosa area and its production represents approximately 1.25% of the energy produced annually in the country. 46

More information about Information Technology (focus on agriculture)

Digital Innovation Hubs: mainstreaming digital agriculture 47

Figure 11: Digital Innovation Hubs

More information about other regional efforts

Figure 10: Logistics Center in Ciudad Hidalgo, Chiapas

At the regional level, efforts have also been made to achieve industrial development in the area, among them, the impulse to the industrial zone called "Puerto Chiapas Industrial Park". This project aims to promote the investment and the establishment of various industries oriented to high-value added activities, also, this zone will stimulate links with international markets such as Guatemala and other countries in Central America. Infrastructure will be developed in this Park to coordinate the logistics activities in the Border with Central America increasing the competitiveness of foreign trade with Central America.

45 https://www.ise.fraunhofer.de/content/dam/ise/de/documents/publications/studies/Photovoltaics-Report.pdf 46 http://www.energiasolar.lat/en/tag/solar-photovoltaic-energy-in-guatemala/ 47 https://www.recap-h2020.eu/eip-agri-seminar-digital-innovation-hubsiculture/

: Mexico – Guatemala Binational Commission

Results of the XII Meeting of the Mexico - Guatemala Binational, June 6, 2017.

Energy Group

Advance the exchange of technical and legal information regarding possible cross-border deposits and conclude the negotiation in 2017 of an agreement between the parties for their use.

Guatemala and Mexico, with the support of the energy ministries, will request the National Institute of Electrification (INDE) and the Federal Electricity Commission (CFE) to strengthen their bi-national electricity interconnection agreements and agreements, highlighting the establishment of a working group to analyze feasibility of formalizing the electricity supply to border communities through the incorporation of Bacantón II and Barrio Veracruz points into the current agreement.

Continue to promote regional energy integration through the Electric Interconnection Commission between Mexico and the Central American Electric Interconnection System (SIEPAC) and the natural gas transport working group.