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Competition and price policies: Monopolies and market dominance
[July 06, 2007]

Competition and price policies: Monopolies and market dominance

(Country Commerce Via Thomson Dialog NewsEdge) Two private companies in Guatemala have significant natural monopolies: Cerveceria Centroamericana, the Castillo family brewery, is the only brewery in the country; the Novella family controls the cement industry.

Cerveceria Centroamericana has virtually monopolised beer production and distribution in Guatemala for years, with some 90% of the market. The Castillo family, Guatemalas richest, controls other beverage sectors as well, including Salvavidas, a brand of drinking water (tap water in Guatemala is not potable) that claims a market share of more than 90%. The family also owns the licence to distribute Pepsi, which claims a sizable portion of the soft-drinks market. Nevertheless, in 2003 Cerveceria Rio (owned by InBev, a Belgian brewer and the worlds largest brewer by volume) slipped into the beer market with the cheaper Brahva brand. Brahva has since gained a market share of around 10%, according to the trade press; InBev claims to hold a 20.5% market share.

Guatemalas banking sector has long been too crowded, and banks are being consolidated in anticipation of tougher banking regulations and the ongoing liquidity squeeze. In December 2002 there were 35 banks (33 private and two foreign), and the International Monetary Fund urged the government to permit the liquidation of insolvent banks. As a result, 22 domestic banks and one foreign bank were still operating in April 2007 (four fewer than in 2006). The top three banksBanco Industrial, Banco G & T and Banruralnow share 60% of total bank assets in the country.

Banco Azteca, Mexicos fifth-largest bank, will begin operations in Guatemala with windows in Elektra home-electronics stores, a chain that has operated in Guatemala for the past ten years. The bank plans to open 75 branches within a year, investing US$13m. The bank will cater to low-income individuals, offering low-interest loans and savings accounts.

Wal-Mart, a US retail giant, purchased a 33.3% stake in the Central American Retail Holding Company (CARHCO) from Royal Ahold of the Netherlands in October 2005. Wal-Mart increased its ownership in CARHCO to 51% in March 2006. The acquisition gives Wal-Mart a significant presence in Central America. As at February 2007 CARHCO operated 413 stores in the region: 137 in Costa Rica, 63 in ElSalvador, 132 in Guatemala, 41 in Honduras and 40 in Nicaragua.

Copyright 2007 Economist Intelligence Unit

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