EL SALVADOR: POULTRY INDUSTRY MAIN PLAYERS

UNCLAS SECTION 01 OF 03 SAN SALVADOR 002156

SIPDIS

STATE PASS USAID/LAC
STATE ALSO PASS USTR
USDOC FOR 4332/ITA/MAC/WH/MSIEGELMAN
3134/ITA/USFCS/OIO/WH/PKESHISHIAN/BARTHUR
USDA FAS FOR BZANIN AND YWEDDERBURN

SIPDIS
SENSITIVE

E.O. 12958: N/A
TAGS: ECON ETRD AGR USTR ES
SUBJECT: EL SALVADOR: POULTRY INDUSTRY MAIN PLAYERS


1. (SBU) Summary. The entrance of U.S. poultry producers to the
Salvadoran market has been deterred by GOES claims that U.S. poultry
and eggs do not meet stringent GOES sanitary and phytosanitary
requirements. However, there are also a small number of
well-connected business interests who control not only the domestic
market but much of the Central American market. The most
influential figure is Carmen Elena Diaz de Sol, the main
presidential adviser regarding agricultural policies and the
National Director of the Agricultural Sector for the ARENA ruling
party. De Sol heads the largest egg operation in Central America and
owns the second-largest chicken producing company in El Salvador.
End Summary.

Current Status
--------------


2. (U) El Salvador produces around 1.2 billion eggs per year and
around 58 million chickens per year (about 223 million pounds
annually). The poultry industry represents approximately 2% of GDP
and 16% of agricultural sector GDP.


3. (U) El Salvador has prohibited the entry of U.S. poultry and
eggs, claiming they don't meet stringent Salvadoran sanitary and
phytosanitary standards, including in the latter case that the eggs
are salmonella free. When the GOES first notified its stringent
standards to the WTO in the late 1990s there apparently were no
objections filed to those standards, even though some of the
standards appear to lack a scientific basis. The entry barrier has
been raised with the GOES at all levels in El Salvador and at the
WTO SPS Committee in Geneva.


4. (SBU) The GOES has also argued that eggs are not poultry products
and were not negotiated under CAFTA. The GOES cited a single U.S.
Federal Registry notice where eggs were not considered as poultry
products. During a October 22 meeting with Ministry of Agriculture
officials, Rafael Gonzalez, a legal advisor to the Minister,
expressed surprise that eggs were being considered together with
poultry when discussing GOES regulations.


5. (U) The Superintendent of Competition has begun a study of the
poultry sector in El Salvador. That could lead to an investigation
of the companies in the sector for anti-competitive behavior.
Similar sector reports on the electricity distribution and gasoline
distribution and retail sale sectors by the Superintendent have led
to investigations and the imposition of fines on several companies
for alleged non-competitive behavior.

Carmen De Sol: Agricultural Commissioner/Queen of Poultry
-------------- --------------


6. (SBU) The most influential figure in the Salvadoran poultry
industry is Carmen Elena Diaz de Sol. Ms. de Sol is heavily
involved in politics as a prominent member of the Alianza
Republicana Nacionalista (ARENA) ruling party and an important
contributor to their political campaigns. Currently, she is the
special Presidential Agricultural Commissioner for El Salvador. In
this role, she is the main presidential adviser on agricultural
policies, and every relevant policy measure taken by the Ministry of
Agriculture has to be approved by Ms. de Sol. She is also the
National Director of the Agricultural Sector for the ARENA National
Executive Council (COENA). De Sol is very close to President Saca,
and one of her ex-husbands, Mr. Ramon Gonzalez Giner, was Minister
of Foreign Affairs during the Presidency of Armando Calderon Sol.


7. (U) De Sol heads the largest egg operation in Central America,
owns the second-largest chicken producing company in El Salvador,
and is also an important sugar cane producer. In El Salvador she
owns the second-largest Salvadoran egg producer "El Granjero," and,
together with other poultry producers, is a co-owner of the main
Salvadoran eggs distributor "Empresas de Granjas Guanacas
(Salvadoran Farm Company)," or EGG El Salvador. "El Granjero" was
founded in 1961 and produces around 194.4 million eggs per year,
roughly 16.2 percent of the Salvadoran eggs market. De Sol also
owns "Avicola Santa Rosa" in Honduras and "Avicola Julia" in
Guatemala and owns part of the mega-distributors EGG from Guatemala
and Avicola the mega-distributor of eggs in Honduras.


8. (U) In the chicken business, de Sol owns "Productos Alimenticios
Sello de Oro," the second-largest chicken producing company in El
Salvador, which annually processes more than 12 million chickens and
controls 20% of the Salvadoran market. Their brands are "pollos
sello de oro," "patties," and "chompipollo." They also own an

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animal feed factory that, under the brand "Ganamas," produces feed
for chicken, dairy cattle and pigs. The Executive Director of
"Pollos Sello de Oro," Engineer Agustin Martinez, is the President
of the Salvadoran Poultry Association (AVES).

Gutierrez Group: The Owners of "Pollo Campero"
-------------- -


9. (SBU) The Gutierrez Group is the second most influential player
in the Salvadoran poultry sector. The Gutierrez Group, or Compania
Multi Inversiones (CMI),is considered the largest agro-industrial
holding company in Central America. They are perhaps best known as
the owners of the well known fast food chicken outlets "Pollo
Campero." The group includes 300 companies with more than 30,000
employees and operates in 14 countries including Guatemala (its
Headquarters),El Salvador, Honduras, Nicaragua, Costa Rica, Panama,
Dominican Republic, Brazil, Paraguay, Ecuador, United States, Spain,
Mexico, Indonesia and China. They operate in several divisions:
poultry and pork; "Pollo Campero" fast food restaurants; flour
mills, pasta and cookie production; construction and real state;
communications (telephone and newspaper); hydroelectric power
generation, and financial services.


10. (U) The Gutierrez group owns "Avicola Salvadorena," the largest
Salvadoran Chicken company, which processes around 30 million
chickens per year (52% of the Salvadoran market) and sells another
five million chicks to third parties. They are vertically
integrated, with operations in incubation, production, processing,
and distribution. The Gutierrez Group also owns chicken producing
companies, factories of animal foods and sausages in Guatemala,
Honduras and Costa Rica. They sell fresh chicken in all countries
except Honduras (frozen chicken only). Their most known brands are
"Toledo," "Pollo Rey" and "Pollo Indio." The Group has expansion
plans for Mexico and the Caribbean, and in El Salvador they are
investing to increase "Toledo fryings" (hot and ranch wings)
production capacity by 50%. Engineer Francisco Flores Recinos, the
General Manager of Multi Inversiones (CMI),has referred to CAFTA as
"a stone in the shoe" that they will have to overcome.

The Group Lemus-O'Byrne
--------------


11. (U) Another powerful company in the Salvadoran egg market is
Group Lemus-O'Byrne (formerly Group INCOCA). The group is the
largest egg producing company in El Salvador, and operates both in
El Salvador and Honduras. The Group is heavily involved in the ARENA
political party. Executive President Licenciado Roberto Lemus
Gonzalez's brother, Mr. Eduardo Lemus-O'Byrne, is Director of
Affiliation and Statistics of the ARENA National Executive Council
(COENA). The group produces around 292 million eggs per year,
equivalent to 24 percent of the Salvadoran eggs market. The Group
Lemus-O'Byrne also partly owns EGG El Salvador and the Avicola
Mega-distributor in Honduras with Ms. de Sol.

Other Players
--------------


12. (U) The owner of "La Granja Catalana," the third eggs producing
company in El Salvador, Mr. Juan Duch Vidri, is the uncle of the
ex-ARENA deputy and ex-President of the Legislative Assembly Juan
Duch Martinez. He owns around 500,000 chickens that produce 150
million of eggs per year (approximately 12.5 percent of the egg
market).


13. (SBU) "Criaves," a genetic incubator of chicken, is owned by
Roberto Trabanino and family. Mr. Trabanino is the best friend of
Mr. Eduardo Zablah, the ex-Technical Secretary of the Presidency.

Comment
--------------


14. (SBU) Although the producers have successfully blocked U.S.
access for the time being, they have acknowledged that CAFTA-DR
eventually will require them to open the market to U.S. producers.
CAFTA-DR establishes a chicken quota of 464 metric tons beginning
the third year (2008),with annual growth until reaching free trade.
Licenciado Carlos Molina, manager of the Salvadoran Poultry
Association (Asociacion de Avicultores de El Salvador, AVES),has
stated that the industry will have three years to develop a plan to
face cheap U.S. chicken imports allowed by CAFTA. Continued
political pressure will be required to ensure that this provision
enters into force and to push for earlier access to the market.

SAN SALVAD 00002156 003 OF 003




15. (SBU) It remains to be seen whether the Suerintendent of
Competition's sector study will lad to an investigation for
non-competitive practces. We are somewhat skeptical, given the
powerful interests involved in the sector. However, we could be
proven wrong. In addition to the poultry sector study, the
Superintendent told us that she intends to study the fertilizer and
cement sectors. Those sectors are also widely believed to be
controlled by local and influential oligopolies. Thus, she seems
willing to take on vested interests, but it is an open question
whether she will be able to do so. Resolution of the poultry access
issues might also come from the USDA invitation, reiterated again in
an October 19 letter from USDA Under Secretary Mark Keenum to
Agriculture Minister Salaverria, for GOES officials to visit the
United States to discuss poultry/egg access issues and review
poultry sanitary standards in the United States. It would also be
useful to have an independent review of El Salvador's poultry
(including eggs) sanitary standards for an independent opinion that
they are not supported by scientific standards.


Glazer