瓜地馬拉的供應鏈金融 - 政大學術集成

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(1)國立政治大學商學院國際經營管理英語碩士學位學程 International MBA Program College of Commerce National Chengchi University. 立. 政治大碩士論文. ‧. ‧ 國. 學. Master’s Thesis. y. Nat. er. io. sit. 瓜地馬拉的供應鏈金融 n. Business Plan: aSupply Chain Finance i v in Guatemala l. Ch. n U engchi. Student: Freddy Roy Gutiérrez Roldán Advisor: Weiyu Kuo. 中華民國一○九年六月 June 2020. DOI:10.6814/NCCU202000595.

(2) 瓜地馬拉的供應鏈金融 Business Plan: Supply Chain Finance in Guatemala. 研究生：羅丹. Student: Freddy Roy Gutiérrez Roldán. 指導教授: 郭維裕. Advisor: George Kuo. 立. 政治大. ‧ 國. 學. 國立政治大學. 商學院國際經營管理英語碩士學位學程. ‧. 碩士論文. sit. y. Nat. er. io. A Thesis. n. a to International MBA Program Submitted v i l C n U h eChengchi National i n g c h University. in partial fulfillment of the Requirements for the degree of Master in Business Administration. 中華民國一○九年六月 June 2020. DOI:10.6814/NCCU202000595.

(3) Acknowledgement First of all, I would like to dedicate this paper, which represents the culmination of my IMBA studies and the chance to put everything I learnt into practice, to my parents. Without them I would not have grown into the person that I am today, always guided by the values and principles they taught me through their daily actions. They have always encouraged me to have big ambitions in life, without forgetting to remain humble, honest and keep integrity as a guiding value.. 政治大 Secondly, to my girlfriend who has been supporting me all across this journey for our studies 立. ‧ 國. 學. in Taiwan. We came together abroad to a country that has been extremely welcoming, and together we have overcome the challenges of a new language, culture shock and homesickness.. ‧. Lourdes you have been an example of hard work, and determination that has helped me to. io. sit. y. Nat. remain disciplined to achieve all the goals we set together for our lives.. n. al. er. Lastly, ICDF and NCCU are institutions that I will be forever grateful. Receiving the. Ch. i Un. v. scholarship that allowed me to study abroad in a top business school in Taiwan has opened the. engchi. doors for a lot of invaluable opportunities such as meeting excellent professors with worldwide experience in business, meeting top businessmen and businesswomen of Taiwan who are leading the country towards the future or meeting Taiwan’s Digital minister Audrey Tang to name a few. Networking is an invaluable tool that allows personal growth, and constant development for professionals. I will never forget these Taiwanese institutions that gave me so much, and allowed me to live here for two wonderful years. Last but not least, I feel in debt with Guatemala, my home country, I miss the beautiful landscapes, all the warm people and a lot of delicious food.. i DOI:10.6814/NCCU202000595.

(4) Abstract Business Plan: Supply Chain Finance in Guatemala By Freddy Roy Gutiérrez Roldán Guatemala is an underdeveloped countries for many historical reasons, but the richness of natural resources, its strategical geographic location in Central America, and the key diplomatic relationship it has with Taiwan puts it in a strategic potential not matched by any third world. 政治大. countries in development stage including Central American neighbors.. 立. ‧ 國. 學. This advantage makes it the ideal candidate country to develop models of supply chain financing that defy the conventional banking Status Quo, provides alternatives for speeding up. ‧. economic development, and allows for the disruption of the typical supply chain relationships. sit. y. Nat. which have worked somewhat efficiently in the past, but need to adapt to the current era which. n. al. er. io. we are living. Technology is a tool that can be used to create or destroy, depending on the focus. i Un. v. given to its usage. In this paper the approach is to create opportunities for those who have. Ch. engchi. struggled with a high cost system, in which more often than not, the big players are the only ones who can benefit from capital at low costs. Allowing smaller companies to leverage working capital is also the tool for development, job creation, competitiveness and fair wealth allocation. This platform does not pretend to be the ultimate solution for economic and social development, but aims to become a useful alternative that can provide fair opportunities for those who seek to work hard to reach them. Keywords: Small and Medium Enterprises, Working Capital, Short Term Financing, Low Cost Capital, Block Chain in Supply Chain. ii DOI:10.6814/NCCU202000595.

(5) TABLE OF CONTENTS 1. Chapter I: Introduction ....................................................................................................... 1 1.1. Motivation for developing the Business Plan .................................................................. 1 1.2. Definitions ....................................................................................................................... 2 2. Chapter 2: Literature Review.............................................................................................. 9. 政治大 Supply Chain Financing existing methods (Competitors).................................... 11 立. 2.1. Supply Chain Transactions .............................................................................................. 9 2.1.1.. ‧ 國. 學. 2.2. Working Capital ............................................................................................................. 16 2.2.1. Equity and Debt Market in Guatemala ................................................................. 16. ‧. 2.2.2. Short Term Corporate Debt in Guatemala ............................................................ 19. sit. y. Nat. io. er. 3. Chapter 3: Background Information ................................................................................ 21. al. iv n C h e ningGuatemala Small and Medium Enterprise c h i U........................................................ 23 n. 3.1. Small and Medium Enterprises ..................................................................................... 21 3.1.1.. 3.1.2. Definitions and supporting institutions ................................................................ 25 3.2. Guatemala Economic Profile ......................................................................................... 28 3.2.1. GDP and inflation rate .......................................................................................... 28 3.2.2. Guatemala main economic activities .................................................................... 30 3.2.3. Guatemala Main Imports ...................................................................................... 31 3.2.4. Guatemala Main Exports ...................................................................................... 33 3.3. Taiwan – Guatemala Relations ...................................................................................... 35. iii DOI:10.6814/NCCU202000595.

(6) 3.3.1. Current trade relations .......................................................................................... 35 3.3.2. Taiwan Block chain potential ............................................................................... 37 4. Chapter 4: Business Model ................................................................................................ 39 4.1. Business Model Canvas ................................................................................................. 39 4.1.1. Key Partners ......................................................................................................... 40 4.1.2. Key Activities ....................................................................................................... 43. 治政大 Value Propositions ................................................................................................ 60 立. 4.1.3. Key Resources ...................................................................................................... 56 4.1.4.. 4.1.5. Customer Segments .............................................................................................. 63. ‧ 國. 學. 4.1.6. Costs ..................................................................................................................... 64. ‧. 4.1.7. Revenues ............................................................................................................... 68. y. Nat. io. sit. 5. Chapter 5: Scenario Analysis............................................................................................. 70. n. al. er. 5.1. Cash Flows and NPV Considerations ............................................................................ 70. Ch. i Un. v. 5.1.1. Most Optimist Scenario – Low investment and perpetual growth ....................... 71. engchi. 5.1.2. Optimist Scenario -High Initial Investment with perpetual growth ..................... 72 5.1.3. Pessimist Scenario – Low Initial Investment and No growth .............................. 73 5.1.4. Worst Case Scenario – High Initial Investment and No Growth .......................... 74 6. Conclusions ......................................................................................................................... 75 7. References............................................................................................................................ 76. iv DOI:10.6814/NCCU202000595.

(7) List of Figures and Tables Figure 1: Typical Block Chain Transaction Flow Diagram ........................................................ 3 Figure 2: Consensus reached in a block chain network Typical Applications of Block Chain .. 4 Figure 3: Flow of information and materials through a generic supply chain. .......................... 9 Figure 4: Factoring process diagram ........................................................................................ 12 Figure 5: example of dynamic discount ................................................................................... 13 Figure 6: typical forfaiting process diagram ............................................................................ 14. 政治大. Figure 7: Guatemala equity and debt market daily report from april 28th 2020 ....................... 17. 立. Figure 8: Number of companies by size and corresponding Sales in 2017 .............................. 23. ‧ 國. 學. Figure 9: Guatemala GDP from 2013 to 2020.......................................................................... 28 Figure 10: Breakdown of main GDP categories from 2013 to 2019 ........................................ 29. ‧. Figure 11: Yearly inflation rate from 1999 to 2019 .................................................................. 30. y. Nat. io. sit. Figure 12: Visual representation of Guatemala main import categories on 2017 .................... 31. n. al. er. Figure 13: Visual representation of origin of imports by Continent in 2017 ........................... 32. Ch. i Un. v. Figure 14: Visual representation of Guatemala main export categories on 2017 ..................... 33. engchi. Figure 15:Visual representation of destination of exports by Continent in 2017 ..................... 34 Figure 16: LIBOR rates from 2010 to 2020 ............................................................................. 36 Figure 17: Blockchain Ecosystem in Taiwan ........................................................................... 38 Figure 18: Sequence of steps for registration into RFS platform ............................................. 44 Figure 19: Invoice approval process ......................................................................................... 45 Figure 20: Market Segmentation Analysis ............................................................................... 63 Figure 21: Cost of block chain implementation by industry .................................................... 65. v DOI:10.6814/NCCU202000595.

(8) Table 1: Summary of advantages and disadvantages of common supply chain financing....... 15 Table 2: Daily Value of transactions in selected exchanges ..................................................... 18 Table 3: Average weighted interest rates for local and foreign currency in the Guatemala Banking System ................................................................................................................ 20 Table 4: Definition of company size by Guatemala Ministry of Economy .............................. 26 Table 5: Business Model Canvas .............................................................................................. 40 Table 6: INFORNET credit assessment pricing ....................................................................... 42. 政治大 Table 8: Service Fees for transaction 立 amount ranges ............................................................... 47 Table 7: Risk premium calculation based on credit rating ....................................................... 46. ‧ 國. 學. Table 9: Summary of ROI and benefits for interested parties in example 1 and 2 ................... 52 Table 10: Buyer rating system details....................................................................................... 58. ‧. Table 11: example of Buyer Rating .......................................................................................... 59. Nat. n. al. er. io. sit. y. Table 12: Comparison of Taiwan Blockchain Suppliers .......................................................... 67. Ch. engchi. i Un. v. vi DOI:10.6814/NCCU202000595.

(9) 1. Chapter I: Introduction 1.1. Motivation for developing the Business Plan Central America is comprised mainly of developing countries due to numerous historic, political and economic factors. In spite of this, entrepreneurship is very important and Micro and Small businesses comprise about 95% of the overall industry in these countries. These make these kind of businesses the engine of development for our countries, due to the fact that big enterprises have proved consistently that they will not contribute to the development of the countries they operate in.. 立. 政治大. ‧ 國. 學. Big enterprises in Central America are mostly monopolies in each of their respective areas. This is related to low taxation, laws created to benefit them and other benefits that have been. ‧. consolidated throughout the years of negotiation with the governments that control the countries. sit. y. Nat. to their whim, neglecting the long term growth and development. Adding to this situation local. n. al. er. io. financial institutions tend to provide capital at low cost only to these established monopolies.. Ch. i Un. v. Startups and micro businesses have low chances of creating businesses, and when they manage. engchi. to do it and sell their goods to bigger companies, a new problem arises: big buyers usually require credit between 30 to 90 days for most purchases. This forces them to acquire more debt at a high cost to leverage operations, and in most cases eventually lead to bankruptcy.. Unless these businesses are provided with low-cost working capital in a steady and reliable way, our countries will keep losing innovative companies capable of finally disrupting toxic monopolies, bringing work opportunities for the locals and working for the nation's long term development. We need to have companies that we can proudly call our own, but first, we need to let them grow. 1 DOI:10.6814/NCCU202000595.

(10) This is where Supply Chain Finance comes into play. Every time small sellers need to sell their products, they could do it through a digital platform where they can sell their invoices at a discount in exchange for receiving early payment. So for example, if they initially were subject to 45 days of credit with a company that they usually make business with, they could now choose to reduce it to a number of days that suit their capital needs. The finance platform now has to hold the credit with the buyer, and if required have the possibility of even extend it further, since now the buyer does not have to rely on the small supplier capability of handling longer. 政治大. credit. This is another arbitrage opportunity for the company.. 立. Finally, to make the business model sustainable the capital has to come from a source that. ‧ 國. 學. requires a lower return compared with the usual sources of short term financing such as banks.. ‧. This can be achieved with rounds of venture capital, exclusively with investors who are interested in the social initiative aspect of the company. This company will help small. sit. y. Nat. io. er. businesses to grow and in the big picture, develop economically countries that require a disruption of old models plagued by corruption and limited opportunities.. n. al. Ch. engchi. i Un. v. 1.2. Definitions Accounts Receivable: current asset in the balance sheet that represents outstanding collection of cash due to a company by customers that received products or services. Accounts Payable: current liability that relates to payments due to suppliers by having received products or services.. Block chain: system that stores information inside blocks that are available to all the users in a network. It allows to record a new transaction only after 4 steps are performed successfully: 2 DOI:10.6814/NCCU202000595.

(11) 1. 2. 3. 4.. Transaction occurrence Transaction verification by the block chain itself Transaction Storage on the block chain Hash identifying code assignment. These four steps ensure that all transactions are valid and that the transparency of all the information can be ensured in real time. For supply chain applications allows full transparency, reduces fraud possibilities and ensures accurate record keeping for all parties.. 政治大. The way every block is added sequentially and using has numbers created by complicated. 立. math models makes forgery or fraud extremely difficult and improbable. When a hacker. ‧ 國. 學. wants to alter a block inside the block chain, they will need to enter and make the modification in every computer that has stored the block chain. Additionally, when making. ‧. changes to the information, a new hash code will generate and thus make impossible the. y. Nat. sit. forgery. If any of the computers detect an altered block, it will immediately reject it as part. n. al. er. io. of the block chain and deny access to the network. Figure 1 illustrates how information is. i Un. v. transferred across in order to eliminate the possibility of fake blocks being added to the chain.. Ch. engchi. Figure 1: Typical Block Chain Transaction Flow Diagram. 3 DOI:10.6814/NCCU202000595.

(12) The other term that needs to be understood in terms of network security is the consensus protocol, in which all the computers in the network have to agree in order to add new blocks of information. This concept is illustrated further by figure 2. In terms of public and private information, the identity of block chain users can be protected by having public and private keys. The public key will allow the participant to engage in transactions with the rest of the block chain, and the private key will allow users to protect their individual or sensitive information. This information may be identity related or finance related.. 立. 政治大. ‧. ‧ 國. 學. n. er. io. sit. y. Nat. al. Ch. i Un. v. Figure 2: Consensus reached in a block chain network Typical Applications of Block Chain. engchi. For the banking industry, block chain can mean reducing settlement time from 3 days for international transfers to 10 minutes, or the time it takes to create a new block. Smart contracts can also be enforced using block chain. For example, in a supply chain a smart contract can be enforced when the goods are received by the buyer to release early payment when the goods have been verified. Additionally, in a supply chain, the origin of goods can be tracked in real time, and also tracked throughout its transit until delivery to the final customer.. 4 DOI:10.6814/NCCU202000595.

(13) Buyer: entity that buys a product from a supplier in a supply chain. It can buy products by paying cash or negotiating credit terms. Crowdfunding: the use of small amounts of capitals from individuals that normally are not part of financial markets, venture capitalists or other traditional funding sources. In recent times crowdfunding has been made possible by platforms created for the purpose, social media and other internet based tools. Typically, crowdfunding is directed to personal projects, entrepreneur activities, prototype development, development of socially oriented. 政治大 keeping a percentage of the 立funds.. products and services among others. Normally crowdfunding sites create revenue by. by. ‧ 國. agreed. 學. Discounted receivables: collecting payment for accounts receivables minus a percentage the. interested. parties.. Follows. the. following. formula:. ‧. Nat. 𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 = 𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 𝑟𝑟𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒 𝑋𝑋 (1 − 𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑 %). sit. y. Dynamic Discounting: A solution that gives buyers more flexibility to choose how and. n. al. er. io. when to pay their suppliers in exchange for a lower price or discount for the goods and. i Un. v. services purchased. The “dynamic” component refers to the option to provide discounts. Ch. engchi. based on the dates of payment to suppliers. In most cases, the earlier the payment is made, the greater the discount. The funder for dynamic discount programs is typically the buyer. Dynamic discounting is typically applied on an invoice-by-invoice basis. Unlike supply chain finance, buyers typically use their own balance sheet or excess cash to “fund” the program and generate additional purchasing discounts. 1 Typical rates for dynamic discounting average at 18% APR. Factoring: same definition as receivables purchase. It involves recourse, which means. 1. Prime Revenue paper: Dynamic Discounting Vs Supply Chain Finance. 5 DOI:10.6814/NCCU202000595.

(14) uncollected bills result in a discount from purchased accounts receivable. Forfaiting: Selling of medium or long term receivables by an exporter to a funder at a discount with no recourse. Eliminates completely the risk of default by paying a discount. Only available at transactions above $100,000. Not many currencies available and the cost tends to be high. Funder: entity who is willing to supply funds for supply chain transactions and assume the risk of default until the buying party transfers the funds back after a negotiated credit period.. 政治大 regulated financial system. 立 Usually involves creating shell companies to give fund. Money Laundering: crime in which funds from illicit activities are introduced to the. ‧ 國. 學. transferring an appearance of legality.. Premium for payables: agreeing to pay a premium for the benefit of paying a credit until further. date.. Follows. the. following. formula:. ‧. a. sit. y. Nat. 𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝 𝑋𝑋 (1 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 𝑓𝑓𝑓𝑓𝑓𝑓 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝 %). 𝑁𝑁𝑁𝑁𝑁𝑁 𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝑡𝑡𝑡𝑡 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝 =. al. n. this Business Model.. er. io. Reverse Factoring Solution (RFS): designated name for the business model developed in. Ch. engchi. i Un. v. Securitization: design of a marketable financial instrument to secure capital. It has to be backed by underlying assets that may increase or decrease their value over time. In the case of a loan, securitization allows the original lender to remove the loan from the liabilities section of the balance sheet. SME: Small and medium enterprises. Depending on the country the definition varies depending on the capital of the company, yearly income or number of employees. Typically, these type of companies have to bear the risk default or late payment by big companies while doing transactions that form part of a supply chain. Supervisory body: private or governmental agency that is responsible for overseeing 6 DOI:10.6814/NCCU202000595.

(15) financial transactions to ensure that the regulations regarding financial services are followed by the corresponding financial institutions. They exist in order to protect customers against excessive charges, excessive interest rates and services that may be harmful for individual investors. Supplier: entity that sells a product to a buyer in a supply chain. It can sell its products through direct cash transfer or credit terms. Supply Chain: sequence of processes involved in the production and distribution of a. 政治大 retail outlets, banks, third立 party logistics providers, etc. Depending of the complexity of commodity. Involves suppliers, manufacturing centers, warehouses, distribution centers,. ‧ 國. 學. supply chains, different parties can become at different points of the chain to ensure timely delivery of produced goods until they reach the final customer.. ‧. Supply Chain Finance: finance solution that aims to reduce supply chain risk by providing. Nat. sit. y. suppliers of products, who are subject to extended payment terms by buyers, the chance of. n. al. er. io. receiving early payments at low cost. Provides liquidity to suppliers, and the chance of. i Un. v. extending credit time for buyers. It can be self-funded or provided by a third party. Typical. Ch. engchi. rates can be around 2-3% average APR.. Transaction Settling: time it takes to record and process a transaction when multiple parties or currencies are involved. Usually the transaction settling takes place due to the fact that exchange rates have to be recorded at a specific market close time, and funds can be transferred internationally at specific schedules. When more banks or financial instutions are involved due to having a low liquidity currency, the transaction settling may take a longer time. Receivables Purchase: process in which a company that has collected accounts receivable over time finds a third party who is willing to purchase them in order to make a profit. The 7 DOI:10.6814/NCCU202000595.

(16) funder is typically a collection agency or a bank. The seller receives security, and the buyer can profit if the collection costs plus receivables purchase cost are lower than collections. The buyer has the right of recourse, which means the buyer can discount uncollected accounts.. 立. 政治大. ‧. ‧ 國. 學. n. er. io. sit. y. Nat. al. Ch. engchi. i Un. v. 8 DOI:10.6814/NCCU202000595.

(17) 2. Chapter 2: Literature Review 2.1. Supply Chain Transactions Every day millions of transactions are carried out throughout the world in order to deliver products to customers across the globe. In order to ensure timely delivery of the goods three main streams have to be accounted for: physical goods flow, information flow and financial flow. Managing these three streams in a coordinate matter is key to reduce costs, optimize delivery time and ensure end customer satisfaction. Figure 3 illustrates how the flows follow. 政治大. opposite directions, materials flow from suppliers to end customers and information flows. 立. backwards. This is a pivot point in many supply chain issues: ensuring correct and efficient. ‧ 國. 學. flow of information.. ‧. n. er. io. sit. y. Nat. al. Ch. engchi. i Un. v. Figure 3: Flow of information and materials through a generic supply chain. The physical goods flow involves raw materials, partially finished products and finished products. It is the main flow that brings every interested party together for the purpose of ensuring the goods reach their destination in a safely and timely manner. Key characteristics that need to be assessed before engaging in supply chain transactions include descriptions and nature of the goods, risks associated with the cargo, special transportation and handling conditions for each category of goods, applicable laws and regulations in different countries, taxes, among others. The typical flow of goods follows goes from the supplier towards the end. 9 DOI:10.6814/NCCU202000595.

(18) customer.. For different industries, there are very unique requirements, that are requested by companies depending on the nature of the economic activities they are performing. For example, the perishable goods industry values measures associated to transportation of cargo using refrigeration equipment to preserve the freshness of goods, services related to determining with certainty the origin of the goods purchased, timely delivery, and handling of the cargo adhering to the highest standards of safety and cleanliness available while maintaining low costs.. 政治大 On the other hand, raw materials 立supply chains may not be so stringent with the handling of the. ‧ 國. 學. cargo itself, but place a higher value on keeping a reliable and steady flow of goods across time. The origin of the goods may not be so important to trace as long as the raw materials comply. Nat. sit. y. ‧. with standards, and keeping a low cost transportation structure.. io. er. The financial flow follows a path from end customers towards suppliers, an opposite direction when compared to the physical goods flow. The lifecycle of the flows does not have equivalent. al. n. iv n C lengths either. From the moment of h transportation from e n g c h i Uthe supplier of raw materials to the reception of the finished goods by the end customer there is a timeframe that does not necessarily match the flow of funds. One of the main reason is the offset created by credit terms between any two participants inside a supply chain. Credit terms represent advantages and disadvantages for individual participants depending on the role they play.. For suppliers, credit terms imposed by big buyers imply having to find external sources of working capital, such as short term borrowing from financial institutions, using own capital or even leveraging at the expense of their own suppliers. This creates a chain effect where every participant of the supply chain creates leverage on its supplier. 10 DOI:10.6814/NCCU202000595.

(19) For buyers, credit terms imposed on their suppliers imply having more free working capital that allows them to conduct daily operations, make investments or finance their own supply chain finance programs. The problem a buyer usually finds when leveraging becomes the norm is that, excessive leverage over small suppliers might create them enough problems to go out of business, new suppliers will be more reluctant to provide credit terms and paradoxically the buyer itself may need to dedicate part of its capital to fund supply chain programs for its suppliers.. 政治大. The main limitation of buyer-funded supply chain finance programs is that the availability of. 立. funds by the average sized company is very small compared to that of financial institutions, and. ‧ 國. 學. the expected rate of return for capital might not be equivalent as well. This is the main reason. Nat. er. io. sit. y. ‧. for the existence of supply chain programs funded by investors.. 2.1.1. Supply Chain Financing existing methods (Competitors). al. n. iv n C The existing methods for supply chain own funding, short term borrowing from h e ninclude gchi U traditional financial institutions, factoring, dynamic discounting, and forfaiting. Each method will be individually explained to understand the differences, advantages and disadvantages. Short term borrowing: banks traditionally provide solutions for both buyers and suppliers when the need for working capital arises. This is especially true when the company is not able to emit commercial paper, issue stocks or have a large percentage of current assets committed to other projects. In countries where banks have monopolistic characteristics, financial markets are underdeveloped and the goods markets themselves have monopolistic traits, rates tend to be higher, as access to capital is ensured mainly for the established oligarchies. 11 DOI:10.6814/NCCU202000595.

(20) Factoring: form of accounts receivables purchase in which accounts receivable are sold to a third party at a discount. The third party is then responsible for collecting the payment of the outstanding debt. There are options of negotiating with recourse or without recourse. Factoring with recourse means that the seller of the accounts receivable will bear all the risk for any uncollected debts. Factoring without recourse places the risk of uncollected debts on the Factor or the purchaser of the accounts receivable. Furthermore, any issues regarding merchandise returns and all associated costs must be borne by the seller of the accounts receivable. Typically,. 政治大 minus the interest expense for 立early payment will be paid when collections are performed.. the advance payment covers around 80% of all accounts receivable, and the remaining 15-20%. ‧. ‧ 國. 學. Figure 4 indicates the sequence of processes for a typical factoring transaction.. n. er. io. sit. y. Nat. al. Ch. engchi. i Un. v. Figure 4: Factoring process diagram Dynamic discounting: agreement term between sellers and buyers that ensures a discount for the total value of the invoice if payment is received within a specific time period. For example, the discount term 2%,15, Net30 is interpreted as follows. If the buyer decides to approve an invoice and pay it in full within the first 15 days of goods reception, then he will only need to pay 98% of the invoice value. If the buyer pays between days 16 to 30 no discount is received. Current dynamic discount models calculate the discount in a linear way to provide a more 12 DOI:10.6814/NCCU202000595.

(21) attractive solution. Figure 5 gives an example of an escalated dynamic discount, in which depending of the days for early payment, a corresponding discount is assigned to the invoice. For 15 days the company would get a 1.2% discount over the invoice, for a 20 days’ early payment 1.0% discount, and for 40 days zero discount.. 學 Figure 5: example of dynamic discount. ‧. ‧ 國. 立. 政治大. sit. y. Nat. Forfaiting: method for exporters to sell medium to long term receivables that are owed to him. io. er. by an importer through a third party. It works for large transactions, and reduces risk for the. al. exporter, placing the risk on a financial institution or a third party investor. Usually transaction. n. iv n C amount ranges from $250,000 to $500,000. bank serves as a risk taker and to provide h e nForfaiter gchi U early payment to the exporter. The forfaiter bank will wait for full payment at maturity from the Issuer bank (Bank in the country of the importer). The issuer bank receives payments of the debt until maturity, and provides collateral for the transaction, while also asking for collateral from the Importer. Mainly the costs of the transaction are diverted to the importer. Figure 6 summarizes the players in a forfaiting transaction, the sequence of steps and the direction of the flow of information, documents and money between the players. Basically all the risks are diverted to the financial institutions, which in turn require collateral from the importer (credit history and physical assets help engage in bigger transactions).. 13 DOI:10.6814/NCCU202000595.

(22) 治政大 diagram Figure 6: typical forfaiting process 立 ‧ 國. 學. In order to provide a better comparison between all the traditional methods of supply chain financing Table 1 was constructed. It displays information about all stakeholders, corresponding. ‧. rates, advantages and disadvantages of each method. Basically when the complexity of the. Nat. n. al. Ch. er. io. of companies without enough collateral, or credit history.. sit. y. financing method increases, so do the costs associated with them, and may be out of the reach. i Un. v. Another aspect to consider for advantages and disadvantages of every method, also requires. engchi. understanding for what activities is each financing method suitable for. International trade, and local trade have varying necessities, warranties and costs. It can be said that factoring and forfaiting are most suitable for middle to long term transactions in international trade; and short term borrowing and dynamic discount the most common methods for local trade.. 14 DOI:10.6814/NCCU202000595.

(23) Table 1: Summary of advantages and disadvantages of common supply chain financing Method/ Characteristic. Short Term Borrowing. Funder. Beneficiary. Average Rates. Advantages. Disadvantages. Popularity. Working. Banks through. Supplier. loans. GT:. capital with. High interest. Widely. TW:. assets as. rates. spread. collateral. Collecting fees, Interest. Third Supplier. 立. Incentive for paying. to have. Widely. invoices in. bargaining. Spread. time. power. Big capital. al. iv. n Investor. Suppliers need. transactions. nrisk Ch reduce U i eFloating n g c hand Importerexport Exporter. y. Buyer. 1% - 3%. rate based. on LIBOR. trading. ‧. Supplier -. International. expensive. allowances. io. Forfaiting. make it. of time. returns. Nat. Discount. Buyer. Sales. allowances. 學. Dynamic. ‧ 國. Collector. Expense,. fees and. sit. Debt. 政Bad Debt治short大 period. advance in a. er. Factoring. expense,. Party. High rates,. Cash. barriers. Exchange rate risk is reduced.. Exporter relinquishes right of full payment. Only selected currencies can participate.. Low, only high value transactions for capital based exports. 15 DOI:10.6814/NCCU202000595.

(24) 2.2. Working Capital In order to engage in supply chain transactions, companies usually engage on various financing methods that usually are within what can be considered short term borrowing. This section will briefly discuss the existing short term borrowing options available in Guatemala, since these are alternatives which suppliers and buyers recur to in order to fulfill their operational needs. These alternatives represent the immediate substitute for our service, so therefore the business model has to have enough selling points, differentiation and economic advantage in order to. 政治大. become attractive enough against the traditional borrowing methods.. 立. 2.2.1. Equity and Debt Market in Guatemala. ‧ 國. 學. In Guatemala currently there is not a fully developed stock market for companies to easily issue. ‧. debt or equity and trade it freely in a competitive and global market.. Currently the existing stock market is consolidated in Bolsa de Valores Guatemala (BVN), but. sit. y. Nat. io. er. the services they currently offer are quite limited and not publicly available. Currently the only way of buying and selling debt or equity requires buyers and sellers to register using a special. n. al. Ch. i Un. v. verification from the trading commission. The information itself is not transparent enough, as. engchi. we can only observe total amount transaction for the day in question, that corresponds to primary market transactions, secondary market transactions and short term borrowing instruments mainly for repurchase agreements. Figure 7 includes a snapshot of the daily report.. 16 DOI:10.6814/NCCU202000595.

(25) 立. 政治大. ‧. ‧ 國. 學. n. er. io. sit. y. Nat. al. Ch. engchi. i Un. v. Figure 7: Guatemala equity and debt market daily report from april 28th 2020. 17 DOI:10.6814/NCCU202000595.

(26) As we can see from this report, not much information is provided about the components of the financial instruments involved in the transactions, the corresponding prices of the stocks, bonds or repurchase agreements. 2 To make a comparison of size, let’s take a look at table 2 which contains information about one of the biggest stock exchange markets of the world NASDAQ, for comparison with the Taiwan Stock Exchange and Guatemala Bolsa de Valores. Table 2: Daily Value of transactions in selected exchanges Exchange. Daily Value of Transactions. NASDAQ 3. 立. $173,186,908,537 $2,052,437,891. 學. ‧ 國. Taiwan Stock Exchange 4. 政治大. Guatemala Bolsa de Valores. $2,370,000. ‧. n. er. io. sit. y. Nat. al. Ch. engchi. i Un. v. 2. http://www.bvnsa.com.gt/bvnsa/preguntas_democratizacion.php. 3. http://www.nasdaqtrader.com/Trader.aspx?id=DailyMarketSummary. 4. https://www.twse.com.tw/en/page/trading/exchange/TWTB4U2.html 5/15/2020 exchange rate: 29.97. 18 DOI:10.6814/NCCU202000595.

(27) 2.2.2. Short Term Corporate Debt in Guatemala The other alternative private companies have for financing their supply chain transactions is by acquiring a short term corporate loan, in which usually the amount authorized depends on past credit history, their own equity and debt capability and the ability of providing collateral for debt. We will analyze the basic requirements for these loans and the real interest rates they demand yearly. The entity which supervises all the banks in Guatemala is called “Superintendencia de Bancos. 政治大 The table number 3 presents a立 summary of the rates by the major banks of the system.. de Guatemala”, and they compile the data for all the transactions regulated within the system. 5. ‧ 國. 學. We can observe that averages of interest rates are very different depending on the nature of the. ‧. loan. For corporate loans on the high denomination, the average rate corresponds to 8.32% and 7.64% for local and foreign currency respectively, whereas in corporate loans of low. y. Nat. er. io. sit. denomination the rates rise to 12.78% and 8.63%. These two segments are our target and investors who want to compete in the supply chain financing environment must match or have. n. al. rates lower than these.. Ch. engchi. i Un. v. In terms of standard deviation, High denomination corporate loans have a standard deviation of 1.43% and 3.21% for local and foreign currency respectively. Low denomination corporate loans have even more volatility with 7.39% and 2.86%. Another selling point for the platform has to be reached by reducing variability on the interest rates offered. To achieve that goal, the interest rates will be calculated taking into account interest free local rates, the risk associated with the buyer company, a service premium, and the investor required return. 5. https://www.sib.gob.gt/web/sib/informacion_sistema_financiero/entidades-. supervisadas?p_p_id=15&p_p_action=1&p_p_state=normal&p_p_mode=view&p_p_col_id=&p_p_col_pos=1&p_p_col_count=2&. 19 DOI:10.6814/NCCU202000595.

(28) Table 3: Average weighted interest rates for local and foreign currency in the Guatemala Banking System. 立. 政治大. ‧. ‧ 國. 學. n. er. io. sit. y. Nat. al. Ch. engchi. i Un. v. 20 DOI:10.6814/NCCU202000595.

(29) 3. Chapter 3: Background Information 3.1. Small and Medium Enterprises Economists talk about the overall importance of the small and medium enterprise role in the country's economies. Analyzing a very simple definition of economy itself: "the state of a country or region in terms of the production and consumption of goods and services and the supply of money". The fact that the definition includes both production and consumption of goods, makes clear the fact that all economies around the world rely on individuals. 政治大. (understanding as individuals both persons and entities) for an economy to develop.. 立. ‧ 國. 學. The great importance of SMEs in an economy can be resumed in the following factors: 1. Employment of local people: SMEs rely on local talent to populate their workforce. In. ‧. exchange for this, many local people that would be employed by international. sit. y. Nat. companies have an opportunity to join the workforce. The main effects of SMEs over. io. al. n. iv n C Adapting to changes: sincehSMEs i U small compared to international e n garec hrelatively respectively.. 2.. er. the local economy are the growth of the GDP and the reduction of unemployment rates. corporations, they can be swifter to keep up with changes in the market. 3. Contribution to local taxes: when SMEs thrive in the local economy they're established, they start to generate higher levels of revenue and profit. When this happens, the taxation of these companies becomes higher, which means that more money enters the local government. Higher recordation by governments means higher spending in local communities, which has a positive impact on the overall quality of living of these communities.. 21 DOI:10.6814/NCCU202000595.

(30) 4. Creation of more local commerce: as SMEs start to grow and mature into corporations, they create many more businesses around them as a side effect. This is a network effect that includes suppliers and customers with interdependent relationships. Mutual benefit and trust makes these relationships to build over the long term. We can conclude that SMEs are one of the key factors to the economic success of countries since they create a symbiotic relationship between interdependent businesses and with the communities in which they operate.. 立. 政治大. ‧. ‧ 國. 學. n. er. io. sit. y. Nat. al. Ch. engchi. i Un. v. 22 DOI:10.6814/NCCU202000595.

(31) 3.1.1. Small and Medium Enterprise in Guatemala In 2019 ASIES 6 [Association for Research and Social Studies (NGO)] published a document which contains a summary about the situation of SME’s in Guatemala. On 2015 small and medium enterprises account for 10.8% of the total number of active enterprises in Guatemala. Of every GTQ (Guatemala Quetzal) sold in that year 0.65 corresponds to big enterprises, 0.31 to small and medium enterprises and only 0.04 was sold by micro enterprises. As shown below in figure 8, the number of companies and their total sales are inversely proportional. Curiously. 政治大. around 17.2% of employed people in the country are hired in small and medium enterprises.. 立. If we put in contrast Taiwan, small and medium enterprises accounted for 97.64% of the total. ‧ 國. 學. number of active enterprises in 2018. Besides, the number of employed persons in SMEs rose. ‧. to 8,965,000, which represented approximately 78.41% employed people in Taiwan.. 250,000 200,000 150,000 GTQ 22,302. Ch. engchi. GTQ 76,315 36,398. 50,000 -. al. n. 300,000. 100,000. sit. 330,752. er. io. 350,000. y. Nat. Number of Companies and Yearly sales (2017) by company size. Micro. Small. Number of Active Enterprises. i Un. v. GTQ 325,036. GTQ 76,560. 4,027. 1,602. Medium. Big. Yearly Sales in Million GTQ. Figure 8: Number of companies by size and corresponding Sales in 2017. 6http://www.asies.org.gt/download.php?get=hacia_pymes_mas_competitivas_una_propuesta.pdf. 23 DOI:10.6814/NCCU202000595.

(32) The small and medium enterprises that operate in Guatemala generate 836,830 jobs among own-account workers with premises, own-account workers without premises, and employers. International historical examples show that in the early stages of economic development, small and medium enterprises play a fundamental role; because with their contribution, the own country's economy can start producing and offering goods and services of higher value than those from countries less developed. Another interesting remark is that the population whose economic purchasing power starts increasing, will start demanding and buying products. This. 政治大. constitutes a determinant factor of economic activity and generation of employment.. 立. ‧. ‧ 國. 學. n. er. io. sit. y. Nat. al. Ch. engchi. i Un. v. 24 DOI:10.6814/NCCU202000595.

(33) 3.1.2. Definitions and supporting institutions Guatemala has three definitions for labor: according to the national statistics institute, according to the commerce chamber and a third one by ILO (the international labor organization). The official one for Guatemala can be found in Labor Government Agreement number 178-2001 were its classified according to the number of employees and the ownership of the enterprise. There is no consensus regarding the definition of Small and Medium Enterprise, as the definitions adopted, vary according to the kind of focus. Some specialists highlight the. 政治大. importance of sales volume, the share capital, the number of people employed, the value of. 立. production, or the assets to define it. Others take the economic criterion as a reference. ‧. ‧ 國. 學. technological.. A study by the International Labor Organization found over fifty different definitions of Small. sit. y. Nat. and Medium Enterprise. The criteria considered is very diverse, from the number of workers or. n. al. er. io. the type of management, the volume of sales or energy consumption rates, or even down to the technological level, to cite the most common.. Ch. engchi. i Un. v. According to ILO the definition of Small and Medium Enterprise is: “Typically, microenterprises are defined as enterprises with up to ten employees, small enterprises as those that have ten to 100 employees, and medium-sized enterprises as those with 100 to 250 employees. Unless otherwise specified, the definition of an SME that is used in this report is any enterprise with fewer than 250 employees. This includes all types of enterprises, irrespective of their legal form (such as family enterprises, sole proprietorships, or cooperatives) or whether they are formal or informal enterprises.”. 25 DOI:10.6814/NCCU202000595.

(34) According to Guatemala Ministry of Economy the definition updated in 2015 7. The difference with the old classification is that the actualized takes in account other factors like the monthly wage of the employees, the amount of sales the company does and the number of times that relate to the GPD per capita. Table 4 presents this new definition, in which we can observe that the productivity is directly related to the size of the corporation. The number of employees also makes this possible, and interestingly enough as mentioned before SME’s can generate yearly sales of up to GTQ 46.11MM or the equivalent of $5.92 MM.. 政治大 Yearly Sales (GTQ). Table 4: Definition of company size by Guatemala Ministry of Economy. 571,472 to 11MM. 81 to 200. 11MM to 46.1MM. io. More than 46.1MM. n. al. 0.1-17 17-336 336-1,401. More than 1,401. er. more than 201. y. 11 to 80. Nat. Big. ‧ 國. Medium. 2,992 to 571,422. ‧. Small. 1 to 10. 學. Micro. Yearly Sales as a proportion # of times the GDP per capita. sit. 立. Employees. Ch. engchi. i Un. v. 7 https://www.prensalibre.com/economia/las-5-formas-de-financiamiento-que-necesitan-las-pymes-guatemaltecas-para-crecer/. 26 DOI:10.6814/NCCU202000595.

(35) The government and private institutions that support the creating and development of Small and medium enterprises in Guatemala are: 1. Asociación Gremial de Exportadores de Productos no Tradicionales (AGEXPRONT) [Union of Exporters of Non-Traditional Products] 2. Ministerio de Economía [Ministry of Economy] 3. Cámara de Comercio [Chamber of Commerce] 4. Federación de Pequeñas y Medianas Empresas (FEPYME) [SME Federation]. 政治大. 5. Instituto Técnico de Capacitación (INTECAP) [Institute for technical studies]. 立. ‧. ‧ 國. 學. n. er. io. sit. y. Nat. al. Ch. engchi. i Un. v. 27 DOI:10.6814/NCCU202000595.

(36) 3.2. Guatemala Economic Profile 3.2.1. GDP and inflation rate Guatemala GDP growth has remained stable with an average of +3.53% (Real) and +6.00% (Nominal) over the course of the last decade. Now in 2020 due to the COVID-19 world crisis there is a projected abnormal growth between -1.5% and 0.5% (Real) or +0.8 and 2.8% (Nominal). Figure 9 below illustrates the constant growth and projected stagnation with data collected by Banco de Guatemala, the central banking institution.. 政治大. 立. ‧. ‧ 國. 學. n. er. io. sit. y. Nat. al. Ch. engchi. i Un. v. Figure 9: Guatemala GDP from 2013 to 2020 8 Secondly, to understand the origin of the GDP, the GDP is broken down into the main categories. We can see from figure 10 that almost 50% of GDP is comprised of internal commerce, manufacturing, agriculture and real estate activities. The remaining 50% is related to basic services for the population, and since there is a trade deficit, the GDP is mainly comprised of these local activities.. 8. Central Guatemala Bank: https://www.banguat.gob.gt/estaeco/boletin/envolver.asp?karchivo=boescu51. 28 DOI:10.6814/NCCU202000595.

(37) 立. 政治大. ‧. ‧ 國. 學. Figure 10: Breakdown of main GDP categories from 2013 to 2019. sit. y. Nat. In terms of purchase power, the Central Guatemala Bank is responsible for the economic. io. er. policies, issuing currency into the system, watching over the banking system and controlling. al. currency exchange fluctuations through monetary policies as well. Inflation control is one of. n. iv n C the main objectives for the central bank, h ewhich i U to keep it stable since 2012 n g has c hmanaged. between 2.4% and 4.4% yearly. Figure 11 illustrates this fact, and demonstrates that monetary policies have reduced previous volatility.. 29 DOI:10.6814/NCCU202000595.

(38) 政治大. Figure 11: Yearly inflation rate from 1999 to 2019 9. 立. ‧ 國. 學. 3.2.2. Guatemala main economic activities. Guatemala can still be described as a mostly rural country. Most of the economic activity. ‧. created in Guatemala is related to agricultural and vegetables. About 80% of Guatemala GDP. Nat. sit. y. comes from the internal consumption of goods and services, so we can safely say that the. n. al. er. io. economy has yet to shift into a more value aggregated economy, instead of the actual model. i Un. v. where most of the income is relaying on remittances Guatemalans living abroad.. 9. Ch. engchi. https://www.indexmundi.com/g/g.aspx?c=gt&v=71&l=es. 30 DOI:10.6814/NCCU202000595.

(39) 3.2.3. Guatemala Main Imports In 2017 Guatemala imported $13.5B, making it the 80th largest importer in the world. During the last five years the imports of Guatemala have decreased at an annualized rate of -4.2% 10 Main imports to Guatemala include refined petroleum in the first place which accounts for 22% of total imports. The machinery imports sector ranks in the second place with 12% of all imports and chemical products third place with 11%. In summary, the main imports categories which account for 80% of yearly imports are: refined. 政治大. petroleum (22%), Machinery (12%), Chemicals (11%), Textiles (8.6%), Food (7.3%), Metals. 立. (7.1%), Plastics (6.7%), and Transportation (6.6%). Figure 12 contains a visual representation. ‧ 國. 學. of this data for better visualization purposes.. ‧. n. er. io. sit. y. Nat. al. Ch. engchi. i Un. v. Figure 12: Visual representation of Guatemala main import categories on 2017. 10. Observatory of Economical Complexity https://oec.world/en/profile/country/gtm/. 31 DOI:10.6814/NCCU202000595.

(40) The main countries where goods and services are exported to Guatemala are USA (40%), followed by China (40%) and then Mexico (12%). Interestingly enough, it seems that Guatemala is not fully taking advantage of the free trade agreement with Taiwan since there are only 0.67% of yearly imports yearly, or the equivalent of $90 million. Figure 13 summarizes the data in a colored visualization separated by continents.. 立. 政治大. ‧. ‧ 國. 學 y. Nat. n. al. er. io. sit. Figure 13: Visual representation of origin of imports by Continent in 2017. Ch. engchi. i Un. v. 32 DOI:10.6814/NCCU202000595.

(41) 3.2.4. Guatemala Main Exports Guatemala is the 82nd largest export economy in the world according to the Economic Complexity Index (ECI). In 2017, Guatemala exported $10B and imported $13.5B, resulting in a negative trade balance of $3.5B. 11 The main exported products from Guatemala include textiles in general with an overall amount of 18%, the agroindustry sector exported 32% of the total exports, with bananas (13%) and coffee beans (7.2%) as the two biggest export products. The processed food products exports. 政治大. accounted for 16% of all the exports, being followed by the chemicals sector, with 6.3%, and. 立. the mineral products with 5.6% of all exports. The data is summarized graphically in figure 14.. ‧. ‧ 國. 學. n. er. io. sit. y. Nat. al. Ch. engchi. i Un. v. Figure 14: Visual representation of Guatemala main export categories on 2017. 11. https://oec.world/en/profile/country/gtm/. 33 DOI:10.6814/NCCU202000595.

(42) The main economic partners for exports include USA with a 42% of all exports, followed by El Salvador (10%) and Honduras (7.3%). Followed by these partners we have the European market that accounts for the 13% of all exports and the Asian market that in total accounts for 6.6%. Again, Guatemala is not using the free trade agreement for exports, as only 0.40% of exports is directed to Taiwan with a value of $40 million yearly. Figure 15 summarizes the data in a colored visualization separated by continents.. 立. 政治大. ‧. ‧ 國. 學 sit. y. Nat. n. al. er. io. Figure 15:Visual representation of destination of exports by Continent in 2017. Ch. engchi. i Un. v. 34 DOI:10.6814/NCCU202000595.

(43) 3.3. Taiwan – Guatemala Relations 3.3.1. Current trade relations Taiwan and Guatemala have formal diplomatic relations since 1960. The stance has not been changed since it was ratified, and there is a big potential for Guatemala to export agricultural products to Taiwan, and also to import from Taiwan products that are not manufacture locally. For example, machinery and technology are important industries, its products are really important for development in third world countries. 12. 政治大. On January 1st 2006, a free trade agreement was signed between both countries which allowed. 立. reduction of tariffs, as well as allowing certain special benefits in terms of credits for short and. ‧ 國. 學. long term investments. Taiwan Eximbank offers these benefits through an approved overseas. ‧. bank in each of the countries it has agreements with. To make the loans attractive, the interest rates offered for these importing activities are based on LIBOR, which have been historically. y. Nat. er. io. sit. more attractive than any rate provided by the local banking system. Figure 16 below gives a historical summary from 2010 up to date of LIBOR rates. The range oscillates between 0.5%. n. al. Ch. i Un. v. and 3.0% for 12 month loans. This is another example of the great opportunities that trade. engchi. between Taiwan and Guatemala can provide to both countries economic outlook. Unfortunately these opportunities have been wasted in the past as mentioned within the Exports and Imports section. The potential for growth is there to exploit.. 12. https://www.taiwanembassy.org/gt_es/post/11.html. 35 DOI:10.6814/NCCU202000595.

(44) 立. 政治大. ‧ 國. 學 ‧. Figure 16: LIBOR rates from 2010 to 2020. Finally to give a brief summary of the evolution of the trade relations, there was a report created. y. Nat. io. sit. by the Guatemala Ministry of Economy and Guatemala Central Bank that summarized the. n. al. er. change over trade relations between 2006 to 2016, spanning 10 years after the creation of the. Ch. i Un. v. Free Trade Agreement. The summarized main points are the following: 13. 13. engchi. • • • • •. Guatemala represents 0.04% of Taiwan’s total exports Guatemala represents 0.02% of Taiwan’s total imports The trade deficit increased for Guatemala’s detriment since the agreement took place Taiwan exports per capita amount to $12,000 contrasting with Guatemala $666 Taiwan overall trade balance equals to +$51.5 Billion compared to Guatemala -$6.8 Billion.. • •. Average inflation is -0.30% for Taiwan and +2.20% for Guatemala There has been a growth of 2.3% yearly growth of overall trade since the agreement was ratified.. https://www.mineco.gob.gt/sites/default/files/Integracion%20y%20comercio%20exterior/10_anos_taiwan.pdf. 36 DOI:10.6814/NCCU202000595.

(45) 3.3.2. Taiwan Block chain potential Taiwan government has taken a proactive stance into making industry 4.0 a priority into governmental policies. One of the main components of industry 4.0 is the block chain protocol, which manages to connect industries and information systems in a safe and transparent way. In 2018, Taiwan was the host for the Asia Block chain summit, and the government officials have been actively promoting the topic providing funds for accelerators, investing in projects, and funding research related to the subject. 14. 政治大. The National Development Council of Taiwan set up in 2019 the Taiwan Block chain Alliance,. 立. with the goal of creating a platform for information exchange, conducting international. ‧ 國. 學. cooperation, promoting field applications and developing talents. The only program that is. ‧. currently running is the Business Angel Investment Program National Development Fund which uses funds from the government and Angel Investors to fund high risk startups. 15. sit. y. Nat. n. al. er. io. Finally, to have an idea of the wide range of alternatives offered by Taiwan companies in the. i Un. v. Block chain industry, Figure 17 presents a summary of the Block Chain Ecosystem that can be supported by local companies.. Ch 16. engchi. 14. https://focustaiwan.tw/sci-tech/201807020027. 15. https://tballiance.org.tw/en/link.php. 16. https://appworks.tw/the-next-crypto-capital-of-the-world-snapshot-of-taiwans-blockchain-ecosystem/. 37 DOI:10.6814/NCCU202000595.

(46) 政治大 Figure 17: Blockchain Ecosystem in Taiwan 立 ‧. ‧ 國. 學. n. er. io. sit. y. Nat. al. Ch. engchi. i Un. v. 38 DOI:10.6814/NCCU202000595.

(47) 4. Chapter 4: Business Model 4.1. Business Model Canvas. To understand at a glance the business model, a Business Model Canvas was created. It includes all the elements that are key for the company to generate revenue, control the costs, establish strategic partnerships and create value proposals that make sense in the business environment.. 政治大 through a sustainable business model, in which long term relationships are fomented through 立 Differentiation among competitors is also key to enter the market, and can only be achieved. ‧ 國. 學. synergies of working together.. Table 5 illustrates all the concepts that will then be individually explained in detail to further. ‧. clarify how each aspect has to be integrated in order to become a sustainable company. The key. y. Nat. io. sit. element for customers to engage in the initial transactions are the value propositions received. n. al. er. from the supply chain financing platform. The value propositions have to match with their own. Ch. i Un. business models in order to facilitate the willingness of usag. engchi. v. 39 DOI:10.6814/NCCU202000595.

(48) Table 5: Business Model Canvas. 立. 政治大. ‧. ‧ 國. 學. n. al. er. io. sit. y. Nat 4.1.1. Key Partners. Ch. engchi. i Un. v. Before engaging into transactions in the open market, alliances have to be negotiated and achieved with two main players: Guatemala Logistics companies, and credit rating local agencies dedicated to providing financing to businesses that engage in commercial operations either local or international. Logistics companies are key for acquiring new customers due to the fact that they hold large portfolios of existing customers, always looking for the cheapest financing sources, services that add value to their existing supply chain operations and opportunities to increase profitability. The synergy created through mutual cooperation lies in the fact that the financing. 40 DOI:10.6814/NCCU202000595.

(49) provides the possibility of existing customers to engage in higher value transactions, attract new customers which were unable to engage in commercial transactions due to capital restrictions and provide added value to the portfolio of services provided. In order to secure the alliance, a one-time only referral fee based on the amount of the first transaction will be paid to the logistic provider to incentivize cooperation. This referral fee will be considered a variable cost.. 政治大 checks on individuals and corporations. INFORNET, is the company that obtains credit history 立 To obtain credit history and credit grading there is a centralized system which performs credit. ‧ 國. 學. from the Guatemala Banking system and emits credit rating documents to assess risk of individuals and corporations. INFORNET operates through a monthly pricing system, in which. ‧. the price for credit assessment is decreased when increasing the number of credit studies. n. al. y. er. io. sit. Nat. requested. Table 6 presents the pricing for credit verifications.. Ch. engchi. i Un. v. 41 DOI:10.6814/NCCU202000595.

(50) Table 6: INFORNET credit assessment pricing Monthly Credit verification – Infornet Price List Monthly Requested credit verification. Price per credit check. 0-30. $40 (monthly fee). 31-500. $1.33. 501-1,500. $1.18. 1,501-3,000. $1.05. 3,001-5,000. 立. $0.95 $0.85. Prepaid credit checks – Infornet Price List. 學. ‧ 國. 5,001-infinite. 政治大. 20 credit verifications. ‧. 40 credit verifications. $3.50. sit. y. Nat. 17. $4.00. n. al. er. io. The importance of INFORNET as a strategic partner is that will ensure a double check on the. i Un. v. credit risk for the customers. This credit risk can either be controlled with a risk premium for. Ch. engchi. each transaction, requesting collateral for transactions up to a specified value or restrict usage of the platform for companies that do not comply with established credit risk standards. For the case of local supply chain transactions, the credit history of the BUYER is the most important to check, since it is the party that will pay the transaction cost after credit days are over.. 17. http://infor.net/portal/?page_id=98. 42 DOI:10.6814/NCCU202000595.

(51) Usually BUYERS are medium to large corporations that can provide credit rating documentation, use assets of the company as collateral and also have banking institution to vouch for their credit history. INFORNET will serve as a neutral party to evaluate the veracity of this claims. For the case of exports, this credit rating will have to be requested before authorizing any new BUYERS that wish to be included in the platform. Credit rating official documents cost has to borne by the applicant, and is not related to our own costs.. 立. 4.1.2. Key Activities. 政治大. ‧ 國. 學. The process for supply chain transactions follow the same core, but has some differences. ‧. regarding the location of buyers, sellers, and investors when talking about import, export and local trade scenarios. For easier comprehension, separate diagrams will be created for each. sit. n. al. er. io. Local Trade. y. Nat. scenario.. Ch. engchi. i Un. v. The typical transaction that our platform or reverse factoring solution will aim to serve is the local transactions of everyday purchases from All sizes of companies to SME’s. The nature of these purchases may be raw materials supply, finished goods and even services in some special cases (maintenance contracts, software development, consulting services including implementation, etc.). Buyer: local company with enough bargaining power to request for credit terms when engaging in supply chain transactions. Usually leverages own operations by having longer credit terms with suppliers and shorter credit terms with customers. Typical credit lengths range from 15. 43 DOI:10.6814/NCCU202000595.

(52) days to 90 days in paper, but in practice the effective payment date can reach up to 100 days due to delays in the payment process for each company. For example, some big buyers only pay on a fixed day of the week, and request for suppliers to physically show up with documentation proof that the service has been provided, and that the credit days have expired. Depending on the dates in which transactions are completed, the delays might reach up to additional 7 days plus any bank settling time. This allows our Reverse Factoring Solution to provide a competitive advantage to suppliers by. 政治大. providing instant work capital, to buyers by allowing access to more suppliers that may have. 立. not the possibility of offering credit in the past, and buyers also have the opportunity of. ‧ 國. 學. extending credit dates for even longer periods and effectively leverage their working capital.. ‧. Figure 18 diagram illustrates the basic steps for registering a new organization into RFS. n. al. er. io. sit. y. Nat. platform.. Ch. engchi. i Un. Application for RFS platform. BUYER. Credit history check for approval. RFS. Designation of credit risk grade based on received documentation and independent credit verification. RFS. Recording of credit behaviour inside the platform and yearly rescoring based on internal and external sources. RFS. v. Issuance of login credentials for the buyer and his authorized suppliers.. Figure 18: Sequence of steps for registration into RFS platform 44 DOI:10.6814/NCCU202000595.

(53) Due to the fact that risk of default is placed only on the buyer, the registration process must ensure this double check of credit rating history in order to make sure to provide the service for companies that comply with the desired parameters. For those who do not approve a rating high enough, they may still be able to join the platform, but will be subjected to higher costs per transaction and asked for collateral in cases of transactions exceeding certain limits. Now we proceed to describe the necessary steps to follow when engaging in a supply chain operation. Figure 19 gives a sequential description of the usual process for invoice approval.. n. SUPPLIER. Ch. engchi. sit. y. •Approves invoice •Requests additional credit days if necessary at a premium based on late payment date. er. ‧ 國. io. al. •Submits invoice for approval from BUYER •Calculates discount rate based on early payment date and compares with local short term lending rates •Uploads financing request to investors indicating ammount and ROI •Informs all parties involved and perform wire transfer to designated accounts. ‧. Nat. •Uploads invoices •Selects requested payment date. 學. 政治大立 RFS. i Un. v. BUYER. Figure 19: Invoice approval process The process will be done in real time and will reduce the time that a supply chain finance program usually takes. The platform will send invoices for approval to the buyers, and they can be either approved or rejected depending on the relationship the supplier has at that moment in. 45 DOI:10.6814/NCCU202000595.

(54) time. When the platform receives a financing request from a supplier, the approved invoice amount is then used to calculate the discount based on the reference rates. The calculation formula for the rate is the following: 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 = (𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅 𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 + 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝 + 𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝) ∗. 𝑛𝑛 360. The risk free rate can be obtained daily from Guatemala Bank18, the federal bank in charge of economic policies, emission of treasuries, and other instruments of national financing. The. 政治大. risk premium will be based on the credit rating of the BUYER previously verified through. 立. external verification, or if it already has a history of at least one year using the platform the. ‧ 國. 學. credit rating will also be updated using this information. Table 7 gives a description of Risk premium depending on credit rating.. ‧. n. al. 18. Risk Premium. i Un. A. 2%. B. e n g c h i 3%. Ch. er. io. Credit Rating. sit. y. Nat. Table 7: Risk premium calculation based on credit rating. v. C. 4.5%+collateral. D. 6.5%+collateral. E. 8%+collateral. https://www.banguat.gob.gt/ publishes daily risk free rate (tasa líder in Spanish). 46 DOI:10.6814/NCCU202000595.

(55) As for the service premium it will always remain at 1% initially, and may change depending on first year profitability. Also, the discount rate will be compared with the average rates for short term borrowing in order to ensure being the most attractive financing alternative. This commission will be split 60/40 with the investor. RFS will keep 40% and the investor will get 60%.. 政治大 8 indicates general ranges for the fees. 立. Another source of revenue will come from a service fee based on the transaction amount. Table. ‧ 國. 學. Table 8: Service Fees for transaction amount ranges. $10,001-$25,000. $250. n. al. v. $25,001-$100,000. i Un. $100,001-$500,000. $5,000. $500,001-$1,000,000. $7,500. Ch. engchi. sit. io. $100. er. Nat. $1,000-$10,000. y. Service Fee. ‧. Transaction Amount. $1,000. 47 DOI:10.6814/NCCU202000595.

(56) Example1:Supplier requesting for early payment The following example will illustrate the calculation of a discount rate for a supply chain operation under the given set of conditions. Credit Days. 90. Requested early payment day. 7th day. Transaction amount. $10,000 USD. BUYER credit rating. 立. 政治大 B. Date of transaction. n. sit er. io. al. 𝒏𝒏 = 𝟗𝟗𝟗𝟗 − 𝟕𝟕 = 𝟖𝟖𝟖𝟖. y. ‧. ‧ 國. 學. Nat. Thus we calculate:. 5/11/2020. i Un. v. 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 = (𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅 𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 + 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝 + 𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝 + 𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟) ∗. Ch. engchi. 𝑛𝑛 360. Risk free rate on 5/11/2020 is: 2.00% 19 Risk Premium is read from table 7, for a buyer with credit risk of B = 3.00% Service Premium the RFS platform will always charge 1% per supplier based transaction Investor expected return will be stated for attracting investors when they join the platform. In this case we assume this investor selected 5% on yearly basis.. 19. https://www.banguat.gob.gt/. 48 DOI:10.6814/NCCU202000595.