What economic prospects for Guatemala are there for the rest2023? Will the world fall into recession, and how would Guatemala be affected? Is the country resilient? At the moment, the world situation is uncertain. Several economic experts attest that we are already in a general recession. Others say that we will enter one early next year. Yet, still, others tell us that there will not be a recession as such, just a general economic shock.

Economic prospects for Guatemala and the rest of the region project moderate GDP growth

In the economic sphere, the International Monetary Fund (IMF) forecasts that the economic prospects for  Guatemala will have a GDP growth rate of 3.2% in 2023. This figure 1.8% less than optimal for an appropriate growth rate for a developing nation. Similar rates are expected to be attained by other countries in the region. This includes Costa Rica at 2.9%, the Dominican Republic at 4.5%, El Salvador at 1.7%, Honduras at 3.5%, and Nicaragua at 3%. This decline in economic activity will cause various crises and disruptions to be experienced this year that will slow down the economy. Nevertheless, it is expected that if the countries adopt the correct policies, they will be able to exceed these numbers and achieve optimal growth that will result in positive economic prospects for Guatemala and the region as a whole.

Concerning the inflationary crisis that is currently being experienced in many countries, some experts expect prices to begin to stabilize at the beginning of the next year. It is anticipated, however, that rates will not return to the low level that many countries’ economies have enjoyed in recent years. The IMF forecasts that in 2023 Guatemala will end with an inflation of 5.6%. In October 2021, this number was expected to be 4.2%, but given the current situation, it increased. Other regional inflation rate forecasts include Costa Rica at 6.4%, the Dominican Republic at 5.7%, El Salvador at 2.7%, Honduras at 8.5%, and Nicaragua at 7%. The Bank of Guatemala (BANGUAT) is expected to achieve anchor inflation expectations in 2023 when it begins to see a significant drop, reducing national uncertainty and improving economic conditions. This is critical for bettering economic prospects for Guatemala and attracting investment and international business.

A slowdown in trade

For trade, a slowdown is expected this year. For Guatemala, the IMF forecasts a 5.9% growth in exports, lower than the 6.1% that was previously expected. However, exports are expected to grow positively for the region as a whole. Most noteworthy is that the Dominican Republic has the highest expected growth at 9.4%.

Concerning imports, general growth is expected in the region with figures of around 1% and 6%. The IMF expects the economic prospects for Guatemala to grow its imports by 1.3%. This figure is lower than countries like Costa Rica, the Dominican Republic, and Honduras, which are all expected to be above 4.3%.

The Foreign Direct Investment (FDI) goal that is expected for Guatemala in 2023 is US $1.7 billion. Will the country be able to exceed the investment goal? It is believed that the answer to this question is “yes.” The efforts of the Ministry of Economy (MINECO) and the private sector will be the key to attracting more and better investment to the country. Guatemala seeks to diversify its investment sectors by taking advantage of the nearshoring and friendshoring opportunities offered through economic cooperation with the United States. Programs such as Guatemala no Se Detiene, or “Guatemala Does Not Stop,” are essential to attracting foreign direct investment.

The Bank of Guatemala has been known for responsible monetary policy

Economic prospects for Guatemala predict that a drop and stabilization of the country’s exchange rate is also expected. This will be possible if BANGUAT maintains the responsible monetary policy for which it has recently been known.

Economic prospects for Guatemala must continue on the right path. This can be assured by promoting initiatives that attract and create investment and employment, which leads to greater industrialization. It is proven that the Guatemalan industry is the one that pays regionally competitive salaries. Therefore, by investing in it, more and better jobs are generated. Consequently, the quality of life of the Guatemalan citizenry improves. The development process is, at times, slow, but, on the whole, economic prospects for Guatemala remain positive. The country is expected to improve its economic conditions in 2023, especially in an important election year.

Digital transformation has become, especially in the last two years, one of the most critical issues in Colombia and the world. This is how the National Association of Businessmen of Colombia ( Andi ) sees the situation when it points out that only 25 percent of Colombian business organizations had digital transformation strategies before the coronavirus pandemic. As a result of the health emergency, however, that figure has recently grown to 60 percent. Consequently, the BPO industry in Colombia is expanding.

According to another report presented at the end of 2021 by Salesforce, today, the interaction of users and customers with business firms is 70 percent digital, while two years ago, it represented 40 percent. Added to this panorama is that Colombia has one of the highest Internet uses in Latin America. According to ProColombia, the country’s citizens spend about ten hours a day per capita.

These are sufficient reasons for various sectors to take advantage of the moment. Business process outsourcing is now one of the main drivers of the economy. Today it contributes 2.8 percent to the national GDP. The BPO industry in Colombia currently employs more than 655,000 people.

According to Ana Karina Quessep Alcove, executive president of the Colombian BPO Association, this industry invested around 2,000 million pesos per month in technology and employee training to manage each digital transformation process. In addition, they consider that a large part of its clients is comprised of the banking and financial services sectors, with a 28 percent share. Beyond this, the telecommunications industry is second with 35 percent. While public services follow with 13 percent, and the health sector comes in fourth place with 10 percent.

The BPO industry in Colombia in figures

The BPO sector, dedicated to outsourcing business processes or contracting commercial activities and functions with external providers, created more than 20,000 jobs during the pandemic. Of these positions, 45 percent were attached to call centers.

Based on figures from the Association, the BPO industry in Colombia, which last year achieved sales of 12 billion Colombian pesos and exports of 1.5 billion dollars, has more than 600 companies in the country. Sixty-five percent of these firms are domestic, while 35 percent are multinationals or “multilatinas.”

For those familiar with the sector, such representativeness in the market requires a robust infrastructure that must be leveraged and replete with technological innovation and digital tools. “Artificial intelligence” (AI) is a vital tool for the industry because it has adapted to digital transformation amid the fourth industrial revolution. These elements are chatbots, new channels that are easy for customers to access (such as WhatsApp), and voice for personalized attention, speech recognition, which personalizes and streamlines the service to the user. In addition to this, it helps the development of proprietary technologies to facilitate all processes supported in the cloud”, adds Quessep Alcove.

More intuitive companies

According to Unisono, a company in the BPO industry in Colombia, one of the significant challenges will be to keep in full evolution to generate connections with clients and create positive user experiences. “Omnichannel, social networks, video assistance, and robotization are other trends in high demand by consumers and digital users. As a result, these services are becoming differentiating elements to improve the customer experience,” said the company’s top executives.

These tools facilitate administrative tasks to provide a superior service to the new digital consumer. These customers have increasingly come to expect immediacy and simplicity in the process. The truth is that care in the BPO industry in Colombia (BPro) has improved with almost immediate information 24 hours a day, seven days a week.

During the Experience Summit, organized by the BPO Association of Colombia, industry leaders in Colombia made it clear that digital platforms, smartphones, constant connectivity, and a robust interface oriented towards the consumer experience will always be essential. “Technology is required to help companies become more intuitive, anticipate what a customer wants, get to know him, and satisfy his real needs.”

Colombia is strong in the industry

“Many multinationals would like to establish operations in the BPO industry in Colombia. This is because the country offers excellent competitive advantages. Among these are:

• The availability and quality of labor in the main cities.
• A modern infrastructure of five submarine cables and a 550 Gbps connection.
• Competitive prices and strategic location geography, since Colombia is in the middle of five time zones.
• Legal stability.

Likewise, it has diversified location offerings in Bogotá and the departments of Atlántico, Bolívar, Antioquia, Risaralda, Quindío, Caldas, Valle del Cauca, and Santander, among others,” according to Flavia Santoro, president of ProColombia.

The Ministry of Economy (MINEC) has made 100% digitized services available to encourage investments in El Salvador.

On Thursday, March 30, 2023, the Salvadoran Ministry of Economy launched the Procedures Streamlining System. This system is administered by  MINEC’s Investment Directorate and is expected to facilitate the flow of investments in El Salvador.

The Minister of Economy, María Luisa Hayem, noted that the Ministry of Economy has succeeded in reducing the investment paperwork process from 31 to 10 procedures on this platform. In addition, the new digital window is available to investors 24 hours a day and can be accessed anywhere in the world.

“Response time to initiate investments in El Salvador has been reduced by 25%, and 100% of the services for our clients have been digitized, specifically for local and international companies, once again protected under our free zone regimes and international services law”, Hayem explained during his launch.

The official commented that past bureaucratic processes disincentivized new investment projects and greater job creation.

System enabled

The Director of Investments, Clarissa Valdebrán, assured that the website “www.inversionista.economia.gob.sv” will be available starting March 31, 2023, for interested investors. Registering an email and a password will only be necessary to enter.

Within the website, entrepreneurs can modify their profiles, verify the documents they share through the platform, and carry out procedures related to audits, attorneys, shareholders, and paperwork.

Users of the system to promote investments in El Salvador will be able to carry out procedures for the qualification and granting of benefits for users of the free zone regime, production and commercialization or deposit, as well as the registration of national and foreign capital. They will also be able to carry out and administer the modification of lists of tariff items.

The director also explained that once each procedure has been completed, an agreement or resolution will be shared by email with the certified electronic signature of the Minister of Economy, which, she stressed, will guarantee the document.

Valdebrán confirmed that companies have already tested this system to encourage investments in El Salvador. She also indicated that the new system’s management training would begin in April.

More investments in El Salvador

The minister hopes that this tool will increase investments in El Salvador, although she clarified that this would most likely take some time. The management of MINEC assured that it works with companies interested in expanding operations in the country and others that are evaluating an entrance into the Salvadoran market.

According to the Salvadoran Central Reserve Bank (BCR), private investment increased by $757.1 million (14.7%) at the end of 2022.

Hayem indicated that the certified electronic signature is being promoted and that finance and technology are the most active sectors in its adoption.

The new window is the result of a national project to facilitate procedures. It results from the agreements reached with 13 institutions with which MINEC will cooperate.

What is on the new MINEC platform to promote investments in El Salvador

Director Valdebrán explained that both natural and legal persons can enter the platform. The processes carried out will include the certified electronic signature of the Minister of Economy.

1.- The profile option

Entrepreneurs may have access to verify their user data and update them. However, the Investment Directorate assured that the regime by which they are covered or wish to engage with must be identified.

2.- Access to documents

The MINEC platform offers the “Documents” option, described by the institution as “a virtual library,” where all the files attached to the stored applications are registered.

3.- Access to audit

During the presentation, Valdebrán assured that this module is important because it allows compliance with the obligations of free zones and international services to present operation reports.

4.- The attorneys

The platform requests to place all necessary information corresponding to the company’s attorney(s). The information is stored in the system and can be used in other procedures.

5.- Add shareholders

Those who access the system can add and access the information of each company’s shareholders who invest in El Salvador. The module represents part of compliance with the Free Zones Law and the International Services Law.

What benefits does MINEC’s platform offer parties seeking to invest in El Salvador?

The new platform implemented by the Salvadoran Ministry of Economy will facilitate investments in the country  by offering users a tool that:

Saves time and money: Streamlining regulatory processes and reducing bureaucratic procedures can save time and money for foreign investors. It allows them to focus on their core business operations rather than being tied up in administrative tasks.

Increases transparency: Simplifying regulations and procedures can increase transparency and predictability, which can help investors understand the risks and rewards associated with investing in a foreign country.

Enhances competitiveness: By reducing red tape, countries can improve their competitiveness and attractiveness to foreign investors. This can lead to increased investment, job creation, and economic growth.

Improves ease of doing business: Reducing red tape can enhance the ease of doing business in a country, attracting more foreign investors. A favorable business environment can encourage companies to invest and expand their operations.

Improves investor confidence: Simplifying regulations and procedures can enhance investor confidence in a country’s business environment. This can encourage investors to invest in the long term and can lead to increased economic growth.

For medical device manufacturing in Costa Rica to continue as a pillar of the economy, issues such as regulations must be improved.

Medical device manufacturing in Costa Rica will continue to grow at a double-digit rate over the next five years. This assessment is according to an estimate by Pedro Beirute Prada, General Manager of the Costa Rican Foreign Trade Promotion Agency (Procomer).

In this regard, it should be noted that Precision and Medical Equipment is the leading export sector in the country. In 2021 it comprised 36% of the country’s exports, equivalent to 5.2 billion dollars. According to the Costa Rican Coalition of Development Initiatives (CINDE) data, this figure is correct. This represented a growth rate of approximately 30% compared to the previous year.

The future of exports of medical devices manufactured in Costa Rica is optimistic. This is because each year, the cluster of this class of manufactured products develops a little more. The sector for medical device manufacturing in Costa Rica presently consists of more than 90 companies. As a result, its ecosystem comprises global leaders and small and medium-sized local companies that act as industry suppliers.

“We continue to see growth in exports this year. And perhaps what is most relevant to this optimistic vision that I have of the sector is that it is an expanding industry. Global demand will continue to grow as the population increases, as longevity and health services increase,” says Beirute Prada.

Innovation is vital for medical device manufacturing in Costa Rica

During the last few years, the country has transitioned from predominantly agricultural exports with little added value to manufacturing-based exports with a high level of sophistication.

This is the specific case of medical device manufacturing in Costa Rica. Currently, its portfolio is made up of multiple products. Among them are kits for medical use, parts, accessories, needles, catheters, prostheses, and serum infusion and transfusion equipment. In addition, to the list must be added diagnostic devices, contact lenses, implants, and heart valves, among others.

In terms of value, of the total exports of Precision and Medical Equipment, 70% of the exports are very sophisticated, points out the Procomer executive.

“Costa Rica is a more boutique country, characterized by generating a lot of sophisticated medical products. It is a country that has responded well to the demands for complexity, let’s say, of medical devices. Companies have found that Costa Rica is a country where they can make the most complex products. This is because of the human resource talent, the inputs, the experience, and the educational level of the engineers, the assembly workers, the managers, etc.,” he points out.

Reference companies and products

From his point of view, among the most complex products that companies manufacturing medical devices in the Central American nation are:

• Medtronic manufactures spinal devices. These implants treat traumatic fractures of the spine and cervical diseases.
• Boston Scientific makes a spinal cord stimulator. They also function for deep brain stimulation. Additionally, the product reduces symptoms of diseases such as Parkinson’s or hereditary tremors.
• The domestic company Establishment Labs produces the latest breast implants in the world. It is recognized for its drop-shaped implants. These have unique silicone and a texture well-recognized by surgeons around the world. They are also known for their safety.
• CooperVision’s contact lenses are distributed worldwide due to its innovation.

What improvements does medical device manufacturing in Costa Rica require?

The director of Procomer attests to the fact that the medical device sector in Costa Rica aims to develop the most complex and sophisticated products in the world. He emphasizes that the country is an excellent place for prototyping and manufacturing but also a suitable environment for research and development.

For this to happen, he believes that it is necessary to improve in the following areas:

• Maintain legal certainty, develop human resource talent, and offer incentives and a business climate conducive to investment.
• Reduce bureaucracy. This will allow companies to operate more agile, safer, and transparently.
• Make regulatory improvements. Therefore, it is necessary to update the legislation around clinical trials for this to occur.

Regarding this last bullet point,  Beirute Prada explains that it is necessary to make clear what can and cannot be done when testing medicines, products, or devices, with the risk that they may or may not work.

In this sense, the products must be approved by the Food and Drug Administration (FDA) of the United States Government. However, they must undergo validation processes for functionality and side effects, among others, for this to happen.

Because of sound economic policy choices that have been made over the last several decades, Chile has managed to consolidate a stable macroeconomic climate and a favorable environment for business. This has positioned the country as one of the most attractive nations in the region for the export of goods and services. As a result, Chilean exports are sold globally.

Chile is a global trading partner

A  recent report by Allianz Trade predicts that foreign direct investment will continue to be Chile’s primary external financing source in the medium term. In addition, Chile’s access to international markets will continue to be solid thanks to the facilities that the country offers through its many free trade agreements (FTAs). Among the FTAs that Chile is currently a party to are the following:

Pacific Alliance: Chile is a member of the Pacific Alliance, which is a trade bloc made up of four Latin American countries – Chile, Colombia, Mexico, and Peru. The bloc has eliminated tariffs on 92% of goods traded among member countries.

Free Trade Agreements with other Latin American countries: Chile has also signed Free Trade Agreements (FTAs) with other Latin American countries such as Argentina, Bolivia, Brazil, Ecuador, and Uruguay.

FTAs with North American countries: Chile has FTAs with North American countries such as the United States and Canada.

FTAs with Asia-Pacific countries: Chile has FTAs with Asia-Pacific countries such as China, Japan, South Korea, Australia, and New Zealand.

FTAs with Europe: Chile has FTAs with European countries such as the European Union (EU), Switzerland, and Norway.

Chile export environment:  a stable macroeconomy

Chile’s record of prudent macroeconomic and fiscal management “has underpinned stability and resilience to shocks,” according to the Allianz Trae report. A rule-based fiscal policy helped contain budgetary deficits, which averaged 2.2% between 2014 and 2019, and public debt levels, which stood at 28% of GDP in 2019.

Real GDP growth was moderate in the last five years leading up to the coronavirus pandemic, with an average year-on-year increase of +2.0%. However, Chile’s robust macroeconomic policy framework has contributed to the country’s resilience to shocks, including the 2019 social unrest. Moreover, due to the adoption of prudent policy, sales of Chilean exports have thrived.

The business climate is one of the best in the region: Chile ranked 59th in the World Bank’s Doing Business 2020 survey, scoring high in minority investor protection, contract enforcement, insolvency resolution, company creation, and processing of building permits.

In addition, the country boasts a very open economy: it is currently subscribed to 31 free trade agreements that facilitate Chilean exports and sustain clear competitive advantages over other, much more restrictive countries.

According to data from the World Bank, it is highly dependent on international trade, representing 57.8% of the country’s GDP in 2020.

Chilean exports: advantages 

Chile has critical competitive advantages that increase its attractiveness as an exporter:

• Plentiful natural resource base: Chile is the world’s largest copper producer but also benefits from other minerals, forestry, and agriculture.
• Strong growth is expected in the medium term.
• Business-friendly environment.
• Solid macroeconomic policy framework.
• A widely accepted democratic political system with successive peaceful transfers of power.
• It is classified as a high-income economy by the OECD.

What are Chile’s main exports?

As mentioned above, Chile is rich in natural resources, although it has also learned to position itself in other industries.

The main Chilean exports are:

1. Metalliferous minerals (mainly copper): 30.1%.
2. Non-ferrous metals: 25.6%.
3. Fruits and vegetables: 9.8%.
4. Fish, shellfish, and derivatives: 7.6%.
5. Cellulose pulp and paper for recycling: 4.5%.

To which countries does Chile export the most?

The main destinations for Chilean exports are America and Asia. However, China and the United States are the big players in Chile’s trade balance and place first and second (respectively) in the ranking of export destination countries and leading importers.

This is the ranking of destination countries for Chilean exports:

1. China: 39%
2. United States: 13.2%
3. Japan: 8.7%
4. South Korea: 5.7%
5. Brazil: 4.2%

Although the outlook for Chilean exports is positive, it depends on several factors, including global demand for its products, changes in trade policies of key trading partners, and domestic economic conditions. In addition, Chile has been working to diversify its export base and move up the value chain, which could help it weather any potential disruptions in its traditional markets for Chilean exports.