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A conversation about foreign investment in Guatemala with Luis Velasquez

by | May 26, 2024

Luis Velasquez Quiroa
President
Consultoría Internacional
Guatemala City, Guatemala
luis.velasquez@consuinter.com

 

LATAM FDI: Today we have Luis Velasquez Quiroa with us. He’s the President of Consultoría Internacional, a firm located in Guatemala City. Today, we are going to discuss foreign investment in Guatemala. Hello, Luis. How are you doing today?

Luis Velasquez: I am doing excellent in Guatemala City, Central America. Thank you for this opportunity to speak with you and your thousands or millions of followers worldwide.

LATAM FDI: Well, that’s great. I hope you’re right about the millions. Let’s start by talking about your background. You have a very interesting resume. You can give the audience a taste of what you’ve done in your career.

Luis Velasquez: Well, I am a member of the fifth generation of a family that came to Guatemala in the 18th century. I have been in different business. My father and mother always told us how to create jobs, how to create opportunities, and how to attract foreign investment in Guatemala. That’s what we have been doing all our life. I am also teaching my grandchildren that the economy is vital worldwide, specifically for Guatemala, Central America, and Latin America. I have experience in agriculture and industrial services. I have been to many different countries around the world. I was also the Minister of the Economy of Guatemala. I was Secretary of State and a candidate for President of Guatemala. I have my TV program. It has existed for 16 years and produced 740 programs. I am also promoting different foreign investments in Guatemala and Latin America.

LATAM FDI: Thank you for providing us with that informational background. It’ll help contextualize some of the answers to the questions I’ll be asking you over the next 20 or 25 minutes. How does Guatemala’s geographic location impact its attractiveness for manufacturing investments, considering its proximity to key markets and transportation routes compared to other countries?

Luis Velasquez: Do you remember the experts say location, location, and location? We are here located in the center of the American continent. God has blessed us to be in this part of the American continent. We are strategically situated because we have the Pacific and Atlantic Oceans. We are a country that is close to the most significant market all over the world. I mean the NAFTA region. Also, the proximity to the United States is by ship, two days and a half from Guatemala to Miami for the Atlantic Ocean. We are only four and a half days from Guatemala to Los Angeles for the Pacific Ocean. If you go by plane, we will be in Miami in 2 hours and 20 minutes, 2 hours and 45 minutes in Houston, Texas, and Dallas if we can go to Panama in less than 2 hours. We are a very strategic location for attracting businesses. It doesn’t matter if they will be installed on the Pacific or the Atlantic coasts. I will give you an example. The Korean companies, the cluster in textiles and clothing, chose Guatemala. They generate over 100,000 direct jobs or over 5,000, I’m sorry, 500,000 indirect workers. They have invested millions and billions of dollars in Guatemala starting 30 years ago. They chose Guatemala as their operational hub to export to the United States, Central American countries, Canada, and Europe.

LATAM FDI: For companies interested in engaging in foreign investment in Guatemala, can you give us an idea of cost costs regarding industrial real estate prices and worker salaries and how those two things compare to neighboring countries?

Luis Velasquez: Yes. This is a critical issue because to be very competitive, you have to take care of the cost related to each product and industry. Here in Guatemala, a square meter costs $4, an excellent price. In other countries, it’s more expensive. To give you an idea, this is the real estate. I give you the actual cost. Worker salaries here are close to $450 per person per month. But most companies are coming here to pay the minimum wage and invest in Guatemala because we are excellent workers. You are living in the United States. You have seen many Guatemalan people and know we like to work. Companies engaged in foreign investment in Guatemala give incentives based on production. They are going to be more competitive here with Guatemala workers. In terms of electricity, we have a lot. Also, we produce our electricity. We are 100% very competitive. Also, we export electricity to Mexico, Honduras, El Salvador, Costa Rica, and sometimes until Panama.

The cost, if you are going to have a big company, you are going to pay seven or five or four cents per kilowatt per hour. It depends on how much you consume. You can sign a big contract for many years. For example, if you are going to have industrial production and need water, there is a lot of water everywhere. When considering foreign investment in Guatemala, you can be very competitive in all the costs necessary to produce your product or service. For example, in the services industry, we have significant, huge investments from TELUS, a company from Canada. They have facilities here with 8,000 people answering the phone, and they provide customer service. Transactel, for example, is from India and is another company that has chosen to make a foreign investment in Guatemala. We have investments from different countries; I am entirely sure that they are also considering the cost of moving to Guatemala.

LATAM FDI: Regarding Guatemala’s transportation infrastructure, What connectivity does the country offer to global markets, particularly concerning ports, airports, and road networks?

Luis Velasquez: We have excellent connectivity by plane. Every day here, we have flights from Guatemala to 10 different cities in the United States. Also, we have connections with Europe, Panama, Mexico, and South America. We have an excellent connection in terms of airports. We are also developing a network of regional airports in the different departments of Guatemala. Another airport will be for cargo in the Pacific Ocean, which will give more competitiveness to companies engaged in foreign investment in Guatemala. We have around 35 other airlines that are coming to Guatemala. Regarding business travel, Guatemala has the highest number of people in Central America and the Caribbean. Also, in terms of ports, we have ports in the Pacific and Atlantic Oceans. We are ready to expand those ports in the Pacific and the Atlantic Ocean to be more competitive, grow the economy, and be part of the global markets. There is a project to recover the railroads we have had since the 18th century from the south border of Mexico through Guatemala. Then, we are recovering rail service from Guatemala to El Salvador to Honduras, the Pacific Ocean, and the Atlantic Ocean.

Regarding the trucks on the roads, we are using an APP system, and we expect this new government to develop more roads because it’s essential for competitiveness and attracting more foreign investment in Guatemala.

LATAM FDI: What are the dynamics of the country’s labor market in Guatemala? Talk about unemployment rates, the presence and influence of labor unions, and the overall market conditions for manufacturing industries in Guatemala if you could.

Luis Velasquez: We have less than a 5% unemployment official rate, but we have close to 70%, 75% of the people that are in informal production, which means that they have their own business. The relationship with the labor unions is excellent. Guatemala respects all the rights of the workers. There is no problem. Also, companies and business people always try to take care of their teams. They have good policies to invest in the people, not only talking about money but also about training, career development, and a good work climate at the companies. We have excellent relationships with the labor people. With the unions, we are fine. Of course, we are not perfect. You know, some people are pushing sometimes. But talking about it in general, the companies don’t have big problems with the workers, and they don’t have big problems with the unions. The excellent issue for foreign investment in Guatemala is that the people here like to work a lot. Of course, they want money. They want to be better, but we don’t see any problem with the unions.

LATAM FDI: Well, how does Guatemala fare in terms of proximity to suppliers, especially concerning access to raw materials, components, and intermediate goods? Additionally, what is the quality of the suppliers found in the country?

Luis Velasquez: The suppliers in Guatemala understand that they are competing in the global market, so they have excellent quality. They are very committed to the contracts that they sign. Of course, the prices are a significant factor. The suppliers in Guatemala don’t think only of the Guatemalan market. They supply some goods to the United States and Latin American countries. We call these companies Multilatinas, which means that they are not only companies for Guatemala but are not only for Central America. They think they must compete, at least in the American continent. Also, we have excellent access to raw materials from the United States, Colombia, Brazil, and Chile, as well as from different countries. For every dollar we import all over the world, 38 cents we import from the United States, which means outstanding quality and reasonable prices. We import 16% from China, and almost 50% comes from Germany, Spain, France, South Korea, and Japan. In terms of the companies that are working here, they have an excellent relationship with the suppliers worldwide.

Honestly, I don’t remember having a problem because of the quality or because the suppliers needed to give the products at the right time. Even when we experienced the coronavirus, it was challenging worldwide. But thanks to God, we have a stable relationship with the suppliers, the local suppliers, and the international suppliers. The excellent issue is that all the companies, nationally and internationally, use the system of the banking system in Guatemala and all over the world. At present, we don’t have claims, we don’t have problems, we don’t have lawsuits. I cannot say everything is perfect, but the average situation with Guatemala’s suppliers and foreign investment is generally good.

LATAM FDI: Regarding political stability, what certainty can foreign investors expect? Are there any incentives the Guatemalan government offers to attract foreign direct investment?

Luis Velasquez: Okay. Guatemala has different systems for the free zones, which we call Zonas de Desarrollo Económico Especial Público Privada. These offer ten years of tax exemption for all the machines and all the equipment you bring to your factory. You do not have to pay any taxes for ten years if you are going to export everything. Can you imagine what that means? That’s an excellent incentive. If you sell to the Guatemala market, of course, you have to pay the sales tax, which is 12%. You will have to pay the income tax for the revenues, which could be 7% of the total gross that you are going to manufacture, or there is another option: you will pay only 25% of the net income. Knowing about those different regimes is essential when considering foreign investments in Guatemala. Also, we recommend that companies investing here in Guatemala take advantage of the CEDEP’s regime to have tax exemptions for ten years. But the most important is that they are going to use all the benefits that we have with the United States because we have the CAFTA-DR, Central American Free Trade Agreement, which means all Central American countries with the United States have a free trade agreement with Mexico also, with Colombia, Chile, Peru, Ecuador.

We are the only CAFTA member with a free trade agreement with Europe. That’s the great news. No other country has this excellent opportunity in Latin America. If you are making a foreign investment in Guatemala, you should have the vision to export to the American continent and Europe. It depends on the product you can export also to Japan or India. For example, one of the biggest companies worldwide that manufactures industrial gloves is based in Guatemala, the American continent. It’s a company with capital from Japan, and they chose Guatemala. They are inside one of the Zonas de Desarrollo Economico, Especial Publico Privada, and they are taking advantage of the fact that we are one of the biggest exporters of rubber and latex in the American continent. They use that as raw material and export it all over the world.

LATAM FDI: I know that you’re involved in a new development in one of the free zones, and it’s called Zona Franca Quetzal, or the Quetzal Free Zone. Can you tell us about that and what it offers to investors?

Luis Velasquez: Well, Free Zone Quetzal, or Zona Libre Quetzal, has an excellent location in the Pacific Ocean. We are only 5 kilometers from Puerto Quetzal in the Pacific Ocean, 5 km from the international airport for cargo, and 2 kilometers from the main highway. Also, the government is rescuing a railroad almost three kilometers from the free zone. Also, there is a lot of infrastructure for a new highway between the south of Mexico and El Salvador, located only 100 kilometers from Guatemala City. That gives us a great opportunity. It’s an excellent location to bring industrial and service company investors. The industrial zone is over 1 million square meters. That’s the first phase, and it can grow. The plans are to develop more Zonas de Desarrollo Economico-Especial, Público-Privado; you can call them free zones. We plan to develop in the Pacific Ocean, the Atlantic Ocean, and other sections of the country. This is still significant because we want to cooperate with people looking for the best job opportunities for foreign investment in Guatemala. There will not be more migration to the United States because we offer excellent facilities for companies investing in Guatemala.

We have been receiving calls from India, Taiwan, Korea, Japan, China, 12 or 11 different countries in the European Union, of course, the United States, Canada, Mexico, and other countries in South America. That is good news, and it is very well-located. We are very well-located, and we have the vision to develop Zona Libre Quetzal and to have, let’s say, 100 customers. We expect to create more than 50,000 jobs in that location only. Still, there are more free zones in Guatemala because companies are looking to our country, and we want to take the opportunity for relocation for nearshoring. We understand very well what this means for companies in the United States and Canada and what this means for companies in Asia that want to sell on the American continent.

LATAM FDI: We’ve covered some ground over the last few minutes. If somebody wants to contact you to ask a question related to foreign investment in Guatemala, can anybody who’s a listener with a question get in contact with you?

Luis Velasquez: Yes, Steve. I can give you my email address, which is luis.velasquez@consuinter.com. I will gladly answer all the questions, and we expect to still receive many questions. Thank you for your interview today.

LATAM FDI: Also, if you don’t mind, at the top of the transcript section of the podcast, would you allow us to put a link built into your name on your LinkedIn page? That way, it would be another direct conduit for people to communicate with you. Would that be okay?

Luis Velasquez: Yes, Steve. I appreciate all your help. Remember that we should work as a team. We love to work as a team, especially with you and many people from your company and, of course, more companies worldwide. Now, we should understand that we need each other and that for Guatemala, in this case, each new job means a new opportunity. The people need more opportunities.

LATAM FDI: That’s correct, and we can all agree. I wish you good luck, and thank you for participating. I look forward to communicating with you and hearing how your development at Zona Franca Quetzal is progressing.

Luis Velasquez: Thank you, Steve. We will keep in touch with you. Remember, anytime you are welcome to come to Guatemala to visit Zona Libre Quetzal, if you want to bring your clients and different companies worldwide, we will take care of you and your associates. We will be glad to give you a special tour. This is your country. The eternal spring of Guatemala is open to do business with you and your colleagues.

LATAM FDI: Thank you very much, and have a great day

Contact LATAM FDI to discuss your foreign direct investment plans in Latin America.

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