Overview of Guatemala’s FDI Target
The Guatemalan government has launched a Guatemalan foreign direct investment strategy, recognizing FDI as a critical driver for the country’s economic development. Over the past 15 years, global FDI has reached $29.9 trillion. Latin America and the Caribbean have captured $3.58 trillion, equivalent to 11.93% of the total. Guatemala, the largest economy in Central America, has seen its FDI grow from $934 million in 2020 to $1.552 billion in 2023, showing an 18.41% increase. The target for this year is $1.65 billion, underscoring the significant role of FDI in Guatemala’s economic growth.
Regional FDI Comparison
According to a World Bank report, the FDI for the eight countries in the Mesoamerican region, from Belize to Panama and the Dominican Republic, is 5.06% of the total for Latin America, similar to the amount captured by Colombia during the same period. The countries in this region that have attracted the most foreign investment are Costa Rica and the Dominican Republic, each exceeding $4 billion annually. In the case of Guatemala, the largest economy in Central America, although investment has been on the rise, the maximum captured during 2023 was $1.552 billion, showing a growth of 18.41% from 2020 to 2023, not considering the exceptional investment from Millicom of $2.2 billion in 2021, according to statistics from the Bank of Guatemala (Banguat).
Challenges and Goals
“FDI has been increasing every year. Since 2020, it has grown from $934 million to $1.65 billion, which is the target for this year. It’s not a bad number, but it’s not enough. Therefore, all efforts to improve this figure will be essential. We need to reach levels closer to those of the Dominican Republic and Costa Rica. This requires inter-institutional collaboration. Without good roads, ports, and airports, it will be challenging to attract the amount of FDI we need,” says Álvaro González Ricci, President of Banguat. This underscores the pivotal role of Guatemala’s foreign direct investment strategy in addressing these infrastructure challenges and its potential to boost FDI significantly.
Government and Private Sector Initiatives
Gabriela García, the Minister of Economy, is more optimistic, aiming to reach $1.7 billion in new FDI, excluding reinvestments. To this end, the Guatemalan government has officially launched the national Guatemala foreign direct investment strategy, a comprehensive plan that includes all measures and actions to promote the country as an investment destination. The strategy encompasses initiatives to improve infrastructure, develop human capital, and promote key sectors for investment. The Ministry of Economy (Mineco) coordinates this national initiative, consolidating seven years of work by various technical teams from the private sector, international cooperation, and the public sector, working together with a common goal: the integral development of the country in all socioeconomic aspects.
“With the presentation of this initiative, or the creation of a national agency for promoting foreign direct investment, additional hands will be needed to achieve results; this is where we are involved,” says Juan Esteban Sánchez, Executive Director of the private investment promotion agency, Invest Guatemala. He adds that while an investment attraction strategy with a realistic component is challenging and not a short-term endeavor, those with the knowledge and commitment to generating results understand this well. A private promotion agency can contribute to a workforce with knowledge, experience, and market intelligence. This specific approach, understanding how a company operates to address its needs and how we can assist, aligns with the government’s approach, as it is a matter of aligning interests and efforts with the ultimate goal of benefiting Guatemala,” Sánchez explains. The Guatemala foreign direct investment strategy reflects this alignment of interests.
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Focus Areas for Investment
The government’s strategy prioritizes the analysis of sectors proposed for short-term investment attraction, such as processed food and beverages, apparel and textiles, IT and business services, contact centers, and BPOs. Mineco will expand the analysis to medium- and long-term economic activities for investment attraction as the strategy develops. The plan also prioritizes markets with which Guatemala has a historical relationship of investment and trade, supported by 19 investment agreements and 14 Free Trade Agreements. Additionally, it considers investment flows with growth and interest in the Central American and North American markets, providing a production and logistics platform for these areas. The Guatemala foreign direct investment strategy thus focuses on leveraging these trade relationships and market opportunities.
Infrastructure and Human Capital Development
Simultaneously, the government authorities under Bernardo Arévalo face the challenge of modernizing the country’s deteriorated infrastructure and promoting human capital development. These efforts are crucial for improving competitiveness in the medium term and attracting companies in more specialized sectors such as health services, electrical-electronic, biotechnology, medical devices, and the tourism industry. Additionally, there are plans to promote business opportunities across the country to link small and medium-sized enterprises to national and international value chains, similar to the experience with the Japanese plant Yazaki in Ayutla, San Marcos. The Guatemala foreign direct investment strategy will be critical to these efforts.
Conclusion
Guatemala’s ambitious FDI strategy, aiming to attract $1.65 billion, is a key part of its plan to boost its economic development. This strategy, which leverages the country’s strategic location and trade relationships, can significantly enhance Guatemala’s economic competitiveness and create new opportunities for local and international businesses. Over the past 15 years, Latin America and the Caribbean have captured $3.58 trillion in global FDI, with the Mesoamerican region, including Guatemala, securing a share of this total. Despite recent growth, Guatemala’s FDI remains below that of regional leaders like Costa Rica and the Dominican Republic. The Guatemalan government, led by the Ministry of Economy and supported by the private investment promotion agency Invest Guatemala, focuses on sectors such as processed foods, apparel, IT, and contact centers. The government’s strategy also emphasizes improving infrastructure and developing human capital to enhance competitiveness and attract specialized investments in the health services and biotechnology sectors.
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