LATAM FDI: We’re pleased to have Wendy Mena with us today. She’s the investment promotion advisor for the Guatemalan Investment Agency. I’ll let her tell you about her organization. We’re going to talk today about opportunities for investment in Guatemala. Hello Wendy, could you introduce yourself and tell us about your organization?
Wendy Mena: Hi, yes, good morning, good evening, or good night to anyone. My name is Wendy MENA. I am an investment promotion advisor at Invest Guatemala. Invest Guatemala working in Guatemala in all processes, from finding local partners, finding opportunities, or installing their new operations in our country. So, I’m very happy to be here to share with you what’s been going on in Guatemala and all the great things we’re doing to attract and have more investment in Guatemala.
LATAM FDI: Based on your experience Wendy, what are the main attracting factors that bring foreign direct investment to Guatemala, and why are companies choosing to start operations there?
Wendy Mena: So, let me start by sharing with you a bit of what we’ve been doing in the last couple of years. After the Pandemic, Guatemala, mainly Guatemala’s private sector, started thinking about how we could develop a plan that will help us recover our economy. And by this time, we were talking about all of the disruptions in the value chains due to the high cost of transport. We started talking in the country about how we could take advantage of the nearshoring tendency related to all companies that wanted to relocate their operations. And so, we made an alliance between the private sector, the public sector, the government in particular, that was starting by then their new electoral period. With the help of academia, developed a plan called Guatemala Moving Forward. In Spanish, its name is Guatemala No Se Detiene. And this basically has been a holistic strategy working towards bringing more foreign direct investment to our country based on strengthening four main areas: human capital, infrastructure, competitiveness, and legal certainty. So since then, we’ve been seeing how working together with the different sectors.
And why are countries or companies choosing to invest in Guatemala? Well, one of the main things is our strategic location. Guatemala is located in Central America, as you know, right next to Mexico. We share a border with Mexico and are the closest of the Central American countries to the North American market, to the US. We have access to both oceans, making transportation more efficient and less costly. Plus, we are the most stable economy in the region, and we have different regulations that favor new investments to come. So, through that and all the preferential access that we have through our free trade agreements, our young and skilled labor force, and the competitive costs in main factors of the operations of the companies, like energy, telecommunications, and real estate, have made companies choose to invest in Guatemala.
LATAM FDI: What laws does Guatemala have in place that specifically benefit the attraction of foreign direct investment, and what kind of benefits do they offer to companies that seek to locate in your country?
Wendy Mena: Guatemala is a bit different than our neighboring countries when it comes to laws that benefit the attraction of investment. Because we don’t have just one special regime. We have three different special regimes that new companies that come to invest in Guatemala and want to export from Guatemala can benefit from. For 30 years, we’ve had one decree that is called the Law of Promotion and Development of Export Activity and Maquila. This is perhaps the main instrument foreign companies have been taking advantage of when they invest in Guatemala. And what happens is that the difference between this promotion law with what we know about neighboring countries that are the free zones, the free trade zones, is that it is not required to be within a specific zone to have special incentives, mainly tax incentives to operate when you’re exporting your product. What you do is qualify the building where you’re operating or where your factory is going to be. And that area, without being an enclosed area, can benefit from a series of different incentives, which include, for example, the exemption of the fiscal taxes for ten years and also suspension of duties when importing machinery, when importing raw material, when importing everything that you need to transform your product.
So, this has been an instrument that, for the past few years, has been developing different industries, and in fact, it perhaps transformed the whole export structure of Guatemala. Guatemala is usually known for exporting coffee or bananas, sugar, and cardamom, which are some of our main products. But the truth is that most of our exports are not those products. Because through this agreement, through this decree that benefited companies for so many years, we were able to develop a very solid industry. This is mainly in the apparel and textile industry, manufacturers of all kinds. We make plastics. We make paperboard. We make toys. We do all kinds of manufactured items. We make a lot of wood products, furniture, food, and beverages, which is a very strong sector. Pharmaceuticals are also big. We have a large agro-industry sector where we grow many vegetables, fruits, flowers, foliage, and all kinds other of items. We have a service sector that has also grown a lot in the past few years because service companies have come to invest in Guatemala in recent years. And aside from that, we also have the usual type of regulations, which are the free zones and the free economic development zones, two of the other models we have established by decree.
There are different incentives for new investors that are thinking about exporting from Guatemala that include exemptions on income taxes for ten years, suspension of all the value-added tax, and import duty taxes for all of the raw materials and anything that you’re going to need in terms of machinery and equipment. After a company comes to invest in Guatemala, it can export from our country to anywhere it wants by taking advantage of our free trade agreements with over 40 countries.
LATAM FDI: I didn’t realize you had that many countries covered. I would assume the Cafta is one of the main trade treaties. Does the country have an infrastructure including industrial parks and real estate developments with office areas for BPO industry companies? Where can new investors start operations in Guatemala?
Wendy Mena: Yes, each year, I will say about 3.5 million m² are authorized for construction in our country. Of course, this includes both residential construction and commercial use construction. Perhaps the relationship is mostly about 50% to 60% residential, and 40% is an investment in Guatemala for commercial use. But yes, we have a very dynamic construction sector and real estate sector that is constantly renewing itself to offer investors tailor-made options for offices of commercial warehouses and anything that companies need to start operations. But also, aside from this because we have different regulations that are looking for more development in industrial parks like the Special Economic Free Zones. We are in the process of developing a lot of these zones. There are actually two in operation currently that have a nice offer for companies that are installing or looking to install and are ready for new projects to start. Over twelve of them are being developed in the next couple of years to facilitate investment in Guatemala. So, we’re talking about projects close to our ports in the Pacific, Puerto Quetzal, our main port in the Pacific. There is a very large project there that is currently receiving new investors.
They have built over 40 already. They have over 12 million square feet available for anyone who would like to invest in Guatemala. And then there’s another large project that is close to our border with Mexico because we share a border with Mexico. This project is also a very interesting offer for companies that are looking to install there, and they also have a nice offer of space ready for anyone who wants to set up new industries. And then we also have the free trade zones. Over seven free trade zones are currently operating, and they receive new projects all the time. But there is development taking place all over the country in new areas where people can invest in Guatemala. I think there’s an interesting offer of new developments for companies looking for something already built and ready to start operations. Additionally, build-to-suits can be done quickly.
LATAM FDI: What kind of industries and sectors are showing interest in the opportunities to invest in Guatemala?
Wendy Mena: In the past couple of years, I will say the sector that has attracted the most greenfield projects because Guatemala has a lot of reinvestments. But talking about new investments and new greenfield projects have been in the manufacturing sector. For example, we have a good cluster in the apparel and textile industry in Guatemala. But for many years, this industry was focused perhaps more on the final products. Now we have a more integrated cluster where you will find more investments coming not only in the area of sourcing, which is what Guatemala used to do, like apparel and finishing products but there are new investments coming in activities like spinning mills and textile mills that are trying to integrate into the cluster that we have. On the manufacturing side, we are seeing new investments, new greenfield projects, and industries that Guatemala didn’t traditionally have. For example, we first invested in the auto parts industry. A huge Japanese company installed operations in Guatemala and is doing electric harnesses. And they are looking into other auto parts of low complexity that they can develop in Guatemala to provide for the Mexican and the United States’ large automobile industries.
Then we have other products that are developing a lot, which include food and beverages. This is happening because of all of our natural resources and the fact that we have a lot of vegetables and fruits grown all year round. Many companies are coming and interested in providing value added to our agro-industrial sector offer by developing plant-based and ready-to-eat products, organic and natural food products, or private label manufacturing of all types of baked goods, snacks, and beverages. And then we also have a lot of companies interested in private labels for cosmetics, for pharmaceuticals. Another interesting new company that will be up in Guatemala is will a natural fiber packaging company. They are developing a project in Guatemala to take advantage of the sugar bagasse and transform it into biodegradable packaging. They’re going to build the largest site in the world for this kind of product. So, we are seeing a lot of dynamism in industries related to textiles and industries related to manufacturers in agro-industry.
LATAM FDI: What strategies did you use to make this activity occur in terms of the promotion of investment in Guatemala?
Wendy Mena: So, before I was telling you a bit about what we’ve been doing as an investment promotion agency in Guatemala and how this organization was born. When we started following a country strategy by implementing the Guatemala Moving Forward plan. So, through the Guatemala Moving Forward plan, we analyzed where the opportunities were happening and the capabilities that Guatemala had in order to attract investment in Guatemala in two areas. One is the traditional products that already Guatemala has, but they can jump into more value-added products. And then new sectors that are having investments all over the world where Guatemala has a big potential, and we can do a leapfrogging into more sophisticated industries. We developed strategies for three specific sectors. One was pharmaceuticals and medical devices, the other was electronic manufacturing services, and the third was all the services like business process outsourcing and information technology outsourcing. We have developed strategies for each of them, specifically where we’ve been trying to reach out to more companies that perhaps have never heard about Guatemala as an investment destination. One of the things that we identify is that Guatemala is a great country to come and invest in, but we have not been very good at letting people know all the advantages of investment.
Unlike our neighboring countries, we haven’t marketed ourselves as well as we should because we have the same good things to offer as our neighbors, attracting many projects. For example, Costa Rica, in particular, is the country that generates the most investment in proportion to its GDP. And Guatemala has a very similar offer that we could promote because we have similar conditions to Costa Rica and additional things because we are a larger country, we have a larger market, we have a border with Mexico, and we have more skilled force because we have the largest population in Central America. So, there are many things that we need to do. We started doing a lot more work of having a presence in international events and making more national events to invite investors to know more about our country and the advantages of investment in Guatemala. We’re implementing a more proactive strategy and not a reactive one, where we are not only now helping people who come and are interested, but we’re also reaching out to them and saying hey, learn about Guatemala and all of the advantages. And we have had success stories by doing that, reaching out to whomever we think might benefit from a near-shoring strategy and investment in Guatemala being the destination.
LATAM FDI: Wendy, when we post these podcasts, we often find that listeners receive the information and, after doing so, they have follow-up questions. This information generates questions in the minds of the listeners. What we like to do is provide them with information on how they can contact you to ask you questions and find out more about how to invest in Guatemala. How could somebody get in contact with you to be able to find out more?
Wendy Mena: So yes, well, first of all, we invite the listeners to visit our website. We do have a website; it’s www.investguatemala.org. You are welcome to visit and know more about all of the advantages that Guatemala offers. It contains success stories about companies that have recently been installed in the different sectors that Guatemala is attracting. Listeners can send any questions through our website, but they may also contact us directly. And by that, let me share with you my email, which is email@example.com. Or I’ll be happy to share with you a QR code so that they can access my contact information and my team’s contact information for specific questions about different industries with opportunities to invest in Guatemala.
LATAM FDI: In addition to that, what we do with the podcast when we process them is we put a transcript of our conversation on our website. Above the text, we will put a link to your LinkedIn page. Is that OK?
Wendy Mena: Yes, yes, please do so. We’ll be happy to share that. Okay?
LATAM FDI: Wendy, I want to thank you for speaking with us today. And it’s it sounds like you have a lot of exciting things happening in Guatemala, and we wish you a lot of you.
Wendy Mena: Thank you.