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GUATEMALA Rising investment platform
As central bankers, ministers of finance and development, private sector executives and academics congregate in Washington D.C. for the 2010 IMF/World Bank meeting (October 9-11), many eyes will be on the U.S. capital as pressing global concerns are debated. For emerging and middle-income economies that depend on IMF and World Bank assistance for their development, the meeting is closely scrutinized as they work toward solving the challenges that impede growth and social development with the institutions.
Contributing 39.8% of the regions' GDP, Guatemala has a positive macroeconomic outlook and is on course to attract more than U.S.$1.512 million in foreign direct investment (FDI) by 2013. At a review meeting in June this year, IMF officials declared that “Guatemala’s economic recovery is firming up. The authorities’ strong policy response Álvaro Colom President to the global crisis, supported by a Stand-By Arrangement with the Fund, has provided a solid foundation for the recovery. "With a more benign global outlook, real GDP growth is expected to exceed 2% in 2010, which is significantly higher than envisaged in the previous review. Downside risks to the outlook have declined further and stem mainly from a slower recovery in the U.S. and a sharper rise in oil prices. “Performance under the program has been strong. All endDecember 2009 and end-March 2010 quantitative performance criteria were met comfortably and inflation stayed within the inner consultation band agreed in the program.”
Guatemala, the largest economy in Central America with a gross domestic product of U.S.$66.4 million, has enormous potential to be a significant world player, yet more than half the Guatemala’s gifts to investors country’s 14 million population lives below the poverty line. Boasting a strategic location on the Atlantic and Pacific Oceans, Guatemala’s proactive, center-left government, led by modern infrastructure, and sound legal and financial frameworks, President Álvaro Colom since January 2008, is, however, the mountainous country enjoys free trade agreements with working with the World Bank in three key areas: legitimacy, some of the largest world markets, including the U.S., neighbortransparency and efficiency of public institutions; investing ing Mexico, and the E.U., and has been given consistently stable in basic social and economic services: and promoting more or positive ratings with the major international ratings agencies in inclusive trade and private sector-led growth. the past decade. In June, Moody's upgraded Guatemala's standing from Ba2 to A beautiful country, known for its coffee, fresh produce and fascinating Mayan culture, Guatemala has, the World Bank observes, Ba1, with a stable outlook. Moody's based its rating on the new incredible potential to accelerate broad-based economic growth "stable macroeconomic environment" of the country, which has and poverty reduction through trade, regional integration and tour- been strengthened by "prudent fiscal and monetary policies." Standard and Poor's have also rated Guatemala BB/Stable&B. ism. As well as offering the freedom of capital mobility and unlimWith 85% of its population under the age of 45, Guatemala has a ited repatriation of profits for any foreign investor, the country has great wealth of human capital—by age range, the most productive also had low and controlled inflation for over 10 years. www.businessfocus.org.uk
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A breathtaking landscape of lakes, mountains and volcanoes.
in Central America—with an important university demographic and a skilled workforce. Its extensive natural and human assets offer several investment opportunities, particularly in agribusiness, tourism, manufacturing, call centers and business process outsourcing (BPO), natural resources, energy and mines. Tackling social challenges Since coming into office, President Colom has been tackling social issues head on, introducing a number of important long-term social programs to lessen inequality and help propel Guatemala forward. One of the most successful has been the "Open Schools" initiative—a nationwide program in which 200 schools open on weekends to give youngsters the opportunity to participate in educational, social and sporting activities. The government also offers financial incentives to parents who ensure their children attend school regularly. “Ours is the first government in 50 years to tackle social issues and there has been a dramatic change in education and health already,” the President says. First Lady Sandra Torres de Colom, who previously worked in the private sector, has also demonstrated an active commitment to the country’s social and business development and bettering the lives of vulnerable people through her much-admired work with Guatemala’s Social Cohesion Council. While acknowledging that science, technology and innovation will play key roles in meeting some of the challenges faced in the Central America region—including climate change, water management and the food crisis—the government continues to work on fiscal reforms, security, and the provision of cleaner, cheaper and safer electricity, as well as the social agenda. Through stablilizing reforms, free trade agreements and a business, Colom, a former businessman himself, has been able to position the country as a highly attractive destination for foreign investment and a competitive platform for the world’s business markets.
Solid financial system Guatemala has modern infrastructure, developed telecommunications, a skilled workforce and state-of-the-art technology at its disposal. Its healthy GDP reflects the high productive potential of the country, with industry, agriculture and trade still the main engines of the economy. Sectors such as services, transportation and construction have experienced important growth, and Guatemala’s economy is the most diversified in Central America. The country enjoys a solid, competitive, and well-regulated financial system, with solid international reserve levels and the lowest foreign debt in the region. In recent years, strong mergers and acquisitions have led to the creation of much larger banks, which has allowed them to better serve larger clients and provide world-class services and products. Small and medium sized banks have in the meantime concentrated on exploiting specific market niches.
Ours is the first government in 50 years to tackle social issues. President Álvaro colom
Improved commercial access A strategic geographic location that grants privileged access to both the Atlantic and Pacific oceans means Guatemala can trade directly with Asia, North America and Europe from modern seaports on both coastlines. Its free trade agreements with the largest world markets constitute a tool for the country’s development and are a basis for the promotion of FDI. Guatemalan products like coffee and rum have been given access to wider international markets, with the country now the world's fifth largest coffee exporter, after Brazil, Vietnam, Colombia and Indonesia. Some 48% of exports are headed for the U.S., 25% for Europe and 16% for Japan. www.businessfocus.org.uk
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President Colom and the First Lady attend an event
Guatemala is home to beautiful and historic attractions
Colom’s government has done much to reduce or eliminate customs barriers, establish transparency and provide a legal framework that does not discriminate between foreign and local investments with the freedom to move capital and repatriate funds. The country's changing face is evident from its export figures. In 1986, 65% of exports were traditional products of coffee, sugar, bananas and cardamom. Today, these commodities account for less than 40% of total exports, with non-traditional products, such as textiles, handicrafts, manufacturing, vegetables and fruit, taking a larger stake. The country exports more than 4,000 products to 131 markets around the world, and there are around 4,000 companies promoting Guatemalan trade. In specific terms, the country is the premier exporter of Chinese green peas to the U.S., the number one exporter of cardamom and poinsettias in the world, the leading supplier of wood for Yamaha and Gibson, the leading supplier of manufactured products in Central America and the first supplier of coffee for the ubiquitous Starbucks brand. Although Guatemala has a modern and developed road infrastructure, the government is currently developing public-private partnership legislation with the purpose of improving and expanding ports, airports, and highways. Invest in Guatemala plays a pivotal role in promoting Guatemala internationally and attracting the investment needed to transform the country. Along with the National Program of Competitivity (Pronacom), it has a clear mandate to improve the business climate and accelerate economic and productive growth. Providing excellent support for investors, Invest in Guatemala acts as a one-stop shop, offering an important network of contacts and services that include: facilitation of initial operations, practical assistance and operational support, up-to-date information, and personalized visits. Executive director Virgilio A. Cordón says: "Our advisors are specialized in providing solutions for clients, and are recognized
for their professionalism, commitment, and confidentiality when handling client information." A full range of incentives is available, and foreign investment laws have been simplified to make them more investor-friendly. Agribusiness Agriculture remains a crucial component of Guatemala's export and domestic economies, accounting for 23% of GDP (U.S.$11 billion) and employing 50% of the labor force (1.7 million workers). With excellent quality produce, such as coffee and fresh fruit and vegetables in plentiful supply, the agribusiness sector offers some of the greatest development and competitive opportunities for Guatemala, at world level, with a range of related industries contributing to the productivity of different industry branches, and providing greater added value. The government and the private sector have together devised long-term strategies that enable the strengthening and development of the sector and its clusters, thereby providing stability to agro-industrial investments. Guatemala's agrobusiness center offers great comparative and competitive advantages, such as proximity and quick access to markets in North America (with 325 million inhabitants) and Mexico (100 million inhabitants) and is the point of entry to the Central American market (37 million inhabitants.) It also has a unique biodiversity, as well as 350 micro-climates, that provide variety and available raw materials all year round; plentiful skilled labor; loading ports on both the Pacific and Atlantic oceans; a positive quality-price ratio: and food security plans that are being adapted as world models. Manufacturing Previously characterized by clothing and textiles, Guatemala’s manufacturing and assembly sectors are now open to electronics, auto parts and medical supplies. Its main partners are Central America, the U.S., the Caribbean, South America and the European Union.
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Guatemala's distinctive textiles and handicrafts are sold at home and abroad.
Call centers and BPO With a strong human capacity and world-class technology, call centers and business process outsourcing offices are becoming a significant part of Guatemala’s economic landscape. The country offers competitive labor costs, high industrial standards, and bilingual staff that speak Spanish and English—all of which are making Guatemala one of the most attractive investment destinations for this type of work in Latin America. Tourism Tourism is a key growth area in the country which can claim an “eternal spring” climate, a fascinating cultural heritage from the indigenous Mayas and stunning beaches. In light of the high profit margins associated with tourism receipts, the government is making solid efforts to expand the sector and attract more foreign visitors to Guatemala, with investment agencies, like Invest in Guatemala, working hard to encourage better marketing and information on tourism products and destinations promoting the country. The service industry—which encompasses retail, financial services, transportation, and ICT services, as well as tourism—contributes the largest segment of Guatemala's GDP (57%) and employs about 35% of the nation's total workforce (1.2 million workers). Guatemala’s privileged geographic position, political stability, natural and cultural richness are all competitive advantages. The breathtaking country provides a comprehensive tourism product and has a large variety of high-quality tourism segments, such as: • Archeology • Colonial history and legacy • Indigenous culture and communities • Volcanoes • Fishing • Ecotourism and adventure • Beaches on the Atlantic and Pacific coasts Accommodations are of good quality, with a host of excellent local
and international hotel names present at sites around the country. Guatemala offers something for everyone: the business traveler, the adventure tourist, the eco-tourist, the cruise passenger, the Mayan/archeology enthusiast, and those who like a combination of beaches and sightseeing. The capital, Guatemala City, located in the geographical heart of the country, is home to around three million people and the largest and most developed city in Central America. As well as maintaining its Mayan flavor and colonial heritage, the city offers visitors a comfortable and cosmopolitan stay, with museums, shopping malls, restaurants, golf courses and nightlife all close at hand.
Guatemala offers something for the business traveler, the eco-tourist, the cultural enthusiast and the beach lover. This political and economic hub has also been building its reputation as an events destination. In 2007, it was chosen as the location for the International Olympic Commission session, and in February this year, it played host to the third meeting of the World Coffee Conference, attracting representatives from over 75 countries. Antigua Guatemala is the best-preserved colonial city in Guatemala and was made a UNESCO Humanity Heritage Site in 1979. A high-quality tourism destination, there are major opportunities here for residential, hotel or boutique hotel development. With the richest rainforest in Central America, the Petén region is home to some of the region's most outstanding Mayan attractions. Beach lovers, meanwhile, can enjoy the tranquility of the Caribbean coast at Izabal, while Guatemala's Pacific Coast is the perfect setting for hosting world-famous fishing tournaments. For further information, please visit: www.investinguatemala.org www.businessfocus.org.uk
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Guatemala report December 2010