Why Did Foreign Investment in Guatemala Spike in 2021?

In 2021, international immediate investment (FDI) into Guatemala strike file ranges, following the place noticed the most affordable levels of FDI in a ten years the prior 12 months. But what created overseas financial commitment in Guatemala spike so radically in 2021?

Guatemala is Central America’s premier economic system by gross domestic solution (GDP), as nicely as a single of the swiftest increasing amid the seven nations on the isthmus, only experiencing  two a long time of GDP decrease because the convert of the century. 

Alongside with Nicaragua, Guatemala was also one of only two international locations from the sub-location not to sign-up GDP drop in 2020 – a calendar year when a lot of of the world’s economies were being rocked by the COVID-19 pandemic. On the other hand, the two international locations had been however adversely influenced by the crisis.

SEE ALSO: Do You Need to have a PEO in Guatemala?

That 12 months, world FDI collapsed, slipping from $1.5 trillion in 2019 to $859 billion the next yr (all figures in USD), before rebounding strongly – albeit erratically – in 2021, to hit $1.65 billion, in accordance to the United Nations Conference on Trade and Advancement (UNCTAD).

A person county where by that unevenness was borne out significantly was Guatemala, in which a leap from $931.1 million in 2020 to $3.472 billion the next yr represented a more than 370% improve in FDI.

In a different notable transform, Luxembourg also leapt into top rated spot among the nations from which FDI in Guatemala originated, leaping in advance of the likes of Colombia, Mexico, and the United States, which have been the greatest sources of financial commitment into into the country in the latest years.

That shift was accompanied by an additional notable twist – simply because in 2021 the sector that obtained the most overseas financial investment in Guatemala was telecommunications, leapfrogging the finance and insurance policy sector, which traditionally occupies top location, in accordance to a report from Prensa Libre. 

Raising recognition of foreign investment decision in Guatemala mirrors financial growth

Guatemala’s financial state has developed exponentially about current a long time, hitting $77.6 billion in 2020, and FDI has followed go well with, with Earth Financial institution figures demonstrating it much more than doubling amongst 2009 and 2019.

Even though the figures revealed by Prensa Libre – one of Guatemala’s most perfectly-highly regarded newspapers – differ rather, they continue to show FDI in 2019 being practically twice what it was in 2009.

Guatemala’s robust economic functionality will come on the back again of major safety improvements, with the country’s notoriously superior amounts of violence drastically lessened – as highlighted by the intentional murder amount extra than halving through that identical period of time.

Guatemala added benefits from owning a hugely strategic place, occupying the the greater part of Mexico’s southern border, and performing as a gateway among the three big North American economies and the relaxation of Central America. 

Spanning the width of the Central The united states isthmus, Guatemala has superior-volume ports serving equally the Pacific Ocean and Caribbean Sea, supplying easy freight accessibility to all of the Americas, as properly as Asia-Pacific and Europe.

The Central American state is effectively-recognized for its agricultural output, with coffee, bananas, and sugar among the its key exports and the sector delivering just about 10% of GDP. The country’s producing sector is also sizeable, giving 22% of GDP, with the garment producing field especially major.

Past that, a quickly-developing expert services sector, such as important locations for foreign expenditure in Guatemala, such as financial expert services and coverage, generates much more than 60% of GDP.

Meanwhile, telecommunications has been an essential desired destination for FDI in Guatemala, whilst the figures getting invested formerly have not arrive shut to the additional than $2 billion in investments in the sector observed in 2021.

Being familiar with the spike in overseas financial commitment in Guatemala

The huge spike in foreign expenditure in Guatemala in 2021, as effectively as the emergence of Luxembourg as the principal origin of capital and telecommunications as its primary location, can all be understood in the context of 1 key deal struck at the conclude of the year.

In November 2021, it was announced that Luxembourg-based telecom business Millicom was investing $2.2 billion to acquire full handle of Tigo Guatemala – just one of the biggest players in the Central American country’s telecommunications sector. 

The deal saw Millicom, a corporation focused on telecommunications in Latin The usa, improve its 55% stake in Tigo Guatemala to choose entire equity and turn out to be the country’s greatest participant in the sector.

The deal represented the premier at any time single foriegn expense in Guatemala, and noticed Millicom further more consolidate its status as a important power in telecommunications in Central The usa. Millicom also has a key existence in Costa Rica, El Salvador, Honduras, Nicaragua, and Panama, as very well as in South American nations Bolivia, Colombia, and Paraguay.

That reportedly took acquisitions by the Luxembourg-dependent company in the sub-region over and above $5 billion inside of a few several years, although the organization followed up its Guatemala investment with a pledge. 

In a mark of the Luxembourg-primarily based company’s religion in the area, in 2021 the organization mentioned that it would be selling all operations in Africa in get to focus on the 9 Latin American markets wherever it is active. In early 2022, the enterprise pledged to commit a further more $3 billion in the region around the coming a few a long time.

According to the Economical Occasions, Millicom has a complete of 44 million mobile customers and 4 million home broadband consumers, and the $3 billion is established to be pumped into infrastructure and the enlargement of its current interests. 

When some commentators have highlighted the challenges concerned in Millicom’s investments in Latin America’s sometimes unstable economies, according to Mauricio Ramos, the company’s main executive, the region offers major possibilities for advancement.

“Our essential premise is: these are escalating economies, extremely steady [foreign exchange], noticeably underpinned by this raising quantity of remittances,” he was quoted as indicating by the Economic Occasions.

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