Why Did Foreign Investment in Guatemala Spike in 2021?
5 min readIn 2021, overseas immediate investment decision (FDI) into Guatemala strike record degrees, following the nation noticed the most affordable concentrations of FDI in a ten years the preceding year. But what made overseas financial commitment in Guatemala spike so radically in 2021?
Guatemala is Central America’s biggest economic system by gross domestic products (GDP), as very well as one particular of the quickest increasing among the seven nations on the isthmus, only experiencing two years of GDP decline since the convert of the century.
Together with Nicaragua, Guatemala was also one of only two nations around the world from the sub-area not to register GDP decline in 2020 – a 12 months when quite a few of the world’s economies were rocked by the COVID-19 pandemic. Nonetheless, both of those countries ended up continue to adversely impacted by the disaster.
SEE ALSO: Do You Need a PEO in Guatemala?
That year, world-wide FDI collapsed, falling from $1.5 trillion in 2019 to $859 billion the subsequent 12 months (all figures in USD), ahead of rebounding strongly – albeit erratically – in 2021, to strike $1.65 billion, in accordance to the United Nations Meeting on Trade and Improvement (UNCTAD).
One county wherever that unevenness was borne out appreciably was Guatemala, where a leap from $931.1 million in 2020 to $3.472 billion the adhering to calendar year represented a extra than 370% raise in FDI.
In a further notable transform, Luxembourg also leapt into top rated spot amid the nations from which FDI in Guatemala originated, leaping ahead of the likes of Colombia, Mexico, and the United States, which have been the major resources of financial commitment into into the state in new decades.
That shift was accompanied by another noteworthy twist – due to the fact in 2021 the sector that gained the most foreign investment in Guatemala was telecommunications, leapfrogging the finance and insurance policy sector, which typically occupies prime place, in accordance to a report from Prensa Libre.
Expanding popularity of overseas expense in Guatemala mirrors economic development
Guatemala’s financial system has grown exponentially above latest decades, hitting $77.6 billion in 2020, and FDI has followed go well with, with Environment Bank stats showing it extra than doubling among 2009 and 2019.
Even though the figures posted by Prensa Libre – just one of Guatemala’s most effectively-revered newspapers – vary somewhat, they continue to present FDI in 2019 being practically twice what it was in 2009.
Guatemala’s solid financial general performance will come on the again of important protection improvements, with the country’s notoriously substantial concentrations of violence drastically lessened – as highlighted by the intentional murder level more than halving all through that same period of time.
Guatemala rewards from obtaining a highly strategic locale, occupying the vast majority of Mexico’s southern border, and performing as a gateway between the a few major North American economies and the rest of Central The usa.
Spanning the width of the Central America isthmus, Guatemala has significant-quantity ports serving each the Pacific Ocean and Caribbean Sea, supplying straightforward freight accessibility to all of the Americas, as very well as Asia-Pacific and Europe.
The Central American nation is perfectly-regarded for its agricultural output, with coffee, bananas, and sugar between its essential exports and the sector providing just about 10% of GDP. The country’s manufacturing sector is also significant, offering 22% of GDP, with the garment producing business especially major.
Further than that, a quickly-growing companies sector, including critical locations for foreign financial investment in Guatemala, these as economic services and insurance plan, generates far more than 60% of GDP.
In the meantime, telecommunications has been an significant destination for FDI in Guatemala, though the figures currently being invested formerly have not arrive near to the much more than $2 billion in investments in the sector seen in 2021.
Being familiar with the spike in overseas investment decision in Guatemala
The massive spike in international investment decision in Guatemala in 2021, as perfectly as the emergence of Luxembourg as the key origin of capital and telecommunications as its key spot, can all be understood in the context of 1 significant deal struck at the close of the year.
In November 2021, it was announced that Luxembourg-based telecom business Millicom was investing $2.2 billion to acquire complete command of Tigo Guatemala – one of the most significant gamers in the Central American country’s telecommunications sector.
The offer noticed Millicom, a business concentrated on telecommunications in Latin The united states, maximize its 55% stake in Tigo Guatemala to choose entire equity and grow to be the country’s largest player in the sector.
The offer represented the biggest ever solitary foriegn expense in Guatemala, and noticed Millicom further more consolidate its status as a essential power in telecommunications in Central The united states. 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-primarily based corporation in the sub-location over and above $5 billion within 3 yrs, even though the enterprise adopted up its Guatemala expenditure with a pledge.
In a mark of the Luxembourg-based mostly company’s religion in the location, in 2021 the business said that it would be marketing all functions in Africa in get to aim on the nine Latin American markets where by it is active. In early 2022, the business pledged to make investments a even more $3 billion in the region about the coming a few decades.
According to the Financial Situations, Millicom has a total of 44 million cellular consumers and 4 million home broadband clients, and the $3 billion is set to be pumped into infrastructure and the enlargement of its present pursuits.
Though some commentators have highlighted the hazards included in Millicom’s investments in Latin America’s from time to time risky economies, according to Mauricio Ramos, the company’s chief government, the location presents major options for progress.
“Our fundamental premise is: these are developing economies, extremely secure [foreign exchange], noticeably underpinned by this growing sum of remittances,” he was quoted as declaring by the Economic Instances.
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