Why Did Foreign Investment in Guatemala Spike in 2021?

In 2021, foreign immediate investment (FDI) into Guatemala hit record amounts, immediately after the nation saw the most affordable concentrations of FDI in a decade the previous year. But what made overseas financial investment in Guatemala spike so radically in 2021?

Guatemala is Central America’s greatest economy by gross domestic product or service (GDP), as properly as one particular of the swiftest increasing among the 7 nations on the isthmus, only experiencing  two years of GDP drop considering the fact that the flip of the century. 

Along with Nicaragua, Guatemala was also just one of only two international locations from the sub-region not to register GDP drop in 2020 – a calendar year when a lot of of the world’s economies have been rocked by the COVID-19 pandemic. Nevertheless, both of those countries ended up nonetheless adversely afflicted by the disaster.

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

That calendar year, international FDI collapsed, falling from $1.5 trillion in 2019 to $859 billion the next yr (all figures in USD), before rebounding strongly – albeit unevenly – in 2021, to strike $1.65 billion, in accordance to the United Nations Meeting on Trade and Improvement (UNCTAD).

A person county wherever that unevenness was borne out significantly was Guatemala, in which a leap from $931.1 million in 2020 to $3.472 billion the pursuing 12 months represented a additional than 370% enhance in FDI.

In an additional noteworthy flip, Luxembourg also leapt into leading location between the nations from which FDI in Guatemala originated, leaping ahead of the likes of Colombia, Mexico, and the United States, which have been the biggest sources of financial commitment into into the region in modern years.

That shift was accompanied by yet another noteworthy twist – due to the fact in 2021 the sector that received the most foreign financial commitment in Guatemala was telecommunications, leapfrogging the finance and insurance sector, which historically occupies major place, in accordance to a report from Prensa Libre. 

Expanding popularity of foreign expense in Guatemala mirrors economic progress

Guatemala’s economic climate has developed exponentially over modern many years, hitting $77.6 billion in 2020, and FDI has followed match, with Globe Financial institution studies showing it far more than doubling among 2009 and 2019.

Even though the figures posted by Prensa Libre – a single of Guatemala’s most properly-respected newspapers – differ rather, they even now exhibit FDI in 2019 remaining nearly 2 times what it was in 2009.

Guatemala’s robust economic performance will come on the again of key safety developments, with the country’s notoriously substantial stages of violence significantly minimized – as highlighted by the intentional homicide fee much more than halving in the course of that identical time period.

Guatemala gains from owning a hugely strategic locale, occupying the bulk of Mexico’s southern border, and performing as a gateway among the a few significant North American economies and the relaxation of Central The united states. 

Spanning the width of the Central The usa isthmus, Guatemala has large-quantity ports serving equally the Pacific Ocean and Caribbean Sea, supplying straightforward freight obtain to all of the Americas, as perfectly as Asia-Pacific and Europe.

The Central American state is perfectly-identified for its agricultural output, with espresso, bananas, and sugar amid its vital exports and the sector providing pretty much 10% of GDP. The country’s manufacturing sector is also substantial, providing 22% of GDP, with the garment manufacturing marketplace significantly major.

Outside of that, a quick-increasing solutions sector, including vital destinations for overseas expenditure in Guatemala, these as money solutions and insurance policy, generates additional than 60% of GDP.

In the meantime, telecommunications has been an vital desired destination for FDI in Guatemala, even though the figures currently being invested earlier have not occur near to the additional than $2 billion in investments in the sector seen in 2021.

Comprehension the spike in international expense in Guatemala

The enormous spike in foreign investment in Guatemala in 2021, as nicely as the emergence of Luxembourg as the primary origin of money and telecommunications as its principal desired destination, can all be understood in the context of one main offer struck at the end of the yr.

In November 2021, it was announced that Luxembourg-primarily based telecom enterprise Millicom was investing $2.2 billion to get total manage of Tigo Guatemala – one of the most significant players in the Central American country’s telecommunications sector. 

The offer saw Millicom, a firm focused on telecommunications in Latin The usa, raise its 55% stake in Tigo Guatemala to get total fairness and come to be the country’s major player in the sector.

The deal represented the greatest ever single foriegn financial commitment in Guatemala, and noticed Millicom additional consolidate its status as a crucial 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 organization in the sub-region past $5 billion inside of a few several years, although the company adopted up its Guatemala expense with a pledge. 

In a mark of the Luxembourg-based company’s faith in the location, in 2021 the business mentioned that it would be selling all functions in Africa in buy to concentration on the nine Latin American marketplaces the place it is active. In early 2022, the company pledged to make investments a additional $3 billion in the region about the coming a few years.

In accordance to the Economic Occasions, Millicom has a complete of 44 million cellular customers and 4 million household broadband buyers, and the $3 billion is established to be pumped into infrastructure and the expansion of its existing passions. 

Even though some commentators have highlighted the risks included in Millicom’s investments in Latin America’s sometimes volatile economies, according to Mauricio Ramos, the company’s chief govt, the region offers important chances for advancement.

“Our primary premise is: these are growing economies, really steady [foreign exchange], drastically underpinned by this raising sum of remittances,” he was quoted as saying by the Economical Periods.

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