Why Did Foreign Investment in Guatemala Spike in 2021?

In 2021, overseas direct investment (FDI) into Guatemala strike history ranges, after the region saw the lowest stages of FDI in a ten years the past yr. But what designed international expense in Guatemala spike so radically in 2021?

Guatemala is Central America’s premier economic climate by gross domestic item (GDP), as perfectly as a single of the fastest increasing amid the 7 nations on the isthmus, only experiencing  two yrs of GDP decrease because the convert of the century. 

Together with Nicaragua, Guatemala was also one of only two nations from the sub-location not to sign up GDP drop in 2020 – a 12 months when several of the world’s economies were being rocked by the COVID-19 pandemic. However, the two countries ended up even now adversely influenced by the crisis.

SEE ALSO: Do You Need a PEO in Guatemala?

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

One particular county exactly where that unevenness was borne out appreciably was Guatemala, wherever a leap from $931.1 million in 2020 to $3.472 billion the subsequent yr represented a much more than 370% raise in FDI.

In a further noteworthy transform, Luxembourg also leapt into prime spot among the 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 largest sources of investment into into the nation in current decades.

That shift was accompanied by yet another noteworthy twist – for the reason that in 2021 the sector that gained the most international expense in Guatemala was telecommunications, leapfrogging the finance and insurance coverage sector, which usually occupies best place, in accordance to a report from Prensa Libre. 

Growing acceptance of overseas investment decision in Guatemala mirrors financial progress

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

Whilst the figures revealed by Prensa Libre – one particular of Guatemala’s most well-revered newspapers – differ to some degree, they nevertheless display FDI in 2019 being pretty much two times what it was in 2009.

Guatemala’s solid economic efficiency arrives on the back again of big security advancements, with the country’s notoriously high stages of violence considerably minimized – as highlighted by the intentional homicide charge additional than halving in the course of that exact same time period.

Guatemala positive aspects from acquiring a really strategic place, occupying the the greater part of Mexico’s southern border, and acting as a gateway concerning the 3 major North American economies and the rest of Central America. 

Spanning the width of the Central The united states isthmus, Guatemala has substantial-quantity ports serving equally the Pacific Ocean and Caribbean Sea, providing quick freight access to all of the Americas, as perfectly as Asia-Pacific and Europe.

The Central American country is very well-identified for its agricultural output, with coffee, bananas, and sugar among the its important exports and the sector supplying just about 10% of GDP. The country’s production sector is also substantial, supplying 22% of GDP, with the garment production marketplace notably considerable.

Beyond that, a speedy-escalating expert services sector, like key locations for foreign investment decision in Guatemala, these kinds of as fiscal solutions and insurance policies, generates extra than 60% of GDP.

Meanwhile, telecommunications has been an important destination for FDI in Guatemala, while the figures staying invested formerly have not occur close to the much more than $2 billion in investments in the sector witnessed in 2021.

Comprehension the spike in international investment decision in Guatemala

The massive spike in overseas financial investment in Guatemala in 2021, as effectively as the emergence of Luxembourg as the key origin of money and telecommunications as its principal spot, can all be understood in the context of just one main offer struck at the finish of the yr.

In November 2021, it was introduced that Luxembourg-based mostly telecom firm Millicom was investing $2.2 billion to acquire comprehensive control of Tigo Guatemala – a single of the biggest gamers in the Central American country’s telecommunications sector. 

The deal observed Millicom, a firm centered on telecommunications in Latin The united states, raise its 55% stake in Tigo Guatemala to acquire entire fairness and come to be the country’s most important participant in the sector.

The deal represented the biggest ever solitary foriegn investment decision in Guatemala, and noticed Millicom additional consolidate its status as a key pressure in telecommunications in Central The usa. Millicom also has a main existence in Costa Rica, El Salvador, Honduras, Nicaragua, and Panama, as effectively as in South American nations Bolivia, Colombia, and Paraguay.

That reportedly took acquisitions by the Luxembourg-primarily based organization in the sub-location further than $5 billion within 3 many years, whilst the enterprise adopted up its Guatemala expense with a pledge. 

In a mark of the Luxembourg-primarily based company’s faith in the region, in 2021 the corporation stated that it would be providing all operations in Africa in order to concentration on the 9 Latin American markets in which it is active. In early 2022, the firm pledged to commit a more $3 billion in the location in excess of the coming three many years.

In accordance to the Money Moments, Millicom has a whole of 44 million mobile prospects and 4 million household broadband prospects, and the $3 billion is established to be pumped into infrastructure and the growth of its existing passions. 

While some commentators have highlighted the challenges associated in Millicom’s investments in Latin America’s from time to time unstable economies, in accordance to Mauricio Ramos, the company’s chief government, the region presents sizeable alternatives for expansion.

“Our basic premise is: these are escalating economies, very steady [foreign exchange], considerably underpinned by this raising sum of remittances,” he was quoted as stating by the Financial Situations.

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