As Guatemala prepares for its fourth presidential election since 1996 peace accords brought an end to one of the longest and bloodiest civil wars in Latin America's history, the investment landscape remains compelling for investors, though a steady drumbeat of violence remains.

Guatemala’s 30-year internal armed conflict saw more than 200,000 people – mostly poor, indigenous campesinos – die as they were caught in the struggle between a militarily-weak leftist insurgency and the ruthless scorched-earth tactics of a national army. Since the agreement between the Guatemalan state and the rebels of the Unidad Revolucionaria Nacional Guatemalteca, however, the country has been surprisingly effective in courting foreign investment.

Impressive investments

In 2010, Guatemala received $678m in FDI, an increase up $104m from what it received during 2009 but still less than the $754m it received in 2008.

However, as Guatemalan president Álvaro Colom prepares to turn over the reins of government to a successor following planned September elections, the country has several large projects of note that it can boast of.

In May of this year, Actis, an emerging markets private equity firm based in London, signed a $345m agreement (plus assumed debt) with the Spanish energy company Gas Natural Fenosa to acquire a group of companies in Guatemala.

The companies included the electricity distribution and supply concerns Deocsa and Deorsa, both focused on supplying and transporting electricity to some 1.4 million of Guatemala’s 14.3 million people. Taken together, the two companies supply electricity to 20 of Guatemala’s 22 regional departments, including to some of the more remote regions of this mountainous, rugged country.

Electricity charge

Since the privatisation of Guatemala’s electricity sector in 1998, it has demonstrated the fastest sales growth for that sector in Central America, with a compound annual growth rate of 6.6%.

“If you look at the Guatemala electricity sector, it’s one of the best managed sectors in Central America,” says David Grylls, director of Actis' infrastructure funds, who was closely involved with the deal. “Over the past 10 years, not only [has the country] successfully privatised all of its distribution, but it has also succeeded in attracting a lot of [FDI] into the area.”

Last year, Jaguar Energy Guatemala, a subsidiary of the Houston-based company AEI, closed $350m in financing for a 300-megawatt coal-fired power plant near Puerto Quetzal in the Pacific regional department of Escuintla. A syndicate of banks, including Banca de Inversión Bancolombia Corporación Financiera and the Banco Centroamericano de Integración Económica, oversaw the structuring of the financing.

Commercial operations at the Puerto Quetzal facility are set to began in 2013, with Jaguar selling 200MW to the now-Actis-acquired Deorsa and Deocsa, and the remainder being sold in local and regional wholesale markets. AEI already controls 234MW of coal capacity via its subsidiary Puerto Quetzal Power.

Additionally, coffee – Guatemala's main export – has remained robust, with the Asociación Nacional de Café en Guatemala, the Guatemalan national coffee agency, reporting that the country's exports of the product climbed 8.7% to 447,265 bags during April 2011.

Violence worries

As Guatemala’s political season heats up, however, violence and questions of impunity continue to dog the country’s economic progress.

In mid-May of this year, 27 people were massacred in the jungle-covered regional department of El Petén, which borders Mexico and which is one of the regions where Los Zetas, a fearsome Mexican drug cartel made up largely of former Mexican soldiers and some recruits from Guatemala’s special forces, are active.

President Colom subsequently declared a state of siege in the department, and a prosecutor assigned to investigate the case was found dismembered in the provincial city of Cobán in the nearby department of Alta Verapaz. Mr Colom had previously declared a two-month state of siege in Alta Verapaz itself late last year, also ostensibly to combat the growing influence of drug traffickers in the region.

UN concern

The Comisión Internacional Contra la Impunidad en Guatemala (International Commission Against Impunity in Guatemala, or CICIG) United Nations-mandated body tasked with investigating clandestine organisations in the country and exposing their relation to the Guatemalan state has also run into recent stumbling blocks.

Under the leadership of former Costa Rican attorney general Francisco Dall'Anese Ruiz, CICIG saw two of its major cases go down to defeat this spring.

On May 9, former Guatemala president Alfonso Portillo Cabrera, who governed from 2000 to 2004, was acquitted of embezzling $16.1m from the Guatemalan state along with his former ministers of finance and defence. Mr Portillo still awaits possible extradition to the US on money laundering charges.

Two days later, Alejandro Giammattei, the former director of Guatemala’s penal system and a former presidential candidate, was acquitted of having been party to the extra-judicial execution of seven prisoners during a September 2006 raid on the El Pavón prison near Guatemala City.

Both prosecutions had been viewed among CICIG’s most important cases.

Leading candidates

With voting due to commence in the coming months, Guatemala’s two top contenders for the presidency look to be the current first lady (President Colom’s wife) Sandra Torres de Colom – who by her own admission went to the trouble of divorcing the president only to skirt constitutional prohibitions against her candidacy – and Otto Pérez Molina, a former general who acted as the Guatemalan military's representative during the negotiations with rebel forces that led to the 1996 peace accords.

Barring any surprises – never in short supply in Guatemala – one of them will enter the presidential mansion early next year.

Whether or not they will be able to face down the various local and foreign criminal cabals operating in the country – an issue on which both candidates have come under criticism both within Guatemala and outside of it – is nowhere near as certain.