While Covid-19 disruption is battering Latin American economies, Guatemala has gone on a charm offensive.
The Central American country’s newly elected pro-business government hopes to bolster its investment attraction efforts through new fiscal incentives and regional collaboration.
Minister of economy Antonio Malouf discusses the country’s drive to attract FDI and his thoughts on improving the post-Covid-19 recovery.
Q: How have your economic development goals changed in the face of Covid-19?
A: Covid-19 has had a few impacts, with a loss of formal jobs and reduction in economic activities. Projections of gross domestic product (GDP) for 2020 are now -2.5%, [compared with] a positive GDP projection at the beginning of the year.
Following the [election of a] new government on January 14, there was a lot of hope for change. [But] Covid-19 has destroyed income sources for Guatemala, whether that is jobs, businesses and also investments.
In order to enable a rebound in the economy, we must prioritise industries with greater potential to galvanise economic growth and development. Therefore, our strategy to face Covid-19 disruption includes three main strands: the creation of new jobs, attracting foreign investment and occupational safety.
We have to keep all these standards in place until we have a vaccine, and need to emphasise safety, innovation, and youth and female employment.
Q: How are you trying to attract investment and which industries are you focused on?
A: We can offer fiscal incentives for any type of economic activity through our special economic zones. We give 10-year exemptions from income tax, value added tax for imported goods and also local goods that are purchased will not be charged.
We also offer decent centres for textiles, garments and business process outsourcing industries, where we have been very successful [in the past], and we can increase that potential.
We have a legislative agenda that includes expanding the same benefits to a larger array of economic activities that can be conducted currently via private free zones. Additionally, we are trying to attract investment via the negotiation of treaties and the avoidance of double taxation.
We already signed [a double taxation agreement] with Mexico and expect to get that approval by the end of 2020. It is important to recognise that the Guatemalan government focus is to move beyond fiscal incentives and emphasise three key benefits we can offer: location, market access and personalised attention to investors through Pronacom [our national competitiveness programme].
We have free trade agreements (FTAs) that allow us to have great potential with the US and Europe: we have the Dominican Republic-Central America FTA, an agreement with the European Union, and an agreement with the British government [for post-Brexit].
Q: What would you say to investors worried about instability in Guatemala?
A: We have been a democracy with continuous elections for over 35 years and the stability is very good at this time. The current government is very pro-investor, and we can give them the assurance that we will have everything in place for the long-term relationship that an investor needs in Guatemala.
Q: How are you planning to reopen to tourists?
A: We have plans to be a Covid-free zone and are working through regional value chains. There is a whole area of Guatemala that has not had Covid-19.
We want to have archaeological tourism in Petén, and have a joint venture with the Dominican Republic, which has a lot of beach tourism. As people want to get away from confinement, we hope to combine adventure and jungle [in Guatemala] with the beach [in the Dominican Republic]. We are currently negotiating the terms of this joint venture with Dominican investors.
Central America must work together to overcome the difficulties caused by Covid [and to kickstart the tourism industry].
This article first appeared in the August - September edition of fDi Magazine. View a digital edition of the magazine here.