Guatemala has a high potential for attracting FDI, but much improvement is needed for this to happen, according to a UN report.

According to the United Nations Conference on Trade and Development (Unctad), Guatemala can become a “hub” for FDI, but should take steps to strengthen governance and the performance of public institutions to help it reach that potential.

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Guatemala’s economy grew by a meagre 0.6% in 2009, after the country had experienced fairly solid levels of growth every year since 2006. Despite this growth it has remained one of the poorest countries in Latin America, and has struggled to control gang and drug-related crime.

Unctad’s review of Guatemala concluded that although modern and open legislation has been introduced in several areas of the regulatory framework for investment, including the labour market, foreign exchange, environmental protection and intellectual property, critical policies essential to ensuring the proper functioning and regulation of the market have yet to be implemented.

The absence of a coherent competition policy and a national competition agency is a case in point, the review added. Furthermore, it stated that important government institutions are often too weak and poorly resourced to effectively fulfil their mandates, to the detriment of the population and of economic development.

Among its key recommendations, Unctad proposed elements of a comprehensive fiscal policy reform that would help Guatemala boost public revenue and offer investors a balanced and competitive fiscal regime. Unctad secretary-general Supachai Panitchpakdi also outlined the recommendations contained in the review relating to economic sectors considered strategic by the government, which included energy, mining and road infrastructure. He stressed the importance that a participatory process can have on the success of investment projects in these three critical areas and on the well-being of populations affected by them.

Alfredo Pókus Yaquián, minister of energy and mining of Guatemala, praised the quality of the Unctad review and its recommendations. He said it would be a very useful tool for guide Guatemala’s FDI attraction strategies. He stressed that the government endorsed the recommendations and had already started implementing them, including in the field of competition policy and through steps to simplify administrative procedures.

Abel Cruz Calderon, Guatemala’s vice-minister of economy in charge of investment and competitiveness, emphasized Guatemala’s continued efforts to foster investment and development through its national competitiveness programme, which is being reviewed to build on Unctad’s recommendations. In particular, Mr Cruz Calderon stressed the need for comprehensive tax policy reform.