Why Did Foreign Investment in Guatemala Spike in 2021?

In 2021, foreign direct expense (FDI) into Guatemala strike history amounts, following the country observed the least expensive stages of FDI in a ten years the past yr. But what produced overseas expense in Guatemala spike so radically in 2021?

A BLH graphic showing foreign investment in Guatemala between 2008 and 2021
Overseas investment decision in Guatemala spiked in 2021

Guatemala is Central America’s biggest financial system by gross domestic solution (GDP), as properly as one particular of the swiftest developing among the the 7 nations on the isthmus, only experiencing  two a long time of GDP decline because the transform of the century. 

Along with Nicaragua, Guatemala was also 1 of only two nations around the world from the sub-region not to register GDP drop in 2020 – a 12 months when quite a few of the world’s economies were being rocked by the COVID-19 pandemic. Nevertheless, the two countries were being still adversely impacted by the disaster.

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That year, world-wide FDI collapsed, slipping from $1.5 trillion in 2019 to $859 billion the subsequent calendar year (all figures in USD), prior to rebounding strongly – albeit inconsistently – in 2021, to strike $1.65 billion, in accordance to the United Nations Conference on Trade and Improvement (UNCTAD).

A single county where that unevenness was borne out considerably was Guatemala, wherever a leap from $931.1 million in 2020 to $3.472 billion the following year represented a far more than 370% raise in FDI.

In yet another notable flip, Luxembourg also leapt into top rated spot amongst the nations from which FDI in Guatemala originated, leaping forward of the likes of Colombia, Mexico, and the United States, which have been the most important resources of expenditure into into the country in latest yrs.

That change was accompanied by one more notable twist – mainly because in 2021 the sector that been given the most international investment decision in Guatemala was telecommunications, leapfrogging the finance and insurance coverage sector, which customarily occupies prime place, in accordance to a report from Prensa Libre. 

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Growing attractiveness of overseas investment in Guatemala mirrors economic progress

Guatemala’s economic climate has grown exponentially in excess of modern many years, hitting $77.6 billion in 2020, and FDI has adopted match, with World Lender figures demonstrating it more than doubling among 2009 and 2019.

Although the figures posted by Prensa Libre – a single of Guatemala’s most very well-respected newspapers – differ somewhat, they nonetheless demonstrate FDI in 2019 becoming practically two times what it was in 2009.

Guatemala’s strong economic efficiency comes on the back of key protection improvements, with the country’s notoriously large amounts of violence substantially decreased – as highlighted by the intentional homicide price additional than halving during that identical interval.

Guatemala advantages from possessing a very strategic locale, occupying the majority of Mexico’s southern border, and performing as a gateway among the 3 key North American economies and the rest of Central The us. 

Spanning the width of the Central The usa isthmus, Guatemala has superior-quantity ports serving equally the Pacific Ocean and Caribbean Sea, providing quick freight accessibility to all of the Americas, as nicely as Asia-Pacific and Europe.

The Central American state is nicely-known for its agricultural output, with espresso, bananas, and sugar among the its crucial exports and the sector giving nearly 10% of GDP. The country’s producing sector is also major, furnishing 22% of GDP, with the garment manufacturing market significantly major.

Over and above that, a quickly-growing companies sector, like critical places for foreign expense in Guatemala, such as monetary providers and insurance plan, generates a lot more than 60% of GDP.

Meanwhile, telecommunications has been an vital vacation spot for FDI in Guatemala, even though the figures getting invested previously have not occur shut to the more than $2 billion in investments in the sector viewed in 2021.

Comprehension the spike in international financial commitment in Guatemala

The huge spike in international financial investment in Guatemala in 2021, as properly as the emergence of Luxembourg as the most important origin of cash and telecommunications as its major location, can all be recognized in the context of one particular significant deal struck at the conclusion of the year.

Photo of Millicom Chief Exec Mauricio Ramos for article on foreign investment in Gautemala.
Mauricio Ramos (source: LinkedIn)

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

The offer noticed Millicom, a firm centered on telecommunications in Latin The usa, maximize its 55% stake in Tigo Guatemala to choose comprehensive equity and turn out to be the country’s most significant player in the sector.

The offer represented the largest at any time one foriegn expense in Guatemala, and saw Millicom even further consolidate its position as a key force in telecommunications in Central The usa. Millicom also has a significant 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-based mostly organization in the sub-location beyond $5 billion inside three years, while the organization followed up its Guatemala investment decision with a pledge. 

In a mark of the Luxembourg-primarily based company’s religion in the area, in 2021 the corporation stated that it would be marketing all operations in Africa in order to emphasis on the nine Latin American marketplaces exactly where it is energetic. In early 2022, the organization pledged to commit a even more $3 billion in the area above the coming 3 years.

In accordance to the Fiscal Instances, Millicom has a total of 44 million cellular buyers and 4 million residence broadband prospects, and the $3 billion is set to be pumped into infrastructure and the expansion of its current pursuits. 

Even though some commentators have highlighted the dangers involved in Millicom’s investments in Latin America’s at times volatile economies, in accordance to Mauricio Ramos, the company’s main executive, the location provides sizeable opportunities for development.

“Our standard premise is: these are expanding economies, really secure [foreign exchange], substantially underpinned by this growing volume of remittances,” he was quoted as indicating by the Economical Instances.

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If you uncovered this report on international financial investment in Guatamala of desire, check out the rest of our coverage of this climbing Central American economic system.

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