Page 138 - STRATEGY Magazine (G)

SETTING UP SHOP
Potential investors may be tempted by the recent creation of free trade zones that offer tax incentives to companies looking to have a bricks-and-mortar presence in the region. Eighteen zones are up and run- ning and nine more are being readied. The former Minister of the Economy, Sergio de la Torre, said that the zones, along with new industrial parks, “will give investors a significant competitive advantage to locate their operations in Guatemala.” Some 1,300 businesses employing more than half-a-million workers are located in the zones. The majority of the companies are engaged in trade, followed by industry and services.
A PUSH FOR PPPs
Guatemala established a legal framework for public-private partnerships (PPPs)
in 2010 when Congress approved the
law as a vehicle to expand the country’s economic infrastructure. The creation of PPPs is expected to boost economic growth with consistent rules for investment and increased transparency.
“Personally, I consider that the PPPs
are a tool through which you can carry
out a project of general benefit in which the state has been limited because of the optimization of the private initiative,” said Juan Carlos Palomo, a Guatemalan attor- ney who specializes in business law.
The law that created the PPP model applies solely to economic infrastructure, including building and construction, expansion of major projects, and freight and public transport services. Excluded from the PPP law are social services such as hospitals, clinics, and prisons. Those projects still fall under a 1992 national procurement law.
The country launched its first inter- national tender under the PPP model in March of 2015 for a US $180 million gov- ernment complex using the Design, Build, and Operate model. Another project said to be in the prequalification and tender stage before the end of the year is the US $50 million Dry Logistics Port and Industrial Park of Tecún Umán.
Other projects slated for 2015 and 2016 include the start of the Jaguar Energy 300
MW coal-fired power plant and the conclu- sion of several highway projects including the northern transversal strip.
“Our country has ... a major stake in the strategic infrastructure that connects us to Mexico, which is the gateway to the entire North American Free Trade Agreement (NAFTA) system,” Estrada said during
a recent interview. The agency he helms, ANADIE, was created to promote the partnerships and to deal with all phases of the infrastructure projects, including the day-to-day aspects. Estrada is motivated to ensure the success of the partnerships to lend legitimacy to the PPP model, thus attracting more international dollars to the country.
THE NEED FOR DOLLARS
Guatemala’s national budget, not unlike other countries in the Central American region, is not adequate to cover its varied infrastructure needs. The country needs to invest an average of 5 percent of its nearly US $54 billion GDP to catch up with inter- national infrastructure standards. Public spending in recent years has been less than half that, about 2 percent. ANADIE is working to give the PPP model credibili- ty to attract more private investment.
This does not mean that investors, both domestic and international, will not face challenges. The PPP model, by law, re- quires all contracts be approved by Guate- mala’s congress before they are executed. There is also some trepidation that major projects undertaken outside of Guatemala City will trigger unrest because of a lack of understanding of the PPP law on the part of those not living in the city and who are outside of the government’s sphere.
RECENT CAUSE FOR CONCERN?
The resignations of former President Pérez Molina’s cabinet, including Econo- my Minister Sergio de la Torre, is vexing to those working to bolster the image of the country to the international commu- nity. The resignations came in late August about two weeks before Pérez Molina stepped down in light of an onslaught of corruption charges that led to his arrest. Political newcomer Jimmy Morales was elected president in late October. The con- cern is that the political changes could af- fect the willingness of investors to consider Guatemala and could slow or even halt the projects already underway.
Estrada is seeking to allay those con- cerns. “There is no danger of projects collapsing, but they may fall behind,” he said.
136 STRATEGY
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