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Time for a New Market to Shine
Guatemala is looking to expand, overcome historic conflict, and attract more foreign investment into its real estate market. To achieve this goal, the nation must market its hard-working workforce and improving regulatory efficiency.
With a growing population and economy, Guatemala is emerging as a prime real estate market in Latin America. As Executive Director of Real Estate Development at IDC Group, a financial services, energy, and real estate firm, Miguel Fernández Klose offers keen insight into Guatemala, its problems and advantages, and its growing demand for housing. With companies such as Nestlé and Pepsi opening distribution centers in Guatemala and new industries like business process outsourcing flourishing, the country’s growing middle class needs somewhere to live, shop, and recreate.
A MASTER PLAN
A mixed-use, master-planned community in Guatemala City’s suburbs serves as a prime example of the new neighborhoods that are being built. Almost 13 years in development in multiple phases, the 800-acre community is designed to attract middle- and upper-middle-class families. “For every house that is built for the market, there are about six different families that need that house. So there’s a lot of demand for housing,” Fernández said. Reasonable mortgage rates, some as low as 6 percent for a 15- to 20-year term, give an advantage to both potential homeowners and residential developers and keep the market humming.
The government has a role to play as well. Fernández points out that countries like Colombia and Panama have significant government involvement in the real estate market, which helps the market to “explode” with affordable housing, especially in the low-income segment. He acknowledges that the Guatemalan government has not yet been able to achieve that level of involvement.
With a population of approximately 4 million people and growing, Guatemala City will continue to exhibit demand for residential housing and retail. Particularly desirable are small apartments in multi-story buildings for workers who want to be closer to the city center. Central America’s leading mall developers are building several regional retail centers in the capital city, and logistical parks currently under construction will attract new companies, adding to Guatemala’s already burgeoning workforce. As tourism becomes a bigger part of the nation’s economy, high-end hotel chains will seek to locate there as well.
WANTED: FOREIGN INVESTMENT
However, real estate in Guatemala would be more attractive to foreign investors if there were greater spending on international marketing of the country’s assets. “We’re not good marketers,” Fernández admits. “I don’t think we market enough.” While local investors have been able to take advantage of the real estate market, it is clear that promoting the country abroad needs to be a greater priority. Currently, demand for both single-family and multi-family housing is high enough that foreign investors should be flocking to Guatemala—if only they knew that such demand existed.
MIGUEL FERNÁNDEZ KLOSE
Executive Director
Real Estate Development at IDC Group
Those who watch the national economy are concerned about the impact in Guatemala of the “golden straitjacket,” a phenomenon in which a country gives up some of its economic control to institutions such as global capital markets and multinational corporations. “I think the golden straitjacket hasn’t worked,” Fernández notes. “Inflation is under control, all the microeconomic variables are okay, and business can run. However, on the political issues and the social issues, that’s not the case. Projects that are long term have suffered because of short-term vision.”
PEOPLE, POLITICS, POTENTIAL
The international perception of Guatemala’s political situation has also been a concern; the solutions required to tackle the questions of security, income distribution, and education are interconnected and complex. As the Guatemalan government and the private sector continue to address these issues, the country’s reputation will improve, enabling more foreign investment into growing sectors like real estate.
The civil war in Guatemala is long over, but there have been lingering effects from the long-time conflict, which has had an impact on foreign investment. Even though the politics of the country has made foreign investors hesitant to invest in the real estate market, the work ethic of Guatemalans, the ease of doing business, and the promising demographics are some of the attributes that should attract investors.
When it comes to the real estate market, Fernández asserts, “Guatemala is like a sleeping giant. There’s a lot of potential.”
“One of the challenges we have in Latin America is that most decision-makers see issues over the short term. There is a lack of long-term vision. But I think people understand that’s not sustainable. I think the vision is going to change.”
INTERVIEW: IDC GROUP
SPECIAL REPORT
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