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In order to increase its bond market, Guatemala targeted foreign institutional investors by issuing two Eurobonds in 2012 and 2013, each for US $700 million.
internal conflicts in its judicial system. The international community, as well as local organizations and the government itself, continues to encourage reform, particularly in the area of labor law, but corruption and illegal practices still exist and impact foreign investment negatively.
Additional obstacles exist for foreign investors as well, such as the requirements to demonstrate solvency, supply financial statements, and deposit operating capital into a Guatemalan bank. They must also sign a contract stating they will satisfy all debts before leaving the country. While these requirements are not in place to act as a deterrent, the degree of difficulty within them and the amount of time involved place barriers in front of investors.
Even with these challenges, Guatemala represents a tremendous possibility for foreign investment. Its financial system is represented by 18 banks, 14 financial institutions, and 15 bonded warehouses that offer numerous financial services. It also yields solid international reserve levels and has the lowest foreign debt in the region.
ATTEMPTS AT TRANSFORMATION
The United States, which represents approximately one- fourth of the region’s FDI, has entered into agreements with
Guatemala and other Central American countries to promote important areas of interest. Earlier this year, the Joint State- ment of Commitments, which was signed by Vice President Joseph Biden along with the Presidents of Guatemala, El Sal- vador, and Honduras, was implemented to assist the region with the productive sectors of the economy, including the de- velopment of human capital, citizen security, social inclusion, and a much needed enhancement to the legal system. Citizen security and public safety are also of major concern and are being addressed with this Joint Statement, due in large part to the United States’ outspoken concern over Guatemala’s lack of enforcement of its labor and environmental laws. These efforts to create a safer environment for the work force will lead to further foreign investment.
Education, long an area that plagued Guatemala’s develop- ment, is undergoing changes, too. The government’s outreach has led to a grant agreement between Guatemala and the Millennium Challenge Corporation (MCC), a U.S. government agency responsible for delivering assistance to countries that have pledged reform. MCC will provide US $28 million over three years toward the growth of educational opportunities. These funds will not only enhance education, but will also be instrumental in the continued growth of the economy.
Partners and Clusters Drive Growth
EDGAR HEINEMANN Director & Ex-President FUNDESA
As a director and the former president of FUNDESA, a think tank focused on sustain- able and democratic development within a mar- ket economy, Edgar Heinemann explores eco- nomic development strategies that truly work. He concludes that public-private partnerships (PPPs) are key to Guatemala’s growth in vital infrastructure projects like road construction that support the nation’s development.
“These projects are very important for the fu- ture of our nation and, when done correctly, are profitable for the company as well as beneficial for our society,” Heinemann says.
CATALYZING CLUSTERS
Another key, he believes, is for Guatemala to catalyze growth beyond the single, giant com- mercial center in Guatemala City, which be-
came a magnet for the displaced population after Guatemala’s devastating 1976 earthquake. This centralization has left vast areas undeveloped and excluded millions from the opportunity to achieve economic stability and prosperity.
Citing the success of business clusters—plac- es like Silicon Valley or the East London Tech Center—Heinemann asserts that clusters fuel synergistic growth by increasing the productivi- ty of companies in the cluster, driving innovation in the field, and stimulating new businesses. He lists agriculture and mining as particularly ripe for cluster development by socially responsible companies committed not only to profitable op- erations but also to improving the lives of the workers.
“Growing partners to help grow Guatemala— that is how we will develop this country.”
“Guatemalans know how to work. A million-and-a-half Guatemalans have gone to the U.S., all of whom are excellent workers. We must develop the infrastructure here so that people can achieve something from their work in the long run.”
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