Page 66 - STRATEGY Magazine (G)

INTERVIEW: MAYORA & MAYORA LAW FIRM
DR. EDUARDO A. MAYORA
Managing Partner
Mayora & Mayora Law Firm
In the last 20 years, notwithstanding certain insti- tutional challenges and a surge in organized crime, Guatemala has undergone significant economic growth and social development. Dr. Eduardo A.
Mayora, Managing Partner of the Mayora & Mayora Law Firm, observes of his country’s efforts to improve the business climate, “It might have followed the steps that other countries have, but the market turns out to be quite different.”
A high percentage of small to mid-sized firms in Guatemala are family owned or closely held. The current trend is for progressive regional companies to employ sophisticated experts to manage their businesses.
LOWER EXPENSES, HIGHER PROFITS
“The reason they come here is that they can make profits,” says Mayora of international investors. He maintains that the relatively smaller size of Guatemala’s consumer and capital markets and the relatively lower frequency of the transactions in them require no overly burdensome legal or tax structure. Thus far, the legislation of Guatemala has remained easy to navigate, especially as compared with its neighbors in the region, and, as a result, these expenses are low. Business can enjoy profits at a lower threshold and recover their investment because of these relatively lower costs.
“The easy-to-navigate, simple, straightforward kind of system we have, it’s become the best-kept secret,” asserts Mayora. He contends that Guatemala’s banking and financing transactions impose little hardship and that antitrust matters are not yet subject to specific regulation.
A TREMENDOUS ADVANCE
Internal security and a rather dysfunctional political process have acted as obstacles to foreign investment in the past. Governmental inefficiencies and corruption remain a challenge, but the economy has managed to grow at approximately 4 percent notwithstanding.
“Our legal, regulatory, and tax environments are by far the easiest to
navigate in the Latin American region.”
Leveraging a Clear Advantage
Guatemala seeks to use its regulatory environment and stable economic base as an advantage in attracting additional foreign investment. Low barriers to entry and minimal transaction costs lead to higher profits in the consumer and capital markets.
Guatemala has a distinct advantage among all the Spanish- speaking countries in the hemisphere. By constitutional provision, the central bank cannot lend funds directly or indirectly to the government. As a result, Guatemala has the smallest per capita public debt in Latin America. “That’s why our currency has been stable and in the last few months has appreciated,” notes Mayora.
This has led to increased interest from global investors. Businesses are finding that acquisitions of or mergers with Guatemalan firms are quite feasible and that joint-venture arrangements are a reasonable alternative.
STABILITY AND OPPORTUNITY
“Many of the important groups in the region have consolidated with their counterparts in other jurisdictions,” says Mayora. Nations too are looking toward cooperation: In 2006, Guatemala was one of six Central American and Caribbean countries to work out a mutual trade pact with the United States. Along with Costa Rica, El Salvador, Honduras, Nicaragua, and the Dominican Republic, Guatemala implemented CAFTA-DR (Dominican Republic– Central America Free Trade Agreement). The trade agreement, Mayora contends, is possible because these countries are finally economically integrated enough.
The agreement makes Guatemala more attractive because it affords mechanisms for the protection of investments, inter alia. CAFTA-DR terms require laws and government procedures that create a better climate for investment and business. This improved economic environment serves as the basis for a more productive future.
While economists recognize that there is still room for progress, they conclude that Guatemala’s achievements have been substantial. Key business leaders continue to increase the number of opportunities for skilled workers. They also seek to improve the country’s basic infrastructure. These measures enhance the lives of citizens as well as attract additional foreign businesses.
Mayora reflects that investors have choices. They can select the best alternative from among several opportunities, if the risks are the same.
In Guatemala, the risk of steep tax burdens and costly regulation is not present. The efforts of government and businesses working together provide the edge Guatemala needs to attract foreign capital. The current economic environment allows investors to see the country’s approach to past obstacles and makes it a viable investment alternative. Mayora concludes, “I think the key point is that it is easier to do business here than in most other jurisdictions in the Central American region.”
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