Page 70 - STRATEGY Magazine (G)

INTERVIEW: AMPEX
CARLOS M. CAVALLINI
President
Ampex Corporation
“The equation is actually very simple,” says Carlos Cavallini, President of Ampex Corporation, as he outlines the virtuous cycle catalyzed by foreign investment. “The first benefit you see is increased demand for labor, and this increases consumption rates, which in turn increases trade, and that calls for more products, factories, and technology, until finally, magic happens. The economy grows, enabling us to address issues such as health and education.” Cavallini views foreign direct investment (FDI) into Guatemala as one
of the keys to the nation’s economic development.
EAGER FOR GROWTH
For the past decade, World Bank data shows FDI in Guatemala in the range of 2 to 2.5 percent of GDP annually. According to the bank, this number is typical of most countries, while 5 to 6 percent or more would be regarded as a significant success. It is that kind of success Guatemala is striving for. The country boasts Central America’s largest economy, yet also some of its highest poverty indicators, especially in rural and indigenous areas. The 2013 Human Development Index ranked Guatemala 133 among 187 countries, and last in Central America.
Nevertheless, the potential of the population, when these disadvantages can be overcome, is remarkable. Cavallini speaks of the aid societies with which he collaborates to rescue homeless children. “These nonprofit foundations take these children from the streets, give them shelter, food, medical care, and education. The next thing you know, they’re at the top of their classes, so we know the potential is there and we can make a difference.”
FERTILE GROUND FOR INVESTORS
But to initiate the virtuous cycle, foreign investors must come. According to Cavallini, Guatemala offers important advantages for the investor. One of these is an extremely professional, local business sector that thinks and acts globally as a consequence of centuries of foreign trade with the United States, Latin America, Europe, and more recently, emerging markets like China. Recent investors have come from traditional partners like the United States and Spain, as well as newer sources, like Colombia and Russia.
Seeds of Foreign Investment Find Purchase
The largest economy in Central America is dreaming big and overcoming big problems. The dream—economic growth—would resolve many issues, but in order to achieve its economic goals, Guatemala needs businesses from abroad willing to invest in a meaningful way.
In addition, Guatemala claims best-in-class companies in many industries. For example, the nation is home to several influential holding companies that span such sectors as agriculture, banking, logistics, and manufacturing. It is Cavallini’s belief that “undoubtedly, foreign capital can find safe, professional, local partners in Guatemala.”
The Ampex president also points out that the country literally rests on fertile soil. Agriculture is one of Guatemala’s largest industries, and the nation’s coffee, sugar, cardamom, and rubber are among the highest quality in the world, as is, according to Cavallini, Guatemala’s natural beauty. “Let me tell you—I’ve been many places around the world, and Guatemala is one of the most beautiful countries I know. We have natural wonders you would not believe.”
A SAFER CLIMATE
The challenge, of course, is that foreign capital seeks security, and that has not been plentiful in Guatemala. Cavallini acknowledges that crime and corruption are legitimate concerns. However, he points out that the business climate in Guatemala has changed a great deal since the 1996 Peace Accords ended a 36-year civil war.
Cavallini also points to a mindset shift in both the government and private sectors that embraces open market concepts and cooperation. An example of this is FEDECOCAGUA (the Federation of Coffee Cooperatives of Guatemala), a powerful group of more than 20,000 small coffee growers—many of them indigenous—that focuses on the open market and also includes bankers, exporters, and other agro-industrial interests.
When asked about the possibility of a Central American Common Market, which would dramatically simplify cross- border business through currency and regulatory unification, Cavallini says, “It is a clearly feasible scenario. In fact there are already extensive commercial interactions between the nations in the region, as well as efforts to integrate institutions such as customs and even the police. It is only a matter of time until we fully realize this integration.”
Despite the challenges that every developing economy faces, Cavallini asserts, “We still have a lot of people coming and investing every year. The weight of the good things is much heavier than the problems.”
“Guatemala is Central America’s leading economy in four important sectors— commercial, agricultural, industrial, and financial,” says Carlos Cavallini. “This is just one of many factors that make Guatemala attractive for foreign investment.”
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