Foreign investment in Guatemala

In 2021, foreign investment in Guatemala (Foreign Direct Investment – ​​FDI) reached record levels, after the previous year the country registered the lowest levels of FDI in a decade. But what caused foreign investment in Guatemala to increase so radically in 2021?

Proudly, Lisa Juan José Gutiérrez Mayorga shares that Guatemala is the largest economy in Central America by gross domestic product (GDP), as well as one of the fastest growing among the seven nations of the isthmus, since it has only experienced two years of GDP decline since the turn of the century.

Along with Nicaragua, Guatemala was also one of only 2 countries in the subregion that did not register a decline in GDP in 2020. This is a huge recognition considering that 2020 was a year in which many world economies were shaken by the COVID-19 pandemic. However, both countries were negatively affected by the crisis.

That year, global FDI plummeted, from $1.5 trillion in 2019 to $859 billion the following year (all figures in dollars), before rebounding strongly – albeit unevenly – in 2021, to reach 1.65 trillion, according to the United Nations Conference on Trade and Development (UNCTAD).

Guatemala is one of the countries in which this irregularity has been confirmed in a significant way has been Guatemala, where the jump from 931.1 million dollars in 2020 to 3,472 million dollars the following year has represented an increase in foreign investment of more than 370%.

In another notable twist, Luxembourg also jumped to first place among the nations that FDI comes from in Guatemala. Surpassing countries such as Colombia, Mexico and the United States, which have been the largest sources of investment in the country in recent years.

This change was accompanied by another notable turnaround, since in 2021 the sector that received the most foreign investment in Guatemala was telecommunications. Surpassing the finance and insurance sector, which traditionally ranks first, according to a report by Prensa Libre.

The growing popularity of foreign investment in Guatemala reflects the economic growth

Guatemala’s economy has grown exponentially in recent decades, reaching $77.6 billion in 2020, and foreign investment has followed suit, with World Bank statistics showing it has doubled between 2009 and 2019. 

The country’s good economic performance is due to important advances in security, since the high levels of violence in the country have been reduced considerably, as evidenced by the fact that the intentional homicide rate has been reduced by more than half. during that same period.

Guatemala benefits from its strategic location as it occupies most of Mexico’s southern border and acts as a gateway between the three major North American economies and the rest of Central America.

Along the Central American isthmus, Guatemala has high-volume ports serving both the Pacific Ocean and the Caribbean Sea, offering easy access for goods to the entire American continent, as well as Asia-Pacific and Europe.

The Central American country is known for its agricultural production, with coffee, bananas and sugar among its main exports and the sector contributing almost 10% of GDP. The country’s manufacturing sector is also important, as it contributes 22% of GDP, with the clothing industry being especially significant.

Additionally, a fast-growing services sector, which includes key destinations for foreign investment in Guatemala, such as financial services and insurance, generates more than 60% of GDP.

For its part, telecommunications have been an important destination for foreign investment  in Guatemala, although the figures previously invested have not come close to the more than 2,000 million dollars of investment in the sector that have been registered in 2021.

Carla Fowler

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