When Indian giant Yash Pakka chose Guatemala to install a sugarcane bagasse-based packaging plant, it confirmed that Guatemala can be a destination for highly sustainable investments. Starting next year, the company will use the raw material to manufacture containers from waste, a virtuous example of the circular economy.
This industry is already showing positive signs of being a niche with potential. Swe-Ca SA, for example, is a company that has been seeking to promote sustainable and ecological agroforestry activities in Guatemala since 1999. Svene Kristensson, the company’s project director, indicates that this year they are applying for an environmental license, which was not necessary when the company first set up. However, Kristensson says they will have to wait approximately the rest of the year to be granted said license.
Enrique Lacs, executive director of the Guatemalan Chamber of Food and Beverages (CGAB), defines a green company as one that manages the use of resources and emissions it produces for the ecosystem. Lacs highlights that, within the food area, most of the country’s largest companies already have circular economy phases in their procedures. Among these companies is Cervecería Centroamericana, which has PET recyclers and gas control. Coca Cola is another company that seeks to reduce its carbon footprint by using electric vehicles.
But for Guatemala to become an investment hub for other similar companies, the ministries and entities in charge must streamline the required procedures and thus position the country as an attractive place to incorporate companies quickly and efficiently. A starting point would be to establish six months as the maximum period to complete the installation process.
Simplification to stay in the market
Guatemala is located in a strategic geographical point, he says Valeria Prado, vice-minister of registry affairs at the Ministry of Economy (Mineco), and this is the reason why companies of this nature could see an opportunity in Guatemala. Wendy Mena, leader of the investment attraction team at Invest Guatemala, explains that companies seek to get closer to their final destinations and reduce costs, which can be achieved with the so-called nearshoring.
The Vice Minister of Natural Resources and Climate Change of the Ministry of Environment and Natural Resources (MARN), Edwin Castellanos, says that there is interest from international companies that focus on the reuse of waste. The arrival of these green companies in the country could mean an increase in formal jobs and more income for the region, as well as economic growth for the population in general, Castellanos acknowledges.
However, Mena points out that Companies usually seek to establish themselves in a country in the shortest time possible. At this time, Mena emphasizes that Guatemala is competing with countries like Mexico, place where companies can begin operating in a matter of two to three months. Meanwhile, he warns that in the country, there is a need from 8 months to two years to be able to manage all the procedures necessary to start a company’s operations.
To avoid being left out of the market, the investment attraction leader points out that The procedures must begin to be digitized and simplifieds, so that procedures are more agile and companies can quickly serve their respective markets. With this streamlining of procedures, the processes will be shorter, emphasizes Devadit Barahona, member of the board of directors of the Guatemalan Association of Exporters (Agexport). In addition, he assures that there will be greater access to procedures that previously could only be carried out in person. “We will have, above all, the modernization of the State,” Barahona points out.
According to Lacs, the World Bank launched a study which mentions that Administrative procedures account for up to 15% of a company’s operating costs. “That’s too much money and too much time,” Lacs says. However, the CGAB executive director points out that, with the reduction in paperwork, the cost could be as little as 2.3%.
Digitalization is key
August 31 is the deadline established by Law 5-2021, called the “Law for the simplification of administrative requirements and procedures,” which indicates that state agencies must simplify and digitize various procedures. Barahona points out that the procedures that must be simplified are a little more than 1,500, and those who fail to meet the goal of the established procedures will not be able to collect these same fees. “There are ministries that depend on these revenues for more than 40%,” Barahona explains.
Edie Cux, coordinator and executive director of the Presidential Commission for Open and Electronic Government (GAE), explains that, thanks to the implementation of this law, the procedures could be significantly reduced; although he indicates that the time of each procedure will depend on the process. “The time will be reduced, I can tell you that definitively,” says Cux.
In addition to this, Prado indicates that at this time, 100% of the digitalization of procedures is being sought, as well as connectivity between all these systems. To this, Cux adds that most of the entities have already incorporated computer systems and are waiting for the approval of regulatory frameworks to be able to begin operating. Likewise, the coordinator of the GAE assures that the next phase, which they plan to work on in the following months, is the standardization of the systems to request certain information only once.
According to the Vice Minister of Mineco, several procedures are already digitalized and she points out that the procedures for commercial registration and intellectual property can now be carried out 100% online. Prado points out that to establish a corporation it takes only 6 days, when before it took 2 to 3 months.
How to attract more green companies?
By 2030, it is expected that 14% of all US jobs are in green companiesan article in World Economic Record states. The article also states that jobs in green companies are on the rise in Europe, which could create up to 4 million jobs between now and 2050.
This could be an opportunity for Guatemala, taking into account the interest of these companies in entering the country, which Castellanos emphasizes. However, Environmental licenses can take up to 180 days to be processedMena said, which could take the country out of the market. Lacs also said that the MARN has some of the procedures that take more time and are more expensive.
To combat these problems, MARN has begun to reduce its paperwork regarding environmental licenses, according to Castellanos, and is in the process of digitizing the procedures and categorizing them appropriately.
Digitization, in addition to speeding up procedures, can also help provide legal certainty to anyone who is in the process of creating a company, says Prado. The vice-minister points out that in cases of rejection, all entities are obliged to provide the points that must be fixed for the procedure to be successful.
Connecting institutions
The challenge facing entities now is interconnectivity. According to Prado, many entities have different systems, so a way must be found so that they can interrelate with each other and thus share the relevant information.
In addition, Cux indicates that some ministries face challenges when it comes to developing digitalization. He also details that some entities hired other companies to digitalize the procedures, although most did so using their own IT resources and stressed that few outsourced the work.
After the August deadline, Lacs indicates that in October, all ministries must demonstrate their progress with respect to the simplification law. And Barahona stresses that, if the law is not complied with, it would be creating a setback for the country.
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