Guatemala could be a more attractive country for foreign investors if it would speed up the installation processwill update its incentive portfolio and accelerate political agreements.
“We chose Guatemala because it offered us many benefits for foreign investors; we were interested in being in a free zone and, in addition to that, We believe that it is a country that is growing and has a significant population, much larger than that of other countries.“This is how the conversation begins with an executive from a Chilean investment company, which has already begun the process to settle in Guatemala.
However, the executive acknowledges, in conversation with Prensa Libre, that there are pending issues, such as, for example, immigration procedures for personnel who come from Chile to support and train. “Here, we’ve been here for almost six months and they tell us that, on average, we still have eight more to finish the process. There are many restrictions when you are a foreign company; They ask you to meet requirements that, obviously, because you are a foreigner, you cannot meet. So, everything is delaying the process and generating loss of time,” he says.
Changing the perception of bureaucracy to start operations in the country is a priority within the roadmap to boost foreign investment. It is because of that Invest Guatemala, a private investment promotion agency, provides softlanding services to investors to assist them in the installation process and start of investment operations. These include from company registration to support in the location of real estate spaces.
However, the issue to be resolved is macro and involves the creation or modification of legislation, the digitalization of processes and the facilitation of procedures so that, eventually, this is reflected in currencies. Wendy Menamanager of Invest Guatemala, explains that when a procedure takes longer than expected or an additional requirement for a permit is requested, all project planning is delayed. This has a economic impact and discourages investors from expanding operations.
“It is because of that the facilitation and digitalization of the procedures to start operations is essential to attract and retain investments, mainly the processes to qualify for special regimes; construction licenses, visas and work permits for foreign employees, registrations and permits from other entities such as the Ministry of Public Health and Social Assistance of Guatemala (MSPAS), Ministry of Agriculture, Livestock and Food (MAGA) and the Ministry of Environment and Natural Resources (MARN)“Adds Mena.
Discussion of new law
A specific law for the business attraction strategy is intended as a first discussion.
Paulo de Leondirector of Economic and Financial Intelligence at Central American Business Intelligence (CABI), emphasizes that, in terms of incentives to attract greater investment, flexibility is needed in issues such as los grace periods in the payment of taxes and a law that contemplates legislative stability.
“Most investors look for a balance, since they are not sure if the model of the country they arrive in will work. First, we must take advantage of the investors who are already in Guatemala, whether national or foreign, and propose incentives that motivate an expansion of your investment portfolio“, indica.
What are the possibilities of a new regulation? Jorge Ayala, president of the Economy and Foreign Trade Commission of the Congress of the Republic, told Prensa Libre that one of the main points that should be included in an investment law is to have fiscal incentives such as the exemption of import tariffs, Value Added Tax (VAT), Income Tax (ISR) for a specific period in relation to the amount of the investment. In addition, agile processes in the registration of companies and the modernization of procedures such as environmental and forestry licenses, among others.
However, the path is just beginning. consulted Antonio RomeroVice Minister of Investment and Competition of the Ministry of Economy, explains that, although there is no clarity in a new law or in specific incentives To attract more Foreign Direct Investment (FDI) to the country, they are in the process of creating a strategy to redirect the way Guatemala attracts investors and identify sectors.
“We are evaluating what weight to give to each incentive so that the role of the MINECO in attracting investments is with a medium and long-term vision and not necessarily only meeting the short-term needs of the investor. “It’s too early for us to talk about specific new issues,” he notes.
The vice minister acknowledges that “we do not currently have a list of specific incentives that we are evaluating; it is like a holistic vision of the investment attraction strategy, deep down there is a decision to be more strategic in the type of investment we are looking for.”
A “menu” of incentives
But the lack of a political agreement should not stop the need to be competitive at the incentive level.
For Lisardo Bolañostechnical coordinator of Guatemala No Se Detiene, the need that exists “should not stop simply if there are political agreements in Congress or not. There is much that the Executive can already do. There are issues of simplification and digitalization of procedures that can be carried out from Mineco, from the Ministry of Agriculture, Health, or the Migration Institute.
“These objectives can range from the development of a new product to the installation of plants, for example, for compliance with international certifications in environmental matters until linking an Intecap, which from the moment a company is interested in coming to invest in Guatemala, begins to produce a program that adjusts to the needs of the company’s operators. and that I can support with the scholarship to be able to carry out that learning,” Bolaños exemplifies.
Nor does everything point to exonerations. According to Enrique Godoy, former commissioner of the National Competitiveness Program, Pronacom, an example of the incentives that are viable in Guatemala is the Law for the Promotion of Innovation and Technology Manufacturing in El Salvador, which offers a total exemption from the payment of taxes levied on the import of goods, inputs, machinery, equipment and tools of the benefited sector.
“These incentives are for a period of fifteen yearsthis must be taken into account when developing an Investment Law, since, in Guatemala without complying with the standards in areas of health, education and infrastructure“We must be more aggressive with longer terms where the investor can feel greater stability and reduce their risk possibilities,” says Godoy.
Enrique Lacsformer vice minister of Economy in the Integration and Foreign Trade sector, points out that some of the viable non-fiscal incentives for the country They would be training bonuses or reducing rent in the areas where the companies are located.
Godoy adds that it is possible to create an investment law, but with certainty and transparency “of the sectors in which we need to invest, such as the business process outsourcing (BPO) sector,” such as customer service, technical support, sales, logistics, software development, among others.
Lacs, who was also a negotiator of free trade agreements, returns to the issue of agility in processing special work and residence visas for investors and their families. and adds the creation of special windows for investors in municipalities to expedite construction licenses.
“The first companies we have to attract should be those that require a large amount of labor in sectors that include business services linked to information technologies and light manufacturing such as food and beverages, clothing, toiletries and furniture. In addition, those in which high investment flows are moving in the world such as pharmaceuticals, medical devices, auto parts and electronics manufacturing,” Lacs lists.
He sees a need to focus not only on attracting greater investment in the city, but also in the interior of the country and offering duty free zones of certain territories that encourage employment so that citizens do not migrate.
Compete with Panama or Vietnam
In the region, countries with similar investment destinations abroad can be Dominican Republic, Costa Rica and Panama.
As of September 2023, Guatemala had attracted foreign direct investment, US$1 thousand 136.1 million, according to the Bank of Guatemala. In that same period, Dominican Republic reached US$3,369.5 million (Central Bank of the Dominican Republic), Costa Rica US$2 thousand 691 million (Ministry of Foreign Trade) and Panama with US$1 thousand 372.1 million (Statistics National Institute).
However, Bolaños argues that Guatemala should pay attention to what it is doing. Vietnam, Indonesia o Malasia.
“They bring very significant amounts of foreign investment, with aspects of high technological content. If they look at Poland and Malaysia that are creating research centers and laboratories in electronic microcomponents, biotechnology, or cutting-edge pharmaceutical products …vWe know that the problem we have is one of vision.“he points out.
With information from Ximena Santiago.
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