Interview with Dr. Alejandro Giammattei, President of Guatemala

Dr. Alejandro Giammattei, the president of Central America's largest economy, tells us why international investors have his country all wrong…

How did Guatemala respond to the pandemic?

President Giammattei: I assumed power on the 14th of January 2020 and by the 13th of March we already had the disease in Guatemala. In the first year we focused on two aspects: looking after our people and protecting the economy. We had to implement lockdowns while we built hospital infrastructure that had been abandoned for many years. We built five hospitals for Covid-19 patients in just five and a half months. Now we have more than 2,000 respirators – when I came to power there were just 200. We were the first country to make the mask obligatory.

But we also focused on keeping the economy moving. We wanted the productive infrastructure of the country to suffer the least impact possible. We tried to balance the health needs with the economic ones. We kept the ports open, installed biosecurity protocols in the food companies and we actually boosted exports within six months of the pandemic. Together with the private sector, we commissioned a study with McKinsey, to look at how we could boost the economy coming out of the pandemic. The plan we produced, Guatemala Moving Forward, grew from a pandemic response to a comprehensive economic transformation for the next 15 years.

So, the pandemic was an opportunity to reform Guatemala’s economy?

PG: Yes, while others worried about the pandemic, we got busy. We saw an opportunity to make Guatemala attractive to investors. We created a package of economic laws that were passed by Congress that included many elements for international investors. For example, the Free Zone Law, to convert Guatemala into a centre of attention for companies that want to use produce for consumers in Mexico, the US or Canada.

And it’s working. In March we had visits from 27 Spanish investors, 61 Indian investors and 50 from the US. We guarantee that the tax regime for new investors will not change in coming years, which gives them long-term security. Moreover, we have also improved legal security and protection of private property, which are essential to attract investors.

Costa Rica and Panama attract more foreign investment than Guatemala; why?

PG: That might be true but both have serious macroeconomic problems. We came out of the pandemic more renovated than ever. We didn’t add a single tax to cope with the pandemic. We raised extra funds by increasing our tax base because we realised there was little point increasing taxes for the people who already pay. As a result, we ended 2021 with a record tax take, 2 billion quetzals ahead of the target.

We will use part of that money to improve the country’s road network, which will make our economy more competitive. It will also generate economic activity that will further increase that tax take. It’s a win-win, whereby we invest around 500 million quetzals this year and next year repairing the Central American highways. We will also improve the national highways that link different provinces and we will build roads to link municipalities within provinces. The road project will cross the 22 provinces of the country, creating employment. We also created the Ventanilla Agil (one-stop-shop) for construction, which has reduced permit times.

If you look at Guatemala City, you will see more than 140 buildings going up right now. More than 2 million square metres of construction will be built in the capital in 2022 and 2023, most of which is much-needed living space. We have tried to facilitate all invest- ment, doing things no government had done before. We are installing a one-stop-shop for exports, because export permissions were also taking too long. The pandemic taught us that we need to be more agile to take advantage of opportunities.

The results of our work are clear. The level of employment now is higher than during the pandemic. One sector that still needs help is tourism. We are preparing a series of initiatives to boost tourism. It will take a few years because the sector has been hit hard. According to the Bank of Guatemala (Banguat) our economy grew at almost 8% in 2021 and contracted by just 1.5% in the pandemic. This growth was fuelled by the confidence that investors have shown in the country.

Most of the investment is local, but that is a strong sign of confidence for international investors. Indeed, the international players are now starting to come. A Japanese car part firm announced that it will build a factory on Guatemala’s border with Mexico to meet demand in Mexico, the US and Canada. They estimate that in four years they will have 10,000 employees. We are working closely with the national training institute to create the workforce that this company needs.

How will you overcome Guatemala’s inability to build infrastructure?

PG: In addition to our road building programme, we will expand the Atlantic port and install modern cranes to boost efficiency. If we are going to be a serious exporter, we can’t have bottlenecks when our products get to the ports. We understand what investors need and we want to create the right conditions for them. We spoke to the US government, when I won the presidency and we made them realise that walls don’t stop migration. The only thing that stops it is creating jobs, health, education, housing and security. The economy is the major factor and that is influenced by the natural disasters we have suffered because of climate change.

The first year of my government was hit by a pandemic, two volcanic eruptions, hurricanes Eta, Iota, Amanda and Cristobal. It was like being hit by the seven plagues of Egypt in one year. The economic experts predicted that Guatemala’s economy would contract by 8% in 2020 and the outlook was bleak. But that analysis overlooked the fact that Guatemala is a resilient society that is able to overcome challenges. Now there will be new challenges posed by the war in Ukraine and Russia but we will overcome them.

Guatemala is strategic for immigration and Taiwan; does this US administration recognise that?

PG: Maybe you should explain that to them. We are the largest ally that Taiwan still has and while I am president, I will only recognise one China and it is called Taiwan. I don’t like to criticise the governments of other countries, although they criticise us and we have to take it. If you criticise them, they don’t take it. We have thicker skin. But, for example, since I became president, the migrant caravans have stopped.

The US didn’t tell me to do it but simply I didn’t want our country to be invaded by thousands of people breaking through the border. Now we catch them and take them back to their country of origin. Nobody said, ‘President, help me with this’, but we wanted to protect our sovereignty and we did it. Mexico felt very pleased, indeed Mexico worked with us because we had a shared problem. Mexico even paid for the buses to take people back. How many buses do you think the US paid for?

The conflict in Ukraine has shown that while there might be great powers, we always need to respect the sovereignty of other countries – even if they are smaller. The situation in Ukraine is flagrant aggression that could set a dangerous precedent for other supposed powers to invade other countries and end the democracy and institutions of a country. It’s bad because that is supposedly why we have the United Nations, which should uphold international law. The price of wheat, oil and gas is already increasing so the repercussions of the war will be felt here. We have officially registered our opposition to the war.

Where are the best investment opportunities in Guatemala?

PG: In manufacturing, in textiles, in medical and pharmaceutical products. But almost anything you decide to produce in one of our free trade zones will be a success because you don’t have to pay taxes on your inputs or on your products if they are exported. We also have great human talent which gives us potential in other areas. For example, BPOs have been a big success here. There are also infrastructure PPP investment opportunities, especially with ports. The country has incredible tourism potential and is ripe for more visitors. Our government is also willing to help international investors.

The economic transformation of this country over the next 15 years will see us produce more of what the world wants, reaching new markets. We have identified a map of huge opportunities and we will keep meeting the challenges.