Antonio Malouf, Guatemala’s Minister of Economy, talks at Barcelona New Economy Week in early October. (Photo by Barcelona New Economy Week)
What are your top priorities right now with regards to economic development and inward investment?
We have a target of $1.2bn (Q9.28bn) in direct investments [for 2021]. That is more than we have had for the past five years [combined]. It might seem a little small compared with other countries, but for Guatemala that is big, and that is without factoring in a new railway [being planned] that will connect Guatemala with the US via Mexico. Logistics costs are high now, but if instead of sending goods by sea we could put them on a cargo train in Guatemala send them to the US, that would be very nice. It will take some time [to get this operational], but we are about to sign the agreement to lay the groundwork for it.
We [have a focus on] the short, medium and long term. We are trying to build a solid base for real development of Guatemala. We are not just looking to get out of this current economic struggle or this presidential period.
I come from the private sector. I have a textile company that is doing very well right now because of the nearshoring trend, but I accepted this job [as minister] to make a better country at the end of the day and that is what I am aiming for. I am lending my time so that I can leave my kids with a better country than the one we have now.
Let’s talk nearshoring. How significant is the trend and how do you think Guatemala can benefit from it?
We take it step by step. Right now we are benefitting because the racks [in shops and warehouses] in the US are empty, so everything we ship is purchased right away, but in the medium term and long term, we can benefit by having that foreign direct investment [FDI] in our country. We want to [say to] investors: ‘Why make your factory in China? You can make it here.’ It is not that different with regards to labour costs. It might be a little bit more expensive [in Guatemala as opposed to China], but when you start adding up the different costs we become competitive – inventory costs, for example. If you don’t need to have those huge inventories, because your turnaround is going to be quicker here, your cost is going to be reduced, and then if you compare Central America with overseas or the Far East, we compete well.
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Where is Guatemala currently in the global value chain and where do you want to be?
It depends on the products. Our largest export right now is clothing, and in clothing we are not operating on a basic level; we don’t do T-shirts and socks. In clothing here is a metric called ‘square metre equivalent’ and the price per square metre equivalent in Guatemala is one of the highest in the region. So that means that whatever is produced in Guatemala, it is the most expensive in the fabric – which is still very basic. We are not doing chips, we are not doing medical products, we are not at the high end, but what we are doing, we are in first in our class. We are in second grade, we are not even in high school, but we are the valedictorian of the second grade. We want to get through elementary school, and then eventually we will go through middle school and then eventually go to college, but where we are right now we are valedictorians in what we do.
What other sectors are you focused on for investment attraction?
The private sector and the public sector… hired McKinsey to do a study called ‘Guatemala no se detiene’ [Guatemala won’t stop]. The findings of the study were for us to do more of what we are good at: that is textiles, beverages and food, plastics and chemicals, and [then exploit our potential in these areas], double and triple them [in size], have more exports, and let’s leapfrog to the sectors [such as] pharmaceuticals, medical devices, call centres and business process outsourcing. In order to do this, you need to have educated your youth to be ready to be hired when those companies come. So those two things are being done and we are attracting companies on both scenarios so we can perhaps [be fast learners] and go from grade school all the way to high school in a couple of years.
Have you identified any weaknesses or shortcomings you have in the investment environment that you would like to work on?
We did at the beginning of our term and as a result we worked on [improving] legal certainty, which was lacking. That is why we reformed our free zone law, for example, and why we are [encouraging digitalisation].
You have got a pretty big FDI target, as you mentioned. How confident are you that you can get there?[We are targeting] $1.2bn at the end of the year, and we have been above average [so far]. In the first month of the year we received $107m in investment. If you divide $1.2bn, that is $100m per month for the year. By the eighth month, which is what I have the most recent figures for, we were at $840m by 31 August. So by now we should be somewhere above $900m and aiming to hit that target.
Where is your investment typically coming from? Is it a broad mix of sources?
We are not putting all our eggs in one basket. I just heard the good news that there is a $200m investment coming from a South Korean company, in the textiles sector. There is Tata, which is an Indian company that makes cars, but they are investing in call centres, so they have a foot in Guatemala. Once they know how the country works, they will hopefully want to do some other investments. Once they get established, they are thinking of doing spare parts for their own vehicles [in Guatemala], for example. There is a pharmaceutical company from Spain that is creating a big laboratory. So [we have] different companies from various countries that invest in different sectors.
Guatemala is a perfect place logistically. We have the Atlantic Ocean, Pacific Ocean, our nickname is ‘the Eternal Spring Weather Country’. So, it is not just location, it is the people, it is the weather. There are many advantages to investing in Guatemala.