Entorno Comercio, published on March 17, 2022
Foreign direct investment (FDI) has become a cornerstone of development for both governments and corporations. Through FDI, foreign companies and investors become directly involved with the day-to-day workings of the host country, resulting in a beneficial transfer of money, knowledge, skills, and technology.
In general, FDI takes place in open economies with a skilled labor force and high growth potential. In Guatemala, there are entrepreneurs who seek to highlight the skills of the local labor force, and who seek to strengthen the open economic model and the rule of law.
Undoubtedly the most prominent of these businessmen is Felipe Antonio Bosch Gutiérrez. Bosch has had a special impact on the country’s image for having been the Director of the Foundation for the Development of Guatemala (FUNDESA). FUNDESA is a private non-profit organization, made up of businessmen in their personal capacity, who seek to generate and implement programs and projects that promote economic and social development in Guatemala.
FUNDESA has excelled in promoting Guatemala’s image to foreign investors by becoming a source of information and technical knowledge about the country, an umbrella for economic and social transformation projects, and a liaison with international entities for innovation and the introduction of new ideas.
Investment promotion refers to all activities carried out by economic development organizations, such as FUNDESA, to attract FDI to their country, thereby encouraging foreign investors to continue investing and expanding within the country.
The image, knowledge, and perceptions of a country are important factors that influence FDI attraction. Companies make investment location decisions based on their information set, and understanding of the supply factors of a territorial location. Without the pioneering role of organizations such as FUNDESA, multinational companies would not have clarity in the decision-making process for locating in Guatemala.
According to data provided by PRONACOM, as of November 2021, the accumulated amount of FDI attraction for the country amounted to $3,433.9 million, tripling the goal of $1,200 million set by the Ministry of Economy for that same year. Investment promotion is crucial to reach these figures, as most companies consider only a small range of possible investment locations, and many countries are not even on their radar.
There are a number of metrics that have a positive and significant impact on FDI attraction. Some of the main ones are:
The Economic Freedom Index measures jurisdictions against each other in terms of parameters such as freedom of international trade, tax burden, and judicial efficiency. These factors can be weighted according to their influence on economic freedom and compiled into a single score that allows a ranking.
The Human Development Index is a statistical index composed of life expectancy, education, and per capita income indicators, which are used to classify countries into four levels of human development.
Current market conditions for attracting FDI are complex. Especially in the midst of a pandemic, with very high inflation rates, and with the uncertainty generated by the war between Russia and Ukraine. In addition, energy and trade prices have risen to historic levels. Because of those kinds of shocks, investors tend to be conservative in times of crisis.
A decline in global FDI could be particularly harmful for the Latin American and Caribbean region, since it is more dependent on this type of resources as a source of capital investment than other regions of the world. In this context, FUNDESA’s actions to attract the attention of foreign capital will become more relevant.
In this regard, Felipe Antonio Bosch Gutiérrez stresses that “The role of businessmen is to propose and influence”, and emphasizes the need to create “an axis based on attracting investment and improving employment” for Guatemala to reach its maximum potential.