Juan Alberto Fuentes Knight resigned to the Finance Ministry; he is unhappy with the little progress made in tax matters.
In a press release, Knight commented the positive things achieved in his tenure, which include the creation of a transparency vice ministry, four information websites, and improving Guatemala’s standing in the International Transparency Ranking by 12 spots.
Companies will now submit their proposals electronically, and the results will be published in Guatecompras, the state’s public acquisitions website.
Juan Alberto Fuentes Knight, Guatemalan Finance Ministry, presented the project, remarking that all public institutions conducting direct purchases (where no bidding takes place) must use the system from September onwards. It will be initially tested by a few institutions.
The Finance ministry suggested the State to acquire insurance to protect public infrastructure.
Minister Juan Alberto Fuentes Knight argued that the country is vulnerable to climate change, and remarked that the State should also generate reserve funds and negotiate precautionary loans.
Newspaper Sigloxxi.com also published comments by Raul Aguilar, president of the Guatemalan Insurers Association (AGIS): “The state owns assets such as bridges, the National Theatre, buildings, etc. They should insure them, as other countries do”.
The Finance Ministry will meet with potential investors this week and will decide how much to set aside for the domestic and international markets.
Decree 19-2010 was published in the official government newspaper, thus authorizing the Finance Ministry to issue the securities.
Juan Alberto Fuentes, Finance Minister, told newspaper Elperiodico.com.gt that “Guatemala is well regarded internationally for its excellent payment reputation.
The Inter-American Development Bank will open an office in Guatemala to process climate change topics in Central America.
The announcement was made by Juan Alberto Fuentes Knight, who added that “the environmental issue has grown in importance in the regional integration agenda and in each nation’s investment plans”.
Fuentes explained that the office will be located at IDB’s Guatemalan headquarters, and that they see this development as the first step of a substantial increase in IDB’s support for environmental topics.
A proposal will be sent to Congress next week, reported Juan Alberto Fuentes, Finance Minister.
The Monetary Board, part of the Central Bank, has green lighted this operation. It is now in the hands of Congress to decide if the country should issue these bonds.
“Miguel Gutierrez, analyst from think tank CABI explained that if the Government decides to move forward with this transaction, it must do so in the next four months, before the U.S.
Guatemala's public finances face a tough scenario for 2010, after Congress rejected a proposed larger budget.
In 2010, a politically weakened Guatemalan Government will be obliged to find financing to cover an expected $770 million fiscal deficit.
It will be tough to achieve such goal without compromising the country's macroeconomic balance and sovereign debt ratings, so there will probably be important cuts in public spending.
The program, developed by the World Bank, intends to eliminate corruption problems in infrastructure projects funded by the state.
It is called 'Initiative for Transparency in the Construction Industry', and its main objective is to provide clear, verified information for all public infrastructure projects.
Juan Alberto Fuentes, Guatemalan finance minister, explained that the program intends to 'increase the quality of public investment in infrastructure'.
In order to increase transparency and efficiency in state spending, the public purchasing system is now under evaluation.
Guatemala's Finance Ministry will analyze purchases and contracts celebrated by public institutions through Guatecompras, the state purchases system. It will benefit from technical and financial assistance by the Inter American Development Bank and the World Bank.
When changing the financing scheme to sovereign debt, BCIE suggested Guatemala to do its bidding process again.
The original public bid, won by its sole participant Solel Boneh FTN, stated that the winning company was responsible for obtaining financing for the project, which in this case was provided by the Central American Integration Bank (BCIE) to the company.
The Finance Ministry presented the issue plan to bankers and investors.
Starting September 1st, public auctions will be carried out in the Stock Exchange, in which state companies, banks and private investors will participate.
"Those intending to invest in this securities have two options: they can approach the Central Bank and purchase bonds by themselves, with a minimum of Q10.000 ($1.214), or they can go to a stock broker and invest a minimum of Q5.000 ($607). In both cases, the investment can increase in multiples of Q100 ($12)", reported Prensalibre.com.
Guatemala´s BB+ sovereign risk rating and stable perspective, which is so close to the desired “Investment Grade,” is facing four threats.
According to an article by C.Véliz and J. Gramajo in Sigloxxi.com, Mauricio Choussy, the director of Fitch Central America, notes that four weaknesses persist in the country: “Low tax revenue, weak social indicators, social instability, and high levels of delinquency.”
In the first quarter $123 million were not executed and the contraction will be for more than $430 million in the second quarter.
The drop in tax collections has forced the Guatemalan government to set in motion a plan of austerity regarding public finances. After having prioritized the operational expenses of administrative salaries, this has fundamentally impacted capital investment.