Alejandro Giammattei, Guatemala's new president, is hosting a country with weak institutions, legal uncertainty and a business sector that is asking for a less "hostile" environment for new investments.
The electoral triumph of Alejandro Giammattei and the appointments he is making in his cabinet to assume next January 14, are the main reasons that explain the upturn that has had business confidence since July.
Guatemala was the only country in the region that improved its position in the global ranking monitoring businessmen's conditions for doing business, while the others went backwards.
The World Bank released the results of the Doing Business 2020 report, which measures the regulations that favor or restrict the development of business activity in different countries.
In the 2019 Global Competitiveness Index, Costa Rica, Panama, Guatemala, El Salvador, and Nicaragua fell back in the ranking, while Honduras registered no changes and the Dominican Republic was the only country that improved.
According to the report by the World Economic Forum, during 2019 Costa Rica ranked 62 out of 141 countries. It was followed by Panama at box 66, the Dominican Republic at 78, Guatemala at 98, Honduras at 101, El Salvador at 103 and Nicaragua at 109.
Partly explained by delays in the labor market, between 2017 and 2018 the Central American country moved from 91st to 96th place in the Global Competitiveness Index.
According to the 2017-2018 Global Competitiveness Index report, prepared by the World Economic Forum, the decline recorded by Guatemala this year is mainly due to lags in the areas of health and labor market.
The Confidence Index in Economic Activity in Guatemala registered a year-on-year fall of 33% in July of this year and in August a 20% drop was registered, compared to the same period last year.
The most recent EconomicExpectations Survey prepared by Banco de Guatemala, forecasts an inflationary rhythm of 3.90% for August, 4.01% for September and 4.03% for October 2018.As for December 2018 and 2019, the Panel foresees an inflationary rhythm of 4.07% and 4.22%, in that order.In addition, for a horizon of 12 and 24 months (August 2019 and August 2020) the Panel forecasts an inflationary rhythm of 4.07% and 4.33%, respectively.
In line with the trend seen since last year, in July 2018, the Confidence Index of Economic Activity in Guatemala fell by 33% with respect to the same month in 2017.
The latest EconomicExpectations Survey prepared by Banco de Guatemala forecasts an inflationary rhythm of 4.19% for July, 4.22% for August and 4.36% for September 2018.As for December 2018 and 2019, the Panel foresees an inflationary rhythm of 4.45% and 4.43%, in that order.In addition, for a horizon of 12 and 24 months (July 2019 and July 2020), the Panel forecasts an inflationary rhythm of 4.26% and 4.36%, respectively.
Reinforcing the trend reported since last year, in June 2018, the Confidence Index of Economic Activity in Guatemala fell by 36% compared to the same month in 2017.
In the most recent Economic Expectations Survey conducted by the Banco de Guatemala,an inflationary rhythm of 4.25% for June, 4.24% for July and 4.37% for August 2018is forecast. As for December 2018 and 2019, the Panel foresees an inflationary rhythm of 4.47% for both years.In addition, for a horizon of 12 and 24 months (June 2019 and June 2020) the Panelforecasts an inflationary rhythm of 4.35% and 4.43%, respectively.
In line with the decreasing trend that has been reported since last year, in May 2018, the Confidence Index of Economic Activity in Guatemala fell by 42% compared to the same month in 2017.
According to a survey carried out by Banco deGuatemala, an inflationary rhythm of 4.09% is forecast for May, 4.12% for June and 4.09% for July 2018. Regarding expectations for the end of the year, the consulted businessmen expect December to close with inflation of 4.50%.In addition, for a horizon of 12 and 24 months (May 2019 and May 2020), the Panel forecasts an inflationary rhythm of 4.31% and 4.48%, respectively.
Entrepreneurs feel that corruption in the public administration is the State's main problem, and they affirm that a high percentage of companies have been exposed to bribes.
The Coordinating Committee of Agricultural, Commercial, Industrial and Financial Associations of Guatemala carried out the "I Survey of Business Perception 2018", and among the main results that were obtained, were that "...38% of entrepreneurs said that corruption in public administration is the state's main problem which prevents development, while 43% say that their companies have been exposed to bribes."
Contrary to the negative figures recorded in 2015 and 2016, in 2017 Peruvian direct foreign investment received by Guatemala totaled $82 million.
In addition to reversing the negative trend in 2015 and 2016, last year Peru became the fourth country in terms of the largest flows of direct investment registered in Guatemala, as it was only surpassed by the US, Mexico and Colombia.
For the third consecutive year, in 2017, foreign investment received by Guatemala fell compared to 2016, explained by a lack of legal certainty, particularly in the mining industry.
Even though no one expected great results at the end of 2017, the 3% fall with respect to foreign investment received in 2016 has worried the business sector, as it reinforces the downward trend seen since 2015, when the FDI received by the country was 12% lower than the amount reported the previous year.
Financial executives point out that in order to regain confidence in the economy, the country is urging improvements in legal certainty and a reduction in political instability.
Sergio Recinos, president of the Bank of Guatemala (Banguat), told Prensalibre.com that "... this year we must improve matters related to legal certainty for investors andpolitical stability.These same business people have expressed in indices that measure the climate of confidence their concern that there should be 'clear rules'."
One of the best parameters of the strength of an economy is the amount of businesses it creates. In Panama, 47% fewer companies were created in 2017 than in 2016.
The union of Guatemalan industrialists will propose a development agenda, with the aim of improving economic conditions and recovering some of the investment lost in recent years.
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