Guatemalan_Market

Guatemala Market Overview Guatemala is a country that is experiencing a rapid shift in its political and social development. Free and fair national elections are held to determine political leaders in Guatemala, and officials are seeking to improve relations with the United States by emphasizing a shared agenda with the U.S. on trade, shared investment strategies, and the fight against corruption and transnational crimes. Any hurdles to investing in Guatemala are thus bureaucratic in nature, and Guatemala’s government is working toward overcoming them. President Alvaro Colom of the National Unity for Hope Party was elected in 2007 promising his commitment to democracy by accelerating rural development, improving education in Guatemala, and providing better access to the countries health care system (Cited from Doing Business, 2010). Demographics The signing of the U.S. Central America Dominican Republic Free Trade Agreement (CAFTA-DR) on August 5th, 2004, provides for the removal of tariffs and quotas on more 80% of U.S. exports, while the remaining 20% of tariffs and quotas are phased out by 2014 (Doing Business; Guatemala, 2010). This new treaty makes Guatemala an excellent market prospect for U.S. products. Guatemalan GDP reached an estimated USD 38.9 billion in 2008 and exports from the United States to Guatemala exceeded USD 4.7 billion. U.S. products and services enjoy high name recognition in Guatemala, and U.S. firms have a good reputation in the Guatemalan marketplace. As a result, more than one third of all Guatemalan imports come from the United States. Guatemala can also be an attractive place for foreign investment, despite some persisting challenges. With a population of around 13.7 million and an estimated population growth rate of 2.06%, it is the largest country in Central America and accounts for more than one-third of the region’s GDP. Guatemala’s literacy rate, however, does not share the same distinction between other Latin America countries, estimated at 70.6%, and barely falling ahead of Nicaragua. It is the northernmost country in Central America with Mexico to the north and west, Belize and the Atlantic Ocean to the east, Honduras and El Salvador to the southeast and the Pacific Ocean to the south. The capital, Guatemala City, has a population of almost 3 million and features first-class hotels and restaurants. La Aurora International Airport, which serves Guatemala City, has recently been renovated and is located just minutes from the major business and financial areas. Tourism has developed in Guatemala and continues to grow as the government works hard to better control the country’s security situation. Coffee exports are still increasing and employ over 400,000 people in Guatemala, which is about 7% of the economically active population as was cited by President Colom in February 2010 at the Third World Coffee Conference. Exports for Guatemala in 2009 totaled $7.2 billion, coming from coffee, bananas, sugar, crude oil, chemical products, clothing and textiles, vegetables. Regarding imports, Guatemala spent $11.5 billion on machinery and equipment, fuels, mineral products, chemical products, vehicles, and plastic material products. The average tariff rate on imports in 2008 was 3% and its tax rates are moderately high, with top income and corporate tax rates being 31%, which is comparable to the United States. Additional costs of trade with Guatemala are import taxes, import licensing, non-transparent sanitary and phytosanitary regulations, market access restrictions, inconsistent customs valuation and administration, problems enforcing intellectual property rights, and inadequate infrastructure. Racial stratification is complex and fluid in Guatemalan politics, culture and identity. But, overall the freedom to conduct a business, as stated above, is only restricted by Guatemala’s regulatory environment. Starting a business takes an average of about 29 days, compared to the world’s average of about 35 days. Most professional services for foreign investors are supplied from people with locally recognized academic credentials. Although the government has instituted many reforms, there still are complex and sometimes non-transparent regulations that require the services of local professional, but U.S. firms like Wal-Mart and GE Finance have made major investments in Guatemala’s economy (The Heritage Foundation, 2010). According to the Heritage Foundation, the largest issues facing foreign direct investment in Guatemala are caused by corruption which is perceived as widespread and considered a serious problem in many customs transactions. Corruption is also believed to make burdensome business licensing procedures, and bring impediments to the bureaucratic process (Cited from The Heritage Foundation, 2010). However, as stated, U.S. firms continue to make large investments into Guatemala’s economy, and the tourism industry continues to grow. References U.S. Department of State (2010). Guatemala. Retrieved from http://www.state.gov/r/pa/ei/bgn/2045.htm Fieser, E. (2010). Ex-guatemala president to be tried in u.s.. Retrieved from http://www.time.com/time/world/article/0,8599,1973329,00.html The Heritage Foundation (2010). Guatemala; 2010 index of economic freedom. Retrieved from http://www.heritage.org/index/country/Guatemala Doing Business (2010). Guatemala: country profile. Retrieved from http://www.doingbusiness.org/Documents/CountryProfiles/GTM.pdf