Infrastructure market in Guatemala
Can $216 million
Canadian exports to Guatemala in 2021.
Jobs in Guatemala’s infrastructure sector.
Infrastructure’s contribution to Guatemala’s GDP.
Government spending allocated to infrastructure in 2021.
Guatemala is Canada’s largest bilateral trade partner in Central America. The Guatemalan economy is relatively stable and largely independent from the state.
The country’s macroeconomic soundness is widely acknowledged, and it has one of the lowest inflation and growth volatility rates in Latin America.
Guatemala’s geographic position is strategic. Located in the centre of the American continent, it borders the largest market in the world, the Canada-United States-Mexico Agreement (CUSMA). It also has coasts on both the Pacific Ocean and the Caribbean Sea.
With 17.6 million people, Guatemala has the largest population in Central America. It also has the largest economy in the region, with an estimated gross domestic product (GDP) of $101.8 billion and a strong GDP growth rate of 8% in 2021 (EIU, May 2022).
Slowly emerging from the pandemic, between 2020 and 2021, 2-way trade with Guatemala increased by 10%, from $788 million to $864 million.
To recover economically from this historical crisis, the Guatemalan government is focusing on:
- creating jobs
- promoting strategic investments (including foreign investments)
- stimulating domestic, regional and international demand for Guatemalan products
Key opportunities for Canadian infrastructure companies in Guatemala
- Government centre (US$240 million)
- Tecun Uman port (US$40 million)
- North-West road (US$180 million)
- International airport modernization (US$200 million)
- Urban train (US$770 million)
- A North-South toll road (US$80 million)
Notable challenges for Canadian infrastructure companies in Guatemala
- Lack of a free trade agreement (FTA) or a Foreign Investment Promotion and Protection Agreement (FIPA) between Canada and Guatemala
- Complex laws and regulations
- Congress approval required for large infrastructure projects
- High costs that negatively affect competitiveness and reduce gains from trade
Guatemala’s business landscape
Guatemala’s economy proved its resilience during the shock of the pandemic and its aftermath. According to data published by the Banco de Guatemala, the merchandise trade deficit was US$433 million in July 2020, compared with a deficit of US$785.8 million in 2019.
The trade deficit narrowed in July 2020 because of a sharp contraction in the import bill, which fell by 15.4% year on year, and a rise in export receipts, which grew by 9.7% year on year as external demand picked up in conjunction with an easing of lockdown restrictions in the U.S. (Guatemala’s main trade and investment partner). The total merchandise trade deficit narrowed to US$3.6 billion in January to July 2020, compared with US$4.8 billion in the same period in 2019.
Export volumes also grew as demand for agricultural products increased. Exports to the U.S. and Central American countries (Guatemala’s main export destinations) improved as well.
Overall, exports are expected to remain stable and post positive growth in year-on-year terms throughout the rest of the year.
On a year-to-year basis, trade with Canada decreased in July 2020. Canadian exports to Guatemala decreased by almost 40% (from US$7.3 million to US$4.4 million). Guatemalan exports to Canada also decreased from US$39.3 million in July 2019 to US$32.5 million in July 2020 (down 17.3%).
This is consistent with the fundamentals of Guatemala’s political economy, in which an economic downturn translates into a shrinking trade balance. In 2019, Guatemalan exports to Canada amounted to US$501 million, while Canada exported US$85.6 million in goods.
Guatemala’s import bill continued to shrink as a result of lower levels of disposable income and widespread unemployment caused by the coronavirus pandemic. Despite a rebound in international remittances from workers, containment restrictions have largely remained in place throughout the summer, dampening consumer demand.
A sharp decline in imports of fuels and lubricants—on the back of lower economic activity—also contributed to a lower import bill.
In 2013, the government established the National Agency for the Development of Partnerships in Infrastructure (ANADIE) to boost investment levels through public-private partnerships (P3). ANADIE is the country’s specialized entity for structuring and procuring P3 infrastructure and transport projects. Health, education and water are excluded from its mandate.
The quality of infrastructure in Guatemala has deteriorated in recent years, especially roads, ports and airports. Frequent and recent natural disasters have inflicted additional damage to the country’s infrastructure.
The private sector is promoting a general infrastructure law (VALO initiative #5431) to establish a proper mechanism for procuring infrastructure projects, currently under discussion in Congress.
ANADIE has identified and prioritized 6 projects valued at over $1.5 billion (projects listed above).
These projects are structured under a design, build, operate and transfer (DBOT) model, with long-term contracting with the state. The model will award the contract to the private entity that demonstrates financial capacity and international experience in P3s, meets national and international standards, and provides the highest return to the state.
Guatemala has high potential for attracting investment through open policies, macroeconomic stability and a sizeable domestic market. Its favourable geographic position and the quality of the Guatemalan labour force also have significant potential for attracting Canadian companies.
Guatemala is committed to improving its infrastructure in various areas and is willing to see more Canadian companies developing those projects.
For more information on infrastructure in the Guatemala market, please contact firstname.lastname@example.org.
- Date Modified: