FDI in Guatemala increased by 8%

By Mayora IP

FDI in Guatemala increased by 8% in 2023 over 2022, according to a report by the Economic Commission for Latin America and the Caribbean (ECLAC). While below the record high of 2021, inflows in 2023, at USD 1.552 billion, exceeded the average of the last 10 years.

The increase was mainly due to the reinvested earnings component, which was 25% higher than the previous year and accounted for more than 97% of FDI inflows into Guatemala. In contrast, intercompany loans fell the most, with a 103% decline and negative inflows, while equity inflows also declined in 2023, by 35%.

As regards sectors, the strongest growth was in manufacturing, with a 75% increase in inflows compared to 2022, although these represented only 21% of total inward FDI in Guatemala. The service sector, accounting for 77% of the total, experienced a small decrease of 1%. Meanwhile, the natural resources sector, which has traditionally had a small share in the country’s FDI inflows, accounting for only 3% of these, had a 55% drop.

More than half of Guatemala’s FDI inflows originated in countries of the region. Panama accounted for 31%, up 16% from the previous year, and Mexico for 15%, up 33%. FDI from the United States represented 15% of the total and was down 23%. Among the main origins, inflows also came from Peru (6% of the total), El Salvador (5%) and Honduras (5%).

As for project announcements, 11 projects worth USD 480 million were announced in Guatemala in 2023, a level close to that of 2022. The renewable energy sector was to the fore, with USD 180 million earmarked by the European company MPCES for a project which includes a long-term power purchase agreement for a solar photovoltaic facility. This contract was signed with Comercializadora de Energía para el Desarrollo S.A., a subsidiary of Ingenio Magdalena S.A. (IMSA), the country’s leading producer and exporter of refined sugar, alcohol and energy (MPCES, 2023b).

Central America and the Caribbean received more investments than in 2022 

The ECLAC report states that, overall, Latin America and the Caribbean in 2023 received USD 184.304 billion dollars in FDI, a figure that is 9.9% below what was recorded in 2022 but is still above the average notched in the last decade,

The weight of Foreign Direct Investment inflows as a share of the region’s GDP also declined: in 2023, it represented 2.8%. However, the region’s participation in global FDI flows (14%) was higher than the average percentage seen during the 2010s (11%), according to the annual report Foreign Direct Investment in Latin America and the Caribbean 2024, released at a press conference in Santiago, Chile.

Central America and the Caribbean received more investments than in 2022 (12% and 28%, respectively). In Central America, nearly all the countries received more FDI, with particularly notable growth in Costa Rica (28%) and Honduras (33%).

“Foreign Direct Investment can help tackle, in particular, the first of the three development traps in which Latin America and the Caribbean is caught: the trap of low capacity for growth. To this end, we need policies to attract investments that put emphasis not only on attracting them but also on what happens once they are established, and that connect these policies with the productive development policies of countries and their territories. All of this requires strengthening the technical, operational, political and prospective (TOPP) capabilities in this area,” ECLAC’s Executive Secretary, José Manuel Salazar-Xirinachs, said upon presenting the study’s main conclusions.