Guatemala is promoting itself as a country specializing in light manufacturing, a segment that, while requiring skilled labor, is a skill that human capital can acquire in a matter of months. Hence, the feasibility of achieving this goal, which provides opportunities for better-paid jobs.

However, there are challenges that the country must address. It is not the only country seeking foreign investors with the aim of creating new sources of employment and boosting its economy, enabling it to offer sophisticated services and products with greater added value.

The lack of an umbrella strategy that comprehensively involves the government, the productive sector, and the general population as a source of human capital is one of the factors that allow its peers to stay ahead.

Building an industrial ecosystem

Since 2021, actions have been taken to boost the country's production rate. The increase in workers affiliated with Social Security, four times more than in the previous decade, is a reflection of this, but there is still a long way to go to achieve the proposed goals.

This year, Japanese auto parts manufacturer Yazaki set up operations in Pajapita, San Marcos, in Puerta del Istmo area, which is considered one of the opportunity zones contributing to economic development and modernization in the region. Promoting more investments like this and more industrial zones like this is what the country needs, emphasizes Lisardo Bolaños, economic analyst and Technical Coordinator of Guatemala Moving Forward.

Now, how can more cases like Yazaki's be replicated? There is consensus among specialists that Guatemala has not been able to view the issue as a macro strategy, as everyone, regardless of their size in terms of contribution to the economy, everybody is rowing in their own direction, with their company, their business, without having the vision to generate more value chains and more ecosystems.

"It's a situation that places us at a disadvantage when it comes to attracting more investment in light manufacturing. First, the country has to close a gap with its neighbors in terms of productive infrastructure, availability of industrial parks, free trade zones, and Special Public Economic Development Zones (ZDEEP) [for its acronym in Spanish], mainly where target investments only have to come and set up their businesses. This is what other countries have and Guatemala does not," emphasizes Wendy Mena, coordinator of Invest Guatemala.

Better incentives and more industrial parks

The ZDEEPs are one example of opportunity zones that are active in the country, and a substantial reduction in red tape is needed. They are particularly suitable for specialized industries to set up, with just over ten currently in operation. Only seven are authorized by the Free Trade and Industry Zone Authority (Zolic) [for its acronym in Spanish], but not by the Tax Administration Superintendence (SAT) [for its acronym in Spanish].

As for incentives to promote industrial parks, which according to the SAT are not within its jurisdiction, there is no clarity in the legislation on incentives for this purpose, as is stipulated in the legislation of the Dominican Republic, El Salvador, Honduras, and even Nicaragua. For example, working on a policy proposal for industrial and technology parks, where Mineco [Ministry of Economy], Concyt [National Council for Science and Technology], and the Ministry of Finance work hand in hand to advance viable proposals with economic resources.

The Zolic Law, Decree 22-73, whose regulations were reformed several years ago, does not have customs procedures that allow for clear communication between an industry covered by the Law on the Promotion and Development of Export and Maquila Activities, Decree 29-89, and a Free Trade Zone, Decree 65-89. As a result, import and export policies must be drawn up and, if the traffic light turns red, the inspection must be paid for, while remaining within the same customs area.

A law is also needed to attract investment, not necessarily based on tax incentives, but on incentives that can facilitate business for companies. “If I want to invest in the rural areas of the country now, the municipalities are not aligned with a national strategy, because the costs of building permits and public lighting are not standardized, and it is left to the discretion of the municipal councils to set those rates,” complains Luis Óscar Estrada, executive director of the Clothing and Textiles Sector (Vestex).

A well-organized national strategy

Establishing land use planning with clear public policies is also key in encouraging trust and attracting investment. For example in Escuintla, one of the model boroughs used as a development hub, they have been working on competitiveness roundtables and are in the final phase of implementing the land use plan.

Hence the importance of municipal governments joining the initiative to turn the country into a destination for the light manufacturing industry. “This generates more stable jobs for the municipality's residents, creates new development opportunities, and opens the way for young people to aspire to better wages in their own community and not feel the need to migrate to other cities or outside the country,” shares Abraham Rivera, mayor of Escuintla.

He points out that forming alliances with other municipalities has allowed them to jointly identify economic corridors and create the conditions to make the department [territorial division in Guatemala] an attractive region for investment.

According to the head of Pronacom [for its acronym in Spanish: National Competitiveness Program], this development is part of the Southern Territorial Competitiveness Strategy. It documents the potential of the port city and the boroughs of Masagua, Iztapa, and San José, which presents a roadmap for making the territory suitable for investment and economic development for the population.

He also points out that through the Directorate of Trade and Investment Services (Disercomi) [for is acronym in Spanish], they are following up on the promotion of special regimes, in particular regimes 29-89 and Free Trade Zones, as well as reducing response times to users and the various procedures.

Estrada returns to the core issue: a comprehensive strategy is needed, a large “umbrella” that allows them to be attractive in all target sectors, in order to take advantage of the opportunities that are arising with the phenomenon of nearshoring. This is part of a promotion law to attract both domestic and foreign investment.

Identify populations and train them

The other pillar of the strategy is human capital. In this regard, from a business perspective, it is necessary to give the population access to vocational and technical training. “Recent experience tells us that we can generate and retain levels of investment in light manufacturing, both domestic and international, which, in addition to offering better wages, contribute to the development of the communities where they are located,” emphasizes Lisardo Bolaños, Technical Coordinator of Guatemala Moving Forward.

Among the challenges in consolidating this national strategy, which is being promoted through the Guatemala Moving Forward program, is continuing to work on fostering innovation and technology in human capital, strengthening technical programs that provide these skills and enable a leap toward the sophistication of the available workforce, says Francis Garnica, Director of Pronacom.

Guatemala has a history of doing this through the Dr. Imrich Fischmann vocational institute, which has been training young people in engine repair, air conditioning, and light machinery assembly for more than half a century. However, it can only serve a small number of young people each year. Therefore, there is a need to revive this institute and expand it.

Similarly, the work done by the Technical Training and Productivity Institute (Intecap) [for its acronym in Spanish], which has 23 vocational training centers that could be 50. “By combining and strengthening these skills, we can have a pool of skilled workers in the short term,” estimates Hermann Girón, President of AGIS and Vice President of the Chamber of Finance.

The clothing and textiles experience

One model sector, which is among the top exporters and generates the most added value, is textiles. In 1997, they developed a comprehensive strategy (umbrella) aimed at generating greater added value throughout the production chain, from yarn to finished garment. And although isolated barriers still need to be overcome, 50% of the added value that remains in Guatemala is derived from this strategy. It does not compete with other countries on labor costs, but rather on services and fast delivery times.

As a sector, they are exporting to other countries in the region. More than 100 million pounds of fabric are sent to be manufactured in Nicaragua, Honduras, and El Salvador. That fabric could be manufactured in Guatemala, but in the capital, it is no longer an aspirational industry. “Young people want to work more in call centers or similar activities. Unfortunately, many do not have the skills to work in those industries, especially in the rural areas,” says Estrada of the exporters' association.

According to Deputy Mayor Víctor Martínez, in this context, the municipal government of the metropolis has been betting on the call center & BPO cluster, not only because it generates thousands of better-paid jobs, but also because it favors real estate investment, the manufacture of office furniture, and, in addition to boosting the sale of technological devices, computer repair technicians benefit from the demand for their services, which is in line with generating formal employment opportunities for the capital's residents.

That is why it is necessary to bring the development of industries such as textiles to the interior, as there are many people who want and need to work. For example, every day, workers from the surrounding departments leave their homes at dawn to work in what used to be Koramsa in the capital and return late at the end of the day.

What should be done in such cases? Estrada suggests that a development park could be established in Celgusa Park (Celulosas de Guatemala, S.A.), as it has all the necessary conditions. There is a labor force nearby from El Progreso, Las Verapaces, and Zacapa. There are production complexes that have been developed, such as Michatoya, which has two industrial parks; Puerta de Istmo, with a park with ZDEEP, free trade zones, and the Zeta Free Trade Zone in Amatitlán.