As of September last year, Costa Rica attracted US$2,691 Million, of which 51% came from companies operating under the free trade zone regime. During the same period, Guatemala attracted US$1,136 million, less than half of what our Central American neighbor achieved.

Costa Rica's results are the result of a long-term strategy that, among various incentives, includes a law that allows it to grant incentives for eight years, compared to the ten years offered by Guatemala. The difference is that, while in Guatemala the incentives can no longer be extended, in Costa Rica they can be extended, in whole or in part, for another eight years, depending on the amount of reinvestment made by companies. Another example is the Dominican Republic, where incentives are granted for up to 50 years.

 “There is another major difference when it comes to attracting investment: Costa Rica has numerous world-class industrial parks. They achieved this thanks to the incentives they offer to industrial park developers in relation to the construction of facilities and the services they provide to investors. The latter, for example, has led them to provide recruitment, training, transportation, and health services to company employees," says Wendy Mena of Invest Guatemala.

According to Ignacio Basterrechea, a partner at Urbop, a firm specializing in real estate strategy, "the repayment period for an industrial park is between 12 and 15 years. In order to obtain financing, it must be backed by contracts for the duration of the loan. Given that the user enjoys 10-year tax incentives, the amount they are willing to invest in Guatemala is reduced and, consequently, so is the term of the lease agreement. This creates uncertainty and hinders the production capacity of industrial warehouses to take advantage of the high demand that exists in the region."

 Both the newly-sworn- in government of President Bernardo Arévalo and the members of the 10th Legislature face the challenge of bringing this situation in line with the progress being made in the region.

Miguel Ángel Par, market leader for Guatemala at Cushman & Wakefield AB Advisory, is critical and states that the country's regimes are not competitive and must be modernized to meet the needs of companies. Having a limited horizon of 10 years goes against companies that want to stay longer, explained Par when talking about incentives that can be extended based on criteria such as reinvestment.

Where to start?

To begin with, the country must identify the business sectors it will focus on to attract investment, explained José Ignacio González, regional director of Business Intelligence at Cushman & Wakefield AB Advisory. It must then review the regulations and see what updates are needed. This is better than trying to cover everything and taking longer.

In this regard, within Guatemala Moving Forward and with the support of studies by McKinsey Global Institute, NASSCOM, and Gartner, it has already been outlined that the pharmaceutical sector, medical devices, electronic device manufacturing or EMS, and BPO ITO GBS are the areas that the country should pursue and, therefore, align the supply of industrial parks. Other opportunities identified include agribusiness and light manufacturing, such as toys.

 In addition to tax incentives, Alejandro Guillén, business manager at Synergy Industrial Park, pointed out that in some countries developing industrial innovation parks, the government provides the developed land, which lowers costs and speeds up the process of building industrial parks. In exchange, the client commits to a deadline for starting operations and the number of jobs to be created.

What else matters to investors? Although the country faces a great opportunity, political uncertainty and having to wait several months to obtain the necessary permits to set up shop make it difficult to meet the demand of investors interested in establishing themselves in the country, Bastarechea said.

In the current context, companies are looking to improve the management of their production chains, long-term social and political stability, lower costs, and above all, skilled human talent, said González. Industrial parks can help manage supply chains, reduce costs, and find and train human talent.

 "Competing countries also offer non-tax incentives to be more effective in attracting sophisticated companies. These include support for the salaries of new workers who require training to enter new industries. They also include the simplification and digitization of procedures for starting operations, ranging from company registration and regulations for foreigners to open bank accounts, to procedures for obtaining construction permits from municipalities. In addition, conditions for access to financing are facilitated, and subsidies are even granted to cover the construction of factories and machinery in strategic industries," says Wendy Mena.

González added that Central America and the Caribbean have positioned themselves positively due to tax incentives, proximity to the US market, and the added value that each country has—Costa Rica for high-value companies in areas such as life sciences and medical devices, and Guatemala in maquila, agri-food products, and auto parts. In this regard, if Guatemala seeks to move toward the type of industries that Costa Rica attracts, strategies must be developed to ensure that our human talent has the required skills, starting

 How are industrial parks responding to attract investment?

Transnational companies seek sophistication in supply and adequate attention to their specific requirements. This represents a challenge because Guatemala has focused on office warehouses with height standards of less than 10 meters, which falls short for companies with global capacity, Par pointed out.

There are individual warehouses that are not part of a park and there are small complexes, while industrial parks are relatively recent in Guatemala, González pointed out, warning that developers install projects on land that is available to them, which is not always the best location. “What has been lacking is looking for land where the demand is,” he said.

 Guatemala needs to build more industrial parks and put itself on the investment map, said Basterrechea, betting on the country's urbanization to generate quality jobs in all departments. Among the industrial parks and warehouse complexes are Michatoya Pacifico, Puerta del Istmo, Zona Libre Quetzal, CAES, Las Tunas, and Distripark. According to the Urbop expert, 16 ZDEEPs are in the process of being approved. This is in addition to four ZDEEPs and seven free trade zones already in operation

Par added that “one of the findings we have made is that Guatemala has great potential due to the size of its domestic market, but it still has a long way to go in terms of the sophistication of its offering and the type of inventory it provides.”

Guatemala could have attracted more investment in recent years, but it did not have industrial parks ready to welcome companies. Experts from Cushman & Wakefield AB Advisory commented that international trends are toward speculative development of industrial parks based on standards for platform sizes, parking, and build-to-suit (BTS) or on-demand, focused on specific requirements, such as in the case of medical device companies in Costa Rica.

 The country must plan developments and a master plan that responds to the type of business investment it seeks to attract. Ideally, it should have the capacity to provide both options, mainly because some companies decide not to invest because they need the facilities within one or two quarters, and a BTS takes between 18 and 24 months to be ready. This leads to opportunities being lost, according to experts.

Guatemala can look to the region, which is moving towards comprehensive proposals with projects that include commercial areas, financial services, hotels, public and private parking, car rentals, executive lofts, sports facilities, and medical services.

This is the case of the Valle de Naco industrial corridor (Honduras), an eco-efficient industrial park with advanced telecommunications, located in a free trade zone and with customized infrastructure. This is how Green Valley is described, while TMEX Park, in the State of Mexico, will offer more than three million square meters for industrial warehouses and companies that will be able to connect to the main multimodal logistics corridors and bonded warehouses connected to customs services.

Synergy Industrial Park, owned by the Pantaleón and Spectrum group, is moving towards this model, offering incentives such as preferential prices for electricity and diesel, as well as logistical support. Guillén indicated that the 500-hectare park is part of a comprehensive master plan that will include housing, commerce, hotels, entertainment, green areas, hospitals, and educational centers.

Specialized vocation

The task at hand is to identify industrial park projects under a plan that allows them to be located in areas close to ports and in municipalities where there is a specific production vocation, while at the same time improving legislation to accelerate the construction of the complexes, Mena suggested.

Meanwhile, Guillén said that the priority for encouraging the construction of parks should focus on investment in infrastructure, including ports, airports, new highways, and bridges; and that the business sector, academia, and the government should work together to help create conditions that attract foreign capital and establish technical and university programs to prepare the workforce. In places where industrial parks are built, development is promoted, jobs are created to reduce illegal migration, and the living conditions of communities are improved, he added.

 An important step is to facilitate infrastructure development and create government support programs to streamline the process of obtaining a construction license and review the special regimes under which free trade zones and new investments operate, Mena said, given that Guatemala lags behind the rest of the region in these areas.

 With the proper development of productive infrastructure and its proximity to Mexico, the country could easily capture a 5% spillover of unmet demand from the Mexican market, which would be a boom for nearshoring, Par predicted.

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