FIRST Guatemala Report 2014

Published to mark the Visit of His Excellency Otto Pérez Molina,
President of the republic of Guatemala, to the United Kingdom
The Republic of
GUATEMALA
Promoting regional integration
in Central America and the Caribbean
O F F I C I A L r e p o rt
energy • mining • agriculture • TOURISM

FIRST
© First 2014
FIRST gratefully acknowledges the cooperation of HE Acisclo Valladares Molina, HE Sarah Dickson and
the staff of the Guatemalan Embassy in London and the British Embassy in Guatemala City
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Senior Staff Writer Nicholas Lyne Award Advisory Panel Rt Hon Lord Woolf of Barnes, Rt Hon Lord Howe of Aberavon ch qc,
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Published to mark the Visit of His Excellency Otto Pérez Molina,
President of the republic of Guatemala, to the United Kingdom
The Republic of
GUATEMALA
Promoting regional integration
in Central America and the Caribbean
O F F I C I A L r e p o rt
energy • mining • agriculture • TOURISM

Developing Guatemala’s
resources in the field
and in the classroom
perenco-guatemala.com
Perenco is committed to supporting
communities close to its operations.
As part of the company’s wide
ranging social programme in
Guatemala, Perenco is proud to
support a number of schools.
One important initiative is the ongoing provision of
school desks. Working closely with the local education
authorities, Perenco provides over 6,000 desks a year
and has to date equipped schools in Petén, Izabal,
Alta Verapaz and “Franja Transversal del Norte”(FTN).
The desks allow the children to study in comfort, fostering
the right environment for them to fulfill their potential.
Perenco has operated in Guatemala since 2001.
Oil production comes from the Xan Field, located
in the north-west Petén region of Guatemala.

Introduction by
The Rt Hon Lord Hurd
of Westwell ch cbe pc
Chairman of the FIRST
Advisory Council
I
have great pleasure in introducing this
official FIRST report on Guatemala to
mark the visit of HE Otto Fernando
Pérez Molina, President of the Republic
of Guatemala. We are particularly grateful to
HE Acisclo Valladares Molina, Guatemala’s
Ambassador in London, for all his assistance
as well as the support of the Guatemalan and
United Kingdom authorities.
The President’s visit is especially timely and
will help focus the attention of international
business leaders and policy makers on the
many trade and investment opportunities
in Guatemala. The President’s visit will also
coincide with the Latin American Investment
Forum to be held in London.
Guatemala is Central America’s most
populous country and its largest economy.
The agricultural sector accounts for over 13
per cent of GDP and 38 per cent of the labour
force. The 1996 Peace Accords, ending thirty
six years of civil war removed an important
obstacle to foreign direct investment. Since
that milestone was achieved, the government
of Guatemala has implemented important
reforms and pursued macroeconomic
stabilisation measures to enhance further the
investment climate.
In addition, the Dominican Republic-
Central American Free Trade Agreement
(CAFTA-DR) of July 2006 has encouraged
increasing inward investment. There remain
challenges, however, particularly in the lack
of skilled workers, security concerns and an
underdeveloped infrastructure.
GivenGuatemala’seconomicstability,steady
growth and the objective promoting foreign
investment, there are significant opportunities
for UK and international businesses, including
sectors such as clean energy, security,
infrastructure and construction, education
and the retail market. Guatemala also offers a
strategic geographical location from which to
accessMeso-America–amarketincludingover
fifty urban centres, a population of 68 million
and a regional economy worth some US$319
billion. Guatemala has trade agreements with
FIRST
GUATEMALA
neighboursincludingMexico,Panama,theUS,
the Dominican Republic, Colombia and Chile.
Guatemala’s important industries include
sugar, textiles and clothing, furniture,
chemicals, petroleum, metal, rubber
and tourism. The energy sector presents
important opportunities and attracts around
32 per cent of the total investment in the
country. Oil production amounts to some
14,000 barrels per day and Guatemala has
27 hydroelectric plants, 27 thermoelectric
plants and two geothermal plants. Given the
country’s participation in SIEPAC (Central
American Electrical Interconnection System)
Guatemala has now become an important
energy exporter to the region.
President Otto Fernando Pérez Molina
came into office on January 14th 2012 and
committed to continue existing government
programmes to promote foreign investment,
enhance competitiveness and increase
investment in the export and tourist
sectors. These objectives are supported
by Guatemala’s major diplomatic interests
including regional security, regional
development and economic integration.
The United Kingdom and Guatemala
enjoy an important investment and trade
relationship and regular dialogue is conducted
between the two countries. Earlier this year
the British Embassy, led with distinction by
HE Sarah Dickson, HM Ambassador to
Guatemala and Honduras, held a series of
events to mark the annual ‘British Week’.
President Pérez Molina’s visit to the
United Kingdom, while providing an
opportunity for private discussions, will give
us all the opportunity to study the significant
developments in Guatemala and to weigh
carefully the many opportunities to work
together even more closely.
We at FIRST are delighted to have been
asked to produce this official publication
to mark the President’s visit and hope
that it contributes, in a small way, to its
success and the further development of the
bilateral relationship. F 3

Profile of H.E. Otto Fernando Pérez Molina
President of the Republic of Guatemala
The word on
voters’ lips
was ‘security’,
and as the
former head
of military
intelligence,
he assured
them he
would deliver
Adopting unconventional solutions
4
W
hen Otto Pérez Molina won
Guatemala’s 2011 elections, many
commentators were puzzled as to
why a country that had only emerged
in 1996 from four decades of civil war that produced
a succession of military governments would vote in a
retired general as president.
The reason is Guatemalans feared that their country
was once again in danger of descending into anarchy,
this time caused by the drugs cartels waging a turf war
over transhipment rights north to the markets of the
United States.
The murder rate had soared to 34 in 100,000,
around 50 times higher than the EU average, while the
cartels were intimidating and killing local officials, or
simply buying control over the country’s institutions.
At the same time, just five out of every hundred crimes
reported were being solved.
President Pérez Molina campaigned on a “mano
dura”, or “iron fist” platform, promising to tackle the
drugs cartels and restore law and order.
After two sustained economic crises and years of
Mexican drug cartels muscling their way across the
border into Guatemala and Central America, President
Pérez had inherited a nation on its knees. The word on
voters’ lips was “security”, and as the former head of
military intelligence, he assured them he would deliver
by bringing in the army to fight drug trafficking and
secure the country’s borders.
About 90 per cent of the cocaine entering North
America every year now passes through Central
America, according to the UN’s International
Narcotics Control Board, and it has cost Guatemala
billions of dollars and thousands of lives.
The problem is relatively recent. Traditionally, the
vast majority of Latin American-grown drugs were
transported to the United States by plane or boat. But
Washington’s war on drugs shifted the problem inland,
leaving Guatemala in the crossfire between drug-
producing countries in the south and drug consumers
in the north.
Soon after taking office in January 2012, the
Guatemalan President approved the creation of two
new military bases in the country, upgraded a third
and made it a priority to reinstate a longstanding ban
on US military aid to Guatemala – a controversial
move since the aid was stopped over concerns
regarding abuses during the country’s civil war.
In late August 2012, around 200 US Marines
arrived in Guatemala as part of Operation Martillo,
an international mission aimed at intercepting illegal
narcotics, bulk cash, and weapons being transported
along Central America’s isthmus. They have been
successful in shutting down the drugs traffickers, who
have moved to new routes in neighbouring Honduras
and El Salvador.
A new approach to tackling drug trafficking
The Guatemalan President says he believes there is
no long-term military solution to drug trafficking,
and is now evaluating a new approach that includes
legalising or regulating some substances. The
controversial proposal, the first by an acting
head of state – but supported by many former
leaders in Latin America and beyond – surprised
many, provoking debate within Guatemala and
criticism from Washington. However, it also
succeeded in getting the international community
to discuss Latin America’s drug problem, which is no
small achievement.
President Pérez Molina’s proposals have been
welcomed by the London School of Economics,
which has organised an event during his historic
visit to London when it will present him with its
Report on the Economics of Drug Policy, a rigorous
independent analysis on current drug control strategy.
President Pérez Molina will be receiving the report
on behalf of Guatemala and will be taking it to official
platforms such as the UN General Assembly and the
Organisation of American States. Last year he appealed
to delegates at the World Economic Forum in Davos
for a new approach to regulating the drugs market.
A clean sweep
At the same time as tackling the drug traffickers by
military means, President Pérez Molina has set about
overhauling the country’s weakened institutions,
working closely with the UN’s International
Commission Against Impunity in Guatemala, and
putting his Interior Minister Héctor Mauricio López
Bonilla to work on overhauling the National Civilian
Police. Some 10,000 new officers are to be hired,
and around $30 million spent on properly equipping
and arming them. The increase will bring the total
GUATEMALA
FIRST

In an era
of waning
American
influence in
Latin America,
he is aligning
Guatemala
more closely
with its
regional
partners
number of police officers in Guatemala to 35,000 –
one agent for every 400 residents.
Guatemala’s police force must be on the same
level as the army – not below it Mr Bonilla says. This
means that all officers will have access to firearms, as
well as the authority to use them. A shortage of guns
prevented agents from confronting armed criminals
in the past. Guatemala is also acquiring cameras that
capture license plate numbers and send signals to
police alerting officers of stolen vehicles.
The PNC set up a new high-security task force in
early August to tackle crime in the most dangerous
parts of Guatemala City.
As well as updating its police uniforms, equipping
patrol cars with new technology, two new police
academies were set up last year.
The initiatives are modeled on Colombia’s police
force following a meeting last year between Colombian
officers and Guatemalan President Otto Pérez Molina
to discuss police reforms in both countries.
The last two years has seen a number of high
profile trials of senior army officers accused of human
rights violations during the civil war. Unsurprisingly,
President Pérez Molina’s record during the conflict has
also come under scrutiny.
The President adamantly denies allegations of
wrongdoing. “I can tell you it is totally false,” he told
Reuters on the eve of his election victory, saying he
was proud of his role during the war and adding: “I
have nothing to hide.” Declassified US documents
from the civil war years support him, he was one of
the Guatemalan army’s most progressive officers – and
a key figure in moving against General Efraín Ríos
Montt, who held power for a year after seizing power
in 1982. Some of the worst crimes of the war were
committed under his rule. The US documents also
show that President Pérez Molina played a key role in
the peace process.
“It fell to me to represent the army and take part in
the negotiations
and the signing of the peace accords. I had to
convince a very tough sector of the army that didn’t
believe in the peace process,” he says.
The legacy question
President Pérez Molina’s term in office is now
at the half-way point, with elections
due in November next year. So
what does the president hope
to leave behind when his
successor takes over in
January 2016? Guatemala
seems to have turned the
corner away from the
failed state that many
feared it was heading towards under the previous
administration. As well as imposing law and order,
strengthening the country’s institutions, and providing
a more business-friendly environment, President Pérez
has arguably used the drugs legalisation debate as a
way to to alter the long-standing foundations of US
relations with Guatemala and Central America more
broadly. The six-country region has largely been an
afterthought in US security cooperation with Latin
America, which has historically centred on the larger
economies of Colombia and Mexico.
The legalisation debate has proved a way of putting
Central America – and Guatemala in particular – on
the United States’ radar screen. It is also a way of
asserting the country’s autonomy from Washington,
as his visit to London – the first ever by a Guatemalan
head of state – also shows.
In an era of waning American influence in Latin
America, he is succeeding in aligning Guatemala more
closely with its regional partners, perhaps pulling a
country long beholden to the United States out from
under its powerful shadow. F

New opportunities for business
6
I
am delighted that Otto Pérez Molina is the first
Guatemalan President to be paying an official
visit to the United Kingdom this week. His
three day visit, accompanied by senior members
of his cabinet, is designed to showcase the significant
opportunities in his country for British business
and is testament to the fact that our efforts to rejuvenate
bilateral relationships in Latin America are working.
Guatemala once sat at the heart of Central America’s
Mayan civilisation and still boasts a rich cultural
ancestry. Today, the country maintains Central
America’s largest economy and population. The
challenges each Guatemalan government has faced
since democratic elections resumed in 1986, following
36 years of civil war, have been well documented. On
taking office in January 2012, President Pérez Molina
immediately set out three overarching priorities
to tackle them: improving the security situation,
eradicating rural malnutrition and financial reforms to
improve the business environment.
Closer partnership between the UK and
Guatemala can provide important, mutual benefits
for both countries, providing jobs and growth, as
well as combating poverty and exclusion. And the
opportunity is there – not least because Guatemala is
becoming an increasingly easy place to do business; it
was recently labelled most improved in the world by
the World Bank. In pursuing its policy of improving
the business environment, President Pérez Molina’s
Government has streamlined bureaucracy, boosted
competitiveness and exploited the benefit of regional
trade deals – through the US-Dominican Republic-
Central America Free Trade Agreement, and
(importantly for the UK) the EU-Central America
Association Agreement.
While in London, President Pérez Molina will
formally open the 4th Latin America Investment
Forum (LAIF), showcasing the diverse range of
opportunities in his country and across the region,
to a British and Latin American business audience.
Last year bilateral trade with Guatemala grew by 15
per cent, moving ever closer to the £100m mark, as
the benefits of implementing the 2011 EU-Central
America Association Agreement start to be felt. From
Guatemala, the UK imports mainly agricultural
produce – President Pérez Molina is also in London
to honour the outgoing Executive Director of the
International Sugar Organisation and welcome in
his Guatemalan successor – with spirits, medical
and pharmaceutical products, and vehicles traded in
GUATEMALA
FIRST
By Rt Hon Hugo Swire MP
Minister of State, Foreign and Commonwealth Office
Hugo Swire
is the Minister of
State at the Foreign
Commonwealth Office,
with responsibilities
for relations with Latin
America, Southern
Asia, Australia and the
Commonwealth. He
has been Member of
Parliament for South
Devon since 2001.
Before moving to the
FCO in 2012, he was
previously Minister
of State for Northern
Ireland. He attended the
Unversity of St Andrews,
and before entering
parliament served in the
Grenadier Guards, and as
a director of the auction
house Sotheby’s.
Rt Hon William
Hague MP, Secretary
of State for Foreign
and Commonwealth
Affairs meets Luis
Fernando Carrera,
Guatemala’s Foreign
Minister, in London

7
Guatemala is
becoming an
increasingly
easy place to
do business; it
was recently
labelled most
improved in
the world by
the World
Bank
the other direction. The UK is already the largest
European investor in Guatemala: British firms Actis,
Perenco and Ashmore have large interests in the
energy sector, the latter stretching back decades.
It is significant that the Guatemalan Minister for
Energy and Mines, Erick Archila, will also accompany
President Pérez Molina to the Investment Forum.
Looking ahead, we calculate that an infrastructure
sector with associated supply chain contracts worth
up to £1.14bn will represent the most valuable
area of opportunity for British business. In March,
representatives from the Guatemalan Interior
Ministry were in the UK investigating technology
in a bid to modernise the police and security sectors.
Demand in the retail sector, primarily in clothing and
accessories, has grown rapidly, with British brands
like Ben Sherman, Clarks shoes, Jimmy Choo and
Burberry increasing in popularity with the emerging
middle class. Appetite for British Education and British
English is growing at a rapid rate.
It has been this government’s policy that commercial
opportunities overseas are not the preserve of large
corporates and multinationals, and I believe we are
readier than ever to support British businesses of all
shapes and sizes as they explore exciting prospects in
Guatemala and across Latin America. In the last four
years, the Foreign and Commonwealth Office has
opened four new posts across the region, including in
Guatemala’s southern neighbour, El Salvador.
Guatemala’s approach to free trade is evidence of
a broader set of values our countries share, including
across the themes of the UK’s 2013 presidency of the
G8: trade, tax and transparency. During President
Molina’s first two years in office, his government has
joined international initiatives on transparency on
extractives (EITI) and construction (CoST) and is
now working to implement their recommendations.
Tax reform also remains high on the agenda.
We also worked closely together on global issues,
including during Guatemala’s recent membership
of the UN Security Council. I hope we can work
equally closely on the post-2015 development goals to
which I know President Pérez Molina’s government
attaches great importance, as do we. Guatemala’s
Foreign Minister, Fernando Carrera, who will also
accompany the President, will return to London
in June for the Global Summit to End Sexual Violence
in Conflict, chaired by the Foreign Secretary.
As a country with firsthand experience of the suffering
caused by sexual violence, Guatemala’s engagement
will be a very important element in global efforts
towards achieving peace, reconciliation and fighting
impunity. I hope that we can continue to learn from
each other’s experience and respective areas of
expertise across the board.
I was appointed British Minister of State for Latin
America in 2012, the same year that President Pérez
Molina took office in Guatemala. Over that time, I
have supported the deepening of our relations with
the region for the benefit of the UK’s security and our
economy, while the President has worked to continue
Guatemala’s trajectory towards stability and sustainable
growth. His visit to the UK will show where the
complementarities lie. I hope to uncover more when
I meet President Pérez Molina and his team this week
and visit Guatemala later this year. F
FIRST
Rt Hon Hugo
Swire MP with HE
Acisclo Valladares
Molina, Guatemala’s
Ambassador to the
United Kingdom

By Nick Lyne
Senior Staff Writer, FIRST
Guatemala
remains
Central
America’s
economic
centre,
accounting
for 35 per
cent of the
region’s GDP
Positive outlook for growth
10
P
resident Otto Pérez Molina took office
January 2012 after an election campaign in
which he pledged to tackle rampant crime
and poverty, as well as to woo foreign
investors to Central America’s largest economy.
Now past the half-way point of his term in office, his
popularity rating remains high at home, while he has
succeeded in raising Guatemala’s profile abroad.
As President Pérez Molina insisted throughout
the campaign, security and economic development
are closely linked. Guatemala has suffered from the
so-called War on Drugs, as President Pérez noted
in a speech last year at Davos: “Drug traffickers
have been able to penetrate the institutions in this
country by employing the resources and money they
have. We are talking about the security forces, public
prosecutors, judges. Drug money has penetrated these
institutions and it is an activity that directly threatens
the institutions and the democracy of countries.”
The new administration’s response has been to call
on world leaders to re-evaluate current drug policy.
Guatemala’s role has been to elevate the discussion to
governmental and multilateral level. Foreign Minister
Luis Fernando Carrera has travelled throughout Latin
America to garner support for a new approach: “It’s a
matter of how to combine the strategies. Traditionally
it has been said that what must be done is “law
enforcement,” application of the law, and that is what
was called the war on drugs. Which is a punitive focus
on trafficking, on production, and in general a violent
response by the state towards the cartels. This, what
has been done in Latin America, has increased the
violence, and because of that we are a continent with
so much violence, with so many homicides. What we’re
trying to find is a different focus, more humane, more
preventive, more oriented towards trying to reduce
violence, and through this way we will succeed in
reducing consumption and production as well as the
human cost.”
A former military intelligence chief, President Pérez
Molina has set about improving the security situation in
the country. Over the past two years, the government
has undertaken root and branch legal reform, working
closely with a UN anti-impunity unit investigating
and prosecuting malfeasance by senior officials, while
vetting judicial appointments. Security Minister Héctor
Mauricio López Bonilla has launched an overhaul of
the police and judiciary, and given the attorney general’s
office greater resources.
At the same time, there has also been a focus on social
programmes, with President Pérez Molina pledging
US$160 million for cash-transfer and anti-hunger
initiatives.Thepresidentplanstocontinue
social programmes from the previous
administration that provide financial aid
to low-income families who send their
children to school and health clinics.
The government has also invested nearly
US$17 million in a new social programme
called ‘Hambre Cero’ (Zero Hunger) to
combat child malnutrition.
Tax reform is helping to fund these
social programmes. Current tax rates are
some of the lowest in Latin America, but
will rise to 5 per cent for middle-income
earners and 7 per cent for high-income
earners. Salaried workers will no longer
be able to offset VAT payments against
income tax by presenting receipts they
gather during the year. Along with
other changes to the income tax rules,
Guatemala will introduce measures to
tackle abusive transfer pricing through
GUATEMALA
FIRST
Guatemala City:
the nation’s capital

11
Since 2003,
despite
the global
downturn
and its own
internal
problems,
Guatemala
has shown
a growth
of 375.6
per cent in
Foreign Direct
Investment
which companies trading across borders manipulate
their accounts to shift profits to jurisdictions levying
little or no tax.
A new 5 per cent capital gains tax will also be
introduced, and some foreign income will now be liable
for tax under “reinforced national income taxation”.
The Economy Ministry estimates tax revenue should
increase from around 10 per cent to 12.5 per cent as a
result of the new measures.
Putting the economy back on track
The first signs that the international community
recognised the changes underway in Guatemala
came by September of 2012, when ratings agency
Standard Poor’s revised its outlook from negative to
stable, noting the “gradually improving prospects for
GDP growth and tax revenue in Guatemala and the
implications these factors could have on Guatemala’s
fiscal prospects over the next few years.” GDP growth
took off in 2011, averaging aound 3.3 per cent since.
Guatemala emerged from four decades of civil war
in 1996 and seemed set for rapid economic growth
until it was hit by the 1998 financial crisis. The
subsequent collapse of coffee prices left what was once
the country’s leading export sector in depression and
had a severe impact on rural income. A decade later,
economic growth fell again as export demand from
US and other Central American markets declined and
foreign investment slowed amid the global recession.
Nevertheless, Guatemala remains Central
America’s economic centre, representing 35 per cent
of the region’s GDP, and is the business hub in the
Mesoamerica region.
The task facing the government now is how to
leverage the competitive advantages Guatemala
has to offer, such as geographical location, wealth
of resources, high quality in labour and a high
performance in logistics, while further developing its
solid infrastructure and technology base.
Since 2003, despite the global downturn and its own
internal problems, Guatemala has shown a growth of
375.6 per cent in Foreign Direct Investment (FDI), “a
fact that demonstrates the strength of our economy
and the confidence of big foreign and multinational
companies,” says Economy Minister Sergio de la Torre
He points out Guatemala’s strategic geographical
location as the perfect platform for the largest markets
in the World. “We have privileged access to both the
Atlantic and the Pacific Oceans, facilitating direct
commerce with Asia, North America and Europe,
through modern seaports. Furthermore, Guatemala
serves as the hinge of Mesoamerica, a region with great
potential due to over 50 urban centres, 25 of which are
located in Central America, its population of 68 million
inhabitants and an economy of US$319 billion.”
Reflecting its commitment to regional integration,
Guatemala has reduced customs barriers: trade
agreements are already in place with the United States,
Mexico and the rest of Central America, including
Panama, as well as Colombia, Taiwan, and Chile.
Guatemala also has partial agreements with Belize,
Cuba and Venezuela. Aside from helping attract
direct foreign investments, these initiatives enable
the promotion of greater and better opportunities
for local consumers and provide broader access for
Guatemalan products to international markets. It is
also worth mentioning that Guatemala is presently in
the process of negotiating free trade agreements with
FIRST
Guatemala’s current oil
and gas production averages
14,000 barrels per day

Guatemala’s
sugar
industry is
acknowledged
as the
number one
worldwide
in terms of
efficiency and
productivity
12
the European Union and Canada.
The first two years of the Pérez Molina
administration have seen intense activity to attract
foreign investment and expand employment in various
sectors, including BPO, oil, energy, agri-business,
tourism, and infrastructure.
Business Process Outsourcing
The information technology and BPO sectors generated
more than 3,000 jobs in Guatemala in 2013, with the
sector piling up more than US$326 million in service
export revenue, an increase of 11 per cent on the previous
year, according to export promotion agency Agexport.
The new positions take the total number of jobs
created by the sector over the past few years to 35,000.
The majority of outsourcing firms in Guatemala are
based in its capital city but the government is working
to entice outsourcers to smaller, regional cities. The
agency stated that in 2013 three jobs fairs were held to
introduce graduates and job seekers to the outsourcing
industry, which features several top global BPO firms
such as Capgemini, Xerox and Telus International. Low
labour costs and a growing number of US expatriates are
driving growth in Guatemala’s offshoring sector. Some
25,000 Guatemalans return home every year to seek re-
employment or to launch a business.
Oil
This is one of the strongest and soundest sectors in
Guatemala. In 2011, it attracted 32.2 per cent of total
inward investment. Guatemala’s current oil production
averages 14,000 b/d, more than 90 per cent of which
is produced by Anglo-French company Perenco from
the Xan Field in the Petén region in the north of the
country. “Xan is a mature, operationally challenging
field, the type of project that suits Perenco’s operational
strength and strategy, so we are at home in this
environment, working with this type of asset. Added
to this, the business climate in Guatemala is positive,
and Perenco values our relationships and strategic
agreements with the Guatemalan authorities. The
quality of local employees is very high, and so all these
factors contribute to the importance of Guatemala
to Perenco,” says the company’s country manager in
Guatemala, Emmanuel Colombel.
Although small, the government has plans to expand
the oil sector. Guatemala’s Ministry of Energy and
Mines has already awarded three-year exploration
contracts for six of seven areas to six small, foreign oil
firms. The aim is to boost production to 51,000 barrels
per day by 2020. Lacking a major refinery, most of
Guatemala’s oil, which is heavy crude, is exported to
the United States and Canada. However, the Refinería
del Motaga project (Zacapa, in the east of the country)
is aiming to cover the national needs of hydrocarbons
with a small surplus forecast to be exported. Currently,
this project is seeking international investors to formally
start operations. Contracts for oil and gas are commonly
issued for a 20-25 years period, with an option to renew.
Energy
Guatemala has 27 hydroelectric plants, 27
thermoelectric plants, 12 sugar mills, and two
geothermal plants, totalling 2,576 MW of installed
power, and 2,186.0 MW of effective power. There is
still significant potential for power and distribution
GUATEMALA
FIRST
Guatemala is the
fourth-largest sugar
exporter in the world

13
Coffee is
Guatemala’s
flagship
product,
generating
exports of
more than
US$2.13
billion in 2011
and 2012
in rural areas, many of which have only 50 per cent
coverage. Guatemala’s membership of SIEPAC
(System of Electric Interconnection of the Central
American Countries) is enabling it to become an
important energy exporter to the region.
Jaguar Energy Guatemala, a subsidiary of Houston-
based Ashmore Energy International, has invested
US$700 million to construct a 300 MW solid-fuel
powered plant in the city of Masagua. The plant will
allow the country to decrease the proportion of electricity
contributed by petroleum derivatives to just 4.6 per cent.
“A coal-fired power plant is part of the government’s
plan to diversify the energy mix of the country. Jaguar
Energy will help reduce the cost of energy, generating a
direct benefit for the country’s population,” says Jaguar’s
General Manager, Ernesto Cordova.
Erick Archila, the Minister for Energy and Mines,
says Guatemala wants to move towards cleaner energy
sources, with hydro the most competitive, but also to
focus on some wind power projects. “However, the cost
of producing power from wind farms remains higher
than other sources. Biomass represents an interesting
opportunity, where Guatemala is already showing
significant progress. There is a good opportunity to
develop the bio-fuel sector further,” he adds.
Guatemala is the strongest potential biofuels producer
in Central America, given the country’s high yields of
sugarcane and palm oil and its efficient local industries.
Nearly all of the dehydrated ethanol produced is
exported to Europe, and a domestic market for biofuels
consumption has yet to be developed. The Guatemalan
sugar industry could easily supply the ethanol required
for a 10 per cent ethanol-gas blend for domestic
consumption. However, there are
several obstacles that Guatemala
must overcome in order to
implement a viable biofuels
policy and the various involved
sectors need to reach consensus.
Guatemala is already producing
biodiesel from oil seeds and
vegetable waste matter.
Guatemala is also the second
largest palm oil producer in the
region (after Honduras), with
output going exclusively to the
international food processing
sector, but could also produce
biodiesel from palm oil.
Agriculture and foodstuffs
One of the country’s strongest
sectors, contributing 14 per
cent of GDP and 11 per cent
of exports, the food processing
industry is well developed and sophisticated, with
good infrastructure and presents many investment
opportunities. The sector generates direct employment
for more than 75,000 people and 353,000 indirect jobs.
Guatemala has approximately 11 million hectares of
fertile soil of which only 12 per cent is cultivated. The
country shows a higher yield in weight in crops like
cacao, sugar cane, coconuts, strawberries, apples, and
black pepper, than in competitor countries.
Guatemala’s sugar industry is acknowledged as
the number one in efficiency and productivity in the
world thanks to the technology used by its sugar mills.
Guatemala has the highest yield in Latin America and
the Caribbean region, and is the fourth largest exporter
in the world and the second in Latin America.
Coffee
After Colombia, Guatemala ranks second in the world
in the amount of high-grade coffee it produces, and has
the highest percentage of its crop classified as “high
quality” by international buyers. It contributes around
15 per cent of Gross National Product and generates
about a third of Guatemala’s foreign exchange. In terms
of exports, coffee is Guatemala’s flagship product:
In 2011 and 2012, exports of more than USUS$2.13
billion were recorded.
Guatemala’s coffee production has changed over
the last 30 years. In 1980, 20 per cent of production
was hard and strictly hard beans, the higher quality
beans that bring better prices in the market. The
lower qualities, prime and extra prime, accounted for
80 per cent of coffee production. Guatemalan coffee
producers recognised the problems inherent in relying
FIRST
Guatemala ranks
second in the world
in the production of
high-grade coffee

Guatemala is
the logistics
and services
centre of
the region,
thanks to a
modern road
network and
efficient ports
on the Pacific
and Atlantic
oceans
14
so extensively on lower-quality product, so they made
a strategic decision to focus on high-quality coffee. By
2005, 80 per cent of coffee production was hard and
strictly hard, while prime and extra prime represented
20 per cent. Although total coffee production has not
increased significantly, the financial security of the
industry has strengthened. Currently, about 80 per cent
of production is carried out on small and medium-sized
farms, located in high-altitude zones that produce hard
and strictly hard beans. Nineteen out of Guatemala’s
22 departments produce coffee, and the sector is the
country’s largest single employer.
Tourism
Guatemala is a unique destination for tourism, thanks
to its magnificent natural resources, and Mayan and
colonial history. Visitor numbers have increased steadily
over the last five years to around two million a year.
More than half of the country’s tourism market
comes from Central America and around 30 per cent
from North America. Around 10 per cent of arrivals
are from Europe.
The Guatemalan Tourism Institute – INGUAT –
and the governement agency Invest in Guatemala have
identifiedeightlargeareaswhichraisediversepossibilities
for investment, and which present the greatest potential
for the development of touristic projects.
Infrastructure
Guatemala is the logistics and services centre of the
region, thanks to a modern road network and efficient
ports on the Pacific and Atlantic oceans, along with
a new airport in Guatemala City. The Multimodal
Plan of Works of Priority Infrastructure (PMOl)
contemplates the development of infrastructure by
air, land, and fibre optics to interconnect the country’s
ports, air, and road systems.
Guatemala is looking to attract more than US$1.3
billion in investments across a portfolio of six Public-
Private Partnership infrastructure projects that will see
the construction of an industrial park on the border
with Mexico; the reconstruction of Champerico port,
a food terminal, and three toll roads.
The government has also given its support to the
Guatemalan Technological Corridor (GTC), a 372km
four-lane highway, two railway routes for freight and
passengers, as well as five pipelines, connecting the
Pacific and Atlantic Oceans, to be funded privately to
the tune of US$12 billion, and that will take up to five
years to complete. The two ports will have capacity to
unload six vessels simultaneously and receive Panamax
vessels. The project is being developed by Odepal
Internacional, which holds 5 per cent of Holding
Corredor Interoceánico de Guatemala, the company
that will own and build the project. The remaining 95
per cent of the holding company is owned by locally
constituted companies that will be responsible for
awarding the private concessions for the land. Some 46
municipal governments are shareholders in the project
and have so far assisted in securing the necessary land
for construction.
The future is regional
Regionalisation is now a fact of life for doing business
in Central America. Factories and distribution facilities
have been and continue to be designed to serve a
regional market. Furthermore, rarely do business
people visit just one Central American country. New
investors weigh the advantages that each country
offers as they look to decide where to establish new
plants. Regional managers are becoming the norm,
with responsibilities for multiple countries within
the Central American marketplace. Trade between
the countries of Central America has also increased
dramatically over recent years, a trend that was
accelerated with CAFTA-DR implementation.
Regional efforts have focused on improving
infrastructure throughout Central America. The
Mesoamerica Project (MP) is a portfolio of nearly
100 projects designed to bring over US$8 billion in
investments in energy, telecommunications, and
transportation, among other areas. MP’s two major
projects are the construction and rehabilitation of the
International Network of Mesoamerican Highways
initiative (RICAM), and the Electric Integration
System of Central America (SIEPAC).
It is significant that the keynote speaker at last year’s
Guatemala Investment Summit, held in Guatemala
City, was Mexico’s President Enrique Peña Nieto,
who at the same time as endorsing President Pérez
Molina’s policies, highlighted the importance of
Central America and Mexico working together,
pledging to “expand the mechanisms for cooperation,
collaboration and integration between our nations,
and ensure that this is reflected in the development
of our peoples, who have a great opportunity ahead
of us. On the basis of greater integration, we will be
able to trigger development for our people, together
with progress and better standards of welfare for all the
families in our countries.”
Guatemala faces the same challenges as its neighbours,
and can benefit from the same opportunities. It is the
region’s logical investment gateway, and has already
shown that it is prepared to work internationally for the
overall benefit of the region. Over the last two years,
its government has made huge progress in laying the
foundations for growth and stability, and will, with
the support of its neighbours, continue in its task of
establishing Guatemala as the economic motor for
Central America. F
GUATEMALA
FIRST

A business membership organisation
catalysing trade and investment between
the UK and Central America
The Central American Business
Council is proud to be a member of:
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and Chambers of Commerce
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Interview with Héctor Mauricio López Bonilla
Minister of Security, Republic of Guatemala
Héctor Mauricio
López Bonilla
holds a degree in
international affairs
from the Universidad
Francisco Marroquín.
Since serving as an
officer in the National
Army, Mr López Bonilla
has enjoyed a long career
working in a number of
sectors. An expert in risk
and crisis management,
as well as strategy and
contingency planning,
he has also designed
and carried out conflict
resolution consulting,
and taught on these
areas of specialisation
at university level. He
also finds time to carry
out social research
and to write regular
opinion pieces.
Improving security, building trust
16
You were President Otto Pérez Molina’s campaign
manager under the ‘Mano Dura’ (Get Tough)
banner, which promised to improve security for
ordinary Guatemalans. How would you assess the
government’s achievements to date in this regard,
and what is your strategy going forward?
The first thing to say about our Get Tough drive is
that this was not the same approach to security that
we have seen in many electoral campaigns throughout
Latin America. For us, getting tough on crime means
firmness in implementing the law, acting in accordance
with the law, and respecting the democratic order of
the country, and is based above all on a commitment
to providing security and safety for all Guatemalans.
This means crime prevention, and responding
to crime through judicial procedures. This is the
underlying philosophy of Mano Dura. The first thing
we had to address when we took office was that the
institutions of the state were weak. So we set ourselves
a timetable of four years in which to implement a
strategic plan, working in three main areas: firstly,
the normative, which means reforming many laws as
well as overhauling the police force and the ministry;
secondly, institutional reform that will improve and
strengthen our institutions, allowing them to carry
out new tasks, and giving them a new perspective; and
thirdly, making sure that all this was actually applied,
that it was put to work. This has meant implementing
mechanisms to monitor the situation; this is not just
about crisis management, but about looking to the
future, and being able to gauge tangible improvements
in the situation of the country.
We have already seen some results in the first two
years of carrying out these reforms, and in the coming
two years we will continue to learn from them, based
on statistical data regarding a reduction in crime;
extortion, violence, violence against women, and
particularly in dealing with organised crime.
How does the situation in Guatemala compare
with other countries in the region? What impact,
if any, is it having on Guatemala’s economic
competitiveness?
This was always going to be a difficult issue to
address. There is a saying here that there is nothing
more cowardly than a million dollars, because it
will always run away from any situation where it
sees the slightest risk! That said, we understand the
importance of how the international community sees
Guatemala. Perception is everything. We believe that
by guaranteeing the security and safety of our own
people, which to a large extent involves an effective
fight against organised crime, against impunity, and
which means establishing stronger judicial procedures,
and of course in strengthening our institutions, we will
also offer a guarantee to international investors that
Guatemala is a safe place to do business and that the
rule of law applies to all.
In two important – but contradictory – senses,
Guatemala plays an important role: it is the region’s
biggest economy, and borders with the country that in
turn borders with the world’s biggest economy. At the
same time, because of its location, a huge amount of
trade passes through from north to south; sadly, at the
moment, this is largely made up of the drugs trade, as
well as money and arms. So, if we address these issues,
and provide better security, we are going to attract
more investment, and more investment means more
possibility of breaking the vicious circle of organised
crime and crime in general, because one of the causes
of crime is poverty and lack of opportunity, so we need
to improve the economy and thus be able to provide
more employment. There is a very clear relationship
between security and investment. A non-effective
security policy means less investment.
How serious an impact has the displacement of
drug cartels from Mexico and Colombia had on
security in Guatemala’s border regions? How
successful has the government’s cooperation with
its neighbours been in addressing the issue?
Before, the drugs trade was discussed in terms of
supply and demand. There was demand in the north,
and there was supply from the south. But there has
not been much discussion about the impact of the
drugs trade on transit countries, of which Guatemala
is one. This involves criminal gangs to guarantee
the passage of drugs to the markets of the north. A
kilogram of cocaine increases in value throughout its
journey northward. It could cost as little as US$2,000
in Colombia and end up with each gram worth
$90 or even $150 in the United States and Canada.
Cooperating in combating the drugs trade means
that these countries recognise our position as transit
GUATEMALA
FIRST

17
We believe
that by
guaranteeing
the security
and safety
of our own
people, we
will also offer
a guarantee to
international
investors that
Guatemala is
a safe place to
do business
countries; it means respecting our right to carry out
actions to protect our sovereignty. But that also means
employing scarce resources that we would rather invest
in health and education, rather than in a war that has
nothing to do with us. An accident of geography has
forced us assume a responsibility we did not ask for.
We believe that the solution is about making producers
and consumers aware of our situation and that we have
a role to play in the struggle, but that we need support;
which means resources and equipment. When our
position is recognised and understood, then we can
play a bigger regional role in fighting drugs trafficking
and money laundering. We have taken steps since we
came into office; we have involved the institutions of
the state in this fight. We have made more progress in
the last two years than all the governments over the
last 15 years.
How has your experience in Peru as an adviser to
the government affected your approach to your
current role?
I had the opportunity to work for the Peruvian
government on communication and marketing
of the government, at an institutional level. It is
very important to inform the electorate about the
government’s achievements. As people become better
informed about the government’s progress, they
understand more about its policies and strategies:
this is a government committed to change, and these
changes can be seen. Peru and Guatemala have much
in common, so working in Peru was very helpful in
preparing for the challenges we faced here.
Talking to ordinary Guatemalans, there is an
almost fatalistic lack of faith in the ability of
the police and judiciary to bring perpetrators
of serious crimes to justice. What steps is
the government taking to strengthen public
confidence in these crucial institutions?
One of the main challenges we face is recovering the
public’s trust in the security forces. This is a process
that involves greater professionalisation of the police.
We have made great progress in this area. We have
a new training school for officers, and we have
professionalised the military academy. We also have
to improve the standing of the police, to give the job
greater status: traditionally people have seen being a
police officer as a low status job, as a result of which,
there has been little empathy between the police and
the public. To improve the status of the police means
investing in the institution, in having resources to
give them better equipment and infrastructure, and to
attract better talent. The third pillar of our strategy is
to purge the police of corrupt influences, of organised
crime or the temptation of officers to get involved with
criminals, because this is where corruption begins, this
is what undermines people’s trust in the police. So
it’s about greater professionalism, about trust, about
improving the reputation of the PNC. But let me say
something else about improving security in Guatemala:
it isn’t just about the police, it is also a task that society
has to play a role in; it affects everybody, we all have a
part to play. Guatemalans must be made more aware of
the role we all have to play in combating crime, which
is something that begins at home, that begins with
the way we teach our children, in how we as parents
behave, and in how communities respond to crime. We
have to overcome this fatalism, this pessimism. What
Guatemala needs is enthusiasm, dynamism, a proactive
attitude; we all have to play our role. This is how the
country will move forward.
One of President Pérez Molina’s most important
engagements during his visit to the UK will be
the launch of the London School of Economics’
report on the economic impact of international
(in particular, US) drugs policy on the countries of
Central America. What do you expect it to contain,
and what do you hope its publication will achieve?
Since President Pérez and other regional leaders first
began calling for a new approach to tackling the drugs
trade, there has been a lot of expectation in Europe
and the United States. Our perception is that the
orthodox approach, based on prohibition of drugs has
not produced the results it should have. So, we feel that
this orthodox approach needs to be revised. This is a
debate that regional organisations like the Organisation
FIRST
Guatemala’s
Fuerza Tecún Umán

Guatemala
plays an
important
role: it is
the region’s
biggest
economy, and
borders with
the country
that in turn
borders with
the world’s
biggest
economy
18
of American States (OAS) are involved in. Our report
should also be a step forward in formulating a new
approach, and will hopefully open up the debate about
finding new ways to combat drug trafficking and in
finding new models that include decriminalisation in
some cases, and in others, legalisation, which as we know,
is already taking place in some US states. The time has
come to move away from a purely prohibitionist model,
and to start looking at cause, more than effect.
How would you describe your cooperation with
the British government on security issues, for
example, in respect of prison reform?
In addressing the question of how to improve our
prison system, the first thing we have looked at it
is the prison infrastructure itself, about the design
and conditions of our prisons, which date back 50
years. We also need to begin better segregation and
distribution of prisoners, based on the seriousness of
their crime. Then there is the question of offering
rehabilitation, so as to prevent prisoners from
reoffending; we have to give them some expectation
that they have a life on the outside. It is very
important to us to work with countries like the UK
on developing these new strategies.
One of the UK’s most successful ‘exports’ to
Guatemala and the wider region has been
its expertise in private security and risk
management. What is the government’s view
of private security companies’ activities in
Guatemala, and do you see a greater role for the
private sector in partnering with the state – for
example, in the case of privately managed prisons?
Private security is something that we need to
incorporate into public security and that can make a
contribution to public safety. We are working with
private security companies on this to give them a bigger
role, and to certify these companies to oversee training,
to establish standards of professionalism, to monitor
who can work in this sector, to control the use of guns;
there are many aspects to this and we are working on
them. I see a lot of potential for private companies as
a strategic arm of the state and the government. That
said, there is still a lot of controversy and opposition to
private companies’ involvement in providing security.
For the moment, we could not outsource the running
of prisons, nor could private security companies work
directly with the police.
Guatemala’s deputy minister of technology
recently visited the Farnborough Security Show.
What were the outcomes of the visit? What kinds
of security technologies and equipment are you
looking to source from the UK?
We are particularly interested in the experience of the
United Kingdom as pioneers of CCTV for combating
crime. London is probably the city with the most
cameras anywhere in the world, and has developed a
sophisticated response system 24 hours a day, seven
days a week. This has proved highly successful, and we
want to learn from it and how we can incorporate these
systems into the judicial system. CCTV is one line of
action; we are also interested in incorporating other
UK technologies to improve street patrols, to control
traffic, to help with registering vehicles. The United
Kingdom has huge experience in this area.
How are you benchmarking your success in your
role as Minister of Security, and what are your
priorities for the remainder of your tenure?
We come back to the areas we spoke about earlier in
the interview: this means measuring to what degree
have we strengthened the institutions of the justice
and security system; have we succeeded
in reforming the police, in creating
a police force of the 21st century? At
the same time, reforming the prison
system is part of the same process.
The second involves restructuring our
institutions, about establishing new
procedures, new departments, all of
which will regenerate the PNC and give
us a modern, well equipped, disciplined
force. The third aspect is about results:
we have to reduce crime, we have to
combat organised crime; we have to
reduce violence, much of it associated
with drug and arms trafficking. So when
we come to the end of this term of office
in two years time, the statistics that will
show what we have achieved. F
GUATEMALA
FIRST
Minister López Bonilla
inspects cadets at the
National Police Academy

19
Working in tandem
By H.E. Acisclo Valladares Molina
Ambassador of the Republic of Guatemala to the United Kingdom
Acisclo Valladares
Molina was appointed
Ambassador of Guatemala
to the United Kingdom
in January 2010. He
is also Concurrent
Ambassador of Guatemala
to Ireland, the Republic
of South Africa, the
Federal Democratic
Republic of Ethiopia,
the Federal Republic
of Nigeria, Kenya, the
Sultanate of Oman, the
United Arab Emirates,
the State of Qatar,
Kuwait and Bahrain. He
has previously served
as Attorney General of
Guatemala and President
of the Central American
and Panama Superior
Permanent Instance of
Attorney Generals.
T
he bilateral relationship between
Guatemala and the United Kingdom
has reached unprecedented levels of
collaboration and mutual benefits.
Holding complementary economies – the UK enjoys
a high level of capitalisation, whilst opportunities for
successful and profitable ventures are abundant in
Guatemala – it is only natural that such disposition
continues to gain momentum and for that, my
Mission in the United Kingdom has the full support
of the Government.
Additionally, Guatemala has shifted its foreign policy
and re-prioritised its links with different regions and
countries. In such efforts, and within the global cuts
on governmental budgets, our country has identified
that the United Kingdom, and especially London, is
an incredibly useful platform to engage in bilateral
relations with many countries that have remained
traditionally outside the remit of our scope of coverage.
This way a functional set of concurrencies – as opposed
to the geographical proximity criterion – have been
vested in me to exercise from London. These are
focused primarily on the African Continent and the
Middle East, bringing us closer than ever before to the
Commonwealth of Nations.
Our recently concluded UN Security Council
two-year term as a non-permanent Member 2012-
2013 demonstrated the ability of Guatemala to play
a relevant role in the most important international
affairs. From that point and onwards, the world has
recognised that we are an able and useful partner in
different global initiatives and fora, hence our stronger
presence in international affairs.
At the same time, HE President Otto Pérez Molina’s
initiative to raise the discussion on the change of
drug policy came about and took the debate to a
governmental level. Aware of the devastating effects
that drug trafficking has had in our country and region
over the 50 years of prohibition, President Pérez
Molina called for a serious and open debate on how
to tackle drug consumption around the globe, being
the very first Head of State to do so. The results of
this initiative are concrete: the UN General Assembly
is to convene a special session (UNGASS) in 2016,
to review the global framework on drugs. Guatemala
has made a contribution to the world, with the aim of
aiding in the solution of a problem that it is not ours, it
is a global problem, but as it affect us all. HE President
Otto Pérez Molina is the spearhead of the movement.
Guatemala is a powerhouse and ought to be
acknowledged as such by its counterparties. With a
young and eager population, the largest and most
dynamic economy in its region, committed to
regionalism and economic integration of free markets,
its potential is immense. Many important British
companies such as Actis, Perenco, Blue Oil, Ashmore
Energy International and others have recognised this,
placing the UK as the primary source of direct foreign
investment in Guatemala in just a few years time.
Our agro-industry produces with efficiency and
profitability some of the finest, most appreciated
varieties of gourmet coffee, consistently being
auctioned at record prices due to the quality of the lots;
we are the top supplier of cardamom and our sugar
industry has attained unrivalled levels of efficiency
both in its production and its export by bulk through
maritime transportation. Nowadays many of these
businesses have diversified into different economic
activities, such as the co-generation of electricity,
leisure and tourism, and most importantly, expanded
their regional scope to become investors in the region.
The International Sugar Organisation, that has its
seat in this great City, is a key multilateral forum for
our region and Guatemala’s sugar industry. After
20 successful years at the helm of the ISO, Mr Peter
Baron has been succeeded by the Guatemalan citizen
Mr José Orive Vides. Mr Orive, using the legacy of
Mr Baron as a foundation, will take the Organisation
into the future, aided by his experience and know-how
gleaned by working for half of his life for the Central
American sugar industry. The success of his tenure will
undoubtedly showcase the talent and potential of our
citizens, and show that our business models are effective.
There is much more to be done between the United
Kingdom and Guatemala. We have just started to
realise the potential that our relationship holds for
both nations. I foresee a stronger bond, much more
interdependent and mutually beneficial, with large
investments in both directions, and profits in both
directions too. Prosperity cannot be achieved in
isolation. Guatemala and the United Kingdom can and
will promote it for its citizens by working in tandem,
whilst continuing its strategic partnership in the great
global affairs. F
GUATEMALA
FIRST

By Pedro Duchez
Director General, Guatemala Tourism Institute (INGUAT)
Harnessing tourism’s potential
20
G
uatemala is a country with all the
ingredients to achieve a world-class
tourism product. It has places with unique
views, hotel infrastructure, roads, space to
practice extreme sports and the most privileged climate
in the region. “The Land of Eternal Spring” had a total
of 2,000,126 international visitors in 2013 and achieved
a growth of 2.5 per cent compared to 2012. In addition,
US$1.48 billion entered the country in 2013 through
tourism, an increase of 4.4 per cent compared to 2012.
In an area of 108,889 km2 (67,660 mi2), Guatemala
concentrates a variety of attractions unique in the
world: The magnificence of the Mayan cities, the
tranquility of the turquoise waters of the Caribbean
Sea and the exciting sea adventures of the Pacific coast;
the Spanish past of one of the most beautiful colonial
cities in the world, La Antigua Guatemala, designated
a World Heritage Site by UNESCO in 1979; the
grandeur of Lake Atitlán, surrounded by three majestic
volcanoes, and other destinations beyond compare.
With an average temperature of 21°C (70°F)
throughout the year, coupled with 360 microclimates,
majestic rainforests and the most modern and
cosmopolitan city in the region, Guatemala City,
Guatemala is undoubtedly a one-of-a-kind destination.
Guatemala’s history goes back four thousand years,
to the emergence of the Mayan civilisation, whose
legacy continues today with the traditions and culture
of its people.
The historic, natural, and cultural heritage of
Guatemala can be found throughout the length and
breadth of the country. The magic and mystery of the
Mayan world persist in the millenary cities such as
Tikal, Yaxhá, Aguateca, and Quiriguá, among others.
The faces, the colourful regional costumes, and the
kindness of the people are also important features of
the Guatemalan Highlands.
Tourism and culture are closely related. That is
why tourism is a priority for the economic and social
development of this country, and why the government
is working together with the private sector to position
Guatemala as a world-class tourist destination.
Guatemala’s geographical location is strategic; it
is the perfect platform for the largest markets in the
world. It has privileged access to both the Atlantic and
the Pacific Oceans, facilitating direct commerce with
Asia, North America and Europe, through modern
seaports. Furthermore, Guatemala serves as the hub
GUATEMALA
FIRST
Sunset on
Lake Atitlán
PhotoscourtesyofINGUAT,unlessotherwisestated
‘The Land
of Eternal
Spring’ had
a total of
2,000,126
international
visitors in
2013 and
achieved a
growth of
2.5 per cent
compared
to 2012

21
Tourism
and culture
are closely
related,
which is why
tourism is a
priority for
the economic
and social
development
of Guatemala
of Mesoamerica, a region with great potential due to
its more than 50 urban centres, 25 of which are located
in Central America, with a population of 68 million
inhabitants and an economy of US$319 billion.
Guatemalan gastronomy represents a wide variety of
flavours, textures, aromas and colours. Our cuisine is
the inheritance of two great culinary traditions. With
the Spanish conquest, the pleasures of the Arabic taste
arrived, transformed by the Spaniards; and the local
ethnical indigenous traditions that contributed to the
unique flavours of its foods.
A diversity of unique destinations
Guatemala has been recognised as a unique destination
for tourism, due to its magnificent natural resources,
Mayan and Colonial history, and the impressive
modern development of its capital city.
The Guatemalan Tourism Institute (INGUAT)
and the government agency Invest in Guatemala
have identified seven major areas that present the
greatest investment possibilities. These areas are in:
Petén, Guatemala City and Antigua Guatemala in
Sacatepéquez; Atitlán in Sololá; the Pacific Coast; the
Caribbean coast in Izabal; Alta and Baja Verapaz; and
the Eastern region of the country.
Tikal: Adventure in the Mayan world
In Petén lies the Mayan city of Tikal, designated a
World Heritage Site by UNESCO in 1979.
Besides Tikal, another major Mayan city is El
Mirador, which is in the process of exploration, an
ambitious project that will become a world-class
tourist destination. It is a region that lacks tourist
infrastructure, however: only 3,277 rooms that do not
meet the existing demand, of which less than 10 per
cent offer 5 star service.
The region of Petén and the attractions of the
Mundo Maya meet the demand of 58 per cent of
the tourists visiting the country in search of cultural,
nature, adventure and sporting activities. The Petén
region is rich in natural resources, preserving the main
Central American backwoods.
The main areas of development in the Mundo Maya
region are located in the area of Lake Petén Itza, El
Remate, Jocompiche, Pichaín, and Yaxhá Quexil, and
several other tourist spots in Petén are suitable for
guesthouses, bars, restaurants, exclusive hotels, tour
operators and other mixed-use projects.
Guatemala City and Antigua:
Contrasts of modernity and the colonial past
Guatemala City attracts large numbers of business
tourists, accounting for 21 per cent of the country’s
visitors for business or conventions, and is home to
the headquarters of the largest and most important
multinationals located in the Central American region,
which has enabled the development of the city’s
culinary industry, entertainment and recreation. It is in
Guatemala City where the international hotel chains
focus, including InterContinental, Westin Camino
Real (part of Starwood Hotels Resorts), Barceló,
View Royal, Holiday Inn, Clarion Suites, Radisson, Best
Western, and Crowne Plaza, among others.
On the other hand, Antigua Guatemala is the
FIRST
The Northern acropolis
and plaza at Tikal

According
to UNESCO,
La Antigua
Guatemala
is the best-
preserved
colonial city
in the whole
of Latin
America
22
main tourist destination after Guatemala City. For
UNESCO, Antigua is the best-preserved colonial city
in Latin America. Walking around Antigua you will
also find a rich cafe and chocolate culture, great people
watching, a chance to sample Guatemala’s renowned
coffee and to practice Spanish.
The accommodation in this city consists mostly of
small hotels, with 2,331 rooms to meet the demand
from tourists, while at Easter the city hosts more than
76,000 foreign visitors, as well as local tourists. The
favourable climate of Antigua also makes it an attractive
destination for retirees and allows outdoor activities all
year round, including golf.
Antigua has become a destination of hotels and high-
class services, bringing greater value to the industry.
In the last five years, major hotel chains have invested
over US$500 million in Antigua, including: Westin
Camino Real, La Reunion Golf Resort Residences,
and Casa Santo Domingo – all exclusive 5 stars hotels.
The Highlands: Living Mayan culture
The most deeply-rooted indigenous culture can be
found in the Highlands of Guatemala. The pine
forests and active volcanoes allow visitors to practice
hiking, canopying, and ecotourism. The Western
region provides a folkloric display that unifies the
pre-Columbian cosmogony and the customs of the
conquerors. This region is a perfect combination of
natural beauties, like Lake Atitlán and traditions, like
the market of Chichicastenango, famous for its size
and colourfulness.
Sololá, the department that houses the majestic Lake
Atitlán, has an area of 437,145 km2 (271,626 mi2). It
is the second most important tourist destination (after
Guatemala City/Antigua) for foreign visitors due to
its rich Mayan culture and traditions, which make it
one of the main cultural attractions of the country. Its
landscapes, suitable for adventure and extreme sports,
meet the demands of 58 per cent of the tourists who
seek this type of activity.
In this department, the main areas of development
are located in the vicinity of Lake Atitlán and its shores,
with the potential to develop exclusive hotels, mixed-
use projects and resort hotels.
The Pacific Coast
Its splendid 300 kilometre-long beaches allow visitors
to practice surfing and sport fishing, especially for
sailfish, an activity that has been recognised as
the number one in the region and second in the
world. The habitats of this region are great for the
development of turtle hatcheries and mangroves, and
facilitate the subsistence of the ecosystems for many
different species.  In this region it is also possible to
climb volcanoes, to practice bird watching, to visit
important archaeological sites like Takalik Abaj in
Retalhuleu and El Baúl in Escuintla.
The Pacific Coast is considered worldwide as one
of the best destinations for sport fishing, with records
of up to 1,663 caught in four days, averaging 660 on
a single day. The Pacific Coast is also the setting for
famous fishing tournaments: the ILTTA, Presidential
Challenge and others.
The Pacific Coast of Guatemala attracts more than
85 per cent of national tourism, while income from
Pacific cruises has doubled in the last four years.
The Pacific Coast offers increasingly attractive
investment opportunities, especially thanks to the
boom in tourism from other countries in Central
America. The sun and sea route called “Guatemágica”
combining adventure activities, fun at the theme parks
Xetulul and Xocomil, rural and ecological tourism,
culture, archaeology and beaches in one place, has
increased the flow of tourists that also seek leisure
fishing activities in the volcanic sand beaches of the
country. This is a demand which increases year-on-
year and enables the development of new tourism
projects to meet it.
The Caribbean Coast: Izabal
The country’s diversity is well represented in the green
Caribbean, with its rich ecosystems that provide a
habitat for many different species. Among its natural
reserves are: Río Dulce, Bocas del Polochic, Punta de
Manabique, and Biotopo Chocón Machacas.
This region is also home to Quiriguá, an
archaeological site declared a World Heritage Site by
GUATEMALA
FIRST
The jewel in the crown:
La Antigua Guatemala
Photo:AlastairHarris

23
The Sport
fishing
resources of
the Pacific
Coast are well
known and
have made
it one of the
best places
in the world
to enjoy this
activity
UNESCO in 1981, where the famous “Estela E”, the
biggest Mayan stela (monumental stone sculpture), at
10.5 metres high is found. In addition, the experience
of visiting Castillo de San Felipe, built in the colonial
era to avoid English pirate attacks, is offered to
visitors.  The stunning Lake Izabal, the largest in the
country, the contrast among jungle, rivers and sea,
and the mixture of the Garifuna and Mayan cultures
make this a magical and fantastic paradise.
Izabal is the third most visited destination in
Guatemala, due to its white sandy beaches and calm
waters, ideal for sailing yachts and sailboats, in places
like Amatique Bay, Río Dulce and Lake Izabal. Close
to Izabal, tourists can also visit other interesting places
such as the ruins of Quiriguá. A few miles from there,
tourists can also visit the Tikal National Park (Petén),
one of the largest archaeological sites and urban centres
of the Mayan civilisation; the Keys of Belize and other
Caribbean islands; or engage in many other cultural,
recreational or sports activities, such as diving.
The Verapaces region: A natural paradise
Characterised for its lush forests, this region has
significantly contributed to the high level of biodiversity
in the country. Home of the Quetzal (Guatemala’s
national bird), the Verapaz region offers a wide range
of potential tourist destinations thanks to its many
waterfalls, natural pools, and varied flora and fauna.
The area is a perfect destination to venture into
tourism development projects linked with adventure
and outdoor recreation. For this, the mountainous
territory of the rainforest allows the incorporation
of tourism services for places
such as the Quetzal Biotope area
and the river Cahabón.
The investment possibilities
become more attractive when
exploring other attractions such
as the long caves of Lankin or
Candelaria, and the majestic
waterfalls of Semuc Champey,
one of the more complex
waterfalls and natural bridges
of limestone in the Central
American region.
The East: Mystical and natural
This region offers great natural
resources, whilst at the same
time being an ideal destination
for investment in hotels and
timeshare services, due to
the religious importance of
Esquipulas, the house of the
Black Christs, considered the
“Central American Capital City of the Faith”.
The Eastern part of the country, mystical and natural,
provides an ideal environment for the development of
enterprises that integrate the services of tour guides,
tour operators, food service and lodging. In addition,
there are other important places in this region, such
as the volcano and lagoon Ipala and Ouija. These and
other destinations have been developing constantly,
and nowadays demand services such as eco-tours. In
addition, the historical and cultural wealth offered
by the Museum of Palaeontology and Archaeology
“Roberto Woolfok Saravia” in Estanzuela, where
are kept the bones of mastodons and whales over 50
thousand years old, is also very attractive for both
national and foreign visitors.
Furthermore, Guatemala offers advantages for
specific segments in tourism, such as its strategic
location and the facilities of its land and maritime
terminals, which make it an important destination for
cruise ships from the Pacific and Atlantic Coasts. The
Sport fishing resources of the Pacific Coast are well-
known and have made it one of the best places in the
world to enjoy this activity. More than 720 species of
birds also make Guatemala a wonderful and important
destination for bird watching. Besides this, the country
has all the necessary characteristics to propitiate business
activities and to be an ideal location for national and
international conventions.  The richness and diversity
of Guatemala offer numerous ways to enjoy vacations or
business trips, since the visitor will find different tourism
segments across all seven of its wonderful regions. F
FIRST
Sport fishing off
Guatemala’s Pacific Coast

Guatemala’s
mining sector
has attracted
growing
FDI, creating
a high-
performance
industry based
around large
scale projects
By Nick Lyne
Senior Staff Writer, FIRST
Reforming the mining sector
24
O
ver the last decade, thanks to the possession
ofsomeofLatinAmerica’slargestdepositsof
gold,nickelandotherminerals,Guatemala’s
mining sector has attracted growing
international investment, which has helped create a high-
performanceindustrybasedaroundlarge-scaleprojectsat
minessuchasEscobal,CerroBlanco,FeNix,Mayaníquel,
Montúfar, and San Juan Sacatepéquez
Dominated by Canadian FDI, there are currently
11 foreign companies in the mining sector, mostly
involved in the exploration and extraction of gold and
nickel, which between them account for around 95 per
cent of the value of total mining output, all of which is
destined for export.
Canada’s Goldcorp is the largest mining company in
Guatemala, and since 2005 has been running the Marlin
project, the country’s leading gold mine, in which the
company has invested more than US$200 million. In
2010, Goldcorp began extraction at its second mine,
Cerro Blanco, where it has invested US$77 million.
At the end of 2012, the deposit contained 1.3 million
ounces of indicated gold resources at an average grade of
15.64 grams per tonne and 0.7 million ounces of inferred
gold resources at an average grade of 15.31 grams per
tonne. But in light of recent declines in metals prices
the company has indefinitely suspended work at Cerro
Blanco indefinitely. Care and maintenance activities will
continue at the site, and project development plans will
be revisited as market conditions warrant, according to
the company.
After gold, nickel is the second most important
commercial mineral in Guatemala: one of the 10
largest known nickel deposits in the world is located in
the department of Izabal.
Compañía Guatemalteca de Níquel (CGN),
acquired by Solway Investment Group in 2011, has
two mining exploration licenses in Izabal at the FeNix
and Montúfar projects. FeNix has an operating licence
and environmental studies approved by the Ministry of
Environment. The operating licence for the Montúfar
project is currently pending.
Solway says it plans to invest up to US$1.6 billion
over the next five years, with the eventual goal of
doubling the operation’s current production, bringing
it to 150,000 tonnes of ferronickel and 50,000 tonnes
of nickel per annum.
Mining and Energy Minister Erick Archila says that
Guatemala has established a stable legal framework
focusedonestablishingcompetitionanddynamisminthe
sector. The country’s strategic geographic location allows
the export of mining products from either the Atlantic or
Pacific Oceans. Guatemala also has a skilled labour force.
Mining production is currently worth around US$1
billion annually, and according to the minister, close
to US$4 billion is expected to be invested by next year.
Substantial changes have been made to Guatemala’s
mining laws over the last decade, designed to attract
investments into the sector. These have seen a decrease
in the royalties paid to the State from 6 per cent to 1
per cent of the national market or international stock
exchange value, split equally between the national
and municipal governments. Foreign institutions
are now allowed to own up to 100 per cent of the
concession. The requirement for import taxes to be
paid for machinery, equipment and production goods
for mining has also been eliminated. The principal
components of the mining fiscal regime are taxes,
royalties, and private funds. Applicable taxes include
corporate income tax, value added tax, and the single
property tax.
Mining licenses are granted by the Ministry of Energy
and Mines (MEM). Applicants for reconnaissance and
exploration licenses must submit an environmental
mitigation study. Applicants for exploitation licenses
must submit a more comprehensive environmental
impact study (EIS) to the Ministry of Environment and
Natural Resources (MARN).
GUATEMALA
FIRST
Light at the end of the
tunnel: close to US$4
billion is expected
to be invested in the
sector in the next year

25
There are
11 foreign
companies in
the mining
sector, mostly
involved
in the
exploration
and extraction
of gold and
nickel
In January of 2012, the association of mining
companies signed a voluntary agreement with the
government to pay higher royalties. Under this
agreement, industrial minerals are not affected, but
gold and silver companies pay 4 per cent and base
metals pay 3 per cent.
Later that year, the government proposed reforms
to the mining law that attempt to address social,
economic, and environmental issues. These reforms
include a voluntary higher royalty rate of 5 per cent,
establishing a mining fund to distribute royalties to
local governments, requiring community consultation,
and addressing environmental concerns and mine
closure issues.
“The reforms will redefine and strengthen national
mining laws and eliminate the voluntary payment of
taxes. If approved, the taxes will be obligatory for the
mining sector,” Mr Archila said at the time, adding:
“There are companies that want to partner with the state
to have a better capacity to operate within the country. It
will create more order and responsibility in the mining
sector and won’t affect investments in the country.”
As of August 2013, 85 Exploration Licenses and 284
Exploitation Licenses had been authorised. A total of
444 exploration licenses and 150 exploitation licences
have been pending since the government announced it
intended to impose a two-year moratorium on licenses
in July 2013.
The government says it hopes the request for the
moratorium will also encourage Congress to speed up
the passage of the reforms to Guatemala’s mining laws.
“We hope Congress opens a great debate so we can
have a law that is in accordance with all our needs,”
President Otto Pérez Molina said last year.
For a moratorium to pass, Guatemala’s 158-member
Congress must approve it with a majority vote in three
separate debates.
It remains unclear when those votes will be cast due
to an extended backlog of pending legislation. Last
year, Guatemala’s government, under pressure from
the industry, withdrew a proposal to acquire as much
as a 40 per cent stake in new mining projects. F
FIRST
In March this year, Guatemala joined the Extractive
Industries Transparency Initiative (EITI), the
global standard for extractive industries to improve
transparency, accountability and governance in
resource-rich countries through the verification,
reconciliation and publication of company payments
and government revenues from oil, gas, and mining.
The EITI process must be overseen and
implemented in a transparent manner by a multi-
stakeholder group. EITI is thus the most significant
and leading international effort to improve
transparency in extractive industries, particularly
in the third stage above involving the generation,
payment, and receipt of resource revenues. While it
will be challenging for any one initiative to provide
a comprehensive resolution for transparency issues
in all these stages, EITI is the most important
advancement in this direction given its multi-
stakeholder approach and its stringent reporting and
compliance requirements.
Following the announcement, Roxana Baldetti,
Vice President of Guatemala, said: “The Government
of Guatemala expresses its satisfaction with the
decision of the EITI Board and reaffirms its
commitment to transparency as an essential element
of the management of natural resources that belong
to all Guatemalans.”
Foreign players operating in Guatemala have also
welcomed the news. Mario Marroquín, Executive
Director at Goldcorp Guatemala, said: “This decision
strengthens the EITI Standard as the reporting rule
for the industry’s payments in Guatemala. We are
confident that this will help to establish transparency
as the rule of the game in the natural resources sector.”
Anglo-FrenchoilindependentPerencowasamember
of the Commission, taking into account the importance
of the oil operation for the country’s economy, through
which Perenco Guatemala generates for the state more
than ninety per cent of income from the oil sector,
making it one of the largest contributors.
Participation in the EITI begins with a country
first attaining “candidate” status through compliance
with initial sign-up requirements. Once a candidate,
a country has 30 months to continue implementation,
toward the end of which time the process needs to be
validated to assess compliance with 20 requirements.
Mining and oil still represent a small share of
total FDI, contributing less than 5 per cent to
GDP. Despite high potential and some investment
in the extraction of nickel and gold, the sector
continues to underperform, in part due to long-
standing opposition from local communities and the
sensitive issue of land distribution and exploitation
in the country. The government believes that
Guatemala’s compliance with the EITI will make a
major contributing toward helping to convince local
communities of the contribution of mining to the
national and regional economies.
Extractive transparency

27
O
ver the last decade, Guatemala has
experienced the fastest electricity
sales growth of any country in Central
America, with a compound annual growth
rate of 6 per cent in that time, driven by the demands of
a fast-growing economy.
Helping Guatemala meet its rising energy needs is
Energuate, which supplies electricity to 1.5 million
customersin20ofthecountry’s22provinces,covering90
percentofthismountainousandheavilyforestedcountry.
Energuate emerged as a result of the privatisation
of Guatemala’s electricity sector that began in
1996. In the wake of the peace accords that ended
decades of conflict, the country embarked on a
major programme of infrastructure reform. This
opened up energy commercialisation, distribution,
transmission, and generation from the control of
the then two major stakeholders: Empresa Electrica
de Guatemala, Sociedad Anonima (EEGSA) and
the Instituto Nacional de Electrificación (INDE),
creating a competitive market where only the prices
of transportation and distribution are still regulated.
EEGSA sold its generation activities in 2001. Before
that, in 1998 the company divested 80 per cent of its
distribution assets. In the same year INDE split its
own distribution assets, which were subsequently
acquired by Spanish outfit Unión Fenosa. In May
2011, UK-based Actis Capital, a private equity firm,
bought a majority stake in the company in what was
the country’s first leveraged buyout, renaming the new
entity Energuate.
As a result of privatisation, today there are 49
electricity generation companies, five transmission
companies,16 distribution companies, and 18 sales
companies in the electricity sector, with 80 per cent of
electricity generation originated by private investment.
Guatemala has a total installed electricity capacity
of around 2,800 MW, according to the US Energy
Information Administration.
The electricity sub-sector in Guatemala is clearly
defined and regulated: The Ministry of Energy
and Mines is the policymaking body, the National
Energy Commission regulates the subsector; while
the Wholesale Market Administrator is the national
operator of the Interconnected National System. Within
this regulatory legal framework operate generators,
transporters, distributors, large users and marketers.
“The financial health of the electricity sector has
improved tremendously since privatisation,” says Jaime
Tupper, Energuate’s CEO, who adds: “Governments
were simply not able to provide the financial support
needed. Now we have a sector with profitable
companies committed to long-term growth through
investment. New plants are being built, transforming
Guatemala from a country with an electricity deficit
into the leading exporter of energy in Central America.
We now have one of the most competitive electricity
sectors in the region, and life has significantly improved
for many people throughout Guatemala.”
More than 60 per cent of Guatemala’s electricity
production comes from renewable sources, with
remaining production made up of coal and diesel. The
generation sub-sector is already highly diversified and
includes hydroelectric, geothermic, biomass, solar,
and wind energy plants. As Mr Tupper explains, the
Ministry of Energy and Mines is working to transform
the energy matrix in favour of renewable energy,
opening the opportunity to establish significant
investments in renewable energy projects: “The
country not only aims to make significant savings as oil
international prices keep increasing, but also to reduce
prices on electricity and to minimise the impacts of
carbon emissions, while shifting the energy mix to
promoting renewable sources of energy.”
Guatemala’s current energy matrix includes almost 50
per cent hydro, 20 per cent diesel, and 14 per cent coal.
The goal by 2015 is to eliminate the use of diesel
and to be producing 1,685 MW of power made up of
65.9 per cent hydro, 16 per cent coal, and 17.8 per
cent geothermal.
Nevertheless, as Mr Tupper points out, coal remains
a cheap, convenient option, and Guatemala is a low-
income country that will have to continue to rely
on fossil fuels for some time. “We have to promote
responsible coal generation, to be as environmentally
friendly as possible as we make the move toward
sustainable, affordable energy,” he says.
Empowering rural areas
Energuate is a key partner in the government’s Rural
Electrification Plan (PER), which is modernising the
electricity sector in Guatemala and expanding coverage
to include a larger number of rural households.
“Since the privatisation process began in 1996,
GUATEMALA
FIRST
Interview with JAIME TUPPER
Chief Executive Officer, Energuate
JAIME TUPPER
graduated in electrical
engineering from the
Universidad Simón
Bolívar in Caracas,
Venezuela. During his
career he has held senior
positions including that
of Vice President of
Commercialisation, Vice
President of Operations,
Director, Director
General and President of
telecommunications and
electricity companies
in Venezuela, Chile,
Colombia, the Dominican
Republic, El Salvador and
Panama. He has served
as CEO of Energuate since
2011, advancing changes
in the distribution
companies and electricity
market of Guatemala in
order to modernise them
and make them more
efficient.
A UK-Guatemalan success story

New plants
are being
built,
transforming
Guatemala
from a
country with
an electricity
deficit into
the leading
exporter
of energy
in Central
America
28
electricity coverage has increased from 50 per cent of
the country to 89 per cent today. Most of that increase
is into rural areas,” explains Tupper.
Development of the electricity sector across the
country has been hampered by memories of incidents
dating back to the 1980s. This has led to a situation where
new projects are met with scepticism and opposition,
regardless of the potential benefits to the communities.
Economic and social disparities between rural and
urban areas exacerbate the situation. Fears about
manipulation often drive resistance to energy projects.
These have led to demonstrations, including the
blocking of important transit routes in Guatemala.
But as Mr Tupper points out, local communities have
been more welcoming of new energy projects. This is
partly due to legislation, which guarantees a fixed rate
of 4 per cent of net profits to the local municipality, but
also due to direct aid programmes set up by Energuate
to provide communities with amenities such as schools
and medical clinics, along with other small economic
development projects included within the companies’
corporate social responsibility programmes.
“It is essential to create and develop a good
communications programme direct to the villagers in
order to share with them the benefits of any particular
energy project,” says Mr Tupper.
Energuate has taken a softly-softly approach in
working with rural communities. “We have focused on
social management, aimed at establishing a relationship
with our customers and customer representatives by
working closely with national, regional, municipal and
local authorities, in which we provide solutions and
alternatives to the concerns and requirements of our
clients. We back this up with a comprehensive CSR
programme that supports efforts in education, health,
safety and the environment. We focus on providing
knowledge and opportunities for children and young
people in our coverage area,” he adds. This has
involved providing information in Mayan languages,
as well as scholarships and training programmes for
electricians, creating a direct link with communities.
This community-based approach very much
reflects Actis’ strategy with Umeme, the Ugandan
energy distribution company. Through experience
gained from running Umeme, and managing Central
America’s largest wind farm, Actis is well placed to
work alongside Energuate’s management team to
transform the company into a transmission network
able to keep pace with demand.
Actis has investments in emerging markets in Africa,
China, India, Latin America, and South East Asia. It
was formed in July 2004, as a spinout of CDC Group
plc (formerly the Commonwealth Development
Corporation, an organisation established by the
UK Government in 1948 to invest in developing
economies in Africa, Asia, and the Caribbean. The
Actis management team acquired majority ownership
of CDC’s emerging markets investment platform.
“We have a very positive relationship with Actis,”
says Mr Tupper. “We have benefitted from its
knowledge of emerging markets, good governance,
and safety policies, as a result of which we have
improved safety tenfold. Actis decided to appoint an
independent board of directors that includes experts in
GUATEMALA
FIRST
We’ve got the power:
routine maintenance
is carried out to the
highest safety standards

29
There is huge
potential
for other
UK-based
companies to
participate
in the
expansion of
Guatemala’s
electricity
supply and
generation
different areas, underscoring the importance of good
governance. Actis has promoted ethical practices. They
come over every two months to carry out an in-depth
analysis of the business, and this is something from
which we also learn a lot.”
Long-term commitment
Actis is taking a long-term approach to its investment
in Energuate, says Mr Tupper. “Actis’ management
approach is focused on generating value at the company
level, about growing the company, rather than taking
money out, or paying big dividends to shareholders.”
In fact, Energuate has not met the goals of the
business plan during the first two years of Actis’
ownership, says Mr Tupper. “This year we are on target,
and we are expecting to close the year fully compliant
with the plan. Actis understands the constraints we are
working under: for example, energy theft. We work
within a tariff that recognises a 16 per cent loss from
theft of electricity, but the reality so far has been a
19 per cent loss. However, In the first quarter of the
year, the trend has reversed, losses have decreased as
a result of negotiations with two major communities
in the East of the country, added protection of the
network, more control at points of energy exchange
and decisive action against fraud. This gives us reasons
to be optimistic on the outlook for the year.”
Energuate has lobbied hard to get the government
to take action against criminal gangs that steal energy
from the national grid and sell it on to households, a
practice that is particularly rife in the western part of
Guatemala, says Mr Tupper.
Looking to the future
Central America’s electricity system is entering
the final stages of interconnection. There is full
already full interconnectivity between Mexico and
Guatemala, which has allowed for regular supply,
while stabilising the market. At the same time,
Guatemala and its five Central American neighbours
– El Salvador, Honduras, Nicaragua, Costa Rica
and Panama – have agreed a regional project known
as SIEPAC (Central American Interconnection
System) that aims to interconnect their respective
transmission grids, allowing power to flow between
the different countries.
The final challenge remains the harmonisation of
regulations within Central America, says Mr Tupper:
“The private sector has an important role to play
in SIEPAC, but its success depends on agreements
between governments throughout the region;
we have to remember that there are major differences
regarding energy policy within Central America.
But when this process is completed, we will see
rapid economic growth and development in this part
of the world.”
“Guatemala has the potential to play a key role in
the regional economy by providing increased energy
generation and distribution,” says Tupper.
“There is huge potential for other UK-based
companies to come here and participate in the
expansion of our electricity supply and generation,”
he says, adding: “We have sustained growth, we offer
equal opportunities for foreign investors, and we have
a stable, regulated power market.” F
FIRST
Reach for the
sky: Energuate’s
CSR programme
aims to provide
knowledge and
opportunities
for children and
young people

FIRST Guatemala Report 2014

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