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What challenges will Guatemala’s new government face?

GUATEMALA CITY (CentralAmericaData) – Alejandro Giammattei, Guatemala’s new president, is hosting a country with weak institutions, legal uncertainty and a business sector that is asking for a less “hostile” environment for new investments.

After winning the presidential elections in August 2019, Alejandro Giammattei took office on January 14, with the challenge of implementing policies aimed at providing greater legal certainty for investments and reviving the economy.

Standard & Poor’s, Fitch Ratings and Moody’s agree that Giammattei will have to face conditions in which debt levels, legal certainty, and investment attraction are some of the main challenges.

Months ago Fitch Ratings anticipated that the new president will have limited support in Congress, as he will have to govern over the next four years without a majority of deputies and with an atomized legislature.

Regarding the business climate, Standard & Poor’s has been forceful, since it indicates that the new government will have to strengthen law enforcement in the fulfillment of contracts, in order to attract private investment and contribute to the country’s economic growth.

The business sector has also expressed its opinion in this regard. Eduardo Girón, president of the Guatemalan Chamber of Industry (CIG), told that “… one of the priorities of the new members of the Economic Cabinet is to create the right conditions to improve the environment for doing business and create new sources of employment.”

Giron added that “… currently in Guatemala there is a hostile environment towards new investment, which is associated with the lack of state presence in several parts of the country, so policies to attract new productive capital must be reviewed.”

The positive thing for the new government is that it receives a country with a rise in business expectations, since in December 2019 the Index of Confidence in Economic Activity (Icae) in the country reported a considerable increase compared to the same month in 2018, a performance that strengthens the upward trend that has been registered since July last year.

Figures from the Bank of Guatemala indicate that in December 2019 the country’s Confidence in Economic Activity Index (Icae) reported a considerable increase compared to the same month in 2018, a performance that reinforces the upward trend it has been registering since July last year.

The rise in business expectations corresponds to the electoral victory of Giammattei, who in August 2019 won the second round by a wide margin, concentrating 57.9 percent of the votes, a proportion higher than the 42.1 percent won by Sandra Torres, the candidate of the Unidad Nacional de la Esperanza.

The official report states that at the end of last year “… the Index of Confidence in Economic Activity (Icae) stood at 59.27 points, up 1.91 percent from November 2019 (58.16 points) and up 21.43 percent from December 2018 (48.81 points).”

The document adds that businessmen consulted estimate that “… the Real Gross Domestic Product will register a 3.2 percent growth in 2019 and 3.3 percent in 2020. Compared to the November survey, the Panel’s forecast for both 2019 and 2020, recorded a 0.1 percentage point increase (3.1 percent and 3.2 percent in the previous survey, respectively).”



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