Guatemalan President Bernardo Arévalo took office three months ago, on January 15, 2024. The first 100 days of a new administration are decisive in setting the course of the new government. Today, we analyze what actions President Arévalo has taken to improve the country's business environment.

International Image

After the political crisis of 2023, restoring the country's image is an indispensable step to attract investment. President Arévalo made two trips with this objective in mind.

The first was a European tour. He signed a memorandum of understanding with the European Union (EU) that includes a US$53.6 million project and access to the EU Global Gateway , which will allow Guatemala to receive investment for infrastructure projects focused on sustainable economic growth, health and education. He also met with French and Spanish businesspeople and signed an agreement with Iberia to stimulate the tourism industry.

The second trip was to the United States (US). The US government announced a contribution of more than US$129 million in cooperation for Guatemala. Representatives of the Guatemalan private sector and multinationals such as Amazon, Walmart and Mastercard, among others, participated in the meetings.

It is worth mentioning that the Ministry of Finance rehabilitated the Country Risk Table. This initiative seeks to coordinate efforts with the private sector to improve Guatemala's credit rating to the investment level.

Infrastructure

One of the biggest challenges the new government is facing is the poor state of roads, ports, airports, and transportation. The Logistics Performance Index, which measures the quality of infrastructure and ease of moving goods and services, ranks Guatemala 88th out of 139 countries.

The Ministry of Communications, Infrastructure and Housing (CIV) initiated a series of audits in different units because it considers that there are contracts that are detrimental to the State. Minister Jazmín de la Vega dismissed the Director of Civil Aeronautics, Francis Argueta. Argueta's administration was characterized by the poor state of La Aurora International Airport and it is expected that efforts to restore it will be initiated.

In addition, President Arévalo announced the construction of an underground subway in the capital, with the support of the World Bank and a public-private partnership. The first section is expected to be inaugurated in 2027. For the moment, no details have been given on how the bidding will be done.

Yale University publishes an government plan contemplates investment projects for the next four years totaling US$3.5 billion. Among them are:

• 500 km of new primary roads; 1,820 km of secondary roads and 1,500 km of rural roads.
• A maintenance program for 100% of the registered road network (39,000 km).
• US$180 million will be allocated to improve port and airport infrastructure.

Mining and Energy

In the energy sector, the new government declared a state of emergency for the Guatemalan electricity system. Population growth, constant urbanization and the El Niño phenomenon have limited the system's capacity to meet growing demand. However, this translates into greater investment opportunities, especially in the PEG 05-2024 bid and in renewable energies.

On the other hand, the outlook for the mining sector is worrisome for investors. Several projects have had a de facto moratorium in the last decade. The Minister of Energy and Mines, Hugo Ventura, announced a two-year mining moratorium during which the government wants to reform and modernize the mining legislation, which has already been supported by the new Minister of Environment, Patricia Orantes. It is uncertain whether they will achieve this objective considering the difficulties they have faced in Congress.

The oil activity has a similar projection. Minister Ventura informed Congress that he will not extend the contract of Perenco, the only oil company in the country. President Arévalo confirmed this decision and indicated that Perenco could operate in the future, but not in Laguna del Tigre, which is a natural reserve.

Legislative Agenda

The ruling party faces a complex scenario in Congress.

The government's priority is the approval of the Antitrust Law (initiative 5074). On April 11th, Congress approved it in its second reading (out of three). Although the law still needs amendments, prioritizing it is a wise decision given that the World Bank recommends this type of legislation to stimulate economic growth. In addition, it provides legal certainty to investors regarding how to resolve disputes with competitors, customers, and suppliers. Finally, it prevents collusion in public tenders, allowing more companies to compete.

However, the ruling party, which only has 23 of the 160 deputies, has no control over the legislative agenda and has been unable to maintain its solid alliance and establish consensus with other benches. The laws approved so far are not of great importance for the country's economy, nor do they correspond to the ten agreed laws announced in January 2024. For this reason, Arévalo concluded his first 100 days without a relevant legislative victory.

Rule of Law

Arévalo ran his political campaign on an anti-corruption platform. As a result, the ministries within the Executive have announced internal audits in different areas. Some of these include the School Health Insurance Program, mining licensing processes, public works contracts and execution, the airport’s mismanagement, hospital administration and medicine purchases, to name a few. Transparency in public administration is important for the State to be able to execute projects effectively in the future.

One of Arévalo's promises was to get Attorney General Consuelo Porras to resign. In 2022, Porras was added to the US Engel List of Corrupt and Undemocratic Actors for her role in the persecution of judges, prosecutors and journalists. She has also been sanctioned by more than 40 countries. Additionally, the Attorney General’s Office (AGO) played a crucial role in the political crisis of 2023 by proposing to annul the electoral results.

The President has been unable to fulfill his promise, and Porras will likely remain in office until the end of her term in 2026. This will limit the anti-corruption efforts and the strengthening of the Rule of Law to which this government aspires, which has negative effects on the business climate because it maintains a situation of uncertainty due to the lack of legal guarantees.

Conclusion

The first 100 days of Bernardo Arévalo's administration have been marked by decisions that have impacted Guatemala's business climate. His strength lies in the international image he projects and the agreements he has reached. We anticipate that such approaches and investment in infrastructure will be positive aspects in the future.

On the other hand, the government faces great challenges to reach a consensus on a legislative agenda and promote the reforms they want. Its decisions regarding the extractive sector provide it with uncertainty. The mining moratorium and the termination of the contract with Perenco are proof of this.

Finally, the President continues to face great challenges to strengthen the Rule of Law, given that the Attorney General will most likely remain in office until the end of her term in 2026.