As a Canadian grad student interested in Central American integration, I moved to Guatemala for a few months to work on my Masters thesis. I had been studying Guatemalan policy, mining laws and economic issues in Guatemala for a year before pursuing fieldwork. While exploring the social impacts and investment of transnational corporations in some of the most remote communities in this country, I became increasingly interested in what poor countries like Guatemala do to attract foreign investment and how the security and growth of the communities where the investment takes place is ensured. In our globalized world, whose responsibility is it to ensure best practices of our trans-national corporations working abroad?
Well it is certainly the responsibility of the host country to ensure its interests promote the security of its population, but countries like Canada, which have 50% of its mining assets abroad concentrated in Latin America, (in countries like Guatemala), must also step up and ensure businesses promote non-discriminatory and non-damaging practices in Guatemala.
Guatemala’s importance as a foreign direct investment (FDI) hub in Central America is increasingly proven due to its numerous advantages including macroeconomic stability, telecommunications infrastructure, competitive labor costs and its geographical location making it an attractive place for trade.
Since the end of the Guatemalan civil war (1996) the country embraced market-oriented reforms. The government took several steps to stimulate trade and investment in the country: the adoption of the investment law in 1998, the privatszation of state-owned enterprises, and the mining reforms of 1996. Thus, there has been an unprecedented rise of FDI inflow.
In fact, the Foreign Investment Law (Decree No.9 of 1998) was created to make a regime favorable to the attraction of FDI, through elevating the status of foreign investment making it immune to previous limitations and restrictions and; simplifying the legal framework for foreign investors by consolidating regulating principles and rules into a single law. But the law contains inconsistencies with other domestic laws and prohibits imposing performance requirements on the entry and operation of foreign investors.
Guatemala City, aerial view, 2009. Image credit: chensiyuan
Guatemala should enforce technology transfer on its foreign investors in their operation, force employment generation requirements upon their entry as well as create a dispute prevention mechanism. This would alleviate the numerous social challenges that Guatemala possesses which threaten FDIs in the country, but whose social challenges are at the same time stimulated by the presence of FDIs.
Guatemala has certainly increased its attractiveness to foreign investment with continued legal and regulatory reform, but other states have not taken responsibility to ensuring a non-damaging approach to enacting their investments, despite their interest in realising Central American integration through global commitment to free trade.
It the responsibility of both countries involved in bilateral agreements to ensure FDI investments are tolerable for as many people, particularly that the global agreements are beneficial for local Guatemalan communities.
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