Spotlight: Guatemala’s infra woes

Guatemala’s construction sector will be focusing on housing and commercial property this year.

At a recent webinar hosted by the construction chamber (Anacovi/Construguate) participants predicted a difficult scenario ahead though, as only 34 projects were started in 2020 compared to 50 the previous year.

Former finance minister Julio Hector Estrada (pictured) suggested that general risk aversion was part of the problem. Such aversion impedes financing or advancing environmental and social impact studies that could trigger protests.

This has led to a situation where public institutions offload risk reports to the private sector, Estrada said. But the related legal uncertainty then impacts private sector cost-benefit analyses.

An election campaign for the constitutional court hinders progress on legal certainty, while proposed changes to PPP laws and promotion agency Anadie remain stuck in congress.

BNamericas tracks 15 Guatemalan infrastructure projects worth over US$50mn in its database. Seven of these are roads, although only the CA-2 is in operation. Construction decisions for the Escuintla-Quetzal port highway and interoceanic corridor remain pending. The C-50 is in the early design phase and the Express Nor-Oriente highway in the prefeasibility stage, while the FTN is under construction. 

Plans to build a bypass around the UNESCO world heritage city of Antigua appear to be suspended.

Short-term government outlooks add to the problem of unfinished infrastructure projects, according to the panel.

The US$12bn interoceanic corridor was part of the Otto Pérez Molina government and designed to compete with the Panama Canal. Although US$370mn went to procuring land for the infrastructure, it has been scratched from the current administration’s plans. Alejandro Giammattei’s government is focusing on the La Aurora international airport and building more regional airports. Improvements are also planned for ports like Tecún Umán.

“The question is how much confidence the private sector has in taking money and investing it long term,” the executive director of industry association Cacif, Roberto Ardón, said at the webinar.

Advocating cautious optimism, Ardón suggested that major transformations of the state over the past 25 years have focused on privatization. Creating a legal infrastructure framework would represent another transformation.

“It will depend on the confidence that exists. When we talk about investment funds and banks using their investment capacity, at this moment they have liquidity and banks are solid. We have to talk about major infrastructure,” according to real estate consultancy Intus CEO Humberto Olavarria.

Guatemala City has large development potential. A light rail could facilitate social infrastructure, housing and road developments in the north and south of the capital.

The country should create metrics that could help investors to evaluate projects, Estrada said. If such metrics were not developed, chaotic growth could ensue due to lack of planning and clear rules.

“We might have an improved legislation that [provides] stability and credibility ... so we can really achieve investment potential,” said Estrada. “The biggest growth motor for Guatemala for 25-30 years is urban development and real estate development.”