Guatemala Business Plan Analysis Economics Essay

Guatemala is a state which is situated in Central America. It attained its independency on 15th September 1821. Guatemala has a population of about 14 million people and a GDP of 26 billion dollars. It is a state with a wealth of natural resources which include crude oil, Nickel, rare forests, fish, chicle, and hydropower. The population is chiefly composed of the autochthonal Mayan people and the chief linguistic communication spoken is Spanish although there are about 21 other linguistic communications. The Guatemalans are chiefly Catholics and Protestants. Its economic system is chiefly boosted by java, sugar and bananas which earns the state foreign exchange. Guatemala has experienced a batch of political alterations since its independency ( Vanden and Gary, Chapter Ten ) . During its first old ages of its independency it experienced several putschs from the military. These were subsequently to take to a civil war, which lasted for about 36year. During the war the authorities had suspended the fundamental law and all political parties. Due to this instability the state has non been able to do sustainable development to its people.

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Most of the people in Guatemala live in utmost poorness and around 10 % of the population controls about 80 % of the state ‘s wealth. Wealth distribution instability has led to illiteracy in a large subdivision of the population. Over the old ages uninterrupted constitutional reforms have shaped the state ‘s economic system and political Fieldss giving room for favourable concern platform.

The state has a democratic signifier of authorities with a president, frailty president and a Congress which are straight elected through a national election. The office holders serve for a period of four old ages. The president is the caput of province and authorities. Guatemala is a multiparty democracy.The fundamental law of 1985 paved the manner for the separation of power supplying for the three weaponries of the authorities ( Vanden and Gary, Chapter Ten ) . These weaponries are the executive, legislative assembly and the bench which are independent.

Guatemala over the old ages has seen internal struggle derail its economic attempts. However the peace agreement of 1996 opened the window for investing. The authorities embarked on economic liberalisation. It started reforms, ordaining friendly Torahs to give investors favorable conditions of making concern. These reforms involved among others exemption from revenue enhancement dividends payout, Low VAT which stands at 12 % and happens to be the lowest in the part. It has besides started particular revenue enhancement inducements to foreign investors. It besides removed VAT on the exports of java, sugar, bananas, meat and cotton.

The authorities of Guatemala has started enterprises to convey about sustainable development through efficient service bringing. Business enrollment procedures have been stimulined so as to do it easier to make concern in Guatemala. The noteworthy processs involves confidentiality of inside informations provided to the mercantile register and internal gross service, rapid incorporation processs where it takes at least five on the job yearss, low capital demands doing it easy to make concern ( Nonaka and Takeuchi 18 ) . Foreign company enrollment is every bit made easy and friendly for any transnational corporation to set up a subdivision in Guatemala.

Business environment in Guatemala has continued to be favourable. However, there are hazards associated with making concern in this state. These hazards are high insecurity, corruptness, low instruction degrees, inadequate and hapless substructure and presently, addition of revenue enhancements by the authorities to finance development. Insecurity makes trouble for concern to transport out its operations for fright of been attacked. Employees for illustration who do selling and distribution of merchandises of a company will happen it trouble to work in country with high insecurity. This state of affairs in Guatemala makes it trouble to make concern and increases cost of making concern since companies are forced to set up for excess security if they have to run in such countries. Corruptness is a frailty which raises the cost of concern. This leads to high monetary values of merchandises so as screen the lost hard currency through the vice.It is of import for a concern to use qualified staff to spur the strategic aims of the concern. Guatemala being a state with low degrees of instruction means that the state is short of equal skilled forces to manage the national demand for skilled labour ( Nonaka and Takeuchi 18 ) .In such state of affairss the concern entity is forced to use exiles whom it has to pay high wages therefore increasing cost of making concern. Inadequate and hapless substructure leads to detain in bringing of goods and services. In instances of hapless route webs it is trouble to present goods and services to meriting clients. Long holds due to hapless roads conditions leads to high losingss due to lost concern chances. Inadequate substructure besides makes advertisement of new merchandises and giving general information to the consumers hard and therefore low concern volumes.

Political instability in Guatemala where the authorities has been toppled on several occasions makes the concern environment unstable. However the sign language of the peace agreement and the authorities ‘s committedness in execution has brought about favourable conditions for making concern. The factors haltering making concern in the state can be mitigated through concerted attempts by the authorities lodging to the execution of the peace agreement. This will guarantee that demilitarizing of armed groups which pose a great security menace is supported by both parties. Guaranting that it is safe in the state brings about investor assurance therefore economic recovery.

The authorities should guarantee that reforms are done to the instruction sector, do immense resource allotment so as to guarantee that the state population gets equal instruction. It is of import that the authorities if possible put in topographic point ordinances necessitating instruction compulsory to all kids who have attained school traveling age. The state should besides do a precedence allotment of resources to enable it to rapidly repair the state ‘s hapless province of the full substructure ( Nonaka and Takeuchi 18 ) . This will extenuate the losingss being incurred in the state as a whole and spur economic growing.

Strengthening capital markets will besides assist concern to raise capital through public offers and heighten economic growing. Adequate concern capital ensures that the entity can put to a great extent in its country of operation and harvest the benefits of economic systems of graduated table. Sectors such as conveyance, telecommunications and electricity can be enhanced so as to supply equal support to concern through public private partnerships to increase efficiency. In cut downing trade barriers and remotion of trade duties will besides heighten concern growing ( World Bank 5 ) .

Sing the concern environment in Guatemala entry of MNC is easy and this means the directors of any MNC should use certain schemes so as to guarantee that concern fight is maintained. Some of these schemes include trade name direction through uninterrupted betterment in merchandise invention. This should besides include betterment in cost, quality and service. The director by using this scheme will guarantee that the merchandises of the company are marketed in all sections of the public.

Business procedure direction is critical in the growing of concerns. Planing a procedure which will guarantee that the organisation relates good with its clients should be a precedence to organisation ‘s leading ( Gomez-Mejia and Cardy 20 ) . A closer relationship with clients and providers puts the company on the profitableness way through enhanced gross revenues volumes. The clients of a company are the most valuable assets of the company and therefore should be good taken attention of for they hold the hereafter of that company.

Change direction should be taken in history so as to guarantee that all information of the company on any alterations is disseminated to all employees in clip. Continuous staff preparation is of import so that they can maintain abreast with any technological alterations and adjust consequently. The concern should be structured in a mode to take into consideration any alterations within the market to place the MNC strategically so as to tap the market potency.

Risk direction enables the company to measure any menaces in the market or in the venture. This will enable the MNC to perpetrate resources to as to minimise or command the effects of the hazards in the event that the unfortunate occurs. The company should place precedences with consideration being given to the hazards with high chance of impacting the concern and the 1 with the highest impact on the concern ( Gomez-Mejia and Cardy 20 ) . The directors should besides use schemes which will work towards extinguishing beds of direction making flatter organisational hierarchies. This ensures that the company policies are rapidly disseminated to staff and feedback is besides obtained without bureaucratism. The attendant consequence here is proper service bringing.

Time direction should be enhanced in the modern direction.P roper clip use makes it possible for the company to do on clip bringings of goods and services to the consumers. MNC should guarantee proper clip direction so as to stay competitory. Quality is one of the factors which should be considered for client keeping. Proper quality direction makes the company continue ruling the market and suppressing new markets due to merchandise quality consistence. Therefore, equal resource allotment to keep quality ensures that the company stays in front of its rivals. MNC operate in different environments and its directors should guarantee that they make usage of new engineering as agencies to bettering their operations ( Gomez-Mejia and Cardy 20 ) . The directors should ever hold a planetary focal point so as to place the demands of their diverse patronage. This besides gives them the ability to concentrate on emerging markets.

Guatemala late has been subscribing pacts with regional states and other states in the universe. In 1994 Guatemala joined NAFTA ( Northern America Free Trade Agreement ) . In this respect it has besides embarked on doing understandings to open its trade window with other states. Like other states US has entered into understandings with Guatemala and in 2005 it ratified the US-Central America Free Trade Agreement ( CAFTA-DR ) which came into force in 2006. U.S is the largest trade spouse with approximately 36.5 % of all it imports coming from there and exports amounting to about 40 % ( Gomez-Mejia and Cardy 20 ) . Trading with US is non new since the states have had along standing relationship all along.

The confirmation of CAFTA-DR has seen the relationship take another dimension where US has been taking acute involvement guaranting that Guatemala committedness to the execution of the peace agreement. The US has been forcing for human rights and the regulation of jurisprudence. The blare for economic growing and sustainable development can non be over emphasized in the relationship between these two states. This has seen Guatemala attain considerable societal -economic reforms and democracy. Apart from trade the US has been assisting Guatemala through grants which channel through USAID.

In consideration of the Guatemalan state of affairs where the state has a wealth of natural resources I wish to urge crude oil as the merchandise for exportation. This will guarantee that the state continue to gain foreign exchange. These financess can be used to back up its ambitious development program and alleviate its population of increased revenue enhancements presently being imposed to finance development. The returns from the exportation of crude oil can besides be used to elate the life criterions of the people of Guatemala. Studies in Guatemala have shown that a big figure of the public live in utmost poorness a state of affairs which can be reversed sing the handiness of natural resources.

Guatemala as an emerging economic system has concern chances but these come with obstructions. The merely ended civil war which lasted for 36 old ages poses serious menaces since a batch of illegal fire weaponries in the custodies of condemnable. This has lead to high insecurity in the state and it continues to halter investing in the state. The authorities has non been able to wholly cover with this state of affairs and set it under control ( Gomez-Mejia and Cardy 20 ) . Due to this cost of making concern in Guatemala has been really high. Investors tend to shy away from insecure concern environments.

The Guatemala ‘s security state of affairs has contributed to decelerate investor response. Political instability has besides been an obstruction to making concern in Guatemala. The fact the state has merely come out of a civil war makes investors non to travel in velocity. Many investors would instead wait and see how the state of affairs is to be following the peace agreement. There is no investor who would desire to set money in a topographic point whereby the state of affairs is unsure for fright of incurring losingss.

Infrastructure forms the foundation for concerns. The absence of a good substructure in Guatemala has seen many investors shy off from puting in the state. The cost of making concern is high since concerns are likely to incur losingss due to lost concern chances, lost patronage as a consequence delays in presenting goods and services and losingss emanating from wastages for the instance of spoilables goods traveling bad while being transported.

Guatemalan economic system is looking up. The current political state of affairs where the state is sing political stableness following the peace agreement is bound to spur economic growing. The authorities is besides transporting out reforms in all sectors so as to set in topographic point Torahs that are investor friendly. It is besides partnering with other states such France, US and Italy who are presently assisting the state through donor financess to help in development. Basically in the following few old ages the model in the state will get down bearing positive consequences. The state ‘s committedness to civil authorities as opposed to military regulation has made it easier for the state to pull foreign investing.

All reforms since 1996 peace agreement such as the passage in 2001 of free dialogue of foreign currency act has seen the cardinal bank free up money market therefore conveying about easy foreign currency trade. This has seen foreign exchange and trade grow enormously. Reforms in the instruction sector which is geared towards supplying instruction to all will cut down illiteracy degrees. This will convey approximately skilled human resources. Knowledge is power and hence a population which educated and good informed will help the state to accomplish its development ends.

Guatemala has successfully been able to cut down the footings of the president, frailty president, and Congress to four old ages and those of Supreme Court Judgess to five old ages doing it possible to pave manner for alteration of leading without some politicians cleaving to power many old ages without conveying meaningful development to the people. Support from the regional neighbor has besides seen the state registry enormous accomplishment in its development ends. The state has partnered with its neighbors to get the better of high degree corruptness and money laundering which for many old ages has had negative effects on the state ‘s economic system. Their attempt to cut down offense rates through demilitarizing the dissenters has been unrelenting, giving the state a peaceable concern environment. Execution of a merely system within its system of administration for the declaration of differences has besides contributed vastly in guaranting that there is clear system and establishments to intercede in instance of a difference as opposed to punitive procedures which were being exercised by the military junta.

The state is besides sing serious reforms to set in topographic point a good and dependable substructure. This will enable easy motion of goods and services. It will besides enable the state concerns to do immense nest eggs in countries where they were passing to a great extent in footings of operational disbursals. Public service reforms in the state have seen the state cut down bureaucratism in authorities ‘s policies ( Gomez-Mejia and Cardy 20 ) . Notably is the remotion of long procedures of concern enrollment at the mercantile register and national gross service where enrollment demands are so clear and it takes merely five working yearss to hold the company registered. This shows the state ‘s committedness N guaranting that public personal businesss are conducted in an efficient and crystalline mode. Current denationalization of many province corporations is besides seen as a conjunct attempt by the state ‘s leading to convey in efficiency and minimize losingss through efficient direction

In decision we must look at the two scenarios of making concern in Guatemala. First we need to look at scenario one, that is making concern in the state in those early old ages when the state was in changeless internal struggle. During this clip making concern was highly difficulty due to high offense rate, illiteracy, low degrees of instruction and deficiency of proper substructure. These coupled with bad administration of the military juntas made making concern a life snake pit. Businesss truly made immense losingss and others literary had to shutdown their operations. Those who continued to run would bear down high monetary values for their goods and services intending that these were merely low-cost to the elect subdivision of the population. In fact no admiration, approximately 75 % of the population is still hapless today and can non afford basic trade goods and live below two dollars a twenty-four hours which seen as utmost poorness.

Scenario two, looks at making concern in the current environment. Following the peace agreement of 1996, it has seen the state get down recovery procedure with ambitious programs for development. The state is doing reforms in all sectors of the economic system to spur growing and open the window for extended foreign investing. These reforms have been initiated to give particular inducements to the movers of the economic system. The authorities has removed Vat on the export of java, sugar, meat, cotton and bananas. It is besides advancing production of veggies, fruits and flowers which are chiefly in the agricultural sector. In order to advance growing in this sector the state has banned the importing of meat, fish and other associated agricultural green goodss. This will guarantee that manufacturers of these merchandises do non confront unjust competition arising from merchandise of other states which may be cheaper due to cheaper production costs in their state of beginning.

The authorities has started economic liberalisation. This has seen the authorities carry out particular revenue enhancement inducements, freedom from revenue enhancements dividend payout and similar benefits, lowered Vat to every bit low as 12 % . The authorities promotes concern besides through seting in topographic point easy enrollment ordinances, as opposed to bureaucratic ordinances practiced earlier ( Gomez-Mejia and Cardy 20 ) . Regional states such as Honduras, Elsalvador, Argentina have been helping the state achieve economic power through trading partnerships such as NAFTA. The US has made enormous aid to the state through proficient support even in times of catastrophe such as Hurricanes, inundations and volcanic eruptions. These attempts have made the state remain on class in footings of development since resources are non strained during these catastrophes.

It is of import to observe the state has natural resources which have non been exploited. The current political environment will promote the state to ask for investors to research these resources and profit the state greatly. The handiness of crude oil in the state means that the merchandise will be cheap in the state. This will back up the industries since they will be obtaining energy cheaply. The state apart from puting in crude oil geographic expedition it should besides supply for more financess to research other natural resources which can be a beginning of foreign exchange through exports to other states.

Proper direction of these resources and the benefits of efficient use in the recent hereafter will get down dribbling down to the concerns and finally the state will witness improved life criterions for it population through low-cost goods and services. This scenario makes any future concern chances in Guatemala bright since the authorities is on path in its programs ( Gomez-Mejia and Cardy 20 ) . Its programs to go on offering inducements makes one feel that it is clip to put in Guatemala. The addition in revenue enhancements non defying, it is clear that the advantages in the current environment outweighs the disadvantages to carry on concern in the state.

Scheme for Conducting Business with U.S

Guatemala has identified U.S as one of the possible spouses in concern. This is attributed to the fact that U.S has legion resources that it lends to the Guatemala authorities to back up concern development ventures. U.S enjoys high revenue enhancement decrease while puting in Guatemala and in return it assists Guatemala in placing concern ventures. U.S for illustration has played a really major function in the crude oil geographic expedition in Guatemala by supplying the needed engineering. Other states have besides been encouraged to put in Guatemala by the betterment in concern enrollment processes in Guatemala. In return Guatemala exports its merchandises to those states while those states besides import their merchandises in Guatemala.

Obstacles with carry oning Business in Guatemala

Illiteracy

Guatemala has an approximate of 30 % rate of illiteracy. This is a chief challenge to concern investors because it means there are few people who can make skilled occupations. It is comparatively expensive to engage professionals from outside Guatemala to work in assorted concerns established in Guatemala.

Poverty

Guatemala has more than 60 % of its population life below poorness line. This poses a challenge to concerns because the consumer base is merely limited to few who can afford to purchase their merchandises. An consequence of these can be reduced gross revenues that may impede concerns from maximising their net incomes.

Poor Infrastructure

In footings of telecommunication and substructure, Guatemala is among the least developed states in Latin America. For any concern to boom, there is demand for dependable substructure such as roads and edifices. It is hence a challenge for most concerns to transport their finished merchandises from their mills. Efficiency is hence hindered as a batch of clip is wasted due to the hapless province of roads.

Hazards associated with carry oning concern in Guatemala

Some of the hazards one is likely to meet in Guatemala are in administering finished goods by companies to the consumers. Due to the hapless province of the roads many goods are likely to be damaged during transit or are likely to be delayed and this might take to immense losingss. This can be mitigated by the authorities engagement in developing the local substructure in order to hike concern activities.

Increase in investing

It is non certain how the tendency of bear downing involvements to single companies will go on. The possibility is that when the rates move up extortionately, companies might make up one’s mind to retreat their concerns from Guatemala. This hazard can be mitigated by presenting favourable involvement to the investors.

Guatemala is one state whose economic strength is mostly dependent on political ties with foreign states. Every state in the universe is presently researching ways of spread outing their economic systems. Guatemala is no exclusion, its foreign policy is custom made to let good working relationship with adjacent states. Its geographic place has enabled the state to further economic and military ties with the US. We are traveling to research characteristics of foreign policy and the mode in which United States is act uponing them. The policy of peace and regard of human self-respect which is advocated by the US authorities is happening its manner in to Guatemalan citizens.

Although the United States president may reason that prosecuting this protagonism is motivated by democracy and desire for the regulation of jurisprudence, there are built-in grounds behind such ambitious foreign policy on developing states, Guatemala included. There is no uncertainty that economic prosperity of whatever state is to a great extent dependent of peace. As a consequence, the United States move to heighten peace in regional economic web log is geared towards accomplishing economic growing. If Guatemala is traveling to encompass America ‘s political orientation, there is no uncertainty that benefits accruing from good administration would be realized. This includes among others attractive force of the much needed foreign investings. If Guatemala proofs herself to be a state of high unity and good administration, so decidedly, its citizens would derive well from employment and concern chances brought approximately by international economic linkages. It is hence inexplicit that making concern in Guatemala would be determined to a great extent by how receptive its authorities would be towards International ties and legislative acts ( White 1 ) .

Despite these chances, there is no uncertainty that universe ‘s acceptance of capitalist system may be damaging to the Guatemalan fighting economic system. Countries which have better capitalist systems are likely to profit more economically than others. Furthermore, states with weak capitalist political orientation may impede the rate of economic recovery in developed states. Generally these states have low political control ( World Bank 1 ) . United States foreign investing policy clearly reveals that if a state is non suited for capital investing on security affairs, so it can non make concern with her. Based on this school of idea, the United States has been really precise on publicity of peace attempts in Guatemala. They are of a strong belief that civil agitation within the part is blockading capitalist economy. As a consequence of these concerns United States has participated in peace maintaining missions constituted by United Nations. It has farther entered into several understandings geared towards bettering peaceable relationships with Guatemala. Critical analysis of these understandings shows that they are carefully aiming ways of doing Guatemala a safe finish of concern promotions every bit good as capital investings by the United States corporations.

It is non merely United States foreign investings policy that is determining manner of making concern in Guatemala but besides authorities attempts are endeavoring to do the Cardinal American state the best investings ‘ finish. Oscar Berger who is Guatemalan presidents together with his advisers on political issues travelled to United States with a exclusive purpose of advancing their state ‘s fiscal circles. This move attracted tremendous involvement amongst possible investors. One of the members of deputation said, “ This meeting was a manner, to give a house foremost step to present Guatemala as an first-class finish for Direct Foreign Investment. We ‘re get downing to make out overseas as we seek to pull investing to a state that has great advantages. ” Upon creative activity of their offices, enlisting of advisers and launch of its official web site, Invest in Guatemala established an ambitious move of retrieving lost clip and chance in American, European and Asiatic investors. To accomplish this, Central America ‘s largest economic system with little skilled work force developed Torahs giving foreign investors equal rights as Guatemalans.

For the instance of United States investors, the upper manus for them is clear. Geographic location ensures that ports in Both Atlantic and Pacific oceans facilitate lading conveyance through the sea within three yearss. Other conveyance channels through good route web through Mexico and less than three hours flight through Houston or Miami. Another great advantage of American investors is the similarity in clip zones with Cardinal part of the United States. Sobalvarro who is the President of an organisation charged with a duty of advancing Guatemalan attraction to foreign investing portions the same idea that his state ‘s geographic location helps favourable environment for furthering international economic ties.

Tourism is another sector which is yet to be to the full explored in Guatemala. It is a sector with diverse merchandises for tourers. Bing the beginning of Maya civilization puts the Cardinal American state at a better place of touristry publicity. Although small has been done about faultless vegetations and zoologies, to a great extent diverse ethnicity and geographic characteristics, touristry industry in Guatemala is a division with bright chances.

Guatemala is fostering her economic growing aspirations through intensification attempts in Business Process Outsourcing. A figure of factors are in topographic point to guarantee competitory advantage of Guatemala. The most recent ordinances on telecommunication in Latin America and bing fiber ocular substructure are some of these factors. Additionally, geographic location, human resource productiveness and clip zone offer large mileposts towards accomplishment of strong economic place ( The International Bank for Reconstruction and Development 3 ) .

Another critical characteristic of Guatemalan economic system is microclimate diverseness. It allows for bringing of a assortment of agricultural merchandises through out the twelvemonth which ensures that significant volumes of export. There are programs at advanced phases to take agriculture sector in to a higher degree. Invest-in-Guatemala is looking for investings in processing of agricultural merchandises in a command to better value add-on. Out of this attempt, the organisation seeks to raise investings in production procedures within the following few old ages. On top of these advantages ensuing from the state and good understandings with other states, Guatemala is besides seting a batch of religion in the credence of CAFTA-DR-USA. Sobalvarro argues that there is a batch of hope for confirmation of understanding and subsequent enlargement chances.

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