“We Are Open For Trade And Foreign Investments”

Indranil Das | August 2016 Issue | The Dollar Business

TDB: You were the last country to open up an embassy in India from Central America. What took you so long?

H. E. Georges de La Roche (GLR): Well, during the dynamics of the cold war, we had priorities elsewhere, much like you did. Post cold war, the realities of international relations have undergone a paradigm shift. Setting up an embassy in India, at one level, is a reiteration of this reality. At an interpersonal level, both Guatemala and India are members of NAM (Non Aligned Movement) and have always had a very congenial relationship. Setting up an Embassy in your country envisages to strengthen the existing ties. Incidentally, talks on this began in 2005 and continued throughout the next two years. But our embassy opened only three years ago as the bureaucratic process takes its own time. India opened its embassy in Guatemala five years ago too.

TDB: Indo-Guatemala trade is hugely lopsided in India’s favour. According to official data, goods worth about $226 million are being exported out of India whereas imports are at just $26 million. We presume that one of the reasons for establishing an embassy in India is improving this trade imbalance?

GLR: Absolutely! The imbalance can be attributed to several reasons, and one of them is the sheer size of India and the corresponding size of its industry. Incidentally, there are quite a number of Indian companies trading in Guatemala. Big brands like Hero, Bajaj and Kirloskar have presence in our country. But if you were to think of Guatemalan companies in India, chances are you won’t find any. I feel Indians in general have an entrepreneurial streak and leverage all possible opportunities as far as exports are concerned. We, on the other hand, are still growing as an economy and most of our exports are still directed to traditional markets in North America. However, we want to correct this trend. The trade imbalance with China is even more and is touching a billion in their favour.

TDB: There seems to be some conflict with regards to exports of cardamom?

GLR: Yes, it is one of our major exports to India. But it is not the same type of cardamom that you grow here. You can use our cardamom in your food industry. There is no reason to compete and restrict our exports. I firmly believe, we should cooperate instead of competing.

TDB: So what do you propose?

GLR: We follow small-scale cooperative system of farming cardamom. But in your country, you have large-scale farming of this spice in several places like Cochin. I firmly believe that the differences in our systems should not threaten primary stakeholders, particularly farmers. We should find a way to cooperate. By drawing synergies from both systems, we could perhaps give a global facelift to the cardamom industry. If sugar can have a worldwide industry presence, why can’t cardamom? This can be a real fillip to our bilateral relations.
 

TDB: Guatemala is a beautiful tourist destination. Ironically, you don’t have a direct flight from your country to India. Besides Guatemala has no reckoning among Indians as a tourist destination and vice-versa. How do you plan to address this situation?

GLR: You will be surprised, but your yoga tourism attracts quite a few Guatemalans. There is a connecting flight via New York. So the situation is not too bleak to start with. We want to attract Indians to Guatemala. The one issue we have is the visas – we have to be very careful about who we market it to. We are not aiming to attract Indian backpackers, but only those tourists who we know are coming specifically for tourism. Incidentally, we are a very competitive tourist destination and receive more footfalls than Costa Rica that has always been a benchmark for us. But, at the moment, we need to invest more in infrastructure. In China, 8% of GDP is invested into infrastructure, which is commendable. This is way ahead of India and, in fact, ahead of all the developed countries. This is one mandate that we cannot afford to ignore, or else it is bound to become our Achilles heel.

TDB: Apart from tourism, which industries is the Guatemalan economy largely dependent on?

GLR: 20 years ago, we were dependent on agriculture. But, today, agriculture accounts for only about 13% of our GDP. The rest comes from the service sector, banking and manufacturing.

TDB: Is it true that if one holds US visa, then a separate visa isn’t required for Guatemala?

GLR: Yes, that is right. But the visa requirements are quite strict because unfortunately, we have had instances, where Indians have sneaked illegally to US via Guatemala and other Central American countries. So, we have to be really careful when we do visa interviews.

TDB: There is a very small population of Indians in Guatemala. Do you see the community growing?

GLR: Yes that’s true, but it is growing. I would say that the Indian population in our country has grown considerably in the last decade, and most of them are businessmen.

TDB: Has something on the lines of a FTA been inked between India and Guatemala?

GLR: We are far from a FTA. Currently our Foreign Investment Protection (FIP) Agreement is being firmed up. I believe you are redoing your norms on FIP. We had led a high-level delegation to India two years ago and initiated talks on FTA. However, the outcomes of the deliberation are yet to materialise.

TDB: What advantages are you getting after signing an FTA with your largest trading partner, the US?

GLR: FDI from US into our country has increased phenomenally. In my view, this increase is a logical consequence of all FTAs. After all, investors do feel more confident about entering a country when there is a clear mediation process and defined rules to ensure transparency. We have also seen an increase of trade between the Central American nations as a result of this particular FTA.

TDB: What are some of the inherent advantages within your economy that you have been able to leverage by signing the FTA with America?

GLR: Our proximity to US market is perhaps the biggest advantage. For instance, this is greatly benefitting exports from our textile industry. In the fast-changing fashion market of US, textiles from Guatemala are reckoned as much as textiles from China.

TDB: What about free trade zones?

GLR: I think there are more than five free trade zones operational in total within Guatemala. So, we have progressed significantly in that direction. We are open to trade and investments. By the way, Guatemala is just the size of Telangana.

TDB: India’s trade with Mexico is huge, but not with Guatemala. Why so?

GLR: Mexico is a much bigger nation. And while Mexico is part of NAFTA, we are a part of CAFTA. Moreover, your relationship with Mexico dates back to several decades. Also, since India buys oil from Mexico in large quantities, you are hugely dependent on them.

Coming back to your question, I do believe that the size of countries does matter when it comes to trade relations. After all, bigger countries have scope for diversification. In fact, this is precisely one reason why we market ourselves as Central America. The Central American Integration System (SICA) has existed since the 1950s and 60s and, maybe, we would want to eventually make it a one monetary union going forward.

TDB: How is the political environment in SICA countries?

GLR: All these countries for the last 30 years have been democracies. The economies of all countries are stable and the exchange rates have also been stable. Across all countries in Central America, the GDP growth is solid, inflation rates are stable and the macroeconomic indices are sound.

TDB: What’s your take on mega regional trade agreements like TPP? How will it impact your relations with US?

GLR: We want to be a part of the Trans-Pacific Alliance. We believe in free trade and feel that these mechanisms are meant to make trade freer. Our geographic location next to Caribbean, close to Pacific Ocean and between the two Americas is bound to translate to an edge, in terms of this alliance.

TDB: There is a perception that US wants more trade barriers particularly when it comes to Mexico and China. What is your opinion?

GLR: I will refrain from commenting on this issue specifically, but, what I will say instead is that, it is to everybody’s advantage to have trade across borders. However, I think this is a realisation that might take longer on the part of some countries.

TDB: What kind of foreign investments are you looking at from India?

GLR: We would like to attract more foreign direct investments in textiles. Other key sectors in which we want to bolster FDI, as far as India is concerned, are tourism, food, mining & infrastructure.

TDB: How is the regulatory system in Guatemala different from that in India? We have a lot of regulations in India, for example in investment in mineral resources. Is Guatemala open to that?

GLR: I would say, we are a little bit friendlier to foreign investment in that industry than you. We have many foreign companies in the mining sector already. Most of these hail from Canada, US, Russia and Norway. We would want Indian companies to explore opportunities in this sector.

TDB: What about Indian companies like Mahindra, Kirloskar, etc. What made them invest in Guatemala?

GLR: Private companies are nimble to respond to opportunities. They have an inherent entrepreneurial streak. In fact, when I met the Kirloskar brothers, I could see that their thirst for entrepreneurial adventure that got them into a country like ours.