Possible US Investment in Guatemala to result from US-China Trade War

Guatemala-based newspaper, Prensa Libre spoke to Trump government aide, Mauricio Claver-Corone, who believes the United States-China trade war may lead to new opportunities for Central America. He assured Prensa Libre that Guatemala will be “one of the first to benefit,” and named the garment, energy, and electronics industries as possible areas of growth. A recent study done by Europa Press found that 13% of US companies with operations in China had either left or hoped to leave the country in the near future. 

This opportunity for formal manufacturing jobs has come at a time when the coronavirus pandemic has led to a global recession, hitting 70% of Guatemalans who work in the informal sector, especially hard. Accessing the government-provided food assistance packages and cash transfers has been difficult for many rural and Indigenous communities who already suffer some of the world’s highest chronic malnutrition rates. The thousands of white flags hanging outside of homes and on the streets demonstrate a mass surrender to hunger.


Photo courtesy, EFE.Description: A woman poses with her white flag and mask outside of a home in Guatemala City.


The president of Guatemala’s Chamber of Commerce told Prensa Libre he hopes politicians will take the necessary steps to ensure the country is an attractive place to invest in, “especially for companies that require intensive manual labor.” Guatemalan President Alejandro Giammattei Falla  has made this a top priority. This past January, he announced plans to create new free trade zones and pass business-friendly leasing reforms as part of his administration’s economic plan to restore “faith, development and peace in Guatemala.” Giammattei has defended his business friendly agenda arguing it will provide an urgent response to poverty reduction, malnutrition, and educational reform. Giammattei’s emphasis on progress has concerned labor and environmental rights activists. They want “progress” to be measured with equal care of workers’ rights and conditions and protections of the environment. 

Many have argued that the country’s policies around investment are already welcoming enough. The Promotion and Development of Exports Law exempts foreign investors in the garment industry from paying income, import, or value-added tax for the first 10 years that they operate in Guatemala. Free trade zones or maquilas have historically been used across Central and Latin America as a way to attract investment, usually in exchange for cheap, non-union labor, generous tax incentives, and lax regulations. This has hardly led to sustainable development as human rights abuses and environmental degradation are well-documented impacts of the garment industry. Many young women enter the maquilas with hopes that these jobs will help them escape poverty. Instead, they face starvation wages, gender discrimination, and long work hours in unsafe and unsanitary conditions. 

Thousands face serious health concerns and often life-long disability due to the intensity of the repetitive movements and lack of personal protective equipment. In 2018, the ITUC an international trade union confederation that ranks global rights, listed Guatemala among the top 10 worst countries for workers. The lack of safety measures in place at a maquila near Guatemala city made it the source of a massive coronavirus outbreak this past May. The city’s mayor ordered the factory’s closure after over 200 people were infected in less than 5 days. At that point, Guatemala was one of the countries with the lowest number of cases in the region. 

The textile industry produces waste that often includes toxic materials and heavy metals and leads to disease and environmental damage. In 2017, the wear and tear generated by these chemicals put the pipeline of a neighborhood in Mixco, Guatemala at risk. The city’s mayor declared on a Facebook Live: “We are going to demand that they [the maquilas] treat the water that has chemicals… If they do not comply, we will close the maquila like we have closed other businesses that pose a threat to our safety and that of our neighbors.” Two years later, the problem had escalated, as bright red chemically charged water had once again damaged the city’s plumbing system. The mayor wrote in a Facebook post, “The maquilas have no idea how many millions we have spent to fix their irresponsible actions. Millions that they should pay!”


Photo courtesy, Neto Bran.Description: Authorities found contaminated water after a routine municipal inspection in Mixco, Guatemala.


Mirna Ramirez, who works for Guatemala-based MUVACOFUM (Women Constructing a Better Future) believes that while the government “must create environments that attract investors and foster economic development,” they must also “ensure that this goes along with decent work and fair wages.” The government has to address the economic hardship brought about by the pandemic, but while doing so they must also represent those working in the maquilas and act on their behalf when considering policy around foreign investment. David Casasola, a Guatemalan economist who works at the Centre for National Economic Research, told Al-Jazeera it is time to “reflect on the laws we have for the operation of businesses and economic activities.” 

The country could benefit from more robust tax evasion prevention and reforming or repealing laws like the aforementioned Promotion and Development of Exports Law, which only serve predatory investors. Addressing the judicial system which routinely fails to hold employers accountable for human rights violations would also be a step in the right direction. Oversight organizations can provide the checks and balances necessary to ensure that foreign investment benefits the Guatemalan people. The government’s Human Rights Commission, non-governmental organizations like the Association of Women in Solidarity (AMES), and trade unions like the General Confederation of Workers of Guatemala (CGTG) are already at work.


Source: AMES Guatemala. AMES protests against labor rights violations and sexual violence


Organizations that educate workers and push for environmental and labor law compliance like AMES, CGTG, and the Maquila Solidarity Network are indispensable in the face of greater foreign investment. Transnational solidarity is going to be as important as ever, given that the country’s President continues to pass legislation that attacks oversight organizations and “creates risk of persecution based on dissent.”

Rosalba Izaca of Erasmus University Rotterdam believes that “a genuinely open conversation about which trade policy a society wants and why, about trade, not as an end in itself but as a means to an end” is an important step towards real democratization and sustainable development. Grassroots organizations like the Maquila Solidarity Network and AMES strive to do just that, including those most impacted by foreign investment and trade. 

Maria Hernandez Pinto | Pitzer College
Maria is pursuing a Bachelor of Arts in Political Science and Foreign Languages at Pitzer College, where she is a rising junior. Born in Guatemala to Colombian parents, Maria has always been deeply invested in Latin American issues. She is passionate about Latin American politics, human rights, and community development. She is looking forward to using storytelling as a tool for advocacy while writing about Ecuador, Guatemala, and Venezuela as a Latin American Correspondent. Maria is excited to highlight and learn from the important work being done by local organizations in the region and hopes to bring Latin American voices to the forefront.