Escuintla, a strategic region in Guatemala, is undergoing a transformation to enhance its economic competitiveness and sustainable development. While historically recognised for its agricultural sector, particularly sugar cane and bananas, the region is now seeking to diversify its economy and attract investment. Despite its potential, Escuintla faces challenges such as infrastructure limitations, skills gaps, and environmental concerns. Leveraging its strategic location, abundant natural resources, and growing industrial sector, particularly with Special Economic Zones (SEZ) like the one within the Synergy Industrial Park, Escuintla aims to become a regional hub for manufacturing, logistics, and renewable energy. The Industrial Park can play a crucial role in improving the quality of life for local communities by providing access to essential public services like education, healthcare, and housing. By addressing these challenges and capitalising on emerging opportunities, the Escuintla region can benefit from inclusive and sustainable economic development.
Rethinking Regional Attractiveness in Escuintla, Guatemala
Abstract
Based on available and sometimes limited information, Escuintla’s Regional Attractiveness Compass1 highlights its strong economic performance within Guatemala while displaying its challenges in international positioning. Limited cultural infrastructure and poor connectivity hinder its tourism and investment appeal, as evidenced by inadequate road infrastructure and limited internet access. Resident well-being is marked by high life satisfaction but offset by security concerns, limited healthcare access and low levels of tertiary education. While afforestation efforts are notable, low renewable energy use and protected land coverage raise sustainability concerns. Addressing these gaps could enhance Escuintla’s attractiveness for investors, visitors, and talent.
The OECD Regional Attractiveness methodology2 considers global engagement beyond international connections and economic factors alone. It encompasses more than 60 indicators, covering 14 dimensions across 6 domains (Economic attraction, Connectedness, Cultural and visitor appeal, Natural environment, Resident well-being, Land resilience and housing) to create a region's attractiveness compass.
The Compass guides regional policymakers to:
Assess their region’s comparative strengths and weaknesses in the new global environment.
Identify priority attractiveness drivers to enhance their region’s future competitiveness.
Monitor and evaluate the impact of regional development policies.
Learn from other regions’ position in globalisation.
Source: OECD Regional Attractiveness Database.
For Guatemalan departments, only a selection of the 60+ indicators of the OECD Regional Attractiveness Database are available, which affects the composition of the Compass. The most significant data gaps are in the Economic Attractiveness domain (Economy, Innovation and Entrepreneurship, and Labour Market) and Land Resilience. As a result, Escuintla’s performance in these areas may appear exceptionally strong or weak compared to OECD and Guatemalan regions, but this is driven by the limited availability of indicators per dimension, rather than reflecting a comprehensive assessment of the department’s attractiveness. Acknowledging the different priorities and characteristics between Guatemala and some OECD countries, and thus to ensure a more context-sensitive benchmark, the following analysis compares Escuintla not only to all OECD regions but also to departments and regions in OECD LAC member countries, including Chile, Colombia, Costa Rica, and Mexico.
Economic attractiveness – Escuintla is one of Guatemala’s strongest performers in economic attractiveness, with a relatively high economic output, positive business climate perceptions, and strong employment levels compared to the national average, yet it lags behind OECD regions across key indicators. The department has the second highest GDP per capita in the country, after the department of Guatemala and is in line with the median of OECD LAC regions,3 but remains well below the overall OECD median, equivalent to the bottom 11% of OECD regions. Escuintla also leads Guatemala in perceived entrepreneurial opportunities, with 50.7% of residents considering it a good place to start a business – significantly above the national average (36.7%) but still below the OECD (61%) and OECD LAC (69.1%) benchmarks. In terms of employment, Escuintla ranks third nationally, with an employment rate of 63.7%, equivalent to the top 15% of OECD regions in this dimension. Limited subnational data availability in this domain constrains the in-depth analysis of Escuintla’s economic attractiveness and its international positioning, with no data, for instance, on innovation, sectoral specialisation, labour productivity, and (youth) unemployment rates.
Cultural and visitor appeal – Low tourism activity and poor cultural infrastructure compared to OECD regions limit Escuintla’s international appeal. The department ranks among the top five in Guatemala for net occupancy rates in hotels and similar accommodations (60%), exceeding both the national and OECD averages. However, this high occupancy rate may reflect the relatively low availability of tourist accommodation beds (12.2 per 1 000 inhabitants), which, while in line with the national average, remains far below OECD (50.2) and OECD LAC (25.9) levels. The department ranks relatively well within Guatemala for tourism activity, with 446 overnight stays per 1 000 inhabitants, surpassing the national median of 227. However, this figure remains far below the OECD average (4 040), positioning Escuintla among the bottom 1% of OECD regions and the bottom quartile among OECD LAC regions. Similarly, the department's cultural infrastructure remains underdeveloped, with the density of museums, galleries, and theatres on average 80% lower than OECD LAC regions and ranking among the bottom 5% across all OECD regions. These gaps in tourism and cultural infrastructure may limit Escuintla's ability to expand its visitor economy and enhance its international attractiveness.
Land resilience and housing – Escuintla faces housing affordability challenges despite relatively high satisfaction with housing costs, while land resilience cannot be comprehensively assessed due to limited data availability. The department has one of the lowest levels of land burned in the country, with 0.044% of its total area affected by wildfires in the years 2019-2023 – placing it among the five least impacted departments and far below the national (0.187%) median but above other OECD (0.022%) regions. However, a full assessment of land resilience is limited by the lack of internationally comparable data at subnational level. In terms of housing, Escuintla’s residents report higher satisfaction with housing affordability (69.8%) than both the national (67.2%) and OECD (49%) averages, ranking among the top 10% with the highest satisfaction levels among OECD LAC regions. Yet, 45.5% of the population reports not having enough money for housing, a figure lower than the national average (48.9%) but significantly above the OECD (16.7%), and OECD LAC (32.7%) benchmarks, pointing to persistent affordability concerns across the country. Housing expenses as a share of household’s income (25.6%) are largely in line with national (25.2%) and OECD (23.5%) levels, suggesting that while costs are relatively aligned with domestic and international standards, financial strain remains high for many households.
Resident well-being – Escuintla shows strong social interactions and relatively high life satisfaction but faces challenges in safety, civic participation, and healthcare availability. The department ranks among the top three in Guatemala for life satisfaction (6.85 on a scale of 1 to 10), exceeding the national (6.33), OECD (6.54), and OECD LAC (6.14) averages. Similarly, 89.1% of residents express satisfaction with opportunities to meet people and make friends, above national (87.4%), OECD (80.7%), and OECD LAC (82.9%) benchmarks. However, Escuintla records the highest homicide rate in the country (43 intentional homicides per 100 000 inhabitants), nearly triple the OECD LAC median (18.1) and far exceeding the national (16) and OECD (7.9) levels. Moreover, only 53.7% of residents feel safe walking alone at night, below the national (59.1%) and OECD (69.5%) benchmarks, but slightly above the OECD LAC average (48.6%). Civic engagement is also low, with a voter turnout of 54% in general elections, placing Escuintla in the bottom three departments nationally and well below the OECD (67.6%) average. Education outcomes remain difficult to assess due to limited internationally comparable subnational data, with only 3.4% of the population holding a tertiary degree, in line with the national level but far from the OECD (33.7%) and OECD LAC (20.2%) averages. Moreover, access to healthcare services remains limited compared to OECD standards, with only 7 doctors and 0.7 pharmacies per 10 000 inhabitants - both above the national median (2.9 doctors and 0.2 pharmacies) but far below the OECD benchmarks (32 doctors and 1.7 pharmacies). In comparison with OECD LAC regions, doctors’ availability (18 per 10 000 inhabitants) is also markedly lower while the number of pharmacies is aligned. This limited availability is reflected in the low satisfaction with healthcare quality, with only 55% of residents expressing satisfaction, below both the national (57.5%) and OECD (65.2%) averages, but above OECD LAC regions (45.7%). Healthcare challenges are compounded by poor air quality, with Escuintla ranking among the top three most polluted departments in Guatemala and in the top 1% across the OECD.
Connectedness – Escuintla exhibits strong digital social engagement but faces significant challenges in internet access and road infrastructure. The department ranks second in Guatemala on the Meta Social Connectedness Index, and positioning among the top 5% of OECD regions, suggesting strong digital social interactions with other national and international regions. However, broadband access remains limited, with only 15.1% of households connected, aligning with the national median but far below the OECD (85%) and OECD LAC (49%) medians. In transport, public satisfaction with the quality of public transport reaches 76.6%, surpassing both the national (74.6%) and OECD (60.9%) averages. Nevertheless, road infrastructure remains a considerable barrier to mobility and investment, with a road density of 0.79 km/km², slightly below the national median (0.82) and significantly lower than the OECD median (0.99). Beyond low density, the poor quality of the road network further exacerbates accessibility issues, as only 45% of roads are estimated to be paved, while the rest are unpaved dirt roads, making transport less reliable (SEGEPLAN, 2024[1]). The adoption of sustainable transport is also limited, with electric and hybrid vehicles accounting for an almost negligible share of the vehicle fleet (0.0004%) – consistent with the country's overall low uptake but substantially below the OECD median (2.6%). These gaps in transport infrastructure and digital connectivity limit Escuintla’s attractiveness for businesses, talent and visitors, despite its strong digital social engagement (OECD, 2023[2]).
Natural environment – Escuintla’s natural environment presents a mixed picture, with notable strengths in reforestation and afforestation efforts but significant weaknesses in protected land coverage and renewable energy generation. The department has experienced one of the most significant increases in tree cover in Guatemala, expanding by 56.8% between 2006 and 2020 – more than triple the national average (17.8%) and among the top three highest rates in the country. However, despite this growth, Escuintla still has one of the lowest tree cover rates in Guatemala (11% of total land), ranking 19th out of 22 departments and far below both the OECD median (34%). Similarly, only 1.9% of its land is designated as protected areas, ranking again fourth lowest nationally and significantly trailing the OECD median (17.9%). These gaps in forest coverage and protected areas may pose challenges for long-term biodiversity conservation and sustainable land management in the region. In terms of energy transition, Escuintla lags significantly behind both national and international benchmarks. Renewable sources account for only 9.7% of electricity generation, placing the department well below the national (54.7%) and OECD averages (48.9%).4 Moreover, many municipalities face issues with inadequate wastewater treatment and solid waste disposal, contributing to pollution risks, particularly during periods of heavy rainfall and soil saturation. In Escuintla City, the existing municipal treatment plants provide only partial coverage, leaving large portions of the population without adequate wastewater management. The lack of a sanitary landfill exacerbates the problem, as the authorised waste site operates without sustainable management practices, leading to the proliferation of illegal dumpsites. These informal disposal sites pose contamination risks and serve as breeding grounds for disease vectors, further straining local public health and environmental sustainability (SEGEPLAN, 2024[1]). This wastewater and waste management issues as well as the heavy reliance on non-renewable energy sources contrast with public perceptions of environmental efforts: 63.6% of Escuintla’s population expresses satisfaction with environmental preservation efforts, ranking it among the top 15% OECD regions and above the national (59.6%) average. While this suggests that residents may not perceive major environmental issues, the department’s low reliance on renewables and limited protected land coverage could undermine long-term sustainability.
A clear understanding of regional attractiveness drivers is essential for identifying a region’s strengths and opportunities and designing effective economic development strategies. OECD analyses, including the Rethinking Regional Attractiveness study and econometric causality analysis, highlight key factors shaping attractiveness in member countries. These findings indicate that FDI tends to concentrate in regions with strong digital infrastructure, leading universities, and well-connected transport networks, particularly rail and air links. Talent attraction, on the other hand, is closely linked to affordable housing, high-speed internet, and the presence of foreign students. However, the extent to which these drivers apply to Latin America – and Guatemala, including Escuintla – depends on the availability and quality of regional data. Further exploration of subnational indicators may be necessary to capture local dynamics more accurately.
Source: OECD (2023[3]).
In the specific context of Guatemala, and particularly Escuintla, understanding the national investment landscape is paramount. This includes acknowledging the challenges posed by low overall public and private investment levels, structural weaknesses, and infrastructure gaps. Simultaneously, the presence of key assets like Escuintla's port and highways, as well as the availability of higher education institutions, schools, and technical training centres like INTECAP, present unique opportunities. Equally critical is understanding the national labour market and talent context, as talent and skills development are fundamental pillars of regional development, shaping the economic trajectory of Guatemala’s diverse regions. This section explores how these elements interact to shape the region's appeal to both investors seeking viable opportunities and skilled talent looking for promising career paths. However, it is important to note that territorialising specific drivers for Escuintla presents a significant challenge due to the current lack of detailed regional-level data. Therefore, while a territorial lens is imperative for a nuanced understanding, the analysis herein will necessarily be conducted at a broader national level, acknowledging the need for enhanced regional data collection to inform future policy and investment decisions.
Investment in Guatemala and the case for FDI in regions
Investment is a fundamental driver of sustainable development, and if managed properly, it can be a source of balanced progress across regions within a country. In Guatemala, low levels of total investment both public and private and relatively low foreign direct investment (FDI) hinder the country’s ability to finance infrastructure (with the risk of a spiral of under-investment, since the lack of infrastructure is a brake on attracting private investment), enhance productivity, and promote long-term economic growth and resilience. This section examines Guatemala’s performance in critical areas related to investment, highlighting the implications for regional development and key policy areas to unlock sustainable and inclusive development. Total investment levels – including both domestic and foreign, public and private – remain low in Guatemala, reaching 14% of GDP in 2022. This is one of the lowest levels of investment as a share of GDP observed across Latin American and the Caribbean (LAC). It is also below the average levels of investment for high-income economies, suggesting that convergence with those countries will be difficult to achieve (Figure 3.3).
Note: As in IMF (2023[4]), data for LAC and high‑income economies corresponds to weighted averages. Investment, defined as gross capital formation, is measured by the total value of the gross fixed capital formation and changes in inventories and acquisitions less disposals of valuables for a unit or sector [SNA 1993]. Investment is expressed as a ratio of total investment in current local currency and GDP in local currency.
Investment levels in Guatemala have been persistently low over time. In the last decade (2013-2022) total investment levels were on average 15% of GDP. This highlights that the reasons behind low investment are structural and diverse, including institutional weaknesses, limited access to finance, infrastructure gaps, and an inadequate competition framework (IFC, 2023[6]). Micro, small, and medium enterprises (MSMEs) often face difficulties in securing financing due to stringent lending criteria and limited financial products tailored to their needs. Likewise, deficiencies in transportation, energy, and communication infrastructure increase operational costs and reduce competitiveness for businesses. Finally, weak governance structures, corruption, and ineffective dispute resolution mechanisms create an uncertain business climate, deterring investment and complicating business operations (IFC, 2023[6]). There is scope to strengthen public investment, especially in infrastructure in strategic sectors.
The private sector is the main driver of investment in Guatemala. In 2019, it represented almost 90% of total investment, well above the average for LAC countries, at 78%, and for OECD countries, at 84% (Figure 3.4). This highlights the important role of private investors in driving economic activity in this country, but also the fact that there is scope for increasing public investment, as well as exploiting the untapped potential of public-private partnerships (PPPs) as a way to address important investment gaps, notably in infrastructure.
Note: The OECD average is a simple average of all member countries in 2019. The LAC average is a simple average of the countries for which data were available in the dataset: Antigua and Barbuda, Argentina, Bahamas, Barbados, Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Grenada, Guatemala, Guyana, Haiti, Honduras, Mexico, Nicaragua, Panama, Paraguay, São Tomé and Príncipe, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Uruguay and Venezuela. See the Methodological Annex at the end of the chapter for general government and private investment calculations. The shares of total investment corresponding to private and general government investment were calculated taking into consideration the respective percentages of GDP represented by each category.
Source: (OECD et al., 2024[7]).
Macroeconomic stability, underpinned by low fiscal deficits and low public debt, provides a solid ground for expanding public investment in Guatemala without jeopardising medium-term fiscal sustainability (IMF, 2024[8]). This should serve the country to enlarge its growth potential. Indeed, while private investments are important for short-term growth, public investment is crucial for building long-term infrastructure and services that benefit society as a whole. Both public and private investment would also benefit from achieving the “investment-grade” rating, providing access to capital in more favourable terms (Box 3.1).
In fact, public capital spending appears to have a positive and permanent multiplier effect on GDP that is sustained through private investment and FDI inflows. One percent increase in public capital can increase GDP by 0.3% in the short term and by 1% in the long term. Also, a one percent increase in public investment spending increases private investment by around 0.4% in the short term and almost 2% in the medium and long term. Furthermore, FDI cumulative inflows increase by about 0.5% of GDP (IMF, 2023[4]).
Achieving an investment-grade credit rating would be a significant milestone for Guatemala, offering numerous economic advantages. First, it could provide enhanced access to international capital markets, under more favourable terms. This translates to lower borrowing costs for the government, allowing for increased investment in critical infrastructure projects, social programmes, and other initiatives that can drive economic growth and development.
Similarly, many institutional investors and sovereign wealth funds have mandates that restrict investments to countries with investment-grade ratings. Therefore, achieving this status would broaden Guatemala's investor base, attracting more FDI. This influx of capital can lead to job creation, technology transfer, and overall economic diversification.
An investment-grade rating would also signal to the global financial community that Guatemala possesses a stable and reliable economic environment. This perception reduces risk premiums on loans and bonds, decreasing the cost of capital also for the private sector, hence stimulating business expansion and entrepreneurship.
In July 2024, Moody’s confirmed Guatemala’s sovereign rating in “Ba1” with a stable outlook, which is just one notch below the investment grade. In early 2025, Fitch Ratings confirmed the “BB” rating shifting the outlook from “stable” to “positive”, hence also very close to the investment grade. These are positive signs encouraging macroeconomic, regulatory and institutional efforts to continue strengthening credit ratings in the country and inspiring trust to its partners.
Sources: Fitch Ratings (2025[9]) and Ministerio de Finanzas Públicas (2025[10]).
Guatemala’s public investment in infrastructure is particularly low, below 1% of GDP. This represents one of the lowest levels in the LAC region, the second lowest in Central America – only above El Salvador (Figure 3.5), and it is well behind the levels observed at the OECD. This explains the persistently large infrastructure gaps in Guatemala. Other factors have also been documented as driving the infrastructure gap in the country, including lack of strategic planning and institutional co-ordination; insufficient analysis and diagnostic on current and future infrastructure needs; lack of technical human capital; presence of corruption and weaknesses in the public procurement system; among others (Consejo Económico y Social, 2022[11]).
Improving transport infrastructure remains one of Guatemala’s main development challenges, with significant implications for investment attraction and for regional development. Most public sector investment in infrastructure is directed to roads (54% of total), while 17% goes to water and sanitation (Figure 3.6). However, transport connectivity gaps are significant, and rural access to the road network is very limited. According to recent estimates, to close the gap in rural access to roads, Guatemala requires a total investment of approximately USD 5.3 billion annually until 2030, including both new infrastructure and maintenance of existing assets (IDB, 2021[12]). The limited road network coverage restricts the population's access to markets and public services, especially in the poorest regions. Businesses located outside the capital also face transportation inefficiencies, which eventually have an impact on investment decisions. Additionally, climate events have direct impacts on roads and transport infrastructure in Guatemala, underscoring the importance of investing in resilient infrastructure and in maintenance.
Regarding logistics, Guatemala shows weak performance, both compared to Central American and to LAC countries. In 2023, Guatemala scored 2.6 in the World Bank’s Logistics Performance Index, below the LAC average of 2.69, being the second lowest performer in Central America, only above Nicaragua, and ranked number 88 among 139 countries in the world (World Bank, 2023[13]).
Note: The data include the latest available year, 2023.
Source: Based on (Infralatam, 2025[14]).
Note: The data include the latest available year, 2023. Sectors under consideration (including water, transportation, energy and telecommunications) centre primarily around infrastructure services and essential utilities. As such, infrastructure investment related to oil and gas production, oil refinement and petrochemistry is excluded. Social infrastructure is also excluded (e.g. schools, hospitals, dwellings and security infrastructure). Telecommunications represents fixed‑line telephone services, mobile and satellite telephony, and data and internet connection services. The other sectors are subdivided into subsectors. Water includes water and sanitation (drinking water supply through the grid, provision of sanitation services); flood defences (urban and rural projects for mitigating the effects of flooding); and irrigation (facilities and systems of artificial irrigation). Transport includes roads and paths; urban mass transportation; railway transportation (infrastructure and rolling stock); air transport; and fluvial and maritime transportation. Energy includes generation, transmission and distribution of electricity, and transmission and distribution of natural gas.
Source: Based on Infralatam (2025[15]).
Infrastructure gaps limit households’ access to electricity, water and sanitation, particularly in rural areas, with implications for people’s well-being as well as on private sector development and performance and, consequently, on investment decisions. Overall, access to these basic services in Guatemala remains below the LAC averages, both in urban and rural areas, and especially for sanitation services. In rural areas, only 40% of households have access to sanitation services (vs. 67.2% in urban areas), while 78.1% (94.2%) and 81.6% (90.8%) have access to electricity and water, respectively (Figure 3.7).
Source: Based on CEPALSTAT (2025[16]).
The approval in late 2024 of Decree 29-2024, known as the Priority Road Infrastructure Law, marks a significant step toward addressing persistent challenges in road infrastructure. Among other aspects, the law creates a directorate within the Ministry of Infrastructure, supervised by a board of directors to provide checks and balances in decision-making. It also prioritises strategic road projects, emphasising regional connectivity and trade facilitation through lower transport costs. The law enables performance-based contracting for road operations, making the developer responsible for maintaining and repairing the network to keep it in optimal condition. It also modernises right-of-way regulations by protecting property rights while declaring public utility based on studies, reducing project risks through legal certainty and ensuring that feasibility costs are paid only when projects are executed.
Neither private nor public investment alone will be enough to bridge the important infrastructure gaps in Guatemala. Indeed, fostering Public-Private Partnerships (PPPs) will be essential to boost infrastructure investment, by mobilising private sector capital to complement the limited public funds available for large-scale projects. However, PPPs have been underutilised in Guatemala. Since the enactment of the Law of Partnerships for Economic Infrastructure Development (Decree No. 16-2010), Guatemala has faced difficulties in effectively implementing PPP projects, with only one project (the Escuintla-Puerto Quetzal toll highway) approved to date.
As of early 2025, a reform to the Law of Partnerships for Economic Infrastructure Development was under discussion. This reform seeks to expedite project approvals by Congress and broaden the scope of sectors eligible for PPPs, including education, water, transport systems, energy, waste management, ports and airports. These changes are intended to streamline bureaucratic processes and enhance the efficiency of infrastructure development.
Guatemala faces challenges in several key areas that determine its capacity to implement successful PPPs (Figure 3.8). These include weaknesses in regulations and institutions, project preparation, risk management, financing, and performance evaluation. Strengthening these components, particularly regulatory frameworks, project planning processes, and financing mechanisms, will be critical for improving Guatemala's readiness for PPPs. Enhanced institutional capacity and better contract management practices are also needed to create a more favourable environment for private-sector participation and ensure that PPP projects are executed efficiently and sustainably (OECD et al., 2023[5]).
Note: Scores from 0 to 100, where 100 = best. Countries are ordered according to their overall score, from highest to lowest.
Source: OECD et al (2023[5]).
Infrastructure gaps prevent Guatemala from fully leveraging its strategic access to the Atlantic and Pacific Oceans. The role of ports is crucial in this respect. Specifically, Puerto Quetzal is a strategic infrastructure asset for Escuintla in particular – where it is located – and more broadly for Guatemala’s insertion into the global economy. In fact, it is the largest maritime port in Guatemala, handling a significant share of the country’s imports and exports. However, it faces significant challenges that require important investments and reforms (Box 3.2).
Ports play an undeniably crucial role in regional attractiveness, serving as vital hubs for international trade and integration. Globally, around 90% of trade is carried out by sea, with ports acting as the primary connection between production and distribution networks (OECD, 2023[2]).
In the context of Escuintla Puerto Quetzal, located on Guatemala’s Pacific coast, stands out as the region's main gateway to international markets, significantly enhancing its attractiveness for investors and businesses. Managed by Empresa Portuaria Quetzal, a decentralised and autonomous state entity with its own legal personality, the port operates under governance structures linked to the Ministry of Communications, Transport, and Public Works (Ley Orgánica de la empresa Portuaria Quetzal, 1985[17]). The port’s board president is appointed by the Guatemalan President, who also selects the general manager.
Since its establishment in 1983, Puerto Quetzal has operated under a mixed model that allows private entities to provide cargo and ship services at regulated rates. While this system aims to improve efficiency, recurring concerns persist about customs-related opacity and delays. Despite reforms by the Tax and Customs Authority (SAT) to address these issues through interagency inspections, transparency and accountability challenges remain (United States Department of State, 2024[18]).
Infrastructure constraints also limit the port’s capacity to handle increased maritime traffic and larger vessels. Expansion has been minimal since its creation. To address this, President Bernardo Arévalo announced in February 2025 a new expansion project, supported by the U.S. Army Corps of Engineers, which includes extending terminals and adding berths for larger ships (Prensa Libre, 2025[19]).
Beyond the coast, Puerto Quetzal has the potential to stimulate broader development throughout Escuintla, including inland areas where key urban centres are located. Following similar approaches in other countries, such as Colombia, the port can serve as a lever for regional growth, investment attraction, and job creation if tied to broader development strategies (OECD, 2023[20]).
To fully leverage its role, the port must strengthen collaboration with Escuintla’s industrial parks, such as the Sinergy Industrial Park. Establishing a formal mechanism for dialogue between port authorities and the private sector would help address logistics and customs bottlenecks. International models show that ports with stakeholder representation – such as Antwerp, Santos, and Jawaharlal Nehru – benefit from more responsive governance and efficient operations (OECD - International Transport Forum, 2017[21]).
Enhancing transparency, upgrading infrastructure, and improving public-private co-ordination will be essential for Puerto Quetzal to fulfil its role as a driver of economic development and to boost Escuintla’s overall regional attractiveness.
FDI is a fundamental and insufficiently tapped driver of development
Guatemala has traditionally shown low levels of FDI inflows in the last decade (2014-23), with an annual average of 1.83% of GDP. This is below what is observed in the Latin American and the Caribbean average, at 3,4%, and represents the lowest level of annual average FDI levels in the period 2014-23 within the DR-CAFTA member countries, which had an average of around 4% of GDP (Figure 3.9).
Source: Based on World Bank (2025[22]).
Since 2020, FDI has been concentrated in three sectors: 1) Financial and Insurance Activities, representing 29.88% of FDI in 2023, with an annual growth rate of 10.77% over the last three years; 2) Trade and Vehicle Repair, accounting for 20.53% of FDI in 2023, with an annual growth rate of 29.45% during the same period; 3) Manufacturing Industries, making up 19.54% of FDI in 2023, with an annual growth rate of 8.04% in recent years.
Guatemala has made FDI attraction a priority for the next years. In this context, a new Strategy for the Attraction of Foreign Direct Investment 2024-27 was launched in 2024. This Strategy seeks to position Guatemala as a top investment destination, making this a driver of sustainable economic development, job creation, and export diversification within a framework of collaboration and transparency. Specifically, this Strategy aims to boost FDI while improving the pool of skills of the workforce, promoting the creation of decent jobs, diversifying the export basket by leveraging existing trade agreements, and promoting investments that comply with environmental regulations and contribute to meeting the country’s climate objectives (Ministerio de Economía, 2024[23]). In terms of countries of origin of FDI, since 2020 there has been a gradual shift towards Central American countries, and in 2023 43.7% of FDI inflows came from Central America and the Dominican Republic, while the rest comes from outside this region, mostly from the United States (15.4%) and Mexico (14.9%) (Ministerio de Economía, 2024[23]).
The Strategy for Attraction of FDI places emphasis in several sectors: in the short term, it calls for a focus on sectors of proven success, including processed foods, apparel and textiles, information and communication technologies (ICTs), and contact centres/BPOs. In the medium and long term, it aims to create the conditions to attract FID in in more advanced sectors, such as electrical-electronic (auto parts), healthcare services, biotechnology, medical devices and equipment, and electronic components (Ministerio de Economía, 2024[23]).
FDI inflows in Guatemala have been mostly concentrated in the Department of Guatemala and a few other departments. While FDI can be a source of regional development, it can also exacerbate territorial disparities, especially when it is highly concentrated in specific areas. In Guatemala, in the most recent period (2020-24), FDI projects announced, measured by capital expenditure, were mostly focused on the Departments of Guatemala (50% of total), Escuintla (18%) and Petén (8%) (Figure 3.10, Panel A). Based on the number of jobs created by these investments in the period 2020-24, the highest impact took place in the Department of Guatemala (55% of all jobs created), followed by Escuintla (14%) and Petén (2%) (Figure 3.10, Panel B). This suggests that FDI coming to the Department of Guatemala had a larger impact in terms of job creation than in other Departments (i.e. each USD invested was able to create more jobs than in other Departments).
Note: This reflects data associated with FDI announcements, as presented in the FDI markets database.
Source: Based on FDI Markets, 2025.
FDI can have a significant impact on various development dimensions, including in fostering productivity, innovation and R&D. This is observed in Guatemala, as well as in several LAC countries, where foreign firms outperform domestic firms in terms of productivity, product innovation, and R&D investment (Figure 3.11). This suggests that there is a significant opportunity for knowledge and technology spillovers from foreign to domestic firms. Specifically, the difference in performance between foreign and domestic firms in terms of labour productivity is not as pronounced as it is for innovation and R&D, which may indicate that while foreign firms contribute to innovation, they are not as heavily involved in building local capabilities and human capital (OECD et al., 2023[5]). This suggests that there is scope to maximise the impact of FDI on labour productivity and on the development of local capacities, by fostering collaboration with SMEs to enhance business linkages and by creating more robust innovation ecosystems (OECD et al., 2023[5]).
Note: In the figure, the orange (blue dot in the case of Guatemala) dots depict the estimation of the indicator while the dash lines represent the corresponding confidence interval. If the value is >0, foreign firms perform better than domestic firms. Based on 2019 data or the latest. For methodological details, www.oecd.org/fr/investissement/fdi-qualities-indicators.htm.
Source: OECD et al (2023[5]).
Policies to enhance regional attractiveness in Escuintla
Regional economic hubs and growth poles
In response to persistent territorial disparities, many governments are adopting place-based policies to strengthen regional competitiveness and productivity. A central pillar of these efforts is the development of regional economic hubs or ‘growth poles’ – geographic areas with the potential to attract investment, generate employment, and drive income growth through agglomeration economies (World Bank, 2013[24]).
These strategies require strong collaboration between public and private actors and must be underpinned by comprehensive development plans. Their successful implementation depends on good governance, careful site selection, and alignment between national and local priorities. However, they often face challenges such as limited institutional capacity and insufficient financing (Frick and Rodríguez-Pose, 2025[25]).
Escuintla, as one of Guatemala’s key intermediary cities, is well-positioned to lead such a strategy. As the capital of its department and the third most competitive city in the country (Fundesa, 2024[26]), it can serve as a catalyst for regional development. Its growing industrial base, combined with its strategic location near key transport corridors, offers significant potential for long-term investment, innovation, and job creation (López, 2021[27]).
To realise this potential, Escuintla’s growth pole strategy should build on local strengths – such as agro-processing, logistics, and renewable energy – and leverage targeted investments in economic zones. These zones can help stimulate innovation, integrate SMEs into value chains, and attract skilled workers. As shown in the “Regional Attractiveness Compass (see Chapter 2), such sectors are closely aligned with Escuintla’s comparative advantages.
Escuintla’s The Departmental Development Plan (PDD) identifies key territorial priorities, including agriculture and agro-industry (SEGEPLAN, 2021[28]). However, the plan could benefit from a clearer strategy for engaging the private sector, particularly around industrial parks and SEZs. Complementary measures – like investment attraction and facilitation plans (AIE), land-use mapping, and improved licensing procedures – can support a more coherent approach.
The emergence of new forms of SEZs across OECD countries are increasingly used to enhance regional competitiveness. When well-designed, they not only attract FDI but also support SMEs, knowledge transfer, and inclusive development. However, their success depends on effective governance to ensure benefits extend beyond the zone and align with regional goals (OECD Cogito Blog, 2025[29]).
An example from Colombia illustrates how national and regional strategies can be better aligned. Under its “Regionalisation Strategy”, Colombia’s Internationalisation Mission focused trade and investment efforts in 11 departments grouped into four priority regions, strengthening co-ordination across levels of government (OECD, 2023[30]) (Box 3.3).
The Internationalisation Mission is an initiative that seeks to connect Colombia with the world, with the purpose of making internationalisation a long-term strategy that contributes to growth through international trade, people's talent, technological flows, global value chains, and the utilisation of the country's natural resources. In other words, it seeks to close the country's technological gap with respect to world leaders through internationalisation. This mission established a series of recommendations and policy guidelines to contribute to the effective integration of the country into the global economy, promoting the increase, diversification, and generation of greater added value in exports, taking advantage of the new dynamics and realities of international trade. To implement the recommendations of the Internationalisation Mission and for the regions to drive their development through internationalisation, the Policy for Internationalisation for Regional Productive Development was approved in May 2022.
These guidelines and recommendations are being implemented through 3 pillars: (1) a short-term plan consisting of 166 milestones, (2) a CONPES document on internationalisation, and (3) a Regionalisation strategy for the Internationalisation Mission.
This last point seeks to apply the recommendations of the Internationalisation Mission at the subnational level (departments), respecting their autonomy and the efforts they are already making in terms of internationalisation. To this end, it seeks to: (1) deepen departmental internationalisation plans, fostering region-nation collaboration on sectoral and cross-cutting issues, (2) give prominence and co‑responsibility to regional actors in achieving national goals in internationalisation, (3) promote articulation between local actors and between them and national actors to work on internationalisation efforts, and (4) compare and monitor departmental internationalisation efforts.
Within this initiative, which seeks to regionalise the internationalisation mission, 11 departments were prioritised, organised around 4 Priority Internationalisation Regions (REGIPs): (1) East - Santander and North Santander -, (2) Caribbean - Atlantic, Bolívar and Magdalena -, (3) Coffee Axis and Valley - Caldas, Risaralda, Quindío and Valle del Cauca - and (4) Greater Tolima - Huila and Tolima -.
Notes: The CONPES document presents the national policy for the internationalisation of the Colombian economy, which is based on the guidelines of the Internationalisation Mission and other related policies approved by the National Council for Economic and Social Policy (CONPES). CONPES Document 4085 “Policy for Internationalisation for Regional Productive Development” was approved on 16 May 2022, and incorporates the recommendations of the Internationalisation Mission.
Source: MINCIT (2021[31]).
Nearshoring and friendshoring
As seen in Chapter 2, Global value chains (GVCs) are undergoing major reconfiguration due to rising trade and geopolitical tensions. For instance, the United States, has been increasingly shifting imports away from the People’s Republic of China towards closer or geopolitically aligned partners. This trend, captured by the concepts of nearshoring and friendshoring, has favoured countries in Latin America and Southeast Asia (Bank for International Settlments (BIS), 2024[32]). It is also a strategy largely exploited by Morocco vis a vis European markets (OECD, 2018[33]) (Bank for International Settlments (BIS), 2024[32]).
Guatemala’s geographic proximity to the United States, coupled with its participation in favourable trade agreements like CAFTA-DR (OAS, 2025[34]), positions the country as a strategic location for companies seeking to relocate operations closer to their primary market. However, this opportunity isn't uniform across all the regions; its potential must be carefully adapted to a regional scale to maximise its benefits and ensure equitable development.
Despite growing national attention, the local development potential of nearshoring is often overlooked. To truly harness the regional potential of nearshoring, Guatemala must adopt a tailored approach. This involves identifying the specific strengths and weaknesses of each region and developing strategies that align with their unique characteristics. The Regional Attractiveness Compass can support regions in this process by providing a general position on their current strengths and weaknesses, highlighting key development challenges and areas for improvement, thus allowing for more targeted and effective nearshoring strategies, as seen in the radar for the department of Escuintla (OECD, 2023[35]).
Subnational governments like that of Escuintla can adapt their strategies to promote sectors with comparative advantages – such as agriculture, logistics, and agro-processing – to companies looking to relocate supply chains closer to major markets. Rather than depending on broad national campaigns, Escuintla can tailor messaging around its infrastructure, skilled labour, and strategic location, ensuring the benefits of nearshoring are felt locally (Kimura and Flood, 2025[36]).
According to FUNDESA, Guatemala holds the potential to become a regional nearshoring hub in four key sectors: pharmaceuticals, medical equipment, EMS (electronic manufacturing systems), and BPO (Business Process Outsourcing) (Guatemala Moving Forward, 2022[37]). Escuintla, with its strategic coastal location and developing industrial infrastructure, can capitalise on this trend by focusing on specific sectors. For example, the region's existing industrial parks and logistical advantages make it well-suited to support EMS and medical equipment manufacturing, potentially becoming a key node in the regional supply chain. Furthermore, while BPO is less developed in Escuintla compared to Guatemala's urban centres, targeted investments in digital infrastructure and workforce training could position the region to attract BPO operations, particularly those linked to the manufacturing and logistics sectors already present. Escuintla’s proximity to markets and its industrial base make it a strong candidate for nearshoring investment. By marketing itself as a cost-competitive and sustainable destination, the region could attract significant foreign direct investment (FDI), expand export-oriented industries, and create quality jobs.
Integrating nearshoring priorities into the PDD (Plan de Desarrollo Departamental) would not only reinforce Escuintla's potential role in global value chains but also provide a crucial platform for identifying the region's comparative advantages and aligning them with the needs of international investors. These advantages include Escuintla's robust agricultural production, its well-developed logistics capabilities, and its expanding agro-processing sector. Furthermore, strengthening public-private collaboration, facilitated through the PDD, will be essential for scaling up nearshoring infrastructure and strategically positioning Escuintla as a reliable and sustainable industrial hub.
Relying heavily on nearshoring as a primary economic strategy or supply chain model is not without shortcomings and carries significant risks. In today's unpredictable global landscape, characterised by escalating geopolitical tensions, volatile regional economies, and the growing imperative for sustainable practices, this dependence can expose regions to considerable vulnerabilities. Sudden disruptions from trade disputes, labour market fluctuations, and infrastructure limitations can destabilise economies that have concentrated their development on nearshoring. Moreover, lack of diversification and potential environmental concerns associated with relying on a single nearshore region can further amplify these risks.
Multi-stakeholders co-ordination for place-based investment and development strategies
The attraction of FDI – both in quantity and quality – and the implementation of place-based development policies demands an ambitious and concerted effort across several stakeholders. First and foremost, the government’s Strategy for the Attraction of FDI 2024-27 is a fundamental document to guide the country’s actions in a multi-annual horizon. To be effective, these efforts should be co-ordinated with other existing institutional structures and procedures, as well as with private sector initiatives, to benefit from synergies and make existing efforts better aligned with the broader National Development Strategy.
In recent years, Guatemala has been actively enhancing its investment climate through a concerted effort involving both public and private sectors. The Guatemala Moving Forward (“Guatemala No Se Detiene” in Spanish, also GNSD) plan, established in February 2021, represents a key public-private co-operation agreement designed to stimulate economic growth and job creation by attracting strategic investments. This initiative, which integrates various government agencies, represents a structured approach to fostering collaboration and streamlining investment processes (Guatemala no se Detiene, 2025[38]).
Furthermore, the National Competitiveness Program (PRONACOM), operating within the Ministry of Economy (MINECO), plays a pivotal role in driving national competitiveness and fostering favourable business climate. It drives territorial economic development as a comprehensive strategy to generate growth, employment, and boost local economies in areas with high productive potential. Its approach is based on strengthening strategic sectors and value chains identified in the National Competitiveness Policy and the National Investment Attraction Strategy, through public-private collaboration, talent development, financial inclusion, business strengthening, and the promotion of strategic investments. PRONACOM recognises that competitiveness is built locally by connecting actors, capacities, and investments according to the productive vocations of each territory (PRONACOM, 2018[39]).
To this end, PRONACOM designs and implements collaborative roadmaps developed through local working groups with an economic-productive focus. These groups bring together key stakeholders from the business and public ecosystem of the territory and are aimed at co-ordinating sectoral interventions. The identification of priority sectors and value chains is carried out through a territorial intelligence information system that integrates productive, social, logistical, infrastructure, talent, and financing variables, among others. This tool makes it possible to identify gaps, opportunities, and necessary investments to trigger local development, as well as to highlight each region’s productive vocation and competitive advantages for investment attraction and the design of targeted interventions, aligning public-private efforts toward a more competitive and inclusive Guatemala.
Additionally, PRONACOM works to improve the business and investment climate in the country by facilitating trade, mainly focusing on making processes and procedures for companies to invest in the country more agile, transparent, and efficient. Through its Digital Transformation Strategy, it is working to create a Single Trade and Investment Window that integrates, into a single web platform, procedures related to the Ministries of Economy, Environment, Health, and Agriculture. It also participates in public-private working groups, where it co-ordinates with other Ministries and Institutions to address barriers that hinder the business climate in the country.
Recent governmental actions to bolster investment attraction include the establishment of the National and Foreign Investment Attraction Agency (ProGuatemala), a new public agency dedicated to investment attraction within the Ministry of Economy (MINECO). While its creation is highly relevant for the country's economic agenda, ProGuatemala's precise mission and institutional structure are still evolving, despite being mentioned in the National Strategy for Foreign Direct Investment Attraction (Ministerio de Economía MINECO, 2024[40]). ProGuatemala, as the specialised government agency for investment attraction, is poised to play a key co-ordinating role between institutions, aiming to enhance the capacities of trade advisors in economic promotion efforts.
Invest Guatemala is the primary private investment promotion agency, playing a pivotal role in attracting FDI, improving the business environment, and boosting the country's competitiveness. Invest Guatemala was designed to assist foreign investors throughout their decision-making process. This includes guiding them in choosing Guatemala over other destinations, advising on optimal location strategies, and expediting their establishment within Guatemalan territory. The agency provides a comprehensive range of services, including investment advice, due diligence and risk analysis, assistance in structuring investments, and support in negotiating and closing deals. Beyond attracting foreign capital, Invest Guatemala also actively supports Guatemalan businesses by identifying opportunities for expansion, securing funding, and facilitating access to new markets (Invest Guatemala, n.d.[41]).
Guatemala’s investment promotion ecosystem goes beyond ProGuatemala and Invest Guatemala. It also includes business associations such as VESTEX (apparel and textiles) and CAMAGRO (agriculture), which actively drive investment in their respective sectors with a targeted approach. At the local level, investment promotion is led by entities like the Advisory Body for Investment and Economic Development of Guatemala City (COINCIDE), currently the only one of its kind in the country. This model of organisations focused on investment promotion and local economic development is being replicated in other municipalities, often through municipal offices or within associations of municipalities and local development councils that work to attract and facilitate economic projects in their specific jurisdictions.
Co-ordination across all actors – public and private – working on fostering the attraction of quality investments and in promoting competitiveness in Guatemala is of the essence. These efforts should be aligned with the National Development Plan, hence the important role of SEGEPLAN (Secretaría de Planificación y Programación de la Presidencia) to ensure that investment policies are well connected with the country’s economic, social and environmental objectives. Similarly, the Sistema Nacional de Inversión Pública (SNIPgt) plays a critical role, by setting strategic public investment priorities, and ensuring that critical infrastructure projects (transportation, energy, etc.) are well-planned and efficiently executed (SEGEPLAN, n.d.[42]).
Talent and skill development are fundamental pillars of regional development, shaping the economic trajectory of Guatemala’s diverse regions. A well-educated and highly skilled workforce is crucial for attracting both domestic and foreign investment, as businesses seek locations where human capital can drive innovation and productivity. In Guatemala, where regional disparities persist, fostering a skilled labour force is especially critical to ensuring that investments lead to meaningful development through the creation of quality, formal jobs. Achieving this requires a dual approach: strengthening local education and vocational training systems while also creating conditions that attract specialised talent from abroad when needed, including from the diaspora. By prioritising human capital development, Guatemala can unlock the full potential of its regions, making them not only more attractive to investors, but also creating the right conditions to promote more formal job opportunities and more resilient and prosperous development.
Education and skills remain insufficient in Guatemala, both in terms of educational attainment and learning outcomes, with important variations across regions
Education levels in Guatemala remain insufficient, as illustrated by the still limited access to the education system, particularly in pre-primary, secondary and tertiary. Gross enrolment rates for primary education were 103% in 2023, similar to the level observed a decade before, and close to the average rate in LAC (105% in that same year). However, gross enrolment rates in secondary stood at 48% in 2023 in Guatemala. This is not only significantly lower than the rates observed on average in LAC, at 97%, but it is also below the enrolment rates seen some years before in Guatemala (at an average of 54% between 2015-19). Gross enrolment rates in tertiary education have improved in the last years, and reached 27% in 2023, still significantly below the average level in LAC, at 58% in 2023 (Word Bank, 2025[22]).
Completion rates are also an issue. In 2023 the completion rate in primary education was only 86% compared to an average of 95% in LAC countries. In lower secondary, completion rates in Guatemala stood at 49.7% (well below the average in LAC of 73.8%), and with a significant and steady decline since 2016, when the rate was 63.9% (World Bank, 2025[43]).
Education levels show important variations across territories in Guatemala. For instance, the gross enrolment rate in basic education (between 13 and 15 years old) in Escuintla was 77.4% for girls and 81.7% for boys, significantly below the best performer, the Department of Guatemala (capital region), with levels of 109% and 105.3% respectively, but also well above the worst performer, the Department of Huehuetenango, with rates of 30.8% and 29.2%, respectively (INE, 2023[44]).
In addition to challenges associated with access to – and permanence in – the education system, learning outcomes also remain insufficient. Results from the OECD’s Programme for International Student Assessment (PISA) indicate that the skills of 15-year-old students in Guatemala are relatively weak. In PISA 2022, the country’s scores in mathematics, reading, and science were below the averages for both LAC and OECD countries (Figure 3.12). The gap between Guatemala and the LAC average is equivalent to slightly more than a full year of secondary education, as 20 points in the PISA test are roughly associated to the learning progress acquired in a year of secondary schooling (OECD, 2022[45]).
PISA assess what students know and are able to do in mathematics, reading and science. In Guatemala, as many as 87% of students scored below Level 2 (31% in the OECD average). Reaching Level 2 in mathematics implies that, at a minimum, students can interpret and recognise, without direct instructions, how a simple situation can be represented mathematically. In reading, 68% of students score below Level 2 (26% in the OECD). Reaching Level 2 in reading means that students can identify the main idea in a text of moderate length, find information based on explicit, though sometimes complex criteria, and can reflect on the purpose and form of texts when explicitly directed to do so. Finally, in science, 73% of students in Guatemala did not reach Level 2 (24% in the OECD). Reaching Level 2 in science implies that students can recognise the correct explanation for familiar scientific phenomena and can use such knowledge to identify, in simple cases, whether a conclusion is valid based on the data provided (OECD, 2023[46]).
Note: The LAC average is calculated as a simple average of the Latin American and Caribbean countries that participated in PISA 2022. The OECD average includes Brazil, despite its official accession to the OECD in 2024.
Source: Based on OECD, PISA 2022 Database.
While learning outcomes remain weak, PISA scores reveal that Guatemala has recorded significant improvements in the last years. Among LAC countries participating in PISA, Guatemala recorded the fourth largest overall improvement across all three subjects between 2018 and 2022, after the Dominican Republic, Panama, and Paraguay (Figure 3.13).
Note: This figure shows the average change in student performance in mathematics, reading, and science between 2018 and 2022, based on PISA scores. The values are expressed in score points, where a positive value indicates an improvement and a negative value indicates a decline in average performance across the three subjects.
Source: Based on OECD, PISA 2022 Database.
Guatemala has important territorial disparities in learning outcomes. The National Assessment Graduandos shows performances of students aged around 18 years old in reading and mathematics across Departments in Guatemala. Specifically, in 2024, the Department of Escuintla showed a rate of success in mathematics of 13.2%, slightly above the national average of 12.9%, and a rate of success in reading of 28%, substantially below the national average of 35.5% (Ministerio de Educación, 2024[47]). Differences in performance between public and private schools were notable in Escuintla. In reading tests, the rate of success was 33.2% in private schools and 20.2% in public schools. In mathematics, these were 16.5% and 10.2% in private and public schools, respectively (Ministerio de Educación, 2024[48]).
Labour markets remain largely informal, with particular incidence in less advantaged territories and across less educated populations
Labour markets in Guatemala are characterised by the large presence of informality. This a particularly relevant policy issue for the country, as labour informality is a complex and multi-dimensional phenomenon and is both a cause and a consequence of low development levels in the country. Labour informality erodes tax collection, undermines productivity growth and leaves a large share of the workforce vulnerable to shocks due to lack of social protection. Similarly, informal work perpetuates low productivity levels, unsophisticated economic structures, a low-skilled labour force, and weak labour market institutions and regulations. All these factors, in turn, are key contributors to informality.
Labour informality has been persistently high in Guatemala over time. The rate of informality in 2023 stood at a level of 83.2%, one of the highest in LAC. Importantly, this rate has been persistently high over time, around 80% in the last two decades.
At the household level, as many as 60.8% of households in Guatemala have all their members working informally, significantly above the average LAC rate of 44.1%. Additionally, 21.3% of Guatemalan households have at least one member working informally (Figure 3.14). A household perspective is important for many reasons. For instance, the informality status of working members within a household may have important well-being implications on their dependent members. A household perspective on informality may also cast new light on tackling the vulnerability challenge of informal workers. Moreover, the wide range of formalisation strategies followed by governments, and the detailed policies put in place to tackle labour informality are not always well-known and documented. Finally, a household perspective allows to design better gender policies. Women prevalently hold part-time jobs more than men do within households, and women in informal households are more than twice as likely to hold part-time employment than working women in formal households (OECD/OISS, 2024[49]).
Distribution of the population by level of household informality, latest year available
Source: Based on Key indicators of Informality based on Individuals and their Households (KIIbIH) database.
Informality is directly linked with geographical location. In Guatemala, in 2022, the informality rate in rural areas represented 83.1%, compared to 64.1% in urban areas (Figure 3.15). This urban-rural divide is also observed at the household level.
Source: Based on Key indicators of Informality based on Individuals and their Households (KIIbIH) database.
Strengthening the talent pool will attract investments and provide better employability prospects for workers
Low levels of education and skills significantly influence investment decisions, as businesses often hesitate to invest where they may confront the challenge of finding a workforce with the necessary qualifications to develop their activities. In turn, this leads to a lack of sufficient quality job opportunities, reducing incentives for individuals to acquire higher skills or to remain in the country. Breaking this cycle requires targeted education policies, skills development programmes, and strategic investment incentives to create a more dynamic and competitive labour market.
In Guatemala, firms see the lack of skills of the workforce as an important constraint to their activities. Specifically, as much as 32.5% of firms identified an inadequately educated workforce as a major or severe constraint in 2018, which is above most Central American countries and also above the LAC (22.3%) and world (19.8%) average (Figure 3.16).
Note: Latest year available is indicated next to each country label.
Source: Based on World Bank Enterprise Surveys (database), World Bank (2025[50]).
There are important mismatches in Guatemala between the skills demanded by the private sector and the qualifications of the available workforce. According to the Brechas de Talento study, led by FUNDESA (Fundacion para el Desarrollo de Guatemala) most new job vacancies (97%) are concentrated in operational roles, with a strong preference for candidates with university degrees (60.7%) or diversified education (24.8%). Despite high demand, companies report difficulties finding talent with the right technical skills, citing this as the top hiring challenge (66.2%). Salaries increase notably with higher education and experience, but most opportunities target workers with little to no experience (Fundesa, 2024[51]).
Low skills are a fundamental driver of low-quality jobs, and often education levels and informality are inversely correlated. In Guatemala, informality across the population with no education stands at 87.2%, while it declines to levels of 80.9%, 58.8% and 32.5% for population with primary, secondary and tertiary education, respectively (Figure 3.17).
Source: Based on Key indicators of Informality based on Individuals and their Households (KIIbIH) database.
Policies to better align the supply of skills with labour market demands are therefore needed in Guatemala, including upskilling initiatives. It is important to establish partnerships with secondary and higher education institutions to design training programmes that guide students according to local economic opportunities, adapting to changes based on the characteristics of the human capital required to shape their education. Technical and vocational education and training (TVET) can play a vital role in this context, as it can offer training specifically targeted at fostering employability in sectors where there is a latent demand for workers. In this context, INTECAP is Guatemala’s Technical Institute for Training and Productivity, in charge of TVET, with potential to support competitiveness at the regional level through its upskilling efforts (Box 3.4). Strengthening the national network of technical and vocational training centres could significantly improve access and quality. Expanding TVET coverage in collaboration with INTECAP and other educational institutions and aligning training programmes with the specific needs of local labour markets, should be a strategic priority.
An institutional platform for skills development aligned with industrial policy priorities
The Technical Institute for Training and Productivity (INTECAP) is an autonomous public institution in Guatemala, established in 1972, with a mandate to provide technical and vocational training to workers, students, entrepreneurs, and the general population, based on the needs of the national productive sector. Through a decentralised structure and a network of over 25 training centres across the country, INTECAP responds to the specific skill demands of key economic sectors.
Targeted skills development to support SEZs and industrial competitiveness
INTECAP plays a strategic role by equipping the labour force with the technical skills required to attract investment and enhance competitiveness in SEZ and industrial parks. Its training programmes are aligned with the needs of priority industries such as light manufacturing, agribusiness, information technology, and logistics services – sectors typically represented in SEZs and industrial clusters
INTECAP works in close collaboration with companies operating within these zones, offering dual training schemes, occupational skills certification, and specialised technological services. This engagement allows for continuous alignment of the training offer with real labour market needs. Training is delivered through a variety of modalities, including face-to-face instruction in INTECAP facilities, dual training combining theoretical education with practical experience in companies, and hybrid formats that blend in-person and digital learning. Additionally, mobile training units bring instruction directly to communities and workplaces, while distance learning options via e-learning platforms provide flexible access to technical education. These diverse formats ensure broad access to relevant skills and enhance the adaptability of Guatemala’s workforce.
Source: INTECAP (2025[52]).
In addition to upskilling efforts, there are other important dimensions to support the match between the demand and supply of skills in Guatemala. For instance, programmes to support youth employment can have a meaningful impact on the trajectory of workers, as transitions from the informal to the formal sector tend to be rare, hence the importance of entering the formal labour market from the onset of their professional careers. The programme Mi Primer Empleo, led by the Ministry of Labor and Social Welfare, seeks to promote and support the hiring of young people aged 18 to 24 as apprentices for a period of four months, providing them with practical work experience and training within participating companies. Scaling up this mechanism and complementing it with dual education initiatives to expand its reach and to take into account the specific needs of different regions labour markets in the country could have meaningful effects in the formalisation of young people.
The recognition of prior learning, which certifies skills acquired through non-formal and informal learning, has considerable potential to improve labour market outcomes, and can be adapted to the specific skills demand and supply of different territories in Guatemala. In a context of high informality and self-employment, many workers develop their skills through hands-on experience in the informal economy, including informal apprenticeships, community involvement, and work within family businesses. These acquired skills range from technical abilities to essential personal and social competencies like negotiation, communication, and management. The Sistema de Certificación de Competencias of the Ministry of Education seeks to provide formal recognition and certification to competencies acquired through life experiences, informal work, and non-formal education, with the goal of improving social and labour opportunities. Similarly, INTECAP evaluates and certifies individuals' labour competencies based on national standards, primarily established in collaboration with the country's productive sectors. Establishing stronger certification mechanisms and fostering co-ordination between companies, training centres, and local governments would help ensure that skills development efforts are better aligned with employer needs.
Public employment services can connect job seekers with employers via job fairs, career guidance, and training programmes. In Guatemala, this role is administered by the Ministry of Labor and Social Welfare through the National Employment Service. One of its key tools is the Tu Empleo Portal, an online platform that facilitates job matching and simplifies access to employment opportunities. However, these services face significant challenges, including limited coverage in rural areas, insufficient tailored support for specific regional labour markets. Strengthening regional offices and expanding digital literacy efforts could help bridge these gaps and make employment services more inclusive across Guatemala. Strengthening regional offices and integrating services with local training centres and employers could help bridge these gaps. Moreover, establishing incubators and accelerators in key regions such as Escuintla, supported by universities, research centres, and the private sector, could encourage entrepreneurship and innovation among youth and local communities.
Identifying key drivers of regional attractiveness – such as digital and transport infrastructure, educational institutions, and housing affordability – is crucial, but unlocking their full potential depends on effective governance. Attractiveness is not incidental; it emerges from complex processes that require effective co‑ordination across government levels and engagement with a broad range of stakeholders.
The multi-dimensional nature of regional attractiveness
Effective regional attractiveness policies demand co-ordinated engagement across sectors, levels, and actors. The multi-dimensional nature of regional attractiveness policies involves a wide range of actors from various sectors (infrastructure, education, housing, industry, etc.), across different levels of government (local, regional, national), and alongside private, public, academic, and civil society organisations. For policies aimed at attracting regional development to be effective, it is imperative that a broad set of stakeholders work together in a co-ordinated manner. Multilevel governance refers to the way responsibilities are distributed vertically across different levels of government and horizontally among multiple administrations and non-governmental actors. This approach reflects the interdependent relationships between stakeholders, which necessitates effective co-ordination. Without adequate co‑ordination, attractiveness policies risk generating negative externalities, zero-sum competition, and widening territorial disparities (OECD, 2023[2]). In Guatemala, the responsibility for key attractiveness drivers is distributed across the national, departmental, and municipal levels, each with distinct roles and areas for development.
National strategies - Who does what?
Guatemala's long-term National Development Plan, K’atun, Our Guatemala 2032, defines the country’s strategic vision for sustainable socio-economic and environmental development (Box 3.5). Structured around five thematic pillars: (1) Urban and rural Guatemala, (2) Welfare for the people, (3) Wealth for all, (4) Natural resources for today and the future, and (5) The State as guarantor of human rights and driver of development, the plan aims to align national and subnational efforts to foster territorial cohesion and improve quality of life. Developed through broad citizen participation via Local Development Councils, K’atun serves as a guiding framework for both public and private sector actions, ensuring coherence with global commitments such as the 2030 Agenda and the Sustainable Development Goals (SDGs). A strong regional dimension is embedded in the plan, recognising the need to tailor development strategies to local conditions and opportunities. In this context, regional attractiveness - shaped by factors such as investment potential, talent retention, and tourism appeal – depends on effective co-ordination among national institutions. The National Council for Urban and Rural Development (CONADUR) oversees inter-institutional co-ordination, while the Secretariat of Planning and Programming of the Presidency (SEGEPLAN) ensures that regional policies align with national development priorities. The Ministry of Economy (MINECO) drives economic policy and investment promotion, recently establishing the Agency for the Attraction of National and Foreign Investment to enhance Guatemala’s competitiveness and job creation (Consejo Nacional de Desarrollo Urbano, 2014[53]).
Other key institutions play complementary roles: the Ministry of Communications, Infrastructure and Housing (CIV) develops critical infrastructure; the Guatemalan Tourism Institute (INGUAT) promotes regional tourism; and the Ministry of Environment and Natural Resources (MARN) safeguards environmental sustainability. However, ensuring that these ministries and agencies work together effectively remains a challenge. While K’atun 2032 provides a common framework, there is limited evidence of structured inter-ministerial mechanisms explicitly designed to integrate sectoral policies into a cohesive, place-based approach. In this regard, the National Strategy for Foreign Direct Investment Attraction and the National Competitiveness Policy represent efforts to strengthen inter-institutional co‑ordination, as FDI attraction initiatives are carried out alongside other institutions of the Executive Branch. Strengthening these mechanisms – whether under the supervision of the Presidency, through dedicated inter-institutional committees, or by reinforcing local governance structures – could help overcome fragmented approaches and consolidate the territorial dimension of Guatemala’s development strategy (Consejo Nacional de Desarrollo Urbano, 2014[53]).
In 2014, Guatemala adopted the K’atun, Our Guatemala 2032 National Development Plan, a strategic initiative designed to guide the nation's socio-economic trajectory through to 2032. This plan emerged from a recognition of the need for a long-term, structured approach to national development, drawing inspiration from the Maya concept of a K’atun, which signifies a period of governance and reflection. The plan was formulated within the National Council for Urban and Rural Development (CONADUR), an entity mandated by the Guatemalan Constitution to organise and co-ordinate public administration through development policies and plans. The Secretariat of Planning and Programming of the Presidency (SEGEPLAN), the government body responsible for national planning and public investment programming, provided crucial technical expertise and advisory support throughout the plan's development. The collaborative efforts of CONADUR and SEGEPLAN ensured that the K’atun plan integrated diverse voices and priorities, fostering alignment between national, regional, and local development objectives.
Governance, Implementation and Monitoring Framework
The K’atun plan is grounded in a solid legal and institutional architecture, as established in Decree No. 11-2002 on Urban and Rural Development Councils. A dedicated commission oversees its implementation and monitoring, ensuring inter-institutional co-ordination and sustained political commitment.
To assess progress, the plan incorporates a multi-level indicator system that includes process, outcome, and impact metrics. This results-based framework promotes policy coherence, transparency, and accountability across sectors and levels of government. By fostering long-term continuity in public action and institutional learning, K’atun 2032 represents a critical instrument to strengthen territorial development, reduce disparities, and support Guatemala’s transition towards a more inclusive and sustainable future.
To achieve these goals,CONADUR established the Commission for the Formulation and Monitoring of the National Development Plan: K’atun, Our Guatemala 2032, and instructed the Planning and Programming Secretariat of the Presidency (SEGEPLAN) to provide technical support and advice throughout the process. The strategic nature of this development plan is reflected in the inclusion of indicators across various levels and areas of national planning. Additionally, the country has defined three types of indicators: process, outcome, and impact. The legal foundation for this monitoring system is provided by Decree No. 11-2002: "Law of Urban and Rural Development Councils" (Article 6).
As a foundational long-term strategy, the K’atun plan continues to inform national development priorities and guide policy decisions in the current Guatemalan administration, serving as a key reference for aligning government actions with the nation's broader developmental goals.
Source: Consejo Nacional de Desarrollo Urbano y Rural (2014[54]).
The competences of regional authorities: Who does what?
Subnational governments play a crucial role in shaping regional attractiveness by co-ordinating economic sectors, leveraging local strengths, and fostering collaboration between governments, businesses, and communities. Well-funded and capable regional authorities are essential for delivering infrastructure and services that enhance a region’s appeal to investors, talent, and visitors. Understanding their responsibilities and interactions with other levels of government is key to designing effective policies (OECD, 2023[2]).
Guatemala’s territorial governance follows a two-tier administrative structure comprising departments and municipalities, each with distinct responsibilities and degrees of autonomy. The country is divided into 22 departments (departamentos), which are further subdivided into 340 municipalities (municipios). This system blends centralised and decentralised governance, influencing how policies are designed and implemented. Municipalities are responsible for local service delivery, urban planning, and economic development, while departments act as intermediaries, co-ordinating broader regional initiatives and aligning local policies with national strategies (Constitución Política de la República de Guatemala, 1993[55]).
Despite their important mandate, subnational governments in Guatemala face significant financial and administrative constraints. Fiscal decentralisation remains limited, with municipalities heavily reliant on central government transfers, their main source of income. Although the Constitution guarantees municipalities 10% of the national budget, these transfers are often delayed, insufficient, or politically conditioned, leading to funding gaps and unfunded mandates. Weak local revenue generation and limited technical capacity further hinder municipalities' ability to implement policies and provide essential services at the required scale (Bertelsmann Stiftung, 2024[56]). To improve co-ordination between national and subnational levels, Guatemala established the Urban and Rural Development Councils (CODEDE and COMUDE) (Box 3.6), which facilitate dialogue and collaboration on development projects. However, challenges remain in ensuring consistent implementation, resource allocation, and policy alignment. Strengthening subnational governance and financial autonomy is crucial for advancing integrated regional development strategies (PRONACOM, 2018[39]).
In Escuintla, one of Guatemala’s most economically significant departments outside the capital region, subnational governance follows this broader national framework. The department consists of 14 municipalities, with Escuintla City serving as the capital and primary urban hub. The departmental governor, appointed by the President of Guatemala, oversees regional development and represents the national government’s interests, while elected municipal mayors are responsible for local governance and service delivery. However, as in the rest of the country, limited financial resources and administrative capacity pose major challenges to implementing development strategies effectively. Addressing these structural constraints – through greater fiscal decentralisation, improved local revenue generation, and stronger co-ordination mechanisms – will be essential for empowering subnational governments to drive regional attractiveness and sustainable development in Guatemala.
Guatemala's development framework incorporates Urban and Rural Development Councils as essential mechanisms for decentralised planning and participatory governance. Operating at both departmental (CODEDE) and municipal (COMUDE) levels, these councils are designed to promote decentralised governance, enhance citizen participation, and ensure that development initiatives are aligned with both national and local priorities.
Departmental Development Councils (CODEDE):
Established at the departmental level and serve as platforms for co-ordinating regional development strategies.
Facilitate dialogue and collaboration among various stakeholders, including government agencies, municipalities, and civil society organisations.
Roles involve planning and prioritising development projects, aligning them with national development plans, and ensuring that regional needs are addressed.
Structured to ensure a multi-faceted approach to regional development. Presided over by the departmental governor, these councils bring together a diverse array of stakeholders. Municipal corporations within the department contribute local perspectives, while representatives from national government ministries and agencies provide insights into national policies and resources. Crucially, CODEDEs also incorporate representatives from civil society organisations, including indigenous groups and development organisations.
Identify and prioritise regional public investment projects, co-ordinating with municipalities and national policies.
Include local mayors, civil society, and a Governor representing the President.
Municipal Development Councils (COMUDE):
Operate at the municipal level and are responsible for local development planning and co‑ordination.
Promote citizen participation in identifying local needs and priorities.
Play a vital role in the implementation of local development projects and the delivery of essential services.
Municipalities manage local infrastructure projects, issue permits, and provide essential services (water, electricity, roads).
Chaired by the municipal mayor, COMUDEs convene a broad spectrum of local actors. Community Development Councils (COCODEs) provide direct representation of neighbourhood and village interests, ensuring that local priorities are voiced. Representatives from local civil society organisations contribute diverse perspectives and specialised knowledge, while representatives from public institutions operating at the municipal level offer insights into government services and programmes.
Sources: PRONACOM (2018[39]) and SEGEPLAN (2024[1]).
Challenges of multilevel governance in Guatemala
Local governments in Guatemala have legal responsibilities for economic development but lack the necessary resources and political power to fulfil them effectively. The Municipal Code grants municipalities the authority to "promote all kinds of economic, social, cultural, and environmental activities" and to provide essential services within their jurisdiction. This includes the capacity to undertake local infrastructure projects, streamline business permits, and establish industrial zones – key levers for attracting and managing investment at the community level. At the departmental level, Development Councils serve as co-ordination mechanisms to align local and national investment priorities. However, governance remains highly centralised, limiting the effectiveness of these structures (PRONACOM, 2018[39]).
Governance in Escuintla reflects both institutional ambition and practical fragmentation. The Departmental Development Plan for Escuintla (2021-2032) outlines a governance model aimed at strengthening multi-actor and multi-level collaboration. However, persistent challenges remain in inter-institutional co‑ordination and equitable resource distribution, particularly in rural and marginalised areas. While municipalities have made progress in planning, implementation is often hampered by limited technical capacity and financial autonomy.
Decentralisation efforts in land use and planning face significant practical constraints. The municipality of Escuintla has developed a Territorial Development and Land Use Plan (PDM-OT) to manage urban growth, mitigate environmental risks, and enhance public service delivery. This strategy prioritises citizen participation and urban-rural integration. However, weak enforcement mechanisms, overlapping responsibilities, and political interference undermine its implementation. While municipalities such as Siquinalá and La Democracia experiment with improved land categorisation and participatory mapping, the broader governance environment remains dependent on central government funding, with institutional continuity often lacking. Furthermore, the absence of binding obligations for municipalities to update SISCODE’s digital directories weakens co-ordination and accountability (SEGEPLAN, 2020[57]).
FDI policy is centralised, with municipalities primarily responsible for facilitation and service provision. Subnational governments in Guatemala play a limited direct role in negotiating or regulating FDI. Core policy instruments such as tax incentives, trade agreements, and major infrastructure concessions remain under central government control. Instead, municipalities focus on local-level facilitation, issuing construction permits, ensuring essential services (water, electricity, local roads), and engaging communities to sustain investment projects. While some municipalities enter partnerships or offer minor local tax incentives, these actions remain strictly within the framework set by national legislation (PRONACOM, 2018[39]). Despite lacking direct policy-making authority, municipalities are at the forefront of implementation, working alongside national authorities to address investor concerns at the local level.
Despite formal decentralisation frameworks, governance in Guatemala remains highly centralised. Municipalities, although constitutionally autonomous, struggle with financial constraints and depend heavily on central government transfers. Departments, acting as deconcentrated arms of the central government, lack the autonomy granted to municipalities. The mancomunidades initiative illustrates how local authorities can collaborate to address scale challenges, yet its long-term impact remains uncertain (Mancomunidad Gran Ciudad del Sur, 2024[58]).
Weak institutional performance, political interference, and a lack of professional capacity further hinder fiscal management and governance. Political fragmentation and legislative inefficiencies have led to budget impasses and delayed judicial appointments. The absence of a merit-based civil service exacerbates the politicisation of public administration, weakening institutional effectiveness at both national and local levels (Bertelsmann Stiftung, 2024[56]).
The challenges of territorialising regional attractiveness policies in Guatemala, particularly in Escuintla, stem from the gap between formal decentralisation and practical implementation. While municipalities hold significant legal responsibilities for local economic development, limited fiscal and technical capacities constrain their ability to execute these policies effectively. Rather than pursuing full decentralisation, which risks fragmentation and uncoordinated efforts, adopting regional-scale approaches can better integrate urban and rural areas. In this context, local authorities must play an active role in designing and implementing regional attractiveness strategies, ensuring that policies are locally responsive while maintaining coherence at a broader scale.
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← 1. Regional attractiveness compasses for all OECD TL2 regions are available at https://www.oecd.org/en/about/programmes/rethinking-regional-attractiveness.html
← 2. OECD (2023), Rethinking Regional Attractiveness in the New Global Environment. Available at https://doi.org/10.1787/a9448db4-en.
← 3. OECD member countries in LAC are Chile, Colombia, Costa Rica, and Mexico.
← 4. Data on renewable energy generation is provided by the Comisión Nacional de Energía Eléctrica (CNEE). The CNEE classifies ingenios azucareros (sugar refineries) as using a mix of biomass and either coal or bunker fuel for energy production. According to the OECD definition, such a mix does not qualify as fully renewable. The CNEE has not provided (or does not make available) data on the specific shares of each input (biomass, coal, and bunker) used by each ingenio. With that information, it would be possible to isolate the share of energy produced exclusively from biomass and classify that portion as renewable. As Escuintla hosts a large number of ingenios, this limitation negatively affects the department's reported share of renewable energy generation.