Foreign Direct Investment in India: Vehicle for Growth or Inequality?

By Julian Valladares

Central America is a fascinating yet ignored sub-continent of the world.  For the sake of raising awareness of the region’s existence, governments of countries such as Honduras and El Salvador undertake the comical, if perhaps tragic practice of depicting a labelled map of Central America on their passports.  But what is Central America, aside from a narrow territory that connects North and South America?

The popular perception sees the region as little more than a collection of former “banana republics”, home to numerous drug cartels, poverty, and military coups. However, the reality of Central America is far from the commonly accepted stereotypes. Is there poverty? Yes, but opportunities for the development of a middle class are emerging. Is crime common? Yes, but no more than in Chicago, Detroit or other major US cities. Are there frequent military coups and consolidated dictatorships? Absolutely not! So what is the current economic reality of the region?

Central America has some of the fastest growing and stable economies in the developing world. Additionally, the era of the undemocratic authoritative regimes is over, and the region has seen impressive development in terms of infrastructure and economic alternatives to agriculture. Nevertheless, the spectre of bloodthirsty drug cartels has strewn obstacles in the path of development for the region, inciting the media to over-emphasize Central American violence in lieu of balancing coverage with the territory’s economic potential.

Guatemala, the colonial capital and a leading actor of the region, exemplifies the economic potential of the isthmus. Guatemala’s nascent growth is driven by recent expansion of the high-tech industry, which has led some economic visionaries to dub it the Central American “silicon valley”.  The high-tech industry in Guatemala City is undergoing unforeseen growth and is projected to increase development of Guatemala’s zone 4, an area that has suffered ups and downs in recent years. Advocates of this technological revolution intend to cultivate the area into a hub for young entrepreneurs and, consequently, resurrect the zone into a vibrant sector of the city.  The development of the high tech industry can be seen in the recent installations of San Francisco style apartments and skyscrapers in Guatemala’s “silicon valley”.

High-tech growth has been triggered by a wave of foreign investment in the country, which the national government has endeavored to protect and maintain. The rational explanation behind the attraction of foreign investment in the industry is the low costs faced by startups in Guatemala. The Global Entrepreneurship Monitor evaluated these low costs, and the results substantiated that the average cost of establishing a startup in Guatemala is 57% cheaper than in Brazil.

By 2020, Guatemala is expected to host the leading high tech industry in the region and will be able to compete worldwide. Indeed, it is not unlikely that the next generation’s Bill Gates or Steve Jobs is currently working in zone 4 of Guatemala City.  

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