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Latin America Investment News on Viva Tropical

Guatemala Ponders Sovereign Fund for Infrastructure Advancements

Article Summary:

Guatemalan constitutional reforms promoted by President Otto Pérez includes a novel idea: create a sovereign fund that is fed from the profits generated by state enterprises and the participation in the mining and oil industries. Pérez is following the lead of other countries, such as Panama and Brazil, who are using sovereign funds to push forward large infrastructure projects.

Photo Credit: El Periodico

Original Article Text From El Periodico via Google Translate :

The idea of ​​Sovereign Fund

Chilean copper, the Panama Canal and the oil from Arab countries have helped to nurture millionaires sovereign funds that allow the governments of these countries to invest in major infrastructure projects, buy U.S. bonds, sponsor football teams, or simply acquire companies face fiscal crises.

The constitutional reform promoted by President Otto Pérez includes a novel idea: create a sovereign fund that would feed the profits generated by state enterprises and the participation in the mining and oil.

“The idea is good but needs more discussion,” says Ricardo Barrientos, former Deputy Minister of Finance during the previous administration, now senior economist at the Central Institute for Fiscal Studies.

Barrientos recalled that the first proposal to create a sovereign fund proposals emerged from the Fiscal Pact, with the difference that would be a counter-depth: the food during the good times and would be used to exit a crisis.

It is proposed that the fund, which would have a non-revolving (money does not return, is used only once), would increase with an annual contribution of funds from state and its involvement in public or private provide public services or exploit natural resources, and funds from privatization or concession of state services.

Unquantified
In Brazil, the government set up a sovereign fund with $ 8 billion, while in Panama is estimated to top $ 1.2 billion would and Chile already reached $ 20 billion. In Guatemala there is still no estimate of the amount that would be available.

The Finance Minister Pavel Rye, said the state assets has not been quantified. “You have to make a study of all mineral resources, oil and rivers, among others, to set an amount,” he adds.

Carlos Gonzalez, a consultant of the Association for Research and Social Studies, points out that the establishment of sovereign fund is linked to other proposed reforms, which aims to provide up to 40 percent of government shares in companies that exploit natural resources does not renewable, which strongly rejects the Extractive Industries’ Guild, which represents most mining companies operating in the country.

Centeno said it is not an expropriation nor is it the State participates in the administration of companies but that it will yield the right thing.

Who is involved?
Gonzalez complains that the proposal should be more specific to know how much would the annual state contribution and what are the other sources of financing sovereign fund, as well as what type of public works fund.

Currently, the State of Guatemala has a 15 percent stake in Empresa Electrica de Guatemala, SA, according to Jorge Alonso, manager of the company generates annual dividends. It also has almost 30 percent of the shares of the Bank for Rural Development.

Other companies with state participation are the Guatemalan Nickel Company, which the Ministry of Energy and Mines is 3 percent of its equity shares and the port companies.

Barnett believes that, rather than an amendment to the Constitution of the Republic, the sovereign fund should be set with an ordinary law.

Link to Original Article:

From El Periodico

Latin America Investment News on Viva Tropical