Guidance

Overseas business risk for Guatemala

Updated 19 August 2024

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Overview

Guatemala is the largest economy in Central America, with a GDP of USD 102.04 billion (2023 IMF); a country with the steadiest growth rate in Latin America for three decades. Guatemala’s economy experienced one of the smallest GDP contractions in 2020 in the region (-1.5%) following onset of the COVID pandemic. The country is also the most populous in the region: 19m inhabitants (2023, IMF) with a GDP per capita of USD 5,370.00 (2023, IMF). It has a major geographical advantage in its access to Mexico and, via North America Free Trade Agreement (NAFTA), the US and Canada. Longer term, Guatemala has the potential to be a major hub of supply chain companies, particularly considering the customs union between Guatemala, Honduras and El Salvador.

Guatemala is heavily reliant on traditional exports such as coffee, banana, cardamom, and sugar, rendering the economy vulnerable to fluctuations in both international prices and weather conditions (impact of climate change and anomalies like El Niño). Manufacturing is centred on light assembly and food processing. Tourism, business process outsourcing and the export of textiles and non-traditional agricultural products such as fruit and cut flowers are increasingly important.

British companies are under-represented in Guatemala compared with other European partners. A British Chamber of Commerce established in 2018 is helping to redress that balance.

Politics

Guatemala won its independence from Spain in 1821. During the second half of the 20th century, a protracted civil war pitted the urban elite, supported by the US, against guerrillas in the rural communities, supported by the Soviet Union. The conflict left more than 200,000 dead and ended with a peace agreement in 1996. Since then, Guatemala has pursued macroeconomic stability with reforms that have attracted foreign investment, including successful privatisation plans.

Guatemala gained an international reputation for the fight against corruption with many senior figures, including former presidents facing corruption charges. During the 2023 election year, democratic institutions were tested, and the country embarked in a tumultuous process that saw many candidates removed from the presidential race. Elections were held and, after several attempts   to overturn the results by opposing organisations, the results were respected and Bernardo Arevalo became President of Guatemala in 14 January 2024. A former diplomat and congressman, Arevalo embarked in a task to improve transparency, purge the country’s finances, and improve the economy and livelihoods of the poorest.

While the Guatemalan economy continues showing signs of stability, corruption and a sizable bureaucracy remain constants. The judicial system remains weak and vulnerable to political interference. The new Government is determined to make improvements on human rights, media freedom and rule of law, as a response to the previous government’s regressive agenda on those topics.

Economics

World Bank data shows that after the negative impact of the pandemic in Guatemala’s economy, GDP had a stable growth increasing 3.5% in 2023 (IMF). Despite this, inequality remains a challenge with 55.1% (IMF, 2023) of the total population living in poverty. The unemployment rate was 2.7% in 2023 (World Bank); however, informal economy is 49% of GDP (IMF), accounting for 71.1% of the workforce, with less than 30% of workers fully covered by social security regulations.

Moreover, the minimum wage for those in the formal economy is around USD 460 per month (2024), which is not enough to cover basket of goods (i.e. rent, food, clothes, health, communications, transport, etc.), which is valued at USD 1,000. Inflationary pressures are likely to have an increasing effect in the coming years as food and oil prices continue to rise. Inflation increased from 4.3% in 2021 to 6.9% in 2022, and 6.2% in 2023 (IMF).

Guatemala has shifted from being a raw materials and traditional agriculture commodities exporter, including sugar, coffee, bovine meat, cardamom, bananas, etc. (25%), to become one of the most diversified exporters in Latin America selling value-added non-traditional products (75%), including textile/apparel and light manufacturing, to over 140 countries in the world. Total exports in 2023 were USD 14.2bn, decreasing 9.3% compared to 2022.

The country remains vulnerable to external shocks, largely because of its over-dependence on the US economy. Any economic slowdown in the US, Guatemala’s principal trading partner, will reduce demand for exports, putting further pressure on a government already struggling to finance additional food and fuel imports. The country is also heavily reliant on remittances from Guatemalan citizens living in the US. In 2023, remittances from the US were USD19.8bn, a 9.7% increase from 2022, accounting for 20% of GDP.

Guatemala has an open investment regime that guarantees national treatment for foreign investment which is governed by the Foreign Investment Act. According to this act, impositions of investment-related measures that might have distorting effects are prohibited, as well as any imposition of any performance requirement as condition for foreign investment. Also, foreign investors are allowed to participate in almost all economic activities, without any quantitative limitations. The only restrictions are the ones established in the country’s Constitution, for example the exploitation of forestry or maritime resources.

Although the government hopes to expand the energy and extractive sectors, these remain relatively under-developed. Much needed foreign investment remains low by regional standards as companies continue to be deterred by endemic corruption and the country’s poor security outlook. According to data from Guatemalan Central Bank (Banguat), the flow of foreign direct investment (FDI) in 2023 was USD 1,552.3 million, a slight increase on the USD 1,352.4 million received in 2022.

Despite decades of steady growth between 2-4%, Guatemala faces challenges to boost a robust and inclusive economic growth. In addition to the consequences of the Covid-19 pandemic, Guatemala’s business climate has been negatively affected by the government’s fight against corruption, which is causing a phase of uncertainty for business and investments. However, the new government is focused in fighting corruption, increasing transparency, and implementing tools to facilitate doing business in the country. These include reducing time/cost to set up a business, implementing online systems to open a business, facilitating credit, working on regional integration, among others.

In 2019, when the last Doing Business Report of World Bank was published, Guatemala was in the 96th position, between Philippines and Togo.

Trade and investment between the UK and Guatemala

Trade between Guatemala and the UK has been increasing in recent years, especially since 2013 following the European Union and Central America Association Agreement (EUCAAA). From 1st January 2021, trade relations with Guatemala are based on the UK-Central America Association Agreement (read more information).

Total trade in goods and services (i.e. exports plus imports) was £249 million in 2023, an increase of 37.6% or £68 million from 2022. UK exports to Guatemala amounted to £59m, while UK imports from Guatemala were £190 million. More details on the bilateral trade with Guatemala and latest trade and investment figures can be found in the Trade and Investment Factsheets.

Potentialities of the market

With its geographical location, in the longer run, Guatemala has the potential to be a major hub of supply chain companies, in particular, automotive and advanced manufacturing (sectors of strength in the UK). However, the following sectors with most potential for UK companies at the moment are shown below.

Infrastructure

Public investment in infrastructure is one of the priorities of the government and there are opportunities in urban planning, modernization of ports and airports, creation of smart cities, public transport (including electric buses), construction of highways, all areas of British expertise.

Energy

The country is focusing in changing its electricity matrix to be fully renewable and the government provides fiscal incentives for renewable generators. Nevertheless, this sector has challenges due to human rights and environmental issues and lack of proper legal framework (consultation process with communities) for the creation of clean energy projects, in particular hydroelectric plants.

Food/beverages

British products are in high demand by local consumers because of their high-quality reputation. Goods in this sector are starting to have more presence in regular supermarkets; in particular alcoholic beverages being the second-most exported goods to Guatemala (i.e. whisky and gin).

Apparel

The strongest industrial sector in Guatemala. Several renowned clothing brands produce their merchandise in the country because of the advantages of the market (i.e. regional rules of origin through FTAs, geographic location, and fiscal incentives). Guatemalan stakeholders have shown interest in representing UK brands locally.

Technology

The UK’s reputation in technology creates a demand to understand best practices and acquire software and hardware to implement it in a range of sectors; as an example: cybersecurity, security equipment (cameras, scanners), education (remote learning) and technology for agriculture (satellite, drones).

Agritech

Guatemala is an agricultural country. Products from this sector represent 40.1% of total exports (Bank of Guatemala). Since the UK has a great expertise in the agritech sector more Guatemalan companies have shown interest in acquiring products that can help them be more efficient/sustainable. Local companies are keen on speaking with UK companies that have solutions and expertise in fertilizers, water and soil management and are eager to acquire new technologies for the field.

Public-private partnerships (PPPs)

Despite national and international efforts to push PPPs in Guatemala, these are still in early stages since they have only approved one project under this model. Nevertheless, there are various upcoming projects using PPP which represent opportunities related to consultancies, advisors, auditors, investors, lenders, developers, among others. The current government recently announced the modernisation of airport under the PPP model. See more in private and public partnerships.

The British Government has been actively working with Guatemala to help it develop its PPP model and to share UK expertise through a series of bespoke workshops.

Education: More information on this sector is included in services and education.

Tax and customs

Tax laws in Guatemala are based on the territoriality principle, with a few exemptions related to withholdings in origin, and all taxes are applicable to activities conducted within the Guatemalan territory. Only Guatemala-sourced income is subject to tax and therefore Guatemalan law does not provide relief for foreign income taxes paid.

These are the key taxes in the country:

  • companies are subject to income tax at a rate of 25% on net taxable income
  • VAT is payable on both domestic and imported goods and services; a standard rate of 12% applies
  • a specific calculation of withholding tax, at rates ranging from 5% up to 15%, exists for income from entities not residing in the country and acting with or without a permanent establishment

Guatemala also imposes internal taxes on country-wide distribution of alcoholic and non-alcoholic beverages, cigarettes, cement and petrol-based fuels.

Three incentive programmes operate in Guatemala based on the exemption of import tax, income tax and VAT. These programmes are:

  • export and drawback activities (Promotion and Development of Exports and Textile/Garments Activity Law – Decree 29-89)
  • free-trade zones (Free Trade Zones Law – Decree 65-89)
  • investment in renewable energy sources

Guatemala also imposes internal taxes on country-wide distribution of alcoholic and non-alcoholic beverages, cigarettes, cement and petrol-based fuels.

Three incentive programmes operate in Guatemala based on the exemption of import tax, income tax and VAT. These programmes are export and drawback activities (Promotion and Development of Exports and Textile/Garments Activity Law (Decree 29-89)); free-trade zones (Free Trade Zones Law (Decree 65-89)); and investment in renewable energy sources.

Customs union between Guatemala and Honduras

The Customs Union between Guatemala and Honduras entered into force in June 2017; and in August 2018, El Salvador officially joined. This created a single customs territory of 242km2 and 34.8 million inhabitants; figures that represent more than 68% of Central America, including 69.4% of regional trade and 50.2% of regional GDP. This union covers free transit of more than 75% of trade, by accelerating mobilization of more than 95% of goods at the border with the use of a document for electronic transfer and payment of taxes in real time (FYDUCA).

This customs union only covers products (not services nor persons) and 38 products groups are excluded. Among these excluded are alcoholic beverages, vehicles, living animals, chemicals, dairy, tobacco, and cement. The excluded products would use the regular customs documents and would have to go through the regular line at customs; whilst included products go through a special line and only use FYDUCA.

Discussions are on-going regarding the free transit of nationals from the Northern Triangle countries (Guatemala, Honduras and El Salvador) between their respective borders, without the need to clear customs. Implementation of this is yet to be realised.

Since the entry into force of the customs union, authorities of the three countries are present at customs offices at the respective borders to help facilitate the mobilization of goods.

Services: education

Facts and strengths of the market according to INE (Guatemala National Institute of Statistics)

  • out of approximately 14,900,000 million inhabitants (2018 national census), the average age is 26 years old
  • approximately 9,0.6 million inhabitants constitute the economically active population (15 to 65years old)
  • Guatemala is ranked as a country with moderate English proficiency according to the English Proficiency Index.  English proficiency is highest among young and urban generations
  • approximately 81.5% of the population aged 7 and over are able to read and write (in Spanish)
  • Guatemala has one public and 14 private universities.

UK education offer in the country

There are opportunities to further engage and strengthen the UK’s education offer in the country. So far one school has been accredited as a Cambridge International School and five schools work with Cambridge English to accredit their English programme. The IELTS exam and other Cambridge recognised certificates are offered by The Anglo Mexican Foundation in Mexico and the British Council in Mexico, Honduras and Costa Rica (they don’t have an active presence in the country). The Oxford Language Center offers preparation courses and exams locally for Guatemalans. Pearson Education is also active in the country offering educational services including English language tests.

Business process outsourcing (BPO) sector

The BPO sector generates around 192,500 direct and indirect jobs in Guatemala. This sector has matured by accumulating over 10 years of experience. BPOs offer a wide range of services such as customer service, telemarketing, collections, data feeding and outsourcing of financial and administrative services. Leading multinational companies such as EGS, [24]/7, Allied Global, Telus International, Capgemini, Genpact and Xerox are situated in the country.

Guatemala has developed several incentives to attract foreign investment to this sector. Some examples are the Promotion and Development of Exports and Textile/Garments Activity Law (Decree 29-89) and Free Trade Zones Law (Decree 65-89). For instance, Decree 65-89 establishes that by locating a service company in an existing free trade zone, it can enjoy exoneration of customs duties on machinery, equipment, tools and others needed to carry out its activities within the free trade zone; value added tax (VAT); and income tax (for 10 years from its authorization).

In the last 5 years, the BPO industry has increased 17%, becoming a pillar for Guatemala’s economy. There are still some challenges for this industry to continue to grow; i.e. English language, technology, innovation and public policies that guarantees the industry sustainability.

Technical education

The Guatemalan labour market is increasingly requiring higher aptitudes and competencies to undertake jobs. Due to socioeconomic factors, limited access to secondary education, rural/ urban divide, and gender barriers, many young Guatemalans are unable to access higher education. Thus, strengthening technical education and diversifying its offer has become a local priority.

Established in 1972 INTECAP is the governing body of vocational training in Guatemala. USAC, Guatemala’s public university and other private universities also offer technical education degrees.

Technical education providers are keen to offer internationally recognized certifications to their students. Demand to develop technical skills is increasing in areas such as: agriculture, hospitality and tourism, cuisine, programming, 3D animation, handling of industrial machinery, electricity, and maintenance.

Opportunities and challenges

There are other opportunities to explore in the education/ English language sector in the country. For instance, English for business, teaching methodologies  and development of specific course material.

There are also several private schools and universities in Guatemala who could establish partnerships with international education providers (such as the British Council) for their students to improve English language skills, immerse in a foreign culture or offer English exams such as IELTS. UK institutions and their quality of education are highly regarded and recognized.

There are several challenges in the education sector to take into consideration. One of them is the strong competition with other English language providers that offer a much divers learning courses that are stablished in the country. Guatemala has closer cultural and commercial affinity with the United States in comparison to the UK. The BPO sector also favours developing in house skills and focusing voice coaching on American clients.

Regarding legal barriers, public entities are unable to contract services over a certain amount without having to open a bidding process. They are unable to contract foreign companies without a legal registration in the country unless they are unique providers of a service. Therefore, on most occasions, UK education providers must seek and establish local partnerships to take forward such opportunities or opt to undertake a local registration process (see further details in the regulatory environment).

Private-public partnerships

Guatemala has a Law of Partnerships for Economic Infrastructure Development (Decree No.16-2010) which regulates public-private partnerships projects focused on improving the infrastructure sector in the country to boost its economic potential. This law also created the National Agency for Partnerships for Economic Infrastructure Development (ANADIE), a decentralized body responsible for the implementation and delivery of PPP projects to improve the country’s competitiveness.

It is worth mentioning that all projects undertaken under this law have to be focused on the creation, construction, development, utilization, exploitation, maintenance, modernization and expansion of infrastructure ( highways, roads, ports, airports, railways) and projects of generation, transmission and sale of electricity.

In summary, the government identifies a need in the infrastructure sector, ANADIE designs the project and conducts the tender for each stage (i.e. pre-feasibility studies, pre-qualification of contractors, etc.), the Ministry of Finance conducts a study regarding the budgetary and financial impact of the project, which has to be approved by the Ministry before the PPP tender is opened. After ANADIE has conducted the tender and an implementer has been granted the PPP contract, the National Congress must approve such contract.

However, since the creation of this law (2010), only one PPP project has been granted. This is mainly due to political challenges i.e. changes of government officials; lack of skilled labour and bureaucratic processes. PPP is relatively new in Guatemala and government officials are looking to countries like the UK to acquire best practices.

There is also the stigma in some sectors (such as civil society) that perceive PPPs as an unacceptable way to implement public infrastructure projects because the private sector is involved. This stigma is based on the corruption that has come to light in past years.

In 2020, ANADIE proposed several reforms to the PPP Law as a way of speeding project approval by Congress and to include more sectors in the PPP Law: education and water. The Reform to the Law is still being discussed and is pending approval by Congress. In 2021, the first PPP for a toll highway was approved by Congress; construction phase was estimated to be 38 months. The past government decided to terminate the contract earlier than expected, causing the contract to be reviewed and legal actions to be undertaken from the company and government. After some revisions, the new government provided authorisation for the project to continue and construction will begin in late 2024.

One of the main needs of Guatemala is the creation of basic infrastructure, and due to the lack of public funds, PPPs seem a feasible way to do it. That is why other stakeholders, like the Inter-American Development Bank are providing funds for institutional and regulatory framework strengthening; capacity and awareness building; and pipeline development support.

The National Agency (ANADIE) has identified 8 initiatives that are under analysis to see if they can use the PPP model and 5 infrastructure projects, ranging from USD 150m to USD 930m, to be delivered under with PPP:

  1. State Administrative Centre
  2. Northeast Highway
  3. Modernisation of La Aurora International Airport
  4. City-Rail
  5. Public Transport System

Global trade and international engagement

Guatemala has an open trade regime and free trade agreements have become an increasingly important part of the country’s trade policy. Guatemala has been a member of the WTO since July 1995 and has signed more than 12 trade and commercial agreements (Guatemala’s trade agreements) providing preferential access to over 40 trade partners, including the UK. Its largest trading partners are the United States; other Central American countries; Mexico and the EU.

Guatemala is very active in the multilateral trade system through the WTO. It is member of six groups of negotiations, including the Small and Vulnerable Economies and Cairns Group and has ratified the latest multilateral trade agreement: Trade Facilitation Agreement. Moreover, it has 17 bilateral investment treaties which support the protection and promotion of investment with such commercial partners.

See Guatemala’s trade agreements

Intellectual property

Guatemala is part of the main international agreements of intellectual property, including its membership of the World Intellectual Property Organization (WIPO) since 1983 and has been improving its legislation to strengthen intellectual property rights (IPRs) in the last few years. The last improvement was done through the Industrial Property Law, which introduced special forms of protection for geographical indications and appellations of origin in Guatemala.

However, the protection of IPRs only applies in Guatemala, meaning that the owner of such rights may not prevent the imports of products being lawfully marketed and purchased in another country. Hence, trademarks, copyrights, patents, industrial designs, and others must be properly registered under Guatemalan regulations. The registration has to be done through the National Intellectual Property Registry; the registration process of trademarks usually takes between 5 to 6 months, while for patents up to 4 to 5 years.

Even though IPR legislation exists, enforcement has been inconsistent; for example there have been several cases pursued, specifically for violation of copyrights (music, movies, software) and trademarks (mostly for pharmaceutical and food/beverages). Additionally, the registration process is not particularly efficient due to bureaucracy issues.

Business and human rights

Historically, Guatemala has maintained an open and welcoming posture to international human rights agreements. The country has ratified and supported numerous resolutions. However, in practice it continues to face implementation difficulties, particularly with those related to recognizing economic, social and cultural rights (see World Report (2024): Guatemala’s Human Rights). Widespread poverty and a large informal sector exacerbate existing implementation challenges.

Currently there is no National Action Plan (NAP) to implement the UN Guiding Principles on Business and Human Rights. Nevertheless, the Presidential Commission for Human Rights continues to lead the development of the Business and Human Rights National Action Plan, with the participation of civil society, the private sector and the Office of the United Nations High Commissioner for Human Rights.  So far, there has been little progress and there is still no clear timeline.

There was interest from civil society and the private sector to place Voluntary Principles on Security and Human Rights on the national agenda. The Centre for Social Responsibility Action in Guatemala CENTRARSE and the Learning Institute for Sustainable Development (IEPADES) were the actors that led this effort at the time.  However, there was little development due to several factors. Currently, President Arevalo has shown interest in reactivating these efforts.

Indigenous groups and investment projects

The most prominent vulnerable groups in Guatemala are indigenous people, women and children. According to the most recent census (2019) indigenous people represent 41.7% of the population, however the UN estimates the percentage to be higher at 60%. The Peace Accords signed between 1991 and 1996 marked the end of 35 years of civil war. The Identity and Indigenous Rights Accord (1995) in particular recognized the identity of different indigenous groups and expressed the State’s commitment to adopt a series of measures to eradicate oppression and discrimination.

In 1997 Guatemala ratified ILO Convention 169. The Convention recognizes that due to different historical factors, indigenous and tribal groups have been unable to exercise their fundamental human rights to the same degree as the rest of the population and that governments should assume responsibility to ensure that indigenous and tribal groups are able to exercise, under equal conditions, the rights and opportunities available to the rest of the population under local laws.

The Convention also establishes that the State should consult indigenous groups on all administrative or legal measures which could directly affect them. This includes but it is not limited to coordinating consultation processes between indigenous groups and companies looking to establish operations in their territories.

In addition to affecting indigenous groups, the consultation process is also a problem which affects non-indigenous communities. Currently, there is no consultation law except for an operation guide which outlines the steps to correctly undertake consultation processes. In late 2022, the Ministry of Energy and Mines presented a government decree proposal to deliver ILO 169. Although the government assured the international community that the decree would be approved by the beginning of 2023, this has not yet reached Congress. Indigenous people aren’t in favour of regulating the consultation process contemplated in the Convention, arguing that it would change their traditional ways of consulting their people.

Understanding the complexity of social conflicts in Guatemala is challenging. In some instances, social conflicts have escalated resulting in the suspension or closing of different projects. The cases of San Rafael Las Flores Silver Mine and Oxec Hydroelectric discussed below are two illustrative examples.

San Rafael Las Flores silver mine now Mina El Escobal

Since the beginning of this project in the municipality of San Rafael Las Flores, Santa Rosa, some local communities have fiercely resisted Tahoe Resources’ mining activities based on environmental arguments and lack of consultation with indigenous populations, particularly the Xinca. However, there have also been local communities who throughout the years have been vocal supporters of the mine. The company has also undertaken corporate social responsibility activities to include programmes to address malnutrition, education, vocational training and environmental concerns, to name a few.

Prior to granting the extraction licence to Tahoe Resources, the Ministry of Energy and Mines (MEM) did not undertake any community consultations. This was due to national registries not indicating the existence of any indigenous community in the area. The mine began its operations in 2014 followed by rising tensions.

In 2017, the Supreme Court of Justice suspended the company’s mining licence but later overturned the measure requiring it to undertake a consultation as established in the ILO Convention 169. Although the company tried to resume operations, constant blockades and demonstrations prevented them from operating. Although the mine was not operating, in 2019 Pan American Silver Mining bought Tahoe Resources. In January 2021, the Ministry of Energy and Mines announced plans to begin pre-consultation, which began in May 2021 and was delayed on numerous occasions due to Covid-19 restrictions. Currently, the consultation process continues with the active participation of the Xinca population, the company and members of the government. In May 2023, the Xinca Parliament won the 40th Annual Human Rights Award of the Robert F. Kennedy Human Rights, for defending the land, rights and culture of its people during the consultation process.

OXEC I and II hydroelectric project

This has been a controversial  project that was suspended by the Supreme Court of Justice (CSJ) in 2016 for not carrying out a consultation process with the local indigenous population. The CSJ decision was annulled by the Constitutional Court (CC), thus allowing the project to continue its operations, however, the CC did require the Ministry of Energy and Mines (MEM) and the company to carry out a retroactive consultation process with the respective indigenous population. Following this ruling, the MEM consulted indigenous people located in 11 surrounding communities.

Although agreements were reached and signed, environmental activists raised concerns that other communities impacted by the hydroelectric project along the Cahabon River were not consulted. Among the activists, Bernardo Caal stands out, a community leader who opposed the project and for doing so was arrested on January 30, 2018 in the department of Alta Verapaz, northern Guatemala. Despite the lack of evidence to support the charges, on November 9, 2018, the Cobán court sentenced him to 7 years and 4 months in prison for the crimes of aggravated robbery and aggravated illegal detention. He spent more than four years in prison and in 2022 a judge ordered his release for good behaviour. Meanwhile, Amnesty International declared him a prisoner of conscience and denounced all the irregularities and negligence that occurred within his criminal process.

Advancements and challenges ahead

Further to consultations with indigenous communities, to date the Guatemalan government has been unable to establish clear regulations. There have been several registered cases of social unrest, attacks against human right defenders, and the suspension or closure of extractive projects. In 2023 , the Unit for the Protection of Human Right Defenders in Guatemala (UDEFEGUA)  registered 9,496 attacks against human rights defenders,  being the most violent year recorded to date.

Regarding extractive industries, Guatemala’s mining sector has been the source of several social conflicts, some resulting in judicial claims and bills submitted in the National Congress.  Although the country joined the Extractive Industries Transparency Initiative (EITI) in 2011, was suspended in 2020 due to the limited progress in the implementation of the EITI Standard.

On the other hand, the Guatemalan government has made efforts to regulate the consultation process at the national level. One of its actions to do so was to create and publish an “operational guide” that provided basic guidelines to carry out a consultation process based on ILO Convention 169 and international standards on the matter. However, these actions have been strongly criticized by indigenous peoples, arguing that the regulation would violate their right to self-determination.

Rule of law and transparency (corruption and bribery)

Guatemala continues to struggle to develop an effective Rule of Law but some improvements have been made on transparency issues. The judiciary is hobbled by corruption, inefficiency, capacity shortages and intimidation of judges and prosecutors. There have been some improvements in transparency, especially in the customs and tax agencies. But challenges remain. Organized private sector in Guatemala remains committed to transparency but other traditional companies want to keep the status quo.

In the 2023 Transparency International Index, Guatemala obtained a score of 23/100 and has a ranking of 154 out of 180 countries. The index highlights that corruption is undermining human rights.

In 2019, Guatemala should have elected the 26 new permanent and deputy judges of the Supreme Court of Justice and the 225 judges of the Court of Appeals, due to the fact that their constitutional mandate was ending. However, it wasn’t until November 2023 that the elections were held (4 years later), which represented judicial instability and lack of legitimacy of the national justice system. Although the High Courts were recently renewed, the term of the current magistrates ends in October 2024, so a new election process has begun for the period 2025-2030. There is fear that this will be a flawed process full of irregularities, as it has been in previous elections.

International Commission Against Impunity in Guatemala (CICIG)

Within the framework of corruption and impunity, the United Nations and the Guatemalan Government signed an Agreement in 2006 for the creation of an independent international organization in charge of investigating cases of corruption in the country, called the International Commission Against Impunity of Guatemala (CICIG), which formally began its operations in 2007 and operated in coordination with the Public Ministry (MP), the National Civil Police (PNC) and other state institutions.

During its tenure, CICIG supported corruption investigations that resulted in indictments against a former president and vice president of Guatemala; the prosecution of dozens of senior government officials (including a former Supreme Court Justice magistrate, former members of Congress and former ministers), the dismissal of more than a dozen corrupt judges and thousands of police officers; and the arrest of powerful drug traffickers.

12 years after beginning operations, the CICIG closed its doors in 2019 after the political party of former president Jimmy Morales was accused of receiving illicit financing during electoral times. This investigation caused Morales to decide not to renew the commission’s mandate and expel its director, Iván Velásquez, from the country.

Due to the closure of the CICIG in the country, it was decided to create the Special Prosecutor’s Office Against Impunity (FECI) within the Public Prosecutor’s Office (MP) to fulfil the functions of investigating corruption cases. However, currently the FECI is orchestrated by actors who have been identified and sanctioned by multiple countries for being corrupt.

‘The Line’ and ‘Co-opting of the state’

Two of the most notable investigations supported by the CICIG were “La Línea” and “Cooptación del Estado.” The first case revealed a widespread criminal structure operating within the Customs Administration. While the investigations of the first case progressed, the MP and the CICIG identified an extensive financial scheme connected to the official political party at that time (Patriota Party). As a result of these investigations becoming public in 2015, citizens carried out massive demonstrations demanding the resignation of then-president Otto Pérez Molina and former vice president Roxanna Baldetti. Both presented their resignation and time later were arrested for being involved in both cases. In 2022 they were sentenced to 16 years in prison and a fine of Q.8,709,580, however, due to a recent resolution of the Constitutional Court of 2024, Pérez Molina has conditional freedom despite the conviction.

Security: impact on business (organised crime)

Due to widespread extortion, crime, and presence of gang members in some areas of the country, most businesses invest in private security. In 2023 the General Directorate of Private Security Services (DIGESSP) registered 62 new security companies, bringing the total to 297. Public forces are unable to meet the growing security demand. Thus, investors must take into consideration security costs when establishing operations in the country.

According to PNUD the economic costs of violence represent approximately 7.7% of the GDP. Guatemala’s insecurity has limited the operations of certain companies and MSMEs. Water providers, gas providers and transportation providers have been commonly targeted by extortionists. In many cases companies have been required to pay fees to extortionists in order to deliver their products or operate in certain zones.

According to the Ministry of Interior, the three most affected municipalities by extortions are Mixco, Villa Nueva, and Guatemala City.

Terrorism and protective security advice

See the FCDO travel advice for Guatemala for the latest information.

The regulatory environment

Guatemalan laws on tax, labour, environment, health and safety, do not forbid foreign investment or foreign companies to operate in the country. However, bureaucratic processes to obtain licences and permits do represent a challenge for foreign companies/investors that do not know how the system operates (in comparison to domestic companies that are more familiar with such processes). In addition, in order to participate in government procurement processes in some cases it is needed for foreign companies to be legally registered in the country, or at least on a temporary basis, making it easier to partner with local companies.

Regarding labour, the Guatemalan Labour Code regulates employer-employee relations and sets the benefits and obligations that have to be complied with. These include social security, bonuses, minimum wage, overtime, vacations, safety standards, etc. All these costs can add up to 50% of the salary of an employee.

For social security, only workers in the formal sector have access to the national system; the informal sector workers can opt for private insurance if they can afford it. This limitation means that more than half of the population of Guatemala are not registered in the social security system, mainly because of the prevalence of the informal economy and agricultural workers. Formal sector is considered employees that work for legally registered companies and enjoy all benefits established by law; informal sector is considered the independent workers, such as cleaners, street sellers, online sellers, and anyone working for an employer that is a non-legally registered company.

Additionally, workers in the formal sector must receive two complete extra salaries per year (as long as they have worked for one year in the company, if not the amount is calculated for the time worked). There is also a requirement to hire Guatemalan workers, at least 90% of the total workers must be Guatemalan and it is prohibited to pay them less than 85% of the total wages earned at the company. This requirement does not apply for high level positions, for example Chief Executive Officers and Chief Financial Officers

Despite labour regulations being supervised by the Ministry of Labour, enforcement of labour laws to protect workers’ rights is not effective (especially in some sectors like agriculture and textile manufacturing), resulting in some labour abuses and many cases that are reported are not resolved appropriately.

There are no price controls or regulation of exchange rates in Guatemala.

For a more comprehensive list of regulations and procedures, Guatemala has created the website www.asisehace.gt and www.comercioeinversionguate.gob.gt.

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Contact the DBT team in Guatemala for further information.

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