Guatemala

Guatemala offers attractive and profitable investment opportunities in clusters of agribusiness, light manufacturing, tourism, BPO (Business Process Outsourcing), clothing and textiles, which in turn have the support and endorsement of the current National Competitiveness Policy.

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GUATEMALA PROFILE

Description of the country's economic outlook

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Rated as one of the best destinations for doing business, according to the fDi's ranking Americas Cities of the Future, the city of Guatemala obtained the first place in the category “Best city to do business according to cost effectiveness”. This qualification was granted based on the experience of the leaders of multinational companies, which specialize in investing in cities with rapid economic growth and attractive investment and expansion plans.

This shows why this nation is recognized as the largest economy in Central America, since it represents a third of the regional GDP and has a market of more than 17.6 million inhabitants. Its strategic geographical position facilitates access to more than 65 million people within the Mesoamerican market.

This country also offers attractive and profitable investment opportunities in clusters of agribusiness, light manufacturing, tourism, BPO (Business Process Outsourcing), clothing and textiles, which in turn have the support and endorsement of the National Competitiveness Policy current.

According to the Guide to business and investment in Guatemala, prepared by the country's Ministry of Economy, the Government's commitment to attract solid investment, especially from multinational companies, to promote all investment sectors and improve the economy is highlighted.

For this, the Guatemalan Government in its Plan for Economic Recovery seeks to manage three strategic axes. The first is made up of actions focused on recovering and generating new jobs. The second axis is made up of actions to attract more investments, which implies streamlining logistics and connectivity in the country; This requires a legal framework favorable to investment and the identification of productive infrastructure projects in the country. It also seeks to attract investment for relocation.

The third seeks to encourage and promote the consumption of Guatemalan goods and services at the national, regional and international levels. To achieve this, in addition to stimulating its demand in the country, new opportunities in foreign trade will be identified.

Additionally, strategies have been created to encourage the arrival of capital and international companies, such as:

  • Participation and creation by entrepreneurs in Guatemalan companies, being able to become legal representatives of their companies.
  • Favorable taxes such as 12% VAT (value added tax) and between 5% and 7% of income (income tax) depending on the type of business.
  • Creation of the Special Economic Regime for Development Zones (ZDEEP), used for industrial, commercial and service companies. Guatemala has positioned itself as an ideal place to install ZDEEPs, thanks to the best energy prices, access to electricity, mobile network and broadband internet coverage, young and trained talent, connectivity, investment and incentives.

For its part, the Guide to Business and Investment in Guatemala, created by the country's Ministry of Economy, emphasizes that its economy has been strengthening with the implementation of initiatives such as the Free Trade Agreement with the United States, which has brought profitable opportunities in the productive sectors, human talent, light manufacturing, assembly, agroforestry and business services.

Likewise, this nation has agreed an Association Agreement between the European Union and Central America, thus generating strategic spaces for the production of national companies to reach the European market. Additionally, the government supports the execution of infrastructure projects through the creation of Public-Private Alliances.

GUATEMALA PROFILE

Why invest in Guatemala

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Strategic point for trade

Given its location on the isthmus of Central America, bordering Mexico and Central America, Guatemala establishes itself as a strategic trade bridge for a market of more than 68 million people, with a production area of more than $319,000 million dollars, according to estimates by the Swiss - Guatemalan Chamber of Commerce.

Additionally, its privileged geographical location that allows it to limit both the Pacific Ocean and the Atlantic Ocean, has facilitated access to the member countries of the North American Free Trade Agreement (NAFTA) and this has positioned this nation as a point strategic for international trade.

Guatemala has become an important destination for foreign investors, since the country contributes to 40% of the economic performance of the region and with its nearly 17 million inhabitants, it is recognized as the most important market in Central America. Thanks to its geography, the nation has a logistics service across the Pacific and Atlantic oceans, and has created a free trade area with the US and Mexican economies.

Young human talent

According to the National Institute of Statistics (INE), the total economically active population in Guatemala was 7,246,495, comprising the age range of 15 to 65 years. This nation has an economically active population of 7.1 million people, with 70% of the population under 30 years of age. According to the Local Competitiveness Index, prepared by the Foundation for the Development of Guatemala (FUNDESA), the Guatemalan labor force ranked sixth in favor of the country's macroeconomic stability with 74.8%, followed by health.

Likewise, the Global Competitiveness Index, from the World Economic Forum, highlights that Guatemala ranks eighth among the 19 countries in the region, where it is easier to find trained personnel. This is partly due to the quality of its 14 universities, which have approximately 50 branches throughout the country. The country also stands out, above all of Central America, for having the largest student population with more than 312,700 students specializing in humanistic and technical careers, meeting the demanding international standards.

Thanks to this educational level, business activity is an important pillar in Guatemalan society and economy, where 50% of companies have personnel under 40 years of age. In this regard, the Government wants to decentralize the industrial sector from the metropolitan areas, to improve productivity in all regions of the nation, opening up a profitable scenario supported by the Government, so that international investors can participate in this process.

Stability and economic performance

Guatemala has one of the largest economies in Central America and has the largest economic market in Central America, which represents 35% of the region's GDP. For 8 years, this nation has achieved an expansion of 375.6% in its FDI, evidencing a good economic stability that has managed to gain the trust of foreign investors and multinationals.

Among the sectors that contribute the highest percentage to GDP are commerce with 25%, and agriculture, forestry, hunting and fishing with 22%. The latter generates two thirds of exports and half of the labor force. Among the main export products are coffee, corn, sugar cane, fruits, vegetables, meat and poultry products. The participation of the Guatemalan industrial sector is 12%, highlighting the production of food and beverages, textiles, footwear, clothing and the manufacture of metal products, mainly.

According to the executive committee of the Guatemalan National Competitiveness Program (Pronacom), it is estimated that foreign investment will increase by 35% by the end of this year, in part due to the search for new markets and the creation of greater opportunities for small and medium-sized companies. Business. According to the Government, the goal is to maintain direct foreign investment at 1.2 billion dollars for this year, which in its first 7 months reached 700 million dollars.

Another interesting aspect that attracts foreign investment is the customs union established between Guatemala, Honduras and El Salvador that facilitates the commercial exchange of more than $3,892.4 MM US and that groups 75% of the population of the Central American region.

Important trade agreements

According to the National Competitiveness Program of Guatemala (Pronacom), this nation has an active participation in international trade thanks to its Free Trade Agreements (FTA) and Partial Scope Agreements (AAP) signed with different regions and countries, among the which are:

  • Central American Economic Integration Treaty.
  • Free Trade Agreement Mexico - Northern Triangle (Guatemala, El Salvador and Honduras).
  • Free Trade Agreement between the United States, Central America and the Dominican Republic DR-CAFTA -Colombia.
  • Free Trade Agreement Guatemala – Taiwan.
  • Guatemala-Panama Free Trade Agreement.
  • Free Trade Agreement Guatemala - Colombia
  • Guatemala-Chile Free Trade Agreement.
  • European Union Association Agreement.
  • Partial Scope Agreement: Belize, Cuba, Ecuador and Venezuela.

Additionally, they also have some commercial investment agreements that have been established with Belgium-Luxembourg, Austria, Korea, Spain, Argentina, Finland, Italy, among other countries.

In this way we can show that the CAFTA-DR FTA (USA, Costa Rica, Honduras, El Salvador, Nicaragua and the Dominican Republic), represents 92% of the industrial and consumer goods of the United States and 82% of agricultural products enter Guatemala free of tariffs.

It is important to note that this country enjoys great macroeconomic stability and very low public debt. It also has high international monetary reserves and a solid financial system, and its GDP has maintained its growth of close to 3% in recent years.

Logistics platform

The National Competitiveness Program of Guatemala (Pronacom), highlights that this nation has a modern infrastructure at the Central American level. For example, in the port area, the country has direct access to the Pacific and Atlantic coasts in its 250 miles from coast to coast, allowing it to be an alternate logistics platform to enter neighboring countries. This income is also made through its highway network that has an extension of 14,000 km, the most used being the Interoceanic Highway that crosses the country from east to west between the Atlantic and Pacific oceans and the Pan-American Highway that unites Mexico with Panama.

Another interesting aspect is that it manages the largest maritime cargo operation in Central America (38%™) through its 3 main seaports, Santo Tomás de Castilla, Puerto Barrios in the Atlantic and Puerto Quetzal in the Pacific. It also has 2 international airports, 9 local airfields, 22 commercial airlines and 11 cargo airlines operating.

Telecommunications infrastructure

As of the entry into force of Decree Number 94-96, issued by the Congress of the Guatemalan Republic, free participation and negotiation in the provision of services in the telecommunications sector was fully enabled. In this way, the General Telecommunications Law established a legal framework to develop telecommunications activities and promote the use and exploitation of the radio spectrum to promote the updating of the sector and attract investors, among others.

In this segment there are interesting technological business opportunities, such as the one being executed from the Guatemalan Pacific coast, where the installation of a fiber optic cable that will reach Valparaíso in Chile and that will help strengthen the communications. This shows that this is a strategic point for fiber optic connections in the region.

Legal support for foreign investment

In order to promote foreign investment, the Government of Guatemala implemented the Foreign Direct Investment Law, through Decree 9-98. This law grants them rights such as:

National treatment. The foreign investor receives the same treatment as a national and discrimination is prohibited both for the person and for his business.

Regarding the issue of private property, the State recognizes the foreign investor the right, use and ownership of the property over their investment. The Government may not directly or indirectly expropriate the investment of a foreign investor.

Likewise, in the aspect of foreign trade, the Government protects the import, export of goods and services of legal trade that are necessary for the development of the activities of the foreign investor in the country.

Another interesting aspect is in the foreign exchange negotiations, since foreign investors have free access to the purchase, sale and convertibility of foreign currency, in accordance with the special laws on exchange matters and on equal terms with the national investor.

Main taxes

Below you can find some of the main taxes in Guatemala, if you want to know in detail the country's tax information you can download our Global Taxes App.

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5% al 10%

Tax on capital gains and dividends

5% al 7%

Simplified Optional Regime

25%

General Tax Regime

25%

Inheritance and gift taxes

12%

Value Added Tax / VAT

5% al 7%

Personal taxes

4%

Solidarity Tax (ISO)

0%

Taxes on transfers

Sectors of interest and market opportunities

These are the sectors that offer the most investment opportunities in the country and that have the support of the government for their development.

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Fruit and vegetable cluster

Thanks to the geographical richness of Guatemala, it is facilitated by a high quality agricultural production, recognized worldwide for products such as vegetables, fresh and frozen fruits, spices and cardamom. The segment that has a participation of 2.5% in the Gross Domestic Product (GDP) of the country, represents about 38% of the national agricultural production and generates about two million jobs according to the National Institute of Statistics.

Currently the products are exported to more than 40 countries, among which the following stand out: the United States, where they are the fifth largest supplier of vegetables and the fourth largest supplier of fruits, Canada, England, Holland, Germany, El Salvador, Qatar, Bahrain, Ukraine and the Emirates United Arabs.

In this sector there are interesting investment opportunities such as:

  • Create pesticide certification laboratories, since international markets require them when exporting.
  • Achieve the implementation of cold chains to guarantee the quality and shelf life of products and facilitate export processes.
  • Establish an auditing body in the country to certify BPA and GMP, since importers require these certifications to guarantee that the products have the quality required by final consumers.
  • Finally, it is necessary, on the one hand, to develop irrigation systems to eradicate seasonal agriculture and, on the other, to implement genetic improvements in seeds to guarantee the yield and quality of the products.
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Forestry, paper, furniture and rubber

The forest cover of the Guatemalan territory reaches more than 3.6 million hectares, that is, it represents 33.6% of its territory. This sector, which contributes 2.3% of GDP, has 1,876 forestry companies that generate 94,600 jobs in the forestry sector and 6,000 in the export segment.

According to the National Competitiveness Program of Guatemala (Pronacom), among the main markets to which the products are exported are:

The United States and Mexico, which receive 79% of all exports in this sector, El Salvador, Honduras, Costa Rica, Colombia, Peru, Chile, Italy, Brazil, Venezuela, the Dominican Republic, Ecuador, Argentina, Belgium and Spain. This segment of the Guatemalan economy has great potential in areas such as:

  • Knowledge management for the generation of new products such as chipboard, plywood and wood manufacturing, and for the cultivation of broadleaf forest species.
  • Industrial improvement through innovation to optimize the transformation of logs by sawmilling. Increase in forest plantations for industrial purposes of Cedar, Mahogany and Rosul .
  • Equipment for the manufacture of products for furniture, carpentry and construction such as arch machines, CNC milling machines, door machines, glue applicators, chippers, electric saws and the tools subsector.
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Textile, clothing and footwear

Fabrics, clothing, accessories and footwear make up this production area, which has a share of 4% of GDP and which, in addition, in the last 20 years has had an interannual growth in its exports of approximately 9%, being one of the most great generators of currencies in this nation.

According to figures from the Guatemalan Chamber of Industry (CIG), the textile industry began the year with a growth of 6.9%, positioning itself among the largest exporting sectors in the nation. Currently, the rate of monthly textile exports from this country ranges between 150 and 200 million dollars in businesses made up of finished garments, textile supplies and fabrics for the manufacture of clothing in other countries. The main markets where these products are exported are the United States, Central America, Peru and Colombia.

Another important factor that has boosted the sector is the Free Trade Agreement (FTA), signed between Guatemala and the United States, which after 14 years of validity showed a growth of 12% last year, where exports were reached in the order of US $1,801 million, according to figures from the Costume and Textile Commission (Vestex).

Given the good moment of this productive sector, a great movement of capital was generated, destined especially in the investment for machinery, equipment and expansion of plants, especially fabrics and spinners for US $60 million.

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Guatemalan industry

The sectors of food, beverages, plastics, the pharmaceutical and chemical industries have shown greater dynamism, according to the Guatemalan Chamber of Industry (CIG), which highlights that the outlook for the industry is positive since the industrial activity index (based on sales), at the end of last year it was -5.7%. This index also shows a significant rate of recovery in the metals and mining, industry, health, agribusiness, energy, gas and water sectors.

For its part, the 2020 Economic Activity Performance Evaluation Report, and the outlook for 2021 emphasizes that there are Guatemalan productive sectors with encouraging prospects such as construction, which would have a 7.5% recovery, accommodation and service of meals would reflect a dynamic performance with 5.7% growth, the financial, with 5.7%, real estate, 3.9%, professional activities, 3.3% and health area, 4.1%.

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Tourism and health services

Specialized in cultural tourism, business and conventions, and special interests (nature, health and wellness, poultry farming, this sector has the capacity to generate nearly 90,000 jobs by the end of this year.

According to the "Sustainable Tourism Master Plan 2016-2026" established by the National Government, in the last decade this sector became the second largest generator of foreign exchange for the country, reaching a direct contribution to the economy of 3.4% of GDP. It also presents a growth rate of 4% per year and a generation of almost 460,000 jobs. This year is expected to close with a large influx of visitors from El Salvador with a 44% share and the United States with 18%.

Along with the above and according to the data obtained by the Health and Welfare Tourism Commission of the Guatemalan Association of Exporters, the Medical Tourism sector in Guatemala presents a constant growth between 10% - 16% per year. Among the main markets in this sector are the United States, Mexico, Canada and Central America. Tourists come to brought by comfortable prices and a wide network of specialties, doctors and medical centers of high quality.

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ICT'S, Software and Contact Centers

With a share of 3.2% of the GDP, this productive sector is made up of the software, development and content subsectors; contact and call centers and business process services. In Guatemala there are about 700 companies specialized in these services that generate about 22,000 formal jobs.

Likewise, the Business Process Outsourcing (BPO) sector has brought important benefits to the country, such as technological processes equal to those present in any developed country, generation of expert human talent, customer service. According to AGEXPORT data, contact centers and BPO have obtained exports of more than US$980 million and the sector generated more than 42,000 direct jobs and around 126 thousand indirect jobs.

The main markets for this Guatemalan productive segment are Canada, Mexico, the United States, Central America, the Caribbean, Spain and Guatemala. I contacted them Services located in Guatemala serve Canada, the United States, the Caribbean, Central America and Europe.

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Building

Housing (housing projects, buildings for industrial commerce) and road infrastructure (roads and bridges) are the two branches that make up this sector and that generate nearly 318,000 jobs. In accordance with the projections established by the Government in its National Competitiveness Policy 2018-2032, construction has contributed to the strengthening of other sectors of economic activity such as mineral extraction, export production and import of construction materials, electricity market, private security, water sanitation and transportation.

It is expected that by 2032, 80% of the population will be urban, and this will imply the development of land use plans in which both the public and private sectors must work together to deal efficiently with the accelerated process of urbanization. It is estimated that there will be 5.6 million homes (2.8 million new homes) and 38,000 kilometers of new roads.

According to Pronacom, among the main investment opportunities in this sector are:

  • Real state development
  • Constriction of shopping centers
  • Social housing in rural areas and intermediate cities
  • Vertical housing in urban areas and in the process of urbanization
  • Road infrastructure projects through public-private partnerships
  • Financial services credits and housing loans.

Our advisors in Guatemala

Guatemala - Beger, Pemueller & Asociados

Berger, Pemueller & Asociados

Berger, Pemueller & Associates is a law firm characterized by its experience of more than two generations of legal practice and the dynamism and continuous preparation of its well-qualified professionals and efficient staff.

Guatemala - BASRO

BASRO – Bautista, Rodríguez & Asociados

BASRO – Bautista, Rodríguez & Asociados is a firm of chartered accountants, auditors and lawyers dedicated to providing financial, tax and other related consulting services in the areas of human resources, legal, commercial, labor and accounting systems. The firm advises and provides its services to major organizations and companies in Guatemala and Central America.