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Investing in Guatemala

#FreshStartMonday

Welcome to #FreshStartMonday!

“An investment in knowledge pays the best interest.” — Benjamin Franklin

Guatemala is facing an economic recovery, amidst economic uncertainty worldwide. Moody’s Investor Servicerating agency, highlights that: "Guatemala's economy recovered strongly from the pandemic-induced recession which, combined with conservative fiscal policies, limited the increase in the country's debt metrics. Moody's expects continued economic growth in 2022 and 2023 to support the stabilization of the country's debt burden," changing the outlook from Ba1 negative to Ba1 stable. Fitch Ratings also raised its qualification for Guatemala, from stable to positive. In addition, the World BankWorld Bank rates Guatemala as the largest economy in Central America and an upper middle-income country.

According to the Bank of Guatemala, the Gross Domestic Product for 2021 exceeded 544 billion quetzals, showing a growth of approximately 38 billion quetzals, compared to 2020, which is equivalent to 7.5%. This means that macroeconomic stability and its indexes are improving, which allows a positive outlook for investment.

Guatemala has extensive legislation that encourages investment, such as: Law for the Promotion and Development of Export and Maquila Activity; Law of Incentives for the Development of Renewable Energy Projects; Law of Foreign Investment; Law of Free Negotiation of Foreign Exchange; Law of Free Zones, Decree of Free Industry and Commerce Zone, Law of Alliances for the Development of Economic Infrastructure, among others.

Additionally, Guatemala has signed investment treaties with several countries. According to the United Nations Conference on Trade and Development (UNCTAD), Guatemala has 21 Bilateral Investment Treaties (BITs), 12 Treaties with Investment Provisions), 12 Treaties with Investment Provisions (TIPs) and 22 Investment Related Instruments (IRIs).

Currently, the trending economic sectors for foreign investment are clothing and textiles, food and beverages, miscellaneous manufacturing, mining, and quarrying, electricity, and water supply, Business ProcessBusiness Process Outsourcing and Call Centers, real estate activities, health care activities. Along with this, many investors are currently betting on Public-Private Partnerships, as they provide legal certainty and security.

There are several ways through which a foreign company can do business in Guatemala, for example, a participation contract or joint venture, generating a relationship with an agent or distributor, or through a new company or the registration of a branch. To identify the greatest advantages and conveniences, before investing, it is recommended:

  1. Investigate the business or industry in which you are considering investing;
  2. Evaluate the financial, legal, and operational risk of the investment; and
  3. Create an investment business plan

For this reason, if you wish to invest in Guatemala, it is recommended to seek legal advice so that you can feel confident in the investments you make and ensure the profitability of these.

 

Sara Santacruz
Juan Francisco Sandoval
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