At first glance, Guatemala might not be the first place in Latin America to move into and set up a business. But with its consistently growing economy, tax-free economic zones and close proximity to the larger markets of Mexico and the United States, doing business in Guatemala might be the right choice for certain businesses and individuals.
What are the advantages of doing business in Guatemala?
There are many positives to doing business in Guatemala (as well as challenges, more on that later) but the upsides might surprise you:
- Guatemala is welcoming of foreign investment
- It boasts consistently strong economic growth
- Possesses a skilled labor force
- Is home to modern telecommunications infrastructure
- Has free trade agreements with the US, Central America
SEE ALSO: How to Incorporate a Company in Guatemala
1. Open to foreign investment
There are very few barriers for foreigners who are thinking of doing business in Guatemala. It’s an open, free-market economy, and almost all sectors of its economy are open to foreign investment. Foreigners can own property such as vehicles and real estate free of any need for local co-signers, partners or stakeholders, and there is no limit to how much of a company a foreigner owns. There are also no restrictions concerning the maximum proportion of foreign shareholders in a business.
2. A consistently growing economy
The Central American country’s economy dwarfs its neighbors in terms of size. Guatemala represents 35 percent of the region’s GDP, and has seen foreign direct investment grow by 376 percent since 2013. The principal sectors of the Guatemalan economy are manufacturing, services, and retail commerce, which combined make up 45 percent of its GDP. Guatemala’s currency, the Quetzal, has been stable against the US dollar for the last decade – this alone might be reason enough to consider doing business in Guatemala.
3. A skilled labor force
One might think that a relatively poor, unequal country like Guatemala has high unemployment and a low-skilled labor force. And while that aspect is true, there is a growing segment of the work force that is well educated and highly skilled – particularly among the young. Roughly 81 percent of young Guatemalan workers hold diplomas or degrees from colleges or universities. Guatemala’s work force is made up of about 6.7 million people, 70 percent of whom are under the age of 30, so for people or companies thinking of doing business in Guatemala, there’s no shortage of local talent to choose from.
4. Modern telecommunications infrastructure
Companies that are doing business in Guatemala have access to a robust telecommunications infrastructure of a highly privatized, free-market telecoms sector. The country is highly connected with 99 percent redundancy of fiber optic cable connections. Pretty much everyone has a smart phone in Guatemala – there are more than 20 million in the country, which is equivalent to 110 percent of the population.
5. Free trade agreements with the US, Latin America
Those doing business in Guatemala will have been able to take advantage of the free trade agreements that the government has negotiated. Among the countries with which Guatemala has free trade agreements are the entirety of Central America, the United States, Mexico, the Dominican Republic, Colombia, Panama, Chile, and the European Union.
Like anywhere else in Latin America, Guatemala has a host of social and political issues that can complicate any decision to do business or domicile there.
What are some of the challenges in doing business in Guatemala?
- Political risk
- Internal security risk
- High reliance on exports, remittances
Here’s a breakdown of the challenges that you should consider before doing business in Guatemala:
1. Bureaucracy is alive and well
Latin Americans seem to have a love affair with bureaucracy, and Guatemala is no different. When setting up a business there, be prepared for red tape – the country is rife with it. The relatively straight-forward act of setting up shop in Guatemala can take up to 40 days to complete. Notarized documents are required at various stages of the process and the business must be registered with several government and business entities. Legal representation is required for any business, so anyone doing business in Guatemala will have to hire a lawyer.
2. Corruption is widespread
The political situation in Guatemala is marked by continuing allegations of corruption and widespread calls for reform. As a consequence, in Guatemala many commercial successes are hard fought. A growing number of US stakeholders in the country have complained of rampant corruption in Guatemala and say that transparency is non-existent. However, corruption tends to be industry specific, so people doing business in Guatemala may or may not encounter this.
3. Guatemala has no shortage of political risk
An ongoing scandal involving alleged persecution/abuse of power of Guatemalan judges by the executive branch has led to an increase of political tensions in the country. Recently the International Bar Association’s Human Rights Institute condemned what it called an assault on the independence of the legal profession and the ongoing deterioration of the rule of law. Incidents of Guatemalan judges and prosecutors – particularly those concerned with cracking down on corruption – are being harassed, intimidated, arrested, and forced to resign, according to media reports. For now, this is largely a political fight, but for those who are thinking of doing business in Guatemala, it’s something that can’t be ignored.
4. Internal security risk
While Guatemala is relatively stable economically, growth is distributed unequally, and rates of poverty and hunger remain high. Those doing business in Guatemala are probably well aware that the country has one of the highest violent crime rates in Latin America. Crime rates are high in Guatemala, especially near border crossings. Drug-related armed attacks occur in regions close to its borders. The southwestern department of San Marcos at the Guatemala-Mexico border and the zone at the border with Belize are especially affected.
5. High dependency on agriculture, remittances
Agriculture is the biggest industry of Guatemala’s economy. The work is labor intensive but largely unskilled, and this type of work employs one-third of the Guatemala’s population. A large percentage of people of all ages rely on money made by relatives working abroad – more than 15 percent of the country’s GDP comes from remittances. These kinds of statistics suggest that the country is still quite under-developed, and they’re things that people thinking of doing business in Guatemala might want to mull over before making the move there.
Biz Latin Hub Can Help You with doing business in Guatemala
At Biz Latin Hub, we provide integrated market entry and back-office services throughout Latin America and the Caribbean, with offices in Bogota and Cartagena, as well as over a dozen other major cities in the region. We also have trusted partners in many other markets.
Our unrivalled reach means we are ideally placed to support multi-jurisdiction market entries and cross border operations.
As well as knowledge of doing business in Guatemala, our portfolio of services includes hiring & PEO accounting & taxation, company formation, bank account opening, and corporate legal services.
Contact us today to find out more about how we can assist you finding top talent or otherwise doing business in Latin America and the Caribbean.
If this article on the advantages and challenges of doing business in Guatemala was of interest to you, check out the rest of our coverage of the region. Or read about our team and expert authors.