Guatemala flag Guatemala: Investing in Guatemala

Foreign direct investment (FDI) in Guatemala

FDI in Figures

According to the UNCTAD 2021 World Investment Report, Guatemala received USD 915 million in FDI inflows in 2020, a slight decrease from USD 975 million in 2019, as a result of the global economic crisis triggered by the Covid-19 pandemic. FDI inflows into Guatemala were estimated at USD 17.3 billion in 2020. Investment levels in Guatemala are lower as a percentage of GDP (less than 15%) than in Latin American (22%) or emerging economies (33%) (El Periódico). Causes include low investor confidence, institutional bottlenecks and uncertainty, recognised by the Bank of Guatemala as even greater factors in investment decisions than interest rates or workforce cost. Main investing countries include the U.S., Mexico, Columbia and Luxembour. Some of the activities that have attracted the most FDI flows in recent years have been manufacturing, trade and vehicle repair, financial and insurance activities, and water, electricity and sanitation services.

Guatemala ranks as the 96th country in the World Bank's last Doing Business Report, released in 2020, which represents a two-spot improvement from the previous year. The Guatemalan government promotes foreign investment, and investors technically receive equal treatment to national investors, but a variety of regulatory hurdles can serve as a barrier to investment. Guatemala is bolstered by free trade agreements with the U.S. and the E.U., its strategic location, abundant natural resources, a good business environment, strong performance in logistics and tourism, interest in technological development and aspiration to become a regional hub. There are also eight free economic zones in Guatemala, which offer tax incentives to investors. However, obstacles to FDI include insecurity, lack of a highly skilled population, low quality infrastructure, weak legal institutions, administrative burdens, social and political instability, and severe levels of crime and drug trafficking. Investors were also wary of a decrease in public investment and the political tensions between the Presidency and the International Commission against Impunity in Guatemala (El Periódico).

 
Foreign Direct Investment 201920202021
FDI Inward Flow (million USD) 9769323,472
FDI Stock (million USD) 16,67017,57021,423
Number of Greenfield Investments* 20712
Value of Greenfield Investments (million USD) 774120417

Source: UNCTAD, Latest available data

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

 
Country Comparison For the Protection of Investors Guatemala Latin America & Caribbean United States Germany
Index of Transaction Transparency* 3.0 4.1 7.0 5.0
Index of Manager’s Responsibility** 2.0 5.2 9.0 5.0
Index of Shareholders’ Power*** 5.0 6.7 9.0 5.0

Source: Doing Business, Latest available data

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.

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What to consider if you invest in Guatemala

Strong Points
Guatemala’s strong points to attract investment are:

- Prudent macroeconomic policy framework
- Access to international financial support
- Trade agreement with the U.S. (DR-CAFTA)
- Adequate business environment
- Geographical proximity of the United States and Mexico
- Strong potential of tourism, agricultural, mining, hydroelectric and geothermal sectors
Weak Points
Guatemala’s weaknesses impeding FDI are :

- Social and political instability
- Weak infrastructure
- Vulnerability to external shocks (natural disasters and commodity prices)
- Strong dependence on a low value-added industry and the remittance flows of expatriates
- Low tax revenues
- Rural poverty, inequality, underemployment, informality, ethnic cleavages
- Severe levels of crime and drug trafficking.

Government Measures to Motivate or Restrict FDI
The Guatemalan legal structure promotes investment and includes provisions that recognize and protect private property rights for both national and foreign investors. Additionally, Guatemalan law favours foreign investment under the Foreign Investment Law (Ley de Inversión Extranjera-Decree 9-98). 

Foreign investors technically receive national treatment, but a variety of regulatory hurdles can serve as a barrier to investment. Some professional services may be supplied only by local accredited enterprises. Mining activities face additional restrictions as minerals and petroleum are the property of the state.

There exist eight free economic zones in Guatemala, which offer tax inventives to investors. It is also important to note that Guatemala is part of  the  MIGA: Multilateral Investment Guarantee Agency, a branch of the World Bank in charge of promoting and protecting foreign investment. It has also been ratified by the OPIC: Overseas Private Investment Corporation. Guatemala's membership to these types of organizations shows its determination to create a safe and attractive environment to foreign investors.

Bilateral investment conventions signed by Guatemala
Guatemala has signed bilateral conventions on FDI with 21 countries. To find out more, please visit the investment policy hub website of the UNCTAD.

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Latest Update: July 2022