Guatemala has the largest economy in Central America, with a $ 85.9 billion gross domestic product (GDP) in 2021. The economy grew by an estimated 7.5 percent in 2021 following a 1.5 percent retraction in 2020. Remittances, mostly from the United States, increased by 34.9 percent in 2021 and were equivalent to 17.8 percent of GDP. The United States is Guatemala’s most important economic partner. The Guatemalan government continues to make efforts to enhance competitiveness, promote investment opportunities, and work on legislative reforms aimed at supporting economic growth. More than 200 U.S. and other foreign firms have active investments in Guatemala, benefitting from the U.S. Dominican Republic-Central America Free Trade Agreement (CAFTA-DR). Foreign direct investment (FDI) stock was $21.4 billion in 2021, a 21.9 percent increase over 2020. FDI flows increased by 272.6 percent in 2021 mostly due to the purchase of outstanding shares of a local company by a foreign telecommunications company. Some of the activities that attracted most of the FDI flows in the last three years were information and communications, financial and insurance activities, manufacturing, commerce and vehicle repair, water, electricity, and sanitation services.
Despite steps to improve Guatemala’s investment climate, international companies choosing to invest in Guatemala face significant challenges. Complex laws and regulations, inconsistent judicial decisions, bureaucratic impediments, and corruption continue to impede investment.
Citing Guatemala’s CAFTA-DR obligations, the United States has raised concerns with the Guatemalan government regarding its enforcement of both its labor and environmental laws.
Guatemala’s Climate Change Framework Law established the groundwork for Guatemala’s Low Emission Development Strategy (LEDS) and is designed to align Guatemala’s emissions and development targets with national planning documents in six sectors: energy, transportation, industry, land use, agriculture, and waste management. In November 2020, the Guatemala government endorsed the LEDS as the country’s official strategy for climate change mitigation.
As part of the government’s efforts to promote economic recovery during and after the COVID-19 pandemic, the Ministry of Economy (MINECO) began implementing an economic recovery plan in September 2020, which focuses on recovering lost jobs and generating new jobs, attracting new strategic investment, and promoting consumption of Guatemalan goods and services locally and globally.
|TI Corruption Perceptions Index||2021||150 of 180||http://www.transparency.org/
|Global Innovation Index||2021||101 of 132||https://www.globalinnovationindex.org/
|U.S. FDI in partner country ($M USD, historical stock positions)||2020||USD 789||https://apps.bea.gov/international/
|World Bank GNI per capita||2020||USD 4,490||https://data.worldbank.org/indicator/
Bribery is illegal under Guatemala’s Penal Code. Guatemala scored 25 out of 100 points on Transparency International’s 2021 Corruption Perception Index, ranking it 150 out of 180 countries globally, and 28 out of 32 countries in the region. The law provides criminal penalties for official corruption, but the Public Ministry (MP) prosecuted very few government corruption cases.
Investors find corruption pervasive in government procurement, including payment of bribes in exchange for awarding public construction contracts. Investors and importers are frequently frustrated by opaque customs transactions, particularly at ports and borders. The Tax and Customs Authority (SAT) launched a customs modernization program in 2006, which implemented an advanced electronic manifest system and resulted in the removal of many corrupt officials. However, reports of corruption within customs’ processes remain. In 2021, SAT implemented additional customs reforms that route flagged shipments to a dedicated secondary inspection team for resolution, rather than assigning the case to the original inspector. The change eliminates opportunity for an inspector to impose deliberate delays.
From 2006 to 2019, the UN-sponsored International Commission against Impunity in Guatemala (CICIG) undertook numerous high-profile official corruption investigations, leading to significant indictments. For example, CICIG unveiled a customs corruption scheme in 2015 that led to the resignations of the former president and vice president. Since then-President Morales terminated CICIG in 2019 and actions by Attorney General Consuelo Porras to impede anti-corruption prosecutors, impunity has increased and poses significant risks for potential new investors.
Guatemala’s Government Procurement Law requires most government purchases over $116,363 to be submitted for public competitive bidding. Since March 2004, Guatemalan government entities are required to use Guatecompras ( ), an Internet-based electronic procurement system to track government procurement processes. Guatemalan government entities must also comply with government procurement commitments under CAFTA-DR. In August 2009, the Guatemalan congress approved reforms to the Government Procurement Law, which simplified bidding procedures; eliminated the fee previously charged to receive bidding documents; and provided an additional opportunity for suppliers to raise objections over the bidding process. Despite these reforms, large government procurements are often subject to appeals and injunctions based on claims of irregularities in the bidding process (e.g., documentation issues and lack of transparency). In November 2015, the Guatemalan congress approved additional amendments to the Government Procurement Law that tried to improve the transparency of the procurement processes by barring government contracts for some financers of political campaigns and parties, members of congress, other elected officials, government workers, and their immediate family members. However, there continue to be multiple allegations corruption and nepotism in the procurement process. The 2015 reforms expanded the scope of procurement oversight to include public trust funds and all institutions (including NGOs) executing public funds. The U.S. government continues to advocate for the use of open, fair, and transparent tenders in government procurement as well as procedures that comply with CAFTA-DR obligations, which would allow open participation by U.S. companies.
Guatemala ratified the U.N. Convention against Corruption in November 2006, and the Inter-American Convention against Corruption in July 2001. Guatemala is not a party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. In October 2012, the Guatemalan congress approved an anti-corruption law that increased penalties for existing crimes and added new crimes such as illicit enrichment, trafficking in influence, and illegal charging of commissions.