Why Do Business in Guatemala?

When expanding into Central America, consider your prospects and the benefits of doing business in Guatemala. Though not the first Central American country in people’s minds as a hub for doing business, Guatemala does offer several key advantages to expanding multinationals.

The country is working towards a more stabilized economy and political landscape, and has more recently become a haven for executives to incorporate their companies and access wider regional commercial opportunities.

Recognize the benefits and advantages when doing business in Guatemala can help you get a step ahead for your own business expansion.

Key benefits of doing business in Guatemala

Little is known about doing business in Guatemala, but there are various reasons why foreign entrepreneurs choose to do business in the country:

1. Strategic geographic location

Guatemala is located in the middle of the Central American region, which is optimal for developing connections to South and North America via air, ocean or road. Flights usually have a duration of between 2 and 5 hours into some of the biggest cities in North and South America, making Guatemala incredibly accessible to business owners and executives.

The country borders Mexico, El Salvador, Honduras and Belize and is the third-largest country in Central America. This is very beneficial for businesses looking to expand further beyond Guatemala, especially with key access to Mexico’s population of approximately 130 million people.

Within Guatemala’s relatively small territory are 14 distinct ecosystems found at elevations ranging from sea level to higher than 4,200 meters. This makes the country very diverse with various climates, offering key agricultural and other commercial opportunities.

2. Productive and low-cost workforce

The workforce in Guatemala is young and productive, with a Labour Participation Rate of 59.3% according to TradingEconomics.

Labour is considered relatively low cost within and surrounding Guatemala, including in El Salvador, Honduras and Belize. The salary in Guatemala is just below US$400 per month currently. The workforce engages with international companies to develop its capabilities in various areas such as manufacturing, agriculture and the services sector.

Guatemala has a great base of technicians and other specialist professionals that are adaptable to different sectors. Guatemala's economy is dominated by the private sector, which generates about 85% of GDP. Most of its manufacturing is light assembly and food processing. The export of their main products, banana and coffee, are sent to the US, and Central American markets. Foreign business owners in Guatemala can access a qualified workforce to support their commercial operations.

3. Bilateral and regional agreements support international trade

Establishing a commercial presence in Guatemala gives companies easy access to other countries in the region through a number of strategic trade agreements.

Guatemala is part of the Central American Free Trade Agreement (CAFTA), which was established in 2006.

CAFTA liberalizes bilateral trade between the United States and countries like Guatemala, Costa-Rica, Honduras, El Salvador, Nicaragua and the Dominican Republic. This multilateral trade agreement promotes regional integration. It also requires Central American countries to introduce necessary reforms to address issues in areas such as

·      customs administration,

·      protection of intellectual property rights,

·      financial and other services

·      investment

·      market access

·      government procurement

This agreement also aims to reduce sanitary, phytosanitary and other non-tariff barriers.

In addition to CAFTA, Guatemala has signed bilateral or regional free trade agreements with Chile, Mexico, Colombia, Taiwan, Panama, the European Union, Peru, and the European Free Trade Association (EFTA) countries. The country is currently negotiating free trade agreements with South Korea, the United Kingdom, and Canada.

For a small country, Guatemala is well connected internationally, and committed to easing trade regulations for businesses operating within its borders.

4. Tourism on the rise

In the past, Guatemala battled national security issues that presented a challenge for visitors and commercial operators. However, over the years the situation has changed significantly, and tourism is on the rise.

2,113,270 visitors entered the country in 2017, representing an increase of 11% compared to 2016. By 2020, there are high expectations to maintain these levels. To achieve this, the country is working to promote itself as a tourist destination over 40 international tourism and travel fairs.

Companies working in the tourism industry can expect to see a growing number of visitors to Guatemala. The country’s self-promotion as a tourist destination offers new commercial opportunities in Central America for hospitality and other tourism services.

5. Natural resources a drawcard for mining companies

Guatemala is known for its abundant mineral reserves which include sand, gravel, nickel, uranium, limestone, petrol, coal, gold, silver, copper and many more. These minerals make up a significant portion of the country’s economic outputs.

Businesses are attracted by competitive conditions for mining companies. According to Azomining, Guatemala exports roughly US$560 million worth of mineral products including refined petroleum, lead ore, and nickel ore, and US$101 million of precious metals, primarily gold and silver.

In 2017, Guatemala produced the following volumes of mineral outputs:

1. Lead ore (US$134 million)
2. Nickel ore (US$122 million)
3. Crude petroleum (US$102 million)
4. Gold (US$57.8 million)
5. Silver (US$33.8 million).

Do business in Guatemala with the support of experienced local specialists

Doing business in Guatemala offers entrepreneurs and businesses the opportunity to expand into a central hub for commercial activity in Central America. The country is open to the prospect of foreign business and trade. Understanding the legalities before designing your business plan will create the foundation for smoother market entry.

To fully reap the benefits of doing business in Guatemala’s relatively unsaturated markets, be sure to engage with experienced local legal experts to ensure you can achieve full market entry, company formation and integration into the local market in full compliance with Guatemala’s corporate regulations.

Move quickly to secure a share of Guatemala’s growing market and play a part in shaping the future of this growing economy.

Biz Latin Hub CEO, Craig Dempsey