International Trade in Guatemala

News Related to International Trade in Guatemala

Business outline for Guatemala

Main Industry Sectors

The agricultural sector accounts for 10% of the GDP and employs more than one third of the active population.  The country produces and exports mainly coffee, sugar, bananas, cotton, rubber, cardamon and a variety of precious woods and exotic fruits. The country has a small mining industry and extracts copper, zinc, iron and nickel.
The industry sector accounts for approximately 30% of the GDP and employs 23% of the population. It stands mainly from textiles, paper industries, pharmaceutical products, as well as rubber transformation industries. It has to be noted that since Guatemala's entry into the Free Trade Area of the Americas (FTAA) created by the United States, the advantages in customs have brought an increment in investments and the establishment of American companies in the country.
The service sector represents the largest part of the GDP accounting for more than 60%. The tourism industry is very dynamic and continues to grow.

Economic Overview

Guatemala was highly touched by the global economic crisis which affected the country's exports and the money transfers from expatriates, the Guatemalan economy was very close to enter into recession in 2009, the growth was 0.5%.  The revival of foreign trade and the measures adopted by the government have allowed a growth increase of 2.4% in 2010.  The perspectives are gloomy due to the slowdown of the American growth.

After an economic crisis transformed into a humanitarian crisis due to meteorological problems, Guatemala requested help from the IMF and signed a stand-by treaty in April 2009.  The priority of the government is, on one side, to continue financing the reconstruction and recovery projects, and on the other side, to establish essential structural reforms.  In particular, a reform of the fiscal system which should allow to improve the collection of taxes and affront its actual deficit.  The country is struck by several difficulties, notably crime and corruption which represent hindrances to tourism and business. 

In the social plan, Guatemala faces a difficult situation: more than half of the population lives below the poverty line, the country has one of the highest rates of malnutrition in the world, and there is a strong inequality in income.

FDI in Figures

The end of the civil war, the measures to liberate the economy and later, the implementation of the free-trade agreement ALCA, have allowed a rapid development of foreign investment inflows into Guatemala.  The global economic crisis, however, provoked a decrease of FDI in 2009, and they are beginning to restart slowly again.  Many hindrances to FDI persist:  Security problems, lack of high-skilled manpower, low quality infrastructures, the frailty of its legal institutions, administrative burdens.

FDI Government Measures

Since 2004, the country has been making substantial efforts to promote foreign investment, facilitating the administrative procedures and establishing central information networks required for all foreign investors. Corruption and violence are denounced and handled by the state. The application and the success of these objectives are taking their time but Guatemala is clearly beginning a process of opening up economically and commercially. A proof of this is the number of trade treaties and agreements that have taken place in the past recent years. It is also important to remark 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 type of organizations shows its determination to create a safe and attractive environment to foreign investors.

Country Strong Points

The Guatemalan market is very competitive. The country benefits of a very advantageous position due to its proximity to Mexico and the United States on one side and to the rest of Central America on the other side. The customs union established among the Central American countries and North America facilitates the passage and trade of goods. Currently, FDI accounts for 17.4% of GDP. The latest executive laws that came into force have accelerated the progress of privatization and instigated the end of monopolies. In this regard, a number of private investments will be able to get established in the next following years. The preferential sectors are the food industry, telecommunications, tourism and consumer goods.

Country Weak Points

Guatemala has the usual problems of the so-called "developing" countries. Corruption and the weakness of the intellectual property protection system are the two most significant loopholes. Additionally, the slowness and complexity of the administrative and bureaucratic procedures are sometimes discouraging. The lack of security and the social inequalities can be a hindrance to the development of a company as well as the decaying condition of roads and  the communication networks in certain geographical areas.

Foreign Trade Overview

Foreign trade represents more than 50% of the Guatemalan GDP.  Guatemala is one of the five countries of the Central American Common Market (CACM) along with Costa Rica, El Salvador, Honduras and Nicaragua. The FTAA  (or ALCA) agreement was signed by Guatemala in 2004. This agreement is characterized by an advantageous customs union for the Central American countries, Mexico, the United States and Canada.
The main export products are coffee, sugar, oil, textile manufacturing, fruits, vegetables and cardamon. Guatemala's main export clients are: the United States, El Salvador, Honduras, Mexico and Costa Rica. The main import partners are: the United States, Mexico, China, El Salvador, Costa Rica and South Korea.  The country's trade balance is structurally in deficit, a trend that should continue.