Infrastructure Improvements Emergency Rescue Plan for Road Infrastructure

Current Situation

The State of Guatemala stops returning on average GTQ 800 million annually. When analyzing the data and projections of the SAT, it can be established that the impact is large for the country's productivity, since approximately USD 6 billion per year is no longer circulated in the economy. According to the estimates made by Central American Business Intelligence (CABI), they indicate that the accumulation of files that the SAT has not concluded from 2012 until 2018 has left losses that exceed the GTQ 40 thousand, due to the effects they have on financial liquidity, the consumption, investments and the payment of taxes that could be generated by these activities. This happens because entrepreneurs and exporters let invest in more products, jobs, and investment in general.

The big problem with the return of the tax credit is that, over the years, the SAT has not been able to create an efficient, transparent and systematized mechanism to expedite this payment. In addition, problems of administration, blurring and expenditure of resources are generated within the different companies that by law enjoy the right to the refund of the tax credit. It also causes discretion of public officials causing the rules to be unclear. The result of poor management in the return of the tax credit translates into the flight of capital from the country and lack of incentives to attract investment, as this has a direct impact on the productivity of capital. The State, by not complying with the return of the tax credit in the term and in the manner established by law, contributes to the weakening of legal certainty and institutions.

Proposal

The economic mechanism that the Government of Guatemala uses for the operation of the refund of the fiscal credit must be improved. Improving the mechanism should immediately reduce the leverage, deficit and debt generated by the incompetence of the tax authorities regarding the authorized return of financial resources that belong to companies and that are indispensable for their working capital.

Currently the State fails to comply with the law and procedures, which has led companies to initiate legal processes to obtain the refund, generating additional costs and deteriorating the relationship with the tax administration. That is why compliance with the law must be strengthened and tax credit return processes must be improved. The law determines the terms and procedures that must be met for the return of financial resources. To this we must add the need to simplify the process of refund of the tax credit and include the reduction of the number of steps and documents for the registration and updating of as people subject to the refund of the tax credit.

Prevention and Eradication of Smuggling

Background

The Prosecutor's Office against Crimes of Fraud and Smuggling was created in May 2019. Since its creation, it has received 365 complaints, of which it has only resolved 74. However, the delay that exists in the resolution of cases is extensive, both those that are in the power of this specific Prosecutor's Office, as well as those that began prior to its creation.

In the course of 2020, the Superintendency of Tax Administration estimates that up to July, 110 million Quetzales have been seized in smuggled merchandise. In addition, the Superintendency estimates that in that same period of time, 2.5 billion Quetzales were no longer received, due to smuggling. In this way, it is evident that smuggling implies a scourge for the economic development of the country. Beyond the perception of fewer taxes by the State, unfair competition is generated from foreign products illegally entered into the country, which translates into a disincentive for the legal industry and national commerce.

Current Situation

The Organic Law of the Superintendence of Tax Administration is clear in establishing that it is responsible for exercising the leadership of the policy to combat smuggling and customs fraud in collaboration with other government entities. Furthermore, the Legal Provisions for Strengthening the Tax Administration indicate that the Superintendency must exercise total control of the country's customs.

As mechanisms to combat smuggling, the entities of the State of Guatemala have designed and implemented different mechanisms. In the first place, the legal framework that governs the fight against smuggling and customs fraud is the Law Against Customs Fraud and Smuggling, which develops the sanctioning regime that applies to those who commit actions framed in said law and creates the Interinstitutional Council for the Prevention and Combat of Tax Fraud and Customs Smuggling. As a complement to the above, the Criminal Code and the Criminal Procedure Code regulate aspects related to smuggling and customs fraud crimes.

On the other hand, the Judicial Organism has created specific courts to hear cases of smuggling and customs fraud, such as the one in the municipality of Ayutla, based in the city of Tecún Umán. This has been an effective strategy for the prosecution of crimes of smuggling and customs fraud, since the Court is positioned within the perimeter of one of the country's customs.

Based on this regulatory body, the Office of the Attorney General, the Prosecutor's Office, the Executive Branch and the Superintendency of Tax Administration created the National Policy for the Prevention and Combat of Customs Fraud and Smuggling 2018-2020.

Proposal

In this way, it is clear that there are legal tools to combat smuggling and customs fraud, so that beyond issuing new regulations or laws on smuggling, concrete actions are required within the current legislation, among which includes:

1. The implementation of technological tools in customs is essential, since the countries in which customs processes are carried out digitally offer more transparency and efficiency in the processing of daily commercial transactions. When making the entire customs process more technical, it is important to minimize the participation of individuals, so that the customs clearance of merchandise is not subject to arbitrary criteria that lead to acts of corruption to expedite the clearance of merchandise.

2. It is necessary to create a specific Prosecutor's Office to combat smuggling, because although in 2019 a Prosecutor's Office was created that is dedicated to the prosecution of customs fraud and smuggling as a whole, they are two fields that require specialization and specificity in the treatment of cases. Said prosecutors must have a presence at the country's borders, and be able to carry out operations in conjunction with the National Civil Police, the Army and the Judicial Branch, for the rapid and efficient capture of those who transgress the law.

3.

As a complement to the previous point, it is relevant to create specialized courts only for smuggling and customs fraud, close to all border and customs crossings in the country.

Insolvency Law

Background

COVID-19 has impacted not only people's health but also their economy. The market naturally adjusts faster than the legal framework. This pandemic anticipates a significant economic slowdown that will affect mostly small and medium-sized entrepreneurs. The first symptoms of this situation begin to be seen with an increase in the unemployment rate and it can be assumed that many of these companies will have an insolvency situation in the future. Legally, the Civil and Commercial Procedural Code regulates collective executions through voluntary and necessary competition;[1] It is within these legal figures that the insolvency of a debtor is dealt with. Despite the fact that the current regulations were enacted in 1963,[2] There are few collective execution processes that have been processed and are currently being processed in the Civil and Commercial Courts of Justice of the Republic of Guatemala.

The regulations currently in force, the Civil and Commercial Procedural Code, dates from 1963. Basically in 53 articles (from 347 to 400) the Guatemalan legal system develops the insolvency of natural and legal persons. Unlike other countries, this regulation, for its time, is very visionary since it includes both the possibility of insolvency of a natural person and a legal person.[3] The current regulations also have an order of priority for creditors and seek to establish precisely how each type of creditor should be treated,[4] providing a logical order and payment structure. Perhaps, where this regulation presents a greater limitation is in the speed and practicality of the process, because even when there is an agreement between creditors and debtor, it has always been interpreted that this must be approved by a judge.[5] In practice, judicial insolvency or bankruptcy proceedings have rarely been concluded in an adequate time, either due to judicial delay, the number of processes assigned by the courts or due to the lack of technical knowledge on the part of the operators. of justice to process the process. In other words, the rule has a substantive foundation and support, but from a practical point of view, the insolvency process has not been able to be concluded in a fast and agile way. Legal regulations are an obstacle to the solution of the legal conflict.

Initiative No. 5446

In the case of the initiative No. 5446 of the Congress of the Republic, named "Insolvency Law", it is currently under discussion. It regulates certain principles that are already recognized at constitutional level, in the Judicial Organism Law and in the Civil and Commercial Procedural Code. This regulation is based on two pillars. First, it proposes a reorganization plan approved by the majority of creditors. However, to do so, it contemplates the creation of a bankruptcy judicial bulletin where the agreement will be published. At the same time, it proposes the creation of specialized bankruptcy courts and a National Insolvency Directorate in charge of the Ministry of Economy, whose purpose is to support insolvency proceedings by promoting conciliation in a technical way. This model, even though it provides solutions to many current questions such as the payment of taxes or the consideration of a loan as uncollectible, has exactly the same problem as the Civil and Commercial Procedural Code: the procedure, far from being a quick and practical solution, is it becomes an obstacle to solving the problem. This logically will only, as it happens now, that those who are in a state of insolvency simply do nothing. In a situation such as the economic slowdown caused by the COVID19 pandemic, regulations such as this must seek a real and executable solution in the short term for the following reasons:

(1) It proposes the creation of specialized courts, that is, they are Courts that do not currently exist and that the Judicial Body must create and implement. If we take as a parameter the response that

the Judicial Body has currently had to COVID-19, the reality is that these courts will not see the light until one or two years after the entry into force of the rule.

(2) The modification of the written process to the oral process. Although it is true that orality facilitates the agility with which a process can be processed, the Judicial Branch in civil matters is not ready for a radical change in the short term. In addition, that a simple reference to the Oral Trial of the

Civil and Commercial Procedural Code is the equivalent of disregarding the practice in Courts in that these processes, with few exceptions, are still processed in writing.

(3) It creates an additional entity, dependent on the Ministry of Economy to provide technical advice in this type of process, both to debtors and creditors. Waiting for an entity to be created and worse, for it to come into operation is the equivalent of not providing a short-term solution to the citizenry.

Conclusions

The discussion and approval of an insolvency law is positive. Reforms and modifications to the insolvency procedures in Guatemala are necessary. However, attention must be paid to the content of this initiative and that it does have a positive impact, that it does not fall into the same problem that exists today.

An adequate proposal should seek to generate a simple change that can allow people, who do have the proper knowledge of insolvencies and bankruptcy, to process legal processes. The proposal should include reform s to the Civil and Commercial Code to allow the debtor and creditors handle the process of insolvency and bankruptcy before a notary. Currently there is experience with various legal processes in which a notary acts as a judge. Among these processes, it is especially important to highlight the succession processes, since they have very similar characteristics to insolvencies and are an example of agility in the face of the judicial apparatus. While a succession process in a notary office can take between 6 months and 1 year, in court the minimum term is 2 years. A proposal like this, which would involve reforming the Civil and Commercial Procedural Code establishing the possibility of processing the insolvency process in full before a Notary, has a real and plausible benefit. There are more notaries than judges in the legal market and this allows adaptation in the legal market to be much faster and more efficient than creating a series of specialized courts and a new Directorate of the Ministry of Economy.

[1] Vid., Articles 347 to 400 of the Civil and Commercial Procedural Code regulate collective execution. These standards regulate

[2] The Civil and Mercantile Procedural Code, Decree 107 was promulgated on September 14, 1963 by the then Head of Government Enrique Peralta Azurdia .

[3] Article 347 of the Code of Civil and Commercial Procedure establishes: “Natural or legal persons, whether or not they are merchants, who have suspended or are about to suspend the current payment of their obligations, may propose to their creditors the celebration of a agreement. They may also do so, even when they have been declared bankrupt, provided that it has not been judicially classified as fraudulent or guilty. ”

[4] Article 392 of the Code of Civil and Commercial Procedure establishes : “The classification and graduation of credits, except as provided in other laws, will follow the following order: 1. Acreedurías for food present and for personal work.

2. Creditors for last illness and funeral expenses, will, inventory and succession process. 3. Accreditations established in public deed, according to the order of their dates. 4. Common credentials , which includes all those not included in the previous numerals. As for the mortgage and pledge credits, once paid, if there is a surplus, it will be delivered to the depositary of the bankruptcy. Accepted the graduation of credits by the General Meeting or the cars that resolve the challenges that have been made, the trustee will formulate the liquidation of the bankruptcy, establishing the amount that corresponds to each creditor in the resulting balance, after deducting the legal expenses . The bankruptcy costs will be paid of all preference. ”

[5] Article 367 of the Civil and Commercial Procedural Code establishes: “If the agreement has not been judicially accepted and approved, the debtor will be declared insolvent and the necessary bankruptcy or bankruptcy will proceed, as the case may be. ”

Initiative for the Simplification of Administrative Procedures

Currently, in Guatemala, there is a high complexity in the procedures due to excessive deadlines, lack of implementation of technology and electronic government, the involvement of different actors in the processes, the high management costs and unnecessary requirements. This is demonstrated by the Doing Business Index in which Guatemala has the 96th position out of 190 countries, according to a 2020 report. Said study was carried out by the World Bank in order to evaluate and compare the ease or difficulty of doing business in a country, analyzing the impact that legislation and institutions have on the creation, operation and expansion of companies in a country. The index analyzes 10 indicators: time to open a business, access to electricity, access to credit, cross-border commerce, taxes, construction permits, property registering, fulfillment of contracts, protection of minority investors, and insolvencies.

For this reason, the Initiative for the Simplification of Administrative Procedures seeks to optimize, simplify and reduce paperwork in public institutions, aiming to improve the efficiency and productivity of the Executive Branch .

The initiative contains three important points:

(i) Governance

An entity responsible to promote the simplification of administrative procedures is the Presidential Commission for Open and Electronic Government, with the support of the Ministry of Economy. To strengthen governance, a sanctioning regime is established in which infractions and sanctions are established to the regulations for employees and public officials responsible for committing the described infractions .

Finally, it is important that it establishes procedures for complaints derived from the implementation of the law.

(ii) Digitalization of administrative procedures and use of electronic government

The initiative contains regulations that allow the implementation of mechanisms for the use of technology and electronic means for greater agility in the procedures. Among which we can mention:

• The signatures of the people in applications or forms that are presented can be physically or electronically to carry out the administrative procedures, and said signature is presumed authentic and does not require the legalization of the signature before a notary.

• The payment methods are extended to be able to do it by means of electronic payment, through virtual banking or bank applications that the entity works, or directly at any branch of the banks that the entity works or other electronic payment services. • Entities should implement the necessary technologies to use and implement progressive media electronics that allow the completion of formalities at a distance or improving your files with security conditions coming. To do this, it establishes: (i) obligations to report on administrative procedures on the internet with information on the procedures, requirements, costs, procedures, time and applicable regulations; (ii) implementation of the technology necessary to carry out procedures remotely, seeking to automate them; (iii) place on the internet available to users in the form or application for managing administrative process and arrangement can perform the procedures in line ; (iv) Any document electronic or digitized, signed with signature electronic advanced and sent the entities through tools that are available to perform procedures on line , they will be exempt from the sent copies physical and entities it will retain in digital form ( v) record and archive mail that will contain all the documents linked to the tr to limit administrative ; (vi) access to the information in the public registry; v) validity of documents and information transmitted electronically • Within the framework of simplification , the entities will work in a coordinated manner and create Inter-institutional Portals aimed at specific procedures or sectors . They will carry out all the administrative actions to facilitate the services to the user.

(iii) Simplification of procedures

The bill also contains rules that will help assist the simplification of procedures that will allow reducing time and costs for management, such as: (I) M echanisms rating service; ( i i) single rating and not partial reviews ; (ii i ) Avoid unnecessary rejections that do not result n relevant to define the bottom of the AFF AIRS or; (iv) Prohibit the requirement of d TATEMENTS j uradas, records or information that is generated by the entity that requires or legalization of documents produced or emanating from authorities public and validity of documents issued abroad duly accredited or certified in accordance with the Hague agreement, without the need for accreditation before a public entity or translation of the apostille seal; (v) no requirement to report a loss of documents; vi) rules on request for renewal of permits, licenses or authorizations.

Therefore, with adequate governance and implementation of the three edges described, it will allow the digitization of administrative procedures allowing electronic government and the use of technology, the effectiveness of government in its response capacity for the benefit of users , as well as significant savings. resource government , which will have a direct impact on developing economic , facilitation of trade and attraction of investment .