Board of Directors 2017 Juan Pablo Carrasco · Central Law President Roberto Castañeda· Special Fruits & Vegetable Exports, S.A. 1st. Vicepresident Nicholas Virzi · Consultant 2nd. Vicepresident Ana Chan · Walmart México y Centroamérica 1st. Secretary Salvador Leiva · Pan American Life de Guatemala 2nd. Secretary Marcelo Bobadilla · Consultant 1st. Treasurer Rodolfo Saenz · United Airlines 2nd. Treasurer María Stella de Aragón · 3M Vocal Rodrigo Gavarrete · Central Distribuidora S.A. Vocal Mario Nathusius · Cemaco Vocal
5 avenida 5-55 zona 14, Edificio Europlaza Torre 1 Nivel 5 Oficina 501-502 PBX: 2417-0800 www.amchamguate.com Published by: AmCham Guatemala
Gustavo Salas · PepsiCo Vocal Alejandro López · McDonald’s Vocal Stephen Miller · Helps International Vocal David Scharf · Colgate Vocal Adriano Yudiro Ueno · Chevron Vocal Nicole DeSilvis · United States Embassy in Guatemala ExOfficio Vocal Waleska Sterkel · AmCham Executive Director
Editorial Board Nicholas Virzi · Vice-President Waleska Sterkel · Executive Director Gabriela Flores · Publication Coordinator Gabriela Negreros· Trade Center Coordinator Gretel de Ippisch · Translator Jimena Nitsch · Design and layout
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Writers Juan Pablo Carrasco Waleska Sterkel Vivian Morales Astrid Beltetón René Castañeda Yaneli Perdomo Victor Asturias Crime Stoppers Guatemala Juan Francisco Solórzano Roberto Velásquez Amán Sánchez Paulo Boteo Alejandra Morales Werner Ovalle Acisclo Valladares
Daniel Fernández Méndez Juan Carlos Zapata Roberto Ardón Kristine Bouscayrol Caludia Galán Egar Ortiz Cristina Sandoval Ana Chan Eduadro Palacios Juan Pablo Morataya Andres Echandi Kevin González Ezrra Orozco Rodrigo Méndez
INVEST IN GUATEMALA Legal Framework for freign investment by Vivian Morales
pg. 11
Guatemala’s Economic Situation 2017 by Astrid Beltetón
pg. 14
Free Trade Zone Act, Decree 65-89 of the Congress of the Republic of Guatemala by René Castañeda
pg. 18
Significance of the bilateral Relationship Between the United States and Guatemala Interviewee Waleska Sterkel de Ortiz by María Isabel Rodríguez, UFM
pg. 20
Basic Requirements to Export by Trade Center
pg. 22
Basic Requirements to Import by Trade Center
pg. 26
Relocation Services by Yaneli Perdomo DOING BUSINESS PUBLIC SECTOR OVERVIEW Significance of CAFTA-DR for Guatemala’s Economy by Victor Asturias
pg. 32
Behind contraband in Guatemala Lies Organized Crime such as Gangs by Crime Stoppers Guatemala
pg. 36
Toward Trade Facilitation: A change of Paradigm in Guatemala’s Customs Model by Juan Francisco Solórzano Froppa
pg. 38
Convention 169: A Clearer and Safer Picture / Interview to Roberto Velazques By David Orrego, UFM
pg. 40
Amendments to the Code of Commerce, Focus on a Competitive Guatemala by Armán Sánchez
pg. 42
Insecurity by Paulo Boteo
pg. 46
Political Reform and Investment by María Alejandra Morales
pg. 48
Customs Competitiveness Tools by Werner Ovalle
pg. 50
National Competitiveness Policy Interviewee Acisclo Valladares by Rudy González Teleguario, UFM
pg. 54
In Search for the Guatemalan Tiger by Daniel Fernández Méndez
pg. 56
DOING BUSINESS PRIVATE SECTOR OVERVIEW The Significance of Infrastructure for Guatemala’s Competitiveness Changing the Scheme to Permit Greater Investment by Juan Carlos Zapata
pg. 60
The Strategic Matrix by Roberto Ardón
pg. 62
The Legal Framework of Intellectual Property in Guatemala by Kristine Bouscayrol Valladares
pg. 64
Institutional Framework a Pillar for Competitiveness by Claudia Galán
pg. 66
From Contraband to Free Trade by Edgar Ortíz
pg. 70
Part-time work: An incentive for the economy? by Cristina Sandoval Saravia
pg. 72
CORPOATE SOCIAL RESPOSABILITY Walmart Promotes the Development of Small Farmers by Ana Chan
pg. 74
Corporate Social Responsability in Guatemala Interviewee Eduardo Palacios by Alma Larissa Pérez, UFM
pg. 76
Sustainability Indicators Interview to Juan Pablo Morataya by María José Quezada Soler, UFM
pg. 80
INNOVATION AND ENTREPRENEURSHIP Uber: An Innovaative Self-Employment Option by Andrés Echandi
pg. 82
Molvu, Guatemalan Creators of Technology by Kevin González
pg. 84
Programs in Place in Guatemala For Development of Micro, Small and Medium-Sized Companies (MSMES) by Ezrra Orozco
pg. 86
Innovation and Development: The Guatemalan Case by Rodrigo Méndez
pg. 92
USEFUL INFORMATION Diplomatic Information
pg. 94
AmCham’s in Central America
pg. 94
Useful Websites
pg. 95
by Juan Pablo Carrasco de Groote President, AmCham Guatemala
Dear reader, Welcome to the 15th edition of our annual publication Doing Business and Investing in Guatemala. As a member of the board of directors for several years and current president of this prestigious chamber, it has been an honor to serve our members, strategic allies and the country in different ways and we will continue doing so for many years to come. It has been an honor to lead this institution in which for 50 years we have supported bilateral trade between the United States and Guatemala. This publication´s main objective is to help companies and investors that are interested on doing business in Guatemala or that have been transferred here to manage the local subsidiaries of multinational companies. Our main goal is for the magazine to be a useful tool to obtain information and find key contacts. Guatemala is a diverse country, with its ups and downs as any other, but very rich in resources, hardworking people, beautiful sites, among many other things that it has to offer. Our country offers many advantages and opportunities. United States is our first commercial partner making the free trade agreement CAFTA-DR a great strength for commercial and diplomatic relations. AmCham looks forward to be your best ally in Guatemala for any need and requirement that you have regarding businesses with United States. Providing contacts, holding meetings with potential business partners and government entities, commerce assessment and events are some of the services that chamber provide. We are here to be your concierge for business. I thank each of the writers of this magazine and each one of you for the trust placed in AmCham Guatemala. We hope that this edition will help you to learn more about the investment climate in our country. Don’t hesitate in contact us, it will be our pleasure to serve you and welcome you to this beautiful country.
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EDITORIAL
Waleska Sterkel de Ortiz Executive Director, AmCham Guatemala
On behalf of AmCham Guatemala’s team, I want to wish you all a happy and prosperous 2018. We plan another great year of engagement and support on behalf of our member companies and investment community. Year after year, we have sought to provide our partners with the best tools for business growth and internationalization. We believe that economic development is essential for progress and well-being, the key is the individual effort and initiative of each member of the society. The rule of law, respect for property and individual liberties must be warranty by all authorities and are fundamental to achieve a better standard of living in the country. As an effort of providing you the know how and essential information to do business and invest in Guatemala, we requested several experts to asses you about different topics that will provide you a complete overview for your business. It is a great pleasure to welcome you to the 15th edition of our annual publication of the magazine “Doing Business and Investing In Guatemala”. We hope this magazine brings you a general perspective about Guatemala and its productive sectors. We look forward to approach the resulting opportunities of the bilateral relation between Guatemala and its first trading partner and be your best ally regarding this topic. Contact us: American Chamber of Commerce in Guatemala 5ª. Avenida 5-55, Zona 14, Edif. Europlaza World Business Centre Torre 1, Niv. 5 PBX: (502) 2417-0800 wsterkel@amchamguatemala.com www.amchamguate.com
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VISION To be a leader organization, proactive and capable of having a positive and longterm impact on its associates, the community and the government, through the promotion of commercial relations between the United States and Guatemala. MISSION Promote relations between the United States, through the medium of economic activity and free enterprise, and further the legitimate interests of its members, fostering social responsibility. CREED AmCham believes that economic development is essential for progress and wellbeing. He considers that the key is the individual effort and initiative of each member of society. The rule of law, respect for property and individual liberties must be guaranteed by all causes and the fundamental status to achieve a better standard of living in the country.
Contact us: American Chamber of Commerce in Guatemala 5ÂŞ. Avenida 5-55, Zona 14, Edif. Europlaza World Business Centre Torre 1, Niv. 5 PBX: (502) 2417-0800 www.amchamguate.com
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DE CENTROAMÉRICA
arlaalaw.com
By Vivian Lucía Morales Herrera de Seré Senior Associate
OVERVIEW Guatemala is a country interested in promoting economic and social development, which is reflected in the Foreign Investment Law (Ley de Inversión Extranjera), since it promotes and guarantees foreigners with an impartial treatment vis-a-vis Guatemalans, who will have the same treatment regarding rights and obligations. LOCAL BUSINESS STRUCTURES The structure for foreign investment will depend on a number of factors including legal considerations, the location of the business and taxation. Guatemalan law recognizes the following local business structures: • Collective Company (Sociedad Colectiva) • Limited Liability Company (Sociedad de Responsabilidad Limitada) • Commandite Company (Sociedad en Comandita Simple) • Commandite Company by Shares (Sociedad en Comandita por Acciones) • Corporation or Stock Company (Sociedad Anónima)
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BRANCH OFFICES A foreign incorporated company may decide to establish a branch in Guatemala because of some of the unique tax benefits related to this business structure. Legally established foreign companies that would like to set up and operate in Guatemala are subject to the provisions of the Code of Commerce and other laws in the Republic. All documents coming from abroad have to include the Apostille (instead of the chain of legalization of foreign documents), since September 18, 2017, the Hague Convention of October 5, 1961 abolishing the Requirement of Legalization for Foreign Public Documents (Apostille Convention) came into force in Guatemala. It is important to mention that the requirements for translation (if the document is not in Spanish language) and to record them in a public deed (if required to present in any public office) are still in force. Temporary business Foreign companies may also request authorization from the Mercantile Registry to carry out temporary business in Guatemala. In these cases, foreign companies are required to provide evidence of being duly organized in its country of origin and must appoint a legal representative in Guatemala. TEMPORARY BUSINESS Foreign companies may also request authorization from the Mercantile Registry to carry out temporary business in Guatemala. In these cases, foreign companies are required to provide evidence of being duly organized in its country of origin and must appoint a legal representative in Guatemala. OPERATIONS REQUIRING NO REGISTRATION IN GUATEMALA Foreign companies do not require to be registered in Guatemala to carry out any of the following activities:
1. 2. 3.
Take part in any legal action or proceeding before a Guatemalan court or public office. Open or maintain bank accounts in an authorized bank in Guatemala. Sell or purchase from independent commercial agents legally established in Guatemala.
4. 5. 6. 7.
Purchase orders through agents legally established in Guatemala provided such purchases are subject to confirmation or acceptance abroad. Grant or open loan to companies established in Guatemala. Issue, endorse or contest credit instruments in Guatemala. Acquire movable goods or real estate, with the exception of land near international borders and waterfront properties, provided that such goods are not part of a local company or the foreign company does not negotiate with such goods regularly.
Main economic sectors of Guatemala are open to both local and foreign investment and ownership; however, some restrictions apply to sectors considered to be of strategic interest, such as military. The Foreign Investment Law of Guatemala (Decree 9-98 of the Congress of Guatemala), promotes foreign investment and includes provisions that recognize and guarantee private property rights equally for Guatemalan nationals and foreign investors and establishes an equal treatment between domestic and foreign investors. This law expressly forbids all and any discriminatory actions towards foreign investors and establishes that no restrictions can be placed on foreigners for owning any amount of stock in Guatemalan business entities. The financial activities or foreign investors are subject to the general protections granted to any kind of investments carried out in Guatemala. The Foreign Investment Law, Chapter 10 (investment chapter) of DR- CAFTA FTA as incorporated by its Chapter Twelve referring to Financial Services Chapter, and the Guatemalan Constitution clearly provides that foreign investors will receive a treatment not less favorable as national investor. The Foreign Investment Law of Guatemala has been valid and binding since March 1998. Its main objective is to encourage domestic and foreign investment in Guatemala and it was issued to comply with a fundamental obligation of the Government established in our Constitution (ConstituciĂłn Nacional de la RepĂşblica de Guatemala), to protect and promote capital formation, savings and investment. Before the enactment of this law, applicable legislation was contained in different laws and regulations and therefore it was considered appropriate and necessary
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to organize and systematize them into a single legal instrument, thus creating the Foreign Investment Law. Although the Guatemalan legal framework already recognized full equal treatment between domestic and foreign investors, there were some laws that included specific limitations for foreign investments such as: fishing licenses, companies commercially providing transportation services, commercial use of radio and television channels in the Radio Communications Law, oil drilling activities, all these were expressly eliminated with this new law. Providing insurance services was limited to Guatemalan nationals until the enactment of the new Insurance Law in 2010 through Decree Number 25-2010 of the Congress of Guatemala. One of the most valuable aspects of this Foreign Investment Law is that it recognizes the foreign investor the same treatment granted to domestic investors in the development of economic activities. This means that any foreign investor has equal legal conditions as domestic investors and this is a great incentive for foreign investors in Guatemala, given that not every country grants this. Our law expressly prohibits any act of discrimination against a foreign investor or its investment in Guatemala. The original text of the law stated that it should apply equally to all foreign investment, regardless of the country they come from, however in 2007 there was an amendment to it and it was established that full equality will be extended to foreign investors from any country or nation that is a member of the World Trade Organization (WTO) or with whom the Republic of Guatemala has signed any agreement for it inclusion in that institution, thus limiting the extend of this right. The aforementioned is regardless of the fact if Guatemala does or does not maintain diplomatic relations with that country or has no formal business with such countries or nations. According to the Foreign Investment Law, Foreign investors may participate in the development of any lawful economic activity in Guatemala, as well as any contribution to the capital of a corporation organized under Guatemalan law. Nevertheless there are some limitations to the aforementioned regulated in specific laws, such as: A) Guatemalan Constitution establishes that the Government reserves the domain of a strip of land three kilometers along the ocean, starting from the top line of tides, two hundred meters around the lake shores, a hundred meters 12
on each side of navigable rivers, fifty meters around the fountains and springs where populations obtain its water supplies. There are two exceptions to the aforesaid: A.1) if the land is located in urban areas and A.2) if the land was acquired prior to March 1st, 1956. If any of the lands included in the referred exclusions wants to be sold to foreigners it is required to obtain an express authorization from the Executive Branch of the Government to do so. B) Forest Law Decree Number 101-96 of the Congress of Guatemala establishes that only a Guatemalan national can be awarded with Government land concession for the sustainable management of a forest. C) Immigration Law (a foreigner requires to have an immigration permit to stay in Guatemala for more than 90 days), among others that regulate the development of a specific activity. Please refer to the next section called “Other Laws that promote foreign investment”. Foreign Investment Law establishes that no public officer or employee may request any additional requirement, condition or qualification applicable to any foreign investors that are not expressly included in a validly binding law. In addition to establishing full equality for foreign investors, the Foreign Investment Law expressly recognizes the following rights for all foreign investor: • Private Property. • Expropriation, only for reasons of collective, social benefit or social interest can be proven. • Free trade. • Free access to foreign exchange. • Prohibition of confiscatory taxation and double taxatio. Regarding administrative matters to apply this law, the Foreign Investment Law establishes the “Investment Office” as a department of the Ministry of Economy for the attention of foreign investors (through the Government Decision No.532-92). The final provisions of the Foreign Investment Law expressly provide that any restriction, requirement or condition applicable only to foreign investors for the development of a business or foreign investment in Guatemala contained in a law that has not been expressly modified or amended by this law is automatically unenforced.
By Astrid Beltetón Director of the Department of Economics, Rafael Landívar University
In early 2017, the world economic climate was one of uncertainty and contradictory signals regarding the economic performance of various regions and countries. This was associated, on the one hand, to the weak economic growth sustained in 2016 (the lowest since the world economic and financial crisis of 2008-2009) and to significant downward risks associated to the likelihood that global imbalances would continue to grow, that China’s deceleration might be more pronounced and that raw material prices would go down even further. On the other hand, it was associated to lack of political certainty, particularly regarding the policies to be promoted by the United States government administration, specifically in terms of foreign trade, immigration and fiscal policy, and their global implications. Added to this was the elections’ agenda in Europe and intensified geopolitical tensions, including the exit of the United Kingdom from the European Union (Brexit). These factors all represented significant sources of instability for the Guatemalan economy, particularly in view of their linkages with trade, investment, tourism and family remittances.
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The picture has changed since. According to the International Monetary Fund (IMF), economic activity bounced back in Europe, Japan and the United States of America in 2017, as did the emerging economies of Asia, particularly China and India (WEO, October 2017), supported by reactivated investment, international trade and industrial production, in a context of high levels of trust by companies and consumers. As a result of this, global economic growth projections were corrected upward in October, to 3.6% for 2017 and 3.7% for 2018, in both cases, over the rate of 2016 (3.2%). In spite of this, Guatemala’s economy sends mixed signals. Some economic performance indicators reflect dynamic behavior, as does foreign trade and Forex income from family remittances. By contrast, other indicators show positive performance but maintain a deceleration trend, such as private sector credit rates and public spending.
PRODUCTION
INFLATION
In recent years, economic growth has been positive, at around 3.5%. Economic activity is expected to have grown during the third and fourth quarter of 2017, respectively, to rates of 3.8% and 3.9% inter-annually. With that, the GDP growth for this year would be 3.27%1, close to 3.2% and 3.4% according to IMF and World Bank (WB) projections, respectively.
Low, consistent inflation continues to be a macroeconomic stability factor. While it continues to be sensitive to food prices, Guatemala’s inflation rate is lower than in other countries in Latin America. Inflation falls within the range established by the Bank of Guatemala (4.0% ± 1 percentage point). In fact, throughout this year, inflation has remained within the Central Bank’s target with the exception of the month of July when it was 5.22%, resulting from an internal supply shock. After that month, the trend has been downward with an official projection of 4.5% for the end of the year, close to the projection by the IMF (4.3%), to drop further to 4.25% in 2018 (to 4.0% according to the IMF).
The manufacturing industry, private services, agriculture and trade are the majot economic activities that promote Guatemala’s economy. Trade stands out in the first half of 2017, with 4.3% growth, associated to the growth in imported goods. By contrast, the manufacturing industry sector experienced a downturn of 0.7% during the second quarter, after having grown in the first quarter (3.1%). Financial intermediation services experienced significant growth during the second quarter of the year (2.6%) as did energy and water catchment (2%).
FOREIGN SECTOR Although current account deficit has been characteristic of Guatemala, a 1.3% surplus was reported in 2016. This was mainly the result of increased family remittances and the reduction of importation prices, in particular, fuels and lubricants, a consequence of the international oil price drop. This, together with the recovery in exports, has continued to influence the current account results during this year, and therefore, a surplus is again expected. The FOB value of exports shows a positive trend. Specifically, as of September 2017, it shows an inter-annual variation of 6.0% over the same period in 2016, unlike the previous two years that recorded reductions of -4.1% in 2016 and 1.1% in 2015. As of the same month, the CIF value of imports shows an inter-annual growth of 6.5% after reductions reported in 2015 and 2016.
Graph 1: 2017* projection made by URL’s Department of Economics. Source, Central Bank of Guatemala.
Forecast produced by the Department of Economics, based on official data.
Direct Foreign Investment (DFI) has dropped gradually in recent years after reaching a record level in 2014. A sustained 3.9% down trend over 2016 is expected in 2017. Forex revenues in the country from family remittances continue to be a significant source of consumption funding and investment for Guatemalan households. The projection is USD8, 266.2 million in total revenues, that is, 15.4% more than in 2016, and 15.0% of the GDP.
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GRAPH 4: 2017* projections by the Department of Economics of URL. Source: Bank of Guatemala
Regarding Forex inflows from tourism, a 7% increase over the previous year is expected, which means that it would be eight times lower than the revenues from family remittances.
FISCAL SECTOR According to the projections of the Department, total Central Government revenues will increase in the last two months of the year (3.9% in November and 4.0% in December). This means a 4.5% increase in 2017 over 2016 due, mainly, to increased tax revenues. This is 11.12% of the nominal GDP. Regarding Central Government spending, the budget in place for 2017 amounts to Q 73,930.20 million, 13.2% of the nominal GDP. Spending in November and December is estimated at Q5,601.83 and Q8,099.49 million respectively which means that the year will close with a total execution of Q65,343.60 million, 88.3% of the budget. This is equivalent to 12.1% of the nominal GDP, a reduction of 0.02% from 2016.
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GRAPH 5: 2017* data projected by the Department of Economics, URL. Source: Ministry of Public Finance
PUBLIC DEBT According to the forecast by the Department, the domestic debt secured through bonds will increase by 8.2% from 2016 and the foreign public debt will increase by 5.1%. Altogether, this would mean that the total public debt of the country is 24.6% of the GDP in 2017 and exceeds total central administration expenses 2.2 times.
​REFERENCES ​ ank of Guatemala. (28 de Noviembre de 2017). http:// B www.banguat.gob.gt. Obtained from http://www.banguat. gob.gt/inc/main.asp?id=111348&aud=1&lang=1 Internatinal Monetary Fund. (2017). World Economic Outlook . Washington, DC. Ministry of Public Finance. (November, 2017). ww.minfin. gob.gt. Obtenido de http://www.minfin.gob.gt/index.php/estadisticas-e-indicadores/situacion-financiera
By RenĂŠ CastaĂąeda Association of Free Zones of Guatemala
The Free Trade Zone Act, contained in Decree number 6589 of Congress, was enacted on November 14, 1989. Its main objectives are the strengthening of foreign trade, the generation of employment and the transfer of technology. Article One defines a Free Zone as a physically defined area of land, which has been planned and designed, and is subject to a Special Customs Regime to engage in the production or marketing of goods for export, as well as for the provision of services associated to International Trade. According to the activity to be developed, it segments its users into: a)Industrial: When engaged in the production or assembly of goods for export outside the national customs territory, re-export, or research and technological development. b)Services: When they engage in the provision of services related to international trade. c)Commercial: when they engage in the trade of goods for export outside of the national Customs territory, as well as to re-export goods, without changing the 18
characteristics of the product, or without altering their original condition. This segregation was reformed through Decree 19-2016 of Congress: Emerging Law for Employment Conservation, which amended Decree 65-89 of Congress: Free Trade Zone Act, which now reads: Industrial goods producers: When they engage in the production, transformation, assembly and processing of goods, with an aim to give them other characteristics, uses or functions different from their original materials or components, or which are consumed, or to technological research and development; and Services: when they engage in the provision of services including trade activities associated to international trade. There are currently 13 free trade zones in Guatemala in operation, located mainly in the Departments of Guatemala and San Marcos (border with Mexico). There are currently over 200 companies established in free trade zones.
REQUIREMENTS TO SET UP OPERATIONS IN A FREE TRADE ZONE Setting up operations in a Free Trade Zone involves four general steps:
1 2 3
4
Having an individual or legal local or foreign Company which may obtain authorization to be a free trade zone user. Signing the respective lease agreement with the Free Trade zone chosen. Each Free Trade Zone defines its lease rates and general services that it provides. However, lease rates are between US$ 2/ m2 and US$ 5/m2 depending on the location of the free trade and the total area which will be used. Processing the qualification of the Company with the Ministry of Economy to be a Good Producer User or a Service Provider User, to include trade activities. Once the User has received authorization from the Ministry of Economy, The Tax Administration – SAT- enables the Company to engage in importation and exportation to and from the Free Trade Zone, free from the payment of taxes, and authorizes the issuance of Invoices for the export of goods or services. These Invoices, which are called “Free Trade Zone User Commercial Invoice” are issued in US$ and no taxes are levied on them. This Invoice is the main support document for exports, which need a Single Customs Declaration (DUA in Spanish).
FISCAL BENEFITS
OTHER BENEFITS Each Free Trade Zone has a Customs Office in its facilities which is responsible for verifying the entry and exit of goods, vehicles and persons. Usually, these procedures are more agile *in time and cost than in a general Customs Service because companies are operating physically in a Free Trade Zone and their import and export processes become habitual. Every Customs control procedure must be met in every case. MAIN OBLIGATIONS The main obligations to be met by companies that are authorized to operate in a Free Trade Zone are: • Every Free Trade Zone Company must file the electronic Social Security (IGSS in Spanish) form on a monthly basis; • Producers must file with SAT, on a monthly basis, a production coefficient report as defined for their productive processes; • On a quarterly basis, the “statistical form” outlining investment, jobs and wages paid during the quarter must be filed with the Ministry of Economy; • On an annual basis, and within the first two months of each year, the Ministry of Labor and the Ministry of Economy must receive the workers’ payroll of the company; • The Company must keep a permanent inventory system; • The Company must allow any necessary inspections required by the Ministry of Economy and by Customs.
• Exemption of Import Tariff Duties (DAI in Spanish) and of the Value Added Tax (IVA in Spanish) on imports and on local purchases. • Exemption of IVA on goods transfers within and between Free Trade Zones. • Exemption of the IRS for 10 years for all exports made from the Free Trade Zone outside of Guatemala. It should be noted that sales made from Free Trade Zones to Guatemala are not IRS-exempted.
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Interviewee Waleska Sterkel de Ortiz Executive Director, AmCham Guatemala by María Isabel Rodríguez Aparicio, Universidad Francisco Marroquín
Since the entry into force of DR-CAFTA in 2006, the relationship between Guatemala and the United States has been primarily economic; this is reflected in exports from Guatemala to the United States. These exports are mainly of agricultural commodities: Guatemala is the main supplier of commodities such as snow peas and bananas to the United States. The most important sectors for the United States’ imports are agricultural and manufacturing; Guatemala is a large exporter to the U.S. in these sectors.
not only from the United States but from the rest of the world, and to do so by focusing particularly on job creation and easing the process to bring businesses to the country. Yet, during this year, several U.S. franchises have opened businesses in Guatemala. Some examples are restaurant chains like Denny’s and Krispy Kreme, and hotel chains like Hyatt Centric. This means that Guatemala is potentially an important trade partner for U.S. chains, and the fact that it is the closest Central American country to the United States makes it even more attractive.
Another important consideration for Guatemala in this bilateral relationship is that the United States is one of its major trade partners, particularly in terms of investment. As the Executive Director of AmCham, Waleska Sterkel, has said, Guatemala needs to focus on amending several laws to favor foreign investment,
The fact that the United States is one of the greatest powers in the world makes its closeness to Guatemala significant in terms of important ties on the political and social sides, particularly regarding migration and drug trafficking. An example in the issue of migration is the Alliance for Prosperity Plan, where international cooperation for Central America’s
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Northern Triangle seeks to work to mitigate migration through joint efforts by the government, civil society and the private sector. The effort also seeks to create optimal economic conditions in Guatemala. Although the Plan was executed during former President Obama’s administration, it continues with the current Trump administration, and in fact, it continues to be improved on through high-level assessment efforts and meetings among officials from the countries of the Northern Triangle and incumbent U.S. Vice President Mike Pence.
THE BILATERAL RELATIONSHIP BETWEEN THE UNITED STATES AND GUATEMALA CONTINUES TO STRENGTHEN.
The change of government administration in the United States brought about migration policy changes. These, however, have not been radical changes and they have not affected the relationship between the two countries. The recent tax break for American citizens increased their purchasing power, which benefits Guatemala since the purchase and imports of Guatemalan products increases. U.S. presence in the country has increased in view of the importance of Guatemala in terms of security concerns and particularly in terms of the economy. However, Guatemala’s cooperation to make improvements is crucial. Also critical is the improvement of the quality of life of Guatemalans through economic growth and the creation of job opportunities, as this will help reduce migration. As to the future of the relationship between the United States and Guatemala, we see a prosperous future in view of the continued and unfailing support on the part of the great American power. The bilateral relationship between the United States and Guatemala continues to strengthen.
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By Gabriela Negreros Trade Center Coordinator AmCham Guatemala
TRADE REGISTRY The exporter must be properly registered as a trader in Guatemala through a License for Trading. UNIFIED TAX REGISTRY (RTU IN SPANISH) The trader must obtain a Unified Tax Registry (RTU in Spanish) from the Tax Administration Agency. EXPORTER CODE This is requested electronically through the SEADEX WEB (Electronic System for the Authorization of Exports) http://seadex.export. com.gt Documents required per type of company:
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*This is a general guide. Advice on exports will be offered individually for each type of product. Please contact an AmCham Trade Center representative.
You will find the authorized signature registration form in the following link: http://vupe.export.com.gt/ayuda-al-exportador/solicitudes/ Reviewing and verifying the application will take 2 to 3 hours. Data will be verified through the telephone number that you enter in the application. In this step you will be asked to pay Q92.00 to the C.E. EXPORT AUTHORIZATION service at any branch of Banco Industrial or Banrural. After obtaining your Exporter Code, for each export you make, the company must process export documents and their respective permits (if you need special permission, depending on the type of product).
EXPORT DECLARATIONS Appropriate export documents must be filed for each export. There are different types of forms, dependent upon the country of origin, country of destination and transportation mode to be used. Formulario Aduanero Único Centroamericano (Central American Single Customs Form) (FAUCA) applies when the origin of the product is Guatemala or Central America and the destination country is in Central America. The Central American Economic Integration Treaty is applicable with the use of this form.
NON-TARIFF REQUIREMENTS Some products are subject to specific export requirements involving the issuance of special permits from the competent authority in each case.
DOCUMENTS Goods declarations must be supported by the following documents, depending on the Customs regime in question: • Commercial invoice in the case of international purchase-sale transactions, or an equivalent document in every other case; • Transportation documents such as: bill of lading, airway bill or an equivalent document; • Certificate of origin, when applicable; • Licenses, permits, certificates or other documents related to non-tariff restrictions and regulations to which goods are subject, plus other authorizations.
Declaración para el registro y control de exportación (Declaration for the registration and control of exports) (DEPREX) applies when the country of origin of the goods is not in the Central American region; the country of destination may be a Central American country or the rest of the world.
TYPES OF EXPORTS
Declaración Única Aduanera Single Customs Declaration (DUA) -Sea/ Air-
Permanent export A permanent export involves the exit from the Customs territory of national or nationalized goods for use or consumption abroad.
•Simplified DUA/Class 11: for exports by sea or air. It is issued prior to export and the export must
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be subsequently settled with a complementary DUA. •Complementary DUA /Class 37: For exports by sea or air. It is issued once the goods have been exported and is used to settle the export with the Tax Administration Agency (SAT).
Temporary export with re-importation in the same condition
Find a guide to fill out the certificate of origin associated to CAFTA-DR here:
Temporary export with re-importation in the same condition is the Customs regime through which, with suspension of the payment of duties on the export, as the case may be, the temporary exit from the Customs territory of national or nationalized goods is allowed for a specific purpose, and for a specific period of time, on the condition that they are re-imported without having undergone abroad any transformation, production process or repair, in which case upon their return they will be admitted with full exemption of import duties.
http://vupe.export.com.gt/wp-content/blogs.dir/8/files/GUIA_ PARA_EL_LLENADO_DEL_CERTIFICADO_DE_ORIGEN_ CAFTA_DR.pdf
Temporary exportation subject to processing abroad Temporary exportation for processing is the regime that allows the exit from the Customs territory of national or nationalized goods to be subject abroad to processes of transformation, production, repair or others permitted, with the suspension, as the case may be, of export duties, for re-importation subject to taxes and within the period of time provided for in the Regulations.
COMMERCIAL INVOICE This is a document that confirms the price of goods, and which contains their full description with the type, variety, model, amount, weight, value and purchase-sale clause agreed to between buyer and seller. The commercial invoice is a private document that the seller of goods issues in favor of the buyer. It reflects the free will of the parties to each condition, but at the same time must abide by international standards and uses since it is one of the most important documents to complete the export and import formalities involved in international purchase-sale transactions.
CERTIFICATES OF ORIGIN VUPE offers to exporters the issuance of different Certificates of Origin electronically through SEADEX Web, to export under Free Trade Agreement or Partial Scope Agreement schemes. The Agreement in place for exports to the United States is the “Central America - Dominican Republic - United States Free Trade Agreement� -CAFTA-DR-. Certificates of Origin are issued at no cost when the DEPREX document is produced. This document will provide support for the origin of the goods to enable the use of free trade agreement benefits.
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By Gabriela Negreros Trade Center Coordinator AmCham Guatemala
transformation, processing, repair or another process authorized under this regime may be imported permanently, according to the rules of the competent authority.
TYPE OF IMPORTS SAccording to the Central American Uniform Customs Code (CAUCA): ARTICLE 92. PERMANENT IMPORTATION Permanent importation is the entry of foreign goods for their final use or consumption in the Customs territory. ARTICLE 97. TEMPORARY IMPORTATION FOR REEXPORT IN THE SAME CONDITION Temporary importation for re-export in the same condition is the regime that allows the entry of goods into the Customs territory for a specific period of time, with the suspension of import duties on them; these are goods for a specific purpose, which will be re-exported within that period of time, without having undergone modifications other than the normal depreciation resulting from its use. ARTICLE 98. TEMPORARY INWARD PROCESSING
ADMISSION
FOR
Temporary admission for inward processing is the entry into the Customs territory with suspension of duties on imports of foreign goods, intended to be re-exported, after undergoing transformation, processing or repair or another legally-authorized process. After complying with the requirements, formalities and conditions established in the Regulation, a percentage of the goods subject to 26
IMPORTER REGISTRATION Importers must register in the Importers’ Registry and meet the following requirements:
a.Have a Tax Identification Number (NIT in Spanish) b.Have at least one business which is registered in the taxation system c. Have a License to Trade that lists the imports that it engages in d. Access to Internet e. BANCASAT accession contract through a bank of the system
Documents to support the Customs Declaration The following documents are required to support the goods’ declaration (except DUT and FAUCA): Commercial Invoice Transportation documents: bill of lading, airway bill or any other like document
Declaration of the Customs value of the goods for the permanent import regime Certificate of origin of the goods, when they are covered by a preferential tariff treatment Licenses, permits or certificates related to compliance with non-tariff restrictions and regulations when required.
NOTE: see the Procedure for the entry of goods into the national territory when they are to be transferred to a fiscal warehouse, free trade zone; guarantees, temporary importation or another special case. fiscal warehouse, free trade zone; guarantees, temporary importation or another special case.
IMPORTATION PROCESS (LOGISTICS OPERATOR/CARGO AGENCY)
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Have a supplier and a price quotation for the product to be imported
Accept the price quotation, receive the invoice with the agreed-to Incoterm
The importer selects a cargo agency in Guatemala to establish contact with the supplier.
The supplier receives payment as agreed and establishes contact with the cargo agency.
The cargo agency collects and provides support for the goods in transit.
Customs procedures are conducted through the Customs broker upon arrival of the cargo in Guatemala.
Duties are paid to clear the goods.
The cargo is transferred to the client’s warehouse.
Incoterms® 2010 COSTS All modes of transport DESCRIPTION
EXW Ex Works
FCA Free Carrier
CPT
INSURANCE Sea and inlan waterways
FREIGHT/RISK MORE DETAILS SELLER SELLER SELLER SELLER SELLER SELLER
BUYER BUYER BUYER
Freight Seller’s premises. Risk Seller’s premises.
BUYER BUYER BUYER
Freight freight handler, Seller is responsible for delivery to the custody of the carrier, wich is provided by the buyer. Risk freight Risk is transferred as soon as loading has taken place. handler.
SELLER
Carriae Paid to
SELLER SELLER
CIP
SELLER
Carriage and insurance Paid to
RISK
DAT DAP Delivered at Place
DDP Delivered Duty Paid
Free Alongside Ship
FOB Free on Board
CFR
Seller delivers the goods to the carrier at an agreed place of delivery and pays for transport to the named destination. Risk is transferred at the place of delivery, wheras seller pays for transport to the destination.
BUYER
Freight Destination. Risk first freight handler.
Seller delivers the goods to the carrier at an agreed place of delivery and pays for transport and insurance to the named destination. Risk is transferred at the place of delivery, wheras seller pays fortransport and insurance to the destination.
Freight: Destination. Risk: Destination.
Seller delivers the goods unloaded at a specified place inside the agreed terminal, Rsik is transferred as soon as the goods have been unloaded.
SELLER
BUYER
SELLER SELLER SELLER
BUYER BUYER BUYER
SELLER SELLER SELLER
BUYER BUYER BUYER
Freight: Place of Seller delivers the goods to the disposal of the buyer on the arriving means of transport at destination. Risk: Arriving means of the agreed place. Seller assumes the risk until the goods are made ready for unloading from transport at destination. the arriving means of transport.
SELLER SELLER SELLER
BUYER BUYER BUYER
Freight Destination. Risk Destination.
BUYER BUYER BUYER
SELLER SELLER SELLER
Freight On board ship. Risk On boad ship.
Seller is responsible for delivery of the goods loaded on board the ship. Risk is transferred as soon as the goods have been set down inside the ship.
BUYER BUYER
Freight Port of destination. Risk On boad ship.
Seller covers cost of freight, duty unpaid, to the named port of destination. Risk is transferred as soon as the goods have been set down inside the ship.
BUYER BUYER BUYER
Freight Port of Seller covers cost of insurance and freight, duty unpaid, to the name port of destination. destination. Risk Port of destination. Risk is transferred as soon as the goods have been set down inside the ship.
BUYER
SELLER SELLER SELLER
CIF
SELLER
SELLER SELLER
Seller is responsible for bringing the goods to the destination, paying any duty and making the goods available to the buyer. Risk is transferred as soon as the buyer has access to the goods ready for unloading at the agreed destination.
Freight Shipside in port Seller is responsible for delivery of the goods at the quay alongside the ship. From this point of departure. Risk shipside in port of onwards, risk lies with the buyer. departure.
BUYER BUYER BUYER
SELLER SELLER SELLER
Cost and Freight
Cost, Insurance and Freight
Freight Destination. Risk first freight handler.
BUYER
Delivered at Terminal
FAS
BUYER BUYER BUYER
SELLER
Seller is only responsible for making te goods available at the seller’s premises. The buyer bears the full risk from there to the destination.
RULES FOR ANY MODE OR MODES OF TRANSPORT EXW Ex Works “Ex Works” means that the seller delivers when it places the goods at the disposal of the buyer at the seller’s premises or at another named place (i.e.,works, factory, warehouse, etc.). The seller does not need to load the goods on any collecting vehicle, nor does it need to clear the goods for export, where such clearance is applicable.
FCA Free Carrier “Free Carrier” means that the seller delivers the goods to the carrier or another person nominated by the buyer at the seller’s premises or another named place. The parties are well advised to specify as clearly as possible the point within the named place of delivery, as the risk passes to the buyer at that point.
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RULES FOR SEA AND INLAND WATERWAY TRANSPORT CPT Carriage Paid To
FAS Free Alongside Ship
“Carriage Paid To” means that the seller delivers the goods to the carrier or another person nominated by the seller at an agreed place (if any such place is agreed between parties) and that the seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination.
“Free Alongside Ship” means that the seller delivers when the goods are placed alongside the vessel (e.g., on a quay or a barge) nominated by the buyer at the named port of shipment. The risk of loss of or damage to the goods passes when the goods are alongside the ship, and the buyer bears all costs from that moment onwards.
DAT Delivered At Terminal
FOB Free On Board
“Delivered at Terminal” means that the seller delivers when the goods, once unloaded from the arriving means of transport, are placed at the disposal of the buyer at a named terminal at the named port or place of destination. “Terminal” includes a place, whether covered or not, such as a quay, warehouse, container yard or road, rail or air cargo terminal. The seller bears all risks involved in bringing the goods to and unloading them at the terminal at the named port or place of destination.
“Free On Board” means that the seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel, and the buyer bears all costs from that moment onwards.
DAP Delivered At Place “Delivered at Place” means that the seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination. The seller bears all risks involved in bringing the goods to the named place. DDP Delivered Duty Paid “Delivered Duty Paid” means that the seller delivers the goods when the goods are placed at the disposal of the buyer, cleared for import on the arriving means of transport ready for unloading at the named place of destination. The seller bears all the costs and risks involved in bringing the goods to the place of destination and has an obligation to clear the goods not only for export but also for import, to pay any duty for both export and import and to carry out all customs formalities.
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CFR Cost and Freight “Cost and Freight” means that the seller delivers the goods on board the vessel or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel. the seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination. CIF Cost, Insurance and Freight “Cost, Insurance and Freight” means that the seller delivers the goods on board the vessel or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel. The seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination. ‘The seller also contracts for insurance cover against the buyer’s risk of loss of or damage to the goods during the carriage. The buyer should note that under CIF the seller is required to obtain insurance only on minimum cover. Should the buyer wish to have more insurance protection, it will need either to agree as much expressly with the seller or to make its own extra insurance arrangements.”
moving l packing l storage l relocation
By Yaneli Perdomo INTERMUD
Nowadays foreign transferees relocated to a new country bring to companies around the world unique perspectives and experienced, which makes greater value to their business. Mobility Management gives a right-size customized package that accommodates transferees, with consistency and flexibility, making them and their families feel not only guided but also confident that most of the details of the new environment have been considered, in other words the relocation transition, are been recognized and coordinated. This can only be provided with a trained, dynamic and certified team with expertise in the relocation field, which turns into efficient, strategic, consultative and professional assistance, seeking stability in the “new life” not only for the company’s best interest but also for the assignees happiness and productivity and for their families as well. Then, how would you define a successful global mobility service? We find important not only to cultivate meaningful connections with our clients and global network supplierpartners but also expect them to trust our commitments towards our relocation services, building solid long-lasting relationships by satisfying common needs getting the work done. INTERMUD’S COMMITMENTS: • Provide tools in relocation services consulting and customized client solutions. • Been a global network with a local home touch. • Understand the value of the mobile workforce; the 32
people we move typically represent a company’s “special forces”. • Creating a positive impact in people’s careers and business. • Assuring growth and profitability for company’s relocating their assignees in an easy non stress environment. • Our Relocation services include: • Familiarization Program • House Search Program • School Search Program • Legal Counseling (Work permit, residence permit, driver’s license, and other specific documents that your new destination requires) • Temporary Accommodation • Furniture rental • Cross Cultural Training • Pet importation • Departure Package Therefore please take into consideration the following tips: • Be sure that before you live origin country you have all the immigration documents legalized as it is required in the destination country, to avoid delays in your process. • Get in touch with your moving company as soon as possible, so you can have the time frame that will take for your belongings to arrive to the new country. • Make sure that you understand all the requirements for export and import process of your belongings. • Be ready! Investigate, verify and learn about the new place you are going to live. • Gather information on climate, typical foods,
holidays, language, and tourist places of the country you are moving in. • Register! Set up new accounts and notify government agencies, internal Revenue Service and/or other government agencies, etc. of your new address. • Identify basic Services, such as local pharmacies, clinics, hospitals, doctors, embassy, the local fire and police departments, Veterinary office/pet hospital and pet food store and supermarkets. • Locate the nearest shopping mall, banks, restaurants, churches, schools, bus stops, beauty and barber shops, dry cleaner, gas stations, fitness center, museums, zoo and parks, general entertainment. • Communicate all the information you’ve gather to your family. Watch and share photos and videos together. • Get your driver’s license and your vehicles registered. Start the process to obtain your auto registration and a new driver’s license or permit. • Get services such as: Electric, Telephone, Lawn Care Service, Newspaper, Water, Laundry, Cable/Satellite TV and Internet. • Know the cost of living in the new city. It’s important to check. Do the research and plan accordingly. • Build a social support network. Use your friends to network to make new friends in the same way that you would try to network for a job. Establishing a social network in your new town is going to make you feel more grounded and happy • Make sure each family member will benefit from your decision. Talk with your family openly in order to see if each family member is supporting the idea. Everyone should have realistic expectations and should also know exact pros and cons of the move and how it will change their lives. • Make a Check List with the priorities things that should be done. With this you will know what things to do first in order of importance. • Learn what appliances will work in the destinations country. Check electric compatibility for your home appliances if you are considering using them abroad. • Take Climate variation into consideration; some clothing, books and family treasures can be affected by moisture or extreme temperatures in your new destination.
• Contact your Insurance Company, to have their phone numbers at hand at all time and know who will support you there, your insurance agent you’ll want to be certain that you are covered and any relevant and important information you should know. • Review laws; ask about wills, investments, insurance coverage, taxes, infractions, traffic, etc. • Take time to get to know your new environment before you move. If you have the luxury of taking some time to explore your new area before arriving, do so. Explore the neighborhoods in the area. • Notify of your new address to: Insurance companies (Life, Homeowners, Health and Auto), Local credit bureau and creditors, financial institutions where you have savings, loans, checking accounts or stock, Magazines, Clubs or associations, etc. • Make sure you take the time to learn what’s available to you—and use it • Don’t make any long-term commitments. Renting at first is a great way to settle into a new city without making a commitment to a neighborhood you might end up not liking. • Throw a housewarming party. Get acquainted with your new neighbors and new colleagues at work. It may serve as a distraction after a really challenging and stressful period. • In case you have children, consider getting a babysitter, to look after your kids in the process while you get your belongings and you start putting all your paper work in order. • It is hard work integrating into a new culture or community but the attitude of your assignee will determined the success, giving them the appropriate tools will be the difference and will guarantee a long term relationship with your company. • Your enthusiasm is contagious, encourage your assignee and take time to explain the mobility process, listen to their needs, the success of your assignee, is your success. The years spent overseas should be an invaluable and fulfilling experience.
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Adquiere TODO lo que necesitas con el servicio mรกs completo de
Leasing
DOING BUSINESS
PUBLIC SECTOR OVERVIEW SIGNIFICANCE OF CAFTA-DR FOR GUATEMALA’S ECONOMY
By Víctor Asturias Minister of Economy
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A free trade agreement was signed in 2006 that would give the country the opportunity to accept a big challenge which, when leveraged, would mean benefits and advantages for Guatemala’s economy. This is how Central America completed negotiations and signed the Free Trade Agreement among the United States, Central America and the Dominican Republic –CAFTA-DR. Beyond numbers, the eleven years of life of CAFTA-DR offer the opportunity of more growth and trade exchange with the United States and the world, as well as a privileged position to promote our competitiveness; it also presents economic challenges in the endeavor to develop a more stable, inclusive and sustainable country.
OFFER THE OPPORTUNITY OF MORE GROWTH AND TRADE EXCHANGE WITH THE UNITED STATES Prior to the entry into force of CAFTA-DR, exports from Guatemala to the United States were mostly of garments, bananas, oil and coffee, an exports portfolio leaning more towards agriculture. After the entry into force of the Agreement, the participation of more sectors with a competitive potential becomes evident. This made it possible to place national production abroad through global value chains. Evidently, eliminating tariff barriers also led to larger export amounts.
On the other hand, our privileged position to promote competitiveness comes from the Agreement’s ability to improve the processes and productivity of our SME’s. Facilitating trade improved access to broad scope markets and led to the generation of sophisticated business models that respond to current market economy demands. Having access to the largest market of the world with high purchasing power citizens has allowed Guatemala to improve and expand its market access. We continue to build an open economy, to consolidate economic growth and to open new and better trade opportunities for current and potential exportable supply. Today, Guatemala has more than 60 trade partners; many of these negotiations were accomplished after the implementation of CAFTA-DR. In the same vein, Guatemala is now positioned as an attractive market for direct foreign investment through its regulatory framework that protects investment and the business climate. By 2016, the United States’ share of the total direct foreign investment in Guatemala was 34.2%, with a structure led by trade, electricity, manufacturing, telecommunications and other sectors that have grown exponentially as a contribution to the GDP.
GUATEMALAN EXPORTS TO THE UNITED STATES OF AMERICA
Garments Bananas Oil Coffee Fresh, dried, or frozen fruits Sugar Legumes and vegetables Manufacture with precious and semi-precious stones and metals Manufacture in wood Bulbs, roots and ornamental plants The rest of the products
1%
Garments Bananas Fresh, drior frozen fruits Precious and semi-precious stones and metals Coffee Legumes and vegetables Oil Sugar Products made of paper and cardboard Plantains The rest of the products
1%
2% 2%
1%
12%
2%
15%
3%
2% 3%
34%
3%
8%
YEAR 2005
52%
YEAR 2016
8% 9%
18%
*The graphs show exports diversification after the entry into force of the Agreement (Graphs 1 and 2. Source: Central Bank of Guatemala, 2016)
3%
6% 7%
8%
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DOING BUSINESS PUBLIC SECTOR OVERVIEW 11 years after the entry into force of CAFTA-DR, challenges and huge opportunities still remain for both countries. Over 90% of tariff lines are now traded freely, with only 15 and 20-year terms pending. Pending for Guatemala are basic considerations such as institutional reform, regulatory framework, infrastructure and exports promotion, plus modernization and continued diversification of our high value added production.
To better leverage the Agreement we must emphasize crosscutting areas such as enhancing a dynamic and innovative business climate, strengthening human capital and addressing regional integration to promote competitive trade as a block. There is no doubt that opening up our economies drives the growth of our economy. Today, 11 years after Guatemala got the opportunity and access to a market of over 300 million citizens, the Agreement has undoubtedly contributed to the country’s development and growth, especially in sectors that contribute to diversified trade exhanges. The expectation, then, is that beyond trade exchanges, CAFTA-DR will generate inclusive development platforms in coming years and that we might see new sources of decentralized economic growth to produce prosperity for our inhabitants.
The Ministry of Economy seeks modernization by developing a strategy to become more efficient in order to promote the acceleration of our economy, eliminate unnecessary barriers, promote new businesses and investment, further leverage tools such as this Agreement, and allow the development of new projects. Along with the Economic Policy, we seek to generate inclusive and sustainable economic growth to help reduce poverty, promote new businesses and foster formal employment, as well as to open new domestic and international markets, thus improving the conditions of the country.
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A S E G U R A MO SL OMÁ S
I MP O R T A N T E C o n f í ae nl o s e x p e r t o s V a l o r a mo s l omá s i mp o r t a n t e : t us a l u d , t uv i d ayt up a t r i mo n i o . C o n t a mo s c o nu ne q u i p od ep r o f e s i o n a l e s p a r aa s e s o r a r t ee n l aa d mi n i s t r a c i ó nd er i e s g o syc o b e r t u r a sd es e g u r o s , b r i n d á n d o t e a s í a t e n c i ó np e r s o n a l i z a d a e nt o d omo me n t o . N e g o c i a mo sp r o g r a ma sd es e g u r o s ,d ea c u e r d oat u s n e c e s i d a d e s , t a n t oe nf o r ma i n d i v i d u a l c o moc o l e c t i v a . T e n e mo s s e g u r o s d e :
C o n t a mo s c o ne l r e s p a l d od e l a s me j o r e s A s e g u r a d o r a s d e l p a í s c o mo :
DOING BUSINESS PUBLIC SECTOR OVERVIEW
BEHIND CONTRABAND IN GUATEMALA LIES ORGANIZED CRIME SUCH AS GANGS By Crime Stoppers Guatemala The international organization Crime Stoppers (www. tupista.gt) that operates in Guatemala since the month of August, has added the fight against illegal trade to its plans of action. Beyond the negative impact on the economy, the Finances of the State, and the public health of the country, the direct relationship between illegal trade and other crimes such as the trafficking of drugs, arms and ammunition, trafficking in persons, asset laundering and extortions, particularly in the countries of the Northern Triangle (El Salvador, Guatemala and Honduras) has been confirmed. Illegal trade covers crimes such as contraband, Customs fraud, piracy, corruption and many other activities or practices that contravene the Law and which are related to the production, transportation, receipt, distribution or sale of a diversity of products. Contraband is on the rise in Guatemala as it is in the entire Central American region, having reached unprecedented levels in 2017. According to CID Gallup, cigarette contraband alone costs Guatemala close to $20,000,000.00 in lost direct taxes that are not collected on account of the illegal entry and trade of this product. This is equivalent to 3.5% of the Gross Domestic Product (GDP). The education of 136,363 children could be funded annually with these resources, according to the estimated average investment per school year, published in the document “What course is education taking in Guatemala” published online by Prodessa.
$20,000,000.00 IN LOST DIRECT TAXES THAT ARE NOT COLLECTED
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The U.S. State Department classified cigarette contraband as a low-risk-high profit criminal activity in its study published under the name “The Global Illicit Trade in Tobacco: a threat to national security”. This illicit trade is used by terrorist groups such as Al Qaeda, Hezbollah, MS and the Zetas to fund other criminal activities such as trafficking in persons, drug trafficking and terrorism. This was confirmed by police authorities in El Salvador, in their statement of September 21 that “cigarette contraband is led by an MS-13 gang leader known as “Lonely”. We should remember that MS is a transnational gang that operates actively from the United States throughout Central America, with cells in Canada, Argentina, Paraguay, Australia and even in some European countries. Crime Stoppers maintains that illegal trade profits are used to purchase arms and ammunition, armored vehicles, telephones, real estate, and a network of protection and corruption. They are also used to promote money laundering in view of the large cash flow generated daily by illegal activities. As an example, in the case of illegal cigarettes, a vehicle entering the country and transporting 10 boxes of cigarettes may sell them for US$14,125.00; 1 truck with 100 boxes sell for US$141,250.00; and a container with 1,000 boxes of cigarettes may obtain US$1,412,500.00. Guatemala has borders with Mexico and Belize, the countries of origin of most contraband and forged products. There are also hundreds of blind crossing points, which are uncontrolled and are operated by gangs to smuggle illegal goods and to carry out other illegal activities. According to maps done by Crime Stoppers for Guatemala, commodities come to Guatemala from Mexico which are manufactured in plants in Mexico. This includes eggs, soft drinks, cooking oil, cereals, and gas cylinders, cleaning materials such as disinfectants, insecticides, air fresheners, or personal care articles such as tooth paste, razor blades and shampoo. Contraband cigarettes come through Belize, originally from factories in North Korea, China and India.
They flood the Guatemalan market and part continues on to El Salvador and Honduras. But there is another problem in Guatemala, which is the clandestine laboratories that make chlorine and fertilizers that can put the lives of people at risk because they do not meet any safety measures; they are a time bomb. According to Crime Stoppers it is necessary to strengthen public agencies working in legal and illegal border crossings, and to promote joint actions with the people of these areas for whom contraband is their livelihoods. A joint plan needs to be implemented from Mexico to Panama and the problem needs to be viewed from a regional perspective. “When a person purchases a forged or smuggled product in a market or in a store, he/she is directly funding gangs that might then extort them and even kill a relative. Behind each illegal product there is a criminal structure operating� a representative of Crime Stoppers said.
The people may be part of the solution of the illegal trade issue in two ways: by filing complaints, for their own safety, of every contraband or forgery event that they may become aware of, through filing complaints against the criminal structures and smugglers and, at the same time, by not purchasing illegal products in the countries. Filing complaints may involve a risk but, if they do so anonymously, whistleblowers may rest assured that their information will not cause reprisals against them or the members of their family. See Crime Stoppers in Guatemala at www.tupista.gt
DOING BUSINESS PUBLIC SECTOR OVERVIEW
TOWARDS TRADE FACILITATION: A CHANGE OF PARADIGM IN GUATEMALA’S CUSTOMS MODEL By Juan Francisco Solórzano Foppa Superintendent of Tax Administration, SAT
Early this year, the Congress of the Republic of Guatemala passed the Trade Facilitation Agreement (TFA) promoted by the World Trade Organization (WTO), thus joining the countries that support and commit to promote trade facilitation initiatives and mechanisms. This responds to the State’s interest to make our country more competitive in the framework of Customs Union and free trade promotion. However, the passage of the TFA was but the first step. Listing the challenges that the country must address to make this agreement operational and to implement projects to allow productivity and competitiveness ensues. Several stakeholders participate in this effort, including the Ministry of Economy as the leader of trade policy, some State agencies that are in charge of creating and maintaining the necessary physical, economic and technologic infrastructure, the private sector as their user, and the Tax Administration (SAT) as the administrator of the Customs system in Guatemala.
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2006
2007
2008
2009
2010
2011
2012
2013
2014
40.1%
36.0%
37.5%
37.0%
36.1%
32.9%
32.0%
2005
40.8%
2004
41.5%
Graph 1: SAT’s share of foreign trade through global tax collection 2015
2016
60% 50%
27.9%
10%
30.6%
20%
48.7%
30%
42.7%
40%
0%
Source: Base SAT We can identify the specific challenges that SAT faces in its effort to become an agency that contributes to trade facilitation. The challenges are not few: our analysis has diagnosed obsolete procedures, inadequate infrastructure, scarce technology, insufficient staffing that, in some cases, is not sufficiently trained, plus, as is widely known, a long history of corruption. These are the visible challenges. To address and overcome them we have promoted a number of projects. These include process revision and optimization, investment in new technologies and services, a new Customs system that responds to today’s complexities, staff hiring and training, the registration of more Authorized Economic Operators (AEO) and others. Despite this all, if I were asked today if this is sufficient to fulfill our role as the Tax Administrator in a country seeking to be competitive in a world that is moving increasingly towards border-free trade, the answer can only be that we need to take a step back to rethink our model. This is exactly what we need to do: to think whether the Guatemalan Customs System is today sufficiently efficient to perform its role in tax collecting, control and facilitation. Before issuing a statement, it is worth analyzing the historic
data that reflects the tax collection trend of Customs. Graph 1 shows a downward trend in Customs collection over a period that exceeds a decade already. Several factors influence this trend, one of them clearly the gradual decrease in the Customs collection role and the expansion of its facilitating role. Starting from this scenario, I allow myself to raise the need for a paradigm shift, in which a Modern Customs Office is the threshold for trade facilitation. This model requires Customs to have tools to accelerate the times of border clearance and trade flows, with an appropriate risk management model that allows reducing the red selective while increasing assertiveness, with effective inter-institutional coordination for the security, infrastructure and compliance with regulations. A new model would entail, in addition, to rethink when and where we will place the controls, because smuggling and fraud continue to be a latent problem in the country. I invite you to discuss this approach and jointly build solutions that allow us to take Guatemala to the development and competitiveness it deserves.
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DOING BUSINESS PUBLIC SECTOR OVERVIEW
CONVENTION 169: A CLEARER AND SAFER PICTURE Interviewee Roberto Velásquez Consultant, Ministry of Labor by David Orrego, Universidad Francisco Marroquín.
International Labor Organization (ILO) Convention No. 169 concerning Indigenous and Tribal Peoples is an international treaty adopted in Geneva on June 27, 1989. Subsequently, the Congress of the Republic of Guatemala ratified it in March 1996 and it became effective in March 1997. According to the ILO, the Convention addresses two important premises. The first one highlights the right of indigenous peoples to maintain and strengthen their cultures, ways of life, and institutions; and secondly, it addresses their right to participate effectively in decisions that affect them. In recent years, the case of Guatemala has been interesting. Since 1997, the Convention has raised several controversial cases, where a legislative vacuum in the Guatemalan Government and an absence of consultation with the indigenous people have been highlighted. However, the new Government administration of Guatemala has taken up the matter seriously and the issue begins to be addressed, with encouraging results. In an interview with Roberto Velásquez, a specialist who has worked with the Government on the matter, he presented us a new perspective of Convention 169 in Guatemala.
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Velásquez says that since the time when Convention 169 was ratified by the Guatemalan Government, there has been a problem of misinterpreting its true purpose; and the lack of implementation of this Convention has led to speculation, and this caused confusion and obstacles for foreign investment. Velásquez defines Convention 169 as a dialogue facilitator to improve relations between the Private Sector and Indigenous Communities, to enable the latter to become participants of development program processes through a State approach. The Convention addresses several stakeholders that must operate jointly to achieve meaningful work. These stakeholders are the State, the Private Sector, and Indigenous Communities. Each stakeholder plays an essential role to enable this Convention to be enforced in every sense.
CONVENTION 169 AS A DIALOGUE FACILITATOR TO IMPROVE RELATIONS BETWEEN THE PRIVATE SECTOR AND INDIGENOUS COMMUNITIES
The first of them is the State and, according to Velásquez, it must approach the rural areas of the country and ensure that their needs are met. The State is also responsible of engaging in ongoing dialogue with Indigenous Communities and the Private Sector, implementing consultation processes and finally, committing to follow-up responsibly. But above all, the State needs much stronger institutions in the country´s inner cities, the only possible way to avoid the matter of the Convention to be misconstrued through the media and for political purposes. On the other hand, there is the Private Sector. Velásquez assures that the matter of consultations is not binding for the issuance of administrative authorizations for companies. Velásquez also recommends the Private Sector to focus on knowing more about the territory, learning about the culture and the strategic sectors where they expect to work, viewing the local population as an ally and taking the issue of consultations seriously; even if the State may seem uninterested, the Private Sector must take the initiative to engage in dialogue with Indigenous Communities. The third group of stakeholders is Indigenous Communities. Velásquez states that these communities in Guatemala have the need and responsibility to restructure and organize themselves and to establish clarity regarding their representation and legitimacy. Once this happens, priority requests from these communities can be understood more clearly and responsibly. Despite the controversies of recent years, resulting from speculation and misinterpretation in different aspects, Velásquez acknowledges that the incumbent government administration has taken specific actions to produce rules that give foreign investment a clear picture and greater confidence to invest.
THE INCUMBENT ADMINISTRATION IS CARRYING OUT REAL EFFORTS AND CHANGES PROMISE TO BE VIEWED IN THE SHORT TERM.
Finally, Velásquez states that the Convention is not an obstacle for the Private Sector and its investment. Conversely, it is a good-faith process from all the actors where greater joint integration is encouraged. Their job is to maintain a three-way dialogue that supports the foundations of greater certainty for the private investment and the development of indigenous communities. In the end, progress has been clear and specific. Velásquez goes on to say that the Government of Guatemala has achieved consensus through the Ministry of Labor, and with Indigenous Communities, on an internal document for use by the Executive branch as an operational guide for the correct application of consultations in Indigenous Communities. Everything points towards great strides in the implementation of Convention 169 with a more committed State, and a Private Sector willing to play with clear and certain rules. Therefore, there is no hindrance to invest in Guatemala and to continue generating development.
On the other hand, Velásquez argues that Guatemala is going through a process of transformation and, as is true of every such process, there is a natural wear down: this wearing down has caused a lack of legal certainty, which was the message the Private Sector may have received. Nevertheless, this transformation is moving towards a promising resolutionn for new companies planning to invest in Guatemala. The incumbent administration is carrying out real efforts and changes promise to be viewed in the short term.
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DOING BUSINESS PUBLIC SECTOR OVERVIEW
By Amรกn Sรกnchez Advisor and Coordinator of Business Climate
The recent amendments made to the Code of Commerce 1 constitute the first legislative outcome of the work that the Ministry of Economy (MINECO) has been engaging in since 2013 through the National Program for Competitiveness (PRONACOM), with the objective of improving the business climate in the country, creating employment, investment and wealth, and showing impact on international indicators. These amendments were achieved by several stakeholders, including public officials and members of the Congress of the Republic. The importance of the Doing Business Report lies in its comparative value; the report is an objective measure of regulations comparing 190 economies worldwide that is aimed at defining the ease of doing business in each of them. The Doing Business Report uses uniform case studies and serves as a reference for research work, comparisons and business decisions. The 2018 report ranked Guatemala in the 97th position; this is the lowest position in the last 6 years and the same one the country had in 20122. 1 Amendments contained in Decree 18-2017 of Congress, published in the Central American Gazette on October 31, 2017. 2 World Bank. 2018. Doing Business 2018: Reforming to Create Jobs. Washington, DC: World Bank. DOI: 10.1596/978-14648-1146-3. License: Creative Commons Attribution CC BY 3.0 IGO 44
The Doing Business Report contains 10 sub-indicators, one of them the ease of opening companies, which examines the procedure of creation and registration of a Guatemalan corporation; hence the importance of the legislative result achieved. The amendments to the Code of Commerce, contained in 19 articles, amend key provisions of the Code of Commerce, in force since 1971, which prevented further work on facilitation, decentralization and acceleration of the procedure that MINECO, the Trade Registry and PRONACOM started in 2013 with the tool Minegocio.gt. This project achieved radical changes at the administrative level, which were reflected in the indicator with a leap of 75 positions from 2013 to 2015. However, this was not enough to compete efficiently worldwide3. 3 World Bank. 2018. Doing Business 2018: Reforming to Create Jobs. Washington, DC: World Bank. DOI: 10.1596/978-14648-1146-3. License: Creative Commons Attribution CC BY 3.0 IGO
DOING BUSINESS PUBLIC SECTOR OVERVIEW
Monitor, Guatemala has 3.2 million potential entrepreneurs and half of the ventures start with less than Q10,000.005. Complicated procedures and high costs are harmful to the development of an economy. In this case, the procedure and its barriers have increased the level of informality in the country to over 70%. The amendments to the Code of Commerce will come into force on January 30, 2018 and, depending on how these changes are enforced, MINECO should analyze the impact accomplished in the registration of companies and on international indicators and continue to work to improve the indicator.
Decree 18-2017 of Congress, which contains these amendments, introduces measures to benefit domestic or foreign businesses that are starting a venture in the country, by simplifying the process to register trade companies or branches of foreign companies; these efforts reduce costs, eliminate steps and streamline completion of the paperwork in the least amount of time possible. These amendments eliminate barriers which were included in the legislation but had no real effect on the creation or operation of companies. The minimum paid capital requirement has been systematically eliminated from business regulations worldwide. The Doing Business Report for 2018 shows that this requirement exists in 62 of 190 economies evaluated, including Guatemala. However, an analysis of the amount of paid capital required shows that only 25 of them require a sum higher than the minimum paid capital required by Guatemala4. Minimum paid capital changed from being a security and response measure to third parties to becoming a barrier for business ventures. Today, more efficient administrative and accounting measures and tools are available for trade operations. According to data obtained from the Global Business
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The Decree through which these amendments are enacted, number 18-2017, has received both positive and negative comments from different groups of thought or opinion. My personal opinion is that these amendments are an accomplishment, a first step in the efforts to streamline our business climate; the government needs to continue working on them in order to adapt our regulations and controls to the best international practices, and allow the work of Guatemalans who act every day in good faith and actively contribute to the development of the country. The biggest accomplishment of the amendments to the Code of Commerce is having proven that the Executive and Legislative Branches can work together to achieve specific results. In spite of complications and their disagreements, it still has been proven that these can be overcome for the benefit of the people.
DOING BUSINESS PUBLIC SECTOR OVERVIEW
By Paulo Boteo Executive Director Fundaciรณn Libertad y Desarrollo
Insecurity has characterized the Northern Triangle of Central America for several decades now. In 2016 alone, 14,952 persons were murdered, a tragedy for the sub-region. In the case of Guatemala, the homicide rate for every one hundred thousand inhabitants has dropped consistently since 2010, without there being a clear explanation of whether this is due to institutional improvements or to a change in the modus operandi of criminals. At any rate, the trend is positive. However, the levels of violence in Guatemala are still quite high. 2016 closed with 27.3 homicides for every one hundred thousand inhabitants. The same year, Chile reported only 3.6 homicides for every one hundred thousand inhabitants, fewer than the United States that has reported between 4 and 5 for every one hundred thousand inhabitants in recent years. This comparison alone shows Guatemala as a very violent country, a reality that is not expected to
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change much with the marginal improvements that may be reported at the end of 2017. But this is not the only number to be reckoned with. Extortions have increased in recent years. According to data from CIEN, the complaints of extortions grew from 31.1 per hundred thousand persons in January 2016 to 46.2 in October 2017. In fewer than 24 months, this crime grew by almost 50%. It would seem that criminals have found a very profitable “business” in extortions. In addition to the human drama and tragedy of violence
IF THE STATE IS INCAPABLE OF PROVIDING SECURITY AND JUSTICE, IT AUTOMATICALLY BECOMES A FAILED STATE.
An evaluation of the agencies that are directly responsible for citizen security shows that the common denominator is that their capacity is exceeded or even that they are part of the problem. For starters, the citizens have little trust in the National Civil Police (PNC). According to the Latin American Barometer (Latinbarómetro) 2017, only 24% of the Guatemalan people trust the PNC, which makes it the fourth country with the lowest trust in its police force in Latin America, closely following Bolivia, Paraguay and Mexico. On the other hand, the Prosecution is present only in 34 of the 340 municipalities of the country, and the Judiciary does not have enough judges to cover an overwhelming docket. The most serious situation seems to be the correctional system of the country that has a capacity for 6,809 inmates and currently holds over 22,000. The State lost control to such degree that 90% of the extortions come from correctional centers, which turns them into true logistical hubs for organized crime. Guatemala faces huge security challenges, considering the size of the problem and the limited capacity to solve it. However, it is important for us to understand as a society that, if the state is incapable of providing security and justice, it automatically becomes a failed State.
and insecurity, these scourges also mean extremely high financial costs. According to the Global Peace Index 2017, the financial cost of violence in Guatemala is equivalent to 15.4% of its GDP, which places Guatemala in the list of 28 countries of the world (out of 163 evaluated) where the cost of violence is the highest. And, according to the Global Competitiveness Index 2017-2018, the business costs of violence and crime are so high in Guatemala that it is one of the 4 countries with the worst grade in this regard worldwide, among 137 countries included in this ranking.
Levels of investment, economic growth and job creation depend on the functionality of the State in terms of security. The country would take a quantum leap if, rather than including so many superfluous expenses in the public budget, these funds were allocated to security and justice agencies in the country, that so urgently need them. Our future depends on it, but for that to happen, the currently absent political will is essential.
The Global Competitiveness Index 2017-2018 also reveals that, in the opinion of businesspersons surveyed, insecurity is the most negative factor to do business in Guatemala, together with corruption and the bureaucratic inefficiency of the government. Viewed from this perspective, unless one of the main objectives for the State becomes reducing the levels of violence and insecurity of the country, we will hardly be able to attract all the investment that is needed to accomplish economic growth.
SOURCES: Insight Crime CIEN Global Peace Index 2017 Global Competitivenes Index 2017-2018 Latinobarómetro 2017 National Civil Police The Prosecution United Nations Office on Drugs and Crime
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DOING BUSINESS PUBLIC SECTOR OVERVIEW
By MarĂa Alejandra Morales Political Analyst
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2015 was a breaking point for Guatemala’s history. The filing of investigations conducted by the International Commission against Impunity in Guatemala (CICIG) and the Prosecution, that involved high government officials in cases of corruption, uncovered the vices of the government system. The system was co-opted, which made it necessary to take steps to purge the system. However, this effort must be reinforced with a number of reforms to strengthen institutions and modernize the State.
CICIG is an independent international agency created as a result of the Agreement for the creation of an International Commission against Impunity in Guatemala, signed between the United Nations and the Government of Guatemala in 2006. The various cases of corruption filed are the result of the joint work by that organization and the Prosecution, the agency in charge of oversee the strict enforcement of the law. Thus, and thanks to the commitment by both organizations to the Agreement, work during the last 2 months has focused on establishing conditions to create a climate of legal certainty in the country. To accomplish that goal, ridding the system of vices and bad practices is essential.
THE POLITICAL REFORM OF THE SYSTEM WILL HAVE A POSITIVE IMPACT ON THE COUNTRY’S ECONOMY.
The foundations have been established to begin to work Purging the system would be the first important step to strengthen agencies and modernize the State. The towards redefining State agencies and armoring them effective construction of a modern State – one with against corruption. That is to say that only purging strong and independent institutions, governed by the the system would open the door to begin to redisign Rule of Law and merit is rewarded rather than cronyism agencies and therefore ensure legal certainty. Purging – is dependent on a gradual transformation process that and reforming are not mutually excluding, they guarantees sustainable outcomes in the long term. complement one another; they make it possible to remove vices from the system, while at the same time The political reform of the system will have a positive they make it possible to fill the voids of spaces previously impact on the country’s economy. Focusing on the taken by corruption, with technical and transparent various work areas will foster investment in Guatemala. The reforms proposed in the area of justice and civil elements that help strengthen institutions. service will generate a business climate which guarantees It is necessary to change the political system to build respect for the rules and the impossibility to buy political governance and make institutional reform agreements will to commit illegal actions. The implementation feasible. Progress attained in terms of purgin have of public spending controls will contribute towards created the conditions needed to begin to work in the transparency and will streamline the auditing role of implementation of political, fiscal and institutional State agencies and international agencies. At the same reform needed. This phase prioritizes changes to the time, this will optimize the revenue collection capacity justice sector, the elections system, civil service, public of the government. Creating a climate of transparency spending control and infrastructure. All of these and the Rule of Law will permit the execution of reforms are essential to create a climate of governance infrastructure projects that optimize conditions for that promotes economic activity in a framework of investment in Guatemala. This will in turn lead to reducing poverty and lack of governance. respect for freedom and the Rule of Law. 51
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DOING BUSINESS PUBLIC SECTOR OVERVIEW
By Werner Ovalle Intendant of Customs
If one considers a global scenario where population growth, ever-increasing demand for goods and services, growing logistical challenges for international trade engaging in legitimate trade, infrastructure limitations, increased smuggling, and controls needed for reasons of security, one must realize that the costs involved are sometimes higher than tariffs or productive process costs.
at all times the active participation of Customs Services, but it should be noted also that TFA also promotes the role of other border control agencies as well as of the Private Sector, which confirms the strategic vision of the WTO in viewing a Customs System as one formed by several public and private stakeholders, called upon to adopting the TFA with a nation-wide perspective.
With this background in mind, the historical challenge for Customs is to become national, regional and global competitiveness tools with the strategic vision of empowered legitimate trade supported with its operations, which should lead to increased trade flow with the resulting increase in employment, tax collection and better prices for consumers, all of which favor and strengthen States.
REGIONAL COMPETITIVENESS TOOLS:
GLOBAL COMPETITIVENESS TOOLS:
Additionally, Central America now has the first Customs Union in the American Continent, a significant accomplishment by Guatemala and Honduras that will lead to the following benefits:
The Trade Facilitation Agreement (TFA) of the World Trade Organization (WTO) includes twelve provisions in Section I to streamline Customs processing and dispatch of goods globally with the support of each one of its member states (including for in-transit goods). These provisions require
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The effort by Central America to promote Customs Services as regional competitiveness tools should be highlighted. This effort is reflected in the Central American Trade Facilitation and Competitiveness Strategy, with emphasis on Coordinated Border Management.
DOING BUSINESS PUBLIC SECTOR OVERVIEW
1 Cálculos de Banco Mundial Y CEPAL 2 Cálculos de Banco Mundial y CEPAL.
It is important to note that El Salvador is close to joining this Customs Union. COMPETITIVE TOOLS FOR GUATEMALA: Strategic actions carried out by the Tax Administration’s Customs Office to be an active part in the implementation of provisions contained in the Trade Facilitation Agreement, as well as measures contained in the Central American Trade Facilitation and Competitiveness Strategy are noteworthy:
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Follow-through and implementation of WTO’s TFA by members of the National Facilitation Committee of Guatemala (under coordination by the Ministry of Economy);
2
Creation of the Trade Facilitation Unit underway under the Customs Office structure;
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Technical assistance requested by Customs from the World Customs Organization through its MERCATOR Program, for the implementation of WTO’s TFA in Guatemala.
Photograph provided by Customs Intendancy.
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Creation of Discussion and Public-Private Cooperation Working Groups on Customs affairs, which has clear objectives and goals to promote improvements to reduce international trade operation time-frames.
Photograph provided by Customs Intendancy
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6
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An effort was made to fully amend the Central American Uniform Customs Code, and its regulations, which is underway for implementation in the framework of the Central American Customs General Directors’ Group. Leadership and participation in the development of cooperation agreements with other border control agencies, an important foundation to accomplish the national implementation of joint revisions and of the Coordinated Border Management scheme. The Tax Administration’s Customs Office promoted mutual recognition of the Authorized Economic Operator figure among Guatemala, El Salvador, Costa Rica and Panamá. This effort is being led by the technical teams of the OAS and the expectation is that it will be ready for execution in November 2018.
Additionally, Customs expects to develop and implement several strategic efforts during 2018 in accordance with its Annual Operations Plan. Noteworthy here is the implementation of the Single Central American Declaration, the development of a model Customs Service in Tecún Umán, and the continued replication of the cargo control scheme in the various Customs Services of the country.
Picture contributed by Agexport
All of these actions confirm the commitment by the Customs Service to assume the historic challenge to turn Guatemala’s Customs Service into real competitiveness tools for our country through its leadership in coordinating and providing support to other border control agencies, and through transparent, active and positive dialogue with the country’s private sector.
Bibliography 1. World Trade Organization (WTO) Trade Facilitation Agreement. 2. Central American Trade and Competitiveness Facilitation with emphasis on Coordinated Border Management (COMIECO-LXIII Agreement 1-2015) 3. SAFE Regulatory Framework of the World Customs Organization (WCO) 4. SAT 2016-2020 Institutional Strategic Plan
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• Guatemala • El Salvador • Honduras • Nicaragua • Costa Rica • Panamá • Perú 59
DOING BUSINESS PUBLIC SECTOR OVERVIEW
Interviewee Acisclo Valladares Presidential Commissioner for competitiveness Minister of micro, small and medium enterprises.
by Rudy González Teleguario, Universidad Francisco Marroquín
What can you tell us about the National Competitiveness Agenda? What is it and how is it implemented? During the last eighteen years, PRONACOM has led and coordinated, together with other stakeholders, the proposal for and updating of the National Competitiveness Agenda (ANC in Spanish) by defining the foundations on which to build comprehensive guidelines to lead and coordinate actions to promote State-wide competitiveness. It is a country-wide policy that seeks to generate development, quality of life, and to foster sustainable and inclusive economic growth. This agenda has been updated. What aspects of this update stand out the most? Moving from the 6 pillars of the previous Agenda to the 12 pillars of the World Economic Forum (WEF), proposed under three major concepts: o Sector-wide approach
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o Cross-cutting approach o Territorial approach • Domestic consumption was added in the update in view of the potential of the so-called “demographic bonus”, that is, the growth of the economically active population of Guatemala. This represents both an opportunity as well as a challenge for job creation. Why did these competitive-oriented policies take a new direction? Guatemala is at a crucial moment where it needs to create conditions to give the population greater access to job opportunities, and thereby ensure higher levels of wellbeing and prosperity. In coming years, the country will experience the effects of a demographic bonus, which means that the working-age population will be larger than the dependent population and therefore there will be greater demand for jobs. The proportion of migrants coming back
to the country in search for jobs is another variable to be considered. This is a turning point for the country since it has the opportunity to create conditions that allow it to respond successfully to the demographic changes coming. What are the main objectives of this national competitiveness agenda? General objective: To improve competitiveness in order to increase national productivity to accomplish inclusive, accelerated and sustainable economic growth A. CLUSTERS OBJECTIVE: POTENTIAL TO CREATE JOBS B. COMPETITIVENESS PRIORITY OBJECTIVE C. TERRITORY OBJECTIVE: CAPABILITIES OF EACH INTERMEDIATE CITY Is there sufficient support to make these objectives likely? Various important sectors and government agencies responsible for articulating the efforts to benefit the policy have been approached. Readiness and good backing in the area of influence of each sector, and for the implementation of the policy is evident. Yet, I should emphasize that to accomplish the desired outcomes it is necessary to have long-term support, not only through budget allocation for each agency but also through the support of the technical staff of each area of influence. Are there latent hindrances that restrict the good operation of these policies? Public policies involving multi-sector and cross-agency inclusion will always face possible obstacles in the search of adequate articulation to accomplish their successful implementation. Success depends on adequate oversight and permanent assessment of implementation processes, to be carried out by the National Competitiveness Program. How and in what sense will Guatemala accomplish improvements with this agenda? The three guidelines seek to contribute to better performance by the productive sectors with the greatest potential to create jobs, in order to add more Guatemalans
to the labor force through improvements in competitiveness conditions that prioritize nine territories which are in a good development stage to become consolidated as Intermediate Cities. This seeks to enhance economic growth that in turn will lead to more tax revenues to be earmarked for the social agenda of the country. 6 specific changes will be proposed to address 11 priorities in terms of competitiveness, in: government agencies, infrastructure, health, primary education, financial market and innovation. •Legal certainty and the streamlining of processes to do business in Guatemala, which will lead to greater investment attraction and more formal job creation •Greater connectivity through local, regional and national infrastructure that provide broad road networks for the distribution and marketing of goods and services in Intermediate Cities (90% of the population). •Learning, aimed at acquiring labor competencies will make it easier for youths to be more competitive in a globalized world. In your capacity as the Presidential Commissioner for Competitiveness and Investment: what message would you like to convey to the sectors that this agenda seeks to benefit? Guatemala has very well developed plans. The problem is that plans are not drawn to collect dust in a drawer; they are drawn to be implemented. Quite often, they are not implemented because they do not meet the needs of the majority, unlike the National Competitiveness Agenda that is capable of proposing and compiling different policies and initiatives from every sector. The National Competitiveness Agenda is not only PRONACOM’s. It BELONGS TO ALL OF US, and as it continues to be recognized it can acquire even more momentum. It will become a reality that Guatemalans are anxiously expecting.
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DOING BUSINESS PUBLIC SECTOR OVERVIEW
By Daniel Fernández Méndez Director of UFM Market Trends and professor of the faculty of economics at the Francisco Marroquín University.
Guatemala has the potential of becoming the new Central American Tiger, Latin America’s envy in terms of growth and a healthy economy. To get there, however, Guatemala must overcome some significant obstacles. From the economic point of view, the Guatemalan State is similar to the Roman god Janus: he has two faces. On one side, it is one of the smallest States in the world in terms of public spending. On the other side, it is one of the most burdensome in the world in terms or regulations, which makes business development difficult. Perhaps the worst enemy of business in Guatemala is the Guatemalan State. It does not do what it can do to promote economic development (provide security and justice), and it does that which it should not do if the aim is to promote development (over-regulation and bureaucratic formalities). The investment climate in Guatemala is not idyllic; the country is going through a political crisis for which there seems to be no end in sight. But beyond circumstantial elements (that ultimately end up fading away), Guatemala faces some significant shortfalls in its ability to attract investment and improve the capitalization of its economy.
The weakest aspects of Guatemala’s economy are (in this order)1 : 1- Crime and violence 2- Corruption 3- Bureaucracy 4- Infrastructure 5- Policy instability 6- Government instability Let’s start out with the things that the Guatemalan government could be doing and is not doing: CRIME AND VIOLENCE Guatemalans have grown accustomed to living with violence, but the cost of crime and violence for business is huge. Guatemala is one of the top 5 economies with the highest business costs related to crime (surpassed only by El Salvador, Venezuela and Honduras). The main task (and only task, according to some) for a Government is to protect its citizens. The recommendation is to prioritize budget lines that target the fight against violence and organized crime; they should be a priority over any other budget line. Once this objective has been accomplished, we can move on to other priorities. 1 According to the World Bank’s Doing Business Index
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DOING BUSINESS PUBLIC SECTOR OVERVIEW
CORRUPTION, BUREAUCRACY AND LEGISLATIVE INFLATION The corruption in terms of public fund misappropriation, though significant, is not addressed as a priority concern for Guatemala (because the Guatemalan government is relatively small and its spending capacity is limited). The main problem is that corruption in Guatemala becomes the huge discretionary power that public servants have. Corruption and bureaucracy are very closely linked. The decision-making power of bureaucracy translates into higher business costs in the form of blackmail and “kickbacks”. Latin American countries are extremely legalistic (following the French tradition) but lack an excellent bureaucratic system (unlike the French tradition). This means that the massive and excessive amount of legislation is not even understood by bureaucrats who ideally should oversee its proper implementation. In this regard, we offer three recommendations: 1- On the one hand, make bureaucracy professional (without extending it quantitatively); and reduce its discretionary power (promote a government of laws and not individuals); 2- Introduce a law that requires the abolition of an old law every time a new one is passed; 3- Simplify the laws and adapt them to praxis, thus reducing the gap between the formal and informal systems. INFRASTRUCTURE Guatemala ranks 114 in the world in terms of logistics quality2. The worst part is not its current ranking (which is very bad) but its progressive deterioration in recent years (in 2007, Guatemala ranked 75). Currently, ownership of Guatemalan infrastructure is f two types: most of it is public, and is in a sorry state of conservation; a small part is private and is world-class quality (roads, for example). Because of the urgent needs faced by the national budget (like fighting crime and violence), higher spending in infrastructure cannot be expected. In view of the success of the infrastructure built by the private sector, the 60
recommendation is then that the Government increase infrastructure works concessions to private companies. POLICY INSTABILITY, GOVERNMENT INSTABILITY AND LEGAL UNCERTAINTY Direct foreign investment (unlike other types of temporary investment) hates political uncertainty. It is difficult enough to forecast market conditions in the future; companies do not need to make their lives more difficult by trying to forecast political conditions as well (which are usually far more unpredictable than markets themselves). In this sense, Guatemala is an expert in scaring investment away. The first step that foreign investors take to consider the suitability of a country as a likely destination for their investment is to look at the last 10 to 15 years of business conflicts. Guatemala will not begin to attract massive capital investment until broad spectrum public policies are made stable. Political terms (4 years or less) are excessively short for business planning. GUATEMALA’S COMPETITIVE ADVANTAGES In spite of it all, Guatemala is a country with a huge potential driven by world-class leading sectors. Several can be listed: 1- The financial sector Guatemala is country number 16 in the world in terms of ease to obtain credit, above Germany, the United Kingdom and the Netherlands3 . The Guatemalan financial system ranks 11 in the world in bank soundness4. A stable and reliable banking system is essential to accomplish prosperity, and Guatemala has done outstanding work in this regard. 2- Electricity market Guatemala ranks 19 in the world in ease to obtain electricity5. Large outages are a thing of the past. Privatization of electric power generation has taken Guatemala from being 2 Out of 163 countries. See the World Economic Forum’s logistics performance index. 3 Out of 190 countries. See the World Bank’s Doing Business Index. 4 Out of 137 countries. See the World Economic Forum’s global competitiveness index.
A VISIT OF A FEW DAYS IN GUATEMALA IS ENOUGH TO SEE THAT THIS IS A COUNTRY OF CONTRASTS. ITS ECONOMIC STATUS AND INVESTMENT CLIMATE ARE NO EXCEPTION.
deficient to being a net exporter of energy. Additionally, Guatemala’s energy price is very competitive world-wide. The price of electric power is one of the lowest of the region and possibly the lowest if subsidies are not taken into account (meaning that it has a lower actual cost). The absence of power supply outages and having competitive energy price schemes make Guatemala a good destination for direct foreign investment.
CONCLUSION A visit of a few days in Guatemala is enough to see that this is a country of contrasts. Its economic status and investment climate are no exception. Today, Guatemala has world-class leading sectors and the growth potential exists. Once the hurdles listed are overcome, the country can easily become the new Central American Tiger.
3-Macroeconomic stability Ever since Guatemala accomplished a stable inflation pattern, in the beginning of the 90s, the Quetzal has remained one of the most stable currencies in Latin America (probably the most stable). Additionally, the country’s economic growth is stable (although clearly insufficient). Neither the monetary policy nor the fiscal policy face major swings (a large part of the political uncertainty is not transferred to economic uncertainty). This is a huge advantage for foreign investors that need not worry (or need to worry less here than in other countries) about the impacts of whimsical economic policies.
5 Out of 190 countries. Se the World Bank’s Doing Business Index.
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THE SIGNIFICANCE OF INFRASTRUCTURE FOR GUATEMALA’S COMPETITIVENESS CHANGING THE SCHEME TO PERMIT GREATER INVESTMENT
By Juan Carlos Zapata Executive Director
According to the economic growth gap analysis of 25 sectors of the economy that represent 70 per cent of the gross domestic product (Mejoremos Guate 2011), Guatemala could reduce poverty if it resolves some bottlenecks, such as by: reducing the bureaucratic cost of doing business, improving the relationship between energy supply and demand, enhancing research, development and innovation, improving the entrepreneurial ecosystem, and focusing efforts more on attracting direct foreign investment, particularly in infrastructure. One of the most important factors for the country’s competitiveness is how to accelerate Guatemala’s capacity to have more efficient infrastructure through which the country can fulfill the goal to leverage tourism, to become a worldclass logistics hub and an exporting platform for the region. According to Doctor Gianpiero Torrisi (2009), infrastructure covers household services, urban development, productive promotion, risk mitigation, internal mobility and global connectivity.
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Guatemala works towards changing the system and the infrastructure investment model to take a quantum leap. According to the World Bank “the country has 1.3 meters of highway per inhabitant, while countries like the United States has 20.5, Brazil has 7.9 and Mexico has 4.1�. An excellent example of what the country has been capable of doing is the electrical sector. During the nineties, incentives and the legal framework were changed to make them straightforward, transparent and efficiency-based. This increased electricity coverage from 46 per cent of the population to 93 per cent in twenty years, involved over US$10 billion in electric power generation, marketing and distribution. The Guatemalan electric sector is a worldclass model that positions us as an energy hub for the region. In recent years, the speed to transfer goods and services across the country has been lost. According to the Private Competitiveness Council (Fundesa, 2017), the average speed at which a person or a product can move through major highways in the country dropped from 58 kilometers per hour in 2000 to 37 kilometers per hour in 2017, a 36.2 per cent speed loss over 17 years. According to the World Bank, the highway network grew by 80 per cent, approximately 7,335 kilometers between 1985 and 2013 (a growth rate equivalent to 1.8 per cent per year). However, not one additional kilometer has been constructed since 2013 in the country.
METERS PER INHABITANT GUATEMALA
1.3 METERS
UNITED STATES
20.5 METERS
BRAZIL
7.9 METERS
MEXICO
7.9 METERS
46%
93%
ELECTRICITY COVERAGE 46% 93%
According to the Ministry of Communications, Infrastructure and Housing, Guatemala has a total of 16,457 kilometers of roads, of which only 44.6 are paved. If we compare this to other countries of the region, based on Inter-American Development Bank information, we see El Salvador, a much smaller country, with 15,139 kilometers of roads, 54 per cent of which are paved. In Costa Rica, a country with approximately half the territory of Guatemala, 66.2 percent of the roads are paved. If we continue to build infrastructure under the same legal framework currently in place, how can we take the leap required by the country to have at least 3.1 meters of roads per inhabitant? It means investing in 47,500 additional kilometers of road infrastructure in the next 15 years. Explore Guatemala: changes now are favorable for investment that will bring prosperity for all.
16,457 KM
44.2% GUATEMALA PAVED ROADS
Bibliographic sources: http://fundesa.org.gt/enade/enade-2017 www.weforum.org www.worldbank.org 63
THE
STRATEGIC MATRIX When a country discusses which should be the winning sectors in its economy, the starting point is at times a very complicated premise. The discussion among economists has always considered “production capability”, that is, those things that the country has talent and disposition to produce vis-a-vis “that which comes from the basic differences in production factors in relation to other competitors or neighboring countries”. The supporters of this last assumption maintain that it is necessary to identify “what I have which is more and better than my competitor”, and then get to work to develop it. In either case, a decision is finally adopted, a sort of Caesar’s thumbs up or thumbs down hand gesture to determine the fate of lives and property. I am not one who believes that these decisions must be made from the cold and gray office of a bureaucrat, but I do not believe, either, that things should be left alone to see what comes of it. Ignoring ways to drive development is too big a responsibility for a society at large. In this regard, I believe that the best alchemy comes from blending a bit of each one of the elements listed above, and add a few additional criteria that need to be considered as well. I call this set of criteria “strategic matrix”. Some important sectors have proven to be very competent to develop, the result of a special and natural ability, or of geographic circumstances and conditions. To not take advantage of this would be reckless. In this line of thought, sectors such as tourism (and there: climate, history and culture, the warmth of the people) surely will continue to be a diamond in the rough with great potential. There are other sectors that have flourished in the last 20 years thanks to the development of specific factors. The telecommunications market, products related to new technologies, and IT services, are experiencing a special momentum, aided by a young labor market and a number of decisions that have ensured very vigorous connectivity and 64
By Roberto Ardón Executive Director
dissemination of telecommunication devices. This growth is tangible and still has much room for growth ahead because it is the natural space for innovation, that creative spirit that constantly generates new opportunities. In addition to examples that have to do with location and conditions on the one hand, and well-developed factors on the other, there are some strategic decisions that need to be brought to the conversation, motivated by what I call “essential criteria”. What sectors can offer the greatest opportunity for horizontal employment (that is, where we can employ the largest number of Guatemalans), what sectors raise the resilience of our productive apparatus (or, said differently, have the capacity to absorb global crises because they are based on robust economic pillars), and certainly, what sectors point towards a sort of economic sovereignty (understood as the likelihood of meeting our own demand), is a question that needs to guide the discussion. In today’s environment we have found very interesting sectors such as energy generation, the food industry – exportable or not – and transformation or assembly activities in their broadest sense, all of which meet these essential criteria. Again, it is not here a matter of saying what needs to be done or not in any one economy. But our eyes should not remain shut to options which, carefully analyzed, may secure better development in the medium term. The latter depends on a sort of consensus in relation to needs, and to make resources available for research and development, on aligning academia and the productive sector, on creating more stable legal frameworks, and on opening our economy to transformational, long-term investment. As we tick each criterion in that matrix that I have alluded to as a task accomplished, we will be securing a better future for current and coming generations.
THE LEGAL FRAMEWORK
OF INTELLECTUAL PROPERTY IN GUATEMALA By Kristine Bouscayrol Valladares, Director of the Intellectual Property Department – Alegalis
Protection of the intellectual property of individuals is the right to protect intellectual creations. This right is recognized and protected by the Constitution of Guatemala as being inherent to human beings, to guarantee for the holders of that right the exclusive ownership of their creations under the Law and in accordance with international treaties to which Guatemala is a party. Listed below are the major laws related to intellectual property in force in Guatemala, as well as the most recent international treaties adopted by Guatemala. Intellectual property is divided in 2 branches: Intellectual Property and Industrial Property. Each one of these branches has specific laws and regulations that regulate and define the protection level for each, as described below:
INTELLECTUAL PROPERTY:
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is protected through the Copyright and Related Rights Act, Decree 33-98 of Congress, and its regulations. Its objective is to protect the rights of authors of literary and artistic works, of performers, producers of phonograms and of broadcasting organizations. Enjoyment and exercise of intellectual property rights are not subject to formal registration.
INDUSTRIAL PROPERTY:
2
Is protected through the Industrial Property Act, Decree 57-2000 of Congress, and its regulations. Its objective is to protect acquisitions and maintenance, distinctive signs, invention patents, utility models and industrial designs, as well as trade secrets. It contains provisions against unfair competition.
The enjoyment and exercise of industrial property rights is subject to formal registration.
OVER THE LAST TWO YEARS GUATEMALA HAS ADOPTED 2 INTERNATIONAL TREATIES THAT SIMPLIFY INTELLECTUAL AND INDUSTRIAL PROPERTY REGISTRATION
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In terms of international treaties, over the last two years Guatemala has adopted 2 international treaties that simplify intellectual and industrial property registration. Decree 1-2016 of Congress approved accession by Guatemala to the Hague Convention for Abolishing the Requirement for Legalization for Foreign Public Documents. The Convention streamlines the legalization of foreign documents through the Apostille. Previously, consular legalization was required. Also, through Decree 20-2016, Congress adopted the Trademark Law Treaty (TLT) the purpose of which is to simplify and harmonize administrative procedures in respect of marks registration.
By Claudia Galán Director economic analysis unit
The more competitive economies have strong institutions that support productivity, which in turn defines the rate of return of investment. This variable is one of the engines of growth. This is how more competitive economies grow faster in the medium and long terms.
As a country enhances its competitiveness it increases its productive capacity and economic growth with it. According to the World Bank, competitiveness refers to the set of institutions, policies and factors that determine the level of productivity of an economy.
An analysis of the last Global Competitiveness Index evaluation, which measures the competitive environment of 138 economies through 12 pillars, and which is done by the World Economic Forum (WEF) shows significant gaps in regional competitiveness.
EVOLUTION OF REGIONAL COMPETITIVENESS 2016-2017 / 2017-2018 Setbacks
Advances
Without changes
Costa Rica
Panamá
Guatemlala
Nicaragua
Honduras
República Dominicana
El Salvador
“Posición 2017 (138 países evaluados)”
54
42
78
103
88
104
105
“Posición 2018 (137 países evaluados)”
47
50
84
93
96
92
109
REQUERIMIENTOS BÁSICOS Instituciones Infraestructura Entorno macroeconómico Salud /Educación básica POTENCIADORES DE EFICIENCIA Educación Superior “Eficiencia mercado bienes” “Eficiencia mercado laboral” “Eficiencia mercado financiero” Preparación tecnológica Tamaño de mercado FACTORES DE INNOVACIÓN Y SOFISTICACIÓN Sofisticación negocios Innovación
Fuente: Reporte de Competitividad Global 2017-2018. Foro Económico Mundial (WEF), 2017. 68
Some of the major challenges to improve regional productivity are: the institutional framework, the quality of infrastructure, labor market efficiency, and innovation. It is interesting to see not only common problems but also shared progress in regional competitiveness, such as in macroeconomic environment, in the efficiency of financial markets, in health and in basic education. The specific case of Guatemala shows an apparent involution in competitiveness from one year to the next. This year, the country lost three places with respect to the previous
measurement, and it now ranks 84 of 137 economies analyzed. Its drop is related particularly to a deteriorated institutional framework (111) where the greatest impact is in trust in politicians (123), costs for reasons of crime and violence, (134) and organized crime (133). The country’s competitiveness has been obscured by this weak institutional framework, and strong challenges lie ahead to ensure progress towards greater growth for the country.
EVALUATION OF THE 12 COMPETITIVENESS PILLARS 2016-2017 / 20172018 Source: Global Competitiveness Report 2017-2018. World Economic Forum (WEF), 2017
The Doing Business Index 2018, which is produced by the World Bank, analyzes a number of indicators grouped in the 10 stages of life of a business, which examine specific regulation costs that may increase or hinder investment, productivity and business development.
DOING BUSINESS 2018 EVALUATION IN GUATEMALA
This measurement confirms that institutional weakness represents the main hindrance to do business in the country. The country went down 9 places and ranks 97 of 190 economies. Its main challenges come again from the institutional framework of the country, subject to excessive bureaucracy and obstacles in construction permits. Source: Foro EconĂłmico Mundial (WEF), 2017. 69
Upon comparing this to the executive survey done by WEF in 2017, we see that bureaucracy (12.6), corruption (13.9) and political instability (9.6) are among the five top obstacles to do business in Guatemala.
THE SOLUTION IS TO TRANSFORM EXTRACTIVE INSTITUTIONS INTO INCLUSIVE INSTITUTIONS, TO GENERATE SYNERGY
PRINCIPALES DESAFÍOS PARA HACER NEGOCIOS
AMONG INCLUSIVE POLITICAL AND ECONOMIC INSTITUTIONS, WHOSE ESSENCE SEEKS MORE COMPETITIVENESS AND PROSPERITY FOR THE COUNTRY.
Souce: WEF, Executive Opinion Survey 2017.
While macroeconomic stability appears to be the major asset of the country’s economy, institutional weakness is a contingent liability which contributes uncertainty for the country’s competitiveness. Douglas North, Nobel laureate of Economics in 1993, agreed in stating that the main role of public agencies is to reduce uncertainty by maintaining a stable structure. This is how institutions provide a structure of incentives for an economy; economic dynamics are driven by institutions that evolve.
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Countries fail with extractive institutions that block economic growth. Specific policies must be aligned to a participatory process. These policies must promote inclusive institutions. The solution is to transform extractive institutions into inclusive institutions, to generate synergy among inclusive political and economic institutions, whose essence seeks more competitiveness and prosperity for the country. As inclusive institutions are created as the main driver for competitiveness, we will give way to a more productive Guatemala in a 2018 full of hope.
MÁS QUE UN PROVEEDOR
UN COLABORADOR EXPERTOS EN IMPRESIÓN
COMERCIAL
CORPORATIVA
PROMOCIONAL
WWW.SERGRAFICA.COM PBX: 2328-1600
EDITORIAL
By Edgar Ortiz Executive Director
Contraband has been a discussion topic in Guatemala for a long time. In 2017, Guatemalan authorities revealed that there are 139 blind border-crossing points. Estimating the total value of contraband is very difficult. Some agencies have stated that the government loses Q17 billion per year in value added tax (VAT) on imports. This is almost equivalent to the amount that the government collects in VAT on imports every year. This means that contraband is almost the same size as legal imports. The government launched its National Policy against Contraband, which includes a study phase to define the actual size of the problem. Increased controls and more operations to seize smuggled goods have also been suggested. It seems reasonable for the government to concern itself with controlling its borders and seeking to increase the presence of authorities in border areas, particularly to control the illegal trafficking of goods or persons. But the current situation also begs the following question: Why are contraband levels so high in Guatemala? If a person in Guatemala wants goods that can be purchased abroad
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at a better price, it makes sense to buy them abroad and import them. But, why resort to illegality, to contraband? The answer may be the complex processes that traders are subject to when they seek to import goods into Guatemala.
THE GOVERNMENT OF GUATEMALA HAS IDENTIFIED THE PROBLEM AND HAS A BIG WINDOW OF OPPORTUNITY.
The World Economic Forum produces the Enabling Trade Report that assesses the ease with which goods and services can move through country borders. One of the sub-indexes in this report refers to Customs process’ quality and ease in each country. Guatemala ranks 70 of 138 countries. In order to assess Guatemala in this ranking, the sub-index takes into account the amount of time to settle taxes, the amount of time it takes to complete border paperwork and the amount of time it takes to complete the documents required for the importation to take place. These outcomes provide important information which leads us to conclude that a considerable portion of contraband begins with the complex and bureaucratic process of importation. Even if the possibility exists to profit from purchasing goods outside of Guatemala, importing them and then selling them locally, it is a fact that Customs procedures are a disincentive to engage in that business, in view of their complexity. And this conclusion sheds light on a likely way out to drastically reduce the problem of contraband. If the government succeeds in considerably simplifying importation processes, contraband would drop significantly. It would be more profitable to import goods through regular Customs channels, which is currently very costly. That would save the government millions of quetzales in policing and patrolling to counter contraband. On the other hand, streamlining procedures could significantly promote trade flows between Guatemala and other countries. The United States is an important trade partner for Guatemala. As of October 2017, 40% of Guatemalan imports came from the United States. Currently, importing goods legally into Guatemala takes an average of a little over four days. In countries like Hong Kong or Singapore, this same process takes a couple of hours. This, despite the fact that the geographic location of
Guatemala is far more favorable, in view of its closeness to important trade partners like the United States. In Hong Kong and Singapore, where importation processes are agile, contraband is marginal. In those countries, the contraband that concerns the authorities is that of controlled or illegal goods such as ivory or tobacco, which are subject to high duties. Conversely, in Guatemala high volumes of goods are smuggled for the purpose of avoiding Customs procedures. It is surprising to see that high volumes of food stuffs are smuggled into Guatemala. Although there is also significant smuggling of illegal goods, many goods that are allowed legally into the country are currently smuggled. The value of legal imports in Guatemala is equivalent to 25% of the GDP. If we add contraband, imports amount to 50% of the GDP. By contrast, in Hong Kong, imports represent 185% of the GDP and in Singapore they represent 146%. Guatemala, as well as Singapore and Hong Kong are small countries. Small countries need to benefit from trade and from international labor division even more than the rest of the world. The government of Guatemala has identified the problem and has a big window of opportunity. The problem is contraband, and a significant cause for contraband is Customs bureaucracy. If Guatemala starts the process of streamlining Customs and making it efficient, it can fight contraband at the same time as it can attract investment. Guatemala could follow the steps of Hong Kong and Singapore and this is a good starting point.
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By Cristina Sandoval Saravia Associate Counsel
The Part-Time Work Convention, Convention Number 175 of the International Labor Organization -ILO- will come into force on February 28, 2018. The Convention was ratified by the Republic of Guatemala on February 28, 2017 through Decree Number 2-2017. This Convention defines a part-time worker as a worker on salary whose work activity has a typical duration that is shorter than full-time workers in comparable situations, for the purpose of regulating work and ensuring protection for the workers who are hired under that modality, both in terms of work conditions as in aspects related to social security. There have been questions as to whether there is contradiction between the Convention and the principle 74
contained in Article 102 g) of Guatemala’s Constitution that provides that workers who work “less than the regular work day” shall receive full pay, excluding in the part-time work modality. In order to resolve this question, below we briefly describe the lecture by Attorney-at-Law Álvaro Castellanos Howell at the IX Ibero-American Labor Law and Social Security Congress held on February 27, 2014, and whose opinion I share that there is no contradiction but rather an “infra-Constitutional” gap because, although part time work could have been regulated in our Constitution, it was not regulated; that gap is bridged by another standard in Convention 175 which is a perfect complement and a source of solution in view of the lack of Constitutional standards on the matter of part-time work. ILO’s Convention 175 seeks to open up new work possibilities through a hiring alternative, thus promoting formal employment. According to the ILO, for purposes of statistical comparison, a part-time work day is usually understood to mean 35 or 30 hours of work per week. This makes its enforcement so controversial due to contradicting positions. While one sector states that this could result in lower wages for workers and therefore, higher revenues for businesses, another sector views it as opening up the opportunity for more employment even if it involves investing in fixed and administrative costs such as hiring, training and the like. Studies done by the National Statistics Institute of Guatemala in 2016 , in the country, estimate that 69.8 per cent of the economically active population work in the informal sector and therefore, without social security coverage. These indices could go down with the entry into force of this Convention because at present, hiring workers part-time is extremely costly for companies due to Constitutional Article 102 g) mentioned above, which provides for the obligation to pay for the full day, which in turn leads to fewer formal work contracts. This new regulated modality seeks to make more jobs formal which, by the way, would benefit both sectors.
workers are therefore, in principle, more productive and are entitled to higher hourly wages for their work. Likewise, in sectors where the economy faces fluctuating demand, such as in services or seasonal work, which are commonplace in Guatemala, hiring part-time workers would undoubtedly be more attractive. The ratification of this Convention addresses the social and economic changes of modern life, where contracts such as “home office” or “telework” are on the rise in view of the practical and effective results they produce for the labor and business sectors. However, their limited regulation at times leads to risks for the parties entering into these schemes, for which reason it is necessary to have specific regulations for them, which is also true for part-time work contracts. It is evident as a result of this discussion that regulations for Decree Number 2-2017, which gives life to this hiring modality, need to have clear standards that promote this type of hiring, of course, to include the adoption of measures to permit access to part-time, productive and freely chosen work. Regulations should include, among other considerations, policies related to social security, and special attention needs to be given to employment policies for specific groups such as the unemployed, workers withy family obligations, workers with disabilities, and workers who continue with their education.
On the facts about part-time hiring, there are several studies in countries that regulate this modality of work that show that the hourly wages earned by part-time workers can be even higher than full-time worker salaries, because the former work more intensely and effectively during their hours of work vis-à-vis the latter. Part-time 75
By Ana Chan Coorporate Affairs
As part of its commitment to the sustainable development of Guatemala, and through its shared value and corporate social responsibility strategy, Walmart promotes the Tierra Fértil (Fertile Soil) program that seeks to include small and medium-size farmers in the chain’s supply portfolio by providing support for their agricultural training and traderelated counseling to help them become new and better producers. This novel program focuses mainly on topics such as: good farming and manufacturing practices, pest control, seed quality, crop rotation, post-harvest management and others. These suppliers also receive information on prices and variations that are on demand. Walmart’s commitment to help improve the quality of life of small and medium-size Guatemalan farmers is met through the positive impact of the Tierra Fértil 76
program. 36 Guatemalan farmers currently participate in this project. PROGRAM BENEFITS - Fair and on-time payment - Direct procurement (without middlemen) - Ongoing training - Logistics counseling - commercial-agricultural - Sowing and harvest planning - Agricultural infrastructure design
variety, quality and freshness in its assortment of fruits, vegetables and grains. At the Agricultural and Livestock Trade Fair held in Guatemala in 2017, Walmart recognized the work of suppliers who achieved the suggested goals with commitment and effort and who stood out for their good practices, quality, food safety, process improvement and increased production. SUCCESS CASE - TIERRA FÉRTIL One of the suppliers who was rewarded was Aníbal Morales, who grows strawberries in Tecpán.
Walmart Guatemala’s operation purchases 31 million dollars of fruits and vegetables annually, which is equivalent to over 47 tons of produce. Over the last year, procuring fruits and vegetables from local growers meant the creation of 4,000 direct and indirect jobs in inner cities of the country, which benefits more than 1,237 farmer families. In the specific case of grains, in 2017 alone, Walmart purchased over 7 thousand tons of the different grain varieties that the chain offers to its customers, which is equivalent to USD$ 4, 899,447.00. The choice, purchase, quality control and distribution of fruits, vegetables and grains for the different formats of the Walmart store is done by Hortifruti, a plant that specializes in this. Hortifruti is part of Walmart and has the FSSC 2200 certification, which guarantees food safety. Hortifruti has a long history and vast experience in this field and, as part of its business strategy, in 1978 gave life to Tierra Fértil in Costa Rica; later, this program was expanded to other countries of the region. A distinguishing element of the Tierra Fértil program is that farmers can be a part of it and receive technical counseling and support for an unlimited amount of time, provided they remain active as suppliers. Also, as part of the activities to support Guatemalan farmers, Walmart holds an Agricultural and Livestock Trade Fair through which business rounds with the growers from different regions of the country are held for the purpose of opening new opportunities to become suppliers for the supermarket chain, and thus offer to customers more
Aníbal Morales started planting and harvesting strawberries in three “cuerdas” of land. He currently has three manzanas. He started selling to Walmart in 2007 and to this date continues to benefit from Tierra Fértil. He started by delivering 300 boxes per week. His production has now grown 400% and delivers 1,200 boxes per week. At the beginning, this was a family business, but his sustained growth has allowed him to give work to more persons in his community.
IT IS VERY SATISFACTORY FOR OUR COMPANY TO KNOW THAT WE CAN HELP CREATE NEW BUSINESS OPPORTUNITIES THROUGH THE AGRICULTURAL AND LIVESTOCK TRADE FAIR; WITH THE TIERRA FÉRTIL PROGRAM WE CREATE NEW PARTNERSHIPS AND TAKE DEVELOPMENT TO A LARGE NUMBER OF FAMILIES AND THE COUNTRY 77
Interviewee Eduardo Palacios Corporate Social Responsibility and Environment Committee President Amcham Guatemala by Alma Larissa PĂŠrez Villatoro, Universidad Francisco MarroquĂn.
Corporate Social Responsibility is the set of knowledge and ethical practices, not only of companies but of individuals who are members of those companies. These stakeholders are interested in matters of compliance with development agendas and with standards and laws through which they will seek the advancement of their communities. By saying this I mean that it is necessary to start from the inside out. It is incumbent upon a company to treat its workers well, and to comply with fiscal and environmental standards. For this reason, it is necessary to promote full and healthy development for workers, which will in turn benefit the society where the workers of the company live. The feeling of wellbeing developed by companies will project itself in society. Then, in those communities where companies
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have their circle of influence, they will be able to have a huge positive impact on social problems, which will in turn benefit the country. It is a fact that if the businesses of a country are not socially responsible, it is difficult to accomplish economic development. The more socially responsible companies there are in Guatemala; therefore, the easier it will be to accomplish more social development that will lead to economic development. Having more economic development will reduce the problems of unemployment, crime and migration to the United States. In addition, as youths find work and economic opportunities, they will stay here to contribute to the development of the country.
THE MORE SOCIALLY RESPONSIBLE COMPANIES THERE ARE IN GUATEMALA; THEREFORE, THE EASIER IT WILL BE TO ACCOMPLISH MORE SOCIAL DEVELOPMENT THAT WILL LEAD TO ECONOMIC DEVELOPMENT
A society with socially responsible companies will be in the best position to collaborate to resolve huge social problems. Likewise, individuals must become educated to be socially responsible and have a positive influence on society. It is important for the public sector to engage with the private sector to improve the economic and social development of Guatemala. It is necessary to bear in mind that investment goes to countries with adequate returns on investment and profits. Socially responsible businesses must seek to be socially responsible.
In order to attract investment to Guatemala, it is necessary to invest in early childhood to ensure that chronic malnutrition is avoided and so that children can then take full advantage of primary education. The success in developing and improving malnutrition and education indicators will lead to the conditions that are necessary Socially responsible leadership is the role that economic, for investment to grow. Together with improved education social and business leaders are called upon to play. Social it is extremely important that the State provide legal responsibility must be addressed in general, not only as certainty to businesses in order to ensure that more foreign concerns businesses but also as concerns the individuals investment comes. that make up Guatemalan society. It is therefore necessary to keep in mind the general principles of social responsibility And back to the discussion on corporate social responsibility, and business ethics. For that reason, AmCham developed it is necessary to act with two principles in mind: public a set of general guidelines for ethical conduct, which is recognition and gratitude. Socially responsible businesses deserve recognition. AmCham annually recognizes the shared with companies. leaders and companies with a good track record of socially The problem that Guatemalan society currently faces is responsible leadership. Likewise, there are organizations leaders lacking in ethical principles and values; this is what such as CENTRARSE and FUNDESA that provide training hinders development in Guatemala. Socially responsible to community leaders to promote socially responsible leadership must be promoted particularly in the young, leadership. Thanks to those efforts there is currently more to encourage them to act as good citizens of our country; knowledge about socially responsible leadership and the it needs to be part of their education. Likewise, families implementation of its principles. should promote principles and values for Guatemalans to grow to be ethically correct citizens. It is essential for parents to be aware of the need to set an example of ethics and values to their children, who will then practice these in their work. It is essential for all the members of society act with values so that then some of these members of society take up the leadership and influence society positively. However, it is also necessary for companies to spread the principles of corporate social responsibility.
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Interviewee Juan Pablo Morataya Head of CENTRARSE by María José Quezada Soler, Universidad Francisco Marroquín
CENTRARSE is a business organization with more than 14 years focusing on the promotion of a responsible business agenda in the country. With more than 100 member companies, Juan Pablo Morataya, the Manager of Centrarse, agreed to an interview to tell us, in his own words, of the progress that the private business sector of the country has accomplished regarding corporate social responsibility, in the understanding that CSR is not synonymous with charity or handouts but is a field of action based on ethics, the Law and sustainable development, influenced by international trends, and with the aim of specifically measuring the impact of companies on the sustainability agenda promoted by the organization. It is important, on the other hand, to stress that Guatemala is the first country of the region to start efforts to consolidate Sustainability Indicators. This shows a strong business commitment with new trends and the desire to conduct business from a new perspective, by addressing each one of the activities of the industry, from consumer to the environment. But now the question comes up: What are Sustainability Indicators? They are measures of the progress that the country has accomplished and of the Guatemalan business effort to consolidate improvements safely and to show the commitment of the private sector with Guatemala’s development. Those indicators are based on four pillars: corporate government, social management, environment, marketing and responsible consumption. These four pillars seek to work together to accomplish unified progress in every sector. For example, it takes into 82
account the impact on communities, reduction of damages that may increase the effects of climate change, disaster prevention, etc. Sustainability Indicators seek to promote business actions towards sustainability in full harmony with international trends. In other words, the way to do business in Guatemala is innovated by promoting sustainable development and corporate social responsibility, not from the charity perspective but to implement sound and lasting changes that allow the country to transform. Finally, these efforts must be recognized with the argument that Guatemala is moving forward and that something momentous occurs each day within its borders that favors the business climate. KEY CONCEPTS: Guatemala continues to be a very important economy for business development. It is a noble country with high quality human talent. Investing in Guatemala brings great opportunities. Good and positive things that are hardly noticed are always happening in Guatemala.
By AndrĂŠs Echandi, General Manager of Uber Central America
Uber is present in more than 600 cities and 77 countries, including Guatemala, where we launched operations in December 2016. After nine months of being here, we are very happy with the positive welcome we have had, which motivates us to continue striving to offer transportation solutions as well as further innovation in the app’s functions.
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These results translate into more than 100,000 satisfied riders who now have a safe and reliable transportation alternative and more than 20,000 driver partners and their families who benefit from extra income to support their daily needs. Uber offers solutions to the citizens where it operates, for in terms of mobility it is the innovative, comfortable, efficient, and safe alternative within reach of anyone with a smartphone. According to a recent study conducted by Uber, 88.3% of riders travel once or more times a month in Uber, meaning a huge potential for each driver partner to consolidate increased income. The study also confirms that 36.21% of women driver partners’ main source of income is Uber; good news, since someone depends financially on them. For 49.10% of driver partners, Uber is their main source of income, which they complement other revenues.
CERTAINLY, UBER IS SYNONYMOUS WITH ENTREPRENEURSHIP AND OPPORTUNITIES FOR GUATEMALANS TO ADJUST THEIR SERVICES TO THEIR OWN NEEDS AND SCHEDULES, TURNING THEM INTO ENTREPRENEURS AND THEREFORE, THEIR OWN BOSSES.
Almost 60% of partner-drivers did not have a job and had been looking for one for more than 3 months before deciding to share their vehicle with Uber riders through the platform. Certainly, Uber is synonymous with entrepreneurship and opportunities for Guatemalans to adjust their services to their own needs and schedules, turning them into entrepreneurs and therefore, their own bosses. In terms of safety, Uber is at the forefront and facilitates safe transportation for riders. Both the rider and the driver partner are aware of the trip details before, during and after the trip. Additionally, the app allows visibility of the route through GPS from the beginning to the end of the trip and the user can share it with a friend or family-member, allowing real-time tracking of the route. In Uber we continue our worldwide expansion and our commitment to Latin America is undoubtedly the best example for further innovation and investment in a region that requires better and safer transportation services for the citizens, every day. We are very happy with the results and reception in Guatemala, and appreciate the welcome we have received both from the riders who choose us daily, as well as from the driver partners who have chosen to diversify their income in an innovative way.
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Molvu’s mission is to create excellent electronic products that adapt to the North and South American markets in terms of quality, functions, appearance, support and price, with products such as PC Tablet, computer accessories, audio and video, accessories for mobile devices, office equipment and industrial tablets.
By Kevin González Molvu Electronics CEO Photo by: Manuel González
Molvu Electronics, a Company that develops and manufactures technological products, was founded by Guatemalan Kevin Gonzalez in 2012. In 6 years of history, it has built a user-base of over 250,000 persons for its products, it serves retail store chains, wholesalers, corporations and banks in 7 countries, and has offices in Guatemala and in China.
It so happens that the work done by Molvu throughout these years is so good that its products sell in the United States, Jamaica, Guatemala, El Salvador, Honduras, Ecuador, Colombia and Paraguay under the Molvu brand or its clients’ private brands.
Molvu Factory located in Shenzhen, China Photo by: Molvu Electronics
Molvu has experienced sustained growth since it opened in 2012 because it makes sure to offer its customers its best effort. It focuses every day on offering the best solution through its Service Centers, the best welding and materials testing in Guatemalan and Shenzhen production lines, the best coded software for its programming geeks, the fastest response through its sales department, the best of smiles, and honest service with its delivery team. Molvu is a solutions Company, not a products Company. For that reason, it is privileged to support regional corporations, wholesalers and prestigious retail companies. In 2017, there are over 250,000 users of Molvu-developed products in the region.
Molvu Factory located in Shenzhen, China Photo by: Molvu Electronics
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This Guatemalan Company has its headquarters in Tower 2 of the Tec Building (Silicon Valley with beans) in Cuatro Grados Norte of Guatemala City. Highly skilled technicians offer support to their users and distributors; this is the
highest value added for the company, since very few technological brands offer local post-sale service to their clients. It has a Guatemalan production line where over 1500 tablets have been assembled during 2017, and it has capacity to produce over 2,000 devices per month. At Shenzhen, Molvu has two proprietary production lines with capacity to produce over 25,000 devices per month.
novel technology will be launched in Guatemala early in 2018. It is also developing new products like the Molvu Laptop and portable audio accessories to be launched in the Guatemalan market also in 2018.
New line of Molvu Wireless headphones Photo by: Molvu Electronics Graffiti found at Molvu in 4° Norte Produced by: Scrub Nueve
The beginnings of Molvu were not easy. With US$3,000 in his pocket, its founder initially established the company in Shenzhen, China, and together with a commercial team led by Guillermo Alfonso, they were able to gradually penetrate store chains, education projects and wholesalers who were in search for a reliable company that understood the need for quality in the region.
Noe Rodriguez, Head of the Molvu Technical Department
The capacity of Guatemalan technicians exceeds by far that of other tech companies in the world. After years of experience, they have developed the necessary precision to weld integrated circuits that are smaller than the smallest ant of the world on electronic boards. The commercial team of Molvu is also at Tec 2, and participates in international events to attract new clients. In the past, they have exhibited Molvu’s products at one of the largest technology trade fairs in Hong Kong. The education segment in Guatemala is one of the Molvu’s great accomplishments since many foundations, public and private schools use the Molvu PC Tablet for its quality, price and local support. The next steps for Molvu are virtual stores as never before seen. It is developing, together with Guatemalan Engineers, a technology of special sensors to offer users a totally innovative experience in the retail segment. This
One of the main added values that Molvu offers its customers is that all the parts used in the assembly process of its products are carefully selected, seeking the best quality. Occasionally, manufacturers of components such as cables, batteries, screens and memory offer second-hand parts that are easily confused with new parts. However, Molvu ensures that every product it dispatches carries fresh and new materials.
From right to left: Justin Zhu Quality control Manager, Kevin González Molvu CEO, Chia Factory Manager Photo by: Molvu Electronics
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By Ezrra Orozco Magister
Regardless of the environment where mention is made of MSMEs, their significant contribution to bring dynamism to the economy, the Gross Domestic Product (GDP), exports and employment creation, to mention but a few, is widely recognized.
Guatemala has made several attempts to produce a uniform definition of MSME. Government Resolution 211-2015 produced the new business classification, which is shown below:
Size
Microenterprise
Small enterprise
Medium-size company
Workers
1 – 10
11 – 80
81 -200
Sales / minimum wage
<190
191 – 3,700
3,701 – 15,420
Approximate sales in Quetzales
< 480,764
From 480,765 to 9,364,788
From 9,364,789 to 39,017,843
Approximate sales in US dollars at a rate of $1 x Q7.5
< 64,102
From 64,103 to 1,248,638
From 1,248,639 to 5,202,380
Source: Produced by the author with information from Government Resolution 211-2015
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SITUATION IN GUATEMALA The Statistics Coordination Office for Micro, Small and Medium-size Companies (â&#x20AC;&#x201C; OCSE-MIPYME in Spanish-) was created as a technical inter-agency unit which specializes in the production of statistics for the MSME sector in Guatemala. It includes the Vice Minister in charge of MSME development, as
its coordinator, the National Statistics Institute, the Tax Administration Bureau, the Guatemalan Social Security Institute, the One-stop Exports Office, the Trade Registry and the Central Bank of Guatemala. Because of the work done by OCSE-MIPYME and with the support of the Republic of China on Taiwan (ICDF) Guatemala now has a National MSME Information System (SIMIPYME) starting in 2015. Some of the most relevant data is shown below:
MSMEs in Guatemala and their distribution by size
Source: Simipyme Guatemala, 2015.
MSME exports and imports
Source: Simipyme Guatemala 2015. 89
Contribution of MSMEs to annual sales
State vendor MSMEs
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This information confirms the significance of the MSME sector for Guatemala’s economy, as further shown below: a. 99.67% of Guatemalan companies are MSMEs b. 50% of exports and 20% of imports are carried out by this sector c. 35% of the annual sales of all the companies in Guatemala are conducted by MSMEs d. 97% of the companies that are State vendors are MSMEs There is no question that it is still necessary for all stakeholders involved to increase investment in this important sector of the economy, namely, the public and private sectors, academia, international cooperation, and the MSME businesspersons themselves. Support programs of the Ministry of Economy (Mineco) The Ministry of Economy is divided into four vice Ministries a. Administration and Finances b. Investment and Competition c. Integration and Foreign Trade d. MSME Development Based on the information provided by Simipyme we know that Mineco serves, in general, the MSME sector. However, it is the Vice Ministry in charge of MSME Development that manages sector-specific programs, namely: a. Business Development Services 1. Entrepreneurship 2. Business ventures b. Financial services The Vice Ministry in charge of MSMEs works in coordination with other members of the business ecosystem and MSMEs, with a second tier strategy, with the main objective of strengthening participants to provide them with installed capacity with a multiplying effect.
4. MSME Promotion Centers (Promipymes) 5. Mipyme, State Vendor 6. One People, One Product 7. ROSDE Services, rosde.mineco.gob.gt 8. EMPRENDE GT Program 9. Business Venture Centers 10. “Start a Micro-franchise for a Better Quality of Life” Program 11. Youth Employment Program For financial services: 1. Global Credit Program 2. National Micro-enterprise Program Challenges faced by the MSME sector. Despite the large number of MSMEs tin the country, there are many challenges to be overcome, such as low productivity, limited growth potential, limited impact, high rate of informality, little technical development, low level of bankarization, scarce incorporation of information and communication technologies, and the list can go on. It must be recognized of this noble sector that it has been and, in my opinion, it will continue to be the main pillar of Guatemala’s economy. For that reason, it is important to invest in it; as we have more businessperson in Guatemala, the dream that some of us have can become a reality: “To turn Guatemala into a country of businesspersons with so much employment that we will need to import labor because we will not have enough”.
FOR A BETTER GUATEMALA, LET US INVEST IN THE MSME SECTOR.
Some of the business development programs in place are: 1. Weaving Food Program 2. Women’s Project 3. International Participation of MSMEs Program 91
By Rodrigo MĂŠndez Economic and Political Analyst
Innovation is not solely dependent on the private sector. It also depends on the synergies that can be created among the private sector, academia and the public sector. Mariana Mazzucato, Professor at the University College of London, highlights the role of the government in the development of new technologies. An example is US DARPA1 that works closely with universities where technologies such as the Internet, LCD screens, to mention but a few, have Why do we need it? If a country seeks to generate greater been developed, and which companies such as Apple then economic growth, it must, among other things, change have adopted to create new products like the iPhone. The its productive structure towards goods with greater interrelationship among the various players is known as added value. That is to say, it is not the same to produce the Innovation Ecosystem. microprocessors, as to produce textiles, as to produce corn. Each of these products has a different level of complexity Currently, Guatemala is one of the countries that invests and requires different types of technologies and levels of the least in research and development in the world, 0.04% of the GDP2, less than neighbors like Costa Rica and Mexico, labor in its production process. that invest around 0.5% of their GDP, and much less than Who innovates? The private sector is and should be more developed countries like South Korea and Israel, that mainly the sector most interested in the development, invest up to 4% of their GDP in research and development. production and marketing of new products. However, This becomes evident through the fact that the country despite the benefits that can be reaped from it, research has one of the smallest numbers of researchers per million and development takes times and its outcomes are often uncertain. This is because we do not know when an item will be invented that can be subsequently developed and 1 https://www.darpa.mil/ marketed. This is a task that can take years; plus, we do not 2Graph 1 shows investment in research and development as a % of know if the new product will be well accepted by the market. the GDP in 2012. Source: World Development Indicators, World Bank. Innovation is a topic that has taken a more prominent role in the discussion of economic development and at the level of public policy proposals at the global level. But, what is innovation? It can take different forms, from the conception of a totally original idea for its subsequent development, to improving existing products or streamlining production processes of goods or services.
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inhabitants, 26.7, while other Latin American countries have between 16 and 262 times this number. So, what can Guatemala do? First, the national innovation ecosystem needs to be made more robust. Little is known of how companies innovate in the country (or whether they do). It is necessary to promote higher education at the graduate level, even if this takes time. In parallel, legal changes are required (work and residence permits, taxation) that make Guatemala attractive to foreign talent through universities and companies, in order to gradually close that gap. This is something that Israel continues to promote for its country; following that example would entail strengthening the institutional framework in the field of science and technology of the country, CONCYT. Clear objectives of a direction must be set, and that needs to be defined as part of a broader economic strategy. Following Israelâ&#x20AC;&#x2122;s example, the participation of the State goes beyond tax incentives for those who invest in research and development. The State also plays an important role in sharing the risk of investing in the development of new
GUATEMALA IS ONE OF THE COUNTRIES THAT INVESTS THE LEAST IN RESEARCH AND DEVELOPMENT IN THE WORLD
products. This is done through incubators, with seed capital, or through grants, or by directly participating in the research process, to mention but a few. Economic development needs more things, but certainly, innovation is essential, as it is to understand the synergies that are required among the public and private sectors and academia to accomplish shared goals and objectives.
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U.S. CHAMBER OF COMMERCE Chamber of Commerce of the United States of America 1615 H Street, NW Washington, DC 200622000 Main Number: 202-659-6000 Customer Service: 1-800-638-6582 Web: www.uschamber.com
U.S. COMMERCIAL SERVICE – UNITED STATES DEPARTMENT OF COMMERCE U.S. Embassy Guatemala Avenida Reforma 7-01, Zona 10, 01010 Guatemala, C.A. Main Number: 011-502-2326-4000 Web: www.buyusa.gov/guatemala Email: guatemala.office.box@trade.gov
EMBASSY, CONSULATE AND DIPLOMATIC OFFICES OF GUATEMALA ABROAD Guatemalan Embassy in Washington, D.C. 2220 R Street NW, Washington, D.C. 20008 Main Number: 202-745-4953 / 202-745-3873 Web: www.guatemalaembassyusa.org Email: info@guatemala-embassy.org
AMCHAM’S IN CENTRAL AMERICA AmCham El Salvador Carmen Aida Muñoz, Executive Director Edificio World Trade Center Torre II Local 308, 89 Avenida Norte, Col. Escalón San Salvador, El Salvador Main Number: 503-2263-9494 / 503-2263-9393 Email: camunoz@amchamsal.com Web: http://www.amchamsal.com
AmCham Honduras Eyby Aguirre, Executive Officer Edificio Torre Alianza, Septimo Piso Colonia Lomas del Guijarro Sur Tegucigalpa, Honduras Main Number: 504-271-0094/0095/0096 Email: eaguirre@amchamhonduras.org Web: http://www.amchamhonduras.org
AmCham Nicaragua Avil Ramírez, Executive Director Apartado Postal 2720 Managua, Nicaragua Main Number: 505-2266-2758 ext. 116 / 505-2266-2758 ext. 103 Email: avil.ramirez@amcham.org.ni Web: http://www.amcham.org.ni
AmCham Costa Rica Alberto Arguedas, Executive Director P.O. Box 4946 1000 San Jose, Costa Rica Main Number: 506-2220-2200 / 506-2220-2300 Email: aarguedas@amcham.co.cr Web: http://www.amcham.co.cr AmCham Panama Susana Uranga, Executive Director Suite 1709, 17th Floor, Ocean Plazq (Banesco Tower) Aquilino de la Guardia Ave. & 47th Street Marbella, Panama, R.P. Main Number: 507-301-3881 Email:Suranga@panamcham.com / amcham@panamcham.com Web: http://www.panamcham.com/
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GOVERNMENT OF GUATEMALA ATTORNEY GENERAL www.mp.gob.gt MINISTRY OF AGRICULTURE www.maga.gob.gt MINISTRY OF COMMUNICATIONS www.civ.gob.gt MINISTRY OF ECONOMY www.mineco.gob.gt MINISTRY OF EDUCATION www.mineduc.gob.gt MINISTRY OF FOREING AFFAIRS www.minex.gob.gt MINISTRY OF LABOR AND EMPLOYMENT ww.mintrabajo.gob.gt
COMPETITIVENESS AND BUSINESS DEVELOPMENT PRONACOM - Programa Nacional de Competitividad de Guatemala https://www.pronacom.gt/ FUNDESA - Fundación para el Desarrollo de Guatemala http://www.fundesa.org.gt/ ASÍ SE HACE – eRegulations Guatemala http://asisehace.gt/ APPAREL AND TEXTILE INDUSTRY ASSOCIATION www.vestex.com.gt GUATEMALAN CONSTRUCTION CHAMBER -CONSTRUGUATEwww.construguate.com GUATEMALAN CHAMBER OF COMMERCE www.camaradecomercio.org.gt
MINISTRY OF MINES AND ENERGY www.mem.gob.gt
GUATEMALAN CHAMBER OF INDUSTRY www.industriaguate.com
MINISTRY OF FINANCES www.minfin.gob.gt
AGEXPORT – Asociación de Exportadores de Guatemala http://export.com.gt/
MINISTRY OF HEALTH www.mspas.gob.gt
INTERNATIONAL TRADE
SUPERINTENDENCY OF TELECOMMUNICATIONS-SITwww.sit.gob.gt GUATEMALA CENTRAL BANK www.banguat.gob.gt
Seadex - Creación del código de exportador http://seadex.export.com.gt
NATIONAL INSTITUTE OF ELECTRICITY -INDE www.inde.gob.gt NATIONAL STATISTICS INSTITUTION www.ine.gob.gt CONGRESO DE LA REPÚBLICA www.congreso.gob.gt
VUPE - Ventanilla Única para las Exportaciones http://vupe.export.com.gt/ SAT – Superintendencia de Administración Tributaria https://portal.sat.gob.gt/portal/ U.S. Commercial Service – Get Ready to Export https://www.export.gov/Export-Education International Chamber of Commerce – Incoterms https://iccwbo.org/ SIECA – Secretaría de Integración Económica Centroamericana http://www.sieca.int/ 97
PAUTA
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